author: BRODERICK, District Judge.

text:
    Paul JONES v. PROGRESS LIGHTING CORPORATION.
    Civ. A. No. 84-0074.
    United States District Court, E.D. Pennsylvania.
    Oct. 18, 1984.
    Edwin B. Barnett, Strong, Barnett, Hayes & Hamilton, Philadelphia, Pa., for plaintiff.
    Allan M. Dabrow, Pechner, Dorfman, Wolffe, Rounick & Cabot, Philadelphia, Pa., for defendant.
   MEMORANDUM

BRODERICK, District Judge.

The plaintiff, Paul Jones, brought this action pursuant to Title VII of the Civil Rights Act of 1964, 42 U.S.C. § 2000e et seq., alleging that defendant Progress Lighting Corporation unlawfully terminated the plaintiff’s employment because of his race. Prior to filing the complaint in this case, the plaintiff filed charges of discrimination against the defendant with the Philadelphia office of the Equal Employment Opportunity Commission, as required by 42 U.S.C. § 2000e-5. Although the parties agree that the plaintiff also “voluntarily” filed charges of discrimination against the defendant with the Philadelphia Commission on Human Relations (P.C.H.R.), it appears that prior to considering the plaintiff’s charges the E.E.O.C. would have referred those charges to the P.C.H.R. pursuant to 42 U.S.C. § 2000e-5(c). On August 4, 1983, the P.C.H.R., following its investigation, notified the plaintiff that his charges would be dismissed as not substantiated unless the plaintiff requested a review hearing. The plaintiff did not request such a hearing, nor did he appeal the P.C. H.R.’s dismissal of his charges to the Pennsylvania Court of Common Pleas, which was his right pursuant to § 9-1107(10) of the P.C.H.R. provisions and 2 Pa.Cons. StaLAnn. §§ 752-754 (Purdon Supp.1984). Subsequently the E.E.O.C., relying on the findings of the P.C.H.R., determined that there was not probable cause to believe that a Title VII violation had occurred and issued the plaintiff a right-to-sue notice. The plaintiff timely commenced this lawsuit within the ninety-day period set forth in 42 U.S.C. § 2000e-5(f)(1). The defendant has filed a motion for summary judgment on the basis of res judicata. The defendant contends that as a result of plaintiff’s failure to appeal the P.C.H.R.’s dismissal of his charges, the determination of the P.C.H.R. would have been afforded “final and preclusive” effect within the Pennsylvania court system. The defendant further contends that under the principles of res judicata embodied in the full faith- and-credit clause of the Constitution (Art. IV § I) and its statutory counterpart (28 U.S.C. § 1738), as recently applied to Title VII cases by the Supreme Court in Kremer v. Chemical Construction Corp., 456 U.S. 461, 102 S.Ct. 1883, 72 L.Ed.2d 262 (1982), the P.C.H.R. determination precludes the plaintiff from bringing this action in federal court. For the reasons that follow the defendant’s motion for summary judgment will be denied.

In Kremer v. Chemical Construction Corp., supra, the plaintiff filed an employment discrimination complaint with the E.E.O.C., which referred the matter to the New York state agency charged with enforcing the New York laws prohibiting employment discrimination. The agency concluded that no discrimination had occurred. The plaintiff appealed the agency’s determination to the Appellate Division of the New York Supreme Court, which affirmed the agency’s findings. Subsequently, the E.E.O.C. determined that there was not probable cause to believe the charge of discrimination was true and issued the plaintiff a right-to-sue notice. The plaintiff then commenced a Title VII action in the federal district court, which dismissed the complaint on the ground that the state court affirmance of the agency’s determination barred the federal lawsuit under the principles of res judicata. See Kremer v. Chemical Construction Corp., 456 U.S. at 463-66, 102 S.Ct. at 1888-89.

The Supreme Court held that the state court’s affirmance of the agency’s determination did preclude the plaintiff’s subsequent Title VII action in federal court. In so holding the Court applied the “full faith- and-credit” provision of 28 U.S.C. § 1738, which provides in pertinent part:

The Acts of the legislature of any state ... and judicial proceedings of any court of any such State ... shall have the same full faith and credit in every court within the United States ... as they have by law of usage in the courts of such State ... from which they are taken.

The Court stated that “[s]ection 1738 requires federal courts to give the same preclusive effect to state court judgments that those judgments would be given in the courts of the state from which the judgments emerged.” 456 U.S. at 466, 102 S.Ct. at 1889 (emphasis added). The Court clearly limited the applicability of res judicata in Title VII cases to agency determinations which had been reviewed by a state court:

No provision of Title VII requires claimants to pursue in state court an unfavorable state administrative action ... while we have interpreted the “civil action” authorized to follow consideration by federal and state administrative agencies to be a “trial de novo”, neither the statute nor our decisions indicate the the final judgment of a state court is subject to redetermination at such a trial.

456 U.S. at 469-70, 102 S.Ct. at 1891 (citations omitted) (emphasis in original). Even if, as the defendant contends, the unreviewed dismissal of the plaintiff’s charges by the P.C.H.R. would be afforded preclusive effect in the Pennsylvania courts, the defendant’s contention that the adverse agency decision should bar the plaintiff’s Title VII suit was explicitly rejected in a footnote to the majority opinion in Kremer:

EEOC review of discrimination charges previously rejected by state agencies would be pointless if the federal courts were bound by such agency decisions. Nor is it plausible to suggest that Congress intended federal courts to be bound further by state administrative decisions than by decisions of the EEOC. Since it is settled that decisions of the EEOC do not preclude a trial de novo in federal court, it is clear that unreviewed administrative determinations by state agencies also should not preclude such review even if such a decision were to be afforded preclusive effect in a state’s own courts.

456 U.S. at 470, n. 7, 102 S.Ct. at 1891 n. 7 (citations omitted). Justice Blackmun, dissenting, emphasized that “[t]he Court, as it must, concedes that a state agency determination does not preclude a trial de novo in federal district court ... Congress made it clear beyond doubt that state agency findings would not prevent the Title VII complainant from filing suit in a federal court.” 456 U.S. at 487, 102 S.Ct. at 1900 (Blackmun, J., dissenting) (emphasis in original).

Recently, the Third Circuit followed Kremer in holding that a Pennsylvania court’s reversal of an agency determination favorable to the plaintiff precluded the plaintiff from litigating her discrimination claim (brought pursuant to 42 U.S.C. § 1981) in the federal court. Davis v. United States Steel Corp., 688 F.2d 166 (3d Cir.1983) (en banc). Nowhere in the majority opinion did the Court indicate that an unreviewed agency determination would be afforded res judicata effect in a federal lawsuit. Judge Gibbons in dissent noted that in Kremer “the Supreme Court was quite careful to state that ... Title VII did not require claimants to seek review of an unfavorable administrative action”. 688 F.2d at 188 (Gibbons, J., dissenting) (footnote omitted):

It appears that subsequent to the Kremer decision, only one court has held that an unreviewed agency determination had any res judicata effect upon a subsequent Title VII claim. In Buckhalter v. Pepsi-Cola General Bottlers, Inc., 590 F.Supp. 1146 (N.D.Ill.E.D.1984), the court held that an unreviewed adverse decision of the Illinois Human Rights Commission barred the plaintiff’s Title VII discrimination lawsuit. The court acknowledged that footnote 7 to the majority’s opinion in Kremer appeared to prevent the application of res judicata where the prior agency decision was unreviewed. Buckhalter v. Pepsi-Cola General Bottlers, Inc., 590 F.Supp. at 1149. However, the court decided that the extensive judicial-type proceedings before the Illinois agency did preclude the plaintiff’s Title VII suit. In support of its decision the district court relied upon United States v. Utah Construction & Mining Co., 384 U.S. 394, 86 S.Ct. 1545, 16 L.Ed.2d 642 (1966), where the Supreme Court stated in dicta that res judicata may be applicable “[w]hen an administrative agency is acting in a judicial capacity and resolves disputes issues of fact properly before it which the parties have had an adequate opportunity to litigate ...” 384 U.S. at 422, 86 S.Ct. at 1560. The Utah Construction case, decided long before Kremer, involved federal administrative mechanisms to resolve government contract disputes and has no application to the Title VII statutory scheme, which “provides for consideration of employment discrimination claims in several forums [i.e., the E.E.O.C., state and local agencies, and the federal courts] ... [a]nd, in general, [provides that the] submission of a claim to one forum does not preclude a later submission to another.” Alexander v. Gardner-Denver Co., 415 U.S. 36, 47-48, 94 S.Ct. 1011, 1024, 39 L.Ed.2d 147 (1974) (citations omitted) (holding that Title VII suit not barred by prior adverse decision of union arbitrator). See also Chandler v. Roudebush, 425 U.S. 840, 96 S.Ct. 1949, 48 L.Ed.2d 416 (1976) (Title VII suit not barred by Civil Service Commission affirmance of federal agency’s rejection of discrimination claim).

The result reached in Buckhalter v. Pepsi-Cola General Bottlers, Inc., directly contravenes the Supreme Court’s clear admonition that “unreviewed administrative determinations by state agencies .... should not preclude [a trial de novo in the federal court] even if such a decision were to be afforded preclusive effect in a state’s own courts.” Kremer v. Chemical Construction Corp., 456 U.S. at 470 n. 7, 102 S.Ct. at 1891 n. 7 (citations omitted). Accordingly this Court declines to adopt the analysis of the district court in Buckhalter, and holds that the plaintiff is not barred from litigating his Title VII claim in this Court.

For all the reasons set forth above, the Court has determined that the defendant’s motion for summary judgment must be denied.


source: Caselaw Access Project

license: Public Domain

text:
    Eugene & Helaine BERNICKER, husband and wife, v. Leonard PRATT and Drexel Burnham Lambert, Inc.
    Civ. A. No. 83-5645.
    United States District Court, E.D. Pennsylvania.
    Oct. 18, 1984.

      Joseph R. Giannini, Philadelphia, Pa., for plaintiffs.
    Jonathan K. Wright, Philadelphia, Pa., Matthew Farley, Newark, N.J., for defendants.
   MEMORANDUM and ORDER

JOSEPH S. LORD, III, Senior District Judge.

Plaintiffs claim they relied on the allegedly fraudulent advice of defendant Pratt in deciding to invest in certain tax straddles. Plaintiffs further allege they invested in the scheme for the sole purpose of deferring payment of tax on substantial capital gains. Unfortunately for plaintiffs, however, the Internal Revenue Service (IRS) recently challenged and disallowed the deductions related to the tax straddles. After learning that they would have to pay the IRS more than $53,000 plus interest and penalty, plaintiffs brought this action asserting both state and federal claims. In this “motion for summary judgment and dismissal of complaint,” defendants now argue that plaintiffs’ federal claims are barred by the statute of limitations, that Counts I and III do not state a claim on which relief can be granted, that plaintiffs’ pendent state law claims must be dismissed, and that the complaint does not allege fraud with the particularity required by F.R.Civ.P. 9(b). Each of these allegations will be addressed in turn.

