Opinion
Civil Action No. 01-2014, Section "K"(4)
January 31, 2002
ORDER AND REASONS
Before this Court is a Motion to Dismiss filed by defendant based on plaintiff's misrepresentations in his application to proceed in forma pauperis. After reviewing the memoranda, relevant law and testimony from the hearing held in this matter, the Court finds that defendants motion to dismiss should be GRANTED and plaintiff's case DISMISSED WITHOUT PREJUDICE.
BACKGROUND
Belle Chasse Marine Transportation Incorporated (Corporation) was incorporated by plaintiff on February 11, 1977. In 1983, plaintiff was convicted of a crime unrelated to the business of the corporation and transferred his shares of stock to defendant, Konrad, to be re-issued indifferent proportions to himself, Charles Arnoult, Judy Balliviero, and Norman Balliviero. After taking possession of the shares, however, plaintiff alleges that Konrad attempted to misappropriate them. Plaintiff then filed the instant suit, in part, to recover his stock from defendant. Specifically, plaintiff sought a declaratory judgment acknowledging that: (1) plaintiff is the owner of 780 shares of stock in Belle Chasse Marine Transportation, Inc., (2) defendant, Gordon Konrad owns no more than 175 shares in the corporation, and (3) plaintiff and three other individual are the duly elected officers to the board of directors.
On July 6, 2001, plaintiff requested and was granted leave to proceed in forma pauperis (rec. doc. 2). In his application to proceed in forma paupris plaintiff made the following representations: (1) he had not received any income from a business, profession, other form of self-employment, or in the form of rent payments, interest, dividends, or other sources, in the last twelve months, (2) he did not own any cash or checking or savings accounts, and (3) he did not own any real estate, stocks, bonds, noted, automobiles, other valuable property.
However, in a later response to interrogatories propounded by defense counsel during discovery and his deposition, plaintiff admitted that he owned: (1) an undivided interest in two parcels of real estate in Buras, La. which were subject to a usufruct in favor of his step mother and had received royalty payments (which varied in amount from month to month) from his ownership interest since 1974, (2) a savings account at Whitney Bank with a $500 balance, (3) a 1993 Mazda worth $2000, and (4) stock in Belle Chasse Marine Co. that is being held for him in his brother's name (Motion to Dismiss, Exhibit C, p. 3).
Recognizing that plaintiff had made misrepresentations in his application to proceed in forma paupris, defendant filed a Motion to Strike Order Granting Motion to Proceed in Forma Pauperis and a Motion to Dismiss on November 1, 2001. (rec. doc. 40). Simultaneously, plaintiff filed a Motion to Rescind his Motion to Proceed in Forma Pauperis and explained that his original affidavit in support of his Motion to Proceed in Forma Pauperis had been filed when he was pro se and admitted to the Court that he: (1) receives $200 to $250 per month in income from real estate as mineral royalties, (2) has a savings account at Whitney bank, and (3) owns a car and an undivided interest in real estate. With those admissions, plaintiff tendered his filing fees.
Defendant's Motion to Dismiss is based on 28 U.S.C. § 1915 (e)(2)(A) which holds that in a case in federal court in which the plaintiff attempts to or is allowed to proceed in forma pauperis:
(2) Notwithstanding any filing fee, or any portion thereof, that may have been paid, the court shall dismiss the case at any time if the court determines that (A) the allegation of poverty is untrue.
Under the plain language of the statute, defendant requests this Court to dismiss plaintiff's cause of action based on plaintiff's misrepresentations in his application to proceed in forma pauperis. Furthermore, defendants urge this Court to dismiss the matter with prejudice because: (1) plaintiff's original affidavit was in "continuing intentional bad faith," (2) plaintiff "is still lying to the Court," and (3) plaintiff "has a past history of lying to this very Court, attempting to retract lies once caught, filing frivolous claims, and not paying the required filing fees." (Supplemental Memoranda in Support of the Motion to Dismiss, p. 17).
In Lay v. Justices of the Middle District Court, 811 F.2d 285 (5t Cir. 1987), the Fifth Circuit analyzed a district court's dismissal of a plaintiff's cause of action under previous 28 U.S.C. § 1915(d) because plaintiff had falsified a signature on an affidavit attesting to his prison account balance in his application to proceed in forma pauperis. In that case, the Court held that while the district court had the discretion to dismiss plaintiff's case, to do so with prejudice was a drastic remedy that should be reserved for further cause. In remanding the case to the district court, the Fifth Circuit also noted that the record did not indicate whether the district court had considered alternative lesser sanctions or inquired onto the details of the forgery.
Therefore, upon receipt of defendant's motion in the instant case, this Court convened a hearing — the purpose of which was to inquire into the details of plaintiff's misrepresentations in his application to proceed in forma pauperis. At the hearing, the Court permitted counsel to question plaintiff and allowed plaintiff the opportunity to offer any explanation for his misrepresentations.
During the testimony, plaintiff confirmed the following: (1) he receives a monthly income from mineral royalties from his undivided interest in certain properties and has been receiving that money since his father died, (2) when he left prison initially, he used a portion of the money from his mineral royalty fund to trade in the stock market, lost $1300, and closed that account, (3) he has $500 in an account at Whitney bank in his name and explained that $500 must be maintained in that account so plaintiff can cash checks mailed to him by his brother, (4) he owns an undivided interest in certain properties in Buras, La. but noted that his brother has "kept track" of it, (5) he owns a car, and (7) he owns stock in Belle Chasse, but it is being held for him by his brother and is intended for his children.
