WRITTEN MATERIALS Oral Argument on Motion for Summary Judgment · Case No.: CV2016-998877 JUDGMENT...

WRITTEN MATERIALS FOR:

Oral Argument on Motion for

Summary Judgment

Presented by

Arizona Bankruptcy American Inn of Court

Pupillage No. 8

February 7, 2019

ARIZONA COUNTRY CLUB

Wade Burgeson

Laura Napoli Coorder

Preston Gardner

Maureen Gaughan

Adam Hauf

Kristin McDonald

Michael Myers

J. Henk Taylor

Jeffrey Wolfe

I. Program Materials

TABLE OF CONTENTS

A, ABAIC Fact Pattern: Industry Background and Dischargeability Litigation ………………. 1

B. Judgment Entered by Maricopa County Superior Court ……………………….……….……4

C. Alden Design and Development’s Motion for Summary Judgment……...................………. 6

D. Orville Yeager’s Opposition to Motion for Summary Judgment …….…….…………….... 15

E. Statements of Facts .………………….………………..……..………..………...…………. 21

i. Stipulated Facts…………………………………………………………………….. 21

ii. Plaintiff’s Statement of Facts………………………………………………………. 23

iii. Defendant’s Response to Plaintiff’s Statement of Facts and Debtor’s

Statement of Facts………………………………………………………………….. 25

II. Publications

A. Ten Tips for Persuasive Oral Argument (Andrew S. Pollis, ABA Journal, June 29, 2017) .. 29

B. Oral Argument for Young Lawyers (Dennis Owens, ABA Newsletter, Summer 2009)…... 36

C. Preparing for Oral Argument: A Survey of Lawyers and Judges (Robert M. Roach, Jr.,

Roach Newton, LLP www.roachnewton.com) …………………………………………….. 39

D. Collateral Estoppel and Dischargeability Proceedings Part I (ABI Journal, May 2002)…… 44

III. Statutes and Cases

A. A.R.S. § 44-403 (Westlaw 2019) …………………………………………………………... 52

B. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 106 S. Ct. 2505, 91 L.Ed 2d 202 (1986) … 53

C. Schalkenback Foud. v. Lincoln Found., 208 Ariz. 176, 91 P.3d 1019 (App. 2004)……….. 74

D. Nortman v. Smith (In re Smith), 362 B.R. 438 (Bankr.D.Ariz 2007) ………….……….….. 88

INDUSTRY BACKGROUND

Office Park Design and Development: Companies in this industry (“OPDDs”) design, develop and

build commercial office parks to the specifications of their clients. OPDDs create plans and

architectural drawings and, in so doing, add to their electronic database (the “Library”) of premade

elements, custom designed elements, drawings, plans, and other work product for future use.

Each OPDD has its own library (or libraries) filled with plans, details, and other proprietary

information developed over years in business. A large, well developed library allows an OPDD to

save time (and therefore money) in creating designs for new and current customers. OPDDs also

can – and often do – license all or part of their libraries to other OPDDs (ostensibly in other

markets).

The Parties

Alden Design and Development (“ADD”): A long established and well respected OPDD in

Phoenix, AZ. ADD maintains one large proprietary Library and licenses seven other Libraries (for

a fee) via non-exclusive licenses. All of ADD’s Libraries are backed up on microfiche and all

copies are kept in a secure location.

Basset Office Build (“BOB”): In 2014, a BOB was founded as an OPDD in Phoenix, AZ. BOB

is a direct competitor to ADD. Upon opening, BOB licensed several of ADD’s Libraries for

$100,000 per year. After the spring of 2015, BOB no longer licensed any of ADD’s Libraries.

Orville Yeager (“Orville” or “the Debtor”): Owns 50% of BOB. When he opened BOB, he

solicited ADD’s Arizona employees to come to work for BOB. Orville convinced Bessie to leave

ADD and paid Bessie a $7,000 signing bonus.

Bessie T. Raitor (“Bessie”): An Architect and former employee of ADD, who now works for BOB.

Bessie had access to all of ADD’s Libraries, used them on a daily basis, and understood that the

Libraries are not public record, but are instead private and proprietary to ADD. Bessie was

responsible for creating a significant number of the items contained in the ADD Libraries. In

anticipation of leaving ADD and beginning work at BOB, Bessie began copying ADD’s Libraries

onto computer discs and thumb drives. She did this without permission from ADD, and ADD did

not have a system in place to monitor the internal copying of their Libraries.

The State Court Litigation

ADD filed a complaint against Bessie, Orville, and BOB in State Court. ADD’s complaint contains

7 counts (see Addendum One for a listing of the various counts).

ADD settled with Bessie a day before trial was scheduled to commence for $15,000 and her

testimony. The funds were to be paid by virtue of a Chapter 13 bankruptcy and ADD agreed not

to report the theft to the authorities. In other words, a very favorable outcome for Bessie.

A non-jury trial was held and on May 2, 2016, the Honorable Dwight Holmes entered judgment in

favor of ADD on Count 2 of the Complaint (see Addendum Two). The judgment awarded

compensatory damages pursuant to the Arizona Uniform Trade Secret Act ($141,500) and

statutory punitive damages twice that amount ($283,000). Since Orville returned all CDs and

deleted the data from his server prior to trial, the court dismissed counts 4, 5, and 7.

1

DISCHARGEABILITY LITIGATION

Orville – encountering financial difficulties related to the demise of BOB – ultimately finds

himself filing for bankruptcy. ADD – having been unsuccessful collecting on the state court

judgment as against defunct BOB – brings an Adversary Complaint, alleging that Orville’s

liability on the state court judgment is excepted from discharge pursuant to 11 U.S.C. 523(a)(6).

The Issues

(1) Is the state court judgment res judicata for purposes of the Adversary Proceeding?

(2) If not, is Orville’s liability under the judgment excepted from discharge under §

523(a)(6)? The Evidence

1. State Court Judgment

2. All state court exhibits (each pupillage is welcome to fabricate their own exhibits here)

3. The following exhibits were not admitted in the state court litigation

a. Letter that predates Bessie’s hiring from Orville to third party regarding importance

of a well-established Library for any OPDD entering a new market, especially if it

is from a local OPDD. (this letter is a “business record”).

b. Email from Orville explaining that libraries like ADD’s are an incredible asset to any

OPDD; NOT a direction to steal. (this email is not a “business record”).

(1) Orville Yeager

(2) Bessie T. Raitor

The Witnesses

The Disputed Facts

(1) Whether Orville encouraged and/or participated in Bessie’s theft from ADD.

(2) Extent of Orville’s knowledge of Bessie’s theft from ADD.

(3) Whether Orville knew the Libraries came from ADD.

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ADDENDUM ONE COUNTS

Count Against Description

1 ALL defendants

Declaratory relief pursuant to the Arizona Trade Secrets Act. ADD asks the court to declare its Libraries trade secrets

2 BOB, Bessie

Misappropriation of Trade Secrets: Bessie misappropriated ADD’s Libraries, BOB knew or had reason to know, and they plan to use it for their own benefit. Seeks compensatory damages, punitive damages and attorneys’ fees.

3 BOB, Bessie

Injunctive relief: ADD asks the court to enjoin Bessie and BOB from using ADD’s Libraries.

4 BOB, Orville, Bessie

Conversion – Intangible Property: Even if ADD’s Libraries do not constitute trade secrets, the information they contain are property of ADD that has been wrongfully converted by BOB and Bessie (seeks general and punitive damages). *Dismissed prior to trial

5 Orville Conversion – Tangible Property: Alleges Orville is in possession of computer discs that contain ADD’s Libraries “taken from the offices of ADD and that were received by Orville as a result of wrongful acts by Bessie” (seeks return of discs and damages in excess of $40,000). *Dismissed prior to trial

6 Bessie Breach of Fiduciary Duty Bessie owed to ADD (seeks injunctive relief and compensatory damages).

7 Orville, Bessie

Conspiracy to Commit Conversion – Tangible Property: Alleges that Orville and Bessie conspired to convert the physical computer discs from ADD for use by BOB. *Dismissed prior to trial

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IN THE SUPERIOR COURT OF THE STATE OF ARIZONA

IN AND FOR THE COUNTY OF MARICOPA

Alden Design and Development, LLC,

Plaintiff,

v.

Basset Office Build, LLC; Blair T. Raitor

and John Doe Raitor, husband and wife;

Orville Yeager and Jane Doe Yeager,

husband and wife,

Defendant(s).

Case No.: CV2016-998877

JUDGMENT

This case was tried to the Court at a four (4) day trial commencing on April 4, 2016

and ending on April 7, 2016. Based on the findings of the Court, and good cause appearing

therefor;

IT IS HEREBY ORDERED that Plaintiff Alden Design and Development, LLC,

an Arizona limited liability company (“Alden Design and Development, LLC”), is

awarded judgment jointly and severally against Defendants Basset Office Build, LLC, an

Arizona limited liability company (“Basset Office Build, LLC”) and Orville Yeager as

follows:

1) As to Alden Design and Development, LLC’s claim for misappropriation of

trade secrets, Alden Design and Development, LLC is awarded the following

amounts: (i) damages in the amount of $141,500; and (ii) interest on the

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foregoing amount at the rate of four and one half percent (4.5%) from the date

of entry of this judgment until paid, pursuant to A.RS. §44-1201(B).

IT IS FURTHER ORDERED that Plaintiff Alden Design and Development, LLC

is awarded judgment against Defendant Basset Office Build, LLC only, as follows:

1) punitive damages in the amount of $283,000 pursuant to A.R.S. § 44-403(B);

(2) reasonable attorneys’ fees incurred in the amount of $96,000 pursuant to A.R.S.

§ 44-404;

IT IS FURTHER ORDERED that the other counts raised in Alden Design and

Development, LLC’s Complaint either have been settled or are hereby dismissed.

Pursuant to Ariz. R. Civ. P. 54(b), this Court expressly determines that there is no

just reason for delay in entry of a final judgment as to these claims and parties.

DONE IN OPEN COURT THIS 4th day of May, 2016.

/s/ Hon. Dwight Holmes

Honorable Dwight Holmes

Superior Court, Maricopa County AZ

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UNITED STATES BANKRUPTCY COURT

DISTRICT OF ARIZONA

In re: ORVILLE YEAGER, Debtor.

__________________________________

ALDEN DESIGN AND DEVELOPMENT,

Plaintiff,

v. ORVILLE YEAGER AND JANE DOE YEAGER, husband and wife,

Defendants.

Chapter 7 Case No. 2:18-bk-012345-MCW AP. No. 2:16-ap-054321-MCW

PLAINTIFF ALDEN DESIGN AND DEVELOPMENT’S MOTION FOR SUMMARY JUDGMENT

COMES NOW, Plaintiff, Alden Design and Development, (hereinafter referred to

as “ADD”), by and through undersigned counsel, hereby moves this Court for Summary

Judgment (the “Motion”) in favor of ADD and against Defendant Orville Yeager

(“Yeager” or “Debtor”) pursuant to Rule 56 of the Federal Rules of Civil Procedure as

incorporated herein by Bankruptcy Rule 7056, on the grounds that there is no genuine

issue as to any material fact and ADD is entitled to a judgment as a matter of law. The

Motion is based upon the accompanying Statement of Undisputed Facts and Judgment,

entered on May 4, 2016, in Alden Design and Development v. Orville Yeager, Arizona

Superior Court Case No. CV2016-998877.

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MEMORANDUM OF POINT AND AUTHORITIES IN SUPPORT OF

MOTION FOR SUMMARY JUDGMENT

Summary judgment in favor ADD and against Defendant is appropriate in this

matter because there is no genuine issue as to any material fact and ADD is entitled to

judgment as a matter of law.

STATEMENT OF FACTS

The facts supporting this Motion are more fully set forth in Alden Design and

Development v. Orville Yeager, Arizona Superior Court Case No. CV2016-998877.

ADD is an Office Park Design and Development Company (“OPDDs”). SOF ¶ 1.

ADD designs, develops and builds commercial office parks to the specifications of their

clients. SOF ¶ 2. Each project ADD completes adds to their electronic database (“the

Library”) of premade elements, customs designed elements, drawings, plans, and other

work product for future use. SOF ¶ 3. A large, well developed library allows ADD and

other OPDD Companies to save time and money in creating designs for new and current

customers. SOF ¶ 4. ADD maintains one large proprietary Library and licenses seven

other libraries. SOF ¶ 5. All of ADD’s Libraries are backed up on microfiche and all copies

are kept in a secure location. SOF ¶ 6.

In 2014, Basset Office Build (“BOB”) was founded as an OPDD in Phoenix, AZ.

SOF ¶ 7. BOB is a direct competitor to ADD. SOF ¶ 8. Yeager owns 50% of BOB. SOF

¶ 9. BOB licenses several of ADD’s libraries for $100,000 per year. SOF ¶ 10. When BOB

opened, Yeager solicited ADD’s Arizona employees to come to work for BOB. SOF ¶ 11.

Yeager convinced Blair T. Raitor (“Blair”) to leave ADD to begin working for BOB. SOF

¶ 12. Before Blair’s departure to work for BOB, Blair had access to all of ADD’s Libraries

and used them on daily basis. SOF ¶ 13. Blair knew and understood that the Libraries are

not public record but are instead private and proprietary to ADD. SOF ¶ 14. In anticipation

of leaving, Yeager convinced Blair to copy ADD’s Libraries onto computer discs and

thumb drives, without permission from ADD. SOF ¶ 15. BOB subsequently used the

designs for its future projects. SOF ¶ 16.

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ADD filed a Complaint against Blair, Yeager and BOB in the Arizona State Court,

Case No. CV2016-998877. SOF ¶ 17. ADD settled its claims against Blair before trial.

SOF ¶ 18. A Non-jury trial was held on April 4, 2016 and the Honorable Dwight Holmes

entered judgment in favor of ADD on Count 2 of the Complaint for Misappropriation of

Trade Secrets against BOB. SOF ¶ 19. The judgment awarded compensatory damages

pursuant to the Arizona Uniform Trade Secret Act for ($141,500) and statutory punitive

damages twice that amount ($283,000). SOF ¶ 20. At his deposition, Yeager testified that

he and BOB were “one and the same.” SOF ¶ 21. The ADD Library made ADD money

and provided ADD a competitive advantage. SOF ¶ 22. The ADD Library was proprietary

and owned by ADD. SOF ¶ 23. BOB paid Blair a signing bonus of $7,000.00. SOF ¶ 26.

Blair misappropriated the ADD Library. SOF ¶ 27. Blair testified in his deposition that

he intended to harm ADD when he misappropriated the ADD Library. SOF ¶ 28.

I. LAW

A. Summary Judgment

Summary judgment in an adversary proceeding is governed by the Federal Rule of

Bankruptcy Procedure 7056, which incorporates the Federal Rules of Civil Procedure,

Rule 56. Rule 56© and © provide in relevant part:

© [A motion for summary judgment shall be granted] forthwith

if the pleadings, depositions, answers to interrogatories, and

admissions on file, together with the affidavits, if any, show

that there is no genuine issue as to any material fact and that

the moving party is entitled to a judgment as a matter of law.

…

(e) When a motion for summary judgment is made and

supported as provided in this rule, an adverse party may not

rest upon mere allegations or denials of the adverse party’s

pleading, but the adverse party’s response, by affidavits or as

otherwise provided in this rule, must set forth specific facts

showing that there is a genuine issue for trial. If the adverse

party does not so respond, summary judgment, if appropriate,

shall be entered against the adverse party.

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In a motion for summary judgment,

the moving party bears the initial burden of identifying for the court those portions of the record which it believes demonstrate the absence of a material fact.

Celotex Corp. v. Ccitrett, 477 U.S. 317, 322-23 (1986).

To defeat a motion for summary judgment, however, the nonmoving party “must

do more than simply show that there is some metaphysical doubt as to the material facts.”

Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586 (1986). There is no

issue for trial unless there exists sufficient evidence in the record favoring the party

opposing summary judgment to support a ruling in that party’s favor. Anderson v. Liberty

Lobby, Inc., 477 U.S. 242, 249-50 (1986). As the court held in Anderson, “[i]f the evidence

is merely colorable, or it is not significantly probative, summary judgment may be

granted.” Id. at 249-50 (citations omitted). In establishing a triable issue of fact, a

responding party must do more than present a scintilla of evidence, rather, the evidence

presented must be sufficient to allow a reasonable finder-of-fact to find in the party’s

favor. Anderson, supra, 477 U.S. at 252; see also, Jung v. EMC Corp., 755 F.2d 708, 710

(9th Cir. 1985).

B. Collateral Estoppel

Federal courts are required to give the same preclusive effect to state court

judgments that those judgments would be given in that state’s own courts under the Full

Faith and Credit Clause of the United States Constitution. 28 U.S.C. § 1738; see also

Marrese v. Am. Academy of Orthopedic Surgeons, 470 U.S. 370, 380, 105 S. Ct. 1327, 84

L. Ed. 2d 274 (1985) and Kremer v. Chemical Construction Corp., 456, U.S. 461,465, 102

S. Ct. 1883, 1889, 72 L. Ed. 2d 262 (1982). This preclusive effect is implemented in cases

through application of the Doctrines of Res Judicata and Collateral Estoppel, otherwise

denominated as “claim preclusion” and “issue preclusion,” respectively. See Ginsberg,

The Work of Professor Alan Delker Vestal, 70 Iowa L.Rev. 13, 15-16 (1984). While

“claim preclusion” occurs when a party has brought an action and a final, valid judgment

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is entered after adjudication or default on identical causes of action, “issue preclusion” or

collateral estoppel is defined as,

When an issue of fact or law is actually litigated and

determined by a valid and final judgment, and the

determination is essential to the judgment, the determination is

conclusive in a subsequent action between the parties, whether

on the same or a different claim.

Restatement (Second) Judgments § 27 (1982).

a. Collateral Estoppel Under Arizona Law. Under Arizona law, collateral estoppel applies when: (1) the issue has been actually

litigated in a previous proceeding, (2) the parties had a full and fair opportunity and motive

to litigate the issue, (3) a valid and final decision on the merits was entered, (4) resolution

of the issue was essential to that decision, and (5) there is a common identity of the parties.

See Robert Schalkenbach Found. v. Lincoln Found., Inc., 208 Ariz. 176, 181, ¶ 18, 91

P.3d 1019, 1024 (App. 2004). Collateral estoppel prevents “repetitious litigation of what

is essentially the same dispute.” Baier v. Mayer Unified Sch. Dist., 224 Ariz. 433, 440, ¶

21, 232 P.3d 747, 754 (App. 2010).

C. Non-Dischargeability Under 11 U.S.C. § 523(a)(6)

Section 523(a)(6) has been applied to a broad range of conduct causing harm

subject to the limitation that the injury be both "willful and malicious." See, In re Riso,

978 F.2d 1151 (9th Cir. 1992). Willfull and malicious are treated seperately under the

Bankruptcy Code.

1. Willful under 523(a)(6)

The legislative history to the Bankruptcy Code states that "the word ‘willful’ means

‘deliberate or intentional,’ referring to a deliberate and intentional act that necessarily

leads to injury." Collier, supra,'[[ 523.12[2], The willfulness element requires that the

debtor intended the consequences of his action, and not just the action itself. Kawaauhau

v.Geiger, 523 U.S. 57, 61, 118 S. Ct. 974, 140 L. Ed. 2d 90 (1998) and Thiara, supra, 285

B.R. at 427.

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An injury is willful when it is shown either that the defendant had a subjective

motive to inflict the injury or that the defendant believed that the injury would

substantially result from his conduct. In re Su, 290 F. 3d 1140 (9th Cir. 2002). Case law

in the Ninth Circuit clearly differentiates between cases of subjective intent and those

evidencing only willfulness of conduct. See id. at 1141-42 (an automobile crash resulted

from the defendant’s running a red light which caused injury); Geiger, supra, 293 U.S.

328 (a negligent medical malpractice case); In re Peklar, 260 F.3d 1035, 1037-39 (9th Cir.

2001) (defendant reasonably believed that she had a legal right to remove and store

furniture owned by her creditor). For the finding of subjective intent, see, McIntyre v.

Kavanaugh, 242 U.S. 138, 37 S. Ct. 38, 61 L. Ed. 205 (1916) (defendant brokerage firm

received stock certificates by mistake but then, without notice to or consent from the

owner, appropriated the certificates to its own use (cited with approval in Geiger, supra,

523 U.S. at 63-64)); and In re Jercich, 238 F.3d 1202 (9th Cir.), cert denied, 533 U.S. 930,

150 L. Ed. 2d 718, 121 S. Ct. 2552 (2001) (employer-debtor withheld wages from

employee-creditor using the funds for personal investments.)

2. Malicious under 523(a)(6).

In the Ninth Circuit, "maliciousness" is found where the conduct that necessarily

causes injury is wrongful and without just cause or excuse, even in the absence of personal

hatred, spite or ill-will. Jercich, supra, 238 F.3d at 1209. In other words, intentional and

deliberate conduct with the intent to cause harm, or in circumstances in which the harm is

certain or almost certain to result, constitutes willful and malicious conduct under section

523(a)(6). Once that it is established that a conduct was “willful” malice may be inferred

from the Defendant’s actions. Littleton, 942 F.2d at 554.

II. Arguments

The Jury’s award of punitive damages shows willful and malicious conduct by the

defendant that injured the Plaintiff.

A. The Judgment of the Arizona State Court is Entitled to Collateral

Estoppel Effect in this Case.

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Yeager cannot dispute that the parties in this proceeding are identical to the parties

in the State Court Action. Likewise, he cannot dispute he had a full and fair opportunity

to litigate the claims asserted in the State Court Action. Yeager was represented in the

State Court action by an attorneys and undeniably understood the issues material to the

case, which included the Trade Secrets Claim and punitive damages.

In addition, the Arizona State Court Judgment entered on May 4, 2016 was a valid

and final decision on the merits as a matter of law. Thus, the only remaining collateral

estoppel element is whether findings of willfulness and malice were essential to the

Judgment and actually litigated by the Court in the state court action.

In fact, the issues of whether the Yeager willfully and maliciously injured ADD,

as set forth in 11 U.S.C. § 523(a)(6), were litigated in the State Court Action and essential

to the Judgment. Defendant clearly understood that the Plans and architectural drawings

were developed and owned by ADD. See SOF ¶ 14 - 15. Indeed, by not paying for the

documents, the Defendant believed he could obtain a competitive edge with his company.

The Defendant’s scheme of hiring away ADD’s employees to avoid paying for the

documents which he could purloin from ADD’s former employees was willful and

malicious, as it was done with an intention to harm ADD.

No other conclusion can be drawn from the Defendant’s conduct. The State Court

was particularly interested in the fact that the Defendant copied the plans he had

improperly obtained through Blair. Moreover, the Court found that the Defendant’s

testimony denying involvement with the misappropriation was not credible and

inconsistent with the testimony and evidence provided by others, including Blair.

Ultimately, the State Court concluded that the Defendant had knowledge of and

acquiesced in the theft and misappropriation of the plans and designs. Clearly, these are

circumstances indicative of willfulness and maliciousness.

B. The Defendant’s Conduct Constitutes Willful and Malicious Injury to

ADD for the Purposes of Section 523(a)(6).

1. The Defendant's Conduct Was Willful.

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Although the State Court’s findings were against BOB, Yeager testified in his

deposition that he and BOB were “one and the same.” SOF ¶ 21. Thus, there is no actual

difference between Yeager and BOB. Defendant knew exactly what he was doing and

the likely consequences of his actions. The Defendant knew that ADD’s trade secrets were

private and proprietary. SOF ¶ 14-15, 23. He also knew that the proper way to acquire

the information and data he was seeking was to create plans and archetectural drawings at

a high cost. The Defendant further understood that acquiring the plans and drawings

without paying for it would make his new company competitive at the expense of ADD

from which the plans and drawings were stolen. SOF ¶ 22. Further, BOB paid Blair a

$7,000.00 signing bonus which was obviously done to incentivize Blair to misappropriate

the Library. SOF ¶ 24, 25. This, in conjunction with Blair’s testimony at his deposition

that he intended to harm ADD when he misappropriated the Library shows clear intent

willfulness by BOB to engage in this behavior. SOF ¶ 26. The finding that the Defendant’s

testimony denying involvement with the misappropriation was not credible and was

inconsistent with the testimony and evidence provided by others on various key points in

an attempt at a continuing cover-up further demonstrates his subjective intent and

understanding of the harm and damage that would necessarily follow from his action.

Indeed, the State Court’s factual findings on these issues led it to the conclusion

that there is ample evidence of willfulness in the actions of the Defendant due to the

cooperation between Yeager and Blair in the taking, copying and surreptitiously returning

the plans and drawings and the fact that the Defendant’s testimony was not credible. Not

only did the State Court render a factual finding that the Defendant’s conduct was

malicious in that it was “willful, wanton and reckless,” but rendered that conclusion of

law as well. As a result, the State Court’s findings and conclusions support the

"willfulness" portion of the Bankruptcy Code’s standard under section 523(a)(6).

2. The Defendant's Conduct Was Malicious. As demonstrated hereinabove, the Defendants’ actions were clearly wrongful. In

addition, ADD suffered damages which necessarily flowed from the Defendants’ conduct

through the loss of business and the competitive disadvantage of underwriting the cost of

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the plans and drawings. Finally, nowhere in the findings of fact is there any evidence that

the Defendant even proffered a just cause or excuse for his conduct. On the contrary, the

Defendant simply denied all involvement in the misappropriation scheme which was

found to be not credible and inconsistent with other testimony and evidence on the key

issues.

Further, not only did the State Court find the Defendant's conduct to be "willful

and malicious", but also found that it was "wanton and reckless." As noted above, there

can be no doubt that the Defendant's conduct was "willful and malicious" under existing

case law and the Bankruptcy Code standard. Indeed, the Defendant's conduct was more

than simply negligent or reckless because his actions were knowingly unlawful and

intended to misappropriate ADD’s business for his own. This is exactly the species of

conduct which Congress chose not to encourage through the reward of a discharge in

Chapter 7. Therefore, a judgment of nondischargeability for the full amount of liability

imposed by the Arizona State Court is mandated by the facts of this case.

3. The Defendant's Conduct Injured ADD.

The Arizona State Court found that ADD had been harmed and damaged by the

Defendants’ actions and conduct. The State Court awarded $141,500.00 compensatory

damages to ADD and $283,000.00 in punitive damages.

CONCLUSION

For all of the foregoing reasons, ADD respectfully requests that this Court enter an

Order granting its Motion for Summary Judgment in this case, enter judgment in favor of

ADD and against the Defendant for all amounts prayed for in its Complaint and for such

other and further relief as the Court deems proper.

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DISTRICT OF ARIZONA

In re: ORVILLE YEAGER, Debtor.

__________________________________


Plaintiff,


Defendants.


DEFENDANT ORVILLE YEAGER’S

OPPOSITION TO PLAINTIFF ALDEN DESIGN AND DEVELOPMENT’S

MOTION FOR SUMMARY JUDGMENT

Defendant, Orville Yeager (“Defendant” or “Yeager”) Opposes Alden Design and

Development’s (“Plaintiff” or “ADD”) Motion for Summary Judgment and requests that

the Court deny it. ADD provides no facts in its Motion to render the debt non-

dischargeable pursuant to 11 U.S.C. Section 523(a)(6). Furthermore, Collateral estoppel

does not apply because the issues that were litigated in State Court are not identical to the

issues in this non-dischargeability action.

STATEMENT OF FACTS

In 2014, Basset Office Build (“BOB”) was founded as an Office Park Design and

Development Company (“OPDD”), in Phoenix, AZ. DSOF ¶ 1. BOB is a direct

competitor to ADD. DSOF ¶ 2. Yeager is a member of BOB. DSOF ¶ 3.BOB licensed

several of ADD’s libraries until 2015 for $100,000 per year. DSOF ¶ 4. When BOB

opened, Blair left her job at ADD to begin working for BOB. DSOF ¶ 5. Yeager was

unaware of Blair copying of any ADD files without permission before her departure.

DSOF ¶ 6. Blair told Yeager the Designs he possessed were created and owned by her.

DSOF ¶ 7.

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ADD filed a Complaint against Blair, Yeager and BOB in the Arizona State Court.

DSOF ¶ 8. ADD settled its claims against Blair only one day before trial. DSOF ¶ 9.

Yeager agreed to testify against BOB in the State Court Suit in return for a favorable

settlement agreement of $15,000.00. DSOF ¶ 10. A Non-jury trial was held on April 2,

2016 and the Honorable Dwight Holmes entered judgment in favor of ADD on Count 2

of the Complaint for Misappropriation of Trade Secrets against BOB. DSOF ¶ 11. Yeager

was not a defendant to the Count 2 of the State Court Suit. DSOF ¶ 12. The judgment

awarded compensatory damages pursuant to the Arizona Uniform Trade Secret Act for

($141,500) and statutory punitive damages twice that amount ($283,000) against BOB

only. DSOF ¶ 13. Yeager filed for a Chapter 7 Relief on June 3, 2018. DSOF ¶ 14.

I. LAW

A. Standard For Motions For Summary Judgment

Summary judgment may be ordered if the record shows that "there is no genuine

issue as to any material fact and that the moving party is entitled to judgment as a matter

of law." Fed. R. Civ. P. 56 (c) , incorporated by Bankruptcy Rule 7056. T.W. Elec. Serv.,

Inc. V. Pacific Elec. Contractors Ass'n, 809 F. 2d 626, 630-31 (9th Cir. 1987). Arrow

Electronics, Inc. V. Howard Justus (in re Kaypro) 218 F. 3d 1070, 1073 (9th Cir. 2001).

The proponent of a summary judgment motion must show that there are no disputed facts

warranting disposition of the lawsuit without a trial. Younie v. Gonya (In re Younie), 211

B.R. 367, 373 (9th Cir. BAP 1997), aff'd, 163 F. 3d 609 (9th Circ.) (quoting Grazybowski

v. Aguaslide "N" Dive corp. (In re Aguaslide "N" Dive Corp.) 85 B.R. 545, 544 (9th Cir.

BAB 1987)). If the moving party adequately carries its burden, the party opposing

summary judgment must then "set forth specific facts showing that there is a genuine issue

for trial." Anderson v. Liberty Lobby, Inc. , 477 U.S. 242, 248, 91, L. Ed. 2d 202, 106 S.

