text:
    UNITED STATES ex rel. BUCCI v. BROM-BERG, Acting Officer in Charge, Immigration and Naturalization Service.
    No. 128.
    District Court, W. D. Pennsylvania.
    Aug. 17, 1945.
    Anthony Troiano, of Pittsburgh, Pa., for relator.
    Charles F. Uhl, U. S. Atty., of Pittsburgh, Pa., and Edward C. Boyle, Asst. U. S. Atty., of Pittsburgh, Pa., for respondent.
   GIBSON, District Judge.

On July 26, 1945, this court heard the petition of the relator, Domenico Bucci, and ordered his discharge from custody.

The United States Attorney has requested the court to file a memorandum opinion relative to the matter, and this memorandum is in compliance with his request.

The record in this matter is somewhat bare, other matters appearing in informal discussion not appearing in it. From the record it would seem that the court based its judgment largely upon the failure of the Government to proceed to vacate the nat-totalization order of this court before seeking deportation of the relator. While the court, at the time the order was made, was of the opinion that the order of naturalization forbade deportation until set aside— which opinion is less fixed at present by reason of subsequent investigation — nevertheless the order had other reasons back of it The relator, while visiting Italy several times, did so under the protection each time of a United States passport. At no time did he remain for any extended time except after he was inducted into the Italian Army. His residence and employment have been continuously in the United States, with no violation of law cited against him.

The allegation against him was a declaration of his wife, seeking entry to this country, that her husband had served in the Italian Army. This admission was certified to the United States by the United States Consul at Rome.

At the time the relator was inducted into the Italian Army complaints of naturalized citizens of Italian birth were numerous to the effect that the Kingdom of Italy refused to recognize United States naturalizations and had forced them to do military service. This fact was known to the court, and received some weight in its decision. The long residence of the relator in this country, and his complaint to the naturalization officers — see testimony of William T. Shockley — made it plain that this petitioner had not voluntarily „ submitted to the military service after his naturalization.


source: Caselaw Access Project

author: FILIPPINE, District Judge.

license: Public Domain

text:
    Robin Earl MARLER, and Rebecca Gail Marler, Plaintiffs, v. Frank A. DUNN, and Erna M. Dunn, Defendants.
    No. 83-1125C(2).
    United States District Court, E.D. Missouri, E.D.
    Aug. 16, 1984.
    Thomas L. Ray, Jr., Farmington, Mo., John A. Michener, St. Louis, Mo., for plaintiffs.
    Samuel T. Vandover, St. Louis, Mo., for defendants.
   MEMORANDUM

FILIPPINE, District Judge.

This matter is before the Court on defendants’ motion for judgment in accordance with their motion for directed verdict and defendants’ alternative motion for new trial. Plaintiffs have filed memoranda in opposition to defendants’ motions.

A. Motion for Judgment Notwithstanding the Verdict

In ruling on a motion for judgment notwithstanding the verdict, this Court is

(1) to consider the evidence in the light most favorable to the plaintiffs as the parties prevailing with the jury; (2) to assume that all conflicts in the evidence were resolved by the jury in favor of the plaintiffs; (3) to assume as proved all facts which plaintiffs’ evidence tends to prove; (4) to give plaintiffs the benefit of all favorable inferences which may reasonably be drawn from the facts proved; and (5) to deny the motion if, reviewing the evidence in this light, reasonable men could differ as to the conclusions to be drawn from it.

J & J Farms, Inc. v. Cargill, Inc., 693 F.2d 830, 834-35 n. 1 (8th Cir.1982); Voegeli v. Lewis, 568 F.2d 89, 92 (8th Cir.1977); Griggs v. Firestone Tire and Rubber Company, 513 F.2d 851, 857 (8th Cir.), cert. denied, 423 U.S. 865, 96 S.Ct. 124, 46 L.Ed.2d 93 (1925); Hanson v. Ford Motor Co., 278 F.2d 586, 596 (8th Cir.1960). Conversely, if there is no evidence from which a jury could properly return a verdict for plaintiffs, the Court must grant the motion. See 9 Wright & Miller, Federal Practice and Procedure § 2524, p. 543.

The evidence presented at trial in the instant action, viewed in the light most favorable to plaintiffs, establishes the following facts.

On August 28, 1978, plaintiffs Robin Earl Marler and Rebecca Gail Marler signed a rental agreement in which they agreed to rent a dwelling owned by defendants Frank A. Dunn and Erna A. Dunn located at 305 Lewis Street, Flat River, Missouri. The rental agreement provided, inter alia, that the Marlers were responsible for keeping the house and yard in good condition and for taking “all possible precautions to prevent damage from rain, freezing, windstorms, fires or other hazards, ____” The Marlers also gave permission in the rental agreement to defendants or their agent, upon prior notification, “to inspect inside and outside property at least once a month if found necessary.”

The rental agreement was signed by plaintiffs in the office of Eleanor Boyd, a real estate agent hired by defendants to manage the property. At the time of the signing of the agreement, Mrs. Boyd told plaintiffs that if they had any “problems,” they were to let her know. Mrs. Boyd retained a key to the dwelling in order to enable her to effectively manage the property.

The Marlers moved into the dwelling on September 20, 1978. Three days later, Mrs. Marler gave birth to the couple’s first son, Jeremy. A second son, Jason, was born on June 13, 1980.

After moving in, the Marlers had several problems with the house. A hole in a sewer pipe resulted in raw sewage escaping onto the driveway. This problem was finally corrected after Mrs. Marler made several phone calls to Mrs. Boyd. The Marlers also experienced a few problems with the plumbing. Similarly, these problems were corrected after the Marlers notified Mrs. Boyd. Additionally, the Marlers saw rats running across the basement floor and heard them gnawing. Mrs. Marler called Mrs. Boyd about the rat problem and was told that she could not afford to pay an exterminator to correct the problem.

The Marlers also had a few electrical problems. An overhead light in the master bedroom did not work. Mrs. Marler called Mrs. Boyd concerning the light. Tnree days later, Mr. Dunn’s father came to the house and fixed the light. There was also an electrical problem with a hairdryer. The Marlers’ own testimony, however, clearly established that the problem was with the electrical cord and plug of the hairdryer — not with any electrical outlet of the house. Finally, a fuse blew when the Marlers installed an air conditioner in the living room. Mr. Marler called Mr. Dunn’s father who replaced the fuse. The air conditioner worked properly after the fuse was replaced.

On the morning of February 15, 1982, there was a fire at the Marler residence. The fire resulted in the death of the Marlers’ youngest son, Jason.

The testimony adduced at trial, viewed in the light most favorable to plaintiffs, indicated that the fire was caused by an arcing between two wires in the electrical outlet in the boys’ bedroom. The testimony also revealed that if the faceplate covering the outlet had been removed and the wiring inspected, the problem could have been discovered.

Based upon the foregoing evidence, the Court read the following verdict-directing instruction to the jury:

Your verdict must be for plaintiffs Robin Marler and Rebecca Marler if you believe:
First, plaintiffs are the parents of Jason Glenn Marler, deceased, and
Second, that defendants promised to repair and maintain the house they rented to the Marlers, and
Third, defendants retained control over the house for the purpose of inspection and repair, and
Fourth, that there was unsafe electrical wiring at the wall receptacle in the bedroom of Jason Marler and as a result the house was not reasonably safe, and
Fifth, defendants knew, or by using ordinary care could have known of this condition, and
Sixth, defendants failed to use ordinary care to make the wiring reasonably safe or warn the Marlers of its unsafe condition, and
Seventh, defendants were thereby negligent, and
Eighth, as a direct result of such negligence, Jason Glenn Marler died.

The jury returned a verdict in favor of plaintiffs and against defendants in the sum of $90,000.00. The Court thereafter entered judgment in favor of plaintiffs in accordance with the jury’s verdict.

After careful consideration of the evidence and the applicable law, the Court finds that the evidence was insufficient as a matter of law to establish that “defendants knew, or by using ordinary care could have known” of the condition of the wiring in the outlet at the time of the fire.

First, there is certainly no evidence that defendants actually knew of the condition. Plaintiffs testified that they had used the outlet at issue without incident during the early period of their occupancy. The outlet had not been used at all for at least six months prior to the date of the fire. Plaintiffs admitted that they had not notified defendants of any problem with the electrical outlet or the wiring.

Second, the Court finds that the evidence presented is insufficient as a matter of law to establish that defendants by using ordinary care could have known of this condition. Defendants had no reason to suspect that there was any problem with this outlet. Cf. Lemm v. Gould, 425 S.W.2d 190, 197 (Mo.1968); Tucker v. Taksel, 345 S.W.2d 385, 388 (Mo.Ct.App.1961). Thus, the Court holds that defendants had no duty to examine it under the facts presented herein. To hold that a landowner who has no reason to suspect that such a condition exists is liable to a tenant for injuries resulting therefrom would impose a duty greater than that of ordinary care and would be tantamount to holding that a landlord is an insurer of the safety of his premises. Such is not the law.

For the foregoing reasons, therefore, the Court will grant defendants’ motion for judgment in accordance with their motion for a directed verdict and will enter judgment in favor of defendants.

B. Alternative Motion for New Trial

A trial court may grant a motion for a new trial if the jury’s verdict is against the manifest weight of the evidence. See 11 Wright & Miller, Federal Practice and Procedure § 2806. See also 9 Wright & Miller, Federal Practice and Procedure § 2531.

For the reasons expressed above, the Court believes the jury’s verdict was against the manifest weight of the evidence on the issue of whether defendants knew, or by using ordinary care could have known, of the dangerous condition.

Therefore, the Court will conditionally grant defendants’ alternative motion for a new trial.

ORDER AND JUDGMENT

In accordance with the Memorandum filed this day and incorporated herein,

IT IS HEREBY ORDERED that defendants’ motion for judgment in accordance with their motion for directed verdict be and is GRANTED.

IT IS FURTHER ORDERED that the Judgment entered in favor of plaintiffs in the above-styled cause on June 8, 1984, be and is VACATED.

IT IS FURTHER ORDERED, ADJUDGED and DECREED that defendants Frank A. Dunn and Erna M. Dunn shall have judgment against plaintiffs Robin Earl Marler and Rebecca Gail Marler on plaintiffs’ complaint.

IT IS FURTHER ORDERED that costs be taxed against plaintiffs.

