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IN RE YAN WANG
JACOB P. HART, United States Magistrate Judge.
On March 31, 2010, the United States Court of Appeals for the Third Circuit granted in part the appeal of plaintiff Darren Johnson, remanding this case to the District Court to consider Johnson's previously denied motion to reinstate Prison Health Services ("PHS") as a defendant in this matter.
The orders appealed from were issued by the Honorable Bruce W. Kauffman, to whom the ease was assigned at that time. Later, the case was referred to the undersigned, pursuant to 28 U.S.C. § 636(c) and Fed.R.Civ.Pr. 73. By the time the case was remanded by the Court of Appeals, Judge Kauffman was no longer sitting on this court. Therefore, I have considered the remanded issue. For the reasons set forth below, I will not reinstate PHS as a defendant.
I. Factual and Procedural Background A. Proceedings Before Judge Kauffman
In this action, brought under 42 U.S.C. § 1983, Johnson alleges that his rights under the Eight and Fourteenth Amendments to the United States Constitution were violated with respect to the treatment of a knee injury he sustained in 1999 while an inmate at Graterford Prison. He argues that proper treatment was wrongfully delayed, resulting in permanent injury which would not have occurred if he had received timely treatment. Although Johnson began this action in February, 2000, by filing a Motion to Proceed in Forma Pauperis, his complaint was filed on December 13, 2000. Docket at Documents 1 and 15.
Among other defendants, Johnson named Correctional Physician Services, Inc., ("CPS"), which was, at the time of his injury, the private entity employed by the Commonwealth of Pennsylvania Department of Corrections to provide medical care to its inmates at facilities including Graterford. He also sued PHS as a successor in interest to CPS, which stopped providing medical care at Graterford in March, 2000.
On January 19, 2005, Judge Kauffman granted in part and denied in part motions for summary judgment brought by all defendants. In relevant part, he dismissed PHS as a defendant, writing:
Plaintiff raises a[n] . . . Eighth Amendment claim against CPS and PHS. As a preliminary matter, PHS claims that it had no contractual obligation to provide medical services to the inmates at SCI-Graterford until May, 2000. [Citations omitted]. Plaintiff has offered no evidence that PHS was involved with medical care at SCI-Graterford at that time, meaning that it can bear no liability for the events giving rise to this suit. Consequently, summary judgment must be granted in favor of PHS.
Memorandum And Order of January 19, 2005, docketed as Document 123.
Nevertheless, a year later, Judge Kauffman permitted Johnson to obtain discovery from PHS. Order of January 31, 2006, doeketed as Document 133. On March 1, 2006, Johnson filed a Motion for Relief from Judgment under Fed.R.Civ.Pr. 60(b)(2), seeking the reversal of Judge Kauffman's order granting summary judgment to PHS. Motion, Docketed as Document 135. In it, he stated that he had finally received in discovery a copy of the Asset Purchase Agreement ("Agreement") between CPS and PHS, dated March 29, 2000, and discovered that, under the Agreement, PHS assumed liability for eases such as his. Id.
In an order dated October 5, 2006, however, Judge Kauffman denied Johnson's motion as untimely, writing that Rule 60(b) required it to have been filed within one year of the entry of the judgment at issue. Order, docketed as Document 142. Judge Kauffman also addressed the merits of the motion in a footnote:
Plaintiff argues that under [the Asset Purehase Agreement], PHS assumed the liabilities of CPS with respect to the provision of health care services to inmates. Motion at 1. However, the Agreement actually states that PHS assumes "all liabilities arising after the Closing Date with respect to the provision of services to inmates covered by the Pa. Contract or the NY Contract." Agreement at p. 7 (emphasis added). The events on which Plaintiff bases his claims occurred in 1999, prior to the Agreement's March 29, 2000, closing date. Accordingly, Plaintiff has presented no new evidence demonstrating extraordinary circumstances which would require this Court to vacate its prior judgment.Id.
By April 12, 2007, CPS was the only defendant remaining in the case. Judge Kauffman scheduled trial for September 17, 2007. Order, doeketed as Document 144. On September 6, 2007, however, counsel for CPS moved to withdraw on the basis that his client no longer existed as a functioning business, and did not have sufficient funds to pay him. Motion to Withdraw, docketed as Document 155. Judge Kauffman granted the motion, and gave CPS 30 days to find substitute counsel. Order, docketed as Document 160.
No new counsel appeared, and on March 31, 2008, Judge Kauffman granted Johnson's motion for a default judgment against CPS. Order, docketed as Document 165. Judge Kauffman then referred the case to me for a trial on the issue of damages. Order, docketed as Document 167.
B. Trial and AppealOn April 30, 2008, I entered an order scheduling a bench trial for May 28, 2008. Order, docketed as Document 170. Copies of this order were served upon CPS principles Kenan Umar and Emre Umar. See, Trial Transcript at 3. On May 28, 2008, however, only Johnson appeared for trial. I therefore proceeded to bear damages testimony from Johnson. On July 11, 2008, I issued a final judgment in favor of Johnson in the amount of $65,000.00, supported by written findings of fact and conclusions of law. Docketed as Documents 180 and 181.
Johnson appealed to the Court of Appeals for the Third Circuit. Among other bases for appeal, he argued that Judge Kanffman had erred in granting summary judgment in favor of PHS, and in refusing to consider Johnson's motion to reconsider that ruling.
On April 22, 2010, the Court of Appeals for the Third Circuit issued its decision. Johnson v. Stempler, No. 08-3434 (April 22, 2010). The Court of Appeals agreed with Johnson that Judge Kauffman should not have dismissed Johnson's March 1, 2006, motion for reconsideration as untimely. It wrote: "Rule 60(b) applies only to final judgments and the one-year time limitation imposed by the Rule does not apply to situations where the order in question was not properly appealable in the first place," Id. at 10, It added that Judge Kauffman's order dismissing PHS was not a final order because it did not dispose of all issues as to all parties. Id. For this reason, it was not property appealable under Rule 60. The Third Circuit remanded the case for consideration of the merits of Johnson's argument regarding PHS's liability under the Agreement. Such consideration is now appropriate since a final judgment has been entered.
