368 F.3d 793
ALLSTATE INSURANCE COMPANY, Plaintiff-Appellee, Cross-Appellant,v.Donna E. KECA and Trisha Bontempo, Individually and as Guardian of Miranda Bontempo, Defendants-Appellants, Cross-Appellees.
No. 03-3702.
No. 03-3835.
United States Court of Appeals, Seventh Circuit.
Argued April 1, 2004.
Decided May 20, 2004.

Vicki L. Arrowood (argued), Banks & Associates, Milwaukee, WI, for Plaintiff-Appellee.
James J. Gende, II (argued), Waukesha, WI, for Defendants-Appellants.
Before FLAUM, Chief Judge, and COFFEY and EVANS, Circuit Judges.
FLAUM, Chief Judge.

1
This appeal presents the question whether an underinsured motorist ("UIM") reducing clause contained in the insurance policies held by the defendants is enforceable under Wisconsin law, and if so, how the clause applies. A severe automobile collision involving an underinsured motorist and Donna E. Keca ("Keca"), Trisha Bontempo ("Bontempo") and Miranda Bontempo, a minor, led to this action. In dispute is the amount of UIM benefits Keca and Bontempo (collectively "defendants") are owed by their insurer, Allstate Insurance Company ("Allstate"). Before the district court, Allstate sought a declaratory judgment that it owes no more than the $250,000 in UIM benefits that it has already tendered to Keca and Bontempo under the policies issued to them. The defendants appeal the district court's ruling allowing an offset from Allstate's coverage for the payment received by the defendants from the tortfeasor's insurance company. Allstate cross-appeals the district court's grant of summary judgment to the defendants on the basis that the benefits Allstate paid to Bontempo may not be offset from other coverage owed to Keca by Allstate. For the reasons stated in this opinion, we affirm the judgment of the district court.

I. Background

2
On November 21, 2001, Trisha Bontempo was driving her car in which her mother, Donna Keca, and four-year-old daughter, Miranda Bontempo, were passengers. The Bontempo vehicle was struck by a car driven by an intoxicated and underinsured motorist, Tina Cogley. The Bontempos and Keca sustained serious injuries as a result of the collision. It is undisputed that collectively their medical bills are in excess of $449,000. As too often is the case with reckless drivers, Cogley did not carry enough insurance to cover the defendants' injuries. The defendants received only $50,000 under Cogley's bodily injury liability.

3
At the time of the accident, both Keca and Bontempo were holders of Allstate automobile insurance policies (the "Keca policy" and the "Bontempo policy" or generally the "Allstate policy") which included UIM coverage. The Keca policy has applicable UIM limits of $300,000 for each accident and the Bontempo policy has applicable UIM limits of $100,000 for each accident. Keca resides at the same address as the Bontempos, making them "resident relatives" covered under each other's insurance policies. It is undisputed that for the accident at issue the Bontempo UIM coverage was primary and the Keca UIM coverage was excess. Allstate has tendered to the defendants $50,000 in UIM benefits under the Bontempo policy and $200,000 in UIM benefits under the Keca policy.

4
Except as to coverage amounts, the Keca and Bontempo policies are virtually identical. The policies are forty-seven pages in length, including the main policy jacket and the added endorsements. The "Auto Policy Declarations" ("declarations") page, containing a chart that reflects the amounts of coverage, types of coverage, premiums, and deductibles, appears at the beginning of each policy. The declarations page sets forth the amount of UIM limits and lists the documents that comprise the policy, including Amendatory Endorsement form AU 1440-3 ("AU 1440-3"). AU 1440-3 is a standalone document located at the end of each policy that contains changes, amendments, and additions to the provisions contained within the main policy jacket. The heading at the top of page 1 of AU 1440-3 states, "This Endorsement Changes Your Policy — Keep It With Your Policy". AU 1440-3 contains — within five pages — all the UIM-related provisions. The following basic UIM coverage provisions are set forth on page 12 of AU 1440-3:

Part VII
Underinsured Motorists Coverage
Coverage SU

5
If your policy declarations indicates that you have this coverage, we will pay those damages that an insured person is legally entitled to recover from the owner or operator of an underinsured auto because of bodily injury sustained by an insured person.

6
The UIM "Limits of Liability" provision, set forth three pages later, states that the coverage limit shown on the policy declarations for "`each accident' is the maximum we will pay for damages arising out of bodily injury to two or more persons in any one motor vehicle accident." The UIM reducing clause, which appears immediately below the Limits of Liability provision, states in part as follows:

7
The limit of Underinsured Motorists Coverage shall be reduced by:

8
1. all amounts paid by or on behalf of any person or organization that may be legally responsible for the bodily injury for which the payment is made, including, but not limited to, any amounts paid under the bodily injury liability coverage of this or any other insurance policy....

9
Based on these provisions, Allstate calculates the amount it owes to the defendants as follows: the $50,000 received from the tortfeasor, Cogley, was offset against the UIM limits of both policies, leaving $50,000 in UIM benefits under the Bontempo policy, which Allstate tendered, and $250,000 in UIM benefits under the Keca policy. The $50,000 in UIM benefits Allstate tendered under the Bontempo policy was offset against the $250,000 UIM coverage under the Keca policy, leaving $200,000 in UIM benefits under that policy, which Allstate also tendered. It is Allstate's position that it has fulfilled its UIM coverage obligations under the plain language of both insurance policies. The defendants contend that the reduction clause is unenforceable and they are entitled to $100,000 in UIM benefits under the Bontempo policy and $300,000 in UIM benefits under the Keca policy, for a combined total of $400,000 in Allstate UIM benefits.

10
Allstate commenced this action seeking a declaratory judgment that the UIM reducing clauses in the Keca and Bontempo policies are enforceable, and therefore, no benefits beyond the $250,000 already tendered is owed to the defendants by Allstate. The district court had jurisdiction over the action, pursuant to 28 U.S.C. § 1332(a), because there was complete diversity of citizenship between the parties, and the amount in controversy was in excess of $75,000. Both parties filed motions for summary judgment. In its order denying summary judgment to Allstate and granting judgment in part to the defendants, the district court rejected Allstate's bid to reduce Keca's UIM benefits by the $50,000 paid under the Bontempo policy. However, the district court also found that Allstate's reducing clause was not ambiguous in the context of the policy as a whole and therefore approved the $50,000 reduction Allstate made to each policy as a result of the payment tendered by Cogley's liability carrier. Allstate now appeals the former decision, and the defendants appeal the latter.

II. Discussion

11
A federal court sitting in diversity has the obligation to apply the law of the state as it believes the highest court of the state would apply it if presented with the issue. See Lexington Ins. Co. v. Rugg & Knopp, Inc., 165 F.3d 1087, 1090 (7th Cir.1999). In this case, interpretation of Allstate's insurance policy is governed by the substantive law of Wisconsin, the forum state. In Wisconsin, the interpretation of an insurance contract and the conclusion as to whether coverage exists are questions of law. See Ledman v. State Farm Mut. Auto. Ins. Co., 230 Wis.2d 56, 601 N.W.2d 312, 314 (Ct.App.1999). We review grants of summary judgment de novo to determine whether any genuine issue of material fact exists and whether the moving party is entitled to judgment as a matter of law. See Williams v. Anderson, 959 F.2d 1411, 1413 (7th Cir.1992).

A. Enforceability of Reducing Clause

12
Prior to 1995, a number of Wisconsin courts found reducing clauses void because they rendered purported UIM coverage illusory. See, e.g., Kuhn v. Allstate Ins. Co., 181 Wis.2d 453, 510 N.W.2d 826, 827 (Ct.App.1993). Courts deemed UIM coverage subject to a reducing clause illusory because the full coverage amount would never actually be paid by the insurer (as the underinsured motorist would always be contributing some portion of the payment). See, e.g., id. at 830. In 1995, the Wisconsin Legislature passed a statute, Wis. Stat. § 632.32(5)(i), specifically allowing for UIM reducing clauses that operate to decrease the amount of the insured's total damages subject to UIM coverage from the insurer by any amounts received from the underinsured tortfeasor. Since the statute's passage, considerable litigation relating to the validity and enforceability of reducing clauses has continued to occur in Wisconsin courts. The Wisconsin Supreme Court itself described UIM coverage as a "`legal iceberg,' a seemingly straightforward area of the law, which in fact can prove to be nettlesome to analyze." Badger Mut. Ins. Co. v. Schmitz, 255 Wis.2d 61, 647 N.W.2d 223, 227 (2002) (quoting Dowhower v. W. Bend Mut. Ins. Co., 236 Wis.2d 113, 613 N.W.2d 557, 562 (2000)).

