author: OBERDORFER, District Judge.

text:
    Kathleen FLAKE, et al., Plaintiffs, v. William J. BENNETT, et al., Defendants.
    Civ. A. No. 84-3632.
    United States District Court, District of Columbia.
    March 28, 1985.

      Latham, Watkins & Hills, Irwin Gold-bloom, Reed E. Hundt, Peter L. Winik, Arne M. Sorenson, Washington, D.C., for plaintiffs; Arthur B. Spitzer, Elizabeth Symonds, American Civil Liberties Union Fund of Nat. Capital Area, Washington, D.C., of counsel.
    Richard K. Willard, Acting Asst. Atty. Gen., Joseph diGenova, U.S. Atty., Judith F. Ledbetter, Alan L. Ferber, Dept. of Justice, Washington, D.C., for defendants; Roxanne Ando, Dept. of Educ., and Elizabeth Corey, Office of Personnel Management, Washington, D.C., of counsel.
   MEMORANDUM

OBERDORFER, District Judge.

On March 22, 1985, this action came before the Court for a hearing on the parties’ cross motions for summary judgment. Plaintiffs Kathleen Flake and William A. Delaney are GS-13 trial attorneys in the Office for Civil Rights (“OCR”) of the Department of Education (“Department”). In April or May of 1984, both plaintiffs applied for promotion to the position of Senior Trial Attorney, GS-14-905. According to the official OCR job description for that position, a Senior Trial Attorney is responsible for “advising the Assistant Secretary for Civil Rights on complaint investigations, compliance reviews and negotiations prior to formal enforcement proceedings, the legal review of cases prior to findings of noncompliance and the assessment and disposition of appeals, filed by complainant appellants from findings and determinations reached in the Regional offices.” Exhibit B to Flake Affidavit (February 14, 1985). He or she is also “expected to work in conjunction with lawyers from the Department of Justice, in the litigation of trials and appeals (primarily in federal courts), [and] in pertinent cases in which the Department is a party, or has an interest.” Id. The occupant of the position must also “have an authoritative knowledge of the civil rights laws, related case law, and rules and regulations administered by the Office for Civil Rights.” Id. The job description makes no mention of any activity or responsibility involved with the protection of the United States from internal subversion or foreign aggression.

Nevertheless, the position has been designated “critical-sensitive” pursuant to the Department’s personnel security program. As a result, the Department refused to process the plaintiffs’ applications in the absence of completed Standard Form 86 and ancillary forms, which would have subjected plaintiffs to a full field security investigation.

At approximately the same time that plaintiffs filed their applications, Mary VonEuler applied for promotion to Senior Trial Attorney. On September 6, 1984, after being told that the position had been designated “critical-sensitive,” she submitted the required forms and consented to a full investigation. She was promoted to GS-14 on October 22, 1984.

Although several other GS-14 and GS-15 employees in OCR are “critical-sensitive” employees, only VonEuler and the plaintiffs were asked to submit to a full field investigation as a condition of promotion. The plaintiffs view the full investigation requirement as an unwarranted invasion of privacy and as a violation of equal protection principles. They also contend, at the threshold, that the Department’s designation of the GS-14 position as “critical-sensitive” is inconsistent with the Supreme Court’s interpretation of the Act of August 26, 1950, 64 Stat. 476, 477, and Executive Order 10450, which provide the basis for security designations like the one at issue here. In support of the latter proposition, the plaintiffs cite Cole v. Young, 351 U.S. 536, 76 S.Ct. 861, 100 L.Ed. 1396 (1956), in which the Supreme Court held that neither the Act nor the Executive Order applied to the position of an employee whose work did not involve the national security.

This suit was filed on November 30, 1984. On January 6, 1984 the defendant Office of Personnel Management published a revision of, among other things, the portions of the Federal Personnel Manual (FPM) that govern personnel security programs under the Executive Order. Sometime during February of 1984, the Department began to consider how to reevaluate its personnel .security program in light of the FPM revision. The Department has now decided to solicit a consultant to review and recommend revisions to the personnel security program.

The Department has determined that it will not make a final decision on its security designations until the outside consultant makes its recommendations. During the hearing on the pending cross-motions for summary judgment, counsel for the defendants represented that the consultant’s evaluation may not be completed for over a year. The Department represents that, pending the completion of this independent evaluation, it will not impose its personnel security requirements on the plaintiffs. According to affidavits submitted by the defendants on the eve of the hearing in this case, plaintiffs’ applications have been processed and the plaintiffs promoted, effective retroactive to October 22, 1984. Affidavit of John C. Yazurlo (March 18, 1985) at ¶ 8; Affidavit of Peggy B. Holly (March 18, 1985). At the March 22 hearing, however, counsel revealed that plaintiffs had not yet been informed of their promotions, and that Standard Form 50, which officially documents personnel action, had not yet been prepared.

I.

The defendants argue that this case is moot because the plaintiffs have obtained all of the relief that they requested in their complaint. However, the plaintiffs sought, among other things,

a declaratory judgment that the national security clearance requirement imposed by defendants on plaintiffs is unlawful, unconstitutional, and therefore invalid and that plaintiffs’ applications for promotion should be considered and processed as of the date plaintiffs submitted their requests for promotion.

Complaint, Prayer for Relief, ¶ 3. Flake avers that her application was complete but that the Department quit processing it when it was received by the Office of the Inspector General’s Security Officer on August 1, 1984. Flake Affidavit (March 13, 1985) at ¶ 4. Delaney states that the Security Officer received his application on August 23, 1984. Delaney Affidavit (March 20, 1985) at ¶ 3. These statements are supported by a Memorandum from Helene Deramond to Antonio J. Califa dated August 30, 1984. See attachment to Flake Affidavit (March 13,1985). It appears that but for the challenged security investigation requirement, the plaintiffs’ applications were complete and they would have been promoted in August, two months before the October 22 retroactive date determined by the defendants. Thus, there is a live controversy because the plaintiffs have not received the relief to which they claim they are entitled, i.e., that their applications be “considered and processed as of the date plaintiffs submitted their requests for promotion ” (emphasis added).

Moreover, there is another sense in which the plaintiffs have not yet received the relief that they have requested. At the hearing on the pending motions, counsel for defendants conceded that the forms that would make plaintiffs’ promotions official have not yet been produced. A purported promotion is without effect in the absence of proper supporting documentation. See Wilson v. United States, No. 324-81C, slip op. 2 (Ct.Cl.1981) (“a Government employee is entitled only to the rights and salary of the position to which he has actually been appointed by one having the authority to do so”). Accordingly, there is at this point still a controversy as to whether or not the plaintiffs must be promoted.

In any event, a live controversy remains because the defendants have not conceded what the plaintiffs asked the Court to declare — that the challenged security program is unlawful. The mere voluntary cessation of the security program pending its reevaluation does not moot this dispute.

The security review requirement affects both applicants and holders of the Senior Trial Attorney position. Thus, the fact that plaintiffs have been promoted does not mean that they will be immune from security review should the Department choose to enforce the program once again. Moreover, the defendants have conceded that “it is possible that upon completion of the Department’s reevaluation, plaintiffs’ positions may be designated critical-sensitive with the recurrence of the challenged personnel security procedures____” Memorandum of Points and Authorities in Support of Defendants’ Cross Motion for Summary Judgment at 11. The decision to seek the opinion of a consultant cannot be properly characterized as a “cessation” at all — the defendants have expressly and impliedly reserved the right to enforce the challenged security program as they see fit, and have not formally rescinded it by rulemaking or otherwise.

Indeed, the Department’s past behavior — about which there appears to be no dispute — highlights the risk that the defendants will quickly return to their “old ways” if the Court does not issue a decision on the merits. In the Spring of 1983, Assistant Secretary for Civil Rights Harry M. Singleton notified the senior staff of OCR that the Department had determined that security investigations would be required for OCR Series 905 attorneys, whose positions had been designated “critical-sensitive.” Virtually all of the OCR’s staff signed a petition that stated, among other things, that “[b]ecause we cannot perceive any link between our jobs and national security, and because none has been explained, we are reluctant to participate in a process that will involve a substantial invasion of our privacy.” Flake Affidavit (February 14, 1985), Exhibit M. In the face of this reaction and the unfavorable press about the dispute, the Department’s Inspector General elected to delay the implementation of the personnel security program in the OCR. Singleton later informed his staff that no more security forms should be submitted because the Inspector General had decided to reconsider the sensitivity of the OCR positions. Flake Affidavit (February 14, 1985), Exhibit O. The security investigation requirement was not imposed again until, without prior notice, the plaintiffs were informed that their applications would not be approved unless they completed forms consenting to a full security investigation. It is apparent, therefore, that the Department’s promise to reconsider its program does not necessarily mean that the challenged action will be stopped.

Under the circumstances, the Supreme Court’s admonition in United States v. W.T. Grant Co., 345 U.S. 629, 73 S.Ct. 894, 97 L.Ed. 1303 (1953), is particularly appropriate:

[V]oluntary cessation of allegedly illegal conduct does not deprive the tribunal of power to hear and determine the case, i.e., does not make the case moot____ The defendant is free to return to his old ways. This, together with a public interest in having the legality of the practices settled, militates against a mootness conclusion.

Id. at 632, 73 S.Ct. at 897 (citations and footnote omitted). Given the defendants’ concession that the challenged practice could be reimposed on the plaintiffs, and the Department’s past behavior, it is not “absolutely clear that the allegedly wrongful behavior could not reasonably be expected to recur.” United States v. Concentrated Phosphate Export Ass’n., 393 U.S. 199, 203, 89 S.Ct. 361, 364, 21 L.Ed.2d 344 (1968); see also City of Mesquite v. Aladdin’s Castle, Inc., 455 U.S. 283, 289, 102 S.Ct. 1070, 1074, 71 L.Ed.2d 152 (1982). Accordingly, there is still a “live” controversy in this case.

