author: NEWCOMER, District Judge.

text:
    James E. WOOD v. Donald T. REGAN, in his capacity as Secretary of the Treasury.
    Civ. A. No. 85-0156.
    United States District Court, E.D. Pennsylvania.
    Aug. 5, 1985.

      Prather Randle, Philadelphia, Pa., for plaintiff.
    Susan Bricklin, Asst. U.S. Atty., Philadelphia, Pa., for defendant.
   MEMORANDUM

NEWCOMER, District Judge.

Plaintiff, a black male, has petitioned under 5 U.S.C. § 7701(g)(2) to recover attorneys fees incurred when he appealed his termination from his job at the United States Mint in Philadelphia, Pennsylvania. Presently before me is a motion to dismiss for lack of jurisdiction or, in the alternative, a motion for summary judgment. For reasons discussed below, I conclude that I may properly exercise jurisdiction over plaintiff’s claim but will deny defendant’s motion for summary judgment.

Plaintiff, James E. Wood, was employed at the Mint for fifteen years as an operator of a machine which placed newly minted nickels into bags for transport. He was discharged after a metal detector sounded as he left his work station and he was found to have eight newly stricken nickels on his person, five of which were misstrikes and thus potentially especially valuable. Wood appealed his termination to the U.S. Merit System Protection Board (MSPB), filing complaints of racial discrimination and procedural irregularities at the hearing. In the midst of the initial hearing before a presiding official at the MSPB’s Philadelphia Office, the Mint cancelled its action and reinstated Mr. Wood to his job with full seniority, pay, and other benefits. It also issued new procedures for the uniform treatment of employees found to possess coinage material without authorization. As a result, the case before the MSPB was dismissed as moot.

The present action is based on Wood’s subsequent petition for attorneys fees. After the MSPB denied the petition and confirmed the denial on review, Wood appealed to this Court. His complaint suggests that 28 U.S.C. § 1343 gives this Court jurisdiction over his claim. That section is not applicable, however, since Title VII “provides the exclusive judicial remedy for claims of discrimination in federal employment.” Brown v. General Services Administration, 425 U.S. 820, 835, 96 S.Ct. 1961, 1969, 48 L.Ed.2d 402 (1976). See also I.M.A.G.E. v. EEOC, 469 F.Supp. 1034, 1037 (D.C.Colo.1979). However, this Court does have jurisdiction under 5 U.S.C. § 7703. Under this section,

[a]ny employee or applicant for employment adversely affected or aggrieved by a final order or decision of the Merit Systems Protection Board may obtain judicial review of the order or decision.

§ 7703(b)(2) specifies that

[cjases of discrimination subject to the provisions of section 7702 of this title shall be filed under section 717(c) of the Civil Rights Act of 1964 (42 U.S.C. 2000e-16(c)).

Wood’s petition is subject to section 7702, which sets forth procedural guidelines for handling Title VII allegations raised before the Board, since that section is applicable to an employee who

(A) has been affected by an action which the employee or applicant may appeal to the Merit Systems Protection Board, and
(B) alleges that a basis for the action was discrimination prohibited by—
(i) section 717 of the Civil Rights Act of 1964 (42 U.S.C. 2000e-16).

Wood’s decision to appeal to this court rather than to the EEOC does not, as the government suggests, constitute a failure to exhaust administrative remedies that would preclude jurisdiction. Section 7702(3) states that

[a]ny decision of the Board under paragraph (1) of this subsection shall be a judicially reviewable action as of—
(A) the date of issuance of the decision if the employee or applicant does not file a petition with the Equal Employment Opportunity Commission under subsection (b)(1) of this section.

Clearly the plaintiff is free to choose whether or not to file with the EEOC.

Finally, this case is properly before this Court rather than the United States Court of Appeals for the Federal Circuit. As noted above, eases of discrimination subject to § 7702 are to be filed under 42 U.S.C. § 2000e-16(c), which confers appellate jurisdiction upon the district courts by reference to § 2000e-5(f) and gives them power to award attorneys fees by reference to § 2000e-5(k). None of the cases the defendant cites in support of its assertion that the case should be brought before the Federal Circuit Court of Appeals involves petitions for attorneys fees. Moreover, they are distinguishable in other ways. In Meehan v. U.S. Postal Service, 718 F.2d 1069, 1073 (Fed.Cir.1983), the plaintiff failed to assert in his petition a clear basis for alleging discrimination or to offer evidence of racial discrimination when appealing his discharge before the MSPB. Wood, in contrast, specifically indicates the manner in which he believed he was discriminated against, as discussed above. In both Wallace v. Merit Systems Protection Board, 728 F.2d 1456 (Fed.Cir.1984) and Hopkins v. Merit Systems Protection Board, 725 F.2d 1368 (Fed.Cir.1984), the Court of Appeals retained jurisdiction because it was ruling on the timeliness of the plaintiffs petition rather than on the merits of the appeal. Wood’s appeal, in contrast, involves the merit of the MSPB’s decision not to award attorneys fees when a matter raising issues of discrimination has been settled.

This Court, then, has jurisdiction under § 7703(b)(2) to hear plaintiff’s case.

The defendant asserts that even if Wood’s allegations of discrimination are sufficient to support this court’s jurisdiction in this action, they will not support his claim for attorneys fees. Since the parties reached an agreement and the suit was dismissed at the MSPB hearing, .the court did not make a finding on the issue of discrimination. If this were a case against a private employer it would be clear that such a finding would not be required, inasmuch as the relevant statute in such cases states:

In any action ... the court, in its discretion, may allow the prevailing party, ... a reasonable attorney’s fee as part of the costs ... (emphasis added).

42 U.S.C. § 2000e-5(k). The defendant observes, however, that the language in the section providing for awards against the government as an employer is different and that the section does require such a finding. The section provides:

If any employee ... is the prevailing party and the decision is based on a finding of discrimination prohibited under section 2302(b)(1) of this title, the payment of attorney fees shall be in accordance with the standards under ... [42 U.S.C. § 2000e-5(k) ]. (emphasis added).

5 U.S.C. § 7701(g)(2).

Although defendant’s interpretation of 5 U.S.C. § 7701(g)(2) has certain appeal, the context of the provision suggests that the provision was intended to be interpreted differently. It seems likely that the requirement in 5 U.S.C. § 7701(g)(2) that “the decision [be] based on a finding of discrimination prohibited under section 2302(b)(1) of Title 5” is intended not to impose a requirement that an express finding of fact be made, but to distinguish cases involving discrimination from other types of cases, referred to in § 7701(g)(1), in which a government agency might also be required to pay attorneys fees. Such a distinction is not required in the provision pertaining to the private sector since all actions for attorneys fees under 42 U.S.C. § 2000e-5(k) arise from discrimination cases.

Without clearer direction from Congress, it would seem improper to make such a distinction between actions against private and public employers, given that “in general ... the substantive anti-discrimination law embraced in Title VII was carried over and applied to the Federal Government.” Morton v. Mancari, 417 U.S. 535, 94 S.Ct. 2474, 41 L.Ed.2d 290 (1974). See also Chandler v. Roudebush, 425 U.S. 840, 841, 96 S.Ct. 1949, 1950, 48 L.Ed.2d 416 (1976) (quoting from a report of the Senate Committee on Labor and Public Welfare, in which the Committee, discussing 42 U.S.C. § 2000e, expressed a desire to grant “Aggrieved [federal] employees or applicants ... the full rights available in the courts as are granted to individuals under Title VII.” S.Rep. No. 92-415, p. 16 (1971)).

Admittedly, there are sound reasons to bar a plaintiff in Wood’s position from raising the issue of attorneys fees once a case has been settled: the grounds for the parties’ decision to settle are not always clear. The Mint did not necessarily concede the issue of discrimination — it may have reinstated Wood to avoid the time, expense, and effort of litigation, or because it recognized that its procedures in such circumstances, though not discriminatory, were faulty. Wood himself alleges that there were procedural irregularities, and it is not clear if these alleged irregularities are exclusively related to discrimination.

