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TCL > March 2010 Issue > Summaries of Selected Opinions

March 2010       Vol. 39, No. 3       Page  113
From the Courts
U.S. Court of Appeals for the Tenth Circuit

Summaries of Selected Opinions

Bar Association (CBA) by Katherine Campbell and Frank Gibbard, licensed Colorado attorneys. They are provided as a service by the CBA and are not the official language of this Court. The CBA cannot guarantee the accuracy or completeness of the summaries. Full copies of the Tenth Circuit decisions are accessible from the CBA website: (click on "Opinions/Rules/Statutes").

No. 08-2281. Shell Oil Co. v. CO2 Committee, Inc. 12/21/2009. D.N.M. Judge Tacha. Agreement to Arbitrate Disputes Arising From Settlement Agreement—New Dispute Based on Prior Arbitration—New Arbitration Panel Required.

The defendant Committee was formed in 2001 to monitor and enforce future-relief provisions of a class action settlement agreement in litigation between the Committee and plaintiffs. The agreement provided for arbitration of any and all disputes arising out of the class settlement. In 2006, the Committee filed an arbitration complaint, alleging that plaintiffs’ accounting practices violated the settlement agreement. An arbitration panel determined that plaintiffs had not violated the agreement. In 2007, the Committee filed a second arbitration complaint that also challenged plaintiffs’ accounting practices. Plaintiffs argued that the issues raised in the second complaint were decided or could have been decided in the first arbitration; they filed suit in federal court seeking a declaration that the second arbitration complaint was barred by res judicata. The district court ruled that the res judicata effect of a prior arbitration was an issue that should be decided in arbitration. The district court directed the parties to go back to the original arbitration panel, and dismissed the case. The Committee objected, claiming that the arbitration agreement provided for a new arbitration panel.

The Tenth Circuit noted that the courts’ limited role in arbitration, which is a contract matter, is to decide questions of arbitrability. The arbitration agreement unambiguously stated the parties’ intent to arbitrate any and all disputes. The agreement also provided that for each new arbitration complaint, an arbitration panel would be selected. Therefore, a new panel was required for the second arbitration complaint. The district court’s order referring the issue to the original arbitration panel was reversed, and the order dismissing the case was affirmed.

No. 08-1366. United States v. Sayad. 12/22/2009. D.Colo. Judge Murphy. Sentencing Guidelines—Departures and Variances—Evidence of Rehabilitation Justifying Probation.

Defendant pled guilty to interstate travel in aid of racketeering after he was stopped by a state trooper while driving a pick-up truck with a hidden compartment containing 11 kilograms of cocaine. His advisory Sentencing Guidelines (Guidelines) range called for the statutory maximum sixty-month sentence. Defendant argued it should be lowered to fifty-seven to sixty months, thus granting him reductions for playing a minor role in the offense and the "safety valve" reduction. Defendant requested an additional downward variance based on several other factors: (1) he was not the supplier of the cocaine and was unaware of the large quantity of drugs hidden in the truck; (2) his family had been persecuted in Iran as Christians and relied on him to help run the family restaurant; and (3) his lack of a criminal history, his nonviolent nature, and his strong family ties made it unlikely that he would present a future risk to the public. The government did not file any written response to defendant’s objections to the sentence or respond or object to these arguments.

The district court was dubious of several of defendant’s arguments. Nevertheless, the court ruled that his subsequent cooperation with the government did entitle him to the safety valve reduction. Because the Guidelines are not mandatory, the district court also considered whether to vary downward. The district court decided against imposing the Guidelines sentence, noting defendant’s "supporting and loving family"; the fact that defendant had given thought to his own immaturity that contributed to his role in the offense; his expression of remorse and lack of a substance abuse problem; and the "potentially disastrous" consequences to his family if he were incarcerated. Defendant was placed on probation for five years.

The government appealed, contending that this sentence was both procedurally and substantively unreasonable. The government objected to the district court’s reference to the family’s Iranian Christian background and the greater effect of shame on persons from that culture.

The Tenth Circuit did not find defendant’s sentence procedurally or substantively unreasonable. His sentence was not based on his status as an Iranian Christian; the district court had merely used this term as a proxy to describe the close-knit nature of defendant’s family and community. The Guidelines disfavor such factors as a defendant’s mental and emotional condition and family ties when determining whether to depart downward, but permit consideration of such factors as a basis for downward variance from the advisory Guidelines range. Furthermore, the conditions on which the district court relied were well supported in the record. In light of defendant’s lack of a prior criminal history, his work in the family restaurant, and other evidence of rehabilitation, the district court’s determination that he was capable of rehabilitation was not unreasonable. The Circuit therefore affirmed the district court’s probationary sentence.

Nos. 07-1454 & 07-1466. Clark v. State Farm Mutual Automobile Insurance Co. 12/29/2009. D.Colo. Judge Tymkovich. Class Action—Not Certified—Payment of Named Plaintiff’s Claims Mooted Class Action.