13
In Dowhower, the Wisconsin Supreme Court concluded that Wis. Stat. § 632.32(5)(i) does not violate substantive due process under the state or federal constitutions. Id. at 565. It also held that the type of reducing clauses authorized by the statute are neither ambiguous nor against public policy. Id. at 562. Two years later, in Schmitz, the Wisconsin Supreme Court explained that although a reducing clause may itself be clear, courts must still consider whether it is unambiguous in the context of the entire policy. 647 N.W.2d at 233. In that case, the court invalidated an otherwise unambiguous reducing clause that did not, when viewed in the context of the entire policy, clearly set forth that the insured was purchasing a fixed level of UIM recovery arrived at by combining payments from all sources. Id. at 238. In reaching this decision, the court stated that the reducing clause "must be crystal clear in the context of the whole policy." Id. at 233.

14
Focusing on the "crystal clarity" language, a number of appellate courts post-Schmitz invalidated reducing clauses after finding that they were contextually ambiguous. See Gohde v. MSI Ins. Co., 261 Wis.2d 710, 661 N.W.2d 470, 471 (Ct.App.2003); Dowhower v. Marquez, 260 Wis.2d 192, 659 N.W.2d 57, 59 (Ct.App.2003); Hanson v. Prudential Prop. & Cas. Ins. Co., 258 Wis.2d 709, 653 N.W.2d 915, 916 (Ct.App.2002). However, this trend was short-lived — the Wisconsin Supreme Court put the breaks on expansive interpretations of the ambiguity standard in the case Folkman v. Quamme, 264 Wis.2d 617, 665 N.W.2d 857, 866-70 (2003). Folkman itself did not involve a UIM reducing clause, but the opinion provided an extensive discussion of such clauses. The Folkman court observed that the "crystal clear" language it used in Schmitz had produced the "unintended effect" of "alter[ing] the analytical focus" in a series of court of appeals decisions. Id. at 868-69. The court went on to emphasize that perfection in draftsmanship was not the standard by which policies should be measured. Id. at 869. Rather, the court explained that "[t]o prevent contextual ambiguity, a policy should avoid inconsistent provisions, provisions that build up false expectations, and provisions that produce reasonable alternative meanings." Id. The court admonished that "[f]erreting through a policy to dig up ambiguity should not be judicially rewarded because this sort of ambiguity is insufficient. Rather, inconsistencies in the context of a policy must be material to the issue in dispute and be of such a nature that a reasonable insured would find an alternative meaning." Id.

15
After Folkman was released, the Wisconsin Supreme Court summarily vacated and remanded a series of appellate court decisions for further consideration in light of Folkman. See Gohde v. MSI Ins. Co., 265 Wis.2d 412, 668 N.W.2d 556 (2003); Dowhower v. Marquez, 265 Wis.2d 410, 668 N.W.2d 735 (2003); Van Erden v. Sobczak, 265 Wis.2d 414, 668 N.W.2d 735 (2003). Relying on the directives from Folkman, courts reviewing two of these three vacated cases changed their prior positions and found the reducing clauses at issue to be contextually unambiguous. See Gohde v. MSI Ins. Co., No. 01-2121, 2004 WL 555441, 2004 Wisc.App. LEXIS 252, at *11 (Wis.Ct.App. Mar. 23, 2004) (policy not susceptible to more than one reasonable interpretation and language not contextually ambiguous); Van Erden v. Sobczak, 677 N.W.2d 718 (Wis.Ct.App. 2004) (UIM coverge reducing clause clear and unambiguous). But see Dowhower v. Marquez, 268 Wis.2d 823, 674 N.W.2d 906, 908 (Ct.App.2003) (UIM provisions contextually ambiguous). An additional post-Folkman appellate court decision, Commercial Union Midwest Ins. Co. v. Vorbeck, 674 N.W.2d 665, 676 (Wis.Ct.App.2003), also determined that the UIM reducing clause at issue was unambiguous.

16
Accordingly, in Folkman, the Wisconsin Supreme Court clarified that "crystal clear" is not the standard for reviewing UIM reducing clauses in insurance contracts, and following this clarification, the appellate courts have been more reluctant to invalidate such clauses. While Schmitz may have caused a momentary rush at the intermediate level towards finding contextual ambiguity, Folkman has clearly turned back this tide. The defendants submit that the law on this issue is in a state of flux in Wisconsin and request that we certify the issue of whether Allstate's UIM reducing clause is enforceable to the Wisconsin Supreme Court. However, we conclude that the rules of decision in this case have been clearly set out by the Wisconsin Supreme Court in Schmitz and Folkman and nothing would be gained through certification.

17
Against this backdrop, we now turn to the Allstate policy. The declarations page in the policy specifically lists "Underinsured Motorists Insurance for Bodily Injury" and the monetary limits for such coverage. The defendants argue that ambiguity is created because there is no indication on the declarations page that the UIM maximum coverage may be subject to further limitations due to the reducing clause appearing later in the policy. However, Wisconsin courts have expressly, and wisely, rejected this argument. See, e.g., Sukala v. Heritage Mut. Ins. Co., 240 Wis.2d 65, 622 N.W.2d 457, 461 (Ct.App.2000) ("A declarations page is intended to provide a summary of coverage and cannot provide a complete picture of coverage under a policy."). The declarations page in the Allstate policy lists many coverages (e.g., bodily injury, property damage) without describing all applicable coverage benefits and restrictions set forth in the policy jacket and endorsements. A detailed description on the declarations page of all of the policy's coverage benefits and restrictions would arguably only create confusion.

18
After the declarations page, UIM coverage is not mentioned again for nearly forty pages, at which point the UIM endorsement is found within AU 1440-3. The defendants argue that ambiguity arises from the omission of references to UIM coverage on various pages throughout the policy appearing before the UIM endorsement. We disagree. Insurers routinely add new coverages to their insureds' policies by way of endorsement. Wisconsin courts have found that the fact that UIM provisions appear in an endorsement instead of the policy jacket does not create ambiguity. See, e.g., Vorbeck, 674 N.W.2d at 673-74 (finding UIM reducing clause added to policy by endorsement unambiguous). Even though it appears toward the end of the policy, a reasonable insured would have no problem locating the UIM endorsement. Moreover, the fact that all provisions relating to UIM coverage, including the reducing clause, are set forth in the separate, standalone endorsement arguably makes the coverage easier for insureds to locate and understand than if the UIM provisions were spread throughout various sections of the policy.

19
Although it is undisputed that the reducing clause itself is unambiguous, defendants argue that other provisions included in the UIM endorsement as well as the endorsement's structure create confusion and ambiguity. Again, we disagree. The Limits of Liability subsection of the UIM endorsement explains that the coverage limit shown on the declarations page ($300,000 per accident for Keca, $100,000 per accident for Bontempo) is the "maximum that we will pay for damages arising out of bodily injury...." The reducing clause is located directly below the "Limits of Liability" subsection. Thereafter, the "If There Is Other Insurance" subsection appears and states in part: "If more than one policy applies on a primary basis to an accident involving your insured auto, we will bear our proportionate share with other collectible underinsured motorists insurance.... If the insured person was in, on, getting into or out of a vehicle you do not own which is insured for this coverage under another policy, we will pay up to your policy limits only after all other collectible insurance has been exhausted."

20
A reasonable insured reading these provisions would understand that the insured purchased a fixed level of UIM recovery which will be arrived at by combining payments made from all sources. See Schmitz, 647 N.W.2d at 231. It would be clear to the insured that the UIM coverage limits are subject to a reduction, thereby putting the insured on notice that the full policy limits may not be payed out from the insurer. The policy is reasonably orderly and logical. None of the provisions are inconsistent. The policy does not set up roadblocks that would confuse reasonable insureds as they attempt to navigate their way through the policy. We are unpersuaded by the fragmented comparisons that the defendants draw between the Allstate policy and the policies determined to be ambiguous in Schmitz, supra, and Hanson v. Prudential Prop. & Cas. Ins. Co., 258 Wis.2d 709, 653 N.W.2d 915 (Ct.App.2002) (a case the supreme court criticized in Folkman). The defendants present us with a laundry list of alleged infirmities found within the Allstate policy, but this sort of "[f]erreting through a policy to dig up ambiguity" was rejected in Folkman. 665 N.W.2d at 869. Simply put, Allstate's policy does not create a maze for its insured that is organizationally complex and plainly contradictory, as was the case in Schmitz.

B. Application of Reducing Clause

21
The next question we consider is whether Allstate is allowed to reduce the UIM limits of the Keca policy by the $50,000 in UIM limits it tendered under the Bontempo policy. Again, the reducing clause in the Keca and Bontempo policies states that UIM coverage shall be reduced by:

22
1. all amounts paid by or on behalf of any person or organization that may be legally responsible for the bodily injury for which they payment is made, including, but not limited to, any amounts paid under the bodily injury liability coverage of this or any other insurance policy.

23
(emphasis added).