Ct. 2505 (1986). "A 'material' fact is one that is relevant to an element of a claim or defense

or whose existence might affect the outcome of the suit. The materiality of a fact is thus

determined by the substantive law governing the claim or defense." T.W. Elec. at 630.

B. Collateral Estoppel

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Principles of collateral estoppel apply to proceedings seeking exceptions from

discharge brought under 11 U.S.C. §523(a). Grogan v. Garner, 498 U.S. 279, 284 n.ll,

112 L. Ed. 2d 755. Under the Full Faith and Credit Act, 28 U.S.C. § 1738, the preclusive

effect of a state court judgment in a subsequent bankruptcy proceeding is determined by

the preclusion law of the state in which the judgment was issued. Gavden v. Nourbakhsh

(In re Nourbakhsh), 67 F.3d 798, 800 (9th Cir. 1995) (citing Marrese v. Am. Acad. Of

Orthopaedic Surgeons, 470 U.S. 373, 380, 84 L. Ed. 2d 274, 105 S. Ct.1327 (1985)). See

Harmon v. Kobrin (In re Kobrin), 250 F. 3d 1240, 1245 (9th Cir. 2000).

Claim preclusion requires three things: (1) identity of claims; (2) a final judgment

on the merits; and (3) the same parties, or privity between the parties. Cell Therapeutics,

Inc. v. Lash Grp. Inc., 586 F.3d 1204, 1212 (9th Cir.2010) (amended).

In Circle K Corp. v. Industrial Com'n of Arizona, the Court stated that Preclusion

in either form promotes: (1) finality in litigation; (2) the prevention of harassment; (3)

efficiency in the use of the courts; and (4) enhancement of the prestige of the courts. 880

P.2d 642, 646, 179 Ariz. 422 (Ariz. App., 1993). However, the Court cautioned against

the rigid application of preclusion, approving the use of preclusion "so long as litigants

are given their day in court and the rights of individuals are not infringed." id. Because of

these policies, courts hesitate to apply preclusion when, for example, the party against

whom preclusion is sought had no incentive to litigate. Id.; Red Bluff Mines, Inc. v.

Industrial Comm'n, 144 Ariz. 199, 205, 696 P.2d 1348, 1354 (App.1984).

C. 11 U.S.C. § 523(a)(6)

While an underlying policy of the Code is to grant a "fresh start" to individual

debtors, that "opportunity for a completely unencumbered new beginning [is meant for]

the 'honest but unfortunate debtor'." Grogan v. Garner, 498 U.S. 279, 287, 111 S. Ct. 654,

659 (1991). § 523(a)(6) of the Bankruptcy Code provides:"(a) A discharge [. . .] does not

discharge an individual debtor from any debt [. . .] for willful and malicious injury by the

debtor to another entity or to the property of another entity.''

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To prevail in their motion ADD must show that the Court found all three elements

of § 523(a)(6). The three elements that must be found for a debt to be non-dischargeable

pursuant to § 523(a)(6) are 1) Willful 2) Malicious and 3) Injury.

First, a debtor's actual knowledge is the focus of the willfulness inquiry. "[T]he

subjective standard correctly focuses on the debtor's state of mind and precludes

application of § 523(a)(6)'s non-dischargeability provision short of the debtor's actual

knowledge that harm to the creditor was substantially certain." In re Thiara 285 B.R. 420

(9th Cir. BAP 2002) (citing Su v. Carrillo (In re Su), 259 B.R. 909, 914 (9th Cir. BAP

2001), aff'd, 290 F.3d 1140 (9th Cir. 2002)).

Second, the injury must be "malicious." This means that it must also be a wrongful

act, done intentionally, which necessarily causes injury, and which is done without just

cause or excuse. Petralia v. Jercich (In re Jercich), 238 F.3d 1202,1208 (9th Cir. 2001),

cert. denied.

Finally, there must in fact be an injury. In Geiger, the Supreme Court found that

“[t]he word "willful'' in (a)(6) modifies the word "injury,'' indicating that non-

dischargeability takes a deliberate or intentional injury, not merely a deliberate or

intentional act that leads to injury. Had Congress meant to exempt debts resulting from

unintentionally inflicted injuries, it might have described instead "willful acts that cause

injury.'' Or, Congress might have selected an additional word or words, i.e., "reckless'' or

"negligent,'' to modify "injury.'' Kawaauhau v. Geiger, 523 U.S. 57, 140 L.Ed.2d 90

(1998) (emphasis in the original).

II. ARGUMENTS

Debtor lacked the requisite subjective intent required by 11 U.S.C. § 523(a)(6) to

commit willful and malicious injury to Plaintiff. Further, subjective intent is a question

for the trier of fact. There is clear dispute of material facts and Plaintiff is not entitled to a

summary judgment as a matter of law.

A. The Arizona Judgment has No Preclusive Effects for Purposes of ADD’s

Nondischargeability Action.

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First, the identity prong of collateral estoppel is not met. Yeager was not a

Defendant to the Count 2 of Plaintiff’s complaint in the State Court action. Count 2 dealt

with Misappropriation of Trade Secrets against Blair T. Raitor (“Blair”) and Basset Office

Building (“BOB”). As a non-defendant to Count 2 of the Complaint, Yeager had no basis

to defend against it. Furthermore, Plaintiff makes no allegations against Yeager under any

of the Counts he litigated and had a personal incentive to litigate.

Second, preclusive effect only applies if the issues are identical. The issues

presented in the Arizona court action and the current Non-dischargeability action are not

identical. The material factual findings that were necessarily required to be made, and

actually made, in the Arizona Court and the material factual findings that must necessarily

be made in the Bankruptcy non-dischargeability action under Section 523(a)(6) are not

identical. In particular, 523(a)(6) requires Plaintiff to show that Defendant had the

subjective intent to injure the Defendant. Plaintiff has failed to show this. Therefore, the

State Court judgment has no preclusive effect on the non-dischargeability action.

Third, the Court had a number of disjunctive bases to award punitive damages.

One of those bases was “consciously disregard a substantial risk” of injury. Here, the

Court also does not designate the basis for the award of punitive damages, and therefore

the parties must be allowed to litigate whether the Debtor’s conduct was willful and

malicious.

B. The Defendant’s Conduct Was Not Willful and Malicious Injury to ADD

for the Purposes of Section 523(a)(6).

The Arizona Judgment does not include the necessary post Geiger findings of fact,

namely, that Yeager had a subjective motive to inflict the injury on ADD or that Yeager

believed that ADD’s injury was substantially certain to occur as a result of his conduct,

which is a required finding for purposes of evaluating ADD’s nondischargeability action

under Section 523(a)(6). It is highly unlikely that Yeager had a subjective intent to inflict

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injury on ADD. Yeager acted to benefit his own company which is insufficient to meet

the standard under Geiger.

Furthermore, the Arizona Court found the Debtor’s acts to misappropriate trade

secrets enriched the Debtor but caused no actual damages to ADD. The Court further

found that the Debtor acted to benefit himself. As the Supreme Court made clear in

Geiger, to be nondischargeable, there must be a willful and malicious injury, not merely

an act. This finding of the Court precludes ADD from arguing that there was an injury that

could therefore be nondischargeable.

A finding by this Court that the Trade Secrets award is dischargeable is also

consistent with the underlying policy of providing a fresh start. Any enrichment of the

Debtor found by the Court was either illusory or turned over to the Chapter 7 Trustee as a

part of the Debtor bankruptcy. 11 U.S.C. § 523(a)(6) is a carve out of the presumption of

dischargeability of a debt to avoid visiting an injustice upon a party willfully and

maliciously injured by a debtor. Here, based upon the finding of the jury, there was no

injury, and therefore, nothing to overcome the presumption of dischargeability.

CONCLUSION

For all of the foregoing reasons. Yeager respectfully requests that this Court deny

ADD’s Motion for Summary Judgment.

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STIPULATED FACTS

1. Alden Design and Development (“ADD”) is an Office Park Design and

Development Company (“OPDD”).

2. ADD designs, develops and builds commercial office parks to the specifications

of their clients.

3. Each project ADD completes adds to their electronic database (“the Library”)

of premade elements, customs designed elements, drawings, plans, and other

work product for future use.

4. A large, well developed library allows ADD and other OPDD companies to

save time and money in creating designs for new and current customers.

5. All of ADD’s Libraries are backed up on microfiche and all copies are kept in

a secure location.

6. ADD maintains one large proprietary Library and licenses seven other libraries.

7. In 2014, Basset Office Build (“BOB”) was founded as an OPDD in Phoenix,

AZ.

8. BOB is a direct competitor to ADD.

9. Orville Yeager (“Yeager”) owns 50% of BOB.

10. BOB licenses several of ADD’s Libraries for $100,000 per year.

11. Yeager convinced Blair T. Raitor (“Blair”) to leave ADD to begin working for

BOB.

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12. Before Blair’s departure to work for BOB, he had access to all of ADD’s

Libraries and used them on daily basis.

13. ADD filed a Complaint against Blair, Yeager and BOB in the Arizona State

Court, Case No. CV2016-998877.

14. ADD settled its claims against Blair before trial.

15. A Non-jury trial was held on April 4, 2016 and the Honorable Dwight Holmes

entered judgment in favor of ADD on Count 2 of the Complaint for

Misappropriation of Trade Secrets against BOB and Yeager. See Attached

Exhibit A.

16. At his deposition, Yeager testified that he and BOB were “one and the same.”

17. The ADD Library made ADD money and provided ADD a competitive

advantage.

18. The ADD Library was proprietary and owned by ADD.

19. BOB paid Blair a signing bonus of $7,000.00.

20. Blair misappropriated the ADD Library.

21. Blair testified in his deposition that he intended to harm ADD when he

misappropriated the ADD Library.

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DISTRICT OF ARIZONA

In re: ORVILLE YEAGER, Debtors.

__________________________________


Plaintiff,


Defendants.


PLAINTIFF’S STATEMENT

OF FACTS IN SUPPORT OF ITS MOTION FOR

SUMMARY JUDGMENT


Development Company (“OPDDs”).

2. ADD designs, develops and builds commercial office parks to the specifications of

their clients.

3. Each project ADD completes adds to their electronic database (“the Library”) of

premade elements, customs designed elements, drawings, plans, and other work

product for future use.

4. A large, well developed library allows ADD and other OPDD companies to save

time and money in creating designs for new and current customers.

5. ADD maintains one large proprietary library and licenses seven other libraries.

6. All of ADD’s Libraries are backed up on microfiche and all copies are kept in a

secure location.

7. In 2014, Basset Office Build (“BOB”) was founded as an OPDD in Phoenix, AZ.



10. BOB licenses several of ADD’s libraries for $100,000 per year.

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11. When BOB opened, Yeager solicited ADD’s Arizona employees to come to work

for BOB.


BOB.

13. Before Blair’s departure to work for BOB, he had access to all of ADD’s Libraries

and used them on daily basis.

14. Blair knew and understood that the Libraries are not public record but are instead

private and proprietary to ADD.

15. In anticipation of leaving, Yeager convinced Blair to copy ADD’s Libraries onto

computer discs and thumb drives, without permission from ADD.

16. BOB subsequently used the designs for its future projects.

17. ADD filed a Complaint against Blair, Yeager and BOB in the Arizona State Court,

Case No. CV2016-998877.




Misappropriation of Trade Secrets against BOB.

20. The judgment awarded compensatory damages pursuant to the Arizona Uniform

Trade Secret Act for ($141,500) and statutory punitive damages twice that amount

($283,000).


22. The ADD Library made ADD money and provided ADD a competitive advantage.






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DISTRICT OF ARIZONA

In re: ORVILLE YEAGER, Debtors.

__________________________________


Plaintiff,


Defendants.


RESPONSE TO PLAINTIFF’S

STATEMENT OF FACTS AND DEBTOR’S STATEMENT

OF FACTS

Disputed Statement of Facts


Development Company (“OPDD”).

Reply: This is not a disputed fact.

2. ADD designs, develops and builds commercial office parks to the specifications of

their clients.


3. Each project ADD completes adds to their electronic database (“the Library”) of

premade elements, customs designed elements, drawings, plans, and other work

product for future use.


4. A large, well developed library allows ADD and other OPDD companies to save

time and money in creating designs for new and current customers.


5. ADD maintains one large proprietary Library and licenses seven other libraries.


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6. All of ADD’s Libraries are backed up on microfiche and all copies are kept in a

secure location.








10. BOB licenses several of ADD’s libraries for $100,000 per year.


11. When BOB opened, he solicited ADD’s Arizona employees to come to work for

BOB.

Reply: This is a disputed fact. The employees chose to work for BOB by choice

and not through BOB’s solicitation.


BOB.


13. Before Blair’s departure to work for BOB, he had access to all of ADD’s Libraries

and used them on daily basis.


14. Blair knew and understood that the Libraries are not public record but are instead

private and proprietary to ADD.

Reply: This is a disputed fact. Yeager is not aware of Blair’s knowledge nor did

they discuss this information.

15. In anticipation of leaving, Yeager convinced Blair to copy ADD’s Libraries onto

computer discs and thumb drives, without permission from ADD.

Reply: This is a disputed fact. Yeager did not convince Blair to copy ADD’s

Libraries.

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16. BOB subsequently used the designs for its future projects.

Reply: This is a disputed fact. Yeager is unaware of ADD’s designs being used for

any specific project.

17. ADD filed a Complaint against Blair, Yeager and BOB in the Arizona State Court,

Case No. CV2016-998877.










($283,000).

Reply: This is a disputed fact. The State Court award was against BOB only.

Yeager was not a named defendant on Count 2 of the Lawsuit.



22. The ADD Library made ADD money and provided ADD a competitive advantage.










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//

//

Debtors’ Statement of Facts



3. Yeager is a member of BOB.

4. BOB licensed several of ADD’s libraries until 2015 for $100,000 per year.

5. When BOB opened, Blair left his job at ADD to begin working for BOB.

6. Yeager was unaware of Blair copying of any ADD files without permission, before

his departure.

7. Blair told Yeager the files he possessed were designed and owned by his.

8. ADD filed a Complaint against Blair, Yeager and BOB in State Court.

9. ADD settled its claims against Blair only one day before trial.

10. Blair agreed to testify against BOB in the State Court Suit in return for a favorable

settlement agreement of $15,000.00.

11. A Non-jury trial was held on May 2, 2016 and the Honorable Dwight Holmes



12. Yeager was not a defendant to the Count 2 of the State Court Suit.



($283,000) against BOB only.

14. Yeager filed for a Chapter 7 Relief on June 3, 2018.

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https://www.americanbar.org/groups/gpsolo/publications/gp_solo/2015/september-october/ten_tips_persuasive_oral_argument/

June 29, 2017

Ten Tips for Persuasive Oral Argument Andrew S. Pollis

When Andy Warhol observed, “In the future, everyone will be world-famous for 15 minutes,” he

probably didn’t have appellate arguments in mind. But in the insular world of appellate

litigation—where we spend so much time holed up by ourselves researching and writing—a 15-

minute oral argument is sometimes our best opportunity to get out and show our stuff. And when

you finally get a chance to take to the stage for your big moment, you want to perform at your

best. To that end, I offer ten tips designed to elicit rave reviews from your colleagues, your

clients, and—most importantly—the judges.

Tip 1: Write the Brief

The first and best way to prepare for oral argument is actually to author the appellate brief

yourself. It may sound like an obvious point, but it’s not one that appellate lawyers consistently

honor. In large firms, high-powered partners may swoop in for the argument after “the team” has

written the brief. In solo shops, it’s not unusual for lawyers to hire law clerks (often students) to

do the “mundane stuff” like brief writing.

Anyone who has not played an active role in briefing will never understand the case as well as

those who lived with it from draft to draft to draft to final product. This is not to say that the brief

can’t be a team effort. But the person who argues the case needs to be an integral part of that

team if he or she has any realistic expectation of arguing the case effectively.

Tip 2: Double-Check Jurisdiction

Appellate courts have limited jurisdiction, usually prescribed by an interconnected system of

statutes and rules. They will use a jurisdictional defect to avoid hearing your case on the merits if

they possibly can—sometimes surprising counsel at oral argument with questions about

jurisdiction. Jurisdictional dismissals occur without the issue even having come up at oral

argument.

You can guard against improper dismissal by anticipating jurisdictional problems and being

prepared to address them at oral argument. Make sure you can articulate the jurisdictional basis

of your appeal in a single sentence, especially if your case has not yet reached final judgment in

the trial court. And if jurisdiction is uncertain—say, for example, the trial court issued a

questionable certification of partial final judgment under Federal Rule of Civil Procedure

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54(b)—be as prepared to address the jurisdictional issues as you are prepared to address the

merits.

Tip 3: Update Your Research—But Judiciously

Time doesn’t stop just because you have filed your brief. Between the time you file your brief

and the date of oral argument, courts may decide other cases that bear on yours. Part of preparing

for oral argument is making sure you monitor those decisions and keep your research current.

One good system for doing so is to program LEXIS or Westlaw to run periodic research queries

on the key cases, statutes, rules, and issues in your case.

Most jurisdictions allow parties to advise the appellate court of new authorities. In federal

appeals, Federal Rule of Appellate Procedure 28(j) permits parties to file a 350-word letter that

explains the significance of supplemental authority (and permits the opposing party to respond).

Some state court rules permit disclosure of new authorities but without the accompanying

argument. Whatever your jurisdiction permits, take advantage of the opportunity to make sure

the court is working with the current state of the law by the time it decides your case. And be

prepared to address these authorities at argument, especially if you have not had an opportunity

to address them in writing beforehand.

But there’s an important caveat here: Don’t over-supplement. A new case may touch on an issue

in your appeal, but that doesn’t necessarily mean you have to run and tell the court about it if it

adds nothing new. Remember that every piece of paper you file adds to the judges’ burden—so

make sure your new authority is worth their time. And never use a notice of supplemental

authority to disclose material that already existed (but that you somehow failed to discover)

when you wrote your brief.

Tip 4: Prepare a Detailed Outline—and Then Chuck It

One of the most effective ways of preparing for oral argument hearkens back to our law school

days, when we would outline our courses. I always found that the process of crafting the outline

was a more helpful study technique than actually having the outline. It is equally so with oral

argument preparation; studying the record and the law carefully enough to prepare your detailed

outline is the heart of preparation, even more than studying the outline once you have it.

And, for that very reason, you should dispense with all the papers by the time you take that

fateful walk from counsel table to the podium. Go up with nothing but your brain and your

charm. I say this for two reasons: First, knowing ahead of time that you will have no notes will

require you to absorb the material all the better, thus ensuring that your preparation will be

complete. Second, the quality of your presentation will, perforce, be immeasurably better if you

have nothing to look at but the judges’ eyes.

The idea of paperless argument strikes some of us at the core of our insecurities. What if I blank

out? What if I can’t remember that case name? If you have prepared adequately—and

memorized your first sentence (see Tip 5, below)—it simply won’t happen. But for those who

remain unconvinced, one simple trick is to have your notes sitting on the corner of the counsel

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table so that, in the worst-case scenario, you can go retrieve them. For the truly faint of heart,

you can bring them to the podium in a closed folder that you don’t dare open unless catastrophe

strikes.

Tip 5: Carefully Script—and Memorize—Your Opening Sentence

One of the most successful advertising campaigns for dandruff shampoo told us that we “never

get a second chance to make a first impression.” This is even truer in oral argument. Research

shows that important judgments materialize in a matter of seconds. Yet some oralists fail to

exploit that crucial moment when the mouth first opens and the pearls of wisdom start to drip

out. This is your moment to grab your audience. And it doesn’t matter how dry the issue may be;

there is always something you can say from the outset to make the case—and your side of it in

particular—sound compelling.

That opening sentence goes by many names, from the mundane (“introduction”) to the strategic

(“core theory”) to the vernacular (“elevator speech”). But the purpose is the same, no matter

what you call it: to distill your entire argument into a crisp and compelling statement that any

listener will understand—and that will leave your listener with no doubt about what side of the

issue you come down on. It’s not an easy task. Sometimes writing that opening sentence is

harder and more time consuming than all your other preparation combined. But getting it right is

crucial and rewarding.

An interesting anecdote on this score: In 2010 I had the honor of working alongside Cleveland

attorneys David E. Mills and Chris Grostic in preparing Mills for his Supreme Court oral

argument in Ortiz v. Jordan, 526 U.S. 1 (2011). The issue in Ortiz was whether the defendants

could appeal the denial of their fact-based summary judgment motion, even though they had not

reasserted their arguments in a post-trial motion. The three of us pored over Mills’ intended first

sentence, until finally we settled on:

Denial of summary judgment is not reviewable on appeal after trial, particularly where the

decision depends on whether the evidence on the merits of the claim is sufficient to cross the

legal line for liability.

The weekend before the argument, I started to worry that “particularly” was a hard word to

enunciate, especially when nerves are jumbled and the mouth is dry. So I counseled Mills to

substitute “particularly” with “especially.” At the argument, no sooner did he eke out that first

sentence (with my suggested revision) than Chief Justice John Roberts interrupted him and

seized on my suggested word:

I’m sorry to interrupt so quickly, but that “especially,” I take it—I take it, is a concession that

there’s a difference between claims for qualified immunity based on evidence and claims that are

based on law.

It was good for a laugh afterward, of course. But it also demonstrates that we were correct to

obsess about the wording because it inspired Chief Justice Roberts to zero in on one of the most

important aspects of the case. (In the end, we won, 9–0.)

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Tip 6: Road Map Your Argument

Medical studies tell us that people are much more comfortable in the doctor’s office if they know

what’s coming. If the doctor says, “I’m going to listen to your heart with my stethoscope, and

then I’m going to palpate your neck to feel your arteries,” we are much more relaxed than if the

doctor simply starts to do these things without warning.

Judges aren’t usually worried about being palpated, but the same principle applies. Everything

goes down more easily if we expect it. It’s simply less taxing to follow. So warn your judges

what path your argument will take. It’s easy to do, and it will help ensure that you structure your

argument logically. Here are three important considerations to keep in mind as you craft your

road map:

1. Disclose the ultimate destination. The best road map starts off with a general statement,

which is usually the major proposition in the case. A generic example for the appellant might be:

“We ask that the court reverse the erroneous trial court judgment.”

2. Disclose the distance. To fill out your road map, tell the court how many arguments you’re

going to make in support of that statement (e.g., “for three reasons”). Three is a good number;

you’re unlikely to be able to cover more than that in only 15 minutes.

3. Disclose the route. Briefly list each of your arguments, using ordinal numbers. “First, the trial

court erred in letting the case go to the jury; second, the trial court wrongly excluded evidence;

and third, the trial court gave the jury an erroneous legal instruction.” Don’t give detail here; that

will come later (or not, depending on how much of your prepared argument you get a chance to

deliver).

You’ll notice that for each of these elements, I used the word “disclose.” Lawyers are sometimes

inclined to keep information to themselves, not to reveal their work product or their thinking for

fear of giving away strategy. This might be an important concern when dealing with opposing

counsel in the throes of discovery or trial, but the opposite instinct should kick in when talking to

a judge. This is the time for full disclosure. This is the moment that all the strategizing has led to.

You’ve worked carefully to build the best hand, so feel free to tip it at the beginning of your

argument!

Also remember that road maps aren’t just for your opening. You can use them even in answering

judges’ questions. If a judge asks a question to which you have multiple responses, tell the judge

so before you start listing them (e.g., “There are three answers to that question, Your Honor”).

Tip 7: Aim for a Real Conversation

The goal of oral argument is, of course, to convince the court that your argument is more

persuasive than your opponent’s. So ask yourself: Are you generally easier to persuade when

someone is talking at you or with you? Most of us would agree that the latter approach—the

conversation, rather than the lecture—is a better way to convince us of the merits of an

argument. It’s no different with judges.

32

If you buy the premise that a conversational argument is more effective, it becomes important to

appreciate the most effective components of conversation and to fold them into our presentation.

It comes down to four basic points.

First, like any other conversation, listening is at least as important as talking. When judges ask

questions or raise concerns, they are giving you important windows into their thinking. Only if

you listen carefully to what they say can you respond and tailor your presentation to meet their

concerns. Then, answer those questions as directly as you can. If they ask a “yes or no” question,

give them a “yes” or “no” answer—and then, if necessary, elaborate to make that answer fit into

your overall argument.

Second, it’s a group conversation. Make sure you engage the whole group, not just a single

judge. Of course, you sometimes can intuit which judges may be your primary targets. For

example, if you know from past experience that one of the judges on a three-judge panel is

already likely to come out your way, the main focus of your energies should be on the other two.

Similarly, if you know you have no hope of winning over a particular judge, engaging him or her

at length may not be the best use of your time. But aside from these strategic considerations, you

should strive as much as possible to give each judge equal time.

Third, as with any other conversation, relate what you say to what others have said. This is

especially important in rebuttal, where the appellant gets a chance to respond to the appellee’s

argument; do whatever you can to connect your rebuttal to a judge’s question or comment to

your opponent. Doing so not only helps you emphasize the point in question, it also makes the

judge feel good, as if you were actually listening to what he or she said. Never pass up an

opportunity to make someone feel heard, even an appellate judge!

Fourth, anticipate the tough questions. Talk the case over ahead of time with smart people who

will find the holes in your argument. Craft answers to fill every one of these holes or, if

appropriate, concede them (see Tip 8, below). Anticipating questions will also allow you to

create pathways from your answers back into your prepared argument, thus increasing the

likelihood that questions will enhance your flow rather than disrupt it.

Tip 8: Concede What You Can

Lawyers tend to be reluctant to concede anything—even points that we don’t really need to win.

It’s ingrained in us not to give any ground unless we absolutely must. Instead of conceding

outright, some lawyers use that awful word, “arguendo”—as in, “even assuming arguendo I’m

wrong on Point X, I’m still right on Point Y.”

But, to borrow from Ecclesiastes, to everything there is a season. A time to refute, a time to

concede. And oral argument is the time to concede weak points, so long as the concession causes

no disruption to the integrity of your argument. Refusing to concede points that you cannot win

comes across as defensive and suggests that you are unwilling to evaluate your case objectively.

This defensiveness, in turn, undercuts your persuasiveness.

33

By contrast, conceding points you don’t ultimately need to win accomplishes two important

goals: establishing your personal integrity with the court and emphasizing your confidence in the

strength of your overall argument. A good example might be an appellate decision from another

jurisdiction that goes against you. If it doesn’t control your court, you might be better off

conceding that it goes against you rather than trying to concoct a weak way to distinguish it. You

can forcefully argue that your court should not follow the erroneous decision of the other court,

and your argument is all the more forceful if you don’t shy away from what the other court held.

Tip 9: Make It Look Fun

In The Adventures of Tom Sawyer, Tom famously got out of whitewashing Aunt Polly’s fence by

making the task look like a treat. “Like it?” he said. “Well, I don’t see why I oughtn’t to like it.

Does a boy get a chance to whitewash a fence every day?”

These days, kids get precious little opportunity to whitewash fences. But lawyers still get the

chance to deliver oral arguments. And the more fun you show the court you’re having, the more

confidence you exude—which is precisely the way to convince the court that you have the better

side.

Fun is contagious. People who see other people having fun want to have fun, too. Especially in

the drudgery of the law, where fun is sometimes the very thing we’re missing, a lawyer who can

stand up and make a joyful noise is naturally going to attract a more favorable response from the

other participants in the conversation.

And the best part is this: When you behave as if you’re having fun, most of the time you actually

do.

Tip 10: Moot Your Argument with a Mixed Audience

In a famous vaudeville joke, the straight man asks the question, “How do you get to Carnegie

Hall?” The answer, of course, is “Practice, practice, practice!” That’s also the best way to get to

the court of appeals. There is not a single appellate argument that cannot be improved by testing

it in front of an actual audience. The more you practice, the more comfortable you will feel in

your paperless walk up to the podium (see Tip 4, above).

Picking the audience should be a thoughtful exercise. Yes, colleagues in your firm are good

choices, but be careful about choosing people who are already biased in your favor or—just as

dangerous—eager to show you how smart they are by giving you an unnecessarily hard time.

And lawyers are not the only folks who can give you good feedback. Do a few moot courts with

laypeople. There is a value in getting reaction from people who don’t know the law—they can

help you identify things about your case that just don’t make sense or just feel wrong. And

because they don’t necessarily understand legal doctrine and authorities, they’ll give you more

thoughtful feedback on presentation style that your lawyer colleagues may miss.

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Make the Most of Your 15 Minutes

The universal consensus about your 15-minute oral argument is that, like a reality celebrity’s 15

minutes of fame, it goes by too fast. So make the most of it, and then savor those moments as

they slowly fade into memory. With any luck, you’ll get a decision down the road that will serve

as a happy reminder of your glorious time at center stage. And if not, your next argument is just

around the corner, offering you an opportunity for a triumphant comeback.

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Appellate Practice »Oral Argument for Young LawyersBy Dennis Owens

Want to be a very good appellate attorney? The skills you will need are different from theskills required for trial lawyers. You must be able to evaluate a case in light of the standard of review. You must have thegumption to tell the client or trial lawyer not to appeal the case that does not have a goodchance of success. You must write clearly and powerfully. You must be able to perform wellat oral argument. Here are some insights into the oral argument process that have been organized into a setof rules and a true “war story” that illustrates how not to present oral argument. 1. Do not waive oral argument. If a case is worth briefing, it is worth arguing orally.Senior Circuit Judge Myron Bright of the Eighth Circuit published a series of articles basedon surveys of appellate judges. The judges reported that oral argument had altered theirviews of cases and that this had happened much more frequently than the working barmay have previously believed. If only one judge has ever changed his or her mind justonce as a result of oral argument in all of legal history, then you should argue; this may bethe second time. 2. Do not plan on giving a speech that will fill your time. You have already madeyour points in the brief. You should not have held anything back. The judges have read allthe briefs. They do not want you to recite your brief to them. 3. Do not read your remarks. If you prepare some remarks (not a speech—Rule 2) to fillin the time before or between answering the court’s questions, do not read them. On ascale of one to ten, with ten being most persuasive and effective, reading a speech is aminus six. Neverread a statute, a contract provision, or ballot language. Put those in anaddendum of your brief. Paraphrase their language. If you must quote, then quote thefewest words possible—from memory. 4. Answer the questions from the bench. Think of it this way: Later today these judgeswill meet, discuss, and vote on the fate of your appeal. Oral argument is one opportunityfor you to participate in a first stage of that conference. You are there to answer theirquestions at their conference. 5. Answer promptly, answer fully, and answer candidly. To answer candidly, youmust be a professional, you must be honest, and sometimes you must be courageous. 6. Think about your answer. The old aphorism is “You can’t win your case in oralargument, but you can lose it.” What does that mean? One judge may ask you in a friendlytone if your position implicates large public policy considerations or if it advances certaininterests. Sensing an opportunity for support, you will be tempted to accept the idea beingoffered. The danger is that the other judges may be dead set against that policy or thatinterest. By aligning yourself with those notions (which you have not really considered),you may needlessly undercut your case. It would be safer to point out that your case couldbe decided in your favor without this judge’s approach—or that you simply had not thoughtabout this doctrine. 7. Be deferential to the judge. As soon as you perceive that a judge wants to ask aquestion, stop talking, set aside whatever point you were trying to make, and answer thequestion. 8. Know the record so you can answer fully. Know it cold. Never be forced to say, “Idon’t know. I did not try the case.” Judge Alex Kozinski says that this is how to lose onappeal.[1] 9. Know every crucial case’s holding. If both sides have cited a case for opposingpropositions, know all of the facts and the law in that case. 10. Be careful when conceding.

