United States v. Scullark, No. 12-3178 (7th Cir. 2014)
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Based on a real estate financing fraud scheme during the housing bubble, Brunt, Farano, Murphy, and Scullark were charged with mail and wire fraud; Brunt and Scullark with money laundering and Farano with theft of federal government funds, 18 U.S.C. 641, 1341, 1343, 1957(a). The scheme involved buying HUD-owned properties at a discount by using a “front” nonprofit corporation that received kickbacks. The properties were resold, with false promises that the defendants would rehabilitate the properties and find tenants. The defendants obtained the mortgages for buyers by submitting false information regarding the conditions of the properties and buyers’ assets, income, employment, and intentions to occupy the properties. A loan officer and appraisers were bribed. The judge refused to severe the trials. A jury convicted the defendants, and the judge sentenced Brunt to 151 months in prison, Farano to 108, Murphy to 72, and Scullark to 78. He ordered them all to pay restitution. The Seventh Circuit affirmed except regarding an order of restitution to refinancing lenders, which it vacated for consideration of whether the refinancing banks that are seeking restitution had based their refinancing decisions on fraudulent representations by the defendants. The court expressed concern about how long the case has taken.
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In the United States Court of Appeals For the Seventh Circuit ____________________ Nos. 12 3007, 3178, 3180, 3276 UNITED STATES OF AMERICA, Plaintiff Appellee, v. JOHN FARANO, et al., Defendants Appellants. ____________________ Appeals from the United States District Court for the Northern District of Illinois, Eastern Division. No. 07 CR 853 Ronald A. Guzmán, Judge. ____________________ ARGUED FEBRUARY 19, 2014 DECIDED APRIL 18, 2014 ____________________ Before POSNER, RIPPLE, and KANNE, Circuit Judges. POSNER, Circuit Judge. Robert Brunt, John Farano, Charles Murphy, and Tracey Scullark were charged with mail and wire fraud and Brunt and Scullark also with money launder ing and Farano also with theft of federal government funds. 18 U.S.C. §§ 641, 1341, 1343, 1957(a). All were crimes relating to an elaborate real estate financing fraud scheme in Chicago during the housing bubble of the early 2000s. A jury con victed the defendants, and the judge sentenced Brunt to 151 2 Nos. 12 3007, 3178, 3180, 3276 months in prison, Farano to 108, Murphy to 72, and Scullark to 78. He also ordered them all to pay restitution. We need to describe the criminal scheme. The U.S. De partment of Housing and Urban Development sells proper ties that it owns at a 10 to 30 percent discount if the buyer of a property is a certified nonprofit organization that agrees to resell the property to a low or moderate income person or family who intends to live there. The defendants obtained the properties from HUD by using a HUD certified non profit named Westwood Community Development, which they corrupted (although surprisingly neither Westwood nor its principals appear to have been prosecuted), to buy the properties for them. Westwood in effect fronted for the defendants, who paid kickbacks, sometimes labeled dona tions, to Westwood personnel who assisted in the scheme. Having obtained the properties from Westwood, the defen dants resold them not to persons of low or moderate income but instead to persons who wanted to invest in real estate rather than use the real estate they bought as a place to re side. To recruit these investors the defendants misrepre sented the value of the properties by promising to rehabili tate them so that they would be worth even more, and to find tenants for the properties. Some of the properties the defendants did not rehabilitate at all; the others they gave cosmetic rehabs of little value. The investor buyers had little or no money, and so needed large mortgages to finance their purchases of the properties. The defendants obtained the mortgages for them by submitting false information to banks regarding the con ditions of the properties and the investors assets, income, employment, and intentions to occupy the properties. A loan Nos. 12 3007, 3178, 3180, 3276 3 officer at a mortgage brokerage company was bribed to as sist in the scheme, and appraisers were bribed to submit fraudulent appraisals of the properties. The defendants played different roles in administering the scheme. Brunt and Scullark recruited the investors (that is, the buyers of the properties) and the appraisers, and Brunt arranged for the cosmetic rehabs, while Farano and Murphy, who were lawyers, financed the transactions the purchase (from HUD via Westwood) and sale of properties and the bank financing. Farano did the paperwork for many of the transactions. Many of the investors were ruined when the housing bubble collapsed and the banks lost money as a result of defaults because the properties were now worth less than the unpaid balances of the mortgages on them. All the defendants except Brunt asked to be tried sepa rately from the other