author: FLANNERY, District Judge.

text:
    James C. POPE v. Langhorne BOND, J. Lynn Helms, Roland A. Eckert, Christian B. Walk, Jr., Jonathan Howe, Michael J. Forrester.
    Civ. A. No. 84-2922.
    United States District Court, District of Columbia.
    June 20, 1985.

      Robert J. Fleishman, Stephen A. Fennell, Shawn C. Conway, Steptoe & Johnson, Washington, D.C., for plaintiff.
    Asst. U.S. Atty. Scott T. Kragie, Civ. Div., Washington, D.C., for defendants.
   MEMORANDUM

FLANNERY, District Judge.

This matter comes before the court on defendants’ motion to dismiss plaintiff’s complaint on grounds of failure to exhaust administrative remedies and absence of a constitutional damages remedy, and defendants’ motion for a protective order barring all discovery pending resolution of their dispositive motion. Plaintiff has already consented to a stay of discovery from the individual defendants pending resolution of the motion to dismiss plaintiff’s claims against them, but opposes a stay with respect to defendant Federal Aviation Administration. For reasons discussed herein, defendants’ motion will be granted in part and denied in part, and the motion for a protective order will be dismissed as moot.

I. Background

Plaintiff, a former official in the Office of General Aviation of the Federal Aviation Administration (“FAA”), brings this suit against various present and former FAA officials in their official and individual capacities for injunctive relief and compensatory and punitive damages for allegedly conspiring to silence him and ultimately force his withdrawal from federal service in violation of his rights under the first and fifth amendments to the United States Constitution. Plaintiff alleges that the named defendants and other “unidentified co-conspirators” retaliated against him for his public advocacy of an airborne collision avoidance system (“ACAS”) manufactured by the Honeywell Corp. known ■ as the AVOIDS system, which, plaintiff contended, would provide mid-air collision protection for airplanes superior to and at a lower cost than a ground-based collision avoidance system being developed in-house by the FAA. Plaintiff contends that he was forced to accept a transfer and ultimately forced to withdraw from federal service after he began disclosing evidence of alleged FAA mismanagement and the danger to public safety created by FAA’s refusal to support or approve the AVOIDS system.

In their motion to dismiss plaintiff’s claims against the FAA and the named defendants who are sued in their official capacities, defendants contend that plaintiff has failed to exhaust his administrative remedies, alleging, among other things, that he has not yet declared himself ready, willing, and able to return to work, that Pope has failed to participate in the reemployment programs available to him, and that he has not appealed FAA’s refusal to accord him reemployment rights to the Merit Systems Protection Board (MSPB). Regarding plaintiff’s claims against defendants in their individual capacities, defendants contend that the Supreme Court’s decision in Bush v. Lucas bars recognition of a constitutional damages remedy in light of the “comprehensive scheme of administrative and judicial remedies” that Congress has established to redress the grievances of federal civil servants.

II. Discussion

A. Exhaustion of administrative remedies

Defendants’ contention that plaintiff has ignored, allowed to lapse, or refused to pursue various potential avenues of administrative relief for his claims rests largely on their characterization of the facts and the relief sought by plaintiff, both of which plaintiff disputes. Regarding the facts underlying plaintiff’s transfer and ultimate withdrawal from federal service, defendants’ “statement of the case” differs in significant respects from both the factual allegations of plaintiff’s complaint and the history recited in plaintiff’s opposition to defendants’ motion to dismiss. First, defendants contend that plaintiff’s transfer from Washington, D.C., to Seattle, Washington, following his public dispute with FAA officials over the AVOIDS system, was only one of “hundreds” of transfers made as part of the decentralization and reorganization of the FAA. Plaintiff, on the other hand, contends that he was the only member of the 22-member Office of General Aviation to be involuntarily reassigned outside FAA headquarters, and submits that his reassignment to other available FAA positions in Washington, D.G., was sought by several FAA officials, whose requests were rejected. Defendants note that plaintiff filed an informal grievance regarding the transfer, but that he decided to forego the formal grievance procedure and take the transfer when his informal grievance was denied. Plaintiff, on the other hand, contends that he was unaware that the Seattle position had been created specially for him and that the job had no duties, and that by the time he had figured out that the new job was a “hoax,” the time to file a formal grievance had expired. Plaintiffs Opposition to Defendants’ Motion to Dismiss at 21-22 n. 28.

Defendants contend that plaintiff was finally removed for cause based on his prehospitalization performance, conduct and attendance problems, but that the FAA ultimately agreed to cancel the firing, expunge plaintiff’s record, and cancel the MSPB hearing which had been scheduled to hear plaintiff’s appeal. Plaintiff, on the other hand, contends that no evidence of any such pre-hospitalization problems existed, and that the FAA unilaterally canceled the removal action and purged plaintiffs records of all charges, which mooted plaintiffs appeal of the removal to the MSPB, so that he had no choice but to concede that no issue remained to be tried by the MSPB. The FAA’s actions, Pope contends, were designed to prevent him from obtaining administrative review of his case.

Finally, regarding plaintiffs efforts to obtain reemployment, defendants contend that because plaintiff has not declared himself ready, willing, and able to return to work, a challenge to the FAA’s refusal to reinstate him is premature. Plaintiff responds, however, that he does not seek court-ordered reinstatement in this action, but rather, that he wants an injunction preventing further interference by defendants with his attempts to obtain reemployment with the FAA, other federal agencies, or private companies; a name-clearing hearing; correction of his employment records; and back pay for positions that he would have obtained by now but for the conspiracy to prevent his reemployment.

As a preliminary matter, it should be noted that

[a] motion to dismiss for failure to state a claim is generally viewed with disfavor and rarely granted. For the purposes of such a motion, the factual allegations of the complaint must be taken as true, and any ambiguities or doubts concerning the sufficiency of the claim must be resolved in favor of the pleader. In particular, “a complaint should not be dismissed for failure to state a claim unless it appears beyond a doubt that the plaintiff can prove no set of facts in support of his [or her] claim which would entitle him [or her] to relief.”

Doe v. United States Department of Justice, 753 F.2d 1092, 1102 (D.C.Cir.1985) (citations omitted) (emphasis in original); see also Krodel v. Young, 748 F.2d 701, 712 (D.C.Cir.1984). With the exception of the alleged interference with plaintiff’s reemployment with the FAA, it appears that, taking all of plaintiffs allegations as true, plaintiff has either exhausted the administrative remedies available to him or was foreclosed from pursuing certain remedies by the agency’s own acts.

Under the rules governing administrative relief for civil servants, it is clear that only “adverse actions” are appealable by an individual employee to the MSPB. See 5 U.S.C. §§ 7512-13; Manning v. Merit Systems Protection Board, 742 F.2d 1424, 1426-27 (Fed.Cir.1984). “Adverse actions” are defined as removals, suspensions, reductions in grade or pay, or furloughs. 5 U.S.C. § 7512. Retaliation for whistleblowing that does not amount to such an adverse action, on the other hand, may constitute a “prohibited personnel practice” under the Civil Service Reform Act, 5 U.S.C. §§ 2301-02, over which the MSPB has jurisdiction “only in the context of a ‘corrective action proceeding’ brought by the [Office of] Special Counsel” (OSC) under 5 U.S.C. § 1206. See Perez v. Army and Air Force Exchange Service, 680 F.2d 779, 787-88 (D.C.Cir.1982); see also Wren v. Merit Systems Protection Board, 681 F.2d 867, 873 (D.C.Cir.1982). In the context of this case, the only “adverse action” taken against plaintiff was the attempt to remove him effective December 18, 1981. Accepting plaintiffs allegations as true, plaintiff properly appealed FAA’s removal decision to the MSPB, and attempted to obtain a hearing on his retaliation claims, but was precluded from doing so when the FAA unilaterally rescinded its removal action and agreed to expunge plaintiff’s record, thus mooting plaintiff’s challenge and depriving the MSPB of jurisdiction over his case. Because the FAA’s unilateral acts foreclosed further MSPB review, the FAA can not now be heard to complain that Pope should have pursued MSPB review or judicial review of the AU’s decision that no issues remained to be tried after the FAA rescinded all of the adverse actions that the agency had attempted to take against Pope. See Motion to Dismiss at 7-9. Therefore, because there remain no further administrative remedies for plaintiff to pursue regarding the removal decision, Pope’s claims cannot be dismissed for failure to exhaust.