Concede what you must concede (but nothing more). 11. Do not mention the trial judge at all. If you must refer to the court below, do notuse the trial judge’s name. Instead, refer to “the trial court.” Remember that you are

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appealing from a judgment, not a judge. Appellate judges wear black robes just as thejudges below. Here is a secret: Within a very short time after ascending to the appellate bench, thejudges know which of the trial judges in their jurisdiction are thoughtful scholars, lazypapershufflers, hard workers, touchy egomaniacs, plaintiff’s judges, defendant’s judges,and timeserving political hacks. The appellate judges do not need to be told that judge soandso “embarrassed the bench” or “made a mockery of the legal process.” Calm down. Donot make it personal. 12. Do not attack opposing counsel. In fact, do not even mention opposing counsel.Appellate judges each hate certain things—ignoring the rules, laziness, verbosity, legalese,needless repetition. But they all hate personal animosity between lawyers. Once upon a time, I was law clerk for Chief Justice Robert Seiler of the Missouri SupremeCourt. I watched nearly all the oral arguments before the court that year. In one caseinvolving a great deal of money and arcane issues of law, the verbal fireworks werespectacular. The two lawyers were each senior partners of prestigious law firms. Theylooked the part—welldressed, wellgroomed, highly polished. They were articulate. Theyspoke with fervor, but not with apparent anger. They each spent a great deal of their timesavagely attacking each other. One claimed that his “worthy opponent” was “deliberatelymisleading the court.” The other claimed that opposing counsel was “sullying the court withhis distortions.” I later excitedly asked the chief justice, “What did you think?” He knewwhich of the several argued cases I meant. He shook his head and said sadly, “Dennis, itdoes not help us to decide these cases to be told why these lawyers hate each other.” Never mention that the other side has lawyers, let alone that they are “misleading thecourt.” 13. Do not joke. Attempts at humor in oral argument almost always fall flat. Judges donot want to be entertained. They do not like wisecracks. Joking does not advance yourargument. But, then, there is that famous story of a U.S. Supreme Court justice who poseda confusing, complex question that seemed to change as it unfolded. The solicitor generalhesitated to respond. The justice scolded him, “Come now, it is an easy question.” TedOlson replied, “Yes, sir. It is the answering that is hard.” A witty, selfdeprecatingresponse, if obviously spontaneous, may bring a laugh from the bench. But do not planongiving a funny answer. 14. Never try to predict the outcome from your oral argument experience.Preparing for oral argument in one case, Chief Justice Seiler wrote out a series of questionsfor the purpose of obtaining ammunition for his participation in the judges’ conference inwhich he would advance the appellant’s position. The briefs had not precisely answered anumber of the questions. The chief justice asked the appellant’s lawyer one question afteranother. The lawyer did not understand what the judge was doing. After a number ofquestions, the appellant’s attorney cut off the judge saying, “You seem to have made upyour mind, Mr. Chief Justice. Would you allow me to answer any questions the otherjudgeshave?” I am sure that the lawyer was shocked when the decision came down, and it wasonly the chief justice who dissented in his favor. Maybe these rules can be demonstrated by the story of My Worst Day in Court—Ever. Iwas retained to pursue an appeal involving a dispute involving taxation, ballot language,and the state constitution. At that time, the Eastern District of the Missouri Court ofAppeals was in the historic Wainwright Building in Saint Louis. I love that old building, butone of its courtrooms was oddly laid out. It was a very wide and shallow, with the benchonly a few feet from the entrance it faced. The bench was low, and, by necessity, thepodium was quite close to the bench. The old lawyer who had retained me to handle the appeal had allowed me free rein indeveloping the case. He was enthused about our brief. He said that he was going to attendthe oral argument. That morning, he asked me if he could take a bit of my time and make “one point.” I wassurprised, but because it was his case, I agreed. The presiding judge agreed to our splitting of my time, even though we could not state thebreakdown in specific allotments of time. The old fellow began to read every word of theballot language (all of which was in the brief, of course). One judge interrupted him assoon as he realized what the older lawyer was doing. The attorney left the podium, tooktwo steps to the bench (where he deposited his papers) and said to the presiding judge,“Will you please allow me to make my argument?” He was apparently referring to beinginterrupted by a question from one of the other judges. She said that she would and beganshifting her notes and briefs away from him. Clearly, he was invading their space. Hestayed there at the bench and proceeded to read the entire ballot, several sections ofseveral chapters of the statutes, and a newspaper editorial. To questions, he twiceanswered, “Mr. Owens will address that.” One judge said, “Well, I want to hear from Mr.Owens now.” The lawyer said “Okay, Judge. Later.” Finally after using 13 of my 15minutes, he took his papers off the judges’ bench and sat down. The presiding judge said, “Mr. Owens, you can have whatever time you need.” (I sensedthat she was feeling sorry for me.) I gave my answers to the three or four questions theyhad already asked and then sat down. We lost. Key words: Appellate practice, oral argument Dennis Owens is of counsel to DeWitt & Zeldin LLC in Kansas City, Missouri. 37


This article appears in the Summer 2009 issue of Appellate Practice, the newsletter of theAppellate Practice Committee.

38

PREPARING FOR ORAL ARGUMENT:A SURVEY OF LAWYERS AND JUDGES

Robert M. (Randy) Roach, Jr.Cook & Roach, L.L.P.

Houston1111 Bagby, Suite 2650Houston, Texas 77002

(713) 652-2800(713) 652-2029 (Facsimile)[email protected]

Austin1004 West Ave.

Austin, Texas 78701(512) 656-9655

(512) 479-5910 (Facsimile)

39

Table of Contents

I. INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

II. THE BASICS OF ORAL ARGUMENT PREPARATION. . . . . . . . . . . . . . . . . . . . .1

III. SURPRISING SIMILARITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1

A. Similarities in Preparation Techniques. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11. Practice and Anticipation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12. Flexibility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .23. Provocation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .24. Core Principles Concerning Jurisprudential Effect. . . . . . . . . . . . . . . .2

B. Similarities in Presentation Techniques. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .31. The Beginning of Oral Argument. . . . . . . . . . . . . . . . . . . . . . . . . . . . .32. Performance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .43. Visual Aids. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5

III. MAJOR DIFFERENCES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5

A. Differences in Preparation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5

B Differences in Presentation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5

IV. CONCLUSION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6

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Preparing for Oral Argument Chapter 19

1

I. INTRODUCTIONThis paper addresses the results from an oral

survey of well-respected appellate lawyers andjudges from across the State of Texas. The surveywas conducted to determine how successfulappellate advocates prepare for oral argument. Theresponses were surprisingly consistent with regard tomany aspects of preparation. Likewise, thestrategies and tools utilized by the lawyers in thesurvey were supported by opinions of the judgeswho participated.

The first section of this paper will present thebasic preparation techniques employed by virtuallyall of the lawyers surveyed. The latter sections willdeal with the differences in their preparation, as wellas presentation considerations that should be kept inmind throughout the process of preparation.

A special thank you is due to the lawyers andjudges for their participation. The lawyersinterviewed were:

Doug Alexander David HolmanPam BarronDon HuntBeth Crabb Kevin Dubose Lynn LiberatoDavid Gunn Rusty McMainsWarren Harris Dean Bill PowersMike Hatchell Roger Townsend

The Justices interviewed were:

Justice Deborah Hankinson Justice Nathan Hecht Justice Sarah Duncan Justice Woodie JonesJustice Mack Kidd

Without the willingness to participate and theremarkable candor of these lawyers and Justices, this

paper would not have been possible.1

II. THE BASICS OF ORAL ARGUMENTPREPARATIONThe survey participants all described the same

basics of oral argument preparation. The first step inpreparation is to gather all of the briefs, all of therecord, and all of the cases that were used in thebriefing process. The next step is to read all thebriefs. Most practitioners read chronologically fromthe first brief to the last. Generally, they read aboutsix to twelve of the key cases to get the backgroundof the important cases. Then they readchronologically, the pertinent excerpts from therecord, based on what they anticipate will beimportant in oral argument.

Almost all practitioners then focus on two orthree key points that are most likely to produce awin for them, regardless of how many points werebriefed. On these key points, special attention ispaid to what questions will be raised by the courtduring oral argument. At one time or another, mostpractitioners also consult with colleagues to discussthe argument and to help anticipate potentialquestions from the court. Finally, the advocatecreates an outline of the argument.

Once this process is completed, the next step isto practice. Some advocates practice privately;others practice in front of someone else. All agreethat practice makes perfect. Throughout the processof practicing, the advocate streamlines and polishesthe argument to the greatest extent possible. Finally,the advocate gathers the materials he or she will taketo the podium, and goes to court.

This general process reflects the unsurprisingsimilarities of what every good oral advocate does.What, then, are the similarities in the answers to thesurvey that are surprising?

II. Surprising SimilaritiesA. Similarities in Preparation Techniques1. Practice and Anticipation

1Additionally, I wish to thank Sean Cox andRobert Dubose for their insights and assistance inpreparing this paper.

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2

Of all the practitioners surveyed, almosteveryone, without prompting, said that they try to setaside at least two weeks before the argument to startpreparing. Over-preparation is the rule. No onesurveyed believed they could ever do a sufficientamount of preparation. Everyone approaches theprocess from the standpoint of: ‘I have to mastereverything.’ So the truth really is over-preparation.The commonality is total immersion. It might beexpected that the total immersion is focused on thebriefs; however, most of the persons surveyedreported a redevelopment of their thinking on theargument based on their oral argument preparation.There are often significant and material changes inthe argument between initial brief preparation andoral argument. The primary concern throughout theoral argument preparation is addressing the concernsof the court.

The most commonly recited key to oralargument is anticipation. None of the participants inthe survey believe that what they want to say is themost important part of preparation. They all believethat the absolute focus of their argument is thecourt’s concerns and questions.

The lawyers also uniformly agreed that constantpractice and input from colleagues is essential tosuccessful preparation. Virtually every lawyersurveyed practices in every way and in every placeimaginable. All lawyers outline their argument andcontinually rehearse and refine it. Many will writetheir argument in order to carefully tailor the wordsfor presentation, or perhaps to carve out the perfectphrase to repeat to the court throughout theargument. Regardless of the approach towardsoutlining, constant practice and refinement isessential.

2. FlexibilityAnticipating the questions of the court must be

tempered with flexibility. Every lawyer in thesurvey spoke about ‘needing to go where the courtwants to go, so you have to build in flexibility.’ Alawyer cannot be tied to a particular outline orparticular logical flow.

Some of the people spoke specifically ofmodules. They prepare questions and answers indiscrete modules so it does not make a differencewhether the court asks them about module number

three first or module number ten first. Theflexibility is built into their outline.

3. Provocation Many of the participants described their

approach to oral argument as wanting to ‘sowquestions in the mind of the court’. Everyone wasconcerned about being provocative. Everyone wasconcerned about steering the court. Some utilize theopening framework to provoke the court to ask thequestions the lawyer feels are important and whichthe lawyer wants to answer.

4. Core Principles Concerning JurisprudentialEffectThe most important point of agreement for both

lawyers and judges is the step beyond theanticipation and practice. That step is the analysis ofthe jurisprudential consequences resulting from aparticular rule of law argued by the advocate.

In an oral argument there are two competingsets of jurisprudential interests. The goal is to framethe issues in a manner that presents these competingsets of jurisprudential interests. If the argument canbe framed in this manner, the issues become easierfor the court to address.

For many judges, including Justice Hecht, themost important practice of a good advocate is tofocus on the weaknesses of his or her case, asopposed to ignoring the weaknesses and focusingonly on the strengths of the case. All of the lawyerssurveyed agreed that the most important tasks theyfaced in analyzing and preparing to present theproblem are understanding their position’s ownweaknesses and vulnerabilities, and being preparedto either defend them or concede them.

The next most important task, from theperspective of both judges and lawyers, was to focuson the consequences of their proposed rule versusthe rule offered by the opposing lawyer. How is theproposed rule going to change the law? How is itgoing to be consistent with the law? How will it beapplicable to another set of facts? Is the ruleconsistent with what other states are doing, or is thelaw in other respects consistent with the proposedrule? Good lawyers focus their energy andarguments on answering these questions for thecourt. This approach of viewing the result from a

42


3

jurisprudential perspective was consistent among theentire survey group.

One of the most insightful comments in thesurvey was Justice Duncan’s comment about how toeffectively frame the issues in a case. She said, ‘thesingle biggest problem is that you get two shipspassing in the night. Both in the briefing and oralargument. There is just no joinder.’ The solution,as she framed it, involves two things: ‘Identifywhere the parties disagree and more importantly,explain to the court why they disagree. It is the whyof the disagreement that is really what’s reallyimportant to us. That’s what we care about andthat’s the way that we are going to decide the case.’

The lawyers surveyed were very conscious oftrying to make the argument simple for both thecourt and themselves. The constant concern in oralargument is to focus the court, as clearly as possible,on the point with which it must wrestle in order todecide the case. The method to do this is to contrastthe lawyer’s argument with the opposing side’sargument and to demonstrate the consequences of adecision in favor or against their proposed rule.Through practice, anticipation, and understandingthe jurisprudential consequences and the clash ofthose issues, a lawyer can become confident that heor she will be able handle any potential questionsfrom the court. In reaching this point, lawyersconsistently prepare to concede their weaker pointsto prevent the court from being distracted, and todraw the attention to the real issues of the case in thelimited time allotted for oral argument.

The goal is to abandon the weaknesses asquickly as possible and thereby avoid the peripheralissues that distract from the core of the case. AsDoug Alexander explained, ‘I want to limit thebattlefield as closely as possible. When missilescome in that are not aimed at my battlefield, but areoutside it, I’m not going to put up any defense onthat, but the missiles that do come into the battlefieldthat I have to protect, I will fight to the death onthose.’

Ultimately, through this process of anticipationand analysis, both offensively and defensively,everyone is refining their position, crystallizingissues, limiting their position for explanation to thecourt.

The most important step is to refine theproposed decisional rule. Everyone has a rule thatthey want the court to adopt and that rule shouldsound as attractive as possible to the court. DavidGunn calls this process ‘finding the primarydecisional point,’ largely because it involvesidentifying for the court the shortest route to take ingranting the relief sought. Focusing on the primarydecisional point, the point that if won will decide thecase, in effect creates a shortcut around some of theissues raised by opposing counsel and perhaps someof the more peripheral issues raised by the advocatethemselves.

As Rusty McMains said, ‘the most importantthing that any advocate can do is to steer the courtby framing the issue.’ If an issue is framed one way,it may have a great deal more persuasive impact thanan alternative way.

B. Similarities in Presentation Techniques

1. The Beginning of Oral Argument

The beginning of the argument is when mostpeople focus the majority of their memorization.Lynn Liberato said, ‘I try to reduce my case to a onesentence description of the argument and when Ihave that, I feel like I can at least get my position outat the very beginning of the argument.’ Mostlawyers surveyed will hone to perfection the firstninety seconds of argument, many even practice andrecite it to themselves while sitting in the courtroomduring the morning of oral arguments. Thismemorization places them more at ease, secure inthe knowledge that they will be able to start out theargument as they wish, and also steer the court to theissues where they want to focus. The mostimportant task in the first ninety seconds is to let thecourt know why the lawyer’s argument is thewinning position. This is the opportunity to placethe argument in the best possible light for winning.

Another commonly stated strategy is to put thebest argument first for fear that, if a weakerargument is placed first, the lawyer may never reachhis or her best argument because of questions fromthe court. The lawyers surveyed believe that thecourt has an expectation that the best argument willcome first, and the judges surveyed confirmed thisbelief.

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The general consensus is that, when crafting anargument, the lawyer should keep the facts in asskeletal a form as possible. One approach is to viewthe facts of an argument as merely reminder facts.Getting bogged down in facts can waste valuabletime for argument. The same is true for casecitations. Many lawyers include only a limitednumber of cases in the structure of their outline.However, all the lawyers surveyed insisted that theseare merely generalizations, as the variety of cases istremendous and some may call for additionalemphasis on the facts or cases applicable to thesituation.

While generalizations may be appropriate indiscussing the uses of facts and case citations in anoutline, one area in which generalizations should notbe made is with regard to panel sensitivity. Panelscan range from hot to cold. The Supreme Court ofTexas is almost always hot. Some courts of appealsare known for asking few questions. Effectiveadvocates will adjust their argument preparationaccordingly.

Often, courts will have decisional memorandathat are circulated before oral argument. Often, thememoranda will predispose the panel against alawyer’s position. One way to address this is toattempt to anticipate the content of the decisionalmemoranda and address the deciding issue first. Forinstance, if it was anticipated that the memorandaindicated affirmance because of waiver, the lawyershould first address waiver and try to convince thecourt that the memoranda is incorrect. If successful,this might open the judges’ minds to consider someof the more substantive issues that would have beenlosing arguments had the court found waiver.

Another key preparation technique is toinvestigate whether panel members have written adecision on point. This will help in framing anargument by determining how the court had framedthe jurisprudential issues previously. If the court hasframed the issues in a manner beneficial to thelawyer’s side in the past, this will give a strongfoundation to build upon. If the court has framedthe issues in a manner antagonistic to the lawyer’sposition, they can use the argument structure tosuggest an alternative framing that might motivate ashift in the court’s disposition.

Other considerations include whether thelawyer will be the appellant or appellee and whetherthe opposing side has presented a good or poorargument. This is the time to pay close attention tothe other side’s argument. If they have done a poorjob, clashing with their argument may not be in thelawyer’s best interest, strategically. It may onlyserve to shine light on a poorly elucidated argumentand inspire the court to take the lawyer to task on theother side’s argument, distracting from the desiredfocus.

2. Performance

Most people surveyed believe that performanceis very important. Most agreed that the style shouldbe more of a learned conversational approach. Thespeaking style suggested by most is the style alawyer would adopt with a colleague in discussingtheir preparation for oral argument. A surprisingnumber of people spoke of spontaneity or ‘being inthe moment.’ Roger Townsend stressed that he feltthat being spontaneous and in the moment was themost important skill in oral argument. It is veryimportant for the lawyers not to appear as if they arepresenting a canned speech, but rather a uniqueconversation developing between the lawyer and thepanel. An essential element of spontaneity ismaintaining eye contact with the panel. If eyecontact is broken, the lawyer loses the ability topersuade and dissolves the conversational posturebetween the lawyer and the court. The obviouscorollary to this is not to rely on notes at the podium.

One technique that requires the utmostspontaneity is humor. Everyone agrees that plannedhumor sounds stilted or canned, and the chances areit will not be effective. Spontaneous humor,however, can be an effective tool of provocation. Itcan inspire the court to engage the lawyer and helprelax the atmosphere of the courtroom. If theatmosphere is not relaxed, persuasion is less likely,and the advocate is limited in his or hereffectiveness.

3. Visual AidsThe use of posters or enlargements was

resoundingly rejected by almost all of the lawyersand judges surveyed. Handouts were the rule. Ifany kind of visual aid is used, it should be ahandout, although many would prefer to use no

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visual aid at all. One of the commonly citedregarding problems with visual aids is that theydistract from the presentation of the advocate andresult in a panel of disengaged observers.

III. MAJOR DIFFERENCESMost of this paper has been dedicated to the

topics on which the survey participants agreed. Theremainder will address the major differences in theirviews.

A. Differences in PreparationSurprisingly, few lawyers said that formal moot

courts or practice arguments are an effective tool inpreparing for oral arguments. Most preferdiscussions with colleagues, because theconversational nature of the discussion is mostsimilar to the desired interaction with the court.Many participants believed that moot courts oftenserve as more of a distraction because, as a practicalmatter, the difficult questions a moot court mightconcoct are unlikely to be replicated by an actualcourt. Only a few lawyers believe that practicearguments are an effective preparation tool.

Everyone agreed that questions and answers arethe key to an effective argument, but only a few saidthat preparing for questions should constitute thebulk of oral argument preparation time. A fewadvocates report that they spend ninety percent oftheir argument time in preparing for questions andanswers as opposed to prepared remarks, but mostreported a 40/60 split between time devoted topreparing for questions as opposed to time devotedto the presentation of rehearsed remarks.

Another significant difference appeared in thefocus of preparation. Some attorneys try to masterevery possible issue so that they are not vulnerablein any exchange with the court. Others will prepareon the key issues only. If any unanticipated issuearises, they ask to address it through post-submission briefings.

Advocates also disagreed on their focus inreading the principal cases. Some read the principalcases to get a sense of the policy that motivates thecourts. Others focused on the holding of theprincipal cases and how those holdings areconsistent and coherent with the rule that they areasking the court to follow in the particular case.

Different advocates have sharply differentapproaches to last minute preparation. Some preferto ‘cram’ as much information into their heads aspossible in the final hours of preparation. Theseadvocates believe that this helps them betterremember the argument and helps them achieve ahigh intensity level for the argument. Others preferto calm themselves, often by clearing their minds ofthe argument. These advocates believe that they canperform better if they have calmed their mind.

Similarly, advocates also disagree about howpreparation affects their primary arguments. Forsome, the process of preparing rarely changes thefocus of the primary arguments. For others, thepreparation process can profoundly change boththeir articulation of the primary arguments as well astheir evaluation of which points are the mostimportant support for their argument.

B. Differences in PresentationOne sharp difference in oral argument

techniques is the degree to which advocates arewilling to use obfuscation as a tool in oral argument.Some advocates, and some judges, candidlyrecognized that advocates in some instances promotetheir position by obfuscating an issue — particularlywhen that issue is one that the advocate is likely tolose if it is understood by the court. Others believethat it never should be the role of the advocate toobfuscate, but instead always to clarify the issuesfacing the court.

Another significant difference is the attitudetoward notes. Some people will take no notes to thepodium. Those who do not use notes believe thateye contact and the other methods of engaging thepanel are more important. Many lawyers who usenotes at the podium use a manilla folder with theoutline attached on the right side of the folder andcase information attached on the left side. Somelawyers will take special care to design their notes,emphasizing with color highlights particular pointsor stages in their argument, or color coding cases forwhether they are for them, against them, or inbetween. Almost no one, however, would ever takea script of the argument up to the podium.

Another difference in technique is how theadvocate views his or her role as an advocate beforethe court. Some practitioners take on the role of an

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‘objective insider,’ or an ally of the court, whoserole is to clarify the issue and the arguments beforethe court. Many of these practitioners citemaintaining their credibility as an important goal oforal argument. Other practitioners view their role asa ‘partisan salesperson.’ They view their job asprimarily one of advocacy and persuasion, notobjectivity.

One surprising difference concerned theordering of arguments. Many advocatesacknowledge that they follow the general rule thatthe best argument should be presented first. Someadvocates, however, indicated that other factorsshould determine the order of arguments, such asmaking the ‘cleanest’ or simplest argument first.

Finally, advocates also disagreed about whetherit is a sound strategy to focus on arguments orauthorities not contained in the brief. Someadvocates often focus on ideas and arguments thatdo not appear in the brief. Some of these advocatesmaintain that making arguments not in the brief cangive the court additional reasons for ruling in theadvocate’s favor. They also maintain that they maynot fully understand the real argument until after thebriefing process is completed. After full briefing,the advocate may understand new arguments thatresolve the conflicting positions. Other advocatesinsist on focusing on the arguments contained intheir brief. Many of these advocates believe that thecourt is not likely to listen to or understandarguments that do not appear in the briefing.

IV. CONCLUSIONAfter completing this survey, it became clear

that what good appellate advocates do in preparingfor oral argument is surprisingly similar to eachother and to what the court wants from them. Eventhe differences among them can be best explained aspersonal attempts to accomplish the same goal — togive the court as much help as possible in decidingthe case.

46

10/9/2018 Collateral Estoppel and Dischargeability Proceedings Part I | ABI

https://www.abi.org/abi-journal/collateral-estoppel-and-dischargeability-proceedings-part-i 1/5

Current Issue Archived Issues Journal Topics Journal Columns Journal Authors Submission Guidelines Advertise

ABI Journal

May 2002Code to Code

Thus, where a court of competent

jurisdiction has previously ruled against a

debtor upon specific issues of fact that

independently comprise elements of a

creditor's non-dischargeability claim, the

debtor may not seek to relitigate those

underlying facts in bankruptcy court.6

Collateral Estoppel and Dischargeability Proceedings Part I

Journal Article: Under the doctrine of collateral estoppel, once an issue has been actually determined by a court of competent jurisdiction, thatdetermination is conclusive in subsequent litigation based on a different cause of action involving a party to the prior litigation.1 Thedoctrine of collateral estoppel is a judicially created doctrine that serves the dual purpose of protecting parties from relitigatingidentical issues with the same party or a person in privity and promoting judicial economy by preventing needless litigation.2 Thefollowing are the elements of collateral estoppel:

1. The issue in the prior litigation and the issue in the dischargeability proceeding are identical;

2. The bankruptcy issue was actually litigated in the prior action;

3. The determination of the issue in the prior action was a critical and necessary part of the judgment in that litigation;

4. The issue must have been determined by a valid and final judgment; and

5. The burden of persuasion in the discharge proceeding must not be significantly heavier than the burden of persuasion in the initial action.3In order for collateral estoppel to apply, the party against whom it is sought to be employed must have had a fair and full opportunity to litigate the issue inthe earlier case.4

The doctrine of collateral estoppel applies in dischargeability proceedings.5 One court has stated:

The doctrine of collateral estoppel applies to state court judgments.7 Under the Full, Faith andCredit Clause of Article IV of Section 1 of the United States Constitution and Judicial Code§1738,8 a federal court is directed to refer to the law of the state in which the judgment wasrendered when deciding whether to give preclusive effect to the state court judgment.9Thereafter, considering the preclusive effect of the earlier judgment under state law, the federalcourt must determine whether a federal statute expressly or impliedly creates an exception toJudicial Code §1738.10

The Issues Must Be Identical

In order for collateral estoppel to be applicable, the issues in the two proceedings must beidentical.11 Moreover, there must be factual findings on the issue involved in the dischargeability proceeding.12 In Estate of Hamilton v. Nolan,13 theDistrict of Columbia Commission on Human Rights found that the debtor had discriminated against a former employee. The estate of the formeremployee commenced an adversary proceeding to have the debt declared non-dischargeable pursuant to Bankruptcy Code §523(a)(6). The court heldthat the doctrine of collateral estoppel was inapplicable. The Commission failed to make findings that the debtor's actions were either willful or malicious.14

Similarly, in Aston v. Burke,15 the court declined to apply the doctrine of collateral estoppel because the issues in the state court action and thedischargeability proceeding were dissimilar.16

In Penn-America Insurance Co. v. Himowitz (In re Himowitz),17 the plaintiff sought to have a debt declared non-dischargeable pursuant to BankruptcyCode §523(a)(4). The bankruptcy court declined to apply the doctrine of collateral estoppel. The district court failed to make precise findings of fact, and

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Issue preclusion (collateral estoppel) does

not apply unless the issue to be precluded

in the subsequent action was actually

litigated and decided in the prior action.

Only matters that were actually litigated

and determined in the first proceeding

cannot later be relitigated. For issue

preclusion to apply, the particular issue in

the prior proceeding must have been

actually litigated and actually decided.19

However, the preponderent view, and we

think the better one, is that, as a general

proposition, a default judgment has no

collateral estoppel effect. To invoke the

doctrine of collateral estoppel in default

causes is not only an oppressive

application of the doctrine, but also

misconceives the nature of a default

judgment.25

The threshold question in the instant case

is whether the second requirement [that

issue must have been actually litigated] for

establishing collateral estoppel has been

satisfied. The Court of Appeals for the

Second Circuit has specifically endorsed

this requirement. "The relevant issue (must

have been) actually litigated and

determined in the prior" proceeding. In the

case at bar no issues were actually

litigated because the prior judgment was

procured by default. Consequently, the

doctrine of collateral estoppel does not

bar relitigation by this court of the issues

included in the default judgment.28

Where, as here, the prior judgment

obtained in the non-bankruptcy action was

obtained by default, the relevant issues

have not been actually litigated and

accordingly collateral estoppel does not

The mere recitation by Roeder's lawyer

that "judgment creditor acknowledges this

debt is non-dischargeable in bankruptcy"

may indicate the intent of the lawyer and

Roeder, but it does not indicate that Brown

therefore it was impossible to determine whether there was an identity of issues. No evidence was presented concerning what facts the district courtutilized to enter its judgment, and no explanation was offered concerning why the court found fraud or defalcation in a fiduciary capacity.

The Issue Must Be Actually Litigated

Another requirement is that the issue must have actually been litigated.18 The "actually litigated" requirement has been described in the following manner:

In Princess House Inc. v. Kraft (In re Kraft),20 the court ruled that the doctrine of collateralestoppel was inapplicable because the prior litigation did not determine whether the debtor hadacted maliciously. A jury found that the debtor had interfered with the plaintiff's contractualrelationships and wrongfully misappropriated trade secrets. The plaintiff commenced anadversary proceeding to have the debt declared non-dischargeable pursuant to BankruptcyCode §523(a)(6). The court held that collateral estoppel was inapplicable because the issue ofmalice, as employed in Bankruptcy Code §523(a)(6), was never before the jury. Consequently,the issue of malice was never actually litigated, and collateral estoppel could not be applied tothe prior judgment.

