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504 F.Supp. 1239 (1981)
HUGHES-GIBB & CO., LTD., Underwriters of Lloyds of London as Subrogee of Ag-World Export, Inc., Plaintiff,
v.
The FLYING TIGER LINE, INC., Defendant.
No. 80 C 3476.
United States District Court, N. D. Illinois, E. D.
January 12, 1981.
*1240 Karen Mellow, Conklin & Adler, Ltd., Chicago, Ill., for plaintiff.
C. Kevin McCabe, Lord, Bissell & Brook, Chicago, Ill., for defendant.
ORDER
BUA, District Judge.
This cause comes before the court on the motion of the defendant herein, the Flying Tiger Line, Inc., for summary judgment.[1] Rule 56(b), Fed.R.Civ.P. As in the matter at bar the defendant's potential liability is predicated upon an interpretation of the Warsaw Convention, 49 U.S.C. § 1502 note, and the amount in controversy exceeds $10,000, exclusive of interest and costs, subject matter jurisdiction over the cause properly lies pursuant to 28 U.S.C. § 1331(a).
Facts
In the matter at bar, the plaintiff, Hughes-Gibb & Co., Ltd., seeks to recover, in its capacity as subrogee, for the loss of 72 breeding swine (out of a shipment of 130) sustained by its subrogor-insured, Ag-World Export, Inc. This loss, Hughes-Gibb contends, was due to and resulted from the defendant's alleged mishandling of the subject swine while they were being transported by Flying Tiger from Chicago, Illinois to Manila, Philippines.
In the summer of 1978, the 130 breeding swine forming the basis of this litigation were located in Bloomington, Illinois. During that summer, Ag-World Exports (the Shipper), the owner of the swine, contracted to have them sold to South Cotabato Hog Raisers, Inc. (the Consignee), a Philippine hog merchant. In conjunction with this sale, the Shipper also contracted with the defendant (the Carrier) to have the 130 pigs transported from the United States to the Philippines.
Although their ultimate destination was Davao City, Philippines, it appears that under *1241 the terms of the Ag-WorldFlying Tiger Line contract of carriage, as embodied in Airway Bill XXX-XXXXXXXX, the defendant was obligated to carry the pigs only from Chicago to Manila, Philippines. Carriage from Manila to Davao City was to be by Philippine Aerotransport, apparently pursuant to a separate transportation agreement. See Defendant's Exhibit B-1.[2]
The 130 breeding swine debarked Chicago for the Philippines on July 12, 1978, aboard an airliner owned and operated by the defendant. Upon their arrival in Manila on July 14, it was discovered that 60 of the pigs had died, allegedly as a result of suffocation during the flight. These 60 pigs were certified as dead on arrival by a Philippines' Customs Examiner, a representative of the Philippines Bureau of Animal Industry, and by a representative of the defendant. Plaintiff's Exhibit A. According to the plaintiff, the dead animals were then rendered, without autopsy, to the National Slaughterhouse of the Bureau of Animal Industry.
At the Manila airport, the 70 surviving boars and gilts were transferred, by the Shipper's agent, to a Philippine Aerotransport aircraft, and flown the same day [July 14] to Davao City. Defendant's Exhibit B-3. According to the plaintiff, 3 more pigs died during that flight. That having occurred, when the 67 surviving swine were off-loaded in Davao City, they were immediately placed in the custody of the Bureau of Animal Industry, and were quarantined for a period of 30 days. 9 more pigs are alleged to have died during this quarantine period. At the expiration of the quarantine, the remaining 58 pigs were released to the Consignee.
On August 28, 1978, the Consignee presented a claim to the defendant for the loss of the original 60 head of breeding swine. Defendant's Exhibit A. Written notice of South Cotabato's claim for the loss of the other 12 pigs was provided to Flying Tiger sometime in January of 1979. Defendant's Exhibit A.
Applicable Law
In its motion for summary judgment, Flying Tiger contends first that any claims against it in this matter will be governed solely by the provisions of Article 26 of the Warsaw Convention; and secondly that, since the plaintiff's subrogor did not give Flying Tiger written notice of its loss within seven days of July 14, 1978, the date of the loss, as is required by Article 26(2), Hughes-Gibb is precluded from recovering against it [the Carrier].[3]
Article 26(2) of the Warsaw Convention provides that:
[i]n case of damage, the person entitled to delivery must complain to the carrier forthwith after the discovery of the damage, and at the latest, within 3 days from the date of receipt in the case of baggage and 7 days from the date of receipt in the case of goods....
As regards Article 26(2), the plaintiff contends that the 7 day notice requirement for goods applies only in cases of "damaged" goods. The 72 dead pigs forming the basis *1242 of its claim, the plaintiff argues, were not "damaged" goods, but rather were "destroyed" goods, to which Article 26 has no applicability.
As to this argument of the plaintiff, the court believes Dalton v. Delta Airlines, Inc., 570 F.2d 1244 (5th Cir. 1978) to be dispositive. Dalton appears to be the only federal decision dealing with the death of animals during a Warsaw Convention-controlled flight. In that action, the unlucky animals were a shipment of 5 greyhounds who had died while in carriage from Ireland to Miami, Florida. The district court had granted the defendant's motion for summary judgment, based upon the plaintiff's admitted failure to provide Delta with notice of his claim within seven days of the date of delivery. The Fifth Circuit, however, reversed, holding instead that "where destruction of goods occurs on an international flight the shipper-consignee need not give [Article 26(2) and (3)] notice." Id. at 1248.
In Dalton, the Fifth Circuit found a "gap" in Article 26, which it entitled "The Lost Chord in the Warsaw Concerto." By its own terms, the Fifth Circuit stated in this regard, "[Article 26] is applicable only in cases of damage or delay. Our unfortunate greyhounds were neither damaged nor delayed; they were destroyed." Id. at 1246.
This court agrees with the Dalton court's conclusion that, due to an apparent drafting oversight, a loophole exists in the Warsaw Convention. This loophole comes into view when three of the Convention's sub-sections are examined: Article 18(1) provides that a carrier shall be liable for damages sustained in three separate factual situationsthose relating to lost, destroyed and damaged goods.[4] Regarding lost goods, Article 13(3) indicates that notice need not be given;[5] as to damaged goods, Article 26(2), as was noted previously, requires timely notice; concerning destroyed goods, the Convention is silent as to notice.
This court also agrees with the position taken by the Fifth Circuit in regard to this Warsaw Convention loophole: that no notice need be given to the carrier for claims involving destroyed goods. The Dalton court reached this conclusion by applying sound and accepted rules of contract construction. Faced with a factual situation not expressly provided for in the Warsaw Convention, the Dalton court turned to and examined that fact situation covered by the Convention which was most similar to the one before it, i. e. the one relating to lost goods, and determined that the two situations should be treated alike. In making this determination, the court noted that a factor clearly common to both lost and destroyed goods, but hardly ever to damaged goods, was that "in [the case of lost or destroyed goods, the goods] are wholly without economic value or utility to the shipper-consignee beyond mere scrap value." Id. at 1246-47.
A careful reading of the debates of the Warsaw Convention provides another basis for approving the Dalton holding. Minutes of the Second International Conference of Private Aeronautical Law, Oct. 4-12, 1929, Warsaw, translated R. C. Horner and D. Legrez. The Minutes of the Fifth Session reveal that the Article 26 notice provision was developed primarily for application in cases involving disputes over the value of delivered goods. That being true, in light of the fact that dead animals seldomif everhave a value subject to dispute, to conclude as the Dalton court did, that the strictures of Article 26 should have no bearing in this type of factual situation, seems eminently sound.
The defendant, however, also argues that, even if this court accepts the Dalton *1243 interpretation of the Warsaw Convention, the instant case is distinguishable. In this regard, Flying Tiger contends that the Consignee of the subrogor-insured of the plaintiff herein, in contrast to what was done in Dalton, while he was at the Manila airport acknowledged receipt of the entire shipment of the subject animals. Assuming such to be true, though, the court does not see how this fact alone could warrant a result different from that in Dalton, at least with respect to the 60 pigs that died on the Chicago to Manila flight.
Although South Cotabato's agent may have acknowledged receipt of the same (which itself has not been established conclusively), the fact remains that those 60 animals never were in the Consignee's possession or control. As was true with the dogs in Dalton, upon their arrival in Manila these 60 pigs were removed immediately from the airport, in this case for rendering to a slaughterhouse. Flying Tiger, moreover, like Deltathe Dalton carrier, recognized that these animals were dead on arrival. The defendant, in fact, along with two officials of the Philippines' government, signed a certificate to that effect at the Manila airport. That being so, as the fact of this loss was obvious and apparent to the defendant, to require that written notice also be provided of it before any recovery could be had would seem to serve no useful or justifiable purpose. Dalton, 570 F.2d at 1247.
The defendant also contends that the plaintiff's breeding pigs, in contrast to the Dalton dogs, must be considered damaged rather than destroyedgoods because, even when dead, they [the pigs] had economic value.[6] Flying Tiger argues in this regard that, unlike dead greyhounds, dead pigs have value because they are edible. The economic value test for destroyed goods, however, as the Dalton court clearly noted, is whether the goods remain useable for the owner's purpose. In this regard, just as dead greyhounds cannot race, dead breeding swine cannot breed. Even for the purposes of Messrs. Swift and Armour, though, pigs that die on airplanes are without economic value. This is so because sausage made from pigs not killed in slaughterhouses is adulterated sausage under the Federal Food, Drug and Cosmetic Act, 21 U.S.C. § 342(a)(5).
As to the 60 pigs that arrived dead in Manila, then, this court adopts the "no notice for destroyed goods" rule of Dalton. That being so, the defendant's motion for summary judgment will be denied as to these animals.
Flying Tiger's motion for summary judgment as to the 12 pigs that died either on board the Philippines Aerotransport flight to Davao City or during the month-long quarantine that followed said flight will, for different reasons, also be denied. This will be done because the court cannot, at the present time, accept as conclusive Defendant's Exhibit B-1 (Airway Bill XXX-XXXXXXXX), which was introduced in part to establish that Flying Tiger was obligated to deliver the entire shipment of 130 pigs only to Manila.[7] The court, though, also believes that, should the facts later establish that the parties intended Manila, and not Davao City, to be the ultimate destination of the Ag-WorldFlying Tiger Line contract of carriage, summary judgment in favor of the defendant would be appropriate as to the plaintiff's claims for those 12 pigs.
These pigs survived the Flying Tiger flight to Manila. Upon their arrival at the Manila airport, they were off-loaded from the defendant's plane, by the Shipper, and placed aboard another carrier's aircraft for shipment to Davao City. Defendant's Exhibit B-3. From the defendant's perspective, therefore, these 12 animals, along with the other survivors, would have been considered *1244 live pigs, on their way to their final destination.
The plaintiff argues that these pigs, when they arrived in Manila, had "hidden damage". Article 26 of the Warsaw Convention, however, was designed and intended to apply to cases of this type, where "hidden damage" has been alleged. See Minutes of the Fifth Session of the Warsaw Convention, supra. That being true, the court believes that, as concerns these 12 pigs, if Flying Tiger's responsibility for them ended in Manila, before recovery could be had by it from that carrier Hughes-Gibb would have to show that its subrogor had satisfied the 7 day notice requirement of Article 26.[8]
CONCLUSION
For the reasons stated above, the motion for summary judgment of defendant Flying Tiger Line, Rule 56(b), Fed.R.Civ.P., is DENIED.
NOTES
[1] The motion under discussion was presented as one for dismissal, for failure to state a claim upon which relief could be granted. Because complete resolution of it required that consideration be given to materials outside of the pleadings, however, it has been treated by the court as one for summary judgment. Rule 12(b)(6), Fed.R.Civ.P.
[2] Sometime before the Flying Tiger flight's departure on July 12, 1978, an agent of the Shipper telexed instructions to the Consignee that it was "to meet Tiger aircraft [and] take deliver (sic) of the 5 containers [containing the subject pigs] and go to Davao." Defendant's Exhibit B-2.
[3] Article 26 provides:
(1) Receipt by the person entitled to the delivery of baggage or goods without complaint shall be prima facie evidence that the same have been delivered in good condition and in accordance with the document of transportation.
(2) In case of damage, the person entitled to delivery must complain to the carrier forthwith after the discovery of the damage, and at the latest, within 3 days from the date of receipt in the case of baggage and 7 days from the date of receipt in the case of goods. In case of delay the complaint must be made at the latest within 14 days from the date on which the baggage or goods have been placed at his disposal.
(3) Every complaint must be made in writing upon the document of transportation or by separate notice in writing dispatched within the times aforesaid.
(4) Failing complaint within the times aforesaid, no action shall lie against the carrier, save in the case of fraud on his part.
[4] Article 18(1) provides:
The carrier shall be liable for damage sustained in the event of the destruction or loss of, or of damage to, any checked baggage or any goods, if the occurrence which caused the damage so sustained took place during the transportation by air.
[5] Article 13(3) provides:
If the carrier admits the loss of the goods, or if the goods have not arrived at the expiration of seven days after the date on which they ought to have arrived, the consignee shall be entitled to put into force against the carrier the rights which flow from the contract of transportation.
[6] In denying this aspect of Flying Tiger's motion for summary judgment, the court has not made a finding of fact regarding this "remaining economic value" issue raised by the defendant. Accordingly, Flying Tiger will not be precluded by the court's ruling in the motion at bar from litigating this question at trial.
[7] The plaintiff contends that the defendant was obligated to deliver the full shipment of 130 pigs to Davao City, not just to Manila. Flying Tiger disputes this contention, claiming instead that, under the provisions of the Ag-WorldFlying Tiger Line contract of carriage, its obligations ended at Manila.
[8] If, as it presently appears, the subrogor's Consignee did not provide the requisite written notice until some six months after the July 14, 1978 delivery in Manila, see Defendant's Exhibit A, Hughes-Gibb's claims as to these 12 pigs likely will be barred, as a matter of law, by Article 26(3) of the Warsaw Convention.
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670 F.Supp. 920 (1987)
C. Frank BRADFORD, et al., Plaintiffs,
v.
Lorin L. MOENCH, et al., Defendants.
No. 87-C-0078S.
United States District Court, D. Utah, C.D.
July 9, 1987.
*921 Robert M. Anderson, Ross C. Anderson, John T. Anderson, William P. Schwartz, Hansen & Anderson, Salt Lake City, Utah, for plaintiffs.
Christopher L. Burton, George W. Pratt, Michael O'Brien, Jones, Waldo, Holbrook & *922 McDonough, Salt Lake City, Utah, for Lorin L. Moench and Richard Moench.
Henry Nygaard, Salt Lake City, Utah, for Robert Beckstead and Copper State Financial Corp.
Denis R. Morrill, Prince, Yeates & Geldzahler, Salt Lake City, Utah, for John Taggart.
Richard M. Taylor, Taylor & Taylor, Spanish Fork, Utah, for Snell Olsen.
ORDER
SAM, District Judge.
The defendant Lorin and Richard Moench, Richard Beckstead, Commercial Security Financial Corporation and John M. Taggert, filed a motion to dismiss the plaintiffs' complaint. The matter was referred to the magistrate under 28 U.S.C. § 636(b)(1)(B). The magistrate issued a report and recommendation and amended report and recommendation that the motion to dismiss be denied except as to the plaintiffs' claim under Section 17(a) of the Securities Act of 1933. As to that claim the magistrate recommended the defendants' motion be granted. No objection has been taken to the magistrate's report and recommendation. The court has reviewed the file and adopts the magistrate's report and recommendation. Therefore,
IT IS HEREBY ORDERED that the motion of the above named defendants to dismiss the plaintiffs' complaint is denied, except that the portion of plaintiffs' claim that is based on Section 17(a) of the Securities Act of 1933 is dismissed.
REPORT AND RECOMMENDATION
The plaintiffs, numerous purchasers of thrift certificates or participants in saving passbook or other accounts of Copper State Thrift and Loan (CST & L) filed suit against CST & L, individual members of CST & L's board of directors and principal stockholders. Copper State Financial Corporation (CSFC) has also been named a defendant. The plaintiffs contend the defendants violated 15 U.S.C. § 78j(b) and Rule 10b-5, 17 C.F.R. § 240.10b-5 of the Securities Exchange Act of 1934; Section 12(2) 15 U.S.C. § 77l(2) of the Securities Act of 1933; Section 17(a) of the Securities Act of 1933, 15 U.S.C. § 77q(a); the Utah Uniform Securities Act, § 61-1-22, et seq., U.C.A., 1953; Section 12(1) of the Securities Act of 1933, § 77l(1); 18 U.S.C. § 1961, et seq., R.I.C.O. Act and § 76-10-1601, U.C.A., 1953 R.I.C.E. Act; and that defendants engaged in common law fraud. The plaintiffs' claims for relief are set forth in plaintiffs' amended complaint (File Entry # 8). The defendants, Lorin L. and Richard Moench, filed a motion to dismiss the amended complaint under Rules 12(b) and 9(b), Federal Rules of Civil Procedure (F.R.C.P.), for failure to state a claim for relief (File Entry # 10). Robert B. Beckstead and CSFC have joined in the same motion as filed by defendants Moench. (File Entry # 15, 16). Defendant John M. Taggart also joined in the motion. (File Entry # 21). Motions to stay discovery pending disposition of the motions were also filed, however, the magistrate orally denied those motions at the time of hearing on the motions to dismiss, a written order confirming the denial of a stay on discovery has also been entered. This case has been referred to the magistrate under 28 U.S.C. § 636(b)(1)(B). This report and recommendation is submitted on the various defendants' motions to dismiss.
The motions to dismiss, even when considered with the affidavit of Robert B. Beckstead and other materials[1] must be considered under the assumption that the allegations in the plaintiffs' complaint are true. Conley v. Gibson, 355 U.S. 41, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957); Jay v. Chicago Bridge & Iron Co., 150 F.2d 247 (10th Cir.1945).
Defendants' Motion to Dismiss
The defendants' memorandum in support of the motion to dismiss the plaintiffs' amended complaint (File Entry # 11) sets *923 forth the essence of defendants' contentions. First, the defendants contend that the plaintiffs' interests in CST & L were not "securities" within the meaning of the Securities Act of 1933 and the Securities Exchange Act of 1934 or the Utah Uniform Securities Act. Whether the plaintiffs' interests in CST & L were securities also directly effects the question of whether the activities alleged to have been engaged in by defendants constitute possible violations of the RICO Act or the RICE Act.
The defendants also contend a private claim for relief cannot be maintained under Section 17(a) of the Securities Act of 1933.
Defendants contend that as to the Third, Fourth, Sixth, Seventh, and Eighth claims, the plaintiffs cannot base a claim for relief on allegations of omissions to disclose because the defendants owed the plaintiffs no duty of disclosure. The defendants also assert the claims of plaintiffs as to securities fraud, common law fraud, RICO and RICE are not pleaded with insufficient particularity to meet the requirements of Rule 9(b), F.R.C.P. The various contentions of the defendants will be considered below.
Compliance With Rule 9(b), Federal Rules of Civil Procedure
The allegations as to the specificity of plaintiffs' RICO Act claims will be considered in conjunction with whether the plaintiff has plead a claim for relief under RICO, 18 U.S.C. § 1961, et seq., and RICE, 76-10-1601 et seq., U.C.A., 1953.
Plaintiffs' Sixth Claim for Relief alleges a common law fraud claim against defendants Moench, Beckstead, Taggart, CST & L and CSFC. Pendent jurisdiction is apparently the basis for this court to act on that matter. The claim incorporates the allegations in paragraphs 1-65 of the complaint and more particularly paragraph 20. That paragraph alleges that schemes and artifices to defraud were used and numerous untrue statements of material facts were made as well as omitted which were deceitful. Subparagraphs A, B, and C set forth specific alleged misrepresentations as to the status of CST & L and the status of its deposits in relation to protection of the CST & L assets and depositors accounts. Also in paragraph 20 D other specific representations are set forth (P. 15 Amended Complaint). Omissions are itemized (Id.), Pages 15 and 16 of the amended complaint also set forth representations defendants made or caused to be made to plaintiffs as members of the general public and as depositors or potential depositors. Specific time periods as to CST & L's difficult and allegedly precarious financial condition are set out (See pp. 16-17 of amended complaint); and misrepresentations as to solvency of CST & L were allegedly made and misrepresentations as to what depositors could expect as to their investments. (See p. 8, ¶ L. Amended Complaint). Omissions are also mentioned (Id.) The allegation is made that the misrepresentations were intentional and reasonably relied on by plaintiffs. An allegation as to materiality is also included (Id. p. 19, ¶ 23). An allegation of conspiratorial omission has been set out. (Id. p. 20, ¶ 26). The persons making the alleged misrepresentation or failing to disclose are identified as the defendants, specifically Moench, Beckstead, CST & L, and CSFC. (Id. p. 10). The defendants assert that the allegations are insufficiently particular to meet the standards of Rule 9(b).
Rule 9(b), F.R.C.P., requires an allegation of fraud be plead with particularity. Central Nat. Bank of Cleveland v. King, 573 F.2d 669 (10th Cir.1978). Mere general allegations do not meet the requirements of Rule 9(b). Nolan Bros., Inc. v. United States, 266 F.2d 143 (10th Cir.1959). However, it must be kept in mind the Rules of Civil Procedure more intended a get away from "booby traps which common law pleaders could set to prevent" litigants from having a day in court. Lurowitz v. Hilton Hotels Corp., 383 U.S. 363, 373, 86 S.Ct. 845, 851, 15 L.Ed.2d 807 (1966). The rules, including those dealing with pleading, were to simplify the litigation process American Fidelity & Casualty Co. v. All American Bus Lines, Inc., 190 F.2d 234, 236 (10th Cir.). cert. denied 342 U.S. 851 (1951). It should also be observed that Rule 9(b) only requires the "circumstances" of fraud be pled not the "elements." *924 See 5 Wright & Miller, Federal Practice and Procedure, § 1297 at 400 (1969).
The defendant relies to some extent on Cook v. Zions First National Bank, 645 F.Supp. 423 (D.C.Utah 1986) where Judge Winder dismissed fraud and deceit claims based in part on inadequate pleading. That case is in opposite, in that in this case, plaintiffs have made more particularized allegations of facts and the erring defendants are reasonably identified. Given the number of plaintiffs, specific claims of individual plaintiffs would be duplicative. However, "each defendant" is advised of what the defendant allegedly did that was wrong. Judge Winder did refer to time, place, content and manner as being the standard for proper pleading. See also Philbosian v. First Financial Securities Corp., 550 F.Supp. 61 (D.C.Colo.1982); Rochambeau v. Brent Explorations, Inc., 79 F.R.D. 381 (D.C.Colo.1978). In Dahl v. Gardner, 583 F.Supp. 1262 (Utah 1984), Judge Winder found the complaint sufficient in part but dismissed a conclusionary allegation with leave to amend. The case was a securities fraud action. Judge Winder noted:
Rule 9(b) requires that `[i]n all averments of fraud or mistake, the circumstances constituting fraud or mistake shall be stated with particularity.' Fed. R.Civ.P. 9(b). That particularity requirement must be read in conjunction with the general principles of notice pleading set forth in Rule 8, which requires `a short and plain statement of the claim' for relief. Fed.R.Civ.P. 8(a). In striking a balance between those two rules, Wright and Miller note: `Perhaps the most basic consideration in making a judgment as to the sufficiency of a pleading is the determination of how much detail is necessary to give adequate notice to an adverse party and enable him to prepare a responsive pleading.' 5 C. Wright & A. Miller, Federal Practice and Procedure § 1298 (1969).
In this case, plaintiffs' complaint states in detail the alleged misrepresentations and omissions. Moreover, the complaint states the time of the alleged fraud, the persons involved and the facts and transactions underlying the fraud. The complaint certainly provides sufficient detail to give notice of the alleged fraud to the defendants to enable them to prepare an answer. The motion to dismiss the fraud claims under Rule 9(b) or alternatively for a more definite statement must therefore be denied.
Id. 1267.
See also, In re Home-Stake Production Co., Securities Litigation, 76 F.R.D. 337 (D.C.Okla.1975).
Of course, normally allegations on information and belief are insufficient. However, the allegations in this case go beyond mere information and belief and are specific. c.f. Schlick v. Penn-Dixie Cement Corp., 507 F.2d 374 (2d Cir.1974) cert. denied 421 U.S. 976, 95 S.Ct. 1976, 44 L.Ed.2d 467 (1975).
Of great significance is the recent case of Seattle First National Bank v. Carlstedt, 800 F.2d 1008 (10th Cir.1986). The issue involved a counterclaim to a suit by a bank. The counterclaim alleged violations of federal securities laws and the trial court dismissed the allegations for failure to meet the standards of Rule 9(b), F.R.C. P. See 101, F.R.D. 715 (W.D.Okla.1984). The Court of Appeals noted it had previously taken a liberal approach in securities fraud cases. Id. p. 1101, see e.g. Clegg v. Conk, 507 F.2d 1351 (10th Cir.1974) cert. denied 422 U.S. 1007, 95 S.Ct. 2628, 45 L.Ed.2d 669 (1975). The Court reversed and held the trial court had erred in dismissing the counterclaim. The Court said:
In Trussell v. United Underwriters, Ltd., 228 F.Supp. 757, 774-75 (D.Colo. 1964), the court elaborated upon the Rule 9(b) requirements:
Rule 9(b) does not ... require the pleading of detailed evidentiary matter, nor does it require any particularity in connection with an averment of intent, knowledge, or condition of mind. It only requires identification of the circumstances constituting fraud or mistake. That requirement means ... that individual plaintiffs should identify particular defendants with *925 whom they dealt directly, and from whom they purchased stock; that individual plaintiffs should designate the occasions on which affirmative statements were allegedly made to them and by whom; and that individual plaintiffs should designate what affirmative misstatements or half-truths were directed to them and how.
We believe this is a correct statement of Rule 9(b) requirements in securities fraud cases. We hold the defendants' counterclaim and amended counterclaim satisfy Rule 9(b) as explained in Trussell.
The counterclaims identify the counter-defendants with whom the counter-plaintiffs dealt directly, and from whom they purchased stock; the occasions on which affirmative misstatements were allegedly made to counter-plaintiffs; and, what affirmative misstatements or half-truths were directed to counter-plaintiffs and how those statements were made.
See also Luce v. Edelstein, 802 F.2d 49 (2d Cir.1986).
Gauging the plaintiffs complaint against the standards of these cases and the particulars of the allegations set out in the complaint referenced hereinbefore, it must be concluded that the plaintiffs' complaint meets the standards of pleading for common law and securities fraud under Rule 9(b).[2]
The pleading gives the defendants notice, demonstrates sufficient particularity to insure the allegations is not a mere "strike suit," and is precise enough to insure the defendants are not being casually injured in their reputations. This is adequate to avoid the pitfalls of fraud litigation and also to avoid retrogression to common law pleading. See Ruhman, Lively, Mell, The Pleading of Fraud: Rhymes Without Reason, 60 So.Cal.L.Rev. 959 (1987).
Omissions
The defendants argue that to the extent that the plaintiffs' claims are based on omissions to disclose material matter, that there must be a duty to disclose before liability can be imposed. The defendants argue there is a duty to disclose only if there is a confidential or fiduciary relationship shown.
As to the defendants' claims in the area of plaintiffs' securities and RICO claims, the argument is without merit. The defendants place emphasis on Chiarella v. United States, 445 U.S. 222, 100 S.Ct. 1108, 63 L.Ed.2d 348 (1980). However, that case sets the standard of duty in a relationship entirely different than the circumstances alleged in plaintiffs' amended complaint. Chiarella dealt with a person outside of the line of a securities transaction.[3] Chiarella was a financial printer engaged to print takeover bids. The Supreme Court expressly approved Cady v. Robert & Co., 40 SEC 907 (1961) which imposed a duty to disclose on "corporate insiders: particularly officers, directors or controlling stockholders." 445 U.S. at 227, 100 S.Ct. at 1114. The relationship between corporation and share purchaser is a relationship imposing a duty of disclosure. Id. p. 228, 100 S.Ct. at 1114-15. In the instant case plaintiffs, if their security argument has merit, are customers and defendants of the corporate entity and its officers. This is enough to require disclosure. Id. See Affiliated Ute Citizens v. United States, 406 U.S. 128, 92 S.Ct. 1456, 31 L.Ed.2d 741 (1972) holding that a bank as transfer agent had a duty to make disclosure to shareholders in a tribal stock company. "Thus, administrative and judicial interpretations have established that silence in connection with the purchase or sale of securities may operate as a fraud ..." 445 U.S. at 230, 100 S.Ct. at 1115. The dicta in Chiarella supports the plaintiffs' position. Further, the claims of the plaintiffs are not allegations of complete silence, but half truths and concealments. This type of misrepresentation is a traditional basis for recovery *926 for fraud.[4] The plaintiffs' RICO and securities actions are joined for the purposes of the legal theory of these actions. The defendants' omissions argument must be rejected[5] as to the RICO and securities claims.
As to plaintiffs' common law fraud claims, the observations made with reference to concealments and partial disclosure will support the claims in this case as against a motion to dismiss.
Restatement, Second Torts, supra, § 529.
However, to the extent that as fiduciary duty may be required under Utah law, Hal Taylor Associates v. Union America Inc., 657 P.2d 743, 749 (Utah 1982); Von Hake v. Thomas, 705 P.2d 766 (Utah 1985), the facts as alleged in the plaintiffs' complaint show the alleged making of representations to secure investments. The facts if shown could well support an inference of "trust and reliance" by plaintiffs on defendants special knowledge of the thrift industry and its financial markets and activities. See Hal Taylor Associates v. Union America, Inc, supra p. 749. Although there is authority for the proposition that banks owe no fiduciary duty to depositors, Denison State Bank v. Madeira, 213 Kan. 684, 815, 640 P.2d 1235 (1982) (see also defendants' memorandum p. 23), the thrift industry is not a bank and the factual circumstances may go beyond a mere depositor/financial institution relationship.[6] If a broader or more specialized relationship actually existed a fiduciary duty may be found. Freegard v. First Western National Bank, 738 P.2d 614. 57 Utah Adv.Rep. 6 (1987). Vai v. Bank of American National Trust and Sav. Assn., 56 Cal.2d 329, 15 Cal.Rptr. 71, 364 P.2d 247 (1961). Further, the facts alleged would support concealment as a basis for relief (See Restatement Second Torts § 550, 551) or negligent misrepresentations. (Restatement (Second) Torts § 552). At this stage of the proceedings the plaintiffs have made out a basis for relief. See Rules 8(a), 9(b), F.R. C.P. This is not to say that as the case unfolds the facts may not give rise to a motion for summary judgment as to any particular plaintiff. See Milliner v. Elmer Fox & Co., 529 P.2d 806, 808 (Utah 1974).
Plaintiffs' § 17(a) Claim
The plaintiffs in the Third Claim for Relief in their amended complaint seek relief against the defendants under Section 17(a) of the Securities Act of 1933, 15 U.S. C. § 77q(a). The defendants claim that no private action may be maintained on such a basis. The Circuit Courts of Appeal that have considered this issue are divided. The Fifth and Eighth Circuits have held no such action is proper. Simpson v. Southeastern Inv. Trust, 697 F.2d 1257, 1258 (5th Cir.1983); Shull v. Dain, Kalmca & Quail, Inc., 561 F.2d 152, 159 (8th Cir.1979). The *927 Second, Fourth, and Seventh Circuits have held a private action may be maintained. Kirshner v. United States, 603 F.2d 234, 241 (2d Cir.1978); Newman v. Prior, 518 F.2d 97, 99 (4th Cir.1975); Surowitz v. Hilton Hotels Corp., 342 F.2d 596, 604 (7th Cir.1965). The Ninth Circuit has recently joined the circuits recognizing a private cause of action under § 17(a). Mosher v. Kane, 784 F.2d 1385, 1391 (9th Cir.1986) cert. denied ___ U.S. ___, 107 S.Ct. 189, 93 L.Ed.2d 122 (1986). See also Securities Investor Protection Corp. v. Poirier, 653 F.Supp. 63, 67 (D.C.Or.1986) abandoning the position of Ahern v. Gaussoin, 611 F.Supp. 1465 (D.C.Or.1985) (no private action); Brabham v. Patenta, 614 F.Supp. 568, 569-71 (D.C.Or.1984) (no private action).
Within the Tenth Circuit the districts are divided as to whether a private action may be maintained under Section 17(a). In, Westland Energy 1981-1 LTD v. Bank of Commerce and Trust Co., 603 F.Supp. 698 (D.C.N.D.Okla.1984) the court found such an action was proper. In Woods v. Homes & Structures of Pittsburgh, Kansas, 489 F.Supp. 1270, 1284-88 (D.C.Kan.1980) and In re Storage Technology Corp. Securities Litigation, 630 F.Supp. 1072 (D.C.Colo. 1986) the courts have concluded no private action can be maintained under § 17(a). As both parties acknowledge, the Tenth Circuit appears to have taken a posture towards the position precluding such an action. State of Ohio v. Peterson, Lowry, Rall, etc., 651 F.2d 687, 689 (10th Cir.1981) cert. denied 454 U.S. 895 (1981). Two earlier cases are not of significance. Hanraty v. Ostertag, 470 F.2d 1096 (10th Cir.1972) (no holding or dicta, mere reference); de-Haas v. Empire Petroleum Co., 435 F.2d 1223 (10th Cir.1970) (same). In Brown v. Producers Livestock Loan Co., 469 F.Supp. 27, 31 (D.C.Utah 1978) Judge Anderson merely examined the statute of limitations that might be applicable to such a claim.
Recently, Judge Greene addressed the issue in Leiter v. Kuntz, 655 F.Supp. 725 (D.C.Utah 1987). Judge Greene canvassed the position within the Tenth Circuit and concluded that no private claim for relief could be maintained under 17(a).
Plaintiff's Third Cause of Action alleged fraud in the sale of a security under section 17(a) of the 1933 Act. 15 U.S.C. § 77q. Since the statutory language of § 17(a) is similar in many respects to § 10(b) and Rule 10b-5 of the 1934 Act, and given the judicially recognized private cause of action under 10(b) and Rule 10b-5, some courts have held that a private cause of action exists under § 17(a). See Stephenson v. Calpine & Conifers II, Ltd., 652 F.2d 808 (9th Cir.1981). The United States Supreme Court has withheld ruling on this issue. See Blue Chip Stamps v. Manor Drug Stores, 421 U.S. 723, 734 n. 6, 95 S.Ct. 1917, 1924 n. 6, 44 L.Ed.2d 539 (1975). Likewise the Tenth Circuit has not directly decided whether an implied right of action under § 17(a) exists. The matter was addressed in State of Ohio v. Peterson, Lowry, Rall, Barber & Ross, 651 F.2d 687 (10th Cir.1981) wherein the court expressed the following dicta:
[T]here is considerable doubt as to whether a private right of action exists under § 17(a) of the 1933 Act. See Woods v. Homes & Structures of Pittsburgh, Kansas, 489 F.Supp. 1270, 1284-88 (D.Kan.1980), where the court reviewed conflicting authorities in detail and came to the conclusion that no private action exists. The Supreme Court has not yet resolved the issue. See Aaron v. Securities Exchange Commission, 446 U.S. 680, 689, 100 S.Ct. 1945, 1951, 64 L.Ed.2d 611 (1980). Our decision today with respect to § 10(b) of the 1934 Act would apply equally to § 17(a) of the 1933 Act, if a private cause of action were assumed to exist under the latter statute.
Id. at 689 n. 1. See also In re Storage Technology Corp. Securities Litigation, 630 F.Supp. 1072, 1079 (D.Colo.1986).
This court has refused to find an implied right of action under § 17(a) of the 1933 Act. In Noland v. Pickett, C80-0034W slip op. (February 12, 1982), Honorable David K. Winder specifically granted a motion to dismiss a claimed *928 cause of action under § 17(a) of the 1933 Act. After a short discussion of legislative intent under the 1933 Act, Judge Winder concluded:
There is nothing on the face of section 17(a) indicating a private right of action for damages, or creating a benefit for an `especial' class of persons. Compare Cannon v. University of Chicago, 441 U.S. 677, 689-94 [99 S.Ct. 1946, 1953-56, 60 L.Ed.2d 560] (1979), with Transamerican Mortgage Advisors, Inc. v. Lewis, 444 U.S. 11, 18-19 [100 S.Ct. 242, 246-47, 62 L.Ed.2d 146] (1979). Nor is there any indication in the legislative history evidencing such an intent; on the contrary, every indication is that private damages were not intended. See SEC v. Texas Gulf Sulphur Co., 401 F.2d 833, 867 (2d Cir.1968) (Friendly, J., concurring); McFarland v. Memorex Corp., 493 F.Supp. 631, 652 (N.D.Cal.1980). Therefore the court can only conclude that no private right of action for damages arises under section 17(a) of the 1933 Act ...
Id. at 3-4; see also Omicron Indus. v. Ihlenburg, C83-1290W slip. op. at 2-3 (July 22, 1986) [Available on WESTLAW, DCT database] (no private right of action under § 17(a)). We are similarly persuaded that no private right of action exists under § 17(a) of the 1933 Act. Accordingly, defendants' Motion to Dismiss plaintiff's third cause of action is granted.
Although the Supreme Court's decision in Herman & MacLean v. Huddleston, 459 U.S. 375, 103 S.Ct. 683, 74 L.Ed.2d 548 (1983) provides strong theoretical support for an argument supporting a private action under 17(a),[7] the status of the law in this district warrants granting the defendants' motion to dismiss plaintiffs' third claim for relief.
RICO and RICE
The plaintiffs in their Seventh and Eighth claims for relief have contended for violations of the federal RICO Act, 18 U.S. C. § 1961 et seq. and the Utah RICE Act, 76-10-1602 et seq. U.C.A., 1953. This court has previously ruled that for the purposes of a motion of the nature of defendants' motion to dismiss, the construction of RICO and RICE and the requirements for pleading are the same. Hoopes v. Zions First National Bank, C-85-1323 S (D.C. Utah 1986) [Available on WESTLAW, DCT database]. See also Basche, Halsey, Stuart, Shields v. Tracy Collins Bank, 558 F.Supp. 1042 (D.C.Utah 1983); Morgan v. Ebert, 85-C-1295 W (D.C.Utah 1986) [Available on WESTLAW, DCT database].[8]
A RICO pleading[9] must meet the standards of Rule 9(b), F.R.C.P. Grant v. Union Bank, 629 F.Supp. 570, 575-76 (D.C. Utah 1986); Hoopes v. Zions First National Bank, supra; Cook v. Zions First National Bank, 645 F.Supp. 423 (D.C.Utah 1986); McKean v. Zions First National Bank, C-85-1230 W (D.C.Utah 1986) [Available on WESTLAW, DCT database].
If the plaintiffs have a valid claim for relief under their securities claims they have alleged an adequate predicate of a "pattern of racketeering" to meet RICO standards. Plains Resources Inc. v. John R. Gable, 782 F.2d 883 (10th Cir.1986). Recently, in Condict v. Condict, 815 F.2d 579 (10th Cir.1987) the court in addressing a RICO claim involving partnership ranch property said:
"In Sedima the Supreme Court held that a violation of 1962(c) requires (1) conduct (2) of an enterprise (3) through a pattern (4) of racketeering and that to state a claim under 1962(c) must allege each of these four elements."
*929 The court found the complaint deficient in the allegation as to a pattern of racketeering. The court quoting from its decision in Torwest DBC, Inc. v. Dick, 810 F.2d 925 (10th Cir.1987), noted that a pattern of racketeering requires an ongoing activity and that a single discreet activity will not suffice. Torwest at 928-29. It should be said at this point, that the allegations of plaintiffs' complaint and the ongoing nature of the activity in this case fully satisfy the Torwest DBC and Condict standards.
The elements mentioned in Condict are more generalized than those outlined in Moss v. Morgan Standley, Inc., 719 F.2d 5, 17 (2d Cir.1983) cert. denied 465 U.S. 1025, 104 S.Ct. 1280, 79 L.Ed.2d 684 (1984), which is the lead case on the elements for a civil RICO claim. However, the requirements are the same in substantive content.
Very recently in Thompson v. Wyoming Alaska, Inc., 652 F.Supp. 1222 (D.C.Utah 1987) Judge Greene held that plaintiffs had failed to plead a RICO case[10] by alleging an adequate factual basis of a continuing scheme.[11] In applying the standards of that case to the ongoing and continuous nature of the enterprise alleged in this case there is no factual deficiency or legal inadequacy in plaintiffs' pleading. In, Grant v. Union Bank, supra, the court held the allegations for a RICO claim to be insufficient where there was a failure to plead the predicate crimes with particularity. The court said "predicate crimes must be pled with sufficient specificity to establish probable cause that a crime has been committed." Id. p. 575. Citing Bache, Halsey, Stuart, Shields, Inc. v. Tracy Collins Bank and Trust, supra. "`Thus a factual statement similar to a bill of particulars is needed in pleadings that allege a violation of the RICO treble damages provision.'" Id. p. 575 quoting 558 F.Supp. at 1046.[12] Judge Greene spoke in terms of a strict pleading requirement. This is justified because of the peculiar nature of a RICO suit. First, because of the relationship between the civil action and the predicate requirement of criminal activity. Second, because the term "racketeering" is one inherently frought with prejudice and subject to use as unwarranted leverage in a complex business case. Third, a case involving racketeering ought not to await jury resolution unless there is in fact substance to the case. Fourth, where the potential consequences of liability are so severe, the legitimacy of the claim ought to be determinable at an early time. Fifth, the complexity of RICO litigation and its attendant expense warrants a substantial basis for crediting the claim before parties are subjected to such a litigation burden.[13] Although no single reason specified may be sufficient to justify a strict rule of pleading, when collectively considered, the mentioned reasons lend support to a requirement of particularized pleading.[14] The question is whether the plaintiffs have met that standards. The allegations as to securities violations are more than sufficient to *930 support probable cause, if a security is involved. Also, as observed before, the pattern of racketeering is adequately set forth.[15] Further, the "conduct" of the alleged racketeering activity is spelled out. If the allegations listed under plaintiffs' Seventh and Eighth claims for relief were the sole basis of plaintiffs' complaint, it would be deficient as simply containing legalistic conclusions. The defendants challenge to the pleading would be well founded. However, the allegations in support of the RICO/RICE claims set forth the prior seventy-one (71) paragraphs of the complaint. When examined "together" the allegations are sufficient to establish the "probable cause" for a RICO claim. However, it should be observed that the defendants have not at this time challenged the issue of whether there is an adequate person/enterprise distinction to satisfy the requirement that there be a difference between the two in order to make a case under RICO. See Grant v. Union Bank, supra; Hirsch v. Enright Refining Co., 751 F.2d 628 (5th Cir.1984); Schofield v. First Commodity Corp., 638 F.Supp. 4 (D.C.Mass.1985); Hoopes v. Zions First National Bank, supra; Rakoff, The Federalization of Commercial Torts, 10 ALIABA Course Materials Journal 4, p. 7, 15 (1986). However, since this issue has not been briefed and the factual context of such an argument not developed, as between the individual defendants and the corporate defendants, no position is expressed on this matter at the time and a resolution of the defendants' motion to dismiss favorably to the plaintiffs on the RICO claims should be without prejudice to later reconsideration.
The motion to dismiss the RICO/RICE claims should be denied.
Substantive Securities Claim
At this point, it is apparent that the linchpin of plaintiffs' claim for relief is based on whether the plaintiffs' interest in CST & L was a security. The express terms of neither the 1933 Securities Act, 15 U.S.C. § 77a, et seq., nor the Securities Exchange Act of 1934, 15 U.S.C. § 78a, et seq. exhaust the considerations necessary to determining what is a security. 15 U.S.C. § 77b is the definition section of the Securities Act of 1933 and is expansive in its description of security, § 78b(1), to include a variety of forms of financial activities, structures and interests. 15 U.S.C. § 78c(a)(10) defines security under the Securities Exchange Act of 1934 and is equally broad. However, neither definitional section answers the question of what is a security in this case.[16] The nature of the transaction must be considered. Substance governs over form. United Housing Foundation, Inc. v. Forman, 421 U.S. 837, 95 S.Ct. 2051, 44 L.Ed.2d 621 (1975); Vincent v. Moench, 473 F.2d 430 (10th Cir. 1973).[17] In Moench the Court observed:
"Whether a particular investment constitutes a security depends upon the facts and circumstances of the case ... Substance is exhalted over form and emphasis is placed on economic reality." (Emphasis added). Id. p. 435.
See e.g., Continental Marketing Corp. v. Securities & Exchange Commission, 387 F.2d 466, 470 (10th Cir.1967).
*931 This position is embodied in the discussion of what is a security in S.E.C. v. W.J. Howey Co., 328 U.S. 293, 299, 66 S.Ct. 1100, 1103, 90 L.Ed. 1244 (1946) where the Court said the term "embodies a flexible rather than a static principle one that is capable of adaptation to meet the countless and variable schemes devised by those who seek the use of money of others on the promise of profit." The "economic reality" standard was stated as the consideration in Tcherepnin v. Knight, 389 U.S. 332, 336, 88 S.Ct. 548, 553, 19 L.Ed.2d 564 (1967). In United Housing Foundation, Inc. v. Forman, supra, the Court again spoke in terms of economic reality[18] in holding the stock in a non-profit housing corporation was not a security because the shares in question did not have the characteristics of stock and the economic reality was that the transaction was not an investment for profit, but the acquisition of low cost rental housing. Id. p. 851.[19] However, in Landreth Timber Co. v. Landreth, 471 U.S. 681, 105 S.Ct. 2297, 85 L.Ed.2d 692 (1785) and Gould v. Ruefenacht, 471 U.S. 701, 105 S.Ct. 2308, 85 L.Ed.2d 708 (1985) the court focused on the economic characteristics of the instruments involved, and not the underlying economic circumstance, and rejected the "sale of business doctrine" and held that the sale of stock of a business was the sale of a security. There the Court focused on the facial identity of the instruments involved and the statutory definition, to find a security "on its face." Thus, the Supreme Court appears to have adopted two standards of determining whether a financial transaction involves a security. First, if it is a facially obvious security instrument it will be included as a security without consideration of the underlying economic circumstances. If however, the instrument is not a classic security or within the statutory definition of security under the two applicable acts,[20] the "economic realities" will be examined to determine whether the transaction warrants characterization as a security.[21] If the function of the transactions is not related to the need for securities regulation the transaction will be excluded. See Rosin, Functional Exclusions From the Definition of a Security, 28 South Tex.L.Rev. 333 (1986).
The Court of Appeals for the Tenth Circuit has clearly recognized and adopted the functional approach and "economic realities" test.[22] Recently in Meyer v. Dans un Jardin, S.A., 816 F.2d 533 (10th Cir.1987) the court held a franchising agreement was not a security. The court applied a "functional" test in determining whether the franchising agreement was security. The *932 court referred to the Howey standard and referred to the court's prior decisions that are compatible with the functional analysis. Crowley v. Montgomery Ward & Co., 570 F.2d 875 (10th Cir.1975); Mr. Steak, Inc. v. River City Steak, Inc., 460 F.2d 666 (10th Cir.1972). The Court in Meyer rejected a claim that it was free to consider an alternative functional analysis such as "risk capital." Id. at 536.
"To the extent that the risk capital test differs from the Howey test as reaffirmed in Forman, 421 U.S. at 852, 95 S.Ct. at 2060-61, and Daniel, 439 U.S. at 558, 561, 99 S.Ct. at 795-96, 797, we must follow the Supreme Court's formulation."
Id. at 536.
In, Zabriskie v. Lewis, 507 F.2d 546 (10th Cir.1974), the court held notes of a commercial character are not securities under the Securities Act of 1933 or the Securities Exchange Act of 1934. The court noted that under the transaction the note has "a commercial character," Id. p. 551, rather than an investment character. At the time of Zabriskie the court observed it had "not determined what tests should be applied in determining which notes come within the definition of a security." Id. 550. The court did actually analyze the functional aspects of the transaction and instrument at issue. Id. p. 551.
The distillate of the above analysis is that there may be a "facial" inclusion or exclusion of a transaction as a security or there may be a functional inclusion or exclusion.[23] In this regard both parties rely on the Supreme Court's decision in Marine Bank v. Weaver, 455 U.S. 551, 102 S.Ct. 1220, 71 L.Ed.2d 409 (1982). The facts of the case were not as straight forward as the issue raised in this case would desire. The Weavers had pledged a six-year bank certificate of deposit to guarantee a loan from Marine Bank to a meat packing company. In exchange Weavers received the right to fifty percent of the meat company's profits. Weavers also received the right to veto the companies future borrowing and the use of some agricultural land. The Weavers contended Marine Bank misrepresented the use of proceeds of the loan in violation of section 10(b) of the 1934 Act. The Third Circuit had held that the bank certificate and the profit sharing arrangement could be securities. Weaver v. Marine Bank, 637 F.2d 157 (3rd Cir.1980). The Supreme Court referred to the fact that the 15 U.S.C. § 77b, the definitional section of the 1933 Act and 15 U.S.C. § 78c, the definitional section of the 1934 Act both use excluding language "unless the context otherwise requires ...", therefore, recognizing the functional approach as having application outside of the facially inclusive circumstances. See Rosin, supra, 28 So. Tex.L.Rev. p. 359, 363. The court did not consider the underlying pledge transaction, but did focus on the deposit certificate's characteristics. The court concluded there was no need for protection under the federal securities laws. Id. 455 U.S. at p. 559, 102 S.Ct. 1225. In a footnote the court continued that other certificates of deposit might be securities. Id. p. 560 n. 11, 102 S.Ct. at 1225-26 n. 11:
"It does not follow that a certificate of deposit or business agreement between transacting parties invariably falls outside the definition of a `security' as defined by the federal statutes. Each transaction must be analyzed and evaluated on the basis of the content of the instruments in question, the purposes intended to be served, and the factual setting as as whole."
Thus the footnote takes as functional approach to the analysis of whether a certificate *933 of deposit is security.[24] This is fortified by the court's discussion of the term security. Id. pp. 555-59, 102 S.Ct. at 1223-25. The court referring to S.E.C. v. United Benefit Life Ins. Co., 387 U.S. 202, 211, 87 S.Ct. 1557, 1562, 18 L.Ed.2d 673 (1967) and S.E.C. v. C.M. Joiner Leasing Corp., 320 U.S. 344, 352-53, 64 S.Ct. 120, 124-25, 88 L.Ed. 88 (1943) said "the test is what character the instrument is given in commerce by the terms of the offer, the plan of distribution, and the economic inducements held out to the prospect." No broad federal remedy for all fraud was intended. Weaver v. Marine Bank, supra, 445 U.S. at p. 556, 102 S.Ct. at 1223-24. A certificate of deposit was not "expressly" excluded from the definition of security. Id. p. 557, 102 S.Ct. at 1224. The court then stated why the certificate of deposit was not a security and was to be treated differently from other "long-term debt" obligations.
In our view, however, there is an important difference between a bank certificate of deposit and other long-term debt obligations. This certificate of deposit was issued by a federally regulated bank which is subject to the comprehensive set of regulations governing the banking industry. Deposits in federally regulated banks are protected by the reserve, reporting, and inspection requirements of the federal banking laws; advertising relating to the interest paid on deposits is also regulated. In addition, deposits are insured by the Federal Deposit Insurance Corporation. Since its formation in 1933, nearly all depositors in failing banks insured by the FDIC have received payment in full, even payment for the portions of their deposits above the amount insured.
* * * * * *
We see, therefore, important differences between a certificate of deposit purchased from a federally regulated bank and other long-term debt obligations. The Court of Appeals failed to give appropriate weight to the important fact that the purchaser of a certificate of deposit is virtually guaranteed payment in full, whereas the holder of an ordinary long-term debt obligation assumes the risk of the borrower's insolvency. The definition of `security' in the 1934 Act provides that an instrument which seems to fall within the broad sweep of the Act is not to be considered a security if the text otherwise requires. It is unnecessary to subject issuers of bank certificates of deposit to liability under the antifraud provisions of the federal securities laws since the holders of bank certificates of deposit are abundantly protected under the federal banking laws. We therefore hold that the certificate of deposit purchased by the Weavers is not a security.
Id. pp. 557-59, 102 S.Ct. at 1224-25.
The decision, therefore, turns not on a facial interpretation of security under the definitions section of the applicable acts, but on a functional analysis of the particular certificate.[25]
The holding in Weaver v. Marine Bank, supra, is really very narrow when applied to certificates of deposit. It excludes certificates or the like of federally regulated banks. The decision in Weaver is therefore not a per se basis for a motion to dismiss in this case. A functional analysis must be made in this case to determine whether the financial instruments in this case, that are claimed to be securities, actually fall within the 1933 and 1934 Acts as well as the Utah Uniform Securities Act.[26] For this reason arguments of both parties as to the guidance to be derived from pre-Weaver cases is premature.[27] The question then is *934 whether given the posture of the pleadings and other documents,[28] is there a basis for the application of the various securities statutes to the parties. The allegations contained in the plaintiffs' complaint are sufficient to create an issue that cannot be resolved one way or the other at this point. Many factors are relevant to the issue. See Arnold, "When is a Car a Bicycle? and Other Riddles: The Definition of a Security Under the Federal Securities Laws, 33 Cleveland State L.Rev. 449, 460-461 (1984-85); Weaver v. Marine Bank, supra, n. 9.
In Wolf v. Banco National de Mexico, 549 F.Supp. 841 (N.D.Cal.1982) appeal dismissed 721 F.2d 660 (9th Cir.1983), rev'd 739 F.2d 1458 (9th Cir.1984) cert. denied 469 U.S. 1108, 105 S.Ct. 784, 83 L.Ed.2d 778 (1985), a post Weaver case, the district court held that Mexican certificates of deposit were securities. Id. 549 F.Supp. at 841. The Ninth Circuit reversed. The Court of Appeals reversed because of the extensive Mexican regulatory scheme for such investments.[29] Id. 739 F.2d pp. 1460, 1464. Most recently in West v. Multibanco Comermex, S.A., 807 F.2d 820 (9th Cir. 1987) the court accepted the same reasoning and said:
Wolf requires that in order for a foreign bank offering certificates of deposit to be exempt from the registration and disclosure requirements of U.S. securities law, the foreign government must have adopted a comprehensive regulatory scheme governing banking operations that `virtually guarantees' repayment to purchasers of such certificates. Although `the trial court must hear evidence on the degree of protection that structure offers a depositor against insolvency,' 739 F.2d at 1463, it may not examine the actual operations of the regulatory system to the extent that such inquiry would directly implicate the failure (whether willful or negligent) of officers of the foreign state to enforce their own laws, at least in the absence of consent of the foreign sovereign. As a matter of comity, we presume that Mexican officials are acting in a manner consistent with the requirements of Mexican law.[30]
Although the West and Wolf cases are of major significance, it appears that a very compelling argument can be made that both cases took too narrow of an approach to the functional issue. The above quoted language seems analytically inadequate in light of the Supreme Court's statement in Weaver in footnote 11. See infra.[31]
*935 Thus, there are issues to be considered that preclude dismissal of this action on the basis of a contention that the instruments in this case are not securities.
Based on the consideration of the legal assertions in defendants' motion to dismiss, it is concluded that it should be denied, except that so much of plaintiffs' claim in their amended complaint as seeks relief under 17(a) of the Securities Act of 1933 should be dismissed. IT IS SO RECOMMENDED.
Copies of the foregoing report and recommendation are being mailed to the parties. They are hereby notified of their right to file objections hereto within 10 days from the receipt hereof.
DATED this 17th day of June, 1987.
(s) Ronald N. Boyce
United States Magistrate
AMENDED REPORT AND RECOMMENDATION
Following the preparation and submission of the magistrate's report and recommendation on the defendant's motion to dismiss, an additional case on the question of whether plaintiffs could maintain a § 17(a), 15 U.S.C. § 77q(a) action as private parties and a RICO action predicated on securities violations was uncovered. In, Metropolitan International Inc. v. Alco Standard Corporation, 657 F.Supp. 627 (D.C.M.D.Pa.1986) Chief Judge Nealon addressed the issues. He observed:
Defendants contend that plaintiffs cannot bring an action pursuant to § 17(a) of the securities laws, 15 U.S.C. § 77q(a), because there is no private right of action under section 17(a). In support they cite, inter alia, Judge Giles' decision in Kimmel v. Peterson, 565 F.Supp. 476 (E.D.Pa.1983) in which an implied private cause of action under section 17(a) was specifically rejected. Plaintiffs counter by maintaining that while neither our Court of Appeals nor the Supreme Court has ruled on the issue, the majority of circuits do imply such a cause of action. Plaintiffs' Memorandum of Law in Opposition to Defendants' Motion to Dismiss, Document 20 of the Record at 31. After careful review and consideration, this court joins those courts holding that there is no private cause of action under Section 17(a). Kimmel v. Peterson, 565 F.Supp. 476 (E.D.Pa.1983).
Section 17(a), an anti-fraud provision of the Securities Act of 1933, provides:
(a) It shall be unlawful for any person in the offer or sale of any securities by the use of any means or instruments of transportation or communication in interstate commerce or by the use of the mails, directly or indirectly
(1) to employ any device, scheme, or artifice to defraud, or
(2) to obtain money or property by means of any untrue statement of a material fact or any omission to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading, or
(3) to engage in any transaction, practice, or course of business which operates or would operate as a fraud or deceit upon the purchaser.
15 U.S.C. § 77q (1976).
In Kimmel, Judge Giles, in a well-reasoned opinion, explored the historical background and legislative history of section 17(a). While noting that the numerical weight of authority of case law was in favor of implying a private cause of action, Judge Giles noted that those opinions had done so with very little discussion or analysis. Kimmel, supra at 482-83. In contrast, those courts holding no private cause of action under section 17(a) exists, have carefully analyzed the four-prong test enunciated by the Supreme Court in Cort v. Ash, 422 U.S. 66, 95 S.Ct. 2080, 45 L.Ed.2d 26 (1975). The Cort test is to be employed to determine whether Congress intended to imply a private cause of action.
First, is the plaintiff "one of the class for whose especial benefit the statute was enacted, that is, does the statute create a federal right in favor of plaintiff? Second, is there any indication of legislative intent, explicit or implicit, either to create such a remedy or to *936 deny one? Third, is it consistent with the underlying purposes of the legislative scheme to imply such a remedy for the plaintiff? And finally, is the cause of action one traditionally relegated to state law, in an area basically the concern of the State, so that it would be inappropriate to infer a cause of action based solely on federal law?"
Cort, supra at 78, 95 S.Ct. at 2088 (emphasis in original) (citations omitted). Later, in Touche-Ross & Co. v. Redington, 442 U.S. 560, 99 S.Ct. 2479, 61 L.Ed. 2d 82 (1979), the court explained that all four factors should not be weighted equally; rather, the first three were more relevant to any determination because those factors concentrated upon Congressional intent.
In this case, since section 17(a) was enacted to prevent fraud, thus protecting potential victims, Kimmel, supra at 486, plaintiffs here are members of the class "for whose especial benefit the statute was enacted." This determination, however, does not end the inquiry.
This court agrees with Judge Giles that the second and third prong of the test have not been met.
[T]he existence of express remedies within the same statute [i.e., sections 11 and 12] militates against a finding of Congressional intent to imply further remedies.... This is especially true here, as section 17(a) is sufficiently broad to cover virtually all activities addressed by sections 11 and 12. As mentioned earlier, however, section 17(a) does not have the internal restrictions and defenses found in sections 11 and 12. Thus, if a private right of action were to be implied under section 17(a), it would become the preferable remedy, rendering sections 11 and 12 entirely superfluous. The complex scheme which Congress wove in the express civil liabilities sections would be totally undermined.
Kimmel, supra at 487. Thus, "[had] Congress wished to provide a private damage remedy, it knew how to do so and did so expressly." Id. at 488 (quoting Transamerica Mortgage Advisors v. Lewis, 444 U.S. 11, 21, 100 S.Ct. 242, 248, 62 L.Ed.2d 146 (1979)).
Nor is the third prong of Cort met, which requires consistency with the underlying purposes of the statutory scheme. In Piper v. Chris-Craft Industries, 430 U.S. 1 [97 S.Ct. 926, 51 L.Ed.2d 124] (1977), the Court phrased the inquiry in terms of whether the legislative purposes "are likely to be undermined absent private enforcement" or whether it "is necessary to effectuate Congress' goals." ... Measured against any of those standards, an asserted private right of action under section 17(a) fails. Rendering sections 11 and 12 effectively impotent is neither necessary to, nor consistent with, the legislative purposes of the 1933 Act.
Kimmel, supra at 488. Accord Binkley v. Sheaffer, 609 F.Supp. 601, 602-03 (E.D.Pa.1985) (Judge Troutman following Judge Giles' opinion in Kimmel, supra). Inasmuch as the factors weighing Congressional intent militate against implying a private cause of action, it is unnecessary to analyze the fourth Cort prong.
In light of the above, the court concludes that it would be inappropriate to imply a cause of action under section 17(a). In this conclusion, the court is not alone. See e.g., Landry v. All American Assurance Co., 688 F.2d 381 (5th Cir.1982); Shull v. Dain, Kalman & Quail, Inc., 561 F.2d 152 (8th Cir.1977) cert. denied, 434 U.S. 1086, 98 S.Ct. 1281, 55 L.Ed.2d 792 (1978); Binkley v. Sheaffer, 609 F.Supp. 601 (E.D.Pa.1985); Bedford v. Lockhart-Bright Associates, No. 825574, slip op. (E.D.Pa., Nov. 1, 1985) (Broderick, J.) [Available on WESTLAW DCTU database]; In re Catanella and E.F. Hutton and Co., 583 F.Supp. 1388 (E.D.Pa.1984); Kimmel v. Peterson, 565 F.Supp. 476 (E.D.Pa.1983); Hudson v. Capital Management Intern., Inc., 565 F.Supp. 615 (N.D.Cal.1983); Massaro v. Vernitron Corp., 559 F.Supp. 1068 (D.Mass.1983); Basile v. Merrill Lynch, Pierce, Fenner & Smith, 551 F.Supp. 580 (S.D.Ohio 1982); Hill v. DER, 521 F.Supp. 1370 (D.Del.1981).
*937 Judge Nealon then addressed the RICO claim and found that allegations of securities fraud, section 10(b), and mail fraud to support its claim. The court said a consistent number of alleged securities and fraud violations were adequate to sustain the pattern of racketeering requirement for a RICO action.
"At this point of the litigation, it is premature to hold as matter of law that the plaintiffs can prove no set of facts which would bear out plaintiffs' theory. As a result, defendants Motion to Dismiss will be denied on this issue."
It is believed that this above case supports the magistrate's conclusion in this case.
On page thirty-two (32) of the original report and recommendation refers to "plaintiffs' motion to dismiss." That reference should be "defendants' motion to dismiss." SO RECOMMENDED.
Copies of the foregoing report and recommendation are being mailed to the parties. They are hereby notified of their right to file objections hereto within 10 days from the receipt hereof.
DATED this 19th day of June, 1987.
(s) Ronald N. Boyce
United States Magistrate
NOTES
[1] The Beckstead affidavit does not contradict the allegations of plaintiffs' complaint but explains the operation of SCT & L. Other discovery has not been submitted in support of the motions to dismiss.
[2] The conclusion as to the securities claims presupposes the application of the securities laws to this situation.
[3] The same is true of Windon Third Oil & Gas Drilling Partnership v. FDIC, 805 F.2d 342 (10th Cir.1986) (investors suit against accountant).
[4] See Kronfeld v. First Jersey National Bank, 638 F.Supp. 1454 (D.C.N.J.1986). Restatement, Second, Torts § 529. See also Id., Comment A.
[5] To the degree plaintiffs' RICO claims are based on mail fraud, 18 U.S.C. § 1341, concealment may be a basis for a "scheme to defraud," and support such a claim. c.f. United States v. Pintar, 630 F.2d 1270 (8th Cir.1980); United States v. O'Malley, 707 F.2d 1240 (11th Cir.1983); United States v. Allen, 554 F.2d 398 (10th Cir. 1977) cert. denied 434 U.S. 836, 98 S.Ct. 124, 54 L.Ed.2d 97; Williams v. United States 368 F.2d 972 (10th Cir.1966) cert. denied 386 U.S. 997, 87 S.Ct. 1317, 18 L.Ed.2d 345.
[6] It should be recognized that the Court of Appeals in Hotmar v. Lowell H. Listrom & Co., Inc., 808 F.2d 1384 (10th Cir.1987) observed as to a claim of fiduciary relationship between a stockbroker and customer:
Under Kansas law the existence of a fiduciary duty depends on the facts and circumstances in each case. Denison State Bank v. Madeira, 230 Kan. 684, 640 P.2d 1235 (1982). However, one may not unilaterally impose a fiduciary relationship on another without a conscious assumption of such duties by the one sought to be held liable as a fiduciary. Id. In this case, Brown never agreed to control Hotmars' account. In fact, Brown testified he never accepted discretionary accounts. Without an agreement by Brown to monitor the trading in Hotmars' account, no fiduciary duty was imposed on Brown to execute only those orders he considered "suitable" for one in Hotmars' position, and hence, no breach of fiduciary duty was shown.
808 F.2d 1387 n. 3.
In this case defendants did manage the plaintiffs' investments to some extent, and the facts and circumstances of the relationship may support a fiduciary claim. Also, there is nothing to suggest the above statement of law is inconsistent with the before mentioned Utah cases.
[7] Schwartz & Wiles, Do Curren & Huddleston Validate a Private 17(a) Right of Action? Nat'l L.Jnl., July 23, 1984.
[8] As to the similarity of RICE and RICO see Moxley and Weisenfeld, An Overview of Utah's Civil RICE, 14 Ut. Bar Jnl. 1-12- p. 31 (1986).
[9] Reference to RICO shall be deemed to include RICE unless expressly indicated.
[10] The case was resolved on summary judgment under Rule 56, F.R.C.P.
[11] See also Huntsman-Christensen Corp. v. Entrada Industries Mountain Fuel Supply Co., 639 F.Supp. 733 (D.C. Utah 1986) as referenced in the Thompson case.
[12] In, United States v. Killip, 819 F.2d 1542 (10th Cir.1987) the Court described an indictment in a criminal RICO case. The indictment pleading was not more specific than the plaintiff's allegations in this case.
[13] In Goldsmith & Keith, Civil RICO Abuse: The Allegations in Context, 1986 B.Y.U.L.Rev. 55, 90-92 (1986) the authors dispute a contention that civil RICO actions have been abusive or are inherently abusive. However, they suggest that the requirement of Rule 9(b), F.R.C.P., for a particularized, allegation of fraud if applied to civil RICO actions, can assist in preventing abuses. Thus the 9(b) standard provides a useful guideline for determining the sufficiency of RICO claims. See cases collected Id. p. 91 n. 254.
[14] The magistrate has doubts as to whether a "bill of particulars" standard or one of probable cause is fully commensurate with Rules 8(a) and 9(b), F.R.C.P. c.f. Cooper v. Zions First National Bank, supra (Winder, J); Seattle First National Bank v. Carlsteadt, supra. A standard of showing a good faith basis for a belief that the predicate standards have been violated seems more reasonable. See American National Bank & Trust Co. v. Haroco, Inc., 473 U.S. 606, 105 S.Ct. 3291, 87 L.Ed.2d 437 (1985) where the Supreme Court appeared little concerned about a more generalized pleading.
[15] This includes either a securities predicate claim or a mail fraud claim. (18 U.S.C. § 1341, 1343).
[16] The 1982 Amendments to § 77b(1) and 78c(a)(10) do mention "certificate of deposit." See infra n. 28.
[17] Defendants have suggested plaintiffs' claim is defeated by the definitional section of § 78c(a)(10) because of the exclusion of "draft, `bill of exchange or banker's acceptance which has a maturity at the time of issuance of not exceeding nine months ...'" However, this may depend on the nature of the transaction. It does not depend on the maturity of the instrument as such. This appears clear from the cases. e.g. S.E.C. v. American Board of Trade Inc., 751 F.2d 529, 538 (2d.Cir.1984); Woodward v. Metro Bank of Dallas, 522 F.2d 84, 92 (5th Cir.1975). Zabriskie v. Lewis, 507 F.2d 546, 550 (10th Cir.1974). If there were any doubt, the legislative history, H.R.Rep. 85, 73d Cong., 1st Session 15 (1933); S.Rep. No. 47, 73d Cong., 1st Session 3-4 (1933) makes it clear the definitional language applies only to short term commercial paper not usually made available to the public. This is apparently the position taken by the S.E.C. S.E.C. Release No. 33-4412, September 20, 1961; 1984 Fed.Sec. 2 Rep. (CCA) ¶ 2045. Also the 1982 addition of certificates of deposit to the definitional sections helps to clarify the intent of Congress as it may apply in this case.
[18] The economic reality standard of S.E.C. v. W.J. Howey Co., supra, for determining if a financial transaction is subject to regulation as a security, has been given a wide application by the courts. Annual Review of Federal Securities Regulation, 40 Business Lawyer, 159 (1984).
[19] In, International Brotherhood of Teamsters, et al. v. Daniel, 439 U.S. 551, 99 S.Ct. 790, 58 L.Ed.2d 808 (1979) the Court held the securities Acts did not apply to a noncontributing, compulsory pension plan. In so ruling the Court observed:
"To determine whether a particular financial relationship constitutes a [security] ... `the test is whether the scheme involves an investment of money in or common enterprise with profits to come solely from the efforts of others.'" Citing Howey v. Forman. The Court also referred to `economic realities of the transaction ...'" Id. p. 558, 99 S.Ct. at 796.
[20] The definition of security in the Utah Uniform Securities Act, 61-1-13(17), U.C.A., 1953, is roughly the equivalent of the definition of a security under the federal acts discussed above. In Payable Accounting Corp. v. McKinley, 667 P.2d 15 (Utah 1983) the Utah Supreme Court said:
"Because most state blue sky laws and the federal securities acts are similar, states frequently rely on federal case law in interpreting state security acts."
Id. p. 17.
The Court quoted from and referred heavily to federal cases especially S.E.C. v. W.J. Howey Co., supra. See also Bennett, Securities Regulation in Utah: A Recap of History and The New Uniform Act, 8 Utah L.Rev. 216 (1963).
[21] This seems to be the same under the Utah Uniform Securities Act. c.f. Payable Accounting Corp. v. McKinley, supra.
[22] The parties have filed excellent memoranda and discussed the analysis of the issues from several courts. However, the Tenth Circuit cases, those from this District, and those of the United States Supreme Court are the only judicial decisions that have status as precedent.
[23] A security may exist in one form of a transaction under one statute but not another. See 12 U.S.C. § 378, and Securities Indust. Assn. v. Bd. of Governors of Federal Reserve System, 468 U.S. 137, 139-40, 104 S.Ct. 2979, 2981, 82 L.Ed.2d 107 (1984) (Glass-Steagall Act Construction). The court applied a combination facial and functional test in holding that commercial paper was a security. However, at one point the court read the Glass-Steagall Act and the Securities Act of 1933 and the Securities Exchange Act of 1934 as part of a general congressional approach to the term security. Id. pp. 150-152, 104 S.Ct. pp. 2986-87. This issue warrants further analysis, unnecessary to the resolution of the motion before the court.
[24] The term "business agreement" could include a passbook type of arrangement. The physical form of the acknowledgment of the transaction is not of controlling consequence. See S.E.C. v. C.M. Joiner Leasing Corp., supra.
[25] The court rejected a functional analysis of the transaction. Id. 455 U.S. at p. 559, n. 9, 102 S.Ct. at 1225 n. 9.
[26] See Rosin, Historical Perspective on the Definition of Security, 28 So.Texas L.Rev. 575, 589 (1987).
[27] Burrus, Cootes & Burrus v. Mackethan, 537 F.2d 1262 (4th Cir.1976) vacated 545 F.2d 1388 (1976) cert. denied 434 U.S. 826, 98 S.Ct. 103, 54 L.Ed.2d 85 (1977). The case is of little assistance since it is pre-Weaver and does not adequately analyze the issue against Weaver standards. Also, Bellah v. First National Bank, 495 F.2d 1109 (5th Cir.1974). If these cases were of controlling significance, Young v. Seaboard Corporation, 360 F.Supp. 490 (D.C. Utah 1973) might be twisted to support a claim that the plaintiffs should be allowed to pursue a per se securities claim. Young does not apply to this case either.
[28] The, White Paper on the State of Utah's Response to the Plight of Thrift and Loan Industry, July 31, 1986 shows that there is significant factual question as to the real nature of the Utah regulatory response. Id. p. 13 etc.
The Amicus brief of the S.E.C.'s in Weaver v. Marine Bank, No. 80-1562 Oct. term 1980 is very narrow and properly confines itself to a discussion of congressional intent as to federally regulated banks. Id. p. 15. It also refers to the "special regulatory context" of the case. The brief does reflect the relevancy of the consideration of benefits to be derived from the regulatory scheme of the securities laws.
[29] It should be noted that Weaver precipitated amendments to the definition sections of the 1933 and 1934 Acts to include "certificate of deposit." 15 U.S.C. §§ 77b(1), 78c(a)(10), P.L. 97-303, §§ 1, 2; 96 Stat. 1409. The effect of these amendments is unclear as to these plaintiffs, but they do not change the nature of the applicable analysis in this case.
[30] The magistrate does not necessarily accept the position of West as to the scope of the inquiry on the extent of regulation as correct. That need not be decided at this time. It requires more thoughtful briefing research and argument. However, the statement in West, Id. p. 828, should not control discovery. The widest latitude of discovery, commensurate with the ultimate issue to be decided should be allowed.
[31] Also the magistrate does not wish to preclude either party from fully urging the significance of the Congressional addition of "certificate of deposit" to the definition sections of the 1933 and 1934 securities Acts. However, "certificate of deposit" may not facially apply to passbook accounts. This distinction can be addressed later.
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843 F.Supp. 1168 (1994)
Charles SHERMAN, and Gail Ann Sherman, his wife, Plaintiffs,
v.
OPTICAL IMAGING SYSTEMS, INC., (formerly Ovonic Imaging Systems, Inc.), and Energy Conversion Devices, Inc., Defendants.
No. 93-71649.
United States District Court, E.D. Michigan, S.D.
February 15, 1994.
*1169 *1170 John M. Callahan, Southfield, MI, for plaintiffs.
Gregory V. Murray, Detroit, MI, for defendants.
OPINION AND ORDER
ROSEN, District Judge.
I. INTRODUCTION
This case involves the alleged constructive discharge of Plaintiff Charles Sherman ("Sherman") from Defendant Optical Imaging Systems ("OIS") in October, 1992. Plaintiffs filed a six-count complaint against OIS on March 19, 1993. Count I alleges a violation of the Michigan Handicappers' Civil Rights Act ("MHCRA").[1] Count II alleges a *1171 violation of the federal Americans with Disabilities Act ("ADA").[2] Count III alleges a negligence cause of action. Count IV alleges a claim for wrongful discharge. Count V alleges a violation of the federal Age Discrimination in Employment Act ("ADEA").[3] Count VI alleges a claim for constructive termination.[4] Lastly, Plaintiff Gail Ann Sherman seeks damages for a loss of consortium as a result of Sherman's alleged discharge.
This case was timely removed to federal court on April 20, 1993. On August 10, 1993, the parties stipulated to the dismissal, with prejudice, of Plaintiffs' claims against Defendant Energy Conversion Devices. On November 30, 1993, Defendant OIS filed a motion for summary judgment on all Plaintiffs' counts. Plaintiffs responded on January 18, 1994, and OIS replied on January 28. Having reviewed the record and the parties' briefs, and having heard oral argument on February 3, 1994, the Court is now prepared to rule on OIS' motion. This Memorandum Opinion and Order sets forth that ruling.
II. FACTUAL BACKGROUND
OIS is a Delaware corporation with its principal place of business in Troy, Michigan. OIS currently develops and manufactures flat panel liquid crystal displays. These displays are used by the Department of Defense and the Federal Aviation Administration for such things as digital maps and forward-looking infrared radar.
On January 30, 1987, OIS hired Sherman as an industrial designer. At the time of his hiring, Sherman informed OIS that he was diagnosed with dyslexia.
Initially, Sherman was working on commercial scanners. However, as OIS switched production to the flat panel liquid crystal displays for government clients, its in-house demands for industrial designers declined. Rather than terminate Sherman or offer him a job at a lower salary, OIS transferred him to a mechanical engineer position.
On April 16, 1992, Sherman and his immediate supervisor, Tim Ewald, met to discuss Sherman's job responsibilities and goals for the period of March 20-June 30, 1992. A memorandum of that meeting signed by both Sherman and Ewald stated that Sherman's general responsibilities were "[t]o design all elements of OIS backlights including coordination of changes in backlight properties with other OIS departments." OIS' Brief, Exhibit D. More specifically, Sherman was placed in charge of five projects with various deadlines set for dates on or before June 30, 1992. They consisted of the following: (1) reducing the costs of backlights; (2) working on SFIM modules; (3) working on lamp heater designs; (4) making progress on a molded image splitting diffuser; and (5) building various demonstration items. Id. Sherman and Ewald set the deadlines in the memorandum based on Sherman's estimates of the time it would take to complete each project. Sherman's Deposition, pp. 102-03 (found in OIS' Brief, Exhibit A).
On June 15, 1992, Ewald met with Sherman to check his progress on the five projects. Ewald filled out a written evaluation, signed by both him and Sherman, which stated that Sherman was making "satisfactory" progress on Project (5), that his work on Project (2) "needed improvement," and that his work on the three other projects was "unacceptable." At least the first four projects *1172 were listed as of "important" significance to the company. The fifth project the only one that Sherman was completing satisfactorily did not receive a ranking on OIS' three-step significance level. See OIS' Brief, Exhibit E (evaluation sheet which, inter alia, ranks projects by the grades "essential," "important," or "routine").
In a commentary written at the bottom of Sherman's June 15, 1992 evaluation, Ewald wrote the following: "Chuck has been distracted from his primary goals. Chuck needs to pay particular attention to accurate estimating and completion of tasks. An interim review is scheduled for 9/15/92." Id. Finally, the evaluation set a goal for Sherman to "complete all task[s]" by the September 15 review. Id.
Ewald next reviewed Sherman's work on October 20, 1992. In a memorandum made on that same date, Ewald wrote:
The following summarizes the interim performance review held today with Chuck Sherman.
I began by explaining the type of business that the company has been pursuing has changed since Chuck was hired. I explained that we are no longer developing commercial scanners and other products that require industrial design and graphic artist services. I then told Chuck that I thought very highly of his skills as an industrial designer and graphic artist, but that his performance as a backlight mechanical engineer has not shown enough progress since our last review in June. I reminded him that the lamination problems [Project (4) above] and the lamp heater application problem [Project (3) above] are still in the same state as the day that I joined the company in February [1992] despite many man months devoted to studying the problems.
Chuck responded by acknowledging that the problems still exist and asked whether I was aware of all of the problems with backlight designs. I responded that I was aware of many problems, but that I could not be sure I knew of them all.
At this point, Chuck wanted to discuss whether or not OIS is pursuing the backlight business. We talked about the fact that many of our customers see the possibility of OIS providing a backlight as a threat. I reiterated that I felt that Chuck was incapable of solving the backlight problems that we face in a time frame that we could afford. I suggested that maybe his inability to solve these problems over the last 8 months may be related to his lack of a college education or to the dyslexia that he often points out. I also asked Chuck if there was anything that OIS could to do accommodate his dyslexia.
Chuck acknowledged that he was not able to perform thermal analysis on the backlights, and that there was nothing that the company could provide to accommodate his dyslexia. We both agreed that backlight design provides many technical challenges. Chuck took the position again that there was nothing he could do to speed up his "invention" process. I re-emphasized that the backlight problems we are facing would be better solved by a formal analytic engineering approach, rather than waiting another 8 months for an "invention" to happen.
I asked Chuck if he had any suggestions on how I could help him get results. He suggested that I have not provided the same level of attention and coaching to him as I have to the other three mechanical engineers. I assured him that that was not the case and reminded him of the meetings that I have had with him on the subject of backlight problems. He claimed he was not able to schedule lab time to conform to his ideas.
I reminded him that when he brought this to my attention at our last review that I instructed him to bring this to my attention immediately when it happened, and I would assist in resolving the conflict. The first and only time that Chuck has brought this to my attention, other than during a poor review, was last Friday. Chuck also accused OIS of not communicating to him all of the relevant information to backlight designs. I explained that I regarded Chuck's communication skills a contributing factor to his lack of results on the backlight projects.
*1173 In closing, I re-emphasized that I felt Chuck was an excellent performer when it came to industrial design and graphic arts, but that I felt he was not capable of dealing with the complexities of backlight designs in a time frame OIS could afford. I suggested that Chuck should consider looking for work as an industrial designer at another company and that OIS would consider a severance offer that would allow him time to look for another job. Chuck is going to consider everything we talked about and meet with me later this week.
OIS' Brief, Exhibit F.
Sherman signed this report on October 21, 1992, but wrote that he "d[id] not necessarily agree." Id. According to Sherman, the reason he was unable to complete the projects Ewald gave him was because he was also receiving assignments from other supervisors at OIS. Sherman Deposition, p. 89. However, Sherman admitted that "[t]hese were small jobs." Id. Moreover, Ewald explained how he permitted his employees to perform extra-department work so long as they continued to complete projects he assigned:
Q. Did you ever discuss with any other department heads verbally or in writing or posting that they shouldn't come in and ask your people to do it or that if they wanted something done, they should come right to you and not to any individual?
A. Yes.
Q. Were those instructions followed or did people still go to individuals, primarily Chuck?
A. Some department managers followed it more regularly than others.
Q. So even though you had requested that they not go to people other than you, still some department managers or their employees still went to Chuck?
A. Yes. I didn't want it to become a bottleneck for work in the company. As a manager, I instructed our people that if they wanted to approach anyone in my department, they were welcome to do so and let that individual decide whether they had the time to meet the deadlines I had given them. I did not want to instruct people to get a hold of me first. If they had time available to loan to someone or perform some work for other departments, I instructed them to do that.
Plaintiffs' Response Brief, Exhibit B, p. 60.
At the close of the October 20, 1992 meeting, Ewald suggested three alternatives to Sherman: (1) he could resign with a severance package; (2) he could remain on the job and bring his performance up to a satisfactory level; or (3) he could face discharge for just cause. See Plaintiffs' Response Brief, Exhibit F (October 26, 1992 memorandum regarding telephone conversation that same day between Sherman and Ewald). Sherman's last day of work was October 26, 1992. On that day he came to the office early and told co-employees he had been laid off; he then cleaned out his desk. Ewald called him at home later that day. In that telephone conversation, Ewald told Sherman that he was not laid off, but, rather, should consider the options he had been given. According to Ewald's memorandum on the call, Sherman agreed to come back to work to discuss the matter further, but never did. Id.
Sherman states that the reason he never returned to work at OIS was that he had heard from a co-employee, Paul Voisin, that the top two managers of the company had a conversation in which they stated that the decision to discharge Sherman had already been made. Sherman recounted what he knew about the alleged conversation in his deposition:
Q. What was it specifically that Mr. Voisin told you that
A. That he had overheard Fan Luo and Chuck Wilson talking about it, about my dismissal, and they were laughing. And one was patting the other I'm not sure which one patted the other on the back, but they were laughing and saying they had made a good decision.
Q. Do you know when this alleged conversation took place?
A. It was probably within that day or day before the day I was terminated. And they were laughing about it. So I knew right then I had no chance of staying with the company. And that's why, *1174 when Tim [Ewald] asked me would I need any help, I felt it was of little to no value.
Sherman Deposition, pp. 72-73. According to Sherman's testimony, he apparently learned of the Luo-Wilson conversation before the October 20 meeting in which Ewald gave Sherman his options. See Sherman's Deposition, pp. 69-74.
Focusing for the moment on Plaintiffs' state and federal disability discrimination claims, Sherman's deposition reveals that he did not consider his dyslexia to be a problem at work:
Q. Now, it is my understanding that you are claiming in this case that you are handicapped because you are dyslexic.
A. That's right.
Q. How did that affect what you did on the job?
A. I don't know that it had that large a role to play. I don't think it was affecting me to a large degree.
Q. Did it slow you down any?
A. It may have in some areas, yes. In an area where I was expected to read a particular document, yes, that would slow me down.
Q. Would you, in estimating your time, build in extra time for yourself if reading was required?
A. Rarely was there reading. In fact, never was there reading required; not required.
Q. Reading was never required in your job assignments from Mr. Ewald?
A. No.
Q. Is it fair to say that to the extent your dyslexia may have affected the speed with which you did a job, that that delay would have been built into your estimate because it was a delay that was part of your experience that went into estimating?
A. (Shaking head from side to side)
MR. CUTLER: I think this has been asked and answered, counsel.
BY MR. MURRAY, CONTINUING:
Q. Your shaking your head no.
A. No.
Q. Because you're saying dyslexia didn't delay
A. No.
Q. That's not what you're saying?
A. I'm saying that the fact that I have dyslexia did not hamper or deter or come into that period of time. It didn't enter into the timing.
Sherman Deposition, pp. 58-59 (emphasis added).
Moreover, Sherman essentially conceded at his deposition that no one at OIS discriminated against him on the basis of his dyslexia:
Q. Do you remember Mr. Ewald saying anything about your dyslexia?
A. No.
* * * * * *
Q. Did you ask anybody at ... OIS for special help because of your dyslexia?
A. No.
Q. Is that a no?
A. No. To my knowledge, there was no problem with that.
* * * * * *
Q. Mr. Sherman, you have alleged that OIS discriminated against you, correct? ...
A. Yes.
Q. Is there a particular individual at OIS that you believe is the one who discriminated against you?
A. Well, Tim [Ewald] was my supervisor, so I'm going to have to say if anybody did, it would be just my supervisor. There was no contact to me by anyone else.
* * * * * *
Q. Are you alleging that anything was done to you while you worked at ... OIS because you were dyslexic?
A. No.
Q. What facts do you have on which you base your opinion that the reason for your termination was dyslexia?
A. Tim's description would indicate that. If you look at it, you will see. * * *
*1175 These two paragraphs are the ones I am referring to. It mentions dyslexia here and there, so I'm imagining that's what it was.
* * * * * *
Q. What did you tell Mr. Ewald when he asked you whether there was anything OIS could do to accommodate your dyslexia?
A. My words were there is nothing that they could do.
Q. Is it fair to say because even at that time, you thought dyslexia wasn't a problem and, therefore, you didn't need them to do anything?
MR. CUTLER: I think that's contrary to the evidence you have heard. It assumes facts not in evidence. He said, in fact, he already knew he was being fired, so why would he ask them to do something for him in the future.
THE WITNESS: That's the way I looked at it. I felt there was nothing that was going to change anything. So my answer was, no, there was nothing I felt they could do....
* * * * * *
Q. Did any of your co-workers at ... OIS treat you in any way that [led] you to believe that any of them were discriminating against you because of your dyslexia?
A. No.
MR. CUTLER: That excludes Mr. Ewald?
MR. MURRAY: That excludes Mr. Ewald.
THE WITNESS: No.
* * * * * *
Q. Were you subject to any written or verbal test while you were employed by ... OIS?
A. No.
Q. No testing?
A. No testing.
Sherman Deposition, pp. 62, 65-67, 74, 79, 80 (emphasis added).
Similarly, Sherman also vitiated any claim of age discrimination with the following testimony:
Q. You also allege, Mr. Sherman, that you were discriminated against because of your age; is that correct?
A. I thought it might have a bearing on it as a result of the fact I am now 50 years old.
Q. Other than the fact that your employment ended at OIS, do you have any other facts that would lead you to the conclusion that your age made a difference in how you were treated by Mr. Ewald or anyone at ... OIS?
A. I am not sure I understand that question.
Q. Do you believe that people treated you differently at the company because of your age?
A. No.
Q. Do you believe Mr. Ewald thought less of you because of your age?
A. No.
Q. Do you believe that Mr. Ewald or anyone at OIS made your job more difficult because of your age?
A. I don't know what the reasons were for seemingly having a more difficult time toward the latter months with Tim. I don't know. There were several things that could have caused it, age being one. I don't know.
Q. Did Mr. Ewald or anyone from OIS ... ever say anything to you about your age?
A. No.
Q. Were there any teasing, jokes, or unkind remarks made to you because of your age or about your age?
A. No.
Sherman Deposition, pp. 81-82 (emphasis added).
With respect to Plaintiffs' breach of implied contract claim, the only statement on which Plaintiffs rely to rebut the presumption of at-will employment is the one made to Sherman in his October 20, 1992 review with Ewald; namely, that he could keep his job if his performance improved. See Plaintiffs' *1176 Brief, p. 24. It is uncontested that OIS did not make any other oral or written statements that may have led Sherman to believe that he was a just-cause employee.
Finally, it is also undisputed that Sherman failed to file charges of age or disability discrimination with the Equal Employment Opportunity Commission at any time after his allegedly discriminatory constructive discharge even after OIS identified the fact that Plaintiffs did not "satisfy the procedural prerequisites to suit" as one of its affirmative defenses. See OIS' Answer, p. 11 (filed April 26, 1993).
III. ANALYSIS
A. THE STANDARDS GOVERNING CONSIDERATION OF A MOTION FOR SUMMARY JUDGMENT.
Summary judgment is proper "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(c).
Three 1986 Supreme Court decisions Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986), Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986), and Celotex Corp. v. Catrett, 477 U.S. 317, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986) ushered in a "new era" in the standards of review for a summary judgment motion. These cases, in the aggregate, lowered the movant's burden on a summary judgment motion.[5] According to the Celotex Court:
In our view, the plain language of Rule 56(c) mandates the entry of summary judgment, after adequate time for discovery and upon motion, against a party who fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof.
Celotex, 477 U.S. at 322, 106 S.Ct. at 2552.
After reviewing the above trilogy, the Sixth Circuit established a series of principles to be applied to motions for summary judgment:
[*] Cases involving state of mind issues are not necessarily inappropriate for summary judgment.
[*] The movant must meet the initial burden of showing "the absence of a genuine issue of material fact" as to an essential element of the non-movant's case.
[*] This burden may be met by pointing out to the court that the respondent, having had sufficient opportunity for discovery, has no evidence to support an essential element of his or her case. * * *
[*] The respondent cannot rely on the hope that the trier of fact will disbelieve the movant's denial of a disputed fact, but must "present affirmative evidence in order to defeat a properly supported motion for summary judgment."
[*] The trial court no longer has the duty to search the entire record to establish that it is bereft of a genuine issue of material fact.
[*] The trial court has more discretion than in the "old era" in evaluating the respondent's evidence. The respondent must "do more than simply show that there is some metaphysical doubt as to the material facts." Further, "[w]here the record taken as a whole could not lead a rational trier of fact to find" for the respondent, the motion should be granted. The trial court has at least some discretion to determine whether the respondent's claim is "implausible."
See Street v. J.C. Bradford & Co., 886 F.2d 1472, 1479-80 (6th Cir.1989) (footnotes with citations omitted). The Court will apply the above principles in deciding OIS' motion for summary judgment.
*1177 B. PLAINTIFFS' MHCRA CLAIM MUST BE DISMISSED.
In order to prevail on a MHCRA claim, Plaintiffs must first establish a prima facie case of handicap discrimination. OIS will then have an opportunity to rebut the prima facie case by showing a legitimate, non-discriminatory reason for Sherman's termination. Lastly, Plaintiffs will have a chance to demonstrate that OIS' proffered reason is merely a pretext for discrimination. See Crittenden v. Chrysler Corp., 178 Mich.App. 324, 443 N.W.2d 412, 415 (1989).
Under MHCRA, a prima facie showing of a handicap-related discriminatory discharge is made when a plaintiff demonstrates the following: (1) he is handicapped; (2) his handicap is unrelated to his ability to perform his job; (3) he was discharged; and (4) there is some evidence that the employer acted with discriminatory intent. See Dubey v. Stroh Brewery Co., 185 Mich.App. 561, 462 N.W.2d 758, 759 (1990), ap. denied, 437 Mich. 916 (1991) (holding that a showing of discriminatory intent is necessary to make out a prima facie case of age discrimination); Crittenden, 443 N.W.2d at 415.
In the instant case, the Court holds that Plaintiffs cannot make out a prima facie case. For one thing, Plaintiffs have not presented any evidence that Sherman is handicapped.
MHCRA defines "handicap" as follows:
A determinable physical or mental characteristic of an individual, which may result from disease, injury, congenital condition of birth, or function disorder, if the characteristic ... substantially limits 1 or more of the major life activities of that individual and is unrelated to the individual's ability to perform the duties of a particular job or position....
M.C.L. § 37.1103(e)(i)(A). The statute further states that: "[`unrelated to the individual's ability'] means, with or without accommodation, an individual's handicap does not prevent the individual from ... performing the duties of a particular job or position." M.C.L. § 37.1103(l)(i) (emphasis added). Thus, in order to have a MHCRA claim, Plaintiffs would have to show, inter alia, that Sherman had a handicap which either did not interfere with his job or which would not interfere with his job if reasonably accommodated. See, supra, M.C.L. §§ 37.1202(b), (g); see also M.C.L. § 37.1210 (establishing which accommodations pose undue burdens). M.C.L. § 37.1210(18), however, also states:
A handicapper may allege a violation against a person regarding a failure to accommodate under this article only if the handicapper notifies the person in writing of the need for accommodation within 182 days after the date the handicapper knew or reasonably should have known that an accommodation was needed.
Plaintiffs have not provided this Court with any evidence on whether Sherman's dyslexia "substantially limits 1 or more of the major life activities" of Sherman. There are no medical reports in the record to substantiate Plaintiffs' claim that Sherman suffers from dyslexia or that it interferes with his ability to read, organize, and calculate. Indeed, Sherman specifically testified that he did not believe his dyslexia affected his work. See, supra, p. 1174. Without any evidence that Sherman's alleged dyslexia significantly interfered with his life in any way, the Court has no choice but to hold that he is not "handicapped" as defined by MHCRA.
Plaintiffs are also unable to show that Sherman was discharged by OIS. It is undisputed that at the October 20, 1992 review, and again in the October 26, 1992 telephone call, Ewald told Sherman that he had options, including the option to stay with the company and improve his performance. Rather than discuss these options further with OIS, Sherman chose instead to rely upon a second-hand story that he was already discharged as his excuse for not returning to work.
The Court finds that the alleged Luo-Wilson conversation is hardly a basis for a finding of a constructive discharge. In Le Galley v. Bronson Community Schools, 127 Mich.App. 482, 339 N.W.2d 223 (1983), the Michigan Court of Appeals defined "constructive discharge:"
The term "constructive discharge" has been used to describe a facially voluntary *1178 termination which should legally be considered an involuntary one. A constructive discharge occurs "when the employer deliberately makes an employee's working conditions so intolerable that the employee is forced into an involuntary resignation." ... A constructive discharge involves the employer's deliberate effort to make things difficult for an employee thus forcing him or her to resign.... Before a constructive discharge may be found, the trier of fact must be satisfied that working conditions would have been so difficult or unpleasant that a reasonable person in the employee's shoes would have felt compelled to resign....
339 N.W.2d at 225-26 (citations omitted).
Applying the above test, the Court concludes that a single conversation not even witnessed by Sherman, and in direct contradiction to what Sherman's supervisor told him two different times after the conversation allegedly occurred is manifestly not, as a matter of law, sufficient to constitute a viable claim of constructive discharge. The record indicates that OIS attempted to play fairly with Sherman, both in terms of laying out its expectations long before it considered discharging Sherman and in offering him assistance, accommodation, and second chances right up until his last day of work so that he could meet those expectations. Given this record, the Court has no alternative but to conclude that Sherman's decision not to return to work was his own. The Court simply does not believe that a report of a single conversation, one which flew in the face of what Sherman heard himself from his supervisor, creates a material issue of fact on whether Plaintiff had no choice but to quit.
Even assuming, arguendo, that Sherman is handicapped by virtue of his dyslexia, and that he was constructively discharged, there is no evidence of record that OIS held any discriminatory animus towards him. For example, there is no showing that OIS treated Sherman differently because of his dyslexia, or even that it replaced him with a non-handicapped employee. Plaintiffs instead rely primarily on the fact that Sherman's supervisor, Tim Ewald, discussed Sherman's dyslexia with him in their October 20, 1992 meeting to show that OIS acted discriminatorily. However, the record indicates that Ewald and Sherman discussed his dyslexia in the context of determining if OIS could accommodate Sherman in any way so that he could perform his job. Moreover, Sherman rejected the offer of accommodation at the meeting, and at no point in his tenure at OIS did he make a request for accommodation in accord with M.C.L. § 37.1210(18). Given Sherman's rejection of OIS' offer to accommodate, and his failure to request accommodation himself pursuant to M.C.L. § 37.1210(18), the Court holds that Ewald's mention of Sherman's dyslexia does not, without more, create a question of material fact on whether OIS had any discriminatory intent.
Plaintiffs alternatively suggest that proof of OIS' discriminatory intent also lies in the fact the company deliberately gave Sherman too much work that it knew or should have known a dyslexic could not handle. OIS ostensibly overloaded Sherman in order to ensure he would fail and, thereby, be dischargeable. See Plaintiffs' Brief, pp. 16-17.
The record reveals, however, that OIS did everything it could to ensure that Sherman completed his designated projects in a reasonable time-frame. It is undisputed that it was Sherman who set the deadlines for the five projects he was doing for Ewald. Thus, the Court believes OIS could reasonably expect Sherman to meet them, or at least be the person to initiate any necessary extensions.
Furthermore, the fact that Sherman accepted work from other departments does not show discriminatory animus. As an initial matter, Sherman conceded that these were "small jobs" which, presumably, should not have interfered with his bigger projects for Ewald. Moreover, Ewald offered uncontradicted testimony that he told his employees that they could accept other work only if it would not interfere with work that they were doing for him. OIS cannot, therefore, be held responsible for Sherman's inability to say no when he was expressly told by Ewald, in two progress meetings in April and June, exactly what work he needed to have done for his own department.
*1179 All of this evidence leads the Court to conclude that no reasonable jury could decide that OIS had any discriminatory animus toward Sherman because of his dyslexia. Sherman never viewed his alleged handicap as an impediment to his work, nor did he communicate such a concern to OIS even when specifically asked about it. OIS, then, cannot be faulted for believing that Sherman was simply an inefficient mechanical engineer.
Even assuming Sherman has made out a prima facie case of handicap discrimination, the Court notes that he has presented no evidence that OIS' articulated reason for his discharge poor performance was mere pretext for discrimination. Ewald conducted two extensive performance reviews with Sherman in June and October of 1992, and he carefully documented the negative results. Certainly by the June 1992 review, Sherman was on notice that he was not performing up to expectations. Furthermore, by the October review, Sherman knew that he was close to discharge. Ewald nonetheless continued to offer Sherman the possibility of continued employment if he brought up his productivity.
In light of these undisputed facts, the Court finds that OIS acted in a legitimate and non-discriminatory fashion toward Sherman. His performance problems are well-documented, and the record also reveals that OIS went more than an extra mile to attempt to keep Sherman on the job even after these problems had persisted for months. In the end, Sherman was the one who ended his employment with OIS, not the other way around. The Court therefore dismisses Plaintiffs' MHCRA claim.
C. PLAINTIFFS' ADA CLAIM MUST BE DISMISSED.
The Court also believes that Plaintiffs' ADA claim must fail. In the first place, the Court is entitled to dismiss this count because Sherman has failed to comply with the procedural prerequisites for bringing an ADA claim. ADA § 107, 42 U.S.C. § 12117(a), specifically incorporates by reference the enforcement mechanisms set out in Title VII of the Civil Rights Act of 1964. That act requires a claimant who wishes to bring a court suit, inter alia, to file a charge of discrimination with the Equal Employment Opportunity Commission ("EEOC") within 300 days of the alleged discrimination. 42 U.S.C. § 2000e-5(e) (filing period for claimants in states, like Michigan, which have their own fair employment laws). Title VII further provides that "a civil action may be brought against the respondent named in the charge ... by the person claiming to be aggrieved" within 90 days of receipt of what is known as a "right-to-sue" letter from the EEOC. 42 U.S.C. § 2000e-5(f)(1).
The U.S. Supreme Court has held that complying with the 300-day EEOC charge-filing period is not a jurisdictional prerequisite for a Title VII court suit; rather, the filing period acts as a statute of limitations and is subject to waiver, estoppel, and/or equitable tolling. Zipes v. Trans World Airlines, Inc., 455 U.S. 385, 392-393, 102 S.Ct. 1127, 1132, 71 L.Ed.2d 234 (1982). The Sixth Circuit has left open the question of whether the receipt of a right-to-sue letter is necessary for a district court to exercise jurisdiction over a Title VII suit. Puckett v. Tennessee Eastman Co., 889 F.2d 1481, 1488 (6th Cir.1989). Puckett noted, however, that "every circuit presented with the issue has decided that the receipt of a right-to-sue letter prior to filing a Title VII action is not a jurisdictional prerequisite...." 889 F.2d at 1487. Given these holdings, the Court believes that it has jurisdiction to decide Plaintiffs' ADA claim on the merits as well as procedurally, even though Plaintiffs did not file a charge with the EEOC or receive a right-to-sue letter.
Plaintiffs' claim is defective procedurally because Plaintiffs have never filed a charge of disability discrimination with the EEOC. Unfortunately for Plaintiffs, ADA is very clear. If a claimant fails to file a timely charge with the EEOC, he cannot pursue a claim based on the statute. See Kent v. Director, Missouri Dept. of Elementary & Secondary Educ., 792 F.Supp. 59, 62 (E.D.Mo.1992), remanded on other grounds, 1993 WL 72395, 1993 U.S.App. LEXIS 4813 (8th Cir. March 17, 1993). Because Plaintiffs did not file a charge with the EEOC within *1180 300 days of Sherman's allegedly discriminatory termination on October 26, 1992, his ADA claim is presumptively time-barred.
Plaintiffs argue that there should be an exception to the EEOC charge-filing requirement for ADA suits filed initially in state court. The Court does not believe, however, that the statute countenances such an exception. ADA expressly states that "a civil action" with no distinction drawn between state and federal actions may not be brought unless one receives a right-to-sue letter from the EEOC after filing a charge with that agency. If Congress had meant to exclude ADA suits in state courts from the EEOC charge-filing requirement, it could have easily done so. Furthermore, Plaintiffs cite no case, nor has this Court been able to locate any, in which the filing of a state court action vitiated ADA's charge-filing requirement.
Plaintiffs also urge the Court to equitably toll the EEOC charge-filing period although they fail to identify any factors which would warrant such a decision. In any case, the Court does not believe that this action is one in which equitable tolling is appropriate. It is true that Plaintiffs filed their suit in state court within 300 days of Sherman's allegedly discriminatory termination. OIS, therefore, had prompt notice of the alleged discrimination, and an opportunity to resolve the same. The Court also notes that certain courts have found that filing in an improper forum is possible grounds for tolling the EEOC charge-filing period. See, e.g., Barrow v. New Orleans S.S. Ass'n, 932 F.2d 473, 478 (5th Cir.1991) ("pendency of suit between same parties in the wrong forum" is grounds for tolling ADEA's charge-filing period); Miller v. International Tel. & Tel. Corp., 755 F.2d 20, 24 (2d Cir.1985) (assertion of rights in the wrong forum might warrant equitable tolling of ADEA charge-filing period), cert. denied, 474 U.S. 851, 106 S.Ct. 148, 88 L.Ed.2d 122 (1985).
The Court, however, believes that this case is distinguishable from those in which equitable tolling permitted claimants to go back and file EEOC charges long after the alleged discriminatory event took place. In the instant case, it is uncontroverted that Plaintiffs retained counsel prior to Sherman's last day of work on October 26, 1992. See OIS' Reply Brief, p. 2. This is important, because numerous courts have held that a discrimination claimant who retains counsel has constructive knowledge of his rights and responsibilities under fair employment laws. See, e.g., Jackson v. Richards Medical Co., 961 F.2d 575, 579 (6th Cir.1992); Kale v. Combined Ins. Co., 861 F.2d 746, 752-53 (1st Cir.1988). Given Plaintiffs' constructive notice of the necessity of filing a charge as early as the day Sherman left work in October, 1992, the Court does not believe that Plaintiffs' failure to file a charge should be in any way excused well over a year later.
Even if Plaintiffs' failure to file an EEOC charge was forgivable at the time Plaintiffs filed their complaint, their refusal to file a charge after receipt of OIS' April 26, 1993 answer warrants dismissal of their ADA count. OIS clearly stated in that answer that one of its affirmative defenses was Plaintiffs' failure to follow ADA's procedural requirements. Plaintiffs were, therefore, put on actual as well as constructive notice of the EEOC charge-filing requirement by virtue of OIS' answer. Still, at no point in this action did Plaintiffs initiate the necessary administrative agency action.
At least one court has held that once the circumstances warranting equitable tolling no longer exist, a claimant should only be allowed a "reasonable time" afterwards in which to file a charge. See Cada v. Baxter Healthcare Corp., 920 F.2d 446, 452-53 (7th Cir.1990), cert. denied, ___ U.S. ___, 111 S.Ct. 2916, 115 L.Ed.2d 1079 (1991). The Court agrees with this analysis, and it holds further that the nine months between receipt of OIS' April 26, 1993 answer and the February 3, 1994 hearing on OIS' summary judgment motion was far more than a reasonable time period in which Plaintiffs could have withdrawn this count and filed a charge with the EEOC. The Court, therefore, concludes that Plaintiffs' failure to file a charge with the EEOC on their ADA claim mandates its dismissal with prejudice.
The Court adds that it believes dismissal of this count is also appropriate after a review of the merits. The analysis applied *1181 to Plaintiffs' MHCRA claim controls, for the most part, their ADA count as well. The Sixth Circuit follows the prima facie case/legitimate, non-discriminatory reason/ pretext for discrimination analysis set forth above. See Roush v. KFC Nat'l Mgt. Co., 10 F.3d 392, 396 (6th Cir.1993). In order to make out a prima facie case, Plaintiffs must show the following: (1) Sherman was "disabled" as defined by the statute; (2) he was qualified, with or without accommodation, to do his job; (3) he was discharged; and (4) he was replaced by a non-disabled person. See Roush, 10 F.3d at 396.
The Court again concludes that Plaintiffs cannot make out a prima facie case of discrimination. As an initial matter, ADA defines "disability" with the same language as MHCRA defines "handicap." See 42 U.S.C. § 12102(2). Thus, in the same way Sherman was not handicapped under MHCRA, he is not disabled under ADA. See, supra, p. 1177. Furthermore, even assuming that Sherman is disabled, the Court has already held that he was not constructively discharged; instead, he quit. Thus, he cannot make out this prong of his prima facie case of discriminatory discharge either. And, lastly, Plaintiffs point to no evidence in the record that Sherman was replaced by a non-disabled person.
Even assuming that Plaintiffs can somehow make out the elements of a prima facie case, the Court is convinced, for the reasons set out above, that no reasonable jury would find that OIS acted in anything but a legitimate and non-discriminatory manner toward Sherman. Summary judgment for OIS on Plaintiffs' ADA count is, therefore, also appropriate.
D. PLAINTIFFS' NEGLIGENCE CLAIM MUST BE DISMISSED.
Plaintiffs also allege that OIS was negligent in failing to perform its duty not to discriminate against Sherman under the various fair employment statutes. OIS correctly points out, however, that the remedies of these statutes are exclusive. There was, and is, no common law anti-discrimination duty; and there is no claim that MHCRA and ADA remedies would fail to fully compensate Plaintiffs for any discrimination Sherman claims to have suffered. See Pompey v. General Motors Corp., 385 Mich. 537, 189 N.W.2d 243, 251 (1971). See also Dudewicz v. Norris-Schmid, Inc., 443 Mich. 68, 503 N.W.2d 645, 649 (1993). This count, then, is also dismissed.
E. PLAINTIFFS' WRONGFUL DISCHARGE CLAIM MUST BE DISMISSED.
Plaintiffs further claim that OIS breached an implied just-cause employment contract. They base this cause of action on one of the alternatives that Ewald offered Sherman at the October 20 review; namely, that if he would improve his performance he could keep his job.
Plaintiffs' claim is simply ludicrous. OIS correctly points out that, as an initial matter, he quit employment rather than explore Ewald's suggestion to stay with the company. Thus, this case presents no claim for wrongful discharge, and, furthermore, the facts do not indicate that Sherman accepted the alleged just-cause contract by continuing to work.
Even assuming that Sherman was discharged, Ewald's statement hardly created an objectively reasonable expectation of just-cause employment. Michigan law is very clear that "oral statements of job security must be clear and unequivocal to overcome the presumption of employment at will." Rowe v. Montgomery Ward & Co., 437 Mich. 627, 473 N.W.2d 268, 275 (1991). In Rowe, for example, the Michigan Supreme Court refused to find a just cause contract when plaintiff was told she had a job with her employer as long as she sold her quota of merchandise. 473 N.W.2d at 275.
Applying the Rowe test to the instant case, Ewald's suggestion that Sherman might be able to keep his job if his performance improved could not, as a matter of law, instill in him any reasonable expectation of lifetime employment at OIS. At the time the statement was made, Sherman had just received his second poor review in five months, and he knew that OIS was considering his discharge. Ewald identified the suggestion that Sherman *1182 could stay with the company provided he improved his productivity as merely one option Sherman should consider in addition to looking for work elsewhere or being discharged. Given Sherman's precarious situation at the company, and the innocuous nature of the statement that if he worked harder he might be able to stay on, this Court can only conclude that no reasonable jury would find that there existed anything close a just-cause employment contract. Summary judgment on this count, therefore, is appropriate.
F. PLAINTIFFS' ADEA CLAIM MUST BE DISMISSED.
Plaintiffs' claim of age discrimination is also ripe for dismissal. As with their count under ADA, Plaintiffs failed to pursue the proper procedural path set out in ADEA. That statute provides:
No civil action may be commenced by an individual under this section until 60 days after a charge alleging unlawful discrimination has been filed with the Equal Employment Opportunity Commission. Such charge shall be filed ... within 300 days after the alleged unlawful practice occurred....
29 U.S.C. § 626(d)(2) (300 day filing period applies to claimants in states, like Michigan, which have fair employment laws of their own). ADEA further requires a claimant to wait until he receives a right-to-sue letter from the EEOC before he initiates a court suit. 29 U.S.C. § 626(e).
As noted above, the 300-day charge-filing rule and receipt of a right-to-sue letter are both not, under current Sixth Circuit law, jurisdictional prerequisites for a district court to hear an ADEA claim. The Sixth Circuit has held, however, that a court may not exercise its jurisdiction over an ADEA suit until the EEOC has had at least 60 days to attempt conciliation. Chapman v. City of Detroit, 808 F.2d 459, 462 (6th Cir.1986).
In Chapman, the district court dismissed plaintiffs' ADEA suit with prejudice for a number of reasons, one of which was their failure to give the EEOC the necessary sixty-day notice of their intent to file suit. The Chapman court stated that normally failure to comply with the sixty-day notice rule should result in a dismissal without prejudice. However, the court affirmed the district court's dismissal with prejudice because plaintiffs' claim was barred by another procedural section of the statute, namely, 29 U.S.C. § 626(c)(1), which terminates private causes of action if the EEOC brings a suit on behalf of the private claimants. 808 F.2d at 462-63.
The Court reads Chapman to hold that a district court may properly dismiss with prejudice an ADEA suit filed in violation of the jurisdictional 60-day rule if the court has an alternative procedural ground for its decision to dismiss. In the instant case, such an alternative ground exists in that, as noted above, Plaintiffs did not file a charge with the EEOC within 300 days of the alleged discriminatory action. Therefore, the Court holds that dismissal with prejudice of Plaintiffs, ADEA count for failure to comply with 26 U.S.C. § 626(d) is proper.[6]
G. PLAINTIFF GAIL ANN SHERMAN'S DERIVATIVE CLAIM FOR LOSS OF CONSORTIUM MUST BE DISMISSED.
Because this Court has dismissed all of Plaintiff Charles A. Sherman's claims, Mrs. Sherman's derivative claim for loss of consortium is also mooted.
H. PLAINTIFFS' COUNSEL, DONALD M. CUTLER, IS ORDERED TO SHOW CAUSE WHY HE SHOULD NOT PAY OIS' FEES AND COSTS FOLLOWING SHERMAN'S DEPOSITION.
As noted above, the hearing on this motion took place on February 3, 1994. Plaintiffs' counsel, Donald M. Cutler, chose not to be present and instead sent a very junior associate to argue the motion. Although Mr. Cutler's associate acquitted himself *1183 as best as he could under the circumstances, the Court finds that Mr. Cutler's decision to absent himself rather than face the music to be an unfortunate example of professional cowardice. If this hearing on a dispositive motion against his clients, case was not of sufficient moment to attract Mr. Cutler's attention and attendance, then Mr. Cutler should not have burdened Defendant with the costs of litigating the case.
This observation provides an appropriate segue into the next, more important point: The Court finds that Mr. Cutler's failure to withdraw this suit or, alternatively, to withdraw as counsel should his clients not agree to dismiss the suit, constitutes potentially sanctionable conduct under Fed.R.Civ.P. 11. Once Sherman's deposition was completed, it should have been clear that the case was without factual support or legal merit, and counsel should have discontinued suit at that point. Pursuant to Rule 11, then, this Court orders Mr. Cutler to show cause why he should not be sanctioned in the amount of OIS' fees and costs following Sherman's deposition. The Court will set a date and time for a hearing on this matter, and Mr. Cutler is advised that he must file any brief he may wish to present to the Court at least three days prior to that hearing.
IV. CONCLUSION
For the foregoing reasons,
NOW, THEREFORE, IT IS HEREBY ORDERED that OIS' motion for summary judgment on all counts is GRANTED. Judgment for OIS shall be entered accordingly.
IT IS FURTHER ORDERED that, consistent with the instructions of this opinion, Plaintiffs' counsel, Donald M. Cutler, is to show cause why he should not be sanctioned under Fed.R.Civ.P. 11.
NOTES
[1] After reviewing Plaintiffs' complaint and brief in response to Defendant's summary judgment motion, the Court views Plaintiffs' claim under the Michigan Handicappers Act to hinge on the following sections:
An employer shall not:
* * * * * *
(b) Discharge ... an individual ... because of a handicap that is unrelated to the individual's ability to perform the duties of a particular job or position.
* * * * * *
(g) Discharge ... an individual when adaptive devices or aids may be utilized thereby enabling that individual to perform the specific requirements of the job.
M.C.L. §§ 37.1202(1)(b), (g).
[2] This Act provides, inter alia, that:
No covered entity shall discriminate against a qualified individual with a disability because of the disability of such individual in regard to ... discharge of employees....
42 U.S.C. § 12112(a).
[3] This Act states, inter alia: "It shall be unlawful for an employer ... to discharge any individual ... because of such individual's age...." 29 U.S.C. § 623(a)(1).
[4] The Court does not read this sixth count as a separate cause of action; rather, it appears Plaintiff's constructive discharge claim merely sets out Plaintiff's spin on the factual context of his termination.
[5] "Taken together the three cases signal to the lower courts that summary judgment can be relied upon more so than in the past to weed out frivolous lawsuits and avoid wasteful trials." 10A Charles A. Wright et al., Federal Practice & Procedure, § 2727, at 33 (Supp.1993).
[6] In addition, the Court feels compelled to note that Plaintiffs' ADEA claim is frivolous on the merits. In his deposition, Sherman conceded that OIS in no way acted with any hint of age bias. See, supra, pp. 1175-76. Plaintiffs' ADEA count, then, would not have survived summary judgment even if Plaintiffs had followed all of ADEA's procedures.
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01-03-2023
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10-30-2013
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https://www.courtlistener.com/api/rest/v3/opinions/2668452/
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UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
SHAUNA I. WHITE, )
)
Plaintiff, )
)
v. ) Civil Case No. 08cv382 (RJL)
)
TIMOTHY F. GEITHNER, )
)
Defendant.
)~
MEMORANDUM OPINION
(March II , 2009) [# 9]
The plaintiff, Shauna I. White, brings this action against her fonner employer,
Timothy F. Geithner, Secretary of the Treasury,l alleging discrimination on the basis of
race, sex, pregnancy, and retaliation in violation of Title VII of the Civil Rights Act of
1964,42 U.S.C. § 2000e-5, and the Pregnancy Discrimination Act of 1978,42 U.S.C. §
2000e(k). The Secretary filed a motion for partial dismissal alleging White failed to
exhaust her administrative remedies for her pregnancy-discrimination claim. The Court
agrees and GRANTS the Secretary's motion.
BACKGROUND
White was a human resources coordinator at the Office of the Comptroller of the
Currency at the Department of the Treasury from May 2000 until May 2007. (Compi. at
lPursuant to Federal Rule of Civil Procedure 25(d), if a public officer named as a party to
an action in his official capacity ceases to hold office, the court will automatically substitute that
officer's successor. Accordingly, the Court substitutes Timothy F. Geithner for Henry M.
Paulson, Jr.
1-2.) She alleges that when she returned from maternity leave on October 3,2005, her
belongings had been packed up and she was stripped of both her responsibilities and her
work station. Eight days later, on October 11,2005, White met with the agency's EEO
representative, Laurie Cymbor (Cymbor), to discuss this tum of events. Cymbor
explained to White that if she felt she was being discriminated against, she could file an
informal EEO complaint within 45 days of the alleged discrimination or she could
participate in the agency's alternative dispute resolution program. White further alleges
that Cymbor explained that if she participated in the alternative dispute resolution
program, she could later file an EEO complaint. (PI. Opp. at 3.)
Indeed, White's notes, taken the same day, do indicate White believed pursuing
mediation would not preclude her from later pursuing an EEO claim. (PI. Ex. 4 at ~ 9 & PI.
Ex. 3.) The notes do not, however, indicate Cymbor told White she could pursue
mediation and later pursue an EEO claim if she had not filed within the 45-day deadline.
Additionally, White offers a journal entry indicating that she understood that by
contacting EEO she was beginning a process of alleging discrimination that could result
in a lawsuit. (PI. Opp. at 10; PI. Ex. 4.)
In any event, when White alternatively chose to participate in the agency's dispute
resolution program, she received a memorandum stating that she could also pursue "an
informal complaint or grievance, provided that [sheJ initiate an action within the
appropriate time/rame." (Def. Ex. 4 at 1 (emphasis added).) The mediation agreement
2
also stated White must request EEO counseling within 45 calendar days of the alleged
discrimination. Indeed, White placed her initials next to this paragraph in the mediation
agreement. (Def. Ex. 6 at 3.) See 29 C.F.R. § I6I4.105(a)(l) (establishing the 45-day
deadline).
After an unsuccessful mediation, White filed an informal EEO complaint on
December 16,2005, (see Def. Ex.II at 1), almost one month after the 45-day deadline to
file a complaint for discrimination based on the incidents of October 3, 2005. White filed
a formal EEO complaint of discrimination on March 7, 2006, in which she alleged
discrimination on multiple grounds, including pregnancy discrimination based on the
actions of October 3,2005. (Def. Ex. 6.) In a letter, the agency agreed to investigate
some of White's discrimination claims, but dismissed her pregnancy-based claim for a
failure to file within the deadline. 2 (Def. Ex. 7 at 1-2.) On March 3,2008, White filed
the instant suit in this Court alleging discrimination on the basis of race, disability, sex,
pregnancy, and retaliation. 3 (See CompI.)
2The agency further explained in the letter that the alleged pregnancy discrimination
occurred on October 3, 2005, and that White elected to use the agency's mediation process
before initiating counseling on December 16,2005. (Def. Ex. 7 at 2.) The agency also explained
White was aware of the deadlines, as indicated by her signing of the agency's form stipulating
the specific time frames for initiating EEO counseling and filing an administrative grievance.
(ld.)
3The agency's motion involves only White's pregnancy-discrimination claim. Therefore,
the Court does not address White's other claims. (Def.' s Mot. for Partial Summ. J. at 1.)
3
ANALYSIS
A plaintiff must have exhausted her administrative remedies, including the timely
filing of an EEO complaint, in order to survive a motion to dismiss. See Gillet v. King,
931 F. Supp. 9,12 (D.D.C. 1996) ("It is axiomatic that a plaintiff must exhaust his
administrative remedies prior to instituting a Title VII judicial action against a federal
agency."); Bowden v. United States, 106 F. 3d 433,437 (D.C. Cir. 1997) ("Complainants
must timely exhaust ... administrative remedies before bringing their claims to court.").
Although White admits she filed her informal EEO complaint papers more than 45 days
after the alleged discriminatory action, she alleges that equitable estoppel should apply to
toll the statute of limitations period because "alleged affirmative misconduct" by an
agency official misled her about the running of the limitations period. 4 How so?
4White also offers a related argument. She asserts she filed her informal EEO complaint
through her meeting with Cymbor on October 11, 2005. (PI.'s Opp. at 7-8.) She notes that
beginning the EEO process does not require filing the paperwork of an informal complaint, but
only that the employee "(1) contact an agency official 'logically connected' with the EEO process
... and (2) demonstrate an intent to begin the EEO process." Klugel v. Small, 519 F. Supp. 2d
66, 71 (D.D.C. 2007). She asserts she demonstrated an intent to begin the process within the 45-
day time frame, during her meeting with Cymbor on October 11,2005.
This argument also fails, however, as White understood during this meeting that the
mediation process was separate and distinct from the EEO process. As White herself explained
in her opposition, "[a]ccording to [White's] notes of the conversation, which she prepared the
same day, Ms. Cymbor advised her that she had two choices: file and informal EEO complaint
within 45 days, or participate in the Defendant's ADR program." (PI. 's Opp. at 3.) Indeed, she
goes on to explain that she understood she was choosing between the mediation and filing an
informal EEO complaint. (ld.) By her own admissions and arguments, White makes it clear she
knew the mediation process and the EEO process were different and she knew she was electing
to pursue mediation rather than the EEO process. Therefore, the uncontroverted evidence does
not support White's assertion that she intended to begin the EEO process during her meeting
with CymboL
4
Equitable estoppel-not surprisingly-is a "high" "hurdle" to clear. Smith-Haynie
v. District a/Columbia, 155 F.3d 575,579-80 (D.C. Cir. 1998). Indeed, only in
"extraordinary and carefully circumscribed instances" will the Court exercise its equitable
power to toll the statute of limitations. Id. (internal quotation omitted). To successfully
do so, "a plaintiff must come forward with specific proof of an employer's affirmative
acts or misleading statements that prevented her from filing an EEO complaint." Klugel
v. Small, 519 F. Supp. 2d 66,73 (D.D.C. 2007); see also Bowden, 106 F.3d at 438 (noting
the court has "excused parties who were misled about the running of a limitations period,
whether by an adversary's actions, by a government official's advice upon which they
reasonably relied, or by inaccurate or ineffective notice from a government agency
required to provide notice of the limitations period" (internal citations omitted); Jarrell v.
u.s. Postal Serv., 753 F.2d 1088, 1091 (D.C. Cir. 1984) (noting equitable considerations,
such as the employee's reliance on assurance of an EEO officer that the officer was
remedying the adverse employment action, may excuse non-compliance with the filing
requirement). White has not done so here!
To the contrary, the evidence does not establish White was misled about the
running of the statute of limitations. White has offered evidence sufficient to establish
only that Cymbor told her pursuing mediation does not foreclose a later EEO action.
Even assuming this, as the Court must, 5 White has failed to provide any evidence to
5As the agency moves to dismiss for failure to exhaust, the Court construes the complaint
in the light most favorable to White and accepts all the complaint's factual allegations as true.
5
establish her general assertion that Cymbor told her she could file an EEO complaint
outside the 45-day filing period. In light of the fact that the agency explicitly informed
White of the deadline in two separate documents, White needed to provide some evidence
that Cymbor contradicted the documents by telling her she could pursue an EEO
complaint regardless of whether she filed it within the 45-day filing period. See Hewitt v.
Rice, 560 F. Supp. 2d 61,65 (D.D.C. 2008) (declining to apply equitable tolling when the
plaintiff alleged his employer gave him 'misinformation,' because the evidence did not
bear this out). The plaintiff having failed to do so, the Court cannot now find the agency
misled her about the running of the limitations period, and equitable estoppel does not
apply.
CONCLUSION
For the foregoing reasons, the Court GRANTS the agency's motion for partial
dismissal. An order consistent with this Memorandum Opinion is attached hereto.
SO ORDERED.
United States District Judge
Martinez v. United States, 587 F. Supp. 2d 245, 247 (DD.C. 2008).
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United States Court of Appeals
FOR THE EIGHTH CIRCUIT
___________
No. 00-3274
___________
United States of America, *
*
Plaintiff - Appellee, * Appeal from the United States
* District Court for the
* Northern District of Iowa.
v. *
* [UNPUBLISHED]
Lawrence Stanley Held, *
*
Defendant - Appellant. *
___________
Submitted: April 9, 2001
Filed: April 13, 2001
___________
Before McMILLIAN and LOKEN, Circuit Judges, and GOLDBERG,* Judge.
___________
PER CURIAM.
A jury convicted Lawrence Stanley Held of possession of methamphetamine with
intent to distribute and conspiracy to distribute methamphetamine in violation of 21
U.S.C. §§ 841(a)(1), 846. He was sentenced to concurrent terms of 135 months in
prison, concurrent five-year terms of supervised release, and a $200 fine. Held
appealed, his appellate counsel filed a brief pursuant to Anders v. California, 386 U.S.
*
The HONORABLE RICHARD W. GOLDBERG, Judge, United States Court
of International Trade, sitting by designation.
738 (1967), and Held filed a pro se supplemental brief raising additional issues,
including alleged ineffective assistance of counsel. After we affirmed without
considering the ineffective assistance claims, Held filed this petition for post-conviction
relief under 28 U.S.C. § 2255. The district court1 denied the petition and granted a
certificate of appealability on two issues -- whether Held’s trial counsel was ineffective
for failing to request a new trial based on the admission of evidence of a drug
transaction, and whether Held’s appellate counsel was ineffective for failing to appeal
the admission of that evidence. Upon de novo review, we affirm. Fields v. United
States, 201 F.3d 1025, 1026 (8th Cir. 2000) (standard of review).
Held was arrested on May 8, 1996, after picking up a package from United
Parcel Service containing one pound of methamphetamine. At the time of the arrest,
police found in Held’s pocket a motel receipt dated May 26, 1995, with the handwritten
notation, “PHONE CALL DAYS INN ½ Grams Sold $60.00 Me owe $30.” At trial,
the district court admitted the receipt into evidence over Held’s objection that it was
irrelevant as too remote in time. Held contends that trial counsel was ineffective for
failing to move for a new trial because the receipt was inadmissible under Rule 404(b)
as prior bad acts evidence, or at least requesting a limiting Rule 404(b) instruction.
However, the indictment alleged a drug distribution conspiracy from 1994 to June 10,
1996. The receipt is evidence of a May 1995 drug transaction and is therefore
admissible as direct evidence of the charged conspiracy, not prior bad acts evidence
subject to Rule 404(b)’s limitations. United States v. Kinshaw, 71 F.3d 268, 270-71
(8th Cir. 1995) (notes describing drug transactions admissible as direct evidence of
participation in drug conspiracy); United States v. Brown, 956 F.2d 782, 786 (8th Cir.
1992) (evidence of drug sale during period of drug conspiracy admissible as direct
evidence of conspiracy). Held contends there was no evidence linking him to the
conspiracy as early as May 1995. We doubt that would affect the document’s
1
The HONORABLE MARK W. BENNETT, Chief Judge, United States District
Court for the Northern District of Iowa.
-2-
admissibility as direct evidence of the conspiracy, but in any event the contention is
inaccurate because the document itself is evidence of Held’s participation at that time.
Because the motel receipt and handwritten note were admissible as direct
evidence, a request for a Rule 404(b) limiting instruction and a motion for a new trial
on Rule 404(b) grounds would have been meritless. United States v. Brownlee, 890
F.2d 1036, 1039 (8th Cir. 1989). Likewise, raising the Rule 404(b) issue on appeal
would have been fruitless. Held’s trial and appellate attorneys acted reasonably in not
pursuing claims we find to be without merit. Dyer v. United States, 23 F.3d 1424,
1426 (8th Cir. 1994). In addition, counsel’s failure to raise the issue at trial or on
appeal did not prejudice Held’s defense. Therefore, Held cannot satisfy either part of
the familiar ineffective-assistance-of-counsel standard under Strickland v. Washington,
466 U.S. 668, 687 (1984).
The judgment of the district court is affirmed.
A true copy.
Attest:
CLERK, U. S. COURT OF APPEALS, EIGHTH CIRCUIT.
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935 F. Supp. 513 (1996)
NL INDUSTRIES, INC., Plaintiff,
v.
COMMERCIAL UNION INSURANCE COMPANY, Defendants.
COMMERCIAL UNION INSURANCE COMPANY, Third-Party Plaintiff,
v.
CERTAIN UNDERWRITERS AT LLOYD'S, Insurance Company of North America, and Northbrook Excess and Surplus Insurance Company, Third-Party Defendants.
NL INDUSTRIES, INC., Plaintiff,
v.
CERTAIN UNDERWRITERS AT LLOYD'S, Insurance Company of North America, and Northbrook Excess and Surplus Insurance Company, Third-Party Defendants.
Civ. No. 90-2124 (WHW).
United States District Court, D. New Jersey.
July 18, 1996.
*514 *515 Peter B. Bensinger, Jr., Bartlit Beck Herman Palenchar & Scott, Chicago, Illinois, and Kirkland & Ellis, Chicago, Illinois, and Kevin J. Connell, McCarter & English, Newark, New Jersey, for Plaintiff NL Industries.
David M. Cassidy, Howard M. Tollin, Rivkin, Radler & Kremer, Uniondale, New York, and Einhorn, Harris, Ascher & Barbarito, Denville, New Jersey, for Defendant and Third-Party Plaintiff Commercial Union.
Terry Cosgrove, Peterson & Ross, Chicago, Illinois, and William B. McGuire, Tompkin, McGuire & Wachenfeld, Newark, New Jersey, for Third-Party Defendant Certain Underwriter's at Lloyd's, London and British Companies.
Paul Koepff, Joseph Boury, O'Melveny & Myers, New York City, and Ribis, Graham & Curtin, Morristown, New Jersey, for Third-Party Defendant Insurance Company of North America.
OPINION
WALLS, District Judge.
This matter comes before the Court on the motions for reconsideration of this Court's May 6, 1996 Opinion and Order ("Opinion") brought by plaintiff NL Industries, Inc. ("NL"), defendant Commercial Union Insurance Company ("CU"), and third-party defendants Certain Underwriters at Lloyd's ("Lloyd's").
BACKGROUND
The Court will not repeat the facts and procedural history of this dispute which were set out at length in the May 6, 1996 Opinion. In that Opinion, the Court ruled on all of the various summary judgment motions concerning CU's duty to defend NL with regard to the new lead paint suits, and the obligations of Lloyd's, NL and third-party defendant Insurance Company of North America ("INA") to contribute to defense costs arising from the original lead paint suits. The Court granted NL's motion for summary judgment against CU for defense costs relating to the four new actions; denied CU's motion for summary judgment against INA for defense costs arising from Santiago, but granted it with respect to defense costs arising from HANO and City of New York; granted CU's motion for summary judgment against NL for contribution after March 1, 1992 arising from the three original lead paint claims; and granted and denied CU's motion for summary judgment against Lloyd's, and Lloyd's cross-motion for summary judgement, to the extent that Lloyd's was obligated to contribute to the defense of the HANO and City of New York actions under the Lloyd's policies from 1958 to 1966.
NL, CU and Lloyd's have now moved for reconsideration of two aspects of that Opinion: (1) factual and legal conclusions concerning the Lloyd's policies, and (2) the Court's legal conclusion that NL must contribute to its own defense costs for periods in which it was self-insured.
DISCUSSION
STANDARD
Rule 59(e) of the Federal Rules of Civil Procedure permits litigants to move to alter or amend a judgment within ten days of its entry. Similarly, Local Rule 12(I) permits a party to seek reconsideration by the Court of matters "which [it] believes the Court has overlooked" when it ruled on a motion. The Third Circuit has held that the "purpose of a motion for reconsideration is to correct manifest errors of law or fact or to present newly discovered evidence." Harsco Corp. v. Zlotnicki, 779 F.2d 906, 909 (3d *516 Cir.1985). Reconsideration motions, however, may not be used to relitigate old matters, or to raise arguments or present evidence that could have been raised prior to the entry of judgment. Charles A. Wright, Arthur R. Miller & Mary Kay Kane, Federal Practice and Procedure: Civil 2d § 2810.1. Accordingly, such motions will be granted only where (1) an intervening change in the law has occurred, (2) new evidence not previously available has emerged, or (3) the need to correct a clear error of law or prevent a manifest injustice arises. North River Ins. Co. v. CIGNA Reinsurance Co., 52 F.3d 1194, 1218 (3d Cir.1995). Because reconsideration of a judgment after its entry is an extraordinary remedy, requests pursuant to these rules are to be granted "sparingly." Maldonado v. Lucca, 636 F. Supp. 621, 630 (D.N.J.1986); Charles A. Wright, Arthur R. Miller & Mary Kay Kane, at § 2810.1.
I. The Lloyd's Policies
The Court previously found that, as to HANO and City of New York, the Lloyd's policies running from November 1, 1949 to May 1, 1958 were not triggered because they did not cover property damage arising from products liability claims; that the policies extending coverage from February 1, 1966 to February 1, 1970 overlapped with policies issued by CU and thus no duty to defend arose therefrom; but, that from May 1, 1958 to February 1, 1966 Lloyd's, as NL's sole insurer, extended coverage to property damage claims arising from products liability and thus was required to defend for claims arising from this period. NL contends that the Court made factual errors when it found that the Lloyd's 1949 to 1958 policies do not cover products liability claims, and when it found that the 1966 to 1970 policies overlapped with CU's policies. And that when these errors are corrected, Lloyd's is required to contribute to NL's defense of HANO and City of New York for the entire time that it provided insurance to NL. Lloyd's maintains that the Court arrived at an incorrect legal conclusion when it held that it had any duty at all to defend NL.
a. The 1949 to 1958 Policies
The Court concludes that there is no basis for reconsidering the factual determination that Lloyd's 1949 to 1958 policies do not extend coverage to product liability claims. NL, for the first time, argues that the 1949 to 1958 policies are essentially identical to the 1958 to 1970 policies which indisputably cover product liability claims, and therefore, that the former policies must extend similar coverage. In addition, NL contends that Lloyd's improperly relied upon parol evidence to interpret the 1949 to 1958 policies to support its position that products liability claims were excepted from coverage, and that a plain reading of the unambiguous terms of the policies mandates the opposite conclusion.
These arguments, however, are unavailing for several reasons. First, motions for reconsideration are an inappropriate avenue for relitigating matters which could have been adequately presented the first time. And here, NL had an opportunity to contest Lloyd's interpretation of its policies, but did not. Secondly, there is no merit to the arguments proffered by NL that Lloyd's interpretation of the 1949 to 1958 policies is nonsensical because the 1958 to 1970 policies are identical and indisputably cover product liability claims, and that parol evidence may not be used to interpret the policies. Original copies of the Lloyd's policies could not be located, and thus NL and Lloyd's entered into a stipulation as to the terms and conditions of the missing contracts, based upon originals or copies of placing slips. While it is true that the reconstructed 1949 to 1958 policies are, on their face, almost identical to the 1958 to 1970 policies, the stipulation states:
5. The issue which is expressly not addressed by this stipulation is whether NL was afforded property damage coverage for product liability claims for the policy periods prior to May 1, 1958. It is stipulated that the issue of whether property damage product liability claims are covered by pre-May 1, 1958 policies issued by the London Insurers is specifically to be left unresolved. In this connection, certain excess policy exhibits, which are appended *517 hereto, contain a product hazard exclusion around which the parties for purposes of this stipulation have placed brackets. There is a dispute between the parties whether or not this clause appeared in the originals of those policies.
6. Should the issue of pre-May 1958 products liability coverage be raised in further proceedings, it is agreed that this stipulation is not intended to preclude any party from offering additional admissible evidence on this remaining disputed issue.
Consequently, Lloyd's interpretation of its policies can not, as NL contends, be considered per se unreasonable.
Moreover, when this Court last considered the issues presented here, Lloyd's offered competent evidence indicating that the disputed product hazard exclusion was included in the 1949 to 1958 policies.[1] NL presented neither evidence nor argument to the contrary. Accordingly, the Court held that product liability claims had been excepted from coverage for those policies. And, contrary to NL's assertion (advanced for the first time now), the Court properly relied upon Lloyd's proffer of extrinsic evidence to decide this contract interpretation question. Parol evidence is only inadmissible where it is offered to alter the unambiguous terms of an integrated agreement. Oxford Commercial Corp. v. Landau, 12 N.Y.2d 362, 365, 239 N.Y.S.2d 865, 190 N.E.2d 230 (1963); 3 Corbin on Contracts, § 573 (1960). The Court was called upon to interpret the Stipulation containing the reconstructed policies as well as the above-quoted language. That language makes clear that at least as to the 1949 to 1958 policies the Stipulation is not the integrated, final expression of the parties.
As NL has presented no controlling decision of law, no evidence previously unavailable, nor demonstrated a need to correct a manifest injustice, the Court will not reconsider its factual determination that the 1949 to 1958 policies failed to extend coverage to product liability claims.
b. The 1958 to 1970 Policies
The Court previously found that under the 1958 to 1966 policies Lloyd's has a duty to defend NL against claims in HANO and City of New York litigation, and thus must contribute to CU; but for the period, 1966 to 1970, when CU's and Lloyd's policies overlapped, no similar duty is triggered. Lloyd's seeks reconsideration of the former, whereas NL requests the same of the latter.
1) 1966 to 1970
The Court had found that from February 1, 1966 to January 1, 1970, the Lloyd's and CU policies overlapped, although Lloyd's covered property damage claims whereas CU covered those resulting from bodily injury. Lloyd's argued that its policy was merely "excess" insurance, and thus if it and CU covered the same risk, then Lloyd's had no duty to defend. Furthermore, even if this Court were to find that the two did not cover the same risk, then CU was still not entitled to contribution, for, under Seaboard Shipping Corp. v. Jocharanne Tugboat Corp., 461 F.2d 500, 503 (2d Cir.1972), one insurer may only obtain contribution from another to the extent that the two insure against the same risk. Accordingly, the Court did not reach a conclusion as to the similarity of the risks, but held that under either scenario Lloyd's need not contribute.
The Court concludes that reconsideration of this finding is appropriate. First, the Court made a factual error. Lloyd's property damage coverage lasted until May 1, 1970. CU provided bodily injury coverage only, from February 1, 1966 to February 1, 1970. Thus, the "overlap" referred to above actually occurred from February 1, 1966 to February 1, 1970. Thereafter, from February 1, 1970 to January 1, 1978, CU provided coverage for property damage as well as bodily injury. Hence, from February 1, 1970 to *518 May 1, 1970, CU and Lloyd's policies overlapped in coverage as to property damage: as to this three month period, the Court now holds that Lloyd's "excess" insurance clause applies, Lloyd's has no duty to defend for this period and thus has no obligation to contribute to CU.
However, the period between February 1, 1966 and February 1, 1970, in which Lloyd's provided property damage coverage and CU covered bodily injury claims, is more complicated. Because the Court concludes that it erred as a matter of law with regard to this overlap, it now holds that Lloyd's has a duty to defend the HANO and City of New York actions for its policies issued during this period.
The relevant legal issue here concerns the risk the Court had concluded that if the two carriers insured the same risk, than the "excess" insurance clause applied, but if not, CU could not obtain contribution. These conclusions were incorrect because the "excess" insurance clause does not apply here in the absence of "other" insurance, nor does the "same risk" contribution doctrine.
The "excess," or "other" insurance clause in Lloyd's policies provide that coverage is secondary to coverage afforded by "any other good, valid and collectible insurance inuring to the benefit of the Assured." Because, pursuant to a settlement agreement and an order of this Court, CU has been and must continue to provide for NL's defense for this period under its policies, Lloyd's argues that its policies are secondary and therefore not triggered. However, Lloyd's "excess" clause only applies "with respect to loss or claims covered hereby." Because those policies cover only property damage, and CU's covers bodily injury exclusively, Lloyd's "excess" clause is not triggered.[2]
Contrary to what the Court held earlier, it now finds the doctrine that one insurer may obtain contribution from another insurer only if both issued policies covering the same risk, Seaboard Shipping Corp. v. Jocharanne Tugboat Corp., 461 F.2d at 503, to be applicable only with regard to coverage disputes, and not, as here, to the obligation of insurers to defend insureds. Therefore, depending upon the nature of the underlying claims asserted against the insured, contribution for defense costs may be procured by one insurer from another even though the two do not cover the same risks.
An insurer covers only "covered" claims, of course, and can therefore only seek contribution from another insurer where both policies cover the same risk. Therefore, the "same risk" doctrine is simply the definition of contribution in the indemnity setting. However, the duty to defend is different. Under New York law, the duty to defend is extremely broad, and attaches whenever the complaint suggests that a reasonable possibility of coverage exists. Continental Cas. Co. v. Rapid-American Corp., 80 N.Y.2d 640, 648, 593 N.Y.S.2d 966, 609 N.E.2d 506 (1993). In addition, where a complaint contains covered and uncovered claims, the insurer must defend the action in its entirety. Id. Thus, even though the HANO and City of New York complaints contain allegations of bodily injury and property damage, and CU's policy covers only the former (and putting aside the question of contribution) CU is obliged to defend these suits in toto.
This difference between the duty to defend and the duty to indemnify requires that contribution for defense costs may be had even where the insurers in question do not provide coverage for the same risks. Indeed, it would be illogical, and inequitable, to deny to CU its right to obtain contribution from Lloyd's where their respective duties to defend have been independently activated by different claims in the same underlying suits. That a mechanical use of this "same risk" theory is inappropriate is demonstrated by its effect: had NL moved against Lloyd's directly, Lloyd's would have had to defend; *519 but not where, as here, NL has moved only against CU, and CU in turn, by impleader, has sought contribution from Lloyd's. Lloyd's has not presented nor has this Court uncovered a case under New York law that has applied this "same risk" contribution doctrine in the duty to defend circumstance. And this Court concludes that the doctrine should and does not apply here.
Lloyd's advances additional bases for avoiding contribution for this period, but they are the same urged with regard to the 1958 to 1966 policies. For reasons stated below, those arguments have no merit. Accordingly, Lloyd's must contribute to NL's defense of the HANO and City of New York suits for its policies issued from 1966 to 1970.
2) 1958 to 1966
The Court had held previously that Lloyd's has to contribute for NL's defense costs arising from claims occurring from 1958 to 1966 for HANO and City of New York, when Lloyd's was the sole insurer for NL, covering property damage. Lloyd's argued that it had no duty to contribute for the following three reasons, all of which were rejected: (1) its and CU's policies do not cover the same risk; (2) there was no "occurrence" within the policy period; and (3) no property damage occurred. Lloyd's claims to be entitled to reconsideration, because of a clear error of law, of grounds (1) and (2), and also contends that the Court failed to address the question of whether the "excess" insurance clause bars contribution. Reconsideration is denied because the Court concludes that it made no error of law.
The Court has already explained why the "same risk" doctrine and "excess" insurance clause do not preclude CU's claim to contribution against Lloyd's when the two issued policies which overlapped in time (although not in coverage). Those arguments have even less merit for this time period, when Lloyd's was NL's sole insurer.
The Court concludes here, as it did above, that the "same risk" doctrine does not prohibit one insurer from seeking contribution of defense costs from another. As for the "excess" clause, it is inapplicable because Lloyd's policy can only be excess if NL had other insurance covering the same risk at the same time, see, e.g., American Transit Ins. Co. v. Continental Cas. Ins. Co., 215 A.D.2d 342, 625 N.Y.S.2d 653, 654 (1995). During the period in question, there was no other operable insurance policy. Lloyd's argument is that because CU is obligated to pay for the defense of HANO and City of New York arising from CU policies issued at different times (and often covering different risks), it is relieved of its obligation to defend because its policies are, as a result, "excess." However, if this were a coverage dispute in which NL had suffered a loss from a property damage claim occurring within Lloyd's policy period during which it was NL's sole insurer, Lloyd's certainly could not escape its obligation to pay (or contribute) under its "excess" clause because CU also had a duty to cover NL for different claims arising at different times. The result should be no different in the duty to defend context. Again, Lloyd's has presented no precedent to support its counter-intuitive proposition. And this Court knows of none.
Finally, Lloyd's claims that the Court's interpretation of the term "occurrence" is contrary to law, and that a proper construction renders the claims in HANO and City of New York uncovered. The Court need not reconsider this issue, for it held in the alternative that the complaints in those actions broadly allege property damage from lead paint and fail to include allegations as to when the paint was purchased or applied. Because there exists a reasonable possibility that the obtaining or use of the paint "occurred" when Lloyd's extended coverage to NL, Lloyd's must defend. Continental, 80 N.Y.2d at 648, 593 N.Y.S.2d 966, 609 N.E.2d 506. Lloyd's has proffered no basis to reconsider this determination, and as such the motion on this ground is denied.
Hence, Lloyd's must contribute to NL's defense of HANO and City of New York under its policies in effect from 1958 to 1970.
II. NL's Duty to Contribute for Periods of Self-Insurance
NL seeks reconsideration on two grounds: (1) that the Court erred as a matter of law *520 when it held that NL is required to contribute to its own defense for periods of self-insurance, and (2) even if it has an obligation to contribute as a self-insurer, it has no obligation to contribute to the defense of the Santiago suit which alleges injuries occurring outside the relevant interval. Although the issue of whether an insured must contribute to its own defense because it self-insured at certain times may not be settled under New York law, the Court maintains that its prediction of New York law is correct.
The burden placed upon insurers under New York law to defend is exceedingly broad. Continental, 80 N.Y.2d at 648, 593 N.Y.S.2d 966, 609 N.E.2d 506. The obligation may not be divided between the insured and the insurer when a complaint contains both uncovered and covered claims instead, the insurer must defend totally. NL's argument, admittedly somewhat cogent, is that this burden should similarly remain undivided when a complaint contains allegations of "occurrences" within both the policy period and periods of self-insurance. New York law, according to NL, requires that under these circumstances the insured must defend entirely.[3]
The problem with NL's position is twofold: first, despite NL's claim to the contrary, it is not at all clear that New York law prohibits the Court from ordering contribution from NL under these circumstances, and second, a rule prohibiting contribution in a case such as this one would be inequitable. As the Court explained in the previous Opinion, the New York Court of Appeals acknowledged, but did not decide this issue in Continental Cas. Co. v. Rapid-American Corp., 80 N.Y.2d at 655, 593 N.Y.S.2d 966, 609 N.E.2d 506. There it announced:
the allegation that Rapid [the insured] was self-insured for a period of time predating the CNA [the insurer] coverage cannot operate to deny Rapid the complete defense to which it is entitled under the CNA policies in the event of overlapping occurrence periods. The question whether the insured itself must contribute to defense costs an issue on which courts have divided (compare, Keene Corp. v. Ins. Co., 667 F.2d 1034, 1050-51 [D.C.Cir.1981], supra, with Ins. Co. v. Forty-Eight Insulations, 633 F.2d 1212, 1224-25 [6th Cir]) is appropriately deferred at least until such time as the underlying lawsuits are shown to involve "occurrences" during self-insured periods. In any event, issues of fact concerning whether Rapid was self-insured for any period make this determination inappropriate for summary judgment.
Id. Although the Court of Appeals did not decide the issue, it provided some guidance. To the extent that an insured has an obligation to pay for its defense for periods of self-insurance, it could not be required to do so up-front; an insurer has an absolute obligation to pay for the defense, and then afterward may seek contribution for claims pertaining to uninsured periods. Id. That Court seemed to be concerned that a forced sharing at the out-set would permit insurers to withhold payment for defense costs on the ground that periods of self-insurance are implicated, and then, only after a judicial determination, would the insured be reimbursed. The Court of Appeals clearly wanted to protect the insured, at least in the short-run, and ensure that the insurer provides a "complete defense." For this reason, the Continental Court "appropriately deferred" the issue of contribution until it could be determined if there were "occurrences" during self-insured periods. Id. This Court had previously questioned the wisdom behind this "deferral," because under New York law the duty to defend is determined by an examination of the "four-corners" of the complaint. Hence, this Court suggested that it is unnecessary *521 to wait until the underlying suits progress before deciding whether an insured should pay for periods of self-insurance. But, after a re-reading of Continental, the Court of Appeal's "deferral" appears logical and appropriate: an insured should be entitled to a complete defense initially; whether it may have to contribute to such costs can and should be decided later.
The Court of Appeals, however, made clear that it was not deciding whether an insured could be required to contribute to its own defense based on periods of self-insurance. This Court, if it wishes, need only consider Continental's dicta concerning how and when contribution (if permissible in this context) may be ordered. Assuming that New York would permit contribution under these circumstances, a question this Court will address below, this Court does not read Continental to preclude an ordering of contribution from NL now, since NL has been dismissed from HANO and only fraud claims remain in City of New York.[4] As this Court held, those suits will not "progress to a point where it can be more readily determined whether there were `occurrences' during the periods of self-insurance."
Although the Court of Appeals has not actually decided to permit insurers to seek contribution for defense costs from insureds relating to periods of self-insurance, this Court predicts that if faced squarely with the issue, the New York Court would do so. Although this Court appreciates the argument of NL concerning the indivisible nature of the duty to defend, the Court does not believe that that indivisibility applies to periods of self-insurance. A rule to the contrary would simply be inequitable. For example, an individual could obtain insurance for one year, and be uninsured for fifty years before and after that year. Yet, under the rule proposed by NL, if a complaint naming that individual as defendant broadly alleged "occurrences" falling within and without that one year of coverage, the insurer would have to defend the action in its entirety, and would not later be able to obtain contribution for defense costs from the insured. For this reason, other courts construing the laws of different jurisdictions have held that contribution from the insured, in this context, may be had. See, e.g., IMCERA Group, Inc. v. Liberty Mutual Ins. Co., 42 Cal. App. 4th 1754, 1763, 50 Cal. Rptr. 2d 583 (Ct.App.1996) (California law); Ins. Co. of North America v. Forty-Eight Insulations, Inc., 633 F.2d 1212, 1224-25 (6th Cir.1980), clarified, 657 F.2d 814, 816 (6th Cir.), cert. denied, 454 U.S. 1109, 102 S. Ct. 686, 70 L. Ed. 2d 650 (1981) (Illinois and New Jersey Law).
In somewhat analogous circumstances, the Second Circuit also concluded that the New York Court of Appeals would require an insured to contribute for periods of self-insurance. Stonewall Ins. Co. v. Asbestos Claims Management, 73 F.3d 1178, 1202-03 (2d Cir.1995). There, the circuit court predicted that New York law would require a "proration-to-the-insured" approach, for periods in which the insured was self-insured, in order to allocate indemnification costs among multiple insurers whose policies were triggered by continuous injuries. Id. at 1202. The Stonewall court, persuaded by the reasoning of the New Jersey Supreme Court which had so held with regard to New Jersey Law, Owens-Illinois Inc. v. United Ins. Co., 138 N.J. 437, 466-80, 650 A.2d 974 (1994), surmised that requiring the insured to contribute was proper where continuous injuries and multiple policies were involved. Stone-wall, 73 F.3d at 1203. Admittedly, the Stonewall scenario is only analogous, for it concerned contribution for indemnity rather than defense costs. And, the duty of the insurer to defend is far broader than its duty to indemnify. Consequently, NL's contention that proration-to-the-insured is inconsistent with the insurer's duty to the insured is more engaging in the defense cost context. Nonetheless, the proration-to-the-insured rule which this Court predicts that the New York Court of Appeals would embrace does not significantly undercut the broad duty to defend imposed upon insurers by New York law. The insurer still must provide a complete defense up-front. It may, however, be entitled to contribution from the insured later, if the existence of occurrences within *522 periods of self-insurance can be demonstrated.
NL cites Avondale Industries, Inc. v. Travelers Indemnity Co., 774 F. Supp. 1416, 1427 (S.D.N.Y.1991), an opinion of the Southern District of New York, for the proposition that New York law does not permit an insurer to obtain contribution from the insured for defense costs for periods of self-insurance. Yet, Avondale was not presented with nor did it address this issue.[5] That Court found, though, that an insurer may not use the "four-corners" rule against the insured to reduce its share of defense costs. Id. However, this Court has made clear that an insurer may not require an insured to pay for its portion of defense costs up-front on the basis of the four-corners rule. Rather, only after the underlying suit ripens sufficiently to permit the Court to determine whether there were occurrences within self-insured intervals can the insurer seek contribution. To this extent, Avondale is not to the contrary.
Because NL has presented neither an intervening change in law nor a clear error of law, its motion for reconsideration with respect to this Court's conclusion that it had to contribute for its defense for periods of self-insurance is denied.
However, the Court will reconsider the extent of the contribution required. NL argues, correctly, that it should not be ordered to contribute to the defense of Santiago. The injury to the Santiago plaintiff was diagnosed in 1973 and has been held to trigger the CU policies in operation at the time. NL thus has no obligation to contribute to the defense of that action because it was self-insured pre-1946 and post-1989 well before and after any "occurrences" alleged in that case. Accordingly, NL must contribute only to its own defense of HANO and City of New York.
CONCLUSION
For reasons stated, all motions for reconsideration with respect to Lloyd's duty to contribute are denied except to the following extent: Lloyd's must contribute to HANO and City of New York under its policies from May 1, 1958 to February 1, 1970; and NL's motion for reconsideration of this Court's conclusion that it had to contribute to its defense of HANO, City of New York and Santiago is denied, except to the extent that it does not have to contribute to the Santiago defense.
ORDER
This matter having been brought before the Court on plaintiff NL Industries, Inc. ("NL"), defendant Commercial Union Insurance Company's ("CU"), and third-party defendants Certain Underwriters at Lloyd's ("Lloyd's") motions for reconsideration of this Court's May 6, 1996 Opinion and Order, and for reasons stated in the accompanying opinion, it is on July 18, 1996 hereby ORDERED that:
1. all motions for reconsideration with regard to Lloyd's duty to contribute are denied except to the following extent: Lloyd's must contribute to the defense of HANO and City of New York under its policies from May 1, 1958 to February 1, 1970.
2. NL's motion for reconsideration of this Court's conclusion that it must contribute to its defense of HANO, City of New York, and Santiago is denied, except to the extent that NL does not have to contribute to the defense of Santiago.
NOTES
[1] Specifically, Lloyd's submitted portions of deposition testimony from Peter Berry, John Bird, Richard A. Green, and Dennis R. Porter, all of whom state that, based upon their examinations of the original placing slips, the 1949 to 1958 policies did not extend coverage to products liability claims. See Exhibits to Affidavit of Terry M. Cosgrove in Support of Certain Underwriter's at Lloyd's, London and British Companies' Cross-Motions for Summary Judgment and Opposition to Commercial Union's Motion for Summary Judgment, Exhibit 3.
[2] The CU policies also contain an "other" insurance clause, although it sets up an equal shares mechanism for contribution when other insurance exists. It, too, is limited to losses which occur "on the same basis." Thus, for the same reason that Lloyd's other insurance clause does not apply, CU's does not either. Accordingly, the Court need not confront the complicated issue of interpreting competing, applicable other insurance clauses. See, e.g., Federal Ins. Co. v. Atlantic National Ins. Co., 25 N.Y.2d 71, 75-76, 302 N.Y.S.2d 769, 250 N.E.2d 193 (1969).
[3] NL contends that the duty to defend under New York law is "limitless ... and indivisible," and cites to Continental Cas. Co. v. Rapid-American Corp., 80 N.Y.2d 640, 648, 593 N.Y.S.2d 966, 609 N.E.2d 506 (1993) in support. However, Continental never implies, let alone states that the duty in question is either "limitless" or "indivisible;" in fact, neither of those words appears on the page cited not even in a different context. It is true that the duty to defend may not be divided between the insured and the insurer as to uncovered and covered claims, but as Continental makes clear, it is an unsettled question whether that indivisibility extends to claims falling within and without periods of insurance and self-insurance. Id. at 656, 593 N.Y.S.2d 966, 609 N.E.2d 506.
[4] NL's duty to contribute with respect to Santiago is discussed below.
[5] The relevant issue in Avondale was whether one insurer could obtain contribution for defense costs from the insured based on the insured's failure to properly notify other insurers, who, but for the improper notice, may have had to defend the claims at issue. The court held that the insured could not be required to contribute under these circumstances, especially because it was unclear whether the other insurers who were not timely notified had any duty to cover the asserted claims, anyway.
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935 F. Supp. 1556 (1996)
SIERRA CLUB, Mobile Bay Audubon Society, and Native Forest Network, Plaintiffs,
v.
U.S. ARMY CORPS OF ENGINEERS, William S. Vogel, and City of Mobile, Alabama, Defendants.
Civil Action No. 96-0672-CB-M.
United States District Court, S.D. Alabama, Southern Division.
August 27, 1996.
*1557 *1558 *1559 *1560 Ray Vaughan, Montgomery, AL, for plaintiffs.
*1561 Ronald Wise, U.S. Attorneys Office, Deborah J. Shoemake, U.S. Army Corps of Engineers, J. Gordon House, Jr., John R. Lockett, Mobile, AL, for defendants.
FINDINGS OF FACT AND CONCLUSIONS OF LAW
BUTLER, Chief Judge.
This matter is before the Court following a hearing held in open court on August 19, 1996. Although this court proceeding was originally conceived as a hearing on the plaintiffs' motion for preliminary injunction, plaintiffs' counsel suggested that, in the interests of efficiency, said hearing could also properly serve as a trial on the merits. Defense counsel offered no objections, and the Court determined that the preliminary injunction hearing could proceed as a trial on the actual merits of this action. After careful consideration of the parties' exhaustive written submissions, as well as of the arguments and evidence presented prior to, during, and after the hearing, the Court finds that the plaintiffs' claims are due to be DENIED, and that this action is due to be DISMISSED with prejudice for the reasons set forth below.[1]
I. Findings of Fact
This action arises from efforts by defendant City of Mobile, Alabama ("the City") to construct an 8,000 seat AA professional baseball stadium and accompanying 2,100 space parking lot near Interstate 65 in Mobile, Alabama. On January 15, 1996, the City filed an application (numbered AL96-00098-L) for a wetlands fill permit with defendant U.S. Army Corps of Engineers ("the Corps"). Admin. Record, at tab 7. Through this permit application, the City sought permission to fill approximately 19.9 acres of transitional wetlands for construction of a baseball stadium complex on a 30 acre tract of land bounded by Interstate 65, Highway 90, McVay Road, and Halls Mill Road. The 30 acre parcel in question is part of a larger, privately-owned 180 acre tract ("the McGowin tract"). After extensive negotiations, the private land owners donated the 30 acre parcel to the City specifically for the purpose of developing the baseball stadium and parking lot thereon.[2]
In conjunction with the permit application, the City submitted a document entitled "Alternatives Analysis", in which the City assessed the relative desirability of eleven different potential sites for construction of the baseball stadium. Admin.Record, at pp. 00076-00090. The conclusion reached by the City in its alternatives analysis was that the McGowin tract was superior to all of the other potential construction sites, based on the overriding criteria of size, accessibility, visibility, and cost-effectiveness.[3] Admin.Record, at p. 00086.
On January 22, 1996, the Corps issued public notice of the City's permit application. Admin.Record, at tab 12. In a letter received by the Corps on February 14, 1996, the U.S. Environmental Protection Agency ("EPA") raised several concerns about the methods used by the City in its alternatives analysis, the possibility of re-orienting the stadium on the site so as to avoid or reduce the contemplated wetlands impact, and the selection of the mitigation site. Admin.Record, at tab 24. On February 21, 1996, the U.S. Fish and Wildlife Service advised the Corps of its recommendation that the permit be denied on the grounds that the wetlands *1562 in question were important environmental resources, the proposed stadium complex was not water-dependent and therefore needed not be constructed on wetlands, and the planned stadium did not maximize use of available on-site upland areas which could have reduced or eliminated any wetlands impact caused by the development. Admin.Record, at tab 27. During the public notice period spanning from January 22, 1996 until February 25, 1996, the Corps also received numerous negative comments regarding the City's proposal from members of the public.
On April 23, 1996, the City revised its proposal by agreeing to set aside three acres of wetlands in the 30 acres of stadium development property, thereby reducing the wetlands loss from 19.9 acres to 16.9 acres. Admin.Record, at tab 67. As part of its revised proposal, the City also offered to set aside seven acres of wetlands on the McGowin tract adjacent to the baseball stadium parcel as a buffer to the development. Id. On April 30, 1996, the Fish and Wildlife Service commented on the City's revised proposal by recommending that additional inquiries be made as to the possibility of wetland avoidance before the Corps issued the permit.[4] Admin.Record, at tab 73. Similarly, on May 17, 1996, the EPA commented on the proposal to fill 16.9 acres of wetlands by reiterating its concern that wetland impacts could be either avoided altogether or mitigated further by the City.[5] Admin.Record, at tab 97.
On May 8, 1996, McGowin property owners' representative Joe H. Little, Jr. advised the City in writing that the 30 acre tract originally offered for the stadium was the only acreage which the land owners would make available for the stadium.[6] Admin.Record, at tab 81. On May 15, 1996, the City supplied a revised alternatives analysis to the Corps. This supplemental analysis addressed some of the comments and concerns which had been raised by various agencies and members of the public during the public notice period for the previous proposal. Admin.Record, at tab 91. The City submitted additional supplemental information regarding alternative sites to the Corps on May 21, 1996. Admin.Record, at tab 101. Also on May 21, 1996, plaintiffs' counsel Ray Vaughan ("Vaughan") wrote a letter to the Corps in which he urged them to consider the possibility of moving the entire stadium project to the uplands which abut the wetlands on the McGowin tract. Admin.Record, at tab 102. He further advised the Corps of his belief that there was insufficient evidence in the administrative record to support any conclusion that it was impracticable to avoid wetlands disruption by moving the stadium complex to the uplands. Id.
On May 23, 1996, the City informed the Corps of a substantial alteration to the plans for the stadium which would result in the reduction of wetlands impact from 16.9 acres to 7.4 acres. Admin. Record, at tab 196. Pursuant to this third variation on the stadium design theme, the proposed stadium site was moved to the southwestern corner of the *1563 McGowin property, with the land owners' consent.[7] Admin.Record, at tab 113. As redesigned, the stadium itself would no longer be constructed upon a former wetlands area; however, approximately 1,000 parking spaces would be dependent on the 7.4 acres of wetlands being filled and developed.
In a letter dated May 24, 1996, City Mayor Michael C. Dow ("Mayor Dow") advised the Corps of recent discussions with the property owners. Mayor Dow indicated that the property owners had informed him "emphatically and finally" that they would make no additional or alternative land available on the 180 acre tract, and noted the property owners' assertion that "further expansion of the baseball stadium site would significantly impact their ability to develop the surrounding area and would be contrary to their development plans."[8]Id. With respect to this third proposal, on May 24, 1996, the Corps denied a request for public hearing on the ground that such a hearing would provide no additional information which would assist the Corps in determining whether or not a permit should issue. Admin.Record, at tab 114.
On May 24, 1996, the Corps faxed information concerning the City's third proposal to the EPA and to the Fish and Wildlife Service. Admin.Record, at tabs 110, 111. On the morning of May 28, 1996, the Corps faxed City-provided maps of the new site plan and mitigation area to those agencies. Admin.Record, at tabs 118-120. Shortly before noon on the same date, without having received comments or recommendations from either the EPA or the Fish and Wildlife Service, the Corps released a Statement of Findings which stated, in relevant part, that:
"Based upon review of the application, as revised, formulation of an environmental assessment, 404(b)(1) evaluation, consideration of comments by other agencies and the public, and after weighing all known factors involved in the proposed action, [the Corps found that] ... the public interest would best be served by issuance of the permit...." Admin.Record, at pp. 00740-41.
As an attachment to the Statement of Findings, the Corps also released a document entitled "Environmental Assessment." Admin.Record, at pp. 00742-00765. In this attachment, the Corps noted that the 7.4 acres of wetlands impacted by the stadium project were of low quality and represented a mere 0.1% of all remaining wetlands in the Dog River drainage basin. Admin.Record, at p. 00748. The assessment included a discussion of the feasibility of each of thirteen alternative sites for the stadium, as well as a "no action" alternative, and explained why each was rejected as inferior to the course of action chosen. Admin.Record, at pp. 00753-00756. With respect to alternative configurations within the 180 acre tract, the Corps noted in the report that relocation to the north along I-65 would impact additional wetland acreage, that relocation to the east would reduce stadium visibility from the interstate and disrupt nearby residential areas, that relocation to the southeast could severely disrupt a cultural resource site, and that the property owners had indicated that there was no additional property on the McGowin tract which would be made available to the City. Admin.Record, at p. 00756. In light of these concerns, the Corps "concluded that the current site and configuration represent the least damaging practicable alternative to accomplish the project purpose." Id.
In the Environmental Assessment, the Corps also explained why the permit was issued without waiting for additional commentary from the Fish and Wildlife Service or the EPA. As to these agencies, the report indicated that the applicable regulations do not require endorsement of the project by either the EPA or the Fish and Wildlife Service as a necessary precondition to permit issuance. Admin.Record, at pp. 00760-61. However, the Corps did assimilate and respond *1564 to earlier comments from both agencies in the report. Admin.Record, at pp. 00757-61. The assessment concluded that the stadium project was not a major federal action which would significantly affect the quality of the environment, and that an Environmental Impact Statement was not required. Admin.Record, at p. 00765. In light of this conclusion, the Corps did not prepare an Environmental Impact Statement assessing environmental effects of the City's proposed project.
In accordance with the statement of findings, the Corps issued a signed permit to the City on May 28, 1996. Admin.Record, at tab 124. Shortly after its issuance, both the Fish and Wildlife Service and the EPA advised the Corps in writing of their dissatisfaction with the Corps' decision, and asserted concerns about wetland avoidance, proper mitigation sites, and the process through which the permit was issued without obtaining agency comment on the revised proposal. Admin.Record, at tabs 138, 143. The Corps wrote back to both agencies, explaining why it was impossible to avoid wetland impacts, why other mitigation sites were not available, and why the Corps believed that the views of both agencies were fully considered during the permitting process. Admin.Record, at tabs 144, 145.
On July 16, 1996, plaintiffs Sierra Club, Mobile Bay Audubon Society, and Native Forest Network filed the instant action against the City, the Corps, and William S. Vogel ("Vogel"), the Corps' District Engineer who was involved in the permitting decision. In their complaint, plaintiffs alleged that the defendants' actions and omissions had violated the National Environmental Policy Act ("NEPA"), 42 U.S.C. ง 4321 et seq.; the Fish and Wildlife Coordination Act ("FWCA"), 16 U.S.C. ง 661 et seq.; the Administrative Procedure Act ("APA"), 5 U.S.C. งง 551 et seq.; and the Clean Water Act ("CWA"), 33 U.S.C. งง 1251 et seq. The plaintiffs seek relief in the form of a permanent injunction voiding the permit and mandating that the defendants comply with the applicable statutory and regulatory authorities.
In their complaint, the plaintiffs allege, inter alia, that the defendants violated NEPA by not fully considering certain readily identifiable alternatives to the permit as issued. In particular, the plaintiffs argue, the defendants failed to consider fully at least two practicable alternatives: (1) the option of building the ballpark on the upland portion of the 180 acre tract, thereby avoiding the entire wetlands area; and (2) the option of redesigning the parking lot to create satellite parking (on upland ground) or to build a parking deck, thereby eliminating the need for wetlands to be filled on the site. Plaintiffs allege that the Corps' failure to consider these alternatives violated NEPA, the CWA, and the APA. At the trial on the merits, the plaintiffs offered no witnesses regarding the practicability of either of these alternatives.[9] The defendants presented Mayor Dow's May 24, 1996 letter as to the feasibility of the first alternative, and the testimony of John Bell ("Bell"), Executive Director of Public Services for the City, and Clifton Lambert, Vice President in charge of construction management at David Volkert & Associates, Inc., as to the feasibility of the second alternative.
*1565 The plaintiffs' complaint also alleges that the Corps acted improperly by granting the permit one working day after the third proposal was submitted to the EPA and the Fish and Wild Service, without public notice and before either agency had been afforded a reasonable opportunity to review and comment on the revised proposal. Plaintiffs contend that these procedural anomalies run afoul of the FWCA, the CWA, and NEPA, and that the resulting permitting decision was rendered arbitrary and capricious, in violation of the APA, as a result.
II. Conclusions of Law
A. Standard of Review
In this action, the plaintiffs seek review by this Court of the Corps' decision to issue the wetlands fill permit to the City, as well as of the procedural mechanisms underlying the Corps' decision in this case. As the plaintiffs seek judicial review of an agency decision, the proper standard of review in this matter is provided by the Administrative Procedure Act ("APA"), 5 U.S.C. งง 701-706.[10] Indeed, under the APA, this Court may set aside the Corps' permitting decision only if the Court finds that the Corps' actions were "arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law." 5 U.S.C. ง 706(2)(A). This standard has been applied in environmental challenges brought under NEPA. See Marsh v. Oregon Natural Resources Council, 490 U.S. 360, 377, 109 S. Ct. 1851, 1861, 104 L. Ed. 2d 377 (1989) (Corps' decision cannot be set aside unless found to be arbitrary or capricious); North Buckhead Civic Ass'n v. Skinner, 903 F.2d 1533, 1539 (11th Cir.1990) (same); Preserve Endangered Areas of Cobb's History, Inc. v. U.S. Army Corps of Engineers, 87 F.3d 1242, 1246 (11th Cir.1996) (same in action under CWA and NEPA). In determining whether an agency decision is arbitrary and capricious, the reviewing court "must consider whether the decision was based on a consideration of the relevant factors and whether there has been a clear error in judgment." Citizens to Preserve Overton Park, Inc. v. Volpe, 401 U.S. 402, 416, 91 S. Ct. 814, 824, 28 L. Ed. 2d 136 (1971). Under this "exceedingly deferential" standard, the Court may not substitute its judgment for that of the agency, but may only set aside the Corps' decision for "substantial procedural or substantive reasons as mandated by statute."[11]Fund for Animals, Inc. v. Rice, 85 F.3d 535, 541-42 (11th Cir.1996).
A logical corollary of the deferential standard of review and the "presumption of regularity" which attach to an agency's decision is that the party challenging such a decision must bear the burden of establishing that the agency acted in an arbitrary and capricious fashion. Indeed, under the APA, the burden of proving that an agency decision was arbitrary or capricious generally rests with the party seeking to overturn the agency decision.[12]See Sierra Club v. Marita, 46 F.3d 606, 619 (7th Cir.1995) (party challenging Forestry Service's decision under APA bears burden of proof); see also Holmes v. Department of Veterans Affairs, 58 F.3d 628, 632 (Fed.Cir.1995); Gulf Power Co. v. F.E.R.C., 983 F.2d 1095, 1099 (D.C.Cir. 1993); McKinley v. United States, 828 F. Supp. 888 (D.N.M.1993); Harris v. United States, 820 F. Supp. 1018 (N.D.Miss.1992). *1566 Accordingly, the plaintiffs in this action bear the burden of demonstrating to the Court that the Corps' decision to grant the permit to the City was arbitrary or capricious, an abuse of discretion, or otherwise not in accordance with the law.
B. Consideration of Extra-Record Materials
1. Applicable Standard
The standard of review having been set forth above, the Court must now examine the proper scope of its review of the Corps' permitting decision. The plaintiffs have sought to introduce several exhibits which were not included in the original administrative record of this case. Additionally, at the trial on the merits, the defendants presented extra-record testimony from three different witnesses. The Court also notes that the administrative "record" submitted by the Corps contains a number of documents created after the permit had already issued. See Admin.Record, at tabs 125-150. Technically, such post-permit documents are not part of the official administrative record on review of the agency's decision. See Preserve Endangered Areas of Cobb's History, Inc. v. U.S. Army Corps of Engineers, 87 F.3d 1242, 1246-47 n. 2 (11th Cir.1996) (noting that administrative record consists only of documents considered by staff prior to agency action).
The Supreme Court has held that the "focal point for judicial review should be the administrative record already in existence, not some new record made initially in the reviewing court." Camp v. Pitts, 411 U.S. 138, 142, 93 S. Ct. 1241, 1244, 36 L. Ed. 2d 106 (1973); see also Cobb's History, 87 F.3d at 1246; Town of Norfolk v. U.S. Army Corps of Engineers, 968 F.2d 1438, 1458-59 (1st Cir.1992). Although there are exceptions to this general rule, the Eleventh Circuit has recognized that a reviewing court may go beyond the administrative record only where:
"(1) an agency's failure to explain its action effectively frustrates judicial review; (2) it appears that the agency relied on materials not included in the record; (3) technical terms or complex subjects need to be explained; or (4) there is a strong showing of agency bad faith or improper behavior." Cobb's History, 87 F.3d at 1246 n. 1 (citing Animal Defense Council v. Hodel, 840 F.2d 1432, 1436-37 (9th Cir. 1988)).
Although not specifically recognized by the Eleventh Circuit, two other exceptions to the prohibition on extra-record materials have been recognized by various appellate courts. The first of these exceptions allows courts to consider matters outside the administrative record where a plaintiff alleges that the agency failed to discuss adequately some reasonable alternative or "swept stubborn problems or serious criticism under the rug." National Audubon Society v. U.S. Forest Service, 46 F.3d 1437, 1447 (9th Cir.1993); County of Suffolk v. Secretary of the Interior, 562 F.2d 1368, 1384-85 (2d Cir.1977). The second additional exception identified by the plaintiffs allows extra-record information to be considered by a reviewing court where such information takes the form of newly discovered evidence which undermines the soundness of the agency's decision. See United States v. Akzo Coatings of America, Inc., 949 F.2d 1409, 1429 (6th Cir.1991) (finding that "sound principles of justice cannot allow a reviewing court to close its eyes and ears to the new evidence"). The Eleventh Circuit has not yet commented on the validity of either of these exceptions; nonetheless, the Court will consider the applicability of those exceptions in this matter, pursuant to the above-cited authorities.
2. Extra-Record Material Offered by Plaintiffs
The extra-record evidence offered by the plaintiffs includes post-decision statements by Mayor Dow and by City council members regarding the availability of other alternatives to the City's third proposal, an affidavit by Dr. George F. Crozier criticizing the Corps' data collection efforts, and various post-decision items of correspondence from the EPA and the Fish and Wildlife Service. The Court will examine each of these items in turn.
As stated in footnote 9, supra, the plaintiffs offered as exhibits the following post-decision statements: (1) a television reporter's *1567 statement attributing to Mayor Dow a comment that the City would do what it must to get the stadium built; (2) Mayor Dow's comments on a talk radio show that other alternatives had been available to the City; and (3) two City council members' remarks that additional upland acreage could probably be obtained from the property owners if this Court were to enjoin the City from filling in the 7.4 acres of wetlands on the McGowin tract. The Court does not believe that any of the four Cobb's History factors apply to these exhibits.[13] Nonetheless, the Court finds it appropriate to expand the administrative record to consider these statements, pursuant to the newly discovered evidence exception set forth in Akzo Coatings.
The plaintiffs have also submitted an affidavit by Dr. George F. Crozier, Executive Director of the Marine Environmental Sciences Consortium. See Exhibit K to Plaintiff's Motion for Preliminary Injunction. In his affidavit, Dr. Crozier asserts that the Corps should have performed a quantitative evaluation of the effects of the proposed wetlands fill-in on stormwater retention and treatment in the area, and that there is no data showing that the detrimental effects of the fill-in on the area's natural cleansing capacity would be insignificant. Dr. Crozier concluded that an Environmental Impact Statement should have been prepared to gauge the impact of the proposed wetlands destruction on the Dog River watershed. The Cobb's History factors are inapplicable to this exhibit. Though the plaintiffs apparently would invoke the "technical terms" exception, the Court is of the opinion that the subject matter at hand is not so technical, complex, or arcane as to compel expert assistance to the Court. Likewise, the newly discovered evidence exception and the National Audubon "failure to consider alternatives" exception cannot avail the plaintiffs with respect to Dr. Crozier's affidavit. Though Dr. Crozier avers that the Corps should have done more than it did, the bare allegation that the Corps could and should have gathered more data is not a viable reason for deviating from the administrative record in this case. Accordingly, the Court will not consider Dr. Crozier's affidavit in its review of the Corps' permitting decision.
Finally, the plaintiffs seek to rely on post-decision letters to the Corps from both the EPA and the Fish and Wildlife Service. See Exhibits B and D to Plaintiffs' Motion for Preliminary Injunction. In these letters, both agencies criticized the Corps' decision to issue the permit, and reiterated the concerns which they had previously articulated in expressing their opposition to the City's previous proposals. The EPA suggested that the Corps had not acted in good faith in issuing the permit without waiting for comment by that agency. See Exhibit B. Additionally, the Fish and Wildlife Service protested that the Corps had never responded to concerns raised by that agency in its earlier letters and that the Corps had completely failed to coordinate communication among the various agencies. See Exhibit D. Under the circumstances, the Court finds that these letters may be considered in its review of the Corps decision pursuant to both the strong showing of bad faith exception and the National Audubon exception which applies where serious criticisms are "swept under the rug". Therefore, the Court will allow the plaintiffs to supplement the administrative record with the two post-decision letters submitted to the Corps by the EPA and the Fish and Wildlife Service.
3. Extra-Record Material Offered by Defendants
The defendants also relied on extra-record evidence at the trial on the merits. This evidence took the form of testimony from three witnesses. The first of these *1568 witnesses, Dr. Barry Vittor, testified regarding the anticipated cost and likelihood of success of any wetlands restoration efforts which might be conducted on the baseball stadium site at a later date. The remaining witnesses, John Bell and Clifton Lambert, were questioned about the timetable of the project and the feasibility of constructing a multi-tiered parking deck in lieu of the ground-level lot which would be built, in part, on the wetlands. Dr. Vittor's testimony goes to the irreparability of the harm suffered by the plaintiffs, rather than to the correctness of the Corps' decision to grant the permit.[14] Accordingly, that evidence will be considered by the Court. Similarly, the testimony of Bell and Lambert relating to the schedule of the project and the potentially disastrous consequences to the City of delaying the construction process relate to the potential harm to the City of delaying or altering the project. As such testimony does not go to the propriety of the Corps' administrative actions, the Court will consider it.[15]
Bell and Lambert's testimony concerning the potential costs and feasibility of a parking deck is on shakier footing than the other extra-record evidence offered by the defendants. Indeed, the defendants offered this evidence regarding the exorbitant expense of a parking garage to show that the parking deck alternative to the chosen plan was not practicable. While none of the Cobb's History factors are implicated by this evidence, the Court is of the opinion that it is amenable to consideration under the "failure to consider alternatives" exception set forth in National Audubon. Where, as here, the plaintiffs have alleged that the agency failed to consider reasonable alternatives, National Audubon indicates that the parties should be able to supplement the administrative record with additional evidence regarding those alternatives. Certainly, the plaintiffs could have relied on National Audubon to present extra-record materials demonstrating the practicability of various alternatives which the Corps did not consider in the administrative record. Thus, the defendants must be permitted to present extra-record evidence showing that a particular alternative championed by the plaintiffs was not, in fact, practicable or reasonable, and therefore was not considered by the agency. In light of this analysis, the Court will weigh Bell and Lambert's parking deck testimony in its review of the Corps' decision to grant the permit.
C. Standing of Plaintiffs to Bring this Action
Before reaching the merits of the plaintiffs' claims for injunctive and declaratory relief, the Court must consider whether the plaintiffs possess standing to bring those claims in the first place. In order to possess standing to invoke the power of federal court, a plaintiff must satisfy the following three constitutional requirements:
"First, the plaintiff must have suffered an `injury in fact' โ an invasion of a legally-protected interest which is (a) concrete and particularized and (b) `actual or imminent, not "conjectural" or "hypothetical".' Second, there must be a causal connection between the injury and the conduct complained of โ the injury has to be `fairly traceable to the challenged action of the defendant and not the result of the independent action of some third party not before the court.' Third, it must be `likely', as opposed to merely `speculative', that the injury will be `redressed by a favorable decision'." Region 8 Forest Service Timber Purchasers Council v. Alcock, 993 F.2d 800, 805 (11th Cir.1993) (quoting Lujan v. Defenders of Wildlife, 504 U.S. 555, 112 S. Ct. 2130, 119 L. Ed. 2d 351 (1992)).[16]
*1569 There appearing to be no dispute that plaintiffs are capable of satisfying the second and third constitutional requirements recited by the Region 8 court, this analysis will focus on the nature and extent of the injury suffered by the plaintiffs. The Supreme Court in Lujan elaborated on the injury in fact criterion by stating that "a plaintiff raising only a generally available grievance" who claims harm "to his and every citizen's interest" and who seeks relief that "no more directly and tangibly benefits him than it does the public at large" has not satisfied the injury in fact requirement. See Lujan, 119 L.Ed.2d at 372. Stated differently, a plaintiff must show that the challenged conduct has caused or will imminently cause demonstrable particularized injury to him such that he will benefit personally in a tangible way from court action. See Cone Corp. v. Florida Dep't of Transportation, 921 F.2d 1190, 1204 (11th Cir.1991) (citing Warth v. Seldin, 422 U.S. 490, 508, 95 S. Ct. 2197, 2210 (1975)). In order to show an injury in fact, a plaintiff need not make any showing as to the magnitude of the injury suffered, and may satisfy the requirement by merely establishing that an "identifiable trifle" of an injury has been or will imminently be incurred as a result of the challenged conduct. See United States v. Students Challenging Regulatory Agency Procedures (SCRAP), 412 U.S. 669, 689 n. 14, 93 S. Ct. 2405, 2417 n. 14, 37 L. Ed. 2d 254 (1973). The critical distinction is between a person with a direct stake in the litigation and a person with a mere interest in a problem. See id.
In their complaint, each of the three plaintiff organizations characterizes itself and its members in the following fashion:
The Plaintiff and its members have been involved for years with helping the Defendants increase protection of Alabama's environment, wetlands, and public health. Plaintiff's members regularly use and enjoy the environment, waters, wetlands, air and lands of Alabama, including Dog River, the lands in the Dog River Basin, and the benefits from the wetlands on this site. Plaintiff's members recreate in Alabama and enjoy the biological diversity of this beautiful site. Complaint, at ถ 7.
Additionally, specific plaintiffs allege that their members engage in various activities, such as fishing and bird watching, in Dog River and in Mobile Bay, and that their ability to enjoy those activities will be impaired by the destruction of the wetlands at issue in this litigation.
To bolster their claims further, three individual members of plaintiff organizations have submitted affidavits to the Court explaining how they are benefited by the wetlands at issue, and how they would be harmed by their elimination. Margie Welch, Chair of the Alabama Chapter of the Sierra Club, filed an affidavit in which she states that she and many other Sierra Club members live on Dog River or in the Dog River basin, that they use Dog River for canoeing, *1570 hiking, boating, and fishing, and that they drive by the impacted wetlands and enjoy their aesthetic beauty. Ms. Welch further avers that the filling in of the wetlands at issue here will further degrade the water quality, destroy the aesthetic beauty of the site, diminish the quality of life for herself and other members of her organization, and otherwise directly affect them. In a second affidavit, Myrt Jones of the Mobile Bay Audubon Society alleges that many organization members live on or near Dog River, and enjoy skiing, birdwatching, boating, and observing the serene beauty of the impacted wetlands. A third affidavit was filed by Cherie Marceaux of the Native Forest Network, who asserts that she and other members of her organization engage in such activities as canoeing, kayaking, photography, and daydreaming on and alongside the Dog River. Ms. Marceaux also asserts that she and other members of her organization enjoy cycling alongside the wetlands which would be impacted by the stadium complex, and that the proposed fill-in site is "magical and beautiful" for its various flora and fauna. In short, Ms. Marceaux contends, she "love[s]" the wetlands which are at issue in this litigation.
The allegations presented in both the complaint and in the affidavits filed by individual members of the plaintiff organizations are sufficient, as a matter of law, to satisfy the injury in fact requirement for standing. The plaintiffs have alleged that they engage in various activities in Dog River and in the Dog River basin which will be curtailed or otherwise be adversely affected by the proposed wetlands fill-in. They have further contended that they derive aesthetic enjoyment from the site itself, that they have studied the wildlife on the site from nearby locations, and that their ability to engage in these pastimes will be directly and tangibly affected by the destruction of the wetlands in question.[17] Though the injury is small in that the impact of the wetlands fill on recreation in the Dog River will undoubtedly be slight, it is sufficient to create an injury in fact. The case law is abundantly clear that a minimal showing of detriment is all that is required to establish an injury in fact, and that the plaintiffs' demonstration of an injury in fact in this case is more than adequate to establish standing to sue. See, e.g., Japan Whaling Association v. American Cetacean Society, 478 U.S. 221, 231 n. 4, 106 S. Ct. 2860, 2866 n. 4, 92 L. Ed. 2d 166 (holding that plaintiff whale watchers alleged sufficient injury in fact by asserting that their ability to engage in whale watching activities would be adversely affected by continued whale harvesting activities of the defendant).[18] Accordingly, the Court hereby rejects the defendants' *1571 argument that the plaintiffs have not sufficiently alleged an injury in fact in this case.[19] As no other standing challenges have been raised by defendants, the Court further concludes that the plaintiff organizations possess the requisite standing to pursue this action in federal court.
Before leaving the standing issue, the Court must visit the defendants' argument that the plaintiffs have alleged "procedural injuries" which they do not have standing to pursue. Specifically, the defendants argue that the plaintiffs have alleged that the Corps' failure to follow proper procedures with respect to public notice and comment from the EPA and the Fish and Wildlife Service, in and of itself, worked a harm upon the plaintiffs. The Court disagrees with this characterization of plaintiffs' allegations of injury. Nowhere in the complaint or the supporting affidavits do the plaintiffs allege an injury based strictly on the Corps' failure to follow proper procedures. Rather, the plaintiffs allege environmental and aesthetic losses which, they claim, would not have been sustained had the proper procedures been followed. Thus, it is not the procedures themselves, but the effect of the Corps' alleged divergence from such procedures, with which the plaintiffs take issue in this action. In that respect, this case is quite different from Region 8, in which the plaintiffs alleged that government agencies' failure to follow proper procedures injured their rights to information, participation, and informed decision making. Region 8, 993 F.2d at 810; see also Lujan, 119 L.Ed.2d at 372 (holding that claim of procedural injury merely states generalized grievance about government and does not establish a case or controversy).[20]
D. Permanent Injunction Standard
Although the proceeding before the Court on August 19, 1996 was scheduled as a hearing on plaintiffs' motion for preliminary injunction, the plaintiffs asked the Court at that hearing to transform it into a trial on the merits. Accordingly, the issue before the Court is not whether a preliminary injunction should issue, but rather whether the plaintiffs are entitled to permanent injunctive relief in this matter.
The standard for issuance of a permanent injunction is essentially the same as that for the issuance of a preliminary injunction, except that a plaintiff seeking the former relief must show actual success on the merits, rather than a mere likelihood of success on the merits.[21]See Amoco Production Co. v. Village of Gambell, AK, 480 U.S. 531, 546 n. 12, 107 S. Ct. 1396, 1404 n. 12, 94 L. Ed. 2d 542 (1987) (citing University of Texas v. Camenisch, 451 U.S. 390, 392, 101 S. Ct. 1830, 1832, 68 L. Ed. 2d 175 (1981)). In order to be entitled to permanent injunctive relief, the plaintiffs must satisfy the following three criteria: (1) violation of the applicable statutory or regulatory authority by the defendants; (2) continuing irreparable injury to *1572 the plaintiffs in the absence of an injunction; and (3) lack of an adequate remedy at law. See Newman v. State of Alabama, 683 F.2d 1312, 1319 (11th Cir.1982); Lopez v. Garriga, 917 F.2d 63, 67-68 (1st Cir.1990); Environmental Waste Reductions, Inc. v. Reheis, 887 F. Supp. 1534, 1570 (N.D.Ga.1994); Diamond Waste, Inc. v. Monroe County, Georgia, 869 F. Supp. 944, 947 (M.D.Ga.1994). In their briefs and oral arguments, the defendants have focused their attention on the first and second of these elements; therefore, the Court's analysis will be devoted exclusively to assessment of those elements.
E. Plaintiffs' Ability to Succeed on the Merits
The plaintiffs attribute two types of wrongdoing to the Corps in its permitting decision. First, they contend that the Corps failed to consider other reasonable and practicable alternatives to the selected project design, in violation of the National Environmental Policy Act ("NEPA"), the Clean Water Act ("CWA"), and the Administrative Procedure Act ("APA"). Second, the plaintiffs attack the procedural mechanism through which the permit was issued, inasmuch as neither the public nor various federal agencies were afforded an adequate, meaningful opportunity to respond to the City's third proposal for the baseball stadium complex design and location. With respect to the latter claim, the plaintiffs allege that the Corps' hasty issuance of the permit without allowing comment violated their responsibilities under the Fish and Wildlife Coordination Act ("FWCA"), NEPA, the CWA, and the APA. In response, the Corps denies that its actions ran afoul of the applicable statutes and regulations. The Corps also suggests that the procedural requirements cited by the plaintiffs are immaterial in this case, because the Corps could have issued a so-called Nationwide Permit number 26 to the City, which permit could have been issued without any of the elaborate procedures identified and relied upon by the plaintiffs. The Court will consider each of these issues in turn.
1. Failure to Consider Alternative Sites
a. Standard of Review of NEPA Documents
The Corps' authority to issue permits to fill wetlands derives from Section 404 of the Clean Water Act, codified at 33 U.S.C. ง 1344(a). Under the applicable Section 404 guidelines, "no discharge of dredged or fill material shall be permitted if there is a practicable alternative to the proposed discharge which would have less adverse impact on the aquatic ecosystem, so long as the alternative does not have other significant adverse environmental consequences." 40 C.F.R. ง 230.10(a) (emphasis added); see also Fund for Animals, Inc. v. Rice, 85 F.3d 535, 542 (11th Cir.1996); see generally Friends of the Payette v. Horseshoe Bend Hydroelectric Co., 988 F.2d 989, 995 (9th Cir.1993). The regulations further provide that an alternative is considered "practicable" if it is "available and capable of being done after taking into consideration cost, existing technology, and logistics in light of overall project purposes." 40 C.F.R. ง 230.10(a)(2); see also Fund for Animals, 85 F.3d at 542. Where an activity would involve destruction of wetlands and where said activity is not "water dependent", the regulations create a presumption that practicable alternatives not involving wetlands are available, unless clearly demonstrated otherwise. See 40 C.F.R. ง 230.10(a)(3); see also Fund for Animals, 85 F.3d at 542. If a permit application complies with the Section 404(b) regulations, the Corps must issue it unless the district engineer finds that such issuance would be "contrary to the public interest." 33 C.F.R. ง 320.4(a)(1).
The degree of scrutiny which the Corps must apply to these alternatives depends on whether the agency is required to produce an environmental impact statement, as opposed to merely an environmental assessment. NEPA requires that agencies prepare environmental impact statements for all "major federal actions significantly affecting the quality of the human environment."[22]*1573 42 U.S.C. ง 4332(2)(C)(i). In determining whether an environmental impact statement ("EIS") is necessary in a particular case, federal agencies must first prepare an environmental assessment ("EA") which provides sufficient evidence and analysis for a determination of whether an EIS should be prepared, and which includes brief discussions of environmental impacts of proposed action and alternatives.[23]See 40 C.F.R. งง 1501.4(a), 1508.9. The purpose of the EA is to determine whether the likelihood of significant environmental harm is sufficiently great to warrant the significant investment of time and expense required to produce an EIS. See Fund for Animals, 85 F.3d at 546 (citing River Road Alliance, Inc. v. Corps of Engineers of U.S. Army, 764 F.2d 445, 449 (7th Cir.1985)). In this case, the Corps' EA found that the instant project was not a "major federal action significantly affecting the quality of the human environment" and that no EIS was necessary. Though the plaintiffs have argued that an EIS should have been prepared, there is no evidence in the record to support their allegation that the finding of no significant impact was arbitrary or capricious.[24] In that respect, this action rests on a similar footing to Preserve Endangered Areas of Cobb's History, Inc. v. U.S. Army Corps of Engineers, 87 F.3d 1242 (11th Cir.1996), in which the Eleventh Circuit held:
"Although the plaintiffs disagree with the conclusion of the Corps, they can point to nothing that would make the Corps decision arbitrary and capricious. The Corps considered the impact on the wetlands, considered the [City]'s mitigation plan, and reasonably concluded that the impact on the wetlands would not be significant." Id. at 1248.
Accordingly, the Corps' obligations under NEPA were not to present a detailed EIS, but merely to "study, develop, and describe appropriate alternatives to recommended courses of action" pursuant to an EA. 42 U.S.C. ง 4332(2)(E); see also Druid Hills Civic Ass'n v. Federal Highway Administration, 772 F.2d 700, 713 (11th Cir. 1985) (noting that consideration need only be given to reasonable alternatives). As stated previously, the Corps is permitted to perform a less detailed analysis of the various alternatives in an EA than it would in an EIS. Furthermore, the Corps is free to consider a narrower range of alternatives where no significant environmental impact is found than it *1574 would otherwise, as the range of alternatives which need be considered is directly proportional to the environmental impact of the proposed action. See Friends of the Ompompanoosuc v. F.E.R.C., 968 F.2d 1549, 1558 (2d Cir.1992); Sierra Club v. Espy, 38 F.3d 792, 796 (5th Cir.1994). In general, the agency need only adhere to a "rule of reason" both in deciding which alternatives to consider and in determining the extent to which it must discuss them in NEPA documents. See Citizens Against Burlington, Inc. v. Busey, 938 F.2d 190, 195-96 (D.C.Cir. 1991) (agency discussion of alternatives upheld so long as alternatives are reasonable and agency discusses them in reasonable detail). Under NEPA, the party challenging the agency's decision shoulders the burden of proving that the scope or extent of the agency's discussion of alternatives was unreasonable. See Sierra Club v. Hodel, 848 F.2d 1068, 1089 (10th Cir.1988) (quoting Park County Resource Council, Inc. v. United States Department of Agriculture, 817 F.2d 609, 621 (10th Cir.1987)).
b. Parking Deck Alternative
The plaintiffs allege that the Corps failed to adhere to the mandates of CWA and NEPA in considering potential alternative sites for the stadium project, including both available alternatives on other tracts of land as well as other locations on the McGowin tract itself. Plaintiffs further contend that the Corps' alleged deviance from applicable statutes and regulations rendered its decision to issue the permit to the City "arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law", and that the APA mandates that this Court therefore hold unlawful and set aside such agency action. 5 U.S.C. ง 706(2)(A). In particular, the plaintiffs point to two alternative plans which, in their view, the Corps failed to consider fully prior to issuing the permit to the City. The Court's inquiry here focuses in the first instance on whether such alternatives were practicable and, if so, whether the degree of scrutiny accorded those alternatives in the EA was sufficiently reasonable to comport with the applicable statutory and regulatory authorities.
First, the plaintiffs argue that the Corps erred in failing to consider the possibility of constructing a multi-tiered parking deck structure for approximately 1,000 parking spaces on available uplands, rather than building a ground-level conventional parking lot for said 1,000 parking spaces on the 7.4 acres of wetlands which the City sought permission to fill. The plaintiffs contend that the parking deck notion was a viable alternative which would have allowed the City to complete its stadium complex without implicating any wetlands whatsoever. The Corps has conceded that it never considered this parking deck option; indeed, the administrative record does not contain a shred of evidence regarding the feasibility of such an alternative plan. There is simply no reference anywhere in the administrative record to the alternate plan of avoiding the wetlands by building an elevated parking structure on nearby uplands rather than a conventional lot on the wetlands.
Despite these omissions, the Corps' failure to assess and evaluate this alternative does not necessarily imply that the Corps violated CWA and NEPA. As stated previously, the applicable regulations are clear that the Corps need only consider "practicable" or "reasonable" alternatives.[25] Moreover, the case law is clear that an EA or EIS "cannot be found wanting simply because the agency failed to include every device and thought conceivable by the mind of man." Vermont Yankee Nuclear Power Corp. v. Natural Resources Defense Council, Inc., 435 U.S. 519, 551, 98 S. Ct. 1197, 1215, 55 L. Ed. 2d 460 (1978).[26] The concept of alternatives *1575 has been held to be an evolving one, such that agencies may be required to consider more or fewer alternatives as they become better known and understood. See id. at 552-53.
In challenging the Corps' failure to consider the parking deck option, the plaintiffs bear the burden of establishing that this alternative to the proposal approved by the Corps was reasonable or practicable. See Sierra Club v. Hodel, 848 F.2d 1068, 1089 (10th Cir.1988). At trial, however, the plaintiffs never presented any evidence or testimony regarding the feasibility, reasonableness, or practicability of constructing a multi-level parking deck structure on uplands in the 30 acre parcel donated by the private land owners. By contrast, the defendants presented testimony from two witnesses regarding the parking deck issue. One witness, City Director of Public Services John Bell ("Bell"), testified that if the City were denied its application to fill the 7.4 acres of wetlands at the site, approximately 1,000 parking spaces would be lost through direct and indirect means. While the City could conceivably construct a multideck parking facility on that site for the remaining spaces, Bell testified, such a facility would cost approximately nine to ten thousand dollars per parking space, leading to a total estimated cost of $9 to $10 million for an elevated parking facility at the stadium complex. Bell also testified that the City's entire budget for the entire stadium project (including ball park, parking lot, etc.) was a mere $7.2 million. Bell expressed serious concerns about the logistical feasibility of placing an elevated parking garage on the stadium site, as he noted that the access road and retention pond would need to be relocated, and that the construction contract would need to be renegotiated by the City at substantial delay and expense. Finally, he testified that the construction contract is currently "out for bids" and bids are due to be accepted by the City on August 27, 1996; and further that the contract proposal has no severability clause in it which would allow the City to award the contract without the 7.4 acres of parking if the Court were to issue the injunction requested by the Plaintiffs. A second defense witness, construction manager Clifton Lambert ("Lambert"), testified that it was unclear where a multi-level parking deck structure could be built on the site which has been donated by the land owners. Additionally, Lambert estimated the cost of an elevated parking deck at $8,500 per parking space, which translates into a total cost of $8.5 million for construction of such a structure.[27]
The plaintiffs have made no effort either before, during, or after trial to demonstrate that the parking deck was, in fact, a workable alternative to the parking lot presently planned for the baseball stadium complex. Rather, the plaintiffs attempt to persuade the Court that the Corps and the City are simply offering post hoc rationalizations for their failure to consider the parking deck issue prior to issuance of the permit. Apparently, *1576 plaintiffs would have the Corps examine every conceivable alternative to a proposal in an on-the-record fashion, then articulate explanations for its determinations that certain of those alternatives are not practicable or reasonable. This is not the law. Indeed, the CWA regulations state that a permit can only be issued if there is no "practicable" alternative with a lesser environmental impact. The defendants presented persuasive, unrebutted evidence that construction of a parking deck on the stadium site was not practicable on the basis of both cost and logistics. Likewise, NEPA requires merely that the agency consider and evaluate "reasonable" alternatives in a reasonable manner. The defendants have shown, and the plaintiffs have not rebutted, that the parking deck was not a reasonable alternative; therefore, the Corps was not compelled under NEPA to consider it. Neither provision compels an agency to explain in the administrative record its determination that a patently unworkable alternative is unreasonable or impracticable before rejecting it from consideration.[28] In sum, the Court simply cannot conclude on the record before it that the Corps acted arbitrarily, capriciously, or unreasonably in failing to consider an alternative parking scheme which would have more than doubled the cost of the construction project and which would have posed substantial logistical problems for construction of the stadium complex on the lands donated by the property owners on the McGowin tract. The plaintiffs have not met their burden of showing that the Corps' failure to study the parking deck possibility was unreasonable, and the Court will not set aside the Corps' decision based on the agency's lack of consideration of that alternative.[29]
c. Additional Land Alternative
The plaintiffs also identify a second alternative which they contend the Corps did not consider adequately before issuing the permit. Specifically, the plaintiffs claim that the Corps should have examined the possibility of obtaining more uplands from the McGowin land owners. Had the City done so, the plaintiffs argue, they might have determined that the entire facility could have been constructed on uplands and that there was no necessity to fill any wetland acreage whatsoever. There is evidence in the administrative record which shows that this alternative was, in fact, considered by the Corps. In particular, the Corps had before it a letter dated May 24, 1996, which was written by Mayor Dow. In this letter, Mayor Dow advised the Corps that "in [the City's] discussions and the negotiations with the property owners they have stated emphatically and finally, that there is no more property available on their 180 area [sic] tract of land that they would make available for the stadium site."[30]*1577 Admin.Record, at tab 113. Mayor Dow also indicated that the land owners had stated that any such alteration of the lands made available for the stadium would disrupt their development plans for the parcel of land. Id.
Clearly, the Corps devoted some consideration to the prospect of securing additional uplands for the project or otherwise moving the complex within the McGowin tract. Indeed, the EA prepared by the Corps shows that the agency did examine these issues in some analytical detail. In that document, the Corps expressly asserts practical and logistical reasons why the stadium could not be moved from its proposed location in the southwest corner of the acreage to the north, east, or southeast, and makes reference to Mayor Dow's May 24 letter. Admin.Record, at p. 00756.
Thus, the Corps did consider the possibility of obtaining additional or alternate land on the McGowin tract. The plaintiffs take issue not with the Corps' decision to consider this alternative, but with the extent of the Corps' consideration of it. In particular, they suggest that the Corps was wrong to rely on the land owners' representations about availability of additional lands. To support their claims, the plaintiffs point to a May 8, 1996 letter in which the land owners' representative informed the City that the owners were unwilling to make any additional or alternative lands available for the construction project. Admin.Record, at tab 81. The May 8 letter notwithstanding, the plaintiffs observe, the land owners made more than 9 acres of additional uplands available to the City two weeks later, as evidenced by the City's unveiling of the a new plan on May 23, 1996, which plan would impact only 7.4 acres of wetlands rather than the 16.9 acres previously contemplated. Because the land owners did not adhere to their vigorous assertions in their May 8 letter, plaintiffs argue, the land owners' representations to Mayor Dow as related to the Corps in his May 24 letter should have been deemed suspect, at best, by the Corps, and should not have been accepted at face value.[31] Plaintiffs further protest that the contents of Mayor Dow's letter, upon which the Corps relied, are unsupported hearsay, and argue that the Corps should have investigated further to ensure that the landowners truly were serious about their stated refusal to surrender any more upland territory to the baseball stadium construction project. In their brief, plaintiffs summarize their position by asserting that "the City and Corps should have tried harder" to determine the land owners' true intentions regarding the availability of additional lands. Plaintiffs' Reply Brief, at 9.
Furthermore, the plaintiffs point to post-decision, extra-record statements by Mayor Dow and by various City council members in which these officials suggested that other lands could be or would have been made available for construction of the baseball stadium. The plaintiffs presented as exhibits the following items: (1) a videotape containing a July 12, 1996 news broadcast in which the reporter ascribed to Mayor Dow a comment that the City would "do what it must" to finish the stadium, even at the cost of moving the parking lot or reducing the number of spaces; (2) a June 14, 1996 radio show transcript in which Mayor Dow stated that there were several ball park sites which the City "should have got"; and (3) a transcript of an August 6, 1996 City council meeting in which two council members suggested that additional upland acreage could be obtained if the City were enjoined from filling in the 7.4 acres of wetlands. See Exhibit J to Plaintiffs' Motion for Preliminary Injunction; Plaintiffs' Exhibits 1, 4; see generally description *1578 of this evidence at section II.B.2., supra.
The Court finds that the Corps engaged in a reasonable analysis of the availability of uplands on the McGowin tract, and that its analysis was reasonably detailed. The evidence in the administrative record unambiguously pointed toward the conclusion that said lands were unavailable, and that alternative configurations within the 180 acre tract were not practicable. Certainly, the land owners had previously stated that no more lands were available, then subsequently swapped 9.5 acres of uplands for 9.5 acres of wetlands in the original proposal. While that fact may cast some cloud or suspicion on the veracity and credibility of their statements to Mayor Dow, the Court is of the opinion that that fact alone does not render it arbitrary and capricious for the Corps to have relied on Mayor Dow's letter in assessing the availability of other lands on the McGowin tract for the baseball stadium. Furthermore, the Court finds that the post-decision statements by Mayor Dow and the City council members are likewise wholly insufficient to allow the plaintiffs to meet their burden of showing by a preponderance of the evidence that the Corps' rejection of the alternative lands option was arbitrary and capricious or that the Corps failed to analyze with reasonable detail the feasibility of such an alternative.[32]
In light of the foregoing analysis, the Court declines plaintiffs' invitation to find unreasonableness or capriciousness on the Corps' part for failing to perform a more indepth inquiry into the availability of alternate lands on the McGowin tract, and for rejecting that alternative to the proposal for which the permit was ultimately issued. Plaintiffs are not entitled to relief on this basis.
Finally, the Court notes that, under 40 C.F.R. ง 230.10(a)(3), where, as here, a wetlands fill permit application involves a prospective use of the land which is not water-dependent, the Corps is instructed to presume that practicable alternatives exist unless the party seeking the permit clearly demonstrates otherwise. See id. However, the Court's conclusion that the Corps' failure to consider adequately various alternatives does not rise to the level of arbitrary and capricious action is not undermined by this regulation. On the contrary, the Court finds that the City did present adequate evidence to demonstrate clearly that no practicable alternatives existed, and to overcome the presumption of practicable alternatives. Indeed, the City's submissions analyzed a myriad of other sites in light of certain clearly stated criteria, and determined that none of those alternate sites could satisfy all of the selection criteria. The plaintiffs have offered no evidence to show that a practicable alternative to that chosen by the defendants did in fact exist. Accordingly, the Court does not find it arbitrary or capricious of the Corps to conclude that the City's submissions were adequate to overcome the presumption against filling in wetlands for non-water-dependent uses. Stated differently, the plaintiffs' claims that the Corps failed to consider adequately various alternatives cannot be rescued by reliance on 40 C.F.R. ง 230.10(a)(3).
2. Lack of Notice to Public and Federal Agencies
a. Statutory and Regulatory Backdrop
The plaintiffs' next claim is that the Corps erred by granting insufficient time for the *1579 public and for the Fish and Wildlife Service and EPA to review and comment on the third proposed plan for the stadium and parking lot. In support of this cause of action, the plaintiffs point to the fact that the Corps faxed to the federal agencies pertinent information about the 7.4 acre plan on May 24, 1996 and on the morning of May 28, 1996, and that the Corps proceeded to issue the permit in the late morning of May 28, 1996 without waiting for any agency responses to be submitted. No public notice of the third proposed plan provided by the City was ever provided, and no public comments were ever submitted or received by the Corps as to this third permutation of the development scheme prior to the Corps' issuance of a permit to the City on May 28, 1996. The plaintiffs allege that these facts give rise to violations of various regulatory and statutory provisions, which allegations shall be considered below.
b. Failure to Provide Notice to Federal Agencies
Under the Fish and Wildlife Coordination Act, 16 U.S.C. ง 661 et seq., prior to the commencement of any project which would cause the "waters of any stream or other body of water . . . to be impounded, diverted, the channel deepened, or the stream or other body of water otherwise controlled or modified for any purpose whatever, including navigation and drainage, by any department or agency of the United States, or by any public or private agency under Federal permit or license, such department or agency first shall consult with the United States Fish and Wildlife Service, Department of the Interior. . . ." 16 U.S.C. ง 662(a). The involvement of the Fish and Wildlife Service is such that the reports and recommendations which it issues "shall be made an integral part of any report prepared or submitted by any agency of the Federal Government" which is required to consult with the Fish and Wildlife Service. 16 U.S.C. ง 662(b). The statute also requires the agencies seeking consultation with the Fish and Wildlife Service to give full consideration to its reports and recommendations. See id. The Corps' governing regulations reflect cognizance of these responsibilities under the FWCA.[33]
On a procedural note, the FWCA does not include a citizen suit provision. Thus, there is no private right of action afforded plaintiffs by the FWCA directly. However, several courts have held that NEPA incorporates the FWCA, such that an agency which complies with NEPA has necessarily also complied with the FWCA. See 40 C.F.R. ง 1502.25(a) (EIS prepared by agency must comply with FWCA); Texas Committee on Natural Resources v. Marsh, 736 F.2d 262, 267 (5th Cir.1984) (NEPA requires compliance with FWCA); Environmental Defense Fund, Inc. v. Froehlke, 473 F.2d 346 (8th Cir.1972) (holding that if the Corps complies with NEPA in good faith, it must automatically take into consideration its obligations under the FWCA); Bergen County v. Dole, 620 F. Supp. 1009, 1064 (D.C.N.J. 1985) (finding that agencies' compliance with NEPA automatically establishes compliance with FWCA). Therefore, the Court perceives the plaintiffs' invocation of the FWCA as a part of their claim that the defendants violated NEPA. See Environmental Defense Fund, Inc. v. Alexander, 501 F. Supp. 742, 767 (N.D.Miss.1980), rev'd on other grounds, 651 F.2d 983 (5th Cir.1981) (holding that "any separate claim that defendants are not complying with FWCA is merged with and subsumed by [the plaintiffs' claim in those counts based in NEPA"). As there is a private right of action under NEPA, the plaintiffs are entitled to proceed with their FWCA claims on that basis. See Texas Committee, 736 F.2d at 268. The Court's review of the Corps' degree of coordination with the Fish and Wildlife Service is governed by the arbitrary and capricious standard, pursuant to the APA.
*1580 The administrative record clearly shows that the Fish and Wildlife Service did not have a reasonable opportunity to respond to the City's third and final proposal, which would result in the destruction of 7.4 acres of wetlands, prior to the Corps' decision to issue a permit authorizing the City to do so. However, the Corps had consulted the Fish and Wildlife Service with respect to both the first (19.9 acres of wetlands) and second (16.9 acres of wetlands) proposals made by the City. Indeed, the administrative record contains two detailed letters to the Corps submitted by the Fish and Wildlife Service, the first of which is dated February 21, 1996, and the second of which is dated April 30, 1996. Admin.Record, at tabs 27, 73. Though not the only issue raised, a focal point of both letters was the Fish and Wildlife Service's concern that the Corps had not fully evaluated the possibility of avoiding wetland use altogether by constructing the entire facility on uplands on the McGowin tract.[34]Id.
The EA prepared by the Corps and released on May 28, 1996 detailed the objections and recommendations raised by the Fish and Wildlife Service in its correspondence, and explained in great detail how the Corps had responded to those issues and why the Corps had determined that the City's third proposal effectively addressed those concerns to the greatest extent possible. Admin.Record, at pp. 00757-60. With respect to the concerns regarding wetland avoidance, the Corps wrote the following: "We believe that the proposed reductions in wetland impacts to 7.4 acres minimizes impacts to the maximum practical level." Admin.Record, at p. 00759. The Corps also expressed its belief that further coordination with the Fish and Wildlife Service after the City submitted its third proposal was not required by the applicable statutes or regulations, inasmuch as the Fish and Wildlife Service had not provided a 3(b) letter elevating the dispute to the agencies' respective national offices. Admin.Record, at p. 00760. Thus, the Corps clearly indicated that it had considered its sister agency's recommendations, and articulated its reasons for finding that the City's third proposal provided the best possible accommodation of those recommendations.
The Court agrees with the Corps' interpretation of the FWCA and the applicable regulations. Nowhere do those authorities provide that the Corps must consult with the Fish and Wildlife Service at every iterative stage of a wetlands fill proposal. Nor must the Corps adhere rigidly to the recommendations given it by the Fish and Wildlife Service. See Texas Committee, 736 F.2d at 268 (Corps satisfies statutory requirements by giving serious consideration to views of Fish and Wildlife Service); Sierra Club v. Alexander, 484 F. Supp. 455, 470 (N.D.N.Y. 1980) (holding that FWCA requires only that agency give views of Fish and Wildlife Service serious consideration, not that its decision correspond to those views); County of Bergen v. Dole, 620 F. Supp. 1009, 1063 (D.C.N.J.1985) (same); Lake Erie Alliance for Protection of Coastal Corridor v. U.S. Army Corps of Engineers, 526 F. Supp. 1063, 1081 (W.D.Pa.1981) (same). Rather, it is enough that the Corps give the Fish and Wildlife Service a meaningful opportunity to comment at some point after a permit application is submitted and before a permit is issued, and that the Corps seriously consider the Fish and Wildlife Service's recommendations and incorporate a discussion of said recommendations into its report. All of those steps were followed here. In the EA, the Corps recited the Fish and Wildlife Service's concerns, and explained its belief that the City's third proposal alternative provided the best possible resolution of those concerns. Nothing more was required of the *1581 Corps. Therefore, the Court concludes that the Corps' failure to consult with the Fish and Wildlife Service following the City's submission of its third plan for the stadium complex cannot be branded arbitrary, capricious, or otherwise unlawful.
It is true that enhanced coordination between and among federal agencies is a laudable and worthy goal. Though increased communication between the Fish and Wildlife Service and the Corps throughout the pendency of the City's permit application may well have been beneficial and desirable in this case, the Corps' limited coordination with the Fish and Wildlife Service did not run afoul of the FWCA or NEPA, and was not arbitrary and capricious under the APA.
c. Failure to Provide Notice to Public
The plaintiffs also maintain that there was inadequate notice given to the public following the City's submission of its third stadium proposal to the Corps. On January 22, 1996, the Corps provided public notice of the City's original plan for the stadium complex, which plan would result in the filling in of 19.9 acres of wetlands. Admin.Record, at tab 12. The notice invited comment from the public, so long as said comments were received by the Corps prior to February 25, 1996. Id. During the notice and comment period, the Corps received over 250 responses from members of the public. Admin.Record, at tab 44. Subsequent requests to reissue the public notice were denied by the Corps on the grounds that numerous individuals had responded to the original notice, that the ballpark plan had received extensive news media coverage, and that the ballpark proposal had not changed radically as of April 1996. Admin.Record, at tabs 44, 45. On May 24, 1996, the Corps denied a request for public hearing as to the City's third proposal on the ground that "a public hearing would not provide any additional information which would assist in making a final decision in this request for a permit." Admin.Record, at tab 114. No public notice was issued by the Corps regarding the 7.4 acre plan and concomitant alterations in design and configuration of the stadium complex prior to its decision to grant the permit on May 28, 1996.
While the plaintiffs are correct that no supplemental public notice was issued by the Corps following the City's submission of its third proposal, they ignore the fact that no such notice is required under the relevant CWA regulations. Indeed, "the applicable regulations give the Corps discretion about whether to issue supplemental public notice about such matters." Fund for Animals, Inc. v. Rice, 85 F.3d 535, 545 (11th Cir.1996); see also 33 C.F.R. ง 325.2(a)(2) ("The district engineer will issue a supplemental, revised, or corrected public notice if in his view there is a change in the application data that would affect the public's review of the proposal."); Friends of the Payette v. Horseshoe Bend Hydroelectric Co., 988 F.2d 989, 996-97 (9th Cir.1993) (public hearing unnecessary where Corps has provided adequate notice of permit application and where Corps is aware of public sentiment on both sides of the issue). The Corps determined that no public hearing or additional notice was necessary because such events would not provide information to the Corps which would assist in determining whether to grant or deny the permit application. Furthermore, the plaintiffs have offered the Court no basis for disturbing this decision as arbitrary, capricious, or abuse of discretion on the part of the Corps. Accordingly, the Court finds that the Corps' decision not to issue supplemental public notice was not violative of the CWA, NEPA, or the APA.
3. Nationwide Permit Option
The plaintiffs have failed to meet their burden of demonstrating that the Corps' decision to issue the wetlands fill-in permit to the City under ง 404(b) of the CWA was arbitrary and capricious. Although the Court's inquiry could begin and end with its discussion of the section 404 requirements, the defendants have offered an additional reason why the issuance of the permit was not arbitrary, capricious, or otherwise erroneous. Specifically, they assert that even if the section 404 requirements had been breached by the Corps in this case, the agency still possessed authority to issue the wetlands fill-in permit to the City in the form of a so-called Nationwide Permit Number 26 ("NWP 26"). Thus, the defendants allege, *1582 any error in the section 404 permitting process is rendered moot by the fact that the permit could have been issued by the Corps to the City as a NWP 26 permit without wading through the procedural morass of section 404.[35]
The applicable regulation establishing the Corps authority to issue a NWP 26 permit is set forth at 33 C.F.R. ง 330.5(a)(26), which authorizes "discharges which cause the loss or substantial adverse modification of 1 to 10 acres" of either waters above the headwaters or isolated waters, including wetlands.[36] 33 C.F.R. ง 330.5(a)(26)(ii). As several courts have commented, an NWP 26 permit has the desirable feature of being "automatic which means that if one qualifies for such a permit no application is needed nor must notice be given before beginning the discharge activity." Shelton v. Marsh, 902 F.2d 1201, 1205 (6th Cir.1990); Riverside Irrigation District v. Stipo, 658 F.2d 762, 764 (10th Cir.1981). Stated differently, when a project qualifies for a NWP 26 permit, the applicant need not secure the approval or follow the procedures otherwise required under section 404 of the CWA in order to obtain authorization from the Corps to fill wetlands. See Shelton, 902 F.2d at 1205. Moreover, the fact that the Corps chooses, as an initial matter, to treat a permit application under section 404 is of no consequence in assessing the eligibility of the permit applicant for consideration under NWP 26. Indeed, the Sixth Circuit has held that the Corps' issuance of a defective section 404 permit does not require set-aside or remand of the Corps' decision where the agency subsequently superseded and replaced the 404 permit with a NWP 26 permit which could have been issued in the first instance. See id. at 1204-1205.
In its final form, the City's proposal encompassed only 7.4 acres of wetlands; therefore, it satisfies the acreage requirement for eligibility for a NWP 26 permit.[37] The sole remaining qualification is whether the wetlands at issue satisfy 33 C.F.R. ง 330.5(a)(26)(i)-(ii) by being either (1) above the headwaters or (2) isolated waters. The first alternative appears inapplicable, as there is no evidence before the Court suggesting that the acreage in question lies above the headwaters. "Isolated waters" are defined as non-tidal waters which are "(1) Not part of a surface tributary system to interstate or navigable waters of the United States; and (2) Not adjacent to such tributary *1583 waterbodies." 33 C.F.R. ง 330.2(e); Reichelt v. U.S. Army Corps of Engineers, 923 F. Supp. 1090, 1094 (N.D.Ind.1996).
Clearly, the wetlands in question are not themselves part of a surface tributary system; therefore, the Court's inquiry focuses on whether they are "adjacent" to tributary waterbodies. The regulations define "adjacent" as meaning "bordering, contiguous, or neighboring". 33 C.F.R. ง 328.3(c); see also United States v. Banks, 873 F. Supp. 650, 658 (S.D.Fla.1995). Wetlands which are separated from other waters of the United States by "man-made dikes or barriers, natural river berms, beach dunes and the like are `adjacent wetlands.'" 33 C.F.R. ง 328.3(c); United States v. Tilton, 705 F.2d 429, 431 (11th Cir.1983). In determining whether particular wetlands are "isolated" or "adjacent", courts have considered such factors as the distance between the wetlands and the nearest rivers or tributaries and the extent of the hydrological and ecological links between the wetlands and the river system. See Tilton, 705 F.2d at 431 & n. 1 (relying on physical proximity, as well as hydrological and ecological linkages, in reaching finding of adjacency); United States v. Banks, 873 F. Supp. 650, 659 (S.D.Fla.1995) (finding of adjacency is "bolstered" by presence of hydrological and ecological links).
The site maps and Corps analysis in the administrative record clearly demonstrate that the wetlands at issue in this case are "surrounded by an interstate highway, commercial and residential development. Admin.Record, at p. 00747; see also pp. 00163-64, 00743-00746. Likewise, the Corps has repeatedly characterized these wetlands as "isolated." Admin.Record, at p. 00747 (describing wetland at proposed stadium site as "isolated remnant of much larger wetland area"); Admin.Record at tab 12 (describing affected waterway as "isolated wetland"). The plaintiffs have made no showing to corroborate their contention that these wetlands are actually adjacent to a surface tributary system to Dog River.[38] Moreover, the only evidence in the record regarding the ecological and hydrological links between the wetlands and Dog River suggests that those connections are virtually nonexistent. Admin.Record, at p. 00748 ("In general, the wetlands provide very limited flood water and contaminant filtration functions and even when combined with surrounding uplands, provide very low quality wildlife habitat."). Simply stated, there is no evidence before the Court from which it could conclude that the 7.4 acre site is bordering, contiguous or neighboring a surface tributary system to Dog River.[39] Finally, the Court's own review of the site maps lends very strong support to the Corps' description of these wetlands as "isolated" from any navigable waters or tributary system thereto.
In light of the foregoing analysis, the Court concludes that the 7.4 acres of wetlands at issue in this matter are in fact isolated wetlands. Accordingly, had it chosen to do so, the Corps could have authorized the wetlands fill through issuance of a NWP 26 permit, rather than a section 404 permit. This finding means that, even if the section 404 procedures were somehow lacking or deficient, the Corps' decision to issue the permit withstands "arbitrary and capricious" *1584 scrutiny by this Court, pursuant to NWP 26 and Shelton. Because the Corps could have issued a NWP 26 permit to the City, any defects in the section 404 process would be immaterial.
F. Continuing Irreparable Injury to Plaintiffs
As the foregoing analysis demonstrates, the plaintiffs cannot succeed on the merits of their claims that the defendants violated various statutory and regulatory provisions. That failing on the plaintiffs' part is sufficient, in and of itself, to bar them from the relief they seek. However, their quest for a permanent injunction is also due to be denied on the basis of their failure to establish any continuing irreparable injury in the event that the City is not enjoined from proceeding with its plans to fill the wetlands and construct the baseball stadium and parking lot on the site presently contemplated. See Newman v. State of Alabama, 683 F.2d 1312, 1319 (11th Cir.1982) (injunctive relief will not be granted in absence of showing of continuing irreparable injury); Lone Star Steakhouse & Saloon, Inc. v. Alpha of Virginia, Inc., 43 F.3d 922 (4th Cir.1995); New York State National Organization for Women v. Terry, 886 F.2d 1339 (2d Cir.1989) (same).
The plaintiffs have never offered the Court any evidence which suggests that they will suffer a continuing irreparable injury in the absence of injunctive relief. Meanwhile, at trial, the defendants offered the expert testimony of Dr. Barry Vittor ("Dr. Vittor"), who testified as to whether the loss of the 7.4 acre tract of wetlands in question could be mitigated. Dr. Vittor opined that he had performed between six and twelve wetlands mitigation projects, all of which had been successful in creating wetlands functions to those lands. According to Dr. Vittor, the loss of the 7.4 acres of wetlands could be successfully mitigated by creation of 15 acres of wetlands in the Three Mile Creek drainage north of the project site. Albeit in a different drainage, the ultimate impact will be felt in Mobile Bay in which both Three Mile Creek and Dog River ultimately drain.[40] The plaintiffs did not counter Dr. Vittor's testimony with any expert testimony suggesting that the imminent harms alleged by plaintiffs are otherwise irreparable. Stated simply, the plaintiffs have made no showing that they will be irretrievably injured if the City proceeds with its plan to fill 7.4 acres of transitional wetlands on the McGowin tract in accordance with its proposed baseball stadium complex.
In light of the plaintiffs' failure to carry their burden of establishing an irreparable injury in the absence of the issuance of a permanent injunction, the Court finds that the irreparable injury criterion constitutes a separate and independent basis for denying them the permanent injunctive relief which they seek.
III. Conclusion
For all of the foregoing reasons, the Court finds in favor of the defendants on all of the causes of action asserted by the plaintiffs. The plaintiffs' claims for permanent injunctive relief are due to be, and the same hereby are, DENIED, and this action is hereby DISMISSED with prejudice.
It is so ORDERED.
NOTES
[1] As the relief sought was injunctive and declaratory in nature, the trial was conducted without a jury. Accordingly, pursuant to Rule 52(a), Fed. R.Civ.Pro., the Court hereby enters its findings of fact and conclusions of law in this matter.
[2] In total, the McGowin tract contains approximately 43 acres of transitional wetlands, spread over three different locations. These wetlands form a part of the Dog River drainage basin, and Dog River ultimately flows into Mobile Bay. The original stadium plan submitted with the application placed the stadium itself and part of the parking lot on 19.6 acres of a 40 acre patch of wetlands, with an additional 0.3 acres of wetlands from a different area on the McGowin tract to be filled in order to facilitate construction of the access road to the stadium.
[3] The City also submitted a mitigation plan in which it proposed to mitigate the loss of wetlands on the McGowan tract by creating 16.5 acres of forested and marsh wetlands near West Fowl River.
[4] The Fish and Wildlife Service's concerns regarding the City's revised proposal revolved primarily around the possibility of wetlands avoidance, as summarized below:
"In view of the adjacent uplands at the ball park project site, avoidance mitigation seems to be a viable option in lieu of filling wetlands for a non-water dependent use. The reasons for not avoiding wetland impacts should be adequately explained before agency acceptance of compensation for unavoidable wetland impacts is sought." Admin.Record, at tab 73.
[5] The EPA succinctly summarized its objections in the following manner:
"Though the applicant has reduced the wetland impact from 19.6 acres [not including the 0.3 acres for the access road] to 16.6 acres [ditto], EPA remains concerned that this is a non-water dependent project and wetland impacts from the project could be avoided altogether.... We are not yet convinced that the avoidance and minimization requirements of the guidelines have been met." Admin.Record, at tab 97.
[6] This letter contained the following language:
"Please allow this letter to confirm that the thirty (30) acres provided for in the Ground Lease dated April 16, 1996 between McGowin Properties, Ltd. and the City of Mobile is the only acreage owned by McGowin Properties, Ltd. that is available to the City for a baseball stadium site. There is no additional or alternative acreage which the partnership is willing to make available for the stadium other than the thirty (30) acres previously agreed upon." Admin.Record, at tab 81 (emphasis added).
[7] The new plan also provided for mitigation of the 7.4 acres of wetlands lost. Specifically, the City announced its plan to restore 15 acres of wetlands at a site near Three-Mile Creek. Admin.Record, at tab 113.
[8] It appears that Mayor Dow obtained his information regarding the property owner's unequivocal refusal to provide any additional or different lands for construction of the stadium complex at meetings with the land owners on May 22, 1996. Admin.Record, at tab 107. Members of the Corps were present at these meetings. Id.
[9] More generally, however, the plaintiffs offered several exhibits which, they contended, established that other alternative sites were practicable. In particular, they offered a videotape of a local news broadcast on July 12, 1996, in which a reporter stated that Mayor Dow had asserted that the City would "do what it must" to get the stadium and parking lot built, even if the parking lot had to be moved or the number of spaces reduced. See Exhibit J to Plaintiffs' Motion for Preliminary Injunction. At trial, plaintiffs also submitted a transcript from a radio talk show on June 14, 1996, in which Mayor Dow stated that "there's nothing that's going to prevent that ball stadium from being built" and that "[w]e've been searching for ballpark sites and, ah, had several we could have got." Plaintiff's Exhibit 4. Finally, plaintiffs submitted a transcript of the Mobile City Council meeting on August 6, 1996. The transcript reveals that two council members suggested that it would be possible to obtain additional upland acreage on the McGowin tract if this Court were to enjoin the City from filling in the 7.4 acres of wetlands. See Plaintiff's Exhibit 1. One council member bluntly stated, "I don't think the 7 acres will hold the project up." Id. Based on this evidence (which lies outside the administrative record), the plaintiffs contend, there were alternatives available under which the City could have erected the stadium complex without destroying any wetlands.
[10] It is well-established that district courts have jurisdiction under the APA to review decisions by the Corps to grant section 404 permits. See Conservation Law Foundation v. Federal Highway Administration, 24 F.3d 1465, 1471 (1st Cir. 1994); Holy Cross Wilderness Fund v. Madigan, 960 F.2d 1515, 1521 (10th Cir.1992); Sierra Club v. Pena, 915 F. Supp. 1381, 1392 (N.D.Ohio 1996).
[11] The fact that two other federal agencies, namely the EPA and the Fish and Wildlife Service, reached a different conclusion about the propriety of issuing the permit than did the Corps does not alter the standard of review. Indeed, "[w]hen specialists express contrary views, an agency must have discretion to rely on the reasonable opinions of its own qualified experts even if, as an original matter, a court might find contrary views more persuasive." Marsh, 490 U.S. at 378, 109 S. Ct. at 1861; North Buckhead, 903 F.2d at 1539.
[12] Similarly, under NEPA, the party challenging the agency action bears the burden of showing by a preponderance of the evidence that the agency failed to follow NEPA's requirements. See Druid Hills Civic Ass'n v. Federal Highway Administration, 772 F.2d 700, 709 n. 9 (11th Cir.1985); Sierra Club v. Morton, 510 F.2d 813, 818 (5th Cir.1975).
[13] The plaintiffs argued that these statements fall under the "bad faith" exception identified in Cobb's History. The Court disagrees. The fact that various City officials suggested post-permit that additional lands could have been obtained from the land owners can in no way be construed as a "strong showing" of bad faith on the part of the Corps in granting the permit. Stated differently, there is no evidence that the Corps had any knowledge pre-permit of any such statements by City officials or of the existence of any such viable alternatives; therefore, while the statements at issue could conceivably support a claim of bad faith on the part of the City, they are not evidence that the Corps acted in bad faith by granting the permit to the City.
[14] Irreparable harm is an element which the plaintiffs must establish in order to prevail in their quest for permanent injunctive relief. See discussion at section II.D., infra. This element is distinct from the requirement that plaintiffs show that the Corps' decision was arbitrary and capricious.
[15] Although the Court will consider Bell and Lambert's testimony on this front, such evidence will be given negligible weight, as the degree of harm to the defendant is not a factor which the Court must examine in determining whether to grant permanent (as opposed to preliminary) injunctive relief. See discussion at section II.D., infra.
[16] In addition to the three constitutional requirements, the plaintiffs must comport with three prudential limits on standing, namely: (1) the plaintiffs must assert only their own rights and interests; (2) the action must not involve "abstract questions of wide public significance"; and (3) the plaintiff's complaint must fall within the "zone of interests" sought to be protected by the statute in question. See Valley Forge Christian College v. Americans United for Separation of Church and State, Inc., 454 U.S. 464, 474-75, 102 S. Ct. 752, 759-60, 70 L. Ed. 2d 700 (1982); Region 8, 993 F.2d at 805. There are also certain additional requirements which are imposed upon voluntary membership organizations which seek standing to sue on behalf of their members, namely: (1) the members must otherwise have standing to sue in their own right; (2) the organizations must be seeking to protect interests germane to their purposes; and (3) the participation of individual members must not be required. See Hunt v. Washington State Apple Advertising Commission, 432 U.S. 333, 343, 97 S. Ct. 2434, 2441, 53 L. Ed. 2d 383 (1977).
The existence of these requirements notwithstanding, the defendants do not contend that any of the prudential or voluntary membership organization requirements have not been met by the plaintiffs. Rather, the full force of the defendants' standing arguments is devoted to a discussion of the plaintiffs' compliance with the constitutional factors. Despite the defendants' failure to raise these issues, the Court performed an independent analysis of the applicability of prudential and voluntary membership criteria in this case. Pursuant to this analysis (which is not set forth here, as the defendants never raised the issue), the Court is of the opinion that such requirements have indeed been satisfied in this case. Therefore, the defendants' standing objections rise or fall with the merits of their constitutional arguments, as set forth above.
[17] The defendants have responded that the activities recited by the defendants are not sufficient to establish standing. For instance, they argue that drive-by viewing of the wetlands along an interstate is insufficient to establish standing, that Ms. Marceaux could not legally engage in cycling activity in the affected area, and that the various plaintiff recreational activities along Dog River will be wholly unaffected by the fill-in of 7.4 acres of wetlands for the stadium project. Thus, the defendants are challenging the factual veracity of the affidavits filed by the plaintiffs.
The Court is unwilling to embark on an indepth inquiry as to each of the factual statements presented in the various affidavits. More to the point, no such inquiry is necessary. Indeed, the defendants' standing argument effectively asks the Court to grant summary judgment to the defendants on standing grounds. Where an attack on standing is brought via a motion for summary judgment, the specific facts set forth by the plaintiffs in their affidavits must be accepted as true. See Region 8, 993 F.2d at 806 (citing Lujan, 504 U.S. at 561-62, 112 S. Ct. at 2137). Therefore, notwithstanding the factual disputes raised by the defendants, the Court accepts the allegations in the plaintiffs' affidavits as true for the purposes of the standing challenge raised by defendants. Parenthetically, the Court notes that it would be ill-equipped at this time to resolve the factual disputes raised by the defendant for the simple reason that no testimony regarding such issues was offered by any of the parties at trial.
[18] Numerous other cases have found an injury in fact based on allegations similar to those presented in this case and in Japan Whaling. See Save Our Community v. U.S.E.P.A., 971 F.2d 1155, 1161 (5th Cir.1992) (organization members who enjoyed wildlife, aesthetic, and other values of wetlands sufficiently stated injury in fact); Sierra Club v. Simkins Industries, Inc., 847 F.2d 1109 (4th Cir.1988) (finding injury in fact based on environmental and aesthetic interests of organization member who hiked along polluted river); Friends of the Earth v. Consolidated Rail Corp., 768 F.2d 57, 61 (2d Cir.1985) (finding that injury in fact had been adequately alleged where organization members recreated on river and found pollution aesthetically displeasing).
[19] Defendants' protestations to the contrary are lacking in merit. In their brief, defendants suggest that the plaintiffs cannot have standing because there is no direct access to the privately owned wetlands at issue in this case. However, this argument ignores the fact that the plaintiffs are alleging that they will suffer direct repercussions on Dog River and in the Dog River basin resulting from the destruction of those wetlands. Defendants' argument is also undercut by the fact that the plaintiffs have alleged that they view the aesthetic beauty of the wetlands in question on a regular basis, and that at least one member of a plaintiff organization claims to ride her bicycle alongside the land at issue and enjoy the wildlife living thereon during such sojourns. Given the plaintiffs' direct involvement with these specific acres of wetlands and the surrounding ecosystem, the Court cannot agree with defendants' assertion that the plaintiffs have alleged a mere interest in a problem, rather than a concrete, particularized injury to themselves.
[20] Indeed, the Region 8 court expressly observed that "[t]his is not a case where the failure to follow a mandated procedure caused a distinct injury, different from that suffered by the public generally." Region 8, 993 F.2d at 810 n. 16. By contrast, this is such a case; therefore, defendants' reliance on Region 8 in this regard is misplaced.
[21] Another difference is that a court facing a motion for preliminary injunction weighs the potential harm to the defendant resulting from an injunction, while a court deciding whether to grant permanent injunctive relief does not do so. This divergence may be explained by the fact that a permanent injunction is awarded against a defendant who has been found to have violated a statute or regulation, while a preliminary injunction is awarded against a party found likely to have done so.
[22] Under NEPA, a court's role in reviewing an agency's decision is to ensure that the agency took a "hard look" at the environmental consequences of the proposed action and its alternatives prior to issuing its decision. See Fund for Animals, Inc. v. Rice, 85 F.3d 535, 546-47 (11th Cir.1996) (observing that Court's role is to examine whether NEPA procedures have been followed, not to interject itself into the area of discretion of the agency); Druid Hills, 772 F.2d at 709 (citing Kleppe v. Sierra Club, 427 U.S. 390, 410 n. 21, 96 S. Ct. 2718, 2730 n. 21, 49 L. Ed. 2d 576 (1976)).
[23] The major distinction between an EA and an EIS lies in the level of detail required. An EA contains merely a brief discussion of the need for the underlying project, the need for the project to impact wetlands, the alternatives available, the environmental impacts of the proposed action and viable alternatives, and a listing of the agencies and persons consulted by the Corps. See 40 C.F.R. ง 1508.9(b). Meanwhile, an EIS is a "detailed written statement" describing the environmental impact of the proposal, adverse effects which cannot be avoided if the proposal is implemented, alternatives to the proposed action, the short-term and long-term uses and productivity of the land at issue, and any irreversible commitments of resources which would be involved if the proposed action were taken. See 42 U.S.C. ง 4332(2)(C); 40 C.F.R. ง 1508.11. Where an EIS is required, the agency must "rigorously explore and objectively evaluate all reasonable alternatives, and for alternatives which were eliminated from detailed study, briefly discuss the reasons for their having been eliminated." 40 C.F.R. ง 1502.14(a). The preparation of an EA is a precursor to the preparation of an EIS.
[24] Plaintiffs' primary evidence regarding the correctness of the Corps' decision not to issue an EIS was the affidavit from Dr. Crozier. In that document, Dr. Crozier suggested that there was insufficient evidence in the record from which the Corps could have reached its conclusion that the environmental impact of the proposed wetlands fill would be insignificant. See Exhibit K to Plaintiff's Motion for Preliminary Injunction. However, the Court has held that this affidavit is extra-record material which does not fall under any of the applicable exceptions to the ban on evidence not in the administrative record; therefore, it will not be considered. Even if the Court were to consider Dr. Crozier's affidavit, the Court is of the opinion that there is sufficient evidence in the record supporting the Corps' finding of no significant environmental impact. In short, Dr. Crozier's affidavit does not affect the Court's conclusion. Neither the finding of no significant environmental impact nor the concomitant decision not to produce an EIS can be characterized as arbitrary or capricious.
[25] As set forth in section II.E.1.a., supra, the Court must apply a "practicable" standard under the CWA and a "reasonable" standard for the purposes of NEPA. As the plaintiffs have alleged that the Corps' failure to consider alternatives violated both statutes, the Court must consider both standards, despite the confusion which results from applying these two slightly differing standards simultaneously.
[26] Numerous appellate decisions have followed Vermont Yankee's lead on this issue. See, e.g., Airport Neighbors Alliance, Inc. v. United States, 90 F.3d 426, 432 (10th Cir.1996) (agency's failure to consider unfeasible alternatives does not violate NEPA because agency need not consider alternatives which it has in good faith rejected as too remote, speculative, impractical, or ineffective); Laguna Greenbelt, Inc. v. U.S. Department of Transportation, 42 F.3d 517, 524-25 (9th Cir. 1994) (noting that the concept of alternatives under NEPA is bounded by some notion of feasibility of those alternatives and that agency need not consider every conceivable alternative nor remote and speculative alternatives); Resources Ltd., Inc. v. Robertson, 35 F.3d 1300, 1307 (9th Cir.1993) (agency may fix parameters and criteria for generating alternatives so as to avoid consideration of countless alternatives); Citizens Against Burlington, Inc. v. Busey, 938 F.2d 190, 196 (D.C.Cir.1991) (agency need not consider infinitely large number of alternatives which could accomplish goals set in a particular project, as doing so would cause project to collapse under the sheer weight of the possibilities).
[27] Both witnesses also indicated that it would be impossible simply to reduce the number of parking spaces at the baseball stadium by 1,000. Bell testified that, at the present time, there are 2,100 planned parking spaces for the 8,000-seat baseball stadium. Additionally, Lambert asserted that restrictions on the extent to which the number of parking places may be reduced are imposed both by City ordinances and by Southern League requirements regarding the number of parking spaces at League facilities. Lambert further testified that the City has already been required to seek and obtain consent from the League to lower the number of spaces from the 2,600 originally mandated by the League to the 2,100 spaces presently contemplated for the stadium complex. From Lambert's testimony, it appears that further reductions in the number of parking spaces would not be feasible.
[28] If either NEPA or the CWA did require such an exposition by the agency, the Court can only speculate on how much more voluminous and unwieldy the administrative record in this case would be than the three volumes and 817 pages which it currently fills.
[29] In one of their briefs and at oral argument, the defendants asserted that the plaintiffs' parking deck alternative should be discredited because the plaintiffs had never presented such an alternative to the Corps prior to the permitting decision being made. The Court does not agree that the plaintiffs' failure to raise the alternative prior to the permit being issued automatically renders the plaintiffs unable to raise it now. Indeed, the plaintiffs alleged that the parking deck only became an issue after the May 24, 1996 plan was revealed, as this third plan was the first to move the stadium itself off the wetlands and to place just part of the parking lot in the wetlands at issue. Because the permit decision was made on May 28, 1996, the plaintiffs did not have sufficient time to comment meaningfully on this third proposal prior to the issuance of the permit. It would be unfair to bar them from raising that alternative now simply because they did not do so during the four day window after the third proposal was submitted by the City. Hence, to be clear, the Court is rejecting the parking deck alternative because there is no evidence that it was reasonable or practicable, not because the plaintiffs failed to present it to the Corps prior to the permit decision being made.
[30] Mayor Dow's representations regarding the land owners' position do not constitute the only information which the Corps had regarding the owners' willingness to part with additional uplands for the stadium project. Indeed, an internal Corps document dated May 23, 1996 indicates that Corps representatives met with Mayor Dow and the land owners "several times" on May 22, 1996 to discuss the pending permit application by the City. Admin.Record, at tab 107. Though this document does not reflect the substance of those meetings in any great detail, it is likely that Corps officials would have taken advantage of their opportunity at the meetings to probe first-hand the landowners' willingness or unwillingness to donate additional uplands to the City for construction of the baseball complex.
[31] In attempting to cast doubt on the land owners' statements to Mayor Dow, the plaintiffs also point out that the stadium project was originally scheduled to impact 40 acres of wetlands. Admin.Record at tab 1. Proceeding with this line of argument, the plaintiffs trace the gradual decline of wetland acreage contemplated by the proposal throughout the permitting process, as the amount of wetlands impacted fell from 40 acres to 28.45 acres to 19.6 acres to 16.6 acres to 7.4 acres. Apparently, the plaintiffs' reasoning is that if the landowners had been willing to replace wetlands with uplands in their proposed donation to the City on several occasions in the past, the Corps should not have taken seriously their May 24 assertion that no more uplands would be made available to the City for construction of the stadium complex.
[32] At trial, the plaintiffs declined to call the land owners or their representatives to inquire as to whether any additional uplands actually would or could have been made available by the land owners. Instead, the plaintiffs chose to rely solely on the post-decision statements recited above. These statements are of negligible evidentiary value. In the exhibits proffered by the plaintiffs, the City officials do not indicate that additional uplands were available, nor do they suggest that any City official was concealing information from the Corps or otherwise attempting to manipulate the permitting proceedings. Rather, the quotations relied upon by the plaintiffs merely reflect the fact that City officials were trying to assuage residents' fears about whether the stadium would be constructed, and to speak in positive, upbeat terms about the prospects of having a AA ball park in Mobile. Moreover, all three statements are simply indicative of the City's determination to complete the project, regardless of the outcome of this lawsuit or the site on which the stadium is ultimately constructed. The plaintiffs' efforts to read some nefarious purpose into such innocuous, stray remarks intended to reassure the citizenry fall far short of meeting their burden of establishing by a preponderance of the evidence that the Corps' analysis of the available of additional lands was unreasonable in its brevity and lack of depth.
[33] The applicable Corps regulation contains the following language:
"In accordance with the [FWCA], district engineers will consult with the [Fish and Wildlife Service] with a view to the conservation of wildlife resources by prevention of their direct and indirect loss and damage due to the activity proposed in a permit application. The [Corps] will give full consideration to the views of [the Fish and Wildlife Service] on fish and wildlife matters in deciding on the issuance, denial, or conditioning of individual or general permits." 33 C.F.R. ง 320.4(c).
[34] In the February 21 letter, the Fish and Wildlife Service wrote that: "We believe the applicant should demonstrate why this stadium must be constructed in wetlands. If it can be satisfactorily concluded that there is no other viable alternative site, the Service would be amenable to permit issuance" under certain circumstances. Admin.Record, at p. 00216. Likewise, the April 30 letter asserted the following: "In view of the adjacent uplands at the ball park project site, avoidance mitigation seems to be a viable option in lieu of filling wetlands for a non-water dependent use. The reasons for not avoiding wetland impacts should be adequately explained before agency acceptance of compensation for unavoidable wetland impacts is sought." Admin.Record, at pp. 00446-47.
[35] The Corps originally opted for the section 404 permitting process rather than that applicable to a NWP 26 permit because the original scope of the proposed wetlands fill was well in excess of the 10 acre limit for eligibility for a NWP 26. In its final form, the City's proposal was amenable to NWP 26 procedures; however, the Corps opted to continue with the section 404 process which had been previously initiated in this case.
[36] The applicable regulation states that any discharge causing the loss or substantial adverse modification of less than 10 acres of wetlands is eligible for NWP 26 status if it falls into one of the following two categories:
"(i) Non-tidal rivers, streams, and their lakes and impoundments, including adjacent wetlands, that are located above the headwaters. (ii) Other non-tidal waters of the United States, including adjacent wetlands, that are not part of a surface tributary system to interstate waters or navigable waters of the United States (i.e., isolated waters)." 33 C.F.R. ง 330.5(a)(26); see also United States v. Marathon Development Corp., 867 F.2d 96, 98-99 (1st Cir.1989).
[37] The plaintiffs contest the defendants' ability to satisfy this criterion. They correctly point out that the issue is not whether the area of wetlands fill itself exceeds 10 acres, but whether the fill will "cause the loss or substantial adverse modification of 10 acres or more." 33 C.F.R. ง 330.5(a)(26); see also Industrial Highway Corp. v. Danielson, 796 F. Supp. 121, 129 n. 6 (D.N.J. 1992) (noting that "it is not a foregone conclusion that [applicant's] proposed discharge of fill into 2.45 acres of wetlands would result in the loss or adverse modification of only 2.45 acres of United States waters"). Plaintiffs offer unsubstantiated allegations about the effects of engine oil drippings, antifreeze, and other automobile pollutants which, they assert, could adversely affect the 32-plus acres of wetlands which will adjoin the stadium parking lot after the fill-in of the 7.4 acres of wetlands is complete. These contentions notwithstanding, there is no evidence whatsoever that the proposed wetlands fill will result in the loss or substantial adverse modification of any wetlands acreage beyond the 7.4 acre fill-in itself. Certainly, there is no basis for concluding that there will be substantial adverse effects on more than 10 acres of wetlands resulting from the 7.4 acre fill-in contemplated in this case. Hence, the Court finds that the plaintiffs' objection on this front is without merit.
[38] In an exhibit to the motion for preliminary injunction, the plaintiffs present an affidavit from Margorie Welch, in which she avers that she had a conversation with Mark LaRue of the EPA on July 26, 1996. See Exhibit L to Plaintiff's Motion for Preliminary Injunction. In this affidavit, Ms. Welch attributes to Mr. Welch certain statements reflecting his opinion that the permit could not have been issued under NWP 26 because they were not isolated, from a technical standpoint. Had the plaintiffs wished to present this testimony to the Court, they should have either called Mr. LaRue as a witness themselves or submitted other credible evidence on the isolated/adjacent question. As it stands, the statements in Ms. Welch's affidavit are rank hearsay which will not be considered by the Court in assessing whether the wetlands at issue are isolated. Even if they were admissible, such statements would not assist plaintiffs, for Mr. LaRue apparently offered Ms. Welch little explanation of the basis for his opinion.
[39] In fact, it appears that the wetlands on the McGowin tract drain into man-made drainage ditches which flow into creeks which eventually feed into Dog River. Such attenuated connections between the wetlands and a tributary system cannot possibly have been contemplated as "adjacent" by the drafters of the NWP 26 regulations; otherwise, the term "isolated waters" would be bereft of meaning.
[40] In reaching these expert opinions, Dr. Vittor relied on his observations that the wetlands involved in this case are isolated low quality, transitional wetlands, rather than river swamp. This characterization of the wetlands at issue in this case finds ample support in the administrative record. See Admin.Record, at p. 00748 ("In general, the wetlands provide very limited flood water and contaminant filtration functions and even when combined with surrounding uplands provide very low quality wildlife habitat, compared to undisturbed areas in a rural setting.").
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935 F. Supp. 1188 (1996)
Kendall D. BARBER, Plaintiff,
v.
ALBERTSONS, INC., Defendant.
No. 96-C-354(H).
United States District Court, N.D. Oklahoma.
June 12, 1996.
Alan R. Carlson, Garrison, Brown, Carson & Buchanan, Bartlesville, OK, for plaintiff.
Steven E. Holden, Mark T. Steele, Best Sharp Holden Sheridan Best & Sullivan, Tulsa, OK, for defendant.
ORDER
HOLMES, District Judge.
This matter comes before the Court on Defendant's petition for removal.[1] Plaintiff originally brought this action in the District Court for Washington County. Plaintiff's petition alleges one cause of action and claims *1189 damages "in excess of $10,000.00" for this cause of action.[2] Defendant Albertsons, Inc. ("Albertsons") filed a petition for removal stating that removal is proper on the basis of diversity jurisdiction.
It appears that complete diversity of citizenship exists between the parties. The question remaining for the Court is whether the jurisdictional amount is satisfied under 28 U.S.C. § 1332(a).
I.
Initially, the Court notes that federal courts are courts of limited jurisdiction. Further, "[d]efendant's right to remove and plaintiff's right to choose his forum are not on equal footing; for example, unlike the rules applied when plaintiff has filed suit in federal court with a claim that, on its face, satisfies the jurisdictional amount, removal statutes are construed narrowly, where plaintiff and defendant clash about jurisdiction, uncertainties are resolved in favor of remand." Burns v. Windsor Ins. Co., 31 F.3d 1092, 1095 (11th Cir.1994).
In order for a federal court to have diversity jurisdiction, the amount in controversy must exceed $50,000. 28 U.S.C. § 1332(a). The Tenth Circuit has clarified the analysis which a district court should undertake in determining whether an amount in controversy is greater than $50,000. The Tenth Circuit stated:
[t]he amount in controversy is ordinarily determined by the allegations of the complaint, or, where they are not dispositive, by the allegations in the notice of removal. (citation omitted). The burden is on the party requesting removal to set forth, in the notice of removal itself, the "underlying facts supporting [the] assertion that the amount in controversy exceeds $50,000." (citation omitted). Moreover, there is a presumption against removal jurisdiction. (emphasis in original).
Laughlin v. Kmart Corp., 50 F.3d 871, 873 (10th Cir.), cert. denied, ___ U.S. ___, 116 S. Ct. 174, 133 L. Ed. 2d 114 (1995); e.g., W.L. Hughes & Lucille A. Hughes v. E-Z Serve Petroleum Marketing Co., 932 F. Supp. 266 (N.D.Okla.1996) (applying Laughlin and remanding case); Melissa F. Martin v. Missouri Pacific R.R. Co. d/b/a Union Pacific R.R. Co., 932 F. Supp. 264 (N.D.Okla.1996) (same); Herber v. Wal-Mart Stores, 886 F. Supp. 19, 20 (D.Wyo.1995) (same); Lawrence J. Homolka v. Hartford Ins. Group, Individually and d/b/a Hartford Underwriters Ins. Co., No. 95-C-727(H) (N.D.Okla. 1995) (same); Travis Johnson v. Wal-Mart Stores, Inc., No. 95-C-1176(H) (N.D.Okla. 1995) (same); Maxon v. Texaco Ref. & Marketing Inc., 905 F. Supp. 976 (N.D.Okla.1995) (Holmes, J.) (same).
In Laughlin, the plaintiff originally brought his action in state court. Defendant removed to federal court based on diversity jurisdiction. The court granted summary judgment to defendant, and plaintiff appealed. On appeal, the Tenth Circuit raised the issue of subject matter jurisdiction and remanded the case to state court. Neither the petition nor the notice of removal had established the requisite jurisdictional amount. The petition alleged that the amount in controversy was "in excess of $10,000" for each of two claims. The notice of removal did not refer to an amount in controversy, but did contain a reference to the removal statute, 28 U.S.C. § 1441. In its brief on the issue of jurisdiction, Kmart set forth facts alleging that, at the time of removal, the amount in controversy was well above the jurisdictional minimum of $50,000. However, Kmart failed to include those facts in its notice of removal.
The Tenth Circuit held that:
Kmart's economic analysis of Laughlin's claims for damages, prepared after the motion for removal and purporting to demonstrate the jurisdictional minimum, does not establish the existence of jurisdiction at the time the motion was made. Both the requisite amount in controversy and the existence of diversity must be affirmatively *1190 established on the face of either the petition or the removal notice.
Laughlin, 50 F.3d at 873.
In Laughlin, Kmart attempted to rely on Shaw v. Dow Brands, Inc., 994 F.2d 364 (7th Cir.1993). The Shaw court held that "the plaintiff had conceded jurisdiction because he failed to contest removal when the motion was originally made, and because he stated in his opening appellate brief that the amount in controversy exceeded $50,000." The Tenth Circuit distinguished Shaw, stating:
[w]e do not agree, however, that jurisdiction can be "conceded." Rather, we agree with the dissenting opinion that "subject matter jurisdiction is not a matter of equity or of conscience or of efficiency," but is a matter of the "lack of judicial power to decide a controversy." (citation omitted).
Laughlin, 50 F.3d at 874.
II.
The Tenth Circuit's interpretation of 28 U.S.C. § 1441, the statute governing a party's removal of a lawsuit to federal court predicated on diversity jurisdiction, is in accord with the views of other federal courts. In a comprehensive, well-reasoned opinion, the Sixth Circuit held that, where the amount of damages in the lawsuit is not specified, the removing party bears the burden of proving by a preponderance of the evidence that the amount in controversy exceeds $50,000. Gafford v. General Elec. Co., 997 F.2d 150, 157-60 (6th Cir.1993); accord Allen v. R & H Oil & Gas Co., 63 F.3d 1326, 1335 (5th Cir.1995) (where the complaint does not allege a specific amount of damages, the removing defendant must prove by a preponderance of the evidence that the amount in controversy exceeds $50,000); Shaw, 994 F.2d at 366 (adopting preponderance of the evidence standard; removing defendant must produce proof to a reasonable probability that jurisdiction exists); McCorkindale v. American Home Assurance Co./A.I.C., 909 F. Supp. 646, 653 (N.D.Iowa 1995) (same); cf. Burns, 31 F.3d at 1097 (where plaintiff alleges a specific claim for damages in an amount less than the jurisdictional amount, to establish removal jurisdiction, defendant must prove to a legal certainty that, if plaintiff were to prevail, she would not recover less than $50,000).
In Gafford, a witness on behalf of the removing defendant, the Senior Counsel for Labor and Employment at the GE facility where Plaintiff was employed, testified at the pretrial hearing on jurisdiction that, if the Plaintiff were to prevail on her claims, she would be entitled to damages in an amount greater than $50,000. Plaintiff did not present any evidence contradicting that testimony. Id. at 160-61. On that basis, the Sixth Circuit upheld the district court's finding of removal jurisdiction. Id. at 161.
The Gafford court noted that its holding (that the appropriate burden of proof born by the removing party is the preponderance of the evidence) comports with the views expressed by the United States Supreme Court in McNutt v. General Motors Acceptance Corp., 298 U.S. 178, 189, 56 S. Ct. 780, 785, 80 L. Ed. 1135 (1936). Quoting McNutt, the Gafford court stated:
[t]he authority which the statute vests in the court to enforce the limitations of its jurisdiction precludes the idea that jurisdiction may be maintained by mere averment or that the party asserting jurisdiction may be relieved of his burden by any formal procedure. If his allegations of jurisdictional facts are challenged by his adversary in an appropriate manner, he must support them by competent proof. And where they are not so challenged the court may still insist that the jurisdictional facts be established or the case be dismissed, and for that purpose the court may demand that the party alleging jurisdiction justify his allegations by a preponderance of the evidence.
997 F.2d at 160.
To the extent that both Laughlin and Gafford represent the requirement that underlying facts be utilized by the removing party to satisfy its burden of proof, the Fifth Circuit is in accord. See Asociacion Nacional de Pescadores a Pequena Escala o Artesanales de Colombia (ANPAC) v. Dow Quimica de Colombia S.A., 988 F.2d 559, 566 (5th Cir. 1993), cert. denied, 510 U.S. 1041, 114 S. Ct. 685, 126 L. Ed. 2d 653 (1994). In ANPAC, a *1191 group of Colombian fishermen sued a chemical manufacturer and its Colombian subsidiary in Texas state court for personal injuries such as "skin rashes" allegedly arising out of a pesticide spill. The complaint did not specify an amount of damages. Defendant Dow filed a notice of removal which stated simply that "the matter in controversy exceeds $50,000 exclusive of interest and costs." Id. at 565. This conclusory statement did not establish that removal jurisdiction was proper. Id. The Fifth Circuit articulated its analysis in Allen, 63 F.3d at 1335, stating:
[f]irst, a court can determine that removal was proper if it is facially apparent that the claims are likely above $50,000. (citations omitted). If not, a removing attorney may support federal jurisdiction by setting forth the facts in controversy preferably in the removal petition, but sometimes by affidavit that support a finding of the requisite amount. (citation omitted).
Removal, however, cannot be based simply upon conclusory allegations. (citation omitted). Finally, under any manner of proof, the jurisdictional facts that support removal must be judged at the time of the removal, and any post-petition affidavits are allowable only if relevant to that period of time. (citation omitted).
See also Lupo v. Human Affairs Int'l, Inc., 28 F.3d 269, 273-74 (2d Cir.1994) ("We hold that if the jurisdictional amount is not clearly alleged in the plaintiff's complaint, and the defendant's notice of removal fails to allege facts adequate to establish that the amount in controversy exceeds the jurisdictional amount, federal courts lack diversity jurisdiction as a basis for removing the plaintiff's action from state court.") (emphasis added); Reid v. Delta Gas, Inc., 837 F. Supp. 751, 752 (M.D.La.1993) (motion to remand denied where removing party introduced deposition testimony of plaintiff and letter from neurosurgeon to establish federal jurisdiction).
These views of other federal courts are consistent with the central holding of Laughlin, as expressed by the Tenth Circuit's statement that "[t]he burden is on the party requesting removal to set forth, in the notice of removal itself, the underlying facts supporting [the] assertion that the amount in controversy exceeds $50,000." 50 F.3d at 873.
III.
In the instant case, neither the allegations in the petition nor the allegations in the removal documents, establish the requisite jurisdictional amount. The petition alleges one claim. Plaintiff seeks damages "in excess of $10,000" for this claim. Thus, on its face, the petition does not establish that the amount in controversy is greater than $50,000.00.
In the removal documents, Albertsons has not complied with the requirements set forth in Laughlin and the other authorities described above. The petition for removal does not allege any underlying facts whatsoever with respect to Plaintiff's claims for damages. Instead, Albertsons offers only a conclusory statement of Plaintiff's damages allegations in the petition for removal and states that Plaintiff's response to Defendant's first request for admissions will substantiate Defendant's claim that the value of the case exceeds $50,000. The request for admission asks Plaintiff to "[a]dmit that the amount in controversy in this action, including all claims for damages made by Plaintiff, does not exceed the sum or value of $50,000.00 exclusive of interest and costs." In response, Plaintiff denies this request for admission.
The effect of this denial is that Plaintiff has refused to admit that the amount in controversy does not exceed $50,000.00. The Court concludes that this response by Plaintiff, standing alone, does not affirmatively establish that the amount in controversy exceeds $50,000 for purposes of diversity jurisdiction.[3]
*1192 IV.
Where the face of the complaint does not affirmatively establish the requisite amount in controversy, the plain language of Laughlin requires a removing defendant to set forth, in the removal documents, not only the defendant's good faith belief that the amount in controversy exceeds $50,000, but also facts underlying defendant's assertion. In other words, a removing defendant must set forth specific facts which form the basis of its belief that there is more than $50,000 at issue in the case. The removing defendant bears the burden of establishing federal court jurisdiction. Laughlin, 50 F.3d at 873. And the Tenth Circuit has clearly stated what is required to satisfy that burden.
Here, Albertsons relies upon Plaintiff's response to its request for admission as the underlying fact supporting its conclusion that the amount in controversy exceeds $50,000.00. The Court believes, however, that under Laughlin, this is not adequate. As set out in Johnson v. Wal-Mart Stores, Inc., No. 95-C-1176(H) (N.D.Okla.1995), if the face of the petition does not affirmatively establish that the amount in controversy exceeds $50,000.00, then the rationale of Laughlin contemplates that the removing party will undertake to perform an economic analysis of the alleged damages with underlying facts. This requirement for removal is certainly not onerous. Indeed, in many cases, the removing party may be able to satisfy its burden by simply parsing out the elements of damages claimed in the petition, assuming, of course, that the total of these elements exceeds $50,000.00. E.g., Herber, 886 F.Supp. at 20 ("Practitioners in Wyoming should be made aware that, under Laughlin, the jurisdictional allegation is determined as of the time of filing the Notice of Removal. An affidavit setting forth underlying facts will properly support a Notice of Removal."). In other cases, the removing party may seek to establish the necessary facts underlying the damages claim through discovery requests which produce "underlying facts", rather than the vague and legally insufficient response to Albertsons' request for admission, which response was tendered to this Court in connection with Defendant's claim of diversity jurisdiction.
In this case, Albertsons could have specifically addressed each of Plaintiff's claims for damages set forth in the petition and sought to establish the requisite jurisdictional amount accordingly. In pertinent part, the petition states:
[a]s a direct and proximate cause of the Defendant's failure to properly fill the medication prescription provided by Plaintiff to Defendant, and the resulting seizures, the Plaintiff suffered a left shoulder injury. The muscles, tendons, ligaments, soft tissue, bony structure, blood vessels, and nerve centers of the Plaintiff were torn, pulled, strained, traumatized, and their functions impaired. Said injuries are permanent, painful, and progressive. When injured, the Plaintiff, KENDALL D. BARBER, was 48 years of age with a life expectancy of 27.9 additional years.
As a direct and proximate cause of the negligence of the Defendant, and the inappropriate filling of Plaintiff's medicine prescription and injuries caused thereby, the Plaintiff has been damaged in that he has incurred hospital, medical, and physicians bills, and he will hereafter incur additional medical bills and he has been permanently impaired due to the nature of the injuries and the extent of the injuries which he has received. The Plaintiff has incurred to date medical bills, and which medical bills are still being incurred at this time, and the Plaintiff reserves the right to submit his claim for medical and hospital bills at the time of trial.
The Plaintiff, KENDALL D. BARBER, has been delayed and hindered in his business and occupation, and he has lost time therefrom, and by such reason has been deprived of wages and gains and profits, which he would otherwise have acquired had he not been so injured, and the Plaintiff reserves the right to submit his claim for lost wages and reduced earning capacity at the time of trial.
The injuries which the Plaintiff, KENDALL D. BARBER, has suffered, have caused and continue to cause the Plaintiff great physical and mental pain and suffering. *1193 The Plaintiff, KENDALL D. BARBER, in the future, and in all probability, for the remainder of his life, will suffer pain and agony, both mental and physical, as a result of his injuries, and his life will, and has been permanently changed and altered as a result of all his injuries.
Thus, from the face of the petition, it is clear that Plaintiff seeks damages for hospital bills, physical and emotional pain and suffering, and lost wages and future earning capacity. Initial discovery might have focused on these elements of the petition to determine whether the amount of Plaintiff's claims exceeds $50,000.00.
Based upon a review of the record, the Court concludes that Albertsons has not met its burden, as defined by the court in Laughlin. Thus, the Court is without subject matter jurisdiction and lacks the power to hear this matter. As a result, this Court must remand the action to the District Court of Washington County. The Court hereby orders the Court Clerk to remand the case to the District Court in and for Washington County.
IT IS SO ORDERED.
NOTES
[1] In pertinent part, the statute governing "procedure for removal" states that:
[t]he United States district court in which [the notice for removal] is filed shall examine the notice promptly. If it clearly appears on the face of the notice and any exhibits annexed thereto that removal should not be permitted, the court shall make an order for summary remand.
If the United States district court does not order the summary remand of such prosecution, it shall order an evidentiary hearing to be held promptly and after such hearing shall make such disposition of the prosecution as justice shall require.
See also 28 U.S.C. § 1447(c) (procedure after removal) ("If at any time before final judgment it appears that the district court lacks subject matter jurisdiction, the case shall be remanded.").
[2] In Oklahoma, the general rules of pleading require that:
[e]very pleading demanding relief for damages in money in excess of Ten Thousand Dollars ($10,000.00) shall, without demanding any specific amount of money, set forth only that the amount sought as damages is in excess of Ten Thousand Dollars ($10,000.00), except in actions sounding in contract.
Okla.Stat.Ann. tit. 12, § 2008(2) (West 1993).
[3] In its removal petition, Albertsons argues that it is appropriate to use a response to a request for admission to establish the amount in controversy, relying on Judy Flood v. Wal-Mart Stores, Inc., No. 92-C-325-E (N.D.Okla. July 28, 1992). Laughlin, however, was decided three years later, in 1995, and is now binding authority upon this Court. Clearly, any reliance upon outdated district court authority is misplaced.
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935 F. Supp. 772 (1996)
Christy BRZONKALA, Plaintiff,
v.
VIRGINIA POLYTECHNIC and STATE UNIVERSITY, et al., Defendants.
Civil Action No. 95-1358-R.
United States District Court, W.D. Virginia, Roanoke Division.
May 7, 1996.
*773 Eileen Marie Nause Wagner, Richmond, VA, for Christy Brzonkala, plaintiff.
Julie C. Dudley, U.S. Attorney's Office, Robert P. Crouch, Jr., U.S. Attorney, Roanoke, VA, Frank W. Hunger, John R. Tyler, Dennis G. Linder, Department of Justice, Civil Division, Washington, DC, for United States.
Kay Kurtz Heidbreder, Virginia Polytechnic Institute & State University, Blacksburg VA, for Virginia Polytechnic and State University.
William David Paxton, M. Chris Floyd, Gentry, Locke, Rakes & Moore, Roanoke, VA, Michael E. Rosman, Center for Individual Rights, Washington, DC, for Antonio J. Morrison.
Joseph Graham Painter, Jr., Blacksburg, VA, for James Landale Crawford.
Sharon R. Chickering, DLC Trial Lawyers, P.C., Roanoke, VA, Julie Goldscheid, Pamela Coukos, Deborah Ellis, NOW Legal Defense and Education Fund, New York City, Minna Kotkin, BLS Legal Services Corp., Brooklyn, NY, for NOW Legal Defense and Education Fund, amicus.
Jane Siobhan Glenn, Jones & Glenn, PLC, Roanoke, VA, for Cornell D. Brown, defendant.
Kay Kurtz Heidbreder, Virginia Polytechnic Institute & State University, Blacksburg, VA, for William E. Landsidle, in his capacity as Comptroller of the Commonwealth, defendant.
KISER, Chief Judge.
On March 1, 1996, Christy Brzonkala filed an amended complaint alleging violations of Title IX of the Education Amendment Act, 20 U.S.C. § 1681, et seq., of the Violence Against Women Act, 42 U.S.C. § 13981 ("VAWA"), and of various state laws. Brzonkala brought claims against Virginia Polytechnic Institute & State University ("VPI"), William Landsidle in his capacity as Comptroller of the Commonwealth, and three VPI students. The VAWA and some state law claims involve the students, and the Title IX and breach of contract claims involve VPI and Landsidle.
All defendants have moved to dismiss Brzonkala's claims. Having permitted briefing on the VAWA issue to be extended, I now will consider only the Title IX and breach of contract claims against VPI. Therefore, I will consider only VPI and Landsidle's motion to dismiss. Brzonkala invoked this Court's jurisdiction for the Title IX claim pursuant to 28 U.S.C. § 1331. She invoked this Court's jurisdiction for the breach of contract claim against VPI pursuant to 28 U.S.C. § 1367(a). She named Landsidle as a defendant in his capacity as Comptroller of the Commonwealth of Virginia in order to comply with Va.Code Ann. § 2.1-223.1. For the purpose of the motion to dismiss the Court must accept facts alleged in the amended complaint as true.
I. Alleged Facts
Brzonkala is an adult female. She attended VPI where she was a "student athlete" and a prospect for the women's softball team. Antonio Morrison, James Crawford, and Cornell Brown are adult males. They attended VPI where they were members of the football team. On the night of September 21, 1994 and the morning of the next day, Brzonkala was sexually assaulted in a room on the third floor of her dormitory by two men whom she and Hope Handley, another female *774 student, had met less than a half an hour earlier and whose identities she knew only by given names and by their status as football team members. About five months later Brzonkala learned that the assaulters were Morrison and Crawford.
On September 21, Brzonkala, Handley, Morrison, and Crawford were in a room on the third floor of Brzonkala's dormitory. Handley and Crawford left the room following fifteen minutes of conversation, and Morrison immediately requested intercourse with Brzonkala. Brzonkala audibly told Morrison "no" twice. When Brzonkala rose to leave, Morrison forced her onto a bed, disrobed her, and forced her to submit to vaginal intercourse. Then Crawford came back into the room, exchanged places with Morrison, and forced Brzonkala to submit to vaginal intercourse. Morrison exchanged places with Crawford and forced Brzonkala to submit to vaginal intercourse a third time.
In the weeks following the assaults, Brzonkala became depressed, stopped attending classes, and attempted to commit suicide. A VPI licensed psychiatrist treated her, giving her anti-depressant medication. No VPI employee attempted any more than a cursory inquiry into the source of Brzonkala's mental distress. Brzonkala eventually sought retroactive withdrawal for the 1994/1995 academic year.
In February 1995, Brzonkala recognized Morrison and Crawford as the two men who forced her to submit to intercourse. At the end of April 1995, Brzonkala filed a complaint against Morrison and Crawford under VPI's Sexual Assault Policy which was formally released for dissemination to students on July 1, 1994. Brzonkala relied on VPI officials to prosecute her complaints, and, believing her failure to preserve physical evidence foreclosed any criminal charges, Brzonkala did not bring criminal charges against Morrison or Crawford. At no time did any VPI employee urge Brzonkala to reconsider her decision not to initiate a formal incident report or to reconsider her basis for thinking that criminal charges would be futile. At no time did any VPI employee report the assaults to the VPI Police or the Blacksburg Police. No incident report was filed with any policing authority.
Male sexual assault on a female is the only violent felony for which VPI authorities decline to file incident reports either with VPI Police or with Blacksburg Police. Male sexual assault on a female is the only violent felony for which VPI authorities defer to the victim's wishes about whether to file an incident report with VPI Police or Blacksburg Police.
In the first hearing, the VPI employee responsible for conducting the hearing stated that the charges were being brought under VPI's Abusive Conduct Policy, which included sexual assault. At this hearing Morrison admitted the sexual contact and admitted that Brzonkala told him "no" twice. Crawford denied any sexual conduct with Brzonkala. The VPI judicial committee found Morrison guilty of sexual assault and suspended him from school for two semesters. The committee found insufficient evidence to take action against Crawford. In May 1995, Morrison appealed the committee's sanction, and an appeals officer upheld the sanction. By the procedural rules in VPI official publications, the decision of the appeals officer is final.
In early July 1995, VPI officials Donna Lisker and Cathryn Goree called personally at Brzonkala's home in Fairfax, a four hour drive from Blacksburg, to advise Brzonkala that (a) Morrison's attorney had threatened to sue the school on due process grounds, (b) the school had deemed as having merit Morrison's ex post facto challenge that he was charged under the Sexual Assault Policy, not yet included in the Student Handbook, (c) the school refused to defend in court the judicial committee's decision and the subsequent appeal decision, and (d) a re-hearing under the Abusive Conduct Policy which predated the Sexual Assault Policy was required. To induce Brzonkala to agree to participate in a second hearing, Lisker and Goree assured Brzonkala that VPI believed Brzonkala's story and that the second hearing was a mere technicality to correct the school's error in bringing the original complaint under the not-yet-widely-disseminated Sexual Assault Policy.
*775 Counsel for VPI, as members of the Office of the Attorney General, were on actual notice before 1995 that the due process arguments which Morrison claimed were groundless under Virginia law. Such an ex post facto challenge had already been rejected in a case in which a school was also represented by the Office of the Attorney General.
Brzonkala submitted to a second judicial committee hearing, which was de novo and lasted seven hours. She was required to engage her own counsel at her own expense. Preceding the second hearing, Brzonkala and her attorney were denied access to the audiotape recordings and other records while Morrison and his attorney were granted full access. VPI officials informed Brzonkala that all student testimony given at the first hearing would be accepted only by sworn affidavit. Notice was not sufficient for Brzonkala to secure these affidavits, due to her witnesses being on summer break, and so Brzonkala had to present a summary of her student witnesses' testimony through testimony of Lisker. Preceding the hearing, VPI officials admonished Brzonkala to avoid mention of Crawford in her testimony because he had been dismissed from the process. Consequently, Brzonkala was forced to give a truncated version of events.
The judicial committee found Morrison guilty of abusive conduct and reimposed the sanction of an immediate two year suspension. Morrison appealed the result, and, without notice to Brzonkala, VPI set aside the sanction against Morrison. Morrison returned to VPI for the Fall 1995 semester. Brzonkala learned through a November 30, 1995 newspaper article that the judicial committee at the second hearing had actually found Morrison guilty of a reduced charge of "using abusive language."
In her amended complaint, Brzonkala states that VPI football coach Frank Beamer, through his subordinates, his agents and/or his representatives, participated directly and indirectly in the process by which the sanction against Morrison was overturned. Brzonkala states that VPI officials coordinated a plan as early as May 1995 to allow Morrison to rejoin the all-male football team for the 1995 season. Brzonkala states that VPI employees coordinated a plan to obscure Brown's role in the rape. She states, "Solely because he is a member of [VPI's] all-male football team, Morrison was accorded affirmative advantages in the second hearing which were not accorded to plaintiff, who is a female." "Plaintiff was repeatedly and intentionally placed by [VPI] officials at a material disadvantage during the second hearing process because she is a female and because she is a victim of a specific type of sexual assault which, under Virginia common law, can only be alleged by a female against a male."
Brzonkala alleged, "Because Morrison would be present on the Virginia Tech campus during the Fall, 1995 semester and because officials of Virginia Tech had repudiated her claim that Morrison had raped her before numerous students and athletes who were aware of the facts, plaintiff feared for her personal safety and canceled her plan to return to Virginia Tech for the Fall, 1995 semester. See paragraph 42 above." Paragraph 42 states, "After plaintiff filed her charge under the school's Sexual Assault Policy, she learned that a Virginia Tech student overheard an unidentified male Virginia Tech athlete advise defendant Crawford that he should have `killed the bitch.'"
VPI is required to make public the nature and number of crimes involving its students, for which there are incident reports. VPI reported four rapes in 1992 and one in 1993. Between 1992 and 1993, thirteen rapes were adjudicated at VPI through internal procedures, with nine resulting in disciplinary action against the accused student.
II. Standard
Rule 12(b)(6) dismissals are generally disfavored and only granted when it appears beyond doubt that a plaintiff can prove no set of facts in support of its claim which would entitle it to relief. Conley v. Gibson, 355 U.S. 41, 45-46, 78 S. Ct. 99, 101-02, 2 L. Ed. 2d 80 (1957). I may only test plaintiff's complaint for any legal deficiency and must construe the factual allegations in a light most favorable to the plaintiff. Scheuer v. Rhodes, 416 U.S. 232, 94 S. Ct. 1683, 40 L. Ed. 2d 90 (1974); Schatz v. Rosenberg, 943 F.2d 485, *776 489 (4th Cir.1991), cert. denied, 503 U.S. 936, 112 S. Ct. 1475, 117 L. Ed. 2d 619 (1992).
III. Discussion
Brzonkala alleges that VPI violated Title IX.[1] Title IX states in part as follows:
No person in the United States shall, on the basis of sex, be excluded from participation in, be denied the benefits of, or be subjected to discrimination under any education program or activity receiving Federal financial assistance....
20 U.S.C. § 1681. This section provides an implied private cause of action. Cannon v. University of Chicago, 441 U.S. 677, 709, 99 S. Ct. 1946, 1964, 60 L. Ed. 2d 560 (1979). Courts have applied the same scheme of analysis for issues arising under this statute as in Title VII cases. See, e.g., Preston v. Commonwealth of Virginia ex rel. New River Community College, 31 F.3d 203, 206 (4th Cir.1994).
A. On the Basis of Sex
To state a cause of action under the above statutory section, the act by the school must be "on the basis of sex." 20 U.S.C. § 1681.
A plaintiff alleging ... gender discrimination by a university must do more than recite conclusory assertions. In order to survive a motion to dismiss, the plaintiff must specifically allege the events claimed to constitute intentional discrimination as well as circumstances giving rise to a plausible inference of racially discriminatory intent.... [A]llegations of a procedurally or otherwise flawed proceeding that has led to an adverse and erroneous outcome combined with a conclusory allegation of gender discrimination is not sufficient to survive a motion to dismiss. The fatal gap is ... the lack of a particularized allegation relating to a causal connection between the flawed outcome and gender bias. A plaintiff must thus also allege particular circumstances suggesting that gender bias was a motivating factor behind the erroneous finding.
Yusuf v. Vassar College, 35 F.3d 709, 713-15 (2d Cir.1994) (citations omitted). In Yusuf, plaintiff Syed Yusuf, a male student, brought a claim against Vassar College alleging in part sex discrimination in violation of Title IX arising out of his discipline for allegedly sexually harassing his roommate's girlfriend. Id. at 711. The girlfriend pursued a charge of sexual harassment only after Yusuf made it clear that he would not drop criminal charges against his roommate. Id. at 712. The Second Circuit reversed the trial court's dismissal of Yusuf's Title IX claim. Id. at 716. Yusuf's complaint alleged
[(1)] that a false and somewhat stale charge of sexual harassment was made against him only after he pursued criminal charges for a brutal assault by the complainant's boyfriend[,] ... [(2)] that he was on good terms with the complainant after the alleged incidents of sexual harassment and until he pursued those criminal charges[,] ... [(3)] that various actions by the presiding official of the disciplinary tribunal prevented him from fully defending himself[,] ... [and (4)] that males accused of sexual harassment at Vassar are "historically and systematically" and "invariably found guilty, regardless of the evidence, or lack thereof."
Id. at 716. The court placed particular importance on the fourth allegation, stating, "The allegation that males invariably lose when charged with sexual harassment at Vassar provides a verifiable causal connection similar to the use of statistical evidence in an employment case." Id.
The case at hand differs from Yusuf in important ways. An important distinction between Yusuf and Brzonkala was their relationship to the college judiciary proceedings. Yusuf was a defendant whose status at the college was directly affected by the alleged biased proceeding which favored the female complaining party. The reverse is true here. Brzonkala, as the complaining witness was in no direct jeopardy of having her status at VPI affected. Thus, the connection between her alleged injuries and the actions of VPI *777 are more tenuous and require factual allegations that bridge the "fatal gap." Id. at 715.
The two cases differ in other important ways. First, Brzonkala does not present any statistical allegations from which I can reasonably infer that VPI's conduct was based on illegal discriminatory intent. Brzonkala's strongest statistical allegations lack relevance and do not indicate discriminatory intent in the same manner as allegation number four above. In fact, the only relevant statistical evidence presented by Brzonkala indicates a lack of discriminatory intent. Second, Brzonkala supports her claim that gender caused the discrimination with a false comparison based on VPI's treatment of her compared to its treatment of Morrison during the judiciary proceedings. Brzonkala and Morrison were not similarly situated with regard to these proceedings, and so any comparison is of little relevance. Third, Brzonkala presents allegations from which I can reasonably infer a controlling intent by VPI which lacks any illegal discriminatory animus whatsoever. These include allegations indicating that VPI officials influenced the judicial proceedings in order to permit Morrison to play football.
1. Statistical Allegations
Brzonkala does not present statistical allegations from which I can even reasonably glean discriminatory intent. She states that VPI authorities treat the violent felony of sexual assault by male students against female students differently from all other violent felonies. Even if substantiated, such a statement would not indicate gender discrimination by VPI. There are much more plausible reasons than discrimination for VPI's disparate treatment of these unusual cases. Rape is very different from other violent felonies, and it is understandable that VPI officials would treat rape differently without any discriminatory animus whatsoever. Indeed, the strongest inference from this allegation is that VPI is sensitive to victims' feelings. For example, VPI officials likely would not want to push raped females into further proceedings when it is undoubtedly often difficult for these females to bring such matters to the attention of school officials in the first place. It is understandable that VPI officials would defer to a sexual assault victim's wishes about whether to file an incident report with police while at the same time not deferring to other violent felony victim's wishes. Some people, including victims, understand rape to socially stigmatize victims. While such a stigma is undeserved, such a perception certainly could warrant a different level of influence by VPI over rape victims than other violent crime victims. Therefore, VPI's less strong influence over rape victims than over other victims of violent felonies is of questionable relevance. The only clearly relevant statistical evidence indicates a lack of illegal discriminatory intent by VPI. Brzonkala stated in her complaint that in 1992 and 1993, VPI adjudicated thirteen rapes with nine resulting in disciplinary action against the accused.
2. False Comparison
Brzonkala relies largely on a comparison of VPI's treatment of her to its treatment of Morrison and Crawford. Brzonkala indicates that these male athletes were given preferential treatment over her, a female athlete. The relative positions of the male football players and Brzonkala were not the same. Brzonkala does not allege that her status as a student athlete was affected or even considered in VPI's handling of the charges. As the charging witness, Brzonkala's status as a student and athlete was not in jeopardy. Although understandably disappointed in the ultimate outcome of the proceedings against Morrison and Crawford, her status at VPI was in no way affected.
The fact that the parties were all VPI athletes who were somehow involved in the same VPI judiciary proceeding is not enough. Unlike Morrison and Crawford, Brzonkala was not even a party to the proceeding. She was comparable to a victim of a crime, with VPI acting as the prosecutor. Unlike Morrison and Crawford, she was not facing judiciary charges or possible suspension from VPI. Had there been the same cross charges between Brzonkala and Morrison and had Brzonkala been treated unfavorably and Morrison favorably, then the comparison of their treatment would indicate discrimination. *778 Had Brzonkala faced judiciary charges for assault, had Morrison later faced similar charges, and had VPI suspended Brzonkala but not Morrison, then comparison of their treatment would indicate discrimination. However, Brzonkala was not in a situation similar to Morrison and Crawford and so an inference of illegal discriminatory treatment from the comparison is unjustified.
3. Permissible Intent
Brzonkala makes a conclusory allegation that Morrison and Crawford received favorable treatment because they are males, but her factual allegations do not support such an inference. Brzonkala argues that VPI gave the football players preferential treatment so that they could play on the all-male football team. By this argument, the fact that Brzonkala is female is incidental to VPI's intent. Gender is of little, if any, consequence to VPI's intent, and Brzonkala's gender is of no consequence. For example, if a football player was in trouble for battering a VPI male softball player and was facing suspension, VPI could have the same reason for trying to influence any judicial proceedings. If a female softball player was facing suspension, VPI could have the same reason for trying to influence the judicial proceedings. It just so happens that Morrison was on an all-male team and in trouble for violent conduct that affects females. VPI's intent was to allow an athlete to play on its team. This intent was proximately based on Morrison's athletic status, not the facts that he is a male and that Brzonkala is a female. The genders involved are inconsequential to VPI's proximate intent, and so Brzonkala has failed to allege the necessary discriminatory intent.
B. Hostile Environment
Although Brzonkala does not specifically argue this point, it is possible to glean from her complaint an allegation that VPI had a hand in permitting a hostile school environment based on Brzonkala's gender. Brzonkala alleged that because VPI permitted Morrison to be present on the VPI campus during the Fall 1995 semester, she feared for her personal safety and canceled her plan to return to VPI for the Fall 1995 semester. She cites paragraph 42 of her complaint which states, "After plaintiff filed her charge under the school's Sexual Assault Policy, she learned that a Virginia Tech student overheard an unidentified male Virginia tech athlete advise defendant Crawford that he should have `killed the bitch.'"
In Harris v. Forklift Systems, Inc., 510 U.S. 17, 114 S. Ct. 367, 126 L. Ed. 2d 295 (1993), in the context of Title VII, the Supreme Court stated, "Conduct that is not severe or pervasive enough to create an objectively hostile or abusive work environment an environment that a reasonable person would find hostile or abusive is beyond Title VII's purview. Likewise, if the victim does not subjectively perceive the environment to be abusive, the conduct has not actually altered the conditions of the victim's employment, and there is no Title VII violation." Id. at 21-22, 114 S. Ct. at 370. Therefore, the Supreme Court listed two requirements: (1) conduct that objectively created a hostile or abusive work environment and (2) the victim's subjective perception that an environment is abusive.
The case at hand is not an illegal hostile environment situation. Brzonkala fails to meet both requirements. First, VPI did not create or implicitly condone a hostile environment. In fact, the hostile environment that Brzonkala alleged never occurred. Brzonkala left VPI due to her concern of possible future reprisal in reaction to her pressing charges. She did not allege that this future reprisal actually occurred. Second, Brzonkala did not perceive that the environment was in fact abusive, but only that it might become abusive in the future.
IV. Conclusion
Considering Brzonkala's allegations either together or seriatim, they do not allege facts which will support a conclusion that VPI acted with an anti-female animus. They simply do not rise to "a plausible inference of [sexually] discriminatory intent." Yusuf at 713. In the final analysis, Brzonkala has alleged a flawed judiciary proceeding, the outcome of which disappointed her, but she has failed to allege facts that would support *779 the necessary gender bias to state a claim under Title IX.
Thus, I will dismiss Brzonkala's Title IX claim. I will dismiss the state law breach of contract claim for lack of jurisdiction. For the stated reasons, I will grant VPI and Landsidle's motion to dismiss. An appropriate order will be entered.
NOTES
[1] Brzonkala makes separate Title IX claims against VPI for disparate treatment and disparate impact gender discrimination. I will analyze these claims together, considering the allegations supporting a Title IX claim generally.
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909 F. Supp. 153 (1995)
NATURAL RESOURCES DEFENSE COUNCIL, INC.; Environmental Defense Fund, Inc.; Alan G. Hevesi, Plaintiffs,
v.
Jeanne FOX, Regional Administrator, United States Environmental Protection Agency, Region II; Carol Browner, Administrator, United States Environmental Protection Agency; United States Environmental Protection Agency, Defendants.
No. 94 Civ. 8424 (PKL).
United States District Court, S.D. New York.
December 11, 1995.
*154 *155 Mark A. Izeman and Eric A. Goldstein, Natural Resources Defense Council, Inc., New York City, for Plaintiffs Natural Resources Defense Council, Inc. and Environmental Defense Fund, Inc.
Alan G. Hevesi, Plaintiff, New York City, pro se.
Mary Jo White, United States Attorney for the Southern District of New York, New York City, for Defendants (William J. Hoffman, of counsel).
OPINION AND ORDER
LEISURE, District Judge:
This is an action (i) under the Clean Water Act based on the alleged failure of the Administrator of the Environmental Protection Agency (the "EPA") to perform a non-discretionary duty, and (ii) under the Administrative Procedure Act based on allegedly arbitrary and capricious action by the EPA. Both sides have moved for partial summary judgment on the issue of liability. Ultimately, plaintiffs want the EPA to promulgate water-quality based pollution limits for New York State's waters, and to disapprove of New York's policy for preventing the degradation of New York's clean waters. For the reasons stated below, the Court denies the parties' motions for summary judgment regarding the EPA's duty to promulgate pollution limits on the ground that there are triable issues of fact, and grants defendants' motion for summary judgment regarding New York's antidegradation policy on the grounds that the action to review the EPA's action under the Administrative Procedure Act is barred by the statute of limitations. The Opinion considers the causes of action separately.
*156 I. The EPA's Duty to Establish Total Maximum Daily Loads for New York's Waters
The Clean Water Act provides for citizen suits against the Administrator of the Environmental Protection Agency "where there is alleged a failure of the Administrator to perform any act or duty under this Act which is not discretionary with the Administrator." 33 U.S.C. § 1365(a)(2). Plaintiffs argue that New York had a duty to promulgate pollution limits, called Total Maximum Daily Loads ("TMDLs"), for various polluted waters and submit them to the EPA for review; that New York failed to fulfill its duty; and that the EPA thus had a duty to establish TMDLs for New York. The Court will first summarize the statutory scheme, then consider whether a constructive submission has occurred, concluding that triable issues of fact exist, and finally will consider whether the action regarding TMDLs is time-barred.
A. Summary of the Statutory Scheme
The Clean Water Act places "primary reliance for developing water quality standards on the states." Scott v. City of Hammond, 741 F.2d 992, 994 (7th Cir.1984). Water pollution is controlled according to two approaches: the effluent-limitation approach and the water-quality-based approach. The effluent limitation approach focuses on regulating, through the issuance of permits and required technology-based abatement methods, the amount of pollutants discharged by a pollution source. The water-quality-based approach focuses on establishing a quality standard for a body of water, and then regulating the various sources of pollution as needed to meet that standard.
In order to facilitate the reduction of water pollution, states are directed to develop water quality standards, which include both a pollution standard and a designation of the uses of a waterway. See 33 U.S.C. § 1313(a). "Timely adoption by states of water quality standards is enforced by withholding of grant funds." Scott, 741 F.2d at 995 n. 7 (citing 33 U.S.C. § 1313a). It may be that the effluent-limitation approach will meet the water quality standard, in that technology-based reduction of the discharge of pollutants into the particular body of water will ensure that the level of pollution in the water will be lower than the established standard. However, if the reduction in effluence is not enough to reach the established water quality standard, the water-quality-based approach must be used. States are required to identify those waters which, taking into account technology-based reduction of pollutant discharge, will fail to meet the water quality standard established for those waters. See 33 U.S.C. § 1313(d)(1)(A)-(B). The states must then prioritize those waters that are identified as failing to meet the standards, and develop water-quality-based controls in order to meet the standard. A water-quality-based control is designed to determine the maximum amount of particular pollutants the water can absorb and still meet the standard, and then to apportion that maximum amount among the various sources of pollution in order to control the pollution.
The water-quality-based approach established by Congress forces the states to study their water bodies, set quality standards, prioritize their water-quality improvement needs, and establish Total Maximum Daily Loads ("TMDLs") for pollutants. The benefit of this approach is that it facilitates the state's ability to meet its water-quality standards by controlling those sources of pollution that are easiest to control. The congressional scheme is not met merely by establishing effluence limits for specific sources, because Congress mandated a comprehensive approach to each body of water's quality standard. Without an understanding of the Total Maximum Daily Load, and the various sources which lower a body of water's quality, there is little chance that the pollution is most efficiently controlled. With the water-quality-based approach, the burden of pollution control can be minimized while maximizing the benefit to the overall quality of the body of water.
The EPA oversees this congressional scheme, and is required to perform a state's duties if the state fails to do so or if the state's attempts to perform its duties are inadequate. "The EPA reviews a water quality standard promulgated by a State to ensure that it `protect[s] the public health or *157 welfare, enhance[s] the quality of water and serve[s] the purposes of [the] Act.'" Scott, 741 F.2d at 994-95 (quoting 33 U.S.C. § 1313(c)(2)) (alteration in original). The EPA likewise reviews the state's lists of water-quality limited segments, the state's priority ranking of segments, and the state's Total Maximum Daily Load determinations. The lists and loads are to be submitted to the Administrator "from time to time", with the first submission of water-quality limited segments list and Total Maximum Daily Loads for pollutants due on June 26, 1979. See 33 U.S.C. § 1313(d)(2) ("the first such submission not later than one hundred and eighty days after the date of publication of the first identification of pollutants under section 304(a)(2)(D) [33 U.S.C. § 1314(a)(2)(D)]"); 43 Fed.Reg. 60662 (Dec. 28, 1978) (identifying pollutants under section 304(a)(2)(D)); see also Scott, 741 F.2d at 996 n. 10 (deadline of June 26, 1979); Alaska Ctr. for the Env't ("ACE") v. Reilly, 762 F. Supp. 1422, 1424 (W.D.Wash.1991) (same). But see Environmental Defense Fund, Inc. v. Costle, 657 F.2d 275, 295 (D.C.Cir.1981) (states' duty to submit TMDL calculations arose June 28, 1979). Within thirty days of submission, "[t]he Administrator shall either approve or disapprove such identification and load." 33 U.S.C. § 1313(d)(2). If the Administrator disapproves, "he shall not later than thirty days after the date of such disapproval identify such waters in such state and establish such loads for such waters as he determines necessary to implement the water quality standards applicable to such waters." Id. In sum, states were to identify water-quality-limited segments, prioritize them, and establish TMDLs by June 26, 1979. If submitted timely, EPA would have been directed to approve or disapprove submissions by July 26, 1979, and establish lists and TMDLs for disapproved submissions by August 25, 1979.
B. Constructive Submission of no TMDLs
Courts have held that a failure by a state to submit TMDLs to the EPA for review amounts to a "constructive submission" of no TMDLs, and the EPA has a non-discretionary duty to approve or disapprove this constructive submission, and upon disapproval, establish TMDLs for the state. See Scott, 741 F.2d at 996-98; Sierra Club v. Browner, 843 F. Supp. 1304, 1312 (D.Minn.1993); ACE, 762 F.Supp. at 1429; cf. Environmental Defense Fund, 657 F.2d at 295 (denying summary judgment motion filed before deadline of June 26, 1979 as premature, but admonishing the "EPA to approve or disapprove such identification, prioritization, and load limits within the requisite statutory framework and time limits").
1. The Standard for Determining Whether a Constructive Submission Has Occurred
Defendants argue that a finding of constructive submission, and a resultant triggering of the EPA's duty, requires a subjective decision on the part of the state not to submit TMDLs. Although the Court recognizes that phrases in the various cases support this interpretation, the Court is persuaded that the statutory scheme intends prompt establishment of TMDLs, which intention would be thwarted by a subjective test of constructive submission.
The relevant section of the statute provides, in mandatory language, that the first state submission to the EPA of listing and prioritization of water-quality-limited segments, along with TMDLs for those segments, is due 180 days after the EPA publishes a list of pollutants susceptible to control by TMDLs. See 33 U.S.C. § 1313(d)(2). Following that, the statute provides 30 days for the EPA to approve or disapprove of state submissions. Id. Upon disapproval, the statute provides 30 days for the EPA to promulgate these lists and TMDLs. This enactment by Congress of specific deadlines, to the day, demonstrates a congressional intent that TMDLs be established promptly. Although these tight deadlines might mean that initially established TMDLs would be based on less than ideal data, that fact was considered and addressed by Congress, as demonstrated by the statutory direction to use "a margin of safety which takes into account any lack of knowledge." Id. § 1313(d)(1)(C). As expressed by one EPA employee, "In other words, Congress says ignorance is no excuse for inaction. Just *158 add a margin of safety to compensate for the lack of knowledge and keep moving." ACE, 762 F.Supp. at 1429 (quoting Thomas Wilson, Chief of the Office of Water Planning, EPA Region X, EPA Nonpoint Source News-Notes, October 1990, at 20).
The Circuit Court case law on the subject, although equivocal, also at points expresses the view that inadequate compliance with the statutory scheme, including its deadlines, perhaps should amount to a constructive submission triggering the EPA's duty. For example, in Scott, the Seventh Circuit wrote, "We cannot allow the states' refusal to act to defeat the intent of Congress that TMDL's be established promptlyin accordance with the timetable provided in the statute." Scott, 741 F.2d at 998. As noted above, see supra Part I.A., the timetable provided in the statute, taking into account the EPA's initial delay in publishing an identification of pollutants, contemplates that initial TMDLs for water-quality-limited segments would be completed by August 25, 1979. Similarly, in Environmental Defense Fund, the D.C. Circuit admonished the EPA to carry out its duties within the statutory framework and stated, "we urge EPA to carefully heed the statutory deadlines in the future." Environmental Defense Fund, 657 F.2d at 295.
Based on the specific deadlines set forth in the statute, and the importance of TMDLs as a foundation for creating cohesive water-quality-based limitations, the Court holds that to require a subjective intent on the part of a state would undermine the intent of Congress. Mere objective failure to submit TMDLs for water-quality-limited segments is enough to trigger the non-discretionary duties of the EPA.
2. Application of the Standard
Plaintiffs argue that "New York's failure for more than 15 years to formally submit to [the EPA] TMDLs developed pursuant to § 303(d) of the Act constitutes a `constructive submission' of no TMDLs." Plaintiffs' Memorandum of Law at 13. However, defendants have provided evidence, which the Court must take as true in considering plaintiffs' summary judgment motion, that in fact New York has created and submitted TMDLs to the EPA, and the EPA has approved them. See, e.g., Declaration of Philip Sweeney ¶ 7 ("we also review the TMDLs/ WLAs underlying the permits we examine"); Declaration of Rosa T. O'Connor ("O'Connor Decl.") ¶ 17 ("EPA reviewed New York's program by ... reviewing individual TMDLs/ WLAs from time to time"); id. ¶ 18 ("EPA determined that the TMDLs/WLAs were acceptable"). In addition, it is reasonable to draw an inference from the documentary evidence submitted, which describes processes used by New York in creating various pollution controls, that TMDLs were in fact created. See, e.g., O'Connor Decl.Ex. A ("Maximum allowable loads and oxygen demanding wasteload allocations are developed utilizing mathematical models ..." and certain assumptions). Although the Court, like plaintiffs, is left wondering "where are the TMDLs?",[1] the Court must deny plaintiffs' summary judgment motion on the grounds that the evidence submitted by the EPA has created a triable issue of fact of whether New York has created and submitted TMDLs.
Defendants' motion for summary judgment likewise must be denied. The assertions of plaintiffs have created a triable issue of fact regarding which TMDLs specifically have been created, and whether they are adequate under 33 U.S.C. § 1313(d)(2) to prevent the triggering of the EPA's duties by a constructive submission.
*159 C. The Timeliness of Plaintiffs' Section 1365(a)(2) Claim
1. Statute of Limitations
Defendants argue that plaintiffs' § 1365 claim is time-barred, asserting that it is subject to the six-year statute of limitations of 28 U.S.C. § 2401(a). See Defendants' Consolidated Memorandum of Law at 33-34. The statute providing for citizen enforcement of the Administrator's non-discretionary duties under the Clean Water Act references no statute of limitations, and which statute of limitations, if any, applies appears to this Court to be an issue of first impression.[2]
The applicable statute of limitations, if any, must be considered in the context of the statutory scheme for enforcement of the Administrator's non-discretionary duties. The statute sets forth mandatory duties of the Administrator; no other body is required by the statute to review submissions of a state or to establish Total Maximum Daily Loads in the event a state submission is disapproved. Therefore, where the Administrator has a duty to review submissions or establish TMDLs beginning on a particular day, with a deadline 30 days later, if the deadline passes without action, the recourse for enforcing the mandatory duty established by the Congress is the citizen suit under section 1365(a)(2). If that mode of enforcement were to be foreclosed by a statute of limitations, the result will be far more than the unfortunate, but necessary foreclosure of rights caused by most statutes of limitations. Most statutes of limitations foreclose the enforcement of rights of general application. When one potential plaintiff loses the right to sue, the rule of law still remains in force. By contrast, where there is only one body charged with a duty by Congress, and that body cannot be forced by the Court to carry out its duty because of a statute of limitations, the practical result is a repeal of the mandatory duty itself. The statute was enacted in order to create a perpetual scheme for protecting the nation's water quality, and does not evince an intent for the mandatory duties of the Administrator to expire after a period of nonfeasance. The Act, like other acts of Congress, can be amended or repealed by subsequent action by Congress and the President. The practical effect of imposing a statute of limitations in a suit such as this is to repeal the mandatory duties established by Congress and the President without the constitutionally prescribed scheme for altering a statute of the United States.
The Administrator has a clear, non-discretionary duty to review and supplement state actions under the Clean Water Act, and it would be perverse to excuse that duty after sustained nonfeasance. To illustrate the drastic result of defendants' proffered statute of limitations: assuming the Administrator's non-discretionary duty to establish TMDLs were triggered on August 25, 1979, the six-year statute of limitations cited by defendants would work a repeal of the mandatory duties of the Administrator on August 25, 1985. Such a result is counter to the intent of Congress in enacting the Clean Water Act. Therefore the Court holds that a citizen suit to enforce a failure by the administrator to perform a non-discretionary duty under 33 U.S.C. § 1365(a)(2) is not subject to any statute of limitations.
