Joseph P. Connors, Sr. v. Incoal, Inc., A/K/A Incoal Coal Co.

SILBERMAN, Circuit Judge,

concurring in the judgment:

I agree with my colleagues that the case should be remanded to the district court. I write separately, however, to set forth what I think is the proper relationship between the nature of the issue before the district court, our scope of review, and the anomaly created by the district court’s grant of summary judgment.

As the majority correctly observes, the ultimate issue in the ease — whether an enterprise is a “trade or business” — is properly described as a question of fact. The majority also rightly looks to Commissioner v. Groetzinger, 480 U.S. 23 , 107 S.Ct. 980 , 94 L.Ed.2d 25 (1987), which interprets that same phrase under §§ 62(1) and 162(a) of the Internal Revenue Code. The Supreme Court there defined a trade or business as one where: (1) “the taxpayer’s primary purpose for engaging in the activity must be for income and profit”; and (2) “the taxpayer must be involved in the activity with continuity and regularity.” Id. at 35, 107 S.Ct. at 987 (emphasis added). 1 That standard requires the district court to make a finding, inter alia, of intent or purpose. And as the Supreme Court has said, “[tjreating issues of intent as factual matters for the trier of fact is commonplace.” Pullman-Standard v. Swint, 456 U.S. 273, 288 , 102 S.Ct. 1781, 1790 , 72 L.Ed.2d 66 (1982). This is true even though the determination of intent — a question of ultimate fact — rests upon other, subsidiary material facts. Id. at 287-90 , 102 S.Ct. at 1789-91 .

Of course, it follows that our standard of review of a district court finding on this issue is quite deferential; it is the clearly erroneous test. Courts of Appeals have been admonished by the Supreme Court to be particularly careful when applying that standard not to encroach on the district court’s domain.

“In applying the clearly erroneous standard to the findings of a district court sitting without a jury, appellate courts must constantly have in mind that their function is not to decide factual questions de novo.” Zenith Radio Corp. v. Hazeltine Research, Inc., 395 U.S. 100, 123 , [ 89 S.Ct. 1562, 1576 , 23 L.Ed.2d 129 ] (1969). If the district court’s account of the evidence is plausible in light of the record viewed in its entirety, the court of appeals may not reverse it even though convinced that had it been sitting as the trier of fact, it would have weighed the evidence differently.

Anderson v. Bessemer City, 470 U.S. 564, 573-74 , 105 S.Ct. 1504, 1511 , 84 L.Ed.2d 518 (1985). Such findings are entitled to deference “even when [they] do not rest on credibility determinations, but are based on physical or documentary evidence or inferences from other facts.” Id. at 574 , 105 S.Ct. at 1511-12 .

In this case, however, we do not have before us a district judge’s findings under Fed.R.Civ.P. 52(a), which are entered after trial. Instead, we have his analysis of the documentary evidence and affidavits in a memorandum accompanying his grant of summary judgment. Both parties below filed motions for summary judgment, and appellants do not challenge the judge’s grant of summary judgment as procedurally inappropriate because the material facts were in controversy. Indeed, appellants asserted that “all of the essential facts were undisputed.” Appellants’ Reply Br. at 2. 2 These include, as far as I. can tell, the amount of tobacco sold, the heads of cattle raised, the extent of appellees’ involvement in the income producing activity, the recreational uses of the farm, and even appellees’ uncon-tradicted assertion of their essential purpose in maintaining the farm. Appellants only dispute what we regard as the ultimate ques *256 tion of fact — whether the farm is a trade or business — which is really a characterization of, or an inference to be drawn from, the subsidiary material facts.

The district judge’s memorandum accompanying his grant of summary judgment does discuss, sift, and evaluate those subsidiary facts in such a fashion as to appear very similar to findings entered after trial. We thus are faced with the anomaly that the Seventh Circuit recently encountered.

Factual disputes are not supposed to be resolved on summary judgment. The purpose of the summary judgment procedure is to determine whether there is a (material) factual dispute, in which event there must be a trial. Fed.R.CivP. 56. That is the general rule, all right, but it doesn’t make much sense in a case in which the only “factual” issue is one of characterization, that is, of application of undisputed lay facts, and the opponent of summary judgment claims no right to a jury trial. For then both the record and the factfin-der are the same in the summary judgment proceeding as they would be in a trial. There is no more evidence to put in and no different trier to evaluate it. When both these conditions are satisfied, the formally “factual” dispute is properly resolved on summary judgment.

See Central States, Southeast & Southwest Areas Pension Fund v. Slotky, 956 F.2d 1369, 1373-74 (7th Cir.1992) (emphasis in original).

The majority thinks Judge Posner’s analysis is incoherent; I do not. It certainly cannot be suggested seriously that a busy district judge faced with this sort of situation must require the parties to put on redundant testimonial evidence — to have an uncontested kabuki-like trial. If the judge does not conduct a trial and instead simply sets forth his analysis, characterization, or inferences from the undisputed subsidiary facts as part of the explanation accompanying his grant of summary judgment, our scope of review of the-ultimate issue of fact cannot possibly be broadened. It is simply not our role to weigh, sift, and balance those subsidiary facts; it is the district court’s job. I agree, therefore, with the Seventh Circuit that no matter how this sort of case comes to us, whether after trial or on a grant of summary judgment, the scope of review (clear error) cannot change.