At the request of the parties, I permitted PHS to file a supplemental response to Johnson's March 1, 2006, motion for reconsideration. Order of April 26, 2010, docketed as Document 191. This was filed on May 11, 2010. Johnson filed a reply memorandum on June 4, 2010. Docketed as Documents 192 and 196. On June 10, 2010, I scheduled oral argument on the motion. Order, docketed as Document 197. This argument was held on June 29, 2010. Minute Ordered, docketed as Document 198.
II. Legal Standard
As explained by the Court of Appeals for the Third Circuit, Johnson's motion challenging the dismissal of PHS as a defendant in this lawsuit is now properly considered under Rule 60(b), since a final judgment has been entered in this case. Under this rule, a court may grant relief from judgment based on newly discovered evidence, such as the Asset Purchase Agreement, if the evidence (1) is material and not merely cumulative; (2) could not have been discovered prior to trial (or, in this case, prior to Judge Kauffman's summary judgment order) through the exercise of reasonable diligence; and (3) would probably have changed the outcome of the trial. Bohus v. Beloff, 950 F.2d 919, 930 (3d Cir. 1991); and see Coyler v. Consolidated Rail Corp., 114 F. Appx. 473, 480 (3d Cir. 2004).
III. Discussion A. The Asset Purchase Agreement
This motion presents a question of contract interpretation. Johnson argues that, in the Agreement, PHS assumed liability for actions such as his own. He points to ¶ 3.1 of the Agreement, which reads:
Assumed Liabilities. As partial consideration for the purchase of the Assets, Purchaser hereby assumes the following liabilities (the "Assumed Liabilities") of Seller (i) all liabilities of Seller with respect to the Assumed Contracts to the extent arising after the Closing Date Hater defined as a date between March 1 and April 30, 2000]; (ii) all accrued current liabilities of Seller as of the Closing Date with respect to the Business with respect to payroll and accrued vacation pay to the extent attributable to any payroll period ending after the Closing Date that relates to the operation of the Business prior to and after the Closing Date or solely to the operation of the Business after the Closing Date; (iii) all liabilities arising after the Closing Date with respect to the provision of services to inmates covered by the Pa Contract or the NY Contract; and (iv) any liability of Seller for the NY Rebate, to the extent disclosed to Purchaser.
Asset Purchase Agreement, attached to Document 134 as Exhibit A. [Emphasis supplied].
PHS maintains that this paragraph cannot apply here, since the medical treatment given to Johnson took place in 1999, well before the Closing Date. Clearly, this was also Judge Kauffman's view, as expressed in the footnote to his October 5, 2006, order.
Johnson, however, argues that no actual "liability" arose with respect to Johnson's medical treatment in 1999, because no one at that time was adjudged liable. He offers the Black's Law Dictionary definition of "liability" as "the quality or state of being legally obligated or accountable." Johnson also citesUnited States v. Hughes Properties, Inc., 476 U.S. 593, 600 (1986), where the United States Supreme court said that a liability "does not accrue as long as it remains contingent." On the basis of this authority, Johnson's counsel asserts that the relevant liability arose only when judgment was entered in this case. Obviously, this is after the Closing Date.
In addition to arguing that ¶ 3.1, does not apply, however, PHS also maintains that ¶ 3.3 of the Agreement explicitly excludes liability:
Excluded Liabilities. Except for the Assumed Liabilities, in no event shall Purchaser assume, agree to pay, satisfy or discharge or otherwise have any responsibility for any liabilities or obligations of Seller, and, without limiting the generality of the foregoing, Assumed liabilities shall not include any liabilities or obligations in respect of the following . . . (ii) any liability or obligation of Seller whatsoever which accrued at any time on or prior to the Closing Date, whether or not such liability or obligation arises prior or subsequent to the Closing Date, including, without limitation, any liabilities with respect to payroll and accrued vacation pay . . . insurance related liabilities . . . and litigation or claims (including, without limitation, contract claims, discrimination claims, EEOC claims and Medical Malpractice Claims. . . .Id.
Again, as to ¶ 3.3, the parties disagree on the meaning of the language used. Johnson again argues that, in a legal sense, no "liability or obligation" had "accrued" with respect to bis treatment as of March 29, 2000, the date of the Agreement. Johnson also maintains that the entire paragraph is modified by its first words: "Except for the Assumed Liabilities", which, he argues, includes this case.
In Pennsylvania, the paramount goal of contract interpretation is to determine the intent of the parties. Nova Chemicals, Inc. v. Sekisui Plastics Co., Ltd., 579 F.3d 319, 323 (3d Cir. 2009),citing Garden State Tanning, Inc. v. Mitchell Manufacturing Group, Inc., 273 F.3d 332, 335 (3d. Cir. 2001), citing Meeting House Lane, Ltd. v. Melso, 427 Pa. Super. 228, 628 A.3d 854, 857 (1993). The strongest manifestation of that intent is the wording of the agreement itself. Nova Chemicals, supra, citing Mellon Bank. N.A. v. Aetna Business Credit, Inc., 619 F.2d 1001, 1009 (3d Cir, 198) (applying Pennsylvania law).
Language in a contract is normally given its ordinary meaning.Nova Chemicals, supra, citing Light v. Miller, 303 Pa. Super. 527, 450 A.2d 51, 53 (1982). However, contract language is ambiguous if it is reasonably susceptible of different constructions and capable of being understood in more than one sense. Nova Chemicals, supra, quoting Madison Construction Co. v. Harleysville Mutual Ins. Co., 557 Pa. 595 (1999).
Merriam-Webster's Dictionary defines liability as "the quality or state of being liable", and "liable" as "obligated according to law or equity; responsible."Http://www.merriam-webster.com/dictionary/liability and liable. This is a broader definition than the Black's Law Dictionary definition offered by Johnson. It suggests that an actor is responsible under law or equity at the time he acts wrongfully, which in this case would mean the time that Johnson's medical treatment took place.
