author: KELLEHER, Senior District Judge.

text:
    GOLDRICH, KEST & STERN, a California Partnership, Plaintiff, v. CITY OF SAN FERNANDO, Defendant.
    No. CV 82-1653-RJK.
    United States District Court, C.D. California.
    Aug. 27, 1985.

      Fadem, Berger & Norton, Richard D. Norton, M. Reed Hunter, Santa Monica, Cal., for plaintiff.
    Rutan & Tucker, Robert S. Bower, Eric R. Newman, Costa Mesa, Cal., for defendant.
   MEMORANDUM OF DECISION

KELLEHER, Senior District Judge.

This matter is before the Court on the motion of City of San Fernando (“San Fernando” or “City”) for attorney’s fees. Plaintiff Goldrich, Kest & Stern (“Developer”) filed this suit in April, 1982, alleging a number of civil rights violations. On March 14, 1985 the Court granted City’s motion for summary judgment in its entirety; a Memorandum Decision (“Decision”) entered on May 28, 1985, explained the Court’s ruling. The City now seeks those attorney’s fees incurred in the preparation of defense of this action. Having carefully considered the voluminous record in this case, the Court finds that defendant City is entitled to recover attorney’s fees in the sum of $57,537. To that extent, the Court hereby GRANTS City’s motion.

Facts

Developer owns several contiguous parcels of undeveloped realty (the Herrick Manor property) located within the city limits of both San Fernando and of Los Angeles. Although already subdivided, Developer sought to resubdivide the property and looked to develop a high density, low and moderate income housing project on the site.

Since 1929, and at the time Developer purchased the Herrick Manor property, the San Fernando portion of the parcel had been zoned R1 — single family residential, 7500 square foot lots. Developer persuaded the San Fernando City Council (“City Council”) to adopt an ordinance which would have rezoned the San Fernando portion of Herrick Manor from R1 to R2 (medium density residential). Angered City residents forced the suspension of the ordinance’s, effective date and convinced the City Council to hold a special referendum on the rezoning issue. The San Fernando electorate resoundingly defeated the ordinance, thereby allowing the Herrick Manor property to retain its R1 designation.

In July, 1982 Developer filed a complaint in the Central District, seeking to overturn the referendum. City moved to dismiss, Developer agreed to do so and, in lieu of the suit, Developer filed an alternative development plan with the City. Once the City Council vetoed said alternative, Developer filed the instant action. Therein, Developer alleged that the referendum: (1) denied the property holder an economically viable use of the property; (2) exceeded the City’s police powers; and (3) constituted discriminatory and exclusionary non-rezoning in violation of the Fifth and Fourteenth Amendments.

Procedural History

City filed a motion to dismiss for failure to state a claim, Rule 12(b)(6), Fed.R.Civ.P. The Court took the matter under submission, and on September 20, 1983, filed an extensive Memorandum of Decision (“Memo”), granting defendant’s motion. Therein, the Court determined that City’s refusal to rezone was not a constitutionally recognized taking. The Court based this finding on the principles of condemnation law espoused by the Circuit in Haas v. City of San Francisco, 605 F.2d 1117 (9th Cir. 1979), cert. denied, 445 U.S. 928, 100 S.Ct. 1315, 63 L.Ed.2d 761 (1980), that the loss of the “highest and best” use of a parcel of property could not find relief in the U.S. Constitution. Further, the Court believed that City’s actions concerning the Herrick Manor property involved a reasonable exercise of its police powers. Finally, the Court also found that Developer did not have a requisite standing to raise the equal protection claims of unnamed third parties. In no uncertain terms, the Court explained that “[rjegardless of the ‘economic viability’ of plaintiff’s property as it is presently zoned, it is precisely what [Developer] bargained for when it purchased a parcel of land zoned R-l [sic] with all the economic limitations which that zone designation entails.” Memo at 7.

Developer’s proposed first amended complaint was lodged with the Court, yet was withdrawn by Developer for a retooled version, the second amended complaint. City renewed its 12(b)(6) motion; on January 23, 1984, the Court granted said motion and dismissed the second amended version of the complaint. At the hearing, the Court admonished Developer for its conclusory recitals of the alleged taking. The Court advised counsel of the necessity to allege, and to later prove, City’s deprivation of any viable economic use of the Herrick Manor property.

On April 9, 1984 the Court undertook the now familiar task of evaluating Developer’s complaint, the third amended edition, on Rule 12(b)(6) grounds. Therein, Developer alleged that City would not permit any development of the Herrick Manor parcel, whatsoever. At the time, the Court was skeptical of such accusations and believed that said assertions were merely an exercise in semantics instituted so as to avoid another dismissal. The oral joustings at the hearing, however, satisfied the Court that, for Rule 12(b)(6) purposes, Developer had finally presented sufficient allegations to avoid dismissal. Ultimately, Developer filed a fourth amended complaint, setting forth the allegations mentioned above.

From the initiation of this suit, the Court had expressed its doubts concerning the purportedly unconstitutional actions of the City. The Court repeatedly warned Developer of the heavy evidentiary burden that must be shouldered to prove a taking in this failure to rezone context. The Court’s skepticism was further fueled by Developer’s lackadaisical attitude toward this litigation. Developer frequently missed deadlines and was forced to file numerous ex parte applications for extensions of time. Such laxness, while not directly reflective on the merits of the action, did suggest to the Court that Developer fully understood the thin foundation supporting its federal action.

A heated letter from counsel for Developer to the managing partner of the contract City Attorney accused counsel for the City of misleading and inflammatory actions concerning a so-called settlement proposal made by Developer. A review of the record, however, contradicts said retorts. Specifically, it appears to the Court that Developer was attempting to use any avenue available to coerce the submission of the City Council into action favorable to Developer’s interests. City remained firm, however, and successfully avoided a full-blown confrontation. City had a right to avoid the so-called settlement offer for, at this stage of the action, Developer had virtually no chance of success on the merits.

For about six months the parties jockeyed during the discovery process. In October, Developer moved to reopen discovery, alleging a number of baseless grounds for its motion. The Court, generally magnanimous in its discovery extensions, denied Developer’s motion, finding it grounded on hollow, unsubstantiated allegations of misdeeds.by individuals related to City. In November, Developer moved for the Court to abstain, alleging “changed circumstances.” Developer conveniently forgot that it had hotly contested a similar motion to abstain, brought by the City in 1982. Instead, Developer attempted an about-face, and argued that “changed conditions” warranted abstention by the district court. In reality, the only changes in this action were Developer’s loss of an identical state action, see infra, and the conclusion of discovery. The Court retained its jurisdiction and denied the motion to abstain.

Finally, the parties presented cross motions for summary judgment. Developer continued its groundless assault on the motive of the City counsel members, alleging dark intentions and illicit misdeeds. Rule 56, Fed.R.Civ.P., however, requires Developer to present factual substantiation for its claims. Vague unsupported “factual” statements coupled with fiery conclusions of constitutional rhetoric served as the mainframe of Developer’s presentations. Yet, such submission, replete with diversionary constitutional arguments, could not survive the deluge of factual averments, depositions, affidavits, and the like offered by City in support of its motion. In its Decision, this Court explained that “Developer has made it this far in this dispute by presenting unfounded allegations and unsubstantiated complaints about the treatment it had allegedly received at the hands of the City. Whenever a critical point in the case arrived, Developer dregged up constitutional argument after constitutional claim to ward off dismissal. The facts remain the same as they have throughout the matter; Developer took a risk and lost.” (p. 29) Accordingly, Developer could not genuinely place at issue any material fact. The Court granted City’s motion for summary judgment in its entirety.

In August, 1984 City adopted a Residential Planned Development Overlay Zone. Said zone would permit the development of the Herrick Manor property in an economically feasible manner. Developer failed to submit a proposal to the City Council until after the Court announced its intended decision to enter summary judgment in favor of the City. In a similar context, documents presented to the Court offer a glaring picture of Developer’s intention to use this litigation as a factor of intimidation, forcing City acquiescence to plans that failed to meet the zoning requirements of Rl. It appears that developer elected not to undertake any development of the property, fearful that such action might undercut Developer’s constitutional allegations that City was not allowing any development of the property. Such inaction belies any belief that City was preventing the development of the Herrick Manor property, and supports the view that Developer knew full well the precarious grounds upon which its complaint rested.

From this litany one could glean the Court’s belief that this action lacked merit from the onset. For over four years Developer has sought a way to force a plan of development through the City Council of the City of San Fernando. This litigation served as a vexatious attack on the motives and decisions of the City Council members and on the City residents themselves. From the beginning, the Court was of the impression that the allegations were unfounded and meritless. The Court’s impressions later proved correct, and the Court concluded this matter by granting summary judgment in City’s favor.

The State Decision

On the identical set of facts, Developer sued for relief in the Superior Court for the State of California, Los Angeles County. See Goldrich Kest & Stern v. City of San Fernando, No. C 406 247 (March 16, 1984). The trial court announced its decision (“State Decision”) on January 13, 1984, following a court trial of the facts at issue. Therein, the court found that: (1) the referendum election substantially complied with the requirements of the California Election Code; (2) the referendum refusing to rezone the Herrick Manor property did not constitute an unconstitutional taking of Developer’s property; (3) City’s refusal to rezone was a reasonable exercise of its police powers; and (4) San Fernando had not discriminated against Developer. An appeal of the State Decision has been filed by Developer.

The State Decision serves as a full and complete vindication of City’s actions within the context of the referendum of 1980. From the Court’s viewpoint, the State Decision should have put Developer on notice of the ill-fated nature of its federal action. The State Decision, after a full trial of facts identical to those presented herein, afforded Developer no relief whatsoever. The Court is of the view that the only difference between Developer’s claims within each action is one of remedy; the federal matter allowed the recovery of damages unavailable under California law. Developer’s reservation of federal issues, filed early in the state case, has no bearing on the fact that the two matters tracked tantamount actions, events, and responses. In sum, the State Decision conclusively exposed the dubious character of the allegations proffered in this Court.