IT IS FURTHER ORDERED that defendants’ alternative motion for a new trial be and is conditionally GRANTED.

      . Rule 50(c)(1), Fed.R.Civ.P., provides that if the Court grants a motion for judgment notwithstanding the verdict, "the court shall also rule on the motion for a new trial, if any, by determining whether it should be granted if the judgment is thereafter vacated or reversed____ If the motion for a new trial is thus conditionally granted, the order thereon does not affect the finality of the judgment.”


text:
    STATE OF MISSOURI, Plaintiff, v. INDEPENDENT PETROCHEMICAL CORP., et al., Defendants.
    No. 83-2670C(2).
    United States District Court, E.D. Missouri.
    Jan. 8, 1985.
    Paul Otto, Shelley Woods, Robert Lynn, David A. Taylor, Asst. Attys. Gen., Je tier-son City, Mo., for plaintiff.
    F. William McCalpin, Shaw, Howlett & Schwartz, Ted L. Perryman, John J. Cole, St. Louis, Mo., Joseph M. Spivey, III, Richmond, Va., and Donald L. Schlapprizzi, St. Louis, Mo., for defendants.
   MEMORANDUM AND ORDER

FILIPPINE, District Judge.

This matter is before the Court on the motion of defendant Syntex Agribusiness, Inc. (Agribusiness) to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6).

This litigation arises out of the disposal of 2, 3, 7, 8-tetrachlorodibenzo-p-dioxin, a hazardous substance that has unfortunately become a household name: dioxin. The State of Missouri filed this lawsuit under the Comprehensive Environmental Response, Compensation and Liability Act of 1980 (CERCLA), 42 U.S.C. §§ 9601-9657, and, through the exercise of this Court’s pendent jurisdiction, also asserts a claim based on the Missouri common law of public nuisance. The state seeks to recover costs of removal and other remedial acts incurred by it as a result of the activities of the defendants.

Specifically, the State of Missouri alleges Agribusiness is liable for costs associated with the clean up of the Minker hazardous waste site. Missouri premises Agribusiness’s liability of 42 U.S.C. § 9607(a) which imposes liability on those who “arranged for [the] disposal ... of hazardous substances ... at any facility ... containing such hazardous substances ... from which there is a release____” Missouri alleges that Agribusiness is liable because its corporate predecessors arranged to have certain waste removed from its property. Missouri avers that Agribusiness’s predecessors arranged to have the dioxin disposed of at “a facility (Bubbling Springs Ranch) from which it was reasonably foreseeable that material would have to be removed, and from which removal to an unsafe facility could have been prevented.” The plaintiff Missouri further asserts that “[t]he hazardous substance was subsequently deposited at another facility (Minker/Stout Romain Creek Site) from which there was and continues to be a release or threat of release of a hazardous substance ... which is causing and will continue to cause the incurrence of response costs.” Plaintiff seeks costs in cleaning up the Minker site.

Agribusiness argues that plaintiff has not stated a claim upon which relief may be granted. Defendant maintains that because plaintiff did not allege that it arranged for disposal at the site for which response costs are sought, plaintiff has failed to state a claim. Defendant argues that it is not liable for the Minker site because it arranged, under the allegations of the complaint, to have the waste disposed of at the Bubbling Springs Ranch not the Minker site.

Agribusiness’s argument is without merit. CERCLA imposes liability upon those who arranged for the disposal of hazardous substances which were released. The term release is defined to be any “spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping, leaching, dumping or disposing into the environment....” 42 U.S.C. § 9601(22). Under this broad definition of release, the hazardous waste originally disposed of at the Bubbling Springs Ranch was released into the environment when it was transported to and disposed of at the Minker site. Thus, the State may seek to recover response costs in cleaning up the Minker site in that this site was the depository of the first release from the Bubbling Springs Ranch. Plaintiff, therefore has presented a cognizable claim under CERCLA. Defendant, of course, remains free to assert at trial any of the affirmative defenses listed in 42 U.S.C. § 9607(b).

Accordingly,

IT IS HEREBY ORDERED that the motion of defendant Syntex Agribusiness, Inc. to dismiss be and is DENIED.

      . There are four statutory categories of exemption from this broad definition, none of which are applicable to the issues presented by defendant’s motion.


author: MOTLEY, Chief Judge.

text:
    THOMSON McKINNON SECURITIES, INC., Plaintiff, v. HAMILTONIAN INDUSTRIES, INC., William H. Rentschler, and Gerald W. Adcox, Jr., Defendants.
    No. 84 Civ. 6676 (CBM).
    United States District Court, S.D. New York.
    Jan. 15, 1985.

      Skadden, Arps, Slate, Meagher & Flom by Jonathan J. Lerner, New York City, for plaintiff.
    Satterlee & Stephens by Robert M. Callagy, New York City, for defendants.
   MEMORANDUM OPINION AND ORDER

MOTLEY, Chief Judge.

Plaintiff, an international financial services firm, brings this diversity action to recover fees from defendant Hamiltonian Industries, Inc. (Hamiltonian), a Mississippi corporation with its principal place of business in Lake Forest, Illinois. The fees are allegedly due under an agreement whereby plaintiff served as Hamiltonian’s financial advisor in connection with the acquisition of a company. The matter is before the court on the motion of defendants Rentschler and Adcox, officers of Hamiltonian and domiciliaries of Illinois and Mississippi, respectively, to dismiss the action against them for lack of personal jurisdiction. For the reasons set forth below, the motion is granted.

Jurisdiction in this court is predicted on several meetings in New York between plaintiff and defendants Rentschler and Adcox at which the contract in dispute was negotiated and at which defendants are alleged to have made fraudulent misrepresentations regarding defendant Rentschler’s background. Plaintiff sues both on a breach of contract theory and a tort theory alleging fraud. Defendants admit that they made several trips to New York in connection with the contract, but contend that these trips were made solely in their corporate capacities and not as individuals. Plaintiffs do not appear to allege any contacts between defendants and the forum state other than the aforementioned meetings.

Defendants Rentschler and Adcox urge the court to dismiss the complaint against them under the fiduciary shield doctrine, which provides that acts performed by persons in their capacity as corporate fiduciaries cannot form the predicate for the exercise of jurisdiction over them as individuals. The policy behind this doctrine is that it is unfair to subject individuals to personal jurisdiction, even if they may be individually liable, whose only relevant contacts arise from activities undertaken not for their own benefit but for the benefit of their employers. Marine Midland Bank, N.A. v. Miller, 664 F.2d 899, 902 (2d Cir.1981). See Laufer v. Ostrow, 55 N.Y.2d 305, 313, 449 N.Y.S.2d 456, 460, 434 N.E.2d 692, 696 (1982).

Plaintiffs assert that the fiduciary shield doctrine has been rejected by the Supreme Court and therefore cannot protect defendants. In Calder v. Jones, 465 U.S. 783, 104 S.Ct. 1482, 79 L.Ed.2d 804 (1984), the Supreme Court held that since defendant had transacted business within the state, he was not insulated from personal jurisdiction just because he was present in the state and acted there only on behalf of his employer. Id., 465 U.S. at-, 104 S.Ct., at 1487, 79 L.Ed.2d at 813. At least one court in this district has interpreted this case as a complete rejection of the fiduciary shield doctrine. Guccione v. Flynt, 1984 Copyright L.Rep. (CCH) paragraph 25,654 at 18,947 (S.D.N.Y. Apr. 27, 1984) (Sweet, J.).

Plaintiff misconstrues the reach of Calder. In that case, the Supreme Court was applying the California long arm statute, which asserts jurisdiction over defendants to the extent permitted under the federal and state constitutions. Id., 465 U.S. at -n. 5,104 S.Ct., at 1485 n. 5, 79 L.Ed.2d at 810 n. 5. Therefore, the Calder court was only concerned with whether the Due Process Clause required the fiduciary shield doctrine to be incorporated into the “minimum contacts” test of World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 100 S.Ct. 559, 62 L.Ed.2d 490 (1980) and other cases. See Id., 465 U.S. at-n. 7, 104 S.Ct., at 1486 n. 7, 79 L.Ed.2d at 811 n. 7. The court concluded that the fiduciary shield doctrine was not a constitutionally required element in the analysis of contacts between defendants and the forum state. Id., 465 U.S. at-, 104 S.Ct. at 1487, 79 L.Ed.2d at 813.

In this diversity case, however, we must apply New York law in addition to the minimum requirements of the Due Process Clause. Arrowsmith v. United Press International, 320 F.2d 219, 223 (2d Cir. 1963). Unlike California and other states, New York’s long arm statute does not extend personal jurisdiction to the limits of the Constitution. Beacon Enterprises, Inc. v. Menzies, 715 F.2d 757, 764 n. 6 (2d Cir.1983). Although Calder eliminates the fiduciary shield doctrine as a consideration of due process, it does not compel New York to abandon it as an equitable doctrine in the construction of its own statute.

Notwithstanding Calder, the fiduciary shield doctrine appears to survive under New York law. This court, in an opinion issued two months after Calder, held that Marine Midland still compelled application of the fiduciary shield doctrine. Picower v. Lynn Wilson Associates, Inc., No. 84-4717, slip op. at 4 (S.D.N.Y. May 23, 1984) (Motley, Ch. J.). See also Photo Promotions Associates v. Household International, Inc., 584 F.Supp. 1238, 1240 (S.D.N.Y.1984) (Weinfeld, J.) (decided one month after Calder). Other recent cases indicate that the fiduciary shield doctrine is an established principle under New York law. See, e.g., Bulk Oil (USA) Inc. v. Sun Oil Trading Co., 584 F.Supp. 36, 40 (S.D.N.Y.1983); Goshen Litho, Inc. v. Kohls, 582 F.Supp. 1561, 1565 (S.D.N.Y.1983); Laurenzano v. Goldman, 96 A.D.2d 852, 852-53, 465 N.Y.S.2d 779, 780 (2d Dep’t 1983); Kossoff v. Samsung Co. Ltd., 123 Misc.2d 177, 180-81, 474 N.Y.S.2d 180, 185 (N.Y. Sup.Ct.1984).