Moreover, if the word "liability" in the Agreement is given its Black's Law Dictionary meaning, the result is untenable. As PHS pointed out at trial, if ¶ 3.1 assumes liability only for judgments arising after the Closing Date, then PHS could be named as a defendant in a lawsuit addressing actions taken by CPS before the closing date — but only in a separate action, filed after the entry of a first judgment. The first trial would be completely useless. CPS would probably (as here) permit a default entry against it, and PHS, as a non-party, would not be able to assert a defense on the merits of the case. A double trial would always be necessary.
It is difficult to see how the parties could have intended this clumsy result, which benefits neither of them. It is much more likely that they did not use the word "liability" in its Black's Law Dictionary sense, but, rather in the broader, Merriam-Webster, sense referring to the time at which actions were taken resulting in a liability. This would lead to the more logical conclusion that PHS agreed to assume liability for services arising under the contract CPS had made with the Pennsylvania Department of Corrections, but only when PHS was actually involved in the behavior giving rise to the liability, i.e., after the closing date. Accordingly, I agree with Judge Kauffman that PHS is not liable regarding the medical care offered to Johnson because it occurred before the closing date.
My conclusion is bolstered by the fact that ¶ 3.3 — although very awkwardly worded — apparently seeks to exclude liability for litigation in which CPS was factually involved. See Watson v. Prison Health Services, Inc., C.C.P. Somerset Cty., No. 399 Civil 2008 (Jan. 22, 2009), which interprets the same Agreement, and states at unnumbered page 9: "In the instant case, the [Agreement] between PHS and CPS includes a section entitled `Excluded Liabilities,' which specifies that PHS did not assume any of CPS's litigation or claims. . . .
B. De Facto Merger
Johnson also argues that, regardless of what the Agreement may provide, PHS is the successor in interest to CPS under the doctrine of de facto merger. In a civil rights action, state common law is applied where the federal statute is deficient in a necessary provision. 42 U.S.C. § 1988. As the Court of Appeals for the Third Circuit once expressed it, 42 U.S.C. § 1988 invites federal courts to adopt state rules to further, but not to frustrate, the purposes of civil rights acts. Miller v. Apartments Homes of N.J., 646 F.2d 101, 106 (3d Cir. 1981). Here, I do not find that a de facto merger existed, under either state or federal law.
The general rule, under either Pennsylvania or federal common law, is that when one company sells all or substantially all of its assets to another company, the purchasing company is not liahle as a successor. U.S. v. General Battery Corp., Inc., 423 F.3d 294, 305 (3d Cir. 2005); Continental Insurance Co. v. Sehneider, Inc., 873 A.2d 1286, 1929 (Pa. 2005), cited in Greenaway Center, Inc. v. Essex Insurance Co., Slip Copy, 2010 WL 827836 (3d Cir. Mar. 11, 2010) at *3. One exception to this rule is a de facto merger, which occurs when the purchasing company is "merely a continuation of the selling corporation." General Battery, Corp., supra; Continental, supra.
Under cither federal or Pennsylvania law, a court is to consider the following factors in deciding whether a de facto merger has occurred: (1) continuity of ownership; (2) cessation of the ordinary business by, and dissolution of, the predecessor as soon as practicable; (3) assumption by the successor of liabilities ordinarily necessary for uninterrupted continuation of the business; and (4) continuity of the management, personnel, physical location, and the general business operation. General Battery Corp., supra; Continental v. Schneider, 810 A.2d 124, 134-135 (Pa. Super. 2002); Berg Chilling Systems, Inc. v. Hull Corp., 435 F.3d 455 at 468-469 (3d Cir. 2006), and see Greenaway,supra.
The major difference between federal and state law is that, under current Pennsylvania law, continuity of ownership is crucial; without it, no de facto merger can be found. In Fizzano Brothers Concrete Products, Inc. v. XLN, Inc., 973 A.2d 1016 (Pa. Super. 2009), the Pennsylvania Superior Court wrote:
With regard to continuity of ownership, the trial court acknowledged that none of the owners of XLN became owners of XLNT. [Citation omitted]. This finding, by itself, should have ended the trial court's consideration of XLNT's potential successor liability. Continuity of ownership is a key element that must exist in order to apply the de facto merger doctrine, since in the absence of a transfer of stoek for assets the consequence of the transaction is not the functional equivalent of a merger. Instead, where there is no continuity of ownership the transaction is merely an arms-length transaction between two corporations and not in any sense a merging of two corporations into one.
973 A.3d at 1020.
On May 19, 2010, the Pennsylvania Supreme Court granted allocatur in Fizzano Brothers, 994 A.2d 1081 (Pa. May 19, 2010) (NO. 390 MAL 2009). Therefore, the Fizzano rule is not yet final. Nevertheless, the Superior Court's reasoning is compelling, and it represents Pennsylvania law as it now stands.
There is no holding similar to Fizzano under federal common law, making continuity of ownership essential. Nevertheless, it remains a very significant factor in this circuit under federal common law. General Battery Corp., supra ( de facto merger found where the seller obtained mostly cash, hut also a small amount of stock, since it represented an "ongoing interest in their assets"); Einhorn v. M.L. Ruberton Construction Co., 656 F. Supp.2d 463, 476 (D.N.J. 2009) (no de facto merger found in an ERISA case where continuity of ownership did not exist, calling continuity of ownership "often critical"); U.S. v. Exide, Civ. A, No. 00-CV-3057 (E.D. Pa. Feb. 27, 2002) ( de facto merger found in a CERCLA case where there was continuity of ownership); U.S. v. Atlas Minerals Chemicals, Civ. A. No. 91-CV-5118, 1995 WL 510304 at *90 (E.D. Pa. Aug. 22, 1995) (no de facto merger found in a CERCLA case without continuity of ownership, citing HRW Systems, Inc. v. Washington Gas Light Co., 823 F. Supp. 318 (D. Md. 1993), (writing that the "most critical element of the test is continuity of ownership") and In Re Acushnet River and New Bedford Harbor, 712 F. Supp, 1010, 1015 (D. Mass. 1989), (calling continuity of ownership a "key requirement.")).
