text:
    Marie CRUMMERE, Plaintiff, v. SMITH BARNEY, HARRIS UPHAM & CO. INCORPORATED, Michael Q. Brown, Jackie Johnston, Merrill Lynch, Pierce, Fenner & Smith, Inc. and Frank Caverretta, Defendants.
    No. 85 Civ. 1376 (RWS).
    United States District Court, S.D. New York.
    Oct. 31, 1985.

      John P. Rudden, New York City, for plaintiff.
    Bachner, Talley & Mantel, New York City (David E. Wolff, of counsel), for defendant Jackie Johnston.
    Mandel, Weiner & Block, New York City (Phillip Mandel, of counsel), for defendant Merrill Lynch.
    Henry Lukas, New York City, for defendant Smith Barney c/o Smith Barney, Harris Upham & Co., Inc.
    Cletus P. Lyman, Philadelphia, Pa., for defendant Michael Q. Brown.
   OPINION

SWEET, District Judge.

Now pending in this securities case are motions on behalf of the individual defendants Michael Brown (“Brown”) pro se, Frank Caverretta (“Caverretta”), Jackie Johnston (“Johnston”), and the two securities firm defendants, Smith Barney, Harris Upham & Co., Inc. (“Smith Barney”) and Merrill Lynch, Pierce, Fenner & Smith, Inc. (“Merrill Lynch”), to dismiss the amended complaint of plaintiff Marie Crummere (“Crummere”) for lack of federal subject matter jurisdiction, failure to state a claim upon which relief can be granted, and for failure to plead fraud with particularity, Federal Rules of Civil Procedure, Rules 12(b)(1), 12(b)(6) and 9(b) respectively. The motion is granted for the reasons set forth below.

Prior Proceedings

Crummere’s initial complaint, filed on February 20, 1985, contained only one claim against defendants Smith Barney, Brown and Johnston which is identical to the first claim of the amended complaint discussed below. On May 24, 1985, Crummere amended her complaint pursuant to leave of this court, adding a second claim against Merrill Lynch and Caverretta and a third claim against Chemical Bank which was dismissed for lack of federal jurisdiction over the defendant. In response to this amended complaint, all defendants filed this motion to dismiss the complaint of July 14, 1985, and one month later Crummere filed a motion for partial summary judgment against defendant Brown on the state law claim. In addition, Crummere has sought leave to amend her amended complaint to add a claim under 18 U.S.C. §§ 1961 et seq. (RICO).

Facts

In determining the validity of a motion to dismiss, the court assumes and sets forth below the facts contained in Crummere’s amended complaint. SEC v. Drysdale Securities Corp., 606 F.Supp. 295 (S.D.N.Y. 1985); Miree v. DeKalb, 433 U.S. 25, 97 S.Ct. 2490, 53 L.Ed.2d 557 (1977).

The complaint charges that the defendants Brown, Johnston, and Caverretta, with the aid of the corporate defendants Smith Barney and Merrill Lynch, defrauded her in violation of the federal securities laws and state laws under the following alleged facts.

In August of 1983, Crummere was approached by Brown who persuaded her to give him $61,000 in cash over the next four months to invest on her behalf with Smith Barney, the brokerage firm which was employing Brown as a registered representative. Five thousand dollars of this initial sum came from the cashing of Long Island Lighting Company (“LILCO”) bonds owned by the plaintiff. Instead of investing this money for Crummere in her Smith Barney account, Brown diverted it to an account maintained at Merrill Lynch in the name of his sister, Jackie Johnston, an account managed by Caverretta as registered representative employed by Merrill Lynch. This Johnston account was controlled by Brown who had discretionary authority over the account. Crummere never received any documentation regarding the investments Brown was purportedly making on her behalf, despite her efforts to verify the safety of her savings.

The misappropriation of funds continued throughout the fall of 1984, when Brown persuaded Crummere to cash $154,000 worth of bonds which she had entrusted to him in her account. She received two checks (totaling $154,000) from Smith Barney as proceeds of these bonds and deposited them in her personal checking account at Chemical Bank. One day later, Crummere turned these proceeds over to Brown for investment in her Smith Barney account by drawing personal checks from her Chemical Bank account. When Crummere received the cancelled checks, she discovered that they never had been deposited in her account, that Smith Barney as payee had been replaced with the word “cash”, and that they were deposited instead in Brown’s personal checking account at Chemical Bank. These funds eventually were transferred to Johnston’s account at Merrill Lynch. When Crummere confronted Brown with these cancelled checks in October of 1985, Brown gave her four promissory notes totaling $220,500. Apparently not comforted by the tender of these notes, Crummere telephoned Brown’s branch manager at Smith Barney to complain of Brown’s alleged fraud. The supervisor never returned her call, and Crummere later contacted another Smith Barney representative to complain that Brown had defrauded her.

The plaintiff bases three claims on these circuitous diversions of her funds. The first claim is that Brown, Johnston and Smith Barney conspired to misappropriate funds and to divert them into the Merrill Lynch account under Johnston’s name, violating section 10(b) of the Securities Exchange Act of 1934 (the “1934 Act”), 15 U.S.C. section 78j(b), and sections 12 or 17 of the Securities Act of 1933 (the “Securities Act”), 15 U.S.C. §§ 77i and 77q. Crummere also alleges two pendent state claims related to this first claim, one based on Brown’s tender of the four promissory notes, and the other based on Smith Barney’s allegedly negligent hiring and supervision of Brown.

Crummere’s second cause of action centers around the activities of Brown and Caverretta in the administration of Johnston’s brokerage account with Merrill Lynch. Crummere contends that Brown, Caverretta and Merrill Lynch conspired to defraud her by diverting money from her Smith Barney account, placing the money in the Merrill Lynch account under Brown’s actual control, and “engaging in speculative, inappropriate churning” of the securities. The claim further alleges that Merrill Lynch knew or should have known that such activities were improper and unlawful and that Merrill Lynch negligently supervised the activities of Caverretta with regard to the account.

The final claim charged that Chemical Bank improperly honored the two checks altered by Brown in violation of the Uniform Commercial Code and applicable duties under common law of negligence and warranty. Chemical Bank was, however, dismissed as a defendant on August 19, 1985 for lack of federal jurisdiction.

Discussion

Crummere’s amended complaint fails to establish grounds for the exercise of federal jurisdiction over her claim. In order to state a claim under the fraud provisions of the Securities Act or the 1934 Act, the fraud must have been accomplished through the purchase or sale of a security. Blue Chip Stamps v. Manor Drug Stores, 421 U.S. 723, 95 S.Ct. 1917, 44 L.Ed.2d 539 (1975) (A private damage action under Rule 10b-5 is confined to actual purchasers and sellers of securities); Birnbaum v. Newport Steel, 193 F.2d 461 (2d Cir.1952); Parness v. Lieblich, 489 F.Supp. 889, 892 (S.D.N.Y.1980) (A plaintiff who is not a purchaser of securities may not maintain a cause of action under Section 17(a) of the Securities Act).

Under both the Securities Act and the 1934 Act, isolated sales or purchases will not satisfy this standing requirement. To state a claim under Rule 10b-5 of the Exchange Act, Crummere must show (1) the defendants misrepresented or omitted to state material facts in connection with the purchase or sale of a security; (2) that she relied to her detriment upon defendants’ misrepresentations and omissions; and (3) defendants made their misrepresentations or omissions with scienter. Savino v. E.F. Hutton & Co., Inc., 507 F.Supp. 1225, 1231 (S.D.N.Y.1981). Section 17(a) of the Securities Act requires the same stringent connection between the fraud and the security transaction. Plaintiffs must show that the fraud, misstatement or omission occurred “in the offer or sale of any securities.” Chemical Bank v. Arthur Anderson & Co., 726 F.2d 930, 945 (2d Cir.1984) (The standard for connection imposed by 17(a) of the Securities Act is at least as high as that of 10(b) and Rule 10b-5).

Crummere alleges that three groupings of transactions meet this purchase and sale requirement: the initial sale of LILCO bonds, the sale of $154,000 of miscellaneous bonds, and the “churning” of securities in Jackie Johnston’s Merrill Lynch account. These security transactions were so removed from the alleged conversion of Crummere’s funds, that they fail to constitute transactions “in connection” with the fraud.