With regard to the various alleged prohibited personnel practices, defendants have emphasized the availability of relief through the Office of Special Counsel. As defendants point out, the OSC has the authority to investigate alleged prohibited personnel practices involving reprisals against whistleblowers. 5 U.S.C. § 1206; see Wren, 681 F.2d at 871-72. The OSC may then petition the MSPB for “corrective action” against agencies or employees engaged in the prohibited personnel practices. See Frazier v. Merit Systems Protection Board, 672 F.2d 150, 154-55 (D.C.Cir.1982). However, given the largely unreviewable discretion of the OSC to compromise or settle complaints, or even refuse to pursue a case at all, see Wren, 681 F.2d at 871-72, 875 n. 9; Frazier, 672 F.2d at 162-63 & n. 41, it would be inappropriate to require a plaintiff to exhaust his “remedy” of filing a complaint with the OSC before he can bring suit in a federal district court for violations of his constitutional rights based on an act simply because it falls within the definition of a prohibited personnel practice. See Wallace v. Lynn, 507 F.2d 1186, 1190 (D.C.Cir.1974). Pope’s failure to file a complaint with the OSC prior to his transfer to Seattle, therefore, would appear to be irrelevant for exhaustion purposes.

In any case, the OSC did ultimately investigate many of plaintiff’s complaints. According to plaintiff, Pope filed a number of grievances relating to the transfer and the conditions of his employment in Seattle during his tenure there, and his efforts to publicize his situation led to a newspaper article which ultimately prompted the OSC to initiate an investigation of plaintiff’s reprisal charges. Although defendants emphasize that the OSC investigation was not prompted by a direct request from Pope, that factor is irrelevant to a determination of whether available OSC remedies have been exhausted, given that the OSC investigation actually did take place. Therefore, to the extent that plaintiff should be required to allow the OSC an initial opportunity to examine his retaliation claims regarding the transfer and subsequent harassment in Seattle, it is apparent that he did so, and that that investigation was completed without a finding that plaintiff’s complaints were substantiated.

In sum, plaintiff appealed the only adverse action that was taken against him to the MSPB and pursued that appeal as far as it appears that he could. The FAA was responsible for plaintiff’s inability to pursue his claims by mooting his appeal. Regarding other alleged retaliatory acts, it does not appear that any reached the level of ar. adverse action. Neither side contends that Pope’s transfer to Seattle constituted an adverse action, nor does it appear that the FAA’s alleged interference with plaintiff’s reemployment efforts since 1982 would constitute an adverse action under section 7512. Defendants’ suggestion that plaintiff should have refused the transfer to Seattle, been fired, and then challenged the firing before the MSPB as an adverse action is specious. Federal employees are not required to take affirmative action which may result in their dismissal so that they can “exhaust” potential remedies available to employees who are fired for improper reasons.

Defendants do not dispute that plaintiff filed numerous informal grievances regarding what he viewed as harassment for his statements regarding waste and mismanagement at the FAA. Further, an OSC investigation of his complaints did ultimately take place. Therefore, with regard to the alleged harassment that preceded Pope’s hospitalization, plaintiff has done everything that could reasonably be expected in exhausting potential avenues of administrative relief.

Nevertheless, considerations underlying both ripeness and exhaustion compel the court to dismiss plaintiff’s claims for injunctive relief against the FAA insofar as those claims relate to reemployment with the FAA. Plaintiff concedes that a refusal by the agency to accord him reemployment rights within the agency would be appealable to the MSPB. Whether or not plaintiff has sufficiently indicated his readiness to return to work at the FAA for purposes of triggering whatever reemployment rights he is due as a recovered or partially recovered employee, plaintiff does not appear to contend that FAA has yet breached any reemployment obligation owed him. All the violations claimed in this regard appear to be either hypothetical in that they have not yet occurred, or beyond the jurisdiction of this court in that they would be subject to the exclusive jurisdiction of the MSPB and the Court of Appeals for the Federal Circuit. If plaintiff declares himself ready to return to work, either as a partially-recovered employee or as fully recovered, and is improperly refused a position, he may appeal to the MSPB. If plaintiff obtains a new position with the FAA and is subjected to retaliation for the exercise of rights protected by the Constitution, a Bivens -type remedy may be available to him, as well as possible administrative remedies. See discussion infra. Because neither of these events has yet transpired, and due to the impracticality of fashioning injunctive relief based on conduct of individuals who have either left the agency or who would no longer be in a position to supervise plaintiff’s work, plaintiff has failed to state a claim for which relief can be granted with regard to his request for an injunction against alleged efforts to thwart his reemployment within the U.S. Department of Transportation (“DOT”) or against predicted harassment upon his return to the agency-

Because plaintiff apparently enjoys no reemployment rights with other federal agencies outside the DOT comparable to his reemployment rights with the FAA, and because his civil service rights clearly do not extend beyond the federal government to private employers, plaintiff has no right to appeal denial of available positions outside the DOT to the MSPB. Because no administrative remedy exists for defendants’ alleged interference with plaintiff’s reemployment outside the DOT, there are no procedures for plaintiff to “exhaust.” Therefore, unless the court is unwilling to recognize the existence of a Bivens-type remedy for the injuries allegedly suffered by plaintiff, plaintiff’s request for an injunction against interference with his efforts to secure employment outside DOT states a claim for which relief can be granted.

B. Claims against individuals

Relying solely on the Supreme Court’s decision in Bush v. Lucas, 462 U.S. 367, 103 S.Ct. 2404, 76 L.Ed.2d 648 (1983), defendants contend that the “comprehensive” scheme of administrative and judicial remedies established by Congress to redress the job-related claims of federal civil servants constitutes a “special factor” which counsels hesitation against the recognition of a remedy of constitutional damages for retaliation for whistleblowing.

Bush involved a suit by a NASA engineer for. defamation and violation of his constitutional rights after he was demoted for making public statements highly critical of the agency. 103 S.Ct. at 2406-07. Assuming that plaintiff’s constitutional rights had been violated, and that the civil service remedies available to plaintiff were not as effective as an individual damages remedy, 103 S.Ct. at 2408, the Court nevertheless held that the elaborate remedial system constructed by Congress to protect civil servants from unfair disciplinary decisions such as the demotion suffered by Bush provided an alternate form of relief such that creation of a judicial remedy for the alleged constitutional violations would not be justified. 103 S.Ct. at 2416-17. Therefore, the extent to which Bush preempts plaintiffs constitutional claims in the case at bar depends on the meaningfulness of the administrative remedies and the opportunity for judicial review under the procedures established under the Civil Service Reform Act discussed supra. See Bartel v. Federal Aviation Administration, 725 F.2d 1403, 1415 (D.C.Cir.1984). “In fact,” the court of appeals held in Doe,

Bush held only that where civil servants enjoy meaningful and constitutionally adequate statutory remedies for first amendment violations, federal courts should not imply an additional Bivens -type damages remedy under the constitution. The Bush holding in no way affects the scope of constitutional rights, and nothing in Bush or any other Court opinion casts doubt on the presumed availability of federal equitable relief against federal officials for committing constitutional violations.