In the alternative, the Court holds that the failure of the Administrator is repeated, *160 and therefore a new cause of action accrues, whenever the Administrator's duties are triggered by either a non-submission or an inadequate submission by a state "from time to time," 33 U.S.C. § 1313(d)(2). In other words, the continued failure of a state to establish TMDLs creates a continuing duty of the Administrator to disapprove of the state's actions and to promulgate TMDLs. Because the state is directed to create TMDLs and submit them to the EPA from time to time, the continued failure to do so is also a repeated failure to do so, triggering separate duties of the Administrator to respond. Therefore, a suit may be brought to enforce the Administrator's non-discretionary duty even where, as here, the first triggering of the Administrator's duty arguably occurred in 1979. The continued failure by the state to submit TMDLs to the EPA triggered subsequent duties of the Administrator to respond, with subsequently accruing causes of action under the citizen suit provision of 33 U.S.C. § 1365(a)(2). Therefore, the Court finds that at some point within the last six years, the Administrator had a duty to review the states' submissions which were due, pursuant to statute, from time to time. A cause of action under 33 U.S.C. § 1365(a)(2) accrued at that point within the last six years. Therefore, the instant suit to enforce the failure of the Administrator to perform the non-discretionary duty is not time-barred by the six-year statute of limitations of 28 U.S.C. § 2401. The Court need not determine precisely when during the last six years the cause of action accrued, because the Court finds that regardless the statute has not run.
2. Laches
The action to compel the Administrator to perform a non-discretionary duty is equitable in nature, because it seeks an order from the court to do something, rather than a compensatory award or civil penalty. Defendants have asserted in their answer, though have not argued the point on the instant motion, that the action is barred by the equitable defense of laches.
However, laches is no defense in a suit to enforce a public right or protect the public interest. Cf. United States v. Summerlin, 310 U.S. 414, 416, 60 S. Ct. 1019, 1020, 84 L. Ed. 1283 (1940) (United States not barred by laches). Because a citizen suit to enforce a non-discretionary duty of the Administrator is a suit to protect the public interest, laches does not apply. See Student Pub. Interest Research Group, Inc. v. P.D. Oil & Chemical, 627 F. Supp. 1074, 1085 (D.N.J.1986).
Even if laches applied in general, it would not bar plaintiffs' suit here. An equitable action is barred by laches where the defendant establishes "both plaintiff's unreasonable lack of diligence under the circumstances in initiating an action, as well as prejudice from such delay." King v. Innovation Books, 976 F.2d 824, 832 (2d Cir.1992). Prejudice can either be in the form of a diminished ability to defend against the suit or increased hardship in ordering the requested relief. Defendants have stated no prejudice to their defense of this case. In addition, it is clear that there can be no prejudice to defendants from any delay in bringing the suit, because their duty to review state actions pursuant to the Clean Water Act, and to establish TMDLs where states fail to do so, is no different today than it was initially. The burden of fulfilling this duty also is no greater today than it was initially. Therefore, because there is no prejudice to defendants from the delay in bringing this citizen suit, the action is not barred by the equitable defense of laches.
In sum, with respect to the parties' motions on claims three and four regarding the Administrator's non-discretionary duty to review TMDLs, or to establish TMDLs, the Court finds that there are triable issues of fact requiring that the motion of each party be denied. In addition, the Court finds that the action is timely.
II. Antidegradation
Plaintiffs challenge as arbitrary and capricious the EPA's approval of New York State's 1992 revisions of its water quality standards pursuant to the Administrative Procedure Act, see 5 U.S.C. § 706(2). Plaintiffs' argument is that the 1992 revisions did not include an adequate antidegradation policy, *161 as required by 40 C.F.R. § 130.6, and therefore should not have been approved. Defendants counter that only new or revised water quality standards are subject to review by the EPA under the Clean Water Act, see 33 U.S.C. § 1313(c)(2), and therefore the review of the 1992 revisions of New York's water quality standards did not include, and need not have included, a review of New York's antidegradation policy. In fact, New York's antidegradation policy was submitted for review and approved in 1985.
The initial question, then, is whether the EPA reviewed the state's antidegradation policy in 1992. The statutory language clearly only requires review of new or revised standards by the EPA. See 33 U.S.C. § 1313(c)(2). Even if the statutory language were ambiguous, the Court would find that the EPA's interpretation of it to require only review of new or revised water quality standards to be reasonable, and therefore entitled to deference. See Chevron U.S.A., Inc. v. Natural Resources Defense Council, 467 U.S. 837, 844-45, 104 S. Ct. 2778, 2782-83, 81 L. Ed. 2d 694 (1984). Furthermore, an agency's interpretation of its own regulations is entitled to greater deference. See Leslie Salt Co. v. United States, 896 F.2d 354, 357 (9th Cir.1990), cert. denied, 498 U.S. 1126, 111 S. Ct. 1089, 112 L. Ed. 2d 1194 (1991); cf. United States v. Yuzary, 55 F.3d 47, 51 (2d Cir.1995) ("Federal courts are bound by an agency's interpretation of its own legislative rule unless the interpretation is inconsistent with the legislative rule, violates the constitution or a federal statute, or is plainly erroneous."). The EPA's interpretation of its regulations requiring a review of officially adopted revisions of water quality standards, see 40 C.F.R. § 131.21, to only encompass a review of the revised parts of the state's system of water quality standards is eminently reasonable and entitled to deference by this Court. Therefore, the EPA's interpretation that there has been no review of New York's antidegradation policy since 1985 is adopted by this Court.
Next the Court must determine whether the approval of the 1992 revision was arbitrary and capricious because it did not contain an antidegradation policy. The EPA interprets 40 C.F.R. § 131.6, which states that an antidegradation policy "must be included in each State's water quality standards submitted to EPA for review," to require only initial water quality standards to meet this requirement, and once an antidegradation policy has been approved, submitted revisions to the water quality standards need not each contain an antidegradation policy. Again the Court finds this interpretation of the relevant regulations, see 40 C.F.R. § 131.1, 131.5-.6, to be reasonable and entitled to deference. Therefore, the Court finds that the approval of the 1992 revisions, despite their omission of any antidegradation policy, was not arbitrary and capricious and shall not be set aside.
Finally, the Court finds that a review of the EPA's 1985 approval of New York's antidegradation policy is barred by the statute of limitations. The Second Circuit has held that the six-year statute of limitations of 28 U.S.C. § 2401 applies to Administrative Procedure Act claims. See Blassingame v. Secretary of the Navy, 811 F.2d 65, 70 (2d Cir.1987). Although there may be some Administrative Procedure Act claims that would fall outside this rule, see Wind River Mining Corp. v. United States, 946 F.2d 710, 715 (9th Cir.1991) (agency decision exceeding constitutional or statutory authority not subject to six-year limitation), this is not one of them, see id. ("[I]f the person wishes to bring a policy-based facial challenge to the government's decision, that ... must be brought within six years."). Therefore, the Court grants defendants' summary judgment motion with respect to count five, the challenge to EPA's approval of the 1992 submission based on the asserted inadequacy of New York's antidegradation policy.
CONCLUSION
For the reasons stated above, the Court HEREBY DENIES plaintiffs' motion and defendants' motion for summary judgment on claims three and four of the complaint. The Court HEREBY GRANTS defendants' motion for summary judgment on claim five of the complaint. Without objection from either side, the Court also HEREBY DISMISSES *162 claims one and two of the complaint as moot.
SO ORDERED.
NOTES
[1] As explained by plaintiffs, TMDLs are generally expressed as a total tons per day limit. See Plaintiffs' Reply Memorandum of Law at 10. The "Preliminary Draft" of a Wasteload Allocation Analysis for the Oswego River basin, see O'Connor Decl.Ex. H, appears to be the only document submitted which includes actual volume per day limits.
The Court notes that it is unclear from this document analyzing the Oswego River basin whether the listed total loading per pollutant or the listed "allowable Aquatic limit" corresponds to the water-quality determined Total Maximum Daily Load. If the allowable Aquatic limit is the maximum loading permissible in order to meet the water quality standard for the Oswego River basin, the combined allocations to the various point sources is roughly double the maximum load for most pollutants. This state of affairs is exactly the type of problem that water-quality-based limits are designed to prevent by setting the maximum allowable load and from that deriving the individual allocation for each point source.
[2] Some courts have held that citizen suits in the nature of private attorney general actions are subject to the five year statute of limitations of 28 U.S.C. § 2462 for actions to enforce a civil penalty. See, e.g., Chesapeake Bay Found. v. Bethlehem Steel Corp., 608 F. Supp. 440, 448 (D.Md.1985). Others have held that there is no statute of limitations for citizen suits to enforce a permit violation under the Clean Water Act. See Student Pub. Interest Research Group, Inc. v. P.D. Oil & Chemical, 627 F. Supp. 1074, 1083-85 (D.N.J. 1986) (rejecting application of statute of limitations of 28 U.S.C. § 2415). See generally Carie Goodman McKinney, Note, Statute of Limitations for Citizen Suits Under the Clean Water Act, 72 Cornell L.Rev. 195 (1986). The only case cited by defendants as applying the six-year statute of limitations of section 2401, although involving a complaint stating claims under both the Administrative Procedure Act and the Clean Water Act, was a decision based largely on the Administrative Procedure Act. See Natural Resources Defense Council v. USEPA, 806 F. Supp. 1263, 1277 (E.D.Va.1992), aff'd, 16 F.3d 1395 (4th Cir.1993). Therefore, the assertion that it held that the section 2401 statute of limitations applies to suits under the citizen suit provision of the Clean Water Act is dubious.
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909 F. Supp. 126 (1995)
Cynthia SALOMON, Plaintiff,
v.
ROCHE COMPUCHEM LABORATORIES, INC., American Airlines, Inc., and Dr. James Yiannou, Defendants.
No. 95 CV 934 (SJ).
United States District Court, E.D. New York.
December 13, 1995.
*127 Seham, Seham, Meltz & Petersen by Lee Seham, New York City, for Plaintiff.
Patterson, Belknap, Webb & Tyler by Gordon L. Demario, New York City, for Defendant Roche CompuChem Laboratories, Inc.
Paul, Hastings, Janofsky & Walker, by Cheryl Saban, New York City, Paul, Hastings, Janofsky & Walker by Patrick Shea and Lawrence Peikes, Stamford, Connecticut, for Defendants American Airlines, Inc. and Dr. James Yiannou.
JOHNSON, District Judge:
INTRODUCTION
Cynthia Salomon, Plaintiff, brings this action for injunctive relief alleging that Roche CompuChem Laboratories, Inc. ("CompuChem"), American Airlines, Inc. ("American Airlines"), and Dr. James Yiannou (collectively, the "Defendants") violated the disclosure obligations set forth in 49 C.F.R. § 40.37 by refusing to provide Plaintiff with certain records related to certification inspections conducted in 1994. Before this Court is Defendants' motion to dismiss the Complaint pursuant to Rule 12 of the Federal Rules of Civil Procedure. For the reasons that follow, the motion is granted.
BACKGROUND
Plaintiff was employed as a flight attendant by American Airlines. A representative of American Airlines notified Plaintiff on June 5, 1994 that she had been selected for a random drug test pursuant to 14 C.F.R. Part 121, Appendix I. On the same day, Plaintiff provided a urine sample for drug testing purposes at a collection site located at John F. Kennedy Airport, Queens, New York. Plaintiff's specimen was sent to CompuChem for testing.
On June 9, 1994, Plaintiff's Supervisor, Rubin Flores, instructed Plaintiff to contact American Airlines Medical Review Officer, Dr. Yiannou. When Plaintiff contacted Dr. Yiannou, Dr. Yiannou informed Plaintiff that she had tested positive for cocaine. Dr. Yiannou also told Plaintiff that she was suspended immediately without pay.
By letter dated December 10, 1994, Plaintiff requested that CompuChem provide her with records relating to CompuChem's certification and information relevant to chain-of-custody issues. Specifically, Plaintiff sought records relating to CompuChem's certification in 1994 by the Department of Health and Human Services, the Substance Abuse and Mental Health Services Administration, and other certification programs. Although Plaintiff received a "Laboratory Documentation Package" which contained laboratory documents regarding Plaintiff's drug test, Plaintiff did not receive the certification documents she requested, despite repeated requests. Plaintiff made the same request to Dr. Yiannou and American Airlines. This action followed.
DISCUSSION
I. Rule 12(b)(6) Standard
A motion to dismiss for failure to state a claim under Rule 12(b)(6) of the Federal Rules of Civil Procedure should be granted only when "it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Green v. Maraio, 722 F.2d 1013, 1015-16 (2d Cir.1983) (quoting Conley v. Gibson, 355 U.S. 41, 45-46, 78 S. Ct. 99, 101-02, 2 L. Ed. 2d 80 (1957)). The court must accept as true all material facts well-pleaded in the complaint and must make all reasonable inferences in the light most favorable to the plaintiff. In re Energy Sys. Equip. Leasing Sec. Litig., 642 F. Supp. 718, 723 (E.D.N.Y. 1986).
*128 II. Drug Testing Regulations
Plaintiff alleges that Defendants violated the disclosure obligations set forth in 49 C.F.R. § 40.37, which provides in full:
Any employee who is the subject of a drug test conducted under this part shall, upon written request, have access to any records relating to his or her drug test and any records relating to the results of any relevant certification, review, or revocation-of-certification proceedings.
A private right of action is not expressly provided for in this regulation. Thus, Plaintiff's claim fails unless a private right of action exists by clear implication from the legislative scheme. Platzer v. Sloan-Kettering Institute, 787 F. Supp. 360, 364-65 (S.D.N.Y.1992), aff'd, 983 F.2d 1086 (2d Cir. 1992), cert. denied, 507 U.S. 1006, 113 S. Ct. 1648, 123 L. Ed. 2d 270 (1993).
The relevant enabling statute is the Omnibus Transportation Employee Testing Act of 1991 (the "Testing Act"), which establishes guidelines for the promulgation of the statutorily mandated drug testing regulations. See 49 U.S.C. § 45102(a). Like the regulations themselves, the Testing Act is silent with respect to the existence of a private right of action to enforce the regulations.
Under 49 U.S.C. § 46101(a)(1), however, an individual may complain in writing to the Secretary of Transportation about an alleged violation of the drug testing regulations. The Secretary of Transportation may then investigate the allegation, dismiss the complaint without a hearing if the complaint fails to allege facts sufficient to warrant an investigation, or conduct a hearing to determine the merits of the allegation. 49 U.S.C. § 46101, et seq. If a violation is found, the Secretary of Transportation would issue an order compelling compliance. Id. The Secretary of Transportation may also "bring an action against a person in a district court of the United States to enforce this part or a requirement or regulation prescribed ... under this part." Id. Moreover, the Secretary of Transportion may request that the Attorney General initiate such an enforcement action. Id.
Thus, there is an administrative enforcement mechanism in place to address alleged violations of the drug testing regulations. Since Congress has not explicitly provided for a private right of action in such cases, Plaintiff must show that Congress intended to make a private remedy available. Suter v. Artist M., 503 U.S. 347, 112 S. Ct. 1360, 118 L. Ed. 2d 1 (1992).
Having reviewed the Record in this case, this Court finds that Plaintiff has failed to make such a showing. In ascertaining whether a private right of action exists under a federal statute, courts are to consider several factors: (1) whether the plaintiff is part of the class for whose special benefit the statute was passed; (2) whether the legislative history indicates a congressional intent to confer a private right of action; (3) whether a federal cause of action would further the underlying purpose of the legislative scheme; and (4) whether the plaintiff's cause of action is a subject traditionally relegated to state law. See Merrell Dow Pharmaceuticals, Inc. v. Thompson, 478 U.S. 804, 810-11, 106 S. Ct. 3229, 3233-34, 92 L. Ed. 2d 650 (1986); California v. Sierra Club, 451 U.S. 287, 293, 101 S. Ct. 1775, 1779, 68 L. Ed. 2d 101 (1981); Cort v. Ash, 422 U.S. 66, 78, 95 S. Ct. 2080, 2088, 45 L. Ed. 2d 26 (1975).
In the instant action, the relevant statute is framed as a general mandate to the Federal Aviation Administration to establish drug testing regulations. No rights are created in the statute for a specific class of persons. Moreover, Congress has expressly provided for enforcement of the drug testing regulations through the administrative mechanism outlined above. In the absence of evidence indicating a contrary congressional intent, this Court must find that Congress intended to provide only the remedy it deemed appropriate. Karahalios v. Nat'l Federation of Federal Employees, Local 1263, 489 U.S. 527, 533, 109 S. Ct. 1282, 1287, 103 L. Ed. 2d 539 (1989). Since there is no evidence that Congress contemplated individual enforcement actions under 49 C.F.R. § 40.37, this Court declines to fashion a new remedy for the enforcement of the drug testing regulations. See Universities Research Ass'n., Inc. v. Coutu, 450 U.S. 754, 101 S. Ct. 1451, 67 L. Ed. 2d 662 (1981). Accordingly, Plaintiff's Complaint asserting an implied right cannot survive the motion to dismiss pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure.
*129 CONCLUSION
For the foregoing reasons, Defendants' motion to dismiss the Complaint pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure is hereby GRANTED.
SO ORDERED.
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590 F.Supp.2d 625 (2008)
GOTTLIEB DEVELOPMENT LLC, Plaintiff,
v.
PARAMOUNT PICTURES CORPORATION, Defendant.
No. 08 Civ. 2416 (DC).
United States District Court, S.D. New York.
December 29, 2008.
*628 Gabriel Fischbarg, Esq., New York, NY, for Plaintiff.
Arnold & Porter LLP, by Peter L. Zimroth, Esq., James B. Swire, Esq., Eleanor M. Lackman, Esq., New York, NY, for Defendant.
OPINION
CHIN, District Judge.
*629 In the motion picture "What Women Want," released by defendant Paramount Pictures Corporation ("Paramount") in 2000, Mel Gibson plays an advertising executive who acquires the ability to "hear" what women are thinking. In one scene, Gibson and his co-star Helen Hunt brainstorm with other employees to develop ideas for marketing certain consumer products to women. At various points during the scene, as shown, for example, in the photograph above, a pinball machine the "Silver Slugger"appears in the background. The Silver Slugger is distributed by plaintiff Gottlieb Development LLC ("Gottlieb"), and Paramount used the pinball machine in the scene without Gottlieb's permission.
In this case, Gottlieb sues Paramount, alleging that Paramount engaged in copyright and trademark infringement, unfair competition, and deceptive trade practices by using the Silver Slugger in the movie without Gottlieb's permission. Paramount moves to dismiss the complaint pursuant to Fed. R. Civ. P, 12(b)(6), arguing principally that its use of the pinball machine was de minimis and therefore not actionable. I agree. Accordingly, Paramount's motion is granted and the complaint is dismissed.
BACKGROUND
A. The Facts
The facts alleged in the complaint and set forth in the exhibits incorporated therein by reference are assumed to be true for purposes of this motion. They are as follows:
1. The Silver Slugger
Gottlieb distributes and sells the "Silver Slugger" pinball machine. (Complaint ("Compl.") ¶¶ 4, 9-11 & Ex. A). The Silver Slugger features three original designs (the "Designs"): (1) a depiction of a baseball diamond on the backglass, which is the upright back portion of the pinball machine; (2) another baseball diamond on the playfield, which is the playing surface of the machine; and (3) the layout of the parts of the playfield. (Id. ¶ 4 & Ex. A). The Designs are copyrighted, and Gottlieb has owned the copyrights since 1998. (Id. ¶ 4).
The trademark GOTTLIEB also appears on the Silver Slugger, in several places. (Id. ¶ 9 & Ex. A). Gottlieb has owned the mark since 1998, and Gottlieb and its predecessors have used the mark in interstate commerce continuously since 1985. (Id. ¶¶ 9, 10).
2. The Film
In December 2000, Paramount released the motion picture "What Women Want" (the "Film"). (Id. ¶ 5). Paramount has shown the Film in theaters and sold and otherwise distributed it worldwide since then on DVD and VHS tapes and on television. (Id.). The Film is a romantic comedy starring Gibson and Hunt. Gibson plays an advertising executive who unexpectedly gains the ability to hear the thoughts of the women around him.[1] The *630 Film runs for a little over two hours, and the scene at issue occurs approximately thirty-seven minutes into the Film.
The three-and-a-half minute scene depicts a brainstorming meeting in the office of the advertising agency. The meeting takes place in a large room with a relaxed and casual atmospherethe room contains recliner chairs and bar stools, and on the far wall there is a large poster board prominently displaying the word "PLAY." A mini basketball hoop appears on one side of the room, and a statue of a penguin appears on the other. Approximately eight people are sitting in a circle. Behind one woman is a table socceror "foosball"game. As Gibson's character pitches various ideas for advertisements, the "Silver Slugger" appears intermittently in the background, next to another pinball machine. It appears only for seconds at a time, always in the background, and always partially obscured by Gibson, a recliner chair, or a bar stool. The "Silver Slugger" does not appear in any shot by itself, nor is it part of the plot. It does not appear anywhere else in the Film, nor does any character ever refer to it. It is simply part of the background in one limited scene.
B. Prior Proceedings
Gottlieb commenced this action against Paramount by filing a summons and complaint on March 10, 2008. The complaint contains five causes of action: (1) copyright infringement under the Copyright Act, 17 U.S.C. § 501 et seq.; (2) trademark infringement under the Lanham Act, 15 U.S.C. § 1125(a); (3) unfair competition under New York common law; (4) unjust enrichment under New York law; and (5) deceptive trade practices under the New York State General Business Law, N.Y. Gen. Bus. Law § 349. The complaint asserts a sixth cause of action for injunctive relief.
The complaint alleges that Paramount infringed Gottlieb's copyrights in the Designs by using the Silver Slugger in the Film without its permission. (Compl. ¶¶ 5, 6). The complaint further alleges that Paramount infringed Gottlieb's trademark by using the mark in the Film "for approximately 3 minutes," without permission, in a manner that is "likely to cause confusion, to cause mistake and to deceive." (Id. ¶¶ 12, 13). The remaining causes of action are based on similar allegations. (Id. ¶¶ 21, 24, 27-28, 31).
This motion followed.
DISCUSSION
A. Standard on a Motion to Dismiss
On a motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6), the court must accept the plaintiff's factual allegations as true and draw all reasonable inferences in its favor. Bernheim v. Litt, 79 F.3d 318, 321 (2d Cir.1996); see also Erickson v. Pardus, 551 U.S. 89, 127 S.Ct. 2197, 2199, 167 L.Ed.2d 1081 (2007) (per curiam).
In its recent decision in Bell Atlantic Corp. v. Twombly, the Supreme Court announced the "retirement" of the oft-quoted "no set of facts" language from Conley v. Gibson, 355 U.S. 41, 45-47, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957), and adopted in its place a "plausibility" requirement. 550 U.S. 544, 127 S.Ct. 1955, 1969, 167 L.Ed.2d 929 (2007). As interpreted by the Second Circuit, Bell Atlantic Corp. did not announce a "universal standard of heightened fact pleading, but . . . instead requir[es] a flexible `plausibility standard,' which obliges a pleader to amplify a claim with some factual allegations in those contexts where such amplification is needed to render the claim plausible." Iqbal v. Hasty, 490 F.3d 143, 157-58 (2d Cir.2007). The question is whether the pleading alleges "`enough *631 facts to state a claim for relief that is plausible on its face.'" Patane v. Clark, 508 F.3d 106, 111-12 (2d Cir.2007) (quoting Bell All. Corp., 127 S.Ct. at 1974).
"`[B]ald contentions, unsupported characterizations, and legal conclusions are not well-pleaded allegations,'" and will not defeat the motion. Gavish v. Revlon, Inc., No. 00 Civ. 7291(SHS), 2004 WL 2210269, at *10, 2004 U.S. Dist. LEXIS 19771, at *10 (S.D.N.Y. Sept. 30, 2004) (quoting Citibank, N.A. v. Itochu Int'l, Inc., No. 01 Civ. 6007(GBD), 2003 WL 1797847, at *1, 2003 U.S. Dist LEXIS 5519, at *2 (S.D.N.Y. Apr. 4, 2003)).
B. The Merits
1. Copyright Infringement
It is undisputed as a factual matter that Paramount copied the Silver Slugger, as an actual Silver Slugger appears in the Film. Paramount argues, however, that the use of the pinball machine was so trivial that the copying is not actionable.
a. Applicable Legal Standards
A copyright holder enjoys the right to reproduce and display publicly a copyrighted work. 17 U.S.C. § 106(1), (5). To prevail on a claim of copyright infringement, a plaintiff must prove that (1) unauthorized copying of the copyrighted work occurred, and (2) the infringing work is substantially similar. Tufenkian Import/Export Ventures, Inc. v. Einstein Moomjy, Inc., 338 F.3d 127, 131 (2d Cir. 2003). To prove substantial similarity, a plaintiff must show "`(i) that it was protected expression in the earlier work that was copied and (ii) that the amount that was copied is `more than de minimis."" Id. (quoting Castle Rock Entm't, Inc. v. Carol Publ'g Group, Inc., 150 F.3d 132, 137-38 (2d Cir.1998)); see also Feist Publ'ns, Inc. v. Rural Tel. Sen. Co., 499 U.S. 340, 361, 111 S.Ct. 1282, 113 L.Ed.2d 358 (1991) (holding that copyright infringement plaintiff must show valid copyright and copying of original elements of work).
To determine substantial similarity, a court must decide "whether the average lay observer would recognize the challenged material as having been copied from the copyrighted work." Crane v. Poetic Prods., 549 F.Supp.2d 566, 569 (S.D.N.Y.2008) (quoting Flaherty v. Filardi, 388 F.Supp.2d 274, 286 (S.D.N.Y.2005)). When similar works resemble each other only in unprotected aspectsfor example, when similarities inhere in ideas, which are by definition unprotected, or in expression that is not proprietary to plaintiffthe defendant prevails. Bill Diodato Photography, LLC v. Kate Spade, LLC, 388 F.Supp.2d 382, 390 (S.D.N.Y.2005) (citing 4 Melville B. Nimmer & David Nimmer, Nimmer on Copyright § 13.03[B][2] (2005)); see also Tufenkian, 338 F.3d at 131 ("[S]ubstantial similarity, we emphasize again, must be to that which is protected in the plaintiffs work.").
In some instances, substantial similarity may be an issue even where, as here, copying as a factual matter is established. As the Second Circuit has explained, there is a difference between "factual copying and actionable copying":
The former (probative similarity) requires only the fact that the infringing work copies something from the copyrighted work; the latter (substantial similarity) requires that the copying is quantitatively and qualitatively sufficient to support the legal conclusion that infringement (actionable copying) has occurred.
Ringgold v. Black Entm't T.V. Inc., 126 F.3d 70, 75 (2d Cir.1997). In other words, even when it is undisputed that copying as a factual matter occurred, there still may be an issue as to whether the copying is actionable. Id.
*632 The legal maxim "de minimis non curat lex ""the law does not concern itself with trifles"applies in the copyright context. Id. at 74. For example, if the copying is de minimis and so "trivial" as to fall below the quantitative threshold of substantial similarity, the copying is not actionable. Id. 74-75; see also Davis v. Gap, Inc., 246 F.3d 152, 172 (2d Cir.2001) (where unauthorized copying is trivial, "the law will not impose legal consequences"); Sandoval v. New Line Cinema Corp., 147 F.3d 215, 217 (2d Cir.1998) ("To establish that the infringement of a copyright is de minimis, and therefore not actionable, the alleged infringer must demonstrate that the copying of the protected material is so trivial `as to fall below the quantitative threshold of substantial similarity, which is always a required element of actionable copying.'") (quoting Ringgold). To determine whether the quantitative threshold of substantial similarity is met in cases involving visual works, courts consider the extent to which the copyrighted work is copied in the allegedly infringing work. The observability of the copyrighted work is critical, and courts will consider the length of time the copyrighted work is observable as well as factors such as focus, lighting, camera angles, and prominence. Sandoval, 147 F.3d at 217; Ringgold, 126 F.3d at 75.
In Sandoval, the Second Circuit affirmed the district court's determination that the use of the plaintiff's copyrighted photographs in the motion picture "Seven" was de minimis and therefore not actionable. The photographs appeared in the film for a total of only 35.6 seconds. They were primarily in the background and were never in focus, and they were often obstructed from view. See Sandoval, 147 F.3d at 218 ("[The] photographs as used in the movie are not displayed with sufficient detail for the average lay observer to identify even the subject matter of the photographs, much less the style used in creating them.").
Courts in this district have dismissed copyright infringement claims on Rule 12(b)(6) motions where no substantial similarity was found. See Bell v. Blaze Magazine, No. 99 Civ. 12342(RCC), 2001 WL 262718, at *3, 2001 U.S. Dist. LEXIS 2783, at *9 (S.D.N.Y. Mar. 16, 2001) (dismissing plaintiff's claim where no reasonable jury could find substantial similarity or that similarity pertains only to unprotected aspects of work); Boyle v. Stephens, Inc., No. 97 Civ. 1351(SAS), 1998 WL 80175, at *4, 1998 U.S. Dist. LEXIS 1968, at *12 (S.D.N.Y. Feb. 25, 1998) (same).
b. Application
Based on the facts alleged in the complaint, and on a viewing of the Film, I conclude that there is no plausible claim of copyright infringement here. Although Gottlieb has sufficiently pled unauthorized copying of its Designs, the use of the Silver Slugger was de minimis as a matter of law. Hence, no reasonable juror could find substantial similarity in the legal sense, and thus the copying is not actionable.
The scene in question lasts only threeand-a-half minutes., and the Silver Slugger appears in the scene sporadically, for no more than a few seconds at a time. More importantly, the pinball machine is always in the background; it is never seen in the foreground. It never appears by itself or in a close-up. It is never mentioned and plays no role in the plot. It is almost always partially obscured (by Gibson and pieces of furniture), and is fully visible for only a few seconds during the entire scene. The Designs (on the backglass and playfield of the pinball machine) are never fully visible and are either out of focus or obscured. Indeed, an average observer would not recognize the Designs as anything *633 other than generic designs in a pinball machine.
Gottlieb cites to Ringgold in support of its claim, but the facts of that case are inapposite. Ringgold involved the unauthorized use of a copyrighted poster in an episode of a HBO television series. The poster was shown, in whole or in part, nine times during a five-minute scene at the end of the episode. The poster (or a portion thereof) was seen for 1.86 to 4.16 seconds at a time, for a total of 26.75 seconds. In some instances, the poster appeared at the center of the screen. 126 F.3d at 72-73. As the Second Circuit held, the poster was "plainly observable." Id. at 76.
More importantly, there was a qualitative connection between the poster and the show. The poster included a painting depicting a Sunday School picnic held by the Freedom Baptist Church in Atlanta, Georgia, in 1909, and was intended to convey "aspects of the African-American experience in the early 1900s." Id. at 72. The show was "ROC," a television "sitcom" series about a middle-class African-American family living in Baltimore, and the scene in question was of a gathering in a church hall with a minister. Id. at 72-73. The Second Circuit noted that HBO's production staff "evidently thought that the poster was well suited as a set decoration for the African-American church scene of a ROC episode." Id. at 77. The Second Circuit concluded:
From the standpoint of a quantitative assessment of the segments, the principal four-to-five second segment in which almost all of the poster is clearly visible, albeit in less than perfect focus, reenforced by the briefer segments in which smaller portions are visible, all totaling 26 to 27 seconds, are not de minimis copying.
. . . The painting component of the poster is recognizable as a painting, and with sufficient observable detail for the "average lay observer" . . . to discern African-Americans in Ringold's colorful, virtually two-dimensional style. The de minimis threshold of actionable copying of protected expression has been crossed.
Id. at 77 (citation omitted).
In the present case, the "average lay observer" would not be able to discern any distinctive elements of Gottlieb's Designsthe baseball players clad in stylized, futuristic gear. The best that the average lay observer could make out in the background is a typical home-plate layout with baseball players arrayed around it. The unique expressive element of the Designs is not discernable in those brief moments when the backglass is visible. The only other protected element of the backglass is the "Silver Slugger" logo in the upper left hand corner, which is glimpsed fleetingly, and in poor focus, during the scene. The camera sweeps past the logo without dwelling or focusing on it. The average lay observer would not discern the stylized aspects of the logo attributable to Gottlieb based on the way the logo appears in the background of the scene.
Gottlieb also asserts that the "Silver Slugger" logo emblazoned on the right side of the pinball machine, which is visible near the center of the frame during the final seconds of the scene, should rise to the level of actionable copyright infringement. (Pl. Mem. 8). But Gottlieb has only claimed copyrights in the Designs on the backglass and the playing field, and not for the "Silver Slugger" logo on the side of the pinball machine. (Compl. 2). Moreover, the "Silver Slugger" logo occupies less than five percent of the frame area, is partially obscured by scenery in the foreground (including Gibson's head), and is not elevated into any prominence by the camera. Even if Gottlieb were to assert *634 a proprietary claim over this logo, the circumstances here would compel the conclusion that the copying was de minimis as well.
Moreover, while use of a copyrighted work in the background may still be a basis for an infringement claim, see Ringgold, 126 F.3d at 77, where the use is de minimis, the copying will not be actionable, even where the work was chosen to be in the background for some thematic relevance. As the Second Circuit explained in Ringgold, "in some circumstances, a visual work, though selected by production staff for thematic relevance, or at least for its decorative value, might ultimately be filmed at such distance and so out of focus that a typical program viewer would not discern any decorative effect that the work of art contributes to the set." 126 F.3d at 77. Here, undoubtedly the Silver Slugger was chosen by the production staff because it fit in with the "sporty" theme of the background in the scene; but the Silver Slugger was one of numerous background items, and it was filmed in such a manner and appears so fleetingly that I conclude there is no plausible claim for copyright infringement here. Accordingly, Gottlieb's copyright infringement claim is dismissed.
2. The Trademark Claim
I also conclude that Gottlieb has not pled a plausible trademark infringement claim. Gottlieb alleges that Paramount's unauthorized use of its trademark in the Film is likely to cause confusion as to the source and sponsorship of Gottlieb's products. But there is no plausible claim of a likelihood of confusion here, for the reasons that follow.
a. Applicable Legal Standards
Section 43(a)(1)(A) of the Lanham Act provides a cause of action for a trademark holder against any person who misuses its trademark in a way that is "likely to cause confusion" to the buying public as to the origin, affiliation or sponsorship of the trademark holder's product or service. 15 U.S.C. § 1125(a)(1)(A).
To bring a successful claim under section 43(a)(1)(A), a plaintiff must show that (i) it has a distinctive mark, i.e. that it has a mark or trade dress distinctive to the source of the good or service at issue, and (ii) there exists a likelihood of confusion between the plaintiff's good or service and that of the defendant by the buying public. See Wal-Mart Stores v. Samara Bros., 529 U.S. 205, 210, 120 S.Ct. 1339, 146 L.Ed.2d 182 (2000); ITC Ltd. v. Punchgini, Inc., 482 F.3d 135, 154 (2d Cir. 2007); Twentieth Century Fox Film Corp. v. Marvel Enters., 155 F.Supp.2d 1, 20 (S.D.N.Y.2001).
The hallmark of infringement is the likelihood of confusion by the buying public between the plaintiff's goods or services and that of the defendant. See Fed. Express Corp. v. Fed. Espresso, Inc., 201 F.3d 168, 174 (2d Cir.2000); Estee Lauder Inc. v. The Gap, Inc., 108 F.3d 1503, 1508-09 (2d Cir.1997). Therefore, for a cognizable claim in trademark cases, the plaintiff must raise "a serious question" as to the likelihood of confusion. Am. Cyanamid v. Campagna per le Farmacie in Italia, S.P.A., 847 F.2d 53, 55 (2d Cir.1988) (internal citations and quotations omitted).
b. Application
I assume that Gottlieb is the owner of the GOTTLIEB mark and that the mark is distinctive. The key issue is the likelihood of confusion.
Gottlieb does not allege any facts to support the conclusion that consumer confusion will likely result from Paramount's use of its mark. On a viewing of the Film, it would be difficult for even a keen observer to pick out Gottlieb's trademark, *635 as it appears in the background of the scene. The trademark is visible at various places on the pinball machine, but it occupies only a minute fraction the frame for three segments lasting approximately three seconds each. Moreover, as discussed above, the pinball machine is merely part of the background, together with another pinball machine, a foosball table, and other furniture and furnishings.
In these circumstances, Gottlieb's assertion that the appearance of its trademark in the Film would confuse ordinarily prudent consumers as to the sponsorship or affiliation of its pinball machines is simply not plausible. See Sherwood 48 Assocs. v. Sony Corp. of Am., 213 F.Supp.2d 376, 377 (S.D.N.Y.2002) (dismissing plaintiffs Lanham Act claims because the lone fact that defendant digitally inserted images of plaintiffs Time Square buildings into a scene of the film "Spider-Man" did not indicate consumer confusion), affd, in part, vacated in part on other grounds, 76 Fed.Appx. 389 (2d Cir.2003). Courts are not concerned with "mere theoretical possibilities of confusion" or "de minimis situations" in trademark cases. See Elec. Design & Sales, Inc. v. Elec. Data Sys. Corp., 954 F.2d 713, 717 (Fed.Cir.1992). Other courts that have considered the appearance of consumer products in motion pictures routinely fail to find any likelihood of confusion. See, e.g., Wham-O Inc. v. Paramount Pictures Corp., 286 F.Supp.2d 1254, 1262 (N.D.Cal.2003) (appearance of plaintiffs water slide toy in defendant's motion picture will not lead "[c]onsumers and viewers [to] mistake plaintiff for a movie production house, and consumers and viewers will not mistake defendants for a purveyor of toys."). Here, no viewer of the Film would consider whether Paramount sponsored the pinball machine or Gottlieb sponsored the Film.
Nor does Gottlieb allege any fact tending to show willful infringement or bad faith on the part of Paramount in its use of the Gottlieb mark. In Caterpillar Inc. v. Walt Disney Co., the court expressed discomfort with the plaintiffs Lanham Act claim because there was no indication of the defendant's intent to "poach or freeride" on the fame or good will of the plaintiffs trademarks. 287 F.Supp.2d 913, 919 (C.D.Ill.2003). As the court in Caterpillar pointed out, the "mere appearance" of a Ford Taurus in a generic film scene involving a car chase would not, by itself, support a trademark infringement claim. Id. at 920. The court concluded that no consumer decision would likely be affected as a result of "any mistaken belief that Caterpillar sponsored [defendant's] movie." Id. There is no indication that Paramount deliberately placed the Silver Slugger into the scene to capitalize on the good will associated with Gottlieb's mark. Paramount could just as well have substituted any other pinball machines to meet its purpose, and, in fact, there was a second, apparently unrelated pinball machine in the scene as well.
It should be noted that Gottlieb does allege a theory of harm in its opposition briefnamely, that its business reputation will be injured by any association of its products with the actor Mel Gibson and his purported anti-Semitic beliefs. (Pl. Mem. 17-18). The notion that any viewer of the Film would think less of Gottlieb because its pinball machine appears briefly in the background in a romantic comedy featuring Mel Gibson is absurd. Moreover, Gottlieb "may not rely on the purely dignitary, non-commercial harm that might arise from being associated with defendants or defendants' products" when asserting a Lanham Act claim. Cecere v. R.J. Reynolds Tobacco Co., No. 98 Civ. 2011(RPP), 1998 WL 665334, at *2, 1998 U.S. Dist. LEXIS 15100, at *6 (S.D.N.Y. Sept. 27, 1998) (dismissing Lanham Act *636 claim because plaintiff failed to allege specific economic losses that would result from defendant's use of a photograph of plaintiffs building to advertise Camel Cigarettes).
Gottlieb alleges no facts to suggest that Paramount's use of its trademark will likely cause consumer confusion, or that Paramount was motivated by ill-intent to freeride on the goodwill associated with Gottlieb's mark. Because Gottlieb does not amplify its trademark claim with factual allegations to rise "above the speculative level," Twombly, 127 S.Ct. at 1965, its trademark infringement claim is hereby dismissed.
3. The Deceptive Trade Practices Claim
Gottlieb further alleges deceptive trade practices under New York General Business Law Section 349, which prohibits "[d]eceptive acts or practices in the conduct of any business, trade or commerce or in the furnishing of any service in this state," and expressly provides a private right of action to "any person who has been injured by reason of any violation" of the statute. N.Y. Gen. Bus. Law § 349(a), (h) (McKinney 2008). This claim is dismissed as well.
a. Applicable Legal Standards
To bring a claim under section 349, a plaintiff must show that: (1) the defendant's conduct was misleading in a material respect, and (2) the conduct was directed at the public at large, injuring the plaintiff thereby. See Twentieth Century Fox Film Corp. v. Marvel Enters., 155 F.Supp.2d 1, 25 (S.D.N.Y.2001). Private transactions not of a recurring nature or without ramifications for the general public do not fall within the purview of section 349. Netzer v. Continuity Graphic Assocs., 963 F.Supp. 1308, 1323 (S.D.N.Y. 1997) (focus of section 349 is on consumer protection, and "generally prohibits only those deceptive practices affecting the public at large").
"`The typical violation contemplated by the statute involves an individual consumer who falls victim to misrepresentations made by a seller of consumer goods usually by way of false and misleading advertising.'" U2 Home Entm't, Inc. v. Hong Wei Int'l Trading, Inc., No. 04 Civ. 6189(JFK), 2008 WL 3906889, at *18, 2008 U.S. Dist. LEXIS 64297, at *56 (S.D.N.Y. Aug. 21, 2008) (quoting Genesco Entm't v. Koch, 593 F.Supp. 743, 751-52 (S.D.N.Y. 1984)). Whether a plaintiff can bring a section 349 claim will depend on "whether the matter affects the public interest in New York." Securitron Magnalock Corp. v. Schnabolk, 65 F.3d 256, 264 (2d Cir. 1995).
The pleading standards under the Lanham Act and section 349 of the New York General Business Law are "substantially the same." Avon Prods, v. S.C. Johnson & Son, Inc., 984 F.Supp. 768, 800 (S.D.N.Y.1997). Courts thus adopt essentially the same analysis for both section 349 and Lanham Act claims. See 24 Hour Fitness USA, Inc. v. 24/7 Tribeca Fitness, LLC, 447 F.Supp.2d 266, 288 (S.D.N.Y. 2006) ("These claims depend on the same analysis . . . ."); accord Twentieth Century Fox, 155 F.Supp.2d at 26.
b. Application
Gottlieb fails to allege any facts that tend to show either material deception on the part of Paramount or harm to the public interest.
Gottlieb has not alleged any facts to show that Paramount's conduct could materially mislead the public. For the reasons that Gottlieb fails to plead a set of facts that would demonstrate a likelihood of confusion to sustain a Lanham Act claim, it likewise cannot show any materially misleading conduct by Paramount. The assertion that Paramount misled the *637 public by using the Silver Slugger in the background in one scene in the Film is not plausible.
Likewise, Gottlieb fails to allege a plausible claim that Paramount's conduct injured the public interest. Gottlieb has not alleged any facts that support the claim that it has been harmed by Paramount's conduct, much less to support the proposition that the public at large has been misled. Although Gottlieb insists that Paramount's conduct has ramifications for consumers at large, it has not furnished anything more than conclusory and speculative allegations about how the public will be deceived as to the affiliation or endorsement of its products. (Pl. Mem. 22). See Vitolo v. Mentor HIS, Inc., 426 F.Supp.2d 28, 34 (E.D.N.Y.2006), aff'd, 213 Fed.Appx. 16 (2d Cir.2007) (no cognizable claim under section 349 where plaintiff's complaint focused on losses suffered by plaintiff's business rather than by plaintiffs patients or public at large).
Accordingly, Gottlieb's claim under section 349 of the New York General Business Law is dismissed.
4. Remaining State Law Claims
Gottlieb also brings claims of unfair competition and unjust enrichment under New York common law, asserting that such claims arise from Paramount's unauthorized use of both its copyrights and its trademark. (Compl. ¶¶ 21, 24). To the extent that these state law claims of unfair competition or unjust enrichment sound in misappropriation of copyright, they are preempted by the Copyright Act. 17 U.S.C. § 301(a); see also Twentieth Century Fox, 155 F.Supp.2d at 24-25 (dismissing plaintiff's claim of unfair competition under New York law as preempted by Copyright Act) (citing Arden v. Columbia Pictures Indus., Inc., 908 F.Supp. 1248, 1263 (S.D.N.Y.1995)); Am. Movie Classics Co. v. Turner Entm't Co., 922 F.Supp. 926, 933-34 (S.D.N.Y.1996) (stating that claims of unfair competition and unjust enrichment under state law deriving from unauthorized use of material are preempted by copyright law). To the extent Gottlieb's state common law claims are based on its trademark infringement claim, they are dismissed for the reasons that its trademark claim is dismissed, as discussed above. See Louis Vuitton Malletier v. Dooney & Bourke, Inc., 454 F.3d 108, 119 (2d Cir.2006) (unfair competition claim under New York Law is analyzed in the same manner as a Lanham Act trademark infringement claim); Info. Superhighway, Inc. v. Talk Am., Inc., 395 F.Supp.2d 44, 56 (S.D.N.Y.2005) (stating that elements of unfair competition under New York law "mirror Lanham Act claims").
CONCLUSION
For the reasons set forth above, defendants' motion to dismiss is granted in its entirety, with prejudice and with costs (but without attorneys' fees). The Clerk of the Court shall enter judgment accordingly and close this case.
SO ORDERED.
NOTES
[1] A DVD copy of the Film is attached to the Declaration of Eleanor M. Lackman, dated July 11, 2008 ("Lackman Decl."), as Exhibit E. As the Film is referred to in the complaint and is integral to Gottlieb's claims, it is deemed incorporated into the complaint by reference. Hence, I consider it on this motion to dismiss. See Blue Tree Hotels Inv. (Can.), Ltd. v. Starwood Hotels & Resorts Worldwide, Inc., 369 F.3d 212, 217 (2d Cir. 2004); accord Int'l Audiotext Network v. AT & T, 62 F.3d 69, 72 (2d Cir.1995) ("[W]hen a plaintiff chooses not to attach to the complaint or incorporate by reference a [document] upon which it solely relies and which is integral to the complaint, the court may nevertheless take the document into consideration in deciding the defendant's motion to dismiss, without converting the proceeding to one for summary judgment.").
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10-30-2013
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https://www.courtlistener.com/api/rest/v3/opinions/1489938/
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45 F.2d 1000 (1930)
ROSENTHAL
v.
UNITED STATES.
No. 8828.
Circuit Court of Appeals, Eighth Circuit.
December 22, 1930.
*1001 Oscar Strauss, of Des Moines, Iowa (A. J. Myers, of Des Moines, Iowa, on the brief), for appellant.
B. E. Rhinehart, U. S. Atty., of Anamosa, Iowa (D. C. Browning, Asst. U. S. Atty., of Sioux City, Iowa, on the brief), for the United States.
Before STONE and VAN VALKENBURGH, Circuit Judges.
VAN VALKENBURGH, Circuit Judge.
Appellant, Rosenthal, was engaged in the transfer and storage business at Sioux City, Iowa. His main warehouse was located at 11 West Third street in said city. November 10, 1928, he rented another warehouse, known as the Rathbun warehouse, located at 21 West Third street, for a period of one year, with an option for four years more, and at a monthly rental of $150. He was to take possession December 1, 1928. At the time this lease was made the Rathbun warehouse was in the hands of a receiver, and was not a going concern. After taking possession on December 1st, appellant proceeded to remove from the Rathbun building, to his main warehouse, a quantity of furniture which was stored on the third floor of the former building. This removal which, it appears, left the third floor of the Rathbun building vacant, was completed December 5, 1928. About December 15th appellant and one Gill looked over the Rathbun warehouse. December 20th a lease was prepared at appellant's direction whereby appellant rented to Gill "for the storage and shipping of flour, mill feeds, farm supplies and groceries" the entire third floor of the Rathbun building, together with office space on the second floor, approximately 25 by 30 feet. The term of the lease was two years, with a renewal option. The rent reserved was $115 per month. This lease was signed December 26, 1928. January 21, 1929, the Rathbun warehouse was raided by prohibition and police officers and an extensive distilling plant was found. The space actually occupied by Gill at this time was the entire upper floor, a part of the second floor, and a space twelve by forty feet in the basement. Openings had been cut in the second and third floors to accommodate what might be termed a shaft about eight by ten feet in dimension. In the basement was a large boiler, tanks, and other distilling apparatus extending from the basement through the openings described to the third floor of the building. On the third floor were twelve large vats, five of them containing fermenting mash. These vats were arranged in rows, and platforms five feet high were piled with sugar. About four hundred sacks of sugar were found in the building. These vats were purchased in Minnesota. There is testimony, denied by appellant, that, when these vats arrived in Sioux City, the trucks on which they were brought in were unloaded with the assistance of appellant's men and placed in the Rathbun warehouse. The first carload of sugar reached Sioux City December 21, 1928. Appellant, being notified by the railroad, directed this car to be sent to his main warehouse, for the assigned reason that the Rathbun warehouse was not yet fully repaired and cleaned. A second car of sugar was received soon after and was sent to the Rathbun warehouse at appellant's direction. Both these shipments were sent in care of the Rosenthal warehouse. Appellant claims to have exercised no supervision over the extensive "repairs" or physical changes made in his building, nor to have had any knowledge or suspicion of the character of business carried on therein. Molasses and coke were hauled to the Rathbun building by appellant's men in appellant's trucks, the molasses in a piano wagon with the sides closed. No records were kept of the hauling of these *1002 goods. Appellant testified that these hauls were marked cash jobs, and that the drivers turned the money over to him in cash.
June 1, 1929, an indictment was returned and filed in the United States District Court for the Northern District of Iowa charging appellant, Gill, Albert Larson, and Hiram Torbet with conspiracy to violate the National Prohibition Act by the illicit manufacture of intoxicating liquor for beverage purposes. At the trial under this indictment appellant was convicted, and from the judgment entered this appeal is taken.
The assigned errors relied upon in brief and argument are five in number. The first two have to do with the instructions to the jury. They charge (1) that the court imposed upon the defendant a greater burden to show his innocence than the law recognizes; and (2) that the court failed to instruct the jury fully on all the principles of law which govern or control the substantial facts in evidence. A third assignment is that the circumstances were as consistent with innocence as with guilt, and therefore appellant was entitled to a verdict of acquittal by direction of the court. It is further complained (4) that "where four are indicted for conspiracy and no severance of the cases is had, two found not guilty, the third convicted, and the fourth never apprehended, tried, convicted, or dead, the conviction and punishment of the third is unlawful"; and (5) that the argument of the district attorney to the jury was an appeal to race prejudice, and a reversal is demanded for that reason.
Taking up the assignments relating to the court's charge, the first is directed to language embraced within slightly more than two pages of the printed record, which appellant charges is unfair and prejudicial to the appellant, argumentative, and an invasion of the province of the jury. The charge of the court upon reasonable doubt and presumption of innocence is unexceptionable. Moreover, the entire charge reiterates again and again the burden of proof imposed upon the government, and throws about the defendant all the safeguards which the Constitution and laws guarantee. The language complained of consists of a passionless recital of the salient points in evidence, and in no respect transcends the limits of legitimate comment.
With respect to the third assignment mentioned, it should be said that there was substantial evidence introduced by the government from which the guilt of appellant could legitimately be found. In such case the question is properly one for the jury. The fact that a defendant's evidence may traverse that of the prosecution does not necessarily alter the situation, if the government has made a sufficient showing on its part. The jurors were told that "the evidence on the whole must not only be consistent with the defendant's guilt, but must, when fully and fairly considered, exclude every reasonable hypothesis of his innocence."
An additional complaint is that, where the jury, after being instructed and having retired, returned for additional instructions "the appellant was fairly entitled to have the jury instructed upon its request, that a landlord is not guilty of conspiracy to violate the National Prohibition Act merely because he has knowledge that liquor is being manufactured on the premises and he does not stop it or take some action towards that end."
The request for additional instruction came in the following language:
"A Juror: May it please the Court, the question that we were wondering about is this, in the event that we find the defendant entered into this contract in good faith, but subsequently to entering into the contract acquired knowledge that there was illicit liquor being manufactured on the premises, but for some reason refused to acquaint himself further with it, entirely stayed away from the premises, even though he did go there and satisfied himself that there was liquor being manufactured there, would that constitute and establish conspiracy? That is the question I believe in the minds of the jurors that they are not certain of. Would that justify them bringing in a verdict of guilty?"
The court replied thus:
"The charge in this case is that of conspiracy to commit an offense against the United States, namely, the manufacture of intoxicating liquor for beverage purposes in violation of the National Prohibition Act. Conspiracy as I have heretofore told you is an agreement or understanding between two or more persons to do an unlawful thing, or cause an unlawful thing to be done thereafter. The conspiracy must have been formed, the understanding arrived at, before the offense which is the object of the conspiracy is committed. When you consider the acts done by the persons charged with the conspiracy after the conspiracy was formed, if such conspiracy was formed, you consider them for the purpose of throwing light upon and revealing the previous understanding and agreement. Before you can *1003 convict the defendant you must find that before these acts were committed he had come to an understanding with Gill or Gille, whatever his name may be, and that understanding contemplated that they or some one acting for them would manufacture the intoxicating liquor, but in arriving at that conclusion as I have heretofore told you, you may consider all of the circumstances and facts in evidence in the case as bearing on the question of a previous understanding or agreement and of preconcert of mind between the two parties. The case, as has been heretofore explained to you, is one involving the application of circumstantial evidence, and one of the material questions is whether the circumstances in evidence in this case, establish beyond a reasonable doubt that the defendant Rosenthal and the man Gill or Gille had an agreement before the installation of this still that it should be established and they should manufacture their intoxicating liquor. I don't think I can give you the law any more clearly."
The answer was clear and sufficient. It is our judgment that the case was submitted to the jury with exceptional care in the court's charge, and that no error can be predicated upon that submission. At a former trial of this case verdicts of not guilty as to Torbet and Larson were directed by the court. A disagreement resulted as to appellant. Gill, concededly one of the principal defendants, has thus far evaded arrest. At the trial resulting in the judgment from which this appeal was taken, appellant alone was tried. It is contended that until a showing is made by the government that Gill is "forever unavailable" any conviction of appellant is unlawful. If the court must await indefinitely the capture of a fugitive whose whereabouts are unknown, it must often result that one primarily guilty of the offense charged may go unwhipped of justice. The contention must be rejected both upon reason and authority. It frequently happens that a conspiracy is charged with persons unknown, whose ultimate arrest and conviction is neither contemplated nor expected. But, where the evidence shows that more than one person participated in the corrupt understanding, the conviction of a single defendant will be upheld. Browne v. United States (C. C. A. 2) 145 F. 1, 13; Donegan v. United States (C. C. A. 2) 287 F. 641, 648. Feder v. United States (C. C. A. 2) 257 F. 694, 5 A. L. R. 370, holds that, where an indictment charges a conspiracy against two only, if one be acquitted the other must be also. This case presents no conflict with the previous decisions of the same court.
Finally, a reversal is prayed because of alleged prejudicial argument on the part of government counsel. In his closing argument the district attorney, referring to the failure of appellant to take cognizance of Gill's action in taking possession of basement space not covered by his lease, said:
"A man grabbing valuable warehouse space from this defendant here, grabbing valuable warehouse space and collecting no rent for it. And that is what he got it for. Isn't that funny? I never knew of a Jew before that would surrender a piece of a warehouse twelve or fourteen feet wide and forty feet long for nothing. And not only that, but he sawed through the bottom floor a hole 8 × 10 or 10 × 12, something like that, and then he built another arrangement up through to the next floor and took possession of that. Never saw it. A man that they would have you believe in one breath was one of the most careful business men that Sioux City possesses and has accumulated a considerable amount of property, and yet he did it without paying any attention to his business."
With respect to this assignment of error it would be sufficient to say that to this argument no objection was made nor exception preserved. But, at any rate, it is obvious that, in the statement made, the district attorney intended no appeal to race prejudice, nor do we think such was the effect of the language used. Instead, the purpose was to call attention to the inconsistency of appellant's conduct with the recognized business acumen of the Jewish race to which appellant belongs. We do not think this statement was of such a prejudicial nature, in the respect complained of, as to warrant reversal, even though exception had been taken at the time. It follows that the judgment below should be affirmed. It is so ordered.
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01-03-2023
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10-30-2013
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https://www.courtlistener.com/api/rest/v3/opinions/2674839/
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UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
)
COUNCIL OF THE DISTRICT OF )
COLUMBIA, )
)
Plaintiff, )
)
v. )
)
VINCENT C. GRAY, in his )
official capacity as Mayor ) Civ. Action No. 14-655 (EGS)
of the District of Columbia, )
)
and )
)
JEFFREY S. DeWITT, in his )
official capacity as )
Chief Financial Officer for )
the District of Columbia )
)
Defendants. )
)
MEMORANDUM OPINION
In 2012, the Local Budget Autonomy Act of 2012 (hereinafter
“Budget Autonomy Act”), D.C. Law 19-321, 60 DCR 1724, was
enacted by the Council of the District of Columbia (hereinafter
“Council”), signed by Mayor Vincent C. Gray, and ratified by
voters of the District of Columbia (hereinafter “District”) in
an April 2013 referendum. The law, if upheld, would grant the
District the right to spend its local tax and fee revenue
without seeking an annual appropriation from Congress. Mayor
Gray and Jeffrey S. DeWitt, Chief Financial Officer for the
District of Columbia (hereinafter “CFO”), both passionate
1
advocates for budget autonomy, have refused to implement the
Budget Autonomy Act. Although they wholeheartedly agree with
the Council as a matter of policy, they do not agree that the
Budget Autonomy Act is valid as a matter of law. On the basis
of this refusal, the Council has sued the Mayor and the CFO in
their official capacities. The Council seeks a declaration that
the Budget Autonomy Act is valid, and an injunction compelling
the Mayor and the CFO to comply with the law.
The fight for budget autonomy in the District is not new.
The District has had a measure of control over its own affairs
since the enactment of the Home Rule Act in 1973, and has been
fighting — unsuccessfully — for budget autonomy ever since. In
1981, Congressional Delegate Walter Fauntroy introduced the
District of Columbia Budget Autonomy Act, which would, if
passed, have ended the congressional appropriation requirement
for locally derived funds. Similar bills have been introduced
in nearly every Congress thereafter. As recently as 2011 and
2012, bills were introduced in the House and the Senate that
would have provided for local control of the local portion of
the District’s budget.1 These efforts have continued even after
1
Those bills were withdrawn at the request of District leaders
because they would have altered District law by banning the use
of local funds for abortion, loosening gun control laws, and/or
prohibiting union security agreements. See Mem. of Points and
Authorities of the Bipartisan Legal Advisory Group of the U.S.
2
the Budget Autonomy Act purportedly became effective. The
President has included budget autonomy for the District in his
fiscal year 2013, 2014, and proposed 2015 budgets, and yet
another bill was introduced in Congress on April 10, 2014.
Despite this long history of seeking budget autonomy
through Congress, the Council now argues that since the Home
Rule Act was enacted in 1973, it has possessed the authority to
grant itself control over its own local spending. This
argument, which the Council advances for the first time in this
litigation, simply cannot withstand judicial scrutiny. As more
fully set forth below, it is contrary to the plain language of
the Home Rule Act, which prohibits the Council from changing the
role of the federal government in the appropriation of the total
budget of the District. It cannot be reconciled with the
legislative history of the Home Rule Act, during which Congress
explicitly considered, and rejected, budget autonomy for the
District. And it violates a separate federal statute, the Anti-
Deficiency Act, which prohibits District employees from spending
public money unless it has been appropriated by Congress.
This case presents a unique situation in which all involved
strongly support the policy of budget autonomy for the District
of Columbia. Indeed, the policy arguments advanced by the
House of Representatives as Amicus Curiae at 11-13 (citations
omitted).
3
Council are extraordinarily powerful. As all District residents
know, the budget procedure in the Home Rule Act makes for
extremely difficult governance in the District. First, Congress
habitually fails to enact a budget by the start of the October 1
fiscal year; it has done so on only three occasions in the last
25 years. In the remaining 22 years, Congress has either passed
a continuing resolution or no budget at all, leading to a
shutdown. Second, because of the lengthy congressional
appropriations process, the District budget is necessarily
outdated by the time it is enacted by Congress. Finally, the
uncertainty in the congressional appropriations process often
negatively impacts assessment of the District’s finances by bond
rating agencies. Notwithstanding these challenges, the District
has demonstrated an unprecedented track record of fiscal
responsibility in recent years, including seventeen balanced
budgets, sixteen years of clean financial audits, and a
reduction in the federal portion of the District’s budget from
over 40 percent to only one percent. The Council makes a
compelling argument that the time has come for budget autonomy.
As a native Washingtonian, the Court is deeply moved by
Plaintiff’s argument that the people of the District are
entitled to the right to spend their own, local funds.
Nevertheless, the Court is powerless to provide a legal remedy
and cannot implement budget autonomy for the District.
4
Notwithstanding the sound policy preferences of conscientious
District lawmakers, members of Congress, and the President, the
Court must interpret and apply the law as enacted. Both
Congress and the President have expressed their support for
budget autonomy for the District, but have failed to act to
achieve that goal. Congress has plenary authority over the
District, and it is the only entity that can provide budget
autonomy.
In sum, having carefully considered the parties’ cross
motions for summary judgment, the responses and replies thereto,
the submissions by amici, the supplemental briefing requested by
the Court, the applicable law, the oral argument, and the record
as a whole, Plaintiff’s motion for summary judgment is DENIED
and Defendants’ cross motion for summary judgment is GRANTED.
Mayor Vincent C. Gray, CFO Jeffrey S. DeWitt, the Council of the
District of Columbia, its officers, agents, servants, employees,
and all persons in active concert or participation with them who
receive actual notice of the injunction, are hereby permanently
ENJOINED from enforcing the Local Budget Autonomy Act of 2012
pending further order of the Court.
5
I. Factual and Procedural Background
A. Local Autonomy in the District of Columbia and the
Home Rule Act
The District of Columbia is “an exceptional community . . .
established under the Constitution as the seat of the National
Government.” District of Columbia v. Murphy, 314 U.S. 441, 452
(1941). The Constitution grants Congress the power to “exercise
exclusive Legislation in all Cases whatsoever, over such
District (not exceeding ten Miles square), as may, by Cession of
particular States, and the Acceptance of Congress, become the
Seat of the Government of the United States.” U.S. Const., Art.
I, § 8, cl. 17. Pursuant to that authority, Congress
established the District of Columbia in 1801. See District of
Columbia Organic Charter Act, ch. 15, 2 Stat. 103 (1801). The
City of Washington was incorporated in 1802, and a local
government authorized to provide services was established.
Plaintiff’s Mem. of Points and Authorities in Support of Motion
for Summary Judgment or Remand (hereinafter “Pl.’s MSJ”) at 3.
From 1802 to about 1871, the local powers of the District were
expanded, and there was a trend toward increased self-
government. Id.; see also Jason I. Newman & Jacques B. DePuy,
Bringing Democracy to the Nation’s Last Colony: The District of
Columbia Self-Government Act, 24 AM. U. L. REV. 537, 541 (1975)
(hereinafter “Newman & DePuy”). In 1871, Washington City,
6
Georgetown, and Washington County were merged to create the
District of Columbia, and Congress granted greater home rule
authority to the District. During that time, the Organic Act
provided for a District Governor, appointed by the President,
and a legislature that could exercise limited power. See
District of Columbia v. John R. Thompson Co., 346 U.S. 100, 104-
05 (1953). However, this gradual increase was temporary, and in
1874 Congress imposed a commission system to govern the
District. Adams v. Clinton, 90 F. Supp. 2d 35, 47 n. 19 (D.D.C.
2000), aff’d, 531 U.S. 941 (2000). In 1878, Congress repealed
the home rule provisions of the Organic Act and disbanded the
territorial government entirely; the District was henceforth to
be governed by a three-person commission appointed by the
President. Id. Under this system of Government, “[l]egislative
powers . . . ceased, and the municipal government [was] confined
to mere administration.” Metro R.R. Co. v. District of
Columbia, 132 U.S. 1, 7 (1889). From 1878 to the 1970s,
Congress exercised its plenary power through direct legislation
for the District, with very little input from District
residents. Banner v. United States, 303 F. Supp. 2d 1, 4
(D.D.C. 2004), aff’d, 428 F.3d 303 (D.C. Cir. 2005).
This continued until 1973, when Congress enacted the
District of Columbia Self-Government and Governmental
Reorganization Act, Pub. L. No. 93-198, 87 Stat. 774 (1973)
7
(codified as amended at D.C. Off. Code § 1-201.01 et seq.), now
known as the “Home Rule Act.” Pl.’s MSJ at 4. The Home Rule
Act was a compromise, granting “the people of the District of
Columbia an opportunity in exercising their rights once more and
yet with adequate safeguards for the Federal interest
component.” Home Rule for the District Columbia, 1973-1974:
Background and Legislative History of H.R. 9056, H.R. 9682, and
Related Bills Culminating in the District of Columbia Self-
Government and Governmental Reorganization Act, at 2106 (1974).
Nevertheless, with the Home Rule Act, Congress expressed the
intent to relieve itself to “the greatest extent possible, . . .
of the burden of legislating upon essentially local District
matters.” D.C. Off. Code § 1-201.02(a). The grant of
legislative authority to the District in the Home Rule Act is
broad, id. § 1-203.02, but Congress included several
restrictions to that authority in Sections 601, 602, and 603.
These included congressional authority to veto District
legislation and the authority to legislate for the District on
any matter. Id. § 1-206.01. The Council of the District of
Columbia, the main legislating body created by the Act, was
prohibited from legislating in nine enumerated areas,2 and
2
The District may not impose any tax on federal or state
property; lend public credit for a private undertaking; enact or
amend any law that concerns the functions of the federal
government or does not apply exclusively to the District;
8
Congress retained broad authority over borrowing, spending, and
budgeting for the District. Id. §§ 1-206.02, 1-206.03.
Congress also retained ultimate legislative authority over the
District by providing that local legislation passed by the
District government becomes law only after review by Congress.
Title IV of the Home Rule Act sets forth the District of
Columbia Charter, which established the “means of governance of
the District” upon ratification by District voters. D.C. Off.
Code § 1-203.01. The Charter 1) establishes a municipal
structure similar to a state constitution that would take
precedence over other locally-enacted legislation; 2) provides a
clear statement regarding the structure of the new government;
and 3) provides the procedure for and limitations to the
District’s ability to amend the Charter. Newman & DePuy, 24 AM.
U. L. REV. at 576-77. The Charter also establishes a tripartite
form of government for the District comprised of the Mayor, the
Council, and the judiciary, and “the basic governmental
structure within which [those entities] operate.” Id. at 576.
The Charter sets forth the process for the enactment of
local legislation. Most legislation becomes law after it is
approved by a majority of the Council after two readings 13 days
regulate the federal or District of Columbia Courts; impose a
personal income tax on nonresidents; permit the construction of
buildings that do not comply with height restrictions; or
regulate the Commission on Mental Health. D.C. Off. Code §§ 1-
206.02(a)(1)-(a)(8).
9
apart, signed by the Mayor (or approved over his or her veto),
and sent to Congress for passive review. If, after 30 days (or
60 days for changes to criminal laws), Congress does not
affirmatively disapprove of the legislation, it becomes law.
D.C. Off. Code §§ 1-204.04(e); 1-206.02(c)(1).
The District budget, by contrast, requires the active
review of Congress. The process for the enactment of the budget
is set forth in Section 446 of the Act, which is included in the
District Charter. Section 446 provides that the Mayor must
present a budget, which includes both locally derived and
federal funds, to the Council. The Council must hold a hearing
and adopt a budget within 56 days of the transmittal from the
Mayor. The Mayor must sign the budget, or it must be approved
over his or her veto, within 30 days. The Mayor then transmits
this budget, called the Budget Request Act, to the President to
submit to Congress as part of the national budget. Congress
must enact affirmative legislation to appropriate expenditures
in the District. D.C. Off. Code § 1-204.46. Further, the
fiscal year of the District is identical to that of the federal
government. Section 446 also provides that “[n]otwithstanding
any other provision . . . , the Mayor shall not transmit any
annual budget or amendments or supplements thereto, to the
President of the United States until the completion of the
budget procedures” outlined in Section 446. Id. It also
10
fundamentally enshrines the role of Congress in the budget
process, stating that “no amount may be obligated or expended by
any officer or employee of the District of Columbia government
unless such amount has been approved by an Act of Congress, and
then only according to such Act.” Id.
The District Charter also created the General Fund of the
District of Columbia in Section 450 of the Home Rule Act. D.C.
Off. Code § 1-204.50. This section transferred revenue
collected from local sources from the Treasury, where they were
held prior to the enactment of the Home Rule Act, to the D.C.
General Fund. Id. The Act also empowered the Council to
“establish such additional special funds as may be necessary for
the efficient operation of the government of the District.” Id.
In 1995, the Home Rule Act was amended by Congress to create the
Office of the Chief Financial Officer. See District of Columbia
Financial Responsibility and Management Assistance Act of 1995,
Pub. L. No. 104-8, 109 Stat. 97, 142 (1995). The CFO and the
Mayor are tasked with the responsibility for administering the
District’s finances.
Like a state constitution, the Charter can be amended
subject to a three-prong process delineated in Section 303 of
the Home Rule Act. D.C. Off. Code § 1-203.03. The Charter is
the only part of the Home Rule Act subject to amendment; “non-
charter provisions are ‘off-limits’ to the local government.”
11
Brief of Amici Curiae Jacques B. DePuy, Daniel M. Freeman, Jason
I. Newman and Linda L. Smith in Support of Defendants Vincent C.
Gray and Jeffrey S. DeWitt (hereinafter “DePuy Amicus”) at 4.
The Charter amendment procedure outlined in Section 303 is
outside of the Charter, thus it is not subject to amendment. To
amend the Charter, the Council must first pass a proposed
amendment. Second, the amendment must be ratified by a majority
of eligible District voters. Finally, the Chairman of the
Council must submit the amendment to the Speaker of the House
and the President of the Senate for a 35-day period of passive
review. Id. § 1-203.03(a). The amendment becomes law unless
Congress passes a joint resolution disapproving of the proposed
amendment within the review period. Id. § 1-203.03(b). The
Council’s amendment authority is not absolute – it is subject to
“the limitations specified in sections 601, 602, and 603 [of the
Home Rule Act].” Id. ¶ 1-203.03(d).
B. The Local Budget Autonomy Act of 2012
The Council of the District passed the Local Budget
Autonomy Act of 2012, which amends “the District of Columbia
Home Rule Act to provide for local budget autonomy.” D.C. Law
19-321. This Act purports to amend Section 446 of the Home Rule
Act, which sets forth the procedure for appropriation of the
District’s budget by Congress. The amended section changes the
procedure for locally derived funds; it does not alter the
12
process for the federal portion of the District’s budget.
Compl. ¶ 50. Pursuant to the Budget Autonomy Act, the budget
process for the local portion of the District’s budget has been
modified so that it is similar to that for most other District
legislation – i.e., it is subject to passive review by Congress
after approval by the Council. Pl.’s MSJ at 8. If Congress
does not pass a joint resolution disapproving of the budget
within 30 days, it becomes law. The Budget Autonomy Act writes
the President and the Mayor out of the local budget process,
providing that “the local portion of the annual budget shall be
submitted by the Chairman of the Council to the Speaker of the
House of Representatives.” Budget Autonomy Act § 2(e).
The Budget Autonomy Act also alters the timeline in which
the Council must pass the budget. The Council is required to
adopt the budget for the District “within 70 calendar days . . .
after receipt of the budget proposal from the mayor.” Budget
Autonomy Act § 2(e). There are to be two readings of the
proposed budget, and those readings must be at least 13 days
apart. Pl.’s MSJ at 8. The Act also amends Section 441(a) of
the Home Rule Act to authorize the Council to change the fiscal
year of the District so that it runs from July to June rather
than October to September. Budget Autonomy Act § 2(d).
The Budget Autonomy Act was unanimously passed by the
Council and was signed into law by Mayor Gray on February 15,
13
2013. Pl.’s MSJ at 9; Defs.’ Mem. of Points and Authorities in
Support of Their Motion for Summary Judgment and in Opposition
to Plaintiff’s Motion for Summary Judgment (hereinafter “Defs.’
MSJ”) at 5. In a letter sent to the Council prior to signing
the Budget Autonomy Act, Mayor Gray stated that while he “fully
and passionately support[ed] the goal of securing budget
autonomy for the District of Columbia as soon as possible[,]” he
believed that the Budget Autonomy Act as written would violate
the Home Rule Act. Defs.’ MSJ, Ex. 1 at 1. He reiterated these
concerns in a signing statement that accompanied the Budget
Autonomy Act. Defs.’ MSJ, Ex. 1, Signing Statement. The Budget
Autonomy Act was then submitted to the D.C. Board of Elections
and Ethics for inclusion on the April 2013 ballot and the
Council filed a Notice of Public Hearing on the ballot language.
District of Columbia Attorney General Irvin Nathan responded to
the notice with a letter expressing his “serious reservations
about the legality of the amendment” and recommended that it be
excluded from the April 2013 ballot. Pl.’s MSJ, Declaration of
V. David Zvenyach (hereinafter “Zvenyach Decl.”), Exhibit A,
January 4, 2013 Letter from Irvin B. Nathan, at 1. At the
conclusion of the public hearings and after considering the
arguments presented, the Board of Elections found no basis to
reject the Budget Autonomy Act and included it on the ballot.
Pl.’s MSJ at 9. The Budget Autonomy Act was ratified by 83% of
14
voters in a special election in April 2013 (approximately 9% of
the District electorate of 505,698 registered voters). Defs.’
Answer ¶ 5. Congress took no action to affirmatively disapprove
of the Budget Autonomy Act, thus it became law on July 25, 2013
and became effective on January 1, 2014. See Pl.’s MSJ at 9.
After the Budget Autonomy Act became effective, Congressman
Ander Crenshaw (R-FL), asked the Government Accountability
Office (hereinafter the “GAO”) to opine on its validity. Pl.’s
MSJ at 9. On January 30, 2014, the GAO returned its opinion,
concluding “that provisions of the Budget Autonomy Act that
attempt to change the federal government’s role in the
District’s budget process have no legal effect.” Defs.’ MSJ,
Ex. 2, January 30, 2014 GAO Opinion, at 2.
C. The Instant Dispute
On April 8, 2014, the Attorney General issued a formal
opinion advising the Mayor that he should not implement the
Budget Autonomy Act and “advise Executive Branch officials and
employees not to do so absent a binding judicial decision to the
contrary.” Pl.’s MSJ, Zvenyach Decl., Ex. B, Opinion of the
D.C. Attorney General, at 9. On April 11, 2014, both the Mayor
and the CFO advised the Council in separate letters that they
would decline to implement the Budget Autonomy Act. Pl.’s MSJ
at 10; Compl. ¶ 52. Specifically, the Mayor notified the
Council of the steps he would take:
15
First, I will direct all subordinate agency District
officials not to implement or take actions pursuant to
the Act, which contravenes our Home Rule Charter and
other federal law. Second, I will veto any FY 15
budget transmitted by the Council that is not
inclusive of both the local and federal portions of
the budget, as required under the Home Rule Act.
Third, as noted, to achieve compliance to the extent I
am able with the Home Rule Act, I will transmit to the
Congress and President the full District budget as it
stands after the 56th day following transmission to
you of the budget, whether or not the Council has
taken a second vote.
Compl., Ex. C, April 11, 2014 Letter of Mayor Vincent Gray, at
3. The CFO mirrored the Mayor’s statements in his letter to the
Council, noting that he would not enforce the Budget Autonomy
Act absent a judicial determination of its validity:
Absent such [determination], I will not make or
authorize any payment pursuant to a budget that was
approved in conformance with the Act. I will also
direct OCFO employees not to certify contracts or make
payments under this budget given the potential civil
and criminal penalties to which they, as individuals,
would be subject under the federal Anti-Deficiency
Act.
Compl., Ex. D, April 11, 2014 Letter of CFO Jeffrey S. DeWitt,
at 2.
In response to these letters announcing the Mayor and CFO’s
intention not to enforce the Budget Autonomy Act, the Council
brought suit in the Superior Court of the District of Columbia
on April 17, 2014. It filed a Motion for a Preliminary
Injunction on that same date. Defendants immediately removed
the action to this Court. Plaintiff filed a motion to remand
16
the action to the Superior Court, arguing that jurisdiction was
lacking in this Court. At a preliminary status hearing on April
22, 2014, with the consent of the parties, the Court
consolidated the motion for preliminary injunction with a
determination on the merits, including jurisdictional arguments,
pursuant to Federal Rule of Civil Procedure 65(a)(2). The
parties have filed motions for summary judgment, and five groups
of concerned individuals have filed amicus briefs to aid the
Court in its determination of the important issues presented.
The Court ordered the parties to file supplemental memoranda to
respond to arguments made by amici in support of Defendants.
The Court heard oral argument on the parties’ cross motions on
May 14, 2014. Those motions are now ripe for determination by
the Court.
II. Standard of Review
Summary judgment is appropriate in situations where the
moving party has shown that there are no genuine issues of
material fact and the moving party is entitled to judgment as a
matter of law. See Fed. R. Civ. P. 56(a); Celotex Corp. v.
Catrett, 477 U.S. 317, 325 (1986); Waterhouse v. Dist. of
Columbia, 298 F.3d 989, 991 (D.C. Cir. 2002). In ruling on
cross-motions for summary judgment, the Court shall grant
summary judgment only if one of the moving parties is entitled
to judgment as a matter of law upon material facts that are not
17
genuinely disputed. See Rhoads v. McFerran, 517 F.2d 66, 67 (2d
Cir. 1975). That a factual dispute exists is not sufficient to
bar summary judgment, rather, the dispute must be regarding a
“material fact.” See Fed. R. Civ. P. 56(a). For the purposes
of summary judgment, “[a] fact is material if it ‘might affect
the outcome of the suit under the governing law,’ and a dispute
about a material fact is genuine ‘if the evidence is such that a
reasonable jury could return a verdict for the nonmoving
party.’” Steele v. Schafer, 535 F.3d 689, 692 (D.C. Cir. 2008)
(quoting Anderson v. Liberty Lobby, 477 U.S. 242, 248 (1986)).
Moreover, the factual dispute must be “genuine,” such that there
is sufficient admissible evidence for a reasonable trier of fact
to find for the non-moving party. Anderson, 477 U.S. at 255.
The moving party bears the burden of demonstrating the absence
of any genuine issues of material fact. See Celotex, 477 U.S.
at 323.
All parties to the instant dispute concur that there are no
genuine issues of material fact before the Court. Summary
judgment is particularly appropriate in situations where, as
here, a pure question of law that is ripe for decision is before
the Court. See Wyoming Outdoor Council v. Dombeck, 148 F. Supp.
2d 1, 7 (D.D.C. 2001); see also Swan v. Clinton, 100 F.3d 973,
976 (D.C. Cir. 1996).
18
III. Discussion
A. This Court has Jurisdiction
Federal courts are courts of limited jurisdiction,
Kokkonnen v. Guardian Life Ins. Co., 511 U.S. 375, 377 (1994),
and a case must be remanded to state court “[i]f at any time
before final judgment it appears that the district court lacks
subject matter jurisdiction.” 28 U.S.C. § 1447(c). Section
1331 confers on District Courts jurisdiction over all civil
actions arising under the Constitution, laws, or treaties of the
United States, or where the controversy presents a “federal
question.” 28 U.S.C. § 1331. A case is only properly in
federal court on the basis of a well-pleaded complaint; it “may
not be removed to federal court on the basis of a federal
defense, . . . even if the defense is anticipated in the
plaintiff’s complaint, and even if both parties concede that the
federal defense is the only question truly at issue.”
Caterpillar Inc. v. Williams, 482 U.S. 386, 393 (1987) (internal
citations omitted).
Federal courts also lack jurisdiction over claims that
pertain only to the District of Columbia. “[F]or the purposes
of [28 U.S.C. § 1331], references to the laws of the United
States or Acts of Congress do not include laws applicable
exclusively to the District of Columbia.” 28 U.S.C. § 1366.
Thus, “[w]hen Congress acts as the local legislature for the
19
District of Columbia and enacts legislation applicable only to
the District of Columbia and tailored to meet specifically local
needs, its enactments should – absent evidence of contrary
congressional intent – be treated as local law.” Roth v.
District of Columbia Courts, 160 F. Supp. 2d 104, 108 (D.D.C.
2001) (internal citations and quotation marks omitted).
Plaintiff argues that this case should be remanded to the
Superior Court for the District of Columbia because this Court
lacks jurisdiction over its claims, which it describes as
exclusively local. Pl.’s MSJ at 40. Because Plaintiff contends
that the Charter is applicable only in the District, it claims
“federal question jurisdiction is unavailable.” Id. at 41.
Moreover, Plaintiff contends that the only bases for federal
jurisdiction presented by Defendants are defenses, which further
counsels in favor of remand.
The Court is persuaded by Defendants’ arguments that this
case unequivocally presents a federal question – whether the
Council can unilaterally amend the District Charter to
fundamentally alter the roles of the President and Congress with
respect to the locally funded portion of the District’s budget.
This case is similar to Thomas v. Barry, 729 F.2d 1469 (D.C.
Cir. 1984), where the Circuit considered a Home Rule Act
challenge raised by employees of the District of Columbia
Department of Employment Services who had been transferred from
20
the Department of Labor. The District Court dismissed their
claims on the grounds that federal jurisdiction was lacking.
729 F.2d at 1470. On appeal, the Circuit noted that while the
Home Rule Act applied to the District, it did not do so
exclusively because “[m]any of the Act’s sections apply directly
to the federal not District government” and it was “thus a
hybrid statute.” Id. at 1471. The section of the Home Rule Act
at issue was not exclusively local, according to the Court,
because it impacted the “actual structure of the Department of
Labor.” Id.
Plaintiff argues that this case is distinguishable from
Thomas, because its “claim to relief is premised on the local
obligations of local officials, as triggered by the budget
process for local funds in the District Charter.”3 Pl.’s MSJ at
43. However, the budget process for the District necessarily
includes federal entities, namely the President and Congress,
the latter of which has an active role in appropriating the
District budget. The Budget Autonomy Act is thus far from the
type of purely local legislation that the D.C. Circuit has found
does not confer federal jurisdiction. See, e.g., Decatur
3
At the oral argument on May 14, 2014, the Court questioned
Plaintiff regarding its argument that Thomas is distinguishable
from the instant matter. While Plaintiff did not concede that
this Court has jurisdiction, it did explain its position that
“if the Court were to rely on [Thomas], . . . it’s an open
question whether there’s jurisdiction and that would certainly
be one way to resolve it.” Transcript of Hearing at 10:25-11:2.
21
Liquors, Inc. v. District of Columbia, 478 F.3d 360 (D.C. Cir.
2007) (finding that the District Court could not exercise
supplemental jurisdiction over a claim that all parties agreed
was local, whether the legislation was invalid because the
Council failed to read it twice before voting on it, as required
by the Home Rule Act); Dimond v. District of Columbia, 792 F.2d
179, 187-88 (D.C. Cir. 1986) (holding that a challenge to the
District’s No Fault Insurance Law on the grounds that it changed
the jurisdiction of the District of Columbia Courts and thus
violated the Home Rule Act did “not fall within the traditional
federal question jurisdiction” because the relevant sections of
the Home Rule Act dealing with the District of Columbia Courts
applied “exclusively to the District of Columbia”).
Accordingly, the Court concludes that federal question
jurisdiction exists over Plaintiff’s claims.4
4
Though not dispositive, the D.C. Circuit’s decision in Bliley
v. Kelly, 23 F.3d 507 (D.C. Cir. 1994), is instructive. There,
several members of Congress sought a declaratory judgment that
would have required the Council to resubmit the Assault Weapon
Manufacturing Strict Liability Act to Congress for review
pursuant to its authority to review District legislation under
the Home Rule Act. 23 F.3d at 509-10. The District Court
dismissed the action on the grounds that plaintiffs had failed
to state a claim under 42 U.S.C. § 1983. Id. at 510. The
Circuit reversed. In ruling on the merits, the Court considered
the D.C. Court of Appeals’ interpretation of the Home Rule Act,
under which the congressional review period for District
legislation would not be suspended by intervening legislation to
repeal the legislation awaiting review. Id. at 511. The Court
held that while it must defer to the D.C. Court of Appeals on
interpretations of purely local law, it was not required to do
22
B. The Local Budget Autonomy Act of 2012 is Unlawful
Plaintiff contends that the Budget Autonomy Act is a valid
exercise of its authority to amend the District Charter by the
procedure outlined in the Home Rule Act. Defendants argue to
the contrary that the Budget Autonomy Act is an unlawful
exercise of the Council’s Charter amendment authority pursuant
to Section 303(d) of the Home Rule Act, which provides that the
“amending procedure [in Section 303(a)] may not be used to enact
any law or affect any law with respect to which the Council may
not enact any act, resolution, or rule under the limitations
specified in sections 601, 602, and 603.” D.C. Off. Code § 1-
203.03(d) (emphasis added). Defendants contend that the Budget
Autonomy Act’s purported amendments to Section 446 violate
Section 303(d) for three independent reasons, each of which
would be sufficient for the Court to find that it is unlawful.
Defs.’ Reply at 6. First, Defendants argue that the Budget
Autonomy Act is a violation of Section 603(a) of the Home Rule
so on matters of federal law. Id. The Court reasoned that it
was “self-evident” that such deference was not warranted in the
matter at hand because “questions regarding Congress’s reserved
right to review District legislation before it becomes law
concerns an exclusively federal aspect of the Act.” Id. As
Defendants persuasively argue, the Circuit’s conclusion in
Bliley “mandates the conclusion that the Council’s claim of
authority” to change the respective roles of Congress and the
President with respect to the locally funded portion of the
District budget “is likewise one of federal law.” Defs.’ Reply
in Support of Their Cross-Motion for Summary Judgment
(hereinafter “Defs.’ Reply”) at 5.
23
Act, which prevents the Council from amending the Charter to
change the respective roles of Congress, the President, and the
Office of Management and Budget in the enactment of the
District’s total budget. Second, Defendants argue that the
Budget Autonomy Act violates Section 603(e) of the Home Rule Act
because its amendments to Section 446 relating to the locally
derived portion of the District’s budget no longer comply with
the Anti-Deficiency Act. Finally, Defendants argue that the
Budget Autonomy Act is unlawful under Section 603(a)(2) because
it purports to amend the Anti-Deficiency Act, which is a federal
law that is “not restricted in its application exclusively in or
to the District.” D.C. Off. Code § 1-206.02(a)(3).
The Court is again persuaded by Defendants’ arguments.
Although the Home Rule Act grants authority to the Council to
amend the District Charter, that authority is subject to the
limitations in Sections 601, 602, and 603. Plaintiff concedes
that its ability to amend the District Charter is subject to the
limitations in those sections; however, it argues that only some
portions of Sections 601, 602, and 603 are limitations.
Sections 603(a) and (e), according to the Council’s theory, are
instead rules of construction that were intended to guide the
interpretation of the Home Rule Act as enacted in 1973. This
argument is contrary to the plain language of Section 303(d);
the legislative history of Sections 601, 602, and 603; the
24
experience of almost 40 years of Home Rule; and common sense.
Plaintiff also argues that Section 450 of the Home Rule Act is a
permanent appropriation that meets the requirements of the Anti-
Deficiency Act without requiring an appropriation from Congress.
This argument is likewise contrary to the plain language of
Sections 450 and 446 and federal appropriations law. Because
the amendments to Section 446 in the Budget Autonomy Act
independently violate sections 603(a), 603(e), and 602(a)(3),
they are unlawful and must be enjoined.
1. Section 603(a)
Defendants argue that the Budget Autonomy Act is unlawful
because it violates the limitations in Section 303(d), which
prevent the Council from amending the District Charter to
conflict with Section 603(a). Section 603(a) provides:
Nothing in this act shall be construed as making any
change in existing law, regulation, or basic procedure
and practice relating to the respective roles of the
Congress, the President, the federal Office of
Management and Budget, and the Comptroller General of
the United States in the preparation, review,
submission, examination, authorization, and
appropriation of the total budget of the District of
Columbia government.
D.C. Off. Code § 1-206.03(a) (emphasis added). Section 303(d)
unequivocally refers to Section 603 as a “limitation[]” on the
Council’s amendment authority and does not specify that only
certain provisions of that section are to be treated as
limitations. Defendants therefore argue that Section 303(d) can
25
only be read to treat the entirety of Section 603 as a
limitation. Defs.’ MSJ at 15.
“Statutory construction must begin with the language
employed by Congress and the assumption that the ordinary
meaning of that language accurately expresses the legislative
purposes.” Park ‘N Fly, Inc. v. Dollar Park and Fly, Inc., 469
U.S. 189, 194 (1985). Here, the text of both Sections 303(d)
and 603(a) is clear – Section 603(a) is intended to be a
limitation on the Council’s amendment authority. The word
“limitation” is generally defined to mean “something that
controls how much of something is possible or allowed” or “the
act of controlling the size or extent of something: the act of
limiting something.” Merriam-Webster Dictionary, available at
http://www.merriam-webster.com/dictionary/limitation (last
visited May 18, 2014); see also Limitation, CONCISE OXFORD AM.
DICTIONARY at 516 (2006 Ed.) (“a limiting rule or circumstance; a
restriction”). The text is also clear that Section 603(a) does
not make a distinction between the locally and federally funded
portions of the District’s budget, but instead refers to the
“total” budget of the District, which is comprised of both
components. Accordingly, “the most logical reading of the
phrase ‘limitations specified in sections 601, 602, and 603’ in
§ 303(d) is that it treats the sections as a whole as
limitations on the Council’s authority, not just to the extent
26
that they explicitly state they are ‘limitations.’” Defs.’ MSJ
at 15-16 (emphasis in original). And the most logical reading
of Section 603(a) is that it prevents changes to the role of
Congress and the President with respect to six areas related to
the District’s budget – preparation, review, submission,
examination, authorization, and appropriation.
Where, as here, the statutory text is clear, there is no
need for the Court to resort to legislative history. See, e.g.,
Ratzlaf v. United States, 510 U.S. 135, 147-48 (1994); Barnhill
v. Johnson, 503 U.S. 393, 401 (1992). However, the legislative
history of the Home Rule Act confirms the plain meaning of
Section 603(a) and demonstrates the flaw in Plaintiff’s
interpretation of the statute. See Hessey v. District of
Columbia Bd. of Elections and Ethics, 601 A.2d 3, 8 n.6 (1991)
(en banc) (“The legislative history of the Self-Government Act
makes clear that the Self-Government Act left in place the pre-
existing Congressional appropriations process for the District
government.”). Though the Senate had passed several home rule
bills in the years leading up to the enactment of the Home Rule
Act, the House did not seriously consider such legislation until
1973. DePuy Amicus at 7. The initial bill drafted by the House
District of Columbia Committee (hereinafter “Committee Bill”)
included budget autonomy for the District; however, the
Committee Bill faced considerable resistance, especially from
27
Congressmen on the Subcommittee on District of Columbia
Appropriations of the House Appropriations Committee, who were
intimately involved in District affairs generally and the budget
process in particular. Id. at 7-8. After it became clear that
there was very little chance that the Committee Bill would pass,
Congressman Charles Diggs, Chairman of the House Committee on
the District of Columbia, took the unusual step of abandoning
the original Committee Bill and offering a comprehensive
substitute. Id. at 8-9. This substitute was referred to as the
“Diggs Compromise.” As Congressman Diggs explained in a “Dear
Colleague” letter:
The Committee substitute contains six important
changes which were made after numerous conversations
and sessions with Members of Congress and other
interested parties. These changes clarify the intent
of [the bill] and accommodate major reservations
expressed since the bill was reported out.
Letter from Charles C. Diggs, et al. to Members of the House of
Representatives (reprinted in 119 Cong. Rec. 33353 (Oct. 9,
1973)).
The main concession in the Committee Substitute Bill was
the first change listed in the letter: “1. Budgetary process.
Return to the Existing Line Item Congressional Appropriation
Role.” Id. It was understood by home rule supporters in
Congress that this concession was a necessary condition for the
passage of any bill. DePuy Amicus at 9-10; see also id., Ex. A
28
(Docket No. 28-1), Jack Kneece, Ford Insists Hill Run D.C.
Budget, WASHINGTON STAR-NEWS, Oct. 16, 1973, at B-2 (quoting the
Vice President-designate as saying that “[i]n my view, this
particular provision of the bill is non-negotiable in the House-
Senate Conference”); id., Ex. B (Docket No. 28-1), Jack Kneece,
Diggs Ready to Deal on Home Rule Bill, WASHINGTON STAR-NEWS, Oct. 5,
1973, at B-1 (noting that Congressman Diggs was “prepared to
continue detailed congressional oversight and control over the
D.C. budget as a means of ‘reaching an accommodation’ with home
rule foes”); id., Ex. C (Docket No. 28-1), Editorial, Home Rule
at Last, WASHINGTON STAR-NEWS Oct. 11, 1973, at A-18 (describing the
process required to get powerful Congressmen on the District
Appropriations subcommittee to sign off on the Committee
Substitute Bill and stating that the “high price was ultimate
congressional control over the city’s budget”); id., Ex. F
(Docket No. 28-1), Editorial, Home Rule: One More Step to Go!,
WASHINGTON STAR-NEWS, Dec. 2, 1973, at G-1 (explaining the changes
made by the Diggs Compromise, and stating that the Committee
Substitute Bill “falls far short of what . . . home rule
advocates had sought” but struck “a balance between the
conflicting desires of Congress to give District residents a
meaningful further measure of control over their own affairs
while at the same time retaining strong measures of
29
congressional oversight”).5 As Congressman Thomas Rees explained
during the floor debate on the bill, the budget process in the
Committee Substitute Bill would not change the existing budget
process for the District:
Really the relationship, if this legislation is
passed, will be the same relationship that Congress
now has with the District of Columbia budget, that no
money can be spent by the District of Columbia. . . .
This was the major compromise . . . so that we have no
change at all on budgetary control when we are
discussing who will run the budget of the District of
Columbia.
119 Cong. Rec. 33390 (Oct. 9, 1973).
The Committee Substitute Bill was eventually approved in
the House after extensive debate. DePuy Amicus at 10. In
addition to the reservation of active congressional authority
over the District’s budget, the Committee Substitute Bill also
added Sections 603 (a) and (e). These sections are entitled
“Budget Process; limitations on borrowing and spending” and,
critically, appear in a portion of the Home Rule Act that cannot
be amended by a Charter Amendment. Id. at 11-12.
The introductory language of Section 603(a) mirrors the
language of Section 602(b), which also begins with “[n]othing in
5
The Court may take judicial notice of newspaper articles that
explain the prevailing views on congressional retention of
budget authority and the importance of the Diggs Compromise to
the ultimate passage of the Home Rule Act. See Wash. Post v.
Robinson, 935 F.2d 282, 291 (D.C. Cir. 1991) (noting that the
court could take judicial notice of newspaper articles
publicizing a criminal prosecution in deciding whether a plea
agreement should be sealed).
30
this Act shall be construed as . . . .” D.C. Off. Code § 1-
206.02(b). Section 602(b) provides that “[n]othing in this Act
shall be construed as vesting in the District government any
greater authority over” the National Zoo, the National Guard of
the District, the Washington Aqueduct, the National Capital
Planning Commission, or any federal agency. Id. While there is
no legislative history for Section 603(a), there is legislative
history explaining Section 602(b) of the original Committee
Bill, which remained largely unchanged between the Committee
Bill, the Committee Substitute Bill (implementing the Diggs
Compromise), and the Home Rule Act as enacted. The legislative
history of that section, therefore, is particularly instructive,
especially as it “appears clear that, when Congress realized in
October 1973 that it needed language implementing the Diggs
Compromise’s provisions on budgeting, it used in § 603 of the
Committee Substitute familiar language borrowed from § 602 of
the Committee Bill.” DePuy Amicus at 13.
The legislative history of Section 602 makes clear that
Congress intended for the entire section, not just the
enumerated limitations in Section 602(a), to serve as a
prohibition on Council action. See H.R. REP. NO. 93-482 at 36-37
(Sept. 11, 1973). In describing the specific areas listed in
Section 602(a) in which the Council could not legislate, the
Report notes that “[t]his section lists specific prohibitions
31
against the District Council’s legislative authority, which
include prohibitions against [the listed activities].” Id. at
36-37 (emphasis added). The Report further describes Section
602(b) as follows: “Subsection (b) prohibits the Council from
exceeding its present authority over the National Zoological
Park, the District National Guard, the Washington Aqueduct, the
National Capital Planning Commission, or any other Federal
agency.” Id. at 37 (emphasis added). Congress used the word
“prohibition” to describe both sections despite the fact that
Section 602(b) begins with the phrase “[n]othing in this Act
shall be construed as,” and the legislative history leaves no
doubt that the limitations in the section are intended to be
prospective. Thus, the identical language in Section 603(a)
must also be read as a prospective prohibition on the Council’s
authority. It is a well-known canon of statutory construction
that the same phrase “appearing in several places in a statutory
text is generally read the same way each time it appears.”
Ratzlaf, 510 U.S. at 143. The legislative history of the Home
Rule Act provides no basis for the Court to depart from this
well-established canon of statutory construction.
Despite the very clear language of Section 603(a) and the
legislative history that reinforces that clear language, the
Council nonetheless argues that Section 603(a) is a rule of
construction, not a substantive limitation. Plaintiff contends
32
that Section 603(a) explains only how the Home Rule Act was to
be construed in 1973 and does not prohibit the amendments to
Section 446 made in the Budget Autonomy Act. Pl.’s MSJ at 30-
31; Pl.’s Consolidated Reply Mem. in Support of Pl.’s Motion for
Summary Judgment or Remand and Mem. in Opposition to Defs.’
Cross-Motion for Summary Judgment (hereinafter “Pl.’s Reply”) at
26. According to Plaintiff, because Congress was explicit
elsewhere in the Act when delineating areas in which the Council
could not legislate, it could not have intended for Section
603(a) to impose limitations on the Council’s ability to amend
the budget process outlined in Section 446, which is located in
the amendable Charter. Pl.’s MSJ at 31. This is the only
reasonable reading of the text, according to Plaintiff, because
“the overall purpose of the Home Rule Act was to provide an
expansive legislative power coupled with a broad Charter
amendment power.”6 Pl.’s Reply at 23.
6
Plaintiff devotes a significant portion of its Reply to a
discussion of the legislative history of the amendment
provisions of the Home Rule Act. See Pl.’s Reply at 11-18.
Plaintiff explains that the Senate and House versions of the
Home Rule Act contained very different amendment provisions –
the Senate version provided for limited amendment authority,
while the amendment authority in the House version was much
broader. Id. at 12. The House version eventually made it into
the final bill. Id. at 13. Ultimately, this discussion is
irrelevant. Nor is it directly relevant that Congress later
amended the Home Rule Act to relax the requirements for amending
the Charter – from active review by both houses of Congress to
passive review – after the Supreme Court’s decision in INS v.
Chadha, 462 U.S. 919 (1983), which invalidated the legislative
33
The Council’s argument, put simply, is not persuasive.
Plaintiff’s own counsel, V. David Zvenyach, has referred to
Section 603(a) as a limitation, stating during testimony before
the Committee of the Whole on November 9, 2012, that of the
“limitations [in Section 303(d)], the most difficult hurdle is
Section 603(a).” Docket No. 38-1, November 9, 2012 Testimony of
V. David Zvenyach, Public Hearing on Bill 19-993, at 3 (emphasis
added). He noted that there were two possible interpretations
of Section 603(a):
It could be read as a bright-line prohibition of the
ability of the Council to affect the budget process.
Or it could be read as a declaration that Congress
maintains ultimate authority with respect to the
budget, and that the Home Rule Act as originally
approved meant to leave the budget process intact. In
my view, the latter reading is preferable and
consistent with both the plain language and the
overall purposes of the Home Rule Act.
Id. (emphasis in original). While the Council’s reading of
Section 603(a) may indeed be “preferable” from a policy
perspective, it is inconsistent with the plain language of the
statute, the rules of statutory construction, and the
legislative history of the Home Rule Act. Section 603(a) is a
veto. See Pl.’s Reply at 16. Even assuming, arguendo, that the
Council has broad authority to amend the District Charter, the
only issue for the Court is whether the Charter amendment
procedures allow the changes that the Council has made with
respect to the local portion of the District’s budget.
34
limitation that prohibits the very change the Budget Autonomy
Act purports to make.7
2. Section 603(e)
Defendants also argue that the Budget Autonomy Act violates
Section 603(e) of the Home Rule Act and thus contravenes the
limitations to its Charter amendment authority in Section
303(d). Section 603(e) provides that “[n]othing in this Act
shall be construed as affecting the applicability to the
District government of the provisions of . . . the [] Anti-
Deficiency Act.” D.C. Off. Code § 1-206.03(e). The Anti-
Deficiency Act precludes “[a]n officer or employee . . . of the
District of Columbia government” from spending public monies
unless Congress makes “the amount available in an appropriation
or fund for the expenditure or obligation.” 31 U.S.C. §
7
At the oral argument on May 14, 2014, Plaintiff argued that
Congress’s silence and failure to pass a joint resolution
disapproving of the Budget Autonomy Act could signify tacit
approval of the changes the Budget Autonomy Act makes to Section
446 of the Home Rule Act. However, congressional inaction does
not make a law immune to judicial review. See, e.g., Brown v.
Gardner, 513 U.S. 115, 121 (1994)(noting that in the context of
congressional approval of administrative regulations,
“congressional silence lacks persuasive significance,
particularly where administrative regulations are inconsistent
with the controlling statute”) (internal quotation marks and
citations omitted). Plaintiff points to dicta in the Supreme
Court’s denial of a stay in Jackson v. D.C. Bd. of Elections and
Ethics, 559 U.S. 1301 (2010), as evidence of a contrary
position. However, in Jackson the Court stated that while
congressional inaction counseled in favor of denying a stay,
those “considerations are of course not determinative of the
legal issues.” Id. at 1302-03.
35
1341(a). As enacted, Section 446 of the Home Rule Act mandates
the procedure by which the District could comply with the Anti-
Deficiency Act by prohibiting the obligation and expenditure of
funds unless the spending has been “approved by an Act of
Congress.” D.C. Off. Code § 1-204.46.
For the reasons set forth in Section III.B.1 supra, Section
603(e) is also a prospective limitation on the Council’s
authority to amend the District Charter pursuant to Section
303(d). Like Section 603(a), Section 603(e) is not included in
the District Charter and cannot be amended. Though the Budget
Autonomy Act only explicitly amends Section 446, it also
effectively amends Section 603(e) by reading compliance with the
Anti-Deficiency Act, which was previously included in Section
446, out of the Home Rule Act entirely.
Defendants argue that the Budget Autonomy Act can only be
valid if the Court accepts Plaintiff’s argument that Section 450
of the Home Rule Act, which establishes the D.C. General Fund,
is an appropriation that satisfies the requirements of the Anti-
Deficiency Act. Defendants urge the Court not to accept that
interpretation because it is contrary to both the plain meaning
of Section 450 and federal appropriations law. Defendants
contend that Section 450 does nothing more than move funds from
the Treasury to the D.C. General Fund subject to requirements in
Sections 446 and 603(e) that those funds be appropriated and
36
comply with the Anti-Deficiency Act. Thus, Defendants argue
that the Budget Autonomy Act is unlawful.
All public funds are subject to the appropriations process.
See Am. Fed. of Gov’t Empls., AFL-CIO, Local 1647 v. Fed. Labor
Relations Auth., 388 F.3d 405, 409 (3d Cir. 2004) (hereinafter
“AFGE”). An appropriation has been made only “[i]f the statute
contains a specific direction to pay and a designation of the
funds to be used.” 1 Office of General Counsel, United States
General Accounting Office, Principles of Federal Appropriations
Law (3d ed. 2004) (hereinafter “Principles of Appropriations
Law”) at 2-16.8 While there are no magic words to signify that
an appropriation has been made, the statutory text must be clear
that funds are being appropriated. Indeed, “[a] law may be
construed to make an appropriation . . . only if the law
specifically states that an appropriation is made.” 31 U.S.C. §
1301(d). Accordingly, an appropriation cannot be inferred. See
Principles of Appropriations Law at 2-16.
8
The parties disagree as to the level of deference that should
be given to GAO opinions. The Court regards the GAO as an
expert, one whose opinions it will “prudently consider,” but
that it has “no obligation to defer” to. Delta Data Systems
Corp. v. Webster, 744 F.2d 197, 201 (D.C. Cir. 1984). Even
though GAO opinions are not binding, the Court will “give
special weight to [those] opinions due to [the GAO’s]
accumulated experience and expertise in the field of government
appropriations.” Nevada v. Dep’t of Energy, 400 F.3d 9, 16
(D.C. Cir. 2005) (internal quotation marks and citations
omitted).
37
Congress can make exemptions to the appropriations
requirement through various means. See AFGE, 388 F.3d at 409.
Congress can establish a revolving fund, which is “replenished
by moneys from the public [and] constitutes an on-going
appropriation which does not have to be renewed each year.”
United Biscuit Co. v. Wirtz, 359 F.2d 206, 212 (D.C. Cir. 1965)
(internal citations omitted). Examples of such funds are a
“stock fund” in the Treasury to fund military commissary
purchases, id., and the Postal Service Fund, which establishes a
revolving fund in the Treasury that “shall be available to the
Postal Service without fiscal-year limitation to carry out the
purposes, functions, and powers [of the Postal Service],” 39
U.S.C. § 2003(a). Congress may also create a permanent
appropriation, which is one that “is always available for
specified purposes and does not require repeated action by
Congress to authorize its use.” Principles of Appropriations
Law at 2-14.
Moreover, Congress may create a nonappropriated fund
instrumentality (hereinafter “NAFI”), through which it makes the
decision “not to finance a federal entity with appropriations.”
See AFGE, 388 F.3d at 409. A NAFI is instead funded “primarily
from [its] own activities, services, and product sales.” Id.
(quoting Cosme Nieves v. Deshler, 786 F.2d 445, 446 (1st Cir.
1986). The fact that an organization receives money from its
38
own activities is not sufficient for designation as a NAFI; as
“long as ‘under the [] authorizing legislation Congress could
appropriate funds if necessary,’” appropriations are still
required. Id. at 409-10 (quoting L’Enfant Plaza Props., Inc. v.
United States, 668 F.2d 1211, 1212 (Ct. Cl. 1982)). In
determining whether a fund or entity is a NAFI, the Federal
Circuit “has adopted a clear statement test,” pursuant to which
funds should be treated as requiring an appropriation unless
there is “a clear expression by Congress” to the contrary. Id.
at 410 (internal quotation marks omitted).
Plaintiff argues that the Budget Autonomy Act is lawful
because Section 450 is a permanent or continuing appropriation
that meets the requirements of the Anti-Deficiency Act.
Alternatively, the Council suggests that the creation of the
D.C. General Fund took District generated revenues out of the
public fisc, thereby obviating the need for appropriation.
Pl.’s MSJ at 20. Though Congress maintained what Plaintiff
refers to as a “second-level requirement” that “expenditures out
of the D.C. General Fund be affirmatively approved by Congress,”
that requirement was located in the District Charter and,
according to Plaintiff, was subject to amendment. Id. at 16.
The Council offers no statutory, legal, or other support
for this novel theory, nor can the Court find any. While
Section 450 “gave the District authority to collect and deposit
39
local revenues, it did not give the District the ability to
obligate or expend those funds.” Defs.’ Supp. Mem. at 4
(emphasis in original). Indeed, the weight of authority, and
the text of the statute itself,9 suggests that the creation of
the D.C. General Fund did not constitute a permanent
appropriation. The location of public money is not dispositive
of this inquiry; whether public money is held in a separate fund
in the Treasury or removed from the Treasury entirely, that
money is still subject to the Anti-Deficiency Act. Simply
removing funds from the Treasury does not satisfy the
requirements of the Anti-Deficiency Act, which is silent
regarding the location of public money (and does not even
contain the word “Treasury”).
9
As Defendants point out, the Council’s interpretation of the
Home Rule Act would render it internally inconsistent, as the
congressionally enacted versions of Sections 446 and 603(e)
specifically note that all funds for the District – regardless
of whether they are locally or federally generated – are subject
to congressional appropriation. See D.C. Off. Code §§ 1-204.46
and 1-206.03(e). “It is a familiar canon of statutory
construction that, ‘if possible,’ [the court is] to construe a
statute so as to give effect to ‘every clause and word.’” Amoco
Prod. Co. v. Watson, 410 F.3d 722, 733 (D.C. Cir. 2005) (quoting
United States v. Menasche, 348 U.S. 528, 538-39 (1955)).
Plaintiff’s reading of Section 450 would not only make the Home
Rule Act internally inconsistent, but it would also render
Sections 446 and 603(e) as enacted superfluous because the
transfer of District collected revenues from the Treasury to the
D.C. General Fund alone constituted an appropriation. There is
no reason to read the statute in that way, especially when its
plain meaning and legislative history support an alternative
reading that gives effect to each section.
40
The D.C. General Fund also cannot be considered a NAFI or
revolving fund that would constitute an appropriation for the
purposes of the Anti-Deficiency Act. While Section 450 takes
District generated revenues out of the Treasury and deposits
them into the D.C. General Fund, nothing in that section (or
elsewhere in the Home Rule Act) is a clear expression by
Congress that the D.C. General Fund was not subject to
appropriations. See L’Enfant Plaza, 668 F.2d at 1212. Nor is
there any indication in the Home Rule Act that Congress could
not appropriate funds for the District if necessary. See id.
The Home Rule Act in fact suggests the opposite. It is a clear
statement that Congress intended the D.C. General Fund to be
appropriated. See D.C. Off. Code §§ 1-204.46, 1-206.03(e).
This Circuit’s decision in Nevada v. Dep’t of Energy, 400
F.3d 9 (D.C. Cir. 2005), mandates the conclusion that Section
450 does not constitute an appropriation. The Court considered
whether Section 116 of the Nuclear Waste Policy Act, 42 U.S.C.
§§ 10101-10270 (hereinafter “NWPA”), which created a Nuclear
Waste Fund, was a continuing appropriation. 400 F.3d at 13.
The Nuclear Waste Fund was a “separate fund” in the Treasury
created to finance the development of a nuclear waste repository
and was funded with payments by regulated entities. Id. at 11.
After Yucca Mountain in Nevada was selected as the location of
the repository, the NWPA was amended to provide financial
41
assistance to the state of Nevada out of the Nuclear Waste Fund.
Id. (citing 42 U.S.C. § 10136(c)(1)). Nevada interpreted the
statute as providing a continuing appropriation, relying on
language in the statute “that the Secretary shall make grants to
the State of Nevada,” id. at 13 (citing 42 U.S.C. § 10136(c)),
and a provision specifying that such grants “shall be made out
of amounts held in the Waste Fund,” id. (citing 42 U.S.C. §
10136(c)(5). Like the Council here, the State argued that “the
mandatory phrase ‘shall make grants’ amount[ed] to a ‘specific
direction to pay,’” one that the GAO would treat as an
appropriation. Id. at 13. The Court held that the Nuclear
Waste Fund did not constitute a continuing appropriation because
another section of the statute made “expenditures from the Waste
Fund, including [] grants, ‘subject to appropriations.’” Id.
In making this determination, the Court explained that it had
found no authority to suggest that “a statute creating a funding
source and ordering payment ‘subject to appropriations’ amounts
to a continuing appropriation.” Id. at 14; see also id.
(“[N]either Nevada nor we have identified any authority
suggesting that a continuing appropriation exists when Congress
creates a special fund but makes spending from it ‘subject to
appropriations.’”).
The Council argues that Nevada is inapposite because it
involved a special fund in the Treasury of the United States and
42
because the case did not arise under the Anti-Deficiency Act.
Pl.’s Reply at 6 n.3. However, Plaintiff’s attempts to
distinguish Nevada fail. The Circuit held that a permanent
appropriation is not statutorily created when another provision
in the same statute makes funds subject to appropriations. The
location of the fund is irrelevant. The D.C. General Fund, like
the fund at issue in Nevada, has not been permanently
appropriated because another section of the Home Rule Act,
Section 446, requires that the Fund be appropriated. It is,
therefore, still subject to the requirements of the Anti-
Deficiency Act. Such a reading of Sections 450 and 446 also
comports with the “broader principle that one should not lightly
presume that Congress meant to surrender its control over public
expenditures by authorizing an entity to be . . . outside the
appropriations process.” AFGE, 388 F.3d at 410. The Budget
Autonomy Act, which removes the provisions in Section 446 that
provide for compliance with the Anti-Deficiency Act, thus runs
afoul of the limitations in Section 603(e) and the Anti-
Deficiency Act.
3. Section 602(a)(3)
Defendants argue that the Budget Autonomy Act is invalid
for the additional reason that it violates Section 602(a)(3) of
the Home Rule Act, which places another limitation on the
Council’s amendment authority under Section 303(d). Section
43
602(a)(3) provides that the Council has no authority to “enact
any act, or enact any act to amend or repeal any Act of
Congress, which concerns the functions or property of the United
States or which is not restricted in its application exclusively
in or to the District.” D.C. Off. Code § 1-206.02(a)(3).
Defendants contend that the Budget Autonomy Act impermissibly
amends an Act of Congress that is not restricted in its
application exclusively to the District, namely the Anti-
Deficiency Act. Defs.’ MSJ at 28-29. Because the Budget
Autonomy Act purports to change the procedure for the local
portion of the District’s budget to authorize spending without a
congressional appropriation, it necessarily seeks to enact or
amend an Act of Congress that is not restricted exclusively to
the District of Columbia. By its very terms, the Anti-
Deficiency Act applies to the federal government and to the
District. See 31 U.S.C. § 1341.
For the reasons explained in Section III.B.2 supra, the
Budget Autonomy Act does not comply with the requirements of the
Anti-Deficiency Act, and the Council’s attempts to characterize
the D.C. General Fund as a permanent appropriation fail.
Because the Council cannot amend the District Charter to exempt
the local portion of the District’s budget from the Anti-
Deficiency Act pursuant to the limitations in Sections 602(a)(3)
44
and 603(e), the Budget Autonomy Act is unlawful by its terms and
as an exercise of the Council’s amendment authority.10
10
Defendants also argue that the Budget Autonomy Act violates
the first part of Section 603(a)(2) because it concerns
functions of the United States. Defs.’ Reply at 6-7. According
to Defendants, “[b]udgeting and appropriations are
unquestionably ‘functions’ of Congress.” Defs.’ Reply at 7. To
support their claim, Defendants cite to two cases in which
budgeting and appropriations are referred to in dicta as
functions of the government. See, e.g. Gross v. Winter, 876
F.2d 165, 171 n.10 (D.C. Cir. 1989) (explaining that in the
context of determining whether an official has immunity from a
Section 1983 suit, budget decisions are “traditional legislative
functions”); Hessey v. D.C. Bd. of Elections & Ethics, 601 A.2d
3, 17 (D.C. 1991) (en banc) (referring generally to
appropriations as a function of the legislature). Because the
Budget Autonomy Act purports to change the role of the President
and Congress with respect to the locally funded portion of the
District budget, Defendants assert that it “is exactly the type
of change to a federal function, i.e., a change to how
responsibilities are divided between federal and local
officials, that the limitation was intended to guard against.”
Defs.’ Reply at 7.
The Council argues that this reading of Section 603(a)(2) would
“gut [its] legislative authority” because it encompasses “any
District law with a non-ministerial federal effect.” Pl.’s
Reply at 21. Plaintiff contends it would be prevented from
cutting taxes or amending the criminal code, and that even the
Initiative, Referendum, and Recall Charter Amendment Act of 1977
would be unlawful. Id. However, Plaintiff’s dramatic reading
of Section 602(a)(3) has no basis in law or fact. Cutting taxes
would impact the total amount of District funds available for
Congress to appropriate, but it would not alter its function in
appropriating those funds. Nor would changing the criminal code
alter the function of the U.S. Attorney in prosecuting crimes.
Indeed, the District Charter already provides that the Council
can amend the District’s substantive and procedural criminal law
subject to a 60-day, as opposed to 30-day, passive review period
by Congress. See D.C. Off. Code § 1-206.02(c)(2); In re
Crawley, 978 A.2d 608, 610-11 (D.C. 2009). While such actions
by the Council “might alter the background against which federal
officials act, neither would change federal officials’
45
IV. Conclusion
Although the Council of the District of Columbia, the
Mayor, and this Court are powerless to grant to the residents of
the District of Columbia the full budget autonomy that they have
demanded for almost forty years to spend their revenue collected
from their local taxes and fees, the United States Congress and
the President of the United States are — without a doubt —
empowered to do so.
In view of the foregoing, the Court concludes that the
Budget Autonomy Act is unlawful. Plaintiff’s Motion for Summary
Judgment is hereby DENIED and Defendants’ Cross Motion for
Summary Judgment is hereby GRANTED.11 Mayor Vincent C. Gray, CFO
Jeffrey S. DeWitt, the Council of the District of Columbia, its
functions, i.e., those officials’ roles, tasks, or
responsibilities.” Defs.’ Reply at 10 (emphasis in original).
The District of Columbia Court of Appeals came to the same
conclusion in In re Crawley. There, the Court considered
whether the Procurement Reform Amendment Act of 1998 (the
District’s false claims act) impermissibly transferred
prosecutorial authority from the U.S. Attorney to the Office of
the Attorney General. 978 A.2d at 609-10. The Court considered
the legislative history of the Home Rule Act and determined that
any law passed by the Council concerning the jurisdiction of the
U.S. Attorney was to be understood as one that concerned the
functions of the United States, and thus subject to Section
602(a)(3). Id. at 615. Likewise, the Budget Autonomy Act
impermissibly affects a function of the United States.
11
At the motions hearing on May 14, 2014, the Council
represented that it would not seek a stay even if it sought an
appeal. Transcript of Hearing at 124:20-24. In the absence of
any request for a stay, the Court will not stay its order.
46
officers, agents, servants, employees, and all persons in active
concert or participation with them who receive actual notice of
the injunction, are hereby permanently ENJOINED from enforcing
the Local Budget Autonomy Act of 2012 pending further order of
this Court. An appropriate order accompanies this Memorandum
Opinion.
SO ORDERED.
Signed: EMMET G. SULLIVAN
United States District Judge
May 19, 2014
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228 U.S. 652 (1913)
MATTER OF THE APPLICATION OF SPENCER, EX PARTE.
MATTER OF THE APPLICATION OF SCHOLL, EX PARTE.
MATTER OF THE APPLICATION OF MOYER, EX PARTE.
Nos. 16, 17, 18, Original.
Supreme Court of United States.
Argued April 28, 1913.
Decided May 26, 1913.
MOTIONS FOR LEAVE TO FILE APPLICATIONS FOR WRITS OF HABEAS CORPUS.
*653 Mr. M.C. Rhone and Mr. W.H. Spencer, with whom Mr. F.P. Cummings was on the brief, for petitioners.
Mr. Max L. Mitchell and Mr. N.W. Edwards, with whom Mr. A.M. Hoagland and Mr. John C. Bell, Attorney *656 General of the Commonwealth of Pennsylvania, were on the brief, for the respondent.
*655 MR. JUSTICE McKENNA delivered the opinion of the court.
These applications were filed and rules to show cause were issued. They were argued together and may be disposed of in one opinion.
The petitions alleged the following:
Petitioners were indicted in the Court of Quarter Sessions of the Peace, in the county of Lycoming, State of Pennsylvania, upon a charge of conspiracy to cheat and defraud, which the indictment charged was executed on the tenth day of September, 1910.
The trial took place in June, 1912, and petitioners were each sentenced to "pay a fine of $500, costs of prosecution, and undergo an imprisonment in the Eastern Penitentiary at Philadelphia, for an indeterminate period, at separate and solitary confinement, at labor, the minimum of which should be eighteen months and the maximum two years."
The costs and fines have been paid. In execution of the sentences of imprisonment, Robert J. McKenty, warden of the penitentiary, holds petitioners in custody in violation of § 10 of Article I, of the Constitution of the United States, which forbids any State to pass an ex post facto law, and in violation of the Fourteenth Amendment to the Constitution of the United States in that petitioners are deprived of their liberty without due process of law.
At the time the offense was committed (September 10, 1910), the laws of Pennsylvania provided, in § 128 of the Crimes Act of March 31, 1860, P.L. 382, that one convicted of the crime of conspiracy to cheat and defraud should be, on conviction, "sentenced to pay a fine not exceeding $500.00 and undergo an imprisonment at *657 separate and solitary confinement, at labor, or by simple imprisonment not exceeding two years." This act was amended and modified by the act of May 10, 1909, P.L. 495, known as the first Indeterminate Sentence Act, which provided, inter alia, as follows:
"Whenever any person convicted in any court of this Commonwealth of any crime shall be sentenced to imprisonment in either the Eastern or Western Penitentiary, the court, instead of pronouncing upon such convict a definite or fixed term of imprisonment, shall pronounce upon such convict a sentence of imprisonment for an indefinite term, stating in such sentence the minimum and maximum limits thereof, fixing as the minimum time of such imprisonment the term now or hereafter prescribed as the minimum imprisonment for punishment of such offense; but if there be no minimum time so prescribed, the court shall determine the same, but it shall not exceed one-fourth of the maximum time, and the maximum limit shall be the maximum time now or hereafter prescribed as a penalty for such offense."
By the terms of these two acts, which were the law for petitioners' punishment at the time their crime was committed, the most severe punishment which could be inflicted upon each of them was a fine of $500, and imprisonment in the penitentiary for the minimum term of six months, and a maximum term of two years.
Nearly a year after the crime was committed the legislature of Pennsylvania repealed the act of May 10, 1909, without any saving clause, and enacted the act of June 19, 1911, under which petitioners were sentenced. By the terms of the latter act the length of the minimum term of imprisonment is wholly within the discretion of the court, provided it does not exceed the maximum term.
Petitioners will contend that the maximum sentence which could have been inflicted upon them, if the court selected the alternative imprisonment rather than the *658 simple imprisonment as provided in the act of 1860, would have been "not less than six months nor more than two years at separate and solitary confinement, at labor."
Petitioners, however, were sentenced each to pay a fine of $500 and costs, and to be imprisoned for an indeterminate period, the minimum of which should be eighteen months and the maximum two years.
To the rules to show cause, the answer of the warden has been filed. It asserts the legality of the sentences and the following reasons why the writs should not issue: Petitioners, after sentence, took an appeal to the Superior Court of Pennsylvania, where the sentences were affirmed. Subsequently they presented a petition to the Supreme Court of the State praying for a special allocatur to allow an appeal from the judgment of the Superior Court, which petition was refused. In neither court did they raise the question of the constitutionality of the statute of June 19, 1911, or complain that the sentences were imposed under an ex post facto law, excessive or in other respects unconstitutional.
Afterwards, petitioners petitioned the Supreme Court of the State for a writ of habeas corpus to the sheriff of Lycoming County, in whose custody they then were, for delivery to the warden, and in their petition raised the same questions which they now raise in their petitions here. The court refused the petition. The petitioners then applied to the judge of the District Court of the United States for the Middle District of Pennsylvania for habeas corpus, raising the same questions as here. The petition was refused. This action of the courts is averred to be an adjudication of the questions here involved. And it is averred that the view most favorable to petitioners is that the sentences imposed upon them are legal and valid sentences for a term of at least six months, and they have not yet served so much of the term.
*659 The petitions and answer to them indicate the contentions of the parties. The petitioners contend that their sentences are illegal in that they were imposed under a law which is ex post facto and violates Article I of the Constitution of the United States, and that they are deprived of their liberty in violation of the Fourteenth Amendment. Respondent opposes the contentions and urges besides that they have been adjudicated against petitioners and that they are seeking to use habeas corpus as a writ of error to review and reverse the judgment of the courts of Pennsylvania. One of the contentions of respondent is that it is too late for petitioners to avail themselves of the objections they urge to their sentences; another contention is that their applications are premature, the sentences being at least valid for six months, which had not expired when the petitions were filed.
Petitioners certainly had ample opportunity to avail themselves of the objections they make to the validity of the sentences. They had it when they were brought up for sentence. They had it when they appealed to the Superior Court. They had it when they applied to the Supreme Court to allow an appeal from the judgment of the Superior Court. And this would have been the orderly course, and efficient as orderly. It would have been orderly because their objections would then have been made in the courts ordained to administer the law applicable to the crime; efficient, because if error was committed against constitutional rights it could have been reviewed and corrected by this court. And surely even a defendant in a criminal case cannot complain if in the tribunals in which he is arraigned for crime, he has opportunity to deny the crime, require its proof, resist unjust or excessive punishment and have a review of all rulings through the successive state tribunals and finally in the ultimate court of review upon questions under the Constitution of the United States. This being a defendant's opportunity, we *660 have declared many times that it would only be an exceptional case when we should interfere by habeas corpus with the course or final administration by the state courts of the criminal justice of a State. The cases are very numerous. They are cited in Urquhart v. Brown, 205 U.S. 179 and In re Lincoln, 202 U.S. 178. In those cases, following other cases, the rule is laid down and some of the exceptional circumstances which might justify its departure are indicated, and the discretion which this court may exercise. In Bailey v. Alabama, 211 U.S. 452, reviewing a judgment of the Supreme Court of Alabama which affirmed a judgment of a lower court denying a discharge on habeas corpus to the plaintiff in error, we said (p. 453): "If the Supreme Court had affirmed the denial of the discharge on the ground that the proper course was to raise the objections ruled upon at the trial of the principal case on the merits and to take the question up by writ of error, it would have adopted the rule that prevails in this court and there would be nothing to be said."
It is true the rule has been announced in cases where habeas corpus was applied for in advance of final decision in the state courts; but the principle of the rule applies as well after decision. The rule would be useless except to enforce a temporary delay if it did not compel a review of the question in the state court and, in the event of an adverse decision, the prosecution of error from this court. In other words, if it gave freedom to omit such defenses in the state court and subsequent review by this court, and yet the accused have an absolute right to habeas corpus. And this case shows the necessity of the application of the rule. We have pointed out the opportunity petitioners had to object to their sentences when they were imposed and successively to attack their validity in the appellate tribunals of the State and in this court. And this satisfies justice. More than this, that for which petitioners contend, *661 will make unstable and uncertain the administration of the criminal laws of the States. If defenses may be omitted at trials, rights of review omitted, and yet availed of through habeas corpus, the whole course of criminal justice will be deranged and, it may be, defeated. This is the practical result in the case at bar. Petitioners contend for a discharge, having fulfilled what they consider the legal part of their sentences, but which is manifestly below what in the law of the State is fixed for their crime. And, illustrating their arguments, petitioners told us of other cases which are waiting to come forward with an appeal for like remedy and jail delivery.
These views dispose of the petitions and we are not called upon to express opinion as to whether the act of 1911 is ex post facto because increasing the punishment of petitioners' crime after it was committed, or whether, as decided by the Supreme Court of the State in Commonwealth v. Kalck, neither that act nor the act of 1909 was intended to fix the punishment for any crime, nor to repeal the laws then in existence prescribing penalties and punishments for different crimes. We may observe that the court, further characterizing the acts, said "they undertook to regulate, not the law which fixed the punishments, but the sentencing of convicts, and the method of releasing them on parole." And, further, that the purpose of the acts "was to regulate the control and discipline of persons convicted of crimes, with a view to their reformation." The final conclusion of the court was that the statutory punishment was neither changed nor increased by the act of 1911. "`The maximum sentence,'" the court said, "`is the only portion of the sentence which has legal validity, and the minimum sentence is merely an administrative notice by the court to the executive department, calling attention to the legislative policy that when a man's so-called minimum sentence is about to expire, the question of grace and mercy ought to be considered and the *662 propriety of granting a qualified pardon be determined.'" See Commonwealth v. Brown, 167 Massachusetts, 144.
The court decided, therefore, that both the acts of 1909 and 1911 prescribed a maximum sentence for crime and that the provisions for indeterminate sentence with provision for clemency were matters of grace and could be varied by the legislature and could not be condemned as ex post facto laws.
The remarks of the court are pertinent to the next contention of petitioners, which is that the sentences have a legal part, to-wit, the fine of $500 and costs, and an illegal part, to-wit, the imprisonment, and that having fulfilled the legal part they are entitled to be discharged from the illegal part. In support of the contention they invoke Ex parte Lange, 18 Wall. 163. In that case a circuit court of the United States imposed a sentence of a fine of $200 and one year's imprisonment, the statute authorizing only a fine or imprisonment. The fine was paid, and on the next day the prisoner was brought before the court by habeas corpus and an order was entered vacating the former judgment and the prisoner again sentenced to one year's imprisonment. It was held that the court had not power to vacate the judgment and resentence the prisoner, that such action was double punishment for his offense, the legal part of the former sentence having been satisfied. It was further held that the judgment was void, not merely erroneous, and the prisoner was entitled to be discharged upon petition in habeas corpus. Two answers are opposed to the contention that the case is controlling of the case at bar. The case was put upon the ground that the Circuit Court had exhausted its power. In the case at bar the judgment of the Court of Quarter Sessions was subject to review and modification by the Supreme Court. Section 1, P.L. 785, 4 Stew. Purd. Dig. 4514, § 30; Daniels v. Commonwealth, 7 Pa. St. 371; Torrence v. Commonwealth, 9 Pa. St. 184; *663 Beale v. Commonwealth, 25 Pa. St. 11; White v. Commonwealth, 3 Brewster, 30.
In Daniels v. Commonwealth, the court said that under the power given by the statute cited above it was authorized not only to reverse or affirm but to modify a judgment, "that is, to change its form, vary, or qualify it, and this as well in criminal as in civil cases." Exercising this power, the court struck from a sentence an illegal part and affirmed it in all other respects. The same power was exercised in Beale v. Commonwealth. In White v. Commonwealth, a judgment in excess of what was authorized by the statute was reversed and the prisoner resentenced.
The sentences imposed on petitioners were, therefore, not void but erroneous only, and subject to change or modification by the Supreme Court, or reversal, and petitioners subject to resentence, and Ex parte Lange does not apply. In In re Lincoln, 202 U.S. 178, habeas corpus was denied because there was an appeal from the judgment attacked which could have been taken to the Circuit Court of Appeals, applying the rule which we have so often expressed, that the writ of habeas corpus is not to be used as a writ of error. And the reason is manifest. When the orderly procedure of appeal is employed, the case is kept within the control and disposition of the courts, and if the judgment be excessive or illegal it may be modified or changed and complete justice done, as we have said, to the prisoner and the penalties of the law satisfied as well. This comment is applicable to the case at bar. The Supreme Court of the State has decided, as we have seen, that neither the act of 1909 nor that of 1911 repealed the act of 1860, supra, which defined the statutory crime of conspiracy, and imposed upon those guilty of it a punishment by fine not exceeding $500 and imprisonment not exceeding two years.
The question then occurs, What is the effect of the act *664 of 1911 upon the act of 1909, assuming the former to be unconstitutional? The Supreme Court of the State, as we have seen, has declared it constitutional, but the question has not been presented to the court as to what would be the effect of the act of 1911 if declared by this court to be unconstitutional. Necessarily this court would leave to the Supreme Court of the State the decision of that question, it being a state question. It would not be our duty to decide it or to anticipate the decision of that court, which might indeed reconcile the acts with the constitutional rights of petitioners. The repealing clause of the act of 1911 is not in absolute form. It repeals only acts which are inconsistent with the act of 1911. It may be declared that a void act cannot be legally inconsistent with a valid one. Shepardson v. Milwaukee &c. R.R. Co., 6 Wisconsin, 605; State v. La Crosse, 11 Wisconsin, 51; Chapman v. Detroit, 14 Michigan, 276; Childs v. Shower, 18 Iowa, 261; Board of County Commissioners v. First National Bank, 6 Colo. App. 423; Trustees v. Laird, DeG., M. & G. 732. See Schneider v. Staples, 66 Wisconsin, 167. There may be cases the other way, as, it may be said, Medley, Petitioner, is. 134 U.S. 160, 174. Which is the more logical rule we are not called upon to pronounce, nor to say which, under the circumstances, the Supreme Court of Pennsylvania might apply.
Rules discharged; petitions dismissed.
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767 F.Supp. 969 (1991)
T.H.S. NORTHSTAR ASSOCIATES, LIMITED PARTNERSHIP, a Minnesota Limited Partnership, Plaintiff,
v.
W.R. GRACE & COMPANY, a Connecticut Corporation, Successor in Interest to Western Mineral Products Corporation and Zonolite Company; H & A Construction Corporation, a New York Corporation, Successor in Interest to SprayCraft Corporation, formerly known as Asbestospray Corporation; Keene Corporation, a New York Corporation, Successor in Interest to Baldwin-Hill Company, Baldwin-Ehret-Hill Company and Keene Building Products Corporation; Keene Building Products Corporation, a Delaware Corporation; National Gypsum Company, a Delaware Corporation, Successor in Interest to Gold Bond Building Products Corporation; United States Gypsum Company, a Delaware Corporation; The Celotex Corporation, a Delaware Corporation, Successor in Interest to Phillip Carey Mfg. Co., Phillip Carey Corporation, Briggs Mfg. Co., and Panacon Corporation; Carey Canada, Inc., a Canadian Corporation, Successor in Interest to Carey Canadian Mines; Pfizer Genetics, Inc., a Delaware Corporation; Basic, Inc., an Ohio Corporation; Turner & Newall Limited, a foreign Corporation; and United States Mineral Products Company, a New Jersey Corporation, Jointly and Severally, Defendants.
Civ. No. 3-87-676.
United States District Court, D. Minnesota, Third Division.
June 12, 1991.
Richard A. Saliterman, Saliterman & Alden, Minneapolis, Minn., Michael B. Serling, Michael B. Serling, P.C., Birmingham, Mich., Philip J. Goodman, Thrun, Maatsch & Nordberg, P.C., Lansing, Mich., Floyd E. Siefferman, Jr., Minneapolis, Minn., for T.H.S. Northstar Associates.
Peter Bologna, Murnane, Conlin, White, Brandt & Hoffman, St. Paul, Minn., for Basic, Inc.
Richard N. Jeffries, Thomas Olson, Jeffries, Olson & Flom, P.A., Moorhead, *970 Minn., for the Celotex Corp. and Carey Canada, Inc.
Robert D. Brownson, Lasley, Gaughan, Stich & Angell, P.A., Minneapolis, Minn., for H & A Const. Corp.
David Herr, Maslon, Edelman, Borman & Brand, Minneapolis, Minn., for Keene Corp. and Keene Building Products Corp.
Thomas V. Seifert, Marianne E. Durkin, Head, Hempel, Seifert & Vander Weide, Minneapolis, Minn., for National Gypsum Co.
Thomas H. Shiah, Thomas H. Shiah, Ltd., Minneapolis, Minn., for Pfizer Genetics, Inc.
Robert V. Atmore, Lindquist & Vennum, Minneapolis, Minn., for Turner & Newall PLC.
Sandra Wallace, Zelle & Larson, Minneapolis, Minn., for U.S. Gypsum Co.
Timothy P. Tobin, Gislason, Dosland, Hunter & Malecki, Minnetonka, Minn., for U.S. Mineral Products Co.
John C. Childs, Donald M. Lewis, G. Marc Whitehead, Popham, Haik, Schnobrich & Kaufman, Ltd., Minneapolis, Minn., and Joseph L. Cotter, Margaret R. Hinkle, Goodwin, Proctor & Hoar, Boston, Mass., for W.R. Grace & Co.
MEMORANDUM
RENNER, District Judge.
In 1986, plaintiff T.H.S. Northstar Associates ("Northstar") purchased the Northstar Center ("the Center") in downtown Minneapolis. Northstar alleges that the Center is contaminated by asbestos and has brought suit against defendant W.R. Grace & Co.Conn. ("Grace"),[1] a former manufacturer of asbestos-containing products that were applied to portions of the Center during construction that occurred between 1962 and 1967. In its eleven-count complaint, plaintiff asserts that Grace is liable for the cost of abatement of the asbestos hazard in the Center.
At the oral hearing on defendants' motion for summary judgment, the Court ruled from the bench and allowed plaintiff to proceed with its claims of fraud and misrepresentation, breach of implied warranty of merchantability, and nuisance. The Court granted defendant summary judgment as to the counts alleging restitution, breach of express warranty, and breach of implied warranty of fitness for a particular purpose.[2]
The Court took under advisement defendant's motion for summary judgment on plaintiff's claims of negligence and strict liability and requested supplemental briefing on how the economic loss doctrine, articulated by the Minnesota Supreme Court in Superwood Corp. v. Siempelkamp Corp., 311 N.W.2d 159 (Minn.1981), applies to the facts of this case. Since the hearing, the Minnesota Supreme Court has issued another opinion relevant to the economic loss doctrine, Hapka v. Paquin Farms, et al., 458 N.W.2d 683 (Minn.1990).[3]
Defendant argues that Superwood and Hapka preclude plaintiff from any recovery under tort theories of negligence or strict liability. It argues that the alleged injuries, even if characterized as damage to other property, constitute economic loss for which the sole remedies are those provided by the Uniform Commercial Code. Plaintiff *971 contends that the damages incurred by the presence of asbestos in the Northstar Center are not economic losses at all, thus making Superwood and Hapka inapplicable.
In its 1981 Superwood decision, the Minnesota Supreme Court held:
economic losses that arise out of commercial transactions, except those involving personal injury or damage to other property, are not recoverable under the tort theories of negligence or strict products liability.
Superwood, 311 N.W.2d at 162 (emphasis added). Superwood generated much caselaw, albeit unsuccessful, attempting to recover economic losses through the "damage to other property" exception. See Minneapolis Society of Fine Arts v. Parker-Klein Assoc. Architects, Inc., 354 N.W.2d 816, 819 (Minn.1984); S.J. Groves and Sons Co. v. Aerospatiale Helicopter, 374 N.W.2d 431, 433 (Minn.1985), and Valley Farmer's Elevator v. Lindsay Bros., 398 N.W.2d 553, 555 (Minn.1987). Responding to this "steady stream of litigation," the Minnesota Supreme Court concluded in Hapka that:
the Uniform Commercial Code must control exclusively with respect to damages in a commercial transaction which involves property damage only, and any statement or implication to the contrary in Superwood and its progeny is hereby expressly overruled.
Id. The Court agrees with defendant that if the plaintiff's alleged injuries constitute economic losses, then Hapka mandates dismissal of plaintiff's claims of negligence and strict liability.[4]
Both parties cite Minneapolis Society of Fine Arts as the keystone for defining economic loss under Minnesota law. In that case, plaintiff sought damages for removal and replacement of exterior brick curtain walls which had deteriorated. The Court set forth the following rationale for concluding that plaintiff had incurred an economic loss:
Generally, "economic loss" has been defined as resulting from the failure of the product to perform to the level expected by the buyer and commonly has been measured by the cost of repairing or replacing the product and the consequent loss of profits, or by the diminution in value of the product because it does not work for the general purposes for which it was manufactured and sold.... The damages sought in this case by [plaintiff] for removal and replacement of the brick and other consequential loss fall squarely within this "economic loss" definition. As such, they were recoverable in contract, if at all. [citations omitted].
Minneapolis Society of Fine Arts, 354 N.W.2d at 821.[5]
Plaintiff argues that a product's failure to "perform to the level expected by the buyer" is essential to economic loss. Id. Focusing on this component of the Minneapolis Society definition, plaintiff concludes that the economic loss doctrine does not encompass damages resulting from defects and risks of loss that were not within the reasonable expectation of parties to the commercial transaction at the time of the transaction. Because the asbestos-containing materials used in the Center performed to the expected level as fire-proofing material, plaintiff urges the Court to conclude *972 that the damage resulting from the fire-proofing's release of toxic asbestos fibres is non-economic loss.
Defendant urges the Court to define economic loss as the expense of repairing or removing a defective construction product. To support this position, defendant focuses on the latter part of the Minneapolis Society definition:
The damages sought in this case by [plaintiff] for removal and replacement of the brick and other consequential loss fall squarely within this "economic loss" definition. As such, they were recoverable in contract, if at all.
Id. Because the remedy sought in the instant case is primarily the cost of removal and replacement of the asbestos-containing fireproofing materials, defendant argues that only economic loss has occurred.
Plaintiff's definition, then, focuses on whether the damage resulted from the failure of the product to meet bargained-for expectations, while defendant's definition focuses on the type of remedy sought by the plaintiff. A remedy-based definition of economic loss based on factors such as product removal and replacement costs is not very precise. In a recent opinion, Judge Richard Posner of the Seventh Circuit noted that anything that destroys "values which can be monetized" causes a type of economic loss. Miller v. U.S. Steel Corp., 902 F.2d 573, 574 (7th Cir.1990).[6]
Moreover, a remedy-based definition diverts attention from the contract principles at the heart of the economic loss doctrine. In eliminating the damage to other property exception to the economic loss doctrine, the Minnesota Supreme Court set forth its belief that:
[t]he foundational assumption of the Code as a whole is that by importing to their negotiations their experience of the marketplace, the reasonable contemplation of sophisticated parties is embodied in the transaction. It is at the time of the contract formation that experienced parties define the product, identify the risks, and negotiate a price of the goods that reflects the relative benefits and risks to each.
Hapka, 458 N.W.2d at 688. On this basis, the court concluded:
[h]aving negotiated the warranties and any limitations of liability, that a defective product causes damage to other property should not defeat the liability parameters the parties have set by opening the door to tort theories of recovery.
Id. Undergirding the economic loss doctrine, then, is the principle that sophisticated parties negotiate commercial contracts according to their reasonable understanding of the risks and liabilities that could exist should the product fail to perform to the level promised by the seller and expected by the buyer. When such a deal has been struck, the parties are limited to remedies under the Uniform Commercial Code for any economic losses resulting from breach of the negotiated agreement.
The Court finds that the rationale set forth in Hapka supports a definition of economic loss premised on a product's failure to perform as promised, as do the holdings of other courts subsequent to Minneapolis Society and Hapka. In S.J. Groves and Sons Company v. Aerospatiale Helicopter Corporation, 374 N.W.2d 431 (Minn.1985), the owner of a plane that crashed sought to recover the cost of its replacement. The Minnesota Supreme Court characterized plaintiff's injury as economic loss because he was seeking "recovery for the product's failure to live up to [plaintiff's] expectations as to its suitability, quality, and performance." Concluding that plaintiff "lost only what it had purchased," id. at 434, the court held that the U.C.C. provided an adequate remedy:
[plaintiff] is a commercial entity possessing bargaining power substantially equal to that of the seller, clearly capable of negotiating a warranty against the damage the defective product caused to itself,....
Id. at 435. In Holstad v. Southwestern Porcelein, Inc., 421 N.W.2d 371 (Minn.App. *973 1988), a Minnesota appellate court concluded that tort claims could be allowed "in limited situations where the nature of the defect or damage is other than that which could ordinarily be contemplated by the parties to a commercial transaction." Id. at 375; see also Thofson v. Redex Industries, Inc., 433 N.W.2d 901, 903-904 (Minn. App.1988).
In other cases, Minnesota courts have specifically found that damage to property from asbestos-containing construction materials does not constitute economic loss even though the remedy may include product removal and replacement costs. A St. Louis County District Court set forth the following rationale when it denied a motion to dismiss negligence and strict liability claims based on damage to a school from asbestos fireproofing:
The gist of the claim is not that the fireproofing failed to perform to the level expected, but rather that the hazardous asbestos products have contaminated Central and exposed persons to unreasonable risks of injury. The Court finds that the contamination constitutes physical injury to District's premises. The fact that damages may be measured by the cost of repairing or replacing does not transform the nature of the injury into economic loss.
Independent School District No. 709 v. Air-O-Therm Application Company, File No. 155716, 7 (St. Louis County District Court, May 30, 1987).
Relying on Independent School District No. 709, a judge from this district held that the injury resulting from asbestos contamination of the Federal Reserve Bank of Minneapolis "is not mere economic loss for which tort recovery is unavailable." Federal Reserve Bank of Minneapolis v. Carey Canada, Inc., Civ. 3-86-185, 7-8 1988 WL 220489 (D.Minn. August 30, 1988). Magistrate Judge Patrick J. McNulty concluded that a strict liability claim for asbestos damage was a viable basis for punitive damages in Miller-Dwan Medical Center v. National Gypsum Company, Inc., Civ. 5-89-71, 16 (D.Minn. November 17, 1989). He differentiated this claim from one for economic loss:
claims arising from failure of the product to meet expectations of suitability, quality and performance resulting in damages which a party to a sales contract could reasonably expect would flow from a defect in the product and which can be measured by cost of repair or replacement, consequent lost revenue, or diminution in value of the product itself, are benefit of bargain claims and can be brought in contract. Only the unusual claim for damages which can be seen as separate and apart from ordinary risk of a commercial transaction can sound in tort.
Id. at 15.
In a recent opinion, Judge Harry MacLaughlin of this district found "the totality of the Minnesota asbestos building cases to be persuasive authority that tort remedies should be available to the plaintiff ..." Independent School District No. 197 v. W.R. Grace & Co., et al., 752 F.Supp. 286 (D.Minn.1990). He concluded:
A review of the claims compels the view that this is not a case of economic loss. Plaintiff is not claiming that the asbestos failed in its primary function. The plaintiff claims the asbestos was purchased as a fire retardant and was applied to the steel support beams in the school. The claim arises not from a failure of the asbestos to perform this basic function, but from the fact that the asbestos had contaminated the entire building with allegedly dangerous asbestos fibers. This definitionally is not "economic loss."
Id. at 301-302.
Finally, in Independent School District No. 622 v. Keene Corporation, File No. C5-84-1701 (Minnesota Tenth Judicial District, September 7, 1990), a Minnesota District Court addressing this matter post-Hapka, found that losses due to the presence of asbestos in a building do not constitute economic loss. The Court held:
Economic loss is defined as loss resulting from a product failing to perform to the level expected by the buyer. Minneapolis Soc. of Fine Arts v. Parker-Klein, *974 354 N.W.2d 816, 820 (Minn.1984). There are no allegations that the fireproofing material failed to perform its function as fireproofing material. Plaintiff is alleging that the asbestos in the fireproofing material creates a danger to the health of those who use the school requiring Plaintiff to remove the material. This is not economic loss as defined in Minneapolis Soc. of Fine Arts. The decisions in Superwood and Hapka do not apply, and Plaintiff has, therefore, alleged proper negligence and strict liability claims.
Id. at 4.
The Court agrees with plaintiff that a proper definition of economic loss under Minnesota caselaw must focus on the failure of a product to perform as contracted rather than on the measure of damages. Given this definition, damage to other property could be found to be economic loss if it results from the failure of a product to perform as contracted. However, damage to other property could also be found to be non-economic loss. This is appropriate when the damage is something other than the risks that are negotiated and bargained for by sophisticated commercial entities. Parties to a commercial transaction can experience non-economic losses when damage to property results from a condition other than a product's failure to meet bargained-for expectations. Such is the case here. Plaintiff may therefore proceed with its tort claims.
MEMORANDUM AND ORDER
On July 13, 1990, the above-captioned matter came before the Court for oral argument on the motions of defendants W.R. Grace & Co.Conn. and National Gypsum Company for summary judgment in an action brought by T.H.S. Northstar Associates. Philip J. Goodman and Floyd E. Siefferman, Jr. represented the plaintiff. G. Marc Whitehead and Donald M. Lewis represented defendant W.R. Grace. Thomas V. Seifert represented defendant National Gypsum.
Based on the arguments of counsel, the record and the entire file, IT IS HEREBY ORDERED that:
1. The motion of defendant National Gypsum Company for summary judgment on the grounds of absence of product identification is granted; all claims of plaintiff against defendant National Gypsum Company are dismissed with prejudice and on the merits;
2. Defendants' motions to dismiss plaintiff's tort and warranty claims based on primary assumption of risk are DENIED;
3. Defendants' motions to dismiss plaintiff's tort claims for lack of an express assignment are DENIED;
4. Defendants' motions to dismiss plaintiff's claim for restitution (Count 1) are GRANTED;
5. Defendants' motions to dismiss plaintiff's tort claims based on the economic loss doctrine are DENIED;
6. Defendants' motions to dismiss plaintiff's claim of fraud and misrepresentation (Count 4) are DENIED;
7. Defendants' motions to dismiss plaintiff's claim of breach of express warranty (Count 6) are GRANTED;
8. With regard to Count 7, defendants' motions to dismiss plaintiff's claim of breach of implied warranty of merchantability are DENIED; defendants' motions to dismiss plaintiff's claim of breach of implied warranty of fitness for a particular purpose are GRANTED;
9. Defendants' motions to dismiss plaintiff's claim of nuisance (Count 8) are DENIED;
10. Defendants' motions to dismiss plaintiff's claim for punitive damages are GRANTED WITHOUT PREJUDICE and with leave to the plaintiff to file a motion before the Magistrate to amend its complaint to assert a claim for punitive damages arising from its cause of action in negligence;
11. Plaintiffs claims of conspiracy (Count 5), concert of action (Count 9), enterprise *975 liability (Count 10) and alternative liability (Count 11) are dismissed.
NOTES
[1] Plaintiff also named National Gypsum Company as a defendant. However, the Court has granted summary judgment to National Gypsum based on plaintiff's failure to create an issue of fact that a National Gypsum asbestos-containing product was used in the Northstar Center.
[2] Plaintiff agreed to the dismissal of counts alleging conspiracy, concert of action, enterprise liability and alternative liability.
[3] On June 4, 1991, Governor Arne Carlson signed legislation that appears to have the effect of overturning the Minnesota Supreme Court ruling in Hapka as well as the bulk of Superwood's progeny applying the damage to other property exception. This statute provides:
(a) Economic loss that arises from a sale of goods that is due to damage to tangible property other than the goods sold may be recovered in tort as well as in contract, but economic loss that arises from a sale of goods between parties who are each merchants in goods of the kind is not recoverable in tort.
1991 Minn.Laws Ch. 352.
Because the Court finds the damage here does not constitute economic loss, the new law does not directly affect this decision.
[4] If, contrary to the conclusion of this Court, plaintiff's injury is determined to be economic loss, then the question will arise whether the new legislation on economic loss, 1991 Minn. Laws, ch. 352, will affect the applicability of Hapka to this case.
[5] In East River S.S. Corp. v. Transamerica Delaval, 476 U.S. 858, 866, 106 S.Ct. 2295, 2299, 90 L.Ed.2d 865 (1986), the United States Supreme Court defined economic loss in a manner similar to the Minnesota Supreme Court in Minneapolis Society of Fine Arts. The issue in East River was whether, under maritime law, damage to a product itself resulting from a defect in the product constituted economic loss. The court concluded:
[S]ince by definition no person or other property is damaged, the resulting loss is purely economic. Even when the harm to the product itself occurs through an abrupt, accident-like event, the resulting loss ... is essentially the failure of the purchaser to receive the benefit of its bargaintraditionally the core concern of contract law. [citation omitted].
East River, 476 U.S. at 870, 106 S.Ct. at 2302.
[6] The Miller court suggests that the term "commercial loss" would more aptly describe the damage encompassed by the economic loss doctrine. Id.
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789 F.Supp. 1108 (1992)
Michael VAN TASSEL, Plaintiff,
v.
Louis W. SULLIVAN, M.D., Secretary of Health and Human Services, Defendant.
Civ. A. No. 91-K-1177.
United States District Court, D. Colorado.
April 24, 1992.
Richard A. Brown, Grand Junction, Colo., for plaintiff.
J. Greg Whitehair, Asst. U.S. Atty., Englewood, Colo., for defendant.
ORDER GRANTING RULE 59(E) MOTION
KANE, Senior District Judge.
On February 3, 1992, I entered judgment in favor of the Plaintiff, reversing and remanding this case to the Secretary for further proceedings to include a full vocational assessment of the Plaintiff.
On February 25, 1992, counsel for the Plaintiff filed a petition for attorney fees under the Equal Access to Justice Act, 28 U.S.C. § 2412(d)(1)(A). The Secretary responded to the petition on March 11, 1992. Although conceding that my February 3 judgment was a "sentence four" remand under 42 U.S.C. § 405(g) and Melkonyan v. Sullivan, ___ U.S. ___, 111 S.Ct. 2157, 2165, 115 L.Ed.2d 78 (1991), the Secretary argued that the petition was premature because the Plaintiff had not yet attained "prevailing party" status under the Act. The Secretary requested me to hold the petition for attorney fees in abeyance until the proceedings on remand were complete and it could be determined whether the Plaintiff was a "prevailing party." On March 12, 1992, I granted the Secretary's motion.
On March 23, 1992, the court erroneously entered an order granting the Plaintiff's petition and awarding him attorney fees under the Act. The Secretary then filed the instant motion for reconsideration, citing my earlier order that consideration of the Plaintiff's petition would be deferred. The Plaintiff opposes the Secretary's motion for reconsideration, contending that the award of fees was proper because he attained "prevailing party" status upon the entry of the court's February 3 judgment.
The Tenth Circuit and several other courts hold that, notwithstanding the Supreme Court's holding in Melkonyan that remand orders under "sentence four" of 42 *1109 U.S.C. § 405(g) are final orders for the purposes of filing a petition for fees under the Equal Access to Justice Act, there is a "subcategory of cases in which the district court makes a fourth sentence remand but intends to retain jurisdiction over the action pending further administrative proceedings and enter a final judgment after those proceedings are completed." Gutierrez v. Sullivan, 953 F.2d 579, 584 (10th Cir.1992). In such cases, an application for fees under the Act is not proper until the proceedings on remand are complete. Id.; see also Welter v. Sullivan, 941 F.2d 674, 675 (8th Cir.1991).
Although not explicitly set forth as a basis for the court's ruling in Gutierrez, other courts have recognized the tension created by the Melkonyan view that "sentence four" remands are final orders which, upon entry, entitle the plaintiff to file a petition for attorney fees, yet in some cases the plaintiff may not properly be considered a "prevailing party" until he is awarded benefits in the proceedings on remand. See, e.g., Welter, 941 F.2d at 675 (view that petition for fees filed after completion of "fourth sentence" remand proceedings was not untimely "supported by the fact that the claimants did not become prevailing parties eligible for attorney's fees until the Secretary reevaluated their cases and awarded them benefits"); Parsons v. Sullivan, 140 F.R.D. 352, 358 (S.D.Ohio 1992) (expressing "grave doubts" about strict application of Melkonyan to "fourth sentence" remands which would "require a social security claimant to file an EAJA petition at a time when he cannot, in good faith, assert that he is the prevailing party in the litigation"). I agree with their view.
Accordingly, the court's March 23 order granting the Plaintiff's petition for attorney fees is WITHDRAWN. The Plaintiff's petition for attorney fees is DENIED as premature, without prejudice to the Plaintiff file a renewed request for fees if he prevails in the proceedings on remand.
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440 F.Supp. 1124 (1977)
Marion Eugene CAVANAUGH, Plaintiff,
v.
TEXAS INSTRUMENTS, INC., Defendant.
Civ. A. No. 75-H-617.
United States District Court, S. D. Texas, Houston Division.
November 15, 1977.
*1125 Elizabeth Dianne Richards, George C. Dixie, Houston, Tex., for plaintiff.
Wayne S. Bishop, Dennis M. Race, Washington, D. C., Akin, Gump, Strauss, Hauer & Feld, Judith S. Waldman, Texas Instruments, Inc., Dallas, Tex., for defendant.
ORDER
SINGLETON, District Judge.
The above-styled-and-numbered cause is a civil action brought pursuant to 29 U.S.C. §§ 621 et seq., the Age Discrimination in Employment Act of 1967 (ADEA), in which plaintiff seeks monetary damages arising from unlawful age discrimination allegedly committed by defendant in its employment practices. Now pending before the court are plaintiff's motions to add additional parties pursuant to Fed.R.Civ.P. 21 and to file an amended complaint. Defendant has opposed both of these motions in part. Preliminarily, a short statement of the facts relevant to these motions is necessary.
FACTS
Plaintiff, Marion Eugene Cavanaugh, worked for defendant, Texas Instruments, *1126 Inc. ("TI"), as an engineer in Houston beginning in December of 1968, until he voluntarily terminated his employment in June of 1974. Plaintiff gave notice of intent to file suit against TI to the Department of Labor in December, 1974.[1] In his complaint given to the Department of Labor along with this notice, plaintiff alleged that he was coerced to leave the employ of TI because of the overall attitude of age discrimination evidenced in TI's promotion, transfer, and compensation policies.
Daniel Smith and Stephen Baird, two other former engineers of TI who were laid off without right of recall allegedly as a result of TI's policy of age discrimination, now seek to be added as plaintiffs in this action. All three individuals are similarly situated with respect to ADEA and their experience at TI in that: (1) they are all between the age of 40 and 65 years; (2) they were all employees of TI occupying "Individual Contributor and/or Engineer" positions of a nonmanagerial status; (3) they all discontinued employment with TI in 1974 or 1975; and (4) they all complain of the same pattern of discrimination and seek the same affirmative relief in their amended complaint.
Stephen Baird received notice that he was being laid off on May 9, 1975, but drew an additional 22 weeks' salary at his regular rate. Baird sent notice of his intent to file suit against TI to the Department of Labor sometime in February, 1976. Daniel Smith received notice that he was being laid off on April 16, 1975, and filed notice of his intent to sue TI with the Department of Labor within 180 days of his termination.
Plaintiff's original complaint seeks only monetary damages from TI for alleged age discrimination. Besides seeking to add Stephen Baird and Daniel Smith as consenting plaintiffs pursuant to 29 U.S.C. § 216(b), plaintiff seeks leave to amend his complaint to request back pay, lost employee benefits, compensatory damages for pain and suffering, liquidated damages, an injunction mandating reinstatement, a declaratory judgment that the defendant violated plaintiff's rights under ADEA and a permanent injunction prohibiting the same, and costs and attorneys fees. The amended complaint requests these forms of relief in favor of the original plaintiff and the consenting plaintiffs Baird and Smith.
MOTION TO ADD ADDITIONAL PLAINTIFFS
Plaintiff Cavanaugh's motion to add Stephen Baird and Daniel Smith as consenting plaintiffs is grounded on 29 U.S.C. § 216(b) of the Fair Labor Standards Act, made applicable to ADEA pursuant to 29 U.S.C. § 626(b). Section 216(b) provides in relevant part that
[an] [a]ction to recover such liability may be maintained against any employer (including a public agency) in any Federal or State court of competent jurisdiction by one or more employees for and in behalf of himself or themselves and other employees similarly situated. No employee shall be a party plaintiff to any such action unless he gives his consent in writing to become such a party and such consent is filed in the court in which such action is brought.[2]
The consents in writing to become plaintiffs of Stephen Baird and Daniel Smith have been filed with this motion.
Defendant does not object to the addition of Daniel Smith as plaintiff and the motion will be granted as to this individual. Defendant does oppose the addition of Stephen Baird on the ground that Baird failed to timely filed a notice of intent to sue with the Department of Labor. The requirement of notifying the Department within *1127 180 days after alleged discriminatory acts is found in 29 U.S.C. § 626(d).[3]
In the context of a suit under ADEA brought by a single individual, the Fifth Circuit has held that timely compliance with section 626(d) is a prerequisite to federal jurisdiction. Powell v. Southwestern Bell Telephone Co., 494 F.2d 485 (5th Cir. 1974). See also, Hays v. Republic Steel Corp., 531 F.2d 1307 (5th Cir. 1976). However, plaintiff contends that (1) section 626(d) should not be construed as a jurisdictional prerequisite to Stephen Baird's joining this action pursuant to section 216(b) to raise the identical issues presented by plaintiffs Cavanaugh and Smith who have filed timely notices with the Department of Labor; and (2) Stephen Baird's February, 1976, notice to the Department of Labor was timely filed.
Plaintiff's first contention raises a question involving the relationship of 29 U.S.C. §§ 216(b) and 626(d) which has not been resolved in this circuit, to wit: whether section 216(b) permits one or more plaintiffs who have timely complied with section 626(d) to maintain an action under ADEA on behalf of similarly situated individuals who have filed the necessary consents under section 216(b) but have not filed timely notices with the Department of Labor. The court has been referred to several district court decisions falling on both sides of this question[4] and agrees with the reasoning of the decisions allowing the representative plaintiffs to satisfy section 626(d)'s notice requirement on behalf of similarly-situated consenting plaintiffs.
The court believes that the purposes of section 626(d)'s notice requirement[5] are fully served as to all similarly-situated individuals if one or more representative plaintiffs have filed a timely notice with the Department of Labor. The Department thereby receives notice of a particular discriminatory practice sufficient to determine whether agency litigation should be initiated, and the employer is made aware of the prospect of litigation if conciliation efforts do not succeed. Moreover, it would be wasteful to force every similarly-situated individual to "go through the repetitive and doubtlessly futile motions of another agency notice and waiting period." Pandis v. Sikorsky Aircraft Division of United Technologies Corp., 431 F.Supp. 793 (D.Conn.1977).
The court is further persuaded to this result by the fact that most courts presented with the question have applied a similar rule in Title VII cases in which an identical jurisdictional prerequisite of providing notice to an administrative agency (EEOC) exists. In class actions under Title VII, the Fifth Circuit stated that
[i]t would be wasteful, if not vain, for numerous employees, all with the same grievance, to have to process many identical complaints with the EEOC. If it is impossible to reach a settlement with one discriminatee, what reason would there be to assume that the next one would be successful. The better approach would appear to be that once an aggrieved person raises a particular issue with the EEOC which he has standing to raise, he may bring an action for himself and the class of persons similarly situated . .. *1128 Oatis v. Crown-Zellerbach Corp., 398 F.2d 496, 498 (5th Cir. 1968).
While this reasoning is fully applicable to ADEA actions, two limitations must also be applied to be consistent with the purposes of section 626(d). First, any consenting plaintiffs who have not complied with the notice requirements of that section must be limited to the categories of claims raised before the Department of Labor by the representative plaintiffs.
Secondly, the representative plaintiff in an ADEA action may only represent those similarly-situated individuals who could have timely complied with section 626(d)'s notice requirement as of the date of the representative plaintiff's filing with the Department of Labor. See Pandis, supra at 798. Because the plaintiff's amended complaint states facts which, if true, satisfy both of the above requirements, the court will grant the motion to add Stephen Baird as a consenting plaintiff in this cause and need not consider plaintiff's alternative ground for joining Baird in this cause.
MOTION TO AMEND THE COMPLAINT
Defendant does not generally oppose this motion but moves to strike the amended complaint as to certain of the types of relief sought. First, defendant contends that plaintiffs' prayer for lost wages in the form of minimum wage and overtime compensation is inappropriate because plaintiffs were exempt salaried employees under the Fair Labor Standards Act of 1938 (FLSA). Section 213(a)(1) of 29 U.S.C. provides an exemption from the minimum wage and overtime requirements of the FLSA as to profession of employees. However, the ADEA, section 626(b) of title 29, provides that "amounts owing to a person as a result of a violation of this chapter shall be deemed to be unpaid minimum wages or unpaid overtime compensation . . .." Therefore, the court finds that Congress did not intend to incorporate the exemptions of the FLSA into the ADEA and that defendant's motion to strike this portion of the amended complaint should be denied.
Secondly, defendant contends that plaintiffs' request for a declaratory judgment is improper, citing the following portion of the note of the Advisory Committee for Fed.R.Civ.P. 57, and decisions applying that note to deny declaratory relief in analogous Title VII actions.[6]
A declaration may not be rendered if a special statutory proceeding has been provided for the adjudication of some special type of case, but general ordinary or extraordinary legal remedies, whether regulated by statute or not, are not deemed special statutory proceedings.
Because the court finds that 29 U.S.C. § 626 is such a special statutory provision, the court will not consider at this point the declaratory-relief prayer of the amended complaint. However, the defendant's motion to strike will not be granted because declaratory relief could still be granted if special circumstances exist. See Katzenbach v. McClung, 379 U.S. 294, 296, 85 S.Ct. 377, 13 L.Ed.2d 290 (1964); see also Roberson v. Great American Insurance Companies of New York, 48 F.R.D. 404, 424 (N.D. Ga.1969).
Thirdly, defendant moves to strike plaintiffs' request for liquidated damages on the same basis that it moved to strike the prayer for unpaid minimum wages and overtime pay. The reason for the court's denial of the latter applies here and defendant's motion will be denied.
Lastly, defendant contends that plaintiffs' prayer for injunctive relief and damages for pain and suffering is improper under the ADEA. Defendant's motion to strike will be granted as to plaintiffs' prayer for damages for pain and suffering, based on the Fifth Circuit's recent decision in Dean v. American Security Insurance Co., 559 F.2d 1036 (5th Cir. 1977). However, the court finds that the language of 29 U.S.C. § 626(b) and (c) authorizing the court to grant, and the plaintiff to seek, *1129 "such legal and equitable relief as [will] effectuate the purposes of this chapter . . ." displaces any limitation contained in 29 U.S.C. § 216(b) or Wirtz v. Jones, 340 F.2d 901 (5th Cir. 1965), on equitable relief in private actions under ADEA. See Morelock v. NCR Corp., 546 F.2d 682 (6th Cir. 1976).
Therefore, for the above-stated reasons, it is ORDERED
(1) that plaintiff's motions to add Daniel Smith and Stephen Baird as consenting plaintiffs and to amend the complaint be GRANTED; and
(2) that defendant's motion to strike the amended complaint be GRANTED as to plaintiff's prayer for damages for pain and suffering and DENIED in all other respects.
NOTES
[1] "I hereby give notice of intent to file suit against Texas Instruments, Inc. in behalf of my client Marion Eugene Cavanagh [sic] under the Age Discrimination in Employment Act of 1967."
[2] The Fifth Circuit has interpreted Section 216(b)'s "opt in" type of class action as the only type available under ADEA, thus disallowing the use of Fed.R.Civ.P. 23. La Chapelle v. Owens-Illinois, Inc., 513 F.2d 286 (5th Cir. 1975).
[3] "No civil action may be commenced by any individual under this section until the individual has given the Secretary not less than sixty days' notice of an intent to file such action. Such notice shall be filed (1) within one hundred and eighty days after the alleged unlawful practice occurred . . .."
[4] Requiring individual notice to Department of Labor: McCorstin v. U. S. Steel, F.Supp., 11 FEP Cases 1478 (N.D.Ala.1974); Oshiro v. Pan American World Airways, 378 F.Supp. 80, 8 FEP Cases 446 (D.Haw.1974); Price v. Maryland Cas. Co., 62 F.R.D. 614 (S.D.Miss.1972). Allowing notice by nominal plaintiff to suffice as to consenting plaintiffs: Burgett v. Cudahy Co., 361 F.Supp. 617 (D.Kan.1973); Misretta v. Sandia Corp., F.Supp., 12 FEP Cases 1225 (D.N.M. 1975); Pandis v. Sikorsky Aircraft Div. of United Technologies Corp., 431 F.Supp. 793 (D.Conn.1977).
[5] See Edwards v. Kaiser Aluminum & Chem. Sales, Inc., 515 F.2d 1195, 1198 (5th Cir. 1975); Powell v. Southwestern Bell Tel. Co., 494 F.2d 485, 488 (5th Cir. 1974).
[6] See Roberson v. Great Am. Ins. Cos. of N. Y., 48 F.R.D. 404, 423 (N.D.Ga.1969); Wilson v. Sharon Steel Corp., 399 F.Supp. 403, 11 FEP Cases 145, 149 (W.D.Pa.1975).
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740 F.Supp. 153 (1990)
Evaristo APONTE, Plaintiff,
v.
Charles J. SCULLY, Superintendent, Green Haven Correctional Facility; Robert Abrams, New York State Attorney General; Charles J. Hynes, District Attorney, Kings County, Defendants.
No. 88 CV 3995.
United States District Court, E.D. New York.
June 19, 1990.
*154 *155 Martin Geduldig, for petitioner.
Leonard Joblove (Charles J. Hynes, Dist. Atty., Kings County) for respondent.
MEMORANDUM AND ORDER
McLAUGHLIN, District Judge.
Petitioner seeks a writ of habeas corpus pursuant to 28 U.S.C. § 2254. For the reasons discussed below, the petition is denied.
FACTS
Petitioner and two codefendants, Luis Maldonaldo and Anderson Garcia, were charged with the murders of Victor Martinez and Robert Toro. According to the two-count indictment, petitioner was an accessory to the Martinez murder and fired the shotgun that killed Toro. By a pretrial omnibus motion dated January 20, 1981, petitioner sought a severance of the two murder counts of the indictment. The motion to sever was denied. Following a jury trial on January 27, 1982, petitioner and both codefendants were convicted in New York Supreme Court, Kings County, on two counts of murder in the second degree.
On direct appeal, petitioner's conviction was modified. Upon review of petitioner's conviction as an accessory to the Martinez murder, the New York Appellate Division found that circumstantial evidence was insufficient to sustain a guilty verdict and, on that count, the conviction was reversed. People v. Aponte, 135 A.D.2d 544, 521 N.Y. S.2d 766 (2d Dep't 1987).
Petitioner filed a motion to reargue the remaining count of his conviction in the New York Appellate Division, but it was denied on February 25, 1988. By order of the court dated March 11, 1988, application for leave to appeal to the New York Court of Appeals was denied. People v. Aponte, 71 N.Y.2d 892, 527 N.Y.S.2d 1001, 523 N.E.2d 308 (1988).
Having exhausted his state remedies, petitioner now seeks a federal writ of habeas corpus in this Court alleging: (1) improper joinder; (2) change of the State's theory of guilt at the appellate level; (3) prosecutorial misconduct; (4) ineffective assistance of counsel; and (5) evidence improperly admitted at trial.
DISCUSSION
I. IMPROPER JOINDER
Petitioner claims that the two counts of murder were improperly joined, depriving him of a fair trial as guaranteed by the fourteenth amendment.[1]
The decision to grant a severance motion is entrusted to the sound discretion of the trial court, and will be reversed on appeal only when a defendant has suffered such substantial prejudice from a joint trial of two or more counts as to show an abuse of discretion. Alejandro v. Scully, 529 F.Supp. 650, 651 (S.D.N.Y.1982). See United States v. Werner, 620 F.2d 922 (2d Cir.1980). Nothing in the record shows any such abuse of trial court discretion.
*156 According to the record, petitioner and codefendant Maldonaldo threatened to kill Martinez during an argument over drug money. People v. Maldonado, 126 A.D.2d 670, 671, 510 N.Y.S.2d 712, 713, (2d Dep't 1987). The following day, November 10, 1980, codefendant Garcia approached petitioner and Maldonaldo, who were seated in a parked car across from 136 South 2nd Street in Brooklyn. Garcia then entered the building at 136 South 2nd Street with both victims, Martinez and Toro. Shortly thereafter, Toro rushed out of the building and Garcia, armed with a small caliber pistol, followed. Garcia and Toro entered a van and drove away. Maldonaldo and petitioner followed in their car. Martinez was found dead in the empty apartment. Id., 126 A.D.2d at 671-672, 510 N.Y.S.2d at 713-714.
The record further discloses that on November 11, 1980, petitioner was sitting in the driver's seat of a car; also seated in the car were the two codefendants. As the next victim, Toro, walked down the street and came within six feet of the car, someone fired a gun and killed Toro. The gunshot appeared to come from the driver's side of the car. Maldonado, 126 A.D.2d at 672, 510 N.Y.S.2d at 714.
As a matter of sound discretion, the trial judge properly denied a motion to sever the two charges. Indeed, two distinct criminal transactions are properly joined if evidence of one crime is material and establishes motive with respect to another crime. Petitioner claims that the connection between the two murder charges "was entirely too speculative to justify the prejudicial impact created by joinder." Petitioner's Mem. at 19. Disposing of the case, however, in a single proceeding "conserves judicial resources, alleviates the burdens on citizens serving as jurors, and avoids the necessity of having witnesses reiterate testimony in a series of trials." United States v. Borelli, 435 F.2d 500, 502 (2d Cir.1970), cert. denied, 401 U.S. 946, 91 S.Ct. 963, 28 L.Ed.2d 229 (1971). It is especially difficult "`to justify the disintegration of a trial ... in which there is a cohesion of crime alleged, defendants charged and proof adduced.'" United States v. Persico, 621 F.Supp. 842, 852 (S.D.N.Y.1985) (quoting United States v. Kahn, 381 F.2d 824, 840 (7th Cir.), cert. denied, 389 U.S. 1015, 88 S.Ct. 591, 19 L.Ed.2d 661 (1967)).
To succeed on a claim for a federal writ of habeas corpus, petitioner must show that the joint trial was so prejudicial as to actually render petitioner's state trial fundamentally unfair and, hence, violative of due process. Alejandro, 529 F.Supp. at 651 (citing Tribbitt v. Wainwright, 540 F.2d 840, 841 (5th Cir.1976), cert. denied, 430 U.S. 910, 97 S.Ct. 1184, 51 L.Ed.2d 587 (1977)); Melchior v. Jago, 723 F.2d 486, 491 (6th Cir.1983), cert. denied, 466 U.S. 952, 104 S.Ct. 2156, 80 L.Ed.2d 542 (1984). Because petitioner has not demonstrated prejudice sufficient to show an abuse of trial court discretion or a deprivation of due process, the joining of the two charges cannot be the basis for a writ of habeas corpus.
II. CHANGE OF THE STATE'S THEORY OF GUILT AT THE APPELLATE LEVEL
Petitioner claims that his constitutional right of due process was violated when the state, on appeal, changed its theory of petitioner's guilt regarding the Toro murder. According to Cole v. Arkansas, 333 U.S. 196, 68 S.Ct. 514, 92 L.Ed. 644 (1948), a change in the state's theory of guilt at the appellate level amounts to a violation of due process under the fourteenth amendment.
Petitioner's reliance upon Cole is misplaced. In Cole, the Supreme Court held that defendants were denied due process when they were tried and convicted for one offense, but the state appellate court affirmed the convictions on the ground that the evidence established guilt of a separate offense, one for which they were not tried. Here, by contrast, the New York Appellate Division affirmed the petitioner's conviction for the Toro murder, a crime for which he was tried and convicted.
*157 Petitioner claims that, at trial, the state argued that petitioner killed Toro to silence him about the Martinez murder and, on appeal, argued that he murdered to protect Garcia, the murderer of Martinez. The Court finds this to be a distinction without a difference. By murdering Toro, petitioner silenced him about the Martinez murder; that silence also protected Garcia. The two statements are not two different theories of conviction.
III. PROSECUTORIAL MISCONDUCT
A. Prosecutor's Argument Linking Petitioner To Both Murders
Petitioner argues that he was prejudiced by the prosecutor's argument to the jury that petitioner was guilty of the Martinez murder. Prejudice, according to petitioner, exists because that murder conviction was subsequently reversed by the Appellate Division. This Court has already found the joint trial of both murder counts proper. Petitioner now challenges the prosecutor's conduct at trial in arguing that both murders were connected to petitioner.
The knowing use of false evidence by the government obviously denies due process. For example, it is quite clear that a prosecutor cannot display a pair of stained undershorts to a jury, alleging them to be stained with blood of the victim's blood type, knowing the shorts were stained only with paint. Miller v. Pate, 386 U.S. 1, 87 S.Ct. 785, 17 L.Ed.2d 690 (1967). The fourteenth amendment will not tolerate a state criminal conviction obtained by the knowing use of false evidence. Id. 87 S.Ct. at 788. Petitioner has not shown that the prosecutor knew that petitioner was not a part of the Martinez murder or knowingly used any false evidence linking him to that murder.
Absent showing of false evidence, petitioner must show that the comments "so infected the trial with unfairness as to make the resulting conviction a denial of due process." Darden v. Wainwright, 477 U.S. 168, 181, 106 S.Ct. 2464, 2471, 91 L.Ed.2d 144 (1986) (citations omitted). See Donnelly v. DeChristoforo, 416 U.S. 637, 642-643, 94 S.Ct. 1868, 1871, 40 L.Ed.2d 431 (1974); Garofolo v. Coomb, 804 F.2d 201, 206 (2d Cir.1986). The factors the Court must consider include "the severity of the misconduct; the measures adopted to cure the misconduct; and the certainty of conviction absent the improper statements." United States v. Modica, 663 F.2d 1173, 1181 (2d Cir.1981), cert. denied, 456 U.S. 989, 102 S.Ct. 2269, 73 L.Ed.2d 1284 (1982).
The trial record reveals no dialogue, comment or argument by the prosecution which can be characterized as improper. Moreover, the trial court's instructions to the jury directed them to deliberate and reach separate verdicts on each count and not to consider the attorneys' opening statements and summations as evidence. Tr. at 1230, 1246-50. Considered in full context, the prosecutor's arguments linking petitioner to both murders did not deprive him of a fair trial.
B. Prosecutor's Reference To Other Witness Testimony
Petitioner separately challenges that part of the prosecutor's summation referring to Ralph Perez, a person interviewed by the police after the murder. The Assistant District Attorney argued:
At the station house they talk to Ralph Perez and they talk to him, and he says, "Listen", from the very beginning, "Listen, I can't talk to you. They will kill me." And they said, "Who's going to kill you?" "No, they're going to kill me. I can't say."
Tr. at 1116.
Under the same standard announced in Darden, supra, the Court can find no actionable misconduct. The prosecutor merely restated prior trial testimony that, ironically, was first elicited by petitioner's attorney on cross-examination of witness Detective Jerry Magliolo. In that context, and in light of the trial judge's instruction that summations are not evidence, this reference to prior witness testimony did not so infect the trial with unfairness as to make *158 the resulting conviction a denial of due process. Id. at 181.
IV. INEFFECTIVE ASSISTANCE OF COUNSEL
In his motion for habeas relief, petitioner also includes the now near-obligatory charge of ineffective assistance of counsel. To establish ineffective assistance of counsel, petitioner must satisfy the two-part test of Strickland v. Washington, 466 U.S. 668, 104 S.Ct. 2052, 80 L.Ed.2d 674 (1984). Petitioner must first show that his counsel's performance was deficient, and, second, that the deficient performance prejudiced the defense. Id. at 687, 104 S.Ct. at 2064.
Petitioner claims that he was denied his right to effective counsel because his attorney did not call three prospective witnesses at trial.
First, petitioner claims that his trial attorney should have called Luz Virella as a witness on his behalf. At a post-trial hearing on a motion to vacate the judgment, Virella testified that petitioner dropped her off at her apartment on the day of the Toro murder at approximately twelve noon. Because Toro was murdered around twelve noon, petitioner claims it was ineffective of his counsel not to call Virella as an alibi witness. According to Virella's own testimony, her apartment was one and a half blocks away from the scene of the shooting. Tr. at 23. Virella also had a romantic involvement with petitioner, which undercuts her credibility. Id. Thus, I cannot conclude that petitioner has overcome the strong presumption that counsel's conduct fell within the wide range of acceptable professional assistance.
Second, petitioner claims that his trial attorney should also have called Johnny Soto as a witness. Petitioner alleges that Soto would have given testimony exculpatory to petitioner, while tending to inculpate another witness who testified at trial for the prosecution. Petitioner's trial attorney, called as a witness at the post-trial hearing, recalled that he had interviewed Soto prior to trial. The trial attorney remembered that Soto's statement contradicted the statements of Elizabeth Estrada, another defense witness at trial. This decision by petitioner's trial attorney is certainly reasonable and falls within the wide range of acceptable professional assistance.
Finally, petitioner claims that Ismael Rodriguez should have been called as a trial witness for the defense. At the time of the trial, however, Rodriguez was in Puerto Rico. At the same post-trial hearing, Rodriguez admitted that he did not pay attention to the car involved in the Toro killing. Any help from his testimony would therefore have been minimal at best, and, I need only observe, carried the added risk of a witness burdened with a lengthy criminal record.
Complaints of uncalled witnesses are not favored on federal habeas review. United States v. Nersesian, 824 F.2d 1294, 1321 (2d Cir.1987); Marler v. Blackburn, 777 F.2d 1007, 1010 (5th Cir.1985); Murray v. Maggio, 736 F.2d 279, 282 (5th Cir.1984). As to all three potential witnesses, petitioner has failed to overcome the strong presumption that his counsel's actions were reasonable.
V. EVIDENCE IMPROPERLY ADMITTED AT TRIAL
Petitioner claims that twice during trial, evidence was improperly admitted by the trial judge. First, petitioner claims that a portion of testimony by Lisa Rizzo, a state witness, was inadmissible hearsay. Second, petitioner argues that a portion of Detective Jerry Magliolo's testimony was so prejudicial that the trial court should not have allowed it into evidence.
To be successful on these claims, petitioner bears a heavy burden; mere evidentiary errors generally do not rise to constitutional magnitude. Jenkins v. Bara, 663 F.Supp. 891, 899 (E.D.N.Y.1987); see Underwood v. Kelly, 692 F.Supp. 146, 150 (E.D.N.Y.1988), aff'd without opinion, 875 F.2d 857 (2d Cir.1989), cert. denied, ___ U.S. ___, 110 S.Ct. 117, 107 L.Ed.2d 79 (1989). If evidence is erroneously admitted, the issue becomes "whether the erroneously admitted evidence, viewed objectively in the light of the entire record before the jury, was sufficiently material to *159 provide the basis for a conviction or to remove a reasonable doubt that would have existed on the record without it." Collins v. Scully, 755 F.2d 16, 19 (2d Cir.1985); see Carroll v. Hoke, 695 F.Supp. 1435, 1440 (E.D.N.Y.), aff'd, 880 F.2d 1318 (2d Cir. 1989); In short, the evidence must have been crucial, critical or highly significant. Collins, 755 F.2d at 19 (citing Nettles v. Wainwright, 677 F.2d 410, 414-15 (5th Cir. 1982)).
Even assuming the disputed testimony was erroneously admitted into evidence, the Court cannot conclude that the error was sufficiently substantial to warrant a writ of habeas corpus.
A. Improper Admission of Hearsay
Concerning the disputed hearsay testimony of Lisa Rizzo, she testified that another person, Jeanette Muniz, told her that the man who brushed past Rizzo on a staircase at 136 South 2nd Street on November 10 just before Rizzo discovered the body of Martinez was Toro, the man who was shot the following day.
Petitioner argues that this inadmissible testimony was damaging and prejudicial because it links the Martinez and Toro murders together. None of the three defense attorneys made a contemporaneous objection. Absent any objection, the trial court had no opportunity to rule on admissibility. Applying the two-fold Collins standard, the Court does not find that the alleged hearsay was so critical as to amount to a constitutional deprivation. The court does not find that testimony to provide a material basis for conviction or to remove an otherwise existing reasonable doubt from the record. Id. at 19.
Petitioner separately argues that admitting Rizzo's hearsay testimony violated the Confrontation Clause of the sixth amendment. The Confrontation Clause affords two essential protections to the criminal defendant, namely, the right to face physically those who testify against him and the right to conduct cross-examination. Pennsylvania v. Ritchie, 480 U.S. 39, 51, 107 S.Ct. 989, 998, 94 L.Ed.2d 40 (1987); see Pointer v. Texas, 380 U.S. 400, 404, 85 S.Ct. 1065, 1068, 13 L.Ed.2d 923 (1965). Muniz, the alleged declarant, was also a witness at trial; and she denied making the statements to Rizzo. Because petitioner had the opportunity to confront Muniz and question her about the alleged hearsay statement, no violation of the Confrontation Clause arose. U.S. v. Owens, 484 U.S. 554, 108 S.Ct. 838, 98 L.Ed.2d 951 (1988) (no violation of the Confrontation Clause if hearsay declarant was present at trial, takes an oath, is subject to cross-examination, and the jury has an opportunity to observe his demeanor).
B. Prejudicial Testimony Erroneously Admitted
Petitioner claims that he was wrongly prejudiced by testimony elicited from Detective Jerry Magliolo. Apparently, Detective Magliolo interrogated a man named Ralph Perez concerning the Toro murder. Magliolo testified that, at the beginning of the interrogation, Perez did not say anything except that "he was frightened to death, that [the killers] were bad people and he did not want to get involved." Tr. at 573. In applying Collins, this Court, again, cannot label the admitted evidence sufficiently substantial to have denied petitioner a fair trial. It was petitioner's own attorney on cross-examination of Magliolo who first elicited the testimony in question. Petitioner cannot now claim that he was prejudiced by the prosecutor's re-direct on the same subject.
On review of the record, such testimony, "viewed objectively in light of the entire record before the jury," did not provide a material basis for conviction. Moreover, Magliolo's testimony did not remove a reasonable doubt that would have otherwise existed on the record. Collins, 755 F.2d at 19.
CONCLUSION
Accordingly, the petition for a writ of habeas corpus must be, and hereby is, denied.
SO ORDERED.
NOTES
[1] New York Criminal Procedure provides that two or more offenses are properly joined when they are:
of such nature that either proof of the first offense would be material and admissible as evidence in chief upon a trial of the second, or proof of the second would be material and admissible as evidence in chief upon a trial of the first.
N.Y.Crim.Proc. Law § 200.20(2)(b) (McKinney 1982).
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01-03-2023
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10-30-2013
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https://www.courtlistener.com/api/rest/v3/opinions/2682226/
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UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
RALPH J. BRADLEY,
Plaintiff,
v. Civil Action No. 14-110 (JDB)
MICHAEL DEWINE, et al.,
Defendants.
MEMORANDUM OPINION
Plaintiff Ralph J. Bradley, proceeding pro se, brings this action against Ohio Attorney
General Michael DeWine; the Honorable Kristin G. Farmer and the Honorable Charles E.
Brown, current and retired judges of the Court of Common Pleas of Stark County, Ohio;
Timothy A. Swanson and George T. Maier, current and former sheriffs of Stark County; and
John D. Ferrero, a Stark County prosecutor. Although the details of Bradley’s claims are
somewhat unclear, he seeks relief in connection with an allegedly fraudulent foreclosure decree
issued by the Stark County Court of Common Pleas. Pl.’s Compl. [ECF No. 1] (“Compl.”) at 2.
DeWine moved to dismiss Bradley’s claims against him under Federal Rules of Civil
Procedure 12(b)(1) and 12(b)(6) for lack of subject-matter jurisdiction and for failure to state a
claim. Mot. to Dismiss of Def. Ohio Attorney Gen. Michael DeWine [ECF No. 6] (“DeWine’s
Mot.”) at 2. The remaining defendants (the “county defendants”) collectively moved to dismiss
the claims against them under Rules 12(b)(1), 12(b)(2), and 12(b)(6), challenging this Court’s
subject-matter jurisdiction over the action, its personal jurisdiction over them, and the sufficiency
of Bradley’s complaint. Def. the Hon. Judge Charles E. Brown, the Hon. Judge Kristin G.
Farmer, George T. Maier, Timothy A. Swanson, and John D. Ferrero’s Mot. to Dismiss [ECF
No. 5] (“Defs.’ Mot.”) at 1-2. For the reasons that follow, the Court will grant both motions to
dismiss Bradley’s complaint under Rules 12(b)(1) and 12(b)(2).
BACKGROUND
At some point before 2014, Ralph J. Bradley, a self-described “sovereign inhabitant
in . . . the County of Washington, DC” was subject to a foreclosure proceeding in the Court of
Common Pleas of Stark County, Ohio. See Compl. at 1. In that proceeding, Bradley alleges, the
defendants in this action “KNOWINGLY and INTENTIONALLY engaged in a Conspiracy to
commit . . . a PONZI SCHEME, INSIDER TRADING, INSURANCE FRAUD, REAL ESTATE
and MORTGAGE FRAUD, WIRE FRAUD . . . [etc.]” Id. at 3. As a result, Bradley claims, a
foreclosure decree was “fraudulently” issued with respect to his property. Id. at 2.
Bradley appears to allege that DeWine, in his capacity as Ohio Attorney General, was the
architect of this conspiracy. See id. at 10-11. He demands that DeWine be made to “answer to
the relationship between the State of Ohio and each banking and lending institution” involved.
Id. at 10. He further demands that Judge Brown, who issued the allegedly fraudulent foreclosure
decree, and Judge Farmer, who affirmed the decree on appeal, “be held in CONTEMPT and
PERJURY [for] aiding and assisting JPMorgan in conducting a Ponzi Scheme.” Id. at 12.
Because it is allegedly “the policy of the Stark County Sheriff’s Department that 99% of all
public[ly] auction[ed] properties [be] retained by the banking or lending institution [that] . . .
‘finance[d]’ the mortgage,” Bradley also accuses Sheriffs Swanson and Maier of participating in
the scheme. Id. at 12. Finally, Bradley alleges that Ferrero, a county prosecutor, fraudulently
“approved” what appears to be the judgment lien entered on Bradley’s property following the
foreclosure. Id. at 14.
2
Bradley’s requested remedies are many, and the legal theories underlying them are
difficult to discern.1 He requests “a full scale investigation and independent State Audit” of the
financial crimes alleged in his complaint. Compl. at 1. He contends that “[a]ny county or state
positions of employment [held by defendants], to include retirement benefits[,] must
immediately be SUSPENDED.” Id. at 4. He seeks a writ of quo warranto to “inquire into the
authority by which [defendants hold] public office.” Black’s Law Dictionary 312-13 (9th ed.
2009); see Compl. at 4 (citing D.C. Code § 16-3501). He demands money damages in the
amount of $104,799,059.54 against each defendant. Compl. at 8. He seems to request injunctive
relief voiding the sheriff’s deed and judgment lien on his property. Id. at 13-14. And he seeks an
injunction against “acts of domestic Violence that would forcibly remove ‘BRADLEY’ from the
premises in question,” by which he presumably means eviction. Id. at 19.
DeWine moved to dismiss Bradley’s claims against him for lack of subject-matter
jurisdiction and for failure to state a claim. DeWine’s Mot. at 2. DeWine raised three
independent grounds for his subject-matter jurisdiction defense: sovereign immunity, the
Rooker-Feldman doctrine, and insubstantiality.2 Id. The county defendants collectively moved to
dismiss for lack of subject-matter jurisdiction under the Rooker-Feldman doctrine, lack of
personal jurisdiction, and failure to state a claim. They also raised qualified and judicial
immunities as affirmative defenses. Because the Court holds that it does not have jurisdiction
1
A pro se pleading “is to be liberally construed.” Erickson v. Pardus, 551 U.S. 89, 94 (2007) (citations
omitted). This principle is not without limits, however. For example, “[p]ro se plaintiffs are not freed from the
requirement to plead an adequate jurisdictional basis for their claims.” Gomez v. Aragon, 705 F. Supp. 2d 21, 23
(D.D.C. 2010) (citations omitted).
2
The insubstantiality doctrine deprives federal courts of jurisdiction under 28 U.S.C. § 1331 where a
plaintiff’s only claims presenting federal questions are “wholly insubstantial and frivolous.” Bell v. Hood, 327 U.S.
678, 682-83 (1946). It is unclear from Bradley’s complaint whether he intends to invoke this Court’s jurisdiction
under section 1331, however, because his jurisdictional theory is not entirely coherent. See, e.g., Compl. at 2
(“Plaintiff will not answer to Diversity jurisdiction, as this Court lacks subject matter and territorial jurisdiction to
supersede Federal Question jurisdiction.”). Because the Court will dismiss Bradley’s claims against DeWine for lack
of subject-matter jurisdiction on other grounds, it is unnecessary to consider DeWine’s insubstantiality defense.
3
over either the subject matter of this action3 or over those defendants who raised a personal-
jurisdiction defense, the Court will grant DeWine’s motion to dismiss under Rule 12(b)(1) and
the remaining defendants’ motions to dismiss under Rules 12(b)(1) and 12(b)(2).4
LEGAL STANDARDS
Federal courts have leeway to “choose among threshold grounds for denying audience to
a case on the merits.” Sinochem Int’l Co. v. Malay. Int’l Shipping Corp., 549 U.S. 422, 431
(2007) (quoting Ruhrgas AG v. Marathon Oil, 526 U.S. 574, 585 (1999)). “[C]ertain nonmerits,
nonjurisdictional issues may be addressed preliminarily, because ‘[j]urisdiction is vital only if
the court proposes to issue a judgment on the merits.’” Pub. Citizen v. U.S. Dist. Court for the
Dist. of Columbia, 486 F.3d 1342, 1348 (D.C. Cir. 2007) (quoting Sinochem, 549 U.S. at 431)
(alterations in original). Where, as here, a party challenges both subject-matter and personal
jurisdiction, the Court must address both before proceeding to the merits. Sinochem, 549 U.S. at
430-31 (citing Steel Co. v. Citizens for Better Env’t, 523 U.S. 83 (1998)). In most cases,
“expedition and sensitivity to state courts’ coequal stature” will lead courts to analyze subject-
matter jurisdiction first. Ruhrgas, 526 U.S. at 587-88.
a. Subject-Matter Jurisdiction
“Federal courts are courts of limited jurisdiction. They possess only that power
authorized by Constitution and statute, which is not to be expanded by judicial decree.”
Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375, 377 (1994) (citations omitted). It is
“presumed that a cause lies outside this limited jurisdiction, and the burden of establishing the
3
Under the heading “Jurisdiction and Venue,” Bradley argues that this Court has jurisdiction over his
claims pursuant to D.C. Code §§ 11-501(1) and (4). See Compl. at 6. These provisions, which relate to the
reorganization of the D.C. court system in 1970, are no longer in force, and so provide no basis for jurisdiction. See
D.C. Code § 11-501.
4
Because this Court lacks subject-matter jurisdiction, however, it will decide neither whether Bradley
states a claim for relief nor whether the county defendants enjoy qualified or judicial immunity.
4
contrary rests upon the party asserting jurisdiction,” which, in this instance, is Bradley. Id.
(citations omitted). And “[b]ecause subject matter jurisdiction focuses on the court’s power to
hear the claim,” a court “must give the plaintiff’s factual allegations closer scrutiny when
resolving a Rule 12(b)(1) motion than would be required for a Rule 12(b)(6) motion for failure to
state a claim.” Bailey v. WMATA, 696 F. Supp. 2d 68, 71 (D.D.C. 2010). Nevertheless, the
court must still “accept all of the factual allegations in the complaint as true.” Jerome Stevens
Pharms. v. FDA, 402 F.3d 1249, 1253 (D.C. Cir. 2005). If “a federal court concludes that it lacks
subject-matter jurisdiction, the court must dismiss the complaint in its entirety.” Arbaugh v.
Y&H Corp., 546 U.S. 500, 514 (2006); accord Fed. R. Civ. P. 12(h)(3).
b. Personal Jurisdiction
A plaintiff also bears the burden of establishing the Court’s personal jurisdiction over a
defendant who moves to dismiss the claims against him under Rule 12(b)(2). See Mwani v. bin
Laden, 417 F.3d 1, 7 (D.C. Cir. 2005). Where, as here, there has been no jurisdictional discovery,
a plaintiff need only make a prima facie showing of the pertinent jurisdictional facts to meet that
burden. See id.; see also Brunson v. Kalil & Co., Inc., 404 F. Supp. 2d 221, 226 (D.D.C. 2005).
“Moreover, to establish a prima facie case, plaintiffs are not limited to evidence that meets the
standards of admissibility required by the district court. Rather, they may rest their argument on
their pleadings, bolstered by such affidavits and other written materials as they can otherwise
obtain.” Mwani, 417 F.3d at 7. Nevertheless, a plaintiff must allege “specific facts upon which
personal jurisdiction may be based,” Blumenthal v. Drudge, 992 F. Supp. 44, 53 (D.D.C. 1998),
and cannot rely on conclusory allegations, see Elemary v. Phillipp Holzmann AG, 533 F. Supp.
2d 116, 121 (D.D.C. 2008).
5
DISCUSSION
Defendants have moved to dismiss all of Bradley’s claims against them. DeWine has
filed a motion to dismiss Bradley’s claims against him, while the county defendants together
have filed a separate motion to dismiss the claims against them. DeWine argues that because he
is an official of the state of Ohio, the Eleventh Amendment deprives this Court of subject-matter
jurisdiction over claims against him for money damages. DeWine’s Mot. at 2-3. In addition, the
county defendants argue that because they are residents of Ohio who lack sufficient contacts with
the District of Columbia, this Court does not have personal jurisdiction over them. Defs.’ Mot. at
3. All defendants argue that because Bradley seeks review of a state-court judgment, this Court
lacks subject-matter jurisdiction over the entire action under the Rooker-Feldman doctrine.
DeWine’s Mot. at 3; Defs.’ Mot. at 4-5. The Court will address each argument in turn.
I. Sovereign Immunity Under The Eleventh Amendment
DeWine first argues that he is immune from Bradley’s claims for money damages under
the Eleventh Amendment. The Eleventh Amendment deprives federal courts of subject-matter
jurisdiction over an action for money damages brought against a state. Edelman v. Jordan, 415
U.S. 651, 662-63 (1974). A suit against a state official in his official capacity is treated as a suit
against the state. See Will v. Michigan Dep’t of State Police, 491 U.S. 58, 71 (1989). If a
complaint does not specify whether an official is being sued in his individual or official capacity,
“‘[t]he course of proceedings’ . . . typically will indicate the nature of the liability sought to be
imposed.” Kentucky v. Graham, 473 U.S. 159, 167 n.14 (1985) (quoting Brandon v. Holt, 469
U.S. 464, 469 (1985)). For example, a court might infer that a plaintiff sues a government
official in the official’s individual capacity if the plaintiff seeks remedies that are unavailable
against a government entity, or if the plaintiff names the government entity separately as a
6
defendant. See Atchinson v. District of Columbia, 73 F.3d 418, 425 (D.C. Cir. 1996). Where no
such clues are present, some courts “presume[] that a state official is sued in her official
capacity.” Hill v. Michigan, 62 F. App’x 114, 115 (6th Cir. 2003); see also Nix v. Norman, 879
F.2d 429, 431 (8th Cir. 1989) (treating a suit as an official-capacity suit where the plaintiff
“failed to indicate . . . that she sought damages directly from [the defendant official]”).
Bradley seeks $104,799,059.54 in money damages against DeWine, but his complaint
does not specify whether he seeks this award from the state of Ohio or from DeWine personally.
Bradley does argue that Ohio has “waived its sovereign immunity under the Eleventh
Amendment,” Compl. at 2, which suggests that he intends to recover the damages from Ohio. He
refers to DeWine as the “Ohio Attorney General” several times in his complaint, which also
suggests an official-capacity suit. See, e.g., Compl. at 9. And Bradley does not name the state of
Ohio separately as a defendant or request remedies that are unavailable against Ohio—in fact, he
asks the Court to issue injunctive orders that could likely only be carried out by the state. See,
e.g., Compl. at 1 (requesting an “independent State Audit”); id. at 4 (requesting that defendants’
state and county employment be terminated). For these reasons, and because the complaint
contains no indications to the contrary, the Court will treat Bradley’s money-damages claim as
one against DeWine in his official capacity. It is therefore a claim against Ohio, and so the
Eleventh Amendment applies.
Although a state can waive its sovereign immunity under the Eleventh Amendment,
waiver is the exception rather than the rule. See Edelman, 415 U.S. at 671-74 (“The mere fact
that a State participates in a [federal] program . . . is not sufficient to establish consent on the part
of the State to be sued in the federal courts.”); Seminole Tribe of Fla. v. Florida, 517 U.S. 44, 72
(1996) (“[T]he Eleventh Amendment prevents congressional authorization of suits by private
7
parties against unconsenting States.”) (emphasis added). Here, Bradley provides no authority to
support his contention that Ohio has waived its sovereign immunity for suits in federal court.5
See Compl. at 2. Perhaps this is because none exists. See Turker v. Ohio Dept. of Rehab. and
Corr., 157 F.3d 453, 457 (6th Cir. 1998) (“[A] federal court cannot entertain a lawsuit against
state officials . . . unless the state has waived its immunity under the Eleventh Amendment . . . .
Ohio has not waived that immunity.”); Lee Testing & Eng’g v. Ohio Dept. of Transp., 855 F.
Supp. 2d 722, 726 (S.D. Ohio 2012) (“Ohio has not waived its Eleventh Amendment immunity
from suits for money damages in federal court.”). In any event, Bradley bears the burden of
showing that Ohio has waived its sovereign immunity, see Kokkonen, 511 U.S. at 377, and he
has failed to carry that burden. Thus, because Bradley has failed to show that Ohio has waived its
sovereign immunity with respect to his money-damages claim, the Eleventh Amendment
deprives this Court of subject-matter jurisdiction over that claim. DeWine’s Rule 12(b)(1)
motion to dismiss the money-damages claim will therefore be granted.
II. Personal Jurisdiction
The county defendants have also moved to dismiss Bradley’s claims against them for
lack of personal jurisdiction.6 See Defs.’ Mot. at 3-4. Under Federal Rule of Civil Procedure
4(k), a federal court has personal jurisdiction over a defendant “who is subject to the jurisdiction
of a court of general jurisdiction in the state where the district court is located.” Fed. R. Civ. P.
4(k)(1)(A). Thus, because none of Rule 4(k)’s other provisions apply here, see Fed. R. Civ. P.
5
Ohio Revised Code § 2743.02 generally waives Ohio’s sovereign immunity for suits in Ohio state court.
See Ohio Rev. Code Ann. § 2743.02 (West).
6
A defendant waives any objection to a court’s exercise of personal jurisdiction over him if he fails to raise
it in a Rule 12 motion. See Fed. R. Civ. P. 12(h)(1)(A). Thus, when DeWine moved to dismiss Bradley’s claims
against him under Rules 12(b)(1) and 12(b)(6) without raising a personal-jurisdiction defense, he waived any
objection to this Court’s exercise of personal jurisdiction over him.
8
4(k), this Court has personal jurisdiction over the county defendants only if a District of
Columbia court could exercise jurisdiction over them.
Two requirements must be met for a District of Columbia court to exercise personal
jurisdiction over a defendant. First, the defendant must qualify for either general or specific
jurisdiction under the relevant District of Columbia statutes. See D.C. Code §§ 13-422 to -423.
Second, the exercise of jurisdiction over the defendant must comply with the Due Process Clause
of the Fourteenth Amendment. See Int’l Shoe v. Washington, 326 U.S. 310, 316 (1945).
General jurisdiction allows a court to adjudicate any claims brought against a defendant.
See Steinberg v. Int’l Criminal Police Org., 672 F.2d 927, 929 (D.C. Cir. 1981). The D.C. Code
grants a District of Columbia court general jurisdiction over a person who is “domiciled
in, . . . or maintaining his . . . principal place of business in, the District of Columbia.” § 13-422.
But the county defendants are all residents of Ohio, Defs.’ Mot at 3, and Bradley does not allege
that they conduct any business in the District of Columbia. They are thus not subject to general
jurisdiction under section 13-422.
Specific jurisdiction arises where a defendant—resident or not—engages in certain kinds
of conduct enumerated in the District’s long-arm statute. See, e.g., § 13-423(a) (listing various
types of conduct). A court with specific jurisdiction may only adjudicate those claims that arise
out of the conduct that triggered its jurisdiction. § 13-423(b). Bradley does not specifically allege
that the county defendants engaged in any of the conduct listed in section 13-423(a). He comes
closest to alleging misconduct within section 13-423(a)(4), which confers jurisdiction over a
defendant who “caus[es] tortious injury in the District of Columbia by an act or omission outside
the District of Columbia,” but only “if he regularly does or solicits business, engages in any other
persistent course of conduct, or derives substantial revenue from goods used or consumed, or
9
services rendered, in the District of Columbia.” § 13-423(a)(4). Bradley alleges that a tortious act
outside the District of Columbia—a fraudulent foreclosure proceeding in Ohio—caused him
injury in the District, where he lives. See Compl. at 1. He does not allege, however, that the
county defendants have any business ties to the District of Columbia or that they “engage in any
other persistent course of conduct” here. § 13-423(a)(4). Thus, because Bradley fails to allege
conduct satisfying section 13-423(a)(4) or any other provision of section 13-423(a), this Court
lacks specific jurisdiction over the county defendants.
The Due Process Clause of the Fourteenth Amendment also constrains this Court in its
exercise of personal jurisdiction. Steinberg, 672 F.2d at 930. Even if Bradley had sufficiently
alleged conduct satisfying D.C.’s long-arm statute, he would still have to show sufficient
“minimum contacts” between “the defendant[s], the forum, and the litigation” to satisfy the Due
Process Clause. Schaffer v. Heitner, 433 U.S. 186, 203-4 (1977). Typically, such “minimum
contacts” arise only where a defendant “purposefully avails itself of the privilege of conducting
activities within the forum State, thus invoking the benefits and protections of its laws.” Hanson
v. Denckla, 357 U.S. 235, 253-54 (1958). “[U]nilateral activity” on the part of a plaintiff is
insufficient. Id. This ensures that “potential defendants [can] structure their primary conduct with
some minimum assurance as to where that conduct will and will not render them liable to suit.”
World-Wide Volkswagen v. Woodson, 444 U.S. 286, 297 (1980).
Because Bradley does not allege that the county defendants engaged in any conduct
whatsoever in the District of Columbia, his allegations do not suggest that these defendants have
purposefully availed themselves of the protections of D.C. law. See Hanson, 357 U.S. at 253-54.
Indeed, it would undoubtedly come as a surprise to them if participating in a foreclosure
proceeding in Ohio exposed them to suit in a D.C. court. Bradley has thus failed to allege facts
10
that would allow this Court to exercise personal jurisdiction over the county defendants
consistent with both District of Columbia law and the Due Process Clause of the Fourteenth
Amendment. As a result, this Court lacks personal jurisdiction over these defendants, and the
Court will grant their Rule 12(b)(2) motion to dismiss Bradley’s claims against them.
III. The Rooker-Feldman Doctrine
All defendants have moved to dismiss Bradley’s entire complaint for lack of subject-
matter jurisdiction based on the Rooker-Feldman doctrine. Under 28 U.S.C. § 1257, the U.S.
Supreme Court has jurisdiction to review “[f]inal judgments or decrees rendered by the highest
court of a State.” 28 U.S.C. § 1257. The Rooker-Feldman doctrine, a judge-made corollary of
section 1257, makes this jurisdiction exclusive. Lance v. Dennis, 546 U.S. 459, 463 (2006)
(quoting Dist. of Columbia Court of Appeals v. Feldman, 460 U.S. 462, 482 (1983)). Thus,
Rooker-Feldman “prevents the lower federal courts from exercising jurisdiction over cases
brought by ‘state-court losers’ challenging ‘state-court judgments rendered before the district
court proceedings commenced.’” Id. at 460 (citations omitted). But Rooker-Feldman is “not
simply [claim] preclusion by another name.” Id. at 466. Because an “expansive Rooker-Feldman
rule would tend to supplant Congress’ mandate . . . that federal courts look principally to state
law in deciding what effect to give state-court judgments,” courts are careful to apply the rule
“only in limited circumstances.” Id.
Rooker-Feldman bars a federal court from exercising jurisdiction over a claim if three
criteria are met. See id. at 462. First, “[t]he party against whom the doctrine is invoked must
have actually been a party to the prior state-court judgment.” Id. Here, the prior state-court
judgment at issue is the foreclosure decree issued against Bradley in Stark County Court: that is
the judgment from which Bradley seeks relief. See, e.g., Defs.’ Mot. at 5. Bradley himself asserts
11
that he was a party to that action, see Compl. at 1, and his assertion is not contested. Rooker-
Feldman’s first requirement is therefore satisfied.
Second, “the claim raised in the federal suit must have been actually raised or
inextricably intertwined with the state-court judgment.” Lance, 546 U.S. at 462. Here, it is
unclear whether Bradley actually raised his conspiracy claims during the foreclosure action. But
a plaintiff’s federal-court claims are “inextricably intertwined” with a prior state-court judgment
unless their “core” is “independent” of that judgment. See Stanton v. Dist. of Columbia Court of
Appeals, 127 F.3d 72, 76 (D.C. Cir. 1997); see also Kenmen Eng’g v. City of Union, 314 F.3d
468, 476 (10th Cir. 2002) (“[W]e [ask] whether the state-court judgment caused, actually and
proximately, the injury for which the federal-court plaintiff seeks redress.”). For example, a
claim is not “inextricably intertwined” with a prior state-court judgment if it is a facial challenge
to the constitutionality of the rule applied by the state court in the prior proceeding. See Feldman,
460 U.S. at 486-87 (holding that a lower federal court could hear a challenge to the
constitutionality of a D.C. bar admission rule, but not a claim that the D.C. Court of Appeals had
abused its discretion in applying the rule); Stanton, 127 F.3d at 76 (“Applying Rooker-Feldman
requires us to draw a line between permissible general challenges to rules and impermissible
attempts to review judgments.”).
Liberally construed, Bradley’s complaint alleges that defendants conspired to abuse the
judicial process in order to unlawfully deprive him of his property. See Compl. at 2. Far from
being “independent” of the Stark Count judgment, the “core” of Bradley’s claims is that the
state-court judgment was fraudulent and therefore invalid.7 Bradley challenges no statute or court
7
In another context, Rooker-Feldman might not bar a party from challenging a state-court judgment as
fraudulent in federal court. Some courts have held that Rooker-Feldman does not apply to “a collateral attack on a
state court judgment which is alleged to have been produced through fraud, deception, accident, or mistake.” In re
Sun Valley Foods Co., 801 F.2d 186 (6th Cir. 1986) (internal quotation marks omitted); but see Hunter v. U.S. Bank
12
rule as unconstitutional. In other words, he seeks review of the state-court judgment. His claims
are therefore “inextricably intertwined” with the state-court judgment, and Rooker-Feldman’s
second requirement is satisfied.
Rooker-Feldman’s third and final requirement is that “the federal claim must not be
parallel to the state-court claim.” Lance, 546 U.S. at 462. A federal-court claim is parallel to a
state-court claim if it is filed after the state-court claim, but before the state court enters
judgment. See Exxon Mobil v. Saudi Basic Indus., 544 U.S. 280, 289-91 (2005) (holding that
Rooker-Feldman did not prevent a state-court defendant from suing a state-court plaintiff in
federal court while the state-court action was still pending). Again, this requirement reflects the
delicate balance between Rooker-Feldman and claim preclusion: “[d]isposition of the federal
action, once the state-court adjudication is complete, [is] governed by preclusion law.” Id. at 293.
Thus, Rooker-Feldman deprives a federal court of jurisdiction over a claim only if it was brought
in federal court after judgment was entered in the state-court action with which the claim is
“inextricably intertwined.” Id.
Here, Bradley “seeks to challenge the alleged free and clear title awarded to [Bradley’s
bank] in Civil foreclosure Case No. 2012-CV-01795.”8 Compl. at 1. Although the date of the
foreclosure decree issued in that action is not clear from the pleadings,9 the decree logically must
Nat. Ass’n, 698 F. Supp. 2d 94, 100 (D.D.C. 2010) (discussing but not adopting this exception); Velazquez v. South
Fla. Fed. Credit Union, 546 Fed. App’x 854, 859 (11th Cir. 2013) (same). A collateral attack allows a party to avoid
the enforcement of a prior judgment in a subsequent proceeding. See generally Restatement (Second) of Judgments
§ 70 (1982) (“[A] judgment in a contested action may be avoided if the judgment (a) [r]esulted from corruption of . .
. the court . . . or (b) [w]as based on a claim that the party obtaining the judgment knew to be fraudulent.”). Here,
however, defendants do not seek to enforce the foreclosure judgment against Bradley, nor do they assert it as res
judicata to bar his claims. Thus, the Court need not consider endorsing the “collateral attack exception” to Rooker-
Feldman, because it would not apply in this case.
8
Case number 2012-CV-01795 is not to be confused with case number 2014-CV-00162, another action
that Bradley has brought in Stark County Court, which apparently duplicates his claims in this action. See Defs.’
Mot. at 2 n.1. Although case number 2014-CV-00162 is apparently still pending, defendants here do not suggest that
it triggers Rooker-Feldman.
9
Bradley also refers to an “Attached January 23, 2014 Judgment Entry,” Compl. at 2, but the attached
order is from a separate action in Stark County Court (No. 2014-CV-00162).
13
have been issued before the complaint was filed, because Bradley refers to it extensively in his
complaint. And a foreclosure decree is “a final judgment of [an Ohio] state court.” In re Hoff,
187 B.R. 190, 193 (Bankr. S.D. Ohio 1995). Thus, Bradley filed his complaint in this Court after
a final judgment was issued in the state-court proceeding that he now seeks to challenge. His
federal-court claims are thus not parallel to the state-court proceeding, and Rooker-Feldman’s
third and final requirement is met. As a result, this Court lacks subject-matter jurisdiction over
all of Bradley’s claims against each defendant, and both Rule 12(b)(1) motions must be granted.
CONCLUSION
For the foregoing reasons, DeWine’s Rule 12(b)(1) motion to dismiss will be granted.
The county defendants’ Rule 12(b)(1) and 12(b)(2) motions to dismiss will also be granted. A
separate Order accompanies this Memorandum Opinion.
/s/
JOHN D. BATES
United States District Judge
Dated: July 8, 2014
14
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OFFICE OF
APP ELLATE COURTS
JUL 15 2014
STATE OF MINNESOTA
IN SUPREME COURT
FILED
Al3-1820
In the Matter of the Welfare of the Child of:
R.D.L. and J.W., Parents.
ORDER
Based upon all the files, records, and proceedings herein,
IT IS HEREBY ORDERED that the decision of the court of appeals filed March 31,
2014, affirming the termination of appellant R.D.L.'s parental rights, is affirmed. This
order is issued with opinion to follow.
Dated: July 15, 2014
BY TIIE COURT:
Isl
Lorie S. Gildea
Chief Justice
PAGE, J., dissents.
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696 F. Supp. 434 (1988)
JOHN DEERE INSURANCE COMPANY, Plaintiff,
v.
SHAMROCK INDUSTRIES, INC.; Gregory Erlandson; Jack T. Mowry; Metal Craft Machine & Engineering, Inc.; NEOS, Inc.; and Cardinal Packaging, Inc., Defendants.
Civ. No. 4-88-176.
United States District Court, D. Minnesota, Fourth Division.
October 13, 1988.
*435 Richard P. Mahoney and Mahoney, Dougherty & Mahoney, Minneapolis, Minn., for plaintiff.
Malcolm L. Moore, Philip G. Alden and Moore & Hansen, Minneapolis, Minn., for defendant Shamrock Industries, Inc.
James W. Reuter, Jon G. Trangsrud and Barna, Guzy, Merrill, Hynes & Giancola, Ltd., Minneapolis, Minn., for defendants Erlandson, Mowry, Metal Craft, and NEOS, Inc.
ORDER
DOTY, District Judge.
This diversity case comes before the Court on defendants Metal Craft Machine & Engineering, Inc.'s and Jack T. Mowry's ("Metal Craft and Mowry") motion for partial summary judgment in a declaratory judgment action brought against defendants by plaintiff John Deere Insurance Company ("Deere"). Deere responded with its own motion for summary judgment including as defendants subject to the motion (in addition to defendants Metal Craft and Mowry), NEOS, Inc. ("NEOS"), Gregory Erlandson ("Erlandson"), Shamrock Industries, Inc. ("Shamrock") and Cardinal Packaging, Inc. ("Cardinal") who are also defendants in the declaratory judgment action. During argument on the motion, NEOS and Erlandson joined Metal Craft and Mowry's motion for partial summary judgment. The Court grants the motion of Metal Craft, Mowry, NEOS and Erlandson except as indicated below and denies that part of the motion of Deere which is against defendants Metal Craft, Mowry, NEOS and Erlandson. The Court grants that part of the motion of Deere which is against defendant Cardinal. The Court grants and denies these motions for the reasons stated below.
FACTS
The parties agree on the following facts. On June 25, 1987, Shamrock commenced an action against Erlandson, Mowry, Metal Craft, NEOS and Cardinal alleging patent infringement, misappropriation of trade secrets, unfair competition and breach of contract (the "underlying action"). These defendants tendered the defense of the underlying action to Deere by letter dated November 25, 1987, stating that a number of insurance policies purchased by Metal Craft obligated Deere to defend the action. Deere refused the tender on December 22, 1987. These defendants requested Deere to reconsider by letter dated January 19, 1988. Deere subsequently commenced this action on February 22, 1988, requesting the Court to declare that it had no duty to defend or indemnify these defendants with respect to the underlying action commenced by Shamrock.
Background of the Underlying Action
Shamrock is a Minnesota corporation engaged in the business of selling plastic containers to dairies. Cardinal is a direct competitor of Shamrock. Both Cardinal and Shamrock install ice cream pail filling machines in their customers' places of business, and permit their customers to use the machines as part of transactions in which their customers buy Cardinal and Shamrock's plastic containers.
Metal Craft is a supplier of precision parts for various industries. Mowry is president and sole owner of all of Metal Craft's stock. Erlandson used to be an employee of Shamrock. In about October of 1985, while still in Shamrock's employ, Erlandson conceived an idea for a machine which would fill containers of ice cream faster than any machine in existence.
Erlandson spoke with Mowry about this idea and in October, 1985, the two agreed to build the machine and market it. Assembly of the prototype began sometime in June, 1986, at the shop of Metal Craft. The prototype was ready for testing in October, 1986.
Mowry and Erlandson decided to form a new company, NEOS, Inc. to continue development and marketing of the machine. NEOS was incorporated in January, 1987. Mowry owns 100 percent of the shares of NEOS. Erlandson left his employment *436 with Shamrock on April 16, 1987, and immediately went to work for NEOS. He has no financial interest in NEOS.
In the fall of 1985 and early 1986, before NEOS had been incorporated, Mowry wrote to Arthur Blackburn, the president of Cardinal, a number of times on Metal Craft letterhead to tell him about this new proposed machine. Blackburn stated he would have an interest if it would perform as well as Mowry said it would. In October, 1986, Blackburn was present at the first demonstration of the prototype at the Metal Craft shop in Elk River, Minnesota. He made no commitment at that time.
In April, 1987, Erlandson and Mowry brought the machine to Winston-Salem, North Carolina, and installed it in Dairy Fresh, a customer of Cardinal. The test was a resounding success. A purchase order for ten of the machines was drafted, but not signed, on April 29, 1987. The actual agreement was finally consummated on August 1, 1987, when Blackburn, on behalf of Cardinal, and Mowry, on behalf of NEOS, signed an exclusive distribution agreement. Mowry personally guaranteed that same agreement.
On May 29, 1987, Shamrock, through its attorney, sent everyone concerned a letter notifying them of Shamrock's assertion of patent infringement. The first installation of a machine at a facility of a former customer of Shamrock occurred on August 6, 1987, when one was installed at Heartland Farms Dairy in Hazelwood, Missouri. That machine did not go into operation until January of 1988.
The essential paragraphs of Shamrock's complaint relevant to this declaratory judgment action allege that Mowry, Metal Craft, NEOS and/or Erlandson manufactured, used and sold pail filling machines; copied features of plaintiff's pail filling machines; have disclosed, disseminated and/or published through direct communication and/or through the sale and distribution of machines, trade secrets and proprietary information of Shamrock, particularly information regarding Shamrock's business practices, design plans and contemplated future improvements for its pail filling machines; and have sold and are continuing to sell and solicit purchase orders for pail filling machines.
The Insurance Contracts
Metal Craft purchased six insurance contracts from Deere (hereinafter referred to as policies I, II, III, IV, V, and VI).[1] This case requires the Court to examine five different areas of these contracts: (1) the scope of the word "insureds" and (2) the phrase "advertising injury"; (3) the meaning of an exclusion which excludes advertising activity coverage where the first publication occurred prior to the commencement of the policy period; (4) the meaning of the phrase "actual malice"; (5) the meaning of a provision which excludes liability "assumed by the insured under any contract or agreement."
The named insured on all the policies is Metal Craft. The policies differ as to the extent to which other insureds are included. Policies I and II extend the definition of an insured to cover "an executive officer ... acting within the scope of his duty as such." Policies III and IV contain the same extension, but also include "any subsidiary of the Named Insured and any other entity coming under the Named Insured's control over which it assumes active management." Policy V extends coverage to "executive officer[s] ... but only with respect to [their] duties as [such]." Policy VI contains the same language as Policy V but also extends coverage to "your subsidiaries under active management and control at the inception of this policy."
*437 Deere contends that only Metal Craft, if anyone, is an insured under these policies. Defendants Metal Craft, Mowry, NEOS and Erlandson all claim coverage under the policies. Defendant Cardinal, by affidavit, admits the policies afford it no coverage.
All of the contracts require Deere to defend the insured against suits brought against the insured which allege "advertising injury". Deere and the defendants vigorously dispute the meaning of that phrase. The policies all define "advertising injury" in essentially the same fashion; that is, policies I and II define it as "injury arising out of an offense ... occurring in the course of the named insured's advertising activities, if such injury arises out of libel, slander, defamation, violation of right of privacy, piracy, unfair competition, or infringement of copyright, title or slogan ...". Policies III and IV call the covered phrase "advertising liability", not "advertising injury" and define it as "damages because of libel, slander, defamation, infringement of copyright, title or slogan, piracy, unfair competition, idea misappropriation or invasion of right of privacy arising out of the named insured's advertising activities ...". Policy V states that "this insurance applies to `advertising injury' only if caused by an offense committed ... in the course of advertising your goods, products or services", and defines advertising injury as "[i]njury arising out of one or more of the following offenses:
(a) oral or written publication or material that slanders or libels a person or organization or disparages a person's or organization's goods, products or services;
(b) oral or written publication of material that violates a person's right of privacy;
(c) misappropriation of advertising ideas or style of doing business; or
(d) infringement of copyright, title or slogan."
Policy VI defines advertising injury as "injury arising out of one or more of the following `offenses' committed in the course of advertising an insured's goods, products or services:
a. oral or written publication of material that slanders or libels a person or organization of disparages a person's or organization's goods, products or services;
b. oral or written publication of material that violates a person's right or privacy;
c. misappropriation of advertising ideas of style of doing business;
d. infringement of copyright, title or slogan; or
e. unfair competition."
Deere contends the suit brought by Shamrock clearly falls outside of the scope of these definitions of advertising injury. The defendants claim that the suit arguably falls within these definitions.
Deere states that three provisions are applicable to exclude coverage under at least some of the policies. The first such exclusion, which Deere claims to be applicable only to policies V and VI, excludes claims made for advertising injury "arising out of oral or written publication of material whose first publication took place before the beginning of the policy period." The second exclusion which Deere argues applies is that which excludes coverage for "injury arising out of any act committed by the insured with actual malice." And finally, Deere contends that coverage is avoided by a provision excluding coverage for "liability assumed by the insured under any contract or agreement."
DISCUSSION
The Court's jurisdiction in this case arises from diversity of citizenship of the parties and the requisite amount in controversy. 28 U.S.C. § 1332 (1982). Accordingly, state law governs the substantive issues in this suit. Erie R.R. Co. v. Tomkins, 304 U.S. 64, 58 S. Ct. 817, 82 L. Ed. 1188 (1983).
In this case, defendants Metal Craft and Mowry, who were joined during argument on the motion by NEOS and Erlandson, moved for summary judgment on their claim that Deere has a duty to defend them in the suit by Shamrock. Deere responded with its own motion for summary judgment. Summary judgment is appropriate *438 if there is no genuine issue as to any material fact and the moving party is entitled to a judgment as a matter of law. See Fed.R. Civ.P. 56(c). Cases such as this one requiring interpretation of insurance contracts raise questions of law and thus are particularly amenable to summary judgment. See Kemper Ins. Co. v. Stone, 269 N.W.2d 885 (Minn.1978); State Farm Mutual Auto Ins. Co. v. Budget Rent-A-Car Sys., 359 N.W.2d 673 (Minn.Ct.App.1984). In ruling on a motion for summary judgment, the judge must view the evidence presented through the prism of the substantive evidentiary burden. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 106 S. Ct. 2505, 2513, 91 L. Ed. 2d 202 (1986). There is no issue for trial unless there is sufficient evidence favoring the nonmoving party for a jury to return a verdict for that party. Id., 106 S.Ct. at 2511.
The evidentiary burden established under Minnesota law is that Deere has the burden of showing that the claims in the underlying lawsuit fall "clearly outside" the policies' coverage. Grain Dealers Mutual Ins. Co. v. Cady, 318 N.W.2d 247, 251 (Minn.1982). Thus, if a reasonable juror could not find that the claims fall "clearly outside" coverage afforded by the policies, summary judgment against Deere is appropriate. On the other hand, the claims against defendants only need to "arguably" fall within coverage afforded by the policy. Johnson v. Aid Insurance Co. v. Concrete Units, Inc., 287 N.W.2d 663, 665 (Minn.1985). Also, the duty to defend a claim against an insured is much broader than the duty to indemnify. Lanoue v. Fireman's Fund Am. Ins. Cos., 278 N.W.2d 49, 53 n. 1 (Minn.1979). Furthermore, all doubts must be decided in favor of the insured. Id.
Insureds
The first provision requiring interpretation is the scope and meaning of the word "insured" as defined under the policies. It is not disputed that Metal Craft, as the named insured, is an insured under the policies. The policies all provide coverage for officers and directors of the named insured acting within the scope of their employ, therefore, Mowry, as president and sole shareholder of Metal Craft, is covered. Metal Craft was in the business of making precision parts for machines. While president of Metal Craft, Mowry spoke with Erlandson about Erlandson's new idea of building a pail filling machine. Mowry decided to develop and market this idead with Erlandson. Work on development of the machine began on Metal Craft's premises. In fact, the first prototype was entirely built and first demonstrated there. While development was going on at Metal Craft, Mowry contacted Cardinal using Metal Craft letterhead, regarding a potential purchase of the machine. All this activity occurred long before NEOS, the company which ultimately developed and sold the machine, was incorporated.
Deere argues that Mowry was not acting within the scope of his duties for Metal Craft because the machine was really a product of NEOS, not Metal Craft. This argument fails to recognize the fact that much of the promotion and development as well as the initial demonstration of the machine occurred at Metal Craft before NEOS was ever created.
Whether NEOS is an insured under the policies poses a more difficult question. NEOS only asserts it is covered under policies III and IV. Specifically, NEOS asserts it is included as a "named insured" where that term is defined in policies III and IV as "any other entity coming under the named insured's control over which it assumes active management."
The facts in this case suggest that Metal Craft arguably controlled and assumed active management of NEOS through its agent Mowry. The close relationship between Metal Craft and NEOS is remarkable. First of all, the sole product of NEOS was originally developed and marketed by Metal Craft. Second, Metal Craft's president, Mowry, exercised total control over NEOS. He was and is the 100% owner of NEOS and one of the two directors. Moreover, the other director of NEOS is Metal Craft's secretary.
All of these facts persuade the Court that a reasonable jury could not conclude *439 that NEOS is not arguably "controlled" and "under the active management" of Metal Craft, and therefore the Court holds that NEOS is covered under policies III and IV.
The Court also finds that the language of policies III and IV arguably cover Erlandson. Policies III and IV further define "insured":
The unqualified word "insured", wherever used ... means the named insured and each of the following to the extent set forth below:
. . . . .
(c) except with respect to the ownership, maintenance or use, including loading or unloading of automobiles or aircraft, (1) any executive officer, other employee, director or stockholder thereof while acting within the scope of his duties as such....
From this language it appears an "employee" of a named insured is covered. It has already been determined above that NEOS is a "named insured" as that phrase is defined under policies III and IV. Since Erlandson is an employee of NEOS, Erlandson is therefore also covered under policies III and IV.
Advertising Activity
Deere's next contention for no coverage has to do with its interpretation of "advertising activity." In its memoranda, and during oral argument, Deere argued that the letters sent by Mowry to Blackburn, president of Cardinal, and the demonstrations of the machine were selling activities, not advertising. Thus, since all of the policies require injury to occur during, or arise out of, some advertising activity, Deere reasons that no coverage is afforded here. Deere relies on a Minnesota Supreme Court case which defines advertising activity rather narrowly as "public or widespread distribution of the alleged [advertising] material." See Fox Chemical Co., Inc. v. Great Am. Ins. Co., 264 N.W.2d 385, 386 (Minn.1978); see also Playboy Enterprises v. St. Paul Fire & Marine Ins., 769 F.2d 425, 429 (7th Cir.1985) ("We agree with the Minnesota Supreme Court in Fox Chemical that the term `advertising' does refer to the widespread distribution of promotional material to the public at large").
These cases are not entirely applicable here. The Minnesota Supreme Court's interpretation was grounded in part on "companion words found in the exclusion." Fox Chemical, 264 N.W.2d at 386. Those companion words were "broadcasting" and "telecasting", which tend to indicate more widespread distribution. There are no such companion words in the instant policies. Therefore, this Court finds that the Minnesota Supreme Court's interpretation of the meaning of "advertising" in Fox not controlling in this case.
Defendants argue that since "advertising activity" is not defined in the policy, it is ambiguous and should be construed against the insurer. See Prahm v. Rupp Const. Co., 277 N.W.2d 389 (Minn.1979). Defendants provide as an alternative to the definition given in Playboy and Fox, for example, that found in Black's Law Dictionary: "Any oral, written, or graphic statement made by the seller in any manner in connection with the solicitation of business...." Black's Law Dictionary, 50 (5th Ed.1979). Deere contends that the phrase "advertising activity" is far from ambiguous and the Court should therefore simply apply its plain meaning. See Gershcow v. Homeland Ins. Co., 217 Minn. 568, 15 N.W.2d 88 (1944). If every word in every insurance policy were required to be defined within the policy, argues Deere, they would become unmanageable heaps of complicated paper.
Very little legal authority exists to provide guidance in interpreting the precise meaning of the phrase "advertising activity". At one extreme are Playboy and Fox which may be read as requiring "wide dissemination" of material for a finding of "advertising activity". On the other extreme is the dictionary's broad definition seemingly encompassing almost any form of solicitation.
In this case, Mowry, using Metal Craft letterhead, sent three letters to a potential buyer, Cardinal, exclaiming the strengths and virtues of the pail filling machine upon *440 which Shamrock bases some of its claims. There were also various demonstrations of the machine on the premises of some of Cardinal's customers specifically for the benefit of Cardinal.
A closer examination of the letters shows that they arguably constituted advertising activity. Moreover, no reasonable juror could find these letters fall "clearly outside" the meaning of advertising activity. The first letter, dated November 1, 1985, stated "we can build machines to help you sell more of your containers." The second letter, dated January 20, 1986, stated such things as "we will warrant each unit for one year. We also furnish a complete maintenance manual with each machine." Mowry's third letter, written on approximately March 1, 1986, listed the machine's "selling points"[2] and enclosed pictures.
If these letters stating the beneficial features of the machine were sent to 100 potential customers, instead of one, Deere would have no argument that they were not advertising activity. While activity directed at one customer seems to stretch the meaning of advertising, Black's Law Dictionary's definition of "advertise" encompasses any form of solicitation, presumably including solicitation of one person. Deere failed to provide in its policy any limitation on the scope of the meaning of advertising activity. If Deere wanted to limit covered advertising activity to "wide dissemination of materials", Deere could have so provided in its policy. Therefore, the Court finds that there is more than one reasonable interpretation of the meaning of "advertising activity", and therefore the policy is ambiguous and must be construed against the insurer.
Deere asserts that even if the letters and demonstrations are considered advertising activity, the policies still require that one of the offenses stated in the policies to arise out of that activity, and be complained of in the underlying action, for Deere's duty to defend to arise. Deere contends the allegations in the Complaint of unfair competition, misappropriation of trade secrets, etc., did not arise out of the sending of the letters or conducting of the demonstrations, but rather arose from the totally unrelated infringement on Shamrock's patent rights. Defendants Mowry and Metal Craft respond that the claims of misappropriation of trade secrets and unfair competition do arise out of the advertising activity because, but for that activity, there would not have been a disclosure of trade secret information, an essential element of a misappropriation of the trade secret claim. Defendants further argue that neither the language of the insurance policies nor case law require there to be proximate cause between the advertising activity and the injury alleged for that injury to "arise out of the advertising activity".
The Court agrees with defendants. Because the underlying claims against defendants need only arguably fall within the coverage of the policies, and because any reasonable differing interpretation must be construed against the insurer, the Court finds that the claims of misappropriation of trade secrets alleged arguably fall within the coverage of the appropriate insurance policy. If even part of a cause of action is arguably within the scope of coverage, the insurer must defend. Prahm v. Rupp Const. Co., 277 N.W.2d 389, 390 (Minn. 1979). Therefore, Deere has a duty to defend Metal Craft, Mowry, NEOS and Erlandson.
Exclusions
Deere next argues that a number of its exclusionary provisions place defendants' claims outside coverage of the insurance policies. First, Deere points to its exclusion in policies V and VI which exclude any advertising injury where the advertising activity was first published before the effective date of the policy. Deere asserts this exclusion emancipates it from its duty to defend under the last two policies because their effective dates were August *441 1, 1987 for both policies and all of the letters and demonstrations occurred well before that.[3]
Defendants Mowry and Metal Craft respond to this argument by asserting that the identical argument was made and rejected in CNA Casualty of California v. Seaboard Surety Co., 176 Cal. App. 3d 598, 222 Cal. Rptr. 276 (1986) (the "Seaboard" case). In Seaboard, the complaint in the underlying action alleged the tortious activities occurred "at a time unknown to plaintiffs but at least as early as 1966." See Id. at 613, 222 Cal. Rptr. 276. The California Court of Appeals thought significant the fact that the complaint then proceeded to list a series of alleged wrongful acts without indicating exactly when any of those specified acts occurred. In this case, the complaint in the underlying action does not specify dates the alleged acts were committed. The dates the letters were sent in the instant case, however, establish specific dates on which the first activity arguably constituting "advertising activity" occurred. Because those dates were discernable well before the commencement of the policy period, this case is distinguishable from Seaboard.
It appears from the facts before the Court that the first publication arguably constituting advertising activity did occur prior to the coverage of policies V and VI, therefore the exclusion applies to remove Deere from any responsibility to defend or indemnify defendants under policies V and VI.
Deere next argues that the exclusion applying an actual malice standard exonerates it from the duty to defend. The Court finds that the defendant's alleged conduct did not rise to the level of actual malice. Actual malice is generally defined as acting "with knowledge that [the allegedly wrongful advertising activity] was false or with reckless disregard of whether it was false or not." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 244, 106 S. Ct. 2505, 2508, 91 L. Ed. 2d 202 (1986).
Deere has come forward with little evidence which lends support to its claim that the defendants acted with actual malice. Deere asserts that because the defendants knew of Shamrock's claim of patent infringement on May 29, 1987, before the first installation of the machine at a former customer of Shamrock, it thereby acted with actual malice. Such a claim, without further proof, fails the standard to be applied. Defendants have vigorously disputed since May 29, 1987, Shamrock's contention that it possessed any patent or protected trade secret. Moreover, no provision in the underlying Complaint by Shamrock alleges that defendant acted with actual malice. Thus, the Court finds that Deere has not met its burden of showing actual malice.
The final exclusion Deere would apply is that which excludes liability for obligations assumed under contract. This argument is of no avail to free Deere from having to defend the covered parties as it only applies to the third count of the underlying Complaint and it is well settled law in Minnesota that where any part of a claim is covered under the policy, the duty to defend nevertheless arises. See Johnson v. Aid Ins. Co. of Des Moines, IA., 287 N.W.2d 663, 665 (Minn.1980); Prahm v. Rupp Const. Co., 277 N.W.2d 389, 390 (Minn. 1979); Christian v. Royal Ins. Co., 240 N.W. 365, 366 (Minn.1932).
Finally, the Court finds no merit to Deere's claim that the injury alleged in the underlying action was not fortuitous, and that therefore Deere has no duty to defend. The case relied on by Deere presented a set of facts entirely distinguishable from this case. See Bituminous Casualty Corp. v. Bartlett, 240 N.W.2d 310 (Minn.1976). In Bituminous it was conclusively established that the insured "knowingly and intentionally" committed an act which triggered coverage. In this case no reasonable jury could conclude that Deere met its burden of clearly showing defendants acted with intent and knowledge.
CONCLUSION
In sum, the Court grants the motions of Metal Craft, Mowry, NEOS and Erlandson *442 requesting that the Court adjudge that Deere has a duty to defend Metal Craft and Mowry under policies I, II, III and IV and NEOS and Erlandson under policies III and IV.
It follows that Deere's motion for summary judgment as against Metal Craft, Mowry, NEOS and Erlandson requesting the Court to declare there is no duty to defend them, is hereby denied except that the Court determines there is no such duty under policies V and VI for any of the defendants, and there is no such duty under policies I, II, V and VI for NEOS and Erlandson.
With respect to that part of Deere's summary judgment motion requesting the Court to adjudge that it had no duty to indemnify any of the defendants in the underlying action, the Court denies that motion on the grounds that there are still numerous genuine issues of material fact which cannot be determined until the underlying action is further developed, if not completed.
With respect to that part of Deere's motion against defendant Cardinal, the Court grants the motion on the ground that Cardinal admits by affidavit that it is entitled to no coverage under the policies.
With respect to damages in this action, the Court concludes that Deere is obligated to provide a defense for defendants Mowry, Metal Craft, NEOS and Erlandson in the underlying action, and the Court awards those defendants costs, disbursements and attorney's fees incurred in defense of the underlying action and in this declaratory judgment action, in an amount to be determined at an evidentiary hearing. See Lanoue v. Fireman's Fund Am. Ins. Co., 278 N.W.2d 49, 55 (1979) ("Where an insurance contract is intended to relieve the insured of the financial burden of litigation, the insured will not be required to pay the litigation costs of forcing the insurer to assume that burden.").
NOTES
[1] The policies' coverage periods date as follows:
Policies I and III: 8/1/85-8/1/86
Policies II and IV: 8/1/86-8/1/87
Policies V and VI: 8/1/87-8/11/88
The policies have the following titles:
Policies I and II: Special Multi-Peril Policy
Policies III and IV: Catastrophe Umbrella Liability
Policy.
Policy V: Commercial General Liability
Coverage Form.
Policy VI: Special Commercial Umbrella
Liability Policy.
[2] The letter listed, among others, the following selling points of the machine: "Dual line for smoothness of operation. Dual line with alternate filling eliminates back pressure and gives a more consistent fill. Dual line filling reduces wear as well as increases productivity. Safety was made a priority in the design of the machine ...".
[3] The letters were sent on November 11, 1985; January 20, 1986 and about March 1, 1986. The demonstrations were conducted from about October, 1986 to April of 1987.
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389 F. Supp. 817 (1975)
UNITED STATES of America
v.
Marion C. NUGENT et al.
Crim. No. 74-164.
United States District Court, W. D. Louisiana, Monroe Division.
February 26, 1975.
*818 Don Carroll, Dist. Atty., Fifth Judicial District, Oak Grove, La., for State of Louisiana.
Donald E. Walter, U. S. Atty., and D. H. Perkins, Asst. U. S. Atty., Shreveport, La., for United States.
George M. Snellings Jr., Snellings, Breard, Sartor, Shafto & Inabnett, Monroe, La., for Nugent, Weinberg, Rizzo and Cernigliaro.
Joe D. Guerriero, Monroe, La., for Henry.
RULING ON MOTION
STAGG, District Judge.
On the night of May 3, 1974, agents of the Federal Bureau of Investigation, acting in concert with members of the Louisiana State Police, conducted a raid of the Forrest Club[1] during which numerous items of gambling paraphernalia were seized. As a result of the investigation, which culminated in the raid, five men were indicted by a federal grand jury on racketeering charges for conducting an illegal gambling business in violation of 18 U.S.C. § 1955.[2]
In due course these defendants were brought to trial and the seized items were introduced into evidence. After three days of trial and several hours of deliberation, the jury was unable to agree on a verdict and the Court declared a mistrial. Thereafter, on the motion of defense counsel, a directed verdict of acquittal was entered by the Court as to each defendant.[3]
At the conclusion of the trial, the United States Marshal was ordered to return several of the seized items to their respective owners but other items remained in the custody of the Marshal. On January 13, 1975, an ex parte motion was filed on behalf of the defendants wherein it was requested that the Marshal be directed to return the remainder of the seized items. On the same day this Court granted the ex parte motion and ordered the Marshal to return all of the remaining items, including dice table, blackjack table, other equipment and cash. On the following day, January 14, 1975, the new District Attorney of Richland Parish asked that the Court reconsider its order of the previous day in view of his stated intention to prosecute the defendants for violations of Louisiana gambling statutes. Determining the ex parte motion to have been improvidently granted, the order of January 13 was promptly recalled and the Marshal was instructed to maintain the status quo pending a hearing to be called on the issue of the return of the seized evidence. This hearing was conducted on January 20, 1975, and briefs were submitted by the defendants and the District Attorney of Richland Parish.
Subsequent to the termination of the federal trial proceedings and the January 20 motion hearing, arrest warrants were issued against the defendants in the name of the State of Louisiana, charging them with illegal gambling operations. Subpoenas and subpoenas duces tecum have been issued to the *819 F.B.I. agent in charge of the investigation concerning the federal offense, and the Deputy United States Marshal who is in custody of the seized items, requesting that the evidence seized in the raid on the Forrest Club (including all gambling equipment) be brought to the Richland Parish Grand Jury for its scrutiny in connection with the state charges.
The explicit decision required in this case is to answer the question: Should the legally seized gambling equipment held in the custody of the United States Marshal be released to the District Attorney of Richland Parish to be used in a state prosecution following the acquittal of the defendants in their federal trial under 18 U.S.C. § 1955?[4]
The state seeks the seized items to use in connection with its illegal gambling prosecution; not to charge the defendants with the possession of such items.[5] This Court felt that during the federal prosecution it was proved beyond all possible doubt that blatant gambling operations were being conducted in the Forrest Club. In fact, on several occasions defense counsel admitted that the conduct of the defendants constituted a violation of Louisiana gambling statutes.
The legislative history of 18 U.S.C. § 1955 indicates Congress' intention to place in the hands of the prosecutor a weapon with which to attack the corruption of local law enforcement personnel and public officials by persons involved in illegal gambling operations. In the section analysis of the Organized Crime Control Act of 1970, it is stated:
"* * * The provisions of this title do not apply to gambling that is sporadic or of insignificant monetary proportions. It is intended to reach only those persons who prey systematically upon our citizens and whose syndicated operations are so continuous and so substantial as to be of national concern, and those corrupt State and local officials who make it possible for them to function." H.R. Rep. No. 91-1549, 91st Cong. 2d Session (1970), U.S.Code Cong. & Admin. News, p. 4029.
The first witness in the federal prosecution was Harold L. Robbins, a Special Agent with the F.B.I. In answering questions about his first encounter with defendant Nugent, Agent Robbins testified that he asked Nugent if there "was any trouble with the local Sheriff", to which Nugent replied, "No, we are two hundred per cent." (Transcript of Agent Robbins' testimony, page 8.) To this Court, the quoted language of Nugent's reply can bear but one connotation pay-off of local law enforcement officials. In light of this testimony and the admitted gambling activities being conducted at the Forrest Club, this Court is convinced that the seized property should be released to the local prosecutor for his use in the state proceedings. To do otherwise would frustrate the expressed intent of Congress and would condone what this Court finds to be patently offensive.
It cannot be gainsaid that the State of Louisiana has an interest in protecting its public morals and the peace and dignity of the State and its citizens and all who reside in it. Accordingly, the District Attorney of the Fifth Judicial District has found that the duty imposed upon him by the Constitution and laws of the State of Louisiana requires him to prosecute these offenders.
*820 The search warrant executed by the Federal Magistrate and authorizing the search of the Forrest Club contained the following language:
"There is now being concealed certain property namely, but not limited to, poker chips, checks, check stubs, tabulation sheets, financial statements, money orders, receipts, I.O.U.'s, telephone number and address books, notebooks, U.S. currency and other equipment which are relative to the operation of a gambling business and which are designed or intended for use and have been used as a means of committing a criminal offense, or the fruits of such offense, and constitute evidence of such offense, in violation of the laws of the United States, that is to say, the operation of an illegal gambling business, which is operating in violation of LA.R.S. Section 14:90, * * *."
Thus the initial seizure was effected, for one thing, because the operations at the Forrest Club were believed to be in violation of the Louisiana Law pursuant to which the State now seeks to prosecute.
The proceeding presently before the Court is unusual. Normally evidence is exchanged as a matter of accommodation between federal and state law enforcement officials. However, in the case sub judice this procedure has been challenged.
Neither party has cited any legal authority to either sustain or condemn the free exchange of evidence between state and federal law enforcement officials. Nevertheless, such authority does exist. In Gullett v. United States, 387 F.2d 307 (8th Cir. 1967), cert. denied, 390 U.S. 1044, 88 S. Ct. 1645, 20 L. Ed. 2d 307 (1968), state officials, acting on certain information they had received, stopped the car in which Gullett was a passenger and conducted a thorough search. The search revealed a number of firearms, therefore federal officials were called in and the defendant was subsequently convicted on federal charges of interstate transportation of stolen firearms. The implicit holding of this case is that evidence legally obtained by one police agency may be made available to other such agencies, without a warrant being obtained by the other agency, even for a use different from that for which the evidence was originally taken.[6] In a footnote in the Gullett case, the Court stated:
"The fact that evidence was obtained by state officers and is now being used in a federal prosecution is, of course, immaterial, provided the obtaining of the evidence was not in violation of the defendants' immunity from unreasonable searches and seizures under the Fourth Amendment to the Constitution of the United States. Elkins v. United States, 1960, 364 U.S. 206, 80 S. Ct. 1437, 4 L. Ed. 2d 1669." 387 F.2d 307, 308, footnote 1.
Furthermore, this Court agrees with the concurrence of Judge Anderson of the Second Circuit in United States v. Birrell, 470 F.2d 113 (1972) wherein he stated:
"There is no reason why evidence which is legitimately in the hands of one state or federal police department cannot be made available to other state or federal law enforcement agencies without a warrant, even if it is to be used for a different purpose. The majority, relying upon Coolidge v. New Hampshire, 403 U.S. 443, 478-481, 91 S. Ct. 2022, 29 L. Ed. 2d 564 (1971), suggests that a second police authority must secure a warrant for its additional `minor' intrusion. This cited portion of Coolidge is a reference to the fact that a warrant is required to search a person's home, even if he is arrested in it without a warrant, but I do not see that this Coolidge discussion, or any other case, mandates that interpolice-agency use of evidence be restricted." 470 F.2d 113, 117.
*821 Since subpoenas have now been issued, the persons holding the evidence are under orders by State law to deliver it up to the proper forum. There is no legal reason why the State laws should not be honored and comity given, since the obtaining of the evidence initially was not done in such a way as to violate the defendants' immunity from unreasonable searches and seizures.
Accordingly, it is ordered that the materials seized from the Forrest Club during the raid conducted on May 3, 1974, and now presently in the custody of the United States Marshal be forthwith delivered to the custody of the Captain-in-Charge, Louisiana State Police Headquarters, Monroe, Louisiana, for use in the State grand jury investigation and prosecution.
NOTES
[1] The Forrest Club is situated in Richland Parish, Louisiana, approximately 11 miles from the City of Monroe, Louisiana.
[2] The five men indicted were Marion C. Nugent, Charles Weinberg, Sam P. Rizzo, Peter D. Cernigliaro and John H. Henry Jr.
[3] The judgment of acquittal rendered on December 31, 1974, stated:
"The government readily proved that Nugent, Weinberg, Rizzo and Cernigliaro were operating an illegal gambling business together and that the business met the specifications of the statutes. The proof, however, was lacking with regard to defendant John H. Henry.
* * * * *
"To establish its case it was critical that the government prove that the business `* * * involves five or more persons who conduct, finance, manage, supervise, direct or own all or part of such business; * * *' (18 U.S.C. 1955)."
[4] The Court is not here faced with an illegal seizure problem. The search of the Forrest Club and the resulting seizures were carried out pursuant to a search warrant, the validity of which has not been contested.
[5] LSA-R.S. 14:90 provides:
"§ 90 Gambling.
"Gambling is the intentional conducting, or directly assisting in the conducting, as a business, of any game, contest, lottery, or contrivance whereby a person risks the loss of anything of value in order to realize a profit.
"Whoever commits the crime of gambling shall be fined not more than five hundred dollars, or imprisoned for not more than six months, or both. Amended by Acts 1968, No. 647, § 1, emerg. eff. July 20, 1968, at 1:30 P.M."
[6] The state officials arrested the defendants and conducted the search of the car for investigation of car theft.
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COURT OF APPEALS
SECOND DISTRICT OF TEXAS
FORT WORTH
NO. 2-07-431-CV
IN THE MATTER OF J.B.C.
------------
FROM THE 323RD DISTRICT COURT OF TARRANT COUNTY
------------
MEMORANDUM OPINION
(footnote: 1)
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I. Introduction
Appellant J.B.C. appeals the trial court’s
order transferring him from the custody of the Texas Youth Commission (TYC) to the Institutional Division of the Texas Department of Criminal Justice (TDCJ) for the completion of his forty-year determinate sentence for the offense of murder. In his sole issue, J.B.C. complains that the trial court abused its discretion by transferring him to TDCJ. We will affirm.
II. Factual and Procedural Background
A jury found that J.B.C. engaged in delinquent conduct by committing murder.
See In re J.B.C.
, 233 S.W.3d 88, 94 (Tex. App.—Fort Worth 2007, pet. denied) (providing details concerning J.B.C.’s fatally shooting his maternal grandmother in the back of the head with a .32 caliber handgun and affirming trial court’s judgment). The trial court sentenced J.B.C. to forty years’ confinement with TYC with a possible transfer to TDCJ.
Id.
After J.B.C.
turned eighteen years old and had spent approximately eighteen months in the custody of TYC, upon TYC’s request, the trial court held a hearing pursuant to section 54.11 of the family code and section 61.079(a) of the human resources code concerning the transfer of J.B.C.
to TDCJ.
See
Tex. Fam. Code Ann. § 54.11 (Vernon Supp. 2008); Tex. Hum. Res. Code Ann
.
§ 61.079(a) (Vernon Supp. 2008)
.
At the November 20, 2007 transfer hearing, the State presented the testimony of TYC court liaison Leonard Cucolo as well as TYC’s general file,
master file, and security file on J.B.C. Cucolo testified that there are three categories by which J.B.C. was evaluated while at TYC—academics, behavior, and conduct. Cucolo said that although J.B.C. had progressed well in the area of academics, he had progressed poorly both behaviorally and in his conduct. Cucolo testified that J.B.C. had demonstrated “pretty serious behavior problems in the form of an assault or aggressive behavior towards staff and students.” Cucolo said that J.B.C. had been confined to the security unit multiple times for being a danger to others. He also said that J.B.C. had a pattern of being disrespectful and verbally aggressive toward staff and students and failed to follow instructions from TYC staff. In all, Cucolo testified that J.B.C. had roughly seventy documented incidents of misconduct or referrals to TYC’s security unit. Eighteen of these referrals resulted in his removal from TYC’s dorm.
Cucolo also detailed a few of the incidents that led to J.B.C.’s removal to TYC’s security unit. One such incident involved J.B.C. “hitting his peer with a closed fist continuously” while yelling out, “White Power.” Cucolo stated that J.B.C.’s reference to “White Power” was “gang-related.” Cucolo also said that J.B.C. had received a variety of services at TYC, including pharmacological intervention, psychiatric counseling, medication for anxiety, individual counseling, group counseling, and staff counseling. Cucolo said that despite these services
, J.B.C. was generally disruptive and tended to blame others for his behavioral problems. In sum, Cucolo said that J.B.C. demonstrated an inability to progress in his re-socialization program.
Jeannette Saha, a case manager for TYC who knew and had worked with J.B.C., also testified. She too stated that J.B.C. had progressed well academically. Saha also stated that she believed J.B.C. had progressed both behaviorally and in his conduct. Saha said that she believed J.B.C. benefitted from being at TYC and that she believed specialized treatment would be of significant benefit to him.
Following closing arguments, the court
took the case under advisement to review the documentary evidence. After reviewing the written evidence, the trial court advised J.B.C.
of his appellate rights and
ordered that J.B.C.
be transferred to TDCJ to complete his forty-year sentence.
This appeal followed.
III. Discussion
1. Minimum Time Requirement
In part of his sole issue, J.B.C. complains that the trial court abused its discretion by ordering him transferred to TDCJ when he had only served roughly half of his three-year minimum time requirement at TYC. We disagree.
The three-year minimum time requirement discussed at the transfer hearing concerns a limitation on TYC’s power to release J.B.C. on parole, rather than a statutory minimum time requirement that J.B.C. was to stay at TYC.
See
Tex. Hum. Res. Code Ann. § 61.081 (Vernon Supp. 2008) (providing TYC “may not release the child under supervision without approval of the juvenile court . . . unless . . . the child has served at least . . . 3 years, if the child was sentenced to commitment for conduct constituting . . . a felony of the first degree.”). In this case, the minimum time before recommending a transfer from TYC to TDCJ was six months.
See
37 Tex. Admin. Code § 85.65(e)(2)(B) (2006) (providing that TYC may request a juvenile court hearing for transfer to TDCJ for sentenced offenders who have been convicted of a felony offense and have spent at least six months in a high restriction facility).
Here, it is uncontested that J.B.C. spent more than six months in a high-restriction facility prior to TYC’s request that he be transferred to TDCJ. We overrule this part of J.B.C.’s sole issue.
2.
J.B.C.’s Transfer
In the remainder of his sole issue, J.B.C. complains that the trial judge’s decision to transfer him to TDCJ was unreasonable and arbitrary. J.B.C. argues that the trial court abused its discretion by not allowing him to return to TYC and be moved to a specialized dorm where he could potentially progress in the areas of behavior and conduct. We are not persuaded by this argument.
In reviewing the trial court’s decision to transfer J.B.C from the custody of TYC to TDCJ, we employ an abuse of discretion standard.
See In re J.D.P.,
149 S.W.3d 790, 792 (Tex. App.—Fort Worth 2004, no pet.);
In re J.M.O.
, 980 S.W.2d 811, 812–13 (Tex. App.—San Antonio 1998, pet. denied);
K.L.M. v. State,
881 S.W.2d 80, 84 (Tex. App.—Dallas 1994, no writ). We are to review the entire record to determine whether the trial court acted without reference to any guiding rules and principles.
J.D.P.,
149 S.W.3d at 792. We may not reverse a trial court’s decision merely because we disagree with that decision, so long as the trial court acted within its discretionary authority.
In re R.G.
, 994 S.W.2d 309, 312 (Tex. App.—Houston [1st
Dist.] 1999, pet. denied).
When a juvenile is given a determinate sentence, upon TYC’s request to transfer the juvenile to TDCJ, the trial court is required to hold a hearing pursuant to family code section 54.11. Tex. Fam. Code Ann. § 54.11;
see also
Tex. Hum. Res. Code Ann. § 61.079(a). At the transfer hearing, a trial court “may consider written reports from probation officers, professional court employees, professional consultants, or employees of the Texas Youth Commission, in addition to the testimony of witnesses.”
Tex. Fam. Code Ann. § 54.11(d). At the conclusion of such a hearing, the trial court may either order the return of the juvenile to TYC or the transfer of the juvenile to the custody of TDCJ for the completion of the individual’s sentence.
Id.
§ 54.11(i).
In evaluating the evidence and deciding whether to transfer a juvenile to TDCJ, a trial court may consider the following: (1) the experiences and character of the person before and after commitment to TYC; (2) the nature of the penal offense that the person was found to have committed and the manner in which the offense was committed; (3) the abilities of the person to contribute to society; (4) the protection of the victim of the offense or any member of the victim’s family; (5) the recommendations of TYC and the prosecuting attorney; (6) the best interests of the person; and (7) any other relevant factor.
Id
. § 54.11(k). Within its discretion, the trial court may assign different weights to the factors it considers, and the court need not consider every factor.
R.G.
, 994 S.W.2d at 312.
Texas courts of appeals have determined that a trial court does not abuse its discretion by transferring a juvenile to TDCJ even when TYC has recommended that the juvenile be returned to TYC.
See
K.L.M.,
881 S.W.2d at 84–85 (upholding transfer to TDCJ where juvenile’s probation officer, treatment supervisor, and TYC’s parole supervisor all recommended that juvenile be recommitted to TYC’s custody);
In re J.C.D.
, 874 S.W.2d 107, 108–09 (Tex. App.—Austin 1994, no writ) (upholding transfer to TDCJ where TYC recommended return to TYC). Texas courts have also held that a trial court does not abuse its discretion in transferring a juvenile to TDCJ even when evidence suggests that the possibility of more specialized treatment would be obtained by a juvenile’s return to TYC.
See In re J.R.W. v. State
, 879 S.W.2d 254, 258 (Tex. App.—Dallas 1994, no writ) (upholding trial court’s transfer of juvenile to TDCJ even though a state psychologist recommended that he be sent back to TYC for participation in a specialized program);
In re C.D.R.
, 827 S.W.2d 589, 592–93 (Tex. App.—Houston [1st
Dist.] 1992, no writ) (rejecting juvenile’s claim that he should have been returned to a TYC specialized sex offender program). Furthermore, a trial court does not abuse its discretion if it considers that a juvenile who has committed a violent offense, if sent back to TYC, would be released from TYC and placed on parole once the juvenile turns twenty-one.
See
Tex. Hum. Res. Code Ann
.
§ 61.084(g) (Vernon Supp. 2008);
see also K.L.M.,
881 S.W.2d at 85–86 (stating trial court could consider consequence of sending juvenile back to TYC);
see also J.R.W.
, 879 S.W.2d at 258 (stating trial court has no duty to rehabilitate a juvenile, but only makes a determination whether to transfer the juvenile to TDCJ or send the juvenile back to TYC).
At the transfer hearing, the trial court was aware that J.B.C.
had previously been found guilty of shooting his maternal grandmother in the back of the head with a .32 caliber handgun. This incident resulted in his placement at TYC.
The trial court was also informed that if J.B.C. was returned to TYC, when he turned twenty-one, he would be released from TYC and placed on parole for the remainder of his sentence. The trial court heard evidence that while at TYC, J.B.C. had assaulted his peers, threatened staff members, and continually failed to take responsibility for his actions.
The evidence before the trial court was that
of the roughly seventy personal-conduct incidents reported in his eighteen months at TYC, J.B.C. had been involved in five assaults and seven documented incidents of danger to others and had demonstrated participation in gang-related activity. Some of these events even occurred after J.B.C. learned he was being reviewed for possible transfer to TDCJ.
After a complete review of the record, and mindful that
one of J.B.C.’s case managers testified that
specialized treatment would be of significant benefit to J.B.C.
, we cannot say that the trial court acted without reference to any guiding rules and principles in declining to send J.B.C. back to TYC and in transferring him from TYC to TDCJ. Accordingly, we overrule the remainder of J.B.C.’s sole issue.
IV.
Conclusion
Having overruled J.B.C.’s sole issue, we affirm the trial court’s judgment.
PER CURIAM
PANEL: HOLMAN, GARDNER, and MCCOY, JJ.
DO NOT PUBLISH
Tex. R. App. P.
47.2(b)
DELIVERED: October 9, 2008
FOOTNOTES
1:See
Tex. R. App. P.
47.4.
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160 F. Supp. 916 (1958)
GERBER PRODUCTS COMPANY, Plaintiff,
v.
BEECH-NUT LIFE SAVERS, Inc., Defendant.
United States District Court S. D. New York.
April 23, 1958.
*917 Gilbert H. Weil, New York City, Melville Ehrlich, Washington, D. C., for plaintiff, Milton Handler, Alfred T. Lee, Stanley D. Robinson, Joshua F. Greenberg, New York City, of counsel.
Rogers, Hoge & Hills, New York City, for defendant, George S. Hills, Andrew J. Graham, Charles Donald Mohr, Mercer L. Stockell, William L. McGuire, William H. Ball, Jr., New York City, of counsel.
WEINFELD, District Judge.
This case centers about what the plaintiff labels a "price war" or a "war of attrition" but which the defendant characterizes as vigorous competition in its struggle for economic survival in the baby food products market in the State of California.
The complaint charges the defendant with attempting to monopolize the California market by unreasonable reduction in the price of its glass contained baby food product and various violations of the Robinson-Patman Act.[1]
The immediate matter before the Court is the plaintiff's motion for a preliminary injunction to compel the defendant to increase the prices charged by it in California by reinstating a price differential which existed between its products and those of the plaintiff prior to September 4, 1957. The motion is expressly confined to an alleged violation of Section 2(a) of the Clayton Act, as amended by the Robinson-Patman Act.[2] The parties have submitted voluminous affidavits containing charges and counter-charges as well as almost three thousand pages of depositions.
The plaintiff Gerber Products Company (hereafter sometimes referred to as "Gerber") and the defendant Beech-Nut Life Savers, Inc. (hereafter sometimes referred to as "Beech-Nut") process, pack and sell in interstate commerce strained and junior baby foods.[3] They sell to wholesalers, chain stores, cooperatives and other large purchasers.
The plaintiff is the largest manufacturer of baby foods in the United States having more than 47% of total national sales. Its sales are greater than the combined sales of its next two competitors, the defendant Beech-Nut which has about 21% and Heinz & Company which has about 16.5% of the national market. The three companies control close to 85% of the national market.
The defendant distributes other commodities in addition to baby foods whereas the plaintiff distributes only baby foods and related products. The volume of each in the baby food business is substantial. Plaintiff's total nationwide sales in 1957 were close to $110,000,000, whereas the defendant's total sales of all its products were in excess of $122,000,000.
Up to the late 1930's all producers of baby foods marketed their wares in tin containers. About that time Beech-Nut successfully marketed its product in glass containers. The innovation succeeded with the consuming public in the east, despite the higher price charged for the glass containers. In time, consumer demand east of the Mississippi compelled a shift from tin to glass and for the past decade or more glass has been, in this area, the only method of packaging and distributing baby foods. Gerber, Heinz & Company and Beech-Nut all sell their *918 glass contained products east of the Mississippi at substantially the same prices.
Despite the change in packaging east of the Mississippi, Gerber, which at all times had a national market for its product, continued to distribute in tin containers west of the Mississippi, including California.
In this case we are concerned with the situation in the State of California, which is Gerber's largest single market. Gerber has sold its product there since the late 1920's.
In 1949 Beech-Nut entered the California market with its glass contained product. From the time of its entry there its product, up to recent months, was sold at a higher price than Gerber's, generally at the same price as in the area east of the Mississippi. Except for California, Beech-Nut at no time sold in any other state west of the Mississippi.
Heinz & Company, like the plaintiff, sold on a nationwide basis but exclusively in glass containers. Its price in California was similar to that charged by Beech-Nut thus observing the same price differential with respect to Gerber's tin packed food.
Plaintiff asserts that the reason for the price differential between tin and glass is that it costs more to package, warehouse and distribute in glass than in tin. The defendant concedes that it costs a little more in glass but disputes that the disparity is as great as is urged by plaintiff.
Gerber over a substantial period has commanded on the average about 75% of the California market as against Beech-Nut's average of about 5%. Heinz & Company is the closest competitor to Gerber having on the average about 16% of that market.
The plaintiff concedes that the basic reason it has the major portion of the California market was the lower price of its product compared to the prices charged by the defendant and Heinz.
After the defendant moved into the California market, it made some progress until 1956 when despite an active advertising campaign and population growth, its sales volume and market share began to decline from a peak of 6.6%. The decline continued so that by July, 1957 the distribution in the California market for strained and junior baby foods by the three principal competitors, stood approximately as follows:
Gerber 73%
Heinz 16%
Beech-Nut 4.3%
Despite the higher prices at which the defendant sold its product, it operated at a deficit because of the small sales volume.
According to the defendant, the deterioration of its competitive position was such that large chain stores, wholesalers and cooperatives were threatening to discontinue its product and several had already done so, and defendant charges that as its sales dropped Gerber's representatives and salesmen engaged in various high pressure and unfair practices to hasten its demise and eliminate it entirely from the California marketwhich plaintiff denies.
Beech-Nut management, after consultation with its sales representatives, advertising agency and marketing experts, concluded that it could recapture a share of its lost market and survive as a competitor in California only by reducing its prices to meet those charged by Gerber. A price reduction, defendant believed, would not only prevent extinction in California but the resulting increased sales volume would yield a profit.
Accordingly on September 4, 1957 Beech-Nut reduced its prices and at the same time put on an intensive advertising campaign announcing the price reduction. It brought down its price for glass contained strained baby food from $1.11 per dozen to $.96 per dozen and for junior foods from $1.59 per dozen to $1.16½ per dozen. This completely eliminated the existing differentials between its prices and Gerber's.
Soon thereafter Heinz & Company also reduced its price of baby food in glass *919 jars to equal those of Gerber and Beech-Nut.
On October 11, 1957 Gerber dropped its price to 86 cents per dozen for strained foods and 95½ cents per dozen for junior foods, asserting that unless the differential were restored, glass containers would be preferred by the consumer.
Beech-Nut, contending that its only means of survival in the California market was to meet the price of Gerber, followed suit and on October 11, 1957 again dropped its prices to meet Gerber's. Heinz again followed suit and since October 11, 1957 Gerber, Beech-Nut and Heinz have been selling at the same price.
Beech-Nut charges that Gerber's reduction on October 11th was a retaliatory measure; that it knew, in order to survive in California, the defendant would be compelled to meet plaintiff's reduced prices even though it meant selling at a lossto which Gerber replies that only by restoring the price differential between tin and glass could it compete with Beech-Nut.
In seeking preliminary injunctive relief Gerber charges Beech-Nut with territorial price discriminationin violation of Section 2(a) of the Robinson-Patman Act. It urges that Beech-Nut is selling at unreasonably low prices for the purpose of destroying competition and eliminating plaintiff as a competitor; that its action is causing irreparable injury which warrants relief in advance of a trial.
At the outset it should be noted that neither party makes any substantial claim that the food content of its product is superior to or more costly than the other's. However, each urges, and has stressed in its advertising, that its container has qualities not possessed by the other. Thus the hard core of the controversy revolves about the packaging of their respective productstin against glass containers.
It should be emphasized what this case does not involve. It does not involve a price differential granted by Beech-Nut to any of its buyers in discrimination against other buyers in California. The complaint here is by plaintiff, a competitor of the defendant who sells to the same trade as the defendant in that area.
In broad outline, Gerber charges that the reduction by Beech-Nut of its prices in California without a similar reduction east of the Mississippi is in violation of Section 2(a) of the Clayton Act. The substance of its charge is that Beech-Nut by bringing its prices in line with the plaintiff's has reduced them to an unreasonably low level which neither plaintiff nor Heinz can meet without substantial losses;[4] that losses sustained by defendant on its sales at lower prices in California are financed by profits arising from higher prices charged by it east of the Mississippi, as well as by defendants financial reserves and power; that defendant's actions not only have the effect, but are motivated by an intent, to injure plaintiff competitively.
The defendant on the other hand contends that the sole purpose of the reduction was economic survival; that the price differential had in effect priced it out of the baby food market in California; that the price reduction was the only effective means by which it could recapture its share of the market, to increase sales volume and to survive economically in the baby food market in California.
Finally, defendant urges that its action, instead of lessening competition in California, has stimulated vigorous competition. It points to the fact that Heinz & Company, which like the plaintiff complains of the defendant's act, has, since all three are selling at parity, actually increased its share of the market.
*920 In sum, Beech-Nut contends, assuming arguendo, that its action in reducing prices in California may be considered discriminatory against its buyers east of the Mississippi, it has, under Section 2(b) of the Clayton Act,[5] met its burden of justificationa good faith attempt to meet Gerber's lower price.[6]
Gerber counters that Section 2(b) is not available to Beech-Nut as a defense. It argues that despite higher prices for glass packed baby food many consumers prefer to buy it because of a belief (right or wrong) that its contents are better preserved and of greater nutritional valuethat in effect, it is a premium product which commands a higher price in competition with tin. The substance of its position here is that marketwise the products are not comparable and that Beech-Nut's reduction was not meeting plaintiff's price but undercutting it. In short, that the elimination of the differential by Beech-Nut gives the latter an unfair competitive advantage, since with prices the same for tin and glass Beech-Nut would run away with the market and would soon eliminate the plaintiff as a competitor in the field.
Plaintiff relies on Matter of Anheuser-Busch,[7] in which the Federal Trade Commission held that if the consumers have demonstrated a willingness to pay more for the product of one manufacturer, than they will pay for the similar product of another manufacturer, the consumer preferred product is a premium product and Section 2(b) is not a defense since in that circumstance a price reduction is not meeting but undercutting competition because the products are not comparable.
The defendant disputes that glass contained food, because it has sold at a higher price, may be considered a premium product. It emphasizes that at no time from its entry in the California market in 1949 has its higher priced product commanded more than 6.6% of the total market as against the plaintiff's more than 70%.
The defendant contends that some consumers prefer tin at any price; a limited number prefer glass at any price; but most prefer glass to tin only when sold at the same price as tin; and that the facts of this case demonstrate that in California the vast majority of consumers refuse to pay a premium price for glass.
In addition to urging the alleged premium aspect of the defendant's packaging, the plaintiff contends that the defendant further undercut plaintiff's price by offering more food content in the junior size[8] and greater discounts in the instance of quantity purchases.[9]
As to the one ounce difference in the contents of the junior size product sold by Beech-Nut and that sold by Gerber, affidavits submitted by retailers, if given credence, indicate that the differential is of no significance, insofar as the consumer is concerned.
As to discounts permitted by Beech-Nut on 10,000 lb. purchases as against Gerber's 40,000 lb. allowance, the record is not quite clear as to whether Beech-Nut has consistently allowed this from the time of its entry into the California *921 market or initiated it when it put into effect the price reduction.
Thus there are challenged issues of fact on a number of items, including charges and countercharges of unfair practices by representatives of each of the parties.
When all is said and done, one comes back to the fundamental questionwas the price reduction made, as Beech-Nut contends, in good faith to meet Gerber as a competitor and to survive in the market or was it, as Gerber contends, a ruthless action the effect of which is to injure it competitively and drive it out of the market by selling at a loss, subsidized with profits from its sales in other areas of the country.
The preliminary relief if granted would require the Court in advance of a trial of the disputed issues to compel the defendant to increase its prices in California by reinstating a so-called historical differential or to require the defendant to reduce its prices to its customers east of the Mississippi. This, of course, is a rather drastic remedy, which may be granted under Section 16 of the Clayton Act[10] only where "the danger of irreparable loss or damage is immediate". The plaintiff urges that it has met the required test. It states that since the price reduction went into effect it has suffered a reduction of profits of $150,000 per month by reason of the lower price at which it now sells its products. Apart from this and loss of sales volume, plaintiff contends there is incalculable damage in the loss of shelf space in the stores of retailers which is deemed a most important advertising medium; that as customers become used to buying Beech-Nut products as against Gerber's, they become more accustomed to glass containers; that in the event the differential is ultimately restored, plaintiff's good name and good will will have been irreparably injured since many customers will feel that plaintiff's product was originally priced unreasonably high. In sum, plaintiff contends that it has come within the doctrine of "balance of hardship" enunciated in the Hamilton Watch case,[11] and is entitled to an injunction at this time.
Undoubtedly the present situation is injurious to the plaintiff as it is to the defendant. Indeed the plaintiff contends that with the two reductions in price neither it nor the defendant can sell at current prices without incurring losses. However, the mere fact of loss of profits or economic injury which results from a competitive situation does not, in and of itself, entitle one to relief. The last price decrease on October 11, 1957 was initiated by the plaintiff on the ground that it was entitled to preserve the price differential theretofore maintained by the defendant. It, like the defendant, did not grant a similar reduction to purchasers of its tin products in areas outside of California. Under the circumstances, the plaintiff can complain of the losses consequent on its October 11th price reduction only if it had a right to the protection of the price differential as against glass. Otherwise, the defendant could justify its October 11th price reduction as well as the earlier elimination of the differential on the ground of good faith meeting of competition.
In short, the defendant's action may be condemned only if its drop in prices was not to meet, but to beat, competition.[12]
This crucial issue in turn hinges on whether the defendant's product is a premium product which is sharply contested.
Impressive affidavits have been presented by merchandising men and those who have had actual experience in trying *922 to sell Beech-Nut's products that its higher price was the reason it faced elimination from the California market, despite plaintiff's contention that it was due to inefficient marketing methods. Indeed plaintiff itself concedes that the preference for tin cannot be separated from price. The proof of market behavior offered by the defendant would indicate that the consumer's resistance to paying the premium price for glass packaging casts serious doubts on its status as a premium product.
The fact that the defendant in its advertising "puffs" the alleged virtue of glass containers does not make it a premium product as against tinany more than plaintiff's advertising claim of unique qualities of tin make its product a premium product. The ultimate test, it seems to me, is whether a substantial part of the public is prepared to pay a greater price for the glass contained product.
With increasing standardization of products generally, consumer appeal through attractive packaging has become a developing aspect of competitive activity. To impose on the more attractive package a disability to meet the price at which it is acceptable to the consumer may of itself chill this developing area of competition. Other considerations not on this application sufficiently persuasive to the Court must be found before a disability to meet the lower price can be established under the law.
A determination upholding the plaintiff's contention that the defendant's glass contained wares is a premium product is bound to have an impact upon marketing and packaging practices in the California area. The consequences which follow in the wake of such a determination seriously effects the consuming public as well as the immediate litigants.
Apart from a substantial doubt that the papers clearly establish the premium quality of the defendant's product, I am of the view that the plaintiff has not on this voluminous record made that showing of irreparable injury or that "the balance of hardship dips decidedly toward the plaintiff"[13] so as to require in advance of trial the granting of the extraordinary relief it seeks.
Plaintiff's loss of sales volume compared to its share of the total California market is not substantial. It still retains the major portion of that market having close to 70%and its sales continue far in excess of both Beech-Nut and Heinz & Companyits two closest competitors.
According to the deposition of Gerber's president, it still has the same or a greater number of outlets than it had prior to the price reduction; and it still has the majority of shelf space.
The plaintiff, as is the defendant, is possessed of vast financial resources and each has great staying power in the intense competitive struggle in which they are now engaged. Plaintiff's position in the California market is dominant; far and away ahead of its closest competitors. It remains the largest distributor of baby foods both in California and throughout the country. The defendant's market position in California is relatively small compared to that of the plaintiff and its distributes baby foods only east of the Mississippi and in California. There is no persuasive indication on the present state of the record of any reasonable likelihood that there would be a substantial lessening of competition or that the plaintiff would be eliminated as a competitor.
It may be that the plaintiff is remitted to measures of competitive retaliation which however costly are the consequences of vigorous competition against which there is no insulation under laws concerned with the preservation of competition. As the Supreme Court has said:
"* * * There is nothing to show a congressional purpose, * * * to compel the seller to choose only between ruinously cutting *923 its prices to all its customers to match the price offered to one, or refusing to meet the competition and then ruinously raising its prices to its remaining customers to cover increased unit costs. There is, on the other hand, plain language and established practice which permits a seller, through § 2(b), to retain a customer by realistically meeting in good faith the price offered to that customer, without necessarily changing the seller's price to its other customers. * * *
"We may, therefore, conclude that Congress meant to permit the natural consequences to follow the seller's action in meeting in good faith a lawful and equally low price of its competitor."[14]
The Court on this motion is not required to determine the ultimate issues as upon a trial. However, the defendant, as of this stage of the record, has advanced sufficient under its Section 2(b) defense to warrant a trial of the contested issues rather than a determination upon conflicting affidavits and further has established that the balance of hardship weighs in its favor.
If plaintiff should eventually prevail there is no question but that the defendant would be well able to respond in money damages to meet not only the loss of profits by reason of reduced sales but for loss of good will or other items which a court may find resulted from the defendant's conduct.[15]
On the other hand, if the price differential is ordered reinstated there can be little doubt that the defendant will be more adversely effected than the plaintiff and may well face elimination from the California market with a consequent substantial lessening of competition in that area.
The Court has carefully considered Porto Rican American Tobacco Co. of Porto Rico v. American Tobacco Co., 2 Cir., 30 F.2d 234 and the other territorial price discrimination cases which plaintiff's counsel has so earnestly pressed. However, in each the predatory practices of the defendant with their consequent competitive injury upon smaller and weaker competitors were clearly found as fact only after a full trial and no meritorious defense under § 2(b) of the Act was established. Here the justification for defendant's acts and their likely consequences are the subject of heated controversy.
Under all the circumstances the plaintiff's papers neither preponderate in its favor nor show a balance of hardship in its favor so as to justify the granting of the motion for preliminary injunctive relief and accordingly it is denied.
Settle order on notice.
NOTES
[1] The complaint alleges six separate claims as follows: Under the Robinson-Patman Act: price discrimination, [Section 2(a)]; discriminatory payments as compensation for services or facilities, [Section 2(d)]; furnishing services and facilities on a discriminatory basis, [Section 2(e)]; and selling at unreasonably low prices for the purpose of destroying competition and eliminating a competitor, [Section 3]. 15 U.S.C.A. §§ 13 (a, d, e), 13a. The Lanham Act claim charges false advertising in violation of Section 43(a), 15 U.S.C.A. § 1125 (a) and another claim charges an attempt to monopolize in violation of the Sherman Anti-Trust Act, 15 U.S.C.A. § 1 et seq.
[2] 15 U.S.C.A. § 13(a).
[3] Strained baby foods are strained sufficiently fine for feeding infants. Junior baby foods are for children who no longer require the finely strained food intended for infants.
[4] Plaintiff, while recognizing that under Nashville Milk Co. v. Carnation Co., 355 U.S. 373, 78 S. Ct. 352, 2 L. Ed. 2d 340, it may not maintain a claim for violation under Section 3 of the Robinson-Patman Act, 15 U.S.C.A. § 13a, contends that defendant's action is evidence to support its charge of a purpose to eliminate it as a competitor.
[5] 15 U.S.C.A. § 13(b).
[6] The factual situation advanced by the defendant in justification makes it unnecessary to consider plaintiff's contention based on Samuel H. Moss, Inc., v. Federal Trade Commission, 2 Cir., 148 F.2d 378 and Federal Trade Commission v. Standard Brands, 2 Cir., 189 F.2d 510, that once territorial price differences have been established, anti-competitive impact in violation of Section 2(a) is presumed.
[7] FTC Dkt.No.6331, CCH Trade Reg.Rep. ¶26,705 (1957).
[8] The defendant's junior foods contain one ounce more than plaintiff's.
[9] The defendant allows its maximum quantity discount on the basis of 10,000 lb. shipments of both strained and junior foods whereas the plaintiff allows it only on shipments of 40,000 lb. and hence plaintiff urges that the defendant's prices are now two cents and two and a half cents lower per dozen than plaintiff's prices.
[10] 15 U.S.C.A. § 26.
[11] Hamilton Watch Co. v. Benrus Watch Co., Inc., 2 Cir., 206 F.2d 738, 740.
[12] Cf. Standard Oil Co. v. Federal Trade Commission, 340 U.S. 231, 249, 71 S. Ct. 240, 95 L. Ed. 239, with Balian Ice Cream Co. v. Arden Farms Co., 9 Cir., 231 F.2d 356, 367.
[13] Hamilton Watch Co. v. Benrus Watch Co., Inc., 2 Cir., 206 F.2d 738, 740.
[14] Standard Oil Co. v. Federal Trade Commission, 340 U.S. 231, 250, 71 S. Ct. 240, 250, 95 L. Ed. 239
[15] Cf. Bigelow v. RKO Radio Pictures, 327 U.S. 251, 66 S. Ct. 574, 90 L. Ed. 652.
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(2008)
SUN MEDIA SYSTEMS, INC., Plaintiff,
v.
KDSM, LLC and Sinclair Broadcast Group, Inc., Defendants.
No. 4:06-cv-106.
United States District Court, S.D. Iowa, Central Division.
September 10, 2008.
ORDER
ROBERT W. PRATT, Chief Judge.
Before the Court is Plaintiffs Motion for Reconsideration pursuant to Rule 59(e), filed July 11, 2008. Clerk's No. 86. In its motion, Plaintiff requests that the Court reconsider its Order, filed July 1, 2008, granting summary judgment in favor of Defendants on Plaintiffs claim of copyright infringement.[1] Defendants filed a resistance to the motion on July 29, 2008. Clerk's No. 93. Plaintiff did not file a reply and the matter is, therefore, fully submitted.
I. STANDARD OF REVIEW
District courts enjoy broad discretion in ruling on motions to reconsider. See Capitol Indem. Corp. v. Russellville Steel Co., Inc., 367 F.3d 831, 834 (8th Cir.2004); Concordia Coll. Corp. v. W.R. Grace & Co., 999 F.2d 326, 330 (8th Cir.1993). Rule 59(e) provides: "Any motion to alter or amend a judgment shall be filed no later than 10 days after entry of judgment." Fed.R.Civ.P. 59(e). Rule 59(e) was adopted to "clarify a district court's power to correct its own mistakes in the time period immediately following entry of judgment." Innovative Home Health Care, Inc. v. P.T.-O.T. Assocs. of the Black Hills, 141 F.3d 1284, 1286 (8th Cir.1998). "Rule 59(e) motions serve a limited function of correcting `manifest errors of law or fact or to present newly discovered evidence.'" Id. (quoting Hagerman v. Yukon Energy Corp., 839 F.2d 407, 414 (8th Cir.1988)). "Such motions cannot be used to introduce new evidence, tender new legal theories, or raise arguments which could have been offered or raised prior to entry of judgment." Id.
In the present case, Plaintiff asserts that the Court misapplied the standard for summary judgment in ruling on Defendants' motion for summary judgment. Namely, Plaintiff contends that because Defendants never provided the Court with the originals of the allegedly infringing mailers, Plaintiff never had the burden of producing to the Court the original of the mailer that was purportedly infringed. Plaintiff further argues that the Court conducted an improper analysis of the mailers in its copyright infringement analysis and that the Court erred in finding that Plaintiffs presentation in Exhibit H was not copyrightable.
II. ANALYSIS
A. Presence of Original Mailers
In one sentence of its fifty-nine page brief in resistance to Defendants' motion for summary judgment, Plaintiff asserted that "the Court does not have before it the necessary materials to conduct the required intrinsic evaluation of the infringing mailers," due to Defendant's failure "to introduce the originals of the infringing mailers that are in [Defendants'] possession." Clerk's No. 60 at 54. The Court addressed this contention in its July 1, 2008 Order:
When a district court has complete copies of both the copyrighted work and the allegedly infringing work, it is "in proper position to apply the substantial similarity test" articulated in Hartman. Nelson v. PRN Prods., Inc., 873 F.2d 1141, 1143 (8th Cir.1989). In the present case, the Court has a photocopied version of Plaintiffs copyrighted work, Exhibit O, as well as copies of all allegedly infringing works produced by Defendants. Plaintiff contends, however, that the "Court does not have before it the necessary materials to conduct the required intrinsic evaluation of the infringing mailers" because "Defendants failed to introduce the originals of the infringing mailers that are in their possession." Pl.'s Resistance Br. at 54. Specifically, Plaintiff argues that the Court cannot make a reasonable comparison of the copyrighted work and the allegedly infringing works because the copies are not the same size, do not have the same weight and feel, and are not bound in the same way as the originals. However, as Defendants point out, Plaintiff has likewise not provided the Court with an original of Exhibit O, making comparison of the "look and feel" equally difficult due to Plaintiffs failing. Moreover, discovery in this case is closed, and nowhere in the record can the Court find a motion to compel, wherein Plaintiff requests that the Court order Defendants to produce the originals of the allegedly infringing mailers. If Plaintiff wanted to hinge its argument on the "look and feel" of the mailers, it had just as much of an obligation to ensure that it had the necessary documents for submission to the Court as Defendants. Indeed, it is Plaintiff who bears the burden of proving that Defendants' mailers infringed on Plaintiffs copyrighted materials. Regardless, the Court has color copies of both Exhibit O and the allegedly infringing mailers, and believes that these documents provide it with ample information to reach a conclusion.
Sun Media Sys., Inc. v. KDSM, LLC, 564 F. Supp. 2d 946, 980 (S.D.Iowa 2008).
Plaintiff argues that the Court improperly granted summary judgment in favor of Defendants on the copyright claim because "Plaintiff did not have the burden of establishing it could prove copyright infringement to defeat Defendant[s'] motion, [rather, Plaintiff] simply had to establish the Defendant[s] did not meet their initial burden." Pl.'s Br. at 4. Plaintiff asserts that it met this burden when it pointed out that Defendants had failed to provide the originals of the allegedly infringing mailers to the Court in support of Defendants' motion for summary judgment. The Court disagrees.
Plaintiff's argument that the Court misapplied the proper standard for summary judgment itself misconstrues the parties' respective burdens on a motion for summary judgment. Celotex stated that "a party seeking summary judgment always bears the initial responsibility of informing the district court of the basis for its motion, and identifying those portions of the [record] which it believes demonstrate the absence of a genuine issue of material fact." Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S. Ct. 2548, 91 L. Ed. 2d 265 (1986). The Celotex Court, however, expressly found "no express or implied requirement in Rule 56 that the moving party support its motion with affidavits or other similar materials negating the opponent's claim." Id. Thus, once Defendants pointed out the Plaintiff's lack of evidence supporting a finding of substantial similarity between Exhibit O and the allegedly infringing mailers, the burden shifted to Plaintiff to show that sufficient facts existed to prove that the works are substantially similar. See, e.g., Celotex, 477 U.S. at 323, 106 S. Ct. 2548 (holding that summary judgment is proper if the "nonmoving party has failed to make a sufficient showing on an essential element of her case with respect to which she has the burden of proof"); Frybarger v. Int'l Business Machines Corp., 812 F.2d 525, 528 (9th Cir.1987) ("Because plaintiff bears the burden of proving that the works at issue are substantially similar in a copyright infringement case, summary judgment for defendant is appropriate when plaintiff fails to make a sufficient showing that the ideas and expressive elements of the works are substantially similar after defendant has properly identified in a motion for summary judgment that plaintiff has failed to do so."); Stewart v. Wachowski, No. CV03-2873, 2005 WL 6186375, at *27 (C.D.Cal. June 14, 2005) (denying a motion for reconsideration after granting summary judgment in favor of defendant on plaintiff's claims of copyright infringement where the plaintiff "failed to submit copies of the allegedly infringing works to show that they were strikingly similar to her copyrighted literary works"); Berkla v. Corel Corp., 66 F. Supp. 2d 1129, 1139 (E.D.Cal.1999) ("Whether derived as interpretation of the best evidence rule, or simply a requirement of summary judgment standards, courts have required the nonmoving party with the burden of proof in copyright cases to produce the alleged infringed and infringing products for comparison purposes at the summary judgment stage." (emphasis added, citations omitted)).[2]
Moreover, as Defendant aptly points out, any concerns that the Court did not have the originals of the infringing mailers or of Exhibit O is tempered by the fact that the Court did have the opportunity to observe the originals of the allegedly infringing mailers and of Exhibit O at the hearing held on Defendant's motion for summary judgment on March 25, 2008. See Hr'g Tr. at 17-18, 40.[3] Finally, any concerns that the Court did not appropriately consider the look, weight, and feel of the mailers was appropriately addressed in the Court's two-step Hartman substantial similarity analysis. See Hartman v. Hallmark Cards, Inc., 833 F.2d 117, 120 (8th Cir.1987) (stating that when determining substantial similarity, a two-step process is employed: "First, similarity of ideas is analyzed extrinsically, focusing on objective similarities in the details of the works. Second, if there is substantial similarity in ideas, similarity of expression is evaluated using an intrinsic test depending on the response of the ordinary, reasonable person to the forms of expression."). Therein, the Court first concluded that Plaintiff had failed to satisfy the first, extrinsic, step of the Hartman test. See Sun Media, 564 F.Supp.2d at 979. The Court, nonetheless, went on to state that even if Plaintiff had satisfied the extrinsic portion of the test, and "even assuming [the mailers] had the same overall weight and feel," the Plaintiff could not satisfy the second, intrinsic, portion of the Hartman test because "to an ordinary observer the dissimilarities between the mailers are immediately apparent...." Id. at 987.
B. Improper Analysis
Plaintiff argues that the Court should set aside its judgment with respect to Count One on the basis that the Court improperly applied the two-step Hartman analysis. As noted previously, Hartman requires a Court evaluating substantial similarity to employ a two-step process: "First, similarity of ideas is analyzed extrinsically, focusing on objective similarities in the details of the works. Second, if there is substantial similarity in ideas, similarity of expression is evaluated using an intrinsic test depending on the response of the ordinary, reasonable person to the forms of expression." Hartman, 833 F.2d at 120.
Plaintiff's primary argument in this regard is that the Court "improperly dissected the infringing mailers into multiple components in determining that the infringing mailers are not substantially similar to SunMedia's copyrights." Pl.'s Br. at 14. Plaintiff cites Taylor Corp. v. Four Seasons Greetings, LLC in support of its position. In Taylor, the Eighth Circuit found that it is improper for courts "to perform analytic dissection, or `filtering,' when conducting the `intrinsic' step" of the Hartman analysis. 403 F.3d 958, 966 (8th Cir.2005). Here, Plaintiff claims that the Court "dissected the mailer into multiple components in determining the second step of the Hartman test," in contravention of Taylor. See Pl.'s Br. at 14. Plaintiff points to pages 59-61 of the Court's Order as evidence that it improperly dissected the mailer.
Plaintiff is correct that the Court "dissected" the mailer in the referenced pages. The Court did so, however, in relation to the first, extrinsic, step of the two-step Hartman analysis, concluding that there were only "minor," rather than "substantial" similarities between Exhibit O and the allegedly infringing mailers. See Sun Media Sys., Inc., 564 F.Supp.2d at 987, (stating "the Court cannot conclude that there is substantial similarity of the general ideas and also of the expression of those ideas, as required by the first step in the Hartman test" and then identifying the similarities and dissimilarities). The Court's "dissection" was entirely proper under the first step of the Hartman analysis because "in applying the extrinsic test, the Court must `filter out and disregard the non-protectible elements in making its substantial similarity determination.'" Id. at 979 (quoting Cavalier v. Random House, Inc., 297 F.3d 815, 822 (9th Cir. 2002)).
C. Presentation H
Plaintiff finally contends that the Court erred in concluding that its presentation, Exhibit H, is not copyrightable. Its argument in this regard, however, simply parrots arguments previously made by Plaintiff, and already rejected by this Court. See Innovative Home Health Care, 141 F.3d at 1286 ("Rule 59(e) motions serve a limited function of correcting manifest errors of law or fact or to present newly discovered evidence." (internal citation omitted)). The Court declines to revise its conclusion that "copyright protection for Exhibit H would amount to a prohibition on virtually any television station explaining the process or method whereby advertisers can receive direct mail advertising when they purchase television advertising." Id. at 950.
Moreover, Plaintiffs argument with respect to Exhibit H does nothing to address the Court's alternative conclusion that "Plaintiffs failure to identify the alleged similarities with particularity is, alone, fatal to maintenance of its claim" with regard to Exhibit H. Id. at 988 n. 48. As was the case with Plaintiffs trade secret and copyright claims in general, Plaintiff made nothing but generalized allegations of infringement or copying with regard to Exhibit H, leaving the Court to search the record in an attempt to discern, on its own accord, the precise boundaries of Plaintiffs claims. See Richards v. Combined Ins. Co. of Am., 55 F.3d 247, 251 (7th Cir.1995) ("It is not our task, or that of the district court, to scour the record in search of a genuine issue of triable fact. We rely on the nonmoving party to identify with reasonable particularity the evidence that precludes summary judgment.").
III. CONCLUSION
For the reasons stated herein, Plaintiffs Motion for Reconsideration pursuant to Rule 59(e) (Clerk's No. 86) is DENIED.
IT IS SO ORDERED.
NOTES
[1] Plaintiff's Second Amended Complaint asserted four causes of action against Defendants: 1) copyright infringement against KDSM and Sinclair; 2) breach of contract against KDSM; 3) misappropriation of trade secrets against KDSM; and 4) misappropriation of trade secrets against Sinclair. See Clerk's No. 40. The Court's July 1, 2008 Order granted summary judgment on all counts. The present motion, however, only requests reconsideration of the Court's grant of summary judgment with respect to the copyright claims alleged in Count One.
[2] Plaintiff cites Seiler v. Lucasfilm, Ltd., 808 F.2d 1316, 1318 (9th Cir.1986), in support of the proposition that "there can be no proof of `substantial similarity' and thus of copyright infringement unless the original works are juxtaposed with the actual allegedly infringing item and their contents compared." Pl.'s Br. at 4. "Because the original content is materially critical to the analysis, the moving party must either produce the original or show that it is unavailable through no fault of his own." Id. Plaintiff incorrectly states the law articulated in Seiler, however, in that Plaintiff ignores the fact that Seiler upheld the district court's grant of summary judgment in favor of the defendant on the basis that the plaintiff was unable to produce originals of the work he was claiming was infringed. See Seiler, 808 F.2d at 1319 (concluding that the "best evidence rule" of Federal Rule of Evidence 1004 required the plaintiff to produce the original drawings that were allegedly infringed).
[3] Defendants' counsel showed the Court numerous allegedly infringing mailers at the hearing on the motion for summary judgment:
And for KDSM, at least, the front covers of these-these are the originals that they've seen before, but we haven't produced as a part of the record. We produced color copies of these, but apparently there's some dispute as to the size and the texture and feel. This is what they look like, Your Honor. This is the first KDSM mailer. It's not registered. The registered mailer that they're asserting that the subsequent mailers infringe upon is Exhibit O. Exhibit O, we've never seen the original of Exhibit O. I suspect we'll probably see one today. But during the course of discovery we never did, the it certainly wasn't attached to the complaint and so the whole touch and feel argument we've never addressed because it wasn't part of the discovery process. The Exhibit O that we have is a black and white eight-and-half by eleven. Your Honor, I'll be happy to supply this to you.
Court's Unedited RealTime Hr'g Tr. at 17-18. Later, Plaintiff's counsel showed the Court the original of Exhibit O:
Moving on to the copyrights, Mr. Collins is right, you probably saw this, this was the actual mailer that was sent out-or actually registered with the copyright office, and it was available for inspection at any time. This is the only original we have, Your Honor. We did enter color copies of this into the record. I don't know that their expert ever viewed this actual document. But when one starts looking at these, you can see they're the same size, same physical appearance. When you touch them and feel them they look and feel the same. When one looks at the infringing mailer later on, it's the same size, same look, same feel, same kind of stuff like that.
Id. at 40.
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(2008)
Antolin Andrew MARKS, Plaintiff,
v.
John P. TORRES, et al., Defendants.
Civil Action No. 07-1660 (EGS).
United States District Court, District of Columbia.
September 18, 2008.
MEMORANDUM OPINION
EMMET G. SULLIVAN, District Judge.
This matter is before the Court on Defendants' Motion to Dismiss Complaint as Frivolous or Malicious Or, in the Alternative, Motion to Transfer, and to Stay Further Proceedings Pending Disposition of the Motion. For the reasons stated herein, the Court will transfer this action to the United States District Court for the Western District of Washington.
I. BACKGROUND
Plaintiff is detained by U.S. Immigration and Customs Enforcement ("ICE") at the Northwest Detention Center ("NWDC") in Tacoma, Washington. See Compl. at 1 (first ¶ 1). According to ICE's website (http://www.ice.gov/pi/dro/facilities/tacoma. htm), NWDC is a temporary detention center operated under contract with The GEO Group Inc. for individuals awaiting either a determination of their immigration status or repatriation.
On or about February 2, 2007, plaintiff prepared for copying and mailing "a letter to the members of Congress who are Democrats, a copy of the Visa Application for Rudder, Wayne,[1] a scan of four pictures showing the Plaintiff at the age of 19, one document showing Rudder at the age of 14, and the exact same documents to the Senators who are Democrats and Independents." Compl. ¶ 14. Plaintiff "presented 285 letters to [Michael] Melendez to be mailed to Congress."[2]Id. Through these letters, plaintiff sought "a private bill to his benefit for assistance in his immigration case[.]" Id. ¶ 10.
After 120 days had passed without "one single response . . . from those letters," Compl. ¶ 14, plaintiff came "to believe that [Mr.] Melendez did not mail the letters as he stated he did." Id. Plaintiff then prepared 285 "follow-up letters" and submitted them for mailing. Id. ¶ 16. According to plaintiff, Mr. Melendez refused to mail the letters on the ground that they were "special correspondence" subject to a limit of five items per week.[3]Id. Legal mail was not subject to such limits. Rather, according to plaintiff, regulations provided that "[i]ndigent detainees will be permitted to mail ... at government expense . . . [a]ll correspondence related to a legal matter, including correspondence to a legal representative, potential legal representative and any court." Compl. ¶ 22. Mailing the 285 letters at the rate of five per week "mean[t] that it would take Plaintiff a full year, one month and one week to send all the letters to Congress." Id.
Plaintiff contends that his follow-up letters to Congress qualified as legal mail because they are related to the "legal matter" of his immigration case. See Compl. ¶¶ 39-42. He asserts that he has a right to petition Congress and that defendants' refusal to mail the follow-up letters at government expense violates his First Amendment right to petition Congress and his Fifth Amendment right to due process. See id. ¶ 41. Plaintiff brings this action against John Torres for his alleged failure to train and supervise his subordinates, Jack Bennett and Neil Clark, with respect to the due process rights of detainees and compliance with national detention standards on the handling of detainees' mail.[4]See Compl. ¶¶ 1-4, 42-43. He further alleges that defendants unlawfully opened legal and confidential mail, see id. ¶¶ 63-94, copied legal documents, see id. ¶¶ 95-101, and improperly returned legal mail to sender, see id. ¶¶ 102-116. In vague terms, plaintiff also alleges that defendants "failed to provide the Plaintiff with a copy of ... documents in violation of the Freedom of Information Act and the Privacy Act." Id. ¶ 117. He demands declaratory and injunctive relief. See id. at 36-39 (Remedy).
Prior to the filing of the instant civil action, in June 2007, plaintiff filed a civil action in the United States District Court for the Western District of Washington. Memorandum in Support of Defendants' Motion to Dismiss Complaint as Frivolous or Malicious or, in the Alternative, Motion to Transfer, and to Stay Further Proceedings Pending Disposition of Motion ("Defs.' Mot."), Ex. D (Marks v. Garman, Civ. No. C07-5282 KDB/KLS (W.D. Wash. filed June 4, 2007) (Complaint)). In addition to claims against the federal government under the Freedom of Information Act, the Privacy Act and the Federal Tort Claims Act, plaintiff alleged that "he ha[d] been subjected to mental torture in violation of the Eighth Amendment under the hands of Neil Clark, Gary Garman and Michael Melendez," id. ¶ 38, who "saddled the Plaintiff with the name[] Wayne Rudder where that name is not the Plaintiffs name." Id. ¶ 46. Ultimately the court dismissed plaintiff's FOIA claims without prejudice, dismissed the constitutional claims with prejudice, and re-referred the Federal Tort Claims Act claim to a Magistrate Judge. Marks v. Garman, No. C07-5282KDB/JKA, 2008 WL 3540177 (W.D.Wash. Aug.11, 2008).
In July 2007, plaintiff filed another civil action in the United States District Court for the Western District of Washington naming Jack Bennett and Neil Clark as defendants. See Defs.' Mot., Ex. B (Marks v. Bennett, Civ. No. C07-5372 RBL/JKA (W.D. Wash. filed July 23, 2007) (Complaint)). Generally, plaintiff alleged that, on July 17, 2007, defendant Bennett "denied the Plaintiff the ability to send letters to Congressional Representatives [and] Senate Representatives of the Plaintiffs Party." Id., Ex. B ¶ 11. In language that is practically identical to that set forth in paragraphs 10-18 of the instant complaint, plaintiff alleged that defendants refused to mail 285 follow-up letters to Congress at the same time, and, instead, declared the letters special correspondence subject to a limit of five items per week. See id. ¶¶ 12-20. Adopting the Magistrate Judge's Report and Recommendation, the court dismissed this action because plaintiff neither qualified for in forma pauperis status and nor paid the filing fee. See id., Ex. C (Order of Dismissal and Judgment in a Civil Case).