Obviously, the parties could have avoided the dispute with which I am presented by addressing the attorneys fee issue in their settlement. Apparently they did not. Case law under similar attorneys fee provisions suggests that, in such circumstances, the Court may award attorneys fees to the prevailing plaintiff. For example, in Maher v. Gagne, 448 U.S. 122, 100 S.Ct. 2570, 65 L.Ed.2d 653 (1980), plaintiff raised both a constitutional claim, for which attorneys fees may be awarded under 42 U.S.C. § 1988, and a statutory claim for which such fees cannot be awarded. The court assessed fees against state officials after the case settled by entry of a consent decree in which plaintiff obtained its objective so as to be a “prevailing party” within the meaning of the statute, even though there was no determination that the plaintiff’s constitutional rights had been violated. Maher v. Gagne, 448 U.S. 122, 132, 100 S.Ct. 2570, 2576, 65 L.Ed.2d 653 (1980). Similarly, in Young v. Kenley, 641 F.2d 192 (4th Cir.1981) the Court awarded attorneys fees to a plaintiff who settled her employment discrimination claim. Before settlement plaintiff presented her case, while defendant did not; however, the court does not indicate that the content of her presentation had any effect on its decision to award attorney’s fees. Instead the Court reasoned that a plaintiff who attains her objective is considered the “prevailing party,” whether she does so by settlement or by a court ruling.

Just as the constitutional issue in Maher and the issue of discrimination in Young remained in those cases until the entire disputes were settled by entry of consent decrees, the issue of discrimination remained in Wood’s case until settlement was reached. It is undisputed that Wood is the prevailing party, attaining his objectives of reinstatement and back pay and benefits. Since it appears highly unlikely that Congress intended to require that a specific finding of discrimination be made before plaintiffs in employment discrimination actions against the government can be awarded attorneys fees, the Mint’s motion for summary judgment will be denied.

I also reject the government’s contention that the merits of plaintiff’s claim must be litigated before me so as to determine the validity of plaintiff’s discrimination claims. Such a procedure would make settlement meaningless. Accordingly, plaintiff will be ordered to submit his attorneys fee petition to the Court.


source: Caselaw Access Project

author: MATSCH, District Judge.

license: Public Domain

text:
    In re the ESTATE OF Michael Patrick SMITH, et al., Plaintiffs, and People of the State of Colorado, et al., Plaintiffs-in-Intervention, v. Margaret M. HECKLER, Secretary of Health and Human Services, Defendant.
    Civ. A. No. 75-M-539.
    United States District Court, D. Colorado.
    Aug. 9, 1985.

      Kathleen Mullen, John Robert Holland, Denver, Colo., for plaintiffs.
    Maurice Knaizer, Asst. Atty. Gen., Denver, Colo., for plaintiffs-in-intervention.
    Shalom Brilliant, U.S. Dept, of Justice, Civ.Div., Washington, D.C., Janis E. Chapman, Asst. U.S. Atty., Denver, Colo., Vicki Shulkin, Office of Gen. Counsel, Dept, of Health and Human Services, Washington, D.C., for defendant.
   MEMORANDUM OPINION AND ORDER

MATSCH, District Judge.

On April 29, 1985, this court ordered the Secretary of Health and Human Services (the “Secretary”) to file a plan of action with the court setting forth the procedures and timetable to be followed in performing the duty required by 42 U.S.C. §§ 1396-1396n as mandated by the Tenth Circuit Court of Appeals in Estate of Smith v. Heckler, 747 F.2d 583 (10th Cir.1984). On June 10,1985, the Secretary filed that plan. On June 19, 1985, the plaintiffs and plaintiffs in intervention filed a response to the Secretary’s plan and a motion for review proceedings. In addition, on May 14, 1985, the plaintiffs filed an application for attorney’s fees, seeking $352,689 in fees.

ATTORNEYS’ FEES

The plaintiff assert that they are entitled to attorney’s fees under (1) 42 U.S.C. § 1988, (2) 28 U.S.C. § 2412(b), and (3) 28 U.S.C. § 2412(d).

42 U.S.C. § 1988

42 U.S.C. § 1988 provides:

In any action or proceeding to enforce a provision of sections 1981, 1982, 1983, 1985, and 1986 of this title, title IX of Public Law 92-318, or title VI of the Civil Rights Act of 1964, the court, in its discretion, may allow the prevailing party, other than the United States, a reasonable attorney’s fee as part of the costs.

This suit was brought as a civil rights action seeking remedies under 42 U.S.C. § 1983 for alleged violations of constitutional rights. The defendants were the Secretary (then the Secretary of the Department of Health, Education and Welfare), the officers of the Colorado Department of Social Services and the Colorado Department of Health, and the owners and administrators of a nursing home. Initially it must be pointed out that by the time of trial, the claims against the state defendants had been dismissed by stipulation and the state defendants had become plaintiffs in intervention. In Re Estate of Smith, 557 F.Supp. 289, 290-91 (D.Colo.1983). In addition, this court ordered separate trials against the federal defendant and the nursing home defendants. The case against the federal defendant went to trial in May, 1982, and resulted in the judgment of dismissal of all claims against the Secretary reported at In Re Estate of Smith, supra. On appeal, the Tenth Circuit Court of Appeals reversed and remanded the case to this court for further proceedings, finding that the Secretary had violated her statutory duty “to promulgate regulations which will enable her to be informed as to whether the nursing facilities receiving federal Medicaid funds are actually providing high quality medical care.” Estate of Smith v. Heckler, 747 F.2d at 591. It is for work done against the federal defendant that the plaintiffs now seek an award of attorneys’ fees.

Under 42 U.S.C. § 1983:

Every person who, under color of any statute, ordinance, regulation, custom, or usage, of any State or Territory or the District of Columbia, subjects, or causes to be subjected, any citizen of the United States or other person within the jurisdiction thereof 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.

To state a claim for relief under § 1983, the plaintiff must show that the defendant was acting under color of state law and deprived the plaintiff of a right secured by the Constitution or laws of the United States. Tongol v. Usery, 601 F.2d 1091 (9th Cir.1979). Section 1983 “does not apply to federal officers acting under color of federal law.” Campbell v. Amax Coal Co., 610 F.2d 701, 702 (10th Cir.1979).

The Secretary was not acting under color of state law. The Tenth Circuit Court of Appeals stated in this case:

The federal government has more than a passive role in handing out money to the states. The district court erred in finding that the burden of enforcing the substantive provisions of the Medicaid Act is on the states. The Secretary of Health and Human Services has a duty to establish a system to adequately inform herself as to whether the facilities receiving federal money are satisfying the requirements of the Act.

Estate of Smith v. Heckler, 747 F.2d at 589. As the only defendant in this case at the time of trial was the federal defendant, acting under color of federal law, the plaintiffs have not stated, nor could they state, a claim for relief under § 1983-,

The plaintiffs argue that Tongol v. Usery, 575 F.Supp. 409 (N.D.Cal.1983) allows a fee award under § 1988 “against a federal defendant where the plaintiffs’ § 1983 claim initially lay against both state and federal officials, as here.” (Plaintiffs’ Brief p. 4). The district court did award attorneys’ fees against the federal defendant in that case stating that “where federal defendants are found to have acted in concert or conspiracy with state officials, courts have held that they could be liable as state actors under § 1983.” Id. at 415. However, the award of attorneys’ fees against the federal defendant in Tongol was later reversed on the ground that the case was no longer pending against the federal defendant at the time the EAJA went into effect because the only unresolved issue was the nonfederal co-defendant’s liability for attorneys’ fees. Tongol v. Donovan, 762 F.2d 727 (9th Cir.1985).

As no claim may be stated against the Secretary under § 1983, the Secretary has not violated any of the provisions enumerated in § 1988, and the plaintiffs are not entitled to an award of attorneys’ fees under § 1988.

28 U.S.C. § 2412(b)

The plaintiffs next assert that they are entitled to an award of attorneys’ fees under the Equal Access to Justice Act (“EAJA”), 28 U.S.C. § 2412. Section (b) of that statute provides:

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. The United States shall be liable for such fees and expenses to the same extent that any other party would be liable under the common law or under the terms of any statute which specifically provides for such an award.

