source: Caselaw Access Project

author: CRABB, Chief Judge.

license: Public Domain

text:
    In re GRAND JURY PROCEEDINGS Julie DZIKOWICH.
    No. 85-GJ-28.
    United States District Court, W.D. Wisconsin.
    Oct. 22, 1985.

      Grant Johnson, First Asst. U.S. Atty., Madison, Wis., for the government.
    Sarah Furey Crandall, Madison, Wis., for prospective grand jury witness.
   OPINION AND ORDER

CRABB, Chief Judge.

Prospective grand jury witness Dziko-wich has filed objections to the order of the United States Magistrate denying Dziko-wieh’s motion to quash a grand jury subpoena served upon her.

As a threshold matter, Dzikowich questions whether a magistrate has authority to hear and determine a motion to quash a grand jury subpoena brought pursuant to 18 U.S.C. § 2518(10) or a claim of illegal electronic surveillance brought pursuant to 18 U.S.C. § 3504.

In In Re the Grand Jury Appearance of William C. Cummings, 615 F.Supp. 68 (W.D.Wis.1985), I noted that subsection (b)(3) of 28 U.S.C. § 636 does not authorize magistrates to perform “vital and traditional adjudicatory duties”; and that the grant of authority in subsection (b)(1)(A) of the same statute to hear and determine pretrial motions in civil and criminal cases does not comprehend the hearing and determining of matters related to grand jury proceedings.

In Cummings I held that the issuance of immunity orders was not a vital and traditional adjudicatory duty, but rather, an administrative and procedural function within the magistrate’s authority to perform under § 636(b)(3). The question raised by Dzikowich is whether a decision on a motion to quash a grand jury subpoena falls into the category of “vital and traditional adjudicatory” or the second category of “administrative and procedural.” Dziko-wich argues that the function is adjudicatory because the motion to quash a subpoena is a dispositive motion and the assertion of a claim of illegal electronic surveillance requires a judicial officer to find facts and exercise discretion. Resolution of Dziko-wich’s argument requires a preliminary analysis of her claim and of her motion to quash a grand jury subpoena.

Before the magistrate Dzikowich filed both a motion to quash and a “claim” pursuant to 18 U.S.C. § 3504. She contended that the claim procedures of § 3504 created an independent right in an “aggrieved person” to require the government to affirm or deny illegal wiretaps. Dzikowich seems now to concede the correctness of the magistrate’s view that § 3504 is simply an adjunct to the motion to quash. It establishes the procedures to be followed, rather than serving as an independent mechanism for the determination of allegations of illegal wiretapping.

In denying Dzikowich’s motion to quash her subpoena, the magistrate found that Dzikowich had not made a sufficient showing that she had been the subject of illegal wiretaps as to warrant relief. He found her supporting affidavits speculative at best. Dzikowich objects to the magistrate’s characterization of the threshold showing a movant must make in order to require the government to file a formal affirmance or denial of illegal wiretapping as well as to his finding that the showing she had made fell far short of that threshold. Additionally, conceding that the affidavit filed with the magistrate may have been drafted inartfully, Dzikowich has submitted supplemental affidavits for consideration on review of the magistrate’s order.

I have made a de novo review of the record before the magistrate and I have reviewed the supplemental affidavits as well. From this review, I reach the same conclusion as the magistrate: that the averments fail to make a colorable claim that Dzikowich was subject to illegal wire surveillance. It is immaterial whether the standard used is the same used for determining whether an evidentiary hearing is required on a motion to suppress, as the magistrate concluded from his reading of United States v. Alter, 482 F.2d 1016, 1025-27 (9th Cir.1973), or something less stringent.

As the magistrate noted, the affidavits of Dzikowich and her attorney are based largely on hearsay. But even ignoring their hearsay nature the affidavits and accompanying exhibits are little more than the barest form of speculation that a wiretap was made of telephone calls placed to or originating from the Robert Lowery residence at 3424 Lake Farm Road, Madison, Wisconsin, at some time after Dzikowich began living with Lowery at that address in July 1982. Such speculation does not require the government to respond, In re Millow, 529 F.2d 770, 775 (2d Cir.1976) or obligate the court to hold an evidentiary hearing on a motion to quash, United States v. Alter, 482 F.2d 1016.

However, even if Dzikowich’s supporting affidavits were more substantial, she would not be entitled to an evidentiary hearing or even to an order requiring the government to affirm or deny the existence of electronic surveillance at this stage of the proceedings.

As the magistrate found, Dzikowich can invoke the possibility of illegal wiretaps only as a defense to a charge of contempt for refusing to answer questions put to her by the grand jury. Gelbard v. United States, 408 U.S. 41, 92 S.Ct. 2357, 33 L.Ed.2d 179 (1972). The remedy of suppression under 18 U.S.C. § 2518(10)(a) is not available to a prospective grand jury witness. Cali v. United States, 464 F.2d 475 (1st Cir.1972); Matter of Archuleta, 434 F.Supp. 325 (S.D.N.Y.1977).

Although Dzikowich argues that her motion to quash is grounded on her claim that the subpoena itself is based on illegal electronic surveillance and thus is different from those considered in Gelbard, 408 U.S. 41, 92 S.Ct. 2357 and in Archuleta and Cali, she has advanced no decision that supports her claim that in such a situation she is entitled to an evidentiary hearing before she is required to appear before the grand jury. In In Matter of Special February 1975 Grand Jury, 565 F.2d 407 (7th Cir.1977), the court permitted an assumption that such a claim might entitle a witness to special consideration, but did not address the matter specifically. Thus, the case is of no precedential value to Dziko-wich. The prevalent view seems to be that a grand jury witness is not an “aggrieved person” within the meaning of 18 U.S.C. § 3504 or 18 U.S.C. § 2518(10)(a) until the witness has been charged with contempt or has had an indictment returned against him or her. In re Mintzner, 511 F.2d 471, 472 (1st Cir.1974). See also United States v. Calandra, 414 U.S. 338, 94 S.Ct. 613, 38 L.Ed.2d 561 (1974) (grand jury witness lacks standing to move to suppress evidence received by the grand jury, to move to quash a grand jury subpoena, or to refuse to answer questions put to him by the grand jury on the grounds that the evidence, subpoena, or questions are based upon illegally obtained evidence); Cali v. United States, 464 F.2d 475; Matter of Archuleta, 434 F.Supp. at 328.

Moreover, even if the Court of Appeals of the Seventh Circuit were to hold that there were circumstances in which a prospective grand jury witness would be entitled to an evidentiary hearing on a motion to quash a subpoena, it is certain that the court would require a more substantial showing than Dzikowich has made here in support of her allegation that knowledge of her very identity was derived from illegal wiretaps.

Finally, Dzikowich argues that the magistrate or the district court should search the files in other grand jury proceedings for evidence to support her contention that an illegal wiretap was conducted of Robert Lowery’s residence while she was living there. In declining to do so, the magistrate acted correctly. As he pointed out, it is the movant’s burden to establish the grounds for her motion; it is not the court’s function to look for supporting evidence.

Neither is it the magistrate’s obligation to follow the , same procedures followed in other instances by another magistrate, in the absence of any legal requirement that he do so. Thus, the magistrate was free to decline Dzikowich’s suggestion that he open the sealed files of other grand jury proceedings to see how his predecessor chose to handle allegedly similar claims by other grand jury witnesses.

I conclude that, in denying Dziko-wich’s motion to quash her grand jury subpoena, the magistrate acted within his statutory authority under subsection (b)(3) of 28 U.S.C. § 636. Because the motion to quash was without any colorable support in the law, the magistrate was not called upon to exercise any discretion in denying it.

As to the sufficiency of a claim raised under § 3504, the magistrate would have authority under § 636(b)(3) to rule on such a claim if it were raised at an appropriate stage of the proceedings. That determination involves no more than a determination of the sufficiency of a paper record, which does not involve the traditional kind of fact-finding entrusted exclusively to Article III judges, see e.g., United States v. Raddatz, 447 U.S. 667, 100 S.Ct. 2406, 65 L.Ed.2d 424 (1980), but is similar to the reviewing of documentation supporting applications for warrants in which magistrates engage on a regular basis. See, e.g. Matter of Establishment Inspection of Gilbert & Bennett Manufacturing Co., 589 F.2d 1335 (7th Cir.1979) (issuance of inspection warrant). Such actions, taken pursuant to 28 U.S.C. § 636(b)(3), are actions taken on behalf of the district court and subject to de novo review by the district court. Cummings, 615 F.Supp. at 71.

In summary, I find and conclude that the magistrate acted within his statutory authority in hearing and determining Dziko-wich’s motion and claim and that his decision to deny both was correct. Therefore, I affirm his decision and deny Dzikowich’s appeal.

      . In pertinent part, 18 U.S.C. § 3504 provides as follows:
      (a) In any trial, hearing, or other proceeding in or before any court, grand jury, department, officer, agency, regulatory body, or other authority of the United States—
      (1) upon a claim by a party aggrieved that evidence is inadmissible because it is the primary product of an unlawful act or because it was obtained by the exploitation of an unlawful act, the opponent of the claim shall affirm or deny the occurrence of the alleged unlawful act;
      ******
      (b) As used in this section "unlawful act” means any act the use of any electronic, mechanical, or other device (as defined in section 2510(5) of this title) in violation of the Constitution or laws of the United States or any regulation or standard promulgated pursuant thereto.