Even in the few cases from other states where continuity of ownership was not required for a finding of de facto merger, the courts looked for something similar. In Kennedy v. City of Zanesville, OH, 505 F. Supp.2d 456, 479 (S.D. Ohio 2007), the United States District Court for the District of Ohio applied the Ohio law of de facto merger in a § 1983 case. Kennedy, unlike this case, involved two municipal entities, rather than privately owned corporations. There were no shareholders involved in either entity. Nevertheless, the court did not skip the "continuity of ownership" factor. Rather, it found that the merger and subsequent dissolution of the entities resulted in a relationship between them that was similar to a continuity of shareholders.
Also, in Woodrick v. Jack Burke Real Estate, Inc., 703 A.2d 306, 314 (NJ Super. A.D. 1997), a New Jersey state court found a de facto merger even though there was no continuity of stock ownership. There, however, the court emphasized the fact that a principal of the seller became an officer of the buyer and assumed management of the assets which were sold. Id.
Under the Agreement in this case, PHS paid $14 million in cash for the assets of CPS. Agreement at ¶ 2.1. There was no continuity of stock ownership. Apparently, CPS's owners, Kenan and Emre Umar, entered consulting agreements with PHS. Agreement, at vi (Table of Schedules) at 6.1.14(c) and (d). However, there is no evidence that either of them became a PHS officer, as inWoodrick, or assumed management of PHS.
Under either Pennsylvania or federal common law, therefore, I conclude that the lack of continuity of ownership is fatal to Johnson's claim of a de facto merger between CPS and PHS. It is difficult to see how two entities can be said to merge when the selling entity no longer has an interest in the business.
C. Successor Liability in Civil Rights Cases; Brzozowski v. CPS
Finally, Johnson has pointed to the case of Brzozowski v. Correctional Physician Services, Inc., 360 F.3d 173 (3d Cir. 2004). In this Title VII employment discrimination case, the Court of Appeals for the Third Circuit interpreted the very asset purchase agreement at issue here — the March 29, 2000 Agreement between CPS and PHS — and found that the plaintiff should have been permitted to amend her claim to name PHS as a successor in interest to CPS.
The Brzozowksi court did not apply the test for de facto merger, as described above. Instead, it employed a test earlier developed for use in employment discrimination cases, requiring only "(I) continuity in operations and work force of the successor and predecessor employers; (2) notice to the successor-employer of its predecessor's legal obligation; and (3) the ability of the predceessor to provide adequate relief directly," 360 F.3d at 178, citing Rego v. ARC Water Treatment Co. of Pennsylvania, 181 F.3d 396, 401 (3d Cir. 1999).
Johnson recognizes that Brzozowski is not a § 1983 case such as this, but he argues that equitable factors compel a similar treatment in the context of a civil rights action. He argues that he should also have the benefit of using the Rego test, rather than the usual test for suecessor liability.
This argument is not properly considered here. This is because Rule 60(b)(2) permits a motion seeking relief based on the existence of newly discovered evidence whieh could not have been discovered by the exercise of due diligence in enough time to move for a new trial under Fed.R.Civ.Pr. 59(b). The Brzozowski case is not such evidence. It was filed on February 23, 2004, several months before Johnson filed his response to PHS's motion for summary judgment on April 20, 2004. Docket at Document No. 101. In any event, Brzozowski did not make new law, as it used the test formulated in Rego, a Third Circuit case decided in 1999. The argument could, therefore, have been raised in Johnson's response to PHS's motion for summary judgment, and does not rely on new evidence, as required by Rule 60(b)(2).
The Brzozowski issue was also not raised in Johnson's original Rule 60(b)(2) motion, filed March 1, 2006. This motion discussed only the Asset Purchase Agreement. Brzozowski was mentioned in the District Court for the first time in PHS's supplementary brief on this motion, filed after the remand. It is possible that Johnson raised the urgument before the Court of Appeals. If that is the case, it is notable that there was no mention at all of the argument in the Third Circuit's appeal decision; remand was granted only to revisit the Rule 60(b)(2) motion.
Moreover, it is by no means clear that Johnson's argument could succeed. The Brzozowski court did not base its decision on a consideration unique to civil rights plaintiffs. Instead, its decision was based upon principles of labor and employment law. The court noted that "Title VII was molded to a large degree on the National Labor Relations Act, including its relief provisions." 360 F.3d at 177. It declined to apply the traditional de facto merger test because "the Supreme Court has expanded the common law rule in the field of labor relations."Id., citing Golden State Bottling Co. v. NLRB, 414 U.S. (1973).Rego, the origin of the three-point test set forth above, was an employment discrimination case.
Further, the other Court of Appeals cascs to whieh theBrzozowski court looked involved employment discrimination, 360 F.3d at 178, n. 10, citing Rojas v. TK communications, Inc., 87 F.3d 745 (5th Cir. 1996) (racial discrimination); EEOC v. G-K-G, Inc., 39 F.3d 740 (7th Cir. 1994) (age discrimination); Slack v. Hayens, 522 F.2d 1091 (9th Cir. 1975) (raee discrimination).
Thus, the Brzozowski decision was founded on a well-established rule permitting a finding of liability against a successor in interest in employment liability cases, including those brought under Title VII, For this reason, it is not persuasive in a § 1983 case such as this, where there is very little applicable precedent, and certainly none suggesting that anything other than a common-law rule of successor liability should be applied.
IV. Conclusion
For the reasons set forth above, I find that the discovery of the Asset Purchase Agreement would not have changed the outcome of trial under Rule 60. Accordingly, Plaintiff's Motion for Relief from Judgment under Fed, R. Civ. Pr. 60(b)(2), docketed as Document No. 135, is hereby DENIED.
ss At her hearing, Ms. Wang provided three basic explanations for these dismissals: (1) her clients failed to keep in touch with her office, and her office's attempts to reach them failed; (2) her clients failed to pay; and (3) she and/or the clients decided that certain matters should not be pursued. Ms. Wang testified that at the time, she did not know that she should file a motion to withdraw if she did not intend to pursue a matter before the Court. She now understands the requirement that she do so.