Nevertheless, the defendants argue that the controversy is not yet ripe for adjudication because the reevaluation of the Department’s security program may yield something quite different from what the plaintiff’s are challenging. This claim appears to be no more than a variation on defendants’ mootness argument and is answerable in the same way: a practice is not less likely to recur because the defendants promise to reconsider the program, rather than to abolish it altogether.

In determining whether an agency’s decision is ripe for adjudication, courts must “evaluate both the fitness of the issues for judicial decision and the hardship to the parties of withholding court consideration.” Abbott Laboratories v. Gardner, 387 U.S. 136, 148-49, 87 S.Ct. 1507, 1515, 18 L.Ed.2d 681 (1967). An issue is fit for decision under the first prong of the Abbott test if it is “essentially legal” and “sufficiently final.” Atlantic Richfield Co. v. United States Department of Energy, 769 F.2d 771, 782-83 (D.C.Cir.1984). Here, there is a concrete question susceptible to judicial review: whether or not the Department of Education may lawfully impose a security investigation requirement on applicants for a position that does not implicate national security concerns. That decision is final in the sense that voluntary cessation does not prevent the defendants from reimposing what had been, until very recently, a fully formed agency determination. Indeed, ripeness is not even an issue insofar as the challenged program prevented the plaintiffs from being promoted before October 22, 1984, and to the extent that plaintiffs have not yet been officially promoted. As to the second prong of the Abbott test, an immediate decision will reduce the potential hardship on all parties to the litigation, The defendants will be in a better position to judge the necessity and scope of the review that they propose to undertake, and the plaintiffs will not be put to the cost of reinstituting this suit in the event that the defendants decide to continue with the security program. For these reasons, the controversy is ripe for decision.

II.

As a second threshold defense, defendants argue that Carducci v. Regan, 714 F.2d 171 (D.C.Cir.1983), deprives the Court of subject matter jurisdiction over this action. Carducci addressed the narrow question of whether an agency personnel action which was not an alleged violation of constitutional rights, but which had been directly reviewable by district courts under the Administrative Procedure Act before enactment of the Civil Service Reform Act of 1978 (CSRA), continues to be reviewable after enactment of the CSRA. The Court held that a “minor personnel action,” which by definition does not rise to the level of an “adverse action” or a “prohibited personnel practice,” was not reviewable under the CSRA. Id. at 175. Defendants argue that the Department has taken no “adverse action” against the plaintiffs and has not indulged in “prohibited personnel practices.” Accordingly, the defendants conclude that the actions at issue here are not reviewable under the CSRA, and therefore are not reviewable at all.

But the action challenged in this case is not an unreviewable “minor personnel action” that applies to one individual; rather, the plaintiffs attack a regulatory program with broad application. The principles enunciated in Carducci simply do not apply to cases like this one. In National Treasury Employees Union v. Devine, 733 F.2d 114 (D.C.Cir.1984), which involved a challenge to personnel regulations, our Court of Appeals rejected a similar CSRA defense with these words:

It is one thing to say that when a statute provides a detailed scheme of administrative protection for defined employment rights, less significant employment rights of the same sort are implicitly excluded and cannot form the basis for the relief directly through the courts. Cf. Carducci [supra]. It is quite different to suggest ... that a detailed scheme of administrative adjudication impliedly precludes preenforcement judicial review of rules.

Id. at 117 n. 8.

In any event, Carducci recognizes district court jurisdiction to consider constitutional challenges like the one at issue here. 714 F.2d at 175-76; see also Andrade v. Lauer, 729 F.2d 1475, 1491 (D.C.Cir.1984). Since the plaintiffs have raised first amendment, right to privacy, and equal protection issues, their action is not limited to the remedy provided by the CSRA.

III.

The defendants have not responded to the plaintiffs’ argument on the merits. The essential facts are undisputed.

The current personnel security program originated in the Act of August 26, 1950 (“Act”), 64 Stat. 476, 477 codified in part at 5 U.S.C. §§ 3571, 7531 & 7532. The Act delegated to certain listed officials and agencies the authority to suspend, without pay, civilian departmental employees “when deemed necessary in the interest of national security.” Section 3 of the Act provided that “[t]he provisions of this Act shall apply to such other departments and agencies of the Government as the President may, from time to time, deem necessary in the best interests of national security.” See also 5 U.S.C. § 7531(9).

Pursuant to section 3, President Eisenhower issued Executive Order 10450, which extends the Act “to all other departments and agencies of the Government.” Executive Order 10450, § 1,18 Fed. Reg. 2489, as amended by Executive Order No. 10491,18 Fed.Reg. 6583 (Oct. 16, 1953); see also Cole, supra, 76 S.Ct. at 874-77. The Order also requires each Department and agency to establish a personnel security program. Pursuant to section 3(b) of the Order and subsequent modifications, a position is to be designated “critical-sensitive” and therefore subject to a full field investigation if its occupant “could bring about, by virtue of the nature of the position, a material adverse effect on the national security____” Employees seeking a “noncritical-sensitive” position are required to undergo a less intrusive “national agency check,” an investigation to which the plaintiffs do not object.

OPM is responsible for determining whether departments and agencies are complying with Executive Order 10450. It also provides advice as to whether a position should be designated “critical-sensitive,” “noncritical-sensitive,” or “nonsensitive.” Pursuant to the Order, OPM’s predecessor, the Civil Service Commission, prepared a Federal Personnel Manual which details the personnel security program. Although that manual has been superseded, it provided the basis for the challenged designations in this case. It defines “security” as being

concerned with the employment and retention in employment of persons in positions the duties of which relate to the protection and preservation of the military, economic, and productive strength of the United States, including the security of the Government in domestic and foreign affairs, against or from espionage, sabotage, and subversion, and any and all other acts or situations likely to weaken or destroy the United States.

Federal Personnel Manual 732-3 at 1-1 (1979); see also Federal Personnel Manual 732-3 at 1-1 (1984) (identical definition). Department of Education Directive A:INS:1-100, which was issued by the Department after it consulted with OPM about developing a personnel security program, lists five criteria to be considered in deciding whether or not to designate a position “critical-sensitive.” The fifth criterion, which provides the basis for the “critical-sensitive” designation of the GS-14 Senior Trial Attorney position at issue here, see Answer at ¶ 27, asks only whether the position involves “[fiduciary, public contact, or other duties demanding the highest degree of public trust.” Directive A:INS:1-100 at 7 (Flake Affidavit (February 14, 1985), Exhibit G).

Reliance on such a sweeping criterion is misplaced. The Act and Executive Order 10450, as interpreted by the Supreme Court in Cole v. Young, 351 U.S. 536, 76 S.Ct. 861, 100 L.Ed. 1396 (1956), prevent the defendants from requiring full security investigations for positions that do not affect the national security of the United States. In Cole, a food and drug inspector of what was then the Department of Health, Education and Welfare was dismissed from his job “in the interest of the national security,” purportedly under the authority of the Act and Order. The Supreme Court held the dismissal unlawful, and found that neither the Act nor Executive Order 10450 applied to the position of the employee who had been dismissed. The Court reasoned that the Act was intended to permit summary employee discharges only in the interest of national security and concluded that the position from which the employee had been dismissed did not implicate national security concerns. The Court observed that while the term “national security”

is not defined in the Act, we think it clear from the statute as a whole that that term was intended to comprehend only those activities of the Government that are directly concerned with the protection of the nation from foreign aggression, and not those which contribute to the strength of the Nation only through their impact on the general welfare.

351 U.S. at 544, 76 S.Ct. at 867. The Court added that the scope of the Executive Order was similarly limited, because the defense and security-oriented nature of the agencies named in the Act “indicates the character of the determination required to effect ... an extension” under section 3 of the Act. Id. at 545, 76 S.Ct. at 867. Moreover, the Order was promulgated to implement the Act, id. at 557 n. 20, 76 S.Ct. at 873 n. 20, and its reach cannot extend beyond the Act’s scope.

The defendants do not dispute the fact that the GS-14 Senior Trial Attorney position sought by the plaintiffs does not implicate national security concerns. Cole teaches that it is unlawful for the defendants to designate such a position as “critical-sensitive,” and thus to impose upon applicants for or occupants of that position the burden of undergoing a full field investigation. Just as the Act’s summary discharge procedure could not be used against the plaintiff in Cole, whose job did not involve the national security, here the full investigation requirement cannot lawfully be imposed on a position the duties of which do not implicate the concerns identified in the Act and the Executive Order.

Because the Court concludes that neither the Act nor Executive Order 10450 permits the defendants to impose such an intrusive requirement on the position for which the plaintiffs have applied, it is not necessary to reach the constitutional issues that the plaintiffs raise. See New York City Transit Authority v. Beazer, 440 U.S. 568, 582, 99 S.Ct. 1355, 1364, 59 L.Ed.2d 587 (1979). An accompanying order will enter judgment for the plaintiffs.

ORDER

A hearing was held in this case on March 22, 1985. Upon consideration of plaintiffs’ motion for summary judgment and defendants’ cross-motion for summary judgment, the oppositions thereto, and the arguments of counsel, and for the reasons set forth in an accompanying memorandum, it is this 29th day of March, 1985, hereby

ORDERED: that plaintiffs’ motion for summary judgment be, and is hereby, GRANTED; and it is further

ORDERED: that defendants’ cross-motion for summary judgment be, and is hereby, DENIED; and it is further

ORDERED, ADJUDGED and DECREED: that defendants are enjoined to promote plaintiffs to the GS-14 positions to which plaintiffs have applied, such promotions to be retroactive in every respect to August 1, 1984 for plaintiff Flake, and August 23, 1984 for plaintiff Delaney; and it is further

ORDERED, ADJUDGED and DECLARED: that the GS-14 senior trial attorney position to which plaintiffs have applied and to which they have herewith been promoted may not lawfully be characterized as “critical-sensitive” within the meaning of Executive Order 10450 and Chapter 732 of the Federal Personnel Manual, and thus subject to a full security investigation.

