author: FELDMAN, District Judge.

text:
    Charles BUTLER v. C. Paul PHELPS, Secretary of Louisiana Department of Corrections and William Guste, Attorney General of the State of Louisiana.
    Civ. A. No. 84-3365.
    United States District Court, E.D. Louisiana.
    Dec. 20, 1984.

      Lawrence J. Boasso of Noland & Boasso, New Orleans, La., for petitioner.
    Joanne C. Marier, Asst. Dist. Atty., New Orleans, La., for respondents.
   ORDER AND REASONS

FELDMAN, District Judge.

On August 22, 1984 this matter was referred to a Magistrate for the purpose of conducting hearings, including evidentiary hearings, if necessary, and submission of proposed findings of fact and recommendation for disposition pursuant to 28 U.S.C. § 636(b)(1)(B) and (C), and as applicable, Rule 8(b) of the Rule governing Section 2254 cases.

Upon review of the record submitted by the respondent, the Court has determined that the state court records are sufficient for the purpose of adjudication of petitioner’s claim, a federal evidentiary hearing is not necessary, and the petition should be dismissed for the following reasons.

Accordingly, the order of reference to the Magistrate is revoked and it is ordered that the petition be denied.

Charles Butler is a state court prisoner currently incarcerated in the custody of the Louisiana Department of Corrections. On February 11, 1976 Butler was convicted after trial, by jury, in the Criminal District Court for the Parish of Orleans of two counts of possession of heroin with intent to distribute. On February 26, 1976 he was sentenced to a term of life imprisonment on each count; the sentences to run concurrently. He did not appeal the conviction.

In the instant application for federal habeas corpus relief Butler asserts that his conviction violated due process of law for the reason that the Criminal District Court lacked jurisdiction because Butler had filed a removal petition with the United States District Court, Eastern District of Louisiana, alleging that as a black man his civil rights were being denied because of the racial composition of the grand jury that indicted him. On February 13, 1981 Butler presented this issue to the Criminal District Court by means of a motion to quash. On February 25, 1981, after hearing, the trial court denied the motion. Butler applied for a writ of certiorari to the Louisiana Supreme Court which was granted. State of Louisiana v. Butler, 400 So.2d 906 (La.1981). On September 28, 1981 the Louisiana Supreme Court in a lengthy discussion held that Butler’s removal procedure was improper because Butler's counsel failed to file a copy of the removal petition with the Clerk of the Criminal District Court as required by 28 U.S.C. § 1446(c).

“The record reflects that defendant’s removal petition was filed with the U.S. District Court for the Eastern District of Louisiana on February 10, 1976, the date of trial. Additionally, the record reflects that a copy of defendant’s removal petition was filed with the district attorney’s office at 9:08 a.m. on February 10, 1976. As previously stated, defendant contends that he filed a copy of his removal petition with the state court thus, properly effecting notice. A careful examination of the record before us clearly indicates that the defendant did not file the removal petition with the Clerk of Court of the Criminal District Court for Orleans Parish. Rather, the defendant filed the subject removal petition with Michael Roig, a minute clerk employed by the state court trial judge. Thus, the question now becomes whether or not the filing of a removal petition with a minute clerk employed by the trial judge is in compliance with the notice requirements essential to the removal of actions to the federal court as set forth in 28 U.S.C.A. § 1446. We conclude that such filing does not comply with the aforesaid statute.”
State of Louisiana v. Charles Butler, 405 So.2d 836, 839-840 (La.1981)

Petitioner has exhausted his state remedies and this Court, therefore, has jurisdiction. 28 U.S.C. § 2254(b); Rose v. Lundy, 455 U.S. 509, 102 S.Ct. 1198, 71 L.Ed.2d 379 (1982).

The sole issue presented for determination by this Court is whether Butler is in custody in violation of the Constitution or laws of the United States.

A review of the state court record and the records of this Court establishes the following facts.

On September 19, 1975 Butler was arrested pursuant to an arrest warrant charging him with selling/distributing two papers of heroin to an undercover officer on June 13, 1975. Although counsel was initially appointed to represent Butler the record reflects that by December 4, 1975 Butler was represented by William Noland, a private attorney.

On January 13, 1976 William Noland filed a motion to quash the grand jury indictment based on the racial composition of the grand jury. The matter was set for hearing on January 19, 1976 and, after hearing, the motion was denied. The trial was set for February 10, 1976.

On February 10, 1976 at 8:38 a.m. William Noland, on behalf of Butler, filed a petition for removal. Butler’s trial commenced on February 10, 1976 in the Criminal District Court for the Parish of Orleans.

A transcript of the opening segment of the trial reflects that Mr. Noland advised the Court that his client was not ready for trial because Noland had filed a petition for removal on Butler’s behalf. Noland advised the trial judge that he wished to formally file a copy of the petition for removal into the record and the trial judge accepted the petition for filing. The petition was then accepted by the Court’s minute clerk, Michael D. Roig, and dated and signed. Butler was tried and convicted on the two count indictment lodged against him. As stated earlier, he never appealed.

On February 13, 1981 Butler filed a motion to quash the indictment alleging that the trial court lacked jurisdiction due to the removal to the United States District Court, Eastern District of Louisiana. On February 25, 1981 the state court trial judge, after hearing, denied the motion. Butler filed for a writ of certiorari which was granted. State v. Butler, 400 So.2d 906 (La.1981). On September 28, 1981 the Louisiana Supreme Court held that Butler’s petition for removal had not removed jurisdiction from the State Court since Butler had not filed the petition with the Clerk of the Criminal District Court but, rather, had filed the petition with the trial judge’s minute clerk. State v. Butler, 405 So.2d 836 (La.1981).

The ultimate holding of the Louisiana Supreme Court is correct, but for reasons other than those given by that court. The purpose of the statutory requirement that a copy of the removal petition be filed with the Clerk of the state court is to inform the state court judge of the existence of the removal petition. Filing the petition for removal with the state court judge, in open court, which is then received and filed in the record by the judge’s minute clerk satisfies the filing requirement. See Adair Pipeline Company v. Pipelines Local Union, No. 798, 203 F.Supp. 434 (D.C.Tx., 1962). Even constructive notice of the filing of the removal petition is sufficient. Medrano v. State of Texas, 580 F.2d 803 (5th Cir.1978).

Butler was convicted and sentenced in February of 1976. Butler did not seek appellate review of this issue until 1981. When the Louisiana Supreme Court denied Butler’s relief in September of 1981 Butler, through his counsel, Noland, waited an additional three years until July of 1984 before seeking relief in this forum. It is a recognized fact that witnesses become unavailable with the passage of time due to death, relocation, and other factors, that evidence is frequently lost or destroyed after a conviction. While the relief which this Court can grant involves setting aside the conviction and allowing the State to retry Butler, due to the lengthy period of time since conviction, this relief would, in all probability, result in his release. As noted by the Fifth Circuit Court of Appeals in Johnson v. Estelle, 625 F.2d 75 (5th Cir.1980) form must not override the substance of the law. We long ago passed the Age of Technical Niceties.

Although the course followed by the state trial judge should not be encouraged, it was not fatal in this instance. Butler’s petition for removal was simply not timely filed.

On these facts, one might argue that Butler’s petition was technically filed prior to trial (by at most a few seconds or minutes), as required by Section 1446(c). But this Court does not interpret Section 1446(c) as compelling such a technical application. This Court believes that the “before trial” measure in the statute means that unless grounds for removal arise or are, with good cause, not noted until immediately prior to trial, a petition for removal in a criminal case, under the law as it existed even prior to 1977, and thereafter, must be filed within a reasonable time before trial. Butler’s lawyer filed a motion to quash the indictment because of the alleged improper racial composition of the grand jury on January 13, 1976 and the motion was denied January 19, 1976, according to the record. Butler had some three weeks to seek removal but waited until the last moment, the morning of trial, to do so. To permit the result Butler seeks, would permit a wholesale manipulation of criminal justice.

The 1977 Amendment to Section 1446(c) supports this Court’s interpretation of the law. 1446(c)(1) now provides that in a criminal prosecution a petition for removal must be filed not later than 30 days after arraignment or at any time before trial, “whichever is earlier”. The legislative history of the amendment teaches that substantive rights of defendants are not changed; in other words, the amendment did not change existing law. See H.R.Rep. No. 95-195, 95th Cong. 1st Session 8 (1977).

Butler’s petition for removal did not void the state court’s jurisdiction; therefore, Butler’s conviction does not violate the Constitution or laws of the United States and his petition must, accordingly, be denied.

Having concluded that an evidentiary hearing is not necessary and that each of the grounds urged in support of this petition are without merit, the Court orders that the petition be dismissed with prejudice.

      . State of Louisiana v. Charles E. Butler, United States District Court, Eastern District of Louisiana, Criminal Action No. 76-128 "F".

      . Justices Calogero and Lemmon concurred in the majority decision but for other reasons.

      . Copy of the complaint filed in Cr. 76-128 "F” is attached hereto.

      . Although Butler was convicted and sentenced in 1976 he did not seek review until 1981.

      . Although this Court is precluded from reading Mr. Noland’s mind, the timing of the petition for removal, completely inadequate grounds for filing, and the overall facts, create an appearance that Noland filed the petition for removal solely to obtain a continuance. The Court is also mindful that a State’s criminal justice system could be thrown into complete chaos if petitioners are permitted at the last moment to file removal petitions which are without merit and which serve only to disrupt their trial dates.


source: Caselaw Access Project

license: Public Domain

text:
    Billy V. VANN, Plaintiff, v. UNITED STATES of America, et al., Defendants.
    Civ. A. No. 3:84-1094.
    United States District Court, M.D. Tennessee, Nashville Division.
    Jan. 28, 1985.
    On Attorney’s Fee March 1, 1985.
    Billy V. Vann, pro se.
    Greg Nelson, Atty. Tax Div., Washington, D.C., for defendants.
   MEMORANDA OPINIONS, FINDING AND ORDERS

NEESE, Senior District Judge, Sitting by Designation and Assignment.