Defendants, in their efforts to demonstrate that plaintiffs’ suit is time-barred, look to the Commodity Exchange Act, 7 U.S.C. § 1 et seq. and the Securities Exchange Act of 1934, 15 U.S.C. § 78a et seq. Neither of these statutes is relevant to the issue before me. The Commodity Exchange Act does not provide a statute of limitations for federal court actions, and the two year limitations period applicable to reparations proceedings before the Commodity Futures Trading Commission is not binding on this court. See e.g. Shelley v. Noffsinger, 511 F.Supp. 687, 690 (N.D.Ill.1981); Bache Halsey Stuart Inc. v. Namm, 446 F.Supp. 692, 697 (S.D.N.Y. 1978).

Under Section 10(b) of the Securities Exchange Act, courts may look either to the Blue Sky law of the forum state or the statute of limitations provided for common law fraud actions in the forum state. Defendants themselves go to great lengths to demonstrate in another section of their brief, however, that the tax straddles at issue in this case involved commodities, not securities. I agree and plaintiffs do not contest this issue. The statute of limitations provided in the Pennsylvania Securities Act, Pa.Stat.Ann. tit. 70, § 1-504(a) (Purdon Supp.1980), is therefore not applicable to the case before me.

I am, therefore, left with the Pennsylvania limitations period governing actions for common law fraud. However, the determination of what this period is now is no easy task. It is indisputable that until June 27, 1978, the statute of limitations for actions for common law fraud was six years. Pa. Stat.Ann. tit. 12 § 31 (Purdon 1953); Home Life Insurance Co. v. Greenspan, 360 Pa. 542, 63 A.2d 72 (1949). On June 27, 1978, the Judiciary Act 1976, which created the Judicial Code, went into effect. The Code repealed several statutes of limitations and provided a new limitations scheme, see Act of July 9, 1976, Act No. 142, 1976 Pa. Laws 586 (Codified at 42 Pa.Cons.Stat.Ann. §§ 5521-5536) (Purdon 1981).), including a two year period for such specific torts as false imprisonment, false arrest, assault, battery, negligence, and trespass to land and chattels. Id. § 5524. It significantly fails to include fraud. Section 5524(3) of the Code mandates a two year limitations period for actions for “taking, detaining, or injuring personal property”. Again, there is no mention of actions for fraud. If fraud is not included in § 5524, it would fall within the six year limitation in § 5527(6) which provides that “any civil action or proceeding which is neither subject to another limitation specified in the sub-chapter nor excluded from the application of the period of limitation by § 5531 ... must be commenced within six years.” Certainly, it is at best unclear from the language of the statute that the legislature intended to change the limitations period from six years to two years.

The legislative history of the Act is not helpful in determining which period applies to actions for common law fraud, and the Pennsylvania Supreme Court has not yet addressed the issue. I have found only one Superior Court decision involving the statutory period, and in that case the court simply assumed without discussion that § 5524(3) — the two year statute of limitations applicable to actions for “taking, detaining, or injuring personal property” — applies to an action for common law fraud. Bickell v. Stein, 291 Pa.Super. 145, 435 A.2d 610 (1981). The court then proceeded to determine whether the plaintiff filed the action within that time period. Id.

Federal courts that have wrestled with this issue have reached no consensus. Two federal courts have simply held that the period is either six or two years without deciding which it is. See Biggans v. Bache Halsey Stuart Shields, Inc., 638 F.2d 605, 607 (3d Cir.1980); Goodman v. Moyer, 523 F.Supp. 35, 37 (E.D.Pa.1981). In Fickinger v. C.I. Planning Corp., 556 F.Supp. 434 (E.D.Pa.1982), Judge Shapiro was persuaded that the statutory period had indeed changed to two years. The court was influenced by the Bickell decision, supra, and by a memorandum from the Special Committee on the Judicial Code of the Pennsylvania Bar Association that stated:

... [Pjeriods applicable to conversion of or injury to personal property and waste or trespass to real property are reduced from six to two years to conform to the modern principle that claims based on conduct, and hence relying on unwritten evidence, should have relatively short statutes of limitations, so as to bring them to trial ... before memories have faded.

Fickinger, supra, at 439, quoting Special Committee on the Judicial Code of the Pennsylvania Bar Association, Explanatory Memoranda Relating to Proposed Judicial Code 17 (1973). The court reasoned that “proof of the elements of fraud may present even more problems of lapsed memory than proof of physically manifested torts; this suggests that the Legislature intended to place fraud in the same category as such torts.” Id.

Nevertheless, Judge Giles in Culbreth v. Simone, 511 F.Supp. 906 (E.D.Pa.1981), held that “[i]n the absence of a state law precedent post dating the Judiciary Act or a clearly manifested legislative intent, the court cannot hold that a drastic change of the common law period from six (6) years to two (2) years was intended.” Id. at 917. Although Judge Giles decided this case before the Bickell opinion was filed by the Superior Court, it certainly cannot be said that Bickell is a definitive and authoritative state law precedent.

Since the case law and legislative history have not been helpful, I have considered the Pennsylvania Supreme Court’s guidelines for interpreting statutes:

When confronted with questions of statutory construction, this Court has repeatedly held that the words of a statute are to be interpreted in light of the antecedent case law. Tarlo’s Estate, 315 Pa. 321, 172 A. 139 (1934). Thus, legislative intent to effectuate a drastic change in the law is not to be inferred by mere omission and implication. Young v. Kaye, 443 Pa. 335, 279 A.2d 759 (1971).

Truck Terminal Realty Co. v. Commonwealth of Pa., 486 Pa. 16, 23, 403 A.2d 986 (1979). The inclusion of fraud within the new two year statute can be done only by reliance on omission and implication. Neither the language of the Judicial Code nor its legislative history makes clear whether the legislature intended to alter the statute of limitations for actions for common law fraud, and there is no satisfactory state court decision interpreting the statute. I can only conclude that the limitations period for fraud has not been drastically reduced from six to two years. Therefore plaintiffs’ action, which was filed within six years of the dates on which defendants allegedly defrauded them, is not time-barred, and defendants’ motion for summary judgment based on the statute of limitations will be denied.

Defendants also allege that plaintiffs failed to satisfy F.R.Civ.P. 9(b) which requires that “in all averments of fraud or mistake, the circumstances constituting fraud or mistake shall be stated with particularity.” Under this Rule, plaintiffs must set forth the time, place, and content of the false representation, the fact or facts misrepresented, and what was obtained or given up as a consequence of the fraud. Seligson v. Plum Tree, Inc., 361 F.Supp. 748, 756 (E.D.Pa.1973). See also In re Sugar Industry Antitrust Litigation, 73 F.R.D. 322, 349 (E.D.Pa.1976). While plaintiffs allege that the investment scheme was sold to plaintiffs “without legal basis nor adequate disclosure” and that defendants “fraudulently induced plaintiff to invest in tax straddles by misrepresenting the controlling Internal Revenue Code provision,” no specific or satisfactory allegations of fraud appear in the complaint. Instead, plaintiffs make vague references to defendants’ “artifice,” “manipulation,” and “devices.” Defendants note in their memorandum of law, “one can read [the] complaint from cover to cover ... and still have no idea what this ‘scheme’ or ‘device’ supposedly was, in what way it was fraudulent, and how defendants knew it was fraudulent.” I agree.

Because dismissing the complaint for failure to comply with F.R.Civ.P. 9(b) seems a particularly harsh remedy, I may treat defendants’ motion to dismiss as a motion for a more definite statement. Seligson, supra, at 756; Lynn v. Valentine, 19 F.R.D. 250 (S.D.N.Y.1956). In fact, defendants argue that if the complaint were pleaded with the requisite particularity, defendants may be able to prevail on a motion for summary judgment. I shall therefore consider defendants’ motion as a motion for a more definite statement and shall grant it as such. I shall allow plaintiffs twenty days to file an amended complaint specifying the time, place, content and circumstances of the alleged misrepresentations. Failure to do so shall result in the dismissal of the complaint. In addition, defendants’ motion to dismiss Count III will be stayed pending the filing of the amended complaint.

Defendants’ motion to dismiss Count I of this complaint will be granted because, as plaintiffs agreed in their response to defendants’ motion, the Securities Exchange Act, on which Count I is based, is inapplicable to the facts of this case. Finally, defendants’ motion to dismiss plaintiffs’ state law claims will be denied because I have retained jurisdiction over some of plaintiffs’ federal law claims. I may therefore retain jurisdiction over plaintiffs’ pendent claims.


author: NORTHROP, Senior District Judge.

text:
    BRAND IRON, INC. v. KOEHRING COMPANY.
    Civ. A. No. N 83-2056.
    United States District Court, D. Maryland.
    Oct. 18, 1984.
    As Amended Oct. 23, 1984.

      Norman B. King, Silver Spring, Md., for plaintiff.
    Donald E. Sharpe, C. Lamar Garren and Piper & Marbury, Baltimore, Md., for defendant.
   NORTHROP, Senior District Judge.

Defendant, Koehring Company, moves for summary judgment pursuant to Rule 56 of the FED.R.CIV.P. on Counts I through III and generally on all claims for punitive damages. After reviewing memoranda and records, this Court is satisfied no hearing is necessary for decision on this motion. Local Rule 6.

The first two counts arise out of an alleged understanding between the parties whereby plaintiff was either the exclusive agent or, alternatively, a distributor or mere agent for the defendant in a proposed sale of forty (40) cranes to the Republic of China (Taiwan). For whatever reasons, the alleged agreement broke down. Plaintiff was neither involved in nor compensated for the subsequent sale of 31 of the 40 cranes Taiwan apparently later purchased from either defendant or defendant’s agents.

In Count I, the issue is whether defendant gave plaintiff an exclusive right to sell the 40 cranes to Taiwan. It is admitted that plaintiff was an agent of defendant. Plaintiff alleges further, however, that he was the exclusive agent for this sale. As an exclusive agent, plaintiff had, in essence, a contract right precluding defendant-principal from either selling the cranes himself or using other agents to do so. Stahlman v. National Lead Company, 318 F.2d 388 (5th Cir.1963); W. Sell, Agency § 161 (1975). To determine whether the above exclusive right to sell ever existed will require a determination of the facts through trial. The written contracts and memoranda are not the only evidence receivable on the issue. In review of the record before me, construed favorably for plaintiff, I find genuine issues of material fact.