      . The government objects to Dzikowich’s supplementation of the record, without obtaining the permission of the magistrate or requesting him to reconsider based upon the supplemental evidence. The government’s objection is well taken. The supplemental affidavits are not properly before this court and should not be considered. I have considered them here only to avoid further motions and briefing on the question, as I find the evidence is unsufficient as a matter of law, even when supplemented.


author: KANE, District Judge.

text:
    UNITED STATES of America, Plaintiff, v. Donald K. TURNER, Defendant.
    Crim. A. No. 85-CR-98.
    United States District Court, D. Colorado.
    Oct. 23, 1985.

      Thomas O’Rourke, Asst. U.S. Atty., Denver, Colo., for plaintiff.
    Brian Holland, Asst. Federal Public Defender, Denver, Colo., for defendant.
   MEMORANDUM OPINION AND ORDER

KANE, District Judge.

On March 19, 1985, a grand jury of the District of Colorado returned an indictment charging defendant, Donald Turner, with two counts of tax evasion, 26 U.S.C. § 7201, and one count of making a false statement in violation of 18 U.S.C. § 1001. This matter is now before me on defendant’s motion to dismiss the indictment for prosecutorial misconduct. It is defendant’s position that the numerous instances of prosecutorial misconduct which he alleges in support of this motion require dismissal of the indictment. Although I have discussed this remedy of dismissal at length in United States v. Anderson, 577 F.Supp. 223 (D.Colo.1983) and United States v. Kilpatrick, 594 F.Supp. 1324 (D.Colo.1984), the instant case presents the opportunity to amplify those decisions.

I.

The power to dismiss an indictment stems primarily from the court’s inherent supervisory powers, although a dismissal may also be based on constitutional grounds. See United States v. Chanen, 549 F.2d 1306, 1309 (9th Cir.), cert. denied, 434 U.S. 825, 98 S.Ct. 72, 54 L.Ed.2d 83 (1977); United States v. Samango, 607 F.2d 877, 881 (9th Cir.1979); United States v. Cedarquist, 641 F.2d 1347, 1352 (9th Cir.1981); Anderson, 577 F.Supp. 223, 230; Kilpatrick, 594 F.Supp. 1324, 1351-52. The purpose of this remedy is to “ ‘protect the integrity of the judicial process,’ ... particularly the function of the grand jury, from unfair or improper prosecutorial conduct.” Chanen, 549 F.2d 1306, 1309 (citations and footnotes omitted). Thus, the remedy of dismissal may be used “to insure proper standards of conduct by the prosecution.” United States v. Pino, 708 F.2d 523, 530 (10th Cir.1983).

This remedy is rarely invoked, however, because it is deemed extraordinary. Pino, 708 F.2d 523, 530; Kilpatrick, 594 F.Supp. 1324, 1351. Courts are reluctant to encroach on the constitutionally based independence of the prosecutor and the grand jury. Samango, 607 F.2d 877, 881. “It is only when the government engages in deliberate conduct which interferes with the grand jury’s independent function or damages the integrity of the judicial process that the remedy of dismissal becomes necessary.” Kilpatrick, 594 F.Supp. 1324, 1352. Such misconduct must not only be “flagrant to the point that there is some significant infringement on the grand jury’s ability to exercise independent judgment,” Pino, 708 F.2d 523, 530, the facts of those cases where dismissal has been granted indicate that the prosecutorial misconduct must actually usurp the grand jury and destroy its independence. See Kilpatrick, 594 F.Supp. 1324; Samango, 607 F.2d 877; Anderson, 577 F.Supp. 223; United States v. Hogan, 712 F.2d 757 (2d Cir.1983). Thus, the remedy of dismissal can be invoked only under the most egregious circumstances.

In ruling upon a motion to dismiss the indictment, a court must examine the facts surrounding each alleged instance of prosecutorial misconduct. Some violations, standing alone, may require dismissal. Others, while not singularly requiring dismissal, when combined with one another may establish a pattern of misconduct rising to that level where government dictation is substituted for the grand jury’s authority and autonomy. See Kilpatrick, 594 F.Supp. 1324, 1352. Isolated errors and improprieties, however, do not require dismissal of the indictment. Anderson, 577 F.Supp. 223, 230; Kilpatrick, 594 F.Supp. 1324, 1352.

II.

Bearing in mind these principles, I now turn to the specific instances of alleged prosecutorial misconduct in the instant case. Relying primarily on Anderson and Kilpatrick, defendant alleges that the prosecutors improperly: 1) used grand jury agents, 2) granted “pocket” or “informal” immunity, 3) allowed an IRS investigator to mischaracterize the evidence before the grand jury, 4) introduced extraneous prejudicial information, 5) testified before the grand jury through the use of leading questions and by directly answering jurors’ questions, 6) placed a government agent in the defense camp in violation of defendant’s Fourth Amendment rights, 7) elicited testimony from defendant’s wife in violation of his marital privilege, and 8) delayed return of the indictment. Each of these alleged instances of misconduct will be examined separately in order to determine if any violation, standing alone, would require dismissal. If none would independently require dismissal of the indictment, then I shall consider their cumulative effect in determining whether the grand jury’s independent role in returning this indictment was usurped.

A. Grand Jury Agents

Defendant first asserts that the prosecutors in the instant case, as in Kilpatrick, improperly used grand jury “agents”. In Kilpatrick, I held that the use of grand jury “agents” in the circumstances of that case violated Fed.R.Crim.P. 6(d) and required dismissal of the indictment. 594 F.Supp. 1324, 1344. There, prosecutors had administered oaths to IRS investigators, purportedly swearing them in as “agents of the grand jury”. 594 F.Supp. 1324, 1328. The prosecutors misled the grand jury as to the appropriate role of these investigators and urged the grand jury members to rely upon them as their “agents”. 594 F.Supp. 1324, 1328-29. When the investigators appeared as witnesses, the government attorney reiterated that they were appearing as “agents of the grand jury”. 594 F.Supp. 1324,1329. Further, the prosecutors instructed the investigators to inform witnesses that they were assisting a grand jury investigation when they went to interview the witnesses. 594 F.Supp. 1324, 1329. Finally, contrary to the role of the investigators described to the grand jury by the prosecutors, the IRS agents themselves did not view their role as agents of the grand jury. Rather, they viewed their role and conducted their investigation as agents of the Department of Justice, primarily assisting the prosecutors. 594 F.Supp. 1324, 1329. In holding that these practices violated Rule 6(d), I found that they constituted “improper intrusion^] into the elusive and independent province of the grand jury by government attorneys and investigators.” 594 F.Supp. 1324, 1344.

In the present case, defendant contends that the IRS investigators misled at least three witnesses by failing to identify themselves as special agents of the IRS and creating the impression that they were “agents” of the grand jury. Two witnesses testified at a hearing on this motion that, although the IRS investigators who interviewed them displayed a badge or an identification card, they did not identify themselves as IRS investigators. Another witness, Steve Wagner, testified before the grand jury that two men came to his office to interview him in connection with this case and that he was confused as to their role in this matter:

THE WITNESS: There is a confusion a bit in my mind about being under investigation by the Grand Jury or by the IRS.
MR. THORNHILL: So Mr.—
THE WITNESS: Now, I’ll tell you where that comes from is because Batson and Lovell came out to my office and for fifteen minutes tried to lead me to believe they were with the Grand Jury. The first time—
MR. THORNHILL: I can advise you that Mr. Batson and Lovell are acting as assistants to this Grand Jury. They are assisting the United States Attorney’s Office in the conduct of this Grand Jury. They are — and I’m sure that they told you this—
THE WITNESS: After about fifteen minutes. The first thing they told me was they were with the Grand Jury.
MR. THORNHILL: They are assisting the—
THE WITNESS: Well, that isn’t what they said.
MR. THORNHILL: Well, all right, fine. THE WITNESS: No, they led me to believe — and I was quite upset about this— that they — they said, “Well, we’re with the Grand Jury.” I says — this was the first time I had met them. I didn’t know who they were or who they were with. And I said, “Oh, are you members of the Grand Jury?” “No, we are not members of the Grand Jury. We are with them conducting an investigation.” I said, “Well, who do you work for?” “Well, we are working for the Grand Jury.” And I said, “Well, could I see some identification?” And which one is the black man—
MR. THORNHILL: Batson.
THE WITNESS: Batson handed me a card that says Special Investigation or—
MR. THORNHILL: Special Agent, Criminal Investigation?
THE WITNESS: Yeah, IRS. I looked at the card and I says, “Oh, you’re with the IRS?” “Well, yeah, we’re with the IRS, but we’re working for the Grand Jury.” And this went on for fifteen minutes. And I said, “Well, why didn’t you just come and tell me you were with the IRS?"
MR. THORNHILL: These men are employed by the Internal Revenue Service as special agents attached to the Criminal Investigation Division.
THE WITNESS: Well, I understand now.
* sk sk * * *
THE WITNESS: ... I was a little perturbed that they would come in and present themselves as—you know, seemed to me they were trying to, you know, present themselves as members of the Grand Jury, you know, and there is a world of difference between Grand Jury members and IRS investigators. I’ll tell the Grand Jury all kinds of things; I’m not going to tell the IRS a lot of things.

