author: WHITMAN KNAPP, District Judge.

text:
    Thomas SULLIVAN, Plaintiff, v. AMERICAN AIRLINES, INC., Sabena Belgian World Airlines and George Soliman, Defendants.
    No. 84 Civ. 6822 (WK).
    United States District Court, S.D. New York.
    July 11, 1985.

      Gordon & Librie by Robert M. Gordon, New York City, for plaintiff.
    Gallagher & Sullivan by Alan D. Kaplan, Mineóla, N.Y., for defendant American.
    Goldman & Grossman by Jay S. Gross-man, New York City, for defendants Sabena & Solimán.
   MEMORANDUM & ORDER

WHITMAN KNAPP, District Judge.

Plaintiff Thomas Sullivan sues American Airlines (“American”), Sabena Airlines (“Sabena”), and George Solimán (“Solimán”) for defamation and tortious interference with his employment contract. The action is before us by virtue of its removal from state court pursuant to 28 U.S.C. § 1441(d) by Sabena, which is majority owned by the Kingdom of Belgium. All defendants now move to amend their answers to assert the affirmative defense of collateral estoppel, and Sabena and Solimán move to assert the affirmative defense of truth. All defendants move for summary judgment on the ground, among others, that plaintiff is precluded from maintaining this suit by virtue of an arbitration decision in a prior proceeding.

Plaintiff is a former building cleaner employed by American, which was under contract with Sabena to perform cleaning work in Sabena’s first class lounge at Kennedy Airport. On June 27, 1983 Solimán, who was the operations manager for Sabena, went with another Sabena employee to the lounge where they observed plaintiff in the performance of his duties. They noticed several bottles of Belgian beer wrapped in a plastic bag lying atop a cleaning barrel. These bottles were unopened and cold to the touch. Solimán looked inside a small refrigerator in the lounge which Sabena stocked with beer and soft drinks for its first class passengers. This cooler normally carried 12 bottles of beer, but Solimán found only two or three. He asked plaintiff about the beer atop the cleaning barrel. Solimán remembers that plaintiff responded, “I took it for the boys.” Plaintiff recalls stating that he “was bringing it to my boss.”

Solimán informed plaintiff that he wished to speak with plaintiff's supervisor. The supervisor reported to Soliman’s office about 15 minutes later and Solimán told him what had transpired. Solimán then took the supervisor to the first class lounge and attempted to show him the beer in the barrel. It was no longer there. However, when Solimán checked the lounge refrigerator he discovered that it had its full complement of beer.

Upon further investigation of these events, American discharged plaintiff for violation of company rules. Through his Union, Local 501, Transport Workers Union of America (AFL-CIO) (the “Union”), plaintiff pursued informal grievance procedures provided for by the Collective Bargaining Agreement (the “Agreement”) signed by the Union and American. When these efforts to reinstate plaintiff failed, the grievance was submitted for arbitration to the New York Area Board of Adjustment pursuant to the terms of the Agreement. In so doing, plaintiff gave his written authorization for the Union

as my representative to act for me in the disposition of this grievance.

Paragraph V(k) of Article 32 of the Agreement provides that the decision of a majority of the Board “shall be final and binding upon the parties to such dispute.”

An arbitration followed on two separate days before a panel of three arbitrators: one for the Union, one for the employer, and a “neutral referee” appointed under the provisions of the Agreement. The question before the arbitrators was whether plaintiff had been discharged for just cause, American contending that plaintiff was guilty of attempted theft of beer and plaintiff maintaining his innocence. Plaintiff was given his choice of counsel and he selected the attorney who continues to represent him here. Also present were representatives for the Union and American. Plaintiff testified in his own behalf along with five other witnesses. Each side had the opportunity to conduct direct and cross-examination and each side submitted post-hearing briefs. The transcript of the hearing spans 381 pages.

Before the arbitrators had rendered a decision, the present lawsuit was filed in state court. About a month after defendants had interposed answers in the state action, the arbitrators handed down a decision in favor of American. By a six-page opinion written by the “neutral referee,” in which American’s representative concurred and from which the Union’s representative dissented, the Board first concluded that plaintiff had been accorded the rights of hearing, representation and consideration granted by the Agreement. The “neutral referee” then wrote

On continued study of the evidence, the unavoidable conclusion is that Sullivan had intended to pilfer the beer. Whatever uncertainty could be derived from the use of the words “boys” and “boss”, must be resolved by the uncontravened testimony of Ferrara [plaintiff’s supervisor] that Sullivan had told him he had taken the beer for the boys. The beer was not refuse or found items which had to be taken to a supervisor. Their condition was such as to indicate that they were taken from the refrigerator. They were cold and the glass was covered with condensation. Furthermore, Sullivan’s many explanations varied so as to give reason to question his credibility. Finally, Sullivan’s own actions indicated that he had in fact intended to take the beer to the boys instead of the supervisor. His apology to Solimán and his later discussion with Mazzone [plaintiff’s other supervisor] show that he was aware of the misconduct that he had committed.

By affirmation, counsel for plaintiff states that about two months after the arbitrators had rendered their award, he wrote to the president of plaintiffs Union and requested that he move to set aside the decision of the arbitrators. He states that, not having received a response to this request he called the offices of the Union and was told that it was the Union's policy not to move to vacate awards. By reply affidavit, counsel for American states that a search by the Union of the president’s files located no correspondence from counsel for plaintiff. No appeal from the arbitrators’ award was taken.

DISCUSSION

Amendment to Pleadings

Defendants’ motions to amend their answers to assert the affirmative defense of collateral estoppel are granted. When defendants filed their answers, the arbitrators had not yet rendered their decision. It was therefore impossible for defendants to have asserted that the award precluded further litigation. Amendments to pleadings are to be granted liberally under F.R.C.P. 15(a), see Middle Atlantic Utilities Co. v. SMW Development Corp. (2d Cir.1968) 392 F.2d 380, 384, and plaintiff, who was certainly aware of the imminence of an arbitrators award, cannot assert he was unduly surprised by the proposed amendment. We see less excuse for Sabena’s failure to plead the affirmative defense of truth. However, its assertion of the hornbook law defense to charges of defamation should likewise come as no surprise to plaintiff. We therefore grant the motion.

Collateral Estoppel

Collateral estoppel is a judicially created doctrine intended to increase judicial efficiency, reduce inconsistent rulings, and promote the finality of judgments, Schwartz v. Public Administrator (1969) 24 N.Y.2d 65, 74; 298 N.Y.S.2d 955, 962, 246 N.E.2d 725, 732, which may, in appropriate circumstances, apply to an arbitration award. See American Renaissance Lines, Inc. v. Saxis S.S. Co. (2d Cir.1974) 502 F.2d 674, 678. There are two requirements for application of collateral estoppel in New York. First, there must have been an “identity of issue which has necessarily been decided in the prior action and is decisive of the present action, and second, there must have been a full and fair opportunity to litigate.” Schwartz, 24 N.Y.2d at 71, 298 N.Y.S.2d 955, 246 N.E.2d 725; Murphy v. Gallagher (2d Cir.1985) 761 F.2d 878, 881.

Plaintiff’s action for defamation flows from Soliman’s comments to plaintiff and from American’s termination investigation and letter to plaintiff which accused him of “[djishonesty ... in relations with the company, such as theft and pilferage of company property____” Complaint, 1110. The merits of this claim turn on whether the statements accusing plaintiff of attempted pilferage were true. That is the precise question which was presented to and decided by the arbitrators, two of whom concluded that

On continued study of the evidence, the unavoidable conclusion is that Sullivan had intended to pilfer the beer.

In light of the arbitrators’ resolution of this question, we conclude that the identity of issues requirement has been met.

Consideration of whether or not a party has had a full and fair opportunity to litigate involves exploration of “such considerations as the size of the claim, the forum of the prior litigation, the use of initiative, the extent of the litigation, the competence and experience of counsel, the availability of new evidence, indications of a compromise verdict, differences in the applicable law and foreseeability of future litigation.” Schwartz, 24 N.Y.2d at 72, 298 N.Y.S.2d 955, 246 N.E.2d 725. The burden of showing that there was not a full and fair opportunity to litigate rests on the party opposing preclusion, here, the plaintiff. Id. at 73, 298 N.Y.S.2d 955, 246 N.E.2d 725.

The fact that technically the party to the prior proceeding was plaintiff’s Union does not preclude application of the doctrine to him. A judgment rendered on behalf of a union binds the members on whose behalf it sued when they later sue in their individual capacities, Aeree v. Air Line Pilots Association (5th Cir.) 390 F.2d 199, cert. denied (1968) 393 U.S. 852, 89 S.Ct. 88, 21 L.Ed.2d 122, and plaintiff, who authorized the Union to pursue the grievance, is no less bound here.

We do not otherwise see that plaintiff was denied a full and fair opportunity to litigate the issues. The Union allowed plaintiff his choice of attorney, and he chose counsel who here represents him. The arbitration consumed two days and over 350 pages of hearing transcript. It involved the testimony of plaintiff and five other witnesses, all of whom were examined and cross-examined. The arbitrators had the benefit of post-hearing briefs. Plaintiff has not alleged the existence of new evidence which was not considered by the arbitrators and he had every incentive to litigate the arbitration, where his job was at stake, as vigorously as he might pursue this defamation action, where he seeks to vindicate his name.

Plaintiff alleges that he requested his Union to appeal the decision of the arbitrators. American disputes that any such request was made. Drawing the inferences in favor of the party opposing the motion for summary judgment, see United States v. Diebold, Inc. (1962) 369 U.S. 654, 655, 82 S.Ct. 993, 994, 8 L.Ed.2d 176, we assume that a request was made which the Union denied. Under these assumptions, plaintiff asserts that his inability to appeal the arbitration award denied him a full and fair opportunity to litigate.

There is no hard and fast rule requiring the right to appeal prior to application of the preclusion doctrines. See Winters v. Lavine (2d Cir.1978) 574 F.2d 46, 62 (“the extent of preclusion produced by a prior judicial determination of material and essential issues is not affected by the fact that the losing party could not appeal that determination to a higher court”); Johnson v. Wharton (1894) 152 U.S. 252, 256-57, 260-61, 14 S.Ct. 608, 609-10, 610-11, 38 L.Ed. 429; Napper v. Anderson, Henley, Shields, Bradford & Pritchard (5th Cir. 1974) 500 F.2d 634, 636-37, cert. denied (1975) 423 U.S. 837, 96 S.Ct. 65, 46 L.Ed.2d 56. Furthermore, the arbitration decision, was by the terms of the collective bargaining agreement “final and binding.” Bearing in mind that “final adjustment by a method agreed upon by the parties is ... the desirable method for settlement of grievance disputes,” Hines v. Anchor Motor Freight, Inc. (1976) 424 U.S. 554, 562, 96 S.Ct. 1048, 1055, 47 L.Ed.2d 231, we must accord this provision some deference.