In Count II plaintiff alleges defendant is liable on a theory of tortious interference with contract. It is undisputed, however, that plaintiff was an agent of defendant. It remains the law in Maryland that only a third party who is not party to the contract can be held liable for tortious interference with the contract. E.g., Continental Gas Co. v. Mirabile, 52 Md.App. 387, 402, 449 A.2d 1176 (1982). Plaintiff alleges that because defendant was an undisclosed principal, plaintiff was a potential party to a contract with Taiwan. Even if this is true, it is irrelevant because an undisclosed principal also remains liable on the contract and thus is, as a matter of law, not capable of tortiously interfering with that contract. Sell, Agency §§ 13, 14 (1975). In effect, both defendant and plaintiff would be parties to the contract with Taiwan. When plaintiff complains of defendant-principal’s “interference” with plaintiff’s attempts to sell cranes to Taiwan, he at best restates Count I for breach of agency agreement.

Tortious interference with contract is not an available action against the defendant, and defendant is accordingly granted summary judgment on Count II.

Counts III and IV arise from a different set of facts. Defendant apparently agreed to sell plaintiff a crane for the subsequent sale to a purchaser in the United Kingdom (UK). A dispute arose over defendant’s sale price. Assuming plaintiff’s version of the facts is true for this motion, plaintiff claims defendant overcharged $7,438.79 by refusing to absorb a service charge it had previously agreed to absorb. Plaintiff also claims defendant then caused a cut-off of sales to coerce plaintiff into accepting the overcharge. Plaintiff also alleges in Count IV continued acts in breach of their distributorship agreement, i.e., further cut-off of sales.

In Count III, plaintiff seeks damages for conversion arising out of the sale of the crane. Even if the foregoing facts are correct, this count must be dismissed as a matter of law. In Maryland, an action for conversion lies for an unlawful and tortious taking or exercise of dominion over plaintiffs property. E.g., Saunders v. Mullinix, 195 Md. 235, 240, 72 A.2d 720 (1950); Staub v. Staub, 37 Md. App. 141, 376 A.2d 1129 (1977). A chose in action, including a debt, may be converted in certain circumstances. Failure by a contracting party to pay the contract price or debt, however, is not conversion but merely breach of contract. See Prosser Law of Torts § 15, at 82-83 (4th ed. 1971); Restatement (Second) of Torts § 242, comment f (1965). If there is no Maryland case that has specifically stated this distinction, it is probably because it is so generally understood it is not frequently litigated. There is no deviation from the above general rule evident in eases from other jurisdictions. E.g., Lyxell v. Vautrin, 604 F.2d 18 (5th Cir.1979); Jensen v. State Bank of Allison, 518 F.2d 1 (8th Cir.1975); Dawkins v. National Liberty Life Insurance Co., 263 F.Supp. 119 (D.S.C.1967); Luxonomy Cars, Inc. v. Citibank, N.A., 65 App.Div.2d 549, 408 N.Y.S.2d 951 (1978). We are given no reason to find Maryland excepted from basic principles of tort and contract law. Because plaintiff has presented facts only sufficient to show a breach of contract, we accordingly grant summary judgment to defendant on Count III as to any claim for conversion. In reviewing the complaint, however, I discover plaintiff has not bothered to claim the $7,438.79 under any other theory. I find, however, that he has essentially made out a case for breach of contract in the Count’s allegations. I will not dismiss this Count entirely because plaintiff asserted an incorrect legal theory for the alleged wrong. I therefore grant summary judgment to defendant on any issue of conversion proffered in Count III, but allow the Count to go to trial on breach of contract.

Defendant finally moves for summary judgment against all punitive damages sought by plaintiff. Because I have granted summary judgment for defendant on Count II, I will address the issue of punitive damages only for the other counts.

Counts I, III and IV arise essentially for breach of contract. No punitive damages are available in Maryland for “pure breach of contract.” E.g., Wiggins v. North American Equitable Life Assurance Company, 644 F.2d 1014 (4th Cir. 1981); Wedeman v. City Chevrolet Co., 278 Md. 524, 529, 366 A.2d 7 (1976). Punitive damages are available where there is a “tort arising out of the contractual relationship” and actual malice is shown. Wedeman, supra. In Wedeman, the Court of Special Appeals reviewed the applicable Maryland cases and noted in all a distinct, albeit intertwined, tort action present alongside the contract breach. This would be a tort “arising out of contract.” Wedeman, supra, 278 Md. at 528-29, 366 A.2d 7. Maryland has chosen to apply different requirements of malice for punitive damages for torts arising before the contractual relationship {i.e., which may have induced the injured party to enter the contract) and those arising out of or intertwined with the contract. Wedeman v. City Chevrolet Co., 278 Md. 524, 366 A.2d 7 (1976); American Laundry Machinery Industries v. Horan, 45 Md.App. 97, 110-113, 412 A.2d 407 (1980). This does not mean, however, that Maryland has done away with either the traditional distinctions between tort and contract or the rule that punitive damages are unavailable for breach of contract. I find little in Maryland law evidencing the existence of a tort-contract hybrid like “malicious breach of contract.” But see, Wiggins v. North American Equitable Life Assurance Co., 644 F.2d 1014, 1018 n. 12 (4th Cir.1981) (dicta). Rather there is a clear requirement that the injured party allege a separate, distinct and recognizable tort — regardless of whether that tort “arises out of,” precedes, or is intertwined with the contract — before we even consider the malice standard applicable for punitive damages. See, e.g., Wedeman, supra, 278 Md. at 527-32, 366 A.2d 7; Strausberg, A Road-map Through Malice, Actual or Implied: Punitive Damages in Torts Arising Out of Contract in Maryland, 13 U.Balt.L.R. 275, 283-84 (1984). In Counts I, III and IV plaintiff only alleges breach of contract. Nor do the facts and complaint, as liberally construed, show any other cause. Plaintiff’s allegations that defendant breached with hate or deliberate purpose to injure do not in themselves invoke punitive damages for breach of contract. “The traditional goal of the law of contract remedies [has been] ... compensation of the promisee for the loss resulting from breach. ‘Willful’ breaches have not been distinguished from other breaches [and] punitive damages have not been awarded for breach of contract ____” Restatement [Second] of Contracts, chapter 16, introductory note (1979); see also id. at § 355. I must therefore grant defendant’s motion for summary judgment on punitive damages.

A separate Order will be issued in accordance with the rulings herein made.

ORDER

In accordance with the foregoing Memorandum, and for the reasons stated therein, IT IS, this 18th day of October, 1984, by the United States District Court for the District of Maryland, ORDERED:

1. That the defendant’s motion for summary judgment BE, and the same hereby IS, DENIED as to Count I;

2. That the defendant’s motion for summary judgment BE, and the same hereby IS, GRANTED as to Count II;

3. That the defendant’s motion for summary judgment BE, and the same hereby IS, GRANTED as to Count III to the extent that plaintiff seeks damages for conversion; plaintiff may proceed for breach of contract under Count III;

4. That the defendant’s motion for summary judgment BE, and the same hereby IS, GRANTED as to punitive damages; and

5. That the Clerk of Court mail copies of this Order and the foregoing Memorandum to counsel for the parties in this case.


author: KATZ, District Judge.

text:
    Robert and Elizabeth BUTLER v. UNITED STATES DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT.
    Civ. A. No. 84-0121.
    United States District Court, E.D. Pennsylvania.
    Oct. 18, 1984.

      Michael Donahue, Chester, Pa., for plaintiffs Delaware County Legal Assistance Association, Inc.
    David B. Comroe, Philadelphia, Pa., for Federal National Mortg. Ass’n.
    Edward S.G. Dennis, U.S. Atty., and Stanley Weinberg, Asst. U.S. Atty., Philadelphia, Pa., for HUD.
   MEMORANDUM

KATZ, District Judge.

Facts

Plaintiffs, Robert and Elizabeth Butler, filed this suit seeking judicial review of a determination by the United States Department of Housing and Urban Development (HUD) that they do not qualify under 12 U.S.C. § 1715u (1982) for participation in HUD’s Mortgage Assignment Program. Mr. and Mrs. Butler petition this court to set aside HUD’s decision and either order the agency to accept assignment of their mortgage or in the alternative, remand the matter for a new administrative hearing. In addition, plaintiffs request this court to enjoin the Federal National Mortgage Association from instituting foreclosure proceedings against their property and to order HUD to direct the Federal National Mortgage Association to suspend prosecution of foreclosure proceedings against the Butlers. This action is before this court on cross motions for summary judgment.

The facts before this Court are undisputed. Plaintiffs purchased their current home in the late 1960’s. Plaintiffs’ mortgage is insured by HUD pursuant to the Section 221(d)(2) program, a federal program designed to stimulate and encourage homeownership among persons of low- and moderate-income. Defendant Federal National Mortgage Association currently holds this first mortgage. In 1970, Mr. Butler was severely injured and became partially disabled. Beginning in 1976, the Butlers took out several loans from the Beneficial Consumer Discount Company. After several years of under-employment and unemployment, Mr. Butler obtained steady employment in 1978. In the spring of 1981, plaintiffs defaulted on their first mortgage. The plaintiffs’ joint tax returns show that their gross income fell from $13,463 in 1977 to $10,273 in 1978 to $8,869 in 1980.

In February 1982, plaintiffs applied to have their mortgage assigned to HUD pursuant to Mortgage Assignment Program. On December 3, 1982 following an informal conference, HUD sent the Butlers a Final Decision of Assignment letter in which it refused to accept assignment of the mortgage. In the letter HUD explained its decision on the grounds that it had found “[t]he default was not caused by a circumstance or set of circumstances beyond your control which temporarily rendered you financially unable to cure the delinquency within a reasonable time____” The HUD determination letter further stated that “[t]he default began in April 1981. There was no loss of income either before, during or after this time.” HUD reaffirmed its determination in a letter dated April 14, 1983. On June 7, 1984 counsel for all parties entered into a written stipulation which provided, in part, that HUD would review its final decision to deny plaintiffs’ request for assignment and that plaintiffs would agree to make their regular monthly mortgage payments commencing with the one due in May 1984. On June 8, 1984, HUD once again rejected plaintiff’s request for assignment although it did find that there was a “reasonable prospect” that the plaintiffs would be able to resume full mortgage payments. On June 11, 1984 this court issued an injunction restraining the Federal National Mortgage Association from proceeding with the foreclosure sale until October 19, 1984. Whether plaintiffs have made mortgage payments pursuant to the June 7, 1984 Stipulation is a matter in dispute.