The plaintiffs rely principally on the decision in Trujillo v. Heckler, 587 F.Supp. 928 (D.Colo.1984), in which the Secretary was enjoined from terminating social security disability benefits under certain conditions. Judge Kane awarded attorneys’ fees to the plaintiffs under 28 U.S.C. § 2412(b) on the basis that § 1988, as incorporated into the EAJA, allows for an award of attorneys’ fees against the United States in suits for violations of constitutional or statutory violations under color of federal law. Judge Kane was guided in his decision by two cases, Lauritzen v. Secretary of the Navy, 546 F.Supp. 1221 (C.D.Calif.1982) and Premachandra v. Mitts, 727 F.2d 717 (8th Cir.1984), holding that a deprivation of constitutional rights by a federal officer acting under color of federal law is “analogous” to a § 1983 claim, entitling a plaintiff to an award of attorneys’ fees under § 1988, by virtue of the waiver of sovereign immunity provided in § 2412. Both of those decisions have since been reversed. Lauritzen v. Lehman, 736 F.2d 550 (9th Cir.1984); Premachandra v. Mitts, 753 F.2d 635 (8th Cir.1985) (en banc). The plaintiffs also cite Boudin v. Thomas, 732 F.2d 1107 (2nd Cir.1984) in support of their position. There the Second Circuit Court of Appeals stated that attorneys’ fees could be awarded against the United States if the “fundamentally analogous” state habeas action would authorize an award of fees, also relying on the earlier decisions in Lauritzen and Premachandra.

The position advanced by the plaintiffs is against the clear weight of authority. The circuits which have directly addressed the issue of whether the federal government may be taxed with attorneys’ fees for violations of federal statutes or deprivations of constitutional rights under color of federal law have held that 28 U.S.C. § 2412(b) does not authorize attorneys’ fees against the federal government in actions “analogous” to § 1983 actions. Unification Church v. Immigration & Naturalization Service, 762 F.2d 1077 (D.C.Cir.1985); Lauritzen, 736 F.2d 550; Premachandra, 753 F.2d 635.

In Premachandra, the plaintiff’s lawsuit was brought against federal officials for alleged violations of his fifth amendment rights. The plaintiffs point to the following language in Premachandra as distinguishing that case:

Section 1983 is the only statute named in section 1988 that provides a remedy for violations of the Constitution. Because Premachandra did not allege that the defendants acted under color of state law, no section 1983 liability could be found— Thus, the action was not brought to “enforce a provision” enumerated in section 1988. Consequently, there is no statute that specifically provides for attorneys’ fees in this case, and section 2412(b) does not apply.

Premachandra, 753 F.2d at 637. Because the Secretary was not acting under color of state law for purposes of § 1983, this action was not brought to enforce a provision enumerated in § 1988. As no statute specifically provides for an award of attorneys’ fees, § 2412(b) does not apply.

The plaintiffs also point to language in Lauritzen which reads: “[W]e hold that where the government has violated a particular substantive statute, and attorney’s fees may be awarded against any other party for violation of that statute, the government is also liable for fees.” Lauritzen, 736 F.2d at 559. The plaintiffs argue that since the state could be held liable for fees for violating the plaintiffs’ rights under the Social Security Act, the federal government may as well. The plaintiffs do not say how the state could be held liable for attorneys’ fees for violating the Act, unless by virtue of § 1988 through a § 1983 suit. While this quotation is somewhat confusing, it must be read in the context of the entire case in which the Ninth Circuit Court of Appeals held that a fee award was not allowable against the federal defendant acting under color of federal law where the claim was “analogous” to a § 1983 claim.

Finally, the plaintiffs point to language in Unification Church, supra, that no violation of state law was at issue, as distinguishing that case. No violation of state law was at issue with respect to the federal defendant in this case either.

As clearly explained by the District of Columbia Circuit Court of Appeals:

Applying the government’s interpretation of subsection (b) would mean that the United States would be liable for fees when it was a losing defendant in proceedings to enforce the statutes listed in section 1988. Applying this interpretation to this case, the United States is not liable for fees. It did not violate section 1983, because it did not violate the appellants’ rights under color of state law, as required by the words of section 1983. It did violate the appellants’ rights under color of federal law, but that creates no cause of action under section 1983. Since it did not violate section 1983, it is not liable for fee awards under Section 1988, and thus not liable for fees awarded under subsection (b) of the [EAJA],

Unification Church, supra, at 1081.

The plaintiffs are not entitled to an award of attorneys’ fees against the Secretary under 28 U.S.C. § 2412(b).

28 U.S.C. § 2412(d)

The plaintiffs’ final argument is that they are entitled to an award of attorneys’ fees under 28 U.S.C. § 2412(d)(1)(A) which provided, prior to its repeal effective October 1, 1984:

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

In the Tenth Circuit, “the test of substantial justification is essentially one of reasonableness in both law and fact.” United States v. 2,116 Boxes of Boned Beef, 726 F.2d 1481, 1486 (10th Cir.1984), cert. denied, — U.S. -, 105 S.Ct. 105, 83 L.Ed.2d 49 (1984). “[T]he position of the United States, for purposes of this Act, means the arguments relied upon by the government in litigation.” Id. at 1487.

The plaintiffs argue that “[wjhile there may be room for substantial debate as to whether or not the federal defendant’s legal position in the litigation was substantially justified, we submit that the factual position of the federal defendant lacked substantial justification.” (Plaintiffs’ brief, p. 7). The plaintiffs assert that

[t]he record adduced at trial was replete with the federal defendant’s own documents showing repeated acknowledgements and admissions of the failures of the existing inspection system, and the need for a substitute system such as that plaintiffs sought. Nevertheless, the federal defendant not only contested the legal power of the court to effectuate a remedy, but equally important, contested the factual predicate of plaintiffs’ case. Had the federal government simply taken the position that the court was not empowered to act, by admitting the factual circumstances, the trial could have been shortened or obviated, and the matter could have been determined on a motion for summary judgment, saving the court hundreds of hours of time, and the litigants and their attorneys substantial time, expense and delay.

(Plaintiffs’ brief, pp. 7-8). The plaintiffs’ attempt to place the blame on the defendants for the length and complexity of the trial is misplaced. In August, 1981, the federal defendant moved for judgment on the pleadings. In their opposition, the plaintiffs argued:

1. The court has been asked by Federal Defendant on repeated occasion [sic] both by formal motion and by oral request at hearings to decide the matters at issue on a summary judgment or motion to dismiss and now on a Motion for Judgment on the pleadings basis.
2. At each request counsel for the parties plaintiffs have pointed out often after written response, the court’s previous denials of such motions on multiple occassions [sic] and the fact that the Court had indicated its clear intention not to decide the case without first providing the parties with a full opportunity to present the evidence that has been gathered in over 6 years of case preparation and for the reasons set forth in 5 and 6 below.
* * * * * *
5. As plaintiffs have pointed out all along the duty of the federal defendant in this case significantly involves, inter alia, an evidentiary analysis of the historical administrative construction of that duty by succeeding secretaries and a review of the agency’s actions in interpreting and implementing its responsibilities thereunder. Substantial documentary and testimonial evidence bear directly on the duty and on the failures of the Department and the Secretary to discharge it. In the absence of its full presentation the Court can not fully evaluate the plaintiffs [sic] claims.
6. Likewise establishment of the breach of the Secretary’s duties involves substantial documentary and testimonial evidence and can only be intelligently determined upon trial.

(Plaintiffs’ Opposition to Motion for Judgment on the Pleadings, filed September 4, 1981). Thus it is clear that the plaintiffs felt that a full presentation of the factual evidence was necessary.

It is true that this court’s decision was reversed by the Tenth Circuit Court of Appeals. However, in view of the fact that this court saw fit to rule in favor of the Secretary on every claim asserted against her, it cannot be said that the Secretary’s position, both legal and factual, was not reasonable.

The plaintiffs are not entitled to an award of attorneys’ fees against the Secretary under 28 U.S.C. § 2412(d), or under either of their other theories. The plaintiffs’ application for attorneys’ fees is denied.

As this court has determined that the plaintiffs are not entitled to an award of attorneys’ fees against the Secretary, it is not necessary to address the parties’ arguments concerning the reasonableness of the fees sought.

THE SECRETARY’S PLAN OF ACTION PURSUANT TO ORDER ON REMAND

On June 10, 1985, pursuant to order of this court, the Secretary filed her Plan of Action Pursuant to Order on Remand (“Plan”). The plaintiffs and plaintiffs in intervention have filed a response to that Plan and a Motion for Review Proceedings.

The Tenth Circuit ordered this court to “compel” the Secretary’s performance of her statutory duty, while admonishing this court that it is not a “super agency” and “cannot control the specifics of how the Secretary satisfies the duty.” Estate of Smith v. Heckler, 747 F.2d at 591. In its Order on Remand of April 29, 1985 (“Order”), this court ordered the Secretary to “file with this court a plan for action to be taken to perform the prescribed duty, specifically setting forth the procedures and timetable for proposing the required regulations and forms.” The Secretary’s Plan was in response to that Order.