Crummere admits in her complaint that the initial sale of LILCO bonds to open her Smith Barney account proceeded without incident (Par. 12) and that the bonds were sold for full value with no detrimental reliance on any representations made by Brown. The $154,000 of miscellaneous bonds were cashed by Smith Barney in accordance with Crummere’s instructions, and Smith Barney sent checks to her home which she deposited in her personal checking account at Chemical Bank. While Brown later convinced Crummere to turn over the proceeds of this sale to him for investments which he never made on her behalf, the mere fact that the funds originated from a bond sale does not connect them to a later conversion of those funds. To satisfy the purchase and sale requirements of rule 10b-5, there must be a causal connection between the misstatements or omissions and the plaintiff’s purchases or sales, and there can be no such connection where the misstatement occurs after the purchase. Troyer v. Karcagi, 476 F.Supp. 1142, 1148 (S.D.N.Y.1979). Here, Brown’s alleged misstatements occurred after the unremarkable sale of Crummere’s bonds, when he converted the funds to Johnston’s account at Merrill Lynch. While Brown may have deceived Crummere into believing that the proceeds of the bond sales would be invested for her, these deceptions did not relate to specific securities, and thus do not meet the “in connection with” requirements of Rule 10b-5. SEC v. Drysdale Securities, supra, 606 F.Supp. 295 (S.D.N.Y.1985).

The fraud which Crummere alleges is actually a failure to purchase or sell securities for her benefit, and courts have been careful to avoid creating federal securities claims out of such common law conversion claims against brokers. In Smith v. Chicago Corporation, 566 F.Supp. 66 (N.D.Ill. 1983), the district court declined to permit this alteration of the “in connection” requirement. Smith’s investment funds were diverted to the personal account of his broker rather than used to purchase stock which Smith had requested the broker to purchase. The court held that Smith did not have standing to assert a Rule 10b-5 violation because no purchase had been made in connection with his broker’s misrepresentations. Similarly, in Bosio v. Norbay Securities, Inc., 599 F.Supp. 1563, 1567 (E.D.N.Y.1985), the court held that a broker’s failure to turn over the cash proceeds of a stock sale in the plaintiff’s account could not sustain a claim under Rule 10b-5 because it was a misrepresentation not as to the inducement to sell the stock, but as to the mechanics of the sale and disposal of the proceeds. “Such ‘bootstrapping’ of a conversion claim should not be permitted.” Id. at 1567-68 (citations omitted).

Crummere attempts to distinguish the Smith and Bosio cases by claiming that purchases and sales in Johnston’s Merrill Lynch account satisfy the “in connection” requirement for Crummere’s Smith Barney account. Crummere argues that the Merrill Lynch account should be considered a “constructive trust” and that the “churning” and deceptive practices which occurred in the account can supply the basis for the Rule 10b-5 claim. This contention has no merit, however, because Crummere’s complaint offered no evidence to support the existence of a conspiracy among Brown, Caverretta and Merrill Lynch. Although Caverretta and Brown were personal friends and Brown had discretion over the Merrill Lynch account of his sister, no facts were asserted to indicate that Caverretta knew that Johnston’s funds were the proceeds of a scheme to defraud Crummere.

Even if Crummere could establish a conspiratorial connection between the Smith Barney and Merrill Lynch accounts, she would fail to qualify for standing under section 10(b). The Second Circuit court has stated that the misrepresentation must relate to the securities alleged to satisfy the purchase and sale requirement, and not just to the transaction in its entirety. Chemical Bank v. Arthur Anderson & Co., supra, 726 F.2d at 943; SEC v. Drysdale Securities Corp., supra, 606 F.Supp. 295. While Crummere’s claim that there was a conspiracy to defraud her could create some relationship between the two brokerage accounts, Brown’s misrepresentations to her would remain unrelated to the actual securities traded in the Merrill Lynch account.

Crummere offers two cases to support the notion that the reasoning in the Chemical Bank and Drysdale cases supra should not control this case. In Competitive Associates Inc. v. Laventhal, K.H. & H., 516 F.2d 811 (2d Cir.1975) the Second Circuit sustained an investors federal securities claims against an accounting firm based on the fact that the accounting firm had falsified information about an investment advisory firm through which the plaintiffs eventually made large purchases and sales of securities. The Competitive Associates court stated, however, that “the accountants accepted payoffs and otherwise actively collaborated with Yamada [the investment advisor] for the specific purpose of influencing investors to carry out security transactions on its behalf.” Id. at 815.

Reliance on Competitive Associates is, however, misplaced for three reasons. First, Crummere has shown no evidence of such a conspiracy between Brown and Caverretta. Second, no securities were purchased on her behalf either in the Smith Barney or Merrill Lynch account. Finally, there is doubt as to the viability of the Competitive Associates interpretation of the “in connection” requirement of Rule 10b-5 in the wake of the Second Circuit’s more restrictive reading of this requirement in the Chemical Bank case. See SEC v. Drysdale Securities Corp., supra, 606 F.Supp. at 299.

The Second Circuit’s Chemical Bank holding that misrepresentations must pertain to the value of securities purchased or sold by the plaintiff also preempts Crummere’s reliance on Henricksen v. Henricksen, 486 F.Supp. 622 (E.D.Wisc.1980), aff'd in part, rev’d in part, 640 F.2d 880 (7th Cir.), cert. denied, 454 U.S. 1097, 102 S.Ct. 669, 70 L.Ed.2d 637 (1981), a case not controlling in this Circuit. This case endorses the theory that sales or purchases made by someone other than the plaintiff with the converted funds is part of a “scheme to defraud” within the meaning of section 10(b). Furthermore, the Henricksen Court cited no authority for this proposition, a fact which has weakened the value of the case in other districts. See, e.g., Smith v. Chicago Corporation, supra, 566 F.Supp. at 69 (N.D.Ill.1983).

Thus Crummere’s amended complaint fails to establish that the federal courts have jurisdiction over her claim because it has not demonstrated that she purchased or sold a security in connection with Brown’s misrepresentations. Crummere’s remaining claims are based solely on state law, and this court normally would decline to retain jurisdiction over the pendent state claims in the absence of a federal claim. United Mine Workers v. Gibbs, 383 U.S. 715, 726, 86 S.Ct. 1130, 1139, 16 L.Ed.2d 218 (1966). However, by companion motion decided in conjunction with this motion, Crummere has sought leave to amend her amended complaint to add a claim based on 18 U.S.C. §§ 1961 et seq. (RICO) which leave has been granted in light of the recent developments in that area.

Therefore the securities claims are dismissed as against all defendants, and leave is granted to renew the motion to dismiss the common law claims in connection with any motions directed to the second amended complaint. Crummere may renew her pending cross motion for partial summary judgment against defendant Brown based on the state law claims after filing the second amended complaint. In addition, the hearing date for Crummere’s renewed motion for partial summary judgment shall be set for not less than thirty (30) days after the filing of the motion in view of the fact that defendant Brown’s counsel is newly appointed.

IT IS SO ORDERED.

      . Crummere’s amended complaint failed to cite the specific sections of the 1934 Act and the Securities Act which were allegedly violated. These citations were made in plaintiffs memorandum of law in opposition to defendants’ motion to dismiss.


source: Caselaw Access Project

author: EDGAR, District Judge.

license: Public Domain

text:
    Gary MacDOUGAL, Plaintiff, v. SEARS, ROEBUCK & COMPANY, Defendant.
    Civ. No. 1-85-296.
    United States District Court, E.D. Tennessee, S.D.
    Nov. 4, 1985.

      William Heck, Chattanooga, Tenn., for plaintiff.
    R.B. Gossett, W. Neil Thomas, III, Thomas, Mann & Gossett, Chattanooga, Tenn., William F. Kirsch, Maurice Wexler, Heiskell, Donelson, Bearman, S.D. Wakefield, Memphis, Tenn., for defendant.
   MEMORANDUM

EDGAR, District Judge.

This matter is before the Court on defendant’s motion to dismiss or for summary judgment pursuant to Federal Rules of Civil Procedure 12(b)(6) and 56. Jurisdiction of the Court is invoked in part pursuant to 28 U.S.C. § 1332. Plaintiff appears before the Court seeking relief for an alleged breach of an employment contract and for violations of the Employee Retirement Income Security Act (“ERISA”), 29 U.S.C. §§ 1001, et seq.

Plaintiff MacDougal was employed by Sears from 1965 through April 6, 1984. MacDougal’s last employment was as Central Service Manager for the Chattanooga, Tennessee area, which included responsibility for managing the Service Department at a Sears Service Center. Plaintiff was considered a “checklist” employee which was a management position.

Located in the same facility as the Central Service Center was a distribution center under the supervision of another individual. Plaintiff utilized the services of this department for the repair of a personally owned table and the painting of a personally owned golf cart. Employees in the department were not remunerated for this work. At all pertinent times there existed management guidelines for individuals in plaintiffs position which restricted or prohibited the use of company workers for personal services.