The majority nevertheless assumes — mistakenly, I believe — that when a summary judgment motion is appealed, review is always de novo, even if the ultimate issue, as here, is a question of fact. The authority upon which the majority relies, however, does not deal with this sort of case, so it is not instructive, let alone binding. Sherwood v. Washington Post, 871 F.2d 1144 (D.C.Cir. 1989), does say that “[t]he ‘clearly erroneous’ standard of Rule 52(a) is not applicable in connection with a review of summary judgment.” Id. at 1145 . But Sherwood’s opening language is dicta. In, that case summary judgment was granted improperly precisely because genuine issues of orthodox material fact remained. Similarly, the case Sherwood relies upon, Tygrett v. Washington, 543 F.2d 840 (D.C.Cir.1974), also states that fact findings made on summary judgment “are not really findings of fact” and that “such findings are not protected by the ‘clearly erroneous’ standard of [Rule] 52(a).” Id. at 844 n. 17. Again, the quoted passage is dicta, because in Tygrett the lower court- was reversed for making an error of law.

To be sure, when a district judge grants a Rule 56 motion, he is not required to set forth findings of fact or conclusions of law. This means, of course, as Judge Harris recently reminded us, that the judge is not obliged to say or write anything in support of his decision. Fairhead v. Deleuw, Cather & Co., 817 F.Supp. 153 (D.D.C.1993); Fed. R.Civ.P. 52(a). 3 But when the judge does provide an explanation,'as did the judge here, we should regard that explanation just as if findings had been entered under Rule 52. After all, the judge could have treated the *257 parties’ submissions as a request for a “paper trial” and then provided Rule 52 findings, 4 which, in context, is not significantly different from what he did. So long as neither party wishes to put on testimonial evidence and to dispute subsidiary material facts, there can be no objection if the judge decides the case as the parties submit it. The case relied upon by the majority, Sherwood , allows for this very procedure. “It is true that ‘[i]n some circumstances cross-motions for summary judgment ... may be treated for purposes of review as a mutual request for trial on [a] stipulated ... record.’” Sherwood, 871 F.2d at 1147 n. 4, quoting Toney v. Bergland, 645 F.2d 1063, 1066 (D.C.Cir. 1981); see also Vetter v. Frosch, 599 F.2d 630 (5th Cir.1979).

Be that as it may, under no circumstances are we entitled to examine the evidence de novo. The majority’s discussion of the evidence, therefore — including its view that “these factors [of continuity and regularity] are fulfilled in this case,” Maj. Op. at 250 n. 7, and that “[o]n this record, we would be inclined to think that summary judgment should have been granted in favor of plaintiffs,” id. at 253 — is not only dicta, it is dicta that the district judge is entitled to (indeed, under Anderson , is obliged to) disregard because it encroaches into his fact-finding domain. The latter observation — that the majority actually would have granted summary judgment for the plaintiffs — seems, moreover, quite inconsistent with its view that summary judgment is inappropriate in such a case.

I concur in the judgment remanding to the district court, however, because I agree with the majority that the district court should not have considered, as a matter of law, the lack of economic nexus between the coal company and the farm as a factor to be weighed in determining no liability. The majority goes too far in unequivocally stating that the economic nexus question is always “irrelevant.” Id. at 249. As the Seventh Circuit found in Slotky , using nexus as a factor to suggest liability may prevent owners of trades or businesses from fractionalizing their assets to escape ERISA. See Slotky, 956 F.2d at 1374 . Still, I agree with the majority’s basic legal point that an unrelated trade or business is nonetheless a trade or business under the Act, and, therefore, that the district judge should not have weighed the nexus factor in favor of appellees. I also believe that the judge, on remand, should make his findings explicitly in the context of the Groet-zinger framework.

Although the district judge was not entirely clear on this point, he may well have believed that appellees’ investment in the farm was not a trade or business without regard to the nexus factor. If so, the judge, of course, can make appropriate findings to that effect on remand. -I will not offer my own evaluation of the evidence at this stage, but I will sáy that I do not believe, as does the majority, that the statutory standard the judge is obliged to apply, even with Groet-zinger as an aid, is all that “plain.” And in a close case, of which this may very well be one, a district judge’s evaluation of the evidence may not be legitimately reversed.

. The second factor seems to be almost fully ignored in the majority’s opinion.

. Appellants thought the issue before us was properly characterized as a “mixed question of law” to which "the proper standard of review must be more searching than the standard applied to a pure finding of fact.” Appellants' Reply Br. at 2.

. My agreement with Judge Harris is expressed with due respect for the motions panel of this court that directed him to do that which the Federal Rules do not require. The order of the motions panel, because it was unpublished, has no precedential force. However, if a district judge in this sort of case offered no reasons that could be construed as findings, I do not see how a court of appeals would have any recourse but to remand for written findings under Rule 52(a).

. That might be the most convenient way for district judges to handle these sorts of cases in ■ the future.