Doe, 753 F.2d at 1109 n. 17 (citations omitted) (emphasis in original). To the extent that plaintiff seeks a Bivens remedy for injuries attributable to wrongful conduct for which the administrative scheme provides no relief, therefore, his claims may not be dismissed for failure to state a claim. See Bush, 103 S.Ct. at 2418 (Marshall, J., concurring); Bartel, 725 F.2d at 1415.

With two notable exceptions, an examination of plaintiffs claims indicates that he is seeking relief for injuries not remediable under the administrative scheme. Unlike the plaintiff in Bush, who could appeal his demotion to the MSPB’s predecessor agency, the Federal Employee Appeals Authority, Pope had no such right to review because none of the actions complained of, other than the rescinded attempt to remove him, constituted an “adverse action.” As explained above, only adverse actions can be appealed to the MSPB. Retaliation that constitutes a prohibited personnel practice but which does not reach the level of an' adverse action under 5 U.S.C. § 7512 is not appealable. Because Pope’s only statutory remedy for all but the removal was “an essentially discretionary and unreviewable petition to the Office of the Special Counsel,” Krodel v. Young, 748 F.2d 701, 712 n. 6 (D.C.Cir.1984), Bush does not dispose of plaintiff’s constitutional claims. See Reuber v. United States, 750 F.2d 1039, 1058 (D.C.Cir.1984); Krodel, id.; Williams v. Internal Revenue Service, 745 F.2d 702, 705 (D.C.Cir.1984); Bartel, 725 F.2d at 1414-15.

With regard to the attempted removal, plaintiff was precluded from airing his claims before the MSPB by the FAA’s eleventh-hour unilateral recission. Although that decision left Pope with no administrative remedies to exhaust, it also provided him with the full measure of relief that would have been available to him had the MSPB ruled in his favor. Unlike the remedies provided by Congress for commission of a prohibited personnel practice, the administrative remedies available to a career civil servant in Pope’s position against whom an adverse action is taken are “constitutionally adequate,” and thus judicial recognition of a Bivens -type remedy is precluded by Bush. Because Pope obtained all the relief that would have been available to him had he gone forward with the MSPB appeal, and because the availability of such relief precludes recognition of a Bivens -type remedy, defendants’ motion to dismiss plaintiff’s claims will be granted insofar as he is seeking damages for the allegedly improper removal.

Plaintiff’s claims with regard to his attempts to obtain reemployment with the FAA may also be precluded by Bush, since he will be able to appeal a denial of reemployment in a position to which he is entitied to the MSPB. As discussed supra, however, those claims do not yet appear to be ripe, and plaintiff has, in any case, failed to exhaust his administrative remedies. Therefore, the court need not reach the issue of whether recognition of a Bivens action once administrative remedies have been fully pursued- would be precluded by Bush.

Regarding the remainder of the alleged retaliatory actions, plaintiffs sole administrative recourse is to the OSC. Since the OSC enjoys broad discretion in deciding whether and how to pursue employee complaints, and since judicial review of OSC decisions not to investigate or prosecute is limited, the court holds that the administrative remedies for commission of prohibited personnel practices alleged by plaintiff are not sufficiently meaningful or constitutionally adequate to preclude recognition of a Bivens-type remedy. See Borrell v. U.S. International Communications Agency, 682 F.2d 981 at 988 (D.C.Cir.1982); Frazier, 672 F.2d at 162-63. Therefore, because the administrative scheme provided Pope with an opportunity for neither administrative nor judicial review of his other claims, Bush does not support defendants’ motion to dismiss, and the motion will be denied.

To summarize, plaintiff’s claims for injunctive relief against defendants’ interference with his attempts to obtain reemployment within the Department of Transportation and harassment subsequent to his return to federal employment will be dismissed due to his failure to exhaust his administrative remedies, lack of ripeness, and the impracticality of fashioning injunctive relief on the basis of actions allegedly taken against plaintiff years ago by persons who would no longer be in a position to supervise plaintiff’s work. Plaintiff’s claims regarding the FAA’s attempt to remove him in 1981 will be dismissed due to the constitutional adequacy of the administrative remedy provided by Congress. Defendants’ motion for a protective order will be dismissed as moot.


source: Caselaw Access Project

author: SHAW, District Judge.

license: Public Domain

text:
    DATAMATIC, INC. v. INTERNATIONAL BUSINESS MACHINES CORPORATION.
    Civ. A. No. 83-1652.
    United States District Court, W.D. Louisiana, Lafayette-Opelousas Division.
    June 24, 1985.

      Henry C. Perret, Jr., Lafayette, La., for plaintiff.
    Robert E. Barkley, Jr., Sessions, Fish-man, Rosenson, Boisfontaine, Nathan & Winn, New Orleans, La., for defendant.
   RULING

SHAW, District Judge.

Now before the Court is the motion of defendant International Business Machines Corporation (IBM) for summary judgment, alleging that the rights of plaintiff Datamatic, Inc. against IBM are limited to those of the original purchasers of the computer equipment at issue under IBM’s limited warranty. Datamatic contends that it cannot be limited to the original purchasers’ rights since it was not privy to their purchase contract with IBM, and that IBM’s limited warranties are contrary to Louisiana public policy.

In this case, plaintiff Datamatic, a computer service bureau, acquired used IBM computer equipment in 1974 and 1975 from ITEL Corporation, a Dallas-based computer leasing company. The equipment was originally sold by IBM to four purchasers in 1968, including American Express Company in New York, Hardware Mutual Casualty Company in Wisconsin, FWD Corporation in Wisconsin and SSI Corporation in California. Each of these four original purchasers bought the equipment pursuant to a purchase agreement which expressly limited IBM’s liability for defective parts to replacement if the defect is discovered within one year from the date of installation. The purchase agreements also provided that “IBM shall in no event have obligations or liabilities for consequential damages,” and that:

[t]he foregoing Warranties and Limitations are exclusive remedies and are in lieu of ■ all other warranties express or implied, including but not limited to the implied warranty of merchantability.

ITEL subsequently acquired the equipment from the original purchasers or their successors in title and sold it to Datamatic in 1974 and 1975 in Dallas for approximately $75,000.00, paid in monthly installments over a four-year period. After Datamatic acquired the equipment it was serviced by IBM pursuant to a 1973 maintenance contract between the two companies, in which Datamatic and IBM agreed that:

[t]he Customer agrees that IBM will not be liable for any consequential damages even if IBM has been advised of the possibility of such damages.

Datamatic operated the equipment twenty-four hours a day for five years until 1980, when it curtailed operations, relocated its offices and sold some of its equipment.

Datamatic contends that the equipment it purchased from ITEL included a defectively designed, manufactured or assembled “terminator.” According to Datamatic, the defective terminator was incorporated into one of its two tape systems in 1975 and the tape system which contained this terminator continuously malfunctioned until June 1982. Datamatic claims that IBM attempted to repair the tape system many times during this period, but failed to do so.

In June 1982, the IBM customer engineer was servicing the malfunctioning tape system when he discovered that certain terminals or pins in the defective terminator were “wire-wrapped” rather than soldered. According to Datamatic, the repairman described the problem as a “manufacturer’s defect” and repaired the terminator by soldering the terminals. Datamatic claims that the terminator has functioned normally ever since.

IBM claims that a few days after the equipment was repaired, Datamatic demanded a refund from IBM for all the maintenance charges attributable to the terminator, and the two parties began.negotiations. Datamatic filed this suit a year later, claiming that the unsoldered pins constituted a redhibitory defect. Datamatic contends that its original sale should be voided because the defective terminator rendered the tape system so inconvenient that the company would not have purchased it had it known of the vice. Furthermore, the malfunctioning system allegedly caused Datamatic to incur excessive down time expenses, forcing it to rerun work already put into the system and to incur substantial maintenance and repair expenses.