Section 1988

It is the general rule that, in the absence of legislation providing otherwise, litigants must pay their own attorney’s fees. Alyeska Pipeline Co. v. Wilderness Society, 421 U.S. 240, 95 S.Ct. 1612, 44 L.Ed.2d 141 (1975). Recently, statutes have begun to offer a flexible approach to the attorney’s fees issue, providing for the discretionary award of such fees to victorious litigants. More specifically, “[i]n any action or proceeding to enforce a provision of ... [Section 1983] ... the court, in its discretion, may allow the prevailing party, other than the United States, a reasonable attorney’s fee as part of costs.” 42 U.S.C. § 1988. Thus, this Court may elect to award fees to the “prevailing party” in this action.

Having obtained a suitable disposition, with an award of summary judgment in its favor, City is the prevailing party in Developer’s § 1983 action. See Lummi Indian Tribe v. Oltman, 720 F.2d 1124, 1125 (9th Cir.1983). The proper standard used to determine entitlement to an award of fees, however, varies based on the identity of the successful party. Plaintiffs in civil rights actions “should ordinarily recover an attorney’s fee unless special circumstances would render such an award unjust.” Newman v. Piggie Park Enterprises, Inc., 390 U.S. 400, 402, 88 S.Ct. 964, 966, 19 L.Ed.2d 1263 (1968). Prevailing defendants, on the other hand, face a much more stringent test.

In Christiansburg Garment Co. v. EEOC, 434 U.S. 412, 98 S.Ct. 694, 54 L.Ed.2d 648 (1978), the Supreme Court set the standard for an award of attorney’s fees to a prevailing civil rights defendant. “[A] district court may in its discretion award attorney’s fees to a prevailing defendant in a [civil rights] case upon a finding that the plaintiff’s action was frivolous, unreasonable, or without foundation, even though not brought in bad faith.” Id. at 421, 98 S.Ct. at 700. The Court’s analysis of the background of attorney’s fees in civil actions proved illuminating. “If anything can be gleaned from these fragments of legislative history, it is that while Congress wanted to clear the way for- suits to be brought under the [Civil Rights Act], it also wanted to protect defendants from burdensome litigation having no legal or factual basis.” Id. at 420, 98 S.Ct. at 700.

The Court, however, advised against retroactive cynicism, explaining that “it is important that a district court resist the understandable temptation to engage in post hoc reasoning by concluding that, because a plaintiff did not ultimately prevail, his action must have been unreasonable or without foundation____ Even when the law or the facts appear questionable or unfavorable at the outset, a party may have an entirely reasonable ground for bringing suit.” Id. at 421-22, 98 S.Ct. at 700. The Supreme Court has specifically applied the Christiansburg standard to actions for attorney’s fees brought under Section 1988. See Hughes v. Rowe, 449 U.S. 5, 14-16, 101 S.Ct. 173, 178-79, 66 L.Ed.2d 163 (1980) (per curiam).

The Ninth Circuit has affirmed the award of attorney’s fees to prevailing defendants, Ellis v. Cassidy, 625 F.2d 227 (9th Cir.1980), has upheld a district court’s denial of attorney’s fees, Dosier v. Miami Valley Broadcasting Corp., 656 F.2d 1295 (9th Cir.1981), and has reversed an attorney’s fees granted by the district court. Mayer v. Wedgewood Neighborhood Coalition, 707 F.2d 1020 (9th Cir.1983) (per curiam). The Ninth Circuit has explained that the strong policy considerations favoring an award of attorney’s fees to a victorious civil rights plaintiff do not apply in favor of a successful defendant. Silver v. KCA, Inc., 586 F.2d 138, 143 (9th Cir.1978). Otherwise, the Circuit has not provided guidance to the district courts on the application of Christiansburg to prevailing defendant’s requests for attorney’s fees.

Prevailing Defendants in Other Circuits

“[C]ourts have awarded attorneys [sic] fees to prevailing defendants where no evidence supports the plaintiffs position or [where] the defects in the suit are of such magnitude that the plaintiff’s ultimate failure is clearly apparent from the beginning or at some significant point in the proceedings after which the plaintiff continues to litigate.” Smith v. Smythe-Cramer Co., 754 F.2d 180, 183 (6th Cir.1985). Another Circuit examined the Christiansburg standard in the context of conflicting policy concerns. The policy question is “simply stated, whether the social benefits of deterring vexatious suits against the government outweigh the social costs arising from the risk that some meritorious suits will be discouraged as well.” Copeland v. Martinez, 603 F.2d 981, 990 (D.C.Cir.1979), cert. denied, 444 U.S. 1044, 100 S.Ct. 730, 62 L.Ed.2d 729 (1980). Elsewhere, a Circuit found a district court judge “particularly well qualified to make the partially subjective findings necessary for [an] award of attorney’s fees.” P. Mastrippolito and Sons, Inc. v. Joseph, 692 F.2d 1384, 1387 (3d Cir.1982).

Finally, another Circuit suggested close judicial oversight by the district court of pending cases is a suitable means to establish a record on which an award of fees might rest. “Such monitoring enables trial courts, at early stages in litigation, to alert certain-plaintiffs to the perilous course that their suits may be taking due to an increasingly apparent lack of support for their claims.” Hermes v. Hein, 742 F.2d 350, 358 (7th Cir.1984). Judicial oversight, and admonitions to the plaintiff, “can later provide a point of reference for awarding fees in a manner that encourages the abandonment of claims that become hopeless, but does not discourage the nonfrivolous of civil rights suits.” Id.

In seeking to determine whether a suit is frivolous, unreasonable or groundless, as required by Christiansburg, courts have focused on several factors. “Among those considered are whether the issue is one of first impression requiring judicial resolution [citation]; whether the controversy is sufficiently based upon a real threat of injury to plaintiff [citation]; whether the trial court has made a finding that the suit was frivolous under Christiansburg guidelines, and whether the record would support such a finding [citation].” Reichenberger v. Pritchard, 660 F.2d 280, 288 (7th Cir.1981).

The Award of Fees Against Individual Plaintiffs

An exhaustive review of Title VII/civil rights actions by individual plaintiffs proved informative. On numerous occasions, courts have found that a plaintiffs complaint met the frivolous test of Christiansburg and have awarded attorney’s fees to prevailing defendants.

District Court Actions

For example, in Soto v. Barcelo, 559 F.Supp. 739 (D.P.R.1983), the court granted defendant’s motion for summary judgment after more than three years of litigation. While charges of pernicious civil rights violations by the defendant abounded, plaintiffs could do little to muster any proof of the alleged unconstitutional actions. Upon review of the entire record, the court found that the “case was frivolous, unreasonable, [and] without foundation at its inception.” Id. at 744. To that effect, the court noted that as “the case unfolded, the absence of support for plaintiff’s allegations ... became all the more apparent____ Any reasonable observer would have concluded that the [defendant] had not committed the acts alleged by plaintiffs. Plaintiffs simply had no evidence in support of their claims____” Id. Thus, where “a plaintiff proceeds on the strength of allegations [alone], which are unsupported and indeed contradicted by unrebutted deposition testimony, attorney’s fees should be awarded to a defendant who obtains summary judgment in his favor.” Id. at 743 (footnote omitted).

In Brown v. Fairleigh Dickinson University, 560 F.Supp. 391 (D.N.J.1983), the court found against the plaintiff and awarded attorney’s fees of about $21,000 to various individual defendants. The case history, replete with specious motions and pretrial delays, thoroughly supported the court’s finding that the allegations against the individual defendants were frivolous. “Plaintiff produced no evidence that any of these men participated in the decision to discharge him____ The baseless nature of the claims against the [defendants] should have been apparent to plaintiff before trial____ Indeed, the court warned plaintiff of the consequences of not adducing evidence of [defendants] culpability at trial....” Id. at 404-05.

In Rogers v. Kroger Co., 586 F.Supp. 597 (S.D.Tex.1984), plaintiff brought a Title VII action, alleging a denial of an equal employment opportunity because of his race. The court found the action ill brought and poorly prosecuted, twice dismissing the dispute for lack of prosecution. In awarding $10,000 in fees under Section 1988, the court explained that plaintiff had prosecuted a “spurious claim, with ... total arrogance and indifference to court procedures [causing] defendant to incur four years of needless inconvenience and expense. By promulgating the attorney’s fees statutes, the legislature has provided the court with a means by which such an abuse of the civil rights laws ... can be deterred.” Id. at 603.

Circuit Court Affirmances

Circuit courts have affirmed the award of fees against individual civil rights plaintiffs, regardless of the amount. In Charves v. Western Union Telegraph Co., 711 F.2d 462 (1st Cir.1983), the First Circuit affirmed an attorney’s fee award of $25,-000 to Western Union. The Circuit found the trial court’s dismissal of this sex discrimination case — after three days of trial — completely appropriate. Further, the large fee award was supported by the record; a finding “that the plaintiff’s case is frivolous provides an adequate foundation for the court to exercise' its discretion to award attorney’s fees to the prevailing defendant. Christianburg [sic] makes this crystal clear.” Id. at 464.

In Munson v. Friske, 754 F.2d 683 (7th Cir.1985), the Seventh Circuit affirmed a fee award to the defendant of over $42,000. Plaintiff had brought this action under Sections 1983 and 1985(3) for an alleged violation of his First and Fourteenth Amendment rights arising out of his termination of his county employment. The district court granted summary judgment in favor of all defendants and awarded a fee against the plaintiff. The Circuit noted that “the district court made explicit findings that Munson’s claims were without merit and simply preposterous ... that the plaintiff had used the judicial system to carry on a personal vendetta against persons who performed the onerous and generally unappreciated tasks of local government.” Id. at 697. In view of the sound findings below, “a detailed analysis of the facts after a review of the volumes of depositions, interrogatories, pleadings, requests for admissions and legal arguments filed during three years of thorough discovery and development of the factual record, [a Circuit Court] should be particularly reluctant to disturb the district court’s conclusions unless there are clear contradictions in the record that the district court is incorrect.” Id. (citation omitted).