Plaintiff was injured when he was hit by a car insured by State Farm Mutual Automobile Insurance Co. (State Farm). He obtained benefits under the policy. Later, in an unrelated case, the Colorado Court of Appeals ruled that an insurer must offer extended coverage, and if it does not, the policy must be reformed to include extended coverage. Due to this change in Colorado law, plaintiff filed suit in 2000, claiming he was entitled to additional benefits from State Farm. He purported to represent a class of similarly situated plaintiffs, but the case was not certified as a class action. The district court dismissed the complaint, and the case was appealed to the Tenth Circuit, remanded, and appealed again. In the earlier appeals, plaintiff did not appeal the district court’s decision not to address class action status. The district court eventually entered judgment in favor of plaintiff, and State Farm paid the judgment in full. A year later, plaintiff moved for class certification, which the district court denied because plaintiff no longer had a personal stake in the outcome. Plaintiff appealed.

The Tenth Circuit observed that federal courts have jurisdiction only over live controversies at all stages, including appellate review. In general, once a class action is certified, the mooting of a named plaintiff’s claims does not moot the claims of the class. In addition, there are two situations in which a class may be certified even if the named plaintiff’s claims are mooted prior to an order certifying the class: (1) when the plaintiff’s claims are capable of repetition, yet evade review; and (2) when the plaintiff’s claim is inherently transitory, giving the district court too little time to rule on class certification before the named plaintiff’s individual interest expires. There may be a third exception: when the named plaintiff’s claims are settled so early that he or she could not have been expected to file a class-certification motion. However, when the named plaintiff had ample time to file a class certification motion, the general rule is that the mooting of his or her claims prior to class certification moots the entire case. Here, plaintiff’s failure to appeal the district court’s decision not to address class action status became law of the case. Accordingly, the class action was mooted when plaintiff’s claims were paid in full. The district court’s judgment was affirmed.

No. 08-6143. United States v. Caldwell. 12/29/2009. W.D.Okla. Judge Lucero. Conspiracy—Variance From Indictment—Harmless Error.

Defendant was convicted of conspiracy to distribute marijuana. The conspiracy charged in his indictment involved three men: defendant; Anderson, a street dealer of marijuana; and Herrera, the drug supplier for both defendant and Anderson. In its verdict, the jury concluded that the three men entered into a "tripartite" conspiracy to distribute at least 100 kilograms of marijuana over a two-year period. At sentencing, the pre-sentence report attributed 188 kilograms of marijuana to defendant, resulting in a sentence of 130 months’ imprisonment.

The evidence showed that on two or three occasions, shortly after they met, Anderson dealt drugs to defendant on consignment. For a year thereafter, the two men had no drug-related interactions. Then, in early 2006, when Anderson’s supplier was running short of marijuana, defendant arranged a meeting between Anderson and Herrera, at which defendant was present and Herrera sold marijuana to Anderson. Defendant received no economic benefit from this transaction. From that time forward, Herrera and Anderson dealt with each other, with no intermediation from defendant. Defendant continued to sell marijuana separately for Herrera.

On appeal, the principal issue involved whether the evidence showed that Herrera, Anderson, and defendant had engaged in a single, tripartite conspiracy to distribute marijuana, as charged in the indictment. The key factor was whether the alleged co-conspirators’ actions exhibited interdependence; that is, whether the conspirators acted together for their shared mutual benefit within the scope of the conspiracy charged.

The Tenth Circuit held that evidence of interdependence was lacking. The fact that Anderson and defendant both bought from Herrera did not establish interdependence; nor did defendant’s introduction of Anderson to Herrera continue the earlier conspiracy between defendant and Anderson, given the lapse of a year and the small amounts involved in the previous transactions involving defendant and Anderson. This led to the key question: did defendant’s introduction of Anderson to Herrera itself create a single conspiracy among the three dealers? The Circuit held it did not. Given defendant’s lack of direct economic benefit and the friendly rather than conspiratorial nature of the introduction, the government failed to prove the tripartite conspiracy charged in the indictment.

The Circuit nevertheless upheld defendant’s conviction. Variance between an indictment and proof at trial results in reversal only where the defendant is prejudiced. Here, the determination of defendant’s guilt did not depend on the drug quantity found by the jury; therefore, he was not prejudiced by the variance of the proof at trial. The Circuit further determined that presentation of evidence of defendant’s prior drug convictions was harmless. The same could not be said, however, concerning his sentence, which did depend on the large quantity of marijuana incorrectly attributed to him under the improper conspiracy theory. The Circuit therefore remanded the case for resentencing.

No. 08-2252. United States v. Ruiz. 12/29/2009. D.N.M. Judge Tacha. Wire Fraud—Honest Services—Nexus With State Law—Mail Fraud—Forseeability of Use of Mails.