      . The inference that the October 22 date was arbitrarily selected by the Department is supported by the fact that it is the effective promotion date for VonEuler and the two plaintiffs, even though each of them applied on different dates and even though the plaintiffs’ applications were received by the Security Officer before VonEuler’s. Moreover, defendants concede that the plaintiffs’ supervisory recommendations had been approved by mid-August, and that it was at that point that the required Standard Forms 52 ("Request for Personnel Action”) were transmitted to the Department's Office of Inspector General for review under the personnel security program. Yazurlo Affidavit (March 18, 1985) at ¶ 3.

      . See United States v. W.T. Grant Co., 345 U.S. 629, 632, 73 S.Ct. 894, 897, 97 L.Ed. 1303 (1953).

      . Defendants' argument that plaintiffs lack standing to raise these constitutional issues is meritless. Even assuming the dubious proposition that plaintiffs have not alleged a sufficiently specific injury to their first amendment rights, the defendants do not even pretend to respond to plaintiffs’ right to privacy and equal protection claims. This case is thus clearly outside the limit that Carducci imposes on this Court's subject matter jurisdiction.

      . Specifically, the Attorney General, the secretaries of the Departments of State, Commerce, Defense, the Army, the Navy, the Air Force, the Coast Guard, and the Treasury, the Atomic Energy Commission, the chairman of the National Security Resources Board, and the director of the National Advisory Committee for Aeronautics.

      . These criteria are also listed in both the old and new Federal Personnel Manuals. See Federal Personnel Manual 732-3 at 2-3 (1984); Federal Personnel Manual 732-3 at 1-3 (1979).

      . The plaintiffs support this proposition with affidavits that are not controverted by the defendants. See Flake Affidavit (February 14, 1985) at ¶ 6; Delaney Affidavit (February 14, 1985) at ¶ 6. A review of the position description of an OCR GS-14-905 Senior Trial Attorney confirms the accuracy of the assertions in the affidavits that the responsibility of the position is "to assist in the effort to fully monitor and enforce the civil rights laws relating to education” and that ”[t]here are no responsibilities of these positions which involve protection of the United States from internal subversion or foreign aggression.” Flake Affidavit (February 14, 1984) at ¶ 6; see id., Exhibit B. The affidavits also support the proposition that the plaintiffs do not have custody of documents or materials “the compromise of which might endanger the country’s security.” Cole, supra, 351 U.S. at 544, 76 S.Ct. at 867.


source: Caselaw Access Project

author: HOLLAND, District Judge.

license: Public Domain

text:
    Debra JEPPSEN, Plaintiff, v. Esther WUNNICKE, et al., Defendants.
    No. F84-015 Civil.
    United States District Court, D. Alaska.
    April 4, 1985.
    Daniel L. Callahan, Schendel & Callahan, Fairbanks, Alaska, for plaintiff.
    Gary Foster, Asst. Atty. Gen., Thomas R. Wickwire, Fairbanks, Alaska, for defendants.
   ORDER

HOLLAND, District Judge.

The court has before it Defendant State of Alaska’s motion for summary judgment based upon the theory that Plaintiff, having recovered for job-related injuries under the workmen’s compensation laws of the State of Alaska, is barred from any recovery in this action under Title VII of the Civil Rights Act of 1964, as amended by the Equal Employment Opportunity Act of 1972, (herein “Title VII”) and from any recovery under Alaska’s employment discrimination statutes, AS 18.80.200 et seq. By way of opposition, Plaintiff has filed a reciprocal motion to strike the State’s third and fourth affirmative defenses (Plaintiff styled it as a motion to strike the fourth and fifth affirmative defenses) which raise the same question.

At oral argument, Defendant State of Alaska conceded that Plaintiff’s workmen’s compensation recovery is not preclusive of a claim by Plaintiff under 42 U.S.C. § 2000e, et seq. By agreement of the parties, the question of whether Plaintiff’s recovery in workmen’s compensation bars an action under AS 18.80.200 et seq. was deferred to permit consideration of a further motion recently filed by the State of Alaska which raises a preliminary question regarding whether this court has jurisdiction under any circumstances over Plaintiff’s pendent claims, including that under AS 18.80.-200 et seq.

The court also has before it a motion for ruling on the law of the case. By this motion the State of Alaska seeks to have the court rule on the question of whether a claim under 42 U.S.C. § 2000e-2(a)(1) requires proof of employer knowledge of illegal sex discrimination where the basis for such claim is that claimant’s supervisor has created a hostile work environment. The parties seem in agreement that employer knowledge of alleged sex discrimination need not be proved in a “quid pro quo” case where a claimant has shown a tangible job detriment, e.g., termination of employment or abolition of the job, etc. This appears to be settled law. An employer is held strictly liable for a supervisor’s discriminatory acts against a subordinate employee where tangible job detriments are proved. Henson v. City of Dundee, 682 F.2d 897, 909 (11th Cir.1982).

As a preliminary matter, this Court notes that no party has questioned that at least four elements must be proved by a Title VII claimant. Those four elements are discussed in Henson. Id. at 903-04. The State of Alaska relies upon Henson for the proposition that in hostile work environment cases, employer knowledge or constructive knowledge is a fifth element which a claimant must prove. Id. at 905. Henson so holds under circumstances where the claimant tried but failed to make a case of wrongful discharge in violation of Title VII. In Henson the defendant had contended, and the district court agreed, that even in a hostile work environment case, a claimant must prove some tangible job detriment. In reversing the latter holding, the Eleventh Circuit relies upon and finds applicable to sex discrimination cases the holdings in race discrimination cases. In the latter cases, the Fifth Ciruit has found that “terms, conditions, or privileges of employment,” 42 U.S.C. § 2000e-2(a)(l), include “the state of psychological well being at the workplace.” Id. at 901, citing Rogers v. EEOC, 454 F.2d 234, 238 (5th Cir.1971), cert. denied, 406 U.S. 957, 92 S.Ct. 2058, 32 L.Ed.2d 343 (1972). The Eleventh Circuit reasons that if the “creating or condoning [of] an environment at the workplace which significantly and adversely affects an employee because of race or ethnicity, regardless of any other tangible job detriment to the protected employee,” constitutes a violation of Title VII, then the same must also hold for sex discrimination cases. Id. The court explains:

Sexual harassment which creates a hostile or offensive environment for members of one sex is every bit the arbitrary barrier to sexual equality at the workplace that racial harassment is to racial equality. Surely, a requirement that a man or woman run a gauntlet of sexual abuse in return for the privilege of being allowed to work and make a living can be as demeaning and disconcerting as the harshest of racial epithets. A pattern of sexual harassment inflicted upon an employee because of her sex is a pattern of behavior that inflicts disparate treatment upon a member of one sex with respect to terms, conditions, or privileges of employment. There is no requirement that an employee subjected to such disparate treatment prove in addition that she has suffered tangible job detriment.

Id. at 902. For the foregoing proposition, the Eleventh Circuit also relies upon Bundy v. Jackson, 641 F.2d 934, 943-46 (D.C.Cir.1981), and cites EEOC regulations to the same effect, 29 C.F.R. § 1604.11(a).

Turning to the point now before us, the Court in Henson proceeds to set out the elements which it requires a claimant to establish in a hostile work environment case. As already suggested, the fifth element which the Eleventh Circuit imposes upon a hostile work environment claimant is characterized as “respondeat superior”, Henson, 682 F.2d at 905. Under the respondeat superior rubric, the court requires that a claimant show that the employer “knew or should have known of the harassment in question and failed to take prompt remedial action.” Id. For this proposition, the court cited Bundy v. Jackson, 641 F.2d at 943 & n. 8, and the case of Vinson v. Taylor, 23 Fair Empl.Prac.Cas. (BNA) at 41-42.

The court having found that Henson had made a prima facie ease for violation of Title VII, the district court dismissal of her claim was overruled and the matter remanded for a new trial. At this juncture it will be pertinent to note that the appeal did not raise the question of whether employer knowledge was in fact an element of a claimant’s case under 42 U.S.C. § 2000e-2. We also note that it is not all that clear that Henson was purely a hostile work environment case. It seems clear enough from the recitation of facts as well as some additional issues argued in Henson that claimant ultimately resigned her employment and in litigation claimed a constructive discharge under Title VII. Henson, 682 F.2d at 901, 907-08. These circumstances cause this court to feel that the court in Henson may very well have been doing precisely what this court has been called upon to do here: to give the parties an advisory ruling as to the law of this case in order that they may present their facts and make their arguments employing the legal frame of reference which the court will apply in deciding the case. The point here is that the Eleventh Circuit was not, as this court is not, dealing with a case which raised in isolation the question of whether or not employer knowledge was a requisite to a Title VII hostile work environment case.

For her part, Plaintiff here relies upon the decision of the United States Court of Appeals for the District of Columbia in Vinson v. Taylor, 753 F.2d 141 (D.C.Cir.1985), which was decided sometime after the subject motion had been initially briefed by the parties.

At oral argument, Defendant State of Alaska contended that Vinson was in reality not a hostile work environment case but, rather, just another case of lost, tangible job benefits. While the circuit court’s recitation of the facts in Vinson could lead one to believe that the case involved a loss of tangible job benefits, it is very clear that the court analyzed and decided the case as a hostile work environment matter. In this regard, the circuit court recognized that a

Title VII plaintiff has two avenues of claim open to him or her:

The first was recognized in Barnes v. Costle [561 F.2d 983 (D.C.Cir.1977) ], where we held that abolition of the job of a female employee because she spurned her male superior’s sexual advances was an infringement of Title VII. [Id. at 992.] The second approach is illustrated by Bundy v. Jackson, [641 F.2d 934, 946 (D.C.Cir.1981) ] decided after the district court’s judgment herein, where we sustained a Title VII cause of action in favor of a woman employee seeking relief simply for pervasive on-the-job sexual harassment by her superiors. [Id. at 943-44.]