Wagner, 3/4/82 at 28-30.

This testimony indicates that both the IRS investigators and the prosecutor represented that the investigators were working for or assisting the grand jury. While such conduct is improper under Kil-patrick, I cannot say that this isolated instance of impropriety requires dismissal of the indictment. Unlike Kilpatrick, the IRS investigators were not sworn in as “agents of the grand jury”, nor did the prosecutors mislead the grand jury as to their role. Rather, when Special Agent Batson testified, his role as an IRS investigator was made clear to the grand jury, and he testified only in that capacity. There is no evidence that the grand jury relied on the IRS investigators as their “agents”, or that their representations to Wagner intruded upon the independence of the grand jury. In short, most of the abuses found in Kilpatrick requiring dismissal are not present in the instant case. Certainly, this conduct did not substantially impair, let alone usurp, the grand jury’s independence. Thus, standing alone, this transgression is not sufficient to require dismissal of the indictment.

B. Pocket Immunity

Second, defendant asserts that three out of 22 witnesses received informal or “pocket” immunity. I condemned this practice in both Anderson and Kilpatrick. Grants of “pocket” immunity do not, however, require dismissal of the indictment.

In Kilpatrick, the prosecutors secured the testimony of no less than 23 witnesses by the use of “pocket” immunity. In granting this immunity, the prosecutors ignored entirely the federal immunity statute, 18 U.S.C. §§ 6001 et seq., which prescribes the congressionally authorized procedure for conferring grants of immunity. 594 F.Supp. 1324, 1336. Previously, I had described bestowal of “informal immunity” through “letters of assurance” as a “damnable practice”. United States v. Anderson, 577 F.Supp. 223, 233 (D.Colo.1983). In Kilpatrick, however, I concluded that “[pjocket immunity is illegal; when granting immunity, the Department of Justice must comply with the requirements of 18 U.S.C. §§ 6002 and 6003.” 594 F.Supp. 1324, 1349. There, I held that “the repeated use of letters of assurance or so-called ‘pocket immunity’ ... violated the applicable statutes and tainted the grand jury with its illegality.” 594 F.Supp. 1324, 1349. I did not hold, however, that use of informal immunity itself required dismissal of the indictment. Rather, I stated that

[t]he conventional remedy for illegal use of “pocket immunity” would, in most instances, take the form of a post facto grant of statutory immunity or the equitable enforcement of the pocket agreement, for the benefit of grand jury witnesses who relied on the prosecutor’s promises. These concerns are not before me here. Still, the use of pocket immunity was so pervasive in this case that it reflects upon the general conduct of the prosecutors and the grand jury.

Kilpatrick, 594 F.Supp. 1324, 1349 n. 22.

In the present case, two witnesses, Loyd Brown and Rene Remund, were given informal immunity. Arguably, a third witness, E. Jay Erickson, was promised the equivalent of such immunity by the prosecutor when he stated to Mr. Erickson that “I was expecting that you were to be testifying here as a witness, not a target or subject of this investigation.” Erickson, 5/4/82 at 2.

Whether the government granted “pocket” immunity to three rather than two witnesses is inconsequential. Any use of such immunity is illegal. This is not to say, however, that the use of pocket immunity in this case constitutes grounds for dismissal of the indictment. As discussed above, any remedy would take the form of a post facto grant of immunity; not dismissal. Moreover, unlike Anderson and Kil-patrick, the use of “pocket” immunity in the instant case was not so pervasive as to taint the grand jury with its illegality. Thus, I cannot conclude that it interfered, substantially or otherwise, with the independence of the grand jury.

C. Mischaracterization of Evidence

Third, defendant asserts that IRS Special Agent Batson improperly summarized witnesses’ testimony before the grand jury and mischaracterized evidence. Defendant argues that, under Kilpatrick, this conduct requires dismissal of the indictment. In Kilpatrick, I condemned both the use of summaries which were misleading and mis-characterization of the evidence. There, two separate grand juries were involved. The first grand jury heard testimony from several witnesses and received other evidence. Instead of recalling these witnesses to appear before the second, indicting grand jury, the government attorneys used the “grand jury agents” to summarize this evidence and testimony in front of the second grand jury. 594 F.Supp. 1324, 1329. These summaries contained numerous inaccuracies and were misleading in several respects. 594 F.Supp. 1324, 1330. I held that such mischaracterization of the testimony intruded upon the independent role of the grand jury. 594 F.Supp. 1324, 1349; see also Samango, 607 F.2d 877, 883-84.

In the instant case, three separate grand juries were involved. Most of the witnesses testified before the first two grand juries. The third grand jury, which returned the indictment against defendant, received testimony only from IRS Special Agents Batson and Hector. Although this grand jury had the opportunity to recall witnesses who appeared before the first two grand juries, the members instead chose to accept transcripts of those witnesses’ testimony. The transcripts were marked as exhibits. According to the United States Attorney, the grand jurors had the opportunity to read each of these transcripts before returning the indictment against defendant.

Contrary to defendant’s allegation that Special Agent Batson summarized witnesses’ testimony before the grand jury, a review of Batson’s testimony reveals that he was merely identifying the exhibits or transcripts which contained witness testimony. Thus, defendant’s contention that Special Agent Batson improperly summarized witnesses’ testimony is without merit.

Defendant’s claim that Special Agent Batson mischaracterized evidence is also meritless. Specifically, defendant asserts that Special Agent Batson led the grand jury to believe that no evidence existed that defendant operated a church “despite clear evidence to the contrary.” According to defendant, material to the indictment is proof that defendant had a likely source of taxable income and was not entitled to claim income exempt as derived from legitimate church activities.

The existence of this church, let alone its legitimacy, is far from “clear.” Several witnesses had testified that defendant represented to them he was a minister and operated a church. Patricia Reichert, 9/9/81 at 3, 41; Paul Moran, 1/6/82 at 8; Steve Wagner, 3/4/82 at 6, 21; Lyle Ferch, 3/5/82 at 11; Philip Andert, 9/27/82 at 12; Rene Remund, 4/8/82 at 39. Only one witness, Alden Kautz, testified that he had ever attended any of defendant’s church services. Alden Kautz, 3/4/82 at 44. In fact, defendant’s ex-wife, Donna Turner, essentially characterized defendant’s church as a sham:

Q And is it your understanding that he opened up these various churches — what is your understanding as to why he had so many different churches?
A So he wouldn’t have to pay taxes.
Q Did he ever tell you that?
A Yes.

Donna Turner, 9/9/81 at 15.

Regarding the issues of whether defendant was a minister and operated a bona fide church, Special Agent Batson testified as follows:

Q Okay. Now, does Mr. Turner on Exhibit 20 list his occupation?
A Yes, he lists his occupation as a minister?
Q And how about on Exhibit 21?
A Also listed as a minister.
Q Okay. Now, has your investigation discovered whether or not Don Turner or Donald K. Turner actually was a minister?
A Yes, I did determine that, and to the best of my ability, I found no instance where he served in the capacity as a minister, nor did he have members of his church.
sjs * sfc sfc *
Q ... Did he purport to have a minister — or to have a church to anybody else except on those returns?
A He did purport to be a minister to some other people.
Q Okay. And did he have some church or did he ostensibly have a church? A He ostensibly had a church called New Life Chapel.
Q Did you find a place, an actual physical location called the New Life Chapel?
A I found a particular address, 5660 South Syracuse Circle that was referred to in various documents as being the location of New Life Chapel.
* * ‡ *
Q Okay. Did you go and take a look at that location?
A Yes, I did.
Q What did you find at that address? A I found at that address not a church, but a business that was conducted out of that suite.
5js Sfc Sfc S¡{ sj; S}¡
JUROR: I was just wondering why he was channeling money through this New Chapel to make it look like it was coming from there and that he was a minister. Is that his idea?
Q (By Mr. O’Rourke) Well is the income of a church taxable?
A The income of a church is not taxable if it’s a church organization.
Q Does a church have to meet certain standards or requirements to be considered a church for tax purposes?
A Yes, they do.
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Q Do you find that Mr. Turner, for example, had a congregation or members of his church?
A No, I found no members of his church.
Q Did you find indications that he — that he, in fact, didn’t have a church except in name?
A Yes, I did. I found several witnesses who testified that he did not have any members of the church, he did not hold any church services and had, in fact, made disclosures to them that the only purpose for the church was to disguise his income and make it nontaxable.

Batson, 2/19/85 at 10-12, 34-35.

Special Agent Batson’s testimony reflects that, at all times, he was testifying as to his own personal knowledge of the investigation of this case. Agent Batson did not deny that there were some indicia of defendant’s alleged ministry. Rather, he testified that he had investigated these issues and could not substantiate defendant’s claims that he was a minister or that a bona fide church existed. There is nothing in his testimony that indicates that Agent Batson mischaracterized evidence on these issues. The grand jury was simply not “overreached or deceived in some significant way, as where perjured testimony has knowingly been introduced.” Samango, 607 F.2d 877, 882. Thus, defendant’s claim of mischaracterization is without merit.