24
Finding that Allstate may not offset benefits paid under the Bontempo policy from payments it owes to Keca, the district court accepted the reasoning of a Wisconsin appellate court decision that addressed a similar question. See Janssen v. State Farm Mut. Auto. Ins. Co., 251 Wis.2d 660, 643 N.W.2d 857 (Ct.App.2002). Janssen held that language in a reducing clause similar to the one at issue in this case did not permit the insurer to reduce its liability for uninsured motorist ("UM") coverage. Allstate argues that we are not bound by Janssen, since it is a lower state court decision, and the Wisconsin Supreme Court has not yet ruled on the issue. However, in situations where a state supreme court has not reached an issue, the rulings of the intermediate court control, unless there is a persuasive indication that the highest court would decide the issue differently. See Lexington Ins. Co. v. Rugg & Knopp, Inc., 165 F.3d 1087, 1090 (7th Cir.1999). See also Liberty Mut. Ins. Co. v. Triangle Indus., Inc., 957 F.2d 1153, 1156 (4th Cir.1992) (noting that in circumstances where a state's highest court has not spoken on an issue decisions from "the state's intermediate appellate court decisions `constitute the next best indica of what state law is,' although such decisions `may be disregarded if the federal court is convinced by other persuasive data that the highest court of the state would decide otherwise.'") (quoting 19 Charles A. Wright, Arthur R. Miller & Edward Cooper, Federal Practice & Procedure § 4507, at 94-95 (1982)). In this case, we are not persuaded that the Wisconsin Supreme Court would take a position different from the one set forth in Janssen.

25
The court in Janssen supported its decision with precedent set by the Wisconsin Supreme Court in Employers Health Ins. v. General Cas. Co., 469 N.W.2d 172, 177 (Wis.1991). Employer's Health held that the plaintiff's subrogation clause that referred to a "responsible third party," clearly meant "a party responsible for the insured's injury and not to an insurer providing uninsured motorist coverage to the insured." Id. Adopting this reasoning, the Janssen court concluded that the phrase "responsible third party" was similar to the term "legally responsible." 643 N.W.2d at 863. After drawing this comparison, the Janssen court held that the term "legally responsible" did not encompass "contractually responsible" (i.e., UM/UIM carriers) parties. Id. Therefore, the UM carrier was not entitled to reduce benefits by payments from other UM/UIM policies. Id.

26
In the absence of authority from Wisconsin's highest court or a compelling indication that it would hold to the contrary, there is no reason for us to deviate from this reasoned position. Accordingly, the district court correctly required Allstate to pay an additional $50,000 in UIM benefits under the Keca policy.

III. Conclusion

27
For the reasons stated above, we AFFIRM the judgment on the district court.


Filed 4/20/17

                     CERTIFIED FOR PARTIAL PUBLICATION*

                COURT OF APPEAL, FOURTH APPELLATE DISTRICT

                                     DIVISION ONE

                                STATE OF CALIFORNIA

THE PEOPLE,                                        D068743

        Plaintiff and Respondent,

        v.                                         (Super. Ct. No. SCD252707)

JOHN LANDIS WISMER,

        Defendant and Appellant.

        APPEAL from a judgment of the Superior Court of San Diego County, Kenneth

K. So, Judge. Reversed.

        Law Offices of Scott M. Schlegel and Scott M. Schlegel for Defendant and

Appellant.

        Kamala D. Harris, Attorney General, Gerald A. Engler, Chief Assistant Attorney

General, Julie L. Garland, Assistant Attorney General, Peter Quon, Jr., and Anthony

Da Silva, Deputy Attorneys General, for Plaintiff and Respondent.

*      Pursuant to California Rules of Court, rule 8.1110, this opinion is certified for
publication with the exception of part 2.
       A standard instruction given in every California criminal case tells jurors they are

not to do any independent research or "conduct any tests or experiments." (CALCRIM

No. 201.) The instruction is based on fundamental principles of due process, because if

jurors conduct independent investigation, the parties are deprived of the ability to

understand and address the results of that investigation, whatever they may be.

Independent investigation and experimentation is error when it provides the jury with

additional evidence never presented at trial. It is evidence the parties never saw, much

less had the opportunity to object or respond to.

       In this case, defendant John Wismer was accused of sexual molestation by the

nine- and 13-year-old daughters of Wismer's friend and business associate, Richard S.

The physical evidence was inconclusive; the prosecution's case turned largely on the

credibility of the two girls and, to a certain extent, their parents. The primary incident,

involving the younger of the two girls, allegedly took place on an evening in late

November. Roughly a week later, police arranged for Richard to make a recorded pretext

call to Wismer in which he confronted Wismer with his daughter's allegations.

       Although the pretext call failed to elicit any admissions from Wismer, jurors

nonetheless focused on the call during their deliberations, listening to it three times and

discussing whether Wismer's reaction to the call was consistent or inconsistent with guilt.

Frustrated they could not reach agreement, one of the jurors (of Asian descent) took it

upon herself to conduct what she characterized as an "experiment" illustrating for her

colleagues how a truly innocent person would respond to a fabricated allegation. Using

racially charged language, she falsely accused a male Hispanic juror of slapping her

                                              2
behind, punctuating the accusation by claiming he said "he wanted to put his Mexican

burrito in my chicken fried rice."

       The Asian juror's false accusation and the Hispanic juror's reaction were not part

of the evidence in the case, yet they were presented to and considered by the jury in

reaching a verdict. This is juror misconduct of a fundamental nature that requires

reversal of the judgment.

                   FACTUAL AND PROCEDURAL BACKGROUND

       In November 2013, I.S., then a nine-year-old girl, and A.S., then a 13-year-old

girl, lived with their parents, Richard and Cecily S., and two younger brothers in San

Diego. A few years earlier, through his occupation as a self-employed private banker,

Richard met and became friends with Wismer. Wismer, who was in his late sixties, often

visited the family's home on Thursdays to discuss business deals with Richard and have

dinner with the family. Wismer was considered an extended family member and a

grandfatherly figure to the children.

       On November 27, 2013, the Wednesday before Thanksgiving, Wismer came to the

family home to have dinner. After the meal, Richard and Wismer went outside to the

patio to have drinks and smoke cigars. The four children had a "camp out" in the

downstairs playroom with sleeping bags, pillows, blankets, and stuffed animals. Around

8:00 p.m., 13-year-old A.S. went outside to the patio and sat in a chair near Wismer. She

asked her father whether she could have a boyfriend. He replied that she could not.

Richard then went inside the house to the kitchen or bathroom.

                                             3
       While Richard was inside the house, Wismer told A.S. she should go out with the

boy. He stroked her thigh, making her feel uncomfortable. When Richard returned to the

patio, A.S. went back inside to the camp-out area and watched television with I.S. while

their brothers slept. Cecily went upstairs, got into bed, and fell asleep.

       Between 12:00 and 12:30 a.m., Richard and Wismer went inside the house.

Richard made some soup while Wismer sat on one end of the couch by himself in the

living room. I.S. and A.S. were still watching television. When Richard returned from

the kitchen, he sat at the other end of the couch. Richard and Wismer watched a movie

while they ate. Richard fell asleep.

       Wismer went to the camp-out area and told I.S. and A.S. that he was going to

leave unless one of them watched the movie with him. While A.S. remained behind,

nine-year-old I.S. went with Wismer into the living room, sat on the couch, and watched

the movie with him. I.S. was wearing a jacket, shirt, and shorts and had a blanket over

her. Richard continued sleeping and snoring at the other end of the couch. After about

15 or 20 minutes, Wismer put his hand underneath I.S.'s blanket and started rubbing her

leg. He then put his hand underneath her shorts and underwear and started rubbing her

vagina. Feeling uncomfortable, I.S. told Wismer she had to go to the bathroom. She got

up and went into the bathroom. She was shocked and did not know what to do.

       I.S. returned to the couch, but sat away from Wismer. Richard was still sleeping.

Wismer scooted next to I.S. and pulled her close to him. He began rubbing her leg again.

She said she was feeling uncomfortable, stood up, walked to the end of the couch, and

                                              4
stood there. Wismer asked her if she was okay. She replied she was not, walked to the

camp-out area, and went to sleep with A.S.

       Richard woke up and saw Wismer sitting on the couch with his hands on his lap

watching the movie. Richard asked him whether it was time for him to go. Wismer

replied that it was and they headed outside. However, Wismer's car would not start.

They went back inside the house, where Wismer attempted to call his wife several times

before finally reaching her. Richard offered to let Wismer sleep in the boys' bedroom

because it was not occupied. They went upstairs and Wismer slept on the bottom bunk

bed in the boys' bedroom.

       In the morning, Wismer declined Cecily's offer of coffee, explaining he had too

much to drink the prior night. Wismer left the house when his son arrived to pick him up.

       After Thanksgiving dinner, I.S. told Cecily that Wismer had put "his fingers in my

privates." Crying, I.S. explained it had happened the prior night on the couch, but that

she did not want to get Wismer in trouble. Cecily then told Richard what I.S. had told

her. Together they talked to I.S., who repeated what she had told Cecily earlier and also

added that Wismer had kissed her.

       Cecily then asked A.S. whether Wismer had done anything that made her feel

uncomfortable. A.S. told her that the prior night he put his hand on her thigh. She also

told her about an incident during which she was in Wismer's car and he put his hand

underneath her shirt.

                                             5
       Cecily called 911 and reported what her daughters had told her. When officers

arrived shortly thereafter, Cecily handed them I.S.'s sweater, t-shirt, and shorts, but not

her underwear. In the presence of the officers, A.S. answered Cecily's questions.