MacDougal was also in the restaurant and vending businesses. He, along with another individual, owned vending machines which were placed at Sears facilities. Plaintiff had been advised against this practice because of the appearance of impropriety. Apparently, another incident involving MacDougal related to the use of a company postage meter for personal letters which was also considered a violation of management guidelines.

MacDougal was terminated in 1984 for the alleged combination of the above-recited facts. At the time of plaintiffs termination, the reason stated for his termination was “wrongful conduct” which, in turn, prevented him from receiving a service allowance from Sears. A service allowance is given by Sears to employees who are in transition from employment at Sears to some other employer. The personnel manual states that the service allowance would not be given to employees terminated for “willful misconduct” and it lists nine non-exclusive examples of such conduct. Section 7201 of the personnel manual also provides that, “The Company reserves the right to make the final decision regarding an employee’s eligibility to receive a service allowance.”

The personnel manual is distributed in a limited fashion to employees of Sears. At the front of the manual is a disclaimer that the manual limits the right of Sears to terminate employees. Plaintiff asserts that the manual gives rise to a contract of employment and that, consequently, he is entitled to a service allowance. He supports his claim by the fact that the Tennessee Department of Employment Security found that he was not guilty of wrongful misconduct when it evaluated his termination for purposes of entitlement to benefits.

Defendant’s motion is supported by affidavits and depositions and will be treated as a motion for summary judgment pursuant to Federal Rule of Civil Procedure 56. Summary judgment may be granted only in the absence of any genuine issue of material fact. Smith v. Hudson, 600 F.2d 60, 63 (6th Cir.), cert. dismissed, 444 U.S. 986, 100 S.Ct. 495, 62 L.Ed.2d 415 (1979). A court must construe the record in the light most favorable to the party opposing the motion for summary judgment. Id.

The present motion focuses on plaintiff’s breach of contract claim and the Court will focus solely on this issue. The Court will reserve judgment on plaintiff’s ERISA claim. The pertinent question presently is whether the personnel manual gives rise to, or supplements, an employment contract creating an entitlement to the service allowance. Secondly, if there is an entitlement, the Court must determine whether it is due the plaintiff. The plaintiff does not contend that he is the victim of a wrongful discharge but solely that he was not paid a service allowance which is owed him by virtue of its inclusion in the personnel manual.

The determination of whether an employee handbook or personnel manual gives rise to guarantees to employees turns on the specific language contained in the employment manual. Whittaker v. Care-More, Inc., 621 S.W.2d 395, 397 (Tenn.Ct. App.1981). Only where the language is specific in stating that the employment manual provides certain guaranteed policies or practices will the employment manual be deemed part of the employment contract. Id. See, e.g., Hamby v. Genesco, Inc., 627 S.W.2d 373 (Tenn.Ct.App.1982). Even where part of the manual may be considered to give rise to a definitive guarantee based on past practices of the company, a manual will not necessarily be treated as a contract if specific language within the manual disclaims certain guarantees. Abbott v. Kellwood Company, Gibson Law No. 1, 682 S.W.2d 206 (Tenn.Ct.App.1985). Thus, in Abbott the Court found that discharged employees were entitled to vacation pay because of a company policy relating to its employment manual but that the employees were not entitled to severance pay because the company had reserved the sole right of decision regarding eligibility for that pay upon termination of an employee. Id. at 6.

While the plaintiff claims that the service allowance was an entitlement because no employee was denied this payment, the plaintiff rests solely on his pleadings for this assertion. In contrast, the defendant has introduced the personnel manual which clearly states that the service allowance may be denied in a variety of circumstances and gives Sears the ultimate discretion to make a final decision on the payment of the allowance. A party cannot rest solely on the pleadings in a summary judgment motion when supporting documentation has been introduced in opposition. Federal Rule of Civil Procedure 56(e).

The introduction to the Sears personnel manual states in part that:

“This manual, in common with other Sears’ employee manuals, handbooks, etc., is not intended to, and indeed does not, bestow any additional rights to employment or employment benefits to Sears’ employees.”

The Court finds that the personnel manual is a unilateral expression of company policy and does not amount to a contract between Sears and the plaintiff. See Garcia v. Aetna Finance Company, 118 LRRM 2298 (10th Cir.1983). Plaintiff does not claim that any provision of the personnel manual was an inducement to his employment, and the circumstances here do not reflect a meeting of the minds which would confer any contractual right upon the plaintiff. Lieber v. Union Carbide Corp., 115 LRRM 2564 (E.D.Tenn.1983).

Even in the event that the personnel manual language amounted to contractual provisions regarding severance pay, it is clear that Sears retains enough discretion under the language of the personnel manual to deny the service allowance to the plaintiff regardless of whether plaintiff was in fact guilty of “willful misconduct.” The Court also notes that a finding by the Tennessee Department of Employment Security under the provisions of T.C.A. §§ 50-7-101 et seq. would not be determinative of whether or not there is “willful misconduct” in this case.

For all of the above reasons, the Court will GRANT a partial summary judgment to the defendant on the plaintiff’s breach of contract claim. An appropriate order will enter.

      . Paragraph 7203 of the Sears' personnel manual states:
      "Willful misconduct includes but is not limited to:
      1. Gross insubordination, where the employee willfully and without justification refuses to carry out orders of unit executives, or
      2. Violation of Company regulations involving the handling of cash, or
      3. Deliberate course of action to falsify Company records, delay proper recording of detail, etc., or
      4. Registering time for another employee (repeated offenses subject both employees to dismissal), or repeated tardiness after corrective review, or
      5. Abusing discount privilege, or
      6. Reporting for work under the influence of, or consuming on Company premises, intoxicants, other stimulants, or drugs, or disorderly conduct on Company premises or while on Company business if repeated after corrective review (also see paragraph 7156 "d”) or
      7. Committing or attempting to commit deliberate damage to Company property, advocating or taking part in unlawful seizure of or trespassing on Company property, or
      8. Affiliation with an organization whose activities are judged subversive by the U.S. Government, or
      9. Conducting a personal business which is in competition with Sears____” (Court File No. 32, p. VII-50b-51).


author: PLATT, District Judge.

text:
    UNITED STATES of America, Plaintiff, v. Rosita Buitrago GUTIERREZ, Defendant.
    No. 82 CV 1031.
    United States District Court, E.D. New York.
    Nov. 6, 1985.

      Raymond J. Dearie, U.S. Atty., Brooklyn, N.Y. by Igou M. Allbray, Asst. U.S. Atty., for Government.
    Stanley A. Landers, Kew Gardens, N.Y., for defendant.
   MEMORANDUM AND ORDER

PLATT, District Judge.

FACTS AND BACKGROUND

This enforcement action was brought by the government upon defendant’s failure to pay a penalty assessed against her for violating a Federal Aviation Administration (“FAA”) safety regulation.

The case arises out of events that transpired six years ago. On October 29, 1979 the defendant, Rosita Gutierrez, was en route to visit family and friends in her native Colombia. When she attempted to proceed through the passenger screening checkpoint at John F. Kennedy International Airport, a .380 caliber Kurz automatic pistol and five live rounds of ammunition were discovered concealed in a portable phonograph in the defendant’s possession.

Mrs. Gutierrez testified that the phonograph was delivered to her earlier that day by an acquaintance, Dario Diaz, who had asked if she would bring it to his son in Colombia. (Pl.’s Dep. at 13.) Earlier that year, Mr. Diaz had delivered a housecoat to Mrs. Gutierrez’s mother in Colombia, and so the defendant consented to return the favor.

When the defendant received the phonograph on the afternoon of her departure day, it was wrapped and screwed shut. She gave it to her son to carry and proceeded directly to the airport. When the weapon was discovered, defendant was arrested for Criminal Possession of a Weapon, a violation of the New York State Penal Law. The matter was subsequently presented to a Grand Jury in the Supreme Court of Queens County, who found “no true bill” against the defendant. Thereafter, in November 1979 the FAA notified Mrs. Gutierrez of its decision to investigate whether she had violated 14 C.F.R. § 107.21(a). Pursuant to its investigation the FAA determined that defendant had violated the regulation and was liable for a penalty of $1,000.00. When the defendant failed to pay the fine, the government commenced this enforcement proceeding in April 1982.

Jurisdiction is conferred upon the Court by section 1007(b) of the Federal Aviation Act, codified at 49 U.S.C. § 1487(b), and 28 U.S.C. § 1345. The case is presently before the Court on cross summary judgment motions.

DISCUSSION

Pursuant to the statutory authority of the Federal Aviation Act of 1958, the FAA is authorized to issue rules, regulations, and minimum standards designed to enhance the safety of civil aeronautics. 49 U.S.C. § 1345 (1982). Section 1471(a) of Title 49 establishes a mechanism to enforce these regulations, providing in relevant part that “[a]ny person who violates (A) any provision of ... this title or any rule, regulation or order issued thereunder ... shall be subject to a civil penalty of not to exceed $1,000.”