Counsel for plaintiff states in his affirmation that he asked plaintiff’s Union to vacate the arbitrator’s decision, and we presume he envisioned action pursuant to New York C.P.L.R. § 7511. Any review pursuant to these provisions, however, would not have gone to the merits of the award, and could not have resulted in vacatur for the arbitrators’ mistake of law or fact. Raisler Corp. v. New York City Housing Authority (1973) 32 N.Y.2d 274, 285, 344 N.Y.S.2d 917, 298 N.E.2d 91. In this situation, we fail to see how plaintiff’s ability to take an Article 75 appeal would have been anything but a fruitless exercise as the reviewing court could not have addressed what plaintiff contends was the major defect in the decision: that the award was incorrect in fact.

Given these considerations, we do not find plaintiff’s inability to appeal fatal to application of collateral estoppel if he otherwise had a full and fair opportunity at the arbitration to present his ease and contest that of American. We believe he did and thus find the full and fair opportunity requirement of the preclusion doctrine to have been met.

Plaintiff’s second cause of action is for tortious interference with his employment contract. This tort is made out where a third party has unjustifiably interfered with a contractual relationship, Moreno v. Marbil Products, Inc. (2d Cir.1961) 296 F.2d 543, 544, and where such interference was motivated solely by malice and not merely incidental to some other lawful purpose. Sadowy v. Sony Corp. of America (S.D.N.Y.1980) 496 F.Supp. 1071, 1080.

The claim against American must fall as American was a party to the contract of employment. As to Sabena and Solimán, it cannot reasonably be disputed that their actions leading to plaintiff’s discharge were undertaken pursuant to the lawful purpose of pointing out what they believed were derelictions of duty. These circumstances vitiate the exclusive malice requirement of the tort. Sadowy, supra; see Leibowitz v. Szoverffy (3d Dep’t 1981) 80 A.D.2d 692, 436 N.Y.S.2d 451 (exercise of defendant’s right to express his honest although critical opinion of plaintiffs performance of duties precludes finding that he was motivated solely by malice and justifies commission of what might otherwise be actionable wrong). The fact that the arbitrators found Soliman’s accusations to have been true further undercuts plaintiffs complaint against him.

In light of the above, the motions for summary judgment are granted. The complaint’s second cause of action for tortious interference with contract is dismissed.

SO ORDERED.

      . The relevant grounds there set forth for vacating an arbitration award are: prejudice by corruption, fraud or misconduct in procuring the award, § 7511(b)(l)(i), partiality of an arbitrator, § 7511(b)(l)(ii), that an arbitrator exceeded his power or so imperfectly executed it that a final and definite award was not made, § 7511 (b)( 1)(iii), or that the arbitration failed to follow the procedures set forth in the C.P.L.R. § 7511(b)(l)(iv).


source: Caselaw Access Project

author: MORAN, District Judge.

license: Public Domain

text:
    John A. BOHN, Sr., Plaintiff, v. Margaret HECKLER, Secretary of Health and Human Services, Defendant.
    No. 82 C 7254.
    United States District Court, N.D. Illinois, E.D.
    July 11, 1985.

      Lawrence Jay Weiner, Weiner, Neuman & Spak, Chicago, 111., for plaintiff.
    Linda A. Wawzenski, Asst. U.S. Atty., Donna Morros Weinstein, Joan L. Lowes, K.N. Traisman, Dept, of Health & Human Services, Chicago, 111., for defendant.
   MEMORANDUM AND ORDER

MORAN, District Judge.

Plaintiff applied for disability benefits on October 31, 1980. His application was rejected at the administrative level. On September 26, 1984 this court reversed the decision of the Secretary of Health and Human Services and remanded the case to the Secretary because of two substantial errors made by the Administrative Law Judge (AU) in evaluating plaintiffs case. Plaintiff has now petitioned for $2,113.25 in attorneys’ fees under the Equal Access to Justice Act (EAJA), 28 U.S.C. § 2412.

The EAJA provides that “a court shall award to a prevailing party other than the United States” reasonable attorneys’ fees and expenses, in addition to costs, “incurred by that party in any civil action ... brought by or against the United States in any court having jurisdiction of that action, unless the court finds that the position of the United States was substantially justified or that special circumstances made an award unjust.” 28 U.S.C. § 2412(d)(1)(A). Thus, in order to recover attorneys’ fees and costs, plaintiff must be the prevailing party and the government must fail to meet its burden of showing that its position was substantially justified.

It is well established that the EAJA applies to suits in federal court against the Secretary of Health and Human Services by plaintiffs who have unsuccessfully pressed disability claims at the administrative level. Berman v. Schweiker, 713 F.2d 1290, 1296 (7th Cir.1983). The EAJA, however, does not apply to administrative proceedings within the Social Security Administration, either before or after action in federal court. Rather, attorneys’ fees for work done at the administrative level are limited to 25% of the past due benefits collected and are paid out of funds that would otherwise go to the client. 42 U.S.C. § 406(b)(1). -

The most difficult question in this case is whether plaintiff was a prevailing party. Some courts have awarded attorneys’ fees to plaintiffs who secure a remand. See e.g., Sizemore v. Heckler, 608 F.Supp. 911 (N.D.Ill.1985); Burt v. Heckler, 593 F.Supp. 1125 (D.N.J.1984); Coffman v. Heckler, 580 F.Supp. 67 (N.D.Calif., 1984); Knox v. Schweiker, 567 F.Supp. 959 (D.Del.1983); Ceglia v. Schweiker, 566 F.Supp. 118 (E.D.N.Y.1983); Gross v. Schweiker, 563 F.Supp. 260 (N.D.Ind.1983). Other courts, however, including three circuit courts, have held that a plaintiff is not a prevailing party simply by obtaining a remand. See e.g. Cook v. Heckler, 751 F.2d 240 (8th Cir.1984); Brown v. Secretary of Health and Human Services, 747 F.2d 878 (3d Cir.1984); McGill v. Secretary of Health and Human Services, 712 F.2d 28 (2d Cir.1983), cert. denied, — U.S. ---, 104 S.Ct. 1420, 79 L.Ed.2d 745 (1984). See also Steffens v. Heckler, 602 F.Supp. 754 (N.D.Ill. 1985). This court adopts the former approach for a remand which is based upon a decision rejecting the Secretary’s rebuttal to a prima facie entitlement to benefits.

Congress intended that the definition of “prevailing party” under the EAJA be consistent with the definition of the term under existing fee-shifting statutes. H.R.Rep. No. 1418, 96th Cong., 2d Sess., reprinted in 1980 U.S.Code Cong & Ad. News 4953. A party need not litigate a case to final judgment in order to be a prevailing party:

[T]he phrase “prevailing party” should not be limited to a victor only after entry of a final judgment following a full trial on the merits. A party may be deemed prevailing if he obtains a favorable settlement of his case, Foster v. Boorstin, 561 F.2d 340 (D.C.Cir.1977); if the plaintiff has sought a voluntary dismissal of a groundless complaint, Corcoran v. Columbia Broadcasting System, Inc., 121 F.2d 575 (9th Cir.1941); or even if he does not ultimately prevail on all issues, Bradley v. School Board of the City of Richmond, 416 U.S. 696 [94 S.Ct. 2006, 40 L.Ed.2d 476] (1974).
In cases that are litigated to conclusion a party may be deemed prevailing for purposes of a fee award in the civil action prior to the losing party having exhausted its final appeal. A fee award may thus be appropriate where the party has prevailed on the interim order which was central to the case. Parker v. Matthews, 411 F.Supp. 1059, 1064 (D.D.C.1976), or where an interlocutory appeal is “sufficiently significant and discrete to be treated as a separate unit”, Van Hoomissen v. Xerox Corp., 503 F.2d 1131, 1133 (9th Cir.1974).

H.R.Rep. No. 1418 at 11, reprinted in 1980, U.S.Code Cong. & Ad.News at 4990. In short, plaintiffs are prevailing parties for attorney’ fees purposes “ ‘if they succeed on any significant issue in litigation which achieves some of the benefit the parties sought in bringing suit.’ ” Hensley v. Eckerhart, 461 U.S. 424, 433, 103 S.Ct. 1933, 1939, 76 L.Ed.2d 40 (1983), quoting from Nadeau v. Helgemoe, 581 F.2d 275, 278-79 (1st Cir.1978). When the administrative procedures for determining disability claims are considered and the limited purpose of the proceedings before the district court recognized, it is evident that in some circumstances a remand represents both success on a significant issue and achievement of much of the benefit sought by plaintiff in bringing the suit.

To make out a prima facie case of disability, claimants must show that an impairment prevents the performance of past work. Whitney v. Schweiker, 695 F.2d 784, 786 (7th Cir.1982). Once a claimant makes out a prima facie case of disability, the Secretary has the burden of going forward with proof that there is available some other kind of “substantial gainful employment” the claimant can perform. Id.

Disability claims are evaluated at the administrative level according to a five-step process. 20 C.F.R. § 404.1520. A finding of disabled or not disabled at any point in the evaluation process is conclusive and terminates the analysis. 20 C.F.R. § 404.-1520(a). First, a claimant who is currently working is not disabled. 20 C.F.R. § 404.-1520(b). Second, a claimant whose impairments are not “severe” is not disabled. 20 C.F.R. § 404.1520(c). Third, a claimant whose impairments meet or equal an impairment listed in appendix 1 of the regulations (the listed impairments) is presumptively disabled. 20 C.F.R. § 404.1520(d). Fourth, a claimant whose impairments are severe but do not meet appendix 1 levels is not disabled if the claimant’s “residual functional capacity” permits performance of past work. 20 C.F.R. § 404.1520(e). Fifth, a claimant with severe but not listed impairments who is unable to do past work is disabled if the claimant cannot do other work in light of the claimant’s age, education and past work experience. 20 C.F.R. § 404.1520(f).

In administrative proceedings Bohn established a prima facie case of disability. He convinced the ALJ that he was incapable of performing his past work because' of back problems. Thus the burden of going forward shifted to the Secretary. At stage 5 of the disability determination process the Secretary established to the ALJ’s satisfaction that plaintiff was capable of sedentary work and was thus not disabled. When the ALJ’s decision denying benefits was adopted by the Appeals Council it became the final decision of the Secretary.

The district court has four main options in a Social Security disability appeal. It can uphold the ALJ’s decision, modify the decision, reverse the decision outright or reverse and remand the case to the Secretary for rehearing. 42 U.S.C. § 405(g). Cases can be remanded on motion of the Secretary for good cause shown or upon a showing that there is new material evidence and good cause for the claimant’s failure to have incorporated the evidence into the record. Most commonly, however, cases are remanded oh substantive grounds when an ALJ’s decision is reversed as unsupported by substantial evidence or because the AU had improperly applied the law. See generally Aubeuf v. Schweiker, 649 F.2d 107, 115-16 (2d Cir.1981).

In this case the court reversed the ALJ’s decision and ordered a remand because of substantive defects in the ALJ’s evaluation. Because claimant had already established a prima facie case of disability, the unexpressed but very real holding of this court was that the Secretary had not met her burden of going forward. The remand order left intact plaintiff’s prima facie entitlement to benefits but invalidated the Secretary’s rebuttal. As might be expected, a remand of this kind substantially increases plaintiff’s chances of ultimately securing benefits. Figures show that over half the claimants who obtain a remand of any type from the district court ultimately secure benefits. See Burt, 593 F.Supp. at 1130 n. 1.