       On November 29, a pediatrician examined I.S. and found a red bruise under the

surface of the membrane of her hymen. I.S. also had visible red petechia on the outer

surface of her hymen, which was redder than normal. The pediatrician believed her

injuries were consistent with digital penetration.

       On December 4, a social worker conducted a forensic interview of I.S., who

explained the Wednesday night incident in a manner similar to her subsequent trial

testimony, as described above. The same day, another social worker conducted a forensic

interview of A.S., who explained the two incidents involving Wismer in a manner similar

to her subsequent trial testimony, as described above.

       Also on December 4, a police detective arranged for Richard to make a recorded

pretext call to Wismer.1 During the call, Richard explained that I.S. had reported to

Cecily and him that Wismer had touched her vagina on November 27 while they were

sitting on the couch. After Wismer denied doing so, Richard falsely told him there was a

video recording on a surveillance camera that confirmed I.S.'s allegations. Wismer

nonetheless did not admit doing anything inappropriate to I.S.

1      At trial, a recording of the pretext call was played for the jury.
                                              6
       On December 9, another pediatrician examined I.S., but did not observe the red

bruise or blood blister. The pediatrician concluded it had healed and that the prior injury

was consistent with digital penetration.

       DNA analysis of I.S.'s shorts showed her male relatives, and not Wismer, were the

primary contributors of DNA. Although there was no DNA evidence showing Wismer

was definitely a minor contributor, he could not be excluded as a possible contributor on

one of the eight samples retrieved from the shorts.

       A second amended information charged Wismer with four counts involving I.S.,

including one count of unlawful penetration of a child 10 years of age or younger (Pen.

Code, § 288.7, subd. (b))2 and three counts of committing lewd acts on a child under the

age of 14 years (§ 288, subd. (a)). It also charged two counts of committing lewd acts on

A.S., a child under the age of 14 years (§ 288, subd. (a)). The information further alleged

that counts 2 through 6 were committed against more than one victim (§§ 1203.066,

subd. (a)(7), 667.61, subds. (b), (c), (e), & (j)(2)) and that count 2 involved substantial

sexual contact (§ 1203.066, subd. (a)(8)).

       At trial, the prosecution presented evidence substantially as described above. In

his defense, Wismer called a number of witnesses who testified regarding his good

character and specifically that he was not the type of person given to lewd conduct with

children and did not have a reputation for being sexually attracted to children. He also

presented several impeachment witnesses who testified that the alleged victims and/or

2      All statutory references are to the Penal Code unless otherwise specified.
                                              7
their parents were not truthful and/or did not have a reputation for honesty. Finally, he

offered the testimony of a physician who stated Wismer had palmar psoriasis such that if

he had inserted his hand into I.S.'s underwear, he would have left hundreds of thousands

of skin cells on the underwear that would have been detectable by forensic analysis.

       The jury found Wismer guilty on counts 1 through 5 and found true the allegations

related to those counts. The jury was unable to reach a verdict on count 6. The trial court

imposed a total term of 50 years to life in prison, consisting of terms of 25 years to life in

prison for each of counts 2 through 5, with the terms for counts 3 and 4 to run

concurrently to count 2 and the term for count 5 to run consecutively to count 2.

Sentence on count 1 was stayed pursuant to section 654.

                                       DISCUSSION

1. Juror Misconduct

       After discharge of the jury following the verdict, several of the jurors met with the

prosecutor and defense counsel outside the courtroom. Juror No. 8, a female of Asian

descent who served as foreperson of the jury, made statements that provided the basis for

a defense motion for an evidentiary hearing regarding jury misconduct. The motion was

supported by declarations from defense counsel and a defense investigator.

       The foreperson told counsel and the investigator that the jury's discussion focused

on the pretext phone calls because there was disagreement as to whether Wismer's

reaction to the accusation was a "natural" response. She devised what she characterized

as an "experiment" to show that Wismer's reaction was not "natural." Inside the jury

room, she falsely accused one of the other jurors, a Hispanic male, of smacking her on

                                              8
the behind while making the racially charged comment that he wanted to put his

"Mexican burrito into her chicken fried rice."

       The trial court denied the motion for an evidentiary hearing, but permitted defense

counsel to file a motion for new trial based on the alleged jury misconduct and to request

the release of juror identifying information that would facilitate the submission of juror

affidavits. In support of the motion, counsel included an affidavit from Juror No. 8

reiterating her story about the "experiment" involving a fabricated allegation of sexual

misconduct leveled at a fellow juror designed to illustrate the "natural" response of an

innocent person to a false accusation.3

       The trial court denied the defense request for release of juror identifying

information, concluding that "good cause has not been established to proceed

further . . . ." Then, "tak[ing] [Juror No. 8's] statement as indicated," the court stated it

had been "unable to find . . . any cases indicating that it's—that kind of discussion is

3       Juror No. 8 separately initialed eight of the 13 paragraphs in the affidavit, making
handwritten corrections on several of them. The remaining five paragraphs were not
initialed, but the numbers were circled and there was a handwritten note at the bottom:
"# 4, 5, 6, 7, 9—I am uncomfortable with the statements due to future mis-interpretation
or how the statements would affect the case." She nonetheless signed the affidavit
without crossing out or correcting any language in the five paragraphs. She also
submitted a second affidavit in opposition to the motion for new trial in which she sought
to "clarify" a statement in her first declaration regarding evidence about the physical
positioning of bodies in defendant's car. There was no attempt to change or clarify any
statement about the experiment in the jury room.
        The People do not dispute that Juror No. 8 did what she said she did. Rather, they
argue that the false accusation of sexual misconduct by a fellow juror did not constitute
an impermissible experiment warranting a new trial. We likewise will accept the
undisputed facts as to what occurred and proceed to decide the legal question whether it
amounts to jury misconduct. (People v. Collins (2010) 49 Cal.4th 175, 242.)
                                               9
misconduct. It looks to me like it was their attempt at a further critical examination of the

evidence . . . that was produced at trial." On that basis the court denied the motion for

new trial based on alleged jury misconduct.

       As a preliminary matter, we agree with the trial court that no formal evidentiary

hearing was required to address the claimed misconduct, nor was it necessary to release

juror identifying information to facilitate the submission of additional affidavits. It is

true, of course, that the trial court has discretion to order an evidentiary hearing where a

criminal defendant moves for a new trial based on alleged juror misconduct. (People v.

Hedgecock (1990) 51 Cal.3d 395, 415.) Here, however, there were no significant factual

disputes to resolve. Juror No. 8—the juror who allegedly engaged in misconduct—was

the source of the information, and she initially told both the prosecutor and defense

counsel what happened. Everyone including the trial court accepted her story and

proceeded to analyze whether her actions amounted to misconduct.

       The jurors in this case were instructed pursuant to CALCRIM No. 201 that they

should not "do any research regarding the case" or "conduct any tests or experiments."

(Italics added.) The law on the subject, however, is less categorical. As the Supreme

Court explained in People v. Collins, supra, 49 Cal.4th 175, "[n]ot every jury experiment

constitutes misconduct. Improper experiments are those that allow the jury to discover

new evidence by delving into areas not examined during trial. The distinction between

proper and improper jury conduct turns on this difference. The jury may weigh and

evaluate the evidence it has received. It is entitled to scrutinize that evidence, subjecting

it to careful consideration by testing all reasonable inferences. It may reexamine the

                                              10
evidence in a slightly different context as long as that evaluation is within the ' "scope

and purview of the evidence." ' [Citation.] What the jury cannot do is conduct a new

investigation going beyond the evidence admitted." (Id. at p. 249, quoting People v.

Bogle (1995) 41 Cal.App.4th 770, 781.) And this is true regardless whether the new

evidence is generated outside the courthouse or inside the jury deliberation room.

(Collins, at pp. 248-249.)

       The problem here is that the accused juror's reaction to Juror No. 8's false

accusation was not part of the evidence in the case. When it was presented to the jurors

in the deliberation room, it became new evidence they were not entitled to consider. It is

really no different than if Juror No. 8 found a psychological study on the internet

examining how people respond to false allegations of sexual misconduct and played a

video clip of a test subject's reaction for her fellow jurors.

       What Juror No. 8 was attempting was a controlled experiment. She hypothesized

that Wismer was in fact guilty (the independent variable), such that if she accused a truly

innocent person (the Hispanic juror) she would observe a different reaction (the

dependent variable). It is the nature of a controlled experiment, however, that all other

variables must be controlled, i.e., not vary. Here there are numerous variations between

the two situations—the setting, the mode of communication, the relationship of the two

parties, the age of the alleged victim, the racial overtones in Juror No. 8's accusation—

that make this anything but a controlled experiment.