Unless New York chooses to eliminate the fiduciary shield doctrine in accordance with the Calder Court’s reasoning, this court must apply it in construing the reach of N.Y.Civ.Prae.Law section 302, New York’s long arm statute. Since it is an equitable doctrine rather than a fixed constitutional standard, the rule cannot be applied mechanically. Rather, we must examine the particular circumstances in the case at bar with an eye towards overall fairness. Marine Midland, 664 F.2d at 903. The key question is whether defendants were acting primarily in the best interest of their employer or were mainly looking out for themselves. Id. If there is “no suggestion that the defendants were engaged in self-dealing or that the corporation was a mere shell,” there is no reason why the fiduciary shield doctrine should not be applied. Bulk Oil, 584 F.Supp. at 40 n. 7. Jurisdiction could then only be had over these non-domiciliary defendants under section 302(a)(2), as plaintiff urges, if they committed a tortious act within the state in their individual capacities.

In the case at bar, there is nothing in the complaint to indicate that defendants were acting in anything other than a fiduciary capacity. The allegations of fraud and breach of contract are generally made against corporate and individual defendants together, and all specific actions alleged to have been taken by individual defendants appear to have been performed in the course of their corporate duties. In fact, plaintiff did not in its brief contest defendants’ affidavits asserting that they only came to New York as fiduciaries for Hamiltonian, but merely disputed the application of the fiduciary shield doctrine. On the day of oral argument of this motion, and weeks after the motion was fully submitted, plaintiff submitted a brief, conclusory affidavit alleging that defendant Hamiltonian was merely a “corporate shell.” The court rejects this affidavit as untimely and lacking a sufficient factual basis for its assertions.

Plaintiff requests discovery on the question of whether defendants “transacted business” in New York, but that question is not in dispute. It seems clear at this stage in the litigation that the actions of defendants Rentschler and Adcox in coming to New York for several meetings and negotiations with plaintiff were sufficient to constitute transacting business for the purpose of conferring jurisdiction over Hamiltonian under section 302(a)(1). Moreover, if plaintiff’s allegatons are proven, defendants’ conduct in New York would constitute the commission of a tortious act within the state sufficient to confer jurisdiction over Hamiltonian under section 302(a)(2). Indeed, defendants do not challenge jurisdiction over the defendant company. Nevertheless, it seems equally clear that the individual defendants acted only in their corporate capacity in coming to New York. There is no indication that discovery is likely to reveal anything to change that conclusion. The court therefore finds that personal jurisdiction over defendants Rentschler and Adcox cannot be obtained under New York law. Defendants’ motion to dismiss as to individual defendants only is granted.

The next pretrial conference in this case will be held on Friday, March 15, 1985, at 10:00 a.m., in Courtroom 906.

SO ORDERED.


author: NESBITT, District Judge.

text:
    Joseph HALPERIN, Plaintiff, v. UNITED STATES of America, Defendant.
    No. 82-8517-CIV-NESBITT.
    United States District Court, S.D. Florida, S.D.
    Jan. 18, 1985.

      Thomas L. Howard, Taplin & Howard, P.A., West Palm Beach, Fla., for plaintiff.
    Steven J. Delaney, Trial Atty., Torts Branch, Civil Div., U.S. Dept, of Justice, Washington, D.C., for defendant.
   ORDER

NESBITT, District Judge.

THIS CASE is before the Court upon the Defendant’s Motion to Dismiss. The case involves a claim against the United States for damages to a vessel on navigable waters. The issues raised by the Government’s Motion and the Defendant’s Response require a review of the procedural history of this case.

On November 23,1982, the Plaintiff filed a complaint under the Federal Tort Claims Act (“F.T.C.A.”), 28 U.S.C.A. § 1346(b) (1976), alleging that his boat was damaged when it struck the submerged remains of a United States Coast Guard aid to navigation. This case was originally assigned to another United States District Judge in this District. At that time, the Government filed its first Motion to Dismiss and in support of the Motion argued that: (1) the action was improperly brought under the F.T.C.A.; it should have been brought under the Suits in Admiralty Act (“S.A.A.”), 46 U.S.C.A. § 742 (1975); (2) the action was barred by the two year statute of limitations provided for in the S.A.A.; and (3) service of process was improperly effected under the S.A.A. The Plaintiff responded to the Motion to Dismiss and at the same time filed a Motion for Leave to Amend the Complaint. The Motion for Leave to Amend was granted; however, the Motion to Dismiss was never decided. The case was thereafter transferred to this division on December 28, 1983.

Subsequent to the transfer of this case, the Government filed a second Motion to Dismiss. In support of this Motion, the Government now argues that the Plaintiff failed to effect proper service of the original complaint under the S.A.A.; the statute of limitations argument has been abandoned. The service of process issue arises out of the language of the S.A.A.:

The libelant shall forthwith serve a copy of his libel on the United States Attorney for such district and mail a copy thereof by registered mail to the Attorney General of the United States, and shall file a sworn return of such service and mailing....

46 U.S.C.A. § 742 (1975) (emphasis added). It is undisputed that the Plaintiff failed to effect service of process for ninety-three days after the filing of the complaint. It also appears to be undisputed that service of process within this length of time does not constitute “forthwith”. See Kenyon v. United States, 676 F.2d 1229 (9th Cir.1981) (service within sixty days and fifty-five days is not forthwith); New York v. McAllister Brothers, Inc., 278 F.2d 708 (2d Cir. 1960) (service within two months does not constitute forthwith).

The Plaintiff has responded to the Motion to Dismiss by arguing that: (1) the Federal Rules of Civil Procedure, which allow greater flexibility in the service of process, superseded the S.A.A.; and (2) the Government, unprejudiced by the delay, has in effect waived the provisions of the S.A.A. Although neither the Fifth nor the Eleventh Circuits has discussed these issues in any manner, both the Second and Ninth Circuits have thoroughly explored the questions raised by the instant case. New York v. McAllister Brothers, Inc., 278 F.2d 708 (2d Cir.1960), was the seminal case with regard to the provisions of the S.A.A. In that case, the Second Circuit held that where the Plaintiff fails to effect service of process in a forthwith manner, as provided for in the S.A.A., the case would be dismissed. Every court which has decided this issue has found that the service of process provisions found in the S.A.A. are jurisdictional and serve as a condition precedent to the waiver of sovereign immunity. These stated requirements must be strictly complied with in order for the Government’s waiver of sovereign immunity to be effective. Id. Failure to comply denies a court subject matter jurisdiction. Amella v. United States, 732 F.2d 711 (9th Cir.1984). The district court in Amelia stated that “requiring private plaintiffs to comply with the strict terms of § 742 is the congressionally mandated quid pro quo for allowing a chink in the armor of sovereign immunity offered the United States.” Amelia v. United States, 570 F.Supp. 816 (N.D.Cal.1983), affd, 732 F.2d at 711.

Although several courts have recognized and even expressed displeasure with the harshness of § 742, not a single one has ruled that the Federal Rules of Civil Procedure take precedence over the S.A.A. See Kenyon, 676 F.2d at 1229. In Kenyon, the Ninth Circuit stated that the wisdom of the S.A.A. was not before the Court. Finding that this statute was a congressional command, the Court held that “forthwith service” was a condition precedent to the waiver of sovereign immunity. While the Plaintiff correctly notes that two of the leading opinions on this subject contained concurrences which criticized the service provisions of the S.A.A., the Plaintiff fails to note that even the judges who authored these concurrences felt bound by precedent and the intent of Congress, and agreed that the S.A.A. was not superseded by the Federal Rules. See id. (Boochever, J., concurring); Battaglia v. United States, 303 F.2d 683 (2d Cir.1962) (Friendly, J., concurring). Although this issue has never been decided in this Circuit, this Court chooses to follow the sound logic and reasoning of the Second and Ninth Circuits. The merit of the S.A.A. service of process requirements is best left to the policymakers. If and until Congress acts, this Court, as did the Second and Ninth Circuits, must follow the dictates of the S.A.A. Accordingly, this Court holds that the “forthwith” provisions of the S.A.A. apply to the instant case.

The Plaintiff also argues that the Government waived the provisions of the S.A.A. as it has not been prejudiced by the Plaintiff’s failure to forthwith serve process. This contention is also erroneous. The same courts that consistently apply the provisions of the S.A.A. have also held that the government may not and cannot waive the conditions or limitations imposed by the S.A.A. Battaglia, 303 F.2d at 686; Amelia, 570 F.Supp. at 817. Therefore, the S.A.A. applies to the instant ease as the Government is unable to waive the forthwith service provisions of the S.A.A.

The Plaintiff’s filing of an amended complaint requires additional discussion and analysis. Pursuant to the previous district judge’s order, the Plaintiff amended his complaint to provide for jurisdiction under the S.A.A. Rule 15(c), Fed.R.Civ.P., requires that in order for an amended complaint to relate back, the facts alleged in the amended pleading must have arisen out of the same transactions or occurrences which gave rise to the original pleading. Rule 15(c) also requires that the Defendant must have had notice of the Plaintiff’s claim. Where, in the case at bar, the Defendant’s amended complaint merely changed the name of the cause of action, both of the requirements of Rule 15(c) have been satisfied. See Ashland v. Ling-Temco-Vought, 711 F.2d 1431, 1437 (9th Cir. 1983). The facts alleged in the amended complaint were identical to the facts alleged in the original complaint, facts which the Government had notice of since at least the time of the serving of the original complaint.

The Defendant has cited several cases which disallowed the relation back of an amended complaint in instances where the amended complaint cured a defect in the naming of the United States as a party-defendant. See, e.g., Davis v. Cohen & Co., 268 U.S. 638, 45 S.Ct. 633, 69 L.Ed. 1129 (1925); Hammond-Knowlton v. United States, 121 F.2d 192 (2d Cir.), cert. denied, 314 U.S. 694, 62 S.Ct. 410, 86 L.Ed. 555 (1941); Jacobsen v. United States, 160 F.Supp. 491 (E.D.Pa.1958); Lomax v. United States, 155 F.Supp. 354 (E.D.Pa.1957). These cases have little applicability to this case, where here, only the cause of action, rather than the party-defendant, has been changed. However, the case of Amella v. United States, 732 F.2d 711 (9th Cir.1984), did discuss the issue of relation back with regard to a suit under the S.A.A. In that case, the Plaintiff also failed to forthwith serve process as required by the S.A.A. In an attempt to rectify the situation, the Plaintiff filed an amended complaint and effected proper service after the statute of limitations had expired. The court held that the amended complaint could not relate back:

Having failed forthwith to serve a libel filed within the statute of limitations, appellants may not now avail themselves of Rule 15 of the Federal Rules of Civil Procedure. First, Rule 15 only applies to the amendment of pleadings. Appellants do not wish to amend the libel to add a new party or cause of action; they merely wish to refile and reserve the present libel. Further, allowing libelants to cure tardy service at any time by simply reserving the original complaint would make § 742 a nullity.

