1)  CONTRACTS / UCC: Butler v. Ima Regiomontana S.A.,  98-16735 (9th Cir. Feb. 3, 2000) (unpublished).  Van Graafeiland, Alarcon, and Silverman, Circuit Judges.
           The District Court for Arizona, Judge Silver presiding, granted partial summary judgment in favor of plaintiffs Kirk Butler, his wife Pamela ("the Butlers"), and KMB, Inc. in this breach of contract cause of action.  Alfonso and Alejandro Dominguez, and Alejandro's wife, Veronica appealed, contending that the district court erred in striking affidavits they offered in opposition to the motion for partial summary judgment.  They argued that the affidavits established a genuine issue of material fact as to whether the $90,000 tile transaction at issue was governed by Arizona's Uniform Commercial Code, whether the shipments of tile were covered by a warranty, and as to the amount owed to the Butlers and IMA.  IMA also appealed a ruling against it, following a jury trial, which awarded the Butler damages for back charges.  IMA maintained that such damages could not be awarded because the Butlers did not properly reject the defective goods.  Alfonso, Alejandro, and Veronica chal-lenged the jugment entered against each of them individually following the jury trial.  Each individual appellant argued that the evidence was insufficient to support the verdict. 
           The USCA affirmed the partial summary judgment and the judgment entered against Alfonso and Alejandro, but reversed the judgment against Veronica.  First, the appellants maintained that the $90,000 received from the Butlers was a loan and not an advance.  They point to the fact that it was to be repaid, not only by crediting back the value of future shipments of tile, but also by cash payment.  They note that 15% annual interest was to be charged on the transaction.  They also relied on evidence that Kirk referred to the document setting forth the transaction as a "note" in his testimony at trial, and that the Butlers' counsel referred to the transaction as a loan several times during trial.  The appellants maintained that because the $90,000 transfer was a loan, it was not a sale of goods covered by the UCC.  Accordingly, they contend that the jugment for damages under the UCC should be reversed.  However, in its November 1, 1995 order granting partial summary judgment in favor of the Butlers, the district court found that the parties' 1990 agreement involving the transfer of $90,000 was an advance.  It based its finding on the evidence offered by Butler establishing that the parties understood the agreement to be an advance and not a loan.  The evidence included testimony from Alfonso's deposition in which he characterized the $90,000 as an advance and contrasted it to outright loans IMA had received from the Butlers.  The district court noted that IMA failed to provide any admissible evidence controverting the Butlers' characterization of the transaction as an advance.  The district court thus concluded that, as an advance, the $90,000 transfer was governed by the UCC.
               The USCA noted, as the district court before it had, that IMA failed to introduce any admissible evidence to the district court controverting the Butlers' evidence that the agreement was understood by the parties to be an advance for the sale.  Without such evidence, there was no genuine issue of triable fact as to whether the transaction was governed by the UCC.  The appellants did not maintain on appeal that they had introduced admissible evidence to the district court establishing that the transaction was not an advance for the sale of goods.  They simply argued that, given the undisputed fact that the agreement contemplated cash repayments and interest charges, it was not a transaction for the sale of goods and was not governed by the UCC.  However, the USCA found that the transaction in this case was an advance payment for the future sale of tile.  To the extent that cash payments or interest charges may be more typical of a securities transaction than a sales transaction, they do not remove this transaction for the future sale of goods from the scope of the UCC.  Based on the undisputed facts, the transaction here was an advance governed by the UCC.  The district court thus properly granted partial summary jugment in favor of the Butlers on this issue.