Courts that have held that plaintiffs who have secured a remand are not prevailing parties have relied heavily upon Hanrahan v. Hampton, 446 U.S. 754, 100 S.Ct. 1987, 64 L.Ed.2d 670 (1980) (per curiam). In Hanrahan the civil rights plaintiffs claimed that they were prevailing parties because the court of appeals, inter alia, had reversed the district court’s directed verdicts against them. The Court, in denying fees, found that Congress intended to permit the interim award of attorneys' fees under 42 U.S.C. § 1988 “only when a party had prevailed on the merits of at least some of his claims.” Id. at 758, 100 S.Ct. at 1989. The Court noted “[a]s a practical matter [plaintiffs] are in a position no different from that they would have occupied if they had simply defeated the defendants’ motion for a directed verdict in the trial court.”

The present case, however, differs markedly from Hanrahan for three closely-related reasons. First, as a result of this court’s de facto reversal of the Secretary’s decision plaintiff has prevailed on the merits of his claim to the extent of making out a prima facie entitlement to benefits that have survived an assault by the Secretary in rebuttal. Second, this case is bifurcated between administrative proceedings, where the entitlement to benefits is properly determined, and the district court, which has a review function. Because the court’s role here is much narrower than in Hanrahan and most other lawsuits, the definition of prevailing party in this proceeding must be adjusted accordingly. Third, “as a practical matter” plaintiff is in a markedly better position than before this court reversed and remanded the case. His chances of recovering benefits have increased from zero to, in the sense of statistical experience, over fifty per cent.

The claimant who has established a prima facie case of disability at the administrative level comes to the federal court in order to prove that the Secretary has failed to meet its burden of producing evidence rebutting the prima facie case. In some circumstances the record is so clear and the plaintiffs case is so compelling that an outright reversal of the Secretary’s denial of benefits is warranted. There is no question that such claimants are prevailing parties.

Courts, however, often remand cases where the entitlement to benefits is clear but certain housekeeping matters remain. See e.g. McKenzie v. Heckler, 589 F.Supp. 1152, 1162 (N.D.Ill.1984). More importantly, courts tend to avoid outright reversals in recognition of their limited role in the disability determination process. The admonition that courts are not to try disability cases de novo, McNeil v. Califano, 614 F.2d 142, 145 (7th Cir.1980), and the substantial evidence standard of review, Whitney v. Schweiker, 695 F.2d 784, 786 (7th Cir.1982), strongly influence courts to show deference to the Secretary by remanding rather than reversing. Moreover, where the ALT has failed to develop, the record the district court will hesitate to reverse outright. See Gross v. Schweiker, 563 F.Supp. 260 (N.D.Ind.1988).

The cramped view of the EAJA adopted by some courts may alter the balance of decisionmaking between the Secretary and the federal courts. District courts are sensitive to the difficulties of representing often indigent clients over protracted periods. They know of the statutory cap on attorneys’ fees under section 206 of the Social Security Act, 42 U.S.C. § 406(b)(1), and that such awards must come from back benefits awarded the client. District courts are also aware that the majority of claimants ultimately prevail on remand. Consequently, if district courts are unable to award attorneys’ fees when plaintiffs obtain a remand on substantive grounds, they may be more likely to perform an extended analysis of the evidence and reverse more decisions outright.

Remands on substantive grounds often and outright reversals always rest upon a rejection of the Secretary’s rebuttal to a prima facie entitlement to benefits. That is decisive. The EAJA does not require a party to succeed on all elements of his claim after a full trial in order to be a prevailing party. The proper approach is a flexible one tailored to the type of proceeding in federal court. In the context of Social Security disability, invalidation of the Secretary’s rebuttal position is not just a limited tactical gain; rather, it is the very prerequisite to receiving benefits. The opportunity to refute the Secretary’s rebuttal is what brings the claimant to federal court in the first place. There is thus no compelling reason for distinguishing remands on substantive grounds from outright reversals for purposes of the EAJA.

The approach adopted here is also consistent with the purposes of Congress in enacting the EAJA. See generally Berman v. Schweiker, 713 F.2d 1290, 1295-96 (7th Cir.1983). Congress recognized that

for many citizens, the cost of securing vindication of their rights and the inability to recover attorneys’ fees preclude resort to the adjudicatory process. When the cost of contesting a government order, for example, exceeds the amount at stake, a party has no realistic choice and no effective remedy. In these cases, it is more practical to endure an injustice than to contest it.

H.R.Rep. No. 1418, 96th Cong., 2d Sess., 9, reprinted in 1980 U.S.Code Cong. & Ad. News, 4984, 4988.

The only forum where a disappointed claimant can challenge the Secretary’s decision is federal court. The prospects of success for a claimant who can secure representation is relatively high, both in federal court and thereafter on remand. A cramped interpretation of the EAJA will make disability appeals less attractive for attorneys by doubling the risk that such work will go uncompensated. Even in cases where the claimant ultimately prevails on remand, a narrow interpretation of the EAJA will force attorneys who represent claimants in federal courts to go uncompensated for many months until the remand proceedings are concluded.

In contrast, the approach adopted here ensures that disability claimants will not be foreclosed from challenging the denial of benefits because of their impecunity. By requiring claimants to refute the Secretary’s rebuttal position before fees are recoverable, this approach is also consistent with the EAJA’s requirement of success on a significant issue.

By ensuring that persons adversely affected by a government position that is not substantially justified can pursue litigation, the EAJA also has an important public policy function:

The [EAJA] rests on the premise that a party who chooses to litigate an issue against the government is not only representing his or her own vested interest but is also refining and formulating public policy. An adjudication or civil action provides a concrete, adversarial test of government regulation and thereby ensures legitimacy and fairness of the law. An adjudication, for example, may show that the policy or factual foundation underlying an agency role is erroneous or inaccurate, or it may provide a vehicle for developing or announcing more precise rules.

H.R.Rep. at 10, 1980 U.S.Code Cong. & Ad.News, 4988-4989.

This second purpose of the EAJA is especially operative in the Social Security disability context. The explosion of disability litigation in recent years, the high rate at which the federal courts have overturned the Secretary’s determinations, and the institutional struggle between the federal courts and the Secretary over the issue of “non-compliance” reflect the useful disciplinary function of legal challenges to the Secretary’s decisions and procedures by often impoverished, ill and politically unorganized disability claimants. A cramped view of the EAJA would slow this process. “Plaintiff should not be forced to bear the costs necessarily incurred to secure [his] right to have the administrative law process operate in its intended fashion.” Knox v. Schweiker, 567 F.Supp. 959, 964 (D.Del.1983).

This court holds that plaintiffs who have refuted the Secretary’s rebuttal position and thus reestablished their prima facie entitlement to benefits are prevailing parties even if their cases are remanded to the Secretary rather than reversed outright. Plaintiff is thus a prevailing party under the EAJA.

A prevailing party is entitled to attorneys’ fees unless the government can show that its litigation position was “substantially justified”. 28 U.S.C. § 2412(d)(1)(A). This means that the Secretary’s position must have had a reasonable basis both in law and in fact. McDonald v. Schweiker, 726 F.2d 311, 316 (7th Cir.1983). The government’s position is not considered unreasonable solely because it lost.

This case was not a difficult one because the AU so obviously failed to consider the potentially disabling effect of the pain suffered by claimant. The AU also overly relied on plaintiff’s failure to sit and squirm at the administrative hearing. The government’s point that plaintiff’s pain is not disabling is well taken. The fact remains, however, that the plaintiff was denied benefits without sufficient consideration of the effects of his pain. If the AU had properly evaluated plaintiff’s pain, the government’s position in the litigation before this court might have been substantially justified; but because the AU so clearly failed to treat the issue of pain, the government’s pursuit of litigation was not substantially justified. Plaintiff has moved for $2,113.25 in fees and costs. The government has not objected to this amount. There are no special circumstances that would make an award of fees unjust.

Conclusion

Plaintiff’s petition for attorneys’ fees and costs under the Equal Access to Justice Act is granted.

      . The EAJA contained a sunset provision that allowed the Act to expire on October 1, 1984. Congress passed a bill in October 1984 to permanently reauthorize and amend the EAJA. H.R. 5479, 98th Cong., 2d Sess. § 2(b). President Reagen vetoed the bill. See 42 Cong., Q. Weekly Rep. 2964 (1984) (text of President's memorandum of disapproval). The EAJA continues to apply through final disposition of any action commenced before the date of repeal.

      . The regulations in part 404 of 20 C.F.R. govern disability claims by applicants insured under the Social Security System. The regulations in part 416 of 20 C.F.R. govern claims by uninsured applicants who are seeking Supplemental Security Income disability benefits. The two parts are very similar.

      . The "severe impairment” requirement as interpreted and applied by the Secretary has been found to violate the statutory definition of disability, 42 U.S.C. §§ 423(d)(1)(A), 423(d)(2)(A), as improperly focusing on medical considerations alone in a disability determination process. See Johnson v. Heckler, 593 F.Supp. 375 (N.D.Ill.1984) (invalidating requirement); see also Hundrieser v. Heckler, 582 F.Supp. 1231 (N.D.Ill.1984) (narrow construction of severity requirement).

      . In order to evaluate a claimant’s ability to do other work, the Secretary generally uses a system of medical/vocational guidelines set forth in appendix 2 of the regulations. See generally Heckler v. Campbell, 461 U.S. 458, 103 S.Ct. 1952, 76 L.Ed.2d 66 (1983).

      . The high success rate for claimants on remand is graphic evidence of the deference district courts show the Secretary.

      . See e.g., Wier v. Heckler, 734 F.2d 955, 956-958 (3d Cir.1984).

      . See e.g., Merli v. Heckler, 600 F.Supp. 249, 250-51 (D.NJ.1984).

      . See Lopez v. Heckler, 713 F.2d 1432 (9th Cir.1983), denying partial stay pending appeal in 572 F.Supp. 26 (C.D.Cal.), partial stay granted pending appeal, 463 U.S. 1328, 104 S.Ct. 10, 77 L.Ed.2d 1431 (Rehnquist, Circuit Justice), emergency application to vacate stay denied, — U.S. ---, 104 S.Ct. 221, 78 L.Ed.2d 217, district court aff’d in part and rev'd in part, 725 F.2d 1489 (9th Cir.1984).

      . A question left open by this opinion is whether a plaintiff must have established a prima facie case of disability at the administrative level before that plaintiff can be a prevailing party in district court. For example, if at step two of the disability determination process the Secretary concludes that claimant does not have a severe impairment, then claimant has failed to make out a prima facie case. It is unclear if the plaintiff who then persuades the district court to reverse the Secretary’s decision is a prevailing party. On the one hand, the plaintiff has yet to establish any entitlement to benefits. On the other hand, the Secretary’s improper decision prevented the plaintiff from establishing a prima facie case. Moreover, the sole relief sought from the district court at this point by the plaintiff is a remand.


author: GOETTEL, District Judge:

text:
    UNITED STATES of America, Plaintiff, v. WATER QUALITY INSURANCE SYNDICATE, Defendant and Third-Party Plaintiff, v. M/V COVE LEADER, her engines, boilers, tackle, etc., and Cove Shipping, Inc., Third-Party Defendants.
    No. 84 Civ. 7737 (GLG).
    United States District Court, S.D. New York.
    July 11, 1985.