Id. at 713 (citations omitted). Following the logic of Amelia, normally an amended complaint filed outside the statute of limitations would not be sufficient to cure a failure of forthwith service of process. However, the facts of the instant case do not quite parallel the facts of Amelia. In this case, the Plaintiff amended his complaint in order to allege an entirely different cause of action.

The case of Ashland v. Ling-Temco-Vought, Inc., 711 F.2d 1431 (9th Cir. 1983), is instructive. In Ashland, several plaintiffs brought claims against the Government under the F.T.C.A. As in the instant case, service of process was not forthwith. The district court dismissed the complaints for lack of subject matter jurisdiction as the S.A.A. provided the exclusive remedy. The plaintiffs refiled their complaints alleging jurisdiction under the S.A.A. and effected forthwith service of process; however, the statute of limitations had previously expired. Both the district court and the Ninth Circuit agreed that in this situation, the amended complaint could relate back to the filing of the original complaint. The Amelia court, also the Ninth Circuit, specifically explained the difference between the facts of the case before it, where the amended complaint did not relate back, and the facts of Ashland. In Ashland, unlike in Amelia, the Plaintiff added a new and different cause of action, while in Amelia, the Plaintiff simply refiled the exact same complaint and reserved process on the Government. Since the Plaintiff, in the case at bar, filed an amended complaint and not an exact duplicate of the original, for the purpose of adding a new cause of action and not for the purpose of re-serving process, the amended complaint could relate back under the Ninth Circuit’s sound reasoning. The Plaintiff would only have had to properly serve the amended complaint in order for this case to go forward. Although not addressed by either party, therein lies the rub of this entire case.

The S.A.A. calls for forthwith service of the complaint upon the United States Attorney by personal service with a copy to be sent, by registered mail, to the Attorney General of the United States. The record reflects that after the filing of the amended complaint, the Plaintiff sent it, by registered mail, only to Stanley Marcus, the United States Attorney for the Southern District of Florida, and to Larry Craig, the Department of Justice Attorney originally responsible for the handling of this case. See Affidavit of Thomas L. Howard, July 15, 1983.

While the Plaintiff promptly carried out this task, the Plaintiff failed to follow the proper procedures as outlined in the S.A.A. for service of the amended complaint. Instead of personally serving the amended complaint on Stanley Marcus, United States Attorney for the Southern District of Florida, the Plaintiff chose to send it by registered mail. Instead of mailing the amended complaint by registered mail to the Attorney General of the United States, the Plaintiff incorrectly chose to mail the amended complaint to the original Government attorney handling the case. In short, the Plaintiff effected service of process all wrong.

The cases discussed above uniformly hold that failure to accurately comply with the service requirements of the S.A.A. divests a court of subject matter jurisdiction. Where the statute requires personal service, but the Plaintiff instead mails the complaint, a court is unable to take jurisdiction over the case. See Amelia, 570 F.Supp. at 712-13, affd, 732 F.2d at 711. The policy considerations which surround the Government’s waiver of sovereign immunity apply here with equal force. In order for the waiver of sovereign immunity to be effective, a Plaintiff must strictly comply with the requirements of the waiver statute. Id. The Plaintiff in this case has failed to comply with the service of process requirements of the S.A.A., a statute which waives the sovereign immunity of the United States. Therefore, even if this Court were to adopt the sound reasoning and logic of the Ninth Circuit and allow the relation back of the amended complaint, the amended complaint would still be dismissed for failure to effect proper service as required by the S.A.A.

This case has presented the Court with novel questions of law for a district court in the Eleventh Circuit. A review of the relevant case law and applicable policy concerns requires that this Court adopt the reasoning of the Second and Ninth Circuits and hold that the Federal Rules of Civil Procedure do not supersede the provisions of the S.A.A. The Court further holds that the Government or a Government agency cannot waive the service of process provisions of the S.A.A. Finally, regardless of whether this Court chooses to follow the logic of the Ninth Circuit’s analysis of the relation back of amended complaints as expressed in Amella and Ashland, the Plaintiff’s service of the amended complaint was wholly contrary to the provisions of the S.A.A. requiring the dismissal of the amended complaint. Accordingly, it is hereby

ORDERED AND ADJUDGED that the Defendant’s Motion to Dismiss is GRANTED. The Plaintiff's complaint and amended complaint are dismissed for failure to properly effect service of process as dictated by the S.A.A. By not adhering to the requirements of this statute, the Plaintiff has failed to meet the burden placed on a citizen who chooses to bring suit against the sovereign.


author: FISH, District Judge.

text:
    UNITED PARCEL SERVICE, INC., Plaintiff, v. WEBEN INDUSTRIES, et al., Defendants.
    Civ. A. No. CA 3-83-0021-G.
    United States District Court, N.D. Texas, Dallas Division.
    Jan. 24, 1985.
    On Motion For Reconsideration March 13, 1985.
    Melvyn L. Douglas, Clark, West, Keller, Butler & Ellis, Harold C. Abramson, Dallas, Tex., for plaintiff.
    Mina A. Brees, Haynes & Boone, Dallas, Tex., for Weben Industries, Inc.
    Vera R. Bangs, Michael Dorman, Liddell, Sapp, Zivley, Brown & LaBoone, Dallas, Tex., for Ken Thelen Co., Inc.
    F. Dean Armstrong, Dallas, Tex., for Conveyor, Machinery & Steel Erectors, Inc.
    William B. Finkelstein, Allan Brent Diamond, Hughes & Hill, Dallas, Tex., for Mercantile National Bank at Dallas.
   MEMORANDUM ORDER

FISH, District Judge.

Introduction

The remaining parties to this suit, Mercantile National Bank at Dallas and Mercantile Dallas Corporation (collectively “MNB”) and Conveyor, Machinery and Steel Erectors, Inc. (“CoMaster”), have filed cross-motions for summary judgment under Rule 56 of the Federal Rules of Civil Procedure. The issues presented concern the priority rights of these adverse claimants to an interpleaded fund (“the contract fund”) deposited by United Parcel Service, Inc. (“UPS”) into the registry of this court in accordance with an agreed order approved by all interested parties on April 2, 1984. After consideration of the motions and the briefs, depositions, affidavits, and exhibits submitted in connection with each, the court has concluded that MNB’s motion for summary judgment should be granted and CoMaster’s should be denied.

Legal Standard

A grant of summary judgment is appropriate only if it appears from the pleadings, depositions, admissions, and affidavits, construed in the light most favorable to the opposing party, that no genuine issue of material fact exists, and that the movant is entitled to judgment as a matter of law. If the existence of a material fact is doubtful, summary judgment is inappropriate. Dorden v. C.H. Heist Corp., 743 F.2d 1135, 1137 (5th Cir.1984).

Undisputed Facts

Both parties agree that the following material facts of this case are not in dispute. Between December 6, 1977 and June 8, 1982 in Dallas, Texas, Weben Industries, Inc. (“Weben”), a Texas corporation with its principal place of business in Dallas, executed and delivered to MNB, a national banking association also based in Dallas, various promissory notes totalling $2,376,-861.00 in aggregate principal amount. MNB remains the owner and holder of all such promissory notes.

As collateral for the indebtedness represented by the promissory notes, Weben granted MNB a security interest in certain assets of Weben, consisting in part of Web-en’s “accounts, including accounts receivable, now owned or hereafter acquired and all products and proceeds thereof.” On April 7, 1981 MNB validly perfected this security interest in the Weben assets, including Weben’s accounts receivable, by recording with the Texas Secretary of State UCC-1 Financing Statements and UCC-3 Assignments of such Financing Statements previously filed by Republic Bank at Dallas from 1975-1980.

On April 26, 1982, UPS and Weben entered into a written contract for the construction and installation of a conveyor system for a UPS facility in Atlanta, Georgia. On May 10, 1982, Weben entered into a written subcontract with CoMaster whereby CoMaster agreed to assemble and install the conveyor system for UPS at the Atlanta facility. CoMaster first performed work for UPS on the Atlanta facility under Co-Master’s contract with Weben on July 9, 1982.

On September 10, 1982, Weben filed a voluntary petition for bankruptcy under Chapter 11 of the Bankruptcy Code in the Bankruptcy Court for the Northern District of Texas. At this point, CoMaster had engaged in substantial efforts toward construction of the Atlanta facility for which it had not yet received payment from Weben. At the same time, money was due Weben from UPS for labor and materials provided by various subcontractors for construction of the UPS facilities. On September 17, 1982, CoMaster recorded a materialmen’s lien against the Atlanta property in accordance with Georgia Code Ann. § 67-2001 (now § 44-14-361) and § 67-2002 (now § 44-14-362) in the sum of $131,886.15, representing the amount Weben owed Co-Master on the Weben-CoMaster contract.

On January 7, 1983 UPS filed in this court its complaint in interpleader and subsequently deposited the sum of $1,190,-089.64 into the registry of this court for the benefit of UPS and all the defendant claimants. Of this sum, UPS allocated $358,-449.33 as the amount it owed Weben for work on the Atlanta facility. CoMaster seeks recovery of $131,886.15 from the contract fund, while MNB asserts a right to the entire contract fund.

Legal Analysis

In a diversity action such as this, a federal court must place itself in the position of a state court and reach that conclusion which it thinks the state court would reach. DiPascal v. New York Life Insurance Company, 749 F.2d 255, 260 (5th Cir.1985); NCH Corporation v. Broyles, 749 F.2d 247, 250 (5th Cir.1985). Both MNB and CoMaster submit that the substantive law of the state of Georgia controls their rights to the contract fund in this case.

In its motion for summary judgment, CoMaster argues that under principles of equity and the common law in Georgia, the portion of the contract fund representing amounts owed for materials and labor incorporated in the Atlanta facility is impressed with a constructive trust for the benefit of subcontractors such as CoMaster. Under this theory, the general contractor holds the funds as trustee only; consequently, the contract fund would not constitute an account receivable or any other kind of asset of Weben to which MNB’s security interests in Weben’s accounts could attach.