Plaintiff also revealed the existence of another account (the "AmeriTrade account"), containing approximately $20,000, which is currently held for him by his brother. Plaintiff explained that $7000 of those funds are for his sister and brother and the other $13,000 is intended to reimburse his mother for the help she has given him. To this date, none of the funds have been dispersed to the intended beneficiaries and plaintiff explained that he had not mentioned it earlier because the account is in his brother's name and disbursements have been made to plaintiff from that account.
Acknowledging that he had made misrepresentations in his affidavit of poverty, plaintiff offered the following explanations: (1) he was not focused when he filled out many of the questions because of his "emotional, physical, and mental state," because he had been diagnosed with a tumor — which was later removed, (2) he had not accurately read the question referring to income because he thought it referred to income from employment — not from a mineral lease, (3) he responded that he had no savings or checking accounts because they are in his brother's name (not his) and are intended for his brother, sister, and mother, (4) when he stated that he did not own any property, he did not think about his undivided ownership interest in the property in Buras because his brother had "kept track of all that" and he had only visited the property briefly on one trip, (5) he incorrectly stated that he did not own any stock because his shares are held by his brother and are intended for his children — even though there has been no act of donation to accomplish that goal, and (6) he incorrectly stated that he did not own a car because he had not focused on the entirety of the question as is asked whether the affiant owns a list of items.
ANALYSIS
Because 1915(e)(2)(A) clearly mandates dismissal at any time when there has been a misrepresentation in a petitioner's allegation of poverty. the issue before the Court is whether such dismissal should be with or without prejudice.
This Court has the discretion to determine whether the dismissal of a plaintiff's cause of action should be with or without prejudice when there has been an untrue allegation of poverty. See Lay v. Justices of Middle District Court, 811 F.2d 285 (5th Cir. 1987) and Heath v. Walters, 151 F.3d 1032) (7th Cir. 1998) (citing Dawson v. Lennon, 797 F.2d 934 (11th Cir. 1986) and Harris v. Cuyler, 664 F.2d 388 (3d Cir. 1981) and noting that in both cases, the appellate court employed an abuse of discretion standard under prior § 1915(d) to review a district courts dismissal of a cause of action based on false allegations of poverty because such actions were within the discretion of the district court).
In determining whether dismissal with prejudice was appropriate in Lay, the Fifth Circuit relied, in part, on the Eleventh circuit's analysis in Camp v. Olvier, 798 F.2d 434 (11th Cir. 1986) in which the court held that dismissal with prejudice is an "extreme sanction that should only be imposed when evidence exists of bad faith, manipulative tactics, or litigiousness." The Fifth Circuit also analogized to the proper use of dismissal in other contexts and noted that dismissal with prejudice is to be used only in those situations where a lesser sanction would not better serve the interests of justice. Lay at 286, citing Burden v. Yates, 644 F.2d 503, 505 (5th Cir. 1981). And, as noted above, the Court in Lay concluded that there had been no indication of extreme circumstances to warrant dismissal with prejudice when the affiant falsified a signature on a document to be presented to the Court.
When faced with similar circumstances, other circuits have upheld district courts' dismissals with prejudice when there has been an untrue allegation of poverty to the court. In Heath v. Walters, 151 F.3d 1032 (7th Cir. 1998), for example, the Seventh Circuit upheld the district court's dismissal with prejudice when the plaintiff misrepresented his average annual income on his application to proceed in forma paupris and explained that he had done so because "his financial situation was complicated because he [was] self employed and because he owes back taxes." The district court concluded that while plaintiff's misrepresentations were not fraudulent, they were "definitely made with the intent to mislead" and dismissed the cause of action with prejudice. Id. at 1032. See also Mathis v. New York Life Ins. Co., 133 F.3d 546 (7th Cir. 1998) (upholding the district courts dismissal with prejudice when plaintiff misrepresented his assets to the court by not disclosing that he owned a home because "he did not own it free and clear").
After reviewing the facts of the instant case, however, this Court has determined that plaintiff's cause of action should be dismissed without prejudice. After the initial misrepresentations in his application to proceed in forma paupris, plaintiff rescinded his motion and attempted to rectify his misstatements. At that point, he admitted that he received royalties from an undivided interest of property and that he had a car and a bank account at Whitney bank. Plaintiff did not, however, disclose the existence of his approximately $20,000 AmeriTrade account until the Court's hearing. While both accounts are in his brother's name, the money in them belongs to plaintiff and he should have disclosed both accounts in his application. Furthermore, his undivided ownership interest in property, shares of stock, car, and mineral royalties should have been disclosed initially. However, plaintiff's health concerns and alleged misunderstanding of several of the questions in the application were offered in mitigation of his misrepresentations.
Plaintiff's misrepresentations in proceedings other than the one in this Court are not relevant.
Dismissal with prejudice is a harsh remedy and should only be used in extreme circumstances. In this case, the Court finds that dismissal without prejudice is a sufficient sanction. Accordingly,
Plaintiff's cause of action against defendant is hereby DISMISSED WITHOUT PREJUDICE at plaintiff's costs.