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Clearly Erroneous Standard

Generally, the findings of fact made in the lower court shall not be set aside on appeal unless they are clearly erroneous.  In Ragland Inv. Co. v. Commissioner, 435 F.2d 118 (6th Cir. 1970), the court stated that on appeal, the court will not disturb findings of fact unless they are clearly erroneous.

On appeal the burden of showing that a finding is clearly erroneous is placed on the appellant.  This burden is a heavy one, especially where findings are based on oral testimony.  The appellant has to clearly point out where findings of the trial court are clearly erroneous.

Finding of fact becomes clearly erroneous when the reviewing court upon reviewing the entire evidence is left with the definite and firm conviction that a mistake has been committed.  In Estate of Lisle v. Comm’r, 541 F.3d 595 (5th Cir. 2008), according to the United States Supreme Court, the clear error standard plainly does not entitle a reviewing court to reverse the finding of the trier of fact simply because it is convinced that it would have decided the case differently. The reviewing court oversteps the bounds of its duty if it undertakes to duplicate the role of the lower court. In applying the clearly erroneous standard to the findings of a district court sitting without a jury, appellate courts must constantly have in mind that their function is not to decide factual issues de novo. If the district court’s account of the evidence is plausible in light of the record viewed in its entirety, the court of appeals may not reverse it even though convinced that had it been sitting as the trier of fact, it would have weighed the evidence differently. Where there are two permissible views of the evidence, the fact finder‘s choice between them cannot be clearly erroneous.

An appellate court should apply the clearly erroneous standard in judging a trial court’s treatment of factual issues.  A judgment becomes reversible if the factual issues are reviewed in a clearly erroneous manner.  In United States v. United States Gypsum Co., 333 U.S. 364 (U.S. 1948), it was stated that a finding is “clearly erroneous” when although there is evidence to support it, the reviewing court on the entire evidence is left with the definite and firm conviction that a mistake has been committed.

When the appellant contends that findings of the trial court are clearly erroneous, the reviewing court must examine the entire record to determine whether the trial court’s findings can pass muster.  The question on review is not simply whether the reviewing court would have found otherwise, but whether the trial court could permissibly find as it did.  The choice made by the trial court between two permissible views of the weight of the evidence cannot be clearly erroneous.  The Supreme Court will not overturn the concurrent findings of two lower courts lightly where an intermediate court reviews and affirms a trial court’s finds.  If the Supreme Court is the only court of review it will engage in a traditional, clear error analysis.

Although a higher than usual standard of proof is required of parties in a case does not expand the scope of appellate review, the review under the clearly erroneous standard can be affected by a stricter than normal standard of proof.

The clearly erroneous standard for review of factual findings on appeal has wide applicability and it governs the factual meaning of contracts and what an actor intended.  Findings of materiality and intent to establish inequitable conduct as a ground for patent invalidity are subject to the clearly erroneous standard of review.

Generally, the clearly erroneous standard governs findings of fact about the significance of documentary evidence.  In Anderson v. Bessemer City, 470 U.S. 564 (U.S. 1985), the court stated that if the district court’s account of the evidence is plausible in light of the record viewed in its entirety, the court of appeals may not reverse it even though convinced that had it been sitting as the trier of fact, it would have weighed the evidence differently. Where there are two permissible views of the evidence, the fact finder’s choice between them cannot be clearly erroneous. This is so even when the district court’s findings do not rest on credibility determinations, but are based instead on physical or documentary evidence or inferences from other facts.

In Estate of Lisle v. Comm’r, 541 F.3d 595 (5th Cir. 2008), the court stated that 26 U.S.C.S. § 7482(a)(1) instructs courts of appeals to review tax court decisions in the same manner as district court decisions on civil cases tried without a jury. Fed. R. Civ. P. 52(a)(6) instructs that courts of appeals can set aside the district court’s findings on cases tried without a jury if they are clearly erroneous. However, when the tax court judge rejects a special trial judge’s findings and a court of appeals is faced with a conflicting report and opinion, it determines whether the tax court judge committed clear error by rejecting the special trial judge’s findings as clearly erroneous by reviewing the special trial judge’s report to determine if his findings were, indeed, without record support.