Vinson, 753 F.2d at 144-45. At this juncture, the circuit court expressly held:

Vinson’s grievance was clearly of the latter type and, accordingly, her case counseled an inquiry as to whether Taylor “created or condoned a substantially discriminatory work environment, regardless of whether the complaining employees lost any tangible job benefits as a result of the discrimination.” [Citing Bundy v. Jackson, 641 F.2d at 943-944 (emphasis in original).]

Id. at 145.

This court’s analysis of Henson and Vinson leads to the conclusion that, even in absolutely identical hostile work environment cases, the Eleventh Circuit and the D.C. Circuit would quite possibly, although not necessarily, reach contrary results on the question of whether employer knowledge is a requisite to such a claim. What is very clear, however, is that only the D.C. Circuit of those discussed by the parties has faced this question squarely and ruled upon it after full exposition under our adversary process. It is particularly significant to this court’s thinking that the district court decision in Vinson was relied upon by the Henson court, and the D.C. Circuit has now reversed that initial Vinson decision.

It should also be noted in evaluating Henson and Vinson that Bundy v. Jackson, 641 F.2d 934 (D.C.Cir.1981), which the court in Henson also relied upon and which the court in Vinson cited repeatedly, simply does not stand for the proposition that a hostile work environment claimant must prove, as a part of his or her case, employer knowledge. Rather, in Bundy the circuit court was dealing with a clear-cut case involving employer knowledge and inaction as regards claimed sex discrimination. Id. at 943. What Bundy says by way of speculation is that the circuit court’s earlier case of Barnes v. Costle, 561 F.2d 983 (D.C.Cir.1977), may stand for the proposition that an employer can avoid liability if the harassing supervisor did so in contravention of an express employer policy against such, and without the employer’s knowledge, and if the employer moved promptly and efficiently to rectify the offense. Even if it is assumed that Barnes and Bundy did stand for the proposition that in some situations employer knowledge is a requirement of some Title VII claims, that proposition was clearly rejected in the appellate decision in Vinson v. Taylor, 753 F.2d at 151.

After a careful analysis of 42 U.S.C. § 2000e, the legislative history of that statute, and the regulations implementing the statute adopted by EEOC, the D.C. Circuit expressly held that an employer who is not on notice of sexual harassment cannot escape liability, even in a hostile work environment case; and in so holding, the D.C. Circuit also expressly rejects the idea that the common law doctrine of respondeat superior is either a necessary or an appropriate foundation or tool for interpreting Title VII. Id. at 150-51. In the latter regard, the D.C. Circuit pointedly observes that:

Confining liability, as the common law would, to situations in which a supervisor acted within the scope of his authority conceivably could lead to the ludicrous result that employers would become accountable only if they explicitly require or consciously allow their supervisors to molest women employees. While modern courts seem more inclined to treat intentional misconduct on the job as arising out of and in the course of the employment, and thus as providing a basis for liability under a somewhat expanded theory of respondeat superior, there simply is no need to so confine either the analysis or the solution where Title VII applies.
To hold that an employer cannot be reached for Title VII violations unknown to him is, too, to open the door to circumvention of Title VII by the simple expedient of looking the other way, even as signs of discriminatory practice begin to gather on the horizon. [Citations omitted.]

Id. at 151. At this juncture, the D.C. Circuit cites and quotes the Ninth Circuit in Miller v. Bank of America, 600 F.2d 211, 213 (1979). We shall have more to say of the latter case in a moment.

After some further analysis of the foregoing problem the decision concludes that:

A requirement of knowledge by the employer of the Title VII transgressions by supervisory personnel would effectively eliminate vicarious Title VII responsibility altogether. It would reserve Title VII liability for only those employers who failed to redress known violations — a direct, not a substitutional, theory of attribution. This would be a retreat from the level of protection Title VII has consistently and designedly afforded, and take a backward step we refuse to endorse. [Citations omitted.]

Id. at 151-52. This Court adopts the holding as well as the reasoning of Vinson as set out above.

This Court recognizes that hostile work environment cases present some especially difficult problems for the finder of fact. Without some tangible event — tangible job detriment such as a refusal to hire, a termination without cause, or a refused raise in pay or promotion — the court can find itself with precious little objective evidence of employer wrongdoing. Worse yet, in a pure hostile work environment case, the Court perceives that it will more likely than not be confronted with diametrically opposed testimony from the employee and the alleged offending employer-supervisor. As a consequence, one must necessarily anticipate arguments such as: “If the hostile and offensive sexual harassment were really going on or were that offensive, plainly the employee would have quit the job.” The Court is concerned that this argument would in many if not most cases be specious. The practical problem is that the employee who stays on the job the longest and puts up with the most offensive sexual harassment is more likely than not going to be the employee who is the most dependent on retaining the job. Worse yet, this same employee is likely to be the one most reticent to complain, and thereby pass knowledge to a higher supervisor, lest he or she be confronted by the same kind of response that Bundy received when she sought to complain — that is, her complaint was not taken seriously, poor performance ratings started appearing, and ultimately a promotion was denied.

Requiring knowledge on the part of the employer in a hostile work environment case might very well provide the court with an easy tool to use in deciding many cases, but this court fears that such a requirement holds the potential for grave injustice as well as subversion of the purpose of Title VII.

So far as this Court is aware, the Ninth Circuit Court of Appeals has not addressed the question which we deal with here. Miller v. Bank of America, 600 F.2d 211 (9th Cir.1979), in substance holds that an employer can be held liable for sex discrimination by an employee-supervisor, despite the employer’s lack of knowledge and even where an express company policy of the employer was violated by the supervisor. Miller, however, is not instructive as regards the problem we confront since it is a “tangible job benefit” case rather than a “hostile work environment” case.

The foregoing brings this court to a final observation on the subject. The distinction above alluded to between “tangible job benefit” (“quid pro quo”) cases and “hostile work environment” cases is often discussed by courts, but this court finds it an extremely slippery concept. See Henson, 682 F.2d at 908 n. 18. The situations which are dealt with in sex discrimination cases, as well as other discrimination eases, present a factual and legal continuum. There is no neat square peg that fits into a square hole nor a round peg for a round hole. Rather, there is a seemingly endless variety of sex discrimination cases with one situation blending into another when comparisons are made. This court rejects the notion that a knowledge requirement exists in one situation but not in the other. Preventing sex discrimination in employment is too important a goal to turn upon the vagaries of what does and what does not constitute a tangible job benefit as distinguished from what is evidently considered to be an intangible benefit such as psychological well-being at the workplace. Rather, we must start from the proposition that there is, by virtue of Title VII, a statutory right to a job environment where none of the terms, conditions, or privileges of employment are adversely impacted by sex discrimination. See Vinson, 753 F.2d at 145 & n. 33; 42 U.S.C. § 2000e-2(a)(l).

This court concludes that employer knowledge is not an element of this Title VII sex discrimination case.

      . Pub.L. No. 88-352, tit. VII, 78 Stat. 253 (codified as amended at 42 U.S.C. § 2000e et seq. (1982)).

      . Pub.L. No. 92-261, 86 Stat. 103.

      . 42 U.S.C. § 2000e-2(a)(l) provides in pertinent part:
      (a) It shall be an unlawful employment practice for an employer—
      (1) ... to discharge any individual, or otherwise to discriminate against any individual with respect to ... terms, conditions, or privileges of employment, because of such individual’s ... sex____

      . In fairness to counsel for the State who argued this case, it appears that the matter was thrust upon him with little notice or opportunity to prepare. This is indeed unfortunate since counsel’s hurried interpretation of Vinson caused him to argue an absolutely wrong basis for distinguishing this case and Vinson.

      . This court thinks that the D.C. Circuit Court never did so hold. At Vinson, 753 F.2d at 147, we read:
      Today, however, we are confronted by the question that was not directly and actively litigated in Barnes or Bundy: whether Title VII imposes upon an employer without specific notice of sexual harassment by supervisory personnel responsibility for that species of discrimination.

      . This order does not require the entry of any judgment by the Clerk of Court.


author: ASPEN, District Judge:

text:
    Beverly J. OTTO, Individually and on Behalf of all Others Similarly Situated, Plaintiff, v. VARIABLE ANNUITY LIFE INSURANCE COMPANY, a Stock Life Insurance Company Organized Under the Laws of the State of Texas, Charles T. Bauer, Mortimer M. Caplin, Henry Chauncey, Harry C. Copeland, Jr., W. Thomas Fiquet, Frederick M. Glass, Grinnel Morris, Roy T. Parker, Jr., Robert S. Phillips, Michael E. Puyans, W. Dawson Sterling, Benjamin N. Woodson, Philip G. Davidson III, Andrew Delaney, Joe F. Flack, Richard H. Hanneman, Harold S. Hook, Marden Miller, John J. Plumb, George F. Reed, Robert L. Baldwin, Stephen D. Bickel, Terrence J. Conlan, Joe D. Heusi, John D. Hogan, William B. Pardue, William C. Phelps, Michael J. Poulos, Robert O. Purcifull, Diane G. D’Agostino, and Gregory C. Wilcox, Individually Variable Annuity Life Insurance Company Separate Account One, and American General Corporation, Defendants.
    No. 82 C 4762.
    United States District Court, N.D. Illinois, E.D.
    April 11, 1985.