Statutory and Regulatory Framework

Pursuant to the statutory national housing goal of “a decent home and a suitable living environment for every American family”, the United States Government operates several housing assistance insurance programs in which it insures mortgages on properties owned by low- and moderate-income individuals, elderly persons, handicapped persons and persons displaced by government action. See 42 U.S.C. § 1441 (1982). This insurance makes it possible for people who might not otherwise.be able to obtain financing to purchase housing. Congress anticipated that persons requiring government assistance to acquire housing might also have difficulty keeping current in mortgage payments. Thus Congress authorized HUD to operate a mortgage relief program which requires HUD after receiving notice of default and for the purpose of avoiding foreclosure, to pay off the mortgage debt, take an assignment of the mortgage from the mortgagee and work out a payment plan for eligible mortgagors.

HUD’s administration of the Mortgage Assignment Program has been subject to some criticism. Ferrell v. Pierce, 560 F.Supp. 1344, 1372 (E.D.Ill.1983), aff'd 743 F.2d 454 (7th Cir.1984).

The statutory authority for the Mortgage Assignment Program is Title 12, Section 1715u(b)(1) of the United States Code which provides:

When the Secretary receives notice of a default described in subsection (a)(1) of this section and makes a determination that assistance under the subsection (a) of this section would be inappropriate in the case of the mortgagor, the Secretary (for the purpose of avoiding foreclosure of the mortgage ...) shall, if determined necessary by the Secretary, acquire the mortgage and security therefore upon payment of the insurance benefits in an amount equal to the unpaid principal balance of the mortgage plus any unpaid mortgage interest and reimbursement for such costs and attorney’s fees as the Secretary finds were properly incurred in connection with the defaulted mortgage and its assignment to the Secretary, and for any proper advances theretofore made by the mortgagee under the provisions of the mortgage. After the acquisition of such mortgage by the Secretary, the mortgagee shall have no further rights, liabilities, or obligations with respect thereto ...

According to federal regulations, the Secretary will accept assignments of mortgages in order to avoid foreclosure when the defaulting mortgagor meets six conditions. 24 C.F.R. § 203.650(a) (1984). Since HUD has changed its position with regard to whether there is a reasonable prospect that the plaintiffs would be able to resume full mortgage payments after a period of reduced or suspended payments, only one of the six criteria is at issue here. Before HUD may accept assignment of a mortgage it must find that “[t]he mortgagor’s default has been caused by circumstances beyond the mortgagor’s control which render the mortgagor unable to correct the delinquency within a reasonable time or make full mortgage payments.” 24 C.F.R. § 203.650(a)(5). HUD’s handbook for administration of mortgage assignment programs provides examples of reasons for default that would be considered beyond a mortgagor’s control including “[cjurtailment of family income, such as unemployment or underemployment; ... or other loss of income due to divorce, illness or death.” See HUD Handbook No. 4330.2, “Administration of The Home Mortgage Assignment Programs,” # 2-3 (January 1979).

Scope of Review

This court’s review of HUD’s determination of the plaintiffs’ eligibility for participation in the Mortgage Assignment Program is governed by the Administrative Procedure Act which provides in part that a “reviewing court shall ... hold unlawful and set aside agency action, findings, and conclusions found to be ... arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law ...” 5 U.S.C. § 706(2)(A) (1982). The Supreme Court characterized the appropriate standard of review under 5 U.S.C. § 706(2)(A) in Citizens To Preserve Overton Park, Inc. v. Volpe, 401 U.S. 402, 416, 91 S.Ct. 814, 823, 28 L.Ed.2d 136 (1971) (citations omitted):

Section 706(2)(A) requires a finding that the actual choice made [by the agency] was not arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with the law ... To make this finding the court must consider whether the decison was based on a consideration of the relevant factors and whether there has been a clear error of judgment ... Although this inquiry into the facts is to be searching and careful, the ultimate standard is a narrow one. The court is not empowered to substitute its judgment for that of the agency.

Therefore in reviewing the administrative record this Court will examine whether HUD considered all factors relevant to whether circumstances beyond the plaintiffs control caused their mortgage default as well as whether HUD’s deliberations indicate any clear errors of judgment. Discussion

Plaintiffs allege that three circumstances beyond their control caused the 1981 default. First they argue that Mr. Butler’s injuries in 1970 both limited and caused a decline in his earnings. Second, they argue that the refinancing of the first mortgage in 1977 and the repeated loans from Beneficial during the period 1976 through 1978 further sapped their ability to make mortgage payments. Finally, plaintiffs argue that tax increases levied in December 1981 were an expense beyond their control leading to default.

HUD denies that any of the three factors put forward by plaintiffs constitute “circumstances beyond the mortgagor’s control” as contemplated by 24 C.F.R. § 203.650(a)(5). With regard plaintiffs’ argument that the increased debt service burdens resulting from mortgage refinancing and consumer loans constitute a circumstance beyond their control, HUD found in its December 3, 1982 determination letter that analysis of the loans indicates financial mismanagement on the part of the Butlers. Although this characterization of the loans might reflect a lack of sensitivity to the problems of low- and moderate-income families trying to make ends meet in difficult economic times, this court cannot say HUD abused its discretion. HUD had before it documentation of the loans and this court will not substitute its judgment for the agency’s.

HUD justifiably rejects the tax increase levied in December 1981 as a circumstance leading to plaintiffs’ default. Normally an increase in taxes would be a factor beyond a mortgagor’s control. However, in this case although there is some confusion in the record as to the date of plaintiffs’ default on their mortgage, the latest date advanced by either party is October 1, 1981, a date two months before the increase in taxes. Therefore HUD quite appropriately argues that the increase in taxes did not cause the plaintiffs’ default regardless of whether it was a circumstance beyond the plaintiffs’ control.

HUD likewise rejects the plaintiffs’ argument that Mr. Butler’s injuries in 1970 qualify as a circumstance beyond the plaintiffs’ control which caused their default. Importantly, the administrative record indicates that HUD refused to consider Mr. Butler’s injuries as causing the default since they occurred a number of years prior to the default. The affidavit of Mr. Harry F. Dougherty, a Supervisory Loan Specialist at HUD, contains the statement, “After extensive deliberation it was concluded that it was not reasonable to go back to an injury that occurred twelve years ago in determining the reason for default.” This court finds that HUD failed to consider whether Mr. Butler’s injuries could have constituted the cause of his default. This finding is confirmed by the November 24, 1982 notes of a HUD official relating to the first conference on the Butler request for assignment:

Mr. Sedemeyer contacted Art Orton, C.O., concerning the period to be considered in determining the reason for default ... Mr. Sedemeyer asked Mr. Or-ton whether it was reasonable to go back 12 years to determine the reason for the default ... Mr. Orton returned Mr. Sedemeyer’s call. Mr. Orton stated it is not reasonable to go back 12 years in determining the reason for default. They agree with this office that what happened 12 years ago was irrelevant.

I find that HUD’s failure to consider injuries to one of the plaintiffs as a possible cause of their default merely because the injuries occurred a number of years prior to the default was arbitrary, capricious, and an abuse of discretion. Neither the statute nor HUD’s own regulations circumscribe the time period during which qualifying circumstances causing default may occur. The adoption by HUD of a per se rule that it will not consider events that took place a certain number of years prior to default is both arbitrary and unreasonable. The circumstances leading to the inability of a mortgagor to remain current may well have been set in motion several months or years prior to the actual default. For example, an unexpected illness and the resulting loss of income and/or increase in medical expenses may deplete a person’s savings making him or her vulnerable to default at some latter time. To refuse to consider the illness as a potential circumstance beyond the control of the mortgagor would be contrary to the objectives of the Mortgage Assignment Program as well as arbitrary, capricious, and an abuse of discretion. See James v. U.S. Dept. of HUD, No. 4-81-457 (D.Minn.1982) (illness occurring several months prior to default should be considered as circumstance beyond mortgagor’s control).

HUD’s decision not to consider Mr. Butler’s injuries as a potential cause of the plaintiffs’ default explains the absence of information in the administrative record relating to the effect of his injuries on his income, both in the past and present. Upon reconsideration of the plaintiffs’ request for assignment, HUD should consider whether Mr. Butler’s injuries and the physical limitations they impose upon him caused the default.

HUD’s refusal to consider events occurring more than a short time period prior to default is also evident in the finding contained in its December 3, 1982 determination letter that “[t]he default began in April 1981. There was no loss in income either before, during or after this time.” HUD, by narrowing its focus to the time period shortly preceding the default, is thus able to ignore a significant decline in the Butlers’ gross income from $13,462 in 1977 to $8,869 in 1980. I find HUD’s determination that the Butlers’ incurred no loss of income before April 1981 to be clearly erroneous.

For these reasons, I hereby grant summary judgment in favor of the plaintiffs. Relief

Based upon this court’s finding that HUD’s consideration of the Butlers’ request for a mortgage assignment was arbitrary, capricious, and an abuse of discretion, it is hereby ordered that HUD conduct a de novo review of the Butlers’ assignment application. The Butlers shall furnish all appropriate information for this review. HUD should consider whether any “circumstances beyond the mortgagor’s control” caused plaintiffs’ default including the injuries of Mr. Butler, their duration and effect.

I will further order that HUD and the Federal National Mortgage Association are enjoined from proceeding with any mortgage foreclosure proceedings against plaintiffs until such time as this court modifies or revokes the injunction upon consideration of HUD’s final administrative determination. In order to grant a preliminary injunction a court must find that the moving party will suffer irreparable injury if relief is not granted to maintain the status quo until a final resolution on the merits can be made and that there is a reasonable probability of eventual success on the merits. In addition, the court must weigh the possibility of harm to the non-moving party as well as to any other interested persons and when relevant, harm to the public. See Continental Group, Inc. v. Amoco Chemicals Corp., 614 F.2d 351, 356-57 (3d Cir.1980); Delaware River Port Authority v. Transamerican Trailor Transport, Inc., 501 F.2d 917, 919-20 (3d Cir.1974).

Plaintiffs will clearly suffer irreparable injury if this court does not act to enjoin HUD and the Federal National Mortgage Association from foreclosing their mortgage since the relief they are seeking is the assignment of the mortgage to HUD. Therefore failure to issue an injunction may lead to loss of the Butlers’ home. This Court finds it necessary to issue an injunction in order to maintain the status quo pending final resolution of the Butlers’ request. Although this Court hesitates to predict how an administrative agency will rule on a matter before it, I find that plaintiffs have shown a reasonable probability of success on the merits.

In weighing the possibility of harm to HUD and the Federal National Mortgage Association if an injunction is granted against the harm to plaintiffs if one is not, I find that the potential harm to the defendants is less than the irreparable harm to the plaintiffs. First, plaintiffs have every reason to maintain the property in question pending final determination of their request for assignment since they will remain the owners if assignment is granted. Secondly, plaintiffs must make regular mortgage payments for the time period of the injunction. If the plaintiffs fail to remain current in their mortgage payments, the defendants may petition this Court for reconsideration of the injunction.