Where the clearly erroneous standard is generally applicable to appellate review of factual findings, a trial court’s initial determination that a witness is qualified to testify as an expert is reviewed under that standard.  A trial court’s findings based on expert testimony are also covered by the clearly erroneous standard.

In Kanter v. Comm’r, 590 F.3d 410 (7th Cir. 2009), a central question the appellate court asked is whether the Tax Court committed clear error when it failed to accord the original findings of fact, credibility of witnesses and conclusions of a Special Trial Judge (STJ) the due deference required under the law. This suggests that review in the court of appeals should proceed through the lens of the question whether the Tax Court gave proper deference to the STJ’s findings. The court further stated that to that end, the Supreme Court has noted that the publication of the STJ’s findings equipped taxpayers to argue to an appellate court that the Tax Court failed to give the special trial judge’s findings the measure of respect required by U.S. Tax Ct. R. 183. In the final analysis, this approach takes the appellate court to the same point: the STJ’s findings are the ones reviewed for clear error, not those of the Tax Court.

Where findings of fact are generally subject to the clearly erroneous standard of appellate review, the standard applies to inferences drawn from undisputed or stipulated facts.  In TradeArbed Inc. v. Western Bulk Carriers K/S, 2010 U.S. App. LEXIS 1755 (5th Cir. La. Jan. 26, 2010), the court stated that the bench-trial fact findings, whether based on oral or other evidence, must not be set aside unless clearly erroneous. Fed. R. Civ. P. 52(a)(6). Restated, this standard is applied even though the district court made no credibility determinations based on oral testimony and based them only on documentary evidence or inferences from other facts.

It is the task of the trial court as a trier of fact to judge credibility, resolve conflicts in testimony, assess the weight to be given the evidence, and determine the factual content of ambiguous testimony.  In United States v. United States Gypsum Co., 333 U.S. 364 (U.S. 1948), the court stated that findings of fact in actions tried without a jury shall not be set aside unless clearly erroneous, and due regard shall be given to the opportunity of the trial court to judge of the credibility of the witnesses.  Where the trial court prejudges the credibility of witnesses, rejects that credibility as insufficient to sustain the plaintiff’s burden, and excludes the witnesses’ testimony, the court’s findings are not entitled to the protection of the clearly erroneous standard.  Under the clearly erroneous standard, findings of fact prepared by counsel and adopted by the trial court are subject to greater scrutiny than those authored by the trial judge.  Adopted findings are entitled to no less weight than other findings.

The clearly erroneous standard applies to appellate review of ultimate and subsidiary facts and therefore, a federal court of appeals is not free to adopt a standard of review other than the clearly erroneous standard merely because the result in a case turns on a factual finding.

Although most of the courts take the view that mixed questions of fact and law do not come under the clearly erroneous standard of review, some consider that a mixed question of law and fact is subject to appellate review under the clearly erroneous standard.  In Umholtz v. Brady, 169 B.R. 569 (E.D.N.C. 1993), the court stated that “in reviewing a bankruptcy court’s decision, a district court applies the same standards of review as those governing appellate review in other cases. In general, an appeal from the bankruptcy court only involves two standards of review: as to findings of fact, a district court must proceed under a clearly erroneous standard of review, as to conclusions of law, a de novo standard of review is appropriate. Although it is clear that the bankruptcy court’s holding as to the existence of a fiduciary duty is a conclusion of law subject to the de novo standard of review, a finding by that court of a breach of that duty is a mixed question of law and fact. The interpretation of a contract and the determination as to its breach are a mixed question of fact and law. In general, factual findings as to what the parties said or did are reviewed under the clearly erroneous standard while principles of contract interpretation applied to the facts are reviewed de novo. An appeals court will apply this same reasoning to a breach of fiduciary duty case, and accordingly will review factual findings as to what the parties said or did under a clearly erroneous standard and will review the legal principles the bankruptcy court applied to those facts under a de novo standard.”


Inside Clearly Erroneous Standard