Chilling a Corporate-Type Civil Rights Action

Surely, the Supreme Court has encouraged civil rights plaintiffs to act as “private attorneys general” so as to vindicate “a policy that Congress considered of the highest priority.” Piggie Park, supra, 390 U.S. at 402, 88 S.Ct. at 966. Yet, the fear of chilling those legitimate claims of the victims of civil rights violations is sometimes overcome by the desire to protect “defendants from burdensome litigation having no legal or factual basis.” Christiansburg, supra, 434 U.S. at 420, 98 S.Ct. at 700.

The above discourse on Section 1988 attorney’s fees awards against individual plaintiffs reveals a willingness to allow such a recovery when the civil rights actions brought were contrived, baseless, and unreasonable. The saddling of such individuals with sometimes huge fee awards indicates a desire to keep the federal court clear of the hubris of frivolous, often vengeful, civil rights claims. This suggests that the courts should be even more prepared to award attorney’s fees against corporate-type plaintiffs who present merit-less civil rights claims. Said group of plaintiffs is certainly well equipped to finance a civil rights suit. For the Court, the chilling effects of an award of attorney’s fees to prevailing defendants as against a corporate-type plaintiff is de minimus. At the very least, courts should not hesitate to award attorney’s fees against corporate civil rights plaintiffs when the Christiansburg standard has been met.

The Court chooses to exercise its discretion under Section 1988, and to award attorney’s fees to the City, as the prevailing defendant in this action. It is the Court’s opinion that “the defects of [Developer’s] suit [were] of such magnitude that the plaintiff’s ultimate failure [was] clearly apparent ... at some significant point in the proceedings____” Smith, supra, 754 F.2d at 183. The State Decision, based on identical facts and discovery, acts as a “significant point in the proceedings.” By this date, Developer must have realized the ill-founded nature of its federal claims. Evidence produced at trial proved unconvincing to a Superior Court judge, yet Developer continued on, seeking to proffer the same proof to this Court.

On January 29,1985 this Court dismissed Developer’s second amended complaint; this action coincides with the State Decision of January 14, 1984. At the hearing the Court alerted plaintiff of “the perilous course that [its suit] may be taking due to an increasingly apparent lack of support for [its] claims.” Hermes, supra, 742 F.2d at 358. This Court’s oversight now “provide[s] a point of reference for awarding fees____” Id. In sum, by January, 1984 it should have been patently obvious to Developer that this action was meritless, grounded on baseless, unsubstantiated allegations. This Court finds that the continued prosecution of the federal claims by Developer was “frivolous, unreasonable [and] without foundation.”

Amount of Fees

It is clearly within the broad discretion of the district court to determine the amount of attorney’s fees to award to City. Rutherford v. Pitchess, 713 F.2d 1416, 1420 (9th Cir.1983). It behooves the Court to analyze the quality and quantity of attorney efforts in line with the factors of Kerr v. Screen Extras Guild, Inc., 526 F.2d 67 (9th Cir.1975), cert. denied, 425 U.S. 951, 96 S.Ct. 1726, 48 L.Ed.2d 195 (1976). Further, while the recent U.S. Supreme Court opinion of Hensley v. Eckerhart, 461 U.S. 424, 103 S.Ct. 1933, 76 L.Ed.2d 40 (1983), involved the reasonableness of a fee award to a prevailing plaintiff, the Court is of the opinion that the reasoning of Justice Powell applies just as readily to the fee issue of prevailing defendants. Thus, this Court recognizes that it “remains important ... for the district court to provide a concise but clear explanation of its reasons for the fee award ... [and realizes that] the district court should make clear that it has considered the relationship between the amount of the fee awarded and the results obtained.” Hensley, supra, 461 U.S. at 440, 103 S.Ct. at 1943; Rivera v. City of Riverside, 763 F.2d 1580 (9th Cir.1985).

Herein, Messrs. Bower and Newman spent 636.3 hours on the preparation and defense of this case, from the time of the entry of the State Decision. Counsel seeks fees exclusively for hours spent by attorneys; proofs of their efforts do not include extra-attorney assistance. Even though the allegations of Developer’s complaint were not overly challenging on an intellectual level, the amount of paperwork and research necessary to convince the Court of the groundless nature of Developer’s claims surely proved burdensome and taxing. The Court finds that Messrs. Bower and Newman argued ably before this bench; thorough documents, exhaustive research, and articulate presentations were the benchmark of the duo’s performances. As contract attorneys to City, Rutan & Tucker bill out at the composite rate of $90 per hour. It is the Court’s belief that said rate is much lower than sums regularly paid in the private practice of most major metropolitan legal markets in the United States.

The Court’s grant of summary judgment in City’s favor reveals the complete success of counsels’ defenses. Further, Developer sought huge sums, and employed reputable land use counsel in its attack on the R1 zone. As gleaned from documents submitted to this Court, Messrs. Bower and Newman have acted as city attorney for eight separate municipalities, and both have extensive backgrounds in the public law area. As noted above, each performed to a level that befits the federal system. Finally, though research has not produced a similar award of fees, numerous cases have awarded sizeable fees to prevailing defendants in alternative contexts. See supra.

The Court is mindful of the admonitions offered by the Hensley decision. Yet, the above recitation satisfies the Court that the award of fees is reasonably related to the outcome of the proceedings. There exists a reasonable relationship between the degree of success and the amount of the award. Hensley, supra, 461 U.S. at 437, 103 S.Ct. at 1941. The award of $57,537 is completely justified on the record.

The Lindy Multiplier

City requests the use of a multiplying factor of two, relying on the frequently cited case of Lindy Bros. Builders, Inc. of Phila. v. American Radiator and Standard Sanitary Corp., 487 F.2d 161 (3d Cir.1973). The Court has considered the use of a multiplier in this case, but finds that Section 1988 contemplates such a factor only in the rarest of cases. The use of a multiplier may be appropriate where “the results obtained ... represent a significant achievement.” White v. City of Richmond, 713 F.2d 458, 461 (9th Cir. 1983). The Court does not wish to detract from the efforts by prevailing counsel. Yet, the Court finds the use of a multiplier of two unwarranted in this instance. Conclusions

For the reasons listed above, the Court granted City’s motion for fees, in the sum of $57,537. City is also entitled to the recovery of costs of $1,122.22.

The Clerk shall send, by United States mail, a copy of this Memorandum of Decision to counsel for the parties.

      . For additional district court cases awarding attorney's fees against individual plaintiffs under Section 1988, see Rapisardi v. Democratic Party of Cook County, 583 F.Supp. 539 (N.D.Ill. 1984); Hughes v. Defender Assoc. of Philadelphia, 509 F.Supp. 140 (E.D.Pa.1981); Woods v. State of New York, 494 F.Supp. 201 (S.D.N.Y. 1980); Sierra v. Datapoint Corp., 459 F.Supp. 668 (W.D.Tex.1978). Cf. EEOC v. Shoney’s, Inc., 542 F.Supp. 332 (N.D.Ala.1982); EEOC v. Union Camp Corp., 536 F.Supp. 64 (N.D.Mich.1982).

      . For other affirmances of attorney's fees awards, see Harris v. Group Health Assoc., Inc., 662 F.2d 869 (D.C.Cir.1981); Hutcherson v. Board of Supervisors of Franklin County, 742 F.2d 142 (4th Cir.1984); Lewis v. Brown & Root, Inc., 711 F.2d 1287 (5th Cir.1983); Tonti v. Petropoulous, 656 F.2d 212 (6th Cir.1981) ($101,-800!); Coleman v. General Motors Corp., 667 F.2d 704 (8th Cir.1981).

      . Having considered the alternative legal argument presented by each side, this Court chooses to rest is findings solely on the Court’s understanding of Christiansburg and its progeny. For example, City presents a five party "test” to assist the Court’s reasonableness analysis. Alternatively, Developer asserts that good faith reliance on counsel insulates it from a fee sanction. This is certainly not the law of this Circuit. Anderson v. Air West, Inc., 542 F.2d 522, 526 (9th Cir.1976); see Link v. Wabash Railroad Co., 370 U.S. 626, 633-34, 82 S.Ct. 1386, 1390-91, 8 L.Ed.2d 734 (1962); see also, Prate v. Freedman, 583 F.2d 42, 48 (2d Cir.1978).

      . The twelve Kerr factors are:
      1. The time and labor required;
      2. The novelty and difficulty of the questions;
      3. The skill requisite to perform the legal service properly;
      4. The preclusion of employment by the attorney due to acceptance of the case;
      5. The customary fee;
      6. Whether the fee is fixed or contingent;
      7. Time limitations imposed by the client or the circumstances;
      8. The amount involved and the results obtained;
      9. The experience, reputation, and ability of the attorneys;
      10. The undesirability of the case;
      11. The nature and length of the professional relationship with the client; and
      12. Awards in similar cases.

        Kerr, supra, 526 F.2d at 70.


source: Caselaw Access Project

author: TOM S. LEE, District Judge.

license: Public Domain

text:
    The DEPARTMENT OF BANKING AND CONSUMER FINANCE OF the STATE OF MISSISSIPPI, Plaintiff, Gulf National Bank, Merchants Bank & Trust Company, Hancock Bank, Peoples Bank of Biloxi, Bank of Wiggins, the Peoples Bank & Trust Company, and Bank of Mississippi, Plaintiffs-Intervenors, v. Joe SELBY, Acting Comptroller of the Currency of the United States and Deposit Guaranty National Bank, Defendants.
    Civ. A. No. J85-0698(L).
    United States District Court, S.D. Mississippi, Jackson Division.
    Aug. 27, 1985.

      Edwin Lloyd Pittman, Robert Arentson, Stephen J. Kirchmayr, Office of the Attorney General, Hubbard T. Saunders, Champ Terney, Donald Clark, Jr., Crosthwait, Terney & Noble, Jackson, Miss., for the Department.
    G.E. Estes, Jr., Estes & Estes, Gulfport, Miss., for Merchants Bank & Trust.
    John M. Harral, White & Morse, Gulf-port, Miss., for Hancock, Bank of Wiggins, Peoples, Peoples Bank & Trust and Bank of Mississippi.
    W. Joel Blass, Mize, Thompson & Blass, Gulfport, Miss., for Gulf National Bank.
    Frank A. Riley, Riley, Weir & Caldwell, Tupelo, Miss., for Bank of MS., Tupelo.
    George Phillips (Danny McDaniel), U.S. Atty., Jackson, Miss., David H. White, U.S. Atty., Dept, of Justice, Mark Leemon, Office of Comptroller of the Currency, Washington, D.C., for Comptroller.
    Robert C. Cannada, Lawrence J. Franck, Butler, Snow, O’Mara, Stevens & Cannada, Jackson, Miss., for Deposit Guaranty.
   MEMORANDUM OPINION

TOM S. LEE, District Judge.