Ms. Wang did not offer specific responses to the dismissals at her hearing but rather chose to address the issue more generally, as described above. This Committee finds that her testimony and the documents presented at the hearing do not provide adequate explanations for her conduct. Her written responses to this Committee regarding this matter are likewise inadequate; those responses are summarized as follows:
(1) In response to the dismissals of Liu v. Ashcroft, 04-1308-ag, Wang v. Ashcroft, 04-6290-ag, Tang v. Gonzales, 05-6826-ag, Gao v. Gonzales, 06-1633-ag and Yang v. Gonzales, 06-3872-ag, Ms. Wang admits that each case was dismissed for failure to file a brief but gives no specific reason for the failure. In each of these cases, she thereafter filed a motion to reinstate, which was granted.
(2) In response to the dismissals of Zheng (Wen Jin) v. Ashcroft, 04-5006-ag, Huang v. Ashcroft, 05-0083-ag. Meng v. Ashcroft, 05-2315-ag, Chen v. Ashcroft, 05-2322r-ag, He v. Gonzales, 05-3744-ag, Lin v. Gonzales, 05-5911-ag, Yang v. Gonzales, 06-1638-ag, and Song v. Gonzales, 06-4802-ag, Ms. Wang admits that each case was dismissed for failure to file a brief but again gives no specific reason for the failure. In each of these cases, she thereafter filed a motion to reinstate, which was denied. Nevertheless, at her hearing, Ms. Wang did not acknowledge that any client was harmed by any dismissal, including these eight petitioners for whom reinstatement was denied.
(3) In response to the dismissals of Zeng v. Ashcroft 04-3214-ag, Chen v. Ashcroft 04-3217-ag, Wang v. Ashcroft 04-3829-ag, Liu-Ziu v. Ashcroft, 04-5253-ag, Lin v. Gonzales, 05-3031-ag, and Quo v. Gonzales, 06-1911-ag, Ms. Wang does not deny that the petitions were dismissed for failure to follow the Court's scheduling orders. She claims that the clients failed to keep in touch with her office and that her office's attempts to reach them failed.
(4) In response to the dismissals of Karangkong v. Ashcroft, 04-3727-ag, Dandi v. Ashcroft 05-2120-ag, Chung v. Ashcroft, 05-2156-ag, Goutama v. Gonzales, 05-4482-ag, and Lomban v. Gonzales, 06-2964-ag, Ms. Wang does not deny that the petitions were dismissed for failure to follow the Court's scheduling orders. As her explanation, she claims that the clients paid one or two often $250 or $300 monthly installments, but then stopped paying.
This Court has specifically rejected such explanations. In Bennett v. Mukasey, 525 F.3d 222 (2d Cir. 2008), on motion to reinstate a petition for review of a BIA decision, Judge Jon O. Newman held that "a lawyer's practice of accepting an initial retainer fee and then deliberately failing to take required action because of non-payment of additional fees, thereby permitting his client's petition to be dismissed, is unacceptable." Id., 525 F.3d at 223.
(5) In Chen v. Gonzales, 06-2954-ag, Ms. Wang claims that she filed a brief on December 15, 2006, but that it was returned because no scheduling order had been issued for briefs. She admits that the case was then dismissed for failure to file a brief. She filed a motion to reinstate the petition, which was granted.
(6) In Liu v. Ashcroft 04-3274-ag, Ms. Wang does not deny that the petition was dismissed for failure to follow the Court's scheduling order. She claims that the client's wife applied for political asylum, that the client abandoned his petition for review in order to focus on her application, and that both her client and her client's wife were thereafter granted asylum.
(7) In Chen v. Ashcroft 04-3728-ag, Ms. Wang does not deny that the petition was dismissed for failure to follow the Court's scheduling order. She claims that she and the government stipulated to dismiss the petition, but the docket does not reflect the entry of any such stipulation.
(8) In Burhan v. Gonzales, 05-4395-ag and Mamahit v. Gonzales, 05-4396-ag, Ms. Wang does not deny that the petition was dismissed for failure to follow the Court's scheduling order. She claims that the cases, for a husband and wife, were transferred to the Third Circuit. They were first dismissed by the Second Circuit, however, and were subsequently dismissed by the Third Circuit for failure to prosecute.
(9) In Li v. Ashcroft 04-0486-ag, Ms. Wang admits that her office did not file a brief and that the case was dismissed for failure to prosecute. She claims that the matter was instead pursued before the Board of Immigration Appeals ("BIA"). While Ms. Wang testified that she generally would consult with clients about whether to pursue a matter in the Second Circuit or move to reopen with the BIA, she offered no proof that she consulted with the client regarding the decision in this case.
(10) In Lin v. Ashcroft, 04-3665-ag, Wang v. Ashcroft, 04-4466-ag, and Jiang v. Ashcroft, 04-5255-ag, Ms. Wang does not deny that the petitions were dismissed for failure to follow the Court's scheduling orders. She claims that the matters were pursued before the BIA instead. As in Li v. Ashcroft, 04-0486-ag, Ms. Wang offered no specific proof that she consulted with her clients in these matters in making the decision to pursue the matter before the BIA instead of the Court.
(11) In Zheng v. Ashcroft, 044200-ag, Ms. Wang does not deny that the petition was dismissed for failure to follow the Court's scheduling order. She claims that after she filed an appeal with the Second Circuit, the client advised that she would like to reopen her case with the BIA.
(12) In Zheng v, Ashcroft, 04-4272-ag, Ms. Wang does not deny that the petition was dismissed for failure to follow the Court's scheduling order. She claims that the matter was pursued before the BIA instead and that her client is currently married to a Permanent Resident who intends to apply for her husband when she becomes a citizen. As with the matters discussed above, Ms. Wang offered no proof that she discussed not pursuing the Second Circuit matter with her client before it was dismissed.
(13) In Lian v. Ashcroft, 04-6105-ag, Ms. Wang does not deny that the petition was dismissed for failure to follow the Court's scheduling order. She claims that her office did not file a brief because they concluded that Respondent had a better chance of relief before the BIA. Ms. Wang provided no proof that this decision was discussed with the client. Ms. Wang claims that the BIA denied relief and the client decided not to pursue an appeal in the Second Circuit.