This is yet another pro se civil action challenging the assessment by the Internal Revenue Service (IRS) of a $500 civil-penalty against the plaintiff for filing a “frivolous” tax-return. 28 U.S.C. §§ 1340, 1346(a); 26 U.S.C. §§ 6703(c), 7422(a). The event which triggered such action on the part of the IRS was the filing by the plaintiff of an “Amended U.S. Individual Income Tax Return” (Form 1040X) on which he sought to reduce his federal income-tax liability for the calendar year 1980 by decreasing substantially the amount he had reported as taxable-income on his original return for that year; in support of his amended-return and claim for a refund, the plaintiff resurrected the long-defunct argument that wages (or salary) (that is, monetary compensation received in return for personal services rendered) did not constitute “income” and, therefore, were not subject to the federal income-tax.

This Court has ruled that wages and salary are taxable-income; that any contention to the contrary is patently frivolous; that any document which purports to be a federal income-tax return (or an amended-return) and which attempts to reduce one’s tax-liability by excluding wages or salary from taxable-income, on the ground that they do not constitute taxable-income, is frivolous within the meaning of 26 U.S.C. § 6702(a); and that where one has filed such a document with the IRS, the assessment of the $500 civil-penalty mandated by § 6702(a), supra, is proper. John B. Hill, Jr., plaintiff, v. United States of America, et al., defendants, civil action no. 3:84-0722, memoranda opinions and orders of November 13, 1984, 599 F.Supp. 118. The Court also forewarned other litigants, who might persist in claiming that wages or salary are not taxable-income, that they risk being assessed with a reasonable attorney’s fee in favor of the United States because “ * * * it is highly unlikely that any similar lawsuit could be maintained in anything other than bad-faith.” Ib., at 122.

For the reasons set forth in John B. Hill, Jr., plaintiff, v. United States of America, et al., defendants, supra, the Court concludes that the plaintiff herein has failed to state a claim upon which relief can be granted. Accordingly, the motion of the defendant for a dismissal of this action, Rule 12(b)(6), F.R.Civ.P., hereby is

GRANTED, and this action hereby is

DISMISSED for the failure of the plaintiff to state a claim upon which relief can be granted.

Additionally, the Court FINDS that this action was frivolous and was maintained by the plaintiff in bad-faith. Thus, the United States is entitled to recover, as a part of its costs herein, a reasonable attorney’s fee and related expenses under 28 U.S.C. § 2412(a) and the bad-faith exception to the American rule generally denying such recovery in the absence of a contractual or statutory provision therefor. See Reed v. United States, 581 F.Supp. 718, 720-21 (D.C.Col.1984); Lovell v. United States, 579 F.Supp. 1047, 1049 (D.C.Wis.1984); Tibbetts v. Secretary of the Treasury, 577 F.Supp. 911, 915[6] (D.C.N.C.1984); Collorafi v. United States, 579 F.Supp. 506, 507[2] (D.C.N.Y.1983); cf. Perkins v. Commissioner of Internal Revenue, 746 F.2d 1187, 1188[4] (6th Cir.1984).

Counsel for the defendant will file forthwith his declaration under penalty of perjury, see 28 U.S.C. § 1746, itemizing the number of hours he expended in representing his client in this proceeding, the approximate hourly-rate at which the United States has compensated (or will compensate) him for such representation, and any expenses incurred in such representation. The plaintiff will be allowed 5 days after such filing in which to submit any desired response. Entry of a final judgment will await the Court’s determination of the amount of allowable attorney’s fee.

ON ATTORNEY’S FEE

The Court hereby FINDS that $132.90 constitutes a reasonable attorney’s fee and related expenses incurred by the United States of America in its defense of this action. Accordingly, judgment will be entered by the clerk, dismissing this action for the failure of the plaintiff to state a claim upon which relief can be granted herein and awarding the defendant its costs of action, including $132.90 in reasonable attorney’s fees and related expenses. Rule 58(1), F.R.Civ.P.

      . The Internal Revenue Service is not a proper defendant herein. 26 U.S.C. § 7422(f). Accordingly, this action against it hereby is DISMISSED sua sponte for the failure of the plaintiff to state against it a claim upon which relief can be granted. Myers v. Davis, 467 F.Supp. 8, 9 n. 2[2] (D.C.Tenn.1978).

        . "Unless expressly prohibited by statute, a court may award reasonable fees and expenses of attorneys, in addition to the costs which may be awarded pursuant to subsection (a), to the prevailing party in any civil action brought by or against the United States or any agency and any official of the United States acting in his or her official capacity in any court having jurisdiction of such action. * * *" 28 U.S.C. § 2412(b).


author: NOLAND, Chief Judge.

text:
    UNITED STATES of America, Plaintiff, v. Jane R. FERGUSON, Defendant.
    Cause No. IP 84-100-CR.
    United States District Court, S.D. Indiana, Indianapolis Division.
    Feb. 12, 1985.
    Roger Duncan, Asst. U.S. Atty., Indianapolis, Ind., for plaintiff.
    Lowell H. Beecraft, Huntsville, Ala., for defendant.
   MEMORANDUM OF DECISION AND FINDING OF GUILTY

NOLAND, Chief Judge.

On November 15, 1984, the Grand Jury returned an eight count indictment against defendant, Jane R. Ferguson. Counts one through three allege that defendant willfully and knowingly failed to file an income tax return for the years 1980, 1981, and 1982. Counts four and five allege that defendant willfully supplied false and fraudulent statements claiming to be exempt from withholding for federal income taxes. These statements were allegedly submitted in 1982 and 1983. Counts six through eight allege that defendant knowingly filed fraudulent claims against the United States on three occasions, once in 1981 and twice in 1983.

Trial on this matter began on January 14, 1985. At this time defendant, in open court, waived her right to have the case decided by a jury. The Court, after fully explaining to defendant her absolute right to a jury trial, accepted defendant’s waiver and proceeded to trial without a jury. The government concluded its ease on January 16, 1985, after which the defendant moved for acquittal. The Court overruled the motion, and defendant rested without calling any witnesses or presenting any evidence.

The Court now finds, for the reasons set forth below, that defendant is guilty on all counts of the indictment.

COUNTS 1-3

Counts one through three allege that defendant willfully and knowingly failed to make an income tax return for the years 1980, 1981, and 1982, in violation of 26 U.S.C. § 7203. Section 7203, in pertinent part, states that “[a]ny person required under this title ... by law or regulation to make a return ... who willfully fails to make such a return ... shall be guilty of a misdemeanor.” To establish a conviction the government must prove that defendant was required to file a return, that defendant failed to make a return, and that defendant’s failure was willful. United States v. Grabinski, 558 F.Supp. 1324 (D.C.Minn.1983). Willfully in the tax crime statutes means a voluntary, intentional violation of a known legal duty. United States v. Moore, 627 F.2d 830 (7th Cir. 1980), cert. denied, 450 U.S. 916, 101 S.Ct. 1360, 67 L.Ed.2d 342 (1981). The government may establish a willful violation by circumstantial evidence alone. United States v. MacLeod, 436 F.2d 947 (8th Cir.), cert. denied, 402 U.S. 907, 91 S.Ct. 1378, 28 L.Ed.2d 647 (1971).

Defendant, in support of her motion for acquittal, argues that the government failed to prove defendant acted willfully. Defendant contends the evidence introduced at trial established only a civil tax liability and not that defendant acted willfully. The Court finds, however, that the government carried its burden of proving the violations of 26 U.S.C. § 7203.

Government’s exhibit 35 consists of the record of income earned by defendant while an employee of the Delco-Remy Division of General Motors in Anderson, Indiana. The exhibit, along with the attached wage and tax statement, shows that defendant earned $20,858.12 in 1980. Government’s exhibit 36, also a record of defendant’s earnings, establishes that defendant earned $24,644.32 in 1981. Government’s exhibit 37 shows that defendant earned $27,205.53 in 1982. The government thus proved that defendant was required to file a return in each of the years in question, since defendant had sufficient gross income to necessitate filing a return. See 26 U.S.C. § 6012.

In support of the second element the government offered the testimony of Beatrice Cox and, in addition, government’s exhibits 4 and 5. Cox testified that exhibits 4 and 5 were account transcripts of defendant kept by the Internal Revenue Service. Cox stated these transcripts revealed that defendant did not file a return in 1980, 1981, and 1982. In addition to this evidence the government introduced exhibits 50 through 54. These exhibits are all entitled “Affidavit of Revocation” and are signed by defendant. Each affidavit states that defendant is “not required to file or pay a tax” because defendant was not a corporation and had not “been granted any special privileges by the government, which would make me liable for any income tax.” These exhibits are further evidence that defendant did not file a return during the years in question. The Court finds that the government has established the failure to file a return in 1980, 1981, and 1982. Thus, the second element of the offense has been proved.

The government must now show that the failure to file was willful. In order to establish this the government introduced exhibits 1, 2, and 3. These exhibits were joint returns filed by defendant and her husband in 1977, 1978, and 1979. The Seventh Circuit has previously held that, in a prosecution for failure to file a tax return, earlier returns can be used to show willfulness. United States v. Moore, supra; United States v. Farris, 517 F.2d 226 (7th Cir.1975). The Court finds that the fact defendant had previously filed income tax returns demonstrates she knew of her duty to file in 1980, 1981, and 1982, but willfully failed to do so. Additional exhibits introduced by the government show that defendant did not consider the Internal Revenue Codes “legal” since they were “not duly constituted laws enacted or in agreement with the United States Constitution.” (Government’s exhibit 56.) Defendant’s belief in the invalidity of the tax laws further strengthens the government’s contention that defendant acted willfully and not just accidentally, inadvertently, or negligently.

In view of the foregoing, it is clear beyond a reasonable doubt that defendant willfully failed to file a return in 1980, 1981, and 1982, in violation of 26 U.S.C. § 7203.

COUNTS 4 & 5

Counts four and five of the indictment allege that defendant willfully supplied false and fraudulent statements to her employer, Delco-Remy, in which she claimed to be exempt from withholding for federal income taxes. The indictment alleges defendant submitted the false withholding statements in 1982 and 1983.