A confession of judgment may serve as the basis for collateral estoppel in a dischargeabilityproceeding.21 In Nier v. Hansen (In re Hansen),22 on the eve of the trial the debtor enteredinto a stipulation and confession of judgment. The debtor admitted the allegations contained inthe second and third claims for relief, which were predicated upon fraud. Subsequently, thedebtor filed for chapter 7, and the judgment-creditor filed a complaint objecting to thedischargeability of its debt pursuant to Bankruptcy Code §§523(a)(2)(A) and 523(a)(6). Thecourt ruled that the doctrine of collateral estoppel was applicable. The debtor actually had the

opportunity to litigate the issues; however, the debtor declined not to expend the resources to litigate the issues or face the possible sanctions.

Default Judgments Not Sufficient

Collateral estoppel is not afforded to a prior judgment if the judgment was entered by default.23 A default judgment is not given preclusive effect becauseno issue has been actually litigated.24 The following observations have been made concerning default judgments and collateral estoppel:

Bankruptcy courts have declined to apply the doctrine of collateral estoppel in dischargeabilityproceedings when the judgment in the prior non-bankruptcy proceeding was a defaultjudgment.26 In In re Ianelli,27 a default judgment had been entered against the bankrupt in theU.S. District Court. One of the issues before the court was whether the default judgment wouldbe the basis for applying collateral estoppel in a dischargeability proceeding. The courtanswered the preceding question in the negative, and it stated:

Similarly, in Graham v. Billings (In reBillings),29 the issue before JudgeFeller was whether a default judgmentcould be employed as the basis forcollateral estoppel in adischargeability proceeding. Again,the preceding issue was answered inthe negative. Judge Feller stated:

A consent judgment may be thebasis of collateral estoppel dependingon the intent of the parties.31 InRoeder v. Brown (In re Brown),32 thecourt held that a consent judgmentcould not act as the basis forcollateral estoppel. The court stated:

On the other hand, in Klingman v.Levinson,34 the Seventh Circuit heldthat a consent judgment could be thebasis for collateral estoppel. Theconsent judgment involved the sameissues involved in the bankruptcycase, and the defendant wasrepresented in the prior proceeding. Ifparties to a consent decree indicatetheir intention that the decree shallterminate the litigation and determinefinally certain issues, then theirintention should be effectuated. Thestipulation provided that the debt

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bar the defendant in the non-bankruptcy

action from attempting to prove facts

necessary to defeat such an action in the

context of a later dischargeability

proceeding.30

had the same intent. Nothing in the

documentation shows that Brown, who

was unrepresented by counsel,

understood or agreed that he would be

precluded in a later bankruptcy case from

asking the court to determine whether the

consent judgment was dischargeable.

Accordingly, the court finds that the issues

sought to be precluded were not litigated

by the parties in the prior state court action

and cannot be given preclusive effect.33

In the consent decree entered into in this

case, the parties specifically provided that

the debt owed to Ms. Klingman would not

be dischargeable in any bankruptcy or

similar proceeding and that in any

subsequent proceeding all of the

allegations of the complaint and findings

of this court may be taken as trusted and

correct without further proof. In this

situation, it is certainly reasonable to

conclude that the parties understood the

conclusive effect of their stipulation in a

future bankruptcy proceeding.

Consequently, the consent judgment

should be given collateral estoppel effect.

35

Issue preclusion attaches only to

determinations that were necessary to

support the judgment entered in the first

action. Two common explanations are

offered to justify this requirement. First, the

tribunal that decided the first case may not

have taken sufficient care in determining

an issue that did not affect the result, even

though the parties vigorously litigated the

issue. Second, appellate review may not

be available to ensure the quality of the

initial decision.36

would be non-dischargeable. TheSeventh Circuit stated:

The Issue Must Be

Necessarily Decided

One of the leading treatises onfederal civil procedure has made thefollowing comments concerning issuepreclusion and the necessarilydecided requirement:

In Mickle v. United States (In reMickle),37 the court declined to applythe doctrine of collateral estoppelbecause it was not necessary to theprior litigation for the tax court todetermine whether the debtor hadattempted to defraud the UnitedStates or willfully avoid or defeat thepayment of taxes. The determinationin the prior proceeding did notestablish that the debtor actedfraudulently in filing certain tax returnsor that he willfully attempted to evadeor defeat any tax. Consequently, theprior judgment could not beemployed as collateral estoppel toprove the elements required for acause of action under BankruptcyCode §523(a)(1)(C).

Courts Have Applied

Collateral Estoppel When All of the Criteria Have Been

Satisfied

In Freer v. Weinstein (In re Weinstein),38 the beneficiaries of various trusts had obtained ajudgment against the debtor for breach of fiduciary duty. The parties made cross-motions for

summary judgment. One of the issues before the bankruptcy court was whether the judgment was non-dischargeable under Bankruptcy Code §523(a)(4). The court ruled that the debtor was collaterally estopped from relitigating the issue as to whether he was a fiduciary because that issue was beforethe state court. Therefore, there were identical issues involved in both actions. The issue of defalcation was also before the state court because the juryfound that the debtor had paid himself excessive commissions. The issues were fully litigated because the debtor contested the allegations for severalyears. The judgment was also a final judgment because all of the debtor's avenues of appeal were exhausted. Finally, the state court's determinationswere essential. The plaintiffs' suit for damages and removal of the debtor as trustee were predicated upon the fact that the debtor had breached hisfiduciary duty. Under these circumstances, the debtor was estopped from arguing that the requirements of Bankruptcy Code §523(a)(4) were notsatisfied.

Footnotes

1 Federal Trade Commission v. Wright (In re Wright), 187 B.R. 826, 831 (D. Conn. 1995); Freer v. Weinstein (In re Weinstein), 173 B.R. 258, 267(Bankr. E.D.N.Y. 1994). Return to article

2 Meyer v. Rigdon, 36 F.3d 1375, 1379 (7th Cir. 1994). Return to article

3 Bush v. Balfour Beatty Bahamas Ltd. (In re Bush), 62 F.3d 1319, 1322 (11th Cir. 1995); Meyer v. Rigdon, 36 F.3d 1375, 1379 (7th Cir. 1994).Return to article

4 Grassgreen v. United States (In re Grassgreen), 177 B.R. 976, 983 (Bankr. M.D. Fla. 1995). Return to article

5 Wilcox v. Hritz (In re Hritz), 197 B.R. 702, 705 (Bankr. N.D. Ga. 1996); Grassgreen v. United States (In re Grassgreen), 177 B.R. 976, 983 (Bankr.M.D. Fla. 1995). Return to article

6 Schaffer v. Dempster (In re Dempster), 182 B.R. 790, 799 (Bankr. N.D. Ill. 1995). Return to article

7 Corn v. Marks (In re Marks), 192 B.R. 379, 383 (E.D. Pa. 1996); Frantz v. Schuster (In re Schuster), 171 B.R. 807, 810 (Bankr. E.D. Mich. 1994).One court has stated:

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Collateral estoppel may be employed in

cases involving dischargeability questions,

however, if the precise issue was raised in

the prior proceeding between the same

parties in privity with them, if it was actually

litigated, and if its determination was

necessary to the outcome in state court.

We believe that the general policy

considerations which support the principle

of issue preclusion in other contexts are

equally present in bankruptcy

dischargeability proceedings. Furtherance

of judicial economy, reliance on judicial

decisions, and the final resolution of

disputes all favor this court giving issue

preclusive effect to a prior judgment. To do

so, moreover, strengthens the relationship

between the relationship between state

and federal courts.

It is the plaintiff's burden to prove by a

preponderance of the evidence that the

debtor's actions were willful and malicious.

Although the Commission found that Nolan

discriminated against Hamilton, it did not

find that her actions were willful or

malicious. Neither willfulness nor

maliciousness are elements of

discrimination. Based on the record that

has been submitted to this court, the

plaintiff has not proven these elements by

way of collateral estoppel.

The results in the state court action appear

to have little to do with conversion. Indeed,

the gist of the action is breach of contract.

The jury instructions bear heavily on the

nature of a contract and its breach and the

jury's special verdict specifically found

there to be a breach of the dental

purchase contract for which damages

were awarded.

Irwin v. O'Bryan (In re O'Bryan), 190 B.R. 290, 295 (Bankr. E.D. Ky. 1995). Anothercourt has stated: Stern v. Dubian

(In re Stern), 77 B.R. 332, 335(Bankr. D. Mass. 1987). Return toarticle8 28 U.S.C. 1738. Return to article

9 In re Chen, 227 B.R. 614, 625 (D.N.J. 1998); Frantz v. Schuster (In reSchuster), 171 B.R. 807, 810 (Bankr.E.D. Mich. 1994). Return to article

10 Frantz v. Schuster (In reSchuster), 171 B.R. 807, 810 (Bankr.E.D. Mich. 1994). Return to article

11 Mickle v. United States (In reMickle), 207 B.R. 958, 962 (Bankr.M.D. Fla. 1997); 18 Moore, James

William, Moore's Federal Practice §132.02[2] (3d ed. 1997). Return to article

12 The Estate of Hamilton v. Nolan (In re Nolan), 220 B.R. 727, 729 (Bankr. D. D.C. 1998); see, also, Penn-America Insurance Co. v. Himowitz (In reHimowitz), 162 B.R. 109 (Bankr. D. N.J. 1993). Return to article

13 220 B.R. 727 (Bankr. D. D.C. 1998). Return to article

14 The court stated:

Id. at 729-30. Return to article15 83 B.R. 716 (Bankr. D. N.D. 1988). Return to article

16 The court stated:

Id. at 723. Return to article17 162 B.R. 109 (Bankr. D. N.J.1993). Return to article

18 Princess House Inc. v. Kraft (In reKraft), 192 B.R. 735, 737 (Bankr.W.D. Mo. 1996). Return to article

19 18 Moore, James William,Moore's Federal Practice§132.03[1] (3d ed. 1997). Return toarticle

20 192 B.R. 735, 737 (Bankr. W.D.Mo. 1996). Return to article

21 Nier v. Hansen (In re Hansen), 131 B.R. 167 (D. Colo. 1991). Return to article

22 131 B.R. 167 (D. Colo. 1991). Return to article

23 Lee v. United States, 124 F.3d 1291, 1295-96 (Fed. Cir. 1997); Marlee Electronics Corp. v. Antonakis (In re Antonakis), 207 B.R. 201, 204-05(Bankr. E.D. Cal. 1997); Graham v. Billings (In re Billings), 94 B.R. 803, 808 (Bankr. E.D.N.Y. 1989). Return to article

24 Meyer v. Rigdon, 36 F.3d 1375, 1379 (7th Cir. 1994); United States v. Gottheiner (In re Gottheiner), 703 F.2d 1136, 1140 (9th Cir. 1983); Hall v.Mady (In re Mady), 159 B.R. 487, 489 (Bankr. N.D. Ohio 1993). Return to article

25 3 Moore, James William; Vestal, Allan D.; and Kurland, Philip B., Moore's Manual Federal Practice & Procedure §30.05[5] p. 30-102 (1997). Returnto article

26 See, e.g., Hall v. Mady (In re Mady), 159 B.R. 487, 489 (Bankr. N.D. Ohio 1993); Graham v. Billings (In re Billings), 94 B.R. 803, 808 (Bankr.E.D.N.Y. 1989); In re Ianelli, 12 B.R. 561 (Bankr. S.D.N.Y. 1981). Return to article

27 12 B.R. 561 (Bankr. S.D.N.Y. 1981). Return to article

28 Id. at 563. Return to article

29 94 B.R. 803 (Bankr. E.D.N.Y. 1989). Return to article


31 Roeder v. Brown (In re Brown), 162 B.R. 17 (Bankr. D. Kan. 1993). Return to article

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Bankruptcy Rule:

32 162 B.R. 17 (Bankr. D. Kan. 1993). Return to article

33 Id. at 19-20. Return to article

34 831 F.2d 1292 (7th Cir. 1987). Return to article


36 18 Wright, Charles Alan, Miller, Arthur R., and Cooper, Edward H., Federal Practice & Procedure §4421 pp. 192-93 (1981). Return to article

37 207 B.R. 958 (Bankr. M.D. Fla. 1997). Return to article

38 173 B.R. 258 (Bankr. E.D.N.Y. 1994). Return to article

2002

Journal Author:

Carlos J. Cuevas

Journal Date: Wednesday, May 1, 2002

Reprint Request

American Bankruptcy Institute | 66 Canal Center Plaza, Suite 600 | Alexandria, VA 22314

Tel. (703)739-0800 | Fax. (866)921-1027

2018 American Bankruptcy Institute, All Rights Reserved

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§ 44-403. Damages, AZ ST § 44-403

© 2019 Thomson Reuters. No claim to original U.S. Government Works. 1

Arizona Revised Statutes AnnotatedTitle 44. Trade and Commerce

Chapter 4. Uniform Trade Secrets Act (Refs & Annos)Article 1. General Provisions (Refs & Annos)

A.R.S. § 44-403

§ 44-403. Damages

Currentness

A. Except to the extent that a material and prejudicial change of position before acquiring knowledgeor reason to know of misappropriation renders a monetary recovery inequitable, a complainant isentitled to recover damages for misappropriation. Damages may include both the actual loss causedby misappropriation and the unjust enrichment caused by misappropriation that is not taken intoaccount in computing actual loss. In lieu of damages measured by any other methods, the damagescaused by misappropriation may be measured by imposition of liability for a reasonable royalty for amisappropriator's unauthorized disclosure or use of a trade secret.

B. If willful and malicious misappropriation exists, the court may award exemplary damages in an amountnot exceeding twice any award made under subsection A.

CreditsAdded by Laws 1990, Ch. 37, § 1.

Notes of Decisions (4)

A. R. S. § 44-403, AZ ST § 44-403Current through the First Special and Second Regular Session of the Fifty-Third Legislature (2018), andincludes Election Results from the November 6, 2018 General Election

End of Document © 2019 Thomson Reuters. No claim to original U.S. Government Works.

52

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Anderson v. Liberty Lobby, Inc., 477 U.S. 242 (1986)

106 S.Ct. 2505, 91 L.Ed.2d 202, 54 USLW 4755, 4 Fed.R.Serv.3d 1041...


KeyCite Yellow Flag - Negative Treatment

Not Followed on State Law Grounds Huckabee v. Time Warner

Entertainment Co. L.P., Tex., May 4, 2000

106 S.Ct. 2505Supreme Court of the United States

Jack ANDERSON, et al., Petitionersv.

LIBERTY LOBBY, INC. and Willis A. Carto.

No. 84–1602.|

Argued Dec. 3, 1985.|

Decided June 25, 1986.

SynopsisLibel action was brought against magazine, itspublisher, and its chief executive officer. TheUnited States District Court for the District ofColumbia, 562 F.Supp. 201, granted summaryjudgment in favor of defendants and plaintiffsappealed. The Court of Appeals for the District ofColumbia Circuit, 746 F.2d. 1563,affirmed in partand reversed in part. The Supreme Court, JusticeWhite, held that: (1) ruling on motion for summaryjudgment or directed verdict necessarily implicatesthat substantive evidentiary standard of proof thatwould apply at a trial on the merits, and (2) whendetermining if genuine factual issue as to actualmalice exists in a libel suit brought by a publicfigure, trial judge must bear in mind the actualquantum and quality of proof necessary to supportliability under the NewYork Times doctrine.

Vacated and remanded.

Justice Brennan filed a dissenting opinion.

Justice Rehnquist filed a dissenting opinion inwhich Chief Justice Burger joined.

West Headnotes (17)

[1] Federal Civil Procedure

Absence of genuine issue of fact ingeneral

170A Federal Civil Procedure170AXVII Judgment170AXVII(C) Summary Judgment170AXVII(C)1 In General170Ak2465 Matters Affecting Right toJudgment170Ak2470 Absence of genuine issue offact in general

Mere existence of some alleged factualdispute between the parties will notdefeat an otherwise properly supportedmotion for summary judgment; theremust be no genuine issue of materialfact. Fed.Rules Civ.Proc.Rule 56(c), 28U.S.C.A.

47820 Cases that cite this headnote

[2] Federal Civil ProcedureMateriality and genuineness of fact

issue

170A Federal Civil Procedure170AXVII Judgment170AXVII(C) Summary Judgment170AXVII(C)1 In General170Ak2465 Matters Affecting Right toJudgment170Ak2470.1 Materiality andgenuineness of fact issue

Substantive law will identify which factsare material for purposes of summaryjudgment, as only disputes over factsthat might affect the outcome of thesuit under the governing law willproperly preclude the entry of summaryjudgment; factual disputes that areirrelevant or unnecessary will notbe counted. Fed.Rules Civ.Proc.Rule56(c), 28 U.S.C.A.



issue

170A Federal Civil Procedure170AXVII Judgment170AXVII(C) Summary Judgment

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170AXVII(C)1 In General170Ak2465 Matters Affecting Right toJudgment170Ak2470.1 Materiality andgenuineness of fact issue

Materiality determination on motionfor summary judgment rests on thesubstantive law and it is the substantivelaw's identification of which facts arecritical and which facts are irrelevantthat governs. Fed.Rules Civ.Proc.Rule56(c), 28 U.S.C.A.



issue

170A Federal Civil Procedure170AXVII Judgment170AXVII(C) Summary Judgment170AXVII(C)1 In General170Ak2465 Matters Affecting Right toJudgment170Ak2470.1 Materiality andgenuineness of fact issue

Summary judgment will not lie if thedispute about a fact is “genuine,” i.e.,if the evidence is such that a reasonablejury could return a verdict for thenonmoving party.


[5] Federal Civil ProcedureHearing and Determination

170A Federal Civil Procedure170AXVII Judgment170AXVII(C) Summary Judgment170AXVII(C)3 Proceedings170Ak2547 Hearing and Determination170Ak2547.1 In general

(Formerly 170Ak2547)

At summary judgment stage, judge'sfunction is not himself to weigh theevidence and determine the truth of thematter but to determine whether thereis a genuine issue for trial. Fed.RulesCiv.Proc.Rule 56(c), 28 U.S.C.A.


[6] Federal Civil ProcedureAbsence of genuine issue of fact in

general


There is no issue for trial unlessthere is sufficient evidence favoring thenonmoving party for jury to return averdict for that party; if the evidence ismerely colorable or is not significantlyprobative, summary judgment maybe granted. Fed.Rules Civ.Proc.Rule56(c), 28 U.S.C.A.


[7] Federal Civil ProcedureFindings and conclusions

170A Federal Civil Procedure170AXVII Judgment170AXVII(C) Summary Judgment170AXVII(C)3 Proceedings170Ak2547 Hearing and Determination170Ak2556 Findings and conclusions

There is no requirement that trialjudge make findings of fact whengranting summary judgment but, inmany cases, findings are extremelyhelpful to a reviewing court. Fed.RulesCiv.Proc.Rule 56(c), 28 U.S.C.A.


[8] Federal Civil ProcedureRight to judgment as matter of law

170A Federal Civil Procedure170AXVII Judgment170AXVII(C) Summary Judgment170AXVII(C)1 In General170Ak2465 Matters Affecting Right toJudgment

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170Ak2470.4 Right to judgment asmatter of law

Standard for granting summaryjudgment mirrors the standard for adirected verdict which is that the trialjudge must direct a verdict if, under thegoverning law, there can be but onereasonable conclusion as to the verdict.Fed.Rules Civ.Proc.Rules 50(a), 56(c),28 U.S.C.A.


[9] Federal Civil ProcedureBurden of proof

170A Federal Civil Procedure170AXVII Judgment170AXVII(C) Summary Judgment170AXVII(C)3 Proceedings170Ak2542 Evidence170Ak2544 Burden of proof

Inquiry involved in a ruling on amotion for summary judgment or fordirected verdict necessarily implicatesthe substantive evidentiary standard ofproof that would apply at the trial onthe merits. Fed.Rules Civ.Proc.Rules50(a), 56(c), 28 U.S.C.A.


[10] Federal Civil ProcedureAbsence of genuine issue of fact in

general


If defendant in a run-of-the-mill civilcase moves for summary judgment orfor directed verdict based on the lackof proof of a material fact, the judgemust ask himself, not whether he thinksthe evidence unmistakably favors oneside or the other, but whether a fair-minded jury could return a verdict for

the plaintiff on the evidence presented.Fed.Rules Civ.Proc.Rules 50(a), 56(c),28 U.S.C.A.


[11] Federal Civil ProcedureWeight and sufficiency

170A Federal Civil Procedure170AXVII Judgment170AXVII(C) Summary Judgment170AXVII(C)3 Proceedings170Ak2542 Evidence170Ak2546 Weight and sufficiency

When ruling on a defendant's motionfor summary judgment or a directedverdict in favor of plaintiff, mereexistence of a scintilla of evidencein support of the plaintiff's positionwill not be sufficient; there must beevidence on which the jury couldreasonably find for the plaintiff.Fed.Rules Civ.Proc.Rules 50(a), 56(c),28 U.S.C.A.


[12] Federal Civil ProcedureTort cases in general

170A Federal Civil Procedure170AXVII Judgment170AXVII(C) Summary Judgment170AXVII(C)2 Particular Cases170Ak2515 Tort cases in general

When determining if a genuine factualissue exists as to actual malice in alibel suit brought by public figure,trial judge must bear in mind theactual quantum and quality of proofnecessary to support liability under theNew York Times doctrine. Fed.RulesCiv.Proc.Rule 56(c), 28 U.S.C.A.


[13] Federal Civil ProcedureTort cases in general

170A Federal Civil Procedure170AXVII Judgment

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170AXVII(C) Summary Judgment170AXVII(C)2 Particular Cases170Ak2515 Tort cases in general

There is no genuine issue of materialfact if the evidence presented inopposing affidavits in libel actioninvolving a public figure is ofinsufficient caliber or quantity to allowa rational finder of fact to findactual malice by clear and convincingevidence. Fed.Rules Civ.Proc.Rule56(c), 28 U.S.C.A.


[14] Federal Civil ProcedureConstruction of evidence

Federal Civil ProcedureQuestions for Jury

Federal Civil ProcedurePresumptions

Federal Civil ProcedureAscertaining existence of fact issue

170A Federal Civil Procedure170AXV Trial170AXV(F) Taking Case or Questionfrom Jury; Preverdict Motion forJudgment as Matter of Law170AXV(F)1 In General170Ak2126 Determination170Ak2127 Construction of evidence

(Formerly 170Ak2470.2)170A Federal Civil Procedure170AXV Trial170AXV(F) Taking Case or Questionfrom Jury; Preverdict Motion forJudgment as Matter of Law170AXV(F)2 Questions for Jury170Ak2141 In general

(Formerly 170Ak2470.2,170Ak2470.2, 170Ak2470.2)170A Federal Civil Procedure170AXVII Judgment170AXVII(C) Summary Judgment170AXVII(C)3 Proceedings170Ak2542 Evidence170Ak2543 Presumptions

(Formerly 170Ak2470.2)170A Federal Civil Procedure170AXVII Judgment

170AXVII(C) Summary Judgment170AXVII(C)3 Proceedings170Ak2547 Hearing and Determination170Ak2552 Ascertaining existence offact issue

(Formerly 170Ak2470.2,170Ak2470.2)

Credibility determinations, weighing ofevidence, and drawing of legitimateinferences from the facts are juryfunctions, not those of a judge,whether his ruling is on motion forsummary judgment or for directedverdict; evidence of the nonmovantis to be believed and all justifiableinferences are to be drawn in his favor.Fed.Rules Civ.Proc.Rules 50(a), 56(c),28 U.S.C.A.


[15] Federal Civil ProcedureSummary Judgment

170A Federal Civil Procedure170AXVII Judgment170AXVII(C) Summary Judgment170AXVII(C)1 In General170Ak2461 In general

Trial court should not act other thanwith caution in granting summaryjudgment and may deny summaryjudgment where there is reason tobelieve that the better course would beto proceed to a full trial. Fed.RulesCiv.Proc.Rule 56(c), 28 U.S.C.A.


[16] Federal Civil ProcedureWeight and Sufficiency of

Evidence

Federal Civil ProcedureAbsence of genuine issue of fact in

general

170A Federal Civil Procedure170AXV Trial170AXV(F) Taking Case or Questionfrom Jury; Preverdict Motion forJudgment as Matter of Law170AXV(F)2 Questions for Jury

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170Ak2142 Weight and Sufficiency ofEvidence170Ak2142.1 In general

(Formerly 170Ak2142)170A Federal Civil Procedure170AXVII Judgment170AXVII(C) Summary Judgment170AXVII(C)1 In General170Ak2465 Matters Affecting Right toJudgment170Ak2470 Absence of genuine issue offact in general

Determination of whether a givenfactual dispute requires submission to ajury must be guided by the substantiveevidentiary standards that apply to thecase and that is true at both the directedverdict and summary judgment stages.Fed.Rules Civ.Proc.Rules 50(a), 56(c),28 U.S.C.A.


[17] Federal Civil ProcedureBurden of proof

170A Federal Civil Procedure170AXVII Judgment170AXVII(C) Summary Judgment170AXVII(C)3 Proceedings170Ak2542 Evidence170Ak2544 Burden of proof

Plaintiff must present affirmativeevidence in order to defeat a properlysupported motion for summaryjudgment, even where the evidence islikely to be within the possession of thedefendant, as long as plaintiff has hada full opportunity to conduct discovery.Fed.Rules Civ.Proc.Rule 56(c), 28U.S.C.A.


**2506 *242 Syllabus *

In New York Times Co. v. Sullivan, 376 U.S. 254,84 S.Ct. 710, 11 L.Ed.2d 686, it was held that, in alibel suit brought by a public official (extended by

later cases to public figures), the First Amendmentrequires **2507 the plaintiff to show that inpublishing the alleged defamatory statement thedefendant acted with actual malice. It was furtherheld that such actual malice must be shown with“convincing clarity.” Respondents, a nonprofitcorporation described as a “citizens' lobby” andits founder, filed a libel action in Federal DistrictCourt against petitioners, alleging that certainstatements in a magazine published by petitionerswere false and derogatory. Following discovery,petitioners moved for summary judgment pursuantto Federal Rule of Civil Procedure 56, assertingthat because respondents were public figures theywere required to prove their case under the NewYork Times standards and that summary judgmentwas proper because actual malice was absent asa matter of law in view of an affidavit by theauthor of the articles in question that they hadbeen thoroughly researched and that the factswere obtained from numerous sources. Opposingthe motion, respondents claimed that an issue ofactual malice was presented because the author hadrelied on patently unreliable sources in preparingthe articles. After holding that New York Timesapplied because respondents were limited-purposepublic figures, the District Court entered summaryjudgment for petitioners on the ground that theauthor's investigation and research and his relianceon numerous sources precluded a finding of actualmalice. Reversing as to certain of the allegedlydefamatory statements, the Court of Appeals heldthat the requirement that actual malice be provedby clear and convincing evidence need not beconsidered at the summary judgment stage, andthat with respect to those statements summaryjudgment had been improperly granted becausea jury could reasonably have concluded that theallegations were defamatory, false, and made withactual malice.

Held: The Court of Appeals did not apply thecorrect standard in reviewing the District Court'sgrant of summary judgment. Pp. 2509–2515.

(a) Summary judgment will not lie if the disputeabout a material fact is “genuine,” that is, if theevidence is such that a reasonable jury could returna verdict for the nonmoving party. At the summary

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judgment stage, the trial judge's function is nothimself to weigh the evidence and *243 determinethe truth of the matter but to determine whetherthere is a genuine issue for trial. There is no suchissue unless there is sufficient evidence favoring thenonmoving party for a jury to return a verdictfor that party. In essence, the inquiry is whetherthe evidence presents a sufficient disagreement torequire submission to a jury or whether it is so one-sided that one party must prevail as a matter of law.Pp. 2509–2512.

(b) A trial court ruling on a motion for summaryjudgment in a case such as this must be guidedby the New York Times “clear and convincing”evidentiary standard in determining whether agenuine issue of actual malice exists, that is, whetherthe evidence is such that a reasonable jury mightfind that actual malice had been shown withconvincing clarity. Pp. 2512–2514.

(c) A plaintiff may not defeat a defendant's properlysupported motion for summary judgment in a libelcase such as this one without offering any concreteevidence from which a reasonable jury could returna verdict in his favor and by merely asserting thatthe jury might disbelieve the defendant's denialof actual malice. The movant has the burden ofshowing that there is no genuine issue of fact,but the plaintiff is not thereby relieved of his ownburden of producing in turn evidence that wouldsupport a jury verdict. Pp. 2514–2515.

241 U.S.App.D.C. 246, 746 F.2d 1563, vacated andremanded.

WHITE, J., delivered the opinion of theCourt, in which MARSHALL, BLACKMUN,POWELL, STEVENS, and O'CONNOR, JJ.,joined. BRENNAN, J., filed a dissenting opinion,post, p. –––. REHNQUIST, J., filed a dissentingopinion, in which BURGER, C.J., joined, post, p.–––.

Attorneys and Law Firms

David J. Branson argued the cause for petitioners.With him on the briefs was David O. Bickart.

Mark Lane argued the cause for respondents. Withhim on the brief were Linda Huber and FlemingLee.*

* Briefs of amici curiae urging reversal were filed forthe American Newspaper Publishers Associationet al. by Robert D. Sack, Robert S. Warren, W.Terry Maguire, Richard M. Schmidt, Jr., R. BruceRich, Lawrence Gunnels, Harvey L. Lipton, Peter C.Gould, and Jane E. Kirtley; for the Reader's DigestAssociation, Inc., by Walter R. Allan and Karen J.Wagner.

Briefs of amici curiae urging affirmance were filedfor the American Legal Foundation by Daniel J.Popeo; and for the Synanon Church et al. byJonathan W. Lubell, Philip C. Bourdette, David R.Benjamin, and Andrew J. Weill.

Opinion

*244 **2508 Justice WHITE delivered theopinion of the Court.

In New York Times Co. v. Sullivan, 376 U.S. 254,279–280, 84 S.Ct. 710, 725–726, 11 L.Ed.2d 686(1964), we held that, in a libel suit brought by apublic official, the First Amendment requires theplaintiff to show that in publishing the defamatorystatement the defendant acted with actual malice—“with knowledge that it was false or with recklessdisregard of whether it was false or not.” We heldfurther that such actual malice must be shown with“convincing clarity.” Id., at 285–286, 84 S.Ct., at728–729. See also Gertz v. Robert Welch, Inc., 418U.S. 323, 342, 94 S.Ct. 2997, 3008, 41 L.Ed.2d 789(1974). These New York Times requirements wehave since extended to libel suits brought by publicfigures as well. See, e.g., Curtis Publishing Co. v.Butts, 388 U.S. 130, 87 S.Ct. 1975, 18 L.Ed.2d 1094(1967).