Finally, I find that the issuance of an injunction preventing foreclosure of plaintiffs’ mortgage will serve rather than detract from the public interest. By enacting the Mortgage Assignment Program, Congress clearly indicated that it is in the public interest to assist low- and moderate-income households in avoiding foreclosure of their mortgages and loss of their homes. See S.Rep. No. 924, 86th Cong., 1st Sess. (1959). Permitting the Butlers’ to lose their home prior to being afforded a full and fair hearing on their request for mortgage assignment would violate the national housing purposes for which the mortgage Assignment Program was enacted.

ORDER

AND NOW, this 18th day of October, 1984, upon consideration of Plaintiffs’ and Defendants’ Motions For Summary Judgment, it is hereby ORDERED that Plaintiffs’ Motion is GRANTED and Defendants’ Motions are DENIED. Defendant, HUD, is further ORDERED to reconsider the plaintiffs’ application for mortgage assignment in accordance with the accompanying Memorandum. Furthermore, HUD and the Federal National Mortgage Association are hereby enjoined from proceeding with any action to foreclose upon plaintiffs’ mortgage so long as plaintiffs continue to maintain their regular mortgage payments and until such time as this Court modifies this Order.

Bond shall be posted by the plaintiffs in the amount of $644.


author: RICHARD L. WILLIAMS, District Judge.

text:
    John T. CORRIGAN, Guardian of Daughter, Maura L. Corrigan, Plaintiff, v. UNITED STATES of America, Defendant. C.L. DIMOS, Personal Representative of the Estate of Michael T. McDonnell, Plaintiff, v. UNITED STATES of America, Defendant.
    Civ. A. Nos. 84-0787-A, 84-0675-A.
    United States District Court, E.D. Virginia, Alexandria Division.
    Oct. 18, 1984.

      John L. McGann, Arlington, Va., for Corrigan.
    William G. Schaffer, Schaffer, Brown & Cooper, Washington, D.C., Bruce B. HcHale, Rosenbleet & McHale, Alexandria, Va., for Dimos.
    Paula M. Potoczak, Asst. U.S. Atty., Alexandria, Va., for U.S.A.
   MEMORANDUM OPINION

RICHARD L. WILLIAMS, District Judge.

This consolidated action is before the Court on defendant’s motion for summary judgment with respect to plaintiff Corrigan, and on defendant’s motion to dismiss with respect to plaintiff Dimos. In considering the defendant’s motions, the Court must treat the allegations of the plaintiffs as either admitted or not genuinely in issue. Meltzer v. Atlantic Research Corp., 330 F.2d 946 (4th Cir.1964), cert. denied, Scurlock v. Meltzer, 379 U.S. 841, 85 S.Ct. 78, 13 L.Ed.2d 47 (1964). FACTS: On the night of December 19, 1981, Patrick Patterson, a member of the U.S. Army, went with a friend to a base club on the Fort Myers Army Base for a few drinks. The base club was a popular place for military personnel on weekends, since drinks are sold to them there at a discount price. While at the club, Patterson allegedly consumed a large quantity of alcohol, including some hard liquor, even though he was only 19 years old; the minimum age for purchasing or consuming hard liquor in Virginia is 21. VA.CODE § 4-62 (1983).

After consuming a large quantity of alcohol at the club, Patterson got into a car and began to drive. At 12:15 a.m., Patterson hit a motor vehicle while approaching a stop light a few miles from the club. While attempting to leave the scene of that accident, Patterson hit a second vehicle, and then drove off. Finally, Patterson drove through a stop sign and collided with a car driven by a Michael McDonnell; Maura Corrigan was a passenger in this car. McDonnell was killed in the accident, and Maura Corrigan is still in the hospital in a coma. After the third accident, Patterson’s blood-alcohol level was measured at .26, well above the legal maximum of .10; he was subsequently convicted of involuntary manslaughter and sentenced to one year in prison.

The administrator of Michael McDonnell’s estate, C.L. Dimos, and Maura Corrigan’s guardian, John T. Corrigan, have brought this action against the United States contending that agents of the United States were negligent in serving alcohol to Patterson when he was both under age and obviously intoxicated, and that this negligence was the proximate cause of the accident. The United States has moved to dismiss the Dimos action, and has moved for summary judgment against Corrigan. In support, of both of its motions, the United States contends that a tavern owner cannot be held civilly liable under Virginia law to innocent victims of an accident caused by the reckless, drunken driving of an under-aged, intoxicated tavern patron. DISCUSSION: Since the plaintiffs’ case against the United States has been brought under the Federal Torts Claims Act, the government’s liability is determined in accordance with the law of the place where the act or omission occurred. 28 U.S.C. § 1346(b). All of the alleged acts of negligence, the accident, and the ensuing injuries took place in Virginia, and therefore Virginia law controls the substantive elements of the litigation.

Virginia law with respect to a tavern owner’s vicarious liability for torts committed by an intoxicated person is unclear. There is no “Dram Shop” or “Civil Liability” statute which specifically imposes any civil liability for the sale of intoxicating beverages, and Virginia courts have never been called on to determine the liability of a tavern owner under the common law for injuries caused by persons to whom the tavern negligently served alcohol. Since there is no state statute or state court ruling directly on point, this Court must try and determine what the Supreme Court of Virginia would do if confronted with the same question. Guidance in such situations comes from analogous Virginia state court decisions, decisions in other jurisdictions, relevant statutes, and scholarly treatments of the law such as law review articles. Moore’s Federal Practice, % 0.309, p. 3119-3124 (citations and footnotes omitted).

While the Virginia legislature has not specifically imposed civil liability on tavern owners for injuries arising out of the sale of alcoholic beverages, it has recognized the inherent unreasonableness of this defendant’s alleged conduct in VA.CODE § 4-62. Under § 4-62, a tavern owner who sells an alcoholic beverage to an under-aged or intoxicated individual is guilty of a misdemeanor. Even though this statute, by itself or in combination with any other statute, does not create a private cause of action, see Ward v. Conner, 495 F.Supp. 434, rev’d on other grounds, 657 F.2d 45 (4th Cir.1981), cert. denied 455 U.S. 907, 102 S.Ct. 1253, 71 L.Ed.2d 445 (1982), it does serve to define a minimum standard of care applicable to those who serve alcoholic beverages. Virginia courts have consistently ruled that violation of a statute constitutes negligence per se, and will support a recovery for damages that are the proximate cause of the injury so long as the injured person is a member of the class for whose benefit the legislation was enacted. Smith v. Virginia Transit Co., 206 Va. 951, 147 S.E.2d 110 (1966).

In the instant action, plaintiffs allege that the United States violated Virginia law by serving alcohol to an intoxicated, under-aged person. First, enactments such as VA.CODE § 4-62 are clearly intended to protect not only the intoxicated person himself, but also to protect members of the general public, especially persons on the highway who might encounter intoxicated drivers. See, e.g., Adamian v. Three Sons, Inc., 353 Mass. 498, 233 N.E.2d 18 (1968). Therefore, plaintiffs here are certainly members of the class for whose benefit the legislation was enacted.

Moreover, while plaintiff’s violation of § 4-62 may not have been the immediate cause of the plaintiffs’ injuries, Virginia has never embraced the notion that proximate cause means the immediate cause. In a case analogous to the present action, Crowell v. Duncan, 145 Va. 489, 134 S.E. 576 (1926), the Supreme Court of Virginia held that the owner of an automobile could be held liable to a third party for injuries arising out of the entrustment of the automobile to an intoxicated person. Recognizing that death and destruction on the highway is the foreseeable result when drinking is combined with driving, the court stated:

Incompetence, recklessness, and accident are so universally the sequel of drinking that an owner of an automobile is put on notice of what is likely to occur if he does not take active steps to prevent any one addicted to drinking from driving it. If he fails in the performance of this duty, he should suffer the consequences of his neglect. 134 S.E. at 581.

The increased speed and power of automobiles, the greater likelihood that patrons will drive after leaving a bar, and the staggering injuries and costs to society of alcohol related crashes in the past decade only serve to reinforce the Crowell court’s farsighted conclusion. Given the mandate of state law and the prevalence of death and damage caused by drunk drivers, tavern owners should be aware of the dangers of serving drinks to minors or to intoxicated patrons. Indeed, the tavern owner here, the United States Army, indicated an awareness of these dangers in its own regulations, which state that under-aged and intoxicated patrons should not be served, and that intoxicated patrons should not be permitted to leave the tavern and drive. Army Regulation 210-65, para. 2.

This Court is confident that a Virginia court would recognize that the plaintiffs here have stated a common law cause of action in negligence against the United States. In light of VA.CODE § 4-62 and the Virginia Supreme Court’s pronouncement in Crowell, this Court holds that, under Virginia law, tavern owners have a duty to refrain from selling alcohol to those individuals who, by industry standards, common experience or actual knowledge, the tavern owner knows or should know are likely to represent an unreasonable risk of harm to others.

In spite of § 4-62 and the decision in Crowell, the defendant argues forcefully that a Virginia court would still decline to impose civil liability upon a seller of intoxicating beverages under these circumstances. Such a position, however, would be at odds with the vast majority of reported decisions and the clear trend nationally in favor of recognizing liability. Currently, 21 states have imposed liability under the common law on vendors of intoxicating beverages for the injuries caused by persons purchasing such beverages while under-age or intoxicated. An additional twenty states have imposed such liability by enacting “Dram Shop” statutes; in eight of the states which impose such liability by statute, the courts have also recognized a common law cause of action. In the past ten years alone fifteen states have recognized a common law action in negligence against tavern owners in these circumstances. This Court cannot conclude that a Virginia court would refuse to impose liability here in the face of such a pronounced trend and against the great weight of ease law in other jurisdictions.

Virginia courts have never hesitated to expand the common law in the absence of specific legislative guidance. For example, the Virginia Supreme Court was willing to recognize the rule of strict liability in blasting operations so as to protect innocent third party victims from the use of dangerous instrumentalities by others, M. W. Worley Construction Co. v. Hungerford, Inc., 215 Va. 377, 210 S.E.2d 161 (1974), and it was quick to recognize a cause of action for the intentional infliction of emotional distress. Womack v. Eldridge, 215 Va. 338, 210 S.E.2d 145 (1974). The failure of the Virginia legislature to affirmatively enact Dram Shop legislation can only be an expression of its confidence that the enlightened Virginia state courts would join the majority of other jurisdictions in imposing common law liability upon tavern owners in these circumstances.


text:
    Wallace H. WEISS, Plaintiff, v. UNITED STATES of America, et al., Defendants.
    Civ. A. No. 84-0129-A.
    United States District Court, E.D. Virginia, Alexandria Division.
    Oct. 18, 1984.