defendants. The judge refused, justifia bly, because severance would have caused massive duplica tion of effort. With severance the entire scheme in all its complexity would have had to be proved anew in each case by the government s witnesses, who included investors, ap praisers, and HUD officers. The superior efficiency of trying defendants jointly in a complex criminal case (provided it isn t so complex that the jury can t understand it if there are multiple defendants) is justification for making the only cri terion for severance prejudice to one or more of the defen dants. Fed. R. Crim. P. 14(a). The only claim of prejudice is that the judge s refusal to sever allowed the admission of very damaging inadmissible evidence against particular defendants in the form of testi mony by their codefendants, notably Brunt. But their real complaint, as should be apparent from the word inadmissi 4 Nos. 12 3007, 3178, 3180, 3276 ble in the preceding sentence, has nothing to do with the refusal to sever; it concerns, rather, the judge s rulings on the defendants motions under Rules 403 and 404(b) to exclude specific testimony. As the Supreme Court explained in Zafiro v. United States, 506 U.S. 534, 540 (1993), a defendant nor mally would not be entitled to exclude the testimony of a former codefendant if the district court did sever their trials, and we see no reason why relevant and competent testi mony would be prejudicial merely because the witness is also a codefendant. If the judge should have granted some of the motions to exclude that he denied, and the defendants have challenged those denials and we decide that his rulings were erroneous and the errors not harmless, the defendants have grounds for reversal of their convictions. Admissibility and severance are separate concerns. In the decision that the Supreme Court affirmed in Zafiro, we had said that persons charged in connection with the same crime should be tried separately only if there is a seri ous risk that a joint trial would prevent the jury from mak ing a reliable judgment about the guilt or innocence of one or more of the defendants, as in a complex case with many defendants some of whom might be only peripherally in volved in the alleged wrongdoing. The danger is that the bit players may not be able to differentiate themselves in the ju rors minds from the stars. 945 F.2d 881, 885 (7th Cir. 1991) (emphases in original). This is not such a case. None of the defendants was a bit player in the conspiracy. In fact they were the principals; the bit players were the investors who misrepresented their ability to repay the mortgage loans that they needed in order to be able to buy properties from the defendants, the bribed loan officer, and the crooked apprais ers. Nos. 12 3007, 3178, 3180, 3276 5 Nor was the trial so long or complex that the jury s ver dict cannot be thought reliable. One can imagine a trial ex pected to be so long that no employed person could take the time off from his job to serve on the jury, with the result that the jury might be unrepresentative. Professionals often cannot afford (or their employers will not abide) jury service on protracted cases. Consequently, courts frequently excuse them upon a showing of undue hardship or extreme incon venience. The hardship results from the projected loss of pay over a lengthier trial. Collectively, these two practices com bine to seriously suppress the percentage of persons with higher education who serve on juries in complex cases. Franklin Strier, The Educated Jury: A Proposal for Complex Litigation, 47 DePaul L. Rev. 49, 72 73 (1997); see also De velopment in the Law III. Jury Selection and Composi tion, 110 Harv. L. Rev. 1443, 1454 (1997); Gordon Van Kessel, Adversary Excesses in the American Criminal Trial, 67 Notre Dame L. Rev. 403, 478 79 (1992). The trial in this case was long nine weeks but there is no indication that the jury was incompetent, by virtue of professional exemptions or hardship exclusions, to render a sound decision. The fact that the jury spent seven days deliberating and acquitted some of the defendants of some of the counts (and a fifth de fendant of the only count against him) suggests that the jury was attentive and conscientious. A second situation that we said in our Zafiro opinion may require severance is where exculpatory evidence essential to a defendant s case will be unavailable or highly prejudi cial evidence unavoidable if he is tried with another de fendant. ¦ There are cases in which a person would refuse to testify for a codefendant in a joint trial for fear of incrimi nating himself, yet if tried separately and convicted might 6 Nos. 12 3007, 3178, 3180, 3276 thereafter be willing to testify and might give testimony ex culpating the other defendant. 