      Frederic J. Otto, and Lowell H. Jacobson, James A. Brandvik, Craig E. Anderson and Herbert I. Rothbart, Chicago, Ill., for plaintiff.
    Randall L. Mitchell, Deborah A. Devaney, Philip Fertik, Adams, Fox, Adelstein & Rosen, Chicago, Ill., for defendants.
   MEMORANDUM OPINION AND ORDER

ASPEN, District Judge:

Plaintiff Beverly J. Otto (“Otto”), on behalf of herself and others similarly situated, brings this suit against the Variable Annuity Life Insurance Company (“VAL-IC”) and certain affiliated companies and named directors of VALIC, alleging, inter alia, violations of the Securities Exchange Act of 1934, 15 U.S.C. § 78a et seq.; the Employee Retirement Income Security Act of 1974 (“ERISA”), 29 U.S.C. § 1001 et seq.; and the Racketeer Influenced and Corrupt Organizations Act (“RICO”), 18 U.S.C. §§ 1961-1968. Otto essentially claims that the defendants have unlawfully failed to disclose to investors in VALIC’s fixed annuity program the manner in which interest is calculated on their deposits, as well as the method by which investors can transfer their funds so as to maximize their rate of return. On March 15, 1984, the Court granted Otto’s motion for class certification, permitting her to represent the class of all Illinois investors who participated in VALIC’s fixed annuity program between October 17, 1975, and August 2, 1982. Presently before the Court is defendants’ motion to strike and dismiss and for summary judgment. For the reasons set forth below, defendants’ motion is granted.

Count I

Defendants offer several reasons why the complaint’s securities fraud count fails to state a claim upon which relief can be granted and why defendants are entitled to summary judgment on that count as a matter of law. We need address only one of these reasons, defendants’ assertion that the fixed annuity is not a security.

Defendants argue that VALIC’s fixed annuity is not within the scope of the Securities Exchange Act of 1934 because it falls into the statutory exemption for “any insurance or endowment policy or annuity contract or optional annuity contract” issued by a regulated insurance company. 15 U.S.C. § 77c(a)(8). Otto, on the other hand, argues that VALIC’s fixed annuity should be characterized as an “investment contract,” one type of security defined in 15 U.S.C. § 78e(a)(10). Although the term “investment contract” is a catch-all to bring within the securities acts various interests that have the functional attributes of stock and other formal securities but are not so denominated, Peoria Union Stock Yards Company Retirement Plan v. Penn Mutual Life Insurance Co., 698 F.2d 320, 324 (7th Cir.1983), we agree with defendants that the fixed annuity is more properly viewed as an insurance product than as an investment contract.

The contract under which Otto and the other class members became participants is designed for annuity purchase plans adopted by public school systems and certain tax-exempt organizations pursuant to Section 403(b) of the Internal Revenue Code, 26 U.S.C. § 403(b). Under the contract’s terms, participants may designate a portion of their salaries for deposit into either a variable or a fixed annuity account, and those amounts (up to a statutory maximum) are excluded from the participants’ gross income for the year.

Since 1968, VALIC’s variable annuity has been funded through Separate Account One, a diversified open-end management investment company registered under the Investment Company Act of 1940. Funds contributed by participants are segregated from VALIC’s other assets and are invested primarily in a diversified portfolio of common stocks and other equity-type investments. The participants bear all the investment risks with this annuity; neither interest nor the principal contributed by the participants is guaranteed by the company. The participants’ profits thus depend solely upon the expertise and investment success of those who invest the funds in the Separate Account.

The fixed annuity, the subject of this lawsuit, operates quite differently. Participants’ contributions become a part of the company’s general assets. The stated primary objective of the fixed annuity is to provide insured retirement stability by long-term accumulation of funds through compound interest. VALIC bears the investment risk, because it guarantees the return of both principal and a minimum of 4% compound annual interest for the first ten years of participation and 3V2% interest thereafter. Interest above the minimum level may be paid in the discretion of VAL-IC’s board of directors.

Otto asserts that the status of VALIC’s fixed annuity as a security is settled “beyond all question” by three cases: SEC v. Variable Annuity Life Insurance Co. of America, 359 U.S. 65, 79 S.Ct. 618, 3 L.Ed.2d 640 (1959); SEC v. United Benefit Life Insurance Co., 387 U.S. 202, 87 S.Ct. 1557, 18 L.Ed.2d 673 (1967); and Peona Union Stock Yards. These cases do shed some light on this issue, but they do not support, much less compel, the conclusion Otto reaches.

The Supreme Court decided long ago that a variable annuity offered by VALIC was a security. VALIC, 359 U.S. at 71, 79 S.Ct. at 622. In doing so, the Court distinguished traditional fixed annuities from the more recently evolved variable annuities. Id., 359 U.S. at 69, 79 S.Ct. at 621. Unlike their predecessors, variable annuities were to be treated as securities rather than insurance products, in large part because they placed the entire investment risk on the annuitant. “For in common understanding ‘insurance’ involves a guarantee that at least some fraction of the benefits will be payable in fixed amounts.” Id., 359 U.S. at 71, 79 S.Ct. at 622.

The Supreme Court discussed the relationship between annuities and the federal securities laws further in United Benefit. That case involved a deferred, or optional, annuity plan called a “Flexible Fund Annuity” contract, under which the purchaser agreed to make certain annual contributions until a specified maturity date. The insurance company invested most of the Flexible Fund contributions in common stocks, with the object of producing capital gains as well as an interest return. “Instead of promising to the policyholder an accumulation to a fixed amount of savings at interest, the insurer promise[d] to serve as an investment agency and allow the policyholder to share in its investment experience.” United Benefit, 387 U.S. 202, 208, 87 S.Ct. 1557, 1560.- Upon maturity the purchaser could either withdraw his contributions, plus the earnings that had accumulated through the insurer’s investment of those contributions, or use them to purchase an annuity from the company. Whatever his choice, the purchaser was guaranteed a low minimum value (with no interest component) at maturity.

The Court found that the accumulation portion of this annuity plan was an investment contract rather than an insurance product. Although the cash value guarantee reduced somewhat the investment risk of the purchaser, this was not enough. The Court stated that “ ‘[t]he test ... is what character the instrument is given in commerce by the terms of the offer, the plan of distribution, and the economic inducements held out to the prospect.’ ” Id., 387 U.S. at 211, 87 S.Ct. at 1562, quoting SEC v. C.M. Joiner Leasing Corp., 320 U.S. 344, 352-53, 64 S.Ct. 120,124, 88 L.Ed. 88 (1943). The Flexible Fund was “considered to appeal to the purchaser not on the usual'insurance basis of stability and security but on the prospect of ‘growth’ through sound investment management.” United Benefit, 387 U.S. at 211, 87 S.Ct. at 1562. Given the plan’s pitch to growth through professionally managed investment, the Court deemed it fair to apply the securities laws to it. Id.

VALIC’s fixed annuity differs significantly from the plans in these two Supreme Court cases. VALIC bears the investment risk, guaranteeing the return of the participants’ contributions plus interest. Moreover, the economic inducement of the fixed annuity is indeed the ‘‘usual insurance basis of stability and security” rather than growth through investment. The company’s literature clearly emphasizes the different objectives of the variable and fixed annuities: the former is “long-term capital growth,” which the latter is the more secure “long-term accumulation of funds for retirement through compound interest.” See, e.g., VALIC’s Owner's Manual, Exhibit B to Otto’s complaint. The stability of the fixed annuity was apparent to Otto, who stated that she chose this annuity instead of the variable annuity because she did not like “the fluctuating rates” and wanted “a more conservative investment.” Otto deposition, p. 25. Accordingly, VAL-IC’s fixed annuity is distinguishable from the annuities which the Supreme Court has found to be within the reach of the securities laws.

Nor does the Seventh Circuit opinion in Peoria Union Stock Yards bolster Otto’s claim that the fixed annuity should be treated like a security. That case dealt with a “group deposit administration annuity contract” sold by an insurance company to pension trustees. The insurance company guaranteed interest payments (at a rate declining from 7x/2% to 3x/2%) on contributions made during the first three years of the contract, but it made no guarantee on later contributions. All the contributions, however, were to be credited with whatever investment income the insurance company could realize, less certain modest administrative charges. Thus, the Seventh Circuit found that the insurance company bore even less of the investment risk than did the company in United Benefit, and that any profits of the enterprise were due solely to the investment efforts of the insurance company. Peoria Union Stock Yards, 698 F.2d at 325. This plan is thus distinguishable from VALIC’s fixed annuity in the same way as the contracts in VALIC and United Benefit — “the insurance company is offering the pension plan a chance to share in the insurance company’s investment experience.” Id. VALIC offers this chance to its customers through the variable, not the fixed, annuity.

Our decision that VALIC’s fixed annuity is not a security is supported by the SEC’s view that “neither the general account nor any interests therein are generally subject to the provisions of the 1933 or 1940 Acts____” Although not controlling, the Commission’s interpretation of the securities laws is entitled to considerable weight. United States v. National Association of Securities Dealers, Inc., 422 U.S. 694, 718-19, 95 S.Ct. 2427, 2442, 45 L.Ed.2d 486 (1975).

Accordingly, we hold that Otto’s securities fraud claim must fail because VALIC’s fixed annuity is not a security.

Count II

Defendants make a two-pronged attack on the complaint’s ERISA count. First, they argue that ERISA does not cover VALIC’s fixed annuity because the annuity is not “employer maintained” — and ERISA applies only to plans or funds “established or maintained by an employer.” 29 U.S.C. §§ 1002(2)(A), 1003(a). Second, defendants argue that even if the fixed annuity were considered to be “employer maintained,” the annuity would be excluded from ERISA’s coverage because Otto’s employer is a governmental subdivision. 29 U.S.C. §§ 1002(32), 1003(b)(1). Defendants’ first argument is persuasive.