       Consider if the prosecutor had called a psychologist to testify about the "normal"

reaction of an innocent person accused of sexual molestation based on experimental

                                               11
studies. Assuming the expert's testimony was otherwise admissible, Wismer would have

been entitled to cross-examine the expert about the studies, questioning their

methodology or the applicability of their conclusions. He could have called another

expert to testify in opposition. He was denied that very fundamental opportunity to

confront and address the evidence against him because that evidence was generated

secretly within the confines of the jury deliberation room. (See Higgins v. Los Angeles

Gas & Elec. Co. (1911) 159 Cal. 651, 657 [jury experiment is improper where it

generates "evidence which it is not possible for the party injured to meet, answer, or

explain."].)

       In asserting that Juror No. 8 did not engage in misconduct, the People suggested

the experiment was "just a hypothetical" akin to asking how a reasonable person would

react if falsely accused. Certainly jurors are permitted to " 'use common experiences and

illustrations in reaching their verdicts.' " (People v. Cumpian (1991) 1 Cal.App.4th 307,

316, quoting United States v. Avery (6th Cir. 1983) 717 F.2d 1020, 1026.) But Juror

No. 8's experiment was conducted precisely to remove the discussion from the realm of

the hypothetical by providing a new concrete standard, observable by every juror, as to

how an innocent person responds to a fabricated charge of sexual misconduct. Indeed, it

was Juror No. 8's frustration with the fact that the jurors' common experience had thus far

failed to produce agreement that prompted her to create a different "common experience"

inside the deliberation room, which amounted to new evidence.

       When jury misconduct has occurred, prejudice to the defendant is presumed and

the burden is on the prosecution to rebut the presumption by showing that the misconduct

                                            12
did not affect the jury's decision. (People v. Honeycutt (1977) 20 Cal.3d 150, 156.) Here

the People make no serious attempt to argue that if misconduct occurred, it nonetheless

did not influence the verdict. To the contrary, Juror No. 8's affidavit itself indicates that

the experiment was aimed at a holdout juror, whose vote changed after the experiment

was conducted. Under these circumstances, the misconduct of Juror No. 8 in creating

new evidence for the jury to consider requires reversal of the judgment.

2. Evidentiary Issues

       We start with some basic principles. Only relevant evidence is admissible at trial

(Evid. Code, § 350), and relevant evidence is admissible unless excluded under the

federal or California Constitutions or by statute. (People v. Carter (2005) 36 Cal.4th

1114, 1166; Evid. Code, § 351.) The credibility of a witness may be attacked by any

party. (Evid. Code, § 785.) In determining a witness's credibility, a jury generally may

consider evidence that "has any tendency in reason to prove or disprove the truthfulness

of his [or her] testimony," including "[h]is [or her] character for honesty or veracity or

their opposites." (Evid. Code, § 780.)

       Although Evidence Code section 1101, subdivision (a), precludes the admission of

evidence to show a person's character or trait of his or her character "when offered to

prove his or her conduct on a specified occasion," that provision does not "affect[] the

admissibility of evidence offered to support or attack the credibility of a witness." (Evid.

Code, § 1101, subds. (a), (c).) Furthermore, Evidence Code section 1103, subdivision

(a), provides: "In a criminal action, evidence of the character or a trait of character (in the

form of an opinion, evidence of reputation, or evidence of specific instances of conduct)

                                              13
of the victim of the crime for which the defendant is being prosecuted is not made

inadmissible by [Evidence Code] Section 1101 if the evidence is: [¶] (1) [o]ffered by the

defendant to prove conduct of the victim in conformance with the character or trait of

character . . . ." A lay (i.e., nonexpert) witness may testify in the form of an opinion if

that opinion is based on his or her own perception. (People v. Thompson (2010) 49

Cal.4th 79, 130.) Nevertheless, under Evidence Code section 352, a trial court may

exclude relevant evidence "if its probative value is substantially outweighed by the

probability that its admission will (a) necessitate undue consumption of time or (b) create

substantial danger of undue prejudice, of confusing the issues, or of misleading the jury."

       Wismer asserts numerous contentions regarding evidentiary rulings made by the

trial court. In general, we would review these rulings regarding the relevance of evidence

and application of Evidence Code section 352 and other rules of evidence for abuse of

discretion. (People v. Guerra (2006) 37 Cal.4th 1067, 1140; People v. Valdez (2004) 32

Cal.4th 73, 108.) With regard to most of these, although other judges might have ruled

differently, we would conclude the trial court's rulings fell within the permissible exercise

of its discretion. For the benefit of the court on retrial, however, we comment on two

particular instances in which the trial court excluded testimony that would have

challenged the credibility of the two complaining witnesses.

                                              A

       Wismer filed a pretrial motion to admit the testimony of Kristen Colwell regarding

a specific incident in 2011 during which I.S. purportedly lied about a boy at school

threatening to kill her. Colwell knew I.S. and A.S. when she was their martial arts

                                              14
instructor. During a recorded interview with a defense investigator, Colwell described

how I.S., who seemed sad, told her in a serious manner that a boy at school threatened to

kill her. Having concerns whether the statement was true or not, Colwell questioned I.S.

further. As the questioning progressed, however, A.S. interrupted them and said, "She's

[I.S.'s] just telling you a lie right now." I.S. and A.S. then "laughed and thought it was

very funny." Although Colwell was no longer concerned about a boy threatening to kill

I.S., she was very concerned about I.S.'s behavior and, in particular, about the seriousness

of the lie and how convincing I.S. was when she told it. Colwell was very disturbed by

the girls laughing as if it were "no big deal to tell such a horrendous lie."

       Wismer argued that Colwell's proposed testimony about I.S.'s story was critical to

his defense theory because it directly challenged the credibility of the prosecution's

primary complaining witness. It showed how I.S. fabricated the story and how

convincing she was when telling a serious lie. He argued the testimony was highly

relevant and its significant probative value outweighed any probability its admission

would consume excessive time, mislead the jury or cause undue prejudice under

Evidence Code section 352. In his view, the testimony would assist the jury in

determining I.S.'s credibility and, in particular, her lack of honesty and veracity regarding

her accusations against him.

       In arguing that Colwell's testimony should not be admitted, the prosecution

asserted that because joking was not a crime and did not involve moral turpitude, specific

conduct by I.S. was inadmissible to impeach her credibility. It also contended the

defense did not prove that I.S.'s statement was actually untruthful. In any event, the

                                              15
prosecution maintained the trial court should exclude Colwell's testimony about the

incident pursuant to Evidence Code section 352 because the incident was a collateral

matter that would require a trial within a trial (i.e., probable undue consumption of time

and confusion of issues), there was no way to independently verify that I.S. lied about the

threat, and the incident would have very little probative value, having occurred when I.S.

was about six years old.

       Colwell was allowed to testify she taught martial arts to I.S. and A.S. over a six-

month period in 2011, a period long enough for her to form an opinion regarding I.S.'s

honesty. She offered her opinion that I.S. "likes to tell lies and manipulate." However,

relying on Evidence Code section 352, the trial court excluded any testimony about the

specific incident in which I.S. lied about a death threat at school.

       We agree with Wismer that the court abused its discretion by excluding Colwell's

testimony about the specific incident during which I.S. lied about a boy threatening to kill

her. As the primary alleged victim in this case, I.S.'s credibility was crucial to the jury's

determination of the charges against Wismer. Absent compelling physical evidence at

trial showing Wismer committed the charged offenses against I.S., the jury necessarily

relied, in large part, on I.S.'s credibility in deciding his guilt on counts 1 through 4. In the

incident about which Colwell would have testified, I.S. implicitly admitted telling a

serious lie.

       In a case of this nature, this was important evidence the jury was entitled to hear.

Although the court allowed Colwell to testify it was her opinion that I.S. was not honest,

the jury had no other evidence on which to adequately assess the basis for her opinion.

                                              16
Had Colwell been allowed to testify regarding the specific incident, the jury would have

had a concrete example showing why she believed I.S. could lie to an adult about a very

serious matter in apparent disregard of the consequences. The probative value of that

excluded testimony was great, while the consumption of time required for that testimony

was not; both direct examination and cross-examination would have consumed less than

an hour. The People fail to articulate why the jurors were likely to be confused or misled.

       We therefore conclude the court abused its discretion under Evidence Code

section 352 by finding the probative value of Colwell's proffered testimony was

outweighed by the undue consumption of time it would require or the likelihood of jury

confusion.

                                             B

       Wismer also argues the trial court abused its discretion by restricting the testimony

of Steve Ely, a school district employee, about the honesty of Cecily and A.S. and, in

particular, excluding evidence on specific incidents. Before trial, Wismer filed a motion

to admit Ely's testimony regarding his opinion on the honesty of Cecily and A.S. Wismer

also filed a separate motion for admission of testimony by two other school district

employees regarding A.S.'s honesty. In an interview with a defense investigator, Ely

stated that he had been A.S.'s special education case manager at her school. After A.S.

had attended her middle school for only a few months, Cecily wanted A.S. placed at a

private school at the public school district's expense. Describing Cecily as a "helicopter

parent," Ely stated that she would make things up for A.S. if she thought it would benefit

their agenda. She contacted A.S.'s school with complaints about things that did not

                                            17
happen. He also believed A.S. knew how to get Cecily's attention "by feeding her things

that will set [Cecily] off against the school."