In the Plan, the Secretary states that she is “currently in the process of studying changes to the survey method used by State survey agencies and federal surveyors,” and that “[i]n order to comply with the duty defined by the Court of Appeals, she intends both to implement new survey procedures and forms and to propose appropriate revisions to the regulations to implement these changes.” Her Plan involves two phases. She first plans to implement a new survey process. This would involve testing the new “outcome-oriented” survey process on an experimental basis, evaluating the test results and making necessary changes, developing a program to train surveyors, obtaining the final approval of the Department of Health and Human Services (HHS), training surveyors, obtaining the approval of the Office of Management and Budget (OMB), revising existing computer programs, revising the State Operations Manual, revising the Regional Office Manual, and, finally, implementing the new procedures in January, 1986 — all prior to any formal rule making proceedings.

The second phase of the Secretary’s Plan involves developing a Notice of Proposed Rulemaking, obtaining clearance from OMB, publishing the Notice of Proposed Rulemaking, providing a sixty-day comment period, evaluating the comments, preparing the final regulation, obtaining clearance of the final regulation from OMB, and publishing the final regulation, with a target date for final publication of August 15, 1986.

The plaintiffs and plaintiffs in intervention have filed a Motion for Review Proceedings in which they ask that this court:

A. Order Secretary Heckler to submit to the court and to plaintiffs and to plaintiffs-in-intervention within 10 days the alleged new “outcome-oriented survey process” which she intends to implement in January 1986 without any review by this court or any public rule making process;
B. Set an evidentiary hearing in November 1985 to review whether the Secretary’s proposed survey process has even the threshold potential for complying with her statutory duty and the mandate of the Tenth Circuit Court of Appeals that “she promulgate regulations which will enable her to be informed as to whether the nursing facilities receiving federal Medicaid funds are actually providing high quality care,” Estate of Smith v. Heckler, 747 F.2d 583, 591 (10th Cir.1984);
C. Establish a discovery schedule which will allow all parties access to relevant information regarding the assumptions of the Secretary’s proposed survey system, any results of field tests or other research related to the proposed survey system, any plans the Secretary has for further field testing, research, or refinement of the survey process, and any critiques of the proposed system which are received by the Department of Health and Human Services (HHS) or which will be presented to the court by any party during the review proceeding requested herein;
D. Allow the Secretary, plaintiffs and plaintiffs-in-intervention to present expert testimony and other evidence to the court regarding the legal sufficiency of the Secretary’s proposed survey system prior to the implementation date for the system in January 1986;
E. Allow any other interested amicus designated by the court to comment on the proposed survey system; and
F. On the basis of the court’s own review of the Secretary’s proposed survey system and evidence presented at the review proceeding, rule prior to the January 1986 implementation date whether the Secretary’s proposed survey system complies with her statutory obligation and the mandate of the Tenth Circuit.

(Plaintiffs’ and Plaintiffs-in-intervention’s Response to Secretary’s Plan, pp. 1-2).

The plaintiffs and plaintiffs in intervention argue that the Secretary’s Plan is insufficient for several reasons. First, they argue that the Plan cannot' support the implementation of a new survey process absent court review and a public rule making process consistent with the Administrative Procedure Act (“APA”). They assert that this is so because the Plan provides no meaningful description of the proposed survey process and no definition of an “outcome-oriented” system, and depending on its definition, an “outcome oriented” system may or may not comply with the Tenth Circuit’s mandate. They also assert that the Plan, by providing no judicial review of the survey process to be implemented in January, 1986, excludes the plaintiffs, the plaintiff class, and the plaintiffs in intervention from having any input into the ultimate remedy. The plaintiffs claim that the Plan violates the APA because any public input will be after the proposed survey process has been implemented, and that the Secretary’s proposed target dates are illusory, because the key dates contain conditions, the occurrence of which will permit the Secretary to revise the plan.

Second, the plaintiffs argue that the Secretary’s Plan and the failure of HHS to implement the required type of survey system during the past ten years require court intervention to protect nursing home residents and to bring survey system into compliance with the mandate of the Tenth Circuit. Third, the plaintiffs argue that new evidence will be available this fall which could help the court determine “whether the survey system ultimately proposed by the Secretary is sound from a regulatory standpoint and meets the requirements of the Medicaid Act as articulated by the Tenth Circuit.” (Plaintiffs’ Response, p. 4).

In response, the Secretary argues that the “Order on Remand called only for a plan setting forth a procedure and timetable for developing new forms and regulations. It did not call for a description of the new forms and regulations in the Plan itself ...” (Defendant’s Opposition, p. 2; emphasis in original). This argument is somewhat disingenuous, as the Secretary was ordered to specifically set forth the procedures and timetable as part of the “plan for action to be taken to perform the ... duty” prescribed by the Tenth Circuit. Second, the Secretary argues that the Order did not indicate that the Plan would provide a basis for judicial review of the substance of the proposed regulations and forms. This court did indicate, however, that it does not intend “to remain passive until some final agency action has been taken.” In addition, the Secretary argues that this court’s review of the Secretary’s actions is limited to the administrative record, that discovery must be confined to the production of that record, and that the scope of this court’s review precludes an evidentiary hearing.

The evidentiary hearing, discovery schedule, and review of the proposed regulations and forms prior to public rule making sought by the plaintiffs are beyond the authority of this court. “[Ojrdinarily review of administrative decisions is to be confined to ‘consideration of the decision of the agency ... and of the evidence on which it was based.’ ... ‘[T]he focal point for judicial review should be the administrative record already in existence, not some new record made initially in the reviewing court.’ ” Federal Power Commission v. Transcontinental Gas Pipe Line Corp., 423 U.S. 326, 331, 96 S.Ct. 579, 582, 46 L.Ed.2d 533 (1976) (citations omitted). Furthermore, discovery in suits challenging an agency regulation “is usually limited to the administrative record that was before the agency when the final rule was adopted.” Texas Steel Co. v. Donovan, 93 F.R.D. 619, 620-21 (N.D.Tex.1982).

The plaintiffs argue that the court has equitable powers to establish a schedule for administrative action. This is different from reviewing the proposed regulations and forms. “The remanding court is vested with equity powers and, while it may not ‘[intrude] upon the administrative province, it may adjust its relief to the exigencies of the case in accordance with the equitable principles governing judicial action.’ ” Zambrana v. Califano, 651 F.2d 842, 844 (2nd Cir.1981) (quoting Ford Motor Co. v. NLRB, 305 U.S. 364, 373, 59 S.Ct. 301, 307, 83 L.Ed. 221 (1939)). As one of the court’s equitable powers, it may set a time limit for administrative action. Id. See also, Engelhart v. Schweiker, 558 F.Supp. 112 (D.S.D.1983) (ordering the Secretary to conduct an expedited de novo hearing following a decision to discontinue disability payments); Natural Resources Defense Council, Inc. v. Train, 510 F.2d 692 (D.C.Cir.1974) (finding that the trial court acted reasonably in incorporating a publication schedule into its order that the EPA publish effluent limitation guidelines within one year to compel performance of the EPA’s statutory duty).

The plaintiffs also cite Blankenship v. Secretary of Health & Human Services, 587 F.2d 329 (6th Cir.1978) in support of their motion. In Blankenship, the plaintiffs challenged delays by the Social Security Administration in scheduling administrative hearings. The district court ordered the Secretary to schedule hearings within 90 days of application for a hearing. The Sixth Circuit Court of Appeals found that claimants had a right to a hearing in a “reasonable” time and that the judicially imposed 90-day time limit was not appropriate and was inconsistent with the principle of separation of powers. The court remanded the case to the district court with instructions to order the Secretary to develop regulations to remedy the problem of unreasonable delay and submit them to the district court for review of their reasonableness before publishing them as proposed or final regulations.

On remand, the district court established a discovery and briefing schedule on the issue of the reasonableness of the regulations proposed by the Secretary, while expressing considerable concern over the scope of the court’s authority to review the matters before it. Blankenship v. Secretary of Health & Human Services, 522 F.Supp. 618 (W.D.Ky.1981). The Sixth Circuit’s affirmance of the time limitations eventually established by the district court was vacated and the case remanded to the district court for reconsideration in light of Heckler v. Day, 467 U.S. 104, 104 S.Ct. 2249, 2258, 81 L.Ed.2d 88 (1984) (“[I]t would be an unwarranted judicial intrusion into this pervasively regulated area for federal courts to issue injunctions imposing deadlines with respect to future disability claims.” Id. at-, 104 S.Ct. at 2258.)