26 U.S.C. § 7205(a) states:

Any individual required to supply information to his employer under section 3402 who willfully supplies false or fraudulent information, or who willfully fails to supply information thereunder which would require an increase in the tax to be withheld under section 3402, shall, in lieu of any other penalty provided by law (except the penalty provided by section 6682), upon conviction thereof, be fined not more than $1,000, or imprisoned not more than 1 year, or both.

To establish a violation of this section the government must show that defendant was an employee, that defendant supplied false or fraudulent information, and that she acted willfully. United States v. Herzog, 632 F.2d 469 (5th Cir.1980), reh. denied, 636 F.2d 315 (1981). As under section 7203, willfully means a voluntary, intentional violation of a known legal duty.

Government’s exhibit 41 is defendant’s employment record from Delco-Remy. This exhibit shows that defendant was employed by Delco-Remy from 1981 through 1984. Defendant stipulated to the admission of this document and also stipulated that only one “Jane R. Ferguson” worked at Delco-Remy during the time in question. Thus, there is no dispute that defendant was an employee.

The government introduced several exhibits to establish that defendant supplied false or fraudulent information. Government’s exhibits 33 and 34, withholding certificates signed by defendant on January 12, 1982 (exhibit 33) and January 3, 1983 (exhibit 34) both state that defendant is exempt from income tax withholding. As proof that these certificates were false or fraudulent, the government introduced exhibit 41, which showed that from 1981 to 1982 defendant earned from $10.39 to $11.09 per hour. Exhibit 41 also showed that from 1982 to 1984 defendant earned from $9.56 to $14.81 per hour. Therefore, since defendant had been earning income during the relevant time periods in counts four and five, defendant’s claims of exemptions were clearly false.

The last element of a section 7205 violation is willfulness. Defendant again contends the government failed to establish that defendant acted willfully. The Court finds, however, that much of what the government used to establish willfulness under section 7203 supports a showing of willfulness under section 7205. Defendant knew of her obligation to pay taxes and to have tax withheld from her earnings (see exhibits 1, 2, and 3, with attached wage and tax statements), but willfully chose to disregard those obligations, in large part because of her disagreement with federal income tax laws.

The government has sustained its burden of establishing the offenses contained in counts four and five of the indictment.

COUNTS 6, 7 & 8

Counts six, seven, and eight of the indictment allege that defendant violated 18 U.S.C. § 287, which states:

Whoever makes or presents to any person or officer in the civil, military, or naval service of the United States, or to any department or agency thereof, any claim upon or against the United States, or any department or agency thereof, knowing such claim to be false, fictitious, or fraudulent, shall be fined not more than $10,000 or imprisoned not more than five years, or both.

Specifically, count six alleges that in 1981 defendant presented a fraudulent Form 1040X to the Internal Revenue Service, in which she claimed that she had no adjusted gross income or federal tax liability in 1979. (Government’s exhibit 6.) Count seven alleges defendant submitted a fraudulent Claim Form 843 to the Internal Revenue Service in 1983. This form stated that tax collected during 1980 had been collected illegally and that Internal Revenue Service owed defendant a $903 refund. (Government’s exhibit 7.) Count eight alleges that defendant submitted another fraudulent Claim Form 843 in 1983. This form requested a refund of $2,309. (Government’s exhibit 8.)

The Court finds that the government has established the offenses charged in counts six, seven, and eight. The documents constituting exhibits 6, 7, and 8 are all claims made by defendant upon an agency of the United States, i.e., the Internal Revenue Service. See generally United States v. Miller, 545 F.2d 1204 (9th Cir.1976), cert. denied, 430 U.S. 930, 97 S.Ct. 1549, 51 L.Ed.2d 774 (1977) (false claims for refund sent to Internal Revenue Service could be prosecuted under 18 U.S.C. § 287.) The government has also shown that defendant knew the claims were false, fictitious, or fraudulent. As has previously been established, defendant knew of her obligation to pay taxes and had done so in the past. But beginning in 1980, defendant refused to pay taxes, claimed she was exempt from withholding, and filed for a refund of any amount that was withheld or paid. Government’s exhibit 6 shows that defendant attempted to get a refund of $10,165, which was the amount defendant paid in taxes in 1979 (see government’s exhibit 3). Government’s exhibit 7 shows that defendant requested a refund of $903, which was within eight cents of the amount withheld from defendant’s wages in 1980 (see government’s exhibit 58). Similarly, in government’s exhibit 8 defendant claimed a refund of $2,309, which corresponds to the amount withheld from defendant’s wages in 1981. The evidence submitted by the government indicates that defendant was attempting to avoid paying any money in income taxes, and that she knowingly submitted false claims in furtherance of her plan. Defendant’s belief that income tax laws are invalid or that income tax withheld from her wages had been collected “illegally/erroneously” does not excuse her deliberate attempts to avoid paying taxes. United States v. Moore, supra. Counts six, seven, and eight have been proved beyond a reasonable doubt.

Accordingly, the government having proved beyond a reasonable doubt all of the offenses in the indictment, defendant Jane R. Ferguson is found guilty on all eight counts. Pursuant to Rule 23 of the Federal Rules of Criminal Procedure, the above memorandum constitutes the general findings of fact and conclusions of law. The Court orders that the probation service of this Court complete a presentence investigation of defendant within 21 days of this entry.

IT IS SO ORDERED.

      . It is well settled that even a good-faith disagreement with the tax law does not negate willfulness. United States v. Kraeger, 711 F.2d 6 (2nd Cir.1983); United States v. Moore, supra; United States v. Karsky, 610 F.2d 548 (8th Cir. 1979), cert. denied, 444 U.S. 1092, 100 S.Ct. 1058, 62 L.Ed.2d 781 (1980).

      . The government correctly points out that there is a dispute as to whether materiality is an essential element of 18 U.S.C. § 287. Compare United States v. Irwin, 654 F.2d 671 (10th Cir. 1981) (materiality not an element), with United States v. Pruitt, 702 F.2d 152 (8th Cir.1983) (materiality is an element). The Court in Pruitt defined materiality as whether the claim had a tendency to induce the government to act by placing the claimant in a position to obtain benefits from the government. If materiality is indeed an element of section 287, the court finds it has been established under the Pruitt test even though defendant never actually received the refunds.


author: DUHE, Judge.

text:
    COMMERCE & ENERGY BANK OF LAFAYETTE v. Herman HANCOCK, Ann Hancock and Herman Hancock Sales, Inc.
    Civ. A. No. 84-1783 “L”.
    United States District Court, W.D. Louisiana, Lafayette-Opelousas Division.
    Feb. 20, 1985.
    Gary McGoffin, Lafayette, La., for plaintiffs.
    Charles S. Weems, III, Alexandria, La., for defendants.
   MEMORANDUM RULING

DUHE, Judge.

Presently before the Court is a motion by defendants Herman Hancock and Ann Hancock to dismiss plaintiff Commerce and Energy Bank of Lafayette’s claims against them for lack of personal jurisdiction. For the reasons set forth below, this Court grants the Hancocks’ motion.

This suit arose out of a certain business arrangement between plaintiff, a Louisiana bank, and Herman Hancock Sales, Inc. (HHS), a Texas corporation. HHS was to purchase accounts receivable from Pelican Fastener Corporation (Pelican) and remit twenty percent (20%) of the collections made to the plaintiff for application on the pre-existing debt of Pelican Fastener. Plaintiff alleges that it is now due $70,-000.00 under the terms of that agreement.

Herman and Ann Hancock are domiciliarles of Jasper, Texas. They are both stockholders in Pelican, a Louisiana corporation, and HHS. Both are also officers in HHS. The agreement which is the source of this suit was concluded when Herman Hancock, representatives of plaintiff, and others met in Lafayette in February, 1983. The question presented is whether the Hancocks are amenable to the jurisdiction of this Court through their activities in this state.

The Louisiana Long-Arm Statute, La.R.S. 13:3201 et seq., provides in pertinent part:

§ 3201. A court may exercise personal jurisdiction over a non-resident, who acts directly or by an agent, as to a cause of action arising from any one of the following activities performed by the non-resident:
(1) Transacting any business in this state.
(2) Contracting to supply services or things in this state.
(3) Causing injury or damage by an offense or quasi-offense committed through an act or omission in this state.

HERMAN HANCOCK

Plaintiff expended a great deal of energy detailing Mr. Hancock’s contacts with the State of Louisiana. Except to the extent those activities are related to the cause of action of this suit, they are irrelevant. The Louisiana Long-Arm Statute permits the exercise of jurisdiction over non-residents only on the basis of activities from which the cause of action arose. The only activity of Mr. Hancock in Louisiana related to plaintiff’s cause of action was his meeting in February, 1983, with representatives of plaintiff.

In order to assert jurisdiction over Mr. Hancock on the basis of the meeting and agreement in question, “it is necessary to show that he took ‘purposeful and affirmative’ action on his own behalf and not as a corporate officer, or that he had a relationship” with HHS that justifies imputing its susceptibility to suit in this court to him. Bamford v. Hobbs, 569 F.Supp. 160, 164 (S.D.Tex.1983).

The Court in Bamford went on to note: “Corporate boundaries are generally respected by the courts. If a corporate officer’s only contact with the forum is through the performance of his official duties, he is not, as a consequence therefrom, subject to personal jurisdiction in that forum [citations ommitted]. An individual may have his corporation’s contacts with the forum attributed to him only if there is an alter ego relationship between the two that justifies a court in disregarding the separate corporate entity”. 569 F.Supp. at 168-169.

The plaintiff’s burden in this case thus has been to establish that Mr. Hancock acted as an individual rather than as an officer of HHS, or that Mr. Hancock and HHS are in effect alter egos. Plaintiff has failed to meet this burden. It has only shown that Mr. Hancock personally negotiated the agreement between it and HHS.

ANN HANCOCK

Ann Hancock is an officer and stockholder of HHS. However, she was not present at the meeting in question in February, 1983, from which the contract and plaintiff’s cause of action arose. Indeed, she had not visited Louisiana at all in connection with plaintiff’s cause of action. In order for this Court to assert jurisdiction over her, the plaintiff has the burden of establishing that (1) she is an alter ego of HHS, or (2) Herman Hancock acted as her agent to bind her in her individual capacity.