       After Cecily was informed the process to obtain a private school placement for

A.S. would take about a year, Ely received a call from Cecily asserting that A.S. had

attempted suicide. However, Cecily would not allow him or others to contact the hospital

or obtain hospital records so they could work with A.S. Ely believed A.S.'s purported

suicide attempt was "convenient" and he would not put it past Cecily "to put [A.S.] up to

it to further her agenda of getting [A.S.] into the private school at the cost of the public."

       In arguing that Ely's specific-act testimony regarding the alleged suicide attempt

should not be admitted, the prosecution asserted that Ely had no basis to conclude Cecily

orchestrated A.S.'s apparent suicide attempt in order to get her placed at a private school.

It suggested the evidence should be excluded under Evidence Code section 352 because it

was a collateral matter that would require a trial within a trial and its potential for

prejudice outweighed its probative value. The trial court agreed, and we conclude it did

not abuse its discretion in doing so.

       But there is one other aspect of Ely's proposed testimony that warrants comment.

A.S. claimed the suicide attempt was motivated by a bullying incident at school. Ely

stated that the school investigated the allegation but found A.S.'s claim to be false.

Although Ely did not think A.S. was necessarily lying, he believed what she perceived

had happened had not, in fact, happened.

       This specific-act evidence supporting the basis for Ely's opinion regarding A.S.'s

credibility did not suffer from the same infirmities as the alleged suicide attempt.

                                              18
Because the school had already conducted an investigation and reached a conclusion, this

testimony did not involve the same danger of a protracted trial-within-a-trial. Moreover,

it impeached the credibility of one of the two principal complaining witnesses, not a

collateral actor (Cecily). On retrial, if the court again concludes Ely's testimony

regarding the suicide attempt should be excluded, he should nonetheless be permitted to

testify regarding A.S.'s apparently false claim that she had been the victim of a bullying

incident.

                                      DISPOSITION

       The judgment is reversed. The matter is remanded for further proceedings

consistent with this opinion.

                                                                                DATO, J.

WE CONCUR:

              McCONNELL, P. J.

                   O'ROURKE, J.

                                             19


                              UNPUBLISHED ORDER
                         Not to be cited per Circuit Rule 53

           United States Court of Appeals
                             For the Seventh Circuit
                             Chicago, Illinois 60604

                             Argued December 6, 2005
                            Decided December 20, 2005

                                      Before

                     Hon. WILLIAM J. BAUER, Circuit Judge

                     Hon. JOHN L. COFFEY, Circuit Judge

                     Hon. TERENCE T. EVANS, Circuit Judge

No. 05-1953

UNITED STATES OF AMERICA,                      Appeal from the United States
              Plaintiff-Appellee,              District Court for the Eastern District
                                               of Wisconsin
      v.
                                               No. 04-CR-171
RUBEN M. HERNANDEZ,
            Defendant-Appellant.               William C. Griesbach,
                                               Judge

                                    ORDER

       Ruben Hernandez challenges his 262-month sentence for conspiring to
distribute more than 500 grams of cocaine and marijuana, 21 U.S.C. §§ 846,
841(a)(1), (b)(1)(B). He argues that the sentence is unreasonable because the
district court ran afoul of our post-Booker line of cases by failing to discuss a
sentencing factor—his “advanced” age—that was raised in support of a sentence
below the advisory guideline range. Because this procedural argument does not
invoke review for reasonableness, and the sentencing court followed the correct
procedure, we affirm the sentence.
No. 05-1953                                                                   Page 2

                                         I.

       For two years, the Kalamazoo Valley Enforcement Team (KVET), a drug task
force centered in Kalamazoo, Michigan, investigated Hernandez and his wife and
son for trafficking in cocaine and marijuana. KVET shared the results of its
investigation with the Wisconsin Division of Criminal Investigation (DCI) and law
enforcement officials in two Wisconsin counties. Further investigation, consisting of
surveillance, controlled buys, searches of Hernandez’s residence, and interviews
with informants, resulted in a nine-count indictment. Hernandez entered into a
plea agreement with the government and pleaded guilty to one count of conspiracy
in exchange for the dismissal of the remaining counts.

       The probation officer who prepared the presentence investigation report
(PSR) calculated an advisory guideline range of 262 to 327 months’ imprisonment.
No written objections to the PSR were filed by the parties, and at the sentencing
hearing on March 23, 2005, Hernandez agreed that the offense level and criminal
history category were properly scored. The government recommended a sentence at
the low end of the advisory range, and Hernandez argued for a sentence below the
range. Hernandez highlighted his troubled background: he had to leave the country
at an early age when his parents were deported, his father died from alcoholism
when he was young, and he attended school for only five years and had no job skills.
He also abused alcohol and marijuana from an early age, and began using cocaine
later in life. Hernandez also referred in somewhat oblique terms to his age as a
mitigating factor. His attorney stated, “Mr. Hernandez is 51 right now, 51 years
old, and although I know I’d like to think 51 is young, Mr. Hernandez has led a kind
of a full life, probably more than one would normally expect by the time they reach
the age of 51.” Counsel also opined that a sentence below the guideline range would
not “unduly depreciate [Hernandez’s] conduct in this case or diminish the fact of his
prior record” and that “in terms of determining where [Hernandez] would be at the
end of his sentence . . . that would be an appropriate recommendation to make.”
Hernandez’s argument in this court suggests that these remarks were meant to
signal that he sought a sentence below the guideline range on the ground that he
would be very old when he completed serving his term if it was within the advisory
guideline range.

       The district court discussed whether a sentence below the guidelines would
be warranted in light of the “severity of the offense,” Hernandez’s prior criminal
record, or “something about the defendant’s character that is not otherwise taken
into account.” The court commented, however, that it had difficulty seeing
“anything at all that inures to the benefit of the defendant.” The district court
noted Hernandez’s lack of “positive adjustment to his community” in terms of
employment or family relationships and remarked that he had been engaged in
criminal behavior his entire adult life. The court concluded that a sentence below
No. 05-1953                                                                      Page 3

the guidelines was not warranted based on “the seriousness of the offense, the
amount of money involved over the period of time the defendant was doing this and
the amount drugs that he distributed, his record, the need for protection of the
public from this type of behavior, and . . . the personal characteristics of the
defendant.”

                                          II.

       On appeal Hernandez argues only that his sentence is rendered unreasonable
by the district court’s failure to “explicitly consider” his age when selecting the term
imposed. He characterizes his argument in the district court as a contention that
“he should be given a sentence lower than the applicable guideline range due to his
anticipated age upon completion of the sentence.” Hernandez concedes that under
our post-Booker cases, “little explanation is required for a sentence within a
properly calculated guideline range,” but insists that the district court must
“discuss” and “make a full record of” any factors in 18 U.S.C. § 3553(a) that a
defendant raises in support of a sentence below the established range. His primary
support for this argument is our statement in United States v. Dean, 414 F.3d 725,
730 (7th Cir. 2005), that “the defendant must be given an opportunity to draw the
judge’s attention to any factor listed in section 3553(a) that might warrant a
sentence different from the guidelines sentence, for it is possible for such a variant
sentence to be reasonable.”

       As an initial matter, Hernandez overstates the extent to which he argued for
a sentence below the range due to his anticipated age at the completion of his
sentence. The two comments we have quoted above completely cover the discussion
of Hernandez’s age, and they do not amount to a discernible argument. The record
simply does not support Hernandez’s assertion that he “raised” the issue with such
clarity as to require the district court to, in Hernandez’s words, “specifically
indicate[] that it had considered Mr. Hernandez’s age, both at the time of
sentencing and at the time of his prospective release from his sentence, and that it
concluded that Mr. Hernandez’s age does not provide a compelling reason to deviate
from the properly calculated guidelines range.” The district court should not be
faulted for not recognizing that Hernandez’s vague comments required more
elaboration. Cf. United States v. McClellan, 165 F.3d 535, 551-52 (7th Cir. 1999).

       Even if Hernandez properly raised an argument regarding his age, his
sentence is not made unreasonable simply because the district court did not
explicitly address it. We recently rejected the argument that a sentence might be
“unreasonable” due to a sentencing court’s “procedural errors” of not considering the
§ 3553(a) factors and not justifying the sentence with reference to those factors.
United States v. Rodriguez-Alvarez, 425 F.3d 1041 (7th Cir. 2005). The court noted
that a defendant must rebut the presumption of reasonableness afforded a guideline
No. 05-1953                                                                      Page 4

sentence with an argument based on “the application of § 3553(a) factors,” not on
potential procedural errors. Id. at 1046; see United States v. Mykytiuk, 415 F.3d
606, 608 (7th Cir. 2005). Arguments regarding the district court’s procedure, we
held, are not to be reviewed under the reasonableness framework; rather, the
reviewing court “must determine whether the sentencing court complied with the
mandatory procedures, and, if it did not, conduct a harmless error analysis if
harmlessness is asserted by the government.” Rodriguez-Alvarez, 425 F.3d at 1046.
Although Hernandez styles his argument as one regarding reasonableness, he cites
only a perceived procedural error—failure to discuss his age—and the district
court’s decision should therefore be reviewed under the standard articulated in
Rodriguez-Alvarez, not evaluated for reasonableness. See id.