While there exists some support for a construction trust fund doctrine in the Georgia law cited by both parties, that support finds expression only in older cases decided before enactment of the Georgia Uniform Commercial Code. See, e.g., Johnson v. Root Manufacturing Company, 241 U.S. 160, 36 S.Ct. 520, 60 L.Ed. 934 (1916); Cutler-Hammer, Inc. v. Wayne, 101 F.2d 823, 825 (5th Cir.), cert. denied, 307 U.S. 635, 59 S.Ct. 1031, 83 L.Ed. 1517 (1939) (funds representing unpaid balance of construction contract price, deposited into bankruptcy court by owner to discharge lien claims, was deposited as money of the lien claimants, not as money of the estate); Mullins v. Noland Company, 406 F.Supp. 206, 213 (N.D.Ga.1975) (“the Georgia courts recognize a substantial obligation on the part of general contractors to ensure that all subcontractors and their materialmen are paid”); Short & Paulk Supply Company v. Dykes, 120 Ga.App. 639, 171 S.E.2d 782, 788 (1969) (in suit by subcontractors against owner to foreclose materialmen’s liens, contractor was an interested witness because “[i]f he received the full contract price for the job he became a trustee of the funds for the purpose of disbursing them properly to those who held valid claims for labor and materials ...”); Scott v. Williams, 111 Ga.App. 735, 143 S.E.2d 16, 17 (1965) (in a suit by general contractor against owner to foreclose a materialmen’s lien under Ga.Code Ann. § 67-2002, as contract price becomes due it “is charged with a lien as against the contractor, in favor of the subcontractors, materialmen, and laborers ____ [T]he statute operates as a sort of automatic garnishment, which ... impounds the fund due by the owner ... ”).

The federal appellate cases holding that funds owed to subcontractors, material-men, or laborers are subject to a “construction trust” dealt with state laws specifically creating statutory trust funds for the benefit of those individuals. See, e.g., Selby v. Ford Motor Company, 590 F.2d 642 (6th Cir.1979) (interpreting Michigan Builders Trust Fund Act); Carrier Corporation v. J.E. Schecter Corporation, 347 F.2d 153 (2d Cir.), cert. denied, 382 U.S. 904, 86 S.Ct. 239, 15 L.Ed.2d 157 (1965) (interpreting New Jersey statutory law); cf. Georgia Pacific Corporation v. Sigma Service Corporation, 712 F.2d 962 (5th Cir.1983) (interpreting Arkansas and Mississippi lien statutes).

CoMaster admits, however, that Georgia, unlike these states, does not have a construction trust fund statute for the benefit of subcontractors. Furthermore, even if the above authorities might somehow be construed to authorize imposition of a constructive trust in favor of the mechanic’s lien claimant here, they are nevertheless distinguishable on the ground that any “trust” imposed on contract funds in those cases was in favor of lien claimants as against general creditors of the bankrupt contractor or as against the general contractor himself. See, e.g., Cutler-Hammer, Inc., 101 F.2d at 825; Mullins, 406 F.Supp. at 211; Short & Paulk Supply Company, 171 S.E.2d at 788; Scott, 143 S.E.2d at 17-18.

Here, by contrast, the rights of the lien claimant compete for priority with the rights of a secured creditor. Indeed, Cutler-Hammer, Inc., upon which CoMaster relies so heavily, was decided prior to enactment of the Georgia Uniform Commercial Code which now governs the rights and priorities of secured creditors. Consequently, this court is of the opinion that a Georgia court would decline, absent express statutory authority, to impose a construction trust on the contract fund involved here.

Although CoMaster cannot rely on the special protection for subcontractors afforded by the construction fund doctrine, the court must still determine which party has the superior right to the contract fund. MNB argues that CoMaster does not have a valid lien on any portion of the contract fund under Georgia law for the reasons that: (1) CoMaster expressly waived any lien rights it may have had to UPS property; (2) CoMaster failed to perfect any possible lien as required by Georgia law; and (3) even if CoMaster has a valid lien, that lien attached only to real estate and not to the contract fund. These arguments need not be decided, however, because the court has concluded that even if CoMaster has a valid mechanic’s lien, MNB’s previously perfected security interest in Weben’s accounts receivable takes priority over Co-Master’s lien.

Georgia Code Annotated § 109A-9-310 (now § 11-9-310) provides in part that:

Except as is expressly provided to the contrary elsewhere in this Article, a perfected security interest in collateral takes priority over each and all of the liens, claims and rights described in section 67-1701, relating to the establishment of certain liens, as now or hereafter amended___1

The “collateral” provided as security for the loans by MNB to Weben is an interest in Weben’s accounts receivable. Texas law governs the contractual relationship between Weben and MNB in this case because both entities have their principal places of business in Texas, and because Weben executed and delivered the promissory notes to MNB in Dallas. Thus, TEX. BUS. & COMMERCE CODE ANN. § 9.106 (Vernon Supp.1985) governs the definition of accounts receivable here. In any event, the definition is identical under Ga.Code Ann. § 109A-9-106 (1972).

Section 9.106 provides in part that:

“Account” means any right to payment for goods sold or leased or for services rendered which is not evidenced by an instrument or chattel paper, whether or not it has been earned by performance.

When UPS deposited the contract fund in the registry of this court, UPS allocated $358,449.33 as the amount it owed to Web-en under the UPS-Weben contract for construction at the Atlanta facility. Under the definition in § 9.106, this amount constitutes accounts receivable of Weben. The fact that the money is now in the registry of this court does not change its essential character. See Sterling National Bank & Trust Company v. Southwire Company, 713 F.2d 684, 686 (11th Cir.1983). Compare Scott, 143 S.E.2d at 17-18 (discussing the rights of an owner as against a contractor and subcontractor) with United States v. Durham Lumber Company, 257 F.2d 570, 575 (4th Cir.1958), affd, 363 U.S. 522, 80 S.Ct. 1282, 4 L.Ed.2d 1371 (1960) (discussing obligations of owner under North Carolina lien statutes to subcontractors and contractor respectively). Thus, that portion of the contract fund allocated to construction of the Atlanta facility constitutes accounts receivable of Weben in which MNB undisputedly has a perfected security interest.

It is a fundamental principle in adjudicating the right to priority of competing lien claimants that “ ‘the first in time is the first in right.’ ” Rice Investment Company v. United States, 625 F.2d 565, 568 (5th Cir.1980). MNB’s security interest in Weben’s accounts was perfected no later than April 7, 1981. CoMaster’s lien, on the other hand, dates back at the earliest to July 9, 1982, the date upon which CoMaster first performed work at the Atlanta facility. Consequently, MNB’s claim is prior in time to CoMaster’s. Under Georgia law, therefore, MNB’s perfected security interest undoubtedly takes priority over CoMaster’s mechanics’ lien. South-wire Company, 713 F.2d at 688; Newton Ford Tractor Company, Inc. v. J.I. Case Credit Corporation, 163 Ga.App. 497, 294 S.E.2d 723, 725 (1982); General Electric Credit Corporation v. Capital Ford Truck Sales, Inc., 164 Ga.App. 468, 298 S.E.2d 159 (1982).

Conclusion

In conclusion, MNB’s motion for summary judgment is GRANTED and CoMaster’s motion for summary judgment is DENIED.

SO ORDERED.

ORDER ON MOTION FOR RECONSIDERATION

The motion for reconsideration filed by CoMaster on February 4, 1985 correctly points out that Georgia adopted the Uniform Commercial Code in 1964. Consequently, this court erred in stating, in its January 24, 1985 memorandum order, that “support [for a construction trust fund doctrine in Georgia law] finds expression only in older cases decided before enactment of the Georgia Uniform Commercial Code.”

Although that statement was inaccurate as to some but not all of CoMaster’s authorities, the court is not persuaded that its conclusion was affected by the error. Whatever the date of its original enactment, Georgia’s version of the Uniform Commercial Code now unambiguously resolves the lien priority question presented here in favor of MNB. See Georgia Code Annotated § 109A-9-310; Newton Ford Tractor Company, Inc. v. Case Credit Corporation, 163 Ga.App. 497, 294 S.E.2d 723, 725 (1982); General Electric Credit Corporation v. Capital Ford Truck Sales, Inc., 164 Ga.App. 468, 298 S.E.2d 159 (1982); Sterling National Bank & Trust Company v. Southwire Company, 713 F.2d 684, 686 (11th Cir.1983).

Accordingly, CoMaster’s motion for reconsideration is DENIED.

SO ORDERED.

      . Georgia Code Annotated § 67-170X(8) (now § 44-14-320), upon which CoMaster relies in asserting its claim to the contract fund, establishes a lien "in favor of contractors, material-men, subcontractors____”

      . The court stated that:
      The money, as it becomes due, is charged with a lien as against the contractor, in favor of the subcontractor____ But if nothing becomes due to the contractor____ [t]here is no fund out of which those employed by him are to be paid. For in all these cases it must be understood that the contractor’s employes are to be paid out of the contractor’s money. The landowner is not under any primary obligation or contract to pay them (emphasis added).

      . The court held that only that portion of the contract price remaining after payments by the owner to subcontractors was disbursable as assets of the bankrupt general contractor’s estate in satisfaction of the government’s tax lien.


author: WHITE, District Judge.

text:
    David L. HENNING, Plaintiff, v. VILLAGE OF MAYFIELD VILLAGE, et al., Defendants.
    No. C84-1131.
    United States District Court, N.D. Ohio, E.D.
    Jan. 29, 1985.

      Jeffrey H. Friedman, Frank Chenette, Friedman and Chenette, Cleveland, Ohio, for plaintiff.
    Dale C. Feneli, Director of Law, Beach-wood, Ohio, for defendants.
   MEMORANDUM AND ORDER

WHITE, District Judge.

This action arises under § 504 of the Rehabilitation Act of 1973, 29 U.S.C. § 794, the Civil Rights Act of 1871, 42 U.S.C. § 1983 and the Court’s pendant jurisdiction over state claims. Plaintiff is employed as a full-time dispatcher with the defendant Village of Mayfield Village, Ohio. When plaintiff was hired the dispatchers worked fixed shifts, plaintiff working the night shift. Subsequently, the Village converted the fixed shift to a rotating shift. Plaintiff alleges that because of his handicap he is unable to work rotating shifts. Plaintiff asserts that the Village’s refusal to allow him to work a fixed shift constitutes discrimination under the Rehabilitation Act of 1973. Counts I and II of the complaint contain plaintiff’s allegations under this act. Defendant has filed a motion to dismiss Counts I and II.