(14) In Zheng v. Gonzales, 05-2612-ag, Ms. Wang admits that the petition was dismissed for failure to prosecute. She claims that her office instead filed a Motion to Reopen to the BIA on April 20, 2007 and again on July 21, 2007. These motions were made over a year after the Second Circuit's dismissal on February 8, 2006.
(15) In Wang v. Gonzales, 05-5346-ag, the Court dismissed the petition for review because the petitioner failed to file form C/A pursuant to this Court's Civil Appeals Management Plan. Ms. Wang provided no response to this allegation.
Ms. Wang acknowledges that she had insufficient knowledge and insufficient systems in place for Second Circuit practice.fn1 She claims that in response to the Court's inquiry into these dismissals, she has undertaken corrective measures. She is using new computer software to track deadlines. She has improved the letter used for contacting clients and gathers more information from clients so that they can stay in better communication. She has taken continuing legal education courses on immigration practice and courses on federal appellate practice. She reads submissions that were drafted by others more closely. She has decreased the number of cases that she takes that will require petitions to this Court.
As noted above, Ms. Wang did not acknowledge that any client was harmed by any of the thirty-seven dismissals, even though her motions to reinstate eight of the dismissals were denied. Further, Ms. Wang testified that she would not voluntarily advise clients that they could consult another attorney. She did express remorse and apologized to the Court for her conduct.
B. Veracity of Representations to the Court
The Referral Order also requested a response regarding separate submissions by Ms. Wang in separate matters that contained similar or identical facts. First, in He v. Gonzales, 05-3744-ag, Liu v. Ashcroft, 04-1308-ag, and Huang v. Ashcroft 05-0083-ag, Ms. Wang filed affidavits in support of motions to reinstate petitions which alleged suspiciously similar facts. In He v, Gonzales, 05-3744-ag, Ms. Wang stated that petitioner was not able to pay for her brief because petitioner's foot had been seriously injured while working in a restaurant. In Liu v. Ashcroft 04-1308-ag, Ms. Wang stated that petitioner was not able to pay for her brief because petitioner's arm had been seriously burned while working in a restaurant. In Huang v. Ashcroft 05-0083-ag, Ms. Wang stated that petitioner was not able to pay for his brief because petitioner's hand and arm had been seriously burned while working in a restaurant.
Ms. Wang testified. that many of her clients work in small restaurants under poor conditions and do indeed frequently get injured in these ways. For purposes of this report, this Committee accepts Ms. Wang's explanation. This Committee is troubled, however, by the fact that Ms. Wang did not have any personal knowledge or check any of the facts included in her affidavits before swearing to them.
Second, in Yi Mei Fang v. Mukasey, 07-0877-ag, Ms. Wang filed a brief that failed to meet the requirements of Federal Rule of Appellate Procedure 28. The Court ordered Ms. Wang to show cause why she should not be sanctioned for her failure to observe the requirements. In her response to the Court, Ms. Wang stated that another attorney had drafted the brief. She acknowledged that she had read it and had not seen the errors. She stated that a "computer bug" may have caused irrelevant matters to be inserted into the brief.
In this proceeding, Ms. Wang further claims that the attorney who was responsible for writing the Fang brief was also responsible for a brief in another matter, Zheng v. Gonzales, 06-5404-ag, which Ms. Wang claims was due at the same time. In her written response, she claims that the errors were due to "templates" being "mixed up" between the two briefs. At the hearing, Ms. Wang claimed that there was a "cut and paste" problem. Essentially, she claims that an "of counsel" attorney wrote the briefs and improperly pasted the facts from one matter ( Zheng) into the papers for another matter ( Fang).
Ms. Wang accepts responsibility for the briefs, both of which were in her name. She claims that she did not read them closely enough and now takes more time to review briefs before their submission. Specifically, Ms. Wang claims that her former practice was to read draft briefs on the computer screen without printing them out, a practice which she claimed inhibited her ability to carefully review the briefs. Ms. Wang testified that she now prints the drafts and reads them on paper. She claims that this practice assists her in a more careful review. However true this may be, this Committee finds this excuse to be unavailing.
What is more, a review of the docket for Zheng v. Gonzales, 06-5404-ag, and Yi Mei Fang v. Mukasey, 07-0877-ag, reveals multiple discrepancies in Ms. Wang's explanation. First, the briefs were not actually due at the same time. In Fang, the brief was due May 14, 2007. In Zheng, however, Ms. Wang requested two extensions to file the brief, which were granted, ultimately resulting in the brief being due on February 20, 2007, nearly three months before Fang was due. Despite the two extensions, Ms. Wang missed the February 20, 2007 deadline, filed a motion to accept a late brief on April 13, 2007, and finally filed the brief on May 1, 2007. While the motion for acceptance of a late brief was subsequently granted, this Committee is troubled by Ms. Wang's inability to make any of these deadlines. This Committee is more troubled by Ms. Wang's inability to provide a cogent response to why the Fang brief was deficient and by her apparent misrepresentation to this Committee that the Fang and Zheng briefs were due contemporaneously, when clearly they were not. It is this Committee's opinion that Ms. Wang's explanation lacks merit and constitutes further misrepresentations to this Committee.
V. Legal Standard
Under the Rules of the Committee on Admissions and Grievances for the United States Court of Appeals for the Second Circuit ("Committee Rules"),
An attorney may be subject to discipline or other corrective measures for any act or omission that violates the rules of professional conduct or responsibility of the state or other jurisdiction where the attorney maintains his or her principal office. . . . An attorney also may be subject to discipline or other corrective measures for any failure to comply with a Federal Rule of Appellate Procedure, a Local Rule of the Court, an order or other instruction of the Court, or a rule of professional conduct or responsibility of the Court, or any other conduct unbecoming a member of the bar.
Committee Rule 4; see also F.R.A.P. 46(c) ("a court of appeals may discipline an attorney who practices before it for conduct unbecoming a member of the bar or for failure to comply with any court rule").