      Teena D. Grodner, Alexandria, Va., for plaintiff.
    Paula P. Potoczak, Asst. U.S. Atty., Alexandria, Va., for defendants.
   MEMORANDUM OPINION

RICHARD L. WILLIAMS, District Judge.

I. Findings of Fact

1. The plaintiff, Wallace H. Weiss, is Jewish. Testimony of plaintiff.

2. The plaintiff is a resident of Alexandria, Virginia. Testimony of plaintiff.

3. Weiss was employed by the Defense Logistics Agency as a GS-13 Operations Research Analyst from February 17, 1980 until August 4, 1983. Testimony of plaintiff.

4. Weiss was fully qualified for his position when he was hired.

5. Plaintiff’s supervisor, Dennis L. Zimmerman, is not Jewish and did not know that the plaintiff was Jewish when he hired him; Mr. Zimmerman became aware of Weiss’s religion only after Weiss told him. Weiss was the only Jewish employee in the office. Testimony of Dennis Zimmerman.

6. Neither of Weiss’s second-line supervisors, Mr. Clark and Colonel Sims, is Jewish. Testimony of Mr. Clark and Colonel Sims.

7. From 1980 until March 1982, plaintiff Weiss was the constant target of a variety of highly offensive religious slurs and taunts made by a co-worker, Michael Pouy, and by plaintiff's supervisor, Dennis Zimmerman. These slurs included such taunts as “resident Jew,” “Jew faggot,” “rich Jew,” “Christ killer,” “nail him to the cross,” and “you killed Christ, Wally, so you’ll have to hang from the cross.” Testimony of plaintiff, Sandra Jones, and Joan Harris.

8. Mr. Zimmerman made no attempt to stop the repeated anti-Semitic remarks that were directed at the plaintiff by Mr. Pouy. Indeed, Mr. Zimmerman himself repeatedly directed anti-Semitic remarks at Weiss. Testimony of plaintiff, Sandra Jones, and Joan Harris.

9. Prior to March 26, 1982, Weiss never repeated or complained about the anti-Semitic remarks to anyone above Mr. Zimmerman. However, the remarks upset Weiss greatly, and caused him to develop stress and anxiety-related disorders. Testimony of plaintiff.

10. Prior to March 26, 1982, and despite being subjected to his co-worker’s and supervisor’s slurs regarding his religion, Weiss received high performance evaluations and generally performed his duties to his supervisors’ satisfaction; in February 1982 his supervisor approved Weiss’s within-grade salary increase. Prior to this time no performance warnings or actions had been taken against plaintiff. Plaintiff’s Exhibits 14, 17 and 19.

11. On March 26, 1982, supervisor Zimmerman held a branch meeting to discuss office reorganization. During that meeting, in front of the branch staff, Pouy called Weiss “the laziest motherfucker in the office.” Testimony of plaintiff, Dennis Zimmerman, and Michael Pouy.

12. In response to Pouy’s outburst at the meeting, Zimmerman took the following steps:

(a) Zimmerman immediately asked Pouy to apologize to the plaintiff, and Mr. Pouy did apologize for his language. Testimony of plaintiff and Michael Pouy.

(b) At the branch meeting, Zimmerman acknowledged that he did not share Pouy’s opinion of the plaintiff. Testimony of Dennis Zimmerman.

(c) Mr. Zimmerman met privately with Mr. Pouy, verbally admonished him for his behavior, recommended that he take a course in stress management, and asked him to apologize to Weiss. Testimony of Dennis Zimmerman and Michael Pouy.

(d) Mr. Zimmerman held a meeting with Mr. Weiss advising him of his actions with regard to Pouy’s outburst. Testimony of plaintiff and Dennis Zimmerman.

13. Pouy wrote Weiss a written note of apology. Testimony of plaintiff and Michael Pouy.

14. Weiss was already upset and humiliated by Pouy’s and Zimmerman’s earlier religious slurs, and the March 26 confrontation, while clearly not religious in nature, was the traumatizing event which triggered an obsessive, and perhaps vindictive reaction toward Pouy and Zimmerman.

15. Weiss felt that a work environment which permitted religious slurs was responsible for the crude epithet expressed by Pouy on March 26, 1982.

16. Weiss’s obsessive reaction to the slurs of Mr. Pouy and Mr. Zimmerman was exacerbated by his awareness of the persecution suffered by Jews throughout history and especially during World War II. Testimony of Lawrence Sank.

17. On March 26, 1982, and during the week thereafter, Weiss spoke to Mr. Zimmerman and demanded an end to the antiSemitic remarks. The plaintiff also complained to Mr. George Clark, Zimmerman’s supervisor, about the anti-Semitic remarks and Pouy’s outburst; moreover, he expressed his strong dissatisfaction with the disciplinary action taken against Mr. Pouy. Despite plaintiffs request, Clark refused to suspend Pouy, refused to fire Zimmerman for his failure to discipline Pouy, and supported Zimmerman’s disciplinary action against Mr. Pouy. Testimony of plaintiff.

18. Mr. Clark held a staff meeting in April 1982 admonishing all personnel to use more appropriate language around the office since some individuals could be offended by improper language. Testimony of Mr. Clark.

19. Zimmerman knew that the plaintiff had reported him to Mr. Clark, because Clark spoke to Zimmerman about the matter on March 29, 1982. Plaintiff’s Exhibits 8 and 9.

20. Mr. Zimmerman was unhappy with Weiss’s vehement criticism of the disciplinary action taken against Mr. Pouy. While Zimmerman stopped directing religious slurs toward the plaintiff after March 26, 1982, Mr. Zimmerman did begin to retaliate against Weiss in the following manner:

(a) by criticizing and demeaning Weiss for his work performance, especially in front of other workers. Testimony of plaintiff and Sandra Jones; Plaintiff’s Exhibit 5.

(b) on April 1, 1982, by revoking prior authorization for Weiss to present a paper at a symposium. Plaintiff’s Exhibits 15, 16.

(c) beginning March 30, 1982, to keep Memoranda for the Record (“MFR”) to build a record against Weiss. Plaintiff’s Exhibits 6, 7.

(d) by issuing a performance appraisal on April 30, 1982 for Weiss in which he rated Weiss substantially lower than he had in his prior appraisal of April 30, 1981. Plaintiff’s Exhibits 14, 18.

(e) by giving Weiss inappropriate and unreasonably difficult work assignments, by blaming Weiss for delays in projects which were largely beyond plaintiff’s control, and by failing to give Weiss the necessary time and assistance to perform many assignments. Testimony of plaintiff, William Hargrave, Paul Wright, and Margaret Jones.

(f) by glaring at Weiss and generally treating him with a hostile attitude. Testimony of plaintiff.

21. Plaintiff initiated EEO counseling on May 18, 1982, naming Mr. Zimmerman as an Alleged Discriminating Official. Plaintiff’s Exhibit 24.

22. On May 25, 1982 Zimmerman was questioned for several hours by plaintiff’s EEO counselor; after leaving that session, Zimmerman threatened to sue plaintiff for what he said and what he wrote in his EEO complaint. Plaintiff’s Exhibit 24, testimony of plaintiff.

23. On May 27, 1982 Zimmerman requested an investigation of plaintiff for alleged contract improprieties; permission was denied because the allegations were found to be groundless. Plaintiff’s Exhibits 25 and 26.

24. No disciplinary action had ever been taken or proposed against Weiss at DLA prior to May 1982.- Plaintiff’s Exhibit 25.

25. In May 1982 Weiss complained to Mr. Clark that Zimmerman was retaliating for his initiation of EEO proceedings, that Mr. Zimmerman was calling him demeaning names such as “crazy Wally,” and that Zimmerman’s actions were giving him headaches and stomach pains. Plaintiff's Exhibit 100.

26. Still dissatisfied with the discipline meted out to Pouy, obsessed with anger toward Pouy and Zimmerman for their preMarch 1982, verbal, religious-based abuse, and angry at Zimmerman’s retaliatory reaction to his complaints, Weiss filed an EEO complaint based on age and religious discrimination on June 17, 1982, naming Zimmerman as the discriminating official. Plaintiff’s Exhibit 21.

27. Weiss filed further EEO complaints on November 5, 1982; December 13, 1982; December 27, 1982; January 26,1982; May 23, 1983 and June 13, 1983. Plaintiffs Exhibits 21 and 22.

28. Mr. Zimmerman brought or proposed bringing misconduct-based disciplinary actions against Weiss on May 27, 1982; February 4, 1983; February 17, 1983; April 8, 1983 (two actions). A grievance examiner recommended that Zimmerman’s reprimand of February 4 be rescinded. Plaintiff’s Exhibits 17, 23, and 35.

29. Mr. Zimmerman held performance counselings with or brought proposed performance-based actions against Weiss on July 19, 1982; September 17, 1982; December 17, 1982; January 17, 1983; February 1,1983; February 14, 1983; March 3, 1983; March 10, 1983; May 5, 1983; May 27, 1983; May 31, 1983 and July 8, 1983. Plaintiff’s Exhibits 17 and 23.

30. In January 1983, Weiss met with his third line supervisor, Colonel McFarland. Colonel McFarland encouraged Weiss to put the past behind and to concentrate on his work. Weiss, however, simply reiterated his frustration with Mr. Zimmerman’s harassment and his intention to “get” Pouy and Zimmerman for what they had done to him. Testimony of Colonel McFarlane.

31. On July 8, 1983, Zimmerman proposed plaintiff’s removal. Plaintiff’s Exhibit 110.

32. Relying on information in the proposed removal, which was written by Mr. Zimmerman, Colonel McFarlane decide to remove Weiss effective August 12, 1983. Plaintiff’s Exhibits 107, 109, 110, and Defendant’s Exhibit 1.

33. Agency officials became aware of Zimmerman’s anti-Semitic verbal abuse of plaintiff, and of Zimmerman’s retaliation against the plaintiff, when the plaintiff spoke out against these attacks publicly, and when plaintiff initiated EEO proceedings. Plaintiff’s Exhibit 21.

34. The agency did not discipline Mr. Zimmerman nor did they order him to cease his retaliatory harassment of the plaintiff.

35. Agency officials refused Weiss’s requests for reassignment to another supervisor even though they could have moved Weiss to another branch. Plaintiffs Exhibits 104 and 105.

36. Mr. Zimmerman’s harassment of Weiss after March 1982 caused Weiss to develop anxiety and stress related disorders, including bleeding and cracking on the hands, headaches, nausea, and stomach pains; these disorders also adversely affected Weiss’s performance and conduct at the office.

37. After March 1982 Weiss became obsessed with getting even with Zimmerman and Pouy, and be began to devote a great deal of his time at the office to his EEO claim, which, together with his anxiety and stress related disorders caused by his supervisor’s harassment, contributed to the considerable decline in his work performance. Weiss’s job performance continued to deteriorate until his termination in August 1983 by Colonel McFarlane for nonperformance of duties.