945 F.2d at 886. That s really two situations, one in which the defendants would oppose severance and the other in which the government would oppose it. Neither one is our case. Our case illustrates a third situation discussed in Zafiro, that of mutual antagonism, finger pointing, and other manifestations or characterizations of the effort of one de fendant to shift the blame from himself to a codefendant ; but those things, we said, neither control nor illuminate the question of severance. Id. Consider Farano s complaints about Brunt s testimony that Farano had used a racial slur against him and Scullark, both of whom are black; Farano is white. But his lawyer didn t object to Brunt s testimony about the racial slur. He did object to Brunt s testimony that Farano had used his law license for theft; but the judge sus tained the objection. Other objections by Farano to Brunt s testimony were overruled but instead of alleging judicial error in ruling on objections, Farano insists mistakenly that his case should have been severed from Brunt s. Defendant Murphy objects to the introduction of evi dence that he claims would not have been introduced had Brunt not been on trial with him. The evidence related to Brunt s rehab of a building on West 72nd Street in Chicago, in connection with which he obtained a loan of $155,000 from a title company and used most of it to buy a Rolls Royce. The evidence of his laundering the fraud induced re ceipt of the $155,000 by using it to buy the Rolls was used by the government to bolster the money laundering charge against Brunt; and Murphy was one of Brunt s partners in the West 72nd Street project. But he was not accused of par Nos. 12 3007, 3178, 3180, 3276 7 ticipating in Brunt s fraud or money laundering with respect to the project. The judge ruled sensibly that the fact that Murphy knew how to establish a proper rehabilitation loan [for a construction project] in which the funds were paid out incrementally only after submission of proof that the work had actually been done is also evidence that the other trans actions in which he and Brunt collaborated to obtain large amounts of money from unsuspecting banks before any reha bilitation work was done were deliberately fraudulent (emphasis in original) contrary to Murphy s claim to be unsophisticated about real estate transactions. The procure ment of the rehabilitation loan showed that Murphy knew what a lawful rehabilitation loan was, implying in turn a so phisticated knowledge of real estate transactions. This evi dence would have been admissible against Murphy even if Brunt hadn t been on trial with him. Brunt had been represented at one time by a lawyer named McDermott, and testified that Murphy had attended a meeting with him and McDermott during which it became clear that McDermott, who shared an office with Murphy, was Murphy s puppet. This testimony, Murphy argues, forced him to call McDermott as a witness. So McDermott testified and obligingly denied having been Murphy s puppet. So far, so good, for Murphy. But on cross examination McDermott acknowledged Murphy s presence in several of his meetings with Brunt, though he insisted that his (that is, McDermott s) advice to Brunt had been based on his independent professional judgment. There is no ground for thinking that joinder with Brunt, by forcing Murphy to call McDermott as a witness, hurt Murphy s defense; for McDermott s testimony as a whole was favorable to Mur phy. 8 Nos. 12 3007, 3178, 3180, 3276 There are other objections to the district judge s rulings at the trial, but they fall with the objections that we ve already discussed. We add that the evidence of the defendants guilt was overwhelming, and if there were any erroneous rulings (which we don t think there were) they were therefore harm less. We turn to the sentences. Farano and Murphy each received a four level enhance ment of their guidelines sentencing range on the ground that each was an organizer or leader of criminal activity in which there were at least five participants or that was otherwise extensive. U.S.S.G. § 3B1.1(a). Both conditions were satis fied. Brunt and Scullark, however, did not receive the en hancement. The omission is puzzling, but may reflect the ambiguity of Application Note 4 to the guideline. It states that in distinguishing a leadership and organizational role from one of mere management or supervision ¦ the court should consider factors that include [but are not necessar ily exhausted by] the exercise of decision making authority, the nature of participation in the commission of the offense, the recruitment of accomplices, the claimed right to a larger share of the fruits of the crime, the degree of participation in planning or organizing the offense, the nature and scope of the illegal activity, and the degree of control and authority exercised over others. Years ago we observed that this multifactor, open ended, unweighted so called test contributes to the murk sur rounding review of § 3B1.1 adjustments. United States v. Mustread, 42 F.3d 1097, 1104 n. 3 (7th Cir. 1994). We elabo rated our concerns in United States v. Rosales, 716 F.3d 996, 997 (7th Cir. 2013), complaining that as with most multifac Nos. 12 3007, 3178, 3180, 3276 9 tor tests, the application note s seven factor test is none too clear. No weighting of the factors is indicated (so really the multifactor test should be called a list of factors ). And a majority of the factors are vague or redundant. That is true of the nature of [the