This case presents the question whether theclear-and-convincing-evidence requirement mustbe considered by a court ruling on a motion forsummary judgment under Rule 56 of the FederalRules of Civil Procedure in a case to which NewYork Times applies. The United States Court ofAppeals for the District of Columbia Circuit heldthat that requirement need not be considered at

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the summary judgment stage. 241 U.S.App.D.C.246, 746 F.2d 1563 (1984). We granted certiorari,471 U.S. 1134, 105 S.Ct. 2672, 86 L.Ed.2d 691(1985), because that holding was in conflict withdecisions of several other Courts of Appeals, whichhad held that the New York Times requirement ofclear and convincing evidence must be considered

on a motion for summary judgment. 1 We nowreverse.

I

Respondent Liberty Lobby, Inc., is a not-for-profit corporation and self-described “citizens'lobby.” Respondent Willis Carto is its founderand treasurer. In October 1981, *245 TheInvestigator magazine published two articles: “ThePrivate World of Willis Carto” and “Yockey:Profile of an American Hitler.” These articleswere introduced by a third, shorter articleentitled “America's Neo-Nazi Underground: DidMein Kampf Spawn Yockey's Imperium, a BookRevived by Carto's Liberty Lobby?” These articlesportrayed respondents as neo-Nazi, anti-Semitic,racist, and Fascist.

Respondents filed this diversity libel action in theUnited States District Court for the District ofColumbia, alleging that some 28 statements and2 illustrations in the 3 articles were false andderogatory. Named as defendants in the actionwere petitioner Jack Anderson, the publisher of TheInvestigator, petitioner Bill Adkins, president andchief executive officer of the Investigator PublishingCo., and petitioner Investigator Publishing Co.itself.

Following discovery, petitioners moved forsummary judgment pursuant to Rule 56. Intheir motion, petitioners asserted that becauserespondents are public figures they were requiredto prove their case under the standards set forthin New York Times. Petitioners also asserted thatsummary judgment was proper because actualmalice was absent as a matter of law. In supportof this latter assertion, petitioners submitted theaffidavit of Charles Bermant, an employee ofpetitioners and the author of the two longer

articles. 2 In this affidavit, Bermant stated that hehad spent a substantial amount of time researching**2509 and writing the articles and that his facts

were obtained from a wide variety of sources. Healso stated that he had at all times believed and stillbelieved that the facts contained in the articles weretruthful and accurate. Attached to this affidavit wasan appendix in which Bermant detailed the sourcesfor each of the statements alleged by respondents tobe libelous.

*246 Respondents opposed the motion forsummary judgment, asserting that there werenumerous inaccuracies in the articles and claimingthat an issue of actual malice was presentedby virtue of the fact that in preparing thearticles Bermant had relied on several sourcesthat respondents asserted were patently unreliable.Generally, respondents charged that petitionershad failed adequately to verify their informationbefore publishing. Respondents also presentedevidence that William McGaw, an editor of TheInvestigator, had told petitioner Adkins beforepublication that the articles were “terrible” and“ridiculous.”

In ruling on the motion for summary judgment,the District Court first held that respondents werelimited-purpose public figures and that New York

Times therefore applied. 3 The District Court thenheld that Bermant's thorough investigation andresearch and his reliance on numerous sourcesprecluded a finding of actual malice. Thus, theDistrict Court granted the motion and enteredjudgment in favor of petitioners.

On appeal, the Court of Appeals affirmed as to 21and reversed as to 9 of the allegedly defamatorystatements. Although it noted that respondents didnot challenge the District Court's ruling that theywere limited-purpose public *247 figures and thatthey were thus required to prove their case underNew York Times, the Court of Appeals neverthelessheld that for the purposes of summary judgmentthe requirement that actual malice be proved byclear and convincing evidence, rather than by apreponderance of the evidence, was irrelevant: Todefeat summary judgment respondents did nothave to show that a jury could find actual malice

59









with “convincing clarity.” The court based thisconclusion on a perception that to impose thegreater evidentiary burden at summary judgment“would change the threshold summary judgmentinquiry from a search for a minimum of factssupporting the plaintiff's case to an evaluation ofthe weight of those facts and (it would seem) of theweight of at least the defendant's uncontrovertedfacts as well.” 241 U.S.App.D.C., at 253, 746 F.2d,at 1570. The court then held, with respect to nineof the statements, that summary judgment hadbeen improperly granted because “a jury couldreasonably conclude that the ... allegations weredefamatory, false, and made with actual malice.”Id., at 260, 746 F.2d at 1577.

II

A

[1] Our inquiry is whether the Court of Appealserred in holding that the heightened evidentiaryrequirements that apply to proof of actual malice inthis New York Times case need not be considered forthe purposes of a motion for summary judgment.Rule 56(c) of the Federal Rules of Civil Procedureprovides that summary judgment “shall be renderedforthwith if **2510 the pleadings, depositions,answers to interrogatories, and admissions on file,together with the affidavits, if any, show that thereis no genuine issue as to any material fact and thatthe moving party is entitled to a judgment as amatter of law.” By its very terms, this standardprovides that the mere existence of some allegedfactual dispute between the parties will not defeatan otherwise properly supported *248 motion forsummary judgment; the requirement is that there beno genuine issue of material fact.

[2] [3] As to materiality, the substantive law willidentify which facts are material. Only disputesover facts that might affect the outcome of thesuit under the governing law will properly precludethe entry of summary judgment. Factual disputesthat are irrelevant or unnecessary will not becounted. See generally 10A C. Wright, A. Miller,& M. Kane, Federal Practice and Procedure §2725, pp. 93–95 (1983). This materiality inquiry

is independent of and separate from the questionof the incorporation of the evidentiary standardinto the summary judgment determination. Thatis, while the materiality determination rests onthe substantive law, it is the substantive law'sidentification of which facts are critical andwhich facts are irrelevant that governs. Anyproof or evidentiary requirements imposed by thesubstantive law are not germane to this inquiry,since materiality is only a criterion for categorizingfactual disputes in their relation to the legalelements of the claim and not a criterion forevaluating the evidentiary underpinnings of thosedisputes.

[4] More important for present purposes,summary judgment will not lie if the dispute abouta material fact is “genuine,” that is, if the evidenceis such that a reasonable jury could return a verdictfor the nonmoving party. In First National Bankof Arizona v. Cities Service Co., 391 U.S. 253, 88S.Ct. 1575, 20 L.Ed.2d 569 (1968), we affirmeda grant of summary judgment for an antitrustdefendant where the issue was whether there wasa genuine factual dispute as to the existence of aconspiracy. We noted Rule 56(e)'s provision thata party opposing a properly supported motion forsummary judgment “ ‘may not rest upon the mereallegations or denials of his pleading, but ... must setforth specific facts showing that there is a genuineissue for trial.’ ” We observed further that

“[i]t is true that the issue of material fact requiredby Rule 56(c) to be present to entitle a partyto proceed to *249 trial is not required tobe resolved conclusively in favor of the partyasserting its existence; rather, all that is requiredis that sufficient evidence supporting the claimedfactual dispute be shown to require a jury orjudge to resolve the parties' differing versions ofthe truth at trial.” 391 U.S., at 288–289, 88 S.Ct.,at 1592.

We went on to hold that, in the face ofthe defendant's properly supported motion forsummary judgment, the plaintiff could not rest onhis allegations of a conspiracy to get to a jurywithout “any significant probative evidence tendingto support the complaint.” Id., at 290, 88 S.Ct., at1593.

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Again, in Adickes v. S.H. Kress & Co., 398 U.S.144, 90 S.Ct. 1598, 26 L.Ed.2d 142 (1970), theCourt emphasized that the availability of summaryjudgment turned on whether a proper jury questionwas presented. There, one of the issues was whetherthere was a conspiracy between private personsand law enforcement officers. The District Courtgranted summary judgment for the defendants,stating that there was no evidence from whichreasonably minded jurors might draw an inferenceof conspiracy. We reversed, pointing out that themoving parties' submissions had not foreclosed thepossibility of the existence of certain facts fromwhich “it would be open to a jury ... to infer fromthe circumstances” that there had been a meeting ofthe minds. Id., at 158–159, 90 S.Ct., at 1608, 1609.

[5] [6] Our prior decisions may not haveuniformly recited the same language in describinggenuine factual issues under **2511 Rule 56, butit is clear enough from our recent cases that at thesummary judgment stage the judge's function is nothimself to weigh the evidence and determine thetruth of the matter but to determine whether thereis a genuine issue for trial. As Adickes, supra, andCities Service, supra, indicate, there is no issue fortrial unless there is sufficient evidence favoring thenonmoving party for a jury to return a verdict forthat party. Cities Service, supra, 391 U.S., at 288–289, 88 S.Ct., at 1592. If the evidence is merelycolorable, Dombrowski v. Eastland, 387 U.S. 82, 87S.Ct. 1425, 18 L.Ed.2d 577 (1967) (per curiam ), oris not significantly probative, *250 Cities Service,supra, at 290, 88 S.Ct., at 1592, summary judgmentmay be granted.

[7] That this is the proper focus of the inquiryis strongly suggested by the Rule itself. Rule 56(e)provides that, when a properly supported motion

for summary judgment is made, 4 the adverse party“must set forth specific facts showing that there is a

genuine issue for trial.” 5 And, as we noted above,Rule 56(c) provides that the trial judge shall thengrant summary judgment if there is no genuine issueas to any material fact and if the moving party isentitled to judgment as a matter of law. There isno requirement that the trial judge make findings

of fact. 6 The inquiry performed is the thresholdinquiry of determining whether there is the needfor a trial—whether, in other words, there are anygenuine factual issues that properly can be resolvedonly by a finder of fact because they may reasonablybe resolved in favor of either party.

[8] Petitioners suggest, and we agree, that thisstandard mirrors the standard for a directed verdictunder Federal Rule of Civil Procedure 50(a), whichis that the trial judge must direct a verdict if, underthe governing law, there can be but one reasonableconclusion as to the verdict. Brady v. Southern R.Co., 320 U.S. 476, 479–480, 64 S.Ct. 232, 234,88 L.Ed. 239 (1943). If reasonable minds coulddiffer as to the import of the evidence, however,*251 a verdict should not be directed. Wilkerson

v. McCarthy, 336 U.S. 53, 62, 69 S.Ct. 413, 417,93 L.Ed. 497 (1949). As the Court long ago said inImprovement Co. v. Munson, 14 Wall. 442, 448, 20L.Ed. 867 (1872), and has several times repeated:

“Nor are judges any longer required to submit aquestion to a jury merely because some evidencehas been introduced by the party having theburden of proof, unless the evidence be of such acharacter that it would warrant the jury in findinga verdict in favor of that party. Formerly it washeld that if there was what is called a scintilla ofevidence in support of a case the judge was boundto leave it to the jury, but recent decisions of highauthority have established a more reasonablerule, that in every case, before the evidence is leftto the jury, there is a preliminary question for thejudge, not whether there is literally no evidence,but whether there is any upon which a jury couldproperly proceed to find a verdict for the partyproducing it, upon whom the onus of proof isimposed.” (Footnotes omitted.)

See also Pleasants v. Fant, 22 Wall. 116, 120–121,22 L.Ed. 780 (1875); Coughran v. Bigelow, 164 U.S.301, 307, 17 S.Ct. 117, 119, 41 L.Ed. 442 (1896);Pennsylvania R. Co. v. Chamberlain, 288 U.S. 333,343, 53 S.Ct. 391, 394, 77 L.Ed. 819 (1933).

**2512 The Court has said that summaryjudgment should be granted where the evidence issuch that it “would require a directed verdict forthe moving party.” Sartor v. Arkansas Gas Corp.,

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321 U.S. 620, 624, 64 S.Ct. 724, 727, 88 L.Ed.967 (1944). And we have noted that the “genuineissue” summary judgment standard is “very close”to the “reasonable jury” directed verdict standard:“The primary difference between the two motions isprocedural; summary judgment motions are usuallymade before trial and decided on documentaryevidence, while directed verdict motions are madeat trial and decided on the evidence that hasbeen admitted.” Bill Johnson's Restaurants, Inc. v.NLRB, 461 U.S. 731, 745, n. 11, 103 S.Ct. 2161,2171, n. 11, 76 L.Ed.2d 277 (1983). In essence,though, the inquiry under each is the same: whetherthe evidence presents a sufficient disagreement torequire submission *252 to a jury or whether it isso one-sided that one party must prevail as a matterof law.

B

[9] [10] [11] Progressing to the specific issue inthis case, we are convinced that the inquiry involvedin a ruling on a motion for summary judgmentor for a directed verdict necessarily implicatesthe substantive evidentiary standard of proof thatwould apply at the trial on the merits. If thedefendant in a run-of-the-mill civil case moves forsummary judgment or for a directed verdict basedon the lack of proof of a material fact, the judgemust ask himself not whether he thinks the evidenceunmistakably favors one side or the other butwhether a fair-minded jury could return a verdictfor the plaintiff on the evidence presented. The mereexistence of a scintilla of evidence in support of theplaintiff's position will be insufficient; there mustbe evidence on which the jury could reasonablyfind for the plaintiff. The judge's inquiry, therefore,unavoidably asks whether reasonable jurors couldfind by a preponderance of the evidence that theplaintiff is entitled to a verdict—“whether there is[evidence] upon which a jury can properly proceedto find a verdict for the party producing it, uponwhom the onus of proof is imposed.” Munson,supra, 14 Wall., at 448.

In terms of the nature of the inquiry, this is nodifferent from the consideration of a motion foracquittal in a criminal case, where the beyond-

a-reasonable-doubt standard applies and wherethe trial judge asks whether a reasonable jurycould find guilt beyond a reasonable doubt. SeeJackson v. Virginia, 443 U.S. 307, 318–319, 99 S.Ct.2781, 2788–2789, 61 L.Ed.2d 560 (1979). Similarly,where the First Amendment mandates a “clear andconvincing” standard, the trial judge in disposing ofa directed verdict motion should consider whether areasonable factfinder could conclude, for example,that the plaintiff had shown actual malice withconvincing clarity.

*253 The case for the proposition that a higherburden of proof should have a corresponding effecton the judge when deciding whether to send the caseto the jury was well made by the Court of Appealsfor the Second Circuit in United States v. Taylor,464 F.2d 240 (2d Cir.1972), which overruled UnitedStates v. Feinberg, 140 F.2d 592 (2d Cir.1944), a caseholding that the standard of evidence necessary fora judge to send a case to the jury is the same in bothcivil and criminal cases even though the standardthat the jury must apply in a criminal case is moredemanding than in civil proceedings. Speakingthrough Judge Friendly, the Second Circuit said:“It would seem at first blush—and we think alsoat second—that more ‘facts in evidence’ are neededfor the judge to allow [reasonable jurors to passon a claim] when the proponent is required toestablish [the claim] not merely by a preponderanceof the evidence but ... beyond a reasonable doubt.”464 F.2d, at 242. The court could not find a“satisfying explanation in the Feinberg opinionwhy the judge should not place this higher burdenon the prosecution in criminal proceedings beforesending the case to the jury.” Ibid. The Taylorcourt **2513 also pointed out that almost allthe Circuits had adopted something like JudgePrettyman's formulation in Curley v. United States,160 F.2d 229, 232–233 (D.C.Cir.1947):

“The true rule, therefore,is that a trial judge, inpassing upon a motion fordirected verdict of acquittal,must determine whether uponthe evidence, giving fullplay to the right of the

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jury to determine credibility,weigh the evidence, and drawjustifiable inferences of fact,a reasonable mind mightfairly conclude guilt beyonda reasonable doubt. If heconcludes that upon theevidence there must be such adoubt in a reasonable mind,he must grant the motion;or, to state it another way,if there is no evidence uponwhich a reasonable mindmight fairly conclude guiltbeyond reasonable doubt, themotion must be granted.If he concludes that eitherof the *254 two results,a reasonable doubt or noreasonable doubt, is fairlypossible, he must let the jurydecide the matter.”

This view is equally applicable to a civil caseto which the “clear and convincing” standardapplies. Indeed, the Taylor court thought that itwas implicit in this Court's adoption of the clear-and-convincing-evidence standard for certain kindsof cases that there was a “concomitant duty onthe judge to consider the applicable burden whendeciding whether to send a case to the jury.” 464F.2d, at 243. Although the court thought that thishigher standard would not produce different resultsin many cases, it could not say that it would neverdo so.

[12] [13] Just as the “convincing clarity”requirement is relevant in ruling on a motion fordirected verdict, it is relevant in ruling on a motionfor summary judgment. When determining if agenuine factual issue as to actual malice exists in alibel suit brought by a public figure, a trial judgemust bear in mind the actual quantum and qualityof proof necessary to support liability under NewYork Times. For example, there is no genuine issueif the evidence presented in the opposing affidavitsis of insufficient caliber or quantity to allow a

rational finder of fact to find actual malice by clearand convincing evidence.

Thus, in ruling on a motion for summary judgment,the judge must view the evidence presented throughthe prism of the substantive evidentiary burden.This conclusion is mandated by the nature ofthis determination. The question here is whether ajury could reasonably find either that the plaintiffproved his case by the quality and quantity ofevidence required by the governing law or that hedid not. Whether a jury could reasonably find foreither party, however, cannot be defined except bythe criteria governing what evidence would enablethe jury to find for either the plaintiff or thedefendant: It makes no sense to say that a jurycould reasonably find for either party without some*255 benchmark as to what standards govern

its deliberations and within what boundaries itsultimate decision must fall, and these standards andboundaries are in fact provided by the applicableevidentiary standards.

[14] [15] Our holding that the clear-and-convincing standard of proof should be taken intoaccount in ruling on summary judgment motionsdoes not denigrate the role of the jury. It by nomeans authorizes trial on affidavits. Credibilitydeterminations, the weighing of the evidence, andthe drawing of legitimate inferences from the factsare jury functions, not those of a judge, whether heis ruling on a motion for summary judgment or for adirected verdict. The evidence of the non-movant isto be believed, and all justifiable inferences are to bedrawn in his favor. Adickes, 398 U.S., at 158–159,90 S.Ct., at 1608–1609. Neither do we suggest thatthe trial courts should act other than with caution ingranting summary judgment or that the trial courtmay not deny summary judgment in a case wherethere is reason to believe that the better coursewould be to proceed to a full trial. **2514 Kennedyv. Silas Mason Co., 334 U.S. 249, 68 S.Ct. 1031, 92L.Ed. 1347 (1948).

[16] In sum, we conclude that the determination ofwhether a given factual dispute requires submissionto a jury must be guided by the substantiveevidentiary standards that apply to the case. Thisis true at both the directed verdict and summary

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judgment stages. Consequently, where the NewYork Times “clear and convincing” evidencerequirement applies, the trial judge's summaryjudgment inquiry as to whether a genuine issueexists will be whether the evidence presented issuch that a jury applying that evidentiary standardcould reasonably find for either the plaintiff orthe defendant. Thus, where the factual disputeconcerns actual malice, clearly a material issue ina New York Times case, the appropriate summaryjudgment question will be whether the evidence inthe record could support a reasonable jury finding*256 either that the plaintiff has shown actual

malice by clear and convincing evidence or that the

plaintiff has not. 7

III

[17] Respondents argue, however, that whatevermay be true of the applicability of the “clear andconvincing” standard at the summary judgmentor directed verdict stage, the defendant shouldseldom if ever be granted summary judgment wherehis state of mind is at issue and the jury mightdisbelieve him or his witnesses as to this issue. Theyrely on Poller v. Columbia Broadcasting System,Inc., 368 U.S. 464, 82 S.Ct. 486, 7 L.Ed.2d 458(1962), for this proposition. We do not understandPoller, however, to hold that a plaintiff maydefeat a defendant's properly supported motion forsummary judgment in a conspiracy or libel case,for example, without offering any concrete evidencefrom which a reasonable juror could return averdict in his favor and by merely asserting thatthe jury might, and legally could, disbelieve thedefendant's denial of a conspiracy or of legal malice.The movant has the burden of showing that thereis no genuine issue of fact, but the plaintiff is notthereby relieved of his own burden of producingin turn evidence that would support a jury verdict.Rule 56(e) itself provides that a party opposing aproperly supported motion for summary judgmentmay not rest upon mere allegation or denials of hispleading, but must set forth specific facts showingthat there is a genuine issue for trial. Based onthat Rule, Cities Service, 391 U.S., at 290, 88 S.Ct.,at 1593, held that the plaintiff could not defeatthe properly supported summary judgment motion

of a defendant charged with a conspiracy withoutoffering “any significant probative evidence tendingto support the complaint.” As we have recentlysaid, “discredited testimony *257 is not [normally]considered a sufficient basis for drawing a contraryconclusion.” Bose Corp. v. Consumers Union ofUnited States, Inc., 466 U.S. 485, 512, 104 S.Ct.1949, 1966, 80 L.Ed.2d 502 (1984). Instead, theplaintiff must present affirmative evidence in orderto defeat a properly supported motion for summaryjudgment. This is true even where the evidence islikely to be within the possession of the defendant,as long as the plaintiff has had a full opportunityto conduct discovery. We repeat, however, that theplaintiff, to survive the defendant's motion, needonly present evidence from which a jury mightreturn a verdict in his favor. If he does so, there is agenuine issue of fact that requires a trial.

IV

In sum, a court ruling on a motion for summaryjudgment must be guided by the New YorkTimes “clear and convincing” **2515 evidentiarystandard in determining whether a genuine issue ofactual malice exists—that is, whether the evidencepresented is such that a reasonable jury mightfind that actual malice had been shown withconvincing clarity. Because the Court of Appealsdid not apply the correct standard in reviewing theDistrict Court's grant of summary judgment, wevacate its decision and remand the case for furtherproceedings consistent with this opinion.

It is so ordered.

Justice BRENNAN, dissenting.The Court today holds that “whether a givenfactual dispute requires submission to a jury mustbe guided by the substantive evidentiary standards

that apply to the case,” ante, at 2513. 1 In myview, the Court's analysis is deeply flawed, *258and rests on a shaky foundation of unconnectedand unsupported observations, assertions, andconclusions. Moreover, I am unable to divine fromthe Court's opinion how these evidentiary standards

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are to be considered, or what a trial judge is actuallysupposed to do in ruling on a motion for summaryjudgment. Accordingly, I respectfully dissent.

To support its holding that in ruling on amotion for summary judgment a trial court mustconsider substantive evidentiary burdens, the Courtappropriately begins with the language of Rule56(c), which states that summary judgment shallbe granted if it appears that there is “no genuineissue as to any material fact and that the movingparty is entitled to a judgment as a matter oflaw.” The Court then purports to restate this Rule,and asserts that “summary judgment will not lie ifthe dispute about a material fact is ‘genuine,’ thatis, if the evidence is such that a reasonable jurycould return a verdict for the nonmoving party.”Ante, at 2510. No direct authority is cited for theproposition that in order to determine whether adispute is “genuine” for Rule 56 purposes a judgemust ask if a “reasonable” jury could find forthe non-moving party. Instead, the Court quotesfrom *259 First National Bank of Arizona v. CitiesService Co., 391 U.S. 253, 288–289, 88 S.Ct. 1575,1592, 20 L.Ed.2d 569 (1968), to the effect thata summary judgment motion will be defeated if“sufficient evidence supporting the claimed factualdispute be shown to require a jury or judge toresolve the parties' differing versions of the truthat trial,” ante, at 2510, and that a plaintiff maynot, in defending against a motion for summaryjudgment, rest on mere allegations or denials ofhis pleadings. After citing Adickes v. S.H. Kress& Co., 398 U.S. 144, 90 S.Ct. 1598, 26 L.Ed.2d142 (1970), for the unstartling proposition that“the availability of summary judgment turn[s] onwhether a proper jury question [is] presented,”ante, at –––, the Court then reasserts, again withno direct authority, that in determining whether**2516 a jury question is presented, the inquiry

is whether there are factual issues “that properlycan be resolved only by a finder of fact becausethey may reasonably be resolved in favor of eitherparty.” Ante, at 2511. The Court maintains that thissummary judgment inquiry “mirrors” that whichapplies in the context of a motion for directedverdict under Federal Rule of Civil Procedure50(a): “whether the evidence presents a sufficientdisagreement to require submission to a jury or

whether it is so one-sided that one party mustprevail as a matter of law.” Ante, at 2511.

Having thus decided that a “genuine” dispute isone which is not “one-sided,” and one which could“reasonably” be resolved by a “fair-minded” juryin favor of either party, ibid., the Court thenconcludes:

“Whether a jury could reasonably find for eitherparty, however, cannot be defined except by thecriteria governing what evidence would enablethe jury to find for either the plaintiff or thedefendant: It makes no sense to say that a jurycould reasonably find for either party withoutsome benchmark as to what standards governits deliberations and within what boundaries itsultimate decision must fall, and these standardsand boundaries are in fact provided by theapplicable evidentiary standards.” Ante, at 2513.

*260 As far as I can discern, this conclusion,which is at the heart of the case, has been reachedwithout the benefit of any support in the case law.Although, as noted above, the Court cites Adickesand Cities Service, those cases simply do not standfor the proposition that in ruling on a summaryjudgment motion, the trial court is to inquire intothe “one-sidedness” of the evidence presented bythe parties. Cities Service involved the propriety of agrant of summary judgment in favor of a defendantalleged to have conspired to violate the antitrustlaws. The issue in the case was whether, on thebasis of the facts in the record, a jury could inferthat the defendant had entered into a conspiracyto boycott. No direct evidence of the conspiracywas produced. In agreeing with the lower courtsthat the circumstantial evidence presented by theplaintiff was insufficient to take the case to thejury, we observed that there was “one fact” thatpetitioner had produced to support the existenceof the illegal agreement, and that that single factcould not support petitioner's theory of liability.Critically, we observed that “[t]he case at handpresents peculiar difficulties because the issue offact crucial to petitioner's case is also an issue oflaw, namely the existence of a conspiracy.” 391U.S., at 289, 88 S.Ct., at 1592. In other words,Cities Service is at heart about whether certainfacts can support inferences that are, as a matter

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of antitrust law, sufficient to support a particulartheory of liability under the Sherman Act. Justthis Term, in discussing summary judgment in thecontext of suits brought under the antitrust laws,we characterized both Cities Service and MonsantoCo. v. Spray-Rite Service Corp., 465 U.S. 752, 104S.Ct. 1464, 79 L.Ed.2d 775 (1984), as cases in which“antitrust law limit[ed] the range of permissibleinferences from ambiguous evidence....” MatsushitaElectric Industrial Co. v. Zenith Radio Corp., 475U.S. 574, 588, 106 S.Ct. 1348, 1356, 89 L.Ed.2d538 (1986) (emphasis added). Cities Service thusprovides no authority for the conclusion that Rule56 requires a trial court to consider whether directevidence produced by the parties is “one-sided.” Tothe contrary, in Matsushita, the most recent *261case to cite and discuss Cities Service, we statedthat the requirement that a dispute be “genuine”means simply that there must be more than “somemetaphysical doubt as to the material facts.” 475

U.S., at 586, 106 S.Ct., at 1356. 2

**2517 Nor does Adickes, also relied on by theCourt, suggest in any way that the appropriatesummary judgment inquiry is whether the evidenceoverwhelmingly supports one party. Adickes, likeCities Service, presented the question of whether agrant of summary judgment in favor of a defendanton a conspiracy count was appropriate. Theplaintiff, a *262 white schoolteacher, maintainedthat employees of defendant Kress conspired withthe police to deny her rights protected by theFourteenth Amendment by refusing to serve herin one of its lunchrooms simply because shewas white and accompanied by a number ofblack schoolchildren. She maintained, among otherthings, that Kress arranged with the police tohave her arrested for vagrancy when she left thedefendant's premises. In support of its motion forsummary judgment, Kress submitted statementsfrom a deposition of one of its employees assertingthat he had not communicated or agreed withthe police to deny plaintiff service or to have herarrested, and explaining that the store had takenthe challenged action not because of the race of theplaintiff, but because it was fearful of the reactionof some of its customers if it served a raciallymixed group. Kress also submitted affidavits fromthe Chief of Police and the arresting officers

denying that the store manager had requestedthat petitioner be arrested, and noted that inthe plaintiff's own deposition, she conceded thatshe had no knowledge of any communicationbetween the police and any Kress employee andwas relying on circumstantial evidence to supporther allegations. In opposing defendant's motion forsummary judgment, plaintiff stated that defendantin its moving papers failed to dispute an allegationin the complaint, a statement at her deposition,and an unsworn statement by a Kress employeeall to the effect that there was a policeman inthe store at the time of the refusal to serve, andthat it was this policeman who subsequently madethe arrest. Plaintiff argued that this sequence ofevents “created a substantial enough possibility ofa conspiracy to allow her to proceed to trial....” 398U.S., at 157, 90 S.Ct., at 1608.

We agreed, and therefore reversed the lower courts,reasoning that Kress “did not carry its burdenbecause of its failure to foreclose the possibilitythat there was a policeman in the Kress storewhile petitioner was awaiting service, and thatthis policeman reached an understanding withsome *263 Kress employee that petitioner notbe served.” 398 U.S. at 157, 90 S.Ct., at 1608.Despite the fact that none of the materials reliedon by plaintiff met the requirements of Rule 56(e),we stated nonetheless that Kress failed to meetits initial burden of showing that there was nogenuine dispute of a material fact. Specifically, weheld that because Kress failed to negate plaintiff'smaterials suggesting that a **2518 policeman wasin fact in the store at the time of the refusal toserve, “it would be open to a jury ... to infer fromthe circumstances that the policeman and a Kressemployee had a ‘meeting of the minds' and thusreached an understanding that petitioner should berefused service.” Ibid.

In Adickes we held that a jury might permissiblyinfer a conspiracy from the mere presence ofa policeman in a restaurant. We never reachedand did not consider whether the evidence was“one-sided,” and had we done so, we clearlywould have had to affirm, rather than reverse,the lower courts, since in that case there wasno admissible evidence submitted by petitioner,

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and a significant amount of evidence presentedby the defendant tending to rebut the existenceof a conspiracy. The question we did reach wassimply whether, as a matter of conspiracy law, ajury would be entitled, again, as a matter of law,to infer from the presence of a policeman in arestaurant the making of an agreement betweenthat policeman and an employee. Because we heldthat a jury was entitled so to infer, and becausethe defendant had not carried its initial burdenof production of demonstrating that there was noevidence that there was not a policeman in thelunchroom, we concluded that summary judgmentwas inappropriate.