Finally, Datamatic claims that the defective equipment damaged its business reputation and caused a loss of substantial profits because customers became dissatisfied with the company’s work. Therefore, Datamatic is seeking the following damages: maintenance fees due to the defective equipment, extra maintenance costs, cost of rerunning the work, cost for when the tape system was “down”, lost profits due to customer dissatisfaction, damage to business reputation, purchase price of the defective machinery, and property taxes on the equipment price.

Although IBM initially argued that New York law should govern this dispute, it has since contended that the motion should succeed regardless of whether Louisiana or New York law applies. Likewise, Datamatic initially argued that Louisiana law should apply, but maintains that the motion must be denied under New York law as well. This Court agrees that it must reach the same result under either Louisiana or New York law, but finds that Louisiana law governs this dispute for the reasons hereinafter stated.

In diversity cases, federal courts must apply the conflicts of law rules of the states in which they sit. Griffin v. McCoach, 313 U.S. 498, 61 S.Ct. 1023, 85 L.Ed. 1481 (1941). Accordingly, this Court must look to the conflicts rules of Louisiana to determine whether Louisiana or New York law will govern this case. Louisiana courts first look to any contractual directive, Delhomme Industries, Inc. v. Houston Beechcraft, Inc., 669 F.2d 1049 (5th Cir.1982), and if no contractual directive is present, the courts look to the “substantial interest” principles embodied in Section 6 of the Second Restatement of Conflicts. Brinkley & West, Inc. v. Foremost Insurance Company, 499 F.2d 928 (5th Cir.1974); Jaegers v. Royal Indemnity Company, 276 So.2d 309 (La.1973).

In this case, each of the original IBM purchase agreements provided that New York law would govern any disputes. This Court finds that Datamatic was not a party to these original agreements, however, and that the choice of law provisions should not be enforced against Datamatic regardless of whether the limited warranty provision is enforceable. Although Louisiana courts have enforced choice of law provisions agreed to by the parties in dispute, Delhomme, 669 F.2d at 1049, this Court finds no Louisiana cases which have held the ultimate purchaser to the terms of a choice of law provision between the manufacturer and the first purchaser, to which it was not a party. The First Circuit case cited by IBM for this proposition, applying Massachusetts law, involved the rights of a third party beneficiary to the contract rather than a “stranger” to the original contract, as in this case. Massengale v. Transition Electronic Corporation, 385 F.2d 83 (1st Cir.1967). Datamatic had no notice that New York law would apply to this case; in fact, its purchase agreements with ITEL stipulated that California law would govern.

Since the choice of law provisions in the original IBM contracts are not enforceable against Datamatic, this Court must analyze the “substantial interest” factors of Section 6 of the Second Restatement of Conflicts. Redhibition cases have been aligned with tort actions in conflicts analysis, Lartigue v. R.J. Reynolds Tobacco, 317 F.2d 19 (5th Cir.1963). Section 145 of the Second Restatement lists four choice of law factors to apply in tort cases: (1) the place where the injury occurred; (2) the place where the conduct causing the injury occurred; (3) the domicile, residence, place of incorporation and business of the parties and (4) the place where the parties’ relationship is seated.

In this case, the equipment was purchased in Texas for use in Louisiana, where the equipment has remained. The defects were discovered in Louisiana and the damages were likewise sustained in Louisiana. The plaintiff is a Louisiana corporation; IBM is authorized to do business in Louisiana and has offices and employees here. IBM also serviced the machines in Louisiana during plaintiffs ownership. Therefore, the Section 145 factors indicate that Louisiana has a greater relationship to the dispute than New York, which is IBM’s principal place of business and place of incorporation. The relevant factors of Section 6 also point toward the application of Louisiana law. In Commercial Union Insurance Companies v. Upjohn Company, 409 F.Supp. 453 (W.D.La.1976), the court applied Louisiana law under circumstances very similar to this case. Therefore, this Court finds that Louisiana law should govern this dispute.

Having decided the conflicts of law dispute, there are three separate issues which must be addressed in this case: first, whether Datamatic can bring a redhibitory action against IBM: second, whether IBM’s limited warranty is valid under Louisiana law, and third, whether IBM can rely on this warranty to limit any obligation towards Datamatic. Datamatic has also raised some peripheral issues, claiming that this court should abstain from deciding the case and that Datamatic may have additional fraud or tort claims against IBM.

Addressing the first issue, this Court holds that Datamatic is entitled to bring a redhibition action against IBM, since privity of contract is no longer a prerequisite to an action in redhibition. In Media Production Consultants, Inc. v. Mercedes-Benz of North America, 262 La. 80, 262 So.2d 377 (1972), the Louisiana Supreme Court abolished the previous requirement of privity between the purchaser of a defective product and its manufacturer, holding that a buyer may proceed directly against the manufacturer of a defective product in a redhibition action. See also Rey v. Cuccia, 298 So.2d 840 (La. 1974); Austin v. North American Forest Products, 656 F.2d 1076 (5th Cir.1981). Thus subsequent purchasers, such as Datamatic in this case, are now able to sue manufacturers like IBM for product defects in redhibitory actions.

IBM has challenged Datamatic’s right to bring this action, however, under the doctrine of waiver by use or conduct. According to IBM, Datamatic has waived its redhibitory rights because it continued to use the computer equipment for a considerable period of time with the knowledge that it was not performing properly, citing C.T. Street, Inc. v. Breland, 88 So.2d 56 (La.App.1956) (plaintiff used equipment and made payments for four months); Scott v. Boylston, 177 So. 812 (La.App.2d Cir.1937) (plaintiff used equipment and made payments for twelve months). In this case Datamatic used the equipment continuously for eight years, from 1975 until it filed suit in 1983, and has admitted that it was aware that the equipment was malfunctioning during this time. Datamatic also paid ITEL in full for the equipment through monthly payments extending over four years, from 1975 to 1979.

Yet Datamatic has successfully distinguished the cases cited by IBM, since the purchasers in those cases all had specific knowledge of the defects involved. For example, in C.T. Street, 88 So.2d at 57, the court stated:

[w]hen a purchaser uses the thing which he has purchased for a considerable period of time with knowledge of its defects and makes part payments on the purchase price thereof without protest, he cannot, when sued for the balance due, repudiate the contract on the ground of redhibition. (Citation omitted, emphasis added.)

In C.T. Street as well as the other decisions cited by IBM, the courts’ holdings were based upon the purchaser’s knowledge of the defect. In this case, however, Datamatic did not become aware of the specific defect until June 1982. Therefore IBM’s waiver by use or conduct theory must fail.

The second question which must be addressed is whether IBM’s limited warranty is valid under Louisiana law. Datamatic alleges that IBM’s limited warranty provisions violate Louisiana public policy and were both inconspicuous and not brought to its attention. IBM responds, however, that there is no violation of public policy since Louisiana law allows waiver of implied warranties. Moreover, IBM claims that limitation of liability provisions need not be conspicuous in contracts between businessmen.

Louisiana law provides that “parties may, by particular agreement, add to the obligation of warranty, which results of right from the sale, or diminish its effect; they may even agree that the seller shall not be subject to any warranty.” LSA-C.C. art. 2503. See also LSA-C.C. art. 1764(A)(2) (warranties are implied in every sale but may be modified or renounced without changing the character of the contract). Louisiana courts have also held that parties are free to limit implied warranties by express agreement, but the limitation must be clear and unambiguous. See, e.g., Rey v. Cuccia, 298 So.2d 840 (La.1974); Hob’s Refrigeration & Air Conditioning, Inc. v. Poche, 304 So.2d 326 (La.1974). This Court finds that the limitation of warranty provision in this case was not contrary to Louisiana public policy since it was clear and unambiguous on its face.