Plaintiff has been declared a "vexatious litigant" against whom the United States District Court for the Western District of Washington has imposed sanctions. See Marks v. United States of America, No. C07-5679 FDB, 2008 WL 803150, *1 (W.D.Wash. Mar. 24, 2008) (order imposing sanctions and removing "his ability to proceed in forma pauperis . . . unless he can show he is in imminent danger of serious bodily harm or death"). Since plaintiffs transfer to NWDC in 2005, he had filed 24 civil actions "show[ing] a pattern of harassing duplicative litigation and abuse of process." Id.; see id. (Magistrate Report and Recommendation setting forth histories of plaintiffs 24 civil actions).
II. DISCUSSION
Defendants move to transfer this action to the United States District Court for the Western District of Washington pursuant to 28 U.S.C. § 1404(a). See Defs.' Mot. at 9-16.[5] Under 28 U.S.C. § 1404(a), a court may transfer a case to any other district where it might have been brought "[f]or the convenience of parties and witnesses, in the interests of justice." Id.
Where, as here, the district court's jurisdiction "is not founded solely on diversity of citizenship," a plaintiff may bring the action only in "(1) a judicial district where any defendant resides, if all defendants reside in the same State, (2) a judicial district in which a substantial part of the events or omissions giving rise to the claim occurred . . ., or (3) a judicial district in which any defendant may be found, if there is no district in which the action may otherwise be brought." 28 U.S.C. § 1391(b). Similarly, a civil action against an officer or employee of the United States government "acting in his official capacity or under color of legal authority . . . may... be brought in any judicial district in which (1) a defendant in the action resides, (2) a substantial part of the events or omissions giving rise to the claim occurred, or (3) the plaintiff resides if no real property is involved in the action." 28 U.S.C. § 1391(e).
Generally, the courts defer to a plaintiffs choice of forum. See, e.g., Sec. & Exch. Comm'n v. Savoy Indus. Inc., 587 F.2d 1149, 1154 (D.C.Cir.1978) (citations omitted). Less deference is warranted where the chosen forum is not plaintiffs home forum. See. Piper Aircraft Co. v. Reyno, 454 U.S. 235, 255-56, 102 S. Ct. 252, 70 L. Ed. 2d 419 (1981); Zakiya v. United States, 267 F. Supp. 2d 47, 59 (D.D.C.2003) (quoting Armco Steel Co. v. CSX Corp., 790 F. Supp. 311, 323 (D.D.C.1991)). "Courts in this jurisdiction must examine challenges to ... venue carefully to guard against the danger that a plaintiff might manufacture venue in the District of Columbia." Cameron v. Thornburgh, 983 F.2d 253, 256 (D.C.Cir.1993). "By naming [a] high government official[] [such as Mr. Torres] as [a] defendant[]," plaintiff "could bring a suit here that properly should be pursued elsewhere." Id.
Plaintiff argues that venue in the District of Columbia is proper under 28 U.S.C. § 1391. He characterizes this action as a "challenge[] [to] the decisions made by John P. Torres and those decisions were made in Washington, D.C." Plaintiffs Opposition to the Defendants' Motion to Dismiss or Transfer ("Pl.'s Opp'n") at 5. Specifically, plaintiff alleges that defendant Torres "failed to properly train his employees," and the "training mechanism for those employees emanate[d] from ... Washington, D.C." Id. at 4-5. His arguments are not persuasive, as the "mere involvement on the part of federal agencies, or some federal officials who are located in Washington D.C.[,] is not determinative." Shawnee Tribe v. United States, 298 F. Supp. 2d 21, 25-26 (D.D.C. 2002).
In this case, plaintiff not only alleges defendant Torres' failure to train, but also challenges defendants' interpretation and implementation of ICE regulations pertaining to legal mail and special correspondence. The interpretation and implementation of the regulations occurred outside of this district, however. Plaintiff, then, cannot establish venue in this district either on the ground that he challenges an ICE policy or that a high-level ICE official based in Washington, D.C. is a named defendant. The Court concludes that venue is not proper in the District of Columbia. This action could have been brought in the Western District of Washington the district of plaintiffs current incarceration and the place where events giving rise to his claims occurred. See Zakiya v. United States, 267 F.Supp.2d at 59 (citation omitted) (concluding that venue in this district is not appropriate where plaintiff made a specific attack on the implementation of a Federal Bureau of Prisons policy by BOP officials to plaintiffs particular situation and the implementation occurred at the facilities where he was incarcerated and not in this district); Stern v. Fed. Bureau of Prisons, No. 207-0564, 2007 WL 1555830, at *2 (D.D.C. Mar. 22, 2007) (transferring federal prisoner's case challenging the validity of the Inmate Financial Responsibility Program implemented by the Bureau of Prisons to the district where the prisoner was incarcerated and where all the events that gave rise to the action occurred); Dominguez v. Bureau of Prisons, No. 05-2242, 2006 WL 1445041, *4 (D.D.C. May 25, 2006) (concluding that venue is appropriate in the district where the implementation of a national policy occurred).
In considering whether transfer would be proper, the court considers, among others, the following factors:
[T]he convenience of the witnesses of plaintiff and defendant; ease of access to sources of proof; availability of compulsory processes to compel the attendance of unwilling witnesses; the amount of expense for the willing witnesses; the relative congestion of the calendars of potential transferor and transferee courts; and other practical aspects of expeditiously and conveniently conducting a trial.
Sec. & Exch. Comm'n v. Page Airways, 464 F. Supp. 461, 463 (D.D.C.1978). It is appropriate to transfer a civil action to the district where plaintiff and most of the defendants are located, and to the district where both witnesses and relevant evidence likely are located. See, e.g., Rogers v. Fed. Bureau of Prisons, 257 F. Supp. 2d 147, 148 (D.D.C.2003) (transferring action filed by incarcerated pro se plaintiff to district where he is incarcerated, where "all relevant witnesses and files are located," and where plaintiff sought "mandamus relief not related to this district"); cf. Boers v. United States, 133 F. Supp. 2d 64, 65 (D.D.C.2001) (transferring action challenging foreclosure to district where land that was subject to foreclosure is located). In this case, the proper district is the Western District of Washington.
Transfer particularly is appropriate in this case. It appears that plaintiff purposely divided his various claims among three complaints filed in two federal districts. He notes in his complaint that "[a] sister suit was sent for filing days before this one ... targeting] Melendez and Clark and the United States and seek[ing] damages under the FTCA," while the instant complaint "is maintained primarily... for an injunction rather than for damages." Compl. ¶ 58 n. 1; see Defs.' Mot., Ex. D at 15 (Remedy). Given the similarities in plaintiffs complaints and in light of the March 2008 injunction order, to allow plaintiff to proceed in this district may circumvent the well-founded filing restrictions imposed in the Western District of Washington. Transfer "avoid[s] the prospect of a litigant using one district court as a safe haven from the lawful orders of another." In re Tripati, 836 F.2d 1406, 1407 (D.C.Cir.1988) (per curiam); see Reddy v. O'Connor, 520 F. Supp. 2d 124, 133 (D.D.C.2007) (transferring action under § 1404(a) to the district where plaintiff and "virtually all of the remaining named parties are located," notwithstanding "the adverse decisions she has thus far received in those courts, including an order that limits her ability to file suit without leave of court"); Mikkilineni v. Penn Nat'l Mut. Cas. Ins. Co., 271 F. Supp. 2d 142, 151 (D.D.C.2003) (transferring civil action where claims duplicate those advanced in plaintiffs suits in another district in order "to prevent the plaintiff from using this court as a `safe haven'" from orders issued by another district court).
The court notes that the injunction order had not been issued at the time plaintiff filed the instant civil action in this district, and this court declines to consider whether it applies to the instant civil action. The court is confident, however, that the judges of the Western District of Washington are better positioned to determine whether the claims alleged in the instant complaint are indeed duplicative of those set forth in plaintiffs prior cases or whether the claims otherwise warrant further consideration.
An Order consistent with this Memorandum Opinion will be issued separately.
NOTES
[1] It appears that plaintiff is also known as Wayne Rudder. Plaintiff "has used or has been known by over fifty aliases, including Vincent Daniel Hopper, Wayne Ricky Elison Rudder, and Antolin Andrew Marks." Marks v. Clark, No. C06-1796-RSM, 2007 WL 2042243, *1 (W.D.Wash. May 29, 2007) (Magistrate Report and Recommendation on Marks' December 18, 2006 petition for writ of habeas corpus), adopted as modified, 2007 WL 2042242 * 1 (W.D.Wash. July 10, 2007). His "fingerprints match the fingerprints of alien Wayne Ricky Elison Rudder, who is a native a citizen of Trinidad and who was admitted to the United States on or about March 7, 1974, as an immigrant." Id.
[2] Mr. Melendez is not a named defendant. It is unclear whether he is an employee or official of ICE or an employee of The Geo Group, Inc.
[3] The term "special correspondence" means:
detainees' written communications to or from private attorneys and other legal representatives; government attorneys; judges, courts; embassies and consulates; the president and vice president of the United States, members of Congress, the Department of Justice (including INS and the Office of the Inspector General); the U.S. Public Health Service; administrators of grievance systems; and representatives of the news media. Correspondence will only be treated as special correspondence if the title and office of the sender (for incoming correspondence) or addressee (for outgoing correspondence) are unambiguously identified on the envelope, clearly indicating that the correspondence is special.
ICE/DRO Detention Standard on Correspondence and Other Mail at 4. The Operations Manual ICE Performance Based National Detention Standards is available on ICE's website (http://www.ice.gov/partners/dro/PBNDS/ index.htm).
[4] Plaintiff alleges that Mr. Torres is ICE's Director of Removal Operations. Plaintiff' Opposition to the Defendants' Motion to Dismiss or Transfer at 2. It appears that Neil Clark is the Director of the ICE Field Office in Seattle, Washington. Plaintiff describes Jack Bennett as the Assistant Field Office Director. Compl. ¶ 13.
[5] In the alternative, defendants move to dismiss the complaint with prejudice as frivolous or malicious. See Defs.' Mot. at 7-9. Review of the instant complaint and two complaints filed in the Western District of Washington reveals substantial similarities in the factual allegations giving rise to plaintiff's constitutional claims regarding the handling of his mail. The complaints are not identical, and each raises a claim, or names a defendant or demands relief that another does not. The Court denies defendants' motion to dismiss without prejudice.
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299 F. Supp. 2d 565 (2004)
TAO OF SYSTEMS INTEGRATION, INC., Plaintiff,
v.
ANALYTICAL SERVICES & MATERIALS, INC., Defendant and Counterclaim Plaintiff,
v.
Tao of Systems Integration, Inc., Dr. Siva Mangalam, Counterclaim Defendants.
No. CIV.A. 403CV67.
United States District Court, E.D. Virginia, Newport News Division.
January 8, 2004.
*566 *567 *568 Virginia M. Sadler, Esquire, Zuckerman Spaeder LLP, Washington, DC, Counsel for plaintiff and Dr. Siva Mangalam.
David K. Sutelan, Esquire, George H. Bowles, Esquire, Troutman Sanders LLP, Norfolk, VA, for defendant and Analytical Services & Materials, Inc.
OPINION AND ORDER
REBECCA BEACH SMITH, District Judge.
This matter comes before the court on three motions: defendant Analytical Services & Materials, Inc.'s motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6), plaintiff's motion to amend the complaint pursuant to Federal Rule 15(a), and plaintiff's motion to dismiss defendant's counterclaim pursuant to Federal Rule 12(b)(6). For the reasons set forth below, plaintiff's motion to amend the complaint is GRANTED, defendant's motion to dismiss is GRANTED in part and DENIED in part, and plaintiff's motion to dismiss the counterclaim is DENIED.
I. Factual and Procedural History
Plaintiff Tao of Systems Integration, Inc. ("Tao") filed the instant complaint, alleging four counts of federal and state claims against defendant Analytical Services & Materials, Inc. ("AS & M"). Counts One and Two allege claims for "reverse passing off" and false advertising in violation of § 43(a) of the Lanham Act, 15 U.S.C. § 1125(a)(1)(A) & (a)(1)(B) (2000). Count Three alleges a claim for misappropriation of trade secrets in violation of the Virginia Uniform Trade Secrets Act ("VUTSA"), Va.Code. Ann. § 59.1-336 to -343 (Michie 2001). Count Four alleges a claim of unjust enrichment under Virginia common law. AS & M filed a counterclaim, also alleging a claim for misappropriation of trade secrets under VUTSA.
Tao, a Virginia corporation headquartered in Williamsburg, Virginia, and AS & M, a Virginia corporation headquartered in Hampton, Virginia, both operate in the aeronautical engineering services market. Tao's claims stem from its allegation that AS & M misrepresented to the National Aeronautics and Space Administration ("NASA") that AS & M owned intellectual property and expertise which actually belonged to Tao. Tao alleges that as a result of these misrepresentations, AS & M was granted a valuable services contract by NASA. Moreover, Tao alleges that because NASA has come to associate Tao's intellectual property and expertise with AS & M, Tao has been unable to secure new contracts with NASA.
AS & M was founded in 1983 by Dr. Jalaiah Unnam. Dr. Unnam is the president of AS & M. From 1985 to 1994, Dr. *569 Siva Mangalam was employed at AS & M, and was, at least part of that time, a partner. In 1994, Dr. Mangalam left AS & M to found Tao. In March and April of 1994, AS & M and Dr. Mangalam executed several agreements regarding Dr. Mangalam's departure from AS & M. Among other provisions, these agreements assigned certain patents from AS & M to Dr. Mangalam or Tao. The agreements also assigned to Dr. Mangalam or Tao the rights and obligations of performance under certain contracts for projects funded by NASA and the Department of Defense through the Small Business Innovation Research ("SBIR") program.
On March 31, 1994, Tao executed an agreement with NASA's Langley Research Center, under which Tao would conduct flutter instrumentation testing at Langley Research Center's Transonic Dynamic Tunnel ("TDT"). The agreement provided that Tao and NASA would share the results of the project, but that the data would be considered proprietary to Tao. Tao conducted the flutter instrumentation testing from April 1994 through June 1994. One of the Tao engineers involved in the data analysis for this project was Dr. Subbiah Venkateswaran. On May 24, 1994, Dr. Venkateswaran participated in a slide presentation of some of the test results to Langley Research Center. In July 1994, Dr. Venkateswaran left the employ of Tao and began employment at AS & M.
In June 1995, AS & M filed a proposal ("the ETS Proposal") in response to a NASA request for proposals, RFP4-00001, for an Engineering and Technical Services contract with NASA's Dryden Flight Research Center in Edwards, California. Tao alleges that both Dr. Unnam and Dr. Venkateswaran participated in preparing in the ETS Proposal. Tao alleges that the ETS Proposal contained a number of misrepresentations in which AS & M took credit for expertise and capabilities belonging to Tao. Tao further alleges that the ETS Proposal suggested that AS & M, rather than Tao, had performed the TDT flutter testing at Langley Research Center. The ETS Proposal contained a figure, labeled "Typical Results from Flexible Wing During Flutter," which included data plots that Tao alleges are "substantially identical" to the data plots presented by Tao in the May 24, 1994 presentation to Langley Research Center. (Compl. ¶ 30; Am. Compl. ¶ 34.) AS & M was awarded the Engineering and Technical Services contract in 1995.
In 1998, AS & M received questionnaires called "Commercialization Metrics" from NASA headquarters, which asked the recipient to describe its efforts to commercialize innovations funded under the SBIR program. Tao alleges that AS & M responded to the questionnaire in part by providing information on projects that were carried out by Tao, misrepresenting Tao as a venture or subsidiary of AS & M.
Tao claims that alleged misrepresentations by AS & M had the effect of confusing NASA as to the nature of the two corporations and the services they provide. In support of this proposition, Tao points to a letter, sent by NASA headquarters in January 2002, which it alleges was addressed to "Dr. Jalaiah Unnam, President, Tao Systems/AS & M." (Compl. ¶ 36; Am. Compl. ¶ 42.) Tao also claims that it has been told by NASA officials on several occasions that, in order to apply its own expertise and innovations toward work with NASA, it would need to seek a subcontract from AS & M. Tao further alleges that it has been unable to obtain any "sole-source contracts" from NASA since AS & M was awarded the ETS contract in 1995. (Compl. ¶ 37; Am. Compl. ¶ 43.)
In the late summer of 2001, Dr. Mangalam received a copy of AS & M's ETS *570 Proposal from an unidentified third party. Tao filed its original complaint against AS & M on May 21, 2003. AS & M filed a motion to dismiss all four counts for failure to state a claim, to which Tao filed a response, and AS & M replied. AS & M also filed an answer to Tao's original complaint, after which Tao attempted to file an amended complaint adding as defendants Dr. Unnam and Dr. Venkateswaran. The amended complaint was filed subject to defect because Tao had failed to receive leave of the court to file it. Tao then filed a motion requesting the court's leave to file the amended complaint, to which AS & M has responded, and Tao has replied.
AS & M also filed a counterclaim, claiming that in acquiring a copy of AS & M's confidential ETS Proposal, Dr. Mangalam and Tao had misappropriated AS & M's trade secrets. Tao and Dr. Mangalam filed an answer to AS & M's counterclaim and moved to dismiss the counterclaim for failure to state a claim. AS & M filed a response and Tao replied. Accordingly, all motions are now ripe for review.
II. Legal Standards
Leave of the court is required to amend a pleading when either a responsive pleading has been served, Fed.R.Civ.P. 15(a), or the amending party seeks to add a party, United States v. Thomas Howell Kiewit, Inc., 149 F.R.D. 125, 126 (E.D.Va. 1993). The court's leave "shall be freely given when justice so requires." Fed. R.Civ.P. 15(a). A motion to amend "should be denied only when the amendment would be prejudicial to the opposing party, there has been bad faith on the part of the moving party, or the amendment would be futile." Edwards v. City of Goldsboro, 178 F.3d 231, 242 (4th Cir.1999) (quoting Johnson v. Oroweat Foods Co., 785 F.2d 503, 509 (4th Cir.1986)). Defendants are not required to file a new motion to dismiss simply because an amended pleading was introduced while their motion was pending. 6 Charles Alan Wright et al., Federal Practice and Procedure § 1476, at 558 (2d ed.1990). If some of the defects raised in the original motion remain in the new pleading, the court will consider the motion as being addressed to the amended pleading. Id.
A complaint should not be dismissed pursuant to Rule 12(b)(6) for failure to state a claim unless it appears to a certainty that the nonmoving party cannot prove any set of facts in support of its claim that would entitle it to relief. Conley v. Gibson, 355 U.S. 41, 45-46, 78 S. Ct. 99, 2 L. Ed. 2d 80 (1957); Labram v. Havel, 43 F.3d 918, 920 (4th Cir.1995). The court must accept the complaint's factual allegations as true and view all allegations in a light most favorable to the nonmoving party. Leatherman v. Tarrant County Narcotics Intelligence & Coordination Unit, 507 U.S. 163, 164, 113 S. Ct. 1160, 122 L. Ed. 2d 517 (1993); GE Inv. Private Placement Partners II v. Parker, 247 F.3d 543, 548 (4th Cir.2001).
Dismissal on a motion pursuant to Rule 12(b)(6) is appropriate when the face of the complaint clearly reveals the existence of a meritorious affirmative defense. Brooks v. City of Winston-Salem, 85 F.3d 178, 181 (4th Cir.1996). "A complaint showing that the statute of limitations has run on the claim is the most common situation in which the affirmative defense appears on the face of the pleading." Id. (quoting 5A Charles A. Wright & Arthur R. Miller, Federal Practice and Procedure § 1357, at 352 (2d ed.1990)).
III. Analysis
A. Tao's Motion to Amend the Complaint
Tao seeks to file an amended complaint in order to clarify certain allegations *571 stated in the original complaint, and to add as defendants Dr. Unnam and Dr. Venkateswaran. Leave of the court is required for two reasons: (1) AS & M has already filed a responsive pleading, Fed.R.Civ.P. 15(a); and (2) Tao is seeking to add parties, Thomas Howell Kiewit, Inc., 149 F.R.D. at 126. As indicated supra Part II, a motion to amend "should be denied only when the amendment would be prejudicial to the opposing party, there has been bad faith on the part of the moving party, or the amendment would be futile." Edwards, 178 F.3d at 242 (quoting Johnson, 785 F.2d at 509). Because Tao's amended complaint is not prejudicial to AS & M, made in bad faith, or futile, it is appropriate for the court to permit amendment.
As the motion to amend was filed at an early stage in the litigation, permitting amendment will not result in prejudice to AS & M. See Thomas Howell Kiewit, Inc., 149 F.R.D. at 126. Tao's desire to amend appears to stem from a good faith belief in legitimate claims against the parties sought to be added, rather than a bad faith attempt to manipulate the court's jurisdiction or cause undue delay. Moreover, the claims asserted in Tao's amended complaint are not clearly frivolous or patently defective such that leave should be denied. Accordingly, the court GRANTS Tao's motion to amend the complaint.
B. AS & M's Motion to Dismiss for Failure to State a Claim
Tao's amendment complaint consists of four counts: (1) reverse passing off, in violation of § 43(a) of the Lanham Act; (2) false advertising, in violation of § 43(a) of the Lanham Act; (3) trade secret misappropriation, in violation of the Virginia Uniform Trade Secrets Act; and (4) unjust enrichment, in violation of the common law of Virginia. AS & M seeks dismissal of each count for failure to state a claim. As the arguments raised in AS & M's motion to dismiss can be applied to Tao's amended complaint, and memoranda from both Tao and AS & M have argued their merits in light of the sought amendment, the court will consider the motion as being addressed to the amended pleading. 6 Wright et al., supra § 1476, at 558.
1. Reverse Passing Off
"The typical § 43(a) Lanham Act claim is brought by a plaintiff who is in competition with the defendant, and charges the defendant with using a mark a brand name, a word, `a slogan, a symbol, a combination of words and symbols, an ornamental feature, a distinctive shape, or something else intended to remind the consumer of the brand' so similar to that of the plaintiff's that the public may be confused as to the source of the good or service." Advanced Res. Int'l, Inc. v. TriStar Petroleum Co., 4 F.3d 327, 334 (4th Cir.1993) (quoting Blau Plumbing, Inc. v. S.O.S. Fix-It, Inc., 781 F.2d 604, 609 (7th Cir.1986)). Although trademark protection is at the heart of the Lanham Act, § 43(a) also reaches a limited number of non-trademark scenarios. Dastar Corp. v. Twentieth Century Fox Film Corp., 539 U.S. 23, ___, 123 S. Ct. 2041, 2045, 156 L. Ed. 2d 18 (2003).
Among these, § 43(a) creates a civil cause of action for a false designation of origin made in connection with goods or services. 15 U.S.C. § 1125(a). Because "origin" refers not only to geographical origin, but also to the origin of source or manufacture, a claim of "reverse passing off" is actionable under § 43(a) as a false designation of origin. Id. at 2044-46. Just as "passing off" occurs when a producer misrepresents his own product as someone else's, "reverse passing off" occurs when a producer misrepresents someone else's goods or services as his own. *572 Id. at 2045 n. 1. The "origin" of a good or service is the producer of the tangible product offered for sale, not the author of any idea or concept embodied in that product. Id. at 2049.[1] The goods or services which are examined for a false designation of origin under a reverse-passing-off claim are those of the defendant. Williams v. UMG Recordings, Inc., 281 F. Supp. 2d 1177, 1184 (C.D.Cal.2003). Thus, the archetypal case of reverse passing off involves a defendant who has sold goods which are actually the repackaged or relabeled goods of the plaintiff.
Tao in Count One does not allege a typical § 43(a) claim involving the misuse of a mark. Tao concedes as much, clarifying its general allegation of a claim under 15 U.S.C. § 1125(a)(1)(A) as an action for reverse passing off. (Pl.'s Opp'n to Mot. to Dismiss at 8-9.) The circumstances alleged by Tao, however, do not support such a claim. To state a claim for reverse passing off, Tao must allege that the actual goods provided to NASA by AS & M were in fact produced by Tao, or the actual services provided to NASA by AS & M were in fact performed by Tao. Neither Tao's amended complaint nor any other filing in this case provides a basis for suspecting that the goods and services which AS & M contracted to provide to NASA were actually provided by Tao.
Instead, Tao alleges that defendants "made both false and misleading representations of fact in the ETS Proposal." (Am. Compl. ¶ 48.) The ETS Proposal may be an offer to contract, an advertisement, or a promotion, but it is not a good or service. Moreover, even if the ETS Proposal arguably was a good or service, there is no allegation that Tao, rather than AS & M, was the actual producer of the ETS Proposal. Tao instead appears to claim that AS & M, in producing its own ETS Proposal, incorporated ideas or concepts that belonged to Tao. This, however, is precisely the type of allegation which the Supreme Court rejected as the basis for a reverse-passing-off claim in Dastar Corporation v. Twentieth Century Fox Film Corporation, 539 U.S. at ___, 123 S.Ct. at 2049. Accordingly, Tao's claims of reverse passing off against all defendants under 15 U.S.C. § 1125(a)(1)(A) are DISMISSED.
2. False Advertising
Section 43(a) of the Lanham Act provides a civil cause of action against a person who misrepresents the "nature, characteristics, qualities, or geographic origin of his or her or another person's goods, services, or commercial activities" in "commercial advertising or promotion." 15 U.S.C. § 1125(a)(1)(B). Section 43's reach is broader than merely the "classic advertising campaign." Gordon & Breach Science Publishers S.A. v. Am. Inst. of Physics, 859 F. Supp. 1521, 1534 (S.D.N.Y. 1994). For representations to constitute "commercial advertising or promotion" within the meaning of § 43(a), they must be (1) commercial speech; (2) by a defendant who is in commercial competition with the plaintiff; (3) for the purpose of influencing consumers to buy defendant's goods or services; and (4) disseminated sufficiently to the relevant purchasing public to constitute "advertising" or "promotion" within that industry. Id. at 1536.[2]
*573 Both the level of dissemination required to constitute commercial advertising or promotion and the size of the relevant purchasing public will vary from industry to industry and from case to case. See Seven-Up Co. v. Coca-Cola Co., 86 F.3d 1379, 1385 (5th Cir.1996); Am. Needle & Novelty, Inc. v. Drew Pearson Mktg., Inc., 820 F. Supp. 1072, 1078 (N.D.Ill.1993). Whether such misrepresentations actually qualify as advertising or promotion depends on the number of alleged contacts or misrepresentations made in relation to the total market. Cavalier Tel., LLC v. Verizon Va. Inc., 208 F. Supp. 2d 608, 617-18 (E.D.Va.2002). If the total market is small, isolated contacts may be enough. Id. at 618.
In various scenarios, courts have found that communications to a very limited number of consumers can reach the required level of dissemination to constitute commercial advertising or promotion. E.g., Coastal Abstract Serv., Inc. v. First Am. Title Ins. Co., 173 F.3d 725, 735 (9th Cir.1999) (holding that a representation to one of two or three institutions involved in nationwide refinancing operations could constitute promotion); Seven-Up Co. v. Coca-Cola Co., 86 F.3d 1379, 1386 (5th Cir.1996) (holding that a sales presentation made to eleven of seventy-four soft drink bottlers constituted advertising or promotion); Nat'l Artists Mgmt. Co. v. Weaving, 769 F. Supp. 1224, 1235 (S.D.N.Y.1991) (holding that, in the context of the theatre-booking industry, telephone contact with twenty consumers was commercial advertising or promotion).
Where it is clear, however, that the relevant market is large and that the alleged contacts are comparatively trivial, dismissal for failure to state a claim is appropriate. E.g., Cavalier Tel., LLC, 208 F.Supp.2d at 618 (holding that an unspecified number of alleged contacts in a market of several million telecommunications consumers fails to state a claim); Lampi Corp. v. American Power Prods., 1994 WL 501996, *2, 1994 U.S. Dist. LEXIS 12828, *5-6 (N.D.Ill. Sept. 12, 1994) (declining to dismiss under 12(b)(6) where "both companies sell to primarily nationwide chains, so making statements and sales presentations to representatives of only a few such chains could have a large impact in the industry"). Dismissal on summary judgment is available when appropriate evidence demonstrates that the market is large enough such that the proven contacts do not constitute advertising or promotion. E.g., Fashion Boutique of Short Hills, Inc. v. Fendi USA, Inc., 314 F.3d 48, 58 (2d Cir.2002); Sports Unlimited, Inc. v. Lankford Enters., Inc., 275 F.3d 996, 1005 (10 Cir.2002).
AS & M raises two challenges to the sufficiency of Tao's false advertising claim. First, AS & M argues that Tao fails to allege the two companies competed commercially. Second, AS & M argues that Tao's allegations do not meet the legal standard of commercial advertising or promotion. However, the allegations of Tao's amended complaint are more than sufficient to support its claim of commercial competition. Tao alleges that both it and AS & M operate in the aeronautical engineering services market (Am.Compl. ¶¶ 2-3), and that both companies have provided aeronautical engineering services to NASA (id. ¶¶ 3, 12, 20). Tao further alleges that, *574 as a subcontractor to another company, it competed for the ETS contract which was granted to AS & M and which provides the subject of this litigation. (Id. ¶¶ 27-28.) No more is required at this stage of the litigation.
AS & M additionally challenges whether Tao's allegations meet the legal standard for commercial advertising or promotion. Accepting Tao's factual allegations as true and viewing all allegations in a light most favorable to Tao, as this court must at this juncture, it does not appear to a certainty that Tao cannot prove any set of facts in support of its false advertising claim. As already discussed, the determination whether particular communications constitute advertising or promotion is dependant upon the industry in question. While the conduct alleged against AS & M the submission of a proposal in response to a NASA request is not advertising in the traditional sense of the term, the court cannot conclude at this time that it is insufficient to support Tao's claim. Just as "in the context of the theatre-booking industry ... `services' are `promoted' by word-of-mouth and ... telephone contacts with producers, promoters, and presenters," Nat'l Artists Mgmt. Co., 769 F.Supp. at 1235, it is reasonable to infer that in the aeronautical engineering industry, services are promoted through proposals to the relevant government agency.
Additionally, Tao has alleged sufficient dissemination of AS & M's allegedly false statements throughout the relevant purchasing public. Although Tao does not state specific claims regarding the size of the relevant consuming public for its services, it alleges that "Tao Systems has been unable to obtain any sole-source contracts with NASA," and that "Dr. Mangalam was told on several occasions by NASA officials that, in order to apply his own expertise and innovation toward work with NASA, he would need to seek a subcontract from AS & M." (Am.Compl. ¶ 43.) While such generalized allegations alone would not be enough to survive a Rule 56 motion, they are sufficient to meet the lesser requirements of Rule 12(b)(6). Viewing these allegations in a light most favorable to Tao, it does not appear to a certainty that Tao cannot prove any set of facts to support its false advertising claim. Thus, the motion to dismiss Count Two for failure to state a claim is DENIED.
3. Misappropriation of Trade Secrets
The Virginia Uniform Trade Secrets Act provides a cause of action for misappropriation of a trade secret. Va. Code Ann. § 59.1-338 (Michie 2001). Under VUTSA, a trade secret is "information, including but not limited to, a formula, pattern, compilation, program, device, method, technique, or process," that (1) derives independent economic value from not being generally known, and (2) is the subject of efforts that are reasonable under the circumstances to maintain its secrecy. Id. § 59.1-336. The secrecy need not be absolute; the owner of a trade secret may, without losing protection, disclose it to a licensee, an employee, or a stranger, if the disclosure is made in confidence, express or implied. Dionne v. Southeast Foam Converting & Packaging, Inc., 240 Va. 297, 397 S.E.2d 110, 113 (1990). Although the subject of a trade secret may be novel in the sense that it is something generally unknown in the trade or business, "[n]ovelty, in the patent law sense, is not required for a trade secret." Id. (quoting Kewanee Oil Co. v. Bicron Corp., 416 U.S. 470, 476, 94 S. Ct. 1879, 40 L. Ed. 2d 315 (1974)). A trade secret "may be a device or process which is clearly anticipated in the prior art or one which is merely a mechanical improvement that a good mechanic can make." Id. (quoting Restatement of Torts § 757 cmt. b (1939)).
*575 Under VUTSA, a number of acts can constitute misappropriation, including disclosure or use of a trade secret without consent by a person who, at the time of disclosure or use, knew or had reason to know that his knowledge of the trade secret was either (1) acquired under circumstances giving rise to a duty to maintain its secrecy or limit its use; or (2) derived from or through a person who owed a duty to maintain its secrecy or limit its use. Va.Code Ann. § 59.1-336. An employer can be held vicariously liable for trade secret misappropriation committed by an employee acting within the scope of his employment. Newport News Indus. v. Dynamic Testing, 130 F. Supp. 2d 745, 754 (E.D.Va.2001). Generally, a former employee has a duty not to reveal confidential information obtained through his employment, and not to use such confidential information after he has left his employment. Bull v. Logetronics, Inc., 323 F. Supp. 115, 133 (E.D.Va.1971).
Tao alleges misappropriation of three trade secrets: (1) the TDT flutter test data and analysis; (2) certain patents; and (3) enhancements, refinements, and improvements that Tao has made to those patents. For the reasons set forth below, Tao's amended complaint states a claim for misappropriation of the TDT flutter test materials, but not for the patents or their refinements.
Tao alleges the necessary elements to state a misappropriation claim for the TDT flutter test data and analysis. Tao alleges that it made efforts to preserve the secrecy of the TDT flutter test materials. (Am.Compl. ¶ 58.) Tao further alleges that Dr. Venkateswaran, a former Tao employee, took the TDT flutter test materials from Tao and provided them to AS & M in contravention of his duty to not reveal confidential information obtained through his employment. (Id. ¶ 64.) These allegations are sufficient to maintain a misappropriation claim for the TDT flutter test materials against Dr. Venkateswaran.
Tao can also maintain a misappropriation claim for the TDT flutter test materials against AS & M and Dr. Unnam. Tao alleges that AS & M and Dr. Unnam "used" the TDT flutter test materials by including them in the ETS Proposal. (Id. ¶ 65.) For the purposes of a motion under Rule 12(b)(6), it is reasonable to infer that, at the time of use, AS & M and Dr. Unnam either knew or had reason to know that Dr. Venkateswaran owed a duty to Tao to maintain the secrecy of the TDT flutter test materials. Moreover, as Dr. Venkateswaran's employer, AS & M can be held vicariously liable for his acts of trade secret misappropriation committed within the scope of his employment. Thus, Tao has stated claims for trade secret misappropriation of the TDT flutter test materials against all three defendants.
The Tao patents, however, cannot provide the basis for a trade secret misappropriation claim. As already noted, information must be "the subject of efforts that are reasonable under the circumstances to maintain its secrecy" in order to qualify as a trade secret. Va.Code Ann. § 59.1-336. Under federal law, files relating to a granted patent are open to the public and available for copying. 37 C.F.R. § 1.11 (2003); 37 C.F.R. § 1.13. Information which is publicly disclosed is not the subject of efforts to maintain its secrecy. Thus, the Tao patents are not trade secrets and cannot provide the basis for a trade secret misappropriation cause of action.
Although the enhancements, refinements, and improvements that Tao has made to its patents may have been the subject of reasonable efforts to maintain their secrecy, Tao cannot maintain a misappropriation *576 claim for this information, as the acts that it alleges do not constitute misappropriation. Under VUTSA, an act of misappropriation must involve either the acquisition, disclosure, or use of a trade secret. Va.Code Ann. § 59.1-336. Tao does not allege that any of the defendants improperly acquired, disclosed, or used the enhancements, refinements, and improvements to the Tao patents. Rather, Tao claims that "[b]y making the false and misleading statements in the ETS proposal regarding Tao Systems' innovations, defendants misappropriated Tao System's [sic] trade secrets." (Am.Compl. ¶ 69.) To falsely claim to have certain information does not constitute the acquisition, disclosure, or use of that information. Tao has not alleged that its patent refinements were misappropriated within the meaning of VUTSA, and cannot maintain a misappropriation claim for the patent refinements.
Accordingly, Tao's claims of trade secret misappropriation of its patents and patent refinements are DISMISSED as to all defendants. The motion to dismiss Tao's claim of trade secret misappropriation of the TDT flutter testing materials is DENIED.
4. Unjust Enrichment
Tao claims that by misrepresenting Tao's technology and trade secrets as their own, defendants were unjustly enriched. Under Virginia law, an action for unjust enrichment is quasi-contractual in nature. Acorn Structures v. Swantz, 846 F.2d 923, 926 (4th Cir.1988); Kern v. Freed Co., 224 Va. 678, 299 S.E.2d 363, 364-65 (1983). To establish the quasi-contract, a plaintiff must show three elements: (1) a benefit conferred on the defendant by the plaintiff; (2) knowledge on the part of the defendant of the conferring of the benefit; and (3) acceptance or retention of the benefit by the defendant in circumstances that render it inequitable for the defendant to retain the benefit without paying for its value. Nossen v. Hoy, 750 F. Supp. 740, 744-45 (E.D.Va.1990).
A disappointed bidder for a government contract cannot maintain an unjust enrichment cause of action against a successful bidder for the value of that contract. John C. Holland Enterprises, Inc. v. J.P. Mascaro & Sons, Inc., 653 F. Supp. 1242, 1247 (E.D.Va.), aff'd without opinion, 829 F.2d 1120 (4th Cir.1987). To bring an action to recover monies received by the defendant from a third party, a plaintiff must demonstrate that he had a preexisting right to that fund. Id. at 1246; City of Norfolk v. Norfolk County, 120 Va. 356, 91 S.E. 820, 826 (1917). As no party has a right to a government contract prior to its award, there can be no cause of action for unjust enrichment on this basis. Holland Enterprises, Inc., 653 F.Supp. at 1246.
The three-year Virginia statute of limitations applicable to oral contracts, Va.Code Ann. § 8.01-246(4) (Michie 2000), also applies to unjust enrichment actions. Belcher v. Kirkwood, 238 Va. 430, 383 S.E.2d 729, 731 (1989). The statute of limitations for unjust enrichment begins to run at the time the unjust enrichment occurred, which is the moment the expected compensation is not paid, Primrose Dev. Corp. v. Benchmark Acquisition Fund I, L.P., 47 Va. Cir. 296, 298 (1998), not when a party "knew or should have known" of the unjust enrichment, Tsui v. Sobral, 39 Va. Cir. 486, 489 (1996).
In this case, the unjust enrichment occurred, if at all, at the moment defendants received a benefit from Tao without paying for its value. Tao claims that defendants were conferred a benefit by misrepresenting Tao's technology and trade secrets as their own. (Am.Compl. ¶ 72.) AS & M *577 filed its ETS Proposal in June 1995 (Am. Compl. ¶ 27), was awarded the ETS contract in 1995 (id. ¶ 43), and responded to the NASA Commercialization Metrics in 1998 (id. ¶ 40). Assuming arguendo that any of these actions constituted unjust enrichment, plaintiff's cause of action was not filed until May 21, 2003, more than three years after any of these events. Any arguable cause of action for unjust enrichment is barred by the statute of limitations.
All claims for unjust enrichment against all defendants are DISMISSED.
C. Tao's Motion to Dismiss for Failure to State a Claim
As discussed supra Part III.B.3, the Virginia Uniform Trade Secrets Act provides a cause of action for misappropriation of a trade secret. Va.Code Ann. § 59.1-338. As previously discussed, under VUTSA, a trade secret must both (1) derive independent economic value from not being generally known, and (2) be the subject of reasonable efforts to maintain its secrecy. Id. § 59.1-336. Acts of misappropriation include the acquisition of a trade secret by a person who knows or has reason to know that the trade secret was acquired by improper means. Id.
AS & M claims that, by obtaining of copy of AS & M's ETS Proposal, Dr. Mangalam and Tao have misappropriated AS & M trade secrets. AS & M alleges that the information contained in the ETS Proposal both (1) derives value from not being generally known (Countercl. ¶ 12), and (2) is the subject of reasonable efforts to maintain its secrecy (id. ¶¶ 8, 18-21). Additionally, AS & M alleges that, by virtue of a notice placed on the first page of the ETS Proposal (id. ¶ 18), federal law under 18 U.S.C. § 1905 prohibiting the disclosure of confidential information by government employees (id. ¶ 20), and Dr. Mangalam's nine years of experience working at AS & M (id. ¶ 22), both Dr. Mangalam and Tao had reason to know that the ETS Proposal had been acquired by improper means. AS & M even alleges a motive, claiming that Tao acquired the ETS proposal in the late summer of 2001 (id. ¶ 9) in order to use it in preparing Tao's own proposal in response to NASA's re-solicitation of the ETS contract on July 11, 2001 (id. ¶ 14).
In response, Tao argues that the only trade secrets contained in the ETS Proposal are its own trade secrets, which it cannot misappropriate. Accepting AS & M's factual allegations as true and viewing all allegations in a light most favorable to AS & M, however, it is reasonable to infer that the ETS Proposal contains trade secrets other than those which may belong to Tao. As it does not appear to a certainty that AS & M cannot prove any set of facts in support of its claim, the motion to dismiss the counterclaim is DENIED.
IV. Conclusion
For the reasons stated above, the court GRANTS plaintiff Tao of Systems Integration, Inc.'s motion to amend the complaint. The court GRANTS defendant AS & M's motion to dismiss Counts One and Four for failure to state a claim, DISMISSING the reverse-passing-off and unjust enrichment claims against all defendants. The court DENIES the motion to dismiss the Count Two claim of false advertising. The court GRANTS the motion to dismiss the Count Three claims of trade secret misappropriation of patents and patent refinements, DISMISSING these claims against all defendants. The court DENIES the motion to dismiss the Count Three claim of trade secret misappropriation of the TDT flutter test materials. The court DENIES the motion by Tao to dismiss the counterclaim for misappropriation *578 of trade secrets. AS & M shall further respond, as appropriate, to any remaining counts of the amended complaint within fourteen (14) days of the date of this Opinion and Order.
The Clerk is DIRECTED to forward a copy of this Opinion and Order to all parties.
IT IS SO ORDERED.
NOTES
[1] To the extent that the author of any idea or concept embodied in a product may have a remedy under federal law, it is to be found in copyright, patent, or the false advertising provisions of the Lanham Act. Dastar Corp. v. Twentieth Century Fox Film Corp., 539 U.S. 23, ___, 123 S. Ct. 2041, 2049, 156 L. Ed. 2d 18 (2003).
[2] Although the court of appeals for the Fourth Circuit has not yet provided a test defining advertising or promotion for purposes of the Lanham Act, the Gordon & Breach test has been cited with approval by the bulk of courts that have considered the issue. E.g., Fashion Boutique Of Short Hills, Inc. v. Fendi USA, Inc., 314 F.3d 48, 58 (2d Cir.2002); Proctor & Gamble Co. v. Haugen, 222 F.3d 1262, 1273-74 (10th Cir.2000); Coastal Abstract Serv., Inc. v. First Am. Title Ins. Co., 173 F.3d 725, 735 (9th Cir.1999); Seven-Up Co. v. Coca-Cola Co., 86 F.3d 1379, 1384 (5th Cir.1996).
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01-03-2023
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10-30-2013
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https://www.courtlistener.com/api/rest/v3/opinions/2682526/
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UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
_______________________________
)
KATELYN SACK, )
)
Plaintiff, )
)
v. ) Civil Action No. 12-244 (EGS)
)
CENTRAL INTELLIGENCE AGENCY, )
et al., )
)
Defendants. )
_______________________________)
MEMORANDUM OPINION
Plaintiff Katelyn Sack requested information from the
defendants, the Central Intelligence Agency (“CIA”), the
Department of Defense (“DOD”), and the Department of Justice
(“DOJ”), and their component agencies under the Freedom of
Information Act (“FOIA”), 5 U.S.C. § 552. Dissatisfied with
their responses, she filed this lawsuit. Pending before the
Court are defendants’ motion for summary judgment and
plaintiff’s motion to reinstate Count Fifteen of her Complaint.
Upon consideration of the motions, the responses and replies
thereto, the applicable law, and the entire record, the Court
GRANTS IN PART AND DENIES IN PART defendants’ motion for summary
judgment and DENIES plaintiff’s motion to reinstate.
I. BACKGROUND
Katelyn Sack, a doctoral student, is writing a dissertation
about polygraph examinations. See Compl. ¶ 4. In 2010 and 2011,
Ms. Sack submitted a number of FOIA requests to the defendants.
Some, but not all, of these requests related to the agencies’
use of polygraphs. Dissatisfied with the agencies’ responses,
Ms. Sack filed suit on February 14, 2012.
On April 25, 2013, the parties entered into a stipulation,
dismissing Counts Two, Six, Eight, Ten, Eleven, Thirteen, and
Fifteen of the Complaint. See Joint Stipulation, ECF No. 13 at
2. They also stipulated to the adequacy of the searches
performed by each defendant. See id. at 1. The defendants moved
for summary judgment on the remaining counts on May 3, 2013. See
Mem. in Supp. of Defs.’ Mot. for Summ. J. (“Mem.”), ECF No. 14-
1. Plaintiff responded on June 24, 2013. See Pl.’s Opp. to
Defs.’ Mot. for Summ. J. (“Opp.”), ECF No. 21. After multiple
extensions, the defendants filed their reply brief on January
10, 2014. See Defs.’ Reply in Supp. of Summ. J. (“Reply”), ECF
No. 27.1 The Court recites the facts relevant only to those
Counts that remain in dispute.
1. The Central Intelligence Agency’s Refusal to Search
(Count One)
On November 30, 2010, plaintiff submitted a request to the CIA
(the “Count One Request”) for “documents pertaining in whole or
1
On February 9, 2014, plaintiff moved to rescind the stipulated
dismissal of Count Fifteen. See Mot. to Rescind, ECF No. 30. The
defendants responded on February 26, 2014, Opp. to Mot. to
Rescind, ECF No. 31, and plaintiff filed her reply on March 9,
2014. See Reply in Supp. of Mot. to Rescind, ECF No. 32.
2
in part (all years, all classifications) to a list of closed
Inspector General investigations and reports.” Defs.’ Statement
of Facts (“Defs.’ SMF”), ECF No. 14-2 ¶ 1; see Ex. A to CIA
Decl., ECF No. 14-5 at 2.
On February 7, 2011, the CIA responded to plaintiff’s request
and indicated that:
We cannot accept your FOIA request in its current form
because it would require the Agency to perform an
unreasonably burdensome search. The FOIA requires
requesters to “reasonably describe” the information
they seek so that professional employees familiar with
the subject matter can locate responsive information
with a reasonable amount of effort. Because of the
breadth of your request, and the way in which our
records systems are configured, the Agency cannot
conduct a reasonable search for information responsive
to your request. We encourage you to refine the scope
of your request (such as a more narrow time frame for
the information you seek) to enable us to conduct a
reasonable search for responsive information.
Ex. B to CIA Decl., ECF No. 14-5 at 5; see Defs.’ SMF ¶ 2.
Plaintiff did not contact the CIA to narrow or modify her
request, and never filed an administrative appeal of the CIA’s
refusal to conduct a search. Defs.’ SMF ¶ 3.2
2. The Central Intelligence Agency’s Withholdings (Counts
Three and Four)
On July 5, 2011, plaintiff submitted to the CIA two separate
requests. The first request (the “Count Three Request”) sought:
(1) All records pertaining to changes made since 1994
in “the policies applicable to the training,
2
The CIA disclaimed any argument related to plaintiff’s failure
to file an administrative appeal. See Reply at 5 n.1.
3
supervision, and performance appraisal of polygraph
examiners to ensure that polygraph examinations are
conducted in a professional manner and produce optimum
results,” in keeping with Recommendation No. 17 of the
SSCI Report;3 (2) All current “policies applicable to
the training, supervision, and performance appraisal
of polygraph examiners to ensure that polygraph
examinations are conducted in a professional manner
and produce optimum results,” regardless of whether or
not the records discuss actual or proposed policy
changes; and (3) Any other records pertaining to
Recommendation No. 17 of the SSCI Report.
Ex. F to CIA Decl., ECF No. 14-5 at 18; see Defs.’ SMF ¶ 5. The
CIA responded to this request on July 26, 2012, and indicated
that it had “located nine documents, seven of which can be
released in segregable form with deletions made on the basis of
FOIA exemption (b)(1), (b)(3), and/or (b)(6)” and that the
remaining two documents were “denied in their entirety on the
basis of FOIA exemption (b)(3) and (b)(5).” Ex. G to CIA Decl.,
ECF No. 14-5 at 27.
Plaintiff’s second request (the “Count Four Request”) sought:
(1) All records pertaining to “[evaluations] of the
polygraph as a part of CIA’s security program” since
1994, in keeping with Recommendation No. 18 of the
SSCI Report;4 (2) All records pertaining to polygraph
3
This refers to a report of the Senate Select Committee on
Intelligence. See Staff of S. Select Comm. on Intelligence, 103d
Cong., An Assessment of the Aldrich H. Ames Espionage Case and
Its Implications for U.S. Intelligence (Comm. Print 1994),
available at http://www.intelligence.senate.gov/pdfs103rd/
10390.pdf. Recommendation 17 proposed that “[t]he Director of
Central Intelligence should tighten polygraph procedures to make
the polygraph more useful” and made suggestions. Id. at 68-69.
4
Recommendation Number 18 suggested that “[t]he Director of
Central Intelligence should institute a fundamental reevaluation
4
reliability and validity with respect to deception
detection; (3) All records pertaining to the
polygraph’s relation to other aspects of the security
process, such as background investigations, financial
and supervisory reporting, and psychological testing;
(4) All records pertaining to the use of inconclusive
test results, especially (but not limited to)
situations in which there are no damaging admissions;
(5) All records pertaining to the use of deceptive
polygraph results in the absence of damaging
admissions; and (6) Any other records pertaining to
Recommendation No. 18 of the SSCI Report.
Ex. H to CIA Decl., ECF No. 14-5 at 30; see Defs.’ SMF ¶ 7. The
CIA responded to this request on June 6, 2012, indicating that
it “located five documents, four of which can be released in
segregable form with deletions made on the basis of FOIA
exemption (b)(1), (b)(3), and/or (b)(6)” and that the remaining
document “must be denied in its entirety on the basis of FOIA
exemption (b)(1) and (b)(3).” Ex. I to CIA Decl., ECF No. 14-5
at 37; see Defs.’ SMF ¶ 8.
The parties agree that only certain CIA documents, and certain
withholdings, remain at issue. See Defs.’ SMF ¶¶ 6, 8; Opp. at
3-4. As to the Count Three Request, the parties dispute partial
redactions made pursuant to Exemption 3 in Documents 3 and 5.
See Defs.’ SMF ¶ 6. As to the Count Four Request, the parties
dispute the withholding in full of Document 1 pursuant to
of the polygraph as a part of CIA’s security program.” Staff of
S. Select Comm. On Intelligence, 103d Cong., An Assessment of
the Aldrich H. Ames Espionage Case and Its Implications for U.S.
Intelligence 69 (Comm. Print 1994), available at http://
www.intelligence.senate.gov/pdfs103rd/10390.pdf.
5
Exemptions 1 and 3, the partial withholding of Documents 2 and 4
pursuant to Exemptions 1 and 3, and the partial withholding of
Document 3 pursuant to Exemption 3. Id. ¶ 8; Opp. at 3–4.
3. The Defense Intelligence Agency’s Withholdings (Counts
Seven and Nine)5
On November 21, 2010, plaintiff submitted a request to the
Defense Intelligence Agency (“DIA”) by email, seeking “a
printout of the list of reports at the Defense Intelligence
Agency, or the Defense Academy of Credibility Assessment written
by Gordon Barland” and “a copy of each of the reports located.”
Ex. D to DIA Decl., ECF No. 14-9 at 32; see Defs.’ SMF ¶ 10. In
response, the DIA released multiple reports by Gordon Barland,
but withheld in full two of his reports (called V-70 and V-71)
pursuant to Exemptions 1, 3, and 7(E). Defs.’ SMF ¶ 10.
Plaintiff challenges only the Exemption 7(E) withholdings. See
Opp. at 4-5 & n.4.
On July 26, 2011, plaintiff submitted another request to the
DIA, seeking “copies of all course materials” for certain
“National Center for Credibility Assessment courses.” Ex. G to
DIA Decl., ECF No. 14-9 at 44; see Defs.’ SMF ¶ 11. The DIA
5
Although the parties have not stipulated to the dismissal of
Count Five, plaintiff appears to concede that Count. Count Five
addressed the DIA’s response to a November 21, 2010 request for
“a list of closed Inspector General investigations and reports.”
Compl. ¶¶ 34-40. In response to that request, the DIA released
one partially redacted document. See Defs.’ SMF ¶ 9. Plaintiff
did not list withholdings from that document among those she
continues to challenge. See Opp. at 4-5.
6
released numerous records in response and the parties dispute
only certain Exemption 3 and 6 withholdings from document V-21,
Exemption 7(E) withholdings from documents V-27 and V-29, and
Exemption 3 withholdings from document V-30. See Defs.’ SMF ¶
11; Opp. at 4–5.
4. The Department of Defense’s Withholdings (Count
Twelve)
On October 24, 2011, plaintiff submitted a request to the
DOD’s Office of the Inspector General (“DODIG”) for “a copy of
all Department of Defense Office of the Inspector General . . .
records relating to the use of polygraphs by DOD components.”
Ex. A to DODIG Decl., ECF No. 14-11 at 20; see Defs.’ SMF ¶ 12.
DODIG conducted a series of document releases in response. See
Defs.’ SMF ¶ 13. At issue are four documents, IG-1, IG-2, IG-3,
and IG-4. See Opp. at 5; DODIG Vaughn Index, ECF No. 14-12 at 2-
3. Plaintiff challenges partial withholdings from IG-1 and IG-2,
and the complete withholding of IG-3 and IG-4, all pursuant to
Exemption 7(E). See Opp. at 5; DODIG Vaughn Index, ECF No. 14-12
at 2-3.
5. The Federal Bureau of Investigation’s Withholdings
(Count Fourteen)
On July 5, 2011, plaintiff submitted to the DOJ’s Office of
Information Policy a request for “records related to the
processing of all FOIA appeals submitted by her, including, but
not limited to, Appeal No. 2010-2171, by OIP.” Ex. A to FBI
7
Decl., ECF No. 14-13 at 34 (emphasis omitted); see Defs.’ SMF ¶
14. The Office of Information Policy came upon four pages of
Federal Bureau of Investigation (“FBI”) records, which it
“referred . . . to FBI for review and direct response.” Defs.’
SMF ¶ 15. On April 24, 2012, the FBI released one page in full
and withheld portions of the other three pages pursuant to
Exemptions 5, 6, and 7(E). Id. Plaintiff challenges only a
single Exemption 5 withholding.
II. SUMMARY JUDGMENT STANDARD
Summary judgment is granted when there is no genuine issue of
material fact and the movant is entitled to judgment as a matter
of law. Fed. R. Civ. P. 56; Celotex Corp. v. Catrett, 477 U.S.
317, 325 (1986); Waterhouse v. District of Columbia, 298 F.3d
989, 991 (D.C. Cir. 2002). In determining whether a genuine
issue of fact exists, the court must view all facts in the light
most favorable to the non-moving party. See Matsushita Elec.
Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986).
Under FOIA, all underlying facts and inferences are analyzed in
the light most favorable to the FOIA requester; as such, only
after an agency proves that it has fully discharged its FOIA
obligations is summary judgment appropriate. Moore v. Aspin, 916
F. Supp. 32, 35 (D.D.C. 1996) (citing Weisberg v. U.S. Dep't of
Justice, 705 F.2d 1344, 1350 (D.C. Cir. 1983)). “FOIA cases
typically and appropriately are decided on motions for summary
8
judgment.” Gold Anti-Trust Action Comm. v. Bd. of Governors of
Fed. Reserve Sys., 762 F. Supp. 2d 123, 130 (D.D.C. 2011)
(quotation marks omitted).
In considering a motion for summary judgment under FOIA, the
court must conduct a de novo review of the record. See 5 U.S.C.
§ 552(a)(4)(B). The court may award summary judgment solely on
the basis of information provided by the agency in affidavits
that describe “the documents and the justifications for
nondisclosure with reasonably specific detail, demonstrate that
the information withheld logically falls within the claimed
exemption, and are not controverted by either contrary evidence
in the record nor by evidence of agency bad faith.” Military
Audit Project v. Casey, 656 F.2d 724, 738 (D.C. Cir. 1981); see
also Vaughn v. Rosen, 484 F.2d 820, 826-28 (D.C. Cir. 1973).
Agency affidavits must be “relatively detailed and non-
conclusory.” SafeCard Servs. v. SEC, 926 F.2d 1197, 1200 (D.C.
Cir. 1991) (quotation marks omitted). Such affidavits are
“accorded a presumption of good faith, which cannot be rebutted
by purely speculative claims about the existence and
discoverability of other documents.” Id. (quotation marks
omitted). An agency may discharge its obligations under FOIA by
producing a Vaughn index, which is an affidavit that indexes and
specifically describes withheld or redacted records and explains
9
why each withheld record is exempt from disclosure. King v. U.S.
Dep’t of Justice, 830 F.2d 210, 218–19 (D.C. Cir. 1987).
III. DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT
A. The CIA’s Refusal to Search (Count One).
The plaintiff’s first argument is that the CIA erroneously
refused to search for records responsive to the Count One
Request. That request sought all “documents pertaining in whole
or in part (all years, all classifications) to a list of closed
Inspector General investigations and reports.” Ex. A to CIA
Decl., ECF No. 14-5 at 2. The CIA claims that the request was
too broad to interpret and that responding would have been
unduly burdensome.
FOIA requires agencies to produce documents “upon any request
for records which . . . reasonably describes such records.” 5
U.S.C. § 552(a)(3)(A). A FOIA request must “enable[] a
professional employee of the agency who [is] familiar with the
subject area of the request to locate the record with a
reasonable amount of effort.” H.R. Rep. No. 93-876, at 6 (1974),
reprinted in 1974 U.S.C.C.A.N. 6267, 6271. “The linchpin inquiry
is whether ‘the agency is able to determine precisely what
records are being requested.’” Dale v. IRS, 238 F. Supp. 2d 99,
104 (D.D.C. 2002) (quoting Tax Analysts v. IRS, 117 F.3d 607,
610 (D.C. Cir. 1997)). By contrast, “[b]road, sweeping requests
lacking specificity are not sufficient.” Id. Relatedly, “[a]n
10
agency need not honor a request that requires an unreasonably
burdensome search,” Armstrong v. Bush, 139 F.R.D. 547, 553
(D.D.C. 1991) (quotation marks omitted), or would require the
agency “to locate, review, redact, and arrange for inspection a
vast quantity of material.” Am. Fed. of Gov’t Emps. v. U.S.
Dep’t of Commerce, 907 F.2d 203, 209 (D.C. Cir. 1990). This is
so because “FOIA was not intended to reduce government agencies
to full-time investigators on behalf of requesters.”
Assassination Archives & Research Ctr. v. CIA, 720 F. Supp. 217,
219 (D.D.C. 1989).
The CIA claims that the Count One Request did not reasonably
describe the records it sought because the language “pertaining
in whole or in part” was undefined and caused the request to
cover any document that is arguably relevant to any list of
closed Inspector General investigations and reports, even if the
document did not reference such a list. See First Declaration of
Martha M. Lutz (“CIA Decl.”), ECF No. 14-4 ¶ 22. The plaintiff
counters that the CIA is intentionally misinterpreting her
request, which was “limited to only those records which
referenced (1) a list (2) of closed (3) Inspector General
investigations and reports,” and asserts that “there would be
very few places which would maintain records discussing lists of
OIG investigations.” Opp. at 8 (emphasis omitted).
11
Plaintiff’s request was broader than she claims. It did not
seek “all lists of closed Inspector General investigations and
reports” or even “all records that refer to a list of closed
Inspector General investigations and reports.” It sought all
records that “pertain[] in whole or in part (all years, all
classifications)” to such a list. Ex. A to CIA Decl., ECF No.
14-5 at 2. Nor did she describe how the CIA should determine
whether a record “pertain[s] in whole or in part” to such a
list. This phrase is difficult to define because a record may
pertain to something without specifically mentioning it. See
Black’s Law Dictionary (9th ed. 2009), pertain (“[t]o relate to”
or “to concern”); Latham v. U.S. Dep’t of Justice, 658 F. Supp.
2d 155, 157, 161 (D.D.C. 2009) (request for “any records . . .
that pertain in any form or sort to [plaintiff]” was “overly
broad, and to require the [agency] to process it would be overly
burdensome”); James Madison Project v. CIA, No. 8-cv-1323, 2009
WL 2777961, at *4 (E.D. Va. Aug. 31, 2009) (request for “all CIA
documents pertaining to . . . [t]he indexing and organizational
structure of all CIA Systems of Records subject to FOIA” was
overbroad “because the term ‘pertaining to’ is synonymous to the
term ‘relating to’” and that “unfairly places the onus of non-
production on the recipient of the request”) (quotation marks
omitted; alteration in original). Accordingly, although
plaintiff’s request clearly encompasses all lists of closed
12
Inspector General investigations and reports and any documents
specifically referencing those lists, it would also cover
documents that otherwise relate to those lists.
The problem for an agency responding to such a request is that
the lack of clarity leaves the agency to guess at the
plaintiff’s intent. As the CIA explained, plaintiff’s request
could cover “any documents that relate to closed investigations
and reports.” Second Declaration of Martha M. Lutz (“CIA Suppl.
Decl.”), ECF No. 27-1 ¶ 13 (emphasis omitted). Indeed, any
document related to a closed investigation may arguably pertain,
at least “in part,” to a subsequently generated list of
investigations. Given this breadth, the CIA could not assume
that responsive documents would be located only in those “very
few places which would maintain records discussing lists of OIG
investigations.” Opp. at 8. That would be a starting point, but
the CIA would also have needed to devise a method to search for
records that do not mention a list of closed Inspector General
investigations and reports, but still somehow pertain to such a
list. This borders on the “all-encompassing fishing expedition”
on which a FOIA requester cannot embark. Dale, 238 F. Supp. 2d
at 104-05; see Marks v. U.S. Dep’t of Justice, 578 F.2d 261,
262, 263 (9th Cir. 1978) (request for all records “under” a
particular individual’s name was a “broad, sweeping request[]”
that did not reasonably describe the records it sought); Hunt v.
13
CFTC, 484 F. Supp. 47, 51 (D.D.C. 1979) (request for records
that “concerned” the requester was overbroad); Fonda v. CIA, 434
F. Supp. 498, 501 (D.D.C. 1977) (requester who sought “all
documents which . . . ‘concern her’ but do not mention her name”
made overbroad request by “offer[ing] no criterion by which
defendants can determine which documents ‘concern her’”).
This problem is especially acute because the CIA’s record-
keeping systems do not permit it to “identify records that do
not necessarily reference a document, but which may bear some
relation to it.” Mem. at 33 (citing CIA Decl. ¶ 22). Although
the D.C. Circuit has cautioned against “an ‘undiscriminating
adoption’” of agency claims, Armstrong, 139 F.R.D. at 553
(quoting Founding Church of Scientology, Inc. v. NSA, 610 F.2d
824, 837 (D.C. Cir. 1979)), “an agency’s affidavit detailing the
reasons that searches are unreasonably burdensome should be
accepted unless there is ‘some reason to believe that the
documents could be located without an unreasonably burdensome
search.’” Id. (quoting Goland v. CIA, 607 F.2d 339 (D.C. Cir.
1978)). Here, “[t]he breadth of plaintiff’s request[] is not
compatible with the CIA’s document retrieval system, and
plaintiff must deal with that system as it is.” Assassination
Archives, 720 F. Supp. at 220.
Moreover, plaintiff had ample opportunity to accept the CIA’s
offer to reframe or narrow her request, but she failed to do so.
14
Now that this case has been litigated for years, plaintiff seeks
to obtain only lists of closed Inspector General investigations
and reports themselves, not any records “about these lists.”
Opp. at 10 n.7. This narrowing, however, did not come in time to
permit the CIA to conduct a search responsive to a more
reasonably framed request. Moreover, the parties have stipulated
that the sole legal issue before the Court is “whether CIA was
legally obligated to conduct [a] search” in response to
plaintiff’s request. Joint Stipulation, ECF No. 13 at 2. Faced
with the task of guessing at plaintiff’s intent regarding what
might “pertain” to any list of closed Inspector General reports
and investigations, the CIA followed a reasonable path: it
sought additional guidance from the requester and, when none was
provided, closed the file.6
B. The CIA’s Withholdings (Counts Three and Four).
6
After this lawsuit was filed, the CIA searched for “a
comprehensive list of closed OIG investigations” and “determined
that no such listing exists.” CIA Decl. ¶ 22. Plaintiff attached
to her opposition what she claims are lists of OIG
investigations, and argued that the CIA’s declaration was
therefore untrustworthy. See Opp. at 9-10. To begin, it is not
clear that the documents are all what plaintiff claims; one is a
“more comprehensive list, which includes open and closed
investigations and other OIG matters, such as grievances.”
Suppl. CIA Decl. ¶ 13 n.5. The Court does not infer bad faith
from the agency’s failure to locate a single document in
connection with a search where the parties have agreed that the
sufficiency of any search is not a legal issue before this
Court. See Joint Stipulation, ECF No. 13 at 2.
15
Plaintiff also challenges the CIA’s Exemption 1 and 3
withholdings in response to the Count Three and Count Four
Requests. She disputes partial redactions in five documents and
the complete withholding of a sixth. Because the CIA indicated
that “all of the information withheld pursuant to Exemption
(b)(1) is also covered by [Exemption (b)(3)],” CIA Suppl. Decl.
¶ 4, the Court need not address the applicability of Exemption 1
if the Exemption 3 withholdings were proper. See, e.g., Elec.
Frontier Found. v. U.S. Dep’t of Justice, 739 F.3d 1, 13 (D.C.
Cir. 2014).
Exemption 3 protects records that are “specifically exempted
from disclosure by statute . . . if that statute . . . requires
that the matters be withheld from the public in such a manner as
to leave no discretion on the issue; or . . . establishes
particular criteria for withholding or refers to particular
types of matters to be withheld.” 5 U.S.C. § 552(b)(3). “In
determining whether the government properly invoked this
exemption, courts should ‘not closely scrutinize’ the withheld
document’s contents but rather determine (1) ‘whether there is a
relevant statute’ and (2) ‘whether the document falls within
that statute.’” Darnbrough v. U.S. Dep’t of State, 924 F. Supp.
2d 213, 217 (D.D.C. 2013) (quoting Perry-Torres v. Dep’t of
State, 404 F. Supp. 2d 140, 143 (D.D.C. 2005)).
16
The CIA relies on two statutes for its Exemption 3
withholdings: Section 102A(i)(1) of the National Security Act,
50 U.S.C. § 3024(i)(1); and Section 6 of the Central
Intelligence Agency Act of 1949, 50 U.S.C. § 3507. These
provisions “plainly are statutes contemplated by Exemption 3.”
Int’l Counsel Bureau v. CIA, 774 F. Supp. 2d 262, 273 (D.D.C.
2011). The question for the Court is whether the information
that the CIA withheld falls within these statutes. Darnbrough,
924 F. Supp. 2d at 217.
1. Section 102A(i)(1) of the National Security Act
Section 102A(i)(1) of the National Security Act provides that
“[t]he Director of National Intelligence shall protect
intelligence sources and methods from unauthorized disclosure.”
50 U.S.C. § 3024(i)(1). This provision grants the CIA “very
broad authority to protect all sources of intelligence
information from disclosure.” CIA v. Sims, 471 U.S. 159, 168–69
(1985). According to the Supreme Court, “it is the
responsibility of the Director of Central Intelligence, not that
of the judiciary, to weigh the variety of complex and subtle
factors in determining whether disclosure of information may
lead to an unacceptable risk of compromising the Agency’s
intelligence-gathering process.” Id. at 180. Accordingly,
“courts are required to give ‘great deference’ to the CIA’s
assertion that a particular disclosure could reveal intelligence
17
sources or methods.” Berman v. CIA, 501 F.3d 1136, 1140 (9th
Cir. 2007) (quoting Sims, 471 U.S. at 179); see also Larson v.
Dep’t of State, 565 F.3d 857, 865 (D.C. Cir. 2009). In light of
the Supreme Court’s decision in Sims, the Act provides a “near-
blanket FOIA exemption.” Berman, 501 F.3d at 1140 (quotation
marks omitted).7
Plaintiff focuses her argument on the CIA’s invocation of the
National Security Act in its Vaughn indices. See Opp. at 11.
These assertions, plaintiff claims, fail to meet the agency’s
burden of demonstrating in a non-conclusory fashion that the
withheld information relates to an intelligence source or
method. See id. at 11-12. Plaintiff is correct that the Vaughn
indices use generic language to invoke the National Security
Act. See, e.g., Count Three Vaughn Index, ECF No. 14-7 at 9
(stating that the document “is withheld in part on the basis of
FOIA exemption (b)(3)” because it “contains information relating
to intelligence sources and methods that is specifically
exempted from disclosure pursuant to the National Security Act
7
The Ninth Circuit has repeatedly warned that “Sims leaves
courts ‘only a short step from exempting all CIA records from
FOIA.’” Id. (quoting Hunt v. CIA, 981 F.2d 1116, 1120 (9th Cir.
1992). It has further expressed “[c]oncern[] that this broad
reading of CIA authority might be contrary to congressional
intent” and has “invited Congress to ‘take the necessary
legislative action to rectify’ that disparity.” Id. (quoting
Hunt, 981 F.2d at 1120); see also Minier v. CIA, 88 F.3d 796,
804 (9th Cir. 1996).
18
of 1947”); see also id. at 115; Count Four Vaughn Index, ECF No.
14-8 at 1, 4, 24, 55. That is not all the CIA provided, however.
First, the CIA explained that the information it withheld
under the National Security Act related to “covert employees and
facilities as well as the limitations, capabilities, successes,
weaknesses or other issues pertaining to polygraph
examinations.” CIA Decl. ¶ 43. Release of this information, the
agency asserts, “would expose sources and methods of the agency,
not simply in the personnel screening settings, but also the
capabilities and limitations of the polygraph in all
applications.” Id. In brief, disclosure of the withheld
information “would reveal critical details about the polygraph
program that would compromise the effectiveness of this method.”
Suppl. CIA Decl. ¶ 8; see also id. ¶¶ 9–11.
The Agency also specified how the particular documents and
withholdings relate to that program. Each document is identified
and described in ways that clarify its relation to the CIA’s
concerns. See Count Three Vaughn Index, ECF No. 14-7 at 9
(“Polygraph Procedures Manual,” which “discusses authorities,
code of ethics, examiner standards, and other topics with regard
to polygraph examinations”; the withheld information “relates to
the polygraph techniques, internal procedures and analysis”);
id. at 115 (regulation related to the “Administration of
Polygraph Examinations” which is described as “establish[ing]
19
the policy for the administration of polygraph examinations”);
Count Four Vaughn Index, ECF No. 14-8 at 1 (report regarding
“[u]se of polygraph in security screening”); id. at 4 (report
entitled “The Value of the Polygraph in CIA’s Personnel Security
Program,” from which CIA redacted “information that would reveal
intelligence sources and methods as they are relate[d] to
polygraph screening procedures”); id. at 24 (index for a report
entitled “Validity and Reliability of the Polygraph as a Tool
for Identifying Deception and Nondeception,” which was written
“to measure the validity and technical reliability of polygraph
examinations”); id. at 55 (report on “CIA’s Use of Polygraphy in
Personnel Screening,” which “goes into specific detail about
reliance on polygraph examinations, the polygraph process,
reinvestigation, training, and recommendations”).
Moreover, the CIA’s supplemental declaration provided
additional description of the particular information that was
redacted from individual documents. See Suppl. CIA Decl. ¶¶ 8-11
(material withheld from the documents included “internal agency
security regulations, details about polygraph examinations
including sample questions, analysis of testing data, and the
contents of examination reports”; “specifics on the accuracy of
certain areas tested during the exam”; “specific details about
the CIA’s polygraph program, including in depth analysis of the
Agency’s security processes and assessments of test techniques”;
20
“statistics and anecdotal and empirical evidence . . . detailing
the utility of and benefits derived from the program”; and “the
organization and functions of the polygraph program and . . .
the utility of this method in different settings”).
The CIA also explained why its polygraph program is itself an
intelligence source and method. Polygraphs are “a key
intelligence method used in the Agency’s security processes.”
They are “a tool for obtaining information and assessing
deception in the course of applicant and personnel screening
evaluations and counterintelligence investigations,” form part
of the agency’s method for “determining an employee’s
eligibility for initial or continued access to classified
information,” and help “reduce the Agency’s vulnerability to
counterintelligence risks.” Id. ¶ 4. Giving “substantial weight
to the CIA’s affidavits,” Larson, 565 F.3d at 865, as the Court
must, this is sufficient to establish that the withheld
information relates to the detailed workings, efficacy, and
weaknesses of a CIA intelligence source and method.8 Accordingly,
8
Courts have held that similar topics relate to intelligence
sources and methods under the National Security Act. See Blazy
v. Tenet, 979 F. Supp. 10, 23-24 (D.D.C. 1997) (upholding the
Exemption 3 withholding of polygraph records based in part on
agency’s explanation “that plaintiff’s polygraphs constitute
intelligence methods and therefore cannot be released”).
21
the CIA’s withholdings under Section 102A(1)(i) of the National
Security Act were justified.9
2. Section 6 of the Central Intelligence Act of 1949
The remaining Exemption 3 withholdings were done pursuant to
Section 6 of the Central Intelligence Act, which provides:
[I]n order further to implement section 3024(i) of
this title that the Director of National Intelligence
shall be responsible for protecting intelligence
sources and methods from unauthorized disclosure, the
Agency shall be exempted from . . . the provisions of
any other law which require[s] the publication or
disclosure of the organization, functions, names,
official titles, salaries, or numbers of personnel
employed by the Agency.
50 U.S.C. § 3507. Plaintiff agrees that Section 6 protects
information about CIA employees, such as their names and
9
Plaintiff cites Berman, 501 F.3d 1136 for the proposition that
the CIA cannot invoke the Act solely “because it uses polygraphs
as part of its work.” Opp. at 12. That case is entirely
distinguishable. In Berman, the CIA relied on the National
Security Act to prevent disclosure of the President’s Daily
Briefs because they were “part of the process by which the CIA
advises the President . . . and therefore intelligence decisions
are directly affected by [them].” 501 F.3d at 1146 (quotation
marks omitted). The Ninth Circuit rejected this argument because
the Briefs “are nothing more than simple memoranda the CIA uses
to communicate with the President.” Id. The Ninth Circuit’s
statement that “[i]f we were to accept the CIA’s logic, then
every written CIA communication . . . would be a protected
‘intelligence method’ because it is a method that CIA uses in
doing its work,” id., is not applicable here, where the CIA is
seeking to protect information related to its polygraph program,
a method by which the agency obtains “information and assess[es]
deception in the course of applicant and personnel screening
evaluations and counterintelligence investigations.” Suppl. CIA
Decl. ¶ 4.
22
specific job functions. See Opp. at 14, 20 n.12.10 Although it is
possible that all of the information withheld by the CIA under
the CIA Act relates directly to agency personnel in this manner,
the Court cannot conclude as much on the current record and
therefore addresses the parties’ competing interpretations of
Section 6.
The dispute boils down to a simple question: does the phrase
“of personnel employed by the Agency” modify each item in the
list of information that Section 6 exempts from disclosure or
only the final item? The plaintiff argues that it modifies each
item, meaning that Section 6 exempts from disclosure “the
organization of personnel employed by the CIA; the functions of
personnel employed by the CIA; the names of personnel employed
by the CIA; the official titles of personnel employed by the
CIA; the salaries of personnel employed by the CIA; and the
numbers of personnel employed by the CIA.” Opp. at 14–15
(emphases omitted). The defendants read the phrase to modify
only the final item in the list. See Reply at 12.
10
Although she does not challenge the withholding of employee
names, plaintiff argues that the Agency’s declaration is “a
textbook example of ‘general sloppiness’” because it mentions
that CIA employee names are present in forty-nine documents, but
the CIA claimed FOIA Exemption 6’s protection for such
information in only two instances. See Opp. at 14. The CIA
clarified that it “does not typically assert Exemption 6 to
protect the identities of its own employees, and instead relies
on the CIA Act to do so.” CIA Suppl. Decl. ¶ 7 n.4. The two
Exemption 6 withholdings involved the names of non-employees.
See Defs.’ Reply at 11.
23
The text of Section 6 does not readily bear the defendants’
interpretation. If the phrase “of personnel employed by the
Agency” modifies only the final term in the list, the provision
becomes difficult to understand because it would exempt from
disclosure: “the organization,” “the functions,” “the names,”
“the official titles,” “the salaries,” and “the numbers of
personnel employed by the agency.” The CIA appears to believe
that the other terms should be read as modified by the phrase
“of the agency,” but that phrase does not appear in Section 6.
Under that reading of Section 6, moreover, many items in the
list would be rendered absurd (e.g. “the salaries [of the
Agency],” “the names [of the Agency],” and “the official titles
[of the Agency]”). Nor can the fact that Section 6 is entitled
“Protection of nature of Agency’s functions,” 50 U.S.C. § 3507,
overcome the provision’s plain language. “[A] statute’s title
may not undo that which the statute itself makes plain.” United
States v. Waters, 158 F.3d 933, 938 (6th Cir. 1998).11
11
Because reading Section 6 as defendant suggests renders the
provision unclear, the last antecedent rule—that “a limiting
clause or phrase . . . should ordinarily be read as modifying
only the noun or phrase that it immediately follows,” Barnhart
v. Thomas, 540 U.S. 20, 26 (2003)—does not apply. As the D.C.
Circuit recently reiterated, that rule may “be overcome by other
indicia of meaning.” Emory v. United Air Lines, 720 F.3d 915,
926 (D.C. Cir. 2013). Similarly, the CIA’s suggestion that it is
entitled to deference, Reply at 15–16, is unavailing because its
interpretation is at odds with the plain language of Section 6.
24
The Court does not write on a blank slate, moreover. Two
Judges of this Court recently rejected identical arguments made
by the CIA. See Whitaker v. CIA, No. 12-316, 2014 WL 914603, at
*5–7 (D.D.C. Mar. 10, 2014); Nat’l Sec. Counselors v. CIA, 960
F. Supp. 2d 101, 174-85 (D.D.C. 2013). There is also a long
history of decisions from the D.C. Circuit limiting the scope of
Section 6. See Nat’l Sec. Counselors, 960 F. Supp. 2d at 175-76.
First, as “an outer limit,” id. at 175, the Circuit has held
that Section 6 “does not ‘allow[] the [CIA] to refuse to provide
any information at all about anything it does.’” Id. (quoting
Phillippi v. CIA, 546 F.2d 1009, 1015 n.14 (D.C. Cir. 1976))
(alterations in original). The provision thus stands in contrast
to Section 6 of the National Security Agency Act, 50 U.S.C. §
3605(a), which protects from disclosure “the organization or any
function of the National Security Agency, or any information
with respect to the activities thereof, or of the names, titles,
salaries, or number of the persons employed by such agency.” See
Hayden v. NSA, 608 F.2d 1381, 1389-90 (D.C. Cir. 1979) (noting
that the National Security Agency Act is “broader” than Section
6 because it protects “‘any information with respect to the
activities’ of the NSA”).
The D.C. Circuit has also made clear that Section 6 “applies
only to ‘information about [the CIA’s] internal structure.’”
Nat’l Sec. Counselors, 960 F. Supp. 2d at 175 (quoting
25
Phillippi, 546 F.2d at 1015 n.14) (alteration in original). The
CIA repeatedly seizes on the use of the phrase “internal
structure” as support for interpreting the term to cover
anything related to the organization or function of the CIA. See
Reply at 10–12. The D.C. Circuit, however, has made clear that
information related to the Agency’s structure is protected only
to the extent it relates to “information concerning the Agency’s
personnel.” Linder v. Dep’t of Defense, 133 F.3d 17, 25 (D.C.
Cir. 1998). Thus, as Judge Howell found in National Security
Counselors, Section 6, “standing alone, only protects
information on the CIA’s personnel and internal structure, such
as the names of personnel, the titles and salaries of personnel,
or how personnel are organized within the CIA.” 960 F. Supp. 2d
at 175 (quotation marks and citation omitted).
The Agency argues that even if Section 6’s protections apply
only to personnel information, information about the functions
and organization of the CIA necessarily relates to the function
and organization of its employees. Reply at 12–13. Were there no
distinction between the function and organization of agency
personnel and the function and organization of the Agency,
however, Section 6 would “encompass any kind of activity
appropriately carried out by the CIA.” Nat’l Sec. Counselors,
960 F. Supp. 2d at 176 (holding that the CIA’s argument would
“strip[] the word personnel of any real meaning”) (quotation
26
marks omitted). Thus, although information related to the
function and organization of the Agency may relate directly to
the function or organization of agency personnel, it does not
necessarily do so. This comports with “the plain text of the
statute[, which] limits protection from disclosure only to the
functions and organization pertaining to or about personnel,”
id., and the D.C. Circuit’s view that Section 6 does not exempt
from disclosure “any information at all about anything [the CIA]
does.’” Phillippi, 546 F.2d at 1015 n.14.12 Accordingly, Section
6’s protection applies only when the withheld information
relates to “the CIA’s personnel and internal structure, such as
the names of personnel, the titles and salaries of personnel, or
how personnel are organized within the CIA.” Nat’l Sec.
12
Illustrative of why “the functions and organization of
personnel” has a narrower meaning than “the functions and
organization of the agency” is the Supreme Court’s
interpretation of the adjective “personnel” as used in FOIA’s
Exemption 2. See Milner v. Dep’t of Navy, 131 S. Ct. 1259
(2011). Exemption 2 protects from disclosure information
“related solely to the internal personnel rules and practices of
an agency.” 5 U.S.C. § 552(b)(2). In Milner, the Court held that
the term “personnel” limits the types of “rules and practices”
that are covered by Exemption 2 to those that relate to human-
resources functions, rather than a broader set of agency rules
and practices. Id. at 1264. Reading the term “personnel” in
Section 6 to effectively mean “agency” would similarly do
violence to the word’s ordinary meaning.
27
Counselors, 960 F. Supp. 2d at 175 (quotations marks and
citations omitted); see also Whitaker, 2014 WL 914603, at *5.13
Under this interpretation of Section 6, the Court cannot
currently say whether the CIA’s withholdings were proper. The
CIA’s initial declaration described the information withheld
under the CIA Act as including: (1) “the names of CIA
employees,” their “official titles,” and “information disclosing
their organizational functions”; (2) “contact information for
CIA personnel”; (3) “internal CIA organizational data, including
file paths”; (5) “internal taskings which would reveal internal
document processing methods, as well as the organization of and
capabilities related to the CIA’s decentralized information
management systems”; and (6) “internal CIA organizational and
functional information.” CIA Decl. ¶ 41. In its supplemental
declaration, the CIA asserted that “the sole instances in which
the CIA has relied exclusively upon the CIA Act concern internal
office and distribution information,” including “the internal
13
The Court is not persuaded by earlier decisions that arguably
condoned the CIA’s interpretation. Those decisions analyzed the
interpretive question very briefly and some appeared to rely
simultaneously on the broad protections provided by the National
Security Act. See Inst. For Pol’y Studies v. CIA, 885 F. Supp.
2d 120, 146–47 (D.D.C. 2012); Schoenman v. FBI, 841 F. Supp. 2d
69, 83–84 (D.D.C. 2012); ACLU v. Dep’t of Justice, 808 F. Supp.
2d 280, 288–89 (D.D.C. 2011), rev’d on other grounds, 710 F.3d
422 (D.C. Cir. 2013); McGehee v. U.S. Dep’t of Justice, 800 F.
Supp. 2d 220, 231–32 (D.D.C. 2011); James Madison Project v.
CIA, 607 F. Supp. 2d 109, 125–27 (D.D.C. 2009); Riquelme v. CIA,
453 F. Supp. 2d 103, 111 (D.D.C. 2006).
28
divisions within the Agency, internal telephone numbers, and
classification dissemination controls” as well as other markings
“involving internal office and distribution information.” CIA
Suppl. Decl. ¶ 6. The CIA also claims that “the National
Security Act applies to the vast majority of information for
which the CIA Act is claimed.” Id. These declarations
nonetheless imply that the withheld information may have related
not only to personnel, but also to the organization of the CIA
itself. To obtain summary judgment, the CIA must provide a
clearer description of the withheld information. Moreover, to
the extent that withheld information relates to “internal CIA
organizational data, including file paths,” “internal document
processing methods,” and “the organization of and capabilities
related to the CIA’s decentralized information management
systems,” CIA Decl. ¶ 41, the Agency must provide a more
detailed description to justify withholding that information as
related to the organization and functions of agency personnel.
See Nat’l Sec. Counselors, 960 F. Supp. 2d at 179 (“Shorn of the
gratuitous addition of the words ‘internal’ and
‘organizational,’ it appears that the information . . . is
information about how the CIA manages, stores, and retrieves
information.”).14
14
It is not clear whether the information that was withheld
pursuant to the CIA Act alone was also subject to an Exemption
29
C. The DIA’s Withholdings (Counts Seven and Nine).
Plaintiff challenges certain of the DIA’s withholdings with
respect to six documents. She challenges withholdings of
polygraph information under Exemption 3 from documents V-21 and
V-30; thermal images from document V-21 pursuant to Exemptions 3
and 6; and Exemption 7(E) withholdings from documents V-21, V-
27, V-29, V-70, and V-71.
1. Exemption 3 Withholdings Pursuant to the National
Security Act.
The DIA’s Exemption 3 withholdings from V-21 and V-30 were all
done pursuant to Section 102A(i)(1) of the National Security
Act. As discussed in Part III.B.1, supra, that provision exempts
from disclosure information related to “intelligence sources and
methods,” 50 U.S.C. § 3024(i)(1), and grants “very broad
authority to protect all sources of intelligence information
from disclosure.” Sims, 471 U.S. at 168–69. As long as the
agency provides “justifications for nondisclosure with
reasonably specific detail, demonstrate[s] that the information
withheld logically falls within the claimed exemptions, and
show[s] that the justifications are not controverted by contrary
evidence in the record or by evidence of [agency] bad faith,”
One withholding. Accordingly, the parties’ disputes regarding
Exemption One may be rendered moot by the Court’s ruling
regarding the National Security Act and the Court declines to
address those arguments at this time.
30
Berman, 501 F.3d at 1140, the Court must “accord[] substantial
weight to the [agency’s] affidavits.” Larson, 565 F.3d at 865.
The plaintiff claims that the DIA’s Vaughn index and
declarations are vague and conclusory. See Opp. at 22-23. In
fact, the DIA provided sufficient information to show that it is
entitled to summary judgment. The DIA’s Vaughn Index states that
V-21 is entitled “National Center for Credibility Assessment,
Alternative Credibility Assessment” and that the National
Security Act was relied upon “to protect intelligence sources
and methods.” DIA Vaughn Index, ECF No. 14-10 at 1. V-30 is
entitled “National Center for Credibility Assessment, Continuing
Education PDD,” and the National Security Act was relied upon
“to protect sensitive information on the population of federal
polygraph examiners throughout government agencies; how
polygraph examiners are trained and the locations where the
training occurs.” Id. at 4.
The DIA’s supplemental declaration provided additional detail.
It explained that the National Center for Credibility
Assessment, the entity to which both V-21 and V-30 relate,
“conducts developmental research and provides academic training
to the polygraph programs within the United States Intelligence
Community,” which then “utilize[s] the . . . technology for both
national security screening and investigative purposes.” Second
Declaration of Alesia Y. Williams (“Suppl. DIA Decl.”), ECF No.
31
27-2 ¶ 2. The DIA further stated that the National Security Act
“was specifically cited to protect intelligence sources and
methods within the Intelligence Community that are related to
the use of polygraph technology,” which “is used by DIA and
other agencies for their intelligence activities and to asses
employees’ and potential employees’ suitability for access to
classified materials.” Id. ¶ 4. Finally, the DIA declared that
“it is not possible to provide any additional information
without compromising the sources and methods.” Id.
This is sufficient to establish that the withheld information
relates to research and training programs of the National Center
for Credibility Assessment regarding polygraphs that are used by
the intelligence community for security and counterintelligence
purposes. In view of the deference owed an agency under the
National Security Act, the Court cannot disagree that the DIA’s
polygraph program is an intelligence source and method and that
the withheld information relates to that program.15
2. Exemption 3 and 6 Withholdings of Thermal Images.
15
Moreover, absent evidence of agency bad faith, the Court must
also consider the agency’s declaration that providing any
further detail would disclose the very information it seeks to
protect. See Sims, 471 U.S. at 179 (noting that “[i]t is
conceivable that the mere explanation of why information must be
withheld can convey valuable information to a foreign
intelligence agency”).
32
Plaintiff also challenges the DIA’s withholding of thermal
images from Document V-21. The DIA explained that the images are
“photographs of Department of Defense employees or contractor
personnel taken for training purposes with a thermal camera . .
. to demonstrate the potential use of these sorts of images in
the credibility assessment process.” DIA Suppl. Decl. ¶ 5. These
images were withheld pursuant to Exemption 6, which protects
from disclosure “personnel and medical files and similar files
the disclosure of which would constitute a clearly unwarranted
invasion of personal privacy.” 5 U.S.C. § 552(b)(6).16 Exemption
6 covers any “[g]overnment records on an individual which can be
identified as applying to that individual.” U.S. Dep’t of State
v. Wash. Post. Co., 456 U.S. 595, 602 (1982) (quotation marks
omitted); see also Judicial Watch, Inc. v. FDA, 449 F.3d 141,
152 (D.C. Cir. 2006) (Exemption 6 applies “to exempt not just
files, but also bits of personal information . . . the release
of which would create a palpable threat to privacy”) (quotation
marks and alterations omitted). The Court determines whether
Exemption 6 applies by “weigh[ing] the privacy interest in non-
disclosure against the public interest in the release of the
records in order to determine whether, on balance, the
16
The images were also withheld under 10 U.S.C. § 424, which
exempts from disclosure “the organization or any function of
[the DIA]” and “the number of persons employed by or assigned or
detailed to [the DIA] or the name, official title, occupational
series, grade, or salary of any such person.”
33
disclosure would work a clearly unwarranted invasion of personal
privacy.” Lepelletier v. FDIC, 164 F.3d 37, 46 (D.C. Cir. 1999)
(quotation marks omitted).
“The only relevant public interest . . . is the extent to
which disclosure of the information sought would shed light on
an agency’s performance of its statutory duties or otherwise let
citizens know what their government is up to.” Id. (quotation
marks and alterations omitted). Here, the public interest in
disclosure of the thermal images is minimal because the “same
type of image could be created with any thermal camera,
including through widely-available smart phone ‘apps’ that
generate images similar to those being withheld.” Suppl. DIA
Decl. ¶ 11. “[T]he public interest is not furthered ‘by
disclosure of information about private citizens that is
accumulated in various governmental files but that reveals
little or nothing about an agency’s own conduct.’” People for
the Am. Way v. Nat’l Park Serv., 503 F. Supp. 2d 284, 304
(D.D.C. 2007) (quoting U.S. Dep’t of Justice v. Reporters Comm.
For Freedom of the Press, 489 U.S. 749, 773 (1989)).
Privacy concerns outweigh this minimal public interest. “The
privacy interest in nondisclosure encompasses an individual’s
control of personal information and is not limited to that of an
embarrassing or intimate nature.” Id. (citing Wash. Post Co.,
456 U.S. at 600). Images of an individual may implicate a
34
privacy interest under Exemption 6. See, e.g., Advocates for
Highway & Auto Safety v. Fed. Highway Admin., 818 F. Supp. 2d
122, 129 (D.D.C. 2011). Indeed, plaintiff “concedes that
photographs of employees may be legitimately withheld,” but
argues that thermal images are different because no employee may
be identified from the images. See Opp. at 23-24. The DIA
stated, however, that the images “could reasonably lead to the
personal identification of these . . . employees or contractor
personnel.” DIA Suppl. Decl. ¶ 5.
Four of the images are such that “[a] viewer is easily able to
identify the gender, age, facial shape, and facial hair of the
subject” and “can easily make out more detailed facial features
that make each person unique.” Id. ¶ 7. “These four images
provide the viewer with an image that is . . . similar to a
regular photograph, but with a detailed color overlay that shows
the measurement of the heat emanating from the subjects’ skin.”
Id. Three other images, while of lesser quality “still allow a
viewer to identify gender, basic facial features, facial hair,
and the subject’s general age.” Id. ¶ 8. Ultimately, the DIA
stated, “it would still be quite easy for a viewer to use the
images’ personally identifying information to discover the
identity of each of these [individuals].” Id. ¶ 9.
Nor are the images being withheld solely to prevent unwanted
disclosure of the individuals’ photographs. As the DIA
35
explained, disclosure of the identities of those depicted in the
images would “allow[] outside actors to identify employees of
this Agency who may be working to further the mission of the
Intelligence Community; and, the release could reasonably be
expected to damage the individual privacy of the employees or
contractors by disclosing their identities to the general
public.” Id. ¶ 6. At a minimum, this creates a moderate privacy
interest and “something, even a modest privacy interest,
outweighs nothing every time.” Nat’l Ass’n of Retired Fed. Emps.
v. Horner, 879 F.2d 873, 879 (D.C. Cir. 1989).17
3. Exemption 7(E) Withholdings.
Plaintiff also challenges the DIA’s withholding of polygraph-
related information pursuant to Exemption 7(E) from V-27, V-29,
V-70, and V-71. Exemption 7(E) protects “records or information
compiled for law enforcement purposes . . . to the extent that
the production of such law enforcement records or information .
. . would disclose techniques and procedures for law enforcement
investigations or prosecutions . . . if such disclosure could
reasonably be expected to risk circumvention of the law.” 5
U.S.C. § 552(b)(7)(E). An agency does not bear “a highly
17
The images were also properly withheld under 10 U.S.C. § 424,
which is “a statute that falls within the scope of Exemption 3.”
Physicians for Human Rights v. U.S. Dep’t of Defense, 778 F.
Supp. 2d 28, 36 (D.D.C. 2011). Section 424 “clearly aims to
protect the identity of DIA personnel” and is therefore a proper
basis for withholding the images. Larson v. Dep’t of State, No.
2-cv-1937, 2005 WL 3276303, at *15 (D.D.C. Aug. 10, 2005).
36
specific burden of showing how the law will be circumvented”;
rather, “exemption 7(E) only requires that [the agency]
‘demonstrate[] logically how the release . . . might create a
risk of circumvention of the law.’” Mayer Brown LLP v. IRS, 562
F.3d 1190, 1194 (D.C. Cir. 2009) (quoting PHE, Inc. v. Dep’t of
Justice, 983 F.2d 248, 251 (D.C. Cir. 1993)) (second alteration
in original).
The DIA maintains that the information withheld under
Exemption 7(E) consists of “details concerning the use of
polygraph technology to test the credibility of employees
involved in specific incidents in the federal workplace” the
release of which “could diminish the effectiveness of the
polygraph examination as an investigative tool by allowing the
general public to discern when DIA is likely to utilize this
tool.” DIA Decl. ¶ 37. Moreover, at least some of the
information withheld relates to “investigative techniques that
were used in an espionage investigation.” Id. ¶ 39.
More specifically, V-21, V-27, and V-29 are “training
materials, which are used to teach polygraph research,
standards, policies and procedures” and the withheld information
“could be used to circumvent the polygraph examination itself”
and potentially diminish “the effectiveness of the polygraph
examination as a critical law enforcement and national security
screening tool.” DIA Suppl. Decl. ¶ 12. V-70 and V-71, reports
37
of Dr. Barland, both include “a significant amount of sensitive
information concerning the use of polygraph countermeasures that
is unknown to the public.” Id. ¶ 13.
Plaintiff argues that this information is not subject to
Exemption 7(E) because the information does not pertain to the
use of polygraphs during a criminal investigation. See Opp. at
24. The Court finds that plaintiff’s proposed distinction
between criminal investigations and personnel-screening has no
legal basis. Indeed, Judge Wilkins rejected an identical
argument in Sack v. U.S. Dep’t of Defense, No. 12-cv-1754, 2013
WL 6640776, at *8 (D.D.C. Dec. 13, 2013). There, the Court
upheld Exemption 7(E) withholdings of polygraph-related
information because disclosure of information regarding the
DIA’s involvement in reviewing and testing other agencies’
polygraph programs would contribute to the circumvention of
polygraphs. Id. The Court rejected plaintiff’s distinction
“between polygraph examinations conducted as part of a criminal
investigation . . . and employment-related polygraph programs.”
Id. Similarly, in Morley v. CIA, the D.C. Circuit applied
Exemption 7(E) to information “revealing security clearance
procedures [that] could render those procedures vulnerable and
weaken their effectiveness at uncovering background information
on potential candidates.” 508 F.3d 1108, 1129 (D.C. Cir. 2007).
The Circuit found that “[b]ackground investigations conducted to
38
assess an applicant’s qualification . . . inherently relate to
law enforcement.” Id. at 1128–29. There is therefore no basis to
exclude information from coverage of Exemption 7(E) based solely
on the fact that it is used in personnel-screening activities.
Plaintiff argues alternatively that the information cannot
lead to circumvention of law enforcement techniques because it
is outdated and there is “no reason to presume that those
vulnerabilities [it identifies] have not been subsequently
corrected. Opp. at 25–26. The DIA declared that the research
discussed in the withholdings “remains an active part” of its
“efforts to detect and prevent the use of polygraph
countermeasures.” DIA Suppl. Decl. ¶ 13. Even if some of the
findings have been used to improve polygraph practices, “harm
would be caused to the overall process were it to be disclosed
precisely which . . . vulnerabilities have been suitably
addressed and which remain a critical task.” Id. ¶ 14. These
statements are sufficient to meet the agency’s burden of showing
that release of the information could lead to circumvention of
current law-enforcement techniques.
D. The DODIG’s Withholdings (Count Twelve).
Plaintiff’s sole challenge to the DODIG’s withholdings asserts
that it invoked Exemption 7(E) in a conclusory manner and should
be “require[d] . . . to supply actual particularized evidence.”
Opp. at 27. The DODIG withheld portions of Documents IG-1 and
39
IG-2, and all of Documents IG-3 and IG-4. See DODIG Vaughn
Index, ECF No. 14-12 at 2-3. Three of the four documents—all but
IG-3—are identified as having been authored by the Defense
Criminal Investigative Service, id., an arm of the DODIG that
utilizes polygraphs in its investigations. See Declaration of
Jeanne Miller (“DODIG Decl.”), ECF No. 14-11 ¶¶ 4(a), 47. The
titles of all four documents shed further light on their
relation to DODIG’s investigative functions. See DODIG Vaughn
Index, ECF No. 14-12 at 2-3 (IG-1 “Psychophysiological Detection
of Deception (PDD) Examinations”; IG-2 “Pyschophysiological
Detection of Deception Program (PDD) Operational Manual”; IG-3
“Utilization of Polygraph in Criminal Intelligence Operations”;
IG-4 “DCIS Form PDD4-DCIS Polygraph Testing Techniques.”).
The Vaughn index also states that each withholding was done
because the information “would disclose investigative techniques
and procedures, specifically, polygraph techniques used by
DCIS.” Id. Finally, in its declaration, the DODIG asserts that
“[i]nformation contained in [the withheld documents], which is
not generally known to the public, is designed solely to guide
DCIS personnel in the use of polygraphs in support of
investigations” and that “[t]he redacted material identifies
specific applications of techniques and procedures used in
polygraph matters and disclosure could enable circumvention of
[the] polygraph test by others.” DODIG Decl. ¶ 47. Moreover,
40
DODIG states, “[p]ublic release of that information could
possibly benefit those attempting to reduce the effectiveness of
the polygraph or violate the law and avoid detection.” Id. This
description meets the agency’s burden by showing that the
withholdings protect information the release of which could lead
to circumvention of the criminal-investigation activities of the
Defense Criminal Investigative Service.
E. The FBI’s Withholdings (Count Fourteen).
Plaintiff’s sole challenge to the FBI’s withholdings relates
to a single Exemption 5 withholding. The FBI released that
information to plaintiff after learning that it “was actually
released by FBI in response to another of Sack’s requests.” Opp.
at 27 (emphasis omitted); see Second Declaration of David M.
Hardy, ECF No. 27-3 ¶ 5. Because plaintiff does not challenge
any other withholdings, this claim is moot.18
F. Segregability.
18
Plaintiff’s request that the Court “issue a written finding
that the circumstances surrounding the withholding raise
questions whether agency personnel acted arbitrarily or
capriciously with respect to the withholding,” Opp. at 28, is
DENIED. For one, the Court has neither “order[ed] the production
of any agency records” in connection with this dispute, nor
“assesse[d] against the United States reasonable attorney fees
and other litigation costs,” 5 U.S.C. § 552(a)(4)(F)(i), both of
which are necessary prerequisites to the relief plaintiff seeks.
See Landmark Legal Found. v. EPA, 959 F. Supp. 2d 175, 184 n.8
(D.D.C. 2013). Moreover, plaintiff has not demonstrated that the
FBI’s withholding was arbitrary or capricious.
41
Before granting summary judgment, the Court must determine
whether “[a]ny reasonably segregable portion of a record” can
“be provided to any person requesting such record after deletion
of the portions which are exempt.” 5 U.S.C. § 552(b). “So
important is this requirement that ‘[b]efore approving the
application of a FOIA exemption, the district court must make
specific findings of segregability regarding the documents to be
withheld.” Elec. Frontier Found. v. U.S. Dep't of Justice, 826
F. Supp. 2d 157, 173 (D.D.C. 2011) (quoting Sussman v. U.S.
Marshals Serv., 494 F.3d 1106, 1116 (D.C. Cir. 2007)) (emphasis
in original). The Court, in fact, has “an affirmative duty to
consider the segregability issue sua sponte.” Juarez v. Dep’t of
Justice, 518 F.3d 54, 60 (D.C. Cir. 2008) (quotation marks
omitted).
In this Circuit, “non-exempt portions of a document must be
disclosed unless they are inextricably intertwined with exempt
portions.” Mead Data Cent., Inc. v. U.S. Dep't of the Air Force,
566 F.2d 242, 260 (D.C. Cir. 1977). The agency must “‘describe
what proportion of the information in the documents,’ if any,
‘is non-exempt and how that material is dispersed through the
documents.’” Elec. Frontier Found., 826 F. Supp. 2d at 174
(quoting Mead Data, 566 F.2d at 261) (alterations omitted). Once
it does so, the agency is “entitled to a presumption that it
complied with the obligation to disclose reasonably segregable
42
material.” Hodge v. FBI, 703 F.3d 575, 582 (D.C. Cir. 2013)
(quotations marks and alterations omitted). This presumption
“must be overcome by some ‘quantum of evidence’ by the
requester.” Judicial Watch, Inc. v. U.S. Dep’t of Justice, No.
12-1350, 2014 WL 794220, at *12 (D.D.C. Feb. 28, 2014) (quoting
Sussman, 494 F.3d at 1117). The Court therefore must analyze the
evidence of non-segregability presented by the DIA and DODIG.19
The DIA declaration asserts:
I have carefully reviewed Attorney General Holder’s
memo . . . which encourages agencies to make
discretionary disclosures and directs agencies to
segregate and release nonexempt information. The
documents were carefully reviewed for reasonably
segregable information. I have determined that there
is no reasonably segregable information that can be
released to the plaintiff.
DIA Decl. ¶ 40. The declaration confirms that the agency
conducted a careful review. The partial withholdings from
documents V-21, V-27, V-29, and V-30 are described in sufficient
detail to indicate that the agency withheld information directly
related to the reason for invoking an exemption. See DIA Suppl.
Decl. ¶¶ 4–5, 7–8, 12.
The DIA’s withholding in full of V-70 and V-71 was justified
by “affidavits that show with reasonable specificity why
documents withheld pursuant to a valid exemption cannot be
19
Because the Court upholds only some of the CIA’s withholdings
at this time, and it is not clear what information was withheld
solely pursuant to the CIA Act, the Court is currently unable to
conduct a segregability analysis as to the CIA’s withholdings.
43
further segregated.” Juarez, 518 F.3d at 61. The DIA determined
that V-70 and V-71 “each contain[] a significant amount of
sensitive information concerning the use of polygraph
countermeasures that is unknown to the public” and “[t]he whole
body of research discussed in documents V-70 and V-71 remains an
active part of the [agency’s] efforts to detect and prevent the
use of polygraph countermeasures.” DIA Suppl. Decl. ¶ 13. The
DIA also concluded that, even if some of the vulnerabilities
identified in the articles have been rectified, “harm would be
caused to the overall process were it to be disclosed precisely
which potential[] vulnerabilities have been suitably addressed
and which remain a critical risk.” Id. ¶ 14. For this reason,
“it is . . . not possible to segregate certain information from
either of these two articles for release to plaintiff.” Id.
The DODIG declaration states:
I have carefully reviewed Attorney General Holder’s
memo . . . which encourages agencies to make
discretionary disclosures and directs agencies to
segregate and release nonexempt information. The
documents were carefully reviewed for reasonably
segregable information. I have determined that there
is no additional reasonably segregable information
that can be released to the Plaintiff.
DODIG Decl. ¶ 48. This statement, combined with the DODIG
declaration’s description of the information redacted from the
partially withheld documents, IG-1 and IG-2, is sufficient. See
id. ¶ 47. The DODIG did not, however, describe “with reasonable
44
specificity” why IG-3 and IG-4 were withheld in full. It may be
that those documents contain information withheld under
Exemption 7(E)—or under other exemptions that plaintiff has
elected not to challenge—that is dispersed such that the
documents must be withheld in full, but DODIG must “show with
reasonable specificity why” this is the case. See Juarez, 518
F.3d at 61 (emphasis added).
IV. PLAINTIFF’S MOTION TO RESCIND
Also before the Court is plaintiff’s motion to rescind the
stipulated dismissal of Count Fifteen of her Complaint. That
Count challenged the DOJ Office of Legal Counsel’s (“OLC”)
response to a FOIA request plaintiff submitted “for all records
relating to polygraphs.” Compl. ¶ 84. Plaintiff claims that she
agreed to the stipulated dismissal of Count Fifteen because OLC
assured her, through a draft Vaughn index, that it would
withhold six documents on the basis of the attorney-client and
deliberative-process privileges. See Mot. to Rescind, ECF No. 30
at 1. She claims that OLC represented that the documents were
communications to other agencies and that it had consulted with
each agency before withholding the document. Id. at 2.
Plaintiff asserts that her counsel found one of the documents,
an OLC opinion from 1967, publicly available through the CIA
Records Search Tool. See id. Plaintiff’s counsel brought this to
the attention of defendants’ counsel, who confirmed with OLC
45
that it had consulted the appropriate agencies in determining
what to withhold. See id. OLC, however, refused to provide
plaintiff the level of detail about these consultations that she
desired. See id. at 2–3. Accordingly, plaintiff moved to rescind
the stipulated dismissal of Count Fifteen.
Plaintiff offers no legal basis for her request. Instead, she
argues the merits of OLC’s withholding, noting that the
privileges claimed in the OLC’s draft Vaughn index may be waived
if published by OLC’s client. Id. at 3. According to plaintiff,
OLC’s failure to learn of the CIA’s publication of the 1967 memo
demonstrates that OLC’s consultations regarding the other five
documents cannot be trusted. Id. at 4.
The Court reads plaintiff’s motion as a request under Federal
Rule of Civil Procedure 60(b), which provides:
On motion and just terms, the court may relieve a
party or its legal representative from a final
judgment, order, or proceeding for the following
reasons: (1) mistake, inadvertence, surprise, or
excusable neglect; (2) newly discovered evidence that,
with reasonable diligence, could not have been
discovered in time to move for a new trial under Rule
59(b); (3) fraud . . . misrepresentation, or
misconduct by an opposing party; (4) the judgment is
void; (5) the judgment has been satisfied, released or
discharged; it is based on an earlier judgment that
has been reversed or vacated; or applying it
prospectively is no longer equitable; or (6) any other
reason that justifies relief.
The D.C. Circuit has held that voluntary dismissals under Rule
41(a), like the parties’ Joint Stipulation, may be subject to
46
Rule 60(b) motions. See Randall v. Merrill Lynch, 820 F.2d 1317,
1320 (D.C. Cir. 1987).
Plaintiff’s failure to provide a legal basis for her request
complicates matters, but the Court finds that her allegation of
“a misrepresentation by OLC,” Mot. to Rescind, ECF No. 30 at 1,
could fall under Rule 60(b)(3), which provides relief for “fraud
. . . misrepresentation, or misconduct by an opposing party.”20
To obtain relief under this provision, “the burden of proof of
fraud is on the moving party and . . . fraud must be established
by clear and convincing evidence.” 11 Charles Alan Wright &
Arthur R. Miller, Federal Practice and Procedure § 2860 (3d ed.
2014); see also Tembec, Inc. v. United States, No. 5-2345, 2007
WL 1169346, at *4 (D.D.C. April 19, 2007) (movant “must
establish fraud or misconduct, and resulting actual prejudice,
by clear and convincing evidence”).
20
Plaintiff does not appear eligible for relief under any other
subsection of Rule 60(b). Her voluntary entrance into the
stipulation would preclude relief under Rule 60(b)(1). See 11
Charles Alan Wright & Arthur R. Miller, Federal Practice and
Procedure § 2858 (3d ed. 2014) (“Voluntary action also may
prevent a party from seeking relief on the ground of mistake or
excusable neglect. This includes . . . deliberately adopted
stipulations, or voluntary dismissals, even when based on
erroneous facts.”). Subsections (b)(2), (b)(4), and (b)(5)
cannot provide relief because they address defects in or changed
circumstances regarding a prior Court judgment. Finally, Rule
60(b)(6) “should be only sparingly used and may not be employed
simply to rescue a litigant from strategic choices that later
turn out to be improvident.” Kramer v. Gates, 481 F.3d 788, 792
(D.C. Cir. 2007) (quotation marks omitted).
47
Plaintiff cannot meet this bar. She establishes only that OLC
failed to learn that the CIA had previously released the 1967
Opinion. There is no evidence—much less clear and convincing
evidence—that this was anything but an oversight in connection
with negotiations regarding a far-ranging FOIA request. A minor
oversight, without evidence of affirmative misconduct, does not
support a finding of fraud. Compare Summers v. Howard Univ., 374
F.3d 1188, 1193 (D.C. Cir. 2004) (granting relief under Rule
60(b)(3) where “plaintiffs engaged in repeated, affirmative
efforts to keep [the relevant information] a secret from [the
defendant]” and “plaintiffs concede[d] that these acts were
intentional”). “There must be an end to litigation someday” and
plaintiff’s strategic decision to stipulate to the dismissal of
Count Fifteen was the kind of “free, calculated, deliberate
choice[ that is] not to be relieved from.” Ackermann v. United
States, 340 U.S. 193, 198 (1950).
V. CONCLUSION
For the foregoing reasons, the Court GRANTS IN PART AND DENIES
IN PART defendants’ motion for summary judgment and DENIES
plaintiff’s motion to reinstate Count Fifteen. An appropriate
Order accompanies this Memorandum Opinion.
SO ORDERED.
Signed: Emmet G. Sullivan
United States District Judge
July 10, 2014
48
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IN THE COURT OF APPEALS OF NORTH CAROLINA
No. COA16-816
Filed: 18 April 2017
Watauga County, No. 15 CRS 51160
STATE OF NORTH CAROLINA
v.
DANIEL MYLETT, Defendant
Appeal by defendant from judgment entered 31 March 2016 by Judge Alan Z.
Thornburg in Watauga County Superior Court. Heard in the Court of Appeals 9
February 2017.
Attorney General Joshua H. Stein, by Assistant Attorney General Kevin G.
Mahoney, for the State.
Arnold & Smith, PLLC, by Laura M. Cobb, for defendant-appellant.
MURPHY, Judge.
Daniel Mylett (“Defendant”) appeals from his conviction for assault on a
government officer. On appeal, he contends that the trial court erred by (1) denying
his motion for a continuance; and (2) denying his motions to dismiss. Specifically, he
argues that the trial court should have granted his motion for a continuance so that
he could prepare a motion to dismiss on the basis that video footage of the assault
recorded on officers’ body cameras was destroyed prior to trial in violation of Brady
v. Maryland, 373 U.S. 83, 10 L. Ed. 2d 215 (1963).
STATE V. MYLETT
Opinion of the Court
He further asserts that, because he did not intend to assault a government
officer, but instead intended to assault civilians standing behind the officer, the
charge of assault on a government officer in violation of N.C.G.S. § 14-33(c)(4) (2015)
was erroneously submitted to the jury as the State failed to establish the requisite
intent element of the offense. After careful review, we reject Defendant’s arguments
and conclude that he received a fair trial free from error.
Factual Background
At 1:37 a.m. on 29 August 2015, Officer Jason Lolies (“Officer Lolies”) and
Officer Forrest (“Officer Forrest”) with the Boone Police Department responded to a
call regarding a male who was bleeding from his head at 200 Misty Lane in Boone,
North Carolina. Upon arriving at the Misty Lane address, Officers Lolies and Forrest
encountered several hundred individuals, most of whom were college-aged.
Officer Lolies recalled that “[a]s we got to the crest of the hill, the driveway,
that’s when we heard a commotion and it sounded like some arguments, some
screaming, some fighting sort of” coming from a smaller group of approximately 30
individuals. Upon investigation, Officer Lolies observed “people pushing and shoving
over top of [Defendant]” who was “laying on the ground.” Officer Lolies continued
that “[i]t appeared that some of the people were trying to defend [Defendant] and
there was obviously people trying to attack him[.]”
-2-
STATE V. MYLETT
Opinion of the Court
The officers moved in to break up the altercation, and, after subduing the
combatants, were approached by Defendant’s girlfriend, Kathryn Palmer (“Palmer”),
who informed them that Defendant was bleeding from his head. Officer Lolies then
went over to Defendant and observed that both of Defendant’s eyes were bleeding and
that he had bruising and a large knot developing over his left eye.
Defendant then jumped up from the ground where he was lying, acted
aggressively towards Officer Lolies, and told him “to do [his] motherfucking job.”
While Defendant was yelling at him, Officer Lolies detected a strong odor of alcohol
on his breath. Defendant then explained to Officer Lolies that the reason he had been
beaten was because he had tried to stop Palmer from dancing with another man.
Shortly thereafter, Officer Dennis O’Neal (“Officer O’Neal”) arrived on the
scene to assist Officers Lolies and Forrest. Officers Lolies and Forrest attempted to
question several other individuals on hand, but were unable to do so because
“[Defendant] was pretty erratically challenging people to fights. He would call them
pussies, just very loud” and “[h]e charged at a couple of people a couple of different
times and Officer Forrest, and eventually when Officer O’Neal arrived on the scene
they would restrain him to prevent him from doing that.” Defendant continued to
verbally berate Officers Lolies, Forrest, and O’Neal by “telling [them] as law
enforcement officers to do [their] . . . motherfucking jobs.”
-3-
STATE V. MYLETT
Opinion of the Court
The officers called for an ambulance for Defendant, and, upon its arrival,
Officer O’Neal directed Defendant into the back of the vehicle. Defendant initially
complied, but proceeded to exit abruptly from the ambulance. Defendant resumed
swearing at the officers and challenging nearby individuals to fight him.
Officer O’Neal positioned himself between Defendant and these individuals
and at that point Defendant “attempted to spit at folks that were walking behind,
behind [Officer O’Neal’s] location, over [his] shoulder.” Defendant’s spit made contact
with the left side of Officer O’Neal’s face and shirt. Defendant spat two additional
times, despite Officer O’Neal ordering him to stop, again hitting Officer O’Neal in his
face and on his shirt.
Officer O’Neal ultimately corralled Defendant back into the ambulance and
rode with him to Watauga Medical Center to receive treatment for his injuries.
Defendant continued swearing at and verbally berating Officer O’Neal in the
ambulance and at one point “stood up in the back of . . . the ambulance, off the gurney,
and began punching the interior walls of the ambulance” prompting Officer O’Neal to
restrain him until they reached the hospital. Later that day, a warrant was issued
and Defendant was arrested for assault on a government officer in connection with
his spitting on Officer O’Neal.
Prior to Defendant’s district court trial, his original trial counsel received
copies of video recordings taken on the officers’ body-cams of the events surrounding
-4-
STATE V. MYLETT
Opinion of the Court
the 29 August 2015 altercation at 200 Misty Lane. However, counsel opted not to
obtain copies or use the footage at trial. After counsel’s review, the original recordings
were destroyed in accordance with the Boone Police Department’s evidence retention
schedule.
On 9 November 2015, Defendant was tried before the Honorable Rebecca E.
Eggers-Gryder in Watauga County District Court. That same day, Judge Eggers-
Gryder found Defendant guilty of assault on a government officer and sentenced him
to 60 days imprisonment, suspended sentence, and placed him on 12 months
supervised probation. On 12 November 2015, Defendant appealed to superior court
for a trial de novo.
A jury trial was held in Watauga County Superior Court before the Honorable
Alan Z. Thornburg from 29 March 2016 through 31 March 2016. Prior to the jury
being empaneled, Defendant’s new trial counsel moved for a continuance on the
ground that counsel wished to prepare a motion to dismiss since the video recordings
of the events of 29 August 2015 taken on the officers’ body cameras had been
destroyed and were therefore unavailable for use by the defense. After hearing
arguments from defense counsel and the State, the trial court ultimately denied the
motion. Significantly, no motion was filed in District Court relating to the videos and
-5-
STATE V. MYLETT
Opinion of the Court
defense counsel did not move to dismiss on this ground in the four and a half months
prior to the trial in Superior Court.1
At trial, the State proceeded on a theory of transferred intent as to the assault
on an government officer charge. To this end, it elicited testimony from, among other
witnesses, Officers Lolies and O’Neal.
Officer O’Neal testified as follows concerning the spitting incident:
Q. I’m sorry -- but was he just talking loudly and a little bit
of spit came out or was he actually projecting spit?
A. He was attempting -- or projected, projecting spit
attempting to hit folks that were walking behind me.
Q. And when it hit you was it just a little driplet (sic) or
was it a lot of liquid?
A. If you know it was like the, you know, what a sneeze
feels like, you know, a sneeze will make you feel the
droplets on your face and you can see you got some stuff on
your shirt.
Q. And how about the third time, did that hit you?
A. Yes, sir, it did, but it was, there wasn’t near as much,
you know, liquid, or I couldn’t feel as much on the third
time.
....
Q. And what did you do at that point?
1Although appellate counsel for Defendant argued for the first time at oral argument that
Defendant’s original counsel had subpoenaed the videos, the record is silent as to the issuance of any
subpoenas by Defendant at any stage.
-6-
STATE V. MYLETT
Opinion of the Court
A. I asked him to stop. I said, please stop, you know, I
commanded, you know, stop spitting.
Q. And the second time did you hear the sound beforehand?
A. Yes.
Q. All right. And where did you get hit?
A. It would have been right here on my uniform shirt.
Q. Did any of it actually go over your shoulder?
A. Sir, I don’t know that.
Q. And the third time you said was it still --
A. Yes.
Q. And was he trying to kind of get around you to spit?
A. Yes, yes he was.
Officer Lolies, in turn, testified as follows concerning the spitting incident:
Q. So I think I asked you, what happened, did anything
draw your attention to Officer O’Neal and the Defendant
at some point later, once the ambulance arrived?
A. Yes, sir. I had three people over here, basically detained
at this point, but I intended on placing them under arrest
when I got the chance. And I was dealing with them,
especially the one that ran so much. But I heard Officer
O’Neal, who was dealing with [Defendant] at the time, ask
the question to the effect of, I don’t remember the exact
words, but did you just spit on me.
Q. And what did you do when you heard that?
-7-
STATE V. MYLETT
Opinion of the Court
A. I looked over at Officer O’Neal, made sure he was okay,
I didn’t go over there and assist him or anything, but I just
kept my eye on them to watch them to make sure that they
were okay. And I continued to deal with these three people
here.
Q. Did you see Officer O’Neal right after he said that do
anything?
A. He made a gesture across the top of his uniform.
Q. And what did that gesture appear to you to be?
MR. ISAACS: Objection.
THE COURT: Overruled.
A. It appeared to me that he was wiping something off of
his uniform.
Q. Could you tell if anyone else was around Officer O’Neal
and the defendant when that incident occurred?
A. There was some other people around, I feel like it may
have been his girlfriend and his brother, and there seemed
to be two males who were giving this information in
support of [Defendant’s] statements and sort of his
recollection of events, but there was also some people from
the opposing party gathered around. And it seemed to me
that these people in the background were taunting each
other.
Q. And the people that you thought were taunting each
other for the opposing party, where were they standing in
relation to Officer O’Neal?
A. They were all around. We were intermingled with all
these people.
-8-
STATE V. MYLETT
Opinion of the Court
Defendant moved to dismiss the charge of assault on a government officer at
the close of the State’s evidence and renewed his motion at the close of all the
evidence. The trial court denied both motions.
The jury found Defendant guilty of assault on a government officer. The trial
court sentenced Defendant to ten days imprisonment to be served over five
consecutive weekends and ordered Defendant to pay costs in the amount of $1,657.50.
It is from this judgment that Defendant appeals.
Analysis
I. Motion for Continuance
Defendant initially argues on appeal that the trial court erred by denying his
motion for a continuance. Specifically, Defendant claims he should have been allowed
additional time to file a motion due to the destruction of the officers’ body camera
video recordings of the events of 29 August 2015 amounting to a Brady violation. We
disagree. “A motion for a continuance is generally a matter within the trial court’s
discretion, and a denial is not error absent an abuse of that discretion. Defendant,
therefore, bears the burden of showing that the trial court’s ruling was so arbitrary
that it could not have been the result of a reasoned decision.” State v. Carter, 184
N.C. App. 706, 711, 646 S.E.2d 846, 850 (2007) (internal citations and quotation
marks omitted). The trial court did not abuse its discretion.
-9-
STATE V. MYLETT
Opinion of the Court
“In Brady, the United States Supreme Court held that suppression by the
prosecution of evidence favorable to an accused upon request violates due process
where the evidence is material either to guilt or to punishment, irrespective of the
good faith or bad faith of the prosecution. This includes evidence known only to police
investigators and not to the prosecutor. The duty to disclose such evidence is
applicable even though there has been no request by the accused.” State v. Dorman,
225 N.C. App. 599, 620, 737 S.E.2d 452, 466 (internal citations, quotation marks, and
brackets omitted), appeal dismissed and disc. review denied, 366 N.C. 594, 743 S.E.2d
205 (2013).
To establish a Brady violation, a defendant must show (1)
that the prosecution suppressed evidence; (2) that the
evidence was favorable to the defense; and (3) that the
evidence was material to an issue at trial. Favorable
evidence can be either exculpatory or useful in impeaching
the State’s evidence. Evidence is considered material if
there is a reasonable probability of a different result had
the evidence been disclosed. A reasonable probability is a
probability sufficient to undermine confidence in the
outcome. However, when the evidence is only potentially
useful or when no more can be said of the evidence than
that it could have been subjected to tests, the results of
which might have exonerated the defendant, the State’s
failure to preserve the evidence does not violate the
defendant’s constitutional rights unless a defendant can
show bad faith on the part of the State.
Id. at 620-21, 737 S.E.2d at 466 (internal citations, quotation marks, and brackets
omitted).
- 10 -
STATE V. MYLETT
Opinion of the Court
In the present case, the record clearly establishes that the recordings at issue
were erased in routine conformity with the Boone Police Department’s evidence
retention schedule. It is undisputed that prior to their destruction, the recordings
were reviewed by both Defendant’s original counsel2 and the prosecutor. Defense
counsel’s decision not to make or preserve copies of the videos — regardless of
counsel’s reason for declining to do so — cannot serve as a basis for arguing a Brady
violation was committed by the State. See State v. Jennings, 333 N.C. 579, 604, 430
S.E.2d 188, 200 (“The law is . . . clear, however, that ‘[a] defendant is not prejudiced
. . . by error resulting from his own conduct.’ ” (quoting N.C.G.S. § 15A-1443(c))), cert.
denied, 510 U.S. 1028, 126 L. Ed. 2d 602 (1993). Consequently, as nothing in the
record tends to demonstrate that the Boone Police Department or the State
suppressed evidence or otherwise acted in bad faith, Defendant has failed to carry his
burden in establishing a due process violation under Brady.
In addition to Defendant’s inability to demonstrate that a Brady violation
occurred, it is also worth emphasizing that he has failed to establish precisely how a
continuance would have enabled him to better prepare for trial given that it is
undisputed that no copies of the videos remain in existence. Therefore, as a
functional matter, the granting of a continuance by the trial court would have served
2 Although the record is vague on this point, it appears that Defendant’s original counsel,
Shannon Aldous, was replaced as counsel by Kenneth D. Isaacs sometime after Defendant was found
guilty in District Court and prior to his trial de novo in Superior Court.
- 11 -
STATE V. MYLETT
Opinion of the Court
no operative purpose. See State v. Gray, 234 N.C. App. 197, 201-02, 758 S.E.2d 699,
702-03 (2014) (“To establish that the trial court’s failure to give additional time to
prepare constituted a constitutional violation, defendant must show how his case
would have been better prepared had the continuance been granted or that he was
materially prejudiced by the denial of his motion.” (citation and quotation marks
omitted)), disc. review improvidently allowed, 368 N.C. 324, 776 S.E.2d 681 (2015).
For all of these reasons, the trial court did not err in denying Defendant’s
motion for a continuance. Defendant’s arguments on this issue are meritless.
II. Assault on a Government Officer
Defendant’s final argument on appeal is that the trial court erred by denying
his motions to dismiss the charge of assault on a government officer. Specifically,
Defendant contends that, because the evidence at trial tended to establish that he
intended to assault civilians standing behind Officer O’Neal and not Officer O’Neal
himself, the State failed to establish the knowledge element of N.C.G.S. § 14-33(c)(4).
We disagree.
The trial court’s denial of a motion to dismiss is reviewed
de novo on appeal. Upon defendant’s motion for dismissal,
the question for the Court is whether there is substantial
evidence (1) of each essential element of the offense
charged, or of a lesser offense included therein, and (2) of
defendant’s being the perpetrator of such offense. If so, the
motion is properly denied.
- 12 -
STATE V. MYLETT
Opinion of the Court
State v. Williams, __ N.C. App. __, __, 784 S.E.2d 232, 233 (citation omitted), disc.
review denied, __ N.C. __, 792 S.E.2d 503 (2016).
N.C.G.S. § 14-33(c)(4) provides that
(c) Unless the conduct is covered under some other
provision of law providing greater punishment, any person
who commits any assault, assault and battery, or affray is
guilty of a Class A1 misdemeanor if, in the course of the
assault, assault and battery, or affray, he or she:
....
(4) Assaults an officer or employee of the State or
any political subdivision of the State, when the
officer or employee is discharging or attempting to
discharge his official duties[.]
“It is well established that this Court’s principal aim when interpreting
statutes is to effectuate the purpose of the legislature in enacting the statute, and
that statutory interpretation properly begins with an examination of the plain words
of the statute.” State v. Williams, 232 N.C. App. 152, 158, 754 S.E.2d 418, 423
(internal citations, quotation marks, and brackets omitted), appeal dismissed and
disc. review denied, 367 N.C. 784, 766 S.E.2d 846 (2014).
It is fundamental that
[t]he primary objective of statutory interpretation is to
ascertain and effectuate the intent of the legislature. If the
language of the statute is clear and is not ambiguous, we
must conclude that the legislature intended the statute to
be implemented according to the plain meaning of its
terms. Thus, in effectuating legislative intent, it is our
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STATE V. MYLETT
Opinion of the Court
duty to give effect to the words actually used in a statute
and not to delete words used or to insert words not used.
Lunsford v. Mills, 367 N.C. 618, 623, 766 S.E.2d 297, 301 (2014) (internal citations
and quotation marks omitted). Moreover, “[w]here . . . the General Assembly includes
particular language in one section of a statute but omits it in another section of the
same Act, it is generally presumed that the legislative body acts intentionally and
purposely in the disparate inclusion or exclusion.” Comstock v. Comstock, __ N.C.
App. __, __, 780 S.E.2d 183, 186 (2015) (citation, quotation marks, and brackets
omitted).
Significantly, the Legislature did not choose to include a reference to intent in
authoring N.C.G.S. § 14-33(c)(4) despite the fact that it did so in other sections of
Article 8, Subchapter III of Chapter 14 of the North Carolina General Statutes
concerning criminal assaults. See, e.g., N.C.G.S. § 14-32(a) (2015) (“Any person who
assaults another person with a deadly weapon with intent to kill and inflicts serious
injury shall be punished as a Class C felon.” (emphasis added)). Nor has this Court
specifically delineated a scienter requirement in its discussion of the offense of
assault on a government officer. Instead, we have simply stated that “[t]he essential
elements of a charge of assault on a government official are: (1) an assault (2) on a
government official (3) in the actual or attempted discharge of his duties.” State v.
Noel, 202 N.C. App. 715, 718, 690 S.E.2d 10, 13, disc. review denied, 364 N.C. 246,
699 S.E.2d 642 (2010).
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STATE V. MYLETT
Opinion of the Court
Defendant concedes that he did, in fact, commit an assault and that Officer
O’Neal was a law enforcement officer discharging his duty. Therefore, we need only
address whether assault on a government officer in violation of N.C.G.S. § 14-33(c)(4)
is a general intent or, alternatively, a specific intent crime.
Nonetheless, Defendant maintains that, even assuming he knew that Officer
O’Neal was a police officer discharging a duty of his office at the time of the assault,
the State failed to provide sufficient evidence that he intended to assault Officer
O’Neal. Essentially, he asserts that all of the evidence tended to show that he
intended to assault one or more civilians standing behind Officer O’Neal, and not
Officer O’Neal himself, thereby precluding him from being found guilty of the offense
of assault on a government officer.
We find our Supreme Court’s decision in State v. Page, 346 N.C. 689, 488
S.E.2d 225 (1997), cert. denied, 522 U.S. 1056, 139 L. Ed. 2d 651 (1998), instructive
on this point. In Page, the defendant was convicted of first-degree murder and assault
with a deadly weapon on government officers for firing a high-powered rifle at several
officers, one of whom was hit and subsequently died from his gunshot wound. Id. at
692-94, 488 S.E.2d at 228. At trial, Page asserted that he was suffering from post-
traumatic stress disorder at the time he shot at the officers and requested a jury
instruction on diminished capacity in order to attempt to repudiate the knowledge
element of N.C.G.S. § 14-34.2. Id. at 694, 488 S.E.2d at 229. The trial court declined
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STATE V. MYLETT
Opinion of the Court
to provide such an instruction and Page was ultimately sentenced to death. Id. at
698, 488 S.E.2d at 231.
On direct appeal to our Supreme Court, Page argued that the jury should have
been instructed on diminished capacity in order to negate the knowledge element of
N.C.G.S. § 14-34.2. The Court rejected this argument stating the following:
This Court has held that knowledge that the victim is an
officer or employee of the State is an essential element of
this offense. State v. Avery, 315 N.C. 1, 31, 337 S.E.2d 786,
803 (1985).
[Page] argues that the diminished-capacity defense should
be available to negate the knowledge element required by
Avery. This argument is without merit. We allow
defendants to assert diminished mental capacity as a
defense to a charge of premeditated and deliberate murder
because we recognize that some mental conditions may
impede a defendant’s ability to form a specific intent to kill.
See Shank, 322 N.C. at 250-51, 367 S.E.2d at 644. This
reasoning is not applicable to the knowledge element of the
felony of assault with a deadly weapon on a government
officer. Knowledge of the victim’s status as a government
officer is simply a fact that the State must prove; it is not a
state of mind to which the diminished-capacity defense may
be applied. In this case, the State presented evidence
tending to prove this fact. The trial court properly
instructed the jury that, in order to convict [Page] of these
charges, it must find that [Page] “knew or had reasonable
grounds to know” that the victims were officers performing
official duties. The State’s evidence indicated that
uniformed police officers and marked police cars were
directly in [Page’s] line of vision. Several officers testified
that defendant shot in their direction. Also, defendant’s ex-
girlfriend testified that she received a telephone call from
[Page] in which he stated that his apartment was
surrounded by police officers. This evidence was sufficient
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STATE V. MYLETT
Opinion of the Court
to support the jury’s conclusion that the knowledge
element of assault with a deadly weapon on a government
officer was satisfied.
[Page] argues further that the diminished-capacity defense
should be available to negate the state of mind required for
defendant to be convicted of a violation of N.C.G.S. 14-34.2.
“In order to return a verdict of guilty of assault with a
firearm upon a law enforcement officer in the performance
of his duties, the jury is not required to find the defendant
possessed any intent beyond the intent to commit the
unlawful act, and this will be inferred or presumed from
the act itself.” State v. Mayberry, 38 N.C. App. 509, 513,
248 S.E.2d 402, 405 (1978). Thus, this felony may be
described as a general-intent offense.
Id. at 699-700, 488 S.E.2d at 232 (emphasis added).
While Page concerns an assault with a deadly weapon on a government officer,
we find its reasoning to be equally applicable to the offense of assault on a government
officer. Indeed, the only substantive difference between N.C.G.S. § 14-33(c)(4) and
N.C.G.S. § 14-34.2 is that the latter requires that the assault be committed with a
firearm. We therefore hold, in accordance with Page, that assault on a government
officer is a general intent crime. As such, we are satisfied that when Defendant spat
at members of the crowd and Officer O’Neal was struck by Defendant’s spit, the
requirements of N.C.G.S. § 14-33(c)(4) were satisfied as, for the reasons stated above,
the State clearly established — and indeed Defendant conceded at oral argument —
that Defendant knew Officer O’Neal was a law enforcement officer and Defendant
intended to commit an assault.
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STATE V. MYLETT
Opinion of the Court
Were we to endorse Defendant’s argument and construe N.C.G.S. § 14-33(c)(4)
as necessitating specific intent — as opposed to general intent — the intrinsic purpose
of the statute would necessarily be defeated. Therefore, we expressly hold that the
knowledge element of assault on a government officer in violation of N.C.G.S. § 14-
33(c)(4) is satisfied whenever a defendant while in the course of assaulting another
individual instead assaults an individual he knows, or reasonably should know, is a
government officer. Defendant’s argument on this issue is consequently dismissed.
Conclusion
For the reasons stated above, we conclude that Defendant received a fair trial
free from error.
NO ERROR.
Chief Judge McGEE and Judge DAVIS concur.
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FILED
United States Court of Appeals
Tenth Circuit
March 31, 2017
UNITED STATES COURT OF APPEALS
Elisabeth A. Shumaker
TENTH CIRCUIT Clerk of Court
UNITED STATES OF AMERICA,
Plaintiff - Appellee,
No. 16-2150
v. (D.C. No. 2:12-CR-02657-RB-1)
(D.N.M.)
GARY RAYMOND AHIDLEY, JR.,
Defendant - Appellant.
ORDER AND JUDGMENT *
Before KELLY, McKAY, and MORITZ, Circuit Judges. **
Defendant-Appellant Gary Ahidley, Jr. appeals from his 11-month sentence
imposed by the district court upon revocation of supervised release. His counsel
filed a brief and motion to withdraw pursuant to Anders v. California, 386 U.S.
738 (1967). Our jurisdiction arises under 28 U.S.C. § 1291 and 18 U.S.C.
§ 3742(a), and we dismiss the appeal and grant counsel’s motion.
*
This order and judgment is not binding precedent, except under the
doctrines of law of the case, res judicata, and collateral estoppel. It may be cited,
however, for its persuasive value consistent with Fed. R. App. P. 32.1 and 10th
Cir. R. 32.1.
**
After examining the briefs and the appellate record, this three-judge
panel has determined unanimously that oral argument would not be of material
assistance in the determination of this appeal. See Fed. R. App. P. 34(a); 10th
Cir. R. 34.1(G). The cause is therefore ordered submitted without oral argument.
In April 2013, Mr. Ahidley was convicted of being a felon in possession of
a firearm. He was sentenced to 37 months’ imprisonment, followed by two years
of supervised release. He was released from prison in March 2015. Later that
November, the probation office petitioned to revoke his supervised release
because he had missed several scheduled substance abuse and mental health
counseling appointments. A federal warrant was issued for Mr. Ahidley’s arrest
shortly thereafter. Mr. Ahidley was arrested and charged with battery in tribal
court that December. He pled guilty, and finished his tribal court sentence in
April 2016. However, he was not released because of a federal detainer based on
his outstanding federal arrest warrant.
The district court held a supervised release revocation hearing on June 7.
Mr. Ahidley admitted he violated the terms of his supervised release, after which
the court heard argument regarding the appropriate sentence. The court found
that his guideline range was five to 11 months’ imprisonment. Mr. Ahidley asked
the court to run his sentence concurrently with his tribal sentence, which would
make him eligible for a time-served sentence. The court sentenced Mr. Ahidley
to 11 months’ imprisonment after noting that “[e]very time [he] drink[s], someone
gets hurt. And . . . it’s been that way for a long time. . . . [O]bviously,
supervision doesn’t work.” 3 Rawle 14. After providing Mr. Ahidley with an
opportunity to allocute, the court remarked that Mr. Ahidley failed to appreciate
the prior opportunities he had been given to avoid prison and reminded him that
-2-
the court could statutorily impose a two-year sentence. See id. at 16. Mr.
Ahidley then sought to appeal.
Mr. Ahidley’s counsel filed an Anders brief and an errata sheet indicating
that Mr. Ahidley was served with the brief. He was given the requisite notice by
this court, pursuant to 10th Cir. R. 46.4(B)(2). Neither Mr. Ahidley nor the
government has filed a response. Under Anders, “if counsel finds his case to be
wholly frivolous, after a conscientious examination of it, he should so advise the
court and request permission to withdraw.” 386 U.S. at 744. If we agree with
counsel after examining the record, we may grant the motion to withdraw and
dismiss the appeal. United States v. Calderon, 428 F.3d 928, 930 (10th Cir.
2005).
After reviewing the record, we find no error. Mr. Ahidley argues that the
district court judge was biased and was required to disqualify himself pursuant to
28 U.S.C. § 455(b)(1). We disagree. While a judge’s bias could arise from
personal or extrajudicial sources, the tenor of the judge’s comments do not
suggest a wrongful or inappropriate position that might indicate bias. See Liteky
v. United States, 510 U.S. 540, 550 (1994). In light of the Sentencing Guidelines
and Mr. Ahidley’s conduct, imposing an 11-month sentence was an entirely
permissible exercise of discretion.
-3-
Accordingly, we DISMISS the appeal and GRANT counsel’s motion to
withdraw.
Entered for the Court
Paul J. Kelly, Jr.
Circuit Judge
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Order Michigan Supreme Court
Lansing, Michigan
October 28, 2013 Robert P. Young, Jr.,
Chief Justice
147372 Michael F. Cavanagh
Stephen J. Markman
Mary Beth Kelly
Brian K. Zahra
Bridget M. McCormack
NORMANDY APARTMENTS David F. Viviano,
CONDOMINIUM ASSOCIATION, INC., Justices
Plaintiff-Appellant,
v SC: 147372
COA: 311735
Wayne CC: 12-000178-CH
BANK OF AMERICA, N.A., Successor by
Merger to BAC HOME LOANS SERVICING,
L.P., f/k/a COUNTRYWIDE HOME LOANS
SERVICING, L.P.,
Defendant-Appellee,
and
SANDRA PARKER,
Defendant.
_________________________________________/
On order of the Court, the application for leave to appeal the May 28, 2013 order
of the Court of Appeals is considered, and it is DENIED, because we are not persuaded
that the questions presented should be reviewed by this Court.
I, Larry S. Royster, Clerk of the Michigan Supreme Court, certify that the
foregoing is a true and complete copy of the order entered at the direction of the Court.
October 28, 2013
t1021
Clerk
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28 F.2d 451 (1928)
UNITED STATES
v.
HUSTON et al.
No. 5343.
District Court, N. D. Ohio, W. D.
June 26, 1928.
*452 Sylvester R. Rush, Sp. Asst. Atty. Gen., and Harry G. Levey, Asst. U. S. Atty., of Toledo, Ohio, for the United States.
Tracy, Chapman & Welles and Brown, Hahn & Sanger, all of Toledo, Ohio, for defendants.
KILLITS, District Judge.
The court is considering pleas in abatement in behalf of the several defendants to this case, who attack the regularity of proceedings in the grand jury because of the alleged unauthorized appearance, in connection with the return of the indictment herein, before that body, of Sylvester R. Rush, Special Assistant to the Attorney General. Mr. Rush, as Special Assistant to the Attorney General, signed the indictment in common with Assistant District Attorney Levy of this district. The bill is in seventeen counts, under section 338, tit. 18, USCA (section 215, Criminal Code), for use of the mails in promoting fraudulent enterprises in connection with certain corporate operations, including those of the Chicago, Southern Minnesota, and Kansas City Joint-Stock Land Banks. There is involved, by the appearance of Mr. Rush in the proceedings, construction of sections 310 and 315, tit. 5, USCA, and a consideration of the place of the grand jury in Federal criminal administration. The pleas raise a substantial issue, and one not a mere defect of form cured by section 556, tit. 18, USCA (R. S. 1025), as one not tending to the prejudice of the defendants. United States v. Heinze (C. C.) 177 F. 770.
In a charge to the grand jury some years ago, in this court, we said, "You are organized under the common law, with all the characteristics and functions which pertain to such an organization." In its inception, the grand jury was an independent branch of the court, whose inquiries were conducted within its own membership, and in the absence of any person not regularly drawn to participate therein as a member thereof. Its origin is not obscure, and the occasion therefor, a matter of historic knowledge, was to provide from the body of the people an instrumentality by which the liberties of citizens were safeguarded against the arbitrariness of government. For convenience, however, and to secure an observance of the formalities of procedure, an innovation was soon established upon the original functioning of grand jury inquisitions whereby a representative of the crown, filling the office of prosecutor, was permitted "to be present during the sitting of the grand jury, to conduct evidence on the part of the crown." 1 Chitty, Criminal Law, p. 317. It should be noted that all the attorney for the crown was permitted to do was to "conduct evidence." It is still not permissible, in the federal practice, for the prosecutor to otherwise participate in the jury's proceedings. In this connection it might be said that we are not disagreeing with the conclusions of Judge Hand, in United States v. Rintelen (D. C.) 235 F. 787. Judge Hand, examining the facts, found that the conduct of the district attorney was within the limitations of Justice Field's charge on this subject in 2 Sawy. 667, Fed. Cas. No. 18255, and as approved in United States v. Cobban (C. C.) 127 F. 713. The district attorney's power to "conduct the evidence" is not limited to mere interrogations, but involved is the right, if called upon, to advise how the facts elicited meet the applicable law, provided that he does so judicially. This is a privilege which we have frequently presented in instructions to our own grand juries. Its exercise demands restraint and tact; to go further, to press for a bill or to exhibit partisanship against the subject of inquiry will gravely affect the stability of the result. At the time of the adoption of the Constitution, in 1787, with a Fifth Amendment forbidding the holding of any person to answer to an infamous crime unless on presentment or indictment of a grand jury, it was this common-law organization which was meant, in the functioning of which none but members participated, except for the assistance of the prosecutor in the taking of evidence, but not to be present during either the deliberations of the body upon the case or the balloting of the members to decide whether or not a bill of indictment should be returned.
From 1787 to the present time, therefore, a federal grand jury has been a body organized and functioning as by the common law at the date of the adoption of the amendment; and it seems reasonably clear that no power abides in the Congress to affect or modify the integrity and independence of the *453 body as established. There is no reason in our judgment to abate the jealous consideration for the rights and liberties of the individual which directed the institution of a grand jury at the beginning, and which later impelled the adoption of the amendment. It is yet entirely consonant with the spirit of our institutions that every reasonable precaution be taken to secure the individual, whose acts are under the scrutiny of a select body of his fellow citizens, from influences to which the grand jury may be subjected, even unconsciously or unintentionally, by the government through its chosen prosecuting representative. It is not to underrate the intelligence or independence of a twentieth century grand jury to suggest that some impression not conducive to a thoroughly dispassionate consideration of a charge might result from the presence, as a conductor of the evidence, of one who is seen to be the special representative of the Attorney General, however decorous, prudent, and fair that personage may attempt to be. This subject was well considered by Judge McCall in United States v. Virginia-Carolina Chemical Co. (C. C.) 163 F. 66, 75, whose observations thereon are worthy of note in the instant case. The general proposition that the Fifth Amendment makes necessary a finding following usage and mode of procedure established in 1787 is, for the purposes of this decision, sufficiently considered in United States v. Welles (D. C.) 163 F. 313, and Renigar v. United States (C. C. A.) 172 F. 646, 26 L. R. A. (N. S.) 683, 19 Ann. Cas. 1117, with the citations made in these cases. Grand jurors are accustomed to the presence of a local prosecutor to assist in the development of facts, and are not slow to act with a proper independence against him; but, when it is seen that the government is moved to bring into the proceedings a special representative of the executive branch, the pending charge may receive, in the minds of the jury, a particular emphasis which tends to sway judgment unconsciously.
From the beginning, evidence might be conducted in the grand jury by the Attorney General, with operative functions in every district in the country, by a district attorney of the appropriate district, and by deputies of these officers, who, by statute, severally function as locum tenens. In United States v. Rosenthal (C. C.) 121 F. 862, it was held that these officers only, including their regular deputies only, were so qualified, and that no such authority abided in the personage then known as a special assistant to the Attorney General. While the authority of this case was subsequently disputed, it was generally regarded as conclusive; and there can be little question, going to the proceedings in Congress to which we may refer (U. S. v. Toledo Newspaper Co. [D. C.] 220 F. 458, 477, and cases cited), that this decision was the genesis of the Act of June 30, 1906, now appearing as section 310, tit. 5, USCA, which reads as follows:
"The Attorney General or any officer of the Department of Justice, or any attorney or counselor specially appointed by the Attorney General under any provision of law, may, when thereunto specifically directed by the Attorney General, conduct any kind of legal proceeding, civil or criminal, including grand jury proceedings and proceedings before committing magistrates, which district attorneys may be by law authorized to conduct, whether or not he or they be residents of the district in which such proceeding is brought."
This statute is not quite clear as to one feature not specially important here i. e., whether an officer, per se, of the Department of Justice, needs special direction respecting appearance in a district but it is quite certain that such a functionary as Mr. Rush is within its provisions. We think that the qualification or limitation, "when thereunto specifically directed by the Attorney General," applies only to "any attorney or counselor specially appointed," etc. These are not strictly officers of the Department such as are Assistant Attorneys General and the Solicitor. United States v. Rosenthal, and United States v. Heinze, supra. We are inclined to agree with Judge Hand, in United States v. Morse (D. C.) 292 F. 273, 276, that a special assistant to the Attorney General may be "specifically directed," in satisfaction of the statute, to more than one district in the same designation, provided that such authorization is specific as to the cause of criminal action which may have ramifications in more than one district involving the same associated parties.
Section 315, tit. 5, USCA, is also involved in the instant controversy. It reads:
"Every attorney or counselor who is specially retained, under the authority of the Department of Justice, to assist in the trial of any case in which the government is interested, shall receive a commission from the head of such department, as a special assistant to the Attorney General, or to some one of the district attorneys, as the nature of the appointment may require; and shall take the oath required by law to be taken by the district attorneys, and shall be subject to all *454 the liabilities imposed upon them by law. Foreign counsel employed by the Attorney General in special cases shall not be required to take the oath required by this section."
In the case of an officer of the Department, one commission as such and a qualifying oath taken before assuming the duties of the office is sufficient for all subsequent activities, whether regularly pertaining to the office or assumed by special direction, wherever undertaken; but, if we are to hold with United States v. Rosenthal, and United States v. Heinze, as we think we should, that a special assistant to the Attorney General is not an officer, then as to every special direction this section applies. The special direction is, in fact, the commission.
The provisions of these sections control the situation here; and through them alone Mr. Rush, Special Assistant to the Attorney General, derived whatever authority he possessed in appearing before the grand jury and in signing the indictment herein. Because these statutes are designed to enlarge the list of persons who may appear before a grand jury representing the government to function only within the limits imposed upon the Attorney General or upon a district attorney or a deputy of either, they should be strictly construed, following familiar principles of interpretation, and strictly followed.
Under section 310, therefore, Mr. Rush, to be qualified, must have been "specially retained under the authority of the Department of Justice" under some provision of law, and must have been specifically directed by the Attorney General to appear before the grand jury returning this bill to perform duties pertaining to this case, and, under section 315, he must have received a commission therefor from the Attorney General; and as a necessary completion of his qualification it must appear that, as special assistant to the Attorney General, he had taken the oath required by law to be taken by district attorneys, prior to his appearance before our grand jury. We have no doubt that, had he qualified upon his special commission, if any, under the provisions of section 315, his failure to exhibit an exemplification of this qualification prior to his appearance before the grand jury would not alone sustain a plea in abatement under the curative section already cited. An exhibit thereof to the court subsequent to the return of the indictment would be sufficient, but we must regard a specific direction by the Attorney General to participate in the conduct of grand jury proceedings in this case, issued in advance of such appearance, to be essential thereto.
This brings us to the facts relied upon for qualification alleged to be within the provisions of section 310, and thus conferring upon him the authority which he attempted to exercise. There are exhibited two commissions, which were not filed with this court until more than three months subsequent to the return of the indictment. Barring a few differences, subsequently to be noted, a quotation from one will suffice for both. Under date of December 17, 1926, Mr. Rush, who had been for many years a special assistant to the Attorney General, received a designation in the following language:
"Honorable Sylvester R. Rush, Special Assistant to the Attorney General, Omaha, Nebraska. Sir: You are hereby appointed a special assistant to the Attorney General of the United States, under the authority of the Department of Justice, in the case of United States v. Walter Cravens, Guy Huston, R. P. Cravens, R. H. Cravens, A. B. Todd, R. W. Street, and others associated with them, charged with violation of sections 37 and 215 of the Penal Code, and section 31 of the Federal Farm Loan Act, pending in the Western District of Missouri; and in that connection you are hereby authorized and directed to conduct in the Western District of Missouri or in any judicial district where the jurisdiction thereof lies, any kind of legal proceeding, civil or criminal, including grand jury proceedings and proceedings before committing magistrates, which district attorneys are authorized by law to conduct.
"You are to serve without compensation other than the compensation you are receiving under your appointment dated March 31, 1923, but will be allowed your actual expenses of travel and subsistence, subject to law and regulations, when absent from headquarters, Omaha, Nebraska. Such expenses will be paid from the appropriation for `pay of Special Assistant Attorneys, U. S. Courts.'
"You should execute the oath of office.
"Respectfully,
"[Signed] John G. Sargent,
"Attorney General."
The second commission bears the same date and is in identical language, except that, in addition to Guy Huston, specifically named in the Missouri commission, John E. Huston and Glenn W. Gold are mentioned as possible defendants, and this specific designation is for the district of Minnesota. It is to be noted that none of the remaining defendants herein, Schee, Boyles, Sigler, or Smith, is specifically named; and, if either is effective in this district respecting these last-named defendants, it is because each of these commissions, *455 after designation of the parties supposed to be implicated in the grand jury investigation proceedings, suggests that the named parties may have others "associated with them," whose names were not available to be included specifically. We are not inclined to doubt that a special commission, which, after designation of certain names of supposed offenders, says in that connection, "and other persons associated with them," would be sufficient to permit an indictment to run, in any district to which the commission might be applied, against unnamed individuals, whose connection with the alleged offenses should develop during the grand jury inquiry. The proof before us shows that Mr. Rush qualified under both of these commissions by taking the necessary oath, separately as to each, required by section 315. As we have noted, not until after the attacks upon the authority of Mr. Rush to appear before the grand jury were made, first by motions to quash, and subsequently by pleas in abatement, in behalf of all of the present defendants, were evidences of these purported authorizations filed in this case, or even brought to the attention of the court.
We must consider that, under the circumstances under which they were made, interlocutory pleadings under consideration were filed in time. Plea in abatement was proper practice. May v. United States (C. C. A.) 236 F. 495. Upon the exhibit of this purported authority, supplemental pleas were filed and demurrers were entered thereto by the United States, pending the consideration of which a showing was made of various somewhat informal attempts at authorization in connection with the proposed investigation in this district, which, in the opinion of the court, are clearly insufficient to strengthen the government's resistance to the pleas. The most important of these is a letter from an Assistant Attorney General authorizing Mr. Rush to proceed to this district to investigate supposed offenses cognate to those alleged to have been committed within the districts of Minnesota and Western Missouri. With no fair regard to proper practice under section 310, or, indeed, having respect to the practice of Mr. Rush himself, in matters of designation in past years for other districts, as shown upon the record before us, can these, singly or in the aggregate, be held to make up a special commission for this district, even in connection with the exhibited special commissions for the western districts named. This is not because they were signed by an Assistant Attorney General, which would be sufficient, under the authority of May v. United States, supra, even for a formal special commission, but because they evidently deal with routine administration of the Department of Justice.
For many years Mr. Rush appears to have been under regular annual retainer, in the form of salary, as special assistant to the Attorney General, and we are shown that, hitherto, for any particular district into which he was about to exercise his retainer, it was his practice, not only to obtain a special direction in the form used in the Missouri and Minnesota instances, but to take a special oath applicable to each designation.
In the matter before us, the propriety of his appearance must be established, if at all, upon the Missouri and Minnesota commissions and the oaths of office taken by him under each, for he never took an oath specially and particularly applicable to this district. As indicated, these western designations are in form as adopted by Department practice in other situations of the same general character. The practice seems to have been to name certain supposed offenders, and to include unnamed possible associates; to state the sections of the Penal Code supposed to be involved; to designate the special district in which the special assistant is to enter; then to proceed with this enigmatical phrase, "or in any judicial district where the jurisdiction thereof lies." If by virtue of his Missouri and Minnesota designations, or both, Mr. Rush was qualified to conduct evidence before our grand jury, it is because of the inclusion in these commissions of this phrase. What does it mean? What is the antecedent of the adverb "thereof" following the word "jurisdiction"? We are unable to find this expression sufficient to fully clothe the special assistant, receiving such a commission, to conduct evidence before a grand jury in any other district than that specially named, except in proceedings instituted, to be ancillary to the case sought to be made in the main district. No other district than that of the Western district of Missouri has any jurisdiction of proceedings about to be instituted therein except by way of assistance thereto. "Legal proceedings, civil or criminal, including grand jury proceedings and proceedings before committing magistrates" in some other district, may be necessary as ancillary to the proceedings in the main district, and for such the authorization might be complete; but we think that it is strained construction of a commission such as this to assume that in this district Mr. Rush had as full and complete authority as that given to him by it in the Missouri district. He himself *456 deemed it necessary, before he could proceed either in Missouri or Minnesota, to obtain special authority for each. That he should have done for this district, for no charge brought against the defendants here by the bill under consideration has any dependent or ancillary connection with the alleged crimes in either Minnesota or Missouri. Here he began de novo to assist in the development of a possible but independent offense, whose existence depended upon facts peculiarly and particularly within the jurisdiction of this district alone, with which neither the Missouri nor Minnesota district had any concern whatever. Some of the evidence, useful here, might travel over the same lines as that appropriate to either of the districts for which he received a special designation; and some of the parties alleged to be offenders in those districts may have been connected with similar crimes here; but no case was complete here without recourse to proof which only could be of transactions exclusively within our jurisdiction.
It needs no further exposition to show that Mr. Rush's qualifications for this district in the instant case were not established by the special commission for either the Minnesota or Missouri district, or both, even though these may be held to cover otherwise the activities herein of any or all of the defendants herein named. The proper and only sufficient practice under section 310, in our judgment, was for Mr. Rush to obtain for the Northern district of Ohio the same special commission which he sought and obtained for those districts.
We must hold, therefore, that the pleas in abatement are well taken; that therefore the indictment herein should be set aside. In order that the practice, acceptable within this district, may be established, we direct, with the concurrence of our colleagues, which we understand we have, the following procedure under sections 310 and 315, namely: The procurement by the special assistant to the Attorney General of a special commission directed for the Northern district of Ohio, substantially of the tenor of that obtained by Mr. Rush for the Western district of Missouri, herein quoted, with a special oath of office indorsed thereon, or attached thereto, to be filed with the court prior to the appearance of such special assistant to the Attorney General before the forthcoming grand jury, the same to designate at least one supposed offender, with unnamed associates, if any, and a reference to the criminal statutes supposed to have been violated.
A second special assistant to the Attorney General, one Dodds, also took part in our grand jury proceedings in this case. No necessity exists to discuss whether his authorization was sufficient, for clearly the proceedings before the grand jury were vitiated by the unauthorized appearance therein by Mr. Rush.
Other contentions are before the court in behalf of the several defendants which need no disposition, for they fall, to the advantage of the several defendants, because of the conclusions at which we have arrived in the foregoing.
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01-03-2023
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10-30-2013
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https://www.courtlistener.com/api/rest/v3/opinions/4233791/
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United States Court of Appeals
For the Eighth Circuit
___________________________
No. 16-4392
___________________________
David William Engstrom
lllllllllllllllllllll Plaintiff - Appellant
v.
Doc Holladay, Sheriff, Pulaski County Sheriff’s Office; Randy Morgan, Jail
Administrator, Pulaski County Sheriff’s Office; Bobbie Townsend, Captain,
Pulaski County Sheriff’s Office (originally named as Townsend)
lllllllllllllllllllll Defendants - Appellees
____________
Appeal from United States District Court
for the Eastern District of Arkansas - Little Rock
____________
Submitted: December 7, 2017
Filed: January 2, 2018
[Unpublished]
____________
Before SHEPHERD, MURPHY, and KELLY, Circuit Judges.
____________
PER CURIAM.
David Engstrom appeals the district court’s1 adverse grant of summary
judgment in his pro se 42 U.S.C. § 1983 action, which alleged that his constitutional
rights were violated in pretrial detention after another detainee signed him up to fast
during Ramadan. Having reviewed the record and the parties’ arguments on appeal,
we find no error warranting reversal. See Peterson v. Kopp, 754 F.3d 594, 598 (8th
Cir. 2014) (de novo review). The judgment is affirmed. See 8th Cir. R. 47B.
______________________________
1
The Honorable Kristine G. Baker, United States District Judge for the Eastern
District of Arkansas, adopting the recommendation of the Honorable Beth Deere,
United Stages Magistrate Judge for the Eastern District of Arkansas.
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01-03-2023
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01-02-2018
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526 F.Supp.2d 66 (2007)
TRANSFORMATIONAL STRATEGIES CONSULTING, INC., Plaintiff,
v.
ACS STATE HEALTHCARE, LLC, Defendant.
Civil Action No. 07-1606 (ESH).
United States District Court, District, of Columbia.
December 21, 2007.
*67 James Stephen McAuliffe, III, James Andrew Sullivan, Jr., Miles & Stockbridge, P.C., Rockville, MD, for Plaintiff.
David Edward Mills, Lynn Marie beavers, Dow Lohnes PLLC, Washington, DC, for Defendant.
MEMORANDUM OPINION
ELLEN SEGAL HUVELLE, District Judge.
Plaintiff Transformational Strategies Consulting, Inc. ("TSCI") has sued ACS State Healthcare, LLC ("ACS") for breach of contract, seeking to recover approximately *68 $2 million allegedly owed as a result of ACS's early termination of the parties' agreement. TSCI has filed a motion for summary judgment, and ACS has moved to dismiss the complaint to the extent that TSCI seeks payment of "Early Termination Charges" under the agreement. As set forth herein, ACS's motion will be granted in part and denied in part, and TSCI's motion will be denied.
BACKGROUND
In October 2005, ACS and TSCI entered into an agreement (the "Original Agreement") for TSCI to provide "Executive Consulting and Advice Regarding the Architecture and Development of the ACS Enterprise Claims Processing Application," a software application. (Pl.'s Statement of Undisputed Material Facts ["Pl.'s Statement"] ¶ 1; Affidavit of Fernando Salgado ["Salgado Aff."], Ex. 1 at 1.) In September 2006, the parties executed an Amendment to the Original Agreement (the "Amendment") for TSCI to provide "Executive Management Resources and Consulting and Advice Regarding Planning, Start up and Formational Executive Management" of the "ACS Solution Center." (Pl.'s Statement ¶ 2; Salgado Aff., Ex. 2 at 1.) The Amendment included an additional scope of work to be performed, as well as amended provisions regarding staffing, compensation, and termination. (See id., Ex. 2.)
The Amendment contemplated that ACS would designate "at contract signing the initial number of Senior Executives and Senior Specialists" to staff the additional scope of work, and specified annual rates of compensation for each category of professional $530,000 per year for each Senior Executive and $300,000 per year for each Senior Specialist. (Id. at 3.) With respect to payment, the Amendment provided for an advance payment of ten percent of the "Amended Scope Cost"defined in the Amendment as equal to "[(# of Senior Executives * $530,000 + # of Senior Specialist * $300,000) * 2 years[1]]"and for monthly billing by TSCI "based on actually worked full time equivalent work days during the month." (Id. at 3-4.)
Although the Amendment included an expiration date of October 15, 2008, it permitted early termination by ACS in certain circumstances:
ACS can terminate this Agreement in case of TSCI default due to grave cause or negligence imputable to TSCI, if TSCI fails to remedy to the satisfaction of ACS said default within 30 days of ACS written notification to this effect. Should ACS terminate, TSCI shall be paid the Invoices issued up to and including the current month, pro-rated if for a partial month, of final determination to Terminate.
If, at the ACS'S sole discretion, the Agreement for this Amended Scope is terminated for the convenience of ACS; then ACS can, at its sole discretion, select one of the following two options:
a) ACS would be able to modify the scope of assignment of the TSCI resources, for the remainder of the original period of two years, to other projects that require similar skills and experience under the same Terms and Conditions, other than the new amended scope or
b) TSCI shall be paid for the Invoices issue up to and including the month when the Notice of Termination for Convenience was received by TSCI. In addition, ACS will pay Early Termination *69 Charges in an amount equal to fifty percent (50%) of the remaining balance of the total Amended Scope Cost minus the actual payments received by TSCI, if Termination within the first 18 months period. ACS will pay Early Termination Charges in an amount equal to twenty five percent (25%) of the remaining balance of the total Contract amount of Amended Scope Cost minus the actual payments received by TSCI, if Termination within the last six month period of the Contract.
(Id. at 2.)
The parties signed the Amendment on September 18, 2006 (id. at 4), and ACS made its initial staffing designations by email that same day, designating four Senior Executives and two Senior Specialists as the "[i]nitial people."[2] (Pl.'s Statement ¶ 5; Salgado Aff., Ex. 3.) TSCI thereafter issued an invoice to ACS in the amount of $544,000, ten percent of an Amended Scope Cost of $5,440,000, calculated based on ACS's initial designations, and ACS paid the invoice the following month. (Pl.'s Statement ¶¶ 6-7; Salgado Aff., Exs. 4-5.)
In May 2007, ACS determined that TSCI had billed it for work performed by TSCI personnel on weekends and holidays. (Decl. of Kevin Cleary ["Cleary Decl."] ¶ 11.) Kevin Cleary, a Director of Finance for the Government Solutions Group of ACS, Inc., notified Dan Acton, a TSCI Senior Executive working for the Solution Center, that ACS did not authorize or approve these charges, and ACS then deducted the charges from the invoice in question. (Id. ¶¶ 2, 11.) When TSCI continued to bill ACS for weekend and holiday work in later months, ACS again notified TSCI that the charges were not authorized and deducted those amounts from TSCI's invoices. (Id. ¶¶ 13, 16, 18.)
In June 2007, Anastasios Tsolakis, the ACS Senior Vice President in charge of the Solution Center, directed Acton to reduce TSCI's staff from five to three by removing two TSCI Senior Executives (Chris McClenaghan and Mark Baenziger) from the project due to their inability to perform the work needed by ACS. (Decl. of Anastasios Tsolakis ["Tsolakis Decl"] ¶ 7.) TSCI did not remove McClenaghan and Baenziger, who continued to perform work for ACS even after June 2007. (Id.; Pl.'s Reply at 11, 13 & Ex. 1.) The parties dispute whether this work after June 2007 was authorized by ACS.
On July 13, 2007, Tsolakis sent an email to Acton stating "[e]ffective Monday July 16th, you and your team need to find another sponsor at ACS. I will not need your services."[3] (Pl.'s Statement ¶ 18; Salgado Aff., Ex. 8.) Although it is undisputed that TSCI continued to do work for the ACS Solution Center after July 16, notwithstanding Mr. Tsolakis's email, the parties disagree as to whether this additional work was authorized. (Compare Pl.'s Statement ¶ 19 (TSCI continued to do work "because on information and belief Tom Burlin and other ACS executives told Mr. Tsolakis to continue to work with *70 TSCI"), with Def.'s Statement of Genuine Issues of Material Fact ["Def.'s Statement"] ¶ 19 ("Mr. Burlin did not tell Mr. Tsolakis to continue to work with TSCI.").)
On August 14, 2007, Tsolakis notified Acton by telephone that ACS was terminating its agreement with TSCI effective August 17, 2007. (Pl.'s Statement ¶ 20.) Acton and Tsolakis thereafter exchanged emails confirming the termination and its August 17 effective date. (Id. ¶¶ 21, 23; Salgado Aff., Exs. 9, 11.) On August 17, 2007, TSCI's counsel sent a letter to ACS requesting payment of a total of $2,033,833, including $1,762,617 in Early Termination Charges under the Amendment and $271,216 allegedly owed on four invoices. (Id., Exs. 12, 13.) ACS did not pay the requested amount, and plaintiff thereafter filed this action in September 2007.
ANALYSIS
I. TSCI's Claim for "Early Termination Charges"
Both parties attempt to argue that the Amendment, read as a whole, is unambiguous as to how "Early Termination Charges" should be calculated in the event of a termination for convenience by ACS, but they vigorously disagree as to how this calculation should be made. The Amendment provides, in relevant part, that
TSCI shall be paid for the Invoices issue up to and including the month when the Notice of Termination for Convenience was received by TSCI. In addition, ACS will pay Early Termination Charges in an amount equal to fifty percent (50%) of the remaining balance of the total Amended Scope Cost minus the actual payments received by TSCI, if Termination within the first 18 months period. ACS will pay Early Termination Charges in an amount equal to twenty five percent (25%) of the remaining balance of the total Contract amount of Amended Scope Cost minus the actual payments received by TSCI, if Termination within the last six month period of the Contract.
(Salgado Aff., Ex. 2 at 2.)
ACS asserts that termination having occurred during the first eighteen months of the Amendment, any Early Termination Charges must be calculated by taking fifty percent of the remaining balance of the total Amended Scope Cost and then subtracting from that figure the "actual payments received by TSCI." (Def.'s Mot. at 5-6.) Because, using TSCI's own dollar amounts, this calculation results in a negative number,[4] ACS contends that no Early Termination Charges are owed as a matter of law. (Id.)
In contrast, TSCI argues that, construing the contract language in light of its apparent purpose to provide TSCI with some positive amount of compensation in the event of an early termination for convenience by ACS, Early Termination Charges should be calculated by taking fifty percent of the "remaining balance," *71 defined in the agreement as "the total Amended Scope Cost minus the actual payments received by TSCI." (Pl.'s Opp'n at 7.) Calculating the Early Termination Charges in this manner, TSCI contends that $1,762,617 is owed. (Id.)
Under New York law, which the parties agree governs this dispute (see Def.'s Mot. at 4; Pl.'s Opp'n at 4 n. 5; Salgado Aff., Ex. 1 at 7 ¶ 21 (specifying that the Original Agreement "shall be governed by, and construed in accordance with, the laws of the State of New York")), construction of an unambiguous contract is a question of law for the Court, as is the prior question whether the agreement is clear or ambiguous. Chimart Assocs. v. Paul, 66 N.Y.2d 570, 498 N.Y.S.2d 344, 489 N.E.2d 231, 233 (1986); Sutton v. E. River Say. Bank, 55 N.Y.2d 550, 450 N.Y.S.2d 460, 435 N.E.2d 1075, 1077 (1982). In making this determination, the Court must "look[ ] within the four corners of the document, not to outside sources," Kass v. Kass, 91 N.Y.2d 554, 673 N.Y.S.2d 350, 696 N.E.2d 174, 180 (1998); W.W.W. Assocs., Inc. v. Giancontieri, 77 N.Y.2d 157, 565 N.Y.S.2d 440, 566 N.E.2d 639, 642 (1990), and must "read [the contract] as a whole to determine its purpose and intent." Id. "The proper inquiry . . . is `whether the agreement on its face is reasonably susceptible of more than one interpretation.'" Clark v. Clark, 33 A.D.3d 836, 827 N.Y.S.2d 159, 160 (2006) (quoting Chimart Assocs., 498 N.Y.S.2d 344, 489 N.E.2d at 233); see also Scholastic, Inc. v. Harris, 259 F.3d 73, 82 (2d Cir.2001) ("A contract is ambiguous where its terms `suggest more than one meaning' when viewed objectively by a reasonably knowledgeable person who has examined the context of the entire integrated agreement.") (quoting Alexander & Alexander Servs. v. These Certain Underwriters at Lloyd's, London, 136 F.3d 82, 86 (2d Cir.1998)).
Applying these standards, the Court finds that the Amendment is ambiguous as to the proper method for calculating Early Termination Charges. ACS's interpretation is certainly reasonable in that it flows most naturally from the literal language of the Amendment, but that consideration alone is not dispositive. See Mellon Bank, N.A. v. United Bank Corp. of N.Y., 31 F.3d 113, 115-16 (2d Cir.1994) (finding loan agreement provision ambiguous notwithstanding that one party's interpretation "stray[ed] somewhat from the plain, meaning of the words used in the second clause of the section" while the other party's interpretation "g[a]ve[ ] `literal effect' to all the words of the clause"). It is also reasonable to interpret the early termination provision as ensuring TSCI some positive measure of compensation in the event of a unilateral termination by ACS. The Amendment provides that ACS "will pay" such charges "[i]n addition" to outstanding invoices (Salgado Aff., Ex. 2 at 2), and such compensation ensures that TSCI is better off financial in the event of a termination for ACS's convenience than if the termination were for cause. Only TSCI's interpretation effectuates this intent, and that interpretation is therefore reasonable as well. Because both parties' interpretations of the early termination provision are "`sufficiently reasonable to render the [provision] ambiguous,'" Mellon Bank, N.A., 31 F.3d at 115 (quoting Wards Co. v. Stamford Ridgeway Assocs., 761 F.2d 117, 121 (2d Cir.1985)), the Court cannot conclude that ACS's interpretation is correct as a matter of law, and the motion to dismiss must be denied.[5] Moreover, *72 because the parties have submitted "relevant extrinsic evidence of [their] actual intent," summary judgment is also inappropriate. Id. at 116; see also Sutton, 450 N.Y.S.2d 460, 435 N.E.2d at 1077-78 (absent a proffer of relevant extrinsic evidence, construction of even an ambiguous contract is for the court). In light of this ruling, the Court need not address ACS's argument that summary judgment must be denied because facts material to TSCI's calculation of the Early Termination Charges allegedly owed are in dispute. (See Def.'s Opp'n at 20-23.)
II. TSCI's Claim for Unpaid Invoices
In addition VI Early Termination Charges, TSCI seeks an award of $271,216 for amounts billed on four invoices submitted to ACS between May and August 2007, which ACS has not paid to date. ACS argues that TSCI is not entitled to summary judgment on these invoice claims because there are factual disputes as to whether ACS was properly charged for the amounts TSCI now seeks to collect. In particular, ACS contends that it properly withheld payment of amounts invoiced for work performed by TSCI personnel on weekends and holidays and that it was improperly billed for work performed by Fernando Salgado in April 2007 and by Chris McClenaghan and Mark Baenziger in August 2007.
As to the latter issue, the Court agrees that summary judgment is not warranted at this stage. With respect to Salgado's time, ACS argues that the charges are precluded by the Amendment, which provides that "[a]ctivities related to this statement of work (Exhibit 2) [i.e., the Amendment] performed by Fernando Salgado will be included in the existing compensation of Exhibit 1 [i.e., the scope of work under the Original Agreement]." (Salgado Aff., Ex. 2 at 4.) In response, TSCI has submitted an email exchange in which Paul Lehman, ACS's Chief Information Officer, approved Salgado's request "to bring two more resources [Chris McClenaghan and Kumar Bhaskaran] into the TSCI Contract," thereby "complet[ing] the team of 5 to be covered under your current authorized budget of the SC Amendment," a team which included Salgado himself "from 4/10/07." (Pl.'s Reply Ex. 2.) The parties have not addressed, however, whether this exchange is sufficient to amend the terms of the Amendment, *73 and summary judgment is therefore premature at this point.
Summary judgment is also inappropriate as to TSCI's claim regarding the August 2007 invoice to the extent that that invoice includes charges for work performed by McClenaghan and Baenziger, since there is a disputed issue as to whether work by these individuals was authorized after June 2007. (Compare Tsolakis Decl. ¶ 7 (stating that in June 2007, Tsolakis directed TSCI's Acton "to remove Chris McClenaghan and Mark Baenziger . . . because they were consistently unable to perform the work needed by ACS"), with Pl.'s Reply, Ex. 1 (emails reflecting that McClenaghan and Baenziger continued to do work for ACS even after June 2007 with ACS's knowledge and, in some instances, at ACS's direction)). Charges for McClenaghan and Baenziger, however, account for only a portion of the August 2007 invoice.[6] Thus, because TSCI does not dispute the remainder of the bill (see Def.'s Opp'n at 26 (stating that "the August 2007 Invoice should be reduced to $143,198.00")), plaintiffs motion for summary judgment as to this invoice will be granted in the amount of $143,198.[7]
Moreover, to the extent that TSCI seeks payment of charges for work performed by TSCI personnel on weekends and holidays, the Court finds that the material facts are not in dispute and that TSCI is entitled to judgment as a matter of law.[8] ACS contends that as "high-level and highly paid executives" who were compensated under the Amendment on a salary, rather than an hourly, basis, the TSCI personnel were not entitled to "overtime pay" for weekend work. (Def.'s Opp'n at 25.)
In addition to specifying an annual salary for each category of professional, the Amendment set daily compensation *74 rates and provided for monthly billing by TSCI as follows:
The Contractual year has 240 work days. The monthly billing will be based on actually worked full time equivalent work days during the month. The billing work day rate will be $2208 for each Sr. Executive and $1250 for each Sr. Specialist.[9] ACS shall not request any reduction in the number of work days from a minimum of 20 days per month. TSCI will provide, in each monthly billing, the accumulated number of work days in the year, such as not to exceed the total work days allocated for each category per Contract year.
(Salgado Aff., Ex. 2 at 3.) Although the Amendment provided that TSCI was "not to exceed the total work days allocated for each category per Contract year," it did not otherwise limit the work days for which TSCI could be compensated. Indeed, the fact that the parties specified that ACS could not request a reduction in the number of work days per month below a minimum of twenty suggests that they contemplated that there could be more than twenty work days in a given month. Thus, by its terms, the Amendment did not preclude TSCI from billing for "actually worked full time equivalent work days" falling on weekends and holidays.
ACS also suggests that "there is reason to believe" that TSCI personnel did not actually work on the holidays and weekend days reflected on the invoices "but rather wrote the hours down just to get paid for `long hours' on other days that they worked during the week." (ACS's Opp'n at 25.) In support of this assertion ACS cites to the Declaration of Kevin Cleary and the invoices themselves, but those documents suggest only that TSCI billed for work days occurring on weekends and holidays, not that the billings for these days were fraudulent, and ACS has therefore failed to create a genuine factual issue as to whether TSCI personnel billed for days not actually worked.[10] Accordingly, TSCI's motion for summary judgment will be granted as to the unpaid amounts on Invoices SC07 and SC08, and as to $6,226 of the unpaid amount on Invoice SC06.[11]
CONCLUSION
For the reasons set forth herein, plaintiff's motion for summary judgment is granted in part and denied in part, and defendant's motion for partial dismissal is denied.
NOTES
[1] The term for the Amendment was approximately two years, beginning on September 15, 2006 and ending on October 15, 2008. (Salgado Aff., Ex. 2 at 1.)
[2] At some point, the parties agreed to exchange the two Senior Specialists for one "CTO" whose annual compensation rate of $600,000 was equal to the combined rate of the two Senior Specialists, each of whom was compensated at a rate of $300,000 per year. (Pl.'s Statement ¶ 5 n. 5; Def.'s Opp'n at 5.)
[3] Earlier in the month, Fernando Salgado, TSCI's President, had sent an email to Tom Burlin, the Chief Operating Officer of ACS's parent company and the executive to whom Salgado reported, expressing concerns about the project on which TSCI staff were working. (Pl.'s Statement ¶¶ 12, 14; Salgado Aff., Ex. 7.)
[4] Using TSCI's numbers, which ACS accepts only for purposes of its motion to dismiss, the "remaining balance of the total Amended Scope Cost"i.e., the Amended Scope Cost ($5,440,000) minus the amounts invoiced by TSCI through August 2007 ($1,914,766)is $3,525,234, and fifty percent of this amount is $1,762,617. (Pl.'s Statement ¶¶ 26, 27.) From this amount, ACS then subtracts $1,914,766, resulting in Early Termination Charges of negative $152,149. (Def.'s Mot. at 6.)
TSCI objects that the $1,914,766 figure represents the total amount invoiced by TSCI through August 2007, rather than the total amount paid by ACS (Pl.'s Opp'n at 7 n, 8); however, TSCI itself uses the $1,914,766 figure in place of the "actual payments received by TSCI" in calculating the Early Termination Charges. (See id. at 7.)
[5] ACS urges that any ambiguity in the Amendment must be construed against TSCI, which drafted both it and the Original Agreement. (Def.'s Opp'n at 19-20; Def.'s Reply at 9 n. 5.) TSCI asserts, however, that the Amendment was negotiated and drafted by both parties. (Pl.'s Reply at 4 & n. 3; see also Decl. of Tom Burlin ["Burlin Decl."] ¶¶ 16, 8-9 (discussing negotiation of the Amendment).) Ambiguities are not construed against the initial drafter in such circumstances. Compare Citibank, N.A. v. 666 Fifth Avenue Ltd. P'ship, 2 A.D.3d 331, 769 N.Y.S.2d 268, 269 (2003) (ambiguities in lease agreements were not to be construed against the defendant who drafted the initial versions, since the agreements "ultimately entered into resulted from extensive negotiations in which both parties, each a commercially sophisticated entity, were represented by counsel, and plaintiff failed to show that it `had no voice in the selection of [the leases'] language'") (quoting 67 Wall St. Co. v. Franklin Nat'l Bank, 37 N.Y.2d 245, 371 N.Y.S.2d 915, 333 N.E.2d 184, 187 (1975)), and Coliseum Towers Assocs. v. County of Nassau, 2 A.D.3d 562, 769 N.Y.S.2d 293, 296-97 (2003) (holding the contra proferentem doctrine inapplicable where both parties participated in negotiating the terms of the lease in question), with Revson v, Cinque & Cinque, P.C., 221 F.3d 59, 67-68 (2d Cir.2000) (applying rule that "equivocal contract provisions are generally to be construed against the drafter" to a fee agreement between an attorney and an individual client).
Nor is the Court persuaded that the failure to include parentheses in the definition of Early Termination Charges is dispositive. (See Def.'s Reply at 6.) Although the parties used parentheses elsewhere in the Amendment in defining the Amended Scope Cost, unlike the provision defining Early Termination Charges, that definition used mathematical symbols and more closely approximated a mathematical equation.
[6] TSCI billed ACS $234,646 for the month of August 2007, reflecting "23 work days for 4 Sr. Executives + 1 CTO." (Salgado, Aff., Ex. 12.) Thus, as McClenaghan and Baenziger were both Senior Executives with a daily compensation rate of $1,988, their time accounted for only $91,448 of the invoiced amount.
[7] Elsewhere in its opposition, ACS asserts that it does not waive the right to raise at a later time the defense that TSCI's conduct justified a termination for cause (Def.'s Opp'n at 9 n. 4), a defense that, if successful, could affect the amount owed by ACS on the August 2007 invoice. (Compare Salgado Aff., Ex. 2 at 2 (providing for pro-ration of invoices issued for the month of final determination to terminate in the event of a termination for cause), with id. (providing for payment of invoices issued up to and including the month when the notice of termination was received in the event of a termination for convenience).) The Amendment permits termination by ACS "in case of TSCI default due to grave cause or negligence imputable to TSCI" but only "if TSCI fails to remedy to the satisfaction of ACS said default within 30 days of ACS written notification to this effect." (Id. (emphasis added).) Although ACS disputes TSCI's assertion that "[a]t no time did ACS ever provide TSCI written notice that it was in default of any term of the Agreement" (compare Pl.'s Statement ¶ 24, with Def.'s Statement ¶ 24), ACS has not produced evidence of any written notification provided to TSCI, nor has it filed a motion to continue summary judgment pending discovery on this issue pursuant to Rule 56(f). Accordingly, ACS has failed to raise a genuine issue as to whether the termination was for cause, rather than for convenience, and TSCI is entitled to summary judgment with respect to the $143,198 balance of the August 2007 invoice.
[8] ACS withheld a total of $36,570 from three invoices submitted by TSCI in May and June, 2007: $16,166 from Invoice SC06, dated May 13, 2007; $10,202 from Invoice SC07, dated May 31, 2007; and $10,202 from Invoice SC08, dated June 30, 2007. (Salgado Aff., Ex. 12; see also Cleary Decl., Exs. G-I.) ACS acknowledges that these shortfalls reflect "charges for work allegedly performed by TSCI personnel on weekends and holidays." (Def.'s Opp'n at 24; Def.'s Statement ¶ 28.)
[9] The compensation provision elsewhere provided that these daily compensation rates would be "reduced by 10% which is a net of $1988 per day for each Sr. Executive and $1125 per day for each Sr. Specialist." (Salgado Aff. Ex. 2 at 4.)
[10] Although ACS also asserts that "[w]hatever improper conduct occurred will surface in discovery" (Def.'s Opp'n at 25), it has not sought to continue summary judgment pursuant to Rule 56(f) so that such discovery can be taken.
[11] Although ACS withheld payment of a total of $16,166 on Invoice SC06 (see Salgado Aff., Ex. 12), this invoice also includes $9,940 in charges for work performed by Fernando Salgado. (Cleary Decl. ¶ 14 & Ex. G.) Because it remains unresolved whether ACS is entitled to a credit for the charges for Salgado's time, the Court will limit the grant of summary judgment to $6,226 of the shortfall on Invoice SC06 at this time.
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Order Michigan Supreme Court
Lansing, Michigan
October 28, 2013 Robert P. Young, Jr.,
Chief Justice
Michael F. Cavanagh
Stephen J. Markman
147375 Mary Beth Kelly
Brian K. Zahra
Bridget M. McCormack
David F. Viviano,
PEOPLE OF THE STATE OF MICHIGAN, Justices
Plaintiff-Appellee,
v SC: 147375
COA: 316069
Ionia CC: 2012-015451-FH
LUIS GEOVANNY RIVERA-ESTRADA,
Defendant-Appellant.
_________________________________________/
On order of the Court, the application for leave to appeal the June 19, 2013 order
of the Court of Appeals is considered, and it is DENIED, because we are not persuaded
that the question presented should be reviewed by this Court.
I, Larry S. Royster, Clerk of the Michigan Supreme Court, certify that the
foregoing is a true and complete copy of the order entered at the direction of the Court.
October 28, 2013
s1021
Clerk
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119 B.R. 413 (1990)
Hattie BROWN, Debtor-Plaintiff-Appellant,
v.
VANGUARD HOLDING CORP., Thomas Polombo, and Faviola Felix, Defendants-Appellees.
No. 89 Civ. 7127(SWK).
United States District Court, S.D. New York.
September 17, 1990.
MEMORANDUM OPINION AND ORDER
KRAM, District Judge.
This is an appeal of the Bankruptcy Court's decision denying appellant Hattie *414 Brown's ("Brown") motion to set aside a judicial foreclosure sale as a fraudulent conveyance under 11 U.S.C. § 548, 104 B.R. 609 (1989).
BACKGROUND
On August 27, 1979, the appellant and her husband purchased property at 830 223rd Street Bronx, New York (the "property"). Appellant executed a first mortgage on the property to Vanguard Holding Corporation ("Vanguard") on the same day. On or about February 1, 1983, appellant defaulted on the mortgage and Vanguard chose to accelerate its mortgage and proceed to judgment in state court. On or about January 28, 1985, a judgment of Foreclosure and Sale was entered, awarding Vanguard $50,591.62 plus interest and costs. Vanguard was twice precluded from proceeding with the scheduled foreclosure sale because the appellant filed for bankruptcy under Chapter 13. Eventually, both bankruptcy petitions were dismissed.
Vanguard continued with the foreclosure action and, on or about February 28, 1988, appellant received a Notice of Sale. A judicial foreclosure sale was duly conducted pursuant to New York State law on March 22, 1988. The property was sold to one of nine bidders, at arm's length, for approximately $74,000.00.
Appellant filed a third Chapter 13 petition on March 22, 1988. On or about April 29, 1988, appellant brought, by order to show cause, a motion requesting the state court to (1) vacate and set aside a default judgment and allow the appellant to answer the complaint in the foreclosure action, and (2) rescind the sale of the property. This motion was denied because the appellant failed to show either a reasonable excuse for her default or a valid defense to the foreclosure action.
The appellant next commenced an action in United States Bankruptcy Court claiming that the judicial foreclosure sale, although duly conducted pursuant to state law, should be set aside as a fraudulent conveyance under the Bankruptcy Code § 548 ("§ 548"). Appellant submitted an appraisal which stated that the fair market value of the property on July 29, 1988, was $155,000. Appellant did not submit any proof as to the expected value at a foreclosure or distressed sale. On July 19, 1989, the Honorable Cornelius Blackshear issued a written decision holding that the sales price constituted "reasonably equivalent" value under § 548. On appeal, the debtor argues that the Court should apply a different standard to determine reasonable equivalent value under § 548. Pending the appellant's appeal to this Court, Judge Blackshear stayed the sale of the property.
DISCUSSION
This Court has not found, and the parties have failed to cite, cases from the Second Circuit interpreting the "reasonably equivalent value" requirement. Courts have taken several different approaches in determining whether a foreclosure sale should be set aside as a fraudulent transfer under § 548.
A recent approach, which was adopted by Judge Blackshear, was expressed in Lindsay v. Beneficial Reinsurance Co., 98 B.R. 983 (Bankr.S.D.Cal.1989). Under this approach, there is an irrebuttable presumption of reasonably equivalent value as long as the sale was procedurally proper, noncollusive and conducted in a commercially reasonable manner. If the court finds that the foreclosing creditor failed to take commercially reasonable steps to achieve the best distressed sale price, the court will then consider evidence of the effect of this failure on the achieved price.
The appellant advocates the approach taken in Durrett v. Washington Nat'l Insurance Co., 621 F.2d 201 (5th Cir.1980). The Durrett court held that reasonably equivalent value had not been received for property that was sold for 57.7% of its fair market value at a non-judicial foreclosure sale. The court reached this conclusion after determining that no court has approved a transfer in which less than 70% of a property's fair market value on the sale date was received. Durrett, supra, 621 F.2d at 203.
*415 This Court does not accept the Durrett holding that inadequacy of price alone is grounds to set aside a foreclosure sale. Prior to Durrett, noncollusive foreclosure sales, properly conducted under state law, were never seen as violating § 548 even if they resulted in a sales price below the property's appraised value. See, e.g., Guardian Loan Co. v. Early, 47 N.Y.2d 515, 521, 419 N.Y.S.2d 56, 392 N.E.2d 1240 (1979) (price inadequacy alone is insufficient to vacate a foreclosure sale); Harris v. Wagshal, 343 A.2d 283 (D.C. 1975) (noncollusive foreclosure of security under a pledge agreement not a fraudulent conveyance); Pierce v. Pierce, 16 Cal. App. 375, 117 P. 580 (1911) (regularly conducted, noncollusive mortgage foreclosure sale not a fraudulent conveyance); Reeves v. Miller, 121 Mich. 331, 80 N.W. 19 (1899) (noncollusive sale resulting in less than fair-market value not a fraudulent conveyance).
It has also been cogently stated that the Durrett approach would discourage potential bidders in foreclosure sales because of the possibility that the purchase would later be set aside as fraudulent by the court. See In re Alsop, 14 B.R. 982, 987 (Bankr.D. Alaska 1981), aff'd, 22 B.R. 1017 (D.Alaska 1982). The resulting loss in value of property sold in foreclosure would hinder debtors from meeting their obligations and deter lenders from accepting property as security.[1] In light of the many public policy problems created by the Durrett approach, this Court declines to adopt this singular interpretation of § 548.[2]
This Court shall follow the Lindsay approach, as Judge Blackshear did, to determine equivalent value. As the Lindsay court stated, "the Court will examine the price obtained at a foreclosure sale only when we are persuaded that the foreclosing creditor failed to take commercially reasonable efforts to achieve the best price." Lindsay, supra, at 991.
In this case both parties agree that the foreclosure sale was conducted pursuant to state law, the property was sold to an arm's length purchaser, and there were nine bidders at the sale. Since the sale was procedurally proper and noncollusive, the next inquiry, under the Lindsay approach, is whether all commercially reasonable steps were taken to achieve the highest foreclosure price. This involves examining the nature and extent of the sales effort, General Indus. v. Shea, 79 B.R. 124 (Bankr.D.Mass 1987), whether there was a fair appraisal of the property, and whether competitive bidding was encouraged. In re Bundles, 856 F.2d 815 (7th Cir.1988).
The evidence demonstrates a reasonable sales effort, resulting in competitive bidding. The appellant admits that she received a proper Notice of Sale on or about February 28, 1988, apprising her of the March 22, 1988 foreclosure date. The fact that there were nine bidders at the auction demonstrates that the sale was properly advertised and that there was competitive bidding.
In determining whether there was a fair appraisal of the property the burden of proof is on the appellant to show that the consideration received was inadequate. Appellant has submitted an appraisal of the property as of July 29, 1988. The sale, however, took place on March 22, 1988. In addition, appellant has not presented any evidence of what a reasonable price for the property in a distress sale would have *416 been. Such evidence is vital in determining the value of property being sold at a foreclosure sale. By not introducing any evidence as to what similar homes in her neighborhood are worth at a foreclosure or distressed sale, the appellant has failed to meet her burden of proof.
Because the foreclosure sale was noncollusive and properly conducted in accordance with state law and the appellee made commercially reasonable efforts to achieve the best price, this Court will not set aside the sale on appeal. Although a low percentage of fair market value was received, the foreclosure price is deemed to provide a reasonable equivalent value within the meaning of § 548(a)(2)(A).
CONCLUSION
For the aforementioned reasons the appellant's appeal is denied.
SO ORDERED.
NOTES
[1] See generally, Note, The Big Chill: Applicability of Section 548(a)(2) of the Bankruptcy Code to Noncollusive Foreclosure Sales, 53 Fordham L.Rev. 813 (1985).
[2] The Madrid approach, urged by the defendant, reads into § 548 an irrebuttable presumption of reasonably equivalent value to any regularly conducted, noncollusive foreclosure sale. An irrebuttable presumption, however, is inconsistent with the language of the statute. Section 548(a)(2)(A) provides that a trustee may avoid a transfer if, inter alia, the debtor "received less than a reasonably equivalent value in exchange for such transfer or obligation." This language focuses on the value received for the transfer, not simply the process. If Congress had intended a regularly conducted, noncollusive sale to benefit from an irrebuttable presumption of reasonably equivalent value the statute would be worded differently. Indeed, an amendment was proposed, codifying the Madrid irrebuttable presumption, but it was rejected. See Cong. Rec.S. 13771-S.13772 (No. 131, Pt. II, Oct. 5, 1984).
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207 B.R. 752 (1995)
JOHN HUGH SHANNON, P.A., and Lauren J. Strickland, Appellants,
v.
Kenneth I. STRICKLAND, Appellee.
No. 93-1393-CIV-T-24(A).
United States District Court, M.D. Florida, Tampa Division.
September 12, 1995.
John H. Shannon, P.A., Lakeland, FL, pro se.
John H. Shannon, P.A., Lakeland, FL, for Lauren Strickland.
Matthew J. Kovschak, John F. Laurent, P.A., Bartow, FL, for Kenneth I. Strickland.
OPINION
BUCKLEW, District Judge.
This Cause is before the Court on Appellants' appeal of the Bankruptcy Court's Order granting Appellee Kenneth Strickland's Motion for Summary Judgement discharging Appellee's debt to the Appellants pursuant to 11 U.S.C. § 523 (Doc. No. 1, filed August 23, 1993). The questioned debt concerns the debtor's ex-wife's attorney's fees arising out of a postdissolution child custody litigation dispute.
Standard for Bankruptcy Appeal
This Court has jurisdiction pursuant to 28 U.S.C. § 158(a). Bankruptcy Rule 8013 provides that on appeal, the district court may affirm modify, or reverse a bankruptcy court's judgment, order, or decree or remand with instructions for further proceedings. Findings of fact should not be set aside unless clearly erroneous, and due regard shall be given to the opportunity of the bankruptcy court to adjudge the credibility of *753 witnesses. A finding of fact is clearly erroneous when the reviewing court is "left with the definite conviction that a mistake has been committed." Anderson v. City of Bessemer City, 470 U.S. 564, 573, 105 S. Ct. 1504, 1511, 84 L. Ed. 2d 518 (1985) (citing United States v. United States Gypsum Co., 333 U.S. 364, 68 S. Ct. 525, 92 L. Ed. 746 (1948)). The district court must independently determine questions of law or mixed questions of law or fact. A bankruptcy court's conclusions of law are freely reviewable on appeal. United States v. Mississippi Valley Generating Co., 364 U.S. 520, 526, 81 S. Ct. 294, 297, 5 L. Ed. 2d 268 (1961).
Summary of Facts
On January 14, 1985, the Circuit Court for Leon County entered a Final Judgment dissolving the marriage of the Debtor/Appellee Kenneth Strickland and the Appellant Lauren Strickland. This Judgment provided for the shared parental responsibility of the minor child, Aubrey, but granted primary physical residence of Aubrey to Lauren Strickland. The Judgment also required Kenneth Strickland to pay $200.00 per month for the support and maintenance of Aubrey.
On May 24, 1989, Kenneth Strickland filed a Petition for Modification of Final Judgment and sought custody of Aubrey and termination of his child support payments. In connection with this Petition, the court appointed a guardian ad litem for Aubrey, conducted extensive psychological evaluations of Aubrey, Kenneth Strickland and Lauren Strickland. On August 12, 1991, the Court entered an Amended Order referring the dispute to Family Mediation and awarded $9,430.50 as attorney's fees to John Hugh Shannon, P.A., Lauren Strickland's attorney. The Order directed the Debtor to pay the amount awarded directly to Mr. Shannon.[1]
On November 15, 1991, Kenneth Strickland filed his Petition for Relief under Chapter 7 of the Bankruptcy Code. On July 2, 1992, Kenneth Strickland filed his complaint seeking a determination that the attorney's fees awarded by the Circuit Court arising from the custody suit were not within the exception to discharge set forth in 11 U.S.C. § 523(a)(5) of the Bankruptcy Code.
The Bankruptcy Court relying heavily on the reasoning in In re Aughenbaugh, 119 B.R. 861 (Bankr.M.D.Fla.1990), held that an obligation to pay attorney's fees arising out of a postdissolution child custody dispute did not constitute "support" under 11 U.S.C. § 523(a)(5). Therefore, the debt was dischargeable.
Analysis
The issue before this Court is whether attorney's fees relating solely to postdissolution child custody litigation constitute "support" under 11 U.S.C. § 523(a)(5) and therefore create an exception to discharge. Although the parties failed to brief the applicable law on the issue, the Court notes that while the Bankruptcy Court's decision was consistent with the emphasis on the fresh start goal of the Bankruptcy Code, it fails to consider the Congressional Policy favoring enforcement of obligations for spousal and child support. Wetmore v. Markoe, 196 U.S. 68, 77, 25 S. Ct. 172, 175-76, 49 L. Ed. 390 (1904); Shine v. Shine, 802 F.2d 583, 585-86 (1st Cir.1986); In re Booch, 95 B.R. 852 (Bankr.N.D.Ga.1988); Cain v. Isenhower, 29 B.R. 591 (Bankr. N.D.Ind.1983).
Section 523(a)(5) of Title 11 U.S.C. enumerates the exceptions to discharge.
§ 523. Exceptions to Discharge
(a) A discharge under 727 . . . of this title does not discharge an individual debtor from any debt -
(5) to a spouse, former spouse, or child of the debtor, for alimony to, maintenance for, or support of such spouse or child, in connection with a separation agreement, divorce decree or other order of a court of record, determination made in accordance with state or territorial law by a governmental unit, or property settlement agreement but not to the extent that -
*754 (A) such debt is assigned to another entity, voluntarily, by operation of law, or otherwise; or
(B) such debt includes a liability designated as alimony, maintenance, or support, unless such liability is actually in the nature of alimony, maintenance, or support.
While the general goal of the Bankruptcy Code is to provide the debtor with a fresh start, this goal must be balanced against the policy favoring the enforcement of obligations for spousal and child support. Nonetheless, a presumption exists that a debt resulting from a dissolution of marriage is dischargeable unless the complaining party, who bears the burden of proving dischargeability, proves that "the obligation under consideration is actually in the nature of alimony, maintenance or support." In re Aughenbaugh, 119 B.R. at 863. Furthermore, what constitutes support is determined under the federal bankruptcy laws, not state laws. In re Lanza, 100 B.R. 100, 101 (Bankr.M.D.Fla.1989).
Although this Court is aware of the bankruptcy opinions which suggest that the fees associated with postdissolution child custody litigation do not constitute support and thus are dischargeable,[2] the more persuasive approach defines the term "support" broader. This approach emphasizes the public policy concern of enforcing obligations for spousal and child support. Consequently, fees derived from postdissolution child custody litigation constitute support and thus are non-dischargeable.
In Matter of Vazquez, 92 B.R. 533, 535 (S.D.Fla.1988), Lenore C. Nesbitt, United States District Judge for the Southern District of Florida, held that attorney's fees incurred in relation to a visitation dispute constituted support. The court, citing another district court opinion from New York, stated, "[T]he statute requires only that the debt fall in one of [the] three categories . . ., not that it be fees incurred litigating only those issues." Id. citing In re Schwartz, 53 B.R. 407, 411 (S.D.N.Y.1985). Furthermore, the Vazquez court emphasized that public policy favored a broad reading of § 523(a)(5). This Court finds the court's reasoning in Vazquez persuasive.
Other cases have also held that debt incurred over child custody disputes constitutes support. In In re Cowley, 35 B.R. 520, 525 (D.Kan.1983), the court held that attorney's fees incurred resisting the motion for change of custody were in the nature of support. See also In re Peters, 133 B.R. 291, 296 (S.D.N.Y.1991) (holding that child custody disputes affect the child and therefore debt incurred in such litigation constitutes support); In re Gedeon, 31 B.R. 942, 945 (Bankr.D.Col.1983) (stating that "it is in the best interests of the children to have custody matters fully and fairly litigated. Insuring this is done is part of the debtor's duty to support his children."); In re Paulson, 27 B.R. 330 (Bankr.W.D.Tenn.1983) (ruling that attorney's fees awarded pursuant to Tennessee Statute to debtor's ex-wife for amounts incurred in successfully defending against postdivorce child custody proceedings were support and therefore non-dischargeable).
The most persuasive opinion on the issue is found in In re Poe, 118 B.R. 809 (Bankr. N.D.Okl.1990). In Poe, the court examined the character of child custody litigation and *755 concluded that such litigation seeks to determine the best interests of the child. The court stated, "[P]ut another way, 11 U.S.C. § 523(a)(5) should be read as using the term `support' in a realistic manner; the term should not be read so narrowly as to exclude everything bearing on the welfare of the child but the bare paying of bills on the child's behalf." Id. at 812. Thus, the court concluded that support included attorney's fees incurred in child custody litigation.
Conclusion
A determination of the issue before the Court requires a balancing of the "fresh start" goal of the Bankruptcy Code against the public policy of enforcing obligations for spousal and child support. The Court is not unmindful of the need for emphasis on the fresh start goal. However, this Court finds persuasive the opinions interpreting debt incurred over child custody disputes as support under 11 U.S.C. § 523(a)(5). Therefore, this Court cannot agree with the Bankruptcy Court's view of the dischargeability of attorney's fees arising out of postdissolution child custody litigation.
This Court holds that attorney's fees relating to postdissolution child custody litigation which includes child support issues constitute support under 11 U.S.C. § 523(a)(5) and therefore are non-dischargeable in bankruptcy. The Appellee is required to pay the amount of $9,430.50 for the Appellant's attorney's fees and costs. The Bankruptcy Court's Order is reversed and the case remanded for further proceedings in accordance with this opinion.
DONE AND ORDERED at Tampa, Florida, this 12 day of September, 1995.
NOTES
[1] Specifically, the Order stated, "That the Petitioner, KENNETH I. STRICKLAND, is required to pay the amount of $9,000.00 for the Wife's attorney fees in this action, and the amount of $430.50 for costs, for a total of $9,430.50, for which let execution issue."
[2] A review of bankruptcy opinions from the Tampa division indicates that two rules exists. First, attorneys' fees arising out of a final dissolution order are "so entwined with the obligation of support that it can be considered in the nature of support and alimony" and thus excepted from discharge. In re Hall, 119 B.R. at 277; see also Matter of Heverly, 68 B.R. at 23 (holding that a final judgment in dissolution proceeding requiring husband to pay ex-wife's attorney fees was tied to the obligation to support and therefore was excepted from discharge); In re Aguero, 118 B.R. at 875-76 (holding as non-dischargeable debt for legal fees awarded by the State Court and based upon legal services rendered by debtor's ex-wife's attorney to enforce child support obligation of husband.) It is important to note the express limitation of this rule. The rule only applies to attorney's fees. If the final judgment requires payment of a guardian ad litem appointed by the dissolution court to represent the interests of the minor child in a custodial dispute, then the fee is not support and therefore is dischargeable. In re Lanza, 100 B.R. at 101-02.
The second rule is that any postdissolution litigation fee associated with child custody, visitation rights, or discovery disputes does not constitute support. These fees are dischargeable. See In re Strickland, 160 B.R. at 677; ; In re Aughenbaugh, 119 B.R. at 864.
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215 F. Supp. 272 (1963)
UNITED STATES of America, Plaintiff,
v.
Cecil MANNING, as Registrar of Voters of East Carroll Parish, Louisiana, and the State of Louisiana, Defendants.
Civ. A. No. 8257.
United States District Court W. D. Louisiana, Monroe Division.
February 23, 1963.
*273 *274 St. John Barrett, Frank M. Dunbaugh, Gerald P. Choppin, Dept. of Justice, Washington, D. C., Edward L. Shaheen, U. S. Atty. for Western Dist. of Louisiana, for plaintiff.
Jack P. F. Gremillion, Atty. Gen. of Louisiana, Carroll Buck, First Asst. Atty. Gen., Albin P. Lassiter, Dist. Atty., Fourth Judicial District, Thompson L. Clarke, Dist. Atty., Sixth Judicial District, Harry J. Kron, Jr., William P. Schuler, Asst. Attys. Gen., Thomas W. McFerrin, Sp. Counsel, Cecil Manning, as Registrar of Voters of East Carroll Parish, Louisiana, and the State of Louisiana, for defendants.
Before WISDOM, Circuit Judge, and CHRISTENBERRY and HUNTER, District Judges.
WISDOM, Circuit Judge.
In this action the State of Louisiana strikes at the vitals of the Civil Rights Act of 1960. These vitals are the power of a federal district court to make a finding *275 of a pattern of discrimination in the denial of registration to Negroes and the concomitant power of the court itself to redress the grievance or to use a voting referee, should the court decide to utilize a referee as an arm of the court in undoing the discrimination. 42 U.S.C.A. § 1971(e).[1] The Attorney General of Louisiana contends that the statute is unconstitutional because it (1) invades rights reserved to the states by the Tenth Amendment, (2) delegates a non-judicial function to the district court, and (3) injects the court into a matter that is not a "case or controversy." These contentions are embodied in the State's complaint and motion which were not filed in the form of an original law-suit but were filed, captioned, and numbered in United States v. Manning et al., the lawsuit filed initially by the Attorney General of the United States under 42 U.S. C.A. § 1971. This three-judge court was constituted to consider the State's complaint and motion. (All other proceedings in this case have been heard by a single judge.) At the conclusion of the hearing on the State's complaint and motion, the court rendered an informal opinion from the bench upholding the constitutionality of the Act. We announced that our reasons would be stated more fully in a formal opinion.[2] We now state these reasons.
First, however, we review briefly the proceedings leading up to the present phase of the action.
April 28, 1961, the Attorney General of the United States filed a complaint alleging that Cecil Manning, registrar of voters of East Carroll Parish, Louisiana, was discriminating against Negro applicants for registration. Under 42 U.S. C.A. § 1971(c), as amended by the Civil Rights Act of 1960, the State of Louisiana was named a party defendant. May 30, 1962, the district court entered judgment for the plaintiff on the finding that Negro citizens in the parish had been deprived of their right to vote, in violation of 42 U.S.C.A. § 1971(a), "pursuant to a pattern or practice" within the meaning of Section 1971(e). Thereafter, 78 Negro citizens of East Carroll Parish applied to the court under the provisions of the statute here challenged for orders declaring them qualified to vote under state law. July 12, 1962, after an ex parte hearing,[3] the court entered an order finding that twenty-eight of the applicants were qualified to vote. A copy of this order was served upon each of the parties, and the plaintiff and defendants were allowed an opportunity to file objections. The State of Louisiana filed objections to the court's findings with respect to all twenty-eight applicants found qualified; the United States filed an objection *276 to the court's finding with respect to one of the applicants found unqualified. A hearing on the objections was set for the afternoon of July 23.
On the morning of July 23, the State of Louisiana filed a "complaint and motion" alleging that the court, in proceeding to act upon the applications of Negroes pursuant to 42 U.S.C.A. § 1971(e), was "acting as registrar," and that the provisions of Section 1971(e) authorizing the judge so to act were an unconstitutional delegation of non-judicial powers upon a federal judge. The State asked that a three-judge court be convened under 28 U.S.C.A. § 2284; that the court declare Section 1971(e) unconstitutional and enjoin its enforcement.[4]
The State did not name the persons against whom the injunction was to run. With its "complaint and motion", however, the State filed a motion for temporary restraining order against United States District Judge Edwin F. Hunter, Jr., "his subordinates, agents, and his successors and assigns from executing or enforcing the terms or provisions of 42 U.S.C.A. 1971(e)." Judge Hunter, before whom the present litigation was pending, recused himself. Judge Wisdom, sitting in Judge Hunter's place by special assignment, denied the motion. The court set the matter for hearing on the merits the following day.
In accordance with the State's request, a three-judge district court was convened. July 24, 1962, the court heard the matter and, after a short recess at the conclusion of the hearing, the court denied the relief sought by the State and dismissed the "complaint and motion." D.C., 206 F. Supp. 623 (1962).
I.
The Tenth Amendment as a Barrier to Federal Action under the Civil Rights Act
A. Background. We approach the problem posed by the State's reliance on the Tenth Amendment with unalloyed respect for the values of federalism and for the root-principle of American federalism fractionation of governmental power through the constitutional recognition of the standing of states as political entities, not as administrative divisions of a central government. We have fixed firmly in our minds counsels of caution from two profound students of federalism. In measured terms Woodrow Wilson pointed out:
"The question of the relation of the States to the federal government is the cardinal question of our constitutional system. At every turn of our national development we have been brought face to face with it, and no definition either of statesmen or of judges has ever quieted or decided it * * *
"It is difficult to discuss so critical and fundamental a question calmly. * * * [B]ecause it lies at the heart of our constitutional system, to decide it wrongly is to alter the whole structure and operation of our government, for good or for evil * * * A sobering sense of responsibility should fall upon every one who handles it".[5] (Emphasis ours.)
Justice Frankfurter has cautioned:
"The interpenetrations of modern society have not wiped out state lines. It is not for us to make inroads upon our federal system either by indifference to its maintenance or excessive regard for the unifying forces of modern technology. Scholastic reasoning may prove that no activity is isolated within the boundaries of a single State, but that cannot justify absorption of legislative *277 power by the United States over every activity."[6]
But nothing in the language or history of the Tenth Amendment gives the State exclusive sovereignty over the election processes against the federal government's otherwise constitutional exercise of a power within the scope of Article I, Section 4 of the Constitution and the Fourteenth and Fifteenth Amendments. In Justice Holmes's phrase, this "is not a controversy between equals."[7] It is necessary at this time to say again, and underscore it, that within the area of delegated power, express or implied, the Tenth Amendment does not reduce the powers of the United States. Instead, notwithstanding its origin, the Tenth Amendment reaffirms the reality of the nation as a nation. It reaffirms the sovereignty of the federal union when a conflict between a state and the United States puts the national interest at stake.
The Tenth Amendment does not stand in lonely isolation. It must be read along with the rest of the Constitution, including the Supremacy Clause and the Necessary and Proper Clause. The Supremacy Clause, Article VI, Clause 2, is the keystone of the Constitution and the principal feature distinguishing the Constitution from the Articles of Confeder ation. It reads:
"This Constitution, and the laws of the United States which shall be made in Pursuance thereof; and all Treaties made, or which shall be made, under the Authority of the United States, shall be the supreme Law of the Land; and the Judges in every State shall be bound thereby, any Thing in the Constitution or Laws of any State to the Contrary notwithstanding."
The Necessary and Proper Clause, Article 1, Section 8, Clause 18, imperative to effective government, reads:
"The Congress shall have Power * * * [t]o make all Laws which shall be necessary and proper for carrying into Execution the foregoing Powers, and all other Powers vested by this Constitution in the Government of the United States, or in any Department or Officer thereof."
The Tenth Amendment must be read in the light of its history. A comparison of the amendment with Article II of the Articles of Confederation is a fair starting point.
In 1777 the Continental Congress adopted the Articles of Confederation. Its structural weakness as a frame of government was obvious: each state considered itself an independent sovereignty and "decisions of Congress were little more than recommendations."[8] The Second Article expresses clearly the dominant intention of its framers to make the Confederation a league of independent, sovereign states:[9]
"Each State retains its sovereignty, freedom and independence, and every power, jurisdiction and right which is not by this confederation expressly delegated to the United States, in Congress assembled."
There is no counterpart of this article in the original United States Constitution of 1789. That was no oversight. Article II, more than any other provision, made the Confederation unworkable.
The debates on ratification of the Constitution made it clear, however, that the *278 states needed reassurance as to their share of the division of powers between the federal and state governments.[10] The Tenth Amendment came into being to give that reassurance. It deals specifically with States' Rights. The amendment falls far short of the hopes of Patrick Henry, Richard Henry Lee, and other zealous advocates of State Sovereignty, for curtailment of "national" powers. It reads:
"The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people."[11]
The differences between this amendment and Article II of the Confederation strikingly demonstrate the subordination of the states to the nation in the new and revolutionary United States Constitution.[12] The Tenth Amendment (1) omits any reference to State sovereignty; (2) substitutes a reservation of undelegated powers for the retention of "sovereignty, freedom and independence, and every power, jurisdiction and right"; (3) eliminates the word "expressly" before the phrase "delegated to the United States;" (4) foreshadows the prohibition of the Fourteenth and Fifteenth Amendments in the clause referring to "power * * * prohibited by it to the States;" and, (5) significantly, makes the reservation run in favor of "the people", as well as the States.
The people in the Tenth Amendment can mean only "the people of the United States" in the preamble to the Constitution. "We the people of the United States" not we the several States by compact among sovereignties and not we the people of the several States ordained and established the Constitution, going beyond the call of the Convention, in order to secure "a more perfect union" than the "firm league of friendship" established by the Confederation.[13] As Farrand observed: This Constitution is "the supreme Law of *279 the Land. [It is] not a treaty, nor an agreement [compact] between sovereign states, but a law. It was a law enacted by the highest of all lawmaking bodies, the people; and in its enforcement the government was backed by all the armed power of the nation; but the significance is that it was a law, and as such was enforceable in the courts."[14]
In debating the amendment, three times Congress voted down resolutions to insert the word "expressly" before the word "delegated".[15] John Marshall regarded this omission as crucial in the construction of the Constitution:
"But there is no phrase in the instrument which, like the articles of confederation, excludes incidental or implied powers; and which requires that everything granted shall be expressly and minutely described. Even the 10th amendment, which was framed for the purpose of quieting the excessive jealousies which had been excited, omits the word `expressly,' and declares only that the powers `not delegated to the United States, nor prohibited to the states, are reserved to the states or to the people;' thus leaving the question, whether the particular power which may become the subject of contest has been delegated to the one government, or prohibited to the other, to depend on a fair construction of the whole instrument. The men who drew and adopted this amendment had experienced the embarrassments resulting from the insertion of this word in the articles of confederation, and probably omitted it to avoid those embarrassments." McCulloch v. Maryland, 4 Wheat. 316, 400, 4 L. Ed. 579, 601.
In the debates on the amendments, James Madison, "Father of the Constitution", who proposed the Tenth Amendment, said, "No government ever existed which was not necessarily obliged to exercise powers by implication."[16] Whatever second thoughts Madison may have had years later, on June 8, 1791, when he offered his amendments to Congress, he emphasized that none of his proposed amendments "would endanger any part of the Constitution which [had been] considered as essential to the existence of the government by those who promoted its adoption".[17] He referred in terms to the Tenth Amendment and to the fact that several of the state conventions had been "particularly anxious that it should be declared in the Constitution that the powers not therein delegated should be reserved to the States". This might be "deemed unnecessary", Madison said, *280 since "the whole of the instrument" implied it, but "there could be no harm in making such a declaration". Extremists went further. Thus, "Centinel", an anti-Constitution Pennsylvania writer, characterized the amendments as a "tub for the whale",[18] "an attempt to gull the people by professing to supply the defects of [the] constitution, whilst in reality they [were] mean[t] to confirm and perpetuate the fulness of the [national] dominion".[19]
In short, the Tenth Amendment "added nothing to the instrument as originally ratified";[20] as finally approved, it was not intended to curtail the powers of the United States derived from the unamended constitution. The Amendment was "not conceived to be a yardstick for measuring the powers granted to the Federal Government or reserved to the states".[21] And no one has put it more succinctly than James Madison:
"Interference with the powers of the States was no constitutional criterion of the power of Congress. If the power was not given, Congress could not exercise it; if given, they [Congress] might exercise it, although it should interfere with the laws, or even the Constitution of the States."[22]
Many years later, in United States v. Darby, 1941, 312 U.S. 100, 124, 61 S. Ct. 451, 462, 85 L. Ed. 609, Mr. Justice Stone paraphrased Madison:
"The amendment states but a truism that all is retained which has not been surrendered. There is nothing in the history of its adoption to suggest that it was more than declaratory of the relationship between the national and state governments as it had been established by the Constitution before the amendment or that its purpose was other than to allay fears that the new national government might seek to exercise powers not granted, and that the states might not be able to exercise fully their reserved powers. See e. g., II Elliot's Debates, 123, 131; III id. 450, 464, 600; IV id. 140, 149; I Annals of Congress, 432, 761, 767-768; Story, Commentaries on the Constitution, §§ 1907-1908."[23]
The argument the Attorney General of Louisiana makes in this action is strongly suggestive of the argument the Attorney General of Maryland made in McCulloch v. Maryland, 4 Wheat. 316, 4 L. Ed. 579 (1819), the first major attempt of a State to rely on the Tenth Amendment as a bar to Congressional action. Chief Justice Marshall's answer then is pertinent now. First, the Constitution *281 comes from "the people of the United States constituting one sovereign political community":
"No political dreamer was ever wild enough to think of breaking down the lines which separate the states, and of compounding the American people into one common mass. Of consequence, when they act, they act in their states. But the measures they adopt do not, on that account, cease to be the measures of the people themselves, or become the measures of the state governments.
"From these [ratifying] conventions the constitution derives its whole authority. The government proceeds directly from the people; is `ordained and established' in the name of the people; and is declared to be ordained, `in order to form a more perfect union, establish justice, insure domestic tranquillity, and secure the blessings of liberty to themselves and to their posterity.' The assent of the states, in their sovereign capacity, is implied in calling a convention, and thus submitting that instrument to the people. But the people were at perfect liberty to accept or reject it; and their act was final. It required not the affirmance, and could not be negatived, by the state governments.
Second, the Constitution was not a compact of sovereign states:
"The constitution, when thus adopted, was of complete obligation, and bound the state sovereignties. * * To the formation of a league, such as was the confederation, the state sovereignties were certainly competent. But, when, `in order to form a more perfect union,' it was deemed necessary to change this alliance into an effective government, possessing great and sovereign powers, and acting directly on the people, the necessity of referring it to the people, and of deriving its powers directly from them, was felt and acknowledged by all."
Finally, the Constitution is to be given a liberal construction because it is a Constitution "intended to endure for ages to come" and because when a power is given to the national government it is to "the interest of the nation to facilitate its execution."
"[A] government, entrusted with such ample powers, on the due execution of which the happiness and prosperity of the nation so vitally depends, must also be entrusted with ample means for their execution. The power being given, it is the interest of the nation to facilitate its execution. * * * To employ the means necessary to an end, is generally understood as employing any means calculated to produce the end, and not as being confined to those single means, without which the end would be entirely unattainable. * * * We admit, as all must admit, that the powers of the government are limited, and that its limits are not to be transcended. But we think the sound construction of the constitution must allow to the national legislature that discretion, with respect to the means by which the powers it confers are to be carried into execution, which will enable that body to perform the high duties assigned to it, in the manner most beneficial to the people. Let the end be legitimate, let it be within the scope of the constitution, and all means which are appropriate, which are plainly adapted to that end, which are not prohibited, but consistent with the letter and spirit of the constitution, are constitutional.[24] * * * This provision is made in a constitution intended to endure for *282 ages to come, and, consequently, to be adapted to the various crises of human affairs."
A number of commentators have observed that the Supreme Court's views on the Tenth Amendment and the reserved powers of the States have oscillated between the philosophies of Hamilton and Jefferson.[25] Under the aegis of the Virginia and Kentucky resolutions and the "compact" theory, the "notion of National-State equality became in due course a part of the constitutional creed of the Taney Court"; the power "to promote the happiness and prosperity of the community" and to "provide for the public health, safety and good order" were sovereign powers reserved to the States by the Tenth Amendment.[26] Thus, the Supreme Court has held that internal matters within the police power of the states are beyond the reach of Congress;[27] that the federal income tax could not be levied on the salaries of state officers;[28] that an excise tax on the products of child labor was an unconstitutional invasion of the reserved powers of the States;[29] that sales of chicken brought from outside of the state were local matters beyond the regulation of Congress.[30] Indeed, the Supreme Court, in effect, did what Congress refused to do: in Hammer v. Dagenhart the court inserted the word "expressly" before "delegated".[31] But in 1937-41 the Court returned to McCulloch v. Maryland. The Court sustained as constitutional the Agricultural Adjustment Act of 1938,[32] the Social Security Act,[33] and the National Labor Relations Act.[34] United States v. Darby, 1941, 312 U.S. 100, 61 S. Ct. 451, 85 L. Ed. 609, from which we have previously quoted, overruled Hammer v. Dagenhart and upheld the constitutionality of the Fair Labor Standards Act against the contention that although the statute was nominally a regulation of commerce its motive or purpose was "[the] regulation of wages and hours of persons engaged in manufacture, the control of which has been reserved to the states". The Court held that the powers of Congress under the "necessary and proper" clause are no more limited by the reserved powers of the States than are its specifically enumerated powers. Justice Stone stated the principle that guides us in this case:
"Such regulation is not a forbidden invasion of state power merely because *283 either its motive or its consequence is to restrict the use of articles of commerce within the states of destination; and it is not prohibited unless by other Constitutional provisions. It is no objection to the assertion of the power to regulate interstate commerce that its exercise is attended by the same incidents which attend the exercise of the police power of the states." 312 U.S. 100, 114, 61 S. Ct. 451, 457, 85 L. Ed. 609.
Here, then, the Civil Rights Act is not a forbidden invasion of states rights merely because it interferes with the State's power to regulate elections, for the Tenth Amendment is not in itself a limitation on the otherwise constitutional powers of the United States, regardless of the extent to which the exercise of those powers conflicts with concurrent or similar powers of the State. The contention that a congressional act is unconstitutional because it interferes with the reserved powers of the states, as Marshall put it, is "an objection to the Constitution itself." United States v. Fisher, 2 Cranch 358, 397 (1805). The proper question is, looking at the Constitution as a whole, does the Act come within the express or implied power of Congress?
B. Article I, Section 4. Section 4 of Article I of the Constitution provides:
"The Times, Places and Manner of holding Elections for Senators and Representatives, shall be prescribed in each State by the Legislature thereof; But the Congress may at any time by Law make or alter such Regulations, except as to the Places of chusing Senators."
Section 4 is a broad and effective grant of authority to Congress over federal elections.[35] Ex parte Siebold, 1880, 100 U.S. 371, 25 L. Ed. 715, 717; Ex parte Clarke, 1879, 100 U.S. 399, 25 L. Ed. 715; United States v. Gale, 1883, 109 U.S. 65, 3 S. Ct. 1, 27 L. Ed. 857. "There is little regarding an election that is not included in the terms, time, place, and manner of holding it." United States v. Munford, 1833, C.C., E.D.Va., 16 F. 223. Carried with the express authority is the implied power, under the "necessary and proper clause", in the language of McCulloch v. Maryland, to accomplish the constitutional objective by "all means which are appropriate, which are plainly adapted to that end." United States v. Mosley, 1915, 238 U.S. 383, 35 S. Ct. 904, 59 L. Ed. 1355; United States v. Saylor, 1944, 322 U.S. 385, 64 S. Ct. 1101, 88 L. Ed. 1341. For purposes of accomplishing the constitutional objective the electoral process is indivisible. The act of casting a ballot in a voting booth cannot be cut away *284 from the rest of the process. It is the last step in a process that starts with registration. Similarly, registration is an indivisible part of elections.
It should be noted that registration is for all elections. There is no separate registration for federal elections. Any interference with the qualified voter's right to register is therefore interference with a federal election.
The Civil Rights Act of 1960 is based on the fact, obvious to all, that violations of suffrage rights are "usually accomplished through discriminatory application and administration of state registration laws."[36] In adopting the Act, Congress attempted to preserve the integrity of elections at its most significant pointthe Registration Office. The registration of voters is relatively modern. For the "original understanding" of Section 4 to have meaning today, "the manner of holding elections" therefore must be read as referring to the entire electoral process, from the first step of registering to the last step, the State's promulgation of honest returns.
The contention that Section 1971(e) invades the reserved powers of the States rests on giving a narrow meaning to "the manner of holding elections" in Article 1, Section 4, and an unnecessarily broad meaning to "qualifications" in Article 1, Section 2. Article 1, Section 2 provides that "the Electors in each State shall have the Qualifications requisite for Electors of the most numerous Branch of the State Legislature." The Seventeenth Amendment makes this language applicable to elections of United States Senators. Thus, anyone qualified to vote for state legislators is qualified to vote for Congressmen and Senators; anyone not so qualified may not vote in congressional elections.
There is no doubt that, historically, the states have exercised exclusive authority to fix the qualifications of voters.[37] In the Constitutional Convention, Rufus King, a member of the Committee on *285 Style, stated, "The power of control given by this section [Section 4] extends to the manner of election and not to the qualifications of the electors." Alexander Hamilton agreed. James Madison and George Mason agreed. The Supreme Court has said that "the manner of holding elections * * * does not authorize Congress to determine * * * what shall be the qualifications of the voters." Ex parte Clarke, 1879, 100 U.S. 399, 25 L. Ed. 715. See also Ex parte Yarborough, 1884, 110 U.S. 651, 4 S. Ct. 152, 28 L. Ed. 274.
The State's argument misses the target. We find no conflict between the Civil Rights Act and the traditional right of the States to determine the "qualifications" of voters. The Act does not purport to fix qualifications of voters or to give that right to any federal judge. It simply protects the right of voters, qualified under state law, to participate in elections. Section 1971(e) clearly states that the only voters who can be registered are those who, after a hearing, are found to be "qualified under State law to vote".
In Ex parte Siebold, 1880, 100 U.S. 371, 25 L. Ed. 717, the Supreme Court had before it the Enforcement Act which provided, among other extensive voting and registration regulations, for the appointment of federal election supervisors who were authorized "to cause such names to be registered as they may think proper to be so marked". The Court held that the meaning of "make or alter" was plain and the power of Congress paramount. "It may be exercised as and when Congress sees fit to exercise it. When exercised, the action of Congress, so far as it extends and conflicts with the regulations of the State, necessarily supersedes them. This is implied in the power "to make or alter". The Court said:
"It is the duty of the States to elect representatives to Congress. The due and fair election of these representatives is of vital importance to the United States. The government of the United States is no less concerned in the transaction than the State government is. It certainly is not bound to stand by as a passive spectator, when duties are violated and outrageous frauds are committed. It is directly interested in the faithful performance, by the officers of election, of their respective duties. Those duties are owed as well to the United States as to the State."
In United States v. Classic, 1941, 313 U.S. 299, 61 S. Ct. 1031, 85 L. Ed. 1368, there was no question of racial discrimination, and the Civil War Amendments were not involved. It was contended that "elections" did not include primary contests. The Court held that the phrase "manner of holding" was broad enough for Congress to protect voters against "interference" with the right to vote in a Democratic primary, "the only stage of the election procedure when their choice is of significance". Mr. Justice Stone, for the Court, going back to McCulloch v. Maryland, pointed out that the "necessary and proper" clause applies to the congressional power under Article 1, Section 4, as well as to the other powers of Congress. Article 1, Section 8 gives Congress authority "[t]o make all Laws which shall be necessary and proper for carrying into Execution the foregoing Powers, and all other Powers vested by this Constitution in the Government of the United States, in any Department or Officer thereof". In the Classic case the Court noted that while, "in a loose sense, the right to vote for representatives in Congress is sometimes spoken of as a right derived from the states [citations], this statement is true only in the sense that the states are authorized by the Constitution, to legislate on the subject as provided by § 2 of Art. 1, to the extent that Congress has not restricted state action by the exercise of its powers to regulate elections under § 4 and its more general powers under Article 1, § 8, Clause 18 of the Constitution `to make all laws which shall be necessary and proper for carrying into execution the foregoing powers.'" The Court held that the right to choose representatives is *286 a constitutional right to have the votes counted. And, "since the constitutional command is without restriction or limitation, the right, unlike those guaranteed by the Fourteenth and Fifteenth Amendments, is secured against the action of individuals as well as of states". In Terry v. Adams, 1952, 345 U.S. 461, 73 S. Ct. 809, 97 L. Ed. 1152, the Supreme Court, relying on the Fifteenth Amendment, however, reached back to a pre-primary county election, having no legal effect, held within a private group not acting under color of a state law. In Ex parte Yarbrough, 1884, 110 U.S. 651, 4 S. Ct. 152, 28 L. Ed. 274, the Supreme Court declared that the right to vote in Federal elections arose from the Federal Constitution and was subject to protection by federal legislation despite the fact that state laws prescribed the qualifications of electors. The Court observed that the Fifteenth Amendment "clearly shows that the right of suffrage was considered to be of supreme importance to the national government, and was not intended to be left within the exclusive control of the States".
A long line of federal statutes dealing with corrupt election practices shows the broad scope of congressional power to enact appropriate legislation, within the "manner of holding" clause, going beyond the conduct of the election. In Burroughs and Cannon v. United States, 1934, 290 U.S. 534, 54 S. Ct. 287, 78 L. Ed. 484, it was urged that the Federal Corrupt Practices Act, 2 U.S. C.A. § 241 et seq., was unconstitutional in that it required the keeping of detailed accounts of contributions and the reporting of campaign data; that the Congressional power is limited expressly in Article II, Section 1, to determining "the Time of chusing [presidential] Electors, and the Day on which they shall give their Votes". The Supreme Court, upholding the constitutionality of the Act, held that since Congress has the power to preserve the purity of presidential elections "the means to that end presents a question primarily addressed to the judgment of Congress". The Court said:
"While presidential electors are not officers or agents of the federal government * * *, they exercise federal functions under, and discharge duties in virtue of authority conferred by, the Constitution of the United States. The President is vested with the executive power of the nation. The importance of his election and the vital character of its relationship to and effect upon the welfare and safety of the whole people cannot be too strongly stated. To say that Congress is without power to pass appropriate legislation to safeguard such an election from the improper use of money to influence the result is to deny to the nation in a vital particular the power of self protection. Congress, undoubtedly, possesses that power, as it possesses every other power essential to preserve the departments and institutions of the general government from impairment or destruction, whether threatened by force or by corruption."
Section 1971(e) of the Civil Rights Act of 1960, dealing with registration, is certainly no less a regulation of the "manner of holding elections" than the Federal Corrupt Practices Act, which operates on the campaigning stage rather than the act of voting and operates on persons who are no official part of the election machinery. Even in Newberry v. United States, 1921, 256 U.S. 232, 41 S. Ct. 469, 65 L. Ed. 913, the Supreme Court had no difficulty in holding that Congress, under Article 1, Section 4, had the power to regulate campaign expenditures. In discussing the comprehensive power of Congress over federal elections, the Supreme Court has said:
"It will be seen from this statement of the important features of these enactments that Congress by them committed to federal officers a very full participation in the process of the election of Congressmen, from the registration of voters to the final certifying of the results, and that the control thus established over *287 such elections was comprehensive and complete." United States v. Gradwell, 1917, 243 U.S. 476, 483, 37 S. Ct. 407, 410, 61 L. Ed. 857.
We hold that Section 1971(e) of the Civil Rights Act is within the scope of the clause allowing Congress to regulate the "manner of holding" elections. We find too that the provisions of the Act are appropriate to the legitimate congressional objective of protecting the integrity of the entire electoral process. The Act does not impair the right of a state to fix qualifications for voters. Instead of conflicting with this States' Right, the Act is designed to assure the right to vote of electors who are "qualified under State law" to vote.
C. The Fourteenth and Fifteenth Amendments. Now, as before enactment of the Civil Rights Acts, the States have the unquestioned right to fix the qualifications of voters, to regulate the registration of voters, and to conduct elections. But no matter how extensive states' rights may be under the Tenth Amendment or Article 1, Section 2, the state law and administration of the law are subject to the federal constitutional standards established in the Fourteenth and Fifteenth Amendments. See Lassiter v. Northhampton Election Board, 1959, 360 U.S. 45, 51, 79 S. Ct. 985, 3 L. Ed. 2d 1072. The Fifteenth Amendment provides broad authority for congress to correct racial discriminations. In addition, the Supreme Court has relied squarely on the equal protection clause of the Fourteenth Amendment to strike down unreasonable discrimination in the electoral process. Nixon v. Herndon, 1927, 273 U.S. 536, 47 S. Ct. 446, 77 L. Ed. 759. These amendments, independently of Article I, Section 4, are expressly enforceable by "appropriate legislation". They are, of course, not limited to elections for federal office.
In United States v. Raines, 1960, 362 U.S. 17, 80 S. Ct. 519, 4 L. Ed. 2d 524, the Supreme Court held the Civil Rights Act of 1957 to be valid legislation under the Fifteenth Amendment. Justice Brennan, organ of the Court, said:
"It is, however, established as a fundamental proposition that every state official, high and low, is bound by the Fourteenth and Fifteenth Amendments. See Cooper v. Aaron, 358 U.S. 1, 16-19 [78 S. Ct. 1401, 3 L. Ed. 2d 5, 15-17]. We think this Court has already made it clear that it follows from this that Congress has the power to provide for the correction of the constitutional violations of every such official without regard to the presence of other authority in the State that might possibly revise their actions."
See also United States v. Alabama, 1960, 362 U.S. 602, 80 S. Ct. 924, 4 L. Ed. 2d 982.
We see no merit to the argument that the Fifteenth Amendment deals only with denial of the right to vote, not with the registration of voters. This is similar to the argument that Article 1, Section 4 as restricted by Section 2 reserving to the states control of the qualifications of voters, gives Congress no power over registration. The Supreme Court set the record straight in striking down the "grandfather clause", one of the first schemes to deny registration to voters. Guinn v. United States, 1915, 238 U.S. 347, 35 S. Ct. 926, 59 L. Ed. 1340. The Court pointed out that the Fifteenth Amendment did not take away the States' power to fix qualifications; but it requires the tests for suffrage to be non-discriminatory. When Oklahoma later enacted a law giving Negro voters only twelve days to register and qualify to vote, the Supreme Court invalidated that law. Lane v. Wilson, 1939, 307 U.S. 268, 59 S. Ct. 872, 83 L. Ed. 1281. In a recent case Judge Bootle, for this Court, United States v. Dogan, 5 Cir., 314 F.2d 767, held: "[42 U.S.C.A. § 1971(a)] forbids any distinction in the voting process based upon race or color, irrespective of whether such distinction involves an actual denial of the [right to] vote. It applies not only to the physical act of voting *288 but to the entire voting process, including the matter of paying poll taxes where the payment of poll taxes is a condition precedent to the right to vote, and including the matter of registration where registering is required in advance of voting." See also Davis v. Schnell, S.D.Ala.1949, 81 F. Supp. 872, aff'd 336 U.S. 933, 69 S. Ct. 749, 93 L. Ed. 1093; Byrd v. Brice, W.D.La.1952, 104 F. Supp. 442, aff'd Bryce v. Byrd, 5 Cir., 201 F.2d 664; United States v. Penton, M.D.Ala., 212 F. Supp. 193 (1963). In United States v. Penton, Judge Johnson made the point we emphasize in this opinion: "[A]lthough the particular qualifications one must possess in order to exercise this right to vote are left to the statesas long as that exercise is within the constitutional frameworkthe power to protect citizens who are qualified to vote but not allowed to vote solely because of their color is confided in the United States Government."
Discrimination in the registration office is the worst kind of oppression of qualified voters, because it is oppression under color of law. Discrimination by a registrar is especially harmful because it is the most effective method for denying the right to vote: it denies the right to vote before an individual has the chance to exercise it, and it bars not only the individual concerned from all elections but inhibits other qualified voters from running the gauntlet of discriminatory and humiliating practices by a registrar and his deputies. It is unthinkable that Congress should not have the power to deal with the right to vote at the most vulnerable point in the electoral process. As the Supreme Court said, in an analogous context, in Ex parte Yarbrough, 1884, 110 U.S. 651, 661, 662, 4 S. Ct. 152, 157, 28 L. Ed. 274:
"[I]t is only because the Congress of the United States, through long habit and long years of forbearance, has, in deference and respect to the States, refrained from the exercise of these powers, that they are now doubted."
When the States, by sophisticated registration requirements coupled with discriminatory practices by registrars, deny suffrage to qualified voters they cannot complain if Congress exercises its constitutional authority, under Article I, Section 4, to regulate the electoral process in federal elections and its Fourteenth-Fifteenth Amendment authority to prohibit discriminatory denial of the right to vote in federal and state elections. This is the rationale of the Civil Rights Cases, 1883, 109 U.S. 3, 3 S. Ct. 18, 27 L. Ed. 835, sustaining constitutionality of the predecessor statutes as "appropriate legislation."[38] The Supreme Court has construed broadly the equivalent clause in Section 5 of the Fourteenth Amendment:
"Whatever legislation is appropriate, that is, adapted to carry out the objects the amendments have in view, whatever tends to enforce submission to the prohibitions they contain and to secure to all persons the enjoyment of perfect equality of civil rights and the equal protection of the laws against State denial or invasion, if not prohibited, is brought within the domain of congressional power." Ex parte Virginia, 100 U.S. 339, 25 L. Ed. 676, 679 (1880).
In United States v. Reese, 1876, 92 U.S. 214, 216, 23 L. Ed. 563; James v. Bowman, 1903, 190 U.S. 127, 23 S. Ct. 678, 47 L. Ed. 979; and Minor v. Happersett, 1875, 88 U.S. (21 Wall.) 162, 178, 22 L. Ed. 627, the Court, interpreting the second clause of the Fifteenth Amendment, struck down the congressional legislation. These decisions however were based, not on the ground that the legislation was inappropriate, *289 that is, used improper means to legitimate ends, but that it sought to achieve improper ends; the statutes sought to protect the voter against discrimination by private persons and against other discrimination than discrimination on the grounds of race, color, and previous condition of servitude. These decisions are not authority today for a narrow view of the term, "appropriate legislation".
We summarize. The object of the Act is to guarantee to qualified voters the right to register and vote. That end is within the scope of Article I, Section 4 and the Fourteenth and Fifteenth Amendments; the corrective registration plan embodied in Section 1971(e) is an appropriate means to accomplish the end. Congress has taken pains to accommodate the Act to States' Rights. For example, the Act does not affect the qualifications fixed by the State and no State registrar is replaced by a federal registrar.[39] It is not for this court to inquire whether the statute is good or bad, or whether state laws are adequate or inadequate for dealing with the problem. The States must make an accommodation too. To the extent a conflict exists, the Supremacy Clause requires the States to yield to the will of the nation.
II.
The Court's Exercise of Allegedly Non-Judicial Functions.
A. The court's direct assumption of non-judicial functions. The State urges that Section 1971(e) is not actually a regulation of state activity to assure state compliance with the Fifteenth Amendment, nor is it a means for affording judicial relief for non-compliance. Instead, so the State argues, the Act is an effort to displace state officials (i. e., the registrars of voters) in the performance of their state duties, and to replace them by a United States District Judge acting in an administrative rather than a judicial capacity. This contention is said to rest on the reserved power of the State under the Tenth Amendment, but the crux of the question is whether a district judge, in carrying out the provisions of 1971(e), is exercising an executive function in violation of Article III vesting only judicial power in the courts.
The grant of judicial power in Article III implies the limitation that courts may not exercise legislative or executive powers. By "giving to the courts `"judicial power" the Constitution presupposed an historic content for that phrase and relied on assumption by the judiciary of authority only over issues which are appropriate for disposition by judges.'" Z & F Assets Realization Corp. v. Hull, 1940, 72 App.D.C. 234, 114 F.2d 464, 470, aff'd 311 U.S. 470, 61 S. Ct. 351, 85 L. Ed. 288. True, the doctrine of separation of powers has been honored in the breach in the delegation of legislative authority to administrative agencies in our complicated modern Government. But the doctrine is still rooted firmly enough in our legal system to withstand cold winters and lukewarm judges.
In support of the State's position, the Attorney General of Louisiana argues that the district judge, in receiving applications under the provisions of 42 U.S.C.A. § 1971(e), in holding an ex parte hearing to determine the qualifications of the applicants, in deciding upon those applications and in signing certificates evidencing the fact that certain of the applicants are qualified, is performing an essentially administrative function. The delegation of such function to the courts, the State asserts, is unconstitutional under the decisions of the Supreme Court in United States v. Todd (1794), 54 U.S. 52, 14 L. Ed. 47; United States v. Ferreira (1852), 54 U.S. 39, 14 L. Ed. 42, and Muskrat v. United States (1911), 219 U.S. 346, 31 S. Ct. 250, 55 L. Ed. 246.
The State misconceives what the Act says and what the court does.
*290 Subsection (e) comes into effect only after the court issues a judgment in an action brought by the Attorney General of the United States to enforce the rights defined by subsection (a). If the court makes a judicial determination that persons have been deprived of their right to vote in violation of subsection (a), it must, upon application of the Attorney General, make a finding of whether such deprivation was in accordance with a pattern or practice. If the court finds that a pattern or practice exists, the procedures set forth in subsection (e) automatically come into effect. Thereafter, any member of the race found by the court to have been the object of discrimination in the pattern or practice is entitled to apply for an order finding him qualified to vote. The court must enter such order if it finds that the applicant (1) is qualified under state law to vote, and (2) has either been denied an opportunity to register or has been found not qualified by a local official. The statute further provides that the court shall issue to each applicant declared qualified a certificate identifying the holder as a person so qualified.
The statute requires service of notice upon the Attorney General of the State, and upon each of the other parties to the lawsuit, together with an order to show cause why a final order should not be entered declaring the applicants to be qualified in accordance with the court's findings.
We have, therefore, a law-suit in which the court makes legal decisions and renders judgment after passing on issues of fact and law.
There is no quarrel with the generality that Congress cannot delegate to the courts a purely executive function. Thus, in United States v. Todd, 54 U.S. 52, 14 L. Ed. 47, it was held that Congress could not authorize the courts to receive and act upon pension applications, and in United States v. Ferreira, 54 U.S. 39, 14 L. Ed. 42 that Congress could not authorize a district judge to make awards under a treaty. But in Section 1971(e) Congress has not so attempted to require the district judge to function as a registrar of voters.
Under Section 1971(e) the court is required to make a determination of the qualifications of any particular applicant only in connection with and as a result of a law-suit filed in court and litigated to judgment. This is a judicial function.
The Supreme Court in Muskrat v. United States, 219 U.S. 346, 31 S. Ct. 250, 55 L. Ed. 246 adopted the following definition stated by Mr. Justice Miller in his work on the Constitution: "`Judicial power,' `is the power of a court to decide and pronounce a judgment and carry it into effect between persons and parties who bring a case before it for decision.'" 219 U.S. at 356, 31 S.Ct. at 253. Subsection 1971(c) authorizes the Attorney General to bring cases before the United States District Courts to enjoin racial discrimination which violates subsection (a) of that section. The court is authorized to render judgment. In subsection (e), Congress has directed how those judgments shall, in the words of Justice Miller, be "carr[ied] into effect."
There is no doubt that before adoption of the 1960 Act a judgment could be rendered against a registrar requiring him to register all qualified persons of the race against whom he had discriminated. See United States v. Raines, 189 F. Supp. 121, 135-136 (M.D.Ga., 1960); Thornton v. Martin, 1 Race Rel.L.R. 213, 217-218 (M.D.Ga., 1955).[40] If the registrar remained adamant, the court, in order to "carry [its judgment] into effect" could add election officials as parties defendant and require them to accept the applicant's ballot on election day.[41] Indeed, *291 in oral argument the Attorney General of Louisiana, conceded that an order requiring election officials of East Carroll Parish to allow Negroes, found by the court to be qualified, to vote on election day would be a proper exercise of "judicial power" in the constitutional sense. The Act reaches the same result, rather than leaving it to the discretion of the trial judge. This congressional limitation on the court's discretion does not change the court's role from "judicial" to "executive." Congressional directions as to modes and quantum of relief have been frequently sustained. United Steelworkers of America v. United States, 1959, 361 U.S. 39, 80 S. Ct. 1, 4 L. Ed. 2d 12 (Labor Management Relations Act); Chattanooga Foundry & Pipe Works v. City of Atlanta, 1906, 203 U.S. 390, 27 S. Ct. 65, 51 L. Ed. 241 (anti-trust); United States v. Wood, 1961, 5 Cir., 295 F.2d 772, 777 (Civil Rights Act of 1957); Henderson v. Burd, 1943, 2 Cir., 133 F.2d 515, 146 A.L.R. 714 (Emergency Price Control Act); Federal Trade Commission v. Rhodes Pharmacal Co., 1951, 7 Cir., 191 F.2d 744 (Federal Trade Commission Act).
The State argues that whatever may be the nature of many of the court's functions under the statute, its action in issuing "to each applicant * * * declared qualified a certificate identifying the holder thereof as a person so qualified," is clearly administrative. This contention confuses the court's certificate with a Louisiana registration certificate. The two are entirely different. The court's certificate has no independent legal significance: it is merely evidence of a judgment in favor of the holder of the certificate in order that the rights established under the judgment will be accorded full acceptance.[42] A certified copy of the court's order would serve the same purpose. The use of certificates in connection with the judicial function as evidence of the acts or orders of a federal court is a common practice. This court issues certificates to attorneys as evidence that they are admitted to practice before the court. The Immigration and Nationality Act specifically provides, in 8 U.S.C.A. § 1449, for the issuance of certificates of naturalization. In Title 28 of the United States Code, section 2253 authorizes judges of this court to issue a "certificate of probable cause" in connection with an appeal from a habeas corpus proceeding, and section 2465 provides for the issuance of a certificate of "reasonable cause" for the seizure of forfeited property. The nature and purpose of the certificate required by section 1971(e) is not essentially different from these other court certificates. The Parish Registrar is not dislodged from office; he continues to function as registrar.
The State objects that the ex parte nature of the initial hearing renders the proceeding essentially administrative. But ex parte proceedings are well established in our jurisprudence.[43] And they *292 are as common in Louisiana as in other states. The State itself, in connection with its "motion and complaint," moved the court, ex parte, for a temporary restraining order. Under section 1971(e), notice must be, and in this case was, given to each party to the law-suit. Both sides are given the right (and it was exercised in this case) to object to the court's interlocutory findings and to present further evidence and argument on both the legal and factual issues.
B. The Court's indirect assumption of non-judicial functions through voting referees. The State attacks the use of voting referees as an inseparable part of the plan by which the court takes over duties which are properly administrative in character.
There is nothing new about the idea of court-appointed judicial officers. Judicial reliance on masters, referees, and other agents of the court has a long history. The court's use of such representatives is in line with the traditional authority courts of equity exercise. The appointment of federal election supervisors by a district judge has been before the courts and held constitutional. In re Supervisors of Election, 1878, C.C., S.D.Ohio, 23 Fed.Cas.No.13,628.
The office of master in chancery, of French origin and imported with the Norman Conquest,[44] is one of our oldest institutions in Anglo-American law. English Chancery Courts, heavy borrowers from the civil law, may have derived the system of special masters from the civilian judex of the Roman Republic and Early Empire.[45] The civil judex ("referee") was a private citizen appointed by the praetor or other magistrate to hear *293 the evidence, decide the issues, and report to the court appointing him. Whatever its origin, the use of masters was a useful tool of English law before the colonization of America. In the colonial development of America "just as chancery relief had been required and had become a part of the judicial system of colonial America, so had the office of master been recognized as an integral part of the administration of that relief and had become soundly rooted in the legal thinking and custom. It was from this basis that after the Revolution the office of master in chancery or its equivalent made its way into many of the state and federal systems of procedure."[46] In most states today a master in chancery is an assistant of the chancellor. He may perform ministerial or judicial acts, but he "acts as the representative of the chancery court, and his official conduct is subject to the court's control and supervision". 19 Am.Jur. Verbo Equity, 251. "Under the Constitution and statutes of some states, a master has the status of a judicial officer * * * and all the powers of the court in which the cause is pending." 19 Am.Jur. Verbo Equity, p. 253.
Rule 53 of the Federal Rules of Civil Procedure allows a district court to appoint a "standing" master for its district or a "special master". "As used in [the] rules the word `master' includes a referee, an auditor, and an examiner." Rule 53. A master under Rule 53 has "the duties and obligations of a judicial officer." In re Gilbert, 1928, 276 U.S. 6, 48 S. Ct. 210, 72 L. Ed. 441. Rule 71A allows the appointment of masters and commissioners in eminent domain proceedings.
A Referee in Bankruptcy has even more power than a master: he may render a binding judgment. Pointing out that there is nothing radical about the suggestion that persons other than the trial judge handle some judicial matters, Judge Zavitt observed:
"There is nothing radical about the suggestion that persons other than the trial judge handle certain details. Referees in Bankruptcy are, in effect, deputy judges, whose determinations are subject to review by the court. Over the years since the Act of 1898, their powers (subject to review) have been extended with the approval of our judges have been extended to the point where (since 1938) they have the power to grant or deny discharges a power formerly reserved to the District Court Judge sitting as a bankruptcy court." Zavitt, The Use of Masters in Aid of the Court, D.C., 22 F.R.D. 283, 285 (1958).
In stockholders' suits to compel the holding of corporate elections, illegally delayed by corporate officers, courts have appointed masters to conduct the elections. Bartlett v. Gates, 118 F. 66 (C.C. Colo., 1902); Burnett v. Banks, 130 Cal. App. 2d 631, 279 P.2d 579 (1955); Fein v. Lanston Monotype Machine Co., 196 Va. 753, 85 S.E.2d 353 (1955). In suits by a remainderman, where the life tenant has failed to carry out his duties, a court may appoint an officer to manage the estate, Restatement of Property, Ch. 13 § 189(f); Keeley v. Clark, 125 Misc. 541, 211 N.Y.S. 391 (1925). Upon failure of a party to comply with an order to convey land or deliver deeds or "to perform any other specific act," federal courts are authorized to appoint a third person to perform the act (Rule 70, Fed.R.Civ.P.). In a suit to protect the rights of union members the court has appointed a Board of Monitors to review and report to the court on the management of the union. English v. Cunningham, 106 U.S.App.D. C. 70, 269 F.2d 517, modified 106 U.S. App.D.C. 92, 269 F.2d 539 (1959), cert. denied, 361 U.S. 897, 80 S. Ct. 195, 4 L. Ed. 2d 152. In suits for abatement of *294 a nuisance, courts have directed an officer of the court to engage a contractor specifically to abate the nuisance. Clarke v. Chicago B. & Q. R. Co., 62 F.2d 440 (C.A. 10, 1933). In a suit for specific performance of a contract for the transportation of personal property, a court has appointed a receiver to take possession of the property and deliver it to the plaintiff. Madden v. Rosseter, 114 Misc. 416, 187 N.Y.S. 462 (1921). See also, In re Utilities Power and Light Corp., 90 F.2d 798 (C.A. 7, 1937), certiorari denied, Associated Investing Corp. v. Utilities Power & Light Corp., 302 U.S. 742, 58 S. Ct. 144, 82 L. Ed. 543; In re Joslyn's Estate, 171 F.2d 159 (C.A. 7, 1949); Bair v. Bank of America Nat. Trust & Savings Ass'n, 112 F.2d 247 (C.A. 9, 1940), certiorari denied, 311 U.S. 684, 61 S. Ct. 61, 85 L. Ed. 441; DuPont v. DuPont, 242 F. 98, 137-138 (D.Del.1917), certiorari denied, 250 U.S. 642, 39 S. Ct. 492, 63 L. Ed. 1185; and Bartlett v. Gates, 118 F. 66 (D.Colo.1902).
Going to the Act, we see that the Referee functions under the close supervision of the appointing court. The referee receives applications, takes evidence, and makes findings that must be reported to the court for action. A copy of the report is forwarded to the State attorney general with an order to show cause why the court should not enter an order in accordance with the report. The attorney general may except as to matters of fact or law. "The issues of fact and law raised by such exceptions shall be determined by the court or, if the due and speedy administration of justice requires, they may be referred to the voting referee to determine in accordance with procedures prescribed by the court." (Emphasis supplied). A voting referee is given "all the powers conferred upon a master by rule 53(c)."
On the face of the act, we cannot say that the court, acting through a voting referee, takes over the non-judicial functions of a state registrar. The court, not the referee, on the basis of the referee's findings, determines whether an applicant, "qualified to vote under State law" is denied that right.
IV.
Finding of a Pattern of Discrimination Not a "Case or Controversy."
The defendants contend that the voting referee procedure established in Title VI is unconstitutional because it imposes on a court the obligation to make a finding or decision as to a discriminatory "pattern or practice" that has no relation to the "case" or "controversy" before the court. Under Article III, Section 2 of the Constitution courts are limited to deciding cases and controversies. The argument is that the proceeding set up in Title VI is not an adversary proceeding (no aggrieved Negro voters are named); that there is no justiciable issue; that there is no controversy appropriate for judicial determination, and, that the obligation imposed on the court of making a finding of a discriminatory pattern has nothing to do with the original finding that particular persons had been deprived of their voting rights. This argument rests on a misconception of a suit under the Civil Rights Acts. The controversy is not between certain aggrieved Negroes and the defendants. The controversy is between the United States and the named defendants.[47]
*295 Section 2 of the Fifteenth Amendment expressly authorizes Congress to enact legislation to prevent denial of voting rights on account of race or color. In accordance with this Section, and in recognition of the public interest in enforcement of the Amendment, the Civil Rights Act of 1957 authorizes the United States, in its capacity as "the guardian of that public interest", as it is characterized in Raines, to bring an action as plaintiff to prevent racial discrimination in voting. Suit is brought "for the United States, or in the name of the United States". It is a suit not just to vindicate the constitutional rights of particular individuals as to whom evidence is presented but to vindicate the public interest in the constitutional right of all citizens to be free from racial discrimination in exercising voting rights. cf. International Salt Co. v. United States, 1947, 332 U.S. 392, 401, 68 S. Ct. 12, 92 L. Ed. 20. Title VI of the 1960 Act provides equitable remedies to make such a suit effective. The issues are, first, whether the defendants deprived particular persons of their right to vote, and second, whether this was pursuant to a "pattern or practice". We have before us, therefore, a case or controversy with real adversaries and with issues that are properly determinable by a court. The fact that the particular aggrieved voters are not named and that, after a finding of discrimination, or along with it, the court may make another finding that the discrimination was according to a pattern is in keeping with the theory of the Act that the real aggrieved party in the "case" or "controversy" is the United States of America.
A hundred years ago in ordeal by battle this nation settled forever the issue of interposition. The reality of national sovereignty prevailed over metaphysical state sovereignty. At this late date the continued assertion of the misguided doctrine of interposition in one form or another, in various kinds of litigation, only confuses the public without benefiting the litigant or aiding bona fide States' Rights.
The United States occupies the same Louisiana land as the State of Louisiana. It has an equal interest with the State or greater interest than the State in many of the same things. The federal government, for example, has a manifestly valid *296 interest in the integrity of the electoral process from registration office to polling booth. The State may have the primary responsibility for conducting elections, but if a State shirks this responsibility, or uses its power to deny the right of qualified electors to vote, it must expect the Nation to honor the obligation the State has evaded.
The non-existence of the doctrine of interposition and the recognition of the paramount sovereignty of the nation are not in conflict with a fair and practicable federal union in which States' Rights are exercised, virtually free from any federal judicial control, in political self-determination, economic regulation, and other vast areas of governmental activity. The words of Justice Bradley, in Ex parte Siebold, 100 U.S. 371, 25 L. Ed. 717, are meaningful today:
"There is no such conflict between [the regulations of the State and those of Congress] as to prevent their forming a harmonious system perfectly capable of being administered and carried out as such. * * Where there is a disposition to act harmoniously, there is no danger of disturbance between those who have different duties to perform. When the rightful authority of the General Government is once conceded and acquiesced in, the apprehended difficulties will disappear. Let a spirit of national as well as local patriotism once prevail; let unfounded jealousies cease, and we shall hear no more about the impossibility of harmonious action between the National and State Governments in a matter in which they have a mutual interest. * * * The true interest of the people of this country requires that both the National and State Governments should be allowed, without jealous interference on either side, to exercise all the powers which respectively belong to them according to a fair and practical construction of the Constitution. State rights and the rights of the United States should be equally respected. Both are essential to the preservation of our liberties and the perpetuity of our institutions. But, in endeavoring to vindicate the one, we should not allow our zeal to nullify or impair the other."
For the foregoing reasons the complaint of the State of Louisiana is dismissed and its motion for an injunction denied.
NOTES
[1] That subsection was enacted by the 86th Congress in Title VI of the Civil Rights Act of 1960 (74 Stat. 86). It reads as follows:
"In any proceeding instituted pursuant to subsection (c) of this section in the event the court finds that any person has been deprived on account of race or color of any right or privilege secured by subsection (a) of this section, the court shall upon request of the Attorney General and after each party has been given notice and the opportunity to be heard make a finding whether such deprivation was or is pursuant to a pattern or practice. If the court finds such pattern or practice, any person of such race or color resident within the affected area shall, for one year and thereafter until the court subsequently finds that such pattern or practice has ceased, be entitled, upon his application therefor, to an order declaring him qualified to vote, upon proof that at any election or elections (1) he is qualified under State law to vote, and (2) he has since such finding by the court been (a) deprived of or denied under color of law the opportunity to register to vote or otherwise to qualify to vote, or (b) found not qualified to vote by any person acting under color of law. * * *"
[2] United States v. Cecil Manning, as Registrar of Voters of East Carroll Parish, Louisiana, and the State of Louisiana, D.C., 206 F. Supp. 623 (1962).
[3] Although counsel for both the plaintiff and the defendants were present at the hearing as observers, they did not participate. The court itself examined each applicant.
[4] In our earlier opinion we stated, "In order to eliminate uncertainty as to the legal effect of the court having been improperly convened, each judge of this Court expressly adopts as his own findings, conclusions, and decree all of the findings, conclusions, and decree of this three judge court." 206 F. Supp. 623, 625.
[5] Wilson, Constitutional Government in the United States 173 (N.Y.1921).
[6] Polish National Alliance v. N. L. R. B., 1944, 322 U.S. 643, 650, 64 S. Ct. 1196, 88 L. Ed. 1509.
[7] Sanitary District of Chicago, 1925, 266 U.S. 405, 425, 45 S. Ct. 176, 69 L. Ed. 352.
[8] Farrand, The Framing of the Constitution 45 (Yale 1962).
[9] "The fundamental principle of the Revolution was that the colonies were coordinate members with each other and with Great Britain, in an empire united by a common executive, and not united by any common legislative sovereign. The legislative power was maintained to be as complete in each American Parliament as in the British Parliament." 6 Writings of James Madison 373 (1906).
[10] In general, on the establishment of the Constitution, see Farrand, ed., The Records of the Federal Convention of 1787 (1911); Elliot, ed., The Debates in the Several State Conventions on the Adoption of the Federal Constitution (1836). Ford, ed. Essays on the Constitution (1892); Ford, ed., Pamphlets on The Constitution (1888). See also McLaughlin, The Confederation and the Constitution (1905); Jensen, The Articles of Confederation, 263 (1940); Warren, The Making of the Constitution (1929); Kelley and Harbison, The American Constitution (1929); Rutland, The Birth of the Bill of Rights (1962).
[11] Madison's original proposal did not include the italicized words. The amendment was Number Twelve on Madison's list of proposed amendments.
[12] Crosskey considers these differences at length. I Politics and the Constitution, pp. 675-708 (1953). Crosskey's construction of the Tenth Amendment and the documentation of his views have value in themselves, without the necessity of one's accepting his general conclusion that the Constitution created a national, not a federal, government. He considers that "the one key-word common to the Articles and the Tenth Amendment, that is, the word `delegated' was used, in the Articles, in contradistinction to the word `retains' * * * So, `delegated' in the Articles, must have meant `parted with absolutely';" that it was carried over into the Tenth Amendment in the same sense; that in contemporary usage "delegated" meant "alienated." He argues that "reserve" was used in its technical, conveyancing sense, "to indicate the creation of a new interest, never previously existing as such, in respect of a thing conveyed;" that the "use of the word `reserved' in the Tenth Amendment, implied, first of all, that the whole thing `sovereignty' out of which the reserved powers of the states were created i. e. `reserved' had, at the same time been conveyed to the nation;" that "that the `reserved powers' of the states were not excepted fragments of the states' pre-existing `sovereignties' but newly created powers which grew out of, and depended for their nature absolutely on the Constitution;" that "the national authority * * * was general in character."
To Crosskey the People, by the Constitution, "transfer[red] `supremacy' or `sovereignty' from the states to the nation": "the `reserved' powers of `the States respectively' in the Tenth Amendment, had, once more, to be subordinate powers."
[13] Corwin, The Constitution and What it Means Today 237 (1953).
[14] Farrand, The Framing of the Constitution 209 (Yale 1962).
[15] The proposal to insert "expressly" was rejected in the House August 17 and August 21, 1789; in the Senate September 7, 1789. 1 Annals of Congress 761 (1789); Journal of the House 108 (1789); Journal of the Senate, 1st Sess., 122 (1789). The omission is especially significant in view of the strong feeling in some of the ratifying conventions that "it [should] be explicitly declared that all powers not expressly delegated to Congress are reserved to the several States, to be by them exercised * * * [as] is consonant with the second article in the present confederation". John Adams in the Massachusetts Convention 2 Elliot's Debates 131.
Virginia and North Carolina placed first on their list of amendments one substantially similar to the present Tenth Amendment; "expressly" was omitted. Massachusetts, New York, Pennsylvania, and Maryland included "expressly". 2 Elliot's Debates (1836) 177, 406, 545, 550.
The first court to discuss the Tenth Amendment commented on the omission of "expressly." "Congress would be continually exposed, as their predecessors, under the confederation were, to the alternative of construing the term, expressly, with so much rigour as to disarm the government of all real authority whatever; or, with so much latitude, as to destroy, altogether the force of the restriction." United States v. The William, 1808, D.C.Mass., Fed.Cas.No. 16,700 at 622.
[16] 1 Annals of Congress 761.
[17] 1 Annals of Congress 433.
[18] "Seamen have a custom, when they meet a whale, to fling out an empty tub by way of amusement to divert him from laying violent hands upon the ship." Jonathan Swift, The Tale of a Tub. Quoted in Crosskey, Politics and the Constitution (1953) p. 688.
[19] Ibid, p. 685.
[20] United States v. Sprague, 1931, 282 U.S. 716, 733, 51 S. Ct. 220, 223, 75 L. Ed. 640. "The Tenth Amendment, in other words, was added to the Constitution out of an abundance of caution. Its purpose was only to allay fears that the new National Government might seek to exercise powers not granted; its sole design was to exclude any interpretation by which powers beyond those which were granted might be assumed. But it has no substantive effect, either upon the question of what powers are granted to the nation or upon the operation of the Supremacy Clause. It is really an express affirmation of what would, in any event, or any just reasoning, be a necessary rule of interpretation, * * *" 1 Schwartz, The Powers of Government (1963) 40-41.
[21] Corwin. The Constitution and What it Means Today 232 (1954).
[22] 11 Annals of Congress, Col. 1897 (1791).
[23] Cf. "The general position is incontestible, that all that is not surrendered by the constitution is retained. The amendment which expresses this, is for greater security; but such would have been the true construction, without the amendment." United States v. The William, 1808, D.C.Mass., No. 16,700 at 622.
[24] Cf. Madison's statement in The Federalist, No. 44: "No axiom is more clearly established in law, or in reason, than that wherever the end is required, the means are authorized; whenever a general power to do a thing is given, every particular power necessary for doing it is included." Again: "Without the substance of this power, the whole Constitution would be a dead letter."
[25] See Corwin, The Constitution and What It Means Today 232-37 (1954); Castro, Doctrinal Development of the Tenth Amendment, 51 W.Va.L.Q. 227, 231 (1949); Cowen, What is Left of the Tenth Amendment, 39 N.Carl.L.Rev. 153, 157 (1961); Corwin, The Passing of Dual Federalism, 36 Va.L.Rev. 1 (1950); 1 Haines, The Role of the Supreme Court in American Government Politics 218 (1944).
[26] Corwin, The Passing of Dual Federalism, 36 Va.L.Rev. 1, 15 (1950). Compare Tucker, The Constitution of the United States (1899) with Schwartz, The Powers of Government (1963).
[27] The states have "complete unqualified, and exclusive" sovereignty over all those powers which relate to merely municipal legislation or what might, perhaps, more properly be called internal police." New York v. Miln, 1837, 11 Pet. 102, 139, 9 L. Ed. 648. See also The License Cases, 1847, 5 How. 504, 573, 12 L. Ed. 256.
[28] Collector v. Day, 1871, 11 Wall. 113, 20 L. Ed. 122.
[29] Bailey v. Drexel Furniture Co., 1922, 259 U.S. 20, 42 S. Ct. 449, 66 L. Ed. 817.
[30] Schechter Poultry Corp. v. United States, 1935, 295 U.S. 495, 55 S. Ct. 837, 79 L. Ed. 1570.
[31] Hammer v. Dagenhart, 1918, 247 U.S. 251, 38 S. Ct. 529, 62 L. Ed. 1101. And in Lane County v. Oregon, 1868, 7 Wall. 71, 76, 19 L. Ed. 101, the court said, "all powers not expressly delegated to the national government [were] reserved to the states and to the people". See also United States v. Hudson and Goodwin, 1812, 7 Cranch 32, 33, 3 L. Ed. 259.
[32] Wickard v. Filburn, 1942, 317 U.S. 111, 63 S. Ct. 82, 87 L. Ed. 122.
[33] Steward Machine Co. v. Davis, 1937, 301 U.S. 548, 57 S. Ct. 883, 81 L. Ed. 1279; Helvering v. Davis, 1937, 301 U.S. 619, 57 S. Ct. 904, 81 L. Ed. 1307.
[34] National Labor Relations Board v. Jones & Laughlin Steel Corp., 1937, 301 U.S. 1, 57 S. Ct. 615, 81 L. Ed. 893.
[35] James Madison described the purpose of Article 1, Section 4, as follows:
"It was found impossible to fix the time, place, and manner of election of Representatives in the Constitution. It was found necessary to leave the regulation of these, in the first place, to the State governments as being best acquainted with the situation of the people, subject to the control of the General Government, in order to enable it to produce uniformity and prevent its own dissolution. * * * Were they exclusively under the control of the State governments, the General Government might easily be dissolved. But if they be regulated properly by the State legislatures the congressional control will probably never be exercised. The power appears to me satisfactory, and as unlikely to be abused as any part of the Constitution." 3 Farrand, Record, 311.
Similarly, In the Federalist, No. LIX, Hamilton wrote:
"They (the convention) have submitted the regulation of elections for the Federal Government, in the first instance, to the local administrations; which in ordinary cases, and when no improper views prevail, may be both more convenient and more satisfactory; but they have reserved to the national authority a right to interpose, whenever extraordinary circumstances might render that interposition necessary to its safety."
[36] The Report of the United States Commission on Civil Rights 140 (1959). Dean Robert G. Storey, Vice Chairman of the Commission, testifying in favor of the Commission's recommendation of appointing federal registrars, observed: "The day when negroes openly were denied the right to vote by state law spread upon the statute books or embodied in the governing codes of political bodies is past. Nevertheless, in many places, the same end is achieved through discriminatory administration of state laws which seem fair upon their face". Hearings before the Senate Committee on Rules and Administration on S. 2684, S. 2719, S. 2783, S. 2814, S. 2722, S. 2785, S. 2535, 86 Cong., 2nd Sess. (1960), p. 24. "In the South registration assumes special importance. * * * Registration authorities determine whether applicants meet literacy and understanding tests and thus have functioned as the principal governmental agency for Negro disfranchisement." Key, Southern Politics (1949) p. 560.
[37] 1 Story, Commentaries § 586 (1891); Warren, The Making of the Constitution 403 (1937). See recent discussion by Senator Sam J. Erwin, Jr., Literacy Tests for Voters, 27 Duke L. and Cont.Prob. 480 (1962), containing pertinent quotations of statements by Rufus King, Alexander Hamilton, James Madison, and George Mason. Crosskey takes the opposite position. 1 Crosskey, Politics and the Constitution 531-33 (1953). So also does the author of a recent study based on close examination of Farrand, The Records of the Federal Convention. As to Article 1, Section 2, he concludes: "Inasmuch as the suffrage requirements in the states were constitutionally prescribed, the method provided by the Constitution represents a compromise between Congressional or state legislative control. It is clear, therefore, that this constitutional provision does not represent a concession to state sovereignty." As to Article 1, Section 4, after quoting various statements of Madison and others, he concludes: "The result of the debate, therefore, was that the ultimate and controlling power of Congress was confirmed and even expanded. * * * It is clear that this clause, although recognizing initial state power to control the electoral process, contrary, the insistence that ultimate power rests with Congress is an express assertion of national supremacy." Murphy, State Sovereinty and the Drafting of the Constitution, 31 Miss.L.Jour. 203, 234, 235, 236 (1960). See also Maggs and Wallace, Congress and Literacy Tests, 27 Duke L. and Cont.Prob. 510 (1962).
[38] In the Civil Rights Cases the court considered the words "necessary and proper" in "the sweeping clause" as synonymous with "appropriate". This is to say, that Congressional power under the Fourteenth and Fifteenth Amendments should be construed as broadly as other powers of Congress. See Maggs and Wallace, Congress and Literacy Tests, 27 Duke Law and Cont.Prob. 510, 527 (1962).
[39] The Civil Rights Commission proposed a system of federal registrars for federal elections.
[40] For a full discussion of the authority of the court to issue an injunction mandatorily requiring the registration of certain Negroes, rather than simply prohibiting racial discrimination, see Alabama v. United States, 5 Cir., 1962, 304 F.2d 583, aff'd, 1962, 371 U.S. 37, 83 S. Ct. 145, 9 L. Ed. 2d 112.
[41] For other types of cases where the court, after judgment, has added defendants and granted supplemental relief to make its original order effective, see Labette County Commissioners v. Moulton, 1884, 112 U.S. 217, 5 S. Ct. 108, 28 L. Ed. 698; Natural Gas Pipeline Co. of America v. Federal Power Commission, 7 Cir., 1942, 128 F.2d 481; Faubus v. United States, 8 Cir., 1957, 254 F.2d 797, cert. den'd 358 U.S. 829, 79 S. Ct. 49, 3 L. Ed. 2d 68.
[42] Testifying on the bill that later became the Civil Rights Act of 1960, Attorney General William P. Rogers explained the voting referee's certificate:
"The voting referee's certifications would be made a part of the court's decree in the original proceeding, and the decree would provide that the persons named are entitled to vote. The decree would be forwarded to the State election officials so that they would be put on notice of the action of the court." Hearings before the Committee on Rules and Administration, U.S. Senate, 86 Cong., 2nd Sess. p. 169.
Again, at page 339, Attorney General Rogers explained, "The certificate will identify the holder as a person entitled to vote at any election covered by the decree."
[43] The Act states that in a proceeding before a voting referee, "the applicant shall be heard ex parte at such times and places as the court shall direct". Ex parte proceedings are proper where the person affected is given an opportunity for an adversary hearing at some stage of the proceeding. Thus, Congress may provide for administrative ex parte fixing of rents if the landlord is given judicial review of the administrative action. Bowles v. Willingham, 1944, 321 U.S. 503, 519-521, 64 S. Ct. 641, 88 L. Ed. 892. Congress may provide for executive seizure of enemy property without hearing where a judicial remedy for a mistaken seizure is later furnished. Stoehr v. Wallace, 255 U.S. 239, 245-246, 41 S. Ct. 293, 65 L. Ed. 604 (1921). So, too, ex parte seizure of misbranded articles in interstate commerce is valid if followed by a judicial hearing. Ewing v. Mytinger and Casselberry, Inc., 1950, 339 U.S. 594, 70 S. Ct. 870, 94 L. Ed. 1088. The United States may collect its internal revenue by summary proceedings where adequate opportunity is afforded for a later judicial determination of the legal rights of the taxpayer. Phillips v. Commissioner, 1931, 283 U.S. 589, 595, 51 S. Ct. 608, 75 L. Ed. 1209. And the Supreme Court has held valid regulations of the Federal Home Loan Board, issued pursuant to the Home Owners' Loan Act of 1933, providing for no hearing until after a conservator had taken possession and control of a savings and loan association. Fahey v. Mallonee, 322 U.S. 245, 253, 67 S. Ct. 1552, 91 L. Ed. 2030. The Interstate Commerce Commission may suspend the operation of a new schedule ex parte pending a hearing. 49 U.S.C. § 15(7). The Federal Communications Commission may do likewise. 47 U.S.C. § 204. Under the Inland Waterways Corporation Act of June 3, 1924, as amended, the Interstate Commerce Commission was authorized to make certain orders ex parte, and, if there was a complaint, then to grant a hearing, the complainant in such hearing to have the burden of proof. In United States v. Illinois Central R. Co., 1934, 291 U.S. 457, 463-464, 54 S. Ct. 471, 473-474, 78 L. Ed. 909, it was held that these provisions were valid, the Court stating "that it was not essential, under the due process of law clause, that a hearing should be held in advance of the initiating order. It is enough that opportunity was given for a full and fair hearing before the order became operative," and, similarly, that the provision "which puts the burden of proof upon the carriers is not inconsistent with the due process clause of the Constitution." In short, the ex parte provision of the Act is not novel and it is not invalid.
[44] See 1 Holdsworth, A History of English Law 416, 441-444 (1956); 1 Pollock and Maitland, History of English Law 193 (1959); Bryant, The Office of Master in Chancery: Early English Development, A.B.A.Jour. 498 (1954); Kaufman, Masters in the Federal Courts: Rule 53, 58 Col.L.Rev. 452 (1958).
[45] 2 Sherman, Roman Law in the Modern World, Sections 849, 881 (1937).
[46] Bryant, The Office of Master in Chancery: Colonial Development, 40 A.B.A.Jour. 595 (1954).
[47] The elimination of proof of specific discrimination against every aggrieved Negro voter is the same kind of relief often accorded by courts of equity in cases brought to vindicate a public interest: the statute permits extension of the protection of a court decree to all persons of a group injured by illegal acts of the defendants. In suits involving the public interest, equity provides numerous examples of decrees which afford protection far beyond the redress of the particular wrongdoing which has been litigated. "Courts of equity may, and frequently do, go much farther both to give and withhold relief in furtherance of the public interest than they are accustomed to go when only private interests are involved." Virginia R. Co. v. System Federation, 1937, 300 U.S. 515, 552, 57 S. Ct. 592, 601, 81 L. Ed. 789; see also Yakus v. United States, 1944, 321 U.S. 414, 442, 64 S. Ct. 660, 88 L. Ed. 834; and Porter v. Warner Holding Co., 1946, 328 U.S. 395, 398, 66 S. Ct. 1086, 90 L. Ed. 1332.
The antitrust field in particular provides significant parallels. In that area, as here, suits are brought by the United States to vindicate a public interest, and the decrees in those cases are fashioned accordingly. In United States v. Bausch & Lomb Co., 1944, 321 U.S. 707, 64 S. Ct. 805, 88 L. Ed. 1024, the Court found that the defendant had established an illegal system of retail price maintenance. The Court invalidated all its price maintenance agreements, even those which were lawful. Similarly, under the instant statute, once a pattern of discrimination has been found, the defendants' authority over all threatened victims of the pattern must be scrutinized by the court in order, as was said in Bausch & Lomb, 321 U.S. 724, 64 S. Ct. 812, "that the ground may be cleansed effectually from the vice of the former illegality. Equity has power to eradicate the evils of a condemned scheme by prohibition of the use of admittedly valid parts of an invalid whole." In International Salt Co. v. United States, 1947, 332 U.S. 392, 401, 68 S. Ct. 12, 17, 92 L. Ed. 20, the Court said: "In an equity suit, the end to be served is not punishment of past transgression, nor is it merely to end specific illegal practices. A public interest served by such civil suits is that they effectively pry open to competition a market that has been closed by the defendants' illegal restraints. If this decree accomplishes less than that, the Government has won a lawsuit and lost a cause." In International Salt the Court ordered the defendant to make its unique machine available "to any applicant" and not merely to those who had been victims of the defendant's previous illegal agreements. Cf. also United States v. U. S. Gypsum Co., 1950, 340 U.S. 76, 71 S. Ct. 160, 95 L. Ed. 89. The voting referee provision operates in a precisely parallel fashion in extending the protection of the court's decree to all members of the group threatened by the defendants' conduct.
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364 U.S. 446 (1960)
SMALL BUSINESS ADMINISTRATION
v.
McCLELLAN, TRUSTEE.
No. 42.
Supreme Court of United States.
Argued November 9-10, 1960.
Decided December 5, 1960.
CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE TENTH CIRCUIT.
Morton Hollander argued the cause for petitioner. With him on the brief were Solicitor General Rankin and Assistant Attorney General Doub.
John Q. Royce argued the cause and filed a brief for respondent.
*447 MR. JUSTICE BLACK delivered the opinion of the Court.
The Small Business Act of 1953[1] created the Small Business Administration to "aid, counsel, assist, and protect insofar as is possible the interests of small-business concerns in order to preserve free competitive enterprise. . . and to maintain and strengthen the overall economy of the Nation."[2] The Administration was given extraordinarily broad powers to accomplish these important objectives, including that of lending money to small businesses whenever they could not get necessary loans on reasonable terms from private lenders.[3] When a part, but not all, of a necessary loan can be obtained from a bank or other private lender, the Administration is empowered to join that private lender in making the loan.[4] The basic question this case presents is whether, when the Administration has joined a private bank in a loan and the borrower becomes a bankrupt, the Administration's interest in the unpaid balance of the loan is entitled to the priority provided for "debts due to the United States" in R. S. § 3466 and § 64 of the Bankruptcy Act,[5] even though the Administration has agreed to share any money collected on the loan with the private bank.
That question arises out of a joint bank-Administration loan of $20,000 to a small business, $5,000 of the loan having come from the funds of the bank and $15,000 from the Government Treasury. Nine months later, an involuntary petition in bankruptcy was filed against the borrower *448 by other creditors. The Administration appeared in the proceedings upon that petition, filed a claim for $16,355.69, the amount then due on the loan, including interest, and asserted priority for its claim to the extent of $12,266.75, its 75 per cent interest in the debt. After a hearing, the referee in bankruptcy denied priority on the ground that the Administration is a "legal entity" and therefore not entitled to the "privileges and immunities of the United States." The District Court, on review, rejected the ground upon which the referee had relied but concluded that since the bankrupt's note evidencing the loan was not assigned by the bank to the Administration until after the commencement of bankruptcy proceedings, the debt is not entitled to priority.[6] The Court of Appeals affirmed on a third groundthat the Administration, having contracted to pay the participating private bank one-fourth of any distribution received, could not assert its priority and thus permit a private party to benefit from a priority which, under R. S. § 3466 and the Bankruptcy Act, belongs to the Government alone.[7] We granted certiorari to consider the Government's contention that the denial of priority to the Small Business Administration handicaps that agency in the effective performance of the duties imposed upon it by Congress.[8]
First. It is contended that the referee was correct in holding that the Small Business Administration is a separate legal entity and therefore not entitled to governmental priority in a bankruptcy proceeding. The contention rests upon a supposed analogy between this case and Sloan Shipyards Corp. v. United States Fleet Corporation[9] and Reconstruction Finance Corp. v. Menihan *449 Corp.,[10] in which cases this Court refused to treat the corporate governmental agencies involved as the United States. Neither of those cases, however, is controlling here. The agency involved in Sloan Shipyards, the Fleet Corporation, was organized under the laws of the District of Columbia pursuant to authority of an Act of Congress which "contemplated a corporation in which private persons might be stockholders."[11] This fact alone is enough to distinguish the Fleet Corporation from the Small Business Administration, which, as was contemplated from the beginning, gets all of its money from the Government Treasury. Our decision in the Reconstruction Finance Corp. case is equally inapplicable for that case involved only the question of whether the Reconstruction Finance Corporation, having been endowed by Congress with the capacity to sue and be sued, could be assessed costs in connection with a suit it brought. The holding that such costs could be assessed would not support a holding that the Small Business Administration is not the United States for the purpose of bankruptcy priority.[12]*450 Thus neither of these cases requires us to hold that the Small Business Administration, an agency created to lend the money of the United States, is not entitled to all the priority that must be accorded to the United States when the time comes to collect that money. Under like circumstances we refused to deny priority for debts due to the Farm Credit Administration in United States v. Remund.[13] As was said there of the Farm Credit Administration, the Small Business Administration is "an integral part of the governmental mechanism"[14] created to accomplish what Congress deemed to be of national importance. And it, like the Farm Credit Administration, is entitled to the priority of the United States in collecting loans made by it out of government funds.
Second. Respondent contends, as the District Court held, that the Small Business Administration's assertion of priority is precluded by our holding in United States v. Marxen[15] that priority attaches only to those debts owing to the United States on the date of the commencement of bankruptcy proceedings and not to debts that come into existence after that date. But this requirement of the Marxen case is fully met here by virtue of the fact that the debt due the Administration arises out of the loan made jointly by the bank and the United States nine months prior to the petition in bankruptcy. Since beneficial ownership of the three-fourths of the debt for which priority is asserted belonged to the Administration from the date of the loan, it is immaterial that formal assignment of the note evidencing the debt was not made by the bank until after the filing of the petition.
*451 Third. The Court of Appeals held, and the contention is reiterated here, that the Administration forfeited any right it might otherwise have had to priority by agreeing to turn over to the bank one-fourth of any distribution obtained because of its priority. By this arrangement, it is urged, the Administration is attempting "to give priority to a claim which the United States is collecting for the benefit of a private party," contrary to the principles announced by this Court in Nathanson v. Labor Board.[16] But the Nathanson case involved a significantly different situation. There the National Labor Relations Board sought to obtain governmental priority for back-pay claims belonging to employees based upon their loss of pay as a result of allegedly discriminatory discharges by the bankrupt. This Court's denial of priority in that case, involving claims in which the United States had no financial interest, would not justify a denial here where the money was loaned by, and the debt sought to be collected is due to, the United States. The fact that the Administration has contracted to pay the participating private bank one-fourth of any money it later collects on its loan does not mean the Government must lose its priority. Respondent's argument to the contrary seems to rest upon the assumption that the Government is deprived of its priority by making a contract to pay a part of its funds to another creditor of the bankrupt who has no priority. This argument finds no support whatever in § 3466, in § 64 of the Bankruptcy Act, or in the Small Business Act. Section 3466 declares in unequivocal language that the United States is entitled to priority "[w]henever any person indebted to the United States is insolvent," and § 64 recognizes that priority in bankruptcy proceedings. The purpose of these sections is simply to protect the *452 interest of the Government in collecting money due to it.[17] Once that money is collected and placed in the Government Treasury, the end sought to be achieved by § 3466 and § 64 of the Bankruptcy Act is completely satisfied. At that point, there is no difference between the money so received and money received from any other source and, like other money, it may be disbursed in any way the Government sees fit, including the satisfaction of obligations already incurred, so long as the purpose is lawful. The Small Business Administration is authorized to enter into contracts calculated to induce private banks to make loans to small businesses.[18] The contract involved in this case, by providing additional security to the private bank at the Government's expense, is well adapted to that end. Indeed, in many cases such a contract may be the only way the Administration could induce private bank participation in a necessary loan. In those cases, acceptance of respondent's argument would make it more difficult for the Administration to perform its statutory duties. Clearly Congress did not intend, by the very act of imposing duties upon the Administration, to take away a privilege necessary to the effective performance of those duties.
Respondent's argument from the policy of equality of distribution for similar creditors expressed in the Bankruptcy Act[19] is no more convincing. It is true that the allowance of the priority asserted here will place the bank, a private unsecured creditor, in a better position than other private unsecured creditors. But this position is a result, not of any inequality of distribution on the part *453 of the bankruptcy court, but of the bank's valid contract with the Small Business Administration.
Fourth. Respondent's last contention, urged throughout these proceedings, is that governmental priority is inconsistent with the basic purposes and provisions of the Small Business Act. The contention rests upon the fact that having a creditor with governmental priority tends to make it more difficult for a small businessman to borrow money from other persons, and, in this respect, handicaps rather than aids borrowers, thus conflicting with the Act's basic policy. In United States v. Emory, we rejected this same argument, with reference to priority for Federal Housing Administration debts, stating that "[o]nly the plainest inconsistency would warrant our finding an implied exception to . . . so clear a command as that of § 3466."[20] The same conclusion must be reached here.
It was error for the courts below to refuse the Government's claim for priority.
Reversed and remanded.
MR. JUSTICE DOUGLAS dissents.
NOTES
[1] 67 Stat. 232, as amended, 15 U.S. C. §§ 631-651.
[2] 67 Stat. 232.
[3] 67 Stat. 235-236.
[4] Ibid.
[5] R. S. § 3466, 31 U.S. C. § 191, establishes a general priority for debts due to the United States. Section 64 of the Bankruptcy Act, as amended, 11 U.S. C. § 104, provides that in bankruptcy cases the priority so established should come fifth in the order of preferred creditors.
[6] 168 F. Supp. 483.
[7] 272 F.2d 143.
[8] 362 U.S. 947.
[9] 258 U.S. 549.
[10] 312 U.S. 81.
[11] 258 U.S., at 565.
[12] The proper scope of that holding was recognized by Congress itself when, several years later, the Reconstruction Finance Corporation Act was amended expressly to deny the Corporation a right of priority except with respect to debts arising out of its wartime activities. Act of May 25, 1948, 62 Stat. 261. That the assumption underlying this amendment was that the Corporation would otherwise have had priority for all debts due to it is clear from the discussion of the purpose of the amendment in the Senate. Senator Buck stated that purpose as follows: "The committee believes that RFC should not have such priority with respect to debts arising from its normal lending activities. A provision has been included in this section which will eliminate that priority except with respect to debts arising under the specific war powers which are designated therein." (Emphasis supplied.) Cong. Rec., 80th Cong., 2d Sess., Vol. 94, Part 3, p. 4108. See also In re Temple, 174 F.2d 145.
[13] 330 U.S. 539.
[14] Id., at 542.
[15] 307 U.S. 200.
[16] 344 U.S. 25, at 28.
[17] For a discussion of the history and purposes of R. S. § 3466, see United States v. State Bank, 6 Pet. 29, 35-37. Compare Nathanson v. Labor Board, supra, at 27-28.
[18] 67 Stat. 236.
[19] 11 U.S. C. § et seq.
[20] 314 U.S. 423, 433. See also United States v. Remund, supra, at 544-545; Illinois ex rel. Gordon v. United States, 328 U.S. 8, 11-12.
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284 U.S. 296 (1932)
CHICAGO & EASTERN ILLINOIS RAILROAD CO.
v.
INDUSTRIAL COMMISSION OF ILLINOIS ET AL.
No. 79.
Supreme Court of United States.
Argued December 1, 1931.
Decided January 4, 1932.
CERTIORARI TO THE CIRCUIT COURT OF COOK COUNTY, ILLINOIS.
Mr. Edward W. Rawlins, with whom Mr. Thomas P. Littlepage was on the brief, for petitioner.
*297 Mr. Samuel E. Hirsch, with whom Messrs. Morris K. Levinson and K.L. Johnson were on the brief, for respondents. They cited.
MR. JUSTICE SUTHERLAND delivered the opinion of the Court.
Thomas, an employee of the railroad company, in attempting to oil an electric motor while it was running, was injured by having his hand caught in the gears. The railroad was engaged in both intrastate and interstate commerce. The motor furnished power for hoisting coal into a chute, to be taken therefrom by, and for the use of, locomotive engines principally employed in the movement of interstate freight. An action was brought before the Industrial Commission of Illinois to recover compensation for the injury under the provisions of the Workmen's Compensation Act of Illinois.
The railroad company contended, and an arbitrator, appointed by the commission, found, that the work in which Thomas was engaged was in interstate commerce, that the case, therefore, was not within the state act and the commission was without jurisdiction. The commission, on review, held otherwise and awarded compensation aggregating $2,184.64. The court below affirmed the award upon a writ of certiorari authorized by state statute. The state supreme court, in the exercise of its discretion, declined to review the judgment; and the case is *298 properly here on certiorari to the state circuit court. American Ry. Express Co. v. Levee, 263 U.S. 19, 20; Western Union Tel. Co. v. Crovo, 220 U.S. 364, 366.
The contention that Thomas was employed in interstate commerce at the time of the injury, rests upon the decisions of this court in Erie R. Co. v. Collins, 253 U.S. 77, and Erie R. Co. v. Szary, 253 U.S. 86. In the Collins case the employee, at the time of his injury, was operating a gasoline engine to pump water into a tank for the use of locomotives engaged in both interstate and intrastate commerce. In the Szary case the duty of the employee was to dry sand by the application of heat for the use of locomotives operating in both kinds of commerce; and he was so employed when injured. In each case this court held that the employee was engaged in interstate commerce at the time of the injury, within the terms of the Federal Employers' Liability Act.
The only difference between those cases and this one is that here the work of the employee related to coal, while in the Collins case it related to water, and in the Szary case, to sand. Obviously, the difference is not one of substance and if the Collins and Szary cases are followed a reversal of the judgment below would result.
But in Chicago, B. & Q.R. Co. v. Harrington, 241 U.S. 177, the injured employee was engaged in taking coal from storage tracks to bins or chutes for the use of locomotives used in the movement of both interstate and intrastate traffic; and this court held that the service was not in interstate commerce. After quoting the test for determining whether an employee is engaged in interstate commerce, laid down in Shanks v. Delaware, L. & W.R. Co., 239 U.S. 556, 558, namely, "was the employe at the time of the injury engaged in interstate transportation or in work so closely related to it as to be practically a part of it," this court said (p. 180), "Manifestly, there *299 was no such close or direct relation to interstate transportation in the taking of the coal to the coal chutes. This was nothing more than the putting of the coal supply in a convenient place from which it could be taken as required for use."
We are unable to reconcile this decision with the rule deducible from the Collins and Szary cases, and it becomes our duty to determine which is authoritative. From a reading of the opinion in the Collins case, it is apparent that the test of the Shanks case was not followed (see p. 85), the words "interstate commerce" being inadvertently substituted for the words "interstate transportation" The Szary case is subject to the same criticism, since it simply followed the Collins case. Both cases are out of harmony with the general current of the decisions of this court since the Shanks case Chicago & North Western Ry. Co. v. Bolle, ante, p. 74, and they are now definitely overruled. The Harrington case furnishes the correct rule, and, applying it, the judgment below must be
Affirmed.
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285 U.S. 222 (1932)
LAMB
v.
SCHMITT, RECEIVER.
No. 433.
Supreme Court of United States.
Argued February 17, 1932.
Decided March 14, 1932.
CERTIORARI TO THE CIRCUIT COURT OF APPEALS FOR THE FIFTH CIRCUIT.
*223 Mr. Edward B. Burling, with whom Messrs. Emile Godchaux, W. Calvin Wells, Preston B. Cavanaugh, and Arvid B. Tanner were on the brief, for petitioner.
Messrs. Gerald FitzGerald and Sam C. Cook, with whom Mr. Garner W. Green was on the brief, for respondent.
*224 MR. JUSTICE STONE delivered the opinion of the Court.
This case is here on certiorari to review a decree of the Court of Appeals for the Fifth Circuit, 48 F. (2d) 533, reversing an order of the District Court for Northern Mississippi, which quashed service of process upon the petitioner Lamb. The suit is a companion to Lamb v. Cramer, decided this day, ante, p. 217, and, like it, is ancillary to the principal suit referred to in that case, which was brought to set aside conveyances of land and dispositions of money and personal property as in fraud of judgment creditors.
The present suit was brought by the respondent here, the receiver appointed by the decree in the first one. It seeks the recovery of a part of the funds involved in the first suit, paid, pendente lite, as fees to Lamb, who acted as attorney of one of the defendants in that suit. The petitioner, a resident of Illinois, was served with process while he was in the Northern District of Mississippi in attendance on the court as an attorney in the principal suit. The sole question presented is whether the court below rightly held that the petitioner, in the circumstances stated, was not immune from service of process.
*225 The general rule that witnesses, suitors, and their attorneys, while in attendance in connection with the conduct of one suit are immune from service of process in another, is founded, not upon the convenience of the individuals, but of the court itself. Page Co. v. MacDonald, 261 U.S. 446; Stewart v. Ramsay, 242 U.S. 128, 130; Hale v. Wharton, 73 Fed. 739; Diamond v. Earle, 217 Mass. 499, 501; 105 N.E. 363; Parker v. Marco, 136 N.Y. 585; 32 N.E. 989. As commonly stated and applied, it proceeds upon the ground that the due administration of justice requires that a court shall not permit interference with the progress of a cause pending before it, by the service of process in other suits, which would prevent, or the fear of which might tend to discourage, the voluntary attendance of those whose presence is necessary or convenient to the judicial administration in the pending litigation. See Bridges v. Sheldon, 7 Fed. 17, 43 et seq. In Stewart v. Ramsay, the court said (p. 130), quoting from Parker v. Hotchkiss, Fed. Cas. 10,739:
"The privilege which is asserted here is the privilege of the court, rather than of the defendant. It is founded in the necessities of the judicial administration, which would be often embarrassed, and sometimes interrupted, if the suitor might be vexed with process while attending upon the court for the protection of his rights, or the witness while attending to testify."
It follows that the privilege should not be enlarged beyond the reason upon which it is founded, and that it should be extended or withheld only as judicial necessities require. See Brooks v. The State, 3 Boyce (Del.) 1; 79 A. 790; Netograph Co. v. Scrugham, 197 N.Y. 377; 90 N.E. 962; Nichols v. Horton, 14 Fed. 327; Iron Dyke Copper Min. Co. v. Iron Dyke R. Co., 132 Fed. 208. Limitations of it on this basis have been not infrequently made because the attendance upon the trial of a *226 cause, however vital to the personal interests of those concerned, was not for the purpose of facilitating the progress of the cause (see Brooks v. State, supra; Vaughn v. Boyd, 142 Ga. 230; 82 S.E. 576; Sampson v. Graves, 208 A.D. 522, 526; 203 N.Y.S. 729), or because the service was made on one whose attendance was not voluntary, and hence had no tendency to interfere with judicial administration. Netograph Co. v. Scrugham, supra.
The question presented here is of a somewhat different character: Whether, despite any effect of the immunity in encouraging voluntary attendance at the trial, it should be withheld from one who, while in attendance, is served with process commanding his continued presence and aid to facilitate the pending litigation, and to carry it to its final conclusion?
It has never been doubted that witnesses, parties, and their counsel are amenable to the process or order of the court for contempt of court, committed while in attendance upon the trial, or that any of them, while there, are subject to the process and orders of the court to compel the production of documents or their testimony in the cause. Nor can it be doubted that the petitioner here, notwithstanding his presence as an attorney and officer of the court in the conduct of the principal cause, was not immune from the service of process in a summary proceeding to compel restoration of the subject matter of the suit wrongfully removed from the custody of the court. See Lamb v. Cramer, supra. The deterrent effect, if any, upon attendance at the trial, of the possibility that these procedures may be resorted to, is outweighed by the fact that the immunity, if allowed, might paralyze the arm of the court and defeat the ends of justice in the very cause for the protection of which the immunity is invoked.
*227 These considerations have in special circumstances led to a denial of the immunity, even though the service was made in an independent suit in no sense ancillary to the pending litigation. See Livengood v. Ball, 63 Okla. 93; 162 P. 768; Rizo v. Burruel, 23 Ariz. 137; 202 P. 234. But it is not necessary to go so far in the present case. Here the two suits, pending in the same court, are not independent of each other or unrelated. The second was brought in aid of the first, on which the petitioner, when served with process, was in attendance, charged with the duty of counsel in the case to assist the court. It was brought to secure rights asserted in the first suit which, but for the acts charged against the petitioner in the second, would have been secured in the first. Cf. Page Co. v. MacDonald, supra. The later suit was so much a part and continuation of the earlier one that the jurisdiction of the court over the first extended to the second without regard to citizenship of the parties or the satisfaction of any other jurisdictional requirements. Pacific Railroad of Missouri v. Missouri Pacific Ry. Co., 111 U.S. 505, 522.
From the viewpoint of the due administration of justice in the first suit, the second was as much a part of it as if it had been an interlocutory motion to compel the production in court of documents or of property involved in the suit. The case is, therefore, not one where the cause pending before the court is subjected to possible hindrance or delay by service of process in some unrelated suit. The aid of the petitioner already in attendance upon the litigation, was demanded in order that the relief prayed might be secured and the cause brought to a final and successful termination. Neither that demand nor compliance with it could prevent his attendance upon the principal cause, as service of process in another court might. Even if we make the assumption that the non-recognition of such immunity might have discouraged *228 petitioner's participation as counsel, still it would defeat, not aid, the administration of justice in the principal cause to encourage petitioner's voluntary presence by the grant of an immunity which would relieve him from any compulsion either to continue his presence or to answer for his acts affecting the progress of the cause. Judicial necessities require that such immunity should be withheld, and it was rightly denied by the court below.
It is said that the service of process in this case cannot be deemed an exception to the general rule without assuming the truth of the allegations in the bill of complaint, and that the truth or falsity of the pleadings cannot be assumed. See Page v. MacDonald, supra, pp. 448-449. But the test of the privilege is not the probable success or failure of the suit or proceeding in which the process was served. If it were, the immunity could never be denied. The test is whether the immunity itself, if allowed, would so obstruct judicial administration in the very cause for the protection of which it is invoked as to justify withholding it. That, as we have said, depends here upon the nature of the proceeding in which the service is made and its relation to the principal suit, both of which are disclosed by the pleadings.
Affirmed.
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250 U.S. 101 (1919)
PHILADELPHIA, BALTIMORE & WASHINGTON RAILROAD COMPANY
v.
SMITH.
No. 472.
Supreme Court of United States.
Argued April 15, 1919.
Decided May 19, 1919.
CERTIORARI TO THE COURT OF APPEALS OF THE STATE OF MARYLAND.
Mr. Frederic D. McKenney, with whom Mr. John Spalding Flannery was on the briefs, for petitioner.
Mr. T. Alan Goldsborough for respondent.
MR. JUSTICE PITNEY delivered the opinion of the court.
Respondent brought his action in a state court of Maryland under the provisions of the Federal Employers' Liability Act of April 22, 1908, as amended April 5, 1910 (c. 149, 35 Stat. 65; c. 143, 36 Stat. 291), to recover damages for personal injuries sustained by him upon one of petitioner's lines of railroad in the State of Maryland over which petitioner was engaged in transporting interstate as well as intrastate commerce.
*102 Plaintiff was employed by defendant in connection with a gang of bridge carpenters, who were employed by defendant in the repair of the bridges and bridge abutments upon said line of railway. The gang, including plaintiff, worked over the entire line, and were moved from point to point as the repair work required in what was called a "camp car," furnished and moved by defendant, in which they ate, slept, and lived. Plaintiff's principal duties were to take care of this car, keep it clean, attend to the beds, and prepare and cook the meals for himself and the other members of the gang. On December 23, 1915, the bridge carpenters were engaged in repairing a bridge abutment on defendant's line near Easton, Maryland, and the camp car was on defendant's side-track at Easton; and while plaintiff was in the car, engaged in cooking a meal for the bridge carpenters and himself, the engineer of one of defendant's trains, without warning, ran the engine upon the side-track and against a car to which the camp car was coupled with such force that plaintiff received injuries, to recover for which his action is brought.
A judgment in plaintiff's favor was affirmed by the Maryland Court of Appeals (132 Maryland, 345), and the case comes here on a writ of certiorari.
The only question we have to consider is whether plaintiff at the time he was injured was engaged in interstate commerce within the meaning of the statute. Petitioner, citing Illinois Central R.R. Co. v. Behrens, 233 U.S. 473, 478, and Erie R.R. Co. v. Welsh, 242 U.S. 303, 306, as conclusive to the effect that the true test is the nature of the work being done by the employee at the time of the injury, and that what he had been doing before and expected to do afterwards is of no consequence, argues that since plaintiff at the time of the injury and for some weeks prior thereto was and had been working as mess cook and camp cleaner or attendant for a gang of bridge carpenters who were quartered "for their own convenience" *103 in a camp car belonging to petitioner, which was not being moved in interstate commerce, but was located and standing on a switch track in the neighborhood of the bridge upon which the carpenters then were and for some weeks prior thereto had been and for some time afterwards were working; and since plaintiff at the moment of the injury was engaged in cooking food which was the property of himself and the carpenters, he was not at the time engaged in interstate commerce.