Deposit Guaranty National Bank (DGNB) is a federally chartered banking association with its principal office in Jackson, Mississippi. DGNB applied to the Comptroller of the Currency of the United States (Comptroller) for permission to establish a branch office in Gulfport, Mississippi, which is approximately 170 miles from Jackson. On July 9, 1985, following review of DGNB’s application and comments submitted by various parties, the Comptroller approved the application. The Department of Banking and Consumer Finance of the State of Mississippi (Department), an agency of the State of Mississippi charged with the responsibility of administering all laws relating to corporations carrying on the banking business in the state, advised the Comptroller during the comment period that approval of the proposed branch would violate Mississippi law. Following approval of the application, the Department brought this action against DGNB and Joe Selby, Acting Comptroller of the Currency of the United States, to enjoin opening of the branch and, following briefing and argument, the court granted the Department’s motion for a temporary restraining order. By agreed order, the parties have treated the temporary restraining order as a preliminary injunction pending an expedited briefing schedule and hearing on the merits of the case pursuant to Federal Rule of Civil Procedure 65. Gulf National Bank, Merchants Bank & Trust Company, Hancock Bank, Peoples Bank of Biloxi, Bank of Wiggins, The Peoples Bank & Trust Company and Bank of Mississippi were allowed to intervene as plaintiffs. The parties extensively briefed the issues and the court heard argument August 20, 1985.

The McFadden Act provides in part:

(c) A national banking association may, with the approval of the Comptroller of the Currency, establish and operate new branches ... at any point within the State in which said association is situated, if such establishment and operation are at the time authorized to State banks by the statute law of the State in question by language specifically granting such authority affirmatively and not merely by implication or recognition, and subject to the restrictions as to location imposed by the law of the State on State banks.
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(h) The words “State bank” “State banks,” “bank” or “banks,” as used in the section, shall be held to include trust companies, savings banks, or other such corporations or institutions carrying on the banking business under the authority of State laws.

12 U.S.C. § 36.

In Mississippi, a state-chartered commercial bank may operate branch banks in the county where its principal office is located, in any county adjacent to the county in which its principal office is located or within a 100-mile radius of the bank’s principal office. Miss.Code Ann. §§ 81-7-5 & -7 (1972). Mississippi savings associations, however, may branch statewide. Miss. Code Ann. § 81-12-175 (Supp.1984). The Comptroller determined, based on cases and statutes defining the business of banking in other contexts and a study of the banking industry in Mississippi submitted by DGNB, that savings associations in Mississippi are engaged in the business of banking and are, therefore, “State banks” as defined in § 36(h). The Comptroller concluded that “[njational banks in Mississippi may, thus, branch to the same extent as Mississippi savings associations, i.e., statewide.” Decision of Comptroller at 31.

The scope of this court’s review of the Comptroller’s decision is governed by 5 U.S.C. § 706 which provides in part:

The reviewing court shall—
(2) hold unlawful and set aside agency action, findings, and conclusions found to be—
(A) arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law;

See Camp v. Pitts, 411 U.S. 138, 142, 93 S.Ct. 1241, 1244, 36 L.Ed.2d 106 (1973). Only questions of fact are subject to the “arbitrary and capricious” standard; “questions of law ... are freely reviewable by the courts.” Coca-Cola Co. v. Atchison, Top. & S.F. Ry. Co., 608 F.2d 213, 218 (5th Cir.1979). Review is further limited to the administrative record made in the proceedings before the Comptroller. Camp v. Pitts, 411 U.S. at 142, 93 S.Ct. at 1244.

The Comptroller’s decision involves questions of law regarding construction of the controlling statute and questions of fact regarding the Comptroller’s determination that Mississippi savings associations carry on the banking business. Because this court concludes that the Comptroller’s construction of § 36(h) is not in accordance with law, consideration of his factual findings is unnecessary.

Defendants contend that the Comptroller’s interpretation of § 36(h) is in accordance with law. The § 36(h) definition, according to the defendants, is a functional one, to be applied by determining what entities carry on the business of banking; reference in § 36(h) to the “authority of state laws” is intended only to distinguish state from national banks and not to impose a state law definition of the banking business. Defendants rely on First National Bank in Plant City v. Dickinson, 396 U.S. 122, 90 S.Ct. 337, 24 L.Ed.2d 312 (1969), wherein the United States Supreme Court stated that federal law governs the § 36(f) definition of “branch” since the use of a state law definition in that regard would allow the states to be “the sole judges of their own powers” under the McFadden Act. Id. at 133, 90 S.Ct. at 343.

Plaintiffs argue that § 36(h) includes as state banks only those entities which are expressly chartered to carry on the banking business by state law. Section 81-3-3 of the Mississippi Code Annotated provides in part:

Every corporation organized under the laws of this state for the purpose of conducting or carrying on a commercial banking business, or the business of a savings bank, or trust company, or the exercise of trust powers as defined in this title, or any combination thereof, shall be subject to supervision by the department of bank supervision and the state comptroller, and to assessments for the maintenance of said department as provided by law.

State-chartered savings associations are not under the supervision of the Department and, according to plaintiffs, are, therefore, not “State banks” within the meaning of § 36(h).

While plaintiffs’ construction of the statute is not entirely persuasive, the court concludes that the legislative history of the McFadden Act and policy considerations weigh heavily in their favor.

In First National Bank v. Walker Bank & Trust Company, 385 U.S. 252, 87 S.Ct. 492, 17 L.Ed.2d 343 (1966), the United States Supreme Court examined the legislative history of the McFadden Act. In 1923, apparently due to a substantial increase in the number of branch banks, the Comptroller recommended congressional action on branch banking. Action was not taken, however, until 1927 with the adoption of the McFadden Act. Walker Bank, 385 U.S. at 258, 87 S.Ct. at 495. The sponsor of the bill, Representative McFadden, stated at the time of enactment:

As a result of the passage of this act, the national bank act has been so amended that national banks are able to meet the needs of modern industry and commerce and competitive equality has been established among all member banks of the Federal reserve system. 68 Cong.Rec. 5815 (1927).

Walker Bank, 385 U.S. at 258, 87 S.Ct. at 495. The 1927 bill allowed national banks to branch in cities where state banks were allowed by state law to do so and limited state bank members of the Federal Reserve system to “inside” branches. Id. In 1931, a bill to allow national banks to branch irrespective of state law was introduced. It met strenuous opposition and was eventually defeated. Id. at 259, 87 S.Ct. at 496. The Banking Act of 1933 abolished the limitation on state banks included in the 1927 Act and, as Senator Glass stated on the Senate floor, “[permitted national banks to branch] only in those States and to the extent that the State laws permitted branch banking.” Walker Bank, 385 U.S. at 259, 87 S.Ct. at 496 (quoting 76 Cong.Rec. 2511 (1933)). The Walker Bank Court concluded that “Congress intended to place national and state banks on the basis of ‘competitive equality’ insofar as branch banking was concerned.” Walker Bank, 385 U.S. at 261, 87 S.Ct. at 497.

In First National Bank of Plant City v. Dickinson, 396 U.S. 122, 90 S.Ct. 337, 24 L.Ed.2d 312 (1969), the Comptroller had approved a national bank’s application to provide armored car services and to establish an off-premises depository. The Florida Banking Commissioner notified the bank that those services violated Florida law which restricted the business of banking to the main banking facility. The United States Supreme Court stated:

Here we are confronted by a systematic attempt to secure for national banks branching privileges which Florida denies to competing state banks. The utility of the armored car service and deposit receptacle are obvious; many States permit state chartered banks to use this eminently sensible mode of operations, but Florida’s policy is not open to judicial review any more than is the congressional policy of “competitive equality.” Nor is the congressional policy of competitive equality with its deference to state standards open to modification by the Comptroller of the Currency.

Id. at 138, 90 S.Ct. at 345.

The Comptroller’s decision before this court reflects a similar attempt to obtain fer national banks a competitive advantage. Mississippi legislation allowing state savings associations greater branching privileges than those of state commercial banks reflects state policy considerations which are not subject to modification by the Comptroller or by this court. That is a responsibility which rests with the Mississippi legislature or with Congress. Certainly there are differences in the ability of commercial banks and savings associations to branch in Mississippi; savings associations may branch statewide whereas commercial banks, state and national, are limited geographically. The' Comptroller’s decision, however, does not abolish these differences; it merely adjusts the situation so that national commercial banks may branch statewide, leaving only state banks subject to the state law limitations. Defendants contend that any inequality between state and national commercial banks which may be created by the Comptroller’s decision could be quickly remedied by Mississippi Code Annotated § 81-5-1(10), which allows state banks to operate branches wherever national banks are allowed to do so. Assuming that defendants are correct in their interpretation of Mississippi law, forcing a state to make such a change is clearly not in furtherance of the purpose of the McFadden Act. The McFadden Act and its legislative history, according to the defendants, reflect a continuing intent to increase the powers of national banks. The McFadden Act, however, actually is intended to preserve a dual banking system, an intent which obviously is not furthered by a decision of the Comptroller that would force a state to change state law in order to preserve its state banking system.