In order to prevail under § 504 plaintiff must prove: (1) that he is a handicapped individual as defined in the statute; (2) that he is otherwise qualified to participate in the program or activity at issue; (3) that he was excluded from the program or activity solely by reason of his handicap; (4) and that the program or activity receives federal financial assistance. Doe v. New York University, 666 F.2d 761 (2d Cir.1981), Fitzgerald v. Green Valley Area Education Agency, 589 F.Supp. 1130 (S.D.Iowa 1984).

The issue presented by defendant’s motion to dismiss is whether the Village receives federal financial assistance within the meaning of the act.

29 U.S.C. § 794a is similar to Title VI of the Civil Rights Act of 1964, 42 U.S.C. § 2000d et seq. In 1978 the Rehabilitation Act was amended making available the remedies procedures and rights set forth in Title VI to those discriminated against under the Rehabilitation Act. Title VI contained a limitation providing that a violation of the act existed only when the employer receives federal financial assistance the primary objective of which is to provide employment. This provision had been held applicable to the Rehabilitation Act although it was not expressly provided. Trageser v. Libbie Rehabilitation Center, Inc., 590 F.2d 87 (4th Cir.1978), cert. denied, 442 U.S. 947, 99 S.Ct. 2895, 61 L.Ed.2d 318 (1979).

In Consolidated Rail Corp. v. Darrone, 465 U.S. 624,104 S.Ct. 1248, 79 L.Ed.2d 568 (1984), the Supreme Court of the United States discussed whether the federal financial assistance required for filing a lawsuit under § 504 must be used to promote employment. In arriving at-its decision the Court found that § 504 does not contain the limitation of Title VI. Section 504 prohibits discrimination against the handicapped under any program or activity receiving financial assistance. The federal funds need not be used to provide employment.

However the federal funds must have some nexus to the program or activity in which the handicapped person is to participate. Grove City College v. Bell, 465 U.S. 555, 104 S.Ct. 1211, 79 L.Ed.2d 516 (1984). In Grove City College v. Bell, supra, the Supreme Court held that Title IX of the Education Amendments of 1972 which prohibits sex discrimination in any education program or activity receiving federal funds applied to the college even though it received no direct federal financial assistance. The college enrolled students who individually received Basic Educational Opportunity Grants. The program or activity found to be receiving federal financial assistance was the college’s financial aid program and not the entire college. Therefore noncompliance with Title IX resulted only in termination of federal funds to the college’s financial aid program.

Attached to the defendant’s motion to dismiss is the affidavit of Patricia L. Minor, Assistance to the Director of Finance for Mayfield Village, Ohio. She states that the Village received Federal Revenue Sharing Funds as its only source of federal financial assistance for 1983 and 1984. In 1983 the funds were used for payment of engineering fees for the reconstruction and resurfacing of Wilson Mills Road and for implementation of a tool and equipment rental program for the benefit of the residents of the Village. The funds received in 1984 were expended for the purchase of police vehicles, Service Department improvements, maintenance of traffic signals and for the purchase of communications equipment. There has been no recommendation to the Mayor and Council as to how the funds received in 1985 will be distributed.

It appears that federal funds received by the Village may be used at its discretion. They can be distributed to any department of the Village and employed within the department in diverse manner. In fact, in 1984 funds were allocated to the police department for purchase of police cars and possibly for communication equipment. Because the city receives funds to be used as it determines and does so for so many different purposes it cannot be found that the programs or activities receiving funds should be limited to a small specific use such as to provide employment for dispatchers. Instead the program or activity considered to be receiving financial assistance for the purposes of the Rehabilitation Act of 1973 must be the Village of May-field itself. It is not important that in one specific year funds are not used for the police department. The funds may be allocated there the next year. A decision that the Village is the program or activity receiving the financial assistance prevents discrimination against handicapped persons from occurring only in the years funds are allocated to the police department.

Accordingly, the defendant’s motion to dismiss Counts I and II is DENIED.

IT IS SO ORDERED.


author: ASPEN, District Judge:

text:
    RICHARD HOFFMAN CORPORATION, Plaintiff, v. INTEGRATED BUILDING SYSTEMS, Defendant.
    No. 83 C 5612.
    United States District Court, N.D. Illinois, E.D.
    Feb. 25, 1985.

      Gerald C. Bender, Chicago, Ill., for plaintiff.
    John T. Duax, Mark L. Hellner, Schwartz & Freeman, Chicago, Ill., for defendant.
   MEMORANDUM OPINION AND ORDER

ASPEN, District Judge:

Plaintiff Richard Hoffman Corporation (“Hoffman”) sued Integrated Building Systems, Inc. (“Integrated”) and the Village of Glendale Heights (“Village”) for violations of the Sherman Antitrust Act, 15 U.S.C. §§ 1 et seq., the Illinois Antitrust Act, Ill.Rev.Stat. ch. 38, § 60-3, and for breach of the duty of good faith. On February 15, 1984, this Court granted the Village’s motion to dismiss under the doctrine of “state action immunity.” 581 F.Supp. 367 (N.D.Ill.1984). However, the Court denied Integrated’s motion for dismissal. The parties have since completed discovery, and Integrated has moved for summary judgment. For the reasons set forth below, Integrated’s motion is granted.

The following material facts are undisputed. In early 1983, the Village, without taking competitive bids, contracted with Integrated to draw up architectural specifications for the construction and remodelling of a Village recreational center. Integrated and the City signed this contract even though Integrated employed no registered architects. Integrated sub-contracted with Pence and Schwartz, an architectural firm, which then prepared the specifications. Pence and Schwartz’s plan specified the use of a pre-engineered building system, manufactured by Kirby Building Systems (“Kirby”). Integrated is the sole local distributor of Kirby systems.

After the specifications were finished, the Village solicited bids for the construction of the project. The reports about the bids appeared from May 18 through May 25, 1983, in a trade publication, the “Dodge Construction News Report.” The reports did not disclose that Integrated, which had drawn up the plans, was also bidding on the construction project. On May 26, 1983, Integrated’s role as both designer and bidder was first revealed.

Three firms, including Hoffman and Integrated, submitted bids by May 31,1983, the due date. The two firms other than Integrated did not include a Kirby system in their bids. The Village did not reject the bids because of that, however. Hoffman bid $816,500, the third firm bid $818,751, and Integrated bid $777,705. The Village accepted Integrated’s bid, the lowest one offered.

Hoffman claims that the above practices of Integrated and the Village unreasonably restrained trade in violation of Section 1 of the Sherman Act. Its theory can be summarized as follows. Because Integrated received the specification contract on March 25, 1983, it had at least nine weeks to prepare its construction bid. In contrast, Hoffman had but 12 days to prepare its bid when the City went public about the project in May 1983. This difference in preparation time gave Integrated an unfair advantage, argues Hoffman. Moreover, Integrated also derived an unfair advantage by drawing up the architectural plans and then bidding on the construction contract. This practice violated an industry custom. Finally, Integrated enjoyed an unfair advantage because the architectural plans specified the use of Kirby products, which Integrated distributes. In sum, argues Integrated, the above facts show that the bidding process was a sham; that the process inherently and unfairly favored Integrated in a way which unlawfully restrained trade. Integrated counters in its motion for summary judgment that its practices, even if considered unfair, did not violate the Sherman Act.

In considering Integrated’s motion, we are aware that summary judgment is ordinarily inappropriate in antitrust cases because the cases often turn on hidden motive and intent. See Poller v. Columbia Broadcasting Co., 368 U.S. 464, 473, 82 S.Ct. 486, 491, 7 L.Ed.2d 458 (1962); O’Bryne v. Checker Oil Co., 727 F.2d 159, 163 (7th Cir.1984). However, summary judgment is proper in antitrust cases where no significant probative evidence tends to support the complaint. O’Bryne, 727 F.2d at 163; Havoco of America v. Shell Oil Co., 626 F.2d 549, 553 (7th Cir.1980). As in any case, summary judgment may be granted only if the record shows that “there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law.” Fed.R. Civ.P. 56(c). As the moving party, Integrated must show that no genuine issue of material fact exists. Korf v. Ball State University, 726 F.2d 1222, 1226 (7th Cir. 1984). We must view the evidence, and the reasonable inferences drawn from the evidence, in the light most favorable to Hoffman, the party opposing the motion. Big O Tire Dealers, Inc. v. Big O Warehouse, 741 F.2d 160, 163 (7th Cir.1984). With these standards in mind, we turn to Integrated’s motion.

Section 1 of the Sherman Act, 15 U.S.C. § 1, provides in relevant part, “[ejvery contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States, or with foreign nations, is declared to be illegal.” To prevail on a Section 1 claim, Hoffman must allege and prove a “conspiracy in restraint of trade,” resulting anticompetitive effects and “antitrust injury,” that is, injury of a type that antitrust laws were designed to prevent. See, e.g., Independence Tube Corp. v. Cooperweld Corp., 691 F.2d 310, 320-23 (7th Cir.1982); rev’d on other grounds, — U.S. -, 104 S.Ct. 2731, 81 L.Ed.2d 628 (1984); Havoco of America, Ltd. v. Shell Oil Co., 626 F.2d 549, 554-57 (7th Cir.1980). It appears that a genuine factual dispute exists on the first, or conspiracy, element. But even assuming that to be true, we think that Hoffman cannot establish the second or third elements of its Section 1 claim.