defendant s] participation in the com mission of the offense, the degree of participation in plan ning or organizing the offense, the nature and scope of the illegal activity, and even the degree of control and author ity exercised over others. For what is the difference between control and authority ? And for that matter is there a dif ference between a leader and an organizer ? The phrase a leadership and organizational role appears to fuse them. We noted that the apparent equation of organizer to leader is another oddity. The organizer of an entire enter prise would usually be thought the person who had started it; he might not be running it; he might not be a leader. Id. at 998. We don t understand the singling out of Farano and Murphy as the sole leaders or organizers of the fraudulent scheme. The gang had officers and enlisted men. The officers were our four defendants. The enlisted men were the buyers who misrepresented their financial situation, the bribed ap praisers, and the bribed loan officer. The four defendants were all leaders, though they led in different domains. The lawyers, Farano and Murphy, played the decisive role in the financial negotiations with Westwood and the banks. Brunt and Scullark were responsible for recruiting investors (the buyers of the properties) and appraisers. Brunt also dealt with Westwood and managed the cosmetic rehabs, which doubtless meant that he was in charge of workers who didn t know they were assisting in a fraud. But in determin ing how extensive a criminal enterprise is for purposes of the 10 Nos. 12 3007, 3178, 3180, 3276 leader/organizer enhancement, unknowing ¦ outsiders assisting the enterprise count. U.S.S.G. § 3B1.1, Application Note 3. Scullark might have been thought a manager or supervi sor, a type of leader who receives only a three level en hancement. U.S.S.G. § 3B1.1(b); see also United States v. Fi gueroa, 682 F.3d 694, 695 97 (7th Cir. 2012). The government sought a four level enhancement for Brunt, but no enhance ment for Scullark, though her presentence report had rec ommended the three level enhancement for her. The judge imposed no section 3B1.1 enhancement on either one. This is especially puzzling with regard to Brunt, who according to his presentence report had organized and led the nominee buyers activities, the submission of loan applications, and gave specific directives to Defendants Scullark, D Aifallah, and Jackson. In addition, Defendant Brunt was primarily re sponsible for identifying properties to acquire. ¦ Although each defendant participated in the scheme of their own voli tion, it was Defendant Brunt that brought the parties to gether. Without Defendant Brunt, neither Defendant Farano or Defendant Murphy had knowledge of the specific proper ties or had relationships with an appraiser and loan officer who would readily participate in the scheme; not to mention Defendant Brunt s relationship with the individuals who served as nominee buyers, who appear to have been easily duped by the defendants. But the government has not ap pealed the denial of the enhancement. The length of the defendants prison sentences was influ enced by the amount of loss that the district judge found had been caused by the fraudulent scheme. See U.S.S.G. § 2B1.1. There were losses of two types: losses to the banks that made Nos. 12 3007, 3178, 3180, 3276 11 mortgage loans to the investors because of misrepresenta tions of the investors financial situation, and losses to HUD equal to the 10 to 30 percent discount at which it sold prop erties to Westwood that were never used to provide low or moderate income housing. All four defendants object that the losses to the banks of ten occurred after the properties that secured the bank loans had been refinanced. (In the case of five such properties, the losses attributed to the defendants were $768,450.) Suppose one of the investors had bought a property for $80,000 nominally from Westwood but actually from the defendants, obtained a $100,000 mortgage on the basis of a phony ap praisal, and later refinanced the property by obtaining a $110,000 mortgage from another bank, replacing the original mortgage. And suppose that later still, when the bubble burst, the mortgagor defaulted and the mortgagee fore closed, but at the foreclosure sale the property brought only $60,000. The government in such a case would assess the loss as $40,000 ($100,000 original loan amount, minus $60,000 foreclosure sale proceeds), but would ignore the further $10,000 loss to the refinancing bank. The $40,000 loss would also have been incurred by the refinancing banks rather than by the banks with which the defendants had dealt; and the defendants argue that refinancing breaks the causal link be tween the original fraud and the loss. Not true. United States v. Morris, 80 F.3d 1151, 1171 72 (7th Cir. 1996). Actual loss is defined as reasonably foresee able pecuniary harm that resulted from the offense, and reasonably foreseeable pecuniary harm as pecuniary harm that the defendant knew or, under the circumstances, reasonably should have known, was a potential result of the 12 Nos. 12 3007, 3178, 3180, 3276 