At issue in this case is an alleged violation of FAA regulation 14 C.F.R. § 107.-21(a). That regulation reads:

(a) Except as provided in paragraph (b) of this section, no person may have a firearm ... on or about the individual’s person or accessible property—
(1) when performance has begun of the inspection of the individual’s person or accessible property before entering a sterile area; ...

The defendant opposes the assessment of the penalty claiming that she did not violate the provisions of the regulation for two reasons. First, and foremost, in an affidavit in support of her motion for summary judgment, defendant states, “I never knew that the package contained any gun____ Certainly the intent of this statute is not to punish, either criminally or civilly, a person with no knowledge of violating it.” (Def.’s Aff. at II5.) Second, defendant argues that the gun was not “accessible” to her as required by the FAA regulation. We address both of these contentions in turn.

A. lip C.F.R. § 107.21(a) Imposes Strict Liability

In the interest of advancing certain public policies, Congress has from time to time enacted strict liability statutes. By their terms, liability attaches upon the commission of the acts proscribed regardless of the absence of fault or wrongdoing. Such measures are passed either because the exigencies of social justice necessitate shifting the loss to the party who can best bear the loss, as with workmen’s compensation laws, or when certain high risk situations demand it, as when a railroad company is held strictly accountable for fires set by their locomotives. Similar policy concerns underlie such varied measures as the Federal Safety Appliance Act, 45 U.S.C. § 1, et seq., and State dram shop acts. See, e.g., Konsler v. United States, 288 F.Supp. 895 (N.D.Ill.1968) (Illinois dram shop act imposes liability without fault and does not require a showing of negligence). At times the unswerving application of these regulations seems harsh and unfair, as may appear in the case at bar. However, the Legislature, in its wisdom, has determined that the overriding public interest in assuring safe air travel offsets any potential unfair individual applications of this statute.

In reviewing the papers filed in connection with this motion, and after conducting an independent search, this Court notes that there is an apparent dearth of caselaw directly on point. The Court, therefore, looked to analogous decisions as persuasive precedent. In Delta Air Lines, Inc., No. 37563, slip op. (C.A.B. Feb. 19, 1981), an Administrative Law Judge confronted a similar issue in deciding whether to assess a penalty under 49 U.S.C. § 1471(a) for Delta’s admitted violation of 14 C.F.R. § 252.2 (requiring non-smoking area for all passengers so requesting it). Delta argued that the incidents complained of were at most, “technical violations of an isolated nature and that the Board did not intend that there should be strict liability imposed on carriers for every failure to comply with Part 252.” Delta, slip op. at 5.

The airline suggested that regardless of the violation, no civil penalties should attach since it would not “ ‘serve any legitimate regulatory or public interest purpose.' ” Id. at 6. The Administrative Law Judge, to the contrary, imposed a fine having, correctly we feel, determined that both the “regulation involved here and the statute require strict compliance with the terms of the regulation.” Id.

Thus, a parsing of the statute and regulation, consideration of the social policy motivating the Legislature, and persuasive judicial reasoning in an analogous case compel the conclusion that regardless of whether Mrs. Gutierrez was cognizant of the gun and ammunition concealed in the phonograph, she is civilly accountable for her action.

B. Accessible Property

The defendant also maintains that the phonograph which was wrapped and screwed closed when she received it was not “accessible” property within the meaning of the regulation. Defendant’s affidavit in support of her motion for summary judgment avers: “I was not carrying any screwdriver, pliers or wrench. The gun was certainly not ‘accessible’ to me in the sense that the statute, F.A.A. Section 107.-21, requires.” (Def.’s Aff. at f 4.)

This Court finds that defendant has misinterpreted the wording of the regulation. The word “accessible” does not modify firearm, it modifies property. Mrs. Gutierrez was in possession of the phonograph; it was obtainable by her. Hence, it was accessible to her within the meaning of the word. See Webster’s New Collegiate Dictionary, p. 5 (1960). The Court concurs with the plaintiff: “[wjhat the statute and regulation reach is the act of having such devices in one’s possession at the time of being screened for entry into a ‘sterile’ area. 43 F.R. 60291.” (PL’s Mem. at 8) (emphasis in original).

Even if the regulation required that the defendant had to be able to reach the gun, her admitted possession of coins or such readily available instruments as in-flight eating utensils would have sufficed to open the phonograph, rendering the gun obtainable, or accessible.

CONCLUSION

Defendant argues that the interests of justice would “be best served if this motion were granted and this complaint dismissed” (Def.’s Aff. at Í! 6), when, in fact, to do so would be to contravene the Legislative intent and fail to apply the law as written. The Federal Aviation Act was designed “to provide for the regulation and promotion of civil aviation in such manner as to best foster its development and safety.” H.R.Rep. No. 2360, 85th Cong., 2d Sess., reprinted in 1958 U.S.Code Cong. & Ad.News 3741. The purpose underlying the Act prompted the promulgation of strict liability regulations in order to implement the congressional mandate. Defendant in this case violated the terms of one such regulation and, hence, liability attaches.

Therefore, this Court grants plaintiff’s •motion for summary judgment and denies defendant’s motion for summary judgment.

SO ORDERED.

      . In sharp contrast to section 1471 is the succeeding section which imposes criminal liability. Only intentional knowing violations are covered: "Any person who knowingly and willfully violates any provision of this chapter ... shall be deemed guilty of a misdemeanor____” 49 U.S.C. § 1472(a) (1982).


author: PLUNKETT, District Judge.

text:
    Daniel F. McCARTHY and First National Bank & Trust Company of Evanston, Trustee of the Melanie B. McCarthy Trust, Plaintiffs, v. UNITED STATES of America, Defendant.
    No. 84 C 8941.
    United States District Court, N.D. Illinois, E.D.
    Nov. 8, 1985.
    Allen H. Meyer, Chicago, 111., for plaintiffs.
    Joan C. Laser, U.S. Atty’s Office, Chicago, 111., for defendant.
   MEMORANDUM OPINION AND ORDER

PLUNKETT, District Judge.

Plaintiffs, Daniel F. McCarthy (“McCarthy”) and First National Bank & Trust Company of Evanston, trustees of the estate of Melanie B. McCarthy (“decedent”), bring this action against the United States of America to recover $8,349 which plaintiffs deposited with the Internal Revenue Service under protest after a deficiency was assessed against the estate in that amount. Presently before the court is defendant’s motion for summary judgment.

The decedent died on May 24, 1980. During the period prior to her death, decedent maintained a checking account. Her son, McCarthy, had authority to write checks on the account and had done so on many occasions to pay decedent’s bills and make gifts. On May 15, 1980, decedent instructed McCarthy to write nine checks, each for $3,000, payable to various members of her family. On May 22, McCarthy wrote the nine checks for a total of $27,-000. The checks were intended as gifts. None of the checks were debited from decedent’s account until after the date of her death.

Plaintiffs filed a federal estate tax return with the I.R.S. They did not include the $27,000 in their calculation of decedent’s estate. The I.R.S. determined that the amount should have been included and assessed the estate $8,579.97 in additional taxes and interest. Plaintiffs paid the amount under protest and brought this action. Defendant claims that the $27,000 was required to be included in decedent’s estate because the money was in her checking account on the date of her death. Plaintiffs contend that the decedent had made gifts of the money prior to her death and thus, the amount should not be included in her estate.

Under § 2031(a) of the Internal Revenue Code, gross estate is defined as: “... including to the extent provided for in this part, the value at the time of his death of all property, real or personal, tangible or intangible, wherever situated.” I.R.C. § 2031(a) (1985). Section 2035(a) provides that gifts made by decedent within three years of her death should be included in her estate. I.R.C. § 2035(a) (1980). However, crucial to this case is the exception to that ruled created by paragraph (b)(2) of section 2035 which excludes from paragraph (a) any gift made by decedent to the extent of $3,000 per donee per calendar year. I.R.C. § 2035(b)(2) (1980). (The 1981 amendments changed the amount to $10,-000 per year, see I.R.C. § 2035 (1985).) The amount of the gifts here meets the statutory limit. The question before this court, given the timing of death between the writing of the checks and the debiting of the decedent’s account, is at what time decedent’s gifts should be considered to have been “made” within the meaning of this exception.

Defendants would have us conclude that the gifts had not been made upon death because, with respect to money in bank accounts, Treasury Regulation § 20.2031-5 provides that:

The amount of cash belonging to the decedent at the date of his death, whether in his possession or in the possession of another, or deposited with a bank, is included iñ the decedent’s gross estate. If bank checks outstanding at the time of the decedent's death and given in discharge of bona fide legal obligations of the decedent incurred for adequate and full consideration in money or money’s worth are subsequently honored by the bank and charged to the decedent’s account, the balance remaining in the account may be returned, but only if the obligations are not claimed as deductions from the gross estate.