The Comptroller is charged with enforcement of the Act, and for that reason, his decision is entitled to “considerable respect.” Ford Motor Credit Co. v. Milhollin, 444 U.S. 555, 566, 100 S.Ct. 790, 797, 63 L.Ed.2d 22 (1980). In Independent Bankers Association v. Marine Midland Bank, 757 F.2d 453, 561 (2nd Cir.1985), the court considered a decision of the Comptroller which was in accord with his past rulings on which national banks and other parties had relied. Such is not the case here where the Comptroller’s decision, while similar to past rulings, has never been upheld by a court. See Mutschler v. Peoples National Bank, 607 F.2d 274 (9th Cir.1979); Dakota National Bank & Trust Co. v. First National Bank & Trust Co., 554 F.2d 345 (8th Cir.), cert. denied, 434 U.S. 877, 98 S.Ct. 229, 54 L.Ed.2d 157 (1977); First National Bank & Trust Co. v. Empie, No. 78-296-C (E.D.Okla., Nov. 15 & Dec. 17, 1982); State Chartered Banks in Washington v. Peoples National Bank, 291 F.Supp. 180 (W.D.Wash.1966). Hence the reliance interest found to be significant in Marine Midland is not a factor to be considered here.

This court is, accordingly, of the opinion that the Comptroller’s decision is not in accordance with law and cannot be upheld. It is, therefore, ordered that defendant Comptroller is prohibited from issuing a certificate of authority authorizing DGNB to establish and operate a branch banking office in Gulfport, Mississippi and defendant DGNB is prohibited from establishing and operating a branch banking office in Gulfport, Mississippi.

Plaintiffs shall prepare a judgment pursuant to the local rules and submit to defendants for approval as to form.

      . Miss.Code Ann. § 81-1-59 (Supp.1984).

      . Use of the word "plaintiffs” hereinafter refers to plaintiff Department and plaintiff-intervenors.

      . 12 U.S.C. § 36(f) provides:
      (f) the term "branch" as used in this section shall be held to include any branch bank, branch office, branch agency, additional office, or any branch place of business located in any State or Territory of the United States or in the District of Columbia at which deposits are received, or checks paid, or money lent.
      Plaintiffs note that § 36(f) contains no reference to state law whereas § 36(h) does.

      . Review of legislative history and public policy is helpful in cases of statutory construction. See, e.g., Sutherland Stat.Constrn. §§ 45.05, 45.-06 & 45.09 (4th ed.).

      . The legislative history and the Act itself are devoid of specific reference to savings and loan associations. Reference was made during debates, however, to the fact that national banks in Missouri would have limited branching power because Missouri imposed such restrictions on state commercial banks. 66 Cong.Rec. 1568 and 1764 (1925). At that time Missouri authorized more extensive branching by savings and loan associations. See Laws of Mo., 1925, p. 152.

      . In Plant City, the Comptroller had determined that the services offered by the bank were not branches within the § 36(f) definition and, therefore, not subject to the state law prohibition. Defendants rely on Plant City contending that it holds that federal law and not state law is to be used to define "branch,” a proposition to which all litigants in the case agreed. See id. at 134, n. 7, 90 S.Ct. at 343, n. 7. To determine whether, under federal law, the services offered constituted a branch, the court looked not only to the language of the statute, but also to the statutory purpose of maintaining competitive equality. See id. at 136, 90 S.Ct. at 344.

      . The branching provisions relevant to commercial banks and savings associations are parts of a legislative scheme devised by the Mississippi legislature to insure that both types of institutions will provide the best service to Mississippi consumers.

      . DGNB initially approached the Mississippi legislature to advocate changes in the state’s branching laws. The legislature apparently decided that the proposed changes were not in the best interest of the state.

      . It should be noted that Congress likewise has established different branching powers for national banks and federal savings and loan associations. Whereas the McFadden Act limits branching by national banks to the extent allowed state banks, The Federal Home Loan Bank Board may permit branching by federal savings and loans irrespective of state law governing state savings and loans. See Independent Bankers Ass'n v. FHLBB, 557 F.Supp. 23, 26 (D.D.C.1982).

      . Even if defendants are not correct, it is arguable that, if DGNB were allowed to open its branch office in Gulfport, the Mississippi Legislature would be under pressure to enact legislation that would allow state banks to do the same.

      . This is particularly true when the state’s legislature has recently refused to make such a change.

      . See Plant City, 385 U.S. at 131, 90 S.Ct. at 342. That defendants are not correct is reflected by the sound defeat of the 1931 bill which would have allowed national banks to branch irrespective of state law. Additionally, the Walker Bank Court began its discussion of the background of the National Bank Act by stating: “There has long been opposition to the exercise of federal power in the banking field.” Walker Bank, 385 U.S. at 256, 87 S.Ct. at 495.

      . Mississippi’s state commercial banking system would be jeopardized in that state commercial banks would be prompted to convert their charters to enable them to compete in the commercial banking market.

      . But see Plant City, 385 U.S. at 138, n. 11, 90 S.Ct. at 345, n. 11 (statements regarding Comptroller’s attempts to allow national banks to branch beyond limits of state law).

      . This court is of the opinion that the substantive analyses utilized in these cases is not controlling for each case fails to address directly the question in issue here. In addition to showing that the Comptroller's position has been rejected by every court that has considered it, the cases are relevant in that, following their dispositions, Congress has not taken any action to change the law through new legislation.


author: HUGH GIBSON, District Judge.

text:
    William T. BROWN, d/b/a Brown’s Exxon Service Center, II v. The MAGNESS COMPANY, INC.
    Civ. A. No. G-85-8.
    United States District Court, S.D. Texas, Galveston Division.
    Aug. 27, 1985.

      Herbert W. Fortson, III, Houston, Tex., for plaintiff.
    Garth E. Wood, Watson, Wiginston, Wood & LeCompte, Alvin, Tex., for defendant.
   FINDINGS OF FACT AND CONCLUSIONS OF LAW

HUGH GIBSON, District Judge.

Plaintiff, William T. Brown, seeks damages and injunctive relief against the defendant Magness Company, Inc., for its failure to renew a lease agreement covering an Exxon service station operated by the plaintiff.

On July 17, 1985, the Court heard plaintiff’s motion for a preliminary injunction which, by the parties’ agreement, was extended to cover all declaratory and permanent injunctive relief. Having considered all evidence presented and counsel’s arguments, the Court now makes the following Findings of Fact and Conclusions of Law.

FINDINGS OF FACT

1. Since 1975, plaintiff has been operating Brown’s Exxon Service Center II, located at 641 Plantation Drive, Clute, Brazoria County, Texas. From 1975 to 1981, plaintiff leased the premises directly from Exxon.

2. On October 30, 1981, plaintiff entered into a written agreement to lease the premises from defendant Magness Company, Inc., an Exxon distributor. The lease covered three years, from December 1, 1981, to November 30, 1984, and affixed a monthly rental of $1,900.00, with annual increases not to exceed 12% of the preceding year’s rent.

3. The lease in question contains the following provision:

“In the event that this lease expires and it has not been renewed ... and if Lessee retains possession of the leased premises from and after the date of such lease expiration, then Lessor shall have the right ..., at its election, upon notice to lessee to consider such holding over as a month-to-month extension of the term of this lease ...” (Emphasis added.) (See plaintiffs Exhibit 1.)

4. Plaintiff is also the operator of a Mobil retail station across the street from Brown’s Exxon Service Center II. The monthly rental for the Mobil station was substantially less than that of the Exxon station. In addition, plaintiff received a discount in monthly rent based on the number of gallons of gasoline sold at the Mobil station.

5. The volume of gasoline sold per month at Brown’s Exxon Service Center II has substantially decreased over the years, evidencing a decline in business. In 1984— 85, the average monthly sale was 18,000 gallons per month, compared to approximately 60,000 gallons in 1979-1980.

6. Since May, 1984, defendants have notified plaintiff of its intention to sell the premises and have offered the plaintiff the right of first refusal. Although the sale price continued to decline, plaintiff expressed no interest in purchasing the premises. Plaintiff testified that he was not profiting from his operation of Brown’s Exxon Service Center II.

7. A real estate expert, Pamela Anderson, testified that considering the nature and conditions of the business, the lessor should charge a monthly rent of approximately over $4,000.00 in order to make a profit.

8. On October 17, 1984, defendant notified plaintiff in writing that the rent on his lease, which expired on November 30,1984, would be $2,669.36 for December of 1984, and that “this amount will be in effect until a new agreement is reached”. (See plaintiff’s Exhibit 5).

9. On November 1, 1984, defendant mailed to plaintiff’s attorney a written notice of its intent not to renew the lease, the non-renewal to be effective February 4, 1985. The notice stated that renewal of the lease would be uneconomical to the lessor. (See plaintiff’s Exhibit 6.)

10. Plaintiff continued to occupy the premises on a month-to-month basis at a rental of $2,669.36 per month.

11. On January 3, 1985, plaintiff initiated this action and filed his motion for a preliminary injunction.

12. On April 30, 1985, defendant executed an option contract purporting to sell the premises in question to Landmark Industries, Inc. at $338,000.00. The buyer understood and was aware of plaintiff’s option to exercise his right of first refusal.

13. On the same date, defendant mailed to plaintiff a proposed new lease, which increased the monthly rent to $4,375.00 and reduced the term to one year. The new lease also imposed a minimum gallonage requirement for monthly sale, and set minimum hours and days for the opening of business.

14. On June 6, 1985, defendant moved to dismiss plaintiff’s action, contending that since a new lease had been offered, plaintiff’s grievance became moot.

15. On June 12, 1985, defendant withdrew all prior notices and advised plaintiff that his lease would be “terminated” effective September 16, 1985, citing as reason for termination plaintiff’s failure to agree on the proposed new lease. (See plaintiff’s Exhibit 11.) The June 12, 1985, notice also advised plaintiff of his option to purchase the premises at $338,000.00 payable in cash.

16. Plaintiff is currently in possession of the premises until September 16, 1985.

CONCLUSIONS OF LAW

1. The Court has jurisdiction pursuant to 28 U.S.C. § 1331 and the Petroleum Marketing Practices Act (PMPA), 15 U.S.C. § 2801, et seq.

2. The lease agreement in question establishes a franchise relationship between the parties, thereby subjecting the conduct of the lessor-franchisor to the mandates of the PMPA.