           The appellants next argued that the district court erred in granting partial summary judgment in favor of the Butlers on the issue of how much IMA owed Butler because it abused its discretion in striking the affidavits of Alejandro and of Armando Macias that were submitted in opposition to the Butlers' motion for partial summary judgment.  The appellants maintained that the portions of the affidavits that were stricken would have created a genuine issue of material fact warranting a denial of the Butlers' motion for partial summary judgment.  However, the USCA noted that FRCP 56(e) requires that affidavits supporting and opposition a motion for summary jugment "shall be made on personal knowledge, shall set forth such facts as would be admissible in evidence, and shall show affirmatively that the affiant is competent to testify to the matters therein,"  In his affidavit, Alejandro sought to establish the specific balance owed to the Butlers.  Alejandro was the operations director of IMA during the time in question, but the nature of his participation in the matters herein at issue was unclear.  Moreover, his title, "operations director." did not imply that he had personal knowledge of the number and value of shipments of tile actually delivered to the Butlers, or by how much those shipments reduced the balance owed to the Butlers.  Alejandro's bare assertion that he was "personally familiar" with the accounting, back charges and balances, did not meet the appellants' duty to show affirmatively that Alejandro was competent to testify as to the balance owed to IMA.  Finally, Alejandro failed to set forth any facts in his affidavit that established that he had personal knowledge.  To the contrary, in his affidavit, he conceded that he determined the balance owed by reviewing the accounting.  At most, he established that he had personal knowledge of the contents of the accounting records after reviewing them.  The accounting records upon which he relied to determine the balance owed to the Butlers were  hearsay and not admissible under the business records exception provided by Rule 803(6) of the Federal Rules of Evidence.  While Alejandro had testified that he reviewed and summarized the records in the ordinary course of business, he did not testify that the records were kept in the ordinary course of business by a person who had knowledge of the facts and entered them at or near the time of the incident recorded as required by Rule 803(6).  The portions of his affidavit that did not comply with Rule 803(6) were thus inadmissible.  The district court did not abuse its discretion in striking them.
          As IMA failed to include a copy of Macias' affidavit in its excerpts of record, the USCA found it impossible to determine whether it had been based on personal knowledge or whether, as the appellants maintained, it shows on its face that it met the requirements of the business records exception.  The appellants were required to prepare excerpts of record, including those parts of the record necessary to permit an informed analysis of their positions.  Pursuant to Ninth Circuit Rule 30-2, the USCA ordered IMA to provide it with Macias' affidavit.  However, the appellants informed the USCA that they are unable to locate it.  The USCA was thus unable to evaluate the merits of IMA's contention that Macias' affidavit had been improperly stricken. 
        The appellants also maintained that the district court improperly granted partial summary jugment in favor of the Butlers on their breach of warranty claim because Alejandro testified in his affidavit that the shipping boxes from IMA stated "Please Inspect Merchandise, Since No Claims Will Be Honored After Installation."  The appellants argued that this statement created a genuine issue of material fact as to whether or not IMA warranted the quality of the tile.  However, the district court struck the portion of Alejandro's affidavit regarding the disclaimer of warranty because it did not comply with the requirements of FRCP 56(e).  Because the district court found that IMA offered no admissible proof contesting IMA's warranty of the tile, it granted partial summary judgment in favor of Butler.  The USCA noted that Alejandro's recitation of the statement appearing on the shipping boxes was hearsay.  He did not state any facts in his affidavit to bring the out-of-court statement within an exception to the hearsay rule.  Moreover, he failed to state any facts establishing that he had personal knowledge that the state-ment appeared on the shipping boxes sent to the Butlers.  The district court thus did not abuse its discretion in striking that portion of Alejandro's affidavit.  IMA presented no admissible evidence in opposition to the Butler's motion for partial summary jugment for the breach of warranty claim.  The district court properly granted the motion.
          IMA argued that, as a matter of law, the Butlers were not entitled to damages for "back charges."  At trial, Kirk Butler testified that in calculating the damages owed for IMA's breach of warranty, they included the value of damaged or defective tiles.  Typically, they would deduct, or charge back, those amounts to IMA in determining how much to pay for a shipment.  IMA argued on appeal that the Butlers were not entitled to those amounts because they failed to reject the defective tiles within a reasonable period of time as required by the UCC.  Section 47-2601 of the UCC allows a buyer to reject goods that fail to conform to the contract.  Section 47-2602 requires that such rejection of goods be within a reasonable time after their delivery or tender.  In its brief, however, IMA raised no factual basis to support its claim that the Butlers failed to meet this requirement.  Simply stating that they "failed entirely to notify appellants within a reasonable period of time of the defective goods," did not give the USCA any ground to reverse the damages awarded to the Butlers for back charges. 

2)  TAXATION:  Meeks v. CIR, 98-71264 (9th Cir. Feb. 22, 2000) (unpublished).  Browning, Rymer, and Kleinfeld, Circuit Judges.   Meeks argued that the Tax Court clearly erred when it found that his colleges in organizational behavior qualified him for a new trade or business.  To determine whether an educa-tional course qualifies the taxpayer for a new trade or business, the USCA looks at what the taxpayer could do with the newly acquired knowledge, not at what he actually intends to do.  Meeks counsel conceded at oral argument that "these classes could qualify a younger person for a new profession."  This did not appear to be an accidental, misstated, or erroneous concession and the facts left little room to take with candor a different position.  It did not matter that Meeks never intended to enter the field of organizational behavior, or that he did not obtain a degree.  The fact that the education could lead (if the entire pro-gram of study was completed) to qualify him for a job as a human resource specialist was enough.  Sharon v. CIR, 591 F.2d 1273 (9th Cir. 1978), held that an IRS attorney's bar preparation class was not deductible because it "allowed him to represent California clients and to pursue private practice rather than continue to practice as an IRS attorney."  Sharon reached this conclusion even though the IRS attorney's employer suggested that he take the bar course, it related directly to the work he was doing for the IRS, and it made him more useful to his employer.  The fact that the education opened up opportunities in a different line of work was enough to deny the deduction.  Similarly, Meeks was not entitled to deduct his course work in organizational behavior because it was part of a program of study that would open up new opportunities for him.