Datamatic also claims that the limited warranty provision is void because it was inconspicuous and never brought to its attention. Louisiana courts have tended to strictly enforce these two requirements in consumer transactions, such as automobile purchases. See, e.g., Media Production Consultants, Inc. v. Mercedes-Benz of North America, Inc., 262 La. 80, 262 So.2d 377 (1972). Yet the courts have not always applied these requirements in cases involving sophisticated parties, since the businessman-purchaser is presumed to be aware of the contents of the contracts he signs. See, Anderson v. Bohn Ford, Inc., 291 So.2d 786 (La.App. 4th Cir.1973), cert. denied, 294 So.2d 829 (La.1974); Louisiana National Leasing Corporation v. ADF Service, Inc., 377 So.2d 92 (La.1979).

This Court finds that the original purchasers of the computer equipment were all sophisticated businesses, which presumably had knowledge of the contractual provisions they signed. Moreover, the sales contracts by which Datamatic acquired the used equipment from ITEL provided a similar exclusion of implied warranties, stating: “[purchaser shall be entitled to the benefit of any applicable manufacturer’s warranties, and such warranties are hereby assigned by Seller to Purchaser for the benefit of Purchaser.” Therefore Datamatic had notice that its manufacturer’s warranties were limited to those received by the original purchasers.

Finally, the third major issue is whether IBM can enforce its limited warranty provisions against Datamatic, a subsequent purchaser. Although Louisiana courts have never addressed this specific issue, several cases offer guidance and indicate the best policy rationale.

As stated earlier, many Louisiana courts have broadly applied LSA-C.C. art. 2503 to cases involving warranties of fitness as well as warranties against eviction. See, e.g., Aizpurua v. Crane Pool Co., Inc., 449 So.2d 471 (La.1984); note 13, supra. Article 2503 not only enables parties to limit the obligation of warranty, but also provides that “whether warranty be excluded or not the buyer shall become subrogated to the seller’s rights and actions in warranty against all others.” This provision has been cited in many cases to support the theory that subsequent purchasers may recover against manufacturers or other predecessors in the chain of title in absence of privity. See, e.g., Aizpurua, 449 So.2d at 472; Huffman-Euro Motors v. Physical Therapy Services, Ltd., 373 So.2d 565 (La.App.3rd Cir.1979); Cotton States Chemical Co. v. Larrison Enterprises, Inc., 342 So.2d 1212 (La.App.2d Cir.1977); Landry v. Baton Rouge Lumber Company, 434 So.2d 1144 (La.App.1st Cir.1983); Moreno’s, Inc. v. Lake Charles Catholic High Schools, Inc., 315 So.2d 660 (La.1975).

Although Louisiana courts have never actually enforced a limited warranty provision against a subsequent purchaser in the chain of title under article 2503, one court relied upon this provision to limit the subsequent purchaser’s prescriptive period. In DeSoto v. Ellis, 393 So.2d 847 (La.App.2d Cir.1981), the court cited article 2503 for the proposition that subvendees are:

entitled to bring any action the vendor could have brought against his vendor ... a subvendee is subrogated to the rights of his vendor and his vendor’s warranty against redhibitory defects from the vendor who sold the property to him, and so on up the chain of title.

Id. at 847. The court held that the plaintiff’s suit had prescribed since the plaintiff’s predecessors had only one year to institute a redhibition action after the discovery of the defect, and the plaintiff had acquired the remainder of this prescriptive period under his warranty deed.

Applying article 2503 to this case, we must hold that Datamatic acquired only the limited warranties possessed by its predecessors in title when it signed the purchase agreement with ITEL. This result is not contrary to any existing Louisiana statutory or case law, and it ensures that subsequent purchasers do not acquire greater rights against the manufacturer than those possessed by the original purchaser. In this case Datamatic had notice in its agreement with ITEL that its warranties might be limited, and Datamatic could have easily discovered the exact scope of its rights against IBM. On the other hand, IBM did everything possible to attempt to limit its warranties with all purchasers, since it had no feasible way to discover subsequent purchasers and advise them of their limited rights. To allow Datamatic to pursue unlimited rights against IBM would render limited warranties almost meaningless to a manufacturer, and would thwart the apparent policy goals of article 2503 as expressed in DeSoto and other cases. Subsequent purchasers such as Datamatic should bear the responsibility of checking what rights they are acquiring against the manufacturer rather than requiring manufacturers to track down all subsequent purchasers of their products.

Datamatic has argued that it has direct, judicially-created rights against IBM, citing Media, and therefore it is not inconsistent for it to have greater rights against IBM than the original purchasers. This Court cannot accept that analysis, however, since Louisiana courts are still applying article 2503 to enable subsequent purchasers without privity to pursue the same rights against the manufacturers as those possessed by the original purchasers. Nor will this Court allow Datamatic to assert new fraud or tort claims against IBM, since it has not made the appropriate allegations. Furthermore, Datamatic cannot rely on La. Civil Code article 2531 since this provision has never been applied to defeat a manufacturer’s limited warranty against a subsequent purchaser through subrogation; article 2531 serves only to defeat a limited warranty between the manufacturer and seller if the seller has been held liable to the buyer.

Therefore, as the court held in R & L Grain Co. v. Chicago Eastern Corp., 531 F.Supp. 201 (N.D.Ill.1981), Datamatic is bound by the warranty disclaimers and damage exclusions contained in the original IBM sales contracts even though it was not a party to those contracts. Since Datamatic claims title to the equipment, which it derivatively obtained from the IBM sales contracts, it takes its title subject to the warranty limitations in those contracts.

Accordingly, the motion for summary judgment filed by defendant IBM is hereby GRANTED and Datamatic’s claims are hereby DISMISSED. Counsel for mover shall submit a judgment in conformity with this ruling within ten (10) days hereof.

      . The equipment was a tape system consisting of two controllers (2804’s) and ten tape drives (2401’s and 2402’s).

      . The dates of installation were 1966, 1967, 1968 and 1969.

      . In 1980 Datamatic’s largest customer, Guaranty Bank, went to an in-house computer.

      . Datamatic sold one 2804 controller and one 2402 tape drive (comprised of two tape drives). Shortly thereafter Parker St. Amanl, one of the two co-owners of Datamatic, sold his interest in the company to Roland Ditch, the other co-owner.

      . According to IBM, the terminator is a device housed in the tape drive which is designed to terminate the signal. IBM claims that it did not manufacture the terminator in question, but it was manufactured by a third party.

      . In 1984 Datamatic closed down its operations completely.

      . Choice of law provisions may be distinguished from manufacturer’s warranties, which are governed by La.Civ.Code art. 2503. See discussion at pp. 721-722, infra. Louisiana courts have subrogated buyers to the warranty rights of their sellers’ under this provision, particularly as to prescription, but have never used this provision to enforce choice of law clauses.

      . Section 145 also provides that ”[t]he rights and liabilities of the parties with respect to an issue in tort are determined by the local laws of the state which, with respect to that issue, has the most significant relationship to the occurrence and the parties under the principles stated in Section 6.”

      . These factors include: the relevant policies of the forum, the relevant policies of other interested states and the relative interests of those states in the determination of the particular issue; the protection of justified expectations; the basic policies underlying the particular field of law; certainty, predictability and uniformity of result; and ease in the determination and application of the law to be applied.

      . IBM also cites Cleaners Equipment Corp. v. Weil Cleaners, 178 So. 771 (La.App.2d Cir.1937) and Goode-Cage Drug Co. v. Ives, 133 So. 813 (La.App.2d Cir.1931).

      . Although IBM argues that precise knowledge of the exact defect or of the cause of the defect is not necessary, the cases cited by IBM are cases allowing redhibitory actions despite the purchaser's lack of precise knowledge of the defect or cause. See, e.g., Jordan v. Security Co., 425 So.2d 333 (La.App. 3rd Cir.1982); Moreno's, Inc. v. Lake Charles Catholic High Schools, Inc., 315 So.2d 660 (La.1975). IBM has cited no causes requiring the purchaser to bring a redhibitory action the first time the equipment malfunctions.