Plaintiff has utterly failed to meet its burden in both respects. It has failed even to suggest that Ann Hancock is an alter ego of HHS, and while it has suggested that Herman acted as her agent in the February, 1983 meeting, there is no evidence whatsoever to support that assertion.

Plaintiff does expend a great deal of energy detailing Ann Hancock’s ownership of stock in the Pelican and Louisiana Plating Corporations. That fact, however, is simply irrelevant. Plaintiff’s cause of action arises from the alleged breach of the agreement between it and HHS.

Accordingly, all claims against Mr. and Mrs. Hancock must be dismissed for want of personal jurisdiction.


author: TERRENCE WILLIAM BOYLE, District Judge.

text:
    Alinda Graham MEARES, Plaintiff, v. BRUNSWICK COUNTY, NORTH CAROLINA, et al., Defendants.
    No. 84-82-Civ-7.
    United States District Court, E.D. North Carolina, Wilmington Division.
    April 12, 1985.
    Leslie J. Winner, Charlotte, N.C., for plaintiff.
    Mary Easley, Southport, N.C., Steven M. Shaber, Asst. Atty. Gen., Raleigh, N.C., Allan Gitter, Winston-Salem, N.C., for defendants.
   ORDER DENYING MOTIONS TO DISMISS

TERRENCE WILLIAM BOYLE, District Judge.

This cause comes on to be heard before the undersigned United States District Judge on the defendants’ motions to dismiss pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure for failure to state a claim upon which relief can be granted. The plaintiff is a former employee of the Brunswick County Department of Social Services. - The defendants are Brunswick County, North Carolina; the Brunswick County Board of County Commissioners; the Brunswick County Department of Social Services; the Brunswick County Board of Social Services; and James F. Orrock, former director of the Brunswick County Department of Social Services.

The plaintiff brings this action pursuant to 42 U.S.C. 1983, alleging that the defendants violated her constitutional rights when the defendant Orrock terminated her employment with the Brunswick County Department of Social Services. She seeks money damages and reinstatement.

The principle of sovereign immunity which is implicit in the Eleventh Amendment is the basis for the defendants’ motions to dismiss. The defendants have filed an affidavit and an exhibit in support of the motions to dismiss, to which the plaintiff has objected. The court sustains the objection because the evidence is not properly considered on a Rule 12(b)(6) motion. The court must assume the factual allegations of the plaintiff to be true on a motion under 12(b)(6). For the reasons stated below the defendants’ motions are DENIED.

The Constitution of the United States originally did not grant to the United States Courts jurisdiction to hear a suit against a state brought by one of its citizens, but in Chisholm v. Georgia, 2 U.S. (2 Dallas) 419, 1 L.Ed. 440 (1793), the Supreme Court ruled that Article III, Section 2 of the Constitution granted the United States Courts jurisdiction to hear suits against a state brought by citizens of another state. The states reacted quickly to this decision and in 1798 ratified the Eleventh Amendment to the Constitution to effectively reverse the Chisholm decision. The Eleventh Amendment reaffirmed the widely-held view that the States did not give up their sovereign immunity when they adopted the Constitution. See Hans v. Louisiana, 134 U.S. 1, 10 S.Ct. 504, 33 L.Ed. 842 (1890). When the states joined the Union, the states’ sovereign immunity to suits brought by its citizens stood undiminished.

The Tenth Amendment to the United States Constitution ratified in 1791 states, “The powers not delegated to the United States by the Constitution, nor prohibited by it to the states, are reserved to the states respectively, or to the people.” One of the “powers not delegated to the United States” is the essential character of a state as sovereign, to be immune to suits brought by its citizens. The Eleventh Amendment has become a shorthand reference to the principle of sovereign immunity which the Amendment implicitly recognizes. See Fitzpatrick v. Bitzer, 427 U.S. 445, 456, 96 S.Ct. 2666, 2671, 49 L.Ed.2d 614 (1976).

A court of the United States may enjoin a state official from enforcing an unconstitutional law and such an injunction does not affect the State in its sovereign or governmental capacity. Ex Parte Young, 209 U.S. 123, 28 S.Ct. 441, 52 L.Ed. 714 (1908). However, a United States court may not enjoin a state official to make back payments of benefits wrongfully withheld, even though the benefits would be in the form of equitable restitution. Such payments would come from the state treasury and are barred by the principle of sovereign immunity. Edelman v. Jordan, 415 U.S. 651, 94 S.Ct. 1347, 39 L.Ed.2d 662 (1974).

The Fourteenth Amendment to the United States Constitution states, in part:

No state shall make or enforce any law which shall abridge the privileges or immunities of citizens of the United States; nor shall any state deprive any person of life, liberty, or property without due process of law; nor deny to any person within its jurisdiction the equal protection of the law.
The Congress shall have power to enforce, by appropriate legislation, the provisions of this article.

Pursuant to this grant of authority Congress passed the 1972 amendments to Title VII of the Civil Rights Act of 1964. These amendments broadened the Act’s coverage to protect persons employed by states from discrimination. The Supreme Court held that the States gave up a part of their sovereignty with the adoption of the Fourteenth Amendment, and therefore the principle of sovereign immunity was no bar to a suit for back pay and attorneys fees brought under the 1972 Amendments. Fitzpatrick v. Bitzer, 427 U.S. 445, 96 S.Ct. 2666, 49 L.Ed.2d 614 (1976).

Title 42 U.S.C. 1983 provides:

Every person who, under color of [state law] subjects, or causes to be subjected, any citizen of the United States ... to the deprivation of any rights, privileges, or immunities secured by the Constitution and laws shall be liable to the party injured in an action at law, suit in equity, or other proper proceeding for redress.

Congress, in this section, did not provide for suits against states, as it did in the 1972 Amendments to Title VII; but instead, it specifically limited the applicability of this section to “persons.” The Supreme Court has ruled that states are not encompassed in the word “person,” but local governments are included. Monell v. Dep’t. of Social Services, 436 U.S. 658, 98 S.Ct. 2018, 56 L.Ed.2d 611 (1978). Though 42 U.S.C. 1983 may have been enacted pursuant to Section 5 of the Fourteenth Amendment, it does not apply to states and therefore states retain sovereign immunity in 1983 actions.

The court must turn its discussion to whether any of the named defendants enjoy the state’s sovereign immunity. The defendant Orrock is sued, not in any official capacity, but as an individual. He has no legitimate claim to sovereign immunity. Scheuer v. Rhodes, 416 U.S. 232, 237-38, 94 S.Ct. 1683, 1686-87, 40 L.Ed.2d 90 (1974).

The defendants Brunswick County and Brunswick County Board of County Commissioners argue that they are part of the state and enjoy the state’s sovereign immunity. See Monell, 436 U.S. at 690 n. 54, 98 S.Ct. at 2035 n. 54. “But the Court has consistently refused to construe the Amendment to afford protection to political subdivisions such as counties and municipalities, even though such entities exercise a ‘slice of state power.’ ” (footnote omitted). Lake Country Estates v. Tahoe Planning Agency, 440 U.S. 391, 401, 99 S.Ct. 1171, 1177, 59 L.Ed.2d 401 (1979). The County and the Commissioners have not shown this court a need “to protect the state treasury from liability that would have had essentially the same practical consequences as a judgment against the State itself.” Id.

The Supreme Court in Moor v. County of Alameda, 411 U.S. 693, 717-21, 93 S.Ct. 1785, 1799-02, 36 L.Ed.2d 596 (1973) articulated several factors from which it concluded that the County of Alameda was not a part of the state of California, but was a separate entity for purposes of diversity jurisdiction. Many of those factors are present in this case: Brunswick County is a “body politic and corporate” which “may sue and be sued;” it has the property rights of a corporation; it “may contract and be contracted with;” and it “may exercise in conformity with the laws of this state county powers, rights, duties, functions, privileges, and immunities of every name and nature.” NCGS 153A-11. The Board of Commissioners exercises the County’s corporate powers. NCGS 153A-12. The County is authorized to levy taxes for a broad variety of purposes including, “To pay and discharge ... any judgment lodged against it____” NCGS 153A-149(c)(10). These powers and the many others enumerated in NCGS-153A show that, Brunswick County and the County Commissioners are not part of the State of North Carolina and they do not enjoy its sovereign immunity.

The defendants Brunswick County Department of Social Services and Brunswick County Board of Social Services also argue that they are an agency or arm of the state and therefore should enjoy its sovereign immunity. The Supreme Court, in Mt. Healthy City Board of Ed. v. Doyle, 429 U.S. 274, 97 S.Ct. 568, 50 L.Ed.2d 471 (1977) found that a local school board was “more like a county or city than ... an arm of the state.” Though the Board received “some guidance from the State Board of Education” and “receive[d] a significant amount of money from the State,” the Court found that it had extensive powers to issue bonds ... and to levy taxes within certain restrictions of state law.” 429 U.S. at 280. The Court decided that the board had no sovereign immunity.

In the case before this court, the Brunswick County Department of Social Services has no authority to tax or raise revenues, but Brunswick County has authority to tax and raise revenues on behalf of the Department. NCGS 153A-149(b)(8), (c)(30). The Board of County Commissioners has extensive authority over the County Department of Social Services as long as the Commissioners act within state law. NCGS 153A-76. The Board of County Commissioners is “authorized to assume direct control of any activities theretofore conducted by or through” the Board of Social Services. NCGS 153A-77. Hence, the County Department of Social Services is merely an extension of the County.

This court’s holding is consistent with the Fourth Circuit’s declaration in Avery v. County of Burke, 660 F.2d 111 (4th Cir. 1981) that the County Department of Social Services is an extension of the county. 660 F.2d at 114. Though that decision was made under NCGS 153 which has been replaced by NCGS 153A, it lends support to this court’s decision. The County Commissioners enact the budget for the County Department of Social Services, NCGS 108A-9(4), and the County has the duty to fund the programs though it receives reimbursement by the state and federal governments NCGS 108A-90. Because the Brunswick County Department of Social Services and the Brunswick County Board of Social Services are extensions of Brunswick County which does not enjoy sovereign immunity, neither do they have sovereign immunity.