      Richard K. Willard, Acting Asst. Atty. Gen., Washington, D.C., Rudolph W. Giuliani, U.S. Atty. for the S.D. of N.Y., Janis G. Schulmeisters, Atty. in charge, New York City, N.Y., for the U.S. of America; Janis G. Schulmeisters, Thomas F. Murphy, Jr., of counsel.
    Thacher, Proffitt & Wood, New York City, N.Y., Attys. for defendant and third-party plaintiff; Sheldon A. Vogel, John M. Woods, of counsel.
    Freehill, Hogan & Mahar, New York City, N.Y., for third-party defendants; Patrick J. Bonner, of counsel.
   OPINION

GOETTEL, District Judge:

The Government commenced this action on October 25, 1980, to recover expenses it incurred cleaning up an oil spill. By motion, the defendant and third-party plaintiff and the third-party defendant seek to dismiss this action as time barred. For the reasons set forth below, the Court denies this motion.

I. BACKGROUND

On February 25, 1980, approximately 630 gallons of No. 6 oil spilled from the Coastal 2505 into the Intracoastal Waterway at Tucker Bayou, Deer Park, Texas. The spill resulted from the rupture of the hose through which the Coastal 2505 was discharging the oil. The United States and private contractors, whom the Government hired, cleaned up the spill. The cleanup was completed on or around March 4, 1980, at a cost to the United States of approximately $30,133.54.

Almost four and a half years later, on October 25, 1984, the United States commenced this action pursuant to section 311 of the Federal Water Pollution Control Act (“FWPCA’-’), 33 U.S.C. § 1321, to recover the cleanup costs from Coastal Towing, Inc., the owner and operator of Coastal 2505, and Water Quality Insurance Syndicate (“WQIS”), the insurer of Coastal 2505. The Government voluntarily dismissed the action against Coastal Towing on November 13, 1984. Defendant WQIS filed an answer asserting several affirmative defenses. It also filed a third-party complaint against the M/V Cove Leader and her owner, Cove Shipping, Inc. (“Cove”), in which WQIS alleged that the rupture of the hose and oil spill resulted solely from the excessive speed and wake wash of the passing Cove Leader.

WQIS now moves for an order granting summary judgment and dismissing the action on the grounds that it is barred by the three-year statute of limitations for tort actions contained in 28 U.S.C. § 2415(b). Cove joins in this motion.

The United States contends that no statute of limitations applies to actions brought on behalf of the United States to enforce the statutory FWPCA remedy created by 33 U.S.C. § 1321(f)(1). Alternatively, the United States contends that if a statute of limitations applies, it is the six-year provision for contract actions contained in 28 U.S.C. § 2415(a).

II. DISCUSSION

A. Sovereign Immunity

The doctrine of sovereign immunity provides that the United States as a plaintiff is not bound by any statute of limitations unless Congress provides otherwise. Guaranty Trust Co. v. United States, 304 U.S. 126, 132, 58 S.Ct. 785, 788, 82 L.Ed. 1224 (1938); Federal Maritime Commission v. Caragher, 364 F.2d 709, 718 (2d Cir.1966). The FWPCA contains no statute of limitations applicable to a cleanup cost recovery action brought by the United States under 33 U.S.C. § 1321(f)(1). The Government thus argues that no statute of limitations applies to this action. In enacting the FWPCA, Congress intended to shift the cost of oil spills away from the public and toward those who engage in enterprises that use the navigable waters and give rise to oil pollution. See United States v. Coastal States Crude Gathering Co., 643 F.2d 1125, 1128 (5th Cir.1981). The courts should not restrict this cost-shifting intent and the remedial nature of the FWPCA, argues the Government, by applying 28 U.S.C. § 2415 to the instant action.

The Government has not cited a case that held 28 U.S.C. § 2415 inapplicable to FWPCA actions, nor have we found any. The courts that have considered the issue of the appropriate limitations period have either rejected or not considered the Government’s argument that it is not subject to any limitations. We also reject the Government’s argument.

The legislative history of 28 U.S.C. § 2415 indicates that the purpose of the statute was to establish statutes of limitations on certain broad types of governmental claims. See Statute of Limitation Act: Hearings on H.R. 13652 Before the Sub-comm. of the House Comm, in the Judiciary, 89th Cong., 2d Sess., ser. 15 at 6-7 (1966) (statement of John M. Douglas, Assistant Attorney General). “[I]t is only right that the law should provide a period of time within which the Government must bring suits on claims just as it now does to claims of private individuals.” S.Rep. No. 1328, 89th Cong., 2d Sess. 1, reprinted in 1966 U.S.Code Cong. & Ad.News 2502, 2503. As stated in the report by the Committee on the Judiciary of the House of Representatives:

Statutes of Limitation have the salutary effect of requiring litigants to institute suits within a reasonable time of the incident or situation upon which the action is based. In this way the issues presented at the trial can be decided at a time when the necessary witnesses, documents, and other evidence are still available. At the same time, the witnesses are better able to testify concerning the facts involved for their memories have not been dimmed by the passage of time. The committee feels that the prompt resolution of the matters covered by the bill is necessary to an orderly and fair administration of justice. Stale claims can neither be effectively presented nor adjudicated in a manner which is fair to the parties involved.

1966 U.S.Code Cong. & Ad.News 2502, 2503. Thus, section 2415 was enacted “to establish statutes of limitations which will apply to contract and tort actions brought by the United States.” S.Rep. No. 1328, 89th Cong., 2d Sess. 1, reprinted in 1966 U.S.Code Cong. & Ad.News 2502.

The Government contends that the FWPCA cleanup cost recovery action is founded upon a unique statutory remedy, and not upon a tort or contract. It contends, therefore, that section 2415 does not apply. However, as discussed below, this action is based upon a contract implied in law. The contention that the FWPCA was intended to create a new and unique system of liability does not diminish the nature of the cleanup cost recovery action. United States v. P/B Stco 213, 756 F.2d 364, 376 (5th Cir.1985).

The Government also argues that 33 U.S.C. § 1321(f) provides that a discharger shall be liable to the United States Government “notwithstanding any other provision of law.” 33 U.S.C. § 1321(f)(1). By this language, argues the Government, it is evident that recovery is to be unencumbered by other statutes as much as possible, including limitation periods.

The meaning of this language is unclear. Tug Ocean Prince, Inc. v. United States, 584 F.2d 1151, 1162 (2d Cir.1978).

While various meanings can be drawn from this phrase ..., we think it means that the remedies established by the FWPCA are not to be modified by any preexisting law. The main objective apparently was to assure that the limits on recoveries established by § 1321(f) are not to be varied by the different limits established by the Limitation Act.

In the Matter of Oswego Barge Corp., 664 F.2d 327, 340 (2d Cir.1981) (citations omitted). Thus, this language was intended to apply to conflicts between the FWPCA and the Limitation of Shipowner’s Liability Act, 46 U.S.C. §§ 181-195, and not time limitations.

In summary, the limitations of section 2415 are applicable to the instant controversy.

B. The Applicable Statute of Limitations

Section 2415 provides in pertinent part:

(a) Subject to the provisions of section 2416 of this title, and except as otherwise provided by Congress, every action for money damages brought by the United States or an officer or agency thereof which is founded upon any contract express or implied in law or fact, shall be barred unless the complaint is filed within six years after the right of action accrues____
(b) Subject to the provisions of section 2416 of this title, and except as otherwise provided by Congress, every action for money damages brought by the United States or an officer or agency thereof which is founded upon a tort shall be barred unless the complaint is filed within three years after the right of action first accrues....

28 U.S.C. § 2415 (1982). WQIS and Cove argue that the Government’s action for oil spill damages is founded upon a tort. Therefore, they contend, the three-year statute of limitations applies and thus the action is time barred by 28 U.S.C. § 2415(b). The Government argues that the six-year statute of limitations applies because the recovery sought is for restitution of its expenditures and thus the action is founded upon a contract implied in law. We agree that “this is essentially an action for restitution, to recover money expended to discharge the duty of clean-up imposed by law on the alleged polluter in the first instance, which the polluter did not perform although obligated to do so.” United States v. Shawnee, Inc., 608 F.Supp. 649, 650 (S.D.N.Y.1985).

The primary duty to clean up the oil spill lies with the polluter. United States v. P/B Stco 213, supra, 756 F.2d at 368-70; United States v. Barge Shamrock, 635 F.2d 1108, 1110 (4th Cir.1980); United States v. Poughkeepsie Housing Authority, No. 80-1998, slip op. at n. 10 (S.D.N.Y. Oct. 16, 1981). If the discharger does not initiate cleanup operations, the Government is authorized to do so. United States v. P/B Stco 213, supra, 756 F.2d at 370; United States v. Poughkeepsie Housing Authority, supra, slip op. at n. 10. In the instant action, the Government cleaned up the oil spill because Coastal Towing refused or was unable to properly remove the oil. Allegedly, despite numerous demands, Coastal Towing and WQIS have not paid the costs.

When one party receives some benefit either in goods or services, but does not compensate the party who has conferred the benefit, courts have allowed the uncompensated party to assert a quantum meruit or quasi-contractual claim for the value of the benefits conferred____ Such a quasi-contractual obligation is created in order to do justice to the parties, “without any expression of assent and sometimes even against a clear expression of dissent.”
In the instant action, although the oil spill could be considered a tort ..., the Government is not seeking compensatory damages suffered as a result thereof, but rather restitution for the money it expended on behalf of the defendants to remove the discharge. Defendants have received the benefits of prompt governmental action on their behalf and should therefore make restitution to the government for its efforts. Accordingly, the Government’s suit to recover the value of the benefits conferred must be characterized as quasi-contractual.

United States v. Poughkeepsie Housing Authority, supra, slip op. at 8-9 (citations and footnotes omitted). Therefore, the six-year statute of limitations of section 2415(a) applies. See United States v. P/B Stco 213, supra, 756 F.2d 364; United States v. Shawnee, Inc., supra, 608 F.Supp. 649 (sharing the view of United States v. P/B Stco 213); United States v. C & R Trucking Co., 537 F.Supp. 1080 (N.D.West Va.1982) (adopting the rationale of United States v. Poughkeepsie Housing Authority); United States v. Poughkeepsie Housing Authority, supra, No. 80-1998.

III. CONCLUSION

The six-year limitation in 28 U.S.C. 2415(a) applies to this action. Therefore, the motion for summary judgment and dismissal is denied.

SO ORDERED.