Accordingly, it is surprising to find the case citedby the majority for the proposition that “there isno issue for trial unless there is sufficient evidencefavoring the nonmoving party for a jury to return averdict for that party.” Ante, at 2511. There was, ofcourse, no admissible evidence in Adickes favoringthe nonmoving plaintiff; there was only an *264unrebutted assertion that a Kress employee and apoliceman were in the same room at the time of thealleged constitutional violation. Like Cities Service,Adickes suggests that on a defendant's motion forsummary judgment, a trial court must considerwhether, as a matter of the substantive law of theplaintiff's cause of action, a jury will be permittedto draw inferences supporting the plaintiff's legaltheory. In Cities Service we found, in effect, thatthe plaintiff had failed to make out a prima faciecase; in Adickes we held that the moving defendanthad failed to rebut the plaintiff's prima facie case.In neither case is there any intimation that a trialcourt should inquire whether plaintiff's evidence is“significantly probative,” as opposed to “merelycolorable,” or, again, “one-sided.” Nor is there ineither case any suggestion that once a nonmovingplaintiff has made out a prima facie case basedon evidence satisfying Rule 56(e) that there is anyshowing that a defendant can make to prevail on amotion for summary judgment. Yet this is what theCourt appears to hold, relying, in part, on these two

cases. 3

As explained above, and as explained also by JusticeREHNQUIST in his dissent, see post, at 2522, Icannot agree that the authority cited by the Court

supports its position. In my view, the Court's resultis the product of an exercise *265 akin to thechild's game of “telephone,” in which a messageis repeated from one person to another and thenanother; after some time, the message bears littleresemblance to what was originally spoken. In thepresent case, the Court purports to restate thesummary judgment test, but with each repetition,the original understanding is increasingly distorted.

**2519 But my concern is not only that the Court'sdecision is unsupported; after all, unsupportedviews may nonetheless be supportable. I am moretroubled by the fact that the Court's opinion sendsconflicting signals to trial courts and reviewingcourts which must deal with summary judgmentmotions on a day-to-day basis. This case is abouta trial court's responsibility when considering amotion for summary judgment, but in my view,the Court, while instructing the trial judge to“consider” heightened evidentiary standards, failsto explain what that means. In other words, howdoes a judge assess how one-sided evidence is,or what a “fair-minded” jury could “reasonably”decide? The Court provides conflicting clues tothese mysteries, which I fear can lead only toincreased confusion in the district and appellatecourts.

The Court's opinion is replete with boilerplatelanguage to the effect that trial courts are not toweigh evidence when deciding summary judgmentmotions:

“[I]t is clear enough from our recent casesthat at the summary judgment stage the judge'sfunction is not himself to weigh the evidence anddetermine the truth of the matter....” Ante, at2511.

“Our holding ... does not denigrate the role of thejury.... Credibility determinations, the weighingof the evidence, and the drawing of legitimateinferences from the facts are jury functions, notthose of a judge, whether he is ruling on a motionfor summary judgment or for a directed verdict.The evidence of the non-movant is to be believed,and all justifiable inferences are to be drawn inhis favor.” Ante, at 2513.

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*266 But the Court's opinion is also full oflanguage which could surely be understood as aninvitation—if not an instruction—to trial courts toassess and weigh evidence much as a juror would:

“When determining if a genuine factual issue ...exists ..., a trial judge must bear in mind theactual quantum and quantity of proof necessaryto support liability.... For example, there is nogenuine issue if the evidence presented in theopposing affidavits is of insufficient caliber orquality to allow a rational finder of fact to findactual malice by clear and convincing evidence.”Ante, at 2513 (emphasis added).

“[T]he inquiry ... [is] whether the evidencepresents a sufficient disagreement to requiresubmission to a jury or whether it is so one-sidedthat one party must prevail as a matter of law.”Ante, at 2512 (emphasis added).

“[T]he judge must ask himself ... whether afair-minded jury could return a verdict for theplaintiff on the evidence presented. The mereexistence of a scintilla of evidence in supportof the plaintiff's position will be insufficient;there must be evidence on which the jury couldreasonably find for the plaintiff.” Ibid.

I simply cannot square the direction that the judge“is not himself to weigh the evidence” with thedirection that the judge also bear in mind the“quantum” of proof required and consider whetherthe evidence is of sufficient “caliber or quantity” tomeet that “quantum.” I would have thought that adetermination of the “caliber and quantity,” i.e., theimportance and value, of the evidence in light of the“quantum,” i.e., amount “required,” could only beperformed by weighing the evidence.

If in fact, this is what the Court would, undertoday's decision, require of district courts, thenI am fearful that this new rule—for this surelywould be a brand new procedure—will transformwhat is meant to provide an expedited “summary”*267 procedure into a full-blown paper trial on

the merits. It is hard for me to imagine that aresponsible counsel, aware that the judge will beassessing the “quantum” of the evidence he ispresenting, will risk either moving for or responding

to a summary judgment motion without comingforth with all of the evidence he can muster insupport of his client's case. Moreover, if the judgeon motion for summary judgment really is toweigh the evidence, then **2520 in my view graveconcerns are raised concerning the constitutionalright of civil litigants to a jury trial.

It may well be, as Justice REHNQUIST suggests,see post, at 2521, that the Court's decision todaywill be of little practical effect. I, for one, cannotimagine a case in which a judge might plausiblyhold that the evidence on motion for summaryjudgment was sufficient to enable a plaintiff bearinga mere preponderance burden to get to the jury—i.e., that a prima facie case had been made out—but insufficient for a plaintiff bearing a clear-and-convincing burden to withstand a defendant'ssummary judgment motion. Imagine a suit forbreach of contract. If, for example, the defendantmoves for summary judgment and produces onepurported eyewitness who states that he was presentat the time the parties discussed the possibility ofan agreement, and unequivocally denies that theparties ever agreed to enter into a contract, while theplaintiff produces one purported eyewitness whoasserts that the parties did in fact come to terms,presumably that case would go to the jury. But if thedefendant produced not one, but 100 eyewitnesses,while the plaintiff stuck with his single witness,would that case, under the Court's holding, still goto the jury? After all, although the plaintiff's burdenin this hypothetical contract action is to prove hiscase by a mere preponderance of the evidence, thejudge, so the Court tells us, is to “ask himself ...whether a fair-minded jury could return a verdictfor the plaintiff on the evidence presented.” Ante,at 2512. Is there, in this hypothetical example, “asufficient disagreement to require submission *268to a jury,” or is the evidence “so one-sided thatone party must prevail as a matter of law”? Ibid.Would the result change if the plaintiff's one witnesswere now shown to be a convicted perjurer? Wouldthe result change if, instead of a garden-varietycontract claim, the plaintiff sued on a fraud theory,thus requiring him to prove his case by clear andconvincing evidence?

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It seems to me that the Court's decision todayunpersuasively answers the question presented, andin doing so raises a host of difficult and troublingquestions for which there may well be no adequatesolutions. What is particularly unfair is that themess we make is not, at least in the first instance, ourown to deal with; it is the district courts and courtsof appeals that must struggle to clean up after us.

In my view, if a plaintiff presents evidence whicheither directly or by permissible inference (and theseinferences are a product of the substantive law ofthe underlying claim) supports all of the elementshe needs to prove in order to prevail on his legalclaim, the plaintiff has made out a prima facie caseand a defendant's motion for summary judgmentmust fail regardless of the burden of proof thatthe plaintiff must meet. In other words, whetherevidence is “clear and convincing,” or proves apoint by a mere preponderance, is for the factfinderto determine. As I read the case law, this is how ithas been, and because of my concern that today'sdecision may erode the constitutionally enshrinedrole of the jury, and also undermine the usefulnessof summary judgment procedure, this is how Ibelieve it should remain.

Justice REHNQUIST, with whom THE CHIEFJUSTICE joins, dissenting.

The Court, apparently moved by concernsfor intellectual tidiness, mistakenly decides thatthe “clear and convincing evidence” standardgoverning finders of fact in libel cases must beapplied by trial courts in deciding a motion forsummary judgment in such a case. The Court refersto this as a “substantive standard,” but I think it isactually a procedural *269 requirement engraftedonto Rule 56, contrary to our statement in Calderv. Jones, 465 U.S. 783, 104 S.Ct. 1482, 79 L.Ed.2d804 (1984), that

“[w]e have already declined in other contextsto grant special procedural protections todefendants in libel and defamation actionsin addition to the constitutional **2521protections embodied in the substantive laws.”Id., at 790–791, 104 S.Ct., at 1487–1488.

The Court, I believe, makes an even greater mistakein failing to apply its newly announced rule to thefacts of this case. Instead of thus illustrating howthe rule works, it contents itself with abstractionsand paraphrases of abstractions, so that its opinionsounds much like a treatise about cooking bysomeone who has never cooked before and has nointention of starting now.

There is a large class of cases in which the higherstandard imposed by the Court today would seemto have no effect at all. Suppose, for example, onmotion for summary judgment in a hypotheticallibel case, the plaintiff concedes that his only proofof malice is the testimony of witness A. WitnessA testifies at his deposition that the reporter whowrote the story in question told him that she, thereporter, had done absolutely no checking on thestory and had real doubts about whether or notit was correct as to the plaintiff. The defendant'sexamination of witness A brings out that he has aprior conviction for perjury.

May the Court grant the defendant's motion forsummary judgment on the ground that the plaintiffhas failed to produce sufficient proof of malice?Surely not, if the Court means what it says, whenit states: “Credibility determinations ... are juryfunctions, not those of a judge, whether he is rulingon a motion for summary judgment or for a directedverdict. The evidence of the nonmovant is to bebelieved, and all justifiable inferences are to bedrawn in his favor.” Ante, at 2513.

The case proceeds to trial, and at the close ofthe plaintiff's evidence the defendant moves fora directed verdict on the *270 ground that theplaintiff has failed to produce sufficient evidence ofmalice. The only evidence of malice produced by theplaintiff is the same testimony of witness A, whois duly impeached by the defendant for the priorperjury conviction. In addition, the trial judge hasnow had an opportunity to observe the demeanorof witness A, and has noticed that he fidgets whenanswering critical questions, his eyes shift from thefloor to the ceiling, and he manifests all other indiciatraditionally attributed to perjurers.

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May the trial court at this stage grant a directedverdict? Again, surely not; we are still dealing with“credibility determinations.”

The defendant now puts on its testimony, andproduces three witnesses who were present at thetime when witness A alleges that the reporter saidshe had not checked the story and had gravedoubts about its accuracy as to plaintiff. Witness Aconcedes that these three people were present at themeeting, and that the statement of the reporter tookplace in the presence of all these witnesses. Eachwitness categorically denies that the reporter madethe claimed statement to witness A.

May the trial court now grant a directed verdict atthe close of all the evidence? Certainly the plaintiff'scase is appreciably weakened by the testimony ofthree disinterested witnesses, and one would hopethat a properly charged jury would quickly return averdict for the defendant. But as long as credibilityis exclusively for the jury, it seems the Court'sanalysis would still require this case to be decidedby that body.

Thus, in the case that I have posed, it would seem tomake no difference whether the standard of proofwhich the plaintiff had to meet in order to prevailwas the preponderance of the evidence, clear andconvincing evidence, or proof beyond a reasonabledoubt. But if the application of the standardsmakes no difference in the case that I hypothesize,one may fairly ask in what sort of case does thedifference in standards *271 make a differencein outcome? Cases may be posed dealing withevidence that is essentially documentary, ratherthan testimonial; but the Court has held in a relatedcontext involving Federal Rule of Civil Procedure52(a) that inferences from documentary evidenceare as much the prerogative **2522 of the finder offact as inferences as to the credibility of witnesses.Anderson v. Bessemer City, 470 U.S. 564, 574, 105S.Ct. 1504, 1512, 84 L.Ed.2d 518 (1985). The Courtaffords the lower courts no guidance whatsoever asto what, if any, difference the abstract standardsthat it propounds would make in a particular case.

There may be more merit than the Court is willingto admit to Judge Learned Hand's observation

in United States v. Feinberg, 140 F.2d 592, 594(CA2), cert. denied, 322 U.S. 726, 64 S.Ct. 943,88 L.Ed.2d 1562 (1944), that “[w]hile at times itmay be practicable” to “distinguish between theevidence which should satisfy reasonable men, andthe evidence which should satisfy reasonable menbeyond a reasonable doubt[,] ... in the long run theline between them is too thin for day to day use.”The Court apparently approves the overruling ofthe Feinberg case in the Court of Appeals by JudgeFriendly's opinion in United States v. Taylor, 464F.2d 240 (1972). But even if the Court is entirelycorrect in its judgment on this point, Judge Hand'sstatement seems applicable to this case becausethe criminal case differs from the libel case inthat the standard in the former is proof “beyonda reasonable doubt,” which is presumably easierto distinguish from the normal “preponderance ofthe evidence” standard than is the intermediatestandard of “clear and convincing evidence.”

More important for purposes of analyzing thepresent case, there is no exact analog in the criminalprocess to the motion for summary judgment in acivil case. Perhaps the closest comparable device forscreening out unmeritorious cases in the criminalarea is the grand jury proceeding, though thecomparison is obviously not on all fours. Thestandard for allowing a criminal case to proceed totrial is not whether the government has producedprima facie evidence of guilt beyond *272 areasonable doubt for every element of the offense,but only whether it has established probable cause.See United States v. Mechanik, 475 U.S. 66, 70, 106S.Ct. 938, 941–942, 89 L.Ed.2d 50 (1986). Thus, in acriminal case the standard used prior to trial is muchmore lenient than the “clear beyond a reasonabledoubt” standard which must be employed by thefinder of fact.

The three differentiated burdens of proof in civiland criminal cases, vague and impressionisticthough they necessarily are, probably do makesome difference when considered by the finder offact, whether it be a jury or a judge in a bench trial.Yet it is not a logical or analytical message that theterms convey, but instead almost a state of mind; wehave previously said:

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“Candor suggests that, to a degree, efforts toanalyze what lay jurors understand concerningthe differences among these three tests ... maywell be largely an academic exercise.... Indeed,the ultimate truth as to how the standardsof proof affect decisionmaking may well beunknowable, given that factfinding is a processshared by countless thousands of individualsthroughout the country. We probably canassume no more than that the difference betweena preponderance of the evidence and proofbeyond a reasonable doubt probably is betterunderstood than either of them in relation to theintermediate standard of clear and convincingevidence.” Addington v. Texas, 441 U.S. 418, 424–425, 99 S.Ct. 1804, 1808, 60 L.Ed.2d 323 (1979)(emphasis added).

The Court's decision to engraft the standard ofproof applicable to a factfinder onto the lawgoverning the procedural motion for a summary

judgment (a motion that has always been regardedas raising a question of law rather than a questionof fact, see, e.g., La Riviere v. EEOC, 682 F.2d1275, 1277–1278 (CA9 1982) (Wallace, J.)), willdo great mischief with little corresponding benefit.The primary effect of the Court's opinion todaywill likely be to cause the decisions of trialjudges on summary judgment motions in libelcases to be *273 more erratic and inconsistentthan before. This is largely because the Courthas **2523 created a standard that is differentfrom the standard traditionally applied in summaryjudgment motions without even hinting as to howits new standard will be applied to particular cases.

All Citations

477 U.S. 242, 106 S.Ct. 2505, 91 L.Ed.2d 202, 54USLW 4755, 4 Fed.R.Serv.3d 1041, 12 Media L.Rep. 2297

Footnotes* The syllabus constitutes no part of the opinion of the Court but has been prepared by the Reporter of

Decisions for the convenience of the reader. See United States v. Detroit Lumber Co., 200 U.S. 321, 337,26 S.Ct. 282, 287, 50 L.Ed. 499.

1 See, e.g., Rebozo v. Washington Post Co., 637 F.2d 375, 381 (CA5), cert. denied, 454 U.S. 964, 102 S.Ct.504, 70 L.Ed.2d 379 (1981); Yiamouyiannis v. Consumers Union of United States, Inc., 619 F.2d 932, 940(CA2), cert. denied, 449 U.S. 839, 101 S.Ct. 117, 66 L.Ed.2d 46 (1980); Carson v. Allied News Co., 529F.2d 206, 210 (CA7 1976).

2 The short, introductory article was written by petitioner Anderson and relied exclusively on the informationobtained by Bermant.

3 In Gertz v. Robert Welch, Inc., 418 U.S. 323, 351, 94 S.Ct. 2997, 3012, 41 L.Ed.2d 789 (1974), this Courtsummarized who will be considered to be a public figure to whom the New York Times standards will apply:

“[The public figure] designation may rest on either of two alternative bases. Insome instances an individual may achieve such pervasive fame or notoriety that hebecomes a public figure for all purposes and in all contexts. More commonly, anindividual voluntarily injects himself or is drawn into a particular public controversyand thereby becomes a public figure for a limited range of issues. In either case suchpersons assume special prominence in the resolution of public questions.”

The District Court found that respondents, as political lobbyists, are the second type of politicalfigure described by the Gertz court—a limited-purpose public figure. See also Waldbaum v. FairchildPublications, Inc., 201 U.S.App.D.C. 301, 306, 627 F.2d 1287, 1292, cert. denied, 449 U.S. 898, 101 S.Ct.266, 66 L.Ed.2d 128 (1980).

4 Our analysis here does not address the question of the initial burden of production of evidence placedby Rule 56 on the party moving for summary judgment. See Celotex Corp. v. Catrett, 477 U.S. 317, 106

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S.Ct. 2548, 91 L.Ed. 265 (1986). Respondents have not raised this issue here, and for the purposes of ourdiscussion we assume that the moving party has met initially the requisite evidentiary burden.

5 This requirement in turn is qualified by Rule 56(f)'s provision that summary judgment be refused where thenonmoving party has not had the opportunity to discover information that is essential to his opposition. Inour analysis here, we assume that both parties have had ample opportunity for discovery.

6 In many cases, however, findings are extremely helpful to a reviewing court.

7 Our statement in Hutchinson v. Proxmire, 443 U.S. 111, 120, n. 9, 99 S.Ct. 2675, 2680, n. 9 (1979), thatproof of actual malice “does not readily lend itself to summary disposition” was simply an acknowledgment ofour general reluctance “to grant special procedural protections to defendants in libel and defamation actionsin addition to the constitutional protections embodied in the substantive laws.” Calder v. Jones, 465 U.S.783, 790–791, 104 S.Ct. 1482, 1487–1488, 79 L.Ed.2d 804 (1984).

1 The Court's holding today is not, of course, confined in its application to First Amendment cases. Althoughthis case arises in the context of litigation involving libel and the press, the Court's holding is that “in rulingon a motion for summary judgment, the judge must view the evidence presented through the prism of thesubstantive evidentiary burden.” Ante, at 2513–2514. Accordingly, I simply do not understand why JusticeREHNQUIST, dissenting, feels it appropriate to cite Calder v. Jones, 465 U.S. 783, 104 S.Ct. 1482, 79L.Ed.2d 804 (1984), and to remind the Court that we have consistently refused to extend special proceduralprotections to defendants in libel and defamation suits. The Court today does nothing of the kind. It changessummary judgment procedure for all litigants, regardless of the substantive nature of the underlying litigation.

Moreover, the Court's holding is not limited to those cases in which the evidentiary standard is“heightened,” i.e., those in which a plaintiff must prove his case by more than a mere preponderance ofthe evidence. Presumably, if a district court ruling on a motion for summary judgment in a libel case is toconsider the “quantum and quality” of proof necessary to support liability under New York Times, ante,at 2513 and then ask whether the evidence presented is of “sufficient caliber or quantity” to support thatquantum and quality, the court must ask the same questions in a garden-variety action where the plaintiffneed prevail only by a mere preponderance of the evidence. In other words, today's decision by its termsapplies to all summary judgment motions, irrespective of the burden of proof required and the subjectmatter of the suit.

2 Writing in dissent in Matsushita, Justice WHITE stated that he agreed with the summary judgment testemployed by the Court, namely, that “ ‘[w]here the record taken as a whole could not lead a rational trier offact to find for the nonmoving party, there is no ‘genuine issue for trial.’ ” 475 U.S., at 599, 106 S.Ct., at 1363.Whether the shift, announced today, from looking to a “reasonable” rather than a “rational” jury is intendedto be of any significance, there are other aspects of the Matsushita dissent which I find difficult to squarewith the Court's holding in the present case. The Matsushita dissenters argued:

“... [T]he Court summarizes Monsanto Co. v. Spray-Rite Service Corp., supra, as holding that ‘courtsshould not permit factfinders to infer conspiracies when such inferences are implausible....’ Ante, at ––––.Such language suggests that a judge hearing a defendant's motion for summary judgment in an antitrustcase should go beyond the traditional summary judgment inquiry and decide for himself whether the weightof the evidence favors the plaintiff. Cities Service and Monsanto do not stand for any such proposition.Each of those cases simply held that a particular piece of evidence standing alone was insufficientlyprobative to justify sending a case to the jury. These holdings in no way undermine the doctrine that allevidence must be construed in the light most favorable to the party opposing summary judgment.“If the Court intends to give every judge hearing a motion for summary judgment in an antitrust case the jobof determining if the evidence makes the inference of conspiracy more probable than not, it is overturningsettled law. If the Court does not intend such a pronouncement, it should refrain from using unnecessarilybroad and confusing language.” Id., at 600–601, 106 S.Ct., at 1363 (footnote omitted).In my view, these words are as applicable and relevant to the Court's opinion today as they were to theopinion of the Court in Matsushita.

3 I am also baffled by the other cases cited by the majority to support its holding. For example, the Courtasserts that “[i]f ... evidence is merely colorable, Dombrowski v. Eastland, 387 U.S. 82, 87 S.Ct. 1425, 18L.Ed.2d 577 (1967) (per curiam), ... summary judgment may be granted.” Ante, at 2511. In Dombrowski,we reversed a judgment granting summary judgment to the counsel to the Internal Security Subcommitteeof the Judiciary Committee of the United States Senate because there was “controverted evidence in the

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record ... which affords more than merely colorable substance” to the petitioners' allegations. 387 U.S., at84, 87 S.Ct., at 1427. Dombrowski simply cannot be read to mean that summary judgment may be granted ifevidence is merely colorable; what the case actually says is that summary judgment will be denied if evidenceis “controverted,” because when evidence is controverted, assertions become colorable for purposes ofmotions for summary judgment law.


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Robert Schalkenbach Foundation v. Lincoln Foundation, Inc., 208 Ariz. 176 (2004)

91 P.3d 1019, 428 Ariz. Adv. Rep. 26, 430 Ariz. Adv. Rep. 12


KeyCite Yellow Flag - Negative Treatment

Distinguished by Buckeye Check Cashing of Arizona, Inc. v.

Lang, S.D.Ohio, February 23, 2007

208 Ariz. 176Court of Appeals of Arizona,

Division 1, Department B.

ROBERT SCHALKENBACH FOUNDATION;Stanley Sapiro; E.C. Redepenning; Carol

Mauch; Elaine Coons; Wayne Wuertz;Common Ground–USA, Center for the Study

of Economics; Henry George Foundationof America; Henry George School of Social

Science of Los Angeles; Henry GeorgeSchool of Northern California; Tax ReformAustralia, Inc.; The Association for Good

Government; The Henry George FoundationLtd. of New South Wales; The Danish

Henry George Society; Resource Rentalsfor Revenue Association; South AfricanConstitutional Property Rights Trust;

Canadian Henry George School of EconomicScience and Social Philosophy; Geonomy

Society; International Union for Land ValueTaxation and Free Trade; and The HenryGeorge Institute, Petitioners–Appellants,

v.LINCOLN FOUNDATION, INC.; Lincoln

Institute of Land Policy, Inc.; David C.Lincoln; Kathryn Lincoln; John G. Lincoln,III; Lillian Lincoln Howell; Ronald Smith;

H. James Brown; Karl W. Case; DavidE. Dowall; Richard A. Kahan; Wallace E.

Oates; Carolina Barco de Botero; JeanHocker; Therese J. McGuire; Evelyn

Lord; Lester Simon; David R. Fullmer;Gary Cornia; Earl Blumenaur; Arizona

Attorney General, Respondents–Appellees.The Henry George School of Social Science,New York, New York, Petitioner–Appellant,

v.Lincoln Foundation, Inc. and TheLincoln Institute of Land Policy,

Inc., Respondents–Appellees.

Nos. 1 CA–CV 02–0208, 1 CA–CV 02–0780.|

June 17, 2004.|

As Amended July 9, 2004.|

Review Denied Nov. 30, 2004.

SynopsisBackground: Individuals, associations, andorganizations dedicated to supporting philosophyof certain economist, and school which was alsodedicated to supporting such philosophy, filedtwo separate petitions in probate court, seekingto enforce charitable trust that was establishedby trustor for purpose of propagating samephilosophy, and requesting writs of mandateto require Attorney General to enforce trust.The Superior Court, Maricopa County, Nos.PB 01–001733, PB 02–000810, Edward Bassett,Commissioner, and Barbara Rodriguez Mundell,J., dismissed complaints for lack of standing, andrefused to grant mandate petitions. Individuals,associations, organizations, and school appealed,and cases were consolidated for appeal.

Holdings: The Court of Appeals, B. Kessler, J., heldthat:

[1] issue preclusion barred individuals, associations,and organizations from relitigating issue ofcommon law standing, which had been resolvedagainst them in previous action;

[2] as matter of first impression, potentialbeneficiaries of charitable trust lack common lawstanding, and standing under Probate Code, toenforce trust, absent special interest in trust;

[3] all appellants lacked standing under eithercommon law or Probate Code to enforce trust;

[4] all appellants also lacked standing as “interestedparties” to compel Attorney General to exercise hisdiscretion, and thus actions were inappropriate formandamus relief.

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Affirmed.

West Headnotes (8)

[1] Appeal and ErrorStanding

30 Appeal and Error30XVI Review30XVI(D) Scope and Extent of Review30XVI(D)3 Procedural Matters inGeneral30k3224 Parties30k3226 Standing

(Formerly 30k893(1))

Whether a party has standing to sue isa question of law reviewed de novo onappeal.


[2] JudgmentJudgment on discontinuance,

dismissal, or nonsuit

JudgmentPersonal status or right

228 Judgment228XIV Conclusiveness of Adjudication228XIV(A) Judgments Conclusive inGeneral228k654 Judgment on discontinuance,dismissal, or nonsuit228 Judgment228XIV Conclusiveness of Adjudication228XIV(C) Matters Concluded228k723 Essentials of Adjudication228k725 Facts Necessary to SustainJudgment228k725(2) Personal status or right

Individuals, associations, andorganizations dedicated to supportingphilosophy of certain economistwere barred by doctrine of issuepreclusion from relitigating issue oftheir common law standing to enforcecharitable trust that was establishedby trustor for purpose of propagatingsame philosophy; ruling that plaintifflacked standing to proceed was

essential to dismissal of complaintin previous action, and dismissal“without prejudice” was final judgmentfor purposes of issue preclusion,although there was no “on the merits”determination of standing issue, ascourt denied motion for leave to amendcomplaint.


[3] Appeal and ErrorBriefs and argument in general

30 Appeal and Error30XVI Review30XVI(J) Waiver of Error in ReviewingCourt30k4094 Failure to Assert orAdequately Discuss Error30k4096 Briefs and argument in general

(Formerly 30k1078(1))

Generally, Court of Appeals willconsider an issue not raised in anappellant's opening brief as abandonedor conceded.


[4] JudgmentNature and requisites of former

adjudication as ground of estoppel ingeneral

228 Judgment228XIV Conclusiveness of Adjudication228XIV(A) Judgments Conclusive inGeneral228k634 Nature and requisites offormer adjudication as ground ofestoppel in general

For the doctrine of issue preclusionto apply, (1) the issue must havebeen actually litigated in a previousproceeding, (2) the parties must havehad a full and fair opportunity andmotive to litigate the issue, (3) a validand final decision on the merits musthave been entered, (4) resolution of theissue must be essential to the decision,and (5) there must be common identityof the parties.

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[5] JudgmentFinality of determination

JudgmentScope and Extent of Estoppel in

General

228 Judgment228XIV Conclusiveness of Adjudication228XIV(A) Judgments Conclusive inGeneral228k650 Finality of determination228 Judgment228XIV Conclusiveness of Adjudication228XIV(C) Matters Concluded228k713 Scope and Extent of Estoppelin General228k713(1) In general

Even if a prior decision is notconsidered appealable, the partiesmay be precluded from relitigatingthe issue again where the decisionwas sufficiently firm to be accordedconclusive effect, meets the otherrequirements for preclusion, and couldhave been reviewed by special action.Restatement (Second) of Judgments §§13 comment, 28(1) comment.

Cases that cite this headnote

[6] CharitiesActions for administration or

enforcement

75 Charities75II Construction, Administration, andEnforcement75k50 Actions for administration orenforcement

Potential beneficiaries of a charitabletrust lack common law standing, andstanding under the Probate Code, toenforce the trust, absent a specialinterest in the trust, such as beinga current beneficiary. Restatement(Second) of Trusts §§ 291 comment,391.


[7] CharitiesActions for administration or

enforcement

75 Charities75II Construction, Administration, andEnforcement75k50 Actions for administration orenforcement

Individuals, associations,organizations, and school dedicatedto supporting philosophy of certaineconomist failed to demonstrate specialinterest in charitable trust which wasestablished by trustor for purpose ofpropagating same philosophy except aspotential beneficiaries, and thus theylacked standing under either commonlaw, or Probate Code as informed bycommon law, to enforce trust; evenschool which had once been beneficiaryof trust lacked such special interest,where such interest ended over 10years prior to school's instigation oflitigation to enforce trust. A.R.S. §§ 14–1201, subd. 26, 14–7201; Restatement(Second) of Trusts, § 391 comments.


[8] MandamusInterest in Subject-Matter

250 Mandamus250I Nature and Grounds in General250k21 Persons Entitled to Relief250k23 Interest in Subject-Matter250k23(1) In general

Individuals, associations,organizations, and school dedicatedto supporting philosophy of certaineconomist were mere potentialbeneficiaries of charitable trust thatwas established by trustor for purposeof propagating same philosophy, andthus lacked standing in mandamus as“interested parties” either to compelAttorney General to exercise his

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discretion to enforce terms of suchtrust, or to act as relators on behalf ofpublic. A.R.S. § 12–2021.