Treas.Reg. § 20.2031-5 (1958). Defendant contends that the plain words of Treasury Regulation § 20.2031-5 compel this court to find that the $27,000 is required to be included in the decedent’s estate. Defendant interprets the regulation as requiring the inclusion in the decedent’s estate of all cash remaining in her account on the date of her death.

It is true that the bank account was in decedent’s name and further that the $27,-000 remained in that account on the date of her death. It is also true that the outstanding checks at issue were not issued to discharge legal obligations incurred for adequate and full consideration. However, this court does not interpret the regulation as requiring the inclusion of the $27,000 in decedent’s account.

Treasury Regulation § 20.2031-5 explicitly states that it applies to cash “belonging to the decedent at the date of [her] death.” Thus, the determination of whether the $27,000 is includible in decedent’s estate depends not upon whether it was in her account on the date of her death, but rather upon whether it still belonged to her on that date. If the gifts were complete prior to decedent’s death, then the $27,000 no longer “belonged” to her within the meaning of the regulation. We will discuss why we believe the gifts were complete, and hence under the regulation the money is not includible in the estate, infra. First, however, even if we interpreted the regulation as applying to all cash remaining in her account, regardless of whether given by gift, we would conclude that the regulation does not govern the situation presented.

Our conclusion that the situation presented in the instant case is not governed by the regulation stems from the tax court’s interpretation of the regulation in Est. of Belcher v. Commissioner, 83 T.C. 227 (1984). In Belcher, the tax court held that the amount of a check which was given as a charitable contribution by the decedent prior to his death but not presented for payment and honored by the bank until after his death, was not includible in the decedent’s estate. The Belcher court applied the relation back doctrine which we will discuss presently. What is relevant here is that the Belcher court concluded that the Treasury Regulation § 20.2031-5 did not govern the situation. In reaching its decision, the court examined the underpinnings of the regulation.

Prior to 1977, the Internal Revenue Code provided that all gifts made by a decedent within three years of the date of her death were includible in the decedent’s estate if they were made “in contemplation of death.” I.R.C. § 2035(b) (1976). The Belcher court determined that that Treasury Regulation may have been intended to thwart any possible argument that the outstanding check at issue was not a gift made in anticipation of death. The court noted the legitimate concern that a drawer may write a check to an individual with the understanding that the individual will not present the check to the bank for payment until after the drawer’s death. But the Belcher court was unable to find any considerations which would give rise to the same concerns with regard to a check given as a charitable contribution and promptly presented for payment. Thus it determined that the situation was not within the contemplation of the regulation and therefore determined that the regulation did not preclude the exclusion of the amount of the check.

Similarly, we find that no policy considerations exist which justify the inclusion of the checks at issue in the reach of the regulation. First, the Internal Revenue Code now provides that all gifts, except those specifically exempted, which are made by a decedent within three years of the date of her death are includible in the estate regardless of whether they were made in anticipation of death. I.R.C. § 2035(a) (1985). Thus, the special concern which the Belcher court recognized with respect to non-charitable gifts may no longer be distinguished. Second, as discussed above, the gifts in the instant case, if made before death, are specifically exempt from inclusion in a decedent’s estate. I.R.C. § 2035(b)(2) (1985). Thus, these gifts appear to have Congress’ stamp of approval. Finally, not only were these checks promptly presented for payment but decedent had made a practice of having McCarthy make gifts by check regularly. Thus, this is not a case in which a decedent is trying to avoid the estate tax laws. Rather, decedent was engaged in a practice of giving away her money to her family in a manner which is not only condoned by Congress but apparently encouraged as well. For these reasons, this court finds that the instant case is not within the contemplation of the regulation and therefore the regulation does not preclude the exclusion of the $27,000.

The ultimate determination in the case, whether or not the regulation applies, depends upon whether the gifts were “made,” or rather, “complete,” prior to the date of decedent’s death within the meaning of § 2035(b)(2) of the estate tax provisions. Treasury Regulation § 25.2511-2(b) on gift tax provides that a gift is complete when “the donor has so parted with dominion and control as to leave him no power to change its disposition.” Treas.Reg. § 25.-2511-2(b) (1958). Similarly, in order to establish that a gift was complete for purpose of determining the estate tax consequence of the gift the following elements have been required: “(1) a donor competent to make the gift; (2) a clear unmistakable intention on [her] part to make it; (3) a donee capable of taking the gift; (4) a conveyance, assignment, or transfer sufficient to vest the legal title in the donee, without power of revocation of the will of the donor, and (5) the relinquishment of dominion and control of the subject matter of the gift by delivery to the donee.” Est. of Mortimer v. Commissioner, 17 T.C. 579, 582 (1951). The only problematic elements in the instant case are (4) and (5). Although defendant does not allege that delivery was not made prior to decedent’s death, it is not clear that McCarthy delivered the checks to the donees other than himself prior to her death. However, since defendant does not contest delivery, for purposes of determining whether defendant’s motion for summary judgment should be granted we will assume that delivery was made prior to her death.

Defendant contends that decedent did not relinquish dominion and control over the checks because she retained the power to order a stop payment on those checks. Defendant cites Revenue Ruling 67-396 which provides, in part, that a gift made by means of a check is not complete until paid by the bank on which it is drawn. 1967-2 C.B. 408. Although Revenue Rulings are not binding on this court, defendant would have this court find that it correctly states the law. Additionally, defendant points to various Illinois banking statutes which essentially state that the drawer of a check has the power to stop payment on the check.

At least one court has determined that this technical ability to exert control establishes that a gift made by means of check is not complete for purposes of estate taxation until the check has been presented and honored by the bank. See Cullis v. United States, No. 84-7797, slip op. (N.D.Ohio 1984). Additionally, it has been held that under Illinois law a check given as a gift is not enforceable against a decedent’s estate. See Falco, Inc. v. Bates, 30 Ill.App.3d 570, 334 N.E.2d 169 (1st Dist.1975). Moreover, Illinois courts have found that promissory notes, which defendant appears to contend are analogous to checks, are merely promises to pay and as such are not enforceable against a decedent’s estate. See Meyer v. Meyer, 379 Ill. 97, 39 N.E.2d 311 (1942).

This court does not find these statutes and decisions compelling. First, the fact that the decedent technically had the power under Illinois banking statutes to stop payment on the check is not dispositive of the question of whether she relinquished dominion and control within the meaning of the estate tax provisions of the Internal Revenue Code. The state banking statutes have only limited relevance to the issue at bar because the policy considerations involved in drafting banking regulations are different from those involved in tax questions. Further, no court has found that, in order to have made a completed gift, a donor must have relinquished all ability to exercise control. Rather, courts have focused on whether the decedent intended to relinquish all dominion and control over the subject matter of the gift at the time in question. Est. of Doyle v. Commissioner, 32 T.C. 1209, 1212 (1959); Wasserman v. Commissioner, 139 F.2d 778, 780-781 (1st Cir.1949). Because the Cullis court based its decision entirely upon the technical ability of the decedent to stop payment on the checks under the Ohio banking statutes without further inquiry, we reject that decision.

With respect to Illinois law regarding the property rights of donees of promissory notes and gifts made by means of a check, we find that although the state law is influential it does not convince us that the decedent did not relinquish dominion and control within the meaning of federal tax law. The Supreme Court has stated that while state law creates legal interests, federal law determines when and how those interests are taxed. Burnet v. Harmel, 287 U.S. 103, 110, 53 S.Ct. 74, 77, 77 L.Ed. 199 (1932). Thus, even if the gifts at issue were not complete prior to decedent’s death for state property law purposes, this court may still find that the gifts were complete for purposes of federal estate tax law.

It is instructive to recall the Supreme Court’s admonition to lower courts, in considering tax questions arising in real world situations, to base their decisions on their “experience with the mainsprings of human conduct.” Commissioner v. Duberstein, 363 U.S. 278, 289, 80 S.Ct. 1190, 1198, 4 L.Ed.2d 1218 (1960). With this admonition in mind, we conclude that, assuming that delivery was made prior to decedent’s death, decedent, by instructing McCarthy to write the nine checks and through his fulfillment of her instructions, relinquished dominion and control over the $27,000 in her checking account.