Since this court has no jurisdiction to entertain a suit against a state by one of its citizens, if during the pendency of this action further developments should indicate that the Brunswick County Department of Social Services is an organ of state government, the court may inquire into this issue again. All defendants are “persons” within the meaning of 42 U.S.C. 1983, and none enjoy sovereign immunity; THEREFORE, the defendants’ motions to dismiss are DENIED, this 12th day of April, 1985.


author: TOM S. LEE, District Judge.

text:
    Dr. R.E. LIZAK and Dr. R.E. McArthur, d/b/a Arrowhead Clinic, Plaintiffs, v. ASSOCIATED INDEMNITY CORPORATION, Defendant.
    Civ. A. No. E84-0096(L).
    United States District Court, S.D. Mississippi, E.D.
    April 25, 1985.

      Murray Williams, Water Valley, Miss., for plaintiffs.
    Luther T. Munford, Butler, Snow, O’Mara, Stevens & Cannada, Jackson, Miss., for defendant.
   MEMORANDUM OPINION

TOM S. LEE, District Judge.

On February 25, 1983, Bobby Wayne Cole was injured in the course of his employment with Construction Services, Inc. (Construction). Pursuant to the written authorization of Nancy Moffett, Seeretary/Bookkeeper of Construction, Cole was treated by chiropractors Dr. R.E. McArthur and Dr. R.E. Lizak, the plaintiffs. Cole presented the bill for services rendered by McArthur and Lizak to Associated Indemnity Corporation (Associated), the defendant and workers’ compensation carrier for Construction. On May 26, 1983, Lucille Barwick, for Associated, wrote Cole:

We are in receipt of Dr. Lizak’s medical report and bill for services through 5/18/83.
Please be advised we will honor this bill but we do not authorize any further Chiropractic treatment or services.
Should you have a continuing problem with this injury, please see a reputable medical or orthopaedic doctor.

By her affidavit, Barwick stated that Associated has a policy of not paying for extended treatment by a chiropractor. In a memorandum dated January 26, 1983 and sent to Associated, Marshall G. Bennett, Chairman of the Mississippi Workmen’s Compensation Commission, stated:

... Under section 71-3-15, the employer-carrier has the right and duty to properly choose and offer medical care and other treatment to the injured employee. In practice, the employee often requests and receives permission from a representative of the employer to see a specific chiropractor and by assenting to the employee’s request for this attendance or treatment, or by failure to reject such request, the employer may have, in effect, consented to and authorized such treatment. The employer-carrier would therefore be responsible for paying for chiropractic services up to and until such time as the authorization is rejected or cancelled by the employer, or the insurance carrier, who stands in the place of the employer when compensation insurance is obtained.

Therefore, Associated was reasonable in taking the position that it could properly cancel the authorization for chiropractic treatment.

Plaintiffs brought this suit against the defendant alleging that the letter to Cole from Barwick was “false, malicious and slanderous” and that it has damaged their professional reputations as well as causing various forms of personal anguish. The defendant has moved for summary judgment and the court, having considered the memoranda with attachments, is of the opinion that there exist no genuine issues of material fact and that the defendant is entitled to judgment as a matter of law.

Cole stated, in his affidavit, that

I gathered from the letter, and so did my wife and other people who saw the letter, that they, Lucille Barwick and Associated Indemnity Corporation, by the language used in said letter were telling me that Dr. Russell E. McArthur and Dr. Richard E. Lizak and both of them, were not reputable, were dishonest, were not competent or qualified to treat me, that they were unscrupulous and had no integrity, and were not competent to practice their profession; I got the distinct impression from reading this letter that Lucille Barwick and Associated Indemnity Corporation was [sic] saying that my Doctors could do me no good, that I was wasting my time and trouble in going to see them, that they were nothing more than quack doctors and were wholly and completely incompetent to help me or anyone else.

Dr. Lizak, in his deposition, stated that, upon reading the letter, “I felt like I was being phrased as being dishonest, unreputable [sic], charging high fees, doing something wrong in my practice, my treatment was wrong. This whole phrase right here, there was no need to, in the context of this letter, to basically say that I am not reputable, and all the terms that this whole phrase does infer, it was a—I was hurt very much by this.”

It is well established in Mississippi that:

Any written or printed language which tends to injure one’s reputation, and thereby expose him to public hatred, contempt or ridicule, degrade him in society, lessen him in public esteem or lower him in the confidence of the community is actionable per se.

See Ferguson v. Watkins, 448 So.2d 271, 275 (Miss.1984). In Ferguson, the court stated that “the defamation must be clear and unmistakable from the words themselves and not be the product of innuendo, speculation or conjecture.” Id. The Mississippi Supreme Court has also stated:

The meaning to be ascribed to the publication is that which the recipient would correctly, or mistakenly but reasonably understand as intended to be expressed—provided the recipient did actually understand it in the defamatory sense.

Conroy v. Breland, 185 Miss. 787, 189 So. 814, 816 (1939).

The statements of Cole and the plaintiffs make clear that they understood the letter “in the defamatory sense.” This court is of the opinion, however, that, as a matter of law, the letter is not defamatory because the meaning ascribed by the plaintiffs and Cole is not reasonable. The letter does not include any statement regarding the competency of the plaintiffs, nor does it question their treatment of the claimant. The plaintiffs apparently find the sentence advising Cole to “see a reputable medical or orthopedic doctor” to be particularly offensive. That statement obviously refers to a reputable, rather than a disreputable, medical or orthopedic doctor and does not in any way cast aspersions on the reputation or ability of the plaintiffs or any other chiropractor.

It is the opinion of this court that the defendant’s motion for summary judgment should be granted. A separate judgment shall be entered according to the local rules.

      . Dr. McArthur and Dr. Lizak do business as Arrowhead Clinic, Professional Association.


author: PARSONS, District Judge.

text:
    SAUL STONE & COMPANY, Plaintiff, v. Jerry BROWNING, Defendant. John BLUM, Plaintiff, v. SAUL STONE & COMPANY and Bonnie Frost, Defendants.
    Nos. 84 C 644, 84 C 8133.
    United States District Court, N.D. Illinois, E.D.
    May 20, 1985.
    As Corrected Aug. 20, 1985.
    Howard J. Stein, Patrick J. Lamb, Fatten Muchin Zavis Pearl & Galler, Chicago, Ill., for Saul Stone & Company.

      Gregory A. Friedman, James J. Stamos, Coffield Ungaretti Harris & Slavin, Chicago, Ill., for Jerry Browning & John Blum.
    Lloyd Kadish, Pamela Rogers, Chicago, Ill., for defendant Frost.
   MEMORANDUM OPINION AND ORDER

PARSONS, District Judge.

In late 1983, John Blum filed a complaint in the State of Washington against Saul Stone & Company, a brokerage house, and Bonnie Frost, one of its agents, alleging that Frost solicited from the plaintiff, through the plaintiff’s agent, the sum of $80,000 to be invested in the commodities market for the benefit of the plaintiff. Thereafter, Frost represented that the investment was showing considerable earnings and that the earnings had increased the plaintiff’s investment to over $350,000. At that point Blum allegedly directed Stone & Co., through his own agent, Browning, to liquidate the account. This request was repeated on several occasions. These requests, says the plaintiff, were ignored— and then the entire investment, including all the earnings, was lost. In his original complaint filed in the U.S. District Court in the District of Washington, Blum sought recovery for securities fraud under both state and federal laws. In addition he sought recovery for common law fraud, for violation of the Washington State Consumer Protection Act, for negligent misrepresentations, for breach of contract and for breach of fiduciary duty.

In January of 1984, Saul Stone & Company in turn filed an action in this court seeking indemnification against Jerry Browning, a/k/a Jerry Bloom, the undisclosed agent for Blum. The complaint of Saul Stone states that Browning opened the account under the name of “Jerry Bloom” with the knowledge of Stone that the name was an alias, that Browning did not advise Stone that he was opening an account as an agent for Blum, and that therefore Browning should be liable to Stone for any amount Stone might be required to pay to Blum should Blum be successful in his claim.

Then in March of 1984, Blum, without leave of court, filed an amended complaint in his case pending in the Eastern District of Washington alleging the existence of a partnership between himself and Browning.

Finally in October of 1984, the two cases were consolidated in this district and by assignment both are before me. The consolidated cases currently are before me for decision of a motion by Saul Stone & Company for summary judgment or partial summary judgment. In support of its motion for summary judgment, Saul Stone & Company asserts that (1) the alleged partnership claims set out in the amended complaint are barred by the applicable statute of limitations, and (2) the amended complaint fails to name as the party-plaintiffs the alleged partners of the partnership.

As a preliminary matter, an important distinction must be made between a joinder of claims and a joinder of parties. Saul Stone asserts that the newly alleged “partnership claims” are now barred by the statute of limitations. But the applicable Federal Rule here is 15(c). It states:

Whenever the claim ... asserted in the amended pleading arose out of the conduct, transaction, or occurance set forth or attempted to be set forth in the original pleading, the amendment relates back to the date of the original pleading.

It is apparent from reading the original complaint and the first amended complaint, that the claims do arise out of the same transaction. The only difference is the relationship of Blum and Browning at the time of the transaction. It was an agency relationship in the original complaint and a partnership relationship in the amended complaint. The claim, itself, has remained the same.

Then, the notes which follow Rule 15(c) direct the reader, in cases of amendments changing plaintiffs to Rule 17(a) which deals with the question of “real parties in interest”. Rule 17(a) provides in pertinent part:

No action shall be dismissed on the ground that it is not prosecuted in the name of the real party in interest until a reasonable time has been allowed after objection for ... joinder ... of the real party in interest; and such ... joinder ... shall have the same efféct as if the action had been commenced in the name of the real party in interest.

Whether the amendment to the complaint in this matter is viewed under Rule 15(c) as an amendment of the claim or viewed under Rule 17(a) as a failure to name the real party in interest, it is clear from the rules that dismissal would not be appropriate.

The second basis on which Saul Stone seeks dismissal is that the amended complaint fails to name as party-plaintiffs all alleged partners of the partnership. Rule 21 which deals with misjoinder and non-joinder of parties states that:

Parties may be ... added by order of the court on motion of any party or of its own initiative at any stage of the action and on such terms as are just.