The parties agree that Hoffman cannot prove a per se violation of the Sherman Act. Instead, the usual test, “the rule of reason,” controls our analysis of whether Integrated’s acts violated Section 1. See Continental T.V., Inc. v. GTE Sylvania, Inc., 433 U.S. 36, 49-50, 97 S.Ct. 2549, 2557, 53 L.Ed.2d 568 (1977); Standard Oil Co. v. United States, 221 U.S. 1, 31 S.Ct. 502, 55 L.Ed. 619 (1911). As the test’s name suggests, “reasonableness” of the challenged practice is the touchstone. Under the Rule, the factfinder must weigh all the circumstances of a case to decide whether a practice unreasonably restrains competition. Continental T. V, 433 U.S. at 49, 97 S.Ct. at 2557; Bunker Ramo Corp. v. United Business Forms, Inc., 713 F.2d 1272,1283 (7th Cir.1983). The Rule of Reason requires that the plaintiff show anti-competitive effects, or actual harm to competition. Bunker Ramo, 713 F.2d at 1283. The question is not whether the defendant’s practices were unfair or tortious, but whether those practices hobbled competition. Id.; see also Havoco of America, Ltd. v. Shell Oil Co., 626 F.2d 549, 558 (7th Cir.1980). After weighing all of the material facts, we conclude below that Integrated’s practices, while arguably unfair and unethical, did not unreasonably restrain competition. Thus, Hoffman cannot recover on its Sherman Act claim.

Hoffman’s most significant argument, we think, was that Integrated’s specification of Kirby pre-engineered materials, which it distributed, eliminated competition from the bidding process. This concern in large part motivated our denial of Integrated’s motion to dismiss. See 581 F.Supp. at 373-74. But the facts now in the record do not support a claim that the specifications had any significant anticompetitive effects. Hoffman’s Vice-President admitted in his deposition that Kirby systems “are essentially the same as” or “interchangeable” with other systems, including the Mitchell system that it had submitted in its bid. The Village did not reject Hoffman’s bid as not conforming to specifications, even though Hoffman had based its bid on the Mitchell system. In fact, the Village had not limited the project to Kirby systems, as it had specified:

The Village hereby reserves the right to approve as an equal, or reject as not being equal, any article the bidder proposes to furnish which contains major or minor variations from specification requirements.

Moreover, Hoffman had attached to its bid more than a hundred pages of materials “touting the virtues” of the Mitchell system. Thus, Security Fire Door Co. v. County of Los Angeles, 484 F.2d 1028 (9th Cir.1973), which we distinguished in our earlier opinion, see 581 F.Supp. at 373-74, is no longer distinguishable, since Hoffman and other bidders were free to “tout the virtues” of similar building systems. Finally, it is also significant that the part of Hoffman’s bid based on the Mitchell system was actually about $24,000 lower than the part of Integrated’s bid which was based on the Kirby system. Thus, Integrated ultimately derived no actual benefit from specifying use of the Kirby system. In sum, the above uncontroverted facts reveal that Integrated’s specification of a Kirby system hindered competition little, if at all.

Hoffman also argues that the additional time Integrated had to prepare its bid supports its antitrust claim. Looked at in the light most favorable to Hoffman, the facts reveal that Integrated had perhaps as much as four months to prepare its bid, while Hoffman had less than two weeks to do so. Integrated gained this advantage because it had known it was going to bid on the construction contract after preparing the specifications. According to Hoffman, industry custom forbids this practice of a firm bidding on a project for which it had prepared specifications. The purpose of this custom is apparently to prevent collusion or the appearance of collusion. Hoffman relies heavily on the fact of the violation of industry custom. However, as we noted in our opinion last year, we have found no support in case law for the proposition that a violation of industry custom amounts to a violation of antitrust law. 581 F.Supp. at 373. Hoffman has still not cited us any authority to the contrary. The relevant question is not whether the practice violated industry custom, but whether it significantly hindered competition in the industry. Cf Havoco of America v. Shell Oil Co., 626 F.2d at 556 (unfair competitive practices do not automatically violate federal antitrust law; conduct may be actionable only if effect is to restrain free competition unreasonably). It might be that in some cases violation of the custom would also substantially hinder competition. As noted above, Integrated’s position as designer of the specifications allowed it to specify Kirby systems. If Kirby were exclusive, Integrated could have frozen out competition for the later bid. But Kirby systems were not in fact required, as Hoffman was free to “tout the virtues” of its Mitchell system. And Hoffman has not submitted evidence that twelve days was too little time for it to prepare a competitive bid. Thus, while Integrated might have derived some advantage from having had more time to prepare its bid, no evidence suggests that this advantage affected competition to the extent necessary to support a federal antitrust claim.

In sum, we conclude that Hoffman cannot prove on this record that Integrated’s practices had significant anticompetitive effects. As such, Integrated is entitled to summary judgment on Hoffman’s Section 1 claim. Although we express no opinion on the issue, it could be that Integrated’s conduct was tortious under some state law theory. However, the antitrust laws did not federalize the field of unfair competition.

Otherwise the mere fact that one party bid successfully against another party for a contract would be equivalent to an anticompetitive effect and would raise the specter of an antitrust action being used as a remedy for any tortious conduct during the course of the competition. This would be contrary to the repeated view of the Supreme Court that the antitrust laws do “not purport to afford remedies for all torts committed by or against persons engaged in interstate commerce.” Hunt v. Crumboch, 325 U.S. 821, 826, 65 S.Ct. 1545, 1548, 89 L.Ed. 1954 [ (1945) ].

Havoco, 626 F.2d at 558. Although a conspiracy among competitors to rig a bidding process would generally amount to a per se violation of the Sherman Act, see, e.g., United States v. Brighton Bldg. & Maintenance Co., 598 F.2d 1101, 1106 (7th Cir.) (criminal prosecution), cert. denied, 444 U.S. 840, 100 S.Ct. 79, 62 L.Ed.2d 52 (1979), in the usual “rule of reason” case it is much more difficult for a bidder to establish that unfair practices on one contract amount to an anticompetitive effect on the general market. Havoco, 626 F.2d at 558; see also General Leaseways v. National Truck Leasing Ass’n, 744 F.2d 588, 596 (7th Cir.1984) (rule of reason generally requires threshold showing that defendant had enough market power to restrain competition substantially); but see F. Buddie Contracting, Inc. v. Seawright, 595 F.Supp. 422, 437-38 (N.D.Ohio 1984) (single contract situation does state antitrust claim under a rule of reason analysis). Whether or not unfair practices on a single contract can ever violate the Sherman Act, Hoffman has failed to prove significant anticompetitive effects in this case.

The rest of Hoffman’s complaint alleges only state law claims. Our dismissal of the Sherman antitrust claim dissolves our pendent jurisdiction over those state law claims. See United Mine Workers v. Gibbs, 383 U.S. 715, 726, 86 S.Ct. 1130, 1139, 16 L.Ed.2d 218 (1966). Those claims are therefore dismissed for lack of subject matter jurisdiction. Accordingly, the case as a whole is dismissed. It is so ordered.

      . Hoffman presented some evidence that Integrated might have had as much as four months to prepare its bid. In our discussion below, we assumed that this longer number is correct.

      . Integrated is correct that no direct evidence supports the conspiracy claim. However, it ignores the fact that bits of circumstantial evidence support a finding of collusion, and that circumstantial evidence can suffice to render summary judgment improper. See, e.g., Independence Tube Corp., 691 F.2d at 320. The following evidence in the record tends to support an inference of collusion between the Village and Integrated: (1) the Village awarded Integrated the specifications contract, without competitive bidding, even though Integrated employed no registered architects; (2) some evidence suggests that Village officials knew that integrated would later bid on the construction project, and that this was highly unusual; (3) the Village failed to disclose Integrated’s role as bidder in its initial solicitations in the Dodge Construction News. These facts imply that the Village and Integrated might have agreed to weight the bidding process in Integrated’s favor. We are not suggesting that collusion actually took place. Rather, we are saying that circumstantial evidence in the record supports a finding of collusion, thus making summary judgment inappropriate on the conspiracy element of the Sherman Act claim.

      . Security Fire Door, held that plaintiff had failed to state a Sherman Act claim where it had alleged that architects and county representatives had drawn up specifications to exclude all dumbwaiters manufactured by firms other than one of the defendants. The Court observed:
      There is nothing alleged in the complaint to suggest that this choice was made other than in an atmosphere of free competition among suppliers. So far as the complaint alleges, each supplier was perfectly free to tout the virtues of his particular dumbwaiter system in an effort to secure favorable specifications. It would appear that the architects simply favored the Guilbert system. In doing so they and their principals can hardly be charged with an antitrust conspiracy.
      484 F.2d at 1301. In our previous opinion we noted that Integrated, the successful bidder, had specified use of its own product and that it was unclear whether competitors could tout the virtues of their own products. Security Fire Door was thus distinguishable. However, in light of the undisputed facts that Kirby and Mitchell systems are essentially equivalent, and that Hoffman was free to tout the virtues of the Mitchell system, this case no longer differs significantly from Security Fire Door.

      . In light of this holding, we need not consider Integrated's alternative summary judgment motion on the issue of damages.


author: BOGUE, Chief Judge.

text:
    Glen CARR, Plaintiff, v. Ervin KORKOW, individually and d/b/a Korkow Rodeos, Donald Korkow, James Korkow, South Dakota 4-H Finals Rodeo Assn., and Paul M. “Willie” Cowan, Defendants.
    No. CIV. 83-5112.
    United States District Court, D. South Dakota, W.D.
    Feb. 25, 1985.
    Gregory A. Eiesland, Lynn, Jackson, Shultz & Lebrun, P.C., Rapid City, S.D., Terence R. Quinn, Stephens, Quinn & Buck-master, Belle Fourche, S.D., for plaintiff.
    Franklin J. Wallahan, Debra D. Watson, Rapid City, S.D., for defendants.
   MEMORANDUM OPINION

BOGUE, Chief Judge.

Plaintiff was rendered a paraplegic in a 4-H Rodeo bareback bronc riding event. The case was duly tried by a jury which found three (3) Defendants negligent, two (2) Defendants not liable and set Plaintiffs damages at One Million Two Hundred Fifty Thousand Dollars ($1,250,000). In addition, Plaintiff settled with six (6) additional Defendants before trial for One Hundred Twenty-five Thousand Five Hundred Dollars ($125,500.00). All cross-claims were dismissed before trial. The verdict was general and did not apportion liability.

The Court must now enter judgment. This usually simple task is compounded by the parties’ conflicting interpretation of South Dakota’s version of the Uniform Contribution Among Joint Tortfeasors Act [UCAJTA], SDCL 15-8-11 through 15-8-22. Plaintiff argues that the Court must deduct the settlements pro tanto which would result in a judgment of One Million One Hundred Twenty-four Thousand Five Hundred Dollars ($1,124,500.00). Defendants argue that the deduction must be pro rata resulting in a judgment of Four Hundred Sixteen Thousand Two Hundred Fifty Dollars ($416,250.00). The Court must reconcile the South Dakota UCAJTA with two decisions of the South Dakota Supreme Court interpreting those statutes. Degen v. Bayman, 90 S.D. 400, 241 N.W.2d 703 (1976); Duncan v. Pennington County Housing Authority, 283 N.W.2d 546 (S.D.1979).