       In imposing a sentence after Booker, the district court must first calculate the
advisory guideline range, which involves ruling on any disputed portion of the PSR.
Dean, 414 F.3d at 727. The defendant must then be afforded the opportunity to
draw the court’s attention to any factors under § 3553(a) that might warrant a
sentence below the guideline range. The court must consider the § 3553(a) factors
in selecting an appropriate sentence, although it need not expressly address all of
them. United States v. Williams, 425 F.3d 478, 480 (7th Cir. 2005). If the court
selects a sentence outside the guidelines, it must “articulate the factors that
determined the sentence.” Dean, 414 F.3d at 729. If the court selects a sentence
within the guideline range, however, it is enough that “the record confirms that the
judge has given meaningful consideration to the section 3553(a) factors.” Williams,
425 F.3d at 480; see United States v. Alburay, 415 F.3d 782, 787 (7th Cir. 2005).
Recently we suggested that “meaningful consideration” should be evinced by a
discussion of the factors a defendant raises that could justify a sentence below the
guideline range. See United States v. Cunningham, 429 F.3d 673, 679 (7th Cir.
2005) (remanding for resentencing in part because district court did not address
defendant’s contention that his psychiatric history was a mitigating factor). Except
as to those points that are “clearly without merit,” the district court’s silence, or a
“rote statement that the judge considered all relevant factors,” will not satisfy this
court that the district court considered the factors relevant to the exercise of its
discretion. See id at 678-79.

       Here, the district court first calculated the applicable guideline range, which
Hernandez does not dispute. At the sentencing hearing, Hernandez highlighted
several mitigating factors he wished the court to take into account. The district
court then discussed the reasons for selecting a sentence within the guidelines.
Although it did not explicitly address Hernandez’s argument—if it may be called
that—regarding his advanced age, the court listed Hernandez’s “personal
characteristics” and “individual qualities” among the factors it considered. Thus,
even if it could fairly be said that Hernandez asked the district court to consider his
age as a mitigating factor, this is still not a case in which the district court “passed
No. 05-1953                                                                 Page 5

over in silence the principal argument made by the defendant even though the
argument was not so weak as not to merit discussion.” See id. at 679. The court
responded to Hernandez’s arguments with more than silence or a rote statement
that it had considered all relevant factors; its discussion reveals meaningful
consideration of the § 3553(a) factors. See id.; Williams, 425 F.3d at 480.

      The district court complied with post-Booker sentencing procedures, and we
therefore AFFIRM the sentence.


                                                                      FILED
                                                          United States Court of Appeals
                                                                  Tenth Circuit

                                    PUBLISH                      April 7, 2020
                                                             Christopher M. Wolpert
                  UNITED STATES COURT OF APPEALS                 Clerk of Court

                               TENTH CIRCUIT

 VINCENT C. HAMILTON and
 STEPHANIE HAMILTON,

             Petitioners - Appellants,
 v.                                                    No. 19-9000
 COMMISSIONER OF INTERNAL
 REVENUE,

             Respondent - Appellee.

                   APPEAL FROM THE UNITED STATES
                             TAX COURT
                           (NO. 1: 008037-16)

Paul W. Jones, Hale & Wood, LLP, Salt Lake City, Utah, for Appellants.

Julie Ciamporcero Avetta, Attorney, Tax Division (Richard E. Zuckerman,
Principal Deputy Assistant Attorney General, and Francesca Ugolini, Attorney,
Tax Division, with her on the brief), Department of Justice, Washington, D.C., for
Appellee.

Before TYMKOVICH, Chief Judge, MATHESON and McHUGH, Circuit
Judges.

TYMKOVICH, Chief Judge.
      The Internal Revenue Code permits taxpayers who demonstrate insolvency

to exclude discharged debts from their taxable income. Claiming insolvency,

taxpayer Vincent Hamilton accordingly sought to exclude nearly $160,000 in

student loans that were forgiven in the aftermath of a disabling injury. During the

same tax year, however, he had received a non-taxable partnership distribution

worth more than $300,000.

      His wife transferred those funds into a previously-unused savings account

held nominally by their adult son. Using login credentials provided by their son,

Mrs. Hamilton incrementally transferred almost $120,000 back to the joint

checking account she shared with her husband. The Hamiltons used these funds

to support their living expenses.

      In a late-filed joint tax return, they excluded the discharged student-loan

debt on the theory that Mr. Hamilton was insolvent. In calculating his assets and

liabilities, however, the Hamiltons did not include the funds transferred into the

savings account. Had they done so, Mr. Hamilton would not have met the criteria

for insolvency; and the couple would have owed federal income tax on the

student-loan discharge.

      The Commissioner of Internal Revenue eventually filed a Notice of

Deficiency, reasoning that the partnership distribution rendered Mr. Hamilton

solvent, such that the Hamiltons were required to pay income tax on the cancelled

                                        -2-
debt. The Hamiltons petitioned for review from the Tax Court, which sustained

both the deficiency and a significant late-filing penalty. They timely appealed.

      We AFFIRM. The Tax Court correctly concluded that the Hamiltons

exercised effective control over the funds Mrs. Hamilton had transferred into the

savings account.

                                 I. Background

      Prior to his disabling back injury in 2008, Mr. Hamilton borrowed more

than $150,000 to pay costs associated with medical school for his son. Mrs.

Hamilton, who managed the family’s finances in the aftermath of his injury,

subsequently sought to discharge these student-loan obligations. Her efforts met

with success, and these loans were fully discharged in 2011.

      That same year, Mr. Hamilton received a non-taxable distribution worth

more than $300,000 from his partnership interest in a movie-theater business.

Mrs. Hamilton transferred these funds into a previously-unused savings account

held by their son, who then provided her with login credentials for the account. 1

Throughout Tax Year 2011, she withdrew nearly $120,000 to finance household

expenses for both parents.

      1
         Mrs. Hamilton included several thousand dollars that did not arise from
the partnership distribution among the funds she transferred into the savings
account. The total value of the funds transferred exceeded $320,000.

                                        -3-
      The Hamiltons did not file a federal return for Tax Year 2011 until March

2014. Filing jointly, they reported just over $850,000 in liabilities and just under

$680,000 in assets. But these figures made no mention of the funds that Mrs.

Hamilton had moved into the savings account. One consequence of this omission

now stands out as particularly important. Mr. Hamilton self-identified as

insolvent, because—using these numbers—his liabilities exceeded his assets by

roughly $170,000. 2 For this reason, the Hamiltons sought to pay no federal

income tax on the discharged debt.

      If they had included the partnership distribution as an asset for purposes of

the insolvency determination, then Mr. Hamilton’s assets (around $1,000,000,

under this new math) would have outnumbered his liabilities (still $850,000) by

roughly $150,000. Obviously, this calculus would deprive Mr. Hamilton of his

rationale for not paying federal income tax on the cancelled debt.

      The Commissioner of Internal Revenue eventually filed a Notice of

Deficiency, reasoning that—because, in light of the funds contained within the

savings account, Mr. Hamilton’s assets outnumbered his liabilities—the couple

could not exclude the discharged debt from their federal tax return. The

Hamiltons disagreed, eventually taking the position that the funds Mrs. Hamilton

      2
        As the government acknowledged during oral argument, we assess
insolvency for purposes of 26 U.S.C. § 108 on an individual basis, even when
taxpayers file jointly.

                                         -4-
transferred into the savings account should be considered their son’s assets, rather

than their own.

      The Hamiltons petitioned for review from the Tax Court, which—on the

basis of this same stipulated record—applied the doctrine of “substance over

form” to sustain the Notice of Deficiency. The Tax Court also sustained the late-

filing penalties. On appeal, the Hamiltons primarily argue the Tax Court erred in

characterizing the funds transferred into the savings account as their assets.

                                   II. Analysis

      We review decisions of the Tax Court in the same manner as civil actions

tried without a jury. Petersen v. Comm’r, 924 F.3d 1111, 1114 (10th Cir. 2019)

(citing Katz v. Comm’r, 335 F.3d 1121, 1125–26 (10th Cir. 2003)); see also 26

U.S.C. § 7482(a)(1). We accordingly review legal conclusions de novo and

factual determinations only for clear error. 3 Id. (citing same).

      3
         Because insolvency requires a factual determination, we review the Tax
Court’s treatment of the cancellation-of-indebtedness income primarily for clear
error. See Merkel v. Comm’r, 192 F.3d 844, 847 (9th Cir. 1999). The Hamiltons
contend the Tax Court’s denial of their claim presents a question of law, such that
we must engage in de novo review. Notwithstanding the legal arguments the
Hamiltons raise, the outcome of this case rests almost entirely upon the Tax
Court’s factual determination of their dominion over the assets contained within
the savings account. No matter the standard of review, however, it is clear that
the Hamiltons exercised effective control over the assets contained within the
savings account.