      . Allegedly, the owner and operator of the Coastal 2505 refused or was unable to properly remove the oil. Section 1321(c)(1) of Title 33 of the United States Code provides:
      Whenever any oil or a hazardous substance is discharged, or there is a substantial threat of such discharge, into or upon the navigable waters of the United States, adjoining shorelines, or into or upon the waters of the contiguous zone, or in connection with activities under the Outer Continental Shelf Lands Act [43 U.S.C. 1331 et seq.] or the Deepwater Port Act of 1974 [33 U.S.C. 1501 et seq.], or which may affect natural resources belonging to, appertaining to, or under the exclusive management authority of the United States (including resources under the Magnusen Fishery Conservation and Management Act [16 U.S.C. 1801 et seq.]) the President is authorized to act to remove or arrange for the removal of such oil or substance at any time, unless he determines such removal will be done properly by the owner or operator of the vessel, onshore facility, or offshore facility from which the discharge occurs.
      33 U.S.C. § 1321(c)(1) (1982).

      . Section 1321(f)(1) of Title 33 of the United States Code provides:
      Except where an owner or operator can prove that a discharge was caused solely by (A) an act of God, (B) an act of war, (C) negligence on the part of the United States Government, or (D) an act or omission of a third party without regard to whether any such act or omission was or was not negligent, or any combination of the foregoing clauses, such owner or operator of any vessel from which oil or a hazardous substance is discharged in violation of subsection (b)(3) of this section shall, notwithstanding any other provision of law, be liable to the United States Government for the actual costs incurred under subsection (c) of this section for the removal of such oil or substance by the United States Government in an amount not to exceed, in the case of an inland oil barge $125 per gross ton of such barge, or $125,000, whichever is greater, and in the case of any other vessel, $150 per gross ton of such vessel (or, for a vessel carrying oil or hazardous substances as cargo, $250,000), whichever is greater, except that where the United States can show that such discharge was the result of willful negligence or willful misconduct within the privity and knowledge of the owner, such owner or operator shall be liable to the United States Government for the full amount of such costs. Such costs shall constitute a maritime lien on such vessel which may be recovered in an action in rem in the district court of the United States for any district within which any vessel may be found. The United States may also bring an action against the owner or operator of such vessel in any court of competent jurisdiction to recover such costs.
      33 U.S.C. § 1321(f)(1) (1982).

      . Testifying in support of the legislation, Assistant Attorney General John W. Douglas listed five reasons why general statutes of limitations on governmental claims were appropriate:
      (1) The limitations would tend to equalize the position of litigants in federal court, whether the case be by or against the government or between private parties.
      (2) The limitations would lead to more effective and fair conduct of government litigation.
      (3) The limitations would lessen the costs of keeping records, and of detecting and collecting on old claims.
      (4) The limitations would eliminate the assertion of stale government claims.
      (5) The limitations would enable potential defendants to put to one side eventually the thought of possible suits against them.

      . Cove argues that the recent introduction of H.R. 1232, a bill designed to replace FWPCA, contains a three-year statute of limitations and evidences Congress’ intent that a three-year limitation applies. This bill is not yet adopted, and is not entitled to any weight. United States v. Shawnee, Inc., 608 F.Supp. 649, 650 (S.D.N.Y.1985).


author: BARBOUR, District Judge.

text:
    VGS CORPORATION d/b/a Southland Oil Company and Globe Asphalt Co., Inc., Plaintiffs, v. UNITED STATES DEPARTMENT OF ENERGY and John S. Herrington, as Secretary of Energy, Defendants.
    Civ. A. No. J81-0170(B).
    United States District Court, S.D. Mississippi, Jackson Division.
    July 12, 1985.
    As Amended Aug. 20, 1985.

      Tom Tardy, Jackson, Miss., Edwin Jason Dryer, Jack L. Lahr and Dennis Henigan, Washington, D.C., for plaintiffs.
    Samuel Soopper, U.S. Dept, of Energy, Washington, D.C., Daniel B. Lynn, Asst. U.S. Atty., Jackson, Miss., for defendants.
   MEMORANDUM OPINION AND ORDER

BARBOUR, District Judge.

The Court has before it the following Motions:

(1) Motion of Plaintiffs, VGS Corporation, d/b/a Southland Oil Company and Globe Asphalt Co., Inc. (hereinafter collectively referred to as “Southland”) for Partial Summary Judgment; (2) Motion of Defendant, United States Department of Energy (“DOE”) to Dismiss; and (3) Motion of DOE to stay.

1. Motion of Southland for Partial Summary Judgment and Motion of DOE to Dismiss

Southland seeks a declaratory judgment that the DOE has an unconditional and non-discretionary obligation to implement an order issued by the Federal Energy Regulatory Commission (FERC) on May 8, 1984, requiring DOE to restore to South-land $5,956,499.00 which DOE wrongfully required Southland to pay under the Crude Oil Entitlements Program. According to Southland the DOE has not only failed to implement the FERC Order, but has also unilaterally imposed additional conditions to obtaining relief by virtue of its January 9, 1985, decision which provides that the Office of Hearing and Appeals (“OHA”) will implement the relief if the OHA determines that refiners as a class were injured by violations of the Emergency Petroleum Allocation Act (“EPAA”).

After oral argument before the Court, on the parties’ Motions, DOE notified the Court that the OHA announced on June 21, 1985, that an appropriate portion of crude oil overcharge funds will be used to fund outstanding, finally adjudicated “receive orders” such as that held by Southland and that an appropriate procedure would be implemented to provide the relief. However, because of litigation concerning the termination of the entitlements program, e.g., Texaco, Inc. v. DOE, TECA Nos. 8-44 through 3-49, payment of the “receive orders” will be placed in an interest-bearing escrow account pending the outcome of Texaco.

DOE asserts that the OHA decision renders the instant litigation moot. South-land argues that the OHA decision of June 21, 1985, places yet another condition on the May 8, 1984, unconditional FERC order. Southland notes that the Texaco litigation is now in the briefing stage before the Temporary Emergency Appeals Court and that the United States Supreme Court may yet have to ultimately determine whether the entitlements lists will be published. Then, Southland comments that other pending litigation will have to decide the accuracy of the entitlements lists. Since the June 21, 1985, OHA ruling does not satisfy the Southland claim, this Court concludes that the June 21, 1985, OHA order does not moot the Southland claim. Accordingly, this Court will consider the merits of the pending Motions before it.

In November 1973, Congress enacted the EPAA which created comprehensive allocation and pricing regulations for crude oil and petroleum products. 15 U.S.C. § 753(a). Pursuant to the Act, the Federal Energy Administration (“FEA”), the predecessor to DOE, established a multi-tiered system of crude oil price controls. 10 C.F.R. Part 212, Sub-Part D (1984). Under the system, certain domestic crude oil was subject to “old” or “lower tier” ceiling prices while other domestic crude oil was subject to higher “new” or “upper tier” ceiling prices. Other categories of crude oil were exempt from price control.

The system placed those refiners forced to buy upper-tier or uncontrolled crude oil at a competitive disadvantage. To address this problem, FEA promulgated the Entitlements Program. 10 C.F.R. § 211.67 (1984); 39 Fed.Reg. 42246 (Dec. 4, 1974). The regulations roughly equalized the cost per barrel of crude oil among refiners through cash transfers between refiners rather than the physical transfer of oil. To achieve this result, each month refiners with greater than average access to price-controlled domestic crude oil bought “entitlements” from refiners with less than average access to low cost crude. 10 C.F.R. §§ 211.67(a)(1), (b)(1) and (c) (1984). The “entitlements” purchased or sold each month by refiners were published in a monthly entitlements notice to the refining industry. 10 C.F.R. § 211.67(i)(l)' (1984). If the obligation to purchase entitlements would impair the refiner’s “historically established financial position,” then the refiner was entitled to “an adjustment” or “exception” to “prevent special hardship, inequity or unfair distribution of burdens....” 42 U.S.C. § 7194(a).

The exceptions process functioned by OHA grants of prospective relief for six month periods based upon the financial projections of the refiner, to be followed by a year-end review based on actual figures to determine whether the refiner had received inadequate or excessive exception relief. To implement the year-end findings, OHA issued orders permitting the refiner to sell or requiring it to buy additional entitlements. Beacon Oil Company, 3 FEA 11 83,209 (June 8, 1976). These buy or sell obligations were then reflected on subsequent entitlement notices.

In October 1983, the Presiding Officer of FERC ruled that Southland had unlawfully been required to pay $7,597,567.00 to the Entitlements Program for the years 1977 and 1978. FERC sought to restore this sum to Southland by relieving it of a purchase obligation imposed by an April 1, 1981, OHA order and by providing that:

... the Economic Regulatory Administration of the Department of Energy shall in the next Entitlements Notice increase the value of entitlements [South-land] would otherwise be permitted to sell (or decrease the value of the entitlements it would otherwise be entitled to purchase) by $5,956,499.00 to the nearest entitlement. In the event no further Entitlements Notice is issued, DOE will take other appropriate action to implement this action.

On May 8, 1984, FERC issued an Order adopting the October 1983 Order of the Presiding Officer. The May 8, 1984 FERC Order is the order which Southland seeks to implement.

Prior to issuance of the FERC Order, President Reagan, on January 30, 1981, issued Executive Order 12287, exempting all crude oil and petroleum products from the price and allocation regulations (the “Decontrol Order”). The Decontrol Order authorized the Secretary of Energy “to take such actions as he deems necessary to implement [the] Order, including the promulgation of Entitlements Notices for periods prior to [the] Order and the establishment of a mechanism for entitlements adjustments for periods prior to [the] Order.”

Shortly after the Decontrol Order, DOE published official assurances that it “will publish” a December 1980 Entitlements Notice in February 1981 and that it “will also publish” a Notice in March reflecting transactions in the first 27 days of January, 1981. Ruling 1981-1, 46 Fed.Reg. 12946 (Feb. 19, 1981) (Answer #2). The December notice was issued February 20, 1981. 46 Fed.Reg. 14157 (Feb. 26, 1981).

Between March 1981 and December 1981, a series of Federal Court injunctions prevented the issuance of the January 1981 Entitlements Notice. See, e.g., Mobil Oil Corporation v. DOE, 520 F.Supp. 420 (N.D.N.Y.), rev’d, 659 F.2d 150 (Temp.Emer.Ct.App.), cert. denied, 454 U.S. 1110, 102 S.Ct. 687, 70 L.Ed.2d 651 (1981); Indiana Farm Bureau Cooperative Association v. DOE, [1981-84 Transfer Binder] Energy Mgmt. (CCH) ¶ 26,315 (S.D.Ind.1981); Winston Refining Company v. DOE, [1981-84 Transfer Binder] Energy Mgmt. (CCH) ¶ 26,311 (M.D.N.C.1981). During this period, however, the Economic Regulatory Administration (“ERA”) of the DOE conducted a rule-making proceeding “to provide for the orderly termination of the Crude Oil Entitlements Program.” See 46 Fed.Reg. 15112 (March 3, 1981). ERA adopted regulations which contemplated issuance of a final “Clean-Up Notice” implementing adjustments relating to the period prior to decontrol, specifically including entitlements exceptions order. 10 C.F.R. § 211.64 (1984); 46 Fed.Reg. 36092 (July 13, 1981).