Standard for Injunctive Relief

3. The PMPA establishes a two-prong standard for injunctive relief. In any action challenging the franchisor’s failure to renew a franchise relationship, a court may not compel continuation of such relationship, if the franchisor has demonstrated to the Court’s satisfaction that:

“(A) the basis for such non-renewal is a determination made by the franschisor in good faith and in the normal course of business ...
(iii) to sell such premises, ... [or]
(iv) that renewal of the franchise relationship is likely to be uneconomical to the franchisor despite any reasonable changes or reasonable additions to the provisions of the franchise which may be acceptable to the franchisee; and
(B) the requirements of section 2804 [notice requirement] of this title have been complied with.”

See 15 U.S.C. § 2805(e)(1).

4. The Court finds that the defendant has satisfied its burden under the first prong of the standard. The evidence sufficiently establishes defendant’s bona fide determination to sell the premises and that plaintiff, although given the right of first refusal, was not interested in such option. The evidence also establishes that renewal under the terms of the old lease did not yield the desired profit. While the broad prophylactic goal of the PMPA is to protect the franchisee from abrupt, unfair, and discriminatory treatment, the legislative history of the Act also discloses Congress’ intent to recognize the legitimate needs of a franchisor to respond to changes in economic circumstances. Ames v. Texaco, Inc., 568 F.Supp. 1317 (W.D.Mich.1983), app dism’d, 727 F.2d 1108 (6th Cir.1984).

5. Under the second prong of the standard, the Court must next consider whether defendant had satisfied the notice requirements of the PMPA. Plaintiff has challenged the validity of defendant’s non-renewal notice dated November 1, 1984, and alternatively, its notice dated June 12, 1985.

6. A franchisor’s notice of termination or non-renewal must be in writing, posted by certified mail or personally delivered to the franchisee, and must contain the reasons for termination or renewal, as well as a “summary statement” of the Act prepared by the Secretary of Energy and published in the Federal Register. 15 U.S.C. § 2804(c). Such notice must be sent not less than ninety (90) days prior to the date on which the termination or non-renewal takes effect. 15 U.S.C. § 2804(a)(2).

The November 1, 1984 Notice

7. The Court finds that defendant’s notice dated November 1, 1984, was timely given. The defendant’s letter of October 17, 1984, served to invoke the “month to month” option provided by the lease, thereby extending plaintiff’s tenancy until a new lease was agreed to. Where the parties did not sign a new lease before the old lease expired and the terms of the old lease established a month-to-month tenancy, notice later furnished by the franchisor within 90 days before the nonrenewal took effect met the requirements of the PMPA. Kesselman v. Gulf Oil Corp., 479 F.Supp. 800 (D.C.Pa.1979), affirmed, 624 F.2d 1090 (3rd Cir.1980); Ferriola v. Gulf Oil Corp., 496 F.Supp. 158, 161 (E.D.Pa.1980), aff'd, 649 F.2d 859 (3rd Cir.1981).

8. Plaintiff’s failure to furnish a “summary statement” as required by the Act does not render the November 1, 1984 notice invalid absent a showing of prejudice. Nor does defendant’s delivery of the notice to the plaintiff’s attorney, and not to plaintiff personally, make such notice defective so as to justify equitable relief. Although the notice requirement, 15 U.S.C. § 2804, must be strictly followed, Thompson v. Kerr-McGee Refining Corp., 660 F.2d 1380 (10th Cir.1981), the statute does not contemplate an elevation of form over substance where plaintiff has not been deprived of actual notification. See Martin v. Texaco, Inc., 602 F.Supp. 60 (N.D.Florida 1985).

The June 12, 1985 Notice

9. The Court next turns to the June 12, 1985 notice and finds that such notice complied with the procedural requirements of 15 U.S.C. § 2804. The plaintiff, however, argues that this notice is substantively invalid. Failure to agree to the proposed lease, plaintiff argues, does not constitute a permissible ground for terminating a franchise relationship.

Under subsection 2802(b)(3)(A) of the Act, failure to agree to changes in the franchise warrants non-renewal only if such changes are made by the franchisor in good faith, within the normal course of business, and not for the purpose of preventing renewal. Failure to agree as a permissible ground applies only to “non-renewal” and not “termination”.

Although the June 12, 1985 letter spoke in .terms of both renewal and termination, it was for the Court to determine whether there was “non-renewal” or “termination” for the purpose of applying the Act. Lasko v. Consumers Petroleum of Connecticut, Inc., 547 F.Supp. 211 (D.Conn.1981). In light of the parties’ attempt to negotiate a new lease and the lease provision allowing month-to-month tenancy in the interim, the Court concludes that the June 12, 1985 notice qualifies as a non-renewal notice.

10. The Court finds that the defendant proposed changes in the lease agreement in good faith. The proposed new lease contains legitimate conditions which reflect the lessor’s business judgment in the normal course of business so as to attain profit. The fact that new provisions in a franchise agreement may make the station unprofitable for the lessee is not of itself determinative of an improper purpose, Meyer v. Amerada Hess Corp., 541 F.Supp. 321 (D.C.N.J.1982), nor does the fact that the new terms are presented on a take-it-or-leave-it basis constitute lack of good faith. Meyer, Id.

Accordingly, it is ORDERED, ADJUDGED and DECREED that Plaintiff’s request for injunctive relief be, and is hereby, DENIED.

If any of the foregoing findings of fact constitute conclusions of law, they are adopted as such. If any of the foregoing conclusions of law constitute findings of .fact, they are adopted as such.


author: BARBOUR, District Judge.

text:
    UNITED STATES TRUST COMPANY, Trustee, Jean C. Lindsey, Cynthia C. Saint-Amand, Margaret A. Chisolm, and the Estate of Alexander F. Chisolm, Deceased, Jean C. Lindsey, Successor Executrix, Plaintiffs, v. The INTERNAL REVENUE SERVICE, an Agency of the United States of America and the United States of America, Defendants.
    Civ. A. No. J83-0909(B).
    United States District Court, S.D. Mississippi, Jackson Division.
    Aug. 28, 1985.

      Kenneth I. Franks, Charles G. Copeland, R. Nash Neyland, Jackson, for plaintiffs.
    George Phillips, U.S. Atty., Jackson, William D.M. Holmes, Tax Div., Dept, of Justice, Washington, D.C., for defendants.
   MEMORANDUM OPINION AND ORDER

BARBOUR, District Judge.

This matter is before the Court on Cross-Motions for Summary Judgment. The material facts are either stipulated or uncontradicted on the record. The material facts are as follows.

FACTS

Alexander F. Chisholm (the “decedent”) died on or about March 12, 1974, a resident of the State of Mississippi, and left a will and testament dated May 17, 1967, which was duly admitted to probate in the Chan-eery Court of the Second Judicial District of Jones County, Mississippi. The will provided in pertinent part:

I give to the Chisholm Foundation, a New York membership corporation, a sum equal to ten percent (10%) of the value of my gross testamentary estate as finally determined in the Federal. estate tax proceeding relating to my Estate, provided that such bequest is deductible from my gross Estate in determining my taxable Estate for Federal Estate tax purposes.

Ten percent of the decedent’s gross testamentary estate was determined to be $2,473,719.00.

During the period of March 12, 1974, through December 31, 1974, no part of the specific bequest of $2,473,719.00 was paid by the Executor to the Chisholm Foundation. During calendar year 1975, the Estate distributed $1,505,000.00 in cash and $512,635.00 in stock to the Chisholm Foundation in partial fulfillment of the ten percent bequest. The cash distributions were made in eleven equal monthly installments of $125,000.00 and one monthly installment of $130,000.00. These monthly cash distributions were made from the Estate’s bank account at First National Bank of Laurel, Account Number 46-353-5 styled “Estate of Alexander F. Chisholm.” The account contained monies of the Estate derived from 1974 and 1975 income and corpus of the Estate; however, at all times the amount of current 1975 income of the Estate in the account exceeded the amount distributed to the Chisholm Foundation and necessary to pay the Estate’s current administrative expenses. No income of the Estate was distributed to a beneficiary of the Estate other than to the Chisholm Foundation.

Thereafter, the Estate filed a Federal Estate Tax Return with the Internal Revenue Service which claimed an estate tax deduction pursuant to 26 U.S.C. § 2055(a)(2), for the entire amount of the $2,473,719.00 specific bequest, which was distributed to the Chisholm Foundation during the calendar years 1975 and 1976. The Estate Tax deduction was allowed in full by the Internal Revenue Service pursuant to § 2055(a)(2).

Of the $1,505,000.00 in cash distributed to the Foundation in calendar year 1975, the Estate deducted $1,240,467.00 from its 1975 gross income as a deduction for distributions to beneficiaries under 26 U.S.C. § 66.1(a)(2). These distributions did not qualify for a deduction for distributions to charitable organization pursuant to 26 U.S.C. § 642(c) because the Will did not specify that the distribution come from income.

In auditing the Estate’s 1975 income tax return, the IRS disallowed the Estate’s § 661(a)(2) deduction for $1,240,467.00 of the $1,505,000.00 of current income distributed to the Foundation in calendar year 1975. Appropriate protests were made to no avail and on or about December 28, 1981, an additional $1,434,822.42 in taxes and interest was paid on behalf of the Estate to satisfy the claimed deficiency in the Estate’s income taxes for calendar year 1975. Of this amount, $1,281,596.72 is attributable to the IRS’s disallowance of the § 661(a)(2) distribution deduction.

On May 17, 1982, an amended Estate income tax return was filed for calendar year 1975, claiming a refund of the taxes and interest wrongfully assessed and collected by the IRS. On August 23, 1983, the Estate received a Notice of Disallowance informing the Estate that its claim for refund was denied. This suit was timely filed pursuant to 26 U.S.C. § 6532, seeking a judgment for federal income taxes and interest previously paid by the Estate for the taxable year 1975 in the amount of $1,281,596.72, plus interest as provided by law and attorney’s fees as provided by 28 U.S.C. § 2411(a) and 26 U.S.C. § 7430.

Jurisdiction to determine this issue is conferred upon this Court by 28 U.S.C. § 1346(a)(1).