D. Extraneous Prejudicial Information

Defendant also asserts as error the interjection by the prosecutor of extraneous prejudicial information. During the testimony of Raymond Gross, the prosecutor asked if the business that defendant was involved in in 1972 was a “pyramid scheme”. Gross answered that he knew it was. Raymond Gross, 9/9/81 at 3. Defendant contends that this “type of question has no place in the grand jury room and only served to invite the grand jury to the conclusion that ... [he] was a con-man, even as early as 1972.” Although “courts have ... held that a prosecutor may not make statements or argue in a manner calculated to inflame the grand jury unfairly against an accused,” Hogan, 712 F.2d 757, 759, there is no indication that the prosecutor’s question in the instant case was calculated to inflame the grand jury. A grand jury does not have to conduct its investigation with blinders on. Nor must we assume that members of a grand jury have abnormal sensibilities which would be inflamed by such an isolated and innocuous question. Thus, defendant’s objection is without merit.

E. Testimony by the Prosecutor

Patricia Reichert, defendant’s secretary, was the first witness to testify before the grand jury during its investigation of this case. At several points during her testimony, the government prosecutor used leading questions. Additionally, the prosecutor essentially testified when he attempted to explain complicated factual and legal concepts to the grand jury. Defendant contends that this type of behavior threatened the grand jury’s independence. The question, however, is not whether the grand jury’s independence was threatened, but whether it was in fact usurped.

In support of this contention, defendant cites Samango. There, the Ninth Circuit found that the transcript of a witness’ testimony was a source of prejudice to the defendant. 607 F.2d 877, 883. The court determined that “throughout the questioning, it was the prosecutor who actually supplied the testimony” by his use of leading questions. 607 F.2d 877, 883.

In the instant case, the prosecutor’s use of leading questions and his answers in response to grand juror’s questions was insignificant in the context of the entire transcript. Certainly, unlike Sa-mango, this transcript does not reveal that it was actually the prosecutor who supplied the witness’ testimony. As the government correctly points out, the few leading questions which were used did not force the suggested answer from the witness. In most cases, Ms. Reichert did not give the expected answer and even clarified misapprehensions apparent in those questions. Thus, although the prosecutor did use leading questions to some extent, and did directly answer grand jury members’ questions at one point, I simply cannot conclude that this conduct was “flagrant to the point” that the grand jury’s ability to exercise independent judgment was impaired. See Pino, 708 F.2d 523, 530.

F.Government Agent in the Defense Camp

Defendant next argues that, as in Anderson, the government utilized an agent in the defense camp in violation of his constitutional rights and that this conduct warrants dismissal of the indictment. In Anderson, government agents covertly infiltrated the defendants’ organization. At least one agent, using questions prepared by the United States Attorney’s office, induced defendants to discuss both their business ventures and the on-going grand jury proceedings. This agent then testified before the grand jury, answering specific questions by the U.S. Attorney about legal strategy and defenses the defendants discussed using in the event of an indictment. Members of the grand jury also asked the agent questions about how he was going to maintain his cover in defendants’ organization. These questions were followed by the U.S. Attorney’s instruction to the agent that “ ‘the grand jury would like you to maintain your cover with regard to this aspect ... and attempt to develop a sufficient amount of probable cause ... in order to obtain a search warrant for [Lowell Anderson’s] offices.’ ” 577 F.Supp. 223, 231.

In holding that this conduct constituted grounds for dismissal, I stated that

[t]he infiltration, and [particularly] the manner of its presentation to the grand jury, graphically demonstrates the collapse of the independent functioning of the grand jury, by the U.S. Attorney and investigating agents as well.... A grand jury that becomes intimately involved in planning an undercover agent’s activities and maintaining his cover is no longer standing between the prosecutor and the citizenry as an independent evaluator of the evidence; it becomes a cabal.

Anderson, 577 F.Supp. 223, 231.

By contrast, in the instant case, there is no indication that the grand jury was involved in the conduct alleged. Defendant contends that Pauline Adams, a secretary in his office, took documents belonging to him and turned them over to IRS agents. Defendant fails, however, to show how this alleged conduct destroyed the independence of the grand jury. There is absolutely no indication that any of these documents were presented to the grand jury. Moreover, none of the grand jury transcripts reveal that Ms. Adams testified or that the grand jury was ever made aware of her purported role in the investigation of this case. Since there was no involvement of the grand jury, its ability to function independently was not usurped. Government infiltration alone is not grounds for dismissal of an indictment.

G. Marital Privilege and Pre-Indictment Delay

Finally, defendant requests that I consider two other instances of alleged misconduct as further evidence of a purported pattern of prosecutorial abuse in this case. First, defendant contends that his ex-wife’s testimony before the grand jury encompassed confidential communications with him. Private, confidential communications between a husband and wife are, of course, privileged. Wolfle v. United States, 291 U.S. 7, 14, 54 S.Ct. 279, 280, 78 L.Ed. 617 (1934); Trammel v. United States, 445 U.S. 40, 45 n. 5, 100 S.Ct. 906, 909 n. 5, 63 L.Ed.2d 186 (1980). The indictment is not subject to dismissal, however, for violation of the marital privilege. See, e.g., United States v. Calandra, 414 U.S. 338, 345, 94 S.Ct. 613, 618, 38 L.Ed.2d 561 (1974). Further, even though defendant’s marital privilege was violated, this instance of impropriety was isolated. I cannot say that Donna Turner’s testimony regarding privileged communications infringed, let alone usurped, the grand jury’s independence. See, for illustration, Judge Learned Hand’s dissent in United States v. Remington, 208 F.2d 567, 571 (2d Cir.1953).

Second, defendant claims that the pre-indictment delay in this case further indicates prosecutorial overreaching of the grand jury. Most of the witnesses testified before the first two grand juries between September 1981 and September 1982. Testimony did not resume until February 1985 before the third grand jury. This delay alone, however, does not give rise to an inference that the grand jury’s role was somehow usurped. Nor is there any indication that this delay was intended by the government to gain some kind of tactical advantage. Instead, defendant again points to an isolated instance of misconduct and argues that it requires dismissal or evidences a pattern of abuse when in fact there exists not even the slightest indication of the deliberate misconduct by the government found in Anderson and Kilpatrick. Without such evidence of deliberate misconduct, defendant’s claim is without merit.

II.

As discussed above, none of the alleged instances of misconduct per se require dismissal of the indictment. Nor can I conclude that the cumulative effect of any of these purported errors operated to impair the grand jury’s independence. These incidents are not deliberate, “flagrant”, or substantial, even when taken as' a whole. Unlike Anderson and Kilpa-trick, the grand jury’s role and independence were not usurped or destroyed by the government attorneys.

IT IS THEREFORE ORDERED THAT:

1. Defendant’s motion to dismiss the indictment is denied.

2. A hearing is scheduled for Friday, November 1, 1985 at 8:15 a.m. on all remaining motions.


author: HAROLD H. GREENE, District Judge.

text:
    RAINBOW NAVIGATION, INC., Plaintiff, v. DEPARTMENT OF the NAVY, et al., Defendants.
    Civ. A. No. 85-2560.
    United States District Court, District of Columbia.
    Oct. 23, 1985.

      Benjamin L. Zelenko, Martin Shulman, Landis, Cohen, Rauh & Zelenko, Washington, D.C., for plaintiff-intervenor Intern. Organization of Masters, Mates and Pilots.
    David J. Anderson, Vincent M. Garvey, Linda L. Lance, Leslie K. Shedlin, Charles Sorenson, Civil Div., U.S. Dept, of Justice, Washington, D.C., for defendants.
    Frank J. Costello, Linwood Holton, Ralph L. Kissick, Charles J. Simpson, Jr., Zuckert, Scoutt, Rasenberger & Johnson, Washington, D.C., for plaintiff; John W. McConnell, Jr., Haight, Gardner, Poor & Havens, of counsel.
   OPINION

HAROLD H. GREENE, District Judge.

Plaintiff, Rainbow Navigation, Inc. (Rainbow), a shipping company in the business of carrying military cargo on the United States-Iceland route, challenges a determination of the Secretary of the Navy pursuant to the Cargo Preference Act of 1904, 10 U.S.C. § 2631, to deprive Rainbow of the preference provided by that statute, on the basis that Rainbow’s rates are excessive or otherwise unreasonable. The Secretary’s decision may be expected to result in reverting the American military cargo business to Icelandic vessels, as the government of Iceland has been insistently demanding of our government for some time.

Presently pending before the Court is plaintiff’s motion for partial summary judgment, which seeks injunctive and declaratory relief pursuant to the Cargo Preference Act, the Armed Services Procurement Act, 10 U.S.C. § 2301, and the Fifth Amendment to the Constitution. As will be seen below, at the heart of plaintiff’s motion is a novel issue: may the congressionally-mandated cargo preference for U.S. vessels be revoked for foreign policy reasons?