This court does not have the authority to review the proposed regulations and forms prior to a public rule making process, and the motion of the plaintiffs and the plaintiffs in intervention for review proceedings must be denied. The court, however, restates its position that it will not sit passively by pending final agency action, particularly under the circumstances of this case where the Secretary proposes to completely implement a new survey process without any opportunity for public participation. The Secretary asserts that “while the Secretary’s plan contemplates certain actions between now and the end of this calendar year, it contemplates final action in stages beginning in January 1986; and plaintiffs offer no cogent reason why final action or substantive review thereof should occur sooner.” (Defendant’s Opposition to Plaintiffs’ Motion, p. 3; emphasis in original). Neither does the Secretary offer any compelling reason why a new survey system must be funded, implemented, and tested prior to any public rule making process.

This court was ordered to “compel” the Secretary to perform her prescribed duty. That duty was to “promulgate regulations which will enable her to be informed as to whether the nursing facilities receiving federal Medicaid funds are actually providing high quality medical care.” Estate of Smith v. Heckler, 747 F.2d at 591. As noted by the Tenth Circuit, the Secretary has broad discretion as to how to accomplish that duty. This court interprets that discretion as relating to the content of the proposed regulations. Accordingly, it is

ORDERED, that by October 31, 1985, the Secretary will develop and publish a notice of proposed rule making, consistent with the requirements of the APA, regarding a new survey system which will enable the Secretary to perform the duty prescribed by the Tenth Circuit Court of Appeals, and it is

FURTHER ORDERED, that the plaintiffs’ application for attorneys’ fees is denied and the motion of the plaintiffs and the plaintiffs in intervention for review proceedings is denied.


text:
    Albert E. and Henrietta R. RADINSKY, Plaintiffs, v. UNITED STATES of America, Defendant.
    Civ. A. No. 84-M-2324.
    United States District Court, D. Colorado.
    Aug. 14, 1985.
    Stanley L. Drexler, Denver, Colo., for plaintiffs.
    Stephen D. Taylor, Asst. U.S. Atty., Denver, Colo., Teresa J. Rasmussen, Asst. U.S. Atty., Tax Div., U.S. Dept, of Justice, Washington, D.C., for defendant.
   MEMORANDUM OPINION AND ORDER FOR JUDGMENT

MATSCH, District Judge.

This is an action brought by Albert and Henrietta Radinsky to recover $8,012.17 wrongfully collected by the Internal Revenue Service (IRS) under threat of levy. The facts in the action are undisputed and set forth in the Memorandum Opinion and Order of May 2, 1985, denying the United States’ motion to dismiss, and are incorporated herein by reference. The matter is now before the court on the parties’ cross motions for summary judgment.

28 U.S.C. § 1346(a)(1) confers jurisdiction upon this court and waives the-sovereign immunity of the United States regarding claims for sums wrongfully collected under the internal revenue laws. In a suit under this section, a plaintiff “may challenge the constitutionality, legality or fairness of any tax statute or amount assessed or collected.” White v. 537 F.Supp. 679 (D.Colo.1982). In the two briefs filed in this action, the IRS has not explained where it finds statutory authority to employ its tax collection procedures to collect from the plaintiffs a sum of money that has never been assessed as a tax. Since the IRS had no authority to adjust the plaintiffs’ account or employ deficiency procedures in these circumstances, it is self-evident that the collection of the sum in this manner was wrongful.

The IRS insists that only “taxpayers” have recourse against the United States under 28 U.S.C. § 1346(a)(1), and that the plaintiffs are not “taxpayers” because no tax has been assessed. “The United States agrees that taxpayers do have recourse against the United States under 28 U.S.C. § 1346(a)(1). But in this case, the plaintiffs are not taxpayers.” (Defendant’s motion for summary judgment at 2).

The government is wrong on both counts. First, the statute provides federal district court jurisdiction for a civil action to recover any tax, penalty, or sum alleged to have been wrongfully collected under the internal revenue laws. There is no requirement that the plaintiffs be taxpayers challenging some assessment. The government’s interpretation of the statute would make “sum” superfluous. In the course of holding that § 1346(a)(1) requires full payment of an assessment before an income tax refund suit can be maintained in federal district court, the Supreme Court has noted:

... We believe that the statute more readily lends itself to the disjunctive reading which is suggested by the connective “or.” That is, “any sum,” instead of being related to “any internal-revenue tax” and “any penalty,” may refer to amounts which are neither taxes nor penalties. Under this interpretation, the function of the phrase is to permit suit for recovery of items which might not be designated as either “taxes” or “penalties” by Congress or the Courts.

Flora v. United States, 362 U.S. 145, 149, 80 S.Ct. 630, 632-33, 4 L.Ed.2d 623 (1960). Accepting the argument that the amount in question is not a tax or penalty, this action is clearly maintainable to recover a “sum.” Therefore plaintiffs who are not “taxpayers” as defined by the United States in this action, i.e. persons who are challenging an assessment, can indeed use § 1346(a)(1). The plaintiffs have standing to bring this action since they were the target of the IRS’s collection efforts.

Second, it is too late for the government to argue that the plaintiffs are not taxpayers. Everything in the record indicates that the IRS attempted to collect, and succeeded in collecting, the disputed money as a “tax.” The February 1984 letter received by the Radinskys, attached as exhibit “E” to the complaint, after reciting the plaintiffs’ “Taxpayer identification number” stated (emphasis added)

Dear Taxpayer

We have previously written to you about the Federal tax shown below. It is overdue and you should pay the total amount due immediately____
We have enclosed a copy of Publication 568A, The Collection Process (Income Tax Accounts), which provides information about our collection procedures and your rights in relation to them. Your attention is specifically directed to our Enforced Collection policy on page 2.

Additionally, Exhibit D attached to the complaint is a “STATEMENT OF ADJUSTMENT TO YOUR ACCOUNT AND BILL FOR TAX DUE”. The statement noted that the plaintiffs had no balance due before the adjustment. After the “adjustment” they owed $5,444.00 for an “erroneous credit” and $2,380.20 interest. The IRS always treated this matter as the recovery of tax. The United States cannot argue that because an assessment was erroneous, or an assessment was never made, a person from whom the IRS has collected money cannot employ § 1346(a)(1) for the semantic reason that only individuals correctly assessed can be “taxpayers.”

The United States misperceives the issue in this matter as whether the plaintiffs were initially entitled to the money. The dispositive issue is instead whether the IRS has followed the law in collecting the money it mistakenly sent to the plaintiffs. While this court is aware that the plaintiffs may receive a windfall, the IRS can only recover the sum pursuant to powers granted by Congress. The United States Code allows the IRS to bring a civil action under 26 U.S.C. § 7405 to recover refunds mistakenly paid to the wrong taxpayer. See, United States of America v. Young, 79-2 U.S.T.C. ¶ 9609 (D.Del.1979). The IRS cannot ignore this statutory requirement, obtain the money by threat of levies and enforced collection proceedings, and then raise in actions such as this the defense that the plaintiffs are not entitled to the money. The short answer to the defense is that the Radinskys are entitled to the money unless the IRS brings a civil action within two years. 26 U.S.C. 6532(b). Congress certainly knew that by imposing a strict statute of limitations persons who, for example, received erroneously large refunds could “keep money that did not belong to them” (defendant’s motion at 2 n. 2) unless the IRS promptly brought a civil action to recover the money. Any windfall is a result of Congressional action, and there is no convincing distinction between a refund that is too large and a refund that is sent to the wrong person.

Finally, the United States suggests that the plaintiffs should not have paid the money but rather should have contested the threatened levy. This contention is totally without merit. Payment of the amount and the filing of a refund claim are prerequisites to jurisdiction under § 1346(a)(1). The United States has spent considerable energy over the years arguing that a fundamental principle in tax litigation should be “pay first and litigate later.” See, e.g., Flora v. United States, 357 U.S. 63, 75, 78 S.Ct. 1079, 1086, 2 L.Ed.2d 1165 (1958), aff'd on rehearing, 362 U.S. 145, 80 S.Ct. 630, 4 L.Ed.2d 623 (1960). It is wrong to fault the plaintiffs for following a procedure long advocated by the IRS.

Congress has provided in 28 U.S.C. § 2411 for recovery of interest on any “overpayment” of “any internal-revenue tax.” Having concluded that this is an action to recover a sum improperly collected by the IRS that bore no relation to the tax liability of the plaintiffs, there is no basis for an award of interest. Nor is there any statutory or other basis for attorney’s fees.