Conclusions of Law

1. This Court has jurisdiction of this action pursuant to 42 U.S.C. § 2000e et seq., Title VII of the Civil Rights Act of 1964 as amended by the Equal Opportunity Act of 1972, 42 U.S.C. § 2000e-16.

2. Admiral Grinstead, Director of the Defense Logistics Agency, is a proper party defendant. 42 U.S.C. § 2000e-16(c).

3. In order to prevail in an action brought pursuant to Title VII of the Civil Rights Act, the plaintiff has the initial burden of establishing a prima facie case of employment discrimination. The plaintiff must show actions taken by the employer which, if unexplained, establish by a preponderance of the evidence that such actions were based upon a discriminatory criterion forbidden by the Act. Texas Department of Community Affairs v. Burdine, 450 U.S. 248, 101 S.Ct. 1089, 67 L.Ed.2d 207 (1981); Furnco Construction Corp. v. Waters, 438 U.S. 567, 98 S.Ct. 2943, 57 L.Ed.2d 957 (1978).

4. In order to make out a prima facie case of retaliatory discharge, plaintiff must show that he opposed an employment practice made unlawful by Title VII, that he was subsequently subjected to adverse employment action, and that there was a causal connection between the two. Womack v. Munson, 619 F.2d 1292 (8th Cir. 1980), cert. denied, 450 U.S. 979, 101 S.Ct. 1513, 67 L.Ed.2d 814 (1980).

5. Once the plaintiff makes out a prima facie case, the burden shifts to the defendant to articulate a legitimate, nondiscriminatory reason for the discharge. Furnco Construction Corp. v. Waters, 438 U.S. 567, 98 S.Ct. 2943, 57 L.Ed.2d 957 (1978).

6. If the defendant meets this burden, the plaintiff must then have the opportunity to prove by a preponderance of the evidence that the legitimate reasons offered by the defendant were not its true reasons, but were a pretext for discrimination. Texas Department of Community Affairs v. Burdine, 450 U.S. 248, 101 S.Ct. 1089, 67 L.Ed.2d 207 (1981).

7. These basic allocations of the burdens of proof apply to all Title VII cases. McDonnell Douglas Corp. v. Green, 411 U.S. 792, 93 S.Ct. 1817, 36 L.Ed.2d 668 (1973).

8. Title VII has, from its enactment, prohibited discrimination against an individual with respect to his conditions of employment because of such individual’s religion or national origin. 42 U.S.C. § 2000e-2(a).

9. Religious harassment, like sexual harassment, can take many forms, but there are two basic varieties: harassment that creates an intimidating, offensive environment (“condition of work”), and “quid pro quo” harassment, in which a supervisor demands that an employee alter or renounce some religious belief in exchange for job benefits. See Katz v. Dole, 709 F.2d 251 (4th Cir.1983).

10. An occasional offensive religious epithet by a co-worker does not necessarily give rise to a Title VII claim against an employer. Nonetheless, when an employee is repeatedly subjected to demeaning and offensive religious slurs before his fellows by a co-worker and by his supervisor, such activity necessarily has the effect of altering the conditions of his employment within the meaning of Title VII. Compston v. Borden, Inc., 424 F.Supp. 157 (S.D.Ohio, 1976). Continuous abusive language, whether racist, sexist, or religious in form, can often pollute a healthy working environment by making an employee feel uncomfortable or unwanted in his surroundings. In more extreme cases such as this one, it can even severely affect the employee’s emotional and psychological stability.

The patterned and discriminatory harassment of plaintiff by his co-worker and by his supervisor prior to March 26, 1982 violated plaintiff’s right to non-discriminatory terms and conditions of employment; plaintiff’s opposition to this abuse was protected by § 704(a) of Title VII, as was his participation in EEO proceedings.

11. The defendants attempted to justify the plaintiff’s discharge on the grounds that it was impelled by his poor work performance. This Court concludes that this reason is merely a pretext, developed by supervisor Zimmerman, for the underlying motivation to fire Mr. Weiss for his charges of discrimination against Mr. Zimmerman.

12. After the plaintiff began to express his opposition to the offensive religious slurs to which he had been subjected, and especially after plaintiff initiated EEO proceedings against his employer for those slurs and the hostile environment that they had created, plaintiff’s supervisor deliberately and intentionally engaged in retaliation. While the demanding religious slurs ceased after Weiss went to his supervisor’s superiors and complained, this Court concludes that Zimmerman gave plaintiff inappropriate and unreasonably difficult work assignments, rated his work performance substantially lower than he had prior to the plaintiff’s complaints, and frequently berated and demeaned Weiss’s work in front of others in order to retaliate against him and establish a pretextual justification for his discharge.

13. The findings indicate that from March 26, 1982 until the time he was terminated, Weiss’s frustrations with his difficult work environment had a negative impact upon his work performance and attitude. However, an employer cannot use an employee’s diminished work performance as a legitimate basis for removal where the diminution is the direct result of the employer’s discriminatory behavior. Henson v. City of Dundee, 682 F.2d 897, 910 (5th Cir.1982); DeGrace v. Rumsfeld, 614 F.2d 796, 804 (1st Cir.1980).

In this action, Weiss’s diminished work performance and attitude was caused by the pattern of anti-Semitic verbal abuse directed at Weiss by Pouy and Zimmerman until March 26, 1982, and by Zimmerman’s subsequent retaliatory harassment of plaintiff and obstruction of his work. While the plaintiff could have quit his position in the face of his supervisor’s retaliation and relied totally upon EEO proceedings for redress, he instead conscientiously attempted to do his job in spite of the difficult circumstances. Plaintiff’s performance was understandably below average during this difficult period; nonetheless, the defendant cannot point to that performance as a legitimate basis for removal when the defendant itself is responsible for creating the difficult working conditions and, in effect, causing the sub-par performance.

14. Where plaintiff makes out a “condition of work” claim under Title VII, plaintiff must demonstrate the propriety of holding the employer liable for the actions of its supervisors under some theory of respondeat superior. In general, the plaintiff must establish that the employer had actual or constructive knowledge of the existence of the offensive discriminatory or retaliatory working environment and yet took no prompt and adequate remedial action. The plaintiff can do this by proving that complaints were lodged with the employer, or that the harassment was so pervasive that the employer’s awareness can be inferred. Katz v. Dole, 709 F.2d 251 (4th Cir.1983).

Prior to March 26, Weiss never publicly opposed co-worker Pouy’s and supervisor Zimmerman’s verbal anti-Semitic abuse. After the March 26 incident, however, the agency was certainly put on notice about the discriminatory behavior when Weiss met with Zimmerman’s supervisors to complain about the harassment, and when Weiss initiated EEO proceedings against Zimmerman. Even though the agency did act swiftly and effectively to put an end to the actual verbal religious abuse after March 26, the agency should also have been aware that its supervisor was retaliating against Weiss for his vocal complaints against Zimmerman’s and Pouy’s abuse when Weiss personally complained to Zimmerman’s supervisors about the retaliation, when Weiss filed EEO complaints about such retaliation, and when Zimmerman’s evaluations of Weiss’s work performance became considerably more critical after the March 26 incident.

15. Once an employer has been put on notice about religious harassment or retaliation, the employer must do more than merely indicate the existence of an official policy against such harassment. Where the employer’s supervisory personnel acquiesced and participated in such harassment, the burden on an employer seeking to avoid Title VII liability is especially heavy. Katz v. Dole, 709 F.2d 251 (4th Cir.1983).

Even though the agency knew that Zimmerman had discriminated against Weiss prior to March 26, and even though Weiss repeatedly complained about Zimmerman’s retaliatory actions, agency officials took no action against Zimmerman, and in fact they relied almost exclusively on Mr. Zimmerman’s representations in deciding to remove the plaintiff. When an employer vests wide discretion over employee assignments and evaluations in the hands of a supervisor, and when the employer is put on notice that the supervisor has engaged in discriminatory or retaliatery actions against an employee, the employer can certainly be held liable if it relies upon that supervisor’s representations to remove the employee. Taylor v. Safeway Stores, 365 F.Supp. 468, 472 (D.Colo.1973), aff'd in part, rev’d in part on other grounds, 524 F.2d 263 (10th Cir.1975).

16. This Court concludes, then, that defendant discriminated against plaintiff concerning the conditions of his employment because of his religion and national ancestry, in violation of the command of Title VII.

17. This Court concludes that the plaintiff failed to make out a prima facie case of age discrimination under Title VII.

18. A Judgment Order will enter establishing the relief to which plaintiff is entitled, and setting attorneys fees, after the hearing scheduled for November 2, 1984.


author: CALDWELL, District Judge.

text:
    Robert I. BURKETT, Plaintiff, v. WESTERN MARYLAND RAILWAY CO., Walter N. Yoder and Sons, Inc., and Westvaco Corporation, Defendants.
    Civ. A. No. 84-0072.
    United States District Court, M.D. Pennsylvania.
    Oct. 18, 1984.

      Joseph Smukler, Herman B. Poul, Meyer, Lasch, Hankin & Poul, Philadelphia, Pa., for plaintiff.
    Joseph Neff Ewing, Jr., Philadelphia, Pa., for defendants.
    Jeffrey B. Rettig, Harrisburg, Pa., for third party defendant Walter N. Yoder & Sons & Westvaco.
   MEMORANDUM

CALDWELL, District Judge.

Defendants, Walter N. Yoder & Sons, Inc. (Yoder) and Westvaco Corporation (Westvaco), have moved pursuant to Fed.R. Civ.P. 12(b) to dismiss plaintiff’s amended complaint against them for lack of complete diversity between the parties. For the reasons set forth below, we grant the motion as to Yoder and deny it as to Westvaco.

Plaintiff’s complaint alleges that he is a citizen of Maryland (¶ 7), Westvaco is a Delaware corporation with its principal place of business in New York (¶ 8), and Yoder is a Maryland corporation with its principal place of business in Maryland. (¶ 14). Plaintiff alleges he suffered personal injuries while working on the lines of the co-defendant, Western Maryland Railway Corporation (Western Maryland) as a result of the negligence of the three defendants. Jurisdiction over Western Maryland is predicated upon the Federal Employers’ Liability Act (F.E.L.A.) 45 U.S.C. § 51 et seq.

Yoder and Westvaco contend that jurisdiction is lacking over them because Yoder and the plaintiff are both residents of Maryland. Hence, complete diversity between the parties is missing here and the complaint against the defendants must be dismissed. See Schultz v. Cally, 528 F.2d 470 (3d Cir.1975).

In rebuttal, plaintiff contends that diversity is established as to Westvaco, a Delaware corporation with its principal place of business in New York, see 28 U.S.C. § 1332(c), and that jurisdiction may be properly exercised over Yoder under the principal of pendent party jurisdiction.