Our decision is based upon the common day usage of the check and the uncontested intent of decedent to give away the $27,000 by means of a check. The check is a peculiar instrument. In the majority of transactions involving checks, the delivery of a check is intended and accepted as payment. The conclusiveness of the transaction is particularly true in the situation at bar where a grandmother gives money to members of her family by giving them checks. In real world terms grandmothers do not intend to or actually stop payment on birthday checks. Moreover, both parties agree that decedent intended to make gifts of the money. The bank had authority to make payment on the checks; thus, had decedent wanted to exercise control over the money by ordering a stop payment, she would have had to do so within days of giving the gifts, a highly unlikely scenario. Further, decedent had made similar gifts in the past. The conclusion is inescapable that decedent fully intended to relinquish dominion and control over the $27,000 when she instructed her son to write the checks and, given the common day usage of the check, she did so relinquish dominion and control for estate tax purposes.

Although we base our decision on the ground that the gifts in question were made prior to the date of decedent’s death and therefore the $27,000 in her checking account did not belong to her on that date, we would find that the $27,000 is excludible from her account even if we were to conclude that the gifts were not complete until paid by the bank. We would reach this conclusion on the alternative ground that the relation back doctrine applies to the facts of this case, so that even if the gifts were not complete until payment was made, upon such payment the date of completion relates back to the date of original delivery.

The relation back doctrine was adopted by the courts in order to deal with the peculiarity of the instrument the cheek. The check does not constitute final payment per se. Spiegel, 12 T.C. at 528. Yet, as previously discussed, in the common day usage of the check, it is considered payment, or at least, conditional payment.

The first cases applying the relation back theory involved the question of whether checks which had been given in discharge of legal obligations related back to the date of original delivery for purposes of determining the tax consequences of such checks under the income tax provisions of the Internal Revenue Code. See Est. of Bradley v. Commissioner, 14 B.T.A. 49 (1930). The tax court in Est. of Spiegel v. Commissioner, R.T.C. 524 (1949), extended the doctrine to checks given as charitable contributions. In so doing, the tax court determined that the existence vel non of consideration was irrelevant. However, the court did emphasize characteristics of charitable contributions which distinguish them from ordinary gifts: the court stated that special legislation treats charitable contributions; and noted that some contributions are legally enforceable. Id. at 531. In 1984, the tax court in Est. of Belcher v. Commissioner, 83 T.C. 227 (1984), extended the relation back doctrine for charitable contributions from income taxation to estate taxation. 83 T.C. 227. The Belcher court, like the Spiegel court, did distinguish charitable contributions from ordinary gifts. However, the court left open the question of whether the relation back doctrine would apply with respect to ordinary gifts.

Recently, the district court for the District of New Jersey held, under facts very similar to the facts in this case, that the relation back doctrine applies with respect to ordinary gifts for purposes of federal estate taxation. In Bacchus v. United States, No. 82-3930, slip op. (D.N.J.1985), the plaintiffs decedent had attempted to make annual gifts of $3,000 to certain relatives in order to come within § 2035(b)(2), which excludes such gifts from estate tax. In particular, the decedent had written two checks on December 31, 1976, each for $3,000 and made payable to two individuals. At that time the balance in her checking account was $2,843.88. On January 4, 1977 she made a deposit of $10,000. In the summer of 1977 she wrote two more checks, each for $3,000 and made payable to the same two individuals. The issue was whether the first gifts were made in 1976. The court found that the relation back doctrine applied and thus found that they were.

We follow the Bacchus court in thinking that the relation back doctrine applies with respect to the gifts in the instant case. Decedent was plainly attempting to come within the exception embodied in § 2035(b)(2). We find no policy considerations which would justify treating such gifts less favorably than charitable donations or legal obligations. Rather, as previously stated, these gifts bear the stamp of approval of Congress. We see no meaningful distinction in this context between the giving of contributions and the giving of gifts. Therefore, we conclude that upon payment of the checks by the bank, the date of the gift related back at least to the time of delivery of the checks. As mentioned, we do not know whether delivery occurred immediately after drafting of the checks. Since plaintiffs have not yet moved for summary judgment, we need not decide today whether under the relation back doctrine the date of the gift will predate decedent’s death.

For all the foregoing reasons, defendant’s motion for summary judgment is denied.


author: SPELLMAN, District Judge.

text:
    Joseph W. LITTLE, Plaintiff, v. CITY OF NORTH MIAMI, Marco V. Loffredo, Jr., John Hagerty, Diane Brannen, James Devaney, Simon, Schindler and Hurst, P.A., and Jennifer Hurst Kroner f/k/a Jennifer Hurst, Defendants.
    No. 85-2555-CIV-EPS.
    United States District Court, S.D. Florida, Miami Division.
    Nov. 18, 1985.

      Richard E. Nelson and Robert C. Widman, Sarasota, Fla., for plaintiff.
    Mark R. Boyd, Ft. Lauderdale, Fla., for defendant Kroner.
    Homer Marlow, Miami, Fla., for defendant Simon.

      T. Michael Kennedy, Miami, Fla., for other defendants.
   MEMORANDUM OPINION AND ORDER GRANTING THE DEFENDANTS’ MOTIONS TO DISMISS THE PLAINTIFF’S COMPLAINT AND ORDER OF DISMISSAL

SPELLMAN, District Judge.

I.

BACKGROUND

This CAUSE comes before the Court on the Defendants’ Motions to Dismiss the Plaintiff’s Complaint. On July 9, 1985, the Plaintiff filed suit in the United States District Court for the Southern District of Florida, alleging violations of 42 U.S.C. Section 1983. Jurisdiction is predicated upon 28 U.S.C. Sections 1331 and 1343.

The Plaintiff is a Professor of Law at the University of Florida College of Law and a member of the Florida Bar. Sometime pri- or to October 11, 1983, he, without compensation, represented the Florida Defenders of the Environment, himself and others in two Florida state court civil actions against the Governor and Cabinet of the State of Florida in which the City of North Miami Beach (CITY) was an intervening party represented by the Defendant, Simon, Schindler & Hurst (P.A.) and the Defendant, Kroner, an attorney-at-law. On October 11, 1983, the CITY adopted Resolution No. R83-65 which states in pertinent part:

The Council of the City of North Miami hereby censures Professor Joseph W. Little for improper use of public funds to represent private parties in litigation against the State and against the interests of the City of North Miami.

All of the Defendants allegedly disseminated this Resolution to each of his superiors at the University of Florida and to other state officials: On November 18, 1983, the attorney for the University of Florida wrote to the Defendant, Kroner, to inform all of the Defendants that the Plaintiff’s activities were pro bono publico, had the prior approval of his employer and were entirely within the scope of his employment duties.

The Complaint contains ten claims for relief, the first five addressed to the alleged violation of 42 U.S.C. Section 1983: the passage of a bill of attainder against the Plaintiff as a per se violation of the United States Constitution; the retaliation against the Plaintiff for the exercise of his first amendment rights; the denial of the Plaintiff’s sixth amendment rights; the deprivation of a liberty interest plus an intentional attempt to deny a property interest; and a denial of due process of law and an intentional attempt to deprive the Plaintiff of a property interest. Counts six through ten are State claims against the various Defendants for defamation, outrage and conspiracy. This Court has carefully considered the Motions to Dismiss and their memoranda of law, the Plaintiff’s memoranda of law in opposition, the respective affidavits, the pleadings, filed supplemental authority, and the Plaintiff’s supplemental memorandum. This Court has also heard and considered the oral argument of counsel. For the reasons set forth below, this Court GRANTS the Motions to Dismiss the Section 1983 claims without prejudice to the Plaintiff to pursue the appropriate remedies in the state court.

II.

BILL OF ATTAINDER

In Count One of the Complaint, the Plaintiff alleges that the Resolution is a bill of attainder forbidden by article I, sections 9 and 10 of the United States Constitution. In 1946, in a landmark case, the United States Supreme Court invalidated a section of the Urgent Deficiency Act of 1943 which prohibited payment of further salary to named federal employees and discussed at length the category of Congressional actions barred by the bill of attainder clause:

A bill of attainder is a legislative act which inflicts punishment without a judicial trial. If the punishment be less than death, the act is termed a bill of pains and penalties. Within the meaning of the Constitution, bills of attainder include bills of pains and penalties. United States v. Lovett, 328 U.S. 303, 315, 66 S.Ct. 1073, 1078, 90 L.Ed. 1252 (1946), quoting Cummings v. Missouri, 71 U.S. 277, 18 L.Ed. 356 (1867).

The Court has also deemed it punishment under the bill of attainder clause certain legislative acts imposing on named individuals or on an easily identifiable class a sanction of mandatory forfeiture of employment or office. See Nixon v. Administrator of General Services, 433 U.S. 425, 97 S.Ct. 2777, 53 L.Ed.2d 867 (1977); United States v. Brown, 381 U.S. 437, 85 S.Ct. 1707, 14 L.Ed.2d 484 (1965).