offense. U.S.S.G. § 2B1.1, Application Notes 3(A)(i), (iv). The defendants knew that the properties were overpriced and that the buyers (the investors ) were underfinanced. They could therefore foresee the likelihood of default and consequent loss. The additional loss the $10,000 in our example for which the defendants were not punished had resulted from the decision to refinance, a decision that may well have been influenced by factors, such as declining interest rates, that the defendants couldn t be assumed to have foreseen; and so for that incremental loss they would not be held re sponsible. But there could be no doubt that they were re sponsible for the $40,000 loss, which would have been a foreseeable loss to the first lender had the borrower not refi nanced. The judge assessed the loss to HUD as the amount of the discounts that HUD gave Westwood on the sales of proper ties intended, HUD thought as it was the motivation for the discount for low and moderate income housing, yet never used for that purpose because the defendants sold the discounted properties to investors who had no interest in providing low or moderate income housing. The defen dants argue that HUD lost nothing because it would have sold the properties at a discount to someone else. The argu ment is unsound. HUD was led to believe that it was buying something of value to it for the amount of the discounts, namely low and moderate income housing; and the defen dants stole the money, thus depriving HUD of a thing of value that had been promised. It s as if you order a product, pay for it in advance, but never receive it, because the prod Nos. 12 3007, 3178, 3180, 3276 13 uct is stolen en route to you. The money you pay to buy a product you never receive is a loss. Of course the defendants could not have foreseen the precise loss to the lenders (as distinct from the loss to HUD), because, while they must have known that the buyers of the properties were very likely to default, having overpaid for the properties with fraudulently obtained mortgage loans, they could not know what the properties would bring at a foreclosure sale, given uncertainty about future real estate prices. Far more financially sophisticated people than the defendants, employed at companies like Bear Stearns, Leh man Brothers, and American International Group, also failed to predict the housing crash. But remember that the loss guideline requires only a pecuniary harm that the defen dant knew or, under the circumstances, reasonably should have known, was a potential result of the offense. U.S.S.G. § 2B1.1, Application Note 3(a)(iv). The key word is poten tial, which means could happen. The losses to the lenders were a potential result of the defendants fraud, as the de fendants well knew. The last issue involves the judge s calculation of the amount of restitution that the defendants were ordered to pay. Remember that in calculating loss for purposes of de termining the defendants prison sentences, the judge had ignored the loss to banks that refinanced properties sold by the defendants, as distinct from the loss that the banks that had originally financed the sales would have incurred had those banks mortgages not been refinanced. Yet the lesser loss, the loss the judge used in calculating the defendants prison sentences, had actually been borne by the refinancing banks, as we know; for the original lenders had been repaid 14 Nos. 12 3007, 3178, 3180, 3276 when their loans were refinanced. And so the judge also in cluded as victims entitled to restitution the refinancing banks, but deemed them entitled to restitution only for the initial loss, the loss the first tier of banks would have borne had their loans not been repaid. In our example of a prop erty on which the first bank had lent $100,000 and the refi nancing bank $110,000 and the property went into default and brought only $60,000 at the foreclosure sale, the loss in dependent of the refinancing was $40,000, and that would be the amount of restitution ordered. In arguing for restitution to the refinancing banks, the government confounds loss amount, which requires only pecuniary harm that the defendant knew or, under the cir cumstances, reasonably should have known, was a potential result of the offense, U.S.S.G. § 2B1.1, Application Note 3(A)(iv), with restitution, authorized only for a victim, de fined as a person directly and proximately harmed as a re sult of the defendant s crime. 