"Conduct unbecoming a member of the bar" includes "conduct contrary to professional standards that shows an unfitness to discharge continuing obligations to clients or the courts, or conduct inimical to the administration of justice. More specific guidance is provided by case law, applicable court rules, and `the lore of the profession,' as embodied in codes of professional conduct." In re Snyder, 472 U.S. 634, 645, 105 S.Ct. 2874, 2881, 86 L.Ed.2d 504 (1985).
Also, under Federal Rule of Appellate Procedure 46 ("F.R.A.P.") and the Court's Local Rule 46 ("Local Rule"), an attorney must be admitted to the Court before practicing before it.
Finally, because Ms. Wang was a member of the bar of New York State during the time period at issue, the New York State Code of Professional Responsibility ("the Code") also applies. Three sections are of particular relevance in this matter. First, D.R. 6-101 provides that a lawyer shall not:
1. Handle a legal matter which the lawyer knows or should know that he or she is not competent to handle, without associating with a lawyer who is competent to handle it;
2. Handle a legal matter without preparation adequate in the circumstances;
3. Neglect a legal matter entrusted to the lawyer.22 N.Y.C.R.R. § 1200.30; see also N.Y.R. 1.3(b).
Second, D.R. 7-101 directs that attorneys shall not intentionally "[f]ail to seek the lawful objectives of the client through reasonably available means permitted by law and the Disciplinary Rules . . ." nor "prejudice or damage the client during the course of the professional relationship." 22 N.Y.C.R.R. § 1200.32(A)(1), (3); see also N.Y.R. 1.3(c). Further, the lawyer must not fail to "carry out a contract of employment entered into with a client for professional services, but the lawyer may withdraw. . . ." D.R. 7-101(A)(2); 22 N.Y.C.R.R. § 1200.32(A)(2); see also N.Y.R. 1.3(c). A lawyer may not withdraw from employment "until the lawyer has taken steps to the extent reasonably practicable to avoid foreseeable prejudice to the rights of the client, including giving due notice to the client, allowing time for employment of other counsel, delivering to the client all papers and properties to which the client is entitled and complying with applicable laws and rules." D.R. 2-110(A)(2); 22 N.Y.C.R.R. § 1200.15(A)(2); see also N.Y.R. 1.16(e); Bennett, 525 F.3d at 223-24.
Third, the Code prohibits conduct that involves misrepresentation, is prejudicial to the administration of justice, and/or "adversely reflects on the lawyer's fitness as a lawyer." D.R. 1-102(A)(4), (5), (7); 22 N.Y.C.R.R. § 1200.3(A)(4), (5), (7); see also N.Y.R. 8.4(b)-(d), (h).
According to this Committee's rules, "[a]ny finding that an attorney has engaged in misconduct or is otherwise subject to corrective measures must be supported by clear and convincing evidence." Committee Rule 7(h).
If an attorney has been found to have engaged in misconduct, this Committee may recommend to the Court's Grievance Panel that the attorney be:
(a) removed from the bar of the Court;
(b) if not a member of the bar of the Court, precluded from becoming a member or from appearing in future cases in the Court;
(c) suspended from practice before the Court, for either an indefinite or a specified period of time;
(d) publicly or privately reprimanded; (e) monetarily sanctioned;
(f) removed from the Court's pro bono or Criminal Justice Act panels;
(g) referred to another disciplinary committee, bar association, law enforcement agency, or other agency or organization;
(h) subject to the supervision of a special master, or receive some form of counseling or treatment by an appropriately certified person; or
(i) subject to such other disciplinary or corrective measures as the circumstances may warrant, including any combination of the preceding possible actions.
Committee Rule 6(a)-(i). The following factors are considered in recommending discipline:
(a) the duty violated;
(b) the lawyer's mental state;
(c) the potential or actual injury caused by the lawyer's misconduct; and
(d) the existence of aggravating or mitigating factors, American Bar Association, Standards for Imposing Lawyer Sanctions ("ABA Standards") (C)(3.0).VI. Aggravating and Mitigating Factors
There are significant aggravating factors in this matter. First, the misconduct described above was repeated by Ms. Wang on multiple occasions and over an extensive period of time.
Second, Ms. Wang has a history of misconduct before other tribunals. In fact, Ms. Wang has been sanctioned twice by the United States Court of Appeals for the First Circuit. For example, in Rantung v. Gonzales, First Circuit Docket No.' 06-1377, the First Circuit found that Ms. Wang's arguments were "neither developed nor supported by references to the relevant law," noting that this "is not the first time we have had occasion to note this attorney's failure to conform to the procedural and substantive standards. . . ." Ms. Wang was ordered to show cause why single or double costs should not be assessed under Federal Rule of Appellate Procedure 38. The First Circuit subsequently imposed a sanction and ordered double costs. Ms. Wang states that the same "of counsel" attorney prepared that brief, though Ms. Wang signed it. Ms. Wang acknowledges that she did not properly review the brief and takes responsibility under Federal Rule 11.
In Panjaintan, the First Circuit noted concern about errors in the papers that showed that Ms. Wang may have conflated two cases and that the petition was frivolous. The Court notified Ms. Wang of its intention to impose double costs under Federal Rule of Appellate Procedure 38, which it did on July 5, 2007, to be paid by Ms. Wang. According to the docket in that matter, the petitioners forwarded payment and the Court had to return the money orders to them and advise that the costs were to be paid by Ms. Wang, not by them. Ms. Wang claims that the same "of counsel" attorney prepared that brief. She acknowledges that she did not properly review it and accepts responsibility.
In addition to the sanctions imposed by the First Circuit, on June 21, 2006, Ms. Wang received a disciplinary letter of admonition from the Executive Office for Immigration Review for failing to appear at scheduled hearings.
There also are mitigating factors in this matter. As noted above, Ms. Wang was born in Beijing, China. Her father committed suicide when she was just four years old, her mother suffered from depression, and Ms. Wang was a target of schoolmates. Despite these significant personal obstacles, Ms. Wang obtained a legal education in China and then came to the United States to obtain an L.L.M. from Temple Law School. For the past seven years working with the Law Offices of Matthew J. Jeon, P.C., she claims to have worked over sixty hours per week without absence.