In the instant case, the Resolution fails to conform to the accepted definition of a bill of attainder in two respects: first, it is not a legislative pronouncement with the force of law; and second, it does not prescribe a punishment, penalty or forfeiture. A Resolution is an opinion. It is not law. Joiner v. City of Dallas, 380 F.Supp. 754 (N.D.Tex.1974). While a Resolution has a “special and temporary character,” it is “an ordinance [that] prescribes a permanent rule of conduct or government.” Certain Lots, etc. v. Town of Monticello, 159 Fla. 134, 31 So.2d 905, 911 (1947). The Resolution herein amounts to nothing more than an expression of the City’s opinion concerning the conduct and the activities of the Plaintiff. Further, it has not been alleged that the Plaintiff has suffered a cognizable deprivation. The University has not fired him. They have not denied him tenure. He has not failed to obtain a position for which he has applied. The Court simply can not find a pain or penalty of the sort traditionally associated with the Constitutionally proscribed bill of attainder.

The Plaintiff has relied upon Crain v. City of Mountain Home, Ark., 611 F.2d 726 (8th Cir.1979). The Plaintiff should note, however, that the two crucial distinctions between Crain and his case are identical to the two above-named elements lacking in his own Complaint that are necessary to make out a bill of attainder. Crain was an action brought against members of the City Council to declare certain ordinances unconstitutional. The City Council had appointed Crain to fill the unexpired term of the previous City Attorney. When he became the sole candidate for the position for the next term, the Council took action which was quite egregious: they enacted ordinances reducing the City Attorney’s salary to $1.00 per year, prohibiting the City Attorney from engaging in the private practice of law, and removing the Plaintiff from office for the remainder of the term. The Court found these acts to be unconstitutional bills of attainder. However, unlike the situation before this Court, the acts complained of were ordinances, not resolutions, and they did have the force of law. In Crain, the legislative acts did indeed inflict punishment: they resulted in the forfeiture of the Plaintiff’s job. In sum, the Resolution in the instant case can not, as a matter of law, be deemed a bill of attainder within the meaning of article I, sections 9 and 10 of the United States Constitution.

Ill

FIRST AMENDMENT

In Count Two of the Complaint, the Plaintiff claims that vindictive and punitive actions taken under color of law violated the Plaintiff’s right to seek access to and represent clients before the courts, a right guaranteed by the first amendment to the United States Constitution. As discussed above, the Resolution does not have the force of law. 42 U.S.C. Section 1983 provides a claim for relief founded on a statute, ordinance, regulation, custom or usage. The Resolution here is nothing more than the expression of an opinion. It did not affect the rights of the Plaintiff. See Joiner v. City of Dallas, 380 F.Supp. 754 ( N.D.Tex.1974).

Further, it can not be successfully argued that the Resolution in the instant case amounts to a “custom or usage” of the municipality. Monell v. Department of Social Services of the City of New York, 436 U.S. 658, 98 S.Ct. 2018, 56 L.Ed.2d 611 (1978) explained what practices may constitute “custom or usage” within the purview of Section 1983. They must be “permanent and well settled” and have “the force of law.” Id. at 691, 98 S.Ct. at 2036. See also City of Oklahoma v. Tuttle, — U.S. -, 105 S.Ct. 2427, 85 L.Ed.2d 791 (1985); Gilmere v. City of Atlanta, 737 F.2d 894 (11th Cir.1984); Pembaur v. Cincinnati, 746 F.2d 337 (6th Cir.1984). A single Resolution expressing a city’s disapproval of an individual’s activities does not automatically become a problem of constitutional dimension. To treat every opinion by a municipality as an impingement upon first amendment rights is to convert already congested federal courts into soap box arenas for theoretical forensics.

IV

SIXTH AMENDMENT

In Count Three, the Plaintiff contends that when the City adopted and disseminated the Resolution, they denied him the right to be informed of charges against him, confront his accusers, present witnesses and evidence in his behalf, and be assisted by counsel as guaranteed by the sixth amendment of the Constitution.

To bolster his sixth amendment claim, the Plaintiff cites Jenkins v. McKeithen, 395 U.S. 411, 89 S.Ct. 1843, 23 L.Ed.2d 404 (1969). In Jenkins, a member of a labor union brought an action for declaratory and injunctive relief challenging as violative of due process and equal protection a Louisiana law creating a Commission to investigate and find facts relating to violations of criminal laws in the labor-management context. In the opinion, the Court carefully distinguished the case from Hannah v. Larche, 363 U.S. 420, 80 S.Ct. 1502, 4 L.Ed.2d 1307 (1960) in which the Court upheld the Civil Rights Commission against similar challenges. The Court in Jenkins elaborated on the different roles and procedures of the two Commissions:

In our view, however, the Commission in the present case differs in a substantial respect from the Civil Rights Commission and the other examples cited by the Court in Hannah. It is true, as the Supreme Court of Louisiana has held ... that the Commission does not adjudicate in the sense that a court does, nor does the Commission conduct, strictly speaking a criminal proceeding. Nevertheless, the Act, when analyzed in light of the allegations of the Complaint, makes it clear that the Commission exercises a function very much akin to making an official adjudication of criminal culpability. Jenkins v. McKeithen, 395 U.S. 411, 427, 89 S.Ct. 1843, 1851, 23 L.Ed.2d 404 (1969).

The adoption and dissemination of the Resolution in the instant case has even less impact on individual rights than the actions that withstood constitutional scrutiny in Hannah. In the present case, the City has not adjudicated. It has not conducted a trial. It has not determined liability. It has not indicted, punished, or imposed legal sanctions. See Hannah v. Larche, 363 U.S. 420, 441, 80 S.Ct. 1502, 1514, 4 L.Ed.2d 1307 (1960). Unlike the Act invalidated in Jenkins, the adoption of the Resolution is not tantamount to empowering an official body to find that a particular individual is guilty of a crime. Jenkins v. McKeithen, 395 U.S. 411, 429, 89 S.Ct. 1843, 1852, 23 L.Ed.2d 404 (1969). In sum, this Court does not agree with the Plaintiffs contentions that Jenkins is directly on point with respect to the facts alleged in his Complaint.

Finally, the United States Supreme Court has repeatedly emphasized the rule that sixth amendment rights attach only at or subsequent to the initiation of adversary proceedings. See Kirby v. Illinois, 406 U.S. 682, 92 S.Ct. 1877, 32 L.Ed.2d 411 (1972); United States v. Wade, 388 U.S. 218, 87 S.Ct. 1926, 18 L.Ed.2d 1149 (1967); United States v. Gouveia, 467 U.S. 180, 104 S.Ct. 2292, 81 L.Ed.2d 146 (1984). The Plaintiff is not embroiled in a trial-type confrontation. Nor has the Resolution charged the Plaintiff with a crime or made a judicial finding. As such, there is simply no violation under 42 U.S.C. Section 1983.

V

DUE PROCESS OF LAW

In the Fourth and Fifth Counts, the Plaintiff has alleged a deprivation of liberty and property interests without due process of law. The situation in Paul v. Davis, 424 U.S. 693, 96 S.Ct. 1155, 47 L.Ed.2d 405 (1976) is factually akin to the present case. In Paul, the chief of police initiated a campaign to alert local merchants of possible shoplifters. After the Plaintiff had been arrested on a shoplifting charge, they included his photograph and name in a flyer notifying the merchants of “active shoplifters.” When the charge was dismissed, the Plaintiff brought a Section 1983 action against the police chiefs. The United States Supreme Court found that the police chiefs had not deprived the Plaintiff of any liberty or property rights secured against state deprivation by the due process clause of the fourteenth amendment. Justice Rehnquist, who delivered the opinion of the Court, stated:

Respondent, however, has pointed to no specific constitutional guarantee safeguarding the interest he asserts has been invaded. Rather, he apparently believes that the Fourteenth Amendment’s Due Process Clause should ex proprio vigore extend to him a right to be free of injury whenever the State may be characterized as the tortfeasor. But such a reading would make of the Fourteenth Amendment a font of tort law to be superimposed upon whatever systems may already be administered by the States. We have noted the ‘constitutional shoals’ that confront any attempt to derive from Congressional civil rights statutes a body of general federal tort law ... [T]he procedural guarantees of the Due Process Clause cannot be the source for such law. Id. at 700-01, 96 S.Ct. at 1160.

The Court further found that an allegation of reputational harm alone is insufficient to invoke the procedural protection of the due process clause. Id. The Court wished to avoid establishing a “constitutional doctrine converting every defamation by a public official into a deprivation of liberty within the meaning of the due process clause of the fifth and fourteenth amendment.” Id. at 702, 96 S.Ct. at 1161.