I

The material facts are not in dispute. Plaintiff is a small shipping company whose sole business consists of carrying cargo between the United States and Iceland, a route on which it is the only U.S. flag carrier. Rainbow’s only ship, the M/V RAINBOW HOPE, is a United States flag ship; it is manned by U.S. citizens; and it operates pursuant to U.S. law and regulations.

Under the Cargo Preference Act, U.S. flag vessels are required to be used to carry military supplies unless the President makes a determination that the freight rates charged by U.S. vessels are “excessive or otherwise unreasonable.” 10 U.S.C. § 2631. Prior to Rainbow’s entry into the Icelandic trade on May 17, 1984, such cargo was carried exclusively by three Icelandic shipping companies, but as a result of the cargo preference for U.S. flag ships granted by the statute, Rainbow now carries 70% of the military cargo between Iceland and the United States.

Ever since Rainbow’s entry into the Icelandic trade, representatives of the government of Iceland have repeatedly approached U.S. government officials in an attempt to regain the U.S. military cargo trade for the Icelandic shipping companies. Indeed, Icelandic officials have raised the issue personally with the Secretary of State on at least six occasions during the past year.

On August 8, 1985, the Secretary of the Navy issued a one-paragraph memorandum declaring that the rates being charged by United States vessels on the U.S.-Icelandic military cargo route were excessive and otherwise unreasonable, thereby invoking the exception to the cargo preference provisions of the Act. The memorandum stated that the determination was made based on “all relevant circumstances, including consultation with the Secretary of State and the Secretary of Defense,” without further elaboration. No dissatisfaction had ever been expressed by the government regarding Rainbow’s rates pri- or to the issuance of the August 8 memorandum, and Rainbow received no notice that such a determination was being considered nor did it have the benefit of a hearing prior to being cut off. In fact, the company learned of the decision only as a result of a joint U.S.-Icelandic press conference in Iceland.

On August 12, 1985, plaintiff filed the instant action, at the same time requesting a temporary restraining order. Prior to the hearing on the TRO, the parties agreed on a stipulation which obviated the need for such an order. The stipulation established a briefing schedule for summary judgment motions, with oral argument set for September 13, 1985.

On September 6, 1985, one week before the scheduled hearing, the Secretary of the Navy issued a second determination that Rainbow’s rates were excessive and otherwise unreasonable. This second determination was virtually identical to the first, except for the addition of the underlined language:

I have reviewed all relevant circumstances, including your memorandum of 30 August 1985, and have consulted with the Department of State and the Secretary of Defense, concerning ocean transportation of military supplies between the United States and Iceland. Pursuant to 10 U.S.C. § 2631, I hereby find that under the existing tariff filed by the United States flag carrier on that route, the rates currently charged by Rainbow Navigation, Inc., are excessive and are also otherwise unreasonable. Proceed to procure ocean transportation service between the U.S. East Coast and Iceland under principles of full and open competition (words no longer appropriate omitted).

Plaintiff has challenged the second determination as well, claiming that, despite the government’s hasty attempts to meet certain of the plaintiffs procedural objections, that determination is as invalid as the first.

The Court has considered the memoran-da and other papers submitted by the parties as well as the arguments made on September 13, and it has decided that plaintiffs position is well taken and that it is entitled to judgment.

II

In its motion for partial summary judgment, plaintiff argues that the determination of the Secretary of the Navy regarding unreasonableness was both procedurally and substantively defective, in that it was arbitrary and capricious and violated both the Cargo Preference Act and the Administrative Procedure Act, 5 U.S.C. § 706(2)(A). The government denies that the Secretary's determination was in any way improper.

The Cargo Preference Act of 1904 is part of a larger statutory scheme designed to protect and foster American shipping. See Autolog Corp. v. Regan, 731 F.2d 25, 30 (D.C.Cir.1984); Curran v. Laird, 420 F.2d 122, 127 (D.C.Cir.1969). As the Court of Appeals has recently stated, it- is the purpose of the Act and related cargo preference provisions

to create a strong domestic merchant marine capable of competing with foreign carriers in the world market, and each act recognizes that foreign subsidies and high domestic labor costs place American-built and American-operated ships at a competitive disadvantage with foreign vessels in the absence of government assistance.

American Maritime Association v. United States, 766 F.2d 545, 548 (D.C.Cir.1985).

The Cargo Preference Act contributes to this congressional purpose by conferring a monopoly on U.S. flag ships over the transportation of military cargo, thus providing American shipping companies with a guaranteed cargo and income. See States Marine International v. Peterson, 518 F.2d 1070, 1074 (D.C.Cir.1975).

Specifically, insofar as here relevant, the Act provides as follows:

Only vessels of the United States or belonging to the United States may be used in the transportation by sea of supplies bought for the Army, Navy, Air Force, or Marine Corps. However, if the President finds that the freight charged by those vessels is excessive or otherwise unreasonable, contracts for transportation may be made as otherwise provided by law.

Thus, military cargo may be shipped by sea in foreign flag vessels only upon a finding by the President that the freight rates charged by American shippers are excessive or otherwise unreasonable. In this instance, of course, the Secretary of the Navy has made just such a finding in his memoranda of August 8 and September 6, and the question before the Court is whether the Secretary was in possession of and cited information upon which the determination to invoke the statute’s escape clause could legitimately be made. Absent some such information, the determination would be arbitrary and capricious and not “a product of reasoned decisionmaking based upon a consideration of the relevant factors.” Motor Vehicle Manufacturers Association v. EPA, 768 F.2d 385 (D.C.Cir.1985); see also, Motor Vehicle Manufacturers Association v. State Farm Mutual, 463 U.S. 29, 43, 103 S.Ct. 2856, 2866, 77 L.Ed.2d 443 (1983).

Ill

A threshold question, of course, is what constitutes an “excessive and unreasonable freight [charge]” within the meaning of the Act. The statute and the accompanying regulations provide no guidance, and the legislative history is inconclusive. As noted above, however (see note 19), the government itself acknowledges that Congress intended that U.S. vessels would receive a preference at remunerative rates, and that U.S. ship owners are at a minimum entitled to a “fair profit.”

In making the September 6, 1985, determination of unreasonableness, the Secretary had essentially two pieces of information before him upon which to base his assessment of economic unreasonableness: (1) charts comparing Rainbow to military cargo carriers on other routes, based on measurement-per-ton and price-per-container rates, showing Rainbow’s rates to be substantially higher than those of other carriers serving other routes; and (2) a memorandum from the Commander of the Military Sealift Command recommending a finding of excessive rates based upon those charts and upon the fact that Rainbow charged the Navy the same rates charged by Icelandic carriers prior to Rainbow’s entry to the trade.

Neither set of documents contained evidence relevant to the question whether Rainbow was, in fact, earning more than a fair profit, if only because none of the documents contains anything about Rainbow’s actual costs or profits.

To begin with, the charts relied upon by the Secretary do not provide facts relevant to a determination of the reasonableness of Rainbow’s rates, in addition to being otherwise deficient and inconclusive. Those charts simply compare rates on a per ton and per container basis; that is, they establish, for example, that one company charges roughly $1,200 per container for a trip from the United States to Europe while Rainbow charges $7,500 per container for a trip from the United States to Iceland. The charts do not take into account the difference in mileage between one route and another, the time required to travel the route, the service provided, or any other relevant factors. To draw an analogy, the chart amounts to nothing more than a comparison between one airline, charging $45 per passenger to fly from Washington to Boston and another which charges $349 to fly from New York to Seattle. In addition to adjusting a comparison of rates between routes to accomodate differentials in distance, any such comparison, to be valid, must necessarily also consider such other relevant factors bearing on those rates as the size of the ships used and any resulting economies of scale, the traffic volume on the route, the number of trips per year the distance and weather conditions permit, and the like. Rainbow ran one small ship on a low volume route over a great distance; the fact that it charged more to carry a container to Iceland than another company might charge to carry the same container to Europe may simply be a reflection of higher costs. Thus, the charts do not contribute at all to an analysis of whether any carrier on the chart, including Rainbow, is earning a “fair profit.” See also, note 23, supra.

The Memorandum from the Military Sealift Command, which asserts that Rainbow adopted the rates previously charged by Icelandic carriers, likewise fails to consider in any way Rainbow’s costs or profits, and it is inconclusive on its face as to reasonableness. In fact, when Rainbow’s military cargo rates are compared to the Icelandic commercial cargo rates on the route, which are several thousand dollars per measurement ton higher than the Rainbow military cargo rate, the Rainbow rate would appear to be eminently reasonable. However, the Secretary failed to make even so basic a comparison.

In short, it is evident that the few factors the Secretary did consider in making the determination simply have no bearing on whether Rainbow was achieving more than a “fair profit,” much less that they are exorbitant (see note 19, supra). It is therefore difficult to escape the conclusion that the Secretary’s economic findings, rudimentary as they are, were nothing more than an after-the-fact attempt to shore up a decision made on other grounds. See Part IV infra.