QUESTION FOR DECISION

The Court having concluded that the distributions at issue did come from distributable net income rather than from corpus, the question for decision is: Is the Estate allowed a § 661(a)(2) distribution deduction for amounts of its current income which it distributed to the Chisholm Foundation, a beneficiary of the Estate and a qualified charitable organization, when the distribution did not otherwise qualify as a § 642(c) deduction for distributions to qualified charities, and the Estate had already claimed and been allowed an Estate tax deduction for the amount of the ten percent bequest, $2,473,719.00, pursuant to 26 U.S.C. § 2055(a)(2)?

I. STATUTES AND REGULATIONS

Although Sections 661 and 663 are most directly involved in the determination of the present controversy, these sections and the regulations purporting to interpret them must be analyzed in light of surrounding and related Internal Revenue Code sections.

Section 641 provides generally that income received by an estate during the administration or settlement of the estate is taxable income. Section 642(c) provides for an income tax deduction in the following situation:

(c) Deduction for amounts paid or permanently set aside for a charitable purpose. (1) General Rule. In the ease of an estate or trust (other than a trust meeting the specifications of subpart B), there shall be allowed as a deduction in computing its taxable income (in lieu of the deduction allowed by section 170(a) relating to deduction for charitable, etc., contributions and gifts) any amount of the gross income, without limitation, which pursuant to the terms of the governing instrument is, during the taxable year, paid for a purpose specified in section 170(c)....

Section 643 defines “Distributable Net Income” of the Estate.

The deduction claimed in the instant ease is that provided by Section 661(a)(2). Section 661 provides in pertinent part:

(a) Deduction. In any taxable year there shall be allowed as a deduction in computing the taxable income of an estate or trust (other than a trust to which subpart B applies) the sum of—
(1) any amount of income for such taxable year required to be distributed currently (including any amount required to be distributed which may be paid out of income or corpus to the extent such amount is paid out of income for such taxable year); and
(2) any other amounts properly paid or credited or required to be distributed for such taxable year;
but such deduction shall not exceed the distributable net income of the estate or trust. (Emphasis ours).

Treasury Reg. § 1.661(a)-2, “Deduction for Distributions to Beneficiaries” provides in pertinent part:

(A) In computing the taxable income of an estate or trust there is allowed under § 661(a) as a deduction for the distributions to beneficiaries the sum of:
(1) the amount of income for the taxable year which is required to be distributed currently and
(2) any other amounts properly paid or credited or required to be distributed for such taxable year.
However, the total amount deductible under § 661(a) cannot exceed the distributable net income as computed under § 643(a) and as modified by § 661(c). (B) The term “income required to be distributed currently” [in § 661(a)(1)] includes any amount required to be distributed which may be paid out of income or corpus (such as an annuity) to the extent it is paid out of income for the taxable year____
(C) The term “any other amounts properly paid or credited or required to be distributed” [in § 661(a)(2)] includes all amounts properly paid, credited or required to be distributed by an estate or trust during the taxable year other than income required to be distributed currently. Thus, the term includes the payment of an annuity to the extent it is not paid out of income for the taxable year, and a distribution of property in kind ... where the income of an estate or trust may be accumulated or distributed in the discretion of a fiduciary, or where the fiduciary has a power to distribute corpus to a beneficiary, any such discretionary distribution would qualify under § 661(a)(2).

Section 662, “Inclusion of Amounts in Gross Income of Beneficiaries of Estates and Trusts Accumulating Income or Distributing Corpus” provides generally for inclusion in the taxable income of beneficiaries for the amounts of income passed through to them to the estate.

Section 663, “Special Rules Applicable to Sections 661 and 662” provides in pertinent part:

(a) Exclusions. There shall not be included as amounts falling within Section 661(a) or 662(a)-...
(2) Charitable, etc. Distributions. Any amount paid or permanently set aside or otherwise qualifying for the deduction provided in Section 642(c)...

Treasury Reg. § 1.663(a)-2, “Charitable, etc. Distributions” provides in pertinent part:

Any amount paid, permanently set aside, or to be used for the charitable, etc. purposes specified in § 642(c) and which is allowable as a deduction under that section is not allowable as a deduction to an estate or trust under § 661 or treated as an amount distributed for purposes of determining the amounts includable in gross income of beneficiaries under § 662. Amounts paid, permanently set aside, or to be used for charitable, etc. purposes are deductible by estates or trusts only as provided in § 642(c).

The parties have stipulated that the Estate was not entitled to a § 642(c) deduction because the will did not specifically provide that the bequest was to be funded from current income.

Sections 661 and 662 form and implement the “conduit” theory of estate and trust taxation. If an estate or trust distributes income to a beneficiary under these sections, the income is carried out of the estate and is included in the beneficiary’s income for taxation purposes. Section 663 provides that an estate or trust is not allowed an additional deduction under § 661 for amounts distributed to a charitable organization when such distribution already carried out estate income under § 642(c). The first sentence of Treasury Reg. § 1.663(a)-2 conforms with this intent. The second sentence, however, goes further and purports to interpret § 663 as precluding any deduction other than a deduction under § 642(c).

The statute itself is explicit and unambiguous and indicates that Congress intended only to prevent an estate from taking two income tax deductions for the same distribution: one under § 642(c) and one under § 661. The legislative history of § 663 makes this clear. In House Report No. 1337 the House construed the meaning of § 663 in conjunction with § 642(c) and stated:

Since the estate or trust is allowed a deduction under § 642(c) for these amounts, they are not allowed as an additional deduction for distributions nor are they treated as amounts distributed for purposes of § 662

H.R.Rep. No. 1337, 83d Cong., 2d Sess., U.S.Code Cong. & Admin.News, p. 4344 (1954). In Senate Report No. 1622, the Senate also construed § 642(c) and § 663 and noted:

Since the estate or trust is allowed a deduction under § 642(c) for amounts paid, permanently set aside, or otherwise qualifying for the deduction provided in that section, such amounts are not allowed as an additional deduction for distributions, nor are they treated as amounts distributed for purposes of § 662 in determining the amounts includable in the gross income of beneficiaries.

S.R. No. 1622, 83d Cong., 2d Sess., U.S. Code Cong. & Admin.News, p. 4995 (1954).

Where the language of the statute and the legislative history clearly indicate one interpretation, and a Treasury Regulation interprets the statute in a contrary manner, the court must determine how much weight to accord the Treasury Regulation. Section 7805 of the Code gives the IRS the general power to promulgate regulations to interpret revenue statutes. Section 7805 provides:

Except where such authority is expressly given by this title to any person other than an officer or employee of the Treasury Department, the Secretary or his delegate shall prescribe all needful rules and regulations for the enforcement of this title, including all rules and regulations as may be necessary by reason of any alteration of law in relation to internal revenue.

Regulations enacted pursuant to this general delegation of authority are contrasted with situations in which Congress grants the IRS the specific power to promulgate regulations to interpret a particular statute. As such, Treasury Reg. § 1.663 is entitled to less deference. In U.S. v. Vogel Fertilizer Co., 455 U.S. 16, 102 S.Ct. 821, 70 L.Ed.2d 792 (1982) the Court, in- considering a regulation promulgated under Section 7805 stated:

The Commissioner has promulgated Treas.Reg. § 1.563-l(a)(3) interpreting this statute only under his general authority to “prescribe all needful rules and regulations.” 26 U.S.C. § 7805(a). Accordingly, “we owe the interpretation less deference than a regulation issued under a specific grant of authority to define a statutory term or prescribe a method of executing a statutory provision.”

Id. at 24, 102 S.Ct. at 827, quoting, Rowan Companies v. U.S., 452 U.S. 247, 253, 101 S.Ct. 2288, 2292, 68 L.Ed.2d 814 (1981). In Manhatten General Equipment Co. v. Commissioner, 297 U.S. 129, 56 S.Ct. 397, 80 L.Ed. 528 (1936) the Court noted:

The power of an administrative officer or board to administer a federal statute and to prescribe rules and regulations to that end is not the power to make law — for no such power can be delegated by Congress — but the power to adopt regulations to carry into effect the will of Congress as expressed by the statute. A regulation which does not do this, but operates to create a rule out of harmony with the statute is a mere nullity____ And not only must a regulation, in order to be valid, be consistent with the statute, but it must be reasonable.

Id. at 134, 56 S.Ct. at 399. In Alcoma Association v. United States, 239 F.2d 365, 367 (5th Cir.1956), the Fifth Circuit held that where a statute explicitly provides for a deduction, the IRS “cannot cut it down without specific statutory authority.”

In view of the favored status of charitable contributions and in light of the clear intent of Congress expressed in the legislative history and in the relevant statutes themselves, the Court is of the opinion that the second sentence of Treasury Reg. § 1.663(a)-2 is entitled to no great deference and should not be enforced to preclude the subject income tax deduction.

II. CASE LAW INTERPRETING TREAS.REG. § 1.663(a)-2

It appears that only two reported cases and one unreported decision have construed the validity of the second sentence of Treas.Reg. § 1.663(a)-2. In Mott v. United States, 462 F.2d 512, 199 Ct.Cl. 127 (1972), cert. denied, 409 U.S. 1108, 93 S.Ct. 902, 34 L.Ed.2d 688 (1973), the estate sought a Section 661(a)(2) deduction for distributions out of corpus to a foundation, which did not qualify for § 642(c) treatment. The balance of the estate, including all of the estate income, was left to a (non-charity) individual. The court noted:

[T]he government also asks us to interpret Section 661(A) as permitting a deduction only for distributions to taxable beneficiaries, based upon its argument that Section 661 must be read as interdependent with Section 662. That is, as we understand the Government’s argument, the incidence of the tax on the income of an estate must be allocated between estate and beneficiary, and to the extent that the beneficiary is exempt from the tax imposed by Section 662, any distributions to that beneficiary would not be deductible by the estate under Section 661____ We think it is sufficient to say that, under the facts of this ease, the Government’s position accords with the general intent of Congress in enacting the distribution rules and, as we discuss below, is in accord with what we believe to be an implied Congressional intent to prevent all charitable distributions, whether or not deductible under Section 642(c), from entering into the operation of the distribution rules.