Both Otto and defendants agree that the school district does no more than: (1) permit annuity contractors to publicize their products to employees, and (2) collect and remit to contractors the contributions designated by participating employees. These minimal, ministerial activities do not render VALIC’s fixed annuity plan one “established or maintained” by the school district. VALIC’s annuity therefore does not fall within the statutory definition of “employee pension benefit plan” or “employee benefit plan” and therefore is not covered by ERISA. The ERISA claims of Otto and all other members of the plaintiff class must be dismissed.

Count III

Otto alleges in Count III that each of the thirty-one individual and four corporate defendants have violated the civil RICO statute. She claims that the defendants went astray from 18 U.S.C. § 1962(c), which prohibits a person from conducting the affairs of an enterprise that is engaged in, or whose activities affect, interstate commerce through a “pattern of racketeering activity.” Section 1961 defines a pattern of racketeering activity as at least two occurrences within ten years of any of several predicate offenses, including mail fraud, bribery and fraud in the sale of securities.

The Seventh Circuit recently discussed the elements of a section 1962(c) claim in Haroco, Inc. v. American National Bank and Trust Co. of Chicago, 747 F.2d 384 (7th Cir.1984), cert. granted, — U.S.-, 105 S.Ct. 902, 83 L.Ed.2d 917 (1985):

To allege a violation of section 1962(c), the plaintiff must allege that the defendant (1) was employed by or associated with (2) an enterprise engaged in, or the activities-of which affected, interstate or foreign commerce, and (3) that the person conducted or participated in the conduct of the enterprise’s affairs (4) through a pattern of racketeering activity-

Id., 747 F.2d at 387. Defendants claim that Otto’s allegations are deficient in various respects, requiring dismissal of the RICO count. We agree with at least two of defendants’ arguments.

Defendants first argue that the RICO count is fatally defective because it fails to identify any “enterprise.” Indeed, the complaint uses the term “enterprise” twice (in paragraphs 74 and 75), but nowhere explains what enterprise was involved. Otto’s response brief does nothing to clear up matters; to the contrary, it simply states at different points that the enterprise might be VALIC or VAMCO or a board of directors or an association in fact of the individual defendants and “the corporation.”

To establish an enterprise, Otto must plead and prove that “the various associates functioned] as a continuing unit” and that the enterprise existed “separate and apart from the pattern of activity in which it engage[d].” United States v. Turkette, 452 U.S. 576, 583, 101 S.Ct. 2524, 2528-29, 69 L.Ed.2d 246 (1981). Moreover, the same individual or corporation may not be both the liable “person” and the “enterprise” under section 1962(c). Haroco, 747 F.2d at 400. Unless Otto specifies the enterprise involved in this case, it is impossible to determine if she has satisfied these other requirements as to each of the defendants. Accordingly, the RICO claim as stated in Count III is insufficient. E.g., Bennett v. Berg, 685 F.2d 1053, 1061-62 (8th Cir.1982), aff'd in part and rev’d in part, 710 F.2d 1361 (8th Cir.1983) (en banc), cert. denied, — U.S.-, 104 S.Ct. 527, 78 L.Ed.2d 710 (1983); see also Laterza v. American Broadcasting Co., Inc., 581 F.Supp. 408, 414 (S.D.N.Y.1984) (general assertion that combination of defendants constituted an “enterprise,” without allegation as to continuity of structure or personnel, was insufficient).

Defendants also point out a second, perhaps greater deficiency — Otto’s failure to specify each defendant’s role in a “pattern of racketeering activity.” The complaint refers to three kinds of predicate offenses which might be a part of such a pattern: mail fraud, wire fraud (which Otto incorrectly calls “false pretenses”), and violations of the federal securities laws. As explained above, Otto has failed to state a claim for any securities laws violation. Thus, to establish a pattern of racketeering activity, Otto must allege at least two instances of mail or wire fraud.

There is little doubt that Fed.R.Civ.P. 9(b), which requires that allegations of fraud specify “with particularity” the circumstances of the alleged fraud, applies to fraud allegations in civil RICO complaints. Haroco, 747 F.2d at 405. Defendants contend that Otto has not satisfied Rule 9(b) because she fails to identify any allegedly false documents and fails to specify how any of the defendants were involved in sending any documents. We disagree with defendants’ first contention, as the complaint refers to (and attaches as exhibits) three specific “investment prospectuses, financial and interest statements.” Complaint, paragraph 73(a). However, we do agree with defendants’ second contention, that the complaint fails to sufficiently plead each defendant’s respective involvement in any fraudulent activity. In fact, the complaint is devoid of any factual allegations concerning particular defendants. The complaint’s conclusory allegations, which merely attribute fraudulent representations to thirty-five defendants collectively, are not specific enough to satisfy Rule 9(b). Hudson v. LaRouche, 579 F.Supp. 623, 628-29 (S.D.N.Y.1983); D & G Enterprises v. Continental Illinois National Bank and Trust Company of Chicago, 574 F.Supp. 263, 267 (N.D.Ill.1983). The inadequacy of the fraud allegations is especially great regarding the individual defendants, many of whom left VALIC before 1978 or joined VALIC after the purportedly fraudulent documents were issued. Accordingly, the complaint’s RICO count is dismissed.

Count IV

In Count IV, Otto alleges that all the defendants conspired to violate the Securities Exchange Act of 1934, ERISA and RICO, the same statutes on which she . relies in Counts I, II and III. At a minimum, a conspiracy requires allegations and proof of one overt act by a defendant in furtherance of the conspiracy, and the assent of each defendant to the operation of the conspiracy. United States v. Sutherland, 656 F.2d 1181, 1186-87 n. 4 and 1193 (5th Cir.1981), cert. denied, 455 U.S. 949, 102 S.Ct. 1451, 71 L.Ed.2d 663 (1982). The defendants argue that Otto’s allegations fail to meet even this minimum requirement. We agree.

It may be theoretically possible for defendants to have conspired to violate RICO or even the federal securities laws or ERISA (which, as explained above, defendants actually could not have violated). However, general allegations of a conspiracy which are unsupported by facts are not enough to state a cause of action. Saine v. A.I.A., Inc., 582 F.Supp. 1299, 1307 (D.Colo.1984). The allegations in Count IV are even sketchier than those in Count III, which we have found inadequate to state a RICO claim against any particular defendant. There are simply no facts alleged which permit a reasonable inference that the dozens of defendants, many of whom were no longer affiliated with VALIC when other defendants began their association with the company, ever assented to a conspiracy to violate various federal laws. Thus, Count IV fails to state a cause of action and must be dismissed.

Counts V and VI

In Counts V and VI, Otto asserts two state law claims: breach of contract and common law fraud. Because the federal claims in Counts I through IV are all dismissed, there is no longer any basis for this Court to exercise pendent jurisdiction over the state law claims. United Mineworkers of America v. Gibbs, 383 U.S. 715, 725-26, 86 S.Ct. 1130, 1138, 16 L.Ed.2d 218 (1966); Americana Healthcare Corp. v. Schweiker, 688 F.2d 1072, 1087 (7th Cir.1982), cert. denied, 459 U.S. 1202,103 S.Ct. 1187, 75 L.Ed.2d 434 (1983). Therefore, these counts are dismissed as well.

Accordingly, defendants’ motion to strike and dismiss and for summary judgment is granted. It is so ordered.

      . Indeed, although the statute refers to insurance policies and annuities as “exempted securities,” they are probably more accurately considered not to be securities at all. See H.R.Rep. No. 85, 73d Cong., 1st Sess. 15; 3 H. Bloomenthal, Securities and Federal Corporate Law § 2.08[1] (1984 rev.).

      . The "investment contract" provision is in fact the only part of the definition of "security” which arguably applies to this case. Section 78c(a)(10) provides:
      The term "security” means any note, stock, treasury stock, bond, debenture, certificate of interest or participation in any profit-sharing agreement or in any oil, gas, or other mineral royalty or lease, any collateral-trust certificate, preorganization certificate or subscription, transferable share, investment contract, voting-trust certificate, certificate of deposit, for a security, or in general, any instrument commonly known as a "security”; or any certificate of interest or participation in, temporary or interim certificate for, receipt for, or warrant or right to subscribe to or purchase, any of the foregoing; but shall not include currency or any note, draft, bill of exchange, or banker's acceptance which has a maturity at the time of issuance of not exceeding nine months, exclusive of days of grace, or any renewal thereof the maturity of which is likewise limited.

      . As defendants point out, state insurance regulations strictly limit the types of investments which insurance companies can make. See, e.g., Ill.Rev.Stat. ch. 73, ¶ 736 et seq. Therefore, the company's funds typically go into conservative debt-type securities, mortgages and bonds, with fixed rates of return.

      . We note once again that it is VALIC’s fixed, and not variable, annuity which is at issue in this case. Otto occasionally blurs the distinctions between the two, both in the complaint and in her brief opposing defendants’ motion.

      . Otto asserts in her response brief that the guaranteed rates of interest were hardly enough to attract anyone to the contract and that the incentive was the discretionary interest payable. This assertion ignores the substantial pecuniary benefits of excluding the contribution amounts from gross income for tax purposes and is belied by Otto’s stated aversion of "fluctuating rates” (the discretionary interest, of course, was just that — discretionary—and could be varied or omitted at any time).

      . See letter of January 31, 1984, to VALIC from Thomas E. Neal, Assistant Chief of the SEC's Office of Insurance Products and Legal Compliance, attached to defendants’ supporting brief.

      . Section 1002(2)(A) provides in pertinent part:
      "[T]he terms ‘employee pension benefit plan’ and ‘pension plan’ mean any plan, fund, or program which was heretofore or is hereafter established or maintained by an employer or by an employee organization, or by both____’’

      . Most of Otto’s response is devoted to defendants’ second argument. In contending that no governmental exemption applies to VALIC’s fixed annuity, Otto emphasizes the fact that the annuity plan is not established or maintained by her school district employer, but rather is formulated and completely controlled by VALIC. While this vitiates defendants’ second argument, it strengthens théir first.