BACKGROUND

In Degen, Plaintiff settled with one of two Defendants whose alleged negligence jointly and severally caused serious injury to Plaintiff. 241 N.W.2d at 705. The jury did not apportion fault. Id. The trial court reduced the amount of the verdict pro tanto by subtracting the amount paid for the settlement. Degen, 241 N.W.2d at 707. Plaintiff appealed, claiming that because the jury had not considered the fault of the settling Defendant, that the Court should make no deduction from the jury verdict. Degen, 241 N.W.2d at 707. To resolve the question, the South Dakota Supreme Court adopted the North Dakota Supreme Court reasoning in Levi v. Montgomery:

Thus the question at issue between the parties is determined by the pleadings. Even though the Plaintiff now contends that he, in fact, had no cause of action in tort against one of the Defendants, the court will consider the issues as framed by the pleadings. Where the Plaintiff charges several Defendants with tort, and one of the Defendants buys its way out of the suit and is given a release and covenant not to sue, the court will not go into the question of liability of such Defendant. The test in such case is: Was the Defendant sued as a tort-feasor? If so, any liability of the remaining Defendants to the Plaintiff must be reduced by the amount paid for such release or covenant not to sue by such Defendant. [Levi v. Montgomery, N.D.] 120 N.W.2d [383] at 388-389 [1963].

Degen, 241 N.W.2d at 707; see also Duncan 283 N.W.2d at 551. The Levi Court basically ruled that after Plaintiff sues a Defendant and take money from that Defendant, it is too late to deny that Defendant’s liability. Because Degen relies on Levi, the Court must briefly discuss the North Dakota reasoning. The North Dakota Supreme Court quoted a portion of that state’s version of the UCAJTA:

When a release or covenant not to sue or not to enforce judgment is given in good faith to one of two or more persons liable in tort for the same injury or the same wrongful death:
1. It does not discharge any of the other tort-feasors from liability for the injury ... unless its terms so provide; but it reduces the claim against the others to the extent of any amount stipulated by the release or covenant, or in the amount of the consideration paid for it, whichever is the greater; and
2. It discharges the tort-feasor to whom it is given from all liability for contribution to any other tort-feasor. Sec. 32-38-04 N.D.C.C.

Levi, 120 N.W.2d at 388.

Two items in Levi make that case weak precedent. First, paragraph 2 in the above passage is not found in the South Dakota UCAJTA. Quite the contrary, South Dakota specifically preserves the right to contribution from settling Defendants unless the conditions of SDCL 15-8-18 are first met. In addition, two Defendants were involved in Levi. The jury returned a verdict for Thirty Thousand Dollars ($30,000). The settling Defendant paid Plaintiff Fifteen Thousand Dollars ($15,000) before trial. Levi, 120 N.W.2d at 383. Whether the Court deducted pro rata or pro tanto made absolutely no difference in the judgment. In relying on Levi, the Degen Court did not acknowledge these distinctions. Rather, the Court simply adopted the above-quoted language, which would make a settler who is sued as a joint tort-feasor, a joint tort-feasor.

Degen, like Levi, involved two alleged tort-feasors. The settling Defendant gave Plaintiff Sixty-five Thousand Dollars ($65,-000). The jury ultimately awarded Plaintiff One Hundred Thousand Dollars ($100,-000). 241 N.W.2d at 705. After quoting Levi, the Degen Court stated “we find that SDCL 15-8-17 is applicable and the lower court was correct in deducting Bayman’s settlement from the jury verdict.” 241 N.W.2d at 707-8.

Since the settlement in Degen was larger than the pro rata share ($100,000.00 verdict/2 accused tort-feasors), the pro tanto result was compelled because the settlement amount was larger. SDCL 15-8-17. Therefore, the Degen Court did not rule whether the reduction is always pro tanto. Nevertheless, the Degen Court quoted from Levi and seemed to rule that when liability is not found or admitted, then the reduction is always pro tanto. Degen, 242 N.W.2d at 707.

The next opportunity for the South Dakota Supreme Court to consider the UCAJTA was in Duncan. Plaintiff sued eleven Defendants. 283 N.W.2d at 547. Plaintiff settled with Defendant PCHA for Twenty Thousand Dollars ($20,000) and with nine other Defendants for One Hundred Thirty Thousand Dollars ($130,000) before trial. The jury found A & K, the remaining Defendant, negligent and awarded damages in the amount of Two Hundred Fifteen Thousand Dollars ($215,000). 283 N.W.2d at 550. By special interrogatory, the jury also found that the nine settling Defendants’ negligence totaled 92%; A & K’s negligence totaled 7.5%; that Plaintiff was .5% eontributorily negligent and that PCHA was not negligent. Id.

The South. Dakota Supreme Court held that the settling group who paid One Hundred Thirty Thousand Dollars ($130,000) actually extinguished One Hundred Ninety-seven Thousand Eight Hundred Dollars ($197,800) of the jury verdict. (.92 x $215,-000). 283 N.W.2d at 552. The Duncan Court then held that the Twenty Thousand Dollar ($20,000) PCHA settlement must be deduced pro tanto. Duncan, 283 N.W.2d at 550. These deductions extinguished more liability than the verdict amount, so the court held that A & K, the trial Defendant, owed nothing. Duncan, 283 N.W.2d at 552. The Duncan Court approved a pro rata reduction when that was the greater and a pro tanto reduction when the jury found no liability.

DISCUSSION

The Court carefully reviewed the settlement documents here. All are identical except for the Defendants involved and the amount. The documents appear to attempt to accomplish two goals. First, Plaintiff agrees to indemnify the settling Defendants from any further liability which may occur beyond the settlement. That portion is not in dispute. The settlement documents also invoke the South Dakota UCAJTA. See for e.g. Theobald, et al., Release and Indemnity Agreement, p. 5. The effect of this portion is the source of this hot dispute.

Here, the jury was not presented with the issue of liability of the settling Defendants. The question is whether the Court is to deduct their settlements pro rata or pro tanto. Plaintiff argues that the settlement document controls and that it directs that the reduction be made pro tanto. However, it is not that clear. The operative language in the settlements before the Court is:

IT IS SPECIFICALLY ACKNOWLEDGED AND UNDERSTOOD that [Plaintiffs] may claim that additional parties, are liable or obligated to them, or may be liable to them arising out of the above-described injury to [Plaintiff] and expenses incurred thereafter, which liability may be jointly and severally as joint tortfeasors. This release is given under, pursuant to and consistent with, the South Dakota Uniform Contribution Among Joint Tort-feasors Law, SDCL 15-8-11 through 22. Thus, it is specifically acknowledged and agreed that this Release does and shall be construed to release [some Defendants], as stated above, in full, and further, that any sums or damages recovered against any other parties or any other persons who may be claimed to be joint tort-feasors, including [other Defendants] shall be reduced in the sum of [$_], or alternatively, in such sum as shall be the extent of the pro rata share of any fault or liability on the part of [the settling Defendants] for damages to [Plaintiff], however, the same may be determined, and which ever sum shall be larger.

Theobald, et al, Release and Indemnity Agreement at p. 5-6.

According to Levi, Degen and Duncan, if Plaintiff sues Defendants as joint tortfeasors and settles with them, they are joint tort-feasors. SDCL 15-8-11 defines joint tort-feasor as “two or more persons jointly or severally liable in tort for the same injury to person or property, whether or not judgment has been recovered against all or some of them.” (emphasis added).

In other words, a party can become a joint tortfeasor, for purposes of applying the UCAJTA, even though the settling party has never been judicially determined to be liable or at fault. If the Degen and Duncan Courts meant what they said, then the settling parties without additional findings are joint tort-feasors for all purposes, including applying SDCL 15-8-17 which states:

A release by the injured person of one joint tort-feasor, whether before or after judgment, does not discharge the other tort-feasors unless the release so provides; but releases the claim against the other tort-feasors in the amount of the consideration paid for the release, or in any amount or proportion by which the release provides that the total claim shall be reduced, if greater than the consideration paid.

If the Court rules that a pro tanto reduction is appropriate here, the Defendants who settled paid One Hundred Twenty-five Thousand Five Hundred Dollars ($125,500) for a second lawsuit. Unless the reduction is pro rata, SDCL 15-8-18 preserves the right of contribution. Those Defendants found liable would then be able to litigate the liability of the settling Defendants. Plaintiff, of course, argues that this is fair because he has agreed, in the settlement document, to indemnify the settling Defendants for any liability they may incur. However, this does not address the problem of application of the UCAJTA.

One of the clearly expressed and agreed purposes of the settlement documents is to extinguish the right of contribution. The documents state that “there shall exist no right of contribution ... on the part of or on behalf of any claimed joint tort-feasor.” See, Theobald, et al., Release and Indemnity Agreement at page 4. Under SDCL 15-8-17, the extinguishment can only result from a pro rata reduction when that is larger. It must be assumed that Plaintiffs wished this statute triggered to accomplish the stated purpose of extinguishment.

It would be unfair to the settling Defendants to find that they purchased a second lawsuit with their One Hundred Twenty Thousand plus. The South Dakota Supreme Court specifically acknowledged the problems of collusive lawsuits should any other result occur.

The settlement documents, statutes, Degen and Duncan all compel the result in this case. The Court must reduce the verdict pro rata since that amount is larger pursuant to SDCL 15-8-17.

For the foregoing reasons, the Court will enter judgment in the amount of Four Hundred Sixteen Thousand Two Hundred Fifty Dollars ($416,250). [$1,250,000.00 X .33] (3 Defendants found liable/9 Defendants sharing liability). However, the Court also finds that the interest of justice dictates that this judgment will be entered nunc pro tunc, effective February 4, 1985.

      . A reduction pro tanto is achieved by simply subtracting the settlement amount from the jury verdict.

      . A pro rata deduction is achieved by dividing the jury verdict by the number of joint tortfeasors and subtracting a portion for each tortfeasor who settled unless the factfinder actually determines the relative degrees of fault. Then the relative degree of fault of the settling Defendant is subtracted from the verdict.