**1021 *178 Brooks & Affiliates, P.L.C. byDavid P. Brooks, Mesa, and Christopher J. Raboin,Phoenix, Co–Counsel for Petitioners–Appellants.

Snell & Wilmer, L.L.P., Patricia Lee Refo, RobertM.J. Kort, Phoenix, Attorneys for Respondent–Appellee Lincoln Foundation, Inc.

Meyer, Hendricks & Bivens, P.A., Donald W.Bivens, Ed Henricks, Jr., Phoenix, Attorney forRespondent–Appellee Lincoln Institute of LandPolicy.

Terry Goddard, Attorney General by Kathryn L.Leonard, Assistant Attorney General, ConsumerProtection and Advocacy Section, Phoenix,Attorney for Respondents–Appellees State ofArizona.

OPINION

KESSLER, Judge.

¶ 1 In this consolidated appeal, AppellantsRobert Schalkenbach Foundation, Inc., et al. (the“Schalkenbach Appellants”) and the Henry GeorgeSchool of Social Science, New York, New York (the“New York School”) (collectively, “Appellants”)assert that two probate judges erred by dismissingtheir petitions for failure to state a claim uponwhich relief can be granted. Specifically, Appellantstake issue with the probate judges' decisions to:(1) dismiss their complaints for lack of standing toenforce a charitable trust; and (2) refuse to granttheir writ of mandamus to compel the AttorneyGeneral to enforce a charitable trust or, in thealternative, to designate them as relators to acton behalf of the Attorney General. Adopting the“special interest” test for standing, we uphold theprobate courts' decisions.

Factual and Procedural History

CV 1999–016329¶ 2 The Schalkenbach Appellants filed a complaintin a prior case in 1999 to: (1) compel the LincolnFoundation, Inc. (the “Foundation”) to honorthe charitable trust under which it holds assetsand to abide by its Articles of Incorporation; (2)replace the Foundation's officers and directors withpersons interested in carrying out the terms of thecharitable trust; and (3) require the reimbursementof improper expenditures made by the Foundation(hereafter, “CV 1999–016329”).

¶ 3 The Schalkenbach Appellants asserted that theFoundation is a charitable trust that was founded,organized and funded by John C. Lincoln for thepurpose of teaching, expounding and propagating

the ideas of Henry George. 1 The SchalkenbachAppellants identified **1022 *179 themselvesas longtime supporters of the ideas of HenryGeorge or nonprofit associations and corporationsorganized to teach and expound the ideas of Henry

George. 2

¶ 4 The Schalkenbach Appellants alleged that: theFoundation improperly paid money to entities thatdid not follow the trust's purpose; the Foundationcreated the Lincoln Institute of Land Policy (the“Institute”) and improperly transferred money tothe Institute; and the Foundation's officers anddirectors did not accept the teachings of HenryGeorge.

¶ 5 The Foundation moved to dismiss the complaintunder Arizona Rule of Civil Procedure 12(b)(6) claiming, in part, that the SchalkenbachAppellants lacked standing under both the ArizonaNonprofit Corporations Act and the common lawof trusts and that their claims were time barred.The court dismissed the Schalkenbach Appellants'complaint without prejudice after finding that theSchalkenbach Appellants did not have a “specialinterest” in the charitable trust and, therefore, theywere unable to enforce the trust under the commonlaw.

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¶ 6 The Schalkenbach Appellants moved to amendtheir complaint to add the Attorney General as adefendant and to compel the Attorney General toenforce the trust, or to appoint the SchalkenbachAppellants as relators to enforce the trust on theAttorney General's behalf. The trial court refused togrant the amendment, stating it would be futile. Thetrial court entered another order, again dismissingthe complaint without prejudice. The SchalkenbachAppellants did not appeal from any of the aboveorders.

PB 2001–01733¶ 7 Instead, in 2001, the Schalkenbach Appellantsfiled a petition in probate court, which is thesubject of this consolidated appeal, (hereafter,“PB 2001–01733”) to enforce the public charitabletrust established by the will (the “Petition”). Inthe Petition, the Schalkenbach Appellants allegedalmost identical facts and legal theories as those setforth in their 1999 complaint with two pertinentdifferences. The Petition: (1) named the AttorneyGeneral as a defendant and requested a writof mandamus to require the Attorney Generalto enforce the trust or allow the SchalkenbachAppellants to be designated relators to act onthe Attorney General's behalf; and (2) referred to

John C. Lincoln's will 3 and claimed the probatecourt could proceed pursuant to Arizona RevisedStatutes (“A.R.S.”) §§ 14–7201, –1401 (1995).

¶ 8 The Foundation and the Attorney Generalmoved to dismiss the Petition on the grounds ofissue preclusion/res judicata, lack of standing, andfailure to state a claim upon which relief could be

granted. 4

¶ 9 The probate court dismissed the petition withoutprejudice. The court found that in CV 1999–016329 the trial court had already determined thatthe Schalkenbach Appellants lacked standing toenforce the charitable trust and, therefore, issuepreclusion barred the Schalkenbach Appellantsfrom again raising this issue in PB 2001–01733.The court noted that while the existence of the willmight support the existence of such a trust, thiswas unimportant to the trial court's ruling in CV

1999–016329 and, therefore, did not undermine thevalidity of the prior ruling.

**1023 *180 ¶ 10 The probate court alsofound that the Schalkenbach Appellants lackedstanding under A.R.S. § 14–7201 because theywere not interested parties. The court did nothold that the writ of mandamus and relator issueswere precluded by res judicata, but adopted thereasoning of the trial court in CV 1999–016329 tofind that these claims against the Attorney Generalshould be dismissed for failure to state a claimupon which relief could be granted. Ultimately,the court dismissed the Schalkenbach's Petitionwithout prejudice.

PB 2002–000810¶ 11 In 2002, the New York School filed its probatecourt petition (the “New York School Petition”),which is also the subject of this consolidatedappeal, to enforce the charitable trust establishedthrough John C. Lincoln's will (hereafter “PB 2002–000810”). The New York School Petition set forthessentially the same allegations as the SchalkenbachPetition in PB 2001–01733, except it asserted that,as a nonprofit organization that is dedicated tothe teachings of Henry George, it had receivedsubstantial assistance from the Foundation fromthe 1950s through the 1970s and it had been anamed beneficiary in the Foundation's Articles ofIncorporation from 1969 until 1992.

¶ 12 The Foundation moved to dismiss the NewYork School's Petition for failure to state aclaim. The probate court granted that motion anddismissed the New York School's Petition withoutprejudice.

¶ 13 The Schalkenbach Appellants timely filed theirappeal in PB 2001–001733 and it was docketed asour case 1 CA–CV 02–0208. New York Schooltimely filed its appeal in PB 2002–00810 and itwas docketed as our case 1 CA–CV 02–0780. ThisCourt consolidated the two appeals. Despite bothorders of dismissal being without prejudice, wehave jurisdiction pursuant to Arizona Constitution,Article VI, Section 9 and A.R.S. § 12–2101(D)(2003); State v. Boehringer, 16 Ariz. 48, 51–52, 141

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P. 126, 127 (1914); Flynn v. Johnson, 3 Ariz.App.369, 373, 414 P.2d 757, 761 (1966).

¶ 14 Collectively, Appellants assert the probatecourt erred by dismissing their petitions becausethey had standing to enforce the charitable trustunder A.R.S. §§ 14–7201 and 12–2021, and undercommon law. The Schalkenbach Appellants alsoassert that they should be allowed to proceedagainst the Attorney General. The Foundation andthe Attorney General assert that the probate judges'decisions dismissing the petitions should be upheld.

Appellants Lack Standing to Enforce the Trust

[1] ¶ 15 Whether a party has standing to sue is aquestion of law we review de novo. Alliance Maranav. Groseclose, 191 Ariz. 287, 289, 955 P.2d 43, 45(App.1997).

A. Issue Preclusion Bars The SchalkenbachAppellants from Relitigating Their Standingto Bring Common Law Claims to Enforce theCharitable Trust.[2] ¶ 16 The probate court held that the

Schalkenbach Appellants were barred by issuepreclusion from re-litigating whether they hadcommon-law standing to enforce the charitabletrust. We affirm that holding on three separategrounds.

[3] ¶ 17 First, the Schalkenbach Appellants didnot challenge that holding in their opening brief.Generally, we will consider an issue not raisedin an appellant's opening brief as abandoned orconceded. DeElena v. Southern Pac. Co., 121 Ariz.563, 572, 592 P.2d 759, 768 (1979); State Farm Mut.Auto. Ins. Co. v. Tarantino, 114 Ariz. 420, 422, 561P.2d 744, 746 (1977); Rowland v. Great States Ins.Co., 199 Ariz. 577, 581 n. 1, 20 P.3d 1158, 1162

(App.2001). 5

[4] ¶ 18 Second, even if this issue was notabandoned, the trial court correctly decided**1024 *181 the preclusion issue. For issue

preclusion to apply:

(1) the issue must have beenactually litigated in a previousproceeding, (2) the partiesmust have had a full andfair opportunity and motiveto litigate the issue, (3) avalid and final decision onthe merits must have beenentered, (4) resolution of theissue must be essential to thedecision, and (5) there mustbe common identity of theparties.

Garcia v. General Motors Corp., 195 Ariz. 510, 514,¶ 9, 990 P.2d 1069, 1073 (App.2000); see also Chaneyv. City of Tucson, 148 Ariz. 571, 573, 716 P.2d, 28,30 (1986).

¶ 19 The issue of whether the SchalkenbachAppellants had common-law standing to enforcethe charitable trust was fully briefed and arguedin CV 1999–016329. In that case, the trial courtheld that they did not have a “special interest” inthe trust and, therefore, were not the appropriateparties to enforce the trust.

[5] ¶ 20 On the facts here, the trial court'sdismissal of the complaint in CV 1999–016329 isa final judgment for purposes of issue preclusion.A ruling that plaintiff lacked standing to proceedwas essential to the dismissal of that case. Thisis true even though there was not an “on themerits” determination of the underlying issue. Also,even though the complaint was dismissed “withoutprejudice,” the court denied the SchalkenbachAppellants' motion for leave to amend. Under suchcircumstances, an issue may be considered to havebeen litigated to finality between the parties forpurposes of issue preclusion. See Flynn, 3 Ariz.App.at 373, 414 P.2d at 761 (“an order granting a motionto dismiss would be appealable if it was enteredwithout leave to amend or with prejudice”); Millerv. Norris, 247 F.3d 736, 740 (8th Cir.2001) (“an issueactually decided in a non-merits dismissal is givenpreclusive effect in a subsequent action between

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the same parties”); Offshore Sportswear, Inc. v.Vuarnet, Int'l, 114 F.3d 848, 850 (9th Cir.1997)(dismissal without prejudice based on a forumselection clause was “a determination on the meritsof the applicability, and enforceability, of the clauseitself” and “[i]f the order becomes final (as willhappen if it is left unappealed), it is preclusive whenthe issues and the parties remain the same”). Evenif the prior decision is not considered appealable,the parties may be precluded from relitigating theissue again where the decision was sufficientlyfirm to be accorded conclusive effect, meets theother requirements for preclusion, and could havebeen reviewed by special action. Elia v. Pifer, 194Ariz. 74, 80, ¶ 33, 977 P.2d 796, 802 (App.1998);Restatement (Second) of Judgments §§ 13 cmt. gand 28(1), cmt. a (1982).

¶ 21 Third, as discussed below, even if the probatecourt had reached the merits of the SchalkenbachAppellants' common-law standing to enforce thetrust, they, like the New York School, do not havesuch standing. We will affirm a trial court's decisionif it is correct for the wrong reason. In re Estateof Fogleman, 197 Ariz. 252, 260, ¶ 24, 3 P.3d 1172,1180 (App.2000).

B. Appellants Do Not Have Common–LawStanding to Enforce the Charitable Trust.[6] ¶ 22 Neither the parties' briefs nor our

independent research has discovered any reportedArizona appellate decision explaining which privateparties have common-law standing to enforce acharitable trust. In Collier v. Board of Nat'l Missionsof the Presbyterian Church, 11 Ariz.App. 428, 431,464 P.2d 1015, 1018 (1970), this Court stated that“potential beneficiaries of a charitable trust haveno standing to enforce, construe, or require anaccounting of the trust or trust property” but thatrule is subject to exceptions “dealing with specialinterests held by particular beneficiaries.” However,the Collier court expressly stated the standing issuewas not before it, thus the above language is dicta.Moreover, the Collier court did not discuss what theterm “special interests” meant.

¶ 23 Relying on treatises and decisions fromother jurisdictions, we hold that to have suchcommon-law standing, a party must show that

they have a special interest in the trust, such asbeing a current beneficiary, and not merely beinga potential or prior beneficiary of a large class ofpotential beneficiaries. **1025 *182 As discussedin relation to Appellants' claim that they hadstanding under the Probate Code, our conclusionfinds further support in the legislature's statedintent to use common-law principles to determinestanding to enforce trusts under that code.

¶ 24 The “special interest” test is the current,

common-law 6 view of standing to enforcecharitable trusts, adopted by the RestatementSecond of Trusts (“Restatement”), leadingcommentators and other state courts. We turn firstto the Restatement for guidance. Section 391 of theRestatement provides:

A suit can be maintained for the enforcement of acharitable trust by the Attorney General or otherpublic officer, or by a co-trustee, or by a personwho has a special interest in the enforcement ofthe charitable trust, but not by persons who haveno special interest or by the settlor or his heirs,personal representatives or next of kin.As explained by comment c to § 291, potentialbeneficiaries of a large or undefined class do nothave a special interest sufficient to endow themwith standing to enforce the trust:

The mere fact that a person is a possiblebeneficiary is not sufficient to entitle himto maintain a suit for the enforcement of acharitable trust ... [w]here a charitable trustis created for the relief of poverty or thepromotion of education, it may be providedthat particular persons shall be entitled toa preference in receiving benefits.... In sucha case any such person can maintain a suitagainst the trustees for the enforcement of thetrust .... [w]here a charitable trust is createdfor the members of a small class of persons, amember of the class can maintain a suit ... forthe enforcement of the trust.

(Emphasis added.) See also Restatement § 391,cmt. d (“A suit for the enforcement of a charitabletrust cannot be maintained by persons who have

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no special interest in the enforcement of thetrust.”).

¶ 25 Most commentators' thinking is consistentwith the Restatement, limiting standing of privatepersons who are not named beneficiaries or trusteesto persons with special interests in the trust. SeeWilliam F. Fratcher, IV A Scott On Trusts §391 (1989) (persons who have special interest inperformance of charitable trust can maintain actionfor its enforcement). As one leading treatise hasexplained:

As a general rule no private citizen can sue toenforce a charitable trust merely on the ground thathe believes he is within the class to be benefited[sic] by the trust and will received charitable orother benefits from the operation of the trust. Thecourts usually require that suits for enforcementbe brought by the established representativeof the charity, [or] the Attorney General ...Nevertheless, in a fairly large group of cases thecourts have permitted private individuals, whosepositions with regard to the charitable trust weremore or less fixed, to sue for its enforcement.These decisions have been regarded in the pastas exceptional and dependent in large part onspecial circumstances showing that the plaintiffwas certain to receive trust benefits, or on lack ofopposition to the capacity of the complainant.

George Gleason Bogert, The Law of Trusts andTrustees § 414 (Rev.2d ed. Supp 2003) (hereafter,“Bogert”) (emphasis added.)

¶ 26 The policy behind limiting enforcement ofcharitable trusts to public officers and personswith a special interest “stems from the inherentimpossibility of establishing **1026 *183 adistinct justiciable interest on the part of a memberof a large and constantly shifting benefitted class,and the recurring burdens on the trust res andtrustee of vexatious litigation that would resultfrom recognition of a cause of action by any and allof a large number of individuals who might benefitincidentally from the trust.” Hooker v. Edes Home,579 A.2d 608, 612 (D.C.App.1990); Bogert, § 414;Blasko at 52.

¶ 27 While the term “special interest” is not definedand must be determined on the facts of each

case, we conclude that a modified version of thefive-factor balancing test described by Blasko isconsistent with the above treatises. It makes themost sense in giving meaning to “special interest,”while also best serving the policies underlyinglimiting standing in enforcing charitable trusts.Those five factors are: (1) the nature of thebenefitted class and its relationship to the charity;(2) the extraordinary nature of the acts complainedof and the remedy sought; (3) the state attorneygeneral's availability or effectiveness to enforcethe trust; (4) the presence of fraud or misconducton the part of the defendants; and (5) subjectiveand case-specific circumstances. Blasko at 61–82.However, we give special emphasis to several ofthose factors—the nature of the benefitted class andits relationship to the trust, the nature of the remedyrequested, and the effectiveness of attorney general

enforcement of the trust. 7

¶ 28 None of the factors support a finding thatthe Schalkenbach Appellants have standing. First,there is no “sharply defined” or “small class”of potential beneficiaries. Consistent with theabove treatises, some jurisdictions have recognizedstanding for such a small group of potentialbeneficiaries, but only if the class is small anddistinct enough to prevent the trustees frombeing subjected to “recurring vexatious litigation.”Hooker, 579 A.2d at 612; Kania v. Chatham, 297N.C. 290, 254 S.E.2d 528, 530 (1979) (refusing togrant standing to an unsuccessful nominee of ascholarship funded by a charitable trust becausegranting standing “would only open the door tosimilar actions by [hundreds] of other unsuccessfulnominees now and in the future”); Williams v.Board of Trustees of Mount Jezreel Baptist Church,589 A.2d 901, 909 (D.C.App.1991) (refusing togrant standing to a group that would be “uncertainand limitless”); Pollock v. Peterson, 271 A.2d 45, 49(Del.Ch.1970) (adjoining landowners who objectedto the proposed use of a trust's real estate lackedstanding to sue for their own special interest);Warren v. Board of Regents, 247 Ga.App. 758,544 S.E.2d 190, 194 (2001) (faculty members whoobjected to university's selection of person toassume endowed chair lacked standing by virtueof their positions as faculty members eligible to beselected for the chair).

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¶ 29 Examples of small, sharply defined classes ofplaintiffs include: (1) female, indigent, aged widowswho are in good health and residents of a city where

the trust was established for their specific care; 8

(2) employees of a founder's corporation and their

families; 9 and (3) residents of a township. 10 Whatcan be considered to be a small, sharply definedclass can differ widely.

¶ 30 More important than numbers of classmembers is the manageability of the size of theclass, whether it can be easily entered, and whetherthe plaintiff established that it has a direct interestin the operation of the trust. For example, otherjurisdictions have found a class of students orfaculty who could possibly receive a scholarshipor be selected **1027 *184 to an endowed chairto be too large and remote to be a group with aspecial interest. Kania, 254 S.E.2d at 530; Warren,544 S.E.2d at 194. See also Blasko at 67–69.

[7] ¶ 31 Applying these concepts to the Appellants,the Schalkenbach Appellants lack standing toenforce the trust. These Appellants have not shownany “special interest” in the trust except as potentialbeneficiaries. As noted above, that is insufficient.Restatement § 391 cmts. c and d; Bogert, § 414.

¶ 32 The New York School presents a closer casebecause it was once a beneficiary and was listed inthe Foundation's Articles as a beneficiary. Thus, itcan contend it has some prior relationship with theFoundation. However, that “special interest” endedover 10 years ago, making the New York Schooljust another potential beneficiary of the trust. Itfails to demonstrate that it is a part of a smalland distinct class of potential beneficiaries who, ifallowed to have standing, would not subject the

Foundation to recurring vexatious litigation. 11 Assuch, the New York School is not an entity whoseposition with regard to the trust is more or lessfixed so that it can be said to be certain to receivetrust benefits. Bogert, § 414. Compare Albert B.Clement Trust v. Vos, 679 N.W.2d 31, 38 (Iowa2004) (nonprofit corporation for which trust hadagreed to help fund citizen center had standing tochallenge trust's decision to revoke funding, but

lacked standing to challenge administration of trustand trust's decision to build a separate communitycenter in town).

¶ 33 Relying on St. John's–St. Luke EvangelicalChurch v. Nat'l Bank of Detroit, 92 Mich.App. 1, 283N.W.2d 852 (1979), the New York School assertsthat it has a special interest because it has a historywith the Foundation. The New York School pointsout that it received substantial assistance from theFoundation in the 1950s through the 1970s andit was a named beneficiary in the Foundation'sArticles of Incorporation from 1969 until 1992.However, the facts in St. John's differ from the onespresented here.

¶ 34 In St. John's, the original trust instrumentnamed St. John's Church as a beneficiary of 10% ofthe trust income, but gave the trustee uncontrolleddiscretion of all distributions. Id. at 853–55. St.John's Church brought suit after the trustee reliedon its discretionary power to stop making paymentsto St. John's Church. Id. Here, the original trustinstrument did not name the New York Schoolas a beneficiary that was to receive a distributionfrom the Foundation. The New York School wasadded as a possible beneficiary decades after thecharitable trust was established and no designateddistribution was ever afforded. Moreover, althoughthe New York School received distributions fromthe Foundation, it has not received a distributionfor over 20 years. St. Johns simply does not supportthe contention that a former named possiblebeneficiary that has not received distributions inover 20 years has a special interest in enforcing thetrust.

¶ 35 Not only must we examine the size andrelationship of the class to determine if Appellantshave a “special interest,” but we must also lookat other factors that could leave the Foundationopen to vexatious litigation. One such factoris whether the actions concern the ongoingadministration of the Foundation, or whether theAppellants are claiming that the Foundation hastaken an extraordinary action that would affectthe Appellants' interest. See Alco Gravure, 490N.Y.S.2d 116, 479 N.E.2d at 756. New YorkSchool claims that the Foundation has been

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systematically diverting funds from their approved

purpose to improper uses. 12 The allegation thatthe Foundation has been systematically divertingfunds implies that the New York School wishesto influence the **1028 *185 daily operationsof the Foundation. The New York School claimsthat the outcome of this systemic diversion is thatall funds are being diverted for improper purposes.Ultimately, the remedies that the Appellants wishto impose are highly intrusive in the administration

of the trust, 13 which could open the Foundation tofurther litigation by other potential or disappointedbeneficiaries.

¶ 36 Another factor is whether the AttorneyGeneral's Office would be able to enforce thetrust if it concluded that Arizona citizens werebeing harmed by the Foundation's alleged breach,or whether the lack of enforcement by theAttorney General is due to a conflict of interest,ineffectiveness, or lack of resources. Blasko at 67–69. Neither the Schalkenbach Appellants nor theNew York School points to any evidence that theAttorney General's refusal to act to enforce the trustis due to a conflict of interest or ineffectiveness. Atoral argument, the Office of the Attorney Generalstated that its decision to not enforce this trustwas not influenced by lack of resources. While theOffice of the Attorney General cannot be expectedto enforce any and all violations of charitable trusts,no matter how trivial, we do not see evidence ofneglect of the public interest in this case.

¶ 37 In conclusion, we hold that all of theprimary factors to determine “special interest”standing weigh against holding Appellants havesuch standing. The weight of these factors removesany need for us to evaluate other, secondary factorsto determine standing. Accordingly, we will notreverse the probate courts' decisions on this issue.

C. Appellants Do Not Have Standing to Enforce theCharitable Trust Under the Probate Code.¶ 38 Appellants also contend that they havestanding under the probate code to seek to enforceJohn C. Lincoln's will. Given both prior case lawand the legislature's stated intent to apply common

law principles to determine standing under the code,we hold Appellants lack such standing.

¶ 39 The probate code that was in effect atthe time the probate judges dismissed Appellants'petitions did not specifically address charitabletrusts or enforcement of charitable trusts.Section 14–7201 provides that the probate courthas jurisdiction over “proceedings initiated byinterested parties concerning the internal affairsof trusts”. Construing this general reference to“trusts” to include “charitable trusts,” Appellantshad to establish that they are “interested parties” tohave standing to enforce a charitable trust.

¶ 40 The definition of “interested persons” for Title14 is found in A.R.S. § 14–1201. In re Hayes, 129Ariz. 174, 176, 629 P.2d 1010, 1012 (App.1981)(applying the definition of “interested persons” todetermine if a person was an “interested party”under A.R.S. § 14–7201).

“Interested person” includesany heir, devisee, child,spouse, creditor, beneficiaryand other person whohas a property right inor claim against a trustestate or the estate of adecedent, ward or protectedperson. Interested person alsoincludes a person who haspriority for appointment ofpersonal representative andother fiduciaries representinginterested persons. Interestedperson, as the term relatesto particular persons, mayvary from time to time andmust be determined accordingto the particular purposes of,and matter involved in, anyproceeding.”

A.R.S. § 14–1201(26) (emphasis added).

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¶ 41 Appellants have no property right in or aclaim against the trust estate. A.R.S. § 14–1201(26).See generally In re Hayes, 129 Ariz. at 175, 629P.2d at 1011 (in the context of a private trust, thecourt analyzed whether the trustor demonstrated anintention to give beneficial interest). Therefore, theissue is whether, in light of the “particular purposesof, and matter involved in” the probate proceeding,may Appellants be considered interested persons?A.R.S. § 14–1201(26).

¶ 42 While § 14–1201(26) does not providefurther guidance as to standing, other statutes areinstructive on the issue. The Arizona Legislatureenacted the Revised **1029 *186 Uniform TrustCode (“RUTC”), effective January 1, 2004. See

Session Laws 2003, Ch. 212, § 13. 14 The RUTCprovides guidance as to the definition of andthe proper parties to enforce a charitable trust.Section 14–10405(C) provides that “[t]he settlor ofa charitable trust, among others, may maintain aproceeding to enforce the trust.” More importantly,the RUTC also provides that “[t]he common lawof trusts and principles of equity supplement thischapter, except to the extent modified by thischapter or another statute of this state.” A.R.S. §14–10106. We may look to the RUTC to analyzehow the purposed legislation sheds light on thepurpose of the laws in place at the time thejudgments were rendered. Weekly v. City of Mesa,181 Ariz. 159, 163, 888 P.2d 1346, 1350 (App.1994).

¶ 43 Appellants argue for a “flexible” interpretationof “interested parties” to satisfy the legislativepurpose of the probate code, which is “[t]o discoverand make effective the intent of a decedent indistribution of his property” and to “facilitate useand enforcement of certain trusts.” A.R.S. § 14–

1102(A), (B)(2) and (4). 15 Appellants also urge usto apply a common-law “special interest” analysisto determine if they are “interested persons.”

¶ 44 Given that the use of common-lawprinciples are helpful in determining standing as an“interested party” under the probate code, we doso here. Under the common-law special interest testanalyzed above, we hold Appellants lack standingto enforce the charitable trust under the probatecode.

¶ 45 Our application of the special interest test ininterpreting the probate code standard is supportedby California, to which we look to interpret ourprobate code. In re Rose's Estate, 15 Ariz.App.73, 75, 485 P.2d 1190, 1192 (1971), vacated onother grounds, 108 Ariz. 101, 493 P.2d 112 (1972).California has similar statutory language thatdefines “interested person.” See California Probate

Code § 48. 16 The code has been interpretedto give a probate judge a “nonexclusive list orrecognizable interests,” while also requiring thejudge “to evaluate underlying policy considerationsregarding specific probate proceedings.” Armanv. Bank of Am., 74 Cal.App.4th 697, 702, 88Cal.Rptr.2d 410 (Cal.Ct.App.1999). California hasadopted **1030 *187 the special interest test tofind that a party lacked standing where it was abranch of a national organization whose membersmight be beneficiaries of the trust because theclaimed interest must be direct or immediate incharacter to the extent that the party will eithergain or lose by the direct effect of the judgment.Veterans' Indus., Inc. v. Lynch, 8 Cal.App.3d 902,921–23, 88 Cal.Rptr. 303 (1970) (subsidiary whosemembership consists of thousands of memberslacked standing to intervene).

¶ 46 Other states have also applied the specialinterest test in determining standing to enforcea charitable trust under their probate codes.See Sister Elizabeth Kenny Found., Inc. v. Nat'lFound., 267 Minn. 352, 126 N.W.2d 640, 643–44 (1964) (national foundation's chances of beingnamed beneficiary might be greater than those ofordinary member of the public but it still had nogreater interest in or claim to trust proceeds thanother members of the public and thus should notbe permitted to intervene in action by trust topermit amendment of trust purposes); Albert B.Clement Trust, 679 N.W.2d at 35–38 (under statutespermitting “interested parties” and other personswith a special interest to participate in proceedinginvolving a charitable trust, mere fact that personwas a possible beneficiary was not sufficient togive that person standing, incorporating “specialinterest” test).

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¶ 47 Arizona's probate code directs the courtsto consider the type of factors set forth in thestatutory language as well as policy considerationsthat would support or discourage standing. A.R.S.§§ 14–1201(26), and –7201. Accordingly, we hold acommon-law “special interest” analysis should beapplied. For the reasons stated in our discussionof common-law standing, Appellants lack standingto enforce the trust. This same analysis deprivesthem of such standing under the probate code andRUTC.

D. Appellants Do Not Have Standing to Obtain aWrit of Mandamus.[8] ¶ 48 To have standing to obtain a writ of

mandamus, Appellants once again ask us to findthat they are “interested parties” to the enforcementof the charitable trust. See A.R.S. § 12–2021 (“writof mandamus may be issued ... on the verifiedcomplaint of the party beneficially interested ”)(emphasis added); see also Johnson v.Super. Ct., 68Ariz. 68, 70, 199 P.2d 827, 828 (1948) (stating thatbefore issuing a writ of mandamus the court mustdetermine if “the petitioners [had] sufficient interestin the matter to entitle them to contest the order

granting a family allowance”). 17

¶ 49 Regardless of whether issue preclusion bars theSchalkenbach Appellants from pursuing such relief,for the reasons stated above we hold Appellantsare not parties interested, beneficially or otherwise,

in the enforcement of the trust. 18 Appellants weremere potential beneficiaries of the trust. As such,they have even less standing than a person whohad unsuccessfully applied for a lease of stateland and was found to not be a party beneficiallyinterested to have a writ of mandamus issuedrequiring officials to approve the lease. Campbell

v. Caldwell, 20 Ariz. 377, 181 P. 181 (1919). Asmere potential beneficiaries and adherents to HenryGeorge's philosophy, they are unlike contingentbeneficiaries who are beneficially interested inwhether trust proceeds are used to pay a thirdbeneficiary. Johnson, 68 Ariz. at 71, 199 P.2d at 830.