Accordingly, it is

ORDERED, that the defendant’s motion for summary judgment is denied, and it is

FURTHER ORDERED, that the plaintiffs’ motion for summary judgment is granted, and it is

FURTHER ORDERED, that the clerk enter judgment in the amount of $8,012.17 in favor of the plaintiffs against the defendant. Plaintiffs shall have costs of action, upon the filling of a bill of costs within ten days.


author: HILLMAN, District Judge.

text:
    ZIN-PLAS CORPORATION, a corporation, Plaintiff, v. PLUMBING QUALITY AGF. CO. LTD., Marvin Freed, and Quality Tool Mfg. Co. Inc., Defendants.
    No. G85-45 CA1.
    United States District Court, W.D. Michigan, S.D.
    Aug. 15, 1985.

      John E. McGarry, Varnum, Riddering, Schmidt & Howlett, Grand Rapids, Mich., for plaintiff.
    Earl J. LaFontaine, Krass & Young, Troy, Mich., John T. Piggins, Day, Sawdey, Flaggert & Porter, Grand Rapids, Mich., for defendants.
   OPINION RE PENDING MOTIONS

HILLMAN, District Judge.

Plaintiff, Zin-Plas Corporation, filed this action on January 18, 1985, to restrain defendants, Plumbers Quality Mfg. (“PQM”), Plumbers Quality Tool Mfg. Co., Inc. (“PQT”), and Marvin Freed, an individual, from importing from Taiwan imitations of plaintiff’s tub spouts and showerheads, and selling them to plaintiff’s customers.

Plaintiff’s complaint is in six counts: (1) patent infringement; (2) false designation of origin (section 43(a) of the Lanham Act); (3) unfair competition/common law trademark infringement; (4) violation of the Michigan Consumer Protection Act; (5) misappropriation of trade values; and (6) unjust enrichment. This matter is presently before the court pursuant to plaintiff’s motion for a preliminary injunction, defendants’ motion to dismiss or transfer, and defendants’ motion for partial summary judgment.

FACTUAL BACKGROUND

Plaintiff, Zin-Plas Corporation, designs, develops and produces plumbing products. Among plaintiff's products are diverter tub spouts and showerheads. Plaintiff has sold these products for 14 years, with total sales for diverter spouts alone exceeding 8 million pieces and $20 million.

Plaintiff manufactures the plumbing products and advertises them extensively. Plaintiff sells the products to wholesalers and packagers. The packagers, in turn, distribute the products to major retailers, such as K-Mart, Montgomery Wards, and Ace Hardware. According to plaintiff, it is the retailers and wholesalers who recognize plaintiff's products as orginating with Zin-Plas, and who would most likely be confused by imitations, especially since the copies and Zin-Plas products are both sold by the same packagers. Plaintiff contends that Marvin Freed is the moving force behind PQM, a Canadian corporation, and PQT, a Michigan corporation, and that PQT is in fact the alter ego of PQM. The record shows that PQT has sold its imported copies to one of plaintiff’s customers, Brass-craft.

DISCUSSION

A. Plaintiffs Motion for Preliminary Injunction.

Plaintiff’s motion for preliminary injunction is based on section 43(a) of the Lanham Act, which provides:

“Any person who shall ... use in connection with any goods or services ... a false designation of origin, or any false description or representation, including words or other symbols tending falsely to describe or represent the same, and shall cause such goods or services to enter into commerce ... shall be liable to a civil action by any person doing business in the locality falsely indicated as that of origin or in the region in which said locality is situated, or by any person who believes that he is or is likely to be damaged by the use of any such false description or representation.”

[Emphasis added]. The intent of the Lanham Act is set forth in section 45 of the Act:

“The intent of this chapter is to regulate commerce within the control of Congress by making actionable the deceptive and misleading use of marks in such commerce ... [and] to protect persons engaged in such commerce against unfair competition____”

Under Sixth Circuit precedent, a preliminary injunction is available to a Lanham Act plaintiff

“upon demonstrating, at a minimum, a likelihood of confusion among consumers as to the origin of the goods and services provided by defendant resulting from defendant’s use of the disputed mark, as well as irreparable harm to the plaintiff’s interests.”

Frisch’s Restaurant, Inc. v. Shoney’s Inc., 759 F.2d 1261 (1985), at 1264 (Frisch’s II). In Frisch’s Restaurants, Inc. v. Elby’s Big Boy, 670 F.2d 642, 648 (6th Cir.1982) (Frisch’s I), the Sixth Circuit adopted eight factors delineated by the Ninth Circuit as being helpful in demonstrating that there is a likelihood of confusion among consumers:

(1) strength of the mark;
(2) relatedness of the goods;
(3) similarity of the marks;
(4) evidence of actual confusion;
(5) marketing channels used;
(6) likely degree of purchaser care;
(7) intent in selecting the mark;
(8) likelihood of expansion of the product lines.

Based on these factors, I am satisfied that plaintiff has not established, by a preponderance of the evidence, that defendants’ products are likely to cause confusion among the buying public.

The strength of a mark is determined by the mark’s distinctiveness. “The more distinct a mark the more likely is the confusion resulting from its infringement, and, therefore, the more protection it is due.” Frisch’s II at 1264.

Here, plaintiff claims that the mark requiring protection is the non-functional shape of its showerheads and spouts. Although plaintiff concedes that this mark is “not inherently strong,” it is well-established that weak marks, such as the nonfunctional shapes of plaintiff’s plumbing products, are entitled to trademark protection if they have acquired a secondary meaning. Hindu Incense v. Meadows, 692 F.2d 1048, 1050 (6th Cir.1982).

A secondary meaning arises from a mental association between a product feature and a single, though perhaps anonymous, source of origin. Inwood Laboratories, Inc. v. Ives Laboratories, Inc., 456 U.S. 844, 102 S.Ct. 2182, 72 L.Ed.2d 606, 214 U.S.P.Q. 1, 4 n. 11 (1982); In the Matter of Certain Single Handled Faucets, Investigation No. 337-TA-167, p. 40. As stated by the Sixth Circuit in American Fork and Hoe v. Stampit Corp., 125 F.2d 472, 475 (6th Cir.1942):

“A secondary meaning attaches to a given shape or form of article when that form is associated in the minds of prospective customers with the source from which the article came to such an extent that demand for the particular article depends upon the business reputation or standing of its maker.”

Moreover, the mental association must be shown to exist in the mind of the public. Inwood Laboratories, 456 U.S. at 851 n. at 613 n. 11, 214 U.S.P.Q. at 4 n. 11. In Astatic Corp. v. American Electronics, Inc., 201 U.S.P.Q. 411, 421 (N.D.Ohio 1978), the court rejected a survey attempting to show secondary meaning because it was not directed to the consuming public:

“The survey potentially included retailers, wholesalers, and other electronics industry members, who were personally associated with the marketing base station microphones, including the Astatic product. However, secondary meaning must be shown to exist in the minds of the consuming public, not in the minds of trade members.”

[Citations omitted.]

Likewise, in the instant case, plaintiff has not established that the public has come to identify the shapes of plaintiff’s products with a single source. Plaintiff does not advertise its products to the public. It sells its products to packagers, such as Brasscraft. These packagers buy plumbing products from several manufacturers, package them in their own distinctive packages, and in turn sell them to retailers. When consumers select a plumbing product from a retailer who sells products packaged by Brasscraft, they assume they are buying a Brasscraft plumbing fixture, since that is the only name that appears on the package. (See plaintiff’s Exhibit #23). This conclusion is supported by the deposition of Andrew Passman, a retail buyer for Rickel Home Centers:

“Q Let’s assume a distribution chain, like the one involved in the present where a manufacturer makes the product, sells it to a packager, and the packager then sells it to a retailer. Is the ultimate consumer aware of the manufacturer’s name when he buys any of these packagers?
A This kind of product?
Q Yes.
A No.
Q The consumer does not know who made the product?
A The true manufacturer or the presumed? If they bought it from a company, if they saw Stanley Hardware on the package, they would presume that Stanley Hardware made it but Stanley — but this would be wrong in presuming that.
Q So, they don’t know who the true manufacture is?
A No. There’s no way.”

Thus, although a retailer or packager may identify the shape of plaintiff’s shower-heads or spouts with Zin-Plas, the evidence shows that the consumers would identify the packager, not Zin-Plas as the single source of all the products contained in its packages.