In 1981, when DOE established the Clean-Up Notice to liquidate entitlements rights and obligations, it noted its duty to implement all OHA exception decisions even after decontrol:

It is the DOE’s position that OHA may award entitlements exception relief after January 28, 1981, if the relief awarded relates to periods prior to decontrol. If OHA decides that a firm should have had exception relief at the time of decontrol, it is DOE’s position that the intervention of decontrol did not negate the prior claim to exception relief and that DOE must give effect to such relief.

46 Fed.Reg. at 36093. With regard to claims finally adjudicated after issuance of the Clean-Up Notice, DOE stated:

We have considered and rejected the notion of ignoring post-clean-up claims and obligations adjudicated by FERC or the courts. First, courts have made clear that agencies cannot extinguish rights sub judice, so we cannot purport to cut off claims and obligations merely because outstanding cases are not finally determined by the date of the clean-up list.

46 Fed.Reg. at 36096.

Despite these affirmations by the DOE of its obligations with regard to exception relief, in November 1983, the DOE announced its tentative decision to issue no further entitlements notices and questioned whether outstanding OHA, FERC and court decisions should be implemented notwithstanding non-publication of the January entitlement adjustment notices. 48 Fed.Reg. at 50482. Thereafter, on June 28, 1984, DOE announced its final decision to issue neither the January 1981 nor the Clean-Up Entitlements Notices. 49 Fed. Reg. 27410 (July 3, 1984). Simultaneously, the DOE announced a “tentative decision” to effectuate orders which provide for receipt of money by firms only “if an appropriate mechanism can be devised which does not unduly disrupt the market.” 49 Fed.Reg. at 27148. DOE also announced its tentative decision not to enforce OHA and FERC orders requiring the repayment of excessive exception relief received by certain firms during the course of the entitlements program. Id. On January 9, 1985, DOE announced its “final decision” on exception orders, making final its “tentative decision” not to enforce such orders. 50 Fed.Reg. 1919 (January 14, 1985). Thus, refiners who, during the course of the Entitlements Program, were granted exception relief in excess of that warranted under the regulatory standards were excused from their obligation to repay the relief erroneously granted. Likewise, DOE also concluded that it had no legal obligation to give effect to exception orders providing for the payment of exception relief wrongfully denied during the operation of the program. 50 Fed.Reg. at 1923. DOE noted, however, that OHA was conducting proceedings to determine proper disposition of refund monies collected in cases involving violations of the crude oil pricing regulations. 50 Fed.Reg. at 1921. According to DOE, unpaid exception orders would be paid if OHA determines refiners as a class were injured by violations or alleged violations of the EPAA regulations. Id. As indicated above, the OHA determined on June 21, 1985, that refiners as a class had been injured and were entitled to an appropriate portion of the Crude Oil Overcharge Fund.

DOE opposes the Motion of South-land for Partial Summary Judgment and moves to dismiss the complaint on the basis that the Decontrol Order rendered the May 8, 1984, FERC order discretionary since the FERC order presupposed the continued operation of the Entitlements Program and the publication of the Entitlements lists. DOE argues that the FERC order and the Decontrol Order left it to the discretion of DOE to determine what relief is appropriate in the event an entitlement list was not published. DOE also states that the implementation of the FERC order is conditional since it depends on whether OHA determines that refiners as a class were injured by violations of the EPAA. Now DOE contends that payment or receive orders must await the outcome in Texaco.

This Court finds that Southland is entitled to a declaratory judgment that the DOE has an unconditional and non-discretionary obligation to implement the May 8, 1984, FERC order, requiring DOE to restore to .Southland $5,956,499.00. The Court further finds that the Motion of DOE to Dismiss or for Summary Judgment is denied as being frivolous. See Texaco, Inc. v. DOE, Civil Action No. 84-391-JLL (D.Del. March 20, 1985); USA Petroleum v. DOE, Civil Action No. 84-1017 (D.C.D.C. February 15, 1985); Navaho Refining Company v. DOE, [1981-84 Transfer Binder] Energy Mgmt. (CCH) ¶ 26,484 (D.N.M.1984), Appeal dismissed, [1981-84 Transfer Binder] Energy Mgmt. (CCH) H 26,514 (Temp.Emer.Ct.App.1984). The decisions in USA Petroleum and Navaho Refining Company clearly mandate the implementation of the Southland exception order. DOE cannot now refuse to recognize the Southland exception order based upon its wholly unreasonable and insupportable interpretations of the FERC order and the Decontrol Order. Indeed, by virtue of the OHA order of June 21, 1985, DOE obviously recognizes that the Southland-type claims are entitled to relief despite its earlier contrary contentions.

In Texaco, Inc. v. DOE, Texaco sued to compel DOE to publish the entitlements list under the Entitlements Program, which DOE claimed it was relieved from doing by virtue of the Decontrol Order. The court held that the power of the DOE to amend the entitlements regulations ended after the Decontrol Order, and that the DOE could not now recoup that power by refusing to comply with the regulations. Further, the court stated that the regulations impose an obligation on DOE to issue entitlements for crude oil transactions occurring prior to the Decontrol Order.

Based upon Texaco, Inc. v. DOE, this Court finds that DOE cannot attach other conditions to the relief Southland seeks since the power of DOE to amend the Entitlements regulations expired after decontrol. Consequently, whether the OHA determines that refiners as a class have been injured by violations of the EPAA is irrelevant to implementation of the relief ordered Southland by FERC. However, at this juncture, the OHA has determined that refiners as a class were injured and has established a fund to reimburse Southlandtype claims. The method of payment will be determined in “Stage II” of these proceedings.

In Navaho Refining Company v. DOE, supra, Navaho, like Southland, sought summary judgment declaring its right to restitution of over four million dollars in excessive payments Navaho was required to make to the Entitlements Program. DOE argued, as they do here, that the implementation of the FERC order was conditioned on issuance of a January 1981 Entitlements List. DOE also argued that the FERC order was not final. The court determined that FERC found that Navaho paid excessive sums into the Entitlements Program. Consequently, the court found that there was nothing more for DOE to adjudicate. “All that is required is implementation of the relief that has already been ordered.” Thus, the court granted Navaho summary judgment.

In USA Petroleum v. DOE, supra, the same issue was before the court. The FERC order contained identical language to the May 8, 1984, FERC order at issue here — “in the event no further Entitlement Notice is issued, DOE will take other appropriate action to implement this order.” The court ruled that the FERC order clearly required some relief, even if it did not specify the relief, and that DOE has a duty to provide relief through appropriate action. The court reasoned that the Decontrol Order ended price control of oil; it did not change or cancel the already adjudicated exceptions given to participants in the program. Consequently, the court granted the motion of USA for partial summary judgment.

These decisions, although unpublished and subject to appeal, convince this Court of the error and of the totally frivolous nature of the DOE position. Consequently, this Court grants the Motion of Southland for Partial Summary Judgment and denies the Motion of DOE to Dismiss or for Summary Judgment. Furthermore, the Court orders DOE to report to this Court within fifteen (15) days the method by which it intends to implement the May 8, 1984, FERC order, whether through means of the crude oil overcharge fund or otherwise.

2. Motion of DOE to Stay.

DOE moves to stay proceedings in this Court pending final resolution of Texaco, Inc. v. DOE, supra, which it has appealed and which it claims will moot the South-land claim. As explained by Southland in opposition to the Motion to Stay, DOE advanced the same argument in USA Petroleum v. DOE, supra, and lost. As stated by the court in USA Petroleum, the “DOE in this connection ... is a dishonest litigant” and their track record to date has been one of “delay — delay—delay.” Moreover, this Court is appalled at the manner in which the DOE uses the Texaco appeal to its advantage, arguing in this case that Texaco will be affirmed and will moot the South-land claims and in Mobil Oil Corporation v. DOE, Civil Action No. 81-CV-340 (N.D.N.Y.) that Texaco will be reversed and moot the claims of Mobil Oil Corporation that the data upon which the DOE will base any entitlements list is erroneous. It seems that the DOE is playing fast and loose with federal courts across the United States. It ends here. The Motion to Stay is denied and the DOE will within fifteen (15) days of the entry of this Order present to this Court its plans for implementing the FERC order.


author: WOLF, District Judge.

text:
    CONSUMERS SAVINGS BANK, CSB Financial Corp. and General Investment Company, Inc., Plaintiffs, v. TOUCHE ROSS & CO. and Crawford & Company, Defendants.
    C.A. No. 85-1156-W.
    United States District Court, D. Massachusetts.
    July 12, 1985.
    Thomas J. Dougherty, Skadden, Arps, Slate Meagher & Flom, Boston, Mass., for plaintiffs.
    S. Beville May, Choate, Hall & Stewart, Gerald F. Rath, Herrick & Smith, Boston, Mass., Mark E. Davidson, Shea & Gould, New York City, for defendants.
   OPINION AND ORDER

WOLF, District Judge.

Upon consideration of the stipulated facts, the evidence presented by affidavit, and the memoranda and oral arguments of counsel, plaintiffs’ Motion for Remand is hereby granted. Plaintiffs’ request for payment of its costs in connection with this motion, which apparently raises an issue of first impression in the District of Massachusetts, is hereby denied.

This action was brought in February, 1985 by plaintiffs Consumers Savings Bank, CSB Financial Corp. and General Investment Company, Inc. against defendants Touche Ross & Co. (“Touche Ross”) and Crawford & Company (“Crawford”). Plaintiffs claim that as a result of defendants’ misrepresentations and omissions of material facts they were improperly induced to purchase all of the stock of Herb-co Corp. and its wholly-owned subsidiary Kent Insurance Co. Plaintiffs seek relief pursuant to state law and under Section 12(2) of the Federal Securities Act of 1933 (the “Act”).

In March, 1985, the defendants removed this action to the United States District Court for the District of Massachusetts pursuant to 28 U.S.C. § 1441(c). Plaintiffs promptly moved to remand, pursuant to 28 U.S.C. § 1447(c), alleging that complete diversity among the parties is lacking.

Certain facts are not in dispute. Plaintiffs are each citizens of Massachusetts. Touche Ross is a general partnership organized under the laws of the State of New York. As such, it is an unincorporated association. There are several hundred genera] partners of Touche Ross, a small number of whom are citizens of Massachusetts. None of the eighteen partners who comprise Touche Ross’ Board of Directors, which governs the firm, is a citizen of Massachusetts. Nor is Crawford a citizen of Massachusetts.

In opposing the Motion to Remand, Touche Ross contends that the decision of the United States Supreme Court in Navarro Savings Association v. Lee, 446 U.S. 458, 100 S.Ct. 1779, 64 L.Ed.2d 425 (1980), directs this Court (1) to disregard nominal or formal parties and rest jurisdiction only upon the citizenship of real parties to the controversy; (2) to engage in a functional analysis, focused on agreements between the general partners concerning management of the partnership’s assets and control of litigation, to determine whether all general partners of Touche Ross or only those general partners on its Board of Directors are “real parties” to this case; and (3) to find that there is complete diversity between what it claims are the “real parties” to this controversy — plaintiffs, Touche Ross’ Board of Directors and Crawford.