                                         -5-
      A. Characterization of Assets

      The Hamiltons contend the Tax Court erred in characterizing the funds

contained within the savings account as their assets for purposes of the insolvency

inquiry. As our application of governing law to these stipulated facts will

demonstrate, we disagree.

             1. Governing Law

      The Internal Revenue Code broadly defines gross income to encompass “all

income from whatever source derived,” including income from the discharge of

indebtedness. 26 U.S.C. § 61(a)(11). But a narrow statutory exception permits

taxpayers to exclude debt from discharged income, so long as the discharge

occurs at a time when the taxpayer is insolvent. 26 U.S.C. § 108(a)(1)(B).

      This exception acknowledges the reality that insolvent taxpayers will

realize no income from discharge because—as a practical matter—no assets

become available to the taxpayer. See United States v. Kirby Lumber Co., 284

U.S. 1 (1931). For this reason, the Code also limits the exclusion of discharge-of-

indebtedness income to the amount by which the taxpayer’s liabilities exceed his

assets. See 26 U.S.C. § 108(a)(3); see also Carlson v. Comm’r, 116 T.C. 87, 91

(2001) (“[T]he term ‘insolvent’ means the excess of liabilities over the fair

market value of assets.”) (quoting 26 U.S.C. § 108(d)(3)).

                                        -6-
      It is well-settled that the taxpayer bears the burden of demonstrating that

his liabilities outnumber his assets. E.g., Shepherd v. Comm’r, 104 T.C.M.

(CCH) 108 (2012) (citations omitted). Although the Code does not expressly

define the term “assets,” the Tax Court has, for these purposes, construed it to

include any resource that “can give the taxpayer the ability to pay an immediate

tax on income from the canceled debt.” Schieber v. Comm’r, 113 T.C.M. (CCH)

1144 (2017) (internal quotation marks omitted) (quoting Carlson, 116 T.C. at

104–05 (observing that even assets beyond the reach of other creditors could

constitute assets for the purposes of 26 U.S.C. § 108(d)(3))).

      In conducting this practical inquiry, the Internal Revenue Service may

appropriately prioritize “substance over form.” E.g., Frank Lyon Co. v. United

States, 435 U.S. 561, 572–73 (1978) (citations omitted). In cases where, as here,

a “transferor continues to retain significant control over the property transferred,”

the Service may set aside niceties like formal title. Id. Indeed, we have

repeatedly ratified the propriety of prioritizing economic reality in place of the

formal characterizations taxpayers may lend transactions. See Rogers v. United

States, 281 F.3d 1108, 1116–17 (10th Cir. 2002) (“[T]he doctrine of substance

over form has been recognized in a number of our precedents.”).

                                          -7-
             2. Application

      The Tax Court appropriately applied the substance-over-form doctrine to

characterize the disputed funds as the Hamiltons’ assets for purposes of the

insolvency calculation required by 26 U.S.C. § 108. Given the evidence disclosed

by the stipulated record, the Tax Court properly concluded they exercised

effective ongoing control over these funds.

      Prior to the transfer, the record suggests their son used this savings account

rarely, if at all. No evidence indicates the transfer represented a gift. 4 Nor did

their son pay any consideration in exchange for these funds. Moreover, he

immediately provided Mrs. Hamilton with login credentials so that she could

access these funds whenever she wanted. During Tax Year 2011, she withdrew

nearly $120,000 to cover living expenses. 5 Their son, by contrast, never withdrew

any of these funds.

      Although the Hamiltons now contend he could have changed the login

credentials so as to lock out his mother, we think it more significant that he never

did so. See, e.g., Sanford’s Estate v. Comm’r, 308 U.S. 39, 43 (1939) (“[T]he

essence of a transfer is the passage of control over the economic benefits of the

      4
        The record discloses none of the tax documentation one might ordinarily
expect for a gift of this size.
      5
         Although only Mrs. Hamilton accessed these funds, it is undisputed that
she did so to pay joint living expenses.

                                         -8-
property rather than any technical changes in its title.”). Because the Hamiltons

retained effective control over the disputed funds, we conclude the Tax Court did

not err.

       The Hamiltons also contend that—under Utah law—their son was the sole

owner of the savings account. 6 But this argument bears not at all on the

substance-over-form inquiry. See Carlson, 116 T.C. at 104–05 (observing that

assets beyond the reach of other creditors may nonetheless constitute assets for

federal tax purposes). This is because “taxation is not so much concerned with

the refinements of title as it is with the actual command over the property taxed.”

See Sanford, 308 U.S. at 43 (internal quotation marks and citations omitted).

       The Hamiltons alternatively assert we should treat the disputed funds as

separate property owned solely by Mrs. Hamilton. This argument fails for much

the same reason, since—as we have seen—assets beyond the reach of ordinary

creditors may nonetheless constitute assets for federal tax purposes. See Carlson,

116 T.C. at 104–05. Here, the vast majority of the disputed funds arose from Mr.

       6
         On appeal, the Hamiltons advance a related argument—which they raised
for the first time in their motion for reconsideration below—that the Tax Court
lacked authority to apply the nominee inquiry to a deficiency proceeding. As the
government observes, we ordinarily will not consider arguments previously
available to litigants that were raised for the first time in post-judgment motions.
See Servants of Paraclete v. Does, 204 F.3d 1005, 1012 (10th Cir. 2000). Even if
we were to depart from that practice here, this argument would not disturb our
conclusion that the Tax Court did not err.

                                         -9-
Hamilton’s partnership distribution; and the funds Mrs. Hamilton withdrew during

Tax Year 2011 supported both of their living expenses. We accordingly conclude

that Mr. Hamilton—with Mrs. Hamilton acting as his agent—exercised effective

control over these funds. See Sanford, 308 U.S. at 43.

      In our view, the Tax Court erred neither factually nor legally in sustaining

the Notice of Deficiency. 7

      B. The Late-Filing Penalties

      As a result of their two-year delay in filing a federal return for Tax Year

2011, the Internal Revenue Service assessed the Hamiltons late-filing penalties

pursuant to 26 U.S.C. § 6651(a)(1). The Tax Court sustained these penalties,

concluding their failure to file stemmed from willful neglect, rather than

reasonable cause. The Hamiltons also appeal that determination.

      7
         The Hamiltons have also argued the Tax Court erred in refusing to shift
the burden of persuasion to the government. Although taxpayers ordinarily must
carry the burden of persuasion with respect to any claimed deduction, a statutory
exception may shift this presumption back to the government on factual issues the
taxpayer supports with credible evidence. E.g., Esgar Corp. v. Comm’r, 744 F.3d
648, 653 (10th Cir. 2014) (citing 26 U.S.C. § 7491). To benefit from this burden-
shifting exercise, an individual taxpayer must have: (1) complied with the
requirements to substantiate any item; (2) maintained all required records; and (3)
cooperated with reasonable requests for witnesses, information, documents,
meetings, and interviews. Id. at 654 n.5 (cleaned up). The Tax Court concluded
the Hamiltons failed to abide by these requirements, such that the burden should
not shift. But we have observed “there is no need to rule on whether the burden
shifts” when “evidence is not equally balanced.” Id. at 654. Since the evidence
in this case strongly favors the government, we decline to consider this argument.

                                        -10-
      The Code provides a limited exception for “reasonable cause” from

otherwise-steep penalties when taxpayers fail to timely file their returns. See 26

U.S.C. § 6651(a)(1). Because the presence or absence of reasonable cause

requires a factual determination, we review the Tax Court’s treatment of late-

filing penalties assessed under 26 U.S.C. § 6651(a)(1) for clear error. See In re

Craddock, 149 F.3d 1249, 1255 (10th Cir. 1998) (citing United States v. Boyle,

469 U.S. 241, 249 n.8 (1985)).

      Precedent tells us the Hamiltons bear a “heavy burden” in seeking to

demonstrate reasonable cause. See id. (quoting United States v. Boyle, 469 U.S.

241, 245 (1985)). Indeed, we have previously observed that “reasonable cause

exists ‘if the taxpayer exercised ordinary business care and prudence and was

nevertheless unable to file the return within the prescribed time.’” Id. (quoting

Treas. Reg. § 301.6651-1(c) (emphasis in original)).

      Here, the stipulated record offers no explanation that would account for the

Hamiltons’ failure to file timely their 2011 Tax Return. In briefing, they contend

their attention was “consumed with [Mr. Hamilton’s] care and well[-]being.”

Aplt. Br. 24. But the record discloses no evidence of incapacity, save for Mr.

Hamilton’s injury. And—during this same period—Mrs. Hamilton successfully

managed the complex task of obtaining the student-loan discharge.

                                        -11-
      In our view, the Tax Court did not clearly err in upholding the late-filing

penalties assessed under 26 U.S.C. § 6651(a)(1).

                                III. Conclusion

      For the reasons stated herein, we accordingly AFFIRM the judgment of the

Tax Court.

                                        -12-