3)  TAXATION:  Cohen v. USA, 98-55730 (9th Cir. Feb. 3, 2000) (unpublished).  B. Fletcher, Kozinski, and Thompson, Circuit Judges.
            Stanley and Jill Cohen owe the federal government some $2.6 million in unpaid taxes.  The IRS attempted to collect those taxes by placing liens on Stanley's interest in the Earl Cohen Testamentary Trust, for which he served as trustee.  In 1995 and 1996, the IRS issued levies on properties in which the Trust holds an interest and filed four nominee liens with respect to the Cohen's liabilities, listing the Trust "as Nominee, Transferee, Alter-Ego, Holder of the Beneficiary Interest, Agent, Assignee or Successor in Interest of Stanley Cohen."  Stanley, as trustee, filed this action against the United States seeking return of the property seized, a release of the levies on Trust properties, and an injunction enjoining the government "from collecting or seeking to enforce by lien, levy, sale or otherwise," from the Trust, taxes owed by the Cohens set forth on the tax assessment against them.  The District Court for the Central District of California, Judge Paez presiding, granted the Cohens summary jugment, ordering the government to remove the levies and return monies collected pursuant them.  Regarding the liens, however, the Court held that it lacked jurisdiction to order relief not specified in IRS Sec. 7426.  Following the entry of judgment, the government voluntarily removed the liens.  Stanley, as trustee, appealed the district court's holding regarding the liens, seeking an injunction against their reimposition and arguing that the district court did not lack jurisdiction to order the liens removed.
            The USCA concluded that the case was moot and dismissed.  The relief sought by the Cohens, cancellation of the nominee liens, has been achieved:  the liens were removed by the IRS following entry of jugment by the district court.  Article III jurisdiction extends only to actual cases and controversies;  to avoid mootness, concrete personal interest in the outcome of the case must be present throughout all stages of the proceedings.  This means that an appeal is moot if the issues presented are no longer live or the parties lack a legally cognizable interest in the outcome.  This case did not fit into the established exception to the mootness rule, which allows for jurisdiction over a controversy if the conduct challenged is capable of repetition but evades review.  To fit this exception, the conduct must meet both prongs of the test simultaneously:  there must be a reasonable likelihood that the action will be repeated, and it must occur so quickly that it "is almost certain to run its course before either this court or the Supreme Court can give the case full consideration."  Here the conduct may be repeated, since no court has found that the IRS is under an obligation to refrain from reimposing the nominee liens.  However, were this to occur, the Trust would have time to challenge the liens upon their reimpo-sition.

4)  TAXATION:  Basque Station, Inc. v. USA, 98-35315 (9th Cir. Feb. 4, 2000) (unpublished).  Rymer, Hawkins and McKeown, Circuit Judges. 
           The District Court for Idaho, Judge Lodge presiding, granted Basque Station summary judgment on its action to recover $2,791 in federal excise taxes for sales of diesel fuel and dismissing a counterclaim seeking to reduce to judgment $1,307,252 in allegedly unpaid excise taxes for the periods ending December 31, 1988 through December 31, 1992.