      . This conclusion is in accord with a Department of Labor regulation, 29 C.F.R. § 2510.3-2(f), which explains that tax sheltered annuities such as VALIC’s shall not be deemed to be "established or maintained by an employer” when the employer’s involvement is limited (as in this case). Otto’s arguments that we should disregard this regulation are unconvincing.

      . After defendants filed the reply brief for their motion, Otto filed a motion seeking leave to add three additional persons as named plaintiffs in this action. Otto's motion was clearly a response to defendants’ governmental exemption argument, as the three putative additional class representatives are employees of a private, nongovernmental entity. However, their inclusion in this suit would have no effect — the ERISA claim is dismissed not because Otto’s employer is a governmental subdivision, but because the annuity plan is not established or maintained by the employer (whether it be governmental or non-governmental). Accordingly, Otto's motion is denied.

      . It is not at all clear which corporation Otto means.

      . See, e.g., United States v. Rose, 590 F.2d 232, 235-36 (7th Cir.1978), cert. denied, 442 U.S. 929, 99 S.Ct. 2859, 61 L.Ed.2d 297 (1978) (legal or factual impossibility of committing offense not a defense to conspiracy claim).


author: PETTINE, Senior District Judge.

text:
    Karen COLAPIETRO, Lynn Forcier, Bruce Holland, William Jones, Janet Lofgren, Penny Plattieau, Simone Proctor, Jill Rabuano, and Peter Smith v. INTERNATIONAL ASSOCIATION OF MACHINISTS AND AEROSPACE WORKERS, DISTRICT 64, LOCAL 1142, LOCAL 883, William Martin, President 1142, Louis N. Vallende, President 883, and Robert V. Thayer, Business Representative 64.
    Civ. A. No. 82-0595 P.
    United States District Court, D. Rhode Island.
    April 22, 1985.

      Gordon P. Cleary, of Vetter & White, Providence, R.I., for plaintiff.
    Mark Gursky, Providence, R.I., for defendant.
   OPINION

PETTINE, Senior District Judge.

The plaintiffs, nine members of the International Association of Machinists and Aerospace Workers, District Lodge 64, Local Lodges 883, and 1142, bring this action; they seek an injunction against their union which will prevent it from enforcing fines imposed on the plaintiffs for crossing a sanctioned picket line and resuming their former employment during a strike. For reasons hereinafter stated, the complaint is dismissed without prejudice.

Jurisdiction is asserted and the suit is brought pursuant to the Labor Management Reporting and Disclosure Act of 1959, 29 U.S.C. §§ 401 et seq. (1970) as amended. (LMRDA).

The aforesaid district and local lodges represent employees of Brown and Sharpe Manufacturing Company (Brown & Sharpe) doing business in North Kingston, Rhode Island.

Defendant District Lodge 64 is an umbrella organization consisting of eighteen local unions throughout Rhode Island. The individual defendants are William Martin, Louis Vallende and Robert V. Thayer, various officials of the union.

This action arises from a strike against Brown & Sharpe, which was called by the union on October 19,1981. The usual picket lines were established. In the beginning, the plaintiffs participated in the strike but, for reasons not germane to this particular controversy, they returned to their jobs; in the process, the picket lines were crossed. As a result, a charge was lodged against each individual. In the case of Jill Rabuano McLaughlin, one of the nine plaintiffs, it was dated February 4, 1982, and reads as follows: “... charges have been preferred against you under Article L of the IAMAW Constitution. The specific charge against you has been defined in Section 3 of page 119 line 24 through line 27 which states in part, ‘accepting employment in any capacity in an establishment where a strike or lockout exists as recognized under this Constitution without permission — .’ You are charged with crossing a sanctioned picket line at Brown & Sharpe Mfg. Co. during the week ending February 5, 1982.” Substantially the same charge was placed against the other plaintiffs. Hearings were held by the union and individual sanctions imposed.

The plaintiffs complain they were not afforded full and fair hearings under the act, 29 U.S.C. § 411(a)(5). They acknowledge they pursued no internal union appeals and that this lawsuit is being financed by Brown & Sharpe Manufacturing Company, the struck employer.

The defendants counter and argue as follows: a) “[t]he complaint should be dismissed for employer financing of the lawsuit, pursuant to 29 U.S.C. § 411(a)(4). —Brown & Sharpe Manufacturing Company is an ‘Interested Employer’ within the meaning of 29 U.S.C. § 411(a)(4); b) [t]he complaint should be dismissed for failure to exhaust intra-union remedies; c) [t]he disciplinary hearings conformed to or exceeded the procedural requirements of LMRDA; d) [t]here is sufficient evidence to support the decision of the Local Lodge.”

Facts:

The strike in question is perhaps one of the most notorious ever held in the state of Rhode Island. It started on October 19, 1981 and is still in progress; it may well be the longest strike ever held in this country. Emotions have run high and the intransigence of all parties has not abated with time. It is claimed that Brown & Sharpe has attempted to induce the strikers to abandon the picket line and return to work; at the same time the union has pressed for the loyalty of its members. Presently there is pending before the National Labor Relations Board in Washington, forty unfair labor practices charges made by the union against Brown & Sharpe.

It was in this setting that each of the plaintiffs was granted a hearing. Jill Rabuano McLaughlin was the first of the nine plaintiffs to be heard. The sequence of events that she experienced reflect the tone and pattern, with some minor differences, of all the other plaintiff hearings.

On February 6, 1983 the plaintiff Rabuano received by certified mail, return receipt requested, the February 4, 1982 letter, supra, in which there was enclosed a hand written charge signed by Bruno Sinischalchi, a union member, alleging he had seen her cross the picket line on February 2, 1982.

On the day of the hearing Mrs. McLaughlin presented herself with her husband (she was at the time unmarried), a court reporter and personal lawyer. Defendants Robert Thayer, the union business representative and Louis Vallende, Local 883 President, were present together with Bruno Sinischalchi.

On arrival the plaintiff was advised that she alone would be permitted to attend the meeting because, if she wanted counsel, the person to act in that capacity had to be a fellow union employee; the union officials also ruled that the court reporter was unnecessary since a “written record” of the proceedings would be made by a union member; and finally, the plaintiff was told the hearing room would be cleared of everyone other than the trial committee, the plaintiff, the defendant and the trial reporter. A discussion ensued during which Mr. Sinischalchi was challenged; it was pointed out that since he signed the charge he was acting as the accuser, and since he was designated to act as chairman of the trial committee, which would be hearing the case, he would be a juror as well. As I understand the testimony, Mr. Thayer responded by saying it did not matter; the trial could still go forward; they would change their plans and not use Sinischalchi as a member of the Committee; instead, he would remain as accuser. Furthermore, the plaintiff was told the union could, if it wished, press a charge different from the one she received — I assume this means with a different accuser; thereupon, the plaintiff refused to attend the hearing and left.

Since there was no request for a postponement, the trial committee nevertheless met; Mr. Sinischalchi testified but did not participate in the deliberations of the Committee which found the plaintiff guilty; it recommended she be fined “a day’s pay for each day ...” she crossed the picket line. This recommended penalty had to be and was submitted for approval to the union members attending a subsequently held Local Lodge meeting. Again the testimony is not entirely clear. I conclude the membership accepted the penalty as recommended. However, the plaintiff received a letter stating she was fined:

One (1) days pay for every day of employment with the Brown & Sharpe Manufacturing Company. (Emphasis added)

This “fine” letter was received by the plaintiff on July 24, 1982, more than forty days after the penalty was affirmed by the union members, which was on June 9,1982. It was signed by the Chairman of the plaintiffs Trial Committee and was drafted and typed by Thayer’s office. The union constitution provides for prompt notification in writing of the decision of a Local Lodge and an appeal “within thirty days after the L.L. [Local Lodge] verdict.” Art. L. Sec. 14, lines 29-32.

The trial of the second plaintiff, Karen Colapietro, was nothing more than a slight variation on the same theme. In this case no copy of the charge was received although there was evidence it had been mailed to her; however, it was not given to her lawyer who had asked for it. Instead of a court reporter this plaintiff sought permission to use a tape recorder — this was denied. A complaining witness different from the one who placed the charge was present as the accuser. The original complaining witness was disqualified because he himself crossed the picket line. Specifically the complaining witness stated, “I saw her cross several times in the month of March, that’s the only time I saw her.” The plaintiff attended the hearing but her lawyer and husband were not permitted to be present; she was found guilty on the “affirmed” testimony of the complaining witness and because she failed, “to ... make any comment on her behalf ...” This latter statement does not square with the transcript evidence which shows Sinischalchi warning the plaintiff, “I allowed you to speak your piece, I did not have to.” Ex. 36, 26 p. 2.

Again the trial committee recommended a fine of “a days pay for each day she crosses.” The membership accepted this recommendation but again the penalty notice the plaintiff received read:

One (1) days pay for every day of employment at Brown & Sharpe Manufacturing Company. (Emphasis added)

I do not feel that it is necessary for me to detail the events of each hearing as to the remaining plaintiffs. There were certain facts common to all, namely: a copy of the charge was not received though requested or if received it was three to six days before the hearing; the defendants displayed a general hostile attitude; in some cases neither the charging party or any other witnesses appeared; the trial committee recommended fines of a day’s pay for each day the picket line was crossed, which fine was subsequently approved by the membership but the penalty letter imposed fines for each day of employment.

The exorbitant penalties imposed on each of these salaried employees range from approximately $25,000 upward to as high as $200,000, depending of their year of employment and salary received.