      . Datamatic also claims that the limited warranty provisions represent a failure of essential purpose and were unconscionable under New York law. Although there is no need to address these two issues under Louisiana law, this Court notes that Datamatic has not sufficiently alleged either of these two claims. The provisions were not unconscionable since there was no "surprise" in this case; Datamatic had notice that it was receiving only the same warranties possessed by its seller. There is also no showing of failure of essential purpose, since the equipment was used for fifteen years.

      . Although article 2503 specifically refers to warranties against eviction rather than warranties of fitness, many courts have applied article 2503 to warranties of fitness as well. See, e.g., Slack v. Inglehart, 386 So.2d 967, 970 (La.App. 3rd Cir.1980).

      . Datamatic claims that IBM cannot enforce the limited warranties in the original contracts against Datamatic since IBM had prohibited assignment of any rights, duties or obligations unless specifically approved by IBM, and IBM has never admitted that it approved the assignment. IBM responds, however, that the provision only illustrates IBM’s reluctance to extent its potential liability beyond that set forth in the original contracts; the provision is designed only to safeguard IBM from being exposed to greater liability by subsequent purchasers. This Court adopts IBM's position on this issue, and finds that Datamatic’s contract with ITEL put it on notice that there might be limited manufacturer’s warranties.

      . Given the complexity of the issues and the lack of state court direction, Datamatic suggested in its second supplemental brief that this Court should abstain and direct the parties to have a state court decide these issues. Abstention is an extraordinary and narrow exception, however; the mere existence of difficult issues of state law does not justify abstention. Meredith v. City of Winter Haven, 320 U.S. 228, 235-37, 64 S.Ct. 7, 11-12, 88 L.Ed. 9 (1943).

      . Datamatic argues that the subrogation language in article 2503 has existed since 1924 but was never utilized since privity was still a requirement for redhibition actions. Datamatic maintains that this subrogation language has been obsolete following the elimination of the privity requirement in Media. Yet the courts seem to disagree with this reasoning in the five decisions cited above, however, relying on article 2503 to support the subsequent purchaser’s cause of action against the manufacturer.

      . Datamatic has attempted to assert a fraud claim against IBM under La. Civil Code article 2548 in its supplemental brief in opposition to IBM’s summary judgment motion, but has not shown that IBM made intentional misrepresentations or false declarations regarding the equipment. Even if Datamatic were to amend its complaint to plead fraud, such a claim has probably prescribed.

      . Article 2531 provides in part: "In any case in which the seller is held liable because of redhibitory defects in the thing sold, the seller shall have a corresponding and similar right of action against the manufacturer of the thing for any losses sustained by the seller, and further provided that any provision of any franchise or manufacturer-seller contract or agreement attempting to limit, diminish or prevent such recoupment by the seller shall not be given any force or effect.


author: REGAN, District Judge.

text:
    Earl BRISSETTE, Plaintiff, v. Margaret HECKLER, Secretary of Health and Human Services, Defendant.
    No. 82-1427C(B).
    United States District Court, E.D. Missouri, E.D.
    June 25, 1985.
    On Motion For Attorney’s Fees July 17, 1985.

      John W. Reid, II, Fredericktown, Mo., for plaintiff.
    Jill Newman, Asst. U.S. Atty., St. Louis, Mo., for defendant.
   MEMORANDUM

REGAN, District Judge.

This matter is before the court upon the plaintiff’s motion for attorney’s fees under the Equal Access to Justice Act, 28 U.S.C. § 2412(d)(1)(A) [1982],

On September 21, 1973, plaintiff Earl L. Brissette filed an application for a period of disability and disability insurance benefits pursuant to 42 U.S.C. § 416(i) and 423. He alleged that he had been unable to work since July 7, 1972 due to injuries incurred as a result of a truck-automobile accident. His application was denied upon initial consideration but approved upon reconsideration. A period of disability was established as of July, 1972. On July 15, 1981, the Social Security Administration determined that plaintiff’s disability ceased as of June, 1981, with the period of disability terminating on August 31, 1981. It was found that plaintiff was capable of returning to his past work. The decision to terminate plaintiff’s benefits was affirmed upon reconsideration. On February 5, 1982, plaintiff appeared at a hearing held before an Administrative Law Judge (AU) at which he testified and was represented by counsel. On March 4, 1982, the AU determined that plaintiff ceased to be disabled in June, 1981 and that his entitlement to a period of disability and disability insurance benefits ended in August, 1981. On August 4, 1982, the Appeals Council affirmed the AU’s decision. This then became the final decision of the defendant Secretary of Health and Human Services. On September 7, 1982, plaintiff filed his petition in the United States District Court seeking judicial review of the defendant’s decision. 42 U.S.C. § 405(g).

On June 16, 1983, the undersigned United States District Judge entered an order affirming the denial of claimant’s appeal by entering summary judgment in favor of the defendant and against the plaintiff, 566 F.Supp. 626. On March 30, 1984, the United States Eighth Circuit Court of Appeals found that the AU had failed to develop the record and the Eighth Circuit remanded the case to the United States District Court with directions to remand to the Secretary for further proceedings consistent with the court’s opinion, 730 F.2d 548.

On July 27, 1984, the claimant was afforded another hearing before Administrative Law Judge F. Daley Abels. On August 23, 1984, AU Abels rendered a decision in favor of the claimant.

On June 30, 1983, the claimant hired John W. Reid, II, to represent him on his appeal of the United States District Court’s decision denying reinstatement of claimant’s social security disability benefits to the United States Court of Appeals for the Eighth Circuit. Mr. Reid also represented the claimant at his hearing before the Administrative Law Judge on July 27, 1984. On February 27, 1985, the claimant filed a motion for attorney’s fees under the Equal Access to Justice Act.

The Equal Access to Justice Act, 28 U.S.C. § 2412(d)(1)(A) [1982] provides:

Except as otherwise specifically provided by statute, a court shall award to a prevailing party other than the United States, fees and other expenses, in addition to any costs awarded pursuant to subsection (a) incurred by that party in any civil action (other than cases sounding in tort) brought by or against the United States and 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 make an award unjust.

Thus, the prerequisite to any award of attorney’s fees under the Equal Access to Justice Act are that the claimant was a “prevailing party”, that the position of the government was not “substantially justified,” and that no “special circumstances” make an award of fees unjust. 28 U.S.C. § 2412(d)(1)(A). As there is no dispute that plaintiff was a prevailing party within the terms of the statute, we turn now to a consideration of whether or not the position of the United States was substantially justified.

The test of whether the position of the government is substantially justified is essentially one of reasonableness in law and in fact, and the United States has the burden of showing the substantial justification of its position. Cornelia v. Sckweiker, 728 F.2d 978, 982 (8th Cir.1984), citing H.R.Rep. No. 1418, 96th Cong., 2d Sess. 10-11, reprinted in 1980 U.S.Code Cong. & Ad.News, 4953, 4989; Foley Const. Co. v. U.S. Army Corp of Engineers, 716 F.2d 1202, 1204 (8th Cir.1983).

After a thorough and careful review of the transcripts, briefs and motions filed in this case, it is the opinion of this court that the United States’ position did have a reasonable basis in law and fact, thus meeting its burden of proving a substantial justification of its position.

This case is similar to Anderson v. Heckler, No. 84-1157-SI (8th Cir., August 30, 1984), wherein the motion for an award of attorney’s fees and expenses was denied. In that case, the Eighth Circuit held that as the government prevailed in the District Court, the position of the government was “substantially justified” within the meaning of the Equal Access to Justice Act, and thus denied the plaintiff’s motion for award of attorney’s fees and expenses. Id.