Pendent party jurisdiction addresses the issue of whether a district court may exercise jurisdiction over a plaintiff's non-federal claim against a person as to whom no independent basis of federal jurisdiction exists when federal jurisdiction over another defendant is proper. See Aldinger v. Howard, 427 U.S. 1, 96 S.Ct. 2413, 49 L.Ed.2d 276 (1976); Lentino v. Fringe Employee Plans, Inc., 611 F.2d 474 (3d Cir. 1979). Plaintiff cites Sparks v. Hershey, 661 F.2d 30 (3d Cir.1981), and Lentino, supra, in support of his contention that jurisdiction over Yoder is proper here. Those cases are inapposite, however, because they both deal with pendent jurisdiction over plaintiff's nonfederal claim against a defendant already properly in the district court on plaintiff’s federal cause of action against him. In the context of those cases, it was proper to assert jurisdiction using the test, quoted by plaintiff on page 3 of his brief, set forth as follows:

Federal courts have the constitutional power to exercise pendent jurisdiction when the state and federal claims derive from a common nucleus of operative fact, such that the plaintiff would ordinarily be expected to try them all in one judicial proceeding, and when the federal claim has sufficient substance to confer subject matter jurisdiction on the court.

Lentino, supra, at 478 (emphasis in original) (citing United Mine Workers v. Gibbs, 383 U.S. 715, 86 S.Ct. 1130, 16 L.Ed.2d 218 (1966). As noted by the Court, however, in Aldinger v. Howard, supra:

From a purely factual point of view, it is one thing to authorize two parties, already present in a federal court by virtue of a case over which the court has jurisdiction, to litigate in addition to their federal claim a state-law claim over which there is no independent basis of federal jurisdiction. But it is quite another thing to permit a plaintiff, who has asserted a claim against one defendant with respect to which there is federal jurisdiction, to implead an entirely different defendant on the basis of a state-law claim over which there is no independent basis of federal jurisdiction, simply because his claim against the first defendant and his claim against the second defendant “derive from a common nucleus of operative fact.” ... True, the same considerations of judicial economy would be served insofar as plaintiff’s claims “are such that he would ordinarily be expected to try them all in one judicial proceeding____” ... But the addition of a completely new party would run counter to the well-established principle that federal courts as opposed to state trial courts of general jurisdiction, are courts of limited jurisdiction marked out by Congress.

427 U.S. at 14-15, 96 S.Ct. at 2420, 49 L.Ed.2d at 286-87.

After Sparks, supra, and Lentino, supra, the Third Circuit Court of Appeals set forth a comprehensive test for determining when a court may appropriately exercise pendent jurisdiction. The “three-tiered” analysis, incorporating the Supreme Court’s pendent party jurisdictional cases, Aldinger, supra, and Owen Equipment and Erection Co. v. Kroger, 437 U.S. 365, 98 S.Ct. 2396, 57 L.Ed.2d 274 (1978), is appropriate for the specific determination of when pendent party jurisdiction is proper. The test is as follows:

On the first level, a court must determine whether it has constitutional power to determine a state-law claim. This “power” test depends on whether there is a “common nucleus of operative fact” between the state claim at issue and the accompanying federal claims. See United Mine Workers v. Gibbs, 383 U.S. 715, 725, 86 S.Ct. 1130, 1138, 16 L.Ed.2d 218 (1966). As we see it, Gibbs provides the unifying principle which limits the extent of federal jurisdiction over both pendent and ancillary claims. The second level requires the court to determine whether the exercise of jurisdiction at issue would violate a particular federal policy decision, such as the requirement of complete diversity or the explicit exclusion of a particular party from federal liability for the actions alleged in the complaint. At this level, the court may consider whether the plaintiffs assertion of ancillary or pendent jurisdiction is an attempt to manufacture federal jurisdiction where it is otherwise foreclosed by the relevant statutes. The issue generally turns on statutory interpretation. The final level — prudential in character — is for the district court, in its discretion, to weigh various factors bearing on the appropriateness of hearing a pendent claim.

Ambromovage v. United Mine Workers, 726 F.2d 972, 989-90 (3d Cir.1984) (footnotes omitted). The analysis does not have to be performed in the order set forth above, and when the jurisdictional issue can be resolved without deciding the constitutional question, the court should make every effort to do so. Id. at 989 n. 49.

In accordance with Ambromovage, we conclude that plaintiff has not satisfied the second tier of the test. To allow plaintiffs claim against Yoder, a fellow citizen of Maryland, would violate an explicit federal policy embodied in the statutory requirement of complete diversity between the parties. See 28 U.S.C. § 1332. We must strictly construe the statute. See Owen Equipment and Erection Co., supra, and cases cited therein.

This case is similar to Owen Equipment and Erection Co., supra. In Owen Equipment, plaintiff, a citizen of Iowa, brought a state-law claim in negligence against the Omaha Public Power District (OPPD), a citizen of Nebraska. OPPD then filed a third-party complaint against Owen Equipment and Erection Co. (Owen), a corporation organized under the laws of Nebraska. Plaintiff then filed an amended complaint naming Owen as an additional defendant. OPPD was granted summary judgment against plaintiff and the case went to trial between plaintiff and Owen. On the third day of trial, it was discovered that Owen’s principal place of business was in Iowa. The Court of Appeals affirmed the district court’s denial of Owen’s motion to dismiss the complaint for lack of jurisdiction. Rejecting that holding, the Supreme Court stated:

[I]t is clear that the [plaintiff] could not originally have brought suit in federal court naming Owen and OPPD as co-defendants since citizens of Iowa would have been on both sides of the litigation. Yet the identical lawsuit resulted when she amended her complaint____
... The limits upon federal jurisdiction, whether imposed by the constitution or by Congress, must be neither disregarded nor evaded. Yet under the reasoning of the Court of Appeals in this case, a plaintiff could defeat the statutory requirement of complete diversity by the simple expedient of suing only those defendants who were of diverse citizenship and waiting for them to implead nondiverse defendants.

437 U.S. at 374, 98 S.Ct. at 2403, 57 L.Ed.2d at 282-83 (footnote omitted) (brackets added).

The Court further stated:

[T]he nonfederal claim here was asserted by the plaintiff, who voluntarily chose to bring suit upon a state-law claim in a federal court____ A plaintiff cannot complain if ancillary jurisdiction does not encompass all of his possible claims in a case such as this one, since it is he who has chosen the federal rather than the state forum and must thus accept its limitations, “[T]he efficiency plaintiff seeks so avidly is available without question in the state courts.” Kenrose Mfg. Co. v. Fred Whitaker Co., 512 F.2d 890, 894 (CA4, 1972).

Id. at 376, 98 S.Ct. at 2404, 57 L.Ed.2d at 284 (footnotes omitted).

Contrary to plaintiff’s assertion, the cases cited by defendants, Shields v. Consolidated Rail Corp., 530 F.Supp. 400 (S.D. N.Y.1981), and Lincoln Manufacturing Co. v. Stem, 515 F.Supp. 21 (N.D.Ill.1981), are in accord with Third Circuit law in this area rather than plaintiffs authority, DeMaio v. Consolidated Rail Corp., 489 F.Supp. 315 (S.D.N.Y.1980). We also note that a F.E.L.A. claim may be brought in a state court as well as a federal one. See DeMaio, supra. Thus, just as in Owen Equipment, the claims against all the defendants can be heard together in one forum so that the “ ‘efficiency plaintiff seeks ... is available without question in the state courts.’ ” Owen Equipment, supra, 437 U.S. at 376, 98 S.Ct. at 2404, 57 L.Ed.2d at 284 (quoting Kenrose Manufacturing Co. v. Fred Whitaker Co., 512 F.2d 890, 894 (4th Cir.1972). Accordingly, pendent party jurisdiction cannot be exercised here over Yoder.

We turn now to Westvaco and Yoder’s contention that the complaint against both of them must be dismissed because Yoder is a nondiverse party to plaintiff. Generally, a complaint will be dismissed when complete diversity between the parties is lacking, see Schultz v. Catty, 528 F.2d 470 (3d Cir.1975), but a party may be dropped to achieve diversity if his presence is not essential to a just adjudication. See Gallo v. Yamaha Motor Corp., 488 F.Supp. 502 (E.D.Pa.1980). Dropping a party depends upon whether he is indispensable to the action. Field v. Volkswagenwerk AG, 626 F.2d 293 (3d Cir.1980). In Field, the court held that the plaintiff driver of a van involved in a single car collision was not an indispensable party to an action between representatives of her passengers and the defendant manufacturer of the van. The defendant corporation was a citizen of West Germany and after suit was brought discovery revealed the driver to be a citizen of Czechoslovakia, not of New York as she had claimed. Thus, complete diversity was lacking because parties on opposite sides of the suit were citizens of foreign countries. Relying upon Fed.R.Civ.P. 19 to sustain diversity jurisdiction as between the remaining plaintiff and defendant, the court stated:

If the right of either [passenger] to relief against [the defendant] were established, these parties would be awarded a judgment; if their claims are not sustained, their complaint would be dismissed. In either event, the district court will be able to grant complete relief as between the parties without the joinder of [the driver], and, as we have shown above, it is unnecessary to join [the driver] as a party in order to enable [defendant] to defend against these claims. [Defendant], while it may be entitled to contribution or indemnity from [the driver], cannot be subjected to multiple obligations since its liability, if any, will be several. Nor, as Professor Moore has emphasized, does the possibility of a subsequent adjudication that may result in a judgment that is inconsistent as a matter of logic, trigger the application of Rule 19.

Id. at 301-02 (brackets added) (footnote omitted).

The above considerations also lead us to believe that Yoder is not indispensable here. All three defendants may eventually be found to be jointly liable with the individual tortfeasor or vicariously liable for his actions. If so, then plaintiff can obtain complete relief without Yoder’s presence. Conversely, if plaintiff does not prevail at trial, then Western Maryland and Westvaco have not been prejudiced by Yoder’s absence. In short, complete relief as between plaintiff and Western Maryland and Westvaco is available here without Yoder. Further, any claim arising from the litigation by Western Maryland or Westvaco or both against Yoder can be adjudicated in a subsequent indemnity or contribution action. Therefore, Yoder is a dispensable party who may be dismissed to preserve diversity jurisdiction over the remaining defendants.

We will issue an appropriate order.

      . Plaintiff had originally filed suit against defendant Western Maryland Railway Corporation. That defendant joined Yoder and Westvaco as third party defendants but by stipulation of the parties, plaintiff filed an amended complaint against all the defendants.

      . We therefore do not decide whether we can constitutionally assert jurisdiction here or whether it would be prudential for us to do so.