Defendant was convicted of multiple counts under federal statutes prohibiting honest services mail and wire fraud, corrupt solicitation, and extortion. While serving as a New Mexico deputy insurance superintendent, defendant perpetrated a quid pro quo scheme through enforcement of New Mexico’s requirement that insurance adjusters be licensed. In furtherance of the scheme, he would detect licensing violations by insurers and threaten them with the maximum possible fines. He would then inform the insurers that they could avoid paying the fines if they contributed 10 to 20 percent of the fine amount to charities with which he and his supervisor were connected. Insurers who refused to pay were fined (albeit in a lesser amount than threatened) and their licensing violations were made public. Defendant benefited from the charitable contributions. He was president of one of the two charities and received royalties from purchases by the other charity of children’s books he had authored.

On appeal, defendant argued that his conduct was authorized by state law; therefore, he could not be convicted under federal statutes. Assuming that a state law violation is required as a predicate offense, such a violation was established here. The New Mexico statutes require that monies received by the insurance division for fees be paid to the state treasurer. Defendant argued, however, that because he merely forgave fines rather than collecting them, and because the charitable donations were not fines or penalties, there was no requirement that he pay them over to the state treasurer. The Tenth Circuit rejected this argument, concluding that the New Mexico legislature could not have intended for regulated entities to avoid penalties owed to the state by paying off regulators.

The Circuit also addressed defendant’s claim that he had not used the U.S. mail to execute his fraudulent scheme. Defendant was convicted of mail fraud because the insurance companies sent checks to the charities through the mail. Defendant argued that he had no control over how the companies sent their checks. The Circuit held that such control is unnecessary; the fact that defendant set in motion forces that would forseeably result in use of the mail to further his fraudulent scheme was sufficient. The Circuit therefore affirmed defendant’s convictions.

No. 07-7002. Kannady v. City of Kiowa. 01/06/2010. E.D.Okla. Judge Holmes. Summary Judgment—Prejudice—Age Discrimination in Employment Act—Law Enforcement Exception—Sua Sponte Determination.

Plaintiff sought employment with a city police department in Oklahoma. The city refused to hire him because of the statutory age limits governing the Oklahoma retirement system for police officers. Under that system, the age limit for new hires was 45 years. Plaintiff was older than 45. Plaintiff sued under the Age Discrimination in Employment Act (ADEA). The district court granted summary judgment in favor of the city.

On appeal to the Tenth Circuit, plaintiff asserted error in the district court’s sua sponte determination that the date the city refused to hire him was undisputed. He alleged that the city did not join the retirement system until after it refused to hire him. The Circuit held that as long as its de novo review confirmed that the district court was correct, the sua sponte resolution of the issue was not error. A sua sponte determination is appropriate if the losing party is not prejudiced. Prejudice occurs where the party does not present evidence in support of its position because it is surprised by the district court’s action. Here, plaintiff had full opportunity to present his evidence but did not do so on this point. Moreover, the evidence clearly showed that the hiring decision was made after the city joined the retirement system.

On the merits, the ADEA broadly prohibits arbitrary discrimination based on age; however, there is an exception for firefighters and law enforcement officers. It is lawful for a local government to refuse to hire a person for a law enforcement position on the basis of age if that person is over the maximum age of hire that the local government had in effect as of March 3, 1983, and if the refusal to hire was pursuant to a bona fide hiring or retirement plan that was not a subterfuge to evade the ADEA’s purposes. The Circuit rejected plaintiff’s claim that the retirement plan was a subterfuge for age discrimination and affirmed the district court’s judgment.

No. 09-1015. United States v. Wayne. 01/14/2010. D.Colo. Judge Holmes. Supervised Release—Mental Health Counseling Evaluation—Recommendation by Probation Department.

Defendant pled guilty to one count of wire fraud and received a sentence of thirty-seven months in prison followed by three years of supervised release. Defendant completed her prison sentence, but failed to fulfill a condition of her supervised release by not participating in a mental health investigation to determine whether mental health counseling was needed while she was under supervision. The district court ordered her to engage in the mental health evaluation and to sign a release providing the results to the probation office. She appealed.

The Tenth Circuit first determined that it had jurisdiction over the appeal, even though defendant had not yet been punished for failure to comply with the district court order. The Circuit determined that the district court did not abuse its discretion by ordering her to sign a release authorizing the submission of her mental health evaluation to the probation office. The district court permissibly concluded that the probation office would need the mental health evaluation to determine whether to recommend that defendant receive mental health counseling during her supervised release term. The Circuit also rejected defendant’s claim that her supervised release condition required only an evaluation, not mental health counseling; the purpose of the evaluation was to determine whether to recommend mental health counseling. Furthermore, because defendant failed to challenge the legal and factual basis of the supervised release condition on direct appeal from her judgment and sentence, she was time-barred from challenging that issue now.

The Circuit also ruled that the district court did not expand the conditions of supervised release or unreasonably deprive defendant of her liberty by ordering her to provide her mental health records to the evaluator. This step was necessary to obtain an accurate evaluation. Finally, the district court did not improperly delegate a judicial function (imposition of mental health counseling) to the probation office. The district court retained ultimate authority to determine whether treatment was required. Accordingly, the Circuit affirmed the district court’s order.

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