As thus stated, the relation of plaintiff's work to the interstate commerce of his employer would seem to be rather remote. But upon a closer examination of the facts the contrary will appear. Taking it to be settled by the decision of this court in Pedersen v. Delaware, Lackawanna & Western R.R. Co., 229 U.S. 146, 152, that the repair of bridges in use as instrumentalities of interstate commerce is so closely related to such commerce as to be in practice and in legal contemplation a part of it, it of course is evident that the work of the bridge carpenters in the present case was so closely related to defendant's interstate commerce as to be in effect a part of it. The next question is, what was plaintiff's relation to the work of the bridge carpenters? It may be freely conceded that if he had been acting as cook and camp cleaner or attendant merely for the personal convenience of the bridge carpenters, and without regard to the conduct of their work, he could not properly have been deemed to be in any sense a participant in their work. But the fact was otherwise. He was employed in a camp car which belonged to the railroad company, and was moved about from place to place along its line according to the exigencies of the work of the bridge carpenters, no doubt with the object and certainly with the necessary effect of forwarding their work, by permitting them to conduct it conveniently at points remote from their homes and remote from towns where proper board and lodging were to be had. *104 The circumstance that the risks of personal injury to which plaintiff was subjected were similar to those that attended the work of train employees generally and of the bridge workers themselves when off duty, while not without significance, is of little moment. The significant thing, in our opinion, is that he was employed by defendant to assist, and actually was assisting, the work of the bridge carpenters by keeping their bed and board close to their place of work, thus rendering it easier for defendant to maintain a proper organization of the bridge gang and forwarding their work by reducing the time lost in going to and from their meals and their lodging place. If, instead, he had brought their meals to them daily at the bridge upon which they happened to be working, it hardly would be questioned that his work in so doing was a part of theirs. What he was in fact doing was the same in kind, and did not differ materially in degree. Hence he was employed, as they were, in interstate commerce, within the meaning of the Employers' Liability Act.
Judgment affirmed.
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01-03-2023
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04-28-2010
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https://www.courtlistener.com/api/rest/v3/opinions/1459743/
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863 F.Supp. 1237 (1994)
PIONEER CHLOR ALKALI COMPANY, INC., Plaintiff,
v.
NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PENNSYLVANIA, Defendant.
No. CV-S-93-276-RLH.
United States District Court, D. Nevada.
September 1, 1994.
*1238 J. Randall Jones and William Kemp of Harrison, Kemp & Jones, and Kevin R. Stolworthy of Jones, Jones, Close & Brown, Las Vegas, NV, for plaintiff.
Philip Silverberg of Mound, Cotton & Wollan, New York City, and Thomas D. Beatty, Las Vegas, NV, for defendant.
ORDER
(Motion for Partial Summary Judgment # 164, # 165, # 166)
HUNT, United States Magistrate Judge.
This matter comes before the Court on the following documents filed by Defendant National Union Fire Insurance Company of Pittsburgh, Pennsylvania ("National Union") which are collectively referred to as "Motion for Partial Summary Judgment": Defendant's Notice of Motion for Partial Summary Judgment on the Issue of Alleged Bad Faith (# 164, filed June 17, 1994); Memorandum of Points and Authorities in Support of Defendant's Motion for Partial Summary Judgment on Plaintiff's Bad Faith Claims (# 165, filed June 17, 1994); and Defendant's Statement Pursuant to Local Rule 140-7 in Support of its Motion for Partial Summary Judgment on Plaintiff's Bad Faith Claims (# 166, filed June 17, 1994).
Plaintiff Pioneer Chlor Alkali Co., Inc. ("Pioneer") responded with Plaintiff's Opposition to Defendant's Motion for Partial Summary Judgment on Plaintiff's Bad Faith Claims (# 189, filed July 8, 1994) and Plaintiff's Counterstatement of Facts Relating to Opposition to Defendant's Motion for Partial Summary Judgment on the Issue of Bad Faith (# 191, filed July 12, 1994).
*1239 On July 19, 1994, National Union filed its Reply Memorandum of Points and Authorities in Further Support of Defendant's Motion for Partial Summary Judgment on Plaintiff's Bad Faith Claims (# 199).
INTRODUCTION
This action arises out of the May 6, 1991 chlorine gas leak which occurred at Pioneer's plant in Henderson, Nevada. On May 6, 1991, Pioneer's Henderson plant was insured by an "all risk" insurance policy (the "Policy") issued by National Union. Pioneer's Second Amended Complaint asserts three causes of action: (1) Pioneer's First Claim for Relief is for declaratory relief, and was previously addressed in earlier summary judgment proceedings, (see Order # 174); Pioneer's Second Claim for Relief alleges unfair claim practices in violation of Chapter 686A of the Nevada Revised Statutes; and (2) After obtaining leave of Court, Pioneer amended its Complaint to add a Third Claim for Relief for breach of the implied covenant of good faith and fair dealing, a tort action often referred to as "bad faith."
Pioneer's Second and Third Claims for Relief and Pioneer's request for punitive damages are the subject of the present Motion for Partial Summary Judgment by National Union.
DISCUSSION
A. Summary Judgment
Summary judgment is proper "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c).
The party moving for summary judgment has the initial burden of showing the absence of a genuine issue of material fact. See Adickes v. S.H. Kress & Co., 398 U.S. 144, 90 S.Ct. 1598, 26 L.Ed.2d 142 (1970); Zoslaw v. MCA Distrib. Corp., 693 F.2d 870, 883 (9th Cir.1982). Once the movant's burden is met by presenting evidence which, if uncontroverted, would entitle the movant to a directed verdict at trial, the burden then shifts to the respondent to set forth specific facts demonstrating that there is a genuine issue for trial. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250, 106 S.Ct. 2505, 2511, 91 L.Ed.2d 202 (1986). If the factual context makes the respondent's claim implausible, that party must come forward with more persuasive evidence than would otherwise be necessary to show that there is a genuine issue for trial. Celotex Corp. v. Catrett, 477 U.S. 317, 323-24, 106 S.Ct. 2548, 2552-53, 91 L.Ed.2d 265 (1986); Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586-87, 106 S.Ct. 1348, 1356, 89 L.Ed.2d 538 (1986); California Arch. Bldg. Prod. v. Franciscan Ceramics, 818 F.2d 1466, 1468 (9th Cir.1987), cert. denied, 484 U.S. 1006, 108 S.Ct. 698, 699, 98 L.Ed.2d 650 (1988).
If the party seeking summary judgment meets this burden, then summary judgment will be granted unless there is significant probative evidence tending to support the opponent's legal theory. First National Bank of Arizona v. Cities Service Co., 391 U.S. 253, 290, 88 S.Ct. 1575, 1593, 20 L.Ed.2d 569 (1968); Commodity Futures Trading Comm'n v. Savage, 611 F.2d 270 (9th Cir. 1979). Parties seeking to defeat summary judgment cannot stand on their pleadings once the movant has submitted affidavits or other similar materials. If the opposing party does submit affidavits, they must affirmatively demonstrate personal knowledge. British Airways Bd. v. Boeing Co., 585 F.2d 946, 952 (9th Cir.1978), cert. denied, 440 U.S. 981, 99 S.Ct. 1790, 60 L.Ed.2d 241 (1979). Likewise, "legal memoranda and oral argument are not evidence and do not create issues of fact capable of defeating an otherwise valid motion for summary judgment." Id.
A material issue of fact is one that affects the outcome of the litigation and requires a trial to resolve the differing versions of events. See Admiralty Fund v. Hugh Johnson & Co., 677 F.2d 1301, 1305-06 (9th Cir.1982); Admiralty Fund v. Jones, 677 F.2d 1289, 1293 (9th Cir.1982). "[S]ummary judgment must be entered against a party `who fails to make a showing sufficient to establish the existence of an element essential *1240 to that party's case, and on which that party will bear the burden of proof at trial.'" Berg v. First State Ins. Co., 915 F.2d 460, 466 (9th Cir.1990) (quoting Celotex Corp., 477 U.S. at 322-23, 106 S.Ct. at 2552-53).
All facts and inferences drawn must be viewed in the light most favorable to the responding party when determining whether a genuine issue of material fact exists for summary judgment purposes. Poller v. CBS, Inc., 368 U.S. 464, 82 S.Ct. 486, 7 L.Ed.2d 458 (1962). After drawing inferences favorable to the respondent, summary judgment will be granted only if all reasonable inferences defeat the respondent's claims. Admiralty Fund v. Tabor, 677 F.2d 1297, 1298 (9th Cir.1982).
The Supreme Court's 1986 trilogy of cases cited above[1] establish that "[s]ummary judgment procedure is properly regarded not as a disfavored procedural shortcut, but rather as an integral part of the Federal Rules as a whole, which are designed `to secure the just, speedy and inexpensive determination of every action.'" Celotex Corp., 477 U.S. at 327, 106 S.Ct. at 2555 (quoting Fed.R.Civ.P. 1).
B. Choice of Law
Generally, a federal court sitting in diversity jurisdiction applies the choice of law rules of the forum state. Klaxon v. Stentor Elec. Mfg. Co., 313 U.S. 487, 61 S.Ct. 1020, 85 L.Ed. 1477 (1941). However, when a case has been transferred to a different venue, the transferee court applies the choice of law rules that the transferor court would have applied. Ferens v. John Deere Co., 494 U.S. 516, 110 S.Ct. 1274, 108 L.Ed.2d 443 (1990). The present case originated in Texas state court and was removed by Pioneer to a federal court in Texas as the case satisfied diversity jurisdictional requirements. On a motion by National Union, the case was then transferred from the Southern District of Texas to this Court pursuant to 28 U.S.C. § 1404(a). This Court then must apply the choice of law rules which the Texas federal court would have applied, i.e., Texas choice of law rules.
Texas follows the "most significant relationship" test of the Restatement (Second) of Conflicts. Duncan v. Cessna Aircraft Co., 665 S.W.2d 414 (Tex.1984).
National Union argues that Texas law should control. National Union asserts that the case was initiated in Texas by Pioneer; Pioneer's principal place of business is in Texas; the Policy insures premises in several states including Texas; and the Policy was executed in Texas.
The place of contracting insurance is generally not a significant contact. See Industrial Indem. Ins. Co. v. United States, 757 F.2d 982, 986 (9th Cir.1985) (citing Restatement (Second) of Conflicts § 188 cmt. e). In the insurance area, the state with the most significant relationship is usually the state in which the insured risk was located. See Restatement (Second) of Conflicts § 193[2]; see also Industrial Indem., 757 F.2d at 986 ("[w]hen insurance is involved, the principal location of the insured risk normally is the state whose law applies") (applying most significant relationship test). In this case, the insured premises were of course Pioneer's Henderson, Nevada chemical plant.
National Union points out that Pioneer's Policy covered several facilities in several states. Section 193 of the Restatement envisions such multiple risk policies. In multiple risk policies, courts treat the policy as though it were several separate policies so that a dispute involving a particular facility will be governed by the law of the state in which that facility is located. See Restatement (Second) of Conflicts § 193, cmt. f (1971) (if a policy insures premises in states X, Y, and Z, a dispute concerning damage to *1241 the facility in state X will normally be governed by the law of state X).
This principal is not so incredible. For if National Union chooses to transact business in several states by insuring properties in several states, National Union should expect to be subject to the laws of each of those states. Each state has a significant interest in regulating insurance practices which concern its residents or property within its borders. Thus, Nevada is the principal place of the insured risk relevant to this suit, Pioneer's Henderson facility. Pioneer's claims are centered around the insured Henderson plant. With respect to that facility, National Union is subject to its contractual obligations and any obligations imposed by Nevada common and statutory law.
Having weighed the interests of each state and considered the principals set forth in Section 6 of the Restatement (Second) of Conflicts, the Court finds that Nevada has the most significant relationship to this dispute. Accordingly, Nevada law will control.
1. National Union is Subject to Chapter 686A of the Nevada Revised Statutes.
Pioneer's Second Claim for Relief is based on Chapter 686A of the Nevada Revised Statutes. In addition to arguing that Texas bad faith law controls this action, National Union also argues that it is not subject to the standards set forth in Chapter 686A of the Nevada Revised Statutes. Under that chapter, an insurer "shall not engage in this state in any practice which is ... an unfair method of competition or an unfair or deceptive act or practice in the business of insurance." NRS 686A.020. The statute then lists identified acts which are declared to be unfair practices. See 686A.310. A private cause of action is available to an insured for violations of NRS 686A.310 by the insurer. See NRS 686A.310(2).
National Union asserts that Chapter 686A of the Nevada Revised Statutes does not apply to its handling of Pioneer's claim because National Union did not engage in a practice "in this state [Nevada]," NRS 686A.020. National Union cites no authority supporting its interpretation of NRS 686A.020.
National Union's argument is completely without merit. Chapter 686A is part of a comprehensive plan to regulate insurance practice in Nevada. As touched upon earlier in this Order, by insuring premises in Nevada, National Union has engaged in the insurance business in Nevada. Consequently, National Union is subject to Nevada insurance law. That a National Union agent was sitting in another state when she decided to deny Pioneer's claim provides no exemption to Nevada insurance law.
C. Common Law Bad Faith and Statutory Unfair Claim Practices Are Two Separate and Distinct Causes of Action With Different Legal Standards.
Having established that National Union is subject to the duties imposed by Nevada insurance law, the Court turns to the causes of action which are the subject of the present Motion for Partial Summary Judgment: statutory unfair claims practices (Pioneer's Second Claim for Relief) and common law bad faith (Pioneer's Third Claim for Relief).
Pioneer alleges the following instances of wrongful conduct: (1) National Union failed to make a prompt coverage determination; (2) National Union failed to adequately investigate all possible grounds of coverage, including Pioneer's "rag theory"[3]; (3) National Union failed to adequately monitor the claim as it was, or was not, being processed; (4) National Union adopted an arbitrary and capricious interpretation of the corrosion exclusion clause; (5) National Union failed to provide coverage to Pioneer; and (6) National Union failed to promptly provide Pioneer, within a reasonable time after proofs of loss were submitted by Pioneer, with a reasonable explanation for the denial of Pioneer's claim.
Pioneer asserts that these allegations state causes of action under common law bad faith and statutory unfair claim practices.
*1242 Pioneer's unfair claim practices claim is based primarily on NRS 686A.310. Pioneer does not explicitly set out which subsections of NRS 686A.310 National Union allegedly violated. However, based on the instances of wrongful conduct alleged by Pioneer, and giving a liberal reading to NRS 686A.310, it appears that Pioneer has stated claims under the following provisions of NRS 686A.310(1):
(c) Failing to adopt and implement reasonable standards for the prompt investigation and processing of claims arising under insurance policies.
(d) Failing to affirm or deny coverage of claims within a reasonable time after proof of loss requirements have been completed and submitted by the insured.
(e) Failing to effectuate prompt, fair and equitable settlements of claims in which liability of the insurer has become reasonably clear.
(n) Failing to provide promptly to an insured a reasonable explanation of the basis in the insurance policy, with respect to the facts of the insured's claim and the applicable law, for the denial of his claim or for an offer to settle or compromise his claim.
The other subsections of NRS 686A.310 do not appear to be possible bases for recovery under the facts of this case, and Pioneer has not affirmatively alleged such subsections (other than alleging in its Second Amended Complaint that National Union has violated NRS 686A.010-686A.315, inclusive).
Before addressing the merits of Pioneer's two causes of action, a general discussion of the distinctions between and the evolutions of common law bad faith and NRS 686A.310 is required. For Pioneer and National Union are mistaken in their assumptions that NRS 686A.310 and bad faith are identical causes of action. See generally Hart v. Prudential Property & Casualty Ins. Co., 848 F.Supp. 900 (D.Nev.1994). As will be demonstrated below, bad faith and NRS 686A.310 involve different legal analyses, and a violation of a provision of NRS 686A.310 is not per se an act of bad faith. Id.
1. Nevada Law on Bad Faith
The Supreme Court of Nevada adopted the cause of action called "bad faith" in United States Fidelity & Guar. Co. v. Peterson, 91 Nev. 617, 540 P.2d 1070 (1975). The duty to deal fairly and in good faith then is implied by common law. Hart, 848 F.Supp. 900. Breach of the covenant of good faith and fair dealing is a tort. Peterson, 540 P.2d at 1071. An insurer breaches the duty of good faith when it refuses "without proper cause to compensate its insured for a loss covered by the policy." Peterson, 540 P.2d at 1071; accord Pemberton v. Farmers Ins. Exch., 109 Nev. 789, 858 P.2d 380, 382 (1993). An insurer is without proper cause to deny a claim when it has an "actual or implied awareness" that no reasonable basis exist to deny the claim. See American Excess Ins. Co. v. MGM Grand Hotels, Inc., 102 Nev. 601, 729 P.2d 1352, 1354 (1986) (citing Peterson, 540 P.2d 1070); accord Falline v. GNLV Corp., 107 Nev. 1004, 823 P.2d 888, 891 (1991) (bad faith is "`the absence of a reasonable basis for denying benefits ... and the defendant's knowledge or reckless disregard of the lack of a reasonable basis for denying the claim'") (citations omitted). Thus, the insurer is not liable for bad faith for being incorrect about policy coverage as long as the insurer had a reasonable basis to take the position that it did. See American Excess Ins. Co., 729 P.2d at 1355 ("[b]ecause we conclude that AEI's [insurer's] interpretation of the [insurance] contract was reasonable, there is no basis for concluding that AEI acted in bad faith").[4]
2. Unfair Claim Practices NRS 686A.310
In 1975, the Nevada legislature passed Assembly Bill No. 594, see 1975 Nev.Stat. 1284, which pertained to the Nevada Insurance *1243 Code. Section 6 of A.B. 594 designated certain acts by insurers to be unfair claims practices. 1975 Nev.Stat. 1284 Sec. 6 (codified at NRS 686A.310). A.B. 594 was modeled after the National Association of Insurance Commissioners Act. See Minutes of Senate Commerce and Labor Committee, May 16 1975. During the Senate Commerce an Labor Committee hearing, Nevada's Insurance Commissioner testified that A.B. 594 gave his Office better means for addressing unfair trade and claim practices. The 1975 version of NRS 686A.310 did not expressly grant insureds a private cause of action for violations of NRS 686A.310 by insurers. Thus, NRS 686A.310 was originally a means of increasing the regulatory power of the state Insurance Commissioner.
In 1987, Nevada's legislature passed A.B. 811 which, among other things, added subsection 2 to NRS 686A.310 expressly providing insureds with a private cause of action.[5]
NRS 686A.310 supplies a list of acts deemed to be unfair practices.[6] Each provision of NRS 686A.310 sets out its own requisite standard of conduct. However, none of the subsections contain a mens rea of knowing or reckless intent as is the case with bad faith. Neither do the provisions of NRS 686A.310 necessarily involve the denial of a claim. See, e.g., NRS 686A.310(1)(i) ("failing upon payment of a claim, to inform insureds or beneficiaries of the coverage under which payment is made") (emphasis added). Accord Hart, 848 F.Supp. at 904. Several of the provisions of NRS 686A.310 involve a reasonableness standard. See, e.g., NRS 686A.310(c), (d); see also NRS 686A.310(e), (n) (involving questions as to the promptness of an insurer's actions). While bad faith involves the absence of any reasonable basis to deny coverage, bad faith is not a reasonableness of conduct standard. Cf. Falline, 823 P.2d at 891-92 (1991) (distinguishing between negligent and bad faith denial of claim under workmen's compensation law). Thus, bad faith involves something more than an unreasonable action, a negligent action, by the insurer. That is, bad faith does not directly address the manner in which an insurer processes a claim as does NRS 686A.310. Bad faith requires an awareness that no reasonable basis exists to deny the insured's claim. American Excess Ins., 729 P.2d at 1354.
Thus, bad faith is not as broad in scope as NRS 686A.310. Bad faith exists where an insurer denies a claim without any reasonable basis and with knowledge that no reasonable basis exists to deny the claim. In contrast, the provisions of NRS 686A.310 address the manner in which an insurer handles an insured's claim whether or not the claim is denied. Furthermore, Nevada's Supreme Court has never held that an act embodied in NRS 686A.310 by itself constitutes bad faith.
3. NRS 686A.310 Was Not Intended to Codify Common Law Bad Faith.
There is also no support for the view that in enacting NRS 686A.310, the Nevada legislature intended to, or thought it did, codify common law bad faith.
The 1975 version of NRS 686A.310 could not have been intended to codify common law bad faith. The Nevada legislature passed A.B. 594 in May 1975 prior to the Supreme Court of Nevada's adoption of the tort of bad faith in Peterson, 540 P.2d 1070 (decided October 10, 1975). As previously stated, NRS 686A.310 was enacted for the purpose of strengthening the state Insurance Commissioner's regulation of insurers.
While the 1987 amendment, A.B. 811, did provide for a private cause of action for a violation of NRS 686A.310, there is no indication that the 1987 Nevada legislature viewed the provisions of NRS 686A.310 as acts constituting bad faith. A witness named William Paterson Cashill testified before the Assembly Commerce Committee and stated *1244 that he believed the 1987 amendment resulted in a codification of bad faith. See Minutes of Nevada Assembly Committee on Commerce, May 25, 1987. However, Mr. Cashill was not a Nevada legislator. Mr. Cashill was an attorney testifying on behalf of the Nevada Trial Lawyers Association. Id. There is no indication that the Nevada legislature adopted the views of this one witness when it passed A.B. 811. Accord Hart, 848 F.Supp. at 904 (Court unpersuaded that Nevada legislature intended to codify common law bad faith by enacting NRS 686A.310); but cf. Crystal Bay Gen. Improvement Dist. v. Aetna Casualty and Sur. Co., 713 F.Supp. 1371, 1376 (D.Nev.1989) (citing Mr. Cashill's testimony as support for conclusion that pre-1987 version of NRS 686A.310 permitted implication of a private cause of action).
Furthermore, in the nineteen years since the enactment of NRS 686A.310, Nevada's Supreme Court has never announced that this statute embodies the law of bad faith.
4. The Supreme Court of Nevada Has Consistently Announced and Ruled That Bad Faith Requires the Denial of a Claim and the Absence of any Reasonable Basis to Deny the Claim.[7]
Nevada's Supreme Court has consistently announced and ruled that bad faith involves the denial of an insured's claim without any reasonable basis.[8]Pemberton, 858 P.2d 380 (1993); United Fire Ins. Co. v. McClelland, 105 Nev. 504, 780 P.2d 193 (1989); American Excess Ins. Co., 729 P.2d 1352 (1986); Peterson, 540 P.2d 1070 (1975); accord Falline, 823 P.2d at 891 (employee may pursue tort action of bad faith against self-insured employer for the bad faith denial of a workman's compensation claim).
However, the Court will address some language in two Nevada cases which could superficially be interpreted as departing from the Nevada Supreme Court's otherwise consistent view that bad faith involves a denial without proper cause.
First, in Farmers Home Mut. Ins. Co. v. Fiscus, 102 Nev. 371, 725 P.2d 234 (1986), the insureds returned home from a three week vacation to discover that their house had been flooded by a broken pipe leading to the swamp cooler. The insurance company briefly inspected the damage and denied the Fiscus' claim for coverage of their carpet, drapery, furniture and other personal property items. The insurance company relied on a policy exemption which was applicable to the dwelling and not to personal property. Id. at 235. The court found that the insurance company "wrongfully denied coverage under a policy exemption that was clearly inapplicable to this claim." Id. Given the failure to investigate, and its unreasonable coverage determination, Farmers was liable for bad faith. Thus, the facts and holding of Fiscus establish that the elements of bad faith are as this Court has set them out.
However, the following language appears in Fiscus:
The district court also decided that Farmers was liable for breach of the implied covenant of good faith and fair dealing by the manner in which Farmers denied Fiscuses' claim without reasonable basis and by reason on the insurance company's unprofessional claims investigative procedures. There is sufficient evidence on the record for this court to conclude on appeal that the district court did not err in finding that Farmers committed a breach of its implied duty of good faith and fair dealing.
Id. at 235-36 (emphasis added). From the underscored language, one could infer that bad faith is broader than the unreasonable denial of a claim, i.e., that unprofessional claims investigation can constitute bad faith. *1245 However, for the reasons given below, the Court does not believe such a conclusion follows from the underscored language.
First, it was the district court, not Nevada's Supreme Court, which apparently found bad faith liability due in part to unprofessional claims investigative procedures. Nevada's Supreme Court simply stated that it was affirming the judgment. This situation could be analogous to the following: a trial judge excludes evidence on the grounds of hearsay; the appellate court finds that the evidence was not hearsay but affirms the exclusion because the evidence was unduly prejudicial. There is no indication in Fiscus that Nevada's Supreme Court adopted unprofessional claims investigative procedures as an act of bad faith.
Secondly, Nevada's Supreme Court would not likely broaden the scope of bad faith in such a casual manner without any discussion as to why bad faith now included elements beyond a knowing unreasonable denial by the insured.[9] The quoted section of the opinion above is the extent of the court's discussion of bad faith. The underscored language appears to be the first time an act other than an unreasonable denial was mentioned in the bad faith context. It seems unlikely that Nevada's high court would adopt a new element for bad faith in such unexplicit fashion.
Moreover, the district court could have meant that the unprofessional claims handling demonstrated the unreasonableness of the insurer's denial rather than constituted bad faith by itself. See Hart, 848 F.Supp. at 905 n. 4 (a failure to investigate is not bad faith but is relevant to whether the denial was reasonable).[10] Additionally and as previously stated, Fiscus did involve an unreasonable denial of a claim. Therefore, this Court finds nothing in Fiscus to indicate that bad faith involves more than the knowing unreasonable denial of a claim.
There is another potentially problematic sentence in United Fire Ins. Co. v. McClelland, 105 Nev. 504, 780 P.2d 193 (1989). Again, this Court notes first that the facts and holding of McClelland support the view that bad faith is the knowing unreasonable denial of a claim. Id. at 197 ("sufficient evidence exists to support the jury's determination that appellants [insurers] acted in bad faith in denying Kenneth's [McClelland's] insurance claims") (emphasis added).
However in McClelland, Nevada's Supreme Court stated that "a jury question on insurer's bad faith arises when relevant facts are in dispute or when facts permit differing inferences as to the reasonableness of the insurer's conduct." Id. (emphasis added) (citing Duckett v. Allstate Ins. Co., 606 F.Supp. 728, 731 (W.D.Okla.1985)).[11]
There are several problems in interpreting this statement to mean that bad faith is broad enough to include the manner in which an insurer handles a claim. First, in talking of the reasonableness of the insurer's conduct, it is not clear that by "conduct" Nevada's Supreme Court meant the manner in which an insurer processes a claim. Nevada's Supreme Court in using the word "conduct" could have been referring to the insurance company's denial, i.e., "a jury question arises when facts permit differing inferences as to the reasonableness of the" denial, McClelland, 780 P.2d at 197. For the court did go on to hold that "sufficient evidence exist[ed] to support the jury's determination that appellants acted in bad faith in denying Kenneth's [McClelland's] insurance claims." McClelland, 780 P.2d at 197 (emphasis added). Reading "conduct" so as to mean denial makes the sentence consistent with the facts *1246 and holding of McClelland and consistent with Nevada's other bad faith cases.[12]
Again, Nevada's Supreme Court would not likely change bad faith from the unreasonable denial of a claim to the manner in which an insurer handles a claim in such unexplicit fashion. It would be a sweeping change if Nevada's Supreme Court in McClelland intended bad faith to go beyond an unreasonable denial to include a wide variety of acts (any of which might be performed negligently) by the insurer which take place in the processing of a claim. It would also be significant if the court no longer required that a denial be knowingly unreasonable but required only an unreasonable or negligent action in handling the claim. However, there is no discussion indicating the court was broadening the scope of bad faith.
Thus, by the insurer's "conduct," the Supreme Court of Nevada in McClelland must have been referring to the insurer's denial of McClelland's claim.[13]
5. Public Policy Concerns Do Not Require That Bad Faith Encompass Claim Practices Which are Governed by NRS 686A.310.
As to the persuasive authority of Oklahoma or any other jurisdiction in which bad faith is broader than the apparent scope of bad faith in Nevada, this Court sees no policy need for bad faith to be broader than the three elements expressly announced by Nevada's Supreme Court. A potential plaintiff should not take umbrage at the fact that she could not assert a bad faith claim if an insurer covered her claim but handled the claim unreasonably or treated her in an atrocious manner. The insured would have a cause of action for such claim handling. However, the cause of action is a violation of 686A.310, not common law bad faith. Additionally, as discussed infra p. 1250, an award of punitive damages is possible for a violation of NRS 686A.310.
As 686A.310 authorizes a private cause of action, there is no need for bad faith to encompass those acts which violate NRS 686A.310. The Court also rejects the persuasive authority of other jurisdictions in which bad faith is broad enough to include the manner in which a claim is processed. Unlike Nevada, in some of these other states, an insured does not have a private cause of action for violations of the unfair claims practice statute. See, e.g., Ariz.Rev.Stat.Ann. § 20-461(D) (no private cause of action for violation of Arizona's unfair claim practices act); accord Utah Code Ann. § 31A-26-303(5); see also White v. Unigard Mut. Ins. Co., 112 Idaho 94, 730 P.2d 1014 (1986) (construing Idaho Code § 41-1329).[14] In such states then, an insured could not sue for negligent claims handling unless bad faith is broad enough to encompass such acts. See, e.g., Deese v. State Farm Mut. Auto Ins. Co., 172 Ariz. 504, 838 P.2d 1265 (1992) (en banc) (bad faith applicable when insurer acts unreasonably toward insured, and denial of claim is not required). Nevada does not have such a problem in light of NRS 686A.310(2).
Certainly bad faith and NRS 686A.310 are not worlds apart, and some cases may demonstrate that there could be an overlap of the two causes of action, i.e., the same conduct *1247 may support an NRS 686A.310 claim and a bad faith claim. However, the two claims are separate causes of action governed by different legal standards. See Hart, 848 F.Supp. at 905 n. 4 ("a failure to investigate is a violation of the statute giving rise to appropriate damages, where under the common law, a failure to investigate merely impacts the reasonableness of the denial"). That is, some acts which violate NRS 686A.310 may be evidence that an insurer's denial was unreasonable, but the statutory violations do not themselves constitute bad faith. This distinction will become more evident as the Court addresses the merits of National Union's Motion for Summary Judgment and Pioneer's allegations.
D. National Union is Entitled to Summary Judgment on the Issue of Bad Faith.
Based on the foregoing discussion, Nevada's definition of bad faith is (1) an insurer's denial of (or refusal to pay) an insured's claim (2) without any reasonable basis and (3) the insurer's knowledge or awareness of the lack of any reasonable basis to deny coverage, or the insurer's reckless disregard as to the unreasonableness of the denial. American Excess Ins. Co., 729 P.2d at 1354; Falline, 823 P.2d at 891.
In the present case, element (1) is obviously met as National Union denied Pioneer's claim in the Fall of 1992 shortly after Pioneer commenced this action.
As to element (2), the Court finds that as a matter of law, National Union had a reasonable basis to deny coverage. After investigation Pioneer's claim, National Union arrived at the conclusion that the cause of the chlorine leak was corrosion, an excluded peril. As this Court previously stated in earlier summary judgment proceedings dealing with liability, corrosion was certainly involved in the chain of events leading to the chlorine leak. (Order # 174.) This Court denied each party's motion for summary judgment largely because case law established that the determination of the proximate cause of Pioneer's loss is a question for the trier of fact. During the coverage summary judgment proceedings, the Court also learned that some cases support Pioneer while other cases support National Union. This case involves a difficult causation issue and a legitimate dispute as to that issue. The Court finds that as a matter of law National Union had a reasonable basis to deny Pioneer's claim.[15] Thus, element (2) of bad faith is missing, and this is fatal to Pioneer's bad faith claim. See American Excess Ins. Co., 729 P.2d at 1355 ("[b]ecause we conclude that AEI's [insurer's] interpretation of the [insurance] contract was reasonable, there is no basis for concluding that AEI acted in bad faith").
The Court having found that National Union had a reasonable basis to deny coverage, neither can Pioneer satisfy element (3) of bad faith, an awareness by National Union that it had no reasonable basis to deny coverage. Moreover, Pioneer has produced no evidence tending to show such awareness or knowledge on the part of National Union.
Consequently, while a jury may find that Pioneer's loss is ultimately covered, no reasonable jury could find that National Union was knowingly without a basis to deny Pioneer's claim. Under the facts of this case, National Union cannot be held liable for bad faith.
Pioneer's allegations and attempts to show issues of fact do not change the bad faith analysis above. However, some of Pioneer's allegations are material to the alleged statutory violations of NRS 686A.310.
E. National Union is Not Entitled to Summary Judgment on the NRS 686A.310 Claims.
National Union has not established the absence of genuine issues of fact as to Pioneer's NRS 686A.310 claims.
Again, Pioneer alleges the following instances of wrongful conduct: (1) National Union failed to promptly provide Pioneer, *1248 within a reasonable time after proofs of loss were submitted by Pioneer, with a reasonable explanation for the denial of Pioneer's claim; (2) National Union failed to provide coverage to Pioneer; (3) National Union adopted an arbitrary and capricious interpretation of the corrosion exclusion clause; (4) National Union failed to adequately monitor the claim as it was, or was not, being processed; (5) National Union failed to adequately investigate all possible grounds of coverage, including Pioneer's "rag theory"; and (6) National Union failed to make a prompt coverage determination.[16]
Most of these allegation are material to NRS 686A.310 but not to common law bad faith. For example, allegation (1), even if proven true, would not satisfy the definition of bad faith. Bad faith is the denial of a claim without any reasonable basis and an awareness by the insurer that it lacks any reasonable basis to deny the claim. American Excess Ins. Co., 729 P.2d at 1354. Allegation (1) which charges that National Union failed to provide an explanation for the denial within a reasonable time is not an element of bad faith. However, allegation (1) tracks the language of NRS 686A.310(1)(n) and is therefore material to Pioneer's statutory claim for unfair claim practices.
Similarly allegation (2), failing to provide coverage, is not itself bad faith. Simply denying the claim may constitute a breach of the insurance contract, but it does not by itself constitute the separate tort of bad faith. While denial of a claim is relevant to bad faith to the extent that it satisfies the first element of bad faith, allegation (2) does nothing to support the second and third elements of bad faith which the Court has found to be absent here.
Allegation (2) could in general be relevant to NRS 686A.310(1)(e) (failing to effectuate settlements of claims in which liability of the insurer has become reasonably clear). However, as can be seen from the Court's previous Order # 174, the liability of National Union has never been reasonably clear. Thus, allegation (2) does nothing to support Pioneer's NRS 686A.310 claim.[17]
In allegation (3), Pioneer asserts that National Union adopted an arbitrary and capricious interpretation of the corrosion exclusion. In general such an allegation is relevant to bad faith because it impacts the reasonableness of an insurer's denial. However, Pioneer cannot succeed in proving this allegation. In the Court's previous Order # 174, the Court rejected Pioneer's contention that National Union's interpretation of the Policy was arbitrary and capricious. National Union's position was not arbitrary but reasonable. Therefore, although an allegation such as allegation (3) is in general relevant to the reasonableness, in this case allegation (3) is without merit because the Court has found that National Union's Policy interpretation was reasonable as a matter of law. Having been rejected as a matter of law, neither can allegation (3) form any basis for recovery under NRS 686A.310.
In allegation (4), Pioneer contends that National Union failed to adequately monitor Pioneer's claim. Pioneer asserts that during depositions two National Union adjustors disagreed as to when Pioneer's claim was transferred from one adjustor to the other. Pioneer contends that a Mr. Waidler, who had been handling Pioneer's claim thought that the claim was transferred from him to a Mr. Smith in the late fall of 1992. Pioneer has some evidence that Mr. Smith did not know of Pioneer's claim until Fall of 1993.
Pioneer's allegation (4) is material to NRS 686A.310 but not bad faith. This alleged failure to monitor the claim occurred after the act of bad faith, i.e., the denial in November 1992. Thus, this failure to monitor the claim during the time period alleged is not material to the reasonableness of National Union's denial. However, this alleged failure to monitor the claim may constitute a violation of 686A.310 and is therefore material to that claim.
*1249 In allegation (5), Pioneer asserts that National Union failed to adequately investigate Pioneer's claim including Pioneer's rag theory. This allegation is relevant to NRS 686A.310(1)(c) ("failing to adopt and implement reasonable standards for the prompt investigation and processing of claims"). Generally an allegation of this kind would also be relevant to a bad faith claim because failure to investigate impacts the reasonableness of an insurer's denial of a claim. See Hart, 848 F.Supp. at 905 n. 4; see also Falline, 823 P.2d at 891 (bad faith is "`the absence of a reasonable basis for denying benefits ... and the defendant's knowledge or reckless disregard of the lack of a reasonable basis for denying the claim'") (citations omitted). A complete failure to investigate would be evidence of an insurer's reckless disregard as to the reasonableness of its denial. However, the failure to investigate is not itself bad faith. See Hart, 848 F.Supp. at 905 n. 4.
Moreover, in the present case it is undisputed that National Union did investigate Pioneer's loss. National Union sent an investigator to Pioneer's plant the day after the chlorine leak. After an initial investigation, National Union retained Thielsch Engineering Associates ("Thielsch") to assess whether corrosion caused the chlorine leak. National Union and Thielsch requested information and documents from Pioneer and the engineering firms Pioneer hired. Thus, National Union investigated Pioneer's claim and concluded that Pioneer's loss was caused by corrosion, an excluded peril.
Pioneer's bone of contention is not that National Union completely failed to investigate Pioneer's claim, but that National Union did not investigate all possible grounds of coverage such as the rag theory. Even if true, this allegation does not support a finding of bad faith in this case. So long as an insurer had a reasonable basis to deny coverage, the insurer cannot be held liable for bad faith. See American Excess Ins. Co., 729 P.2d at 1355. National Union investigated this loss and concluded that corrosion was the cause of the loss. Nevada's bad faith cases do not support Pioneer's view that an insurer who has made a legitimate investigation of a claim must continuously track down subsequent theories of coverage proffered by the insured.[18] A court will assess such legitimate disputes as to coverage. In Fiscus, the insurer denied coverage on an exclusion which Nevada's Supreme Court found to be "clearly inapplicable." Fiscus, 725 P.2d at 235. The insurer had made a brief visit to the Fiscuses' house and based on such visit denied the Fiscuses' claim. The insurer clung to a clearly inapplicable exclusion despite information given by the insured, and conducted little investigation. Implicit in the courts reasoning is that a good faith investigation would likely have lead the insurer to a correct coverage determination. As National Union investigated Pioneer's claim and reasonably concluded that the cause of Pioneer's loss was corrosion, the alleged failure to explore the rag theory is not material to Pioneer's claim of bad faith.[19]
Although National Union's alleged failure to explore the rag theory does not demonstrate an unreasonable denial by National Union, the evidence may warrant a finding by the jury that under NRS 686A.310(1)(c) National Union ought to have assessed the rag theory (assuming National Union did not assess it). The evidence could warrant a finding that National Union did not "adopt and implement reasonable standards for the prompt investigation" of Pioneer's claim. NRS 686A.310(1)(c). Thus, a genuine issue of fact exists as to Pioneer's claim under NRS 686A.310(1)(c). However, National Union's investigation was sufficient to support a denial of Pioneer's claim so as to preclude a finding of bad faith.
Finally, in allegation (6), Pioneer contends that National Union failed to make a prompt coverage determination. This allegation tracks the language of NRS 686A.310(1)(d). The Court finds that the facts of this case and the legal standard of NRS 686A.310(1)(d) *1250 preclude summary judgment in favor of National Union. The evidence at trial may warrant a jury finding that National Union should have made a decision on coverage sooner than it did.
However, even if National Union violated NRS 686A.310(1)(d), the violation does not constitute bad faith. Here allegation (6) (the alleged delay) is material only to the first element of bad faith (denial of the claim). That is, at some point in time a failure to affirm or deny coverage could in effect constitute a denial. In Pemberton and Peterson the court stated that bad faith occurs when a insurer "refuses `without proper cause' to compensate the insured for a loss covered by the policy." Pemberton, 858 P.2d at 382 (quoting Peterson, 540 P.2d at 1071). For example if an insurer without proper cause did not affirm or deny coverage for five years, the delay should constitute the denial prong of bad faith. In other words, an insurer should not be able to escape an otherwise valid bad faith claim on the technical basis that it never officially denied coverage. Thus, an official denial is not necessary to satisfy the first prong of bad faith. At any rate, this similarity of denial and refusal to pay for purposes of the first element of bad faith makes no difference in this case. National Union did deny Pioneer's claim, and the Court in analyzing the bad faith claim treated the denial prong as having been satisfied.[20]
Thus, the present case involves a legitimate coverage dispute. Accordingly, National Union is entitled to its day in court on such an issue without facing a claim for bad faith simply because it disagrees with Pioneer. National Union had a reasonable basis to deny Pioneer's claim. The Court finds as a matter of law that National Union is not liable for bad faith. Furthermore, Pioneer has not established a dispute as to any fact which is material to the claim of bad faith. Accordingly the Court will grant National Union's summary judgment request as to Pioneer's Third Claim for Relief based on bad faith.
Pioneer has established some factual issues as to its statutory unfair practice claim under NRS 686A.310. Consequently, the Court will deny National Union's request for summary judgment as to the NRS 686A.310 claim embodied in Pioneer's Second Claim for Relief.[21]
F. National Union is Entitled to Summary Judgment on the Issue of Punitive Damages.
National Union also requests summary judgment on the issue of punitive damages. National Union asserts that the conduct justifying an award of punitive damages requires a higher level of culpability than that of bad faith. Thus, according to National Union, if it is not liable for bad faith, then it cannot be liable for punitive damages.
However, bad faith is not a prerequisite for punitive damages. Nevada law authorizes an award of punitive damages "for the breach of an obligation not arising from contract, where ... the defendant has been guilty of oppression, fraud or malice, express or implied." NRS 42.005(1).
NRS 686A.310 imposes statutory duties on insurers, i.e., noncontractual duties imposed by law. Theoretically, if an insurer violates a provision of NRS 686A.310 and if its conduct involves oppression, fraud, or malice, a trier of fact could award punitive damages.
Practically however, the Court has difficulty constructing a factual situation where an *1251 insurer who violated the statute could have done so with an oppressive or malicious intent yet not denied, or refused to pay, the claim. Oppression means "`a conscious disregard for the rights of others which constitute[s] an act of subjecting plaintiffs to cruel and unjust hardship.'" Ainsworth v. Combined Ins. Co. of America, 104 Nev. 587, 763 P.2d 673, 675 (1988) (citations omitted). Nevada's Supreme Court has stated that malice involves actual hatred or ill-will, or the desire to successfully injure, vex, annoy or harass. Craigo v. Circus-Circus Enterprises, Inc., 106 Nev. 1, 786 P.2d 22 (1990); but see Granite Constr. Co. v. Rhyne, 107 Nev. 651, 817 P.2d 711 (1991) (upholding punitive damage award based on defendant's conscious disregard for known safety procedures).[22] It is difficult to conceive a situation where an insurer would act with such ill-will toward an insured or subject an insured to a cruel and unusual hardship and yet not deny or refuse to pay the claim.[23]
At any rate the Court need not decide such a hypothetical situation. For the Court finds that no facts exist here to support an award of punitive damages under NRS 42.005. Thus, the Court does not rest its decision as to punitive damages on National Union's argument that summary judgment for an insurer as to bad faith precludes an award of punitive damages.[24]
Pioneer has shown no issue of fact as to the punitive damages request. There is nothing to indicate that National Union acted with malice or oppression.[25] An analysis of Ainsworth, 763 P.2d 673, cited heavily by Pioneer, demonstrates why punitive damages are not justified in this case.[26] In Ainsworth, the plaintiff suffered a stroke and lapsed into a coma for a week. The plaintiff was completely disabled for the following six months. During the six months, the plaintiffs wife attempted to collect benefits under two accident policies of the defendant. The defendants' agents had instructed the Ainsworths that the policies protected against "any conceivable accident." Id. at 674. After the defendant's first refusal to pay benefits, a salesman advised Mrs. Ainsworth to resubmit her claim. Mrs. Ainsworth submitted letters from doctors establishing that her husband's stroke occurred as a result of an accident which occurred during a medical procedure. Desperate for medical payments, *1252 Mrs. Ainsworth submitted her claim five times over an eighteen-month period alerting the defendant that the stroke occurred from an accident. The insurer without obtaining accurate and complete medical records or considering the documents provided by Mrs. Ainsworth clung to its restrictive interpretation of the term "accident" despite its representations that "accident" covered any conceivable accident. The insurer also knew of the Ainsworths' desperate situation. With such knowledge, inadequate investigation, and its clinging to a restrictive interpretation of an ambiguous term (which interpretation was at odds with previous representations by the insurer), the insurer acted in conscious disregard of the Ainsworths' rights. Id. at 675-76.
There is nothing in the record to indicate any actions by National Union approaching the oppressive conduct which occurred in Ainsworth. National Union alerted Pioneer that a potential problem existed regarding coverage. National Union conducted an investigation which resulted in a 454 page report on the loss. National Union repeatedly sought documents from Pioneer and assessed such information in determining the cause of Pioneer's loss. Moreover, National Union's decision to deny coverage was reasonable, even if a jury ultimately concludes that it was erroneous. Thus, there is no issue of fact material to Pioneer's request for punitive damages. As a matter of law, National Union has not acted oppressively or maliciously.
CONCLUSION
Bad faith, NRS 686A.310, and punitive damages involve three separate issues. Judgment as to one of these issues does not necessarily decide the other two. Under Nevada law and the facts of this case, no reasonable trier of fact could find National Union liable for bad faith. As a matter of law National Union had a reasonable basis to deny coverage. However, genuine issues of fact do exist as to whether National Union violated a provision of NRS 686A.310. The Court also finds as a matter of law that National Union did nothing which would justify and award of punitive damages.
Accordingly, good cause appearing,
IT IS HEREBY ORDERED that Defendant National Union's Motion for Partial Summary Judgment (# 164, # 165, # 166) is GRANTED as to Plaintiff Pioneer's Third Claim for Relief for bad faith and GRANTED as to Plaintiff Pioneer's request for punitive damages.
IT IS FURTHER ORDERED that Defendant National Union's Motion for Partial Summary Judgment (# 164, # 165, # 166) is DENIED as to Plaintiff Pioneer's Second Claim for Relief for unfair claim practices in violation of NRS 686A.310.
NOTES
[1] Celotex, Matsushita, and Anderson.
[2] Section 193 provides:
The validity of a contract of fire, surety or casualty insurance and the rights created thereby are determined by the local law of the state which the parties understood was to be the principal location of the insured risk during the term of the policy, unless with respect to the particular issue, some other state has a more significant relationship under the principles stated in § 6 to the transaction and the parties, in which event the local law of the other state will be applied.
Restatement (Second) of Conflicts § 193 (emphasis added).
[3] Pioneer's rag theory is set out in Order # 174.
[4] Throughout this opinion, when the Court discusses bad faith, the Court is discussing the scope of a bad faith action in the context of a first party action. A first party action involves a claim made on an insurance policy by the insurer's own insured. A claim made on the insurance policy by another persona against the insured is a third party claim. Nothing in this opinion is intended to address issues involving an insurer's duty of good faith and fair dealing in the third party context, e.g., settling a claim against the insured within or outside the policy limits.
[5] Subsection 2 provided that
In addition to any rights or remedies available to the commissioner, an insurer is liable to its insured for any damages sustained by the insured as a result of the commission of any act set forth in subsection 1 as an unfair practice. A.B. 811, 1987 Nev.Stat. 1067.
[6] See supra p. 1242 for the provisions of NRS 686A.310 which are relevant to this case.
[7] This heading and the following sentence are not designed to be a definition of bad faith as they omit the third element of bad faith (knowledge or awareness by the insurer of the lack of any reasonable basis to deny the claim) because this third element is not expressly listed in all of the bad faith cases as are the first two elements.
[8] A formal denial is not necessary as a refusal to pay a claim can satisfy the first element of bad faith. See Pemberton, 858 P.2d at 382; Peterson, 540 P.2d at 1071. This proposition is discussed more fully infra p. 1250 in addressing Pioneer's allegation that National Union took to long to decide Pioneer's claim. The Court simply uses "denial" as the first element of bad faith for brevity's sake.
[9] The Court will use the term "knowing unreasonable denial" as a short-hand method of referring to the three elements of bad faith set out earlier. This short-hand phrase should not be viewed as the actual definition of bad faith as it does not fully describe the three elements of bad faith.
[10] That improper investigation is not bad faith but evidence of an insurer's unreasonable denial is discussed more fully infra pp. 1248-49.
[11] McClelland did not arrive at Nevada's Supreme Court pursuant to a grant of summary judgment. McClelland ended in a jury trial. The insurer appealed contending that the trial judge erred in giving a bad faith instruction because, due to an alleged novation of the insurance policy, the insurer's denial of the claim was reasonable. McClelland, 780 P.2d at 197.
[12] Using the more encompassing word "conduct" to refer to a particular act is not so strange. A court may refer to a defendant's "conduct" rather than the particular crime, e.g., burglary, or tort, e.g., intentional infliction of emotional distress.
[13] In Duckett v. Allstate Ins. Co., 606 F.Supp. 728 (W.D.Okla. 1985), from which the McClelland court took the problematic sentence, the Oklahoma court may have indeed intended "conduct" to refer to the manner in which a claim is handled. However, an examination of Duckett reveals that Oklahoma bad faith law (unlike Nevada) is explicitly broader than just the knowing unreasonable denial of a claim. See Duckett, 606 F.Supp. at 731 (bad faith involves the reasonableness of the manner in which the insurer deals with the insured). Nevada's Supreme Court has never stated that bad faith involves conduct other than the denial of a claim without any reasonable basis and an awareness of such lack of basis. Thus, Duckett's proposition as to when a jury question arises in a bad faith action is accurate for Oklahoma bad faith law but not for Nevada bad faith law.
[14] Recall that NRS 686A.310 did not originally contain a provision for a private cause of action and was intended to be a regulatory means for Nevada's Insurance Commissioner.
[15] If the Court's conclusion that National Union had a reasonable basis appears to be in summary fashion here, it is because Order # 174 contains a lengthy analysis demonstrating (although perhaps not explicitly stating) that National Union had a reasonable basis to deny coverage.
[16] The first two allegations are contained in Pioneer's Second Amended Complaint (# 128 at 6.), while the last four allegations are contained in Pioneer's Opposition (# 189).
[17] Allegation (2), denial of Pioneer's claim, is of course relevant to Pioneer's First Claim for Relief (declaratory relief). Pioneer's First Claim for Relief was addressed in Order # 174 which denied each party's motion for summary judgment.
[18] There is conflicting evidence as to when Pioneer communicated the rag theory to National Union.
[19] The Court also notes that it did not accept as a matter of law Pioneer's rag theory in earlier summary judgment proceedings. (See Order # 174.)
[20] In a case where no official denial had occurred, a court would simply substitute refusal to pay for denial. An insurer would then be liable for bad faith if it did not have a reasonable basis for refusing to pay and had knowledge or awareness of the lack of any reasonable basis for refusing to pay the claim. An on-going good faith investigation should be a proper cause for refusal to pay (although it would not justify a denial as the investigation is not complete). Here, National Union had a reasonable basis for withholding coverage to Pioneer. National Union initially found that a question as to coverage existed. National Union then went on to investigate the accident at Pioneer's plant, and that investigation resulted in National Union's conclusion to deny Pioneer's claim.
[21] As Pioneer's NRS 686A.310 claim is still viable, Pioneer may offer evidence at trial supporting any of the provisions it feels are applicable. Pioneer is not bound by this Court's recitation of the subsections the Court discerned to be applicable. See supra p. 1242.
[22] Granite's possible lessening of the conduct required to constitute malice does not affect this case as National Union's conduct did not involve the conscious disregard of known safety procedures.
[23] This problematic situation of course would not change if bad faith were viewed as broad enough to encompass claims handling procedures. The assumed situation involves improper claims handling, yet the insurer paid the claim or had a reasonable basis not to pay it. If such improper claims handling were subject to a bad faith action, only the name of the cause of action for improper claims handling would have changed. One would still be left to decide if an insurer could act maliciously or oppressively although it paid the claim or had a proper basis not to pay the claim. For a finding of bad faith does not automatically entitle a plaintiff to punitive damages. See Peterson, 540 P.2d 1070 (finding bad faith but denying punitive damages). Thus, this opinion should not be construed as a win or loss for insurers or insureds. Rather, it is an attempt to clarify causes of action which understandably have confused more than a few persons. As the Hart court said when it drew distinctions between NRS 686A.310 and common law bad faith, "[t]he Court does not expect the ramifications of its decision on this issue to be far reaching." Hart, 848 F.Supp. at 905 n. 5.
The Court does note however that the recovery caps on punitive damages are not applicable for "[a]n insurer who acts in bad faith regarding its obligations to provide insurance coverage." See NRS 42.005. The Court need not decide here the Nevada legislature's intent as to the scope of this exception to the recovery caps.
[24] The Court also notes that Pioneer did not make a claim for punitive damages in its Second Claim for Relief based on NRS 686A.310. Pioneer's punitive damage claim and corresponding allegations appeared in its Third Claim based on common law bad faith. Nevertheless, the Court finds that there has been no conduct by National Union which would warrant an award of punitive damages.
[25] Pioneer has not contended that National Union acted fraudulently.
[26] Incidentally, Pioneer cites Ainsworth frequently as authority that certain acts constitute bad faith. Although the insurance company committed bad faith, the issue before the Ainsworth court was the award of punitive damages, not whether a particular act constituted bad faith. See Ainsworth, 763 P.2d 673.
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01-03-2023
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10-30-2013
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https://www.courtlistener.com/api/rest/v3/opinions/101432/
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279 U.S. 415 (1929)
CENTRAL NEW ENGLAND RAILWAY COMPANY
v.
BOSTON & ALBANY RAILROAD COMPANY, ASSIGNOR.
No. 532.
Supreme Court of United States.
Argued April 19, 1929.
Decided May 13, 1929.
CERTIORARI TO THE SUPERIOR COURT FOR THE COUNTY OF SUFFOLK, STATE OF MASSACHUSETTS.
*416 Mr. John L. Hall, with whom Mr. Marcien Jenckes was on the brief, for petitioner.
Messrs. Lowell A. Mayberry and George H. Fernald, Jr., were on the brief for respondent.
MR. JUSTICE STONE delivered the opinion of the Court.
Petitioner is an interstate rail carrier having a branch line, a portion of which formerly extended a distance of 1.87 miles from Feeding Hills to Agawam Junction, Massachusetts, where it connected with the line of respondent. In order to secure an entrance to Springfield, Massachusetts, petitioner, on October 25, 1899, entered into a contract which provided that until August 30, 1940, it should have the right to operate a limited number of trains per day over the line of respondent from Agawam Junction to Springfield, for which it agreed to pay the sum of *417 $15,000 annually. In 1921, purporting to act under a certificate of public necessity issued by the Interstate Commerce Commission, petitioner abandoned this section of its branch line, notified respondent that it would no longer meet its obligations under the contract and proceeded to sever the connection between their lines.
This suit was brought by the New York Central Railroad, lessee of the present respondent, in the Superior Court for Suffolk County, Massachusetts, to recover from petitioner the annual payments due under the contract; and a verdict was returned in favor of the plaintiff. Exceptions to rulings on the trial in the superior court were overruled by the Supreme Judicial Court of Massachusetts on condition that the present respondent be substituted as plaintiff. The superior court entered judgment for respondent in accordance with the rescript of the higher court. The judgment of the superior court was thus, under local practice, a final decision of the highest court of the state in which the decision could be had and the writ of certiorari, 278 U.S. 596, was properly directed to that court. See Davis v. Cohen Co., 268 U.S. 638, 639; Myers v. International Trust Co., 273 U.S. 380, 381.
Petitioner offered several defenses to the suit in the state court, only two of which involve federal questions, and which alone may be considered here.
1. In June, 1921, petitioner made application to the Interstate Commerce Commission, as required by § 1, paragraph 18, of the Interstate Commerce Act, as amended by the Transportation Act of 1920, 41 Stat. 456, 474, "for a certificate of public convenience and necessity . . . permitting the abandonment of operation of its line between Feeding Hills . . . and Agawam Junction . . ." on the grounds that it could not be operated except at a large annual loss and other available transportation facilities had rendered its continuance unnecessary. The Commission *418 issued its certificate accordingly, authorizing petitioner to abandon the designated section of its branch line.
It is contended by petitioner that the effect of the order was to relieve it from making any further annual payments under its contract. It is said that the provisions of the Transportation Act conferring broad powers on the Interstate Commerce Commission, and designed to secure to interstate carriers an adequate return and the segregation from surplus earnings of a revolving fund for their benefit, see Dayton-Goose Creek Ry. Co. v. United States, 263 U.S. 456, 478, taken in conjunction with its authority to permit the abandonment by a carrier of a part of its line, evidence a purpose to grant to the Commission power to relieve the carrier from the further performance of obligations already incurred which are incidental to the operation of the abandoned section. From this it is concluded that, as the abandonment of the branch line by which alone petitioner could reach the tracks of respondent, made it impossible for petitioner to exercise its trackage rights over the lines of respondent, the order permitting the abandonment must be taken to have relieved petitioner from its obligation to make further payments which served but to reduce its revenues and so to burden its other commerce.
Respondent argues, with persuasive force, that the purpose of § 1, paragraphs 18, 19, 20 of the Transportation Act, was merely to protect the public from ill advised or improper abandonment of its line by an interstate carrier, Colorado v. United States, 271 U.S. 153, and that it conferred no authority upon the Commission to relieve a carrier of its contractual obligations either past or prospective, with respect to an abandoned line. But we need not pass on this contention. It suffices, for present purposes, that the certificate and the accompanying report of the Commission did not purport to exercise such a power. *419 The former certified only that the present and future public convenience and necessity permitted the abandonment of the designated section of petitioner's branch line and that petitioner was authorized to abandon it. No reference was made in it to the present or any other contractual obligation of petitioner, and respondent, whose rights were vitally affected by the order, if petitioner's contention is to be supported, was not notified of the proceeding before the Commission nor a party to it.
The report mentioned the fact that petitioner's trains entered Springfield over the tracks of the Boston & Albany, for which privilege it paid $15,000 annually, and included a finding that the operating loss for the abandoned section for the year 1920 was $38,832.58. But even though it be possible to spell out of this finding as to revenue the conclusion that the net loss included the annual rental of $15,000, the findings did not so state, nor was the trackage agreement otherwise mentioned. The omission from the certificate of any reference to the contract thus brought to the attention of the Commission, plainly evidences an absence of intention to deal with it. Even if the broad purposes ascribed to the Act be assumed, it is not to be supposed that the Commission intended to do more than was stated in its order or to deprive respondent of income to which it was entitled under its contract for the purpose of lightening the financial burden of petitioner, both of whom were interstate carriers, without giving respondent an opportunity to be heard and without dealing with the question specifically.
To the suggestion of petitioner that, by force of the statute, the permission to abandon its line necessarily operated to cancel its obligation, regardless of the intention of the Commission, we need only say that the statute contains no such provision nor any language suggesting it. We need not decide whether such may be the effect of a proper order of the Commission on contracts previously *420 entered into by the carrier and not expressly mentioned in the order, where the contract and the order necessarily conflict. See Colorado v. United States, 271 U.S. 153, 165; New York v. United States, 257 U.S. 591, 601; cf. New England Divisions Case, 261 U.S. 184. But without such a conflict, there could be no justification for holding that the order would also operate sub silentio to release a carrier from a contract merely because it has ceased to be of value through compliance with the order. This is especially the case where the other party to the contract is another common carrier with whose financial condition the Commission is equally concerned.
2. Petitioner also challenged the jurisdiction of the state court. As the suit is upon contract and does not assail the order of the Commission, it is not one to "enjoin, set aside, annul or suspend" an order of the Commission of which the federal district courts are given exclusive jurisdiction under § 208 of the Judicial Code. Hence the state court retained its jurisdiction to give "remedies now existing at common law," preserved by § 22 of the Interstate Commerce Act, Pennsylvania R.R. v. Puritan Coal Co., 237 U.S. 121; Pennsylvania R.R. v. Sonman Coal Co., 242 U.S. 120, and subject to the power of revision by this Court, it could construe the order of the Commission. Great Northern Ry. Co. v. Merchants Elevator Co., 259 U.S. 285.
In Lambert Co. v. Baltimore & Ohio R.R. Co., 258 U.S. 377; Venner v. Michigan Central R.R. Co., 271 U.S. 127; North Dakota v. Chicago & Northwestern Ry. Co., 257 U.S. 485; Illinois Central R.R. Co. v. Public Util. Comm., 245 U.S. 493, relied upon by petitioner, affirmative relief was prayed directing either that the order be set aside, or that the carrier do or refrain from doing acts in a manner inconsistent with the order of the Commission directing or permitting certain administrative acts to be performed, *421 relief which, it was held, would operate practically to set aside the order of the Commission. Here respondent does not ask that the order be set aside or that it be regarded as illegal and void; it insists only that the order did not purport to deal with the contract between the carriers, and so cannot have the effect, attributed to it by petitioner, of annulling the contract. The question is merely one of the legal effect of the order. Neither party contests its validity or asks that the carrier be compelled to do anything inconsistent with its terms.
Affirmed.
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294 U.S. 216 (1935)
JENNINGS, RECEIVER, ET AL.
v.
UNITED STATES FIDELITY & GUARANTY CO.
No. 338.
Supreme Court of United States.
Argued January 16, 17, 1935.
Decided February 4, 1935.
CERTIORARI TO THE CIRCUIT COURT OF APPEALS FOR THE SEVENTH CIRCUIT.
*217 Messrs. John F. Anderson and George P. Barse, with whom Mr. F.G. Awalt was on the brief, for petitioners.
Mr. Arthur L. Gilliom, with whom Mr. Samuel O. Pickens was on the brief, for respondent.
*218 MR. JUSTICE CARDOZO delivered the opinion of the Court.
A trust has been impressed upon the assets of a national bank in the hands of a receiver for the proceeds of a check collected through a clearing house before the closing of the bank by the Comptroller of the Currency. The question is whether the trust may be upheld.
On December 29, 1931, the Commercial Trust Company of Gary, Indiana, as maker, delivered to the respondent, United States Fidelity and Guaranty Company, a check to the order of respondent in the sum of $2,196.89 upon the Gary State Bank of Gary, Indiana, as drawee. The check, duly endorsed by the payee, was deposited in a bank in Indianapolis, and thereafter was transmitted for collection to the National Bank of America at Gary, Indiana, being received for that purpose on December 31, 1931. At that time both the collecting bank (the National Bank of America) and the drawee bank (Gary State Bank) were members of the Gary Clearing House Association. In accordance with banking custom the National Bank of America delivered to the local clearing house whatever checks in its possession were payable by the member banks (a total of $10,425.45) including the foregoing item of $2,196.89, and received in return the checks drawn on itself ($11,470.19). The outcome was a debit balance of $1,044.74, which it paid on the same day by a draft, thereafter duly honored, to the order of the clearing house. At the same time it delivered to the forwarding bank in Indianapolis a draft for $3,660.83, which covered along with other items the check for $2,196.89, collected from the drawee in the manner just described. Before the draft so transmitted could be honored, its maker, the collecting bank, had been forced to close its doors (January 4, 1932), and the Comptroller of the Currency was in possession of the business.
*219 This action, which was begun in a state court in Indiana and was thereupon removed to a United States District Court, was brought by the United States Fidelity and Guaranty Company, payee of the check for $2,196.89, against the collecting bank and Jennings, its receiver, to impress a trust upon the assets to the extent of the proceeds of collection, and for payment accordingly. The District Court held that the payee was entitled to a preference over the general creditors of the insolvent bank, and entered a decree for the face amount of the check with interest. 4 F. Supp. 569. Upon appeal to the Circuit Court of Appeals for the Seventh Circuit, the decree was modified as to the interest, and as modified affirmed. 71 F. (2d) 618. A writ of certiorari brings the case here.
There was in force in Indiana in 1931 a statute known as the Bank Collection Code (Indiana Acts, 1929, c. 164[1]), which is applicable to national banks in so far as it is consistent with the policy or provisions, express or reasonably implied, of the National Bank Act or of other federal acts of paramount authority. Lewis v. Fidelity & Deposit Co. of Maryland, 292 U.S. 559, 566; First National Bank v. Missouri, 263 U.S. 640, 656. Under that code (§ 2), the relation between the forwarding bank and the collecting bank is that of principal and agent until the agent has completed the business of collection. Whether a fiduciary relation continues even afterwards, upon the theory that the proceeds of the collection until remitted to the forwarder are subject to a trust, depends upon the circumstances. In the absence of tokens of a contrary intention, the better doctrine is, where the common law prevails, that the agency of the collecting bank is brought *220 to an end by the collection of the paper, the bank from then on being in the position of a debtor, with liberty, like debtors generally, to use the proceeds as its own. Commercial Bank of Pennsylvania v. Armstrong, 148 U.S. 50; Marine Bank v. Fulton Bank, 2 Wall. 252; Planters' Bank v. Union Bank, 16 Wall. 483, 501; Hecker-Jones-Jewell Milling Co. v. Cosmopolitan Trust Co., 242 Mass. 181, 185, 186; 136 N.E. 333; Freeman's National Bank v. National Tube Works Co., 151 Mass. 413, 418; 24 N.E. 779; Manufacturers' National Bank v. Continental Bank, 148 Mass. 553, 558; 20 N.E. 193; First National Bank of Richmond v. Wilmington & W.R. Co., 77 Fed. 401, 402; Philadelphia National Bank v. Dowd, 38 Fed. 172, 183; Merchants' Bank v. Austin, 48 Fed. 25, 32.[2] "One who collects commercial paper through the agency of banks must be held impliedly to contract that the business may be done according to their well known usages, so far as to permit the money collected to be mingled with funds of the collecting bank." Freeman's National Bank v. National Tube Works Co., supra. There is a contention for the respondent that the rule at common law has been modified by statute. We shall consider later on whether the change, if any, is material upon the record now before us.
At the closing of its doors on January 4, 1932, the collecting bank at Gary had finished the business of collection, and had arrived at the stage when it was subject to a duty, either as trustee or as debtor, to make remittance of the proceeds. In the method of collection there had been no departure from the ruling of this court in Federal Reserve Bank v. Malloy, 264 U.S. 160, that an agent bank is at fault when it accepts anything but cash in the absence of custom or agreement for the acceptance *221 of a substitute. To preclude the extension of that ruling to collections through a clearing house, the Bank Collection Code makes provision in § 9 for media of payment that are to be deemed equivalent to currency. There may now be acceptance of a bank draft, or settlement through a clearing house in the customary manner, without involving the agent in liability for damages if the draft is dishonored or the credit subsequently revoked.[3] On the other hand, when credit ceases to be provisional, or when the accepted instrument is paid, the collecting bank is liable as debtor, if not otherwise, to the same extent as if payment had been made in cash over the counter. One duty the duty to collect is at an end, and another the duty to remit has arisen in its place.
To say that a collecting agent may be held to the liability of a debtor "as if" payment had been made in cash is not to say that the two methods of collection are *222 equivalent for every other purpose. More particularly it does not mean that they are equivalent for the purpose of identifying a res to be subjected to a trust. The distinction is made definite by the controversy before us. What happened in the clearing house was this, that a check for $2,196.89, due to the collecting bank as agent or fiduciary, was used to cancel or extinguish liability upon a check or checks of equal amount due from it as principal, all with the sanction of statute and with the tacit assent of the forwarder or owner. At the close of the day there was not a dollar in the treasury of the agent that could be identified as part of the proceeds of collection or as a substitute therefor. If the money had been paid over the counter with the understanding that it was accepted as a special deposit (Blakey v. Brinson, 286 U.S. 254, 262, 263; People v. City Bank of Rochester, 96 N.Y. 32; Genesee Wesleyan Seminary v. United States Fidelity & Guaranty Co., 247 N.Y. 52, 55; 159 N.E. 720), the doctrine of a continuing trust would charge the agent with a duty to set the proceeds of collection apart from other assets, and hold them intact for transmission to the forwarder. Nothing of the kind was done. Nothing of the kind was required or expected to be done. On the contrary, the statute gave notice to the agent that instead of establishing a trust, it was at liberty to set off what was due to it in one capacity against what was owing by it in another, being liable, however, as debtor when the set-off became final.
We are not concerned at this time with a constructive trust in the strict sense, a trust ex maleficio, which may be fastened upon a wrongdoer irrespective of intention. Pomeroy, Equity Jurisprudence, vol. 1, § 155; vol 3, §§ 1044, 1046. There was no wrongdoing here, but conduct wholly regular, with the result that any trust existing must be one implied in fact. In that situation there is no basis for a holding that a trust was transferred *223 from the proceeds of collection to an equivalent part of the cash resources of the agent, the beneficial interest of the principle being unaffected by the set-off. Cf. Knatchbull v. Hallett, 13 Ch. Div. 696; National Bank v. Insurance Co., 104 U.S. 54, 68; Schuyler v. Littlefield, 232 U.S. 707. To draw such an inference, far from promoting intention, would ignore and override it. By a permitted course of dealing the proceeds of the check, instead of being deposited upon collection in the vaults of the collecting agent, were specifically appropriated to the discharge of other obligations. There was not even a partial or proportionate payment that could have found its way into the vaults, for the balance at the close of the operations of the day was adverse to the collector and in favor of the clearing house. These being the facts, there is no room in our view for the use of those presumptions that affect the conduct of a wrongdoer who draws upon a mingled fund made up of his own moneys and another's. Knatchbull v. Hallett, supra; National Bank v. Insurance Co., supra. The presumption collapses when there is neither trust nor wrong.
For the purposes of this case we do not need to determine whether the Bank Collection Code has changed the preexisting rule whereby in the absence of tokens of a contrary intention a bank ceases to be an agent and is turned into a debtor when collection is complete, without reference to the form or manner of the payment. If we assume for present purposes that a trust will attach under the statute when the proceeds of the collection are in the hands of the collector, the assumption will not hold where there are no proceeds of collection that have ever come into his hands, or where such proceeds as there were have been so mingled and confused that it is impossible to follow them. Currency paid over the counter and deposited in a vault is a thing that can be identified and so subjected to a trust whenever in equity and conscience *224 a trust should be implied. Not only that, but a trust so created will not fail though other dollars may have taken the place of those originally received, for dollars are fungibles and any one of them will be accepted as a substitute for another. Knatchbull v. Hallett, supra. But the situation is very different when what has been received by the collecting agent is not a thing at all, but a reduction of liabilities by set-off or release. Blakey v. Brinson, supra; People v. Merchants & Mechanics Bank, 78 N.Y. 269, 272, 273; Hecker-Jones-Jewell Milling Co. v. Cosmopolitan Trust Co., supra, p. 187; City Bank v. Blackmore, 75 Fed. 771; Anheuser-Busch Brewing Association v. Clayton, 56 Fed. 759; Farmers National Bank v. Pribble, 15 F. (2d) 175, 176; Dickson v. First National Bank, 26 F. (2d) 411; Schilling v. Rowe, 64 F. (2d) 188, 190; Allied Mills v. Horton, 65 F. (2d) 708, 710; Smith v. Zemurray, 69 F. (2d) 5, 6, 7; First National Bank of St. Petersburg v. Miami, 69 F. (2d) 346; Wisdom v. Keen, 69 F. (2d) 349.[4] A debt does not furnish a continuum upon which a trust can be imposed after cancellation or extinguishment has put the debt out of existence.
The truth of this statement, though obvious enough upon its face, finds point and confirmation when the benefit, if any, accruing to the debtor is viewed as of the time of insolvency or later. What was done by the collecting bank through a settlement in the clearing house has not increased the assets available for distribution in the hands of the receiver. What was done through that settlement has had no effect after insolvency except to diminish liabilities. The dividend that would be due upon the debts canceled through the set-off if they were now *225 to be revived is the measure of any benefit accruing to the creditors. Decisions of other courts, to the extent that they give support for a different conclusion are built, as we think, upon an inadequate analysis, and do not win our approval.[5] It is the benefit to the creditors, not the loss to the respondent, that marks the gain to the fund now held by the receiver. If the respondent is permitted to prove against the assets on a parity with other creditors, the share thus allotted will correspond accurately to whatever accretion has resulted from the act of set-off and cancellation in the operations of the clearing house.
One other section of the Bank Collection Code is still to be considered. This is § 13, which has to do, as its caption indicates, with the procedure following insolvency. What is regulated in that section is not the relation between a bank and its correspondents during the normal course of business. What is regulated is the relation and the remedy when insolvency has set in and business is suspended.[6] Then for the first time a trust comes into *226 being through the action of the statute, a trust coextensive in its subject matter with all the assets of the bank, irrespective of their nature, and yet a trust for a special class, the owners of negotiable instruments whose debts remain unsatisfied after payment of the paper has been collected by the agent. Cf. Spradlin v. Royal Manufacturing Co., 73 F. (2d) 776. "Such owner or owners shall be entitled to a preferred claim upon such assets, irrespective of whether the fund representing such item or items can be traced and identified as part of such assets or has been intermingled with or converted into other assets of such failed bank." A trust so created, to arise upon insolvency, is a preference under another name. As applied to a national bank, the preference is plainly inconsistent with the system of equal distribution established by the federal law. R.S. § 5236; 12 U.S.C. § 194; Davis v. Elmira Savings Bank, 161 U.S. 275, 283, 284; Easton v. Iowa, 188 U.S. 220, 229; Cook County National Bank v. United States, 107 U.S. 445; Texas & Pacific Ry. Co. v. Pottorff, 291 U.S. 245; Lewis v. Fidelity & Deposit Co. of Maryland, supra. The power of the nation within the field of its legitimate exercise overrides in case of conflict the power of the states.
The decree is reversed, and the cause remanded for further proceedings in accordance with this opinion.
Reversed.
NOTES
[1] The Code is stated to have been adopted in as many as eighteen states. It was framed by counsel for the American Bankers Association in an endeavor to promote uniformity of banking practice in the collection of commercial paper.
[2] The decisions to the contrary are criticized in Hecker-Jones-Jewell Co. v. Cosmopolitan Trust Co., supra, and additional decisions are collected by Scott, Cases on Trusts, pp. 67, 68.
[3] § 9. "Where ordinary care is exercised, any agent collecting bank may receive in payment of an item without becoming responsible as debtor therefor, whether presented by mail, through the clearing house or over the counter of the drawee or payor, in lieu of money, either (a) the check or draft of the drawee or payor upon another bank or (b) the check or draft of any other bank upon any bank other than the drawee or payor of the item or (c) such method of settlement as may be customary in a local clearing house or between clearing banks or otherwise: Provided, That whenever such agent collecting bank shall request or accept in payment an unconditional credit which has been given to it on the books of the drawee or payor or on the books of any other bank, such agent collecting bank shall become debtor for such item and shall be responsible therefor as if the proceeds were actually received by it in money."
The time within which credit, when once given, may be revoked is defined by § 3: "A credit given by a bank for an item drawn on or payable at such bank shall be provisional, subject to revocation at or before the end of the day on which the item is deposited in the event the item is found not payable for any reason. Whenever a credit is given for an item deposited after banking hours such right of revocation may be exercised during the following business day."
[4] Many cases are collected in Bogert, Failed Banks, Collection Items and Trust Preferences, 29 Mich. Law Review 545, 551, 552.
[5] For a collection of the cases, see 82 A.L.R. 97.
[6] "Sec. 13. (1) When the drawee or payor, or any other agent collecting bank shall fail or be closed for business by the state bank commissioner or by action of the board of directors or by other proper legal action, after an item shall be mailed or otherwise entrusted to it for collection or payment but before the actual collection or payment thereof, it shall be the duty of the receiver or other official in charge of its assets to return such item, if same is in his possession, to the forwarding or presenting bank with reasonable diligence.
.....
"(3) Where an agent collecting bank other than the drawee or payor shall fail or be closed for business as above, after having received in any form the proceeds of an item or items entrusted to it for collection, but without such item or items having been paid or remitted for by it either in money or by an unconditional credit given on its books or on the books of any other bank which has been requested or accepted so as to constitute such failed collecting or other bank debtor therefor, the assets of such agent collecting bank which has failed or been closed for business as above shall be impressed with a trust in favor of the owner or owners of such item or items for the amount of such proceeds and such owner or owners shall be entitled to a preferred claim upon such assets, irrespective of whether the fund representing such item or items can be traced and identified as part of such assets or has been intermingled with or converted into other assets of such failed bank."
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Nebraska Supreme Court Online Library
www.nebraska.gov/apps-courts-epub/
08/14/2020 08:08 AM CDT
- 978 -
Nebraska Supreme Court Advance Sheets
305 Nebraska Reports
STATE v. ANDERSON
Cite as 305 Neb. 978
State of Nebraska, appellee, v.
Melvin Anderson, appellant.
___ N.W.2d ___
Filed May 29, 2020. No. S-19-1038.
1. Effectiveness of Counsel: Appeal and Error. Whether a claim of inef-
fective assistance of trial counsel may be determined on direct appeal is
a question of law.
2. ____: ____. In reviewing claims of ineffective assistance of counsel on
direct appeal, an appellate court decides only whether the undisputed
facts contained within the record are sufficient to conclusively determine
whether counsel did or did not provide effective assistance and whether
the defendant was or was not prejudiced by counsel’s alleged deficient
performance.
3. Pleas: Waiver. Generally, a voluntary guilty plea or plea of no contest
waives all defenses to a criminal charge.
4. Effectiveness of Counsel: Pleas. When a defendant pleads guilty or
no contest, he or she is limited to challenging whether the plea was
understandingly and voluntarily made and whether it was the result of
ineffective assistance of counsel.
5. Effectiveness of Counsel: Proof. To prevail on a claim of ineffective
assistance of counsel, the defendant must show that his or her counsel’s
performance was deficient and that this deficient performance actually
prejudiced the defendant’s defense.
6. Effectiveness of Counsel: Appeal and Error. In reviewing claims of
ineffective assistance of counsel on direct appeal, an appellate court
decides only whether the undisputed facts contained within the record
are sufficient to conclusively determine whether counsel did or did not
provide deficient performance and whether the defendant was or was not
prejudiced by counsel’s alleged deficient performance.
7. Effectiveness of Counsel: Records: Appeal and Error. The record on
direct appeal is sufficient to review a claim of ineffective assistance of
trial counsel if it establishes either that trial counsel’s performance was
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305 Nebraska Reports
STATE v. ANDERSON
Cite as 305 Neb. 978
not deficient, that the appellant will not be able to establish prejudice, or
that trial counsel’s actions could not be justified as a part of any plau-
sible trial strategy.
8. Effectiveness of Counsel: Proof. To show that counsel’s performance
was deficient, a defendant must show that counsel’s performance did not
equal that of a lawyer with ordinary training and skill in criminal law.
9. ____: ____. To show prejudice in a claim of ineffective assistance of
counsel, the defendant must demonstrate a reasonable probability that
but for counsel’s deficient performance, the result of the proceeding
would have been different.
10. Words and Phrases. A reasonable probability is a probability sufficient
to undermine confidence in the outcome.
11. Convictions: Effectiveness of Counsel: Pleas: Proof. When a convic-
tion is based upon a plea of no contest, the prejudice requirement for
an ineffective assistance of counsel claim is satisfied if the defendant
shows a reasonable probability that but for the errors of counsel, the
defendant would have insisted on going to trial rather than pleading
no contest.
12. Preliminary Hearings: Probable Cause. The purpose of a preliminary
hearing is to ascertain whether or not a crime has been committed and
whether or not there is probable cause to believe the accused commit-
ted it; it is not a trial of a person accused to determine his or her guilt
or innocence, but is a procedural safeguard to prevent a person from
being detained in custody without probable cause existing that the crime
charged was committed by that person.
13. Preliminary Hearings: Plea in Abatement. A plea in abatement is used
to challenge the sufficiency of the evidence at a preliminary hearing.
14. Motions to Dismiss: Plea in Abatement. Generally, a motion in the
nature to dismiss is permitted in criminal cases in various forms, includ-
ing a motion to quash and a plea in abatement.
15. Plea in Abatement: Evidence: Probable Cause: Verdicts. In order to
resist a challenge by a plea in abatement, the evidence received by the
committing magistrate need show only that a crime was committed and
that there is probable cause to believe that the accused committed it; the
evidence need not be sufficient to sustain a verdict of guilty beyond a
reasonable doubt.
16. Effectiveness of Counsel. As a matter of law, counsel is not ineffective
for failing to make a meritless objection.
17. Preliminary Hearings: Probable Cause: Witnesses. A full adversarial
hearing in which witnesses are called is not required for a determina-
tion of probable cause in a preliminary hearing under Neb. Rev. Stat.
§ 29-1607 (Reissue 2016).
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305 Nebraska Reports
STATE v. ANDERSON
Cite as 305 Neb. 978
18. Constitutional Law: Preliminary Hearings: Probable Cause. In an
informal preliminary hearing, it does not violate the Confrontation
Clause to rely on out-of-court statements to determine probable cause
for purposes of continuing a defendant’s pretrial detention.
19. Criminal Law: Depositions: Pretrial Procedure. There is no obliga-
tion for the State to produce the victim or assist in locating the victim
for purposes of a pretrial deposition by defense counsel.
Appeal from the District Court for Lancaster County:
Andrew R. Jacobsen, Judge. Affirmed.
Abby Osborn, of Shiffermiller Law Office, P.C., L.L.O., for
appellant.
Douglas J. Peterson, Attorney General, and Kimberly A.
Klein for appellee.
Heavican, C.J., Miller-Lerman, Cassel, Stacy, Funke,
Papik, and Freudenberg, JJ.
Freudenberg, J.
NATURE OF CASE
In an appeal from a plea-based conviction, the defendant,
through new counsel, asserts that his plea was the result of
ineffective assistance of trial counsel. The majority of the alle-
gations of deficient conduct revolve around the victim’s failure
to appear at the preliminary hearing and law enforcement’s
inability to serve her with subpoenas for her appearance at the
preliminary hearing and subsequent deposition. The defendant
also argues that trial counsel was ineffective by failing to move
to suppress his inculpatory statement to law enforcement in
relation to the charge of third degree domestic assault to which
he pleaded.
BACKGROUND
Melvin Anderson was originally charged in county court with
strangulation, in violation of Neb. Rev. Stat. § 28-310.01(2)
(Reissue 2016), in relation to events occurring on March 14,
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STATE v. ANDERSON
Cite as 305 Neb. 978
2019. Following a hearing on March 15, the court issued an
order of probable cause and further detention.
The probable cause affidavit described that law enforce-
ment had responded to a call of domestic assault on March
14, 2019. Law enforcement observed red marks on both sides
of the victim’s neck consistent with being choked. The victim
described that while she was at her and Anderson’s apartment,
Anderson grabbed her around the neck with one hand and
held her against the wall for several minutes while threaten-
ing to kill her. She said there were moments when she could
not breathe. The victim’s cousin witnessed the assault and was
able to eventually assist the victim and accompany her out
of the apartment. Law enforcement later contacted Anderson,
who admitted only to grabbing the victim by her coat so that
he could get his wallet and telephone from her. Anderson
described that he grabbed the front of the victim’s coat near
her neck and that it was possible he could have grabbed her
neck with the coat.
On April 25, 2019, trial counsel filed a praecipe for a
subpoena to be served upon the victim, commanding her
appearance at the preliminary hearing scheduled for May
22. The journal entry for the preliminary hearing on May
22 reflects that the court found probable cause and that the
case was bound over to the district court for trial. It does not
describe the court’s reasoning in finding probable cause. The
only witness at the hearing was a law enforcement officer.
The journal entry does not reflect that the victim appeared at
the hearing.
On June 26, 2019, an amended information was filed in
district court charging Anderson with the original count of
strangulation in violation of § 28-310.01(2) and new counts of
tampering with a witness or informant in violation of Neb. Rev.
Stat. § 28-919 (Reissue 2016) and violating a protection order
in violation of Neb. Rev. Stat § 42-924(4) (Cum. Supp. 2018).
The new counts related to events occurring between June 1
and 12. Anderson waived appearance at the arraignment of the
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STATE v. ANDERSON
Cite as 305 Neb. 978
amended information. There is no record that a preliminary
hearing was held on the amended charges.
A reciprocal discovery order was entered on June 25, 2019,
with depositions to be taken by Anderson within 30 days. A
praecipe for a subpoena was filed on June 25, commanding
the victim to appear as a witness before the district court on
July 16. Records show that the sheriff attempted to serve the
subpoena on July 1, 9, and 12. On July 16, at the request of the
county attorney, the subpoena was returned unserved.
Another subpoena was issued on July 16, 2019, command-
ing the victim to appear as a witness before the district court
on July 22. Records show that the sheriff attempted to serve
the subpoena on July 18, 19, and 22, and it was returned as not
served on July 23.
On August 23, 2019, Anderson entered pleas of no contest
to the State’s second amended information, which then charged
Anderson with one count of third degree domestic assault
in violation of Neb. Rev. Stat. § 28-323(1) and (4) (Reissue
2016), one count of attempted tampering with a witness or
informant in violation of Neb. Rev. Stat. §§ 28-201(4)(e) and
28-919 (Reissue 2016), and one count of violating a protection
order under § 42-924(4).
The factual basis provided by the State asserted that on
March 14, 2019, law enforcement responded to a report of
domestic assault. A protection order had been granted for the
victim against Anderson earlier that day, but had not yet been
served. Anderson went to the victim’s apartment, there was an
argument, and Anderson grabbed the victim by the neck, apply-
ing so much pressure to her neck that there were moments she
was unable to breathe and telling her that he would kill her.
The victim’s cousin was a witness to the assault and was able
to assist the victim in leaving the apartment. Anderson later
indicated to law enforcement that he had an argument with
the victim and admitted to grabbing her coat, but denied stran-
gling her.
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While Anderson was in custody for this offense, the victim
received a letter addressed to her from an inmate at the jail
who identified himself as “Lucky Luciano.” The victim did not
open the letter. She knew that “Lucky” was Anderson’s nick-
name. Law enforcement opened the letter, which informed the
victim she should tell the courts that there was no fight and no
choking, that she feels protected and safe around “Lucky,” and
that it was a mistake putting him in jail. The letter directed the
victim to report that she was off her medication and did not
know what she was doing when she made the report. Enclosed
with the letter was a piece of a dreadlock that the victim
believed was from Anderson. There was a protection order in
place when this letter was delivered to the victim.
After an extensive colloquy with Anderson, the court
accepted Anderson’s pleas as voluntarily, freely, knowingly,
and intelligently made, and it found that there was a factual
basis for the pleas. Despite trial counsel’s request to sentence
Anderson immediately, the court ordered a presentence investi-
gation be completed. The State noted that it was trying to reach
the victim in order to obtain a victim impact statement, but that
its last contact with her had been in May 2019.
Once the presentence investigation was completed, the court
proceeded to sentencing. The State noted at the sentencing
hearing that the probation office was able to obtain a victim
impact statement, which was somewhat surprising because the
State had been having difficulty locating her. The State noted
that Anderson “had the benefit of a very generous plea agree-
ment from the State simply because we were having difficulty
finding [the victim] after we tried to subpoena her several
times for a deposition and trying to locate her by mail and
by phone.”
The court sentenced Anderson to imprisonment for 180 days
on count 1, 360 days on count 2, and 360 days on count 3. The
sentences on counts 2 and 3 were ordered to be served concur-
rently to each other and consecutively to count 1.
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Anderson appeals, seeking to set aside his pleas and the
resulting convictions and sentences, as the result of ineffec-
tive assistance of trial counsel. He obtained new counsel for
his appeal.
ASSIGNMENTS OF ERROR
Anderson assigns that trial counsel provided ineffective
assistance by (1) failing to move to continue the plea in abate-
ment, when the subpoena issued by Anderson was not served
on the alleged victim; (2) failing to file a plea in abatement,
because there was insufficient evidence to support a probable
cause finding that Anderson strangled the alleged victim; (3)
failing to move the trial court to require the State to produce
the alleged victim for deposition and exclude the alleged vic-
tim as a witness; (4) failing to move to suppress Anderson’s
statement; and (5) counseling Anderson to enter a plea. We
disregard Anderson’s broad assignment of error that trial coun-
sel provided ineffective assistance of counsel to Anderson in
violation of his Sixth Amendment rights, because assignments
of error on direct appeal regarding ineffective assistance of
trial counsel must specifically allege deficient performance,
and an appellate court will not scour the remainder of the brief
in search of such specificity. 1
STANDARD OF REVIEW
[1] Whether a claim of ineffective assistance of trial counsel
may be determined on direct appeal is a question of law. 2
[2] In reviewing claims of ineffective assistance of counsel
on direct appeal, an appellate court decides only whether the
undisputed facts contained within the record are sufficient to
conclusively determine whether counsel did or did not provide
effective assistance and whether the defendant was or was not
prejudiced by counsel’s alleged deficient performance. 3
1
State v. Mrza, 302 Neb. 931, 926 N.W.2d 79 (2019).
2
Id.
3
Id.
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ANALYSIS
[3,4] Generally, a voluntary guilty plea or plea of no con-
test waives all defenses to a criminal charge. 4 Thus, when a
defendant pleads guilty or no contest, he or she is limited to
challenging whether the plea was understandingly and vol-
untarily made and whether it was the result of ineffective
assistance of counsel. 5 For this direct appeal, Anderson has
obtained counsel different from trial counsel, and he asserts
that his pleas were the result of ineffective assistance of trial
counsel. He does not challenge whether his pleas were other-
wise understandingly and voluntarily made.
[5-7] To prevail on a claim of ineffective assistance of
counsel, the defendant must show that his or her counsel’s
performance was deficient and that this deficient performance
actually prejudiced the defendant’s defense. 6 In reviewing
claims of ineffective assistance of counsel on direct appeal,
an appellate court decides only whether the undisputed facts
contained within the record are sufficient to conclusively
determine whether counsel did or did not provide deficient
performance and whether the defendant was or was not preju-
diced by counsel’s alleged deficient performance. 7 The record
on direct appeal is sufficient to review a claim of ineffective
assistance of trial counsel if it establishes either that trial
counsel’s performance was not deficient, that the appellant
will not be able to establish prejudice, or that trial coun-
sel’s actions could not be justified as a part of any plausible
trial strategy. 8
[8-11] To show that counsel’s performance was deficient, a
defendant must show that counsel’s performance did not equal
4
State v. Privett, 303 Neb. 404, 929 N.W.2d 505 (2019).
5
Id.
6
See, Strickland v. Washington, 466 U.S. 668, 104 S. Ct. 2052, 80 L. Ed. 2d
674 (1984); State v. Avina-Murillo, 301 Neb. 185, 917 N.W.2d 865 (2018).
7
See State v. Lee, 304 Neb. 252, 934 N.W.2d 145 (2019).
8
State v. Iddings, 304 Neb. 759, 936 N.W.2d 747 (2020).
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that of a lawyer with ordinary training and skill in criminal
law. 9 To show prejudice, the defendant must demonstrate a
reasonable probability that but for counsel’s deficient per-
formance, the result of the proceeding would have been dif-
ferent. 10 A reasonable probability is a probability sufficient to
undermine confidence in the outcome. 11 When a conviction
is based upon a plea of no contest, the prejudice requirement
for an ineffective assistance of counsel claim is satisfied if the
defendant shows a reasonable probability that but for the errors
of counsel, the defendant would have insisted on going to trial
rather than pleading no contest. 12
Anderson asserts that but for trial counsel’s failure to pur-
sue various pretrial motions pertaining to the victim’s lack
of appearance at the preliminary hearing and the inability to
serve a subpoena upon her, the charges against him would
have been dismissed; therefore, he would not have pleaded no
contest. He also asserts that counsel was deficient by failing to
move in limine to suppress his statements to law enforcement.
Anderson’s assignment of error that counsel was ineffective
in advising him to plead no contest is intertwined with these
assertions because, he argues, it was deficient conduct for
trial counsel to advise him to plead before pursuing the pre-
trial motions.
Preliminary Hearing
Anderson first argues that but for trial counsel’s ineffective
assistance in failing to file a plea in abatement or a motion
to continue at the preliminary hearing, the charges against
him would have been dismissed before he decided to plead
no contest. The undisputed facts contained within the record
are sufficient to conclusively determine that trial counsel was
9
Mrza, supra note 1.
10
Id.
11
Id.
12
See Privett, supra note 4.
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not deficient by failing to file a plea in abatement. Further,
we are able to conclusively determine upon the record that
Anderson will be unable to demonstrate that but for trial coun-
sel’s failure to file another motion to continue the preliminary
hearing, the charges would have been dismissed—the premise
upon which he asserts he would have declined to enter into a
plea bargain agreement with the State. Accordingly, the record
conclusively demonstrates that the allegedly deficient act of
failing to move to continue the preliminary hearing did not
prejudice Anderson.
[12] The purpose of a preliminary hearing is to ascertain
whether or not a crime has been committed and whether or not
there is probable cause to believe the accused committed it. 13 It
is not a trial of a person accused to determine his or her guilt
or innocence, but is a procedural safeguard to prevent a person
from being detained in custody without probable cause existing
that the crime charged was committed by that person. 14
Anderson asserts that the court stated during the preliminary
hearing that it was binding the matter over because Anderson
had admitted he strangled the victim, and he argues that
because the probable cause affidavit did not contain such an
admission, the case would have been dismissed had counsel
filed a plea in abatement on the grounds of lack of probable
cause. With this reasoning, Anderson concludes that trial coun-
sel was ineffective for failing to file a plea in abatement.
[13-15] A plea in abatement is used to challenge the suf-
ficiency of the evidence at a preliminary hearing. 15 It has been
observed that, generally, a motion in the nature to dismiss
is permitted in criminal cases in various forms, including a
motion to quash and a plea in abatement. 16 In order to resist
a challenge by a plea in abatement, the evidence received by
13
State v. Hill, 255 Neb. 173, 583 N.W.2d 20 (1998).
14
Id.
15
State v. Lasu, 278 Neb. 180, 768 N.W.2d 447 (2009).
16
See State v. Chauncey, 295 Neb. 453, 890 N.W.2d 453 (2017).
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the committing magistrate need show only that a crime was
committed and that there is probable cause to believe that the
accused committed it. 17 The evidence need not be sufficient to
sustain a verdict of guilty beyond a reasonable doubt. 18
Anderson acknowledges that the county court’s alleged state-
ment as to its reasoning in concluding there was probable cause
is not in the record, because the preliminary hearing was not
preserved. He does not assert that trial counsel was ineffective
in failing to insist that the preliminary hearing be part of the
record. In any event, whatever was said by the county court
at the preliminary hearing, the undisputed facts of the record
affirmatively demonstrate there was probable cause to show
that a crime was committed and that Anderson committed it.
At the time of the preliminary hearing, Anderson had not yet
sent the letter from “Lucky,” and his allegations of ineffective
assistance of trial counsel at the preliminary hearing appear
limited to count 1, strangulation, which was reduced to third
degree domestic assault pursuant to the plea bargain agreement.
The affidavit of probable cause described that law enforce-
ment had observed red marks on both sides of the victim’s
neck consistent with being choked and that the victim reported
Anderson had grabbed her around the neck with one hand and
held her against the wall for several minutes while threatening
to kill her. She told law enforcement there were moments when
she could not breathe.
[16] The affidavit provided sufficient evidence to support
the court’s finding of probable cause. A plea in abatement, had
it been made, would have lacked merit. And, as a matter of
law, counsel is not ineffective for failing to make a meritless
objection. 19
Anderson also asserts that trial counsel was ineffective for
failing to move to continue the preliminary hearing, because
17
Id.
18
See id.
19
See State v. Schwaderer, 296 Neb. 932, 898 N.W.2d 318 (2017).
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the victim did not appear at the hearing despite the issuance of
a subpoena. We observe that trial counsel moved to continue
the preliminary hearing, albeit not before issuing a summons
for the victim’s appearance. Anderson articulates his argument
as follows:
Rather than moving to continue the hearing in order to
obtain [the victim’s] presence and testimony, Anderson’s
counsel allowed the matter to proceed through the pre-
liminary hearing denying Anderson the right to confront
[the victim] at the first opportunity which could have
produced the first opportunity to have the case dismissed
by the Court. 20
In his summary of the arguments, Anderson also argues that
trial counsel’s failure to move to continue the preliminary hear-
ing “theoretically waived Anderson’s ability to use the Court’s
power to enforce the subpoena regarding [the victim’s] refusal
to appear if she had been served.” 21
[17,18] Anderson’s reliance on the right to confrontation
under these facts is misplaced. A full adversarial hearing in
which witnesses are called is not required for a determination
of probable cause in a preliminary hearing under Neb. Rev.
Stat. § 29-1607 (Reissue 2016). 22 In an informal preliminary
hearing, it does not violate the Confrontation Clause to rely on
out-of-court statements to determine probable cause for pur-
poses of continuing a defendant’s pretrial detention. 23
Nor is it clear how trial counsel’s inability to cross-examine
the victim at the preliminary hearing could have resulted in
the dismissal of the strangulation charge. Even if trial counsel
could have obtained another continuance and the victim would
20
Brief for appellant at 20.
21
Id. at 15.
22
See, Neb. Rev. Stat. § 27-1101 (Reissue 2016); State v. Wilkinson, 219
Neb. 685, 365 N.W.2d 478 (1985); Daniel A. Morris, Nebraska Trials
§ 4:11 (2019).
23
See Gerstein v. Pugh, 420 U.S. 103, 95 S. Ct. 854, 43 L. Ed. 2d 54 (1975).
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have eventually appeared and been cross-examined at the pre-
liminary hearing, Anderson does not argue that she would have
recanted her report to law enforcement. Nor would it follow
that the court would have dismissed the case if she had. There
was a witness to the strangulation, and law enforcement had
observed the victim’s injuries.
As already stated, with or without the victim’s testimony,
there was probable cause to conclude that a crime was com-
mitted. The record, accordingly, conclusively demonstrates that
Anderson would be unable, in an evidentiary hearing, to prove
the strangulation charge would have been dismissed if trial
counsel had moved to continue the preliminary hearing. The
undisputed facts in the record demonstrate that Anderson was
not prejudiced by an alleged failure to obtain dismissal because
of trial counsel’s failure to move to continue the prelimi-
nary hearing.
As for any argument that the failure to move to continue the
preliminary hearing prejudiced Anderson because he thereby
waived his ability to move for an order compelling the State
to produce the victim for a pretrial deposition, as explained in
the next section, a motion for an order compelling the State to
produce the victim would have lacked merit. Trial counsel’s
alleged waiver of a nonexistent right could not have preju-
diced Anderson.
Alleged Unavailability
of Victim
Anderson asserts trial counsel was ineffective by failing to
move for a court order that the State produce the victim or
otherwise assist in making the victim available for the deposi-
tion ordered by the court pursuant to Neb. Rev. Stat. § 29-1917
(Reissue 2016) and for which a subpoena under Neb. Rev. Stat.
§ 25-1223 (Cum. Supp. 2018) had been issued at trial counsel’s
request. In conjunction with this allegation, Anderson asserts
that his trial counsel was ineffective by failing to move to sup-
press the victim’s testimony.
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According to Anderson, if trial counsel had made a request
that the State produce the victim or assist in locating her and
the request had been granted, and if the State had thereafter
acted in bad faith by failing to comply with the order, then
trial counsel could have requested that the victim’s testimony
be excluded as a sanction against the State. Anderson asserts
that if this had been done, the court would have granted such
a motion and he would have insisted on going to trial. Again,
these allegations appear limited to the charge of strangulation
that was reduced to third degree domestic assault under the
plea bargain agreement.
[19] The long chain of hypothetical variables in this allega-
tion of ineffective assistance of counsel is not amenable to
evidentiary proof. Most notably, it fails at its first premise. As
Anderson admits, there is no obligation for the State to pro-
duce the victim or assist in locating the victim for purposes
of a pretrial deposition by defense counsel. There would have
been no merit to a motion for a court order compelling the
State to produce the victim or otherwise assist in making the
victim available for the court-ordered deposition. As a matter
of law, counsel is not ineffective for failing to make a meritless
objection. 24 Because there is no merit to Anderson’s assertion
that trial counsel was ineffective for failing to move to compel
the State in this manner, it follows that there is no merit to his
assertion that trial counsel was ineffective for failing to move
to suppress the victim’s testimony, under the hypothetical that
had such motion been made and granted, the State would have
acted in bad faith.
We also note that while there generally are remedies for
the State’s fault or bad faith, Anderson does not assert that the
State was concealing access to exculpatory evidence in any
sort of a violation of Brady v. Maryland. 25 He does not assert
that the victim’s testimony would be exculpatory. Nor does he
24
See State v. Schwaderer, supra note 19.
25
Brady v. Maryland, 373 U.S. 83, 83 S. Ct. 1194, 10 L. Ed. 2d 215 (1963).
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assert that the State was concealing the victim’s whereabouts.
Indeed, the record indicates that the State had been unable to
contact her despite its attempts to do so. The allegation that
the State somehow would have acted in bad faith if there had
been an order to supply the victim for the deposition is entirely
too speculative to be susceptible to proof at an evidentiary
hearing. Prejudice for purposes of ineffective assistance of
counsel cannot be founded on hypothetical bad acts that did
not occur but allegedly would have occurred had counsel not
acted deficiently.
We are able to conclusively determine on the record that
counsel was not ineffective for failing to move the court to
compel the State to produce the victim or assist in locating her
so that she could be deposed by trial counsel.
Anderson’s Statement to
Law Enforcement
Lastly, Anderson argues that trial counsel was ineffective for
failing to move to suppress his statement to law enforcement
as involuntarily made. Anderson asserts that he was heav-
ily medicated and therefore unable to understandably waive
his Miranda rights when he made the statement. Anderson
does not assert that any statements are at issue other than
those described in the affidavit in support of probable cause.
According to that report, Anderson specifically denied that he
had strangled the victim. Anderson admitted only that he “did
grab the victim by her coat” so that he could get his wallet and
telephone from her.
Anderson describes this as a “confession.” 26 It clearly was
not a confession to the original charge of strangulation, but
perhaps could be described as such in relation to the charge of
third degree domestic assault to which he pleaded. It cannot
be determined on the appellate record whether this “confes-
sion” was voluntarily made, and thus, we cannot determine on
26
Brief for appellant at 20.
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this record whether a motion to suppress the statement would
have had any merit. Neither does the record affirmatively dis-
prove Anderson’s assertion that if the statement would have
been suppressed, he would not have pleaded no contest to the
charge of third degree domestic assault. Therefore, we do not
resolve on direct appeal the merits of this allegation of ineffec-
tive assistance.
CONCLUSION
For the foregoing reasons, we affirm the judgment below.
Affirmed.
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305 U.S. 364 (1939)
FORD MOTOR CO.
v.
NATIONAL LABOR RELATIONS BOARD.
Nos. 182 and 183.
Supreme Court of United States.
Argued December 14, 1938.
Decided January 3, 1939.
CERTIORARI TO THE CIRCUIT COURT OF APPEALS FOR THE SIXTH CIRCUIT.
*365 Mr. Alfred McCormack, with whom Messrs. Frederick H. Wood, Louis J. Columbo, and Thomas T. Cooke were on the brief, for petitioner.
Mr. Charles Fahy, with whom Solicitor General Jackson, and Messrs. Charles A. Horsky and Robert B. Watts were on the brief, for respondent.
MR. CHIEF JUSTICE HUGHES delivered the opinion of the Court.
This case presents the question of the propriety of the action of the Circuit Court of Appeals in remanding a cause to the National Labor Relations Board for the purpose of setting aside its findings and order, and issuing *366 proposed findings, and making its decision and order upon reconsideration.
The National Labor Relations Board, on December 22, 1937, entered an order against petitioner directing it to desist from described practices and to offer reinstatement, with back pay, to certain discharged employees.
On January 7, 1938, the Board filed its petition in No. 182 (called the Board's proceeding) in the Circuit Court of Appeals, seeking the enforcement of its order, and at the same time filed the transcript of the record.
On April 4, 1938, petitioner asked leave to adduce additional evidence. On April 11, 1938, petitioner filed its answer to the Board's petition, alleging that the order was invalid and asking that it be set aside upon the grounds, among others, that the Board had failed to accord petitioner a full and fair hearing, and that the Board had not itself considered the evidence but had adopted as its own a decision prepared by its subordinates without affording petitioner any opportunity to be heard thereon. It was also alleged that the findings were not supported by the evidence. Petitioner moved for a commission to take the depositions of witnesses, and served interrogatories upon the Board.
On May 2, 1938, after our decision in Morgan v. United States (April 25, 1938), 304 U.S. 1, the Board filed a motion for leave to withdraw its petition for enforcement and the transcript of record, without prejudice. The Board stated that, should its motion be granted, it would set aside its order, would issue proposed findings, with permission to the parties to file exceptions and present argument, and thereafter make its decision and order. On May 5, 1938, the court granted the Board's motion. On May 6, 1938, the Board served notice on petitioner of its intention to vacate its findings and order of December 22, 1937, but later in view of petitioner's objection held that action under advisement. On May 9, 1938, the order *367 of May 5th was amended so far as it permitted the withdrawal of the transcript of record and the court directed that the transcript remain on file. On June 2, 1938, the Board purported to withdraw its petition for enforcement. On June 4, 1938, the petitioner moved to vacate the order of May 5th. That motion was denied on June 10, 1938, with a stay of the withdrawal of the Board's petition pending application here for writ of certiorari.
Meanwhile, on May 4, 1938, the petitioner filed with the Circuit Court of Appeals in No. 183 (called the petitioner's proceeding) its petition asking the court to review and set aside the Board's order of December 22, 1937. On May 9, 1938, the court directed that the transcript of record filed in the Board's proceeding should be deemed to have been filed in the petitioner's proceeding to review as of the date of May 4th. On June 2, 1938, the Board filed a motion to vacate that order of May 9th. At the same time the Board moved that in the event of a denial of that motion the case should be remanded to the Board for further proceedings.
On June 10, 1938, the court entered its order denying certain motions of the petitioner for leave to amend its petition for review, denying the Board's motion to vacate the order of May 9th, and granting the Board's motion of June 2d
"to remand this cause to the National Labor Relations Board for the purpose of setting aside its findings and order of December 22, 1937, and issuing proposed findings, and making its decision and order upon a reconsideration of the entire case."
Because of the importance of the questions presented in relation to the scope of the court's jurisdiction and its appropriate exercise, certiorari was granted to review the order of May 5th, granting the Board's motion to withdraw its petition for enforcement, and the order of *368 June 10th, remanding the cause as above stated. October 10, 1938.
First. The authority conferred upon the Board by § 10 (d)[1] of the National Labor Relations Act, to modify or set aside its findings and order, ended with the filing in court of the transcript of record. Upon the filing of the transcript in connection with the Board's petition for enforcement, and notice, the Circuit Court of Appeals had jurisdiction of the proceeding as provided in § 10 (e) of the Act, as follows:
"Upon such filing [of the transcript], the court shall cause notice thereof to be served upon such person, and thereupon shall have jurisdiction of the proceeding and of the question determined therein, and shall have power to grant such temporary relief or restraining order as it deems just and proper, and to make and enter upon the pleadings, testimony, and proceedings set forth in such transcript a decree enforcing, modifying, and enforcing as so modified, or setting aside in whole or in part the order of the Board. . . . The findings of the Board as to the facts, if supported by evidence, shall be conclusive. If either party shall apply to the court for leave to adduce additional evidence and shall show to the satisfaction of the court that such additional evidence is material and that there were reasonable grounds for the failure to adduce such evidence in the hearing before the Board, its member, agent, or agency, the court may order such additional evidence to be taken before the Board, its member, agent, or agency, and to be made a part of the transcript. The Board may modify its findings as to the *369 facts, or make new findings, by reason of additional evidence so taken and filed, and it shall file such modified or new findings, which, if supported by evidence, shall be conclusive, and shall file its recommendations, if any, for the modification or setting aside of its original order. The jurisdiction of the court shall be exclusive and its judgment and decree shall be final, except that the same shall be subject to review . . ." 49 Stat. 454, 455.
Under § 10 (f) the jurisdiction of the Circuit Court of Appeals is of the same character and scope in a proceeding for review brought by a person aggrieved by an order of the Board as the jurisdiction which the court has in a proceeding instituted by the Board for enforcement.[2]
While § 10 (f) assures to any aggrieved person opportunity to contest the Board's order, it does not require an unnecessary duplication of proceedings. The aim of the Act is to attain simplicity and directness both in the administrative procedure and on judicial review. Where the Board has petitioned for enforcement under § 10 (e) *370 and the jurisdiction of the court has attached, no separate proceeding is needed on the part of the person thus brought into the court. The breadth of the jurisdiction conferred upon the court to set aside or modify in whole or in part the Board's order, or to permit new evidence to be taken, necessarily implies that the party proceeded against is entitled to raise all pertinent questions and to obtain any affirmative relief that is appropriate. Here, petitioner in the Board's proceeding had sought affirmative relief and had taken steps to establish that right. Considering the scope and purpose of the jurisdiction of the court in a proceeding under § 10 (e), and the position and rights of the person proceeded against, we are unable to conclude that the Board has an absolute right to withdraw its petition at its pleasure. We think that permission to withdraw must rest in the sound discretion of the court to be exercised in the light of the circumstances of the particular case.[3]
While in the instant case there are two proceedings, separately carried on the docket, they were essentially one so far as any question as to the legality of the Board's order was concerned. Petitioner's answer in the Board's proceeding presented substantially the same objections as those raised in petitioner's proceeding for review. The present contentions of the parties are largely addressed to procedural distinctions, but if we follow the course of the two proceedings we find that there is really but one ultimate question and that is with respect to the court's *371 final action in remanding the cause to the Board for further proceedings.
Before the court on May 5th granted the Board motion to withdraw its petition, the other proceeding had been instituted by the filing of the petition for review on May 4th. That proceeding was taken by petitioner as a person aggrieved by the order of December 22, 1937, and was doubtless prompted by the Board's motion to withdraw its own petition. As the transcript of the record of the administrative proceeding had already been certified and filed, it was within the court's control. The order of May 5th was amended on May 9th so as to preclude the withdrawal of the transcript, and on the same day the court ordered that the transcript be deemed to be filed in the petitioner's proceeding as of May 4th. We see no reason to doubt the power of the court to retain the transcript or to amend its order of May 5th accordingly, and certiorari has not been sought by the Board in relation to the order of May 9th. Our decision in In re National Labor Relations Board, 304 U.S. 486, is not apposite. There the transcript had not been filed, the court had not acquired jurisdiction of the subject matter, and the Board still had the authority conferred upon it by § 10 (d). In the circumstances of the present case we think it is clear that the court was possessed of exclusive jurisdiction of the administrative proceeding "and of the question determined therein," and thus of the power of "enforcing, modifying, and enforcing as so modified, or setting aside in whole or in part the order of the Board." § 10 (f). As on the Board's petition the court could grant affirmative relief to the person against whom the Board's order was directed, so on the court's entertaining the petition of that person for review the Board could seek not merely to have the petition denied but to have its order enforced, regardless of any separate proceeding to that end.
*372 It thus appears that neither the order of May 5th, granting the Board permission to withdraw its petition, nor the attempt of the Board on May 6th to reassume control of the administrative proceeding, nor the Board's withdrawal of its petition on June 2d, accomplished anything of substance, as the Board, in the presence of the court's continued and exclusive jurisdiction, remained without authority to deal with its order. And any question as to the propriety of the court's order of May 5th became one of merely academic interest after the court by its order of June 10th remanded the cause to the Board. We turn to the consideration of that order.
Second. The cause was remanded to the Board for the purpose "of setting aside its findings and order of December 22, 1937, and issuing proposed findings, and making its decision and order upon a reconsideration of the entire case." The Board in its application for the remand stated that it would take that course. The specified purpose qualified the court's order. It created a condition which the Board was bound to observe. If the Board within a reasonable time failed to set aside its findings and order, we have no doubt that the court could vacate its order of remand and proceed with its consideration of the petition to review. The propriety of the order of remand must be considered in that aspect.
Third. If the court itself had set aside the findings and order of the Board upon the ground, as asserted by petitioner, that the Board had not considered the evidence and made its own findings, but had adopted as its own a decision proposed by its subordinates without affording petitioner any opportunity to be heard thereon, the court could have remanded the cause for further proceedings in conformity with its opinion. That ground being sufficient for setting aside the order, there is no principle of procedure in relation to the review either of judicial decrees or administrative orders which would require the court to examine other grounds of attack.
*373 It is familiar appellate practice to remand causes for further proceedings without deciding the merits, where justice demands that course in order that some defect in the record may be supplied.[4] Such a remand may be made to permit further evidence to be taken or additional findings to be made upon essential points.[5] So, when a District Court has not made findings in accordance with our controlling rule (Equity Rule 70 1/2) it is our practice to set aside the decree and remand the cause for further proceedings.[6] The jurisdiction to review the orders of the Labor Relations Board is vested in a court with equity powers, and while the court must act within the bounds of the statute and without intruding upon the administrative province, it may adjust its relief to the exigencies of the case in accordance with that of the administrative governing judicial action. The purpose of the judicial review is consonant with that of the administrative proceeding itself, to secure a just result with a minimum of technical requirements. The statute with respect to a judicial review of orders of the Labor Relations Board follows closely the statutory provisions in relation to the orders of the Federal Trade Commission, and as to the latter it is well established that the court may remand the cause to the Commission for further proceedings to the end that valid and essential findings may be made. Federal Trade Comm'n v. Curtis Publishing Co., 260 U.S. 568, 580, 583; International Shoe Co. v. Federal Trade Comm'n, 280 U.S. 291, 297; Federal Trade Comm'n v. Royal Milling Co., 288 U.S. 212, 218; Procter *374 & Gamble Co. v. Federal Trade Comm'n, 11 F.2d 47, 48, 49; Ohio Leather Co. v. Federal Trade Comm'n, 45 F.2d 39, 42.[7] Similar action has been taken under the National Labor Relations Act in Agwilines, Inc. v. National Labor Relations Board, 87 F.2d 146, 155. See, also, National Labor Relations Board v. Bell Oil & Gas Co., 91 F.2d 509, 515. The "remand" does not encroach upon administrative functions. It means simply that the case is returned to the administrative body in order that it may take further action in accordance with the applicable law. See Federal Radio Comm'n v. Nelson Brothers Co., 289 U.S. 266, 278.
Such a remand does not dismiss or terminate the administrative proceeding. If findings are lacking which may properly be made upon the evidence already received, the court does not require the evidence to be reheard. Federal Trade Comm'n v. Curtis Publishing Co., supra; International Shoe Co. v. Federal Trade Comm'n, supra. If further evidence is necessary and available to supply the basis for findings on material points, that evidence may be taken. Federal Trade Comm'n v. Royal Milling Co., supra; Procter & Gamble Co. v. Federal Trade Comm'n, supra; Ohio Leather Co. v. Federal Trade Comm'n, supra; Agwilines, Inc. v. National Labor Relations Board, supra. Whatever findings or order may subsequently be made will be subject to challenge if not adequately supported or the Board has failed to act in accordance with the statutory requirements.
Fourth. The present controversy thus comes to the narrow point that instead of setting aside the Board's findings and order, the court has allowed the Board itself *375 to set them aside. The contention on that ground is without substance. In either event the findings and order are vacated. Petitioner's objection to the order because of lack of due hearing results in the abandonment of the findings and order and petitioner will thus be completely freed from any determination they contain or any obligation they impose.
Petitioner says that the Board has not confessed error. This is immaterial if the assailed findings and order are set aside. Nor is it important that the court has not held the findings and order to be void. It is elementary that the court is not bound to determine questions which have become academic.
There is nothing in the statute, or in the principles governing judicial review of administrative action, which precludes the court from giving an administrative body an opportunity to meet objections to its order by correcting irregularities in procedure, or supplying deficiencies in its record, or making additional findings where these are necessary, or supplying findings validly made in the place of those attacked as invalid. The application for remand in this instance was not on frivolous grounds or for any purpose that might be considered dilatory or vexatious. Petitioner had raised a serious question as to the validity of the findings and order. The Board properly recognized the gravity of the contention and sought to meet it by voluntarily doing what the court could have compelled. That was in the interest of a prompt disposition, and whatever delay has resulted is due to petitioner's resistance to that course.
Petitioner insists that it had other objections to the Board's conduct of the proceeding. But it was not necessary for the court to consider them, as the setting aside of the findings and order carried with it the opportunity for reconsideration and the making of a new record. *376 What findings or order would thus be made became a matter of conjecture and in any event these and the manner of arriving at them would be subject to any justified criticism.
As the substantial question is presented by the order of June 10th, the writ of certiorari in No. 182 is dismissed. The order of June 10th in No. 183 is affirmed.
Affirmed.
MR. JUSTICE ROBERTS did not hear the argument and took no part in the consideration and decision of this case.
NOTES
[1] Section 10 (d) provides:
"(d) Until a transcript of the record in a case shall have been filed in a court, as hereinafter provided, the Board may at any time, upon reasonable notice and in such manner as it shall deem proper, modify or set aside, in whole or in part, any finding or order made or issued by it." 49 Stat. 454.
[2] Section 10 (f) provides:
"(f) Any person aggrieved by a final order of the Board granting or denying in whole or in part the relief sought may obtain a review of such order in any circuit court of appeals of the United States in the circuit wherein the unfair labor practice in question was alleged to have been engaged in . . . by filing in such court a written petition praying that the order of the Board be modified or set aside. A copy of such petition shall be forthwith served upon the Board, and thereupon the aggrieved party shall file in the court a transcript of the entire record in the proceeding, certified by the Board, including the pleading and testimony upon which the order complained of was entered and the findings and order of the Board. Upon such filing, the court shall proceed in the same manner as in the case of an application by the Board under subsection (e), and shall have the same exclusive jurisdiction to grant to the Board such temporary relief or restraining order as it deems just and proper, and in like manner to make and enter a decree enforcing, modifying, and enforcing as so modified, or setting aside in whole or in part the order of the Board; and the findings of the Board as to the facts, if supported by evidence, shall in like manner be conclusive." 49 Stat. 455.
[3] See Cooper v. Lewis, 2 Phillips, Ch. 177, 181; Bank v. Rose, 1 Rich Eq., 292, 294; Stevens v. The Railroads, 4 F. 97, 105; Chicago & Alton R. Co. v. Union Rolling Mill Co., 109 U.S. 702, 713-715; City of Detroit v. Detroit City Ry. Co., 55 F. 569, 572, 573; Pullman's Palace Car Co. v. Central Transportation Co., 171 U.S. 138, 146; Ex parte Skinner & Eddy Corp., 265 U.S. 86, 93, 94; United Motors Service v. Tropic-Aire, 57 F.2d 479, 481, 482; Jones v. Securities & Exchange Comm'n, 298 U.S. 1, 19, 20.
[4] Estho v. Lear, 7 Pet. 130; Levy v. Arredondo, 12 Pet. 218; Villa v. Van Schaick, 299 U.S. 152, 155, 156.
[5] Chicago, M. & St. P. Ry. Co. v. Tompkins, 176 U.S. 167, 179, 180; United States v. Rio Grande Irrigation Co., 184 U.S. 416, 424; Lincoln Gas & Electric Light Co. v. Lincoln, 223 U.S. 349, 361-365.
[6] Railroad Commission v. Maxcy, 281 U.S. 82; Interstate Circuit, Inc. v. United States, 304 U.S. 55.
[7] Compare Texas & Pacific Ry. Co. v. Interstate Commerce Comm'n, 162 U.S. 197, 238, 239; Southern Railway Co. v. St. Louis Hay & Grain Co., 214 U.S. 297, 302; Florida v. United States, 292 U.S. 1, 9; Brotherhood of Railroad Trainmen v. National Mediation Board, 66 App. D.C. 375; 88 F.2d 757, 761.
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01-03-2023
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04-28-2010
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https://www.courtlistener.com/api/rest/v3/opinions/1678852/
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31 F. Supp. 817 (1940)
BROADWAY MUSIC CORPORATION
v.
F-R PUB. CORPORATION.
District Court, S. D. New York.
February 15, 1940.
Wattenberg & Wattenberg, of New York City (Sidney W. Wattenberg and Harold W. Tepfer, both of New York City, of counsel), for complainant.
Greenbaum, Wolff & Ernst, of New York City (Alexander Lindey and Harriet F. Pilpel, both of New York City, of counsel), for defendant.
CONGER, District Judge.
This is a motion to dismiss the plaintiff's complaint, which seeks damages for an alleged copyright infringement.
It appears that the plaintiff is the owner of the copyright of the song "Poor Pauline", which was published in 1914, contemporary with the motion picture serial "Perils of Pauline". The weekly magazine, "The New Yorker", which the defendant *818 publishes, in its August 13, 1938, issue, carried an article on the death of Pearl White in Paris, in which the following appeared under the title "The Talk of the Town":
"The death of Pearl White in Paris made us think of a song everybody sang when we were thirteen and `The Perils of Pauline' was being shown every week at the Nemo Theater, on Broadway and 110th Street. As nearly as we can remember it, the chorus went:
"Poor Pauline, I pity poor Pauline!
One night she's drifting out to sea,
Then they tie her to a tree,
I wonder what the end will be,
This suspense is awful!
Bing! Bang! Biff! They throw her o'er the
cliff,
They dynamite her in a submarine.
In the lion's den she sits with fright,
The lion goes to take a bite
Zip, goes the fillum! Good night!
Poor Pauline!
"There was another chorus something about how they try to feed her up on Paris green, but
"Of course, her horse
Cries "Nay, nay, nay, Pauline!"
"We forget the rest. As 1940 creeps on, it often seems to us that we have forgotten practically everything of any importance."
The plaintiff claims thereby an infringement of its copyright on "Poor Pauline". The defendant contends that there is no infringement, and that the incidental, illustrative and fragmentary use made by the "New Yorker" is a "fair use" allowed by law.
Neither attorney has called to my attention any decisions involving facts similar to this controversy, except the case of Shapiro Bernstein & Co. v. P. F. Collier et ano.[1] (decided 1934, S.D.N.Y.). This case came on before Frank J. Coleman, United States District Judge, and later an opinion was written by Judge Goddard of this Court. While the facts in that case are somewhat dissimilar to the facts found in this case, inasmuch as the use of the copyrighted song was more fragmentary there, nevertheless it seems to me the principle laid down in that case applies to the case at bar. As in the Bernstein case there is no issue of similarity involved. There is no question but that the defendant used the chorus of the song "Poor Pauline".
In the Bernstein case Judge Goddard pointed out generally some of the tests to be applied: (1) The extent and relative value of the extracts; (2) the purpose and whether the quoted portions might be used as a substitute for the original work; (3) the effect upon the distribution and objects of the original work.
Applying these tests, I have come to the conclusion that in publishing the portion of the song "Poor Pauline", there was no infringement, and that the publication was a "fair use" and permissible and not contrary to law.
Certainly there was no intent to commit an infringement; although intent was not necessary, it goes to fill out the whole picture. The article was a news item of interest to a large number of people who in the past had seen Pearl White in the "Perils of Pauline". It solely related to an event which had occurred shortly prior thereto, to wit: the death of Pearl White. The publication of part of the song "Poor Pauline" was only incidental.
When the song was written, Pearl White was a noted motion-picture actress, the star of the picture "Perils of Pauline". She became famous and the song became popular, and the general public associated the song with her. Therefore, when she passed away, it seems to me, a fair comment in connection with her passing, to refer to the song and perhaps print part of it.
True the defendant could very well have commented on the passing of Pearl White without any use of this song, and no doubt reference to the song made the article more attractive, but the whole news article, with the song included, was nothing more than an epitaph for the dead actress, an epitaph that would be recalled by thousands of Americans.
There was no music published with the chorus of the song, and I doubt very much if anyone could complain that the defendant's use impaired the value of the copyrighted song, or that the part published could be used for plaintiff's copyrighted song.
I cannot conclude that the publication of the chorus of plaintiff's copyrighted song by the defendant, in the manner aforesaid, has in any way harmed or seriously affected the distribution of plaintiff's song.
*819 By and large, applying the tests above set forth, I find the defendant's quotation from plaintiff's song does not go beyond the limit of "fair use".
Complaint dismissed. Settle order on notice.
NOTES
[1] No opinion for publication.
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01-03-2023
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10-30-2013
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https://www.courtlistener.com/api/rest/v3/opinions/1799385/
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47 F. Supp. 1004 (1942)
FLEMING, Administrator of Wage and Hour Division, United States Department of Labor,
v.
MILLER et al.
No. 255.
District Court, D. Minnesota, Third Division.
November 14, 1942.
*1005 *1006 Warner W. Gardner, Sol., and Roy C. Frank, Asst. Sol., both of Washington, D. C., Donald M. Murtha, Regional Atty., of Minneapolis, Minn., and Lester M. Levin, Principal Atty., of Washington, D. C., all of Wage and Hour Division, United States Department of Labor, for plaintiff.
Doherty, Rumble, Butler, Sullivan & Mitchell, of St. Paul, Minn., and Feldman, Kittelle, Campbell & Ewing, of Washington, D. C., for defendants.
JOYCE, District Judge.
This matter is before the court on a motion by defendants to vacate, suspend or modify a consent decree entered herein on July 17, 1941, and to permit defendants to defend the proceeding on the merits.
The consent decree in question was entered against defendants pursuant to a stipulation between them and plaintiff. It ordered defendants to refrain from violating the Fair Labor Standards Act and to pay to their employees an amount of money which was equal to the difference between what the employees received as wages and what they would have received if defendants had complied with the Act since it became effective. However, the parties agreed that the entry of the consent decree did not constitute an admission by defendants that they had violated the Act.
Defendants' counsel informed the court when the decree was entered that his clients were fully aware of their responsibility under the decree. Since its entry various things have taken place which defendants claim entitle them to relief from the decree:
1. The United States Supreme Court has affirmed the case of Walling v. A. H. Belo Corporation, 316 U.S. 624, 62 S. Ct. 1223, 86 L. Ed. 1716; Fleming v. A. H. Belo Corp., 5 Cir., 121 F.2d 207, which defendants claim is in point in the instant case and which they have discovered since entry of the decree.
2. On October 6, 1941, the Interstate Commerce Commission held that the employees of Addison Miller, Inc. (Minn.), were employees of a "carrier" under Part I of the Interstate Commerce Act, 49 U.S. C.A. § 1 et seq. (I.C.C.Docket, Ex Parte No. 72, Sub. No. 1), reversing the decision of the Examiner and Third Division of the I.C.C. made prior to the decree.
3. In 1941 the Emergency Mediation Board, operating under the provisions of the Railway Labor Act, 45 U.S.C.A. §§ 151-163, exercised jurisdiction over Addison Miller Company subsequent to the entry of the decree.
4. The Railroad Retirement Board, which is created by the Railroad Retirement Act, 45 U.S.C.A. § 228a et seq., is apparently preparing to exercise jurisdiction over some of the defendants.
5. Several employees of the Addison Miller Company and employees of Addison Miller, Inc. (Ill.) are now bringing suit against those defendants under Section 16 (b) of the Fair Labor Standards Act, 29 U.S.C.A. § 216(b), seeking back wages and the damages allowed by the Act.
*1007 Since entry of the decree defendants have employed new counsel who are pressing the motion here involved. The motion is based upon several grounds, to-wit:
(1) The decree is defective.
(2) The court lacked jurisdiction to order restitution of any wages due under the Fair Labor Standards Act.
(3) Defendants' former counsel was probably mistaken with respect to defendants' liability under the Fair Labor Standards Act, and therefore defendants are entitled to at least a modification of the decree because of Rule 60(b) of the Rules of Civil Procedure, 28 U.S.C.A. following section 723c.
(4) The change in circumstances since the entry of the decree requires that the court exercise its equitable power and grant defendants relief from the decree, for otherwise "inconsistent liabilities" would exist under the Railway Acts and the Fair Labor Standards Act.
Plaintiff contests all of defendants' arguments, and urges that the decree stand.
(1) IS THE DECREE SO DEFECTIVE THAT IT SHOULD BE CHANGED?
Defendants contend that the decree should be modified, vacated or suspended because it enjoins any violations of the Act, whereas the complaint asks that only certain specified violations be enjoined.
This case involves the enforcement of the Wage and Hour Law. Section 17 of that Act, 29 U.S.C.A. § 217, invests in United States District Courts jurisdiction to restrain violations of Section 15, 29 U.S.C.A. § 215. Since the complaint asked that the defendants be ordered to comply with the Act and that an injunctive decree so ordering be granted, this court obviously possessed jurisdiction over the subject matter of the action. The defendants all appeared by counsel so that the court also possessed jurisdiction over the persons involved. In fact, no question was raised in that respect. Consequently, the fact that the court granted a greater degree of relief than the complaint requested seems immaterial, for the statute empowered the court to grant injunctive decrees to restrain violations of the act. The error, if it is an error, is not one going to the question of the court's possessing jurisdiction over the subject matter; it goes to the question of the exercise of that jurisdiction, and the attack should be by appeal rather than by a motion to vacate, modify or suspend.
Swift & Co. v. United States, 276 U.S. 311, 48 S. Ct. 311, 316, 72 L. Ed. 587, cited by plaintiff, supports the conclusion that an attack upon a consent decree which affords plaintiff a greater degree of relief than that for which plaintiff petitioned cannot be made by a motion to vacate or modify if the court entering the decree had jurisdiction over the parties and the subject matter. The court said. "Obviously the generality of a court's decree does not render it subject to a motion to vacate."
This case has been followed by the lower Federal Courts in Securities and Exchange Comm. v. Jones, D.C.S.D.N.Y., 15 F. Supp. 321, affirmed in 2 Cir., 85 F.2d 17; Bullard v. Com'r of Internal Revenue, 7 Cir., 90 F.2d 144; Smyth v. United States, 10 Cir., 92 F.2d 900, 901. The rule seems sound in view of the doctrine that parties may litigate by consent issues not raised by the pleadings if the court has jurisdiction over the subject matter.
In opposition to the Swift case defendants rely upon National Labor Relations Board v. Express Publishing Co., 312 U.S. 426, 61 S. Ct. 693, 85 L. Ed. 930; Fleming v. Salem Box Co., D.C., 38 F. Supp. 997; and Milk Wagon Drivers Union v. Meadowmoor Farms, 312 U.S. 287, 61 S. Ct. 552, 85 L. Ed. 836, 132 A.L.R. 1200. However, the first case involved a contested decree which was before the court on an appeal, and the cases relied upon by the court in that case, including the Swift case, are the same kind. No courts, so far as I am advised, have applied the rule of that case to a consent decree. The Salem Box Company case involves a consent decree, but the question of the generality of the decree appears to have been raised by the court when the decree was made. Whether the parties could raise the question, or when it could be raised, was not involved. The fact that plaintiff consented to the modification of that decree seems immaterial here. The Meadowmoor case involved the review of a decree directing a permanent injunction against acts of violence and picketing by a labor union. The warning of the misuse of an appropriate injunction had to do with encroachments on free discussion, and the court's availability to correct finds no analogy in the instant facts.
*1008 Therefore, in view of the general rule that a court's decree cannot be collaterally attacked if the court possessed jurisdiction over the subject matter and the parties, I am of the opinion that the decree should not be modified because of its generality and broadness.
Neither do I agree with defendants' contention that plaintiff was estopped from bringing this action because of plaintiff's employee informing them their practices were not violative of the Act, for the United States Government cannot be estopped from enforcing a statute because of the interpretation placed upon it by its "officers or agents". United States v. San Francisco, 310 U.S. 16, 60 S. Ct. 749, 757, 84 L. Ed. 1050.
Defendants also contend that the decree violates Rule 65(d) of the Rules of Civil Procedure. This rule pertains to the form of the decree. 3 Moore's Federal Practice 3324, which cites Lawrence v. St. Louis-San Francisco R. Co., 274 U.S. 588, 47 S. Ct. 720, 71 L. Ed. 1219, and Druggan v. Anderson, 269 U.S. 36, 46 S. Ct. 14, 70 L. Ed. 151, holds that the failure to comply with a provision like Rule 65(d) does not render the decree void. The Lawrence case interprets 28 U.S.C.A. § 383 and the Druggan case interprets a Prohibition Act, 27 U.S.C.A. § 34, provision. Both provisions are similar to Rule 65(d), and Moore declares that no distinction can really be drawn. Such provisions were held to be not mandatory. Defendants cite no cases in support of their contention and did not press their argument that the rule has been violated.
Defendants further contend that "in view of the probable application of the Railroad Labor Acts" they are exempt from Section 7 of the Fair Labor Standards Act, 29 U.S.C.A. § 207, and that therefore the court did not have jurisdiction to grant the decree. I am of the view, however, that the defendants' liability under the railway acts (if they are liable) would not affect the court's power to enjoin violations of the Wage and Hour Act. It would go only to the question of whether the court should exercise its power with respect to them.
(2) DOES THE COURT POSSESS JURISDICTION TO ORDER RESTITUTION IN THIS CASE?
This is an equitable action based upon Section 17 of the Fair Labor Standards Act. Since Section 17 does not authorize the court expressly to order the payment of back wages in actions brought under that section, those awards can be granted only as a result of the equity court's power to grant incidental relief. The United States District Court does not appear to possess under this section the power to order the payment of back wages as incidental relief. It is the general rule that if a statute creates a liability (or right) and gives a special remedy for the enforcement of that liability or right, that remedy is the exclusive one. United States v. McCord, 233 U.S. 157, 34 S. Ct. 550, 58 L. Ed. 893; Fourth National Bank v. Francklyn, 120 U.S. 747, 7 S. Ct. 757, 30 L. Ed. 825. Section 16(b) of the Fair Labor Standards Act specifically gives to the employees the right to sue for the back wages which the incidental relief granted by this court would involve. Therefore, the remedy given to the employees seems to be the only manner by which the employer's liability for back wages could be enforced under the Act. This construction was applied in Decorative Stone Co. v. Building Trades Council, 2 Cir., 23 F.2d 426, certiorari denied 277 U.S. 594, 48 S. Ct. 530, 72 L. Ed. 1005, to practically identical provisions in the Anti-trust Acts, 15 U.S.C.A. § 1 et seq. The court plainly declared in that case that the suit by the person entitled to sue for money could not be joined with the suit to enjoin violation of the Act even though the suits were brought by the same party.
Plaintiff does not question the applicability of the above rule but contends that the power to issue an injunction includes the power to decree restitution and assumes that defendants are questioning the power of the court upon constitutional grounds. However, defendants clearly contend that the court cannot grant restitution because Section 17 only empowers it to grant an injunction. I do not think the holding in Fleming v. Warshawsky & Co., 7 Cir., 123 F.2d 622, is as broad as plaintiff's counsel implies. The court held that the restitution order therein involved was proper only to the extent that the employees to whom restitution was ordered were designated with sufficient certainty. The court's power to grant both an injunction and restitution in an action brought under Section 17 was not questioned in that case as far as the opinion indicates. In a statutory proceeding the court may make orders reasonably adapted to effectuate the objectives of the statute and such powers *1009 are implicit in remedial statutes. However, the objective of the Fair Labor Standards Act, as far as Section 17 is concerned, is the protection of the employees by restraining violations of the Act. I doubt whether such a rule can enlarge the powers of the court, for it goes only to the manner in which the power may be exercised. Plaintiff relies upon Virginian R. Co. v. System Federation, 300 U.S. 515, 57 S. Ct. 592, 81 L. Ed. 789, and N. L. R. B. v. Jones & Laughlin, 301 U.S. 1, 57 S. Ct. 615, 81 L. Ed. 893, 108 A.L.R. 1352, which do not conflict with this interpretation.
The argument that no prejudice can result to defendants from the restitution order because defendants intend to pay back wages to their employees even if the restitution order is vacated is without merit. Because defendants are going to do of their own volition that which the decree erroneously orders them to do does not mean that the error is corrected and can become the basis of an unjustifiable precedent.
Federal Trade Comm. v. Klesner, 280 U.S. 19, 50 S. Ct. 1, 74 L. Ed. 138, 68 A.L.R. 838, holds that actions under the Federal Trade Act, 15 U.S.C.A. § 41 et seq., are brought for the benefit of the public. That case concerns an injunction. It might also be said that the injunction proceedings under Section 17 are brought for the benefit of the public. However, the payment of back wages is a direct benefit to the individual and so remotely beneficial to the public that it would not be within the purview of such protection even if the bringing of an action for the benefit of the public did enlarge the jurisdiction of the court. I do not read the Klesner case as holding that the mere fact that an action is brought for the benefit of the public enlarges the jurisdiction of the court in which it is brought.
(3) ARE DEFENDANTS ENTITLED TO RELIEF UNDER RULE 60(b) OF THE RULES OF CIVIL PROCEDURE?
The applicable part of Rule 60(b) reads as follows: "Mistake; Inadvertence; Surprise; Excusable Neglect. On motion the court, upon such terms as are just, may relieve a party or his legal representative from a judgment, order, or proceeding taken against him through his mistake, inadvertence, surprise, or excusable neglect. The motion shall be made within a reasonable time, but in no case exceeding six months after such judgment, order, or proceeding was taken."
Defendants' counsel contend that they, their former counsel, and plaintiff's agents, were mistaken as to defendants' liability under the Fair Labor Standards Act. It will be noted, however, that Rule 60(b) specifically mentions only the mistakes made by the moving party and I do not believe that any mistake made by plaintiff's agents is material so far as this rule is concerned. Obviously, the mistakes of defendants and their former counsel are upon the same basis with respect to the application of Rule 60(b). Defendants argue that the decisions which the Interstate Commerce Commission and the Emergency Mediation Board have rendered with respect to the defendants since entry of this decree indicate that defendants are liable to the operation of the Railway Labor Act and, therefore, are exempt from the provisions of Section 7 of the Fair Labor Standards Act. These decisions, however, do not expressly hold that defendants are subject to the Railway Labor Act. In fact, not until the future decisions upon that question are rendered by the proper tribunal will it be known if defendants are subject to the Railway Act. Defendants do not show any facts which place them within the purview of the Railway Labor Act and do not claim the question as to their being subject to that Act is before this court. Therefore, the existence of a mistake by defendants as to their liability under the Railway Labor Act is still in the stage of probability. I doubt if Rule 60(b) contemplates the giving of relief for a probable mistake. To hold that a probable mistake is within the purview of the rule would deal with uncertainty, and the question would then arise as to the degree of probability necessary for the application of the rule and would necessarily lead to the setting of arbitrary limits. But be that as it may, the very wording of the rule assumes that actual mistake, inadvertence, surprise, or excusable neglect must exist, and I interpret the rule in the light of the common law as it was laid down by Judge Learned Hand in The Amaranth, 2 Cir., 68 F.2d 893, wherein it was held that neither a default nor consent judgment should be vacated unless at least a prima facie case of mistake is shown. In Western Union v. Dismang, 10 Cir., 106 F.2d 362, it was also shown that the common law requires more than a mere *1010 probable mistake for the vacation of a consent decree. The same reasoning applies with respect to defendants' conclusion with reference to the probable action of the Railroad Retirement Board.
Defendants' contention that they are entitled to relief under Rule 60(b) because the decisions which the Interstate Commerce Commission and the Emergency Mediation Board have rendered since entry of this decree indicate that defendants may be subjected to the Railway Labor Act also raises the question whether subsequent adjudications can create a mistake within the meaning of Rule 60(b). It is asserted by defendants that a mistake of law is treated like a mistake of fact and that therefore equitable relief should be granted here. However, Peterson v. First National Bank of Ceylon, 162 Minn. 369, 203 N.W. 53, 42 A.L.R. 1185, upon which defendants rely, does not involve subsequent adjudications. It involves well established principles of law which existed at the time the mistake in that case was made by the moving parties' counsel. Further, as Justice Stone pointed out, all mistakes of law do not fall within the rule of that case. Justice Stone declared that if a mistake of law is one of practice it cannot be treated like a mistake of fact, because as Justice Story held public interest requires that there be an end to litigation. The same public interest would seem to be present with respect to a mistake which arises because of legal rules which are enunciated subsequent to the doing of the thing which becomes the mistake, for an interpretation such as contended for by defendants would threaten the finality of a court's decision. See Nachod & United States Signal Co. v. Automatic Signal Company, D.C., 32 F. Supp. 588. In that case the mistake of law was made by the court and not the parties. A reading of the opinion suggests the view that subsequent adjudications do not constitute previous conclusions a mistake within the meaning of Rule 60(b). The Hiram, 14 U.S. 440, 1 Wheat. 440, 4 L. Ed. 131, also cited by defendants, is a case of the same type as the Peterson case. It involves a mistake with respect to a law that already existed at the time the error was made. In the instant case the rulings with respect to which the alleged error was made were not yet existent. In The Amaranth case, 68 F.2d 893, 895, which is similar to the instant case, the defendant moved to vacate the consent decree which had been entered against him by stipulation one and one-half months prior to the motion, claiming that another case decided in the United States Supreme Court since the decree in that case had been entered had decided that the law upon which his liability was based had become void prior to the time when the decree was entered. Admitting that because of the subsequent case the law under which the consent decree was entered against him was void, and discussing defendant's "mistake of law", judge Learned Hand said, by way of dictum:
"As a motion to vacate, it may be doubted whether a mistake of law, even though mutual, is enough in the case of a consent decree."
Although that case did not arise under Rule 60(b), it indicates the attitude which the court adopted towards mistakes of law which subsequent adjudications create.
Defendants assert that the Belo case is authority for their contention that their practices do not violate the Fair Labor Standards Act, and since they were not advised by their former counsel of the decision in that case prior to the consent judgment herein, they were mistaken as to their obligations under the Act. I am of the view that this contention is without merit. The Belo case was not the law of this district at the time the decree was signed or defendants' motion made. Judge Gardner, in affirming the lower court's decision of March 13, 1941, in Fleming v. Carleton Screw Products Co., 8 Cir., 126 F.2d 537, 540, certiorari denied, 317 U.S. ___, 63 S. Ct. 54, 87 L. Ed. ___, said of the Belo case: "We are not persuaded that this decision correctly construes these provisions of the statute, and we think it is not sustained by the weight of authority."
It is clear, therefore, that defendants were not mistaken when they thought no rule like that in the Belo case was in effect in this circuit. The decision of the Supreme Court came down about a year after the entry of the decree in question. To use such a decision as the basis for creating a mistake within Rule 60(b) would be a dangerous precedent with respect to the finality of decrees and judgments.
(4) DO THE CIRCUMSTANCES WHICH HAVE ARISEN SINCE THE ENTRY OF THE DECREE REQUIRE THE COURT TO GRANT RELIEF THROUGH THE EXERCISE OF ITS EQUITY POWERS?
*1011 Defendants contend that the court should exercise its equitable powers and modify, vacate, or suspend the consent decree because of the circumstances which have arisen since the decree was entered. They rely upon United States v. Swift & Co., 286 U.S. 106, 52 S. Ct. 460, 462, 76 L. Ed. 999, as authority for their position. That case holds that the inherent powers of an equity court permit it to modify the consent decree if the circumstances which have arisen since the entry of the decree make it "an instrument of wrong". The decree is an instrument of wrong if, because of the change in circumstances, the moving parties are "the victims of oppression." The moving parties are the victims of oppression if the hardships they are suffering because of the changed circumstances are so extreme and unexpected that, when they are balanced against the substantial dangers which the injunction was designed to protect, equity and good conscience require a modification of the decree.
The circumstances which have arisen in the instant case since the entry of the decree are, as before stated, as follows:
1. Defendants have discovered the case of Fleming v. Belo Corp., supra, which they contend proves that they have not violated the Fair Labor Standards Act.
2. Several employees have instigated suits for back wages and damages under Section 16(b) of the Fair Labor Standards Act.
3. The Railroad Retirement Board is preparing to bring action to place one of defendants under its jurisdiction.
4. The Interstate Commerce Commission has rendered a decision against one of defendants under the Railway Labor Act.
5. The Emergency Mediation Board has rendered a decision with respect to one of the defendants.
All of the facts and circumstances which have arisen since the entry of the decree have not occurred with respect to all of the defendants. Only the Belo case discovery can be said to apply to all of them. The Interstate Commerce Commission decision under the Railway Labor Act pertained only to Addison Miller, Inc. (Minn.); the Mediation Board's ruling affected only the Addison Miller Company; the employees' suits under Section 16(b) are against only Addison Miller, Inc. (Ill.) and the Addison Miller Company; the Railroad Retirement Board's preparations appear to be only against Addison Miller, Inc. (Minn.). Neither party sets forth sufficient facts to determine whether the agency decisions could be extended to all of the defendants. The following diagram indicates the defendants to which each of the subsequent circumstances applied:
G. N. Icing Co. Addison Miller Company
Discovery of Belo case. Discovery of Belo case.
Mediation Board's decision.
Suits by employees.
Addison Miller, Inc. Addison Miller, Inc.
(Minn.) (Ill.)
Discovery of Belo case. Discovery of Belo case.
Interstate Commerce Suits by employees.
Commission decision.
Railway retirement
Board's preparations.
As heretofore pointed out, the Belo case was not the law of this Federal district at the time of signing the decree or the making of the motion. Therefore, even if defendants had discovered the case prior to the entry of the decree, it would not have helped them, and for the reasons before set forth it cannot help them now. Thus the only basis for Great Northern Icing Company's motion disappears and under the Swift case doctrine that defendant is entitled to no relief.
The suits by the employees do not appear to be subsequent facts which require the court to exercise its equity jurisdiction under the Swift case. When defendants consented to the entry of the decree, they knew that their employees possessed the right to sue under Section 16(b) for back wages and liquidated damages. In fact, counsel discussed this problem prior to the negotiations and entry of the decree. Therefore, this action by the employees not only was foreseeable, it was foreseen, and defendants made agreements with respect to it with the plaintiff. In the Swift case the court said:
"Nothing less than a clear showing of grievous wrong evoked by new and unforeseen conditions should lead us to change what was decreed * * * with the consent of all concerned."
So that the last basis for the motion of Addison Miller, Inc. (Ill.) seems to fall, and the court is not bound to exercise its equitable powers under the Swift case with respect to that defendant.
*1012 Assuming that the decisions of the Interstate Commerce Commission, the Emergency Mediation Board and the Railroad Retirement Board indicate that the defendants probably are subject to the Railway Labor Act and the Railroad Retirement Act and that those subject to that Act are within the Section 13(b) (2) exemption to Section 7 of the Fair Labor Standards Act, I doubt that the Swift case affords defendant Addison Miller, Inc. (Minn.) or defendant Addison Miller Company any basis for relief. The Swift case requires that the extreme and unexpected hardship which entitles defendants to a modification of the decree should be actual and existing at the time the modification is sought. The wisdom of requiring that the hardship be actual and present seems quite clear. If that requirement did not exist, the purpose of the decree could easily be defeated.
Defendants here claim a probable injury. The actual injury will not occur, if at all, until defendants are subjected in the future to the alleged inconsistent liabilities of the railway acts and the Fair Labor Standards Act. Even if the Swift case is not limited in this manner, I doubt whether the equities weigh so heavily in defendants' favor that a change in the decree is necessary. Defendants' claim that they are not subject to Section 7 of the Act can be determined in the suits by the Railroad Retirement Board or other agencies enforcing the railway acts. The danger that defendants will not pay their employees the wages required by the Fair Labor Standards Act may still be present, for they contend that their methods used in determining the employees' wages prior to the entry of the decree is proper. In view of all the facts, I doubt whether the dangers which the decree seeks to remedy are reduced to any mere "shadow" when compared with the hardship suffered by the defendants. As the Swift case points out, the danger that the moving party will continue with the acts which the decree was designed to protect against is not "attenuated to a shadow" because the modification of the decree will serve the convenience of the moving party. Likewise, it appears that the doctrine of the Swift case does not permit a vacation or modification of the decree for the purpose of contesting the merits of the case. The court in that case said:
"The injunction, whether right or wrong, is not subject to impeachment in its application to the conditions that existed at its making."
If the decree were vacated, modified, or suspended and defendants permitted to contest the case on its merits, as they request, the result would be that they would be able to question the conditions existent at the time the decree was entered. In view of all of which I am of the opinion that the Swift case doctrine does not permit a modification, suspension, or vacation of this consent decree.
Summary.
I. Because the court had jurisdiction over the general subject matter of the action and over the parties to it, any defect in the form of the decree or the inclusion in it of restraints not asked for by the complaint do not require a change in the decree, for such things go only to the exercise of the court's jurisdiction and not to its possession of it.
II. Because Section 16(b) of the Fair Labor Standards Act gives to the employees a right to recover their wages and because Section 17 does not expressly permit the recovery of wages in an action brought under Section 17, any incidental powers which the court might have under that section are withdrawn, for when a statute creates a right (or liability) and gives a special remedy for its enforcement, that remedy is the exclusive one. Therefore, the court lacked jurisdiction to grant restitution in this action.
III. No mistake was created within the meaning of Rule 60(b) of the Rules of Civil Procedure:
(1) Because any mistakes by plaintiff's employees are immaterial.
(2) Probable mistakes do not seem to be covered by the rule.
(3) Subsequent adjudications do not create a mistake within the meaning of the rule.
(4) No mistake as to the law applicable to defendants was made with respect to the Belo case.
IV. The circumstances do not appear to have changed sufficiently since the entry of this decree to justify a vacation, modification, or suspension of the decree as prayed; but this does not mean that if defendants are subjected to subsequent liability and resultant hurt the decree should not be *1013 modified to grant appropriate relief as the change in the facts or circumstances may suggest.
In view of the above conclusions the only relief to which defendants are now entitled is a vacation of the decree's order to make restitution of the back wages to their employees, and to that extent there will be a vacation and modification.
It is so ordered and an exception is granted to the parties aggrieved by this order.
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680 F. Supp. 928 (1987)
UNITED STATES of America, Plaintiff,
v.
STATE OF MICHIGAN, James J. Blanchard, Governor of Michigan, Michigan Corrections Commission; Gwen Andrew, Chairman, Michigan Corrections Commission, Thomas Eardley, G. Robert Cotton, Dwayne Waters, Don Le Duc, Members, Michigan Corrections Commission, Michigan Department of Corrections, Perry M. Johnson, Director, Michigan Department of Corrections, Robert Brown, Jr., Deputy Director, Michigan Department of Corrections, Dale Foltz, Regional Administrator, State Prison of Southern Michigan, John Jabe, Warden, Michigan Reformatory, Theodore Koehler, Warden, Marquette Branch Prison, John Prelesnik, Administrator, Reception and Guidance Center, State Prison of Southern Michigan, and Jack Bergman, Administrator, Michigan Intensive Programming Center, Defendants.
No. G84-63.
United States District Court, W.D. Michigan.
COMPILATION OF OPINIONS AND ORDERS Through July 27, 1987.
*929 *930 *931 *932 *933 Arthur E. Peabody, Jr., Chief, Special Litigation Section, U.S. Dept. of Justice, Civil Rights Div., Washington, D.C., by Andrew J. Barrick, for plaintiff.
Patricia A. Streeter, Detroit, Mich., for amicus curiae Hadix plaintiffs.
Elizabeth Alexander, Adjoa Aiyetoro, for National Prison Project of the American Civil Liberties Union, Washington, D.C.
William Fette, Kalamazoo, Mich., for Michigan American Civil Liberties Union Foundation.
Frank J. Kelly, Atty. Gen., State of Mich., Lansing, Mich., by Thomas Nelson, Brian MacKenzie, for defendants.
COMPILATION OF OPINIONS AND ORDERS
(Through July 27, 1987)
INTRODUCTORY STATEMENT AND TABLE OF CONTENTS
ENSLEN, District Judge.
The following is a collection of opinions the United States District Court for the Western District of Michigan has issued in the case of United States v. Michigan, No. G84-63. The United States Department of Justice filed the case on January 18, 1984 under the Civil Rights of Institutionalized Persons Act, 42 U.S.C. §§ 1997-1997j, following a two-year investigation into conditions in three Michigan prisons. On July 13, 1984 the Court approved a Consent Decree setting forth the parties' agreement to settle the suit. The Court has been overseeing the implementation of the Consent Decree for the past three years, during which time it has conducted numerous hearings on compliance issues and has issued numerous opinions. The opinions that are labeled "bench opinion" were issued from the bench during those hearings. The Court has not edited these opinions; what appears in written form here was taken almost verbatim from the transcripts of the hearings. The reader accordingly *934 occasionally may find it difficult to follow the bench opinions. The Court felt, however, that it should remain faithful to the actual record of the case.
TABLE OF CONTENTS
1. Bench Opinion of March 23, 1984 Granting Hadix Plaintiffs and the National Prison Project Amicus Curiae Status, page 935.
2. Bench Opinion of March 23, 1984 Rejecting Proposed Consent Decree, page 944.
3. Bench Opinion of June 22, 1984 Denying Jasson Plaintiff's and Knop Plaintiffs' Motions to Intervene and Approving Consent Decree, page 949.
4. Bench Opinion of June 21, 1985 Approving Parties' Stipulation and Announcing Intent to Appoint a Special Master, page 953.
5. Memorandum Opinion and Order of August 5, 1985 Announcing Intent to Appoint an Independent Expert, page 956.
6. Bench Opinion of August 21, 1985 Extending the Parties' Stipulation; Denying the Knop Amicus' Motion to Amend the State Plan; and Denying the United States' Request for Sanctions Against the Knop Amicus, page 957.
7. October 2, 1985 Appointment of F. Warren Benton as Independent Expert and Order for Instructions, page 962.
8. Opinion of December 2, 1985 Denying the Hadix Plaintiffs' Request to Exclude the Central Complex and the Reception and Guidance Center from Coverage Under the Consent Decree, page 964.
9. Bench Opinion of February 13, 1986 Denying Defendants' Motion to Modify the State Plan Regarding a Mental Health Plan and Granting the United States' Motion to Enforce the Consent Decree Regarding Mental Health, page 970.
10. Order of February 21, 1986 Establishing Supplementary Mental Health Care Requirements, page 978.
11. Memorandum Opinion and Order of March 19, 1986 Regarding an Independent Psychiatric Expert, page 983.
12. Bench Opinion of March 27, 1986 Allowing Knop Amicus to Present Witnesses and Appointing an Independent Psychiatric Expert, page 984.
13. Order of April 2, 1986 Appointing an Independent Psychiatric Expert, page 988.
14. Memorandum Opinion and Order of April 3, 1986 Granting Defendants' Motion to Modify in Part, page 988.
15. Bench Opinion of May 9, 1986 Granting United States' Motion for Relief and Sanctions Regarding Mental Health; Denying United States' Motion to Terminate the Authority of the Independent Expert; and Rejecting Parties' Stipulation Clarifying Issues Under the Consent Decree, page 989.
16. Order of May 12, 1986 Granting the United States' Motion for Relief and Sanctions, page 999.
17. Order of June 30, 1986 Extending and Revising the Independent Expert's Order of Appointment, page 1001.
18. Opinion of July 15, 1986 Interpreting Certain Provisions of the Consent Decree and the State Plan for Compliance, page 1001.
19. Opinion of July 15, 1986 Granting in Part and Denying in Part Defendants' Motion for Relief from Order, page 1005.
20. Opinion of July 22, 1986 Regarding March 1986 Compliance Hearing, page 1007.
21. Order of July 22, 1986 Granting Plaintiffs' Motion for Order Enforcing Consent Decree and Stipulation, page 1015.
22. Opinion of August 29, 1986 Scheduling a Mental Health Hearing, page 1018.
23. Opinion of August 29, 1986 Resolving Various Motions, page 1019.
24. Opinion of September 26, 1986 Extending Authority of Independent Psychiatric Expert, page 1021.
25. Bench Opinion of October 24, 1986 Purging the Defendants of Contempt Regarding Mental Health, page 1022.
26. Order of October 29, 1986 Purging Defendants of Contempt, page 1025.
*935 27. Opinion and Order of January 29, 1987 Enforcing the Fire Safety Provisions of the Consent Decree, the State Plan for Compliance, and the Stipulation, and Granting Defendants' Request for Modification of the State Plan, page 1025.
28. Opinion of March 27, 1987 Modifying in Part the Parties' Stipulation Regarding Mental Health Care, page 1037.
29. Show Cause Order of April 1, 1987 Regarding Overcrowding, page 1038.
30. Opinion of May 8, 1987 Enforcing the Medical Care Requirements of the Consent Decree, the State Plan for Compliance, and the Stipulation, page 1039.
31. Bench Opinion of May 21, 1987 Issuing Temporary Restraining Order Regarding Overcrowding at the Reception and Guidance Center, page 1045.
32. May 22, 1987 Temporary Restraining Order, page 1047.
33. Bench Opinion of May 22, 1987 Finding the Defendants in Contempt of Court Regarding Overcrowding at the Decree Institutions, page 1047.
34. Order of May 28, 1987 Holding Defendants in Contempt of Court, page 1053.
35. Opinion of July 2, 1987 Scheduling Mental Health Hearing, page 1054.
36. Opinion of July 20, 1987 Denying Pro Se Motion to Intervene and Motion for Order of Contempt, page 1055.
37. Opinion and Order of July 28, 1987 Enforcing Provisions of the Consent Decree, the State Plan for Compliance, and the Stipulation Regarding Overcrowding and Protection from Harm and Sanitation, Safety, and Hygiene, page 1056.
BENCH OPINION OF MARCH 23, 1984 GRANTING HADIX PLAINTIFFS AND THE NATIONAL PRISON PROJECT AMICUS CURIAE STATUS
The Court has before it two motions. One is the motion to intervene on behalf of the Hadix plaintiffs, so-called Hadix plaintiffs, or in the alternative for status as amicus curiae. And the motion on behalf of the A.C.L.U. group, to be amicus curiae only, and, of course, the Hadix interest is only in a portion of the proposed consent decree. That is to say, the Jackson Prison portion. I am taking the Hadix motion first, since that is the way that we listened to arguments. The Hadix applicant or applicants move for grant of intervention pursuant to Rule 24(a)(2). They are the plaintiff class in an action pending in the United States District Court, Eastern District of Michigan, before Judge John Feikens, Chief Judge, styled Hadix, et al. vs. Johnson, et al. That suit as I understand it is against various officials of the State of Michigan Department of Corrections and the State Prison of Southern Michigan at Jackson only. They are not involved, as I indicated earlier, in the Ionia or Marquette situation.
Pursuant to an order of the court in Hadix, the applicant claims, the Michigan Attorney General representing the defendant was ordered to appear to explain the relationship if any existing between the proposed consent decree herein and the Hadix case. In fact, I had first heard about the Hadix interest by means of a letter from counsel for Hadix, and later, and I responded to that letter, and to counsel for all sides with a copy of the letter to Judge Feikens. I think that may have been in January or perhaps early February. On February 16, 1984, the applicants claim Elaine Fischhoff took the position in the open courtroom that the proposed decree will not be made the basis for a legal claim of mootness as to any similar constitutional issues in Hadix, but that it may have an impact on the negotiations and possible litigation in Hadix. The transcript never arrived, and I don't know what was said. But, I have heard Mr. Quinn's representation, and I have heard Mr. Bennett's representation. I am not so sure that it makes any difference.
Applicants state in the written motion that based upon the statement of the Attorney General they ought to be entitled to intervention herein as a matter of right. They contend, as I understand it, that they seek intervention for the sole purpose of excluding the State Prison of Southern Michigan, *936 the Central Complex of that prison, including the Reception and Guidance Center, from these proceedings, and they argue that, or they kind of alternatively argue, that if they are granted some kind of intervention status or amicus status their interest is limited to the Jackson penitentiary, the state prison at Jackson. As reported by the applicants with portions disputed by the defendant State, Hadix was filed in 1980, as I understand it, at least, in propria persona. Since that date, it evidently has become a class action. There was an amended complaint filed, and I assume by counsel for the Hadix group, in 1982, I think in July.
The subject of that amended complaint, which has been furnished to the Court and summarized by the applicants, touches virtually all of the conditions of confinement at that facility located in Jackson. According to the defendant, the Hadix complaint is in reality a "totality of conditions" claim. This appears to be correct to me from a reading of the language of the amended complaint, but it doesn't seem to have a lot of relevance to what is before us.
Trial, apparently, in the Hadix case was scheduled in 1983 in the early part of the year, but before the trial, either the defendants requested an opportunity to negotiate or the plaintiffs, and the defendants told Judge Feikens that they would like to negotiate, and they would like to have a court-supervised settlement discussion. Negotiations took place, whoever suggested them, and whoever was the moving party, and they continued throughout the summer of 1983. Numerous documents were compiled and exchanged, and, apparently, some discovery goes on today as I understand the arguments. In July of 1983, the applicants argue that there were only some unresolved issues remaining which required Judge Feikens' intervention, and the court then issued an order establishing a time schedule for proceedings and a possible trial date. And that has been furnished to me. The negotiations continued into the fall involving, mainly, and I think argued by Mr. Bennett today, the physical structure of the facilities involved both well, all the facilities were argued on today, and the sufficiency of the administrative staff if that is part of the structure argument, and I guess it is.
Applicants assert that Judge Feikens was assured by Governor Blanchard that defendant Perry Johnson was authorized to negotiate regarding this issue of the overall operation of the Jackson facility. Defendants say the evidence shows that the statement that by July, 1983 they had reached agreement on most issues is imprecise at best, and seem to deny, and I believe deny, Johnson's authority. They also say that there is privileged information which is not relevant to this case.
In any event, shortly after Judge Feikens' meeting with Governor Blanchard and I understand they metthere was a settlement between Justice and the State in this case. Defendants did not thereafter return to the negotiation table with the applicants. The defendants argue this is because of the applicant's counsel. I don't know the answer to that.
Judge Feikens issued the order requiring the Attorney General, that I mentioned earlier, to explain the impact on Hadix, and it obviously bothered Judge Feikens. It was in response to this order that the applicants alleged the Attorney General represented that the case before me would not be made a basis of a claim for mootness, but would impact negotiations and possibly litigation. But there is no question about that now. The defendants now state they reserve the right to raise the claims of mootness should the negotiations fail in Hadix, and, perhaps, that is what they said in front of Judge Feikens, or perhaps it isn't. But it is absolutely clear to me that is what they said in their written pleadings, and that is what Mr. Quinn argued today.
The applicants as I indicated advised me of this by letter and then later filed a motion. The motion is for leave to intervene as a matter of right under Rule 24(a)(2). 24(a)(2) says, in part:
Intervention of Right. Upon a timely application anyone shall be permitted to intervene in an action ... (2) when the applicant claims an interest relating to *937 the property or transaction which is the subject of the action and he is so situated that the disposition of the action may as a practical matter impair or impede his ability to protect that interest, unless the applicant's interest is adequately represented by existing parties.
The parties do not appear to me to dispute the elements necessary to establish non-statutory intervention as a matter of right. The four elements that the parties agree on are: First, the application must be timely; Second, the applicants must show an interest relating to the property or transaction which is the subject of the action; Third, the applicants must show that the protection of the interest may as a practical matter be impaired or impeded by the disposition of the action; and Fourth, and finally, the applicants must show that their interest is not adequately represented by an existing party. That comes out of Moore on Federal Practice, not cited by the lawyers. But I have read Blanchard v. Johnson, which is a Sixth Circuit case in 1976; also County of Fresno v. Andrus, which is a Ninth Circuit case in 1980; and also my fellow District Judge Gibson's decision in Usery v. Brandel, 87 F.R.D. 670 (W.D. Mich.1980). It is clear to me that the applicants have the burden of showing that 24(a)(2)'s requirements are satisfied because Blanchard v. Johnson says so. Blanchard's cite, by the way, since it wasn't cited by the parties, is 532 F.2d 1074. The Fresno cite is 622 F.2d 436.
First, then as to the timeliness. The applicants make no argument in their written pleadings whatsoever concerning the requirement of timeliness, but Mr. Bennett does make that argument today. The defendants argue that this motion should be denied solely on timeliness grounds.
Defendants argue that the applicants have known or should have known of the Department of Justice's proceedings under CRIPA since at least as late as 1982. It sounded to me that in argument Mr. Bennett may have known about it about that time or perhaps before then. Defendants argue that the applicants did not attempt to consolidate an approach to remediation of allegedly violative conditions in Michigan prisons. Defendants cite two cases in support of their argument. The first is NAACP v. New York, 413 U.S. 345, 93 S. Ct. 2591, 37 L. Ed. 2d 648, a 1973 Voting Rights Act case, from the Supreme Court. The Court stated in NAACP that timeliness is to be determined from all the circumstances involved. This determination is left to the sound discretion of the trial court. The Court found in the NAACP case that the applicant's motion to intervene was untimely. In reaching that conclusion, the Court stated that applicants knew or should have known of the pendency of the action involved because of a New York Times article discussing the lawsuit, the public comment by community leaders, and the size and astuteness of the membership of the organizational applicants, and the questioning of two of the applicants by Department of Justice attorneys investigating the matter. The Court also found that applicants had failed to protect their interest in a timely fashion after the date they allege they were first informed of the pendency of the action. At that point, the suit was three months old, and it had reached a critical stage, or at least the Supreme Court said that it was a critical stage because among other things a summary judgment was pending.
Defendants also cite for me Stallworth v. Monsanto Company, 558 F.2d 257, which is a Fifth Circuit case in 1977 wherein the court in Monsanto enunciated four factors that ought to be considered in making a timeliness determination. In brief, those four factors from Monsanto were: First, the length of time during which the would-be intervenor actually knew or reasonably should have known of his interest in the case before he petitioned for leave to intervene; Two, the extent of the prejudice that the existing parties to the litigation may suffer as a result of the would-be intervenor's failure to apply for intervention as soon as he actually knew or reasonably should have known of his interest in the case; Third, the extent of the prejudice that the would-be intervenor may suffer if his petition for leave to intervene is denied; Fourth, and finally, the existence of unusual *938 circumstances militating either for or against a determination that an application is timely.
In the Usery case, which is my Brother Gibson's opinion, not cited by the defendants for timeliness, Judge Gibson found that a motion to intervene filed ten months after the complaint was not untimely. I note that not only did he find that, but also the brief was filed fourteen months after the motion. So Judge Gibson was facing a 24-month delay. Judge Gibson noted that alacrity is but one of the factors among several to be addressed by the court, and the primary attention must be focused on the stage of the proceedings in which the application to intervene is made. Assessment must be made as to whether the intervention will: "One, prejudice the rights of the existing parties to the litigation, or, two, substantially interfere with the orderly processes of the court." That is a quote, essentially.
In EEOC v. United Air Lines, 515 F.2d 946, a Seventh Circuit case in 1975, also not cited by the defendants in this section of their brief, the EEOC court opined that the trial court should be more lenient with timeliness requirements in cases of intervention as of right as opposed to permissive intervention. I find no merit whatsoever in defendant's timeliness argument. The fatal flaw in the argument is that there wasn't any action whatsoever in which to intervene until the complaint was filed. The complaint was not filed until January of 1984. The case law deals with timely applications to intervene in pending lawsuits, not in pre-lawsuit governmental investigations. It would be unreasonable for me to hold that the applicants should somehow have tried to intervene in the Justice Department's investigation, it seems to me for obvious reasons.
The complaint was filed on January 18, 1984. The applicants sent the letter to me that I referred to earlier on February 2nd, and the instant motion was filed February 27th, a little bit over a month after the instant action was filed, which Mr. Bennett argues he heard about by reading in the newspaper. The Court believes that the applicant acted in a timely fashion, and without having to go over all of that again as far as timeliness is concerned, I make the same finding with regard to the A.C.L. U. application. There is no merit that the applications are not timely.
Second, the second condition for mandatory intervention is whether or not there is an interest relating to the property or the transaction which is the subject matter of the action. 24(a)(2) requires a significant protectable interest in the pending litigation. In Donaldson v. United States, according to the District of Columbia and Ninth Circuits, the "interest" test is primarily a practical guide to disposing of lawsuits by involving as many apparently concerned persons as is compatible with efficiency and due process. Two cases not cited by the parties, one from the D.C. Circuit is Nuesse v. Camp, 385 F.2d 694 (1967), which is the District Court for the District of Columbia, and second is the County of Fresno v. Andrus, which I mentioned earlier. But one can also look at other cases. From the District of Minnesota comes the U.S. v. Reserve Mining Company case. Thus, the interest requirement is viewed as a prerequisite to intervention rather than a determinative criterion. The interest requirement should be considered in light of the type of case with which the Court is concerned.
In this case, the applicants argue that since a substantial number of the issues raised in the Hadix action are encompassed in the proposed consent decree, and thus subject to interpretation by this Court, the requirement that they have a protectable interest is met. The Justice Department makes no specific argument regarding this second requirement. However, the Department in arguing that it adequately represents the interests of applicants points out that the Hadix class and the Department in this case both seek to remedy federal constitutional violations, which is true. In addition, the Hadix class seeks to vindicate Michigan constitutional and statutory rights. Therefore, although the interest of the United States may be more limited than that of applicants, they basically *939 are identical, and in fact both seek the same goal, that is, of course, the operation of a correctional facility consistent with the constitutional requirements. This appears to me to be a recognition by the Department that the interest requirement of Rule 24(a)(2) is met, and I don't think the Department of Justice seriously challenges that.
The defendants, on the other hand, argue that the applicants have no interest that is significant or protectable herein. In support of this argument, defendants contend it is significant that applicants have raised no specified objection to the adequacy and fairness of the relief proposed in the consent decree. In my opinion, the applicants satisfied the second requirement of 24(a)(2). I think that the United States Department of Justice's analysis is correct. The Hadix case seeks broader relief, but both that class and the Department are concerned with conditions at Jackson for federal constitutional purposes. CRIPA was after all designed to protect the applicants and others like them. This surely creates a sufficient "interest," with I guess quotes around the word "interest," on their part to be involved in the subject matter of these proceedings. So I find the second test of the applicants is met.
The third test, the protection of the interest may as a practical matter be impaired or impeded by the disposition of this action. In Usery, once again, my Brother Gibson recognized that an undesired precedent on the same facts is a practical impairment. However, in United States v. City of Jackson, 519 F.2d 1147, from the Fifth Circuit in 1975, it was noted by the Fifth Circuit that courts "fully understand" that consent decrees do not purport to be "definitive statements of the parties' legal rights and will accord them little or no weight in the determination of the rights of persons not party to them." CRIPA provides in section 1997j that its provisions do not expand or restrict the authority of private parties to enforce their legal rights.
Applicants argue that entry of the consent decree will impair and/or impede their ability to protect their interests in the pending Hadix case. They cite the fact that they have been negotiating for more than twelve months in that action, which has been pending for four years. Applicants believe that statements by the Attorney General that the decree will have an impact on the negotiating process therein establishes this element, and also that the mootness argument put forth by the Attorney General satisfies that interest.
Defendants, however, point out that the applicants do not argue that their interests will not be served by the implementation of the consent decree. The Justice Department argues that the mere conclusory allegation that there will be impact upon the private cause of action is insufficient, is not sufficient. Applicants are free in the Hadix litigation to pursue all of the rights and remedies they deem appropriate. The Department contends there has been no demonstration that the relief applicants seek privately will be impaired, impeded, or is even in conflict with that afforded in the consent decree.
The Court believes that the applicants, however, satisfy this third requirement of Rule 24(a)(2). The rule requires that there be a showing that protection of applicants' interest may as a practical matter be impaired or impeded, not that it will. Applicants have been involved in a class action lawsuit involving conditions at the facility at Jackson for four years. Extensive negotiations have taken place. Included in the issues involved are federal constitutional questions, some of the very same questions involved in the instant litigation. Although applicants would be free to pursue federal constitutional remedies in the Hadix case even after entry of this proposed consent decree, I believe the decree's provisions regarding actions constitutionally mandated at Michigan prisons, including Jackson, may quite possibly impair and/or impede their efforts to seek relief therein. I am convinced this is true as to any future settlement negotiations in the case, and after listening to the arguments today, any future trial. The defendant's apparent contradictory statements concerning the effect *940 of the consent decree support my conclusion with regard to item number three.
I also believe that the impact and I am not sure that I can make this clear. I also think that the impact argument is strengthened of the applicants by the comparison to a decree with a voluntary plan attached. That plaintiffs lose in Hadix on the grounds of mootness, and later the State, which has the power to amend the agreement ex parte, will have one effect on the clients of the plaintiffs, versus, on the other hand, a more comprehensive decree which includes mandatory language and injunctive language, and the plaintiffs lose the Hadix litigation on mootness, which leaves their client in a very different position. And, therefore, I find that argument, while I don't know the answer to the argument, supports the impact requirement, the third requirement of Rule 24.
And finally, is the interest of the applicants adequately represented by an existing party? In Trbovich v. United Mine Workers, 404 U.S. 528, 92 S. Ct. 630, 30 L. Ed. 2d 686, a 1977 Supreme Court case, the Supreme Court indicated that the requirement that there is inadequate representation by existing parties is satisfied if the applicants show the representation of their interest may be and the words "may be" come directly from Trbovich "may be" inadequate; and the "burden of making that showing should be treated as minimal." That is an absolute quote. And by the way, the Supreme Court at that moment decided to cite and did cite Moore on Federal Practice. So the standard in Trbovich is a very simple one. "May be" the representation may be inadequate, and "the burden on the applicants is minimal." That is also Judge Gibson's finding in Usery v. Brandel that I have cited at least three times.
The burden, however, whether it is minimal or not, remains with the applicants. There have been case holdings that the government is inadequate to represent the interests of private parties. See National Farm Lines v. I.C.C., 564 F.2d 381 (10th Cir.1977) and other cases cited by the parties. These decisions frequently turn on the conflict created when the government is attempting to protect both the public interest and the private interests of the applicants. That is sort of from National Farm Lines. In making this determination, practical as well as formal representation of the applicants' interest should be assessed. That is what Gibson said in Usery. Judge Gibson in that case indicated that applicants' burden may be met by demonstrating collusion, disinterest in the case, or imcompetence. Also, if the interests of the applicants and the party in question are divergent so that their interests are similar but not identical, intervention should ordinarily be allowed, Judge Gibson argues, citing Wright & Miller, Federal Practice and Procedure. Nevertheless, slight differences in interests between applicant and the existing party do not show inadequacy if they both seek the same outcome.
In the County of Fresno case that I mentioned earlier, the Ninth Circuit stated that a "would-be intervenor is adequately represented if: (1) the interests of a party to the suit are such that it will undoubtedly make all of the intervenor's arguments; (2) the present party is capable of and willing to make such arguments; and (3) the intervenor would not offer any necessary element to the proceedings that the other parties would neglect." County of Fresno, 662 F.2d 439. The plaintiff Department also cites U.S. v. South Bend Community School Corporation, 692 F.2d 623, a Seventh Circuit case in 1982 in Indiana, coming out of Indiana. There the court held that the NAACP would not be allowed intervention as of right in a school desegregation case brought by the federal government. The NAACP first sought to represent as of right all black students in the district and their parents, even though the interests of that class were represented by the government under the Civil Rights Act of 1964 and the Equal Educational Opportunities Act of 1974. The NAACP conceded that it and the government had a similar objective, desegregation of students and staff, but they disagreed as to the appropriate method to achieve that goal.
*941 The court held that since the NAACP and the government had the same ultimate objective, it would be presumed that the government adequately represents the NAACP. The court found this conclusion especially appropriate because the government was charged by law with representing the interests of the absentee, and there had been no showing of gross negligence or bad faith on the part of the government. Nor had there been any collusion between the parties, nor, the court also found, did the government represent any interest adverse to those of the NAACP, or that the government counsel was ineffective or, it was effective, in other words. The NAACP had not attacked the proposed consent decree as constitutionally or otherwise inadequate, but had merely suggested improvements in it.
This case before us today is, of course, distinguishable from the circumstances involved herein, because applicants do attack the proposed consent decree as inadequate. Furthermore, they believe that the United States does not seek the same goal as they do in Hadix. The applicants, remembering that they only have to show that they may be inadequately represented and have a minimal burden, make the following arguments in a general sense and this I gleaned not very much from the written briefs, but from the arguments I heard today: The applicants argue that the United States admitted today, and that is true, that it does not represent the inmates. That was one of Ms. Russell's first statements. Only the United States. So that there is a distinction with regard to whether or not the Hadix group is adequately represented. Second, it is not proven by any means, but there is an allegation made in this courtroom that the United States accepted less than the State of Michigan offered. That is hotly contested by the defendants, but it is an allegation made by the applicant group. Third, applicants argue that the constitutional interpretation of the Justice Department's Civil Rights Division is not the same as the plaintiff's constitutional interpretation of CRIPA, and, therefore, argue the applicants, how could we be adequately represented when on the face of it we view the constitutional questions differently as lawyers. As kind of in support of that argument, the applicants argue that the United States is not as vigorous as we are in representing our clients. Fourth, the applicants claim that the State has the ability to amend ex parte and monitor the plan by itself without involvement of the Justice Department which is, argues the plaintiffs and the applicants, not sufficient representation for plaintiffs' group. Then there is the argument about the voluntary plan and the mootness argument that I have already gone over, and in an earlier section which is simply another argument it is an adverse impact argument. It is also an adequacy of representation argument. I won't burden the record further by that.
Next there are, the Court is in receipt of two separate petitions coming, I think from Hadix, one clearly from Hadix, and the other I think. One is in the form of a letter by a prisoner named Frederick Spalla. He starts his letter by saying that he favors the American Civil Liberties Union and the National Prison Project intervention, makes no particular reference to the Hadix litigation except he makes the comment that, as follows it is only a letter. It is open to more than one conclusion. He says that:
On more than one occasion I have contacted the Justice Department Civil Division. I have requested pursuant to the Freedom of Information Act the correspondence that has been generated between Justice and Michigan Department of Corrections as a result of the former's 1981 report on Michigan prison conditions. To date I have not received any information. Months have passed.... I request that this failure of the Justice Department to disclose the requested information amounts to no more than mere indifference. The whole scenario reminds me of a sweetheart deal. All too often the approach has been utilized....
The sum and substance of the Spalla letter, perhaps on behalf of the ACLU, perhaps not on behalf of the Hadix people, is that he doesn't believe that a proper representation *942 is happening to him as a member of the Hadix group. This morning I received a petition signed by numerous prisoners. I have no idea how many a substantial amount of prisoners under a Re Hadix v. Perry Johnson heading, with a case number that is not my case number. It is Judge Feikens' case number. John R. Ford, a prisoner, with his number, essentially is suggesting that the class of Hadix people are not being well represented by the Department of Justice, asks any prisoners who agree with that proposition to sign the petition. The petition as I have indicated bears the signatures of many, many, many prisoners, and was only filed today. The letter to his fellow prisoners was written, he alleges, on March 20th and 21st. The postmark is dated the 22nd, but it arrived at this Court today. I also believe that, although it is subject to a motion to strike by the defendants, that the testimony of two U.S. Justice Department lawyers indicates that the representation by the Justice Department, not by the State of Michigan, is inadequate.
Although the showing, as I have indicated, is of a mere showing with regard to element four that they may not be properly represented, and that the burden which is theirs is minimal, based upon that, I believe the applicants have satisfied the burden of demonstrating that the United States' representation of their interests may, certainly not is, may be inadequate. The applicants among other things, as I have just summarized in great length, seek much broader relief than advocated by the plaintiff. The interests are the same in many respects. The interest of the United States is a little bit more limited. It is likely that the United States would not make the same arguments that the plaintiffs make. Furthermore, I have at least some concern about the allegations made in these various documents that have been furnished to me. There is absolutely no proof of any of the allegations. Nevertheless, because the applicants' issue is minimal, I am going to grant their motion to intervene on a limited basis. The limited basis is on the basis of their interest in the Jackson Prison case in this case, and I am not extending it any broader at this moment than their right to argue about the consent decree in the litigation pending before us.
With regard to the amicus curiae proposition, motion of the applicants to intervene on a limited basis is granted.
The ACLU argument, they don't seek to intervene it doesn't seek to intervene. The two plaintiffs don't seek to intervene. The Michigan Civil Liberties Union Foundation and the National Prison Project of the American Civil Liberties Union merely request to appear as what they describe as litigating amicus curiae. Their litigating position in this case is identical, they claim, because both organizations are represented by the same two counsel that signed the pleadings. They are simply petitioners.
They have filed this motion following a review, apparently, only of the proposed consent decree. At least, I heard the argument that they were not privy to all of the pleadings. They argue to me that the particular circumstances surrounding the filing of litigation and the substance of the proposed decree raise serious and troubling questions as to whether the decree should enter in its present form. The proposed decree, they argue, will have a major impact on the conditions of confinement of Michigan inmates, none of whom had any voice in the proposed decree.
As I indicated earlier, I can't be sure that the two prisoner applications I have don't refer to them instead of the Hadix people, but it appears in one case to relate to both. The petitioner believes that prior to the entry of a decree the Court should hear from a source other than the parties. Petitioners make a long argument in their petition, and cite the two, or add the materials that are objected to by the defendants.
They talk about the fact that when the case was filed three and one-half years had passed since the passage of CRIPA. They argue that it was only the second time that the Department utilized its authorization under the statute. They make some argument with regard to internal policy within the Department of Justice which is not *943 before the Court unless it is before the Court in the limited sense that they argue that there is somehow an inadequate representation of the interests they serve, namely, the inmates in all three of the prisons as opposed to the Hadix petition which is only at Jackson.
Regarding the proposed consent decree, the petitioners believe its provisions deserve close scrutiny. I think I will save their arguments for the arguments made on the decree itself because they, in their petition, specifically attack the decree in some major fashion. That is why they added the two, the testimony of the two ex-Justice Department lawyers, and make the allegation that was spoken to briefly by Mr. Curry. I think that even besides that, of the two lawyers involved in U.S. v. Michigan before us here, one has quit the Department entirely, and the other has left the case. That we will find out when we listen to arguments in a few minutes, but that is the substance of what they say.
They only seek amicus status as I understand it for the limited purpose of arguing about the decree. They talk about litigating status, and I am not certain even after I hear their arguments what it is that they intend to litigate. The plaintiff Department and the defendant Attorney General oppose the involvement of the two ACLU groups on many grounds as amici. One ground is that they are serving an interest and are not in fact a friend, friends of the Court. The plaintiff Department also argues that if the Court is persuaded that the petitioners are prepared to submit an objective legal memorandum, the U.S. would not oppose the filing with amicus brief, at least in the case of the Hadix people, and I presume meaning the same thing with regard to the ACLU. The Department states, however, that it is not sure what the applicants' interest in Hadix is, and I, therefore, take that to mean it is not sure of the ACLU's position, either.
The defendants oppose the applicants and the petitioner's amicus status. The applicants don't need an amicus status because I have permitted them to come in as stated. The argument is that there could be no value to the Court whatsoever. They are partisan, argues both the United States and the defendant State of Michigan. In Bradley v. Milliken, 460 F. Supp. 320 (E.D. Mich.1978), which is a case that all of the lawyers know about, the court denied intervention to representatives of a Hispanic community in the remedial phase of a school desegregation case. The court found that the applicants could protect their interest, which was recognized as legitimate and substantial, by petitioning to be allowed to speak as amici curiae in future proceedings if there happened to be a remand. In Brewer v. Republic Steel Corporation, 513 F.2d 1222 (6th Cir.1975), in this Circuit, not cited by any of the lawyers that I know of, the court denied a motion by the Ohio Civil Rights Commission to intervene in a private employment discrimination case, but invited the Commission to participate as amicus curiae by filing briefs and making evidentiary presentations.
The defendants cite three cases on the Hadix brief in support of their opposition to amicus position on behalf of the Hadix people, and I take it make the same argument with regard to amicus positions sought by the ACLU. In this case, it appears to the Court that the ACLU at least on the face of it is not a partisan in the matter. It is an organization devoted to concerns about such rights as the rights of prisoners who are incarcerated or are mentally retarded as the Act talks about, or juveniles. It doesn't seem to me to harm anyone to permit the two organizations to intervene as amicus or amici since there are two of them. I don't, however, act upon their motion to be a litigating amici. I think that awaits a decision as to what to do on the consent decree. The purpose of allowing them amicus status or amici status is for them to be able to argue the consent decree which is before the Court today, and which is of the greatest importance to everybody.
Therefore, I grant the petition of the two ACLU plaintiffs to act as amici curiae for the limited purpose of arguing the consent decree.
*944 BENCH OPINION OF MARCH 23, 1984 REJECTING PROPOSED CONSENT DECREE
Well, there are a number of things that I want to say, and I guess that I will say them as briefly as possible. The hour is late. I thought some while I was stretching my legs, and trying to figure out if there were any blood left between the top of my head and the toes, and thought maybe I ought to have you come back tomorrow. And I though that might be a cruel and unusual punishment against lawyers, especially Mr. LaVille who has been sitting here from Grand Rapids doing nothing except accompanying the Justice Department lawyers. But I don't think that there is a plane out of Kalamazoo this late anyways, but just the same I don't think people ought to have to come back.
I think the briefing done in this case was extraordinarily well done by everybody in the room, and most helpful to me, although terribly voluminous in its nature. I think the arguments done by the lawyers were fine oratorical experiences for me. It is a very important case.
I hesitate to do things when it is late at night and when I am tired, and when I have been suffering some kind of a Michigan virus, I guess curious to Michigan, but perhaps not. When I first heard about this case, I did not realize it was a case as a matter of fact. I read about it in the newspapers, and I thought that it was a case that had been assigned to some court and settled, and I was, as any citizen would be, pleased that the United States and the State of Michigan had gotten together and made some kind of an agreement involving the penal situation in Michigan. And lo and behold, a day or two later, the case was filed in the Western District of Michigan, for whatever reason I don't know, and assigned to me for whatever reason I don't know, either. All I knew at the time was what one newspaper article said, and what the consent decree with the plan attached to it said. And since I didn't understand much of anything, events went from there.
I start off as a judge terribly interested in the settlement of lawsuits. We, as any other district court, are burdened to the point of almost being unable to continue with the caseload. I don't know a federal judge in the country that wants a massive prison suit dumped on him or her, or a school case, or any other case that goes on forever. There are lots of reasons for it, but the principal reason is that it eats up so much of the court's time that the court has very little time for other litigants who are as deserving of being heard as anyone is. It is a constant problem. It seems to me that the federal district court, whatever its failings or merits, is the workhorse of the federal government, and who else, what other judge in his right mind would be sitting in a courtroom a quarter to seven on Friday night with tickets to Peter, Paul and Mary and I am, I am not going to see Peter, Paul and Mary which would have taken me perhaps, back to my youthful days to the sixties. I guess that is beside the point, too.
By the same token, of course, I don't want to enter something that is meaningless and continues to plug up the docket for many years. I am not as familiar as all of the counsel here are with the prison problems of the United States, or as Mr. Quinn is with the State of Michigan, or as Mr. Bennett is with the State of Michigan. I have this is not my first jail or prison case, however, and it looks like it may be one of the worst, but it is not the first.
The problem, it seems to me is, it is oftentimes like a dog chasing its tail. There are good-willed people that are trying to resolve the issues involved in overcrowding, for example, which leads to the myriad of other sins that have occurred in our prisons. But it is judges that put people in jail, not the lawyers in this room, or who deny bond, and it is for those reasons that the overcrowding situation occurs.
It is particularly a relevant personal issue because the public in the political atmosphere in which we live cries for swift justice and the incarceration of people charged with crimes. Elected state judges are not un-hearing of those loud cries. So it is left to somebody else to try to resolve the problems, and the lawyers in this room, *945 it seems to me, are morally and legally dedicated to a resolution.
I particularly like the arguments made by Mr. Quinn this last time that he argued to me with regard to what the State of Michigan was prepared to do from his point of view without any decree, or in terms of modifying any decree as the case may be. Mr. Bennett to some degree contests that by saying with all of the goodwill Mr. Quinn may have, and all of the legal talent he has, one of his clients, to-wit, the Department of State Prisons, is not as compliant with Mr. Quinn's desires as Mr. Quinn may want it to be. However that is, I don't know. I have had in this courtroom a member of that department recently in the Grand Rapids prison case, county jail case, and he strikes me as a man who is after a resolution to the problems of the overcrowded county jails, and is not falling over for the Kent County argument that it has solved its problem. I am very impressed with his background and the amount of time that he has spent in the system, what he is trying to do for it.
So as an initial proposition, I start out, one, absolutely wanting to resolve the lawsuit without a lawsuit on just general principles, and, two, I start off wanting to be in any way possible helpful to the parties who have reached agreement here, that is to say, the United States of America and the State of Michigan.
The question, of course, is, can I be of that assistance with regard to the proposed decree that is in front of me. The Court has spent a good deal of time thinking about what my role is when parties come to an agreement. It happens all the time, and it happens in litigation that is more private than this litigation. Particularly in tort litigation do I find parties coming into the courtroom and agreeing to a settlement of a longstanding lawsuit, breathing a sigh of relief, being doubly anxious to, oh, resolve the matter as the parties want to resolve it, and simply become a scrivener. On one occasion in the short four years that I have sat on this bench, I did such a thing only to find that heirs who were not represented at the hearing did not agree with the consent that had been reached by others, that I was not aware were involved, and it led to a protracted problem which was finally resolved. With that single exception, however, every consent judgment I have been asked to enter I have entered. I want to enter this one. Let's see if I can on the basis of what is in front of me.
In general, the fact that the judgment is entered by means of a consent decree does not affects its validity or enforceability. Of course, the law favors, encourages compromise settlements for the reasons that I have just set forth. Nevertheless, a court cannot enter a consent decree without an appropriate review. The lawyers have cited to me, and I cite simply back to the record, some of the cases that they have called to my attention. Williams v. Vukovich, 720 F.2d 909, is a case out of this circuit. It is a very recent case. It is a 1983 case. The Sixth Circuit there addressed specifically the test for approval of the consent decree.
In the Williams v. Vukovich case, which was a case involving black police officers who had filed a class action against the city of Youngstown, Ohio, and city officials, alleging that the city had engaged in racially discriminatory hiring and promotion practices, unlike this case, in the Williams case, there had been a five and one-half year period of negotiations, and a consent decree that finally resolved the hiring and promotion issues that were involved in the Youngstown case. Several class members, however, objected to the decree. The district court in Ohio held that it was unreasonable, but granted a stay for appeal.
The Circuit then held that the decree was illegal and contrary to the public interest because it embodied impermissible waivers of future discrimination. The Court then outlined a procedure for approving consent decrees. And, the procedure was, as follows: The consent decree, said the Sixth Circuit, is essentially a settlement agreement subject to continued judicial policing. The terms of the decree unlike those of a simple contract have unique properties. A consent decree has attributes of both contract and of a judicial act. *946 On the one hand, a consent decree is a voluntary settlement agreement which can be fully effective without judicial intervention. In this sense, the decree merely memorializes the bargained-for position of the parties. The consent decree, therefore, should be strictly construed to preserve the bargained-for position of the parties. The court has no occasion to resolve the merits of the disputed issues or the factual underpinnings of the various legal theories advanced by the parties. This is a random quote, and not entirely a quote. I have skipped, but it is, what I have read, was a quote.
Skipping some more:
A consent decree, however, is also a final judicial order. Judicial approval of a settlement agreement places the power and prestige of the court behind the compromise struck by the parties. Judicial approval, therefore, may not be obtained for an agreement which is illegal, a product of collusion, or contrary to the public interest. Once approved, the prospective provisions of the consent decree operate as an injunction. The injunctive quality of the consent decree compels the court to, one, retain jurisdiction over the decree during the term of its existence, two, protect the integrity of the decree with its contempt powers, and, three, modify the decree should changed circumstances subvert its intended purposes.
That essentially comes from page 920 of Williams v. Vukovich, some eleven pages into the opinion. The court also cited another Sixth Circuit opinion, Stotts v. Memphis Fire Department, which was also a recent case, a 1982 case, which was cited in the litigation by the plaintiff Department of Justice, but not by the defendants, for the proposition that suggested procedures for approving consent decrees, which was a class action, involved three steps:
First, preliminary approval in order to determine if a compromise is illegal or tainted with collusion. To determine if the decree is a product of an arm's length negotiation, the party who objects has a heavy burden of demonstrating that the decree is unreasonable.
Second, notice should be given to all individuals who may be affected by the decree, which of course discusses giving class members the best notice practicable. And this is not a class action. The Stotts case is.
Third, a reasonableness determination after a hearing is held in which all interested parties may comment on the proposed decree. The court will then determine if the decree is fair, adequate and reasonable. The court must consider the fairness of the decree to those affected, the adequacy of the settlement of the class, and the public interest. Articulated reasons should be given for rejecting a decree. The Court must also evaluate the adequacy of the decree by weighing the plaintiff's likelihood of success on the merits against the amount and the form of the relief offered in the settlement, which, of course, is another way of talking about the Mason County standard and the first test of the Mason County standard.
Finally, the court should consider whether the proposed consent decree is consistent with the public interest. In Stotts, the court elaborated on the reasonableness determination that should be made by a court. "The reasonableness determination is an issue of law," said Stotts, "to be determined by the court, not by others." This reasonableness determination is an issue of law, and in making it the court is under a duty to evaluate three factors:
First, the court must consider whether the decree is a fair and adequate resolution of the allegations contained in the complaint. Ordinarily, the following factors should be considered: The complexity, suspense, and likely duration of the litigation; the state of proceedings, and the amount of discovery completed; the risks of litigation; the resources of the defendant; and the reasonableness of the settlement in light of the best possible recovery.
The Court notes that because both Williams and Stotts involved class actions *947 both parties to the lawsuit here argue that the procedures outlined in those cases need not be strictly followed by me here. In that regard, either the intervening party or the amicus curiae called my attention to the Fifth Circuit's statement in the case of United States v. City of Miami, Florida, 664 F.2d 435, which is a 1981 Fifth Circuit case, that a court's duty when presented with a consent decree is to give it greater scrutiny than would be given a proposed compromise in a class action.
In discussing intense scrutiny, the Fifth Circuit, discussing intense scrutiny, said:
Because the decree does not merely validate a compromise, but by virtue of its injunctive provisions reaches into the future, and has a continuing effect, its determinations require more than careful scrutiny. Even when it affects only the parties, the court should examine it carefully to ascertain not only that it is a fair settlement, but also that it does not put the court's sanction and power behind a decree that violates the Constitution, statute or jurisprudence. This involves the determination that the proposal involves a reasonable factual and legal determination based upon the facts of record, whether established by evidence, affidavit or stipulation. If the decree also affects third parties, the court must be satisfied that the effect on them is neither unreasonable nor proscribed. In assessing the problem of giving judicial imprimature to the consent decree, the court must also consider the nature of the litigation and the purpose to be served by the decree. If the suit seeks to enforce a statute, the decree must be consistent with the public objectives sought to be obtained by the Congress.
That comes, in essence, from page 441 of the City of Miami. The Court's first look at the two documents gave the Court considerable concern long before I heard any kind of, perhaps, not altogether relevant issues about policies of the Justice Department. The five-page consent decree did not read to me like a consent decree has ever read.
I realize that I have only been in the profession twenty-six years, but I have never seen a consent, five-page document like this five-page document. I couldn't read it. I couldn't decide what I was doing or what I was being asked to do. It didn't seem like I was being asked to do anything. Then I read the forty-two page plan or fifty-four page plan, however many pages it is. It doesn't come to fifty-four to me, because it stops before that and has some appendixes that are important. And I saw things in there that I thought were extraordinarily well done by the parties, and some not so well done. I recognized some problems.
I recognized, number one, that Pennhurst, a very recent case, does not allow me as the federal district judge to order the State of Michigan to comply with state law, and there are provisions in the plan document I am going to call it the plan document as opposed to the five-page decree which could require a court to do that.
The lawyers are bright here and know that I can't do that. So we put that aside. There are also some things in the forty or fifty plus page document, however many pages it is, which I don't think rise to a level of a constitutional question. They vary. They have been addressed by the lawyers here. There are others that very clearly do come to a constitutional issue, very clearly come to a constitutional issue. The lawyers know what they are. They are included, but not limited to the overcrowding, the supervision of prisoners so that they don't harm each other, the fire protection problems which appear to be difficult in the Michigan prisons mentioned here if I believe what I read in the documents, the medical, psychiatric care, and so forth. These are areas that I think lawyers on both sides of all tables agree are of constitutional magnitude.
The point is that in its present form it seems to me that I do nothing by signing the five-page consent decree. I don't know what it means, and if I don't know what it means, I can't see how anybody else does. And I agree with one of the lawyers who argued I will have to litigate this case from *948 now until the end of my term inasmuch as I will not be able to understand what it is a) that is claimed to be a constitutional violation, and b) if it is a constitutional violation, what it is that I am supposed to do or what evidence I am going to have to hear to make a determination if that really happened. "Minimally adequate" language doesn't particularly distress me because the statute talks about minimally adequate. I would have preferred, I suppose, to see the word "adequate" instead of "minimally adequate," but that doesn't bother me. The term, however, as I relate it to the remainder of the forty-two page document is indefinite, and in my determination potentially unenforceable.
I have particular concern with a part of the decree and the record should show that when I am talking about the decree I am talking only about the five page document. I am not talking about the whole decree as some of the parties have characterized, but I am only talking about the five pages. There is a statement that I am going to have to find. It is on page four of the five page document. It says: "Such plan shall not be construed as a specification per se of constitutional required acts on the part of the state." That is a most perplexing sentence. I think that I know what the parties meant to say there, but I don't think that they said it, and that seems to me to present an argument on any enforcement attempt by the United States that opens up the Pandora's box of deciding what parts of the fifty page document relate to constitutional acts and which do not. A most distressing sentence to me.
There are other sentences that I am distressed about in the first five or six pages. "Defendant's failure to comply with provisions of the plan shall not be construed as a constitutional violation of any sort whatsoever." "Compliance with the plan shall constitute full and complete compliance with the decree." That language bothers me greatly. If defendants are as it says willing as they say today willing to comply with the entire plan, why not make it a requirement in the consent decree? I don't understand what the language is intended to mean. I don't know what the defendants are promising.
I am concerned about a portion of the five page document that I mentioned to counsel during the arguments. The decree states that after the defendants have complied with the terms of the degree, "they may apply to terminate this Court's jurisdiction, and this Court shall grant the application upon a showing of pattern and practice of ongoing full compliance." That sentence can be read, I suspect, to say that a hearing would have to be held in which I would have to decide if there was full compliance, which I can't do because I can't read the decree; but if I do, an argument could be made about the State of Michigan that I would have no option except to grant the application made by the defendant. Perhaps, perhaps, that is not the way it was intended to read. It is the only way that I read it the first time. That is why I asked a question about it today. It doesn't comply as I indicated to counsel in argument even with the complaint filed. It looks to the Court like a complaint was prepared prior to the time the consent was altered, but for whatever reason.
The remedy section of the, in fact, paragraph 26 and paragraph 27 of the United States' compliant signed by William French Smith is the kind of remedy that I would have expected the government to ask for, and it is the kind of language that I would have expected to find in the five-page consent decree. It is exactly the way that I would expect the consent decree on this kind of a matter to go. Whether the defendant had agreed to do additional things that were not of a constitutional nature or whether it hadn't it simply seems obvious to me. Well, I am not going to keep everybody all night.
I have examined the proposed consent decree, and I believe under the standards of the Sixth Circuit, and certainly under the standards of the Fifth Circuit, and I think any circuit, the decree as I read it is inadequate. It says very little. It is impossible for me to know what has been agreed upon, and I don't know how such an agreement is to be enforced. I will, therefore, *949 not sign the consent decree in its present form.
That is not to say, however, that the attached plan is deficient. I find much in the attached plan that is efficient, and very much that ought to be a part of a consent decree. That plan with modifications to remove any possible Eleventh Amendment Pennhurst problems may or may not be adequate to withstand my scrutiny, but I suspect that it may be adequate. That is without deciding what that does directly right now to the intervening parties in the Eastern District matter. Because I find it inadequate, I issue the following order:
I order the plaintiff and the defendants to meet with an attempt to redraft into enforceable language a new consent decree for the Court to consider. I give them thirty (30) days to accomplish that task from this date, and to immediately submit their new effort to me for scrutiny. At that moment, they shall serve on the amici curiae and the intervening parties copies only of the proposed consent decree. Those two parties, meaning the intervening and the amicus curiae parties, shall have fifteen (15) days to respond in any fashion they wish to in writing as to their feelings about the proposed consent. In fairness, I give the United States and the State of Michigan fifteen (15) days from the day to reply to any objections raised by an intervening party or by the amici curiae. That will consume sixty (60) days. And to me it is a matter of some sadness because I want to have the consent decree signed so that the plan can get on its way. I am heartened, Mr. Quinn, by your remarks to me today, and hope that during those sixty (60) days those things that you have indicated to me so clearly as an officer of this court go forward.
. . . .
That will consume sixty (60) days. I then want to set a hearing in which all the parties will have submitted all of their materials to me and will once again try to, we will once again try to see if it isn't possible that the United States of America and the State of Michigan can't provide a consent decree to me that I can sign that can pass the muster and can comply with the Sixth Circuit standards as I believe to be correct. I think that I set that day for June 11, but I left is that correct? At 9:30. June 11th is a Monday which I think will cause minimal problems with the movement of the lawyers from various places. I set it in the morning so that we wouldn't have a repeat of this miserable afternoon and evening affair. I will be most anxious to see what has happened by that time. I consider this order to be an ongoing order, and that the State of Michigan and the United States of America can continue to amend their agreement up to the time of the hearing.
Of course, I want as much notice as possible as to what is in it, but just because I have only given them thirty (30) days it could be that they will see a suggestion made or an objection made by the intervening party or parties or the amici curiae and want to make an alteration to overcome that objection. I have no reason to be concerned about that, either. I could string out the time problem, but this is such an important case involving such an important issue that I don't want it to slip away from me. Neither do I want to try it piecemeal, little by little, as I would have to do in my judgment if I entered the matter set before me. I don't intend to do that, and I hope that it continues to be a consent decree. I certainly never want to be any part of having to litigate this case in its entirety.
BENCH OPINION OF JUNE 22, 1984 DENYING JANSSON PLAINTIFFS' AND KNOP PLAINTIFFS' MOTIONS TO INTERVENE AND APPROVING CONSENT DECREE
I want the lawyers to know, and through the media to know, the public to know, that I believe the decree ought to be signed, and I can't imagine why the single sentence would cause any great difficulty after my explanation. It may not be the most perfect consent decree ever issued, but I am satisfied with it, and we have worked hard at it. Everybody has had an opportunity to have input, and I believe that is important in matters of public concern. And I have *950 some confidence in the lawyers that have appeared in this courtroom, and in an effort to resolve the issue. As far as I am concerned, there is a consent decree I will sign it if we have all of the things that we have before us today, and I am pleased with the whole thing.
I turn to the question of intervention because I must resolve without and I do this at this stage to assist the lawyers that are in this room from having to answer things, and try to put this matter to bed. I don't think that I have to really address the non-intervention because of the comment made by Ms. Alexander, but I do have to address the Jansson case.
The motions to intervene were both brought under 24(a)(2). The first was filed on May 16, 1984, and involves an action brought in pro per by several inmates of Jackson Prison. The action which is styled Jansson, J-a-n-s-s-o-n, v. Michigan, and is our file number 84-1263, is currently pending in the Eastern District of Michigan before Judge Thornton, having been filed on February 8, 1984, in that district. In a complaint naming various officials of the Michigan Department of Corrections and the State Prison of Southern Michigan, the named plaintiffs complain generally of the conditions of confinement at the South and North Complexes of Jackson. In support of their motion to intervene, these plaintiffs allege that the consent decree in this case will impair or impede their ability to protect their interests that they have expressed in their own district action. They base this argument upon prior statements that they claim the Attorney General of Michigan made in Hadix, and argue that since the Attorney General has, "said that the agreement will have an impact in Hadix, applicants having similar claims will also be impacted." End of quote, out of their pleading. They seek to exclude the South and North Complexes from the consent decree as in Hadix.
The second motion to intervene before the Court was filed June 11th, 1984, the same day the case was filed, and that is the Knop case v. Johnson, that we have talked about, and is G84-651. Somewhat like the Jansson action, this action names various officials of the Michigan Department of Corrections, the State Prison of Southern Michigan, Michigan Reformatory of Ionia, and the Prison at Marquette, and raises claims based upon the totality of conditions at these institutions. This case is styled as a class action, but has not been certified as such by me. Attorneys for plaintiffs are the same as represent the amici, to-wit, William Fette and Elizabeth Alexander. In support of their motion to intervene, the Knop plaintiffs originally asserted that the entry of the proposed consent decree in this case will have a practical impact on their ability to litigate their case.
In a supplemental pleading filed yesterday, June 21st, 1984, applicants assert that they should be allowed to intervene in the enforcement of this litigation, stating, "Despite serious reservations applicants do not oppose the entry of the revised consent decree if an appropriate mechanism for monitoring enforcement will exist." And in my judgment, such a mechanism now exists in the event that the last sentence is worked out. Applicants believe that it is necessary that this Court hear from someone other than the parties when an issue of enforcement or modification emerges. Although both plaintiff and defendants have had notice of these motions, I have received no response whatsoever to Jansson, and the response to the Knop motion came only from the State defendants and was filed only yesterday.
As everyone knows, I have previously rendered a lengthy oral opinion on the question of limited intervention for the Hadix group. I now attempt to be very brief today and simply draw the parties' attention to the previous ruling, and specifically incorporate and rely upon the facts and case law that I recited at that time.
Rule 24(a)(2) provides:
(a) Intervention of Right. Upon a timely application anyone shall be permitted to intervene in an action ... (2) when the applicant claims an interest relating to the property or transaction which is the subject of the action and he is so situated that the disposition of the action *951 may as a practical matter impair or impede his ability to protect that interest, unless the applicant's interest is adequately represented by existing parties.
The parties previously were not in disagreement as to the elements necessary to establish the nonstatutory intervention as of right. Those elements are: First, the application must be timely; second, the applicants must show an interest relating to the property or transaction which is the subject of the action; third, the applicants must show that the protection of the interest may as a practical matter be impaired or impeded by the disposition of the action; and fourth, the applicants must show that their interest is not adequately represented by an existing party. For those four propositions, I cite Moore's Federal Practice, 24.07(1), pages 24 to 50; Blanchard v. Johnson, from the Sixth Circuit, 532 F.2d 1074; County of Fresno v. Andrus, 622 F.2d 436, from the Ninth Circuit; Usery v. Brandel, from the Western District of Michigan, 87 F.R.D 670 (1980). Applicants bear the burden of showing that the Rule 24(a)(2) requirements are satisfied.
As to timeliness, number one, in NAACP v. New York, 413 U.S. 345, 93 S. Ct. 2591, 37 L. Ed. 2d 648, the Court stated in 1973 that timeliness is to be determined from all the circumstances involved. This determination is left to the sound discretion of the trial court. I also draw your attention to Stallworth v. Monsanto Company, 558 F.2d 257, from the Fifth Circuit in 1977, and Usery v. Brandel that I have already cited, and EEOC v. United Air Lines, 515 F.2d 946, a Seventh Circuit case in 1975, cited and elaborated upon by me in my ruling in the Hadix motion, and considered again relative to the instant motions. I have also considered Johnson v. North Carolina State Highway Patrol, in the Eastern District of North Carolina, 1980, 91 F.R.D. 406, not cited previously.
Unlike the motion in Hadix, I do not believe either of the instant motions to be timely. It is clear that the applicants were aware or should have been aware in the Jansson case of this action in January, as were the plaintiffs in Hadix. Unlike the plaintiffs in Hadix, who filed a motion to intervene immediately, the applicants delayed filing until several months after the institution of this lawsuit, and at a time when the matter had reached a critical stage with entry of the consent decree looming. I believe there would be substantial prejudice to the parties to this action caused by the untimeliness of these motions should they be granted. On the other hand, as will be explained more fully in a moment, I do not believe there is prejudice to the applicants in denial of their motions.
Second, the interest relating to the property or transaction which is the subject of the action. Rule 24(a)(2) requires a "significant protectable interest" in the pending litigation. While I find it unnecessary to make a specific ruling as to this element of the intervention prerequisites because of my conclusions regarding the other elements, it is likely that both applicant actions would be able to satisfy this test.
Third, the protection of the interest may as a practical matter be impaired. As pointed out in my prior ruling, CRIPA provides in section 1997j that its provisions do not expand or restrict the authority of private parties to enforce their legal rights. Furthermore, consent decrees are generally accorded little or no weight in the determination of the right of persons not a party to them. In that latter regard, I cite the lawyers here to United States v. City of Jackson, cited in my previous rulings, from the Fifth Circuit in 1975.
When considering the Hadix motion, I found myself faced with concerns I do not find present in Knop and Jansson. Hadix was a class action that had been pending for four years when this case was filed. The parties had been negotiating toward settlement for more than twelve months. By contrast, Jansson has been pending since February 8th of this year, and it is not a class action. Although I am not privy to information as to the current status of that case, I can only assume that there has been little if any discussion of settlement. The Knop action is even younger, having been filed June 11th. There has been as yet no answer filed to *952 the complaint that I know of. Obviously, any discussion of settlement has been limited. These two actions may, of course, proceed despite the entry of this consent decree.
More importantly, there was some confusion at the time that I ruled on the Hadix motion concerning the Attorney General's position on the question of mootness and the effect of this consent decree on negotiations and litigation in that lawsuit. These concerns led me to look favorably upon intervention because I believed entry of the decree could impair or impede the disposition of Hadix. These concerns are no longer present. While Hadix is not settled, it appears to be that it is so far down the line to settlement that it will settle, and I cannot think of any way that the State or the defendants in that case can lack motivation based upon the comments made in this court today, and based upon the representations that I believe they have made to Judge Feikens.
However, even though it has not been resolved and maybe in some weird way it will never be resolved the consent decree as it presently stands before me contains a specific disclaimer of the mootness argument, and this statement in my opinion now relates and directly responds to Jansson concerns as well, and should be treated in the same manner as the Hadix concerns, and it is based upon the consent agreed upon here. It must be remembered that Knop and Jansson plaintiffs are free to continue to pursue the remedies they deem appropriate in spite of the entry of this consent decree. The State defendants must, of course, respond, and I am certain will respond, to those lawsuits. I do not believe under the circumstances as I understand them that the applicants have demonstrated that their plight may be impaired or impeded by the entry of this consent decree.
Fourth, and finally, the interest not being adequately represented by an existing party. On this, the final prerequisite under Rule 24(a)(2), I find that applicants have completely failed to make the requisite showing. The Jansson applicants are unrepresented and are currently incarcerated. The Knop applicants are represented by the same attorneys presently representing the ACLU in this case. In their role as amicus curiae, these attorneys on behalf of the ACLU, have vigorously pursued a just and proper resolution of this dispute. They are more than adequate to represent the interests of every inmate in the three prisons subject to this consent decree. As I indicated in the decree, amici, the ACLU and Hadix group, will be provided with all documentation relative to this case. They will have the opportunity to respond in writing and to appear and argue at hearings. They surely will make all of the prisoners' arguments. Based upon the impressive pleadings and arguments presented thus far by amici, I do not believe applicants could hope to be better represented.
The important considerations in ruling on the Hadix motion to intervene, and also the ACLU motion to appear as amicus curiae, were allegations without proof that the Department of Justice would not vigorously pursue compliance with a consent decree, that it had accepted less than the State of Michigan was offering, that its internal policies were inconsistent with the protected rights of inmates, and that there were differences of opinion on constitutional interpretation. The transcripts of Congressional testimony of two ex-Justice Department attorneys added to this concern and uncertainty. Intimately tied with these issues was the concern that the proposed decree was vague and unenforceable, and subject to ex parte amendment by defendants. These latter concerns have been alleviated in my mind by the revisions of the consent decree. The former concerns, as I have indicated, are adequately addressed by the capable representation of amici. I find no reason to conclude applicants should be any further represented.
For all of these reasons, I deny the motions to intervene of both the Jansson and Knop applicants without prejudice, and on the assumption that the language the Court suggests in the one sentence not yet resolved is ultimately agreed upon by the State and the federal government.
*953 Finally, there is a document entitled, quote, "Laymans Pleading," filed on June 15, 1984, by a prisoner at Jackson named Robert Carl Marr, M-a-r-r. Mr. Marr alleges that he has been incarcerated within the Michigan Prison System for the better part of the last thirty-eight (38) years. He claims to be qualified as an expert, friend of the court, party, or "anything else that this court will allow in the court's endeavor to arrive at a fair, lawful and just decision in this matter." Mr. Marr would like to testify as to the conditions at the various Michigan prisons, and as to the competence of Perry Johnson. The Court has already ruled that the consent decree, as amended, is fair, just and lawful, and shall be entered by this Court, provisionally, if that last sentence is agreed upon, and I do not believe that there is any need for the testimony or anything else from Mr. Marr.
BENCH OPINION OF JUNE 21, 1985 APPROVING PARTIES' STIPULATION AND ANNOUNCING INTENT TO APPOINT A SPECIAL MASTER
The past few months, it seems like this Court has spent an unusual amount of time in litigation styled the United States v. State of Michigan. Not, of course, the same litigation. But their submissions have been so voluminous here that it has taken a long time to try to understand what has happened here since we last met or approximately last met. In my judgment, this problem came to me in an unfortunate manner inasmuch as I was dissatisfied with the proposed consent decree when it first came to me, and felt very much like a vehicle just passing through some political considerations on to the other branches of government, and wouldn't do it because it was pointless; and after a while, as we got together, and worked on it, and negotiated really, came up with what I thought at least was a reasonable consent decree that the Court could interpret and enforce, make certain that the object of the, the objects of the consent decree were complied with; and I must say that I have read with interest all of the submissions that have come.
It seems to me as an initial matter that when you get a hearing like this, and I did not know what to expect at the hearing I certainly knew, I certainly knew what were the written positions of the state and the United States of America. I did not know the positions of the amici except on the limited issue of the mental health plan. I would have expected as the years went by that I would have heard from the amici in the event that the amici believed that the State of Michigan's compliance was not sufficient to satisfy the requirements of the consent decree, and I did not with that single exception. There are three, at least three possible reasons why I didn't hear from the amici.
One is because the amici through their counsel were not aware of what was happening within the penal system of the State of Michigan. It seems to me that that is partly true and partly untrue. Ms. Alexander has indicated to me discontent in her visits to the prisons in the form of her dissatisfaction with being cast in the apparent role of a Justice Department employee, which of course she is not. Secondly, it would appear that she has not gotten all of the submissions called for in paragraph "O" of the consent decree. So she was in part ignorant of what was happening through no fault of her own, and I suppose it could also be argued that she was in large part satisfied with some things that were happening, which is why I didn't receive any reports.
Really, I come out here today, and I think you can boil down and summarize what I heard this morning in two fashions: First of all, you have the State of Michigan and the United States saying well, you have the State of Michigan saying we have complied as best we can, we have not totally complied for reasons that were unknown to us at the time of the consent decree, including the illness of a psychiatrist, and including the time deadlines which were not realistic, including lots of other things having to do with construction and construction contracts, and the bureaucratic process that every government faces. The United States comes in and says, both, there has been some compliance, and we *954 are pleased with it, and where there has not been compliance we have insisted on a better situation within the realities of the real world.
Then the amici come in and say essentially there is a collusive situation between the two competing sovereigns in this litigation and what I have heard is not true. One I think could make one has to make some conclusions. I am in a very unenviable position it seems to me for a number of reasons. First of all, some of the matters are impossible for me to correct because the deadlines weren't met. What can I do except hold somebody in contempt who hasn't met a deadline? That is the first unenviable position. The second one is, how do I cull the truth from what is being said to me today. After all, in the final analysis, isn't that my job? That is what I am paid to do, is to find the truth.
I can make some tentative conclusions, and I will make them. It does seem to me there has been substantial progress and the State of Michigan in many respects has to be complimented in what it has done in the year that has gone by. It sounds to me as though there has been a good faith effort on the part of the State of Michigan to do what is difficult to do. I cannot but sympathize with correction officials in this state or any state as not being an enviable job for them, either.
It seems to me like the United States has kept its word from what I am hearing in the courtroom. It has not simply agreed with the State of Michigan on all of its requests to put things off, and to come up with new deadlines, and I have to compliment the United States and the State of Michigan for that. And I do. It certainly sounds better than it did a year ago.
Like all other citizens, I do read the newspapers, and I see there has been some unrest, particularly at Jackson. Whether that unrest has any causal relationship to the issues before this Court, I don't know, but I have to suspect that it is so. I also recognize the realities of the need for the sovereigns through their counsel to put the executive branches of their respective governments in a good posture before the media that is attending this hearing. It is a reality that I have to deal with, I have to consider. I have to think if it makes any difference, does posturing in the courtroom have anything to do with the matter before the Court. I don't think it does. But I guess there is not much I can do about political considerations.
When you get right down to it, Ms. Alexander is saying two things: First, she is saying I haven't been fairly treated procedurally. So I can't get my interests before the Court because I haven't the material to do it. I haven't had the twenty (20) days promised by paragraph "O". But, and she says that is all she wants is for me not to sign the stipulation today because she hasn't had a fair opportunity. And she hasn't had a fair opportunity. She is right. That is easy. Obvious. Why, I don't know. Certainly the paragraph wasn't complied with. Then secondly she predicts that if I knew the real truth I wouldn't sign the decree anyway, if after her twenty (20) days we had another hearing and she could parade some witnesses before me or something I would find there hadn't been enough compliance. The answer to that is I don't know.
I am disinterested in the Knop litigation. That is a matter beyond this Court. I agree with Ms. Russell on that. I don't intend to improve her posture in the Knop case one way or the other, or hurt it one way or the other. I am just disinterested. I am interested only in the United States v. Michigan case. So how do I cull the truth out of that? Well, I don't know as much about the administration of penal institutions as I do about the people in this room, but I believe if I had two months or a month and one-half, I could myself find the truth by simply going to where I have to go, and that is, to the institutions, to the correction officers, to the inmates, to the, probably, the legislative officials and executive officials, and make my own mind up about compliance. I don't think that any court would do that or has the time to do it; and I am not going to do it. Therefore, I am going to remain in the dark. And that is not a hopeful thing, either.
*955 Ordinarily, it seems to me that in a consent decree situation, in a consent judgment situation, when the parties are in substantial agreement, ordinarily it is the job of the Court to put an imprimature on that agreement, and I suspect courts for the most part in the ordinary situation do that. I certainly have found myself doing it on occasion, and I am sure that I will again. But this is public interest litigation, and it affects all the people of the State of Michigan and to some degree the United States. Furthermore, the subject matter of the litigation, the constitutional rights of the inmates, are in this litigation almost unrepresented. That is to say, the amici appear for the inmates, but the inmates have no counsel in these institutions, and it is the Eighth Amendment that brought this matter into the courtroom in the first place. I don't think it is analogous really to school children in a school desegregation case because the interests are represented for the most part, usually by a class of either plaintiffs or defendants including the governmental entities involved in that. This just has a group of people, numerous I don't know how numerous, but numerous who aren't here, and they are telling me something.
From time to time I have received letters from inmates. The parties know about that because I have always sent those letters right on to the parties, and I get the expected response, quote, we will look into that, end quote, and nothing else. So I act like kind of a clearinghouse for the inmates that are upset and write to me about their upset. That is kind of ex parteing the Judge, and I just send them on to the parties, the amici, and get no response except as I indicated, someday maybe we will get around to answering that.
Well, there are really two options in front of me right now. One is the option to sign the stipulation which of course I have read; and one is not to sign. What else can I do?
What I am going to do is the following: I am going to sign the stipulation. It will expire at 5:00 p.m. on August 21st. I have written that into the order. The order reads that the above stipulated agreement is an order of this Court hereby entered the 21st of June, 1985, at Kalamazoo, Michigan, and it expires on August 21st, 1985, 5:00 p.m.
That is of course about sixty (60) days from today. It is two months from today. In the United States v. Michigan involved in the Indian fishing rights case, I appointed a special master for the purpose of trying to expedite a settlement, and for that purpose principally alone. It was of help to the Court in the final analysis. And from the day this litigation was filed, I began to, this instant litigation, U.S. v. Michigan slash Prisons, I began to think about a special master, because I began to think that I would never be able to learn what I needed to learn about the conditions in Michigan's prisons, and probably might not recognize them myself if I saw them.
From that date to this date, I have seen two separate individuals in this courtroom on different litigation who have presented themselves to the Court, called by the litigating parties as ex-prison they were both ex-prison administrators of some standing in the country. Both had been wardens as I recall it, and they helped the Court with their testimony with regard to the issues that I was facing then. One was, I specifically recall, involved in the case where an inmate was alleging that he had been raped at one of the institutions involved in this litigation maybe maybe not but with regard to the conditions of confinement; and I thought about this case at the time.
I intend to appoint a special master in this case pursuant to Rule 53 who will tell me, I hope, what the truth is with regard to implementation. I am going to give the parties the following assignment. I want them to the parties include amici. I want them to brief by July 5th, that is, two weeks from today, issues involving a special master, including the following issues: The role of the master as the parties and amici see it; the question of funding provisions; and whether or not the master's fee ought to be shared by both governments, and if so to what degree. That is to say, *956 should it be 50-50 or something different. Funding provisions as the parties see it.
I will be interested in comments from the parties and amici about the value of the special master in this case; although I think that I have said to the parties the reason I feel the necessity. I need some independent person not bound to the United States, not bound to the State of Michigan, not bound to the amici, not bound to the inmates, but knowledgeable about the issues facing this Court; and I don't see that there is any other way that I can do that. I am about 85 percent convinced, but not 100 percent, that the United States and the State of Michigan are telling it to me like it is. But I need to have a percentage much greater. I need to get as close to 100 percent as I can.
I am also ordering that Ms. Alexander be served with all documents which paragraph "O" contemplates, that she hasn't been, by July 1st and no later, and I am ordering that the stipulation that I just signed be amended when it talks about service on the opposite party and the Court, that there be an amendment to that saying "and the amici" in each place where it appears in this 13, 14-page document, actually a 13-page document, a signature page. I did not make the amendments in pen. I am ordering it amended that way. Then I am ordering the parties and the amici to submit to this Court motions if they have any with regard to what ought to happen on August 21st together with briefs and supporting memoranda regarding what has been complied with from this date, June 21st, until that date, August 1st.
Some of the deadlines in the stipulation will have already occurred, and some will not have occurred as everyone here knows. And those briefs and motions should stop the legal paper unless it is necessary after August 1st. On August 21st, 1985, the day the stipulation and order expire, I order a hearing in this courtroom at 9:00 a.m. I hope to be able then to take the step that seems appropriate at that time. The master may or may not be in place by that date. I would hope to be able to issue an order of reference by mid to early part of the latter part of the month of July, which would only give that master thirty (30) days at best.
But something has to be done. One of the things that disturbed me when I took the recess was that Ms. Alexander wanted me to delay the matter further by not signing the stipulation, and I don't want to delay the matter further. It creates by itself, obviously, delay. It is a problem that it is the same problem on the same problem. I don't see any value in doing that. That is why I am not doing it.
We will meet again on August 21st. We will have more knowledge then than we have today. I hope that in the next two months the stipulated order works out but I don't know the answer to that. There will be no further written notice from this Court I say to the parties, about the hearing date or about the briefing dates, other than this oral order. The stipulation that I have talked about is signed, and I will hand it to you, Ms. Chapman. I am not going to bother as I indicated making the corrections, inserting the amici in the stipulation, because it has just been done by my oral order.
MEMORANDUM OPINION AND ORDER OF AUGUST 5, 1985
On June 21, 1985, a hearing was held in the above-captioned case on the subject of Defendants' (hereinafter referred to as "the State") compliance with the terms of the Consent Decree entered July 16, 1984. After being presented by the parties and amici curiae (amici) with seemingly incompatible versions of the State's compliance efforts, I indicated an intention to appoint an independent person; i.e., a Special Master, to assist the Court in overseeing implementation of the Consent Decree. The parties and amici were ordered to submit briefs on the subject of a Special Master by July 5, 1985.
The Court has, since July 5, 1985, received numerous pleadings from the parties and amici. The Plaintiff and Defendants strenuously object, on several grounds, to the appointment of a Special Master. Amici strongly favor the appointment. *957 Having carefully considered the arguments made in these pleadings, both on the issue of the appropriateness of utilizing a Special Master and on the issue of the State's compliance efforts, I am still unable to make a comfortable and accurate assessment of the State's progress. Therefore, I remain of the opinion that input from an independent person on this important subject is necessary. However, I am persuaded by the parties that the Court's inquiries may be adequately addressed, and in the least intrusive manner, by the appointment of an independent expert rather than a Special Master. Should the selection of an independent expert prove to be an unsatisfactory manner in which to address the Court's concerns, the appointment of a Special Master will again be considered. Therefore,
IT IS HEREBY ORDERED that pursuant to Federal Rule of Evidence 706 and 28 U.S.C. § 1920, an independent expert shall be appointed to study and report upon efforts of the State of Michigan to comply with the Consent Decree entered July 16, 1984.
IT IS FURTHER ORDERED that the fees for said independent expert shall be shared jointly by Plaintiff, United States of America, and Defendant, State of Michigan.
IT IS FURTHER ORDERED that the parties and amici shall submit to the Court names and resumes of proposed independent experts within fifteen (15) days from the date of this Order. The Court will immediately thereafter select a qualified expert. If unsatisfied with any of the names suggested, the Court will make its own independent selection of a qualified expert.
IT IS FURTHER ORDERED that the hearing previously set for August 21, 1985 remains as scheduled. The issues of the implementation of the Consent Decree and the appointment of an independent expert will be addressed.
IT IS SO ORDERED.
BENCH OPINION OF AUGUST 21, 1985 EXTENDING THE PARTIES' STIPULATION; DENYING THE KNOP AMICUS MOTION TO AMEND THE STATE PLAN; AND DENYING THE UNITED STATES' REQUEST FOR SANCTIONS AGAINST THE KNOP AMICUS
The Court takes up the issue, I guess, joint issues of the Knop plaintiffs, Knop amici, motion to amend, and the other motions to strike the pleadings which were the argument that we heard just before I took the recess. In a motion and brief with attachments which exceeded 150 pages, the amici now move the Court for an order amending the substantive provisions of the state plan for compliance and the supplemental plans associated with the consent decree issued last year. These provisions include among other things psychiatric care, medical care, physical plant conditions, and sanitation and crowding, and protection from harm, and access to the courts.
The motion and brief also ask the defendants to cease to inform inmates that administrative actions result from the consent decree unless that turns out to be in fact true. In terms of what the brief contains, which is summarized briefly by counsel today, I think it is sufficient to say that it states amici's view of the present conditions in the areas listed and the law as to what they believe is constitutionally required. They believe these modifications are necessary to the state plan in order to effectuate the purposes of the consent decree. Also cited in the brief are areas in which the state plan as it exists now is being complied with.
Prior to addressing the question of whether the amici should be allowed, that is to say, have standing, if that is the proper term, to bring this motion, a comment is proper as far as the brief is concerned. It is exhaustive and well written, and if one has enough patience to read the 150 pages as I did there is interesting material there. However, as with all of the pleadings that I have read for the past several months, there is absolutely no way *958 for me to ascertain the truth of the allegations. Without being vulgar about it, it is the same stuff that I keep seeing over and over again; and although in the responsive briefs of the United States and the State the substantive arguments are not addressed, the substantive arguments have been addressed in the past and, I am sure, could be exhaustively treated if the United States and the State wanted to do that. The whole reason for my wanting to appoint a special master, or as I have altered that order, independent expert, was to give me some information, and that has not been done. I, therefore, as a preliminary ruling would indicate that the motion if allowable, if I were to allow it, is in my judgment premature because I have the same lack of information that I had in June.
It is obvious to me from reading the voluminous pleadings, the paper war that is going on between angry counsel and of which I am the unfortunate beneficiary, that the only way that I can determine what conditions are and what has been done by the State, or what has not been done by the State, as well as any extensions that might be necessary, is after I get the report or consult with the independent expert, which I haven't had the opportunity to do for a host of reasons that I will address in a few moments. The only option that I would have after reading that brief and the response is, without an independent expert, to conduct some kind of a trial, which I suspect would be very long and complicated, and which I suspect would be mostly unproductive.
I am concerned with the status of the amici here as far as the prison project is concerned. I am not unaware that they are the Knop plaintiffs. That is exactly the position they have here. The potential class action involves the totality of the conditions of the prisons involved in this case. I tend to agree with the parties in the case herein when they argue that the amici appear to be trying to litigate Knop in part at least. I know, and I assume that the lawyers know, that CRIPA requires only the, quote, "constitutional minimum." While there may be no way in this world to accurately determine what satisfies a constitutional minimum, I note that amici, the Knop amici, were at one time satisfied with the terms of the consent decree and the state plan. In fact, the Knop plaintiffs stated they were not here to challenge the substantive provisions of the decree or the plan, only to be sure there were provisions for adequate monitoring and/or enforcement.
By reading between the lines of the pleadings, and that is all I can do, it appears to me that the Knop plaintiffs have changed their minds. It may be that they are seeking extra relief as plaintiffs in Knop rather than the limited status of amici in this case. As in all other matters in this case, I continue to be frustrated because I don't think anyone in this room, myself included, really knows what is constitutionally required as a minimum. If that is true, and I am persuaded by all that I have heard that it is, how can I be expected to make a judgment as to what should or shouldn't happen with regard to the issues set forth in the 150-page brief of the Knop plaintiffs? As I have indicated a few minutes ago, I do not believe that the Knop plaintiffs have standing or authority to bring a motion to change the state plan. 42 U.S.C. 1997 or the CRIPA Act clearly gives standing to seek remedies only to the United States. The Knop plaintiff or the Knop amicus is not a party, never was a party. Although Hadix was once an intervening plaintiff, Hadix isn't anymore, and if I have my way, and I think I will, Hadix will be out of this case altogether.
The pertinent provisions of the consent decree do not in my opinion support amici's ability to bring this motion. The decree refers very specifically to parties, and I would underscore the word "parties," having stipulated and agreed to the entry of the decree. After addressing various conditions involved in the decree and I call the record's attention and the lawyer's attention to paragraphs H, I, J, K, and L I specifically stopped at paragraph O which in substantial part reads as follows: "The parties by agreeing to this decree do not intend to create any rights and obligations *959 enforceable by inmates. It is, nonetheless, recognized that for the purpose of entry of this decree the Court has granted limited intervention to the plaintiffs in the pending action of Hadix" citation omitted "and to the plaintiffs in the pending case of Knop" citation omitted "to participate as amicus curiae. To the extent that the defendants are required by paragraphs I, J, K, and L to this decree to furnish reports, plans, pleadings, memoranda or other documentation to the Court and the United States, an informational copy shall be provided at the same time to the amicus curiae. Any responses of the United States shall be similarly circulated. Within 20 days after receipt of said reports, plans, pleadings, memoranda or other documentation, Hadix and Knop plaintiffs may respond to the Court and parties as amicus curiae." Those are two words that ought to be underlined, it seems to me. "Further, Hadix and Knop plaintiffs have a limited right at the Court's discretion to participate as amicus curiae at any hearing which may be called."
That is a substantial reading of paragraph O of the consent decree previously entered. Paragraphs P and Q are of some assistance as well. Paragraph P indicates that the United States may seek appropriate orders for enforcement of the decree, but will not do so until first consulting with the defendants in an effort toward an informal resolution of the dispute; and Q says the Court shall continue its jurisdiction of this matter until further notice. "One year following the decree" some material omitted "the Court shall hold a hearing to determine whether the decree to the extent then implemented in accordance with the terms and provisions thereof is fulfilling its stated purpose to bring SPSM, RFC, MR, MBP and MIPC into constitutional compliance. Should it be determined at such hearing that the decree is in some respect deficient in such requirements, the Court may entertain motions for modification of the decree so as to correct the deficiency. The Hadix and Knop plaintiffs may participate as amicus curiae in said hearing." End Quote. Quite clearly Q and O indicate the status of the Knop plaintiffs, and that status is not as a party. Nor does it give the Knop plaintiffs any right to make a motion to amend. I believe these provisions grant the amicus, therefore, very limited authority, the type of authority usually granted to a person or an entity with an amicus status.
I have to agree with the parties that the amicus does not have authority to make a motion to modify. Also, even if it did, or they did have the authority, it seems to me very untimely, over one year after the decree was entered and subsequent to the compliance hearing of June 21st, 1985. I think that the past briefs of amicus were very proper. They presented the Court with a third view of the facts and assisted me in understanding the requirements of the Constitution with regard to this legislation.
It seems to me this is the only role of an amicus at this stage. In fact, as you all will recall, I reduced the Knop plaintiff from litigating amicus to plain old amicus when the decree was entered. I disagree with the argument of amici that somehow my statement on June 21st in effect that the parties and the amici submit by August 21st such motions that they may have, about what should happen today, August 21st, was any kind of an open invitation to amici to make a motion to amend. I interpret my own remarks as an invitation to make motions, submit pleadings, regarding whether the stipulation should be extended past August 21st, nothing more, nothing less. I am hard-pressed to understand that it was a grant of some kind of authority to amici which hadn't been in the litigation before and isn't today. The ruling that I make, therefore, on the motion pending is that I grant the motion to strike the motion to amend as requested. I will continue. I will keep, however, the brief on file for use by me since it is well written, and since it may be of assistance to the Court and to the expert the Court appoints. The motion is stricken. The brief is not. The brief is still part of the Court's material.
Because the United States and because the State of Michigan responded to that motion by outrage, which is understandable *960 to me, they did not address any of the substantive portions of the materials contained in the Knop brief. If the government wants to do, governments want to do that, Michigan or the United States and they may not want to as there is already a bevy of material here that addresses most of those issues I am going to permit that to be done because certainly the expert that I appoint is going to have access to the Knop brief, and it seems to me only fair to permit the United States and the State of Michigan if they desire to submit responsive briefs as to the substantive portions of the Knop amici's brief. I will give them twenty days to do that, twenty days from today. They are not required to. Neither entity is required. If they want to, they have the right to do that. Thus endeth that matter.
Also before the Court is a motion for sanctions regarding some of the background material involving the Knop plaintiff's counsel who unfortunately doesn't appear today because she is on vacation. The motion was brought pursuant to paragraph P of the consent decree. In part, the United States, it says the United States may seek appropriate orders for enforcement of this decree, but will not do so until first consulting with the defendants in an effort toward informal resolution of any dispute. The motion seeking sanctions against amici is in my judgment, has nothing to do with that paragraph, despite the fact that that is what I was pointed to, to do something about it. I don't think that I will go into all of the issues, but I certainly don't intend to hold a long evidentiary hearing in which and there are already affidavits from both sides, and there is already animus that is not of benefit, that is reflected in the pleadings and is not to the benefit of any lawyer in this room or any lawyer not in this room. It is the kind of paper that I think no judge in the country wants to read. I certainly don't. It diminishes this professional greatly. My analyzation of the motion, and what all of the bevy of materials that have been sent to me, is essentially, as follows:
First of all, there is in my judgment apparent misunderstanding by amici as to their authority in this case as I have just ruled. They are, as I have indicated, and will be treated as, traditional amici. I have read the pleadings, and from the pleadings and the materials that appeared, it appears to me that Elizabeth Alexander did not intend to act improperly. It does appear that she misunderstood the role of these experts vis-a-vis the United States. I, of course, have no way of knowing the truth here, and I wouldn't if we had a full evidentiary hearing. I, therefore, do not intend to hold an evidentiary hearing, a you did, you didn't kind of thing. I am not going to raise that issue to the level of dignifying it with a hearing. I expect, of course, that the matters contained in that motion, and the background from that motion, which was only filed August 13th, will not occur in the future. I am denying the motion for sanctions without prejudice in the sense that if problems occur in the future that motion may be raised again, and I will keep all of the materials that have been furnished to me including the affidavits for reference.
The motion for sanctions against Elizabeth Alexander is denied. That leaves on the agenda the principal issues for which I had set the hearing today, and that is what to do about the extension of the stipulation entered June 21st, what to do about the State's motion for relief from the order, what to do about the expert situation.
. . . . .
The Court was in the midst of concern with the issues that were the same issues that I had back in June. In terms of the paper flow, the paper war, it is unfortunate, and I must confess as I have, it is becoming wearisome to me and to my whole staff. The background was not very helpful, either. It was on July 16, 1984, that the consent decree was finally signed by me after considerable difficulties. Paragraph Q of that decree provided that I would continue jurisdiction of this matter until further notice, and that one year following the entry, and specifically on June 21st, I would hold a hearing to determine whether the decree, to the extent then implemented in accordance with the terms *961 and provisions thereof, is fulfilling its stead purpose to bring the institutions into constitutional compliance. Should it be determined, the order reads, in such hearing that the decree is in some respect deficient in its requirements, the Court may entertain motions for modification of the decree so as to correct the deficiency. The Hadix and Knop plaintiffs as I previously indicated were permitted to participate as amicus curiae in that hearing.
The next year, I received copies of periodic reports from the State and copies from the United States on the steps being taken to comply with the decree. No objections or any comments whatsoever were ever received from amici. Just prior to the June 21st hearing, I received a motion from the State to modify the decree. That is, to extend some dates for compliance in various areas. The United States and State submitted a stipulation of their agreed upon time extensions. The A.C.L.U. Prison Project strenuously objected and submitted lengthy arguments and reports stating that the conditions of the prisons were not as indicated by the United States and the State. The United States and the State contended that the A.C.L.U. position was incorrect in every respect. Allegations flew back and forth, of no assistance to the Court.
And frustration, in frustration and not much else, I stated at that June 21st hearing that I could not ascertain the truth as to the compliance efforts of the State, and I ordered at that time that I would appoint a special master to help in making evaluations and reporting to me about his evaluations or her evaluations. I ordered the parties and the amici to brief by July 5th the issues involving the appointment of a special master. I also ruled that I had signed the stipulation to extend the date, that it would expire today, August 21st, on which date there would be another hearing. Then from the transcript I ordered the parties and the amici to submit to me motions I covered that matter. I don't see any point in covering it again, I guess.
By July 5th anyway, I received a huge stack of papers on the question of the appointment of the special master. After listening to this material from my own office, since I was absent, I decided in my absence to appoint an independent expert instead of a special master. I reserved the possibility of appointing a special master at a later date if the expert proved to be an unsatisfactory manner in which to address my concerns. As of today, and only as of today, as far as I am maybe it was yesterday or the day before not very long ago I received from the United States the names and resumes of three proposed experts. I received the names and resumes from the State of Michigan of three proposed experts; and I received from the Knop plaintiffs the names and resumes of three proposed experts. I have received one or two, possibly three, requests from individuals who simply knew about the litigation and submitted their own resumes.
I do not know whether the two governments and the amici know of each other's experts. I just got them myself, and I haven't actually had the opportunity to analyze the material therein. There are no names repeated. So I can tell at first blush that there is no single individual who bears the recommendation of either of the sovereigns or of the amici. What I don't know is if that may be true if all sides are privy to the individual recommendations made. What I am going to do about the expert problem then is this: I am going to order that the lawyers present today meet to discuss the expert issue with regard to the names and resumes submitted, and if the lawyers here don't have the resumes of certain individuals, we will get them Xeroxed so they do have them. The purpose of the meeting is to see, is to have me learn two things before the day is out: One, are there, is there a person or persons which are agreeable to the lawyers representing the United States and the State of Michigan, and the amici if possible. But my judgment is that, or my observation is that nothing is agreeable to the lawyers in this room. So I wouldn't expect that I would have any agreement. Nevertheless, in frustration, I try.
At the same meeting, perhaps, we can identify those experts who are not agreeable *962 for one reason or another based upon their resumes or other things. Several of the resumes that I have looked at, they appear to contain significant qualifications for the people who submitted them, and it could be that the lawyers haven't had an opportunity to see each other on the subject. That today may not resolve that issue. I hope it resolves that issue if the lawyers talk with each other in good faith. If it doesn't, I am going to give the government of the United States and the government of the State of Michigan ten days from this date to respond to me about all of the experts who have been submitted for my consideration.
I intend within one day of receiving those briefs to appoint the expert so that there will be no more delay. One of the significant problems that has occurred between June and today is that no progress has been made toward appointing an independent person to assist the Court in understanding what the problems of compliance with the Court's consent decree are. And that will continue ad infinitum, it appears to me, unless I get busy and appoint the expert.
For the reason that I don't have the expert, for the reasons that I have stated before, I continue to be in an unenviable position of not being able to do anything except what the parties want me to do. That is, I can either rubber-stamp the parties' request for extension, not being sure that I should, or I can deny it and just leave chaos in the case. So if I can't deny it, and I don't know the truth of the allegations, all I can do is extend it; and without any happiness at all I do extend it until January 17, 1986, at which time I hope to have heard from the expert on his or her views as to what happens with compliance. There will obviously have to be additional orders from the Court on briefing and other things. That is all I am doing right now is extending the stipulation of June 21st to January 16 (sic), 1986, at the close of business that day. I am ordering a hearing for that day at 9:00 a.m.
OCTOBER 2, 1985 APPOINTMENT OF F. WARREN BENTON AS INDEPENDENT EXPERT AND ORDER FOR INSTRUCTIONS
Due to its difficulty in determining from the submissions of the parties and amici the degree of the State's compliance with the Consent Decree entered July 16, 1984, the State Plan for Compliance, and the Stipulation entered August 21, 1985, the Court finds it necessary to appoint an Independent Expert to study and report to it on the efforts of the State of Michigan to comply with the provisions of such documents. The Court believes the Independent Expert's report will provide it with an objective and thorough analysis of the status of the State's compliance in the subject prison facilities. The Court has considered carefully the qualifications of the candidates submitted by the parties and amici. Therefore, pursuant to Federal Rule of Evidence 706 and 28 U.S.C. § 1920, and with the consent of the parties,
IT IS ORDERED that F. Warren Benton is hereby appointed by the Court as its Independent Expert empowered to study and report on the State's efforts to comply with the Consent Decree, the State Plan for Compliance, the Stipulation entered August 21, 1985, and other plans and orders entered in this case. In furtherance of his duties, the Independent Expert shall have the authority set forth below.
I. Authority
1. The Independent Expert shall have unlimited access to all facilities, buildings, or premises under the control of the Michigan Department of Corrections (hereinafter DOC) that are subject to this action, i.e., those facilities, buildings, and premises at the State Prison of Southern Michigan ("SPSM") at Jackson, the Reception and Guidance Center ("RGC"), the Michigan Reformatory ("MR") at Ionia, the Marquette Branch Prison ("MBP") at Marquette, including the Michigan Intensive Programming Center ("MIPC"), and the Riverside Psychiatric Center. He shall have the authority to conduct tours of these facilities, buildings, and premises as *963 necessary. This access includes the DOC central administration facilities.
2. The Independent Expert shall have unlimited access to all relevant records, files, and papers maintained by the DOC and the Department of Justice (hereinafter DOJ) to the extent necessary to perform his duties as detailed in this Order. The DOC and the DOJ shall refuse no reasonable request for documents. The Independent Expert may, upon specific request, view in camera any relevant confidential documents in the possession of the parties, including individual inmate records and the consultant reports of the United States. The Independent Expert shall maintain the confidentiality of such information. The Independent Expert shall receive the following documents at the time of appointment:
A. The Consent Decree;
B. The State Plan for Compliance;
C. All Supplemental State Plans submitted to date, together with all comment letters from the United States and amici;
D. The Stipulation;
E. The semi-annual compliance reports of December 1984 and June 1985;
F. The amici's memorandum to amend the State Plan and the United States' responsive memorandum; and
G. Any other documents the Court may wish to provide.
The Independent Expert shall have ready access to all other papers filed with the Court.
3. The Independent Expert shall have access to all pertinent staff members and employees of the DOC and the DOJ. He may engage in both formal and informal conferences with such staff members and employees, including confidential personal or group interviews, and such persons shall cooperate with him fully and shall respond to all reasonable inquiries and requests relating to the State's compliance efforts. The State shall designate a representative to have the sole responsibility to coordinate tours of the relevant institutions or facilities, to assist in gathering documents, and to provide any additional material or information the Independent Expert may request. Lawyers representing the parties and amici or otherwise associated with this action, or with the Hadix and Knop actions, shall not attend tours undertaken by the Independent Expert or otherwise participate in the Independent Expert's activities without notice to the parties and permission of the Court. Such lawyers shall not contact the Independent Expert except by Order of the Court. Such lawyers may, however, respond to any written questions or other submissions the Independent Expert may have, provided such responses are in writing, and provided further that the lawyers for the parties to this action and for amici in this action shall receive copies of such questions or other submissions and the responses. All communications between the Independent Expert and counsel for either party or for amici concerning substantive issues pertaining to compliance shall be reported to the Court, the parties, and amici.
4. The Independent Expert may conduct confidential interviews and meetings with any prisoner or groups of prisoners incarcerated at the subject facilities.
5. The Independent Expert may attend, upon his oral or written request, any formal or informal institutional, or central administration, meeting(s) or proceeding(s) conducted by DOC staff. The DOC shall not refuse any such requests.
6. The Independent Expert may require DOC or DOJ staff to prepare, where appropriate, written responses to any questions raised by him.
7. The Independent Expert is authorized to hire Mr. Don Stoughton to assist him with his study and report. The amount, coverage, and payment of Mr. Stoughton's fees and expenses shall be governed by the same terms governing the Independent Expert's fees and expenses, as provided for in part III of this Order. The Independent Expert may, subject to the Court's approval and with the consent of the parties, employ such other persons as he feels are needed for him to carry out his duties. The parties shall divide equally the *964 fees and other costs of such individuals, who shall be under the Independent Expert's supervision and control.
II. Procedure
1. The Independent Expert shall give state officials reasonable notice of all tours, unless he believes such notice will interfere with the factfinding process. The Independent Expert, when possible, shall notify the State in advance of each tour of any special needs or arrangements that should be made, e.g., staff interviews or confidential interviews with inmates.
2. Upon conclusion of the compliance hearing scheduled for March 7, 1986, either party or amici may petition the Court to terminate the grant of authority to the Independent Expert contained in this Order. The Court, however, retains the authority to order the Independent Expert, upon conclusion of such hearing and notwithstanding any petition for termination of the Independent Expert's authority, to perform such additional duties with respect to this action as it may direct or which the parties or amici may petition the Court to, within its discretion, direct, and which are agreeable to the Independent Expert.
3. Any and all disputes concerning the interpretation of this Order shall be resolved by the Court, with appropriate notice and opportunity to respond to the parties and amici. The Independent Expert shall have the unqualified right to contact the Court, without notice to either party or amici, with any questions he may have regarding this Order or any other aspect of this action. The Court, except as noted in the first sentence of this paragraph, shall respond to such contacts with or without notice to the parties or amici.
4. The Independent Expert shall submit his report to the Court, the parties, and amici on or before February 1, 1986.
5. The parties and amici shall have until February 14, 1986, to file with the Court any responses to the Independent Expert's report they may wish to make. The parties and amici shall have until February 21, 1986, to file with the Court any replies to such responses they may wish to make.
6. The Independent Expert shall be prepared to testify at a compliance hearing, scheduled for March 7, 1986, at 9:00 a.m.
III. Authorized Fees and Expenses
1. It is understood that the parties shall divide equally all fees and reasonable expenses submitted by the Independent Expert, and approved by the Court.
2. The Independent Expert shall be compensated at the rate of four hundred dollars ($400.00) per day for services performed in accordance with this Order. The Independent Expert shall also be reimbursed for all reasonable and customary expenses incurred in the course of the performance of the duties outlined in this Order, including but not limited to airfare, cabfare, car rentals, parking, hotels, meals, tips, telephone calls, postage, and photocopying costs. Typist expenses are specifically excluded from the reimbursement provisions of this Order.
3. If an expense arises which is not customary and is over twenty-five dollars ($25.00), the Independent Expert shall seek authorization from the parties prior to submitting a bill. Authorization of the parties shall be in writing. No reasonable expense will be denied.
4. The parties shall provide the Independent Expert with appropriate billing instructions within ten (10) days of the entry of this Order.
IT IS SO ORDERED.
OPINION OF DECEMBER 2, 1985 DENYING THE HADIX PLAINTIFFS' REQUEST TO EXCLUDE THE CENTRAL COMPLEX AND THE RECEPTION AND GUIDANCE CENTER FROM COVERAGE UNDER THE CONSENT DECREE
Introduction
Currently before the Court is a "request" by amicus curiae the Hadix Plaintiffs for permission to intervene as a party plaintiff and for the Court to exclude the inmates confined at the Central Complex of the State Prison of Southern Michigan *965 ("SPSM"), including the Reception and Guidance Center ("RGC"), from coverage under the Consent Decree entered July 16, 1984, as amended August 21, 1985. On March 23, 1984, the Court granted the Hadix Plaintiffs a limited right to intervene as a party in this action so they could protect their interest in their own action before Judge Feikens of the United States District Court for the Eastern District of Michigan. The Court at that time, however, and at subsequent hearings, declined to exclude the Central Complex and the RGC from this action. After giving serious consideration to the Hadix Plaintiffs' latest request for exclusion, I still find, although it is a close question, that for the reasons discussed below the Central Complex and the RGC should at least for the present remain covered by the Consent Decree.
Facts
The United States Department of Justice, through the Attorney General, initiated this action on January 18, 1984, pursuant to its authority under the Civil Rights of Institutionalized Persons Act ("CRIPA"). 42 U.S.C. § 1997 et seq. Concurrent with its filing of the complaint, the United States filed a motion to dismiss pursuant to Rule 41(a)(2) of the Federal Rules of Civil Procedure ("FRCP") in which it requested the Court to accept and to enter a Consent Decree it had negotiated with the State of Michigan as the parties' settlement of the issues raised in the complaint. The Court set March 2, 1984, as the date for a hearing on the adequacy of the proposed consent judgment.
On February 2, 1984, the Court received a letter from the attorneys for the Hadix Plaintiffs advising it of their own action in the Eastern District of Michigan. The Court responded to this letter by inviting the Hadix Plaintiffs to participate in the hearing on the proposed consent judgment. On February 24, 1984, the Hadix Plaintiffs filed a motion to intervene as Plaintiffs in this action or, alternatively, for status as amicus curiae. The Hadix Plaintiffs stated in their motion that they sought to intervene for the sole purpose of excluding the Central Complex and the RGC from the proceedings before the Court. In an oral opinion rendered on March 23, 1984, the Court found that the Hadix Plaintiffs' satisfied Rule 24(a)(2)'s criteria for intervention as a matter of right, and accordingly allowed them to intervene "on the basis of their limited interest in the Jackson Prison." Transcript of March 23, 1984 Hearing, Vol. I, at 84. The Court also granted them status as amicus curiae. Id. at 85.
The Court indicated at subsequent hearings on the adequacy of the proposed Consent Decree that it was seriously considering excluding the Hadix Plaintiffs, i.e., the Central Complex and the RGC, from this action and thus from the scope of the decree. See Transcript of June 12, 1984 Discussions on Consent Decree at 6. The Court nevertheless approved the Consent Decree with the Central Complex and the RGC included among the institutions subject to the decree, and changed the status of the Hadix Plaintiffs to that of strictly amicus curiae. Transcript of June 22, 1984 Hearing at 26; Consent Decree, para. O.
On August 20, 1985, the Hadix Plaintiffs, having negotiated a settlement of their own action with the State of Michigan, renewed their request for exclusion from the Consent Decree. They argued, among other things, that failure to exclude them from the Consent Decree would constitute a waste of judicial resources and that the inmates were confused by the two decrees. At the compliance hearing held on August 21, 1985, the Court once again indicated its desire to exclude the Hadix Plaintiffs from coverage by the Consent Decree. Transcript of August 21, 1985 Rulings at 7 & 15. The State of Michigan indicated at the hearing that although it felt there was no conflict between the two decrees, it would not object to the exclusion of the Hadix Plaintiffs. Transcript of Statements of Attorneys, Scheduling by Court, of August 21, 1985, at 11. The United States, however, objected strenuously to the proposed exclusion, id. at 7-9, and subsequently filed a brief on the issue. The Hadix Plaintiffs then filed a reply to *966 the United States' response to their request.
The Parties' Positions
The Hadix Plaintiffs' motion or request presents two issues for the Court to resolve: (1) whether the Court should allow the Hadix Plaintiffs to intervene as a party for the sole purpose of seeking exclusion from the Consent Decree; and (2) if it should allow them to intervene for that purpose, whether it should grant their motion or request for exclusion. The Hadix Plaintiffs presented three arguments in support of their request in the motion they filed on August 20, 1985: (1) judicial supervision of the implementation of two separate consent decrees, in two different courts, covering the same institution, would constitute a waste of judicial resources and could lead to conflicting interpretations and enforcement measures; (2) the implementation of two separate consent decrees has created confusion and disharmony among the inmates at the Central Complex and the RGC, which in turn has created problems for the Hadix attorneys, who often have to explain that corrective measures to which the inmates object, and for which they blame the Hadix attorneys, are necessitated by the Consent Decree entered in this case; and (3) the entry of their consent decree has obviated the legal basis for continuing this Consent Decree with respect to the inmates they represent by removing the threat of irreparable injury required to support injunctive relief.
The United States filed a five-fold response to the Hadix Plaintiffs' request for exclusion. First, it argued that the Hadix Plaintiffs, pursuant to their status as amicus in this action, lack authority to file such a request, and that exclusion of the Central Complex and the RGC (which contain approximately 37.4% of the inmates affected by the decree and in which conditions are the worst) from the Consent Decree would significantly impair the United States' efforts to implement badly needed changes. Second, the United States argued that there are no conflicts between this Consent Decree and the one recently entered in Hadix that would justify excluding the Central Complex and the RGC from this action. It noted that the Consent Decree contains procedures for resolving any conflicts which may arise and that the State of Michigan stated at the August 21, 1985 hearing that it has taken the requisite steps to comply with the terms of both decrees.
The United States argued for its third ground that the Hadix Plaintiffs do not meet Rule 24(a)(2)'s requirements for intervention as a matter of right. It asserted in particular (1) that the Hadix Plaintiffs' request was untimely, (2) that the Hadix Plaintiffs do not have a "significantly protectable interest" in the Consent Decree, (3) that any interest they may have in the decree would not be subject to impairment, and (4) that the United States will adequately represent the Hadix Plaintiffs' interests. The United States argued as its fourth ground that the Hadix Plaintiffs have not established the requisite justification for changing or modifying the Consent Decree. Finally, the United States argued that exclusion of the Hadix Plaintiffs would subvert its efforts pursuant to its authority under CRIPA and the decree to remedy the egregious conditions existing at the subject institutions.
The Hadix Plaintiffs subsequently filed a vigorous reply to the United States' response to their request for exclusion. They stated that the decision to grant or to deny their request is not subject to any statutory bar but rather is committed to the sound discretion of the Court. The Hadix Plaintiffs noted that the Court had indicated at the August 21, 1985 hearing its desire to exclude them from this action, and argued that there exist strong reasons why the Court should modify the Consent Decree so as to accomplish that result. Amicus Curiae The National Prison Project filed a letter in support of the Hadix Plaintiffs' request.
Analysis
The Hadix Plaintiffs' request has presented the Court with a peculiar problem to which it can find no firm answer in *967 the statutes or case law. The Court notes initially that because the Consent Decree is a final judgment, Williams v. Vukovich, 720 F.2d 909, 920 (6th Cir.1983), the first issue it must resolve is whether it should allow the Hadix Plaintiffs to intervene as a party so they can request, under FRCP 60(b), the Court to modify the Consent Decree. I discuss this issue, even though I will deny the Hadix Plaintiffs' motion to exclude, to resolve any uncertainty regarding their right to intervene for the purpose of seeking exclusion.
The Court exhaustively discussed this intervention question at the hearing held on March 23, 1984, when it allowed the Hadix Plaintiffs to intervene "on the basis of their interest in the Jackson Prison case." Transcript of March 23, 1984 Hearing, Vol. I, at 62-85. I will not repeat that discussion and analysis here other than to update it to take into account certain changed circumstances and to answer the objections of the United States.
A proposed intervenor as a matter of right under Rule 24(a)(2) must satisfy four conditions: (1) the application to intervene must be timely; (2) the intervenor must have a significant protectable interest in the subject matter of the litigation; (3) the intervenor must show that the disposition of the action may as a practical matter impair or impede his ability to protect that interest; and (4) the intervenor must show that the parties already in the litigation cannot adequately protect that interest. Triax Co. v. TRW, Inc., 724 F.2d 1224, 1227 (6th Cir.1984). The Court will discuss these factors in the order presented.
First, I find that the Hadix Plaintiffs' motion to intervene is timely. See Michigan Association for Retarded Citizens v. Smith, 657 F.2d 102, 105 (6th Cir.1981) (factors to consider in judging timeliness). As the Hadix Plaintiffs state in their brief, the United States answered its own objection of timeliness by noting in its brief that the Hadix Plaintiffs have on at least four occasions indicated their opinion that they should not be in this action. The Court thus does not find that their latest request should have surprised the United States. It also does not believe that granting their request to intervene would unduly prejudice either the United States or the State of Michigan. This is not a case where the proposed intervenor has kept quiet until after entry of the consent judgment and seeks to intervene only after the original parties have finally settled their dispute. Compare id. at 105. The Hadix Plaintiffs have consistently made their desires known to the Court and to the parties. Finally, it is clear that the presence of the Consent Decree does not create an absolute bar to the proposed intervention. See id. at 105 (court considered request for intervention filed one month after entry of consent decree); Stallworth v. Monsanto Co., 558 F.2d 257, 261-62 (5th Cir.1977); EEOC v. ET & WNC Transportation Co., 81 F.R.D. 371, 373-76 (W.D.Tenn.1978).
Second, the Court finds that the Hadix Plaintiffs have a significant protectable interest in this litigation. A proposed intervenor under Rule 24(a)(2) must claim "an interest relating to the property or transaction which is the subject of the action." FRCP 24(a)(2). The Hadix Plaintiffs can claim two interests that certainly relate to the transactions which are the subject of this action i.e., the conditions of confinement in Michigan prisons and the consent decree and which certainly are significant. The first is their constitutional interest in being free from cruel and inhumane treatment. The second is their interest in the effective implementation of their own consent decree, which may be affected by the implementation of the decree in this case.
The United States' argument that the Hadix Plaintiffs do not have a "significantly protectable interest" because the Consent Decree in this case will fully protect whatever interest they may have goes more toward the third requirement for intervention: that the Hadix Plaintiffs are "so situated that the disposition of the action may as a practical matter impair or impede [their] ability to protect that interest." FRCP 24(a)(2). In this case, the relevant "disposition" would be the implementation of the Consent Decree. This disposition may impair or impede the Hadix *968 Plaintiffs' ability to protect their interests by adversely affecting their efforts to enforce their right to be free from cruel and inhumane treatment through the effective implementation of their own decree. The Hadix Plaintiffs cannot effectively protect their interests in their present status as amicus curiae, moreover, because, as the United States argues, they cannot file a motion as amicus curiae for exclusion from the Consent Decree. The Hadix Plaintiffs are so situated that implementation of the decree may, at some point in the future, as a practical matter impair or impede their ability to protect their interests in this matter. Rule 24(a)(2) requires no more to justify intervention. See Little Rock School District v. Pulaski County Special School District No. 1, 738 F.2d 82, 84 (8th Cir.1984).
With regard to the final factor, the Court must determine whether the Hadix Plaintiffs' interests are adequately represented by an existing party, namely, the United States. The Court need not question the United States' efforts to enforce the Consent Decree to determine that for two reasons, the United States cannot adequately represent the Hadix Plaintiffs' interests. First, under CRIPA the United States does not represent the inmates directly but rather the public interest in seeing constitutional rights upheld. 42 U.S.C. § 1997a(a); S.Rep. No. 416, 96 Cong., 2d Sess., at 31, reprinted in 1980 U.S.Code Cong. & Adm. News 787, 813; Transcript of March 23, 1984 Hearing, Vol. I, at 28. The inmates at the affected institutions in fact have no right to seek to enforce the terms of the Consent Decree. Consent Decree, para. O. The Hadix Plaintiffs, however, directly represent the inmates at the Central Complex and the RGC. Second, the United States cannot represent the Hadix Plaintiffs' interest in seeing their own decree effectively implemented. These two reasons suffice to satisfy the "minimal burden" of proof the inadequate representation requirement imposes on the Hadix Plaintiffs. See Trbovich v. United Mine Workers, 404 U.S. 528, 538 n. 10, 92 S. Ct. 630, 636 n. 10, 30 L. Ed. 2d 686 (1972). The Court therefore will grant the Hadix Plaintiffs' motion to intervene for the purpose of seeking exclusion of the Central Complex and the RGC from the Consent Decree.
Having found that the Hadix Plaintiffs are entitled to intervene in this action, the Court must now decide whether to grant their motion for exclusion. The Court finds that the Hadix Plaintiffs have not proven sufficient changed circumstances since the entry of the decree, or other extenuating factors, that would justify modification of the decree so as to exclude them from its coverage. The Court's discussion of this issue consists of two parts: (1) a discussion of the appropriate standards for determining whether a modification of the decree is justified, and (2) a discussion of whether the Hadix Plaintiffs have satisfied those standards.
The Hadix Plaintiffs' request does not fit any of the established standards for determining whether a consent decree should be modified. The Court notes initially, however, that in general it has the power to modify the decree if it believes modification is required either to prevent the decree from being turned into an instrument of injustice or to fulfill the intent of the decree. "A consent decree is essentially a settlement agreement subject to continued judicial policing." Williams, 720 F.2d at 920. The prospective features of the decree, moreover, are analogous to a permanent injunction and as such are subject to modification as needed to meet the decree's intended purpose. Id.; see System Federation No. 91 v. Wright, 364 U.S. 642, 646-48, 81 S. Ct. 368, 370-71, 5 L. Ed. 2d 349 (1961). The Court in addition has explicitly retained jurisdiction over this decree "until further notice." Consent Decree, para. Q; see United States v. Swift & Co., 286 U.S. 106, 114, 52 S. Ct. 460, 462, 76 L. Ed. 999 (1932).
Thus, although the Consent Decree is entitled to some respect under general principals of finality such as res judicata and law of the case as a final judgment of the Court, the Court has retained jurisdiction over it and has the discretionary power to modify it as necessary. In this case, moreover, principals of finality are entitled to *969 less weight because the underlying issues, although the subject of much negotiation between the parties, have not been subject to the crucible of litigation nor in effect resolved by the judicial branch. Compare Arizona v. California, 460 U.S. 605, 619, 103 S. Ct. 1382, 1391, 75 L. Ed. 2d 318 (1983) ("an issue once determined by a court of competent jurisdiction is conclusive") (emphasis supplied); Swift & Co., 286 U.S. at 119, 52 S.Ct. at 464. The Court thus rejects the United States' argument that "principals of finality absolutely foreclose the reopening of the parties' final judgment for the purpose of implementing the Hadix amici's requested exclusion." United States' Response at 15.
The standards for determining when a court should exercise its discretion to modify a decree may differ depending on whether the plaintiff or the defendant is requesting relief. See New York State Association for Retarded Children, Inc. v. Carey, 706 F.2d 956, 967-69 (2nd Cir.1983), cert. denied, 464 U.S. 915, 104 S. Ct. 277, 78 L. Ed. 2d 757 (1984). A defendant seeking relief from the terms of a consent decree generally must show that the decree "has been turned through changing circumstances into an instrument of wrong" or that even though the purposes of the decree have not been achieved he is suffering a "grievous wrong evoked by new and unforeseen conditions." Swift & Co., 286 U.S. at 114-15 & 119, 52 S.Ct. at 462 & 464; see also Carey, 706 F.2d at 968-69 (noting that a lesser standard may apply in some cases). A plaintiff, though, need only show that modification is necessary to achieve the intended effect of the decree. United States v. United Shoe Machinery Co., 391 U.S. 244, 249, 88 S. Ct. 1496, 1500, 20 L. Ed. 2d 562 (1968). In general, however, courts should employ their power to modify consent decrees whether at the defendant's or the plaintiff's behest only for the purpose of insuring in light of changing circumstances that the intended effect of the decree is achieved. See United Shoe Machinery Co., 391 U.S. at 249, 88 S.Ct. at 1500; Carey, 706 F.2d at 969.[1]
The intended effect of the decree in this case, as well as the Hadix decree, is to improve the conditions of confinement at the subject institutions. The Court's primary concern thus is whether exclusion of the Central Complex and the RGC from the Consent Decree would hinder or facilitate implementation of the improvements this decree and the decree in Hadix require Defendants to make in the subject institutions. The Hadix Plaintiffs present some compelling arguments in favor of the latter conclusion. There appear to be several areas, for example, in which the provisions of the Hadix decree provide more protection for the inmates than the decree in this case. The Court has serious doubts, moreover, as to whether it is desirable in terms of judicial economy, administrative convenience, and confusion among the inmates to subject the Hadix Plaintiffs to both decrees.
The Court nevertheless believes that the Hadix Plaintiffs have not sufficiently supported their request for exclusion from the Consent Decree. The Central Complex and the RGC are in many ways at the core of the Michigan prison system, and the Court feels that it would not be appropriate to exclude them from the decree at this stage of its implementation. Such exclusion may hinder the United States' efforts to implement the decree as an integrated package of reforms. The finality to be accorded the Consent Decree, moreover, although not a bar to subsequent modifications of the decree, requires that the Court at least deny the Hadix Plaintiffs' request until it has more accurate and detailed information regarding the implementation of the decree.
*970 Such information should be produced at the compliance hearing scheduled for March 7, 1986. The Court therefore will deny the Hadix Plaintiffs' motion without prejudice for them to renew it following the March 7th compliance hearing. The Court will add that, for a couple of reasons, it would give serious consideration to granting a renewed motion. First, it cannot see the sense of having two separate comprehensive decrees covering the same institution. Second, and perhaps more importantly, there are significant issues arising out of the differing positions of the Hadix Plaintiffs and the United States. One strong argument favoring exclusion is that the Hadix Plaintiffs represent the inmates at the Central Complex and the RGC directly, whereas the United States under CRIPA represents its own interest or the "public interest" in seeing constitutional rights enforced. One need not cast any doubt on the United States' willingness or ability to enforce the terms of the Consent Decree to appreciate that the Hadix Plaintiffs have a more personal interest in seeing their decree enforced and thus may be more vigorous in pressing the Defendants to meet their obligations.
The Court also finds significant the United States' obligation under CRIPA not to take any actions that would "restrict the authority of parties other than the United States to enforce the legal rights which they may have pursuant to existing law." The legislative history states more explicitly that the authority granted the Attorney General under CRIPA "is in no way intended to preclude, delay or prejudice private litigants from enforcing any cause of action they may have." S.Rep. No. 96-416 at 31, reprinted in 1980 U.S.Code Cong. & Adm.News at 813. The Court quite frankly was surprised at the strength of the United States' opposition to the Hadix Plaintiffs' request. It rejects the United States' insinuation that the Hadix Plaintiffs may not be able to implement successfully their own consent decree. United States' Response at 22 n. 15. There is no indication that such is the case. If later events prove, moreover, that inclusion of the Hadix Plaintiffs in this decree is impairing or impeding their efforts to implement their own consent decree, and that they are receiving no benefits under this decree that they are not or would not be receiving under their own decree, then the Court would consider it to be the United States' obligation under CRIPA to accede to the Hadix Plaintiffs' exclusion from coverage under this Consent Decree.
The Court will enter an appropriate order in accordance with this opinion.
ORDER
In accordance with the opinion dated December 2, 1985;
IT IS HEREBY ORDERED that amicus curiae the Hadix Plaintiffs' request to exclude the Central Complex and the Reception and Guidance Center from coverage under the Consent Decree is DENIED without prejudice.
BENCH OPINION OF FEBRUARY 13, 1986 DENYING DEFENDANTS' MOTION TO MODIFY THE STATE PLAN REGARDING A MENTAL HEALTH PLAN AND GRANTING THE UNITED STATES' MOTION TO ENFORCE THE CONSENT DECREE REGARDING MENTAL HEALTH
The Court convenes a little late, having been buried in the mass of paper for the last several weeks in this case, needing a starting place, I think. The State of Michigan has been under an order to submit a comprehensive mental health care plan, or as the plan is labeled, Comprehensive Psychiatric Services Plan, for some considerable period of time. The Court granted extensions on numerous occasions to the State, and finally on October 9th the State submitted this plan which I have in front of me, and its bulk and volume can be seen.
The Court looks to the decree and notes in the decree in paragraph "K" that each plan upon submission shall be submitted to the United States for review, as this plan has been since October 9th. If there is no objection to the defendant's proposed plan, "the plan shall be appended to the state *971 plan and be subject to enforcement in accordance with the provisions of the decree." Before the Court, the Court turns to the question of modification which was simultaneously filed with the Court on October 9th. The most curious position. The State filed its long-awaited plan, on the same date, the same moment, requested modification.
Before I take up the question of modification, it seems to me the Court has to decide where it is, what does it have, and the Court believes there well, for a number of reasons the Court believes the plan is part of the state plan for compliance and, therefore, part of the decree, and, therefore, subject to enforcement by the Court. I believe that I should accept the Comprehensive Psychiatric Services Plan or the Comprehensive Mental Health Plan for at least three reasons: First, because it is very late; Secondly, and more importantly I suppose, because there has been no substantive objection by any party or amicus or amici in this case whatsoever as the decree permitted. There just aren't any objections. The Court believes that the plan, that is to say, the Comprehensive Psychiatric Services Plan or the Comprehensive Mental Health Plan, whatever it is supposed to be labeled, meets constitutional standards. The issue is going to be, apparently, whether it exceeds constitutional standards, but there is no objection that it meets it from anything that I can see. The third reason that the Court believes it should accept the plan is because the inmates deserve a remedy to the problem identified in the original decree, and the remedy is already a year behind. We have just been slowly moving at all times. I understand that that should be done. I am doing it.
Therefore, I am ruling that the CPSP is in fact a plan not objected to and shall be, and hereby is, appended to the state plan and subject to enforcement in accordance with the provisions of the decree entered by the Court in 1984.
Now the Court meets for two purposes today having we need a starting place. The starting place is the plan. That is the starting place, and it is part of the decree, or it is appended to the decree and subject to enforcement. As I indicated earlier, simultaneously, the defendants propose to modify the plan, and, as follows: The second paragraph of II.H.4 states that the professionally designed plan which is intended to assure that prisoners with serious mental illnesses have adequate access to care facilities, quote, "shall provide for full and continuous implementation of the entire said plan within an additional three years after its adoption or approval." The State proposes to amend the sentence to read, as follows: "The Department shall fully and continuously implement the plan to the extent necessary to assure provisions of constitutionally adequate mental health care to prisoners with serious mental illnesses as defined above." End quote. The State as I understand it thus is not willing to commit itself to full implementation of its own plan, but, rather, would implement the plan only to the extent, quote, "necessary to assure," end quote, of what it, the State, defines to be constitutionally adequate mental health care.
The State from its pleadings presents two arguments in support of this request. First, it argues that the plan purports to mandate treatment for inmates who fall beyond the legal definition of seriously mentally ill. The State also argues in this regard that the plan proposes unsupported, quote, "legal due process requirements for involuntary treatment and transfer of mentally ill prisoners." End quote. Secondly, the State argues that the plan overestimates the number of inmates in need of mental health care as defined by the Consent Decree and the state plan for compliance.
The State proposes first to identify the actual number of seriously mentally ill prisoners during the implementation phase of the plan and then to develop the precise type of care required by each subgroup pursuant to the reports' recommendations. The United States agrees with the State's proposal for three reasons: First, it believes that the proposed modification focuses the State's attention on constitutional requirements. The Department of Justice *972 states that the new mental health care plan apparently I underscore the word apparently, the Justice Department did not apparently recommends the adoption of certain practices that exceed the minimum requirements of the Constitution. That is the end of the quote. The modification would simply relieve the State of any selfimposed duty to carry out each proposed recommendation of the plan. Secondly, the DOJ argues the modification's insertion of the language, quote, "serious mental illness" to define the inmates the plan would cover is surplus and thus not objectionable since the Consent Decree already defines seriously mentally ill inmates as those requiring treatment under the plan. Finally, the proposed modification would not change the State's obligation to implement the plan by October 9th, 1988. The United States also notes that the implementation of the plan would not by itself satisfy all of the State's mental health obligations, but, rather, would be targeted primarily at items A.5 and .6 of the Consent Decree.
The amici object to the State's proposal. They note that the State has received several extensions on its obligation to present a professionally designed mental health plan, and now seek to have the Court relieve it of any obligation to commit itself to definite staffing or bed requirements.
The amici also argue, one, that the plan does not purport to treat inmates who are not seriously mentally ill, noting that the consultants explicitly stated in the plan that they were considering constitutional standards in developing the plan and, secondly, that numerous studies including the report of the Task Force that designed the plan have identified the, quote, "desperately inadequate" nature of the State's mental health care system.
The amici also object to the United States' position with regard to the defendant's request. They note the United States and the State seek to have the Court adopt a position that it rejected at the very beginning of this case, i.e., that it is sufficient if the Court does nothing except order the State to obey the Constitution. The problem with this approach, the amici argue, is that it allows the State and the United States to self-define what the Constitution requires and would force the Court to hold a trial on constitutional issues to determine if the defendants were obeying the Constitution. They note that the State repeatedly has refused to recognize the dimensions of the mental health care problem and urge the Court to reject the State's efforts to avoid direct consideration by the Court of the magnitude of the deficiencies in the State's system.
That is, in essence, the posture of the three litigating parties today as I understand their postures. Now I will start in a few minutes to hear what the lawyers want to say about the modification, modification requests, but I think I ought to say also that the fact that I accepted the plan as part of the Consent Decree does not mean that I would not be willing to listen to modification requests properly presented to the Court by any of the parties at any time; for it is certainly possible that the plan may need modification. I am not saying that the plan does not need modification by accepting the plan. I am saying that we have waited long enough to have a plan, and it is part of the decree. I am not sure who is going to be testifying today, and as a starting place I am looking at the United States' answers to or the State of Michigan's answers to some interrogatories with regard to who is going to testify.
. . . . .
I think that we should be interested in modifications. The State may well be right. But how does it help [the State] to attack the plan submitted by the State without giving me and the parties modifications? It leads nowhere. This morning when we started, the State started off by saying it was shocked about the Task Force report, but submitted it anyway in order to comply with the Court's extended deadline. Well, now I wonder about that, and I am going to indicate very clearly why I don't think the State is shocked. I call the record's attention and the parties' attention to the letter dated May 3rd, 1985, not from any consultant, but from Kenneth Faiver, the Associate Director of Health *973 Care for the Department of Corrections, written on Department of Corrections stationery. The purpose of that letter was to advise me why the State couldn't meet its deadline. Let me read the third paragraph into the record: "To meet the requirement for a professionally designed plan" quotes around professionally designed "the Department of Corrections has contracted with a number of outside mental health professionals. An initial group of consultants has been developed; however, approval was withheld by the Michigan Department of Management and Budget; and it was not until mid-March that final approval was received." End quote.
What does that say to me? That says to me that the State was carefully selective in consulting people to assist in developing a comprehensive plan, that OMB, the financial wing of the State government, had a shot at who those people were and held up the process, and then approved the process. That goes to the issue of the impeachment we are talking about. How can you impeach your own consultants when you spent this much time getting your consultants approved, not only by the Department of Corrections, not by the Department of Mental Health, but by the Office of Management and Budget?
Of greater concern to me in that same letter, on page two, is the first entire paragraph, and I am most concerned about that one. Again, Mr. Faiver writing to me: "The first meeting of the consultant group consisted of a discussion of materials written by the Office of Health Care staff" repeat, Office of Health Care staff. Repeat, Office of Health Care staff, not the consultants. This is the defendant itself. Picking up the quote: "These materials encompassed an introduction to the project and to the requirements of the Consent Decree and the State Plan for Compliance; a review of scientific research and findings into the prevalence of mental disorders in the general community; an analysis of the impact of deinstitutionalization" the testimony that we were hearing just a few moments ago "homelessness, and the criminalization of disordered behavior on the prison population; and a summary of studies dealing with the prevalence of mental disorders within the prison community. This last part, which included studies from a variety of states, including several studies from Michigan, was completed at our two-day meeting." That is the end of the quote. I cannot emphasize enough how that negates the surprise comment, shock comment I heard this morning. You couldn't be shocked. That is exactly what Mr. Faiver was telling us in May of 1985 when the State couldn't come up with any plan at all.
Now I am trying to get, gain some, or get some order out of this amorphous hearing. The bottom line is going to be this, and I am going to return to it in a minute. I need specifics of modification requests, and I don't have them. If the State wants to modify its plan, I will with an open mind consider that, and I suspect it needs to be modified. The earlier testimony of Dr. Adams, which hasn't had a chance to be cross-examined, or, by anyone, suggests that. And I am going to listen to that. But I am not going to listen to it without the modification being in front of me. And before I, when I finish these remarks that I am making here, I am going to invite the parties, especially the defendant, to indicate to me what its proposed modification is, even though it is not prepared, and that will give us something, someplace to go.
But I hope it is clear what I am saying. How in the world does it help advance the problem to say that the report we submitted wasn't any good even though we submitted it, and our own staff prepared it, and we don't like our consultants, without saying and here is specifically what we can do that is constitutionally, minimally required? And the State hasn't done that, and I am going to give it every opportunity to do so. I am going to deal right now with the issue of the modification request before me because I can dispose of that in short order and still get, I hope, in the time left to the real important issues before us.
I might say just in passing before I do that that if I were to accept the proffered testimony of Dr. Adams and any other witnesses the State wanted to offer to impeach *974 its own plan I am left with no alternative. What do I do? Go back to zero plan? That is why I accepted the plan when I came in today. After over a year's working for it, I refuse to do that, and I don't think any reasonable person should expect to, expect me to. That is why it doesn't take me anyplace. The State presents evidence that may even be persuasive. I don't know if it is or isn't. To say our plan isn't any good, but we have no alternative, Judge, doesn't help much.
The Court has been consistently troubled by the State's position with regard to the mental health issue. It appears to the Court that the State initially took the position that its present system of mental health care is constitutionally adequate. It maintained that position despite numerous reports beginning with Dr. Terry Kypers' 1982 report, and despite numerous admissions from the defendants' own staff members that the system is not adequate to meet the needs of seriously mentally ill inmates. In its memorandum in support of its motion of May 8, 1985, for an extension of time in which to submit a comprehensive mental health care plan, the State opined that its, quote, "current system provides necessary mental health care to those inmates with serious mental illness in accordance with," end quote, Eighth Amendment standards, and that the comprehensive plan is designed merely, quote, "to improve the delivery of these services if necessary in order to assure continual compliance with the requirements of the Constitution." End quote. And part of that was, the request, is where the Kenneth Faiver letter appeared. As the United States stated in its response to the defendant's May 8 motion, however, submission and implementation of a mental health care plan do raise constitutional issues. It is clear to me that the defendant's present mental health care system probably does not meet constitutional standards.
The Task Force that designed the plan indicated that there are several areas in which the defendants' present system is inadequate, and recent reports from psychiatric experts indicate defendants are not providing constitutionally adequate care for seriously mentally ill inmates of that system. The State apparently supported the work of the Task Force some of the time as is clearly indicated and right up to the time that it submitted its plan. The State submitted no documents to the Court prior to the present motion to modify indicating it either was dissatisfied with the work of the Task Force or that it was not planning to support the Task Force's final product.
As I have indicated, Kenneth Faiver, the Acting Director the Director, he is acting I guess sent that letter to me that I have put on the record, in part indicating that the consultant group was proceeding well with its plans, that the department hoped to submit a plan by October 9th, and it did. The members of the group were apparently approved by the department, and the group was headed by one of the department's own staff members, Dr. Ort, that I have spoken about earlier. The Office of Health Care's narrative statement concerning the plan, moreover, indicated that the department through the Office of Health Care would keep tabs on and review the consultant's work.
The Court cannot see how the department can now disclaim responsibility for the final product. The State, nevertheless, is before the Court arguing that the Court should not require it to implement fully the plan that it submitted on October 9th. Initially, the Court should make clear that it considers the plan defendant submitted on October 9th, as I have indicated earlier today, to be the State's plan, and believes that defendants are obligated to implement such plan fully absent a modification proposed and approved in accordance with the Consent Decree and the state plan for compliance. The Court does not consider the defendant's current proposal to be appropriate. If the Court were to accept defendant's proposed modification of the state plan for compliance I would be effectively allowing the defendants to decide, absent any judicial supervision, which inmates they must treat and what level of treatment they must provide, which is precisely *975 the problem that I was confronted with when the decree was first presented to me.
Furthermore, I can imagine easily, and it is clear today I think, a situation arising where the Court would be forced to conduct a mini-trial or a series of mini-trials on the issue of whether the treatment defendants are providing satisfies constitutional requirements. The purpose of the, the very purpose of the Consent Decree, the very purpose of the state plan for compliance and the various plans required by the State for compliance, was to modify this very situation, this very mini-trial situation.
The Court then must reject the State's proposed modification of the state plan for compliance. If the State believes that the mental health care plan it submitted on October 9th is defective in some respect, and it does, then its proper course of action is to submit a modified plan that meets the requirement of Section "K" of the Consent Decree. This means, among other things, that the plan must include, quote, "a detailed statement of the measures that the defendants will take to achieve timely compliance with the plan along with a detailed timetable setting forth dates for interim and final compliance measures."
The State indicated in its Stipulation Update of December 3, 1985, attachment "F", that it had hired a Mr. Fred Cohen to review the Comprehensive Psychiatric Services Plan and that it plans to, quote, "issue a definitive response and plan of action to the psych plan." The Court notes that whatever modified plan the State chooses to submit will be submitted well past the State's October 9th, 1985 deadline for submitting a Comprehensive Psychiatric Services Plan that it is willing to implement fully. The Court believes that the State's proposal would put it in a position of having no control over whether the State is providing constitutionally adequate mental health care to the inmate population. I cannot, and I will not, allow the State to determine by itself what level of implementation of the October 9th plan, and thus what level of mental health care, is constitutionally required.
Having reached that conclusion, however, puts the Court in a bit of an unusual position. In accordance with the State Plan for Compliance, the State was to have submitted a professionally designed plan to assure that prisoners with serious mental illnesses have adequate access to appropriate care. Given its current position, the State apparently believes it has yet to submit such a plan, even though almost a year has gone by since the State's original deadline of April 9, 1985 for submitting a plan. As I have discussed, I believe that the October 9th plan is the State's plan, and that the issue is whether I should allow the State to modify that plan on the basis of the October 9th modification request.
That issue raises a number of subsidiary issues that the process for submissions of plans established by the Consent Decree was designed to avoid entirely. For example, I do not know whether the plan submitted in October, on October 9th, merely satisfies the constitutional minimum, or rather provides more than the Constitution requires. I do not know whether the State's intended modifications, whatever they may be, would satisfy constitutional standards. It appears to the Court that the consultant group that designed the Comprehensive Psychiatric Services Plan stuck pretty close to constitutional requirements, such as in their definition of seriously mentally ill inmates, but I cannot tell for sure since I am not, of course, a psychiatric expert, and no one has had an opportunity to brief that issue for me. I do not, on the other hand, look forward to reviewing numerous briefs, supporting documents, and cases to determine what kind of plan or level of implementation of the present plan would meet constitutional requirements. The Court believes there are three or four ways that I have thought we could proceed. I am going to suggest a way for the lawyers to think about and tell me before the day is over, and we will be recessing after awhile.
Well, I want this hearing to continue, particularly with regard to the State presenting to me what it believes its plan is going to be, to give us some guidelines; but as a first step it seems to me the Court *976 has to require the defendants to submit a plan that the defendants believe satisfies the requirements of the Consent Decree and state plan for compliance, and one which they will be willing to fully implement. This plan may well be merely a variation of the October 9th plan, and tentatively, tentatively let the lawyers think about this for a minute and maybe even consult with Dr. Benton tentatively I want that plan by February 28th. If that happens, then the plaintiff, United States, and the amici might want to file comments they have regarding the plan sometime before the 27th of March, and my suggestion would be March 20th.
Specifically, I want Dr. Benton to comment on the plan. It seems to me that to assist Dr. Benton, and mostly to assist me, the Court ought to authorize him to contract with the psychiatric expert of his own choosing to evaluate the plan in light of the requirements of the Consent Decree and the State Plan for Compliance. Dr. Benton's current order of appointment provides that he may, quote, "subject to the Court's approval and with the consent of the parties, employ such other persons as he feels are needed for him to carry out his duties." End quote. Reading that as literally as it is, the defendants and the United States ought to agree to allow Dr. Benton to hire a psychiatric consultant. If they don't agree, I guess I could appoint Dr. Benton as a psychiatric expert under Rule 53. I would prefer not to do that. I prefer to do what I suggested.
I believe, moreover, that authorizing Dr. Benton to comment on the State's modified plan is absolutely consistent with his original authorization to, quote, "study and report on the state's efforts," end quote, at compliance. Whenever that is done, whether it is done by March 27th or not, and perhaps it can't be, I am going to make a comment about this in a minute probably it can't be but I am going to listen to input from the lawyers for the parties this afternoon. I will eventually consider the State's plan or any other modified proposals by the government or even the amici, and Dr. Benton; his comments will be of considerable importance to me. I end up deciding whether it is March 27th or whether it is not, whether the modified plan is acceptable or whether some other modified plan is acceptable. I could then hold a hearing later if the time frame is insufficient to allow everyone, particularly Dr. Benton, a full opportunity to comment on the plan.
If the Court finds at the conclusion of the hearing or whatever hearings it holds to consider the state plan that the state plan turns out to be inadequate and it may well be adequate I can appoint Dr. Benton to work with the parties and the amici in formulating a plan that will be acceptable to the Court. Placing this responsibility on Dr. Benton would constitute an enlargement of his duties under the original order of appointment because that order provides, quote, "the Court retains the authority to order the independent expert upon conclusion of such compliance hearing, and notwithstanding any petition for termination of the independent expert's authority, to perform such additional duties with respect to this action as it may direct, and which are agreeable to the independent expert." End quote. So that power probably exists already.
The Court's order then is with regard to the current modification request of the defendants; that modification request is denied. However, the Court as indicated is open to whatever plan even tentatively the State has, and I would continue this modification hearing on the limited basis of letting the Court be informed as to how the State wants to modify the comprehensive plan even though it is not finalized.
. . . . .
The Court is going to modify what it has said in the schedule and ask the lawyers I have it written down someplace. During our recess before the doctors showed up I had, I had opined without putting it in concrete I now put it in concrete that the State has until Monday, March 17th that is two days more than the State asks to submit a modified plan. I discovered that the 15th was on a Saturday, and the record I think discloses that not only did *977 the State's witness, Ms. Burke, say that she believed the State could come up with a plan, but counsel agreed. So the Court takes that as a reasonable period of time, having waited since, having waited almost a year for that plan. Monday, March 17th the plan is due.
The United States may respond to the plan and may submit a modification request if it requires, if it desires, by April 18th, 1986, a Thursday. And the amici may submit memoranda with regard to the State's modified plan on the same date. That is to say, April 18th, 1986. That happens to be a Thursday. No submissions should be submitted after that time. I think the Court will set May 8th and 9th for a hearing, which is a reasonable time for me and my staff to be able to look at the documentation submitted by both the State and the United States and the amici. May 8th and 9th is a Thursday and a Friday, and that is why I asked Dr. Ort if he were going to be free on that date, at which time on those two days if we need more time than that, I will deal with it when we start. If I have to extend it, I will extend it.
How to structure the hearing I think is something we will have to wait and see when we see what the State's plan is. The Court had also considered the question of contempt with regard to the State, without leave to have a suggestion made by the ACLU or anybody else. That is premature at this time for at least one major reason. That is to say, that the State is entitled to a due process response to any such thing. Because I am concerned that the modified plan may not help and I certainly hope that it does. I simply express that as a concern I am ordering the State to show cause during the May 8th and 9th hearings why it should not be held in contempt for failure to produce a plan within the time specified by the Consent Decree that it itself could comply with. The Court granted an extension until October 9th only to find on October 9th that the State wasn't prepared to comply with its own plan.
It could entirely be that there will be an ability on behalf of the State to show that cause, but I am giving fairness notice to the State so that the State can come prepared to offer testimony with regard to this problem, and also I am doing it I should be aboveboard with counsel because I am trying to implore the State to come up with a plan that it can implement. That will also be a part of that hearing.
I am ordering you, Dr. Ort, to come as the Court's witness since nobody apparently wants to call you, and I will be in touch with your office as to the date, but there is no reason for you to be here two days, May 8th and May 9th. I will be in touch with you, and if I don't please get in touch with my office shortly before that, and we will let you know what date is convenient.
I think that the Court's concerns are matters of record today, and I am hopeful that maybe a false hope on my part but some progress will be made by then, by the middle of May, and I am hopeful that the State's plan is something of substance, I think if Ms. Burke has anything to do with it it will be. I just don't know how much Ms. Burke will have to say about the plan.
. . . . .
Okay, thank you. As to the state of the record with regard to this issue, the plaintiff's motion to enforce the Consent Decree and the stipulation, it is basically an undisputed record. The Court makes an easy finding of fact of violation in all of the areas described but not rebutted by the State in the slightest as far as I am concerned. There is no question but what the inmate population at the affected institutions are suffering unconstitutional conditions at this very moment in violation of the decree and in violation of the stipulation, and, of course, in violation of the Eighth Amendment to the Constitution.
The problem the Court faces is obvious. No one presented to me during the hearing and I got some assistance how to rectify that immediately. The Court is going to do the following, therefore. I am going to order the United States to prepare a proposed order as it suggested, but the order shall be in my hands by next Tuesday, which is the 18th day of February, 1986; and I will within 48 hours issue a *978 detailed written order. The order shall include in it, however, the following provisions: First of all, with regard to the psychotropic, well, with regard to the polypharmacy problem, the suggestions made by Dr. Sovner just now shall be incorporated in the order. That is why I had him make them. I take it the lawyers heard what he had to say. The problem in rectifying the situation is as he says. It is a case-by-case basis, and we don't have data on the length of time. But some things can be ordered right now.
One of the things the order should contain is that there should not be the prescription of psychotropic drugs in administrative segregation cases. With regard to the issue of seclusion, the order should contain a provision that the State immediately abandon the practice of secluding people in the Riverside facility for 48 hours; and the Court will adopt the suggestion of both physicians who testified, that it must be on a case-by-case basis, and there must be a rational reason to seclude someone immediately upon entry at the Riverside facility or any of the other facilities covered by the decree. The order should also contain a provision with regard to the recommendation of Dr. Sovner that there be no seclusion unless within one hour of seclusion a psychiatrist orders it, to give enough leeway to the Department of Corrections with regard to emergencies.
I don't know what to tell you, Mr. Wynn, what to do about the monitoring system now for reasons that are it seems to me apparent. The order should contain the suggestion made by Dr. Sovner that there be a computerized effort with the available software to be administered by the psychiatric heads in the corrections system. Unfortunately, that is probably going to take some time, and I don't know what to do; but I am going to be thinking about it between now and next Tuesday.
With regard to stiffening the audit procedures that are now in effect, I don't know what to do. That is very frustrating because the system is not working, and it can't work tomorrow morning, and I want it to work tomorrow morning; and I don't know how to do it. Let me say some other things that ought to occur. It ought to cover the suggestion made also for the development of broad guidelines, specific guidelines, for prescribing physicians as suggested. Those guidelines ought to be in effect within fifteen days of the date of my order of sometime next week. Among other things, they ought to define the standard of care of physicians prescribing within the affected institutions, including a detailed description of what physicians must do or not do before prescribing additional psychotropic medication or any medications that are psychotropic in nature.
Perhaps, Mr. Wynn, you would think of other things, and I will certainly be anxious to see what you come up with when you do. The Court will ultimately design its own order, but I have to have a place to start somewhere. At this late hour, I don't know much more that I can do.
ORDER OF FEBRUARY 21, 1986 ESTABLISHING SUPPLEMENTARY MENTAL HEALTH CARE REQUIREMENTS
In accordance with the oral opinion rendered at the hearing held on February 13, 1986;
IT IS HEREBY ORDERED that defendants' Request for Modification of section II.H.4 of the State Plan for Compliance is DENIED;
IT IS FURTHER ORDERED that the Court hereby accepts the Comprehensive Psychiatric Services Plan submitted by defendants on October 9, 1985 as the plan required by section II.H.4 of the State Plan for Compliance;
IT IS FURTHER ORDERED that defendants shall have until March 17, 1986 to submit a modified comprehensive mental health plan to the Court, and that plaintiff and amici shall have until April 18, 1986 to submit comments on such plan;
IT IS FURTHER ORDERED that the Court's Independent Expert and his associate are authorized to study and to report on any modified plan(s) defendants may propose, and that they are authorized to *979 secure the services of a psychiatrist of their choosing to assist them in such effort. Defendants have agreed to pay the fees and expenses of such psychiatrist, subject to a reasonable limitation to be agreed upon by defendants, the Court, and the Independent Expert. The fees and expenses of the Independent Expert and his associate will be paid in accordance with the Order of Appointment. The Independent Expert's evaluation will be due on April 18, 1986 also, and defendants, plaintiff, and amici shall have until April 25, 1986 to submit comments on such evaluation;
IT IS FURTHER ORDERED that Plaintiff's Motion for Enforcement of the Consent Decree and the Stipulation is GRANTED. After considering the evidence presented at the hearing, the Court finds that defendants are failing to meet certain Consent Decree requirements regarding the provision of mental health care to seriously mentally ill inmates in the prison facilities covered by the Decree. Specifically, the Court finds that defendants' drug prescription practices, including polypharmacy; monitoring of drug induced side effects; use of seclusion and restraint; and practice of housing seriously mentally ill inmates in administrative segregation units violate paragraphs A.5, A.7, and A.9 of the Consent Decree and paragraph II.2. of the Stipulation dated June 21, 1985. Accordingly, the Court orders defendants to take the following steps to ensure compliance with the requirements of the Consent Decree and the Stipulation.
I. Diagnostic Practices, Drug Prescription Practices, and Monitoring of Drug Induced Side Effects
A. Definition of Terms
1. Acute Treatment:
Any time during the course of administration of psychotropic drugs when four or more changes in the dose or type of medication prescribed are made within any 30 day period. Stat doses, prn doses, and the use of pharmacological agents to treat psychotropic drug side effects are to be counted for the purpose of determining whether four or more changes in the dose or type of medication have occurred.
2. Maintenance Treatment:
Any time during the course of administration of psychotropic drugs when less than four changes in the dose or type of medication prescribed are made within any 30 day period. Stat doses, prn doses, and the use of pharmacological agents to treat psychotropic drug side effects are to be counted for the purpose of determining whether fewer than four changes in the dose or type of medication have occurred.
B. Establishment of a Central Drug Monitoring System
1. Defendants shall establish a central, computer-based system to track the prescription of medications and to monitor harmful side effects of such medications. The system shall be fully operational no later than 180 days from the date of this Order. Defendants may develop the system in conjunction with the chronic disease monitoring system presently under development.
2. The central drug monitoring system shall contain a file on each inmate receiving drugs.
3. Each file shall contain the inmate's name, identification number, and, at a minimum, the following information:
(a) Current medical diagnoses;
(b) Drugs prescribed, by name;
(c) The drug dosage and times per day administered; and
(d) The date when each drug was first administered.
4. The monitoring system shall be used to monitor daily doses of medication; to *980 prevent unjustified polypharmacy, in particular by identifying any combinations of medications not authorized by appropriate protocols; to ensure that diagnosed mental disorders are treated with appropriate medication; and to schedule ongoing monitoring for harmful side effects.
C. Protocols
Within sixty (60) days from the date of this Order, defendants shall submit to the Court, the United States, and amici specific protocols as to the use of all psychotropic medications, including the specific conditions and associated medications for which copharmacy will be permitted, and the limited and specific conditions and associated medications for which polypharmacy will be permitted. The protocols will also include specific requirements relating to monitoring for harmful side effects caused by the medications. Defendants shall consider the following principles in developing these protocols:
Avoidance or minimal use of polypharmacy, with explicit documentation and review.
Use of the lowest dosage of anti-psychotic medication necessary for effective treatment.
Documentation of the clinical gains associated with the initial and continued use of an anti-psychotic medication.
Documented use of the AIMS or Rockland scales on any patient receiving antipsychotic medication on at least a quarterly, and preferably monthly, basis.
Selection of psychotropic drug(s) in accordance with the patient's psychiatric diagnosis and accepted standards in the medical profession.
Justification in the record of departures from standard prescription practices.
Development of a list of approved inter-class polypharmacy regimens and the mental disorders for which the regimens can be prescribed.
Development of a list of maximum daily drug doses for each psychotropic drug class, and inclusion of stat doses and PRN orders in the maximum daily dose calculations.
The protocols, moreover, shall provide for the following procedures:
1. Establishment of a Diagnosis
Prior to the initiation of any psychotropic drug regimen, a psychiatric diagnosis consistent with the terminology used in the Diagnostic and Statistical Manual of Mental Disorders, 3rd edition, (DSM III), shall be made and the mental disorder to be treated shall be identified.
The diagnosis and the justification for the diagnosis shall be written in the patient's chart or record; the diagnosis must be updated every three (3) months.
2. Establishment of Objectives
Prior to the initiation of any psychotropic drug regimen, the objectives to be achieved by use of the drugs, i.e., the target signs and symptoms to be treated, shall be listed in the patient's chart or record. The objectives shall be updated every three (3) months.
3. Pretreatment Medical Evaluation
Prior to the initiation of any psychotropic drug regimen, defendants shall perform a medical evaluation of the patient who is to receive such drugs.
4. Renewal of Drug Orders
(a) Acute Treatment
During acute treatment, as defined in section I.A.1 of this Order, standing psychotropic drug orders must be renewed in writing every seven (7) days.
(b) Maintenance Treatment
During maintenance treatment, as defined in section I.A.2 of this Order, standing psychotropic drug orders must be renewed in writing every two (2) months.
5. PRN Orders
(a) PRN orders for psychotropic drugs must be in writing.
*981 (b) PRN medication cannot be ordered by telephone.
(c) PRN orders must be renewed in writing every 72 hours.
(d) PRN orders cannot be written during maintenance treatment.
6. Stat Dose Orders
Only one Stat dose of a psychotropic drug for each 24 hour period shall be ordered by telephone.
7. Documentation of Drug Effects
The following documentation shall be maintained in the medical record of each seriously mentally ill inmate receiving psychotropic drugs:
(a) Acute Treatment Documentation
(i) A progress note pertaining to the use of psychotropic drugs shall be written at least every seven (7) days.
(ii) Progress notes shall contain the following information:
(A) Changes in the patient's target symptoms;
(B) Changes in side effects and their management;
(C) The rationale for any changes in daily drug dose;
(D) The rationale for changing the type of psychotropic drug prescribed;
(iii) A progress note shall be written each time PRN psychotropic drug therapy is ordered.
(b) Maintenance Treatment Documentation
(i) A progress note pertaining to the use of psychotropic drugs shall be written every two (2) months.
(ii) Progress notes shall contain the following information:
(A) Changes in the patient's target symptoms;
(B) Changes in side effects and their management;
(C) The rationale for any changes in daily drug dose;
(D) The rationale for changing the type of psychotropic drug prescribed;
(iii) A progress note shall be written each time PRN psychotropic drug therapy is ordered.
D. Within sixty (60) days from the date of this Order, defendants shall cease the distribution, by nonmedical staff, of psychotropic medications to inmates housed in segregation units in the subject institutions. On at least one shift per day, medication distribution within segregation units shall be performed by a psychiatric nurse practitioner.
E. Within thirty (30) days from the date of this Order, defendants shall develop, implement, and submit to the court, the United States, and amici, a procedure by which the prescribing physician will be notified daily of those inmates who fail to receive or decline to receive prescribed medication, except in those cases where the physician explicitly indicates on the prescription that the medication is to be provided "as needed" or upon the inmate's request. This procedure will apply to all psychotropic medications whether delivered by medical or correctional staff.
F. Within thirty (30) days from the date of this Order, defendants shall require the pharmacies servicing SPSM, MR, MBP, MICP, and RPC to maintain a log of all inmates receiving psychotropic medications. The pharmacy will notify the prescribing physician on any prescription that falls outside of a medication protocol or is a departure from standard prescription practices.
G. Within sixty (60) days from the date of this Order, defendants shall initiate monthly audits of all prescriptions of anti-psychotic medications. The audits shall include a summary review of all anti-psychotic medication prescriptions in effect, to ensure that all dosages and combinations fall within the limitations of the medication protocols. For a more intensive sample consisting of not less than 10% of all instances in which anti-psychotic medications are prescribed as well as all cases in which two anti-psychotic medications are prescribed simultaneously, the audit will assess compliance with the substantive provisions of the applicable medication protocol.