Plaintiff points out that some courts have held that secondary meaning can be inferred from the mere fact that a business competitor has consciously imitated a nonfunctional design feature. See, e.g., Westward Co. v. Gem Products, Inc., 219 U.S.P.Q. 784, 788-89, 730 F.Supp. 943 (E.D.Mich.1983) (citing cases). The court, however, finds these cases inapposite where, as here, the marketing mechanism ensures that the buying public identifies an entity other than plaintiff as the single source of the products. Accordingly, I conclude that plaintiff’s showerheads and spouts have not acquired a secondary meaning among the buying public.

The second, third, and fifth factors, the relatedness of the goods, similarity of the marks, and the marketing channels used, focus on the similarity of the products and the manner in which they are placed in the stream of commerce. If related goods, bearing similar marks are sold through the same channels, there is a likelihood of confusion. Here, plaintiff’s and defendants’ products are identical in appearance and function, except that plaintiff’s spouts bear the “ZP” logo. In addition, both manufacturers use the same indirect marketing channels (packagers) to sell their products to the public. Thus, the second, third and fifth factors militate in favor of finding a likelihood of confusion, although again, not necessarily among consumers.

The fourth factor is evidence of actual confusion. While evidence of actual confusion is the best evidence of a likelihood of confusion, the Sixth Circuit has held that a plaintiff need only show the likelihood of confusion to obtain a preliminary injunction. Frisch’s I. 670 F.2d at 648. In the instant case, the only evidence of actual confusion occurred at the retail level of the distribution chain. Mr. Passman stated in his deposition that as a retail buyer for Stanley Hardware he was once confused about the source of a tub spout that resembled a Zin-Plas product. (Passman Deposition, pp. 32-35). On cross-examination, however, Mr. Passman admitted that the confusing imitation may have originated with a manufacturer other than defendants. (Passman Deposition, pp. 90-93). Indeed, the record suggests that defendants were not in business yet at the time Pass-man received the confusingly similar product.

In any event, there is no evidence of actual confusion among the buying public, nor is such confusion likely, since the consumer identifies the products with the packagers, not the manufacturers. Mr. Passman’s deposition testimony on this point is unequivocal:

“Q If a packager who was purchasing a tub spout from Zin-Plas began purchasing a similar appearing tub spout from another manufacturer and put it in the same packager, would the ultimate consumer likely be confused by that switch?
A No.”

Likewise, Mr. Bastion, President of Zin-Plas Corporation conceded that confusion among consumers is unlikely:

“Q Do you believe that a consumer that would see a display like that or displays like that would come to associate this design with the Zin-Plas Company?
A My guess is the consumers wouldn’t know.
* * * * * *
Q So you are not contending that there is any confusion at the retail trade, are you?
A A am not in the main, no.”

(Hearing Transcript, pp. 82-83).

Plaintiff argues that the public is likely to be confused because plaintiff’s and defendants’ products are displayed side-by-side in identical packages. This argument, however, lays the blame for confusion on the wrong doorstep. Plaintiff would be liable for unfair competition if the shape of its products caused confusion among the buying public. Plaintiff’s argument, however, demonstrates that it is the products’ deceptive packaging, not their shape, which confuses the public. Plaintiff may have a cause of action against the packagers for misleading packaging, but defendants cannot be held liable for unfair competition based on conduct over which they exercise no control. Accordingly, I find that there is no evidence of public confusion, either actual or likely, as a result of defendants’ imitative copies.

The sixth factor is the likely degree of purchaser care. The less care likely, the greater the likelihood of confusion. The evidence shows that defendants’ customers, the packagers, exercise a great deal of care, and have no doubt about the source of the product they buy. The evidence also shows that most retailers exercise a great deal of care concerning the products they buy from packagers, although some don’t care who supplies the products. However, the retailers demand for plumbing products is a derived demand which comes from the demands of the ultimate purchasers, the do-it-yourself homeowners. As far as these ultimate consumers are concerned, there is little evidence that they are careful purchasers. Rather, they rely on the retailers to provide them with quality plumbing fixtures.

The seventh factor is defendants’ intent in selecting the mark. As plaintiff points out, proof of wrongful intent alone may justify the granting of a preliminary injunction. Quoting the Fifth Circuit’s decision in Chevron Chemical Co. v. Voluntary Purchasing Groups, Inc., 659 F.2d 695, 703-04 (5th Cir.1981), cert. denied, 457 U.S. 1126, 102 S.Ct. 2947, 73 L.Ed.2d 1342 (1982), the Sixth Circuit held in Frisch’s I, 670 F.2d at 648, that a defendant’s intent to adopt plaintiff’s mark “is a critical factor, since if the mark was adopted with the intent of deriving benefit from the reputation of [the plaintiff] that fact alone may be sufficient to justify the inference that there is confusing similarity.” (Citation omitted; emphasis added by the Sixth Circuit.) As this language indicates, however, intentional copying is not actionable under the Lanham Act absent evidence that the copying was done with the intent to derive a benefit from the reputation of another. The Sixth Circuit delineated the distinction between permissible copying and unfair competition in West Point Mfg. Co. v. Detroit Stamping Co., 222 F.2d 581, 586 (6th Cir.1955):

“where the copying by one party of another’s product is not done to deceive purchasers and thus derive a benefit from another’s reputation, but rather to avail oneself of a design which is attractive and desirable, a case of unfair competition is not made out.”

Similarly, in Astatic Corp., 201 U.S.P.Q. at 419, the court stated:

“Section 1125(a) is limited in scope to merchandising practices equivalent to misuse of trademarks, that is the passing off or ‘palming off’ of one’s goods as those of another.”

There is simply no evidence of “palming off” in the instant case. The packagers know they are buying from defendants, not Zin-Plas, and the consumers don’t identify the shape of the products with Zin-Plas or any other “single source,” except perhaps the packager. In fact, defendants’ products do not contain the “ZP” logo — the only mark that might have acquired a secondary meaning in the mind of the public. Thus, the instant case is distinguishable in a controlling respect from those cases cited by plaintiff where the infringer has copied both the product’s outer configuration and its packaging, color scheme, or lettering. See, e.g., Chevron Chemical Co. v. Voluntary Purchasing Groups, Inc., 659 F.2d 695 (5th Cir.1981); Teledyne Industries, Inc. v. Windemere Products, Inc., 433 F.Supp. 710 (S.D.Fla.1977); The Westward Co. v. Gem Products, Inc., 219 U.S.P.Q. 784, 570 F.Supp. 943 (E.D.Mich.1983). In those cases the defendant crossed the line of “fair” competition by intentionally copying aesthetic features that had acquired a secondary meaning, thereby hoping to benefit from the confusion caused among the buying public. By contrast, in the instant case, the evidence shows no more than that defendants copied plaintiff's spout and showerhead because they were attractive and accepted in the market. (Freed Deposition, pp. 140-141). Such competition is not prohibited by the Lanham Act.

The eighth factor is the likelihood of expansion of the product lines. The evidence produced thus far concerns only two product lines, showerheads and tub spouts. As to these product lines, the evidence shows that defendants will probably try to sell their copies to more of the packagers who currently buy from Zin-Plas. There is, however, no evidence, one way or the other, from which the court can determine whether defendants will try to copy other Zin-Plas product lines, besides the spouts and showerheads.

In sum, of the eight factors listed by the Sixth Circuit in Frisch’s I, 670 F.2d at 648, for finding a likelihood of confusion, the first, fourth and seventh factors militate strongly against finding a likelihood of confusion, while the other factors point tentatively in the opposite direction. In Frisch’s II, 759 F.2d 1261, 1264, the Sixth Circuit stated: “These factors are not immutable, but merely indicate the need for weighted evaluation of the pertinent facts in arriving at the legal conclusion of confusion.” After weighing each of these factors in light of the basic purpose of the Lanham Act, I am satisfied that plaintiff has not established a likelihood of confusion by a preponderance of the evidence.

In addition, plaintiff has not established that failure to grant the preliminary injunction will cause irreparable injury. It is quite apparent that granting the injunction would put defendants out of business. Plaintiff, on the other hand, will not be forced out of business if the injunction is not granted. Thus far, plaintiff has lost one customer, albeit a large one, through market competition caused by defendants’ cheaper imported products. This injury, while significant, is not irreparable.