As authority for its assertions, Touche Ross relies substantially on two District Court cases applying what those Courts understood to be the Supreme Court’s holding in Navarro and finding that only the general partners, but not the limited partners, of the limited partnerships in question were the real parties to those controversies for the purpose of determining diversity. Wroblewski v. Brucher, 550 F.Supp. 742 (W.D.Okla.1982); Sixth Geostratic Energy Drilling Program 1980 v. Ancor Exploration Co., 544 F.Supp. 297 (N.D.Okla.1982). Touche Ross cites no case in which a partnership has not been held to be a citizen of each state of which a general partner is a citizen. Touche Ross asks this Court, however, to extend the inquiry into the relative roles of the general and limited partners in Wroblewski and Sixth Geostratic to the relative roles of its general partners and Board of Directors and decide that merely those partners on its Board of Directors, rather than all of its general partners, are real parties to this controversy for diversity purposes.

This Court finds, however, that while the Supreme Court in Navarro reaffirmed the principle that jurisdiction should be determined on the basis of the citizenship of real parties to the controversy, it did not modify the uniform precedent, discussed below, establishing that all general partners of an unincorporated association are the real parties to an action against the partnership. New York State Teachers Retirement System v. Kalkus, (4th Cir.1985), 764 F.2d 1015; Elston Investment, Ltd. v. David Altman Leasing Corporation, 731 F.2d 436 (7th Cir.1984); Trent Realty Associates v. First Federal Savings and Loan Association of Philadelphia, 657 F.2d 29 (3d Cir.1981); Hereth v. Jones, 544 F.Supp. 111 (E.D.Va.1982). Nor did it indicate that a functional analysis is authorized to determine whether the citizenship of all or only some members of an unincorporated association should be considered in determining whether complete diversity exists. It is, therefore, neither necessary nor appropriate for this Court to engage in a functional analysis of the internal arrangements of the Touche Ross general partners or to decide the issues Touche Ross raises concerning the relative roles of its general partners and its Board of Directors.

It has long been the law that, for the purposes of diversity, a partnership is a citizen of each jurisdiction of which a partner is a citizen. Great Southern Fire Proof Hotel Co. v. Jones, 177 U.S. 449, 456, 20 S.Ct. 690, 693, 44 L.Ed. 842 (1900); Wittenberg v. Continental Real Estate Partners, Ltd-74A, 478 F.Supp. 504, 510 (D.Mass.1979), aff'd, 625 F.2d 5 (1st Cir.1980); Weinfeld v. Paine, Webber, Jackson and Curtis, 191 F.Supp. 750, 751 (D.Mass.1961).

Navarro did not involve an unincorporated association. Rather, Navarro involved an action brought in a state court by a citizen of Texas against a Massachusetts business trust. The trustees invoked the diversity jurisdiction of the federal courts on the basis of their own citizenship, rather than that of the trust’s beneficial shareholders, some of whom were, like Navarro, Texas citizens. Navarro, 446 U.S. at 459-460, 100 S.Ct. at 1781. Plaintiff contended that the trust had many attributes of an unincorporated association, that the real parties to the lawsuit were the trust’s beneficial shareholders, and that the precedent establishing that an unincorporated association is a citizen of each state of which a member is a citizen should be applied to the trust, thus destroying diversity jurisdiction. Id. at 461-62, 100 S.Ct. at 1782.

The Court in Navarro, however, refused to engage in the effort advocated by the plaintiff to determine whether the trust in question was sufficiently like an unincorporated association to cause the diversity principles applicable to such associations to be applied to the trust. Rather, in identifying the relevant standards for determining diversity, the Court gave decisive weight to the statutory form of the entity involved. It stated:

We need not reject the argument that [the trust] shares some attributes of an association. In certain respects, a business trust also resembles a corporation. But this case involves neither an association nor a corporation. [This case involves] an express trust, and the question is whether its trustees are real parties to this controversy for purposes of a federal court’s diversity jurisdiction.

Id. at 462, 100 S.Ct. at 1782. The Court proceeded to analyze the issue presented in the context of the law relating to express trusts. Id. at 462, 100 S.Ct. at 1782 et seq. It plainly stated that, “[T]he Court never has analogized express trusts to business entities for purposes of diversity jurisdiction.” Id. at 463, n. 10, 100 S.Ct. at 1783, n. 10. In Navarro, the Court demonstrated that it also would not analogize express trusts to unincorporated associations. New York State Teachers Retirement System, 764 F.2d at 1018; Trent, 657 F.2d at 32.

The focus on the statutory form of the party before it and the refusal to consider alleged analogies to other legal forms of organization displayed by the Court in Navarro is consistent with its earlier reasoning in addressing questions concerning the citizenship of unincorporated associations. For example, in determining the citizenship of an unincorporated labor union, the Court declined to decide whether the union was, as a practical matter, indistinguishable from a corporation. United Steelworkers of America v. R.H. Bouligny, Inc., 382 U.S. 145, 147, 86 S.Ct. 272, 273, 15 L.Ed.2d 217 (1965). Rather, the Court in United Steelworkers analyzed the jurisdictional issue solely on the basis of the principles applicable to the form in which the union chose to do business, that of an unincorporated association. Id. See also Great Southern, 177 U.S. at 456-57, 20 S.Ct. at 693; Chapman v. Barney, 129 U.S. 677, 682, 9 S.Ct. 426, 427, 32 L.Ed. 800 (1889); New York State Teachers Retirement System, 764 F.2d at 1018.

Although the Court in Navarro did, in the context of applying the law relating to trusts, look at issues including title and management of assets and control of litigation, it did not indicate that these questions should be addressed in determining the citizenship of an unincorporated association. To the contrary, the Court in Navarro reiterated the standards it had established previously concerning such organizations, stating:

[Unincorporated associations remain mere collections of individuals. When the “persons composing such association” sue in their collective name, they are the parties whose citizenship determines the diversity jurisdiction of a federal court. Great Southern Fire Proof Hotel Co. v. Jones, 177 U.S. 449, 456 [20 S.Ct. 690, 693, 44 L.Ed. 842] (1900) (limited partnership association); see Steelworkers v. Bouligny, Inc., 382 U.S. 145 [86 S.Ct. 272, 15 L.Ed.2d 217] (1965) (labor union); Chapman v. Barney, 129 U.S. 677 [9 S.Ct. 426, 32 L.Ed. 800] (1889) (joint stock company).

Id. at 461, 100 S.Ct. at 1782. Thus, the Court in Navarro “took pains to re-assert the strict Great Southern rule.” Hereth, 544 F.Supp. at 114.

Nor has the Supreme Court indicated that, as Touche Ross contends, the Great Southern rule is not equally applicable when some general partners agree to delegate some managerial responsibilities to a smaller group of general partners. To the contrary:

Supreme Court precedent clearly demonstrates that all association members’ citizenship is relevant to a determination of diversity even if all members do not have managerial responsibility. For instance, union members generally delegate managerial responsibility to their elected leaders, yet each member’s citizenship determines the citizenship of the union. United Steelworkers of America v. R.H. Bouligny, Inc., 382 U.S. 145 [86 S.Ct. 272, 15 L.Ed.2d 217] (1965).

Elston, 731 F.2d at 439.

It may not be illogical to contend that, as a matter of policy, a large, multi-state general partnership should be treated like a corporation or an express trust for diversity purposes. Since 1789, diversity jurisdiction has existed to protect non-resident litigants from local prejudice and perceived professional inferiority of state courts. Judiciary Act of 1789, ch. 20, §§ 11, 12, 1 Stat. 73, 78-79. See United Steelworkers, 382 U.S. at 150, 86 S.Ct. at 274; R. Posner, The Federal Courts: Crisis and Reform 142 (1985). Corporations receive the benefit of access to the federal courts on the basis of diversity jurisdiction in all but one or two states. 28 U.S.C. § 1332(c). Yet the present rule concerning unincorporated associations may exclude a large, multistate partnership like Touche Ross from receiving the benefit of diversity jurisdiction in virtually every state.

It might be argued in opposition to these contentions that since 1789 state courts have been deemed appropriate forums for all actions, including those presenting federal questions. Judiciary Act of 1789, ch. 20, § 25,1 Stat. 73, 85. Moreover, in enacting Section 12(2) of the Federal Securities Act of 1933, Congress expressly recognized state courts as fair forums for claims like those at issue in this case by vesting concurrent jurisdiction in such courts and making Section 12(2) claims nonremovable in their own right. 15 U.S.C. § 111(2,). The present law concerning the citizenship of general partnerships arguably also provides a level of predictability concerning jurisdiction which is important to both prospective plaintiffs and defendants. Adoption of a rule requiring an analysis of the internal arrangements regarding the relative roles of different general partners in order to decide the citizenship of a general partnership for the purpose of any particular case would inject a potentially time-consuming and expensive litigable issue into the early stage of each case involving a large partnership.

Whatever the relative merits of these competing policy considerations, however, the arguments are misdirected. In considering the United Steelworkers union’s claim that it should not be considered a citizen of each state in which a union member was a citizen, the Supreme Court stated in 1965, that “We are of the view that these arguments, however appealing, are addressed to an inappropriate forum, and that pleas for extension of the diversity jurisdiction to hitherto uncovered broad categories of litigants ought to be made to the Congress and not to the courts.” United Steelworkers, 382 U.S. at 150-51, 86 S.Ct. at 275. Thus, the Supreme Court has plainly stated its view that any expansion of the rules for determining diversity of citizenship of unincorporated associations should come from the legislative rather than the judicial process. New York State Teachers Retirement System, 764 F.2d 1019; Elston, 731 F.2d at 439; Hereth, 544 F.Supp. at 117.

Absent a clear directive to the contrary from the Supreme Court or the Congress, this Court declines to engage in the functional analysis of the internal arrangements concerning management of Touche Ross which it contends would demonstrate that Touche Ross should not be deemed a citizen of Massachusetts in this matter.

Is sjs ¡K % *

The law as applied to the undisputed facts of this case demonstrates that there is not complete diversity of citizenship among the parties. This action is, therefore, hereby ORDERED remanded to the Superior Court of the Commonwealth of Massachusetts.

      . Plaintiffs also asserted that remand was required because the claim based upon Section 12(2) of the Act is not removable. 15 U.S.C. § 77/(2). The parties agreed that if the Court found that complete diversity among the parties is lacking, the issue of removal of the Section 12(2) claim would be moot. The Court so finds.

      . Touche Ross also relies on Colonial Realty Corp. v. Bache & Co., 358 F.2d 178, 183-84 (2d Cir.), cert. denied, 385 U.S. 817, 87 S.Ct. 40, 17 L.Ed.2d 56 (1966), in which the Second Circuit, prior to Navarro, held that only the citizenship of the general partners of a New York limited partnership was relevant to determining diversity because, under the applicable New York statute, a limited partner was not a proper party to a suit against the partnership unless the action sought to enforce his rights against or liability to the partnership. The reasoning of Colonial Realty was rejected by the Third Circuit in Carlsberg Resources Corp. v. Cambria Savings and Loan Association, 554 F.2d 1254 (3d Cir.1977). Even in the Second Circuit, however, the rule for general partnerships is that for the purpose of determining diversity jurisdiction, a general partnership is a citizen of each jurisdiction of which a partner is a citizen. Lewis v. Odell, 503 F.2d 445, 446 (2d Cir.1974); Coudert Brothers v. Easyfind International, Inc., 601 F.Supp. 525, 526 (S.D.N.Y.1985); Cunard Line Ltd. v. Abney, 540 F.Supp. 657, 660 (S.D.N.Y.1982).