Clearly, dismissal for non-joinder also would be inappropriate here. Browning may be joined as a party-plaintiff and the partnership entity may also be joined as a party-plaintiff. Accordingly, the motion of Saul Stone for summary judgment must be and the same hereby is denied.

In the alternative, Saul Stone seeks partial summary judgment as to the causes of action set out in the amended complaint for violation of the Washington State Securities Act and Consumer Protection Act. The grounds given are that Illinois law, not Washington law, governs the rights and liabilities of the parties to this action. The customer’s agreement between Mr. Browning and Saul Stone provides in paragraph 13:

All actions or proceedings arising directly, indorectly, or otherwise in connection with, out of, related to, or from this agreement or any transaction covered hereby shall be litigated at the discretion and election of Stone only in courts whose situs is within the State of Illinois. The undersigned consents to and submits to the jurisdiction of any state or federal court located within the State of Illinois.

Paragraph 12 provides in part:

The provisions of this agreement shall in all respects be construed according to, and the rights and liabilities of the parties hereto shall in all respects be governed by, the laws of the State of Illinois.

Paragraph 12 relates to the choice of laws. This paragraph, however, is limited by its own terms to “provisions of the agreement” and cannot be extended to torts such as those claimed here. Paragraph 13 is much broader. However, it relates only to forum selection and not the choice of law. Therefore, the motion of Saul Stone cannot be granted on these grounds.

Saul Stone also asserts that partial summary judgment should be granted in its favor and that the causes of action based on the Washington State Securities Act and Consumer Protection Act should be stricken because they are preempted by the Commodity Exchange Act, 7 U.S.C. § 1, et seq. It is elementary that a state statute is preempted to the extent it purports to regulate a subject over which Congress has sought to exercise exclusive jurisdiction. Numerous courts have held that the exclusive jurisdiction provisions of the Commodity Exchange Act prevent the application of state statutes in this area. As the court stated in Hofmayer v. Dean Witter & Company, Inc., 459 F.Supp. 733, 737 (N.D.Cal.1978),

In light of Congress’ plainly stated intent to have the Commodity Exchange Act, as amended, preempt the field of regulation of commodity futures trading, any claim under Federal or state securities statutes is barred. (Citations omitted)

In Bache Halsey Stuart Shields, Inc. v. Erdos, 35 Wash.App. 225, 667 P.2d 89, 92-93 (1983), a Washington Appellate Court recognized the preemption of the Commodity Exchange Act over federal and state securities laws dealing with commodity futures trading. The weight of authority dictates that the claims based on the Washington Securities Act and the Washington Consumer Protection Act should be stricken as having been preempted by the Commodity Exchange Act.

In summary, the motion of Saul Stone for summary judgment is denied. The alternative motion of Saul Stone for partial summary judgment as to those matters in the complaint based on Washington state law should be and the same hereby is granted.


author: BELL, District Judge.

text:
    Jacob I. ROSENBAUM and Marjorie Rosenbaum, Plaintiffs, v. INTERNAL REVENUE SERVICE, Defendant.
    No. C84-3830.
    United States District Court, N.D. Ohio, E.D.
    May 22, 1985.
    Westley R, Parsons, Cleveland, Ohio, for plaintiff.
    John Siegel, Asst. U.S. Atty., Cleveland, Ohio, Robin L. Greenhouse, Tax Div., U.S. Dept. of Justice, Washington, D.C., for defendants.
   ORDER

BELL, District Judge.

Plaintiffs seek an award of attorney fees in this matter pursuant to 26 U.S.C. § 7430. The substantive issues in this case were mooted by the actions of defendant, Internal Revenue Service (the Service), in releasing a tax levy which was placed on plaintiffs’ bank account. Plaintiffs filed this action to dissolve that levy in that they had already paid the tax deficiency Internal Revenue sought to collect and had so informed the Service. Plaintiffs offered to send a copy of the cancelled check to resolve the misunderstanding. Nonetheless, the Service levied on plaintiffs’ account as it could find no proof of payment in its own records. Plaintiffs then filed this action to dissolve the levy. Upon receipt of the complaint and investigation of the matter, the Service determined that plaintiffs’ check had in fact been received. The levy was thus promptly dissolved.

Upon submission of the Service’s motion to dismiss, this court determined that because the remedy plaintiffs were seeking had been accomplished, the case was moot and properly subject to dismissal. The matter of attorney fees, however, was reserved as a post judgment matter. The parties have been given an opportunity to argue their positions to the court. The following findings are now entered.

The Service raises two major reasons why attorney fees cannot be entered. First, it is argued that as there was no jurisdiction under the underlying action, attorney fees cannot be awarded. Second, it is argued that even if the court considers the award of attorney fees under 26 U.S.C. § 7430, the requirements cannot be met.

The jurisdictional argument raised by the Service would perhaps be applicable to the end result had this case proceeded further. However, this court at all times maintained jurisdiction over this suit until the issue of jurisdiction could be decided or until it was dismissed. Here all proceedings were deemed moot and no such determination of subject matter jurisdiction was made.

The second issue raised by this request for attorney fees involves the language of § 7430 and the congressional intent as to its application. This provision is part of the Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA) which became effective on February 28, 1983.

To recover attorney fees under this provision, plaintiffs must establish that they were prevailing parties. Pursuant to the definition of that term, two showings must be made: first, that the position of the United States in the civil proceeding was unreasonable; and second, that plaintiffs substantially prevailed with respect to the most significant issue. 26 U.S.C. § 7430(c)(2)(A). It is undisputed in this case that plaintiffs had already paid the deficiency when the levy was imposed and that the levy should not have been imposed. They, therefore, prevailed on the most significant issue.

The second factor to be considered is whether the position taken by the Service was reasonable. The district courts are fairly explicit as to whether the reasonableness of the Government’s position under 26 U.S.C. § 7430 should be considered on the basis of its pre-litigation posture, Sharpe v. United States, 607 F.Supp. 4, 84-1 USTC ¶ 13,574 (E.D.Va.1984); Kaufman v. Egger, 584 F.Supp. 872 (D.Me.1984), aff’d, 758 F.2d 1, 85-1 USTC ¶ 87,629 (1st Cir.1985); Hallam v. Murphy, 586 F.Supp. 1, 84-1 USTC ¶ 9230 (N.D.Ga.1983); Penner v. United States, 584 F.Supp. 1582 (S.D.Fla. 1984), or its posture after litigation has been commenced. Eidson v. United States, 84-1 USTC ¶ 9182 (N.D.Ala.1984); Zielinski v. United States, 84-1 USTC H 9514 (D.Minn.1984); Brazil v. United States, 84-2 USTC 119596 (D.Or.1984). The only circuit court to address the issue was the First Circuit in affirming the district court in Kaufman v. Egger, 758 F.2d 1, 85-1 USTC at 1187-629.

In the instant case, the position taken by the Service after litigation was begun has at all times been reasonable. Its position prior to litigation was undeniably unreasonable, however. The conduct of the Service in failing to properly record plaintiff’s payment of the deficiency may be considered a reasonable mistake. Once plaintiffs contacted the Service, however, and advised it that they had paid and their check had been processed, it was undeniably unreasonable for the Service to impose the levy without investigating thoroughly. Such an investigation pursued after this case was filed easily revealed that plaintiffs had in fact paid the deficiency.

In this court’s view, the better interpretation of § 7430 in this regard is that the prelitigation conduct of the Service may be considered. See Kaufman v. Egger, 758 F.2d 1, 85-1 USTC at ¶ 9278. It would otherwise be too easy in every case for the Service to become “reasonable” after a case is filed when its conduct had caused untold hardships at the administrative level. As the plaintiffs have shown that the conduct of the Service was unreasonable prior to their filing of this case, they may properly be considered prevailing parties under § 7430.

Before awarding litigation costs under section 7430, however, plaintiffs must also show that they have exhausted administrative remedies. 26 U.S.C. § 7430(b)(2). Treasury Regulation § 301.7430-l(d) sets out what is required before suit is filed:

(d) Actions involving summonses, levies, liens, jeopardy and termination assessments, etc. (1) A party has not exhausted its administrative remedies available within the Internal Revenue Service with respect to a matter other than one to which paragraph (b) or (c) applies (in-eluding summonses, levies, liens and jeopardy and termination assessments) unless, prior to filing an action in a court of the United States—
(i) The party submits to the district director of the district having jurisdiction over the dispute a written claim for relief reciting facts and circumstances sufficient to show the nature of the relief requested and that the party is entitled to such relief; and
(ii) The district director has denied the claim for relief in writing or failed to act on the claim within a reasonable period after such claim is receivd by the district director.

Plaintiffs admit that no written claim was submitted to the district director. They argue that this provision may be waived by the Service and was waived in this case when they were told that there was nothing they could submit to avoid the levy. That is not convincing, however. In fact, submission of a written claim with a copy of the cancelled check in this case may well have prevented the levy. It is not reasonable to infer that a Service agent could unilaterally waive this requirement in a telephone conversation. Consequently, as plaintiffs failed to submit a written claim as outlined in the treasury regulation, they failed to exhaust their administrative remedies prior to filing this case and are thus ineligible for an award of litigation costs pursuant to § 7430.

Notwithstanding the rulings of this court as they relate to the legal issues raised, the court is fully sympathetic with the frustrations experienced by plaintiffs in regard to the emplacement of the tax levy under discussion. The position taken by the Service’s representative—if not his arrogance—created a needless situation resulting in real and measurable anguish to these plaintiffs. The problem created as a result of the Services’ robotic reaction to plaintiffs’ inquiries could have been resolved with very little effort on the part of defendant’s representative.

In view of the precedent of the law as this court views it, however, judgment must be rendered in favor of defendant on the issue presented. Because plaintiffs do not meet the requirements set forth in section 7430, their motion for attorneys’ fees must be denied.

IT IS SO ORDERED.


author: CONABOY, District Judge.

text:
    Joseph S. MARRANCA, Plaintiff, v. UNITED STATES of America, Defendant. Charles MARRANCA, Plaintiff, v. UNITED STATES of America, Defendant.
    Civ. Nos. 83-0619, 83-0620.
    United States District Court, M.D. Pennsylvania.
    May 31, 1985.