As a practitioner, Ms. Wang has worked with a challenging portfolio of clients. Approximately two-thirds of Ms, Wang's appellant clients were previously represented by other offices. They often do not have their files and therefore Ms. Wang must file a petition for review to protect the client's interests before she has had an opportunity to review the clients' entire file.
Further, Ms. Wang has accepted responsibility for the misconduct at issue and has instituted various corrective measures. For example, she has made changes to the way the office functions and is further educating herself through reading and course work. She utilizes a new calendar tickler system; has updated the office's retainer agreement; and has requested and documented more thorough information, including more extensive contact information, from clients. In addition, the "of counsel" attorney who Ms. Wang claims was responsible for some of the misconduct described herein was replaced, and paralegals are now provided with more training. Further, Ms. Wang now takes fewer Second Circuit cases and spends more time reviewing cases. She claims now to spend four hours reviewing a brief and the corresponding record, instead of her former practice of spending only twenty minutes per brief.
Nevertheless, despite these changes, Ms. Wang has continued to miss deadlines with the Court. For instance, in the matter of Fang v. Mukasey, 080986, Ms. Wang missed two Court-imposed deadlines in 2008. What is more, as part of her explanation for those missed deadlines, Ms. Wang stated that she had lost the client file. Further, until she was confronted with questions at the hearing about these missed deadlines, Ms. Wang represented that no deadlines had been missed since the allegations in the Referral Order. Consequently, this Committee lacks confidence both in Ms. Wang's .current ability to meet deadlines — even in light of the corrective measures that she claims to have taken — and in her efforts to be fully candid with this Committee.
VII. Recommendation
The Committee finds, based on clear and convincing evidence, that Ms. Wang has violated F.R.A.P. 46(c); DR 6-101; 22 N.Y.C.R.R. § 1200.30; DR 7-101(A)(1), (2), (3); 22 N.Y.C.R.R. § 1200.32(A)(1), (2), (3); DR 1-102(A)(4), (5), (7); 22 N.Y.C.R.R. § 1200.3(A)(4), (5), (7). Additionally, Ms. Wang violated F.R.A.P. 46 and Local Rule 46 by practicing before the Court without being admitted.
It is this Committee's conclusion that Ms. Wang was not properly equipped to handle the influx of Second Circuit matters that her office received. That is, Ms. Wang lacked sufficient practical skills and knowledge to adequately follow the Court's rules and properly protect her clients' interests. It is also this Committee's conclusion, however, that because of Ms. Wang's educational background and her showing of genuine dedication to her clients' needs, Ms. Wang is not incapable of competently representing petitioners before the Court — rather, she simply has thus far been ill-equipped to do so. This Committee finds that Ms. Wang could benefit from continued, and targeted, legal education regarding handling cases at the appellate level and overall law practice management. Consequently, this Committee recommends that the Court require Ms. Wang to participate in significant continuing legal education as part of any sanction it may order.
Additionally, this Committee concludes that though Ms. Wang has taken certain corrective measures and has expressed remorse that this Committee also finds to be genuine, discipline is warranted in light of her misconduct and her insufficient and sometimes inconsistent representations to this Committee.
Consequently, this Committee recommends that Ms. Wang be suspended for a period of six months. Ms. Wang should be required to promptly provide notice of her suspension to her current clients for whom she has an action pending in the Court or for whom action in the Court may be warranted during the suspension period and to all attorneys in matters pending in the Court for which she is counsel of record. Specifically, within twenty-one days of the commencement of her suspension, she should be required to; (1) notify each client for whom she has an action pending in the Court or for whom action in the Court, may be warranted during the suspension period, by registered or certified mail, that she is unable to act as counsel due to suspension and advise the client to obtain new counsel and (2) in each matter pending in the Court, notify all counsel for all parties, by registered or certified mail, that she is unable to act as counsel due to suspension and advise of the name and address of her client in each respective matter. If any of Ms. Wang's clients in matters pending in the Court fails to obtain new counsel, Ms. Wang shall move for permission to withdraw as counsel. No later than thirty days after the commencement of her suspension, Ms. Wang should be required to file with the Court an affidavit showing her current mailing address and attesting that she has complied with the order, including all notice requirements; Ms. Wang should be required to serve, by registered or certified mail, a copy of the affidavit on the Secretary for this Committee. Ms. Wang should be required to maintain records of compliance with these notice and reporting requirements and produce them to the Court or this Committee upon request.
This Committee further recommends that during her suspension, she be required to complete no fewer than eight hours of continuing legal education ("CLE") in appellate level advocacy and no fewer than eight hours of CLE in law office/practice management from CLE providers accredited by the bar of New York, in addition to the CLE hours required for all attorneys admitted in New York State. Ms. Wang should exercise due diligence in seeking out courses that will provide information and direction for her substantive representation and practical management in federal appellate matters. She should report and provide documentation of her compliance to this Committee's Secretary no later than thirty days before the conclusion of her suspension.
In addition, she should be required, in connection with her practice in any federal court in the Second Circuit or in any federal administrative agency whose action is subject to the Second Circuit's review, to submit to this Committee sworn statements identifying under oath each and every instance during each of the four reporting periods described below in which (1) a submission is not filed or is filed out of time; or (2) an application is made for permission to make a late filing only after the due date has passed. It is expected that these reports will show no such instances absent exigent circumstances, which circumstances should be attested to under oath in the respective report.
In the event that a report is not timely filed or reveals deficiencies not justified by exigent circumstances, the Committee may recommend the imposition of additional discipline, including, but not limited to, further suspension from the Second Circuit, without hearing further testimony.
The following reporting periods and deadlines shall be observed. The report for each reporting period shall be mailed to the Committee Secretary within ten (10) days of the end of that reporting period. The first reporting period shall commence 10 days after the Committee's recommendation is mailed to Ms. Wang and shall end six months after the Second Circuit issues its order of disposition in this matter. Each of the three subsequent reporting periods shall be for a period commencing at the end of the prior reporting period and ending six months later. A total of four reports will be prepared and mailed to the Committee Secretary.
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