H. The protocols required by section I.C. of this Order and the procedure required by Section I.E. of this Order will be *982 subject to review by the United States in accordance with section K of the Consent Decree. The Court, however, retains the authority to review and to modify on its own motion such protocols and procedures.
II. Seclusion and Restraint
A. Defendants shall comply with the requirements of Procedure OP-RPH 42.06, as approved for implementation in 12/85-1/86, entitled "Seclusion as a Therapeutic Intervention in Management of Mentally Ill Patients." Compliance with this procedure shall also encompass orders requiring restraint and shall include, but not be limited to, the following elements:
Examination of the inmate by a physician, or by a qualified mental health professional specifically designated by the physician, within one hour after the patient has been placed in seclusion or restraint. The physician or other professional must:
a. Examine the inmate;
b. Sign a seclusion or restraint order; and
c. Write a progress note documenting the mental state of the inmate and why the seclusion or restraint is necessary.
Placement of a seriously mentally ill inmate in seclusion for no longer than six (6) hours unless a physician again examines the inmate, signs a seclusion order, and documents both the mental state of the inmate and why continuing seclusion is necessary.
Placement of a seriously mentally ill inmate in restraints for no longer than two (2) hours unless a physician again examines the inmate, signs a restraint order, and documents both the mental state of the inmate and why continuing restraint is necessary.
Examination by a physician every 24 hours thereafter, who will write a new order and justification if continued seclusion or restraint is necessary.
Observation of the inmate every 15 minutes, or more frequently when needed, and recordation of each such observation. Defendants shall modify Procedure OP-RPH 42.06 as necessary to satisfy these requirements.
B. Defendants shall issue copies of the above procedure to the United States, the Court, and amici within thirty (30) days of the issuance of this order, and shall notify the United States, the Court, and amici as to any modification of the above procedure. The United States and amici shall then have thirty (30) days to review the above procedure and to present to the Court proposals to correct any deficiencies that may exist in such procedure.
C. Defendants shall initiate monthly audits of all instances of the use of seclusion and restraint for mentally ill inmates or for inmates receiving anti-psychotic medications. The audits will include a summary review of all records of instances of seclusion or restraint for such inmates to determine that appropriate documentation is provided. For a more intensive sample of instances, to include not less than 10% of all instances in which anti-psychotic medications are prescribed as well as all cases in which two anti-psychotic medications are prescribed simultaneously, the audit, performed by competent medical authorities, will assess compliance with each element of the above procedure.
D. Within thirty (30) days of the issuance of this Order, the use of seclusion as a therapeutic intervention at SPSM, MR, MPB, and MIPC shall be consistent with the provisions of OP-RPH 42.06 and paragraph II.A. of this Order. This provision does not preclude the use of seclusion at SPSM, MR, MBP, and MIPC as a security or sanitation measure as may be provided for in other procedures. However, seclusion of any inmate who is seriously mentally ill, or for whom psychotropic medication is currently prescribed, must comply with the provisions of OP-RPH 42.06 and paragraph II.A. of this Order.
E. Within seventy-two (72) hours of the issuance of this Order, the Riverside Psychiatric Center will discontinue restrictions associated with the "Diagnostic Room Restriction Status" that have been applied on a general basis to newly admitted inmates. *983 Newly admitted inmates may be assigned to D status as this status relates to the general patient population, but further restriction must be based on a documented need as defined in Procedure OP-RPH 42.06, specifically: a danger to self, a danger to others, a danger of causing substantial property damage, or serious interference with another patient's treatment. Use of seclusion and restraint must comply with Procedure OP-RPH 42.06 and paragraph II.A. of this Order.
F. Each unit covered by the Consent Decree shall maintain a log of the hours and reason each mentally ill inmate is secluded or restrained. The Chief of Psychiatry at each unit shall examine the logs monthly, prepare a monthly report detailing the hours and the reason each seriously mentally ill inmate was secluded or restrained, and send a copy of the report to the Assistant Director of Health Care, Psychiatry for review.
III. Identification and Treatment of Seriously Mentally Ill Inmates in Segregation Units
A. Within sixty (60) days of the issuance of this Order, any inmate assigned to disciplinary or administrative segregation, for whom an anti-psychotic medication has been prescribed, shall be examined by a psychiatrist within seventy-two (72) hours of initial placement on the segregation unit, and shall be examined on a daily basis by a psychiatric nurse practitioner. Following seven days of confinement, such inmate shall be interviewed by a psychologist weekly, and by a psychiatrist not less than monthly. The findings of such interviews shall be documented in the inmate's medical record.
B. Within thirty (30) days of the issuance of this Order, defendants shall develop and provide to the Court, the United States, and amici, a procedure for the identification and referral for appropriate housing and treatment of seriously mentally ill inmates housed in segregation units. The United States and amici shall have thirty days to review the above procedure and to present to the Court proposals to correct any deficiencies that may exist.
MEMORANDUM OPINION AND ORDER OF MARCH 19, 1986 REGARDING AN INDEPENDENT PSYCHIATRIC REPORT
Plaintiff has filed a document with the Court entitled United States' Opposition to Enlarging the Authority of the Independent Expert by Authorizing him to Review and Employ a Psychiatrist to Help him Review the Defendants' Modified Comprehensive Psychiatric Services Plan. The Court finds that its order enlarging the authority of the Independent Expert was in accordance with the Independent Expert's Order of Appointment, and therefore will reject plaintiff's opposition to its order on that ground. I find, however, that plaintiff is correct in its contention that the Court should follow the procedure established in Federal Rule of Evidence 706 in authorizing the Independent Expert to employ a psychiatrist to assist him in reviewing defendants' modified comprehensive mental health services plan.
Section II.2 of the Order of Appointment entered October 1, 1985, allows the Court, notwithstanding the objections of the parties, to order the Independent Expert "to perform such additional duties with respect to this action as it may direct." Plaintiff now claims that it never agreed to that language, and hence is not bound thereby. Plaintiff's Memorandum at 2 n. *. The Court simply notes that plaintiff did not object to the terms of the order of appointment at the time it was entered, and has never filed a motion for the Court to modify or to amend such order. It is too late now for plaintiff to raise such an objection.
The Court has found the Independent Expert's assistance to be indispensable, and believes it is amply justified in continuing to employ his expertise. The volume and detail of the materials on file in this case reflect its scope and complexity. The Independent Expert has assisted the Court considerably in evaluating this material, and the level of defendants' compliance with the requirements of the Consent Decree *984 and the Stipulation. The Court does not doubt plaintiff's ability to monitor defendants' compliance with such requirements. I must, however, have an independent basis for judging whether defendants' are in compliance with such requirements, and the case law supports the use of an Independent Expert to accomplish that purpose.
Defendants have lodged no objections to the activities of the Independent Expert, and I believe his work has been significantly less intrusive, and less expensive to the parties, than the actions of monitors in similar complex prison litigation. Moreover, although heavy caseloads and the press of other work are not reasons, by themselves, to appoint Independent Experts and other such assistants to the Court, if the Court did not have the assistance of the Independent Expert in this case it would be forced to devote significantly more time to this case, and hence less time to other, equally important, matters. The alternative would be for the Court to give true meaning to the phrase "blind justice" and attempt to decide matters in this case without full knowledge of the facts. This I refuse to do. I therefore will decline to reconsider my decision to authorize the Independent Expert to review defendants' modified comprehensive mental health services plan.
The Court also believes that given defendants' willingness to bear the cost of such expert, it was justified under the Order of Appointment in authorizing the Independent Expert to hire a psychiatrist to assist him in reviewing defendants' modified plan. As plaintiff argues, however, it would be more appropriate for the Court to follow the procedure established in Federal Rule of Evidence 706(a) in appointing a psychiatric expert to assist the Independent Expert. An order of appointment issued pursuant to Rule 706 would clarify the psychiatric expert's ability to testify at the May 8th and 9th hearing on defendants' modified plan. Therefore, the Court will give the parties until March 26, 1986, to show cause why the Court should not adhere to its prior order authorizing the Independent Expert to employ a psychiatric expert to assist him in reviewing defendants' modified mental health services plan, and accepting defendants' offer to bear the expense of such expert. The Court will enter an appropriate order at the compliance hearing scheduled for March 27, 1986.
IT IS SO ORDERED.
BENCH OPINION OF MARCH 27, 1986 ALLOWING KNOP AMICUS TO PRESENT WITNESSES AND APPOINTING AN INDEPENDENT PSYCHIATRIC EXPERT
Good morning. The Court anticipates four pretty full days based upon the materials that the parties have received and based upon the information that the Court has. And to make it go as well as I can, I am going to do two or three or four things this morning as we get started, to try to help everybody with a focus so that we don't waste any time. The Court never contemplated there would be any hearing on Wednesday, April 2nd, and there will not be, and it appears to me that we will have at least one issue left over for Tuesday, April 1st, which may or may not require the whole day. I hope that we can cover the materials in the fashion that I described in the earlier order. What I am going to do first is the following:
There are four, presently four motions in front of me. First, the United States' objection to the presentation of witnesses by the Knop amicus at the hearing, which has to be decided and I am going to decide it. Secondly, the designation of a psychiatric expert under 706(a). While that may not have to be decided today, I am going to decide it because it needs to be. Third, the State's motion to amend the mental health order of February 21st, 1986. I am not going to address that at the outset, but I believe that I am going to address part of it before the hearing ends. Fourth and finally, the Hadix motion, renewed motion, to exclude that group from the Consent Decree. I may or may not address that issue at the conclusion of the hearing, but it is not ripe for resolution at this stage of the hearing. Then I think what I am going to *985 do right now is decide two of the motions, and then we will move to something else. And then we will be able to get into the swing of things, I hope. First, the Knop amicus problem.
The United States objects to the Knop amicus being allowed to present two witnesses, one on mental health, and the other on sanitation and hygiene, for essentially four reasons as I understand the pleadings: First, the Knop amicus does not have the authority under paragraph "O" of the consent decree to present witnesses; Secondly, the introduction of witnesses would result in the Knop plaintiffs litigating Knop v. Johnson in this case; Thirdly, the presentation of witnesses would prejudice the United States which has not had an opportunity to depose the Knop witnesses; and, Fourth, the testimony of the Knop witnesses would be cumulative and unnecessary. I will address the last three of the United States' objections first rather than in seriatim fashion as I just announced them.
Initially, the Court is well aware of the position of the Knop amicus with respect to both its own case of Knop v. Johnson and this case. The two cases involve some overlapping issues, but each case also raises many unique issues. I have decided to allow the Knop amicus to present two witnesses on areas that I believe present substantial problems for compliance by the State under the Consent Decree. The Court has instructed the Knop amicus and the Hadix amicus that they should limit the testimony of their witnesses strictly to the issues presented in the Consent Decree and the stipulation. It is in my opinion not an abuse of the Court's discretion to allow the presentation of relevant evidence and to seek to gain a full understanding of the compliance issues in this proceeding today, and tomorrow, and Monday and Tuesday.
These efforts, moreover, cannot constitute unfair prejudice to any party. This latter point is particularly true since the defendant in this action, the party who today bears the burden of establishing that it is complying with the requirements of the Consent Decree and the stipulation, has had a full opportunity to depose and otherwise discover the testimony of the Knop amicus' proposed witnesses. I cannot see why allowing the Knop amicus to present two witnesses would prejudice the United States. The United States and amici presumably have the same goal of seeing that the defendant, defendants, comply with the requirements of the Consent Decree and the stipulation. At some point, of course, the introduction of testimony becomes burdensome and becomes unduly cumulative. I do not believe that allowing the Knop amicus to present two witnesses would exceed that point, however.
Third, I am well aware of the testimony that the United States intends to present at this hearing. The Court will not hesitate to cut off the testimony of the Knop witnesses, or the Hadix witnesses, if it feels that such testimony is not adding anything to what has already been introduced. By the same token, the Court will listen to testimony that adds to its understanding of the issues.
Finally, the Court believes that paragraph "O" of the Consent Decree grants it the discretionary authority to allow the amici to present witnesses at compliance hearings. Counsel may recall that there was a lengthy discussion at the hearing held on June 22, 1984, concerning the language in paragraph "O". The Court at that hearing rejected a proposal by the United States that the amici be allowed only to present oral argument and written submissions in regard to the compliance hearing. A fair reading of the transcript of that hearing, particularly the Court's comments on pages 35 and 36, indicates that the Court intended to retain, and did retain, the discretion to allow the amici to present witnesses at compliance hearings. As the Court notes, amici were not being granted the privileges of litigating amici, such as the right to participate in discovery or, as the Court demonstrated in its decision of August 21, 1985, to file motions. In summary, however, to participate, those two words, that language found in paragraph "O" of the Consent Decree, encompasses *986 the authority with the Court's permission to present witnesses.
The Court believes, moreover, that allowing the Knop amicus to present two limited witnesses at this hearing is consistent with the traditional status of amicus curiae. See Hoptowit v. Ray, 682 F.2d 1237, especially at 1260, from the Ninth Circuit in 1982, in which the Ninth Circuit held the court did not abuse its discretion in allowing the United States Department of Justice and the United States Attorney to participate as amicus curiae in the lawsuit in which they had the full rights of a party and advocated almost exclusively in the plaintiff's behalf. The Court does not intend to allow the Knop amicus to participate in these proceedings as litigating amici, as I previously held, but as the United States Department of Justice has done in several cases. See Hoptowit, for example; see In re Estelle, 516 F.2d 480, at pages 482-83, Fifth Circuit in 1975; see DeVonish v. Garza, 510 F. Supp. 658, at 658-59, from the Western District of Texas in 1981. I do not believe, however, that allowing the Knop amicus to present two witnesses transforms them into litigating amici, and I will permit them to do so in this hearing.
I must now address briefly the State's response to the United States. As the Court understands the State's argument, the State is arguing that the Court must vacate paragraph "M" of the Consent Decree, which states in part that entry of the decree, quote, "shall not operate to render moot or otherwise to preclude any issues before ... the Western District of Michigan in Knop v. Johnson," before it can consider the United States' objection. The State apparently feels that allowing the Knop amicus to present witnesses at this compliance hearing will transform it into a litigating amicus, and that it would then be unfair to allow the Knop amicus to claim the benefit of paragraph "M" of the Consent Decree. Alternatively, the State argues that notwithstanding paragraph "M" of the Consent Decree, allowing the Knop amicus to present witnesses would render them parties to this proceeding, and thus also subject them to the doctrines of collateral estoppel and res judicata in their own case, meaning, of course, the Knop v. Johnson case.
Initially, as I have noted before, I note that I am not extending litigating status to the Knop amicus, and I have no, absolutely no intention of doing so. The Knop amicus cannot participate in discovery and, more importantly, cannot file motions in this litigation. The amicus' inability to file motions or take other substantive action to enforce the terms of the Consent Decree and the stipulation is by itself sufficient to refute the State's argument that they have assumed the status of a party or of litigating amicus. Unlike the situation in Montana v. United States, 440 U.S. 147, 99 S. Ct. 970, 59 L. Ed. 2d 210, moreover, the Knop amicus clearly are not directing and/or financing the activities of the plaintiff in this action and should not be subject to the estoppel doctrines. Compare Montana at 147-155 in the U.S. volumes, 440 U.S. at 154, 99 S.Ct. at 974, in 1979.
The Court sees no reason to consider whether it should vacate paragraph "M" of the Consent Decree since the activities of the Knop amicus in this action are not inconsistent with the benefits they derive from such paragraph. The role they will play in this proceeding is fully consistent with the status accorded them under paragraph "O" of the decree, and I see no need to modify that paragraph. The Court also does not see how the Knop amicus can now be considered a party to this proceeding, and thus subject to estoppel doctrines, particularly since it does not have the right to file motions. I, therefore, reject the State's argument and do not wish to consider further any arguments it has raised in motions filed in the Knop proceeding.
The second issue the Court must deal with this morning before beginning the hearing concerns its decision to appoint an independent psychiatric expert to assist Dr. Benton in reviewing defendants' proposed modified Comprehensive Mental Health Services Plan.
On March 19, 1986 the Court issued a Memorandum Opinion and Order in which it declined to reconsider its decision to request *987 Dr. Benton to review defendants' proposed modified plan, and granted, quote, "the parties until March 26, 1986" yesterday "to show cause why the Court should not adhere to its prior order authorizing the Independent Expert to employ a psychiatric expert to assist him in reviewing defendants' modified mental health services plan, and accepting defendants' offer to bear the expense of such expert." End of quote. The Court is in receipt of the United States' objection to its decision to appoint an independent psychiatric expert to assist Dr. Benton. The United States argues that there is no reasonable basis for the Court to appoint an independent psychiatric expert under Federal Rule of Evidence 706(a), and that it therefore would be an abuse of discretion for it to do so. Plaintiff notes that its own psychiatric expert, Dr. Robert Sovner, will review the plan and provide the Court with sufficient information on its adequacy. It concludes accordingly that there is no need to have yet another expert review the plan.
District courts enjoy broad discretion in deciding whether to appoint independent experts under Rule 706. As the Court of Appeals for the Ninth Circuit has stated, "under Rule 706, the court is free to appoint an expert of its own choosing without the consent of either party. .... Appointments under Rule 706 are reviewable only for abuse of discretion." That quote comes from Students of California School for the Blind v. Honig, 736 F.2d 538. The quote comes from 549, and the decision of the Ninth Circuit was made in 1984. There is a long history of courts employing independent or special experts to assist them in resolving complex issues of law and fact. See, for example, Hart v. Community School Board of Brooklyn, 383 F. Supp. 699, at 762 and 764, from the Eastern District of New York, sitting across in Brooklyn, in 1974, affirmed by the Second Circuit at 512 F.2d 37, in 1975 also.
District courts, of course, do not enjoy unlimited discretion in deciding whether to employ independent experts to assist them in resolving particular cases or issues. I think I can say that as a district court judge, I have not been one to appoint an independent expert just because I was faced with a difficult issue of law or fact. The Court believes it is justified in this case, however, in appointing an independent psychiatric expert to assist Dr. Benton. Both parties recognize that the treatment of seriously mentally ill inmates is one of the most, if not the most, difficult compliance issues defendants face. That was evident at the February 13th hearing. Defendants in particular have had difficulty in preparing a comprehensive mental health services plan that is both acceptable to them and acceptable to the Court. I wish to resolve this issue once and for all and to get defendants busy implementing a satisfactory plan.
Dr. Benton and his associate, Mr. Stoughton, have been extremely helpful to the Court. I believe that the assistance of the psychiatric expert Dr. Benton has chosen, Dr. James, will be of equal benefit to the Court. The Court does not doubt in the slightest the competency of the United States' psychiatric expert. It believes, however, that it would also benefit from independent advice on this issue, and I have no hesitation in appointing Dr. James to provide me with that advice. This appointment, moreover, will not result in considerable expense to the United States as the State has agreed to bear Dr. James' fees and expenses.
The Court, therefore, pursuant to its authority under Federal Rule of Evidence 706(a), appoints Dr. James Franklin James to assist its Independent Expert, Dr. F. Warren Benton, to review and to report on defendants' proposed Modified Comprehensive Plan for Mental Health Services. Dr. James shall work under the authority and at the direction of Dr. Benton. He shall be compensated in accordance with the arrangement Dr. Benton and he have made with defendants. The report he shall prepare, in conjunction with Dr. Benton, on defendants' proposed modified plan shall be due on April 18, 1986, and shall be served on the parties and the amici as well as submitted to the Court on that same day. In accordance with Rule 706(a), moreover, Dr. James will be subject to deposition by *988 any party and shall be available to testify at the hearing on defendants' proposed modified plan to be held on May 8th and May 9th, 1986. Now then as required by Rule 706(a), I will enter an appropriate order of appointment in accordance with this opinion sometime in the next two or three days.
ORDER OF APRIL 2, 1986 APPOINTING AN INDEPENDENT PSYCHIATRIC EXPERT
In accordance with the oral opinion rendered at the hearing held on March 27, 1986;
IT IS HEREBY ORDERED that pursuant to Federal Rule of Evidence 706(a), Dr. James Franklin James is appointed as the Court's independent psychiatric expert to assist Dr. F. Warren Benton, the Court's previously appointed Independent Expert, to review and to report on defendants' proposed modified Comprehensive Plan for Mental Health Services;
IT IS FURTHER ORDERED that Dr. James shall work under the authority and at the direction of Dr. Benton;
IT IS FURTHER ORDERED that Dr. James shall be compensated in accordance with the arrangement Dr. Benton and he have made with defendants;
IT IS FURTHER ORDERED that the report Dr. James shall prepare, in conjunction with Dr. Benton, on defendants' proposed modified plan shall be due on April 18, 1986, and shall be served on the parties and the amici as well as submitted to the Court on that date;
IT IS FURTHER ORDERED that in accordance with Federal Rule of Evidence 706(a), Dr. James will be subject to deposition by any party, and shall be available to testify at the hearing to be held on defendants' proposed modified plan on May 8th and May 9th, 1986.
MEMORANDUM OPINION AND ORDER OF APRIL 3, 1986, GRANTING DEFENDANTS' MOTION TO MODIFY IN PART
Defendants have filed a motion pursuant to Rule 60 of the Federal Rules of Civil Procedure requesting the Court to modify and/or clarify certain aspects of the order it entered on February 21, 1986. Plaintiff has responded to this motion. The Court will grant defendants' motion in part and withhold ruling on it in part in accordance with the following opinion.
The Court notes initially that plaintiff objects to the following of defendants' proposed modifications, and requests that the Court not deal with such modifications until the May 8th and 9th hearing on defendants' proposed modified comprehensive mental health services plan when its expert, Dr. Robert Sovner, will be available to testify on defendants' proposals: (1) defendants' proposed modification of section I.C.6 of the Order; (2) defendants' proposed modification of section I.G. of the Order; and (3) defendants' proposed modifications of section II.A. of the Order concerning the length of time an inmate can be secluded or restrained without being examined by a physician. The Court believes that plaintiff's request is reasonable, and will withhold ruling on those portions of defendants' proposal until the May 8th and 9th hearing. The Court also is concerned by defendants' request that a psychologist or a physician who is not a psychiatrist be allowed to conduct the examination section III.A. of the Order requires within seventy-two (72) hours after an inmate for whom an anti-psychotic medication has been prescribed has been assigned to disciplinary or administrative segregation. I thus will also withhold ruling on that request until the May 8th and 9th hearing, and request that Dr. Sovner address that issue as well in his testimony at such hearing. Of course, until the Court has ruled on the above proposals, defendants shall continue to abide by the February 21st Order.
The Court will grant defendants' remaining requests as follows:
1. Defendants request that the Court limit their computer-based system for tracking the prescription of medications to psychotropic medications. The Court believes that defendants' request is reasonable *989 and hereby modifies section I.B.1 & 2 of the Order to read as follows:
1. Defendants shall establish a central, computer-based system to track the prescription of medications and to monitor harmful side effects of such medications for all patients receiving psychotropic medications. The system shall be fully operational no later than 180 days from the date of this Order. Defendants may develop the system in conjunction with the chronic disease monitoring system presently under development.
2. The central drug monitoring system shall contain a file on each inmate receiving psychotropic medication.
2. Defendants also request that the Court modify the portion of the Order requiring them to maintain logs of inmates receiving psychotropic medications. The Court will modify section I.F. of the Order to read as follows:
F. Within sixty (60) days from the date of this Order, defendants shall require the pharmacies servicing SPSM, MR, MBP, MIPC, and RPC to maintain a log of all inmates receiving psychotropic medications. The pharmacy will notify the prescribing physician on any prescription that a) falls outside of a medication protocol submitted pursuant to section I.C. of this Order, or of any such protocol as thereafter modified in accordance with section I.H. of this Order, or b) is a departure from standard prescription practices.
3. With regard to defendants' request for clarification concerning placement of inmates in seclusion or restraint, it is allowable for "a qualified mental health professional specifically designated by the physician" to conduct the initial examination of an inmate placed in seclusion or restraint. The follow-up examination must be conducted by a physician.
4. Defendants' next request concerns the monitoring of inmates confined in seclusion or restraint. The Court will modify the third sentence of section II.C. of the Order to read as follows:
For a more intensive sample of instances, to include not less than 10% of all instances in which patients with current prescriptions of anti-psychotic medications have been secluded or restrained as well as all cases in which two anti-psychotic medications are prescribed simultaneously, the audit, performed by competent medical authorities, will assess compliance with each element of the above procedure.
IT IS SO ORDERED.
BENCH OPINION OF MAY 9, 1986 GRANTING UNITED STATES' MOTION FOR RELIEF AND SANCTIONS REGARDING MENTAL HEALTH; DENYING UNITED STATES' MOTION TO TERMINATE THE AUTHORITY OF THE INDEPENDENT EXPERT; AND REJECTING PARTIES' STIPULATION CLARIFYING ISSUES UNDER THE CONSENT DECREE
The Court is going to render three opinions, and because they aren't that lengthy, I would ask that those who are here to remain in court until the Court finishes instead of leaving partway through.
One leftover item, it seems tome, and I don't need to address the lawyers about this I will simply take the decision myself what to do about the additional documents supplied by Dr. Ort. The Court has accepted as the record shows, and as the lawyers know, one exhibit from him. It was bound in black and labeled I think Exhibit No. "A." And then I put on the record as best I could a label for the other documents that, that he furnished to the Court, and left the parties to view those during the lunch hour. I heard informally that the United States had no objection. I didn't hear about the amici or the State defendants.
The Court thinks as a result of some decisions that it has been, that it has arrived at trying not to finish that in a preposition and failed the Court isn't going to consider those documents. It is going to thank Dr. Ort for providing them, but they are not going to be terribly helpful to the Court. I do thank him for his *990 testimony. It was helpful in some respects.
I don't see the point in getting the documents. I know some would not help. I am already bogged down with more paper-work in this case than one can imagine. So that is the end of that problem. Now turning to the sanctions issue, a lot need be said, I guess, and maybe not much need be said. On the one hand, when I started out considering the problems here, I try to remember and do remember the good will expressed throughout this litigation by the Attorney General's office, through current counsel and previous counsel, and through the same level of good will demonstrated by Ms. Burke throughout this litigation. It is about the only solace that the Court has had in this lengthy, supposedly consented to decree.
Turning my attention to Plan Two, and the issue of sanctions. I think no one is in terrible disagreement in this courtroom about how the Court should view at least for the moment the totality of Plan Two. I will call it Plan Two because I think it is easier for the record. This hearing started off yesterday by making that reference, I think, through Director Brown and through his counsel, and the Court finds it helpful, rather than trying to repeat either the acronyms or the titles of the two plans. While there are a couple of things about Plan Two that the Court ought to and will accept, in reviewing the plan as a totality, the Court has to announce its dissatisfaction with the plan, as I think comes as no surprise. The reasons that the Court believes that Plan Two on its, in its totality is not compliant include but really are not limited to the following observations that I have made during the two-day hearing:
First of all, to me it is unclear, it is unclear whether it supplants Plan One or supplements Plan One depending upon what witnesses testify and what the witnesses' view is. But it certainly at the very least one can say is unclear. If it is unclear to the witnesses, it must certainly be unclear to the Court, and it is, and it would be impossible of course to try to implement, implement from that point of view. Secondly, if it does supplement, as I have a tendency to suspect it does, it isn't clear to me what portions of Plan One it supplements. So I am equally in the dark. Neither plan, that is to say Plan One or Plan Two, provides a detailed blueprint for implementation. That is especially clear from Dr. James' testimony, but it is also fairly clear from Dr. Sovner's testimony. Dr. Sovner also testified, and the Court did not hear any real rebuttal of it, that Plan Two has no substance, basically said maybe it was a plan to have a plan or stated broad principles, but no more than that. The United States tends to look at that as a plan to have a manual, but I tend to look at it the way Dr. Sovner did, as a relatively hurried document that is a precursor or a predecessor to a plan.
Fifth (sic), it seems to the Court that the testimony of the Deputy Director of the Bureau of Health Care Services, Dr. Green, and the generous offer of proof by Mr. MacKenize, indicate that the plan as it is before the Court at the minimum needs the 11 recommendations of the expert witness. That is also under advice there isn't any dispute about it. In other words, all 11 recommendations of the Independent Expert need at the minimum to be added to Plan Two to make Plan Two of any value. Because the Court realizes that what the lawyers have said today is of course true, that the Court has been waiting forever for a State mental health plan, it is substantially correct that it, the State, missed its deadline once or twice and the Court got it in October, and has, as I think Ms. Alexander pointed out to the chagrin of the Court the plan was being submitted, and the Court was asked not to implement it the same day, the same moment. That is extraordinary, and I think it placed the state, the defendants at that moment in contempt of the Consent Decree. And then to make matters worse, of course, in February we had a hearing, the Court gave the State more time until I believe the middle of March, or the 19th of March, some date like that, and another plan came in, and that is unacceptable for the reasons that I have just indicated, and as I said earlier in the hearing, one could imagine that the *991 Court is in a position that it has three choices. At least, I made this observation yesterday.
The three choices were that I accept Plan One, which the amici still want me to accept even though it contains no implementation and is shy in retardation issues, or, or, and I should stay on that subject and a plan that the State through its Director of the Department of Corrections doesn't support. That is not a very enviable position for the Court to be in; or I could accept Plan Two, and for the reasons that I have already stated that is impossible; or go on to some third delay, and I don't intend to do that.
For the reasons that I have just set forth then, the Court upon consideration of the United States' Motion for Relief and Sanctions, and all pertinent evidence, and arguments presented at the hearing held these two days, May 8th, May 9th, the Court finds that the State of Michigan, the State of Michigan and some State defendants have violated Section II(A)(2) of the Stipulation, the Court's oral order of February 13th, 1986, and the February 21st, 1986 order.
It is therefore ordered, adjudged, and decreed on this 9th day of May, 1986, that the United States' motion is granted. The following relief and sanctions are hereby ordered:
First, the State is hereby declared to be in contempt of the 1985 Stipulation and the orders of February 13th and February 21st, 1986.
Secondly, the State may purge its contempt by submitting by June 9th, 1986, a detailed supplementary implementation schedule and specification designed to cure the mental health care deficiencies addressed in the Consent Decree and Stipulation.
Third. That the supplementary implementation schedule and specification shall include or be consistent with the following provisions:
A., a statement assuring that the provisions of the plan and schedule and specification shall apply at a minimum to all inmates with serious mental illness.
B., the schedule and specification will include a definition of serious mental illness that comports with the Diagnostic and Statistical Manual of Mental Disorders, Third Edition, or DSM-III.
C., that the supplementary schedule and specification will clearly define the precise steps the State will take to implement the two plans hereinbeforeexcuse heretofore submitted to the Court. These provisions must meet or exceed the recommendations in the April, 1986 Report of the Independent Expert, as well as the applicable Consent Decree provisions.
D., the schedule and specification will provide for compliance with the recommendations of the April, 1986 Report of the Independent Expert according to the following schedule:
(1) Population projections, June 9th, 1986;
(2) Epidemiological study, June 15th, 1987. A parenthetical comment about that date. After listening to Mr. MacKenzie, one would be, would want to put that back six months because of the funding problem. Listening to the testimony of Dr. James, however, Dr. James believes an epidemiological study can be completed in six months. Taking the six months year-end time, and the six months testified to by Dr. James, that makes June 15th, 1987 a realistic date.
(3) Aggregate inpatient population by January 1st, 1987;
(4) Inpatient hospitalization by June 9th, 1986;
(5) Comprehensive care capacity, June 15th, 1987;
(6) Protected environment study by June 15th, 1987;
The numbers that I am using come, of course, from the Independent Expert's April, 1986 Report.
(6-a) PE corrective action by October 15th, 1987;
(7) Developmentally disabled prisoners by June 15th, 1987;
*992 (10), omitting (8) and (9), outpatient services by September 1st, 1986.
End of numbers. The approach and timetable for implementation of recommendations 8, 9, and 11 will be described in the schedule and specification. I pause and depart from the order to call the lawyers' attention to page 12 of the Independent Expert's Report of April, 1986, and particularly with regard to the last paragraph which reads, as follows: "Accreditation by the Joint Commission on Accreditation of Hospitals should be considered. While JCAH has traditionally focused upon more traditional medical and psychiatric hospitals, new certification processes have been developed to address the specialized needs of correctional psychiatric facilities." End quote. The Court has included the language in the order that I have just read because Dr. James has convinced me that given the Court's scarce, sparse judicial resources that the most comfort the Court could get would be from an accreditation by JCAH.
Dr. James would opine, secondly, that the next best thing the Court could hope to get without having to police its own order would be both a license and an accreditation certification with regard to Mental Health Care services issued by a state of Michigan agency, probably the Department of Mental Health. The Court by listening to the testimony of one of the defendants recalls that at best ten days from now Riverside facility may get a provisional license without the accreditation. The Court, of course, does not order the State of Michigan or any of its defendants necessarily to obtain JCAH accreditation or necessarily to get accreditation from the State of Michigan, but it is what is on the Court's mind with regard to that part of the order.
Continuing with the order.
E., the schedule and specification would include adequate description of professional and other staff, a multi-year hiring schedule, and a basis, that is to say, ratios or quantitative standards, by which the adequacy of staff can be determined and monitored. Any facility accredited by the Joint Commission on Accreditation of Hospitals is exempt from the provisions of Section 3(e).
F., the defendants will develop by October, 1986 a manual or system of manuals to include all policies, procedures, and treatment protocols related to mental health care. All policies, procedures and treatment protocols will be consistent with the Consent Decree, consistent with the state plan, stipulation, and orders of this Court, and will be submitted to the plaintiff and the amici for review.
G., the schedule and specification will include an appropriate organizational structure for mental health services that ensures continuity of care.
H., all schedules, specifications, and other documents developed pursuant to paragraph three of this order will be submitted directly to the Court with copies to the plaintiff and amici. Plaintiff and amici will have two weeks following the submittal to comment on the adequacy and the sufficiency.
The Court will then accept the submittal or order additional changes along with coercive or punitive sanctions as they may become necessary.
The Court is then looking, of course, at a period of two weeks after June 9th, toward the end of June. The Court simply as advice to the State defendants indicates that it currently considers coercive sanctions in an amount up to $10,000 a day.
Fourth. The defendants will conduct an epidemiological study, of course, to determine the prevalence of serious mental illness and associated treatment needs. In selecting an independent professional researcher or research team to conduct that study, and in the subsequent design and conduct of the study the defendants will comply with the following provisions:
A., the defendants will consult with the plaintiff and the amici to order a researcher or research team acceptable to defendants, plaintiff, and amici if possible;
B., if, by July 1st, 1986, no mutually acceptable researcher or research team is identified, the parties will each submit one recommendation to the Court which will *993 designate the researcher or the research team from the submitted list.
If, in the opinion of the Court, all recommended researchers or research teams are roughly equivalent in competence and credibility to the parties, the Court will defer to the recommendation submitted by the defendants.
C., the study is to be completed and submitted to the Court and the plaintiff and the amici as I indicated earlier by June 15, 1987.
D., and lastly, pursuant to the findings of the study, the defendants may submit a request to modify the plan by July 15, 1987. The Court will determine whether the modification is to be granted and may conduct a hearing on the merits of the modification.
I have just read from a four-page document completed by me last evening, and modified throughout the day today. The Court has entered the order this second. Copies are available for counsel at the conclusion of this hearing. I don't believe that I brought enough on the bench with me, but the original order I will hand to the clerk. And one copy is here, and there are at least ten copies or twelve copies of that order. Is that right? Five copies of the order. More copies can be available if people want them.
. . . . .
Turning to the United States' motion to terminate the authority of the independent expert, at the conclusion of the March compliance hearing the United States filed a and this is the exact name of it a Motion to Terminate the Authority of the Independent Expert and Withdrawal of Consent to the Independent Expert's Continued Service. That is the style of the motion. The United States filed the motion pursuant to Section II(2) of the Court's order of October 2nd, 1985, which provides in pertinent part that, quote, "Upon conclusion of the compliance hearing scheduled for March 7, 1986, either party or amici may petition the Court to terminate the grant of authority to the Independent Expert contained in this order." end quote. This section goes on to state, quote: "The Court, however, retains the authority to order the Independent Expert, upon conclusion of such hearing and notwithstanding any petition for termination of the Independent Expert's authority, to perform such additional duties with respect to this action as it may direct or which the parties and amici may petition the Court to, within its discretion, direct, and which are agreeable to the Independent Expert." That quote, both quotations come from the "Appointment of F. Warren Benton as Independent Expert and Order for Instructions," Roman number II, paren (2). The Court stated at the end of the compliance hearing, not having received any petition to terminate the Independent Expert's authority, that it was going to extend the authority of the Independent Expert in accordance with that section. That appears at page 794 of the transcript of the hearing.
The United States, in a well written brief, sets forth three reasons, however, why the Court should not have extended the authority of the Independent Expert, and why it should not terminate that authority: First, it argues that the Independent Expert has completed the task the Court appointed him to accomplish, and that there thus is nothing left for him to do. It notes that the Independent Expert was appointed to study and report on the State's efforts to comply with the Consent Decree, the Stipulation, and the State Plan for Compliance, and that the parties had envisioned that his authority would terminate at the end of the compliance hearing initially scheduled for January and later rescheduled for March, 1986. The Independent Expert accomplished his appointed task, plaintiff argues, when he produced his report and appeared to testify at the compliance hearing.
Second, the United States argues that there is no reasonable basis, as required by Federal Rule of Evidence 706, for the Court to continue the appointment of the Independent Expert. The United States notes that it is fully capable of monitoring defendants' compliance with the terms of the Consent Decree and the Stipulation, and, as evinced by its actions with regard *994 to mental health, fire safety, and sanitation, safety, and hygiene, is fully committed to protecting the constitutional rights of the inmates at the subject institutions. It accordingly argues that extension of the Independent Expert's appointment, quote, "is unnecessary, redundant, and unduly costly." That is from the motion at seven. The United States notes, moreover, that the Consent Decree establishes an elaborate enforcement mechanism that it is committed to following, and has followed, and argues that continuation of the Independent Expert's appointment would unduly infringe on its role under that mechanism, and would in effect supplant the United States' efforts.
Finally, the United States argues that continuation of the Independent Expert's appointment would convert him into a Special Master, and that, as it argued last summer, there simply do not exist the requisite circumstances to justify the appointment of a Special Master. The United States concludes, moreover, that, quote, "the doctrine of sovereign immunity bars recovery from it of any fees or expenses that may be created by the appointment of a compliance monitor or special master."
The United States' motion and supporting memorandum caused the Court to pause and to reflect on the role of Dr. Benton, and his associate, Mr. Stoughton, in this litigation. There is some merit to the United States' arguments. After reflecting about where the Court was last summer, and where it is now, due in large part to the efforts of the Independent Expert, in terms of its understanding of this case and, more importantly, of the level of defendants' compliance with the requirement of the Consent Decree, the Stipulation, and the State Plan for Compliance, however, I conclude that the Court is fully justified in continuing the appointment of the Independent Expert in accordance with the terms of the October 2, 1985 order of appointment. Because the United States' arguments do have some merit, I believe they deserve discussion.
With regard to the first argument, the Court disagrees that the Independent Expert has completed the task for which he was appointed. The Court appointed Dr. Benton, quote, "to study and report on the State's efforts to comply with the Consent Decree, the State Plan for Compliance, the Stipulation entered August 21, 1985, and other plans and orders entered in this case." The Court noted that it believed that Dr. Benton's report would, quote, "provide it with an objective and thorough analysis of the status of the State's compliance in the subject prison facilities." No one disputes that Dr. Benton and his associate, Mr. Stoughton, have accomplished this purpose.
As Section II(2) of the Order indicates, however, the Independent Expert's appointment was not, contrary to what the United States argues, necessarily meant to be a "one-shot" deal. As I noted in my memorandum opinion and order of March 19, 1986, quote, "the plaintiff did not object to the terms of the order of appointment at the time it was entered, and has never filed a motion for the Court to modify or to amend such order," end quote, and I think it is too late for it to do so now. The Court does, indeed, thanks to the efforts of the Independent Expert, now possess an accurate portrait of the State's successes and failures in implementing the Decree. The United States' use of the word portrait is apt, however. A portrait captures a scene or situation as it is at one particular moment in time. It does not, and cannot, indicate what the scene or situation will be like in the future. The Independent Expert's report has given the Court a portrait of defendants' present level of compliance with the requirements of the Decree documents. It cannot, however, indicate what defendants' level of compliance will be in the future.
As I stated in my March 19th opinion, the Court does not doubt plaintiff's ability to monitor defendants' compliance efforts. It needs, however, an independent basis for judging defendants' compliance efforts, and the case law amply supports the use of an independent expert for this purpose. See, for example, Reed v. Cleveland Board of Education, 607 F.2d 737, at 740-41, from the Sixth Circuit in 1979, which court *995 noted that the district court had appointed two experts to assist a special master in implementing a school desegregation plan. Plaintiff admits that, quote, "the original appointment of Dr. Benton to study and report on mixed questions of fact and opinion certainly comports with Federal Rule of Evidence 706(a)." It is apparent that there still exist mixed questions of fact and opinion regarding defendants' level of compliance with the Decree documents. The Court accordingly does not agree that the Independent Expert has completed the task for which he was appointed. There still is a need for him to study and to report on defendants' efforts.
The discussion that I have just addressed also speaks, in part, about plaintiff's second argument. As the Court discussed in its March 19th opinion, it believes that there is a reasonable basis for it to continue Dr. Benton's appointment. See the order at page two. I believe that the United States' arguments in this regard evince its misconception that the Court should, for the most part, abdicate its responsibilities with regard to the Consent Decree and entrust the United States to determine, one, whether defendants are complying with the terms of the Consent Decree, the Stipulation, and the State Plan for Compliance, and, two, if they are not, whether such noncompliance implicates the constitutional rights of the inmates. I refuse to so abdicate my responsibilities as an Article III judge entrusted to do justice in this, and all other, proceedings.
The United States also argues that it now wishes to embrace, quote, "all of the procedural protections that an appointment under Rule 706 entails." I believe the United States has received full procedural protection in this matter. Since the Court first broached the idea of appointing a special master in this litigation last summer, the United States has not hesitated to make known its views regarding the appointment by the Court of an independent person, whether called a Special Master, Monitor, or Independent Expert, to report to the Court on defendants' level of compliance with the requirements of the Decree documents.
Finally, the Court does not believe that extension of Dr. Benton's authority as an Independent Expert would convert him into a special master or monitor. See Rule 53 of the Federal Rules of Civil Procedure. I note initially that Dr. Benton's role in this proceeding is a limited one. He clearly is not supplanting the United States' efforts to enforce the Decree documents. As the United States notes, both it and the amici have continued to employ their own experts to assess defendants' compliance with the requirements of the Decree documents, and the United States even notes at least one instance in which its expert was more critical of defendants' efforts than was the Independent Expert. The United States' role, of course, as the plaintiff, is to examine critically the defendants' compliance efforts. The Independent Expert's role, concurrently but not necessarily similarly, is to provide the Court with an independent and informed view of defendants' compliance efforts. To the extent that the United States' more critical comments are supported by the evidence, the Court has not hesitated to accept them, and will not hesitate in the future.
Secondly, the Court believes that its use of Dr. Benton in this litigation fits well within the Sixth Circuit's indications that district courts are to use the least intrusive means possible to monitor a defendant's compliance with the terms of a consent decree, particularly in a prison setting. See Kendrick v. Bland, 740 F.2d 432, at pages 438-39, from the Sixth Circuit in 1984, where the court noted that courts often appoint monitors in prison cases to enable the monitor to, quote, "oversee compliance with its continuing order"; also see United States v. City of Parma, 661 F.2d 562, at 578-79, from the Sixth Circuit in 1981. The Court's use of Dr. Benton does not constitute a significant intrusion on defendants' affairs, and nor does it constitute a delegation of the Court's factfinding and interpretive powers.
Finally, the Court believes that a brief comparison of Dr. Benton's powers and authority with the powers and authority traditionally delegated to a special master *996 conclusively establishes that an extension of Dr. Benton's authority will not convert him into a monitor or special master, and thus exempt the United States from liability for his fees and expenses. Dr. Benton has been empowered to study and to report on defendants' compliance efforts. To accomplish that goal, the Court granted Dr. Benton the powers that an expert witness normally possesses, for example, the right to tour the subject institutions; to have access to documents possessed by the parties; to have access to staff members and employees of the Department of Corrections and the Department of Justice; and to conduct interviews with the inmates.
Significantly, however, Dr. Benton and his associate are empowered only to report on mixed questions of fact and opinion, that is to say, to give their professional view, as penologists, of defendants' efforts to comply with the requirements of the Decree documents. The Independent Expert was not empowered, and will not be so empowered under the terms of the extension of his authority, to conduct hearings or to resolve factual disputes between the parties, both of which traditionally fall within the duties and powers of a special master. See Federal Rule of Civil Procedure 53(c) indicating that a special master has the power to conduct hearings, receive and report evidence, require the production of documents, rule on the admissibility of evidence, and question witnesses under oath; or 53(e) whereby a special master may be required to make findings of fact and conclusions of law; and in non-jury actions the court, quote, "shall accept the master's findings of fact unless clearly erroneous"; and Reed v. Rhodes, 691 F.2d 266, at 269, from the Sixth Circuit in 1982, noting that a special master is an appointee of the court who acts, quote, "in a quasi-judicial capacity"; and as in Reed on page 741, where the district court empowered the Special Master to evaluate the practicability of defendants' desegregation plans and to, quote, "conduct such hearings and investigations as he deems necessary to the performance of his duties." See also Ruiz v. Estelle, 679 F.2d 1115, at 1162, from the Fifth Circuit in 1982, noting that the special master was given quasi-judicial powers, such as being permitted to hold hearings and make findings of fact that the district court would accept unless clearly erroneous. The Independent Expert will continue solely to study and to report on the defendants' compliance efforts. He shall continue to advise the parties of his findings, to be subject to deposition by any party, and to be available to testify at future compliance hearings, all within the purview of Rule 706(a) of the Federal Rules of Evidence.
The Court, therefore, will reject the United States' motion to terminate the Independent Expert's authority, and will continue Dr. Benton's authorization to study and to report on the defendants' compliance efforts. The Court anticipates that Dr. Benton and his associate will continue to study defendants' compliance efforts in accordance with the requirements of the Consent Decree, the Stipulation, and the State Plan for Compliance. Dr. Benton also will be studying defendants' compliance with the State Plan's requirements regarding the formulation and implementation of various subsidiary plans.
To the extent, of course, that the parties, or either party, wish to have Dr. Benton perform additional duties, such as to act as a factfinder in the sense of a Special Master or to act as a negotiator between the parties, they may apply to the Court for permission to have him assume such responsibilities. At that point, Dr. Benton would not be acting as an Independent Expert under Rule 706 of the Federal Rules of Evidence, and the parties would have to make different arrangements, other than that available under 28 U.S.C. Section 1920, for payment of his fees and expenses.
With regard to Dr. James, the Court will inquire of Dr. James' willingness and ability to serve in the capacities suggested by the defendants in this case. If he is willing to serve and able to serve in that capacity, the Court will issue an order continuing, or either continuing or appointing him under different authority, as the case may be. The Court will take that up with Dr. James at the first earliest practicable moment. I *997 am now sorry that I permitted him to leave as quickly as I did, but I can make up for that. The Court will enter an order in a day or two denying the United States' motion to terminate.
The Court turns next to the parties' stipulation clarifying issues under the Consent Decree. At the conclusion of the March compliance hearing, the Court requested the parties and amici to address, in writing, a number of interpretive issues concerning the Consent Decree and the State Plan for Compliance. That is found between pages 784 and 787 of the transcript, of the compliance hearing in Volume III. In response to a question from defendants' counsel, the Court indicated that it would consider, but not necessarily accept, a stipulation from the parties concerning such issues.
On April 18th this year, the parties submitted a "Stipulation Clarifying Issues Under the Consent Decree," and a motion for the Court to enter the stipulation as an order of the Court. As plaintiff explained in its post-hearing brief, the stipulation evinces the parties' belief that only two of the interpretive issues the Court raised at the hearing implicate the constitutional rights of the inmates: Number one, quote, "The continued use of inmate workers at the subject facilities to prepare sick call registers and, two, the possibility that windows at the subject facilities are not being repaired promptly." That is in the plaintiff's brief at page 17. It is in the Stipulation at pages 2 and 3. With regard to the remaining interpretive issues, the parties basically take the position that the Court's concerns do not implicate the constitutional rights of the inmates, and, therefore, cannot properly be considered under the Consent Decree. I believe at best that the parties may have misunderstood the Court's instructions with regard to these questions of interpretation, and believe that it might be useful to delineate the roles of the parties and the Court under the Consent Decree and the State Plan for Compliance.
First, the Court had envisioned and expected that the parties would address and brief how the issues I had raised were handled by either the Consent Decree or the State Plan for Compliance, not whether the issues presented concerns that are enforceable, because they are explicitly mentioned in the Consent Decree. The 60 square foot requirement of Section IV.A of the State Plan presents a good example of this dilemma or situation. The Court had asked the parties to brief a computational question, that is to say, whether each inmate's 60 square feet should be explicitly marked, whether areas such as day space should be taken into account in determining the 60 square feet, or whether space for compliance with fire safety requirements should be considered. See pages 786 and 787 of the transcript. Instead of addressing this computational issue, the parties simply stipulated that defendants are required only to, quote, "eliminate overcrowding in accordance with the standard articulated by the United States Supreme Court in Rhodes v. Chapman, 452 U.S. 337, 101 S. Ct. 2392, 69 L. Ed. 2d 59, in 1981," end quote, and that the Consent Decree does not require the defendants to provide 60 square feet for every inmate.
I believe that the parties' proposed stipulation on this point reflects a gross misunderstanding of the Consent Decree. Section "H" of the Decree states that, quote, "defendants intend to fully implement the State Plan unless implementation is excused or modified in accordance with the terms of this Decree." Defendants have reiterated, both at the March compliance hearing and at this hearing, their intention to implement fully the State Plan in fact, all the time that this litigation has existed.
As the Court interprets the Consent Decree, the defendants are bound to implement the State Plan, including the 60 square foot requirement, unless excused by the Court in accordance with the Decree. The procedure for excusing the State from full compliance with the State Plan is well established in Section "J," which states, as follows, quote: "Defendants shall report to the Court and to the United States any time they intend to modify their plan, and shall advise the Court and the United States, by legal memoranda, whether the *998 modification sought raises constitutional issues. The United States shall respond to such report within 20 days, by legal memoranda, whether it believes such a modification raises constitutional issues." The next two sentences the Court underscores once, twice, three times: "The Court will then determine whether to conduct a hearing and will in such event determine the modification request. The United States Department of Justice will monitor compliance with the State Plan." I could read the last two sentences there more than once to underscore them. I need not. The defendants have not asked to be excused from the 60 square foot requirement; and in any event, neither party has supplied the Court with what it would consider to be legal memoranda addressing the issue. Unless and until the Court modifies the State Plan to excuse the defendants from compliance with the 60 square foot requirement, they are bound under Section "H" of the Consent Decree not just the State Plan for Compliance to comply with that requirement.
The United States, moreover, is obligated under Section "J" of the Decree, as quoted above, to monitor the State's compliance with that requirement. A necessary corollary of the obligation to monitor compliance is the obligation to enforce compliance. The United States' monitoring and enforcement efforts with regard to the State Plan for Compliance as it is integrated into the Consent Decree is even more explicitly established in Section "I" of the Consent Decree, which provides as follows: "Implementation of the various provisions of the State Plan will be adequate to bring defendants into full compliance and thereby satisfy the terms and provisions of this Decree. The Court shall" underscore the word shall "be advised as to each failure" underscore the words each failure "to comply with the provisions of the State Plan, and, on request of either party or on the Court's own motion, a hearing may be held as to the constitutional implications of said failure and defendants' noncompliance. Nothing in this Decree shall be interpreted as requiring defendants to specifically comply with any state law, or any other provision of the State Plan that does not implicate the constitutional rights of the inmates."
I draw four basic principles from this section of the Decree and from Section "J." First, defendants must fully and specifically implement the State Plan for Compliance unless the Court explicitly approves a modification of such Plan. Defendants correspondingly must fully and specifically implement all other plans called for by the State Plan unless implementation is excused by the Court in accordance with the Consent Decree. Secondly, defendants may propose to modify the State Plan, or any subsidiary plan required by it. Defendants and plaintiff must comment on the constitutional issues raised by such a modification request as well as on such other issues as they deem important. The Court, the Court will then determine whether the modification is to be approved, and in so doing, will determine whether the requested modification implicates the constitutional rights of the inmates at the subject institutions.
Thirdly, the Court shall not interpret the Consent Decree to require defendants to comply specifically with state law. The Court, however, has the authority to require defendants to comply with state law, a., when noncompliance with state law implicates the constitutional rights of the inmates at the subject institutions, and, b., when compliance with state law is the most effective remedy for any specific unconstitutional conditions that may exist at the subject facilities. Citing for myself at least Swann v. Charlotte-Mecklenburg Board of Education, 402 U.S. 1, at page 15, 91 S. Ct. 1267, 1276, 28 L. Ed. 2d 554 (1971), the court there saying, quote: "Once a right and violation have been shown, the scope of a district court's equitable powers to remedy past wrongs is broad, for breadth and flexibility are inherent in equitable remedies." Fourth, the United States shall monitor compliance with the State Plan for Compliance, and the subsidiary plans called for by that plan, and shall advise the Court of each and every failure by the State to comply with *999 the provisions of such plans. The parties, at the request of either party or of the Court, shall submit memoranda on the constitutional implications of such failure. The Court will then determine whether the State's failure to comply with the requirement of the State Plan, or of the subsidiary plan, implicates the constitutional rights of the inmates at the subject institutions.
In accordance with the above understanding of the Consent Decree, and the State Plan for Compliance, the Court rejects the parties' proposed stipulation, and orders the parties to submit memoranda on the interpretive issues the Court raised at the compliance hearing. The parties shall limit their briefs to the issue of what interpretation of the issues posed is contemplated by the Consent Decree and the State Plan for Compliance. The parties shall seek to clarify, not modify, the Consent Decree and the State Plan for Compliance. To the extent that such clarification is grounded in constitutional issues, the parties shall fully address such issues in their memoranda. The Court will also invite the amici to submit their comments on these interpretive issues. The parties' and amici's memoranda on these interpretive issues are due May 23rd, 1986 at 5:00 p.m.
I note that I agree with the parties that the Consent Decree prohibits inmate workers from access to or participation in the creation of sick call registers or rosters at the subject facilities, and that it requires defendants to inspect windows at the subject facilities on a continuing basis and to replace promptly broken or missing glass. Due to the means by which the parties proposed these clarifications of the Consent Decree, however, the Court cannot accept them at this time, and, hence, will not adopt them as an order of the Court.
Speaking, I guess, by means of dicta, I have the following observations to make. The Court notes that the United States has vigorously involved itself in the compliance issues involving mental health, hygiene and sanitation, fire safety in the past few weeks, months, and I am pleased by that position that the United States has taken. I hope that the plaintiff monitors the other issues encompassed by the Consent Decree and the State Plan as vigorously as it has monitored these compliance issues involving mental health; and I hope the United States will leave it to the Court as the representative of the Third Branch of the government to decide what the Constitution requires of the defendants.
To the extent that the United States honestly believes that it does not possess the statutory authority under the Civil Rights of Institutionalized Persons Act, 42 U.S.C. Section 1997, et seq., to monitor and to enforce the defendants' obligations to comply with the requirements of the State Plan for Compliance as required by the Consent Decree see, for example, United States' Post-hearing Brief at pages one through four in which the United States indicates it will force defendants to implement the State Plan only to the extent that it, the United States, believes that noncompliance implicates the constitutional rights of the inmates the Court is left to speculate and wonder whether it is employing scarce judicial resources on a true case and controversy as required by the Constitution, and if it is not, whether the CRIPA, at least as it is interpreted by the United States, is constitutional itself.
ORDER OF MAY 12, 1986 GRANTING THE UNITED STATES' MOTION FOR RELIEF AND SANCTIONS
Upon consideration of the United States' Motion for Relief and Sanctions and all pertinent evidence presented at the hearing held on May 8-9, 1986, the Court finds that the State of Michigan has violated § II(A)(2) of the Stipulation, the Court's oral Order of February 13, 1986, and the Order of February 21, 1986.
It is therefore ORDERED, ADJUDGED, and DECREED on this 9 day of May, 1986, that the United States' Motion is hereby GRANTED. The following relief and sanctions are hereby ORDERED:
1. That the State is hereby declared to be in CONTEMPT of the 1985 Stipulation and the orders of February 13 and 21, 1986;
2. That the State may purge its contempt by submitting by June 9, 1986, a *1000 detailed supplementary implementation schedule and specification designed to cure the mental health care deficiencies addressed in the Consent Decree and Stipulation;
3. That the supplementary implementation schedule and specification shall include or be consistent with the following provisions:
a) A statement assuring that the provisions of the plans and schedule/specification shall apply, at a minimum, to all inmates with "serious mental illness."
b) The schedule and specification will include a definition of "serious mental illness that comports with the Diagnostic and Statistical Manual of Mental Disorders, Third Edition (DSM-III).
c) The supplementary schedule and specification will clearly define the precise steps the State will take to implement the two plans heretofore submitted to the Court. These provisions must meet or exceed the recommendations in the April 1986 Report of the Independent Expert, as well as applicable Consent Decree provisions.
d) The schedule and specification will provide for compliance with recommendations of the April 1986 Report of the Independent Expert according to the following schedule:
1. Population projections June 9, 1986
2. Epidemiological study (final) June 15, 1987
3. Aggregate inpatient population January 1, 1987
4. Inpatient hospitalization June 9, 1986
5. Comprehensive care capacity June 15, 1987
6. Protected environment study June 15, 1987
6a. PE corrective action October 15, 1987
7. Developmentally disabled prisoners June 15, 1987
10. Outpatient services September 1, 1986
The approach and timetable for implementation of recommendations 8, 9, and 11 will be described in the schedule and specification.
e) The schedule and specification will include adequate description of professional and other staff, a multi-year hiring schedule, and a basis, i.e. ratios or quantitative standards, by which the adequacy of staff can be determined and monitored. Any facility accredited by the Joint Commission on Accreditation of Hospitals is exempt from the provisions of section 3e.
f) Defendants will develop by October 1986, a manual or system of manuals to include all policies, procedures, and treatment protocols related to mental health care. All policies, procedures, and treatment protocols will be consistent with the Consent Decree, State Plan(s), stipulation, and orders of this Court, and will be submitted to the Plaintiff and Amici for review.
g) The schedule and specification will include an appropriate organizational structure for mental health services, that ensures continuity of care.
h) All schedules, specifications, and other documents developed pursuant to paragraph 3 will be submitted directly to the Court, with copies to the Plaintiff and Amici. Plaintiff and Amici will have two weeks following the submittal to comment on adequacy and sufficiency. The Court will then accept the submittal or order additional changes along with coersive or punitive sanctions as may become necessary.
4. Defendants will conduct an epidemiological study to determine the prevalence of serious mental illness and associated treatment needs. In selecting an independent professional researcher or research team to conduct the study, and in the subsequent design and conduct of the study, Defendants will comply with the following provisions:
a) The Defendants will consult with Plaintiff and Amici to identify a researcher or research team acceptable to Defendants, Plaintiff, and Amici.
*1001 b) If, by July 1, 1986, no mutually acceptable researcher or research team is identified, the parties will each submit one recommendation to the Court, which will designate the researcher or research team from the submitted list. If, in the opinion of the Court, all recommended researchers or research teams are roughly equivalent in competence and credibility to the parties, the Court will defer to the recommendation of the Defendants.
c) The study is to be completed and submitted to the Court and the Plaintiff and Amici by June 15, 1987.
d) Pursuant to the findings of the study, Defendants may submit a request to modify the plan by July 15, 1987. The Court will determine whether the modification is to be granted, and may conduct a hearing on the merits of the modification.
IT IS SO ORDERED.
ORDER OF JUNE 30, 1986 EXTENDING AND REVISING THE INDEPENDENT EXPERT'S ORDER OF APPOINTMENT
In accordance with the oral opinion rendered at the hearing held on May 9, 1986, and the Order issued on May 13, 1986;
IT IS HEREBY ORDERED that the authority of the Independent Expert, Dr. F. Warren Benton, and of his associate, Mr. Donald Stoughton, is extended in accordance with the terms of the Order of Appointment and Order for Instructions issued October 2, 1985, until further order of the Court, and except as modified as follows:
a. The parties and all amici shall serve the Independent Expert and his associate with copies of any and all documents, such as motions, memoranda, and reports, they file with the Court.
b. Section I, paragraph 3 of the October 2, 1985 Order is modified to read as follows:
3. The Independent Expert shall have access to all pertinent staff members and employees of the DOC and the DOJ. He may engage in both formal and informal conferences with such staff members and employees, including confidential personal or group interviews, and such persons shall cooperate with him fully and shall respond to all reasonable inquiries and requests relating to the State's compliance efforts. The State shall designate a representative to have the sole responsibility to coordinate tours of the relevant institutions or facilities, to assist in gathering documents, and to provide any additional material or information the Independent Expert may request. Lawyers representing the parties and amici or otherwise associated with this action, or with the Hadix and Knop actions, shall not attend tours undertaken by the Independent Expert or otherwise participate in the Independent Expert's activities, without notice to the parties and permission of the Court. Such lawyers shall not initiate contacts with the Independent Expert except by Order of the Court. The Independent Expert, however, shall not be precluded from contacting such lawyers, either orally or in writing, and the lawyers shall not be precluded from responding to such contacts, provided that the Independent Expert periodically provide a summary of such contacts and responses to the Court, the parties, and the amici.
c. The Independent Expert and his associate are further authorized to study and to report to the Court on defendants' efforts to formulate and to implement the subsidiary plans mentioned in section K of the Consent Decree. The Independent Expert shall, as appropriate, submit reports on defendants' efforts with regard to such plans. The parties and amici shall have fifteen days following the submission of such reports in which to file responses to them.
OPINION OF JULY 15, 1986 INTERPRETING CERTAIN PROVISIONS OF THE CONSENT DECREE AND THE STATE PLAN FOR COMPLIANCE
At the compliance hearing held on April 1, 1986, the Court ordered the parties to address certain interpretive questions concerning the Consent Decree and the State *1002 Plan for Compliance. Transcript of Compliance Hearing, vol. III, at 784-87. On April 18, 1986, the parties submitted a joint stipulation addressing such questions. The Court, for reasons it will not reiterate here, rejected the parties' stipulation in an oral opinion rendered at the hearing held on May 9, 1986, and ordered them to submit individual memoranda on the interpretive issues. Transcript, Concluding Statements by the Court, Opinions of the Court, at 23-24. The parties submitted such memoranda on May 23, 1986.
Before discussing the specific issues it had asked the parties to address, the Court will respond briefly to plaintiff's objections to that portion of its May 9th opinion in which it expressed its views on the proper relationship between the Consent Decree and the State Plan for Compliance. For the most part, plaintiff simply reiterates views it has made known to the Court at previous hearings and in previous briefs and memoranda. I do not believe that I need to repeat everything I said at the May 9th hearing on this topic. I carefully reviewed and considered plaintiff's arguments, and found nothing to change my views. Pursuant to Paragraph H of the Consent Decree, defendants must implement the State Plan for Compliance "unless implementation is excused [pursuant to paragraph I of the Decree] or modified [pursuant to paragraph J of the Decree]." Pursuant to paragraph J of the Decree, moreover, plaintiff "will monitor compliance with the State Plan", and, pursuant to paragraph I, it will advise the Court "as to each failure [by defendants] to comply with the provisions of the State Plan." Defendants may, of course, defend against a charge of non-compliance at a hearing held pursuant to paragraph I on the ground that such non-compliance "does not implicate constitutional rights of inmates", Consent Decree ¶ I, and they may seek modification of their obligations under the State Plan on the same ground. In either case, though, the Court expects that the parties would submit appropriate memoranda and evidence on the issues. The Court will not address this issue further, except to note that it expects the parties to adhere to its May 9th ruling.
The parties submitted thorough and useful memoranda on the interpretive issues the Court had raised at the April 1st hearing. For lack of a better method, the Court will consider these issues in the order they are discussed in the United States' memorandum.
I. Medical Care
A. Prompt Medical Care
The Court accepts defendants' interpretation that they "are mandated by the Plan to provide medical care to individuals as soon as reasonably possible, in a manner consistent with security and medical concerns." Defendants' Memorandum ("DM") at 3. The Court does not believe that a separate transportation system for inmates in need of medical treatment is required by either the Plan or the Consent Decree, or that it should place time limitations on the transfer of such inmates to the appropriate facilities. I am concerned, however, that inmates in need of care receive prompt treatment, and remind defendants that a delay in providing treatment may well, in specific cases, constitute deliberate indifference to serious medical needs. I agree with plaintiff, moreover, that although the "Constitution and the Consent Decree do not require that all inmates be treated for all medical problems within a specified period of time ... the question when patients should be afforded medical treatment is a medical decision that must be left to the professional judgment of competent medical practitioners." Plaintiff's Memorandum ("PM") at 8. Defendants thus may not allow security or transportation concerns to override a medical determination that a particular inmate is in need of prompt treatment and must be transported to an appropriate facility.
B. Employees That Serve as Both Psychologists and Resident Unit Managers
The Court agrees with the parties that neither the Consent Decree nor the State Plan explicitly prohibit defendants from allowing *1003 the psychologist at MIPC to function also as the Resident Unit Manager. The Court is concerned, however, that this psychologist, and other psychologists who also function as Resident Unit Managers, be aware and fully informed of mental health care procedures. In particular, the psychologist should be aware of all protocols concerning the identification and treatment of seriously mentally ill inmates in segregation units.
C. Housing for Suicidal Inmates at the Michigan Reformatory
Defendants state that "[n]o prisoner who exhibits a serious threat of suicide or who attempts suicide is left at the Michigan Reformatory." DM at 3. Defendants, however, apparently use the "suicide observation cell" at the MR while they are evaluating inmates who may be suicidal. See id. at 3-4. The Independent Expert noted in his report that this cell is not separated from the remaining inmate housing and is not subject to continuous observation. The Court accepts defendants' representation that inmates are referred to the RPC once a medical professional has made a determination that they may commit suicide. It is concerned, however, that inmates may be confined in an inadequate cell pending this determination. The Court thus believes that section II.H.3 of the State Plan requires that any inmate "who exhibits a serious threat of suicide or who attempts suicide", or whom defendants strongly suspect may commit or attempt to commit suicide, should not be housed in the "suicide observation cell" at the MR for more than twenty-four (24) hours before being examined by an appropriate medical professional. The Court also assumes that defendants will continue to monitor this cell at least once every fifteen (15) minutes.
D. Development and Implementation of Sick Call Plan
The Court accepts the parties' stipulation that "[t]he Consent Decree prohibits inmate workers from access to or participation in the creation of sick call registers or rosters at the facilities subject to the Consent Decree."
II. Sanitation, Safety, Hygiene
A. MIOSHA Inspections
The Court accepts the parties' stipulation that the State Plan does not require defendants to comply with MIOSHA regulations. It would be beneficial, however, although not required, if defendants were to keep the Court, plaintiff, and amici informed as to the outcome of their MIOSHA consultations and their ability to implement any recommendations that may arise from them.
B. Annual Inspections
The provision of the State Plan at issue here requires defendants to "obtain complete, annual inspections of the subject prisons by qualified non-corrections Building and Constructions Trades Inspectors, qualified non-corrections agricultural inspectors; and appropriate follow-up inspection or re-inspection." State Plan ¶ I.C. Defendants state that this section was inserted only to acknowledge their desire "to cooperate with the annual inspections that are required under State law". DM at 5. The United States has no view regarding the proper interpretation of this part of the State Plan. PM at 13-14. The Court does not believe that the State Plan requires state agencies, such as the Department of Labor, to conduct inspections beyond those required by state law. Paragraph I.C., however, apparently means more than what defendants are willing to acknowledge. This paragraph does not state that these annual inspections must be conducted by personnel from the Department of Labor and the Department of Agriculture. The Court thus would request that defendants investigate means for complying with the requirements of this paragraph other than relying solely on inspections performed by state agencies if such inspections will not be performed on an annual basis.
C. Food Service Sanitation Requirements
The Court accepts defendants' understanding that they are required to obtain a *1004 score of "70 or above at all food service facilities at the affected institutions." DM at 5; see State Plan ¶ I.I.5. I also believe, moreover, that the last sentence of paragraph I.I.5 requires that defendants achieve full compliance on at least each item for which a score of 4 or 5 is indicated on the inspection form.
D. Inspections for Broken Glass
As it indicated at the May 9th hearing, the Court accepts the parties' stipulation that the Consent Decree and the State Plan require defendants to inspect the windows at the subject facilities on a continuing basis and to replace promptly broken or missing glass.
III. Fire Safety: Storage of Combustibles
It appears that defendants are planning to file a motion to modify the section of the State Plan concerning the storage of inmates' personal property in their cells. The Court thus will not discuss this issue further, except to note that it agrees with the United States that the inmates should not be prohibited from storing reasonable amounts of personal property in their cells.
IV. Overcrowding and Protection from Harm
A. Surveillance of Inmates
The Court accepts defendants' understanding that surveillance may occur on an irregular basis, as long as the requisite number of rounds (24) will occur in any twenty-four (24) hour period. The Court also believes that defendants should apply the caveat that no more than 90 minutes may lapse between rounds to all of the institutions covered by the Consent Decree. The Court does not, of course, indicate at this time any view on whether defendants are actually in compliance with the applicable requirements of the Consent Decree and the State Plan.
B. Food Loaf
The Court will defer ruling on the issue of whether defendants may use "food loaf" as an administrative measure for dealing with inmates who throw their food, etc. I would ask that the parties and amici provide the Court with additional information at the next compliance hearing on defendants' use of food loaf. The Court is particularly interested in knowing how many inmates are served food loaf in lieu of their regular meals; whether the loaf is consumed by the inmates; whether there is any limitation on the length of time an inmate can be served the loaf; and whether any inmates have suffered mental or physical injury from having to eat the loaf.
C. Food Temperature
There was some confusion at the compliance hearing concerning the applicable requirements for the storage, transportation, and service of hot foods. All parties agree that the Food and Drug Administration Food Service Sanitation Ordinance (1976 Recommendations) ("FDA Ordinance") governs defendants' actions with regard to this issue. The Court, after reviewing the FDA standards, finds that it must agree with plaintiff that defendants apparently have misinterpreted such standards. Defendants recognize that food which has an internal temperature within the danger zone of 45° F to 140%A F should not be served. Testimony of Michael J. Kirkwood, T at 572; Affidavit of Michael J. Kirkwood ¶ 6; see also Testimony of George Butler, T at 261. They apparently adopt the position, however, that hot food can be served at a temperature below 140° F provided that such food has not been maintained below this temperature for longer than four (4) hours. See Affidavit of Michael J. Kirkwood ¶¶ 4-9; T at 276 (statement of counsel for defendants).
It is clear, though, that, as Mr. Duel testified at the compliance hearing, the FDA's four-hour standard applies only to food that is being cooled for refrigeration. See T at 670-71. In such a case, the standards provide that the cooling period, during which the food is cooled from a temperature in excess of 140° F to a temperature of less than 45° F, "shall not exceed 4 hours". FDA Ordinance § 2-302(b). Section 2-302(b) indicates, moreover, that the *1005 four-hour standard applies to food that is being "rapidly cooled". It apparently has no application to food that is merely being transported to cellblocks for service to inmates. Sections 2-303(b), which provides that "[p]otentially hazardous food to be transported shall be held at a temperature of 140° F or above", and 2-501, which provides that "[p]otentially hazardous food shall be kept at an internal temperature of 140° F or above during display and service", govern the latter kind of food. The Court thus rejects defendants' argument that they may take up to four hours to serve potentially hazardous hot food whose internal temperature has fallen below 140° F. Defendants should serve such food as soon as possible.
D. Personal Property in Administrative Segregation
Based on the parties' submissions, the Court does not believe there is an issue for it to interpret or to resolve at this time.
E. Adequate Provision of Space
The Court accepts defendants' interpretation that the areas considered in determining compliance with the sixty-square foot requirement should be limited to the inmates' sleeping area and should "not include recreational facilities or other areas." DM at 6. The Court also agrees that defendants are not necessarily required to "mark off that 60 square foot area in some visual manner."
V. Access to Courts
The Court raised two issues regarding defendants' law libraries. With respect to the first issue, the parties argue that defendants' current stock of law books satisfies constitutional minima, but that they will meet periodically to ensure that defendants maintain this standard. The Court has not received any firm evidence that would lead it to disagree with the parties' general assessment of this situation. As it stated at the compliance hearing, however, the Court does believe that defendants must replace their treatise on habeas corpus law, which was published in 1969. T at 786. It is ridiculous that defendants have a seventeen year old treatise to guide inmates in this crucial area of the law. Use of such a treatise cannot possibly give inmates "meaningful access to the courts". Consent Decree ¶ E.
With regard to the second issue, the Court considers the six-month survey requirement as marking the maximum length of time defendants can defer identification and replacement of missing and mutilated volumes. I note, moreover, that the last sentence of section V.3 of the State Plan provides that "[a]ll missing or mutilated volumes, however discovered to be missing or mutilated, must be replaced or restored promptly." Defendants thus are obligated to replace or to restore missing or mutilated volumes whenever they discover them to be missing or mutilated, not just when they identify such volumes during a semi-annual survey.
OPINION OF JULY 15, 1986 GRANTING IN PART AND DENYING IN PART DEFENDANTS' MOTION FOR RELIEF FROM ORDER
On March 4, 1986, defendants filed a motion for relief from the Court's Order of February 21, 1986, regarding various aspects of their mental health care system. On April 3, 1986, the Court issued a memorandum opinion and order in which it granted defendants' motion in part and withheld ruling on it in part pending the hearing on defendants' mental health care plan scheduled for May 8th and 9th. At the May 8th and 9th hearing, plaintiff's mental health expert, Dr. Sovner, testified regarding the portions of defendants' motion on which the Court had withheld decision. Having listened to Dr. Sovner's testimony, and having considered the other evidence presented at the hearing, the Court is prepared to rule on the remaining portions of defendants' March 4th motion.
The first remaining issue is defendants' request that the Court modify section I.C. 6 of the February 21st Order, which concerns the use of state doses. Specifically, defendants request that they be allowed to order more than one stat *1006 dose by telephone in a twenty-four hour period. Dr. Sovner testified that defendants' requested modification did not comport fully with contemporary community standards, and indicated that the State should not provide emergency services by telephone but rather should have twenty-four hour psychiatric coverage of its facilities.
The Court tends to agree with Dr. Sovner that defendants' request may not comport with contemporary community standards. Concurrently, however, the Court recognizes that defendants may not presently possess the resources to maintain twenty-four hour psychiatric coverage, and that such coverage is not necessarily required by either the Consent Decree or the State Plan for Compliance, which require that defendants provide "[a]ppropriate use and distribution of psychotropic medications, that fully comports with the standards of use and distribution in the medical profession", Consent Decree § A.7., and "care of serious mental illness [that] meet[s] contemporary professional standards". State Plan for Compliance § II.H. The Court believes that the following modification of its February 21st Order best accommodates the competing concerns it must consider while granting priority to the rights of the inmates under the Consent Decree and the State Plan.
6. Stat Dose Orders
Only one Stat dose of a psychotropic drug for each 24 hour period shall be ordered by telephone, except that a physician may, in a subsequent telephone consultation, order one additional individual stat dose according to his or her medical judgment, provided that the physician fully documents the necessity and rationale for such order in the inmate's medical record on the next working day and that he or she promptly reports and justifies the occurrence in writing to the Medical Director of the facility.
Order of February 21, 1986, § I.C.6.
The second remaining issue is defendants' request that the Court modify section I.G. of the Order, concerning monthly audits of all prescriptions of anti-psychotic medications. The Court shares Dr. Sovner's concern that a relaxation of this requirement may allow the improper administration of medications to inmates who are treated for only a month or two to escape the attention of the auditors. The Court also appreciates defendants' concern, however, that the audits may unnecessarily consume valuable staff time. I also note, moreover, that Dr. Sovner appears to be concerned primarily with the improper use of polypharmacy. The Court therefore will amend section I.G. of the Order to read as follows:
G. Within sixty (60) days from the date of this Order, defendants shall initiate monthly audits of all prescriptions of anti-psychotic medications. The audits shall include a summary review of all anti-psychotic medication prescriptions in effect, to ensure that all dosages and combinations fall within the limitations of the medication protocols. For a more intensive sample consisting of not less than 10% of all instances in which antipsychotic medications are prescribed, defendants shall conduct quarterly audits to assess compliance with the substantive provisions of the applicable medication protocols. In all cases in which two anti-psychotic medications are prescribed simultaneously, defendants shall conduct such intensive audits on a monthly basis.
Order of February 21, 1986, § I.G.
The third leftover issue concerns defendants' request that the Court modify section II.A. of the Order, concerning the length of time an inmate can be secluded or restrained without being examined by a physician. Defendants' primary concern seems to be that the February 21st Order places limitations on their use of seclusion and restraint that are more stringent than those contained in the State Mental Health Code or their own policies. As Dr. Sovner noted at the hearing, however, the State Mental Health Code does not necessarily reflect contemporary community standards. More importantly, however, he also noted that one needs to examine the history of the system, and testified that in his opinion modification of the Order in this area may well invite further abuse by inducing *1007 a feeling that it is all right to resume "business as usual".
In light of plaintiff's essentially uncontradicted testimony, which it presented at both the February 13th hearing and the May 8th and 9th hearing, concerning the problems associated with defendants' use of seclusion and restraint, the Court finds no basis for granting defendants' requested modification at this time. I thus will decline to modify section II.A.'s requirements concerning defendants' use of seclusion and restraint, and will order defendants to modify their policies to reflect such requirements. After April 1, 1987, however, defendants may again request the Court to modify those requirements. Defendants must, of course, support any such request with appropriate evidence of their success at correcting the abuses that plaintiff has identified.
The final issue the Court must resolve concerns defendants' request that it modify section III.A. of the Order to allow a psychologist or a physician who is not a psychiatrist to conduct the examination required within seventy-two hours after an inmate for whom an anti-psychotic medication has been prescribed has been assigned to disciplinary or administrative segregation. The Court is troubled by the prospect of potentially unqualified personnel conducting this examination. I believe that Dr. Sovner suggested a reasonable solution to defendants' concerns, however, when he testified that he would be comfortable with a person from any of the following three groups of persons conducting this examination: (1) psychiatrists; (2) Ph.D.-level clinical psychologists; or (3) psychiatric nurse practitioners who have had a one to two year internship in a psychiatric facility. The Court therefore will modify section III.A. of the Order to allow a person from any one of the above three groups to conduct this examination.
OPINION OF JULY 22, 1986 REGARDING MARCH 1986 COMPLIANCE HEARING
Introduction
On March 27, 1986, through April 1, 1986, the Court held its first compliance hearing in this case to evaluate defendants' efforts to comply with the requirements of the Consent Decree and State Plan for Compliance entered July 16, 1984, and the Stipulation entered June 21, 1985, as approved August 21, 1985. These requirements are intended to ensure the constitutionality of the conditions under which persons are confined at four Michigan institutions: the State Prison for Southern Michigan (SPSM); the Michigan Reformatory (MR); the Marquette Branch Prison (MBP); and the Michigan Intensive Programming Center (MIPC). To assist it in evaluating defendants' compliance efforts, the Court appointed an Independent Expert on October 2, 1985, and instructed him to study and to report to it, and to the parties and the amici, on such efforts. The Independent Expert submitted his report to the Court, the parties, and the amici on February 11, 1986, and the parties and the amici were given an adequate opportunity to comment on such report. The report represented a comprehensive survey of defendants' compliance efforts in each of the five major areas of concern: Medical Care; Sanitation, Safety and Hygiene; Fire Safety; Overcrowding and Protection from Harm; and Access to Courts. At the compliance hearing, the Court heard further evidence from the parties and the amici on defendants' compliance efforts. The following opinion, and the accompanying order, are based on the Independent Expert's findings and conclusions and on the evidence the Court heard at the compliance hearing. As the parties and the amici are aware, the issue of mental health has been effectively segregated from the other compliance areas, and thus will not be covered in this opinion and order.
On March 26, 1986, the United States filed a motion for an order enforcing certain aspects of the Consent Decree and the Stipulation. In particular, the United States was concerned that defendants were not in compliance with paragraphs B.6., C.1., and C.2. of the Consent Decree, and paragraphs II.b.3(4), II.C.3., and II.C.4. of the Stipulation, and requested that the *1008 Court take appropriate action to ensure compliance. The United States' particular areas of concern involved fire safety and sanitation, safety, and hygiene. The Independent Expert's report and the evidence presented at the compliance hearing demonstrated, however, that the State is also experiencing compliance problems in the other three areas of concern and that there are problems in the areas of fire safety and sanitation, safety, and hygiene in addition to those the United States discussed in its March 26th motion. Therefore, although the Court is particularly concerned about the areas the United States discussed in its motion for enforcement, it believes that the other areas also deserve its attention. As discussed below, there are significant areas of noncompliance that defendants must address in accordance with this Opinion and its accompanying Order. The Court will discuss those areas in this Opinion. The accompanying Order will list the steps defendants must take to remedy their noncompliance.
The Court also finds that as defendants argue, there has been substantial compliance with the requirements of the Consent Decree, the State Plan for Compliance, and the Stipulation. I also do not believe that I currently have a substantial basis for finding that defendants are not engaged in a good faith effort to comply completely with such requirements. The Court thus will decline, for the moment, to consider whether it should issue an order requiring defendants to show cause why they should not be held in civil contempt of court for failing to comply with all the requirements that are presently due. Defendants should be prepared, however, to show significant improvement in the areas of noncompliance at the next compliance hearing.
The Court will first discuss its findings on fire safety. I will then discuss sanitation, safety, and hygiene; medical care; access to courts; and overcrowding and protection from harm. Due to the volume of paper that this case has already generated, and the parties and amici's familiarity with the applicable requirements and the evidence, this discussion will be somewhat summary.
I. Fire Safety
In many respects, this area presents the most troublesome problems of noncompliance. The Court finds that there are nine areas in which defendants are experiencing significant compliance problems. As the discussion indicates, the degree of significance varies, and in many areas defendants need only provide the Court with a status report on when they will achieve compliance. There are, however, several, more crucial, areas in fire safety in which compliance is due this month, July, 1986, and yet defendants do not expect to be in compliance. The Court received some idea at the hearing of when it might expect defendants to be in compliance in those areas. It needs, however, a more detailed schedule of when defendants will be in compliance, and an explanation of why they did not achieve compliance by the designated date. I note that attachment b of the Compliance Report Outline defendants submitted to the court on June 30, 1986, contains a memorandum from George Walter to Luella Burke concerning expected completion dates for many of these areas. The Court would ask that defendants provide another such progress report on October 1, 1986. Given the serious danger that fire poses in the prison setting, the Court expects defendants to make these requirements one of their top priorities.
A. Storage of Combustibles
Testimony at the hearing revealed this to be the most significant area of noncompliance. The Court has little difficulty in finding that defendants are not in compliance with paragraph B.6. of the Consent Decree, which requires them to "[p]rovide for immediate proper storage or removal of combustible materials." The June 21, 1985 Stipulation gave defendants until that date (June 21, 1985) to document their full compliance with such requirement, Stipulation, ¶ II.B.4., even though compliance was originally due August 21, 1984. The Independent Expert noted that although many institutions have proper areas for the storage of combustibles, defendants frequently fail *1009 to use such areas. He also noted problems with inmate personal property in their cells; material draped over the bars of the cells; the lack of suitable trash containers at MBP inside and trusty; and the lack of proper storage areas in certain places.
Plaintiff's fire safety expert, Mr. Copeland, more explicitly discussed these problems. He noted that defendants frequently fail to store combustibles properly, even when appropriate areas are available, Transcript ("T") at 290-91, and that there are excessive amounts of combustibles on the cells bars. T at 299. He also stated that in cellblock 5 at SPSM, defendants store laundry carts, which naturally are often full of clothes, in dangerous proximity to the living areas. T at 296-97; pls. exs. 1 & 3. Mr. Copeland in addition stated that the compressed gas cylinders in the hospital at SPSM are stored improperly, T at 299, and that individual cellblocks often are used for temporary storage of combustibles. T at 333. He gave his opinion that the improper storage of combustibles creates an unreasonable risk of harm to the inmates. T at 290, 291 & 298. Other testimony also supported Mr. Copeland's observations. T at 120-22 (testimony of Mr. Grossman).
Defendants, on their cross-examination of Mr. Copeland, were able to deflect somewhat the significance of his testimony. Individual defendants testified, moreover, that they are attempting to remedy the problems Mr. Copeland had identified. See, e.g., T at 365-67 (testimony of Warden Foltz). The improper storage of combustibles, however, particularly within the inmates' living areas, is a significant problem.
B. Equipment Maintenance
The Independent Expert noted in his report that defendants are experiencing difficulty in complying with paragraphs B.3. of the Consent Decree and III.H.4. of the State Plan. Testimony at the hearing indicated that defendants believe that they are in compliance with these paragraphs. T at 461-63 (testimony of Mr. Bristol); T at 479 (testimony of Mr. Walter). The Court merely notes that this may be a problem area, and requests that defendants clarify the status of this requirement.
C. Water Flow and Automatic Alarms
The Independent Expert's report indicates that defendants are experiencing major difficulties in this area. As with the immediately preceding area, however, the Court is not sure whether defendants are presently in compliance with this requirement. The Independent Expert noted that each of the three major complexes at SPSM was experiencing major deficiencies. It appears from defendants' June 1986 compliance report that they are still experiencing problems. The Court therefore will order defendants to provide appropriate documentation of their efforts to comply with this requirement.
D. Replacement of Nonconforming Tiles and Panels
Defendants do not dispute that they are not in compliance with this requirement. Mr. Hinds testified at the hearing that a contract had been let at Marquette, and that work should be completed by July, 1986. Mr. Walter testified, apparently with respect to the remaining institutions, that compliance would not occur for another six to nine months. The Court therefore will order defendants to provide appropriate documentation of their efforts to comply with this requirement.
E. Absence of a Fire Safety Office at the MR
With regard to this aspect of noncompliance, the Court will order defendants to report on their efforts to fill this position, or when the position was filled if it has been already. They also should report on the qualifications of whomever is or has been selected for the position. Finally, defendants should report on their efforts, if any, to cover this vacancy.
F. Lack of Monthly Inspections at SPSM
Mr. Bristol testified at the hearing that defendants would start conducting monthly fire safety inspections at SPSM, as required *1010 by section III.J. of the State Plan, as of June 1, 1986. T at 465-66. Defendants are to report to the Court on whether they are conducting monthly inspections at SPSM and, if they are not, when they expect to start doing so.
G. Lack of Fire Extinguishing Systems on Kitchen Hoods at SPSM and the Magnum Farm
Defendants should state whether they have installed the chemical extinguishing systems required by section III.B.3. of the State Plan at the Magnum Farm. With regard to SPSM, defendants shall report on the status of their conversion to the "quickchill" food preparation system.
H. No Adequate Fire Safety Operations Plan
The Court expressed concern at the hearing regarding defendants' Fire Safety Operations Plan. In the Order dated May 14, 1986, the Court accepted the United States' limited waiver of rights with regard to its consultant's report on such plan. I thus will not discuss this issue further, and expect that defendants will modify their plan in accordance with the concerns the Court expressed at the compliance hearing. T at 399-417 & 500-05.
I. Removal of Combustible Materials from Cellblock Areas
The Independent Expert's report indicates that the subject facilities are in varying degrees of compliance, or non-compliance, on this requirement, and that it is unclear when defendants will be in compliance at all of the facilities. The Court therefore will order defendants to report on their compliance status, and when they expect to be in full compliance. Exhibit 13b to defendants' June, 1986 compliance report on the Central Complex indicates that they will be in compliance as of January 31, 1987. The Court will order defendants to report by October 1, 1986, on whether they will meet this deadline.
II. Sanitation, Safety, and Hygiene
Sanitation, Safety, and Hygiene appears to be the second most troublesome area in terms of noncompliance. Specifically, the Independent Expert's report and the evidence presented at the compliance hearing identified five areas in which defendants are experiencing significant compliance difficulty.
A. Housekeeping Practices
Paragraph C.1. of the Consent Decree requires defendants to establish, maintain, and implement "[h]ousekeeping systems, to be operated and managed by qualified staff with designated responsibilities, to prevent filth, vermin and rodent infestation." Attached to the State Plan for Compliance are sanitation plans defendants developed to satisfy this requirement of the Consent Decree. Defendants state that "[a]ll required sanitation systems and plans are in place" and that "[c]leaning supplies and materials are readily available." Memorandum Regarding Consent Decree Sanitation Requirements at 2. These statements may well be true. As the Independent Expert's report and testimony at the compliance hearing revealed, however, the problem is that the facilities are not being kept clean.
Specifically, plaintiff's expert, Mr. Butler, testified that the filth in 5-Block at SPSM was such that he has seen "cleaner zoos." T at 266. He noted in particular the presence of many birds in the area, T at 269, and opined that the risk of harm posed to inmates as a result of the filth and vermin infestation was "very serious." T at 281. Messrs. Kirkwood and Vogel testified regarding their efforts to ensure that the cellblocks are maintained in a clean condition, and Warden Bergman testified about his efforts to keep MIPC clean. E.g., T at 571 & 347-48. It nevertheless is clear that at least some of the institutions, in particular SPSM 5-block and MIPC, are experiencing difficulty in this area.
B. Food Service Sanitation
Paragraph C.2. of the Consent Decree requires defendants to establish, maintain, and implement "[s]ystems to ensure safe *1011 and sanitary food service." Defendants' noncompliance with this requirement presents troubling issues. These issues break down into two major areas: (1) the presence of vermin, etc. in the food service areas; and (2) the service of food at unsafe temperatures.
Mr. Butler testified that the commissary at the Southern Complex, SPSM, definitely was suffering from a rodent infestation. T at 267. He also noted that in the Central Complex, garbage was improperly maintained near the food service area, T at 267-68, and stated that the application of rodenticides and pesticides would not, by themselves, cure the infestation problem. T at 272. Amici's expert, Mr. Duel, supported Mr. Butler's findings. T at 672-74, 676 & 736-37. Mr. McClellan testified that the introduction of the quick-chill food processing method may alleviate some of these problems, since the Central Complex kitchen would no longer be used to prepare most foods. T at 553 & 556-57. Mr. McClain testified regarding recent vermin control efforts at SPSM, T at 559-60, and stated that in his last inspection of the Central Complex, he did not find any rodents or vermin in the food service area. T at 566.
Mr. Kirkwood testified that there presently is not a vermin infestation problem at MBP. T at 571. He did state, however, that the kitchen floor and ceiling must be replaced as they can no longer be cleaned properly. T at 576-78. Finally, Mr. Vogel testified that he was taking steps to cure the vermin problem he had been experiencing at the Michigan Reformatory. T at 588-89. From this testimony, the Court finds that there is strong evidence of non-compliance by defendants in terms of food service sanitation, but that defendants are taking steps to cure the problems.
The second problem area concerns the temperature at which defendants serve hot food. Testimony at the hearing clearly established that at least some hot food is served below the safe temperature of 140° F. See T at 261 & 275 (testimony of Mr. Butler); T at 565-66 (testimony of Mr. McClain); T at 570 (testimony of Mr. Kirkwood); & T at 587 (testimony of Mr. Vogel). There was vigorous disagreement, however, over whether this occurrence constituted a risk of harm to the inmates. After reviewing the testimony, the Court finds that the weight of the authority lies in plaintiff's favor on this issue.
Mr. Butler testified that maintaining food in the 98° F to 100° F temperature range promotes bacterial growth, T at 281-82, and stated that bacteria in hot food maintained at a temperature of less than 140° F would double every fifteen to twenty minutes. T at 276. Mr. Duel similarly testified that bacteria in food maintained at a temperature below 140° F would go "through a stage of growth every 20 minutes." T at 670. As the Court explained in its opinion regarding the interpretive issues, moreover, it credits Mr. Duel's testimony that the "four-hour" rule applies to refrigeration, not serving, time, and finds that defendant's understanding of the rule is erroneous. See T at 670-71. Given a proper understanding of the temperature at which hot food must be served to avoid the danger of bacterial growth, Mr. McClain's testimony that it has been taking up to two hours to serve inmates at the Central Complex (T at 560-61) and Mr. Butler's testimony that food often is stacked awaiting an inmate's return to his cell (T at 265-66) indicate that inmates may indeed be subject to a significant risk of harm. The Court thus considers it crucial that defendants devise faster methods of serving inmates, and purchase equipment, such as serving trays, that insulate the food better.
C. Pipe Chases, Sewer Lines, and Ports
In his report, the Independent Expert noted instances where the defendants had failed to "maintain pipe chases free of all standing water and filth; maintain, as properly closed, all sewer lines; and maintain, with proper plumbing fixtures, all clean-out ports" as required by paragraph I.I.2 of the State Plan. See also C.D. ¶ C.3. Mr. Butler testified that he had noticed several broken or disconnected vent pipes at the MR, T at 263, and Mr. Duel testified *1012 that he had noted unclean pipe chases at the MR. T at 660-61; see also Amici ex. 1. Witnesses for defendants admitted that they were experiencing some difficulty in keeping the pipe chases clean, see T at 568 (testimony of Mr. Kirkwood), but stated that they were correcting the problems. Mr. Kirkwood also testified that there was a cross-connection problem in the kitchen at Marquette, T at 571, but noted that funding had been requested to resolve the problem. T at 576. Many of defendants' problems in this area, moreover, can be traced to antiquated plumbing that is supposed to be replaced soon. Thus, although the Court finds that defendants are not in full compliance in this area, it is hopeful that this situation will not last long. It will require defendants, however, to maintain a vigorous program of keeping the pipe chases clean and ensuring that all sewer lines are properly closed.
D. Broken Windows
This is a serious problem that defendants must remedy immediately. Defendants acknowledge that they are obligated to repair or to replace broken windows immediately. Compare Amici's Proposed Order, attachment A. Mr. Butler testified that the presence of the broken windows allows birds and other vermin easy access to the facilities. T at 269 & 274. The Court thus will enjoin defendants to maintain a vigorous repair and/or replacement policy in this area. If such a policy is ineffective in keeping birds and other animals out of the facilities, particularly SPSM 5-Block, the Court will consider requiring defendants to screen problem areas.
E. Training Programs
It appears from the Independent Expert's report and testimony at the hearing that defendants are having difficult ensuring that the appropriate employees receive sanitation training. Report at 47 & 52; see T at 568 (testimony of Mr. Kirkwood) (indicating that training programs for assistant food service directors and food service directors are not yet underway); T at 579 (testimony of Mr. Kirkwood) (indicating that the food service training program for inmates also is not operational); T at 610 & 612 (testimony of Mr. Johnson) (indicating that only 50% of the appropriate personnel at Jackson have received sanitation training). Defendants indicate in their most recent compliance report that they still have achieved only partial compliance in this area. The Court expects, at a minimum, that defendants will complete the appropriate training by the end of this year.
III. Medical Care
As the Court stated earlier, one of the key problem areas in the medical care field, mental health, has been and will be dealt with in separate hearings and opinions and orders. With regard to other medical care issues, Dr. Green, Dr. Faiver, and Mr. McMillan presented testimony at the hearing. The Court also notes that it heard testimony from amici's expert, Dr. Rundle, on various aspects of defendants' provision of mental health care. The Court will not deal specifically with mental health care in this opinion. It believes, however, that Dr. Rundle presented some valuable testimony, particularly with regard to the provision of mental health care at SPSM, RPC, and MIPC, that it will consider when it deals with defendants' mental health care plan. The Court is particularly concerned about Dr. Rundle's conclusions regarding the provision, or lack, of mental health care at MIPC. See T at 443.
With regard to other areas of medical care, the Court finds that there are two areas of concern it should cover at this time: (1) defendants' training programs; and (2) defendants' staffing levels at the SPSM hospital. I will also note that I considered carefully the suggestions listed on pages ten through thirteen of the amici's proposed order. The Court does not believe that there is a sufficiently substantial basis at this time for it to adopt such suggestions. The parties should be on notice, however, that I consider the problems amici discuss to be serious and expect them to take appropriate steps to resolve any problems that may exist. The Court is particularly concerned that inmates in need *1013 of emergency medical care receive it; that inmates are not involved in the provision of medical care; that inmates at MIPC and MBP receive adequate mental health care; and that inmates with serious chronic diseases receive appropriate follow-up care.
With regard to defendants' training programs, the Court notes first that the Independent Expert found that many correctional officers still are not properly distributing medications. See also T at 618 (testimony of Mr. McMillan). The Court does not believe it would be appropriate at this time for it to order that only health care personnel distribute medication. I expect, however, that defendants will act promptly to correct this situation, and I will order appropriate compliance measures. I also expect that all non-medical personnel will receive adequate emergency training. See State Plan ¶ II.I.1.
The Court's second area of concern is staffing at the new SPSM hospital. Dr. Faiver testified about defendants' staffing plans at the hearing. T at 631-38. Dr. Green testified that she would like to have twenty-four hour physician coverage at the new hospital. T at 535. It is the Court's understanding that plaintiff will evaluate the adequacy of defendants' staffing plan once it is complete. I accordingly will not make any findings concerning staffing at this time, and will merely note my concern that the hospital is adequately staffed.
IV. Access to Courts
This area was ignored at the compliance hearing. As amici indicate, however, the Independent Expert found three areas of noncompliance that deserve discussion. The first concerns the situation at the MR, where defendants, despite diligent efforts, have been unable to maintain adequate staffing. As a result, the law library is, or at least was, not open a sufficient number of hours during the evening to meet the requirement of paragraph V.1 of the State Plan. Defendants' latest compliance report indicates that they are now in compliance with this requirement in the MR-inside. The Court thus would request that defendants clarify the status of their compliance at the MR.
The second area concerns the mini-law library at MBP, C-Block. The Independent Expert indicated in his report that defendants have plans to develop such a library, but have not yet done so. Defendants indicate in their latest compliance report that they are in compliance on this requirement at MBP. The Court would ask that defendants inform it whether there is a mini-law library at MBP, C-Block.
The final compliance issue in this area concerns the fact that certain of the books in the law libraries may be out-of-date. The Court discussed this issue in its separate opinion on the interpretive issues. I thus will not discuss it further here, other than to note that I interpret defendants' obligation to update each publication "promptly as revised editions, pocket parts, or advance sheets become available" to encompass an obligation to purchase new publications in particular areas if it becomes no longer possible to update the present ones.
V. Overcrowding and Protection from Harm
There are seven issues the Court will address in this area.
A. Plan to Decrease Overcrowding
The Court accepts defendants' plan, as outlined in the April 29, 1986 memorandum from William L. Kime to Robert Brown, Jr., to reduce overcrowding at the decree institutions by January 1, 1987, and to end inappropriate security classification placements by 1989. The Court will request defendants to supply it, plaintiff, and amici with tri-monthly updates on their progress in meeting their goals. I will also request that the Independent Expert keep the Court informed on defendants' progress in this regard. The parties and amici shall have an appropriate opportunity to comment on any reports the Independent Expert may submit.
The Court, in addition, would be remiss if it did not recognize defendants' commitment *1014 to maintaining single-celling at the subject institutions.
B. Conversion of MIPC
The Court also accepts defendants' plan to convert MIPC to a maximum security protective custody unit. See April 29, 1986 memorandum from Dan Bolden to Robert Brown, Jr. The Court requests that defendants keep it, plaintiff, and amici informed on their progress in this regard. The Court will also request defendants to continue to inform it, plaintiff, and amici on their plans for the old infirmary at SPSM, and the effect of such plans on the operation of 5-Block at SPSM.
C. Surveillance of Inmates
Paragraph D.2 of the Consent Decree requires defendants to "[e]nsure adequate guard surveillance of inmates." As it discussed in its opinion on the interpretive issues, the Court accepts defendants' interpretation of the surveillance requirement. It is clear from the Independent Expert's report and testimony at the compliance hearing, however, that surveillance is not always conducted properly. See Report at 80-81; T at 120-21 & 138-40; see also attachments to amici's Memorandum in Support of Proposed Supplemental Order (concerning a suicide at MBP and a homicide at RCF). It appears that defendants' problems in this area are two-fold. First, defendants do not always have sufficient staff to conduct the requisite number of rounds. Second, the staffs view of the cell often is blocked by towels and other items. The Court will enter an appropriate order to ensure compliance with the surveillance requirement.
D. Segregated Housing
Paragraph D.3 of the Consent Decree requires defendants to "[d]evelop and implement rules and procedures governing use of segregation housing units." In the Stipulation, moreover, defendants agreed to take additional measures to ensure that protective custody inmates and administrative segregation inmates are treated properly in accordance with the Consent Decree. Mr. Grossman testified at the hearing, however, that protective custody inmates still suffer significant disparate treatment when compared to general population inmates. T at 122-23 & 135-36. The Court expects defendants to take appropriate measures to end this disparity, and will enter an order to that effect.
A second problem involving protective custody inmates is that they apparently are occasionally exposed to administrative segregation inmates. See T at 122-23. Warden Foltz testified that using protective custody inmates as porters in the administrative segregation block creates a risk of harm. T at 370-72. The Court is aware, however, of defendants' security concerns with any alternative cleaning arrangements. Id. at 371-72.
Finally, the Court notes that it is concerned with indications that defendants are not complying with section IV.J.1. of the State Plan. I would ask that plaintiff and the Independent Expert keep the Court informed on defendants' efforts to comply with that requirement.
E. Classification
Plaintiff has indicated that it has secured a copy of defendants' classification plan, which defendants apparently intend to retain as the plan required by paragraph D.1. of the Consent Decree, and intends to evaluate such plan. The Court would request that plaintiff complete its evaluation by June 1, 1987, or sooner if it wishes, and submit a copy of the evaluation to it, defendants, and amici. Defendants and amici shall then have until August 1, 1987 to comment on plaintiff's evaluation and/or defendant's plan. If necessary, the Court will consider obtaining the services of an Independent Expert to evaluate defendants' plan.
F. 5-Block and MIPC
The Court finds from its reading of the Independent Expert's report, its tour of 5-Block in February, 1986, and the testimony given at the compliance hearing that conditions in 5-Block and MIPC, particularly with respect to sanitation and fire safety, *1015 pose an unreasonable risk of harm to the inmates confined in those facilities. I note, for example, the excessive amount of combustibles present in both facilities and the unsanitary conditions that exist in them. The Court does recognize that defendants' most recent compliance report on MIPC indicates that conditions have improved significantly at that facility. Given defendants' plan to convert MIPC to a protective custody facility, moreover, the Court believes that they may soon eliminate any remaining problems.
With regard to 5-Block, the Court hopes that defendants' recent measures will be effective. I will ask that plaintiff, amici, and the Independent Expert keep the Court informed on defendants' progress in this area.
Finally, the Court will request plaintiff, defendants, amici, and the Independent Expert to address the issue of whether confinement of an inmate in a cell with solid doors at MIPC constitutes "isolation" within the meaning of paragraph IV.J.9. of the State Plan.
The Court also notes that defendants and amici have filed various comments on the testimony of Mr. Duel and Dr. Rundle. With regard to defendants' objections to the testimony of Mr. Duel, the Court believes that their first and third objections are effectively moot since it did not rely on such testimony. The Court will reject defendants' second objection based on its understanding that Mr. Duel was testifying on behalf of the Hadix amicus as well as the Knop amicus. With regard to defendants' objections to the testimony of Dr. Rundle, the Court rejects each objection. Dr. Rundle's testimony fell within the limitations imposed by the Court; the Court believes that his testimony concerning the Central Complex was relevant to the claims of the inmates whom the Knop amicus represent; and the Court did not rely on Dr. Rundle's testimony concerning the conversion of the infirmary to a segregation unit.
The Court also notes that amici have lodged certain objections to defendants' cross-examinations of Mr. Duel and Dr. Rundle. With regard to Dr. Rundle, the Court agrees that certain aspects of defendants' cross-examination were highly objectionable. I therefore will order that lines 19-24 of page 449, vol. II of the Transcript, and lines 16-24 of page 455, vol. II of the Transcript, be stricken from the record. See Federal Rules of Evidence 608 & 611(a). With regard to defendants' cross-examination of Mr. Duel, the Court will caution defendants not to suggest that certain "facts" are true unless they have a foundation for such questions.
The Court will enter an order in accordance with the above findings and conclusions. It will discuss defendants' efforts in the mental health area in a separate opinion and order.
ORDER OF JULY 22, 1986 GRANTING PLAINTIFF'S MOTION FOR ORDER ENFORCING CONSENT DECREE AND STIPULATION
In accordance with the opinion dated July 21, 1986;
IT IS HEREBY ORDERED that plaintiff's Motion for Order Enforcing Consent Decree and Stipulation is GRANTED, and that defendants are found to be in violation of paragraphs B.6., C.1., C.2., D.2., and D.3. of the Consent Decree, and paragraphs II. B.4., II.C.3., II.C.4., II.D.2.b., and II.D.2.c. of the June 21, 1985 Stipulation;
IT IS FURTHER ORDERED that defendants are found to be in violation of other provisions of the Consent Decree and the State Plan for Compliance, as discussed in the Court's opinion;
IT IS FURTHER ORDERED that defendants shall take the following steps to ensure their compliance with the Consent Decree, the Stipulation, and, consistent with paragraphs H and I of the Consent Decree, the State Plan for Compliance.
I. With respect to Fire Safety, defendants are enjoined:
A. To immediately and on a continuing basis survey all prison areas subject to the Consent Decree and, with the exception of a reasonable amount of personal property *1016 in inmate cells, immediately remove or store properly all combustible materials.
B. Within ten days of the date of this Order, and thereafter monthly on the 15th day of each month, to submit to the Court, the United States, and amici, affidavits from the Warden or Assistant Deputy Warden for Housing in each institution stating that such persons have personally surveyed all prison areas subject to the Consent Decree and that, as of the dates of the affidavits, all combustible materials, with the exception of a reasonable amount of personal property in inmate cells, have been removed or stored properly.
C. To clarify, by August 30, 1986, whether they are in compliance with paragraphs B.3. of the Consent Decree and III.H.4. of the State Plan at each of the subject facilities, and if they are not in compliance, to submit their plans for bringing such facilities into compliance.
D. To provide, by August 30, 1986, appropriate documentation regarding their efforts to comply with the requirement of paragraph III.B.2. of the State Plan concerning water flow and automatic alarms.
E. To provide, by August 30, 1986, appropriate documentation of their efforts to replace non-conforming tiles and panels in accordance with paragraph III.D. of the State Plan.
F. To report, by August 30, 1986, on their efforts to fill the fire safety officer position at the MR.
G. To report, by August 15, 1986, on whether they are conducting monthly fire safety inspections at SPSM.
H. To report, by August 15, 1986, on whether they have installed a chemical extinguishing system at the Magnum Farm, and on the status of their "quick-chill" food preparation system at the SPSM.
I. To report, by October 1, 1986, on whether they will meet their January 31, 1987 deadline for removing non-structural combustible materials from cellblock areas.
J. To report, by October 1, 1986, on their efforts to implement the requirements with respect to which compliance was due July, 1986.
II. With respect to Sanitation, Safety, and Hygiene, defendants are enjoined:
A. To remove immediately all trash, litter, and other filth from cellblocks and to maintain them on a continuous basis in sanitary condition.
B. To institute immediately measures necessary to assure the complete and effective eradication and control of all vermin, including birds. Such measures shall include such additional commercial pest control as is necessary to ensure complete eradication.
C. To inspect immediately, and on a continuing basis, all windows, and to replace promptly all broken or missing glass. If such a program is not effective in keeping vermin, particularly birds, out of the facilities by October 1, 1986, defendants shall screen all exterior windows which open and shut.
D. To implement immediately and in full each and every requirement specified in sections I and III of the Sanitation Plan attached as Appendix A to the State Plan for Compliance. The Warden and Assistant Deputy Warden for Housing in each institution shall file monthly on the 15th day of each month an affidavit stating that each requirement has been satisfied in full and, if not, the full particulars of non-compliance. The Resident Unit Manager of 5 Block, SPSM, shall likewise file an affidavit certifying performance consistent with sections I and III of Appendix A.
E. To correct as soon as practicable, but by no later than February 1, 1987, all inadequate plumbing in food service areas, including cross-connected plumbing hazards in MBP dishwasher facilities.
F. To implement as soon as practicable, but by no later than December 1, 1986, the Solid Waste Disposal Plan in all food service areas.
G. To take immediately all necessary steps to ensure that food is stored, prepared, transported, and served at safe temperatures. The institutional sanitarian at each facility shall submit an affidavit on the 15th day of each month stating whether *1017 such steps have been taken, and whether food is being served at the appropriate temperatures.
H. Consistent with paragraph G of the Consent Decree, to provide training programs to all food service workers by January 1, 1987, and to provide, on a continuing basis, such supervision of these workers as is necessary to ensure adequate food service sanitation.
I. Within thirty (30) days from the date of this Order, to submit to the Court, the United States, and amici, complete protocols and procedures designed to assure effective food sanitation, including adequate food protection, storage, preparation, and transportation; food handler cleanliness and practices; and effective equipment cleaning and storage. To the extent existing procedures and protocols address these areas, defendants shall review them and submit any revisions necessary to ensure the foregoing to the Court, the United States, and amici.
J. With respect to paragraphs E and F, to notify the Court, the United States, and amici within thirty (30) days of the date of this Order of the specific date by which they will meet the designated requirements.
K. To maintain a vigorous program of keeping pipe chases clean and ensuring that all sewer lines are properly closed.
III. With respect to Medical Care, defendants are enjoined:
A. To ensure that all correctional officers are properly trained in the distribution of medication, and to provide to the Court, plaintiff, and amici a proposal by September 15, 1986, for ensuring that all medication is distributed properly.
B. To provide appropriate emergency training to all non-medical personnel by January 1, 1987.
IV. With respect to Access to Courts, defendants are enjoined:
A. To clarify, by August 30, 1986, whether the library hours at the MR-Inside are in compliance.
B. To clarify, by August 30, 1986, whether there is a mini-law library at MBP, C-Block.
V. With respect to Overcrowding and Protection from Harm, defendants are enjoined:
A. To implement their plan to decrease overcrowding and to end inappropriate security classification placements, and to provide the Court, the plaintiff, and amici with tri-monthly progress reports on their efforts in this regard.
B. To proceed with their plan to convert MIPC to a maximum security protective custody unit, and to continue to inform the Court, plaintiff, and amici on their plans for the old infirmary at SPSM and the effect of such plans on the operation of 5 Block at SPSM.
C. To institute immediately, and on a continuing basis, direct observation of each cell, and of each inmate within the cell, by a correctional staff member on a schedule that complies with the requirements of the Consent Decree and the State Plan.
D. To remove immediately all combustibles and non-combustibles from cell fronts to the extent that such items prevent the observation required in paragraph C, and to maintain cells sufficiently unobstructed to permit a clear view of inmates for surveillance purposes.
E. To submit, by August 30, 1986, documentation of compliance with the requirements of paragraphs C and D. Such documentation shall include: a) the total number of surveillance rounds completed during each twenty-four hour period; and b) evidence that a correctional staff member directly observed each inmate.
F. To implement immediately and in full paragraphs II.D.2.b. and II.D.2.c. of the June 21, 1985 Stipulation, and to submit, by August 30, 1986, documentation evincing that the requirements of such paragraphs have been met, and if they have not, providing the full particulars of noncompliance.
G. To notify the Court, by August 30, 1986, of the status of their compliance with section IV.J.1. of the State Plan.
*1018 IT IS FURTHER ORDERED that plaintiff shall evaluate defendant's classification plan in accordance with the Court's opinion;
IT IS FURTHER ORDERED that plaintiff and the Independent Expert shall keep the Court informed as to defendants' efforts with regard to 5-Block, SPSM;
IT IS FURTHER ORDERED that plaintiff, defendants, amici, and the Independent Expert shall inform the Court by October 1, 1986, on whether confinement of an inmate in a cell with solid doors at MIPC constitutes "isolation" within the meaning of paragraph IV.J.9. of the State Plan;
IT IS FURTHER ORDERED that lines 19-24 of page 449, vol. II of the Transcript, and lines 16-24 of page 455, vol. II of the Transcript, be stricken from the Record.
OPINION OF AUGUST 29, 1986 SCHEDULING A MENTAL HEALTH HEARING
On May 9, 1986 the Court granted the United States' motion for relief and sanctions with regard to defendants' failure to submit a satisfactory plan for the provision of mental health services to seriously mentally ill inmates. It found defendants to be in contempt of court, and stated that they may purge their contempt "by submitting by June 9, 1986, a detailed supplementary implementation schedule and specification designed to cure the mental health care deficiencies addressed in the Consent Decree and Stipulation." Defendants submitted their Implementation Schedule and Specification in accordance with the Court's order on June 9, 1986. The United States and the Knop amicus submitted criticisms of the schedule and specification, and asked the Court to find that defendants had failed to purge themselves of their contempt. Defendants responded to these criticisms on July 17, 1986. On July 29, 1986 the Knop amicus suggested that the Court allow oral argument on the mental health issues.
The Court finds some merit in the criticisms submitted by the United States and the Knop amicus. It is also evident, however, that defendants are attempting in good faith to comply with the Court's orders and the requirements of the Consent Decree and the Stipulation, and have developed and are developing specific policies, programs and other means for achieving such compliance. The Court believes that most of the United States' and the amicus' criticisms are based on defendants' apparent failure to have refined or communicated sufficiently the means by which they will comply with the Court's orders, the Consent Decree, and the Stipulation. I also believe that the Court can most expeditiously resolve these criticisms at a hearing preceded by further written submissions from defendants.
The Court accordingly will hold a hearing to consider defendants' continued efforts to bring their system of mental health care into compliance with the Consent Decree, the Stipulation, and the Court's prior orders on October 24, 1986 at 2:30 p.m. in Kalamazoo, Michigan. I do not want the parties or amici to present witnesses at the hearing, with the possible exception of Ms. Burke by defendants. The parties and amici should submit any further written information they wish on the mental health issues, including affidavits from appropriate persons, to the Court by October 10, 1986. The Court in particular would like defendants to address in their written submission the questions listed in the appendix attached to this opinion and the status of the compliance measures due on or before the hearing date, such as the opening of the Comprehensive Care Unit at the Riverside Correctional Facility and the implementation of outpatient services. The Court hopes that defendants, either through their written submissions or at the hearing, will be able to allay the concerns expressed by the United States and the Knop amicus and reflected in the Court's questions.
The Independent Expert may, if he wishes, also express his views on defendants' compliance efforts on the mental health issues. He should submit his report, if any, by October 17, 1986. The parties and amici may respond to the Independent Expert's comments at the hearing. The Court will also defer ruling on whether *1019 defendants have purged themselves of contempt until the hearing. Finally, the parties and amici should be prepared to discuss future scheduling of compliance hearings and/or other means for assessing defendants' level of compliance with the terms of the Consent Decree, the State Plan for Compliance, and the Stipulation.
APPENDIX
1. How do defendants intend to assure that the provisions of the plans and Schedule/Specification shall apply, at a minimum, to all inmates with serious mental illness?
2. Are all sections of the Schedule/Specification equally binding on defendants?
3. Will the sixty (60) mental health spaces within the Department of Mental Health be fully used? What arrangements are in place to assure this?
4. How will the Comprehensive Care Units be licensed or certified with respect to psychiatric services? What psychiatric services standards will defendants be prepared to meet?
5. How will defendants evaluate the Protected Environments? Who will conduct the evaluations and what questions will the evaluations attempt to have answered? Will experts who are not employed by the Department of Corrections be involved in the evaluations?
6. How do defendants propose to determine and monitor the adequacy of staffing arrangements?
7. How do defendants intend to assure appropriate licensing, qualification, and training of staff?
8. If defendants continue to experience difficulty in recruiting and retaining staff, what additional efforts do they propose to undertake to provide a reasonable assurance that they will meet the applicable staffing requirements?
9. How will defendants staff the upper levels of their Mental Health Services organizational structure? What organizational structures will apply to each type of program unit?
ORDER
In accordance with the opinion dated August 28, 1986;
IT IS HEREBY ORDERED that the Court will hold a hearing on October 24, 1986 at 2:30 p.m. to consider defendants' compliance efforts in the area of mental health; the parties and amici may submit materials before the hearing in accordance with the opinion.
OPINION OF AUGUST 29, 1986 RESOLVING VARIOUS MOTIONS
There remain a number of matters for the Court to decide in this case. The following opinion will discuss four of those matters: (1) the United States' Motion for Order Compelling the Hadix Plaintiff-Intervenors to Answer Interrogatories, and the Hadix Plaintiff-Intervenors' Motion for Extension of Time to File Response to Plaintiff's Motion; (2) questions that have arisen concerning defendants' plans to renovate the old infirmary at the State Prison of Southern Michigan; (3) the United States' Objection to Defendants' Revised Procedure OP-DWA-40.02; and (4) the United States' Motion to Strike Amici's Response to the United States' Brief Opposing an Expansion of the Role of the Amici Curiae. Before discussing these matters, the Court reminds the parties and amici that in accordance with its Order of June 30, 1986 concerning the Independent Expert and his associate, they are to serve Dr. Benton and Mr. Stoughton "with copies of any and all documents, such as motions, memoranda, and reports, they file with the Court."
1. Hadix-Related Motions
On February 27, 1986 the United States served the Hadix Plaintiff-Intervenors with four interrogatories concerning the Intervenors' request to exclude the Central Complex and the Reception and Guidance Center at the State Prison for Southern Michigan from the Consent Decree entered in this case. The Hadix Intervenors filed an objection to the interrogatories on *1020 March 31, 1986. On April 9, 1986 the United States filed a motion to compel the Hadix Intervenors to respond to the interrogatories. On June 30, 1986 the Court ordered the Hadix Intervenors to respond to the United States' motion by July 10, 1986. On July 18, 1986 the Hadix Intervenors filed their response and a motion for an extension of time in which to file such response. The United States has not responded to the Intervenors' request for an extension of time to respond. Given the circumstances of this case, the Court believes that the motion should be granted, and it will consider the Hadix Intervenors' response to the United States' motion to compel.
The Hadix Intervenors raise two arguments in response to the United States' motion: (1) that they are not a party to this proceeding, and thus cannot be served with interrogatories pursuant to rule 33 of the Federal Rules of Civil Procedure; and (2) that rule 33 does not apply in post-judgment proceedings. The Court must reject the first argument. The Hadix Intervenors correctly note that the Court reduced them to the status of amicus curiae at the June 22, 1984 hearing. In its opinion of December 2, 1985, however, the Court granted the Hadix Intervenors' motion to intervene "as a party for the sole purpose of seeking exclusion from the Consent Decree." Opinion of December 2, 1985 at 4 & 9. They thus are a party to this proceeding for that limited purpose. Since the United States' interrogatories are related to that purpose, the Court finds that it must reject the Hadix Intervenors' first ground of objection.
The Hadix Intervenors' second objection is more substantial. In general, the discovery rules, and in particular rule 33, apply only to pre-trial proceedings, and are inapplicable to post-trial proceedings. See Goldy v. Beal, 91 F.R.D. 451, 456 (M.D.Pa. 1981); see also H.K. Porter Co. v. Goodyear Tire & Rubber Co., 536 F.2d 1115, 1118-22 (6th Cir.1976). The Sixth Circuit's decision in H.K. Porter does not, however, completely foreclose the use of discovery procedures in post-judgment proceedings. The Hadix Intervenors' Motion for exclusion, moreover, does not concern matters that were the subject of pretrial discovery, and it does not represent a direct attack on the merits of the judgment the Court entered in this case. In certain respects, then, the Hadix Intervenors' motion is more analogous to the filing of a separate action and the arguments against allowing post-judgment discovery are less cogent. I note, moreover, that it is anomalous for the Hadix Intervenors to file a motion requesting to be excluded from the Consent Decree and then to resist revealing information the United States needs to defend against such motion.
Given these peculiar factors, the Court believes that the United States' interrogatories are proper and will grant its motion to compel. At the March compliance hearing, the Court stated that it would conduct a separate hearing on the Hadix Intervenors' request for exclusion. Transcript of Compliance Hearing, Vol. I, at 70-72. The Court accordingly will hold a limited two and one-half hour hearing on the Hadix Intervenors' request for exclusion on Monday, November 3, 1986 at 2:30 p.m. The Hadix Intervenors shall respond to the United States' interrogatories by October 10, 1986.
2. Renovation of the Infirmary
As was noted at the March compliance hearing, defendants plan to convert the old infirmary at the State Prison of Southern Michigan into a segregation unit. On July 11, 1986 defendants submitted preliminary drawings for the renovation of the infirmary to the Court. On July 29th the Knop amicus expressed concern that the cells would face each other, similar to the design at MIPC. The Court believes that defendants adequately responded to this concern on August 8th by noting that the cell doors would be solid with only a view window, thereby precluding the throwing of materials from one cell into another. The Court, however, has some other questions regarding the renovation of the infirmary that it would like defendants to address.
a. What are the staffing plans for this segregation unit?
*1021 b. Will the planned use for the infirmary allow defendants to comply with all of the requirements of the Consent Decree and the State Plan, particularly with respect to indoor and outdoor exercise?
c. How much supervision and surveillance will the cell doors allow?
d. What precautions have defendants taken to deal with flooding due to toilet overflows, particularly intentional ones?
e. Are there provisions for any programs involving small groups, such as education, worship, or group therapy?
f. Are there provisions for case management offices and related program support spaces?
Defendants should respond to these questions by September 30, 1986.
3. Procedure OP-DWA-40.02
On April 29, 1986 defendants submitted a revised procedure for the Identification, Referral, Evaluation and Treatment of Prisoners with Serious Mental Disorders Housed in Segregation Units in accordance with the Court's Order of February 21, 1986. See OP-DWA-40.02. The United States submitted some objections to defendants' revised procedure on July 7, 1986. The Court has reviewed the United States' objections, and believes that they may be well-founded. I also note, however, that the objections are based in part on the United States' concern that the revised procedure does not comply with the requirements of the Consent Decree even though it may comply with the Court's February 21st Order. In any event, defendants have not responded to the United States' objections. The Court accordingly will not make any rulings on the objections at this time, but rather will request the parties to attempt to settle their differences between themselves. Plaintiff shall inform the Court by September 15, 1986 whether defendants have satisfactorily revised OP-DWA-40.02. If the United States still has concerns about the procedure at that time, the Court will schedule a hearing to decide the issue.
4. United States' Motion to Strike
At the March compliance hearing the Court decided to allow the parties and amici to submit briefs on the Knop amicus' request to be allowed to participate in this proceeding as a litigating amicus. I stated that "I will just invite simultaneous briefs, and don't really want any response because I understand the issue, I understand what everybody is saying to me, and I just want to see if it is developed in any more persuasive manner by counsel between now and the 15th of April." Transcript of Compliance Hearing, Vol. III, at 520. Contrary to the Court's statement, the Knop amicus submitted a responsive brief on June 12, 1986. The United States accordingly filed a motion to strike such brief. As amicus argues, the Court did not explicitly forbid the parties from filing response briefs. It appears, moreover, that amicus did not receive the transcript page containing the Court's statement. The Court therefore will deny the United States' motion to strike. In fairness to the United States, however, I will give it until September 12th to file its own response brief, if it wishes to do so.
OPINION OF SEPTEMBER 26, 1986 EXTENDING AUTHORITY OF INDEPENDENT PSYCHIATRIC EXPERT
The Court recently received a letter from Dr. James requesting clarification of his status in this proceeding. The Court has sent the parties and amici a copy of Dr. James' letter and its response to the letter. In accordance with the offer made by defendants at the May 8th and 9th hearing, the Court has decided to extend Dr. James' authority as an Independent Expert, with his fees and expenses to be paid by defendants, at least for the purpose of ensuring that defendants properly implement the recommendations which Dr. James and Dr. Benton made in their April, 1986 Review of the Comprehensive Plan for Mental Health Services, and which the Court adopted in its order of May 9, 1986. Transcript of Hearing and Rulings, vol. II, at 379-80 (May 9, 1986). The Court accordingly has requested Dr. James to testify at the October 24, 1986 hearing, and, if he desires, to *1022 submit written comments on defendants' mental health efforts by October 17, 1986. The parties and amici may respond to Dr. James' written comments, if any, either before or at the hearing.
The Court realizes that it ordered the parties and amici not to present witnesses at the hearing, with the possible exception of Ms. Burke by defendants. If it becomes obvious during the course of the hearing that the Court should hear live testimony from persons in addition to Dr. James and Ms. Burke before making any rulings, I will schedule an additional hearing.
ORDER
In accordance with the opinion dated September 25, 1986;
IT IS HEREBY ORDERED that Dr. James' authority as the Court's Independent Expert is extended in accordance with such opinion and the prior orders of the Court;
IT IS FURTHER ORDERED that Dr. James shall testify at the October 24, 1986 hearing with regard to defendants' mental health efforts. Dr. James may submit written comments in advance of the hearing by October 17, 1986. The parties and amici may respond to such comments, if any, either before or at the hearing.
BENCH OPINION OF OCTOBER 24, 1986 PURGING THE DEFENDANTS OF CONTEMPT REGARDING MENTAL HEALTH
The Court called this hearing today for essentially two reasons: First, to determine whether defendants have purged themselves of contempt with regard to the mental health plan; and, secondly, something I will do in a few minutes, to discuss future scheduling problems. The hearing, of course, delved into questions of defendants' implementation of the Mental Health Plan as well as the substance of the plan. I believe, however, as I indicated, that the question of implementation is separate, albeit not completely distinguishable, from the issue of whether defendants have purged themselves of contempt.
The Court found defendants to be in contempt of court on May 9th, 1986, because they had failed to produce an acceptable plan for identifying and treating inmates suffering from serious mental illnesses, as required by previous orders of this Court; specifically, section II(A)(2) of the stipulation, the Court's oral order of February 13th, 1986, and the Court's written order of February 21st, 1986. At the May 8th and 9th hearing, the Court determined that defendants' Comprehensive Plan for Mental Health Services, commonly referred to as CPMHS or Plan Two, was unacceptable. I will not reiterate here the bases for that finding. The Court further determined at the May 8th and 9th hearing that defendants could purge themselves of contempt "by submitting by June 9, 1986, a detailed supplementary implementation schedule and specification designed to cure the mental health care deficiencies addressed in the Consent Decree and Stipulation." That is my order of May 9th, 1986, at page one. The Court listed a number of provisions that this schedule and specification should contain, and ordered defendants also to "conduct an epidemiological study to determine the prevalence of serious mental illness and associated treatment needs." Finally, the Court stated that it would consider the documents submitted pursuant to paragraph three of the order and either "accept the submittal or order additional changes along with coercive or punitive sanctions as may become necessary." That comes from the order at page three.
Defendants submitted a schedule and specification on June 9th, 1986, in accordance with the Court's order. Plaintiff and amici thereafter submitted critiques of the schedule and specification that, in the Court's mind, raised issues that needed further study. I thus scheduled this hearing, ordered defendants to respond to several questions I had about their schedule and specification and Plan Two, and requested Dr. Benton and Dr. James to express their views on defendants' compliance efforts. Opinion and Order of August 29, 1986; Opinion and Order of September 26, 1986. Defendants responded to the Court's questions, plaintiff and amici submitted additional *1023 comments, and Dr. Benton and Dr. James prepared an additional report on defendants' mental health plan prior to this hearing. I believe that these submissions further defined the ambiguities in defendants' plan and the areas in which further modification and/or clarification was needed.
The Court finds that defendants, with the assistance of Dr. Benton, Dr. James, plaintiff, amici, and this Court, have satisfactorily explained these ambiguities, and for the most part have provided appropriate modifications and/or clarifications of Plan Two and the June 9th implementation schedule and specification, and have otherwise resolved most of the Court's concerns about Plan Two and the implementation schedule and specifications. The Court further finds that defendants' Comprehensive Plan for Mental Health Services, as modified, clarified, etc., by the following: A., the June 9th, 1986, Implementation Schedule and Specification; B., the representations defendants made in their July 17, 1986, response to the plaintiff's and amici's criticisms of their June 9th submission; C., the representations defendants made in their response to the questions the Court posed in its order of August 29, 1986; and D., the representations defendants made at this hearing, on October 24, 1986, satisfies the requirements of Section II(H)(4) of the State Plan for Compliance and the other applicable orders of the Court, and therefore, should be and is accepted by the Court.
This finding, of course, preempts the Court's February 21, 1986, acceptance of the Comprehensive Psychiatric Services Plan submitted by defendants on October 9th, 1985, as the plan required by Section II(H)(4) of the State Plan for Compliance. It also means, of course, that the Court accordingly finds that defendants have purged themselves of contempt in accordance with the Court's May 9th, 1986, order.
The Court's acceptance of Plan Two, along with its various clarifications, modifications, etc., is, however, subject to the following qualifications: First, defendants are still obligated, of course, to produce the manual or system of manuals required by paragraph 3(f) of the Court's May 9th order. Secondly, defendants are still obligated to complete and implement the epidemiological study required by paragraph four of the Court's May 9th order in accordance with the provisions of that paragraph; and I have been told today they will do that. Third, the Court has determined only that defendants' Plan Two, along with its various clarifications, modifications, etc., that I have referred to is acceptable as a means by which defendants intend to comply with the applicable substantive requirements of the Consent Decree, the Stipulation, the State Plan for Compliance, and the other applicable orders of this Court. The Court is expressing no opinion whatsoever on whether defendants are making adequate progress in implementing the provisions of this Plan or are otherwise in compliance with the substantive requirements found in the above documents. I note, however, that the testimony of Dr. James and other information elicited at this hearing suggests that defendants are experiencing some implementation difficulties. The Court, as evinced by its questions and comments at this hearing, intends to keep a close eye on this situation. I stress again that I have only determined that defendants have produced an acceptable "plan" for the provision of mental health services to inmates suffering from serious mental illnesses. I sincerely hope that defendants will be able to implement this "plan" successfully, and will otherwise be able to comply with the substantive requirements of the applicable orders of the Court.
Fourth, the Court, of course, retains jurisdiction to resolve any disputes that may arise regarding defendants' modification, clarifications, etc., of the Comprehensive Plan for Mental Health Services. Fifth, I agree with Ms. Alexander with regard to the ratio of outpatient teams with regard to average versus maximum, at page seven of the defendants' October 13th submission. There is a sentence on page seven which says that this staffing allows for each outpatient team to serve an average case load of approximately 192 patients. The Court, reading page 14 of the original *1024 submission in April of 1986, of Dr. Benton's and Dr. James' review of the Comprehensive Plan for Mental Health Services, finds on page 14 the following sentence toward the top of the page, quote: "Given the above figures, the average psychiatrist might be able to support an active case load of 192 patients at any time." End quote. "Average" refers to psychiatrists, not the size of the case load. The Court's interpretation, therefore, is that the report means that an outpatient team should in no event handle more than 192 patients at any time. Therefore, with that caveat, those five caveats, the Court approves the plan, finds the defendants have purged themselves of contempt.
Now I chose at this stage to say the following, a couple of comments. First of all, I agree with Dr. Benton that this is a happier day for me and for the Court and for the inmates than I found in the past couple of years, particularly with regard to the mental health plan, and I congratulate the State of Michigan and all of the defendants for all the work that they have put in to try to make the situation work. There has rarely been any question of the good faith of the State of Michigan anyway. There has been a question of other things impeding progress. I am pleased with I was pleased with the reaction of the State of Michigan in the beginning, the settlement of this lawsuit before it was ever filed; and I continue to be pleased with the efforts put in by many, many people, at least six of whom are in this room, and they deserve the accolades and the applause of this Court, and they hereby receive them from me.
A word of, a word of caution and I don't think it is even necessary. The fact that I am as pleased as I am with the final, the finalizing of the plan, and the removal of the punitive sanctions should not be interpreted by those not in this room employed by the State of Michigan into believing that now it is time to coast, and that we are over the hurdle of the June 9th submission and the October 24th hearing. I hope that the lawyers here and Ms. Burke will communicate to those who are not here and unable to hear my words. I find it to be a good day, and I am pleased that things were possible. I am pleased by the prospect that we can get some help from the University of Michigan, from Wayne State University, and from Michigan State University.
I think that while we are doing that, and I intend to have the lawyers stay around for a few minutes after we adjourn today so we can talk about what I intend to do with regard to that, that we ought to be looking for the quality assurance person that we have been so concerned about. Here is the ideal place to find a quality assurance person; and I hope that we can do that as well in our recruiting efforts, Ms. Burke, and others. And I am pleased that the State is willing to cooperate with me in this regard. Well, there are some other issues that concern the Court, and the Court wanted to get to today, and simply did not. Particularly am I concerned about the fire safety, the fire safety issue, and I had hoped that we would be able to get to it today. We did not get to it today.
So what I am going to do is, if I can find all of my notes, is the following: I stated in my opinion of August 29th that the parties and amici should be prepared to discuss future scheduling of a compliance hearing and/or other means for assessing the defendants' level of compliance with the terms of the Consent Decree, the State Plan for Compliance, and the Stipulation. The Court believes that it would be better to hold a series of one to two-day hearings on specific issues as opposed to the four or five-day hearing on all of the issues. I think this format will be more manageable and would allow me to focus on specific problems, specific areas. In particular, I see a need to examine the areas of fire safety and sanitation, safety and hygiene. Defendants filed a motion on September 29th, less than a month ago, for permission to modify certain parts of the state plan as they relate to fire safety. The Court recognizes the basis for the defendants' request, but believes that it must be judged in the context of the defendants' efforts to maintain an adequate level of fire safety *1025 today at the institutions. I therefore believe that we need, and I am going to order, a mini-hearing of two days on fire safety before I will turn my attention to the defendants' pending motion.
The times that I selected during the recess for this hearing are January 15th and January 16th, 1987. That is a Thursday and Friday. I have cleared those dates with Dr. Benton, and they are acceptable to him. I am ordering him, however, to accelerate the Independent Experts' report with regard to the fire safety issue, so that we will have something, all of us, to go on when we have that hearing. If the parties wish to submit any further written communications with regard to the fire safety issue, I already have a lot of submissions, and those submissions are due by January 2nd, 1987. I also want by January 2nd the parties to indicate to the Court what witnesses they intend to produce with regard to the fire safety issue. I am prepared after that to submit to the parties I will give you some proposed dates with regard to the other issues.
ORDER OF OCTOBER 29, 1986 PURGING DEFENDANTS OF CONTEMPT
In accordance with the opinion rendered at the hearing held on October 24, 1986;
IT IS HEREBY ORDERED that the Court accepts defendants' Comprehensive Plan for Mental Health Services, as modified, clarified, etc., by the following: (a) the June 9, 1986 Implementation Schedule and Specification; (b) the representations defendants made in their July 17, 1986 response to the plaintiff's and amici's criticisms of their June 9th submission; (c) the representations defendants made in their response to the questions the Court posed in its order of August 29, 1986; and (d) the representations defendants made at the hearing held on October 24, 1986, as the plan required by Section II.H.4 of the State Plan for Compliance and the other applicable orders of the Court;
IT IS FURTHER ORDERED that the Court accepts this plan subject to the qualifications stated at the hearing;
IT IS FURTHER ORDERED that defendants have purged themselves of contempt in accordance with the Court's Order of May 9, 1986;
IT IS FURTHER ORDERED that the Court shall conduct a hearing on Fire Safety on January 15 and January 16, 1987, to begin at 9:00 a.m. on each day; plaintiff and defendants shall submit whatever further written information they wish on this issue to the Court by January 2, 1987; amici shall file their written submission by January 9, 1987; the parties and amici shall file their witness lists by January 2, 1987.
OPINION AND ORDER OF JANUARY 29, 1987 ENFORCING THE FIRE SAFETY PROVISIONS OF THE CONSENT DECREE, THE STATE PLAN FOR COMPLIANCE, AND THE STIPULATION, AND GRANTING DEFENDANTS' REQUEST FOR MODIFICATION OF THE STATE PLAN
Introduction
On January 16, 1987 the Court held a hearing on defendants' efforts to comply with the fire safety requirements of the Consent Decree, the State Plan for Compliance, and the Stipulation. The Court considered two issues concerning those requirements: (1) whether defendants were, in general, complying with them; and (2) whether it should grant defendants' September 29, 1986 Request for Modification of the State Plan, and thereby excuse defendants' failure to have complied with several of the fire safety requirements. In developing the following opinion and the accompanying order, the Court considered the entire record of this case, and in particular the following evidence, which was prepared specifically for the January 16th hearing: (1) the January 1987 Report of the Independent Expert, which is entitled Compliance Evaluation of Fire Safety Provisions; (2) the testimony the Independent Expert, Dr. F. Warren Benton, presented at the hearing; (3) the testimony defendants' witnesses, George Walter and *1026 Richard Hinds, presented at the hearing; (4) the testimony plaintiffs' expert witness, George Gray, presented at the hearing; (5) defendants' exhibit 1, which they introduced at the hearing; and (6) plaintiff's exhibits 1, 2, and 3, which were also introduced at the hearing. The Court stated at the conclusion of the hearing that it would take defendants' Request for Modification of the State Plan and defendants' efforts to comply with the fire safety requirements of the decree documents under advisement, and issue a written opinion and order.
As I will discuss in the following opinion, the Court finds that defendants are substantially not in compliance with the fire safety requirements of the decree documents. Defendants' noncompliance not only violates their solemn agreement with the plaintiff and the Court, as embodied in the Consent Decree, the State Plan for Compliance, and the Stipulation, to remedy dangerous conditions of confinement at the decree institutions, but also presents a serious risk of harm to the physical safety of the inmates confined at those institutions. The Court therefore reluctantly concludes that it must take significant action, as embodied in the order accompanying this opinion, to ensure that all of the defendants do everything within their power to fulfill their commitments to the plaintiff and the Court. As the Court informed the parties at the start of the hearing, it believes that defendants bear the burden of explaining four issues: (1) why they have failed to meet all of the applicable fire safety deadlines; (2) why the Court should in effect excuse their noncompliance and allow them yet more time to meet those requirements; (3) what assurances can they offer that they will in fact meet their new dates; and (4) what can they do to promptly enhance operational fire safety to mitigate the extended period of physical risk to the inmates that their request will cause. Before discussing these issues, defendants' compliance efforts, and defendants' Request for Modification of the State Plan, the Court will briefly discuss the history of this case regarding fire safety. I believe that this discussion will help to put current matters in the proper perspective.
Background
The Court record shows that the events that led to the filing of this action began on October 9, 1981, when the United States sent William G. Milliken, who at that time was the governor of the State of Michigan, a letter announcing its intention to commence an investigation into conditions of confinement at the State Prison of Southern Michigan, the Michigan Reformatory, and the Marquette Branch Prison, pursuant to its authority under the Civil Rights of Institutionalized Persons Act of 1980. Attorneys for the plaintiff met with the Governor and other state officials on October 29, 1981 to discuss the scope of the investigation and other related matters. Between November 2, 1981 and April 4, 1982 plaintiff conducted six expert tours of the subject institutions, reviewed numerous official documents, and interviewed many witnesses. With regard to fire safety, a Mr. Jay Farbstein toured the institutions between March 29, 1982 and May 4, 1982 on plaintiff's behalf. Pages five through twenty-three of Mr. Farbstein's report on this tour, which deal with fire and life safety, make for some very interesting reading. J. Farbstein, Report to the US Department of Justice Civil Rights Division on Life Safety, Architectural and Environmental Conditions in Three Michigan Prisons, attached as part of exh. A. to Plaintiff's Feb. 24, 1984 Memorandum in Support of Proposed Consent Decree [hereinafter cited as "Farbstein Report"]. I think that it is proper for the Court to quote some portions of Mr. Farbstein's report at this time, to illustrate the seriousness of the fire safety issue:
Correctional institutions are prone to very serious fire dangers. Because of open grills and bars, smoke can travel freely from one area to another. Since inmates are confined and are not free to remove themselves from exposures to heat or smoke, they are dependent for protection on the structure and for evacuation on the staff.
Studies have shown that [it] is usually the toxic products of combustion which *1027 cause the most serious injury. Relatively few inmates actually burn to death, while many are overcome and killed from inhaling smoke and fumes.
When fires erupt, they test both the ability of the structure to resist flame and smoke spread, and of the staff to control the fire and, if necessary, to release and safely evacuate the inmates. Under these highly stressful circumstances, even well meaning staff often fail with tragic consequences.
Farbstein Report at 5-6. Mr. Farbstein had many specific criticisms of fire safety at the subject institutions:
In general, provision for the protection of life from fire and smoke are appallingly deficient in the institutions visited. With the exception of certain essentially brand new facilities ... or facilities which are administered with a degree of independence ... there appears to be very little regard for life safety at these institutions.
Not only are the facilities entirely outmoded with respect to provision of exists, smoke enclosures, unlocking systems, marking of exits, and other physical facility issues, but of equal concern is the total inadequacy of planning and operations to cope with fire safety.
The only fire and life safety features commonly (though not universally) found throughout the institutions are fire extinguishers and emergency lighting.
[With regard to facility issues], Due to the size and design of most cell blocks, there are far too many inmates contained within each "smoke enclosure." From 300 to 500 inmates in each of the larger blocks are exposed to the hazards of their co-inhabitants in a situation where smoke can flow freely from one cell to another through bars and grills. No smoke evacuation system was observed in any of these blocks. Nor was any of the blocks equipped with sprinklers.
Due to outmoded locking systems, it would take staff an inordinantly long time to unlock the cells. Some staff would have to unlock the individual cell doors of an entire tier ... while others would have to operate four gang locks on each of five tiers.... The exit ways (consisting of passages, stairs, and doorways) are totally inadequate for the number of people they serve....
Not only are exit ways far too narrow, but the distance from many living areas to the point of exit from their smoke enclosure are much too great.
In addition a number of living areas have only one means of egress for their inmates, rather than meeting the requirement of two remote exits. If the one path of exit were blocked, many inmates would find no alternative and be stranded in an exposed and dangerous location....
Exit ways are almost universally unmarked, while they are required to have permanently illuminated exit signs.... There is an almost universal lack of smoke and/or heat detectors and of fire alarms which are necessary for the early detection and notification of emergencies. Nor are there automatic linkages to the local fire departments.
Farbstein Report at 8-10 (emphases in original). Similar criticisms are enumerated in the remainder of the report. The Court realizes that defendants have cured some of many of the problems Mr. Farbstein identified in his report and recognize their obligation to attack the remainder of them. I read these excerpts primarily to illustrate defendants' awareness of the fire safety problems at the subject institutions, and the serious risk of harm those problems pose to the inmates. I note, however, that defendants' Request for Modification of the State Plan directly implicates some of the more serious problems Mr. Farbstein identified in his report: such as not having ganglocks for all cells, not having two remote exits with appropriate doors, not having appropriate separations between smoke enclosures, not having sprinkler systems, and not having appropriate exit and directional signs.
On October 29, 1982 plaintiff officially notified defendants of its conclusion that at the subject institutions it had discovered what it believed "to be a pattern or practice *1028 of egregious or flagrant conditions that are subjecting the prisoners incarcerated in each facility to grievious harm in violation of their Eighth Amendment rights." Letter of October 29, 1982 from Wm. Bradford Reynolds to Governor Milliken, attached as ex. B to plaintiff's February 24, 1984 Memorandum in Support of Proposed Consent Decree. Plaintiff had the following to say with regard to fire safety:
... Our life safety expert cautions that inadequacies in these prisons' provisions for fire safety threaten a disaster as major as any seen in a correctional facility. For example, facilities often lack necessary smoke separations, smoke detectors, alarms, remote exits, illuminated exit signs, posted evacuation procedures, and appropriate cell locking mechanisms. Fire safety and suppression equipment is inadequate, and professional inspections are too infrequent, if they occur at all. Staff training and staff and inmate drilling are inadequate, and certain areas often are understaffed or unstaffed at certain times, presenting a severe fire hazard to inmates locked in their cells. In addition, there is a critical overall lack of professional supervision of maintenance, sanitation, and fire safety.
Letter at 3. The parties thereafter undertook extensive negotiations to attempt to resolve the problems plaintiff had identified. By January, 1984 the parties had reached a formal agreement on those problems. The Court notes that the parties reached this agreement over two years after plaintiff had initially informed defendants of its concerns, and after over one year of extensive negotiations. These negotiations presumably involved the highest levels of state government.
On January 18, 1984 plaintiff filed its complaint against defendants, and concurrently filed a motion for the Court to accept the parties' negotiated settlement, which consisted of a five page Consent Decree and a forty-nine page Plan for the Michigan State Prisons. I note here that the following persons and entities were named as defendants in the complaint: State of Michigan; Governor Blanchard; the Michigan Corrections Commission, and its members; the Michigan Department of Corrections; Perry M. Johnson, the director of the MDOC; Robert Brown, Jr., the Deputy Director of the MDOC; Dale Foltz, Warden at the SPSM; John Jabe, Warden at the Michigan Reformatory; Theodore Koehler, Warden at Marquette; John Prelesnik, the Administrator at the Reception and Guidance Center; and Jack Bergman, the Administrator at the Michigan Intensive Programming Center. Of course, new persons have been substituted for some of the individual defendants. See FRCP 25(d). Following several hearings, the Court finally approved entry of the Consent Decree and the State Plan for Compliance on July 13, 1984. These two documents contain many requirements concerning fire safety, which I will not enumerate at this time.
On June 21, 1985 the Court approved a stipulation between the parties that extended certain of the defendants' fire safety compliance deadlines. Specifically, defendants received extended deadlines for the installation of fire extinguishers; for the clearing of exitways; for the storage of combustibles; for the establishment of emergency evacuation procedures; and for the development and implementation of a program for the inspection of smoke detection units. In March and April of 1986, the Court held its first compliance hearing in this case. A major concern at the hearing was defendants' compliance with fire safety requirements. The Court stated in its July 22nd opinion on the hearing that the area of fire safety "[i]n many respects ... presents the most troublesome problems of noncompliance." The Court proceeded to discuss several deficiencies in defendants' performance that it will not repeat. I do note, however, two statements that are currently applicable: (1) that "[t]here are ... several ... crucial ... areas in fire safety in which compliance is due this month, July, 1986, and yet defendants do not expect to be in compliance"; and (2) that "[g]iven the serious danger that fire poses in the prison setting, the Court expects defendants to make these requirements one of their top priorities." Opinion of July 22, *1029 1986 at 4. The areas of fire safety in which compliance was due in July, 1986 are adequately listed and discussed in the Independent Expert's February, 1986 report and the transcript of the compliance hearing. See February 1986 Report at 72-76; Transcript at 467-92. In the order accompanying the July 22nd decision, the Court ordered defendants "[t]o report, by October 1, 1986, on their efforts to implement the requirements with respect to which compliance was due July, 1986." Order of July 22, 1986, ¶ I.J.
In accordance with the Court's order, on September 29, 1986 defendants submitted a report, of sorts, on their efforts to implement the requirements for which compliance was due in July, 1986. The "report" consisted of defendants' Request for Modification of the State Plan. In this request, defendants ask the Court to modify the State Plan, and, as plaintiff and the amici point out, by implication the Consent Decree as well, to extend significantly the deadlines for completion of most of the fire safety construction projects that are required by section III, subsection E, of the State Plan for Compliance. These projects constitute items number 22 through 37 of the Independent Experts' February, 1986 and January, 1987 reports on fire safety. The Independent Experts' January, 1987 report indicates that defendants are in complete compliance with respect to only two of these sixteen items: (1) the breathing apparatus requirement (number 26); and (2) the requirement of a fire separation for the control room at MIPC, which is now part of the MBP (number 30). On all of the other requirements, defendants are in either partial or complete noncompliance. The Court will briefly discuss six of these requirements to illustrate its perception of the problem.
The State Plan obligated defendants to provide within two years of the date of the plan's approval, or by July, 1986, "in each cellblock or other housing area and in each activity, work, or indoor recreation area (including farm basement), no fewer than two operational remote exits with doors properly swinging to facilitate the flow of egress." Mr. Farbstein discussed the critical nature of this requirement in his 1982 report. Defendants asked in their September request that the Court extend the deadline for completion of this requirement until November 1, 1987 for MBP and MR, and until December 15, 1987 for SPSM. In his February, 1986 report the Independent Expert stated that defendants' staff had informed him during a tour of the institutions that January 1, 1987 was a realistic deadline for meeting that requirement. Report at 72. At the March compliance hearing, Mr. George Walter testified that October, 1986 was a possible deadline for that requirement. Transcript at 473. He also stated that defendants were proceeding with the work, and that "[t]here is not a tremendous amount of work on second exits, actually." Id. at 472-73. Indeed, in their request for an extension, defendants note that "[t]he work basically involves installation of new second exit doors and changes in the `swing' of existing doors." Defendants' Memorandum in Support of Request for Modification at 4 [hereinafter "Defendants' Memorandum"].
Despite the apparent ease of this project, however, defendants have given the Court, either directly or indirectly, at least five different deadlines for its completion: the original date of July, 1986; the date of January 1, 1987 mentioned in the IEs' report; Mr. Walter's date of October, 1986; the dates listed in the Request for Modification; and, most recently, the dates listed in Defendants' Exhibit 1, introduced at the hearing. The latter set of dates indicate that defendants will not achieve full compliance until November, 1988, despite the dangers posed by the lack of second exits and doors that do not swing in the right direction.
A second requirement is for the installation of ganglocks in each housing unit "that will allow for the remote immediate unlocking of cells." This requirement applies at the SPSM Central Complex. Defendants estimated a completion date of December 15, 1987, almost one and one-half years behind schedule, in their Request, and a completion date of February 28, 1988 at the hearing. Defendants' noncompliance *1030 exists, and they request a significant extension of the June, 1986 deadline, despite the presumed importance of being able to release inmates quickly in a fire emergency.
A third requirement is for the enclosure of certain stairwells with two-hour fire resistant construction. The Independent Experts' January, 1987 report indicates that MR and MBP, but not SPSM, are in compliance with this requirement. Defendants estimated in their Modification Request that SPSM will not be in compliance until September 15, 1987, over one year behind schedule, and stated at the hearing that they will not complete construction until March 1, 1988, even though the project involves only three stairwells within the SPSM complex. Defendants' Memorandum at 6.
The fourth requirement is for the installation of magnetic hold-open devices on fire and smoke doors in areas where those doors are kept open. The IE indicates that defendants are in complete noncompliance on this requirement. At the hearing, defendants requested extensions for compliance until June 1, 1987 for MBP, July 1, 1987 for MR, and an undetermined date for SPSM. All three proposed extensions far exceed the July, 1986 deadline for what appears to the Court to be a relatively simple project.
The fifth requirement is for the provision of automatic sprinklers in the basement of buildings 18 and 19 at SPSM, the Central Complex. Defendants stated at the hearing that they anticipate that the sprinklers will be installed by no later than November 1, 1987. As I discuss later in this opinion, however, they have failed to provide the Court with any acceptable explanation of why this specific project is more than one year behind schedule.
The final requirement is for the provision of smoke barriers between sleeping areas and other areas in dormitories and farm barracks. Defendants state that MR and MBP should be in compliance on this requirement, but request an extension until March 1, 1988 for the Wing Farm at SPSM. Once again, the Court does not completely understand why defendants have failed to complete this project which does not appear to be too difficult on time.
The Court could continue this discussion for some time drawing from both the Independent Experts' report and the defendants' December, 1986 Semi-Annual Compliance Report but will save further discussion for later in this opinion. I believe that what I have said suffices to establish the basis for the Court's concern at the hearing. Before further discussing defendants' compliance efforts and Request for Modification of the State Plan, I note that in their December report defendants indicated for the requirements that were due in July, 1986 that the Court had already granted the requested extensions on that deadline, as opposed to marking themselves as being noncompliant. So that the record is clear for whomever may bother to read those reports, defendants should have marked themselves as not being in compliance on those requirements rather than as having been granted extensions on the compliance deadline.
Analysis of Defendants' Compliance Efforts
The Court will divide the fire safety requirements of the decree documents into two major areas, and will discuss separately defendants' efforts to comply with each set of requirements. The first area covers the capital or physical improvement projects defendants have agreed to perform. This in general covers items number thirteen (13), fourteen (14), and nineteen (19) through thirty-seven (37) of the Independent Experts' report. The second area covers what I will broadly describe as the operational aspects of defendants' fire safety commitments. This area covers the remaining items in the Independent Experts' report. The Independent Experts thoroughly discussed all of the fire safety requirements in their report.
Before discussing specific fire safety requirements, the Court observes that the parties and the amici agree with most of the Independent Experts' findings and conclusions regarding fire safety. Thus, with *1031 the exception of the following findings and conclusions, the Court adopts the Independent Experts' January, 1987 Compliance Evaluation of Fire Safety Provisions as a complete and accurate representation of defendants' compliance efforts. There are seven items that require some clarification and modification.
The first is item number 12, which concerns fire extinguishers. The rating for MBP-Inside for this item should be changed from a two (2) to a four (4). The second is item number fourteen (14), which concerns fixed dry chemical fire extinguishers in kitchen range hoods. The rating for SPSM, central complex, should be changed from a one (1) to a five (5), and the rating for SPSM, south complex, should be changed from a one (1) to a four (4). Third, the ratings for SPSM central complex, north complex, and the reception and guidance center for item number twenty-eight (28), which requires the installation of fire separation between cellblocks, should be changed from sixes (6s) to ones (1s). Defendants apparently installed fire separators, but they were inadequate and the project needs to be redone. The fourth change is that since MR now has a fire safety officer, the ratings for items number two (2) and ten (10) for that institution should be changed from ones (1s) to sixes (6s).
The fifth change concerns the Independent Experts' determination that the SPSM central complex and reception and guidance center are deficient in keeping their exits clear and in storing combustibles. I find based on George Gray's report and testimony at the hearing and on defendants' representations at the hearing that the defendants are in compliance with items number three and four of the Independent Experts' report at the CC and the R & GC. The ratings for those items at these institutions thus should be changed from twos (2s) to fives (5s) or sixes (6s). The sixth change concerns the Independent Experts' finding that SPSM, Central Complex is not in compliance with item number 21, which concerns magnetic hold-open devices for doors. Defendants explained at the hearing that the old infirmary is no longer being used as a hospital, and that the hold-open devices accordingly are not required since the doors are no longer held open. The rating for this item therefore should be changed from a two (2) to a six (6). The final change concerns defendants' attempts to implement items number twenty (20) and twenty-one (21), which concern ceiling tiles, at the MBP. Defendants explained at the hearing that the areas that still need work are in classrooms and the visiting area, not in inmate housing or exit areas. The Court believes that the one (1) rating should remain since defendants are not in full compliance with this requirement, but does not consider this noncompliance to pose a serious threat to inmate safety.
With the exception of these seven changes, the parties and amici agree with and accept the Independent Experts' findings and conclusions. Anyone reading the Independent Experts' report will realize that by accepting these findings and conclusions, defendants have acknowledged that they have failed to comply with many fire safety requirements, and in particular with the requirements that fall within the area of capital improvement projects. The Court does not believe it needs to discuss every aspect of defendants' noncompliance. Rather, I will simply discuss (1) some of the highlights to illustrate the seriousness of the situation, (2) defendants' explanations for why they are not in compliance with the fire safety requirements, and (3) the measures the Court can take to ensure compliance in the future.
A. Capital or Physical Improvement Projects
With regard to the capital of physical improvement projects defendants have agreed to perform, the Court discussed the highlights of defendants' noncompliance in this area earlier in this opinion. I would add only that the testimony at the March, 1986 compliance hearing, defendants' request for modification of the state plan, the Independent Experts' January, 1987 report, the exhibit defendants introduced at the January 16th hearing, and the testimony of defendants' witnesses at that hearing *1032 evince defendants' repeated and continuing inability to complete these projects in a timely manner. Rather than further detail the extent of defendants' noncompliance, the Court believes it would be more profitable to examine defendants' responses to the first two of the four questions the Court posed at the beginning of this opinion: (1) why have defendants failed to meet the fire safety construction deadlines; and (2) why should the Court excuse their noncompliance and allow them more time to complete the construction projects.
Defendants' primary witness on these two issues was George Walter, who is the supervisor and coordinator for the fire safety construction projects, or at least for those aspects of the projects over which the Department of Corrections has control. In very detailed and extensive testimony on the physical improvement projects, Mr. Walter weaved a sad, and judicially frustrating, tale of bureaucratic incompetence and lack of foresight and initiative at the highest levels of state government. Mr. Walter started his testimony by informing the Court that most of the extensions that defendants had requested in their September 29th Request for Modification of the State Plan which defendants had formulated only after an extensive meeting with the plaintiff and its expert witness in July, 1986 were inadequate, and that defendants needed yet more time to complete their projects. He then introduced a new schedule of completion dates, this time including interim dates for significant steps in the planning, approval, and construction process. See Defendants' Ex. 1. Mr. Walter testified that these new completion dates and interim deadlines represented the best effort of department personnel to provide the Court with an accurate schedule with which defendants could comply.
Mr. Walter then proceeded to discuss the requested extensions, explaining why the projects had not proceeded on schedule and how the Department planned to attempt to ensure that the new deadlines will be met. The Court does not believe it needs to repeat Mr. Walter's testimony in detail. I will, rather, discuss three aspects of Mr. Walter's explanations that I find significant.
First, Mr. Walter's testimony revealed a significant and serious lack of concern about and coordination of these fire safety projects within state government. There was a significant lack of foresight on the part of defendant the State of Michigan on how it was going to complete the physical improvement projects it had agreed to in the State Plan for Compliance. This lack of foresight existed despite the fact that defendants had agreed to the Consent Decree and the State Plan for Compliance only after extensive negotiations with the plaintiff that had presumably involved the highest levels of state government. It is also clear that completion of these projects has not been a major, or even a significant, priority of the State. This lack of concern, foresight, and priority is apparent in the lack of inter-agency cooperation on these fire safety projects. Mr. Walter testified, for example, to several instances of where progress on a project has been delayed pending another agency's review of a certain aspect of the project. This lack of concern, foresight, and priority is also evident in defendants' failure to anticipate the need to comply with Department of Labor and State Fire Marshal regulations for projects costing more than $15,000, and in their failure to expedite compliance with those regulations once they became aware of them.
Second, the Court believes that the Department of Corrections itself has failed to make completion of these construction projects a priority, and has failed to coordinate its efforts to complete them. With regard to the first factor, the Court notes that the Department has failed to staff Mr. Walter's office adequately, has burdened Mr. Walter with many assignments that have adversely affected his ability to coordinate the construction projects, and, perhaps most egregiously, failed to cover for Mr. Walter's responsibilities when he was out for fourteen (14) weeks with a back injury. With regard to the second factor, Mr. Walter testified to two instances one involving a study of electrical generator capacity at the subject institutions and the *1033 other involving a decision by the Fire Marshal to reject a smoke detection or smoke barrier project of where he was not timely informed of decisions, actions, or lack of action that adversely affected defendants' ability to complete the construction projects. The Court believes that Mr. Walter and other individuals within the Department are making a good faith and concerted effort to complete the projects. Any task of this magnitude, however, requires more than individual effort. Such tasks also test organizational ability, dedication, and competence, which appear to be lacking in this instance.
Finally, it appears that defendants may have tried to accomplish too much at once, without adequately thinking through and examining the ramifications of attempting to plan and to complete several major construction projects simultaneously. Mr. Walter testified, for example, to instances of where defendants' decision to lump several projects together, and to schedule sequential completion times for projects, caused some delay.
Defendants thus attempted to answer the Court's first two inquiries. Because of Mr. Walter's testimony, the Court understands why defendants have failed to meet the deadlines for the physical improvement projects. Defendants have not, however, answered the second inquiry to the Court's satisfaction, and, relatedly and perhaps more importantly, failed to address the third inquiry adequately at the hearing. With regard to the second inquiry, defendants' justifications indicate that they have failed to devote their full efforts toward complying with the fire safety requirements of the decree documents. As I stated previously, some individuals within the Department of Corrections have made significant efforts to bring the Department into compliance. The Court heard little or no evidence, however, that would indicate that all of the defendants in particular Governor Blanchard, the State itself, including all of its departments and agencies, and the Corrections Commission have made significant efforts to ensure compliance with the fire safety requirements. I thus fail to detect a reasonable excuse for defendants' noncompliance. The Court believes, moreover, that a solid, good faith effort by all of the defendants is a sina qua non for an unfettered extension of the compliance deadlines. Cf. Kendrick v. Bland, 740 F.2d 432, 439 (6th Cir.1984) (indicating that a court should consider a defendant's "cooperation and good faith" in fashioning a remedy for a constitutional violation).
More importantly, defendants failed at the hearing to offer the Court any reasonable assurances that they will in fact meet the new completion dates that they have proposed. Mr. Walter offered two reasons why the Court should have some confidence in those dates: (1) defendants formulated them after extensive consultation with all of the relevant department personnel; and (2) he will personally do his best to see that defendants meet the new deadlines. Mr. Walter acknowledged, however, that he could not offer the Court an iron-clad guarantee, primarily for two reasons: (1) he has no control over the actions of other state departments and agencies; and (2) there are some factors, such as whether materials will be available on the open market when defendants need them, that are beyond even the State's control.
Defendants do not, of course, have much control over the second factor. They do, however, have control over the first factor, and Mr. Walter admitted toward the end of his testimony that the involvement of some person with the ability to coordinate the efforts and responsibilities of all of the state departments and agencies involved in the construction projects would aid defendants' compliance efforts significantly. The Independent Experts and plaintiff's expert, Mr. Gray, similarly indicated that someone in a position "organizationally superior to the agencies normally involved in the conduct of" the fire safety projects should become involved in the compliance effort. See Independent Experts' January, 1987 Report at 4; Testimony of George Gray (indicating that the Court should consider whether defendants have made the projects a priority and whether someone with sufficient authority is administering them, and *1034 stating in particular that the Executive Department of the State must make the projects a State priority and not simply a MDOC priority). Defendants failed, though, to offer the Court any suggestions in this regard.
As the Court stated at the conclusion of the hearing, it is an easy finding to make that defendants are not in compliance with the requirements of the decree documents that concern physical improvements in fire safety at the subject institutions. The issue of how to remedy this noncompliance is a more difficult one to resolve, and is intimately connected to defendants' Request for Modification of the State Plan. The Court thus will defer any further discussion of that issue until it discusses defendants' Request.
B. Fire Safety Operations
The Court was interested in two issues concerning fire safety operations at the January 16th hearing. First, it wanted to know if defendants are in compliance with the fire safety operations requirements of the decree documents. Second, as the Court indicated earlier in this opinion, it wanted to know what steps defendants could promptly take to enhance their fire safety operations and thus to mitigate the extended period of physical risk to which their inability to complete the physical construction projects will subject the inmates. With regard to the first issue, once again, the parties and amici agree that the Independent Experts' report accurately assesses defendants' compliance efforts. The Court thus will not discuss the level of defendants' compliance with the fire safety operations requirements, other than to make a couple of important observations.
First, defendants' compliance with those requirements, although much better than their compliance with the physical construction project requirements, is far from complete. I note in particular defendants' failure to conduct monthly inspections at SPSM; their failure to ensure that combustibles are removed from all cell bars at SPSM-CC; their failure to store oxygen bottles properly at the Welding School at SPSM; and their failure to implement in full the fire safety operations plan at SPSM and MR. With regard to the last issue, Mr. Gray testified that some of the posted evacuation diagrams are inaccurate and misleading and that the Scott Air Pack training at the MR and the SPSM obviously is inadequate; he noted that out of four guards he asked to demonstrate the pack, only one, who happened to be a trainer, was able to use it properly. The Court realizes, however, that defendants acknowledge their shortcomings in this area and are taking steps to remedy their noncompliance.
The real issue the Court must address in this area is whether there are steps defendants can take to enhance immediately their level of compliance in order to mitigate the danger posed by their failure to have completed the construction projects on time. The Independent Experts observed in their report, and Mr. Richard Hinds testified at the hearing, that defendants are taking a step in that direction by having Mr. Hinds work to coordinate fire safety operations at the three subject institutions, and thus to enhance the effectiveness of the fire safety operations plan. After the hearing, moreover, defendants submitted a document indicating that they are creating a full-time fire safety coordinator position. The Court agrees that this is a step in the right direction, and will discuss later what it wants defendants to do to mitigate the harm posed by their construction delays. For now, I will simply note that once again defendants offered little, if anything, at the hearing in response to the Court's fourth inquiry of what can be done to enhance operational fire safety immediately.
Defendants' Request for Modification and Remedies for Noncompliance
Defendants' failure to have complied with the physical construction fire safety requirements of the decree documents has put the Court in a difficult position. Given that defendants do not dispute their ultimate obligation to complete the construction projects, the standards the Court discussed at the hearing for modifying a consent *1035 decree are not completely relevant, although they do underscore the heavy burden defendants bear in convincing the Court that their requested modifications of the Consent Decree and the State Plan either are not inconsistent with the purposes of the Consent Decree, or if they are, that they can mitigate those inconsistencies by other means. The issue before the Court, rather, is what steps it should take to ensure that defendants come into compliance with the fire safety requirements of the decree documents as soon as possible. This issue breaks down into three subissues: (1) whether defendants' new proposed deadlines are realistic; (2) what actions the Court should take to ensure that the defendants adhere to those deadlines; and (3) what actions it should take to mitigate the danger posed by defendants' requested extensions. Again, I emphasize that in addressing these issues, my primary concern is to fullfill, both in the short-term and in the long-term, the intent of the Consent Decree and the State Plan for Compliance to ensure the fire safety of inmates at the subject institutions. See New York State Association for Retarded Children, Inc. v. Carey, 706 F.2d 956, 967-71 (2d Cir.1983), cert. denied, 464 U.S. 915, 104 S. Ct. 277, 78 L. Ed. 2d 257 (1984).
With regard to the first issue, the Court finds, based on Mr. Walter's testimony at the hearing, that the final and intermediate deadlines defendants propose in exhibit 1 are realistic. It also finds for the record that defendants have missed the July, 1986 deadline and cannot meet the deadlines they proposed in their September 29th Request for Modification of the State Plan. The Court therefore, with great reluctance and regret, accepts defendants' proposed extensions in the completion deadlines for the fire safety construction projects as set forth in the document defendants introduced at the January 16th hearing as Defendants' Exhibit 1. I accordingly will enter an order granting defendants' September 29, 1986 Request for Modification of the State Plan, as that Request is modified by Exhibit 1. I accept, moreover, not only the final completion dates listed in exhibit 1, but also all of the interim deadlines for completion of relevant phases of the construction projects that defendants list in that exhibit. The Court therefore expects and orders defendants to comply with all of both the interim and the final deadlines given in Exhibit 1.
With regard to the second issue, the Court believes that the Independent Experts, Mr. Walter, and Mr. Gray have suggested a primary part of the answer to it, i.e., all of the defendants in this case must make completion of the fire safety construction projects one of their primary concerns and they must place in control of those projects a person with the authority to monitor and to administer them effectively. This monitor, coordinator, or administrator whatever job title defendants wish to give her or him must be in a position where she or he will be kept fully informed of any and all actions taken toward the completion of the projects and of any and all slippages that occur in the project timetables, and must have the authority to coordinate the activities of all of the relevant state agencies and departments and otherwise to ensure that any slippages are remedied immediately and that the projects are completed on time. Defendants' continuing inability to complete these projects leaves the Court with little choice but to order that they take stronger measures. They also seem to be unable to comply with general requirements, and require specific guidance on their compliance obligations.
With regard to the third issue, the Court believes that defendants need to take measures to ensure that the operational aspects of their fire safety program are sufficiently effective to mitigate the danger posed by the construction delays. The Independent Experts' Report, the testimony of Mr. Gray, and the testimony of Mr. Hinds indicate that the appointment of a full-time coordinator to oversee and to ensure compliance with the fire safety operations requirements of the decree documents would be an effective way to achieve that goal. The Court notes that defendants have indicated that they intend to appoint such a coordinator. The Court *1036 also believes that defendants are fully capable of implementing in full all of the fire safety requirements that do not require physical improvements in the subject institutions.
In the order accompanying this opinion, therefore, I will require defendants to take appropriate actions, including the appointment of a full-time fire safety coordinator for the consent decree institutions, to ensure immediate and full compliance with the operational fire safety requirements of the decree documents. To the extent that any portion of my order may require defendants to take actions beyond those required by the decree documents, I believe that it is fully justified because of the extensive extensions defendants request in their construction deadlines and of the need to mitigate the danger that such extensions pose to the safety of the inmates confined at the subject institutions. With regard to this last statement, I note that Mr. Farbstein identified in his report the critical need for defendants to upgrade the physical structure of the decree institutions and that Mr. Gray recognized at the hearing the relationship between physical improvements at the decree institutions and operational fire safety.
In accordance with the above opinion, the Court will enter an order (1) finding defendants not to be in compliance with the fire safety requirements of the decree documents as set forth in the Independent Experts' January, 1987 Report and in this opinion, (2) granting defendants' modified September 29, 1986 Request for Modification of the State Plan, and (3) requiring defendants to take certain actions to ensure that they will come into compliance with the fire safety requirements of the decree documents as soon as possible. The Court realizes that defendants have made substantial improvements in the area of fire safety. I also realize that running a large prison system, particularly while concurrently attempting to implement extensive reforms, is a complex and difficult task. For that reason, the Supreme Court and the Sixth Circuit have consistently admonished district courts to act cautiously in requiring state officials to remedy unconstitutional conditions of confinement. See Kendrick, 740 F.2d at 438. Yet a Court is not required to stand by while a defendant violates the terms of a consent decree, particularly when the decree was entered after extensive negotiations between the parties, such defendant consistently has been unable to achieve compliance, and such defendant offers no compelling justification for its noncompliance. As the Sixth Circuit stated in Kendrick, "[i]n the event that the state fails to avail itself of the deferential opportunity to correct its constitutional defects with minimal federal intrusion, the federal court may implement a more intrusive remedy." Id. at 439.
In short, there is a limit to the deference a federal court must accord state officials. In the case of fire safety, I believe that I have just about exhausted my patience and deference. The testimony offered at the March, 1986 compliance hearing, the Independent Experts' January, 1987 Report, and the testimony offered at the January 16, 1987 compliance hearing demonstrate that the defendants which include the State of Michigan and the governor of the State of Michigan have not put forth their best efforts to bring the subject institutions into compliance with the fire safety requirements of the decree documents. The Court therefore believes that it is amply justified in entering the attached order.
ORDER
In accordance with the opinion dated January 29, 1987;
IT IS HEREBY ORDERED that the Court finds defendants not to be in compliance with the fire safety requirements of the Consent Decree, the State Plan for Compliance, and the Stipulation, as identified and discussed in the Independent Experts' January 1987 Compliance and Evaluation of Fire Safety Provisions and in the Court's opinion;
IT IS FURTHER ORDERED that the Court GRANTS defendants' September 29, 1986 Request for Modification of the State Plan, as modified by the document defendants introduced as Defendants' Exhibit 1 at *1037 the January 16th hearing, and ACCEPTS and ORDERS defendants to comply in full with the interim and final deadlines for completion of the fire safety construction projects that are contained in exhibit 1;
IT IS FURTHER ORDERED that within fifteen (15) days of the date of this opinion and order, Governor Blanchard, as a named defendant and as the chief executive officer of defendant the State of Michigan, shall designate an official who is or shall be located within the Office of the Governor, and who has or will have regular access to the Governor, to monitor the progress of the fire safety construction projects, to ensure the proper coordination, management, and execution of the work on those projects, and to report to the Court in the event that any of the interim and final deadlines set forth in Defendants' Exhibit 1, and adopted as an order of the Court, are not met. In such an event, the report from this official must (1) explain the reason(s) for the delay, (2) explain what actions defendants, including the State of Michigan and the Governor, have taken to correct the deficiency(ies), and (3) demonstrate why defendants should not be held in contempt of court and assessed monetary and other coercive sanctions for failing to meet the deadline(s). This official shall file an appropriate report with the Court within ten (10) days of any missed interim or final deadline;
IT IS FURTHER ORDERED that within ninety (90) days of the date of this opinion and order, the Department of Corrections shall implement and provide to the Court an enhanced fire safety operations program to mitigate the dangers and risks associated with the construction delays that defendants have proposed and the Court has accepted. This program must include, at a minimum, the following:
1. The appointment of a full-time coordinator of fire safety for the Consent Decree Institutions, who shall be approved by the Court;
2. The establishment of two full-time positions to assist the coordinator. One of these positions may be used to provide clerical support for the coordinator; the other position shall be used to provide a person to assist the coordinator in the development and implementation of procedures and training programs;
3. The provision of adequate staff at each Consent Decree Institution to implement the operational fire safety provisions of the Consent Decree, the State Plan for Compliance, the Stipulation, and, in particular, the Fire Safety Operations Plan. This staff shall include not less than one fire safety officer and one clerk for the Michigan Reformatory, one fire safety officer and one clerk for the Marquette Branch Prison, and one fire safety officer and one clerk for each of the three complexes North, South, and Central at the State Prison for Southern Michigan, at Jackson. Defendants shall authorize these positions within sixty (60) days of the date of this opinion and order, and shall fill these positions within ninety (90) days of the date of this opinion and order;
IT IS FURTHER ORDERED that defendants may request the Court to dissolve the above provisions concerning a project coordinator and an enhanced fire safety operations program once they have completed all of their fire safety construction projects and can demonstrate to the satisfaction of the Court that they possess the capacity to ensure continuing compliance with the fire safety requirements of the Consent Decree, the State Plan for Compliance, including the Fire Safety Operations Plan, and the Stipulation;
IT IS FURTHER ORDERED that the Court will conduct a compliance hearing on Medical Care, excluding Mental Health issues, on March 27, 1987, and will conduct a hearing on Sanitation, Safety, and Hygiene on May 15, 1987.
OPINION OF MARCH 27, 1987 MODIFYING IN PART THE PARTIES' STIPULATION REGARDING MENTAL HEALTH CARE
At the October 24, 1986 mental health hearing the parties presented and placed on the record certain stipulations they had agreed to concerning defendants' mental health obligations. See Transcript of Oct. *1038 24, 1986 Hrg. at 4-19. On January 16, 1987 the parties submitted a written version of their stipulations. On January 26, 1987 amici filed certain objections to the written stipulations. Independent of the amici's concerns, the Court has its own problems with the parties' stipulations. Rather than having the parties file amended stipulations, the Court will modify their January 16, 1987 stipulations as follows:
1. In-patient psychiatric hospital beds
The Court has accepted defendants' use of the sixty (60) beds operated by the Department of Mental Health at the Ypsilanti Forensic Center to meet the one percent (1%) requirement the Court adopted in its May 9, 1986 Order. This acceptance, however, does not foreclose proof that to maintain an adequate level of mental health care, the Department must maintain sufficient unrestricted, actually used, bedspace to service one percent (1%) of the inmate population.
2. Dormitory Space at the Riverside Comprehensive Care Unit
The Court shares amici's concern over this issue. The Court wants to receive defendants' proposed clinical criteria for placement in the dormitory, plaintiff's critique of those criteria, and defendants' final criteria, if I do not already have them. Beyond that, the Court for the present will trust that defendants will not place inappropriate inmates in the dormitory area.
3. Staffing Ratios
The Court accepts defendants' November 26, 1986 staffing ratios as a starting point. I note that these ratios may be altered during the JCAH accreditation process. See Order of May 9, 1986, ¶ 3.e). The Court's understanding is that JCAH accreditation for the Comprehensive Care Units is a compliance issue, at least for the present, and not a voluntary goal of the defendants. In its May 9th Order, the Court adopted the Independent Experts' recommendation that defendants seek some form of external accreditation or licensure of the CCUs. Defendants accepted this recommendation in their June 6th submission, and more specifically agreed to pursue JCAH accreditation in their October 14th response to the Court's August 29, 1986 questions. Implementation Schedule and Specification, § 3c., # 8 & § 3e); Defendants' Response of Oct. 14, 1986 at 4-5; see also Transcript of Oct. 24, 1986 Hrg. at 6 & 19-20. The Court specifically relied on this acceptance of JCAH accreditation in accepting defendants' Comprehensive Plan for Mental Health Services and in finding that defendants had purged themselves of contempt. Id. at 83 (relying on representations defendants had made "in their response to the questions the Court posed in its order of August 29, 1986" and on the "representations defendants made at this hearing"); Order of October 29, 1986. The Court thus believes that JCAH accreditation is a compliance issue at this time, and that such accreditation may affect defendants' staffing levels.
4. Treatment of the Developmentally Disabled
The Court does not interpret the parties' stipulation as supplanting either recommendation number seven (7) of the Independent Experts' April, 1986 Report or paragraph 3.d)7. of the Court's May 9, 1986 Order.
ORDER
In accordance with the opinion dated March 27, 1987;
IT IS HEREBY ORDERED that the parties' January 16, 1987 Stipulations Clarifying Comprehensive Mental Health Plan and the Implementation Schedule are MODIFIED.
SHOW CAUSE ORDER OF APRIL 1, 1987 REGARDING OVERCROWDING
In accordance with the oral opinion rendered at the hearing held on March 27, 1987;
IT IS HEREBY ORDERED that the Court shall conduct a hearing on overcrowding and sanitation, safety, and hygiene on May 20, 21, and 22, 1987 in Kalamazoo, Michigan;
IT IS FURTHER ORDERED that at such hearing, defendants shall be prepared *1039 to show cause why they should not be held in contempt of Court for failure to comply with Section D.5. of the Consent Decree, section IV.A. of the State Plan for Compliance, paragraphs I.4. and II.D.1 of the June 21, 1985 Stipulation, and section V.A. of the Court's July 22, 1986 Order;
IT IS FURTHER ORDERED that the parties and amici shall be prepared to discuss the effects of overcrowding on the following requirements of the Consent Decree and the State Plan for Compliance:
provisions relating to adequate staffing;
provisions relating to surveillance and security;
provisions relating to the delivery of required programs and services;
provisions relating to out-of-cell activities;
provisions relating to the appropriate assignment of inmates to housing units;
provisions assuring that inmates likely to be violent will not be assigned to dormitory units;
provisions relating to sanitation; and
provisions relating to physical and operational fire protection.
The parties and amici shall also consider and be prepared to discuss conditions that existed prior to the hearing dates as well as conditions that can be anticipated based on defendants' plans, projects, and projections.
IT IS FURTHER ORDERED that the parties shall submit any reports of their expert witnesses to the Court, the Independent Expert, the other party, and amici by May 11, 1987.
OPINION OF MAY 8, 1987 ENFORCING THE MEDICAL CARE REQUIREMENTS OF THE CONSENT DECREE, THE STATE PLAN FOR COMPLIANCE, AND THE STIPULATION
On March 27, 1987 the Court held a hearing on defendants' efforts to comply with the medical care requirements of the Consent Decree, the State Plan for Compliance, and the Stipulation, which I shall collectively refer to as the decree documents. The following persons testified at the hearing: the Court's Independent Expert, Dr. F. Warren Benton; plaintiff's expert witness, Dr. Charles A. Braslow, M.D.; Defendants' Consent Decree Coordinator, Ms. Luella Burke; the Director of Nursing at the Marquette Branch Prison ("MBP"), Ms. Gloria Anthony; the Director of Nursing at the State Prison of Southern Michigan ("SPSM"), Ms. Jacklyn Tietlebaum; and the Medical Director at the SPSM, Dr. Silas Norman, M.D. The Court accepted into evidence as exhibits Dr. Braslow's curriculum vitae, Dr. Braslow's expert report, and defendants' March 25, 1987 Status Report on Mental Health Staffing. The Court also has considered the Independent Experts' March 1987 Compliance Evaluation of Medical Services Provisions, which the parties and amici have had an opportunity to review and to challenge, in preparing this opinion. The following opinion constitutes my findings of facts and conclusions of law concerning defendants' efforts to comply with the medical care provisions of the decree documents, excluding those provisions relating to mental health care, which will be the subject of a separate hearing later this year.
In general, the Court believes that the Independent Expert's report and the evidence introduced at the March 27th hearing established that defendants' efforts to comply with the medical care requirements of the decree documents are succeeding. I observe in particular that defendants are committed to providing medical care to the inmate population that is consistent with contemporary professional standards. They have, for example, opened a new hospital at the SPSM that impressed plaintiff's expert, and are implementing an annual health care audit program that should allow them to discover, and presumably to correct, any deficiencies that may exist in their system of health care. Defendants are, moreover, aware of most, if not all, of the defects in their health care system and are taking actions to remedy them. In this opinion, the Court will discuss (1) the defects or problem areas that the Independent Expert and the persons who testified at the hearing have identified in defendants' *1040 health care system and (2) what it believes defendants either have agreed to do or should do to remedy those defects and problem areas.
1. Surgical Backlog at SPSM
The Court understands that due (at least in part) to the delayed opening of the surgical unit at the SPSM hospital, there currently is a backlog of inmates waiting to undergo surgery at the hospital. The IEs' report and the testimony at the hearing indicate that the surgical unit is now open and that the hospital staff is beginning to reduce the backlog. I did not, moreover, receive any evidence indicating that the backlog has caused or is causing inmates to suffer any significant harm. The Court therefore simply will note this as a potential problem area and request defendants to include a special notation on their July, 1987 semi-annual compliance report concerning the status of the surgical backlog, if any, at the SPSM hospital.
2. 24-Hour On-Site Physician Coverage at the SPSM Hospital
Defendants currently do not have a physician at the SPSM hospital twenty-four (24) hours a day. Dr. Norman testified that on the night shift, a physician's assistant ("PA") is on duty and a physician is on-call. He also stated that a hospital emergency room is only five minutes away and that defendants are prepared to transport any inmate in need of emergency treatment that either the PA or the on-call physician cannot provide. Dr. Norman in addition testified that defendants have no plans to provide 24-hour on-site coverage at the hospital, even though Dr. Lynn Green, the Deputy Director of the Bureau of Health Care Services, testified at the March, 1986 compliance hearing that defendants planned to provide such coverage once they had sufficient staff. Transcript of Compliance Hearing, vol. III, at 535. Dr. Braslow testified, moreover, that given the size of the institution at SPSM and the presence of an operating room and an emergency room at the hospital, there should be 24-hour on-site physician coverage.
The Court does not believe it has sufficient evidence before it at this time to determine whether it should require defendants to provide 24-hour on-site physician coverage at the SPSM hospital. The Consent Decree requires defendants to provide "adequate medical ... services ... to respond to the serious needs of the prisoners," para. A, while the State Plan provides that "the services and practices" at the new SPSM hospital "shall be no less than those that would be required for licensure in a non-prison setting." Sec. II.B.1. Defendants argue that their current system is adequate because during the night shift they have a PA on duty, a physician on call, and a hospital emergency room only five minutes away. Dr. Braslow believes that defendants should have 24-hour physician coverage on the hospital premises, and Dr. Green appears committed to that goal. The Court, however, received little evidence indicating that the lack of 24-hour on-site coverage in this context either poses a specific risk of harm to the inmates or falls below contemporary professional standards. I therefore will leave the situation as it is for the moment, with the provisos that defendants should clarify at the May 20th hearing whether they intend to provide 24-hour on-site coverage once all of the physician positions at the SPSM are filled, and that plaintiff is free to move the Court to require defendants to provide 24-hour on-site physician coverage at the hospital.
3. Limitations on Surgery at the SPSM Hospital
The SPSM Hospital apparently is not equipped to perform certain kinds of operations, particularly those that require invasive surgical techniques, complex orthopedic procedures, and neurosurgical procedures. Defendants indicated at the hearing that they recognize the hospital's surgical limitations and will not attempt to perform operations for which the hospital is not properly equipped.
4. Respiratory Therapy Staff at the SPSM Hospital
Dr. Braslow recommended in his report that defendants acquire respiratory therapy *1041 staff "as a necessary service for management of general anesthesia patients and patients with chronic lung disease." Report at 3. Dr. Norman testified that defendants currently have qualified staff to deliver respiratory therapy at the hospital, but the Court understands that defendants have agreed to establish a respiratory care unit at the hospital anyway. The Court accepts defendants' agreement, subject to the proviso that plaintiff must approve the care unit.
5. Medical Examination Room at the Michigan Reformatory Dormitory
Dr. Braslow stated in his report that the examining room at the Michigan Reformatory ("MR") Dormitory is quite small and is employed for on-site sick call evaluations only once a week. At other times during the week, sick inmates must walk to the medical care area inside the reformatory. Dr. Braslow believes that "[e]xpansion of the size and utilization of the medical area within the dorm would be helpful in improving access to medical care of the inmates housed there." Report at 3. Dr. Braslow testified at the hearing that the sick call area is minimally adequate, but also observed that several inmates perceived difficulty in getting to the main institution for medical care; he noted in particular that several inmates who apparently were unable to walk to the main institution also were unable to secure transportation there.
The Court is concerned about this situation, but is unsure where to place it in the context of the Consent Decree and the State Plan. The State Plan requires defendants to upgrade the examination room at the dormitory, which they apparently have done, and to ensure that the room complies "with minimal professional standards as necessary to protect inmate health." Sec. II.B.2. The Plan's provision on access to health care states, moreover, that defendants will "make adequate provisions to assure that inmates will be transported as needed from housing or other areas to the health care facility." Sec. II.D.1. I interpret this provision as requiring defendants to transport inmates in need of care who are unable to walk from the dormitory to the main institution at the MR. As an alternative, defendants may wish to expand their on-site sick call evaluations at the dormitory. Regardless of how defendants choose to proceed, the Court believes that they are required to ensure that inmates unable to transport themselves are provided with appropriate access to a medical care area.
6. Prompt Medical Treatment for Transferees
The amici expressed concern that inmates in need of treatment are not being transported quickly enough to institutions where they can receive appropriate care. This problem appears to be particularly acute at the MBP, where inmates in need of treatment often must be transported to the SPSM. In his report, the Independent Expert reported instances of where inmates had to wait three or four weeks to be transported to the SPSM for treatment. The Court received no evidence, however, indicating that inmates are suffering from this transportation delay. I expect, moreover, that defendants are adhering to my July 15, 1986 interpretation of the Consent Decree and the State Plan as requiring them not to "allow security or transportation concerns to override a medical determination that a particular inmate is in need of prompt treatment and must be transported to an appropriate facility." Opinion of July 15, 1986 at 3. I therefore will take no action on this issue at this time.
7. Involvement of LPNs in Triage Decisions
The Independent Experts, plaintiff, and amici expressed concern that Licensed Practical Nurses ("LPNs") may be performing triage decisions. The State Plan provides that "uncredentialed staff are not to make triage decisions." Sec. II.E.2. The concern apparently is that LPNs constitute "uncredentialed staff" where triage decisions are concerned. The Court is unable to resolve this issue at this time for two reasons. First, I am not sure whether LPNs actually are performing "triage" decisions. Second, I have an insufficient factual basis for determining whether LPNs *1042 are qualified to perform triage decisions. I note that defendants have provided the Court with a description of the LPNs' duties. The Court therefore will await further comments, arguments, and evidence from the parties and amici before taking any action on this issue. At the present, I am not convinced that there exists a problem I need to resolve, and thus will take no action.
8. Chronic Disease Index Plan
The State Plan requires defendants to establish a "professionally designed plan ... to provide for systematic follow-up care for inmates with serious chronic disease." Sec. II.G. At the MR and the MBP, defendants have established a computerbased chronic disease index and are in full compliance with the State Plan's requirement. At the SPSM, however, defendants still are operating a manual card system and apparently are having difficulty keeping the system up-to-date. The Independent Experts indicate that the system was not in operation from May, 1986 until October, 1986, but that as of February, 1987 it was back in operation and in the process of being updated.
The Court believes that a manual system probably is adequate to satisfy the State Plan's requirement, provided the system is maintained and serviced on a regular basis. I expect that defendants will continue to maintain the system at the SPSM that they had reactivated in October, 1986, and expect them to report to the Court immediately any breakdowns in that system.
9. Staffing at the MR and the SPSM
It is clear from the Independent Experts' report and from the testimony at the hearing that defendants continue to experience significant staffing problems at the SPSM and, to a lesser extent, at the MR. The primary staffing problem at the MR appears to be a vacancy in a physician's position. Dr. Braslow indicated that defendants should fill that position as soon as possible. The Court, however, heard no evidence that the vacant position creates an unacceptable risk of harm to the inmates. I thus urge defendants to fill that position as soon as possible, but will not establish a specific deadline for them to do so.
The staffing problem at the SPSM is more severe. It appears that defendants' staffing plan for this institution is adequate, provided all of the positions are filled. I thus agree with defendants that the Independent Experts' 2 rating for the SPSM hospital for requirement number 43 reflects defendants' failure to have filled all of the positions rather than a defect in the staffing plan itself. Dr. Braslow did testify at the hearing, however, that the SPSM's current level of staffing is not minimally adequate. Dr. Norman disagreed with that assessment, stating that the current vacancies do not affect defendants' ability to deliver health care services.
The Court does not believe that the situation at the SPSM is sufficiently serious that it should, as amici suggest, require defendants to contract out for services. I am concerned, however, about the vacancies' effect on defendants' ability to provide an adequate level of health care to the inmates. I believe that defendants should fill all vacant medical care positions at the SPSM by July 24, 1987. On that date, defendants shall file a status report on their efforts with the Court. If positions remain vacant, defendants shall describe their efforts to fill those positions and shall provide a detailed assessment of the effect of such vacancies on their ability to comply with the medical care requirements of the decree documents. Plaintiff and amici shall then have until August 10, 1987 to respond to defendants' submission, and to suggest actions the Court should take to alleviate or to remedy any problems. Defendants shall have until August 17, 1987 to reply to the plaintiff's and amici's submissions.
10. Medical Administrative Audits
The State Plan requires defendants to conduct annual administrative audits "by Health Care administrators and persons qualified in various specialized support services to assess the organization of health services, quality and quantity of health care staff, adequacy of policies and procedures, processing of grievances, and inmate *1043 perception of quality of care." Sec. II.M.2. The Independent Experts question whether these audits assess "inmate perception of quality of care." Defendants acknowledge that they have failed to consider this factor, but agree to do so in the future, such as by examining inmate grievances on the health care system. The Court accepts defendants' agreement and expects them to follow through on it.
11. Problem-Oriented Health Record System
The State Plan requires defendants to maintain their modified problem-oriented health record format. The Independent Experts' report suggests that defendants have had difficulty keeping the records at the SPSM up-to-date. The Court believes that defendants recognize the problem and are taking steps to cure it, and therefore will take no action on the issue at this time.
12. Access to Health Care
The most contentious issue at the hearing concerned defendants' system for providing inmates access to the health care system. The Consent Decree requires defendants to provide "inmate access to adequate medical facilities and medical staffing including licensed, qualified physicians and psychiatrists, dentists, registered nurses, and such other medical personnel as defendants deem necessary." Para. A.1. The State Plan establishes more detailed access to health care requirements:
1. Within 60 days from the date of the implementation of this plan the Department will submit a plan pursuant to decree Section VI on Plans, by which all inmates will be afforded daily access on each weekday to a sick call register. Any inmate who registers for sick call shall within 24 hours receive an appointment to be seen by medical staff within a reasonable time given the particular medical complaint, except those registering on a Friday may have their appointments determined on the following Monday. Inmates shall be afforded direct access to a register, which health care staff then collect. The register shall provide an opportunity to request care for serious medical, serious mental health, and serious dental conditions.
The Department's plan for direct access to health care must provide at least equivalent daily access on weekdays for inmates in segregation units (administrative, punitive, protective) and MIPC. While the procedure may differ for such inmates, the access may be no less.
Sec. II.D.1.
Defendants promptly submitted a plan for access to health care that, in general, establishes a kite system for such access. An inmate in need of care or treatment fills out a kite (a piece of paper) on which he discusses his need and symptoms. The kites are collected on a daily basis, on weekdays, and are reviewed by qualified health care personnel who establish an appointment for the inmate to see a health care specialist. The inmate generally receives an appointment to see someone on the next sick-call day for his living unit. The health care personnel base their appointment decisions, in general, on a review of the inmate's kite, sound professional judgment, and applicable procedures and protocols. They are instructed to take further action to investigate the inmate's complaint if necessary, and are instructed to respond promptly to complaints that require emergency treatment. Depending on the institution, sick-call days are held one to three days a week. In addition, licensed health care providers, who appear to be predominately registered nurses ("RNs"), make daily rounds in the segregation units. Finally, at the SPSM defendants conduct daily afternoon drop-in clinics for inmates who cannot or do not wish to wait for the weekly sick-call day. To access this system, however, an inmate must request a correctional officer for permission to go to the clinic. The kite sick-call system by comparison bypasses the correctional officers.
In his report, Dr. Braslow expresses concern about defendants' system of access to health care. He states that in his opinion, "the major purpose of the plan, which is to allow inmates `to receive health-related services at other times' than once or twice *1044 weekly, has not been accomplished as the plan has been implemented at MBP and SPSM." Report at 5. Dr. Braslow's primary concern is that defendants base their judgment on when an inmate will actually see a health care professional on a paper review of the kite rather than on an actual physical examination of the inmate. He believes that "information on a kite may be insufficient for determining the true urgency of a medical condition, even for those with `sound professional judgment.'" Id. Dr. Braslow argues that defendants should conduct daily sick-calls, at least on weekdays, as is done at the MR. He also observes that although health care personnel make daily rounds in the segregation units, care must be taken to ensure that the rounds are not rushed, but rather are "conducted thoroughly and carefully in order to pick up signs of significant medical or mental disorders." Id. at 6.
Dr. Braslow reiterated these concerns at the hearing. He testified that the current system is not adequate to meet inmates' health needs, primarily because under the current kite system inmates enjoy no direct contact with the medical staff on a daily basis. He acknowledged that defendants could adequately screen medical emergencies based on a review of a kite if inmates could adequately describe their conditions and the severity of their symptoms. He doubted, however, inmates' ability to do so, and also expressed doubt as to whether defendants could develop a protocol that would allow for proper triaging based on a review of a kite. He believes that one cannot diagnose certain conditions based simply on a kite. Dr. Braslow in addition testified that the afternoon drop-in clinic system defendants operate at the SPSM is not an adequate substitute for daily sick-calls because it involves the correctional officers, who must allow an inmate out of his cell to attend the clinic.
Defendants' witnesses, Ms. Anthony, Ms. Tietlebaum, and Dr. Norman, testified that the present kite system is adequate to provide inmate access to the health care system. The Court did not, however, find their testimony sufficient to allay the concerns that Dr. Braslow, who has had extensive experience in the provision of medical care in prison settings, expressed in his report and at the hearing. Ms. Anthony testified that she has had no experience reviewing kites and that she had based her testimony on oral orders she had given her nurses and on what she expects them to do. I also observe that she testified that implementation of a daily sick-call system probably would not increase the number of patients seen or otherwise make much of a difference. Ms. Tietlebaum had been in her present position for only six months and acknowledged that defendants base their handling of an inmate's request for treatment largely on the information he has supplied on his kite. Finally, Dr. Norman is not directly involved on a daily basis with the review of kites, but rather performs more an oversight function. The Court accepts Dr. Norman's testimony that in a significant number of cases, a health care professional can adequately judge the severity of an illness on a review of the kite. I also credit Dr. Braslow's testimony, however, that in an equally significant number of cases a personal examination of the inmate is required, and I cannot accept Dr. Norman's assertion that defendants generally are able to judge when further investigation is needed. In short, the Court finds that defendants' present system of access to health care in the general population units at the MR and the SPSM is inadequate to protect the inmates from a serious risk of harm.
The Court also is unsure about the adequacy of defendants' system for providing regular access to health care to inmates confined in segregation units. Defendants apparently have sick-call in the segregation units once a week. As I stated previously, however, defendants also have health care professionals make daily rounds in the segregation units. Dr. Braslow indicated both in his report and in his testimony at the hearing that these daily rounds could comprise sick-call visits if the persons making such rounds are thorough and are able to identify inmates with problems and to provide them with adequate care. He also indicated that although RNs trained in *1045 physical assessment could fulfill this function, he would prefer to see PAs making the rounds.
In accordance with the above discussion of this issue, the Court will enter an order requiring defendants to produce a revised system of inmate access to health care at the MBP and the SPSM that is acceptable to the plaintiff. The parties shall have thirty (30) days from the date of this Opinion to negotiate an improved system. If they are unable to agree on a revised system within that time frame, they shall submit their proposals to the Court along with supporting memoranda, and the Court will issue a written decision on the issue. I note here that my strong preference, based on Dr. Braslow's testimony at the hearing, is for a system that allows inmates daily direct physical access to the health care system (on weekdays) (i.e., daily sick-calls), and that provides for an increased percentage of PAs to perform these sick-calls, particularly in the segregation units. In the segregation units, however, the Court will accept assessments performed by RNs who are adequately trained in that function.
There remain for discussion two additional issues the Court had asked defendants to report on at the March 27th hearing. The first concerns the overcrowding problem at the decree institutions. The Court has scheduled a hearing on this issue for this month and thus will not discuss it further here. Second, the Court had asked defendants to report on their efforts to fill the vacant mental health care positions. Defendants submitted at the hearing an extensive status report that details the actions they have taken to recruit qualified mental health care personnel. I see little that I can do in this area at the present, although I strongly believe that defendants must fill those vacancies as soon as possible. It appears that defendants are making a good faith attempt to do just that, and the Court hopes that their efforts are soon rewarded.
ORDER
In accordance with the Opinion dated May 7, 1987;
IT IS HEREBY ORDERED that defendants shall clarify at the May 20, 1987 compliance hearing whether they intend to provide twenty-four (24) hour, on-site physician coverage at the SPSM hospital;
IT IS FURTHER ORDERED that defendants shall file a status report on July 24, 1987 on their efforts to fill the medical care vacancies at the SPSM; they should make every possible, reasonable, effort to fill those vacancies by that date;
IT IS FURTHER ORDERED that defendants shall have thirty (30) days from the date of the Court's opinion to produce a revised system for inmate access to health care at the MBP and the SPSM that is acceptable to the plaintiff.
BENCH OPINION OF MAY 21, 1987 ISSUING TEMPORARY RESTRAINING ORDER REGARDING OVERCROWDING AT THE RECEPTION AND GUIDANCE CENTER
Have to take a roll. Is everybody here? The Court has heard two full days of testimony. It is 7:00 o'clock at night. There is going to be more testimony tomorrow, and I will have to make my final decision obviously based upon what I hear tomorrow, compared to what I have already heard. What I am going to say now, I am going to modify possibly or possibly I am not. The Court issues a restraining order at this very moment; and the restraining order is that no prisoners shall be received at the Reception and Guidance Center from this moment, 7:00 o'clock tonight, until at least Tuesday, May 26th, which is the day after the holiday. I may modify that. I may extend it. I may abolish it after I have heard testimony tomorrow. I make this ruling, this restraint, based upon the extreme risk of harm as presented to this Court so far in two days, on the testimony of Mr. Gray, the testimony of Mr. Miller, and especially the testimony of Deputy Director Bolden and all that he said just today, including his being extremely embarrassed by the risk of harm to inmates both from a fire safety point of view, from a sanitation point of view, and from a general *1046 risk of harm point of view. Perhaps I will wish to modify that when I hear more testimony tomorrow from the State. That is to be seen.
The Court observes in making this restraint at this time, and in considering a much broader restraint tomorrow, the following matters of concern: First, as I indicated at the outset of this hearing, Section D.5 of the Consent Decree provides that the defendants shall "Take each and every step within their lawful authority to eliminate overcrowding." That section further provides that the defendants shall have complied with this requirement as appears in the State Plan no later than June 30th, 1985. Second, Section IV.A of the State Plan for Compliance additionally says: "This plan assumes continuation of single celling. Dormitories shall provide 60 square feet per inmate. Space requirements for administrative segregation are set out elsewhere herein." Thirdly, and a scant nine days before that deadline was to be met, a Stipulation was filed with this Court on June 21st, 1985, wherein the parties recognized that, "the minimum security dorms are presently overcrowded, are not providing 60 square feet per inmate according to the State Plan requirement."
The Stipulation provided, however, the State with an extension of time to comply with the State Plan, provided the State should keep the Court and the United States fully informed as to the State's effort to reduce overcrowding, and extended the time until June 30th, 1986 to comply with Section D.5 of the Consent Decree which had not been complied with by the State. The reason that the Court signed the Stipulation, it was because it had, or the order, accepted it, was because it had no real choice, and the Court was concerned that the situation be consistent with Rhodes v. Chapman, 452 U.S. 337, 101 S. Ct. 2392, 69 L. Ed. 2d 59 (1981), as I indicated before.
Fourth, by Section V.A of the Court's July 22nd, 1986 order which, there was another request to extend past the June, 1986 period of time and submitted to the Court as I recall in about April or May as the deadline was again running out the Court ordered by July 22nd when the second deadline had been missed, ordered the defendants to implement their plan and decrease overcrowding and end inappropriate security classification placements, and provide the Court and amici with tri-monthly progress reports based upon the testimony of Ms. Burke who assured the Court that regardless of population influxes and classifications there would be no problem in meeting the deadline on January 1st, 1987. As everybody knows, it has not been met. So the Court obviously is considering at this moment issuing an order tomorrowas a possibility of immediately ordering compliance. I mean they are five months past the third missed requirement. We have heard all of the reasons why that has happened. The record is full of that.
The Court also believes that it doesn't understand from the defendants' lawyers what it is being asked to do. I have the vague feeling after the last two days and after reading materials that the lawyers are asking me to do something, but they won't tell me what it is. Maybe they are saying to me they want another motion to modify. If they want a motion to modify and I don't know that they do. I don't know that they are prepared at this moment to tell me they should do so by 9:00 o'clock tomorrow morning; and if they do so by 9:00 o'clock tomorrow morning they should tell me what it is the State defendants propose to do about the overcrowding situation. It should incorporate, this motion if it is made, a plan they may wish to propose. I don't know. And that was clear from my asking Mr. Kime whether or not a plan was being presented to me or not. And in that motion, if a motion is to be filed, they should tell me what sanctions should be applied by this Court if the State defendants again fail to comply with now what I would call the fourth plan, or the fourth attempt. It is not really the fourth plan. It is the third plan. But it is the fourth new deadline date if there is a new deadline date. I don't know if there is. I am not aware what I am being asked to do. I want to know about that at 9 o'clock tomorrow morning. If the State defendants *1047 wish to produce a witness, that is fine. I will take anything. I don't understand what is happening. If not, the Court will just act as if there were no motion to modify, and I think that to act accordingly I have got to clear out the consent institutions from overcrowding tomorrow. I don't see any other alternatives. That includes more than the Reception and Guidance Center. It includes everything in the Consent Decree institutions.
As I say, I have the feeling that somebody is asking me to do something, but nobody is looking me in the face and nobody is saying this is what we want you to do. If there is something that somebody wants me to do, I want to know about it. That is the State's assignment anyway. I am not sure what I need to say to Justice tonight.
MAY 22, 1987 TEMPORARY RESTRAINING ORDER
In accordance with the bench opinion rendered at the hearing held on Thursday, May 21, 1987;
IT IS HEREBY ORDERED that defendants, their officers, agents, and employees, and anyone else hearing or receiving notice of this Order, is enjoined and restrained from receiving any new inmates into the Reception and Guidance Center at the State Prison of Southern Michigan, Jackson, Michigan, from seven o'clock in the evening Thursday, May 21, 1987 until six o'clock in the morning Tuesday, May 26, 1987.
BENCH OPINION OF MAY 22, 1987 FINDING THE DEFENDANTS IN CONTEMPT OF COURT REGARDING OVERCROWDING AT THE DECREE INSTITUTIONS
The Court is going to address, I guess, three or four issues: First, the situation at the Reception and Guidance Center; Secondly, the situation with overcrowding at the Decree Institutions; Thirdly, the motion made by the defendants this morning; and, Fourthly and finally, some matters about posttrial submissions and a mental health hearing that I will set today.
Starting first with the Reception and Guidance Center situation, the Court has heard a lot of testimony over the past three days. As everyone in this room knows by now, one of the Court's primary concerns is with the situation at the Reception and Guidance Center at the State Prison of Southern Michigan at Jackson. Last night, of course, I found the situation of the inmates on the base at the Reception and Guidance Center sufficiently serious to justify an order forbidding the defendants from admitting any inmates into the institution until at least Tuesday, May 26th, 1987. I withheld taking any further action, however, to allow defendants more time to justify their position on the placement of inmates on the base at the Reception and Guidance Center. Having heard additional testimony from defendants this morning, I remain convinced that inmates cannot be housed at all on the base at the Reception and Guidance Center, and can be housed on the bulkheads at the Reception and Guidance Center only as a temporaryi.e., not lasting more than three days emergency measure to handle unexpected influxes of inmates.
Deputy Director Bolden testified for defendants that putting inmates on the base and in the bulkheads at the Reception and Guidance Center was the last thing that he wanted to do, but that he had no choice because there simply was and is no room in the system to put the inmates who have completed the intake process. He also stated that to eliminate overcrowding at the Reception and Guidance Center simply would create equally serious problems elsewhere in the system. I am convinced, however, that the situation at the Reception and Guidance Center is sufficiently serious that I would be abdicating my judicial responsibility, and could easily have a significant disaster on my hands, if I were to do nothing about it. I am further convinced that defendants have a multitude of options regarding the placement of inmates that would not create serious problems elsewhere in the system, or elsewhere in our society.
I think that just a brief summary of the testimony will suffice to illustrate the seriousness *1048 of the situation at the Reception and Guidance Center. Mr. George Gray, plaintiff's fire safety expert, states in his report that the stairways at the Reception and Guidance Center are inadequate to handle the inmate population, particularly when the bunks in the bulkheads partially block the stairs. He also criticized defendants for having an insufficient number of exits and for having extensive travel distances to the exits. More importantly, he had the following to say regarding the placement of bunk beds on the base of the institution. Quote: "Bunks beds at base are so crowded that in some cases they barely miss touching and would not permit access to the bed from either side. This creates a condition wherein an inadvertent or deliberately set fire could quickly ignite bedding and other inmate combustible materials and flash to adjacent and overhead material in such a way as to become quickly uncontrollable. A flash fire through this area would almost certainly cause a loss of life. The rapid generation of smoke and its rise within the block could catch many before they could get down and out. The few staff with air pacs could be so overwhelmed as to cause a real disaster. The typical arrangement of bunk beds with at least a three-foot spacing and inmate personal possessions in steel lockers disperses the combustibles in such a way that an incipient fire can probably be caught and dealt with. The crowding in this particular situation substantially defeats that probability." He concludes that, quote, "at cellblock 7, overcrowding does increase risk not only to the inmates housed above the normal capacity but also to the normal capacity population itself."
Mr. Gray's testimony was equally damning. He stated that the Reception and Guidance Center was seriously and dangerously overcrowded. He explained again the inadequate stairways, the bunks that are too close to the stairs, the dangers posed by the extremely long cellblock, and the special concerns posed by the bunk beds on the base. Mr. Gray concluded that in terms of fire safety, the Reception and Guidance Center was a hazardous situation that should be remedied immediately before a tragedy occurs.
Plaintiff's other expert witness, Mr. Miller, also noted the dangerous conditions that exist at the Reception and Guidance Center. He noted in his written report that no storage areas are available for the inmates' private possessions; that many inmates suffer from boredom and idleness; and that the, quote, "base dorm must be seen to be fully appreciated." I think Mr. Miller summed up his feelings in the following paragraph of the written report on page 9: "Many inmates have stretched an extra sheet or large plastic bag over the length of the top bunk as a defense against the `Jackson Air Force', i.e., the pigeons that infest the cellblock. This is not some inmate fable; walking around the upper tiers of the cellblock one encounters pigeons on patrols of their own, especially in the walkway behind the cells. Also, one can see the bird excreta on the sheets and bags stretched across the top bunks. In addition, the Jackson Air Force apparently will hold occasional maneuvers during mealtimes, resulting in the befouling of food on people's plates. Since the food is brought over from a main kitchen based on a definitive count, there are no extras available to replace portions on which the birds have left their mark. To say that this situation causes tension and unrest is to state it mildly. Being stuck on or immediately adjacent to one's bunk under such crowded, filthy conditions is untenable. Even though these people are convicted criminals, it is atrocious that any human being would be kept in such conditions. While not being a sanitarian, even I can readily see that such conditions are filthy and an abominable comment on the lengths to which the system is forced to go in an effort to cope with overcrowding. Even with the extra correctional officer staffing, one can only observe that these conditions are atrocious and cannot or should not be sustained as adequate housing. The base dorm should be closed. Even if the pigeon problem were to be resolved, there are still too many people packed into this area. In addition to the base dorm, inmates are also housed on the bulkheads on the third and *1049 fourth galleys. On each galley, one cell is kept open for use as a lavatory. On the day of my visit, neither cell had hot water. People stay on the bulkheads for two to three weeks and I seem to recall one man who had been there for two and one-half months. As with the base dorm, there is no furniture other than double bunks. Storage of personal property is a definite problem, when the inmates leave the bulkhead for showers, meals or outdoor exercise, their goods are at the mercy of the other inmates who use the stairways at either side of the bulkhead as their main mode of transit within the cellblock. Furthermore, several bunks are just too close to these stairways, if a quick evacuation of the upper galleys were necessary. Boredom, idleness and a total lack of privacy are the order of the day. The one saving grace that prevents major trouble is the placement of a correctional officer right in the middle of the base dorm with backup, if necessary, coming from the other officer stationed on that galley. Two major problems with this arrangement are the inherent opportunities for theft and the potentially negative impact on emergency evacuation."
Mr. Miller reiterated these concerns in his testimony at the hearing. He testified that out of the 550 to 600 prisons he has seen in this country, the Reception and Guidance Center was the worst in terms of the base dorm. He testified that the inmates confined in the base dorm are, quote, "very definitely exposed to harm as well as potential for harm," end quote, and that the base dorm, quote, "cannot be justified as housing for human beings." He strongly suggested that the Court close the base dorm forthwith, and concluded that conditions are so indefensible that the Court should close the base dorm regardless of the consequences elsewhere in the system.
The Court finds that defendants were unable to rebut this testimony, or the conclusions I should draw from it. Deputy Director Bolden admitted that defendants have a serious problem at the Reception and Guidance Center and stated that, testified actually, he was ashamed to hear Mr. Gray's and Mr. Miller's testimony regarding conditions there. Warden Jabe agreed that the base dorm should be closed although he thought that it did not have to be closed immediately. I note, however, that Warden Jabe is not a fire safety expert and has been at the SPSM only since May 1 or for 22 days maximum. Fire safety, moreover, is not the kind of situation where you may get a second chance to correct "management problems"; one disaster is enough. One disaster is the end. Mr. Camp agreed it was desirable to get inmates off the base and bulkheads, and the word "desirable" was the strongest statement that he would make about conditions at the institution, wherever they might occur.
I am, of course, pleased that the defendants have made an effort to clear out the Reception and Guidance Center base area and bulkhead area voluntarily today, although a little late, but the Court cannot do anything except order that it stays that way; and I return to the statement that I made at the start of this brief opinion, that is, that it would be an abdication of my judicial responsibility if I failed to take affirmative action regarding the base dorm in the Reception and Guidance Center. The record more than amply supports the complete closure of the dorm area. It also supports an order restricting use of the bulkhead areas to emergency, overflow type situations. As additional support for this action, if any is needed, I do not believe that closure of the base dorm will, as Mr. Bolden testified, simply create equally dangerous situations elsewhere in the system. I thus see no sense to waiting until sometime in June, as Mr. Bolden urges, to close the base dorm.
Specifically, the record indicates that there are at least five measures the defendants can take to relieve the overcrowding situation (I would note parenthetically, not only in the Reception and Guidance Center but throughout the Consent Decree institutions) that will not enhance the problems that exist elsewhere in the system and that are consistent with defendants' Consent Decree obligation to, quote, "take each and every step within their lawful authority to *1050 eliminate overcrowding." First, Governor Blanchard can invoke his powers under the Emergency Powers Act to reduce overcrowding in the system. Mr. Kime testified that use of the EPA could reduce the prison population by 500 to 600 inmates over the next two to three months. He also stated that the inmates who would be released are inmates who would be getting out on parole within the next three months in any event. The increased harm to the public thus should be minimal, if in fact any exists at all. In this regard, one will remember Mr. Kime's testimony as to the fact that since the EPA has not been used since 1984 and since the "bottom of the barrel" was being scraped then, that this would be one of the best times to use the EPA in the last seven years.
Secondly, Mr. Kime testified that well, I should say this. He indicated in his May 12th, 1987 memorandum to Luella Burke, and in his testimony yesterday, that the department could add 400 inmates to the Lakeland Correctional Facility immediately. The only barrier to placement of additional inmates in this facility appears to be an agreement Director Brown had made with the community that he would not place any more inmates there without the community's consent. The Court appreciates the department's desire to maintain good relations with the local communities and with neighbors of the system. This agreement, however, clearly does not bind Governor Blanchard, and it does not bind the legislature, both of whom I remind everyone are defendants in this action; and I do not believe that a community's wishes outweighs defendants' and the Court's obligation to ensure that the constitutional rights of the inmates are protected and that the Consent Decree is enforced.
Thirdly, defendants apparently can place about 56 additional inmates in the Macomb County Jail. The only barrier to this action appears to be the wishes of a local sheriff. Once again, the Court fails to see how a local sheriff can hamstring the defendants in this action, particularly the Governor of this State and the State legislature. It is difficult for me to see how his wishes can override defendants' obligation to implement the Consent Decree and the State Plan for Compliance and to protect the constitutional rights of the inmates.
Fourthly, defendants could reopen the farms at the State Prison of Southern Michigan. This would, of course, require legislative action. The State, however, including the legislature and the Governor, is a defendant in this action, and thus must, as an entity, abide by its constitutional and contractual obligations. There is, moreover, nothing in the record to indicate that to reopen the farms would create a danger that would outweigh the harm facing the inmates confined at the Reception and Guidance Center. Finally, the state legislature and the Governor could remove the population cap on the Dunes Correctional Facility. Deputy Director Bolden testified that without the legislative cap he could easily place additional prisoners in the facility without overcrowding it.
In accordance with the above discussion, the Court hereby finds defendants in contempt of Court, and specifically in contempt of my July 22nd, 1986 Order that they, quote, "implement their plan to decrease overcrowding and to end inappropriate security classification placements" end quote with regard to the situation at the Reception and Guidance Center at the State Prison of Southern Michigan, in Jackson. To purge themselves of this contempt citation, defendants shall remove all inmates from the base dormitory at the Reception and Guidance Center no later than May 26, 1987. In addition, they shall remove all inmates in the bulkheads by that date, and shall thereafter use the bulkheads only for short-term, emergency, overflow housing. Operationally, I mean by this to say that all the bulkheads shall be clear at least four days out of every seven days. In addition, defendants shall not double cell inmates at the Reception and Guidance Center to compensate for the closure of the base dorm and the limited closure of the bulkheads. In other words, by May 26, 1987 defendants shall be operating the Reception and Guidance Center at its rated capacity, and not more, with an *1051 exception for the limited allowable use of the bulkheads already discussed.
If defendants fail to take this action by May 26, 1987, they shall be subject to fines in the amount of $10,000 per day until compliance with the Court's order is achieved. They also, moreover, will be subject to a fine of $10,000 for every day the population at the Reception and Guidance Center exceeds the limitations set forth in this order. Furthermore, in addition to fines, if defendants fail to comply with the Court's order regarding the Reception and Guidance Center by May 26, 1987, they shall be enjoined from admitting any more inmates to that institution until they have achieved absolute, total compliance with this order.
No court likes to take action of this nature. In light of the testimony I have heard at this hearing, however, I am left with no choice. I again reiterate that the good faith of the defendants is not an issue here. What does appear to be an issue, however, is the continued failure of certain defendants specifically the Governor and the legislature to recognize that they too are defendants in this action. I find it absolutely incomprehensible, for example, that the legislature could be defeating its own plan to eliminate overcrowding by continuing legislative caps on the populations of institutions that apparently can accommodate additional inmates or by closing down the State Prison of Southern Michigan farms.
Thus end the comments that I wish to make about the Reception and Guidance Center.
The Court's interest in this show cause portion of the hearing regarding the overcrowding of the Decree institutions is as it always has been to ensure that the State lives up to its contractual obligations as those obligations appear in the Consent Decree and the State Plan for Compliance. I note here that the State first entered into these commitments on July 13th, 1984, nearly three years ago, but I also note that this followed a lengthy fact-finding and negotiation period with representatives from the Department of Justice of the United States. At that time, July 13th, 1984, the defendants agreed to, quote, "take each and every step within their lawful authority to eliminate overcrowding," end quote, at the Decree institutions by June 30, 1985. On June 21, 1985, a scant nine days before the deadline agreed to by the defendants, this requirement was extended for another year until July 30, 1986.
At the March, 1986 compliance hearing, the issue of overcrowding once again reared its ugly head. On May 1st, 1986, the defendants proposed a plan to this Court in which they stated they would end all overcrowding at all Decree institutions no later than January 1, 1987. The Court accepted this representation and ordered the defendants to implement its order, implement its plan, by this Court's order of July 22, 1986.
Up until January 9th, 1987, the defendants failed to inform the Court that they would not be able to meet the deadline which had passed eight days before they informed the Court. At the March, 1987 hearing, therefore, on medical care, this Court once again raised the overcrowding issue. By that time it appeared obvious that the defendants were in serious noncompliance with the Court's July 22nd, 1986 order. On April 1st, 1987, the Court ordered the defendants to show cause why they should not be held in contempt of Court for failure to comply with Section D.5 of the Consent Decree, Section IV.A of the State Plan for Compliance, paragraphs 1.4 and II.D.1 of the June 21st, 1985 stipulation, and Section V.A of the Court's July 22nd, 1986 order.
It is patently obvious from the evidence received at this hearing that the defendants continue to be in serious noncompliance at the Decree institutions. Moreover, it was not until this morning, May 22nd, 1987, that the Court for the first time learned what defendants now believe to be the first moment they can be in compliance at the Consent Decree institutions on the overcrowding issue, and even then I had to extract that information by ordering the defendants last evening to inform the Court what it was that they wanted the *1052 Court to do for them in order to be compliance with the July 22nd, 1986 order.
I, of course, expected a response to my April 1st show cause order well in advance of the hearing scheduled for May 20-22, 1987. This morning counsel indicated to the Court that the defendants, as I recall it, quote, "sort of intended," end quote, to file a motion for a modification of the State Plan. The Court has seen no legal memoranda, has had no law cited to it, and knows of no reason why it should grant this request. In particular, the Court notes that the defendants appear to be asking for a modification of paragraph D.5 of the Consent Decree and not a mere modification of the State Plan for Compliance. The defendants make this request despite their complete failure to have established that they have taken each and every step within their lawful authority to eliminate overcrowding at the Consent Decree institutions.
The Court earlier in this opinion, and with reference to, specifically, to the Reception and Guidance Center has already pointed out at least five alternatives which earlier had been pointed out to the Court by the defendants' own witnesses. It is obvious that the defendants are in contempt of the Court's July 22nd, 1986 order. Particularly egregious was the information received by the Court during this hearing that the Department of Corrections has been frustrated in trying to accomplish the goals that it agreed to by the actions and inactions of other defendants to this action, including but not limited to the Governor and the legislature. I believe that these actions constitute direct violation of Section D.5 of the Consent Decree in addition to the Court's July 22nd, 1986 order. The defendants have presented little in this hearing to excuse these failure and foreclose a finding of contempt, including declining my invitation to address the contempt issue at the conclusion of today's hearing.
I, therefore, find the defendants in contempt of Court. They may purge themselves of this contempt by eliminating overcrowding at the Consent institutions in accordance with the Consent Decree, the State Plan for Compliance, and the Court's July 22nd, 1986 order no later than November 1st, 1987. Failure to have purged themselves of contempt by that day shall subject them to fines of $10,000 per day, said fines to continue from day to day until they have fully complied.
As I previously observed, the defendants requested of the Court to modify the State Plan for Compliance, and certainly that would require a modification of the Consent Decree itself. The defendants bear a heavy burden in requesting a modification of a consent decree, and this is not something that a court should treat lightly. A defendant seeking relief from the terms of a consent decree, any consent decree, must show that the decree, quote, "has been turned through changing circumstances into an instrument of wrong," end quote, or that even though the purposes of the decree have not been achieved they are suffering a, quote, "grievous wrong evoked by new and unforeseen conditions." End quote. The quotes and the thoughts are from United States v. Swift and Company, 286 U.S. 106, at pages 114, 115, and 119, 52 S. Ct. 460, at pages 462, 463, and 464, in 1932. This the defendants have failed to show.
Therefore, the Court denies the motion made this morning. The Court is, of course, extremely sensitive to conditions at the non-decree institutions. This sensitivity was heightened by the testimony of Deputy Director Bolden who testified that the system was, quote, "seriously and dangerously overcrowded." The Court trusts and indeed hopes that all others in this room are just as sensitive, and notes in particular that the testimony of Mr. Bolden ought to give the Department of Justice pause to consider whether or not Bolden's testimony alone triggers the beginning language of the Civil Rights for Institutionalized Persons Act in relation to the non-Consent Decree institutions.
I note that I would not be taking this step if I were faced with a situation where defendants had no other options, quote, "within their lawful authority to eliminate *1053 overcrowding," end quote, at the Decree institutions other than to create intolerable conditions elsewhere. This, of course, is not such a situation. If such a situation does develop, however, the defendants should feel free to request the Court for appropriate modification of the Consent Decree and the State Plan for Compliance. At such a time the defendants will be required of course to show that there are no steps they can take within their lawful authority to maintain uncrowded conditions at the Consent Decree institutions other than to create intolerable situations elsewhere in the system.
There remains of course the requirement that the Consent Decree institutions remain uncrowded after November 1st. This relates directly to defendants' plan to eliminate crowding systemwide. The Court is unsure how it should address the situation, but is meaning to say it is unclear what defendants are requesting the Court to accept as their, quote, "new plan." Therefore, by June 5th, the defendants shall formulate their plan and suggest appropriate sanctions for compliance as discussed earlier in this hearing.
Post-hearing submissions on the issues that were brought up today are due June 5th, 1987, two weeks from today. In those submissions the lawyers should note in particular those portions of the Independent Expert's report with which they disagree, if any there might be.
ORDER OF MAY 28, 1987 HOLDING DEFENDANTS IN CONTEMPT OF COURT
In accordance with the bench opinion rendered at the hearing held on May 22, 1987;
IT IS HEREBY ORDERED that defendants are in Contempt of Court for having failed to comply with section D.5. of the Consent Decree, section IV.A. of the State Plan for Compliance, paragraphs I.4. and II.D. 1 of the June 21, 1985 Stipulation, and section V.A. of the Court's July 22, 1986 Order and specifically for having failed to comply with the Court's July 22, 1986 Order that they "implement their plan to decrease overcrowding and to end inappropriate security classification placements" with regard to the situation at the Reception and Guidance Center at the State Prison of Southern Michigan, in Jackson, Michigan. Defendants may purge themselves of this contempt by removing all inmates from the base dormitory and from the bulkheads at the Reception and Guidance Center by May 26, 1987, and by thereafter maintaining the inmate population at the Reception and Guidance Center at or below the Center's Rated Capacity. Defendants may, however, use the bulkheads for short-term, emergency, overflow housing. Operationally, this means that defendants shall keep all of the bulkheads clear at least four days out of any seven-day period. If defendants fail to purge themselves of contempt in this matter, they shall be subject to a fine in the amount of $10,000 per day and shall be enjoined from admitting any additional inmates to the Center until they do comply with the Court's Order.
IT IS FURTHER ORDERED that defendants also are in Contempt of Court for having failed to comply with the above-cited provisions of the Consent Decree, the State Plan for Compliance, the Stipulation, and the Court's July 22, 1986 Order and in particular for having failed to comply with Section D.5. of the Consent Decree and section V.A. of the Court's July 22, 1986 Order with regard to the remaining institutions covered by the Consent Decree and the State Plan for Compliance. Defendants may purge themselves of this Contempt by eliminating overcrowding at the Consent Decree Institutions in accordance with the Consent Decree, the State Plan for Compliance, and the Court's July 22, 1986 Order by no later than November 1, 1987. If defendants fail to purge themselves of contempt in this manner, they shall be subject to a fine of $10,000 per day to continue day to day until they have so complied with the Court's Orders.
IT IS FURTHER ORDERED that defendant's May 22, 1987 Oral Motion to Modify the Consent Decree and the State Plan for Compliance is DENIED.
IT IS FURTHER ORDERED that defendants shall have until June 5, 1987 to *1054 submit whatever revision of their May 1, 1986 plan to eliminate overcrowding through-out the system, and thereby to ensure compliance with the overcrowding provisions of the Consent Decree and the State Plan for Compliance, they wish to propose; defendants shall also submit at that time proposed sanctions for failure to comply with the revised plan.
IT IS FURTHER ORDERED that the plaintiff and the amici shall have until June 19, 1987 to submit comments on defendants' proposed revision and sanctions; both parties and amici shall have until June 19, 1987 to submit post-hearing briefs on the other issues covered in the Independent Expert's Report and/or at the hearing; the parties and amici shall indicate in particular in their briefs those aspects of the Independent Expert's Report to which they object.
IT IS FURTHER ORDERED that the Court will conduct a hearing on the mental health aspects of the Consent Decree and the State Plan for Compliance on July 30 and 31, 1987, beginning at 9:00 a.m., in Kalamazoo, Michigan; the Independent Expert shall submit a draft report on mental health by approximately June 15, 1987; the parties and amici shall submit their comments on the draft report and the reports of their expert witnesses to the Court and the Independent Expert by July 20, 1987 at 12:00 p.m.; the parties and the amici shall meet on July 29, 1987 to discuss the mental health issues.
OPINION OF JULY 2, 1987 SCHEDULING MENTAL HEALTH HEARING
In its May 27, 1987 Order the Court scheduled a compliance hearing on the mental health aspects of the Consent Decree, the State Plan for Compliance, and related documents for July 30 and 31, 1987. In its May 9, 1986 Order the Court had given defendants until July 15, 1987 to submit any requests for modification of their plan for the delivery of mental health services they may wish to make based on the epidemiological study that was due to be completed by June 15, 1987. On June 8, 1987 defendants submitted a motion requesting an extension of the July 15, 1987 deadline. In support of their motion, defendants state that the epidemiological study will not be completed until July 1, 1987. Defendants also suggest that the Court consider rescheduling the July 30 and 31 hearing date. Amici oppose defendants' motion, arguing that any delay in holding the hearing will have serious implications for the inmates. Plaintiff supports defendants' motion, noting that its own mental health expert would not be prepared to testify at the July hearing.
The Court reluctantly agrees with the parties that it should reschedule the July hearing in favor of a later date. I share amici's concerns about the inmates access to appropriate mental health care. My concerns are particularly acute in light of the Independent Experts' draft report on mental health care, in which they identify several significant compliance problems. On the other hand, the Court believes it is important to have the mental health hearing when the parties will be prepared to discuss the issues intelligently and fully. In particular, given the extension of the hearing date, I expect the parties to submit full and complete reports from their experts on defendants' compliance efforts, to be fully and completely prepared to discuss such efforts at the hearing, and to be fully and completely prepared to discuss practical solutions to any problems of noncompliance that may exist. In addition, defendants shall be fully and completely prepared to document their compliance efforts and to provide acceptable explanations for any problems of noncompliance that may exist. Finally, defendants shall be prepared in particular to discuss the following issues at the hearing: (1) the status of their administrative staffing for mental health; (2) the status of their professional staffing for mental health; (3) their plans for the recommendations contained in the June 12, 1987 Protected Environment Study; and (4) their plans for the recommendations contained in the June 12, 1987 Developmentally Disabled Prisoner Program.
*1055 The Court will reschedule the Mental Health Hearing for September 24 and 25, 1987 in Kalamazoo, Michigan. The parties and amici shall submit their comments on the Independent Experts' draft report and the reports of their expert witnesses to the Court and the Independent Experts by September 1, 1987 at 5:00 p.m. Defendants shall file any modification motions they wish to make by September 1, 1987. Plaintiff and amici shall have until September 18, 1987 to respond to any such motions. The Independent Experts shall have until September 18, 1987 to submit their final report to the Court, the parties, and the amici. The parties and amici shall meet on September 23, 1987 to discuss the mental health issues.
ORDER
In accordance with the opinion dated July 2, 1987;
IT IS HEREBY ORDERED that the mental health hearing scheduled for July 30 and 31, 1987 is rescheduled for September 24 and 25, 1987.
OPINION OF JULY 20, 1987, DENYING PRO SE MOTION TO INTERVENE AND MOTION FOR ORDER OF CONTEMPT
There are two matters pending in this case that the Court will deal with in this opinion. The first is a pro se motion to intervene and motion for order of contempt that two inmates filed on May 4, 1987. The second is the issue of whether confinement of an inmate in a cell with solid doors at the MIPC, now A-Block of the MBP, constitutes "isolation" within the meaning of paragraph IV.J.9 of the State Plan for Compliance. For the reasons discussed below, the Court will deny the pro se motion to intervene and for contempt, and will request the parties to address the solid doors issue further at the Mental Health hearing.
A. Motion to Intervene and Motion for Order of Contempt
Proposed intervenors Ronald L. Jordan and Carl L. Ashley are inmates confined at the Marquette Branch Prison. They seek to intervene in this action for the purpose of enforcing the out-of-cell activity requirement of the State Plan for Compliance, which provides in part that defendants are to provide activities such "that at SPSM and MR, 75% of all inmates, and at MBP all general population inmates, may be active out of their cells and dormitories, including exercise, meal, shower, and law library time, no fewer than 7 hours daily on weekdays and 5 hours daily on weekends." State Plan for Compliance ¶ IV.H.2. Mr. Jordan and Mr. Ashley allege that inmates at the MBP receive significantly less than seven hours per weekday, and five hours on weekends, out-of-cell time, and support their allegation with affidavits and petitions. They also allege that defendants have refused to remedy this violation of the State Plan, and that the plaintiff and amici in this case also have failed to take action on this issue. Finally, the proposed intervenors seek to hold defendants in contempt of court for having failed to comply with this requirement of the State Plan.
Rule 24(a)(2) of the Federal Rules of Civil Procedure provides that "[u]pon timely application anyone shall be permitted to intervene in an action: ... (2) when the applicant claims an interest relating to the property or transaction which is the subject of the action and he is so situated that the disposition of the action may as a practical matter impair or impede his ability to protect that interest, unless the applicant's interest is adequately represented by existing parties." FRCP 24(a)(2). The Court will deny the motion to intervene for three reasons. First, I believe that it is untimely. The Consent Decree in this case was signed over three years ago, and in the interim the parties have undertaken extensive action to implement and to enforce the Decree and the accompanying State Plan for Compliance. Under these circumstances, I believe this motion to intervene is untimely. See Michigan Association for Retarded Citizens v. Smith, 657 F.2d 102, 105 (6th Cir. 1981).
Secondly, I disagree with the proposed intervenors that they have the right to *1056 intervene to protect their interest as third-party beneficiaries of the Decree. The Decree specifically provides that it does not "create any rights or obligations enforceable by inmates." Consent Decree ¶ 0; compare South v. Rowe, 759 F.2d 610, 612 (7th Cir.1985) (intervention allowed where the inmate "was an intended third-party beneficiary of the consent decree"). Third, although the proposed intervenors can claim an interest relating to this action, I believe that the United States and the Knop amicus are adequately representing that interest. In particular, counsel for the Knop amicus has been diligent in protecting her clients' interests, which I believe includes the interests of the proposed intervenors.
For these reasons, the Court will deny this motion to intervene. I also will deny the motion to hold defendants in contempt. I am concerned, however, about the out-of-cell activity situation at the MBP, and would ask the Independent Expert to investigate it when he does his next report on that requirement of the State Plan.
B. Solid Doors at MBP-A Block
During the March 1986 compliance hearing the issue arose of whether the cells at the MBP-A Block that have solid doors are subject to section IV.J.9 of the State Plan, which provides that "[n]o inmate may be held in isolation (no sight or sound contact) from all other inmates for more than 2 days in any month, unless the isolation occurs for medical reasons in a medical area or unless the inmate is evaluated on a daily basis by a psychiatrist or a clinical psychologist who states in writing, that the inmate is not suffering serious harm." State Plan for Compliance ¶ IV.J.9. In its July 22, 1986 Opinion and Order, the Court asked the parties to address that issue by October 1, 1986. The parties and amici subsequently filed written submissions on the issue.
The Court unfortunately then lost track of the issue and discovered it only recently while reviewing the file in this matter. While I wish to resolve it as soon as possible, there are some unresolved factual matters concerning these cells that the parties and amici should be prepared to address briefly at the Mental Health hearing. Specifically, they should be prepared to inform the Court of the exact use of these cells; how long inmates are confined in them without contact with other inmates; whether inmates have free access to other parts of the institution or cellblock; and whether the cells are used for punitive detention. On receipt of this information, the Court will decide whether the cells are subject to section IV.J.9 of the State Plan.
OPINION AND ORDER OF JULY 28, 1987 ENFORCING PROVISIONS OF THE CONSENT DECREE, THE STATE PLAN FOR COMPLIANCE, AND THE STIPULATION REGARDING OVERCROWDING AND PROTECTION FROM HARM AND SANITATION, SAFETY AND HYGIENE
On May 20th, 21st, and 22nd, 1987 the Court held a hearing on defendants' efforts to comply with the requirements of the Consent Decree, the State Plan for Compliance, the Stipulation, and related opinions and orders concerning overcrowding and protection from harm and sanitation, safety, and hygiene. In conjunction with this hearing, the Independent Expert submitted a report on defendants' compliance efforts. During the hearing, the Court listened to a number of lay and expert witnesses and received into evidence a number of exhibits. It also issued two bench opinions, and two written orders, concerning the overcrowding situation. See Temporary Restraining Order dated May 22, 1987; Order of May 28, 1987. On June 23, 1987 the parties submitted a stipulation and proposed order concerning the overcrowding and various sanitation-related issues, as well as the sick call issue the Court had addressed in its May 7, 1987 opinion. The Court was pleased to see the proposed order, and will adopt it with some modifications. The order, however, fails to address several significant issues the Independent Expert had identified in his Report, and thus will be supplemented by this opinion and the attached order. In addition, in this opinion the Court will discuss defendants' *1057 July 16, 1987 motion for relief from portions of the Court's July 22, 1986 order. The order attached to this opinion consists of two parts. The first part reflects the parties' stipulations, as modified by the Court. The second part reflects the following opinion on the compliance hearing and defendants' motion.
The Court will first discuss nine issues concerning sanitation, safety, and hygiene. The parties covered some of these issues in their proposed order; the rest were discussed in the Independent Expert's Report but not by the parties in their order. The Court also observes that this opinion does not cover all of the problem areas the Independent Expert identified in his report. Rather, I have selected for discussion those areas that I believe require the most attention.
The first area concerns various renovation projects defendants have agreed to undertake. The most urgent problem appears to exist in the area of ventilation. Mr. Powitz testified that the ventilation in 5-Block is practically nonexistent. Transcript ("T") at 417. This situation exists even though defendants had agreed to provide adequate ventilation by July, 1986. Stipulation at 9-10; I.E.Rpt. at 13. Similar problems apparently also exist in housing areas at the Marquette Branch Prison and the Michigan Reformatory. In addition, both Mr. Powitz and Mr. Butler testified about the lack of adequate ventilation in the food service areas. See T at 427-28 (Testimony of Mr. Powitz).
The parties address the food service ventilation problem in their proposed order, in which defendants agree to survey "all food preparation areas to assess ventilation requirements to determine whether existing exhaust systems need to be repaired or replaced." The Court in addition will require defendants to submit a schedule of any necessary repair or replacement work. With regard to ventilation in the housing units, defendants clearly are in violation of the June 21, 1985 Stipulation and the Consent Decree. In their response to the Independent Expert's report, moreover, defendants indicated that at the MBP they will not be in compliance until February 5, 1988. Under the circumstances, I think it is emminently fair and reasonable to require defendants to submit, with respect to the housing areas, a detailed schedule for completing the ventilation projects. See Stipulation at 10 (defendants agreed to "keep the Court and the United States fully informed of its progress in meeting the Decree date"). In addition, for any projects that will not be completed by July 1, 1988, two years past the original due date in the Consent Decree, defendants shall submit a detailed explanation of why they will fail to complete the project(s) by that time. If the problem is the presence of asbestos, defendants shall detail the steps they are taking to solve that problem. The schedule and the explanation (if any) are due sixty (60) days from the date of this Opinion.
The second area of concern is the building trades inspection requirement. See State Plan for Compliance, ¶ I.C. The Court interpreted this provision in its opinion of July 15, 1986, dealing with certain interpretive issues that had arisen under the Consent Decree and the State Plan. As the Independent Expert notes in his Report, however, defendants apparently have done little, if anything, to achieve compliance with this requirement. In their response to the Report, in fact, defendants acknowledge, at least with respect to the MBP, that they "are in an unresolved quandry of trying to determine who will inspect, and what will be the nature and scope of the inspections." The Court will give defendants until November 1, 1987 to resolve this quandry. The issue is an important one in terms of defendants' continued compliance with the requirements of the decree documents. External inspections certainly appear to be one way to ensure that once remedied, unconstitutional conditions of confinement do not thereafter reappear. By November 1, 1987, then, defendants shall submit a report to the Court on how they intend to comply with this requirement of the State Plan.
The third area of concern is with kitchen sanitation. Mr. Butler testified that the situation is much improved, and the inspection reports that the Court has reviewed *1058 reflect this improvement. Nonetheless, defendants still have not fully complied with the requirement that they "achieve full compliance on at least each item for which a score of 4 or 5 is indicated on the inspection form." Opinion of July 15, 1986 at 6. Defendants appear to be on the right track, though, and in their proposed order have agreed to take some additional steps in this area. For the present, then, the Court will not order any additional remedial measures.
The next area of concern is with the laundry system at 5 Block in the Central Complex at the SPSM. The Independent Expert stated in his report that substantial problems exist in this area, with respect to both the frequency of the laundering and the handling and storage of the linens. Mr. Powitz, moreover, testified as to his concerns with defendants' failure to provide the inmates clean linens on a regular basis. T at 411-12. This is a serious problem that defendants should remedy as soon as possible. At the hearing and in their response to the Independent Expert's Report, defendants put forth no explanation for this breakdown in laundry service in 5-Block. Therefore, within thirty (30) days of the date of this opinion defendants shall submit to the Court a plan for remedying this problem as soon as possible.
The fifth area of concern is with the temperature of the food served to the inmates, particularly to those inmates confined in the segregation units. In the parties' proposed order, defendants agree to "take all reasonable steps to ensure that food arrives at food service areas, including food served in cell block areas, at the required temperatures...." I note that Mr. Powitz observed in his April 20, 1987 report that the poor condition of the insulated trays may be a cause of the problem, and I request the Independent Expert to continue to monitor the situation.
The next area of concern is the requirement that defendants provide sufficient electrical outlets and lighting for inmates in their cells. Compliance with this requirement was due in July, 1986. Stipulation at 9. The Independent Expert states in his report, however, that certain facilities do not comply with this requirement, and that full compliance is not expected until November, 1988. The Court will order defendants to submit a detailed construction schedule, with an explanation for why the construction was not completed on time, within sixty (60) days.
The seventh area of concern is defendants' continued failure to comply with the hot water requirements of the State Plan. The Court will not order any remedial action at this time, but simply notes the situation as one to be remedied under the Consent Decree and the State Plan.
The eighth area of concern is the showers situation. Testimony at the hearing and the Independent Expert's Report indicate that inmates confined in the overcrowded areas of the decree institutions may not have access to the required number of showers. This problem should disappear, however, once defendants have remedied the overcrowding situation; in addition, in the parties' proposed order defendants have agreed to provide additional showers and lavatories to the inmates in the North Complex Gymnasium. Amici, however, also raise questions about whether inmates at the MBP may have been denied shower privileges in the recent past; whether these inmates are forced to go to the showers without their clothes on; and whether these inmates are shackled during their shower times, allegedly in violation of the Consent Decree and the State Plan. Defendants, therefore, shall submit a report to the Court within thirty (30) days of the date of this Opinion indicating whether MBP inmates have been denied shower privileges for any period of time since January, 1987, and if so the reason(s) for the denial; whether MBP inmates are forced to go to the showers without their clothes on; and whether MBP inmates are shackled during their showers, and if so whether that practice violates either the Consent Decree or the State Plan.
The final area of concern is defendants' use of the food loaf. In my July 15, 1986 Opinion dealing with certain interpretive questions I deferred ruling on the issue of *1059 whether defendants may use food loaf as an administrative measure for inmates who are disciplinary problems. I asked the parties and amici to provide additional information on the following issues: "how many inmates are served food loaf in lieu of their regular meals; whether the loaf is consumed by the inmates; whether there is any limitation on the length of time an inmate can be served the loaf; and whether any inmates have suffered mental or physical injury from having to eat the loaf." Opinion of July 15, 1986 at 7. They have failed to provide this information. I therefore request them to do so at the mental health hearing, and I will resolve the issue then.
With regard to overcrowding and protection from harm, there are four issues the Court will discuss in this opinion. The first issue concerns the staffing levels, and the experience of the staff, at the various institutions. In his report, the Independent Expert expressed concern about the high turnover of staff at the SPSM and the relative inexperience of that staff. Mr. Miller also expressed concern about the staff turnover situation and the requirement that staff work a significant amount of overtime, T at 206; Deputy Director Bolden confirmed the high turnover rate and the significant use of overtime. T at 289. The Court has no suggestions at this time for remedying this problem, but raises it so it is not buried and forgotten.
The second issue concerns defendants' extensive use of waivers to place inmates in institutions that are outside of their security classification, thus severely compromising the housing assignment plan and the classification system required by the State Plan. The Independent Expert's Report and testimony at the hearing adequately documented the use of these waivers, and I see no need to repeat that evidence here. I agree with plaintiff that whether the classification system "is compromised by lack of appropriate housing at each security level" is an issue that needs to be explored. See Letter of June 2, 1987 from Andrew Barrick to Thomas Nelson at 2. Although the elimination of overcrowding should solve this problem, defendants do not plan to eliminate overcrowding system-wide until 1990. In the interim, there is a need to monitor the situation. I agree with plaintiff that it would help if defendants periodically reported on the waiver situation. Defendants therefore should file with the Court any reports, and subsequent updates, they develop concerning the waiver situation.
The third area of concern is defendants' out of cell activity plan(s). I agree with amici that in his next report on this issue, the Independent Expert should analyze whether the inmates actually participate in the programs defendants offer, and should attempt to determine whether the programs are effective and actually used. Defendants arguably cannot comply with the Consent Decree and the State Plan by offering activities that the inmates reject.
The final issue in this area concerns defendants' "plan" to eliminate overcrowding in the decree institutions and to ensure that they remain in compliance with the space requirements of the Consent Decree and the State Plan for Compliance. In May 1986 defendants submitted a "plan" to eliminate overcrowding in the decree institutions by January 1, 1987, and to eliminate overcrowding system-wide and thus end inappropriate security classification placements at the decree institutions by 1989. In my July 22, 1986 Opinion and Order I accepted defendants' plan and ordered them to implement it. In late 1986 and early 1987 it became apparent that defendants would not be able to adhere to that plan. In their March 20, 1987 Update, defendants' exhibit 1, defendants acknowledged that they were not in compliance with the plan and that periods of noncompliance would exist over the next couple of years. In their May 13, 1987 Update, defendants' exhibit 5, defendants indicated that they had to make adjustments to their May 1986 plan. See Memorandum dated 5/12/87 from William L. Kime to Luella Burke; Letter dated May 6, 1987 from Robert Brown, Jr. to Robert Naftaly. At the hearing, witnesses for the defendant indicated that they wanted the Court to accept these adjustments. See T at 393-95 *1060 (testimony of William Kime); cf. T at 331-37 (testimony of Dan Bolden). Defense counsel even indicated during the hearing that he considered the May 13th submissions to be modifications of the May 1986 plan.
By the end of the hearing, however, the Court was not sure what adjustments or modifications defendants intended to make in their May 1986 plan to eliminate overcrowding and inappropriate security classification placements at the consent decree institutions. In my May 27, 1987 Order, therefore, I gave defendants until June 5, 1987 "to submit whatever revision of their May 1, 1986 plan to eliminate overcrowding through-out the system, and thereby to ensure compliance with the overcrowding provisions of the Consent Decree and the State Plan for Compliance, they wish to propose." Order of May 27, 1987 at 3. The Court anticipated that defendants would submit a revised plan that combined their May 1986 plan with elements of their May 13, 1987 submission.
In their June 8, 1987 submission, though, defendants proposed no changes in their May 1986 submission, but indicated rather that they intended to adhere to that submission or plan. The Court cannot accept this submission for two reasons. First, although defendants must end overcrowding at the decree institutions by November 1, 1987, they state in their June 8th submission that "it may become necessary to exceed rated capacities at some areas of the Consent Decree institutions after November 1, 1987 due to unanticipated population increases or other factors beyond the control of the Defendants." Memorandum at 3. This statement indicates that the population levels at other institutions in the Michigan system affect the population levels at the decree institutions, and that the Court, plaintiff, and amici are entitled to know that defendants have population and construction projections that they can live with and which will eliminate the problem. Second, defendants' ability to satisfy their promise to eliminate improper security classification placements at the decree institutions by 1989 also depends on their ability to control the population levels at nondecree institutions.
In summary, the Court is seeking a commitment by defendants to an overall plan to eliminate overcrowding throughout the system and thus to ensure that the decree institutions will not be overcrowded and that improper security classification placements will not be used at the decree institutions that they can live with and implement. I thought I had that commitment in May 1986. It turned out I was wrong. Defendants should propose a plan, whatever it may be, that the Court can count on to accomplish the tasks required by the Consent Decree and the State Plan. I will give them sixty (60) days from the date of this Opinion to do so.
One final note concerns defendants' July 16, 1987 Motion for Relief from Portions of the July 22, 1987 (sic) Order of the Court. I have reviewed defendants' motion and amici's response. I have not yet received a response from the United States. I sympathize with defendants' objections to the reporting requirements and recognize that in certain respects the requirements may no longer be serving a useful function. In addition, I agree with both defendants and amici that it makes sense to structure the reporting requirements so as to achieve their intended goal with the least possible administrative burden on the defendants. I believe, however, that the requirements are important and, despite defendants' substantial improvements in the areas of fire safety, sanitation, and inmate surveillance, should be maintained in some form.
Rather than have the Court somewhat arbitrarily devise new reporting mechanisms, though, I think the parties, amici, and the Independent Expert should discuss this issue in their meeting before the Mental Health hearing. I realize that they may have to extend this meeting in order to discuss all of the issues to be covered at the hearing. I think, however, that the issue of how to reduce defendants' administrative burden while maintaining an effective reporting mechanism is one that the parties and amici should attempt to resolve *1061 among themselves, preferably without the necessity of judicial intervention.
I will enter an appropriate order in accordance with this opinion. I observe again, in closing, that this opinion covers only the most significant areas of noncompliance. Defendants must, of course, remedy all of the defects the Independent Expert identified in his Report.
ORDER
In accordance with the opinion dated July 27, 1987;
IT IS HEREBY ORDERED that defendants shall implement the following version of the parties' proposed order concerning medical care, overcrowding and protection from harm, and sanitation, safety, and hygiene:
Medical
To assure prompt inmate access to non-emergency medical care, defendants shall institute the following procedure at Marquette Branch Prison ("MBP") and the State Prison of Southern Michigan ("SPSM") in lieu of the present "sick call" system:
1. Within 24 hours following the receipt of an inmate request for medical care ("medical kite"), an inmate in general population or trusty division shall have his medical kite screened by a registered nurse, and the following actions shall be taken according to the contents of the kite:
a. If the medical kite merely requests information, the kite shall be answered.
b. If the kite requests an ordinary, non-emergency, dental or optometric appointment the matter shall be referred to the appropriate clinic and an appointment shall be scheduled.
c. If the kite requests medication or diet renewals, the request shall be immediately reviewed and, if appropriate, the request shall be renewed within seven days of the kit's submission; in no event, however, shall a medication or diet requirement that should be renewed be allowed to lapse.
d. If the kite requests an appointment for a routine follow-up review of a chronic medical condition such as diabetes or other similar continuing pre-existing condition documented in the inmate's medical record, a clinical appointment shall be made within seven days of the kite's submission; this provision in no way modifies defendants' obligation to respond immediately to medical emergencies arising out of chronic diseases.
e. If the kite indicates a "new complaint" which does not fall within the above categories, the inmate shall be seen at the clinic by appropriate medical staff within 24 hours of the screening. If the medical kite indicates, for example, that the inmate wishes to "see a doctor" or "go to the clinic," an appointment shall be promptly scheduled and the inmate shall be seen within the required 24 hours. If the medical kite is ambiguous, it shall be presumed that the kite reflects a "new complaint" which shall be treated according to the procedure set forth herein.
2. Segregation units at MBP and SPSM shall continue their current policy of providing daily access to medical staff, for nonemergency medical care, by the utilization of medical staff rounds. The rounds shall be performed by qualified medical personnel, i.e., either physician assistants or registered nurses who have received some form of specialized training in that function.
3. Defendants shall promptly implement a program advising inmates of the change in "sick call" procedures. They shall advise inmates of the new system for access to health care by means of inmate newspapers, inmate forums, and similar means of notification, and shall provide documentation of these efforts to the United States. Commencing one month after the implementation of the foregoing "medical kite" procedures at each facility or unit, defendants shall file a report each month for a six month period which shall set forth the total number of medical kites received during one week in the preceding month by category of kite, and in particular, the number of inmates scheduled and seen as "new complaints."
*1062 4. Defendants shall implement the foregoing system of medical access at the North Complex and South Complex of SPSM within three months of the entry of this order and shall implement it at the Central Complex of SPSM and at the MBP within six months of such time.
Overcrowding
In their memorandum submission of June 5, 1987, defendants stated that they "intend to eliminate overcrowding at the remainder of the Consent Decree institutions no later than November 1, 1987, in accordance with the May 27, 1987 Order of the Court." Defendants have agreed to implement, and shall implement, the following additional measures to alleviate the adverse effects of overcrowding at certain housing units prior to the final compliance date of November 1, 1987.
1. Marquette Branch Prison Gym: The gymnasium which is attached to Dormitory 1 in the trusty division is currently not used to house inmates. Defendants shall not use this area for housing absent a clear need for temporary emergency housing.
2. Michigan Reformatory Gym: The gymnasium adjacent to Unit B is not presently being used to house inmates. Defendants shall not house inmates in the gym under any circumstances.
3. State Prison of Southern MichiganWing Farm: By July 1, 1987 the population of this housing unit shall not exceed 106 inmates. After that date, defendant shall not send additional inmates to this unit so that the population will be reduced by attrition at the expected rate of four or five inmates per week. Population reduction will continue by attrition until the unit reaches its rated capacity on or before November 1, 1987.
4. State Prison of Southern Michigan North Complex Gym: Until November 1, 1987 defendants may continue to house a maximum of eighty (80) inmates at this unit. To assure the safety of staff and inmates, defendants shall immediately implement the following procedures and actions:
a. Correctional officer staffing shall be increased from the current staffing of three officers per afternoon and evening shift to four officers per afternoon and evening shift;
b. An elevated platform shall be constructed and shall be manned at all times by a correctional officer so that adequate lines-of-sight may be maintained;
c. Within ten days of the entry of this order, defendants shall install a toilet and shower trailer containing a minimum of four (4) showers and four (4) water closets each, and shall maintain said trailer so long as the Northside Gymnasium continues to be used for housing purposes.
d. Inmates selected for placement in beds located in the North Complex Gym shall at least meet the following criteria:
i. Not have a criminal conviction or documented history as an arsonist;
ii. Not be a predatory homosexual;
iii. Not be seriously mentally ill;
iv. Not have a history of being unmanageable in an open dorm setting.
Sanitation and Environment
With respect to sanitation and environmental matters, defendants shall take the following additional steps to achieve full compliance with the Consent Decree. The Court recognizes that defendants have demonstrated great improvement in environmental conditions in kitchen areas and that bird and vermin control projects that will represent a capital outlay in excess of four million dollars are about to commence in accordance with the requirements of the Hadix Consent Decree.
1. Food Service Ventilation: Within sixty (60) days of the entry of this order, defendants shall complete a survey of all food preparation areas to assess ventilation requirements and to determine whether existing exhaust systems need to be repaired or replaced. Within an additional sixty (60) days, defendants shall submit to the Court a proposed schedule for performing any necessary repairs and replacements.
*1063 2. Pipe Chases: Defendants recognize those areas of remaining problems identified by the Independent Expert and Plaintiff's Sanitation Expert in their May 1987 reports and testimony with regard to pipe chases. All areas so identified shall be subject to ongoing corrections efforts including, but not limited to, repair or replacement of broken vents.
3. Food Transport: Defendants shall take all reasonable steps to ensure that food arrives at food services areas, including food served in cell block areas, at the required temperatures as described in the Consent Decree and State Plan, including, but not limited to, minimizing food transport times.
4. Operational Items: While the following described measures are not specifically required by the State Plans as submitted or modified, defendants recognize the importance of such actions in achieving the goals of the Consent Decree and Plans submitted in accordance therewith. Therefore, defendants shall undertake the following actions:
a. At all subject facilities, take all reasonable and practical measures to eliminate access routes to food storage and preparation areas for vermin including, but not limited to, repair or replacement of defective, missing, or broken doors. Take all reasonable and practical measures to reduce or eliminate access to sources of food that may attract vermin including, but not limited to, prompt repair or replacement of broken or missing lids on dumpsters, where used.
b. At all food preparation services, in all subject facilities, take all reasonable and practical steps to ensure cleanliness of food service workers including, but not limited to, requiring food service workers to wear appropriate protective clothing and to receive appropriate training.
5. Bird and Vermin Control State Prison of Southern Michigan:
Defendants shall complete the Window and Screen Renovation Project in residential cell blocks in accordance with the Hadix Consent Decree. Within ninety (90) days of the entry of this order a construction contract shall be awarded and, barring extraordinary and unanticipated construction delay, all phases of the project shall be completed within seventeen (17) months of the award of the construction contract. In recognition of the particular acuity of the bird infestation in cell blocks 4, 5, 6, and 7, said blocks shall be a priority in the replacement program. The new window system in blocks 4, 5, 6, and 7 shall be completed no later than twelve (12) months from the awarding of the construction contract. Defendants shall advise the Court, plaintiff and amici of the progress toward completion of each phase of the project in periodic reports. This commitment does not, however, preempt the requirement of paragraph II.C. of the Court's July 22, 1986 Order that defendants inspect "on a continuing basis, all windows" and "replace promptly all broken or missing glass."
6. With respect to the kitchen and bakery at SPSM Central Complex, defendants shall immediately, and on a continuing basis, take all reasonable and practical measures to eliminate all access points for the entry of birds and other vermin into the bakery and kitchen areas. In addition, immediately, and on a continuing basis, defendants shall take all practical and reasonable measures to eliminate existing populations of birds and other vermin in the kitchen and bakery areas.
IT IS FURTHER ORDERED that defendants shall do the following:
A. Submit, within sixty (60) days of the date of the Opinion, a detailed schedule for completing ventilation projects in the housing areas and, for any projects that will not be completed by July 1, 1988, a detailed explanation of why they will fail to complete the project(s) by that time;
B. Submit by November 1, 1987 a report on their plan(s) to comply with the building trades inspection requirement of the State Plan;
C. Submit, within thirty (30) days of the date of the Opinion, a plan for remedying the laundry problem at 5-Block;
D. Submit, within sixty (60) days of the date of the Opinion, a detailed construction *1064 schedule for the electrical outlets and lighting requirement of the State Plan, with an explanation of why the construction was not completed on time;
E. Submit, within thirty (30) days of the date of the Opinion, a report on the shower situation at the Marquette Branch Prison;
F. Be prepared to address the food loaf issue at the Mental Health hearing;
G. Submit any reports, and subsequent updates, they may develop concerning the use of waivers in the security classification system;
H. Submit, within sixty (60) days of the date of the Opinion, a plan to ensure that the decree institutions will not be overcrowded and that no improper security classification placements will be used at the decree institutions.
IT IS FURTHER ORDERED that the parties, amici, and the Independent Expert shall discuss defendants' Motion for Relief from Portions of the July 22, 1987 (sic) Order of the Court in their meeting before the Mental Health Hearing.
NOTES
[1] The Second Circuit has stated, moreover, that a court should be particularly willing to modify a consent decree in institutional reform litigation, in which unforeseen obstacles are more likely to present themselves, a better understanding of the problem may emerge only after a decree is entered, and a court may have to consider a wider constellation of interest than is represented in the adversarial setting of the courtroom. Carey, 706 F.2d at 969-70; see Brown v. Neeb, 644 F.2d 551, 560 n. 17 (6th Cir.1981). The Court also believes it is significant that granting the Hadix Plaintiffs' request would decrease neither the benefits enuring to the inmates at the subject institutions nor the obligations imposed on the Defendants.
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728 F. Supp. 41 (1989)
UNITED STATES of America
v.
Rodney J. DAOUST, Defendant.
Crim. No. 88-00015-B.
United States District Court, D. Maine.
December 11, 1989.
*42 Richard S. Cohen, U.S. Atty., James McCarthy, Asst. U.S. Atty., Bangor, Me., for plaintiff.
Leonard Sharon, Lewiston, Me., for defendant.
MEMORANDUM DECISION ON MOTION TO SUPPRESS
CONRAD K. CYR, District Judge.[*]
A three-count superseding indictment charges the defendant with making false representations to obtain a firearm and with receiving and possessing firearms following a felony conviction. The defendant moves to suppress evidence, and the fruits of evidence, seized in connection with a warranted search of his residence.
I. FINDINGS OF FACT
As a known associate of Robert Whittemore, a suspected cocaine dealer, the name of Rodney Daoust first surfaced in mid-1987 in connection with a federal investigation into cocaine distribution in Maine. Senior Special Agent Kenneth MacMaster and Detective Michael Sperry, both of the Maine State Police [MSP], and Lt. Timothy Bourassa, of the Rumford Police Department, went to the Daoust residence on August 11, 1987, to interview Daoust in connection with the Whittemore investigation. The defendant's house is situated at the end of a driveway which turns off a dirt road approximately one mile from Route 2 in Carthage, Maine. The driveway ends near the left front (southwest) corner of defendant's house. Upon their arrival the officers observed no telephone or power lines leading to the house.[1] There were toys outside the house, but no vehicles in the driveway. Detective Sperry knocked several times on the double-glass cellar door near the southwest corner of the house. Receiving no response, the officers left.
On August 21, 1987, at about noon, Sperry returned to defendant's house with MSP Detective William Draper. The residence appeared just as it had on August 11, and again there was no vehicle in the driveway. The officers first knocked on the cellar *43 door. Upon receiving no response and observing that the front door, which is located at the mainfloor level on the south side of the house, was approximately five or six feet above ground level, and inaccessible, the officers decided to walk around the house to look for an accessible mainfloor entrance.
Sperry and Draper proceeded from the southwest corner of the house, where the cellar door is located, along the west side. The ground along the west side of the house slopes steeply upward to such an extent that the cellar wall, which is completely exposed along the entire south wall of the house, is completely covered by earth along the rear (north) wall. There is no path around the house, nor is the perimeter of the house landscaped in any way. Upon determining that there was no door on the north side of the house, Sperry and Draper continued along the north wall to look for a door on the east side.
While walking along the north wall Sperry looked into a window near the northeast corner of the house to see if anyone was inside. The window ledge is approximately six feet above ground level, and Sperry and Draper, walking side by side, came within about three feet of the window as they were walking past it. Approaching and peering up through the window, Sperry saw a semi-automatic handgun fastened between the exposed kitchen ceiling joists which run parallel to the east side of the house. The view through the window was unobstructed by shades, curtains, shutters, vegetation or any other visual obstruction. Although there was a fly screen on the window, it did not obstruct Sperry's view into the house. From his vantage point, which required him to look up at an angle through the window, Sperry would have been able to see a person standing near the window, but all he in fact saw was the ceiling area of the kitchen. Sperry did not use any device, or otherwise attempt, to enhance his view. Sperry asked Draper to look through the window, and Draper immediately saw the handgun.
Sperry and Draper continued around the north side of the house looking for a mainfloor entrance, proceeding from the north side, along the east side and then back to the south side. The officers left the premises immediately upon learning that there was no accessible mainfloor entrance.
At about four or five o'clock that afternoon, Sperry returned to the Daoust residence, knocked on the cellar door, and left immediately after receiving no response.
Sperry returned to the residence on August 24, 1987, this time with Special Agent MacMaster. There were no vehicles in the driveway. After knocking on the cellar door to no avail, Sperry and MacMaster proceeded to the northeast corner of the house, where Sperry asked MacMaster to look through the window. Standing a few inches from the window, MacMaster saw the handgun between the ceiling joists. Sperry's stated intention in pointing out the location of the handgun was to forewarn MacMaster in the event MacMaster were to return to the residence without Sperry. Immediately afterward the officers left the premises.
En route to Augusta, Sperry and MacMaster decided to find out whether Daoust had ever been convicted of a felony. They confirmed that Daoust had been convicted of felony burglary, that he had not received an executive pardon and that he was over 18 years of age when he committed the felony offense. The officers learned also that the defendant had been convicted in 1982 of disorderly conduct and class D assault. Local law enforcement officials informed them that the defendant had been divorced and that he lived alone.
Sperry and MacMaster believed that the defendant was in violation of a Maine statute which criminalizes the possession of a firearm by a convicted felon. See Me.Rev. Stat.Ann. tit. 15, § 393. Accordingly, on August 24 MacMaster prepared an affidavit and procured a warrant to search the Daoust residence for "[a] semi-automatic handgun, blue steel in color," and nothing else.
Prior to executing the search warrant, MacMaster informed the state district attorney that Daoust was under investigation *44 for firearms violations. MacMaster contacted the United States Attorney's office as well. It is normal procedure for State of Maine law enforcement officers assigned to the federal-state anti-drug task force to contact the U.S. Attorney's office concerning suspected criminal activity which may be subject to prosecution by both state and federal authorities.
The search warrant was executed on August 25, 1987. Sperry, Bourassa, Draper and MSP Trooper Dennis Appleton participated in the search, with MacMaster in charge. All of the officers had prior experience in the execution of search warrants. Before going to the Daoust residence, the search party met near Jay, Maine to plan the search. At the meeting it was stated that there was no way of knowing whether the officers would find anyone at the residence, and that it would be necessary to conduct a routine safety sweep for concealed persons immediately upon entering the premises in order to assure that the premises were safe to work in. The safety sweep was considered necessary due to the presence of at least one firearm on the premises of a convicted felon with a criminal record for assaultive conduct. MacMaster gave the officers their duty assignments, assigning Draper and Bourassa responsibility for conducting a safety sweep of the second floor.
The officers arrived at the Daoust residence at 7:00 a.m. There were no vehicles in the driveway, and no lights were visible in the house. The officers wore raid jackets and hats bearing MSP insignia. After MacMaster knocked on the cellar door, and yelled "police," to no avail, the officers fanned out around the house. Sperry went to the rear of the house and looked through the northeast corner window to confirm that the handgun was still located between the ceiling joists. At about the same time, MSP Trooper Appleton observed the handgun through a kitchen window on the east side of the house.
The officers discussed the least destructive means of forcing entry. They decided to try a cellar window on the east side of the house. Draper found and held a board against the window frame, while Sperry placed his foot against the board to force the window inward. The force bent the latch securing the top of the window, but did not break either the latch or the window. Sperry crawled through the window and let the other officers in through the cellar door.
Immediately after entering the cellar, Bourassa and Draper proceeded to the second floor to conduct a safety sweep for concealed persons. Its purpose was to assure the safety of the officers, and any occupant, by locating concealed persons and conducting them to a central location on the premises while the officers were seizing the handgun and preparing an inventory. The officers considered a routine safety sweep necessary because they knew that there was at least one firearm in the house, and they could not be sure that the residence was unoccupied.
Immediately upon entering through the cellar door, Bourassa and Draper proceeded to the main floor and on to the second floor, which consists of a bedroom and an unfinished room. Draper was experienced in the securing of search premises, and he knew that he and Bourassa were to conduct a superficial sweep for any person who might be concealed on the second floor, and that he was to yell "secure" if they found no one. The superficial safety sweep was restricted to places where a person could have been concealed. The sweep was swiftly completed, within about 30 seconds. There was no search for evidence, and no occupants were found.
During the sweep of the second floor bedroom, Draper saw three long guns. Two of the guns a 12-gauge Winchester pump shotgun and a Remington model 30-06 rifle (which was inside a rifle case) were observed leaning against a dresser. Another gun a single-shot, 12-gauge Revelation model 350 shotgun was partially visible behind a nightstand to the right of the bed. Immediately upon observing them, and without moving any object (or removing the soft-covered gun case containing the 30-06), Draper recognized that each of the three objects was a gun. After *45 completing the safety sweep of the second floor, Bourassa and Draper returned to the main floor and told Appleton and MacMaster about the three guns.
The main floor consists of a large living-room area, a kitchen area in the southeast corner, and a dining area. The officers observed an unconcealed Thompson black powder musket leaning against a cabinet to the right of the kitchen sink, and an unconcealed ammunition clip on a counter to the right of the kitchen sink. Before any item was seized, including the handgun fastened between the ceiling joists, Appleton photographed the item in the position first observed.
Prior to leaving the premises, the officers left a copy of the search warrant, an inventory of the items seized and a note informing the defendant how to contact MacMaster. The officers replaced the cellar window by bending the latch back to its original position and locking it. They locked the cellar door on their way out.
In early October, Appleton received a phone call from the defendant, who asked to speak with MacMaster about the return of the firearms seized from his home. The defendant was particularly interested in two of the weapons, which he said did not belong to him.
The record reveals no other attempts to contact Daoust prior to August 1987, except through his estranged wife and Sperry's inquiry for a telephone listing. See note 1 supra. At no time was there any police surveillance of defendant's residence.
The United States Attorney for the District of Maine decided to prosecute the Daoust case in federal court after the firearms seized from the Daoust residence had been turned over to the Bureau of Alcohol, Tobacco and Firearms.
II. DISCUSSION
The defendant advances four principal contentions in support of suppression. First, he argues that the search warrant was predicated on evidence unconstitutionally discovered and seized; second, that the forcible entry of his home violated fourth amendment principles embodied in the "knock and announce" rule codified at 18 U.S.C. § 3109; third, that the search was flagrantly overbroad because the safety sweep of the second floor went beyond the scope of the warrant and was unjustified; and fourth, that the defendant's assertions of a possessory interest in the guns seized from his residence, as well as all records and other evidence (e.g. testimony of potential witnesses) discovered through defendant's statements following the search, are the tainted fruit of the illegal search and seizure. See Wong Sun v. United States, 371 U.S. 471, 484-87, 83 S. Ct. 407, 415-17, 9 L. Ed. 2d 441 (1963).
The government response relies mainly on the "plain view" doctrine, which requires "that the seizing officer have a prior justification for being in a position to see the item in plain view, that the discovery of the item be inadvertent, and that the evidentiary value of the item be `immediately apparent' to the officer," United States v. Johnston, 784 F.2d 416, 419 (1st Cir.1986).[2]See also Texas v. Brown, 460 U.S. 730, 741-42, 103 S. Ct. 1535, 1542-43, 75 L. Ed. 2d 502 (1983) (plurality opinion); Coolidge v. New Hampshire, 403 U.S. 443, 466, 91 S. Ct. 2022, 2038, 29 L. Ed. 2d 564 (1971) (plurality opinion); Ker v. California, 374 U.S. 23, 43, 83 S. Ct. 1623, 1635, 10 L. Ed. 2d 726 (1963) (plurality opinion).
1. Validity of Search Warrant
Daoust challenges the constitutionality of Sperry's initial warrantless observation of the handgun on August 21, 1987, the original source of the information included *46 in the affidavit submitted by MacMaster in support of the application for the search warrant.[3] Shorn of any such taint the MacMaster affidavit does not show probable cause. Cf. Franks v. Delaware, 438 U.S. 154, 171-72, 98 S. Ct. 2674, 2684-85, 57 L. Ed. 2d 667 (1978) (challenge to veracity of affidavit merits hearing if affidavit would not support probable cause absent challenged portions).
a. Curtilage Intrustion
The defendant concedes that the officers had the right to come upon his land to locate and interview him in connection with the Whittemore investigation, see, e.g., United States v. Miller, 589 F.2d 1117, 1133 (1st Cir.1978), cert. denied, 440 U.S. 958, 99 S. Ct. 1499, 59 L. Ed. 2d 771 (1979); Davis v. United States, 327 F.2d 301, 303 (9th Cir.1964), but he insists that the officers arrived at their vantage point near the window on the northeast corner of the house by means of an unconstitutional trespass upon the curtilage of his home.
"The private property immediately adjacent to a home is entitled to the same protection against unreasonable search and seizure as the home itself." United States v. Anderson, 552 F.2d 1296, 1300 (8th Cir. 1977); United States v. Bradshaw, 490 F.2d 1097, 1100 (4th Cir.), cert. denied, 419 U.S. 895, 95 S. Ct. 173, 42 L. Ed. 2d 139 (1974). Accord Oliver v. United States, 466 U.S. 170, 180, 104 S. Ct. 1735, 1742, 80 L. Ed. 2d 214 (1984). But "`police with legitimate business may enter the areas of the curtilage which are impliedly open to use by the public,' and ... in so doing they `are free to keep their eyes open and use their other senses.'" 1 W. LaFave, Search and Seizure § 2.3(c), at 393 (2d ed.1987) (quoting State v. Crea, 305 Minn. 342, 233 N.W.2d 736 (1975)). See also Anderson, 552 F.2d at 1300. Thus, Sperry's initial intrusion upon the curtilage of the Daoust home for the legitimate purpose of locating and interviewing the defendant was reasonable in the circumstances. See id. (initial intrusion justified by legitimate objective of locating defendant for questioning about theft).
b. The Circumambulation
The defendant complains that the officers trammeled his fourth amendment rights by proceeding around the pathless and unlandscaped perimeter of his home in search of an accessible mainfloor entrance. Law enforcement agents confronted a somewhat similar situation in Anderson.
The agents rang the doorbell and knocked, but no one appeared. A light was visible inside the house and the agents heard a dog barking behind it. After waiting briefly, they walked around the house to determine if there was someone with the barking dog. As they walked along the side of the house, they noticed a lighted basement window partially covered by a shade. Glancing through the window, they saw numerous unopened crates marked "Coronado Color Television" piled on the floor of the basement. After observing the cartons, the agents proceeded to the back porch where they saw the dog alone. They then returned to the front of the house.
552 F.2d at 1298. The Eighth Circuit decided that it could not conclude "that the agents' action in proceeding to the rear after receiving no answer at the front door was so incompatible with the scope of their original purpose that any evidence inadvertently seen by them must be excluded as the fruit of an illegal search." Id. at 1300 (footnote omitted). See also United States v. Roberts, 747 F.2d 537, 542-43 (9th Cir.1984) (police observations through unobstructed windows, incident to attempt to question occupant of premises, held lawful); United States v. Gabriel, 715 F.2d *47 1447, 1450 (10th Cir.1983) (declining to suppress observations through windows of unfinished house by agents legitimately on premises to locate suspect associated with owner). Cf. United States v. Wheeler, 641 F.2d 1321, 1322-27 (9th Cir.1981) (no unreasonable search where officer, attempting to locate defendant for questioning, observed incriminating evidence by peering over fence surrounding defendant's backyard from vantage point atop a tire).
The legitimate original purpose of the officers was to locate Daoust for questioning in connection with the Whittemore cocaine investigation. Unable to determine whether there was anyone in the residence, or to gain access to the only mainfloor entrance visible from the front of the house, Sperry and Draper proceeded around the house looking for an accessible mainfloor entrance. The perimeter of the residence was not landscaped, and there was no discernible path to or around the back of the residence. The front (south side) of the house was unfinished, and it was not unreasonable for the officers to expect that the more elevated ground level along the rear (north side) of the house would afford mainfloor access. Upon discovering that there was no mainfloor entrance at the rear of the house, the officers were continuing to pursue their original purpose when Sperry made the initial observation of the handgun while looking through the unobstructed window to see if anyone was inside the house. Since the initial encroachment upon the curtilage was lawful and the handgun was observed in pursuit of the same purpose, no reasonable expectation of privacy was violated.
Therefore, the MacMaster affidavit was sufficient to establish probable cause, and the search warrant is valid.
2. Lawfulness of Forcible Entry
The defendant argues that the officers violated the "knock and announce" requirement of 18 U.S.C. § 3109, or the fourth amendment principles embodied in it, by forcibly entering the residence through a cellar window after knocking on the cellar door and shouting "police," but without announcing their specific purpose.
a. "Knock and Announce" Statute
Section 3109 states:
The officer may break open any outer or inner door or window of a house, or any part of a house, or anything therein, to execute a search warrant, if, after notice of his authority and purpose, he is refused admittance or when necessary to liberate himself or a person aiding him in the execution of the warrant.
18 U.S.C. § 3109. The government correctly asserts that section 3109 does not control the present case since these state police officers were acting pursuant to a state court search warrant for evidence of a violation of state law. See Miller v. United States, 357 U.S. 301, 305, 78 S. Ct. 1190, 1193, 2 L. Ed. 2d 1332 (1958) (lawfulness of forced entry by local officers to arrest occupant is controlled by local law). Maine law applies in these circumstances. Cf. United States v. Bradley, 455 F.2d 1181, 1185 n. 8 (1st Cir.1972) (state law governs arrest by state officials for federal offenses) (citing Ker v. California, 374 U.S. 23, 83 S. Ct. 1623, 10 L. Ed. 2d 726 (1963)), aff'd, 410 U.S. 605, 93 S. Ct. 1151, 35 L. Ed. 2d 528 (1973); Jackson v. United States, 354 F.2d 980, 981 (1st Cir.1965) (Massachusetts law applies where federal agents, assisted by Boston police, force entry to execute arrest warrant). Maine has neither a statutory, see Maine v. Martelle, 252 A.2d 316, 319-20 (Me.1969), nor a decisional "knock and announce" rule.[4]
*48 The forced entry by MSP officers violated neither section 3109, nor any Maine decisional or statutory rule.
b. Constitutional Implications of Failure to "Knock and Announce"
An unannounced entry effected by state or local police in accordance with state law may nonetheless be unreasonable within the meaning of the fourth and fourteenth amendments. See Ker v. California, 374 U.S. 23, 28, 42, 83 S. Ct. 1623, 1627, 1634, 10 L. Ed. 2d 726 (1963) (unannounced police entry, effected by means of passkey to prevent destruction of contraband, upheld as reasonable incident of lawful arrest without warrant). The Ker plurality accepted the view of the California Supreme Court that the warrantless arrest was lawful under the "exigent circumstances" exception to California's statutory "knock and announce" rule, id. at 38-41, 83 S. Ct. at 1632-34 (plurality opinion), but allowed as how, "notwithstanding its legality under state law, the method of entering [a] home may offend federal constitutional standards of reasonableness and therefore vitiate the legality of an accompanying search," id. at 38, 83 S. Ct. at 1632. Since Ker's conduct had been "furtive," id. at 40, 83 S. Ct. at 1633, and the police believed that Ker possessed narcotics "which could be quickly and easily destroyed," id., the unannounced entry was considered reasonable within the meaning of the fourth amendment, id. at 40-41, 83 S. Ct. at 1633-1634.[5]
Although the plurality opinion in Ker plainly requires that an unannounced forcible entry be reasonable within the meaning of the fourth amendment, Ker refrained from imposing an inflexible fourth amendment "knock and announce" rule incorporating in all circumstances the particular procedures delineated in section 3109.[6] Several courts of appeals since Ker have discerned a "knock and announce" requirement in the Constitution, though often in obiter dicta and sometimes without close analysis of the plurality opinion in Ker.[7]Cf. United States v. Francis, 646 F.2d 251, *49 258 (6th Cir.) ("Though each case by itself is less than compelling, their conclusion has been unanimous: the fourth amendment forbids the unannounced, forcible entry of a dwelling in the absence of exigent circumstances.") (unannounced entry of business premises) (dictum), cert. denied, 454 U.S. 1082, 102 S. Ct. 637, 70 L. Ed. 2d 616 (1981).
A "knock and announce" requirement provides far less privacy protection than the Warrant Clause of the Fourth Amendment, but it nevertheless serves important fourth amendment purposes by preventing needless destruction of private property, eliminating unnecessary intrusions upon privacy, and reducing the risk of violence. United States v. Bustamante-Gamez, 488 F.2d 4, 9 (9th Cir.1973), cert. denied, 416 U.S. 970, 94 S. Ct. 1993, 40 L. Ed. 2d 559 (1974).[8] Since compliance normally consumes little time and may be excused in exigent circumstances, Sabbath v. United States, 391 U.S. 585, 591 n. 8, 88 S. Ct. 1755, 1759 n. 8, 20 L. Ed. 2d 828 (1968); United States v. Baker, 638 F.2d 198, 202 (10th Cir.1980), a "knock and announce" requirement, reasonably tailored to the attendant circumstances, generally imposes little burden on law enforcement personnel while promoting important fourth amendment interests, United States v. United States District Court, 407 U.S. 297, 313, 92 S. Ct. 2125, 2134, 32 L. Ed. 2d 752 (1972) ("[P]hysical entry of the home is the chief evil against which the wording of the Fourth Amendment is directed....") It is imperative that any articulation of a constitutional "knock and announce" requirement be informed by the fundamental fourth amendment principle "that `the permissibility of a particular law enforcement practice is judged by balancing its intrusion on ... Fourth Amendment interests against its promotion of legitimate governmental interests.' Delaware v. Prouse, 440 U.S., [648] at 654 [99 S. Ct. 1391, 1396, 59 L. Ed. 2d 660 (1979)]." Texas v. Brown, 460 U.S. 730, 739, 103 S. Ct. 1535, 1541, 75 L. Ed. 2d 502 (1983) (plurality opinion) ("plain view" doctrine applied in context of automobile stop).
1. Reasonableness of Forcible Entry
The constitutionality of a forcible entry does not depend upon ritual *50 adherence to the statutory "knock and announce" procedures of section 3109, but is to be assessed against the fourth amendment proscription of unreasonable searches.[9]See Ker v. California, 374 U.S. at 38, 83 S. Ct. at 1632 (plurality opinion); Martelle, 252 A.2d at 319 ("The execution of the [search] warrant will withstand attack on constitutional grounds provided it does not amount to a breach of the constitutional mandate that people be secure in their persons, houses, papers and possessions from all unreasonable searches and seizures.") (emphasis in original). The fourth amendment "secures the persons, houses, papers, and effects of the people against unreasonable searches and seizures...." Texas v. Brown, 460 U.S. at 735, 103 S. Ct. at 1539 (plurality opinion) (emphasis added).
A principled approach to the present inquiry requires recognition of "the Fourth Amendment's central requirement of reasonableness...." Id. at 739, 103 S. Ct. at 1541. The reasonableness of the challenged conduct must be viewed in light of "what the officers had reason to believe at the time of their entry," Ker, 374 U.S. at 40-41 n. 12, 83 S. Ct. at 1633 n. 12 (emphasis in original); see United States v. Bustamante-Gamez, 488 F.2d 4, 10-12 (9th Cir. 1973), cert. denied, 416 U.S. 970, 94 S. Ct. 1993, 40 L. Ed. 2d 559 (1974), and by balancing the official intrusion against whatever legitimate governmental interests it serves, see Delaware v. Prouse, 440 U.S. at 654, 99 S. Ct. at 1396.
The officers had visited the Daoust residence on several previous occasions, at a different time of day on each occasion, without ever finding anyone at home. The officers announced their presence "loud and clear," by knocking on the cellar door and by yelling "police," see Sabbath, 391 U.S. at 591 n. 8, 88 S. Ct. at 1759 n. 8 ("... possible constitutional rule relating to announcement and entry ...") (emphasis added); but cf. Jackson, 354 F.2d at 982 (discussing Massachusetts common law "knock and announce" requirement: "[T]he officers' bare announcement, `Sam, police,' did not `notify the [occupant] ... that they demanded admission to his apartment for the purpose of arresting him.'") (citing Miller v. United States, 357 U.S. at 310, 78 S. Ct. at 1196) (applying § 3109), and after announcing their presence the officers allowed several minutes to pass, during which there was no response from within the residence, before forcing the latch on the cellar window. There were no indications of occupancy: no lights, no animals, no vehicles in the driveway, and no sound.
Although it directly implicates only section 3109, the decision in United States v. Brown, 556 F.2d 304 (5th Cir.1977), affords an instructive analog.
Agents of the Alcohol, Tobacco, and Firearms Bureau obtained a valid warrant to search appellant's residence for unregistered firearms. Accompanied by a local deputy sheriff who knew appellant, the federal agents surrounded the house, knocked on doors and windows, and announced their identity. They did not announce that they had a search warrant. There was no response to their knocks and calls, so, assuming that Brown was not on the premises, the officers dispatched the deputy sheriff to find Brown. After searching for over an hour without locating Brown, the deputy sheriff returned to the residence where the federal officers were keeping watch. Again they knocked and announced their identity, but they did not announce their purpose the execution of the warrant. Being reasonably certain that the residence was unoccupied, the agents broke a pane of glass, unlocked a door and entered. They found an unregistered machine gun in the house. The house was, in fact, unoccupied. *51 556 F.2d at 305 (emphasis added). As the Fifth Circuit concluded in Brown, "it is futile to require police to wait for refusal of admittance to an unoccupied dwelling.... Clearly, it is just as futile to announce to an unoccupied building that federal officers have a search warrant." Id. Cf. Payne v. United States, 508 F.2d 1391 (5th Cir.1975). In these very similar circumstances, Brown held that the officers did not violate section 3109 by forcibly entering a dwelling without an announcement of their purpose. Brown, 556 F.2d at 305. Although the officers in Brown waited more than an hour before forcing their way into the residence, the extended delay was necessary to allow time for a deputy sheriff to attempt to locate the owner elsewhere. Brown, 556 F.2d at 305. Cf. Jackson, 354 F.2d at 982 (mere ten second pause not unreasonable).
The police may execute a search warrant in a vacant dwelling. See United States v. Gervato, 474 F.2d 40, 43 (3d Cir.) (forcible entry of apartment after knocking and announcing identity and purpose, despite known absence of tenant), cert. denied, 414 U.S. 864, 94 S. Ct. 39, 38 L. Ed. 2d 84 (1973). Unless the officers were to abdicate their responsibility to execute the search warrant, a forcible entry was unavoidable in these circumstances. Considering the uniformly unsuccessful earlier efforts of the officers to elicit a response from within the residence, and their duty to execute the search warrant, their forcible entry could be invalidated only by ritual insistence upon an announcement of purpose in circumstances which objectively demonstrate that it would have elicited no response, let alone result in their admittance. See Jackson, 354 F.2d at 982 ("The government cannot be faulted for deficiencies having no prejudicial effect.")
The forcible entry of the Daoust residence in these circumstances violated neither section 3109 nor any fourth amendment "knock and announce" requirement.
3. Execution of Search Warrant
The search warrant directed the officers to enter and search the residence and to seize the handgun previously observed by Sperry and MacMaster. Although the warrant does not restrict the scope of the search to any particular part of the premises, immediately prior to their forcible entry Sperry visually confirmed that the handgun remained fastened to the kitchen ceiling. There being no contention that the warrant in these circumstances impliedly authorized a search of the entire premises, either for this weapon or for others, the question before the court is whether the safety sweep of the second floor was an impermissible "general search." See, e.g., Payton v. New York, 445 U.S. 573, 583, 100 S. Ct. 1371, 1378, 63 L. Ed. 2d 639 (1980) ("It is familiar history that indiscriminate searches and seizures conducted under the authority of `general warrants' were the immediate evils that motivated the framing and adoption of the Fourth Amendment.") (footnote omitted).
a. Constitutional Implications of Security Sweeps[10]
The defendant contends that the safety sweep of the second floor violated the fourth amendment and that the three long guns observed and seized in the upstairs bedroom must be suppressed. The thrust *52 of the argument is that the fourth amendment does not permit a superficial safety sweep incident to the execution of a search warrant immediately after the police forcibly enter an unoccupied residence without having announced their specific purpose. Relieved of its overburden the unarticulated rationale for this argument is that the failure of the officers to announce their specific purpose can be countenanced, as a constitutional matter, only if there existed a reasonable basis to believe that the premises were unoccupied, thus preempting the only conceivable basis for the ensuing safety sweep for concealed persons.
The government counters that the safety sweep was lawful under the exigent circumstances "exception" to the warrant requirement, see, e.g., Steagald v. United States, 451 U.S. 204, 212, 101 S. Ct. 1642, 1647, 68 L. Ed. 2d 38 (1981); United States v. Curzi, 867 F.2d 36, 41 (1st Cir.1989), because the officers could not be sure that the premises were unoccupied, and they knew that Daoust was a convicted felon, with a criminal record for assaultive conduct, that there was at least one firearm in the Daoust residence and that Daoust associated with a suspected cocaine dealer. The government principally relies on United States v. Castillo, 844 F.2d 1379 (9th Cir.1988).[11]
1. Security Sweeps
The court examines the soundness of the silent premise underlying the defendant's contention; namely, that the issues implicated by the forcible entry and the safety sweep are controlled by the same constitutional constraints.[12]
a. Protective Sweeps
The analysis begins with an examination of analogous precedent relating to "protective sweeps."[13]
The Supreme Court has not recognized any general "protective sweep" exception *53 to the warrant requirement. See generally Comment, Clean Sweeps: Protecting Officer Safety and Preventing the Imminent Destruction of Evidence, 55 U.Chi.L.Rev. 684 (1988). Nor has this court sought to create one. Our view has been and remains exactly opposite: "a `protective sweep' is `no more lightly taken than any other instance where the government seeks to justify an unwarranted search.'" United States v. Gerry, 845 F.2d 34, 36 (1st Cir.1988) (quoting United States v. Hatcher, 680 F.2d 438, 443 (6th Cir. 1982)). Without benefit of search warrants, security sweeps are constitutionally impermissible unless (a) supported by probable cause, and (b) justified by consent, exigency, or some other acceptable reason for bypassing the usual constraints of the fourth amendment. See United States v. Gerry, 845 F.2d at 36; United States v. Veillette, 778 F.2d 899, 902-03 (1st Cir.1985), cert. denied, 476 U.S. 1115, 106 S. Ct. 1970, 90 L. Ed. 2d 654 (1986).
United States v. Curzi, 867 F.2d 36, 41 (1st Cir.1989) (textual emphasis added).
Curzi involved a protective sweep[14] following the execution of a warrant for the arrest of a person other than the owner of the residence. Although the police had ample opportunity to obtain a search warrant before entering the defendant-owner's home, Curzi, 867 F.2d at 42; cf. United States v. Veillette, 778 F.2d 899 (1st Cir. 1985), cert. denied, 476 U.S. 1115, 106 S. Ct. 1970, 90 L. Ed. 2d 654 (1986), they did not attempt to do so, Curzi, 867 F.2d at 42. Judge Selya accordingly acknowledged in Curzi that some "acceptable reason for bypassing the usual constraints of the fourth amendment" is necessary to justify a protective sweep in the absence of a search warrant. Curzi, 867 F.2d at 41.[15] Absent consent, exigent circumstances, or a search warrant, the Curzi court unexceptionably struck down the protective sweep as a violation of the Warrant Clause of the Fourth Amendment. Curzi, 867 F.2d at 41-46, aff'g, 699 F. Supp. 995 (D.Mass.1988).
b. Safety Sweeps
Curzi is inapposite to the present analysis. The Curzi protective sweep, conducted incident to the execution of a warrant for the arrest of a person other than the owner of the premises, clearly was unconstitutional under Steagald, absent either consent or exigent circumstances. Steagald, 451 U.S. at 213, 101 S. Ct. at 1648. Just as clearly, Steagald does not control the constitutionality of the present safety sweep, which was conducted incident to the execution of a search warrant. Steagald in fact explains the constitutional significance of the distinction between Curzi and *54 the present case.[16]
Because an arrest warrant authorizes the police to deprive a person of his liberty, it necessarily also authorizes a limited invasion of that person's privacy interest when it is necessary to arrest him in his home. This analysis, however, is plainly inapplicable when the police seek to use an arrest warrant as legal authority to enter the home of a third party to conduct a search. Such a warrant embodies no judicial determination whatsoever regarding the person whose home is to be searched.
Steagald, 451 U.S. at 214 n. 7, 101 S. Ct. at 1649 n. 7. See supra notes 10, 14, 15. On the other hand, the present case is essentially indistinguishable from Castillo,[17] except that the entry and protective sweep in Castillo were not conducted under the auspices of a search warrant, but incident to the execution of a warrant for the arrest of the owner of the premises. The search warrant in the present case provided no less protection than an arrest warrant would have afforded the defendant. See Payton v. New York, 445 U.S. 573, 602, 100 S. Ct. 1371, 1388, 63 L. Ed. 2d 639 (1980) ("It is true that an arrest warrant requirement may afford less protection than a search warrant requirement, but it will suffice to interpose the magistrate's determination of probable cause between the zealous officer and the citizen.")
The United States Supreme Court has yet to determine whether a valid search warrant implicitly authorizes a safety sweep of areas within the search premises which could conceal a person who might pose a risk to the safety of the officers while executing the warrant. Nevertheless, analogous Supreme Court precedent suggests that a safety sweep in the present circumstances was not violative of the fourth amendment. See, e.g., Michigan v. Long, 463 U.S. 1032, 103 S. Ct. 3469, 77 L. Ed. 2d 1201 (1983) (police may search passenger compartment of suspect's car on reasonable belief that the suspect poses danger to officers); Michigan v. Summers, 452 U.S. 692, 101 S. Ct. 2587, 69 L. Ed. 2d 340 (1981) (no violation of fourth amendment safeguards against unreasonable seizures where police require suspect to re-enter own house and to remain there during execution of search warrant); Chimel v. California, 395 U.S. 752, 89 S. Ct. 2034, 23 L. Ed. 2d 685 (1969) (warrantless search of suspect's house, extending beyond area within which suspect may reach weapon or destroy evidence, held invalid); Terry v. Ohio, 392 U.S. 1, 88 S. Ct. 1868, 20 L. Ed. 2d 889 (1968) ("stop and frisk," on reasonable belief suspect may be armed and dangerous, held valid seizure of suspect's person).
Reasonableness is the ultimate test of any search and seizure under the fourth amendment. See Michigan v. Summers, 452 U.S. at 699-700, 101 S. Ct. at 2592-2593 ("... the Court was applying the ultimate standard of reasonableness embodied in the Fourth Amendment"). Summers recognizes *55 that reasonableness depends upon "... both the character of the official intrusion and its justification." Id. at 701, 101 S. Ct. at 2593. As the Supreme Court observed in Summers:
Of prime importance in assessing the intrusion is the fact that the police had obtained a warrant to search respondent's house for contraband. A neutral and detached magistrate had found probable cause to believe that the law was being violated in that house and had authorized a substantial invasion of the privacy of the persons who resided there. The detention of one of the residents while the premises were searched, although admittedly a significant restraint on his liberty, was surely less intrusive than the search itself.
Id. at 701, 101 S. Ct. at 2593 (emphasis added) (footnote omitted).
Summers relied principally upon the prophylaxis of the probable cause determination by a neutral magistrate prior to the issuance of the warrant to search the premises within which the owner was detained. The initial detention of the owner of the search premises in Summers was predicated on his "... connection [to those premises,] ... [which gave] the ... officer[s] an easily identifiable and certain basis for determining that suspicion of criminal activity justifie[d] ... [plaintiff's] detention...." Summers, 452 U.S. at 703-704, 101 S. Ct. at 2594-2595 (emphasis added). Similarly, the officers executing the search warrant in the Daoust residence were left with no constitutionally significant discretion, inasmuch as the search warrant itself specified the object and scope of the search, and the independent probable cause determination by a neutral judicial officerthat there was a firearm on the premises of a convicted felon provided an objective basis for a reasonable suspicion of risk to the safety of the officers while executing the search warrant.[18]
Following several unsuccessful precautionary investigations aimed at locating the defendant, at his residence and elsewhere, cf. Brown, 556 F.2d at 305 (§ 3109 case), the officers determined that a superficial sweep for concealed persons was essential to their safety because they could not reasonably be assured that there would be no other person inside the house while they executed the search warrant, see Excerpts of Proceedings on Hearing on Defendant's Motion to Suppress Evidence, at 5, 9, 12, 17, 19, 22. MacMaster, who was in charge of the search party, testified: "If I saw a wide-open space, then I could scan with my eyes. But when I see rooms, I'm going to want to go in those rooms." Id. at 16-17. On redirect examination, MacMaster was asked: "Had you known for a fact, absolute fact, that there was no one in that residence, as the leader of a search team, would you have authorized any agents to look anyplace other than but that one kitchen for the gun?" MacMaster answered, "No, I would not have." Id. at 17.
All fourth amendment safeguards against unreasonable governmental intrusions upon the privacy of the people in their homes must be faithfully observed, see, e.g., Castillo, 866 F.2d at 1079 ("It is *56 our fervent hope that every police officer made aware of this decision will understand that `routine' violations of the [C]onstitution will in all cases result in the exclusion of evidence and may compel the courts to release a guilty person.") Nevertheless, in these circumstances it was not unreasonable to conduct a superficial safety sweep for persons who might have been concealed in the Daoust residence. Under the auspices of the particular probable cause determinations supporting the search warrant in this case, and given the fact that all prudent alternatives had been exhausted, it was reasonable for the officers to conduct a superficial safety sweep for concealed persons immediately upon entering the premises because there was no other means by which the safety of the officers could be reasonably assured.
4. Seizure of Other Evidence in Kitchen
The presence of the officers in the kitchen was essential to the execution of their mandate to seize the handgun from the ceiling above the kitchen sink. There the black powder musket and the ammunition clip were inadvertently discovered in "plain view," and their incriminating nature was immediately apparent. These items were lawfully seized.[19]See United States v. Johnston, 784 F.2d at 419.
Accordingly, the motion to suppress was in all respects DENIED.
NOTES
[*] Of the First Circuit, sitting by designation.
[1] Defendant's ex-wife told Sperry that the defendant had no telephone. Earlier that summer Sperry had made at least one unsuccessful attempt to obtain a telephone listing in defendant's name.
[2] The critical focus for present purposes is upon the first element: whether Draper had a "prior justification for being" in the upstairs bedroom when he observed the three long guns. There is no contention and no evidence that these guns were not discovered "inadvertently," or that their evidential value was not immediately apparent. See also Texas v. Brown, 460 U.S. 730, 741-42, 103 S. Ct. 1535, 1542-43, 75 L. Ed. 2d 502 (1983) (seizure "presumptively reasonable" where there is probable cause to believe property is associated with criminal activity) (plurality opinion).
[3] Daoust does not contest the constitutionality of the observation which MacMaster made of the handgun at Sperry's invitation on August 24, 1987, nor has either party addressed the constitutionality of that incursion upon the curtilage of Daoust's home. In any event, MacMaster also included in his affidavit hearsay information concerning Sperry's observation of the handgun on August 21, 1987, which itself provides sufficient support for the MacMaster affidavit. See Franks v. Delaware, 438 U.S. 154, 165, 98 S. Ct. 2674, 2681, 57 L. Ed. 2d 667 (1978) ("probable cause may be founded upon hearsay").
[4] Moreover, courts have excused incomplete compliance with "knock and announce" requirements where full compliance would amount to a futile gesture, as when officers know or reasonably believe that the premises are vacant. See, e.g., Jackson, 354 F.2d at 981-82 (court declines to find unreasonableness where officers knocked and "hollered ... police," waited ten seconds and, receiving no response, forced entry to execute arrest warrant); United States v. Brown, 556 F.2d 304, 305 (5th Cir.1977) (officers knock and announce identity, but not purpose, and wait for over an hour before forcing entry to execute search warrant); Payne v. United States, 508 F.2d 1391, 1394 (5th Cir.) (futile to require officers to await refusal of admittance to unoccupied dwelling), cert. denied, 423 U.S. 933, 96 S. Ct. 287, 46 L. Ed. 2d 263 (1975). Cf. United States v. Agrusa, 541 F.2d 690, 697-98 (8th Cir.1976) ("[U]nannounced and forcible entries into vacant premises, even homes, in order to conduct a search, are constitutional in the absence of exigent circumstances, provided that the search and seizure is pursuant to warrant and reasonable under the circumstances.") (emphasis in original) (vacant business premises forcibly entered pursuant to court order to install electronic intercepts) (dictum), cert. denied, 429 U.S. 1045, 97 S. Ct. 751, 50 L. Ed. 2d 759 (1977). But cf. Miller, 357 U.S. at 306-310, 78 S. Ct. at 1194-96 (failure to announce authority and purpose before forcing entry to effect warrantless arrest of occupant violated District of Columbia criteria assumed to be identical to § 3109). See also infra pt. II, 2, b & notes 5 & 6.
[5] Mr. Justice Brennan, writing for four dissenting Justices, vigorously challenged the sufficiency of the evidence to support a finding of exigent circumstances. Ker, 374 at 60-63, 83 S. Ct. at 1643-1645 (dissenting opinion). The dissent expressed the view also that a fourth amendment "knock and announce" rule had been violated by the failure of the police to announce their presence and purpose before entering. Id. at 53, 83 S. Ct. at 1639 (dissenting opinion).
[6] In Sabbath v. United States, 391 U.S. 585, 591 n. 8, 88 S. Ct. 1755, 1759 n. 8, 20 L. Ed. 2d 828 (1968), the Court indicated that Ker indeed had not settled the constitutional question. "Exceptions to any possible constitutional rule relating to announcement and entry have been recognized [by the dissent in Ker]" (emphasis added). This conclusion is supported by the dissent in Payton v. New York, 445 U.S. 573, 603-20, 100 S. Ct. 1371, 1388-97, 63 L. Ed. 2d 639 (1980) (White, J., dissenting). Payton held that the police must obtain a warrant in order to make a routine felony arrest of a suspect in his own home. 445 U.S. at 602-03, 100 S.Ct. at 1388-89 (plurality opinion). The dissenting opinion of Mr. Justice White, joined by the Chief Justice and Mr. Justice Rehnquist, argues that, under the common law, which is "highly relevant to the present scope of the Fourth Amendment," id. at 604, 100 S. Ct. at 1389, the police were required only to announce their presence and to demand, and be denied, admittance before forcibly entering a suspect's home to effect a daytime felony arrest. Id. at 616, 100 S. Ct. at 1395. These views find support in the plurality opinion in Ker. See Ker, 374 U.S. at 38, 83 S. Ct. at 1632 (exigent circumstances) (plurality opinion).
[7] See, e.g., United States v. Baker, 638 F.2d 198, 202 n. 7 (10th Cir.1980) ("knock-announce" rule incorporated "to some extent" in fourth amendment) (dictum); United States v. Valenzuela, 596 F.2d 824, 830 (9th Cir.) (same) (dictum), cert. denied, 441 U.S. 965, 99 S. Ct. 2415, 60 L. Ed. 2d 1071 (1979); United States v. Murrie, 534 F.2d 695, 698 (6th Cir.1976) (fourth amendment incorporates all elements of § 3109) (dictum); United States v. Bustamante-Gamez, 488 F.2d 4, 9 (9th Cir.1973) (requirements of § 3109 incorporated, "to some extent," in fourth amendment), cert. denied, 416 U.S. 970, 94 S. Ct. 1993, 40 L. Ed. 2d 559 (1974); United States v. Mapp, 476 F.2d 67, 75 (2d Cir.1973) (merger of § 3109 and fourth amendment) (citing United States v. Manning, 448 F.2d 992, 1002 (2d Cir.) (en banc rehearing), cert. denied, 404 U.S. 995, 92 S. Ct. 541, 30 L. Ed. 2d 548 (1971)); United States ex rel. Manduchi v. Tracy, 350 F.2d 658, 660-61 (3d Cir.) (forcible entry incident to execution of search warrant, after knocking and waiting "a few seconds," not unreasonable in circumstances; § 3109 held inapplicable), cert. denied, 382 U.S. 943, 86 S. Ct. 390, 15 L. Ed. 2d 353 (1965).