      . Large, multi-state general partnerships apparently are not all, or always, in agreement as to whether they wish to be deemed a citizen of each jurisdiction of which a partner is a citizen. Such organizations have successfully asserted positions contrary to that advocated in this case by Touche Ross in order to defeat allegations that complete diversity existed. See, e.g., Coopers & Lybrand v. Cocklereece, 506 F.Supp. 587, 588 (S.D.N.Y.1981) (Coopers & Lybrand "contends that, for the purposes of diversity citizenship, it, as a partnership, is a citizen of each of the states of which its partners are citizens____”); Wittenberg, 478 F.Supp. at 510, n. 7; Weinfeld, 191 F.Supp. at 751.

      . The Court notes that the current public debate and proposed legislation concerning diversity jurisdiction is primarily focused on proposals to curtail or abolish access to federal courts on this basis, rather than on measures to enlarge it. See, e.g., R. Posner, supra, at 139-47.


author: STECKLER, District Judge.

text:
    INTERNATIONAL UNION OF ELEVATOR CONSTRUCTORS, et al. v. The HOME ELEVATOR COMPANY, INC.
    No. IP 84-1154-C.
    United States District Court, S.D. Indiana, Indianapolis Division.
    July 12, 1985.

      Brian A. Powers and Francis J. Martorana of O’Donoghue & O’Donoghue, Washington, D.C., and William R. Groth of Fillenwarth, Dennerline, Groth & Baird, Indianapolis, Ind., for plaintiffs.
    James S. Downing of Peterson, Haramy, Cline & Shoup, Indianapolis, Ind., for defendant.
   ORDER

STECKLER, District Judge.

This matter is before the Court on defendant’s motion to dismiss plaintiffs’ claim for breach of a collective bargaining agreement brought pursuant to § 301 of the Labor Management Relations Act (LMRA), 29 U.S.C. § 185(a). Defendant contends that the Court lacks jurisdiction over plaintiffs’ claims arising after the expiration of the collective bargaining agreement and that plaintiffs’ claims are time barred. Defendant also has filed a motion for enlargement of time within which to respond to plaintiffs’ first set of interrogatories.

Plaintiffs allege that in November 1977 they entered into an agreement with defendant which bound the parties to a collective bargaining agreement between the National Elevator Industry, Inc. and the international union. The agreement expired July 8, 1982. Plaintiffs and defendant began negotiations for a successor agreement in January 1983 but reached an impasse on March 4, 1983. During these negotiations, plaintiffs learned that defendant had not paid the wage rates set forth in the agreement. Subsequently, plaintiffs filed this § 301 action on August 1, 1984. Plaintiffs seek an accounting of all hours worked and money paid to defendant’s employees under the agreement from November 1979 to March 1983. Plaintiffs also request specific performance, damages in the amount owed the employees under the agreement plus interest, costs, and attorney fees.

Defendant first argues that the Court lacks subject matter jurisdiction over plaintiffs’ claims for the period after July 8, 1982 because the agreement had expired. Thus, without an existing contract the Court would not have jurisdiction under § 301. Plaintiffs respond that federal law requires an employer to maintain the status quo during negotiations and, therefore, the contract continued to exist until March 1983 when the parties reached the impasse.

When a complaint alleges the existence of a contract between a union and an employer, the Court has jurisdiction to decide whether the contract does exist. Baker v. Fleet Maintenance, Inc., 409 F.2d 551 (7th Cir.1969). Because the issue presented here is whether the collective bargaining agreement continued to exist after its termination date due to the parties’ negotiations, the Court does have jurisdiction. However, the issue need not be resolved because the Court finds that plaintiffs’ claims are untimely.

Defendant argues that the six-month statute of limitations, established in DelCostello v. Teamsters, 462 U.S. 151, 103 S.Ct. 2281, 76 L.Ed.2d 476 (1983) for hybrid § 301/fair representation suits, should be applied in regular § 301 actions. Plaintiffs argue that DelCostello is an exception to the general rule that the most analogous state law statute should be used. UAW v. Hoosier Cardinal Corp., 383 U.S. 696, 86 S.Ct. 1107, 16 L.Ed.2d 192 (1966). Thus, plaintiffs contend that Indiana’s six-year limitations period, Ind.Code § 34-1-2-1, is the applicable statute of limitations for their action.

This question is one of first impression in this circuit. After extensive research and careful consideration of the parties’ arguments, the Court concludes that the six-month statute of limitations in 29 U.S.C. § 160(b) is the most applicable limitations period and the most conducive to federal labor policy. See Federation of Unions v. Westinghouse, 736 F.2d 896 (3d Cir.1984).

Although the Court in DelCostello did not overrule Hoosier Cardinal, this Court believes that, if presented with the issue, the Court would apply the six-month statute to a § 301 case also. See 462 U.S. at 158 n. 12, 103 S.Ct. at 2287 n. 12. Straight forward § 301 claims, although distinguishable from the hybrid suit in DelCostello, still are subject to the federal labor policy of promoting quick resolutions and private settlements of . disputes to avoid industrial strife. This policy is especially relevant when the collective bargaining agreement provides for binding arbitration, as did the one involved here. Thus, contrary to plaintiffs’ assertions, the Court finds the arbitration clause in this contract very relevant in arriving at the applicable limitations period.

First, this case does differ from Hoosier Cardinal because the agreement in Hoosier did not require the parties to submit disputes to arbitration. 383 U.S. at 705 n. 7, 86 S.Ct. at 1113 n. 7. See DelCostello, 462 U.S. at 162, 103 S.Ct. at 2289. Second, private resolution of disputes, if agreed upon by the parties, is at the heart of federal labor policy. “Final adjustment by a method agreed upon by the parties is declared to be the desirable method for settlement of grievance disputes arising over the application or interpretation of an existing collective-bargaining agreement.” 29 U.S.C. § 173(d). The method of dispute resolution chosen by the parties is not to be usurped by the courts. Hines v. Anchor Motor Freight, Inc., 424 U.S. 554, 562, 96 S.Ct. 1048, 1055, 47 L.Ed.2d 231 (1976). Furthermore, if a party has not invoked the grievance procedure before coming to federal court, the claim must be dismissed. Republic Steel Corp. v. Maddox, 379 U.S. 650, 85 S.Ct. 614, 13 L.Ed.2d 580 (1965); Chicago Area Vending v. Local Union No. 761, 564 F.Supp. 1186 (N.D.Ill.1983).

Here, plaintiffs decided to forego the arbitration procedure and chose to institute this suit over sixteen months after they discovered defendant’s noncompliance with the wage provisions of the contract. Neither this procedure nor the application of a six-year statute of limitations comports with federal labor policy. State statutes of limitations are not to be applied if they conflict with federal policy. DelCostello, 462 U.S. at 161-62, 103 S.Ct. at 2289; Vallone v. Local Union No. 705, Intern. Broth., 755 F.2d 520, 521 (7th Cir.1984).

Another factor which led the Court in DelCostello to apply the six-month limitation was the similarity between a breach of the duty of fair representation and an unfair labor practice under § 8 of the National Labor Relations Act. Section 301 suits often resemble unfair labor practices also. See Westinghouse, 736 F.2d at 900. In fact, plaintiffs rely on § 8 and its case law in arguing that the collective bargaining agreement remained in existence during the negotiation period. Thus, as in DelCostello, the most analogous limitations period for this action is the six-month period in 29 U.S.C. § 160(b).

Moreover, the application of the six-month statute will promote uniformity in federal labor law. The Court in Hoosier Cardinal addressed the desirability of a uniform limitations period but found it not to be a controlling concern. 383 U.S. at 702, 86 S.Ct. at 1111. A review of the subsequent cases, however, emphasizes the desirability of a uniform limitations period for § 301 cases. See, e.g., United Brotherhood of Carpenters & Joiners v. FMC Corp., 724 F.2d 815 (9th Cir.1984) (twenty-day limitations period applied to union action to set aside arbitration decision); Derwin v. General Dynamics Corp., 719 F.2d 484 (1st Cir.1983) (six- or twenty-year limitations period could be applied to union action to confirm arbitration award); Intern. Union of Elec., Radio v. Ingram Mfg., 715 F.2d 886 (5th Cir.1983) (four-year limitations period applied to union action to enforce arbitration award); Province v. Cleveland Press Pub. Co., 571 F.Supp. 855 (N.D.Ohio 1983) (six-year limitations period applied to employees’ § 301 action against employer).

In this circuit, the six-month period has been applied to §§ 411 and 412 claims by employees against their union, Vallone, 755 F.2d at 522, and to § 301 claims by an employee against an employer. Oglesby v. R.C.A. Corp., 752 F.2d 272 (7th Cir.1985). See DelCostello, 462 U.S. at 158 n. 12, 103 S. Ct. at 2287 n. 12. This Court sees no reason to distinguish between a § 301 claim by an employee and one by a union. In all likelihood, a union will be in a better position to institute a § 301 action more quickly than individual employees, who may be unsophisticated in collective bargaining matters and unfamiliar with legal procedures. See DelCostello, 462 U.S. at 166, 103 S.Ct. at 2291. Furthermore, a § 301 action by the union is often done on behalf of individual employees. Thus, to invoke a different limitations period based on who is bringing the action rather than on the cause of action itself is illogical and contrary to common law principles. See International U., U.A., A & A.I. Wkrs. v. Hoosier Cardinal Corp., 235 F.Supp. 183 (S.D.Ind.1964), aff'd, 346 F.2d 242 (7th Cir.1965), aff'd, 383 U.S. 696, 86 S.Ct. 1107, 16 L.Ed.2d 192 (1966).

The six-month limitations period of 29 U.S.C. § 160(b) is the most analogous time period for § 301 suits by unions. At the same time, the six-month period serves the federal labor policy of quick dispute resolution. The application of § 160(b) also will promote uniformity in labor law actions and among various potential litigants in § 301 suits. Therefore, the Court concludes that the six-month statute of limitations should be applied to this action.

Plaintiffs’ complaint alleges that they discovered defendant’s noncompliance with the collective bargaining agreement during negotiations for a new contract. These negotiations took place between January 14, 1983 and March 4, 1983. Thus the latest date on which the six-month statute could have begun to run was March 4, 1983. Plaintiffs did not file this lawsuit until August 1, 1984. Consequently, their action is barred.

Defendant has requested an extension of thirty days from the date of this ruling in order to respond to plaintiffs’ discovery request. Because plaintiffs’ claims are being dismissed, the motion is moot.

By reason of the foregoing, IT IS ORDERED that defendant’s motion to dismiss is GRANTED. Plaintiffs’ claims are dismissed for failure to state a claim. Fed.R. Civ.P. 12(b)(6).

IT IS SO ORDERED.