¶ 50 Moreover, Appellants lack standing to compelthe Attorney General to exercise his discretion. The“general rule is that if the action of a public officer isdiscretionary that discretion may not be controlledby mandamus.” Sears v. Hull, 192 Ariz. 65, 68,961 P.2d 1013, 1016 (1998) (refusing to compelmandamus “if the public officer is not specificallyrequired by law to perform the act”). Here, anyauthority the Attorney General **1031 *188 hasto initiate a proceeding against the Foundation isdiscretionary. See A.R.S. § 10–11430(A) (providingdiscretionary authority for the Attorney Generalto initiate a proceeding to dissolve a nonprofitcorporation). Accordingly, this action would beinappropriate for mandamus relief. Sears, 192 at 68,961 P.2d at 1016.

Conclusion

¶ 51 For the foregoing reasons, we conclude thatthe probate court correctly dismissed Appellants'petitions and affirm those orders.

CONCURRING: JEFFERSON L. LANKFORD,Presiding Judge and DANIEL A. BARKER,Judge.

All Citations

208 Ariz. 176, 91 P.3d 1019, 428 Ariz. Adv. Rep. 26,430 Ariz. Adv. Rep. 12

Footnotes1 Henry George was a nineteenth century American economist and social philosopher who propounded a

“Single Tax” theory that proposes that all taxes be abolished except a tax on the community-produced groundrent of land. In his book, PROGRESS AND POVERTY 362–64 (1879), George wrote:

We should satisfy the law of justice, we should meet all economic requirements, by at one stroke abolishingall private titles, declaring all land public property, and letting it out to the highest bidders in lots to suit,under such conditions as would sacredly guard the private right to improvements.

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But such a plan, though perfectly feasible, does not seem to me the best.... To do that would involvea needless shock to present customs and habits of thought—which is to be avoided. To do that wouldinvolve a needless extension of governmental machinery—which is to be avoided.I do not propose either the purchase of or to confiscate private property in land. The first would be unjust;the second, needless. Let the individuals who now hold it still retain, if they want to, possession of whatthey are pleased to call their land. Let them continue to call it their land. Let them buy and sell, andbequeath and devise it.... It is not necessary to confiscate land; it is only necessary to confiscate rent.

2 The Schalkenbach Appellants include individuals, associations and organizations located around the world.

3 At some time during the prior civil proceeding, the Schalkenbach Appellants unsuccessfully offered tointroduce the will into the proceedings.

4 While the pleadings for the motion to dismiss were pending, the Schalkenbach Appellants also moved tojoin the New York School as an additional co-petitioner, which was successfully opposed by the Foundationand the Attorney General.

5 In their reply brief, the Schalkenbach Appellants addressed an argument regarding preclusion raised in theFoundation's answering brief. Even if this were sufficient to preserve the standing issue, the SchalkenbachAppellants only addressed whether issue preclusion would bar their claims under the probate code or formandamus relief, not their common-law standing to enforce the trust.

6 Historically, once courts began to look with favor on charitable trusts, they relied upon state attorneys generalto enforce the terms of the trust. David Villar Patton, The Queen, The Attorney General, and the ModernCharitable Fiduciary: A Historical Perspective on Charitable Enforcement Reform, 11 U.Fla. J.L. & Pub.Policy 131, 159–61 (Spring 2000), citing to Trustees of Dartmouth College v. Woodward, 17 U.S. (4 Wheat)518, 4 L.Ed. 629 (1819); Mary Grace Blasko, Curt S. Crossley, David Lloyd, Standing to Sue in the CharitableSector, 28 U.S.F.L.Rev. 37, 41–47 (Fall 1993) (hereafter, “Blasko”). Later, recognizing the limitations onstate attorney general enforcement of such trusts, courts began to expand the standing concept, allowingprivate persons to bring relator actions, analogizing to corporate law and derivative suits and ultimatelydeveloping a “special interest” test. Blasko at 49–82.

7 We give little, if any, weight to the nature of the acts complained of and whether there are any allegations offraud because any plaintiff can allege such misconduct, regardless of the merits of the complaint. If we foundthat mere allegations of grave misconduct were sufficient to confer standing, the purposes of limiting standingto protect trustees from vexatious litigation would be undermined. Where there are such allegations, wepresume that the availability of Attorney General enforcement will suffice to remedy any alleged misconduct.

8 Hooker, 579 A.2d at 615.

9 Alco Gravure, Inc. v. Knapp Found., 64 N.Y.2d 458, 490 N.Y.S.2d 116, 479 N.E.2d 752, 756 (App.1985)

10 Township of Cinnaminson v. First Camden Nat'l Bank and Trust, Co., 99 N.J.Super. 115, 238 A.2d 701,707–708 (1968).

11 The Appellants do not set forth how many people may be followers of Henry George, how easy or difficult itmay be to become a follower of Henry George, or how they are directly affected by the Foundation's actions.

12 Specifically, the New York School asserts the Foundation improperly paid money to entities that did notfollow the purpose of the charitable trust; the Foundation created the Institute and improperly transferredmoney to the Institute because it did not follow the purpose of the charitable trust; and the officers anddirectors of the Foundation renounced the teachings of Henry George.

13 Appellants seek to have a court order: the Foundation to comply with the terms of the trust; removal ofthe Foundation as the trustee and appointment of a new trustee that would fulfill John C. Lincoln's intent;removal of one or more of the Foundation's directors and appointment of new directors that would fulfill JohnC. Lincoln's intent.

14 In its Second Special Session of 2003, the Arizona Legislature adopted H.B. 2025, postponing the effectivedate of the RUTC until January 1, 2006. See 2003, Ariz. Sess. Laws, ch. 7. The postponement was enactedas emergency legislation. Id. In its Second Regular Session of 2004, the Arizona Legislature repealed theRUTC, stating it “reaffirms the efforts of the national conference of commissioners on uniform state laws ...and intends to continue to analyze provisions of the uniform trust code so that acceptable elements maybe implemented to improve Arizona trust laws.” 2004 Ariz. Sess. Laws, ch. 148, § 2. The Governor signedChapter 148 into law on April 23, 2004. Id. Thus, the RUTC never took effect in Arizona.

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15 The Schalkenbach Appellants also rely on In re Estate of Kidd, to support their assertion that they areinterested persons under A.R.S. § 14–7201. 106 Ariz. 554, 479 P.2d 697 (1971). However, we do not findthis case to be instructive on the standing issue. In Kidd, a “bachelor of frugal nature” wrote a holographicwill that provided his estate “go in research or some scientific proof of a soul of the human body whichleaves at death I think in time their can be a Photograph of soul leaving the human at death [sic].” Id. at556, 479 P.2d at 699.While the appeal stemmed from a challenge of the willingness of a court-appointed beneficiary to execute thecharitable trust, the case does not provide any insight into Arizona's law regarding standing, let alone discusswho “interested parties” would be for a charitable trust. Id. at 558, 479 P.2d at 701. See also Valley ForgeHistorical Soc'y v. Washington Mem'l Chapel, 493 Pa. 491, 426 A.2d 1123, 1128, n. 2 (1981) (noting that“an agency devoted to aiding the deaf generally, had no legally recognized private interest in the dispositionof [funds to certain institutions for the blind and deaf] and was, therefore, not a proper party to appeal froma decree in a charitable trust proceeding.”).

16 Section 48 of the California Probate Code defines interested persons as the following:(a) Subject to subdivision (b), “interested person” includes any of the following:(1) An heir, devisee, child, spouse, creditor, beneficiary, and any other person having a property rightin or claim against a trust estate or the estate of a decedent which may be affected by the proceeding.(2) Any person having priority for appointment as personal representative. (3) A fiduciary representingan interested person. (b) The meaning of “interested person” as it relates to particular persons may varyfrom time to time and shall be determined according to the particular purposes of, and matter involvedin, any proceeding.

17 The term “party beneficially interested” should “not receive a close construction but must be applied liberallyto promote the ends of justice.” Armer v.Super. Ct., 112 Ariz. 478, 480, 543 P.2d 1107, 1109 (1975) (citingBarry v. Phoenix Union High Sch., 67 Ariz. 384, 387, 197 P.2d 533, 534 (1948)). However, we still determinethat the statutory language requires us to analyze if the party is beneficially interested in the context of theaction. Id.

18 Appellants must also be interested parties to act as relators to bring an action on behalf of the public. SinceAppellants are not interested parties to enforce the trust, they are also precluded from acting as relators.See generally Armer, 112 Ariz. at 480, 543 P.2d at 1109.


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In re Smith, 362 B.R. 438 (2007)


362 B.R. 438United States Bankruptcy Court,

D. Arizona.

In re G.S. SMITH, a/k/aGordon Sloan Smith, Debtor.

Peter Nortman, et al., Plaintiffs,v.

Gordon Sloan Smith, Defendant.

Bankruptcy Nos. 2–06–bk–00006–EWH, 2–06–bk–00007–EWH.

|Adversary No. 2:06–ap–00373–EWH.

|March 30, 2007.

SynopsisBackground: Judgment creditors who hadpreviously obtained default judgment againstChapter 7 debtor in securities fraud litigationin federal court brought adversary proceeding toexcept judgment debt from discharge, and movedfor entry of summary judgment in their favor basedon issue preclusive effect of this prior judgment.Debtor opposed judgment creditors' motion, ontheory that, due to fact that prior judgment was bydefault, the question of his alleged fraud was not“actually litigated” in prior district court action.

[Holding:] The Bankruptcy Court, Eileen W.Hollowell, J., held that fraud issue was “actuallylitigated” in prior proceeding, notwithstandingthat debtor eventually chose not to appear atpretrial conference or to comply with court-ordereddeadlines, given debtor's substantial participationand opportunity to defend himself on merits.

Motion granted.

West Headnotes (4)

[1] Judgment

Courts or Other TribunalsRendering Judgment

JudgmentNature of Action or Other

Proceeding

228 Judgment228XIV Conclusiveness of Adjudication228XIV(A) Judgments Conclusive inGeneral228k635 Courts or Other TribunalsRendering Judgment228k636 In general228 Judgment228XIV Conclusiveness of Adjudication228XIV(A) Judgments Conclusive inGeneral228k643 Nature of Action or OtherProceeding228k644 In general

Principles of collateral estoppel applyin bankruptcy debt dischargeabilityproceedings. 11 U.S.C.A. § 523(a).

Cases that cite this headnote

[2] JudgmentNature and requisites of former

adjudication as ground of estoppel ingeneral

228 Judgment228XIV Conclusiveness of Adjudication228XIV(A) Judgments Conclusive inGeneral228k634 Nature and requisites offormer adjudication as ground ofestoppel in general

Application of collateral estoppelis appropriate when the followingrequirements are met: (1) there was fulland fair opportunity to litigate issue inprevious action; (2) issue was actuallylitigated in that action; (3) issue waslost as a result of final judgment in thataction; and (4) person against whomcollateral estoppel is asserted in presentaction was a party or in privity withparty in previous action.


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In re Smith, 362 B.R. 438 (2007)


[3] JudgmentJudgment by default

JudgmentMatters actually litigated and

determined

228 Judgment228XIV Conclusiveness of Adjudication228XIV(A) Judgments Conclusive inGeneral228k652 Judgment by default228 Judgment228XIV Conclusiveness of Adjudication228XIV(C) Matters Concluded228k716 Matters in Issue228k720 Matters actually litigated anddetermined

Default judgment previously enteredagainst Chapter 7 debtor in securitiesfraud litigation in federal court couldbe given collateral estoppel effectin subsequent fraud-based litigationin bankruptcy court to preventdebtor from discharging this judgmentdebt, where prior default judgmentwas no mere “ordinary” default,but was entered after debtor hadactively participated in district courtlitigation for at least one year, withassistance of three different attorneys,had filed responsive pleadings andthird-party complaint, engaged inmediation, and been deposed; fraudissue was “actually litigated” inprior proceeding, notwithstanding thatdebtor eventually chose not to appearat pretrial conference or to complywith court-ordered deadlines, givendebtor's substantial participation andopportunity to defend himself onmerits.


[4] JudgmentJudgment by default

JudgmentMatters actually litigated and

determined

228 Judgment228XIV Conclusiveness of Adjudication228XIV(A) Judgments Conclusive inGeneral228k652 Judgment by default228 Judgment228XIV Conclusiveness of Adjudication228XIV(C) Matters Concluded228k716 Matters in Issue228k720 Matters actually litigated anddetermined

Requirement that issue must have been“actually litigated” in prior proceeding,in order for judgment entered inthat proceeding to be given collateralestoppel effect, may be satisfied bysubstantial participation in adversarycontest, in which the party to beestopped was afforded a reasonableopportunity to defend himself on meritsbut chose not to do so.



*439 Carlos M. Arboleda, Arboleda Brechner,Phoenix, AZ, Frederic Ernest Cann, Cann Lawyers,Portland, OR, for Plaintiffs.

Alan A. Meda, Warren J. Stapleton, StinsonMorrison Hecker LLP, Phoenix, AZ, forDefendant.

MEMORANDUM DECISION

EILEEN W. HOLLOWELL, Bankruptcy Judge.

I. INTRODUCTION

Plaintiffs obtained a default judgment based ona fraud claim against the Debtor in prepetitionlitigation. Plaintiffs filed an adversary complaintin Debtor's bankruptcy case, alleging that the debtowed to them is nondischargeable under 11 U.S.C.§ 523(a)(2)(A) as a debt for money obtained byfraud, and § 523(a)(19) as a debt for violationof federal and state securities law. Plaintiffs have

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In re Smith, 362 B.R. 438 (2007)


moved for summary judgment, asserting that thedefault judgment requires an entry of judgmentof nondischargeability as a matter of law underprinciples of issue preclusion. Because the Debtorparticipated in the prior *440 litigation and wasafforded a full and fair opportunity to defendhimself on the merits, but chose not to, the priorjudgment is entitled to be given preclusive effect inthis proceeding.

II. FACTS AND PROCEDURALBACKGROUND

On March 9, 1995, Plaintiffs sued the Debtor, hiswife and several related entities in the United StatesDistrict Court for the District of Oregon (“OregonLitigation”). The Oregon Litigation arose out ofcreditor claims that the Debtor had purchased in abankruptcy filed by Wallace and Clarice Hall (“theHalls”) and their businesses in Seattle, Washington.The Plaintiffs alleged they delivered $325,000 to theDebtor to purchase the claims as part of a “work-out” of the Halls' bankruptcy and that the Debtorreceived a dividend on the purchased claims, whichhe improperly kept. The Plaintiffs' allegations in theOregon Litigation included common law fraud andviolations of federal and state securities law. A briefsummary of some of the proceedings in the OregonLitigation follows.

In response to the first amended complaint, theDebtor, represented by counsel, filed a motion todismiss and to strike allegations. The matter washeard by a Magistrate Judge whose Findings andRecommendation held that the Debtor's motion todismiss should be granted in part and denied inpart. Plaintiffs filed a second amended complaint,which mooted Debtor's motion to strike allegationsof the first amended complaint. The Debtor filed ananswer on June 27, 1995.

By stipulated order, Debtor was permitted to fileda third-party complaint for indemnity against theHalls on September 20, 1995. The MagistrateJudge also granted the Debtor's motion toextend discovery and file dispositive motions. InDecember 1995, the Magistrate Judge granteddefense counsel's motion to withdraw as counsel

for the Debtor and the other defendants. ThePlaintiffs were granted leave to file a third amendedcomplaint. Through new counsel, the Debtor filedan answer in March 1996.

In July 1996, Mortgage Lenders of America's(“Intervenor”) motion to intervene was granted.Intervenor filed a complaint against the Debtorand others, alleging breach of contract concerningloans it had made to the Debtor in connectionwith the Halls' bankruptcy. In September 1996, theMagistrate Judge ordered the parties to mediation;it was unsuccessful. Also in September, Debtor'snew defense counsel's motion to withdraw ascounsel for all defendants was granted. Debtor wasordered to obtain new counsel by October 4, 1996.The Debtor did not.

During the course of the litigation, Plaintiffs filedseveral motions to compel against the Debtor toobtain discovery. The Debtor was also deposed.

In July 1997, the Magistrate Judge sent the caseback to the District Court. On November 20, 1997,the District Court ordered status reports from allparties by December 19, 1997. The Plaintiffs andIntervenor filed their reports. On December 18 or19, 1997, the Debtor faxed a letter to chambers,advising the District Court that he was living inArizona and had been unable to find counsel.The Debtor further stated that “the primary issuein dispute in this case is whether or not theNortmons [sic] are entitled to any of the moneybeing held by the Bankruptcy Court” and thathe had “tried to discuss this with Norton's [sic]attorney without success.” He stated that he wouldleave the proposed briefing and hearing schedule toPlaintiffs' attorneys and suggested that the DistrictCourt “schedule a status *441 conference andperhaps direct the parties to go to mediation.”

In February 1998, the District Court entered defaultagainst the corporate defendant entities becausethey were required to appear through counsel.On May 28, 1998, the District Court issued itspretrial order, setting various deadlines and thepretrial conference for November 16, 1998. In the11–month period between the Debtor's letter tochambers and the pretrial conference, the Debtor

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did not communicate with the District Court orcomply with court-ordered deadlines. The Debtordid not appear at the pretrial conference.

At that conference, the District Court grantedPlaintiffs' motion for default against the Debtor. OnDecember 2, 1998, the District Court granted theIntervenor's motion for default judgment againstthe Debtor. On January 4, 1999, the Debtor,through counsel, filed an answer to the Intervenor'scomplaint; a motion to set aside the default anddefault judgment and supporting memorandum;and a declaration by the Debtor in support of hismotion. The Debtor's declaration was unsigned.

On January 11, 1999, the District Court ruled onthe Debtor's motion, noting that the grounds forthis default “consist of defendant's dilatory tacticsand lengthy inactivity in this matter.” The Orderfurther stated that “[t]he unsigned Declaration fromSmith filed with the motion to set aside provides nosubstantive explanation or justification for Smith'srefusal to cooperate or even communicate withthis court for over one year, and fails to provideany good cause for setting aside the Default.”However, to ensure strict compliance with thenotice requirements of Fed.R.Civ.P. 55, the DistrictCourt vacated the default judgment in favor ofthe Intervenor and denied Plaintiffs' motion forentry of final judgment. The District Court grantedthe parties leave to move for default judgment byJanuary 29, 1999, and directed defense counsel tofile objections or any other responsive pleadingby February 12, 1999. Defense counsel was alsodirected to assert any grounds for conducting ahearing on the applications.

The Plaintiffs and Intervenor moved for defaultjudgments and the Debtor filed his objectionsand also moved to amend his answers. On April29,1999, the District Court granted the applicationsfor default judgments. The District Court grantedthe Plaintiffs final judgment on seven of their elevenclaims for relief, including the claims for violationsof securities law (2nd through 5th claim) and forcommon law fraud (6th claim). The District Courtdismissed with prejudice the other claims for relief.An amended opinion and order was issued on May

25, 1999, which did not alter these judgments. TheDebtor did not appeal.

On May 17, 2004, Debtor filed his Chapter 7petition. The Plaintiffs timely filed their proof ofclaim as a judgment creditor in the amount of$1,037,638.50. They filed a complaint to determinedischargeability for which they seek an order ofsummary judgment.

III. ISSUE

Is the default judgment based upon fraud entitledto preclusive effect in the bankruptcy proceeding soas to prevent discharge of the judgment debt?

IV. JURISDICTIONAL STATEMENT

Jurisdiction is proper under 28 U.S.C. § 1334. Thisadversary proceeding is a core proceeding pursuantto 28 U.S.C. § 157(b)(2)(l ). Venue is proper under28 U.S.C. § 1409.

*442 V. DISCUSSION

[1] [2] [3] Summary judgment should be grantedwhen “there is no genuine issue as to any materialfact” and “the moving party is entitled to judgmentas a matter of law.” Fed. R. Bankr.P. 7056. It is wellestablished that the principles of collateral estoppelapply in dischargeability proceedings pursuantto § 523(a). Grogan v. Garner, 498 U.S. 279,284–85 n. 11, 111 S.Ct. 654, 112 L.Ed.2d 755(1991). Collateral estoppel is appropriate when thefollowing elements are met:

(1) there was a full and fairopportunity to litigate theissue in the previous action;(2) the issue was actuallylitigated in that action; (3) theissue was lost as a result of afinal judgment in that action;and (4) the person againstwhom collateral estoppel is

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asserted in the present actionwas a party or in privity witha party in the previous action.

In re Palmer, 207 F.3d 566, 568 (9th Cir.2000)

(citations omitted). 1 Although the parties' papersrely on different sets of facts, their oral argumentspresented no material facts in dispute, and theCourt finds there is no genuine issue as to anymaterial fact. Moreover, the parties agreed that forpurposes of the summary judgment motion, thecritical question is whether the issue of fraud was

“actually litigated” in the Oregon Litigation. 2

The cases addressing whether an issue was actuallylitigated are on a continuum; they generally turn onthe degree of participation by the debtor in the priorlitigation. For example, at one end of the spectrumis In re Silva, 190 B.R. 889 (9th Cir.BAP1995),in which there was almost no participation by thedebtor in the prior proceeding. The debtor wasan employee of a company that had engaged infraud; he had played a minor role in the scheme.Silva filed a pro se denial of the complaint and didnothing more. Id. at 891. The court's fifteen-pagedecision finding fraud mentioned Silva once. Thecourt found that because the debtor's fraudulentconduct was not actually litigated in the priorcase, the judgment was not entitled to collateralestoppel effect on the issue of dischargeability in hisbankruptcy. Id. at 894.

An example at the other end of the spectrum isMuegler v. Bening, 413 F.3d 980 (9th Cir.2005),in which the debtor actually participated in atrial that resulted in a jury verdict of fraud. TheDebtor argued, inter alia, that the issue was notactually litigated in the prior preceding becausethe discovery and trial sanctions placed on himprevented the judgment from being a final judgmenton the merits. The court disagreed and held that thedebtor was collaterally estopped from relitigatingthe issue of fraud in the bankruptcy court. Id. at 986.

The parties agree that the instant case fallssomewhere along the spectrum of cases, but theydo not agree where. Plaintiffs cite In re Gottheiner,703 F.2d 1136, (9th Cir.1983), among others, to

support its position that the “actually litigated”prong has been satisfied here. In Gottheiner,the government sued the debtor and his *443company to collect a debt based upon payments formedicare services. Gottheiner actively participatedin the litigation for sixteen months. When thegovernment moved for summary judgment and hiscounsel was not permitted to withdraw from thecase, the motion was unopposed and granted. Id.at 1138. Subsequently, in his bankruptcy case, thedebtor challenged the use of collateral estoppel todeclare the debt nondischargeable, arguing that theissue had not been actually litigated. The NinthCircuit affirmed the bankruptcy court, noting thatthe Debtor had not simply given up “from theoutset” in the prior litigation and the fact that he“decided his case was no longer worth the effortdoes not alter the fact that he had his day in court.”Id. at 1140.

The Debtor, on the other hand, argues that hiscase is much closer to the facts in Silva thanto Gottheiner and other cases at the more activeend of the continuum. Debtor believes his case is“very similar” to Silva because he “answered, andthen stopped participating”; he did not “initiatediscovery”; and he was handicapped by the lack ofresources to defend himself. Debtor's Response toMotion for Summary Judgment at 10.

The Debtor also argues that Gottheiner isdistinguishable because the district court therereviewed the record on its own to conclude there

were no genuine issues of material fact. 3 Thedistrict court noted its independent review, but theaffirmation by the court of appeals did not turnon that fact. In holding that collateral estoppelwas proper, the Ninth Circuit made the point thatthe circumstances were “quite different” from aparty that simply fails to put up a fight because thedebtor actively litigated for sixteen months beforehe decided to give up. 703 F.2d at 1140.

The Debtor also relies on a footnote in In re Bush,62 F.3d 1319, 1325 n. 8 (11th Cir.1995), for theproposition that the Court should consider that“the amount of money at stake or the inconvenienceof the forum might disincline a defendant to offer adefense.” The Debtor suggests those factors weigh

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In re Smith, 362 B.R. 438 (2007)


in his favor because he would have had the expenseand inconvenience of traveling to Oregon (aftermoving to Arizona) and the face value of thelawsuit was in the range of $325,000. Given thatthe Debtor, through counsel, participated in theOregon Litigation for at least a year and even sueda third-party for indemnification, it is doubtfulwhether these factors apply here or, if they do,whether they actually argue in Debtor's favor.

Putting that question aside, however, Debtor'sargument overlooks the principal holding of thatcase, which upheld the preclusive effect of a defaultjudgment based on fraud. In Bush, a court entereda pretrial order of default judgment for fraudagainst the debtor as a sanction for failing tocooperate in discovery and failing to appear ata pretrial conference. 62 F.3d at 1321–22. In thedebtor's subsequent Chapter 7 case, the bankruptcycourt granted the judgment creditor's motionfor summary judgment in its nondischargeabilityproceeding on the basis of collateral estoppel. Theonly issue on appeal was “whether, in a bankruptcydischarge exception proceeding, a default judgmentbased upon allegations of fraud may be used toestablish conclusively the elements of fraud andprevent discharge of the judgment debt.” Id. at1322.

The Eleventh Circuit was persuaded by thereasoning of bankruptcy courts giving preclusiveeffect in a dischargeability proceeding *444 to aprior default judgment because the debtor did notdeserve “a second bite at the apple.”

Debtor/defendant was giventhe full opportunity to defendhimself in the [prior] actionand he chose not to doso. Debtor/defendant couldhave reasonably foreseenthe consequences of notdefending an action basedin part on fraud. It wouldbe undeserved to give debtor/defendant a second bite at theapple when he knowingly chose

not to defend himself in the firstinstance.

Id. at 1324 (emphasis in original; citation omitted).Because the debtor in Bush had participated in theprior action over an extended period of time and,subsequently, engaged in conduct that resulted inthe sanction of a default judgment, the court ofappeals was reluctant to give him a second chance.Id.

The court of appeals also relied heavily on In reDaily, 47 F.3d 365 (9th Cir.1995), in which theNinth Circuit affirmed the use of a default judgmententered as a sanction to estop the debtor fromdenying fraud in bankruptcy court. The Bush courtfound the facts in Daily “very similar” to its case.

Like Daily, Bush did notsimply give up at the outset.He actively participated inthe adversary process foralmost a year. He wasrepresented by counsel. Heanswered the complaint. Hefiled a counterclaim. Hefiled discovery requests. Afterundertaking to representhimself, he began to refuseto cooperate in discovery.He refused to producedocuments despite repeatedrequests. He refused toappear at his properly noticeddeposition. He did respondto [plaintiff's] Motion forSanctions claiming he was outof state on the scheduled day.At the district court's properlynoticed pre-trial conference,Bush failed to appear. As inDaily, the default judgmentfor fraud against Bush wasentered pursuant to Rule 37as a sanction for deliberate

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refusal to participate indiscovery.

62 F.3d at 1325–26. Finding that Bush hadparticipated in the prior action and had beengiven a full and fair opportunity to defend onthe merits, but chose not to, the Eleventh Circuitaffirmed: “Just as due process is not offended bythe entry of a default judgment against a partyfor failure to cooperate with discovery, ... neitheris due process offended if a debtor is held to theconsequences of that judgment in a subsequentbankruptcy discharge proceeding.” Id. at 1325(citations omitted).

[4] The facts of the instant case are far moresimilar to Bush and Daily than they are to Silva. TheDebtor here did not simply give up at the outset.He actively participated in the Oregon Litigationfor at least a year. He was represented by threedifferent attorneys. He filed responsive pleadingsto complaints and filed a third-party complaintfor indemnity. He engaged in mediation. He wasdeposed. Eventually, he chose not to participateand failed to comply with court-ordered deadlines.He did not appear at the pretrial conference.As in Bush and Daily, the default judgment forfraud was entered as a sanction. The Debtor didrespond, through counsel, to the entry of defaultand default judgment. At bottom, the Debtor wasgiven a full and fair opportunity to litigate theallegations on the merits and he chose not to.“In such a case the ‘actual litigation’ requirementmay be satisfied by substantial participation in anadversary contest in which the party is afforded a

reasonable opportunity to defend himself on themerits but chooses not to do so.” Daily, 47 F.3d at369.

VI. CONCLUSION

This was not an “ordinary” default. See id. at 368.Unlike Silva, the Debtor did *445 not simply filea general denial and nothing more. Like Gottheiner,Bush and Daily, the Debtor participated in theprior litigation over an extended period of time—in the Debtor's case, both as a defendant andthird-party plaintiff. At some point, the Debtordecided the Oregon Litigation was no longer worththe effort, but that does not alter the fact thathe was afforded a full and fair opportunity tocontest the issues on the merits. Gottheiner, 703F.2d at 1140; Bush, 62 F.3d at 1325; Daily, 47F.3d at 368. Under such circumstances, the “actuallitigation” requirement is satisfied. Daily, 47 F.3dat 368. Accordingly, the Plaintiffs' default judgmentis entitled to be given preclusive effect in thisadversary proceeding. Plaintiffs' motion is grantedand their debt is deemed nondischargeable under 11U.S.C. § 523(a)(2)(A) as a debt for money obtainedby fraud.

The foregoing constitutes the Court's findings offact and conclusions of law as required by Fed. R.Bankr.P. 7052. Counsel for the Plaintiffs is directedto lodge an appropriate form of judgment.

All Citations

362 B.R. 438

Footnotes1 The Debtor argues that federal collateral estoppel law is the appropriate standard for determining whether

the claims resolved in the Oregon Litigation are precluded here and that, in any event, there is little practicaldifference between Oregon and federal law—both require that the issue have been actually litigated in theprior dispute. Debtor's Response to Motion for Summary Judgment at 7–8. The Court agrees.

2 Because the Court finds that the issue of common law fraud was actually litigated in the prior litigation, itneed not reach the question of the whether the state and federal securities violations fall squarely within§ 523(a)(19).

3 Plaintiffs argue that the Oregon Litigation was like Gottheiner because the district court reviewed theirsubmissions independently and did not accept all of their claims for relief.

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WRITTEN MATERIALS Oral Argument on Motion for Summary Judgment · Case No.: CV2016-998877 JUDGMENT...

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