[8] Prevention of Needless Destruction
The care with which the officers forced their way into the Daoust residence avoided any unnecessary damage to the premises. The defendant has not suggested any other means by which the search warrant could have been executed in a timely manner by less destructive means in the circumstances confronting these officers.
Of course, in different circumstances, as where the premises are in fact occupied, announcement of the police purpose, i.e., execution of the search warrant, could dispel an occupant's anxiety that the police entry was unauthorized. There is no doubt that this would be a closer case had there not been ample reason for the police to conclude (correctly), on the basis of their previous visits and the absence of any response to their knocking and announcement of their presence and identity, either that the premises were vacant or that further announcement would elicit no response.
ii. Prevention of Unnecessary Intrusions Upon Privacy
The lawful execution of a search warrant occasions a significant intrusion upon privacy even though the premises are vacant. The courts must be especially vigilant in circumstances which are conducive to a clandestine general search of unattended papers and effects. In the present case there is no evidence that the officers exceeded the scope of the search warrant, except as concerns the safety sweep for concealed persons. See text infra at p. 22 et seq.
iii. Reducing Potential for Violence
The risk of unnecessary violence in the wake of an unannounced forcible entry is reduced most effectively by an announcement of the police presence, rather than by announcement of their specific purpose. In the circumstances of the present case it would have been more prudent for the officers to announce their purpose notwithstanding the likelihood that the premises were vacant or that any occupant would not respond. Nevertheless, failure to do so occasioned no unnecessary damage to the premises, no avoidable intrusion upon privacy, and no increased risk of violence.
[9] The United States Supreme Court has not determined that the fourth amendment incorporates the particular "knock and announce" procedures delineated in § 3109. See Sabbath v. United States, 391 U.S. 585, 591 n. 8, 88 S. Ct. 1755, 1759 n. 8, 20 L. Ed. 2d 828 (1968) ("Exceptions to any possible constitutional rule relating to announcement and entry have been recognized....") (emphasis added); 2 W. LaFave, Search and Seizure § 4.8(a), at 271. See supra note 6. But cf. Miller, 357 U.S. at 306-310, 78 S. Ct. at 1194-96 (applying local District of Columbia criteria identical to § 3109, in exercise of supervisory power of court) (dictum).
[10] The term "security sweep" encompasses "protective sweeps" and "safety sweeps." The term "safety sweep" is used to indicate a superficial sweep for concealed persons, conducted incident to the execution of a warrant to search the premises for evidence. A "safety sweep" differs fundamentally from a "protective sweep," by which is meant a premises search incident either to a warrantless arrest on probable cause, or to a warranted arrest of a person other than the owner of the premises, see, e.g., Steagald v. United States, 451 U.S. 204, 101 S. Ct. 1642, 68 L. Ed. 2d 38 (1981); United States v. Curzi, 867 F.2d 36 (1st Cir.1989), or to a warrantless search of the same premises. The distinction is important. A search warrant assures that a detached magistrate has found probable cause to enter and search at least some portion of the premises. A "protective sweep," on the other hand, is conducted incident to a warrantless search, or a warrantless arrest, or to the execution of a warrant for the arrest of a person other than the owner of the premises, none of which entails any determination by a neutral magistrate that there is probable cause either to enter, or to search, the premises for any purpose. See Steagald, 451 U.S. at 214 n. 7, 101 S. Ct. at 1648 n. 7.
[11] Prior to the filing of the government's "Supplemental Memorandum," United States v. Castillo, 844 F.2d 1379 (9th Cir.1988), was superseded by United States v. Castillo, 866 F.2d 1071 (9th Cir.1988).
[12] Other questionable assumptions underpin the defendant's position as well. For example, can the failure of the police to announce their specific purpose, after knocking and announcing their presence, be excused only on the basis of a reasonable belief that the premises were unoccupied? In the present circumstances a reasonable person might well conclude that announcement of the specific police purpose and authority would have been futile even if the premises were occupied; in other words, that anyone who might have been inside was not about to admit them. Cf. Jackson, 354 F.2d at 982 ("Ten seconds might be a short time for him (defendant-occupant) to reach both doors (outside door and apartment door), but ten seconds of silence in this case could mean that the occupant had not even started, and hence was not going to.") It would seem reasonable in the present circumstances for the officers to conclude that several minutes was enough time to allow an occupant to admit them, and to infer from the lack any response either that the premises were unoccupied or that any occupant intended to refuse them admittance. See United States v. Bustamante-Gamez, 488 F.2d 4, 11 (9th Cir.1973) (§ 3109 case: "refusal of admittance" generally is to be implied; test is whether reasonable man would believe that admittance had been refused), cert. denied, 416 U.S. 970, 94 S. Ct. 1993, 40 L. Ed. 2d 559 (1974); McClure v. United States, 332 F.2d 19, 22 (9th Cir.1964) ("[R]efusal of admittance contemplated by [section 3109] ... will often times be present only by implication.") (footnote omitted), cert. denied, 380 U.S. 945, 85 S. Ct. 1027, 13 L. Ed. 2d 963 (1965). It is clear, however, that the officers need not only have concluded that the premises were unoccupied, as there was no way that the mere absence of a response, and the lack of indicia of occupancy, could assure them that no one was inside the residence. And where the safety of the officers is at stake it is reasonable that they be allowed to employ the precaution of a cursory safety sweep to assure that they are not at unnecessary risk during the execution of a search warrant.
Of course, where an announcement of police purpose is required, the police are not free to disregard it. See, e.g., Jackson, 354 F.2d at 982 ("There should have been a reference to the warrant.") Absent a specific statutory mandate, however, officers attempting to execute a valid search warrant, after having been unable to raise the owner on numerous occasions, violate no constitutional standard of reasonableness in these circumstances by forcibly entering the premises without first announcing their specific purpose. That is to say, the court has found no authority which suggests that a fourth amendment reasonableness test requires an announcement of the specific police purpose in all circumstances.
[13] See supra note 10.
[14] The First Circuit in Curzi described a "protective sweep" conducted incident to the execution of an arrest warrant.
When we allude to a protective sweep, we refer, in general, to the right of arresting officers to conduct a limited search of part or all of the premises in question for purposes of security or evidence preservation. We agree, in principle, with the Second Circuit's formulation of the protective sweep doctrine:
Law enforcement officers may conduct a security check a quick and limited pass through the premises to check for third persons without a warrant when making an arrest on private premises when they reasonably fear that other persons are lurking within who may pose a threat to their safety or are likely to destroy evidence.
United States v. Escobar, 805 F.2d 68, 71 (2d Cir.1986). See generally United States v. Gerry, 845 F.2d 34, 36 (1st Cir.1988); United States v. Veillette, 778 F.2d 899, 902 & n. 1 (1st Cir.1985), cert. denied, 476 U.S. 1115, 106 S. Ct. 1970, 90 L. Ed. 2d 654 (1986).
Curzi, 867 F.2d at 39, n. 2. Although Curzi does not differentiate between a "protective sweep" and a "safety sweep," it is clear from its facts, as well as those in Escobar, that the focus in Curzi was on a security sweep (however denominated) incident to some law enforcement action other than the execution of a search warrant. See supra note 10.
[15] The First Circuit followed the lead in Steagald v. United States, 451 U.S. 204, 101 S. Ct. 1642, 68 L. Ed. 2d 38 (1981). Curzi, 867 F.2d at 39. Steagald, like Curzi, dealt with the "... narrow issue ... whether an arrest warrant as opposed to a search warrant is adequate to protect the Fourth Amendment interests of persons not named in the warrant, when their homes are searched without their consent and in the absence of exigent circumstances." Steagald, 451 U.S. at 212, 101 S. Ct. at 1647 (emphasis added).
[16] More precisely, perhaps, Steagald demonstrates the constitutional significance of the distinction between Curzi and Castillo, 866 F.2d 1071 (9th Cir.1988). Of course, Curzi and Castillo are readily reconcilable, nevertheless, on the basis that "... the arrest warrant [in Curzi] was inadequate protection for the privacy rights of a resident not named therein," Curzi, 867 F.2d at 39 (emphasis added), whereas in Castillo there was a valid warrant for the arrest of the owner of the premises. See also Steagald, 451 U.S. at 214 n. 7, 101 S. Ct. at 1648 n. 7.
[17] The defendants in Castillo were believed to be involved in a large and dangerous cocaine conspiracy, whereas the present record merely evidences that the officers were investigating the defendant's association with a suspected cocaine trafficker as to whom the record is silent concerning the volume of suspected drug activity, and there is no direct evidence that the suspected cocaine trafficker was believed to be violent. Cf. United States v. Flickinger, 573 F.2d 1349, 1355 (9th Cir.) ("when the police do not have a reasonable basis for believing the suspect is armed beyond his alleged participation in non-violent criminal activity, that fact alone is insufficient to demonstrate exigency"), cert. denied, 439 U.S. 836, 99 S. Ct. 119, 58 L. Ed. 2d 132 (1978), overruled on standard of review, United States v. McConney, 728 F.2d 1195, 1205 (9th Cir.), cert. denied, 469 U.S. 824, 105 S. Ct. 101, 83 L. Ed. 2d 46 (1984). Flickinger concerned warrantless arrests, while the case at bar concerns a safety sweep pursuant to a search warrant. On the other hand, Daoust's felony conviction and record of assaultive criminal conduct gave the officers concrete cause for caution upon entering Daoust's residence, where at least one firearm was known to be present.
[18] Castillo itself upheld a protective sweep on the basis of a reasonable belief that "there might be other persons on the premises who could pose some danger to [the officers]." Castillo, 866 F.2d at 1079 (emphasis added). See also United States v. Gardner, 627 F.2d 906, 909-10 (9th Cir.1980). ("[T]he Government must be able to `point to specific and articulable facts which, taken together with rational inferences from those facts, [would] reasonably warrant [the warrantless] intrusion.'") (footnote omitted in original) (quoting United States v. Dugger, 603 F.2d 97, 99 (9th Cir.1979)).
Moreover, unlike Castillo, the evidence in the present case would not support a finding that these officers collectively understood that the execution of a search warrant inside a residence invariably permits or requires a safety sweep. At the suppression hearing, Officers Appleton, Sperry and MacMaster testified that it is standard practice to conduct a security sweep for concealed persons incident to the execution of a search warrant, unless the officers can be sure that no one is inside the premises. See, e.g., Excerpts of Proceedings on Hearing on Defendant's Motion to Suppress Evidence (Excerpts of Proceedings), at 3-4, 5, 7, 8, 10, 14. Their testimony differed significantly from the "flip remarks" in Castillo, 866 F.2d at 1078-79 (officer testifies that it was "standard procedure to do a protective sweep of the premises"). But see Excerpts of Proceedings, at 18 (testimony of Officer Draper).
[19] The court rejects the contention that all items seized from the residence must be suppressed because the search was flagrantly overbroad. See United States v. Whitten, 706 F.2d 1000, 1010 (9th Cir.1983), cert. denied, 465 U.S. 1100, 104 S. Ct. 1593, 80 L. Ed. 2d 125 (1984). The search was not overbroad. Even if the safety sweep of the second floor had been unlawful, there is no suggestion whatever that the officers "searched" for any evidence. Rather, the officers conducted a superficial safety sweep for concealed persons who might pose a danger to the officers during their execution of the search warrant. Whether or not the safety sweep of the second floor was valid, the "plain view" discovery of the musket and the ammunition clip in the kitchen area was unaffected.
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366 F. Supp. 215 (1973)
Joseph F. ZIMMER, Plaintiff,
v.
WELLS MANAGEMENT CORP. et al., Defendants.
No. 69 Civ. 2503.
United States District Court, S. D. New York, Civil Division.
July 31, 1973.
*216 Schwartzman & Green, New York City (Benjamin H. Schwartzman, New York City, of counsel), for plaintiff.
Herrick, Feinstein, Mendelson & Abramson, New York City (Donald E. Nawi, New York City, of counsel), Clune & O'Brien, Mineola, N.Y. (James M. O'Brien, Mineola, N. Y., of counsel), for defendants.
MEMORANDUM AND ORDER
WHITMAN KNAPP, District Judge.
This case was tried without a jury. On June 7, 1973, I dismissed from the bench plaintiff's first cause of action but found for the plaintiff on his second cause of action based on breach of an employment contract. Pursuant to 28 U.S.C. § 1332(b) I assessed costs against the plaintiff because his verdict could not have been expected to exceed $10,000. Defendant now seeks to dissuade me from sustaining the second cause of action; I decline to be dissuaded.
The parties have now stipulated that plaintiff's damages resulting from defendant's breach amount to $4364.63. The sole issues remaining are:
1. Whether judgment is to be entered against both defendants Pro Data Computer Services, Inc. and Wells Management Corp., or only against the latter and
2. the correct time span on which to compute the interest to which plaintiff is concededly entitled.
On the first issue, I find that the plaintiff has failed to establish that defendant Wells Management Corp. assumed any obligation on the employment contract between defendant Pro Data and the plaintiff.
On the second issue, problems are presented as to both the proper starting point from which interest should be calculated, and the proper end-point.
As to the starting point, CPLR § 5001 defines that as "the earliest ascertainable date the cause of action existed, except that interest upon damages incurred thereafter shall be computed from the date incurred. Whether such damages were incurred at various times, interest shall be computed upon each item from the date it was incurred or upon all of the damages from a single reasonable intermediate date."
Here the breach concededly occurred on February 14, 1969 the date plaintiff was discharged but plaintiff was not on that date entitled to the full balance of his salary. Presumably his salary was paid in weekly, bi-weekly, monthly or annual installments. Accordingly, he is entitled to interest on each unreceived salary check from the date that each check would have been paid but for the breach, or alternatively, to interest from a single reasonable intermediate date. In view of the fact that the record as it now stands does not indicate the frequency of plaintiff's salary payments, and that neither counsel has supplied such information, in order to avoid further delay and expense I will in my discretion award interest from June 17, 1969 the midpoint between defendant's breach and the expiration date of the contract.
As to the date through which the interest should be computed, defendant contends that interest should stop running as of the earliest date that defendant allegedly offered to "settle" the actions and was rejected by plaintiff.
Plaintiff denies that any firm offer of settlement was ever advanced by defendant. This issue of fact need not be resolved by the Court however, because defendant does not contend that any tender was ever made pursuant to the requirements of CPLR Rule 3219, or that a proper offer to liquidate damages conditionally was made under Rule 3220, or even that a proper written offer to compromise was made under Rule 3221. According to the Commentary accompanying Rule 3221, C3221:3, Professor Wachtell, New York Practice Under the CPLR (Third Ed.) 317-319, and the case law, only a formal tender will stop the running of interest. In this case defendant does not claim any such tender.
*217 Judgment to be entered against defendant Pro-Data Computer Services, Inc., with interest from June 17, 1969. Complaint dismissed against the other defendants. Costs to defendants.
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366 F. Supp. 1089 (1973)
TULIA FEEDLOT, INC., Plaintiff,
v.
UNITED STATES of America, Defendant.
Civ. A. No. 5-1119.
United States District Court, N. D. Texas, Lubbock Division.
November 30, 1973.
Clarence P. Brazill, Jr., Nelson, McCleskey, Harriger & Brazill, Lubbock, Tex., for plaintiff.
Frank D. McCown, U. S. Atty., Fort Worth, Tex., Robert B. Wilson, Asst. U. S. Atty., Lubbock, Tex., Fleming T. de-Graffenried, Atty., Tax Div., U. S. Dept. of Justice, Dallas, Tex., for defendant.
MEMORANDUM OPINION
WOODWARD, District Judge.
The above case came on to be tried before the court, without a jury, on the 31st day of October, 1973, with all parties being present and being represented by counsel in open court. After hearing and considering the evidence and argument of counsel and the respective briefs filed by the parties, the court files this Memorandum Opinion which shall constitute the court's Findings of Fact and Conclusions of Law.
The plaintiff is a Texas corporation engaged in the business of farming, cattle feeding, and the custom feeding of cattle for its customers and has been so engaged each and every year since about the year 1962. The business of the corporation has increased from a capacity of feeding about 5,000 head at its inception to a capacity of about 28,000 head at the present time. The plaintiff, in *1090 addition to custom feeding for its customers, feeds its own cattle and its farming operations produces feed for cattle in the feed yards and for grazing. The corporation lost money in the first two years of its operation and lost money again in 1968, 1970, and 1971, but made substantial profits in the other years.
Normally these operations are financed by financial institutions which require a cash payment from the borrower of approximately 30% of the cost of the cattle and the financial institution then loans the money for the balance of the purchase price of the cattle and for the necessary cost of feed, which amounts to about $100 per head. This business necessarily requires large sums of money and credit, especially with respect to the financing by the plaintiff of its own cattle feeding operations.
From the year 1966 forward there were eleven directors and principal stockholders of the corporation who owned all of the 3,400 outstanding shares of stock of the corporation, except about 22 shares owned by employees as minority stockholders. One of the directors, a Mr. Adams, shared his ownership of the stock with his son and in 1970 and subsequent years the number of principal stockholders has been increased by one or two but at all times critical to the determination of this case, the eleven referred to have owned practically all of the stock.
The plaintiff corporation is on an accrual basis for federal income tax purposes and has its fiscal year ending August 31st. The income tax return on Form 1120 was filed for this corporation for the fiscal year ending August 31, 1970 and in the return it was shown that the corporation sustained a loss of $6,309.07 and that there was no income tax liability. An audit of this return was made by the Commissioner of Internal Revenue Service who asserted a deficiency in the amount of $23,798.71 and the plaintiff paid this assessment on April 6, 1972. On May 29, 1972, plaintiff filed a claim for refund which was disallowed by the Commissioner on September 29, 1972, and this action is brought by the plaintiff to recover the assessment so paid. Accordingly, this court has jurisdiction pursuant to 28 U. S.C. § 1346(a)(1).
The deficiency was assessed because the Commissioner disallowed as a deductible expense of the business the sum of $54,000 which had been paid to the principal stockholders and directors during this fiscal year. Specifically the directors had signed an instrument of guaranty wherein they guaranteed to the Plainview Production Credit Association the payment of any indebtedness owing by Tulia Feedlot, Inc. to that association. Each person's liability was limited to $150,000, with the exception that Mr. Adams and his son guaranteed $75,000 each. The amount of the fee paid, and taken as a business expense by the corporation, was 3% of the amount of the guarantee while the amount of the guarantee of each such stockholder-director was proportionate to his percentage of ownership of the stock of the corporation. The testimony in the suit and the minutes of the board of directors indicate that this fee was to be paid annually.
These directors and stockholders had on many occasions previously executed guaranty agreements on loans made to Tulia Feedlot, Inc., and in each instance their guarantee was proportionate to their ownership of the shares of the stock in the corporation. These guarantees were: $5,000 each in 1964 to the First National Bank of Tulia, $8,000 in 1964-1965 to the First National Bank of Tulia, $45,000 in 1967 or 1968 to the First National Bank of Tulia, $91,000 on January 20, 1970 to secure a $1.1 million dollar loan from the First National Bank of Tulia, $125,000 to secure a $1.5 million dollar loan to Plainview Production Credit Association on March 10, 1970, and $150,000 guarantee each to secure a loan from said association in the amount of $1.8 million dollars on July 28, 1970. In addition, John Hancock Mutual Life Insurance Company made a *1091 loan of $350,000 in 1968 to the corporation, the payment of which was similarly guaranteed by these directors-stockholders.
Each of these instruments of guaranty was executed by the stockholder-directors without any fee, payment, or compensation to them except for the 3% fee paid to them by the corporation for their guaranty of the $1.8 million dollar loan. However, there had been many previous discussions among the members of the board of directors that such fees should be paid and the board of directors considered the authorization of such fees for several of the guaranties above listed but it was not until the $1.8 million dollar loan was obtained that the fee was actually authorized and paid.
The stockholder-directors were not required to offer collateral to support their guarantee but the corporation secured the loan with various mortgages and other security instruments covering its cattle and certain stored feed. The John Hancock loan was secured by a mortgage on real estate.
An officer of the First National Bank of Tulia testified that although the corporation was considered to be in good financial shape that the bank would not have made any of the loans involved unless the guarantees were received by the bank insuring individual liability on the part of the stockholder-directors. Similarly an officer of the Plainview Production Credit Association stated that the loans made by the association to the plaintiff would not have been made without these guarantees.
There is evidence that although this business is not considered to be "risky," that the "ups and downs" of the cattle market did create a condition that made it necessary, from a lender's point of view, to secure these loans rather than to depend upon the assets of the corporation alone to repay the indebtedness.
Although there is evidence indicating that the corporation could have stayed in business without getting its line of credit from the association extended upward from $1.5 million dollars to $1.8 million dollars, it is obvious that this type of business could not be successfully carried on and enlarged by the plaintiff corporation without adequate and heavy financing.
The shareholder-directors who testified stated that, although they had executed similar guarantees in the past, they would not have signed the $150,000 guarantee unless they received some remuneration. By the execution of these guarantees the stockholders-directors provided a valuable and necessary service to the corporation and at the same time decreased their individual borrowing capacities because this guarantee would be listed on their financial statements as a liability, thereby reducing their net worth.
Although there is no direct evidence as to what was the usual and customary fee for guaranteeing such loans, the board of directors of the plaintiff corporation had discussed this question on many occasions and in doing so took into consideration the risk involved, the nature of the operations of the corporation, the fact that their individual lines of credit would be restricted and the current rate of interest charged by the banks and associations for these loans. It was finally agreed that the 3% fee would be charged, as it was the lowest figure upon which all the directors could agree.
The Government contends that the payment of these fees to the stockholder-directors was a distribution of income in the nature of a dividend rather than a business expense because the amount of the fees was proportionate to their percentage of ownership of the stock of the corporation. Plaintiff contends that the payment of the fees was necessary, that it was done in the ordinary course of business, that the amount of the fee was reasonable and, therefore, that the deduction should be allowed.
*1092 The payment of amounts to the stockholders of the corporation in proportion to their ownership of the stock of the corporation constitutes prima facie evidence that the payments were dividends. But the plaintiff contends that the evidence in this case rebuts this prima facie presumption of a dividend. The court is in agreement with the plaintiff.
First of all, the fee of 3% of the amount guaranteed, under all of the facts and circumstances of this case, was reasonable. It was resasonably related to the then current interest rates and the amount of risk involved. Further, it was reasonable in light of the adverse effects on the borrowing capacity of each of the guarantors. Significantly, there is no evidence in the record that the directors of the corporation determined the amount of the fee after consideration of its effect on the amount of income tax that would have to be paid for the year 1970. To the contrary it appears that the fee was charged and the amount thereof was determined on considerations other than the resulting income tax liability to Tulia Feedlot, Inc.
Secondly the payment of such a fee was necessary. Without the loan the business could not have been successfully operated and the loans would not have been made in this case unless they were guaranteed by the directors. Further, the testimony indicates that the directors would not have guaranteed the loan which is in question in this case without the payment of a fee. Therefore, in order to operate and expand its business in an efficient manner, the plaintiff was required to pay the fee in this case.
It therefore appears that the plaintiff could properly deduct a fee made to a guarantor of a loan it obtained from a financial institution under these circumstances. But the question has been raised as to what portion of the fee should be allowed as a deduction for the year 1970. It should be noted that the guaranties are each dated July 28, 1970 and call for the guarantee of the payment of the indebtedness of Tulia Feedlot, Inc. to the Plainview Production Credit Association to the extent of $150,000 and that it was agreed by the directors of the plaintiff corporation that this would be an annual fee. These payments were made about one month before the termination of the corporate fiscal year. As the corporation was on an accrual basis for the purposes of income tax computations, the deduction was allowable in the taxable year in which all the events fixing liability occurred. 26 C.F.R. § 1.461-1(a)(2). The Certified Public Accountant who supervises plaintiff's records testified that, under the above test, the guarantor's fee accrued in the fiscal year ending August 31, 1970 and that the fee was thus deductible in that fiscal year. The fee was authorized and paid during the taxable year ending August 31, 1970, thus all the events determining the fact and amount of liability occurred during that year. This court is convinced that, under the above Internal Revenue Service regulation, the $54,000 in fees was fully deductible in the taxable year ending August 31, 1970.
Accordingly, it is ordered that a proposed judgment will be prepared by the attorney for the plaintiff and submitted to the attorney for the Government for approval as to form. Interest is allowed in accordance with law and all costs are taxes against the defendant.
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46 F.2d 91 (1930)
In re McALLISTER-MOHLER CO.
No. 6924.
District Court, S. D. Ohio, E. D.
June 12, 1930.
*92 *93 *94 *95 *96 *97 *98 *99 Arnold, Wright, Purpus & Harlor, of Columbus, Ohio, for petitioner.
Hedges, Hoover & Tingley, and Watson, Davis & Joseph, of Columbus, Ohio, for trustee.
HOUGH, District Judge.
Petition in review dismissed, and findings and conclusions of referee approved and confirmed, upon authority of Wells v. Realty Co. (C. C. A.) 12 F.(2d) 237 and Kothe, Trustee, v. R. C. Taylor Trust, 280 U.S. 224, 50 S. Ct. 142, 74 L. Ed. 382.
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305 F. Supp. 125 (1969)
UNITED STATES of America
v.
Valentine GREEN, Katherine Czarnik, Patricia Ann Kennedy, Jill Boskey, Linda Forest and Barbara Webster, Defendants.
No. M 18-65.
United States District Court S. D. New York.
September 26, 1969.
*126 Robert M. Morgenthau, U. S. Atty., John F. Pollard, Asst. U. S. Atty., New York City, for plaintiff.
Frederick B. Boyden, New York City, for defendants Green, Czarnik, Kennedy and Boskey.
William M. Kunstler, and Edward Carl Broege, Jr., New York City, Law Center for Constitutional Rights, for defendants Forest and Webster.
MOTLEY, District Judge.
Statement of Facts
On July 3, 1969, defendants were observed at an outdoor rally at Rockefeller *127 Plaza throwing alleged records of the Selective Service System in the air. A complaint was filed on that day before the United States Commissioner for the Southern District of New York, charging all six defendants with a very serious offense, in that they
"unlawfully, wilfully and knowingly did receive, conceal and retain without authority records of a department and agency of the United States, to wit, Local Boards 5 through 17 of the Selective Service System located at 321 West 44th Street, New York knowing the said records to be stolen, with intent to convert them to their own use,"
in violation of 18 U.S.C.A. §§ 2, 641. [Complaint of Thomas J. O'Toole, Special Agent, Federal Bureau of Investigation]. If convicted of this offense, the defendants may possibly be fined $10,000 or be imprisoned for ten years. 18 U.S.C.A. § 641.
Each was held in custody on $2,500 bail. Defendants Forest and Webster posted bail and were released on July 5, 1969, and the others similarly were set free on July 7, 1969. At that time, the government consented to extensions of bail limits with respect to all defendants, including, severally, extensions from New Jersey to California. The Commissioner cancelled all bail on September 9, 1969; he ordered defendants Forest and Webster continued in their own recognizance, and permitted them to travel throughout the continental United States.
The Commissioner scheduled a preliminary examination for all defendants to be held on July 8, 1969. This was adjourned by agreement of all counsel until July 22, 1969. Subsequently, the government requested, and was granted, postponements on four occasions: July 22, August 7, August 19, and September 9, 1969. The final adjournment secured by the government was until September 30, 1969, the day after the government's proposed grand jury investigation of the defendants.
Counsel for defendants Forest and Webster opposed all adjournments of the preliminary examination subsequent to July 22, 1969. Counsel for defendants Green, Czarnik, Kennedy, and Boskey consented to all adjournments up until September 9, 1969.
Only defendants Czarnik, Boskey, Forest, and Webster appeared in person at the scheduled preliminary examination on September 9, 1969. Defendants Kennedy and Green were represented by counsel. The four defendants who appeared in person on September 9, 1969 were there served with subpoenas ordering them to appear before a grand jury of the Southern District of New York, in regard to an alleged violation of 50 App. U.S.C.A. § 462, on September 29, 1969.
Service of the subpoenas occurred "immediately prior to the beginning of the soon aborted proceeding," [Defs' Memorandum In Support of Application That Subpoenas Be Quashed, p. 1], apparently "outside the courtroom, presided over by the United States Commissioner." [Government's Affidavit in Opposition, p. 5].
All six defendants moved by order to show cause dated September 12, 1969 and signed by Hon. Marvin E. Frankel, United States District Judge, to dismiss the complaints against them because of unreasonable delay in affording them an opportunity for a preliminary examination pursuant to Rule 5(c) Federal Rules of Criminal Procedure, or, in the alternative, 18 U.S.C.A. § 3060 (1969). Defendants Czarnik, Boskey, Forest, and Webster also moved by the same order to show cause to quash the grand jury subpoenas, on several grounds: that they were immune to service of the subpoenas under the rule of Lamb v. Schmitt, 285 U.S. 222, 52 S. Ct. 317, 76 L. Ed. 720 (1932); that the service of the subpoenas placed an intolerable burden on their "privilege" of having a preliminary examination; and that the government *128 has used the subpoenas to harass the defendants and that the subpoenas have consequently had a "chilling" effect on their exercise of First Amendment rights of political expression, as discussed in Dombrowski v. Pfister, 380 U.S. 479, 85 S. Ct. 1116, 14 L. Ed. 2d 22 (1965).
We turn first to the question of the validity of the service of the grand jury subpoenas upon four of the defendants.
The Service of the Subpoenas
In Lamb, an attorney who was a resident of Illinois, was served with process in Mississippi in a related civil suit to the one in which he was initially appearing. The Court denied him immunity from service of process because the second suit was intimately connected with the first, at the same time endorsing
"[t]he general rule that witnesses, suitors, and their attorneys, while in attendance in connection with the conduct of one suit are immune from service of process in another, * * *." 285 U.S. at 225, 52 S.Ct. at 318.
The Court also spoke of the genesis of the rule of immunity as arising from the solicitude for "the voluntary attendance of those whose presence is necessary or convenient to the judicial administration in the pending litigation." 285 U.S. at 225, 52 S. Ct. at 318. See also In re Equitable Plan Company, 277 F.2d 319, 320 (2 Cir.1960) (Friendly, J.). In doing so, it was considering the fear that out-of-state counsel might have of being served with process in a foreign jurisdiction. The rule of immunity was seen as generally applicable to persons ordinarily without the jurisdiction of a court, and, therefore, necessarily not amenable to its service of process, who appeared within that jurisdiction solely with respect to the cause there already underway. Such persons were viewed as giving up the "safety" of one jurisdiction to serve the interests of justice, and their natural state of immunity was held to be generally respected.
However, defendants can claim affinity neither with the facts of Lamb nor its logical and judicial extensions, in support of the allegation that their "right" to a preliminary examination is eroded in this instance by the fear of being compelled to testify before the grand jury. They assert that they might not voluntarily attend the examination armed with the knowledge of possible liability to service of the subpoenas. But the service of process of the grand jury is nationwide, Rule 17(e) (1), Federal Rules of Criminal Procedure, and defendants could have been validly served with the subpoenas in question anywhere in the United States. Cf. United States v. Aronson, 319 F.2d 48, 52 (2 Cir.1963), cert denied 375 U.S. 920, 84 S. Ct. 264, 11 L. Ed. 2d 164 (1963), rehearing denied, 375 U.S. 982, 84 S. Ct. 477, 11 L. Ed. 2d 428 (1964). Thus, defendants' "fear" of attendance at the preliminary examination is not at all analogous to any deterrent to court attendance operating with respect to suitors in a case like Lamb. Here, there is no jurisdiction in which petitioners could have avoided service of process as an original matter, because their conditions of bail restricted their travel to the continental United States.
The Supreme Court in Lamb also stressed the integrity of the judicial process, not the convenience of the parties, in deciding when and where to confer immunity from service of process.
"The test is whether the immunity itself, if allowed, would so obstruct judicial administration in the very cause for the protection of which it is invoked as to justify withholding it." 285 U.S. at 228, 52 S.Ct. at 319, 76 L. Ed. 720.
And the Court further expressed the concern that a judicial proceeding not be fractionated and its energies dispersed *129 by competing claims to the attention of parties, witnesses, and court alike:
"* * * [T]he due administration of justice requires that a court shall not permit interference with the progress of a cause pending before it, by the service of process in other suits." 285 U.S. at 225, 52 S. Ct. at 318.
It is difficult to conceive of a case in which the "obstruction" to judicial administration, and hence the justification for withholding the immunity, would be greater than that here. Certainly the primary interest of justice in both the preliminary examination and the grand jury investigation, is the determination of probable cause to believe that the defendants are guilty of some crime. If the subpoenas were to be quashed, this determination would be seriously hampered: new subpoenas would have to be issued to compel attendance at a delayed grand jury investigation.
On the other hand, while it is true that the government effectuated service with considerably greater ease than if defendants had not been gathered together in one place, such taking advantage, or even creation, of a convenient situation does not amount to an interference with the due administration of justice. Since, as already indicated, defendants were not lured into jurisdictional quicksands that imperiled their rights or privileges, the government's unseemly eagerness in securing service of process cannot be held to be the type of activity meant to be prevented in Lamb.
This court does not decide the threshold question of whether Lamb applies initially to the present facts, because of the strong likelihood that defendants have been served in the same cause as that involved in the complaint, as contended by the government. Defendants claim, to the contrary, that the scope of the grand jury inquiry will be much broader than the fact situation in the complaint, as evidenced by the subpoenas pursuant to 50 App. U.S.C.A. § 462. That statute, it is true, is a veritable dragnet for offenses of protean nature, and includes prohibitions on interference with respect to all manner of Selective Service procedures. However, it does proscribe the activity of any person "who forges, alters, knowingly destroys, knowingly mutilates, or in any manner changes any * * * certificate * * *" issued by the Selective Service System. 50 App. U.S.C.A. § 462 (b) (3). Such an offense is almost identical with the one charged in the complaint against defendants. Because of this court's decision that the rule of immunity in Lamb does not apply to these defendants, it does not feel compelled to decide whether defendants have been served in "another" cause.
Defendants also invoke Dombrowski v. Pfister, 380 U.S. 479, 85 S. Ct. 1116, 14 L. Ed. 2d 22 (1965), in support of their motion to quash the grand jury subpoenas. They claim that the government is improperly seeking to discourage their political activity in opposition to the draft, by calling them as grand jury witnesses. The subpoenas, consequently, are deemed to "chill" a protected area of First Amendment expression.
Beyond a perfunctory and undocumented insinuation of governmental misconduct, there is insufficient evidence in the record to indicate a deliberate scheme of governmental harassment or persecution of the defendants. They concede that their charges depend upon a suspicion, or "inference," of misuse of the inquisitorial power, derived, it would seem, largely from the unpopularity of their views and practices with the authorities. However, they concede as well that this court is not the proper instrument to initially produce support for their belief, and
"that a preliminary examination * * * might go a long way toward providing * * * a hearing * * *
to test the legitimacy of this inference." [Defendants' Memorandum In *130 Support of Application That Subpoenas Be Quashed, p. 8, ftn. 5; p. 8].
Without a more specific showing of governmental misconduct, the factual requirements of Dombrowski have not been met.
"[I]t does not appear that the [defendants] `have been threatened withany injury other than that incidental to every criminal proceeding brought lawfully and in good faith, * * *.' Douglas v. City of Jeannette, 319 U.S. 157, 164, 63 S. Ct. 877, 87 L. Ed. 1324 [1943]." Dombrowski v. Pfister, 380 U.S. at 485, 85 S.Ct. at 1120.
Moreover, there are no allegations that the statute with regard to which defendants were subpoenaed, for all its breadth and far-ranging scope, is void on constitutional grounds. There are no representations that the prosecution of defendants is not intended to be completed in good faith; indeed, the impending grand jury investigation would indicate the government's steadfastness in this purpose. Finally, suspicions of the government's bad faith are diluted by its consent to generous extensions of bail limits with respect to all defendants. Cf. Cameron v. Johnson, 390 U.S. 611, 619, 88 S. Ct. 1335, 20 L. Ed. 2d 182 (1967); DuBois Clubs of America v. Clark, 389 U.S. 309, 312, 88 S. Ct. 450, 19 L. Ed. 2d 546 (1967).
This court is not asked to enjoin the government's prosecution of defendants, as was the Supreme Court in Dombrowski. That is one indication that defendants' First Amendment freedoms are not felt to be seriously threatened. In fact, the question of impropriety with regard to the issuance of the subpoenas is only colorable in conjunction with the delay in granting the preliminary examination. Even as to that, there is no evidence of any nefarious intent to deprive defendants of any rights, constitutional or otherwise.
There is, however, a disquieting history of governmental laxity with respect to the holding of preliminary examinations in the Southern District of New York. See infra, note 1. This is not to be condoned, especially where, as here, governmental practices may imperceptibly lead to a "chilling" effect on First Amendment freedom of expression.
In the light of this court's order, dated September 24, 1969, with respect to the holding of a preliminary examination on or before September 29, 1969, the motion to quash the subpoenas is denied.
The Preliminary Examination
On the oral argument, the government justified its request for the five postponements of the preliminary examination on the grounds of the complex fact situation alleged to be present here. Because a large number of persons were at the July 3, 1969 rally at which defendants were observed, and because not all of them had draft records in their possession, it is argued that it is difficult for the government to identify the parties guilty of the offense charged.
This justification is most damning, however. The reason for the government's delayuncertainty of the guilt of the named defendantsis the very reason for a speedy preliminary examination. An innocent accused should not have an arrest hanging over her head for more than 60 days without an opportunity for a determination of probable cause for her loss of freedom and her continuing interest to the authorities. The preliminary examination is not intended as a vehicle for establishing guilt beyond a reasonable doubt. If the government cannot show that it had probable cause to arrest the defendants, then its arrests were unlawful and the defendants should go free.
The government also says in its opposing affidavit (pp. 4-5) that on each occasion on which it requested a delay, "it indicated to the Court its unpreparedness to proceed, stating as its chief reasons, the then unavailability of evidence taken from each defendant at the time immediately preceding their [sic] arrest, which was undergoing laboratory and *131 other tests, and the unavailability of necessary civilian witnesses then on summer vacation." But the government has now moved to bring these defendants before a grand jury on September 29, one day before the date set by the Commissioner for a preliminary hearing. Having taken this step, it seems proper to assume that the government will be prepared on that date to present evidence to the grand jury sufficient for it to find probable cause to believe that these defendants have committed the crime charged.
Neither this court nor the government should furnish evidence to support the charge that the prosecution has been engaging here in the frequently used tactic of delaying the preliminary examination out of existence.[1] Congress recognized that commissioners have also routinely acquiesced in the government's requests for adjournments, despite the firm requirement of Rule 5(c) that a hearing be held within a "reasonable time.[2]"
Congress sought to remedy the lack of a speedy hearing by enacting the Federal Magistrates Act, P.L. 90-578, 82 Stat. 1107 (October 17, 1968), 1 U.S. Code Cong. & Admin.News, p. 1280. [Hereinafter referred to as the "Act"]. Title 18 U.S.C.A. § 3060 (1964)[3] was amended by § 303 of the Act to require the commissioner to order a hearing within 10 days for in-custody defendants, and within 20 days for defendants who are released, unless defense counsel consents to the delay or exceptional circumstances are found by the district court.[4]
*132 In effect, the Act mandates a speedy determination of probable cause within precise limitations of time.[5] The Act's restrictions on the commissioner's discretion to grant postponements may not, however, lead to more numerous preliminary examinations: the government can avoid the necessity for holding them either by obtaining indictments more quickly, so that the preliminary examinations would become moot,[6] or by letting the applicable time period lapse, allowing the complaints to be dismissed, and proceeding by indictment at some later date;[7] and defense counsel may not take advantage of the defendant's right to a speedy hearing, because of ignorance or choice.[8] Given the preliminary examination's great importance to the administration of justice,[9] it is to be hoped nevertheless that there will be a marked increase in its use.
Defendants Webster and Forest have not consented to a postponement of the preliminary examination since July 22, 1969, more than 60 days ago. Such a long delay clearly violates the requirement of Rule 5(c) that a hearing be held within a reasonable time, even without the guidance of the Federal Magistrates Act. As indicated previously, and stated by Judge Weinstein, "[i]nconvenience to the prosecutor is never an excuse for denying the preliminary examination." United States ex rel. Wheeler v. Flood, 269 F. Supp. 194, 198 (E.D.N.Y.1967).
*133 Although defendants Green, Czarnik, Kennedy, and Boskey consented to postponements up until September 9, 1969, the proposed adjournment to September 30, 1969 will have been 21 days. Such a delay is not so clearly unreasonable. However, on these facts it is unreasonable because the government is uncertain as to who "did receive, conceal and retain without authority records of a department and agency of the United States."[10] The government's procrastination is all the more deplorable when the accused are deeply involved in political activities, and their arrest grew out of a protest, aimed against the Vietnamese War. An extended, languorous prosecution (even if the accused are ultimately found to be innocent) would definitely have a "chilling" effect on the desire of these defendants, and others, to engage in their fundamental right to protest governmental policies. Cf. Dombrowski v. Pfister, 380 U.S. 479, 85 S. Ct. 1116, 14 L. Ed. 2d 22 (1965), and discussion supra.
In addition, this court holds that 18 U.S.C.A. § 3060 (1969), as amended by the Act, has been in effect in the Southern District of New York since its enactment on October 17, 1968, and that the proposed 21-day postponement of the preliminary examination is violative of it.
The government argues that § 3060 does not take effect in this district until a federal magistrate has assumed office, and that no magistrate has done so yet. The plain language and legislative history, as well as the unmistakable policy, of § 3060 all point to the enactment date of the Act as the effective date of this Section.
Section 403 of the Act states:
"Except as otherwise provided by sections 401 and 402, this Act shall take effect on the date of its enactment."
Section 402(a)[11] seeks to insure that commissioners will continue to sit up until the time that the magistrates assume office. Section 402(b) prevents the existing commissioners from exercising any of the new, expanded powers given to the more qualified magistrates.[12] It does so by deferring implementation of the expanded powers until the first magistrate has assumed office,[13] or until 3 years have elapsed, whichever occurs first.
Section 3060 does not give any new powers to the magistrates that the old commissioners did not have; rather, it "clarifies existing law with regard to the preliminary hearing." H.R.Rep. No. 1629, 90th Cong., 2d Sess. 8 (1968), 3 U.S.Code Cong. & Admin.News at 4253, 4265 (1968); see S.Rep.No. 371, 90th Cong., 1st Sess. 33-36 (1967).
Congress could not have intended the bizarre result that a statute attempting to bring uniformity to the definition of "reasonable time",[14] would *134 have the opposite short-range effect of creating a patchwork of uneven contours of permissible delay in holding the preliminary examination. Districts with magistrates would apply the specific time limits of § 3060; those with commissioners would retain the old and indefinite time limits.
Finally, as defendants rightly argue, if § 3060 falls without § 403 of the Act, then § 403 is a nullity. For it is difficult to find any section that is more remote from the meaning of §§ 401 and 402 of the Act, than § 3060. See 8 J. Moore, Federal Practice at 11-12, ftn. 15.1 (by Cipes, 2d ed.) (Cum. Supp.1969) (Effective date is enactment date).
Therefore, this court holds that all the defendants have been denied a timely preliminary examination, according to the dictates of both Rule 5(c), Fed.R.Crim.P., and of § 3060. Violation of Rule 5(c) does not mandate dismissal of the complaint against defendants, but gives the court great flexibility in framing relief to aggrieved defendants. Cf. Blue v. United States, 119 U.S.App.D.C. 315, 342 F.2d 894 (1964), cert. denied, 380 U.S. 944, 85 S. Ct. 1029, 13 L. Ed. 2d 964 (1965); United States ex rel. Wheeler v. Flood, supra. Section 3060 does authorize dismissal of the complaint. However, because the government relied on the belief that § 3060 was not in effect in this district, and because a speedy determination of probable cause in this case is necessary to protect defendants' First Amendment freedom of expression, this court will not dismiss the complaint. Instead, the government will be required to afford each defendant an opportunity for a preliminary examination before the United States Commissioner on Monday, September 29, 1969, at a time prior to the appearance of any of the defendants before the grand jury investigation for which they have been subpoenaed on that day. If the government fails to comply with this order with respect to any defendant, the complaint will be dismissed and all conditions of release dissolved, with respect to that defendant. See Order of this court dated September 24, 1969.
NOTES
[1] It has been charged that prosecutors do everything in their power to delay the preliminary examination until after the indictment is obtained, because once the indictment has been returned, "[m]ost courts * * * deny [the defendant an opportunity to have a preliminary examination] on the ground that the issue of delay was mooted by indictment." United States ex rel. Wheeler v. Flood, 269 F. Supp. 194, 197 (E.D.N.Y.1967) (Weinstein, J.) (cases cited therein). See Statement of Professor Younger on the United States Commissioner System, Hearings of the Subcommittee on Improvements in Judicial Machinery, Senate Committee on the Judiciary, 89th Cong., 2d Sess., at 218-220 (Feb. 1966). See also Judge Weinfeld's statement that the preliminary examination
"has fallen into disuse, at least in the Southern District of New York [, and that he is] unaware of any instance in the last several years in which a defendant has been accorded a hearing. * * *" Second Circuit Judicial Conf.
Panel Discussion on the Problems of Long Criminal Trials, 34 F.R.D. 155, 165 (S.D.N.Y.1963).
A leading authority also observes that:
"While statistics compiled by the Administrative Office indicate an approximate 20 percent rate of preliminary hearings, a disproportionate number of these appear to be held in districts where the grand jury meets infrequently. In the Southern District of New York, for example, only a handful of preliminary hearings have been held in recent years." (Emphasis Supplied) 8 J. Moore, Federal Practice, ¶ 5.04[3], at 5-34, n. 13 (1969).
[2] S.Rep.No.371, 90th Cong., 1st Sess. 33 (1967). Fed.R.Crim.P. 5(c):
"[T]he commissioner shall hear evidence within a reasonable time."
[3] Old § 3060 was merely a directive to consult Fed.R.Crim.P. 5.
[4] 18 U.S.C.A. § 3060 (1969) [hereinafter referred to as Section 3060]:
"(b) * * * Except as provided by subsection (c) of this Section, * * * such examination shall be held within a reasonable time following initial appearance, but in any event not later than
(1) the tenth day following the date of the initial appearance of the arrested person before such officer if the arrested person is held in custody * * *; or
(2) the twentieth day following the date of the initial appearance if the arrested person is released from custody * * *.
"(c) With the consent of the arrested person, [after opportunity to consult counsel], the date fixed by the judge or magistrate for the preliminary examination may be a date later than that prescribed by subsection (b), or may be continued one or more times to a date subsequent to the date initially fixed therefor. In the absence of such consent of the accused, the date fixed for the preliminary hearing may be a date later than that prescribed by subsection (b), or may be continued to a date subsequent to the date initially fixed therefor, only upon the order of a judge of the appropriate United States district court after a finding that extraordinary circumstances exist, and that the delay of the preliminary hearing is indispensable to the interests of justice."
The government alleges no "extraordinary circumstances" to justify its delay of 21 days, from September 9September 30, 1969, and this court finds none to excuse such delay. See discussion, supra.
[5] "This procedure is designed to insure that a determination of probable cause is madeby either the magistrate, some other judicial officer, or the grand jurysoon after a person is taken into custody. No citizen should have his liberty restrained, even to the limited extent of being required to post bail or meet other conditions of release, unless some independent judicial determination has been made that the restraint is justified." S. Rep., supra note 2, at 34.
[6] See note 1, paragraph 1, supra.
[7] Section 3060(d) permits the government to indict after the dismissal of the complaint.
[8] "* * * [M]any defense counsel prefer to waive preliminary hearings since they may [otherwise] harden and preserve the government's case." United States ex rel. Wheeler v. Flood, 269 F. Supp. 194, 198 (1967).
[9] Judges and commentators have recognized the crucial function of the preliminary examination in the criminal process. Beyond its basic purpose of affording an expeditious determination of probable cause, it enables the defense counsel to discover a part of the government's case, and, through cross-examination of government witnesses, to expose its weaknesses or strengths. Either result can lead to the avoidance of a trial,because of the government's decision not to prosecute, or because of defense guilty pleas "a contingency which benefits the prosecution, the public, and the defense." Note, The Preliminary Examination in The Federal System: A Proposal For a Rule Change, 116 U. of Pa.L.Rev. 1416, 1419 (1968). For a collection of cases discussing the importance of the discovery function of the preliminary examination, see United States ex rel. Wheeler v. Flood, 269 F. Supp. 194, 198 (E.D.N.Y. 1967). See, e. g., Hearings on S. 3475 and S. 945 Before the Subcommittee on Improvements in Judicial Machinery, Senate Committee on the Judiciary, 89th Cong., 2d Sess., 90th Cong., 1st Sess. 132-147 (Statements of Sam Dash and Gerhard Mueller); 8 J. Moore, Federal Practice, ¶ 5.04[1], at 5-31 (2d ed. 1969); see also United States ex rel. Hughes v. Gault, 271 U.S. 142, 152, 46 S. Ct. 459, 70 L. Ed. 875 (1926) (concurring opinion of Justice Brandeis).
[10] Complaint, United States v. Valentine Green, et al., supra, at 1 (July 3, 1969).
[11] Section 401 is not discussed because it deals only with the mechanics of the transition to the new system and could not possibly refer to § 3060.
[12] A present commissioner does not have to be a lawyer, but a full-time magistrate must be (except in special circumstances)
"* * * a member in good standing of the bar of the highest court of the state in which he is to serve * * *." Section 631(b) (1) of the Act.
[13] At first glance it seems strange that the powers should vest as soon as the first magistrate is appointed. However, it becomes clear, when § 401(a) is read together with it: the commissioners' terms end as soon as the first magistrate assumes office.
[14] The evil sought to be remedied was the variance between the districts as to the meaning of `reasonable time': "Testimony before the Subcommittee on Improvements in Judicial Machinery, and the answers to questionnaires circulated by the subcommittee [sic] to all commissioners revealed that there is much uncertainty [among the districts], * * * and that there is a great variance from judicial district to district, and, indeed, even among commissioners in the same district * * *". S.Rep., supra note 2, at 33.
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The allegations of the amended complaint recite the following facts: That respondent was the duly appointed, qualified and acting administrator of the estate of Emily M. Whiting, deceased; that on or about February 8, 1929, letters of administration upon her estate were issued to defendant; that defendant caused a notice *Page 253
to creditors of said deceased to be published in the manner required by law, requiring all persons having claims against said deceased to exhibit them to said administrator at El Centro, California, said place being specified therein as his place of business, within four months from February 28, 1929, the last day for filing claims in said estate being June 28, 1929. That on June 15, 1929, appellant filed an original affidavit or verified claim (a copy of which was attached to the original complaint, marked exhibit A, and referred to in the amended complaint by reference only) with the Division of Labor Statistics and Law Enforcement in California, at its regular office in the Rowell Building, Fresno, California, setting forth certain items of wages due her from said estate for services performed in the city of Fresno.
A portion of the purported claim contains wording as follows: "Bureau of Labor Statistics of the State of California. Mrs. Lillian M. Jordan, Applicant, v. E.E. Keltz, Administrator of the Estate of Emily M. Whiting, Deceased, Respondent. Affidavit of Applicant." Then follows an affidavit setting forth the alleged facts supporting her claim for wages before the Bureau of Labor Statistics. The affidavit closes with this prayer: "Wherefore affiant prays that the wages claimed of $570.63 may be adjudged and decreed in these proceedings to be due and payable against the estate Emily M. Whiting, Deceased, etc."
That on June 15, 1929, a full, true and correct copy of said affidavit and claim, unverified, was served upon defendant administrator. On July 12, 1929, appellant attempted to file a claim, apparently in proper form, with respondent as such administrator but, the time of filing claims having expired, respondent refused to receive or file said claim, and so notified appellant.
The only allegation in plaintiff's complaint as to the presenting or filing of a creditor's claim against the estate is the allegation of filing the affidavit or claim with the Division of Labor Statistics and serving a copy thereof on respondent administrator.
The only question involved in this appeal is whether or not the filing of such an affidavit or claim in a proceeding before the Division of Labor Statistics and Law Enforcement, *Page 254
and the service of a copy thereof, unverified, upon the administrator, complied with the statute relating to the presenting and filing of claims against the estate of a decedent.
The statute provides that all claims arising upon contract must be filed or presented within a time limited in the notice to creditors, and any claim not so filed or presented is barred forever. (Code Civ. Proc., sec. 1493.) It further provides that no holder of any claim against an estate shall maintain any action thereon unless the claim is first filed with the clerk (of the court) or presented to the executor or administrator. (Code Civ. Proc., sec. 1500.)
[1] A complaint against an estate, stating a cause of action founded on contract, which does not aver that a claim for the cause of action sued on has been thus presented to the administrator, fails to state a cause of action. (Moore v.Steele, 149 Cal. 303 [86 P. 693]; Morrow v. Barker,119 Cal. 65 [51 P. 12]; Burke v. Maguire, 154 Cal. 456, 463 [98 P. 21].)
[2] Appellant claims that the filing of her verified claim with the Bureau of Labor Statistics in Fresno was a sufficient compliance with the statute, and relieved her of the necessity of filing a verified claim in the estate with the clerk of the court, or presenting a verified claim to the administrator of the estate, and cites as her authority Griffith v. Lewin,129 Cal. 596 [62 P. 172]; Guerian v. Joyce, 133 Cal. 405
[65 P. 972]. We see no merit to this contention.
Appellant relies upon the case of Doolittle v. McConnell,178 Cal. 697 [174 P. 305, 310], holding that a court may properly refuse "to hear minute technical objections based upon the supposed faulty verification of a claim made long after the commencement of the action and after the time for presentation of claims has expired". We do not believe the allegations of the complaint before us are similar to the facts in that case. The administrator, as a reasonable man, had a right to assume that the service of this copy of the affidavit and claim, as it was worded, was but a process of the Bureau of Labor Statistics, notifying the administrator of his right to be present and contest the claim before the bureau, and that a claim for the amount found might be subsequently filed in the estate. *Page 255
Under the circumstances, we are of the opinion that appellant has neither alleged, nor can she allege, facts sufficient to bring herself within the requirements of the statute.
The order of the trial court is affirmed.
Barnard, P.J., and Marks, J., concurred.
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IN THE COURT OF APPEALS OF NORTH CAROLINA
No. COA16-1002
Filed: 18 April 2017
Edgecombe County, No. 15 CRS 50277
STATE OF NORTH CAROLINA
v.
KENRICK J. BATTLE
Appeal by defendant from judgment entered 10 February 2016 by Judge
Wayland J. Sermons, Jr. in Edgecombe County Superior Court. Heard in the Court
of Appeals 22 March 2017.
Attorney General Joshua H. Stein, by Assistant Attorney General Joseph L.
Hyde, for the State.
William D. Spence for defendant-appellant.
TYSON, Judge.
Kenrick J. Battle (“Defendant”) appeals from judgment entered upon a jury’s
conviction of felonious possession of a firearm by a felon. We reverse the trial
court’s denial of Defendant’s motion to dismiss.
I. Background
On 3 February 2015, Edgecombe County Sheriff’s deputies arrived at a
residence in a rural part of the county in an attempt to locate Defendant. They
determined Defendant was not present inside the residence and left. The deputies
STATE V. BATTLE
Opinion of the Court
received a “tip” approximately fifteen minutes later, which caused them to establish
a perimeter around a large section of woods adjacent to the residence.
Deputy Kenneth Wooten deployed a canine, a Dutch Shepherd, “Max,” to
track human scent in the wooded area. Deputy Wooten testified Max is trained “to
track human beings that have fled from an area” and “indicate where someone is
hiding” by tracking a combination of human scent, crushed vegetation, and
sedimentation. Deputy Wooten further testified Max is trained to “ensure [he] is
not going to veer off of one track onto another,” and to remain on the original track
in the event he detects the scent of another human being.
Deputy Wooten took Max along a wood line and was accompanied by
Detective Greg Weeks. Max detected a human scent on a footpath, which led into
the woods. Max led the deputies and proceeded along the footpath, which ended
approximately fifteen to twenty yards from the beginning of the wood line. Max
continued to track into the woods, and led the deputies across a ditch and into a
dense thicket. While in the vegetation, Max raised his head and began sniffing the
air. This behavior, Deputy Wooten referred to as “air scenting,” indicated they were
“close to someone or something.” The deputies saw an “assault rifle” in front of
Max, which they retrieved and determined it was loaded.
Max began tracking away from the area from where the rifle was found. He
led the deputies through the woods, parallel to Highway 122. The deputies
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STATE V. BATTLE
Opinion of the Court
continued to follow Max parallel to the highway, until they came upon a ditch at the
edge of a field. A footprint was visible on the other side of the ditch. Max led the
deputies across the ditch, but lost the track. Another man, Anthony Lyons,
emerged from the woods at another location, while Max and the deputies were near
the ditch. Another deputy arrested Lyons at the perimeter of the woods.
The deputies and Max emerged from the woods after Max lost the track.
They gave the recovered rifle to their supervisor, and allowed Max to rest for
approximately five minutes. The deputies and Max returned to the ditch, where
Max had lost the track. According to Deputy Wooten, Max “immediately picked the
track back up,” and led the officers toward the highway. Max led the officers into
an area of extremely thick briars and began “air scenting.” Defendant was
discovered lying upon the ground. Deputy Wooten testified the distance between
where the rifle was recovered and Defendant was found was between seventy-five
and one hundred yards.
No evidence was presented regarding the ownership of the rifle. DNA swabs
that were taken from the rifle and compared to Defendant’s DNA were inconclusive.
The State did not present any fingerprint or additional evidence to connect
Defendant to the rifle.
The State presented evidence tending to show Defendant was previously
convicted of a felony offense, taking indecent liberties with a child, in 2009. The
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STATE V. BATTLE
Opinion of the Court
jury convicted Defendant of possession of a firearm by a felon. The trial court
sentenced Defendant to an active prison term of nineteen to thirty-two months.
Defendant appeals.
II. Jurisdiction
Jurisdiction lies in this Court from final judgment of the superior court
entered upon the jury’s verdict pursuant to N.C. Gen. Stat. §§ 7A-27(b)(1) and 15A-
1444(a) (2015).
III. Sufficiency of the Evidence
In his sole argument on appeal, Defendant argues the trial court erred by
denying his motion to dismiss the charge of possession of a firearm by a felon.
Defendant asserts the State presented insufficient evidence to show he possessed
the rifle found in the woods. We agree.
A. Standard of Review
“We review the trial court’s denial of Defendant’s motion to suppress de
novo.” State v. Sanders, 208 N.C. App. 142, 144, 701 S.E.2d 380, 382 (2010). Under
a de novo standard of review, this Court “considers the matter anew and freely
substitutes its own judgment for that of the trial court.” Id.
In ruling on a motion to dismiss for insufficiency of the evidence,
the trial court must consider the evidence in the light
most favorable to the State, drawing all reasonable
inferences in the State’s favor. All evidence, competent or
incompetent, must be considered. Any contradictions or
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Opinion of the Court
conflicts in the evidence are resolved in favor of the State,
and evidence unfavorable to the State is not considered.
In its analysis, the trial court must determine whether
there is substantial evidence (1) of each essential element
of the offense charged and (2) that defendant is the
perpetrator of the offense. Substantial evidence is such
relevant evidence as a reasonable mind might accept as
adequate to support a conclusion. When the evidence
raises no more than a suspicion of guilt, a motion to
dismiss should be granted. However, so long as the
evidence supports a reasonable inference of the
defendant’s guilt, a motion to dismiss is properly denied
even though the evidence also permits a reasonable
inference of the defendant’s innocence. The test for
sufficiency of the evidence is the same whether the
evidence is direct, circumstantial or both.
State v. Bradshaw, 366 N.C. 90, 92-93, 728 S.E.2d 345, 347 (2012) (internal citation
and quotation marks omitted).
B. Possession of the Firearm
To convict Defendant of felonious possession of a firearm by a felon, the State
must prove: (1) Defendant was previously convicted of a felony; and (2) Defendant
thereafter possessed a firearm. N.C. Gen. Stat. § 14-415.1 (2015); State v. Best, 214
N.C. App. 39, 45, 713 S.E.2d 556, 561, disc. review denied, 365 N.C. 361, 718 S.E.2d
397 (2011). Defendant does not challenge his status as a convicted felon. He argues
the State failed to present sufficient evidence he possessed the firearm the deputies
discovered in the woods.
Possession of a firearm may be actual or constructive. State v. Billinger, 213
N.C. App. 249, 253, 714 S.E.2d 201, 205 (2011). Our Court has explained:
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Opinion of the Court
A person has actual possession of a firearm if it is on his
person, he is aware of its presence, and either by himself
or together with others he has the power and intent to
control its disposition or use. In contrast, a person has
constructive possession of a firearm when, although not
having actual possession, the person has the intent and
capability to maintain control and dominion over the
firearm.
Id. at 253-54, 714 S.E.2d at 205.
“‘It is sometimes difficult to distinguish between evidence sufficient to carry a
case to the jury, and a mere scintilla, which only raises a suspicion or possibility of
the fact in issue.’” State v. Brooks, 136 N.C. App. 124, 129, 523 S.E.2d 704, 708
(1999) (quoting State v. Johnson, 199 N.C. 429, 154 S.E. 730 (1930)), disc. review
denied, 351 N.C. 475, 543 S.E.2d 496 (2000). If the evidence “is sufficient only to
raise a suspicion or conjecture as to either the commission of the offense or the
identity of the defendant as the perpetrator of it, the motion for nonsuit should be
allowed. This is true even though the suspicion so aroused by the evidence is
strong.” In re Vinson, 298 N.C. 640, 656-57, 260 S.E.2d 591, 602 (1979) (citations
omitted). Here, the testimonies of Deputy Wooten and Detective Weeks regarding
Max’s tracking behavior may raise a “strong suspicion” that Defendant possessed
the rifle, constructively or otherwise, “but [is] not sufficient to remove that issue
from the realm of suspicion and conjecture.” State v. Malloy, 309 N.C. 176, 179, 305
S.E.2d 718, 720 (1983).
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Opinion of the Court
Our Court has declined to uphold convictions based upon constructive
possession in cases where the defendant is not the sole occupant of the area where
the firearm is found, and no other incriminating evidence links the defendant to the
weapon. For example, Defendant cites State v. Bailey to support his argument the
State failed to present sufficient evidence to show he constructively possessed the
rifle. 233 N.C. App. 688, 757 S.E.2d 491, disc. review denied, 367 N.C. 789, 766
S.E.2d 678 (2014). In Bailey, officers responded to a report of gunshots at an
apartment complex, and saw a vehicle drive away. Id. at 689, 757 S.E.2d at 492.
Officers stopped the vehicle, which was owned and driven by the defendant’s
girlfriend. Id. The defendant was seated in the passenger’s seat and told the
officers that a firearm was located on the rear floorboard. Id. The firearm was
warm, had recently been fired, and was registered to the defendant’s girlfriend. Id.
A gunshot residue test taken of the defendant’s hands was inconclusive. Id. at 689-
90, 757 S.E.2d at 492. This Court held “the only evidence linking [the] defendant to
the rifle was his presence in the vehicle and his knowledge that the gun was in the
backseat[,]” and was insufficient to allow the jury to infer constructive possession.
Id. at 693, 757 S.E.2d at 494.
We acknowledge the officers’ testimonies that Max tracked an unknown
human scent from the wood line to the area where the rifle was recovered, and that
Max is trained not to veer off one human scent and onto another. However the rifle
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Opinion of the Court
was not found in Defendant’s physical possession or in the immediate area under
his “capability to maintain control and dominion over the firearm.” Billinger, 213
N.C. App at 254, 714 S.E.2d at 205. Another man was also present in the same
woods as Defendant, while the officers searched for Defendant. Furthermore, Max
lost the original track at the ditch, took a break to rest outside of the woods, and
then resumed tracking.
This Court has upheld a defendant’s conviction, where the defendant was
identified as the perpetrator by a tracking canine. State v. Green, 76 N.C. App. 642,
334 S.E.2d 263, disc. review denied, 315 N.C. 187, 340 S.E.2d 751 (1985). In Green,
the officers utilized two canines to investigate a breaking and entering and larceny
from a store. Id. at 643, 334 S.E.2d at 264-65. The canines were offered a “scent
source” at the crime scene, which consisted of gloves and shoes taken from the
defendant and the codefendant. Id. at 643, 334 S.E.2d at 265. One of the dogs, a
Doberman pinscher, tracked the scent to a location where two stolen microwave
ovens had been abandoned. Id. The Doberman was taken off the trail to protect the
dog from the cold rain. Id. The other dog, a Rottweiler, “then traced the scent along
the same path . . . to where the defendant and the codefendant were apprehended.”
Id.
The defendant in Green argued the trial court erred by admitting the dog
tracking evidence without testimony of the characteristics of the breeds, and by
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Opinion of the Court
failing to dismiss the charges of larceny and breaking and entering for insufficient
evidence. Id. Our Court held the trial court properly admitted the evidence and the
defendant’s motion to dismiss was properly denied. Id. at 646, 334 S.E.2d at 266.
In State v. Styles, 93 N.C. App. 596, 599, 379 S.E.2d 255, 258 (1989), two
bloodhounds tracked a human scent originating from the rape scene to the front
door of a trailer where the defendant was staying. The defendant argued on appeal
that the evidence was insufficient to convict him, because the victim was unable to
identify the defendant as the perpetrator of the rape. Id. at 603, 379 S.E.2d at 260.
Our Court disagreed, and explained “a bloodhound specially trained in
tracking human beings led a path from the front of the victim’s house to the culvert
where shoe prints were found and then to the trailer where the defendant was
staying.” Id. An expert testified the defendant’s shoes made the prints at the rape
scene and by the culvert. Id. at 600, 379 S.E.2d at 258. Additional expert testimony
showed hairs found and recovered at the scene were consistent with the defendant’s
hair. Id.
The facts of this case are distinguishable from those in both Green and Styles.
Here, the testimony of Max’s tracking behaviors was the sole testimony offered by
the State to establish that Defendant constructively possessed the rifle. In Styles,
hair and shoe print evidence was also presented to show Defendant was the
perpetrator. Id. In Green, the canines were offered a scent source of the defendant
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Opinion of the Court
and codefendant, and were tracking a known scent. Green, 76 N.C. App. at 643, 334
S.E.2d at 265. Further, unlike the facts in this case, nothing in Green and Styles
indicates the canine lost the track, took a break for a period of time, and then
resumed. Defendant was not alone in the immediate area where the rifle was
found. No other evidence, such as fingerprints, DNA, or ownership, linked
Defendant to the rifle or the site from which it was recovered.
The officers’ testimony is insufficient to establish any link between Defendant
and the firearm. The canine tracking evidence on an unknown scent fails to raise,
as a matter of law, a reasonable inference of either actual or constructive possession
of a firearm by Defendant as a convicted felon. Viewed in the light most favorable
to the State, the evidence raises only a “suspicion [or] conjecture” that Defendant
possessed the rifle. The trial court erred in denying Defendant’s motion to dismiss.
Malloy, 309 N.C. at 179, 305 S.E.2d at 720.
IV. Conclusion
After viewing the evidence in the light most favorable to the State, the
evidence is insufficient to raise or permit an inference that Defendant actually or
constructively possessed the rifle, and to “remove that issue from the realm of
suspicion and conjecture.” Id. The trial court erred by denying Defendant’s motion
to dismiss the charge of possession of a firearm by a felon.
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Opinion of the Court
The trial court’s judgment is reversed. This matter is remanded to the trial
court for entry of an order granting Defendant’s motion to dismiss. It is so ordered.
REVERSED AND REMANDED.
Judges ELMORE and DIETZ concur.
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1 Reported in 283 N.W. 750.
This action to recover for default of an administrator against his surety was commenced November 20, 1937. Final decree determining and directing distribution of the estate was entered November 14, 1929. Judgment was ordered below on the pleadings because the statute of limitations had run. The attempted appeal is from the order for judgment. (Judgment has not been entered.) That order is not appealable, and hence the appeal must be dismissed. State ex rel. Quale v. Penney,144 Minn. 463, 174 N.W. 611.
Inasmuch as we have heard the argument, it may not be amiss to say that the decision below appears correct under the rule of Ganser v. Ganser, 83 Minn. 199, 86 N.W. 18,85 A.S.R. 461.
Appeal dismissed.
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506 F. Supp. 1093 (1981)
TRUST CORPORATION OF MONTANA, Personal Representative of the Estate of Marlin Everett Wagner, Deceased, on behalf of Cindy Pilecki, Kirk Wagner, Mark Wagner and Daisy Wagner, the legal heirs of Marlin Everett Wagner, Deceased, Plaintiffs,
v.
PIPER AIRCRAFT CORPORATION, Defendant.
No. CV-79-51-GF.
United States District Court, D. Montana, Great Falls Division.
January 8, 1981.
*1094 Dennis Clarke, Smith, Baillie & Walsh, Great Falls, Mont., for plaintiffs.
Alexander Blewett, Jardine, Stephenson, Blewett & Weaver, Great Falls, Mont., for defendant.
MEMORANDUM
HATFIELD, District Judge.
This action is a result of an airplane crash on July 25, 1976, at the Butte, Montana airport. The airplane, piloted by Marlin Everett Wagner, shortly after lift-off struck a telephone wire and thereafter crashed, killing, or severely injuring all on board. Plaintiff, Trust Corporation of Montana, brings this action as personal representative of the estate of decedent Wagner. Defendant, Piper Aircraft Corporation, is incorporated in Pennsylvania and has its principal place of business in Florida. Jurisdiction is invoked pursuant to 28 U.S.C. § 1332 as the amount exceeds the sum of $10,000 exclusive of costs, and the parties are citizens of different states.
Plaintiff's action is founded on strict products liability. The theory of plaintiff's complaint is that defendant is strictly liable for damages allegedly caused by a defective restraint system. The restraint system lacked shoulder harnesses which plaintiff claims would have prevented injury upon impact.
The case has been dubbed a "second collision" action in which the defect, although not causing the crash, allegedly enhanced the injury.
Plaintiff, pursuant to Rule 12(f), F.R. Civ.P. has moved to strike defendant's third, fourth and fifth affirmative defenses on the grounds said defenses are insufficient as a matter of law. The defenses are that Wagner, the pilot of the ill-fated aircraft involved here, sustained injury as a result of his own contributory negligence; that Wagner assumed the risk of injury; and that Wagner sustained injury due to his own misuse of the aircraft.
Present in this case is the overriding issue of whether comparative liability principles should apply in "second collision" products liability actions. For the reasons stated hereinafter, I conclude that comparative liability should apply and that the defenses as framed should be stricken. Accordingly, plaintiff's motion is granted.
The law, while still evolving in this area, is generally that a manufacturer of a product is subject to strict liability where it can be shown that his product was defectively designed so that it was unreasonably dangerous to the consumer or user and caused injury. See, Brandenburger v. Toyota Motor Sales, 162 Mont. 506, 513 P.2d 268 (1973). Here then plaintiff must first prove the crash was survivable; second, that the lack of a shoulder harness system was a defect, unreasonably dangerous, and, finally, that the defect caused injury.
A second collision action is viable even though the cause of the accident was not the defective condition alleged to have enhanced the injuries. Brandenburger, supra. In a crashworthiness case such as this, plaintiff must prove that the defect, though not necessarily the proximate cause of the accident, was, at least, a substantial cause of the injuries. See, Fietzer v. Ford Motor Co., 590 F.2d 215 (7th Cir. 1978).
As to damage allocation, the Court of Appeals in the leading decision of Larsen v. General Motors Corp., 391 F.2d 495, 503 (8th Cir. 1968) ruled:
Any design defect not causing the accident would not subject the manufacturer to liability for the entire damage, but the manufacturer should be liable for that portion of the damage or injury caused by the defective design over and above the damage or injury that probably would have occurred as a result of the impact or collision absent the defective design.
The Montana Supreme Court followed the Larsen decision in Brandenburger, supra, 513 P.2d at 274.
In the instant case, plaintiff alleges essentially that he was subjected to enhanced injuries as a result of defendant's failure to provide a shoulder harness restraint system. *1095 Plaintiff contends that if a shoulder harness had been available for use, Wagner's injuries would have been greatly reduced, perhaps to the point of saving his life. Plaintiff admits that the cause of the crash was not the design defect alleged to have enhanced Wagner's injuries.
Defendant Piper contends that the lack of shoulder harnesses in this 1965 aircraft is not a design defect and did not proximately cause any of Wagner's injuries. Furthermore, Piper asserts that plaintiff's claim here is barred because of Wagner's contributory negligence, assumption of risk and misuse of the aircraft. Defendant maintains that pilot Wagner was grossly negligent in the operation of the aircraft. In particular, Piper alleges that Wagner attempted to take off from the Butte airport with the plane over weight and the air temperature too high. In addition, Piper states that Wagner realized the problem, attempted a right turn and struck a telephone wire with the right wing which cartwheeled the airplane and caused it to crash.
Returning now to the question of the application of comparative fault principles in a strict liability action in Montana,[1] a review of the pertinent law in other jurisdictions persuaded this court that the Montana Supreme Court, if confronted with the issue would adopt the doctrine of "comparative fault"[2] in products liability actions. Essentially, the doctrine recognizes that defendants are strictly liable for injury caused from defective products, except that damages, if any, are reduced in proportion to plaintiff's own contribution to his loss or injury. Product liability defendants may to this extent present evidence of plaintiff's culpable conduct as a partial defense.
Application of comparative principles to strict liability will not dilute the fundamental goals of strict liability. As the California Supreme Court stated when it adopted such principles in Daly v. General Motors, 144 Cal. Rptr. 380, 20 Cal. 3d 725, 575 P.2d 1162 (1978):
Plaintiffs will continue to be relieved of proving that the manufacturer or distributor was negligent in the production, design or dissemination of the article in question. Defendant's liability for injuries caused by a defective product remains strict. The principle of protecting the defenseless is likewise preserved, for plaintiff's recovery will be reduced only to the extent that his own lack of reasonable care contributed to his injury.
Daly, 144 Cal.Rptr. at 386, 575 P.2d at 1168.
In addition to the inherent fairness to all parties, another convincing reason to adopt comparative fault principles is that it relieves the inequities associated with absolute defenses which produce windfalls for manufacturers or absolute bars to asserting defenses which produce windfalls for plaintiffs.
Apportioning liability in products cases is sound, logical and inherently more equitable. Furthermore, the majority of states considering the issue have extended comparative principles to strict products liability.[3]Daly, supra, 144 Cal.Rptr. at 388, 575 P.2d at 1170.
*1096 Commentaries[4] have argued that the task of merging comparative fault principles in products liability is impossible. Plaintiff argues that contributory negligence can only be a defense to negligence, that it is theoretically distinct from principles of strict products liability, and that contributory negligence therefore cannot be a defense to strict liability.[5] It is true that strict products liability theory eschews injection of traditional negligence. However, as the Daly court points out, it is merely the insistence on precise and fixed definitions of legal concepts which creates the conceptual difficulties in blending the principles of strict products liability and traditional negligence. See, Daly, supra, 144 Cal.Rptr. at 385, 575 P.2d at 1167.
The concepts of contributory negligence, assumption of risk, and misuse of the product overlap conceptually. See, Baccelleri v. Hyster Co., 287 Or. 3, 597 P.2d 351, 354 (1979). Common to all these concepts is the existence of some type of blameworthy conduct on the part of plaintiff.
With the adoption of comparative fault principles the labels become less important as the trier of fact considers all blameworthy conduct which contributes to an injury, notwithstanding traditional labels. In addition, the harshness of the "all or nothing" legal effect connoted with these labels is ameliorated. Thus, this court rejects, as inconsistent with comparative fault concepts, the wooden formalism of fault related labels
... which either allows plaintiff to recover full damages, even though he was partially at fault, or which totally bars his recovery, even though the defendant was partially at fault....
Pan-Alaska Fisheries, Inc. v. Marine Const. & Design Co., 565 F.2d 1129, 1139 (9th Cir. 1977) and cases cited therein; see also, Daly v. General Motors Corp., supra. Such labels and principles are inconsistent with comparative fault concepts.
This court is confident that the Montana Supreme Court, when presented with the issue, will apply comparative fault to strict products liability actions. The Montana Supreme Court ruled in Oltz v. Toyota Motor Sales, 166 Mont. 217, 531 P.2d 1341 (1975), that contributory negligence was a proper defense in a second collision strict liability case where the plaintiff (driver of the automobile) was found to be grossly negligent. No other Montana case has been cited which squarely addresses contributory negligence in a second collision products liability action. The Oltz decision is consistent with the adoption of comparative fault, as that decision clearly recognized plaintiff's contribution to his own injury. Adoption of *1097 comparative fault does, however, change the harshness of contributory negligence as being a complete bar. Now, for instance, if the jury finds the defendant to be strictly liable, and also finds plaintiff's own fault contributed to 90% of his injury, the court will reduce the damage award by the percentage figure the jury has supplied.
The defense of assumption of risk was addressed in Brown v. North Am. Mfg. Co., 176 Mont. 98, 576 P.2d 711, 719 (1978). There, the Montana Supreme Court stated that strict products liability was not absolute liability. Rather, it is relevant in strict products liability cases to consider conduct of the plaintiff which may break the chain of causation and operate to bar recovery. The court, quoting approvingly from Comment "n" of 2 Restatement of Torts 2d, § 402A, stated:
... The form of contributory negligence which consists in voluntarily and unreasonably proceeding to encounter a known danger and commonly passes under the name of assumption of risk, is a defense under this section as in other cases of strict liability. If the user or consumer discovers the defect and is aware of the danger, and nevertheless proceeds unreasonably to make use of the product and is injured by it, he is barred from recovery.
The court made clear that assumption of risk is governed by the subjective standard, i. e., personal knowledge of the plaintiff in realizing the existence of the defect or danger. Only if plaintiff realizes the defect or danger and voluntarily and unreasonably exposes himself to it will the assumption of risk defense apply and bar recovery. Since Brown, the Montana Supreme Court has once again commented on the defense of assumption of risk.
In Kopischke v. First Continental Corp., Mont., 610 P.2d 668 (1980), a negligence case, the Montana Supreme Court stated in dicta that it would in the future follow the modern trend "and treat assumption of the risk like any other form of contributory negligence and apportion it under the comparative negligence statute." Kopishke, supra, 610 P.2d at 687. Thus it would appear the court has merged assumption of risk into the general scheme of liability assessment whereby the defense is just one of the factors to be considered in determining plaintiff's portion of fault.
This pronouncement by the court in Kopishke is a clear indication that the court would rule similarly, given the opportunity, in the products liability area. Such a ruling would be consistent with the national trend. Moreover, adoption of pure comparative fault necessarily entails the merger of assumption of risk (as a form of contributory negligence) into the general scheme of liability assessment according to degrees of fault.[6]See, Daly, supra, 144 Cal.Rptr. at 387, 575 P.2d at 1169.
The parties have not cited, and this court has not found, any Montana strict products liability case which discusses the defense of misuse of a product. Generally speaking, the law is that a manufacturer is not responsible for injuries resulting from abnormal or unintended use of his product if such use was not reasonable foreseeable. 1 Frumer and Friedman, Products Liability, § 15:01. Because the defense of misuse of the product necessarily involves foreseeability, the question becomes one of whether under these circumstances the crash and subsequent injuries were foreseeable.
Here the alleged design defect did not cause this accident. However, plaintiff alleges that the lack of shoulder harnesses was a substantial factor in causing the injuries. Furthermore, plaintiff persuasively contends that airplane crashes are readily foreseeable as an incident to normal and expected use. The conceptual difficulty here lies in applying the misuse doctrine to second collision cases.
Granted misuse of the product may have primarily caused the crash, but perhaps a substantial cause of the injuries was *1098 due to some defect associated with the airplane's crashworthiness. In Brandenburger, supra, the court said "While automobiles are not made for the purpose of colliding with each other, a frequent and inevitable contingency of normal automobile use will result in collisions and injury-producing impacts." 513 P.2d at 274. The same can be said with regard to airplane crashes. Abnormal or unintended use of a product merely constitutes culpable conduct on the part of plaintiff. If, as contended by defendant, the injury resulted from a totally unforeseeable misuse of the product, the defense of misuse is appropriate. Kroon v. Beech Aircraft Corp., 465 F. Supp. 1223, 1225 (M.D.Fla.1979); Kay v. Cessna Aircraft Co., 548 F.2d 1370 (9th Cir. 1977). The court cannot say at this time that the use of this aircraft in this manner was so unforeseeable as to result in a complete defense, although defendant's factual allegations on the extent of misuse, if proven, will certainly diminish recovery in proportion to the degree of pilot Wagner's culpable conduct. See, General Motors Corp. v. Hopkins, Tex., 548 S.W.2d 344 (1977).
Since the determination has been that plaintiff's fault can be compared to the manufacturer's liability for a defective product, the question becomes what conduct of plaintiff is to be compared.
Here plaintiff seeks to begin examination at the moment of impact, ignoring the events leading up to the crash. Defendant, on the other hand, argues for a more comprehensive view of the crash, which is to say a consideration of all plaintiff's conduct contributing to the crash.
Plaintiff's position boils down to this: that the accident-causing factors and the injury-causing factors are qualitatively different and must be considered separately. Plaintiff argues that this court should exclude evidence dealing with the nature and cause of the crash and allow only that evidence pertaining to the enhancement of injuries as a result of Piper's failure to provide shoulder harnesses. Although plaintiff's position has some merit in a second collision type case, the modern trend rejects this piecemeal approach. Rather, inquiry focuses on the product design as an integrated whole, and a consideration of all the factors that contributed to the event which caused the injury. Daly v. General Motors Corp., supra, 144 Cal.Rptr. at 393, 575 P.2d at 1175; Fietzer v. Ford Motor Co., 590 F.2d 215 (7th Cir. 1978).
The obligation of Piper to incorporate in its aircraft design an appropriate amount of crashworthiness cannot excuse the user from responsible operation. Similarly, since airplane crashes are foreseeable, an airplane manufacturer is not excused from a defective design which enhances injury or causes death in an otherwise survivable crash. Thus an examination of all the circumstances (eg. speed, angle, weight, etc.), prior to and after impact is proper in fairness to the parties. In short, all of plaintiff's conduct, regardless of labels attached to that conduct, is to be compared to defendant's liability. See, Pan-Alaska, etc. v. Marine Const. & Design Co., 565 F.2d 1129, 1139 (9th Cir. 1977).
CONCLUSION
Under the facts alleged, it is particularly appropriate in this case to apply comparative fault principles. Wagner's degree of responsibility for his own injuries must be an issue in the trial of the action against Piper under a second collision theory. Wagner should be held to assume responsibility for whatever portion of his injury is attributable to his own conduct. To disallow injection of plaintiff's own conduct in causing his injuries under these circumstances is to stretch products liability theory beyond the bounds of reason and justice, and to grant plaintiff an undeserved windfall. A ruling that any culpable conduct of pilot Wagner should not be considered by the court because such conduct would be labeled "contributory negligence" and as such be stricken by traditional products liability theory, would be to sanction a result wholly unreasonable and unacceptable to modern thinking in this area.
Under the facts alleged, the accident-causing fault of the pilot and the injurycausing *1099 defects of the manufacturer are to be compared equally. Both manufacturer Piper and pilot Wagner should be held responsible when, but for the action of both, injury would have been less or none at all. Each should bear the legal responsibility for his share of fault.
Therefore, plaintiff's motion to strike defendant's third, fourth and fifth affirmative defenses is granted. Conduct by the plaintiff which could be termed contributory negligence, assumption of risk, and misuse, shall in the future be used, if applicable, only to compare fault and reduce damages, if any are proved.
NOTES
[1] See, also, Zahrte v. Sturm, Ruger & Co. 498 F. Supp. 389 (D.Mont.1980), wherein Judge Murray predicted that if the Montana Supreme Court was presented with the issue, it would adopt comparative fault principles in products liability actions.
[2] In Pan-Alaska Fisheries, Inc. v. Marine Const. & Design Co., 565 F.2d 1129 (9th Cir. 1977) the court in discussing the doctrine of comparative fault stated:
... whether we use the term comparative fault, contributory negligence, comparative causation, or even comparative blameworthiness, we are merely beating around the semantical bush seeking to achieve an equitable method of allocating the responsibility for an injury or loss. It comes down to this: the defendant is strictly liable for the harm caused from his defective product, except that the award of damages shall be reduced in proportion to the plaintiff's contribution to his own loss or injury.
Id. at 1139.
[3] Jurisdictions applying comparative principles in strict liability actions are: Alaska, California, Florida, Idaho, Minnesota, Mississippi, New Hampshire, New Jersey, Oregon, Texas, Washington and Wisconsin. See, Edwards v. Sears, Roebuck & Co., 512 F.2d 276 (5th Cir. 1975); Sun Valley Airlines, Inc. v. Avco-Lycoming Corp., 411 F. Supp. 598 (D.Idaho 1976); Hagenbuch v. Snap-On Tools Corp., 339 F. Supp. 676 (D.N.H.1972); Butaud v. Suburban Marine & Sporting Goods, Inc., 555 P.2d 42 (Alaska 1976); Daly v. General Motors Corp., 20 Cal. 3d 725, 575 P.2d 1162, 144 Cal. Rptr. 380 (1978); West v. Caterpillar Tractor Co., 336 So. 2d 80 (Fla.1976); Busch v. Busch Constr., Inc., 262 N.W.2d 377 (Minn.1977); Thibault v. Sears, Roebuck & Co., 118 N.H. 802, 395 A.2d 843 (1978); Suter v. San Angelo Foundry & Mach. Co., 81 N.J. 150, 406 A.2d 140 (1979); Baccelleri v. Hyster Co., 287 Or. 3, 597 P.2d 351 (1978); Hamilton v. Motor Coach Indus., Inc., 560 S.W.2d 571 (Tex.1978); Berry v. Coleman Systems Co., 23 Wash.App. 622, 596 P.2d 1365 (1979); Dipple v. Sciano, 37 Wis. 2d 443, 155 N.W.2d 55 (1967). See also, Carestia, Comparative Principles and Products Liability in Montana, 41 Mont.L.Rev. 269 (1980).
[4] See, Daly v. General Motors Corp., 144 Cal. Rptr. 380, 20 Cal. 3d 725, 575 P.2d 1162 (1978).
[5] It is interesting to note that the defense of assumption of risk although recognized as a form of contributory negligence could, indeed, be asserted in strict liability as a complete bar to recovery. See, Comment "n" 2 Rest. of Torts 2d, § 402A. Even misuse could bar recovery although it "... occurs when the product user does not act in a manner ... expected of an ordinary reasonably prudent person ... in the same or similar circumstances." 1 Frumer and Friedman, PRODUCTS LIABILITY, § 15:01. It could be argued contrariwise that misuse is a form of negligence and it too is inconsistent with strict liability. See, for example, Kirkland v. General Motors Corp., Okl., 521 P.2d 1353 (1974).
While the Brown v. North American Manuf. Co., 176 Mont. 98, 576 P.2d 711 (1978), opinion suggests that traditional contributory negligence should not be injected and is not a defense in products liability actions, the court did not have before it the issue of comparative fault.
[6] The court directs the parties' attention to the Daly, supra, decision for a thorough discussion of the pure system of comparative fault.
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259 F. Supp. 429 (1966)
James CARTER et al., Plaintiffs,
v.
HILL & HILL TRUCK LINE, INC., Defendant.
Civ. A. No. 66-H-407.
United States District Court S. D. Texas, Houston Division.
October 12, 1966.
Rafferty, Taylor, Kepner & Associates, James H. Kepner, Houston, Tex., for plaintiffs.
Baker, Botts, Shepherd & Coates, Houston, Tex., V. R. Burch, Jr., J. M. Neel and W. R. D'Armond, Houston, Tex., for defendant.
INGRAHAM, District Judge.
Memorandum:
Suits under the Fair Labor Standards Act, 29 U.S.C.A. § 201 et seq., may be commenced in either federal or state courts. State of Missouri ex rel. St. Louis, Brownsville & Mex. Ry. Co. v. Taylor, 266 U.S. 200, 45 S. Ct. 47, 69 L. Ed. 247 (1924). Plaintiffs brought this action to recover damages under the Act in the 113th District Court of Harris County, Texas, and defendant removed to this court. Plaintiffs now move to remand. The sole question presented is whether a suit filed under the Act in a state court may be removed to a federal court. This court holds that it cannot and will grant the motion to remand.
The federal removal statute, 28 U.S. C.A. § 1441(a), provides that:
"Except as otherwise expressly provided by Act of Congress, any civil action brought in a State court of which the district courts of the United States have original jurisdiction, may be removed by the defendant or the defendants, to the district court of the United States for the district and division embracing the place where such action is pending."
Because this court has original jurisdiction of the action and is within the proper district and division, removal is proper unless Congress has elsewhere expressly provided otherwise. 29 U.S.C.A. § 216(b) provides that actions under the Act "may be maintained in any court of competent jurisdiction." The question is whether these words constitute an express prohibition of removal.
Prior to 1948, the majority opinion was that Section 216(b) prohibited the removal of cases under the Act. The leading case of Johnson v. Butler Brothers, 162 F.2d 87, 172 A.L.R. 1157 (8 CA 1947), took the position that Section 216(b) gave a plaintiff a choice of a state or federal forum in which to commence a suit under the Act, and prosecute to its conclusion. A minority of federal courts took the opposite position.
In 1948, the removal statute was amended to include the words "[e]xcept as otherwise expressly provided by Act of Congress." This amendment has prompted a swing, most courts now holding that Fair Labor cases are removable. A district court in the Eighth Circuit, *430 for example, held that the 1948 amendment made the Johnson case no longer binding in that circuit and permitted removal. Niswander v. Paul Hardeman, 223 F. Supp. 74 (E.D.Ark.1963). Professor Moore strongly endorses the view that the 1948 amendment resolved all doubt and that such cases are removable. See 1A Moore's Federal Practice 0.167(5) at 962.
Neither the Supreme Court nor any Circuit Court of Appeals has considered this question, except for the Johnson case. Since the 1948 amendment, some federal courts have continued to hold cases under the Act not to be removable, with which this court agrees.
The rationale which this court accepts as the better view was well stated by Chief Judge Estes of the Northern District of Texas. Wilkins v. Renault Southwest, Inc., 227 F. Supp. 647 (N.D. Tex.1964). Judge Estes based his decision on three points: (1) a 1958 Senate Report expressing the opinion that Fair Labor cases are not removable; (2) the use of the word "maintain" in Section 216(b); (3) Congress' intent to limit removability by its 1948 amendment to the removal statute.
As the wide split of authorities indicates, there is no clear answer to the question presented in this case. No decision can be free from doubt, and the question has not been resolved by higher authority. This court is most impressed by Judge Estes' third point. Removal adds expense and delay to a plaintiff's attempt to recover. It further congests the already crowded dockets of federal district courts with controversies usually involving well under the $10,000 requirement for diversity jurisdiction (plaintiffs' claim here, for example, is for $4,810.26). The State of Texas, in common with other states, maintains courts of competent jurisdiction well equipped to render justice. So long as the propriety of removal is questionable, no higher court has rendered decision, and no court or litigant has advanced a highly persuasive case that Congress intended these cases to be removable, this court will not accept removal jurisdiction.
The motion to remand will be granted. The clerk will notify counsel to draft and submit appropriate order.
APPENDIX TO JAMES CARTER, ET AL. V. HILL & HILL TRUCK LINE, INC. CIVIL ACTION 66-H-407, HOUSTON DIVISION
The American Law Institute
Study of the Division of Jurisdiction
between State and Federal Courts
Tentative Draft No. 4April 25, 1966
§ 1312 (pp. 7-9)
(d) The following civil actions shall not be removed under subsection (a) of this section from a State court to any district court of the United States:
(1) Actions by an employee to recover wages under section 216 of Title 29;
* * * * * *
[Commentary, pp. 79-80]
The case law is quite unsettled as to whether the language in the Fair Labor Standards Act, 29 U.S.C. § 216, that suits by employees "may be maintained in any court of competent jurisdiction" prohibits removal of such suits. Compare, e. g. Asher v. William L. Crow Const. Co., 118 F. Supp. 495 (S.D.N.Y.1953) (removal permitted) with Wilkins v. Renault Southwest, Inc., 227 F. Supp. 647 (N.D.Tex. 1964) (removal barred). Clause (1) resolves that controversy by prohibiting removal. These cases are typically for a very small sum and would invite the use of removal as a harassing tactic. * * *
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221 F. Supp. 930 (1963)
Horace ANDERSON, Petitioner,
v.
STATE OF NORTH CAROLINA, Respondent.
Misc. No. 25.
United States District Court W. D. North Carolina, Asheville Division.
Heard August 23 and 30, 1963.
Decided October 7, 1963.
*931 Bruce Brown, Asheville, N. C., for petitioner.
Theodore C. Brown, Jr., Staff Atty., Office of Atty. Gen. of North Carolina, Raleigh, N. C., for respondent.
CRAVEN, Chief Judge.
This is a civil action begun by application for a writ of habeas corpus. Upon issuance of the writ, the State of North Carolina responded by answer, and two evidentiary hearings have been held.
"Where the facts are in dispute, the federal court on habeas corpus must hold an evidentiary hearing if the habeas applicant did not receive a full and fair evidentiary hearing in a state court, either at the time of the trial or in a collateral proceeding." Townsend v. Sain, 372 U.S. 293, 312, 83 S. Ct. 745, 757, 9 L. Ed. 2d 770, 785 (1963). (Emphasis added).
"The duty to try the facts anew exists in every case in which the state court has not after a full hearing reliably found the relevant facts." Id., 83 S.Ct. p. 759, 9 L.Ed.2d p. 788.
But, if the habeas applicant has been afforded a "full and fair hearing by the state court resulting in reliable findings", the federal judge "may, and ordinarily should, accept the facts as found in the hearing." Id., 83 S.Ct. p. 760, 9 L.Ed.2d p. 789.
Unfortunately for this court's "delicate role in the maintenance of proper federal-state relations" (Ibid), no hearing of any sort was accorded petitioner Anderson in the courts of North Carolina despite a modern and enlightened procedural machinery adequately designed to determine the basic historical facts underlying constitutional questions and to review such questions.[1] Although the federal judge may not "defer" or give "binding weight"[2] to the state courts' conclusions of law, it does not follow that his independent application of federal law to state court fact findings will necessarily depart from state court conclusions of law.
Since there were no state court findings of fact with respect to the alleged unconstitutionality of petitioner's confinement, this court is now compelled to supply them.
A "plenary", "evidentiary", "trial-type"[3] habeas corpus hearing *932 ought to be conducted in an atmosphere of a search for truth by the presiding judge with the fair-minded assistance of the responding government rather than a strictly adversary proceeding. This is so because no enlightened government, whether federal or state, ought be assumed to wish to continue the confinement of one of its citizens except in accordance with law. A completely adversary atmosphere with too rigid adherence to rules of evidence can sometimes discourage even competent questions and exclude relevant information. Moreover, it ought not be forgotten that "the common law rules of evidence grew up exclusively in jury trial, and do not apply `ex stricto jure' in any tribunal but a jurycourt." 1 Wigmore on Evidence, Section 4(b), p. 27 (3d Edition).
Even so, the evidence problems which arose at the hearings can be avoided. The decision of the court does not turn on the report of the prison psychiatrist or upon the testimony of petitioner's former counsel with respect to any confidential communication, and it is not necessary to rule on the competency of such evidence.
From competent evidence to which no objection was taken, the court finds the facts to be as follows:
1. That about 2:30 P.M. on the 23rd of October, 1961, petitioner Horace Anderson was arrested upon a warrant for assault on an eight year old minor female child, and was subsequently released about 6:00 P.M. of the same day upon a $1,000.00 bond.
2. That about 8:30 P.M. on October 30, 1961, petitioner Horace Anderson was again arrested, put in jail, and on the following morning, October 31, warrants charging him with incest and rape were served on him. All warrants (October 23 and 31) arise out of the same occurrence alleged to have happened on October 21.
3. About the first of November, the Honorable Grover C. Mooneyham was contacted by Horace Anderson's father, and they discussed employment to represent Horace Anderson; Mooneyham interviewed Anderson in jail "the first part of November"; because of lack of money, Mooneyham was not employed, but was subsequently appointed by the Superior Court of the State of North Carolina to represent the defendant the said appointment being made on November 21, 1961.
4. That Horace Anderson was indicted for the capital crime of rape on or about November 21, 1961.
5. That Grover C. Mooneyham discussed the case with Horace Anderson fifteen or twenty times; that he inquired for witnesses who might be favorable to Horace Anderson, and sought and received permission of the State to confer and talk with the prosecuting witness, Patricia Anderson, and her mother, wife of the defendant, and talked with them; that after his appointment as counsel for the defendant, Mr. Mooneyham moved the court for a continuance, which continuance was granted for the purpose of giving Mooneyham sufficient time to study the case and to understand it and competently advise his client; that as a result of Mooneyham's motion for a continuance, the case was continued from the November 20 term until the December term, pursuant to N.C.G.S. § 15-4.1.
6. On the 14th day of December, 1961, Horace Anderson was brought to the superior courtroom of Buncombe County, and on the morning of that day entered a plea of not guilty; the trial was again postponed until January 8, 1962.
7. At 4:30 P.M. on the same day, Anderson pleaded guilty to a lesser offense.
8. At the time of entry of the guilty plea, December 14, 1961, the record shows that the Solicitor stated to the court that "(t)he defendant, through *933 his counsel, in open court, tenders to the state a plea of guilty of assault upon a female with intent to commit rape, which plea the state accepts." (Tran. p. 1)[4] Immediately thereafter, and sufficiently important to be set out verbatim, occurred the following: "The Court: Is that correct? That is the plea you enter?"
"The Defendant: Yes." (Ibid)
"The Court: You do it freely and voluntarily, knowing the probability is you will get an extended prison term, is that right?"
"The Defendant: Yes, sir." (Id. at p. 2)
9. Thereafter, the court proceeded to hear evidence going to the question of guilt for the purpose of determining proper punishment.
10. After the evidence had been heard, Mr. Mooneyham addressed the court asking for leniency, and in the course of his remarks, advised the court that the defendant was submitting to this lesser offense (as compared with the capital felony) because of his prior record, and that he still asserted his innocence. (Tran. p. 10) Whereupon it appears the court said in response: "I thought this man was pleading guilty. I am not finding him guilty. I don't want any misunderstanding about that because he has plead guilty now, and if there is any misunderstanding, I want him to withdraw it and continue the matter."
"Mr. Mooneyham: No, sir, he knows he has plead guilty."
"The Court: I don't want him to go out and say he was sentenced for something he didn't do." (Tran. pp. 10 and 11)
11. Thereafter, the court afforded the defendant the right of allocution. Nothing was said by the defendant with respect to his plea or with respect to whether he was truly guilty or innocent.
12. After the defendant had spoken at some length, the court again addressed him in words as follows: "Well, you understand you have plead guilty to this thing. That is what you wanted to do, wasn't it?"
"The Defendant: Yes." (Tran. p. 13)
13. Thereupon, the court sentenced the defendant to a term of not less than 12 nor more than 15 years, and the defendant was immediately taken back to jail.
14. The defendant is alert and his demeanor is such as to convey the impression that he grasps and understands the nature of the present habeas corpus proceedings. During cross-examination and questioning by the court, his responses to questions indicated complete understanding of the matters being inquired into. He has a sixth grade education and is not lacking in intelligence. According to Dr. Sargent, prison physician, he is "not quite right." But, also according to Dr. Sargent, he appreciates and understands the nature of the proceedings and is not "insane." He knows and understands the difference between right and wrong. At the time of sentencing he understood the significance of the relevant facts and the nature of the proceeding.
15. No evidence is forthcoming from the petitioner to seriously put in issue the question of his mental competence at the time of his trial; his own medical witness negates the contention.
16. Anderson pleaded not guilty to the capital offense at 11:30 A.M. on the 14th of December and pleaded guilty to the lesser felony at 4:30 P.M. the same day. The evidence does not make entirely clear why he changed his mind. But, immediately before his plea of guilty on the afternoon of December 14, 1961, the Solicitor and members of his staff *934 talked with the prisoner in jail in the absence of his counsel but apparently with counsel's consent. Although no specific words of threat or promise were used, it is fair to say that the following impression was conveyed to the petitioner Anderson and was intended to be conveyed:
That he was charged with a capital offense and that the Solicitor would put him on trial for his life with the probability of a sentence of death unless Anderson agreed to plead guilty to the lesser offense of assault with intent to commit rape, and that if he so pleaded he could not be imprisoned under the law for longer than fifteen years and, in all probability, the presiding judge would give him as little as two to three or three to five years in prison. Anderson was further assured that the Solicitor "would talk to the judge." It does not appear that the Solicitor ever did so.
17. Anderson exhausted all state court remedies and never received a state court hearing to review the constitutionality of his sentence and judgment of imprisonment.
Only one of Anderson's several allegations of unconstitutionality of his imprisonment has sufficient merit to require discussion his contention that he was effectively denied his right to counsel. At the time of trial, Gideon v. Wainwright, 372 U.S. 335, 83 S. Ct. 792, 9 L. Ed. 2d 799 (1963), had not been decided. But, even then, since he had been indicted for a capital crime, he was constitutionally entitled to counsel at every stage of the proceeding terminating in his guilty plea to the non-capital felony. Powell v. Alabama, 287 U.S. 45, 53 S. Ct. 55, 77 L. Ed. 158 (1932); N.C.G.S. § 15-4.1.
There is thus a causal relationship between the imprisonment for the noncapital felony and the alleged denial of counsel in the capital case as will more clearly appear hereinafter.
The right to counsel is not merely a matter of form. It can be waived by the defendant but not by his counsel. It is, therefore, irrelevant that counsel may have consented for the Solicitor to conduct in counsel's absence what amounted to a pre-trial conference with the prisoner in jail. Unquestionably, the most important part of the proceedings against Anderson occurred in jail when his counsel was not present to advise him. It was at that time and place that the decision was made to plead guilty to the lesser felony. Otherwise, he would not have been returned to the courtroom for the jury had long since gone, and his trial had been set for the next term. What happened in the courtroom was to merely make a formal record of a decision arrived at upstairs in jail in a conference between the Solicitor and the defendant. Counsel's presence at the sentencing (he was sent for by the Solicitor) does not give it validity. The most he could have done was to ratify a decision previously made. More than this is implicit in the right to counsel: petitioner was entitled to have counsel aid and help him in making the decision.
Compromise pleas in criminal cases occur very frequently in the administration of the criminal law. Seldom are such instances reflected in the law books for the simple reason that both sides are by hypothesis usually satisfied, i. e., the defendant has escaped a greater penalty, and the state has avoided a protracted and expensive trial.
The constitutional validity of the time-honored compromise plea[5] is assumed for purposes of this opinion. But, a compromise necessarily involves negotiation, *935 and here Anderson was without the assistance of his lawyer in negotiating the compromise with the Solicitor. Not infrequently counsel succeed in getting the Solicitor to affirmatively recommend to the court a specific sentence in return for a guilty plea. It is not unheard of for the trial judge to be informed of the negotiations and to indicate whether or not he will likely follow the Solicitor's recommendation. Sometimes Solicitor and counsel relate the facts to the judge, and he will then indicate the probable sentence in the event of a plea of guilty. If the sentence comes out as indicated, everyone is satisfied. If the judge changes his mind after learning more of the case, he need only permit the withdrawal of the guilty plea. The trial may then proceed as if the negotiations had never occurred preferably before another judge and at another time.
Unquestionably petitioner Anderson could not bargain on equal terms with the Solicitor. The conference in the jail was inherently unfair, and the agreement made there infects all subsequent proceedings.
It is idle to speculate whether petitioner's counsel could have, if present, worked out a better deal with the Solicitor. The point is Anderson was entitled to have him try. For lack of effective counsel at a "critical" stage of the proceedings against him, those proceedings are constitutionally defective. White v. Maryland, 373 U.S. 59, 83 S. Ct. 1050, 10 L. Ed. 2d 193 (1963); Hamilton v. Alabama, 368 U.S. 52, 82 S. Ct. 157, 7 L. Ed. 2d 114 (1961).
Petitioner Anderson is unlawfully confined and is entitled to be released unless the State of North Carolina elects to retry him for either the capital offense or the lesser felony within a reasonable period of time. Unless the Attorney General of North Carolina shall file with this court within thirty days a certificate of the State's election to proceed with re-trial, an appropriate order will be entered commanding Anderson's release from imprisonment.
NOTES
[1] N.C.Gen.Stat., § 15-217 et seq.
[2] Brown v. Allen, 344 U.S. 443, at 506, 73 S. Ct. 397, 97 L. Ed. 469 (1953).
[3] Adjectives modifying "habeas corpus" proceedings in Townsend v. Sain, 372 U.S. 293, 83 S. Ct. 745, 9 L. Ed. 2d 770.
[4] Refers to the transcript of the State court trial proceedings.
[5] Can a person charged with crime be constitutionally denied the right to weigh his chances and accept a lesser penalty, e. g., escape the death sentence? Apparently he has the right to make such a Hobson's choice if effectively aided by counsel. Martin v. United States, 256 F.2d 345 (5th Cir. 1958); Tabor v. United States, 203 F.2d 948 (4th Cir. 1953). And see: Edgerton v. North Carolina, 315 F.2d 676 (4th Cir. 1963); 22 C.J.S. Criminal Law § 423(5).
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221 F. Supp. 845 (1963)
Molly Ann SEIDEN, Plaintiff,
v.
Myron E. BOONE et al., Defendants.
Civ. A. No. 2705.
United States District Court D. Delaware.
September 27, 1963.
Irving Morris, of Cohen & Morris, Wilmington, Del., for plaintiff.
G. Francis Autman, Jr., Deputy Atty. Gen., for the State of Delaware, for defendants.
LAYTON, District Judge.
Plaintiff alleges that she is a graduate of the University of Pennsylvania Dental School and that she has passed the examinations required by the Commonwealth of Pennsylvania and the State of New York for admission to the practice of dentistry as well as the examination administered by the National Board of Dental Examiners, an agency of the American Dental Association. In 1963, she took the examination prescribed by the Delaware State Board of Dental Examiners and was subsequently notified that she had failed it. Plaintiff alleges that she has, in fact, passed the examination and has in all other respects complied with the laws of the State of Delaware for the issuance to her of a license to practice dentistry, and that the Board's action in asserting that she had failed and in denying her the opportunity to practice her profession in Delaware was wilful, arbitrary, capricious and discriminatory conduct which amounted to a denial of the due process of law and the equal protection of the laws guaranteed by the Fourteenth Amendment. Plaintiff seeks an order directing the individual members of the Board to cease discriminating against her, an order *846 directing them to issue to her a license to practice dentistry in the State of Delaware, and a judgment against them for damages to compensate for the humiliation and embarrassment suffered by her as a result of their conduct and for punitive damages. Jurisdiction is alleged on the basis of 28 U.S.C.A. § 1343 (the "Civil Rights Act") and 28 U. S.C.A. § 1331.
Defendants have moved to dismiss this action on the ground[1] that, even though a Federal Court may have jurisdiction of an action involving the construction or application of state laws or orders and ordinances of state bodies, "a sound regard for the rightful independence of state governments" requires that the Court, in the exercise of equitable discretion, abstain from and dismiss this action. Railroad Commission of Texas v. Pullman Co., 312 U.S. 496, 501, 61 S. Ct. 643, 85 L. Ed. 971. See also e. g., Martin v. Creasy, 360 U.S. 219, 224, 79 S. Ct. 1034, 3 L. Ed. 2d 1186 (1959).
As was stated in Allegheny County v. Frank Mashuda, 360 U.S. 185, 188-189, 79 S. Ct. 1060, 1063, 3 L. Ed. 2d 1163:
"The doctrine of abstention, under which a District Court may decline to exercise or postpone the exercise of its jurisdiction, is an extraordinary and narrow exception to the duty of a District Court to adjudicate a controversy properly before it. Abdication of the obligation to decide cases can be justified under this doctrine only in the exceptional circumstances where the order to the parties to repair to the state court would clearly serve an important countervailing interest."
At the outset, however, it may be said that the nature of the issues involved in this case indicates that this is no occasion for the application of the abstention doctrine.
Concededly, Federal Courts have often abstained in cases where the state law involved in the controversy is so unclear or unsettled that federal intervention to protect constitutional rights should await a prior resolution by the state courts. See, e. g., Railroad Commission of Texas v. Pullman, supra. But this is not such a case. The Delaware Code clearly requires that if the plaintiff passed the examination and was of proper moral character, she is entitled to the issuance of a license.[2]
Again, Federal District Courts have on occasions declined to exercise their jurisdiction in other situations in which they have been asked to interfere with the actions of state officials or administrative agencies. Thus, in Burford v. Sun Oil Co., 319 U.S. 315, 63 S. Ct. 1098, 87 L. Ed. 1424 (1942), the Supreme Court held that the District Court should have declined to take jurisdiction in a suit to enjoin an exception granted by the state regulatory commission to its oil well-spacing rules. The Court reasoned that, because of the serious and widespread[3] effects of Federal Court intervention into a comprehensive regulatory scheme involving local policy making and extensive expertise, initial judicial review ought to be confined to the one court which the state, in order to insure uniformity and expertise, had by statute provided for that purpose.[4]
*847 And, in Alabama Public Service Commission v. Southern Railway, 341 U.S. 341, 71 S. Ct. 762, 95 L. Ed. 1002 (1951), where injunctive relief was sought in the Federal District Court from an order denying permission to discontinue certain intrastate passenger services, the Supreme Court held that the District Court should not have attempted to resolve the particularly local problem of balancing the loss to the railroad from the continuation of the services in question against the public need for those services for the reason that the appeal to the Alabama Supreme Court provided by statute was an integral part of the regulatory process under the Alabama Code.
But again, the considerations underlying the Burford and Alabama Public Service Commission decisions do not apply to this case. Federal Court relief to this plaintiff would neither disturb large segments of a local regulatory scheme nor supplant specialized review within the state judicial system.
In the case at bar, plaintiff relies upon the individual liberty to practice her profession, and not upon the economic aspects of the due process and equal protection clause relied upon in Burford and Alabama Public Service Commission, supra. See Schware v. Board of Bar Examiners, 353 U.S. 232, 77 S. Ct. 752, 1 L. Ed. 2d 796 (1957). Where relief against state officers or agencies has been sought under the Civil Rights Act because of unreasonable searches and seizures,[5] racial segregation,[6] violations of first amendment rights,[7] and discrimination in voting,[8] Federal Courts have been reluctant to follow the abstention doctrine. The most recent of the racial segregation cases is McNeese v. Board of Education, 373 U.S. 668, 83 S. Ct. 1433, 10 L. Ed. 2d 622 (1963), where the Court indicated that the abstention doctrine is to be given less weight when Federal Courts are asked to exercise their special responsibility for the protection of all individual civil liberties. Significantly, the Court quoted with approval the following language of Judge Murrah in Stapleton v. Mitchell, 60 F. Supp. 51 (D.C.Kans.1945):
"We yet like to believe that wherever the Federal courts sit, human rights under the Federal Constitution are always a proper subject for adjudication, and that we have not the right to decline the exercise of that jurisdiction simply because the rights asserted may be adjudicated in some other forum."[9]
And in Browder v. Gayle, 142 F. Supp. 707 (M.D.Ala.1956), aff'd per curiam, 352 U.S. 903, 77 S. Ct. 145, 1 L. Ed. 2d 114, another of these segregation cases, the District Court said the abstention doctrine:
"* * * has no application where the plaintiffs complain that they are being deprived of constitutional civil rights, for the protection of which the Federal courts have a responsibility *848 as heavy as that which rests on the State courts."[10]
The question of the fitness of applicants for admission to the practice of the several professions ordinarily is primarily a matter of State concern. However, we would defeat the purposes of the Civil Rights Act "if we held that assertion of a federal claim in a federal court must await an attempt to vindicate the same claim in a state court."[11] Accordingly, the abstention doctrine should not be recognized in this case and this Court will take initial jurisdiction.
NOTES
[1] Another defense based upon the doctrine of sovereign immunity has been withdrawn by the State upon the concession by plaintiff that (a) the injunctive process prayed for lies against the individual defendants only and (b) damages are sought not against the State but against the defendants in their individual capacity.
[2] 24 Del.Code § 1124.
[3] The spacing of the exception might have affected wells throughout a very large petroleum field.
[4] See also, Railroad Commission of Texas v. Rowan & Nichols Oil Co., 310 U.S. 573, 60 S. Ct. 1021, 84 L. Ed. 1368 (1940), amended, 311 U.S. 614, 61 S. Ct. 66, 85 L. Ed. 390 (1941); Railroad Commission of Texas v. Rowan & Nichols Oil Co., 311 U.S. 570, 61 S. Ct. 343, 85 L. Ed. 358 (1941).
[5] Monroe v. Pape, 365 U.S. 167, 81 S. Ct. 473, 5 L. Ed. 2d 492 (1961).
[6] McNeese v. Board of Education, 373 U.S. 668, 83 S. Ct. 1433, 10 L. Ed. 2d 622 (1963) (equitable relief against school board); Romero v. Weakley, 226 F.2d 399 (9th Cir. 1953) (same); Turner v. City of Memphis, 369 U.S. 350, 82 S. Ct. 805, 7 L. Ed. 2d 762 (1961) (injunction against enforcement on city property of state agency's segregation regulation pursuant to its authority to make regulations pertaining to safety and sanitation); Browder v. Gayle, 142 F. Supp. 707 (M.D.Ala. 1956), aff'd per curiam, 352 U.S. 903, 77 S. Ct. 145, 1 L. Ed. 2d 114 (injunction against segregation statute and ordinance on city bus line).
[7] Stapleton v. Mitchell, 60 F. Supp. 51 (D.Kans.1945), appeal dismissed pursuant to stipulation, sub nom Mitchell v. McElroy, 326 U.S. 690, 66 S. Ct. 172, 90 L. Ed. 406 (1945). Alesna v. Rice, 74 F. Supp. 865 (D.Haw.1947), rev'd on other grounds, 172 F.2d 176 (9th Cir. 1949).
[8] Lane v. Wilson, 307 U.S. 268, 59 S. Ct. 872, 83 L. Ed. 1281 (1939).
[9] 373 U.S. at 674, n. 6, 83 S.Ct. at 1437.
[10] Id., 142 F.Supp. at 713.
[11] McNeese v. Board of Education, supra, 373 U.S. at p. 672, 83 S.Ct. at 1436.
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221 F.Supp. 39 (1963)
Virginia COLEMAN, Plaintiff,
v.
The UNITED STATES of America, Defendant.
Carolyn Coleman ROUNDS, Plaintiff,
v.
The UNITED STATES of America, Defendant.
Civ. Nos. W-2223, W-2224.
United States District Court D. Kansas.
August 8, 1963.
*40 Malcolm Miller and Donald L. Cordes, of Foulston, Siefkin, Schoeppel, Bartlett & Powers, Wichita, Kan., for plaintiffs.
Newell A. George, U. S. Atty., Kansas City, Kan., and Robert W. Green, Asst. U. S. Atty., Wichita, Kan., Faust F. Rossi, Tax Division, Dept. of Justice, Washington, D. C., Louis F. Oberdorfer, Asst. Atty. Gen., Edward S. Smith, Jerome Fink, William A. Miner, Howard N. Singes, Attys., Dept. of Justice, Washington, D. C., for defendant.
TEMPLAR, District Judge.
These actions were brought for the recovery of estate taxes paid by the taxpayers who were heirs-at-law of Georgia C. Jones, deceased, after the administration and closing of her estate.
At the hearing of these cases before the Court, the parties submitted a stipulation covering the facts of the case which may be summarized as follows:
Georgia Coleman Jones, died testate on the 12th day of January, 1954 while a resident of the city of Las Vegas in the state of Nevada. On October 7, 1955 a federal estate tax return was filed for her estate in which it was reported that the gross estate amounted to $256,744.35, with tax and interest due of $10,171.18.
On the 7th day of October, 1955 there was paid to the Collector of Internal Revenue the sum of $10,171.18. Thereafter and on May 29, 1958 the Collector of Internal Revenue assessed a deficiency in estate tax and interest against the estate in the amount of $34,713.32.
On June 9, 1958 this amount was paid to the Collector.
On January 14, 1959 the estate of Georgia Coleman Jones, being administered in the District Court of Clark County, Nevada was closed. A timely refund claim in the amount of $6,512.70 was filed by each of the plaintiff taxpayers, representing the proportionate amounts of taxes and interest paid by them.
During her lifetime and on November 30, 1949, Georgia Coleman Jones (then Georgia Coleman) created an irrevocable intervivos trust with herself and the First National Bank of Wichita as the trustees. The income from the trust was reserved to the settlor for her life.
Upon her death, the trust provided as follows:
"Upon the death of the settlor this trust shall terminate and the corporate trustee shall forthwith distribute the entire trust estate to the persons who shall be designated in the settlor's last will and testament to receive the same."
The trust corpus remained in and was administered in the State of Kansas during the lifetime of settlor with the First National Bank of Wichita, Kansas, acting as trustee. The trust instrument provided that it was to be construed *41 and interpreted under the laws of the State of Kansas.
Sometime after executing the above trust instrument, Georgia Coleman Jones moved to the State of Nevada and died there, a resident of said state on January 12, 1954. Surviving her were her two children, complainants herein, and her husband, Whipple Van Ness Jones. Her last will and testament which was executed on March 20, 1953, was duly admitted to probate by the District Court in and for the County of Clark, Nevada. Her husband, Whipple Van Ness Jones, and the First National Bank of Nevada, Reno, Nevada, were duly appointed and qualified as executors of the estate.
In pursuance of their duty to marshal the assets of the estate of Georgia Coleman Jones, the executors made demands upon the First National Bank of Wichita, Wichita, Kansas, for delivery over to them of the corpus of the aforementioned trust, which corpus then consisted of about $200,000.00 in United States bonds. The First National Bank of Wichita, however, refused to surrender the property on the basis that it was not clear whether under the will of Georgia Coleman Jones, the power of appointment reserved by her was exercised. The said last will contained no mention of the trust or of the power of appointment. There was a general residuary clause; however, that clause did not refer to any power of appointment and purported to apply only to the property owned at the time of the death of Georgia Coleman Jones. The residuary clause read as follows:
"FOURTH, All the rest, residue and remainder of the property which I may own at the time of my death, both real and personal and of every kind and description, wherever the same may be situated, I give, bequeath and devise to my husband, WHIPPLE VAN NESS JONES, and to FIRST NATIONAL BANK OF NEVADA, RENO, NEVADA, a National Banking Institution, as joint tenants, in trust, however, for the following uses and purposes."
The will then went on to provide that income from such testamentary trust was to be paid to the husband of the testator Whipple Van Ness Jones, for his lifetime, and, upon his death, the principal was to be distributed equally to complainants herein or to their heirs.
Following the death of Mrs. Jones, the First National Bank of Wichita, as trustee, filed an action in the District Court of Sedgwick County, Kansas, for the purpose of obtaining a construction of the trust instrument and for instructions from the Court as to the proper distribution of the assets of the trust. This action was filed following a demand on the trustee, made by the Executors and Trustees of the Will of Georgia Coleman Jones, appointed by the Clark County District Court in the State of Nevada, that said trust property be delivered to them. The First National Bank of Wichita as Trustee requested the Court to determine particularly whether Georgia C. Jones, by the residuary clause of her Last Will and Testament exercised the power of appointment reserved to her in the trust agreement under which that bank was operating, or whether she died intestate as to the assets of the trust estate created by that agreement, and in such event that the Court determine such intestacy as to the assets of the trust, and that the Court further determine who are her heirs-at-law and in what proportions distribution of the trust property should be made to such heirs-at-law. A copy of the entire court proceeding had by the Sedgwick County District Court and a copy of the entire proceedings before that Court were made a part of the stipulation.
In the action filed by the Trustee, First National Bank of Wichita, the Executors under the Will appointed by the Nevada Court, as well as the heirs of Mrs. Jones, who were Whipple Van Ness Jones and the two plaintiff taxpayers herein, were named as parties.
To the Petition of the Trustee, Virginia Coleman filed an Answer contending that since the power of appointment *42 reserved in the Trust had not been exercised in the Will that her mother had died intestate as to all property contained in the Trust, and that the Court should adjudge the Trust terminated as of January 12, 1954, and the Trust property be distributed under the laws of intestate succession of the State of Nevada.
The Answer of Virginia Coleman Nafziger was adopted as the Answer of Carolyn Coleman Rounds.
The First National Bank of Nevada and Whipple Van Ness Jones, as Executors of and Trustees under the Last Will and Testament of Georgia C. Jones, deceased, filed their joint Answer in which they requested the dismissal of the action brought by the First National Bank of Wichita, Trustee, contending that no good faith doubt as to the meaning of the trust agreement exists, that if such doubt exists, it is immaterial to any rights of plaintiffs in effecting delivery of the assets to the Executors and Trustees of the decedent's Will to them in return for their receipt and release, and further alleging that there is no ambiguity in the Will and no reason to construe the same, and challenging the jurisdiction of the Court to attempt to do so. In their pleading the Executors and Trustees of the Will filed a Cross-Petition in which they allege that the First National Bank of Wichita as Trustee has converted the $200,000.00 in assets to which the Executors are entitled and demanding judgment requiring the Trustee to deliver the assets of the Trust, together with all interest accrued and collected by the Trustee, to the Executors under the Will and in the alternative that they have judgment against the Trustee in the amount of $200,000.00 plus interest.
There was likewise a separate Answer by Whipple Van Ness Jones as an individual and beneficiary of the assets coming into the hands of the Executors and Trustees of the Will of Georgia C. Jones, deceased. In his Answer he adopted all the denials and allegations of the Executors and Trustees under the Will by reference and asked the Court to enter a judgment in accordance with the prayer of the Cross-Petition filed by the Executors and Trustees of the Will.
The plaintiff, First National Bank of Wichita, filed an Answer to the Cross-Petition of the Executors and Trustees of the Will in which it denied that it refused to deliver the assets of the Trust to the Executors and the Trustees of the Will, but on the contrary alleged that it was carrying out a request made to it by the Executors and Trustees of the Will, that a judicial determination be made as to the disposition of the Trust at its termination. The Trustee, as plaintiff generally and specifically denied all other allegations contained in the pleading of the Executors and Trustees of the Will.
Following the filing of the pleadings by the parties in interest as outlined above, all the parties to the action appeared for trial of the case before the State Court on June 2, 1955. At that hearing the parties by and through their attorneys made statements of their position conforming to the pleadings they had filed. Certain facts were established by admission of the parties, and after disclosing their positions and after submitting to the trial court documents bearing upon the issues involved, the trial court announced that "it seems to me that the better rule would be, under the evidence or facts in this particular case that the power was not exercised in the Will by the residuary clause of the Will. I am of the opinion that the power was not exercised." "The Court is going to hold that the power was not exercised. So let's go from there."
Thereafter on November 30, 1955 after briefs were filed by the parties pursuant to their request for permission to do so and the trial court's direction that same should be filed, and after they had been considered by the trial judge, the judge advised counsel for all the parties that his judgment would be "that the trust created on November 30, 1949 was terminated by the death of Georgia Coleman Jones, the settlor, and that the said Georgia Coleman Jones failed to exercise the power of appointment reserved to her *43 under the trust agreement, and therefore the assets of the trust were not any part of the estate and should be distributed by the Trustees to her surviving husband and two daughters in accordance with the intestate laws of the State of Kansas, which entitled the defendant Whipple Van Ness Jones as an individual to receive one-half of the trust property and Carolyn Coleman Rounds and Virginia Coleman (now Nafziger) one-fourth each."
The files in that proceeding disclose that a Journal Entry was prepared by counsel pursuant to this announcement by the Court, and the same was filed and judgment entered in conformity therewith on December 9, 1955.
From this judgment no appeal was taken although such action was considered by the Executors and Trustees of the decedent's estate. Their reasons for determining that no appeal should be taken according to the undisputed evidence does not lend any support to the government's contention that the judgment entered was collusive.
It now appears that the First National Bank of Wichita, as Trustee, has disbursed the assets of the Trust in the manner directed by the State Court decree and that Whipple Van Ness Jones received $100,000.00 and the two plaintiffs in the present action received $50,000.00 each. These amounts were reduced by certain fees, expenses and costs deducted, about which the parties to the judgment make no complaint.
QUESTION NOW TO BE DETERMINED
The question now presented, according to the government's brief, is "whether the corpus of the trust established by Georgia C. Jones, deceased, on November 30, 1949, passed by the Will of the decedent to or for the benefit of the decedent's husband, Whipple Van Ness Jones, as a life estate or terminable interest, and, therefore, did not qualify as a part of the marital deduction under Section 812 of the Internal Revenue Code of 1939."
Before this question may be resolved, there must be a determination made of the legal consequences involved in the proceedings, and in the final judgment and decree of the District Court of Sedgwick County, Kansas in which determination was made of the property rights and interests of the parties in this trust property. If it be ascertained that the State Court had jurisdiction of the parties in interest, that it had jurisdiction of the property involved in the controversy before it, and the power and authority to enter the judgment that it did, it would appear that the interested parties would be bound by it. In the event such jurisdiction and power existed in the State Court, then it must be ascertained whether the judgment of the Court adjudicated the rights of the parties in the property involved and fixed their title in it under state law, and placed the surviving spouse in the full and complete title of his distributive share which was found and determined to be fifty percent of the property held by the Trustee at the date of decedent's death.
It is at this crucial point that the government's contention comes into focus, for, says the government, though legal rights and interests of the parties in property are created and determined by state law, still, if the order or judgment by which such property rights are determined is obtained through collusion or attended with some other badge of fraud, or is entered in a non-adversary proceeding, then it is not binding as between one or more parties to such proceeding and the government in respect to income or estate tax imposed by federal legislation.
Consideration should first be given to the question of jurisdiction of the State Court to render the judgment which it did before the record is reviewed to see if the more serious claim of fraud, collusion and non-adversary proceedings as charged by the government is sustained by the preponderance of the evidence.
JURISDICTION OF THE COURT
It is and cannot be disputed that the assets of the Georgia Coleman Trust, at *44 the time of her death on January 12, 1954, remained in the hands of the Trustee, First National Bank of Wichita, and that its situs was in Sedgwick County, Kansas; that the District Court of Sedgwick County, Kansas is a court of general jurisdiction in that state; that the Trust terminated with the death of Georgia Coleman Jones; that she did not specifically by her Last Will and Testament designate the persons who were to receive the trust estate and that all interested parties making claim or having a right to make any claim to the trust property appeared at the hearing and trial of the action brought by the Trustee in the Sedgwick County District Court to have determined the ownership of the property previously held in trust, and for a determination of the proportions and the manner in which the same should be distributed.
In Kansas, the state district courts are held to be proper courts for the administration of a trust estate, and are held to be authorized to advise and direct a trustee in all matters pertaining to the Trust. The statutes of Kansas specifically provide for jurisdiction of district courts in matters relating to trusts created by written instrument other than by wills. G.S.Kans.1949, 59-301(8).
The Kansas Legislature by specific legislative edict, provided that all courts of record within their respective jurisdictions should have the right to afford relief from uncertainty, insecurity and doubts attendant upon the controversies over the meaning and legal construction of express trusts and trust instruments, and that the act should be liberally interpreted and administered with a view of making the courts of the state more serviceable to the people. (Laws of 1941, Chap. 289.)
Clearly, the Sedgwick County District Court had jurisdiction over the matter brought before it. This view is sustained by the cases of Knox v. Knox, 87 Kan. 381, 124 P. 409; by Achenbach v. Baker, 151 Kan. 827, 101 P.2d 937, and by Coolbaugh, Trustee v. Gage, 182 Kan. 145, 319 P.2d 146. Furthermore the trust instrument itself provided that, "this trust agreement shall be interpreted and construed according to the laws of the State of Kansas."
Jurisdiction is the power of a court to hear and decide a matter, and the test of jurisdiction is not a correct decision but a right to enter upon inquiry and make a decision; it is not limited to the power to decide a case rightly, but includes the power to decide it wrongly. (See cases cited In re Johnson's Estate, 180 Kan. 740, at page 746, 308 P.2d 100, at page 106.)
Again, where jurisdiction of a court depends upon a fact that is litigated in a proceeding pending before it, and is adjudicated in favor of the party asserting jurisdiction, the question of jurisdiction is judicially decided, and the judgment record is conclusive evidence of jurisdiction until set aside or reversed in a direct proceeding, and may not be otherwise attacked collaterally. (In re Estate of Burling, 179 Kan. 687, 694, 298 P.2d 290.)
Though the judgment of the Sedgwick County Court made no specific finding of jurisdiction, it must be held that even where jurisdiction of a court depends upon a finding of a particular fact, the exercise of jurisdiction implies the finding of that fact. So here, the Court exercised jurisdiction and no appeal having been taken by an interested party, and the fruits of the judgment having been received by the parties, the judgment is conclusive. Bindley v. Mitchell, 170 Kan. 653, 656, 228 P.2d 689.
The defendant has raised no issue on the question of the State Court's jurisdiction and furnishes the Court no authorities on this point.
This Court is satisfied that the District Court of Sedgwick County, Kansas had jurisdiction of the parties and the subject matter of the action and the power to make the determination and adjudication by which it established the property rights of the parties in the assets held by the First National Bank of Wichita in the Georgia Coleman Jones *45 trust at the time of her death. It was by that judgment and order that the ownership of that property was fixed and established between all the parties having any interest therein and under which distribution was made to them as their definite portions were established. The interest of Whipple Van Ness Jones, as determined by the State Court, was a complete fee interest and as such was not terminable and does qualify for the marital deduction.
COLLUSION AND FRAUD
The defendant bases its sole defense and seeks to avoid the force and effect of the State Court's decree of title, not on the question of jurisdiction, but on the assertion and charge made by the defendant that the judgment of the State Court is not binding on the federal government because it was obtained in a non-adversary, collusive and, in effect, a fraudulent proceeding. The defendant undertakes to make more mellow the charge of collusion which is a badge of fraud by dulcet statements in which it urges that such charge (of fraud) is not really intended by it. However, the effort of the defendant to convert fraudulent conduct into something different and less repulsive does not lessen the seriousness of the accusation.
This Court has taken the time to review the entire record, including all the pleadings, briefs, exhibits, transcripts of statements and depositions plus the file of the State Court proceedings. It should be first observed that the defendant did not in its Answer in either case plead the defense of collusion, a species of fraud, or allege that the proceeding was non-adversary. The defendant contends that the language of the Court in Brodrick v. Gore, 224 F.2d 892 (C.A.10th) at page 896, cannot be construed to mean that the defendant relying on collusion or fraud must so plead, even though the Court in that case said:
"But here, the order or judgment entered by the probate court was expressly pleaded in the complaint. In his answer, the Director admitted the entry of such order or judgment, and he did not plead that it was collusive, or was otherwise fraudulent, or was entered in a nonadversary proceeding. His answer was silent in respect to tendering any issue of that kind. And in the absence of collusion, in the absence of other bad faith, and in the absence of its entry in a nonadversary proceeding, the order or judgment must be given effect as a judicial determination that the executors were obligated to sell and convey to the surviving copartners the interest of the decedent in the partnership property for a sum equal to the book value thereof, and as a judicial determination of such book value."
And see Steele v. United States, 146 F. Supp. 316, 318. (D.Mont.)
While this Court believes that the failure to affirmatively plead collusion in obtaining the judgment in question should preclude the defendant from relying upon that defense, the Court will nevertheless proceed to consider the matter of collusion, fraud and non-adversary proceedings even though they are not presented by the pleadings.
The defendant concedes that in determining whether the Nevada Will of Georgia C. Jones exercised the testamentary power of appointment created by the Kansas trust, the Kansas Court should apply Kansas property law.
However, the defendant urges the Court to ignore the determination made by the Kansas Court adjudging that the Will of Georgia C. Jones, and particularly the residuary clause thereof, did not exercise the power of appointment contained in the Declaration of Trust even though this conclusion was announced by that Court in proceedings on the second day of June, 1955, at which time all the parties in interest were present and participated in the hearing and trial and took sharply divergent views as to the law applicable in the case. It is apparent that the State Court followed the general rule in making its decision on *46 this point; there being no prior determination of the question by the Kansas Supreme Court. (See Simes on Future Interest § 63 page 205.) In this Court's view of the law, the State Court could not have reached any other conclusion.
Significantly, it is observed that the defendant makes no contention that there is any evidence whatsoever of collusion on the part of the contending parties to the estate of Georgia C. Jones at the time the Kansas Court decided that the power of appointment was not exercised.
Notwithstanding it is urged by the defendant that after this ruling was announced by the Kansas Court on June 2, 1955 the parties then entered into connivance for the purpose of obtaining a determination by the Kansas Court which would qualify a portion of the money which had been held in trust as a marital deduction under Estate Tax law provisions. This Court is urged to ignore the judgment, announced by the Kansas Court on November 30, 1955 and entered December 9, 1955 in which that Court determined that the assets of the trust passed under the laws of intestacy of the state of Kansas, one-half to the surviving spouse and the other half in equal shares to the two children of the decedent. The defendant declares that this decision was not only contrary to law but that it was a collusive proceeding and not binding on the Treasury Department of the Government in determining the liability of the Jones estate for Estate Taxes.
In such circumstances, this Court has the right to determine whether a State Court judgment is collusive, fraudulent and non-adversary. It should be realized, however, that simply because a State Court enters a judgment that conforms to the wishes of some of the litigants, this fact does not establish it as collusive, nor is it any evidence of collusion, since a court must decide a cause when it is submitted, as here.
EVIDENCE OF COLLUSION
Defendant points to the fact that the estate tax return was filed by the Executors on October 7, 1955, some two months before the Sedgwick County District Court judgment was entered and argues that it set up a formula of distribution consistent with the Court's final judgment. In addition, the defendant insists that the correspondence carried on between the First National Bank of Nevada and its attorney and the other attorneys requires a finding of collusion.
This evidence would appear to establish that the alleged collusive acts of the parties took place immediately following the announcement in June of 1955 by the trial judge in the state court that the Will of Mrs. Jones did not exercise the power of appointment in the trust agreement. However, it should be noted that the estate tax return was due not later than October 12, 1955, and that the due date had been extended previously at the request of the executors. Notwithstanding the fact that the most favorable position was taken by the Executors from the standpoint of tax liability is not persuasive that a collusive determination had been made among the parties. Informed taxpayers, as a rule, will submit a return which gives them the greatest tax advantage. Experience in negotiations with representatives of the Internal Revenue Service may very well justify taking such a position.
Moreover, the correspondence found in the file of the Nevada Bank indicates a situation that occurs in many lawsuits; negotiations, with a view of settlement, are generally carried on under assumed facts and under an assumption of what the Court will conclude the law to be under those facts. Partisan counsel may convince themselves that a Court can properly make no other determination than the judgment for which they contend.
The Court fails to find anything evil in efforts to settle litigation, nor anything reprehensible in considering the manifest ramifications of tax laws, and their application while so doing. This Court has followed a policy of encouraging negotiations in litigation designed to settle issues of fact and to determine questions *47 of law involved even though a complete settlement of a case may not always be effected. The statements or admissions made by parties indicating such negotiations are not ordinarily admissible as evidence against them. Again, this Court believes there is nothing wrong with discussing and considering the tax consequences of any matter; it is not the avoidance of taxes, but the evasion of taxes which is condemned.
The Court recognizes that very often speculation by counsel on what a Court's decision will be is inaccurately stated as being the declaration of the Court. The record in this case discloses that letters written by counsel to clients contained mistaken assumptions of this nature. It would extend this opinion unnecessarily to recite all the details of the evidence. It is sufficient to point out that following the hearing on June 2, 1955, and on July 27, 1955, Carolyn Rounds and Virginia Coleman Nafziger filed briefs insisting, among other things, that the trust property should be distributed as intestate property under the laws of Nevada which would have given each of them one-third of the $200,000.00 trust. From this position they never retreated and there is no evidence that they ever did. The Court is convinced that the Coleman girls never entered into any collusive disposition of the case in State Court, as contended for by the defendant, for the overpowering reason, among others, that the determination of the case as it was decided by the State Court cost each of them $16,666.66, a total of $33,333.32. It may very well be that the surviving spouse and his attorneys had endeavored to negotiate a compromise with the daughters, on this basis, but surrendering over $33,000.00 to Whipple Van Ness Jones, their step-father, could not be considered by the girls as a sound basis of compromise from any point of view.
It should be observed that the proposed stipulation and compromise agreements mentioned in letters of the Nevada Executors were never settled or reached by the parties. Furthermore, the only verbal evidence offered by the defendant to sustain its contention was contained in the communications between one of the parties and its attorneys and the statement of an officer of the Nevada Bank who had no privity with the other parties to the Kansas litigation. The correspondence, when compared with the undisputed facts in the record of the Kansas Court, indicates that the suggested settlement and disposition of the Kansas action, though hopefully entertained by counsel for the Executors, was in fact never carried out; but on the contrary, the record reveals adverse proceedings down to the day of judgment with serious consideration given thereafter by the Executors and Trustees to the taking of an appeal. Until the judgment was announced, the parties, apparently unable to effect the compromise that had been considered by the attorney for one of them, had made vigorous contentions involving; First, whether the assets of the trust should be delivered to the Executors of the Will, and thereafter placed in trust under the residuary clause of the Will; and Second, whether the assets should be distributed under the laws of intestacy and Third, if so, whether the succession laws of Nevada or of Kansas should apply. These issues were determined by the State Court and this Court finds that those proceedings were adversary and that under the weight of the evidence in this case the judgment entered by the Judge of the State Court was not collusive or fraudulent.
Furthermore, this Court feels that the affidavit of the trial judge is convincing evidence that his judgment was not the result of any agreement by the parties nor the product of any negotiations with him for the purpose of obtaining the decision reached by him. This affidavit was not contradicted. Indeed, it is a clear and an unequivocal recitation of the manner in which the case was heard, considered and determined.
Moreover, since this case involves the application of the marital deduction, we should not lose sight of the fact that such provision was enacted by Congress in order to place taxpayers in *48 common law states on an equal basis taxwise with taxpayers in community property states. Taxpayers residing in community property states held a great and undeserved advantage over taxpayers who lived in states in which the common law prevailed. Passage of the marital deduction provision was purposely designed to eliminate such discrimination. Many states went so far as to create statutory community property laws to permit their citizens to take advantage of the tax privileges community property laws afforded. Congress, in the passage of the law which made the principle of community property universal taxwise, required, as a condition for its application, that the property passing to a surviving spouse (in the common law states) must vest the spouse with the full and unrestricted title or the power to dispose of it. The interest acquired must not be a so-called "terminable interest" i. e., any interest less than complete title for the reason that if full title passed to the surviving spouse, the property so received would result in its inclusion in the spouse's estate at the time of death and then be subject to the imposition of estate tax. The purposes and objects of the marital deductions statute should not be ignored in considering the facts of this case.
To sustain its contentions, defendant urges the Court that evidence in the record requires a finding that the judgment of the State Court determining the property rights of the heirs of Mrs. Jones was in fact collusive and was obtained for the specific purpose of avoiding estate taxes that would otherwise be imposed.
Standing alone, the evidence put forward by defendant might justify its contentions. On the other hand this Court, after considering all the evidence in the case, both that which is favorable to defendant and that which is favorable to plaintiffs, is inclined to the view that the weight of the evidence is with the plaintiffs and that the property received from the assets of the Georgia Coleman Trust by Whipple Van Ness Jones, her surviving spouse, was not a terminable interest and did qualify as a part of the marital deduction.
It will be the order of the Court that the plaintiffs in each of the cases shall recover the amount of tax illegally assessed to be computed by the parties. Counsel for plaintiffs shall prepare appropriate forms of judgment to be approved by counsel and then submit same to the Court for entry.
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221 F.Supp. 576 (1963)
LAND O'LAKES CREAMERIES, INC., a corporation, Plaintiff,
v.
OCONOMOWOC CANNING COMPANY, a corporation, Defendant.
No. 59-C-234.
United States District Court E. D. Wisconsin.
September 25, 1963.
*577 Lyman A. Precourt, Milwaukee, Wis., Harold Jordan, St. Paul, Minn., for plaintiff, Arnold B. Christen, Washington, D. C., of counsel.
Gerrit D. Foster and Paul R. Puerner, Milwaukee, Wis., for defendant.
GRUBB, District Judge.
This action for cancellation of trademark registrations and for unfair competition was tried to the court. Jurisdiction is based upon the federal trademark laws, the Trademark Act of 1946, Title 35 U.S.C.A. § 146, pursuant to Title 15 U.S.C.A. §§ 1064, 1071, 1119, and 1121, and upon diversity of citizenship of the parties.
Plaintiff is a Minnesota corporation with its principal offices located in Minneapolis. It was incorporated in June of 1921 under the name of Minnesota Co-operative Creameries Association, but changed its corporate name to Land O'Lakes Creameries, Inc., in March 1926. Its primary business is the receiving of butter, which is its chief product, cheese, eggs, and poultry from its stockholders, comprised of about 450 local farmers' cooperative creameries. It grades, inspects, packages, and sells these products to wholesale and retail food establishments throughout the United States.
Among plaintiff's distributors are the Baltimore Wholesale Grocery Company, Baltimore, Maryland, which began handling plaintiff's butter under its trademark *578 some time in the 1930's and Rochester Grocers Cooperative, Inc., Rochester, New York, which started to sell plaintiff's products about three years ago. It also sells to other food distributors in Rochester, Buffalo, Syracuse, and Jamestown, New York.
Plaintiff adopted the name "Land O'Lakes" as a trademark in 1924 as the result of a public prize contest. On November 8, 1924, it filed application for registration of the mark on dairy products, butter, dressed poultry, cheese, and eggs, claiming adoption and use since February 1, 1924. Registration No. 197,022 was granted on April 7, 1925. Plaintiff obtained four additional registrations Nos. 238,023, 295,002, 321,392, and 444,420. All of its registrations are fully effective at the present time.
Defendant is a Wisconsin corporation with its principal offices located in Oconomowoc, Wisconsin. Since its incorporation in 1920, its principal business has been the canning of vegetables, some of which are sold under its own trademarks. It also cans vegetables for various retail and wholesale food establishments which sell these items under their own private labels. Defendant began using its trademark "Land O'Lakes" on canned peas in the year 1920, and on other canned vegetables produced by it in the year 1928. It has used the mark on these goods continuously to the present time. Defendant has been and is now selling canned foods produced in its plants, which foods bear the mark "Land O'Lakes," in the following areas: Midwest territory, excluding North and South Dakota, Montana, and Idaho; southwest territory as far as Texas; southeast territory; and east territory. Some of its accounts are at Auburn, New York (six years' use); Jamestown, New York (fifteen years' use in about forty-five supermarkets); and Buffalo, New York (fifteen years' use).
Beginning in the year 1924, defendant granted oral authorization to Howard E. Jones & Company (hereinafter called "Jones"), a partnership located in Baltimore, Maryland, to use the mark "Land O'Lakes" on various canned goods in the State of Maryland and adjacent areas. Defendant has never owned any interest in Jones.
Jones is a food broker which obtains customers for various canning factories and receives a brokerage fee from said factories. The customers obtained by it are located primarily in and about Baltimore, Maryland. Jones does not maintain warehouse facilities and does not itself take possession or title to the products which it handles.
The oral authorization given to Jones by defendant to use the mark "Land O'Lakes" remained in effect continuously up to June 21, 1937, when it was superseded by a series of written license agreements which continue to this date. In 1937, Jones began use of the trade style name "Ocono Co." There was no separate entity by that name. Canned foods not produced by defendant, which were being distributed by Jones, were labeled with the mark "Land O'Lakes" and carried the following inscription:
"OCONO CO
Distributors
Baltimore, MD"
and the following statement in smaller print:
"Trade mark Registered
U. S. Patent Office
Oconomowoc Canning Company
Oconomowoc, Wisconsin."
Jones tested the products so labeled by using government grading standards and cutting by opening cans and testing as to flavor and appearance. In the event there was any question as to the quality of the goods, Jones turned the cut samples over to an independent testing concern for inspection and report.
Jones, as a broker, represented a large number of canners and furnished them with labels containing the above-stated markings. Some, but not all, of these canners packed their products under continuous inspection of the United States Department of Agriculture or maintained their own inspection laboratories. These *579 canners are permitted to use the labels furnished by Jones only on goods sold through it as a broker. In the Baltimore area, goods bearing "Land O'Lakes" labels, brokered by Jones, are sold exclusively to Baltimore Wholesale Grocery Company which supplies and distributes a line of grocery items to a group of cooperative stores known as the "G. A. Stores."
Continuously for many years Jones has undertaken to procure a complete line of canned foods under the mark "Land O'Lakes" for Baltimore Wholesale Grocery Company. Jones purchases and pays for its own "Land O'Lakes" labels which it furnishes to the canners. The advertising which is done in Baltimore newspapers of the products bearing such labels is paid for through advertising allowances which Jones obtains from the respective canners.
Beginning in September 1961, and continuing to the present time, W. S. Mountfort Company, acting as broker for defendant in the territory surrounding Buffalo, New York, supplied defendant's products to Rochester Grocers Cooperative, Inc., which supplies a full line of groceries to a group of approximately seventy-five independent retail stores in Rochester, New York, which have an affiliation known as "R G C" stores. Rochester Grocers Cooperative, Inc., is the only customer of the W. S. Mountfort Company handling defendant's "Land O'Lakes" products in the Rochester area.
Defendant supplies fibre mats to its customers for their use in printing pictures of its "Land O'Lakes" products in newspaper advertisements, but it does not control the manner in which such mats are used.
On May 14, 1924, defendant filed application for registration of the trademark "Land O'Lakes" on canned vegetables, claiming adoption and use of the mark since July 15, 1920. Registration No. 189,018 was granted on said application on September 9, 1924. Defendant's subsequent registration No. 355,650, dated March 22, 1938, covers substantially the same products but contains slight changes of design of the mark without change of name.
On April 16, 1938, defendant filed application for registration of the trademark "Land O'Lakes" on approximately thirty-four additional items of canned foods. This application was opposed by plaintiff. The matter was litigated in the patent office, evidence being adduced on both sides. The application was finally denied by the commissioner of patents on December 6, 1940. Subsequently defendant amended this application to cover canned vegetables and canned tomato juice only, and registration No. 388,363 was then issued. On August 30, 1948, defendant filed further application for registration of the trademark "Land O'Lakes" based upon its sworn statement that it had adopted and was using said mark on various canned goods covered by the application and that, to the best of its knowledge and belief, no other person had the right to use said mark in commerce. The items included such canned items as vegetables and vegetable juices, fruits and fruit juices, berries, spaghetti with tomato sauce and cheese, baked beans, tomato paste, catsup and chili sauce, apple sauce, cranberry sauce, and fruit cocktail. Registration No. 541,681 was granted on this application on May 1, 1951. All of defendant's registrations are presently effective.
On or about June 1, 1957, plaintiff filed four petitions in the United States Patent Office for cancellation of the four registrations of defendant's trademark "Land O'Lakes." Defendant's answer to said petitions included a request for cancellation of all of the plaintiff's registrations of the mark. On August 3, 1959, the patent office Trademark Trial and Appeal Board rendered its decision denying the respective parties' claims. See Land O'Lakes Creameries, Inc. v. Oconomowoc Canning Company, 122 U.S.P.Q. 411 (1959).
The foregoing facts have been stipulated by the parties. Other facts are as stated in this decision.
In the instant action plaintiff seeks review and reversal of the decision of the *580 Board. Additionally, it requests a permanent injunction of use of the mark by defendant or its transferees. Defendant, which did not seek court review of the adverse decision of the Board on its claims, now asserts the defense of laches and counterclaims for cancellation of plaintiff's registrations and injunction of plaintiff's use of the mark, as well as for an accounting and for compensatory and punitive damages. Both parties request an award of attorneys' fees.
In respect to that part of the case which is a review of the patent office cancellation proceedings, this court must accept as controlling the findings of fact of the patent office unless there is convincing evidence to the contrary. Watkins Products, Inc. v. Sunway Fruit Products, Inc., 311 F.2d 496 (7th Cir. 1962). The Board's denial of plaintiff's claims for cancellations was based on a conclusion of law supported by undisputed evidence, to wit: A junior user of a trademark could not in any event be damaged by the registrations of the senior user. Thus, the junior user had no standing to maintain the petition for cancellation.
In respect to defendant's counterclaim, the Board found that the record showed that the goods of the parties had been sold and advertised extensively in the same trade areas for more than thirty-five years, and had been distributed, at least in one instance, through the same wholesale house without any instances of actual confusion having come to the attention of either party. The Board further found that the goods of the parties pertained to different fields of trade and that plaintiff's activities under the mark "Land O'Lakes" were outside of defendant's "field and scope."
This court, in its earlier decision in the case on defendant's motion to dismiss the complaint for failure to state a cause of action, held that a junior user of a trademark may have standing to sue for cancellation of a senior user's registrations on proper allegations of likelihood of confusion arising from concurrent use which resulted in an invasion of the junior user's rights in its mark. See Land O'Lakes Creameries, Inc. v. Oconomowoc Canning Company, 199 F. Supp. 124 (E.D.Wis.1961).
As a basis for its claims for cancellation and for unfair competition, plaintiff contends that there is confusion as to the source of the parties' goods arising from concurrent use of the mark. It predicates its request for cancellation upon the statutory grounds of alleged abandonment and on fraud in obtaining one of the registrations. Capitalization on plaintiff's good will and reputation, established by extensive use and promotion, is the activity claimed to constitute unfair competition.
Confusion
On the record of this case, the court finds, contrary to the finding of fact of the Board on defendant's counterclaim, that there is likelihood of confusion as to the source of origin of plaintiff's and defendant's goods bearing the mark "Land O'Lakes." This finding is based on evidence which was not before the patent office in the prior proceeding.
Seven ladies from Baltimore, Maryland, members of the purchasing public in a trade area where Land O'Lakes butter and Land O'Lakes canned goods have been sold concurrently for over thirty years, stated that they thought the canned goods originated with plaintiff which they identified as the "butter people." Their belief was based on long familiarity with the butter and with plaintiff's extensive advertising and promotional activities.
A consumer survey conducted by plaintiff in the Baltimore area also tends to demonstrate confusion of the purchasing public as to the source of goods bearing the mark "Land O'Lakes." It may be assumed that a similar state of mind would prevail in trade areas where the mark "Land O'Lakes," through long use and advertising, had become associated in the mind of the public with one of the parties and where the goods of both parties were being sold concurrently.
*581 Cancellation
Plaintiff contends that defendant's failure to exercise personal supervision and control over the quality of the Land O'Lakes goods handled by Jones constitutes abandonment.
The operation under the licensing arrangement between defendant and Jones has been in effect since 1924. Originally it was under oral agreement, then under written contract since 1937. The presently-effective contract authorizes Jones to sell canned goods bearing the mark in a designated geographical area. Jones is required to use its "best efforts to preserve the high standard and good will" of the mark. Since 1949, defendant has retained the right of supervision over all labels and products bearing the mark.
Defendant does not know in advance at any given time the source of the goods to which its licensee attaches the mark. It has undertaken no testing of these products on its own account. In lieu of direct control, defendant has relied on the control exercised by Jones, on its familiarity with the quality products of the suppliers of Jones, and on its knowledge of the circumstances which serve to discipline Jones in the use of the mark. Any complaints as to the quality of the goods would come to the attention of the Baltimore Wholesale Grocery, Jones' exclusive customer for these goods, through the stores which the wholesale company served as distributor; or the complaints would come to defendant, the owner of the mark, whose name appeared on the label as registrant thereof. To safeguard its market as well as its contractual right to use the mark, it was incumbent upon Jones to handle quality merchandise.
Plaintiff has not claimed, nor has it been shown on the trial, that the quality control of the Land O'Lakes goods by Jones is deficient. The production, brokerage, and merchandising arrangement involving use of defendant's mark "Land O'Lakes" among defendant, Jones and his suppliers, and Baltimore Wholesale Grocery has continued without interruption for almost forty years to the apparent satisfaction of these parties. Plaintiff did not offer one positive instance of deviation from quality of the canned goods bearing the mark in the Baltimore area. Of the seven housewives who testified on the issue of confusion, one had discontinued use of the canned goods because she found out that they did not originate with the "butter people," not because she was dissatisfied with the quality. Another did not like the canned corn and string beans but did not indicate a reason for the dislike. The others, who had occasionally purchased the canned goods in the past or were doing so presently, indicated no dissatisfaction with quality.
The failure of a licensor to take reasonable measures to control the activities of the licensee in respect to the nature and quality of the goods bearing the mark may constitute an abandonment thereof. Dawn Donut Company, Inc. v. Hart's Food Stores, Inc., 267 F.2d 358 (2d Cir. 1959). The practice of the parties and the contract conditions render the license arrangement more than a naked license. Under the circumstances shown here, defendant's reliance on its licensee's quality control may be deemed the taking of reasonable measures to protect the quality of the goods bearing the mark. The defendant's activities with respect to control do not constitute an abandonment of the mark.
The designation of "OCONO CO" as part of the labels used by Jones may have tended to obscure the source of origin and have lead the public to believe that the goods emanated from defendant rather than from other suppliers of the licensee. Since the purchasing public generally tends to look only to the prominent print of the label, as demonstrated clearly by the testimony of the housewives, this practice would appear to have had little significant consequence. The evidence shows it to be a common practice in connection with canned goods that the packer or distributor whose identity is found in fine print is someone other than the owner of the brand name or registered trademark such as "Carnation," *582 "Libby," or "Land O'Lakes" which is prominently displayed on the label. In no event would the use of this style name lead the public to believe that the goods originated with plaintiff. This labeling practice does not constitute misuse of the trademark which would result in an abandonment of defendant's rights therein.
In obtaining its fourth registration No. 541,681 in 1951, defendant falsely declared under oath that it had used the mark on a great variety of products covered by the registration, whereas in fact the use on such goods had been by its licensee. This registration covers a line of canned products which are a natural expansion of defendant's prior use of its mark. Misrepresentations as to prior use of the mark did not result in an invasion of a trade area related to dairy products and have not been shown to cause other injury to plaintiff.
The patent office did not deem the defect in the registration actionable. See decision and order of the Examiner of Interferences on plaintiff's motion for summary judgment in the prior patent office cancellation proceeding, docketed October 3, 1957. Under the circumstances here, the false statements do not amount to fraud in obtaining the registration to warrant cancellation thereof. Cf. Bart Schwartz International Textiles, Ltd. v. Federal Trade Commission, 289 F.2d 665 (C.C.P.A.1961), where the court granted cancellation because of false statements which concerned the rights of others to use of the mark in respect to the same kind of goods as those of the registrant.
Proceedings for cancellation of registration of a trademark are concerned with more than the rights of the general public. The statute affords relief to a party which "believes that he is or will be damaged by the registration." Title 15 U.S.C.A. § 1064, as amended 1962.
The likelihood of confusion shown by the evidence adduced on this trial is a natural incident of concurrent use of the mark on goods sold in common trade areas and, on occasion, through the same outlets. In the case of identical marks on goods which are closely related but noncompetitive, mere likelihood of confusion resulting from lawful use of the mark would not necessarily justify termination of either party's rights therein. Avon Shoe Co., Inc. v. David Crystal, Inc., 279 F.2d 607 (2d Cir. 1960). If, as in the Avon case, a senior user of a mark must bear the consequences of concurrent lawful use by a junior, the latecomer's use of the mark must certainly be subject to the rights of the senior user.
In cancellation proceedings, likelihood of damage is a condition to recovery. It may not be presumed as resulting from confusion in respect to marks granted concurrent registration by the patent office for use on noncompeting goods. Attachment of secondary meaning; that is, identification of the mark with a particular user, does not serve to establish the fact of injury or to render the confusion actionable. It is not to be imagined that the public will buy less butter because it is confused as to the origin of the canned goods or because it thinks that the canned goods originated with the producer of the butter. The Baltimore ladies did not appear to have slighted the "butter people" before their state of confusion was enlightened by the polltakers conducting plaintiff's survey in the area.
The acts of alleged abandonment have not been shown to result or to be likely to result in use of the mark on inferior or otherwise objectionable canned goods which might tarnish plaintiff's reputation and good will. The labeling practices of Jones did not lead the public to identify plaintiff as the source of the goods. False statements in a registration have not resulted in interference or limitation with the natural expansion of plaintiff's rights in its mark. There has been no invasion of any rights plaintiff has in its registered mark. Plaintiff is not entitled to cancellations of any or all of defendant's registrations.
*583 Unfair Competition
The activities claimed to constitute unfair competition are the alleged taking advantage of plaintiff's good will and reputation established by use and advertising. Plaintiff contends that defendant accomplishes this "coattailing" by moving into areas where plaintiff's products have found acceptance and by side-by-side newspaper advertising of the parties' products in areas where they are sold concurrently.
Land O'Lakes canned goods were being sold in the Baltimore area before plaintiff's Land O'Lakes products became identified with the "butter people"; that is, plaintiff. Although defendant began sales of its canned goods to Rochester Grocers Cooperative, Inc., at Rochester, New York, about one year later than did plaintiff, both parties had been selling their goods in this general area of upper New York State for some time. Plaintiff has offered no other proof of an "invasion" of territory where its reputation has been established.
Side-by-side newspaper advertising of goods bearing plaintiff's and defendant's marks has been taking place for more than twenty years. Defendant furnishes mats to its customers for advertising purposes. It does not control the manner in which these materials are being used. The persons who control the advertising which plaintiff finds objectionable are customers of plaintiff as well as of defendant.
The sum total of the activities of alleged unfair competition represents consequences of the natural expansion and development of the mark "Land O'Lakes" by both parties rather than misuse or other wrongful conduct by the defendant. Plaintiff commenced use of its mark without knowledge of defendant's rights therein. A diligent search of the trademark field would have revealed defendant's use and registration proceedings at least at the time when plaintiff adopted the designation "Land O'Lakes" as its corporate name and began its extensive promotional and advertising practices involving the mark "Land O'Lakes."
Plaintiff has never enjoyed exclusive use of the mark "Land O'Lakes." A latecomer as to defendant at the outset, it now shares the mark with other users and registrants as well. Plaintiff took the risk of developing its interest in the mark subject to the legitimate rights of defendant. Thus, plaintiff's rights in the mark are not entitled to the strong protection as granted in Polaroid Corporation v. Polaraid, Inc., 319 F.2d 830 (7th Cir. 1963).
In weighing the interests of the respective parties in this case, shear size of operations and investment does not tip the scales in favor of the latecomer to warrant termination of the earlier user's lawful rights in the mark. As noted with reference to the cancellation claim, the likelihood of confusion as to the source of origin of goods bearing the mark has not been shown to cause or threaten to cause injury to plaintiff's economic status, its reputation and good will, or to any other lawful interest in its mark. Statistics cited by plaintiff demonstrating a decline in butter sales in the Baltimore area have not been related to any activities of the defendant. While, under proper circumstances, confusion of the public may warrant the grant of an injunction where a mark is used on noncompeting goods see Polaroid Corporation v. Polaraid, Inc., supra, at 835 an evaluation of the respective interests of the parties, as well as the public interest against being misled as to the source of goods, in this case does not require or justify interference with long-established rights of the defendant.
Plaintiff has especially cited the decision in Jenney Mfg. Co. v. Leader Filling Stations Corporation, 291 Mass. 394, 196 N.E. 852 (1935), as defining the rights of a junior user of a trade name or mark as against the senior user thereof. The case is to be distinguished because the senior's use of the name, prior to attachment of secondary meaning associating it with the latecomer, had been "vacillating." Defendant, in the instant case, *584 has used the name continuously since adoption and registration in respect to a portion of its canned goods which has been expanding progressively over the years. Plaintiff did not establish when secondary meaning began to attach to its products, but in no event would this have preceded defendant's use. Further, the name in issue in the cited case was used competitively by both parties in conjunction with the sale of gasoline.
In the absence of a showing of misuse of the defendant's mark or other wrongful conduct, plaintiff must assume the incidental benefit which it confers on the defendant by its extensive promotional activities in respect to the mark "Land O'Lakes." Under the evidence of this case, plaintiff is not entitled to an injunction of defendant's use of the mark.
Although plaintiff has not established that it is entitled to the relief requested, the court finds that its claims, if valid, would not have been barred by the defense of laches. It commenced the cancellation proceedings when it believed that the alleged confusion and misuse had reached proportions which constituted a threat to its interests. Mere passage of time does not constitute laches where the allegedly wrongful conduct, such as the invasion of trade areas where plaintiff's mark had found acceptance, is claimed to show a pattern of "progressive encroachment." Independent Nail & Packing Co. v. Stronghold Screw Products, Inc., 205 F.2d 921, 927 (7th Cir. 1953).
Defendant has not established that it is entitled to relief on its counterclaim. The nature and extent of the likelihood of confusion under the circumstances of this case do not warrant cancellation of plaintiff's registrations, injunction on use of the mark, or other relief requested by counterclaim. As noted above, plaintiff commenced its use of the mark in innocence of the rights of others therein and has developed substantial interests therein which may benefit, rather than injure, other users or registrants of the mark.
No circumstances have been shown in the case which would warrant the award of attorneys' fees to either side.
The court hereby adopts the stipulation of facts as its findings of fact. Other findings of fact and conclusions of law are as set forth in the foregoing opinion in accordance with the requirements of Rule 52 of the Federal Rules of Civil Procedure, 28 U.S.C.A.
The clerk is hereby directed to enter an order for judgment dismissing the action and for defendant's costs herein.
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75 B.R. 177 (1987)
In re COLOMBIAN COFFEE CO., INC., Debtor.
Lawrence R. METSCH, Plaintiff/Appellant,
v.
FIRST ALABAMA BANK OF MOBILE, Defendant/Appellee.
No. 86-1214-Civ.
United States District Court, S.D. Florida, Miami Division.
June 24, 1987.
Lydia A. Fernadez, Miami, Fla., for plaintiff/appellant.
Richard T. Dorman, Mobile, Ala., for defendant/appellee.
MEMORANDUM DECISION
SCOTT, District Judge.
The Trustee of Colombian Coffee Co., Inc. ("Trustee"), Lawrence R. Metsch, brought an adversary proceeding in the United States Bankruptcy Court for the Southern District of Florida to recover $3,787,000 from the First Alabama Bank of Mobile ("Bank"). As grounds for recovery, the Trustee alleged that the funds constituted a fraudulent transfer under 11 U.S.C. § 548(a). He further alleged that the Bank, as the "initial transferee" or as an "immediate or mediate transferee," was liable under § 550(a).
The operative facts, succinctly stated by Chief Judge Thomas C. Britton, are as follows:
During the four weeks between February 3 and March 2, 1983, the amount in question moved in three separate transfers from Colombian Coffee's bank accounts in New York and Miami to the defendant bank for deposit in the account of General Coffee Corporation. The funds were disbursed almost immediately by General Coffee. Colombian, General and the individual who owned and controlled both corporations and caused the transfer of the funds from one to the other, all filed for bankruptcy within three months thereafter.
In re Colombian Coffee Co., Inc., 59 B.R. 643, 644 (Bkrtcy.S.D.Fla.1986).
Following a trial, Judge Britton entered judgment for the Bank and dismissed the Trustee's complaint with prejudice. 64 B.R. 585. Although finding that the Trustee had proved the elements of constructive fraud under § 548(a)(2), Judge Britton held that the Trustee could not recover from the Bank because the Bank was "neither the `initial transferee' nor `any immediate or mediate transferee' for the purposes of § 550(a)." Id. at 645. He reasoned that nothing in the legislative history indicated that "§ 550(a) was intended to make an innocent link in the commercial chain bear *178 the loss of a fraudulent or preferential transfer that has vanished beyond the trustee's reach." Id. From the adverse decision, the Trustee appeals.
I.
Code section 550(a) provides that:
to the extent that a transfer is avoided . . . the trustee may recover . . . the property transferred, or, if the court so orders, the value of such property, from (1) the initial transferee of such transfer or the entity for whose benefit such transfer was made; or (2) any immediate or mediate transferee of such initial transferee." (Emphasis added).
The Trustee urges a literal reading of this statutory language. He contends that the statute's legislative history dictates such a reading. He also contends that the specific statutory exceptions provided in § 548(d)(2)(B) and (C) confirm the intent of Congress to insulate from liability only brokers or repo participants who receive margin payments and to permit no other exceptions.
The sparse case law on point does not support the Trustee's position. The court in In re Fabric Buys of Jericho, Inc., 33 B.R. 334 (Bankr.S.D.N.Y.1983) faced a situation analogous to the present case. The trustee instituted adversary proceedings against a law firm asserting that the law firm was liable as the "initial transferee" of a preferential payment. The payment had been made by the debtor to settle a dispute with a client of the firm. After the payment was made in escrow to the client's attorneys, the funds were disbursed to the client. The court rejected the trustee's argument that the law firm was liable as the "initial transferee" of a preferential payment. Reasoning that § 550(a) was passed to remedy recovery problems which existed under the former Bankruptcy Act of 1898, the court determined that Congress intended to "preclude multiple transfers or convoluted business transactions from frustrating the recovery of avoidable transfers." Id. at 336. Because the law firm had acted merely as a conduit of funds from the debtor to the client, the court concluded that the law firm was not an "initial transferee" within the meaning of § 550(a).
In re Black & Geddes, Inc., 59 B.R. 873 (Bankr.S.D.N.Y.1986) similarly dealt with the applicability of § 550(a) to an entity that is a mere conduit of funds. There a steamship agency, acting on behalf of a common carrier by sea, collected payment from the debtor for freight due on a bill of lading for carriage. Upon receipt of the funds from the debtor, the agency paid the freight over to the common carrier, less the amount of its commission. Following Fabric Buys, the court held that an entity that acts as a mere conduit of funds is not an "initial transferee" within the scope of section 550 and denied recovery against the agent. By so holding, the court noted that it found
continued vitality in Judge Cardozo's discussion in Carson v. Federal Reserve Bank, 254 N.Y. 218, 235-36, 172 N.E. 475 (1930) ("The person to be charged with liability, if he has parted before the bankruptcy with title and possession, must have been more than a mere custodian, an intermediary or conduit between the bankrupt and the creditor. Directly or indirectly, he must have had a beneficial interest in the preference to be avoided, the thing to be reclaimed.").
Id. at n. 4, 875.
This court finds the reasoning in Fabric Buys and Black & Geddes persuasive and agrees with Judge Britton's application of the "commercial conduit" analysis to the facts of this case.[1] Those *179 facts illuminate the weakness of the Trustee's argument.
It is undisputed that the Bank acquired no beneficial interest from the wire transfers and exhibited no bad faith. Colombian Coffee, supra at 644. In addition, the Bank possessed no discretion with respect to the disposition of the fundsit was constrained to follow the debtor's instructions. Id. Nothing in the legislative history of § 550 indicates that Congress intended to impose liability under these circumstances. Indeed, it would be both problematical and preposterous were courts to adopt the Trustee's position.
As so aptly stated by Judge Britton:
Wire transfers are voluminous. The defendant bank receives over 100 a day. Larger banks receive thousands. They involve billions of dollars. They constitute an integral part of today's worldwide banking system.
The wire transfer notice frequently does not identify the originating party. . . . They are frequently automated and never seen by a human eye. If a bank must at its peril examine the source of the wired funds, determine its solvency and verify the consideration it received before the bank honors the transfer, the wire transfer system would utterly collapse. Id. at 645.
The logic of the above is obvious and makes it unnecessary for this Court to further expound on its ruling. In sum, this Court is not persuaded by the Trustee's arguments and refuses to literally apply § 550(a) to the circumstances of this case. To apply this section literally in the present case would clearly work an absurd and inequitable result.[2]
II.
Relying on Bankruptcy Judge Galgay's opinion in In re Fabric Buys of Jericho, Inc., 33 B.R. 334 (Bankr.S.D.N.Y.1983), Judge Britton held alternatively that even if the Bank had been a transferee for the purposes of § 550(a), the court should exercise its equitable discretion to prevent the Trustee from recovering a windfall from an innocent party. The final issue before the Court is whether the bankruptcy court possessed the equitable discretion to prevent the Trustee from recovering the transfer from the Bank.
The equitable powers of the bankruptcy court have been expressly recognized by the United States Supreme Court. In Bank of Marin v. England, 385 U.S. 99, 87 S.Ct. 274, 17 L.Ed.2d 197 (1966), the trustee sought an order holding the bank liable for its payment of checks drawn by the debtor before its bankruptcy but presented for payment after the filing of the bankruptcy petition. The trustee argued that the bank's payment of the checks after the filing of the petition was a "transfer" within the meaning of the former bankruptcy statute, § 70d(5), which allowed the trustee to avoid post-petition transfers. The Supreme Court held that although a literal reading of the statute might suggest otherwise, it would be inequitable to hold the bank liable to the trustee. The Court stated:
*180 [W]e do not read the statutory words with the ease of a computer. There is an overriding consideration that equitable principles govern the exercise of bankruptcy jurisdiction.
385 U.S. at 103, 87 S.Ct. at 277, 17 L.Ed.2d at 201.
Several circuit courts have recently followed the principle enunciated by the Supreme Court:
Essential to any analysis of the meaning of and policy behind any section of the Bankruptcy Code is the recognition that a bankruptcy court is a court of equity. Bankruptcy courts do not read statutory words with a computer's ease, but operate under the overriding consideration that equitable principles govern the exercise of bankruptcy jurisdiction.
In re Briggs Transportation Co., 780 F.2d 1339, 1343 (8th Cir.1986). See also, In re Ranch House of Orange-Brevard, Inc., 773 F.2d 1166, 1169 (11th Cir.1985); In re Mobile Steel Company, 563 F.2d 692, 698-99 (5th Cir.1977).
As these cases make clear, the bankruptcy courts are courts of equity. Judge Britton was thus empowered to employ equitable principles in interpreting and applying § 550(a) to the facts of this case.[3]
This Court will not reiterate why it would be inequitable to hold the Bank liable to the Trustee in the instant case, for enough has been said in the preceding section. In this Court's opinion, Judge Britton's exercise of equitable discretion was appropriate as a matter of law to alleviate an indisputable inequity to the Bank.
CONCLUSION
This Court is convinced that § 550 has no application to the facts of this case. The Bank is not a "transferee" of property of the debtor within the meaning of section 550. Alternatively, the Bankruptcy Court properly exercised its equitable discretion in holding that the Bank is not liable for the transfer of funds under section 550. It is therefore,
ORDERED and ADJUDGED that the Bankruptcy Court's holding is AFFIRMED.[4]
NOTES
[1] This court disagrees with the Trustee's assertion that while the "commercial conduit" analysis is arguably appropriate when a trustee invokes 11 U.S.C. § 547 to avoid a preferential transfer, it is illegitimate in the context of an avoidance effort under 11 U.S.C. § 548. Section 550 separates the concepts of avoidable transfers and recoverability from the transferees. H.R.Rep. No. 595, 95th Cong., 1st Sess. 375 (1977); S.Rep. 989, 95th Cong.2d Sess. 90 (1978), U.S.Code Cong. & Admin.News 1978, p. 5787. The specific principle under which a transfer is avoided is "irrelevant to the liability of the transferee against whom the trustee claims recovery of the property." 4 Collier on Bankruptcy ¶ 550.01, at 550-2 to 550-3 (a5th ed. 1985).
This court also rejects the Trustee's contention that the specific statutory exceptions provided in § 548(d)(2)(B) and (C) indicate a legislative intent to permit no other exception. As correctly stated by Judge Britton, "[t]hese provisions have no application to § 550(a), which is the only predicate for this defendant's liability. Colombian Coffee, supra at 646.
[2] Relevant to this Court's decision is the recognized principle of statutory construction where
if a literal construction of the words of a statute would lead to an absurd, unjust or unintended result, the statute must be construed so as to avoid that result.
United States v. Mendoza, 565 F.2d 1285, 1288 (5th Cir.1978); see Perry v. Commerce Loan Co., 383 U.S. 392, 86 S.Ct. 852, 15 L.Ed.2d 827 (1966); Rector of Holy Trinity Church v. United States, 143 U.S. 457, 12 S.Ct. 511, 36 L.Ed. 226 (1892); Worthy v. United States, 328 F.2d 386 (5th Cir.1964); Bulk Distribution Centers, Inc. v. Monsanto Co., 589 F.Supp. 1437 (S.D.Fla.1984). See also, Muniz v. Hoffman, 422 U.S. 454, 95 S.Ct. 2178, 45 L.Ed.2d 319 (1975) ("a literal construction of a statute need not be accepted where the thing may be within the letter of the statute, but not be found to be within the statute because it is not within the spirit of the statute, or within the legislative intent").
[3] The Trustee contends that in spite of this case law, 28 U.S.C. § 1481 has been repealed and thus deprives the bankruptcy courts of equitable powers. The courts, however, are divided on the issue of whether 28 U.S.C. § 1481 is still in effect. See Better Homes of Virginia v. Budget Service Co., 52 B.R. 426, 430 (E.D.Va.1985); In re Industrial Tool Distributors, Inc., 55 B.R. 746, 749 n. 6 (N.D.Ga.1985). Despite the disagreement among the courts as to the status of § 1481, this Court finds it unnecessary to reach an opinion regarding its status due to the clear authority supporting the existence of a bankruptcy court's equitable discretion. Moreover, bankruptcy courts are empowered to "issue any order, process, or judgment that is necessary or appropriate" to carry out the provisions of the Bankruptcy Code. 11 U.S.C.A. § 105(a) (West Supp.1987).
[4] In light of this Court's disposition of the merits of the case, Appellee's Motion for Leave to File Posthearing Brief is DENIED as moot.
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791 F. Supp. 315 (1992)
MAPCO INTERNATIONAL, INC., Plaintiff,
v.
FEDERAL ENERGY REGULATORY COMMISSION, et al., Defendants.
Civ. A. No. 91-769.
United States District Court, District of Columbia.
May 11, 1992.
Jerry E. Rothrock, Margaret H. Spurlin, Akin, Gump, Hauer & Feld, Washington, D.C., for plaintiff.
Don W. Crockett, Richard F. Ahern, Thomas W. Sacco, Judicial Litigation Div., Office of the Sol., Economic Regulatory Admin., U.S. Dept. of Energy, Washington, D.C., for defendants.
MEMORANDUM OPINION
SPORKIN, District Judge.
In April of 1991, after several stages of administrative review had been completed, plaintiff brought this action seeking a declaratory judgment stating that the Federal Energy Regulatory Commission (FERC) was required to rule on the procedural validity of the layering rule, 10 C.F.R. § 212.186. The defendants opposed remanding the case to FERC and instead sought to have this Court decide the legal issues raised by the plaintiff's dispute. After considering the arguments of the parties, the Court ordered both sides to file cross motions for summary judgment and brief all aspects of the case. The Court took jurisdiction under 42 U.S.C. § 7192.
On January 30, 1992, the Court granted the motion of the United States to intervene in this matter and allowed the United States to file a counterclaim. The counterclaim *316 sought to have "judgment entered against the plaintiff in the full amount established in the Remedial Order together with interest from the date of the pricing violations to the date of judgment...." See Answer and Counterclaim of the United States of America, 3. The Court determined it had jurisdiction over the counterclaim under sections 209 and 211 of the Economic Stabilization Act of 1970, 12 U.S.C. § 1904 note, and 15 U.S.C. § 754(a)(1). The Court decided the case on the merits and granted summary judgment in favor of the defendants in this case, including the United States. It ordered the plaintiff to pay the government the overcharges generated by its resale of oil during the late 1970s, together with interest on the overcharges.
Defendants then filed a motion requesting the Court to enter a judgment for an exact dollar figure against the plaintiff along with an amount for prejudgment interest. Plaintiff opposes this motion with a number of arguments, including the contention that it should not be required to pay prejudgment interest. The Court, after holding a hearing on the motion asked the parties to submit supplemental briefs on the issue of prejudgment interest. The parties have now submitted those briefs, and the Court is prepared to rule on the defendants' motion.
In its order granting summary judgment, the Court upheld the Department of Energy's remedial order and ordered plaintiff to pay the overcharges and the interest assessed against it and claimed by the United States in the counterclaim. Plaintiff is now asking the Court to use its equitable powers to relieve MAPCO of the burden of paying prejudgment interest.
A. BACKGROUND
In 1983 the Department of Energy (DOE) issued a proposed remedial order charging the plaintiff with violations of federal regulations. Three years later it finalized that decision and issued a remedial order. MAPCO had engaged in the business of reselling crude oil, and the Department of Energy claimed that MAPCO's practices violated the "layering rule," 10 C.F.R. § 212.186. The Department sought to recover the money it alleged MAPCO had obtained in illegal overcharges on the transactions as well as interest from the date of the violations. MAPCO claimed that it had not violated the regulations, and sought administrative appeals from every subsequent administrative order entered by the Department of Energy and the Federal Energy Regulatory Commission (FERC). MAPCO was free to deposit the alleged overcharges in an escrow account while it resolved its dispute with the government. MAPCO chose not to avail itself of this option. After adverse administrative decisions over many years, plaintiff MAPCO brought this action before the Court. The Court ordered the parties to brief all aspects of the case and held an oral hearing on cross motions for summary judgment. The Court granted summary judgment in favor of the defendants.
B. PREJUDGMENT INTEREST
Plaintiff does not dispute that pursuant to this Court's order granting summary judgment, it owes $1,992,021.54 in overcharges. It does, though, argue that it should be relieved from paying the $5,664,325.75 in interest which defendants claim plaintiff owes because the defendants took so long to reach a final administrative decision.
The Court has the authority when deciding cases under section 209 of the Economic Stabilization Act to impose prejudgment interest. See United States v. Exxon Corp., 773 F.2d 1240, 1277-79 (Temp.Em.Ct.App.1985). In this case, plaintiff must pay prejudgment interest on the overcharges assessed. If a party chooses to contest an administrative order, it must absorb the costs of litigation, including prejudgment interest. See F.T.C. v. Standard Oil of California, 449 U.S. 232, 244, 101 S. Ct. 488, 495, 66 L. Ed. 2d 416 (1980). If the party declines to put the disputed amount in escrow, it may not keep for itself the time value of the money constituting the overcharges. To allow MAPCO to forego prejudgment interest in this *317 case would encourage litigants, whether or not they had a colorable claim, to contest every administrative ruling whenever possible and thus to delay resolution of disputes. The plaintiff enjoyed the use of the overcharges during the time its case was in dispute, and it must now return the money it made as a result.
Although the plaintiff may not be relieved of its obligation to pay prejudgment interest, the Court is troubled by the unwarranted delay that occurred during the administrative process. MAPCO had a right to contest the overcharges before DOE and before FERC, and it was entitled to receive intermediate decisions from the agencies in a timely fashion. Cf. 5 U.S.C. § 555(b) ("With due regard for the convenience and necessity of the parties or their representatives and within a reasonable time, each agency shall proceed to conclude a matter presented to it."). The Court became aware of at least one specific instance of agency-caused delay when MAPCO filed an action in this court in 1988, seeking to expedite FERC's decision. This Court dismissed that action while simultaneously urging FERC to act promptly. See MAPCO v. FERC, No. 88-1130 (D.D.C. 1988). From the record in this case, it appears that FERC took between two and three years to issue a final decision. Since an award of prejudgment interest is made pursuant to the Court's equitable authority, the Court will take into account and disallow interest for any period of time when it believes the prevailing party has not acted as expeditiously as it should have.
When an agency takes an undue amount of time to decide a matter submitted to it, the Court believes interest would be tolled during the inordinate length of time used by the agency. There may be some question as to what amount of time constitutes inordinate delay. The Court believes six months should be ample time for an agency to issue a decision. By way of analogy, the Court looks to legislation Congress has recently passed expressing its view on delay resulting from the adjudicative process. See 28 U.S.C. §§ 471-482 (Civil Justice Reform Act). Congress discouraged federal courts from allowing matters to remain pending for longer than six months. See 28 U.S.C. § 476. It appears that it would be appropriate to apply the same principle to this case and use a six month standard for the assessment of prejudgment interest in this case. Accordingly, the amount of prejudgment interest owed by the plaintiff will be adjusted for those periods of time when either DOE or FERC took longer than six months to decide a pending matter in this litigation.
Interest will be charged at the rates authorized by the Department of Energy policy. See 46 Fed.Reg. 21412 (April 10, 1981). These rates have been recognized by judicial authority as appropriate. See United States v. Ladd Petroleum, 843 F.2d 506, 510 (Temp.Em.Ct.App.1988). The Court finds no compelling reason for adopting the rates proposed by the plaintiff.
An appropriate order accompanies this opinion.
ORDER
For the reasons set forth in the accompanying opinion, it is this 7 day of May, 1992, hereby
ORDERED that the defendants are awarded prejudgment interest on their counterclaim; and it is
FURTHER ORDERED that
(1) Interest shall begin to accrue from the first date in August of 1978 on which there was a violation.
(2) Interest shall continue to accrue during the entire period of the controversy except that it shall be tolled for any period in which a defendant had a decision in this proceeding pending before it for longer than six months.
(3) Administrative appeals, petitions for review, and similar requests filed by parties other than than MAPCO will have no affect on the calculation of prejudgment interest owed by the plaintiff.
(4) Civil actions filed in court, other than this action, No. 91-769, will have no *318 affect on the calculation of prejudgment interest owed by the plaintiff;
and it is
FURTHER ORDERED that prejudgment interest shall be calculated at the rates proposed by the defendants; and it is
FURTHER ORDERED that the parties shall have twenty-one days to provide the Courts with their calculations of the prejudgment interest due as calculated pursuant to the order of this Court.
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Dismissed and Memorandum Opinion filed August 20, 2013.
In The
Fourteenth Court of Appeals
NO. 14-13-00543-CR
JOHN MANUEL CASTILLO, Appellant
V.
THE STATE OF TEXAS, Appellee
On Appeal from the 262nd District Court
Harris County, Texas
Trial Court Cause No. 1373069
MEMORANDUM OPINION
Appellant entered a guilty plea to burglary with intent to commit assault. In
accordance with the terms of a plea bargain agreement with the State, the trial
court sentenced appellant on June 5, 2013, to confinement for four years in the
Institutional Division of the Texas Department of Criminal Justice. We dismiss the
appeal.
The trial court entered a certification of the defendant’s right to appeal in
which the court certified that this is a plea bargain case, and the defendant has no
right of appeal. See Tex. R. App. P. 25.2(a)(2). The trial court’s certification is
included in the record on appeal. See Tex. R. App. P. 25.2(d). The record supports
the trial court’s certification. See Dears v. State, 154 S.W.3d 610, 615 (Tex. Crim.
App. 2005).
Accordingly, we dismiss the appeal.
PER CURIAM
Panel consists of Justices Frost, Boyce and Jamison.
Do Not Publish C Tex. R. App. P. 47.2(b).
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755 F. Supp. 2d 236 (2010)
Anton K. SAMAAN, Plaintiff,
v.
ST. JOSEPH HOSPITAL, et al., Defendants.
No. 1:09-cv-00656-JAW.
United States District Court, D. Maine.
December 21, 2010.
*237 John P. Flynn, III, Daniel G. Lilley, Law Offices, P.A, Portland, ME, for Plaintiff.
*238 James F. Martemucci, L. John Topchik, Germani Martemucci Riggle & Hill, Jeffrey D. Russell, Thomas V. Laprade, Lambert Coffin, Portland, ME, for Defendant.
ORDER ON DAUBERT HEARING
JOHN A. WOODCOCK, JR., Chief Judge.
Following a December 9, 2010 Daubert hearing, the Court grants Dr. David Kaplan's motion to exclude the expert testimony of Dr. Ravi Tikoo concerning the consequences of the failure to administer tissue plasminogen activator (t-PA) to Anton K. Samaan within three hours of the onset of his stroke symptoms. The battle line in this motion is drawn on whether it is more likely than not Mr. Samaan would have benefited if he had received timely t-PA. The Court concludes it is not.
I. STATEMENT OF FACTS
A. Mr. Samaan's Stroke and Treatment at St. Joseph
On January 14, 2006, Anton K. Samaan boarded a flight in Milan, Italy to return to New York, New York after visiting his family in Egypt for the holidays. During the flight, Mr. Samaan got up from his seat and headed toward the plane's galley for a cup of tea. When Mr. Samaan reached the galley, he was confronted by a flight attendant who told him that "he appeared sick." Notice of Removal at Attach 2 ¶ 9 (Docket # 1), Compl. The flight attendant called for doctors on the plane, and at approximately 11:30 a.m., a doctor diagnosed him with "a likely stroke in progress." Id. ¶ 10. In accordance with the doctor's instructions, the pilot diverted the plane to the nearest airport. Id.
The plane landed in Bangor, Maine and Mr. Samaan reached the emergency department at St. Joseph Hospital not later than 12:40 p.m., where he was treated by emergency room physician David Kaplan, M.D. Id. ¶¶ 11, 15. Dr. Kaplan did not administer t-PA. Id. ¶ 11. Mr. Samaan has suffered "severe deficits as a result of the ischemic stroke he suffered on 01/14/06." Id. ¶ 13. He filed this suit against St. Joseph and Dr. Kaplan, alleging that Dr. Kaplan's failure to administer t-PA violated the standard of medical care and caused him severe damages. Id. ¶ 22.
B. Defendant's Motion in Limine and the Subsequent Procedural History
Mr. Samaan designated Dr. Ravi Tikoo, a neurologist, to testify as his expert. Dr. Tikoo has stated that "Dr. Kaplan's decision not to administer t-PA proximately caused [Mr. Samaan's] alleged injuries." Def. David Kaplan M.D.'s Mot. in Limine To Exclude Test. of Ravi Tikoo, M.D. at 2 (Docket # 26) (Def.'s Mot.). In response, Dr. Kaplan says that Dr. Tikoo's opinion is inadmissible because his methodology is flawed. Dr. Kaplan maintains that Dr. Tikoo's view that "a patient would have a 51 percent or better chance of improvement if he was given t-PA as opposed to being given none" does not meet Daubert scientific standards for admissibility.[1]Id. at 3.
On October 14, 2010, the Court issued an order denying Dr. Kaplan's motion, and observing that it "would benefit from a greater understanding of the foundation for the experts' opinions and from more illuminating and less adjectival advocacy." Order on Mot. in Limine at 9 (Docket # 49). Responding to the Court's suggestion, *239 Dr. Kaplan moved for a Daubert hearing on the expert witness issue. Def. David Kaplan, M.D.'s Mot. for Recons. Of the Court's Order on his Mot. for Summ. J. or in the Alternative for a Daubert Hearing on the Admissibility of the Opinions of the Pl.'s Causation Expert (Docket # 53) (Def.'s Daubert Mot.). Mr. Samaan responded and Dr. Kaplan replied, and on November 15, 2010, the Court granted the motion for a Daubert hearing. Pl.'s Mem. in Opp'n to Def. Kaplan's Mot. for Recons., or in the Alternative, for Daubert Hearing (Docket # 65) (Pl.'s Daubert Opp'n); Def. David Kaplan, M.D.'s Reply to Pl.'s Opp'n to Mot. for Recons. Of the Court's Order on His Mot. for Summ. J. or in the Alternative for a Daubert Hearing on the Admissibility of the Opinions of the Pl.'s Causation Expert (Docket # 66); Order Granting Mot. for Daubert Hearing (Docket # 68) (Def.'s Daubert Reply). After consulting with counsel, the Court scheduled the Daubert hearing for December 9, 2010, following which the parties filed legal memoranda. Defs.' Supplemental Mem. on the Use of Absolute Risk Reduction Versus Odds Ratio in Causation Analysis (Docket # 88) (Defs.' Supplemental Mem.); Pl.'s Mem. Following Daubert Hearing (Docket # 89) (Pl.'s Supplemental Mem.).
C. Daubert Hearing
At the Daubert hearing, the two experts testified by split screen videoconference; they were not only projected into the courtroom, but were able to hear and see each other.
1. The National Institute of Neurological Disorders and Stroke (NINDS) Study
In 1995, the NINDS published a paper in The New England Journal of Medicine titled "Tissue Plasminogen Activator for Acute Ischemic Stroke." The experts agree that the NINDS Study is the gold standard for assessing the effectiveness of the administration of t-PA within three hours of the onset of stroke symptoms. In general, the NINDS Study concluded that some patients who received timely t-PA improved over patients who did not. In one table, for example, using a National Institute of Health Stroke Scale Standard (NIHSS), the percentage of patients who improved after t-PA ranges from a high of 38% to a low of 31% and the percentage of patients who improved with a placebo ranges from a high of 21% to a low of 20%. Based on simple subtraction, Dr. Kaplan urges the Court to conclude that a difference of ten to eighteen percent does not begin to reach the civil standard of more than 50%.
The proper way to view improvement from t-PA, however, is disputed by the parties. Dr. Tikoo expressed the view that the NINDs Study supported his view that the likelihood of improvement was greater than 50%; Dr. Nyquist rejected Dr. Tikoo's opinion and stated that although the NINDS Study demonstrated that some patients improved, the percentage was markedly less than 50%. If Dr. Tikoo is correct, it is more likely than not that Mr. Samaan would have improved if t-PA had been timely administered; if Dr. Nyquist is correct, the failure to administer t-PA to Mr. Samaan may have caused him to improve, but it is not more likely than not that it would have done so.
2. Examination of Dr. Tikoo
The hearing opened with testimony about Dr. Tikoo's background and experience. Dr. Tikoo's curriculum vitae (CV) confirmed that he had received an award from the NINDS, the institute that had performed the seminal NINDS Study. He testified that, in performing the research for the NINDS that led to that award, part of his job was to interpret data. Dr. *240 Tikoo said he relied on interpretive methodologies he used with the NINDS in forming his opinions in this case.
Consistent with his deposition testimony, Dr. Tikoo reiterated that he relied on the NINDS Study and noted that the NINDS Study showed at least 30% of ischemic stroke patients who received t-PA suffered minimal or no disability three months after the stroke. He emphasized that the criteria used to reach the 30% figureminimal or no disabilitywere very stringent and that a more relaxed view of improvement would expand the percentage of patients who benefit from t-PA.
In forming his opinion, Dr. Tikoo said that he relied predominantly on a figure called the Global Odds Ratio, a ratio that measures the relative likelihood of an outcome between two groups. According to Dr. Tikoo, an odds ratio of 1.0 indicates an outcome is equally likely between two groups and an odds ratio of 1.5 indicates that an outcome is 50% more likely for one group than another. Dr. Tikoo testified that the Global Odds Ratio combined the results of four measures of post-stroke function: the Barthel Index, the Modified Rankin Scale, the Glasgow Outcome Scale, and the National Institute of Health Stroke Scale (NIHSS). He testified that the NINDS Study resulted in a Global Odds Ratio of 1.7 for patients who received t-PA versus those who did not. This figure, he said, supported his opinion that Mr. Samaan would have had a greater than 50% chance of a more favorable outcome if he had been administered timely t-PA.
Dr. Tikoo also cited a 2001 and a 2004 article from Stroke, a medical journal of the American Heart Association. He testified that the 2001 article examined the NINDS Study data and reanalyzed it to determine t-PA's efficacy in achieving partial improvement below the stringent criteria of the indices in the original study. Dr. Tikoo stated that the reanalysis showed that in addition to the patients who fully recovered, an additional 20 to 30% of patients receiving t-PA enjoyed partial improvement. He argued that those partial improvements should be considered in examining the efficacy of t-PA. He further testified that the 2004 article reanalyzed the NINDS data and found an odds ratio of 2.1.
Dr. Tikoo also cited the 2008 ECASS-III study, which tested whether the time window for administering t-PA after the onset of stroke symptoms should be expanded beyond its 3-hour guideline. He testified that the study showed that 52.4% of patients receiving t-PA more than 3 hours after onset of stroke symptoms had a favorable outcome while 45.2% in the placebo group had a favorable outcome. Dr. Tikoo testified that the odds ratio between the t-PA and placebo groups was 1.34.
Finally, Dr. Tikoo testified that in addition to the scientific studies, he had relied on his own clinical experience in forming his opinion. He stated that he had overseen the administration of t-PA on approximately twenty to twenty-four patients in his career. He testified that he was not aware that any of those patients died following administration of t-PA, that he had seen neurological improvement in some, and that there was no movement in the medical community to stop the administration of t-PA.
On cross-examination, Dr. Kaplan tested the limits of Dr. Tikoo's expertise. Dr. Tikoo admitted that he had never served on a stroke team, had never made the final decision to administer t-PA, and had never published anything related to stroke care. He conceded that he did not follow the patients for whom he had administered t-PA *241 to learn whether they suffered any adverse reactions. Dr. Tikoo acknowledged that he is not on the American Heart Association's Stroke Counsel and that his neurology expertise concentrates in the areas of epilepsy and neurooncology, not in stroke care. He admitted he did not know the sub-type of stroke Mr. Samaan suffered, did not know whether Mr. Samaan was taking anticoagulants before suffering his stroke, did not know whether Mr. Samaan had suffered from seizures before his stroke, and did not know whether St. Joseph had a stroke team or a certified stroke program.
Dr. Kaplan's cross-examination also revealed that Dr. Tikoo is not familiar with certain statistical calculations. Specifically, Dr. Tikoo was unfamiliar with how to make a Number Needed to Treat (NNT) calculation and conceded that he would not be able to determine the NNT from the NINDS Study data. However, Dr. Tikoo argued that the NNT is an efficacy calculation that does not measure whether t-PA is more likely than not to benefit a patient. He acknowledged that there are a number of ways to interpret data but reiterated that the odds ratio is the best measure of whether a patient is more likely than not to benefit from t-PA.
In his cross-examination of Dr. Tikoo, Dr. Kaplan demonstrated some weaknesses in the application of NINDS Study data to Mr. Samaan's circumstances. For example, Dr. Tikoo had assumed that Mr. Samaan arrived at St. Joseph at least two hours after the onset of his symptoms, so the portion of the NINDS Study data reflecting t-PA administration between 0 and 90 minutes after the onset of symptoms would not be applicable to him.[2] Dr. Kaplan further elicited testimony that the 2001 Stroke article upon which Dr. Tikoo had relied was an editorial, not a peer-reviewed publication.
Finally, the Court examined Dr. Tikoo. As an initial matter, Dr. Tikoo affirmed the Court's understanding that the NINDS Study demonstrated a roughly 30% favorable outcome rate in patients who were administered t-PA. Although the NINDS Study had been published in 1995, Dr. Tikoo testified that he was not aware of any improvements in t-PA or its administration that would have increased the rate of patient improvement between the conclusion of the NINDS Study in 1995 and Mr. Samaan's stroke in 2006. He agreed that once the NINDS Study demonstrated that a significant enough percentage of patients improved with the administration of t-PA over those patients who did not receive t-PA, it would be unethical to perform another clinical study in which a group of stroke victims was deliberately denied t-PA. Therefore, he agreed, the medical community has had difficulty refining its understanding of t-PA's effectiveness beyond the 1995 data.
3. Examination of Dr. Nyquist
Turning first to his background and experience, Dr. Paul Nyquist testified that he specializes in strokes and stroke care both in academic and the clinical settings. He said that he has published articles and lectured on stroke management and t-PA, that he has personally administered t-PA to at least twenty-five patients, and that he has made the decision to administer t-PA at least 100 times.[3]
*242 Dr. Nyquist asserted that the science on administration of t-PA has improved immensely since 1995. Specifically, he said that further research has revealed the danger of t-PA to patients who present with certain contraindications and that research has led to limits on the types of patients who receive t-PA. However, Dr. Nyquist acknowledged that neither the drug itself nor its recommended dosages has changed since 1995.
Rejecting Dr. Tikoo's odds ratio approach, Dr. Nyquist explained that the odds ratio is not a proper method of determining whether the failure to administer t-PA was more likely than not the cause of Mr. Samaan's injuries. Dr. Nyquist said that, to meet the "more likely than not" standard, Mr. Samaan would have to prove that he was more than 50% likely to benefit from administration of t-PA. He contended that an odds ratio does not address that standard because it only measures the risk of disability relative to a placebo group. To determine whether something is more likely than not to occur, Dr. Nyquist said that one needs to consider relative risk together with absolute risk to arrive at the NNT. He calculated that the results of the NINDS Study reveal an NNT of 7, meaning that for every seven patients administered t-PA, only one will experience a favorable outcome.
Dr. Nyquist also contended that the specific circumstances of Mr. Samaan's presentation at St. Joseph generated further doubt as to whether he would have benefited from t-PA. Dr. Nyquist noted that no one at St. Joseph could have known exactly when Mr. Samaan's stroke symptoms began. Although they had been told that Mr. Samaan's symptoms had begun at least two hours before presentation at the ER, his symptoms could well have started over three hours earlier. He testified that medical practitioners understand t-PA is more effective the earlier after the onset of symptoms it is administered. Furthermore, he observed that the doctors at St. Joseph were unaware of Mr. Samaan's of medical history, precluding them from fully evaluating the presence of any contraindications for t-PA.[4]
Dr. Nyquist turned to the NINDS Study's failure to measure partial recoveries from stroke. He acknowledged this as a weakness of the NINDS Study but stated that a peer reviewed article by Jeffrey Saver, published in 2004, had reanalyzed the data to take a broader range of outcomes into account (Saver Article).[5] Dr. Nyquist pointed out that the Saver Article presented its results using the NNT calculation. Dr. Nyquist noted that the Saver Article found an NNT of roughly 3. He explained that this means one out of three patients administered t-PA will receive some benefit. He asserted that this represents the most generous empirically-derived figure for the efficacy of t-PA to date but observed it still does not reach the greater than 50% figure necessary to satisfy the "more likely than not" standard.
*243 Mr. Samaan cross-examined Dr. Nyquist. Dr. Nyquist conceded that he is not certified in statistical analysis, but added that his stroke certifications required him to complete a program that included training in statistical analysis. He agreed that as a general principle, he wants to increase the number of people with safe access to t-PA. He acknowledged that odds ratios are the traditional expression of the relative likelihood of outcomes. Noting the word "novel" in the Saver Article's title, Mr. Samaan asked Dr. Nyquist whether the Saver Article had employed an unconventional statistical analysis. Dr. Nyquist responded that the Saver Article's statistical methodology was well established and that the word "novel" referred to the analysis of multiple levels of disability. He added that the Saver Article is frequently cited in scholarship on strokes and is featured on the American Heart Association's website. Finally, Dr. Nyquist conceded that although he read Dr. Kaplan's record of his treatment of Mr. Samaan, he did not recall any mention of t-PA in the medical chart.
The Court asked Dr. Nyquist about the changes in t-PA administration guidelines between 1995 and 2006. Dr. Nyquist testified that there had been significant improvements in the administration of t-PA, but those improvements had not been in the dosage or administration of the drug. Rather, medical science has a greater appreciation for the categories of patients who respond best to t-PA. He explained that immediately after the NINDS Study, many emergency departments used t-PA over-aggressively without taking contraindications into account. He noted that since then, there have been studies on contraindications, which have allowed physicians to more accurately determine which subsets of patients can safely receive t-PA. He stated that the adoption of quality assurance programs and stroke teams at hospitals has also made the administration of t-PA safer. Finally, he testified that he would not have treated Mr. Samaan with t-PA if he had been the physician treating him at St. Joseph Hospital because too many factors were undeterminable at the time, including when Mr. Samaan had last been observed without stroke symptoms.
4. Closing Statements
The parties made brief closing statements following the experts' testimony. Mr. Samaan asserted that the standard for admissibility is reliability. He noted that Dr. Tikoo obtained his odds ratio calculation directly from the NINDS Study, which is recognized as the authoritative study on the efficacy of t-PA.
Dr. Kaplan responded that expert testimony has to be not only reliable but also the testimony must have bearing on the facts, and that Dr. Tikoo's testimony does not meet the latter prong. He contended that the statistics Dr. Tikoo relied upon in forming his opinion merely reflect that t-PA treatment yields a better chance of recovery than a lack of t-PA treatment. Although this evidence may meet the causation standard in a jurisdiction that recognizes the loss of chance doctrine, he argued that the state of Maine has not recognized the loss of chance doctrine. Instead, he said that the Maine standard is articulated in Merriam v. Wanger, 2000 ME 159, 757 A.2d 778: a plaintiff in a medical malpractice case must prove that breach of the standard of care was more likely to have caused the plaintiff's injury than any other potential cause. He argued that under that standard, Mr. Samaan must proffer expert testimony suggesting that the failure to administer t-PA was the most likely cause of his injury. Dr. Kaplan further contended that Mr. Samaan failed to do so because Dr. Tikoo's statistics support the proposition that Mr. Samaan would have been at least 50% *244 likely to suffer the same level of injury regardless of t-PA.
Mr. Samaan responded that the loss of chance doctrine is available in Maine. Citing Phillips v. Eastern Maine Medical Center, 565 A.2d 306 (Me.1989), he said that Phillips left open the possibility that the loss of chance doctrine has been adopted in Maine. Dr. Kaplan responded that what the Maine Supreme Judicial Court avoided in Phillips, it decided in Merriam: that the Maine standard for causation in a medical malpractice case is "more likely than not."
D. Legal Contentions
Mr. Samaan contends that the admissibility of expert testimony in the First Circuit depends solely on whether "the expert's conclusion has been arrived at in a scientifically sound and methodologically reliable fashion." Pl.'s Supplemental Mem at 2 (quoting United States v. Mooney, 315 F.3d 54, 63 (1st Cir.2002)). He contrasts this with the test used by the Fifth Circuit in Young v. Memorial Hermann Hospital Services, 573 F.3d 233 (5th Cir.2009), which, according to Mr. Samaan, would allow a court to choose to admit only that "expert testimony it regarded as more authoritative or more persuasive." Pl.'s Supplemental Mem. at 2. Mr. Samaan argues that Dr. Tikoo's analyses meet the First Circuit test because they are "well founded in scientifically sound and accepted principles and reliable methods." Id. at 2.
Mr. Samaan further argues that in Merriam, the Maine Supreme Judicial Court addressed the burden of proof for demonstrating proximate cause at trial, which does not "equate to the test under Rule 702 for the admissibility of expert opinion testimony." Id. at 5. He contends that making "a qualitative comparative decision between competing expert opinions" is "for the sole discretion of the jury." Id.
Dr. Kaplan responds that Dr. Tikoo's expert testimony should not be admitted because it does not shed light on t-PA's absolute benefit to Mr. Samaan. Dr. Kaplan contends that, given Maine's "more likely than not" causation standard, "this Court must look to the data showing t-PA's absolute benefit to Mr. Samaan, not the data showing t-PA's relative benefit." Defs.' Supplemental Mem. at 1. He asserts that Dr. Nyquist's NNT calculation expresses the absolute benefit of t-PA and establishes that "approximately seven people need to be treated to achieve one positive outcome". Id. at 1. He argues not only that an odds ratio is "a poor metric to use in the legal question before the Court," but also that the conclusion Dr. Tikoo derives from the odds ratio is wrong. Id. at 2. He asserts that "the law has recognized that, even if odds ratio is a useful methodology in a particular case, the odds ratio must exceed 2.0 to establish that a positive outcome was more likely than not." Id. (citing Vanderwerf v. SmithKlineBeecham Corp., 529 F. Supp. 2d 1294, 1302 n. 10 (D.Kan.2008)). Finally, Dr. Kaplan cited a recent United States District Court decision granting summary judgment to a defendant in a similar case because "the showing of an absolute benefit of 12% that could have been achieved through treatment with t-PA did not establish that `failure to administer TPA was the proximate cause of [the plaintiff's] injuries.'" Id. at 3 (quoting Dannenberg v. U.S., No. 04-CV-4897 (NGG)(JMA), 2010 WL 4851341, at *10 (E.D.N.Y. November 22, 2010)). He urges the Court to follow the Eastern District of New York's reasoning.
II. DISCUSSION
A. Legal Standards
1. Admissibility of Expert Testimony
Federal Rule 702 governs the admissibility of expert testimony:
*245 If scientific, technical, or other specialized knowledge will assist the trier of fact to understand the evidence or to determine a fact in issue, a witness qualified as an expert by knowledge, skill, experience, training, or education, may testify thereto in the form of an opinion or otherwise, if (1) the testimony is based upon sufficient facts or data, (2) the testimony is the product of reliable principles and methods, and (3) the witness has applied the principles and methods reliably to the facts of the case.
Fed.R.Evid. 702. The trial judge is responsible for screening expert testimony to determine "whether the expert is proposing to testify to (1) scientific knowledge that (2) will assist the trier of fact to understand or determine a fact in issue." Daubert, 509 U.S. at 592, 113 S. Ct. 2786. Under this standard, courts should consider the following nonexhaustive list of factors:
(1) whether the theory or technique can be and has been tested;
(2) whether the technique has been subject to peer review and publication;
(3) the technique's known or potential rate of error; and
(4) the level of the theory or technique's acceptance within the relevant discipline.
Mooney, 315 F.3d at 62 (citing Daubert, 509 U.S. at 593-94, 113 S. Ct. 2786).
Furthermore, an expert's conclusions must not be too remote from his methodologies. Mr. Samaan asserts that the First Circuit limits a trial court's consideration to whether "the expert's conclusion has been arrived at in a scientifically sound and methodologically reliable fashion."[6]Pl.'s Supplemental Mem. at 2. He quotes Mooney:
Daubert does not require that the party who proffers expert testimony carry the burden of proving to the judge that the expert's assessment of the situation is correct.... It demands only that the proponent of the evidence show that the expert's conclusion has been arrived at in a scientifically sound and methodologically reliable fashion.
315 F.3d at 63.
Mr. Samaan seeks too much from Mooney. In General Electric Co. v. Joiner, 522 U.S. 136, 146, 118 S. Ct. 512, 139 L. Ed. 2d 508 (1997), the Supreme Court observed that a district court may exclude expert testimony if the expert's conclusion does not logically follow from his methodology:
Trained experts commonly extrapolate from existing data. But nothing in either Daubert or the Federal Rules of Evidence requires a district court to admit opinion evidence that is connected to existing data only by the ipse dixit of the expert. A court may conclude that there is simply too great an analytical gap between the data and the opinion proffered.
The Court does not read Mooney as conflicting with Joiner. In Mooney, the defendant challenged the sufficiency of the standards and testing in the field of handwriting analysis. Mooney, 315 F.3d at 63. Because the reliability of the field of expertise *246 itself was being challenged, the First Circuit focused on the soundness of the science and the reliability of the methodologies. Id. However, the First Circuit also noted that an expert's ultimate opinion must be linked to the reliable methodologies of the field. Id. (stating that the district court judge "explained that the reliability of the handwriting comparison testimony and the expert's ultimate opinion on authorship were inevitably linked because they were based on the same methodology.") Mooney is consistent with the Supreme Court's holding that there must not be "too great an analytical gap between the data and the opinion proffered." Joiner, 522 U.S. at 146, 118 S. Ct. 512. In fact, the First Circuit has repeatedly quoted with approval this exact language in Joiner. United States v. 33.92356 Acres of Land, 585 F.3d 1, 7 (1st Cir.2009); Ruiz-Troche v. Pepsi Cola of P.R. Bottling Co., 161 F.3d 77, 81 (1st Cir.1998); see United States v. Raymond, 700 F. Supp. 2d 142, 146 (D.Me.2010).
Finally, in Mooney, the First Circuit emphasized that these matters are largely within a district court's discretion. Mooney, 315 F.3d at 63. It held that the district court did not abuse its discretion in admitting opinion testimony by a handwriting expert, but noted that it was not deciding whether another district court would have abused its discretion by excluding similar testimony. Id. (citing United States v. Hines, 55 F. Supp. 2d 62 (D.Mass.1999) and Kumho Tire Co. v. Carmichael, 526 U.S. 137, 158, 119 S. Ct. 1167, 143 L. Ed. 2d 238 (1999)).
2. Maine Causation Standard
Mr. Samaan correctly notes that in Phillips, the Law Court identified two potential standards of causation in malpractice actions. The "more likely than not" standard requires "the plaintiff to show a better than even chance of avoiding harm in the absence of medical negligence,"[7]Phillips, 565 A.2d at 308. The loss of chance doctrine requires a plaintiff to show "that he was deprived of a significant chance of avoiding harm." Id. Phillips did not decide whether Maine adopted the loss of chance standard because the Law Court concluded that the jury could have "rationally determine[d] that the plaintiffs satisfied even the more stringent requirement." Id.
The Court agrees with Mr. Samaan that it is critical to identify the proper standard in Maine. If Maine has adopted the "loss of chance" doctrine, Mr. Samaan would not necessarily have to demonstrate that he would have stood a better than 50% chance of improvement if he had received a timely dose of t-PA. Instead, he would only need to demonstrate that by failing to administer t-PA, Dr. Kaplan "deprived [him] of a significant chance of avoiding harm." Id. Under the "more likely than not" standard, Mr. Samaan may not proffer Dr. Tikoo's opinion; under the "loss of chance" standard, he may.
Current Maine law favors Dr. Kaplan's position. The Maine Supreme Judicial Court has not mentioned the loss of chance doctrine since 1989 and at the same time, has consistently reiterated that the standard for causation in Maine is "more likely than not." Just months after Phillips, the Maine Law Court stated that Maine uses the more likely than not standard in malpractice actions. Spickler v. York, 566 A.2d 1385, 1390 (Me.1989) (agreeing that a jury instruction asking whether the result "could" have been different "diluted the `more likely than not' burden of proof imposed on malpractice plaintiffs"). In 2000, *247 the Law Court clarified that Maine's "more likely than not" standard mirrors that of other jurisdictions, and requires a showing that the negligence was the most likely cause of injury when weighed against other possible causes. Merriam, 2000 ME 159, ¶ 8, 757 A.2d at 781 (stating that "[t]he mere possibility of such causation is not enough, and when the matter remains one of pure speculation or conjecture, or even if the probabilities are evenly balanced, a defendant is entitled to summary judgment" (emphasis added)); accord Roney v. Wendy's Old Fashioned Hamburgers of New York, Inc., No. Civ. 2:05-CV-109-GZS, 2006 WL 696251, at *10 (D.Me. Mar. 17, 2006) (quoting Merriam, 2000 ME 159, ¶ 8, 757 A.2d 778, 780.)
Merriam establishes that foreseeability of a risk does not suffice to prove causation in Maine. In Merriam, two of the plaintiff's experts testified that the defendant's negligence created a reasonably foreseeable risk to the plaintiff. Id. ¶¶ 11-13, 757 A.2d at 781-782. However, the Law Court held that "foreseeability of a risk does not permit a jury to infer causation." Id. ¶ 16, 757 A.2d at 782. Because the experts did not testify that the plaintiff's damages "would have been avoided had [the defendant] acted properly," the Merriam Court held that the plaintiff was unable to prove causation and granted the defendant judgment as a matter of law. Id. at ¶ 18, 757 A.2d at 782.[8]
The role of the federal court in blazing new trails in state law is decidedly limited. Ryan v. Royal Ins. Co. of Am., 916 F.2d 731, 744 (1st Cir.1990). A federal court considering state law claims is "bound by the teachings of the state's highest court." N. Am. Specialty Ins. Co. v. Lapalme, 258 F.3d 35, 37-38 (1st 2001). Although a federal court is allowed to "make an informed prophecy" about what rule the state courts would likely follow, the First Circuit has stressed that federal courts should do so "only on interstitial questions." Phoung Luc v. Wyndham Mgmt. Corp., 496 F.3d 85, 88 (1st Cir. 2007). A federal court must not "create new rules or significantly expand existing rules. We leave those tasks to the state courts." Id.
Within these constraints, the Court is unable to predict with any confidence that the Maine Supreme Judicial Court, if presented with a loss of chance case, would adopt the doctrine. Starting with the decisions of Maine's highest court, reviewing the decisions of its lower courts, examining the precedents in other jurisdictions, and surveying "the collected wisdom found in learned treatises," Andrew Robinson Int'l, Inc. v. Hartford Fire Ins. Co., 547 F.3d 48, 51-52 (1st Cir.2008), the result is inconclusive. Maine courts have been silent on the question since 1989, other jurisdictions are split, and the authors of MAINE TORT LAW have said only that Maine has not decided *248 whether to adopt the doctrine. Jack H. Simmons, Donald N. Zillman & David G. Gregory, MAINE TORT LAW § 9.05 (2004 ed.) (stating that "[t]he Maine Law Court has not to date decided whether it will follow the traditional approach to evaluating causation in medical malpractice cases, or whether it will adopt one of the competing `lost chance' approaches").
B. Analysis
Dr. Tikoo's opinion that Mr. Samaan was more likely than not to have recovered but for Dr. Kaplan's failure to administer t-PA is not supported by sound science or reliable methodologies. Even assuming the scientific reliability of the methodologies used to generate the data Dr. Tikoo relied upon and the accuracy of his calculations, none of his statistics supports the conclusion that the failure to administer t-PA, more likely than not, caused Mr. Samaan's injury. Therefore, the Court cannot admit Dr. Tikoo's testimony because it would not assist a trier of fact in determining a fact in issue. Daubert, 509 U.S. at 592, 113 S. Ct. 2786 (1993).
To satisfy Maine's causation standard, Mr. Samaan must prove that his failure to receive t-PA was more than 50% likely to cause his injury. To sustain his burden, Dr. Tikoo proffers an odds ratio calculation, which he says demonstrates that stroke patients who receive t-PA experience favorable outcomes 50% more frequently than stroke patients who do not receive t-PA.
The question in this case focuses on Mr. Samaan and asks whether it is more likely than not that he would have improved if he had received t-PA. The NINDS Study confirms that Mr. Samaan's chance for improvement over his chance for improvement without t-PA ran between ten and eighteen percent, which in absolute terms, does not reach the 50% threshold for maintaining a civil malpractice action. It is true that if the number of patients who improved without t-PA is subtracted from the number of patients who improved with t-PA, the resulting percentage is greater than fifty percent of the placebo group. But that figure is a relative benefit, not an absolute benefit, and says little about Mr. Samaan's individual chance of improvement with t-PA. See Young v. Mem'l Hermann Hosp. Sys., No. H-03-1859, 2006 WL 1984613 *5-6, 2006 U.S. Dist. LEXIS 47920 *17-18 (S.D.Tx. Jul. 14, 2006) (discussing absolute versus relative benefit in the context of t-PA injections).
Similarly, the odds ratio calculation does not respond directly to Maine's causation standard. The 50% figure in Dr. Tikoo's calculation relies on a comparison between two groups. A figure comparing one group's likelihood to recover solely in relation to another group's likelihood to recover does not demonstrate an individual's overall likelihood to recover. That is to say, an odds ratio could indicate a drug is highly effective as compared to a placebo, but that comparison does not inform an individual patient's overall likelihood of recovery. See Vanderwerf v. SmithKline-Beecham Corp., 529 F. Supp. 2d 1294, 1303 n. 10 (D.Kan.2008) (discussing the relative risk or odds ratio in the context of a products liability case). Dr. Tikoo's odds ratios indicate that t-PA is successful compared to a placebo, but the ratios fail to speak to t-PA's overall effectiveness. Based on this record, the Court remains unconvinced. There is simply "too great an analytical gap" from the odds ratio to the conclusion that Mr. Samaan's injuries were more likely than not caused by his failure receive t-PA. See Joiner, 522 U.S. at 146, 118 S. Ct. 512.
Dr. Tikoo's reference to the ECASS-III study similarly does not support his opinion that the failure to administer *249 t-PA was more likely than not the proximate cause of Mr. Samaan's injuries. While 52.4% of t-PA recipients in that study experienced a favorable outcome, 45.2% of patients in the placebo group also experienced a favorable outcome. An efficacy figure above 50% alone is insufficient to meet the "more likely than not" standard because it includes patients who would have recovered without t-PA. The 45.2% figure demonstrates that there is a cause of recovery independent of t-PA. That undermines the argument that t-PA was the cause of the favorable outcome in the 52.4% of t-PA recipients who experienced a favorable outcome. To satisfy the "more likely than not standard," "epidemiological evidence must show that the risk of an injury or condition in the exposed population [i.e. placebo recipients] was more than double the risk in the unexposed or control population, [i.e. t-PA recipients]." Young, 573 F.3d at 236. Because Dr. Tikoo can offer no scientific evidence to meet this standard, his opinion will not assist the trier of fact.
The Court's conclusion is consistent with the opinions of other courts that have addressed this precise issue, including whether the statistics in the NINDS Study satisfy a plaintiff's burden of proof on causation. See generally Young, 573 F.3d at 233; Dannenberg v. United States, No. 04-CV-4897 (NGG)(JMA) 2010 WL 4851341, at *10 (E.D.N.Y. Nov. 22, 2010) (stating that "Plaintiff has failed to prove by a preponderance of the evidence that assuming she was a [t-PA] candidatethe lack of treatment with [t-PA] was a substantial contributing factor to her injuries"); Smith v. Bubak, No. CIV 08-44023, 2010 WL 605269, at *6-8 (D.S.D. Feb. 18, 2010) (concluding that "Plaintiff has failed to present reliable expert medical testimony that had Smith been treated with t-PA she would have had a greater than 50 percent chance of receiving a benefit"); Ensink v. Mecosta Cnty. Gen. Hosp., 262 Mich.App. 518, 687 N.W.2d 143, 156 (Ct. App.Mich.2004) (stating that the "plaintiffs failed to establish that defendants' alleged malpractice deprived plaintiff of an opportunity to achieve a better result greater than fifty percent"). By the same token, the Court has found no case in which a court has allowed an expert to testify that the failure to administer t-PA more likely than not caused an injury. Though given an opportunity to develop the record, Mr. Samaan provided no basis to break from the other courts. In addition, Dr. Tikoo was unable to testify to changes in the administration of t-PA between 1995 and 2006 that would have made Mr. Samaan's chances of a favorable outcome greater than the favorable outcome rates in the NINDS Study. In short, Dr. Kaplan has successfully challenged the legal sufficiency of Mr. Samaan's proffered expert testimony.
III. CONCLUSION
The Court GRANTS David Kaplan, M.D.'s motion to exclude Dr. Tikoo's expert testimony Defendant David Kaplan, M.D.'s Motion for Reconsideration of the Court's Order on his Motion for Summary Judgment or in the Alternative for a Daubert Hearing on the Admissibility of the Opinions of the Plaintiff's Causation Expert (Docket # 53).
SO ORDERED.
NOTES
[1] Daubert v. Merrell Dow Pharmaceuticals, Inc., 509 U.S. 579, 113 S. Ct. 2786, 125 L. Ed. 2d 469 (1993).
[2] This point, however, runs to the facts underlying Dr. Tikoo's opinion, which would be subject to proof at trial. In evaluating whether Dr. Tikoo should be allowed to testify, the Court assumes that Mr. Samaan's symptoms began when the flight attendant noticed his symptoms. There is no evidence in this record to the contrary.
[3] Dr. Nyquist was the doctor's expert on this same issue in Smith v. Bubak, Smith v. Bubak, No. CIV 08-44023, 2010 WL 605269, at *6-8 (D.S.D. Feb. 18, 2010), in which the district court concluded that the Plaintiff had failed to demonstrate that the failure to administer t-PA more likely than not caused her injuries in that case.
[4] As noted earlier, this portion of Dr. Nyquist's testimony addresses whether Mr. Samaan was a candidate for t-PA to begin with, not whether if he had been administered timely t-PA, he would have likely improved.
[5] Jeffrey L. Saver, Number Needed to Treat Estimates Incorporating Effects Over the Entire Range of Clinical Outcomes: Novel Derivation Method and Application to Thrombolytic Therapy for Acute Stroke, 61 ARCH NEUROL. 1066 (2004).
[6] After the Daubert hearing, Mr. Samaan supplied Ellison v. United States, No. 09cv331, 753 F. Supp. 2d 468, 2010 WL 4670359 (E.D.Pa. Nov. 10, 2010) presumably for its discussion of the proper standard for evaluating the admissibility of expert testimony. Ellison does not advance his argument. Under the Third Circuit formulation, the proponent of an expert must demonstrate the expert's qualification, reliability, and fit, the third criterion being another way of expressing the Supreme Court's and First Circuit's requirement that there must not be too great an analytic gap between expert's testimony and the underlying data.
[7] The Law Court's articulation is consistent with the "more likely than not" standard. See Spickler v. York, 566 A.2d 1385, 1390 (Me. 1989).
[8] Mr. Samaan's case is a hard one. At least as presented, while he was in the ER at St. Joseph Hospital, he had some chance for a degree of recovery if he had received t-PA. Tragically, according to his attorney, Mr. Samaan suffered a truly catastrophic injury and has not recovered. If given a risk-reward option, a person in Mr. Samaan's situation might well elect to receive t-PA and hope for improvement, running the risk of greater injury or death. But there is no evidence Mr. Samaan was given that option, and he will never know what his life would have been like if the dose had been administered. His case resolves not on negligence but on causation.
At the same time, the Court is aware that it has not heard Dr. Kaplan's side of this story and defense counsel cautioned that the doctor's explanation for why Mr. Samaan did not receive t-PA is convincing. The Court is in no position to evaluate Dr. Kaplan's professional judgment at the ER on January 14, 2006 and does not do so.
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01-03-2023
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10-30-2013
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https://www.courtlistener.com/api/rest/v3/opinions/625332/
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672 F.3d 1152 (2012)
OTAY LAND COMPANY, a Delaware limited liability company; Flat Rock Land Company, a Delaware limited liability company, Plaintiffs-Appellants,
v.
UNITED ENTERPRISES LTD., a California limited partnership; United Enterprises, Inc., a Delaware corporation; John T. Knox; The Otay Ranch L.P., a California limited partnership; Baldwin Builders, a California corporation; Sky Communities, Inc., a California corporation; Olin Corporation, a Virginia corporation; Phil G. Scott; Ray Enniss; Patrick J. Patek; Sky Vista, Inc., Defendants-Appellees.
No. 10-55550.
United States Court of Appeals, Ninth Circuit.
Argued and Submitted November 8, 2011.
Filed March 14, 2012.
*1153 James A. Bruen, San Francisco, CA, and Michelle Burton, San Diego, CA, for the plaintiffs-appellants.
Barbara Suzanne Farley, Piedmont, CA, for defendants-appellees United Enterprises Ltd., United Enterprises, Inc., John T. Knox.
R. Gaylord Smith, San Diego, CA, for defendants-appellees United Enterprises Ltd., United Enterprises, Inc., John T. Knox.
Thomas A. Teschner, San Diego, CA, for defendants-appellees United Enterprises *1154 Ltd., United Enterprises, Inc., John T. Knox, Patrick J. Patek.
Mark J. Dillon, Carlsbad, CA, for defendants-appellees The Otay Ranch L.P. and Baldwin Builders, Sky Communities, Inc., Sky Vista, Inc.
Stephen A. Sunseri, Carlsbad, CA, for defendants-appellees Baldwin Builders, Sky Communities, Inc., Sky Vista, Inc.
Thomas L. Van Wyngarden, Salt Lake City, UT, for defendant-appellee Olin Corporation.
Walter Bradley Hill, Orange, CA, for defendant-appellee Phil G. Scott.
John J. Freni, San Diego, CA, for defendant-appellee Ray Enniss.
Before: FERDINAND F. FERNANDEZ, KAREN NELSON MOORE,[*] and M. MARGARET McKEOWN, Circuit Judges.
OPINION
McKEOWN, Circuit Judge:
Given the complexities of litigation and the escalating magnitude of attorneys' fees, it is no surprise that appellate review of attorneys' fees and costs has focused overwhelmingly on fees. Nonetheless, costs also can add up to a considerable amount and because fees are not always available by contract, statute or otherwise, an award of costs can take on heightened importance.
Under 28 U.S.C. § 1919, when a suit is dismissed for lack of jurisdiction, the court "may order the payment of just costs." This case requires us to parse the term "just" and consider what constitutes "just costs." Here, the district court awarded costs to defendants on the ground that they were necessarily incurred in defending the action. Because the district court implied a presumption of award of costs that is absent in the permissive statute, and because it equated incurred costs with "just costs," we conclude that the court abused its discretion under § 1919.
BACKGROUND
This case, which is on its second trip to this court, began in December 2003 when Otay Land Company and Flat Rock Company, LLC (collectively, "Otay") filed a federal action against U.E. Limited, L.P., United Enterprises Ltd., United Enterprises Inc., John T. Knox, Baldwin Builders, The Otay Ranch L.P., Sky Communities, Inc., Sky Vista, Inc., Olin Corporation, Ray Enniss, Phil Scott, and Patrick Patek (collectively, "United Enterprises"). Otay's Third Amended Complaint alleged that United Enterprises, comprised of former owners and operators of a shooting range in Chula Vista, California, was responsible under § 107(a) of the Comprehensive Environmental Response, Compensation, and Liability Act and § 7002 of the Resource Conservation and Recovery Act for removing lead and other pollutants from the real property in question, now owned by Otay. The complaint also included a claim under the California Hazardous Substances Account Act, as well as other state causes of action.
After extensive discovery, United Enterprises filed motions for summary judgment and partial summary judgment. The district court granted the motions for summary judgment, dismissing the federal *1155 environmental claims on the merits and declining to exercise ancillary jurisdiction over the pendent state law claims. See Otay Land Co. v. U.E. Ltd., L.P., 440 F.Supp.2d 1152, 1157-58 (S.D.Cal.2006), vacated by Otay Land Co. v. United Enters. Ltd., 338 Fed.Appx. 689 (9th Cir. 2009). Following the dismissal, Otay filed a nearly identical action against United Enterprises in a California state court. As the prevailing party, United Enterprises submitted its cost bill to the district court. Pursuant to Federal Rule of Civil Procedure 54(d) and 28 U.S.C. § 1920, the district court awarded United Enterprises costs of $271,990.56 for court reporter, witness and service fees. On appeal, our court vacated the district court's judgment and remanded with directions to dismiss Otay's complaint. See Otay Land Co., 338 Fed.Appx. at 691. The panel reasoned that the case was not yet ripe for judicial review because "no public agency has indicated the need for remediation of the subject property and Otay has not demonstrated a reliable basis for its claimed remedial costs. . . ." Id. The panel remanded to the district court for determination of whether defendants were entitled to costs under 28 U.S.C. § 1919. Id. at 692.
On remand, at a hearing on costs, the district court advised the parties:
Counsel, I have to tell you, I have reviewed the case pretty thoroughly. I don't see any reason why costs should not be imposed in this case. Even though there is, perhaps, no prevailing party, it does certainly appear to me that just cause [sic] should be awarded to the defendants. It appears that this action was filed prematurely, and so, therefore, you know, it just makes sense to me to award costs to the defendants.
Otay argued that the district court should not award costs because Otay's state law claims were pending against the same parties in a California court and the discovery at issue would be equally applicable in the state court action. United Enterprises responded that costs validly incurred in defending the federal action should be awarded.
The district court agreed with United Enterprises and again awarded all costs to United Enterprises, this time under § 1919 rather than under § 1920. Reasoning that many courts look to § 1920 for "help" in determining "just" costs under § 1919, the district court noted that costs for deposition transcripts and service of summons and subpoenas are enumerated under § 1920.[1] The district court also observed that the "necessity and reasonableness" of costs may be considered in awarding costs under § 1920. The district court awarded the costs as "necessary because they enabled Defendants to properly ascertain the claims in the case and litigate the case accordingly."
ANALYSIS
I. Background of § 1919 and Just Costs
Section 1919 provides that "[w]henever any action or suit is dismissed in any district *1156 court, the Court of International Trade, or the Court of Federal Claims for want of jurisdiction, such court may order the payment of just costs." 28 U.S.C. § 1919. Unlike Rule 54(d)(1) ("costsother than attorney's feesshould be allowed to the prevailing party"), a cost award under § 1919 does not turn on prevailing party status and lies within the sound discretion of the district court. See Miles v. California, 320 F.3d 986, 988 n. 2 (9th Cir.2003) (noting that § 1919 is "permissive," allows the district court to award "`just costs,'" and does not carry a presumption that costs shall be awarded to the "`prevailing party'").
Section 1919 traces its roots to an 1875 congressional act that altered the common law rule that a court lacking jurisdiction had no power to award fees or costs. See Signorile v. Quaker Oats Co., 499 F.2d 142, 144 (7th Cir.1974) (citing McIver v. Wattles, 22 U.S. 650, 9 Wheat. 650, 6 L.Ed. 182 (1824)). Through Section 5 of the Act of March 3, 1875, 18 Stat. 470, 472, Congress conferred on circuit courts the power, when remanding a suit to state court that had been improperly or wrongfully removed to the federal courts, to "make such order as to costs as shall be just." As explained in Mansfield, C. & L.M. Ry. v. Swan, this provision was "manifestly designed to avoid the application of the general rule, which, in cases where the suit failed for want of jurisdiction, denied the authority of the court to award judgment against the losing party, even for costs." 111 U.S. 379, 387, 4 S.Ct. 510, 28 L.Ed. 462 (1884).
"The law applied in Mansfield is still on the books, now split into two and modified."[2]Citizens for a Better Env't v. Steel Co., 230 F.3d 923, 927 (7th Cir.2000). According to the Seventh Circuit,
One part appears in 28 U.S.C. § 1919:
Whenever any action or suit is dismissed in any district court, the Court of International Trade, or the Court of Federal Claims for want of jurisdiction, such court may order the payment of just costs.
The other [part] survives as 28 U.S.C. § 1447(c):
If at any time before final judgment it appears that the district court lacks subject matter jurisdiction, the case shall be remanded. An order remanding the case may require payment of just costs and any actual expenses, including attorney fees, incurred as a result of the removal.
Id. In the years since the passage and recodification of Section 5 of the 1875 Act, Congress has remained silent as to what constitutes "just costs" when an action is dismissed or remanded for lack of jurisdiction.[3] We therefore turn to analogous statutes to understand the meaning of the term.
In discussing § 1447(c), the Supreme Court characterized the objective of the Act of March 3, 1875 as the "desire to deter removals sought for the purpose of prolonging litigation and imposing costs on the opposing party, while not undermining Congress' basic decision to afford defendants *1157 a right to remove as general matter, when the statutory criteria are satisfied." Martin v. Franklin Capital Corp., 546 U.S. 132, 139-40, 126 S.Ct. 704, 163 L.Ed.2d 547 (2005); see also id. ("When applying fee-shifting statutes, `we have found limits [to the district court's discretion] in the large objectives of the relevant Act, which embrace certain equitable considerations.'") (quoting Indep. Fed'n of Flight Attendants v. Zipes, 491 U.S. 754, 759, 109 S.Ct. 2732, 105 L.Ed.2d 639 (1989)). Accordingly, the Court determined that district courts should award attorney's fees and costs under § 1447(c) "only where the removing party lacked an objectively reasonable basis for seeking removal." Martin, 546 U.S. at 141, 126 S.Ct. 704.
II. Award of Costs Under § 1919
In determining "just costs" under 28 U.S.C. § 1919, a district court should consider what is most fair and equitable under the totality of the circumstances. An emphasis on a "case-by-case approach" based on "the circumstances and equities of each case" is in keeping with a court's discretion to award costs, "a practice long recognized in equity." 10 Charles Alan Wright, Arthur R. Miller, Mary Kay Kane, & Richard L. Marcus, Federal Practice and Procedure § 2668, at 230-31 (3d ed. 1998) (discussing discretionary nature of Rule 54(d)); see also Ericsson GE Mobile Commc'ns v. Motorola Commc'ns & Elecs., 179 F.R.D. 328, 334 (N.D.Ala.1998) (the "broad discretion" allowed to trial courts in awarding costs "encourages this court to exercise its discretion as to what are `just costs' under the totality of circumstances"). Although "just costs" is a unitary standard, it involves a two step analysiswhether an award of costs is just and equitable and, if so, the appropriate amount of costs.
Here, the district court awarded "just costs" as "necessary because they enabled Defendants to properly ascertain the claims in the case and litigate the case accordingly." Our difficulty with this approach is that it is essentially identical to the prevailing party presumption of Rule 54(d). The district court's rationale assumes that United Enterprises is entitled to costs because it "prevailed" on the ripeness issue and that the costs were just because they were incurred. But our case law makes clear that § 1919 carries no such presumption. See Miles, 320 F.3d at 988 n. 2. Nor should costs be presumed just solely because they were necessarily incurred. As the Supreme Court has said of a related statutory provision, 28 U.S.C. § 1447(c), § 1919 allows courts to award costs, "but only when such an award is just. The question remains how to define that standard." Martin, 546 U.S. at 138, 126 S.Ct. 704. Recognizing that this is explicitly a discretionary cost statute, we offer a number of considerations that could be factored into such a decision. We do not suggest that these considerations are the only appropriate ones; nor do we suggest that all of them must be addressed in every case.
To begin, and most importantly, § 1919 stands in stark contrast to costs under Rule 54(d), which turns on a prevailing party standard. See Miles, 320 F.3d at 988 ("Because Rule 54(d)(1) states that costs `shall' be allowed `as of course,' there is a strong presumption in favor of awarding costs to the prevailing party.") (citing Ass'n of Mexican-American Educators v. California, 231 F.3d 572, 591 (9th Cir. 2000)). The court's authority under § 1919 was "manifestly designed to avoid the application of the general rule, which, in cases where the suit failed for want of jurisdiction, denied the authority of the court to award judgment against the losing party, even for costs." Mansfield, 111 *1158 U.S. at 387, 4 S.Ct. 510. But the mere fact that authority is now granted does not mean that costs are mandated. See Miles, 320 F.3d at 988 n. 2.
Another consideration is the role played by exigent circumstances, such as hardship or culpable behavior by the parties. Otay argues that costs should not have been awarded because no such circumstances were present in this case. To the extent that Otay argues that costs should not be awarded absent exigent circumstances, we disagree. Although exigent circumstances may properly be considered a factor in the court's determination of "just costs," we decline to make it the threshold requirement for such a finding. But see Edward W. Gillen Co. v. Hartford Underwriters Ins. Co., 166 F.R.D. 25, 28 (E.D.Wis.1996) (denying cost award to defendants in matter dismissed for lack of diversity on grounds that there had been no "exigent circumstances" such as "financial hardship," "prejudice," or "culpable delay"). Such an approach reads too much into the statute. Under § 1919, costs may be justly awarded even absent extraordinary circumstances. Cf. Martin, 546 U.S. at 138-39, 126 S.Ct. 704 (declining to apply the "frivolous, unreasonable, or without foundation" standard when considering just costs under 28 U.S.C. § 1447(c), on the basis that "we see nothing to persuade us that fees under § 1447(c) should either usually be granted or usually be denied") (internal quotation marks omitted).
Otay is on stronger ground to the degree that it points to the overall reasonableness of its jurisdictional claim and to the fact that United Enterprises did not move for summary judgment on the basis of jurisdiction, as relevant factors in determining just costs. We agree that the strength of the plaintiff's jurisdictional claim is a legitimate consideration, albeit not definitive. See Ericsson, 179 F.R.D. at 334 (awarding defendants only those costs conceded by plaintiffs as necessary where it was "undisputed that [plaintiff's] claims, both as to jurisdiction and as to merits, were far from frivolous").
Incorporation of this factor strikes us as appropriate because it comports with the "large objectives" and "equitable considerations" the Supreme Court found in § 1919's predecessor, the Act of March 3, 1875. As previously referenced, in Martin the Court concluded that Congress sought, with the removal statute, to balance the goal of deterring removals sought merely for the purpose of prolonging litigation and imposing costs on the opposing party, with that of affording defendants a right to remove as a general matter when proper. See Martin, 546 U.S. at 140, 126 S.Ct. 704. Although § 1919 deals with actions initially brought in federal court, not removal, its goals are easily analogized to Congress' "large objectives" in the removal context. Id. at 141, 126 S.Ct. 704. That is, the driving motivation behind § 1919 is to balance the need to deter improper or wrongful invocations of federal jurisdiction against the importance of providing a federal forum for actions that fulfill the "statutory criteria" for jurisdiction. Id.
It might be argued that we should take this principle to the next logical step and conclude that, in light of their shared history, the standard for just costs under § 1919 and just costs under § 1447(c) should be one and the same. Such a rule would require district courts to award just costs only when the plaintiff's invocation of federal jurisdiction was objectively unreasonable. See Martin, 546 U.S. at 141, 126 S.Ct. 704 ("Absent unusual circumstances, courts may award attorney's fees under § 1447(c) only where the removing party lacked an objectively reasonable basis for seeking removal. Conversely, when an objectively *1159 reasonable basis exists, fees should be denied.").
We decline to embrace this rationale. Although § 1447(c) and § 1919 may share a legislative history, they are now different statutes and govern cost awards under different procedural circumstances. Significantly, § 1447(c) involves attorney's fees, an additional basis that differentiates it from § 1919. See Signorile, 499 F.2d at 145 (attorney's fees should be awarded under § 1919 only under "extraordinary circumstances"); see also Barron's Educ. Series, Inc. v. Hiltzik, 987 F.Supp. 224, 225 (E.D.N.Y.1997) ("[T]here is not a single reported case in the history of American jurisprudence in which attorney's fees have been awarded under § 1919"). Most importantly, such a rule would divest district courts of their broad discretion to take into account other equitable considerations. The plain language of § 1919 supports the notion that the proper standard for "just" costs is what is most fair and equitable under the circumstances. Cf. Ericsson, 179 F.R.D. at 331 ("The word `justice' is an elongation of the word `just.' `Justice' and `fairness' have a close kinship. Thus, the sole question before the court in this case can be restated simply as `what is fair here?'").
A final consideration, which is particularly pertinent here, is the significance of pending parallel litigation in state court. Otay contends that the district court erred in awarding "just costs" because Otay has filed a similar action against United Enterprises in California state court and costs should be sorted out at the conclusion of that litigation.
Both parties focus on Callicrate v. Farmland Indus., Inc., 139 F.3d 1336 (10th Cir.1998), the closest analogous case. The Tenth Circuit concluded that where the merits of the case remained in active litigation between the parties in state court, an award of costs in federal court under § 1919 was "speculative and premature." Id. at 1342. After the district court dismissed the plaintiff's action due to a lack of diversity between the parties, the plaintiff, like Otay here, refiled the same claims in state court against two of the three defendants. Id. The district court awarded costs to all defendants. Id. at 1338. The Tenth Circuit vacated the award of costs, reasoning that because the merits of the controversy between the parties remained undecided, any cost award respecting those merits was inappropriate. Id. at 1342. In particular, the court noted that under the applicable state law, the prevailing party in state court would be entitled to an award of its costs. Id. According to the Tenth Circuit, any award of costs respecting the controversy would be "improper under federal law, as it would be under [state] law, if [plaintiff] prevails against [defendant] on the merits of his claims." Id.
Here, the district court did not abuse its discretion in declining to follow Callicrate. Unlike in Callicrate, a diversity action in which the plaintiff refiled the state law claims in state court, see id. at 1337-38, Otay may not refile its two dismissed federal claims in state court, nor may it refile the federal claims unless they are ripe. This is reason enough to distinguish Callicrate. As a general matter, a blanket rule that just costs can never be awarded under § 1919 when state litigation respecting the merits of the controversy is pending between the parties would inappropriately narrow the district court's discretion in a manner unjustified by the statute. If the costs in question are "just" in the federal case, we see no need to defer to future proceedings in state court. As for the danger of double recovery, we presume that state courts will exercise their available discretion to prevent *1160 such an event.[4]See, e.g., Cal.Civ. Proc.Code § 1032(a) (providing for an award of costs to the prevailing party under certain circumstances, "unless the context clearly requires otherwise"). Thus, while the existence of parallel state litigation may factor into a district court's determination of just costs, it should not be the only factor, a point we believe the district court recognized in this case.[5]
In light of our explanation that a determination of "just costs" under § 1919 must involve an analysis of what is fair and equitable under the totality of the circumstances, we conclude that the district court's standard is inadequate and erroneous. The award of costs may well have been appropriate here. But we do not take a position on the ultimate award of costs, a decision we leave to the district court. Rather, we reiterate that while § 1920 may be helpful in determining what costs to award once other relevant factors have been considered, its enumeration of cost items is not a substitute for determining whether an award of costs is "just" under § 1919. Nor can the award of costs be presumed simply because a party was successful on a threshold ground and the costs were incurred. We vacate the cost award and remand to the district court to consider the "just costs" issue consistent with the considerations outlined in this opinion.
VACATED AND REMANDED.
NOTES
[*] The Honorable Karen Nelson Moore, Circuit Judge for the Sixth Circuit, sitting by designation.
[1] 28 U.S.C. § 1920 provides, in pertinent part:
A judge or clerk of any court of the United States may tax as costs the following:
(1) Fees of the clerk and marshal;
(2) Fees for printed or electronically recorded transcripts necessarily obtained for use in the case;
(3) Fees and disbursements for printing and witnesses;
(4) Fees for exemplification and the costs of making copies of any materials where the copies are necessarily obtained for use in the case;
(5) Docket fees under section 1923 of this title;
(6) Compensation of court appointed experts, compensation of interpreters, and salaries, fees, expenses, and costs of special interpretation services under section 1828 of this title.
[2] The Judicial Code of 1948 separated Section 5 of the Act of March 3, 1875 into three separate statutes: language dealing with improper joinder or collusion was incorporated into 28 U.S.C. § 1359; the removal provisions into 28 U.S.C. § 1447; and the remainder into 28 U.S.C. § 1919. See H.R.Rep. No. 80-308, at A162 (1947).
[3] The floor debates accompanying the passage of the original 1875 act did not include discussion of "just" costs. See 2 Cong. Rec. 4301, 4302-04, 4978-88 (1874). The change in language from "costs as shall be just" to "just costs" enacted by the 1948 judicial acts was described as "one of phraseology and not of substance." Signorile, 499 F.2d at 144; see also H.R.Rep. No. 80-308, at A162.
[4] The parties dispute whether an award of the discovery costs incurred in the federal action could be recovered by the prevailing party in the state action, a question we need not resolve. See Sarah Daft Home v. Hansen (In re Bauer's Estate), 59 Cal.App.2d 161, 138 P.2d 721, 722 (1943) ("Costs are allowable only in the action in which the costs are incurred."). Nor do we need to address the parties' dispute whether Otay's state claim is functionally equivalent to its federal claims. The district court ought not be required to resolve the overlapping merits of federal and state cases simply to determine just costs.
[5] Otay also argues that the district court violated Local Rule 54.1(b)(3)(a) of the United States District Court for the Southern District of California ("Local Rule 54.1") by allowing defendants to claim costs for copies of depositions. We note, however, that Local Rule 54.1 expressly applies to 28 U.S.C. § 1920 and Fed. R. Civ. P. 54(d). See Local Rule 54.1(a) ("Unless otherwise ordered by the court, or stipulated by the parties, the prevailing party is entitled to costs. . . ." (emphasis added)). Therefore, it does not bind the district court in awarding costs under § 1919; instead, at its discretion, the court may award any costs it deems "just."
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01-03-2023
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03-14-2012
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https://www.courtlistener.com/api/rest/v3/opinions/2395512/
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262 F.Supp.2d 50 (2003)
COMMERCIAL DATA SERVERS, INC., d/b/a Xbridge Systems, Inc. Plaintiff,
v.
INTERNATIONAL BUSINESS MACHINES CORPORATION Defendant.
No. 00CIV.5008CMLMS.
United States District Court, S.D. New York.
April 4, 2003.
*53 Bernard Persky, Barbara Jane Hart, Goodkind, Labaton, Rudoff & Sucharow, L.L.P., New York City, Bruce L. Simon, Steven N. Williams, Cotchett, Pitre & Simon, Robert T. Scott, Cotchett, Pitre & Simon, Bruce L. Simon, Cotchett, Pitre & Simon, Burlingame, CA, for Commercial Data Servers, Inc. dba Xbridge Systems, Inc., plaintiff.
Evan R. Chesler, Cravath, Swaine & Moore, L.L.P., Evan R. Chesler, Cravath, Swaine & Moore, L.L.P., New York City, for International Business Machines Corporation, defendant.
*54 MEMORANDUM DECISION AND ORDER DENYING DEFENDANT'S MOTION TO STRIKE THE DECLARATIONS OF RONALD S. ALEPIN AND BRETT L. REED, OVERRULING PLAINTIFF'S OBJECTIONS TO DEFENDANT'S EVIDENCE, AND GRANTING IN PART DEFENDANT'S MOTION FOR PARTIAL SUMMARY JUDGEMENT
MCMAHON, District Judge.
Plaintiff, Commercial Data Servers, Inc. ("CDS") alleges that Defendant International Business Machines Corporation ("IBM") committed federal and state antitrust violations under the Sherman Act §§ 1, 2 (15 U.S.C.A. §§ 1, 2), the Clayton Act § 3 (15 U.S.C.A. § 14), and the Donnelly Act (N.Y. Gen. Bus. Law § 340). Plaintiff also brings claims for tortious interference with its relations with two vendors. Defendant denies these allegations, and counterclaims for breach of two contracts and copyright infringement.
Defendant has moved for summary judgment under Fed.R.Civ.P. 56, on all of the plaintiffs claims except one claim of tortious interference. Defendant also moves for summary judgment on one of its breach of contract counterclaims.
Both the plaintiff and the defendant have also made separate motions regarding the admissibility of evidence submitted by the other. Plaintiff objects to the exhibits submitted by defendant with its Motion for Summary Judgment, on the grounds that the exhibits were not properly authenticated. Defendant moves to strike two expert affidavits submitted by plaintiff with its Motion in Opposition to Summary Judgment, on the grounds that the affidavits are unsubstantiated and speculative, and untimely under Fed. R.Civ.P. 26.
The motions are disposed of as follows: (1) I overrule plaintiffs objections to defendant's exhibits; (2) I deny defendant's motion to strike plaintiffs expert affidavits; (3) I grant defendant's motion for summary judgment on Counts II through VI of CDS's Second Amended Complaint, and deny summary judgement as to Count VII; and (4) I grant defendant's request for summary judgment on its breach of contract counterclaim.
FACTUAL BACKGROUND
IBM is a New York corporation that maintains its principal executive offices in Armonk, New York. (Plaintiffs Second Amended Complaint, ("Plaintiffs Sec. Amd. Cmplt."), ¶ 8.) IBM describes itself as a company that "uses advanced information technology to provide customer solutions through, inter alia, the sale of a variety of computer hardware and software products." (Defendant's Amended Answer and Counterclaims, p. 11.) CDS (which is currently doing business under the name "Xbridge Systems, Inc.") is a California corporation that maintains its principal executive offices in California. (Plaintiffs Sec. Amd. Cmplt, ¶¶7, 10.) CDS was formed in 1996 by three former IBM executives. Id. at ¶ 22. According to CDS's pleadings, CDS provided its founders with an "opportunity to compete with IBM."[1]Id. at ¶ 24.
Over a number of years, IBM developed the S/390 computing platform, "a component-based computer system consisting of hardware and software products that are compatible and interoperable with the platform's architecture." (Plaintiffs Second Amd. Cmplt., ¶ 13.) The primary *55 hardware component of the S/390 system is a central processing unit ("CPU") board, referred to as the "P/390 Card." Id. at ¶¶ 13, 26. The P/390 card enables the computer to run OS/390 operating system software, and other predecessor IBM operating system software.[2] Other operating system software, such as software based on the UNIX or Windows NT operating systems, generally cannot run on S/390 platform computers. Likewise, S/390 operating system software and applications generally cannot be used on alternative platform computers.
IBM builds and markets its own S/390 computer systems and products. However, it also has agreements with other companies under which they incorporate IBM technology into their products. Plaintiff CDS was one of these companies.
In 1995, CDS entered into an Original Equipment Manufacturer ("OEM") Agreement with IBM, under which CDS was able to purchase the P/390 card and S/390 operating software. Id. at ¶ 26. CDS purchased the software at the entry system level ("ESL"), which was IBM's most favorable software pricing level. Id. ¶¶ 4, 20. The OEM Agreement allowed CDS to incorporate the P/390 Card into its own product, and licensed CDS to "preload" S/390 operating system software onto these CDS systems. Pursuant to this agreement, in 1997 CDS introduced the CDS 104 system (later renamed CDS 2000). Id. at ¶ 26.
In 1997, CDS entered into another agreement with IBM, an Original Provider Agreement ("OPA"), pursuant to which CDS invested in IBM's efforts to create an improved P/390 cardthe "P/390e" card. Id. at ¶ 29. In 1998, the OEM Agreement was amended to allow CDS to purchase the P/390e card. ("OEM" Agreement and amendments, Ex. 23 to Burke Dec.) CDS then developed a product incorporating the P/390e card and the OS/390 operating system, which it marketed as the "CDS 2000e." (Plaintiffs Sec. Amd. Cmplt. at ¶ 29.)
In May 1998, IBM "pre-announced" a new product, the S/390 Integrated Server (also referred to as the "Planter"), scheduled for release in November 1998. Id. at ¶¶ 16, 69. At the same time, IBM also preannounced an additional S/390 product, with higher processing power (estimated to be two times as fast). Id. Both products was based on the P/390E, and were designed to compete with CDS's computers. Id. at ¶ 51, 52. IBM released the integrated server in November 1998, as scheduled. In September 1999, IBM released the "Multiprise 3000" servers, which provided processing power approximately six times greater than CDS's product. IBM stopped offering the S/390 Integrated Server in February 2000. Id. at ¶ 71. The Multiprise products are still on the market.
CDS alleges that IBM viewed CDS as a competitive threat and sought to "eliminate" them. Id. at ¶ 6. CDS alleges that the introduction of the S/390 Integrated Server, and subsequent decision to "drop[ ]" the server from the market, was intended to destroy the CDS market opportunity. Id. CDS also alleges that IBM refused to provide CDS with ESL pricing qualification except under anti-competitive terms and conditions which limited the marketing claims that CDS could make regarding its product. Id. at ¶¶ 44-45. IBM also allegedly "threatened" and/or "coerced" two value added resellers ("VARs"), Information Technology Co. ("ITC") and Intelliware, in an effort to *56 "prevent CDS from distributing the CDS 2000" through certain distribution channels. Id. at ¶¶ 756-66.
PROCEDURAL HISTORY
Plaintiffs original complaint in this action was filed on July 7, 2000. Counts I through VI of the original complaint alleged various antitrust violations, Count VII alleged tortious interference with prospective business relations, Counts VIII and IX alleged misappropriation of plaintiffs technology, and Count X alleged breech of the OPA Agreement. Defendant moved to dismiss Counts VIII through X and the Hon. Louis Stanton granted defendant's motion, albeit with leave to replead. Commercial Data Servers, Inc. v. International Business Machines Corp., 2001 WL 277303 (S.D.N.Y. March 21, 2001)("CZ)S I"). Pursuant to the Court's Rules for the Division of Business, the case was sent to White Plains and reassigned to me.
On May 8, 2001, plaintiff filed its first amended complaint, which repeated the original Counts I through VII and repleaded Counts VIII and IX, the misappropriation claims dismissed by Judge Stanton. Defendant moved to dismiss the complaint in its entirety. This Court granted defendant's motion on October 9, 2001. Commercial Data Servers, Inc. v. International Business Machines Corp., 166 F.Supp.2d 891 (S.D.N.Y.2001)("CDS IF). The misappropriation claims previously dismissed by Judge Stanton, Counts VIII and IX, were dismissed with prejudice. The antitrust claims, Counts I through VI, were dismissed without prejudice, due to plaintiffs failure to properly allege a relevant market. Id. at 896. The tortious interference claim, Count VII, was dismissed without prejudice, due to plaintiff failure to identify any particular "VARs" that plaintiff had a relationship with who were intimidated by defendant. Id. at 898.
On November 13, 2001, plaintiff filed a second amended complaint, realleging with greater specificity the claims that were dismissed without prejudice. Defendant moved a third time under Fed.R.Civ.P. 12(b)(6), this time seeking to dismiss the antitrust claims, Counts I through VI. On March 15, 2002, this Court dismissed Count I for failure to state a claim for per se violation of Section 1 of the Sherman Act. Commercial Data Servers, Inc. v. International Business Machines Corp., 2002 WL 1205740 (S.D.N.Y. March 15, 2002)("CDS III"). I denied the motion as to the other claims. Thereafter, defendant answered the second amended complaint and asserted three counterclaims: (1) breach of the OPA; (2) breach of the OEM Agreement; and (3) copyright infringement.
Discovery in this matter began in the summer of 2001, while the motion to dismiss the first amended complaint was pending. After accommodating the parties by twice extending the close of discovery, I finally ordered that all discovery must be completed on or before February 28, 2002. At the conclusion of discovery, the parties had deposed fourteen individuals and exchanged numerous documentary evidence, including contracts, copies of internal emails, marketing and sales materials, and internal strategy documents. CDS also provided IBM with responses to two sets of Requests for Admission and two sets of Interrogatories.
Two days after I ruled on the final motion to dismiss, defendant filed a motion for summary judgment pursuant to Fed. R.Civ.P. 56, seeking judgment in its favor as to the plaintiffs surviving claims against it (Counts II through VII) and as to its counterclaim for breech of the OPA.
In addition to IBM's summary judgment motion, each side has submitted motions challenging the admissibility of supporting *57 documents submitted by its opponent with its summary judgment motion papers. I deal with the evidentiary motions first, and then turn to the merits.
DISCUSSION
I. Discovery Motions
When ruling on a motion for summary judgment, courts need only consider evidence that would be admissible at trial. Raskin v. Wyatt Co., 125 F.3d 55, 66 (2d Cir.1997). Each side asserts that materials submitted by the other are not admissible under the Federal Rules of Evidence and/or the Federal Rules of Civil Procedure, and thus should not be considered by this Court in deciding the summary judgment motion. In considering the admissibility of documents, the court appropriately draws all reasonable inferences in favor of the opposing party, as it is the burden of the moving party to prove that there is no genuine issue of material fact. See Wright & A. Miller, Federal Practice and Procedure § 2738, p. 342-45; see also U.S. v. Bell, 27 F.Supp.2d 1191, 1194 (E.D.Cal. 1998); Western Land Corp. v. Crawford-Merz Co., 62 F.R.D. 550 (D.Minn.1973).
A. CDS's Objection to Exhibits Submitted by IBM
Local Civil Rule 56.1 requires a party seeking summary judgment under Fed. R. Civ. Pro. 56 to include a statement of the material facts as to which the moving party contends there is no genuine issue to be tried. Each statement of material fact must be followed by a "citation to evidence which would be admissible, set forth as required by the Federal Rule of Civil Procedure 56(e)." Accordingly, IBM's Motion for Summary Judgment is supported by a Statement of Material Facts Pursuant to Local Rule 56.1 ("Statement of Material Facts") and four volumes of exhibits attached to the Declaration of Kevin A. Burke, Esq., an attorney for IBM ("Burke Declaration"). The Burke Declaration states that true and complete copies of the following documents, all of which are referenced in the Statement of Material Facts, are attached: (1) excerpts of CDS's Responses to Interrogatories and Requests for Admission; (2) excerpts of deposition transcripts; (3) the expert report of Carl Shapiro; and (4) other documents produced during discovery and referenced in the Statement of Material Facts, some of which were produced by IBM and some of which were produced by CDS. In total, there are eighty exhibits contained in the four volumes attached to the Burke Declaration.
Plaintiff objects that the exhibits attached to the Burke Declaration have not been properly authenticated as required under Fed.R.Evid. 901(a). (Plaintiffs Objection to Defendant's Evidence in Support of its Motion for Summary Judgment, submitted April 12, 2002, p. 1.) Plaintiff argues that Mr. Burke is not someone through whom the documents could be admitted into evidence at trial. Id.
Defendant responds that plaintiffs general objection to the exhibits as a whole is improper under Fed.R.Civ.P. 7(b)(1), which requires that motions "shall state with particularity the grounds therefor." (Defendant's Response to Plaintiffs Objection to Defendant's Evidence, submitted April 29, 2002, p. 1.) Defendant further responds that the documents are sufficiently authenticated because their form, their appearance, the circumstances through which they were acquired, and the record evidence indicate reliability. Id. In support of these assertions, defendant submits the Declaration of Keith R. Hummel ("Hummel Declaration"), an attorney for IBM, which attaches portions of deposition transcripts in which CDS witnesses discuss various CDS documents which were attached to the Burke Declaration. Defendant *58 also submits the Declaration of Joanne Richardson ("Richardson Declaration"). Ms. Richardson, an IBM Legal Analyst employed by the company for twenty two years, attests that twenty five of the exhibits are IBM documents maintained in the ordinary course of business that were produced to CDS pursuant to document requests in this litigation. Finally, defendant submits a table, attached as an exhibit to its response to plaintiffs motion, which describes each exhibit in the Burke Declaration and provides the basis for the authentication of the exhibit. ("Authentication Table").
Plaintiff replies that it is unfair for IBM to attempt to authenticate documents in its opposition papers that it did not initially authenticate, and maintains that the exhibits are still are not properly authenticated. (Plaintiffs Reply to Defendant's Response to Plaintiffs Objection to Evidence, submitted May 16, 2002, p. 2.) As a preliminary matter, I reject Plaintiffs contention that it is "unfair" for IBM to submit, and for the court to consider, the Richardson Declaration. I consider both the Richardson and Hummel Declarations to be supplemental affidavits to the Burke Declaration, and under F.R. Civ. P. 56(e), the Court may permit affidavits to be supplemented or opposed by depositions, answers to interrogatories, or further affidavits.[3]
While I agree with defendant that plaintiffs motion is very broad, the grounds are stated with sufficient particularityplaintiff is objecting to my considering the documents attached to the Burke affidavit on the grounds that they have not been properly authenticated. However, since plaintiff has not objected on a document-by-document basis, I shall respond by discussing the admissibility of categories of documents. See Kendrick v. Sullivan, 766 F.Supp. 1180, 1192 n. 1 (D.D.C.1991) (noting that defendant's arguments against plaintiffs documentary evidence in opposition to summary judgment were overly broad and concluding that the court was compelled to respond to the motion in general terms),
1) CDS's Responses to Interrogatories and Requests for Admission
The Burke Declaration states that Exhibits 1 through 5 are true and complete copies of CDS's Responses to Interrogatories and Requests for Admission. Mr. Burke, as an attorney for the firm representing IBM, has personal knowledge that the documents attached were obtained during discovery by the firm.[4]
Generally, under Fed.R.Civ.P. 56(c), pleadings, depositions, answers to interrogatories, and admissions on file can be utilized by the court in considering a summary judgment motion. Under F.R. Evid. 901(a), the requirement that documents be authenticated "is satisfied by evidence sufficient to support a finding that the matter in question is what the proponent claims." Under F.R. Evid. 901(b), testimony of a witness with knowledge provides appropriate authentication. Mr. Burke's declaration that these documents are true and correct copies of CDS's responses constitutes testimony by a witness with knowledge of what the firm received from its opponent in response *59 to legitimate discovery requests. In addition, under F.R. Evid. 901(b)(4), authentication is provided by "appearance, contents, substance, internal patterns, or other distinctive characteristics, taken in conjunction with the circumstances." Each of the challenged documents contains the caption of the instant case, is signed by the plaintiffs attorney, is available to both parties in the action, and is being submitted to the Court by the defendant's attorney with a declaration that it is a true copy. Plaintiff, who is clearly in the position to know if the exhibits are not authentic copies of its Responses to Interrogatories and Requests for Admission, has not objected that the exhibits are not authentic, just that they are not authenticated. The characteristics of Exhibits 1-5, and the surrounding circumstances, indicate that these are authentic documents.
2.) Excerpts of Deposition Transcripts
The Burke Declaration states that Exhibits 6 through 22 are true and complete copies of excerpts of transcripts from depositions taken in this action. Depositions are expressly recognized by Fed. R.Civ.P. 56(c) as relevant to consideration of a summary judgment motion.
Mr. Burke has personal knowledge that the documents are deposition transcripts taken during the discovery period of this action. In fact, either Mr. Burke himself or one of his colleagues from Cravath, Swain & Moore personally attended each of these depositions. Therefore, his declaration that the exhibits are true and correct copies of discovery materials is testimony of a witness with knowledge, which provides authentication under F.R. Evid. 901(b). In addition, I find that the appearance of the documents, each of which includes a cover page and the title page, and the circumstances through which they are presented to the Court in this action, authenticates them under F.R. Evid. 901(b)(4). Finally, I note that according to the cover page of each transcript, plaintiffs counsel appeared at each of these depositions. Plaintiff never claims that the cover page is a fabrication (that plaintiffs counsel was not there) or asserts that its counsel was there and that the transcripts are not accurate depictions of what took place. Again, plaintiff is in a position to know if the documents are not authentic, but makes no such claim.
3.) The Expert Report of Carl Shapiro
The Burke Declaration states that Exhibit 80 is a true and complete copy of the Expert Report of Carl Shapiro, referenced in IBM's Statement of Material Facts. Plaintiff does not challenge the admissibility of the defendant's expert report based on its substance, only for lack of any authentication. Mr. Burke is competent to testify that Exhibit 80 is a true and complete copy of IBM's expert's report. At trail, the expert could be expected to testify as to the contents of the report.
Further, I note that CDS has itself submitted Mr. Shapiro's expert report into evidence, as Exhibit 15 to the Declaration of Steven N. Williams. CDS thus challenges a document for lack of authentication, while at the same time submitting an identical copy of the document. Such tactics unnecessarily occupy the Court's time on matters not touching the merits of this case.
4.) Additional Documents Produced by IBM and CDS
Over two thirds of the exhibits attached to the Burke Declaration are documents produced during discovery by IBM or CDS, including letters, contractual agreements between the parties, and marketing materials. The Authentication Table, attached as an exhibit to defendant's *60 response to plaintiffs objection motion, provides the basis for authentication of each of these documents.
As to the CDS documents, the Authentication Table notes that all of these documents were produced by CDS in the course of discovery, and bear CDS production numbers. In addition, the Table notes that many of the CDS documents are also authenticated by CDS's Response to IBM's Second Set of RFAs, or by CDS employees during their depositions. The Hummel Declaration, cross-referenced by the Authentication Table, includes as exhibits the specific deposition excerpts in which certain documents were discussed.
It is disingenuous and wasteful for plaintiff to object that its own documents are not authenticated, and thus inadmissible at trial and on summary judgment. The appearance of these documents and the circumstances surrounding this motion most importantly the fact that the plaintiff is in the best position to know if they are authentic and that they have never claimed that they are notshow that these are authentic documents. See F.R. Evid. 901(b)(4)
The IBM documents are authenticated by the sworn Declaration of Joanne Richardson, an IBM employee for over twenty two years, who attests that each of the documents is a true and complete copy of an IBM document maintained by IBM employees in the regular course of business. As discussed above, under F.R. Evid. 901(b), testimony of a witness with knowledge provides appropriate authentication for documents. Ms. Richardson is a witness with knowledge, and her sworn affidavit provides authentication for the IBM documents.
I thus find that all of the documents challenged by plaintiff as "unauthenticated" meet either the requirements of Fed. R. Evid 901(b) or 901(b)(4). There is sufficient evidence of their authenticity for the court to consider these documents on this motion for summary judgment. See Bieda v. J.C. Penney Communications, Inc., 1995 WL 437689, *9 n. 2 (S.D.N.Y. July 25, 1995) (denying defendant's motion to strike plaintiffs documents from consideration in a summary judgment motion when defendants did not challenge the authenticity of the documents, but rather the plaintiffs ability to authenticate them, and finding that there was sufficient evidence of authenticity based on the appearance of the documents, the defendant's interrogatory responses regarding the documents, and the fact that defendant had produced the documents). The court deems the documents authenticated and considers them.
B. IBM'S Motion to Strike CDS Declarations
On April 12, 2002, plaintiff filed its opposition to defendant's motion for summary judgment, along with supporting documents, including the expert affidavits of Ronald S. Alepin and Brett L. Reed. On April 29, 2002, defendant submitted a motion to strike the expert affidavit of Mr. Alepin and a separate, yet very similar, motion to strike the expert affidavit of Mr. Reed. Both motions argue that the affidavits should be stricken on two grounds. First, defendant claims that the opinions expressed in each expert's affidavit are so different from the opinions expressed in his "Rule 26 Report" (report pursuant to Fed.R.Civ.Pro. 26) that the affidavit is, in essence a new and untimely expert report. Second, defendant claims that each expert's opinion is unsubstantiated and speculative, and argues that the affidavits should thus be disregarded as conclusory. Plaintiff argues that both declarations are consistent with the underlying expert reports and deposition testimony, and that both experts' opinions are properly supported. (Plaintiffs Opposition to Defendant's Motions to Strike Declarations of *61 Ronald S. Alepin and Brett L. Reed, submitted May 16, 2002.)
I conclude that Mr. Alepin's Affidavit is entirely consistent with his timely Rule 26 Report. Mr. Reed's Affidavit goes well beyond his Rule 26 report. However, I will overlook that for purposes of this motion, because the failure is harmless. Neither affidavit is impermissibly speculative.
Fed.R.Civ.P. 26(a)(2)(B) ("Rule 26(a)(2)(B)") requires that an expert's report contain "a complete statement of all opinions to be expressed and the basis and reasons therefor..." It is essential that the expert's opinions be known to the other party, so that they may properly prepare their opposition. As a result, under Fed.R.Civ.P. 37(c)(1) ("Rule 37(c)(1)"), "a party that without substantial justification fails to disclose information required by Rule 26(a)... is not, unless such failure is harmless, permitted to use as evidence at trial, at a hearing, or on a motion any witness or information not so disclosed." Defendant provides examples of several cases where courts have held that affidavits containing opinions that were not disclosed in a Rule 26 report would be inadmissible at trial, and thus should not be considered on a motion for summary judgment. See Brumley v. Pfizer, Inc., 200 F.R.D. 596, 603-604 (S.D.Tex.2001) (affidavit stricken to the extent that it went beyond opinions expressed in the Rule 26 report); Baker v. Indian Prairie Cmty. Unit, School Dist. No. 204, 1999 WL 988799, *2-*3 (N.D.Ill. Oct. 27, 1999) ("The Court will not allow [Plaintiffs] to ambush Defendants with new expert opinions after the expert disclosure deadline and after they filed or summary judgment."); Penland v. BIC Corp., 796 F.Supp. 877, 881 (W.D.N.C.1992) (striking expert affidavits filed in opposition to summary judgment because they "contained] purported expert opinion not previously disclosed ... as required by the Federal Rules of Civil Procedure").
I have reviewed the Rule 26 Reports and expert affidavits of both Mr. Alepin and Mr. Reed. In the light most favorable to plaintiff, I find that Mr. Alepin's affidavit is substantially similar to his Rule 26 Report, that the opinions therein would be admissible at trial (albeit subject to crossexamination), and that the affidavit may be considered on the motion for summary judgment.
Mr. Reed's affidavit, however, offers his opinions on an entirely different topic than the one discussed in his Rule 26 report. The Reed Affidavit opines on switching costs and "lock-in" of IBM customers. All of the opinions and analysis in the Rule 26 Report relate to damages, via lost opportunities to CDS or sales by IBM.
Plaintiff insists that "analysis of the lock-in was this [sic] explicitly and implicitly part of his entire analysis of this case," and that the subject matter is "coextensive." (Plaintiffs Memorandum in Opposition to Defendant's Motion to Strike the Expert Affidavits, p. 5.) It may be that Mr. Reed analyzed whether IBM locked-in its customers via high switching costs and simply omitted that analysis from his report. Or it may be that he assumed the fact (lock-in) and proceeded from there. Either way, Mr. Reed's Rule 26 Report does not discuss the issue of lock-in and does not offer any opinions on that subject, including opinions about how the asserted lock-in came into being. It is simply and solely a damages analysisnumber crunching. In contrast, his expert affidavit provides detailed opinions regarding how IBM S/390 customers were allegedly locked into uneconomical IBM systems by high switching costs, how IBM allegedly took advantage of these customers, how IBM engaged in other allegedly "anticompetitive" conduct, and why the relevant *62 market for anti-trust considerations should be limited to those customers "locked-in" to the S/390 system.
Plaintiff further argues that "the examination of Mr. Reed on [the topic of lock-in] covers many pages of his deposition." Id. But as defendant correctly notes, deposition testimony on a topic does not cure a failure to provide Rule 26 disclosure. See e.g., Ferriso v. Conway Org. 1995 WL 580197, at *2-3 (S.D.N.Y. Oct. 3, 1995) Moreover, Mr. Reed's deposition testimony about "lock-in" is very general, and is not couched in the form of opinions about how any lock-in arose or what caused it. He assumes that there is a lock-in effect for the purposes of calculating damages. Whether or not these opinions were "implicitly" part of Mr. Reed's analysis, he never explicitly discussed them in his Rule 26 Report or at his deposition. The topics of damages and lock-in/switching costs are certainly interrelated in some respects, but they are not "coextensive."
However, failure to comply with Rule 26(a) does not always provide a basis for sanctions under Rule 37(c)(1). As noted above, the text of Rule 37(c)(1) provides that the evidence should be precluded only if the party that failed to disclose the information is "without substantial justification" and if the failure is not "harmless." Fed.R.Civ.Pro. 37(c)(1). In addition, courts in this Circuit have considered imposition of sanctions under Rule 37 a "drastic remedy" that should only be applied "in those rare cases where a party's conduct represents flagrant bad faith and callous disregard" of the Federal Rules. See e.g., Johnson Elec. N. Am. v. Mabuchi Motor Am. Corp., 77 F.Supp.2d 446, 458 (S.D.N.Y.1999); Sterling v. Interlake Industries, Inc., 154 F.R.D. 579, 587 (E.D.N.Y.1994).
Here the failure is harmless, because Mr. Reed's Affidavit does not create a genuine issue of material fact that prevents me from granting IBM's motion. Therefore, the better part of valor is to consider it rather than strike it.
Defendant also argues that the Alepin and Reed affidavits consist of "speculative and unsubstantiated assertions" that are not properly supported by "underlying bases or citation" and thus do not satisfy Rule 26(a)(2)(B). Defendant urges the court to conclude that these expert opinions do not create any genuine issues of material fact, and thus should not be considered on summary judgment, citing Raskin, 125 F.3d at 66-68 and Virgin Atlantic Airways, Ltd. v. British Airways, PLC, 69 F.Supp.2d 571, 579-80 (S.D.N.Y.1999). Rather than doing that, I have chosen to consider themand having done so, I conclude that they do not create any genuine issue of material fact.
II. Summary Judgment Standard
Defendant has moved for summary judgment pursuant to Fed.R.Civ.P. 56(c), which allows the court to grant judgment in a movant's favor when there is no genuine issue of material fact. In considering any summary judgment motion, the court draw all reasonable inferences in the nonmovant's favor, but in an antitrust case, "those inferences must be reasonable in light of competing inferences of acceptable conduct." Tops Markets, Inc. v. Quality Markets, Inc., 142 F.3d 90, 95 (2d Cir. 1998) citing Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 588, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986) "By avoiding wasteful trials and preventing lengthy litigation that may have a chilling effect on pro-competitive market forces, summary judgment serves a vital function in the area of antitrust law." Id. citing Matsushita Elec, 475 U.S. at 593-94, 106 S.Ct. 1348 (additional citations omitted). Where the nonmoving party has the burden *63 of proof at trial, "it must go beyond the pleadings to demonstrate the existence of some specific facts that create a genuine issues as to those matters for which it has the burden of proof." Id. citing Celotex Corp. v. Catrett, 477 U.S. 317, 324, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986).
III. The Relevant Product Market
CDS alleges that defendant violated the Sherman Act and the Clayton Act, federal antitrust laws, and the Donnelly Act, a New York state antitrust law that mirrors the Clayton Act. The threshold issue in considering each of these antitrust claims is determining the relevant market. Berkey Photo, Inc. v. Eastman Kodak Co., 603 F.2d 263, 268 (2d Cir.1979)("[T]he first step in a court's analysis must be a definition of the relevant market.")(citing United States v. E.I. du Pont de Nemours & Co., 351 U.S. 377, 391-93, 76 S.Ct. 994, 100 L.Ed. 1264 (1956)).
CDS alleges that the relevant market for purposes of this litigation includes only "low-end IBM mainframe S/390 computers with processing power of 10 MIPS, or less." (Plaintiffs Sec. Amd. Cmplt. ¶74.) CDS's clarifies that not all users of "10 MIPS, or less" S/390 computers belong in the relevant market. (Reed Aff., ¶ 12.) Rather, CDS claims that the market includes only some sub-set of users who "are locked-in to the IBM platform" due to the high costs of switching to a non-IBM platform. Id. Plaintiff argues that these IBM customers had invested so much time and money in S/390 equipment and software applications written for the S/390 system that they faced prohibitively high switching costs, and were thus "lock[ed]-in" to the S/390 system. Id. at 74-75.
At the motion to dismiss stage, this Court found that plaintiff properly alleged that switching costs associated with changing platforms were prohibitive, which gave rise to a theoretically rational explanation for a distinct market at the "low-end." CDS III, 2002 WL 1205740 at *6-7. Thus, the Court concluded that plaintiffs market definition was "plausible on its face." But I also noted, "whether plaintiff will succeed in proving the alleged market is a question for a later date." Id citing Todd v. Exxon Corp., 275 F.3d 191, 204-205 (2d Cir.2001).
That "later date" has arrived. And while plaintiffs definition of the relevant market was sufficient as an allegation, plaintiff has failed to advance evidence that creates a genuine issue of material fact concerning the relevant market.
A. Standard for Relevant Product Market Definition
The relevant product market is "the area of effective competition" within which a firm's products compete.[5] AD/SAT v. Assoc. Press, 181 F.3d 216, 227 (2d Cir. 1999) quoting Tampa Elec. Co. v. Nashville Coal Co., 365 U.S. 320, 327, 81 S.Ct. 623, 5 L.Ed.2d 580 (1961). The market must include all products "that have reasonable interchangeability for the purposes for which they are producedprice, use and qualities considered". United States v. E.I. du Pont de Nemours & Co., 351 U.S. 377, 404, 76 S.Ct. 994, 1012, 100 L.Ed. 1264 (1956); see AD/SAT, 181 F.3d at 227. Products are "reasonably interchangeable" where there is sufficient cross-elasticity of demand, i.e., where consumers would respond to an increase in the price of one product by purchasing another product. See AD/SAT, 181 F.3d at 227. Products need not be identical, however, to be included in the same market, complete functional overlap is not required. See United *64 States v. Grinnell Corp., 384 U.S. 563, 572-73, 86 S.Ct. 1698, 1704-05, 16 L.Ed.2d 778 (1966); E.I. du Pont de Nemours, 351 U.S. at 393, 76 S.Ct. at 1006 ("one can theorize that we have monopolistic competition in every nonstandardized commodity with each manufacturer having power over the price and production of his own product. However, this power ... is not the power that makes an illegal monopoly. Illegal power must be obtained in terms of the competitive market for the product." (footnote omitted)).
B. A Reasonable Trier of Fact Would Have to Conclude that S/390 Platform Computers Are Reasonably Interchangeable with UNIX and Windows NT Platform Computers.
IBM argues that the record includes evidence of vigorous competition, based on reasonable interchangeability and cross-elasticity of demand, between S/390-compatible computers and alternative platform computers, primarily those compatible with the UNIX or Windows NT operating systems.
IBM documents acknowledge the competitive impact that alternate platform computers, particularly those incorporating UNIX or Windows NT operating systems, had on the sale of S/390 platform computers. (See e.g., "S/390 Strategy" Document, p. 5, September 1995, Ex. 41 to Burke Dec. ("Fierce competition from alternate platforms has eaten into the potential growth of the S/390 workload."); "Alternate Platform Market Model Survey Data, U.S. and Europe," January, 1995, Ex. 42 to Burke Dec. (finding that S/390 customers were projecting movement of "significantly more" workload off the S/390 platform over the next few years); "S/390 Strategy Document, p. 1, July, 1996, Ex. 47 to Burke Dec." (noting accelerating competitive pressures, predicting that UNIX vendors will "continue their strategy" to replace S/390 solutions and predicting that "in the future, the greatest threat will come from NT.").) CDS itself alleges that IBM's favorable entry server level ("ESL") pricing for S/390 products was offered in response to the price competition faced from UNIX and Windows, though it does so while alleging that IBM was seeking to "lock-in" new customers by enticing software developers to write S/390 software applications. (Plaintiffs Second Amd. Cmplt. ¶ 20.)
CDS's own sales and marketing documents identified UNIX and Windows NT based systems as "Substitutes" for CDS's own S/390-compatible products ("CDS Systems"). ("Commercial Data Servers Marketing Strategy and Implementation Plan," Ex. 30 to Burke Dec; "Commercial Data Servers Sales Strategy and Implementation Plan," Ex. 31 to Burke Dec.) These documents state that S/390-compatible manufacturers were "under severe competitive pressures from UNIX and in the near future this competition will also come from NT". (Id.) In addition, CDS's marketing material and private placement memoranda acknowledged cross-platform competition faced by the CDS Systems. (CDS Executive Summary, Ex. 29 to Burke Dec; CDS Private Placement Memorandum, July 1998, Ex. 32 to Burke Dec; CDS Private Placement Memorandum, September 1995, Ex. 33 to Burke Dec; CDS Private Placement Memorandum, September, 1998, Ex. 34 to Burke Dec.)
Both CDS and IBM witnesses attested to the existence of vigorous competition between S/390 platform computers and UNIX and Windows platform computers. For example, Ron Hankison, CDS's corporate designee, testified:
We would, no matter where we went, find customers that had an intention or desire to move away from 390 into some *65 other architecture, and we'd run into UNIX and NT as an alternative.
(Hankinson Dep., 30:9-13, Ex. 10A to Burke Dec. accord Holstrom Dep., 67:8-22, Ex. 11A to Burke Dec; Smarting Dep., 35:22-36:2, Ex. 22A to Burke Dec.) Similarly, Robert Port, IBM Manager of S/390 Sales Support, testified:
[T]he real competition here was all the other alternative platforms and choices the customer had for deploying their applications. So, I view in this Sun was a competitor, HP is a competitor, DEC is a competitor. Unysis is a competitor. Intel based alternatives, some companies like Compaq were competitors. This was a very, very competitive environment....
(Port Dep., 172:17-173:3, Ex 17B to Burke Dec); accord Brogan Dep., 219:6-12, Ex. 7E to Burke Dee. (IBM asserts that all of the competitors identified by Mr. Port sold non-S/390 platform computers.). Mr. Port further stated:
The competition was the Unix vendors and the [Windows] NT vendors.
Those were the guys we were really competing against.
(Port Dep., 229:18-20, Ex. 17D to Burke Dec.)
CDS itself alleges that, under certain circumstances (e.g., with respect to new workload), S/390-compatible computers competed directly with UNIX and Windows-compatible computers. See Plaintiffs Second Amd. Cmplt. ¶¶ 18-19 ("competing systems offered by Windows and Unix, among others, were an increasingly tempting alternative"; "Windows NT and UNIX... [represented] cost-effective alternative[s].") CDS even admits that it lost customers to computers compatible with the UNIX and Windows NT operating systems. (CDS's Responses to IBM's Second Set of RFAs, Nos. 30, 31 (Ex. 3); Holstrom Dep., 55:16-24, Ex. 11A to Burke Dec.)
The record contains ample evidence that this competition is not limited to new customers. Surveys conducted by both IBM and CDS show that customers who had previously purchased S/390 compatible systems migrated to non-S/390 platform computers during the relevant time frame. (See e.g., Results of CDS telemarketing survey, Ex. 45 to Burke Dec; IBM Surveys, Exs. 49 and 50 to Burke Dec.) Between 1995 and 2000, the number of S/390 platform computers worldwide decreased 18% and the number of customers with S/390-compatible computers decreased 17%. (IBM Data Chart, Ex. 51 to Burke Dec.) The decrease in the installed base was even more pronounced in the "10 MIPS or less" arena on which CDS focuses. Between 1995 and 2000, the number of S/390 platform computers worldwide with processing power of "10 MIPS or less" decreased 60% and the number of customers with S/390 platform computers with processing power of "10 MIPS or less" decreased 59%.[6] (IBM Data Chart, Ex. 55 to Burke Dec.) During this same period, spending on S/390-compatible computers was decreasing, while spending on non-S/390-compatible computers was increasing. (IBM Server Market Forecast and Analysis, p. 37, Ex. 53 to Burke Dec.) CDS itself found, based on its telemarketing results, that many of the VM, VSE and MVS S/390 customers on which it focused had "already migrated" or were considering migrating to "other vendors/architectures" *66 as the year 2000 approached. (CDS Internal Presentation, p. 4, Ex. 46 to Burke Dec.) These facts indicate that CDS and IBM were competing in a market that included non-S/390-compatible computers.
C. S/390 Customers Are Not "Locked-In".
CDS responds to this evidence of competition by arguing that the relevant market should be limited to existing IBM S/390 customers. If it is appropriate to limit the relevant product market in this way, then there is no question that IBM has market power in the relevant market. IBM is the world's leading producer of IBM productsjust as The Coca-Cola Company is undoubtedly the leading producer of Coca-Cola. But it is an established maxim that antitrust law protects competition, not competitors. Brown Shoe Co. v. United States, 370 U.S. 294, 320, 82 S.Ct. 1502, 8 L.Ed.2d 510 (1962). Thus, courts generally conclude that single brands do not constitute separate markets. Mathias v. Daily News, 152 F.Supp.2d 465, 482-83 (S.D.N.Y.2001) (dismissing antitrust claims based on a market definition limited to the "Daily News" newspaper and excluding other newspapers, and recognizing other cases in the Second Circuit rejecting a relevant market based on a single brand name); Re-Alco Indus., Inc. v. Nat'l Center for Health Educ, Inc., 812 F.Supp. 387, 391-92 (S.D.N.Y.1993) (dismissing antitrust claims when plaintiff failed to make a showing why the relevant market should be limited to a particular brand of health education materials) See also, Town Sound & Custom Tops, Inc. v. Chrysler Motors Corp., 959 F.2d 468, 480 (3d Cir.1992) (rejecting a market definition limited to Chrysler cars, finding that Chrysler cars competed with other companies' automobiles); Domed Stadium Hotel, Inc. v. Holiday Inns, Inc., 732 F.2d 480, 488 (5th Cir.1984) (rejecting market definition limited to Holiday Inn hotel rooms, finding that the relevant market was hotel rooms generally).
CDS's argues, however, that the relevant product market should be limited to existing IBM S/390 customers because they suffer the "lock-in" effect described by the Supreme Court in Eastman Kodak Co. v. Image Technical Services, Inc., et. al, 504 U.S. 451, 112 S.Ct. 2072, 119 L.Ed.2d 265 (1992). In Kodak, several independent service organizations brought an antitrust action against Kodak after it created a new policy that it would sell Kodak replacement parts only to customers who used Kodak maintenance services to maintain their photocopier and micrographic equipment (or maintained their own). Id. at 458, 112 S.Ct. 2072. The Supreme Court, affirming the Ninth Circuit's reversal of the district court's grant of summary judgment in favor of Kodak, found that there were genuine issues of material fact as to Kodak's market power in a properly defined market. Specifically, the Court found that there was a genuine issue as to whether Kodak machines and post-purchase Kodak maintenance services and parts were two distinct products with a "tying arrangement" between them or as Kodak claimedone unified market.[7]*67 Id. at 463, 112 S.Ct. 2072. The Court explicitly recognized that a single brand of a product could constitute a separate market for antitrust purposes, explaining that the relevant market was properly determined by the choices available to Kodak equipment owners, and that "[b]ecause service and parts for Kodak equipment are not interchangeable with other manufacturers' service and parts, the relevant market from the Kodak equipment owner's perspective is composed of only those companies that service Kodak machines." Id, at 482, 112 S.Ct. 2072. The Court noted that customers who had already purchased Kodak equipment would tolerate some level of service-price increases, even supra-competitive prices, if the switching costs remained higher than the service prices. Id. at 477, 112 S.Ct. 2072. If the seller could discriminate between these customers and new customers, the company could charge new customers below-marginal costs on equipment and regain the costs through service and warranty packages not available to the "locked-in" customers. Id. The Court found that the respondents (plaintiffs) had offered evidence of high switching costs, and that Kodak itself had confirmed that it varied the package price of equipment/parts/service for existing customers. Id. The Court also considered the difficulty consumers faced in informing themselves of the total cost of the Kodak "package" including equipment, service, and partsat the time of purchase, due to the difficulty of calculating accurate lifecycle pricing for a large, complex machine. Id. at 473, 112 S.Ct. 2072. In the context of this potentially limited relevant market (for Kodak parts alone), the Court concluded that Kodak had failed to demonstrate that the respondents' inference of market power was unreasonable, particularly in light of the direct evidence that Kodak had raised prices to drive out competition. Id. at 477, 112 S.Ct. 2072. And it was also plausible from the evidence "to infer that Kodak chose to gain immediate profits by exerting that market power where lockedin customers, high information costs, and discriminatory pricing limited and perhaps eliminated any long-term loss." Id. As a result, the Supreme Court concluded that it was inappropriate for the district court to grant summary judgment in favor of Kodak. Id.
While there is no allegation of an illegal tying arrangement in the instant case, plaintiff argues that here, as in Kodak, summary judgment is not appropriate because there is a genuine issue of fact concerning the existence of a "lock-in" effect. (Plaintiffs Opposition to Summary Judgment ("Plaintiffs Opp."), p. 20.) CDS claims that IBM S/390 customers are locked-in by high switching costs and high information costs and asserts that, "faced with the `commercial realties' of the market, it is apparent that the relevant market at issue is low-end S/390 platforms." Id. at 20.
However, CDS fails to present evidence of any of the elements that the Kodak Court found could indicate "lock-in": (1) high switching costs faced by a substantial number of customers; (2) high information costs faced by a substantial number of customers; and (3) a substantial ability to exploit "ignorant" customers, i.e., those with high information costs. See, generally, Universal Avionics Sys. Corp. v. Rockwell Int'l Corp., 184 F.Supp.2d 947, 956 (D.Ariz.2001) (applying these factors to determine whether plaintiff had established "lock-in" under Kodak). Absent such evidence, CDS does not raise a genuine issue of fact.
1. CDS does not present evidence showing that a substantial number of customers faced "high switching costs".
"Switching costs" are the additional costs (over and above the market price of *68 the item) incurred by customers who have previously invested in a particular product line. See generally, PSI Repair Servs., Inc. v. Honeywell, Inc., 104 F.3d 811, 818 (6th Cir.1997). In Kodak, the respondent plaintiffs submitted evidence of "very high switching costs" for existing Kodak customers. Kodak, 504 U.S. at 477, 112 S.Ct. 2072. There was also evidence that customers used Kodak service "even though they preferred ISO service, [and] Kodak service was of higher price and lower quality than the preferred ISO service" Id at 465, 112 S.Ct. 2072. In the instant case, however, CDS has not provided any evidence of customers who wanted to leave the IBM S/390 system but were unable to because of high switching costs.
In the case of a computer system, the cost of purchasing or programming new software is a potential switching cost. Arguing that locked-in customers face prohibitively high switching costs, CDS cites the Declaration of Robert Fleming ("Fleming Dec"). Mr. Fleming, the President of a library bibliographic supply company, states that his company used a IBM S/390 operating system (or its predecessors) and software applications for twenty years, and that "due to the complexity of the software... it was not possible to migrate the software to another non-IBM platform." (Fleming Dec, ¶ 3, 4.) Unfortunately for CDS, Mr. Fleming goes on to state that eventually his company "successfully migrated" to a CDS operating system, which allows it to run their S/390 applications. (Fleming Dec, ¶ 5.) And Mr. Fleming then reveals that his company is currently "going through a very difficult transition from OS/390 system to a non-IBM network systems," albeit one involving "very high costs for new hardware and very high costs for software." (Fleming Dec, ¶ 6.) While Mr. Fleming's affidavit provides evidence that switching costs may be high and are not incurred lightly, they are apparently not prohibitive, because his company made the switch, despite the costs.
CDS also cites to the Declaration of Ron Hankison ("Hankison Dec"). Mr. Hankison, the President of CDS (now Xbridge Systems, Inc.), opines that a "substantial portion of S/390 customers" are locked-in, and IBM customers are "generally unable to cost-effectively migrate their applications to less expensive computing platforms offered by IBM's competitors." (Hankinson Dec, ¶ 7, 8.) But Mr. Hankison provides no evidentiary basis for his wholly conclusory statements.
In addition to the Fleming and Hankinson Declarations, CDS seeks to support its claim of "high switching costs" through the expert testimony of Ronald Alepin. While Mr. Alepin concludes in his declaration ("Alepin Dec") that, "Customers are unwilling or unable to consider replacing their ... [S/390 systems] because the conversion cost is prohibitive," he offers no examples to support this opinion. (Alepin Dec, ¶11.) Alepin admits that he did not try to identify any S/390 customers who wanted to leave the S/390 platform but were unable to migrate due to high switching costs, or to quantify how many such customers there might be. (Alepin Dep. at 127:5-8, 174:19-175:9.) Likewise, CDS's other expert, Brett Reed, neither identifies any customers that are allegedly "lockedin" nor quantifies how many such customers there are.
In Virgin Atlantic Airways, plaintiff submitted an expert report which purported to explain market facts relevant to the antitrust litigation. The Second Circuit noted that plaintiff had failed to supply the hard data that the expert relied upon, and that the charts and graphs that were offered provided data for an irrelevant time period. Virgin, 257 F.3d at 264. The Circuit concluded that plaintiff failed to meet it burden of showing an actual adverse *69 effect on the relevant market by submitting the speculative report, explaining that, "Expert testimony rooted in hypothetical assumptions cannot substitute for actual market data." Id. Likewise, the speculative affidavits of Mr. Alepin and Mr. Reed do not overcome for the lack of hard evidence. CDS has failed to identify any specific customers, let alone a substantial number, that allegedly faced switching costs of a magnitude sufficient to make migration impractical.
The only concrete evidence regarding the cost of migration in the record comes from IBM documents, in which the defendant estimated the costs to consumers of moving from various platforms. ("PS90E Competitive Analysis," Ex. H to Reed Dec; "Entry S/390 Concept DCP," Ex. I to Reed Dec.) However, these documents do not show that switching costs were prohibitive for any identified customers; rather, they generally suggest that the cost of migration is one factor among others that consumers use to determine the most efficient, beneficial, and economical computing solution for their needs. These documents show nothing more than that defendant was concerned about migrating customers, and sought to retain them by providing a competitive alternative. (See, e.g., Ex. I, p. 11-12, explaining that IBM is seeking to provide "a platform which is priced more competitively with alternate platforms" and noting that "The point is that in order to be successful in our established geographies at replacing the install base, we have to be affordable to the customer, be able to demonstrate cost of computing savings, be an economical platform alternative (including migration costs), provide server function in today's client/server world, and reach the customer.") Even Mr. Alepin acknowledges that switching costs should be considered in light of the benefits of migration. (Alepin Dep. at 127:5-8, 174:19-175:9). See also SMS Sys. Maint. Servs., 188 F.3d at 22 ("cost of shifting to another [computer] system must take into account the efficiency gains of buying new softwaregains that often may dwarf hardware price in dollar terms").
The fact that existing IBM customers would need to spend money to migrate to another computing system does not establish "lock-in." See e.g. Geneva Pharm. Tech. Corp. v. Barr Lab., Inc., 201 F Supp.2d 236, 273 (S.D.N.Y.2002) (declining to limit a relevant market to one brand and noting that switching costs alone do not establish lock-in under Kodak) (citations omitted). CDS offers no evidence that "high switching costs" made migration to an alternative platform impractical for a substantial number of S/390-compatible customers.
2. CDS does not present evidence showing that "high information costs" prevented a substantial number of customers from making fully informed purchase, decisions.
"Information costs" prevent customers from obtaining relevant information about the costs and benefits of a product at the time customers initially invest in that product. See, e.g., PSI Repair Servs., 104 F.3d at 818; see generally, Universal Avionics, at 956-57 (to show absence of high information costs, "`[i]t suffices that most buyers know the risks of dealing initially with the defendant rather than with his rivals'") (quoting 10 Areeda et al, Antitrust Law § 1740, at 157 (1996)); Little Caesar Enters., 34 F.Supp.2d at 488-89 (central to the inquiry is "the degree of knowledge ... reasonably available to the buyer[s]" when they initially invest, quoting Areeda, § 1740, at 151). CDS could have supported its allegation of a limited relevant market by showing that a substantial number of existing S/390 customers were unable to make fully informed purchase decisions regarding the costs and *70 benefits of investing in S/390-compatible computers. However, CDS presents no evidence of high information costs.
Again, there is no record evidence that any S/390 customer was unable to make a fully informed decision regarding the attendant costs and benefits of owning, or switching from, an S/390 platform computer, let alone that a substantial number of customers was unable to do so. Unlike defendant Kodak, IBM did not change any policies related to its product after purchase. And there are no allegations in the instant case that customers who bought S/390 systems had difficulty calculating things like lifecycle pricing involving service and warranties, thus preventing them from making an informed decision about what product to purchase.
CDS argues that IBM took action "equivalent to Kodak's change in parts policy" when it "hindered CDS." (Reed Dec, 18). This argument is based on the theory, advanced by Mr. Reed, that, "Customers who selected IBM in the 1980s or early 1990s (or before) could have reasonably expected that new low-cost IBM S/390-compatible technologies made available in 1997 would be made available without undue interference from IBM." This argument not only relies on an unsupported divination of what IBM customers expected; it also begs the ultimate question of whether IBM committed antitrust violations. Mr. Reed's statement does not provide evidence that supports his conclusory claim of undue inference.
Courts generally consider the viability of Kodak-based limited markets in cases where there is an allegation of an illegal tying arrangement, as there was in Kodak. In such cases, if there is no evidence of "information costs," federal courts have routinely granted summary judgment against plaintiffs basing claims on alleged "lock-in" markets. See SMS Sys. Maint. Servs., 188 F.3d at 23 (rejecting "lock-in" market in part because computer users know beforehand that their investment in a particular computer architecture will have certain consequences); PSI Repair Servs., 104 F.3d at 820 (holding that a plaintiff "cannot succeed on a Kodak-type theory when the defendant has been otherwise forthcoming about its pricing structure and service policies."); see also, United Farmers Ass'n, Inc. v. Farmers Ins. Exck, 89 F.3d 233, 238 (5th Cir.1996) (rejecting claim that insurance agents were "locked-in" to particular insurance company because the agents "would clearly have become aware of [the alleged anticompetitive] policy long before they faced significant switching costs"); Universal Avionics, 2001 WL 1771185, at 956-57, 959-60 (finding that manufacturers "know that it is costly to switch" avionics suppliers and that "it would be plainly contrary to the 'economic reality of the market at issue' to assume that [defendant's] customers did not know what they were doing" when they initially invested in defendant's proprietary flight control system (quoting Kodak, 504 U.S. at 467, 112 S.Ct. at 2082)); Laserworks v. Pitney Bowes, Inc., Civ. No. C2-96-1307, 1999 WL 33435671, at *8 (S.D.Ohio Dec.29, 1999) (rejecting "lock-in" market premised on customers' investment in Pitney Bowes fax machines because customers "were armed with all of the information they needed to make an informed decision" in the foremarket and Pitney Bowes policy was not changed after customers invested in the technology) affd 8 Fed.Appx. 380, 2001 WL 392045 (6th Cir. 2001); Metzler v. Bear Auto. Serv. Equip. Co., 19 F.Supp.2d 1345, 1359 (S.D.Fla. 1998) (rejecting "lock-in" market based on customers' investment in particular automotive diagnostic equipment where customers were not faced with a "sudden restrictive change in policy" after they had invested in the technology); Wilson v. Mobil Oil Corp., 984 F.Supp. 450, 461 *71 (E.D.La.1997) (rejecting franchise "lockin" because investors "had sufficient information to evaluate the risks of entering [Defendant's] franchise before they signed their agreements"). Here, I am faced with an effort to extend Kodak beyond the illegal tying arena, with no evidence in the record about excessive information costs. What the First and Sixth Circuits did in SMS and PSI is equally appropriate here.
3. CDS does not present evidence that IBM exploited "locked-in" customers.
IBM argues that, even if the record contained evidence of high switching costs and information costs, IBM could not exploit these customers because they could not identify them, as they had no access to the information necessary to conduct a cost/benefit analysis of switching for each individual customer. CDS counters that the "locked-in"and thus exploitableS/390 customers can be identified simply by the fact that they have remained customers. This argument rests on the plaintiffs wholly unsupported theory that "If customers were not locked-in or otherwise reliant on the S/390 platform, all IBM customers would have switched to Unix and NT." (Reed Dec, ¶ 20.)
CDS claims that IBM exploited these locked-in customers through price discrimination. In Kodak, respondents presented evidence that Kodak practiced price discrimination by selling parts to customers who serviced their own equipment (most likely high-volume customers who were more likely to have invested the time to gather information on the complicated pricing calculations), but refusing to sell parts to customers that hired third-party service companies. Id at 476, 112 S.Ct. 2072.
There is no similar evidence in the instant case of any type of illicit price discrimination. CDS, however, attributes a nefarious purpose to IBM's tiered pricing index, claiming that it demonstrates "IBM's ability to impose higher prices on its customer base." (Plaintiffs Opp., p. 5.) Yet CDS itself admits the rationale behind the group pricing structure: "... IBM is able to charge different prices for the same OS/390 software platform depending on the MIPS level of the CPU in the system hardware." Id. In plain English, IBM charged higher prices for software in computers with higher processing power. This is hardly evidence of exploitive pricing of locked-in customers.
* * * * * *
In sum, CDS provides no evidence to support its claim that IBM S/390 customers are locked-in in the same manner the Supreme Court thought Kodak photocopier and micrograph equipment customers might be locked-in. To the contrary, as discussed below, there is evidence in the record that S/390 customers migrated from S/390 platforms to other operating systems. CDS does not dispute this migration away from S/390 systems, but argues that, while "some IBM customers are leaving the IBM platform (emphasis in original), . .. these customers are leaving the proper relevant market, not defining a new market. These customers would not stay with IBM S/390 products if IBM reduced prices a small but significant amount, and thus the fact these customers have migrated away from the IBM platform does not demonstrate that the market must be defined as broadly as claimed by IBM." (Reed Aff, ¶ 12.) CDS offers no factual support for its claim that IBM customers would leave the S/390 market if the prices were reduced. Moreover, CDS's argument now becomes in essence: "All S/390 customers want to migrate to other operating systems, but they can't, and when they do, it just means that they shouldn't be counted." This rather hyperbolic *72 theory is unsupported by evidence. It is not rational to assume that every single person who ever bought an IBM S/390 System would prefer to switch to another vendor.
I note that CDS repeatedly stresses that these computing platforms were not "interchangeable" because the S/390 products were not functionally interchangeable with products based on different operating systems. {See e.g., Plaintiffs Opp., p. 4.) But "interchangeability" in antitrust analysis does not refer only to products can be seamlessly swapped for each other. Within the same relevant market, competing products will have various benefits and detriments, including factors such as price and functionality, and customers will chose the product that best suits their overall needs. Only "reasonable interchangeability" is required. See generally E.I. olu Pont de Nemours, 351 U.S. at 404, 76 S.Ct. 994 ("[t]he market is composed of products that have reasonable interchangeability for the purposes for which they are producedprice, use and qualities considered.")
It is true that, due to the lack of functional interchangeability, customers who have invested resources in S/390 products face switching costs if they chose to migrate to another system. It may be that some of these customers are "locked-in" to their investment in the colloquial sense.[8] But this does not mean that they are victims of a "lock-in" effect caused by anticompetitive behavior under Kodak. And the record evidence of migration off the systemespecially given CDS's failure to identify even one specific customer who wants to leave the system and cannot undermines CDS's theory that customers are "locked-in" by conversion costs in any meaningful sense.