      Patrick E. Dougherty, Kingston, Pa., Joseph R. Reisinger, Wilkes-Barre, Pa., for plaintiffs.
    Frederick E. Martin, Asst. U.S. Atty., Lewisburg, Pa., Michael J. Salem, Trial Atty., Tax Div., U.S. Dept. of Justice, Washington, D.C., for defendants.
   MEMORANDUM AND ORDER

CONABOY, District Judge.

Presently before the Court is Plaintiffs’ motion for litigation costs filed pursuant to 26 U.S.C. § 7430. The appropriate briefs and memoranda have been filed and the matter is now ripe for our decision.

BACKGROUND

This matter stems from termination assessments made against the Plaintiffs by the Internal Revenue Service for the amount of $54,577.94 each. After the termination assessments were made the Plaintiffs sought administrative review of the assessments with the Internal Revenue Service. The assessments were sustained by the Appellate Division on May 5, 1984 and thereafter, on May 11,1983, the matter was filed in this Court.

The termination assessments were prompted by information obtained from the Pennsylvania State Police.

Commencing on January 30, 1983 legal wiretaps were placed by the Pennsylvania State Police on the residential telephone of Joseph Marranea at 107 Jean Street, Exeter, Pennsylvania, and the residential telephone of his brother Charles Marranea at 106 Jean Street, Exeter, Pennsylvania. These wiretaps revealed that the taxpayers were involved in accepting “layoff” bets on various sporting events (particularly football and basketball games), and further revealed the extent of the betting activity for the particular days on which the wiretaps were monitored. Based upon information received from the wiretaps and additional surveillance, search warrants were issued for the premises of the taxpayers and executed on February 23, 1983.

During the course of the searches, the State Police, in conjunction with various local police, seized approximately $58,000 in cash.

Based on its assessment and analysis of the wiretap and search and seizure information obtained by the State Police, the Internal Revenue Service concluded that the taxpayers were operating as “bankers” in an illegal wagering operation for a period beginning at least as early as 1982 and ending at the time of the State Police raids on February 23, 1983. “Bankers” in such an operation are the people who control the illegal wagering operations. They make all payouts, pay commissions owed to betting pool sellers, and are literally the owners-operators of the betting business. Based upon the aforesaid information, the Service determined that average daily receipts of $11,400.00 were taken over the telephone of Charles Marranea and average daily receipts of $3,497.00 were taken over the telephone of Joseph Marranea. These average daily receipts were then combined and multiplied by 53 days to determine a gross income from gambling for the two Plaintiffs of $789,852.00. [see Gerardo v. Commissioner, 552 F.2d 549 (3d Cir.1977) ] The Interna] Revenue Service then utilized a factor of 30% as a profit margin for the illegal wagering operation, resulting in an estimated net profit of $236,956.00. [see Shades Ridge Holding Co. v. Commissioner, 23 TCM 1665 (1964) aff’d sub. nom. Fiorella v. Commissioner, 361 F.2d 326 (5th Cir.1966) ] This amount was then split equally between the Plaintiffs, again based on the wiretap information which indicated that the Plaintiffs were in the habit of splitting the profits from the enterprise equally.

Based upon this information, the Service made termination assessments against the Plaintiffs on March 7, 1983 for income taxes for the period of January 1, 1983 through and including February 23, 1983.

On February 29, 1984, this Court issued an Opinion and Order remanding the matter to the Commissioner of Internal Revenue. In our Opinion we noted that Commissioner was reasonable in making the assessment, but that, the taxpayers sustained their burden of showing that the amount of the assessment was not appropriate under the facts presented to this Court. We felt that the Commissioner should be given the opportunity to review the appropriate evidence concerning the type of profit margin that generally attaches to a sports gambling operation such as that carried by the Marraneas, and concluded that the appropriate action was to remand the matter to the Commissioner for further review of the amount of the assessments. The matter was eventually settled by agreement to pay tax on a 7% profit margin rather than 30%.

PLAINTIFFS’ § 7430 MOTION

Title 26 of the Code, § 7430, provides that in the case of any civil proceeding brought in a court of the United States in connection with the refund of any tax “the prevailing party may be awarded a judgment for reasonable litigation costs incurred in such proceeding.” Id. § 7430(a). The Code states that “reasonable litigation costs” include, inter alia, “reasonable fees paid or incurred for the services of attorneys in connection with the civil proceeding.” Id. § 7430(c)(l)(A)(iv).

In order to collect reasonable litigation costs under 26 U.S.C. § 7430, the party seeking such costs must have prevailed in the underlying action. Here, the United States does not agree that the Plaintiffs are the prevailing parties and thus the Court must determine that issue pursuant to 26 U.S.C. § 7430(c)(2)(B). In making this determination we look to 26 U.S.C. § 7430(c)(2)(A), which provides as follows:

In general—the term “prevailing party” means any party to any proceeding described in subsection (a) ... which—
(i) establishes that the position of the United States in the civil proceeding was unreasonable, and
(ii) (I) has substantially prevailed with respect to the amount in controversy or
(II) has substantially prevailed with respect to the most significant issue or set of issues presented.

Here, the Government concedes that the Plaintiffs have satisfied the requirement of Section 7430(c)(2)(A)(ii), since they have “substantially prevailed with respect to the amount in controversy” in that they have obtained a significant reduction in the amounts of the termination assessments against them as a result of the settlement with the Government.

The Government correctly argues, however, for the Plaintiffs to succeed, they must also satisfy Section 7430(c)(2)(A)(i), which requires establishing that the position of the United States in the civil proceeding was unreasonable.

Here, the Plaintiffs argue that because the Government sought to recover an amount by way of taxes (based on a 30% profit margin) that was so far in excess of what finally was agreed upon in settlement (based on a 7% profit margin), that the Government’s position must therefore be considered unreasonable. An extension of that argument is that it required extensive litigation and negotiation in settlement, all of which was costly to the Plaintiffs, to finally settle the Government’s claim against them.

The Government, on the other hand, argues that it was the Plaintiffs’ own violation of the law (Int.Rev.Code of 1954 Sec. 6001, 26 U.S.C.) in failing to keep accurate records and report their income properly that made it extremely difficult for the Government to assess an accurate amount of taxes. Here, too, the Government argues that it used current case law (see Shades Ridge, supra) to assist it in determining the amount of taxes claimed, even though that case eventually turned out to refer to a different type of gambling than that which was engaged in by the Plaintiffs. While the Government concedes that eventual investigation and review of the case determined that their estimates of profit in the type of operation in which the Plaintiff was engaged was excessive, it argues that it was not unreasonable under circumstances where the Plaintiffs were engaged in illegal conduct and further where they failed to provide the Government with any records at all, upon which the Government could make an accurate and responsible allocation of taxes.

In looking to the history of 26 U.S.C. § 7430, we find that Congress intended that the awarding of fees to prevailing parties “will deter abusive actions and overreaching by the Internal Revenue Service and will enable individual taxpayers to vindicate their rights regardless of their economic circumstances.” H.R.Rep. 97-404, 97th Cong.2d Sess. 16 (1982), at 11.

Further reference to this history reveals that it was Congress’ intention that in making its determination on whether or not the Government’s position was unreasonable in a given situation, the Court should take into account all pertinent factors, including:

(1) Whether the Government used the costs and expenses of litigation against its position to extract concessions from the taxpayer that were not justified under the circumstances of the case,
(2) Whether the Government pursued the litigation against the taxpayer for purposes of harassment or embarassment, or out of political motivation,
and
(3) Such other factors as the Court finds relevant. (H.R.Rep. 97-404, supra, at 12).

In this day and age, when by Statute, and otherwise, successful parties, particularly against the Government and Government agencies, may be entitled to payment of counsel fees and costs, a number of decisions have provided guidelines and philosophic directives for determining the “reasonableness” of the Government’s conduct in defending a case, or whether the Government was “substantially justified” in its handling of a claim against it. The rationale in those cases is helpful to us here also. For instance, in National Resources Defense Council, Inc. v. United States Environmental Protection Agency, 703 F.2d 700 (3d Cir.1983), we find the following:

The mere fact that the United States lost the ease does not show that its position in defending the case was not substantially justified. The committee reports make this clear. They explain that the standard of reasonableness “should not be read to raise a presumption that the Government position was not substantially justified, simply because it lost the case.” S.Rep. No. 253, supra at 7; H.R. Rep. No. 1418, supra at 11, 1980 U.S. Code Cong. & Ad.News at 4990. Indeed the committee reports show that Congress did not intend the “substantially justified” standard to “require the Government to establish that its decision to litigate was based on a substantial probability of prevailing.” Id. Making the outcome of the case determinative would virtually eliminate the “substantially justified” standard from the statute. Broad Ave. Laundry and Tailoring v. United States, 693 F.2d 1387 (C.A. Fed.1982).

Earlier, in 1977, the Third Circuit Court of Appeals struck a balance between the legitimate interest in assessing applicable taxes on income derived from illegal gambling and the right to be free from oppressive arbitrary assessments, (see U.S. v. Gerardo, supra) More recently, the Court, citing United States v. Janis, 428 U.S. 433, 96 S.Ct. 3021, 49 L.Ed.2d 1046 (1976), endorsed its Gerardo decision and stated that the IRS has sometimes overreacted and that the taxpayer’s failure to keep adequate records does not justify a “naked assessment without foundation whatsoever”. L. Jay Walker v. Commissioner of Internal Revenue, 757 F.2d 36 (3d Cir. 1985).

Using the foregoing guidelines we find no proof that the Government’s position was unreasonable under the circumstances of this case. Here, we have an instance where the Plaintiffs tried to avoid all payment of taxes by not reporting any income whatsoever, and further, complicated the process of determining the amount of taxes they did owe by keeping no records at all, which would allow the Government to make a reasonable assessment against them. In other words, the Plaintiffs forced the Government to make a termination assessment by not reporting any income. And even though the Plaintiffs eventually showed their profits were not as great as the Defendant originally claimed, had no action been taken by the Defendant, the Plaintiffs would have paid no tax at all. It is hard to imagine that the Congress intended to consider parties such as the Plaintiffs in this case, as prevailing parties, under circumstances where their initial action was designed to evade any payment of taxes on this substantial illegal income.