This Court can not accept the Plaintiff’s position that his injury fits into Paul’s definition of “stigma plus.” The allegations in the Complaint are devoid of any suggestion of a deprivation of a tangible, economic interest. The University has not fired the Plaintiff. They have not denied him tenure. There is no indication that the Plaintiff has sought employment elsewhere only to meet with closed doors. In fact, it is difficult for this Court to see how the Resolution has even interfered slightly with the Plaintiff’s employment when he alleges that the University attorney reacted to the Resolution by informing the Defendants that the Plainiff’s activities “had the prior approval of his employer and were within the scope of his employment duties.” See page 6 of the Complaint. This Court finds that when viewing the allegations in the Complaint most favorably to the Plaintiff, they simply do not meet the requirements of Paul.

VI

CONCLUSION

The Resolution in the instant ease can not be a bill of attainder because it is not a legislative pronouncement with the force of law, nor does it prescribe a penalty or punishment. In addition, the single Resolution does not amount to the “custom or usage” of a municipality within the meaning of 42 U.S.C. Section 1983. Since the City in adopting a Resolution has not initiated adversary proceedings, indicted or imposed legal sanctions, sixth amendment rights do not attach. Further, an allegation that amounts to nothing more than reputational harm does not establish the deprivation of a liberty or property interest repugnant to the due process clause. Since the Plaintiffs claim is not cognizable under 42 U.S.C. Section 1983, this Court is without subject matter jurisdiction to address the merits of the remaining state claims. Therefore, this case is hereby DISMISSED without prejudice to the Plaintiff to seek redress for the State claims in the appropriate forum — the State court.

      . See Cummings v. Missouri, 71 U.S. 277, 18 L.Ed. 356 (1867) (barring clergymen from ministry in the absence of subscribing to a loyalty oath); United States v. Lovett, 328 U.S. 303, 315, 66 S.Ct. 1073, 1078, 90 L.Ed. 1252 (1946) (barring named individuals from government employment); United States v. Brown, 381 U.S. 437, 85 S.Ct. 1707, 14 L.Ed.2d 484 (1965) (barring Communist Party members from offices in labor unions).

      . The Court is quoting Justice Harlan in Adickes v. S.H. Kress & Co., 398 U.S. 144, 167-68, 90 S.Ct. 1598, 1613-14, 26 L.Ed.2d 142 (1970).


text:
    INTERSTATE UNDERWRITING AGENCIES, INC., a Florida corporation, Interamerican Syndicate, Inc., a Florida corporation, and Financial Premium Service, Inc., a Florida corporation, Plaintiffs, v. William GUNTER, etc., et al., Defendants.
    No. 84-1978-CIV.
    United States District Court, S.D. Florida, Miami Division.
    Nov. 18, 1985.
   ORDER GRANTING DEFENDANTS’ MOTION FOR ATTORNEYS’ FEES

SPELLMAN, District Judge.

Plaintiffs, a general lines insurance agency, an insurance syndicatee, and a business entity, respectively, instituted this suit on August 20, 1984. Plaintiffs alleged that their constitutional rights and privileges were being violated by an injunction issued by a state court, in contravention of 42 U.S.C. § 1983. Damages and declaratory and injunctive relief were sought, as were attorneys’ fees, pursuant to 42 U.S.C. § 1988.

The state suit involved a Verified Petition for an Order to Show Cause and Temporary Injunction and for Entry of an Order of Seizure against Universal Casualty Insurance Company, filed by Gunter and Rubin, two of the defendants herein, on August 15, 1984. The Petition requested that the state court enjoin the plaintiffs herein from disposing of or transferring any funds, assets, or any other property which belonged to Universal.

Plaintiffs herein requested an emergency hearing, and sought a Temporary Restraining Order, a Preliminary Injunction and other relief against the defendants. Such a hearing was held before the undersigned Judge, by emergency assignment, on August 23, 1984.

At the hearing, the Court addressed the issue of abstention when confronted with plaintiffs’ request to enjoin an action before the Circuit Court of the Second Judicial Circuit in and for Leon County, Florida from going forth. This Court did not have an opportunity to formally abstain, since the plaintiffs gave notice of and were granted a voluntary dismissal, once the Court’s views were made clear to the parties.

Subsequently, the defendants moved for an award of attorneys’ fees pursuant to 42 U.S.C. § 1988. The Court is inclined to grant the motion.

The Civil Rights Attorney’s Fees Awards Act of 1976 (“Fees Act”), 42 U.S.C. § 1988 provides in pertinent part:

[T]he Court in its discretion may allow the prevailing party, other than the United States, a reasonable attorney’s fee as part of the costs.

In light of the plaintiffs’ voluntary dismissal, the Court will direct its discussion to two issues. First, whether the defendants are a “prevailing party,” and second, whether a voluntary dismissal precludes an award of attorneys’ fees.

I

A defendant seldom, if ever, is the party seeking remedial relief or a vindication of rights. Therefore, the “catalyst test” applied to plaintiffs seeking attorneys’ fees is not appropriate. See Robinson v. Kimbrough, 652 F.2d 458 (5th Cir. 1981). Rather, a different standard is applied. Fees may be awarded to prevailing defendants only where the plaintiff’s claim is “frivolous, unreasonable, or without foundation, even though not brought in subjective bad faith.” Hughes v. Rowe, 449 U.S. 5, 14, 101 S.Ct. 173, 178, 66 L.Ed.2d 163 (1980) (quoting Christiansburg Garment Co. v. EEOC, 434 U.S. 412, 421, 98 S.Ct. 694, 700, 54 L.Ed.2d 648 (1978)).

Defendants’ memorandum in support of their motion accurately reflects the factual and legal posture of this case. There is little doubt that plaintiffs brought this action with full knowledge that this Court was not in a position to grant any relief, and more importantly, that plaintiffs were not entitled to any relief. At the very least, the record contains sufficient bases to support defendants’ claim that this suit was without foundation.

II

Had the defendants moved for attorneys’ fees under the sanctions provisions of Rule 11 of the Federal Rules of Civil Procedure, this Court would be without jurisdiction to enter any orders, in light of plaintiffs’ voluntary dismissal. See Williams v. Ezell, 531 F.2d 1261 (5th Cir.1976). Case law and the legislative history of the Fees Act, however, provide an alternate basis of jurisdiction for this Court in civil rights actions. As a matter of law one may prevail for purposes of the Fees Act even though the action was voluntarily dismissed. Fields v. City of Tarpon Springs, Fla., 721 F.2d 318, 321 (11th Cir.1983) (award of attorneys’ fees was not an abuse of discretion even though case was voluntarily dismissed where plaintiffs had satisfied catalyst test). See also DeMier v. Gondles, 676 F.2d 92 (4th Cir.1982).

Legislative history of the Fees Act is consistent with the Eleventh Circuit’s view:

A prevailing defendant may also recover its fees when the plaintiff seeks and obtains a voluntary dismissal of a groundless complaint.

H.Rep. No. 94-1558, 94th Cong., 2d Sess. 7-8 (1976).

Ill

As to the amount of the award, the Court finds that under the analysis set forth in Johnson v. Georgia Highway Express, 488 F.2d 714 (5th Cir.1974), the defendants are entitled to an award of $13,-500.00. Close to one hundred hours were spent in preparation of this case, and the level of skill demonstrated by the team of attorneys arguing on defendants’ behalf was truly impressive. And, because this Court’s time was fairly monopolized by the activity in this case for approximately three and one-half days, it would be fair to assume that counsel’s time was likewise tied up, thereby precluding the three man firm from working on other matters. In all other areas mentioned in Johnson, supra, the defendants’ counsel have convinced the Court that the affidavits filed on their behalf do reflect a fair determination of the amount to be awarded.

Based on the above and foregoing, it is hereby

ORDERED AND ADJUDGED that defendants’ motion for attorneys’ fees is GRANTED. Counsel for the defendants shall be awarded an award, payable by plaintiffs, in the amount of thirteen thousand five hundred dollars ($13,500.00).

      . Because this matter was heard in its entirety before this Court, and pursuant to Judge William Hoeveler’s Order of February 7, 1985, this ease was referred to this Court for disposition of pending motions.

      . In Bonner v. City of Prichard, 661 F.2d 1206, 1209 (11th Cir.1981) (en banc), the Eleventh Circuit adopted as binding precedent all decisions of the former Fifth Circuit handed down prior to the close of business on September 30, 1981.

      . The Court would like to point out that defendants’ motion for attorneys' fees was filed on October 18, 1984. No response was filed by the plaintiff to refute the arguments set forth in defendants’ memorandum of law.