Additionally, there is affirmative evidence that Rainbow’s rates were not excessive or unreasonable. Thus, prior to Rainbow’s entry into this trade in May 1984, the rates were set by competition among the Icelandic carriers; yet, as noted, Rainbow set its rates at levels that were no higher than those established by that comparative environment. Further, there is evidence that the nature of Rainbow’s service is such that the use of Rainbow’s ship reduces the military’s overall costs by about 9%. Finally, the military has never complained about Rainbow’s rates or service; the only complaint Rainbow received was that of the Icelandic companies which charged that the company’s rate for certain commercial shipments was too low (although that rate was higher than the military rate).

Even with a deferential standard of review, the Court finds that the Secretary’s determination of economic excessiveness is not the product of reasoned decisionmaking based upon a consideration of the relevant factors and is therefore not in accordance with law.

IV

The government’s position suffers from an even more fatal defect. It is apparent from the face of the record that the Secretary’s determination was not based solely or even primarily on freight rates — as the statute requires — but on what has been characterized by both plaintiff and the government as foreign policy, political, or geopolitical grounds. The government concedes that foreign policy considerations contributed to the Secretary’s determination; at oral argument government counsel stated that “the decision was a political one;” and it is obvious from the record which is before this Court that the many entreaties of the Icelandic government to the Secretary of State (see note 5, supra) had a great deal to do with the Navy’s ultimate decision or, more likely, that they were the only or the decisive basis for that decision. Yet there is nothing in the language of the statute or its legislative history to support the conclusion that the Executive Branch may disregard the cargo preference granted by law to U.S. vessels on account of political considerations.

The government meets this problem head-on, arguing that the determination of excessiveness is committed to the broad discretion of the Executive Branch, and that the President, through his designees, may consider all relevant circumstances, including foreign affairs concerns. Indeed, the government contends that the Act contains broad, discretionary language in an area particularly within the President’s province — the realms of foreign affairs and military policy.

The question whether that argument is acceptable depends upon the nature of the authority Congress delegated to the President (or his designees) in granting him the power to make the determination of excessive or unreasonable rates. If in the Cargo Preference Act Congress delegated to the President authority to make a decision in the province of foreign affairs, clearly the courts would have no authority to second-guess the President’s decisions or those of his designees with respect thereto. See Norwegian Nitrogen Products Co. v. United States, 288 U.S. 294, 58 S.Ct. 350, 77 L.Ed. 796 (1933). But the problem with the government’s argument is that none of the discretion vested in the President by the Cargo Preference Act involves foreign, military, or geopolitical policy.

The statute does not state, as the government would have it, that the U.S. cargo preference provisions may be overridden or waived if the President finds that the use of U.S. vessels would be unreasonable; the statute mandates that these provisions may be disregarded only if the “freight charged” by such vessels is unreasonable. In other words, what is involved here are not vast geopolitical, foreign affairs, or national defense issues, but only the economic question whether Rainbow’s freight rates are excessive or otherwise unreasonable. Yet in making an affirmative finding on that issue, the Secretary took decisively into account American foreign policy concerns vis-a-vis the Icelandic government — a factor which is wholly unrelated to the economic decision the President was called upon to make under the law.

The legislative history of the Act strongly supports the conclusion that the Secretary’s consideration of geopolitical considerations is unauthorized by law. The Car-' go Preference Act is first and only a statute designed to protect and nurture the American maritime industry. It was enacted out of concern that the United States might be dependent upon foreign shippers to carry military supplies during wartime if the United States lacked a strong national merchant marine. The American maritime industry during the early 1900s was floundering, struggling to compete with heavily subsidized foreign shipping companies. H.R.Rept.1893, 58th Cong., 2d Sess., 4-5. To ensure that an American merchant marine could operate in a trade promising a fair profit to their owners, Congress elected to provide U.S. flag ships with a monopoly in carrying military cargo, thereby guaranteeing the merchant marine a steady stream of business. Id. at 4-5. Aside from providing direct military advantage, the bill was designed, to benefit the entire American shipping industry, from the shipbuilders to working sailors. Id. at 5. In short, the statute was a piece of protective domestic legislation, designed to insulate American shipping from foreign competition and to protect against American dependence upon foreign shipping to transport military supplies during war.

The legislative history further indicates that the exception to the Act which is at issue here was enacted solely out of a concern that American shippers might abuse the monopoly power thus provided to them by charging the government exorbitant rates. 38 Cong.Rec. 2412 (February 26, 1904). As noted, the version of the bill finally passed provided that the mandate of the Act could be waived if the President made a finding that the freight rates charged were excessive or otherwise unreasonable. Other proposed checks, all ultimately rejected, were to include a ceiling for the rates based on a percentage over foreign rates charged or a ceiling based upon the shipping company’s commercial rates in the same trade. See 38 Cong.Rec. 2415, 2458.

Most significantly, the exception in the original Senate version of the bill included a provision permitting the President to suspend the Act “whenever, in the interests of the national defense, or for the protection of the interests of the government, such suspension may seem desirable. ” 38 Cong.Rec. 2^12. This language was eliminated by the Senate and the “excessive or otherwise unreasonable” freight standard was substituted because of concern expressed by several Senators that otherwise the authority delegated to the President would be too broad. Id. at 2476-76. Specifically, Congress did not want to grant such broad authority “that the President shall absolutely have the right to countervail a law.” Id. at 2475. To solve this problem, Congress substituted language that in its view would require the President to find a “specific fact” rather than language that would have committed to the President “in his uncontrolled discretion, the question whether or not a general law shall be operative or whether it shall be suspended, either temporarily or permanently.” Id. at 2474. The provision finally agreed upon was thus quite deliberately a far cry from one allowing the President to suspend the Act based upon whatever circumstances he or his designees might deem relevant, including foreign policy factors.

While conceding that neither the statute itself nor the legislative history mentions foreign affairs or national security as justifications for waiving the provisions of the Act, the government argues that the President may nonetheless consider such factors as long as the Act does not, in so many words, forbid him from doing so. The difficulty with that argument is that the Act does just that. The statute mandates affirmatively that “only vessels of the United States” may be used for transporting military supplies, and it then goes on to establish a single, specific exception, to operate if the President finds that the freight rates charged by those vessels are excessive or otherwise unreasonable. If words mean anything, that statutory language means that there are to be no other exceptions to the positive mandate of the law requiring military supplies to be transported in United States ships.

In short, both a straightforward reading of the Act and an examination of its legislative history support the conclusion that geopolitical or foreign affairs considerations are not permissible factors for displacing United States vessels from the military cargo trade. It follows that any expansion of the exception to the Act to accommodate foreign policy or other considerations would require congressional action.

However desirable it might seem to one or more departments of the Executive Branch to develop and nurture good relations with Iceland, they have no authority to do so in defiance of a congressional mandate and to the detriment of American citizens or companies. See American Cetacean Society v. Baldridge, 768 F.2d 426, 444-45 (1985), where the Court of Appeals held that the Secretary of Commerce was required to certify Japan as not adhering to an international whaling quota even though the Executive Branch interposed objections based on foreign affairs considerations and had entered into an agreement on the subject with Japan.

For the reasons stated, the Court grants plaintiff’s motion for partial summary judgment, and it issues an injunction which restores plaintiff’s preference with respect to the carriage of U.S. military supplies between the United States and Iceland in conformity with law.

      . Plaintiff also asserts, in an amended complaint, that the government has impermissibly diverted some cargo on the United States-Icelandic route to U.S. military aircraft in retaliation for plaintiffs challenge by way of this lawsuit. In this regard, plaintiff relies on a stipulation and on a regulation codified at 48 C.F.R. 47.-101(b)(1). Both the facts and the legal issues raised by that claim are entirely distinct from the Cargo Preference Act claim, and neither those facts nor the applicable law have been sufficiently developed by the parties to permit the Court to render a decision on those issues on summary judgment.

      . Defendants’ Points and Authorities in Opposition to Plaintiff's Motion for Summary Judgment does not assert that material facts are in dispute.

      . More than 98% of Rainbow’s business consists of carrying military cargo between Norfolk, Virginia, and the U.S. military installation in Kefla-vik, Iceland.

      . The statute goes on to provide that when the President makes such a determination, the American cargo preference is waived and the government may proceed to book the cargo by another appropriate method. The regulations currently in force provide for competitive bidding as the alternative method. See 48 C.F.R. § 47.500 et seq.

      . Declaration of George Schultz, pp. 2-3. According to the government, the issue of sea transportation has become a matter of great concern to the government of Iceland and a source of friction between it and the United States. Defendants’ Points and Authorities, p. 8.

      . On the same day, the Military Sealift Command issued a solicitation for bids to carry military cargo on the Icelandic trade route.

      . This was the first invocation of that exception in the 81-year history of the statute.

      . The entire text of the Secretary’s determination is as follows: "I have reviewed all relevant circumstances, including consultation with the Secretary of State and the Secretary of Defense, concerning ocean transportation of military supplies between the United States and Iceland. Pursuant to 10 U.S.C. § 2631, I hereby find that the rates currently being paid are excessive and are also otherwise unreasonable.”