Therefore, for the foregoing reasons, the plaintiff’s application for attorney’s fees under the Equal Access to Justice Act is denied.

On Motion For Attorney’s Fees

This case is now before this court on the motion of the plaintiff’s attorney to obtain an award of attorney’s fees for the representation of the plaintiff. This claim arose out of counsel’s representation of Earl Brissette. Subsequent to a remand by the Eighth Circuit Court of Appeals on March 30, 1984, the claimant was afforded another hearing before an Administrative Law Judge, and on August 23, 1984, the AU rendered a decision in favor of the claimant.

Presently, the Social Security Administration is withholding $9,699.12 for payment of attorney’s fees, which represents 257- of accrued benefits. Counsel has submitted an itemization of his hours and is requesting approval of a fee application in the amount of $8,799.12. The Social Security Administration has already allowed the plaintiff’s attorney $900.00. The original contract signed by the plaintiff and his counsel was contingent, providing for a 25% recovery. The attorney for plaintiff spent approximately 46.25 hours in preparation for the judicial phase of this case.

The relevant statutory provision, 42 U.S.C. § 406(b)(1), provides the district court with the discretion to award a reasonable attorney’s fee to an attorney for the representation of a Social Security claimant before the court. MacDonald v. Weinberger, 512 F.2d 144 (9th Cir.1975). The statutory provision contains a maximum allowance of 25% of the back pay award. Therefore, this court may not award a fee any greater than that amount. In addition, a court is obligated in every case to determine a reasonable fee for services rendered; routine approval of the statutory maximum allowable fee should be avoided in all cases. Allen v. Heckler, 588 F.Supp. 1247, 1250 (W.D.N.Y.1984), quoting Redden v. Celebrezze, 370 F.2d 373, 376 (4th Cir. 1966). Finally, a district court is without jurisdiction to award a fee for services at the administrative level. Fees for legal services performed at the agency level are committed by statute to the discretion of the Secretary of Health and Human Services. Whitt v. Califano, 601 F.2d 160 (4th Cir.1979); MacDonald v. Weinberger, 512 F.2d 144 (9th Cir.1975); Fenix v. Finch, 436 F.2d 831 (8th Cir.1971).

Counsel and plaintiff agreed to payment on a contingency basis in this case. Although this court will consider the fact that payment was arranged in this manner, the award of this fee may not be unquestionably approved in this type of case. MacDonald v. Weinberger, supra, 512 F.2d at 147; Reeves v. Mathews, 435 F.Supp. 419, 425 (E.Tenn.1977). A valid consideration in making an award of attorney’s fees is that the fee is to be paid from the limited resources of a claimant. Reeves v. Mathews, supra.

Therefore, it is the conclusion of this court that counsel should be allowed a total fee in the amount of a reasonable hourly rate times the number of hours spent in preparation for proceedings before this court. In light of the complexity of a case of this nature, $60.00 an hour is a reasonable hourly rate. Therefore, counsel will be awarded a fee of $2,775.00 for his work in preparing the judicial phase of this case.

      . This amount represents 46.25 hours times $60.00. The itemization submitted by plaintiff's attorney contained a total of 63.50 hours. However, 17.25 of these hours represented the time representing plaintiff at the administrative level (after and including May 9, 1984). As discussed in the text, fees for such legal services are committed to the discretion of the Secretary and plaintiff's counsel has advised this court that he has been awarded $900.00 for his work before the Secretary.


author: FORRESTER, District Judge.

text:
    David L. OVBEY and Nora G. Ovbey, Plaintiffs, v. CONTINENTAL INSURANCE COMPANY, Defendant.
    Civ. A. No. C84-1617A.
    United States District Court, N.D. Georgia, Atlanta Division.
    June 25, 1985.
    H. Sanders Carter, Jr., Carter, Ansley, Smith & McLendon, Atlanta, Ga., for plaintiffs.
    Clayton H. Farnham, Drew, Eckl & Farnham, Atlanta, Ga., for defendant.
   ORDER

FORRESTER, District Judge.

This action, for breach of an insurance contract, is before the court on cross motions for summary judgment. The defendant contends that the cause of the foundation wall collapsing on plaintiff’s house was the result of either a latent defect or of water pressure below ground exerted on the foundation wall, both of which are excluded risks from the policy. The plaintiff has moved for summary judgment that the cause of the foundation wall collapse was covered, and did not fall within any of the exclusions.

The undisputed facts of the case establish that the wall collapsed due to hydrostatic pressure on the foundation wall, aggravated by inadequate wall strength. Tarbutton Affidavit; Paul Deposition; Paul Affidavit. The undisputed facts also indicate that the water which accumulated in the ground next to the foundation wall of the house was present for several reasons: improper soil compacting; an unfinished sodding project in the yard which directed rainfall from a recent storm toward that point of the foundation; improper yard drainage, in that the yard sloped toward the house instead of away; drainage from the road up a hill from the house; and the lack or inadequacy of a foundation drain in the house. Paul Deposition.

The issue before the court on these cross motions for summary judgment is whether the “cause” of the wall’s collapse was excluded by the terms of this policy or not. The defendant has pointed to two policy exclusions which it alleges preclude plaintiff’s recovery in this case. First, the policy excludes any physical loss or damage which results from latent defect. Second, the policy excludes losses which are caused, directly or indirectly, by “water below the surface of the ground, including water which exerts pressure on, or seeps or leaks through a ... foundation.” Plaintiffs do not dispute that the expert testimony in this case demonstrates that the reason the wall failed was hydrostatic pressure on the foundation. According to Jeffrey Tarbutton,

... the wall failed as a result of excess lateral pressure on the wall due to the loads imposed by the back-fill adjacent to the wall. These loads were the direct result of saturation and movement of the soil which had been placed against the wall when it was constructed. Tarbutton Affidavit.

David Paul, the other expert, testified that “... the immediate reason for the collapse of the basement wall at the ... Ovbey residence ... was hydrostatic pressure” from the uncompacted saturated soil immediately exterior to the wall. Paul Affidavit. Paul further testified that although the sodding project on the front lawn could have aggravated the situation, he could not say that without the sodding project the collapse would not have occurred, “since the primary cause for the collapse was the construction of the soil immediately adjacent to the wall.” He further testified that although the county road-grading up the hill from the house may have increased the water run-off toward the foundation wall, it was improbable that this caused the collapse of the wall.

In order for the defendant to demonstrate that the cause of the collapse of plaintiffs’ home is not covered by the insurance policy, defendant must demonstrate that the “cause,” whether direct or indirect, of the collapse was an excludable risk. In determining whether an excludable risk is the cause of damage, the question is whether the proximate, dominant, and efficient cause of the loss is an excluded risk. Cuesta v. Royal Insurance Co., 98 Ga. 720, 27 S.E. 172 (1896).

The case before the court is interesting, in that what happened was that there were five reasons water built up next to the home. Of those five, it appears that three of them were latent defects in the house, and hence excluded under the policy. These three are the improper soil compacting, the inadequate yard drainage, and the absence or inadequacy of a foundation drain. The other two causes for the water build-up, the incomplete sodding project and the county road work up the hill from the house are, arguably, covered risks under the policy. If plaintiff were seeking to recover for a build-up of water, defendant’s motion for summary judgment would have to be denied, since there is evidence from which the jury could find that a covered risk was the “but for” causative agent for the build-up of water. The loss which plaintiffs suffered, however, is not the build-up of water. Rather, it is the collapse of the wall in the house, which was caused directly and immediately, according to the undisputed expert testimony in this case, by water pressure from below the surface of the ground. The policy exclusion in this case says that damage which results directly or indirectly from water below the surface of the ground exerting pressure on a foundation wall is excluded. Use of the word “direct” in this context is construed to mean “immediate” or “proximate” as distinguished from “remote.” 10A Couch on Insurance 2d § 42:650, p. 690 (1982). There is expert testimony in this case that the “immediate” cause of the collapse of the wall in plaintiff’s house was water pressure from below the surface of the ground. Paul Affidavit.