The defendants’ answer to the foregoing facts is summarized in its brief to the court at pages 4 and 5, and is as follows:

The hearings were held at a conference room, at 78 Kenwood Street in Cranston, in an area separate from the union offices. Id. at 125. Thayer attended most of the hearings, including those involving Karen Colapietro, Lynn Forcier, Janet Lofgren, Jill McLaughlin, Penny Plattieau, and Simone Proctor. Id. at 109. He attended in his capacity as a representative of the International Union. Id. at 109; Defendant’s Ex. Q. Thayer did not testify at any hearing, file any charges, sit on the trial committee or participate in its deliberations. Id. at 125. No person who was brought up on charges was denied a postponement if requested. Id. at 133. No person who had filed a charge against any individual participated in trial committee deliberations. Id. at 133-134. No person was denied an opportunity to leave the hearing room to consult with counsel and the hearing room was unlocked from the inside. Id. at 134. Anyone could leave the hearing room at any time. Id. Plaintiffs’ attorney, Mr. Cleary, was advised on several occasions that, pursuant to the union constitution, he could not attend the hearing, but could remain outside. Id. at 135. The union did not have an attorney in attendance. Id. at 135-136. All hearings were tape recorded, and the tape recorder was visible to all participants. Id.
After each hearing, a union meeting was held to discuss the recommendation of the trial committee. Pursuant to the union constitution, the trial committee chairman gave a synopsis of each trial, member’s plea (if any), and the charges and evidence presented. The membership then voted by secret ballot. Any union member was permitted to be heard at the meetings. Id. at 139. A separate vote was taken on each recommended penalty. Id. at 140.
No decision of a local lodge was appealed by any plaintiff, although Mr. Cleary had requested the name and address of the appropriate appellate tribunal, Defendants’ Ex. S, and had received that information by letter immediately. Defendants’ Ex. R. Thayer Testimony at 143-144. The next step in the appeal would have been to the International President, William Wimpisinger. Id. at 146. All action is stayed pending appeal. Id. at 147, 153-154. Although the International President received copies of the notice of hearing and charges, no member of the trial committee spoke with him, he did not come to Rhode Island during the strike and he did not attend any local union meetings. Id. at 154-155.

The first argument the defendants make is that this case must be dismissed because the lawsuit is being financed by Brown & Sharpe which has an interest in and is likely to be affected by the litigation; all as proscribed by 29 U.S.C. § 411(a)(4) supra.

One of the leading cases on this issue is Adamszewski v. International Ass’n of Machinists, Local 1487, 496 F.2d 777 (7th Cir.1974); from which both sides seek support. The defendants quote the following language:

There remains the question of whether the proviso was intended to bar the employee’s suit. If it did not have that effect, it would be merely precatory, for no other sanction is provided in the Act for violation of the proviso. Appearing as it does in the paragraph of the act guaranteeing the employees’ right to sue in any court, it must be construed as a limitation on that right.
Id.
it is clear that Congress meant to prohibit an employer from financing a suit when the employer had a concrete interest in the litigation due to its relationship with the union.
Id. at 783-784.

The last quotation is also cited by the plaintiffs. They contend, however, that a “concrete interest” in litigation, as adopted by the court, means “having a share or concern in the litigation, liable to be affected by it.”

There can be no dispute that the pivotal issue here is the meaning of “interested employer.” All that need be said on the issue at stake has been exhaustively set forth by Judge Eachbach in the Adamszewski case, supra and by Judge Tamm in International Union Etc. v. National Right To Work, 590 F.2d 1139 (D.C.Cir.1978). We must decide if Brown & Sharpe falls within that definition.

“From [the] background of the relevant legislative history, it is clear that Congress meant to prohibit an employer from financing a suit by a union member when the employer had a concrete interest in the litigation due to its relationship with the union. [And] [h]aving a concrete interest in the litigation means having a share or concern in the litigation, liable to be affected by it.” Adamszewski, supra, at 783-784.

The plaintiffs argue that if section 411(a)(4) is narrowly construed, as they claim it should be, then Brown & Sharpe is not an interested employer, because the litigation has only one purpose — “to establish that the plaintiffs were not afforded due process”; they reason, “[i]f the plaintiffs win, their rights are vindicated. Brown & Sharpe gains nothing. If they lose, they face financial ruin. Brown & Sharpe loses nothing.” Finally, the plaintiffs argue that the purpose of Brown & Sharpe’s “payment” was not to induce strikers to return to work; as proof they point out that the [plaintiffs learned of the financing “only from their lawyer, well after suit was commenced, and long after plaintiffs were claimed to have returned to work. Indeed one plaintiff first heard of the issue during trial.” However, this is not entirely accurate; six of the plaintiffs admitted they were advised early in the litigation that it was being financed by Brown & Sharpe.

As in Adamszewski, supra, I, too, say that “[w]hether an employer is concerned with it or is liable to be affected by it or has some self interest in it, must necessarily be determined in the factual context which gave rise to the litigation.” Id. at 784. Anyone who lives in Rhode Island and has, at least, a modicum of interest in the news and the economic well being of this state knows of the enormity of the strike and the resulting impassioned intransigence of the opposing factions. I accept the testimony of the defendant Thayer who stated that Brown & Sharpe attempted to induce strikers to abandon the picket line and return to work by employing newspaper advertisements, letters and direct telephone conversations with employees; the union responded by calling special meetings to rebut what it claimed was misinformation being disseminated by Brown & Sharpe and its “further continuing effort ... to break the union, and undermine the union’s collective authority.” And, as I have already stated, the union resorted to filing forty unfair labor practices charges with the National Labor Relations Board, alleging that Brown & Sharpe did not negotiate in good faith and caused the strike. As the defendants state in their brief, “[approximately twenty of [the charges] were filed through September of 1982. Eventually the charges were found to have merit and Brown & Sharpe was charged in a complaint with numerous unfair labor practices. A trial commenced, but the company appealed and the matter is pending before the National Labor Relations Board in Washington.” It seems clear to me this is the classic setting in which an employer would be motivated to encourage suits by its employees against their union.

It is clear from the record that the employer involved itself in this case by directly financing the litigation. The record provides no alternative explanation for how one of the state’s prestigious law firms came to represent these plaintiffs. There is not a scintilla of evidence that any one of the plaintiffs themselves retained counsel. There is likewise no evidence that one or several of the plaintiffs independently instigated the legal action and then subsequently accepted present counsel. Finally, this is not a case in which the employer merely contributed finances to a bona fide independent legal aid organization who in turn represented plaintiffs. If it were so, the picture would change, since the employer’s involvement could fairly be characterized as indirect. See International Union, supra, 590 F.2d at 1139.

I find that it is sheer sophistry to say that the direct financing of this lawsuit by Brown & Sharpe is not tantamount to employer influence in the dispute. “Congress apparently was concerned that if employers were permitted to encourage, finance, or participate in suits by their employees against unions, they would be able, through subtle coercion or otherwise, to lead union members into action contrary to the members’ desires or best interests.” International Union, 590 F.2d at 1149 (emphasis added). The whole purpose of the section in question is to “keep employer influence out of disputes between union members and their unions by making it ‘against the law, for an employer or an employer association, directly or indirectly, to spend any money or otherwise get into that type of situation, unless it were a party.’ ” Id. citing II NLRB, Legislative History of LMRDA at 1237.

There is no doubt that the plaintiffs deliberately crossed the picket lines and for doing this the union has the right to discipline them — if it had no disciplinary powers “it would disintegrate”. NLRB v. Boeing Co., 412 U.S. 67, 93 S.Ct. 1952, 36 L.Ed.2d 752 (1973). Brown & Sharpe’s financial support of this litigation, if approved, can lead to a proliferation of such suits; if this happens, one of the strongest weapons the union has — the picket line — will be virtually negated.

I find defendant Thayer’s testimony captures the very core of the opposing factions’ respective aims:

[t]he Union’s only course of action in that situation is to keep the morale, keep the picket line up in hopes that economic sanctions by not being able to ship the products will bring the company to their senses in that case. If, as time goes on, and the adversities set in, and the people start to have second thoughts, can I withstand it any longer? I am about to lose my house, and the company can impede the process and just make it so difficult that it is meaningless, then, certainly, they gain the upper hand, hey, you can cross the picket line, and we are going to finance your legal battle for you. Maybe the union can bring you up on charges, but its assurance is, come on in and we will take care of the bill as far as legalities go, and then they’ve broken the union.

Trial Transcript, Vol. 2, p. 156.

I am constrained to conclude that on the grounds herein discussed I have no alternative but to dismiss the complaint; however, I do so without prejudice to the plaintiffs’ rights to bring another action provided it is not financed by Brown & Sharpe. As a result of this ruling, I do not reach the statutory due process issues.

In the interest of fundamental fairness, justice and the avoidance of needless future suits, it might be wise for the union to reconsider the procedures it used against the plaintiffs. Disciplinary measures may be a sine qua non for union effectiveness but only in the context of the LandrumGriffin Act which vests union members with certain procedural rights; specifically, the member must be “afforded a full and fair hearing.”

The importance of these procedural provisions is accentuated by the magnitude of the penalty the Union imposed in this case — individual fines ranging from approximately $20,000 to $200,000. The Union should be assured that were it not for the employer’s illegal involvement in this suit, I would have rigorously scrutinized the fairness of the procedures it employed.

Counsel will prepare an order in keeping with this Opinion.

      . 29 U.S.C. § 411(a)(5) reads:
      (5) Safeguards against improper disciplinary action. — No member of any labor organization may be fined, suspended, expelled, or otherwise disciplined except for nonpayment of dues by such organization or by any officer thereof unless such member has been (A) served with written specific charges; (B) given a reasonable time to prepare his defense; (C) afforded a full and fair hearing.
      (b) Any provision of the constitution and bylaws of any labor organization which is inconsistent with the provisions of this section shall be of no force or effect.
      Pub.L. 86-257, Title I, § 101, Sept. 14, 1959, 73 Stat. 522.

      . 29 U.S.C. § 411(a)(4) reads in pertinent part: [N]o interested employer or employer association shall directly or indirectly finance, encourage, or participate in, except as a party, any such action, proceeding, appearance or petition.