            The USCA vacated the decision of the district court and remanded the case.  The Omnibus Budget Reconciliation Act of 1987 moved the point of collection of the excise tax on diesel fuel from the sale by the retailer to the sale by a "producer," with a producer defined to include wholesale distributors.  At the same time, the Act provided for an exemption  from the tax for sales between "producers" as defined in the statute.  Section 4092(b)(1) establishes the requirements for meeting the definition of a "producer" under Sec. 4091(a).  To qualify, one must be, inter alia, a wholesale distributor and must elect to register under Sec. 4101.  The relevant part of Sec. 4101 requires that an applicant register with the Secretary of the Treasury.  In 1991, the IRS audited Basque and determined that it had made sales of diesel fuel to Transport Petroleum subject to the excise tax imposed by Sec. 4091(a) during the last two quarters of 1988 and during all four quarters of 1989, 1990, 1991, and 1992.  These sales, according to the IRS, were not exempt from the excise tax because Transport Petroleum had not received a Certificate of Registration number and was, thus, not a "producer" under Sec. 4092(b)(1)(A).  The sales, then, did not qualify for the "producer-to-producer" exemption from the tax under Sec. 4093(b).  Basque paid the tax liabilities assessed for the third quarter of 1988 and then filed an administrative claim for refund.  After the IRS denied the claim, Basque filed this tax refund suit seeking to recover payment.  The government filed a counterclaim seeking to recover $1,307,252 in unpaid assessments for the remaining tax periods.  Basque sought to resolve the issue on summary jugment, arguing that no sales, as defined by the Treasury regulations, had occurred between itself and Transport Petroleum during the relevant time periods.  The district court found disputed material facts surrounding the issue and denied the motion.  Basque then filed a new motion for summary judgment arguing that, even if there were sales, they were exempt from the excise tax under Sec. 4093(b) because both Basque and Transport Petroleum qualified as a "producer" under Sec. 4092(b).  The district court granted this motion.  In holding that Transport Petroleum was a producer under Sec. 4092(b), the district court interpreted Sec. 4101(a) as only requiring an applicant to submit a registration form to the appropriate IRS office.  The government maintained that the proper reading of the diesel fuel excise tax statutory scheme requires an applicant to actually receive approval from the IRS, in the form of a Certificate of Registration number, in order to qualify for the Sec. 4093(b) exemption as a "producer."  The structure of the statute itself calls for an analysis that begins with the issues of whether any sales took place.  When Congress chose to amend the provisions of the excise tax on diesel fuel in the Omnibus Budget Reconciliation Act of 1987 it began, in Sec. 4091, with the issue of "sales."  It is proper, then, that Sec. 4091 should begin the inquiry.  If no sales took place, then no exemption is needed, and there is no need to interpret Sec. 4092(b) or Sec. 4101(a).  The USCA thus vacated the district court's decision and remanded the case with the following instructions:  (1) the district court should first resolve the issue of whether any "sales" took place between Basque and Transport;  (2) if it is determined that sales did indeed take place, the district court should then revisit its interpretation of Sec. 4101(a) and whether Transport Petroleum was a "producer" under Sec. 4092(b), therefore exempting such sales under Sec. 4093(b).

5)  BANKRUPTCY LAW / DISCOVERY VIOLATIONS:In re Hurt, 98-16455 (9th Cir. Feb. 8, 2000) (unpublished).  Browning, Rymer, and Kleinfeld, Circuit Judges.
            The bankruptcy court dismissed the adversary complaint filed by BFOW, Inc. after its corporate officer failed to appear for a deposition and failed to produce documents as required by a discovery order.  The District Court for Arizona, Judge McNamee presiding, affirmed, noting what while the bankruptcy court could have adopted a lesser sanction, it was not an abuse of discretion to impose a harsher one.
            The USCA reversed.  While the dispute between BFOW and the debtor, Hurt, arose relatively recently, it follows decades of litigation involving Hurt and her ex-husband Pace.  In 1956, Transamerica Title Insurance Company conveyed a ½  interest in realty to Pace and Hurt, then married, a ¼ interest to Stringham, and a ¼ interest to Spain.  Hurt was a party to the agreement.  The deed was recorded in 1956.  In 1978, she divorced Pace and got the couple's interests in numerous properties, including the property herein at issue, as part of the settlement.  The decree did not mention either Stringham's or Span's interests in the property, nor would there be any apparent reason for Pace's divorce to affect his co-venturers' interests in the real estate.  Between 1978 and 1985, numerous parties claimed security and ownership interests against the various properties Hurt had acquired through the divorce.  These claims were based in some cases on security interest given by Pace, but not Hurt, prior to the divorce.  Spain was among the creditors, claiming a $5,000 security interest on the property at issue from a loan to Pace.  The creditors eventually forced Hurt into an involuntary bankruptcy.  In the bankruptcy proceedings, Hurt disputed the claims.  She claimed that Pace had granted security interests based on non-existent debts and ownership interests unsupported by consideration to his business associates in an effort to cloud title to Hurt's property.  The bankruptcy court agreed with Hurt as to at least one of the creditors, holding that there was insufficient evidence of the claimed lien and ownership interest.  It stated that Pace's testimony about the claimed lien and interest was "totally inaccurate and incredible" and that the transfers "were not for consideration but solely to prevent the Debtor from the enjoyment of her property."  It relied on the fact that the substantial sums of money that Pace claimed were transferred were never reflected on the books of the various entities, and that property transfers occurring well before the divorce were not recorded until just after the divorce.  Hurt settled the bankruptcy case with the creditors in January 1990.  Spain, but not Stringham, was a party to the settlement agreement and agreed, along with the other creditors, to "waiver and release of liens and encumbrances placed upon the real properties of the Debtor."  What Spain settled was apparently his $5,000 debt and associated lien;  it is not clear whether his agreement conveyed the interest he obtained in 1956.  Between 1990 and 1994, BFOW purchased both Spain's and Stringham's ownership interests in the property.