It is the finding of this Court then that the Plaintiffs are not the prevailing parties who would be entitled to payment of their legal fees, because they have been successful in proving only one prong of the test required for a grant of such fees, and further, it is our finding that in the area where they did “prevail”, they did not fully “prevail” since their original effort was to pay no tax at all, when in the final analysis they were only successful in negotiating a lesser amount than the Government originally demanded.

Under all of the circumstances of this case, therefore, it is the determination of this Court that the Plaintiffs have not proved their right as prevailing parties to any fees, and the motion will therefore be denied. See Kaufman v. Egger, 584 F.Supp. 872 (D.Maine, 1984), and Randazzo v. U.S. Dept. of Treasury, et al., 581 F.Supp. 1235 (W.D.Pa.1984).


author: RAYMOND J. BRODERICK, District Judge.

text:
    Mohammed S. JAHANGER, M.D. v. PUROLATOR SKY COURIER, Purolator Courier Corporation c/o C.T. Corporation Systems.
    Civ. A. No. 83-4674.
    United States District Court, E.D. Pennsylvania.
    June 28, 1985.

      Thomas J. McBride, McBride, Ruch & Gontram, Philadelphia, Pa., for plaintiff.
    Steven A. Asher, LaBrum & Doak, Philadelphia, Pa., for defendant.
   MEMORANDUM

RAYMOND J. BRODERICK, District Judge.

Plaintiff Mohammed Jahanger seeks to recover damages he suffered when his shipment of legal documents in support of his claim against the Iranian government arrived at its destination at the Peace Palace, The Hague, one day late for consideration by that body. Plaintiff contends that agents of the defendant, Purolator Sky Courier, made oral representations constituting an oral contract that the shipment would be delivered in four days, and claims that the fact that the delivery actually took five days to reach its destination constitutes a breach of that agreement. Defendant contends that its standard airbill is the express contract governing this shipment. The airbill provides that Purolator does not specifically guarantee a delivery date. The defendant moves for summary judgment on the basis of the terms of the airbill.

In deciding defendant’s motion for summary judgment, the Court must determine whether it has carried its burden of showing that there are no genuine issues of material fact which would preclude judgment in its favor as a matter of law. See Hollinger v. Wagner Mining Equipment Co., 667 F.2d 402, 405 (3d Cir.1981). As to issues of fact, all reasonable inferences from the evidentiary material of record must be drawn in favor of the plaintiff. Small v. Seldows Stationary, 617 F.2d 992, 994 (3d Cir.1980). A response to a properly supported summary judgment motion may not rest on allegations in the pleadings, but must present significant probative evidence in the form of affidavits, depositions, or answers to interrogatories sufficient to create a genuine issue of material fact. Fed.R.Civ.P. 56(e); Sunshine Books Ltd. v. Temple University, 697 F.2d 90, 96 (3d Cir.1982).

The material facts as to which there is no genuine issue establish that plaintiff believed he had a property claim against the Iranian government. In order for that claim to receive consideration, it was essential that certain legal documents be received at the Peace Palace in The Hague by January 19, 1982. On January 12, 1982, a secretary in the office of plaintiff’s former attorney in Woodbury, New Jersey called defendant Purolator to inquire about the travel time required to send a package from New Jersey to The Netherlands, and was told that delivery took four days. On January 14, 1982, the same secretary called defendant and asked that the shipment be picked up the following day. Upon pickup on January 15, 1982, plaintiff’s lawyer told defendant’s courier that someone in defendant’s office said delivery would take four days. Defendant’s courier responded, “... if that’s what they said ... then it must be true.”

Defendant’s courier filled out a Purolator airbill and left a copy with plaintiff’s attorney. Plaintiff’s attorney did not read or sign the airbill presented to him. The air-bill provides that no specific delivery date is guaranteed. Plaintiff’s package did not arrive at its destination until January 20, 1982, precluding plaintiff’s opportunity to present his claim against the Iranian government.

Defendant maintains that the five-day delivery in this case was one day longer than the normal delivery time. Defendant’s affidavit states that this delivery took an extra day because the Laker Airlines flight used by defendant was diverted by fog to London Stonstead Airport and was not able to land at Gatwick Airport, its scheduled destination. At Stonstead, plaintiff’s package was impounded by Customs with all other baggage on the airline. Despite attempts by defendant’s agent to expedite the Customs process, plaintiff’s package was returned to Gatwick too late to connect with the flight defendant used to transport shipments to Continental Europe [see Affidavit of Laurie Watkins]. These allegations by defendant are uncontroverted by plaintiff.

Plaintiff contends that defendant’s courier should have advised plaintiff’s attorney of the airbill terms inconsistent with plaintiff’s expectation that delivery would take four days. It is defendant’s position that there is no genuine issue as to any material fact, and that summary judgment should be granted defendant on the ground that the airbill is an express contract between the parties, and that based on the uncontroverted facts of this case parol evidence may not be used to vary the terms of the airbill.

Summary judgment will be granted to defendant. No material factual dispute exists in this case. The only dispute is whether defendant’s airbill or the conversations between the agents of the plaintiff and agents of the defendant constitute the contract in this case.

Plaintiff contends that New Jersey law governs the controversy. The Court is of the opinion, however, that the Warsaw Convention, as modified by the Montreal Treaty, governs this case. Title 49 U.S.C. § 1502. The Warsaw Convention applies to “all international transportation of persons, baggage, or goods performed by aircraft for hire” between signatory nations. Chapter I, Article (1), Title 49 U.S.C. § 1502. The United States and The Netherlands are signatory nations of the Convention. The airbill in this case states that in the event of international carriage, the liability provisions of the Warsaw Convention shall apply to the carriage. It is well-settled that where the contract of the parties provides for international carriage between designated termini, the provisions of the Convention govern the carriage. Butz v. British Airways, 421 F.Supp. 127 (E.D. Pa.1976), aff’d 566 F.2d 1168 (3d Cir.1977). Where the Warsaw Convention applies, its limitations and theories of liability are exclusive. Abramson v. Japan Airlines Co., Ltd., 739 F.2d 130, 134 (3d Cir.1984); Boehringer-Mannhein Diagnostics v. Pan Am World Airways, Inc., 737 F.2d 456 (5th Cir.1984).

Article 19 of the Warsaw Convention provides that carriers “shall be liable for damage occasioned by delay in transportation of ... goods.” In this case the plaintiff contends that an oral agreement explicitly fixed the time for arrival of the plaintiffs goods on January 19, 1982. However, the airbill does not show that any specific time for delivery was stipulated, and in fact the printed provisions on the airbill state that “Due to the nature of the business, Purolator cannot guarantee delivery by a stipulated date or by a stipulated time, nor shall Purolator be liable for the consequences of delay ...”

Article 8(p) of the Warsaw Convention provides that the airbill shall contain “The time fixed for the completion of the transportation and a brief note of the route to be followed, if these matters have been agreed upon.” Article 10(1) provides that “The consignor shall be responsible for the correctness of the particulars and statements relating to the goods which he inserts in the air waybill.” Article 6(5) of the Convention provides that “If, at the request of the consignor, the carrier makes out the air waybill, he shall be deemed, subject to proof to the contrary, to have done so on behalf of the consignor.” Finally, Article 11(1) provides that “The air waybill shall be prima facie evidence of the contract ... and of the conditions of transportation.”

In this case the airbill states on its face that it is “subject to conditions of contract on reverse of shipper’s copy”. Where the airbill states on its face that the conditions printed on the back are part of the contract, and the shipper receives the airbill and permits the carrier to proceed with the shipment, the shipper is presumed to have assented to the terms of the airbill. Carriage Bags, Ltd. v. Aerolinas Argentinas, 521 F.Supp. 1363, 1366 (D.Col.1981). In Carriage Bags, the court observed that in analyzing the legal effect of an airbill under the Warsaw Convention, “the law governing bills of lading is instructive”, and stated

Most courts have held that “a shipper who receives a bill of lading without objection after an opportunity to inspect it, and permits the carrier to act on it by proceeding with the shipment, is presumed to have accepted it as correctly stating the contract and to have assented to its terms.”

Carriage Bags, 521 F.Supp. at 1366, quoting 13 Am.Jur.2d Carriers § 273 (1964). In this case the plaintiff’s attorney, who as shipper was responsible for correctly stating the particulars of the airbill contract (including “the time fixed for the completion of the transportation ... if agreed upon”, (Article 8(p))) must be presumed to have accepted the airbill as correctly stating the terms of the contract, which states that no specific delivery time will be guaranteed.

Plaintiff nevertheless contends that parol evidence is admissible because defendant perpetrated a fraud upon plaintiff. However, plaintiff has failed to present a cognizable issue of fraud in this case. As discussed supra, a response to a motion for summary judgment must rely on significant probative evidence sufficient to create a genuine issue of material fact. Fed.R. Civ.P. 56(e). Plaintiff has produced neither depositions, affidavits, or any other probative evidence in support of his allegations of fraud.

Finally, even if the plaintiff were entitled to rely on the fact that Purolator’s normal timetable called for delivery to The Netherlands in four days, it has been noted that “Given the inevitable hazards of air navigation, which the carrier’s client cannot escape being aware of, many authors and some courts are of the opinion that ‘delay’ should be construed as meaning ‘abnormal delay’, i.e., a delay resulting from the earrier’s failure to take all appropriate measures to ensure departure and arrival of the aircraft at the times specifically specified or indicated in [the] timetable.” Mankiewicz, The Liability Regime of the International Air Carrier 186 (1981). In this case the defendant’s affidavit establishes that the delay of one day was indeed “abnormal” because it resulted from a weather-caused diversion of the carrier’s airplane from its normal destination, and that despite the efforts of the defendant’s agent to expedite the Customs process, plaintiff’s package arrived at its scheduled destination too late to make the connecting flight to The Netherlands. Accordingly, even if plaintiff was somehow entitled to rely on Purolator’s normal timetable for deliveries to The Netherlands, this Court is of the opinion that under the circumstances of this case there was no “delay” for which liability could be imposed under Article 19 of the Warsaw Convention. The defendant’s motion for summary judgment will be granted.