A theory similar to CDS's was rejected by the First Circuit in SMS Sys. Maintenance Serv., Inc. v. Digital Equipment Corp., 188 F.3d 11 (1st Cir.1999). In SMS, an independent computer service (repair/maintenance) provider ("SMS") brought antitrust claims against a computer manufacturer ("DEC") based on an alleged attempt by the manufacturer to monopolize the aftermarket for service of its computers by providing a mandatory warranty. Id. The plaintiffs argued that current DEC customers were "locked-in." Id at 21. The Court found that there was a "serious shortcoming that permeat[ed] SMS's lock-in argument" because "being part of an installed base and being lockedin are not synonymous." Id.
The evidence offered by the plaintiffs in SMSand the evidence that was conspicuously not offeredwas similar to the evidence in and not in the record of the instant case. SMS's "most direct evidence of lock-in" came from employees of DEC customer companies, who testified that, once a company committed to a certain brand of hardware and acquired ancillary software, it would be costly to migrate. Id. However, the Court found that the evidence in the record showed that the decisionmaking surrounding the purchase of computers is qualitatively different from the decision to buy copier parts, and that a large range of factors enter into the computer user's decision most significantly, the availability of desirable software applications. Id at 22. Thus, "the cost of shifting to another system must take into *73 account the efficiency gains of buying new software" which may be economical, "even if one considers the switching costs that are associated with retraining employees and discarding software designed to run exclusively on a particular platform." Id. And in an uncanny parallel to this case, the SMS Court noted that the very witnesses on whom SMS relied to establish the costs of migration undermined the lock-in argument through their actual behavior, because their firms were in the process of switching some of their systems to other platforms. Id at 23.
The First Circuit concluded that the record did not support the conclusion that a substantial number of installed base customers were locked-in, noting that SMS should have provided empirical evidence of the actual behavior of the installed base. Id. The Court noted, "Although we do not doubt that some customers may experience the lock-in that SMS envisions, the record affords no reason to believe that such customers are numerous or that they are representative of the installed base." Id. The Court found it significant that, in contrast to Kodak, there was no evidence of exploitation of customers in the installed base through price discrimination or other suspicious practices. Id at 24. The Court found the conclusions of SMS's expert "highly suspect," noting that he did not conduct a customer survey, but rather based his opinion on his interpretation of certain internal DEC documents. Id at 25.
Although SMS, like Kodak, involved an analysis of "lock-in" in the context of a derivative aftermarket, the similarities to the instant case are obvious. In SMS, after noting that "a lock-in phenomenon must be shown, not assumed," the First Circuit found that "the evidence, taken most favorably to SMS, does not demonstrate a lock-in, certainly not one that raises antitrust concerns." Id at 21, 23. Likewise, in the instant case, I find that CDS has not demonstrated that IBM S/390 customers suffer from an antitrust "lock-in" effect.
D. IBM Lacks Power in the Relevant Market Containing S/390 Platform Computers and Alternate Platform Computers.
Market power is the ability: "(1) to price substantially above the competitive level and (2) to persist in doing so for a significant period without erosion by new entry or expansion." AD/SAT, 181 F.3d at 227 (internal quotes omitted)(emphasis in original); see also CDC Techs, v. IDEXX Labs., Inc., 186 F.3d 74, 81 (2d Cir.1999) (defining market power as the "ability to raise price significantly above competitive level without losing all of one's business" (internal quotes omitted)). This power may be demonstrated by direct evidence of specific conduct indicating the defendant's ability to control price or exclude competition. See CDC Techs., 186 F.3d at 81; K.M.B. Warehouse Distribs., Inc. v. Walker Mfg. Co., 61 F.3d 123, 129 (2d Cir.1995). In the absence of such direct evidence, a firm's share in the relevant market may be used as a proxy for determining power. See CDC Techs., 186 F.3d at 81; K.M.B. Warehouse, 61 F.3d at 129. The record evidence here plainly demonstrates that IBM lacks powerhowever measuredin a properly defined market.
First, there is no evidence in this record that IBM had the ability to set prices at a supracompetitive level, or to exclude competition. The evidence shows just the oppositeIBM was engaged in competitive pricing. According to CDS, the price of S/390-compatible computer processing was "dropp[ing] significantly," falling 75%, from September 1995 to July 1998. (See CDS Private Placement Memorandum, September 1995, p. 11. Ex. 33 to Burke *74 Dec. (cost approximately $20,000/MIPS); CDS Private Placement Memorandum, July 1998, p. 14, Ex. 32 to Burke Dec. (cost approximately $5,000/MIPS); see also IBM Large Systems Customer I/T Panel Survey, Fall 1998, p. 25, Ex. 50 to Burke Dec. (IBM confirmation of price decrease).) Thus, customers were getting more S/390-compatible processing power for less money. In addition (and as discussed more fully below), Sun Microsystems, Hewlett Packard, and Compaq, to name a few competitors, significantly increased their market shares during the relevant time frame at the expense of IBM. (Expert Report of Carl Shapiro, Table 4, Ex. 80 to Burke Dec.) These trends are entirely inconsistent with the exercise of market power by IBM.
Second, the evidence shows that IBM had a relatively low, and declining, market share. This is true regardless of whether the market includes all computer systems available in the world or only those computers at the "low end" of the market.[9] IBM submitted evidence showing that, with respect to all computer systems, IBM's share of sales based on integrated hardware was 23% in 2000. (Expert Report of Carl Shapiro, p. 29, Ex. 80 to Burke Dec.) IBM's share based on operating system software was 20% in 2000. Id. Both of these shares with respect to all computer systems declined from 1996 to 2000. Id.
IBM also submitted evidence regarding the "low end" of the market, which it defined by price bracket rather than processing power. The evidence shows that, based on operating system software, IBM's market share for computer systems priced at $250,000 or less (which includes the IBM and CDS systems at issue here) declined from 20% in 1996 to 8% in 2000.[10] Id. at Table 3. Based on integrated hardware, IBM's market share for systems priced at $250,000 or less declined from 23% in 1996 to 14% in 2000. Id. at Table 4. Moreover, as of the year 2000, IBM ranked fourth (based on integrated hardware), behind Compaq (21%), Sun Microsystems (18%) and Hewlett-Packard (16%). Id. CDS does not provide contradictory evidence or dispute the validity of IBM's data in its summary judgment papers.
These low market share numbers are dispositive. "Courts have consistently held that firms with market shares of less than 30% are presumptively incapable of exercising market power." Union Carbide Corp. v. Montell N.V., 27 F.Supp.2d 414, 417 (S.D.N.Y.1998) (Section 1 claim); see also Jefferson Parish Hosp. Dist. No. 2 v. Hyde, 466 U.S. 2, 26-27, 104 S.Ct. 1551, 1566, 80 L.Ed.2d 2 (1984) (Section 1 claim; *75 finding that 30% market share does not constitute "dominant market position"); AD/SAT, 181 F.3d at 229 (Section 2 claim; "33% market share does not approach the level required for a showing of dangerous probability of monopoly power"); Twin Labs., Inc. v. Weider Health & Fitness, 900 F.2d 566, 570 (2d Cir.1990) (same); Hayden Co. v. Siemens Med. Sys., Inc., 879 F.2d 1005, 1017-18 (2d Cir.1989) (Section 2 claim; finding that 20% market share is insufficient to establish "dangerous probability"); Valley Prods. Co. v. Landmark, 128 F.3d 398, 402 n. 3 (6th Cir.1997) (Section 1 claim; noting that federal courts "have repeatedly held that a 30% market share is insufficient to confer... market power"); State of New York v. Anheuser-Busch, Inc., 811 F.Supp. 848, 873 (E.D.N.Y.1993) (Section 1 claim; finding, in context of vertical restraint, that "39% share is below that which has been deemed sufficient to confer market power in any previous decision").
The fact that IBM's share was decliningwhile spending on non-S/390-compatible computers was increasingis further evidence that IBM did not possess market power. See Nifty Foods Corp. v. Great All. & Pac. Tea Co., 614 F.2d 832, 841 (2d Cir. 1980); United States v. Syufy Enters., 903 F.2d 659, 666 (9th Cir.1990); Winter Hill Frozen Foods and Servs., Inc. v. Haagen-Dazs Co., 691 F.Supp. 539, 547-48 (D.Mass.1988).
CDS does not dispute these facts, instead relying on its narrowly defined market of "existing IBM S/390 customers" and arguing that IBM holds market power in that market. Again, I have no doubt that IBM does, in fact, possess market power in a market limited to its own products. However, the properly defined relevant market includes products with which the relevant IBM products compete; and in that market, there is no question that IBM lacked market power.
IV. IBM IS ENTITLED TO SUMMARY JUDGMENT ON CDS's CLAYTON ACT SECTION 3 CLAIM (COUNT IV).
To establish a violation of Section 3 of the Clayton Act, CDS must prove: (1) sales of goods for use, consumption or resale within the United States; (2) sales conditioned on the purchasers not dealing in the goods of a competitor; and (3) a potential effect or substantial lessening of competition. See Reisner v. Gen. Motors Corp., 511 F.Supp. 1167, 1176 (S.D.N.Y. 1981); see also Tampa Elec. Co. v. Nashville Coal Co., 365 U.S. 320, 328, 81 S.Ct. 623, 628, 5 L.Ed.2d 580 (1961) (competition foreclosed "must be found to constitute a substantial share of the relevant market"). CDS cannot prove elements (2) and (3).
Even if IBM's Business Partner relationships were deemed "exclusive" for purposes of the Clayton Act, a substantial foreclosure of competition cannot be found where, as in this case, numerous alternative channels of distribution existed. See Omega Envtl. v. Gilbarco, Inc., 127 F.3d 1157, 1163 (9th Cir.1997). IBM points to evidence that CDS entered into a number of marketing, distribution and sales agreements with numerous business partners of its own. (Def. SMF ¶¶ 51-52.) In a private placement memorandum, CDS described its marketing approach to "use multiple channels depending on the system type and application," and explained that "a primary channel will be the computer service companies to include Amdahl, Fujitsu, and Decision One." (Private Placement Memorandum, p. 5, Ex. 32 to Burke Dec.) Indeed, CDS described Decision One, as "the largest independent service provider in the USA" Id. Ron Hanikson stated in his deposition that CDS had "several working arrangements" with independent service providers to distribute their products, including "major software firms" with *76 whom it would "be difficult for IBM itself to partner". (Hankison Dep. 61:19-22, Ex. 10A to Burke Dec.) CDS employees also provided evidence that they advertised to VARs, distributors, and other potential customers through trade shows and other direct methods, including telemarketing, by which it completed sales of its products. (Johnson Dep. at 56:16-57:22, Ex. 12A to Burke Dec; Holstrom Dep. at 220:7-13, Ex. 11B to Burke Dec.)
The Ninth Circuit has held that where the plaintiff could have sold its product directly to end-users or used distribution channels other than those used by defendant, defendant did not, as a matter of law, violate Section 3 of the Clayton Act:
If competitors can reach the ultimate consumers of the product by employing existing or potential alternative channels of distribution, it is unclear whether such restrictions foreclose competition from any part of the relevant market.... Competitors are free to sell directly, to develop alternative distributors, or to compete for the services of existing distributors. Antitrust law requires no more.
Omega Envtl, 127 F.3d at 1163 (citations omitted)(emphasis in original); see also CDC Techs., Inc. v. IDEXX Labs., Inc., 7 F.Supp.2d 119, 120 (D.Conn.1998) affd on other grounds 186 F.3d 74 (2d Cir.1999) (granting summary judgment on Clayton Act Section 3 claim where plaintiff could have availed itself of "existing, or potential alternate channels of distribution" and reached consumers through direct sales, non-distribution sources and distributors that had not contracted with defendant). Moreover, the IBM Business Partner agreements were terminable by either party "without cause on three months' written notice." ("IBM Business Partner Agreements for Solution Providers," p. 5, Ex. 58 to Burke Dec.) Thus, CDS was free to compete with IBM for distribution/reseller arrangements. See Paddock Pubis., Inc. v. Chicago Tribune Co., 103 F.3d 42, 45 (7th Cir.1996) ("Competition-for-the-contract is a form of competition that antitrust laws protect rather than proscribe ... A termination clause works just like a stated time limit in facilitating competition for the contract."); see also Omega Envtl, 127 F.3d at 1163 (one year duration of, and 60 day terminability clause in, agreements "negate substantially their potential to foreclose competition") accord CDC Techs., 7 F.Supp.2d at 129.
CDS counters this evidence by arguing that IBM interfered with its relationship with Information Technology Company ("ITC"). (Plaintiffs Opp. at 14.) CDS claims that this alleged interference creates a genuine issue of material fact as to the existence of a Clayton Act violation, because CDS "relied upon [VARs]" and ITC was "one of the most important VARs." While CDS does not explicitly argue that IBM's alleged interference with its relationship with Intelliware also supports a Clayton Act violation, I construe the complaint in its favor to include this allegation. Even so, CDS's allegations of interference with these two VARs fails to create a genuine issue of fact as to whether IBM violated the Clayton Act.
CDS attempts to support its argument by citing to the Hanikson Declaration, in which he claims that "[t]here were not very many VARs" and characterizes ITC as "one of the most important." (Hanikson Dec, ¶ 15.) This statement directly contradicts Mr. Hanikson's deposition testimony, where he estimated that there were "in the hundreds, one hundred and fifty" VARs selling S/390 computers. (Hanikson Dep. 72:17-22, Ex. 10A to Burke Dec.) It is well settled that a party cannot create a disputed issue of fact by submitting an affidavit that is at variance with his deposition testimony. Mack v. *77 U.S., 814 F.2d 120, 124 (2d Cir.1987). Moreover, CDS admits that it entered into marketing, distribution and sales agreements with at least eleven other companies. (CDS's Responses to Defendant's First Set of Requests for Admissions, 92-102.) And among two dozen firms that CDS strategy documents identified as prospective or desirable business partners, neither ITC nor Intelliware is mentioned. (CDS Sales Strategy and Implementation Plan, p. 11, Ex. 31 to Burke Dec.) There is absolutely no record evidence that any specific VAR was particularly "influential" within the distribution/reseller community. And CDS cannot refute the availability of its other options by arguing that certain firms did not have the same "proven finances, abilities and customer relationships" as other resellers. See Omega Envtl., 127 F.3d at 1163 ("[T]he antitrust laws were not designed to equip the plaintiffs' hypothetical competitor with [defendant's] legitimate competitive advantage.").
Thus, even though I am denying summary judgment to IBM on CDS's claim that IBM interfered with its relationship with ITC and IntelliWare, there is no evidence that any such interference could have had the potential effect or resulted in a substantial lessening of competition. At the motion to dismiss stage, I allowed CDS's antitrust claims to proceed because they alleged that ITC and Intelliware were such "influential" VARs that IBM's interference with them had the effect of substantially foreclosing CDS from the relevant market. CDS III, 2002 WL 1205740 at * 7. CDS has failed to provide any evidence to support its claim that these VARs were particularly "influential."
Because the record evidence establishes that CDS had available, and availed itself of, numerous distribution channels, no reasonable trier of fact could find a substantial foreclosure of competition. IBM is entitled to summary judgment on CDS's Section 3 Clayton Act claim (Count IV).
V. IBM IS ENTITLED TO SUMMARY JUDGMENT ON CDS's SHERMAN ACT SECTION 1 CLAIMS (COUNTS II-III).
A violation of Section 1 of the Sherman Act occurs when there is (1) a combination or some form of concerted action between at least two legally distinct economic entities, and (2) such combination or conduct constituted an unreasonable restraint of trade under the rule of reason.[11]See Tops Markets Inc. v. Quality Markets, Inc., 142 F.3d 90, 95-96 (2d Cir.1998). Under the rule of reason, the plaintiff must show that the challenged conduct had an actual adverse effect on competition in the market, not just that it harmed competition. Id at 96.
CDS does not claim, and there is absolutely no evidence of, any horizontal agreements between any two or more distributors regarding the distribution of CDS products. Rather, CDS alleges discrete vertical agreements between IBM and its business partners. (Plaintiffs Sec. Amd. Cmplt, Counts II & III.) In its Motion in Opposition to IBM's Motion for Summary Judgment, CDS argues that summary judgment is inappropriate as to the Sherman Act claims because it has presented evidence of arrangements between IBM and two individual Business Partner VARsITC and Intelliware. (Plaintiffs Opp., p. 12.) Regarding these two companies, CDS claims that "these initial potential customers were extremely important to CDS's business plan, and were essential to building momentum in the market place." Id. By allegedly causing ITC and Intelliware to stop dealing with CDS, CDS claims that *78 IBM "effectively shut[ ] [them] out of the market." Id.
The allegations underlying CDS's Sherman Act Section 1 claims are thus essentially the same as those underlying its Clayton Act Section 3 claim. The Supreme Court has held that if conduct does not fall within "the broader proscription of [Section] 3 of the Clayton Act", it is not forbidden by Sections 1 or 2 of the Sherman Act. Tampa Elec. Co., 365 U.S. at 335, 81 S.Ct. at 632; see also CDC Techs., 7 F.Supp.2d at 122. For substantially the same reasons that no violation under Section 3 of the Clayton Act exists on these allegationsthere is no evidence of a relationship which caused substantial foreclosure in the marketno violation exists under Section 1 of the Sherman Act.
However, even if IBM had not prevailed on the Clayton Act claim, it would be clear that CDS had not established a violation under Section 1 of the Sherman Act. CDS provides no evidence of an unreasonable restraint of trade under the rule of reason, and thus fails to establish the second element of a Section 1 Sherman Act claim. Unreasonable restraint of trade under the rule of reason requires "an actual adverse effect on competition as a whole in the relevant market". Virgin Atlantic Airways, 257 F.3d at 264 (internal quotes omitted). The "overarching standard is whether defendant's actions diminish overall competition, and hence consumer welfare." K.M.B. Warehouse, 61 F.3d at 128 (internal quotes omitted).
The traditional indicators of an adverse effectreduced output, increased price, or decreased qualityare entirely absent in the record evidence. See Virgin Atlantic Airways, 257 F.3d at 264. Indeed, as discussed above (see Part III. D, supra), prices for S/390 computing capacity decreased drastically (by 75%) during the relevant time framea trend that is inconsistent with anticompetitive behavior.
Lacking direct evidence of an adverse effect, CDS would have to show not only that IBM possessed market power, but also that "other grounds [existed] to believe that the defendant's behavior will harm competition market-wide such as the inherent anti-competitive nature of defendant's behavior or the structure of the interbrand market." Clorox, 117 F.3d at 59 quoting K.M.B. Warehouse, 61 F.3d at 129. IBM plainly does not possess market power in a properly defined market. (See Part III. D, supra.) And even if it did, there is no evidence in the record of "other grounds" to believe that IBM's actions could harm market wide competition. As noted above, there is no evidence that, even if IBM did interfere with CDS's relationships with ITC and Intelliware, its actions harmed market-wide competition. (See Section III, supra.) Rather, the evidence shows that CDS had numerous distribution channels available to it and used them. See Id.; Ryko Mfg. Co. v. Eden Servs., 823 F.2d 1215, 1234 (8th Cir.1987) (no Section 1 violation where plaintiff failed to show that other means of promoting and selling its product were unavailable). As IBM points out, there is nothing anticompetitive about the fact that some of IBM's Business Partners, among a much larger population of available VARs and other distribution channels, elected not to do business with CDS. See CDC Techs., 7 F.Supp.2d at 129 ("[A] distributor's reluctance to establish ties to a reasonably small company rather than a company with a strong reputation ... is not surprising or anticompetitive. In fact, it is the essence of competition." (internal quotes omitted)). And the evidence shows that there were multiple vigorous competitors in the relevant market with shares greater than IBM; these competitors' shares increased at the expense of IBM during the relevant time frame. See Part III. B; K.M.B. Warehouse, 61 F.3d at 129 (no "other *79 grounds" to substantiate competitive harm where evidence demonstrated "healthy" interbrand competition).
CDS also argues that IBM saw CDS as a "threat" and "targeted the CDS S/390 with their own product," the "aptly named Piranha (subsequently renamed Planter)." (Plaintiffs Opp., p. 12.) Again, CDS attempts to support a claim not with evidence, but with nefarious characterization of legitimate behavior. Developing a new product in an attempt to compete with another company's product is not evidence of anticompetitive behavior. It is, rather, the essence of competition.
For all of these reasons, IBM is entitled to summary judgment on CDS's Section 1 claims (Counts IIIII).
VI. IBM IS ENTITLED TO SUMMARY JUDGMENT ON CDS's SECTION 2 MONOPOLIZATION CLAIM (COUNT V).
The first issue with Count V to decipher is what is alleged. The claim is entitled "Attempt to Monopolize," but it also contains allegations that IBM's conduct constituted both an attempt to monopolize and a conspiracy to monopolize. (Plaintiffs Sec. Amd. Cmplt., 11126.) In its Prayer for Relief, CDS asks that the Court find a violation of Section 2 of the Sherman Act based on "monopolization, attempt to monopolize and conspiracy to monopolize." Id., p. 48. IBM suggests in its motion for summary judgment that the references to conspiracy and monopolization claims are drafting errors left over from previous complaints, and focuses in its motion on the "attempt to monopolize" allegation. CDS responds by arguing both that IBM attempted to monopolize the market and that its attempts were successful- a monopolization claim. CDS does not advance any arguments to support a "conspiracy to monopolize" claim, presumably abandoning the theory because there is no record evidence to support it.
To establish attempted monopolization, CDS must prove: (1) that IBM engaged in predatory or anticompetitive conduct; (2) with a specific intent to monopolize; and (3) there was a dangerous probability of achieving monopoly power in a relevant market. See Spectrum Sports, Inc. v. McQuillan, 506 U.S. 447, 456, 113 S.Ct. 884, 890-91, 122 L.Ed.2d 247 (1993); accord Virgin Atlantic Airways, 257 F.3d at 266. To establish monopolization, CDS must prove: (1) possession of monopoly power in a relevant market; and (2) willful acquisition or maintenance of that power as distinguished from growth or development as a consequence of a superior product, business acumen, or historic accident. See Volvo N. Am. Corp. v. Men's Int'l Prof I Tennis Council, 857 F.2d 55, 73 (2d Cir.1988). In other words, to prove monopolization under the Sherman Act, plaintiff must show both that defendant has a monopoly and that defendant willfully engaged in anticompetitive conduct in the relevant market, Invamed, Inc. v. Barr Laboratories, 22 F.Supp.2d 210, 218 (S.D.N.Y.1998).
CDS fails to establish essential elements of both attempted monopolization and monopolization.
A. CDS Has Not Raised an Issue of Material Fact Concerning Either IBM's Possession of Monopoly Power in a Relevant Market or a Dangerous Probability of Achieving Monopoly Power.
CDS has not shown that IBM possessed monopoly power in the properly defined relevant market. See Part III, supra. CDS thus fails to prove the first element of a monopolization claim. Furthermore, to demonstrate a dangerous probability of achieving monopoly power, CDS must *80 prove that IBM possessed significant market power in the relevant market. See Walsh Trucking Co., 812 F.2d 786, 791 (2d Cir.1987). As established in Part III D, supra, IBM did not have such market power. Accordingly, the attempted monopolization claim must also be rejected. See AD/SAT, 181 F.3d at 229; Twin Labs., 900 F.2d at 570-71.
B. CDS Cannot Establish Anticompetitive Conduct or Acts of Willful Acquisition or Maintenance of Monopoly Power.
In the context of discussing its attempted monopolization claim, CDS argues that IBM engaged in anticompetitive conduct by using its power in the market to force ITC and Intelliware to refuse to deal with CDS. (Plaintiffs Opp., p. 13). In the context of discussing its monopolization claim, CDS makes a general statement that there is "ample" record evidence that precludes summary judgment, including evidence of "(1) IBM's economic coercion and threats to ITC and Intelliware, which shut CDS out of the market; ... (2) IBM's prohibition of honest marketing claims by CDS; ... (3) raising CDS's software prices, to the detriment of consumers and to protect the locked-in market... and (4) preannouncing a product to chill the market for the CDS product, and then dropping that product once CDS left the market, again to the detriment of consumers." (Id., p. 14.) CDS's allegations, if proven, could be used to support either a monopolization or an attempted monopolization claim, as both require proof of anticompetitive behavior on the part of the defendant, Invamed, 22 F.Supp.2d at 218. However, CDS fails to support any of these allegations with evidence raising a genuine issue of fact, and thus fails to sustain a valid claim under either theory.
1. The Allegations Regarding ITC and Intelliware Do Not Support a Claim Under Section 2 of the Sherman Act.
The alleged interference by IBM with the ITC and the Intelliware relationships was the unsuccessful basis of the Section 3 claim. (Section III, supra.) The Supreme Court has held that if conduct does not fall within "the broader proscription of [Section] 3 of the Clayton Act", it is not forbidden by Sections 1 or 2 of the Sherman Act. Tampa Elec. Co., 365 U.S. at 335, 81 S.Ct. at 632; see also CDC Techs., 7 F.Supp.2d at 122. CDS failed to show that IBM's alleged interference with these VARs had an anticompetitive effect on the market, and thus failed to support its allegation of a violation under Section 3 of the Clayton Act. This alleged interference thus does not establish a violation under Section 2 of the Sherman Act.
2. There is No Evidence that IBM's Actions Regarding ESL Pricing Were Anticompetitive.
CDS's second and third accusations of anticompetitive conduct relate to IBM's actions regarding ESL pricing. CDS claims that IBM took "direct action" against it by "refusing to provide ESLpriced software to CDS except under anticompetitive terms and conditions, and by limiting marketing claims that CDS could make regarding its product." (Plaintiffs Opp., p. 9 citing Hankison Dec, ¶13.) IBM counters that all system manufacturers were held to the same standardthey were permitted to offer their customers ESL pricing on IBM software if the manufacturers' performance claims were consistent with IBM's uniform criteria for ESL pricing. (Defendant's Mem. in Support of Summary Judgment, p. 20.)
The record evidence supports IBM's contention that the "ESL" pricing level *81 was offered by IBM to CDS based on explicit performance claims about its products. Under the OPA signed by both IBM and CDS, it was clearly stated by IBM that "Based on your claims regarding your System's performance as compared to other IBM S/390 Systems IBM will assign your System the appropriate S/390 group software price. The lowest possible S/390 software price for Systems using P/390E is ESL." (See OPA Agreement, Ex. 2, § 5.2, Ex. 23 to the Burke Dec.) The OEM Agreement stated that: "Buyer agrees and understands that IBM has classified the Buyer System as an Entry Level System (ESL). Buyer further agrees that IBM, in its sole discretion, may change this classification which may result in changes to the Eligible Program Price." ("Amendment to the OEM Agreement," Ex. 1, § 1.3, Ex. 23 to the Burke Dec).
In addition to the explicit terms of the contract, there is record evidence showing that CDS was reminded of the guidelines for ESL pricing several times. On October 16, 1997, an IBM employee sent an email to Ron Hankison explaining that, "The class of system that CDS compares itself to will dictate the price paid for the software used on the CDS system. Comparison to Entry Level class systems will assure that the software price is ESL." (Email to Ron Hankison; Ex. 68 to the Burke Dec). This email indicates that CDS was permitted to decide what marketing claims it wanted to make about its product, but that it might face higher software prices for claims of higher performance. Id. ("Basically CDS can make whatever claims they can support by their own benchmarks and testing... Marketing claims that clearly are defining a system that has attributes beyond that of an Entry Level system could raise the question of whether this is an Entry Level system.") In an earlier email, another IBM employee had provided Ron Hankison with the same messageIBM provided ESL group software pricing only for Entry Level systems. (See Email to Ron Hankison and attached Facsimile, Ex. 66 & 67 to Burke Dec.) ("Systems that use the P/390EE and are defined and compared to other Entry Systems will qualify for ESL software pricing... Systems, either IBM or OEM, that use P/390EE but are defined as and compared to other ESA level IBM Systems will be assigned the software group prices for that class of System.")
When CDS introduced its new product, however, it chose to align itself with an IBM system that was not an entry level system. Instead of naming its product the "CDS-O," as originally planned, CDS named its offering the "CDS-104." Ron Hankison acknowledged that, in doing so, CDS was attempting to position its product to resemble IBM's existing "Multiprise-104" S/390 computer. (Hankison Dep., 28:23-29:10, Ex. 9 to Burke Dec.) But IBM's Multiprise-104 was a more powerful computer than the entry system level computers, and it did not qualify for ESL pricing. (Leahy Dep., 115:11-20, Ex. 13C to Burke Dec.) (explaining that the Multiprise product family had the full I/O subsystem, wasn't subject to the I/O limitations [producing greater thoroughput], and thus did not qualify for ESL pricing.) IBM also claims that CDS made performance claims for its computer that were outside the guidelines allowable for an Entry Level system. (Defendant's Motion for Summary Judgment, p. 20.)
IBM thus informed CDS that, based on its performance claims, the CDS system was no longer qualified for ESL classification, and assigned the system to a higher software pricing group. (Letter to CDS from IBM, Ex. 71 to Burke Dec.) However, IBM and CDS subsequently reached an agreement under which CDS was able to once again receive ESL software prices. *82 (Hankison Dep., 29:14-23, Ex. 9 to Burke Dec.) Pursuant to this agreement, CDS changed the name of its product from "CDS-104" to "CDS-2000." Id. The following year, IBM qualified the CDS2000e system for ESL software pricing. (Letter from IBM to Kevin Murphy, arch 13, 1998, Ex. 72 to Burke Dec.)
CDS has provided no evidence to support its allegation that IBM's actions regarding ESL pricing were retaliatory and anticompetitive. To the contrary, the record evidence shows that IBM was acting within its rights under the OEM agreement and the OPA. The record evidence also shows that CDS customers had to pay for IBM operating system software based on the performance claims made by CDS, but there is nothing that indicates CDS was prohibited from accurately describing its products. There is certainly no evidence in this record that IBM allowed customers other than CDS to take advantage of ESL pricing while advertising products outside the allowable guidelines. Rather, it appears that IBM imposed the same software pricing guidelines on itself that it imposed on CDS. (Leahy Dep., 115:11-20, Ex. 13C to Burke Dec; Email to Ron Hankison and attached Facsimile, Ex. 66 & 67 to Burke Dec.) CDS thus fails to provide any evidence which would raise a genuine issue of material fact as to whether IBM's decisions regarding CDS's qualification for ESL pricing were anticompetitive.
3. There is No Evidence that the May 7, 1998 Announcement Was Anticompetive.
In May 1998, IBM announced plans to offer a new S/390 Integrated Server in the Fourth Quarter of 1998. ("Preview: IBM S/390 Integrated Server," Ex. 77 to Burke Dec.) At the end of the announcement, IBM, in a "Statement of Direction," stated that in 1999, "S/390 will announce and deliver a processor with 2X performance of the processor shipped in fourth quarter 1998." Id. Immediately after this statement, IBM noted that the notice was "subject to change or withdrawal without notice" and represented IBM's "goals and objectives only." Id
To base an antitrust claim on IBM's "pre-announcement" of the Integrated Serveror the statement of direction regarding the two-times performance follow-on productCDS must prove that the announcement was "knowingly false" at the time it was made. See AD/SAT, 181 F.3d at 231; accord MCI Comm. Corp. v. Am. Tel. & Tel. Co., 708 F.2d 1081, 1130 (7th Cir.1983) (announcement not anticompetitive absent "deception or knowing falsehood"). That is because "reasonable good faith statements about research, development, and forthcoming production serve the social interest in maximizing the relevant information available to buyers". MCI Comm., 708 F.2d at 1128 (internal quotes omitted).
There is no evidence suggesting that IBM's "pre-announcement" was anything but a "reasonable good faith statement." To the contrary, the internal IBM documents regarding the productwhich CDS suggests show anticompetitive behavior actually demonstrate that IBM was working strenuously to develop and price the product, in an effort to get it out on the market to compete with the CDS product. (See e.g., Internal IBM email, 3/30/98, Ex. L to Reed Dec. ("I am charged with pushing this forward to give it the opportunity to succeed. If the DBB decides today otherwise than we'll reset the plan... but if they go for success we will be pushing very hard over the next few weeks for the SOD"); Internal IBM email, 7/30/97, Ex. 12 to Williams Dec. (discussing a plan to respond to the CDS product by "counter[ing] with our PS390/R390 offerings, which are even more cost effective in this *83 segment. Regardless of the specifics behind this, CDS is getting good press, and we need to counterattack. We have the offerings, but not a good marketing strategy at this time" and noting that Piranaha (Planter) is the product to "go[ ] after CDS full bore with.").) Once again, CDS's "evidence" of anticompetitive conduct is actually evidence of the very competition that antitrust laws are designed to protect.
Moreover, IBM did offer an Integrated Server in November, 1998, as pre-announced. (CDS's Second Amend. Cmplt. 181.) It is hard to characterize a statement as "knowingly false" when it turns out to be true. And in September 1999, IBM released the "Multiprise 3000" servers, S/390 products that provided more than twice the performance of the Integrated Server. ("S/390 Multiprise 3000 Server" Ex. 79 to Burke Dec.) CDS expert Brett Reed claims that the product IBM ultimately introduced was not the product pre-announced in May 1998, because the smallest of the Multiprise servers was 60 MIPS, which was "five times larger than the 2X performance enhancement suggested in the May 1998 preannouncement." (Reed Dec. 1127.) The fact that IBM released a more powerful processor than originally planned, at a time when processing power was becoming cheaper, is not evidence that IBM's original announcement was made in bad faith.
Mr. Reed suggests that the pre-announcement was not a "reasonable good faith statement" because internal emails showed concern that the development team was "overworked" and that it was too early for the announcement. (Reed Dec. 127, citing Internal IBM email, 3/30/98, Ex. L to Reed Dec.) The emails to which Reed refers were written five weeks before the announcement was made. They discuss what needed to happen within IBM, and the development team, to announce the integrated server and go forward with the statement of direction successfully. While one email indicates that the "team" is being "driven hard" to "get to announce readiness," there is absolutely no evidence in any of the emails of a bad faith decision to announce a product that IBM did not intend to offer. And, as noted above, IBM released the product.
CDS does not submit any evidence to support its nefarious interpretation of IBM's decision to stop offering the S/390 Integrated Server in February 2000. None of the documents in evidence that discuss the development and introduction of the Integrated Server suggest that IBM planned to "drop" the product once CDS had left the market. But the record evidence does suggest a reason why both the IBM and the CDS products failed. Ron Hankison explains that the CDS S/390 products were withdrawn from the market due to "declining sales and dwindling cash balances." (Hankinson Dec, 1113.) While Hankinson attributes CDS's lack of success in the S/390 market to the anticompetitive conduct of IBM, the record evidence shows that sales of all S/390 products were decreasing at this time and that customers were increasingly turning to non-S/390 platform computers and non-S/390 compatible software applications. See Section III B & D, supra. The rational inference to be drawn is that as the demand for S/390 products declined, both IBM and CDS experienced decreased sales. In CDS's case, this resulted from a withdrawal from the market, and for IBM, it lead to a reduction in their S/390 product offerings. CDS's contrary assertion that the removal of the IBM offering from the market was anticompetitive is based solely on the conclusory allegations of its own witnesses, and is not supported by any record evidence.
CDS fails to provide any evidence which would raise a genuine issue of fact as to *84 whether the May 1998 IBM announcement was anticompetitive.
* * * * * *
No reasonable trier of fact could conclude that CDS has established the essential elements of its monopolization or attempted monopolization claims. IBM is entitled to summary judgment on Count V.
VII. IBM IS ENTITLED TO SUMMARY JUDGMENT ON CDS's NEW YORK GENERAL BUSINESS LAW SECTION 340 CLAIM (COUNT VI).
Section 340 of the New York General Business Law, known as the Donnelly Act, is modeled after the Sherman Act and should be construed in light of federal precedent. See X.L.O. Concrete Corp. v. Rivergate Corp., 83 N.Y.2d 513, 518, 611 N.Y.S.2d 786, 789, 634 N.E.2d 158 (1994). For the same reasons that CDS has not raised critical issues of fact on its federal Sherman Act claim, CDS cannot establish a violation of the Donnelly Act, and IBM is entitled to summary judgment on Count VI. See, e.g., Empire Volkswagen, Inc. v. World-Wide Volkswagen Corp., 814 F.2d 90, 98 n. 4 (2d Cir. 1987).
VIII. IBM IS NOT ENTITLED TO SUMMARY JUDGMENT ON CDS's CLAIM FOR TORTIOUS INTERFERENCE WITH PROSPECTIVE BUSINESS RELATIONS (COUNT VII).
To establish a claim for tortious interference with prospective business relations under New York law, CDS must prove: (1) business relations with a third party; (2) IBM's interference with those business relations; (3) that IBM acted with the sole purpose of harming CDS or used dishonest, unfair or improper means; and (4) injury to the business relationship. See Nadel v. Play-by-Play Toys & Novelties, Inc., 208 F.3d 368, 382 (2d Cir.2000).
Along with its Opposition to Summary Judgment, CDS produced the Declaration of Stan King. ("King Dec") Mr. King, President of ITC, states that he was threatened by an IBM employee. IBM concedes in its Reply Memorandum that the King Declaration raises a genuine issue of material fact as to whether IBM interfered with CDS's relation with ITC. While IBM makes a cogent argument that this claim should be dismissed insofar as it deals with Intelliware, I decline to do so on motion. While CDS has not offered similar direct evidence of covert threats by IBM against Intelliware, a trier of fact confronted with the evidence about ITC could view IBM's contacts with Intelliware in a different light. Therefore, the claim of tortious interference will go to trial as to both customers. Because there is diversity between the parties, the Court retains jurisdiction over this matter under 28 U.S.C. § 1332(a).
IX. IBM IS ENTITLED TO SUMMARY JUDGMENT ON ITS CLAIM FOR BREACH OF THE ORIGINAL PROVIDER AGREEMENT.
To prevail on its claims for breach of the OPA under New York Law, IBM must prove: (1) a valid contract; (2) performance of the contract by IBM; (3) breach of the contract by CDS; and (4) damages. See Terwilliger v. Terwilliger, 206 F.3d 240, 245-46 (2d Cir.2000).
IBM argues that CDS has admitted all the elements of IBM's claim: the OPA constituted a valid and binding contract (CDS's Answer to IBM's Counterclaims f 33); IBM has fully performed its obligations under the OPA (CDS's Answer to IBM's Counterclaims 1(40) ("CDS admits that IBM created and wrote IBM's copyrighted code in the Eligible Programs"); and CDS never paid IBM $155,000 in principal *85 due and owing under the OPA (CDS's Response to IBM's First Set of RFAs, No. 39.). As a result of CDS's failure to make these payments, IBM claims that it has suffered damages in the principal amount of $155,000, plus interest.
CDS does not dispute the factual basis for IBM's claim, and instead pleads affirmative defenses based on IBM's alleged misconduct: fraud, constructive fraud, acquiescence, inequitable conduct, unclean hands, breach of covenant of good faith and fair dealing, estoppel, and laches. (CDS's Reply to the Amended Answer and Counterclaims of IBM, ¶ s 48-56.) Conflating all these different theories, it asks the court to exercise its equitable power and bar IBM from recovering against CDS because the antitrust violations alleged by CDS "demonstrate that IBM has breached the law and its contract with CDS." (Plaintiffs Opp., p. 24.)
Unfortunately for CDS, I have dismissed its antitrust claims.[12] The tortious interference claim that remains bears no relation to the OPA between IBM and CDS. Accordingly, there are no genuine issues of material fact to be tried, and IBM is entitled to summary judgment for liability on its counter-claim.
As this case will be going to trial on the tortious interference claims, I will hear evidence regarding the appropriate interest calculations for this claim at that time.
CONCLUSION
This constitutes the decision and order of the Court.
NOTES
[1] CDS referred to their "second" opportunity to compete with IBM, as these three individuals had previously founded another computer company, Amdahl Corp.
[2] The term "S/390 operating system software" is used to include the OS/390 system as well as compatible predecessor system software, including the MVS, VM/ESA, and VSE/ ESA operating system software.
[3] No doubt IBM did not proffer the Richardson and Hummel Declarations (or equivalent information) along with the original motion papers because it did not anticipate CDS's motion. In this Court's experience, it is unprecedented to have reputable counsel (or any counsel, for that matter) challenge the authenticity of deposition transcripts, discovery responses, and documents produced from his client's files.
[4] At the relevant time, Mr. Burke was associated with Cravath Swain and Moore, the law firm representing defendant.
[5] The relevant geographic market is not in dispute. CDS pleads, and IBM agrees, that the relevant geographic market is worldwide. (Plaintiff's Sec. Amd. Cmplt., 1173; Defendant's Mem. in Support of Summary Judgment, p. 4.)
[6] The testimony of both IBM and CDS employees suggests that one factor behind this substantial migration was that computer software, not hardware, drove customers' purchase decisions. (Holstom Dep. 79: 21-25, Ex. 11A to Burke Dec; Port Dep. 204:23-205:8, Ex. 17C to Burke Dec.) Since 1997, more applications were being written for UNIX and Windows NT than for S/390. (CDS's Response to IBM's Second Set of RFAs, No. 19, Ex. 1 to Burke Dec.)
[7] "A tying arrangement is `an agreement by a party to sell one product but only on the condition that the buyer also purchases a different (or tied) product, or at least agrees that he will not purchase that product from any other supplier.'" Kodak, 504 U.S. at 461, 112 S.Ct. 2072 (quoting Northern Pac. Ry. Co. v. United States, 356 U.S. 1, 5-6, 78 S.Ct. 514, 2 L.Ed.2d 545 (1958)) A tying arrangement violates Section 1 of the Sherman Act "if the seller has `appreciable economic power' in the tying product market and if the arrangement affects a substantial volume of commerce in the tied market." Kodak, 504 U.S. at 462, 112 S.Ct. 2072 (quoting Fortner Enter. Inc. v. United States Steel Corp., 394 U.S. 495, 503, 89 S.Ct. 1252, 22 L.Ed.2d 495 (1969)).
[8] CDS argues that IBM "acknowledge^]" that IBM customers are locked-in, quoting a document where an IBM employee states. "... we do not need this upstart company [CDS] wedging its way into a marketplace we should have locked-in the low end arena." (Plaintiff's Opp., p. 2, quoting Ex. 12 to Williams Dec.) First, the statement that something "should" be done implies that it has not yet been done. More important, a statement by an employee regarding "locking-in" business or customers is not an admission by the company of the existence of a "lock-in" effect for antitrust purposes.
[9] The record evidence does not clearly establish that there is a definable "low end" market within the computer systems market. There are some IBM documents that discuss the "low end" of the market (usually defining the low end in terms of processing power). This distinction may be one that IBM makes for marketing and strategic planning purposes. Or it may indicate that there is a distinct product market at the lower cost/lower processing power end of the market. However, there is no concrete data that suggests that the relevant product market must be subdivided in such a way, and it is unnecessary to hypothesize about whether such line-drawing is appropriate. The evidence presented shows that IBM had a relatively small, and declining, market share of both the computing system market as a whole and at the "low end" specifically.
[10] IBM's expert, Carl Shapiro, defined the "low end" by price bracket, rather than by processing power, and analyzes the data within that framework. The data in Tables 3 and 4 is for all computers in the $250,000 or less price bracket (defined by Shapiro as the Entry and Midrange Systems), and includes both IBM and CDS Systems.
[11] As noted above, this Court previously dismissed Count I of CDS's complaint, which alleged a Sherman Act § 1 violation for per se unreasonable restraint of trade.
[12] CDS submits no evidence that IBM breached its contract with CDS. CDS originally asserted a breach of contract claim against IBM, but chose not to replead it after Judge Stanton dismissed it.
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01-03-2023
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10-30-2013
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https://www.courtlistener.com/api/rest/v3/opinions/1116679/
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326 U.S. 60 (1945)
INTERSTATE COMMERCE COMMISSION ET AL.
v.
PARKER, DOING BUSINESS AS PARKER MOTOR FREIGHT, ET AL.
No. 507.
Supreme Court of United States.
Argued March 28, 1945.
Decided June 18, 1945.
APPEAL FROM THE DISTRICT COURT OF THE UNITED STATES FOR THE SOUTHERN DISTRICT OF INDIANA.[*]*61 Mr. Daniel H. Kunkel, with whom Mr. Daniel W. Knowlton was on the brief, for the Interstate Commerce Commission; and Mr. John Dickinson, with whom Messrs. Harry E. Yockey, H.Z. Maxwell, John B. Prizer, Sterling G. McNees and R. Aubrey Bogley were on the brief, for the Willett Company et al., appellants in No. 507.
Mr. Kit F. Clardy, with whom Mr. Howell Ellis was on the brief, for Parker et al.; Mr. Fred I. King, with whom *62 Mr. Clair McTurnan was on the brief, for the Norwalk Truck Line Co.; and Mr. Claude H. Anderson entered an appearance for Days Transfer, Inc. et al., appellees.
MR. JUSTICE REED delivered the opinion of the Court.
These appeals bring here for review a final judgment of the Special District Court which enjoined the enforcement of an order of the Interstate Commerce Commission. The proceedings below and the appeals here were brought under 28 U.S.C. § 41 (28), §§ 43-48 and § 345. The report of the Commission appears under the title Willett Co. of Ind., Inc., Extension Fort Wayne-Mackinaw City, 42 M.C.C. 721. The district court did not file an opinion.
The applicant, the Willett Company, is a wholly owned, common carrier by motor, subsidiary of the Pennsylvania Railroad Company. Previous to this application it held motor carrier operating rights for some twenty-five routes which paralleled lines of the Pennsylvania Railroad at other points than those covered by this application. Fort Wayne was included. Willett sought to secure from the Commission in this case certificates of convenience and necessity for seven additional routes extending along the lines of the Pennsylvania Railroad between Fort Wayne, Indiana, and Mackinaw City, Michigan.
The applications were granted after findings that Willett would render service auxiliary to and supplemental of the Pennsylvania's service in the transportation of less-than-carload freight. The service is to be rendered on railroad billings and is to employ railroad fixed and clerical facilities. The Commission found that Willett's service would be coordinated with the rail service and under railroad supervision. 42 M.C.C. 725; 21 M.C.C. at 407. It also found that the present and future public convenience and necessity required those motor carrier operations.
In accordance with the policy of the Commission in granting certificates to railroad motor carrier affiliates *63 to improve the service of the railroad, the Commission limited the carrier to service which is auxiliary to or supplemental of the rail service of the Pennsylvania. It forbade service to "any point not a station on a rail line of the railroad," and took steps to keep the Commission informed of the contractual arrangements between Willett and the Pennsylvania.
While the routes paralleled the lines of the Pennsylvania in northern Indiana and the southern peninsula of Michigan, the authorization to Willett forbade the transportation by applicant as a common carrier of any shipments from Fort Wayne, Indiana, to Grand Rapids, Michigan, or through or to or from more than one of said points. The purpose of this limitation was to restrict Willett to transportation truly supplemental or auxiliary to the rail traffic. The two cities are break-bulk or key points. Less-than-carload freight comes to or leaves them in carload lots. When a mixed carload reaches one of these key points, the contents are distributed to the smaller, intermediate points of destination as way-freight by "peddler" cars. The Willett Company seeks to take over this "peddler" work and not to do over-the-road trucking. Such motor-rail coordination has proven successful in improving service and reducing carrier costs.
As a further assurance that Willett might not inadvertently have received privileges beyond the Commission's intention to grant, a right was reserved by the Commission to impose such further specific conditions as it might find necessary in the future to restrict Willett's operation "to service which is auxiliary to, or supplemental of, rail service."
The operation of the order of the Commission was enjoined by the district court because there was no substantial evidence to support the order of the Commission that public convenience and necessity required the issuance of a certificate to Willett. The district court said in the findings *64 of fact that there was no proof that the present highway, common motor carrier transportation service by certificated carriers was or would be inadequate to serve the public need. The appellants, of course, contest here the soundness of the district court judgment.
The Interstate Commerce Commission insists that its order authorizing the issuance to Willett of the certificates of convenience and necessity for the specified routes is valid. It bases its contention on the statutory provisions which authorize the Commission to act in regulation of motor carriers and asserts its compliance with them. Under the Interstate Commerce Act, part II, § 206 (a), 49 Stat. 551, no motor vehicle subject to the act may operate on the highways without a certificate of public convenience and necessity. Section 207 (a) provides for issuance of the certificate on application, if the proposed service "is or will be required by the present or future public convenience and necessity." No other provisions are here involved. The entire subsection appears below.[1] A finding of public convenience and necessity was made, 42 M.C.C. at 726, but that ultimate finding must have been based on the proper statutory criteria and must have had the necessary factual findings to support it.
*65 Public convenience and necessity is not defined by the statute. The nouns in the phrase possess connotations which have evolved from the half-century experience of government in the regulation of transportation. When Congress in 1935 amended the Interstate Commerce Act by adding the Motor Carrier Act, it chose the same words to state the condition for new motor lines which had been employed for similar purposes for railroads in the same act since the Transportation Act of 1920, § 402 (18) and (20), 41 Stat. 477. Such use indicated a continuation of the administrative and judicial interpretation of the language. Cf. Case v. Los Angeles Lumber Co., 308 U.S. 106, 115. The Commission had assumed, as its duty under these earlier subsections, the finding of facts and the exercise of its judgment to determine public convenience and necessity. This Court approved this construction. Chesapeake & Ohio R. Co. v. United States, 283 U.S. 35, 42. Cf. Gray v. Powell, 314 U.S. 402, 411-12. The purpose of Congress was to leave to the Commission authoritatively to decide whether additional motor service would serve public convenience and necessity. Cf. Powell v. United States, 300 U.S. 276, 287. This, of course, gives administrative discretion to the Commission, cf. McLean Trucking Co. v. United States, 321 U.S. 67, 87-88, to draw its conclusion from the infinite variety of circumstances which may occur in specific instances. The disputants, here, do not clash over the power of the Commission to determine the need for the new service or that it will serve the public convenience and necessity. The evidence is ample and uncontradicted that delivery by motor of less-than-carload freight to way stations is a more adequate, efficient and economical method for railroads than by "peddler" car. They join issue on the Commission's determination as to the carrier which will render that service. Shall it be by the railroad through the use of its trucking subsidiary or by the existing common carriers by motor?
*66 The National Transportation Policy has recently been authoritatively summarized by Congress. That declaration requires administration so as to preserve the inherent advantages of each method of transportation and to promote "safe, adequate, economical, and efficient service."[2] Such broad generalizations, while well expressing the Congressional purpose, must frequently produce overlapping aims. In such situations, the solution lies in the balancing by the Commission of the public interests in the different types of carriers with due regard to the declared purposes of Congress. Cf. I.C.C. v. Inland Waterways Corp., 319 U.S. 671, 691; United States v. Pennsylvania R. Co., 323 U.S. 612, 615.
When Congress directed that the act should be administered to preserve the inherent advantages of each mode of transportation, it is abundantly clear that it was not intended to bar railroads from the operation of off-the-rail motor vehicles. In 1938 when committee hearings were being held to consider amendments to the Motor Carrier Act, 1935, Mr. Eastman explained the difference in opinion *67 as to whether or not railroads should acquire motor carriers.[3] Section 213 (a) of the 1935 act specifically regulated acquisition of motor carriers by railroads. Provision for such acquisitions appear now in § 5 of the Interstate Commerce Act, 54 Stat. 905. See McLean Trucking Co. v. United States, supra. Section 202 (c) (1) of the 1940 Interstate Commerce Act, part II, as amended, withdraws railroad operation of motor carriers in terminal areas from the scope of motor carrier regulation and leaves such operations under part I.[4] Railroads may, therefore, *68 in appropriate places operate trucks. However, since the preservation of the inherent advantages of motor carriers is of equal importance with efficiency under the national transportation policy, the Commission must weigh the needs of the railroad against disadvantages to the motor carriers to find the balance of public convenience and necessity in determining whether to grant a railroad application for motor operation where these certificates are required. Cf. Texas v. United States, 292 U.S. 522, 530.
This the Commission did in its findings and conclusion. It said:
"The motor-carrier service proposed by applicant, operated in close coordination with the railroad's service, will effectuate a reduction in cost, and will result in an increase in efficiency in the transportation over the routes herein considered, which will inure to the benefit of the general public. Furthermore, it does not appear that the restricted service would be directly competitive or unduly prejudicial to the operations of any other motor carrier. . . ." 42 M.C.C. at 726.
In support of this statement the evidence showed that Willett served, similarly and satisfactorily, other localities along the Pennsylvania lines in Ohio, Indiana and Illinois. The coordination of Willett's line-haul method of operations with the rail service has been explained. The existing schedules of protestants do not fit into the needs of the projected service. Common management of railroad *69 and trucks gave promise of better cooperation than would be obtained by arm's-length contracts or agreements. While the evidence shows that there were operating truck lines in the area which individually could serve all the waystations by securing extensions to their present routes, it also shows that no motor carrier is now in a position to render this complete service. Cf. Kansas City Southern Transport Co., Common Carrier Application, 10 M.C.C. 221, 232. The Commission on this evidence had a basis to conclude that a railroad subsidiary offered the most satisfactory facilities for making less-than-carload deliveries to way-stations.
The contention of appellees, protestant motor carriers, is that since no evidence was offered as to the inadequacy of the presently duly certificated motor carriers to serve the railroad's need, there was a failure of proof as to convenience of and necessity for a new motor truck operation in the territory. Public convenience and necessity should be interpreted so as to secure for the Nation the broad aims of the Interstate Commerce Act of 1940. Cf. New England Divisions Case, 261 U.S. 184, 189; I.C.C. v. Railway Labor Assn., 315 U.S. 373, 376-77; United States v. Lowden, 308 U.S. 225, 230; Texas & N.O.R. Co. v. Northside Belt R. Co., 276 U.S. 475, 479. In protestants' view a certificate of convenience and necessity should not be granted to railroads for motor truck operation when existing motor carriers are capable of rendering the same service. Appellants take the position that this precise issue need not be decided in this case. They look upon the application as asking for authority to improve "an existing service." We think that it was for a motor service to improve an existing rail service. Consequently, the issuance of the certificate is subject to all the requirements of any other application for a certificate for operation of motor lines. Since, however, on adequate evidence the Commission found that the motor service sought was of a different character from the existing motor service and not directly *70 competitive or unduly prejudicial to the already certificated motor carriers, 42 M.C.C. 725-26, we hold that the Commission had statutory authority and administrative discretion to order the certificate to issue. The public is entitled to the benefits of improved transportation. Where that improvement depends in the Commission's judgment upon a unified and limited rail-truck operation which is found not "unduly prejudicial" to motor carrier operations, the Commission may authorize the certificate even though the existing carriers might arrange to furnish successfully the projected service.
Certificates of the general character of the one proposed by the Commission for Willett have been granted heretofore.[5] The motor service was not the normal over-the-road type but restricted to services auxiliary or supplemental to the rail service. In order to restrict motor carriers which were operated by railroads to this coordinated service, the Commission customarily inserted a provision in the order granting the application that the motor shipments must have prior or subsequent movement by rail. E.g. Kansas City Southern Transport Co., Common Carrier Application, 10 M.C.C. 221, 240. The rail carriers pointed out, however, that this restriction interfered with the efficiency of their operations, since commodities might be offered them at one way-station for transportation to another way-station within ordinary motoring distance. In such a case a way-freight train would be required. It was to *71 meet this situation that the key-point or break-bulk rule, which is employed here, was developed. Kansas City Southern Transport Co., Common Carrier Application, 28 M.C.C. 5, 9, 11, 22 (par. 3), 25 (App. B).
This key-point requirement is one factor of differentiation between this certificate and the normal over-the-road motor certificate of convenience and necessity. Other differentiations are found in the limitation of service to rail station points and the condition that the Commission reserved the right to impose such other requirements as might be found necessary to restrict the rail subsidiary to coordinated rail service instead of permitting general competition with motor carriers in over-the-road service.
It is, of course, obvious that opportunity exists for limited encroachment upon the over-the-road business of the existing motor carriers. A shipper from one way-station to another station on the same railroad within the permitted key-point limitation may use the railroad motor carrier instead of the motor carrier. Free pickup and delivery service may extend the competition to the limits of the territorial boundaries of the railroad terminal areas and give a further advantage to the railroad where the motor carrier does not furnish the same service.[6] If the *72 Commission later determines that the balance of public convenience and necessity shifts through competition or otherwise, so that injury to the public from impairment of the inherent advantages of motor transportation exceeds the advantage to the public of efficient rail transportation, the Commission may correct the tendency by restoration of the rail movement requirement or otherwise.
Administrative discretion rests with the Commission to further improvements in transportation. The Interstate Commerce Act contains no provision by which the Commission may compel non-rail motor carriers to coordinate their road service with rail service or may compel rail carriers to coordinate their service with motor carriers.[7] When in railroad applications for coordinated motor service the Commission finds public convenience and necessity for such motor service on evidence of transportation advantages to shippers and economy to the rail carriers, cf. Texas v. United States, 292 U.S. 522, 530, it is in a position to determine by its administrative discretion whether the *73 projected service may be better rendered by the railroad or existing motor carriers. In the absence of power to compel coordination between the modes of transportation and in the presence of the probable gains in operative efficiency from unified management, we think the Commission, in view of the limitations on the railroad's motor service, is entitled to conclude that the public will be better served by the rail operation than by use of the available motor carrier facilities. The alternative to the existence of this discretion is that the language of the Interstate Commerce Act, part II, forbids the granting to railroads of a certificate of convenience and necessity for the operation of motor trucks, under specially limited certificates, when there are certificated motor carriers, independent of railroad authority or supervision, with whom arrangements for the service might be made by the rail carriers. There is no such prohibition in terms. Any such implication is negated by the discretion to grant certificates conferred on the Commission by the Act.
Protestants, the appellee motor carriers, point out that under this interpretation in every case of an application by a rail carrier or its wholly owned subsidiary, for a certificate of convenience and necessity to operate a motor line to render service at way-stations, the Commission will have power, under facts and with limitations in the certificate, previously described, to grant the certificate. This is true. It must be expected, however, that the Commission will be as alert to perform its duty in protecting the public in the maintenance of an efficient motor transportation system as it is in protecting that same public in the successful operation of its rail system. The Commission is trusted by Congress to guard against the danger of the development of a transportation monopoly. 49 U.S.C. § 5 (2) (a) and (b). It has the duty to preserve the inherent advantages of each mode of transportation.
Appellees raise here an objection to the failure of the Commission to reopen the case to hear evidence on the *74 bias of the railroad witnesses. No valid reason for failure to bring out the alleged bias at the trial is suggested.
We pass also without further discussion the appellees' complaint of material error in the refusal to produce the contract between the Pennsylvania and Willett at the hearing. It does not seem material in view of our conclusions. The Joint Board directed that the contract be filed as a "late exhibit."
Reversed.
MR. JUSTICE DOUGLAS, dissenting.
I
Sec. 207 (a) of the Interstate Commerce Act authorizes the issuance of a certificate to a common carrier by motor vehicle if the proposed service "is or will be required by the present or future public convenience and necessity." But the present decision allows the Commission to construe the statute as if "railroad convenience and necessity" rather than "public convenience and necessity" were the standard.
I can find in the Act no indication whatsoever that railroad applicants for a motor vehicle certificate are to be considered any more favorably than any other type of applicant. Yet it is plain that this decision permits just that. For if any applicant other than a railroad affiliate were before the Commission with an application for a certificate to serve this precise territory, it would have to show that existing transportation facilities were inadequate to serve the needs of the public efficiently.[1] No such showing has been made here. None has been attempted.
*75 That necessity is sought to be avoided by holding that the motor carrier service to be rendered is "auxiliary to or supplemental of rail service." If, as the Commission at first required (Kansas City Southern Transport Co., 10 M.C.C. 221), this motor carrier service was restricted to goods which had a prior or subsequent rail haul, the service might properly be designated as an auxiliary or supplemental one. But the Commission changed its position and withdrew that condition. Kansas City Southern Transport Co., 28 M.C.C. 5. The key-point condition was substituted. Between those points the railroad will operate like any motor carrier. The service which it seeks to render is not a combined rail-and-truck service. As the Commission states in its report in the present case, "The railroad, through its subsidiary, merely seeks the substitution of a more efficient for a less efficient means of service." This "substituted" service differs from the adequate independent motor carrier service already existing only in its being under railroad control. In that respect and in that respect alone is the service of a new and different character.
The Commission justifies that "substitution" of service on the grounds of the operating convenience of the railroad and a reduction in its costs. That is a standard of "railroad" not "public" convenience. Would it be thought for a moment that motor carriers could obtain authority to build a new competing railroad by any such standard of "motor carrier" convenience?
Whether it is wise policy for the railroads to enter and dominate this field is neither for us nor the Commission to decide. If the railroads are to be given this preferred treatment when they seek to substitute motor carrier service for rail service, the authority should come from Congress, not this Court. Meanwhile, we should be alert to see to it that administrative discretion does not become the vehicle for reshaping the laws which Congress writes.
*76 II
If the railroad company was acquiring an existing motor carrier to render this service, the Commission could approve the acquisition only if it found, among other things, that the acquisition would "not unduly restrain competition." 49 U.S.C. § 5 (2) (b). See McLean Trucking Co. v. United States, 321 U.S. 67. This provision was inserted so as to protect the motor carrier industry from the domination of other types of carriers which "might use the control as a means to strangle, curtail, or hinder progress in highway transportation for the benefit of the other competing transportation." 79 Cong. Rec. 12206.
The same standard should be applied whether the railroads enter the motor carrier field by acquisition of existing facilities or by establishment of their own motor carrier affiliates. The potentialities for abuse may be as great in one case as in the other. Railroads, like other business enterprises, are subject to the anti-trust laws except as Congress has created exemptions for them. Georgia v. Pennsylvania R. Co., 324 U.S. 439. And the anti-trust policy is one of the components of the public interest which the Commission is supposed to protect in the transportation field. McLean Trucking Co. v. United States, supra.
The preservation of healthy competitive conditions must therefore be an ingredient of "public convenience and necessity" which the Commission is under the duty to determine in issuing certificates under § 207 (a). Certainly the effect on competition looms large when one type of carrier seeks to enter another field of transportation. The Commission paid lip-service to that policy when it said in the present case that the restricted service to be rendered by this railroad affiliate would not appear to be "directly competitive or unduly prejudicial to the operations of any other motor carrier." But where is the evidence to support that finding? I do not find it. It is suggested *77 that there can be no competition because the railroad now has the business. But the railroad is not restricted to business which it now has. Between the key-points it is entitled to any and all business which it can get. Every future movement of freight will be the subject of competition. If, as assumed, the present railroad service is poor as compared with the proposed new motor carrier service, a new and important competitive element will certainly be introduced. The railroad wants this broad certificate so it can better compete with existing motor carriers. If the railroad really wants a purely auxiliary service, let the certificate be limited to commodities which have a prior or subsequent rail haul. But it is not so conditioned. The railroad is entering the motor carrier field and rendering a pure motor carrier service. If the policy of Congress is to be honored, there must be a finding supported by evidence that competition will not be unduly restrained. On this record no such finding has been or can be made.
MR. JUSTICE BLACK and MR. JUSTICE RUTLEDGE join in this dissent.
NOTES
[*] Together with No. 508, United States v. Parker, doing business as Parker Motor Freight, et al., also on appeal from the District Court of the United States for the Southern District of Indiana.
[1] 49 Stat. 551-52:
"Sec. 207. (a) Subject to section 210, a certificate shall be issued to any qualified applicant therefor, authorizing the whole or any part of the operations covered by the application, if it is found that the applicant is fit, willing, and able properly to perform the service proposed and to conform to the provisions of this part and the requirements, rules, and regulations of the Commission thereunder, and that the proposed service, to the extent to be authorized by the certificate, is or will be required by the present or future public convenience and necessity; otherwise such application shall be denied: Provided, however, That no such certificate shall be issued to any common carrier of passengers by motor vehicle for operations over other than a regular route or routes, and between fixed termini, except as such carriers may be authorized to engage in special or charter operations."
[2] 54 Stat. 899:
"It is hereby declared to be the national transportation policy of the Congress to provide for fair and impartial regulation of all modes of transportation subject to the provisions of this Act, so administered as to recognize and preserve the inherent advantages of each; to promote safe, adequate, economical, and efficient service and foster sound economic conditions in transportation and among the several carriers; to encourage the establishment and maintenance of reasonable charges for transportation services, without unjust discriminations, undue preferences or advantages, or unfair or destructive competitive practices; to cooperate with the several States and the duly authorized officials thereof; and to encourage fair wages and equitable working conditions; all to the end of developing, coordinating, and preserving a national transportation system by water, highway, and rail, as well as other means, adequate to meet the needs of the commerce of the United States, of the Postal Service, and of the national defense. All of the provisions of this Act shall be administered and enforced with a view to carrying out the above declaration of policy."
[3] Hearings before a subcommittee of the Committee on Interstate Commerce, United States Senate, 75th Cong., 3d Sess., on S. 3606, p. 23:
"The reason for that proviso was that at the time when this act was under consideration by your committee, there was a feeling on the part of many that railroads, for example, ought not be permitted to acquire motor carriers at all. It was pointed out, in opposition to that view, that there were many cases where railroads could use motor vehicles to great advantage in their operations, in substitution for rail service, as many of them are now doing. Many railroad men, for example, feel that the operation of way trains has become obsolete; that the motor vehicle can handle such traffic between small stations much more economically and conveniently than can be done by a way train; and the motor vehicles are being used in that way by many railroads. The same is true of many terminal operations. The motor vehicle is a much more flexible unit than a locomotive switching cars, and it can be used to great advantage and with great economy in many railroad operations.
"For that reason, something of a compromise was reached between those two opposing views, and it was provided that a railroad could acquire a motor carrier if it could make special proof that the transaction was not only consistent with the public interest but would promote the public interest and would also promote the public interest in a special way, namely, by enabling such carrier other than a motor carrier to use service by motor vehicle to public advantage in its operations. And a further finding was required, that the acquisition will not unduly restrain competition."
[4] 56 Stat. 300, § 2:
"(c) Notwithstanding any provision of this section or of section 203, the provisions of this part . . . shall not apply
"(1) to transportation by motor vehicle by a carrier by railroad subject to part I, or by a water carrier subject to part III, or by a freight forwarder subject to part IV, incidental to transportation or service subject to such parts, in the performance within terminal areas of transfer, collection, or delivery services; but such transportation shall be considered to be and shall be regulated as transportation subject to part I when performed by such carrier by railroad, as transportation subject to part III when performed by such water carrier, and as transportation or service subject to part IV when performed by such freight forwarder . . ."
See Conference Report, H. Rep. No. 2832, 76th Cong., 3d Sess., § 17 (B), p. 74.
[5] Pennsylvania Truck Lines Control Barker, 1 M.C.C. 101, 113; 5 M.C.C. 9. Similar finding was made in Illinois Central R. Co., Common Carrier Application, 12 M.C.C. 485; Gulf, M. & N.R. Co., Common Carrier Application, 18 M.C.C. 721; Missouri Pacific R. Co., Extension of Operations Illinois, 19 M.C.C. 605; Willett Co. of Ind., Extension Ill., Ind. and Ky., 21 M.C.C. 405; Pacific Motor Trucking Co., Common Carrier Application, 34 M.C.C. 249, 322, par. 4.
The Commission's brief, Appendix B, lists 94 opinions dealing with truck movement of rail freight.
[6] I.C.C. Local Freight Tariff, Rules, Charges and Allowances for the Pick-Up and Delivery Service on Less Than Carload Freight, Issued January 2, 1942, effective February 6, 1942, p. 9:
"Item No. 30. Territorial Boundaries. (a) Except as otherwise specifically indicated in Section 2, Pick-up or Delivery service will be confined within the corporate limits of cities or towns; at points not having corporate limits, within a radius of one mile of carrier's freight station."
See also Pick-up and Delivery in Official Territory, 218 I.C.C. 441, 445; dissent, 483-84; Pick-up of Livestock in Illinois, Iowa and Wisconsin, 238 I.C.C. 671; 248 I.C.C. 385, 391, 397; 251 I.C.C. 549; Morgain Forwarding Co., Pick-up and Storage, 258 I.C.C. 547, 771; Empire Carpet Corp. v. Boston & M.R. Co., 258 I.C.C. 697. Also see, § 202 (c) of part II, Interstate Commerce Act, 54 Stat. 920, 56 Stat. 300.
[7] 10 M.C.C. 235-36:
"We are without jurisdiction to compel coordinated service between carriers by rail and carriers by motor vehicle. It could only be accomplished through the medium of through routes and joint rates and we have no power to require their establishment. It follows that any such plan must be dependent on voluntary cooperation. While protestants say that they are willing to entertain proposals, they have not developed a plan nor do they suggest what general form it might take.
.....
"Upon the evidence, therefore, we are persuaded that coordinated service through the voluntary cooperation of all or some of the protesting motor carriers is not here practicable, and that the `useful public purpose' which the proposed new operation will serve cannot `be served as well by existing lines or carriers.' It remains to be determined whether, in accordance with the definition of `public convenience and necessity' in the Pan-American case, [1 M.C.C. 190], `it can be served by applicant with the new operation or service proposed without endangering or impairing the operations of existing carriers contrary to the public interest.'"
[1] Norton, Common Carrier Application, 1 M.C.C. 114; C & D Oil Co., Contract Carrier Application, 1 M.C.C. 329; Carr, Contract Carrier Application, 2 M.C.C. 263, 269; Irven G. Saar, Common Carrier Application, 2 M.C.C. 729; Merrill & Hamel, Common Carrier Application, 8 M.C.C. 115, 117; Boyles & Luten, Common Carrier Application, 8 M.C.C. 593; White Circle Line, Common Carrier Application, 16 M.C.C. 516.
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https://www.courtlistener.com/api/rest/v3/opinions/2473720/
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748 F. Supp. 2d 293 (2010)
SANOFI-AVENTIS, Sanofi-Synthelabo Inc., and Bristol-Myers Squibb Sanofi Pharmaceuticals Holding Partnership, Plaintiff,
v.
APOTEX INC. and Apotex Corp., Defendants.
No. 02 Civ. 2255 (SHS).
United States District Court, S.D. New York.
October 19, 2010.
*294 David Noah Greenwald, Evan R. Chesler, Richard J. Stark, Cravath, Swaine & Moore LLP, Robert Louis Baechtold, William Ericson Solander, John D. Murnane, Fitzpatrick, Cella, Harper & Scinto (NYC), New York, NY, for Plaintiff.
Allan H. Fried, Bruce J. Chasan, Kevin Alan Keeling, Manny D. Pokotilow, Mona Gupta, Robert S. Silver, William Joseph Castillo, William C. Youngblood, Caesar, Rivise, Bernstein, Cohen & Pokotilow, Ltd., James Kozuch, Philadelphia, PA, Jonathan Jay Faust, Katten Muchin Rosenman, LLP (NYC), New York, NY, Robert Burton Breisblatt, Welsh & Katz, Ltd., Chicago, IL, for Defendants.
OPINION & ORDER
SIDNEY H. STEIN, District Judge.
Plaintiffs Sanofi-Aventis, Sanofi-Synthelabo Inc., and Bristol-Myers Squibb Sanofi Pharmaceuticals Holding Partnership (collectively, "Sanofi") seek summary judgment on the issue of damages in this patent dispute concerning the drug Plavix. Because defendants Apotex Inc. and Apotex Corp. (collectively, "Apotex") are liable to Sanofi for fifty percent of a net sales figure that the parties agree is $884,418,724, Sanofi's motion for $442,209,362 in damages is granted. Sanofi is also entitled to interest and costs pursuant to 35 U.S.C. section 284.
I. BACKGROUND
On March 21, 2002, Sanofi filed this patent infringement suit against Apotex. This Court's Opinion dated August 31, 2006 recounted the history of this protracted litigation and granted Sanofi's motion for a preliminary injunction. See Sanofi-Synthelabo v. Apotex Inc., 488 F. Supp. 2d 317 (S.D.N.Y.2006), aff'd, 470 F.3d 1368 (Fed.Cir.2006). The Court assumes familiarity with that Opinion. In 2007, the Court held a five-week bench trial on the merits, after which it found that Sanofi's patent on clopidogrel bisulfate (the chemical name for Plavix)U.S. Patent No. 4,847,265 ("`265 patent")was valid and enforceable, and that Apotex had violated the patent by manufacturing and distributing a generic form of the drug. The Federal Circuit affirmed that determination in December 2008, and the United States Supreme Court denied Apotex's petition for certiorari in November 2009. See Sanofi-Synthelabo *295 v. Apotex Inc., 492 F. Supp. 2d 353 (S.D.N.Y.2007), aff'd, 550 F.3d 1075 (Fed.Cir.2008), cert. denied, ___ U.S. ____, 130 S. Ct. 493, 175 L. Ed. 2d 346 (2009).[1]
The only aspect of this action that remains unresolved is the amount of damages to be awarded plaintiffs. The parties specifically limited the amount of damages awardable in this action in a settlement agreement entered into prior to trial (Settlement Agreement between Sanofi and Apotex dated May 26, 2006 ("Settlement Agreement"), attached to Decl. of David Armillei dated Dec. 18, 2009, Ex. 2.) Sanofi has moved for summary judgment in the amount of $442,209,362, plus prejudgment interestat the average annual prime rate, compounding daily, from August 2006 to the presentas well as the costs of the action and statutory post-judgment interest. Defendants contend that only Apotex Corp.and not Apotex Inc.is liable for damages and that Sanofi is not entitled to any prejudgment interest. Defendants also argue that if the Court does award prejudgment interest, material issues of fact preclude summary judgment as to how it should be calculated.
II. DISCUSSION
A. Legal Standard
Summary judgment is appropriate only if the evidence shows that there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(c); Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S. Ct. 2548, 91 L. Ed. 2d 265 (1986). In determining whether a genuine issue of material fact exists, the Court "is to resolve all ambiguities and draw all permissible factual inferences in favor of the party against whom summary judgment is sought." Patterson v. Cnty. of Oneida, 375 F.3d 206, 219 (2d Cir.2004). Nonetheless, the party opposing summary judgment "may not rely on mere conclusory allegations nor speculation, but instead must offer some hard evidence" in support of its factual assertions. D'Amico v. City of New York, 132 F.3d 145, 149 (2d Cir. 1998).
B. Apotex's Liability
The parties entered into the Settlement Agreement to govern the damages from Apotex's patent infringement. This agreement specifically defines "Apotex" as "Apotex Inc. and Apotex Corp., collectively and individually, and including any entity now or hereafter owned or controlled by any of them." (Settlement Agreement ¶ 1.) Bernard Sherman, CEO of Apotex Inc., signed the agreement explicitly "[f]or Apotex Inc[.] and Apotex Corp." (Id. at 5). Accordingly, Apotex Inc. and Apotex Corp. are jointly and severally liable for damages pursuant to the Settlement Agreement.[2]
C. Damages Amount
Sanofi seeks summary judgment awarding 50% of the agreed upon net sales figure of $884,418,724. The Settlement Agreement provides that:
If the litigation results in a judgment that the '265 patent is not invalid or *296 unenforceable, Sanofi agrees that its actual damages for any past infringement by Apotex, up to the date on which Apotex is enjoined, will be 50% of Apotex's net sales of clopidogrel products if Sanofi has not launched an authorized generic and 40% of Apotex's net sales if Sanofi has launched an authorized generic. Sanofi further agrees that it will not seek increased damages under 35 U.S.C. § 284.
(Settlement Agreement at ¶ 14(ii).) Pursuant to this agreement, Apotex is liable to Sanofi for fifty percent of its net sales resulting from a three-week period in August 2006 during which it flooded the market with its generic product before being preliminarily enjoined from doing so by this Court, which found the `265 patent to be valid and enforceable.[3] (See id.) See also Sanofi-Synthelabo, 488 F.Supp.2d at 321.
The parties have conducted discovery and fully briefed Sanofi's motion for summary judgment on damages. They have agreed that Apotex's net sales for the relevant period were $884,418,724. (Pl.'s Local Civil Rule 56.1 Statement of Undisputed Facts ¶ 1; Def.'s Local Civil Rule 56.1 Statement of Undisputed Facts ¶ 1.) Thus, the underlying damages are 50 percent of that figureor $442,209,362. (See Settlement Agreement at ¶ 14(ii).)
D. Prejudgment Interest
1. Sanofi is Entitled to Prejudgment Interest
The parties dispute whether prejudgment interest applies to this damage award. While the Settlement Agreement sets the measure of damages, it is silent as to prejudgment interest on those damages. (See Settlement Agreement ¶ 14(ii).) The parties' dispute turns on the relationship between 35 U.S.C. sections 271(e) and 284, which govern liability and damages, respectively, in patent infringement actions.
Apotex contends that because Sanofi alleged and proved infringement only under section 271(e)(2), Sanofi is not entitled to recovery under section 284. Section 271(e)(4) states that the remedies a court may order upon a finding of infringement are 1) directing that the effective date of the approval of a drug be not earlier than the expiration date of the infringed patent, 2) an injunction, and 3) "damages or other monetary relief." The statute goes on to state that those three remedies "are the only remedies which may be granted by a court for an act of infringement described in [section 271(e)(2)], except that a court may award attorney fees under section 285." 35 U.S.C. § 271(e)(4). Because section 271(e) does not list prejudgment interest as one of its three exclusive remedies, Apotex argues that prejudgment interest is not authorized by the Patent Act.
It is undisputed that one of the available remedies for patent infringement is "damages or other monetary relief" pursuant to 35 U.S.C. section 271(e)(4)(c). In addition to filing an Abbreviated New Drug Application in violation of section 271(e)(2), Apotex also imported the drug and sold it commercially within the United Statesconduct that makes "damages or other monetary relief" available pursuant to section *297 271(e)(4)(c). Section 284 defines what constitutes "damages" in patent infringement cases. That section provides, in pertinent part, that: "[u]pon finding for the claimant the court shall award the claimant damages adequate to compensate for the infringement, but in no event less than a reasonable royalty for the use made of the invention by the infringer, together with interest and costs as fixed by the court." 35 U.S.C. § 284 (emphasis added). See Gen. Motors Corp. v. Devex Corp., 461 U.S. 648, 657, 103 S. Ct. 2058, 76 L. Ed. 2d 211 (1983) ("[P]rejudgment interest should be awarded under § 284 absent some justification for withholding such an award.")
The court finds no justification to withhold prejudgment interest here. Sanofi has a right to interest and costs pursuant to section 284[4] on the basis of Apotex's violation of section 271(e).[5] While the Settlement Agreement explicitly limits damages, it does not in any way restrict an award of interest on those damages. (See Settlement Agreement ¶ 14(ii).) Damages and interest are distinct categories of recovery. See 35 U.S.C. § 284. Moreover, the fact that the parties agreed on an interest rate for one obligation (see Settlement Agreement ¶ 10), but not for damages, does not vitiate Sanofi's statutory right pursuant to section 284 to prejudgment interest. In the absence of any agreement to the contrary, the general rule awarding interest on damages in patent infringement actions remains unaltered. See 35 U.S.C. § 284; Devex, 461 U.S. at 657, 103 S. Ct. 2058.
Years of litigation have only confirmed Apotex's liability to Sanofi. Apotex has had the use of money Sanofi was entitled to since the patent infringement occurred, and Sanofi deserves complete compensation. Id. at 655, 103 S. Ct. 2058 ("[A]n award of prejudgment interest is necessary to ensure that the patent owner is placed in as good a position as he would have been in had the infringer entered into a reasonable royalty agreement."). Therefore, this Court grants Sanofi prejudgment interest on the $442,209,362 in damages.
2. Calculation of Prejudgment Interest
Sanofi contends that prejudgment interest should be set at the average annual prime rate for each year (or partial year) from August 2006 to present, compounding daily. Apotex, on the other hand, contends that if the Court awards prejudgment interest, further discovery is needed because issues of factsuch as Sanofi's sales reports and whether Sanofi borrowed money at the prime rate during the infringement periodpreclude summary judgment on Sanofi's motion. Apotex suggests that the U.S. Treasury-bill rate may be more appropriate.
A trial court has discretion in setting the amount of prejudgment interest. 35 U.S.C. § 284 (granting "interest and costs as fixed by the court") (emphasis added); see also Uniroyal, Inc. v. Rudkin-Wiley Corp., 939 F.2d 1540, 1545 (Fed. Cir.1991) ("A trial court is afforded wide latitude in the selection of interest rates. . . and may award interest at or above the prime rate."). Awarding interest at the prime rate, compounded quarterly, "better approximates a corporate borrower's costs of funds" than the Treasury-bill rate, which represents the government's borrowing rate. U.S. Philips Corp. v. Iwasaki *298 Elec. Co., Ltd., 607 F. Supp. 2d 470, 483 (S.D.N.Y.2009); see also NTP, Inc. v. Research in Motion, Ltd., 270 F. Supp. 2d 751, 763 (E.D.Va.2003) ("The prime rate, compounded quarterly, is a conservative, middle-of-the-road approach that takes into account normal market fluctuations."); John M. Skenyon, Christopher S. Marchese, John Land, Patent Damages Law & Prac. § 4:6 (Aug.2010) ("The prime rate is the most common candidate for an appropriate interest rate.") Although Sanofi has not provided evidence of the rate at which it borrows money, the Federal Circuit has held that "it is not necessary that a patentee demonstrate that it borrowed at the prime rate in order to be entitled to prejudgment interest at that rate." Uniroyal, Inc., 939 F.2d at 1545. This Court therefore sets prejudgment interest at the average annual prime rate, compounded quarterly.[6]
The parties dispute the point from which prejudgment should start to run. Apotex contends that the interest calculation should depend on when Sanofi would have sold Plavix if Apotex had not entered the market. However, Sanofi is correct that damages in this action are based on Apotex's net sales during a period in August 2006. (See Settlement Agreement ¶ 14(ii).) Because Sanofi's claim for damagesand interest on those damagesaccrued when Apotex made the infringing sales, Apotex must pay prejudgment interest from the date of those sales. Rather than engender another round of disputation in regard to when each sale was made, the Court exercises its discretion to pick the mid-point of the infringing period as the date for the start of prejudgment interest. See 35 U.S.C. § 284 (granting interest as "fixed by the court"). Accordingly, this Court finds as a matter of law that prejudgment interest shall run from August 19, 2006 until the date judgment is entered. See Devex, 461 U.S. at 655-56 & n. 10, 103 S. Ct. 2058.
E. Post-judgment Interest
Post-judgment interest is governed by 28 U.S.C. section 1961. Pursuant to that statute, "[i]nterest shall be allowed on any money judgment in a civil case recovered in a district court." 28 U.S.C. § 1961(a). "Such interest shall be calculated from the date of the entry of the judgment, at a rate equal to the weekly average 1-year constant maturity Treasury yield" and "compounded annually." Id. at § 1961(b). The United States Supreme Court has noted that "the purpose of post-judgment interest is to compensate the successful plaintiff for being deprived of compensation for the loss from the time between the ascertainment of damage and the payment by the defendant." Kaiser Aluminum & Chem. Corp. v. Bonjorno, 494 U.S. 827, 835, 110 S. Ct. 1570, 108 L. Ed. 2d 842 (1990) (citation omitted).
Here, Sanofi's right to damages was established in this Court's June 17, 2007 opinion. Sanofi-Synthelabo, 492 F. Supp. 2d 353 (S.D.N.Y.2007). However, those damages were "to be set in an amount to be determined through future proceedings." Id. at 397. Because the amount of damages was not set until this Opinion and Order, all interest to date is prejudgment, rather than post-judgment. The relevant "money judgment" for purposes of section 1961 is the judgment that the Clerk of Court will enter pursuant to this Opinion and Order, see Fed.R.Civ.P. 54(a), and post-judgment interest will run from that date until the judgment is paid, see 28 U.S.C. § 1961.
*299 III. CONCLUSION
For the reasons set forth above, Sanofi's motion for summary judgment on its claim for $442,209,362 in damages is granted. Sanofi is also entitled to prejudgment interest on that award at the average annual prime rate, compounded quarterly, from August 19, 2006 until the presentas well as costs and post-judgment interest as set by statute. The Clerk of Court is directed to enter judgment accordingly.
SO ORDERED.
NOTES
[1] In addition, the United States Patent and Trademark Office has certified the patentability of all claims of Sanofi's patent, (see Ex Parte Reexamination Certificate dated Jun. 29, 2010, attached to Robert L. Baechtold letter dated July 1, 2010). It also denied the second reexamination requested by Apotex, (see Order Denying Request for Reexamination, attached to Baechtold letter), and on October 1, 2010, it denied Apotex's petition to review its denial of the second reexamination request, (see Decision on Petition attached to Richard S. Stark letter dated Oct. 14, 2010).
[2] The Court also notes that Apotex waited until now-years after trial and appealto draw a distinction for these purposes between Apotex Inc. and Apotex Corp., and to assert for the first time a defense to Apotex Inc.'s liability for damages.
[3] Apotex contends that it is liable for only forty percent of its net sales because Sanofi "launched an authorized generic." However, the fact that Sanofi lowered its price for branded Plavix in order to compete with generics does not constitute the launch of an authorized generic. As this Court previously ruled, "Sanofi is correct that the acts alleged by Apotex do not fall within the plain and unambiguous meaning of the contract that contemplates the `launch of an authorized generic drug.'" Sanofi-Synthelabo v. Apotex Inc., 2009 WL 5247497, at *2 (S.D.N.Y. Dec. 30, 2009). Thus, Sanofi is entitled to fifty percent of net sales pursuant to paragraph 14(ii) the Settlement Agreement.
[4] Sanofi is also entitled to costs pursuant to Fed.R.Civ.P. 54(d)(1), since it is the "prevailing party." Fed.R.Civ.P. 54(d)(1) ("[C]osts. . . should be allowed to the prevailing party.").
[5] Sanofi argues that Apotex's conduct constituted patent infringement pursuant to section 271(b) as well, which constitutes a separate basis for prejudgment interest pursuant to section 284, but it is unnecessary for the Court to address that issue.
[6] For the annual prime rate, see U.S. FED. RESERVE BD. H.15 SELECTED INTEREST RATES, BANK PRIME LOAN-ANNUAL, available at http://www.federalreserve.gov/releases/h15/data/Annual/H15_PRIME_NA.txt.
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806 F. Supp. 547 (1992)
In re AMERICAN TRAVELLERS CORP. SECURITIES LITIGATION.
This Document Relates to all Actions.
No. 92-1304.
United States District Court, E.D. Pennsylvania.
November 3, 1992.
*548 *549 Daniel E. Bacine, Barrack, Rodos & Bacine, Philadelphia, Pa., for plaintiffs.
Scott L. Vernick, Philadelphia, Pa., for defendant.
*550 MEMORANDUM
BARTLE, District Judge.
Plaintiffs bring this consolidated class action against American Travelers Corporation (ATC) and several of ATC's senior executives. Plaintiffs allege violations of the Securities Exchange Act of 1934 §§ 10(b) and 20(a), as amended by 15 U.S.C. §§ 78j(b) and 78t(a), and of Rule 10b-5 promulgated thereunder by the Securities and Exchange Commission. Plaintiffs also allege common law negligent misrepresentation under Pennsylvania Law. Defendants have moved to dismiss all counts pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure for failure to state a claim upon which relief can be granted, and for failure to plead fraud with particularity pursuant to Rule 9(b) of the Federal Rules of Civil Procedure.
Defendant ATC specializes in the underwriting and sale of supplemental accident and health insurance policies to senior citizens. ATC focuses its business on the segment of the senior citizen population that pays for long-term health care from their own personal resources. The company offers, among other products, long-term nursing home and home health care policies, designed to help policyholders defray the cost of nursing home confinement and home health care treatment. In addition, it offers Medicare Supplement coverage which provides payments to cover "deductibles" and other gaps in Medicare coverage. Prior to 1986, ATC conducted virtually all of its business in Pennsylvania. Since that time, ATC has sought to establish a national presence and is now licensed to conduct business throughout most of the United States. As a result of its rapid expansion, ATC achieved an unbroken string of record revenues and earnings from 1988 through 1990.
Plaintiffs allege that by early 1991, defendants knew that a shift in the company's product mix was occurring, with an increasing percentage of ATC's total annualized premiums generated by ATC's medicare supplement business. The medicare supplement business has a lower profit margin than the Company's long-term care business. The shift would therefore weaken the company's overall profitability. During the first and second quarters of 1991, ATC continued to report significant increases in revenues and net income. However, at the same time, the benefits paid out to policyholders increased dramatically and the company's overall loss ratio increased. During the third quarter of 1991, while ATC again reported an increase in revenues and net income, it described the increase as "lower then anticipated." The company disclosed that the sluggish third quarter was due mainly to costs associated with the medicare supplement business.
On March 3, 1992, ATC announced that its previously reported earnings for the second and third quarters of 1991 were incorrect, and that the company was restating those earnings. The company said it was correcting its second quarter net income by lowering it almost 25% to $2.6 million or $.25 per share, compared to previously reported net income of $3.4 million or $0.30 per share. The company lowered its third quarter net income 20% to $2.9 million or $0.28 per share compared with previously reported net income of $3.6 million or $0.35 per share. Defendants stated that they undertook the restatement to correct errors in recording certain expenses and acquisitions completed during 1991. At the same time, ATC announced its financial results for the fourth quarter of 1991 and for the entire fiscal year. The company reported that although revenue increased by 53.6%, net income declined to $11.3 million or $1.09 per share for fiscal 1991 from $11.5 million or $1.32 per share for fiscal 1990. As a result of these announcements, trading in ATC's common stock, was temporarily halted on the NAS-DAQ/NMS. The company's stock, which had been trading as high as $20 per share during the class period, lost nearly 20% of its then total value and closed that day at $11.25 per share.
Plaintiffs allege that ATC willfully and recklessly concealed the effects of the shift in its product mix from the investing public. According to the complaint, defendants manipulated the company's financial *551 statements to overstate its net income and earnings per share. Furthermore, defendants made numerous statements describing the shift as "an isolated event," and "temporary" when allegedly they knew that the shift was likely to continue. Plaintiffs also contend that defendants made several optimistic financial projections, which had no reasonable basis given the effects of the shift in product mix. Finally, plaintiffs allege that defendants made false and misleading statements about the company's ability to handle its explosive growth.
As stated above, defendants seek to dismiss plaintiffs' complaint under Rule 12(b)(6). When considering such a motion, the court must accept as true all allegations in the complaint, and all reasonable inferences which can be deducted therefrom. Rocks v. City of Philadelphia, 868 F.2d 644, 645 (3d Cir.1989).
Plaintiffs allege accounting fraud in paragraphs 70(a)-(c) and (n) of the complaint. Defendants argue that the inaccurate disclosures concerning ATC's earnings set forth in these paragraphs merely describe errors in calculation, and are therefore non-actionable mismanagement. This contention is without merit. Rule 10b-5[1], promulgated by the Securities and Exchange Commission under § 10(b) of the Exchange Act of 1934, makes it unlawful to misrepresent or omit material information in connection with the purchase or sale of securities. Shapiro v. UJB Financial Corp., 964 F.2d 272 (3d Cir.1992), cert. denied, ___ U.S. ___, 113 S. Ct. 365, 121 L. Ed. 2d 278 (1992). In order to state a claim under § 10(b), and Rule 10b-5, plaintiff must plead a false representation of a material fact, the defendant's knowledge of its falsity, the defendant's intention that the plaintiff rely on it, the plaintiff's reasonable reliance on the representation, and the plaintiff's resulting loss. Id. Claims of mismanagement or breach of fiduciary duty unaccompanied by any "deception, misrepresentation or nondisclosure," do not constitute federal securities fraud. Santa Fe Industries, Inc. v. Green, 430 U.S. 462, 476, 97 S. Ct. 1292, 1302, 51 L. Ed. 2d 480 (1977).
In the instant case, however, plaintiffs allege more than mismanagement. They allege that defendants disseminated false financial information by deliberately or recklessly misstating ACT's earnings for the second and third quarters of 1991. False statements of material fact made knowingly or recklessly are actionable under § 10(b). Thus, plaintiffs' allegations of accounting fraud state a claim upon which relief can be granted.
Plaintiffs' allegations, contained in paragraphs 70(o) and (p) of the complaint, also withstand the motion to dismiss under Rule 12(b)(6). In these paragraphs plaintiffs allege that defendants falsely attributed the increases in benefits to policyholders and in ATC's overall loss ratio to the normal process of expansion. Plaintiffs contend that defendants failed to disclose that an "unhealthy" increase in medicare supplement claims caused a substantial portion of the increases. Here, plaintiffs have alleged a material and deliberate misrepresentation of fact by defendants, which is sufficient to state a claim under § 10(b).
In contrast, the allegations contained in paragraphs 70(m) and 70(r) of the complaint fail to allege any false representation and therefore must be dismissed for failure to state a claim under § 10(b). In paragraph 70(m) of the complaint, plaintiffs challenge ATC's statement concerning its *552 installation of a new computer system designed to help the company manage its continued growth and expansion. According to the complaint, ATC's 1990 annual report stated:
One of our most significant accomplishments is the installation of a state-of the art computer system which encompasses all operating areas within the Company. As this new system gets fully implemented, it will greatly enhance our capacity and streamline our workflow ...
(Complaint at ¶ 31). Plaintiffs do not dispute that ATC purchased a "state of the art" computer system. They claim that contrary to defendants' promises, the system was in fact inadequate to serve the company's needs, and actually contributed to the company's rising costs. The challenged statement, however, indicates that the computer system would provide significant benefits only "when fully implemented." This suggests that ATC expected a transitional period during which problems would be worked out. Plaintiffs do not allege that the system was fully implemented at the time of the alleged problems. However, even if the computer system failed to live up to expectations after being "fully implemented," that would indicate mismanagement at the most. See Santa Fe at 463, 97 S.Ct. at 1296. The complaint does not allege that defendants knew or had any reason to believe, at the time the statement was made, that the computer system would not perform as expected. Plaintiffs have failed to allege either a misstatement of fact or knowledge of its falsity.
Paragraph 70(r), alleges that defendants misled investors into believing that ATC was immune to the effects of the recession. Here also, plaintiffs fail to allege any false or misleading statement which would support a claim under § 10(b). Plaintiffs challenge a letter to shareholders which stated in part:
[ATC has] produced superb financial results during both upswings and downswings in the economic cycle. Our products satisfy a basic security need and it is common for basic needs to receive as much, if not more, focus in bad times as is good.
(Complaint at ¶ 29). Contrary to plaintiffs' assertion, this statement does not promise a recession proof company.[2] Plaintiffs do not dispute the fact that ATC has produced superb financial results in the past, that ATC satisfies a basic security need, or that basic needs receive "as much ... focus in bad times as in good." Rather, plaintiffs attack the statement by alleging that "defendants knew that a lowering of interest rates in a recessionary environment would reduce the spendable income of senior citizens living on investment retirement income which would weaken the demand for the Company's product." (Complaint at ¶ 70(r)). This alleged omission cannot support a § 10(b) claim. The general effect of a recessionary environment on the income of senior citizens, as on the rest of the community, can hardly be considered secret information concealed from investors. The investing public is charged with "knowledge of information of which they reasonably should be aware," Lewis v. Chrysler Corp., 949 F.2d 644, 651 (3d Cir.1991), citing Warner Communications, Inc. v. Murdoch, 581 F. Supp. 1482 (D.Del.1984). Thus, because defendants did not withhold any relevant information which would render the statement misleading, the allegation contained in paragraph 70(r) must be dismissed.
Plaintiffs have also moved to dismiss Count I of the complaint for failure to plead fraud with particularity as required by Rule 9(b)[3] of the Federal Rules of Civil Procedure. With respect to paragraphs 70(d)-70(1), (q), and (s) of the complaint, this motion will be granted. These paragraphs relate to several optimistic predictions *553 and statements of opinion concerning ATC's financial future. Plaintiffs challenge defendants' characterization of the increase in ATC's medicare supplement business as "an isolated event" and "temporary." Furthermore, plaintiffs claim that ATC's optimistic projections of future earnings were false and misleading because defendants knew that the shift in the Company's product mix would result in a decreasing level of profitability.[4] Finally, plaintiffs challenge defendants' statement that pending litigation "will not have a material adverse effect on the Company's consolidated financial statements" and allege that defendants "knew that the company failed to make adequate provisions for reserves in connection with litigation against it ..." (complaint at ¶¶ 70(q), (36)).
Optimistic projections and statements of opinion are actionable if made without a reasonable basis. Virginia Bankshares, Inc. v. Sandberg, ___ U.S. ___, 111 S. Ct. 2749, 115 L. Ed. 2d 929 (1991). However, a disappointed investor may not bring an action for securities fraud simply because an optimistic projection fails to materialize. In order to prevent spurious and vexations claims, courts must determine that failed predictions contain sufficient indicia of fraud to justify "the enormous expense and burden of discovery and trial of a large securities fraud actions." Kowal v. MCI Communications, 60 U.S.L.W. 2796, 1992 WL 121378 (D.C.Dist.1992).
Rule 9(b) of the Federal Rules of Civil Procedure addresses this problem by requiring that allegations of fraud be pleaded with particularity.[5] Thus, although a complaint may state a prima facie case for securities fraud under § 10(b), the complaint must be dismissed if it fails to provide a sufficient factual basis to substantiate its claims. When the complaint alleges that an optimistic prediction lacks a reasonable basis, "it need not necessarily allege the specific information at defendants' disposal at the time the prediction was made." Craftmatic Securities Litigation v. Kraftsow, 890 F.2d 628, 646 (3d Cir.1989). However, the complaint must at *554 least "accompany [its] allegations with facts indicating why the charges against defendants are not baseless and why additional information lies exclusively within defendants' control." Id. Plaintiffs must specify more than merely the time, place and content of the alleged fraudulent representation if those allegations alone do not give rise to a strong inference of fraudulent intent. Romani v. Shearson Lehman, Hutton, 929 F.2d 875 (1st Cir.1991). Specifically, when plaintiffs allege that defendants knew of adverse circumstances which they failed to disclose or account for in making optimistic predictions, the complaint must at least contain factual allegations that the adverse conditions existed at the time of the misstatement and that defendant had reason to know of them. Id.
Plaintiffs provide no factual support for the conclusion that defendants knew or could have known that the shift in product mix was not temporary. They merely allege that the shift lasted longer then expected. Similarly, plaintiffs provide no basis for the statement that defendants knew that the company's loss reserves would be inadequate to cover future losses resulting from litigation. Inaccurate predictions alone are not actionable. While it is true that Rule 9(b) allows scienter to be averred generally, plaintiffs must provide some factual basis for conclusory allegations of knowledge or intent. See e.g. Quaknine v. MacFarlane, 897 F.2d 75, 81 (2d Cir.1990). The ability to plead scienter generally, "must not be mistaken for license to base claims of fraud on speculation and conclusory allegations." Wexner v. First Manhattan Co., 902 F.2d 169, 172 (2d Cir.1990). Allegations which by themselves indicate nothing more than innocent mistake or mismanagement cannot be transformed into a claim for fraud merely by asserting that plaintiffs "knew" that their predictions were inaccurate.
The court is mindful that the particularity rule should be relaxed when factual information "is peculiarly within the defendant's knowledge or control." Craftmatic, 890 F.2d at 645. In the instant case, plaintiffs have alleged that "further detailing of the specifics of the fraudulent scheme ... is not possible at this time because the underlying information with respect thereto is non-public and lies exclusively within defendants' control." (complaint at ¶ 71). This conclusory declaration, however, does not satisfy the requirements of rule 9(b). In Shapiro, 964 F.2d at 285, the Court of Appeals stressed that even under a relaxed interpretation of rule 9(b), plaintiffs "must accompany such an allegation with a statement of the facts upon which their allegation is based." Id. Plaintiffs may allege the necessary facts on information and belief so long as the complaint delineates at least "the nature and scope of plaintiffs' effort to obtain, before filing the complaint, the information needed to plead with particularity." Id. Thus, Shapiro does not relieve plaintiffs from the obligation to provide allegations indicating why the charges are not baseless. Shapiro allows plaintiffs to allege, on information and belief, the specific facts which give rise to the necessary inference of fraud if the information lies within the defendant's exclusive possession and control, and plaintiffs have made diligent efforts to obtain such information.
Here, the plaintiffs have satisfied neither requirement. They have not detailed their efforts to obtain needed information from defendants. Furthermore, as explained above, they have not provided any allegations, on information and belief or otherwise, which would suggest that the charges are not baseless. Because nothing in the complaint gives rise to the inference of fraud required by 9(b), paragraphs 70(d)-70(1), (q), and (s) of the complaint will be dismissed with leave to amend within eleven (11) days of this order.
Finally, Count II of the complaint, alleging common law negligent misrepresentation, must be dismissed for failure to state a claim upon which relief can be granted. Under Pennsylvania law, an essential element of a claim for common law misrepresentation is a plaintiffs' reliance on the misrepresentation. See Squitieri v. Gould, 133 F.R.D. 25, 28 (E.D.Pa.1990), In re Scott Paper Co. Sec. Litig., 142 F.R.D. *555 611 (E.D.Pa.1992). In the instant case, the complaint lacks the necessary allegations of reliance.
ORDER
AND NOW, this 3rd day of November, 1992, for the reasons set forth in the accompanying Memorandum, it is hereby ORDERED that:
1. The Motion of defendants to Dismiss plaintiffs' complaint is DENIED as to paragraphs 70(a)-(c), (n), (o) and (p) of the complaint and GRANTED as to paragraphs 70(m) and (r) and as to Count II of the complaint.
2. The motion of defendants is GRANTED as to paragraphs 70(d)-70(1), (q), and (s) of the complaint for failure to plead with particularity pursuant to Rule 9(b) of the Federal Rules of Civil Procedure, with leave to amend as to these paragraphs within eleven (11) days from the date of this Order.
NOTES
[1] Rule 10b-5 provides that it is unlawful for any person
directly or indirectly, by the use of any means or instrumentality of interstate commerce, or of the mails or of any facility of any national securities exchange,
(a) To employ any device, scheme, or artifice to defraud,
(b) To make any untrue statement of a material fact or to omit to state a material fact necessary in order to make the statements made in light of the circumstances under which they were made, not misleading, or
(c) To engage in any act, practice, or course of business which operates or would operate as a fraud or deceit upon any person, in connection with the purchase or sale of any security.
17 C.F.R. § 240.10b-5 (1991).
[2] Even if the court were to read the statement as plaintiffs suggest, such vague expressions of general optimism constitute unactionable "puffing." See Shapiro, 964 F.2d at 284 n. 12.
[3] Federal Rule of Civil Procedure 9(b) states, "In all averments of fraud or mistake, the circumstances constituting fraud or mistake shall be stated with particularity. Malice, intent, Knowledge, and other condition of mind of a person may be averred generally."
[4] Allegations concerning the nature of the shift in product mix are set forth in ¶¶ 70(d)-70(l) and 70(s) of the complaint. ¶ 70(d) states, for example:
There was no reasonable basis for defendant Powell's projection of increased earnings for 1991 ... because, inter alia, defendants knew that the shift in the Company's product mix toward its lower-margined Medicare Supplement business would result in an increasing rate of Medicare Supplement claims and a decreasing level of profitability.
Similarly, ¶ 70(e) provides:
The statement in American Travellers' March 25, 1991 press release that net income for the first quarter of 1991 would remain flat due to factors that were `of a temporary and nonrecurring nature,' ... was false and misleading because defendants knew that the shift in the Company's product mix toward the lower-margined Medicare Supplement business was not temporary and non-recurring and that such shift would persist at least for the balance of 1991 and would materially and negatively affect the Company's profitability.
In ¶ 70(j) plaintiffs challenge ATC's statement that "the reserves for future policy benefits are adequate to cover anticipated losses and expenses" on the grounds that the company allegedly "knew that reserves were inadequate to, inter alia, cover anticipated losses and expenses associated with the `marked increase' in the Company's Medicare Supplement business." Although this allegation does not directly challenge the company's predictions about the nature of the "shift", it hinges on the premise that the company knew or had reason to know of the shift's likely duration and that the reserves were inadequate to account for it. If the company had no reason to believe that the shift was not a temporary event, then their predictions as to the adequacy of the loan loss reserves did not lack a reasonable basis.
These allegations must be distinguished from those set out in paragraphs 70(o) and (p). Those allegations do not challenge the accuracy of defendant's predictions, but rather allege that defendants' explanations of certain negative financial results where false and misleading because defendants withheld relevant information.
[5] It is worth noting that Rule 11 of the Federal Rules of Civil Procedure is also designed to prevent frivolous litigation by requiring that attorneys sign any pleading, motion or paper, certifying that:
it is well grounded in fact and warranted by existing law or a good faith argument for the extension, modification, or reversal or existing law, and that it is not interposed for any improper purpose, such as to harass or cause unnecessary delay or needless increase in the cost of litigation.
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491 F. Supp. 226 (1980)
UNITED STATES of America
v.
James Elwood MORRIS, Jr.
Crim. Nos. 180-31, 180-32.
United States District Court, S. D. Georgia, Augusta Division.
April 14, 1980.
*227 *228 J. Michael Faulkner, Asst. U. S. Atty., Augusta, Ga., for plaintiff.
Grace E. Evans, Asst. Federal Public Defender, Augusta, Ga., for defendant.
ORDER ON DEFENDANT'S MOTION TO SUPPRESS EVIDENCE OF STATEMENTS
BOWEN, District Judge.
Currently pending in these criminal cases is the motion of defendant James Elwood Morris, Jr. to suppress oral admissions made by him to law enforcement officers while in custody on February 1, 1980. An evidentiary hearing on this motion was held on March 26, 1980, and the Court makes the following findings pursuant to Fed.R. Crim.P. 12(e).
Defendant Morris was arrested and taken into custody on February 1, 1980, pursuant to an arrest warrant for armed bank robbery. The arrest was made by Lloyd Buck, Special Agent of the Federal Bureau of Investigation [FBI], in the company of four other officers. While frisking defendant for a weapon, and subsequently finding a .25 caliber automatic pistol, Agent Buck advised defendant of his rights as required by Miranda v. Arizona, 384 U.S. 436, 86 S. Ct. 1602, 16 L. Ed. 2d 694 (1966). Defendant made no statement; he was handcuffed and placed in the rear seat of an FBI vehicle.
At the request of the case agent in charge of the case, Allen Byron Gilbert, Special Agent, FBI, Morris was transported to his residence. During the course of this trip, which lasted approximately 15 minutes, defendant was told the reason for his arrest, and the Miranda warnings were read to him. Asked whether he wanted to say anything, defendant responded negatively. No further questions were asked at that time.
Upon arrival at defendant's residence, a mobile home, Morris was taken inside. Several other FBI agents were at the mobile home executing a search warrant; these agents took custody of defendant. Defendant was handcuffed and seated in the living room of his residence when Agent Gilbert, one of those conducting the search, read the Miranda warnings to him. Agent Gilbert was not told of defendant's previous statement that he did not want to talk.
Morris was asked whether he understood his rights and he responded affirmatively; no waiver of rights was signed. Agent Gilbert also asked whether defendant was willing to answer some questions. Morris' qualified response was that it depended on the question. Thereafter, Agent Gilbert took some general identification information from defendant. Morris was further informed of the charges against him and shown the items seized during the search. The defendant testified that Agent Gilbert said they had him cold when he was shown these items. The testimony of Agent Gilbert was that he possibly said something to that effect but could not recall. Defendant's response was to deny any involvement in the robberies.
Defendant testified that during the course of this colloquy he stated: "Didn't you say I could have a lawyer?" This testimony was not expressly controverted. Agent Gilbert and Special Agent Roy Thomas Smith, Jr., who was also present at this time, testified that defendant never directly asked for an attorney.
After approximately 20 minutes at the mobile home, defendant, still handcuffed, was transported to the FBI office by Agent Smith and another FBI agent for the purpose of arranging an appearance before the United States Magistrate. During the drive which lasted 15 to 20 minutes, Morris was reminded that the Miranda warnings previously given still applied, specifically his right to remain silent. Defendant made no response and no indication that he wanted to make a statement.
Agent Smith proceeded to ask some questions. The tenor of these questions was as *229 follows: Have you been in trouble before?; Are you employed?; What is your status with the Army?; and, What would your father [a police officer] think about this? Agent Smith also told defendant that the FBI had a surveillance photograph of the robber and that it resembled him. Morris denied the robbery.
During this discussion, Agent Smith told Morris that an attorney would be provided for him. Asked whether he had an attorney or would need a public defender, defendant replied that he couldn't afford an attorney. Agent Smith later told the Magistrate's office that a public defender would be required.
Once at the FBI office, Morris, still handcuffed, was seated at a desk not in use and Agent Smith was immediately opposite him at a desk with a telephone. Another agent was also present. Agent Smith told defendant the Miranda warnings from memory. Morris made no indication he wanted to talk.
Agent Smith placed the surveillance photograph in front of Morris and stated: "This looks like you to me;" he then made a phone call. Defendant testified that he responded the photograph was not of him, but that it must be of his twin brother [said facetiously]. Thereafter, defendant specifically asked to see the photo again. After being shown the photograph, defendant made oral admissions that the photograph was of him and that he robbed the two banks. Defendant also provided some details of the robberies and identified money found at his residence as the proceeds. No notes were made of these oral admissions by the agents.
The foregoing series of events began at approximately 2:18 p. m. on February 1, 1980, and terminated at 3:29 p. m. the same date. Thus, the time span was approximately one hour and fifteen minutes. Defendant then appeared before the Magistrate.
Defendant Morris is a twenty-two year old black male with a [G.E.D.] high school education. Testimony adduced at the hearing revealed that defendant is immature for his age; yet he is not unintelligent. On direct examination, defendant evinced a conversant understanding of polysyllabic words such as "transpired", "transported", and "acknowledged."
The proper analysis in determining the admissibility of a confession is threefold: first, whether the protective guidelines delineated in Miranda v. Arizona, 384 U.S. 436, 86 S. Ct. 1602, 16 L. Ed. 2d 694 (1966) to secure the Fifth Amendment privilege against self-incrimination were scrupulously honored; see generally Michigan v. Mosley, 423 U.S. 96, 96 S. Ct. 321, 46 L. Ed. 2d 313 (1975); Michigan v. Tucker, 417 U.S. 433, 94 S. Ct. 2357, 41 L. Ed. 2d 182 (1974); second, whether defendant voluntarily, knowingly and intelligently waived the rights enumerated in the Miranda warnings; third, whether defendant's eventual confession was the result of a voluntary decision. See Johnson v. State, 425 F. Supp. 538, 545-46 (D.Md.1976).
In considering these issues, the initial burden rests with defendant to present evidence challenging the legality of the confession. See United States v. Crocker, 510 F.2d 1129, 1135 (10th Cir. 1975). To show admissibility, the government must carry the counterveilling burden that constitutional standards have been satisfied by a preponderance of the evidence. United States v. Watson, 469 F.2d 362 (5th Cir. 1972). This quantum of evidence has uniform application to the constituent parts underlying admissibility. See id. at 364; see also United States v. De La Fuente, 548 F.2d 528, 533 (5th Cir.), cert. denied, 431 U.S. 932, 97 S. Ct. 2640, 53 L. Ed. 2d 249 (1977) as to burden of persuasion where interrogation is custodial.
As outlined above, one constituent part of admissibility is the voluntariness of the confession. The Supreme Court has indicated that the appropriate standard in judging voluntariness is whether "the confession was `extracted by any sort of threats or violence, [or] obtained by any direct or implied promises, however slight, [or] by the exertion of any improper influences.'" *230 Hutto v. Ross, 429 U.S. 28, 30, 97 S. Ct. 202, 203, 50 L. Ed. 2d 194 (1976) (quoting Bram v. United States, 168 U.S. 532, 542-43, 18 S. Ct. 183, 186-87, 42 L. Ed. 568 (1897)). Yet this test is not readily applied. As stated by the Fifth Circuit in Jurek v. Estelle, 593 F.2d 672, 676 (5th Cir. 1979):
In its efforts to define how much pressure is too much [causing an involuntary response], the Supreme Court has only concatenated metaphors. To be voluntary, a confession must be "the product of an essentially free and unconstrained choice." Culombe v. Connecticut, 367 U.S. 568, 602 [81 S. Ct. 1860, 1879, 6 L. Ed. 2d 1037] (1961). The decision to confess must be "freely self-determined," Rogers v. Richmond, 365 U.S. 534, 544 [81 S. Ct. 735, 5 L. Ed. 2d 760] (1961). "The product of a rational intellect and a free will," Blackburn v. Alabama, 361 U.S. 199, 208 [80 S. Ct. 274, 280, 4 L. Ed. 2d 242] (1960). The defendant's "will to resist," Rogers v. Richmond, 365 U.S. at 544 [81 S. Ct. 735] must not be overborne; nor can his "capacity for self determination [be] critically impaired, Culombe v. Connecticut, 367 U.S. at 602 [81 S. Ct. 1860].
Ultimately, voluntariness turns "on the effect of the totality of the circumstances on the defendant's will." United States v. Ballard, 586 F.2d 1060, 1062 (5th Cir. 1978), and requires an assessment of human motivation and behavior. Id. at 1063.
Reviewing the circumstances in the instant case reveals that defendant is an adult with sufficient verbal intelligence to understand questions and the import of his answers, and not be susceptible to influence and suggestions. Cf. Sims v. Georgia, 389 U.S. 404, 88 S. Ct. 523, 19 L. Ed. 2d 634 (1967). Further militating against a finding of involuntariness was evidence that no coercion was used by law enforcement officers. Moreover, defendant's nervousness in the FBI office, see United States v. Arroyave, 477 F.2d 157, 161 (5th Cir. 1973), his feelings and thoughts of causing embarrassment to his father, see United States v. Shelby, 573 F.2d 971, 975 (7th Cir.), cert. denied, 439 U.S. 841, 99 S. Ct. 132, 58 L. Ed. 2d 139 (1978) and his perception that FBI agents were "not smiling and looked mean", see United States v. Brown, 436 F. Supp. 998, 1004 (E.D.Mich.1977), do not establish involuntariness. Nor does the oral rather than written nature of the statement, in itself, render the confession inadmissible. See United States v. Pollard, 509 F.2d 601 (5th Cir.), cert. denied, 421 U.S. 1013, 95 S. Ct. 2419, 44 L. Ed. 2d 681 (1975).
Defendant testified that FBI agents told him: "if you cooperate, it will go easy on you," and further told him the possible penalties for armed robbery. Assuming arguendo such statements were made, this does not render the subsequent confession involuntary. "[T]elling the [defendant] in a noncoercive manner of the realistically expected penalties and encouraging [him] to tell the truth is no more than affording [him] the chance to make an informed decision with respect to [his] cooperation with the government." United States v. Ballard, 586 F.2d 1060, 1063 (5th Cir. 1978) (citing inter alia United States v. Frazier, 434 F.2d 994 (5th Cir. 1970); Rivers v. United States, 400 F.2d 935 (5th Cir. 1968)).
Based upon the totality of the circumstances, the Court concludes that defendant's confession was the result of a voluntary decision.
This finding of voluntariness, however, does not render the confession admissible if defendant did not make a knowing and intelligent waiver of his constitutional privileges as set forth in the Miranda warnings. See United States v. Montos, 421 F.2d 215, 222 (5th Cir.), cert. denied, 397 U.S. 1022, 90 S. Ct. 1262, 25 L. Ed. 2d 532 (1975). See also Johnson v. State of Maryland, 425 F. Supp. 538, 547 (D.Md.1976). As the Montos court stated: "To be valid, a waiver must be made voluntarily and may not be presumed `simply from the silence of the accused after warnings are given or simply from the fact that a confession was in fact eventually obtained.'" 421 F.2d at 224 (quoting Miranda v. Arizona, 384 U.S. 436, 475, 86 S. Ct. 1602, 1628, 16 L. Ed. 2d 694 (1966)) (citation omitted). See Government of Canal Zone v. Sierra, 594 F.2d 60, 65 (5th Cir. 1979).
*231 Defendant in the present case never signed a waiver form or expressly stated he waived his constitutional privileges. The three times defendant was questioned prior to his confession were initiated by law enforcement officers. The first and third time defendant was given the full Miranda warning (during his transportation to and from his residence), he said he did not want to talk or made no response. The second time defendant made a limited response that he would answer questions depending upon their content. While an express waiver is not required, see United States v. James, 528 F.2d 999, 1019 (5th Cir.), cert. denied, 429 U.S. 959, 97 S. Ct. 382, 50 L. Ed. 2d 326 (1976), "implied waivers are clearly disfavored." United States v. Hernandez, 574 F.2d 1362, 1371 (5th Cir. 1978).
A central concern bearing upon knowing and intelligent waiver is whether the mandate of Miranda was transgressed. "[A] Miranda transgression lessens the probability that rights were voluntarily waived." 574 F.2d at 1372. Thus the final question is whether the procedural safeguards of Miranda were scrupulously honored by law enforcement officers.
As stated by the Fifth Circuit Court of Appeals in United States v. Hernandez, 574 F.2d 1362, 1367 (5th Cir. 1978): "Miranda's salutary prophylactic prescription was designed to combat the inherently coercive atmosphere of a police-dominated, in-custody interrogation." The operative passage of Miranda is as follows:
Once warnings have been given, the subsequent procedure is clear. If the individual indicates in any manner, at any time prior to or during questioning, that he wishes to remain silent, the interrogation must cease. At this point he has shown that he intends to exercise his Fifth Amendment privilege; any statement taken after the person invokes his privilege cannot be other than the product of compulsion, subtle or otherwise. Without the right to cut off questioning, the setting of in-custody interrogation operates on the individual to overcome free choice in producing a statement after the privilege.
384 U.S. at 473, 86 S.Ct. at 1627-1628. This right to cut off questions must be scrupulously honored. See Michigan v. Mosley, 423 U.S. 96, 104, 96 S. Ct. 321, 326, 46 L. Ed. 2d 313 (1975).
In the instant case, the Miranda warnings were read to defendant shortly after his arrest while he was being transported to his residence. At this time, defendant responded that he did not wish to talk. The questioning ceased but was resumed approximately 15 minutes later by another FBI agent after defendant was again informed of his rights. The issue presented is whether defendant's right to cut off questioning was scrupulously honored.
The Supreme Court considered under what circumstances a resumption of questioning is permissible after the right to silence has been invoked in Michigan v. Mosley, 423 U.S. 96, 96 S. Ct. 321, 46 L. Ed. 2d 313 (1975). The Mosley Court rejected a blanket prohibition against resumption of questioning, and indicated instead that a case-by-case approach was necessary. The Court concluded that since "the police here immediately ceased the interrogation, resumed questioning only after the passage of a significant period of time and the provision of a fresh set of warnings, and restricted the second interrogation to a crime that had not been a subject of the earlier interrogation," id. at 106, 96 S.Ct. at 327, the incriminating statement was admissible. Thus factors such as passage of a substantial period of time, subsequent questioning on a distinct charge, or the discovery of new and different facts favor admissibility. See United States v. Mearns, 443 F. Supp. 1244, 1253 (D.Del.1978).
As applied to the statements of defendant Morris, these elements do not support admissibility. After initially invoking his right to remain silent, defendant was questioned by law enforcement officers on three subsequent occasions within the span of one our. Although each period of questioning was prefaced with a renewal of the Miranda warnings, this is not necessarily curative. The Fifth Circuit has recognized:
*232 The more times police inform a suspect of his rights in the face of his repeated invocation of one of those rights the right to remain silent the clearer it becomes that the police must not mean what they say. This is exactly the type of subtle coercive pressure which the Miranda opinion condemned.
United States v. Hernandez, 574 F.2d 1362, 1368 (5th Cir. 1978). In addition to the minimal time period separating subsequent questioning from defendant's assertion of his desire not to talk, the later interrogation was not about a distinct crime.
The circumstances do not reveal any reprehensible conduct by the FBI agents. They have simply run afoul of the mandates of Hernandez and Mosley. The statement of Justice Stewart in Mosley controls:
To permit the continuation of custodial interrogation after a momentary cessation would clearly frustrate the purposes of Miranda by allowing repeated rounds of questioning to undermine the will of the person being questioned.
423 U.S. 96, 96 S. Ct. 321, 46 L. Ed. 2d 313.
Accordingly, any and all statements which defendant Morris made to law enforcement officers after invoking his right to remain silent are ORDERED suppressed.
This conclusion renders analysis of defendant's equivocal questions regarding a lawyer unnecessary.
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01-03-2023
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10-30-2013
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https://www.courtlistener.com/api/rest/v3/opinions/101969/
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287 U.S. 178 (1932)
INTERSTATE COMMERCE COMMISSION
v.
NEW YORK, NEW HAVEN & HARTFORD RAILROAD CO. ET AL.
No. 15.
Supreme Court of United States.
Argued October 17, 18, 1932.
Decided November 21, 1932.
CERTIORARI TO THE COURT OF APPEALS OF THE DISTRICT OF COLUMBIA.
*179 Mr. Thomas M. Ross, with whom Messrs. Charles W. Needham and Robert E. Freer and Mrs. Mary B. Linkins were on the brief, for petitioner.
Messrs. John L. Hall and Charles O. Pengra for respondents.
*184 MR. JUSTICE CARDOZO delivered the opinion of the Court.
The New York, New Haven & Hartford Railroad Company, and other railroad companies subject to its control, the group making up together the New York, New Haven and Hartford System, and collectively described as "the carrier," petitioned the Supreme Court of the District of Columbia for a writ of mandamus directed to the Interstate Commerce Commission and commanding the Commission to include the value of the carrier's interests in the tracks of the New York and Harlem Railroad Company from Woodlawn to Forty-third Street in the City of New York, in the Grand Central Terminal in that city, and in the land and buildings of the Boston Terminal Company, as part of the inventory and valuation required by § 19a of the Interstate Commerce Act. 37 Stat. 701, c. 92; 49 U.S.C., § 19a. The Supreme Court of the District dismissed the petition. Its judgment was reversed by the Court of Appeals, 60 App. D.C. 403; 55 F. (2d) 1028, and a writ of certiorari brings the case here.
The carrier operates lines of railroad in Massachusetts, Rhode Island, Connecticut and New York. Its tracks enter the state of New York at or near Port Chester, and at Woodlawn connect with the tracks of the New York and Harlem Railroad Company, now operated under lease by the New York Central System. From Woodlawn south to the Grand Central Station, a distance of about twelve miles, the carrier's passenger trains run over the Harlem tracks; and the carrier and the Central use the station in common. At Boston, Massachusetts, the carrier's tracks connect with those of the Boston Terminal Company, the owner of the South Station in Boston; and *185 the carrier has the use of that station in common with other lines. The facts bearing upon its interest in the Harlem tracks and the Grand Central Terminal will be considered first, and afterwards those bearing upon its interest in the terminal at Boston.
On March 17, 1848, an "agreement and contract of transportation" was entered into between the New York and Harlem Railroad Company and the New York and New Haven, a predecessor of the carrier. By this contract, the Harlem granted to the New Haven the right "to run their trains, engines and cars for the transportation of passengers, mails, expresses, freight, etc., over the track or tracks of the road of the New York and Harlaem Railroad Company from the point of junction aforesaid to and into the city of New York." The New Haven was to furnish its own haulage and to pay the Harlem "as full compensation for the use and occupation of their track or tracks as aforesaid, a certain sum for each passenger transported," and a portion of the tariff rates received for the transportation of express matter and the mails. Compensation was to be adjusted every five years by agreement, or in the event of failure to agree, by arbitration. Following the execution of this contract, and on March 29, 1848, the legislature of New York passed an act to amend the charter of the New York and Harlem Railroad Company. In § 6 of that act, it confirmed the validity of the contract with the carrier's predecessor. "The New York and New Haven Railroad Company is hereby authorized to enter upon and run their cars and engines for passengers, freights, mails, expresses and other business, over the road of the New York and Harlem Railroad Company, from the point of junction of the roads of said companies at or near William's Bridge, in the County of Westchester, to the City of New York, and as far into the said city as the said Harlem Railroad may extend, upon such terms, and to such point as has been or may *186 hereafter be agreed upon by and between said companies, a copy of such agreement or agreements to be duly authenticated and filed in the office of the Secretary of State of this state." Promptly upon the enactment of this statute, the New Haven connected its line with the tracks of the Harlem, and ever since that time has run its trains over them into the City of New York. The Harlem on April 1, 1872, leased its road to the New York Central for a term of 401 years, the lease reciting that it was subject to the contract between the Harlem and the New Haven.
From a statement of the facts as to the carrier's interest in the tracks south of Woodlawn we pass to a consideration of its interest in the Grand Central Terminal. An agreement described as a "tripartite lease" was entered into on November 1, 1872, between the Harlem, the Central and the New Haven whereby the Harlem leased to the other roads the use of certain parts of the Grand Central Depot (a building since then destroyed) and the adjacent yards. On July 24, 1907, this agreement was superseded by another tripartite lease between the same parties. The Central agreed at its sole expense to acquire the lands and make all the changes necessary for the construction of a new station, the present Grand Central Terminal. Acting for itself and the Harlem, it leased to the New Haven during the term of the New Haven's charter (i.e., in perpetuity) the "use, in common with the Central Company, subject to all the provisions of this agreement, of the said Railroad Terminal for the accommodation of the traffic of the New Haven Company, other than freight traffic," with the proviso that the New Haven's right to the use of the terminal should in no event exceed fifty per cent of the maximum capacity. As "compensation for the premises hereby demised," the New Haven was to pay to the Central that proportion of four and one-quarter per cent interest on the cost of construction and of the annual expenses for *187 maintenance and operation "which the use of the Railroad Terminal by the New Haven Company bears to the entire use thereof." The terminal was to be under the direction of a terminal manager appointed by the presidents of the Central and New Haven Companies and removable by either.
Next in order is a statement of the interest of the carrier in the terminal at Boston. By an act of the Massachusetts legislature, approved June 9, 1896, the Boston Terminal Company was incorporated "with power to construct and maintain a union passenger station in the southerly part of the City of Boston, and to provide and operate adequate terminal facilities for the five railroad companies entering the city and for the accommodation of the public." These railroad companies, including the New Haven, were severally authorized to subscribe for the capital stock in equal amounts. Upon the completion of the proposed improvements, the five railroads were to use the station and its terminal facilities for all their terminal passenger business in Boston, and were to pay to the Terminal Company the amounts necessary to satisfy the expenses of the corporate administration and of the maintenance and operation of the station and other facilities, together with interest on the bonds and a dividend not to exceed four per cent on the capital stock. The payments by the several roads were to be proportioned to the use, and were to be deemed to be a part of their operating expenses. At the time of the trial, the New Haven, having succeeded to the interests of some of the other roads, held in its ownership or subject to its control eighty per cent of the Terminal stock, the remaining twenty per cent being controlled by the Central.
With this statement of the facts as to the carrier's interests in the tracks and terminals, we reach the question whether the Commission was under a clear duty, enforceable *188 by mandamus, to include those interests with a specific valuation in the statutory inventory.
By § 19a of the Interstate Commerce Act (49 U.S. Code; Act of March 1, 1913, c. 92, 37 Stat. 401, as amended), there is laid upon the Commission the colossal task of preparing an inventory and valuation of the property of the railroads of the United States.[1]
Subdivision a of the section is sweeping in its extension.
"The Commission shall . . . investigate, ascertain, and report the value of all the property owned or used by every common carrier subject to the provisions of this act." It "shall make an inventory which shall list the property . . . in detail, and show the value thereof as hereinafter provided, and shall classify the physical property, as nearly as practicable in conformity with the classification of expenditures for road and equipment, as prescribed by the Interstate Commerce Commission."
Subdivision b contains directions as to the method of showing values and thus fulfils the promise of subdivision a that such directions as to form will be "hereinafter provided."
The provisions are distributed into five classes.
Under the heading "first," there is a command to the Commission to "ascertain and report in detail as to each piece of property, other than land, owned or used by said common carrier for its purposes as a common carrier, the original cost to date, the cost of reproduction new, the cost of reproduction less depreciation, and an analysis of the methods by which these several costs are obtained and the reason for their differences, if any."
For convenience of reference this part of the directions that are grouped under the heading "first" will be described as number one.
*189 Under the same heading there is, however, another part which will be identified as number two.
"The Commission shall in like manner ascertain and report separately other values, and elements of value, if any, of the property of such common carrier and an analysis of the methods of valuation employed, and of the reasons for any differences between any such value and each of the foregoing cost values."
The division described as "second" contains directions for a report of the original cost and present value of lands, rights of way and terminals separately from improvements.
The "third" division deals with the valuation of property held for purposes other than those of a common carrier; the "fourth" with the financial history and corporate structure of the carriers; and the "fifth" with the ascertainment and valuation of governmental aids or gifts.
By subdivision c the Commission is empowered, except as otherwise provided, "to prescribe the method of procedure to be followed in the conduct of the investigation, the form in which the results of the valuation shall be submitted, and the classification of the elements that constitute the ascertained value."
The Commission at an early stage in its labors was confronted with the problem as to the proper method of valuation where there was a division of interest between the ownership and the use. The first exposition of its views upon that subject will be found in a decision made July 31, 1918, in the matter of the valuation of the Texas Midland Railroad, 75 I.C.C. 1, 20, 121, 122. The substance of its ruling there was that where property is jointly used by two owners, the details will appear in the inventory of each; that where property is owned by one carrier, and exclusively used by another, the details will appear in the inventory of the owner, but in addition *190 the value will be shown in the inventory of the user; that where a carrier owns and uses property but gives to some other carrier not the exclusive use but only a qualified use in common with itself, such as the right to use its tracks, the fact and nature of the use will be described in the inventory of both the owner and the user, but the value of the property will be reported in the inventory of the owner solely. "The physical property," said the Commission (p. 124), "is not changed by this dual use." "The law requires the ascertainment of values for property owned or used, but not the value of the use." 75 I.C.C. 24. Despite the comprehensive command to report the value of all the property owned or used by any common carrier subject to the act, there is still, so the Commission held, some latitude of judgment as to the extent to which the component elements of worth are to be separated, and a specific valuation allocated to each.
The Commission has steadfastly adhered to these principles in the fulfilment of its task. Along the lines there charted, a thousand inventories and reports have been made, it is said, during the nineteen years that have gone by since the Valuation Act was passed. Cf. Report of the I.C.C. for 1931, p. 68. In only one instance, except this, has the method, so far as we are informed, been challenged in the courts as a departure from the statute, and there mandamus was refused. Kansas City Southern Ry. Co. v. Interstate Commerce Commn., 6 F. (2d) 692. Cf. Matter of Kansas City Southern Ry. Co., 75 I.C.C. 223, 234. What was done in this inventory has at least that sanction of validity which is born of long administrative practice. United States v. Moore, 95 U.S. 760, 763; Logan v. Davis, 233 U.S. 613, 627; Brewster v. Gage, 280 U.S. 327, 336; Fawcus Machine Co. v. United States, 282 U.S. 375, 378. In conformity with that practice the Commission overruled the protest of the *191 carrier, and held that the trackage rights over the Harlem roadbed and the rights of user in the New York and Boston terminals would be reported in the inventory as valuable rights or interests belonging to the carrier, but without assigning to them a specific value separate from the value given to the system as a whole. Like " going concern value" and that of many other intangibles, the value of these qualified privileges of user, falling short of ownership or full possession of the physical thing, was not excluded altogether as an element to be reflected in the ultimate appraisal. Cf. Texas Midland R.R. Case, 75 I.C.C. 1, 69. What was held was no more than this, that the contribution of such factors was not a separate thing of value to be segregated from all the other values inhering in a unified system of railroad operation, and ticketed by itself. "We report all the costs which are specifically named in the valuation act, on which we can obtain tangible data, and we find a single sum value after a consideration of those tangible costs and the intangible elements of value which inhere in a fully organized and operating property." Cf. Des Moines Gas Co. v. Des Moines, 238 U.S. 153, 165; McCardle v. Indianapolis Co., 272 U.S. 400, 414. These are the words of the Commission in answering the carrier's objection that the going concern value had not been separately stated. Its answer might have been the same if it had been meeting the objection that privileges of user, incapable of appraisal in terms of the cost of the thing used, had been described in the inventory without specific appraisal of the value of the use.
We are thus remitted to the question whether this method of classification, accredited to us, as it is, with all the authority springing from administrative practice, is a departure from any duty created by the statute, or, more accurately, from any duty so peremptory and unmistakable as to be enforceable by mandamus. True indeed it *192 is that by the express direction of the statute there is to be a valuation of all the property owned or used by any carrier subject to the act. We do not travel very far upon the road to a solution of our problem by repeating that command. A valuation there is to be, for so it is commanded in subdivision a, but only "as hereinafter provided," and to discover what is "hereinafter provided," we must look to subdivision b. If there is nothing in subdivision b calling for the separate classification and appraisal of the value of a right to use, then the duty so to classify and appraise is not created by the statute, and certainly not created in any clear and peremptory way.
We must distinguish between the ultimate result to be attained by the preparation of the inventory and the details of form and method prescribed for its attainment. To admit that there must be a valuation of the whole is not equivalent to admitting that a separate and specific valuation must be allocated to every kind of property interest embraced within the whole. To what extent a group of interests shall be resolved into its elements is thus a question of degree. If a barren literalism were to guide us, subdivision could be carried down to the dimensions of an atom. We are not to push the mandate to "a drily logical extreme." Noble State Bank v. Haskell, 219 U.S. 104, 110. A roadbed and a terminal are property, but so are license privileges, and contracts for supplies, and rights in personam as well as those attaching to a res. Was it the meaning of the lawmakers that rights and interests such as these were to have a value specifically assigned to them apart from their relation to the "going value" of the business? Not even counsel for the carrier would have us go so far. By concession there are forms of property which are to be considered by the Commission as contributions to a larger whole, and not as things apart. We were told upon the argument that the interests in the Harlem tracks might have been omitted from the inventory *193 if they had been licenses, and nothing more. Specific valuation became necessary because, in the view of counsel, the interests had their basis in a franchise or an easement. A like distinction was drawn in respect of the interests in the terminals. They might have been omitted from the inventory, however great their value, if the privilege of use had been derived from a contract giving rise to a mere license. The omission of a specific valuation became wrongful, it was argued, if the interests amounted to a title or estate. The Commission declined to go into these niceties. "It is . . . not necessary for us to determine whether the right of use in the carrier is best defined by reference to it as a license to use, an easement or a trackage right." We shall practice a like restraint, observing only in passing that the proper classification is obscure (Union Pacific Ry. Co. v. Chicago, Rock Island & Pacific Ry. Co., 163 U.S. 564, 582, 583; Union Pacific R. Co. v. Mason City & Ft. Dodge R. Co., 222 U.S. 237, 247, 248), and that the carrier by its own conduct has admitted the obscurity. In its annual reports to the Commission, starting in 1888 and including the year preceding the beginning of this suit, its interests in the Harlem tracks and in the New York and Boston terminals are reported under "class 5," which is described in the report as including "all tracks operated and maintained by others, but over which the respondent has the right to operate some or all of its trains. In roads of this class, the respondent has no proprietary rights, but only the rights of a licensee." What concerns us at the moment, however, is not the fitness or the unfitness of one classification or another. What matters for present purposes is the carrier's concession that the command to prepare an inventory in which all the property shall be valued does not mean that every property interest shall be separately valued. Something, then, is to be abated from the dictates of an implacable literalism allowing no exceptions. *194 At one point or another a line of division has to be drawn between the property to go in and the property to stay out. The location of the line will involve considerations of legislative intention and administrative judgment. Division being necessary, did the members of the Commission ignore a plain and certain duty in making it where they did?
In our summary of the statute, the provisions under the heading "first" of subdivision b were separated into two parts, described as numbers one and two. Part number one was intended to procure the valuation of a railroad considered as a physical thing. Every "piece of property" is to be inventoried, and with reference to every "piece" so inventoried the Commission is to ascertain the investment in the thing, and the cost of producing it anew. The factors have been made familiar by historic litigations. Smyth v. Ames, 169 U.S. 466; St. Louis & O'Fallon Ry. Co. v. United States, 279 U.S. 461. But the statute does not mean that there shall be a duty to appraise in terms of cost if the interest to be appraised is such that the cost of the thing is without relevance as a criterion of the value of the interest. There can be no plain and certain duty, enforceable by mandamus to proceed to a valuation that will be a snare or a deception. Here the New Haven has not invested anything in the roadbed or the terminals. It is not affected for good or ill by fluctuations in the cost of building them anew. Whatever the legal category in which its interests are to be placed, the value is independent of the cost of the thing in which those interests inhere. Plainly untenable is its contention that the amount to be allowed to it is the proportion of the cost value of the property that would result from a division of such value between itself and the Central in the ratio of use. 30 I.C.C. Val. Rep. 1 at pp. 31, 33. Such a method of appraisal ignores the millions of dollars payable year by year in perpetuity to keep *195 the privilege alive. It treats as an investment what is merely a contingent debt. The value of the trackage rights, whether one views them as amounting to a license or an easement, is not the cost of the roadbed, but the difference between the value of the use and the rent to be paid therefor. The value of the interests in the terminals, whatever the proper name for them, must be measured in the same way. Today, under the Transportation Act of 1920, the Commission may compel a carrier owning terminal facilities to grant to other carriers the use of such facilities, including main line tracks for a reasonable distance, in return for a compensation prescribed as just and reasonable. 49 U.S. Code 3 (4). For all that appears the rights now in controversy might continue to be enjoyed though the agreements set forth in the record were to be rescinded or annulled, and enjoyed at a smaller cost, if a rental lower than the existing one were to be fixed by the Commission. Be that as it may, the value for the New Haven is not the value of the thing or piece of property owned or used, or of any fractional interest therein. The value for the New Haven is the value of the use, which is measured by the difference between the rent payable under the lease and the fair and reasonable rent that would be the compensation payable to the owner in the absence of agreement. There is nothing to indicate that the carrier laid testimony before the Commission as to what this difference would be. Cf. Texas Midland Railroad Case, 75 I.C.C. 1, 24. It took its stand upon the position that pro tanto, in proportion to its use, it was the owner of the fee.
The argument will be made, however, that the Commission is inconsistent. Appraisal on the basis of cost has been thought to be suitable where the lessee has a possession exclusive of the owner. Why, then, is it not suitable also where the interest of the lessee is in common with the owner, and this though the interest fluctuates from *196 day to day with the measure of the use? No doubt the practice of the Commission has been what the argument assumes. The practice has been, as we have already pointed out, when the possession of a lessee is exclusive of the possession of the owner, to inventory leased property in the name of each of them, setting down for each the original and the reproduction cost of the subject matter of the lease, setting down the fact of use, and making allowance thereafter for any increase or deduction due by reason of such use when costs are readjusted and corrected to express the final values.[2] Never upon the face of the inventory has there been a specific valuation of the interest of the lessor and that of the lessee considered as estates in the land and structures and apart from the valuation of the property demised. The Commission has been unfaltering in its adherence to the principle that the value to be reported is the value of the thing, and not of every interest connected with the thing. Whenever the nature of a lease is such that the cost of what is leased may appropriately be taken as an index of the value of the leasehold, the inventory and the valuation have been made upon that basis. Whenever the interest has been such that cost is not an index, the test of cost has been rejected. In the application of these methods there has been no discrimination between this carrier and others. In the inventory now in controversy there are properties owned by the New Haven, and wholly leased to other lines, and properties owned by other lines, and wholly leased to the New Haven. For all these properties the reproduction cost is set forth in the inventory of the New Haven System without specific appraisal of the value of the reversion as an interest subject to the lease, or the value of the lease as an interest distinct from the reversion. *197 The New Haven itself is thus the beneficiary of the principle that the inventory is to set forth the value of the thing, and not of every interest touching the enjoyment of the thing.
We recur, then, to the question why the method of appraisal that has been thought to be appropriate where a lessee has the sole use may not be followed here also where in common with the owner the lessee has an undivided interest in the use of tracks and terminals in return for yearly payments. Perhaps a sufficient answer is that it is never mandatory on the Commission to value the interest of any lessee on the basis of the cost, though such a method may in certain circumstances be appropriate as an exercise of discretion. But other answers are available, if this be thought inadequate. There can be no doubt that even in its application to a sole lessee, the method of valuing a lease on the basis of the cost of the property demised is at best a rough and ready approximation. Even so, the formation of a rate base by treating a lessee as owner and measuring a fair return of income as a percentage of the cost may yield a reasonable average of accuracy where the interest of the lessee is constant and the rentals that it pays are excluded from the computation of its operating expenses. Such exclusion is required by the accounting rules of the Commission where the lessee has the sole use. The practice is different, however, where a carrier has the benefit of joint-facilities. There the rentals paid for the use of the facilities are part of the operating expenses, and were so treated in the case at hand. This treatment of them has the support of statute (Transportation Act, 1920; 49 U.S.C., § 15a [1])[3] as well as of administrative practice. A carrier *198 receives a duplication of benefits if it is permitted to include its rentals as an operating expense while earning a return upon the value of an unincumbered fee.[4] Aside from this objection, a lease which gives to the lessee, not exclusive possession of the property demised, nor even a fixed share, but a share fluctuating from time to time with the variations of the business, is too uncertain and inconstant to be valued with even approximate correctness by the test of the cost of the property subjected to the use. The Commission was satisfied to adopt the formula of cost where the lease was such as to lead it to believe that the margin of error would not be inordinately large.[5] Nothing in the statute makes it mandatory to apply the same formula, inaccurate at best, to leases of a different nature if the margin of error would thereby be increased.[6] Nor is there anything in the objection that by force of § 15a of the Transportation Act, 1920, a form of inventory permissible under § 19a of the Valuation Act of 1913 is permissible no longer. The Act of 1920 *199 authorizes the Commission to "utilize the results of its investigation under § 19a" of the Interstate Commerce Act for certain additional purposes "in so far as deemed by it available." 49 U.S. Code, § 15a (4). There is nothing in the new statute to suggest that earlier inventories are to be revised, or that forms of valuation lawful in the past are to be unlawful in the future.
What has been written serves, we think, to show that the interests in controversy are not affected by that part of subdivision b of the statute which we have identified as number one. The question remains whether a specific valuation is made mandatory by the provisions of the part identified as number two. "The Commission shall in like manner ascertain and report separately other values, and elements of value, if any, of the property of such common carrier and an analysis of the methods employed, and of the reasons for any differences between any such value and each of the foregoing cost values." The carrier did not build its case on that command in making proof to the Commission. It took the position, on the contrary, that it was an owner of the roadbed and the terminals in proportion to its use and made its proof accordingly. See Matter of New York, New Haven & Hartford R. Co., 30 Val. Rep. I.C.C. 1, 31, 32, 33. There can surely have been no breach by the Commission of an inflexible and certain duty in omitting from an inventory a separate and specific estimate of the difference between the value of the use and the rents reserved to the lessors when the protest of the carrier was silent as to what the valuation ought to be. The result will be the same, however, though this defect be overlooked. The command to report other elements of value does not impose a duty, inflexible and certain, to appraise the value of a use which is unrelated to the value of what is subject to the use. The ends to be attained are different. *200 They can be gathered from a report of the Senate Committee on Interstate Commerce submitted to the Senate in February, 1913. 62nd Congress, 3rd Session, No. 1290, p. 8. The report begins with a consideration of the three criteria of value that are stated in part one of subdivision b: first, original cost; second, cost of reproduction new; third, cost of reproduction, less depreciation. From these it passes to a consideration of the effect and purpose of part two, prefacing the discussion with the title "other values and elements of value; that is, intangible values." "This classification," the report continues, "provides for going value, good will value, and franchise value. Whether any or all of these values will be considered by the Commission or the courts in determining the fair value of the property, and if so, what importance shall attach to them is a matter for the Commission and the courts. Especially as to intangible values, the Commission and the courts are in a transition period. The elements of value which will finally constitute fair value for rate-making purposes are steadily narrowing. They are not expanding. No decision by Commission or court will stand which is ultimately found to be unfair to the public or to the common carrier. The committee has, it is believed, provided for ascertaining every element of value which, upon recognized authority, should be considered." Congress had not thought to tie the hands of the Commission by imposing a peremptory duty to classify in any particular way the factors supplementing or modifying the significance of cost, and to allocate to each a specific value. The report makes it clear that Congress did not know what those factors were, and that the Commission, guided by the courts, was to work out in its own way a practical and fair result. Whatever duty was imposed had its basis in a general admonition which left a wide and indefinite margin of judgment as to the method of obedience.
*201 In the light of these considerations, the aim of the statute in bidding heed to be given to other elements of value than those of cost alone, is readily discerned. Its aim is to afford play for the correction of the errors certain to result where the value of a railroad is identified with the cost of its component parts without reference to the values generated or extinguished by the union of the parts into a single and organic whole. Effects that are the resultant of two or more forces working in combination may be capable of appraisal when it would be difficult, if not impossible, to estimate the consequences of any one of the forces operating singly. For an illustration of this truth we have only to bear in mind the obscure and varied factors, psychical as well as physical, that enter into the creation of the "going value" of a business. Not infrequently the value of these intangibles will be an aggregate made up of elements too deeply interpenetrated for any specific figure to be set opposite to one of them dissevered from the others. What is true of "going value" is true of roadbeds and stations, of trackage rights and rights in terminals. As soon as one passes beyond an appraisal of the cost, the increments or the deductions involve estimates of relation, the parts being worthless or nearly so unless adapted to the whole. Not a mile of track would be worth the cost of reproducing it, nor a trackage right the rental, if there were not stations at either end. Not a station would be worth the cost of building it anew if there were not roadbeds or tracks or trackage rights beyond. The final value set down in the report of the Commission shows that over and above the cost of reproduction less depreciation, something has been added, in appraising the property of the carrier, to express the value of the whole as distinguished from the total of the parts. Not even the depreciated reproduction cost, let alone something in addition, would *202 have been reported as the final value if the road had been viewed as a congeries of fragments. To argue that the Commission ignored these intangibles altogether because it failed to value them specifically is to miss the significance of the whole process of appraisal. Every trackage contract and every terminal use, in so far as it contributes to the unity of the system, is reflected in the final value ascribed to the physical things that are listed in the inventory. The Harlem trackage contract is there reflected, for the reproduction cost would cease to be a measure of the value if the trains stopped short at Woodlawn. The rights in the New York and Boston terminals are there, for again the reproduction cost would be of no avail as a criterion if there were no terminal facilities for passengers at Boston or New York. The question is not whether trackage rights and rights in terminals are interests that the Commission is at liberty to treat as nonexistent. The question is whether they are interests of such a kind that they must be specifically valued instead of being viewed as factors that enter by infusion into the lifeblood of the organism. If there is anything in the statute requiring values of that order to be separately stated, the carrier has not pointed to it. In the absence of such a duty, nothing in the report of valuation justifies a holding that any property interest was excluded altogether. "We have given careful consideration," said the Commission, "to all facts of record and pertaining to the value of the common-carrier property of the carrier as an organized, developed, well-maintained, seasoned property in operation as a going concern." Many diverse elements, reacting one upon another, have been fused in an act of judgment drawing its sustenance from all.
A word may yet be due with reference to those provisions of subdivision b of the statute which are set forth *203 under the heading "second." "Such investigation and report," it is there said, "shall state in detail and separately from improvements the original cost of all lands, rights of way and terminals owned or used for the purposes of a common carrier and ascertained as of the time of dedication to public use, and the present value of the same." The rights of way there in view are those that involve an investment of the moneys of the carrier, and result in the possession of the land itself, the roadbed on which the tracks are laid. Georgia v. Cincinnati Southern Ry. Co., 248 U.S. 26, 28. They do not include the privilege of hauling cars for a rental over the roadbed of another. What is true of rights of way is true also of terminals. If the New Haven has no interest in the improvements constituting the roadbed and the terminal stations sufficient to require a specific valuation of its interests under parts one and two of subdivision "first," it has none sufficient to require such valuation under subdivision "second."
We do not go beyond the necessities of the case before us in shaping our decision. Whether an inventory such as this one, omitting a specific valuation of important rights and interests, gives full or adequate effect to the intention of the lawmakers, we are not required to determine. In later or collateral controversies that question may be pertinent. For the purpose of this case, it is enough to hold, as we do, that the duty of specific valuation, if it exists, has been imposed upon the Commission too vaguely and obscurely to be enforced by a mandamus. United States ex rel. Redfield v. Windom, 137 U.S. 636; Wilbur v. United States ex rel. Kadrie, 281 U.S. 206. One cannot rise from a study of the statute in the setting of its history and of the administrative practice under it and hold at the end an assured belief that the Commission has been commanded by the Congress to do the act omitted. *204 Where a duty is not plainly prescribed, but is to be gathered by doubtful inference from statutes of uncertain meaning, "it is regarded as involving the character of judgment or discretion," (Wilbur v. United States ex rel. Kadrie, supra), and mandamus is thereby excluded. The case at hand differs in essentials from Kansas City Southern Ry. Co. v. Interstate Commerce Commn., 252 U.S. 178, where a specific, unequivocal command, removed after the decision by an amendment of the statute,[7] was laid upon the Commission to value a particular thing, and the Commission ignored the command to the extent of refusing to hear any evidence whatever. The ruling in that suit has been explained in later cases, and confined to its peculiar facts. Interstate Commerce Commission v. Waste Merchants Association, 260 U.S. 32, 35; United States v. Los Angeles & Salt Lake R. Co., 273 U.S. 299, 311.
Public policy forbids that the work of the Commission in the fulfilment of the stupendous task of valuation shall be hampered by writs of mandamus except where the departure from the statute is clear beyond debate. The report is not a stage in a judicial proceeding affecting this carrier or others. "It is the exercise solely of the function of investigation." United States v. Los Angeles & Salt Lake R. Co., supra, p. 310. The final valuations made in it will indeed be prima facie evidence against the carrier in proceedings under the Commerce Act. 49 U.S.C. § 19a (1). Even so, the opportunity to contest them, if at any time they are introduced in evidence, is "fully preserved to the carrier, and any error therein may be corrected at the trial." United States v. Los Angeles & Salt Lake R. Co., supra, p. 313. The valuation of the railroads of the country has been ordered by the Congress in *205 the belief that this new "Domesday Book" will promote an important public purpose. Nearly twenty years have passed since that belief found expression in the enactment of the statute, and the work is still unfinished. Report of the I.C.C. for 1931, p. 68. In the meantime the enactment of § 15a of the Transportation Act of 1920 has made the need for valuation more imperative than ever. 49 U.S.C., § 15a. In any work so vast and intricate, what is to be looked for is not absolute accuracy, but an accuracy that will mark an advance upon previous uncertainty. If every doubt as to the extent and form of valuation is to be dispelled by mandamus, the achievement of the ends of Congress, already long deferred, will be put off till the Greek Kalends.
The judgment of the Court of Appeals of the District of Columbia is reversed, and the judgment of the Supreme Court dismissing the petition affirmed.
Reversed.
MR. JUSTICE VAN DEVANTER, MR. JUSTICE McREYNOLDS and MR. JUSTICE SUTHERLAND are unable to concur in this decision. But, as the decision is put distinctly on the ground that the specific duty sought to be enforced by mandamus is not so definitely and plainly described by the statute as to justify the application of that remedy, and the question whether the inventory in controversy, omitting a specific valuation of important rights and interests, gives full or adequate effect to the intent of the statute, is not determined but distinctly reserved for future contestations, they deem it sufficient to say at this time that they regard the reasons assigned by the Court of Appeals for its judgment as sound and requiring an affirmance of its judgment.
The CHIEF JUSTICE and MR. JUSTICE BUTLER took no part in the consideration and decision of this case.
NOTES
[1] The events leading up to the adoption of the act and the public policy it was designed to further will be found clearly stated in Sharfman, The Interstate Commerce Commission, vol. 1, pp. 117 to 137.
[2] The practice is explained by Mr. Esch, formerly Valuation Analyst of the Commission, in an article "Valuation of Leased Railroad Property." 33 Yale L.J. 272, 276, 277.
[3] "The term `net railway operating income' means railway operating income, including in the computation thereof debits and credits arising from equipment rents and joint facility rents."
There is a like direction in the act incorporating the Boston terminal.
[4] Esch, Leased Railroad Property, supra, at p. 274.
[5] "Not only is the matter of proportion of use at any particular moment largely speculative, but it varies from time to time." Esch, supra, at pp. 278, 279.
[6] Upon a hearing before the Senate Committee, Senator La Follette, the Chairman, inquired of a witness, Prof. Commons, as to the proper method of valuation where property was leased. The answer was in substance that such a case might be taken care of in either one of two ways, by valuing the property as if it were owned by the lessee or by making allowance for the rent as an operating expense, and that it would be the function of the Commission to determine the preferable method in any given situation. The members of the Committee apparently acquiesced. Senator La Follette adverted to the possibility of a double valuation if one railroad had the privilege of running its trains over the tracks of another, and added that, of course, only one valuation would be proper. Physical Valuation of Property of Common Carriers, Senate Committee on Interstate Commerce, 62nd Congress, 3rd Session, Senate Library, Vol. 15, No. 6, pp. 128 and 129.
[7] See Act of June 7, 1922, c. 210, 42 Stat. 624.
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451 F. Supp. 1230 (1978)
INSURANCE COMPANY OF NORTH AMERICA, Plaintiff,
v.
FORTY-EIGHT INSULATIONS, INC., Affiliated FM Insurance Company, Illinois National Insurance Company, Travelers Indemnity of Rhode Island and Liberty Mutual Insurance Company, Defendants.
Civ. A. No. 7-71654.
United States District Court, E. D. Michigan, S. D.
May 4, 1978.
*1231 *1232 G. Cameron Buchanan, Buchanan, Ogne & Jinks, P. C., Troy, Mich., Michael R. Gallagher, Thomas E. Betz, Gallagher, Sharp, Fulton, Norman & Mollison, Cleveland, Ohio, for plaintiff.
W. Robert Chandler, Cross, Wrock, Miller & Vieson, Detroit, Mich., William C. Murphy, Richard L. Horwitz, Reid, Ochsenschlager, Murphy & Hupp, Aurora, Ill., for defendant Forty-Eight Insulations, Inc.
Ralph W. Barbier, Jr., Barbier, Goulet, Petersmarck & McFarland, St. Clair Shores, Mich., for defendant Affiliated FM Ins. Co.
David M. Tyler, Tyler, Canham, Goulding, Morad & Warner, P. C., Detroit, Mich., for Illinois National Ins. Co.
Richard J. Tonkin, Vandeveer, Garzia, Tonkin, Kerr & Heaphy, P. C., Detroit, Mich., for Travelers Indemnity of Rhode Island.
Jack H. Erps, Birmingham, Mich., for Liberty Mutual Ins. Co.
OPINION
FEIKENS, District Judge.
A declaratory judgment is sought by the Insurance Company of North America (INA) against its former insured, Forty-Eight Insulations, Inc. (Forty-Eight), and four (4) other insurance carriers who at some time insured Forty-Eight. These four companies are Affiliated FM Insurance Company (Affiliated FM), Illinois National Insurance Company (Illinois National), The Travelers Indemnity Company of Rhode Island (Travelers), and Liberty Mutual Insurance Company (Liberty Mutual).
This court has jurisdiction of this case by reason of diversity of citizenship of the parties and venue is proper in this district.
The dispute raises questions as to which insurance carrier has a duty to defend and/or to indemnify Forty-Eight for any resultant judgments against it in numerous pending underlying lawsuits. An ancillary *1233 issue is whether or not Forty-Eight must share in the payment of a judgment or in the costs of defense. The plaintiffs in each of those lawsuits, either for themselves or as representatives of decedents, claim to have suffered injury or death from asbestos-caused lung diseases as a result of being exposed to Forty-Eight's products containing asbestos. As of the date of this opinion 251 underlying lawsuits have been filed throughout the United States naming Forty-Eight as a defendant. All these suits also name additional defendantsin some cases as many as twenty (20).
In a typical underlying lawsuit a plaintiff construction worker, employed for many years installing products containing asbestos, sues all of the manufacturers whose asbestos products were used at any of the construction sites at which he was employed. The amount of asbestos dust from each manufacturer's product to which such worker was allegedly exposed or what amount he inhaled during any period of exposure cannot be determined with certainty. The exposures allegedly range in duration from a few years to as long as 48 years.
Under the law of some jurisdictions in which these underlying suits are filed all of the manufacturers may be held jointly and severally liable for an entire damage award. See, Borel v. Fibreboard Paper Products, 493 F.2d 1076 (5th Cir. 1973); Prosser, Law of Torts, § 52 at 315-320 (4th Ed. 1971). In other jurisdictions the defendant manufacturers may have the burden of showing the proper apportionment of damages. Id. In all cases there is the potentiality that any or all of the defendant manufacturers may be held liable for damages.
The dispute between the parties in this case results from their disagreements over the interpretation of the various insurance policies issued to Forty-Eight and concern their respective rights and obligations regarding coverage and the duty to defend. During the past 50 years Forty-Eight has had at least five (5) liability insurance carriers.[1] The controversy as to coverage is whether the coverage at the time of exposure to asbestos or the coverage at the time the disease manifests itself is the relevant coverage. Plaintiff INA and three of the defendant insurance carriers argue for the application of a "manifestation theory" while Forty-Eight and Travelers advocate an "exposure theory."[2]
I.
The parties have stipulated to most of the facts. In 1934 Forty-Eight, as a subsidiary of an Illinois corporation incorporated in 1923, began selling products containing asbestos. From 1923 through 1970 Forty-Eight or its predecessor manufactured and sold various types of insulation blocks and cements containing asbestos for use on boilers, pipes, fittings, elbows, and flat surfaces. In 1970 it discontinued the use of asbestos in all its products. This fact does not necessarily end the possibility of its asbestos product liability, however, in that demolition or removal of structures containing old insulating materials may cause asbestos to become airborne and may cause injury to persons employed in such activity. Given the latent periods of asbestos-caused lung disease, it is also anticipated that additional actions will be brought against Forty-Eight alleging injury from past exposure.
A. INSURANCE COVERAGE
INA insured Forty-Eight in various policies from October 31, 1955 through October 31, 1972; Affiliated FM from October 31, 1972 through January 10, 1975; Illinois National *1234 from January 10, 1975 through January 12, 1976; and Travelers from January 12, 1976 through November 8, 1976. Liberty Mutual became an insurer of Forty-Eight on November 8, 1976 on a $100,000.00 deductible policy currently in force. The following chart shows the dates and coverage limits of the individual policies.
More Than
One Person One Person
Policy Name and Number From To One Accident One Accident Aggregate
Ins. Co. of North America
9LB21567 10/31/55 10/31/58 100,000 300,000 300,000
9LB24403 10/31/58 10/31/61 100,000 300,000 300,000
LB24688 10/31/61 6/17/62 100,000 300,000 300,000
LB24688 (End) 6/18/62 10/31/64 500,000 500,000 500,000
LB24913 10/31/64 10/31/67 500,000 500,000 500,000
ALB25120 10/31/67 10/31/72 500,000 500,000 500,000
Affiliated FM Insurance Co.
GLA71255 10/31/72 1/22/73 500,000 500,000 500,000
GLA71342 1/22/73 12/31/73 500,000 500,000 500,000
GLA71886 12/31/73 1/10/75 400,000 400,000 400,000
Illinois National Insurance Co.
GLA953273 1/10/75 1/12/76 300,000 300,000 300,000
The Travelers Indemnity Co. of Rhode Island
650-862A376-4-TRI-76 1/12/76 11/8/76 500,000 500,000 500,000
Liberty Mutual Insurance Co.
LGI-632-004010-126 11/08/76 1/01/78 1,000,000 1,000,000 1,000,000
The relevant policy provisions are those that define what is covered, when the coverage applies, and the definitions of the various terms used. These provisions are summarized as follows:
RELATION
POLICY INSURING POLICY TO OTHER
INSURER PERIOD AGREEMENT PERIOD/TERRITORY INSURANCE DEFINITIONS
INA 10/31/55-10/31/58 To pay on behalf This policy applies Excess over other Bodily injury ...
of insured . . . for only to such injuries valid and collectible shall be construed
damages because and damages insurance to include sickness,
of bodily injury occurring disease . . .
. . . caused by during the policy
accident period . . .
INA 10/31/58-10/31/61 Same Same Same Same
INA 10/31/61- 6/18/62 Same Same Same
INA 6/18/62-10/31/64 To pay on behalf Same Same Bodily injury . . . shall
(endorsement) of insured . . . for be construed to include
damages because sickness, disease . . .
of bodily injury
. . . caused by occurrence Occurrence means either
an accident happening
during the policy
period or a continuous
or repeated exposure
which . . . causes injury
during the policy
period
*1235
INA 10/31/64-10/31/67 To pay on behalf This policy applies Excess over other Bodily injury means
of insured . . . as only to occurrences collectible insurance bodily injury, sickness,
damages because which take place with any disease . . .
of bodily injury during the policy other insurer
period As respects property
damage liability, occurrence
means either an
accident happening during
the policy period or
a continuous or repeated
exposure to conditions
which unexpectly
and unintentionally
causes injury to or
destruction of property
during the policy period
INA 10/31/67-10/31/70 To pay on behalf This policy applies Primary; contains Bodily injury means
(renewal through of insured . . . as only to bodily injury formula where bodily injury, sickness
10/31/72) damages because . . . which other insurance or disease . . .
of bodily injury occurs during the applies on same
. . . caused by an policy period basis . . . As respects property
occurrence damage liability occurrence
means an accident,
including injurious exposure
to conditions,
which results, during the
policy period, in property
damage neither
expected nor intended
from the standpoint of
the insured
Affiliated 10/31/72- 1/22/73 Will pay on liability This policy applies Same Bodily injury means
of insured . . . as only to bodily injury bodily injury, sickness
damages because . . . which occurs or disease . . .
of bodily injury during the
. . . caused by an policy period . . . Occurrence means an
occurrence accident, including
injurious exposure
to conditions, which results
during the policy
period in bodily injury
neither expected
nor intended from the
standpoint of the insured
Affiliated 1/23/73-12/31/73 Will pay on behalf This policy applies Same Bodily injury means
of the insured . . . only to bodily injury bodily injury, sicknes
as damages because . . . which occurs or disease,
of bodily injury within the which occurs during
. . . caused by an policy territory the policy period . . .
occurrence
Occurrence means an accident,
including continuous
or repeated exposure
to conditions
which results in bodily
injury . . .
Affiliated 12/31/73-1/10/75 Will pay on behalf This policy applies Same Definition of bodily injury
of the insured . . . only to bodily injury jury same as above
as damages because jury . . . which
of bodily injury occurs within the
. . . caused by policy territory
an occurrence
Definition of occurrence
same as above
*1236
Illinois 1/10/75-1/12/76 Same Same Same Definition of bodily injury
same as above
Definition of occurrence
same as above
Travelers 1/12/76-11/8/76 Same This policy applies Same Definition of bodily injury
during the policy same as above
period as described
in such sections Definition of occurrence
same as above
Liberty 11/8/76- Same This policy applies Same Definition of bodily injury
Mutual only to bodily injury same as above
. . . which occurs
within the Definition of occurrence
policy territory same as above
On June 27, 1977, INA advised Forty-Eight that INA disclaimed any duty to defend or indemnify Forty-Eight under its various policies issued to Forty-Eight with respect to any lawsuits alleging asbestos-caused injury or death, as well as to any such lawsuits filed after June 27, 1977 in which a complaint alleged that the disease manifested itself after October 31, 1972, the date INA's final policy expired. Suit was thereupon filed by INA in the Northern District of Ohio and in this district. The Ohio action was adjourned pending the outcome of this declaratory judgment action. Forty-Eight has counterclaimed for declaratory judgment.
B. MEDICAL EVIDENCE
The medical testimony of Dr. Forde A. McIver introduced at trial and the depositions of Dr. Henry Anderson and Dr. George Wright admitted into evidence deal with asbestos-caused lung diseases in detail and are in substantial agreement on all points that are relevant to the issues. Asbestos-caused lung diseases alleged in the underlying complaints and described as asbestosis, mesothelioma or bronchogenic carcinoma (also known as lung cancer) can be divided into malignant and non-malignant varieties.
Asbestosis is a non-malignant disease resulting from the inhalation of asbestos fibers of a certain length over a considerable period of time causing a bodily reaction that may eventually impair the function of the lungs. The body has several defense mechanisms that exclude from the functional areas of the lungs most of the foreign matter inhaled. It also has a mechanism for removing such matter that passes these defenses. Asbestos fibers of a certain length, however, cannot be removed and become embedded in the lung tissue in the areas where the alveoli are found and where the transfer of gases in and out of the blood takes place. Being unable to remove these minute particles of foreign matter, the body copes by walling off the particles. The walling off is done by a proliferation of fibrous cells that eventually produce a dense scar-like material in the functional area of the lungs. This process takes about six (6) months and is irreversible. Each repetition of inhalation and reaction adds a tiny deposit of scar-like tissue in this critical area.
The accumulation of scar-like tissue decreases the functional volume of the lungs, stiffens the passage ways, and impedes the transfer of gases in and out of the blood. If the process continues, the functional capacity of the lungs becomes inadequate to *1237 support normal activities and may eventually be unable to support life.
Asbestosis progresses slowly as a disease. Damage begins with the initial insult, and scar-like tissue builds up over many years before symptoms become noticeable or a diagnosis can be made. In the majority of cases symptoms do not appear until more than twenty (20) years after initial exposure. The intensity and duration of each insult as well as the frequency of repetition combine with numerous individual characteristics to determine which persons who are exposed sustain noticeable lung damage, when functional impairment becomes noticeable, and what symptoms such a person finally demonstrates. Even if after a period of exposure, no additional asbestos fibers are inhaled, tissue change may nonetheless continue and be unnoticed for decades. Since the effects of tissue changes are cumulative, an exposed person's condition is the product of an unknowable sequence of insults arranged randomly or in groups along a continuum that stretches from as long as 50 years to less than six months prior to manifestation. Additional factors such as variations in ventilation, moisture in the air, and an exposed person's health at the time of any exposure combine to make it impossible to determine which exposure to asbestos caused injury or to determine when such a person becomes "diseased."[3]
A second asbestos-caused disease, mesothelioma, is a malignant condition of cells lining the chest wall resulting in a tumor. This disease is rare except in persons who have been exposed to asbestos. The relationship between asbestos and mesothelioma is not well understood, and relatively small exposures over a period of a few years have been associated with this condition. The growth of a tumor generally follows a latent period of over 20 years during which there need not be any additional exposure. Diagnosis is possible within a short time of the beginning of tumor growth. Death follows diagnosis by less than two years in most cases. As with asbestosis it is virtually impossible to determine which exposure or exposures to asbestos cause the disease.
Bronchogenic carcinoma (lung cancer) is another malignant disease that has been associated with asbestos, at least in persons who smoke cigarettes. It also has a latent period following inhalation averaging approximately 15 to 20 years. It also progresses slowly, but can and often is diagnosed within a few years of its initial appearance.
II.
A. APPLICABLE LAW
In a contract diversity action such as this, Michigan conflict of law rules require the application of the law of the place where the insurance policies were issued and countersigned. Chrysler Corp. v. Insurance Co. of North America, 328 F. Supp. 445 (E.D.Mich.1971). The parties agree that Illinois law applies to the interpretation of all the policies except the Liberty Mutual policies, which are governed by New Jersey law. The law of both states holds that where the terms of an insurance contract are clear and unambiguous, they must be given their common and ordinary meaning. See Canadian Radium & Uranium Corp. v. Indemnity Insurance Company of North America, 411 Ill. 325, 104 N.E.2d 250 (1952); Boswell v. Travelers Indemnity Co., 38 N.J. Super. 599, 120 A.2d 250 (1956); Wilkinson & Son, Inc. v. Providence Washington Ins. Co., 124 N.J.Super. 466, 307 A.2d 639 (1973). In both states insurance contracts are to be liberally construed in favor of the insured and against the insurer. J. L. Simmons Co. v. Fidelity and Casualty Co., 511 F.2d 87 (6th Cir. 1975) (applying Ill. law); Last v. West American Co., 139 N.J.Super. 456, 354 A.2d 364 (N.J.1976). If there are ambiguities in the policy, or uncertainty over its *1238 interpretation, the policy is to be construed against the insurer, and in favor of the insured. Tiffany Decorating Co. v. General Accounts Fire and Life, 12 Ill.App.3d 597, 299 N.E.2d 378 (1973); Bryan Construction Co. v. Employer's Surplus Lines Ins. Co., 60 N.J. 375, 290 A.2d 138 (N.J.1972). See also Corbett Co. v. Ins. Co. of North America, 43 Ill.App.3d 624, 2 Ill. Dec. 148, 357 N.E.2d 125 (1976).
B. POLICY LANGUAGE AND THEORIES OF INTERPRETATION
In each policy the insurer has agreed to pay on behalf of the insured such damages as are determined because of "bodily injury" caused by an "occurrence" during the policy period. "Bodily injury" includes injury, sickness and disease. "Occurrence" includes a continuous or repeated exposure to conditions which result in bodily injury. INA, Affiliated FM, Illinois National, and Liberty Mutual contend that in lawsuits alleging asbestosis, mesothelioma, or lung cancer, coverage is provided by Forty-Eight's insurer at the time such a plaintiff's disease manifests itself, that is, the date on which the condition became known or should have become known to plaintiff or the date on which plaintiff's condition was medically diagnosed, whichever comes first. Relying heavily on statute of limitations and health insurance cases, these insurers argue that though there is tissue damage long before manifestation, a person cannot be considered injured or diseased until symptoms are noticeable or a diagnosis is made. They point out that an exposure may or may not result in lung damage; that only some persons who are exposed to asbestos dust inhale it; that only some of those who inhale it experience tissue change; and, that the level of tissue change only reaches the point of functional impairment in some of those who undergo such tissue change. Thus, they argue, exposure is not necessarily related to injury, and it is reasonable to say that injury or disease does not "occur" until functional impairment is noticeable.
They cite medical evidence to substantiate the contention that it is impossible to determine with any degree of certainty: (a) the correlation between the onset or progression of the disease with specific incidents of exposure; (b) the extent of damage at any particular date as the disease develops; or (c) the time at which bodily function begins to be impaired. They claim that the manifestation theory provides the only certain method of establishing coverage and advocate its adoption as a "rule of reason." See, General Dynamics Corp. v. Benefits Review Board, et al., 565 F.2d 208 (2d Cir. 1977).
Forty-Eight and Travelers, on the other hand, contend that manifestation is unrelated to injury. They maintain that these liability policies are "occurrence" or "accident" policies, not "discovery" or "claims made" policies. It is their position that I would drastically reform the terms of the relevant insurance contracts if I adopt the manifestation theory. They point out that the uncontroverted medical evidence indicates that tissue damage occurs shortly after inhalation and as far back as 50 years before manifestation. They cite medical evidence to show that asbestos-caused diseases involve cumulative minute injuries and are progressive. They characterize this chain of events as a "continuing tort" and claim that this makes all insurers on the risk from the time of alleged initial exposure through manifestation jointly and severally obligated to defend and to indemnify Forty-Eight if liability is found.
Following the decision in Borel, supra, holding all manufacturers of asbestos products to which a claimant was exposed jointly and severally liable, some insurers began to espouse the manifestation theory for coverage determination while others continued to advocate the exposure theory. Discussions and meetings have heightened the controversy and its continued existence is demonstrated by the fact that there are insurers on both sides of the issue in this declaratory judgment action. Forty-Eight has introduced numerous items of correspondence and other documents to show that even within certain insurance companies' *1239 practices and positions relative to this coverage controversy have changed over time.
In the three years prior to INA's letter of June 27, 1977, Forty-Eight tendered the defense of approximately 150 lawsuits to INA and the other carriers involved in this action. In every instance a defense was providedusually by INAwithout a reservation of rights raising the point that manifestation of the disease must occur during the coverage period as a requirement for coverage. There is evidence that demonstrates that INA sought contribution and litigation expense arrangements with other insurers using periods of exposure as the determining factor. In some of the suits defended by INA without objection or reservation the manifestation date of a plaintiff's disease came after the expiration of INA's coverage. In all cases there is exposure alleged during INA's policy periods. Illinois National and Affiliated FM also each declined coverage in specific cases on grounds that the dates of exposure alleged in the complaint were outside the coverage period of their respective policies.
I accordingly conclude that the conduct and correspondence of some of the insurers in this case are instructive on the issue of interpretation of the policies involved. Brooklyn Life Ins. Co. v. Dutcher, 95 U.S. 410, 24 L. Ed. 410 (1877); Weger v. Robinson Nash Motor Co., 340 Ill. 81, 172 N.E. 7 (1930). The meaning the parties themselves attach to the terms of the contract can be inferred from their conduct. Philips Electronics v. Leavens, 421 F.2d 39 (3d Cir. 1970). From such conduct it would appear that the manifestation theory appears to be a new approach and that it was this that precipitated litigation quite soon after it was put into practice by the insurers who now advocate its adoption.
C. LEGAL IMPLICATIONS OF THE EVIDENCE
Beyond this implicit approval of the exposure theory as the correct interpretation by three of the four carriers who now oppose it, there are several other factors that compel adoption of the exposure theory of coverage. The medical evidence establishes that each tiny deposit of scar-like tissue causes injury to a lung. Each such insult causing injury is an "occurrence" for the purpose of determining which coverage applies. (This must be distinguished from any test that may be used to determine when an applicable statute of limitations begins to run in the underlying lawsuits.) This occurrence takes place within a short time after inhalation in any instance where exposure results in tissue change. It is irrelevant that not all persons who are exposed experience tissue damage; it is clear that, when a lawsuit is brought by a person who alleges an asbestos-caused lung disease, there is a strong likelihood that proof is available as to inhalation and tissue change. Each minute injury may then be a part of a "continuing tort," Karjala v. Johns-Manville, 523 F.2d 155 (8th Cir. 1975), and may constitute a separate occurrence. Consequently, each insurer on the risk when a currently diseased plaintiff was allegedly exposed is obligated to acknowledge coverage and to provide a defense and possibly indemnification.
To obtain a judgment against Forty-Eight, a plaintiff in an underlying lawsuit must show exposure to Forty-Eight's asbestos products. A similar showing must be made in the underlying lawsuit as to other defendant asbestos manufacturers who, it is claimed, are involved. Having shown such exposure to the products of asbestos manufacturers and the existence of disease, such a plaintiff has made out a prima facie case of injury. Such a plaintiff's inability to fix the exact time when each injury occurred does not preclude liability in a case where such injuries are cumulative and progressive, and cannot be apportioned between given points or periods of time. Borel, supra, at 1094.[4]
*1240 By analogy, each insurer of each manufacturer has coverage for the injuries allegedly caused by that manufacturer. By being on the risk during an indivisible injurious process, each insurer is rendered jointly and severally liable to defend and indemnify its insured.[5]
Any other theory of coverage would render Forty-Eight's insurance illusory. Under Borel and similar cases Forty-Eight may be held liable for asbestos-caused injuries occurring during the period from 1923 until 1970 when it discontinued the sale of asbestos products. If the manifestation theory is adopted, Forty-Eight would be effectively deprived of coverage it paid for and might be unable to secure coverage for liability in future cases where manifestation occurs after coverage is not available. Joint and several liability of the insurers who insured Forty-Eight at various times during the injury producing process (which I equate with exposure) is the necessary analogue of Forty-Eight's potential joint and several liability to each plaintiff in the underlying lawsuits.
D. CONCLUSIONS OF LAW
Cases dealing with statute of limitation issues are not applicable to this coverage problem. See, Tijsseling v. General Accident, Fire & Life Assurance Corp., Ltd., 55 Cal. App. 3d 623, 127 Cal. Rptr. 681 (1976). Statute of limitation cases are based on public policy considerations which balance the prejudice to a defendant caused by stale claims when weighed against considerations of fairness to a plaintiff. So considered, it is at the time an asbestos-caused disease manifests itself in a way that implicates a causal relationship to the manufactured product that the public interest in limiting the time for asserting a claim attaches, and it is then that the statute of limitations begins to run. Karjala, supra; Urie v. Thompson, 337 U.S. 163, 69 S. Ct. 1018, 93 L. Ed. 1282 (1949). Because of this, courts often speak of the "injury" having "occurred" at that time as a way of determining when a cause of action accrues. Discovery is a necessary requirement for a fair rule in limitations of actions cases, but, from an insurance coverage perspective, it is the injury and not its discovery that subjects a manufacturer to liability and consequently its insurer to a duty to defend and to indemnify. The alleged injury in the underlying lawsuits is the formation of scar-like tissue because of the implanting of asbestos fibers in the lungs. If this injury causes a plaintiff to suffer damages, the insurer who was on the risk at the time that that injury occurred has the relevant coverage.
INA has cited General Dynamics, supra, and its predecessor, Travelers Ins. Co. v. Cardillo, 225 F.2d 137 (2d Cir. 1955), cert. denied, 350 U.S. 913, 76 S. Ct. 196, 100 L. Ed. 800 (1955) as explicit support for its position that the date of manifestation of disease should control coverage. Both these cases deal with workmen's compensation awards under the Longshoremen's and Harbor Worker's Compensation Act and apply *1241 the "last insurer" of the "liable employer" rule of coverage. They are clearly distinguishable in that Congress altered the common law to further a statutory compensation scheme. This and similar state workmen's compensation schemes that establish a "last employer" or "last exposure" rule for occupational disease cases are explicitly in derogation of the common law of contracts. Such common law principles are nonetheless still applicable in this case. The courts in General Dynamics and Cardillo concluded as they did because they held that the determination by Congress as to how the equities should be balanced in arriving at a comprehensive compensation scheme had to be followed. In this case I am bound to apply the contract laws of Illinois and New Jersey, and I am not permitted to determine public policy which may be in derogation of the common and statutory law of those states. If such is to be done, it must be done through legislative action.
There is no support in the insurance policies in this case for the contention that bodily injury must manifest itself during the policy period to invoke coverage. Such a requirement could have easily been drafted within the definition of "occurrence" assuming that such a restriction would not be contrary to public policy. Stauffer Chemical Co. v. Ins. Co. of North America, 372 F. Supp. 1303 (S.D.N.Y.1973) concerned an "occurrence" policy. Stauffer manufactured a product that was intended to protect potato seedpieces against "seed rot" and "damp off." It was shown that the product was not effective in so doing. INA denied coverage on the ground that the policy did not apply to liability which arose out of the ineffectiveness or failure of the product to perform as represented. INA said that there was no occurrence within the meaning of the policy because the conditions that caused injury were not Stauffer's productit was rather the failure to prevent such conditions that caused injury. The court rejected this interpretation:
However, it was not made a condition of coverage with respect to the definition of occurrence in the instant policy that the condition causing the injury be created by the insured, and the court may not inject a clause into the policy or make a new contract for the protection of the insurer. Id. at 1306.
Stauffer provides guidance in the matter of construction of insurance contracts, but it also meets INA's contention in this case that any given exposure cannot be an occurrence because it did not cause the worker to become diseased, that it merely made such a disease possible when the effects of additional exposures were added to it.
The proponents of the manifestation of disease theory cite case law holding that the time when the injury or damage occurs and not the time when the negligent act occurs determines insurance coverage. See, e. g., Peerless Ins. Co. v. Clough, 105 N.H. 76, 193 A.2d 444 (1964); Remmer v. Glen Falls Indemnity Co., 140 Cal. App. 2d 84, 295 P.2d 19 (1956); Annotation 57 ALR2d 1385. They argue that there is an implicit analogy between the negligence-injury sequence in those cases and the exposure-disease (severe enough to manifest itself) sequence alleged in the underlying lawsuits. This analogy is rejected. The negligent acts alleged in the underlying lawsuits occurred when the products were sold without sufficient warning, not when the plaintiffs were exposed. The medical evidence in this case indicates clearly that injury to lung tissue occurs soon after exposure, not when the disease manifests itself.
Two recent United States District Court cases deal with occurrence policies in this context. In Porter v. American Optical, Civil Action No. 75-2202 (E.D.La., entered November 23, 1977) (cited by INA) an asbestos worker who was diagnosed as having asbestosis, sued the manufacturer of a respirator alleging that his disease was caused by defects in the apparatus as well as defendant's failure to warn him of the danger involved in its use. Following a jury verdict and based on some of the evidence adduced at trial the court found that the insurer on the risk at the time of manifestation had to afford coverage even *1242 though another insurer also had an occurrence policy and had been on the risk throughout much of the period during which the plaintiff was exposed to asbestos. The court equated "bodily injury" with "sickness or disease sustained by any person," and found that the manifestation of the disease was the occurrence that triggered coverage. Such a construction is not warranted here. While the definition of bodily injury includes sickness or disease in the policies before me, the definition also specifically includes injury to the body within its terms. Because of the extensive medical testimony that tissue injury is sustained long before a worker can be termed diseased, the plain meaning of the term "bodily injury" requires coverage at the time of the insult of asbestos that follows upon exposure. Porter is also distinguishable in that it deals with coverage of the liability of a manufacturer of a respirator, not a manufacturer of asbestos products. The liability of a manufacturer of a product designed to prevent injury from an inhaled substance may be materially different from the liability of the manufacturer of the deleterious substance inhaled.
The second case is Tenneco Chemicals v. Employers Mutual Liability Ins. Co., 76 Civ. 809 (S.D.N.Y., filed April 8, 1977) (cited by Forty-Eight). In the underlying lawsuit to that case, the plaintiff had been injected with a radioactive drug for testing purposes. The drug was defective in that it underwent atomic decay, breaking down into new elements and emitting harmful radiation during a 23-year period while lodged in plaintiff's body. Employers Mutual Liability Insurance Company was on the risk as an insurer for an eight-year period from two years after the injection until ten years after the injection. The policy provisions are the same as those before me in this case. The court there held that occurrence coverage is perhaps the broadest possible coverage and that injury caused by the drug was sustained during Employers' coverage period. This injury was held to be an occurrence for the purpose of determining coverage even though the condition of the plaintiff in the underlying lawsuit was not diagnosed until more than eleven years after the policy expired. Tenneco Chemicals is solid support for my holding.
III.
IMPLICATIONS OF THE ADOPTION OF EXPOSURE THEORY
The language of the various policies, the medical evidence as to bodily injury, and the reality of joint and several liability in the underlying lawsuits combine to mandate the adoption of the exposure theory of coverage. This conclusion, however, leaves several questions unanswered. How is the duty to indemnify to be apportioned? What is the liability of Forty-Eight in its self-insured status? How is "stacking" of policy limits to be avoided?
In underlying cases in which Forty-Eight is held liable, it will in all likelihood be held jointly and severally liable with other manufacturers for all damages caused by an indivisible injury.[6] This may ultimately result in an equal sharing of the payment of the judgment or in some negotiated formula for payment by each manufacturer found liable. Since each insurer covered Forty-Eight for differing periods of time, the obligation to indemnify should be apportioned on the basis of the relative lengths of their respective coverage periods.
As explained in footnote 5, supra, the indivisible and cumulative nature of the injuries and the possibility of a joint and several judgment may render Forty-Eight liable for all damages caused by an injury, some portion of which was caused by exposure *1243 to asbestos occurring after 1970 when Forty-Eight stopped manufacturing asbestos products. It is also possible that Forty-Eight may be held liable for all of the damages caused by an injury, some portion of which was caused by exposure to asbestos products of other manufacturers before a plaintiff was exposed to Forty-Eight's products. This application of the doctrine of joint and several liability, in addition to providing a remedy when the cause or time of the injury cannot be determined precisely, is appropriate because the medical evidence shows that all insults to lung tissue from asbestos combine to cause functional impairment. Insults occurring before and/or after exposure to Forty-Eight's products would not cause the same injury if it were not for the insults that resulted from exposure to those products.
Since part of the injurious process for which Forty-Eight may be held liable in an underlying lawsuit may occur before 1955, or at some time in the future when it is uninsured, it must bear a part of such judgment in the same proportion as the periods during which it had no coverage bear to the total period of proved exposure. This does not render Forty-Eight's coverage illusory; the insurers have a duty to indemnify Forty-Eight for judgment liability for the injuries that are apportioned for the periods of their respective coverages, while Forty-Eight must bear judgment liability for injuries apportioned to the period when it had/has no coverage.[7]
The table of coverage, supra, shows that different individual policies were in effect for varying lengths of time and had differing limits of liability. It might be argued that since an injury occurs each time an asbestos fiber insults the tissue of a lung, the policy limits for each policy period could be "stacked" to produce a coverage liability in any given case that would be many times the aggregate limit of any one policy. Forth-Eight has stated on the record that it does not seek to stack coverages in this way. In any event, no insurer should be held liable in any one case to indemnify Forty-Eight for judgment liability for more than the highest single yearly limit in a policy that existed during the period of the claimant's exposure for which judgment was obtained.
Various aspects of these questions may arise. Insurers will be able to resolve many, if not all, of these questions since they possess great skills in the compromise and settlement of disputes.
IV.
THE DUTY TO DEFEND
The duty to defend requires additional comment in that it is distinguishable from and in some ways broader than the duty to indemnify. Sprayregen v. American Indemnity Co., 105 Ill.App.2d 318, 245 N.E.2d 556 (1969); McFadyen v. North River Insurance Co., 62 Ill.App.2d 164, 209 N.E.2d 833 (1965). Each of the relevant policies contains a provision that the insurer will defend any suit against its insured that alleges injury, sickness, or disease and seeks damages on account thereof even if such suits are groundless, false or fraudulent. None of the policies contains language that makes manifestation a factor in determining whether or not there is a duty to defend.
*1244 In Maryland Casualty Co. v. Peppers, 64 Ill. 2d 187, 355 N.E.2d 24 (1976), the Illinois Supreme Court said:
In determining whether the insurer owes a duty to the insured to defend an action brought against him, it is the general rule that the allegations of the complaint determine the duty. If the complaint alleges facts within the coverage of the policy or potentially within the coverage of the policy the duty to defend has been established. (Citations omitted).
This duty to defend extends to cases where the complaint alleges several causes of action or theories of recovery against an insured, one of which is within the coverage of a policy while the others may not be. (Citations omitted). 64 Ill. 2d at 193-195, 355 N.E.2d at 28.
New Jersey law is to the same effect. See, Burd v. Sussex Mutual Ins. Co., 56 N.J. 383, 267 A.2d 7 (1970).
The cumulative and indivisible nature of the injuries alleged in an underlying lawsuit may result in a judgment holding Forty-Eight jointly and severally liable for all of a plaintiff's damages. The cumulative and indivisible nature of the injuries also makes it impossible to determine when any given portion of such injuries occurred. Consequently, the resulting judgment relates to the entire period of exposure and must be apportioned by the length of each insurer's coverage. Query whether it necessarily follows that the duty to defend or bear the cost of defense should also be apportioned in this way. The public policies behind such an apportionment of the duty to indemnify do not exist with the same force as to the duty to defend. It might be contended that the insurer on the risk at the time the suit is brought, or the manufacturer if it is uninsured at the time the suit is brought, should assume all of the responsibilities and costs of defense. This might, however, result in unequal treatment of the various insurers. What is more, the defense of lawsuits that arise out of injuries caused during a policy period is one of the benefits Forty-Eight paid premiums for and is entitled to receive.
The apportionment of the duty to indemnify should be accompanied by a similar apportionment of the costs of defense. These costs must also be apportioned over the entire period during which the alleged injuries occurred to reflect the cumulative and indivisible nature of the process that gave rise to the cause of action. The duty to defend as established by this method will be coextensive with the duty to indemnify. In every case in which an insurer (or insurers) has coverage and there is a possibility that because of the allegations of a complaint it may be called upon to indemnify Forty-Eight, it also has a duty to defend or share in the costs of defense. These costs, if originally borne by one insurer, should be apportioned among all insurers under a duty to defend by the number of years of exposure for which each insurer provided coverage.
Since Forty-Eight is to be considered self-insured prior to 1955 and may well be uninsured in the future, it will also be obligated to bear such defense costs in direct proportion to the other insurers as stated above. It would be anomalous to hold that Forty-Eight is liable for a portion of a judgment because part of the alleged injury occurred when it had no coverage but allow it to avoid the costs of defending the suit for that period. As mentioned, supra, the policies involved are not "claims made" policies that provide coverage and defense only if a claim is brought within the policy period, but rather "occurrence" policies that provide coverage and defense for injuries that occur within the policy period. Since a portion of the injury is allocated to the period for which Forty-Eight is considered self-insured, it must be treated as an insurer, and a portion of the defense costs must be allocated to that period.[8]
*1245 Since notice pleading was adopted, it has been held that an insurer has a duty to defend even if there is a doubt whether a complaint against an insured comes within the coverage of a policy. This duty to defend continues "until such time as the claim against the insured is confined to a recovery that the policy did not cover." Carboline Co. v. Home Indemnity Co., 522 F.2d 363 (7th Cir. 1975) (applying Illinois law and citing numerous cases). Many of the underlying complaints allege general dates of exposure, and since exposure determines coverage, such an allegation is sufficient to trigger the duty to defend. Burger v. Continental Nat. Am. Group, 441 F.2d 1293 (6th Cir. 1971). If more than one insurer was on the risk during the alleged periods of exposure, they will be jointly and severally obligated to assume the defense. In those cases where no specific dates of exposure are alleged, the insurer providing coverage on the date the suit is filed must undertake the defense.[9] This duty, likewise, will fall upon Forty-Eight for suits that are brought in a period in which it has no coverage. In these suits as well as in instances where, because of exposure prior to 1955 it could ultimately be liable for a substantial part of the judgment, Forty-Eight may want to assume control of the defense in any event. If it does, it will be entitled to be reimbursed for such part of the costs of that defense by any insurer who would be obligated to pay part of a judgment.
This opinion constitutes the required findings of fact and conclusions of law.
An appropriate order has been entered.
NOTES
[1] Forty-Eight had additional insurers, but its records of coverage prior to 1955 have been destroyed. For the purposes of this declaratory judgment action it will be considered self-insured prior to that date.
[2] The parties entered into an agreement, supplemented by a stipulation in open court between Liberty Mutual and Forty-Eight to provide a defense for Forty-Eight and to handle the underlying lawsuits during the pendency of this declaratory judgment action, without prejudice to the rights of any party thereto to assert any claim or defense.
[3] For a discussion of asbestosis and its effects on the body see Selikoff, Bader, Bader, Churg, and Hammond, "Asbestosis and Neoplasis," 42 Am.J.Med. 487 (1967); Selikoff, Churg, and Hammond, "The Occurrence of Asbestosis Among Insulation Workers," 132 Ann.New York Acad.Sc. 139 (1965).
[4] See also, Prosser, Law of Torts, (4 Ed. 1971), pp. 313-323, regarding apportionment of damages; Nachman, "The New Policy Provisions for General Liability Insurance," 18 The Annals, No. 3, p. 197 (Fall, 1965).
Note also the reference to injurious exposure to conditions which results in injury. This eliminates any requirement that the injury result from a sudden event. Although it is most common that the injury takes place simultaneously with the exposure, there are many instances of injuries taking place over an extended period of time before they become evident. For example, slow ingestion of foreign substances of inhalation of noxious fumes. In cases such as these, the definition of occurrence serves to identify the time of loss for the purpose of applying coverage the injury must take place during the policy period.
In some exposure types of cases involving cumulative injuries, it is possible that more than one policy will afford coverage. Under these circumstances, each policy will afford coverage to the bodily injury or property damage which occurs during the policy period.
Elliott, New Comprehensive General Liability Policy, Liability Insurance Disputes Litigation Series, Practicing Law Institute, 12-3, 12-5 (1968). Accord, Long, Law of Liability Insurance, § 11.05A.
[5] For an analogous situation involving property damage that resulted from a process of dry rot following defective construction, see Groul Construction v. Insurance Company of North America, 11 Wash.App. 632, 524 P.2d 427 (1974).
[6] In the event that special questions to the jury or the post-trial certification of the judge establishes the dates of exposure to the products of each manufacturer, the judgment could be apportioned on the basis of the relative lengths of the periods of exposure.
It should be noted that this opinion deals only with insurance coverage and does not in any way address or establish what the liability of Forty-Eight may be in any underlying lawsuit.
[7] A hypothetical case may clarify this point. Assume, in addition to the facts as to coverage in this case, that Forty-Eight has liability coverage for asbestos-related injuries through 1979, but not thereafter. Assume further an award through a joint and several judgment to a plaintiff who was found to have been exposed to asbestos dust from January 1, 1945 to December 31, 1984. Also, assume that the proofs show that the plaintiff was exposed to the asbestos products of manufacturers X and Y from 1945 to 1950, to the products of Forty-Eight, and manufacturers X, Y, and Z from 1950 to 1970, and to the products of manufacturers Y, Z, and A from 1970 through 1985. Each insurer would be obligated to indemnify Forty-Eight for 1/40th of the judgment for each year that it was on the risk. Since Forty-Eight was self-insured or uninsured during portions of this period it would likewise be obligated to pay a portion of the judgment for each year of exposure during which it had no coveragein this example 15/40ths.
[8] The following hypothetical case illustrates this apportionment. Assume that Forty-Eight has coverage for asbestos-caused injuries through 1979, but not thereafter. Assume further that a lawsuit is brought in 1986 and that the plaintiff alleges exposure to asbestos dust from January 1, 1965 to December 1, 1984. Forty-Eight must assume the defense and ultimately pay 5/20ths of the cost of the defense.
[9] If pretrial discovery uncovers specific dates of exposure which indicate that the current insurer cannot be held liable to indemnify Forty-Eight, that insurer may tender the defense to the insurer (or insurers) who could be held liable. An insurer faced with such a tender either from the current insurer or from its insured must assume the defense or make arrangements for sharing the cost of the defense. See, Liberty Home Improvement v. Royal Globe Ins. Co., CCH Auto Cas. 17, 682 (¶ 9394) (Tenn.App.1977). Due regard must be given to possible conflicts of interest.
When the duty to defend arises as a question between insurers it is proper to go outside the complaint to make this determination. This is particularly so because of notice pleading. Long, Law of Liability Insurance § 502 (1976); see also, Hartford Acc. & Indemnity Co. v. Allstate Ins. Co., 5 Ohio App. 2d 287, 215 N.E.2d 416 (1966). Once it has been established by the investigation of the current insurer that the dates of exposure place the duty to defend on a prior insurer, the current insurer is entitled to be reimbursed for the costs of defense it has incurred.
This court notes that a pragmatic approach would be to seek a determination of underlying liability before any attempt is made to fix the duty to defend.
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01-03-2023
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10-30-2013
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https://www.courtlistener.com/api/rest/v3/opinions/1527340/
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221 F. Supp. 191 (1963)
MOHASCO INDUSTRIES, INC., a New York corporation, Plaintiff,
v.
E. T. BARWICK MILLS, INC., a Georgia corporation,
and
Barwick Carpet Mills, Inc., a Georgia corporation, Defendants.
Civ. A. No. 7000.
United States District Court N. D. Georgia, Atlanta Division.
August 29, 1963.
*192 Albert E. Mayer, Atlanta, Ga., Pennie, Edmonds, Morton, Barrows & Taylor, New York City, for plaintiff.
Wilson, Branch & Barwick, Atlanta, Ga., Charles H. Walker, Albert E. Fey, Fish, Richardson & Neave, New York City, for defendants.
MORGAN, District Judge.
This cause came on to be tried before the Court, sitting without a jury, on February 4th through February 12th, 1963. This is an action for alleged infringement of two patents brought by Mohasco Industries, Inc., a New York corporation (hereinafter referred to as Mohasco) against E. T. Barwick Mills, Inc., and Barwick Carpet Mills, Inc., both Georgia corporations. For the purposes of this suit, defendant Georgia corporations will be hereinafter referred to as Barwick. The patents alleged to be infringed are:
Patent Filed Issued Claims in Suit
Odenweller No. 2,853,032 4/1/54 9/23/58 1, 3, 6, 8, 9
Crawford No. 2,853,033 7/22/54 9/23/58 1, 3, 4, 5, 8, 10, 11
A third patent, Crawford No. 2,853,034, which was originally charged to be infringed, has been withdrawn from suit.
The patents in suit relate to apparatus called "pattern attachments" which are applied to the large special-purpose sewing machines used for making tufted carpet. These attachments control the feed of yarn to the machines in such a way as to cause the machines to produce carpets in which some of the loops or tufts of the carpet are longer or higher *193 than others, the low loops and the high loops being distributed over the surface of the carpet in a pre-arranged pattern.
DISCUSSION
The principal defense which defendant Barwick asserts and claims to be controlling is that the patents are invalid in view of the statutory disqualification from patenting, citing the portion of 35 U.S.C. § 103, which provides in part:
"if the differences between the subject matter sought to be patented and the prior art are such that the subject matter as a whole would have been obvious at the time the invention was made to a person having ordinary skill in the art to which the said subject matter pertains." (emphasis supplied)
This statutory requirement that a patent may not be sustained if its subject matter "would have been obvious" to one skilled in the art is the principal ground of invalidity in a large proportion of the many cases in which patents, duly issued by the Patent Office, are held by the courts to be invalid.
It has long been a matter of concern that, despite concerted efforts to avoid the issuance of patents which do not meet the statutory requirements as interpreted and enforced by the courts, such patents, nevertheless, continue to be issued. That it is the duty of the courts to protect the public against the enforcement of patents which do not meet the statutory requirements is clear.
Before setting forth the Court's findings of fact and conclusions of law (proposed findings of fact and conclusions of law having been submitted by both the plaintiff and defendant in the case at hand) the Court shall review briefly what it construes to be the controlling principles of law in the matter.
It will be noted that the statutory requirement of unobviousness is in the subjunctive. The significance of this is to disqualify, as the subject of a valid patent, not merely what was in fact obvious to persons skilled in the art, but also what would have been obvious to a hypothetical persons skilled in the art in the sense that he was aware of all the ramifications of the machinery and mechanical principles which have been used or suggested for use in the art, regardless of his actual knowledge of them, combined with the occasion and incentive to apply this knowledge. It is admittedly difficult to judge what "would have been obvious" to such a hypothetical person. In the present case, however, this difficulty largely disappears, for in this case the subject matter of the patents was in fact independently and spontaneously thought of almost simultaneously by a number of persons concerned with the problem, in different parts of the country,[1] as soon as the occasion to do so arose.[2] The fact that all three concerned themselves with the problem at about the same time and independently built the patent attachments demonstrates to this Court that the subject matter "would have been obvious".
Since patents are restrictions upon the natural right of members of the public to avail themselves of the abilities of skilled artisans, and upon the right to free competition which is basic to our economic system, monopolies based on patents must be jealously scrutinized by the courts to make certain that they are of the character which the statutes authorize. As the Supreme Court said in Great Atlantic & Pacific Tea Company v. Supermarket Equipment Corporation, 340 U.S. 147, 152, 154-155, 71 S. Ct. 127, 95 L. Ed. 162 (1950):
"The function of a patent is to add to the sum of useful knowledge. *194 Patents cannot be sustained when, on the contrary, their effect is to subtract from former resources freely available to skilled artisans. (340 U.S. p. 152, 71 S.Ct. p. 130)
* * * * * *
"Every patent is the grant of a privilege of exacting tolls from the public. The Framers plainly did not want those monopolies freely granted. The invention, to justify a patent, had to serve the ends of science to push back the frontiers of chemistry, physics, and the like; to make a distinctive contribution to scientific knowledge. That is why through the years the opinions of the Court commonly have taken `inventive genius' as the test. It is not enough that an article is new and useful. The Constitution never sanctioned the patenting of gadgets. Patents serve a higher end the advancement of science. An invention need not be as startling as an atomic bomb to be patentable. But it has to be of such quality and distinction that masters of the scientific field in which it falls will recognize it as an advance. Mr. Justice Bradley stated in Atlantic Works v. Brady, 107 U.S. 192, 200 [2 S. Ct. 225, 27 L. Ed. 438], the consequences of a looser standard:
"`It was never the object of those laws to grant a monopoly for every trifling device, every shadow of a shade of an idea, which would naturally and spontaneously occur to any skilled mechanic or operator in the ordinary progress of manufactures. Such an indiscriminate creation of exclusive privileges tends rather to obstruct than to stimulate invention. It creates a class of speculative schemers who make it their business to watch the advancing wave of improvement, and gather its foam in the form of patented monopolies, which enable them to lay a heavy tax upon the industry of the country, without contributing anything to the real advancement of the arts. It embarrasses the honest pursuit of business with fears and apprehensions of concealed liens and unknown liabilities to lawsuits and vexatious accountings for profits made in good faith.'"
To the same effect are the holdings of the Court of Appeals of this Circuit in Glikin v. Smith, 269 F.2d 641, 651 (5 Cir., 1959), cert. denied 361 U.S. 915, 80 S. Ct. 260, 4 L. Ed. 2d 185:
"The patentee's claims, as he construes them in this case, are broad in scope and far-reaching in effect. A substantial segment of the hearing aid industry and an enormous number of the hard of hearing public will be affected if the patentee's contentions should be sustained in this litigation. In the circumstances, the interest of the public, paramount to the interests of the patentee and of the user of the accused device, compels a close scrutiny of the plaintiff's claim of invention."
and in Stabler v. Bright Leaf Industries, Inc., 261 F.2d 383, 385 (5 Cir. 1958), cert. denied 359 U.S. 960, 79 S. Ct. 799, 3 L. Ed. 2d 766 (1959):
"Inventions require close scrutiny lest patent monopolies be granted to `each slight technological advance in an art' merely because it is useful."
See also Anthony v. Ranco, Incorporated, 316 F.2d 509, 512 (5 Cir. 1963).
The patent statutes set forth certain requirements which must be met if a patent is to be held valid. The most important of these, the requirement of "invention", is the focal issue in this case.
Here the question of patentability boils down to the question of invention, that is, whether the subject matter "would have been obvious" to one skilled in the art so as to come within the prohibition of Section 103 of the patent statutes quoted above. Barwick contends that the devices disclosed and claimed in the patents in suit do not involve invention.
*195 Generally, all patents, publications and public uses which have been in existence prior to a patentee's date of invention or more than a year prior to his filing date are referred to as "prior art". If a patentee's alleged invention is identically disclosed in the prior art, it clearly is not new. In such a situation, the alleged invention is said to lack novelty and the patent must be declared to be invalid.
It is where the patentee's alleged invention is not identically disclosed in the prior art as defined above, and, therefore, is not directly anticipated, that the conception of "invention" or "obviousness" becomes an issue. To evaluate invention, one must first determine just what difference or differences exist between the patentee's contribution and the prior art, and then determine whether this difference measures up to the statutory definition of invention.
In making inquiry regarding obviousness, it is important to note that the prior art includes all patents, publications and uses, etc., irrespective of whether a particular patentee was aware of them or not. Certainly no one person could possibly keep abreast of all the scientific and engineering advances in this rapidly changing world, but the purpose of the patent law is to encourage the disclosure of new, non-obvious developments, and the monopoly which a patent carves out of the public domain is granted only in exchange for such developments. Therefore, a patentee's contribution must be measured against the entire body of prior art, and he is presumed by law to have been familiar with the whole prior art as it existed at the time he made his contribution. See Mast, Foos & Company v. Stover Manufacturing Company, 177 U.S. 485, 494, 20 S. Ct. 708, 44 L. Ed. 856.
The hypothetical person "having ordinary skill in the art" has been characterized by the cases as a person of education and training in his art. Speaking with regard to the communications art, the Court in Radtke Patents Corporation v. Coe, 74 App.D.C. 251, 122 F.2d 937, 946 (1941), cert. denied American Tri-Ergon Corp. v. Radtke Patents Corp., 314 U.S. 695, 62 S. Ct. 410, 86 L. Ed. 556 (1941) defined persons skilled, and their knowledge of their calling, thus:
"the knowledge of the prior art is not limited to the knowledge of lawyers or of the public generally, but is that of the experts and scientists, the trained egnineers who have been working for many years in the electrical art of sound communication. If expert testimony and prior scientific publications reveal such knowledge, sufficient to teach such men or to suggest to them what is here claimed to be invention, then the fact that such claims may seem remarkable, or new, or profound, to lawyers or to the public generally, is not sufficient to constitute invention."
Likewise, cases hold that obviousness must be measured in terms of persons whose business it is to design and build the things in question, not those who only use them. For example, what in the present case would have been obvious to a tufting machine designer cannot be inventive no matter how obscure or mysterious it might have seemed to a carpet manufacturer who merely uses such machines and consequently has no occasion to be concerned with the intricacies of their design. Zoomar, Inc. v. Paillard Products, 152 F. Supp. 328, 331 (S.D.N.Y. 1957), affirmed 258 F.2d 527 (2 Cir. 1958), cert. denied 358 U.S. 908, 79 S. Ct. 237, 3 L. Ed. 2d 230 (1958).
The test of obviousness as the test of invention is not new with the quoted section of the Patent Act of 1952, although it was first expressed by statute at that time. Long before the statute was enacted, the courts had applied the test, first announced by the Supreme Court in 1850 in Hotchkiss, et al. v. Greenwood, et al., 11 How. 248, 266, 52 U.S. 248, 266, 13 L. Ed. 683 (1850). To the same effect are the consistent holdings of the Court in a long line of cases such as Great Atlantic & Pacific Tea Company v. Supermarket Equipment *196 Corporation, supra, and Atlantic Works v. Brady, 107 U.S. 192, 200, 2 S. Ct. 225, 27 L. Ed. 438.
Nor was Section 103 intended to change or modify in any way the standard of invention as expressed by the prior decisions, Vincent v. Suni-Citrus Products Company, 215 F.2d 305, 315-316 (5 Cir. 1954), cert. denied 348 U.S. 952, 75 S. Ct. 440, 99 L. Ed. 744 (1955):
"The object and purpose of the patent statutes is to promote really novel advances in the art, rather than those attributable merely to a person having ordinary skill in the trade. The judgment in this case was entered before the enactment of Sec. 103 of the Patent Act of 1952, 35 U.S.C., § 103, and this section, therefore, is not specifically applicable in the decision of this case. Nevertheless, since the section purports and has been construed to merely embody existing law, * * *.
* * * * * *
"It is sufficient to say that, if we should assume that either of these processes is new in the sense of not having been tried before, we should be obliged to hold that they present nothing novel since what they purport to do would have been perfectly obvious, at the time the invention was made, to a person having ordinary skill in the art of liming and drying citrus waste. Though, therefore, that process may be as useful and efficient as other liming and drying methods are, or even more so, nevertheless, it is perfectly plain that they claim nothing which so advances the art as to justify monopoly protection. Altoona Publix Theatres, Inc. v. American Tri-Ergon Corp., 294 U.S. 477, at page 486, 55 S. Ct. 455, 79 L. Ed. 1005."
Subsequent opinions in the Fifth Circuit have reaffirmed this view. See Glikin v. Smith, supra, and Stabler v. Bright Leaf Industries, Inc., supra.
Finally, it should be noted that while obviousness is the test of invention, this test is to be applied more strictly in the case of combination patents. A "combination patent" claims an invention which purports to be a new combination made up of a number of elements, each of which itself is old. The courts have held that there is an inherent improbability that the subject matter of such patents can amount to invention, and therefore combination patents are viewed critically. Great Atlantic & Pacific Tea Company v. Supermarket Equipment Corporation, supra.
In striking down a combination patent in Fritz W. Glitsch & Sons v. Wyatt Metal & Boiler Works, 224 F.2d 331, 334 (5 Cir. 1955), the Court of Appeals of this Circuit referred to "the stricter test for patentable invention now required to justify monopoly protection". In Glikin v. Smith, 269 F.2d 641, 651-652, the Court of Appeals of this Circuit held:
"A presumption of validity attaches to a patent. Because of this presumption and because a patent is a legislatively condoned monopoly that is not granted willy nilly to just any advance or improvement in commerce, combination patents are viewed strictly. This is particularly true where the elements in the combination are old and known to the art, since a liberal construction of such combination claims would erase the line, such as it is, between mechanical judgment and inventive skill."
The patents sued on in this case are for combinations.
To be sure, the issuance of a patent carries with it a presumption of validity (35 U.S.C. § 282) but the Courts recognize the problems which inhere in an immense administrative operation such as is carried on by the Patent Office and have minimized the presumption accordingly. See Gentzel v. Manning, Maxwell & Moore, Inc., 2 Cir., 230 F.2d 341, cert. denied 352 U.S. 840, 77 S. Ct. 63, 1 L. Ed. 2d 57; Wabash Corporation v. Ross Electric Corporation, 2 Cir., 187 F.2d 577.
*197 The fact that the Patent Office issues a patent does not necessarily mean that the subject matter was patentable. Pursuant to a rule of long-standing, still in existence today, the Patent Office must grant a patent even when in doubt as to its patentability. In re Thomson, 26 App.D.C. 419, 1906 C.D. 566, 571 (1906):
"In case of ordinary doubt, the policy of the patent system, as customarily maintained in the Patent Office, has been to give the applicant the benefit thereof, because no absolute right of property is conferred by the grant of a patent. (Ex parte Fanshawe, C.D., 1891, 203; 57 O.G., 1127). The patentee is merely put in a position to assert his prima facie right against infringers who may, in their defense, raise the question of the validity of the patent, and have the same finally adjudicated in the light of a full presentation and consideration of all the evidence attainable in respect of anticipation, prior knowledge, use and the like."
See also Application of Hummer, 241 F.2d 742, 746, 44 CCPA 814, and Application of Citron, 251 F.2d 619, 620, 45 CCPA 773.
Considering what has been said, it is hardly surprising that Courts have observed that the standard of patentability in the Patent Office is below that required by the Courts. Packwood v. Briggs & Stratton Corporation, 195 F.2d 971, 974 (3 Cir., 1952) cert. denied 344 U.S. 844, 73 S. Ct. 61, 97 L. Ed. 657 (1952); Picard v. United Aircraft Corporation, 128 F.2d 632, 641 (2 Cir., 1942) cert. denied 317 U.S. 651, 63 S. Ct. 46, 87 L. Ed. 524 (1942):
"The Patent Office grants from 50,000 to 100,000 patents each year. The Committee of the Science Advisory Board reported that it was one of the primary defects in our patent system that the Patent Office issues `an enormous number of patents, many of which should never be issued * * *' That probably means, as the Committee intimated, that the standard of inventiveness employed by the Patent Office is far below that employed by the courts." (emphasis supplied)
The history of the development of the attachment here concerned constitutes, in this Court's opinion, the most reliable evidence as to the presence or absence of invention. When several persons, such as Odenweller of James Lees, Crawford of Mohasco, and Parker and Short of Callaway, addressing themselves to the same alleged problem each independently arrive at the same solution shortly after the problem is presented, lack of a patentable invention is strongly indicated.
In evaluating "invention", that is, obviousness, the critical importance of the surrounding circumstances was emphasized by Judge Learned Hand in Safety Car Heating and Lighting Company v. General Electric Company, 155 F.2d 937, 939-940 (2 Cir., 1946).
The Courts have consistently held that evidence of simultaneous solution of a problem by several independent workers is such as to "effectively refute" any suggestion that the solution was unobvious or involved invention. Graham v. Jeoffroy Manufacturing, 206 F.2d 769, 771 (5 Cir., 1953):
"The District Court, in holding the patent invalid for lack of invention and anticipation by the prior art, found that when the bending and breakage of the beams on the plows occurred two individuals, Floyd W. Tyler and J. A. Robinson, independently and without any knowledge of the Graham device, developed and used an angular brace to reinforce their clamps and plow beams very similar to that of the patent in suit. In this connection, appellees concede that the Graham structure probably antedated the Tyler and Robinson developments and, therefore, that the latter may not be relied upon for the purpose of anticipating Graham. However, even though these developments admittedly do not rise to the dignity of patentable invention, we *198 think they nevertheless remain significant as tending to reveal spontaneous and independent solutions of the problem without any knowledge of the Graham device by ordinary unskilled farmers and laymen, and effectively refute appellants' claim that the Graham patent involved any invention, or anything beyond the skill of an ordinary workman or mechanic."
To the same effect, see Thomson Spot Welder Company v. Ford Motor Company, 265 U.S. 445, 452-453, 44 S. Ct. 533, 68 L. Ed. 1098. And especially is this so when each of the several independent workers addressed himself to the problem, and quickly found the solution, only shortly after the need for a solution became apparent, as did Parker and Short in the case at hand. See McElrath v. Industrial Rayon Corporation, 123 F.2d 627, 629 (4 Cir. 1941); Fluor Corporation v. Gulf Interstate Gas Company, 259 F.2d 405, 407-408 (5 Cir. 1958); J. R. Clark Company v. Murray Metal Products Company, 219 F.2d 313, 318 (5 Cir. 1955).
In the case under consideration, several persons who had occasion to address themselves to the manufacture of patterned, or textured, tufted carpet independently arrived at substantially the same device for doing so very shortly after the desire to have such a product arose. The facts are strikingly similar to those in the Safety Car Heating and Lighting case above referred to.
The foregoing discussion and cases cited therein appear applicable to the principal issue in the case under consideration, and after having considered the testimony, the exhibits and depositions, along with the briefs of both parties and the proposed findings of fact and conclusions of law (submitted by both parties), the Court hereby makes the following findings of fact and conclusions of law.
FINDINGS OF FACT
1.
Mohasco Industries, Inc., plaintiff, is a New York corporation having its principal place of business in Amsterdam, New York. Defendants are E. T. Barwick Mills, Inc., and Barwick Carpet Mills, Inc., a wholly-owned subsidiary, both Georgia corporations. There is no dispute as to jurisdiction and venue. Defendants are referred to as Barwick, as for the purpose of this case no distinction need be made between them.
2.
The complaint in this action, filed November 4, 1959, charges defendants with infringement of Odenweller Patent No. 2,853,032 and Crawford Patent No. 2,853,033, both of which issued to plaintiff on September 23, 1958, and are still owned by plaintiff. Plaintiff relies on Claims 1, 3, 6, 8, and 9 of Patent 2,853,032 and Claims 1, 3, 4, 5, 8, 10, and 11 of Patent 2,853,033, and alleges infringement thereof by defendants' manufacture and use of slat pattern attachments for the production of patterned tufted carpets. Defendants have denied infringement and allege that both patents in suit are invalid because the subject matter they purport to monopolize "would have been obvious at the time the invention was made to a person having ordinary skill in the art". Defendants have also counterclaimed for a declaratory judgment of invalidity and noninfringement on the same grounds.
3.
Odenweller Patent 2,853,032, entitled "APPARATUS FOR CONTROLLING PILE HEIGHT", is directed to a device, called a slat pattern attachment, for controlling the feed of yarns to the needles of a tufting machine, thus to control the height of pile loops created in the carpet made on the tufting machine. The pattern attachment consists of a pair of intermeshing gears which extend the full width of the tufting machine. The teeth on one of the gears are of uniform height, both with respect to one another and along their length, whereas the teeth or slats on the other gear are varied in height along their length in accordance with a desired pattern. The sheet of yarns to be fed to the tufting machine, *199 one yarn for each individual needle, is passed through the intermeshing zone between the variable-height teeth or slats carried on the surface of one gear and the fixed-height teeth on the surface of the other. When an individual yarn encounters a slat of low height, which, due to its low height, intermeshes only slightly with the teeth of the other gear, the amount of yarn taken up in the intermeshing will be small, a correspondingly small amount of feed will result, and because the height of the pile loops in the resultant fabric is dependent upon the amount of yarn feed, a low loop will result. If a yarn encounters a slat of full height, a greater amount of yarn is taken up in the intermeshing, a correspondingly greater amount of yarn is fed, and a high loop results in the fabric. Thus, a pattern of high and low loops, determined by the contour of the variable-height slats carried by one of the gears, is created in the pile fabric manufactured by the tufting machines.
4.
Crawford Patent 2,853,033, entitled "METHOD AND APPARATUS FOR FEEDING YARNS", is directed to a device which is the same in principle but differing in certain mechanical aspects from that of the Odenweller Patent 2,853,032. In the Crawford patent the variable-height slats and the fixed-height slats are mounted on endless chains rather than on the surface of cylindrical drums in the manner of gear teeth. Claims 4, 5, 8, and 10 of Patent 2,853,033 are directed to this apparatus, whereas Claims 1, 3, and 11 of this patent are directed to a method of feeding yarns through the use of this apparatus.
5.
The slat attachments of the patents in suit rely in their operation upon the principle that the height of the pile loops in tufted carpet can be controlled by restricting the amount of yarn fed to the needles of a tufting machine. At the time the alleged inventions of the patents in suit were made, this principle was not new. Patent 2,876,441 to Boyles, covering this basic concept, was issued after a nine-party interference in the Patent Office which Odenweller and Crawford declined to join, thereby conceding that they had no basis for claiming authorship of this basic concept. Plaintiff does not contend that either patentee originated this principle of controlling pile height by controlling the rate of yarn feed. The application for the Boyles patent was filed in February, 1952, nearly two years prior to the work of either Odenweller or Crawford, and, hence, is prior art with respect to both patents in suit. The Boyles patent was not cited by the Patent Office against the applications for the two patents in suit.
6.
Prior to the time of the alleged inventions of the patents in suit, it was common practice to selectively produce high and low loops in tufted carpet, and thus achieve patterns in such carpets defined by the high and low pile loops, by the application of this principle of controlled yarn-feeding set out in Paragraph 5 above. The use of rollers to feed yarn was well known, and the manufacture of patterned tufted carpet was accomplished largely through the use of roller-type feeding attachments in which the yarn fed to the needles of a tufting machine were passed in contact (in the shape of a letter S) around and between a pair of feed rolls which could be driven at high or low speeds depending on whether a high or low loop was desired. Patterns were made with attachments of this sort by selectively varying the speeds of each of a number of rolls and thus creating high and low loops in accordance with a predetermined pattern.
7.
Yarn-feeding devices known as furnishing wheels also were old and well known at the time the alleged inventions of the patents in suit were made. Yarn-furnishing wheels are nothing more than a pair of intermeshing gears wherein the yarn to be fed is passed through the intermeshing zone between the gears, the intermeshing causing undulations in the *200 yarn. For a given speed of rotation of the gears, the amount of yarn released for each increment of rotation is directly proportional to the extent that one of the gears intermeshes with the other a greater degree of intermesh releasing a longer length of yarn upon the disengagement of a pair of teeth and a smaller degree of intermesh releasing a shorter length of yarn. Yarn-furnishing wheels of this sort are disclosed by Patent 2,432,685 to Sawyer and Patent 2,247,245 to Lawson, neither of which was cited by the Patent Office against the applications for the two patents in suit.
8.
The patentee Odenweller, an employee of James Lees & Sons of Philadelphia, was the first to build a slat pattern attachment. Odenweller did his work in the fall of 1953, less than a year after he had first been exposed to tufting machines. The idea of applying the intermeshing principle to a pattern attachment for a tufting machine occurred to him while he was driving in his car to Bethlehem, Pennsylvania, to keep a date in October of 1953. Thereafter he did not immediately disclose his ideas to his superiors but kept them to himself for a time because he said he was "patent crazy", as was everyone else in the tufting industry. On January 8, 1954, Odenweller made a complete disclosure of his design to his superior at James Lees, which disclosure substantially conformed to the device shown in his patent in suit, No. 2,853,032. Shortly thereafter Lees appropriated sufficient money to Odenweller for the construction of a model machine in accordance with his ideas, and he proceeded with plans to build a model. Later, on January 15, 1954, he submitted to his superiors at James Lees an amplification of his original disclosure. In this amplification he stated as a design alternative that the variable-height slats in his device might be carried by chains rather than drums. This is the substance of the Crawford patent in suit.
9.
The patentee Crawford's first exposure to commercial tufting machines came in the fall of 1953 after he had been assigned to work in the experimental department of Mohawk, corporate predecessor of the present plaintiff. In the spring of 1953, Mohawk had purchased a tufting mill in Laurinburg, South Carolina, and Crawford was sent there to work with the tufting machines, which were not operating properly. In Laurinburg, while working with tufting machines equipped with a single feed roll and intended to produce tufted carpet of plain pile height, Crawford first became aware of the principle that the control of yarn feed controls the height of pile tufts in tufted carpet. Shortly after his return to Amsterdam that fall, he devised his slat pattern attachment and, some time in early 1954, built a small model with slats about one inch wide carried by chains to test his theories. The model proved workable, so Crawford built a sample-sized slat attachment, and thereafter a full-sized slat attachment for use on a production tufting machine.
10.
Parker and Short where machine designers employed by Callaway Mills of LaGrange, Georgia. On June 20, 1955, Parker and Short were asked by Hans Lewis of Callaway's Valway plant to look at a pattern attachment Callaway had purchased on trial from the Specialty Machine Company of Dalton, Georgia, to see if it could be made to operate properly. This Specialty attachment had rollers with abrasive surfaces and, although its principle was sound, it was not operating up to production standards because the abrasive surfaces on the rollers "fluffed up" the particular type of yarn they were trying to use with the attachment. Parker thought he could design a better feeding attachment, relying on the intermeshing principle, and by June 24th, (4 days later) working in conjunction with his assistant, Short, he had reduced the height of a few teeth on one of a pair of gears and used these gears *201 to feed a single yarn to the needle of an experimental tufting machine. These gears controlled the feed in such a way as to produce high and low loops. Thus fortified with confirmation of the thought that the intermeshing principle of furnishing wheels could be applied to feeding yarn to a tufting machine. Parker and Short felt they "had the problem licked", and so set out to design a sample attachment. In doing this, only a few days after having built and tested the gears, Parker and Short decided to use intermeshing slats carried by chains rather than gears in their design. Thereafter they built a model slat attachment employing intermeshing slats carried by chains, tested it and found it satisfactory, and began construction of a commercialsized attachment. In a period of little more than a week after their first exposure to the problem, Parker and Short had "invented" the devices of both the Odenweller and Crawford patents.
11.
"Doc" Williams, President of Modern Tufting Company in Dalton, Georgia, made a single-strand slat pattern attachment in 1956 to determine whether or not the intermeshing principle could be applied to feeding yarns to a tufting machine. Williams' single-strand model proved successful, and thereafter he built a full-sized slat attachment and began using it in the production of tufted carpet in the fall of 1959.[3]
12.
Crawford, Parker and Short, and Williams, in devising their slat pattern attachments, built small models using intermeshing elements to control the feed of a single strand of yarn because they knew that if the intermeshing principle could be employed to control a single strand, it could be used to control as many strands as desired. The intermeshing principle of any slat attachment, whether the slats are carried by cylindrical drums or chains, is properly represented by a model capable of feeding a single strand. So represented, slat pattern attachments relying on the intermeshing principle differ from furnishing wheels only in that in the slat attachment the varying degree of intermesh is achieved by varying the height of the intermeshing elements, whereas in furnishing wheels it is achieved through varying the spacing of the centers of the gears.
13.
At the times that they made the devices set out in Paragraphs 8 through 11 above, Odenweller, Crawford, Parker and Short, and Williams were mutually unaware of one another and each did his work independently. They also were all unaware of furnishing wheels which rely upon the intermeshing principle to control yarn feed.
14.
It would have been obvious to a person of ordinary skill in the tufting art to control the feed of yarn to the needles of a tufting machine, to achieve patterns defined by high and low loops in accordance with Boyles' old and well known controlled-feed principle, through the use of the old and well known intermeshing principle of furnishing wheels.
15.
The fact that each of four different persons or groups of persons was able to devise slat pattern attachments as soon as the desire to make them manifested itself is a well-nigh conclusive demonstration that to make such an attachment not only would have been, but in fact was, obvious to persons having ordinary skill in the art. Indeed, the fact that each of the persons who accomplished this was without knowledge of the most pertinent prior artfurnishing wheels *202 makes it much more conclusive that the result would have been obvious to a person having this knowledge, which is imputed by law to be a hypothetical man skilled in the art to whom a device must be unobvious to meet the statutory requirement for patentability.
16.
The Boyles patent, basic to the concept of forming high and low loops in tufted fabric by controlling the feed of yarn to the needles of a tufting machine, contemplates the formation of low loops by the withdrawal or "robbing" of yarn from the previously formed loop as the needles of the tufting machine descend to form the next loop. Because it was in fear of a charge of infringement of the Boyles patent, Mohasco sought and obtained another patent, Crawford 2,853,034 (not in suit), disclosing and claiming an alternative to the Boyles technique, which alternate contemplates forming low loops by withdrawing yarn from the loop just formed instead of robbing yarn from the previously formed loop. Mohasco thought and hoped that this alternative to loop-robbing provided the means to avoid infringement of the Boyles patent.
17.
An interference was declared in the Patent Office between applications for patents which were filed on behalf of Odenweller, Crawford, and Parker and Short. That interference was settled by an agreement among the parties which was precipitated by the fact that Mohasco held title to the application for the Crawford '034 patent, not involved in the interference, which seemingly offered a way to avoid a charge of infringement based upon the prior and adversely-held Boyles patent. James Lees and Callaway, the owners of the Odenweller and the Parker and Short applications, respectively, agreed to assign their applications to Mohasco and received in exchange free licenses under the applications involved in the interference and the additional application owned by Mohasco. Lees and Callaway were motivated to settle the interference and give Mohasco title to the Odenweller and Parker and Short applications, primarily to obtain the right to use the alternative to loop-robbing of Crawford '034. The circumstances of this settlement, together with the circumstances of the filing of the application for Crawford's '034 patent mentioned in Paragraph 16 above, minimize the importance of the patents in suit compared with that which was attributed (whether rightly or wrongly) to Crawford's '034 patent.
18.
After this settlement of the interference mentioned in Paragraph 17 above, Mohasco undertook to offer licenses to the tufting industry under its Odenweller, Crawford '033, and Crawford '034 patents. In these offers Mohasco emphasized that its patent to Crawford, 2,853,034 (not to be confused with Crawford Patent 2,853,033 in suit) offered a way to avoid the Boyles patent and, as an added inducement, agreed in its standard license contract to hold its licensees harmless in any suit on the Boyles patent. Licenses were taken by about thirteen tufters, out of about eighty in the industry as a whole. But, to whatever extent Mohasco's licensees considered patents at all, they were motivated to take a license by the indemnity against suit on the Boyles patent which Mohasco offered them. None of plaintiff's licensees was motivated to take a license by the strength of the patents here in suit, 2,853,032 and 2,853,033. The licensees whose testimony was offered at the trial stated that they had made no inquiry into the scope or validity of these patents, but had taken their licenses either (1) simply to get the attachment from Mohasco, the only source from which it was then available, or (2) if they considered patents at all, to take advantage of the 2,853,034 patent's avoidance of the Boyles patent and its accompanying indemnity. Furthermore, most of plaintiff's licensees, representing only a small segment of the tufting industry, were small manufacturers having neither the means nor the inclination to engage in a legal battle with Mohasco to test the *203 validity of Mohasco's patents. Under these circumstances, the licenses are no tribute to the patents in suit.
19.
When the Boyles patent issued, it was owned by a Georgia patent holding company called Tufted Patterns, Inc. Barwick, by virtue of its interest in a patent to Nix, a Barwick employee, obtained a free license under all of the Tufted Patterns patents, including the Boyles patent. In the summer of 1960, the Boyles and related patents were sold by Tufted Patterns to Singer-Cobble, a large manufacturer of tufting machines and related equipment, the agreement of sale reciting the existence of the Barwick license. Singer-Cobble threatened Mohasco and its licensees with suit for infringement of the Boyles patent and Mohasco brought suit against Singer-Cobble for a declaratory judgment of invalidity of the Boyles patent. This suit was settled by an agreement between Mohasco and Singer-Cobble, by which Mohasco agreed to pay over to Singer-Cobble 50 percent of most of the royalties it had theretofore received under its licenses and 60 percent of all royalties to be received on future licenses. This agreement testifies to the value attributable in these licenses to the Crawford '034 patent (the supposed way to avoid Boyles) on the one hand and the patents in suit on the other. It further demonstrates that the licenses taken from Mohasco involve no recognition of validity or tribute to the patents in suit.
20.
In the decade between 1952 and 1962 the tufting industry enjoyed enormous growth. In 1952 tufted carpets amounted to only about 7 percent of all carpets produced, whereas in 1962 they amounted to nearly 80 percent. This growth in the tufting industry is attributable to a variety of factors which combined to take tufted carpets out of the category of "sleazy" products and enabled them to compete on a quality basis with woven floor coverings. These factors include the use of jute backings, roller coated latex backings, and double jute backings to give tufted products dimensional stability and the feel of quality; improved dyeing techniques, making possible rapid and economic coloring of tufted carpets; and, perhaps most importantly, improved pile fibers, both natural and synthetic. The ability to produce patterned tufted carpets, afforded by the various types of pattern attachments in use, also contributed in some measure to this growth, but to a lesser extent than any of the factors mentioned above. In the Barwick organization the demand for patterned tufted carpet is decreasing, and in 1962 Barwick's business in patterned carpet was off 1½ million dollars from the previous year.
21.
Slat pattern attachments of the sort the patents in suit purport to monopolize have found some use in the tufting industry but they have not taken the place of pattern attachments relying on the roller principle. Altogether about eighty-five slat attachments are in use in the tufting industry today. In contrast with this, there are about three hundred and forty roller attachments in use, nearly four times as many. About one hundred and fifty 6- or 7-roll pattern attachments, the first and the most rudimentary of the roll-type attachments, have been sold and are in use in the industry. By subsequent refinement, so-called "scroll" attachments, having from sixty to one hundred and twenty rolls, have been devised and have found increasing acceptance in the tufting industry; over one hunderd of these attachments have been sold since 1958, and their use is increasing. Universal attachments, which rely on a variant of the basic roller principle in which each yarn is laterally switched from a high or low speed roll, depending on whether the high or low loop is desired, have also been widely used and about ninety of these attachments, manufactured by Singer-Cobble, are in use in the industry today. Other attachments of the same sort, but differing in mechanical detail, are used by other companies, such as Cabin Crafts.
*204 22.
There was no long-felt want for slat pattern attachments in the tufting industry. The various roll-type attachments mentioned in Paragraph 21 above were perfectly adequate to satisfy the demand for patterned tufted carpet, as evidenced by the fact that Lees, Odenweller's employer, though in possession of his model slat attachment and assured of its operability in 1954, elected to make its best-selling carpet on a 6-roll attachment and did not build a slat attachment until 1960. Similarly, Mohasco, Crawford's employer, purchased and used a 6-roll attachment after he had devised and proved his slat attachment. The experience of others in the industry is similar, and these experiences combine to demonstrate that the slat pattern attachment was neither devised to satisfy a long-felt demand nor did it achieve immediate acceptance to the exclusion of other devices capable of performing the same job after it was devised.
23.
Barwick's first sample-sized slat attachment was designed in the fall of 1957, nearly a year before Mohasco's patents issued, by Joe Nix, a Barwick Vice President, and two engineers working under him. This work was done without any knowledge of Odenweller and Crawford or their work, but Nix had some knowledge of Parker and Short's slat attachments which he had obtained from E. F. O'Neal, a former Callaway employee who was then assistant manager of Barwick's Dalton plant. While at Callaway, O'Neal had obtained a general understanding of the operation of Parker and Short's slat attachment and, since Callaway had made no effort to keep it secret, he felt no hesitancy about passing this information on to Nix. After the sample-sized attachment proved workable, Barwick built a full-sized slat attachment, which went into production in June, 1958, several months before the Mohasco patents issued. Thereafter, additional slat attachments were made and put into production.
24.
In the fall of 1958 plaintiff's patents issued. In May of 1959, Llewellyn, Mohasco's Manager of Merchandise Development, wrote to Mr. Barwick, calling attention to the Mohasco patents and suggesting a license. Mr. Barwick turned the matter over to Nix who, by virtue of his participation in the Tufted Patterns enterprise, was acquainted with the patent situation, both with respect to Tufted Patterns and Mohasco. Nix and other Tufted Patterns principals, including George Hopkins and Edward Taylor Newton, Atlanta patent attorneys, had been considering the patent situation at some length ever since the Mohasco patents had issued, and had concluded that the methods used by Barwick were considerably different from those the Mohasco patents purported to monopolize. On the advice of Nix and his Tufted Patterns associates, Barwick responded to Llewellyn's letter with the contention that Barwick's process was different from anything claimed in the patents. Mohasco was not satisfied with this response and this litigation followed.
25.
A major difference in mode of operation exists between the slat pattern attachments disclosed and claimed in both patents in suit and those used by Barwick. Both patents require in their specification that their slat attachments be operated in synchronism with the needles of the associated tufting machine in such a manner that one full wave of yarn gripped between intermeshing slats is released for each needle stroke. The specifications of the patents emphasize this as an essential mode of operation, and plaintiff's witnesses, Crawford and Lawrence, both testified at length as to the importance of this feature. Barwick's slat attachments do not operate in this way. In Barwick's attachment the amount of yarn released for each stroke of the needles of the tufting machine may and does vary from less than a full wave to more than a full wave Barwick makes no effort whatever to synchronize the release *205 of yarn with the needle strokes. If a Barwick machine were ever operated with the release of yarn and the needle strokes in synchronism, it would be purely by chance and without significance to the operation.
CONCLUSIONS OF LAW
1.
This Court has jurisdiction over the parties and over the subject matter of this action and defendants' counterclaim seeking a declaratory judgment of invalidity.
2.
United States Letters Patents Nos. 2,853,032 and 2,853,033, the patents in suit, issued to plaintiff on September 23, 1958, and were owned by plaintiff on November 4, 1959, when the complaint in this action was filed.
3.
Patents Nos. 2,853,032 and 2,853,033 are entitled to no presumption of validity over the prior art relied upon by defendants which was not cited or considered by the Patent Office; their presumption of validity is further diminished by the fact that the interference in which they were involved was settled by agreement rather than decided by the Patent Office.
4.
Claims 1 to 9, inclusive, of Patent 2,853,032 and Claims 1 to 12, inclusive, of Patent 2,853,033 are each invalid and void for lack of any patentable invention over the prior art because they define nothing more than an obvious use of the intermeshing principle of yarn-furnishing wheels as illustrated by the patents to Sawyer, 2,432,685, and Lawson, 2,247,245, a use which would have been obvious to a man of ordinary skill in the tufting art at the time the alleged inventions were made.
5.
Plaintiff has failed to prove infringement of Claims 1, 3, 6, 8, and 9 of Patent 2,853,032 and Claims 1, 3, 4, 5, 8, 10, and 11 of Patent 2,853,033, the only claims plaintiff has charged defendants with infringing.
6.
Defendants, E. T. Barwick Mills, Inc., and Barwick Carpet Mills, Inc., are entitled to judgment against plaintiff, Mohasco Industries, Inc., dismissing the complaint with prejudice, adjudging all claims of Patents Nos. 2,853,032 and 2,853,033 invalid and not infringed and with taxable costs to defendants.
JUDGMENT
In accordance with the foregoing findings of fact and conclusions of law, it is hereby ordered, adjudged and decreed that
1.
Claims 1 to 9, inclusive, of United States Letters Patent No. 2,853,032 are, and each of them is, invalid and void in law.
2.
Claims 1 to 12, inclusive, of United States Letters Patent No. 2,853,033 are, and each of them is, invalid and void in law.
3.
Claims 1 to 9, inclusive, of United States Letters Patent No. 2,853,032 have not been infringed by defendants.
4.
Claims 1 to 12, inclusive, of United States Letters Patent No. 2,853,033 have not been infringed by defendants.
5.
Plaintiff's complaint for infringement of said Letters Patent is hereby dismissed with prejudice, and plaintiff shall take nothing by its complaint.
6.
Defendants, E. T. Barwick Mills, Inc., and Barwick Carpet Mills, Inc., shall have and recover from plaintiff, Mohasco Industries, Inc., their taxable costs.
NOTES
[1] (a) Odenweller of James Lees & Sons of Philadelphia, Pennsylvania, 1954; (b) Crawford of Mohawk (later Mohasco) of Amsterdam, New York, 1954; (c) Parker and Short of Callaway Mills Company of LaGrange, Georgia, 1955.
[2] Parker and Short built a model slat attachment in a period of a little more than a week afer having been exposed to the problem.
[3] The Court heard evidence of Williams' work subject to objection of plaintiff that such work was not contemporaneous within the meaning of the statute, Section 103, and therefore irrelevant. This Court holds the evidence of Williams relevant and admissible. See Safety Car Heating and Lighting Company v. General Electric Company, 155 F.2d 937, 939-940
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https://www.courtlistener.com/api/rest/v3/opinions/1432308/
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952 F. Supp. 927 (1997)
Berris BLAKE, Plaintiff,
v.
H-2A AND H-2B VOLUNTARY EMPLOYEES' BENEFICIARY ASSOCIATION, et al., Defendants.
No. 3:95CV00399(WWE).
United States District Court, D. Connecticut.
January 10, 1997.
*928 Kenneth I. Friedman of Beck & Eldergill, Manchester, CT, for plaintiff.
Eric M. Gross of Green & Gross, P.C., Bridgeport, CT and Morris Kletzkin of Friedlander, Misler, Friedlander, Sloan & Herz, Washington, DC, for defendants.
Ruling on Defendants' Motion for Summary Judgment
EGINTON, Senior District Judge.
This tragic case involves a challenge by plaintiff, now a quadriplegic as a result of a serious automobile accident, to the actions of defendants in amending an employee welfare benefit plan to provide a lifetime cap on medical benefits of $150,000, which did not exist at the time of plaintiff's accident. Plaintiff claims that the actions of defendants violate the antidiscrimination provisions of the Employee Retirement Income Security Act ("ERISA"), 29 U.S.C. § 1140, and constitute a breach of the fiduciary duties owed to plaintiff as a plan participant under 29 U.S.C. §§ 1104, 1109, as well as under the terms of the plan and summary plan description.
Pending before the Court is Defendants' Motion for Summary Judgment (Document # 17). Although plaintiff's case is emotionally compelling, this Court holds, for the reasons set forth below, that defendants are entitled to summary judgment as a matter of law.
I. Facts
Plaintiff Berris Blake is a citizen of Jamaica. During June of 1994, plaintiff was a temporary worker in the United States under the Temporary Foreign Workers Labor Program (the "H-2A Program"). See 8 U.S.C.A. § 1101(a)(15)(H)(ii)(a) (West 1996 Supp.). He was employed as a tree farm worker by Cappachione Farms in Preston, Connecticut.[1] On June 18, 1994, plaintiff was severely injured in an automobile accident in Connecticut, as a result of which he was rendered a quadriplegic. He was hospitalized at the William Backus Hospital in Norwich, Connecticut, for two and one-half *929 months and later received rehabilitative care at Fairlawn Rehabilitation Hospital for approximately one year. In July of 1995, he returned to Jamaica for further rehabilitation.
By virtue of his H-2A worker status, plaintiff was able to participate in the H-2A and H-2B Voluntary Employees' Beneficiary Association Health and Welfare Plan ("the Plan"), a welfare benefit plan governed by ERISA. The Plan was adopted on December 31, 1992, by defendant H-2A and H-2B Voluntary Employees' Beneficiary Association as its Sponsor to benefit H-2A and H-2B workers who are sponsored by participating Caribbean countries to work in the United States. Trustees of the Plan are Vincent Morrison, who resides in Kingston, Jamaica, and Anthony Irons, who is also the Permanent Secretary-Ministry of Labour, in Jamaica.
The Plan is administered by defendant West Indies Central Labour Organisation ("WICLO"), an unincorporated organization established by the governments of the Caribbean participating countries to monitor the welfare of their workers while they are in the United States.[2] The Plan provides life, accidental death and dismemberment benefits; accident and sickness benefits; hospital benefits, surgical expense benefits, medical expense benefits and drug and medicine benefits for members of the H-2A and H-2B Voluntary Employees' Beneficial Association who elect coverage. (Section 1.3 of the Plan).
Since the commencement of the Plan, every eligible H-2A and H-2B worker has elected to be covered by the Plan, including plaintiff. To receive coverage each participant must make a weekly contribution of $4.80.
Prior to and at the time of plaintiff's accident, the Plan did not have a cap on the dollar amount of medical coverage which it would provide to Plan participants.[3] The Plan did, however, limit the payment of hospital, surgical, medical, and drug and medicine benefits to those expenses incurred during a thirteen-week period of disability. (Sections 8.4, 9.4, 10.4, and 11.3 of the Plan). Furthermore, any benefits under the Plan would terminate upon a participant's leaving the United States. The Plan also provided for continuation coverage if elected by a participant, which plaintiff through his attorney elected.[4] (Section 16.1 of the Plan).
On September 22, 1994, the Plan was amended by the Trustees, Mr. Morrison and Mr. Irons, to provide a cap of $150,000 on the amount of all medical benefits that could be paid over the lifetime of any one individual.[5]*930 The amendment was effective October 1, 1994, and applied to medical expenses incurred after September 30, 1994. In determining whether the cap had been reached, however, the amendment provided that benefits paid both before and after September 30, 1994, were to be taken into account. See Note 5, supra. Furthermore, the cap applied to all types of Plan benefits in the aggregate, such that for example hospital and surgical expense benefits, medical expense benefits, and drug and medicine expense benefits would be added together to determine whether the cap had been reached. Id. Additionally, the amendment applied to every Plan participant irrespective of illness.
The Plan was amended pursuant to Section 15.1 of the Plan which provides in relevant part:
Section 15.1 Amendment. This Agreement may be amended at any time and from time to time by a written instrument signed by the Trustees.... The instrument of amendment shall specify its effective date and amendments may be made effective retroactively. This Agreement also may be terminated at any time by the Trustees.
As a result of his accident, plaintiff incurred medical bills of $191,134 as of September 30, 1994, which were paid by the Plan. However, plaintiff has incurred substantial additional medical bills of $206,105.94,[6] which defendants have refused to pay, citing the $150,000 lifetime cap on benefits which plaintiff had already exceeded as of September 30, 1994.
These facts are not disputed. In dispute, however, are the facts relating to defendants' motivation in adopting the cap and whether defendants attempted to force plaintiff to return to Jamaica so as to deprive him of Plan benefits.
Defendants claim that their motivation in adopting a lifetime benefits cap was purely financial and was in no way designed to penalize plaintiff. While this Court has no difficulty in accepting defendants' assertion that their motivation was financial, more problematic is their motivation vis-a-vis the plaintiff. Defendants assert that the idea for amending the Plan was conceived prior to plaintiff's accident and arose out of a concern for the financial condition of the Plan. They assert that the Plan was losing money and the only two options available were to increase the workers' contributions,[7] which they chose not to do, or to establish a benefits cap. They admit, however, that plaintiff was the first Plan participant to have medical bills in excess of $150,000. Given that fact, it is difficult to understand how the Trustees would have contemplated prior to plaintiff's accident, that enacting a $150,000 benefits cap would improve the financial condition of the Plan. At that point in time, it would have had no effect.
Moreover, Noel P. Heron, the Chief Liaison Officer for WICLO, the Administrator of the Plan, admitted in his deposition that plaintiff's accident was a precipitating force in rushing the passage of the amendment. He further admitted that, when he contacted the Plan's attorneys to discuss implementing the cap, he discussed with them the subject of plaintiff. He testified that the $150,000 figure was based on his research relating to the cost of three months of hospitalization for a serious injury. (It is not clear whether his $150,000 figure also included doctors' bills and other medical bills that would not be included in the hospital bill). He stated that the three-month baseline that he employed correlated with the thirteen-week period under *931 the Plan during which benefits were payable to an injured or sick member.
Plaintiff contends, however, that not only was his accident the precipitating event for the Trustees' amending the Plan, but that the cap was based upon his medical bills of which defendants were keenly aware not on Mr. Heron's analysis of three months of hospitalization costs.
In opposition to the motion for summary judgment, plaintiff has filed excerpts from the deposition of Joan Orowson, the Patients Account Manager at the hospital where plaintiff was treated. From these excerpts, it is abundantly clear that defendants were very concerned about plaintiff's escalating hospital bills, as well as plaintiff's return to Jamaica. Despite the repeated visits of the WICLO liaison officers to the hospital, the hospital was not aware that plaintiff had medical coverage through the Plan until early August of 1994 when the hospital finally got in touch with the Plan Administrator with the help of plaintiff's attorney. The hospital accounts records indicate that Mr. Heron was less than forthcoming about any available coverage. At one point he refused to indicate whether plaintiff was covered by the Plan; at another time he refused to provide information regarding the amount of coverage; and yet at another time he advised the account representative that there was very limited funding available and that there was no way they could cover a charge of $103,718, which was the outstanding hospital bill at that time.[8] Eventually plaintiff's attorney supplied the hospital with necessary documentation. Ultimately, representatives of WICLO contacted the hospital to request a discount of 20% to 30% on the bill, and the hospital did in fact grant the Plan a 20% allowance on the hospital's bill of $142,712.50. There are also several notations in the hospital accounts records of representatives of defendants inquiring as to why plaintiff had not yet been sent back to Jamaica.
Plaintiff further alleges that Larkland Stone, a WICLO liaison officer, visited him on at least two occasions in the hospital for the purpose of forcing plaintiff to agree to return to Jamaica for medical treatment. The first of these visits occurred the day after plaintiff's accident when plaintiff was in intensive care. Plaintiff states that he never wanted to return to Jamaica for medical treatment and never did anything to indicate to defendants that he wanted to return. When plaintiff indicated to Mr. Stone that he did not want to return, however, according to plaintiff, Mr. Stone laughed and told plaintiff that he would send him back anyway. Plaintiff also asserts that, without his knowledge or consent, defendants went so far as to contact a physician in Jamaica concerning plaintiff's medical care and made arrangements to have him returned to Jamaica.
Defendants do not dispute that WICLO liaison officers discussed plaintiff's returning to Jamaica with him and admit that they operated on the assumption that he would be returning as soon as he was released from the hospital. Indeed, Mr. Stone admits that he saw plaintiff on at least six occasions while he was hospitalized and admits that he told plaintiff he would be returning to Jamaica for rehabilitation after he was released from the hospital. He claims that, although plaintiff could not speak, plaintiff nodded his head in agreement. When asked in deposition why he wanted to return plaintiff to Jamaica, he responded that this was the "normal" procedure but he admitted that it was not a written procedure. He and Mr. Heron testified that in WICLO's fifty-two years of experience in administering to the needs of its workers, WICLO has always operated on the "well-founded assumption" that its injured workers preferred to receive treatment in their home countries because they recuperate better and more rapidly once they return to their home countries. Mr. Stone further testified that he reported on plaintiff's condition to Mr. Heron, who requested periodic updates on plaintiff's condition and who was *932 very concerned about the cost of plaintiff's medical treatment. He also discussed with Mr. Heron plaintiff's return to Jamaica.[9]
Construing all facts and drawing all reasonable inferences in favor of plaintiff as the non-moving party, as this Court is required to do in ruling on a motion for summary judgment, see Donahue v. Windsor Locks Bd. of Fire Comm'rs, 834 F.2d 54, 57 (2d Cir.1987), this Court finds that defendants intentionally adopted a cap on medical benefits for the purpose of limiting plaintiff's medical benefits as well as those of others similarly situated in the future. The Court further finds that defendants intentionally sought to induce plaintiff to return to Jamaica for rehabilitation as soon as possible so as to reduce the costs of his medical treatment to the Plan.[10] Having drawn these factual inferences in favor of plaintiff, the Court now turns to the legal issues presented by defendants' motion for summary judgment.
II. Discussion
A. Plaintiff's Discrimination Claim
Plaintiff has alleged that the defendants discriminated against him for exercising his rights to benefits under the Plan and unlawfully interfered with his attainment of rights, in violation of section 510 of ERISA. Section 510 of ERISA, 29 U.S.C.A. § 1140 (West 1985), provides in relevant part as follows:
It shall be unlawful for any person to discharge, fine, suspend, expel, discipline, or discriminate against a participant or beneficiary for exercising any right to which he is entitled under the provisions of an employee benefit plan, this subchapter, section 1201 of this title, or the Welfare and Pension Plans Disclosure Act [29 U.S.C.A. § 301 et seq.], or for the purpose of interfering with the attainment of any right to which such participant may become entitled under the plan, this subchapter, or the Welfare and Pension Plans Disclosure Act.... The provisions of section 1132 of this title shall be applicable to the enforcement of this section.
As recognized by the Second Circuit in Dister v. Continental Group, Inc., 859 F.2d 1108 (2d Cir.1988), "[s]ection 510 was designed primarily to prevent `unscrupulous employers from discharging or harassing their employees in order to keep them from obtaining vested pension rights.' West v. Butler, 621 F.2d 240, 245 (6th Cir.1980)." Id. at 1111 (emphasis added). And, in fact, most of the reported decisions under section 510 involve an employer-employee relationship. Vogel v. Independence Fed. Sav. Bank, 728 F. Supp. 1210, 1225-26 (D.Md.1990).
Plaintiff in this case, however, seeks to invoke section 510 not to challenge discriminatory conduct of his employer but to challenge actions by a plan sponsor and administrator in amending an ERISA plan. Whether section 510 encompasses this type of claim is an issue that has not been addressed by the Second Circuit.
As recognized by the Fifth Circuit in Hines v. Massachusetts Mutual Life Ins. Co., 43 F.3d 207 (5th Cir.1995), the courts are divided on this issue. At least three circuits have restricted the scope of section 510 to acts that affect the employer-employee relationship; "in other words, plan amendments by themselves cannot be actionable under § 510." Id. at 210 n. 5. See Haberern v. Kaupp Vascular Surgeons Ltd. Defined Benefit Pension Plan, 24 F.3d 1491, 1504 (3d Cir.1994), cert. denied, ___ U.S. ___, 115 S. Ct. 1099, 130 L. Ed. 2d 1067 (1995); McGath v. Auto-Body North Shore, Inc., 7 F.3d 665, 670 (7th Cir.1993); Rogers v. Jefferson-Pilot Life Insur. Co., 883 F.2d 324 (4th Cir.1989) (applying section 510 only to actions against an employer, not against insurers or other third parties administering insurance benefits). *933 At least one other circuit court has suggested that a plan could be discriminatorily modified to intentionally benefit or injure certain identified employees or groups of employees. See Aronson v. Servus Rubber, Div. of Chromalloy, 730 F.2d 12, 16 (1st Cir.), (although the court found that a termination of benefits that cut along independent lines, e.g., the elimination of a profit-sharing plan at one of two plants, and that had a readily apparent business justification demonstrated no invidious discriminatory intent), cert. denied, 469 U.S. 1017, 105 S. Ct. 431, 83 L. Ed. 2d 357 (1984). The court in Hines noted this split in the circuits but expressly reserved ruling on the issue, as it had in an earlier case, McGann v. H & H Music Company, 946 F.2d 401 (5th Cir.1991), cert. denied, 506 U.S. 981, 113 S. Ct. 482, 121 L. Ed. 2d 387 (1992).
The district courts have also divided on this issue. In Vogel v. Independence Fed. Sav. Bank, 692 F. Supp. 587 (D.Md.1988), an action against an employer, insurance agency and insurer for intentional termination of medical coverage for a particular employee, the court noted that, while section 510 is most commonly applied in cases when an employer terminates an employee to prevent his pension rights from vesting, "the language of the statute cannot be read so as to limit its application solely to those situations. ... The statute ... cannot be limited solely to suits against employers.... [T]he Court is satisfied that a claim of wrongful interference with the attainment of medical benefits is sufficient to seek redress under this section." Id. at 593. Accordingly, the court denied the defendants' motion to dismiss. But see Rollo v. Maxicare of Louisiana, Inc., 698 F. Supp. 111, 114 (E.D.La.1988) (expressly rejecting the holding in Vogel and holding that section 510 was not intended to apply to non-employers).
The Vogel and Rollo decisions were discussed by the court in Swanson v. U.A. Local 13 Pension Plan, 779 F. Supp. 690 (W.D.N.Y.), aff'd, 953 F.2d 636 (2d Cir.1991), in addressing the issue of whether a pension plan administrator and the plan itself could be liable under section 510 for persuading the plaintiff to retire without fully advising him of the consequences of his retirement. The court held that the import of West v. Butler, supra, relied upon by the Second Circuit in Dister, supra, as well as by the court in Rollo, was not that section 510 applied only to employers but that it only reached conduct which fundamentally changed the employer-employee relationship so as to interfere with pension rights. 779 F.Supp. at 701. Indeed, the court in Swanson read West as holding that "persons" other than employers could be liable under section 510 and concurred in that holding since "employers are not the only persons or entities capable of affecting the employment relationship."[11]Id. at 702. The court then held that the individual administrators were nevertheless entitled to summary judgment in that their conduct did not amount to the kind of direct interference in the employment relationship that is required to establish liability under section 510. Id.
This Court finds the reasoning of Swanson persuasive and holds that section 510 may apply to defendants other than employers. The statute by its very terms applies to "persons," which is defined by ERISA. Had Congress intended to limit the applicability of section 510 to "employers," a term also defined by ERISA, 29 U.S.C.A. § 1002(5), it could have done so as it has in other discrimination statutes. See, e.g., 42 U.S.C.A. § 2000e-2(a) (1994); 29 U.S.C.A. § 623 (1985). This Court notes parenthetically that the Summary Plan Description for the Plan in question supports this interpretation. It provides that "[n]o one, including your employer, any union, or any other person, may dismiss you or otherwise discriminate against you in any way to prevent you *934 from obtaining a benefit under the Plan or exercising your rights under ERISA." (Emphasis added). Thus, this Court holds that plaintiff's section 510 claim is not barred solely by virtue of the fact that it does not involve an employer-employee relationship.[12]
That determination, however, does not resolve the issue of defendants' liability under section 510. An essential element of plaintiff's proof under section 510 is to show that the defendant was "at least in part motivated by the specific intent to engage in activity prohibited by section 510." Dister, supra, 859 F.2d at 1111. As discussed above, construing the facts most favorably to plaintiff, we find that defendants were motivated at least in part by the specific intent to limit plaintiff's medical benefits both in amending the Plan and in seeking to return plaintiff to Jamaica as quickly as possible. A more difficult question, however, is presented regarding whether this was activity prohibited by section 510.
In McGann, supra, relied upon by defendants, the Fifth Circuit considered whether a section 510 claim would lie for alleged discrimination in reducing benefits available under a group medical plan for treatment of acquired immune deficiency syndrome (AIDS) and related illnesses. Just seven months after the plaintiff submitted his first claim for his treatment for AIDS, he was informed by his employer that they had become self-insured and had limited the benefits payable for AIDS-related claims to a lifetime maximum of $5,000, whereas previously the lifetime cap had been $1,000,000. No limitation was placed on any other catastrophic illness. Just as in this case, the plaintiff argued that the provision limiting coverage for AIDS-related expenses was directed specifically at him in retaliation for exercising his rights under the medical plan and for the purpose of interfering with his attainment of a right to which he may become entitled under the plan. In moving for summary judgment, the defendants admitted that the reduction in AIDS benefits was prompted by knowledge of the plaintiff's illness, and that the plaintiff was the only employee known at the time to have AIDS.
Although the court expressly declined to decide whether section 510 applied to a case where the employee benefit plan was altered in an allegedly discriminatory manner, the court granted the defendants' motion for summary judgment on two other grounds. First, holding that at trial the plaintiff would bear the burden of proving the existence of the defendants' specific discriminatory intent, the court found nothing in the record to suggest that the defendants' motivation was other than as they had stated namely to avoid the expense of paying for AIDS treatment. That intent, the court found, was directed no more toward the plaintiff than any other present or future participant who might contract AIDS. 946 F.2d at 404.
The same rationale would apply in this case. However, in light of the Second Circuit's holding in Dister, supra, that the plaintiff's burden is to show only that the defendant "was at least in part motivated by the specific intent" to engage in prohibited activity, this Court declines to go as far as the Fifth Circuit did in holding that the mere fact that the amendment could apply to other participants absolves the defendants of liability. The Court does, however, find compelling the other basis for the court's granting summary judgment in McGann, i.e. that plaintiff has not, and cannot, prove the existence of a right to which he is entitled under the Plan.
Section 510 is entitled "interference with protected rights." It provides that it is "unlawful for any person to ... discriminate against a participant ... for exercising any right to which he is entitled under the provisions of an employee benefit plan .. or for the purpose of interfering with the attainment *935 of any right to which such participant may become entitled under the plan...." 29 U.S.C.A. § 1140 (West 1985) (emphasis added). Thus, for plaintiff to be able to assert a cause of action under section 510, he must establish that he had a right to continued unlimited medical benefits.
The McGann court, faced with this issue, held that the plaintiff had failed to adduce evidence of the existence of any right to which he might become entitled under the plan. The "right" to which section 510 refers, the court held, is a "right to which an employee may become entitled pursuant to an existing, enforceable obligation assumed by an employer." 946 F.2d at 405. The court found that there was nothing to indicate that the $1,000,000 coverage limit in that case was permanent. Indeed, the plan expressly provided that it could be terminated or amended at any time. The court held that to adopt the plaintiff's position would mean that an employer could not effectively reserve the right to amend a medical plan to reduce benefits as to subsequently incurred medical expenses. Id. Citing the Second Circuit case of Moore v. Metropolitan Life Ins. Co., 856 F.2d 488, 492 (2d Cir.1988), the court held that ERISA does not require the "vesting" of the right to a continued level of the same medical benefits as those that are ever included in a welfare plan. Id.
The Second Circuit in Moore held that automatic vesting does not occur in the case of welfare plans. Where the plan documents clearly reserve the right to amend the plan, an ERISA plan may be amended to change or limit the coverage provided. The Court reasoned:
With regard to an employer's right to change medical plans, Congress evidenced its recognition of the need for flexibility in rejecting the automatic vesting of welfare plans. Automatic vesting was rejected because the costs of such plans are subject to fluctuating and unpredictable variables. Actuarial decisions concerning fixed annuities are based on fairly stable data, and vesting is appropriate. In contrast, medical insurance must take account of inflation, changes in medical practice and technology, and increases in the costs of treatment independent of inflation. These unstable variables prevent accurate predictions of future needs and costs. While these plaintiffs [retired employees who were challenging an employer's ability to amend a medical plan based in part on representations outside of the plan documents] would be helped by a decision in their favor, such a ruling would not only fly in the face of ERISA's plain language but would also decrease protection for future employees and retirees.
856 F.2d at 492. See also Curtiss-Wright Corp. v. Schoonejongen, 514 U.S. 73, ___, 115 S. Ct. 1223, 1228, 131 L. Ed. 2d 94 (1995) (holding that ERISA does not create any substantive entitlement to employer-provided health benefits or any other kind of welfare benefits).
Similarly, the Eleventh Circuit in Owens v. Storehouse, Inc., 984 F.2d 394 (11th Cir. 1993), held that "ERISA does not prohibit a company from terminating benefits that are neither vested nor accrued.... Unlike pension benefits, welfare benefit plans neither vest nor accrue. See 29 U.S.C. § 1051(1)." Id. at 397-98 (citations omitted). In so holding, the court rejected the plaintiff-claimant's "latent vesting" argument that employers may not change the terms of their employee insurance programs to affect a particular illness once an employee has contracted that illness and begun making claims for it. The court held that section 510 contains no such requirement. Id. at 398.
The Plan at issue contained a clear and unambiguous provision allowing the Trustees to amend the Plan and for those amendments to apply retroactively. Under ERISA, as the Second Circuit has made clear, there is no vested right to a continuation of a certain level of medical benefits under a welfare benefits plan. See also West v. Greyhound Corp., 813 F.2d 951, 954 (9th Cir.1987) (holding that there is no language in ERISA which provides for the accrual of welfare benefits or guarantee that such benefits are vested or nonforfeitable). Plaintiff, as a participant in an ERISA welfare benefit plan, possessed no inviolate rights in the terms of the Plan, such as might be true with *936 respect to vested provisions of a pension plan. As regrettable as plaintiff's situation is, the Trustees had the right to amend the Plan to ensure the continued viability of the Plan. Accordingly, plaintiff cannot carry his burden at trial of proving discrimination with respect to any "right to which he is entitled under the provisions of an employee benefit plan" or interfering with "the attainment of any right to which [he] may become entitled under the plan." 29 U.S.C.A. § 1140 (emphasis added). On this basis this Court will grant Defendants' Motion for Summary Judgment as to Plaintiff's Section 510 Claim.
B. Plaintiff's Claim for Defendants' Breach of Fiduciary Duty
In addition to alleging a violation of section 510, plaintiff also claims that defendants breached their fiduciary duties owing to him as a plan participant under the terms of the Plan documents and ERISA. Citing section 404(a)(1) of ERISA, 29 U.S.C. § 1104(a)(1), plaintiff alleges that defendants were required to discharge all duties as fiduciaries solely in the interests of the participants and beneficiaries and "for the exclusive purpose of providing benefits to participants and their beneficiaries ... and in accordance with the documents and instruments governing the plan insofar as such documents and instruments are consistent with ERISA." In addition, plaintiff asserts that the Summary Plan Description required defendants to ensure that the Plan was administered in a manner that was fair to all members, which he alleges they failed to do.
As the Supreme Court held in Curtiss-Wright Corporation v. Schoonejongen, 514 U.S. at ___, 115 S.Ct. at 1228, "[e]mployers or other plan sponsors are generally free under ERISA, for any reason at any time, to adopt, modify, or terminate welfare plans," citing Adams v. Avondale Industries, Inc., 905 F.2d 943, 947 (6th Cir.1990) (holding that a company does not act in a fiduciary capacity when deciding to amend or terminate a welfare benefits plan).
In Musto v. American General Corp., 861 F.2d 897, 912 (6th Cir.1988), cert. denied, 490 U.S. 1020, 109 S. Ct. 1745, 104 L. Ed. 2d 182 (1989), the court rejected the plaintiffs-retirees' claims against their former employer for breach of its contractual and fiduciary duties by changing the terms of the medical coverage available to them. The court noted that "[t]here is a world of difference between administering a welfare plan in accordance with its terms and deciding what those terms are to be. A company acts as a fiduciary in performing the first task, but not the second." 861 F.2d at 911. See also Owens v. Storehouse, Inc., supra.
Here, the benefits cap was enacted in compliance with the amendment provisions of the Plan, Section 15.1. Defendants were not acting as fiduciaries in amending the Plan or in deciding what the new terms would be. Plaintiff was put on notice by the Summary Plan Description that the Plan could be amended, which it in fact was. It cannot be said that defendants acted unfairly toward plaintiff or breached any fiduciary duty owing to plaintiff in enacting this amendment. There was no fiduciary duty owing in that regard.
Therefore, this Court will grant Defendants' Motion for Summary Judgment as to Plaintiff's Breach of Fiduciary Claims.
III. Conclusion
For the reasons set forth above, Defendants' Motion for Summary Judgment is GRANTED. The Clerk is directed to enter judgment in favor of Defendants on all Counts.
SO ORDERED.
NOTES
[1] The I-9 Form completed by plaintiff and his employer shows New Apple Council, Inc., of Shelburne, Massachusetts, as his employer. The exact identity of his employer is unimportant to this motion for summary judgment. It is important to note only that plaintiff was not employed by either of the defendants.
[2] Defendants describe WICLO as an unincorporated association that is the administrative arm of the Caribbean Regional Labour Board, whose members are the Caribbean nations of Jamaica, Barbados, St. Vincent, St. Lucia, Grenada, Belize, Trinidad, Tobago, and Dominica. Each of these nations has contributed workers to the Temporary Foreign Workers Labor Program, the H-2A Program. The workers are monitored by WICLO while in the United States.
[3] Exhibit I of the Plan is the "Schedule of Maximum Benefits." For "Hospital Expense Benefits, Surgical Expense Benefits, Medical Expense Benefits and Drug and Medicine Expense Benefit[s]", the only maximum was "Reasonable and Customary Medically Necessary actual expense incurred by the Member."
[4] On September 30, 1994, plaintiff's attorney notified the Plan that plaintiff elected continuation benefits and enclosed a check for the pre-payment of the next fifteen months of continuation benefits.
[5] The Amendments to the Plan provided in relevant part as follows:
The Trustees of the H-2A And H-2B Voluntary Employees' Beneficiary Association Health and Welfare Plan ("Plan") hereby amend the Plan to impose a lifetime cap on benefits. These amendments generally are effective October 1, 1994. For purposes of determining the total benefits paid to a Member, however, benefits paid before and after October 1, 1994 are counted.
1. A new Section 4.4 is added to read as follows:
"Section 4.4 Lifetime Maximum Benefit Limit. Notwithstanding any other provision of this Plan, no more than $150,000 of benefits shall be paid to any Member. This limit applies to the aggregate amount of benefits paid under the plan (it does not apply on a benefit by benefit basis). For example, if a Member receives $50,000 in hospital and surgical expense benefits, $50,000 in medical expense benefits, and $50,000 of drug and medicine expense benefits, no additional benefits of any kind will be paid to that Member."
Additionally, each section dealing with Life Benefits, Accidental Death and Dismemberment Benefits, Hospital Benefits, Surgical Expense Benefits, Medical Expense Benefits, and Drug and Medicine Expense Benefits was amended to incorporate this lifetime maximum benefit limit of Section 4.4. Exhibit I, Schedule of Maximum Benefits, was also amended with the addition of the following sentence: "In accordance with Plan Section 4.4, no more than $150,000 of total benefits shall be paid to any Member."
[6] Although the Summary of Unpaid Bills does not indicate whether all of the outstanding bills are for services rendered after September 30, 1994, this appears to be the case based on the briefs submitted by the parties. Moreover, plaintiff does not contend that defendants have refused to pay any bills that were incurred prior to the effective date of the amendment.
[7] At the time the amendment was passed, each Member was paying a weekly contribution of $4.80.
[8] The Summary Annual Report of the Plan, which plaintiff's attorney supplied to the hospital, showed Plan assets as of September 30, 1993, just nine months after commencement of the Plan, of $248,003. No additional information regarding assets as of August 1994, when these conversations between the hospital and Plan Administrator took place, has been provided.
[9] Mr. Heron testified that the cost of medical treatment in Jamaica was approximately one-tenth of the cost of treatment in the United States, and therefore it would cost the Plan less money if Plaintiff returned to Jamaica. While a member's entitlement to benefits would normally cease upon his leaving the United States, because Plaintiff elected continuation coverage, he would still be entitled to coverage for these expenses in Jamaica.
[10] For purposes of the motion for summary judgment only, defendants indicate in their Reply Memorandum that they will accept plaintiff's characterization of the events which took place at the hospital.
[11] The court noted, however, that not every type of entity was a proper defendant under the statute, and held that a pension plan was not a proper defendant. 779 F.Supp. at 701 (citing Adams v. Koppers Co., 684 F. Supp. 399 (W.D.Pa. 1988)). The court reasoned that "ERISA expressly defines the term `person' as `an individual, partnership, joint venture, corporation, mutual company, joint-stock company, trust, estate, unincorporated organization, association, or employee organization.' 29 U.S.C. § 1002(9). Pension plans are conspicuously absent from this list." Id.
[12] Obviously, Plaintiff's employment relationship was terminated as a result of this tragic accident that rendered him totally disabled for the rest of his life. Dr. Tom P. Bell, the attending surgeon for Mr. Blake, wrote in a letter dated September 29, 1994 to the State of Connecticut, Disability Determination Services,
Mr. Blake suffers from a cervical spine fracture with resultant quadriplegia. He is unable to care for himself in any way and is completely dependent on other[s] for all activities. He is obviously disabled medically.... It is clear that his medical and surgical disease are without question totally disabling.
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810 F. Supp. 1072 (1993)
STANDARD HAVENS PRODUCTS, INC., Plaintiff,
v.
GENCOR INDUSTRIES, INC., Defendant.
No. 88-1209-CV-W-3.
United States District Court, W.D. Missouri, W.D.
January 27, 1993.
Joseph B. Bowman, Thomas P. McBirde, Kokjer, Kricher, Bradley Wharton Bowman & Johnson, Kansas City, MO, for plaintiff.
*1073 Constantine L. Corpas, Corpas & Phys, Cleveland, OH, John R. Cleary, D.A.N. Chase, Linde Thomson Fairchild Langworthy, Kohn & Van Dyke, P.C., Kansas City, MO, for defendant.
ORDER
ELMO B. HUNTER, Senior District Judge.
This is a case of patent infringement which was tried before this Court to a jury. The jury returned a verdict in favor of the plaintiff, Standard Havens Products, Inc. (Standard Havens), finding that the patent in question was not invalid and that defendant Gencor Industries, Inc. (Gencor), wilfully infringed the patent. The jury awarded damages in the amount of $5,931,000.00, on the basis of what it found to be ten (10) infringing sales and, also, awarded damages in the amount of $2,284,000.00 for breach of contract.
Defendant Gencor appealed. The Court of Appeals for the Federal Circuit affirmed this Court on the issues of patent validity and infringement but vacated the amount of damages awarded, 953 F.2d 1360.
As noted above, the jury found that there were ten (10) infringing sales, which resulted in $5,931,000.00 in damages. The appellate court, however, determined that there were only six (6), (not ten (10)) infringing sales. The appellate court vacated the damage award and remanded the matter to this Court for recalculation of the damages based on the six (6) infringing sales.
As previously noted, the jury, also, found that plaintiff was entitled to $2,284,000.00 for breach of contract. A component of the contract damages was attributable to projected future sales. The appellate court, essentially, held that the future sales component was too speculative to support a damage award. Accordingly, the appellate court, in its remand, instructed this Court to recompute the contract damages excluding any portion attributable to the projected future sales.
This Court also entered a permanent injunction against Gencor. During the appeal, the Federal Circuit granted Gencor a conditional stay of the injunction entered by this Court. On remand, the Federal Circuit ordered its stay to remain in effect until this Court had the opportunity to consider whether, under the circumstances, continuation of the injunction was appropriate. It instructed that, in making its determination, this Court "should take into account the unusual aspects of this case." Specifically, while this matter was on appeal, the Patent and Trademark Office (PTO) issued a reexamination decision determining that certain claims of the patent-in-suit, in this matter, are unpatentable. Standard Havens has challenged this determination in the District Court for the District of Columbia.
I.
Presently before the Court is defendant Gencor's Motion for Stay of Injunction and Stay of Proceedings. Gencor is requesting an order staying this Court's earlier issued permanent injunction and staying all further proceedings until a final decision issues in the above-referenced reexamination case. The parties have comprehensively briefed and argued the issues related to this motion.[1] Indeed, the Court recalls few *1074 issues that have received the attention the parties have given this matter.
Much of the argument between the parties arises from the fact that the parties and the patent at issue in this case are currently involved in separate reexamination proceedings being prosecuted in another forum. To wit, the patent in question was "re-examined" by the Patent and Trademark Office (PTO) and found to be invalid.[2] Of course, this determination is subject to judicial review. See 35 U.S.C.A. § 306 (1984) (patent owner may seek court review pursuant to 35 U.S.C. §§ 141-145). Defendant urges that if it is judicially and finally determined that the patent in question is invalid, the patent would be void ab initio, thereby removing the basis for this Court's earlier judgment. Plaintiff counters that there has already been a judicial determination that the patent in question has been infringed, that defendant continues to infringe such patent, and that any determination as to the validity of the patent in question made in another forum is not controlling in this case.
At the end of the day, this Court agrees with the plaintiff.[3] A jury found in favor of the plaintiff as to the validity of the patent and found that it had been wilfully infringed by the defendant. The determination of these issues has been affirmed by the United States Court of Appeals for the Federal Circuit. The action pending in the other forum is an action for reexamination and, regardless of the outcome, is not controlling in this matter. See Ethicon, Inc. v. Quigg, 849 F.2d 1422, 1427 (Fed.Cir. 1988) (reexamination proceedings considering patentability are separate and distinct from lawsuits involving infringement and patent validity and have separate records and different standards of proof). It is this Court's view that plaintiff, in this matter, possesses the equivalent of a final judgment on the issues of patent validity and infringement and is entitled to have defendant enjoined from further infringing sales.
II.
The Court notes that, in this matter, the trial was completed and a verdict rendered prior to commencement of the reexamination proceeding. While the matter was on appeal, however, the Court of Appeals was fully cognizant of the pendency of the reexamination proceedings. In fact, after the PTO Board of Appeals ruled against Standard Havens on the reexamination issue, and while the parties were still awaiting the Federal Circuit's decision in this matter, Gencor moved the Federal Circuit to estop Standard Havens from denying the invalidity of the patent-in-suit. Had the Federal Circuit believed the reexamination determination made by the PTO to be dispositive of this case, it could have so ruled. The Federal Circuit, however, denied Gencor's motion and proceeded to rule on all issues raised by this District Court's judgment, which it characterized as "ripe for decision on appeal."
The Court also notes that, prior to issuing its decision on appeal, the Federal Circuit directed Standard Havens and Gencor to submit supplemental briefs as to whether the appeal to the Federal Circuit should be suspended until a final unappealable *1075 decision had been rendered regarding the PTO's reexamination determination. It is significant that Gencor, which now argues that this Court should stay all proceedings, strenuously opposed suspension of the appeal, at the very time it had the opportunity to persuade the Federal Circuit to hold matters in abeyance.
Neither Gencor nor the Federal Circuit Court of Appeals deemed it wise or necessary to hold this matter in abeyance until a final unappealable decision on the PTO's reexamination determination had been issued. Similarly, this Court is convinced it is time to move toward final disposition of this case.
III.
The Federal Circuit opined that certain circumstances occurring since this Court originally issued its injunction bear on whether the Court should now entertain a stay. As noted above, the Circuit Court specifically referred to the PTO's reexamination decision (determining that the claims of patent-in-suit are unpatentable) as part of the special circumstances this Court may want to consider. The PTO's determination is currently on appeal to the District Court for the District of Columbia. The appellate court also noted that Gencor's shaky financial condition has not changed since the Circuit Court granted a stay February 23, 1990.
In deciding whether to grant Gencor's motion for a stay, four factors must be balanced:
(1) whether the stay applicant has made a strong showing that he is likely to succeed on the merits; (2) whether the applicant will be irreparably injured absent a stay; (3) whether issuance of the stay will substantially injure the other parties interested in the proceeding; and (4) where the public interest lies.
Hilton v. Braunskill, 481 U.S. 770, 776, 107 S. Ct. 2113, 2119, 95 L. Ed. 2d 724 (1987); see also E.I. DuPont de Nemours & Co. v. Phillips Petroleum Co., 835 F.2d 277, 278 (Fed.Cir.1987); Reserve Mining Co. v. United States, 498 F.2d 1073, 1076-77 (8th Cir.1974) (party seeking stay must make strong showing that it (1) is likely to succeed on the merits of the appeal; and a showing that (2) unless a stay is granted, it will suffer irreparable injury, and that (3) no substantial harm will come to the other interested parties, and that (4) a stay will do no harm to the public interest). Of course, these factors need not be applied woodenly or rigidly and, in fact, are sufficiently flexible to allow the Court to justly and equitably determine individual cases. See generally Hilton, 481 U.S. at 776, 107 S.Ct. at 2119; DuPont, 835 F.2d at 278; Roland Mach. Co. v. Dresser Indus., Inc., 749 F.2d 380, 387-88 (7th Cir.1984); Washington Metro. Area Transit Comm'n v. Holiday Tours, 559 F.2d 841, 844 (D.C.Cir. 1977). After full consideration of the matter, including the additional circumstances pointed out by the Federal Circuit, this Court declines to grant defendant's request for a further stay.
Defendant cannot demonstrate a strong showing that is likely to succeed on the merits. The merit issues validity of the patent and infringement have been reviewed and decided by the appellate court, as to this case. The Federal Circuit Court of Appeals affirmed this Court's determination in favor of the plaintiff on those issues.
Defendant argues that if the PTO's reexamination determination, which is on appeal in a parallel action being prosecuted in another district, is affirmed in the form of a final judgment then the patent at issue in this case would be void ab initio, thereby removing the basis for this Court's judgment on the patent infringement. As a result, defendant urges this Court's judgment would become a nullity.
Such a result would squarely confront the traditional concepts of res judicata, collateral estoppel, law of the case and finality, as understood by this Court. Indeed, defendant does not cite, and this Court could not find, a single controlling case that would compel such a result. In this case, this Court returned a plaintiff's verdict. The appellate court affirmed this Court as to the issues of patent validity and infringement. It remanded the matter *1076 to this Court solely for the purpose of determining the appropriate amount for damages. The issues of patent validity and infringement have been finally decided as to this case. This Court apprehends of no case or rule of law that holds that a final judgment in a separate lawsuit, in a separate jurisdiction, which may or may not be rendered at some undetermined point in the future would control and, indeed, void this Court's judgment in this case. If that is the law or the intended result of the Reexamination Statute,[4] this Court would encourage the appellate court to squarely address the issue and say so. It is this Court's view that such appellate guidance, if called for, is necessary and would be welcomed.
Defendant contends that if the stay is not granted and the injunction issues it will be put out of business. Presumably this result will obtain because Gencor's business relies so heavily on the sales which have been found to be infringing. In such cases, the harm to the infringing party is not dispositive. The harm defendant might suffer simply reflects the success it has enjoyed through its infringing activity. See Polaroid Corp. v. Eastman Kodak Co., 641 F. Supp. 828, 228 U.S.P.Q. 305, 342-44 (D.Mass.1985) denial of stay aff'd 833 F.2d 930 (Fed.Cir.1986). Defendant took a calculated risk with its infringing activity and lost: it should not now be allowed to complain of what were predictable results. Id. Put another way, "[o]ne who elects to build a business on a product found to infringe cannot be heard to complain if an injunction against continuing infringement destroys the business so elected." Windsurfing Int'l, Inc. v. AMF, Inc., 782 F.2d 995, 1003 n. 12 (Fed.Cir.), cert. denied sub nom. BIC Leisure Prods., Inc. v. Windsurfing Int'l, Inc., 477 U.S. 905, 106 S. Ct. 3275, 91 L. Ed. 2d 565 (1986).
In its argument, Gencor speaks to the interests of several hundred employees it contends will be put out of work if this Court denies a stay. Of course, such a result is of no small moment in today's economy. As noted in Eastman Kodak Co., supra, however, the public policy primarily affected in patent cases is the protection of the rights secured by that are secured by valid patents. 228 U.S.P.Q. at 342-44. "Courts grant or refuse to stay injunctions in order to safeguard that policy, even if those injunctions discommode business and the consuming public." Id. Additionally, public policy has consistently favored the innovator, not the copier. S.C. Johnson, Inc. v. Carter-Wallace, Inc., 225 U.S.P.Q. 968, 972, 1985 WL 501 (S.D.N.Y.1985) aff'd in part, vacated in part 781 F.2d 198 (Fed.Cir.1986).
Issuance of a stay would clearly and substantially injure the plaintiff. Once validity and infringement of a patent have been established "immediate irreparable harm is presumed." Smith International, Inc. v. Hughes Tool Co., 718 F.2d 1573, 1581 (Fed.Cir.), cert. denied, 464 U.S. 996, 104 S. Ct. 493, 78 L. Ed. 2d 687 (1983). Ten infringing sales were the basis of this lawsuit. More than twenty additional sales have subsequently occurred. Under the terms of the appellate court's stay, defendant Gencor was to pay $50,000.00 into an escrow account for each infringing sale. There is reason to question whether this amount is adequate to compensate plaintiff for damages resulting from each infringing sale. Additionally, the parties agree that the escrow account is otherwise encumbered and may not, in any event, be available to the plaintiff. Defendant concedes that its present financial condition remains shaky and that it may never be in a position to adequately compensate plaintiff for the infringement. Granting defendant's motion for a stay would only serve to further injure the plaintiff, without providing any satisfactory guarantee that defendant will ultimately compensate plaintiff for its infringing conduct.
With regard to where the public interest might lie, the appellate court stated that neither party provided a convincing argument that the public interest favored its position. Accordingly, the appellate *1077 court found that one argument negated the other and therefore favored neither party.
It is this Court's view that the parties and the appellate court omitted from their considerations important aspects of the public interest. Certainly the public has an interest in swift, efficient, affordable and final resolution of all forms of civil litigation.[5] Such interest is reflected by the recent passage of the Civil Justice Reform Act of 1990 (CJRA), 28 U.S.C.A. §§ 471-482 (Supp.1992) (enacted as Title I of the Judicial Improvements Act of 1990, Pub.L. No. 101-650, 104 Stat. 5089 (1990). The CJRA calls for a series of sweeping changes at the local and national levels targeted at making federal civil litigation more affordable, more accessible and less time consuming. Id.; see also J. Peck, "Users United": The Civil Justice Reform Act of 1990, 54 LAW & CONTEMP. PROBS. 105 (1991). The CJRA expressly seeks to "improve litigation management, and ensure just, speedy, and inexpensive resolutions of civil disputes." 28 U.S.C.A. § 471 (Supp.1992).
Additionally, the public interest as reflected by the important public purpose Congress had in mind when it enacted the patent Reexamination Statute (argued by defendant as a ground for granting its requested stay) is consistent with the aims of the CJRA. Passage of the Reexamination Statute "was part of a larger effort to revive United States industry's competitive vitality by restoring confidence in the validity of patents issued by the PTO." Patlex Corp. v. Mossinghoff, 758 F.2d 594, 601 (Fed.Cir.1985). Proponents of the Reexamination Statute sought to strengthen the patent and copyright systems, to provide a means to settle validity disputes more quickly and less expensively and to reinforce confidence in the certainty of patent rights. Id. at 602.
In this case, defendant would have the Reexamination Statute used to protract the length and inflate the cost of this litigation. It would be a perversion of purpose to allow the Reexamination Statute to be used to afford parties, who have lost after full and fair litigation in front of an Article III Court, the opportunity for a second bite of the apple, in a manner that would prolong existing litigation and start related litigation anew in another forum.
In this light, the Court finds that it is in the public interest to bring the instant litigation to a close as expeditiously as practicable, and that interest is served by denying defendant's motion for a stay.
Since the Federal Circuit's decision in Smith International, Inc. v. Hughes Tool Co., supra, district courts have consistently held that once patent validity and infringement have been determined, the holder of the patent is entitled to injunctive relief. Accordingly, it is hereby
ORDERED that defendant Gencor's Motion for Stay of Injunction and Stay of Proceedings is DENIED; and it is further
ORDERED that the temporary stay granted by the appellate court, which was to remain in effect until this Court had the opportunity to consider the special circumstances of this case, as related to the stay, is LIFTED IMMEDIATELY UPON FILING OF THIS ORDER; and it is further
ORDERED that the permanent injunction previously entered by this Court TAKES EFFECT IMMEDIATELY UPON FILING OF THIS ORDER.
IT IS SO ORDERED.
NOTES
[1] The parties have filed and the Court has considered the following:
(1) Gencor's Motion for Stay of Injunction and Stay of Proceedings (Doc. # 263); Suggestions in Support thereof (Doc. # 264); and Exhibits (Doc. # 265);
(2) Standard Havens' Suggestions In Opposition and Exhibits (Doc. # 270);
(3) Gencor's Reply to Standard Havens' Response (Doc. # 272) and Exhibits (Doc. # 273);
(4) Standard Havens' Reply to Gencor's Reply and Appendix (Doc. # 275);
(5) Gencor's Supplemental Brief and Exhibits (Doc. # 276);
(6) Standard Havens' Supplemental Brief in Response to Gencor's Brief (Doc. # 278);
(7) Gencor's Response to Standard Havens' Supplemental Brief (Doc. # 279);
(8) Additional Evidence in Opposition to Gencor's Motion (Doc. # 280);
(9) Gencor's Notice of Parallel Proceedings (Doc. # 281); and
(10) Miscellaneous letters and documents addressing or related to the issues raised by Gencor's motion. Additionally, the parties have appeared, in person, before the Court and advocated their respective positions.
[2] Current patent law allows that "[a]ny person at any time may file a request for reexamination ... of any claim of a patent on the basis of any prior art." 35 U.S.C.A. § 302 (1984). Additionally, the Commissioner "[o]n his own initiative, and any time, ... may determine whether a substantial new question of patentability is raised by patents and publications discovered by him." 35 U.S.C.A. § 303(a) (1984).
Plaintiff contends that the PTO's reexamination proceeding came at the urging of defendant Gencor. In the main, defendant disputes this contention. In any event, it is clear that counsel for defendant did have some contact with the PTO at or around the time the issue of reexamination was taken up. It is reasonable to conclude that, at a minimum, Gencor's contact with the PTO increased its interest in conducting the reexamination.
[3] The Court has found no controlling on point authority (and defendant has cited none) dictating that if it is judicially and finally determined, in a separate proceeding, that the patent in question is invalid, the patent would be void ab initio, thereby effectively voiding this Court's earlier judgment.
[4] This Court's reference to the "Reexamination Statute" refers to 35 U.S.C. §§ 301-307, which was enacted by Congress in 1980 and provides for the reexamination of existing patents.
[5] Few topics have received more commentary in recent years than the need to reform the system of civil litigation in this country. Articles, essays and other commentary are legion and are certainly too numerous to attempt to list. An indication of the interest in this area is reflected in a recent issue of LAW and CONTEMPORARY PROBLEMS, a journal published by the Duke University School of Law. 54 LAW & CONTEMP. PROBS. (Iss. # 3) 1-252 (entire issue dedicated to Modern Civil Procedure: Issues in Controversy).
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416 F. Supp. 606 (1976)
UNITED STATES of America, Plaintiff,
v.
Alec BARBACOFF t/a New Beacon Pharmacy, Defendant.
Civ. A. No. 75-1069.
United States District Court, District of Columbia, Civil Division.
July 9, 1976.
*607 Thomas G. Corcoran, Jr., Asst. U. S. Atty., U. S. District Court, Washington, D. C., for plaintiffs.
Paul F. Interdonato, Washington, D. C., for defendant.
JOHN H. PRATT, District Judge.
FINDINGS OF FACT AND CONCLUSIONS OF LAW
By order dated March 10, 1976, the Court granted the plaintiff's second motion for partial summary judgment herein. Thereafter, on June 3, 1976, the Court held a hearing at which plaintiff and defendant had an opportunity to present witnesses and cross-examine. Based on that hearing and the entire record herein, the Court makes the following Findings of Fact and Conclusions of Law.
Findings of Fact
1. Defendant failed to maintain complete and accurate records with respect to the receipt and distribution of Preludin 75 mg. Endurets during the period extending from the opening of business on June 5, 1973 through the close of business on September 10, 1975. Defendant was unable to account for an overage of 1,962 Preludin 75 mg. Endurets. [Affidavit of Zenon Grundkowski, dated December 29, 1975, ¶¶ 4-5, Exhibit A to plaintiff's second motion for partial summary judgment; Affidavit of Robert C. Williamson, dated December 24, 1975, ¶ 3, Exhibit B to plaintiff's second motion for partial summary judgment].
2. Defendant failed to maintain complete and accurate records with respect to the receipt and distribution of Ritalin 20 mg. Tablets during the period extending from the opening of business on June 5, 1973 through the close of business on September 10, 1975. Defendant was unable to account for an overage of 3,072 Ritalin 20 mg. Tablets. [Affidavit of Zenon Grundkowski, dated December 29, 1975, ¶ 4, supra; Affidavit of Robert C. Williamson, dated December 24, 1975, ¶ 3, supra].
3. Defendant failed to complete 43 Official Order Forms (DEA-2220) showing receipts of Controlled Substances during the *608 period June 5, 1973 to September 10, 1975. [Affidavit of Zenon Grundkowski, dated December 29, 1975, ¶ 5, supra; Affidavit of Robert C. Williamson, dated December 24, 1975, ¶ 3, supra ].
4. Defendant failed to inventory preparations containing methaqualone on November 5, 1973. [Affidavit of Zenon Grundkowski, dated December 29, 1975, ¶ 6, supra; Affidavit of Robert C. Williamson, dated December 24, 1975, ¶ 3, supra ].
5. Defendant failed to inventory preparations containing pentobarbital, secobarbital, and amobarbital on January 1, 1974. [Affidavit of Zenon Grundkowski, dated December 29, 1975, ¶ 6, supra; Affidavit of Robert C. Williamson, dated December 24, 1975, ¶ 3, supra ].
6. Defendant filled 527 forged prescriptions for Preludin and Ritalin. [Affidavit of Zenon Grundkowski, dated December 29, 1975, ¶ 7, supra; Affidavit of Robert C. Williamson, dated December 24, 1975, ¶¶ 4-5, supra; Affidavit of Thomas M. Dent, III, M.D., dated December 23, 1975, ¶¶ 1-2, Exhibit C to plaintiff's second motion for partial summary judgment; Report of Barry M. Spittle, Exhibit A to plaintiff's memorandum on civil penalty to be assessed].
7. Defendant filled 300 prescriptions for Preludin Tablets bearing the xeroxed signature of Frederick J. Washington, M.D. [Affidavit of Zenon Grundkowski, dated December 29, 1975, ¶ 1, supra; Affidavit of Robert C. Williamson, dated December 24, 1975, ¶ 1, supra; Report of Investigation, Exhibit A to Amended Complaint, pp. 9-11].
8. Between the beginning of 1972 and the end of 1975, defendant dispensed nearly 500,000 Preludin 75 mg. Endurets and approximately 400,000 Ritalin 20 mg. Tablets. [Defendant's Answer to Interrogatories; Deposition of Alec Barbacoff].
9. Defendant grossed approximately $76,648 from the sale of Preludin in this period and $51,981 from the sale of Ritalin. [Defendant's Answer to Interrogatories; Deposition of Alec Barbacoff].
10. The profit made on the sale of Preludin and Ritalin between 1972 and 1975 was essential to the solvency of his business. [Plaintiff's memorandum on civil penalty to be assessed, p. 3; Deposition of Alec Barbacoff, Exhibit B to plaintiff's memorandum on civil penalty to be assessed, pp. 59-61; Testimony of Alec Barbacoff, June 3, 1976].
11. Between 1972 and 1975, phenmetrazine was one of the most commonly used drugs, if not the most commonly abused drug, in the District of Columbia. [Exhibits G, H, and I in support of plaintiff's memorandum on civil penalty to be assessed].
12. From May 10, 1973 to August 10, 1973, Boehringer-Ingelheim, the manufacturer of Preludin, imposed a moratorium on its distribution in the Washington area.
13. During the week of June 17, 1974, Mr. Barbacoff had a conference with Assistant United States Attorney Jason D. Kogan. Mr. Kogan informed Mr. Barbacoff that Dr. Burton had been selling prescriptions for Preludin and Ritalin to persons with no medical need for them, that Mr. Barbacoff had been filling those prescriptions, and that the persons to whom the prescriptions were issued were using these drugs to satisfy their own addictions or to sell the drugs to addicts. [Affidavit of Jason D. Kogan, Exhibit C to plaintiff's memorandum on civil penalty to be assessed; Testimony of Jason D. Kogan, June 3, 1976].
14. On June 26, 1974, the District of Columbia Pharmaceutical Association sent to each of its members a Report of the Resolution Committee, including the following:
Resolution # 3: Whereas, the D.C. Pharmaceutical Association, recognizing the problems associated with the illegal diversion and usage of D.E.A. Schedule II Drugs in the Washington area includes the District of Columbia as well as nearby and adjacent Virginia and Maryland, and, Whereas, much of the diversion has occurred through LEGITIMATE Rx dispensing, Therefore, Be it resolved that *609 the D.C. Pharmaceutical Association recommend to the D.C. Government that they undertake an investigation into the possibility of establishing in conjunction and cooperation with these neighboring states a monitoring system of D.E.A. Schedule II Drug prescriptions. (Exhibit D).
The records of the District of Columbia Pharmaceutical Association indicate Mr. Barbacoff was a member at that time. [Exhibits D and E in support of memorandum on civil penalty to be assessed].
15. On June 28, 1974 Mr. Barbacoff's pharmacy was inspected by Detective DiDomenico of the Metropolitan Police Department. Detective DiDomenico noticed approximately 40 vials of Preludin stacked on Mr. Barbacoff's prescription counter. The detective asked Mr. Barbacoff why he had all these vials. Mr. Barbacoff answered with words to the effect that he was the only pharmacist around who was willing to fill these prescriptions and if it was a legitimate prescription he would fill it. [Testimony of Charles F. DiDomenico, June 3, 1976; Affidavit of Charles F. DiDomenico, dated May 25, 1976, Exhibit F in support of memorandum on civil penalty to be assessed].
16. On August 8 and 9, 1974, New Beacon was again inspected by Detective DiDomenico. The detective told Mr. Barbacoff he was filling an enormous volume of prescriptions for Preludin and Ritalin and that he had filled a number of obviously forged prescriptions. Mr. Barbacoff responded that he did not have time to check things like that and that he would fill any prescriptions that came in. [Id.]
17. On February 20, 1975 the New Beacon Pharmacy was inspected by Compliance Investigators Williamson and Grundkowski of the Drug Enforcement Administration. When shown two sets of prescriptions imprinted with Dr. Dent's name but in two different handwritings, Mr. Barbacoff admitted to the investigators that he had filled both sets of prescriptions with the full knowledge that one set was false. When asked why so many customers were flocking to his pharmacy, not only from the District of Columbia but from Virginia and Maryland as well, to have their prescriptions filled for Preludin and Ritalin, Mr. Barbacoff replied that certain pharmacies were reluctant to fill prescriptions for these drugs, but he was not. [Testimony of Zenon Grundkowski, June 3, 1976; Exhibit A to the Complaint, pp. 8-9].
18. New Beacon Pharmacy was the most important source of Preludin in the Washington area during the period from 1972 to 1975. [Testimony of Zenon Grundkowski, June 3, 1976; Status Report of Zenon Grundkowski, dated March 29, 1976, Exhibit J in support of memorandum on civil penalty to be assessed].
19. Based on an examination of prescriptions filled by Mr. Barbacoff and knowledge of the price he charged, two reputable pharmacists in the District of Columbia, Mr. Aaron Rosenstadt, President of the District of Columbia Board of Pharmacy, and Mr. Everett A. Gill, President-Elect of the Washington, D.C., Pharmaceutical Association, concluded that a pharmacist who filled these purported prescriptions must have known that some of the prescriptions had been forged (Exhibit B in support of motion for summary judgment), some had been mechanically reproduced (Exhibit G in support of motion for summary judgment), and that the bulk of them had not been issued in the course of legitimate medical practice. [Testimony of Aaron Rosenstadt and Everett A. Gill, June 3, 1976; Exhibits K and L in support of memorandum on civil penalty to be assessed].
20. The Court finds that the defendant, Alec Barbacoff, filled all or most of the prescriptions filed herein as Exhibit E in support of the plaintiff's second motion for partial summary judgment, knowing that the signatures thereon were forged.
21. The Court finds that the defendant, Alec Barbacoff, filled all or most of the prescriptions filed herein as Exhibit G in support of the plaintiff's second motion for partial summary judgment, knowing that the signatures thereon were mechanically reproduced.
*610 22. The Court finds that the defendant, Alec Barbacoff, failed to maintain complete and accurate records with respect to the receipt and distribution of Preludin and Ritalin in the course of a reckless pursuit of profit that amounted to willfulness. [Exhibits A and B in support of plaintiff's second motion for partial summary judgment; Answer to Interrogatories; Testimony of Alec Barbacoff, June 3, 1976; Deposition of Alec Barbacoff].
23. The Court finds that the defendant, Alec Barbacoff, failed to complete 43 Official Order Forms showing receipts of controlled substances during the period June 5, 1973 to September 10, 1975, in the course of a reckless pursuit of profit that amounted to willfulness. [Exhibits A and B in support of plaintiff's second motion for partial summary judgment; Testimony of Alec Barbacoff, June 3, 1976; Deposition of Alec Barbacoff].
24. The Court finds that the defendant, Alec Barbacoff, failed to inventory preparations containing methaqualone, pentobarbital, secobarbital, and amobarbital as required, in the course of a reckless pursuit of profit that amounted to willfulness. [Exhibits A and B in support of plaintiff's second motion for partial summary judgment; Testimony of Alec Barbacoff, June 3, 1976; Deposition of Alec Barbacoff].
25. The Court finds that the defendant, Alec Barbacoff, filled prescriptions for Preludin and Ritalin between 1972 and 1975 knowing that many of them had not been issued in the course of legitimate medical practice. [Testimony of Aaron Rosenstadt and Everett A. Gill, June 3, 1976; Exhibits K and L in support of memorandum on civil penalty to be assessed].
Conclusions of Law
1. This Court has jurisdiction to order injunctive relief and to assess penalties for the violation of the Controlled Substances Act in the District of Columbia. 21 U.S.C. §§ 842(c)(1) and 882(a), and 28 U.S.C. § 1355.
2. For purposes of determining whether defendant had violated the Controlled Substances Act, it is immaterial that defendant observed reasonable commercial standards. Rather, such a showing, if relevant, would only be in mitigation of the penalty to be assessed.
3. In considering the amount of penalty to be assessed, the Court should consider (1) the willfulness of the violations, (2) how much the defendant earned as the result of his unlawful activities, (3) the harm to the public, and (4) the financial capacity of the defendant to pay. United States v. J. B. Williams, 498 F.2d 414, 436 (2nd Cir. 1974); United States v. Ancorp, 367 F. Supp. 1221 (S.D.N.Y.1973).
4. Defendant has violated 21 U.S.C. § 827(a)(3), 21 U.S.C. § 842(a)(5), 21 U.S.C. § 828(c)(2), 21 U.S.C. § 842(a)(1), 21 C.F.R. § 1304.24 (1975), 21 C.F.R. § 1305.09(e) (1975), 21 C.F.R. § 1304.14 (1975), 21 C.F.R. § 1306.05(a) (1975), and 21 C.F.R. § 1306.06 (1975), as set out in Counts I through V of the Amended Complaint.
5. Defendant has also violated 21 C.F.R. § 1306.04 (1975).
6. Defendant has engaged in a course of business conduct in willful and callous disregard of the law and regulations regarding controlled substances when he knew, or should have known, that he was in violation of the Controlled Substances Act, 21 U.S.C. § 801 et seq.
An Order consistent with the foregoing Findings of Fact and Conclusions of Law has been entered this date.
ORDER
It is therefore, this 9th day of July, 1976,
ORDERED, that defendant (1) prepare and maintain complete and accurate records of controlled substances in accordance with 21 U.S.C. § 827(a)(3) and the regulations of the Drug Enforcement Administration, (2) that defendant inventory drugs containing controlled substances in accordance with 21 U.S.C. § 827(a)(3) and the regulations of the Drug Enforcement Administration, and (3) that defendant cease and desist from filling *611 prescriptions in violation of 21 U.S.C. § 842(a)(1) and the regulations of the Drug Enforcement Administration; and it is
FURTHER ORDERED, judgment be and it hereby is entered in favor of plaintiff and against defendant for $2,000 for the violations set out in Count I of the Amended Complaint, for $1,000 for the violations set out in Count II of the Amended Complaint, for $2,000 for the violations set out in Count III of the Amended Complaint, for $30,000 for the violations set out in Count IV of the Amended Complaint, and for $30,000 for the violations set out in Count V of the Amended Complaint, the total amount of this judgment being $65,000.00.
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416 F. Supp. 1119 (1976)
Chester C. KAMINSKI
v.
SHAWMUT CREDIT UNION et al.
Civ. A. No. 73-1873-C.
United States District Court, D. Massachusetts.
July 19, 1976.
*1120 Frederic N. Halstrom, William L. Eaton, William A. Cotter, Jr., Parker, Coulter, Daley & White, Boston, Mass., for Chester C. Kaminski.
Marnold Tagrin, Boston, Mass., for Shawmut Credit Union.
Donald J. Wood, Haussermann, Davison & Shattuck, Boston, Mass., for Share Ins. Corp. and Consumers Credit Union.
Arthur Nicholson, Boston, Mass., for defendant.
MEMORANDUM
CAFFREY, Chief Judge.
This matter came before the Court on the plaintiff's motion under Rule 23, F.R.Civ.P., for entry of an order certifying this case as a class action.
The subject matter of the claim by plaintiff is that the defendant Shawmut Credit Union (Shawmut) allegedly violated disclosure provisions of the Massachusetts and the Federal Truth in Lending Acts, (hereinafter TILA), M.G.L.A., c. 140C § 1 et seq., and 15 U.S.C.A. § 1601 et seq., as well as Regulation Z of the Federal Reserve Board, 12 C.F.R. § 226.1 et seq. In addition, the plaintiff invokes this Court's pendent jurisdiction in asserting a claim under the Massachusetts Consumer Protection Act, M.G. L.A., c. 93A.