            On October 6, 1995, Hurt sought court approval to sell the property.  BFOW opposed the sale.  BFOW bought the real estate at the sale, so the dispute is now over whether it is entitled to the portion of what it paid attributable to Spain's and Stringham's interests.  BFOW argued that it had properly succeeded to Span's and Stringham's ownership interests by purchase from subsequent owners and was thus entitled to ½ the proceeds.  Hurt argued that the bankruptcy settlement order quieted title in her and eliminated other interest in the property, and that even if the interest were not eliminated, she had full ownership by adverse possession because she possessed the property and paid all the taxes since 1978.  The settlement agreement did not on its face purport to quiet title in Hurt and convey to her the other interests, nor did Stringham even sign it, so her claim, on its face, is arguable.  BFOW maintained that it is successor to the interests Spain and Stringham acquired from Transamerica in 1956.  Those interest were acquired prior to whatever fraudulent conveyances Pace may have made later, and were unaffected, BFOW argued, by Spain's settlement of his claims to a security interest arising from a subsequent loan by Spain to Pace.  On April 19, 1996, counsel for Hurt and BFOW agreed to informal discovery in a status hearing.  On April 23, Hurt requested various documents relating to the purchase of the property and the last three years of BFOW's corporate and financial records.  On July 12, BFOW provided a copy of the Purchase Agreement, but refused to provide the corporate records, claiming that the records were not relevant to the narrow issue of ownership.  On July 16, Hurt asked the court to order production of the requested records.  Hurt apparently sought the records to show that Pace was manipulating his old business associates through BFOW to get even with his ex-wife, as part of the fraudulent scheming she alleged he had engaged in for decades.
At a July 26 status meeting, the court expressed impatience with the delays, stating that it would start the discovery process over and hold all pending motions until discovery was finished.  BFOW opposed the discovery on the ground that the issues were straightforward questions of law and that enough evidence was already in the record.  The court disagreed.  It opined that "these people are all related to each other.  Something is going on here. … Just from reading what I've read in the file, there's so much more to this.  I mean, there's too many shams created here that I don't believe anything until I hear it from the witness stand, and then I'll make my own decisions."  On that basis, the court tacitly approved Hurt's discovery requests, explained to BFOW that Hurt had a right to put on her case, and made it clear that further discovery trouble would not be tolerated.  On August 1, a discovery order was entered, setting a discovery cutoff for October 15 and warning that the court would impose sanctions for any discovery dispute.  Two extensions of that deadline were granted, and by court order on November 13, Draper was to appear for a deposition on December 6, and produce all documents requested by defendant by December 2.  On November 27, BFOW tried to fire its lawyer.  It delivered some documents, but apparently not all of them, three days late, and Draper failed to appear for the deposition on De-cember 6.  The bankruptcy judge dismissed the case.
           The USCA noted that, as the trial court did not expressly consider the five factor test for dismissal, it had to review the record "independently" to make sure the trial court did not abuse its discretion.  The five factors are: (1) the public's interest in expeditious resolution of litigation;  (2) the court's need to manage its docket;  (3) the risk of prejudice to the defendants;  (4) the public policy favoring disposition of cases on their merits;  and (5) the availability of less drastic alternatives.  The USCA noted that it could affirm if four factors weighed in favor of dismissal, or three weighed strongly in favor of dismissal. What is most critical for casedispositive sanctions, regarding risk of prejudice and of less drastic sanctions, is whether the discovery violations "threaten to interfere with the rightful decision of the case."  Circuit cases suggest that discovery violations can threaten to interfere with a rightful decision in two ways.  First, a party's discovery violations may present a pattern of deception that makes it impossible for the district court to conduct a trial with any reasonable assurance that the truth would be available.  Even a single violation to a discovery order can be justification