Those elements which plaintiffs point to as being covered risks, in support of plaintiffs’ motion for summary judgment, may properly be termed as antecedent contributing circumstances. Once again, Couch’s treatise on insurance law provides useful guidance:

An antecedent contributing circumstance is generally ignored in determining the proximate cause [of a loss]. That is to say, a situation which merely sets the stage for the later event is not regarded as being the proximate cause merely because it made possible the subsequent loss. For example, the explosion of gas, and not the lighting of a match, is the proximate cause of a loss, where the explosion is caused by the lighting of a match in a room filled with gas.

18 Couch on Insurance 2d § 74:717 p. 1024 (1982). That example seems to the court to be particularly apposite to the case at bar. The causes of the water build-up, i.e. the improper soil compacting, the sodding project, the inadequate yard drainage, the road drainage, and the inadequate foundation drain, all set the stage for the collapse of the basement wall. They are equivalent to lighting the match. What caused the damage, however, was the pressure of the water against the basement wall, just as the cause of the damage in Couch’s example was the explosion of the gas, and not the lighting of the match. A rather old Fifth Circuit case applying Georgia law illustrates the obverse of this principle. In Hanover Fire Insurance v. Newman’s, Inc., 108 F.2d 561 (5th Cir.1939), cert. denied, 309 U.S. 680, 60 S.Ct. 718, 84 L.Ed. 1024 (1940), the insured was covered against damage from sprinkler leakage, but the policy excluded damage resulting from a cyclone. A cyclone caused the sprinkler to leak. When the case reached the Fifth Circuit, the court noted that the damage was the result of the sprinkler leaking, and not the fact that the sprinkler was made to leak by the cyclone. Therefore, the court concluded that the loss was covered by the sprinkler leakage policy, and not excluded by the cyclone exclusion. That is similar to the case at bar, where it does not matter what made the water build up, the fact is that it was the pressure of the water which caused the basement wall to collapse. That is clearly excluded by the terms of this policy, such that it is unnecessary for the court to apply principles of contract construction which dictate that ambiguities in an insurance contract are construed against the insurer. See, e.g., Broome v. Allstate Insurance Co., 144 Ga. App. 318, 241 S.E.2d 34 (1977).

For the foregoing reasons, the court concludes that the undisputed facts of this case demonstrate that the proximate, dominant, and efficient cause of plaintiffs’ loss was pressure from water below the ground on a foundation wall of the house. That falls clearly within an exclusion in this policy, and therefore defendants’ motion for summary judgment is GRANTED, and plaintiffs’ motion for summary judgment is DENIED. The court notes defendants’ motion to amend the answer, filed March 21, 1985, has been withdrawn.

      . Plaintiff argues in support of the motion for summary judgment that the fact that this exclusion falls under the general category of “water damage” means that the exclusion applies only to the chemical effects of water, such as rusting or staining, and not the kinetic effects, such as hydrostatic pressure. In support of this contention, plaintiff cites Peach State Uniform Service, Inc. v. American Insurance Co., 507 F.2d 996 (5th Cir.1975). The Peach State case is distinguishable. The clause at issue in that case excluded “water damage caused by ... water below the surface below the ground, including that which exerts pressure on ... foundation walls ...." The court held that in order to give the phrase “water damage” meaning, the court must construe the policy to mean only damage which comes from the nature of water itself, meaning chemical effects, rather than kinetic effects, because if the insurance company had meant kinetic effects, it would have just said "damage caused by” water pressure on the foundation. The clause at issue in the present case says that the insurance company excludes coverage for "losses caused by” water pressure on the foundation. The clause clearly and unambiguously falls outside the definition imposed in Peach State, and indeed appears to have been drafted with Peach State in mind.

      . But see National Hills Shopping Center v. Insurance Company of North America, 308 F.Supp. 248 (S.D.Ga.1970). In National Hills, a wind storm policy was at issue, and Judge Lawrence of the Southern District held that the issue was whether the damage would have occurred in the absence of a wind storm.


author: NORMA HOLLOWAY JOHNSON, District Judge.

text:
    James Edward ANTOSH, Plaintiff, v. FEDERAL ELECTION COMMISSION, Defendant.
    Civ. A. No. 85-1410.
    United States District Court, District of Columbia.
    June 25, 1985.
    Michael E. Avakian, Center on National Labor Policy, North Springfield, Va., Francis T. Coleman, Stephen W. Robinson, Washington, D.C., for plaintiff.
    Robert E. Pease, Federal Election Com’n, Washington, D.C., for defendant.
   MEMORANDUM OPINION

NORMA HOLLOWAY JOHNSON, District Judge.

Plaintiff, James Edward Antosh, brings this action under 2 U.S.C. § 437g(a)(8)(A), seeking review of a decision of the Federal Election Commission (Commission) dismissing an administrative complaint filed with the Commission by plaintiff. The case is presently before the Court on the defendant’s motion to dismiss pursuant to Fed.R. Civ.P. 12(b). For the reasons set forth below, the defendant’s motion will be denied.

In support of its motion to dismiss, defendant alleges that the Court lacks jurisdiction over this action because the plaintiff did not file the complaint within sixty days of the Commission’s dismissal of the administrative complaint as required by 2 U.S.C. § 437g(a)(8)(A) and (B) which provide:

8(A) Any party aggrieved by an order of the Commission dismissing a complaint filed by such party under paragraph (1), or by a failure of the Commission to act on such complaint during the 120-day period beginning on the date the complaint is filed, may file a petition with the United States District Court for the District of Columbia.
(B) Any petition under subparagraph (A) shall be filed, in the case of a dismissal of a complaint by the Commission, within 60 days after the date of the dismissal.

In the instant case, plaintiff filed an administrative complaint with the Commission on March 1, 1984, alleging violations of the Federal Election Campaign Act of 1971, as amended. On March 1, 1985, by an affirmative vote of 5-0, the Commission decided to accept conciliation agreements and to close the file. The Commission notified counsel for the plaintiff of the Commission’s actions by letter dated March 11, 1985. Thereafter, the conciliation agreements were executed by all parties. The agreements contained the following provision:

This agreement shall become effective as of the date that all parties hereto have executed same and the Commission has approved the entire agreement.

The agreements were approved by the Commission on March 11, 1985. The instant complaint, seeking review of the Commission’s action, was filed on May 1, 1985.

It is the position of defendant that the date of dismissal by the Commission is March 1, 1985, that the complaint was not filed within the limitation period prescribed in 2 U.S.C. § 437g(a)(8)(B), and that, therefore, this Court lacks jurisdiction to entertain this action. Plaintiff, on the other hand, takes the position that the Commission’s action which affirmatively dismissed the administrative complaint was the Commission’s approval on March 11, 1985, of the conciliation agreements and that by the terms of the conciliation agreements, they were not effective until the parties had executed them and the Commission had approved them.

The Court is unpersuaded by defendant’s argument. Rather, the Court determines that the date of dismissal by the Commission was March 11, 1985, the date the Commission approved the conciliation agreements and they became effective. It is also notable that the Commission’s regulations provide at 11 C.F.R. § 111.18(b) that:

A conciliation agreement is not binding upon either party unless and until it is signed by the respondent and by the General Counsel upon approval by the affirmative vote of four (4) members of the Commission.

Therefore, the effective date of the dismissal being March 11, 1985, the instant complaint filed on May 1, 1985, was timely filed within 60 days after the effective date of the dismissal as provided by 2 U.S.C. § 437g(a)(8)(B).

For the reasons set forth above, the defendant’s motion to dismiss must be denied. An Order consistent with this Memorandum Opinion, will be issued this date.