The plaintiff, a citizen of Massachusetts, purports to represent a class made up of
"All customers of the Shawmut Credit Union who received loans from the Shawmut Credit Union or renegotiated loans from the Shawmut Credit Union from June 14, 1972 to date."
At the time of the violations of the TILA alleged in the Substitute Bill of Complaint the defendant Shawmut was a corporation organized under the laws of Massachusetts regularly engaged in the business of making small loans. The defendants Massachusetts Credit Union Share Insurance Corporation (Share Insurance Corp.) and Consumers Credit Union (Consumers) are corporations organized under the laws of Massachusetts.
Subsequent to the filing of this action on June 14, 1973, the Share Insurance Corp., pursuant to the authority vested in it by M.G.L.A. c. 171 App. § 1-6, took over the assets and liabilities of Shawmut. The Share Insurance Corp. then sold those assets and liabilities to Consumers pursuant to the same statute. Share Insurance Corp. and Consumers were added as party defendants in the instant action on December 10, 1975.
In prior proceedings in this case the Court has ruled that it has subject matter jurisdiction over the instant claims and has denied Shawmut's motion for summary judgment. Unpublished Memorandum and Order, September 16, 1975.
The plaintiff alleges that he is a debtor of Shawmut according to the terms of the "Promissory Note and Disclosure Statement" (so-called "Form 61") that he signed as maker, and upon which Shawmut appears as the payee. Form 61 was allegedly executed on or about July 29, 1972. It is further alleged that the plaintiff received $2072.00 from Shawmut for which he was required to repay Shawmut $2800.00.
The Substitute Complaint focuses upon four elements of Form 61 which the plaintiff claims contained untrue statements of material facts and failed to state required facts and facts necessary to make it unambiguous, all in violation of the aforementioned statutes and Regulation Z. The plaintiff further alleges that he and an as yet undetermined number of proposed class members suffered actual damages resulting from defendant's alleged TILA violations in that all customers of Shawmut were required to pay 10% of their loan into a *1121 passbook account which amount was not returned to them.
In particular, the plaintiff alleges that Form 61: (1) falsely stated that there were "other charges" when in fact there were none; (2) failed to disclose the items and amounts, if any, constituting "other charges"; (3) falsely stated the amount of the "Finance Charge" as $252.00 when it should have also included all the amounts included in "other charges" and (4) understated the true annual percentage rate on the loan. The plaintiff further alleges that such statements and omissions were knowingly and wilfully made.
In support of his motion for class certification of the instant action the plaintiff alleges that: (1) the class would number between 700 and 800 members; (2) the claims of the named plaintiff are "typical" of those of the class because all questions of law and fact are identical for all members of the class since they all received or renegotiated loans on Form 61; (3) because the proposed class is made up of those who became debtors of Shawmut after June 14, 1972, all claims fall within the applicable period of limitations; (4) the named plaintiff will adequately protect the interests of the class; and (5) the class action is "superior" to other available methods for the fair and efficient adjudication of the controversy.
The defendant Shawmut has objected to certification under Rule 23, F.R.Civ.P. on the grounds that: (1) there is no "federal question", and alternatively, even if the Federal TILA applied, the plaintiff would be barred from recovery; (2) the applicable state law is a "penal statute"; (3) Shawmut no longer exists, having been taken over by the Share Insurance Corp. which sold its assets and liabilities to Consumers; and (4) the factual basis for the plaintiff's motion for certification is disputed.
The plaintiff seeks certification pursuant to Rule 23(b)(3), F.R.Civ.P. Certification requires, initially, that the four prerequisites of Rule 23(a) be met. Rule 23(a) provides in relevant part that
"One or more members of a class may sue . . . as representative parties on behalf of all only if (1) the class is so numerous that joinder of all members is impracticable, (2) there are questions of law or fact common to the class, (3) the claims . . . of the representative parties are typical of the claims . . . of the class, and (4) the representative parties will fairly and adequately protect the interests of the class."
Once the prerequisites of Rule 23(a) are met, an action may be maintained as a class action if, in addition,
"[t]he court finds that the questions of law or fact common to the members of the class predominate over any questions affecting only individual members, and that a class action is superior to other available methods for the fair and efficient adjudication of the controversy." F.R.Civ.P., 23(b)(3).
Rule 23(b)(3) then lists four matters "pertinent" to the Court's findings. They are
"(A) the interest of members of the class in individually controlling the prosecution or defense of separate actions; (B) the extent and nature of any litigation concerning the controversy already commenced by or against members of the class; (C) the desirability or undesirability of concentrating the litigation of the claims in the particular forum; (D) the difficulties likely to be encountered in the management of a class action."
For the reasons hereinafter articulated, I find that the requirements of Rule 23, F.R.Civ.P., have been met by the plaintiff herein and that the instant action is properly maintainable as a class action.
The question of applicability of class actions to suits under the Federal TILA has been the subject of extensive and conflicting federal court decisions in the six years the TILA has been in force. This is due primarily to the fact that there is no mention of class recovery in any of the legislative proceedings leading up to the enactment of the TILA. See Wilcox v. Commerce Bank of Kansas City, 474 F.2d 336, 343, n. 21 (10 Cir. 1973); see also Note, Class Actions Under the Truth in Lending Act, 47 Notre Dame Law, 1305, 1307 (1972). Further, the Federal TILA provides for both administrative and private enforcement but does not indicate when one or the *1122 other is the preferred enforcement mechanism.
Several courts of appeals have held, however, that the TILA as originally enacted did not absolutely preclude class action enforcement. See, Haynes v. Logan Furniture Mart, Inc., 503 F.2d 1161, 1164-65 (7 Cir. 1974); Lamar v. H. & B. Novelty and Loan Co., 489 F.2d 461 (9 Cir. 1973); Wilcox v. Commerce Bank of Kansas City, supra, 474 F.2d at 343.
In 1974, the Federal TILA was amended[1] in such a way as to eliminate the chief stumbling block to class certification as identified by most courts that declined to certify, see e. g., Ratner v. Chemical Bank New York Trust Co., 54 F.R.D. 412 (S.D.N. Y.1972). The effect of the amendment is to leave Rule 23 to be applied to Federal TILA cases precisely as it applies to other cases. Boggs v. Alto Trailer Sales, Inc., 511 F.2d 114 (5 Cir. 1975); see also, 3B, MOORE's FEDERAL PRACTICE, ¶ 23.02, p. 10 (Supp.1975).
Although the amendment clarified Congress' position in actions brought under the Federal TILA, questions remain as to the "superiority" of the class action where the case is brought in a state such as Massachusetts which has been "exempted" from the Federal TILA,[2] but which has not amended its statute in conformity with the federal amendment. By federal regulation, however, the exemption is treated as partial, preserving the district court's jurisdiction to entertain civil liability claims under 15 U.S. C.A. § 1640 and rendering the state-imposed standards of disclosure the federal disclosure requirements at issue in such litigation. Cf. 12 C.F.R. § 226.12 (1975). The regulation specifically provides that
"In order to assure that the concurrent jurisdiction of Federal and State courts created in section 130(e) of the Act [15 U.S.C.A. § 1640(e)] shall continue to have substantive provisions to which such jurisdiction shall apply, and generally to aid in implementing the Act . . .
(1) No such exemption shall be deemed to extend to the civil liability provisions of sections 130 [15 U.S.C.A. § 1640] and 131 . . ." 12 C.F.R. § 226.12(c)(1)(1975). [emphasis supplied]
Thus, TILA cases brought in Massachusetts are not "exempted" from the provision of the Federal TILA which limits the damages recoverable in a class action suit. The limitation of the Federal TILA thus applies in the instant case.
In view of the identical policies of the Federal and Massachusetts TILA's, the clear policy expressed in the 1974 amendment to the Federal TILA, and the numerous federal cases post-dating the 1974 amendment to the Federal Act in which certification has been allowed, I rule that the instant case is one appropriate for prosecution as a class action because by applying the Rule 23(a) threshold criteria to the case at bar, I find and rule that:
1. The class is so numerous that joinder of all members is impractical. Shawmut's answers to interrogatories indicate that there are approximately 712 members of the proposed class. The inconvenience that would be occasioned by joining all the members as plaintiffs is obvious.
2. There are questions of law or fact common to the class. The Common questions concern the so-called Form 61 used by all members of the proposed class in executing or renegotiating loans during the period from June 14, 1972 through August 5, 1974, the date upon which Shawmut ceased *1123 doing business. Furthermore, Shawmut admitted in its Answers to Requests for Admission that all members of the proposed class were required to pay a $1.00 entrance fee, were required to take out credit life insurance, and were required to put 10 per cent of the face amount of their loan into a passbook account.
3. The claims of the representative party are typical of the claims of the class. The effect of this clause is to guarantee that the "representative's interest should be `coextensive' with those of the potential class members." Koehler v. Ogilvie, 53 F.R.D. 98, 100 (N.D.Ill.1971), aff'd 405 U.S. 906, 92 S. Ct. 938, 30 L. Ed. 2d 777 (1972).
4. The representative party will fairly and adequately protect the interests of the class. This prerequisite is met where (a) the representative shares, without conflict, the interests of the unnamed members of the class, and (b) the court is assured that the representative will vigorously prosecute the rights of the class through qualified counsel. See Katz v. Carte Blanche Corp., 52 F.R.D. 510, 515 (W.D.Pa.1971), aff'd 17 F.R.Serv.2d (3 Cir. 1973), rev'd on other grounds 496 F.2d 747 (3 Cir. 1974).
Moving to the requirements for certification found in Rule 23(b)(3), I find that the questions of law or fact common to the members of the class predominate over any such questions affecting only individual members. In this regard I find that the proposed class is "seeking to remedy a common legal grievance," 3B MOORE'S FEDERAL PRACTICE, ¶ 23.45(2), and that although the question of actual damages may differ among individual members of the class, this fact alone is insufficient to defeat certification of an otherwise appropriate class. See City of New York v. General Motors Corp., 60 F.R.D. 393, 395 (S.C.N.Y. 1973), appeal dismissed 501 F.2d 639 (2 Cir. 1974).
Finally, I find that in the instant case the class action is superior to other available methods for the fair and efficient adjudication of the controversy involving the now defunct Shawmut Credit Union.
The class will be defined as follows:
"All customers of the Shawmut Credit Union who received or renegotiated loans from the Shawmut Credit Union using the so-called `Form 61' from June 14, 1972 to date."
Damages, if any, will of course be limited by the provisions of 15 U.S.C.A. § 1640(a).
I further find none of the overriding reasons for refusing to certify the instant action are present in this case which were found by the court in Ratner v. Chemical Bank New York Trust Co., supra. In particular, there was no allegation of actual damages in Ratner as there are in the case at bar, and the defendant in Ratner was a mere "technical" violator of the TILA whereas far more substantial and even wilful violations of the TILA's disclosure requirements are alleged in the case at bar. Further, the proposed class in Ratner was composed of 130,000 members while in the case at bar the proposed class numbers approximately 712.
Finally, I rule that this court has pendent jurisdiction of the plaintiff's state claims under the Consumer Protection Act, M.G.L.A. c. 93A. That act clearly authorizes class actions, M.G.L.A. c. 93A § 9(2), and the class, therefore, may properly be certified as to the plaintiff's cause of action thereunder.
Order accordingly.
NOTES
[1] The 1974 amendment to the Federal Act (Act of October 28, 1974, Pub.L. 93-495) limits damages in class actions to $100,000 or one per cent of net worth, whichever is smaller. The $100 minimum damage provision that governed actions prior to the amendment was left applicable to individual actions. 15 U.S.C.A. § 1640(a).
[2] The Massachusetts TILA, M.G.L.A. c. 140C, § 9 as amended by St.1972, is nearly identical to the Federal Act. See Shepard v. Finance Associates of Auburn, Inc., Mass., 316 N.E.2d 597, 1974 Mass.Adv.Sh. 1371, 1381.
This fact qualified Massachusetts for the grant in 1970 of an "exemption" from application of federal requirements to state regulated transactions pursuant to 15 U.S.C.A. § 1633. See Amendment to Supplement III of Regulation Z, 35 F.R. 10,538, June 25, 1970.
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416 F. Supp. 405 (1976)
Salvador MADRIGAL, aka Felipe Renteria, Plaintiff,
v.
DISTRICT DIRECTOR OF INTERNAL REVENUE, INTERNAL REVENUE SERVICE, LOS ANGELES, CALIFORNIA, Defendant.
Civ. No. 73-986-AAH.
United States District Court, C. D. California.
June 3, 1976.
Phillip Singer, Beverly Hills, Cal., for plaintiff.
William D. Keller, U. S. Atty., Charles H. Magnuson, Asst. U. S. Atty., Chief, Tax *406 Div., Washington, D. C., J. Clancy Wilson, Asst. U. S. Atty., for defendant.
DECISION, FINDINGS OF FACT AND CONCLUSIONS OF LAW, AND ORDER FOR JUDGMENT FOR DEFENDANT
HAUK, District Judge.
The present matter was tried on December 19, 1975, for purposes of determining whether amended tax returns signed by the plaintiff were forced upon him by ruse, coercion, threat or intimidation. Having considered the testimony of the witnesses, the documents offered and admitted at trial, the argument of counsel, the pleadings, motions, memorandum in support, and the recent Supreme Court decision in Commissioner of Internal Revenue v. Shapiro, 424 U.S. 614, 96 S. Ct. 1062, 47 L. Ed. 2d 278, 44 U.S.L.W. 4313 (1976) the following are the Court's findings of fact and conclusions of law.
Nature of the Action
1. The present suit was instituted on May 3, 1973, by the plaintiff's "Action for Injunction Against Enforcement of Wrongful Levy." The plaintiff alleges that he is a citizen of Mexico, and has been employed in the United States as a full time employee of a domestic corporation since 1967. The plaintiff further alleges that on August 13, 1971, he applied for a permanent resident visa at the American Embassy in Mexico City, for the purpose of entering the United States as a legal permanent citizen. It is further alleged by the plaintiff that an employee of the Internal Revenue Service at the Office of the International Operations of the Internal Revenue Service prepared amended Federal Income Tax Returns (Forms 1040NR) for the years 1968, 1969 and 1970. The plaintiff alleges that he was coerced into signing the amended Federal Income Tax Returns. It is alleged that the plaintiff was told that unless he signed the amended tax returns he would lose his priority for entry into the United States.
2. On August 16, 1973, the United States filed a motion to dismiss the plaintiff's complaint for injunctive relief. The basis for the Government's motion to dismiss was that the plaintiff had an adequate remedy of law by paying the additional assessment due and by simply submitting an administrative claim for refund with the Internal Revenue Service. The Government argued in its motion to dismiss that if the administrative claim for refund were denied, plaintiff may bring an action in the United States District Court for a refund of the taxes paid. It was further argued by the United States that since the plaintiff had not followed the statutory prerequisite of filing an administrative claim for refund, the present lawsuit was barred by Sections 7421[1] and 7422[2] of the Internal Revenue Code of 1954 (Title 26, United States Code).
3. On or about August 28, 1973, the plaintiff filed a first amended complaint *407 *408 asserting again the coercion described in the first complaint and further alleging that the amended returns signed by the taxpayer were, "in effect assessed . . . as supplemental assessments under IRC Section 6204(a)."[3] Accordingly, the plaintiff alleged that the Internal Revenue Service was required to send a notice of deficiency pursuant to Section 6213[4] of the Internal Revenue Code of 1954. The prayer for relief seeks to enjoin the Government from enforcing any tax levy or lien relating to the amended tax returns.
4. On December 14, 1973, the United States filed its motion to dismiss the first amended complaint. The position of the United States in support of its motion to dismiss was that Section 6213[5] requires that a notice of deficiency be mailed to the taxpayer only where there is a deficiency as statutorily defined in Section 6211[6] of the *409 Code and that there was no statutory deficiency.
5. On March 4, 1974, a hearing was held and the Court denied the Government's motion to dismiss.
6. Subsequently, the Government filed its answer to the complaint for an injunction denying the allegations of the plaintiff and raising as an affirmative defense the jurisdiction of the Court for the reasons stated in the Government's previous motion to dismiss.
7. For the purpose of protecting the interests of the Government, the taxpayer was mailed a statutory notice of deficiency for the tax year 1970 pursuant to Code Section 6213[7] on April 11, 1974. The relevant statute of limitations is Section 6501[8] of the Code. Subsequently, the plaintiff *410 filed a petition with the Tax Court on June 7, 1974 for the purpose of determining in the Tax Court the taxpayer's proper liability for the year 1970. *411
*412 Findings of Fact
8. Plaintiff is an alien who has not been lawfully admitted to the United States as a permanent resident.
9. In 1964 plaintiff illegally entered the United States, was apprehended by the Immigration and Naturalization Service and was granted voluntary departure from the United States.
10. Subsequently, the plaintiff returned to the United States after being in Mexico for only two days, and after staying a year and a half in the United States, plaintiff was again deported.
11. After being deported a second time, plaintiff returned to the United States using the false name of Felipe Renteria and a false social security number.
12. The plaintiff used the false name and social security number because he thought it would be easier for the plaintiff to stay in the United States.
13. On February 2, 1967, the plaintiff was again deported by the Immigration and Naturalization Service.
14. For purposes of obtaining an immigrant visa, plaintiff applied for a visa from the American Embassy in Mexico in early 1971.
15. As a requirement for obtaining an immigrant visa, the visa applicant must present evidence of support to show that the applicant will not become a public charge under Section 212(a)(15) Act of 1952. Title 8, United States Code, Section 1182(a)(15).[9]
*413 16. As evidence of his ability to support himself in the United States, plaintiff submitted to the Embassy Vice Consul's office copies of his U.S. Individual Income Tax Returns (Forms 1040) for the years 1968, 1969 and 1970.
17. Upon examination of the plaintiff's tax returns for the years 1968, 1969, and 1970, plaintiff was referred by the Vice Consul's office to the office of the Internal Revenue Service in Mexico City.
18. The plaintiff's 1968 U.S. Individual Income Tax Return (Form 1040) reflects that the plaintiff claimed exemptions for four sisters and one brother in addition to exemptions for his wife and himself, that the plaintiff provided 100% support for the brother and four sisters in 1968 and that the brother and four sisters resided in Mexico. The designated filing status was "married filing joint" and the return was signed by plaintiff and his wife, Olga Madrigal. The 1968 return reflects total earnings of $6,065.17.
19. The plaintiff's 1969 U.S. Individual Income Tax Return (Form 1040) reflects the plaintiff claimed exemptions for his mother, a brother and three sisters, that the plaintiff provided 100% support for the mother, brother and three sisters in 1969, that the mother and one sister resided in Mexico while the brother and two sisters resided at the plaintiff's address in Los Angeles. The designated filing status was "married filing joint" and the return was signed by plaintiff and his wife, Olga Madrigal. The 1969 return reflects gross income of $7,303.99.
20. The 1970 U.S. Individual Income Tax Return (Form 1040) reflects that the plaintiff claimed nine exemptions consisting of the plaintiff, his wife, a child, five sisters and the plaintiff's mother. The return for 1970 further reflects that the plaintiff indicated on the return that the five sisters and mother all resided in Mexico and that plaintiff provided 100% support for the five sisters and mother during 1970. The designated filing status was "married filing joint" and the return was signed by plaintiff and his wife, Olga Madrigal. The 1970 return reflects gross income of $8,971.92.
21. The Court finds and concludes that for each of the years 1968, 1969 and 1970, there was sufficient reason for the tax returns to be referred to the Internal Revenue Service by the Vice Consul because the face of the returns raised significant questions regarding plaintiff's financial responsibility and plaintiff's ability to support himself and provide 100% of the support for the dependents claimed on the 1968, 1969 and 1970 returns.
22. After the plaintiff was referred to the Internal Revenue Service by the Vice Consul's office, the plaintiff was interviewed on July 13, 1971 by Mrs. Eva Corral, a program aide for the Internal Revenue Service at the American Embassy in Mexico City.
23. On July 13, 1971, the program aide prepared three amended U.S. Nonresident Alien Income Tax Returns Forms (1040NR) for the years 1968, 1969 and 1970 in the presence of the plaintiff and on July 13, 1971, the plaintiff signed the returns for 1968, 1969 and 1970.
24. With respect to each amended return, signed by the plaintiff on July 13, 1971, the plaintiff also signed Withdrawal Statements withdrawing his exemptions claimed for his mother, brother and sisters for the years 1968, 1969 and 1970. The Withdrawal Statement is a part of Form 2038, Information to Support Exemption Claimed for Dependent on Federal Income Tax Return. A Form 2038 was signed by the plaintiff for each exemption claimed for the years 1968, 1969 and 1970 other than the exemptions claimed for his wife and child.
*414 25. The amended returns signed by the plaintiff on July 13, 1971 reflected additional income tax as follows:
1968 $ 953.15
1969 914.86
1970 1,154.03
26. In addition to signing the amended nonresident tax returns and the related Withdrawal Statements described above, the plaintiff also signed on August 1, 1973, a Payment Agreement (Form 433-D) wherein the plaintiff stated "that because of my financial condition, as evidenced by my previously submitted financial statement, I am unable at this time to pay the internal revenue taxes I owe in the amount shown below." The Payment Agreement which was also signed by a delegate of the Internal Revenue Service, further reflects taxes owed in the amount of $3,417.25 for the years 1968, 1969 and 1970 and also the plaintiff's request to pay the taxes in monthly payments of $100.00 per month.
27. It has not been alleged and the evidence produced by the plaintiff does not show that plaintiff objected in any manner to the presently contested tax liabilities when the plaintiff signed the Payment Agreement on August 1, 1973.
28. Having considered the testimony of the plaintiff and the testimony of the program aide, Eva Corral, the Court finds that the plaintiff voluntarily chose to sign the amended returns as a step in showing his financial responsibility under the immigration laws of the United States. The evidence presented does not support the plaintiff's contention that he signed the amended U.S. Nonresident Alien Income Tax Returns (Forms 1040NR) for the years 1968, 1969 and 1970 under any threat of force, ruse, coercion or intimidation.
29. The plaintiff has not filed claim for refund described in Section 7422[10] of the Internal Revenue Code of 1954 for the years 1968, 1969 and 1970, nor has the plaintiff paid the additional tax reflected on the amended returns and assessed against the plaintiff in the amounts of $953.15, $914.86 and $1,154.03 for the years 1968, 1969 and 1970.
30. Any conclusion of law deemed as or properly constituting a finding of fact is hereby adopted as a finding of fact.
Conclusions of Law
1. The gravamen of plaintiff's complaint is that the increase in taxes shown on the amended U.S. Nonresident Alien Income Tax Returns signed by plaintiff on July 13, 1971 over the U.S. Individual Income Tax Returns originally filed by the plaintiff for the years 1968, 1969 and 1970 constitutes a determination of a deficiency by the Internal Revenue Service under Section 6211(a)[11] of the Internal Revenue Code of 1954 for the reason that the plaintiff did not voluntarily sign the amended tax returns and therefore plaintiff contends there was no voluntary self assessment of tax as when an individual files his annual income tax return. Accordingly, plaintiff contends that a notice of deficiency defined by Section 6212(a)[12] of the Code should have been mailed to the plaintiff and the collection of the increase in tax may be enjoined because of the exception noted by Section 7421(a)[13] of the Code, and the specific exceptions provided in Sections 6212(a),[14] 6213(a)[15] and Section 7426(a) and (b)(1).[16]
*415 2. Section 6211[17] of the Internal Revenue Code and related case law support the distinction between a voluntary self-imposed determination of tax and the fact that an involuntary addition to tax gives rise to a deficiency and the required access to the Tax Court by virtue of the notice of deficiency. For example in Lyddon & Company v. United States, 158 F. Supp. 951, 141 Ct. Cl. 545 (1958) the Court stated at 953:
"When one files a tax return showing taxes due, he has, presumably, assessed himself and is content to become liable for tax, and to pay either when it is due according to the statute, or when he can get the money together. At any rate he shows no desire to resort to the Tax Court to contest the assessment. The Commissioner has no occasion to determine a deficiency and give the taxpayer notice of it, since at that stage, and until an audit shows something different, the taxpayer's own computation of his taxes may be taken as correct. The only notice which will be sent to the taxpayer will be a notice that the taxes shown to be due by his return should be paid immediately, with appropriate interest."
In questioning whether taxes reflected on the return constituted a statutory deficiency, the Court stated that a deficiency is ordinarily a shortage arising out of circumstances not disclosed in the return. See also General Outdoor Advertising Co. v. United States, 169 F. Supp. 947 at 950-951, 145 Ct. Cl. 127 (1959).
3. Additional support is found in the language of Section 6212 authorizing the notice of deficiency only where "the Secretary or his delegate determines that there is a deficiency . . . " In the present case, having concluded there was no duress or coercion and that the plaintiff signed the amended returns voluntarily, clearly, it was the voluntary act of the plaintiff, not a determination by the Internal Revenue Service, which resulted in the additional tax liabilities.
4. In the alternative, assume arguendo that the voluntary self assessment of taxes shown on the amended U.S. Nonresident Alien Income Tax Returns (Forms 1040NR) for 1968, 1969 and 1970 constitutes Section 6211[18] deficiency to the extent the tax liability is greater than the tax liabilities reflected on the original U.S. Individual Income Tax Returns (Forms 1040) filed earlier by the plaintiff. Even if the increase in the tax liabilities does constitute a Section 6211[19] deficiency, the plaintiff has waived his right to a Section 6212[20] notice of deficiency *416 because the facts show the plaintiff did not contest the increase in tax at the time he signed the Forms 1040NR on July 13, 1971; nor did the plaintiff contest the increase at the time he signed the Payment Agreement (Form 433-D) on August 1, 1973. See General Outdoor Advertising Co. Inc. v. United States, 169 F. Supp. 947 at 950, 145 Ct. Cl. 127 (1959).
5. For the reasons stated above, the case falls outside of the statutory exceptions stated in Section 7421[21] of the Code. Accordingly, the case must be examined in light of the limited circumstances when an injunction may nonetheless be granted under the principles of Enochs v. Williams Packing and Navigation Company, 370 U.S. 1, 82 S. Ct. 1125, 8 L. Ed. 2d 292 (1962) more recently reaffirmed in Bob Jones University v. Simon, 416 U.S. 725, 94 S. Ct. 2038, 40 L. Ed. 2d 496 (1974) and Commissioner of Internal Revenue v. "Americans United" Inc., 416 U.S. 752, 94 S. Ct. 2053, 40 L. Ed. 2d 518 (1974); Thrower v. Miller, 440 F.2d 1186 (C.A. 9, 1971).
6. Under Enochs v. Williams Packing and Navigation Company, supra., the collection of taxes may not be enjoined unless the taxpayer meets a two pronged test showing that (1) it is "clear that under no circumstances could the Government ultimately prevail" and that (2) "equity jurisdiction otherwise exists" because of the threat of irreparable injury for which there is no adequate legal remedy.
7. The taxpayer did not sign the amended tax returns and the related Exemption Withdrawal Statements under unlawful duress and no evidence was produced by the plaintiff showing that the subsequent Payment Agreement was signed under duress. Accordingly, there is no reason to believe that "under no circumstances could the Government ultimately prevail."
8. similarly, since the taxpayer need only institute a refund suit under Section 7422[22] of the Internal Revenue Code, the plaintiff is not without an adequate remedy at law. Accordingly, there is no irreparable injury. Bob Jones University v. Simon, supra, 416 U.S. pp. 746-748, 94 S. Ct. 2038.
9. As recently noted by the Supreme Court in Commissioner of Internal Revenue v. Shapiro, 424 U.S. 614, 96 S. Ct. 1062, 47 L. Ed. 2d 278, 44 U.S.L.W. 4313 (1976):
". . . the Government's interest in collecting the revenues is an important one, Fuentes v. Shevin, 407 U.S. 67, 92 [92 S. Ct. 1983, 2000, 32 L. Ed. 2d 556, 557] (1972). This interest is clearly sufficient to justify seizure of a taxpayer's assets without a pre-seizure hearing, Fuentes v. Shevin, supra, and to remove any need to subject the Commissioner to the burden of an inquiry into the basis for his assessment absent factual allegations of irreparable injury by the taxpayer."
10. The language of Phillips v. Commissioner of Internal Revenue, 283 U.S. 589, at 595, 596, 51 S. Ct. 608 at 611, 75 L. Ed. 1289, clearly states that constitutional due process requirements are met if there is an opportunity for the ultimate judicial determination of the tax liability:
". . . Where, as here, adequate opportunity is afforded for a later judicial determination of the legal rights, summary proceedings to secure prompt performance of pecuniary obligations to the government have been consistently sustained. * * * Where only property rights are involved, mere postponement of the judicial enquiry is not a denial of due process, if the opportunity given for the ultimate judicial determination of the liability is adequate."
11. Based upon the facts and law stated above, plaintiff must seek a judicial determination of his liabilities in a properly instituted suit for refund and he may not seek a premature adjudication in the present injunctive suit.
12. Any finding of fact deemed as or properly constituting a conclusion of law is hereby adopted as a conclusion of law.
*417 ORDER
LET JUDGMENT BE ENTERED ACCORDINGLY.
NOTES
[1] § 7421. Prohibition of suits to restrain assessment or collection
(a) Tax. Except as provided in sections 6212(a) and (c), 6213(a), and 7426(a) and (b)(1), no suit for the purpose of restraining the assessment or collection of any tax shall be maintained in any court by any person, whether or not such person is the person against whom such tax was assessed.
(b) Liability of transferee or fiduciary. No suit shall be maintained in any court for the purpose of restraining the assessment or collection (pursuant to the provisions of chapter 71) of .
(1) the amount of the liability, at law or in equity, of a transferee of property of a taxpayer in respect of any internal revenue tax, or
(2) the amount of the liability of a fiduciary under section 3467 of the Revised Statutes (31 U.S.C. 192) in respect of any such tax.
26 U.S.C. 7421
[2] § 7422. Civil actions for refund
(a) No suit prior to filing claim for refund. No suit or proceeding shall be maintained in any court for the recovery of any internal revenue tax alleged to have been erroneously or illegally assessed or collected, or of any penalty claimed to have been collected without authority, or of any sum alleged to have been excessive or in any manner wrongfully collected, until a claim for refund or credit has been duly filed with the Secretary or his delegate, according to the provisions of law in that regard, and the regulations of the Secretary or his delegate established in pursuance thereof.
(b) Protest or duress. Such suit or proceeding may be maintained whether or not such tax, penalty, or sum has been paid under protest or duress.
(c) Suits against collection officer a bar. A suit against any officer or employee of the United States (or former officer or employee) or his personal representative for the recovery of any internal revenue tax alleged to have been erroneously or illegally assessed or collected, or of any penalty claimed to have been collected without authority, or of any sum alleged to have been excessive or in any manner wrongfully collected shall be treated as if the United States had been a party to such suit in applying the doctrine of res judicata in all suits instituted after June 15, 1942, in respect of any internal revenue tax, and in all proceedings in the Tax Court and on review of decisions of the Tax Court where the petition to the Tax Court was filed after such date.
(d) Credit treated as payment. The credit of an overpayment of any tax in satisfaction of any tax liability shall, for the purpose of any suit for refund of such tax liability so satisfied, be deemed to be a payment in respect of such tax liability at the time such credit is allowed.
(e) Stay of proceedings. If the Secretary or his delegate prior to the hearing of a suit brought by a taxpayer in a district court or the Court of Claims for the recovery of any income tax, estate tax, gift tax, or tax imposed by chapter 42 or 43 (or any penalty relating to such taxes) mails to the taxpayer a notice that a deficiency has been determined in respect of the tax which is the subject matter of taxpayer's suit, the proceedings in taxpayer's suit shall be stayed during the period of time in which the taxpayer may file a petition with the Tax Court for a redetermination of the asserted deficiency, and for 60 days thereafter. If the taxpayer files a petition with the Tax Court, the district court or the Court of Claims, as the case may be, shall lose jurisdiction of taxpayer's suit to whatever extent jurisdiction is acquired by the Tax Court of the subject matter of taxpayer's suit for refund. If the taxpayer does not file a petition with the Tax Court for a redetermination of the asserted deficiency, the United States may counterclaim in the taxpayer's suit, or intervene in the event of a suit as described in subsection (c) (relating to suits against officers or employees of the United States), within the period of the stay of proceedings notwithstanding that the time for such pleading may have otherwise expired. The taxpayer shall have the burden of proof with respect to the issues raised by such counterclaim or intervention of the United States except as to the issue of whether the taxpayer has been guilty of fraud with intent to evade tax. This subsection shall not apply to a suit by a taxpayer which, prior to the date of enactment of this title, is commenced, instituted, or pending in a district court or the Court of Claims for the recovery of any income tax, estate tax, or gift tax (or any penalty relating to such taxes).
(f) Limitation on right of action for refund.
(1) General rule. A suit or proceeding referred to in subsection (a) may be maintained only against the United States and not against any officer or employee of the United States (or former officer or employee) or his personal representative. Such suit or proceeding may be maintained against the United States notwithstanding the provisions of section 2502 of title 28 of the United States Code (relating to aliens' privilege to sue) and notwithstanding the provisions of section 1502 of such title 28 (relating to certain treaty cases).
(2) Misjoinder and change of venue. If a suit or proceeding brought in a United States district court against an officer or employee of the United States (or former officer or employee) or his personal representative is improperly brought solely by virtue of paragraph (1), the court shall order, upon such terms as are just, that the pleadings be amended to substitute the United States as a party for such officer or employee as of the time such action commenced, upon proper service of process on the United States. Such suit or proceeding shall upon request by the United States be transferred to the district or division where it should have been brought if such action initially had been brought against the United States.
(g) Special rules for certain excise taxes imposed by chapter 42 or 43.
(1) Right to bring actions. With respect to any act (or failure to act) giving rise to liability under sections 4941, 4942, 4943, 4944, 4945, 4971, or 4975, payment of the full amount of tax imposed under section 4941(a) (relating to initial taxes on self-dealing), section 4942(a) (relating to initial tax on failure to distribute income), section 4943(a) (relating to initial tax on excess business holdings), section 4944(a) (relating to initial taxes on investments which jeopardize charitable purpose), section 4945(a) (relating to initial taxes on taxable expenditures), 4971(a) (relating to initial tax on failure to meet minimum funding standard), 4975(a) (relating to initial tax, on prohibited transactions), section 4941(b) (relating to additional taxes on self-dealing), section 4942(b) (relating to additional tax on failure to distribute income), section 4943(b) (relating to additional tax on excess business holdings), section 4944(b) (relating to additional taxes on investments which jeopardize charitable purpose), section 4945(b) (relating to additional taxes on taxable expenditures), section 4971(b) (relating to additional tax on failure to meet minimum funding standard), or section 4975(b) (relating to additional tax on prohibited transactions) shall constitute sufficient payment in order to maintain an action under this section with respect to such act (or failure to act).
(2) Limitation on suit for refund. No suit may be maintained under this section for the credit or refund of any tax imposed under sections 4941, 4942, 4943, 4944, 4945, 4971, or 4975 with respect to any act (or failure to act) giving rise to liability for tax under such sections, unless no other suit has been maintained for credit or refund of, and no petition has been filed in the Tax Court with respect to a deficiency in, any other tax imposed by such sections with respect to such act (or failure to act).
(3) Final determination of issues. For purposes of this section, any suit for the credit or refund of any tax imposed under sections 4941, 4942, 4943, 4944, 4945, 4971, or 4975 with respect to any act (or failure to act) giving rise to liability for tax under such sections, shall constitute a suit to determine all questions with respect to any other tax imposed with respect to such act (or failure to act) under such sections, and failure by the parties to such suit to bring any such question before the Court shall constitute a bar to such question.
(h) Cross references.
(1) For provisions relating generally to claims for refund or credit see chapter 65 (relating to abatements, credit, and refund), and chapter 66 (relating to limitations).
(2) For duty of United States attorneys to defend suits, see section 507 of Title 28 of the United States Code.
(3) For jurisdiction of United States district courts, see section 1346 of Title 28 of the United States Code.
(4) For payment by the Treasury of judgments against internal revenue officers or employees, upon certificate of probable cause, see section 2006 of Title 28 of the United States Code.
26 U.S.C. § 7422
[3] § 6204. Supplemental assessments
(a) General rule. The Secretary or his delegate may, at any time within the period prescribed for assessment, make a supplement assessment whenever it is ascertained that any assessment is imperfect or incomplete in any material respect.
26 U.S.C. § 6204(a).
[4] § 6213. Restrictions applicable to deficiencies; petition to Tax Court
(a) Time for filing petition and restriction on assessment. Within 90 days, or 150 days if the notice is addressed to a person outside the States of the Union and the District of Columbia, after the notice of deficiency authorized in section 6212 is mailed (not counting Saturday, Sunday, or a legal holiday in the District of Columbia as the last day), the taxpayer may file a petition with the Tax Court for a redetermination of the deficiency. Except as otherwise provided in section 6861 no assessment of a deficiency in respect of any tax imposed by subtitle A or B, chapter 42, or chapter 43 and no levy or proceeding in court for its collection shall be made, begun, or prosecuted until such notice has been mailed to the taxpayer, nor until the expiration of such 90-day or 150-day period, as the case may be, nor, if a petition has been filed with the Tax Court, until the decision of the Tax Court has become final. Notwithstanding the provisions of section 7421(a), the making of such assessment or the beginning of such proceeding or levy during the time such prohibition is in force may be enjoined by a proceeding in the proper court.
26 U.S.C. § 6213
[5] See Footnote 4 above.
26 U.S.C. § 6213
[6] § 6211. Definition of a deficiency
(a) In general. For purposes of this title in the case of income, estate, and gift taxes imposed by subtitles A and B and excise taxes imposed by chapters 42 and 43, the term "deficiency" means the amount by which the tax imposed by subtitle A or B, or chapter 42 or 43, exceeds the excess of
(1) the sum of
(A) the amount shown as the tax by the taxpayer upon his return, if a return was made by the taxpayer and an amount was shown as the tax by the taxpayer thereon, plus
(B) the amounts previously assessed (or collected without assessment) as a deficiency, over
(2) the amount of rebates, as defined in subsection (b)(2), made.
26 U.S.C. § 6211
[7] See Footnote 4 above.
26 U.S.C. § 6213.
[8] § 6501. Limitations on assessment and collection
(a) General rule. Except as otherwise provided in this section, the amount of any tax imposed by this title shall be assessed within 3 years after the return was filed (whether or not such return was filed on or after the date prescribed) or, if the tax is payable by stamp, at any time after such tax became due and before the expiration of 3 years after the date on which any part of such tax was paid, and no proceeding in court without assessment for the collection of such tax shall be begun after the expiration of such period.
(b) Time return deemed filed.
(1) Early return. For purposes of this section, a return of tax imposed by this title, except tax imposed by chapter 3, 21, or 24, filed before the last day prescribed by law or by regulations promulgated pursuant to law for the filing thereof, shall be considered as filed on such last day.
(2) Return of certain employment taxes and tax imposed by chapter 3. For purposes of this section, if a return of tax imposed by chapter 3, 21, or 24 for any period ending with or within a calendar year is filed before April 15 of the succeeding calendar year, such return shall be considered filed on April 15 of such calendar year.
(3) Return executed by Secretary. Notwithstanding the provisions of paragraph (2) of section 6020(b), the execution of a return by the Secretary or his delegate pursuant to the authority conferred by such section shall not start the running of the period of limitations on assessment and collection.
(4) Return of excise taxes. For purposes of this section, the filing of a return for a specified period on which an entry has been made with respect to a tax imposed under a provision of subtitle D (including a return on which an entry has been made showing no liability for such tax for such period) shall constitute the filing of a return of all amounts of such tax which, if properly paid, would be required to be reported on such return for such period.
(c) Exceptions.
(1) False return. In the case of a false or fraudulent return with the intent to evade tax, the tax may be assessed, or a proceeding in court for collection of such tax may be begun without assessment, at any time.
(2) Willful attempt to evade tax. In case of a willful attempt in any manner to defeat or evade tax imposed by this title (other than tax imposed by subtitle A or B), the tax may be assessed, or a proceeding in court for the collection of such tax may be begun without assessment, at any time.
(3) No return. In the case of failure to file a return, the tax may be assessed, or a proceeding in court for the collection of such tax may be begun without assessment, at any time.
(4) Extension by agreement. Where, before the expiration of the time prescribed in this section for the assessment of any tax imposed by this title, except the estate tax provided in chapter 11, both the Secretary or his delegate and the taxpayer have consented in writing to its assessment after such time, the tax may be assessed at any time prior to the expiration of the period agreed upon. The period so agreed upon may be extended by subsequent agreements in writing made before the expiration of the period previously agreed upon.
(5) Tax resulting from changes in certain income tax or estate tax credits.
For special rules applicable in cases where the adjustment of certain taxes allowed as a credit against income taxes or estate taxes results in additional tax, see section 905(c) (relating to the foreign tax credit for income tax purposes) and section 2016 (relating to taxes of foreign countries, States, etc., claimed as credit against estate taxes).
(6) Tax resulting from certain distributions or from termination as life insurance company.In the case of any tax imposed under section 802(a) by reason of section 802(b)(3) on account of a termination of the taxpayer as an insurance company or as a life insurance company to which section 815(d)(2)(A) applies, or on account of a distribution by the taxpayer to which section 815(d)(2)(B) applies, such tax may be assessed within 3 years after the return was filed (whether or not such return was filed on or after the date prescribed) for the taxable year for which the taxpayer ceases to be an insurance company, the second taxable year for which the taxpayer is not a life insurance company, or the taxable year in which the distribution is actually made, as the case may be.
(7) Termination of private foundation status.In the case of a tax on termination of private foundation status under section 507, such tax may be assessed or a proceeding in court for the collection of such tax may be begun without assessment, at any time.
(d) Request for prompt assessment. Except as otherwise provided in subsection (c), (e), or (f), in the case of any tax (other than the tax imposed by chapter 11 of subtitle B, relating to estate taxes) for which return is required in the case of a decedent, or by his estate during the period of administration, or by a corporation, the tax shall be assessed, and any proceeding in court without assessment for the collection of such tax shall be begun, within 18 months after written request therefor (filed after the return is made and filed in such manner and such form as may be prescribed by regulations of the Secretary or his delegate) by the executor, administrator, or other fiduciary representing the estate of such decedent, or by the corporation, but not after the expiration of 3 years after the return was filed. This subsection shall not apply in the case of a corporation unless
(1)(A) such written request notifies the Secretary or his delegate that the corporation contemplates dissolution at or before the expiration of such 18-month period, (B) the dissolution is in good faith begun before the expiration of such 18-month period, and (c) the dissolution is completed;
(2)(A) such written request notifies the Secretary or his delegate that a dissolution has in good faith been begun, and (B) the dissolution is completed; or
(3) a dissolution has been completed at the time such written request is made.
(e) Substantial omission of items. Except as otherwise provided in subsection (c)
(1) Income taxes. In the case of any tax imposed by subtitle A
(A) General rule. If the taxpayer omits from gross income an amount properly includible therein which is in excess of 25 percent of the amount of gross income stated in the return, the tax may be assessed, or a proceeding in court for the collection of such tax may be begun without assessment, at any time within 6 years after the return was filed. For purposes of this subparagraph
(i) In the case of a trade or business, the term "gross income" means the total of the amounts received or accrued from the sale of goods or services (if such amounts are required to be shown on the return) prior to diminution by the cost of such sales or services; and
(ii) In determining the amount omitted from gross income, there shall not be taken into account any amount which is omitted from gross income stated in the return if such amount is disclosed in the return, or in a statement attached to the return, in a manner adequate to apprise the Secretary or his delegate of the nature and amount of such item.
(B) Constructive dividends. If the taxpayer omits from gross income an amount properly includible therein under section 551(b) (relating to the inclusion in the gross income of United States shareholders of their distributive shares of the undistributed foreign personal holding company income), the tax may be assessed, or a proceeding in court for the collection of such tax may be begun without assessment, at any time within 6 years after the return was filed.
(2) Estate and gift taxes. In the case of a return of estate tax under chapter 11 or a return of gift tax under chapter 12, if the taxpayer omits from the gross estate or from the total amount of the gifts made during the period for which the return was filed items includible in such gross estate or such total gifts, as the case may be, as exceed in amount 25 percent of the gross estate stated in the return or the total amount of gifts stated in the return, the tax may be assessed, or a proceeding in court for the collection of such tax may be begun without assessment, at any time within 6 years after the return was filed. In determining the items omitted from the gross estate or the total gifts, there shall not be taken into account any item which is omitted from the gross estate or from the total gifts stated in the return if such item is disclosed in the return, or in a statement attached to the return, in a manner adequate to apprise the Secretary or his delegate of the nature and amount of such item.
(3) Excise taxes. In the case of a return of a tax imposed under a provision of subtitle D, if the return omits an amount of such tax properly includible thereon which exceeds 25 percent of the amount of such tax reported thereon, the tax may be assessed, or a proceeding in court for the collection of such tax may be begun without assessment, at any time within 6 years after the return is filed. In determining the amount of tax omitted on a return, there shall not be taken into account any amount of tax imposed by chapter 42 or 43 which is omitted from the return if the transaction giving rise to such tax is disclosed in the return, or in a statement attached to the return, in a manner adequate to apprise the Secretary or his delegate of the existence and nature of such item.
(f) Personal holding company tax. If a corporation which is a personal holding company for any taxable year fails to file with its return under chapter 1 for such year a schedule setting forth
(1) the items of gross income and adjusted ordinary gross income, described in section 543, received by the corporation during such year, and
(2) the names and addresses of the individuals who owned, within the meaning of section 544 (relating to rules for determining stock ownership), at any time during the last half of such year more than 50 percent in value of the outstanding capital stock of the corporation,
the personal holding company tax for such year may be assessed, or a proceeding in court for the collection of such tax may be begun without assessment, at any time within 6 years after the return for such year was filed.
(g) Certain income tax returns of corporations.
(1) Trust or partnerships. If a taxpayer determines in good faith that it is a trust or partnership and files a return as such under subtitle A, and if such taxpayer is thereafter held to be a corporation for the taxable year for which the return is filed, such return shall be deemed the return of the corporation for purposes of this section.
(2) Exempt organizations. If a taxpayer determines in good faith that it is an exempt organization and files a return as such under section 6033, and if such taxpayer is thereafter held to be a taxable organization for the taxable year for which the return is filed, such return shall be deemed the return of the organization for purposes of this section.
(3) DISC. If a corporation determines in good faith that it is a DISC (as defined in section 992(a)) and files a return as such under section 6011(e)(2) and if such corporation is thereafter held to be a corporation which is not a DISC for the taxable year for which the return is filed, such return shall be deemed the return of a corporation which is not a DISC for purposes of this section.
(h) Net operating loss or capital loss carrybacks.In the case of a deficiency attributable to the application to the taxpayer of a net operating loss carryback or a capital loss carryback (including deficiencies which may be assessed pursuant to the provisions of section 6213(b)(2)), such deficiency may be assessed at any time before the expiration of the period within which a deficiency for the taxable year of the net operating loss or net capital loss which results in such carryback may be assessed. In the case of a deficiency attributable to the application of a net operating loss carryback, such deficiency may be assessed within 18 months after the date on which the taxpayer files in accordance with section 172(b)(3) a copy of the certification (with respect to the taxable year of the net operating loss) issued under section 317 of the Trade Expansion Act of 1962, if later than the date prescribed by the preceding sentence.
(i) Foreign tax carrybacks. In the case of a deficiency attributable to the application to the taxpayer of a carryback under section 904(d) (relating to carryback and carryover of excess foreign taxes), such deficiency may be assessed at any time before the expiration of one year after the expiration of the period within which a deficiency may be assessed for the taxable year of the excess taxes described in section 904(d) which result in such carryback.
(j) Investment credit carrybacks. In the case of a deficiency attributable to the application to the taxpayer of an investment credit carryback (including deficiencies which may be assessed pursuant to the provisions of section 6213(b)(2)), such deficiency may be assessed at any time before the expiration of the period within which a deficiency for the taxable year of the unused investment credit which results in such carryback may be assessed, or, with respect to any portion of an investment credit carryback from a taxable year attributable to a net operating loss carryback or a capital loss carryback from a subsequent taxable year, at any time before the expiration of the period within which a deficiency for such subsequent taxable year may be assessed.
(k) Reductions of policyholders surplus account of life insurance companies. In the case of a deficiency attributable to the application to the taxpayer of section 815(d)(5) (relating to reductions of policyholders surplus account of life insurance companies for certain unused deductions), such deficiency may be assessed at any time before the expiration of the period within which a deficiency for the last taxable year to which the loss described in section 815(d)(5)(A) is carried under section 812(b)(2) may be assessed.
(l) Joint income return after separate return.
For a period of limitations for assessment and collection in the case of a joint income return filed after separate returns have been filed, see section 6013(b)(3) and (4).
(m) Tentative carryback adjustment assessment period. In a case where an amount has been applied, credited, or refunded under section 6411 (relating to tentative carryback adjustments) by reason of a net operating loss carryback, a capital loss carryback, an investment credit carryback, or a work incentive program carryback to a prior taxable year, the period described in subsection (a) of this section for assessing a deficiency for such prior taxable year shall be extended to include the period described in subsection (h), (j), or (o), whichever is applicable; except that the amount which may be assessed solely by reason of this subsection shall not exceed the amount so applied, credited, or refunded under section 6411, reduced by any amount which may be assessed solely by reason of subsection (h), (j), or (o), as the case may be.
(n) Special rule for chapter 42 taxes.
(1) In general. For purposes of any tax imposed by chapter 42 (other than section 4940), the return referred to in this section shall be the return filed by the private foundation for the year in which the act (or failure to act) giving rise to liability for such tax occurred. For purposes of section 4940, such return is the return filed by the private foundation for the taxable year for which the tax is imposed.
(2) Certain contributions to section 501(c)(3) organizations. In the case of a deficiency of tax of a private foundation making a contribution in the manner provided in section 4942(g)(3) (relating to certain contributions to section 501(c)(3) organizations) attributable to the failure of a section 501(c)(3) organization to make the distribution prescribed by section 4942(g)(3), such deficiency may be assessed at any time before the expiration of one year after the expiration of the period within which a deficiency may be assessed for the taxable year with respect to which the contribution was made.
(o) Work incentive program credit carrybacks.In the case of a deficiency attributable to the application to the taxpayer of a work incentive program credit carryback (including deficiencies which may be assessed pursuant to the provisions of section 6213(b)(2)), such deficiency may be assessed at any time before the expiration of the period within which a deficiency for the taxable year of the unused work incentive program credit which results in such carryback may be assessed, or, with respect to any portion of a work incentive program credit carryback from a taxable year attributable to a net operating loss carryback or a capital loss carryback from a subsequent taxable year, at any time before the expiration of the period within which a deficiency for such subsequent taxable year may be assessed.
26 U.S.C. § 6501.
[9] § 1182. Excludable aliens General classes
(a) Except as otherwise provided in this chapter, the following classes of aliens shall be ineligible to receive visas and shall be excluded from admission into the United States:
(15) Aliens who, in the opinion of the consular officer at the time of application for a visa, or in the opinion of the Attorney General at the time of application for admission, are likely at any time to become public charges;
8 U.S.C. § 1182(a)(15)
[10] See Footnote 2 above
26 U.S.C. § 7422
[11] See Footnote 6 above
26 U.S.C. § 6211
[12] § 6212. Notice of deficiency
(a) In general. If the Secretary or his delegate determines that there is a deficiency in respect of any tax imposed by subtitle A or B or chapter 42 or 43, he is authorized to send notice of such deficiency to the taxpayer by certified mail or registered mail.
26 U.S.C. § 6212(a)
[13] See Footnote 1 above
26 U.S.C. § 7421
[14] See Footnote 12 above
26 U.S.C. § 6212(a)
[15] See Footnote 4 above
26 U.S.C. § 6213
[16] § 7426. Civil actions by persons other than taxpayers
(a) Actions permitted.
(1) Wrongful levy. If a levy has been made on property or property has been sold pursuant to a levy, any person (other than the person against whom is assessed the tax out of which such levy arose) who claims an interest in or lien on such property and that such property was wrongfully levied upon may bring a civil action against the United States in a district court of the United States. Such action may be brought without regard to whether such property has been surrendered to or sold by the Secretary or his delegate.
(2) Surplus proceeds. If property has been sold pursuant to a levy, any person (other than the person against whom is assessed the tax out of which such levy arose) who claims an interest in or lien on such property junior to that of the United States and to be legally entitled to the surplus proceeds of such sale may bring a civil action against the United States in a district court of the United States.
(3) Substituted sale proceeds. If property has been sold pursuant to an agreement described in section 6325(b)(3) (relating to substitution of proceeds of sale), any person who claims to be legally entitled to all or any part of the amount held as a fund pursuant to such agreement may bring a civil action against the United States in a district court of the United States.
(b) Adjudication. The district court shall have jurisdiction to grant only such of the following forms of relief as may be appropriate in the circumstances:
(1) Injunction. If a levy or sale would irreparably injure rights in property which the court determines to be superior to rights of the United States in such property, the court may grant an injunction to prohibit the enforcement of such levy or to prohibit such sale.
26 U.S.C. § 7426(a), (b)(1)
[17] See Footnote 6 above
26 U.S.C. § 6211
[18] See Footnote 6 above
26 U.S.C. § 6211
[19] See Footnote 6 above
26 U.S.C. § 6211
[20] See Footnote 12 above
26 U.S.C. § 6212
[21] See Footnote 1 above
26 U.S.C. § 7421
[22] See Footnote 2 above
26 U.S.C. § 7422
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416 F. Supp. 1227 (1976)
Richard W. POPPLE, Plaintiff,
v.
UNITED STATES of America, United States Department of Defense (Department of the Army) Defendants.
No. Civ-76-144.
United States District Court, W. D. New York.
August 9, 1976.
Brown & LeBlanc, Depew, N.Y. (Norman A. LeBlanc, Jr., and James E. Brown, Depew, N.Y., of counsel), for plaintiff.
*1228 Richard J. Arcara, U.S. Atty., Buffalo, N.Y. (James A. Fronk, Buffalo, N.Y., of counsel), for the Government.
CURTIN, Chief Judge.
The plaintiff in this action, who was married in Alabama in 1946 and divorced in Arkansas in 1971, challenges the garnishment of his Army retirement pay ordered by a Georgia court in February of this year. The basis for the Georgia summons of garnishment served on the United States Attorney in Georgia is 42 U.S.C. § 659, which reads:
Notwithstanding any other provision of law, effective January 1, 1975, monies (the entitlement to which is based upon a remuneration for employment) due from, or payable by, the United States (including any agency or instrumentality thereof and any wholly owned Federal corporation) to any individual, including members of the armed forces, shall be subject, in like manner and to the same extent as if the United States were a private person, to legal process brought for the enforcement, against such individual of his legal obligations to provide child support or make alimony payments.
The plaintiff apparently is deficient in support and alimony payments.
The Government did not contest the garnishment and it contends that there is no jurisdiction for this action in this court. It claims that it is merely in the position of a stakeholder and that this action should have been brought against the plaintiff's exspouse in the Georgia state courts. In his complaint, the plaintiff alleges jurisdiction under 42 U.S.C. § 659, supra, but in his memorandum of law he argues that § 659 does not provide a jurisdictional basis for this action. Instead, he argues:
Rather, the plaintiff is commencing this action against the United States and the Department of Defense to preclude the Department of Defense from honoring the Summons of Garnishment on the grounds that there is no statutory authority permitting the procedure as the one challenged herein. Consequently, the plaintiff's relief is not asserted by way of any of the sections of title 42, but rather to challenge action threatened under the alleged authority of 42 U.S.C. section 659.
The Federal District Court undoubtedly has jurisdiction to hear a challenge to intended action by the government or any of its agencies, where the challenge is based upon a belief that there is no lawful authority permitting such action.
Plaintiff's real argument is that § 659 does not give a state court jurisdiction over an individual not resident in that state. This argument would properly be made in the state court that purported to garnish wages of an individual not resident in that state. This court is of limited jurisdiction under the Constitution and, before it can proceed, it must have subject matter jurisdiction. Plaintiff has not shown that there is any basis for jurisdiction. Similar conclusions have been reached in two recent decisions dealing with slightly different questions under § 659. See West v. West, 402 F. Supp. 1189 (N.D.Ga.1975); Bolling v. Howland, 398 F. Supp. 1313 (M.D.Tenn. 1975).
Prior to enactment of § 659 in 1975, federal employees were not subject to garnishment. § 659 in effect simply waived the government's sovereign immunity and allowed garnishment of federal employees for the limited purposes stated. Under the statute, the government is to be treated as any other private individual. The actual order of garnishment, however, must be grounded on other, often state, statutory authority. This court can be sympathetic with the plaintiff's claim that the garnishment by the Georgia court of 100% of his Army retirement benefits was improper because he was not within the Georgia court's jurisdiction, and/or because the 100% garnishment apparently allowed by Georgia statute is excessive. However, this argument should be made to the Georgia court and is not properly within this court's jurisdiction. Plaintiff's cause is dismissed.
So ordered.
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79 F.2d 9 (1935)
UNTERMYER
v.
BOWERS.[*]
No. 426.
Circuit Court of Appeals, Second Circuit.
July 8, 1935.
Guggenheimer & Untermyer, of New York City (Eugene Untermyer and Harry Hoffman, both of New York City, and Edgar J. Goodrich, of Washington, D. C., of counsel), for appellant.
Martin Conboy, U. S. Atty., of New York City (Edward J. Ennis, Asst. U. S. Atty., of New York City, of counsel), for appellee.
Before MANTON, L. HAND, and AUGUSTUS N. HAND, Circuit Judges.
L. HAND, Circuit Judge.
This appeal is in an action to recover from the collector income taxes unlawfully *10 collected for the year 1919; it is from a judgment dismissing the third amended complaint for insufficiency in law upon its face. On September 18, 1930, the plaintiff took out his writ, and two days later he served it with a complaint which he first amended on October 4, 1932, and again on January 26, 1933. This complaint was in two counts; the first, for money had and received in the sum of $29,497.30; the second, having been abandoned, we may disregard. On a motion for judgment on the pleadings the judge held the first count bad because it did not allege that the plaintiff had not owed as taxes the payment which he asked to recover, or what was his true income for 1919, or what the proper tax. It merely alleged that the collector had compelled the plaintiff to pay an excessive amount, and that the commissioner conceded that there had been an overpayment; it had pleaded evidence or legal conclusions, not "ultimate facts." Thereupon the plaintiff, retaining the first and second counts as they were, amended again by adding a third and fourth. In the third he repeated all that he had said in the first, and added those formal allegations which had been missing; the fourth count was for the conversion of a check drawn by the commissioner in the plaintiff's favor. A second judge dismissed all four counts for insufficiency, and the plaintiff appealed.
The facts as set forth are in substance as follows: On March 14, 1919, the plaintiff filed a tentative income tax return for the year 1918, showing a tax due of $25,000, which he later corrected so as to show a net loss for the year. The time to assess having been extended by waiver, the commissioner in March, 1924, imposed an additional assessment of $127,000, against which the plaintiff protested and appealed to the Income Tax Bureau. The collector made the usual demand on May 22d, but on October 3d credited against the deficiency over $41,000, so as to leave only $85,270. He distrained for this on March 28, 1927, but on June 8, 1929, the commissioner abated the deficiency, which had been reduced to $49,522 by the application of the sum of $29,497.30, which had been allowed as a refund for another year. It is the application of that amount to that deficiency, whose validity was never determined, which is the subject of this action.
The refund arose as follows: On April 13, 1920, the plaintiff filed his return for the year 1919, showing a liability of about $18,600, upon which he claimed the refund of a payment made upon his original tentative return for 1918; this tax he paid. The commissioner assessed him for a deficiency of $88,900 for that year, which he paid on June 3, 1924, and for $35,700 of which he filed a claim for refund on March 11, 1925. This claim the commissioner allowed on March 25, 1926, by the usual certificate of overassessment which the collector delivered to the plaintiff on that date, at the same time advising him that a check in the sum of $29,497.30 with interest of $3,179.65 had been drawn by the Treasury in his favor, which the collector was holding. In order to release this check the plaintiff was required to declare that there were no outstanding internal revenue taxes due from him, and this he refused to do. On July 2, 1926, the collector wrote the plaintiff that he was returning this check to the commissioner to be applied against the outstanding deficiency for 1918, which he did on August 31, 1926. On April 10, 1928, the plaintiff filed a second claim for refund of $35,665.42 for the year 1919, substantially the amount of his first claim, which the commissioner rejected on September 24, 1928. The action was brought within two years thereafter, as already appears. The question is, whether to the extent of the check, $29,487.30, and interest, the plaintiff can recover upon the rejection of the second claim.
The erroneous payment on which the action rests having been made June 3, 1924, the five years' limitation for suit expired on June 3, 1929; so that the plaintiff can recover only in case his time was extended by the claim for refund of April 10, 1928, rejected on September 24, 1928, Rev. St. § 3226, as amended, 26 USCA § 156. If either the collector's letter of July 2, 1926, or his credit in August of the check upon the deficiency of 1918, was a rejection of the only permissible claim, the suit is barred. The plaintiff can succeed on one of two theories. Either the credit of the check against the 1918 deficiency was not a rejection of the first claim, or it was lawful to file a second claim within four years after payment of the tax (section 284 (b) (1), Revenue Act 1926, 26 USCA § 1065 (b) (1), and to sue within two years after its rejection. The Court of Claims held in B. Altman & Co. v. U. S., 40 F.(2d) 781, that after rejection the taxpayer might not so extend his time by another claim, in a case where the grounds of both claims were the *11 same, and where there was therefore no excuse for the second. In Pacific Mills v. Nichols (C. C. A.) 72 F.(2d) 103, the First Circuit added a gloss that the taxpayer might within the period of limitation file a new claim based upon new grounds; and this distinction the Court of Claims had itself recognized in Hills v. U. S., 50 F.(2d) 302, 303. In the case at bar perhaps the claim of March 11, 1925, was, strictly speaking, never rejected at all; by treating it as a credit the commissioner did not recede from his allowance of it; he used it as a payment. That use was indeed unlawful, "an erroneous collection" (Graham & Foster v. Goodcell, 282 U.S. 409, 424, 51 S. Ct. 186, 75 L. Ed. 415; but it was nevertheless a payment. However, de facto the claim was rejected because the plaintiff did not get what he asked, his money; we shall assume arguendo that it was rejected de jure. But we can see no reason why the plaintiff might not file a second claim within the statutory period, except one which we reserve for the moment. The ground of his second claim was not, it is true, the original taking on that he had succeeded it was the commissioner's subsequent refusal to return what he conceded to have been unlawfully taken. Certainly the plaintiff could not foresee that having so conceded, he would unlawfully refuse to make amends; indeed that he could not have so alleged, because the commissioner had not then refused. An action for money had will lie as well upon a refusal as upon a tortious taking, and as the claim for refund is merely to allow the Treasury to prepare its defense, it must be possible to meet the condition precedent to such an action by such a claim.
The possible objection is this: The taxpayer, by accepting the certificate of overassessment, agreed to an account stated between himself and the United States; only on this theory may he sue the United States. United States v. Kaufman, 96 U.S. 567, 570, 24 L. Ed. 792; United States v. Real Estate Savings Bank, 104 U.S. 728, 26 L. Ed. 908; Bonwit Teller & Co. v. U. S., 283 U.S. 258, 265, 51 S. Ct. 395, 75 L. Ed. 1018. Hence it might be argued that the statement of the account was a discharge of the liability upon which it was founded; i. e., the unlawful collection on June 3, 1924, on which alone an action will lie against the collector, because a taxpayer, if he sues upon the account stated, must sue the United States. But this is an error, for normally an account stated is no more than any other accord, and an accord must be followed by satisfaction to be a good bar. Restatement, Contracts, § 417 (c). And when the debtor has repudiated the accord, the creditor may rescind and sue upon the debt. It is true that the accord itself may be a satisfaction; the parties may mean to make the new liability a payment for the old; but this is not the ordinary understanding, and there is no ground for imputing such a mutual purpose to a certificate of overassessment. Thus the suggested defense fails.
Nevertheless we agree with the district judge who granted the motion to dismiss the second amended complaint. The allegations of the first count were and are formally insufficient, for the reasons given by him. But the effect, the gist, of the count was entirely apparent, and we cannot agree with the second judge who refused to allow the amendment set up in the third count; the cause of action had not been changed. The amendments were no more than an amplification of the first inartificial efforts of the pleader; and as an addition to the first count or in a new count were allowable even after the period of limitations had expired. The fourth count was bad because the check had never been delivered and was not the plaintiff's property until it had been. Daube v. U. S., 289 U.S. 367, 372, 53 S. Ct. 597, 77 L. Ed. 1261.
Judgment affirmed on the first, second, and fourth counts. Judgment reversed on the third count.
NOTES
[*] Write of certiorari denied 56 S. Ct. 174, 80 L. Ed. ___.
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416 F. Supp. 830 (1976)
Mrs. Oleta GRAVITT, Individually and as Executrix of the Estate of T. O. Gravitt, Deceased, et al.
v.
SOUTHWESTERN BELL TELEPHONE COMPANY and American Telephone and Telegraph Company.
James H. ASHLEY
v.
SOUTHWESTERN BELL TELEPHONE COMPANY et al.
Civ. A. No. SA75CA117.
United States District Court, W. D. Texas, San Antonio Division.
April 27, 1976.
Pat Maloney, San Antonio, Tex., for plaintiffs.
*831 Jack Hebdon, Hubert W. Green, James E. Barden, San Antonio, Tex., for defendants; Dewey, Ballantine, Bushby, Palmer & Wood, New York City, of counsel.
ORDER REMANDING CASE TO STATE COURT
SPEARS, Chief Judge.
This lawsuit was initially instituted in state court on November 15, 1974. Before its removal to this Court on May 8, 1975 almost six months of pretrial and discovery had been conducted, and a definite trial date had been set for July 11, 1975. Despite this, the parties have constantly bombarded this Court with numerous pretrial and discovery matters ever since the case was removed, and there are no indications that the case is yet ready for trial. In this connection, the records in the office of the Clerk reflect that for the period of time the case has been in this Court, 327 separate docket entries have been made, the last as recent as April 21, 1976.
As was pointed out by this Court in a prior opinion denying the first motion to remand,[1] the improvident filing by plaintiffs of an amended complaint brought about the removal to this Court, and the defendants, having been handed the opportunity on a silver platter, immediately seized upon the totally unexpected turn of events to transfer the case to the forum of their choice.
Now, however, the situation has dramatically changed. It appears that in a 1968 suit filed in Harris County, Southwestern Bell swore that it was a "corporation, duly organized under and by virtue of the laws of the State of Texas, and domiciled in Dallas, Texas, where it has its principal office of business". The plaintiffs argue, therefore, that under the doctrine of judicial estoppel, Southwestern Bell is estopped to allege its Missouri domicile as a basis for diversity jurisdiction in the instant case, and this Court agrees, the protestations of Southwestern Bell to the contrary notwithstanding.[2] Having previously elected to make its judicial bed in Texas, it must now lie in it. It cannot enjoy the best of two worlds.
The Supreme Court of Texas in Long v. Knox, 1956, 155 Tex. 581, 291 S.W.2d 292, 295, in explaining the doctrine of judicial estoppel, said that "a party is estopped merely by the fact of having alleged or admitted in his pleadings in a former proceeding under oath the contrary to the assertion sought to be made", and that "it is not necessary that the party invoking this doctrine should have been a party to the former proceeding".
In Johnson Service Co. v. Transamerica Insurance Co., 485 F.2d 164 (5th Cir. 1973), the Fifth Circuit Court of Appeals discussed the doctrine of judicial estoppel at some length, and concluded that it "is a technical rule designed to meet [the] needs of broad public policy", and is "directed against those who would attempt to manipulate the court system through the calculated assertion of divergent sworn positions in judicial proceedings. . . ."
So, after virtually monopolizing the time and energies of a state court for six months, and a federal court for almost a year, this case has come full circle. It was removed to federal court as the result of a fluke, pure and simple, and it must be remanded to the state court because of a doctrine "designed to meet the needs of [a] *832 broad public policy". In the end, however, justice is done, since the case will now be tried in the forum in which it was originally filed, and where, except for the bungling of plaintiffs, it would have remained.
Accordingly, it is ORDERED, ADJUDGED and DECREED that this action was improperly removed, and that the plaintiffs' second motion to remand be, and the same is hereby, GRANTED. The Clerk of this Court is directed to return to the state court from whence they came, all records and proceedings received therefrom by this Court, as well as all records and proceedings filed in this Court since the removal date.
It is FURTHER ORDERED that the plaintiffs recover all their costs and disbursements by reason of the improper removal of this action, as provided by Title 28, United States Code, Section 1446(d).
NOTES
[1] Gravitt v. Southwestern Bell Telephone Co., 396 F. Supp. 948 (W.D.Tex.1975).
[2] In an affidavit filed by the attorney who represented Southwestern Bell in the 1968 case, it is stated that the plea of privilege filed therein, which contained the quoted language, was "intended to refer only to the fact that Southwestern Bell is duly licensed to do business as a foreign corporation in the State of Texas". However, "a corporation, duly organized under and by virtue of the laws of Texas", constitutes a clear and unambiguous allegation concerning Southwestern Bell's state of incorporation, and could hardly be characterized as the description of a foreign corporation duly licensed to do business in Texas. Significantly, the Texas venue provisions are more favorable to domestic corporations than they are to foreign corporations. Commercial Ins. Co. of Newark v. Adams, 369 S.W.2d 927 (Tex.Sup.Ct.1963).
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349 F. Supp. 268 (1972)
William SMITH, Jr. and Richard Schofield
v.
George SAMPSON, Sheriff, Rockingham County.
Civ. A. No. 72-125.
United States District Court, D. New Hampshire.
October 6, 1972.
*269 Paul MacGregor, N. H. Legal Assistance, Concord, N. H., for plaintiffs.
Carleton Eldredge, Shaw & Eldredge, Exeter, N. H., for defendant.
OPINION
BOWNES, District Judge.
This is an action by plaintiffs seeking declaratory relief under 28 U.S.C.A. § 2201, injunctive relief, and both compensatory and punitive damages under 42 U.S.C.A. § 1983 for the alleged deprivations, under color of state law, of rights, privileges, and immunities secured by the Fourteenth Amendment of the Constitution of the United States. Jurisdiction is based on 28 U.S.C.A. § 1343(3, 4).
The issue in this case is whether pretrial detainees can be compelled to have long hair cut and beards shaven in compliance with county jail regulations.
FACTS
Plaintiffs William Smith, Jr., and Richard Schofield were arrested on burglary charges in Derry, New Hampshire, on February 10, 1972. Bail was set in the amount of $2,000 for Schofield and $3,000 for Smith. Plaintiffs were taken to the Derry District Court where a continuance was granted in their probable cause hearing in order to give Smith the opportunity to confer with his appointed counsel and to give Schofield an opportunity to obtain an attorney. Since they were unable to raise bail, the plaintiffs were bound over by the Derry District Court on February 10, 1972, and were transferred from the Derry Town Jail to the Rockingham County Jail in Brentwood, New Hampshire, on February 11, 1972, where they were lawfully incarcerated.
Upon their arrival at the Rockingham County Jail, plaintiffs were photographed and fingerprinted. During this processing, they were informed that they would have to get their hair cut since it was the jail policy not to allow inmates to wear long hair or beards. It is stipulated by the defendant that it is a rule of the Rockingham County Jail that all those lawfully admitted to the jail must have their hair cut upon the completion of processing if it is exceedingly long. The determination of what constitutes exceedingly long hair is made by the desk guard on duty at the time. This rule has been applied without exception, has been in effect since September 12, 1971, on an oral basis, and was reduced to writing on January 7, 1972. The rationale in support of this regulation is threefold: (1) to improve sanitary conditions; (2) to assist in identification of the prisoners; and (3) for security reasons. Sheriff Sampson testified that when he took over as chief administrator of the jail on September 12, 1971, after a serious stabbing, he found the jail to be a "human jungle full of filth, dirt and lice."
Both plaintiffs who had beards and exceedingly long hair by any standards, protested that the forced cutting of *270 their hair and beards would violate their constitutional rights. The prison officials warned them that their hair would be cut and that physical force would be used if necessary. Both plaintiffs were advised to submit willingly, and both made it clear that they would not submit to a forced haircut without a struggle.
The day following his admission to the jail Smith was called out of his cell on the pretext of being allowed to make a phone call to a bail bondsman, and he was told that he was going to get his hair cut whether he liked it or not. Smith reasserted his refusal to get a haircut and resisted as best he could, but was eventually subdued, handcuffed, and taken to the laundry room where his hair and beard were shorn closely by electric clippers.[1]
After having his hair and beard cut, Smith was returned to his cell. Smith's nose, lip, and mouth were bleeding from a punch in the mouth which he received at the start of the struggle that preceded the forced haircut. Smith's repeated requests for medical aid for his injured lip were ignored.
The jail officers then turned their attention to Schofield and told him that he too was going to get his hair cut. Schofield made it clear that he would resist. Three men then entered the cell and dragged him out of the cell and onto the cell tier where he was handcuffed. In the scuffle his right thumb was bruised and injured. A prison nurse later put Schofield's thumb in a splint. After having his hair and beard cut, Schofield was removed from the cell he had shared with Smith and was placed in solitary in cell number one.[2]
The Rockingham County Jail at Brentwood, New Hampshire, has facilities for the confinement of approximately forty to forty-five inmates, about half of whom are pretrial detainees. The convicted prisoners at Rockingham County Jail are serving sentences of up to a maximum duration of one year.
Although plaintiffs requested showers on a more frequent basis, it was the policy of the jail to permit an inmate to take one shower a week. The plaintiffs testified that no soap was issued to them nor were any towels provided. They also testified that clean clothing was sometimes not available after a shower.
Sheriff Sampson stated that prisoners are now allowed to bathe twice a week and that more frequent showers are feasible. He testified that disinfectants are available for personal use. He did not know what was furnished to the petitioners at the time. The Sheriff also stated that after he took over the administration of the jail on September 12, 1971, he instituted a thorough cleaning, disinfecting, and repainting program which successfully eliminated the problems of filth and lice. He explained that due to the physical layout of the jail pretrial detainees and convicted prisoners are subject to the same basic rules. There are differences, however, in the treatment of pretrial detainees and convicted prisoners. Pretrial detainees are restricted to the cell block and are denied access to the jail recreation areas. They do not have to work and, although they can volunteer to work, they, unlike convicted prisoners, are not allowed to work outside the jail. Therefore, in terms of the conditions of their confinement, pretrial detainees are not treated as well as convicted prisoners.
LAW
Plaintiffs Smith and Schofield were held in the Rockingham County *271 Jail because they were unable to raise the bail set for them. It is axiomatic that under the Constitution persons held in jail awaiting trial are presumed to be innocent of the pending and yet untried criminal charges against them. Their actual guilt or innocence remains for future determination. Tyler v. Ciccone, 299 F. Supp. 684, 687 (W.D.Mo.1969); Jones v. Wittenberg, 323 F. Supp. 93, 100 (N.D. Ohio 1971).
The only legitimate state purpose served by holding in jail those who are unable to make bond is to make certain that they are present for arraignment and trial; it is simply a means of guaranteeing the appearance of the detainee. Hamilton v. Love, 328 F. Supp. 1182, 1191 (E.D.Ark.1971). As pointed out in Butler v. Crumlish, 229 F. Supp. 565 (E.D.Pa.1964):
The constitutional authority for the State to distinguish between criminal defendants by freeing those who supply bail pending trial and confining those who do not, furnishes no justification for any additional inequality of treatment beyond that which is inherent in the confinement itself. At page 567.
Where a person has not been convicted of a crime, any deprivation of his liberty by the state must be the "least restrictive means" of achieving the purpose of the deprivation.
In summary, all restrictions on detainees must be reasonably related to the state purpose of holding them until trial; the means used must be no more restrictive than is required to accomplish that limited purpose. Note, "Constitutional Limitations on the Conditions of Pretrial Detention," 79 Yale L.J. 941, 950 (1970); See also Covington v. Harris, 136 U.S.App.D.C. 35, 419 F.2d 617, 623 (1969).
Plaintiffs here claim that their right to wear their hair long and have a beard is a personal liberty protected by the Due Process Clause of the Fourteenth Amendment. The Court of Appeals for the First Circuit in Richards v. Thurston, 424 F.2d 1281, 1284 (1st Cir. 1970), stated that the Due Process Clause of the Fourteenth Amendment establishes a "sphere" of personal liberty for every individual, subject to reasonable intrusions by the state in furtherance of legitimate state interests.[3] The court went on to say that the governance of the length and style of one's hair is not necessarily so fundamental as those substantive rights already found implicit in the "liberty" assurance of the Due Process Clause, requiring a "compelling" showing by the state before it may be impaired. Yet the court did conclude that the right to wear one's hair as he wishes was a personal liberty within the "sphere" of the Due Process Clause of the Fourteenth Amendment which could be infringed only by a countervailing state interest which justified the intrusion, and that that countervailing state interest must be self-evident or affirmatively shown.
Although there is disagreement over the proper analytical framework,[4] there can be little doubt that the Constitution protects the freedoms to determine one's own hair style. Indeed, the exercise of these freedoms is highly important in preserving the vitality of our traditional concepts of personality and individuality.[5] Here we have the example of two individuals who were willing to fight to try to keep their hair from being cut.
Since the issue in this case does reach constitutional dimensions, this court must proceed to examine the state interests advanced by the jail officials as justification *272 for the haircut and shave regulation so as to determine whether the countervailing state interests do justify such intrusion of plaintiffs' personal liberty.
It is well settled that federal courts entertain a natural reluctance to interfere with the internal discipline of correctional institutions or prisons. Walker v. Pate, 356 F.2d 502 (7th Cir. 1966), cert. denied, 384 U.S. 966, 86 S. Ct. 1598, 16 L. Ed. 2d 678 (1966). However, a court must not be loathe to strike down a jail regulation if it is clearly unconstitutional.
This court must balance the need for the haircut regulation against the constitutional right asserted by the plaintiffs and the degree to which it has been infringed by the regulation in question. Gilmore v. Lynch, 319 F. Supp. 105, 109 (N.D.Cal.1970), aff'd, Younger v. Gilmore, 404 U.S. 15, 92 S. Ct. 250, 30 L. Ed. 2d 142 (1970). Due weight, of course, must be given to the expert opinion proffered by Sheriff Sampson. As the court in Seale v. Manson, 326 F. Supp. 1375 (D.Conn.1971) said:
In sum, the court must recognize the difficulties inherent in the administration of a prison community and must respect the need for restrictive regulations; yet, at the same time it must be solicitous of the civil and personal rights of the prisoner. At page 1379.
Of particular significance in this case, and a factor that weighs heavily on the scale, is that the plaintiffs are unconvicted pretrial detainees whom the law presumes innocent. Unlike convicted prisoners, the state's only asserted interest with respect to these inmates is to insure their appearance at trial; any limitation on the constitutional rights of unconvicted persons must find justification in the legitimate advancement of that interest. Tyler v. Ciccone, supra; Jones v. Wittenberg, supra; Palmigiano v. Travisono, 317 F. Supp. 776 (D.R.I. 1970). Moreover, the difference in the legitimate state interests in convicts and detainees suggest that detainees must be treated better. "Constitutional Limitations on the Conditions of Pretrial Detention," supra, at page 957; Hamilton v. Love, supra, 328 F.Supp. at page 1191.
The defendant advanced three principal justifications in support of the compulsory haircut and shave regulation: First, it was stated that to maintain adequate sanitary and hygienic conditions in the Rockingham County Jail, it is necessary to have all of the inmates' hair shorn closely to protect against the potential health hazard of lice and crabs. The second rationale asserted by defendant was that short haircuts are necessary to assist in identification of inmates. Third, it was claimed that security reasons dictate the shearing of new inmates' hair in that weapons and other contraband might be concealed in long hair. The Sheriff gave as an example a comb that could be concealed in a prisoner's hair and used as a weapon.
Admittedly, the state has a legitimate concern over the sanitary and hygienic conditions of its prisoners. However, Sheriff Sampson's testimony was that after a thorough cleaning, disinfecting, and repainting program, the problem with lice and filth at the Rockingham County Jail has been eliminated. Sheriff Sampson further testified that inmates are now allowed to bathe twice a week and that more frequent showers are feasible. He also stated that disinfectants are available for personal use. With frequent showers and with the use of personal disinfectants, it would not appear to be necessary to compel pretrial detainees to have their hair and beards cut in order to maintain proper sanitary conditions at the prison. Thus, absent a lice or other body vermin problem, this rationale in support of the haircut and shave regulation, in and of itself, is inadequate to justify the infringement of plaintiffs' constitutional rights. See Seale v. Manson, supra, 326 F.Supp. at 1380-1381.
*273 The defendant advances the argument that the haircut and shave regulation assist in the personal identification of inmates by prison officials. The cell block is divided into two separate sections, one for pretrial detainees and one for convicted prisoners. As the number of inmates on each side of the tier approximate only twenty, it does not seem that identification of inmates is a serious problem.
Lastly, defendant claims that in order to maintain adequate security, short haircuts must be given to all inmates. Allegedly, the haircuts prevent weapons and other contraband from being smuggled into the jail. However, Sheriff Sampson indicated that it would be possible to check for weapons and contraband that might be concealed in the hair of all inmates being processed into the Rockingham County Jail without having to subject inmates to the indignity of having their hair and beard closely clipped.
On balance, the three state interests advanced in support of the compulsory haircut and shave regulation, taken together, do not justify the infringement of plaintiffs' constitutional rights to maintain their individuality by choosing the style and manner in which they wish to wear their hair.
I, therefore, rule that the jail policy relative to compulsory haircuts and shaves as applied to pretrial detainees is unconstitutional as violative of the plaintiffs' rights under the Due Process Clause of the Fourteenth Amendment.[6]
I realize that this decision may entail some extra work as far as prison officials are concerned, and perhaps even some additional expense, but the mandate of the Constitution protecting individual rights is far more important.
DAMAGES
I turn now to plaintiffs' claim for damages, both compensatory and punitive, under 42 U.S.C.A. § 1983. It is apparent that both plaintiffs physically resisted getting a haircut after they were clearly warned that force would have to be used if they did not submit to a haircut willingly. Since the jail officers were under a duty to follow their own regulations, they had no alternative except to forcibly overcome plaintiffs' resistance. There was no evidence that the jail officers were vindictive in the way in which they carried out their orders. The claims for both compensatory and punitive damages are, therefore, denied.
So ordered.
NOTES
[1] Smith testified that during the haircutting he called the jail officials "fucking fascist pigs," and that they replied by stating that they were just following orders.
[2] The petition does not raise any issue as to the placement of Schofield in solitary confinement. It is clear, however, that the law now requires that any inmate, either pretrial detainee or convicted prisoner, be given some sort of a hearing before summary punishment of this sort is imposed.
[3] Although this was a school case involving the suspension of a student who wore his hair long, the "sphere" of personal liberty protected by the Due Process Clause of the Fourteenth Amendment must certainly extend to one who is in jail awaiting trial.
[4] See, e. g., Griswold v. Connecticut, 381 U.S. 479, 85 S. Ct. 1678, 14 L. Ed. 2d 510 (1965).
[5] See Breen v. Kahl, 296 F. Supp. 702 (W.D.Wis.1969), aff'd 419 F.2d 1034 (7th Cir.1969), cert. denied, 398 U.S. 937, 90 S. Ct. 1836, 26 L. Ed. 2d 268 (1970).
[6] I am not unmindful of other decisions upholding prison haircut regulations, but it should be pointed out that in each of these cases the courts were dealing with convicted prisoners. See, e. g., Brooks v. Wainwright, 428 F.2d 652 (5th Cir. 1970); Brown v. Wainwright, 419 F.2d 1376 (5th Cir. 1970); Blake v. Pryse, 315 F. Supp. 625 (D.Minn.1970), aff'd 444 F.2d 218 (8th Cir. 1971); Winsby v. Walsh, 321 F. Supp. 523 (C.D.Cal. 1971); and Ralls v. Wolfe, 321 F. Supp. 867 (D.Neb.1971), aff'd 448 F.2d 778 (8th Cir. 1971). See also "The Emerging Rights of the Confined," South Carolina Department of Corrections, William D. Leeke, Director, pp. 96-101 (1972) for a discussion of the state of the law relative to grooming and attire of prisoners.
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349 F. Supp. 539 (1972)
UNITED STATES of America
v.
Joseph RIPKA et al.
Crim. No. 70-456.
United States District Court, E. D. Pennsylvania.
October 10, 1972.
*540 George F. Kelly, U. S. Dept. of Justice, Philadelphia, Pa., for plaintiff.
Donald J. Goldberg, Leonard Sarner, Michael A. Marolla, Edward A. Savastio, Philadelphia, Pa., for defendants.
OPINION AND ORDER
MASTERSON, District Judge.
The above-named defendants are charged with illegal use of interstate telephone facilities to conduct gambling operations.[1] A significant part of the Government's evidence consists of recordings of conversations through wiretaps installed on two New Jersey telephones in 1969, pursuant to several orders entered by Judge Frank J. Kingfield of the Superior Court of New Jersey. Defendants[2] have moved to suppress this wiretap evidence on several grounds ranging from the unconstitutionality of the applicable wiretap statutes[3] to the insufficiency of the applications and orders authorizing the taps, and nonconformity to the orders themselves.
The constitutional bases for suppressing the evidence secured by wiretap were recently discussed by Chief Judge Lord in United States of America v. Whitaker et al., 343 F. Supp. 358 (E.D.Pa., filed May 31, 1972). However, we have decided not to suppress the evidence on this basis while that decision is being tested on appeal.
The first non-constitutional contention is based on the fact that none of the defendants who are moving to suppress the wiretap evidence were provided with an inventory in connection with Judge Kingfield's orders.[4] However, we find the reliance on the recently decided case of United States of America v. Eastman, 465 F.2d 1057 (3rd Cir. filed August 8, 1972), to be misplaced. The Court of Appeals held that the deliberate failure to serve the notice or inventory on the defendants, as required by 18 U.S.C. § 2518(8)(d), constituted grounds for suppression of the wiretap evidence. That section provides:
"(d) Within a reasonable time but not later than ninety days after the filing *541 of an application for an order of approval under section 2518(7)(b) which is denied or the termination of the period of an order or extensions thereof, the issuing or denying judge shall cause to be served, on the persons named in the order or the application, and such other parties to intercepted communications as the judge may determine in his discretion that is in the interest of justice, an inventory which shall include notice of(1) the fact of the entry of the order or the application;
(2) the date of the entry and the period of authorized, approved or disapproved interception, or the denial of the application; and
(3) the fact that during the period wire or oral communications were or were not intercepted. . . ." (Emphasis added).
In Eastman, the defendants moving for suppression of the evidence were clearly the persons named in the order authorizing the interception of the telephone communications. See the opinion of the District Court at 326 F. Supp. 1038 (M.D. Pa.1971). In the present case, Judge Kingfield ordered the interception of the wire communications of "an individual known as Joe Rip and other unidentified persons."[5] After each order, Judge Kingfield directed service of an inventory on W. Ripka, Joseph Patrick Ripka and Louis James Vilotti.[6]
Several defendants argue, however, that although they are not one of the persons named in the order or application there is sufficient identification made to have required the service of an inventory. For example, defendant Manuszak points out that he is identified as "Sassy Doc" in the renewal application of November 25, 1969, and that on December 6, 1969, agents of the F.B.I. and members of the New Jersey state police knew that "Sassy Doc" was the defendant Manuszak.[7] However, there is nothing in the record upon which we must make our decision which indicates that Judge Kingfield was made aware of this fact. Therefore, Eastman, in which the judge who ordered the interception explicitly stated that "notice to the [defendant] is hereby expressly waived," is not on point:
"In the case at bar we have the extraordinary circumstance of an advertence to the provisions respecting . . . the inventory required by 18 U.S.C. § 2518(8)(d) and an express failure by the New York Justice to adhere to these provisions. . . . .
The touchstone of our decision on this aspect of the case at bar is . . . one in which specific provisions of Title III were deliberately and advertently not followed. In other words the failure to file the notice or inventory is no mere ministerial act. It resulted from a judicial act which on its face deliberately flouted and denigrated the provisions of Title III designated for the protection of the public." United States v. Eastman, supra, 343 F.Supp. at 1061 and 1062.[8] (Emphasis added).
We are asked to hold that even if an inventory is not required by the language of 18 U.S.C. § 2518(8)(d), this section is constitutionally infirm in not requiring service of an inventory on any "aggrieved person" as defined in 18 U.S. C. § 2510(11). While this argument is initially persuasive, we are satisfied that any weakness in the statutory framework due to the artificial distinction between "persons named in the order or the application" and others whose communications have been intercepted is cured by *542 18 U.S.C. § 2518(9) which requires the furnishing to any defendant of a copy of the interception order and application at least ten days prior to any proceeding in the case. We are satisfied that all of the defendants received whatever notice is required by the Constitution or Title III.[9]
Defendants' second group of arguments relate to the sufficiency of Judge Kingfield's orders. For example, we are asked to hold that "communications relating to the offenses of book-making and conspiracy" is not a "particular description of the type of communication sought to be intercepted" as required by 18 U.S.C. § 2518(4)(c). We do not agree. See United States v. Leta, 332 F. Supp. 1357 (M.D.Pa.1971). Nor do we find substance to defendants' assertion that the order is insufficient because it does not state "the period of time during which such interception is authorized, including a statement as to whether or not the interception shall automatically terminate when the described communication has been first obtained." 18 U.S.C. § 2518(4)(e). A reading of the Orders and Applications make it clear that a thirty (30) day period was contemplated, and that Judge Kingfield found that "more than one communication of the type described will occur."[10] Finally, defendants complain about the direction that "said interception will begin and end as soon as practicable and will be conducted in such a way as to minimize or eliminate the interception of communications other than the type described." This language is taken verbatim from N.J.S.A. 2A:156A-12, and we have concluded that this provision is directed to the same objective as the federal requirement, i. e., that "no order entered under this section may authorize or approve the interception of any wire or oral communication for any period longer than is necessary to achieve the objective of the authorization". 18 U.S. C. § 2518(5).
We have examined defendants' remaining contentions as to the validity of the agents' applications and as to the agents' compliance with the Orders authorizing the interceptions and we find no substance to them. Accordingly, we will enter an order denying defendants' Motions to Suppress.
NOTES
[1] 18 U.S.C. § 1952. Defendants are also named in a related conspiracy count under 18 U.S.C. § 371.
[2] All defendants have filed Motions to Suppress except Joseph Ripka who is a fugitive and remains unrepresented at this time.
[3] 18 U.S.C. § 2510 et seq., N.J.S.A., 2A:156A-1 et seq. Our decision must look to both these sections since the federal statute governing wiretaps procured by state prosecuting officials provides as follows:
"The principal prosecuting attorney of any State, or the principal prosecuting attorney of any political subdivision thereof, if such attorney is authorized by a statute of that State to make application to a State court judge of competent jurisdiction for an order authorizing or approving the interception of wire or oral communications, may apply to such judge for, and such judge may grant in conformity with section 2518 of this chapter and with the applicable State statute an order authorizing, or approving the interception of wire or oral communications . . . ." 18 U.S.C. § 2516(2). (Emphasis added).
[4] Stipulation of Facts, paragraph 8.
[5] The order of October 8, 1969 names an individual known as "Jerry Ripka" and other unidentified persons.
[6] See orders for Service of Inventory dated January 29, 1970 and February 6, 1970.
[7] Stipulation of Facts, paragraph 4.
[8] We do not intend to imply that a deliberate or advertent attempt by the police to delude the judge authorizing the wiretap, so that notice is not given to the unnamed defendant, will not result in suppression under Eastman. We will re-examine our decision if the record can be supplemented to demonstrate such a state of affairs.
[9] On November 4, 1970, we extended the limits of requisite notice by ordering the Government to make available to each defendant full and complete transcripts of all recorded intercepted communications made in connection with the case.
[10] For example, see Finding of Fact Number 6 pursuant to the Order of October 29, 1969.
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349 F. Supp. 1263 (1972)
James E. BAKER et al.
v.
Dr. George J. BETO et al.
Civ. A. No. 71-H-345.
United States District Court, S. D. Texas, Houston Division.
March 13, 1972.
*1264 *1265 *1266 James De Anda, Corpus Christi, Tex., Ed Idar, Jr., San Antonio, Tex., Frances T. Freeman Cruz, Houston, Tex., for plaintiffs.
Robert Flowers, Asst. Atty. Gen., Austin, Tex., for defendants.
MEMORANDUM AND ORDER
OWEN D. COX, District Judge.
This is an action originally filed by Plaintiffs, James E. Baker, Coy Ray Campbell, Sam Bernard, and Fred Arispe Cruz, convicted felons and prisoners of Texas Department of Corrections (TDC), pursuant to 42 U.S.C. § 1983, known as the Civil Rights Act of 1871. Sam Bernard asked to be, and he was, dismissed as a Plaintiff.
The remaining three prisoners, whose present status results from their total disregard of the rights of others, are asking, for themselves and as alleged representatives of their class, by way of rather ambiguous pleadings, for declarations by this Court that (1) the procedures followed by TDC in imposing prison discipline for infractions of its policies and rules of conduct violate Plaintiffs' fundamental rights of procedural due process and equal protection under the Fourteenth Amendment to the Constitution of the United States of America; (2) the rules and procedures relating to the handling of the mail, that is, reading, censoring, copying, withholding or delaying written communications, particularly between the prisoners (clients) and their attorneys, violate their fundamental First Amendment right of expression and deprive them of equal protection under the Fourteenth Amendment; and (3) the monitoring, observing or interfering with the attorney-prisoner (client) visits also violates such First Amendment right of expression and denies said prisoners equal protection under the Fourteenth Amendment.
The Plaintiffs herein, and others which they purport to represent as members of their class, have suffered the loss of "good time" and have been committed to solitary confinement while inmates of the Texas prison systems by virtue of disciplinary procedures followed in the prison system; and, they seek injunctive relief in connection with any favorable declarations of this Court, including orders to require the Defendants to recompute their respective good-time status; and to prohibit Defendants from continuing the present procedures for imposing prison discipline, the censorship of correspondence, and interference with attorney-prisoner (client) conferences.
This Court will first concern itself with the question of what rights does a prisoner accused of violating the rules of the prison system have? The Courts do generally recognize that the prisoner does not carry with him into prison all of the rights which the law-abiding citizens of this country enjoy. "Lawful incarceration brings about the necessary withdrawal or limitation of many privileges and rights, a retraction justified by the considerations underlying our penal system." Price v. Johnston, 334 U.S. 266, 285, 68 S. Ct. 1049, 1060, 92 L. Ed. 1356 (1948). But, the earlier, extreme attitude that the prisoner was "for the time being a slave of the State"[1] has been relaxed in recent years. Although the relaxation of the sterner views of years past has been considerable, there is yet no real uniformity as to how extensive a prisoner's rights may now be. Some Courts appear to be excessively sympathetic to the convict and thus over-react to his plight, or so it seems to this Court. Others give more consideration to the extremely difficult task of maintaining order among prisoners, many of whom are incorrigible and violent.
In this case, we are only concerned with the constitutional rights of *1267 the convicts to some degree of due process, equal protection of the laws, and freedom of expression. Direct access to the Courts to air grievances the prisoner has, regardless of how vicious or incorrigible he may be. This right is well recognized. But, as to the other constitutional protections named, this Court feels that only minimal safeguards are necessary. The degree of constitutional protection to be afforded the convicted criminal must necessarily be measured against the demanding requirements placed upon the prison system to control and discipline a large number of prisoners prone to unruliness, under very trying circumstances, and weighted in favor of the latter. Walker v. Blackwell, 411 F.2d 23 (5 Cir., 1969).
With regard to the procedures for disciplinary action which result in either a loss of "good time" or commitment in solitary confinement, the only issue relates to due process. There doesn't seem to the Court to be any issue with regard to lack of equal protection under the Fourteenth Amendment. The procedures that are followed affect all prisoners alike. That law-abiding citizens have more protection by way of due process than do prisoners of the state is not such a distinction as creates unequal protection. Both law-abiding citizens and convicted criminals are entitled to due process, but the process due the law-abiding citizen is considerably greater than the process which is due to any convicted criminal serving time in the penitentiary. The Court finds no facts which indicate any violations of the rights of the three named Defendants to claim a failure of equal protection under the Fourteenth Amendment with regard to disciplinary action.
When a prisoner runs the risk of revocation of his "good time" already accrued, or of a sentence to solitary confinement, for an infraction of any of the rules and regulations of the Texas prison system, he is entitled to be heard as soon as practicable after the infraction is reported. The procedures set up by such prison system, and which the evidence shows are followed, require this. There is no evidence in this case which indicates any accused prisoner is given a formal, written notice of the charges against him at any particular period of time in advance of the hearing. However, the procedures provide, and the Court finds, that the accusations against the prisoner are fully explained to him before the hearing commences, and formally read to him when the hearing starts. The hearing is before a committee of three prison officials. At the time of this hearing to adjudicate the guilt or innocence of the prisoner and, if any, the punishment, the accused prisoner is given a full opportunity to tell his side of the story. The officer who has accused the prisoner of an infraction of a rule or regulation may sit on the committee. This may not be the better practice, but, standing alone, does not violate any constitutional right of the prisoner. The Court finds no constitutional abuse resulted to the named prisoners by the actions of the committees before whom they appeared.
The forfeiture of good time is permissible, and the Courts should not interfere with the decision of the disciplinary committee in forfeiting the good time of any prisoner. Sexton v. United States, 429 F.2d 1300 (5 Cir., 1970); Theriault v. Blackwell, Warden, 437 F.2d 76 (5 Cir., 1971).
The case of Grannis v. Ordean, 234 U.S. 385, 395, 34 S. Ct. 779, 58 L. Ed. 1363 (1914), makes it clear that the fundamental requisite of due process of law is the opportunity to be heard. Once that is granted and minimal procedures followed to insure that the prisoner may, if he desires, speak his piece without interference, there can be no clear showing of arbitrary or capricious action which makes the forfeiture of good time invalid.
No Court should camouflage its decision as to what it thinks would be a fair and humane procedure in a particular case, with a constitutional mantle. *1268 The Fifth Circuit has been very chary, and rightly so, about interfering in the internal operations and administration of prison systems and this policy has been followed except in exceptional cases. Diehl v. Wainwright, 5 Cir., 419 F.2d 1309. A prisoner's complaint about the lack of medical attention did not, in the case of Thompson v. Blackwell, 374 F.2d 945 (5 Cir., 1967), "rise to the level of stating facts which would make out a case of an abuse of discretion on the part of the prison authorities." The Federal Court should refuse to interfere with the internal administration of any state prison system except in the most extreme cases involving a shocking deprivation of fundamental rights. Baldwin v. Smith, 446 F.2d 1043 (2 Cir., 1971). This rule is also followed in Rodriguez v. McGinnis, 451 F.2d 730 (2 Cir., 1971).
The TDC does not permit a prisoner to have legal counsel or counsel substitute at such disciplinary hearing, nor necessarily allow the prisoner to be confronted by all the witnesses against him. He is not permitted to cross-examine any of the witnesses. The denial of these rights which the law-abiding citizen customarily has does not constitute lack of due process for the convicted felon. These hearings are carried forward in good faith and are not merely a formality to be gotten over with as quickly as possible. The evidence reflects that many prisoners have been absolved at such hearings and this fact attests to the fairness of the hearings as conducted by the prison officials.
There is provided adequate protection for an accused prisoner against errors and mistakes which might occur at the disciplinary hearing. The prisoner is not entitled to be present at any review of his case, but his absence does not offend due process, since no evidence is taken during review proceedings. Decisions of the disciplinary committee are customarily reviewed by the warden, except as to minor infractions, and he may approve, modify or disapprove the action taken by the committee. The Court does not consider this review to be perfunctory.
In those cases where the prison disciplinary committee recommends forfeiture of an inmate's statutory "good time," a review by the state disciplinary committee is automatic, and it must approve such action. The Director of the Texas Department of Corrections is the final reviewing authority in matters of this kind.
Where the disciplinary committee imposes solitary confinement, or a lesser punishment, although the prisoner is entitled to write to Dr. Beto and request review, the Court recognizes that the punishment is already under way before the report is seen by the Director. However, this fact alone does not abrogate due process. The Director does not defer to the judgment of the disciplinary committee, nor to the action of the prison warden; and, the Director may intervene at any time if it appears to him to be reasonably necessary.
This Court has already indicated, and it here concludes, that the procedures followed by the Texas Department of Corrections in disciplinary action generally, and as heretofore followed in dealing with those three Plaintiffs, James E. Baker, Coy Ray Campbell and Fred Arispe Cruz, when disciplinary action was called for, has not offended any of the constitutional rights afforded to the prisoners generally, or the three named prisoners.
In none of the cases was the testimony sufficient to show arbitrary, capricious or fraudulent action on the part of the prison officials. The Court has found that the committee followed the procedures provided and this Court is not required to review the evidence, even if there be a sharp conflict in the testimony, presented to the committee. The written report in each case was in evidence. In each case, the Defendant had an opportunity to tell his side of the story, after he was advised as to what the charges were against him. This is *1269 all the committee needed to do. Consequently, the action as taken by the prison officials, and in particular the disciplinary committee, is conclusive.
The prisoners (including those named and the prisoner inmates of their alleged class) also complain in this civil suit that prison officials read, censor, copy, withhold and delay communications between them and their respective attorneys. The contentions of the Petitioners indicate "copying, withholding and delaying" of such communications is incidental to and results from the principal complaint against the prison officials, that is, "reading and censoring" of attorney-prisoner mail. Petitioners place considerable stress on the sanctity of the attorney-client privilege, and claim such censorship nullifies it, but they fail to recognize that the privilege has limitations and is not established as to the contents of any particular letter merely by an announcement from the prisoner, or his counsel, that it ought to be.
The privilege which protects the confidentiality of the attorney-client relationship was originally established on the ground of public policy in civil cases. It was extended in Texas to criminal cases in Orman v. State, 22 White & W. 604, 3 S.W. 468 (1886). The rule is now also predicated on Article 38.10 of the Code of Criminal Procedure, and extended to civil cases under Williams v. Williams, Tex.Civ.App., 108 S.W.2d 297 (1937). So, the rule is applied the same in both criminal and civil cases. At this point, in order to assist in determining its applicability here, it seems appropriate to discuss in some detail what attorney-client privilege really does for the client. It is not a broad privilege that can be invoked to cover everything the client and his attorney may say to each other, orally or in writing, or that they, or either of them, may do as a result of what was said or written. And, the violation of the correctly construed privilege does not, of itself, raise a constitutional question.
In Comercio E. Industria Continental, S.A. v. Dresser Industries, Inc., et al., 19 F.R.D. 513 (D.C.1956), United States District Judge Irving R. Kaufman says that the privilege is available, (1) where legal advice of any kind is sought; (2) from a professional legal advisor as such; (3) the communications relating to that purpose; (4) made in confidence; (5) by the client; (6) or at his instance are permanently protected; (7) from disclosure by himself or by the legal advisor; (8) except where the protection is waived. It follows that a communication made in confidence must necessarily be a secret one, and when known to a third person it is no longer secret. 97 C.J.S. Witnesses § 284, Note 40; Clayton, et al v. Canida, Tex.Civ.App., 223 S.W.2d 264 (1949); and Morton v. Smith, Tex.Civ.App., 44 S.W. 683 (1898).
We must remember that these prisoners are not trying to urge the privilege for their protection against the effects of any statements given to their respective lawyers at or prior to the trial of the criminal case which resulted in their present incarceration. They have already been convicted. Nor is any one of the Petitioners trying to claim the privilege concerning a crime for which he could be tried and convicted in the future. They are not troubled about information given prior to a hearing concerning some infraction, large or small, of the prison rules. These prisoners are insisting on the privilege in connection with correspondence between themselves and their attorneys regarding prison conditions and their own legal theories as to why certain prison regulations are invalid, or, at least, should not be enforced as to them. The claimed privilege does not protect this sort of correspondence. Nor are they protected if their hope is, and it may very well be, to obtain guidance in creating situations upon which another civil suit which attacks the procedures of the prison system might be predicated. The contents of the letters between Petitioners and their attorneys, offered and admitted *1270 together as Plaintiff's Exhibit 4, do not warrant the application of the attorney-client privilege rule, as this Court understands it.
These convicted inmates also regard the censorship of prisoner mail as abrogating their First Amendment rights of expression. In other words, Plaintiffs ostensibly feel inhibited in being unable to write, in letters to their attorneys, whatever they want to say about prison officials and prison conditions, or about anything else, without the prison officials finding out about it. In dealing with this alleged constitutional deprivation, the fact that these prisoners are already convicted felons and are not in the category of "awaiting trial" must be taken into account. This Court must also acknowledge that the "`control of mail to and from prisons is a necessary adjunct to penal administration.'" Schack v. Wainwright, 391 F.2d 608 (5 Cir., 1968). The attorney-client privilege not being applicable here, no consideration will be given to it.
This Court finds that, based upon the testimony of Dr. Beto, and other evidence in the record, censorship of the mail is justified because of the serious and difficult problem of security. The fact that some prison systems do not require mail censorship such as the Texas system enforces is not pertinent.
There might be some justification for dispensing with censorship of attorney-client mail in instances where the Fifth Amendment protection that, "No person . . . shall be compelled in any criminal case to be a witness against himself, . . ." should be afforded a prisoner. This sort of situation would be very unusual and obviously is not present in this civil suit. The nature of the mail between Petitioners and their lawyers, as shown by the evidence in this instant case, is not such as to require it to be handled differently from other mail. It may be dealt with under the general rules of mail censorship which are in effect in the Texas prison system.
This Court recognizes that prisoners should have access to the Courts, and it realizes that some Courts suggest this requires uncensored communication with counsel. However, this Court does not agree with such suggestion. The so-called "jailhouse lawyers" may give assistance, and, with the help otherwise available, no prisoner should be seriously handicapped in getting the attention of the Courts. What inconvenience to the prisoner, if any, that might arise would not reach the unconstitutional level. Mail addressed to any Federal judge or any state district or court of appeals judge need not be formal in nature, and should be immediately forwarded without censorship and without delay, except as is necessary to be sure nothing which might be of harm to the Court is enclosed. Coleman v. Peyton, 362 F.2d 905 (4 Cir., 1966). Ex parte Hull, 312 U.S. 546, 61 S. Ct. 640, 85 L. Ed. 1034.
TDC can make reasonable rules regarding censorship within the limits set forth above, and this it has already done. It can make exceptions, from time to time, with regard to the handling of attorney-client mail, pursuant to such rules, but TDC was not required to as to Baker, Campbell and Cruz and other prisoners in their class. Extreme circumstances such as would necessitate a variation from the normal in censorship are not before this Court.
In addition to the objections regarding censorship of their mail, the prisoners complain of interference with confidential visits between the prisoners and their attorneys. This activity, they say, has seriously impeded the preparation of this case, but, without explaining how. It is little short of ridiculous for them to complain about the preparation of any case which has been as well prepared as this one has been by their attorneys. These prisoners apparently have other civil suits involving what *1271 they consider other constitutional questions as to prison procedures. They plead there is a chill in the air around their First Amendment right of expression. We heard the named prisoners testify and view this with some skepticism. In any event, the evidence showed and this Court so finds, that the rules as promulgated by TDC and followed by the prison officials are reasonable and provide only for observance of the prisoner and his visitor. No attempt is made to listen in on any part of the conversation. Such physical observation is obviously necessary for the maintenance of internal security and order. These prisoners are suffering no deprivation of First Amendment rights of free speech by such observation.
As Petitioners' final complaint in this action, they request relief because equal protection under the laws is being denied them by actions of the prison officials, including Dr. Beto, in enforcing, generally, the rules of the Texas Department of Corrections.
At this point, we should not forget that these prisoners, upon their incarceration, have retained, in varying degrees according to the circumstances, only minimal protections as to due process and freedom of expression. While the constitutional rights of prisoners to due process and freedom of expression, in diluted form, are easy to understand, it is difficult for this Court to see how a prisoner could retain equal protection rights to any degree at all, when their very incarceration evidences the lack of it. However, the Petitioners allege, generally, a lack of equal protection under the laws as guaranteed by the Fourteenth Amendment, and we assume the prisoners have some minimal equal protection. Nevertheless, the disparity and unequalness as between the prisoners' rights and the rights of others not so incarcerated, including the prison officials and employees, as to the loss of "good time," solitary confinement, censorship of the mails and observance of attorney-client visits, is adequately justified. The prison officials must be allowed wide discretion in maintaining order and discipline. Royal v. Clark, Warden, 447 F.2d 501 (5 Cir., 1971). This Court concludes there is no showing by Petitioners of any arbitrary disregard of or infringement upon their diluted equal protection rights so as to outweigh the need for order and discipline, or constitute an abuse of the discretion resting with the prison officials.
The Plaintiffs named have all been punished by solitary confinement, by the loss of considerable "good time" and, except as to Campbell, have been reduced to "Class III" inmate status, which earns no "good time." But, the Court finds there was no abuse by the Defendant Dr. Beto, or Defendant Lamer, or any other of the prison officials, of their discretionary duties, no arbitrary or capricious action, in assessing such penalties, and, in each case, the prisoners were granted the minimal protections to which they were entitled under the Constitution of the United States. Their requested relief of the return of forfeited "good time" and reclassification to "Class I" inmates is denied. And, injunctive relief as to disciplinary procedures is refused.
The censorship of the attorney-client mail, and the observance of the physical activities of the prisoners and their attorneys during prison visits have not been unduly burdensome to the prisoners and have not seriously restricted their legitimate dealings with their attorneys. The Petitioners are not entitled to injunctive relief in this regard, and such relief is denied.
The foregoing constitute the findings of fact as made by the Court and its conclusions upon which this Court denied the relief prayed for by Petitioners. This is a final judgment.
NOTES
[1] Ruffin v. Commonwealth, 62 Va. (21 Grat.) 790, 792, 1871, cited in Jackson v. Godwin, 400 F.2d 529, 532 (5 Cir., 1968).
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349 F. Supp. 94 (1972)
Rodney Richard ROBBINS, Plaintiff,
v.
Mahlon S. BRYANT, Sheriff, Amherst County,
and
Henry L. Brockman, Deputy Sheriff, Amherst County, Defendants.
Civ. A. No. 72-C-79-L.
United States District Court, W. D. Virginia, Lynchburg Division.
October 6, 1972.
William R. Rakes, Gentry, Locke, Rakes & Moore, Roanoke, Va., for defendants.
OPINION AND JUDGMENT
DALTON, District Judge.
Plaintiff brings this action in forma pauperis under 42 U.S.C.A. § 1983[1] and claims his civil rights were violated as a result of an illegal search by defendant Henry L. Brockman, who was acting in his official capacity as Deputy Sheriff of Amherst County.
Plaintiff is currently serving a two and one-half year sentence in the Virginia State Penitentiary, having been tried by a jury and found guilty of statutory burglary in Lynchburg Corporation Court on June 23, 1971. The present action concerns a previous conviction of statutory burglary, on January 6, 1971 in Amherst County Circuit Court, where plaintiff received a three year suspended sentence, plaintiff being placed on probation for five years. After his conviction in the Lynchburg Corporation Court, his probation was revoked.
The facts, as alleged by the plaintiff, are that on October 9, 1970, Deputy *95 Sheriff Brockman came to plaintiff's home with a search warrant to search plaintiff's premises for a portable color television, serial no. 079537. It is alleged that Deputy Sheriff Brockman, during the search, seized articles that were not described in the search warrant, to wit, an AM-FM radio, and a single-barrel 20 gauge shotgun. The plaintiff also contends that the warrant did not particularly describe the house to be searched. He therefore claims that his Fourth Amendment right to be secure from unreasonable searches and seizures was violated and he therefore prays for $100,000 damages.
Defendants admit that the color TV, AM-FM radio and 20 gauge shotgun were seized, and further state that all three articles were stolen from Dr. E. H. Hancock, Jr. They state that the radio and shotgun were lying in the room where the color TV was located, open and obvious to view, and that plaintiff's wife, who was present at the time of the search, had no objection to the radio and shotgun being taken along with the color TV. Defendants further allege that a description of the radio and shotgun had previously been given to them by Dr. Hancock. They allege that the search warrant contained a specific description of the house to be searched. The defendants deny that they were acting under color of law at the time and place in question, and that plaintiff's own unlawful acts and conduct resulted in the search and subsequent conviction and that the defendants did not violate or deprive the plaintiff of any of his rights, privileges and immunities secured to him by the Constitution. Defendants move for dismissal of the amended complaint.
The court first recognizes that if defendant Brockman was searching plaintiff's premises under authority of a valid search warrant, he was acting in an official capacity and therefore under color of state law at the time. This case does not present the court with much difficulty for the "plain view" exception to the warrant requirement comes into play here.
It has long been settled that objects falling in the plain view of an officer who has a right to be in the position to have that view are subject to seizure and may be introduced in evidence. Harris v. United States, 390 U.S. 234, 236, 88 S. Ct. 992, 993, 19 L. Ed. 2d 1067 (1968).
There is no dispute here as to the facts which indicate that the AM-FM radio and 20 gauge shotgun were lying in the room where the color TV was located, open and obvious to view. There is also no dispute to the fact that Deputy Sheriff Brockman had a right to be in the room, as he was operating in an official capacity incident to a valid search warrant, which permitted him to search plaintiff's house.
The "plain view" exception is not without problems, however, for as the Supreme Court noted in Coolidge v. New Hampshire, 403 U.S. 443, 465, 91 S. Ct. 2022, 2037, 29 L. Ed. 2d 564 (1971), "The problem with the `plain view' doctrine has been to identify the circumstances in which plain view has legal significance rather than being simply the normal concomitant of any search, legal or illegal."
The Supreme Court continued to define the doctrine by stating:
An example of the applicability of the `plain view' doctrine is the situation in which the police have a warrant to search a given area for specified objects, and in the course of the search come across some other article of incriminating character. Cf. Go-Bart Importing Co. v. United States, 282 U.S. 344, 358, 51 S. Ct. 153, 75 L. Ed. 374; United States v. Lefkowitz, 285 U.S. 452, 465, 52 S. Ct. 420, 76 L. Ed. 877; Steele v. United States, 267 U.S. 498, 45 S. Ct. 414, 69 L. Ed. 757; Stanley v. Georgia, 394 U.S. 557, 571, 89 S. Ct. 1243, 22 L. Ed. 2d 542 (Stewart, J., concurring in result).
403 U.S. at 465, 91 S.Ct. at 2037.
*96 In discussing the prior justification and the limits of a general search, the court in Coolidge noted:
What the `plain view' cases have in common is that the police officer in each of them had a prior justification for an intrusion in the course of which he came inadvertently across a piece of evidence incriminating the accused. The doctrine serves to supplement the prior justificationwhether it be a warrant for another object, hot pursuit, search incident to lawful arrest, or some other legitimate reason for being present unconnected with a search directed against the accused and permits the warrantless seizure. Of course, the extension of the original justification is legitimate only where it is immediately apparent to the police that they have evidence before them; the `plain view' doctrine may not be used to extend a general exploratory search from one object to another until something incriminating at last emerges. Cf. Stanley v. Georgia, 394 U.S. 557, 571-572, 89 S. Ct. 1243, 22 L. Ed. 2d 542 (Stewart, J. concurring in result). 403 U.S. at 466-467, 91 S.Ct. at 2038.
Although the court questions why the radio and shotgun were not included in the original warrant, along with the TV, since defendants did have knowledge and a description of them from the owner, Dr. Hancock, it appears that there was sufficient cause for seizure, because the articles were in plain view, the discovery of them was inadvertent, and did tend to incriminate the accused. There is no evidence to indicate that a general exploration search was conducted which uncovered the articles.
Furthermore, there was no challenge or objection by the plaintiff's wife to the radio and shotgun being taken along with the TV. The court does not find any evidence on the part of defendants to coerce or dominate her or to direct her actions by more subtle techniques and therefore concludes that her consent was freely given. Since the defendants had a warrant to search the house in question and the stolen articles were in plain view and plaintiff's wife consented to their seizure, the court is of the opinion that the search and seizure were not unreasonable.
Accordingly, the court dismisses plaintiff's amended complaint as it finds he was not deprived of any privileges or immunities guaranteed to him under the Constitution.
NOTES
[1] 42 U.S.C.A. § 1983.
Every person who, under color of any statute, ordinance, regulation, custom, or usage, of any State or Territory, subjects, or causes to be subjected, any citizen of the United States or other person within the jurisdiction thereof to the deprivation of any rights, privileges, or immunities secured by the Constitution and laws, shall be liable to the party injured in an action at law, suit in equity, or other proper proceeding for redress.
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349 F. Supp. 1007 (1972)
H. M. YOUNG ASSOCIATES, INC.
v.
UNITED STATES.
C.D. 4388; Port of New York, Court No. R65/12412 on Fabrics of Special Construction (Waistband Elastics).
United States Customs Court.
October 27, 1972.
Wildman, Harrold, Allen & Dixon, Chicago, Ill. (Lawrence J. West, Chicago, Ill., of counsel), Rode & Qualey, New York City (William E. Melahn and Ellsworth F. Qualey, New York City, of counsel), associate counsel, for plaintiff.
Harlington Wood, Jr., Asst. Atty. Gen., Bernard J. Babb, New York City, trial attorney, for defendant.
On Motion and Cross-Motion for Summary Judgment
RICHARDSON, Judge:
The merchandise of this case described on the special customs invoice as "Cotton Tissues (Waistband-Elastic)", was exported from West Germany in April, 1965, and appraised upon entry at the port of New York at 98 cents per *1008 yard on the basis of constructed value as defined in 19 U.S.C.A., section 1401a(d) (section 402(d), Tariff Act of 1930, as amended by the Customs Simplification Act of 1956).[1] It is alleged in the complaint herein that the merchandise should be appraised under the same basis of value at 62 cents per yard, the difference of some 36 cents representing additions to the entered unit value for royalty and trademark certification payments which constitute no part of the constructed value of the merchandise.
Plaintiff has moved under rule 8.2 for summary judgment; and defendant has cross-moved under that rule for the same relief, both parties being of the belief that no triable factual issue remains in the case.
In the pleadings it is conceded, among other things, that constructed value under section 1401a(d) is the proper basis for determination of the value of the merchandise the subject of this action, and that the instant merchandise and parties are the same as the merchandise and parties in H. M. Young Associates, Inc. v. United States, 64 Ct. Cust. 642, R.D. 11695 (1970), application for review dismissed October 29, 1970 (4 Cust.Bull., No. 47, p. 80, November 25, 1970), wherein the reappraising court held that amounts for royalty and trademark certification payments totalling 36 cents which had been added to the invoice unit value of U.S. $0.62 per yard, packed, in the appraisement of the merchandise under the constructed value basis formed no part of the constructed value of the merchandise.
In issue under the pleadings at bar are paragraphs of the complaint numbered eighth, ninth, and thirteenth which read:
Eighth: That on information and belief, said appraisement was made by adding amounts for royalty and trademark certification payments totalling 36 cents to the entered unit value of U.S. $0.62 per yard packed;
Ninth: That said appraisement is in error, in that charges for royalty and trademark certification payments are not part of the dutiable value of the subject merchandise;
* * * * * *
Thirteenth: That the issues involved herein are the same in all material respects to the issues in H. M. Young Associates, Inc. v. United States, 64 Ct. Cust. 642, R.D. 11695 (1970).
Plaintiff takes the position that there is no issue respecting these allegations of the complaint. And an examination of the record before the court sustains that view, even though the defendant persistently refused in its answer and amended answer to concede paragraph Eighth of plaintiff's pleading, and only did so in its cross-motion for summary judgment after plaintiff brought it out by interrogatories, deposition and affidavit from employees of defendant.
*1009 In R.D. 11695 the trial court observed on rehearing (page 644):
At the second trial, plaintiff called Thomas F. Sweeney, import specialist, who testified as follows: In the course of his duties he examines, classifies, and values elastic fabrics of the kind in issue. As the line examiner, he is ordinarily responsible for the appraisement of this type of merchandise. In this case he instructed the examiner at the airport as to the basis on which he was to make appraisement. The invoice price on each invoice was 62 cents per yard and the merchandise was appraised at 98 cents per yard on the basis of constructed value. Mr. Sweeney said that at the time he made his appraisement he had received copies of a patent royalty agreement and a certification mark agreement by which Jaymar-Ruby, Inc. was to pay to the licensors 24 cents a yard as a royalty for the elastic used in the manufacture of slacks and 12 cents per yard for use of a certification mark known as NB. In arriving at the appraised value, he added to the invoice unit price 24 cents representing the patent royalty payment, and 12 cents representing the certification mark payment. He did not allocate these amounts to any particular element of constructed value and made no breakdown of the invoice value of 62 cents. The report of value was adopted by the appraiser.
On the instant motion plaintiff introduced the following questions and answers, among others, from the deposition of the said import specialist, Thomas F. Sweeney, taken in this action:
Q. Do you know whether or not an amount for royalty was included in the appraisement of this entry? A. Since I didn't make the appraisement I don't know what he included here.
Q. Was the appraisement made under your general instructions? A. Yes.
Q. Do you now testify that you don't know what was included in the appraisement? A. I don't know what was in Kasday's mind when he put the figure down.
Q. What is the figure? A. Ninety-eight cents per yard, net packed.
Q. What is the invoice unit? A. Sixty-two cents, F.O.B.
Q. What were your instructions to the airport examiners? A. That the invoice value did not necessarily represent the full value of the merchandise.
Q. How did you instruct them to appraise? A. We had information that certain of the payments were made in addition to the invoice price.
Q. What were your instructions as to how the merchandise was to be appraised? A. To include all the items that would represent a constructed value on that Section 402.
Q. How was this to be done? A. By arriving at a figure in addition to the invoice value that would represent the full constructed value of the merchandise.
Q. What amounts were to be added to the invoiced value? A. An amount equal to certification mark fees, royalty fees or license fees.
Q. What were the total of these fees, Mr. Sweeney? A. Thirty-six cents.
Q. How much for the royalty fee? A. I believe the royalty fee was twenty-four cents.
Q. The certification fee? A. Twelve cents.
Still later in his deposition, Mr. Sweeney testified:
Q. In counsel's amended answer to the plaintiff's amended complaint in the instant case, on the No. 13, it is stated, "Defendant contends that certain factual and legal developments make the issues different from the case cited in paragraph 13 of the complaint," which is the prior test case, and I ask you, are you aware of any factual differences between the test *1010 case and the present case? A. No, I am not aware of any.
And finally on the motion herein plaintiff sets forth as exhibit A the affidavit of Robert Kasday, dated April 13, 1972, former import specialist assigned to JFK Airport, Queens County, relative to the entry at bar. Kasday's affidavit states in part:
That my examination of the papers shows my initials under date of April 6, 1965 on the Summary Sheet and on the commercial invoice of H & H Kalbskopf. The commercial invoice also shows that the merchandise was entered at 62¢ per yard FOB and that I appraised the merchandise at US $0.98 per yard net packed;
That it is my recollection that our office at JFK Airport was in close contact with the New York office of Import Specialist Thomas Sweeney in connection with the appraisement of this merchandise and it is my further recollection that 36¢ was added to the entered value of 62¢ to cover a royalty fee of 24¢ and a certification fee of 12¢ pursuant to instructions received from Mr. Sweeney for the advisory appraisement of this merchandise.
It is clear from the foregoing evidence introduced on the motion by plaintiff, to which there is no rejoinder in the cross-moving papers, that the issues in this action are the same as those adjudicated in R.D. 11695. And on the strength of this evidence, coupled with the pleading admissions hereinbefore referred to, plaintiff contends, among other things, that it is entitled to a summary judgment in its favor under the doctrine of collateral estoppel. Defendant responds to this contention in the cross-moving papers by asserting that there has been an intervening change in the law since the court's decision in R.D. 11695 that requires a different result in the instant case. In this connection defendant points out that the decision in R.D. 11695 was predicated upon an application of the separability doctrine as announced in United States v. Bud Berman Sportswear, Inc., 55 CCPA 28, C. A.D. 929 (1967), and United States v. Chadwick-Miller Importers, Inc., et al., 54 CCPA 93, C.A.D. 914 (1967), which has been significantly restated by the court of appeals with respect to export value, since the decision in R.D. 11695 in United States v. Pan American Import Corp. et al., 57 CCPA 134, C.A.D. 993 (1970). The restatement is not in such manner as affects the applicability of the doctrine of separability to the facts in this case which involves constructed value. Since it has been established that 36 cents was added to the invoice unit price to cover patent royalty and trademark certification payments, which were not made to the manufacturer or the importer and these amounts were not allocated to any particular element of constructed value and there was no breakdown of the invoice value of 62 cents, the appraisement is separable. The importer's challenge to the 36 cents is valid and he may presume the correctness of the 62 cents and rely on it as the appraised value. Also, the defendant concedes by way of its answer in paragraph 12 that the instant merchandise and the parties are the same as that the subject of the previous adjudication, electing here only to litigate the question as to the identity of issue between the two cases. Defendant's pleading admission is conclusive, barring any inquiry upon the facts admitted. And the effect of this admission is to represent to the court that the state of facts or cause of action now before it has been the subject of previous adjudication in this court.
This being the posture of the instant case, it follows that plaintiff's motion must be granted and defendant's cross-motion denied under the doctrine of estoppel. For it requires no lengthy citation of authority for this court to *1011 reach the conclusion that a state of facts or cause of action that has been reduced to a final judgment in a court of competent jurisdiction may not again be the subject of a new litigation in the same court. And this, even though the earlier adjudication may have been founded upon an erroneous view or application of the law. United States v. Moser, 266 U.S. 236, 45 S. Ct. 66, 69 L. Ed. 262 (1924); Hadge v. Second Federal Savings and Loan Ass'n of Boston, 409 F.2d 1254, 1256 (C.A. 1, 1969). Accord: See Judge Maletz' comprehensive discussion of the use of collateral estoppel in reappraisement cases in J. E. Bernard & Co., Inc. v. United States, 66 Ct. Cust. 545, R.D. 11739, 324 F. Supp. 496 (1971), and Kennedy v. Mendoza-Martinez, 372 U.S. 144, 157, 83 S. Ct. 554, 9 L. Ed. 2d 644 (1963).
Plaintiff's motion for summary judgment is granted, and defendant's cross-motion for summary judgment is denied. Judgment will be entered herein accordingly.
ORDER
Upon reading and filing plaintiff's motion for summary judgment and defendant's cross-motion for summary judgment, and upon all other papers and proceedings had herein, it is hereby
Ordered, that defendant's cross-motion for summary judgment be, and the same hereby is, denied, and it is further
Ordered, that plaintiff's motion for summary judgment be, and the same hereby is, granted, and it is
Adjudged and decreed that constructed value as that value is defined in 19 U.S.C.A., section 1401a(d) (section 402(d), Tariff Act of 1930, as amended by the Customs Simplification Act of 1956) is the proper basis for determination of the value of the merchandise involved in this action, and that such value is U.S. $0.62 per yard, net packed.
NOTES
[1] Section 1401a(d) reads:
(d) For the purposes of this section, the constructed value of imported merchandise shall be the sum of
(1) the cost of materials (exclusive of any internal tax applicable in the country of exportation directly to such materials or their disposition, but remitted or refunded upon the exportation of the article in the production of which such materials are used) and of fabrication or other processing of any kind employed in producing such or similar merchandise, at a time preceding the date of exportation of the merchandise undergoing appraisement which would ordinarily permit the production of that particular merchandise in the ordinary course of business;
(2) an amount for general expenses and profit equal to that usually reflected in sales of merchandise of the same general class or kind as the merchandise undergoing appraisement which are made by producers in the country of exportation, in the usual wholesale quantities and in the ordinary course of trade, for shipment to the United States; and
(3) the cost of all containers and coverings of whatever nature, and all other expenses incidental to placing the merchandise undergoing appraisement in condition, packed ready for shipment to the United States.
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349 F. Supp. 605 (1972)
Jeff JACOBS et al., Plaintiffs,
v.
The BOARD OF SCHOOL COMMISSIONERS OF the CITY OF INDIANAPOLIS et al., Defendants.
No. IP 72-C-263.
United States District Court, S. D. Indiana, Indianapolis Division.
October 19, 1972.
*606 Ronald E. Elberger, Craig E. Pinkus, and Richard G. Goetz, of Legal Services Organization, Indianapolis, Ind., for plaintiffs.
Lawrence McTurnan, of Bredell, Martin & McTurnan, Indianapolis, Ind., for defendants.
*607 ENTRY ON MOTION FOR PERMANENT INJUNCTION
STECKLER, Chief Judge.
This action is before the Court on the plaintiffs' motion for, among other things, an order against the defendants enjoining said defendants, their agents, servants, and employees, and all those in active concert and participation with them, from continuing to suppress and prohibit the distribution of the Corn Cob Curtain. Jurisdiction is based under Title 42, United States Code, Section 1983 and Title 28, United States Code, Sections 1343, 2201 and 2202.
On August 24-25, 1972, an evidentiary hearing was conducted. Oral argument was heard on the motion for temporary restraining order and the collateral issues raised by Defendants' Petition for Appointment of Guardian Ad Litem or Next Friend for Plaintiffs and All Members of the Class They Purport to Represent, and Petition of Defendants for an Order Requiring Plaintiffs' Attorney to Produce Authority Under Which He Appears. The Court denied defendants' motion to assign guardian ad litem, and granted defendants' motion for plaintiffs' attorney to show authority. Plaintiffs' attorney filed a memorandum in response to defendants' motions; the Court found that the regulations governing the services to be rendered by the Legal Services Organization and the persons whom it is to represent was not a matter for this Court to determine or fix, but rather if the defendants had a complaint, this was a matter to be taken up with the funding authorities and the organized bar. The Court found that plaintiffs' attorneys could proceed with representation. See, Hernandez v. Stockton Bd. of Education, 6 Clearinghouse C.R. 172 (July 1972); State ex rel. Koch v. Vanderburgh Probate Court, 246 Ind. 139, 203 N.E.2d 525 (1965).
The parties by counsel met in conference with the Court on September 27, 1972, and the defendants presented Resolutions 1033 and 1034 having been adopted by the Board of School Commissioners of the City of Indianapolis to amend Rules 11.05 and 11.06 of the Rules of the Board of School Commissioners, i. e., the rules subject to complaint in this litigation. While these resolutions were under advisement for further consideration by the Court, the defendants filed Additional Paragraph of Answer with exhibits on October 12, 1972, with consent of plaintiffs; Exhibit A attached thereto replaced Resolution 1033 filed September 27, 1972, and Exhibit B was identical to Resolution 1034 filed September 27, 1972. [Hereinafter Exhibits A and B filed October 12, 1972, amending School Board Rules 11.05 and 11.06, will be referred to as Rules 11.05 and 11.06.]
Rules 11.05 and 11.06 subject to complaint in this litigation are as follows:
Rule 11.05 [Exhibit A]
1. General. The following rules shall govern the distribution of literature and other communicatory material (hereinafter collectively referred to as `literature') by students in the Indianapolis public school system (any of whom is hereinafter referred to as `a student') in or upon the School Board's public school buildings, structures and/or grounds (the term `school' being used, hereinafter, to signify any such building, structure or the grounds of any such building or structure).
1.1. Distribution of Certain Kinds of Literature Prohibited.
1.1.1. No student shall distribute in any school any literature that is
1.1.1.1. obscene as to minors
1.1.1.2. libelous or
1.1.1.3. either by its content or by the manner of distribution itself, productive of, or likely to produce a significant disruption of the normal educational processes, functions or purposes in any of the Indianapolis schools, or injury to others.
1.1.1.4. not written by a student, teacher or other school employee; provided however, that advertisements *608 which are not in conflict with other provisions herein, and are reasonably and necessarily connected to the student publication itself shall be permitted.
1.1.2. Literature other than literature of the kind described in Section 1.1.1. above, is hereinafter referred to as `distributable literature.'
1.2. Who May Distribute Distributable Literature.
Subject to the provisions of Section 1.3. below, distributable literature may be distributed by, and only by, any student, within any school in which the student is regularly enrolled.
1.3. Conditions Under Which Distributable Literature May Be Distributed.
1.3.1. No distributable literature shall be distributed by any student in any school
1.3.1.1. while classes are being conducted in the school in which the distribution is to be made;
1.3.1.2. in any place other than a place designated by the principal of the school in which the distribution is to be made, which place shall be selected by the principal with a view toward insuring that the proposed distribution will be made without interference with other persons lawfully within the school;
1.3.1.3. in such a way that the place of distribution (or any other part of the school in which the distribution is made) becomes littered;
1.3.1.4. in such a way that any person within the school can reasonably be made to feel that the distributable literature is being `forced' upon him;
1.3.1.5. in immediate exchange for money or any other thing of value (or for an immediate promise of money or any other thing of value), whether the transaction is characterized as a sale of the distributable literature, as a contribution to finance the publication or distribution of the distributable literature, or as any other transaction whereunder money or any other thing of value (or a promise of either) immediately passes to or for the direct or indirect benefit of the student who is distributing the distributable literature; or
1.3.1.6. unless the name of every person or organization that shall have participated in the publication of the distributable literature is plainly written in the distributable literature itself.
1.4. Spirit in Which the Foregoing Regulations are to be Applied.
In the application of the foregoing regulations pertaining to the distribution of literature in the schools by students, principals and other school administrators shall take care to insure that the constitutional and other legal rights of students to express themselves freely shall not be infringed. The spirit in which the regulations shall be applied shall not be a repressive one, but shall combine a respect for the rights of students with an appropriate regard for the maintenance in the schools of the kind of environment that is necessary to the School Board's conduct of its public educational mission in the School City of Indianapolis.
1.5. Limitation of the Scope of the Foregoing Rules.
The foregoing rules define the conditions under which students will be permitted to distribute literature in the schools. Nothing in those rules is intended to be, or is, or shall be construed as, an indication that the School Board will permit, without its express prior consent, the distribution in any school of any literature or other article by any person who is not a student in the school where the literature is to be distributed.
1.6. Penalties for Violation and Student Rights of Review and Appeal.
1.6.1. For violation of any of the provisions of this Rule 11.05 a student may be suspended or expelled by the principal of the school where such violation occurs and the principal or any teacher of the school may take other disciplinary action which is reasonably desirable or necessary to help any student, *609 to further school purposes, or to prevent any interference therewith.
1.6.2. In the event that suspension or expulsion is deemed necessary, the due process provision of public law 162 of the laws of the State of Indiana and the rules of this board adopted by Resolution #1030 shall apply.
1.7. Severability of Rule.
If any one or more sections, clauses or phrases of this Rule 11.05 shall be declared unconstitutional, such decision shall in no sense invalidate any other part of this act.
Rule 11.06 [Exhibit B]
No person, including students and organizations or corporations, other than the school corporation acting through its designated agents, or organizations of parents and teachers or students whose sole use of funds is for the benefit of the particular school in which they are organized or in attendance, may sell merchandise or material, collect money, or solicit funds or contributions from the students for any cause or commercial activity within any school or on its campus.
The Seventh Circuit has held that students may commence actions seeking relief for infringement of their constitutional rights. Fujishima v. Bd. of Education, 460 F.2d 1355 (7th Cir. 1972); Scoville v. Bd. of Education of Joliet Tp. H. S. Dist. 204, etc., Ill., 425 F.2d 10 (7th Cir. 1970); Crews v. Cloncs, 432 F.2d 1259 (7th Cir. 1970).
In the instant case there can be no discomfort to strict constructionists who prefer their Constitution to be literal. No right is more clearly within the protection of the First Amendment, whose provisions Tinker v. Des Moines Independent Community School Dist., 393 U.S. 503, 89 S. Ct. 733, 21 L. Ed. 2d 731 (1969), has now extended to the public school, than the freedom to distribute printed matter. Throughout our constitutional history, only three exceptions have been permitted to limit this freedom, and the exceptions themselves have been narrowly construed; these exceptions include obscenity, libel, and speech which constitutes a "clear and present danger." [In the context of the public school, the Tinker decision defined "clear and present danger" as that which "materially disrupts classwork or involves substantial disorder or invasion of the rights of others." 393 U.S. 503 at 513, 89 S. Ct. 733 at 740.]
The interpretation of two of these three limitations, obscenity and to a lesser degree, "clear and present danger," provides the matrix for the controversy confronting this Court.
PRIOR RESTRAINT AND PRIOR CENSORSHIP
In the recent Seventh Circuit case of Fujishima, supra, a blanket prior restraint similar to the one relied upon by defendants in the instant case was invalidated. The Court disposed of the matter saying:
"Because section 6-19 requires prior approval of publications, it is unconstitutional as a prior restraint in violation of the First Amendment. This conclusion is compelled by combining the holdings of Near v. Minnesota ex rel. Olson, 283 U.S. 697 [51 S. Ct. 625, 75 L. Ed. 1357] (1931), and Tinker v. Des Moines Independent Community School Dist., 393 U.S. 503 [89 S. Ct. 733, 21 L. Ed. 2d 731] (1969). Tinker held that, absent a showing of material and substantial interference with the requirements of school discipline, schools may not restrain the full First-Amendment rights of their students. Near established one of those rights, freedom to distribute a publication without prior censorship." [Footnote omitted.] Fujishima, 460 F.2d at 1357.
Fujishima recognized that a school district may lawfully establish a rule punishing students who publish and distribute on school grounds material which is obscene or libelous. See also, Sullivan v. Houston Independent School *610 District, 333 F. Supp. 1149, 1162-1167 (S.D.Tex.1971).
OBSCENITY
Perhaps the major thrust of the defendants' attack concerns "obscenity." Obscenity was defined in Roth v. United States, 354 U.S. 476, 489, 77 S. Ct. 1304, 1311, 1 L. Ed. 2d 1498 (1957), in the following terms:
". . . whether to the average person, applying contemporary community standards, the dominant theme of the material taken as a whole appeals to prurient interest."
Mr. Justice Brennan, delivering the opinion of the Court in A Book Named "John Cleland's Memoirs of a Woman of Pleasure" v. Massachusetts, 383 U.S. 413, 418, 86 S. Ct. 975, 977, 16 L. Ed. 2d 1 (1966), stated:
"Under this definition [of obscenity], as elaborated in subsequent cases, three elements must coalesce: it must be established that (a) the dominant theme of the material taken as a whole appeals to a prurient interest in sex; (b) the material is patently offensive because it affronts contemporary community standards relating to the description or representation of sexual matters; and (c) the material is utterly without redeeming social value."
Later, Mr. Justice Brennan discussed the power to employ variable concepts of obscenity in Ginsberg v. New York, 390 U.S. 629, 636, 88 S. Ct. 1274, 1278, 20 L. Ed. 2d 195 (1968), and quoted the Court of Appeals of New York in Bookcase, Inc. v. Broderick, 18 N.Y.2d 71, 271 N. Y.S.2d 947, 952, 218 N.E.2d 668, 671 (1966):
"[M]aterial which is protected for distribution to adults is not necessarily constitutionally protected from restriction upon its dissemination to children. In other words, the concept of obscenity or of unprotected matter may vary according to the group to whom the questionable material is directed or from whom it is quarantined."
In determining whether future issues of the Corn Cob Curtain may be determined "obscene" pursuant to the three-pronged definition as applied to minors, two important limitations on the obscenity test must be remembered. First, the definition of "contemporary community standards" by which a work must be judged to determine its obscenity must necessarily be the community standards of the Indianapolis School District, not merely one school in said district. Second, in judging whether a publication of the Corn Cob Curtain is "obscene" according to legal standards laid down by the higher courts, the whole publication must be considered. As long ago as 1934 it was held that a publication must be considered as a whole in order to determine whether it is obscene. United States v. One Book Entitled "Ulysses" by James Joyce, 72 F.2d 705, 707 (2d Cir. 1934). See, Roth v. United States, supra. A federal court recently rejected the argument that an alleged obscene newspaper need not be judged as a whole, because it is merely a package of separate publications. United States v. Head, 317 F. Supp. 1138, 1143 (E.D.La.1970).
BAN ON SALES
A further objection to the Board's regulations concerns the ban on sale of distributable literature. As presently constructed, Rule 11.05, Section 1.3.1.5, would prevent many worthwhile fund raising projects on school grounds, for example, magazine sales by school band members or the often financially necessary sale of the "local school newspaper." Likewise, Rule 11.06 would prohibit fund raising for charities and other public service groups organized outside the school. Further, defendants would prohibit all sales of distributable literature, irrespective of "disruption." "Such a blanket proscription is not a legitimate exercise of the Board's power to regulate the `time, place and manner' of distribution." Sullivan v. Houston Independent School District, supra, 333 F. Supp. at 1162.
*611 Accordingly the Court concludes, and it is hereby ordered, that the named plaintiffs who are no longer students in a secondary school of the City of Indianapolis have no standing to sue in this cause. See, consolidated appeals, Passwater v. Myers, Steel v. Kuykendall, Monroe v. Eads, Nos. 71-1367, 71-1570, 71-1571 (7th Cir., September 15, 1972); Watkins v. Chicago Housing Authority, 406 F.2d 1234 (7th Cir. 1969). However, the remaining named plaintiffs are qualified as proper representatives of the class whose interest they seek to protect. Fujishima v. Bd. of Education, supra.
It is further ordered that the defendants, their successors in office, their agents, servants, and employees, and all those in active concert and participation with them are hereby permanently restrained and enjoined from the promulgation, maintenance and enforcement of any such rule, or portion thereof, found in this entry to be unconstitutional unless the following conditions are met:
(1) The rule must be specific as to places and times where possession and distribution of published materials are prohibited.
(2) The rule must be understandable to persons of the age and experience of covered students.
(3) The rule must not prohibit or inhibit conduct which is orderly, peaceful and reasonably quiet and which is not coercive of any other person's right to accept or reject any written material being distributed subject to the rule.
(4) The rule may prohibit such distribution at times and in places where normal classroom activity is being conducted. Such rule may not prohibit such distribution at other times and places unless such prohibition is necessary to prevent substantial and material interference with or delay of normal classroom activity or normal school function. As used herein, "normal classroom activity" means organized educational activity of students under the direct supervision of a teacher or a school administrator. Such phrase includes student activity in library areas, physical education classes, whether conducted indoors or outdoors, official assemblies and other similar gatherings. "Normal school function" means such activities as athletic contests, band concerts, school plays and scheduled on-campus lunch periods. Further, the peaceful, orderly, non-coercive distribution of written material before the commencement of classes in the morning and after the conclusion of classes in the afternoon by students lawfully on or off the premises of the school in which they are enrolled shall not be prohibited unless, under the circumstances, such distribution substantially and materially interferes with some normal classroom activity or normal school function as those phrases are hereinabove defined.
(5) The rule must not subject any covered student to the threat of discipline because of the reaction or response of any other person to the written material, provided, however, that defendants and their successors in office may prohibit, and punish, even to the extent of expulsion, for the publication or distribution of obscene material, hereinabove defined, or of libelous material for which a cause of action may exist in some person.
Sullivan v. Houston Independent School District, 333 F. Supp. 1149, 1152-1153 (S.D.Tex.1971).
For the hereinabove reasons and pursuant to the plaintiffs' prayer for relief, it is the further judgment of this Court that the following defendants' rules, or portions thereof, are unconstitutional and should be, and they are, hereby declared to be null and void:
Rule 11.05, in part, as follows:
Proviso 1.1.1.3, as being vague and overbroad. [The Court would suggest that the following would be *612 more apt to be constitutionally acceptable: ". . . either by its content or by the manner of distribution itself, productive of, or likely to produce a substandial and material interference with or delay of normal classroom activity or normal school function."]
Proviso 1.1.1.4, as requiring prior censorship. See, New York Times v. United States, 403 U.S. 713, 91 S. Ct. 2140, 29 L. Ed. 2d 822 (1971); Near v. Minnesota ex rel. Olson, 283 U.S. 697, 51 S. Ct. 625, 75 L. Ed. 1357 (1931).
Proviso 1.3.1.1, as being overbroad and impermissible. See, Fujishima v. Bd. of Education, 460 F.2d 1355 (7th Cir. 1972); Sullivan v. Houston Independent School District, 333 F. Supp. 1149, 1152 (S.D.Tex.1971).
Proviso 1.3.1.5, as being vague, overbroad and impermissible. See, Sullivan v. Houston Independent School District, supra at 1162.
Proviso 1.3.1.6, as requiring prior censorship and restraint. See, Tinker v. Des Moines Independent Community School District, 393 U.S. 503, 89 S. Ct. 733, 21 L. Ed. 2d 731 (1969); Scoville v. Board of Ed. of Joliet Tp. H. S. Dist. 204, etc., Ill., 425 F.2d 10 (7th Cir. 1970).
Rule 11.06, in total, as being overbroad and impermissible.
See, Sullivan v. Houston Independent School District, supra, 333 F.Supp. at 1162.
Further, this Court takes no action on the plaintiffs' request to expunge from their personal files any notations relating to this matter since no evidence was submitted indicating such a recordation.
In addition, with respect to plaintiffs' request for compensatory damages, the Court finds that plaintiffs have not established sufficient data from which the Court can properly estimate the extent of the damages, if any. Such damages sought to be recovered must be shown with reasonable certainty as to their nature and extent, and may not be based on mere speculation or conjecture. Bond v. Snyder Const. Co., 142 Ind.App. 325, 234 N.E.2d 659 (1968).
Finally, the costs of this action, excluding attorney fees, shall be taxed against the defendants.
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349 F. Supp. 264 (1972)
Regina ROSS, d/b/a Waupaca Rest Home, a proprietorship, individually and on behalf of all other Wisconsin Nursing Homes whether corporately or individually owned, similarly situated, Plaintiffs,
v.
Patrick LUCEY, Governor of the State of Wisconsin, et al., Defendants.
No. 72-C-136.
United States District Court, E. D. Wisconsin.
August 10, 1972.
*265 *266 Thomas J. Bergen, Milwaukee, Wis., for plaintiffs.
Robert W. Warren, Atty. Gen. by Ward L. Johnson, Asst. Atty. Gen., Madison, Wis., for defendants.
DECISION and ORDER
MYRON L. GORDON, District Judge.
The plaintiff brought this action on behalf of herself and a class stated to include "all other Wisconsin Nursing Homes". The complaint requests that a three-judge court be convened pursuant to 28 U.S.C. § 2281, seeks to have § 146.30(3)(c) of the Wisconsin statutes and certain administrative rules thereunder declared unconstitutional, and asks to have future application and enforcement of those provisions enjoined.
The defendants have moved to dismiss the complaint on the grounds that this court lacks jurisdiction over the subject matter and that the complaint fails to state a claim upon which relief can be granted. In the alternative, the defendants ask that their motion to dismiss be treated as a motion for summary judgment.
Section 146.30(3)(c) of the Wisconsin statutes grants authority to the department of health and social services (hereinafter "department") to "immediately withdraw" patients who are receiving county or state support from nursing homes under certain circumstances. This can be done when the department "determines that an emergency exists which places the patient's health, safety or welfare in jeopardy" because of a failure by the nursing home to comply with the department's standards.
The challenged regulations create categories of violations of standards and prescribe actions, up to and including patient removal, which are to follow from asserted violations of each category. The standards themselves are found in chapter 32H of the state's administrative code. The statute does not contain any provisions allowing nursing home administrators to be heard or to challenge the statements of welfare directors or department inspection personnel those statements being the basis for the department's actioneither before or after patient removal.
The plaintiff alleges that the statute and the administrative rules allow deprivation, under color of state law, of rights and privileges secured by the United States Constitution. Specifically, she complains about the removal of patients and the loss to her of government funds for their care, without an opportunity to be heard in a meaningful manner. The defendants acknowledge that "the plaintiff has a qualified right to receive public money for support of public welfare patients residing in [her] nursing home."
A statute which, on its face, allows a government agency to terminate such a right and does not provide an affected party with an opportunity to be heard is arguably subject to challenge under 42 U.S.C. § 1983. See Goldberg v. Kelly, 397 U.S. 254, 90 S. Ct. 1011, 25 L. Ed. 2d 287 (1970). See also Misurelli v. City of Racine, 346 F. Supp. 43 (E.D. Wis., 1972). Thus, the motion is properly before this court under 28 U.S.C. § 1343, the jurisdictional counterpart of § 1983. This is true even though the plaintiff alleged jurisdiction under 28 U.S.C. §§ 1331, 2201 and 2202 rather than § 1343. The facts alleged clearly invoke jurisdiction under § 1343, and "Federal jurisdiction may be sustained if granted by a Federal statute even though such statute is not pleaded or relied upon." Paynes v. Lee, 377 F.2d 61, 63 (5th Cir. 1967). See also Rule 8(f), Federal Rules of Civil Procedure.
The defendants urge that the $10,000 jurisdictional amount must be *267 alleged because the rights sought to be protected have a measurable monetary value. This argument has its origins in the concurring opinion of Justice Stone in Hague v. CIO, 307 U.S. 496, 531, 59 S. Ct. 954, 83 L. Ed. 1423 (1939). That opinion fostered the view that federal courts find jurisdiction in § 1983 actions under either § 1331 or § 1343, depending on whether the claim involves violation of property or personal rights, respectively. Jurisdictional amount is generally required to be alleged under § 1331, but it is not under § 1343. Regardless of any merit the Hague theory may have had in the past, it was expressly rejected in Lynch v. Household Finance Corp., 405 U.S. 538, 542-552, 92 S. Ct. 1113, 31 L. Ed. 2d 424 (1972). Lynch clearly holds that § 1343(3) is the jurisdictional counterpart of § 1983 in all cases. Thus, no allegation of jurisdictional amount is necessary in this action.
The defendants have also raised questions in their brief concerning the propriety of allowing this action to proceed against the defendants named and concerning the issue of mootness.
Patrick Lucey, the governor of Wisconsin, is a named defendant, but the complaint does not allege any acts on his part. The plaintiff, in her brief, states that he is named simply because of his general responsibility under the state constitution to see that the state laws are enforced. This is an insufficient connection in a case based on a statute directed at persons who have allegedly acted under color of state law. See Reichenberger v. Warren, 319 F. Supp. 1237 (W.D.Wis.1970). As to Governor Lucey, therefore, the complaint must be dismissed.
The defendants also argue that the State of Wisconsin is immune from suit under the eleventh amendment to the United States Constitution. I see no need to decide this issue because the state, as such, is not in fact named as a defendant. The caption of the complaint does not set off "the State of Wisconsin" as a separate defendant but uses the phrase as part of the title of the department. Furthermore, paragraph VI of the complaint, which purports to describe the defendants, identifies them as Governor Lucey, the department, and Mr. Schmidt (the secretary of the department).
The defendants also contend that the department and Mr. Schmidt are immune from suit under the eleventh amendment. This contention is without merit.
"The act to be enforced is alleged to be unconstitutional. . . . The state has no power to impart to [its officers] any immunity from responsibility to the supreme authority of the United States." Ex Parte Young, 209 U.S. 123, 159-160, 28 S. Ct. 441, 454, 52 L. Ed. 714 (1908).
See also Griffin v. County School Board of Prince Edward County, 377 U.S. 218, 228, 84 S. Ct. 1226, 12 L. Ed. 2d 256 (1964); Board of Trustees of Arkansas A&M College v. Davis, 396 F.2d 730, 732-734 (8th Cir. 1968).
The defendants additionally urge that the plaintiff's claim is moot because the original effort to enforce the challenged statute against the plaintiff has now terminated. I do not find this argument persuasive. The plaintiff's facility is subject to inspection at all times. These inspections are recognized in the challenged statute as the basis for the action which is claimed to be unconstitutional; as long as the plaintiff operates a nursing home in the state of Wisconsin, she is subject to such action.
The defendants' concept of mootness would require the plaintiff to suffer the withdrawal of patients and loss of funds in order to insist on her alleged right to be heard; correction of reported deficiencies would moot her cause of action. Since economic realities compel the plaintiff to choose the latter alternative, the problem here is "capable of repetition, yet evading review" and, therefore, is ripe for adjudication. Southern Pacific Terminal Co. v. Interstate Commerce Commission, 219 U.S. 498, 515, 31 *268 S.Ct. 279, 55 L. Ed. 310 (1911). See also Moore v. Ogilvie, 394 U.S. 814, 816, 89 S. Ct. 1493, 23 L. Ed. 2d 1 (1969).
This case involves a challenge to the constitutionality of a state statute. The infirmity is claimed to lie in the statute's failure to provide a meaningful opportunity to be heard to those who will suffer the loss of important rights or privileges through its enforcement. The defendants point to the reasonableness of the action which the statute allows; regardless of any effect that such argument may have at subsequent phases of the case, it does not negate the plaintiff's claim at this stage.
I find that the plaintiff's complaint alleges a claim under § 1983 which, if proved, could entitle her to relief. I also find that this court has jurisdiction under § 1343(3).
Therefore, it is ordered that the defendants' motion to dismiss, insofar as it relates to Governor Lucey, be and hereby is granted; in all other respects it is denied.
It is also ordered that the defendants' alternative motion for summary judgment be and hereby is denied.
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162 F. Supp. 206 (1958)
In the Matter of Homer ALCORN, Bankrupt.
No. 47105.
United States District Court N. D. California, S. D.
May 23, 1958.
John Griffin, Gaylord & Gaylord, San Francisco, Cal., for bankrupt Homer Alcorn.
Dinkelspiel & Dinkelspiel, San Francisco, Cal., for petitioner Hilda Alcorn.
*207 OLIVER J. CARTER, District Judge.
The matter is before the Court upon the petition for review of an order of the Referee in Bankruptcy, pursuant to the provisions of 11 U.S.C.A. § 67. The petitioner, Hilda Alcorn (also known as Hilda Allcorn), is the divorced wife of the voluntary bankrupt, Homer Alcorn (also known as Homer Allcorn); she is a resident of St. Louis, Missouri, and he is a resident of San Mateo County, California. She has objected to the proof and discharge of a judgment and certain contractual obligations which she contends represent past and future payments for her maintenance and support, but which the bankrupt alleges to be provable and dischargeable liabilities.
The bankrupt filed a voluntary petition in bankruptcy on August 13, 1956. Listed on Schedule A-3, Creditors Whose Claims are Unsecured, is the following item:
"Mrs. Hilda R. Alcorn, 3720A Keokuk St., St. Louis, Mo. based upon written contract to pay said creditor the sum of $50.00 per month for her maintenance and support payable in instalments of $25.00 on the 1st and $25.00 on the 15th day of each month with the first payment commencing July 1, 1949 and continuing so long as said creditor remains single and unmarried. Based on life expectancy of creditor of 69 years less $3545.75 paid prior to filing this petition. Judgment for $2415.00 of this amount against petitioner in 1955 in San Francisco being Superior Court #338252 on June 1955.
$30954.25"
The Referee in Bankruptcy, in his order of July 17, 1957, stated:
"Upon the facts set forth in the `Memorandum of Points and Authorities' * * * and basing the order, judgment and decree hereinafter set forth upon those facts and the pertinent law of the State of Missouri, particularly as declared in Edmondson v. Edmondson, [Mo. App.], 242 S.W.2d 730, decided in 1951 and practically on `all-fours' with the case here under consideration and also based upon Section 17, sub. a of the Bankruptcy Act [11 U.S.C.A. § 35, sub. a], the court concludes as matters of law, (1) that the debt listed in the bankrupt's schedules (which is set out in full in the preceding paragraph) * * * is a debt dischargeable in this bankruptcy proceeding * * *."
Questioning the correctness of this ruling, the petitioning judgment creditor, Mrs. Alcorn, demanded a review of the Referee's holding.
The bankrupt filed a petition for divorce against his wife in 1949 in Missouri, and she subsequently filed a cross bill for divorce against him. The parties entered into an agreement, which is fully set out in Allcorn v. Allcorn, Mo. App., 241 S.W.2d 806, 808; the agreement purported to dispose of the property of the parties, and it provided, inter alia, that should the wife's cross bill be granted:
"* * * then in such event the said Party of the First Part shall receive, by way of alimony and support and maintenance for herself and the minor child of the parties, Delores, the following financial payments and support from the Party of the Second Part: * * *"
Following a clause concerning payments for the support and maintenance of the minor child, the agreement provided:
"Second: The Party of the Second Part is to pay to the Party of the First Part for her maintenance and support the sum of Fifty Dollars ($50.00) per month * * * starting July 1, 1949, should a decree of divorce be granted before that time and that such payments shall continue thereafter in such amounts and at such times as long as the said Party of the First Part remains single and unmarried. Should said First Party remarry, the payments shall cease."
*208 The decree of divorce was granted to the wife; the judgment of divorce contained the provision that the wife was to receive "as and for alimony" the sum of fifty dollars per month. Subsequently, the husband filed a motion to modify the decree. His motion was granted with regard to the provisions concerning the minor daughter, who had become emancipated. The court held, however, that the agreement between husband and wife was a consent judgment based upon a binding contract and immune from modification, save by the consent of the parties. See Allcorn v. Allcorn, supra.
In 1955, after failure of payment on the contract, and before institution of bankruptcy proceedings, the divorced wife filed suit in the Superior Court of the State of California and recovered a judgment upon the contract. After the filing of the involuntary petition in bankruptcy, a restraining order was issued by the Referee in Bankruptcy restraining the wife from enforcing the judgment. The wife, desiring to proceed once more against the bankrupt in the California courts, petitioned the Referee to dissolve the restraining order. Her petition was denied; the judgment and the obligations arising from the contract were proved and ordered discharged; hence, this review.
The question before the Court is whether the contract is one for the support and maintenance of the wife arising out of the statutory or common law obligation of the husband for maintenance and support, or whether the contract is one settling the property rights of the parties and providing for the support and maintenance of the wife as a part of the property settlement, and not arising out of the obligation in law of the husband to support and maintain the wife. The answer to this question will determine whether the debt created by the agreement is dischargeable in bankruptcy. Inasmuch as the parties entered into the agreement in Missouri, and inasmuch as Missouri was the locus domicilii of the parties and the state where the decree of divorce was granted, the Court will look to the law of that state with regard to the status of the parties, and with regard to their respective rights and duties under the contract and decree in question.
According to the law of Missouri:
"It is well settled that husband and wife have the right by contract, in the event of their separation, to adjust and settle all their property rights, including dower, alimony and support, and the courts are bound by such contract if it is free from fraud, collusion or compulsion, and is fair to the wife. North v. North, 339 Mo. 1226, 100 S.W.2d 582, 109 A.L.R. 1061." Moran v. Moran, Mo. App., 286 S.W.2d 389, 391.
In Missouri, the parties to a separation and divorce may either enter into a contract and agree between themselves as to the terms and amounts of the support and maintenance payments to the wife, or they may leave the matter of alimony to the sound discretion of the court. Alverson v. Alverson, Mo.App., 249 S.W.2d 472; Jenkins v. Jenkins, Mo. App., 257 S.W.2d 250. One aspect of the Missouri law is that when the parties have entered into a binding agreement for alimony or maintenance and support, and such agreement is incorporated into the decree of divorce, such agreement may not be modified without the consent of the parties. Allcorn v. Allcorn, supra; Jenkins v. Jenkins, supra.
There is a fundamental and basic distinction which must be drawn between a property settlement agreement and alimony or an agreement for maintenance and support. "Alimony does not arise from any business transaction, but from the relation of marriage. It is not founded on contract, express or implied, but on the natural and legal duty of the husband to support the wife." Audubon v. Shufeldt, 181 U.S. 575, 21 S. Ct. 735, 736, 45 L. Ed. 1009. The parties may contract between themselves concerning the amount of alimony, in which event their agreement may be termed a contract for maintenance and support. Alimony or support and maintenance may continue *209 only so long as the wife does not remarry, or for so long as the husband may live. Modification of the terms of the decree or contract, permitted in many jurisdictions when there is a change in the financial condition of the parties, is no longer a valid criterion, since some states, e. g. Missouri, will not modify a valid and binding contract for maintenance and support, even though in the nature of alimony. Bankruptcy will not relieve a husband of his obligation to make alimony payments; similarly, he may not be relieved from an obligation arising from a contract for maintenance and support where his liability is of the same nature as alimony. "* * * why should it be held that Congress intended that such a contract, to do what the law enjoins upon him as a duty, should be released?" Dunbar v. Dunbar, 190 U.S. 340, 23 S. Ct. 757, 762, 47 L. Ed. 1084.
The basic public policy concerning the nature and extent of the obligation of alimony or maintenance and support is one that has been drawn from the precepts of the common law. "The community as a whole is vitally concerned that families shall not be left destitute by irresponsible husbands or fathers." Goggans v. Osborn, 9 Cir., 1956, 237 F.2d 186, 189.
On the other hand, a property settlement agreement deals with the division of property belonging to a husband and wife. The wife may, for a consideration, waive her rights to alimony or maintenance and support. The rights of the parties are determined according to the law of contract, and may survive the parties and continue on in spite of remarriage or changed financial conditions. A property settlement agreement may be discharged in bankruptcy. Fernandes v. Pitta, 47 Cal. App. 2d 248, 117 P.2d 728; Tropp v. Tropp, 129 Cal. App. 62, 18 P.2d 385.
The exception from discharge upon which the petitioning creditor relies, 11 U.S.C.A. § 35 (Bankruptcy Act § 17, sub. a), states that:
"A discharge in bankruptcy shall release a bankrupt from all of his provable debts, whether allowable in full or in part, except such as * * * (2) are liabilities * * * for alimony due or to become due, or for maintenance and support of wife or child * * *"
In determining whether an agreement is one which comes within the provisions of this exemption, the Court must look to the nature of the contract itself and ascertain whether the agreement is one which merely provides for the division of property between the parties, and as such is in lieu of alimony and a bona fide property settlement agreement, or whether the contract, although denominated "property settlement agreement," is one which embodies within its terms the common law or statutory duty and, consequently, is essentially a contract for maintenance and support. In re Hollister, D.C.S.D.N.Y.1942, 47 F. Supp. 154, affirmed 2 Cir., 1943, 132 F.2d 861; Blair v. Blair, 44 Cal. App. 2d 140, 112 P.2d 39; In re Adams, 2 Cir., 1928, 25 F.2d 640; In re Ridder, 2 Cir., 1935, 79 F.2d 524, certiorari denied Ridder v. Ridder, 297 U.S. 721, 56 S. Ct. 599, 80 L. Ed. 1005; In re Dean, D.C.W.D.N.Y.1937, 17 F. Supp. 1023; In re Runge, D.C.E.D.N.Y. 1936, 15 F. Supp. 31; Goggans v. Osborn, supra.
Looking at the contract between the bankrupt and his wife, substance, rather than form or caption, must be the test. From the four corners of the contract, it is obvious that the agreement is one for the maintenance and support of the wife, and arises out of the lawful duty of the husband to support her. There is little property of consequence divided between the separating spouses, and the obligation of the husband is one which would cease either upon the remarriage of the wife or upon the death of either party. Although the contract is not subject to modification, it is none the less one wherein the parties have agreed as to the nature and extent of the husband's "natural and legal duty." See Moran v. Moran, supra.
The Referee in Bankruptcy, in ordering the proof and discharge of the judgment *210 and contract, has relied upon the case of Edmondson v. Edmondson, Mo. App., 242 S.W.2d 730, 735. He has stated that the case is on "all-fours" with the matter at bar. The Court is of the opinion that the Referee has misconceived the dictum contained in that case, in that he has taken it as authority for the proposition that a non-modifiable Missouri contract for maintenance and support may be discharged in bankruptcy.
The two cases are readily distinguishable. Edmondson v. Edmondson, supra, was an appeal from an order sustaining motions to quash successive executions upon the same judgment. The judgment was one for divorce in Missouri. The parties, having been married less than five months, entered into an agreement wherein the husband promised to pay certain monthly sums to the wife for her natural life, regardless of whether she remarried, and the payments were made a charge upon the husband, his heirs, executors and administrators, and "a charge upon his estate." Such provisions, the appellate court stated in its opinion, are "not allowable in a divorce decree." However, when the decree of divorce was granted to the wife, the terms of the agreement were expressly adopted by the trial court and were made a part of the judgment of divorce.
After the husband had made several payments, he was adjudged a bankrupt; on his schedule of creditors, he listed his former wife as his sole creditor, and described the obligation under the contract as one in the amount of $32,083.00, based upon the life expectancy of the wife. In the meantime, the wife had obtained several executions, based upon the judgment of divorce; the husband moved to quash them on the grounds, among others, that the debt had been discharged in bankruptcy and that the judgment of divorce was void insofar as it attempted to provide for the monthly payments to the wife. The motions were sustained, and upon appeal the court held that the lower court was without power to enter a judgment of divorce containing provisions forbidden under the Missouri law; the court held that that part of the decree which adopted, ratified and confirmed the agreement of the parties as one for maintenance and support was void. Inasmuch as the executions had been issued upon a void judgment, they were absolutely without effect. Therefore, the court did not pass upon the claim that the debt had been discharged in bankruptcy. The court said:
"* * * it is not necessary for us to discuss * * * the effect of the bankruptcy adjudication upon defendant's indebtedness to the plaintiff." (Emphasis added.) 242 S.W.2d 736.
Further distinguishing the matter at bar from Edmondson v. Edmondson, supra, the following differences are readily apparent:
1) The obligation for maintenance and support for Mrs. Alcorn in both the contract and decree were to continue only so long as Mrs. Alcorn remained unmarried; the provisions in the Edmondson agreement were for payments regardless of Mrs. Edmondson's subsequent marital status.
2) The Alcorn obligation would terminate upon the death of either husband or wife; Mr. Edmondson's duty was one which would continue after his death.
3) Mrs. Alcorn has at all times relied upon the contract; she pursued it to judgment in the California court, and is here attempting to sustain it as one for her maintenance and support. In the Edmondson matter, Mrs. Edmondson relied solely upon the decree of divorce, and the Edmondson decision was based exclusively upon the invalidity of that decree.
4) In the case of Allcorn v. Allcorn, the Missouri appellate court held only that the contract could not be modified without the consent of the parties; neither the contract nor the decree was invalidated. In the Edmondson appeal, the validity of the contract was not assailed; only the judgment was invalidated, the court stating at 242 S.W.2d 735:
*211 "It does not follow that the provisions of a decree for support and maintenance are valid because a similar agreement of the parties therefor is valid."
5) In the Allcorn case, the Missouri court considered the provisions of both the contract and decree to be for maintenance and support. For example, the court stated at 241 S.W.2d 811:
"In the case at bar there were no strings attached to defendant's award of support and maintenance as in the Tysdal case, supra [Tysdal v. Tysdal, Mo.App., 235 S.W.2d 124] and the omission of any language both in the stipulation and the decree is persuasive evidence that no future modification was intended either by the parties or the court; that they intended the award of support and maintenance to be peremptory and final." (Emphasis added.)
In the Edmondson case, on the other hand, only the decree of divorce was before the court; there was no holding as to whether Mrs. Edmondson had waived her statutory right to support and maintenance, but only a holding that "The provisions in the decree for payments to the plaintiff for her maintenance and support did not, under the circumstances, constitute a valid judgment for alimony or authorize the executions * * *" 242 S.W.2d 737.
The bankrupt, himself, has listed the obligation upon Schedule A-3 as a: "* * * written contract to pay said creditor the sum of $50.00 per month for her maintenance and support * * *." This obligation is one which falls squarely and precisely within the provisions of 11 U.S.C.A. § 35 (Bankruptcy Act, § 17, sub. a), and consequently neither the judgment nor the contract may be discharged in bankruptcy.
Accordingly, the order of the Referee in Bankruptcy is reversed and the cause remanded for further proceedings not inconsistent with the views hereinabove expressed. So ordered.
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297 F. Supp. 989 (1969)
FIELD ENTERPRISES EDUCATIONAL CORPORATION, Plaintiff,
v.
COVE INDUSTRIES, INCORPORATED, Defendant.
No. 66-C-742.
United States District Court E. D. New York.
March 20, 1969.
*990 *991 Paul, Weiss, Goldberg, Rifkind, Wharton & Garrison, New York City, for plaintiff, Jay H. Topkis, Neale M. Albert, George P. Felleman, New York City, of counsel.
Jerome Bauer, Mineola, for defendant, Herbert H. Goodman, New York City, of counsel.
*992 MEMORANDUM AND ORDER
WEINSTEIN, District Judge.
Field Enterprises Educational Corp. (Field), publisher of the "World Book Encyclopedia," seeks an injunction, damages and an accounting in this action for trademark infringement and unfair competition against Cove Industries, Inc. (Cove), publisher of the "Illustrated World Encyclopedia." Cove attacks the trademark's validity, asserts laches, and claims lack of infringement; it counterclaims for a declaration that Field's Trademark Registrations are void. For the reasons indicated below, the trademark is valid but affirmative relief for infringement or unfair competition is not warranted.
I. FACTS
Field or its predecessors have published a "World Book Encyclopedia" uninterruptedly since 1917. "Illustrated World Encyclopedia" has been published by defendant or its predecessors since 1959.
Field's trademark, "World Book," was entered on the Principal Register of the United States Patent Office as a mark for books on December 17, 1963, with Registration Number 761,657. The same phrase was entered as a trademark for books and publications on August 24, 1965, with Registration Number 794,812.
There have been at least eight other encyclopedias in which the word "World" appears as part of the title (the dates during which these reference works were published, or are being published, are given in parentheses): "New World Cultural Library" (1962-1964); "New Wonder World Encyclopedia" (1959-1962); "Our Wonder World" (1914-1930); "Our Wonderful World" (1955-present); "Universal World Reference Encyclopedia" (1963-present); "World Educator Encyclopedia" (1963-present); "World Scope Encyclopedia" (1945-1963); "World Wide Encyclopedia" (unknown-present); "World Wide Illustrated Encyclopedia" (1935-1939); and "World University Encyclopedia" (1963-present). See Reference Books Research Publications, Inc., General Encyclopedias in Print, 1965, at 42 and passim. (1965). "New World Cultural Library," "New Wonder World Encyclopedia" and "Our Wonder World" appear to be separate titles for the same work which was also published under the title "New Wonder World." Id. at 46.
All told, at the time of the first registration by Field, there were at least five other encyclopedias then being published which incorporated the word "World" in their titles. "World Book" appears to have acquiesced in the use of the word "World" by other publishers throughout its publishing history. In addition, disclaimers of trademark rights to the exclusive use of the word "World" were made at trial.
Prior to first use by plaintiff in 1917, the "World Book Company" of Yonkers, New York used the term. But this prior use, it is fair to infer from the evidence, was abandoned many years before Field applied for registration.
"World Book Encyclopedia" presently sells at prices ranging between one hundred eighty and two hundred dollars; within the past ten years, it has not sold at a price lower than one hundred forty dollars. It is sold on a "door-to-door" basis by salesmen dealing with individual purchasers. Field controls the distribution of its product until it reaches the ultimate consumer.
At the present time, the price of Cove's "Illustrated World Encyclopedia" is approximately forty dollars. It is sold in department stores and other retail outlets. Before 1964 it was sold from house-to-house at approximately one hundred ten dollars. For a short period in 1964 and 1965, after the selling price was reduced from $109.90 to $34.95, Cove's publication was advertised in "publisher's sensational closeout sales" as the same "famous, highly rated Illustrated World Encyclopedia" formerly "Sold Door to Door."
"Illustrated World" is published in at least one edition that is very similar to the "Aristocrat" edition published by "World Book." Both are bound in yellow *993 parchment fabric with a green and gold spine. Both are heavily illustrated. "World Book" is published in twenty volumes, "Illustrated World" in twenty-one. Both utilize contributors with scholarly backgrounds, and both print the names of these contributors on the title pages of their publications. Both are arranged alphabetically. Physically, the only significant difference lies in the size of the volumes: "World Book" is substantially thicker, and slightly taller.
The differences between the two, beyond superficial physical appearance, are striking. "Illustrated World Encyclopedia" is written for readers at the elementary or junior high school levels. "World Book," by contrast, attempts to appeal to all age groups above the grade school level; it is not recommended for use by children in lower elementary grades. Reference Books Research Publications, Inc., General Encyclopedias in Print, 1965, at 15 (1965). Field conducts an extensive and continuous revision program, and publishes an updated supplement annually. In addition, the entire work is reprinted semiannually, with current changes incorporated in the text. This is not the case with "Illustrated World," although changes are made in later editions.
In short, it may be said that as to content, format and accuracy, the "World Book" is obviously superior to the "Illustrated World Encyclopedia" for those who have successfully completed grade school. In this connection, "World Book" is:
"RECOMMENDED by the Subscription Books Committee of the American Library Association both as a children's and young people's encyclopedia for use in the home and in school and public libraries, and as a general encyclopedia for home use serving adults for ready reference. RECOMMENDED FOR FIRST PURCHASE in the Standard Catalog for High School Libraries and the Children's Catalog. ON THE APPROVED LIST OF EVERY STATE AND PROVINCE maintaining such lists." Reference Books Research Publications, Inc., General Encyclopedias in Print, 1965, at 16 (1965).
The "Illustrated World" was much less highly thought of in educational circles. Id. at 54.
Field has expended an estimated $17,000,000 over the last ten years for advertising products bearing the "World Book" trademark; it has sold three and a half to four million sets during this period. Although Cove has also advertised, its expenditures and sales have not approached those of Field.
Prior to 1965 there would have been some danger of confusion of the two works on the part of an unwary purchaser. With the reduction in price and change in marketing methods of Cove's product, the possibility of confusion has become remote. Reference has already been made to the "closeout" advertising in 1964 and 1965. During this transitional period it was not unlikely that at least some of Field's customers concluded that the superior product they had bought, or were contemplating buying, was the same as the one being "closed out" at some one hundred dollars less than the "World Book" price. There has been no evidence that this source of confusion existed after 1965.
Field was aware of Cove's use of the title "Illustrated World" and a similar format at some time prior to 1960, possibly in 1958 or 1959. Without protest, Field permitted Cove to continue on its course for over five years before bringing suit. No explanation has been offered for this delay. Since it is likely that defendant was aware of the extensive use by other publishers of the word "World," it is reasonable to conclude that Cove considered itself justified in the use of its title "Illustrated World Encyclopedia." There has been no evidence of bad faith or intent to defraud on the part of Cove.
II. PRESUMPTION OF TRADEMARK VALIDITY
Use of a registered trademark for a continuous five-year period after *994 registration and while "there is no proceeding involving said rights pending," is required before the mark becomes incontestable and before there is a conclusive presumption of a registrant's exclusive right to use a registered trademark. 15 U.S.C. §§ 1065, 1115(b). Since "World Book" was registered less than five years before this action was commenced, registration is merely prima facie evidence of Field's exclusive right. Cove is not precluded from proving "any legal or equitable defense"including prior use, use of non-protectable descriptive words and lack of similarity "which might have been asserted if such mark had not been registered." 15 U.S.C. § 1115(a).
III. TRADEMARK INFRINGEMENT
A. Prior Use
Unless abandoned, prior use of a word or phrase vitiates any claim to exclusive rights by a later user. Columbia Mill Co. v. Alcorn, 150 U.S. 460, 14 S. Ct. 151, 37 L. Ed. 1144 (1893).
In light of the extensive use of the word in other encyclopedias, prior use prevents a successful claim of exclusive rights to "World." Assertion of rights in the phrase "World Book" is not precluded for this reason, however, unless there was earlier continued use of this specific combination of words. Since the phrase "World Book" has not been used for many years by any other company in a related field, use by anyone rather than Field has been abandoned for purposes of the trademark statutes. Gruelle v. Molly-'Es Doll Outfitters, 94 F.2d 172, 175 (3d Cir. 1937), cert. denied, 304 U.S. 561, 58 S. Ct. 943, 82 L. Ed. 1528 (1938). Prior use does not invalidate plaintiff's trademark.
B. Use of Descriptive Words
A fundamental concept in the law of trademarks and trade names is that known as "hierarchy of trademarks." Farmers' Educational & Coop. Union of America v. Farmers' Educational & Coop. Union of America, Iowa Div'n, 141 F. Supp. 820, 824 (S.D.Iowa 1956), aff'd, 247 F.2d 809 (8th Cir. 1957). Some words, fanciful or coined, bear so little relation to the product they identify that they are considered entitled to protection against all users. These are commonly denominated "strong" marks. Others are either descriptive or closely related to the product which they identify, and are therefore entitled to no protection unless they have acquired a secondary meaningthat is to say, unless the public has learned to identify the name of the product with its source or origin. Warner Bros. Pictures v. Majestic Pictures Corp., 70 F.2d 310 (2d Cir. 1934); Fishler v. Twentieth Century-Fox Film Corp., 159 F. Supp. 215 (S.D.Cal.1958). The law seeks to protect the reputation of the manufacturer and the interest of the public in not being deceived as to the source of the goods. 3 Callman, Unfair Competition and Trade-Markes 1057 (Supp. 1965); Clairol, Inc. v. Gillette Co., 270 F. Supp. 371, 376 (E.D.N.Y.1967), aff'd 389 F.2d 264 (2d Cir. 1968).
The title "World Book" is neither fanciful nor coined. It relates descriptively to the work itself, indicating that the publication makes available the relevant knowledge of the world; it succinctly summarizes the dictionary definition of an encyclopedia:
"1 A work containing information on all subjects, or exhaustive of one subject; a cyclopedia. * * * 3 The entire circle of knowledge." Funk & Wagnalls Standard Dictionary 417 (Int'l ed. 1966).
The "weakness" of the title is emphasized by the proliferation of encyclopedia names incorporating the word "World."
Unless a weak title has attained some secondary meaning which would cause the public to identify the source of the work, there could be no valid trademark. Alexander v. Irving Trust Co., 132 F. Supp. 364, 368 (S.D. N.Y.), aff'd, 228 F.2d 221 (2d Cir. 1955), cert. denied, 350 U.S. 996, 76 S. Ct. 545, 100 L. Ed. 860 (1956). Such a *995 secondary meaning entitled to protection under the trademark laws has been acquired by the phrase "World Book." Long and continued use of the name, widespread sales of the book, as well as the large sums spent for promotion and advertising, support this conclusion. See Annot., 150 A.L.R. 1067, 1083 (1944). Moreover, the approval which has been accorded the work within educational circles increases the likelihood of public familiarity. A highly praised work is more likely than not to be known to the public by name.
C. Similarity
In addition to showing that its trademark is entitled to protection, the plaintiff must also show that it has been infringed. On the claim of trademark infringement the relevant inquiry is whether the material protected by trademark has been infringed by the defendant's choice of titlethat is to say, is there a confusing similarity between the names "World Book" and "Illustrated World?"
Since the only word that is identical in the titles is "World," it may be assumed that it is the use of this word which the plaintiff finds objectionable (either alone or in conjunction with "Illustrated" or "Encyclopedia," or both). As already pointed out, this word is extremely "weak," in the trademark sense. See, e. g., Palmer v. Gulf Pub. Co., 79 F. Supp. 731 (S.D.Cal.1948) ("World Petroleum"); cf. Field Enterprises Educational Corp. v. Grosset & Dunlap, Inc., 256 F. Supp. 382 (S.D.N.Y.1966) ("How and Why" trademarks not infringed by "How and Why Wonder Books").
It is undesirable that words in common use be given a monopoly under the trademark laws. For this reason, in determining whether there has been infringement, a distinction is made between primary and secondary uses. While the secondary use may be protected, the use of a common word in its primary sense may not be. Jean Patou, Inc. v. Jacqueline Cochran, Inc., 201 F. Supp. 861 (S.D.N.Y.1962), aff'd, 312 F.2d 125 (2d Cir. 1963); see also Barton v. Rex-Oil Co., 2 F.2d 402, 404, 40 A.L.R. 424 (3d Cir. 1924). Here, it is apparent that the word "World" has been used by the defendant in its primary sense, i. e., pertaining to the earth and its contents. There has been no trademark infringement.
IV. UNFAIR COMPETITION
Although there has been no infringement, this conclusion does not dispose of the claim against Cove for unfair competition. Trademark law must be distinguished from the law of unfair competition. The latter, since it protects more than a name, may give broader protection. As Judge Bonsal has pointed out:
"The essential element of a trademark is the exclusive right of its owner to use a word or device to distinguish his product. On the other hand, a claim of unfair competition considers the total physical image given by the product and its name together." Jean Patou, Inc. v. Jacqueline Cochran, Inc., 201 F. Supp. 861, 863 (S.D.N.Y. 1962), aff'd, 312 F.2d 125 (2d Cir. 1963).
The law of New York is to be applied in a claim for unfair competition. Flexitized, Inc. v. National Flexitized Corp., 335 F.2d 774, 780 (2d Cir. 1964), cert. denied, 380 U.S. 913, 85 S. Ct. 899, 13 L. Ed. 2d 799 (1965). The decisions of the Supreme Court in Sears Roebuck & Co. v. Stiffel Co., 376 U.S. 225, 84 S. Ct. 784, 11 L. Ed. 2d 661 (1964) and Compco Corp. v. Day-Brite Lighting, Inc., 376 U.S. 234, 84 S. Ct. 779, 11 L. Ed. 2d 669 (1964) do not change this rule. In Sears and Compco, the Court was concerned about the use of state unfair competition laws to extend the effective term of patent protection. While these two cases may apply by analogy to the use of common law copyright (Goldstein, Federal System Ordering of the Copyright Interest, 69 Colum.L.Rev. 49 (1969)), they have no bearing on trademarks. Since the term of federal trademark protection is theoretically perpetual *996 (assuming no abandonment), use of state unfair competition law to protect trademark registrants does not conflict with the federal policy "of allowing free access to copy whatever the federal patent and copyright laws leave in the public domain." Compco Corp. v. Day-Brite Lighting, Inc., 376 U.S. 234, 237, 84 S. Ct. 779, 782 (1964). Where there is no federal policy in favor of creating a body of material in the public domain, there can be no conflict created by a state policy restricting unfair competition by granting greater protection than that available under federal trademark law.
State law requires more than simple forbearance in use of a competitor's name. "The critical question is whether customers are, or may be, misled." Jean Patou, Inc. v. Jacqueline Cochran, Inc., 201 F. Supp. 861, 863 (S.D. N.Y. 1962), aff'd, 312 F.2d 125 (2d Cir. 1963). See also Coca-Cola Co. v. Snow Crest Beverages, 64 F. Supp. 980, 985 (D.Mass.1946). New York courts ask whether there is sufficient similarity between products to lead to a reasonable likelihood of confusion among purchasers. Fischer v. Blank, 138 N.Y. 244, 33 N.E. 1040 (1893); Ronson Art Metal Works, Inc. v. Gibson Lighter Mfg. Co., 3 A.D.2d 227, 159 N.Y.S.2d 606, 610, reargument denied, 3 A.D.2d 833, 161 N.Y.S.2d 829 and 3 A.D.2d 833, 161 N.Y.S.2d 830 (1st Dep't 1957). Where there is a substantial similarity in packaging or advertising, with a likelihood of misappropriation of good will or misrepresentation as to source, and a resultant possibility of confusion in the trade, the courts may grant relief. Distillerie Flli Ramazzotti, S.P.A. v. Banfi Products Corp., 52 Misc. 2d 593, 276 N.Y.S.2d 413, 421-422 (Sup.Ct.1966). Prospective purchasers are "not required to carry in [their] memory, at all times, the exact details of the package so that [they] will be able, at the time of purchase, to differentiate such two items." Id. at 422. Such criteria as price, degree of competition, methods of distribution, advertising and identifying names, marks or symbols, as well as outward appearance, must be considered.
Had the advertising of defendant's work as one formerly selling from door-to-door at over one hundred ten dollars continued, there would have been substantial confusion. Such publicity, coupled with the high degree of similarity between the works, constituted unfair competition. But this advertising was discontinued even before this action was commenced. Confusion since 1965 has not been shown by any proof of experts, surveys or individual complaints. In light of the different methods of distribution, sales price and quality, it is doubtful that the public will now mistake the two encyclopedias.
V. REMEDY
A. Damages and Accounting
Field has requested both damages and an accounting against Cove for loss of profits caused by unfair competition.
Relief in the form of damages or an accounting is not granted as a matter of course. Where it appears clear that the loss of property emanating from the unfair competition would be entirely speculative, an accounting is not justified. Cf. Ronson Art Metal Works, Inc. v. Gibson Lighter Mfg. Co., 3 A.D.2d 227, 159 N.Y.S.2d 606 (1st Dep't 1957), reargument denied, 3 A.D.2d 833, 161 N.Y.S.2d 829 and 3 A.D.2d 833, 161 N.Y.S.2d 830 (1st Dep't 1957). Here, the possible unfair competition was extremely limited in time; there is proof of only a few instances where prospective purchasers might have been misled by the 1964-65 advertisements. No loss of sales has been shown. The remedies of damages or of an accounting are unjustified; Field's damages were at the most de minimis.
Additionally, Field is estopped from obtaining an accounting for profits by laches. Defendant's good faith, plaintiff's delay, the equities of the case, and the implication of abandonment of a demand for an accounting "in the *997 absence of its being urged" at the trial by any evidence, all support denial of monetary relief. Victory Chain, Inc. v. Rosenberg, 10 Misc. 2d 382, 174 N.Y.S.2d 46, 53 (Sup.Ct.1958). See also Shaffer v. Rector Well Equipment Co., 155 F.2d 344 (5th Cir. 1946); Fruit Industries v. Bisceglia Bros. Corp., 101 F.2d 752, 754 (3d Cir. 1939); Kay Dunhill, Inc. v. Dunhill Fabrics, Inc., 44 F. Supp. 922, 935 (S.D.N.Y.1942); Cohn & Rosenberger v. Kaufman & Ruderman, 280 A.D. 241, 113 N.Y.S.2d 62 (1st Dep't 1952).
Finally, where the defendant has expended money in advertising its product and attempting to build up good will for its own encyclopedia during the years when Field remained quiescent, it would be unjust and inequitable to require compensation for possible minor injuries in the past.
B. Injunction and Declaratory Judgment
As already suggested, Cove's unfair advertising campaign of 1964-65 does not seem to have been repeated and apparently resulted from a non-recurring change in its merchandising practices. Ordinarily this conclusion would suggest terminating the case by declaring Field's registrations valid against this defendant and denying all other relief. But both parties remain in active competition with respect to an overlapping market at approximately the junior-high school level and the physical similarity of their volumes provides a continuing danger that defendant or its retailers may relapse into some form of the earlier advertising campaign.
The collateral estoppel effect of a limited declaratory judgment in a new action for unfair competition would not be completely clear in view of changed circumstances required to be alleged and proved in the new action. Restatement of the Law of Judgments § 68(2) and Comments j, o, and q. See also Speed Products Co., Inc. v. Tinnerman Products, Inc., 222 F.2d 61, 67-68 (2d Cir. 1955) (collateral estoppel not applied); Seven-Up Co. v. Bubble-Up Corp., 312 F.2d 472, 50 CCPA 1012 (1963) (collateral estoppel applied to doctrine of laches); Gottesman v. General Motors Corp., 221 F. Supp. 488, 491-92 (S.D.N.Y.1963) (distinction between ultimate facts and mediate data).
While, in a new action, the court could take judicial notice of the instant litigation, courts have generally been reluctant to extend the doctrine to specific findings of fact. Cf. 9 Wigmore, Evidence 570 (3d ed. 1940) ("practical notoriety and certainty of the fact"); McCormick, Evidence 702 (1954) (informal presentation approved); South Shore Land Co. v. Peterson, 226 Cal. App. 2d 725, 38 Cal. Rptr. 392, 402, 403 (1964) (prior proceeding in federal court noticed); Meck v. Allen Properties, Inc., 206 Misc. 251, 132 N.Y.S.2d 674 (Sup.Ct. 1954) (prior action between same parties relied upon for map used by court). But cf. Shuttlesworth v. City of Birmingham, Alabama, 394 U.S. 147, 89 S. Ct. 935, 22 L. Ed. 2d 162 (1969) ("surrounding relevant circumstances" in civil liberties dispute).
An effective procedure, cheaper for both parties than a new action should unfair competition be threatened again, would be to retain foot-of-the-decree jurisdiction. Speedy relief by way of a specific injunction directed to particular dangers could then be obtained by a motion made by either party in the present action brought on by order to show cause. Such a practice represents a slight departure from normal judicial usage but is supported by the general power of federal courts as inheritors of the flexible authority of equity. Rules of Civil Procedure, Rule 60(b) (5); United States v. Swift & Co., 286 U.S. 106, 114, 52 S. Ct. 460, 76 L. Ed. 999 (1932); 7 Moore's Federal Practice ¶¶ 60.16[6], 60.26[4].
Where, as here, a full trial has been required to determine both relevant and material facts and the parties can benefit from a judgment, a *998 dismissal for mootness is not mandated. See Borchard, Declaratory Judgments 428-30 (2d ed. 1941).
"[W]hen coercive relief only is sought but is deemed ungrantable or inappropriate, the court may sua sponte, if it serves a useful purpose, grant instead a declaration of rights." Original Committee Note of 1937 to Rule 57, 6A Moore's Federal Practice ¶ 57.01 [2].
If there is a substantial possibility that the act sought to be enjoined may be repeated, the matter is not necessarily mooted. Papaliolios v. Durning, 175 F.2d 73, 75 (2d Cir. 1949); 6A Moore's Federal Practice ¶ 57.13. There is some discretion to weigh the continuing needs of the parties.
The major disadvantage of retaining open ended jurisdiction without a specific decree is that the parties may be more inhibited from acting than they would otherwise be. Insecurity resulting from ambiguity should be avoided if possible. International Salt Co. v. United States, 332 U.S. 392, 400, 68 S. Ct. 12, 17, 92 L. Ed. 20 (1947). In the antitrust and civil rights fields, it is not uncommon to grant a decree ordering a new course of conduct or enjoining future specific activities not then threatened. United States v. United States Gypsum Co., 340 U.S. 76, 88, 89, 71 S. Ct. 160, 169, 95 L. Ed. 89 (1950), motion to amend denied, 340 U.S. 909, 71 S. Ct. 289, 95 L. Ed. 657 (1951); International Salt Co. v. United States, 332 U.S. 392, 398-401, 68 S. Ct. 12, 16-18, 92 L. Ed. 20 (1947); United States v. Jefferson County Board of Education, 372 F.2d 836 (5th Cir. 1966); corrected, 380 F.2d 385 (5th Cir. 1967), cert. denied sub nom., Board of Education of City of Bessemer v. United States, 389 U.S. 840, 88 S. Ct. 77, 19 L. Ed. 2d 104 (1967). This doctrine is not limited to disputes of broad public interest. In any equity case once danger is revealed, the power to protect against foreseeable abuse is broad.
Accordingly, counsel for the parties will arrange to confer with each other in an attempt to work out details of a judgment, subject to Court approval, designed to insure against future unfair competition. If they cannot agree the Court will meet with the attorneys and issue an appropriate decree.
So ordered.
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01-03-2023
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10-30-2013
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https://www.courtlistener.com/api/rest/v3/opinions/2173631/
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781 F. Supp. 2d 721 (2011)
Ronald KITCHEN, Plaintiff,
v.
Jon BURGE, et al., Defendants.
No. 10 C 4093.
United States District Court, N.D. Illinois, Eastern Division.
April 19, 2011.
*725 G. Flint Taylor, Jr., Alexa Anne Van Brunt, Benjamin H. Elson, J. Samuel Tenenbaum, Joey L. Mogul, Sarah Jeanette Gelsomino, Locke E. Bowman, III, Chicago, IL, for Plaintiff.
Michael Joseph Kralovec, Richard Michael Beuke, Sara R. McClain, Chicago, IL, William George Gamboney, Jr., Oak Park, IL, for Defendants.
MEMORANDUM OPINION AND ORDER
ELAINE E. BUCKLO, District Judge.
On August 25, 1988, plaintiff Ronald Kitchen ("Kitchen") was arrested and interrogated in connection with the murders of Rose Marie Rodriguez, Daniel Rodriguez, Deborah Sepulveda, Peter Sepulveda, and Rebecca Sepulveda ("the Rodriguez/Sepulveda murders"). After making an incriminating confession, he was convicted, sentenced to death, and spent twenty-one years in prison. Kitchen claims that he was tortured into confessing by several Chicago Police officers and their supervising Lieutenant, Jon Burge ("Burge"). He further claims that his case is only one of many in which African-American males were tortured by Burge and other officers into confessing to crimes they did not commit. According to Kitchen, this was known to a number of City officials, who conspired with one another to keep the information from reaching the public.
Kitchen's twelve-count complaint alleges several causes of action against the various participants in this alleged conspiracy. In addition to Burge, Kitchen brings claims against a number of other now-retired members of the Chicago Police Department: John Byrne, Michael Kill, Thomas Byron, and John Smith (the "officer defendants"). Kitchen has also named several City officials, including former police superintendents Leroy Martin and Terry Hillard; Hillard's assistant, Thomas Needham, and Gayle Shines, Director of the Chicago Police Department's Office of Professional Standards ("OPS") (together, the "municipal defendants"). Further, Kitchen has sued former Assistant State's Attorneys Mark Lukanich ("Lukanich") and John Eannace ("Eannace") (together, the "ASA defendants"); and former Cook County State's Attorney and Mayor of *726 Chicago, Richard M. Daley ("Daley"). Finally, Kitchen has sued the City of Chicago ("the City"), Cook County ("the County"), and the Cook County State's Attorney's Office ("SAO").
Each of these groups of defendants has filed a motion to dismiss claims asserted against them in Kitchen's complaint. For the reasons discussed below, Daley's and the ASA defendants' motions to dismiss are granted; the officer defendants' and the municipal defendants' motions to dismiss are granted in part and denied in part.
I.
According to the allegations in Kitchen's complaint, which I must accept as true for purposes of this motion, Kitchen was initially implicated in the Rodriguez/Sepulveda murders by an associate, Willie Williams ("Williams"). After learning of the crime, Williams, who was incarcerated at the time, contacted Officer Smith and claimed that Kitchen had confessed to committing the murders with an associate named Marvin Reeves ("Reeves"). Smith informed ASA Lukanich of this information, and they subsequently obtained a court order allowing them to listen in on Williams's phone conversations with Kitchen and Reeves. When these failed to produce any incriminating information, police arrested Kitchen on unrelated auto theft charges. He was brought to Area 3 Police Headquarters and handcuffed to the wall of an interrogation room, where he was questioned for sixteen hours. During that time, he was deprived of food and sleep, and was subjected to torture and racial insults by Burge, Byron, and Kill.
Kitchen alleges that Lukanich entered the room on two separate occasions during his interrogation. In each instance, he asked Kitchen whether he was willing to speak with him. Instead of confessing, however, Kitchen asked to speak with a lawyer. Lukanich left the room and the verbal and physical abuse resumed. When Kitchen could no longer endure the torture, he agreed to make a statement. Lukanich returned to the interrogation room, and Kill recited a step-by-step account of the murders. After each step in the narrative, Lukanich asked Kitchen if Kill's account was accurate. Kitchen simply answered with a "yes" after each question. Lukanich then drafted a statement and Kitchen signed it. In the statement, Kitchen admitted to being present at the scene of the crime, but he denied having committed the murders himself.
Kitchen later filed a pretrial motion to suppress his confession. Kill, Byron, Smith, and Lukanich falsely testified at the hearing that Kitchen had voluntarily confessed and denied that Kitchen had been tortured or coerced.
Lukanich and others had additional meetings with Williams in order to refine his story about Kitchen's alleged confession. Although never disclosed to Kitchen's defense counsel, promises were made to Williams in exchange for his testimony, including money and early release from prison. Additionally, the defendants suppressed exculpatory evidence suggesting that others, including Deborah Sepulveda's husband, had committed the murders. Based solely on his false confession, the officers' perjured testimony, and Williams's fabricated statement, Kitchen was tried, convicted, and sentenced to death.
Kitchen claims that during roughly the same time period, many other African-American males were tortured by Burge and other Area 2 and Area 3 detectives into confessing to crimes they did not commit. He claims that the officers' use of torture was known to a number of public officials who actively worked to cover it up. In particular, Kitchen alleges that Mayor *727 Daley, who served as Cook County State's Attorney from 1981 to 1989, was aware of the torture from at least as far back as 1982. Also involved in the conspiracy were Leroy Martin, Commander of the Area 2 Detective Division, and who served as Superintendent of Police for the City of Chicago from 1987 to 1992; Gayle Shines, OPS Director from 1990 to 1998; Terry Hillard, Police Superintendent from 1998-2004; and Hillard's chief administrative aid, Thomas Needham.
Among other things, Kitchen's complaint alleges that these defendants worked to suppress a 1990 report prepared by Chicago Police OPS investigator Michael Goldston ("the Goldston Report"), which "found that there was systemic abuse of suspects held in custody at Area 2 and that Area 2 command personnel were aware of the systematic abuse and encouraged it by actively participating or failing to take action to stop it." Compl. ¶ 88. The report also found that Burge and Byrne were the "prime movers" behind the abuse. Id. When the report was finally released, the defendants sought to publicly discredit it.
Similarly, Kitchen alleges that in 1993, the OPS re-opened investigations into several Area 2 interrogations and concluded that a number of detectives had engaged in torture. Between 1993 and 1998, Shines acted in collusion with the other defendants to suppress the information "by secreting the files that contained those findings in her personal office." Compl. ¶ 100. Moreover, after Hillard became Police Superintendent in 1998, he and Needham worked to overturn the OPS's findings in the reopened cases.
Kitchen later filed a Second Amended Post-Conviction Petition. His conviction was vacated by the Circuit Court of Cook County, and he was granted a new trial. On July 7, 2009, an order of nolle prosequi was entered and he was released from custody.
II.
Rule 12(b)(6) permits a court to dismiss a claim where plaintiff fails to state a claim upon which relief can be granted. Fed. R.Civ.P. 12(b)(6). The court must accept as true the allegations of the complaint and draw all reasonable inferences in favor of plaintiff. Pisciotta v. Old Nat'l Bancorp, 499 F.3d 629, 633 (7th Cir.2007) (internal citation omitted). To survive a Rule 12(b)(6) motion, "the complaint need only contain a `short and plain statement of the claim showing that the pleader is entitled to relief.'" EEOC v. Concentra Health Servs., Inc., 496 F.3d 773, 776 (7th Cir. 2007) (quoting Fed.R.Civ.P. 8(a)(2)). The facts must provide the defendant with "fair notice of what the ... claim is and the grounds upon which it rests." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555, 127 S. Ct. 1955, 167 L. Ed. 2d 929 (2007) (quotation marks omitted). The plaintiff need not plead particularized facts, but the factual allegations in the complaint must be enough to raise a right to relief above the speculative level. Id.
Count I
Count I of Kitchen's complaint alleges that the defendants violated 42 U.S.C. § 1983 by fabricating inculpatory evidence and suppressing exculpatory evidence in connection with his case. The various groups of defendants have raised different objections to Kitchen's claim.
The Officer Defendants
The officer defendants do not seek outright dismissal of Count I. Rather, they seek to establish that the claim is not actionable "beyond the ambit of Brady." According to the officer defendants, regardless of the way in which the claim is characterized by Kitchen, he is in fact seeking to assert a federal claim for malicious prosecutiona cause of action that the Seventh Circuit has explicitly and repeatedly declined to recognize. See, e.g., *728 Newsome v. McCabe, 256 F.3d 747, 751 (7th Cir.2001). Hence, the officer defendants contend that Count I should be construed strictly as a Brady claim.
The specific due process claim that Kitchen asserts here has been recognized in many other cases. See, e.g., Fields v. City of Chicago, No. 10 C 1168, 2011 WL 1326231, at *4 (N.D.Ill. Apr. 4, 2011); Howard v. City of Chicago, 2004 WL 2397281, at *9 (N.D.Ill. Oct. 25, 2004); Patterson v. Burge, 328 F. Supp. 2d 878, 889 (N.D.Ill.2004) ("Patterson I"); Corbett v. White, No. 00 C 4661, 2001 WL 1098054 (N.D.Ill. Sept. 17, 2001). Although defendants in the latter cases, like the defendants here, have often insisted that the claim is a way of asserting a federal malicious prosecution claim by other means, courts have consistently rejected this argument. The difference, as Judge Andersen has put it, is that "[m]alicious prosecution claims require allegations that the Defendants commenced or continued criminal proceedings against the plaintiff without probable cause," whereas the claim here "arise[s] from allegations that Defendants concealed exculpatory evidence from prosecutors, thereby denying him the right to a fair trial." Howard, 2004 WL 2397281, at *9. Although Kitchen contends that he should be allowed to bring a malicious prosecution claim under § 1983 and he purports to preserve the claim "pending possible consideration of the issue in the United States Supreme Court," Kitchen Resp. to Officer Defs. at 5 n. 5; see also Pl.'s Resp. Mun. Defs. at 4 n. 1, he disavows any intention of pressing such a claim in earnest here. In short, the defendants' concerns about Count I's scope are misplaced.
The officer defendants further argue that Count Iand indeed all counts of the complaintshould be dismissed as to defendant Byrne. I agree. Bryne is not alleged to have directly participated in Kitchen's torture. Rather, the complaint simply alleges that Byrne was Burge's "right hand man," and that, like Burge, Bryne "engaged in a pattern and practice of torture and brutality himself, and also supervised, encouraged, sanctioned, condoned and ratified brutality and torture by other detectives, including the Police Officer Defendants named herein." Compl. ¶ 8. These generic and conclusory allegations are not sufficient to assert a claim against Byrne. Accordingly, I grant the officer defendants' motion to dismiss Byrne from the complaint.
The Municipal Defendants
The municipal defendants assert several arguments for Count I's dismissal. First, they argue that Kitchen's claim fails because it rests on an unsound doctrinal underpinning. In particular, they maintain that Count I is based on a Fourth Amendment theory of "continued imprisonment," which, like the § 1983 malicious prosecution claim, has been expressly rejected by the Seventh Circuit. See, e.g., Wiley v. City of Chicago, 361 F.3d 994, 998 (7th Cir.2004) (noting that the Seventh Circuit has "repeatedly rejected the `continuing seizure' approach" and stating that the "scope of a Fourth Amendment claim is limited up until the point of arraignment"). Second, the municipal defendants argue that Kitchen seeks to hold them liable for failing to investigate the allegations of torture surrounding Areas 2 and 3. They contend that the claim fails because the Seventh Circuit has held that law enforcement officers have no duty to investigate potentially exculpatory information once they have probable cause to arrest a suspect. See, e.g., Garcia v. City of Chicago, Ill., 24 F.3d 966, 970 (7th Cir.1994) ("[O]nce police officers have discovered sufficient facts to establish probable cause, they have no constitutional obligation to conduct any further investigation in the hopes of uncovering potentially exculpatory *729 evidence.") (quotation marks omitted). Further, the municipal defendants contend that Kitchen's claims against them fail because he does not allege that they had any direct involvement in his torture and other violations of his rights. Indeed, Shines, Hillard, and Needham point out that they had not even obtained their relevant positions as municipal officers at the time of the alleged torture.
These objections misapprehend the nature of Kitchen's claim. As Kitchen explains, for example, Count I does not allege a continuing violation of his Fourth Amendment rights by suppressing exculpatory evidence; he asserts that their actions constituted a continuing violation of his due process right to a fair trial. Similarly, Kitchen does not claim that the municipal defendants are liable for failing to search for evidence that might have proved his innocence; he claims that the defendants worked actively to suppress evidence indicating his innocence. Nor is Kitchen's claim undermined by the fact that certain of the municipal defendants had not yet been hired or appointed to their respective positions at the time he alleges that he was tortured, for Count I seeks to hold them liable for suppressing evidence of his innocence after they had assumed the positions in which they are sued.
The municipal defendants' other main argument is that no causal connection can be established between their alleged conduct and Kitchen's injuries. As they point out, Kitchen's theory is that if the municipal defendants had not suppressed information about Burge's and other officers' practices of coercing and torturing suspects into making false confessions, Kitchen himself would never have been forced to confess and he would never have been convicted. The municipal defendants claim that the "chain of inferences necessary to conclude plaintiff would have been exonerated sooner if Hillard, Needham, and Shines would have investigated and/or disclosed the re-opened OPS investigations unrelated to plaintiff is too tenuous." Municipal Defendants' Mem. at 9.
This argument has frequently been advanced in other cases arising out of the of coercive interrogation methods as Areas 2 and 3. See, e.g., Cannon v. Burge, 2006 WL 273544, at *12 (N.D.Ill. Feb. 2, 2006); Orange v. Burge, No. 04 C 0168, 2005 WL 742641, at *13 (N.D.Ill. March 30, 2005) ("Orange I"); Patterson I, 328 F.Supp.2d at 888, 890; Howard, 2004 WL 2397281, at *13. Courts have consistently rejected the argument on the ground that it raises factual questions that cannot be decided on a motion to dismiss. The reasoning of these cases is persuasive. At the present stage, the municipal defendants are entitled to dismissal of Count I only if the complaint lacks "enough facts to state a claim to relief that is plausible on its face." Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570, 127 S. Ct. 1955, 167 L. Ed. 2d 929 (2007). I cannot say as a matter of law that no causal relationship can be demonstrated between the municipal defendants' conduct and Kitchen's coerced confession.
It is true that, despite their initial determinations to the contrary, the courts in Orange and Patterson later held that the inferential chain was indeed too weak to support plaintiffs' claims. See Orange v. Burge, No. 04 C 0168, 2008 WL 4425427, at *5 (N.D.Ill. Sept. 29, 2008) ("Orange II"); Patterson v. Burge, No. 03 C 4433, 2010 WL 3894433, at *3 (N.D.Ill. Sept. 27, 2010) ("Patterson II"). Importantly, however, the later determinations were made in the context of summary judgment motionsnot, as here, on a motion to dismiss.[1]
*730 In sum, given the facts and procedural posture of this case, I am not persuaded by any of the municipal defendants' arguments for Count I's dismissal. Accordingly, their motion to dismiss is denied as to Count I.
The ASA Defendants
ASA defendants Lukanich and Eannace argue that Count Ias well as the other claims against themshould be dismissed because, as prosecutors, they are entitled to absolute immunity. It is wellsettled that "[p]rosecutors are absolutely immune from suits for monetary damages under § 1983 for conduct that is intimately associated with the judicial phase of the criminal process." Smith v. Power, 346 F.3d 740, 742 (7th Cir.2003) (quotation marks omitted). In other words, "[a] prosecutor is shielded by absolute immunity when he acts as an advocate for the State but not when his acts are investigative and unrelated to the preparation and initiation of judicial proceedings." Id. (quotation marks omitted). Whether Lukanich and Eannace are absolutely immune from suit, therefore, depends on whether their conduct can be characterized as "prosecutorial" or must be viewed as "investigatory." And since Lukanich and Eannace played different roles in different phases of Kitchen's case, it is necessary to ask at each point whether they were acting as prosecutors or as investigators.
The complaint first seeks to hold Lukanich liable for his participation in Kitchen's interrogation and confession. Kitchen insists that in coming to Area 3 during the interrogation, and in taking Kitchen's statement, Lukanich was acting as an investigator, not a prosecutor. Courts addressing similar claims in other cases have consistently found that conduct of the kind alleged of Lukanich falls on the prosecutorial rather than the investigative side of the line. As Judge Zagel remarked in Andrews v. Burge, 660 F. Supp. 2d 868 (N.D.Ill.2009):
Taking a court reported statement from a defendant is an act within a prosecutor's (as well as a police officer's) duties.... The prosecutor acts within his core functions when he evaluates the evidence gathered by police and, in the case of a confession, takes steps to see that the words of the defendant are properly preserved. A prosecutor should not be deprived of immunity because, in a case of murder, he decides to hear what the defendant has to say for himself.
Id. at 878; see also Patterson II, 2010 WL 3894433, at *10; Boyd v. Village of Wheeling, No. 83 C 4768, 1985 WL 2564, at *10 (N.D.Ill. Sept. 12, 1985).
Kitchen's reliance on Hill v. Coppleson, 627 F.3d 601 (7th Cir.2010), is misplaced. There, the prosecutor was alleged *731 to have gone beyond merely taking the plaintiff's statement. For example, the prosecutor was alleged to have "fed" the plaintiff several details about the murder to which he eventually confessed. Id. at 603. The prosecutor also whispered and mouthed answers to plaintiff when he was being asked key details about the crime. Id. at 604; see also Orange II, 2008 WL 4425427, at *9 (no prosecutorial immunity where ASA was "personally involved in [plaintiff's] ongoing interrogation," was present during electric shocking of plaintiff and was part of "ongoing attempts to get `the story' straight"). Here, by contrast, Lukanich is alleged only to have taken Kitchen's statement.
Kitchen next argues that Lukanich and Eannace are liable for suppressing exculpatory information after his trial. For example, he maintains that the ASAs failed to respond truthfully to questions by the prosecutors handling Kitchen's post-conviction proceedings about the manner in which Kitchen's confession had been obtained. Kitchen argues that since at that time Lukanich and Eannace were no longer acting as prosecutors in connection with his case, they are not entitled to prosecutorial immunity for suppressing any exculpatory information.
Kitchen bases his argument on Houston v. Partee, 978 F.2d 362 (7th Cir.1992). In Partee, the plaintiffs were convicted of murder. While their appeals were pending, a cooperating witness identified three others as the murderers. The three eventually confessed to the crime. Although the prosecutors were aware of this development, they lied when the plaintiffs' attorney specifically asked for information that had been obtained from the cooperating witness. The prosecutors also testified untruthfully to this effect during appellate proceedings. When the plaintiffs later brought a § 1983 suit, the prosecutors claimed that they were entitled to absolute immunity. The court disagreed, holding that at the time the prosecutors discovered the evidence exculpating the plaintiffs, they were no longer functioning as prosecutors. The court observed that the plaintiff had already been convicted and that the appeal had been assigned to other prosecutors. As a result, the court held, the "prosecutors' knowledge of and failure to disclose [the] original statements and the three subsequent confessions thus had no connection to their role as advocate for the State." Id. (quotation marks omitted).
As with Hill, Kitchen's reliance on Partee is misplaced. For one thing, the prosecutors in Partee suppressed information they had obtained after their role as prosecutors had ceased; here, the exculpatory information in question was obtained by the ASAs while they were still performing their role as prosecutors. Prosecutors remain immune from having to divulge exculpatory information they obtained while prosecutors, even after they are no longer prosecutors. See, e.g., Reid v. State of N.H., 56 F.3d 332, 338 (1st Cir.1995) (holding that "absolute immunity [was not] forfeited because the prosecutors continued to withhold the exculpatory evidence long after [the defendant's] conviction"); Jones v. Shankland, 800 F.2d 77, 80 (6th Cir.1986); cf. Patterson II, 2010 WL 3894433, at *5 (finding that former State's Attorney Richard Devine was entitled to absolute immunity from liability for failing to disclose exculpatory evidence of a pattern of police brutality).
The ASAs' position is further supported by the Supreme Court's decision in Van de Kamp v. Goldstein, 555 U.S. 335, 129 S. Ct. 855, 172 L. Ed. 2d 706 (2009). The plaintiff in Van de Kamp was released from prison after showing that prosecutors had failed to turn over potential impeachment information about one of its witnesses. The plaintiff later brought a § 1983 suit against *732 the former Los Angeles County district attorney and chief deputy district attorney for failing properly to train and supervise prosecutors, and for failing to establish an information system containing potential impeachment material about informants. The defendants claimed that they were protected by prosecutorial immunity. The Court agreed.
In reaching its decision, the Court observed that if the plaintiff had sued the trial prosecutor for failing to turn over exculpatory material instead of suing the prosecutor's supervisors for failure to train, the prosecutor's supervisors and his colleagues would all have been protected by prosecutorial immunity. As the Court explained, "Imbler makes clear that all these prosecutors would enjoy absolute immunity from such a suit. The prosecutors' behavior, taken individually or separately, would involve "[p]reparation ... for ... trial," and would be "intimately associated with the judicial phase of the criminal process" because it concerned the evidence presented at trial." Id. at 862 (citations omitted). From this, the Court reasoned that there was no reason why the prosecutor's supervisors should not be entitled to immunity on the facts of the case before it. The Court explained:
The only difference we can find between Imbler and our hypothetical case lies in the fact that, in our hypothetical case, a prosecutorial supervisor or colleague might himself be liable for damages instead of the trial prosecutor. But we cannot find that difference (in the pattern of liability among prosecutors within a single office) to be critical. Decisions about indictment or trial prosecution will often involve more than one prosecutor within an office. We do not see how such differences in the pattern of liability among a group of prosecutors in a single office could alleviate Imbler's basic fear, namely, that the threat of damages liability would affect the way in which prosecutors carried out their basic court-related tasks. Moreover, this Court has pointed out that it is the interest in protecting the proper functioning of the office, rather than the interest in protecting its occupant, that is of primary importance.
Id. at 862-63 (citations and quotation marks omitted).
Under Van de Kamp Lukanich and Eannace are entitled to prosecutorial immunity for their alleged post-trial suppression of exculpatory evidence. Although Lukanich and Eannace were no longer prosecutors on the case, they were colleagues of the prosecutors who had been assigned to work on the appellate phase of Kitchen's case. As Van de Kamp's hypothetical illustrates, immunity extends to a prosecutor's colleagues and supervisors, without regard to "the pattern of liability among prosecutors within a single office." Id. at 862.
Lastly, Kitchen argues that the ASAs are liable for the their alleged role in fabricating the statement of Willie Williams, the individual who originally brought Kitchen to the attention of the police. According to Kitchen, "[k]nowing that they did not have sufficient credible proof to sustain their case, the police officer Defendants, together with Defendants Lukanich and Eannace ... continued their `investigation' by further shaping Williams' story, by making promises and extending favors that included giving his girlfriend rent money and obtaining his early release from prison." Compl. ¶ 50. Although Williams's story was "obviously false," Compl. ¶ 27, the defendants continued to reward him with such favors so long as his story was helpful to them in building a case against Kitchen.
Kitchen contends that the ASAs are not entitled to absolute immunity for their conduct during this period because they were *733 engaged in investigatory, rather than prosecutorial, activities. He also points out that their alleged fabrication of Williams's statement took place early on in the "investigation"about two weeks prior to Kitchen's arrest and interrogation, see Compl. ¶ 31before they could have had probable cause to arrest Kitchen for the murders. As Kitchen points out, "A prosecutor neither is, nor should consider himself to be, an advocate before he has probable cause to have anyone arrested." Buckley v. Fitzsimmons, 509 U.S. 259, 274, 113 S. Ct. 2606, 125 L. Ed. 2d 209 (1993) ("Buckley II"); see also Hill v. Coppleson, 627 F.3d 601, 605 (7th Cir.2010).
One issue that Kitchen does not sufficiently address, however, is that insofar as the ASAs were engaged in preparing Williams to testify, they retain their prosecutorial immunity. As the Supreme Court has repeatedly affirmed, "an out-of-court effort to control the presentation witness' testimony was entitled to absolute immunity because it was fairly within the prosecutor's function as an advocate." Buckley II, 509 U.S. at 273, 113 S. Ct. 2606 (quotation marks and brackets omitted); see also Imbler v. Pachtman, 424 U.S. 409, 431 n. 32, 96 S. Ct. 984, 47 L. Ed. 2d 128 (1976).
Even if Lukanich and Eannace were not entitled to absolute immunity for their conduct during this period, they would be entitled to qualified immunity. The qualified immunity inquiry asks two questions: whether the plaintiff's allegations make out a deprivation of a constitutional right, and whether the right was clearly established at the time of defendant's alleged misconduct. McAllister v. Price, 615 F.3d 877, 881 (7th Cir.2010). Kitchen fails to explain in what way the ASAs' conduct violated his constitutional rights. Merely making promises of favorable treatment to Williams does not violate the Constitution. And to the extent that Williams's fabricated story could have resulted in a constitutional violation of Kitchen's rights, the violation could have taken place only when the story was used against Kitchen at trial. Buckley v. Fitzsimmons, 20 F.3d 789, 795-96 (7th Cir.1994) ("Buckley III"). At that point, however, they were protected by prosecutorial immunity. Id. at 794.
The upshot of the foregoing discussion is that Lukanich and Eannace are entitled to immunity with respect to Count I. As just explained, Lukanich and Eannace committed no violation of Kitchen's rights by virtue of their alleged fabrication Williams's statement. Insofar as the rest of the ASAs' involvement is concerned, they were acting as prosecutors and are therefore absolutely immune from suit. As a result, Kitchen's claims against the ASAs fail and their motion to dismiss Count I is granted.
Mayor Daley
Count I is alleged against Daley in his role as mayor of Chicago (1989 to the present). As with the ASAs, Kitchen contends that Daley violated his due process right to a fair trial by suppressing and concealing exculpatory information. In particular, Kitchen cites four different bases for holding Daley liable after he became mayor: (1) Daley's remarks discrediting the OPS Report, which had found that Burge and his subordinates had systematically abused African American suspects in their custody"; (2) his promotion of Burge's "confederate," Peter Dignan ("Dignan"), to Lieutenant, despite an OPS finding that Dignan was guilty of torturing several still-incarcerated individuals; (3) his directive to City lawyers, over the objection of his senior staff, to continue defending Burge, even after Burge's indictment by federal authorities for crimes arising out of the torture; and (4) his continued concealment of the information regarding torture by Burge and others, which he had personally learned of during *734 his years as State's Attorney. See Pl.'s Resp. at 19.
For reasons already discussed in connection with the ASAs' motion, it is clear that the last of these bases (4) does not afford grounds for holding Daley liable. Since Daley was acting as a prosecutor at the time he obtained the information in question, he is immune from having to disclose the information. Reid, 56 F.3d at 338; Shankland, 800 F.2d at 80. It is true that Daley would not be immune for suppressing exculpatory information he learned after leaving the State's Attorney's Office. But Kitchen does not base his argument on such information. Rather, (4) specifically refers to "information regarding torture by Burge and others, which he had personally learned of during his years as State's Attorney."
Kitchen's first three bases also fail to support a claim against Daley. This is because no causal connection can be established between these allegations and the alleged violation of Kitchen's due process rights. It cannot plausibly be argued that Kitchen would have been exonerated if Daley had not promoted Dignan, or if he had not ordered Burge's defense, or if he had not criticized the OPS Report. Indeed, it is difficult to discern any connection between Daley's decisions to promote Dignan or to defend Burge and Kitchen's continued imprisonment.[2]
Kitchen insists that this is a factual question that cannot be decided on a motion to dismiss. I disagree. The Supreme Court has affirmed that "only a complaint that states a plausible claim for relief survives a motion to dismiss." Ashcroft v. Iqbal, U.S. , 129 S. Ct. 1937, 1950, 173 L. Ed. 2d 868 (2009). "Determining whether a complaint states a plausible claim for relief will ... be a context-specific task that requires the reviewing court to draw on its judicial experience and common sense. Id. But where the well-pleaded facts do not permit the court to infer more than the mere possibility of misconduct, the complaint has allegedbut it has not `show[n]'`that the pleader is entitled to relief.'" Id.
The fact that I rejected a similar argument in the municipal defendants' case is not inconsistent with my acceptance of the argument in Daley's case. Given the nature of the information that the municipal defendants are alleged to have suppressed, the possibility of establishing a causal link with Kitchen's incarceration is at least minimally plausible. For example, Martin is alleged to have hindered OPS investigations into Burge's and others' use of torture at Area 2 and 3 Headquarters; and when findings of torture were made, Shines attempted to "secret" or suppress them. Although none of the suppressed information had specifically to do *735 Kitchen's case, it is not unreasonable to infer that awareness of other instances of torture could have drawn attention to the problem more generally, causing Kitchen's case to come to light sooner. In Daley's case, however, judicial experience and common sense do not permit such a reasonable inference based on Daley's decision to promote Dignan, for example, or to provide Burge's legal defense. For these reasons, Daley's motion to dismiss Count I is granted.
In sum, the officer defendants' and the municipal defendants' motions to dismiss Count I are denied; the ASAs' and Daley's motions are granted.
Counts II & III
In Count II, Kitchen asserts a claim for false arrest/false imprisonment under § 1983; and in Count III, he asserts a § 1983 claim for torture and physical abuse. Both claims allege a violation of Kitchen's Fourth Amendment rights. The defendants argue that since the "scope of a Fourth Amendment claim is limited up until the point of arraignment," Wiley, 361 F.3d at 998, both claims are time-barred. Kitchen does not oppose dismissal of either claim. Accordingly, Counts II and III are dismissed.
Count IV
Kitchen characterizes Count IV of his complaint as a § 1983 coercive interrogation claim. Specifically, the complaint alleges that the defendants violated his Fifth Amendment right against self-incrimination and his Fourteenth Amendment substantive due process right "not to have been convicted based upon a physically coercive interrogation that was shocking to the conscience." Resp. to Def. Officers' Mot. to Dismiss at 6.
The defendants first argue that the claim is barred by its two-year limitations period. See, e.g., Wallace v. Kato, 549 U.S. 384, 387, 127 S. Ct. 1091, 166 L. Ed. 2d 973 (2007). The timeliness of the claim depends on when it accrued. According to the defendants, the claim could have accrued no later than 1990 (i.e., when Kitchen challenged his interrogation during a suppression hearing). However, Kitchen maintains that the claim did not accrue until his conviction was set aside.
To determine when the claim accrued, it is necessary to consider Heck v. Humphrey, 512 U.S. 477, 114 S. Ct. 2364, 129 L. Ed. 2d 383 (1994). "Under the Heck framework, a claim that directly attacks the validity of a conviction cannot accrue until after the conviction has been terminated in a manner favorable to the plaintiff." Parish v. City of Elkhart, 614 F.3d 677, 681 (7th Cir.2010). The question is whether Kitchen's claim directly attacks the validity of his conviction. If so, the claim will not have accrued until after his conviction was set aside.
I agree with the other courts to have considered the issue that Kitchen's coercive interrogation claim cannot be challenged without impugning the validity of his conviction. See, e.g., Walden v. City of Chicago, 755 F. Supp. 2d 942, 955-56 (N.D.Ill.2010) (plaintiff's claim did not accrue until he received the innocence pardon because he could not have challenged his coerced interrogation without necessarily demonstrating the invalidity of his conviction under Heck); see also Cannon, 2006 WL 273544, at *9.
From this, it follows that Kitchen's claim in Count IV did not accrue until August 19, 2009, the date on which Kitchen he received his certificate of innocence. Since his suit was filed within two years of that date, Count IV is timely.
Municipal Defendants
Of the municipal defendants, Count IV is alleged only against Martin. *736 Kitchen alleges what he refers to as a "supervisory liability/failure to intervene" claim. See Pl.'s Resp. to Municipal Defs. at 4. The parties dispute at length whether "supervisory liability" is allowed under § 1983. On inspection, however, the dispute is merely verbal. The Seventh Circuit has recognized liability for faulty supervision. See, e.g., Trentadue v. Redmon, 619 F.3d 648, 652 (7th Cir.2010); Nanda v. Moss, 412 F.3d 836, 842 (7th Cir.2005) ("Under § 1983 ... supervisory liability can be established if the conduct causing the constitutional deprivation occurs at the supervisor's direction or with the supervisor's knowledge and consent."); Jones v. City of Chicago, 856 F.2d 985, 992-93 (7th Cir.1988) ("There is no principle of superiors' liability, either in tort law generally or in the law of constitutional torts. To be held liable for conduct of their subordinates, supervisors must have been personally involved in that conduct.... The supervisors must know about the conduct and facilitate it, approve it, condone it, or turn a blind eye for fear of what they might see. They must in other words act either knowingly or with deliberate, reckless indifference. This heavy burden on plaintiffs is easy to understand in a case such as this case where the ground of the supervisors' liability is that they conspired with subordinates to violate the plaintiff's constitutional rights.") (citations omitted).
Here, Kitchen is not seeking to hold Martin vicariously liable for others' actions; he claims that Martin is primarily liable for failing to stop others from violating his constitutional rights. See Compl. ¶¶ 127, 128. His liability, if any, is not for the officers' actions but for his own action in failing to stop them. Accordingly, the municipal defendants' motion to dismiss Count IV is denied.
The ASA Defendants and Mayor Daley
Lukanich (the only ASA defendant against whom Count IV is asserted) and Daley are both immune with respect to Count IV for the same reasons as discussed in connection with Count I.
In addition to the federal claims asserted in Counts I and IV, the ASA defendants claim that they are immune with respect to Kitchen's state law claims. The ASAs base their argument on two distinct grounds: prosecutorial immunity and sovereign immunity. Kitchen contends that prosecutors are immune from suit under Illinois law only insofar as they have not acted with malice. Since he has alleged that the defendants did act with malice, Kitchen maintains that the ASAs are not entitled to prosecutorial immunity for his state law claims.
Kitchen's account of prosecutorial immunity under Illinois law is mistaken. In particular, as the ASA defendants point out, Kitchen confuses prosecutorial immunity under Illinois law with "public official immunity." See, e.g., Lanza v. City Of Chicago, No. 08 C 5103, 2009 WL 3229407, at *4 (N.D.Ill. Oct. 1, 2009); Hughes v. Krause, No. 06 C 5792, 2008 WL 2788722, at *1 (N.D.Ill. July 17, 2008). "Although under Illinois law there is a doctrine of public official immunity which has a lack of malice requirement [in order for the immunity to apply], such is not the immunity afforded prosecutors." Lanza, 2009 WL 3229407, at *4 (quotation marks). "Rather... prosecutors, like judges, must be allowed to perform the functions of their jobs fearlessly and without fear of consequence." Id. Relying on the Supreme Court's jurisprudence, the Illinois Appellate Court held that a "prosecutor is absolutely immune only for those activities `intimately associated with the judicial phase of the criminal process.'" White v. City of Chicago, 369 Ill.App.3d 765, 308 Ill. Dec. 518, 861 N.E.2d 1083, 1088 (2006) (quoting Imbler v. Pachtman, 424 U.S. 409, 430, 96 S. Ct. 984, 47 L. Ed. 2d 128 (1976)); see also *737 Patterson II, 2010 WL 3894433, at *11; Gordon v. Devine, 2008 WL 4594354, at *17 (N.D.Ill. Oct. 14, 2008). Decisions appearing to hold the contrary have either been changed on reconsideration, see, e.g., Hughes v. Krause, No. 06 C 5792, 2008 WL 904898, at *6 (N.D.Ill. Mar. 31, 2008), altered on reconsideration by Hughes v. Krause, No. 06 C 5792, 2008 WL 2788722, at *1 (N.D.Ill. July 17, 2008), or have been misunderstood, Horstman v. County of DuPage, 284 F. Supp. 2d 1125, 1132 (N.D.Ill.2003).[3]
Since the Illinois and federal doctrines of prosecutorial immunity are coterminous, and since I have determined that the ASA defendants are entitled to prosecutorial immunity under federal law, it follows that they are also entitled to immunity with respect to Kitchen's state law claims. It is also unnecessary for me to consider whether the ASAs are protected by sovereign immunity.[4]
The parties devote virtually no attention to whether Daley can be liable for the state law claims brought against him. Both parties appear to assume that the same analysis would apply to the state as well as federal claims. Since the federal claims against Daley have been dismissed, the state claims are dismissed against him as well.
Counts V and X
In Count V, plaintiff alleges three conspiracy claims: (1) a claim under § 1983 for conspiracy to violate plaintiff's constitutional rights; (2) a claim under § 1985 for conspiracy to deprive plaintiff and other African Americans of the equal protection of the laws and/or of equal privileges and immunities under the law; and (3) a claim under § 1986 for failure to prevent the § 1985 conspiracy. The claim is asserted against all of the defendants, but since the claims against the ASAs and Daley have been dismissed, it is necessary to consider Counts V and X only insofar as they apply to the remaining defendants.
"42 U.S.C. § 1983 creates a federal cause of action for the deprivation under color of state law, of a citizen's rights, privileges, or immunities secured by the Constitution and laws of the United States." Fitzpatrick v. City of Hobart, No. 2:03-CV-359 PS, 2006 WL 2736127, at *6 (N.D.Ind. Sept. 25, 2006) (quotation marks and brackets omitted). "Thus, the Plaintiffs must show that the defendants both 1) deprived them of a right secured by the Constitution or the laws of the United States; and 2) that the defendants acted under color of state law." Id.
As for claims under § 1985(3), "four elements are required: (1) a conspiracy; (2) a purpose of depriving any person of equal protection of the laws; (3) an act in furtherance of the conspiracy; and (4) injury to one's person or property or a deprivation of a right or privilege of a citizen of the United States." Malone v. American Friends Service Committee, 213 *738 Fed.Appx. 490, 494-95 (7th Cir.2007). Section 1986 "creates a cause of action against a person that neglects or refuses to stop a conspiracy to violate the civil rights of a member of a protected class." Id. at 494.
The defendants first argue that the conspiracy allegations lack sufficient specificity. The Seventh Circuit has made clear that conspiracy claims under § 1983 are not subject to a heightened pleading standard. See, e.g., Srivastava v. Cottey, 83 Fed.Appx. 807, 810 (7th Cir.2003). Rather, a complaint need only provide "notice of time, scope, and parties involved." Id. Kitchen's complaint easily satisfies this requirement.
Defendants argue that Kitchen's § 1985 and § 1986 conspiracy claims fail because there must be an underlying predicate violation of constitutional rights. As already explained, Counts I and IV are sufficient to state a claim. Defendants also argue that plaintiff has failed to allege an "underlying equal protection claim or any specific facts tying Defendant Officers to any racially motivated intent to deprive Plaintiff of his equal protection rights." The complaint alleges that the conspiracy was formed "with the knowledge and purpose of depriving Plaintiff, who is African-American, and numerous other African American torture victims of the equal protection of the laws and/or of equal privilege and immunities under the law, and with racial animus toward the Plaintiff and the other victims of this racially motivated conspiracy." Compl. ¶ 131; see also Compl. ¶ 60. Accordingly, I deny the defendants' motions to dismiss Count V.
In addition to his federal conspiracy claims in Count V, Kitchen asserts a state law conspiracy claim in Count X. Defendants do not adduce any further arguments for dismissal of the state law claim. Thus, I decline to dismiss Count X of the complaint.[5]
Count VII
Count VII of Kitchen's complaint alleges a claim for false arrest/false imprisonment under Illinois law. The defendants argue that the claim is untimely. The statute of limitations is one year. Jones v. Navia, No. 09-cv-6968, 2010 WL 4878869, at *4 (N.D.Ill. Nov. 23, 2010) (citing 745 ILCS 10/8-101).
The Seventh Circuit recently affirmed that under Illinois law, a false arrest ends, and a claim for false arrest therefore accrues, when authorities obtain a warrant for a suspect's arrest. National Cas. Co. v. McFatridge, 604 F.3d 335, 344-45 (7th Cir.2010). Since Kitchen was arrested in 1988, his false arrest claim is time-barred.
Kitchen also claims false imprisonment. His argument depends on the assertion that his false imprisonment claim did not accrue until he was released from prison in 2009. Under Illinois law, "personal injury claims accrue when the plaintiff suffers an injury," or, under the discovery rule, when the "injured plaintiff knows or reasonably should know that he has been injured and that his injury was wrongfully caused." Hill v. City of Chicago, No. 06 C 6772, 2007 WL 1424211, at *5 (N.D.Ill. May 10, 2007) (quotation marks omitted). Based on the allegations in his *739 complaint, Kitchen knew that he had been falsely imprisoned in 1990, when he was first imprisoned. See, e.g., Thompson, 2009 WL 674353, at *5; Jones v. Navia, No. 09-cv-6968, 2010 WL 4878869, at *4 (N.D.Ill. Nov. 23, 2010); Cote v. Hopp, No. 09-1060, 2010 WL 1416851, at *3 (C.D.Ill. April 1, 2010); Gora v. Edgar, No. 95 C 4087, 1996 WL 11938, at *2 (N.D.Ill. Jan. 10, 1996); Burge v. Harvey Police Officers, No. 97 C 4569, 1997 WL 610045, at *2 (N.D.Ill. Sept. 25, 1997).
Against this, Kitchen argues that his false imprisonment claim did not accrue until he was released from prison.[6] His position appears to be based on his conception of the claim as a continuing tort or violation. He claims that his false imprisonment "claim concerns a course of conduct, continuing over many years, beginning with Plaintiff's warrantless arrest without probable cause." Pl.'s Resp. to Officer Defs. at 9. This view is unpersuasive. As the Illinois Supreme Court has explained, "[a] continuing violation or tort is occasioned by continuing unlawful acts and conduct, not by continual ill effects from an initial violation." Feltmeier v. Feltmeier, 207 Ill. 2d 263, 278 Ill. Dec. 228, 798 N.E.2d 75, 85 (2003). "Thus, where there is a single overt act from which subsequent damages may flow, the statute begins to run on the date the defendant invaded the plaintiff's interest and inflicted injury, and this is so despite the continuing nature of the injury." Id. (citations omitted).
Although Kitchen casts his claim as consisting of continuing acts rather than continuing effects, the error is essentially the same. Courts have indicated that false imprisonment should be viewed as springing from an unlawful act that results in continual ill effects, not from continuing unlawful acts. See, e.g., Pierce v. Pawelski, No. 98 C 3337, 2000 WL 1847778, at *2 (N.D.Ill. Dec. 14, 2000); see also Jones, 2010 WL 4878869, at *4; Ford v. City of Rockford, No. 88 C 20323, 1990 WL 304240, at *2 (N.D.Ill. May 10, 1990). Kitchen's false imprisonment claim is untimely. Accordingly, Count VII is dismissed.
Counts VI & XI
In Count VI, Kitchen asserts a Monell claim against the City. "The elements of a Monell claim are: (1) the deprivation of a constitutional right; (2) that action was taken pursuant to a custom, policy or practice of the local government unit; and (3) that such action was the cause of the deprivation." Williams v. Anderson, No. 09 C 1915, 2010 WL 5014393, at *4 (N.D.Ill. Dec. 2, 2010). The City argues that the Monell claim fails because Kitchen cannot establish an underlying violation of his constitutional rights. However, as Counts I and IV sufficiently allege that the officer defendants deprived Kitchen of his civil rights, the City's motion to dismiss Count VI is denied.
The City makes a parallel argument with respect to Kitchen's respondeat superior claim in Count XI. The City argues that there can be no vicarious liability absent a showing of primary liability on the part of its employees. As discussed above, Kitchen has alleged state law claims for conspiracy, malicious prosecution, and intentional infliction of emotional distress. These claims form a basis on which the *740 City can potentially be held vicariously liable. As with Count VI, therefore, the City's motion to dismiss Count XI is denied.
Count XII
Lastly, Count XII asserts a claim for indemnification pursuant to 745 ILCS 10/9-102 against the City, Cook County, and the County's State's Attorney's Office.
The City once again argues that it cannot be held vicariously liable without any showing of primary liability on the part of its employees. As already discussed, this argument depends on the assumption that there can be no showing of primary liability on the part of the City's employees. Since that assumption is incorrect, this argument is without merit and the City's motion to dismiss Count XII is denied.
The County's motion to dismiss is granted. In response to the County's motion, Kitchen explains that he does not seek to hold the County liable for any substantive defense; instead, he states that he has named the County as a defendant only because it is a necessary party in the event that judgments are entered against Mayor Daley, Lukanich, or Eannace. Indemnification is unnecessary, however, because each of these defendants has been dismissed from the suit.
I also grant the State's Attorney's Office's motion to dismiss. The State's Attorney's Office is entitled to immunity under the Eleventh Amendment. See, e.g., Hernandez v. Joliet Police Dept., 197 F.3d 256, 265 (7th Cir.1999) (dismissing claim against Will County State's Attorney's Office on the ground that "[t]he Eleventh Amendment prohibits courts from deciding suits brought by private litigants against states or their agencies.") (quotation marks omitted).
III.
For the reasons discussed above, the ASA defendants' motion to dismiss [56] and Mayor Daley's motion to dismiss [45] are granted in their entirety. The officer defendants' motion to dismiss [47] and the municipal defendants' motion to dismiss [44] are granted as to Counts II, III, and IV. Burge's partial motion to dismiss [77] is granted in part and denied in part. All claims are dismissed as to Sergeant Byrne.
NOTES
[1] In rejoinder, the municipal defendants point out that, although Orange II involved a motion for summary judgment, the court nevertheless opined that it would have reached the same conclusion even assuming (as is required under Rule 12(b)(6)) that the plaintiff's allegations were true. Orange II, 2008 WL 4425427, at *5. Orange II's holding still does not apply here, however, because of a key factual difference between the two cases. The plaintiff in Orange II sought to hold former Cook County State's Attorney Richard Devine liable for failing to disclose evidence of the pattern of torture at Area 2. In the portion of the opinion in question, however, Orange II was addressing only the period between 1981 and 1983, which was before the plaintiff had even been arrested. The court unsurprisingly held that Devine could not have suppressed information favorable to Orange before Orange had even been prosecuted. Notably, when the court went on to discuss the plaintiff's claims relating to the period when Devine had returned to the SAOafter which point Orange had been prosecutedthe Orange II court did not refer back to its earlier conclusion regarding the plaintiff's inability to establish a causal link. Although the court granted Devine summary judgment, it did so on other grounds.
[2] Kitchen's theory becomes slightly more complicated, for he seeks to hold Daley liable not only for Daley's own actions, but also for the acts of the municipal defendants, with whom he claims Daley entered into a conspiracy. In particular, Kitchen seeks to establish that, as a participant in the conspiracy, Daley is liable not only for the actions he took as mayor but also for deeds of co-conspirators before he joined the conspiracy. Kitchen cites cases for the proposition that "[e]ach conspirator is liable for overt acts of every other conspirator done in furtherance of the conspiracy, whether the acts occurred before or after he joined the conspiracy." United States v. Read, 658 F.2d 1225, 1230 (7th Cir. 1981). In making this argument, however, Kitchen attempts to sidestep the fact that Daley possesses absolute immunity for the period in question, and the Seventh Circuit has expressly held that "prosecutors do not lose their absolute immunity by allegations that they conspired to perform actions that are shielded by immunity." Johnson v. City of Joliet, No. 1:04CV06426, 2006 WL 1793574, at *5 (N.D.Ill. June 27, 2006); see French v. Corrigan, 432 F.2d 1211 (7th Cir.1970).
[3] Gordon cited my decision in Horstman as refusing to dismiss a claim based on prosecutorial immunity because the plaintiff had alleged malice on the defendant's part. Gordon, 2008 WL 4594354, at *16. In point of fact, Horstman discussed malice only in connection with public official immunity. Horstman, 284 F.Supp.2d at 1132-33. I declined to dismiss on prosecutorial immunity grounds because of factual questions as to whether the defendant had been acting as an investigator or a prosecutor. Id. at 1132.
[4] It is also unnecessary for me to entertain the ASAs' contention that I lack jurisdiction over Kitchen's state law claims because of 705 ILCS 505/8, which provides that the Illinois Court of Claims "shall have exclusive jurisdiction to hear and determine ... [a]ll claims against the State for damages in cases sounding in tort, if a like cause of action would lie against a private person or corporation in a civil suit." 705 ILCS 505/8(d).
[5] In his reply brief, Burge says in passing that Kitchen's conspiracy claim is untimely insofar as it is premised on allegations of torture and coercion. See Burge Reply at 7. This contention was raised for the first time in his reply brief and is not developed. As a result, it is forfeited. See, e.g., Wilson v. Giesen, 956 F.2d 738, 741 (7th Cir.1992) (argument was waived "as the plaintiff failed to raise it until his reply brief, leaving the defendants no chance to respond"); United States v. Berkowitz, 927 F.2d 1376, 1384 (7th Cir.1991) (perfunctory and undeveloped arguments are waived).
[6] Only two cases from this District support this position, Cooper v. Butler, No. 92 C 5604, 1995 WL 399009, at *5 (N.D.Ill. June 29, 1995), and Hernandez v. Sheahan, No. 93 C 1668, 1993 WL 257486, at *6 (N.D.Ill. July 8, 1993), and their reasoning has been rejected by most courts. See, e.g., Thompson v. City of Chicago, No. 07 C 1130, 2009 WL 674353, at *5 (N.D.Ill. Mar. 12, 2009).
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349 F. Supp. 88 (1972)
Richard E. JULIS et al., Plaintiffs,
v.
CITY OF CEDAR RAPIDS, IOWA, a municipal corporation, et al., Defendants.
No. 72-C-31-CR.
United States District Court, N. D. Iowa, Cedar Rapids Division.
August 8, 1972.
Robert C. Gross, Iowa City, Iowa, for plaintiffs.
Asher Schroeder, Iowa Highway Commission, Ames, Iowa, C. Kenneth Cranston, U. S. Dept. of Transportation, Kansas City, Mo., Evan L. Hultman, U. S. Atty., Sioux City, Iowa, David F. McGuire, City Atty., Cedar Rapids, Iowa, for defendants.
ORDER
McMANUS, Chief Judge.
This matter is before the court on plaintiffs' complaint filed July 19, 1972, seeking a preliminary and permanent injunction restraining certain street construction work on Mt. Vernon Road in Cedar Rapids, Linn County, Iowa, and a declaratory judgment that such construction is in violation of the National Environmental Policy Act of 1969 (NEPA). Plaintiffs base their claim upon the failure of defendants to prepare an environmental impact statement as prescribed by NEPA.[1] A consolidated *89 hearing pursuant to F.R.Civ.P. 65(a)(2) was held on July 26 and 27, 1972. The court has jurisdiction of the parties and the subject matter. 5 U.S.C. § 702, 28 U.S.C. § 1331.
The work, officially identified by the acronym TOPICS (Traffic Operations Program to Improve Capacity and Safety) #72-T-006, involves a total expenditure of $651,515.55, $313,089.88 being the federal contribution. The construction area encompasses fourteen blocks.[2] The undertaking primarily eliminates a bottleneck by widening a portion of an existing major traffic artery from two lanes to four lanes and includes traffic signal installations and a pedestrian overpass.
As noted above, NEPA requires the filing of an environmental impact statement for "major Federal Actions significantly affecting the quality of the human environment." (Emphasis added.) Therefore the threshold question for the court, involving a twofold determination, is whether the project is a "major federal action" and if "major", whether it significantly affects the quality of the human environment. Absent either element the Act does not apply.
Being of relatively recent origin (effective date January 1, 1970) the decisions interpreting specific provisions of the Act are scanty. From research of legislative history, little light has been shed on the meaning of the words "major federal action." See 1969 U.S.Code Cong. and Adm.News, p. 2751 et seq. Nor have the briefs of counsel been helpful. Generally the cases have been concerned with projects of such magnitude that the question is not raised. See Named Ind. Mem. of San Antonio Conservation Soc. v. Texas Hy. Dept., 446 F.2d 1013 (5 Cir. 1971) (Highway project ultimately crossing parkland involving cost of $12.6 million); Morning-side-Lenox Park Association v. Volpe, 334 F. Supp. 132 (D.C.1971) (Interstate Highway involving cost of $95 million); Environment Defense Fund v. Corps of Eng. of the U. S. Army, 325 F. Supp. 728 (D.C.1971) (Construction of dam inundating 4,680 acrescost of $14.8 million).
However, the inclusion of the term "major" raises the obvious inference that not every federal action was meant to be included. Congress evidently intended to exclude from consideration the myriad minor activities with which the federal government becomes involved.
The spectrum of federal actions affecting the human environment range from the manufacture and sale of an 8 cent stamp by the Postal Service to the construction of the Interstate Highway System by the Federal Highway Administration at an estimated cost of $76 billion and to the waging of the Viet Nam War by the Department of Defense. Webster's Third International Unabridged Dictionary defines "major" as ". . . greater in dignity, rank, importance, or interest: SUPERIOR . . . greater in number, quantity or extent: LARGER . . . notable or conspicuous in effect or scope: CONSIDERABLE, PRINCIPAL . . ." It is the view of the court that by using the term "major" Congress reasonably intended to limit the Act to those federal actions of superior, larger and considerable importance, involving substantial expenditure of money, time and resources.
The United States Department of Transportation Guidelines, which deal with implementing this section of NEPA, state what appear to be reasonable considerations to be used in determining whether a highway section represents a "major" action.
The following should be used to determine whether a proposal to construct or improve a highway section is a major action.
*90 a. Highway sections entirely or generally on new location.
b. Major up-grading of an existing highway section resulting in a functional characteristic change (e. g., a local road becoming an arterial highway). Such changes usually result by adding lanes, interchanges, access control, medians, etc., and require extensive right-of-way acquisition and construction (grading, base, paving, bridges, etc.) which have the potential of significantly affecting the human environment.
Policy and Procedure Memorandum 90-1, App. F, 2 (1971).
In applying these tests and a common sense meaning to the word "major" the court is of the opinion that the Mt. Vernon project is not a "major federal action." The construction does not create a new highway location nor does it represent a functional characteristic change in a section of the highway. The evidence is clear that Mt. Vernon Road is and has been since 1846 a major traffic artery in Cedar Rapids, handling much of the east-west traffic through the City. Traffic entering the city on Mt. Vernon Road from the east proceeds from 42nd Street along four lanes until 27th Street or Memorial Drive (the Eastern limit of the FAMS project) at which point it is funneled into two lanes. The two lanes continue to 10th Street and 5th Avenue, if heading northwesterly, or until 8th Street, if heading southwesterly, where the street again becomes four lanes.
The primary purpose of the project is to eliminate the "bottleneck". The improvement entails no extensive right-of-way acquisition. Only slivers of land up to 4½ feet wide were acquired from 10 abutting property owners. No one is displaced from his home. No parkland is disturbed. Federal expenditures are limited to approximately $300,000. For these reasons, placing this project in its proper federal perspective, the court is of the view that it is not a "major federal action" and therefore is outside the scope of NEPA.
Having made this determination, it would be unnecessary for the court to consider the project's effect on the human environment. However, since the bulk of the testimony in the case concerns this issue, the court will comment briefly. The plaintiffs' contention that the project will significantly affect the quality of the human environment stems from one factthe widening of the road will lead to more traffic. This anticipated increase in traffic will in turn have the effect of changing the type of neighborhood adjacent to the road, increasing the amount of carbon monoxide, and increasing the level of noise.
No one doubts that the traffic along Mt. Vernon Road will increase. The Linn County Transportation Plan, plaintiffs' exhibit #2, predicts an increase from the present average daily count of 13,000 vehicles to a count of more than 20,000 vehicles in 1990. It is fair to say, however, that this increase can be anticipated whether the present project is completed or not. In viewing the confused Cedar Rapids street system, it is apparent that Mt. Vernon Road is the only east-west artery in the southeast section of the city. As the population of this area grows, increased use of the street is necessitated. The elimination of the present "bottleneck" will not be the cause of the increased traffic, but will facilitate the movement of present and future traffic.
The neighborhood near Mt. Vernon Road is mixed residential-commercial. Adjacent to the project are three schools, a hospital and a cemetery. It would be unwarranted to anticipate any substantial effect on the human environment due to the road improvement because the nature of the road is not substantially changed. Mt. Vernon Road has been a major artery for over a century. Representatives of the schools, hospital and cemetery favor the improvement and the evidence indicates that among residents of the area, supporters outnumber opponents. Plaintiffs have failed to prove by a preponderance of the evidence that the project *91 will significantly affect the human environment.
The court concludes that the TOPICS Project does not come within NEPA and the complaint should be dismissed.
NOTES
[1] 42 U.S.C. § 4332(2)(C) provides in part: "The Congress authorizes and directs that, to the fullest extent possible: . . . (2) all agencies of the Federal Government shall . . . (C) include in . . . major Federal action[s] significantly affecting the quality of the human environment, a detailed statement . . . on(i) the environmental impact of the proposed action . . .."
[2] A second project, officially known as FAMS (Federal Aid Metropolitan System), will extend the improvement to the east an additional eight blocks. No contract has been let for this project and its cost including the Federal share does not appear in this record.
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349 F. Supp. 149 (1972)
Stillman E. WILBUR, Jr., Petitioner,
v.
Allan L. ROBBINS, Warden, Maine State Prison, and State of Maine, Respondents.
Civ. No. 13-3.
United States District Court, D. Maine, S. D.
September 29, 1972.
*150 Peter J. Rubin (C.J.A. appointment), Portland, Me., for petitioner.
Ferand LaRochelle, Peter W. Culley, Asst. Attys. Gen., Criminal Division, Augusta, Me., for respondents.
OPINION AND ORDER OF THE COURT
GIGNOUX, District Judge.
After a jury trial in the Franklin County, Maine Superior Court, the petitioner, Stillman E. Wilbur, Jr., was convicted of the crime of murder in violation of 17 M.R.S.A. § 2651. He was sentenced to life imprisonment in the Maine State Prison and is presently in respondents' custody serving that sentence. On appeal, the Supreme Judicial Court of Maine affirmed his conviction. State v. Wilbur, 278 A.2d 139 (Me.1971). He has now filed in this Court a petition for a writ of habeas corpus pursuant to 28 U.S.C. § 2241 et seq. In his present petition, petitioner contends that his conviction was obtained in violation of his federal constitutional rights on a number of grounds, only one of which raises a sufficiently substantial federal constitutional claim to justify further consideration by this Court. This is petitioner's contention that he was denied his Fourteenth Amendment right to due process of law by the trial judge's instructing the jury that if it were satisfied the State had proved beyond a reasonable doubt an intentional and unlawful killing, malice aforethought was "presumed" and the defendant would be guilty of murder, rather than manslaughter, unless he established, by a fair preponderance of the evidence, that he had killed in the heat of passion upon sudden provocation.
The single issue presented is whether in thus placing the burden on petitioner to show, even by a preponderance of the evidence, the absence of malice aforethought, the Court denied him due process of law under the rule of In re Winship, 397 U.S. 358, 90 S. Ct. 1068, 25 L. Ed. 2d 368 (1970). It is conceded that petitioner has exhausted his available state remedies with respect to this question as required by 28 U.S.C. § 2254(b), and the case has been submitted on the state court record. For the reasons which follow, the Court is persuaded *151 that In re Winship requires that petitioner's conviction be set aside.
At the trial, the State's evidence was that on January 30, 1966 one Claude Hebert was beaten to death by the defendant in Hebert's motel room. In the absence of any eyewitness, the State's case was based upon circumstantial evidence and the defendant's pretrial admissions that he had inflicted such severe injuries upon Hebert with his fists and a blunt instrument that Hebert had died within a few minutes. The defendant did not testify or offer any evidence. The theory of the defense was that, as asserted in the defendant's pretrial admissions, the defendant had killed Hebert in the heat of passion suddenly provoked by an indecent homosexual overture on the part of Hebert and that therefore he had not acted with malice aforethought and was guilty of manslaughter, not murder. The trial judge instructed the jury at length on the difference between murder and manslaughter. He then informed the jury of the State's burden to prove beyond a reasonable doubt that the defendant killed Hebert and that the killing was intentional and unlawful. He also informed the jury that malice aforethought was an "essential and indispensable" element of the crime of murder. Finally, quoting in part from the standard instruction on murder which has been given in this state for over one hundred years,[1] he
charged the jury as follows:
"In all cases where the unlawful killing is proved beyond a reasonable doubt, and where there is nothing in the circumstances of the case to explain, qualify or palliate the action, the law presumes it to have been done with malice aforethought. And if the accused, that is the defendant, would reduce the crime below the degree of murder, the burden is upon him to rebut the inference which the law raises from the act of killing, by evidence in defense." It is again, I must say, that he must call witnesses to the stand in defense. But it means that from all the evidence in the case he must be able to satisfy you by a fair preponderance of the evidence that . . . although he killed, and although he killed unlawfully, if such is the case, he killed in the heat of passion upon sudden provocation, as I shall explain hereafter. And if such were your findings, then the respondent, the defendant, would be guilty of manslaughter. So, when the defendant has the burden of going forward with the evidence his burden is not that of proof beyond a reasonable doubt. His burden is only of proof by a fair preponderance of the evidence. By a fair preponderance of the evidence, we mean by the greater weight of the evidence, by evidence which is more satisfying and more convincing than the evidence that seems to bear the other side's point of view of the case. So, if the evidencewell, so if the unlawful killing was proved by the State beyond a reasonable doubt, and if there was nothing in the circumstances to explain anything palliating, then you'd find the defendant guilty of murder, because it would be presumed it would have been done with malice aforethought. However, if the defendant has satisfied you by a fair preponderance of the evidence introduced, that although he caused the death unlawfully of Claude Hebert, yet the act was done in the heat of passion upon sudden provocation, without malice aforethought, then you would find him guilty of manslaughter and not murder.
The trial judge's initial charge and two supplementary charges, given when the jury returned to ask for further instructions, included repeated references to the mandatory nature of the presumption of malice and the burden on the defendant to rebut the presumption in order to "reduce" the homicide from murder to manslaughter.
*152 In Winship, the Supreme Court held that proof of a criminal charge beyond a reasonable doubt is constitutionally required. The Court stated:
Lest there remain any doubt about the constitutional stature of the reasonable-doubt standard, we explicitly hold that the Due Process Clause protects the accused against conviction except upon proof beyond a reasonable doubt of every fact necessary to constitute the crime with which he is charged. Id. at 364, 90 S.Ct. at 1073.
The Maine court recognized the implications of Winship, but declined to apply it to the case on, it appears, two grounds. First, it saw "no occasion to anticipate" that Winship would be applied retrospectively. State v. Wilbur, supra, 278 A.2d at 146. Second, it felt that Winship would not be "so extended" as to reach the presumption of malice arising from an intentional and unlawful killing since "no burden is imposed upon defendant until the State has first convinced the jury beyond a reasonable doubt that defendant is guilty of a voluntary and intentional homicide," and the issue at that point "is no longer guilt or innocence of felonious homicide but rather the degree of the homicide." Idem.
As to the first ground upon which the Maine court declined to apply Winship, the Supreme Court has since eliminated any doubt as to the retrospective application of Winship. In Ivan V. v. City of New York, 407 U.S. 203, 92 S. Ct. 1951, 32 L. Ed. 2d 659 (1972) (decided six days after oral argument in this case), the Court squarely held that Winship was to be given complete retroactive effect. As the law now stands, therefore, and as it applies to petitioner, his conviction for murder can be upheld only if "every fact necessary to constitute the crime with which he is charged" was proved beyond a reasonable doubt.[2]
The second ground upon which the Maine court distinguished Winship was based upon its conclusion that the crime with which petitioner was charged was "felonious homicide," and that malice aforethought was not an essential ingredient of that crime, but merely determined the degree of the offense. The term "felonious homicide," however, has never appeared in the Maine criminal statutes. Under the Maine statutory scheme an unlawful killing may be either murder or manslaughter. The statutory definition of murder is:
Whoever unlawfully kills a human being with malice aforethought, either express or implied, is guilty of murder and shall be punished by imprisonment for life. 17 M.R.S.A. § 2651. (Emphasis supplied.)
The statutory definition of manslaughter, insofar as presently relevant, is:
Whoever unlawfully kills a human being in the heat of passion, on sudden provocation, without express or implied malice aforethought, . . . shall be punished by a fine of not more than $1,000 or imprisonment for not more than 20 years. . . . 17 M.R.S.A. § 2551. (Emphasis supplied.)
*153 The Maine statutes thus define two separate and distinct crimes of murder and manslaughter, each with its own elements and sentence. Malice aforethought is made the distinguishing element of the offense of murder, and it is expressly excluded as an element of the offense of manslaughter. For a person to be guilty of murder, malice aforethought, either express or implied, must be found. State v. Merry, 136 Me. 243, 247 (1939)[3]. It is undeniably an essential element of the crime of murder and as such, under the rule of In re Winship, must be proved by the prosecution beyond a reasonable doubt.
The Maine court also sought to justify the presumption of malice as reflecting "the public interest in the administration of justice" and as recognizing "the practical impossibility in a vast number of cases of meeting a mere suggestion of sudden provocation and heat of passion by negating proof beyond a reasonable doubt." State v. Wilbur, supra, 278 A.2d at 145[4]. But the Supreme Court has made clear the limited circumstances in which a presumption in a criminal case can pass constitutional muster. It has specifically rejected the comparative convenience of producing evidence as sufficient to validate a presumption. Tot v. United States, 319 U.S. 463, 467, 469-470, 63 S. Ct. 1241, 87 L. Ed. 1519 (1943). At a minimum, there must be a "rational connection between the fact proved and the ultimate fact presumed." Id. at 467, 63 S.Ct. at 1245. A criminal presumption is "irrational" or "arbitrary," and therefore unconstitutional, "unless it can at least be said with substantial assurance that the presumed fact is more likely than not to flow from the proved fact on which it is made to depend." Leary v. United States, 395 U.S. 6, 36, 89 S. Ct. 1532, 1548, 23 L. Ed. 2d 57 (1969) (emphasis supplied). In addition, the Supreme Court has strongly implied, even prior to Winship, that a criminal presumption must "also satisfy the criminal `reasonable doubt' standard if proof of the crime charged or an essential element thereof depends upon its use." Id. at 36, n. 64, 89 S.Ct. at 1548; Turner v. United States, 396 U.S. 398, 416, 90 S. Ct. 642, 24 L. Ed. 2d 610 (1970). But whether the proper test is the "more likely than not" standard or that of "reasonable doubt," it is not satisfied by the presumption of malice in the present case. It surely cannot be said with substantial *154 assurance, and it certainly cannot be said beyond a reasonable doubt, that malice accompanies intentional killings in more cases than not. Cf. State v. Cuevas, 488 P.2d 322 (Hawaii 1971).
There remains for consideration the question of whether the trial judge's instruction constituted "harmless error" under the doctrine of Chapman v. California, 386 U.S. 18, 87 S. Ct. 824, 17 L. Ed. 2d 705 (1967). In Chapman, the Supreme Court held that "there may be some constitutional errors which in the setting of a particular case are so unimportant and insignificant that they may, consistent with the Federal Constitution, be deemed harmless, not requiring the automatic reversal of the conviction." Id. at 22, 87 S.Ct. at 827. But Chapman also laid down the rule that "before a federal constitutional error can be held harmless, the court must be able to declare a belief that it was harmless beyond a reasonable doubt." Id. at 24, 87 S.Ct. at 828. This Court has carefully reviewed the entire charge. Although the charge included the usual instruction regarding the burden upon the state to prove the guilt of the defendant beyond a reasonable doubt, the trial judge repeatedly and explicitly instructed the jury on the mandatory nature of the presumption of malice and the burden on the defendant to rebut that presumption by a preponderance of the evidence. On this record, this Court is unable to say that the error was harmless beyond a reasonable doubt.
For the reasons stated, this Court holds that petitioner's conviction was obtained in violation of his Fourteenth Amendment right to due process of law. Accordingly, the judgment of conviction and sentence imposed upon petitioner by the Franklin County Superior Court is vacated, and the matter is remanded to that court to afford the State an opportunity to grant petitioner a new trial. In the event of the failure of the State to grant petitioner such relief within 60 days from the date hereof, the writ will be sustained and petitioner ordered discharged from custody.
The Clerk will enter an appropriate order in accordance with the foregoing, which order will also provide that this Court will retain jurisdiction of the present petition for the entry of such further orders as may be necessary or appropriate.[5]
NOTES
[1] See note 4 infra.
[2] If the nonretroactivity of Winship were the sole basis for the Maine court's decision, this Court would be disposed to require petitioner to return to the Maine courts in order that they might be given an opportunity for reconsideration in the light of the subsequent Supreme Court decision. It is well settled that comity requires such action. Subilosky v. Massachusetts, 412 F.2d 691, 693-694 (1st Cir. 1969); Brown v. New Jersey, 395 F.2d 917 (3rd Cir. 1968); Blair v. California, 340 F.2d 741, 743-744 (9th Cir. 1965); Pennsylvania ex rel. Raymond v. Rundle, 339 F.2d 598 (3rd Cir. 1964). And this Court has done so on several recent occasions. See, e. g., Gordon v. Robbins, Civil No. 13-127 (D.Me., Aug. 16, 1972). But since the Maine court has already held that, even if retroactive, Winship would not be applicable, it would be only repetitious to require petitioner again to present the issue to the state courts. Brown v. Allen, 344 U.S. 443, 73 S. Ct. 397, 97 L. Ed. 469 (1953). See generally Note, Developments in the LawFederal Habeas Corpus, 83 Harv. L.Rev. 1038, 1093-1103 (1970).
[3] "[I]n murder, malice aforethought must exist, and as any other elemental fact, be established, not beyond all possible doubt, but beyond a reasonable doubt . . .".
[4] It is unquestionably true that the "presumption of malice" from an intentional killing dates back to at least the sixteenth century. See Moreland, Law of Homicide 20-23 (1952). As the Maine court observed, it has existed in the law of Maine, apparently without challenge, for well over one hundred years. See, e. g., State v. Knight, 43 Me. 11, 35, 137 (1857); Brine v. State, 264 A.2d 530, 534 (Me. 1970). But see State v. McCarthy, 256 A.2d 660, 663 (Me.1969). Today, however, most jurisdictions regard the "presumption of malice" as really an "inference" rather than a "presumption," so that the jury may, but need not, conclude that malice is present in the absence of evidence to the contrary. See, e. g., Belton v. United States, 127 U.S.App. D.C. 201, 382 F.2d 150, 154 (1967); People v. Morrin, 31 Mich.App. 301, 187 N.W.2d 434 (1971); Commonwealth v. O'Neal, 441 Pa. 17, 271 A.2d 497 (1970); LaFave & Scott, Criminal Law 539 (1972). Furthermore, as the Maine court conceded, State v. Wilbur, supra, 278 A.2d at 146, in most jurisdictions the defendant need do no more than merely raise the issue of lack of malice in order to create a reasonable doubt in the jury's mind. LaFave & Scott, supra at 539-540. Indeed, the Maine court has recognized the distinction between a mandatory presumption and a permissive inference in closely analogous cases. State v. Collamore, 287 A.2d 123, 124-125 (Me.1972); State v. Poulin, 277 A.2d 493, 498 (Me. 1971). The difficulty in the present case is that the presumption of malice upon which the trial judge charged the jury, and which was approved by the Maine court, was a mandatory presumption which required the jury to find malice unless the defendant proved the absence of malice by a preponderance of the evidence.
[5] Petitioner has been ably represented throughout these proceedings by court-appointed counsel, Peter J. Rubin, Esquire, of the firm of Bernstein, Shur, Sawyer and Nelson, Portland, Maine. Mr. Rubin's service has been in the highest tradition of the bar. His conscientious efforts on behalf of petitioner have greatly assisted the Court.
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366 F.Supp. 1208 (1972)
Rita WRIGHT et al.
v.
HOUSTON INDEPENDENT SCHOOL DISTRICT et al.
Civ. A. No. 70-H-1236.
United States District Court, S. D. Texas, Houston Division.
August 3, 1972.
As Amended October 30, 1972.
Leona Weber, pro se, James K. Kelly, Houston, Tex., for plaintiffs.
Herbert Coffman, Houston, Tex., for intervening plaintiff.
Bracewell & Patterson, William Key Wilde and Kelly Frels, Houston, Tex., Crawford Martin, Atty. Gen., James C. McCoy, Asst. Atty. Gen., Austin, Tex., for defendants.
MEMORANDUM AND ORDER:
SEALS, District Judge.
Plaintiffsstudents of the Houston Independent School Districthere seek to enjoin the District and the State Board of Education from teaching the theory of evolution as part of the District's academic curriculum and from adopting textbooks which present that theory without critical analysis and to the exclusion of other theories regarding the origins of man. Plaintiffs base their claim for relief upon the provisions of 42 U.S.C. § 1983. Jurisdiction is invoked pursuant to 28 U.S.C. § 1343. The case is presently before the Court on Defendants' motion to dismiss for failure to state a claim.[1]
*1209 Plaintiffs' principal contention is that the teaching of the theory of evolution in the Houston Independent School District inhibits Plaintiffs in the free exercise of their religion and constitutes an "establishment of religion," in contravention of the first amendment to the United States Constitution.[2] The theory of evolution is, according to Plaintiffs, presented by Defendants without critical analysis and without reference to other theories which purport to explain the origin of the human species. The "other theory" whose case Plaintiffs here champion is the explanation derived from the Bible, the basis of which is that man was created by God. In Plaintiffs' view, the theory of evolution is so inimical to the Creation account that its presentation as part of the academic curriculum should be deemed a direct attack upon Plaintiffs' religious beliefs by an organ of government. The State, by implicitly rejecting a central tenet of Plaintiffs' religion, is holding that religion up to contempt, scorn, and ridicule, and is thus acting to discourage, if not to restrain, Plaintiffs in the free exercise of their religion.
Plaintiffs also argue a constitutional deprivation in terms of the Establishment clause of the first amendment. Plaintiffs maintain that, by restricting the study of human origins to an uncritical examination of the theory of evolution, Defendants are lending official support to a "religion of secularism."[3] Under the guise of scientific theory, Plaintiffs submit that Defendants are engaged in the propagation of a doctrine that is fundamentally religious in nature, and thus, are "establishing" a particular religion in contravention of the first amendment.
Plaintiffs contend that Defendants' teaching of the theory of evolution violates the doctrine of neutrality which the Supreme Court has held must be State policy in matters of religion.[4] The principle of neutrality was most recently affirmed by the Court in Epperson v. Arkansas, 393 U.S. 97, 89 S.Ct. 266, 21 L.Ed.2d 228 (1968). In that case, the Court struck down an Arkansas statute which prohibited any teacher in a state school from teaching the theory of evolution. The Court had
"* * * no doubt that Arkansas has sought to prevent its teachers from discussing the theory of evolution because it is contrary to the belief of some that the Book of Genesis must be the exclusive source of doctrine as to the origin of man." Epperson, supra, at 107, 89 S.Ct. at 272.
*1210 Such a statute, since it
"* * * was confined to an attempt to blot out a particular theory because of its supposed conflict with the Biblical account, literally read,"
could not pass the test of religious neutrality whose standard the Constitution requires all organs of government to uphold. Id., at 109, 89 S.Ct. at 273.
Plaintiffs have thus attempted to draw an analogy between the Arkansas prohibition and the teaching of the theory of evolution in the Houston Independent School District. From that position, Plaintiffs would suggest an appropriately analogous remedy: an injunction against the teaching of the theory of evolution. But Plaintiffs have wholly failed to establish the analogy.
In the first place, Arkansas chose to promote a particular view regarding human origins by means of legislative enactment. It was clear to the Supreme Court
"* * * that fundamentalist sectarian conviction was and is the law's reason for existence." Id., at 108, 89 S.Ct. at 272.
Defendants, however, are not acting pursuant either to State law or school district regulation. Plaintiffs have not alleged that there exists even a school district policy regarding the theory of evolution. All that can be said is that certain textbooks selected by school officials present what Plaintiffs deem a biased view in support of the theory. This Court has been cited to no case in which so nebulous an intrusion upon the principle of religious neutrality has been condemned by the Supreme Court.
Neither have Plaintiffs alleged that Defendants attempt to discourage the free discussion of the subject of human origins. There has been no suggestion that Plaintiffs, or any other students, have been denied the opportunity to challenge their teachers' presentation of the Darwinian theory. Arkansas, on the other hand, prohibited any discussion of the subject of evolution.
In short, whereas Arkansas labelled as a criminal offense the mere reference to an entire body of scientific opinion, neither the State of Texas nor the Houston Independent School District has given legislative expression to any view of the subject of evolution. The State, at most, has a general policy of approving textbooks which present the theory of evolution in a favorable light. No position regarding human origins is even indirectly proscribed by State or District. Furthermore, Plaintiffs have failed even to assert the suppression of opposing ideas. Clearly, Defendants' "policy" (or lack thereof) regarding the theory of evolution is far removed from Arkansas' blanket censorship.
Plaintiffs' case depends in large measure upon their demonstrating a connection between "religion," as employed in the first amendment, and Defendants' approach to the subject of evolution.[5] The Court is convinced that the connection is too tenuous a thread on which to base a first amendment complaint.
In Cornwell v. State Board of Education, 314 F.Supp. 340 (D.Md., 1969), aff'd, 428 F.2d 471 (C.A. 4, 1970), a group of Baltimore children and their parents sought to enjoin the enforcement of a bylaw, adopted by the State Board of Education, requiring "the local school system to provide a comprehensive program of family life and sex education in every elementary and secondary school for all students." Among other contentions, the Plaintiffs asserted that the sex education program constituted an establishment of religion and that its implementation denied to them the free exercise of their religious beliefs: Reminding Plaintiffs that the first amendment does not say that in all *1211 respects there must be a separation of church and state, the District Court applied the test devised by the Supreme Court in School District of Abington Township v. Schempp, 374 U.S. 203, 83 S.Ct. 1560, 10 L.Ed.2d 844 (1963), for determining the validity of a legislative provision under the Establishment Clause of the first amendment:
"[W]hat are the purpose and the primary effect of the enactment? If either is the advancement or inhibition of religion then the enactment exceeds the scope of legislative power as circumscribed by the Constitution." Schempp, supra, at 222, 83 S.Ct. at 1571.
The Cornwell court was convinced that the
"* * * purpose and primary effect of the bylaw here is not to establish any particular religious dogma or precept, and that the bylaw does not directly or substantially involve the state in religious exercises or in the favoring of religion or any particular religion." Cornwell, supra, at 344.
In the case at bar, the offending material is peripheral to the matter of religion. Science and religion necessarily deal with many of the same questions, and they may frequently provide conflicting answers. But, as the Supreme Court wrote twenty years ago, it is not the business of government to suppress real or imagined attacks upon a particular religious doctrine. Burstyn v. Wilson, 343 U.S. 495, 505, 72 S.Ct. 777, 96 L.Ed. 1098 (1952). Teachers of science in the public schools should not be expected to avoid the discussion of every scientific issue on which some religion claims expertise.
Avoidance of any reference to the subject of human origins is, indeed, a decidedly totalitarian approach to the problem presented here. Book-burning is always dangerous, but never more dangerous than when practiced on behalf of young and impressionable minds. How is the teacher to respond to the inquiry of a high school biology student regarding the theory of evolution? Is he to be told that the subject is taboo, that the teacher is not permitted to speak of it, that he mustn't ask such questions?
Plaintiffs, however, would propose another approach that, at first glance, seems reasonable and fair: "equal time" for all theories regarding human origins.[6] If the beliefs of fundamentalism were the sole alternative to the Darwinian theory, such a remedy might at least be feasible. But virtually every religion known to man holds its own peculiar view of human origins. Within the scientific community itself, there is much debate over the details of the theory of evolution. This Court is hardly qualified to select from among the available theories those which merit attention in a public school biology class. Nor have Plaintiffs suggested to the Court what standards might be applied in making such a selection.
Plaintiffs' case must ultimately fail, then, because the proposed solutions are more onerous than the problem they purport to alleviate. For this Court to require the District to keep silent on the subject of evolution is to do that which the Supreme Court has declared the Arkansas legislature is powerless to do. To insist upon the presentation of all theories of human origins is, on the other hand, to prescribe a remedy that is impractical, unworkable and ineffective.
The State Board of Education, as one of the Defendants in this action, has suggested that Plaintiffs may be assisted by taking advantage of the provisions of § 21.104 of the Texas Education Code, V.T.C.A., which permits any child to be exempted, without penalty, from receiving instruction in certain areas of physiology and hygiene, upon the presentation of a signed statement from his parent or guardian that the material *1212 conflicts with the family's religious beliefs.[7] Defendants maintain that § 21.104 is broad enough to encompass Plaintiffs' objections to the teaching of the theory of evolution.
Plaintiffs assert, however, that reliance on § 21.104 is misplaced, because the requirement of a signed statement compels a student "to profess a belief" in a religion, contrary to the Supreme Court's decision in Torcaso v. Watkins, 367 U.S. 488, 81 S.Ct. 1680, 6 L.Ed.2d 982 (1961). Torcaso, however, dealt with a provision of the Maryland Constitution which required declaration of a belief in the existence of God as a qualification for holding public office. The State contended that the Maryland Court of Appeals, in upholding the qualification, had been acting on the authority of Zorach v. Clauson, 343 U.S. 306, 72 S.Ct. 679, 96 L.Ed. 954 (1951). Zorach had upheld the validity of a New York City "released time" program which permitted interested students to attend religious courses operated outside the school building by various religious groups, with all other students remaining in the classroom. The Supreme Court, in Torcaso took care to distinguish Zorach and to express the view that, to whatever extent that case had breached the wall separating church and state, it had not
"* * * open[ed] the way for government, state or federal, to restore the historically and constitutionally discredited policy of probing religious beliefs by test oaths * * *. Torcaso, supra, 367 U.S. at 494, 81 S.Ct. at 1683.
The Supreme Court, presented in Torcaso with an opportunity to impose a narrowly restricted reading upon its decision in Zorach, declined to do so. And Zorach, thus affirmed, provides the answer to Plaintiffs' discomfort with the alternative of § 21.104:
"It takes obtuse reasoning to inject any issue of the `free exercise' of religion into the present case. No one is forced to go to the religious classroom and no religious exercise or instruction is brought to the classrooms of the public schools. A student need not take religious instruction. He is left to his own desires as to the manner or time of his religious devotions, if any." Zorach, supra, 343 U.S. at 311, 72 S.Ct. at 682.
Plaintiffs in the case at bar are attempting to have it both ways. On the one hand, they argue that they are forced to submit to teachings which deeply offend their religious beliefs. And yet they reject the option of leaving the classroom during the presentation of the offending material, contending that their exit under such circumstances is equivalent to the coerced expression of religious belief. For that matter, the mere filing of the present civil action puts Plaintiffs on record as holding certain religious views. But the fundamental difference between the compulsion of a test oath and that of a "released time" program, or that underlying § 21.104 is simply too great to ignore.
The Court thus finds that, under the facts pleaded, each of Plaintiffs' contentions regarding the teaching of the theory of evolution in the Houston public schoolsthat it inhibits Plaintiffs in the free exercise of their religion and that it constitutes an establishment of religionfails to state a claim upon which relief can be granted. Although they have made no effort to develop the *1213 issue, Plaintiffs have also asserted that the teaching of the theory of evolution denies to them the equal protection of the laws, in contravention of the fourteenth amendment. Since Plaintiffs have failed to indicate the manner in which they have been denied the equal protection of the laws, the Court will merely note that Defendants' presentation of the theory of evolution seems to apply equally to all students. Thus, it appears that Plaintiffs' equal protection contention also fails to state a claim upon which relief can be granted.
Accordingly, Defendants' motion to dismiss for failure to state a claim is granted and this cause of action is hereby dismissed.
NOTES
[1] This case has been repeatedly delayed by a number of unfortunate circumstances. The principal Plaintiff, Mrs. Leona Weber, an obviously sincere and concerned parent, initiated the suit on November 17, 1970. A month later, the original counsel withdrew and a second attorney took up the case. Defendants filed their motion to dismiss on January 22, 1971. On March 29, 1971, a pretrial conference was held and the case was set on the Court's October trial assignment. On June 2, 1971, Mrs. Weber's second attorney asked for permission to withdraw. Upon granting this request, the Court directed Plaintiffs to submit the name of a new attorney within ten days. At Plaintiffs' request, the Court extended this date to August 1, 1971. Since Plaintiffs had not by that date been able to employ counsel, the Court granted a further indefinite extension, but set the case for the November trial assignment. The Court was notified on October 20, 1971, that Plaintiffs had retained new counsel, who requested and received permission to continue the case from the November docket. On November 17, 1971, however, this third set of attorneys asked for leave to withdraw, and the Court granted the motion. On December 6, 1971, the case was passed, at the request of Mrs. Weber, to the February 1972 trial assignment. Mrs. Weber agreed in open court that the case, if not prosecuted at that time, would be dismissed. At the February docket call, Plaintiff John R. Brown moved to intervene, which motion was opposed by Mrs. Weber. The Court granted Dr. Brown permission to intervene on March 27, 1972. That attorney sought to withdraw as Mrs. Weber's counsel on April 5, 1972, although he would continue to represent Mrs. Drew. The Court granted leave to withdraw on April 13. On May 9, 1972, Mrs. Weber informed the Court of her inability to employ counsel, and, at her request, the Court granted her leave to proceed pro se. On June 14, 1972, Mrs. Weber, Mrs. Drew, and Dr. Brown each sought to bring in additional plaintiffs. On June 21, 1972, the Court held a hearing on Defendants' motion to dismiss, and subsequently, the case was taken under advisement. Leona Weber, on July 24, 1972, noticed the defendants of the intention to take oral depositions of Dr. George Garver, Dr. George Oser and Dr. Leonard R. Robbins on August 4, 1972, and the Court, on August 3, 1972, granted defendants' motion to quash the depositions.
[2] The first amendment reads, in pertinent part:
"Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof * * *"
The Supreme Court first recognized the applicability of this provision to the States in a concurring opinion by Justice Cardozo in Hamilton v. University of California, 293 U. S. 245, 55 S.Ct. 197, 79 L.Ed. 343 (1934).
[3] In School District of Abington Township v. Schempp, 374 U.S. 203, 83 S.Ct. 1560, 10 L. Ed.2d 844 (1963), the Supreme Court held that the State may not establish a "religion of secularism" in the sense of affirmatively opposing or showing hostility to religion and thus preferring those who believe in no religion over those who do believe.
[4] See School District of Abington Township v. Schempp, 374 U.S. 203, 83 S.Ct. 1560, 10 L.Ed.2d 844 (1963).
[5] In Davis v. Beason, 133 U.S. 333, 10 S.Ct. 299, 33 L.Ed. 637, the Supreme Court said that
"The term `religion' has reference to one's view of his relation to his Creator, and to the obligations they impose of reverence for his being and character, and of obedience to his will." Id., at 342, 10 S.Ct. at 300.
[6] If this approach were applied in other areas, teachers might be obliged to provide equal time for an exposition of the Mormon belief in the inequality of the races, and for indoctrination in the Christian Science view of health and disease.
[7] § 21.104 reads as follows:
"All textbooks on physiology and hygiene purchased in the future for use in the public schools of this State shall include at least one chapter on the effects of alcohol and narcotics. Although physiology and hygiene must be taught in all public schools, any child may be exempted, without penalty, from receiving instruction therein if his parent or guardian presents to the school principal a signed statement that the teaching of disease, its symptoms, development and treatment, and the viewing of pictures or motion pictures on such subjects conflict with the religious teachings of a well-established church or denomination to which the parent or guardian and the child belong."
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826 F.Supp. 1243 (1993)
Joseph A. CEREGHINO; Mario Cereghino; Joseph Cereghino, as Personal Representative of the Estate of Angelo Cereghino, Plaintiffs,
v.
The BOEING COMPANY, a Delaware corporation; International Controls Corporation, an Oregon corporation; Datron Systems, Inc., a New Jersey corporation; Elecspec Corporation, aka Elecspec International, Inc., aka Electronic Specialty Corporation, a Washington corporation, Defendants.
Civ. No. 92-247-JE.
United States District Court, D. Oregon.
May 10, 1993.
*1244 Thomas H. Tongue, Michael J. Francis, John C. DeVoe, Dunn, Carney, Allen, Higgins & Tongue, Portland, OR, for plaintiffs.
Paul T. Fortino, David A. Bledsoe, Perkins Coie, Portland, OR, Mark W. Schneider, Perkins Coie, Seattle, WA, for defendant Boeing Co.
Joan P. Snyder, Loius A. Ferreira, Stoel Rives Boley Jones & Grey, Portland, OR, for defendants Datron Systems, Inc. and International Controls Corp.
ORDER
FRYE, District Judge:
The Honorable John Jelderks, United States Magistrate Judge, filed Findings and Recommendation on March 5, 1993. The plaintiffs filed timely objections to the Findings and Recommendation. When either party objects to any portion of a magistrate's Findings and Recommendation, the district court must make a de novo determination of that portion of the magistrate's report. 28 U.S.C. § 636(b)(1); McDonnell Douglas Corp. v. Commodore Business Machines, Inc., 656 F.2d 1309, 1313 (9th Cir.1981), cert. denied, 455 U.S. 920, 102 S.Ct. 1277, 71 L.Ed.2d 461 (1982). The matter is before this court pursuant to 28 U.S.C. § 636(b)(1)(B) and Fed.R.Civ.P. 72(b).
This court has, therefore, given de novo review of the rulings of Magistrate Judge Jelderks. This court ADOPTS the Findings and Recommendations of Magistrate Judge Jelderks dated March 5, 1993 in its entirety.
IT IS HEREBY ORDERED that the motion for partial summary judgment of defendant The Boeing Company (# 32) is GRANTED; the motion for summary judgment of defendant Datron Systems, Inc. (# 38) is GRANTED; and the motion for summary judgment of defendant International Controls Corporation (# 43) is GRANTED.
FINDINGS AND RECOMMENDATION
JELDERKS, United States Magistrate Judge:
Plaintiffs Joseph A. Cereghino, on his own behalf and as personal representative of the estate of Angelo Cereghino, and Mario Cereghino (collectively Cereghinos) bring this action, based on the release of certain chemicals, against the Boeing Company (Boeing), International Controls Corporation (ICC), Datron Systems, Inc. (Datron), and Elecspec Corporation (Elecspec). Boeing moves for partial summary judgment. ICC and Datron move for summary judgment. These motions should be granted.
*1245 BACKGROUND
The Cereghinos own farmland in Multnomah County, Oregon, located on the north side of Northeast Sandy Boulevard near the intersection of Northeast 185th Avenue and Sandy Boulevard. Industrial activities giving rise to this action began in 1964 on the south side of Sandy Boulevard, opposite the Cereghinos' land. At that time, Electronic Specialty Company (ESC), which is not a party to this action, began to operate a manufacturing facility on the site. ESC later became a subsidiary of ICC. Until 1971, ESC performed heavy manufacturing operations in one part of a plant on the site, and fabricated and assembled electronics equipment in another part.
In 1971, Radiation International, Inc. (RII), another ICC subsidiary which is not a party to this action, assumed ESC's heavy manufacturing operations. RII continued that work until Boeing assumed those operations when it began leasing the industrial site in 1974. Another ICC subsidiary, defendant Datron, took over ESC's electronics work in 1971, and manufactured electronic components on the site until 1983. From 1983 to 1985, defendant Elecspec operated the electronics manufacturing facility. Boeing, which purchased the industrial site in 1979, began operating the electronics part of the facility in 1985. It has operated both the heavy manufacturing and electronics facilities since that time.
In early 1986, Boeing discovered that groundwater on the industrial site contained hazardous industrial solvents. It reported this finding to the United States Environmental Protection Agency, and to the Oregon Department of Environmental Quality. In July 1986, Boeing entered into a Consent Order and Compliance Agreement with those agencies. It has been investigating the contamination and taking remedial action since that time. Boeing has also supplied the Cereghinos with water for drinking, irrigation, and other farm uses for the past several years.
In August 1986, the Cereghinos were notified that the groundwater in their land was contaminated with trichloroethylene (TCE). They subsequently learned that TCE and trichloroethane (TCA) had migrated into their groundwater from neighboring property. TCE and TCA are industrial solvents used as degreasers and in preparation for painting. These compounds are listed as hazardous wastes under the Federal Resource, Conservation and Recovery Act. 40 C.F.R. § 261.31. Boeing stopped using TCE in 1980. The levels of TCA detected in the groundwater on the Cereghinos' property do not exceed federal drinking water standards. TCE levels do exceed those standards.
Plaintiffs' Complaint
Plaintiffs filed this action in January 1992. Their amended complaint, filed in January 1993, asserts that Boeing has owned the industrial site and has operated industrial facilities on that site "from about 1963 to the present, and at all material times thereto...." They also allege that, from 1968 to 1985, ICC, Datron, and Elecspec operated manufacturing facilities on the land owned by Boeing, and that these defendants "used, handled, stored and disposed of hazardous substances, including but not limited to [TCE] and [TCA], in the course of the operation of the manufacturing and/or industrial facilities located on Boeing's land."
Plaintiffs' action against ICC is based on that defendant's alleged control of subsidiaries. As to ICC, plaintiffs' amended complaint includes these assertions not found in the original complaint:
6.
In or about 1968, Electronic Specialty Company, which had previously operated manufacturing facilities at the Boeing property, was merged into defendant ICC and continued operating at the site as either the alter ego or agent of ICC. In about 1971 the same manufacturing operations were transferred to Radiation International, Inc. (RII), a wholly-owned subsidiary of ICC, which operated as the alter ego and/or agent of ICC. Electronic Specialty Company and RII have dissolved and are no longer in existence. During the period they operated at the Boeing property as alter egos or agents of ICC, all earnings, profits and income derived from those operations were under the control of *1246 ICC, which financially drained Electronic Specialty Company and RII, resulting in an inability to perform even routine maintenance.
7.
By express assumption agreement dated July 22, 1971, ICC expressly agreed to assume any and all liabilities of Electronic Specialty Company existing at the date of the agreement or which may accrue or arise by reason of any acts or omissions by Electronic Specialty Company on or before the date of the assumption agreement.
Plaintiffs assert claims of intentional and negligent trespass, intentional and negligent nuisance, and "strict liability/ultrahazardous activity." In their intentional trespass claim, plaintiffs allege that, between 1963 and September 1985, defendants "intentionally caused or contributed to the release of hazardous substances...." Plaintiffs further allege that "Boeing has known of the existence of releases of TCE and TCA at the Boeing property, but concealed that knowledge, and failed to report those releases of which it was aware when requested to do so by the EPA." They add that hazardous substances have migrated into their groundwater, and assert that Boeing's failure to disclose "the existence of known releases of TCE and TCA onto the soils" justifies an award of punitive damages.
In support of their negligent trespass claim, plaintiffs allege that defendants knew or should have known that they were using and handling hazardous substances "in a manner which was substantially certain to result in releases of those hazardous substances into the environment, and onto land owned by third parties."
Plaintiffs' nuisance claim alleges that defendants have unreasonably interfered with plaintiffs' use and enjoyment of their land.
Plaintiffs' ultrahazardous activity claim asserts that defendants' "use, handling, storage and disposal of hazardous substances" constituted an ultrahazardous activity. This claim adds that defendants knew, or in the exercise of reasonable care should have known, that releases resulting from these activities would substantially harm landholders such as themselves.
STANDARDS FOR EVALUATING MOTIONS FOR SUMMARY JUDGMENT
Federal Rule of Civil Procedure 56(c) authorizes summary judgment if no genuine issue exists regarding any material fact and the moving party is entitled to judgment as a matter of law. The moving party must show the absence of an issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 325, 106 S.Ct. 2548, 2553, 91 L.Ed.2d 265 (1986). The moving party may discharge this burden by showing that there is an absence of evidence to support the nonmoving party's case. Id. When the moving party shows the absence of an issue of material fact, the nonmoving party must go beyond the pleadings and show that there is a genuine issue for trial. Id. at 324, 106 S.Ct. at 2553.
The substantive law governing a claim or defense determines whether a fact is material. T.W. Elec. Serv., Inc. v. Pacific Elec. Contractors Ass'n, 809 F.2d 626, 630 (9th Cir.1987). Reasonable doubts concerning the existence of a factual issue should be resolved against the moving party. Id. at 630-31. The evidence of the nonmoving party is to be believed, and all justifiable inferences are to be drawn in the nonmoving party's favor. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255, 106 S.Ct. 2505, 2513, 91 L.Ed.2d 202 (1985). No genuine issue for trial exists, however, where the record as a whole could not lead the trier of fact to find for the nonmoving party. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 1356, 89 L.Ed.2d 538 (1986).
DISCUSSION
A. Boeing's Motions
Boeing has filed a motion seeking summary judgment in its favor on each of plaintiffs' three claims. At a hearing on these motions, Boeing clarified that it seeks summary judgment only as to the solvent TCE, and not TCA, on the nuisance and trespass claims. Boeing seeks summary judgment as *1247 to both TCE and TCA on the ultrahazardous claim, and as to plaintiffs' claim for punitive damages.
1. Trespass and Nuisance Claims
In trespass and nuisance actions, liability is based on interference with the possession of land. Martin v. Reynolds Metals Co., 221 Or. 86, 90, 342 P.2d 790 (1959), cert. denied, 362 U.S. 918, 80 S.Ct. 672, 4 L.Ed.2d 739 (1960). A trespass is an actionable invasion of a possessor's interest in the exclusive possession of land. Id. A nuisance is an actionable invasion of a possessor's interest in the use and enjoyment of that land. Id. A trespass is intentional if "the acts setting in motion the invasion were done with knowledge that a trespass would result and not that the acts were done for the specific purpose of causing a trespass or injury." Ream v. Keen, 112 Or.App. 197, 199, 828 P.2d 1038 (citation omitted), aff'd, 314 Or. 370, 838 P.2d 1073 (1992). If their invasion results in damages, intentional trespassers are liable "without proof of further fault...." Gymnastics USA v. McDougal, 92 Or.App. 453, 457 n. 4, 758 P.2d 881, rev. denied, 307 Or. 77, 763 P.2d 731 (1988). Similarly, nuisance is intentional "if the defendant acts for the purpose of causing the invasion or if he knows that it is resulting or is substantially certain to result from his conduct...." Gronn v. Rogers Constr., Inc., 221 Or. 226, 231, 350 P.2d 1086 (1960).
Boeing contends that it is entitled to summary judgment on plaintiffs' intentional trespass and nuisance claims because plaintiffs have produced no evidence either that Boeing's employees or agents intended the solvents to migrate into Boeing's or plaintiffs' groundwater, or that they knew that disposal of the solvents would result in such contamination. I agree. In his deposition, Joseph Cereghino stated that he had no reason to believe that plaintiffs' land had been intentionally contaminated. Though plaintiffs have cited testimony that solvents were intentionally disposed of, they have not shown any evidence that those disposing of the solvents intended to harm plaintiffs' land, or knew that such harm would occur.
Boeing contends that plaintiffs' claims of negligent trespass and nuisance based on TCE contamination are barred by the statute of ultimate repose, Or.Rev.Stat. § 12.115. That statute provides that:
(1) In no event shall any action for negligent injury to person or property of another be commenced more than 10 years from the date of the act or omission complained of.
(2) Nothing in this section shall be construed to extend any period of limitation otherwise established by law, including but not limited to the limitations established by ORS 12.110.
The undisputed evidence is that more than 10 years elapsed between the use of TCE on Boeing's property and the filing of this action.
I initially questioned the proposition that the statute of ultimate repose could bar plaintiffs' negligent trespass and nuisance claims, because it appeared to be inconsistent with a neighboring landowner's ongoing responsibilities, such as that of providing lateral and subjacent support to contiguous property. I continue to find the application of the statute of ultimate repose to the facts of this action somewhat inconsistent with the general obligations of a neighboring landowner and with the growing awareness of the dangers and long-range effects associated with the disposal of hazardous substances as reflected in state and federal environmental statutes. However, after devoting considerable attention and research to this issue, I conclude that the statute of ultimate repose does bar plaintiffs' negligent trespass and nuisance claims against Boeing as to TCE contamination.
This conclusion is based primarily upon the Oregon Supreme Court's explication of the effect of the statute of ultimate repose in Josephs v. Burns, 260 Or. 493, 491 P.2d 203 (1971). There, the Court affirmed dismissal of a negligence action brought against the architects and engineers who had supervised construction of a building whose roof had collapsed. Plaintiffs brought their action more than 10 years after defendants had acted, but within two years of the collapse. The Court rejected the plaintiffs' contention *1248 that the statute of ultimate repose did not begin to run until the roof collapsed. Id. at 496, 491 P.2d 203. The Court concluded that the words "act or omission complained of" did not relate to the collapse of the roof, noting that "it seems obvious ... that such language refers to the acts of commission or to omissions which are the basis for plaintiffs' claims of defendants' negligence and that the language does not refer to the occurrence of the resulting damage." Id. The Court rejected the plaintiffs' contention that the cause of action could not accrue until they had suffered some damage, concluding that, in considering the legislative history of the statute of ultimate repose, "it becomes clear that the inability of the damaged party to bring an action was not intended to prevent the running of the statutory period." Id. The Court added that the ten-year limitation was intended to apply regardless of "when the act or omission was discovered." Id. at 500, 491 P.2d 203.
Significantly, the Josephs Court likewise rejected the plaintiff's contention that the defendants had an ongoing duty to warn of or to take remedial action to repair the defects up to the time of the collapse. The court concluded that
If the statute was intended to be one of ultimate repose, regardless of circumstances, it would follow that the legislature did not intend the statute to be circumvented by allegations that subsequent to the fundamental wrong, a continuing duty existed to rectify the results of such wrong.
Id. at 501-02, 491 P.2d 203.
Under Josephs, it is clear that the "act or omission" referred to in the statute of ultimate repose is an act or omission of a person, not the act of objects such as hazardous substances. This case also clarifies that the statute begins to run at the time of an initial negligent act or omission, and does not refer to any ongoing duty to correct the initial wrong. In the present action, plaintiffs' contentions that the "acts" complained of are the invasion of contaminants, and that the omission was the failure to prevent the migration after disposal, therefore fail. The Oregon Supreme Court left no doubt in Josephs that potential plaintiffs such as the Cereghinos can be barred from recovery even before they have been harmed.
Plaintiffs contend that Boeing concealed the contamination, tolling the running of the statute of ultimate repose. Plaintiffs assert that, despite its knowledge of improper disposal practices, Boeing "never reported releases of TCE and/or TCA to regulatory authorities as it was required to by law." They add that Boeing failed to mention releases of TCE and TCA when it compiled a list of "all of the releases and spills of substances on their property which might be hazardous" in 1985. Plaintiffs note that some of Boeing's "agents and employees were formerly also agents and employees of defendant ICC and its subsidiaries, Electronic Specialty Company, RII, and Portland Heavy Industries Division, before 1974." Plaintiffs add that some of these persons knew that hazardous wastes had been disposed on the site, and contend that that knowledge should be imputed to Boeing. Plaintiffs also note that some Boeing agents and employees were aware that spills and discharges had occurred in the course of Boeing's operations between 1974 and 1985.
Plaintiffs' contentions of concealment do not alter the conclusion that Boeing's motion for summary judgment on the negligent trespass and nuisance claims as to TCE should be granted, because concealment would not toll the statute of ultimate repose. Tolling is an equitable concept, and equitable estoppel "is not available to avoid [the statute of ultimate repose...."] Beals v. Breeden Bros., Inc., 113 Or.App. 566, 572, 833 P.2d 348, rev. denied, 314 Or. 727, 843 P.2d 454 (1992). As the Beals court observed, a contrary holding "would thwart the legislature's intent to provide an absolute cutoff date for the bringing of such actions." Id.
Even if the statute of ultimate repose could be equitably tolled, I would conclude that plaintiffs have not shown the existence of triable issues of fact as to concealment which would defeat the running of the statute. Plaintiffs' contention that Boeing failed to disclose contamination centers on a failure to include TCE and TCA releases in a 1985 *1249 report to the Environmental Protection Agency. Even if Boeing had concealed contamination at that point, any tolling of the statute of ultimate repose would continue only for the time that such concealment deprived plaintiffs of knowledge they otherwise would have had. Because this action was not filed until 1992, and Boeing has shown that it used no TCE after 1980, tolling during a less than two-year period would not alter the conclusion that, as to TCE, this action was filed after the statute of ultimate repose had run.
In addition, plaintiffs have shown no evidence that those who they assert failed to inform the "regulatory authorities" of chemical releases knew that the substances could invade Boeing's groundwater and migrate onto the groundwater on plaintiffs' property. In addition, they have not shown that those who knew of releases had an obligation to report those to Boeing managers, either in their capacities as original Boeing employees, or, if they were hired from other entities, after they began working for Boeing. An agent's knowledge is imputed to a principal only if the agent has a duty to reveal the information to the principal. See Restatement (2d) Agency, § 275, Comment c. Plaintiffs here have not shown evidence from which a trier of fact could conclude that those who knew of the discharges had an obligation to inform Boeing, to investigate, or to report those discharges to governmental agencies.
2. Ultrahazardous Activity Claim
Strict liability may be imposed on those who engage in "ultrahazardous" activities. An activity is considered ultrahazardous if it is "extraordinary, exceptional, or unusual, considering the locality in which it is carried on; when there is a risk of grave harm from such abnormality; and when the risk cannot be eliminated by the exercise of reasonable care...." McLane v. Northwest Natural Gas, 255 Or. 324, 328, 467 P.2d 635 (1970). No Oregon court has decided whether the use of solvents such as TCE and TCA constitutes an ultrahazardous activity.
Boeing has submitted the uncontroverted affidavit of an expert who states that TCE and TCA are commonly-used degreasing agents, and opines that "it is entirely feasible to use both TCA and TCE in ways that would prevent any contamination of soil or groundwater." Boeing has also submitted uncontroverted evidence that use of degreasing solvents is common in the area around its property, and that plaintiffs themselves use solvents in maintenance of their farming equipment.
Boeing has shown the absence of material issues of fact as to whether use of the solvents in question here constituted an ultrahazardous activity. Use of solvents cannot be classified as ultrahazardous in this case and the motion for summary judgment on this claim should be granted.
3. Punitive Damages Claim
In Oregon, punitive damages may not be awarded unless a defendant has engaged in wanton misconduct. See McGregor v. Barton Sand & Gravel, Inc., 62 Or.App. 24, 27, 660 P.2d 175 (1983). Punitive damages may not be assessed for negligent or reckless indifference to the rights of others, but must be based on a deliberate disregard for those rights. Id. at 27-29, 660 P.2d 175. As noted above in the discussion of plaintiffs' intentional trespass and nuisance claims, plaintiffs have shown no evidence that those who disposed of the solvents intended that the solvents migrate into plaintiffs' groundwater, or that they knew that their disposal of solvents would result in such contamination. In the absence of this evidence, plaintiffs cannot prevail on a claim for punitive damages.
B. Datron's Motions
Datron moves for summary judgment on all of plaintiffs' claims, and on plaintiffs' claim for punitive damages.
Datron operated an assembly plant on the Boeing site between 1971 and September 15, 1983. As noted above, plaintiffs have not shown the existence of evidence supporting their intentional nuisance and trespass claims. Given the applicable statute of ultimate repose, plaintiffs can prevail on their negligent nuisance and trespass claims against Datron only if they can show that *1250 Datron negligently disposed of TCE or TCA after January 21, 1982 (10 years before this action was filed), and before it vacated the site in 1983. Plaintiffs have cited no evidence linking Datron to any disposals occurring during that time, but instead cite only evidence of disposals related to Datron occurring earlier. Datron is therefore entitled to summary judgment on the nuisance and trespass claims.
The above discussion of plaintiffs' ultrahazardous activity claim and claims for punitive damages against Boeing applies equally to these claims against Datron.
C. International Controls Corporation's Motions
Plaintiffs' claims against ICC are based on that corporation's ownership and alleged control of Electronic Specialty Company (ESC) and Radiation International, Inc. (RII). Plaintiff alleges that ICC operated these subsidiaries as "alter egos or agents," and that it "financially drained [ESC] and RII, resulting in an inability to perform even routine maintenance."
ICC has raised a number of issues in support of its motion for summary judgment. These include plaintiffs' failure to properly serve ICC within the period of the statute of limitations, this court's lack of personal jurisdiction over ICC because that corporation has never "done business in Oregon," and ICC's status as a mere shareholder in ESC and RII. ICC's arguments raise a number of complex questions, including whether plaintiffs' amended complaint relates back to the original complaint, whether ICC's actual notice of the original complaint corrects any defect in service, and what degree of control is required to fix a parent with liability for the actions of its subsidiary.
My conclusions concerning the potential liability of Boeing and Datron make it unnecessary to reach these interesting issues. The evidence submitted establishes that ESC ceased its operations in 1971, and that Boeing took over RII's operations in 1974. Even if this court has jurisdiction over ICC, and ICC exercised the control over ESC and RII needed to give rise to potential liability, plaintiffs' intentional nuisance and trespass claims would fail for the reasons discussed above. Plaintiffs' negligence claims would fail as barred by the statute of ultimate repose. Their ultrahazardous activity and punitive damages claims would also fail as discussed above. ICC's motion for summary judgment should be granted.
CONCLUSION
Defendant Boeing's motion for partial summary judgment (# 32) should be GRANTED. Datron's motion for summary judgment (# 38) should be GRANTED. International Controls Corporation's motion for summary judgment (# 43) should be GRANTED.
DATED this 5th day of March, 1993.
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01-03-2023
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10-30-2013
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