      . See Mathews v. Eldridge, 424 U.S. 319, 96 S.Ct. 893, 47 L.Ed.2d 18 (1976); Gonzalez v. Freeman, 334 F.2d 570 (D.C.Cir.1964); Art-Metal USA, Inc. v. Solomon, 473 F.Supp. 1 (D.D.C.1978).

      . The government notified the Court by letter dated September 5 that it was unable to comply with the schedule, and that it would therefore simply oppose plaintiff’s motion.

      . At the same time, the Military Sealift Command withdrew the first solicitation for bids and commenced procedures for a second solicitation.

      . Because the government, pursuant to the schedule entered into between the parties, agreed to maintain the status quo only until October 14, 1985, the Court issued a brief summary judgment order on October 15, indicating that an explanation of the Court’s action would be provided later. This Opinion is that explanation.

      . The alleged procedural problems have either been remedied by the Secretary’s second determination or they have not been adequately developed by the parties. It is to be noted, however, that the Act reserved the decision-making authority to the President, not some lower-ranking official, see Curran v. Laird, 420 F.2d 122, 134 (D.C.Cir.1969), and that there are serious questions about the propriety of the delegation of authority. Hotch v. United States, 212 F.2d 280, 283 (9th Cir.1954). In view of the Court’s disposition of this case, it is not necessary at this time to consider or decide the procedural or delegation issues.

      . The Secretary’s determination is clearly reviewable. Curran v. Laird, supra. Plaintiff also claims that the procedures followed by the Military Sealift Command in implementing the Secretary’s determination violated the Armed Services Procurement Act, 10 U.S.C. § 2301 et seq., and the Federal Acquisition Regulations, 48 C.F.R. §§ 47.500-45.507.

      . Other statutory provisions which are part of this scheme include, inter alia, the Merchant Marine Act of 1936, 46 U.S.C. § 1101, which declares that it is the policy of the United States to foster the development of the Merchant Marine, and the Cargo Preference Act of 1954, 46 U.S.C. § 1241(b), which requires that at least 50% of all government supplies transported by ship must be transported on U.S. flag vessels. See 48 C.F.R. 47.502.

      . But see note 13, supra.

      . Foreign vessels may also be utilized if American ships are not available. Curran v. Laird, supra, 420 F.2d at 127-28.

      . However, a 1907 Opinion of the Attorney General appears to equate "excessive or otherwise unreasonable" with "exorbitant and unreasonable.” 26 Op.Atty.Gen. 415, 418-101 (1907). In a somewhat parallel statute, the term “excessive profits” is defined as "profits that are unconscionable or amount to the unjust enrichment of contractors or subcontractors.” 10 U.S.C. § 2382(a)(3).

      . The plaintiff argues that the legislative history indicates that Congress meant that the rates had to be "exorbitant” or constitute "extortion” —a much higher standard than only allowing a “fair profit" to ship owners, as the government contends. Both standards are mentioned in the legislative history. Compare 38 Cong.Rec. 2409, 2475 (Feb. 26, 1905) with 38 Cong.Rec. 2476-77, 2596. The Court will accept the government’s characterization of the standard for present purposes although it is not at all clear that that minimum standard faithfully expresses the congressional intent.

      . See Defendants’ Points and Authorities at p. 30 n. 21. See also, S.Rep. No. 182, 58th Cong., 2d Sess., at 3; H.R.Rep. No. 1893, 58th Cong., 2d Sess., at 4-6.

      . The August 8 determination was essentially mooted by the September 6 determination. For purposes of this analysis, the Court has assumed that, in making the later determination, the Secretary had before him both information presented to him in connection with the earlier determination as well as additional information acquired prior to the later determination.

      . For example, the charts established that on a measurement per ton rate basis, Rainbow’s rates were 5.9 times higher than the rates on the U.S.-Europe route and 2.5 times higher than the Seattle-Adak, Alaska route. See Defendants’ Exhibit 8.

      . The Secretary had also a half-page memorandum from the Assistant Secretary of the Navy concurring with the recommendation of the Commander of the Military Sealift Command, and stating, without explanation or elaboration that Rainbow priced the service off commercial rates, and that an (unspecified) analysis indicates that profitable operations can be achieved with rates about 60% of the current level. These conclusory statements are unaccompanied by any underlying data, and they therefore cannot be assigned any weight. Moreover, there are at least three objective factors indicating that the Assistant Secretary was wrong: (1) the only actual rates charged on the Norfolk-Ke-flavik route, that of the Icelandic vessels, were not lower than Rainbow’s; (2) no U.S. shipping company has seen fit to compete with Rainbow at lower rates; and (3) the military rates charged by Rainbow were far below the commercial rates charged on the same route by Icelandic companies.

      . Even within the scope of the deferential nature of the courts’ review under the circumstances, the Court has the responsibility, at a minimum, to ensure that the Secretary took into account relevant factors in reaching his decision. See Wawszkiewiez v. Dept. of the Treasury, 670 F.2d 296, 301 (D.C.Cir.1981); Environmental Defense Fund v. Costle, 657 F.2d 275, 283 (D.C.Cir.1981).

      . It is not apparent why that fact, without more, would support the conclusion that Rainbow’s rates are excessive. The pricing equality could as easily indicate that the rates charged both by the Icelandic companies and by Rainbow are fair market rates.

      .The government asserts that the Icelandic carriers’ rates may have been the result of monopoly pricing rather than of competition. Even if this were so, it would still undercut the government’s claim that Rainbow’s rates are unreasonable. With the elimination of Rainbow as a factor, it is inevitable that Icelandic monopoly pricing will return to the military trade — just as it has always existed, and continues to exist in the commercial cargo trade. In short, upon an elimination of the cargo preference, the government will, at a minimum, be paying the same rates as now — only it will pay them to Icelandic shipping companies rather than to a United States company. Such a result clearly defeats the purpose of the Cargo Preference Act. See discussion, supra, in Part II.

      . Tr. 24-25. Counsel added that economic factors were also taken into account. See also Defendants’ Points and Authorities at 33, 35-37.

      . See Atkins v. United States, 556 F.2d 1028, 1069, 214 Ct.Cl. 186 (1977).

      . See Atkins v. United States, supra, 556 F.2d at 1069; Consumers Union of the United States v. Rogers, 352 F.Supp. 1319 (D.D.C.1973); See also, Van Alstyne, the Role of Congress in Determining Incidental Powers of the President and of the Federal Courts, 36 Ohio St.L.J. 788, 794 (1975).

      . If that phraseology had been used in the statute, presumably all of the President’s powers, including those over foreign affairs and national defense, could appropriately have been brought into play.

      . The regulations implementing the Act likewise state that U.S. flagships must be used "unless those vessels are not available at fair and reasonable rates.” 48 C.F.R. § 47.502.

      . The weakness of the government’s position is underscored by its almost frivolous attempt to read the word "otherwise” in the phrase “freight charged ... is excessive or otherwise unreasonable" as referring to subjects other than freight rates. Defendants’ Points and Authorities at 18.

      . At no point in the legislative history was there any indication that the presidential decision would be anything more than a check upon economic extortion. See id. at 2475. All of the floor debates on the bill centered on the question of how best to provide the President with the authority to protect against exorbitant rates set by cartels taking advantage of the noncompetitive market, a fear engendered by the monopolistic structure of the merchant marine industry in the early 1900s. The provision ultimately enacted, the exception at issue here, was exclusively an attempt to ensure that the government would not have to pay unreasonable freight charges to ship military cargo. Id. at 2409.

      . As Senator Bacon stated, "It can not be put simply upon the ground if the judgment of the President as to the interest of the United States. There must be some specific fact found.” 38 Cong.Rec. at 2475.

      . The appropriateness of the utilization of foreign vessels when American ships are not available (see note 17, supra) cannot be regarded as a true exception to the statutory purposes.

      . Youngstown Sheet & Tube Co. v. Sawyer, 343 U.S. 579, 72 S.Ct. 863, 96 L.Ed. 1153 (1952).


author: LA PLATA, District Judge.

text:
    Sandra FIARMAN, Plaintiff, v. WESTERN PUBLISHING CO., INC., Defendant.
    No. 83-CV-1145-DT.
    United States District Court, E.D. Michigan, S.D.
    Oct. 23, 1985.
    Jeanne E. Mirer, Detroit, Mich., for plaintiff.
    Robert E. Williams, Stephen C. Tohay, Washington, D.C., for defendant.
   ORDER DENYING PLAINTIFF’S APPLICATION FOR ATTORNEY’S FEES

LA PLATA, District Judge.

On February 28, 1983, Plaintiff, Sandra Fiar man, filed a wrongful discharge Complaint in the Wayne County Circuit Court, alleging that her employment was terminated on January 18, 1983, as a result of Defendant’s intentional sex discrimination. After a hearing on Plaintiff’s Motion for a Preliminary Injunction, the circuit court judge entered an order requiring Defendant to reinstate Plaintiff during the pend-ency of the lawsuit. Thereafter, Defendant, a foreign corporation, removed the action to this Court, pursuant to 28 U.S.C. § 1441.

At the conclusion of a six day trial, the jury, on August 26, 1985, rendered a no cause for action verdict in favor of Defendant. The sex discrimination case was submitted to the jury on two theories: disparate impact and disparate treatment.