Plaintiff portrays this action as a “microcosm of problems of international trade now facing the United States.” I agree and am sympathetic to plaintiff’s plight. Nevertheless, based on the facts before the court, plaintiff has failed to establish a violation of the Lanham Act. As a belated effort to obtain relief, plaintiff’s post-hearing brief states, in the alternative, that it is entitled to a preliminary injunction based on its common law claim of misappropriation. The court declines to rule on this claim, however, since it raises factual issues that were not developed either at the hearing or in the briefs. Accordingly, plaintiff’s motion for a preliminary injunction is denied.

B. Defendant’s Motion to Dismiss or Transfer.

Defendant moves to dismiss all counts with respect to PQM on the grounds that PQM, a Canadian corporation, has never transacted any business in the United States. In support of its motion, defendants submit the affidavit of Marvin Freed, President of PQM, which states that PQM has never sold any merchandise outside of Canada. Although denominated a motion to dismiss for lack of subject matter jurisdiction, defendant’s motion should properly be characterized as one for summary judg-. ment, since the court has considered matters outside the pleadings. Fed.R.Civ.P. 12(b) and 56. On a motion for summary judgment, movant bears the burden of showing conclusively that no genuine issue of material fact exists. Smith v. Hudson, 600 F.2d 60 (6th Cir.), cert dismissed, 444 U.S. 986, 100 S.Ct. 495, 62 L.Ed.2d 415 (1979); Tee-Pak, Inc. v. St. Regis Paper Co., 491 F.2d 1193 (6th Cir.1974); Fed.R.Civ.P. 56(a). In determining whether issues of fact exist, “the inferences to be drawn from the underlying facts contained in [the affidavits, attached exhibits and depositions] must be viewed in the light most favorable to the party opposing the motion.” United States v. Diebold, Inc., 369 U.S. 654, 655, 82 S.Ct. 993, 994, 8 L.Ed.2d 176 (1962). A court may not resolve disputed questions of fact in a summary judgment decision, and if a disputed question of fact remains, the district court should deny the motion, and proceed to trial. United States v. Articles of Device, 527 F.2d 1008, 1011, reh. denied, 532 F.2d 1056 (6th Cir.1976).

In the instant case, plaintiff alleges that all defendants have infringed on plaintiff’s patents by importing imitative copies which come within the scope of plaintiff’s patents. Plaintiff further alleges that PQM, either by itself, or acting on concert with its alter ego, PQT, has sold infringing goods in the United States. Although defendants deny that PQM has sold any infringing products within the United States, the deposition of Marvin Freed, coupled with the evidence produced at the hearing, raises a material issue of fact, whether PQM and PQT are alter egos. Accordingly, summary disposition of plaintiff’s claim against PQM is inappropriate, and defendants’ motion to dismiss all claims against PQM is denied.

With respect to Marvin Freed, defendants argue that the patent infringement claim should be dismissed for the reason that venue is improper under 28 U.S.C. § 1400(b) since Freed is a United States citizen, last domiciled in Los Angeles, California, and does not reside in this district. Plaintiff, on the other hand, contends that venue is proper under 28 U.S.C. § 1391(d), which provides: “An alien may be sued in any district.” I agree.

In Brunette Machine Works, Ltd. v. Kockum Industries, Inc., 406 U.S. 706, 92 S.Ct. 1936, 32 L.Ed.2d 428 (1972), the Supreme Court held that the special patent provisions of section 1400(b) were inapplicable to aliens, because venue provisions were based on the defendant’s resident and an alien generally has no residence within the United States. The rational of Brunette Machine Works, Ltd. should apply with equal force to a United States citizen without a United States residence, such as Freed. Indeed, the failure to apply the venue provisions of section 1391(d) to Freed would preclude plaintiff from bringing an action in any federal court against him. As the Supreme Court acknowledged in Brunette Machine Works, Ltd., it is the responsibility of the judiciary to ensure that the venue statutes do not operate to deprive plaintiff of federal rights that have been granted by Congress. Accordingly, defendants’ motion to dismiss the patent infringement claim against Freed is denied.

With respect to PQT, defendants argue that the patent count should be dismissed for improper venue, or, in the alternative, the entire action should be transferred to the Eastern District of Michigan where venue is proper. Defendants’ motion is based on 28 U.S.C. § 1400(b), which establishes the exclusive venue for patent infringement actions against a United States corporation or citizen:

“Any civil action for patent infringement may be brought in the judicial district where the defendant resides or where the defendant has committed acts of infringement and has a regular and established place of business.”

The record shows that Marvin Freed, resident agent of PQT, resides in the Eastern District of Michigan and that PQT is a Michigan corporation with its principal place of business in the Eastern District of Michigan. Thus, by the plain meaning of section 1400(b), venue for the patent action against PQT lies only in the Eastern District unless this court can exercise a theory of pendent venue to maintain jurisdiction over the entire case because venue is proper on the other, non-patent counts of plaintiff's complaint.

This was addressed in Hoffacker v. Bike House, 540 F.Supp. 148 (N.D.Cal.1981). In Hoffacker, as in the instant case, plaintiff joined a patent infringement claim with a claim under the Lanham Act. Noting that the patent venue statute “represents an effort by Congress to restrict the number of forums available for the trial of patent cases,” the court held that a party cannot circumvent the intent behind the statute merely by joining a related federal claim to a claim of patent infringement:

“it seems clear to this court that [Goggi v. Outboard Marine Corp., 422 F.Supp. 361 (S.D.N.Y.1976)] represents judicial disapproval of the pendent venue theory. The better view which is represented by a growing line of authority holds that a court may not entertain a patent claim when the specific requirements of the venue statute are not satisfied notwithstanding proper venue over other related claims for relief.”

Id. at 150. Likewise, in the instant case, plaintiff should not be permitted to circumvent the requirements of section 1400(b) by joining other claims with its patent infringement claim.

As another theory for bringing the patent claim in this district, plaintiff argues that a corporation resides in every district in the state of its incorporation. There is a split of authority on whether section 1400(b) can be so interpreted, with one case adopting plaintiff's interpretation of the statute. See BMB Controls v. C.S.E. Automation Engineering, 587 F.Supp. 1027 (W.D.La.1984). At least two other cases, however, have taken the opposite position, holding that

“a corporation may be sued under the § 1400(b) residence provision only in the state of incorporation and, within that state, only in the judicial district where its principal place of business is located.”

Action Communication Systems, Inc. v. Datapoint Corp, 426 F.Supp. 973, 974-75 (N.D.Tex.1977); Hydro-Clear v. Aer-O-Flo, 317 F.Supp. 1317 (N.D.Ohio 1970). I find that the reasoning of Action Communication Systems best comports with the plain meaning of section 1400(b). Accordingly, I find that venue as to the patent infringement count is improper in this district, 28 U.S.C. § 1404(a) states that

“for the convenience of the parties and witnesses, in the interest of justice, a district court may transfer any civil action to any other district or division where it might have been brought.”

In the instant case, defendant PQT has its only United States offices in the Eastern District of Michigan. Marvin Freed resides in Ontario, Canada, which is immediately adjacent to the Eastern District of Michigan and a significant distance away from the Western District. PQM likewise is located in Ontario, Canada. Although plaintiff resides in the Western District, most of the discovery will take place in either the Eastern District or Ontario, Canada. Thus, for the convenience of the parties and witnesses, I find that this action should be transferred to the Eastern District of Michigan.

C. Defendants’ Motion for Partial Summary Judgment.

Defendants also move for partial summary judgment on Counts II-VI. Because this court has determined that venue for this action lies in the Eastern District of Michigan, it would be improper for the court to address the merits of defendants’ motion for partial summary judgment. Accordingly, defendants’ motion for partial summary judgment is denied without prejudice.

CONCLUSION

For the reasons stated above, plaintiff’s motion for a preliminary injunction is denied. Defendants’ motion to dismiss the action against PQM is denied. Defendants’ motion to transfer is granted. Defendants’ motion for partial summary judgment is denied without prejudice.

      . Plaintiff also sells its products to original equipment manufacturers, and plumbing wholesalers, but defendants do not sell into these markets, in addition, plaintiff recently began its own packaging company, Stem Search, which sells Zin-Plas products to retailers.

      . Plaintiff also argues that venue is proper in this district under section 1391(d) because PQT is the alter ego of PQM. This argument is without merit. Plaintiff cannot rely on sales made by PQT in the United States in order to establish jurisdiction over PQM, and at the same time argue that the existence of PQT should be ignored for venue purposes because it is the alter ego of PQM.