18 U.S.C. § 3663A(a)(2); see United States v. Shepard, 269 F.3d 884, 886 87 (7th Cir. 2001); cf. United States v. Donaby, 349 F.3d 1046, 1053 (7th Cir. 2003); United States v. Marino, 654 F.3d 310, 319 (2d Cir. 2011). The refinancing banks may have been caught up in the housing bubble and willing therefore to make liars loans, that is, loans made without requiring proof of ability to repay. The $110,000 loan in our example may have been such a loan. But banks making such loans would be coauthors of their loss, since had they required proof of financial soundness from the borrowers they would not have refinanced the properties in question. United States v. Yeung, 672 F.3d 594, 603 (9th Cir. 2012), held that banks that had bought fraudulently obtained Nos. 12 3007, 3178, 3180, 3276 15 mortgages were victims of the fraud entitled to restitution because as part of the defendant s fraud the borrower for each loan had misrepresented his financial ability to repay the loan and the banks had relied on that fraudulent infor mation, which had been concocted by Yeung. There is as yet no evidence in this case of such reliance by the refinancing banks, and in its absence those banks cannot be counted as victims for restitution purposes, though their loss is loss under section 2B1.1 and thus usable in determining the de fendants prison sentences. A second question concerning restitution concerns the method of calculating it for victims entitled to restitution. The defendants argue that the method used was wrong, cit ing United States v. Robers, 698 F.3d 937, 939 (7th Cir. 2012), cert. granted, 134 S. Ct. 470 (2013). The victims in that case were a mortgage lender and a mortgage guarantor (for sim plicity we ll call them both mortgagees ). They correspond to the defrauded banks in our case. As a result of Robers s fraud, the properties were worth less than the balance of the mortgages and so the mortgagees could not recover the bal ance when the mortgagors defaulted. The restitution statute entitles a victim to the value of the [victim s] property on the date of sentencing, less the value (as of the date the property is returned) of any part of the property that is re turned. 18 U.S.C. §§ 3663A(b)(1)(B)(i)(II), (ii). The question was whether the date the property is returned should be the date of the foreclosure or, later, when the property is sold (presumably by the mortgagee, on the assumption that the mortgagee had acquired title to the property at the fore closure sale). We held that it was the latter. Four circuits agree with this approach, United States v. Statman, 604 F.3d 529, 538 (8th Cir. 2010); United States v. James, 564 F.3d 1237, 16 Nos. 12 3007, 3178, 3180, 3276 1244 47, (10th Cir. 2009); United States v. Innarelli, 524 F.3d 286, 294 (1st Cir. 2008); United States v. Himler, 355 F.3d 735, 745 (3d Cir. 2004), and maybe a fifth. See United States v. Boc cagna, 450 F.3d 107, 115 20 (2d Cir. 2006). Two disagree. United States v. Holley, 23 F.3d 902, 914 15 (5th Cir. 1994); United States v. Smith, 944 F.2d 618, 625 26 (9th Cir. 1991). The Supreme Court will decide; until it does, we ll stick with our Robers decision. Since the refinancing banks probably were not victims and therefore were not entitled to restitution, the choice of the transaction date to use to measure the restitution that would have been due them had they been victims is irrele vant. But not all the banks awarded restitution were refi nancers some were owners of the original mortgages, and thus entitled to restitution. Robers would make the amount of that restitution the loss the banks suffered when they sold the properties that they acquired after they foreclosed their mortgages, just as the district court calculated. That completes our analysis of the colorable issues pre sented by the defendants. We affirm the judgments against them except for the order of restitution to the refinancing lenders, which we vacate. The district judge will have to consider evidence on whether the refinancing banks that are seeking restitution had based their refinancing decision in whole or part on fraudulent representations by the defen dants, and, depending on the outcome of that consideration, the judge may have to recalculate the restitution that the de fendants owe. And of course should the Supreme Court re verse or modify our decision in the Robers case, the judge will be guided by the Court s opinion rather than by this opinion in calculating the amount of restitution. Nos. 12 3007, 3178, 3180, 3276 17 We would be remiss if we ended this opinion without expressing our concern with the length of time that this case has taken to reach us six and a half years since indictment. The initial delays were attributable largely to the complexity of the government s investigation of the defendants, which continued after the indictment was returned and resulted in a superseding indictment that added Murphy as a defen dant. Trial was scheduled to begin on January 31, 2011 already more than three years since the initial indictment but on the eve of trial Brunt switched lawyers, and as a re sult the trial was postponed nine months; it shouldn t have been postponed that long for that reason. The trial took nine weeks, and after that the defendants were allowed two months for briefing their motions for acquittal, which was followed seven months later by sentencing. The defendants filed their notices of appeal in July 2012, other than Murphy, who filed in October of that year. The defendants lawyers than withdrew, and new counsel were appointed. The ap peal was not argued until 19 months after the original no tices of appeal. The delay troubles us, especially as there must now be further proceedings in the district court. AFFIRMED IN PART, REVERSED IN PART, AND REMANDED.
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