On September 25, 1985, Plaintiff filed a petition for attorneys’ fees, claiming that under the provision of the Elliot-Larsen Civil Rights Act empowering a trial court to award attorney’s fees, M.C.L.A. § 37.-2802, she is entitled to costs in the amount of $4,339.79 and attorney’s fees in the sum of $33,112.50. Plaintiff claims that she was a “prevailing” party in the litigation, in view of the fact that she was reinstated to her former position by virtue of a court order, a position she continues to hold, even after the adverse jury verdict. Plaintiff argues that she has been permanently reinstated, which has to amount to at least a partial victory in the lawsuit, since one of Defendant’s attorneys, Mr. Williams, stated on the record and in his opening statement that Defendant did not intend to discharge Plaintiff, even if it were successful in the litigation.

Opposing the Motion, Defendant argues that an injustice would ensue if it were required to pay costs and attorney’s fees to Plaintiff, in light of the jury’s determination that Plaintiff’s discharge in 1983 was not motivated by intentional sex discrimination. Defendant contends that Plaintiff’s reinstatement was not the result of a settlement or a final court order, and, thus, she is not a “prevailing party” for purposes of an award of attorney’s fees and costs under M.C.L.A. § 37.2802. ,

In King v. General Motors Corp., 136 Mich.App. 301, 356 N.W.2d 626, 629 (1984), the Michigan Court of Appeals stated that the Legislature sought to achieve two goals by enacting the attorney fee provisions of the Elliot-Larsen Civil Rights Act: (1) to enable persons deprived of their civil rights to seek compensation and have access to the courts and (2) to deter discrimination in the work place. The Court in Cheeseman v. American Multi-Cinema, Inc., 108 Mich.App. 428, 310 N.W.2d 408, 415 (1981), vacated an award of attorneys’ fees to the Defendant, on the basis that the statute authorized such an award only “to successful complainants of violations under the Civil Rights Act.”

As deftly cited to the Court by both parties, numerous federal decisions exist regarding the definition of a “prevailing party” under the Civil Rights Attorney’s fees awards Act of 1976, 42 U.S.C. § 1988, which provides in pertinent part:

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.

The Court has reviewed the cases referred to by the parties and other federal cases that have decided whether attorney’s fees were awardable to complainants in civil rights cases. A case decided in the Eastern District of Michigan, Parks v. Grayton Park Associates, 531 F.Supp. 77 (E.D.Mich.1982), is similar to the matter at bar. Therein, two black complainants instituted a civil rights action under both federal and state statutes, maintaining that they were denied an opportunity to rent an apartment at a complex owned by Defendant on account of their race. A temporary restraining order and a preliminary injunction were entered preventing Defendant from leasing any units until Plaintiffs decided whether to apply for an apartment. Although they moved into one of Defendant’s units, Plaintiffs continued their lawsuit, seeking damages for the alleged discrimination in housing. Determining that the conduct of Defendant’s manager was not racially motivated, the jury rendered a verdict of no cause for action. Thereafter, the Plaintiffs filed an application for attorney’s fees, contending that they triumphed, at least in part, in the lawsuit by virtue of the entry of injunctive orders which resulted in their obtaining a unit at Defendant’s apartment complex.

After discussing Hanrahan v. Hampton, 446 U.S. 754, 100 S.Ct. 1987, 64 L.Ed.2d 670 (1980), the Parks Court held that the Plaintiffs were not prevailing parties in the litigation, and, therefore, were not entitled to an award of attorney’s fees under 42 U.S.C. § 1988:

In the present case, plaintiffs obtained the preliminary injunctive relief they requested, but in so doing they did not vindicate any rights since, in fact, it was left for the jury to decide whether any rights had been violated. It is true that one grants preliminary relief by looking to the merits of the case as it then appears, but technically it is not a “decision on the merits” as much as a decision on the likelihood that plaintiffs would eventually prevail on the merits. The final decision on the merits was left to the jury which determined that no rights had been violated; plaintiffs not only did not receive a favorable judgment, they received a contrary judgment and, according to the Supreme Court’s understanding of § 1988 as articulated in Han-rahan, plaintiffs cannot, therefore, be considered prevailing parties. Parks at 79.

In Roman v. Schweiker, 559 F.Supp. 304 (E.D.N.Y.1983), the Plaintiff filed an application for supplemental social security benefits with The Department of Health and Human Services. Following the Department’s denial of the application, Plaintiff appealed to the Federal District Court, which remanded the case for more specific findings concerning the agency’s determination. Immediately thereafter, the Plaintiff submitted a petition for attorney’s fees, under the Equal Access to Justice Act, seeking an award of costs and fees against the United States. In support of her petition, the Plaintiff maintained that she was a prevailing party.

Denying the request for attorney’s fees, the District Court held that prior to a final ruling in the case, Plaintiff could not be designated as the victor in the litigation:

In this ease, plaintiff may not, in any way, be said to have established her entitlement “to some relief on the merits” of her claim. This Court did not make any determination as to the substance of plaintiff’s claim of disability. We merely remanded the case for the purpose of taking additional evidence regarding the nature of plaintiff’s previous area of employment — assembly line work. On the remand, this additional evidence may establish that plaintiff is quite capable of returning to such employment. Thus, because of the significant possibility that plaintiff may ultimately obtain no relief at all on her substantive claim, the temporary “success” of her appeal in this Court is insufficient to elevate her to the status of “prevailing party” within the meaning of the EAJA. Roman at 305.

In a case parallel to the matter at bar, Smith v. University of North Carolina, 632 F.2d 316 (4th Cir.1980), a female assistant professor sought relief in the nature of damages and reinstatement against the University on .the basis that her contract . was not renewed as a result of her employer’s intentional discrimination against her. Although a preliminary injunction had been entered reinstating the Plaintiff until a trial on the merits, the jury, on the issue of age discrimination, and the trial court, on the issue of sex discrimination, rendered verdicts in favor of the University, finding that the Plaintiff's failure to attain tenure was not attributable to intentional discrimination.

Following the adverse verdicts, the Plaintiff filed an application for attorney’s fees, asserting that she prevailed, at least in part, by obtaining a preliminary injunction. The trial court agreed with her position, awarding an attorney’s fee of $8,300.00. In addition to affirming the judgment of no cause for action in favor of the Defendant, the Fourth Circuit Court of Appeals vacated the award of attorney’s fees, on the ground that the entry of a preliminary injunction did not elevate the plaintiff to the status of a prevailing party:

The temporary injunction was designed only to preserve the status quo, until resolution on the merits could be obtained. It was designed to increase the likelihood that neither party would be deprived, through change of circumstances, of an opportunity to have her or its fair day in court. The University was deemed better able to weather, without serious adverse consequences, the inconvenience of retaining on its payroll someone it wished to terminate, than could Smith survive dismissal while a case was pending in which she had hopes of obtaining an order that she not be discharged. At the most the preliminary injunction hearing involved a prognosis of probable or possible success. It in no way sought to announce or establish a final result. Smith at 347.

This Court finds the reasoning and holding in Smith, supra, to be persuasive. Like the unsuccessful litigant in Smith, the Plaintiff herein continued in her employment with the Defendant, by way of a court order, until the conclusion of the wrongful discharge trial. The jury completely vindicated Western Publishing Company’s decision to terminate Plaintiff in January, 1983. Plaintiff’s reinstatement pending the outcome of her discrimination lawsuit, along with Defendant’s decision to retain her despite the verdict of no cause of action, was not the result of either (1) a finding by a court that Defendant discriminated against Plaintiff or (2) a consent judgment, settlement, or other acknowl-edgement by the company that she was wrongfully discharged. It cannot be seriously contended that the Wayne County Circuit Court judge’s entry of a preliminary injunction constituted a finding on his part that Plaintiff’s termination was actuated by sex discrimination. That judge solely permitted Plaintiff to remain as an employee of Defendant until the outcome of the sex discrimination lawsuit.

Concluding that the Plaintiff was not a prevailing party in this lawsuit, the Court DENIES the application for attorneys’ fees under Section 802 of the Elliot-Larsen Civil Rights Act. The Court determines that it simply would be unfair to require Defendant, the ultimately successful litigant in the case at bar, to subsidize Plaintiff’s action. It would be incongruous to hold that a discharged employee may obtain attorneys’ fees and costs against her employer where, as here, a jury determined that her termination was not the result of illegal employment practices.

So Ordered.

      . “A court, in rendering a judgment in an action brought pursuant to this article, may award all or a portion of the costs- of litigation, including reasonable attorney fees and witness fees, to the complainant in the action if the court determines that the award is appropriate.”

      . In Hanrahan, the Plaintiffs sought attorney’s fees premised on three favorable appellate court rulings, including a reversal of directed verdicts against them. Vacating the award of attorney’s fees, the Supreme Court held that the Plaintiffs, who ultimately were unsuccessful at trial, were not prevailing parties within the framework of the Civil Rights Attorney's Fees Awards Act of 1976. Hanrahan, 446 U.S. at 756, 100 S.Ct. at 1988.

      . 28 U.S.C. § 2412(d)(1)(A).