Id. at 518 (emphasis added). The court cited to no statutory authority for its finding that Congress impliedly intended to exclude charities from § 661 distributions. Furthermore, while the court found the second sentence of Treas.Reg. § 1.663(a)-2 controlling, the court noted that the sentence was not supported by the express language of the statute. The court noted:

From our reading of [Treas.Reg. § 1.663(a)-2], two things seem clear. First, the [second sentence] is dispositive of the issue in this case since it prevents an estate from claiming as a deduction under Section 661(a)(2) any amounts distributed to a charitable beneficiary except as permitted by Section 642(c). Second, however, there is nothing in Section 663(a)(2), the statutory provision under which this regulation was promulgated, which expressly supports the rule announced in the regulation. Section 663(a)(2) provides only that an estate or trust may not deduct under Section 661 any amounts which are also deductible under Section 642(c); it does not specifically cover situations like the one here, where amounts paid to a charitable organization do not qualify for the charitable deduction.

462 F.2d at 517. (emphasis added).

The Court was concerned however that the Section 661 deduction would be used to pass income tax free to a non-charitable benefieiary. The court noted:

[T]he estate will pay no tax on the income which it accumulates, because that income will be offset by deductions for its distributions of corpus to the Teagle Foundation. Later on, the estate can distribute the accumulated income to Jane [Teagle (the income recipient) ] tax-free.

Id. at 519. Faced with a situation in which income passed tax-free to a non-charitable entity, the court read an implied congressional intent into the statute to preclude application of Section 661 to distributions to charities. Even so, the court limited its ruling by stating:

The Government’s position seems to be correct in the context of this case, but we do not hold that it is a general rule which may be applied in every conceivable situation that may arise under the provisions of the Code here considered.

Id. at 518.

In Estate of A. Lindsay O’Connor, 69 T.C. 165 (1977), an estate claimed a § 661(a)(2) deduction for its distributions of income and corpus equal to Distributable Net Income. Relying upon Treas.Reg. § 1.663(a)-2, the IRS denied the deduction. In a decision by a divided court, the majority upheld the position of the IRS, relying upon Mott v. United States, 462 F.2d 512, 199 Ct.Cl. 127 (1972), cert. denied, 409 U.S. 1108, 93 S.Ct. 902, 34 L.Ed.2d 688 (1973) and Commissioner v. South Texas Lumber Company, 333 U.S. 496, 501, 68 S.Ct. 695, 698, 92 L.Ed. 831 (1948) (The validity of an IRS regulation must be sustained unless it is “unreasonable and plainly inconsistent with the revenue statutes ... ”). The dissent argued that estates should be allowed a § 661(a)(2) deduction for all amounts distributed to a charitable organization so long as such amount had not already been deducted under § 642. The dissent noted:

Therefore, neither the legislative history nor the statute requires the conclusion that an amount distributed by an estate or trust to a charity, which does not meet the requirements of Section 642(c), cannot under any circumstances qualify for a deduction under Section 661(a). Under a literal interpretation of the statute a finding that Section 642(c) is inapplicable ... in fact makes Section 663(a)(2) inapplicable.
In my opinion, Section 1.663(a)-2, Income Tax Regs., is inapplicable to the facts before us; the regulation is consistent with the aforenoted statute and legislative history. Congress having authorized an exceptionally broad deduction for charitable gifts under Section 642(c) understandably wanted to prevent a double deduction under Section 661. To deny the deduction under Section 642(e) because of its inapplicability and then to further deny a distribution deduction under Section 661 would be the killing of two birds with one stone. In my view the second sentence of Section 1.663(a)-2, Income Tax Regs., must be read with the first sentence to preclude a deduction under Section 661 when both Section 642(c) and Section 661 are applicable. However, where Section 642(c) is inapplicable, one must then test the deductibility of the distribution to the foundation under Section 661.

69 T.C. at 195.

In Pullen v. United States, 1979 Fed. Tax.Rptr. (CCH) § 9105, a distribution of corpus was made to a tax-exempt foundation. The estate claimed a § 661(a)(2) deduction which was denied by the IRS in reliance upon Treas.Reg. § 1.663(a)-2. The Pullen court, as did the courts in Mott and O’Connor, found an “implied congressional intent” to prevent distributions to charitable organizations under § 661.

This Court, having reviewed the relevant statutes, regulations and statutory history, has found no congressional intent to insure that all distributions are taxed at least once. There is no statute, cited to or found by this Court, which prohibits a double deduction such as that sought in the instant case. The Estate having taken an estate tax deduction under § 2055 now seeks an income tax deduction under § 661. The government argues that the Estate should not be allowed to claim an estate tax deduction and an income tax deduction for the same distribution. The Court is of the opinion that the estate taxation provisions in the Internal Revenue Code are separate and distinct from the income tax provisions and are not mutually exclusive. In Farid-EsSultaneh v. Commissioner, 160 F.2d 812 (2d Cir.1947) the court noted, “the income tax provisions are not to be construed as though they were in pari materia with either the estate tax law or the gift tax statutes.” Id. at 814-15. In Edwards v. Phillips, 373 F.2d 616 (10th Cir.), cert. denied, 389 U.S. 834, 88 S.Ct. 38, 19 L.Ed.2d 94 (1967), the court noted:

Appellant’s comparison of the language used in § 2055 of the 1954 Code with that in § 642 does not provide a sound basis for deciding the application of § 2055 to the facts before us. The sections are unrelated and the provisions of one or even the policy expressed in one cannot be carried over to the other.

Id. at 619.

More convincingly, however, Congress has specifically addressed the disallowance of double deductions and has not disallowed the one sought by the Estate. In § 642(g) Congress provided as follows:

Disallowance of Double Deductions.— Amounts allowable under Section 2053 [estate tax deduction for expenses, indebtedness or taxes] or 2054 [estate tax deduction for losses] as a deduction in computing the taxable estate of a decedent shall not be allowed as a deduction____

If Congress had intended to disallow a deduction under § 2055 it could have and would have included that section in § 642(g). In the face of clear Congressional intent not to disallow double deductions under Section 2055 and the income provisions of the Code, the Court will not infer one. As the court noted in Commerce Trust Co. v. U.S., 309 F.Supp. 1317 (W.D. Mo.1969), Aff'd. 438 F.2d 111 (8th Cir.1971):

[I]f the Congress had intended to wipe out all double tax benefits it could have found appropriate language to accomplish that objective. The legislative history of Section 642(g) ... does not indicate that the Congress was seeking to find such language.

309 F.Supp. at 1321.

CONCLUSION

The statute quite clearly and simply creates a loophole by which income accumulated by the Estate and distributed to a charity is never taxed, when the same distribution qualifies for an estate tax deduction. Treas.Reg. § 1.663(a)-2 is an attempt by the IRS to close this loophole. It is up to Congress, however, and not the IRS or this Court to close this loophole. As noted by the court in Evans v. Dudley, 188 F.Supp. 9 (W.D.Penn.1960):

The government inferentially is suggesting that this court is empowered to legislate on what appears to be a loophole in the law permitting a double deduction. Such power rests with Congress and not the courts____
General equitable considerations do not control the measure of deductions or tax benefits. It is as applicable to the government as the taxpayer. Congress may be strict or lavish in its allowance of deductions or tax benefits. The formula it writes may be arbitrary and harsh in its applications. But, where the benefit claimed by the taxpayer is fairly within the statutory language and the construction sought is in harmony with the statute as an organic whole, the benefits will not be withheld from the taxpayer though they represent an unexpected windfall. It is clear that a court cannot impose equitable considerations in controlling the measure of deductions or tax benefits. The Court is not empowered to legislate or impose restrictive conditions which are not present in the law.
While an intention to allow one expenditure to be deducted twice under a single statutory provision will not be imputed to Congress, a double tax benefit is obtainable from a single cash outlay under different sections of the law unless Congress has indicated that one or the other shall be inapplicable.

Id. at 12-13 (citations omitted).

On the basis of the record before this Court, it is clear that the distributions at issue were of income and did not exceed the Estate’s Distributable Net Income, and in all respects qualified as a deduction under § 661(a)-2. There being no genuine issues of material fact, the Plaintiffs are entitled to a summary judgment entitling them to a Section 661(a)(2) deduction for $1,281,596.72 and a refund of that amount plus interest. A separate judgment will be entered to this effect.

      . According to affidavits submitted by two of the Estate’s certified public accountants from the Arthur Andersen & Company firm in New Orleans, Louisiana, it was the intent of the Estate to fund the contributions to the Chisholm Foundation from its current income from sales of oil, gas and sulphur from Jay Field. Income from these sales were deposited in the First National Bank of Laurel Account No. 46-353-5 and all distributions to the Chisholm Foundation were made the same day or shortly thereafter from this account. At no time were distributions to the Chisholm Foundation made when there was not more money in the account derived from the Estate’s current 1975 undistributed income than was needed to fund distribution. At calendar year end 1975 the income from sales of oil, gas and sulphur alone, exceeded the amount of cash distributions to the Chisholm Foundation and Estate administration expenses by $1,816,029.00. Furthermore, the Government has stipulated that, "prior to each of the monthly distributions in 1975 described in paragraph no. 11 above there was no deposit in such account an amount of money derived from current 1975 income of the estate which exceeded each of the monthly distributions to the Chisholm Foundation in the estate’s current administrative expenses.” The government also stipulated that, "the amount claimed as a deduction did not exceed the Estate’s distributable net income.”

      . The parties have stipulated that the question of whether plaintiff is entitled to attorney’s fees will be raised with the Court at a later time, depending upon the manner in which these Motions for Summary Judgment are resolved.

      . All citations are to the Internal Revenue Code of 1954, 26 U.S.C.

      . Indeed, where as here, the statute is clear and unambiguous, it should not be interpreted by regulation at all, see Quarles v. St. Clair, 711 F.2d 691 (5th Cir.1983).

      . Exemptions pertaining to charitable contributions reflect basic public policy priorities and should be generously construed. See, Helvering v. Bliss, 293 U.S. 144, 155, 55 S.Ct. 17, 20, 79 L.Ed. 246 (1934); United States v. Provident Trust Company, 291 U.S. 272, 285, 54 S.Ct. 389, 392, 78 L.Ed. 793 (1934); Rockefeller v. C.I.R., 676 F.2d 35, 42 (2d Cir.1982).