author: KEADY, District Judge.

text:
    Oliver JONES and John Wilchie, Plaintiffs, v. MISSISSIPPI DEPARTMENT OF CORRECTIONS and Morris Thigpen, Commissioner of Corrections, Defendants.
    Civ. A. No. GC82-115-WK-O.
    United States District Court, N.D. Mississippi, Greenville Division.
    Aug. 15, 1985.

      Charles Victor McTeer, Willie Griffin, Greenville, Miss., for plaintiffs.
    Sidney J. Martin, John Kitchens, Mississippi Atty. Gen. Office, Jackson, Miss., for defendants.
   MEMORANDUM OF DECISION

KEADY, District Judge.

On May 21, 1982, plaintiffs, Oliver Jones and John Wilchie, blacks, sued the Mississippi Department of Corrections (MDOC) and Morris Thigpen, Commissioner of Corrections, defendants, to redress claims of racial discrimination in promotion employment practices. Federal jurisdiction was founded upon 28 U.S.C. § 1343(a)(4) for causes of action arising under 42 U.S.C. § 2000e, et seq., and 42 U.S.C. §§ 1981 and 1983. Plaintiffs sought back pay, reinstatement, injunctive relief, and attorney’s fees and costs. Defendants denied the allegations of the complaint and in turn moved for an award of attorney’s fees against plaintiffs for defending the action.

After discovery and pretrial conference, the parties entered into a stipulation of facts contained in a pretrial order dated August 31, 1984. The court conducted an evidentiary hearing on August 12 and 13, 1985, at which time the parties appeared personally and by their attorneys, offered oral and documentary evidence, and the court heard argument of counsel. Being advised in the premises, the court now makes findings of fact and conclusions of law pursuant to Rule 52(a), Fed.R.Civ.P., as follows.

FINDINGS OF FACT

Oliver Jones

Plaintiff Jones was initially employed by MDOC on July 15, 1974, as a Correctional Officer I (CO-I), the entry level position for employment as a guard at the Mississippi State Penitentiary. Jones’s education consisted of two years of junior college, four years at Mississippi Valley State University, and two years in the United States Army, where he attained the rank of sergeant. He successfully completed training prescribed for correctional officers. On December 21, 1979, he applied for and was promoted to the position of Correctional Officer II/Correctional Administrator I (CO-II/CA-I), or sergeant. He served in that capacity until March 9, 1981, when he applied for promotion to the position of Correctional Officer III/Correctional Administrator II (CO-III/CA-II), or lieutenant, for Unit 22. Pursuant to a vacancy announcement for this position, Jones submitted a written application setting forth his educational background but left blank the sections on prior employment or work experience. The minimum job requirements set forth in the vacancy announcement were as follows:

(2) Considerable knowledge of the custody and care of inmates at a state correctional institution; knowledge of the principles and elements of supervision.
(3) Ability to supervise and direct the work of subordinate officers; to plan work assignments; to command respect and obedience; to act quickly in an emergency; and to judge situations accurately.
(4) Thorough knowledge of the rules and regulations, and policies of the institution or prison where employed.

(P. Ex. 7).

On March 31, 1981, the Mississippi State Personnel Board (Personnel Board) advised Jones by post card that his application was disapproved because of his failure to meet the experience requirement of “IV2 years employment as a Correctional Officer II or Correctional Administrator I.” (P. Ex. 20). Hence, Jones was not interviewed. The applications of several others were disapproved for the same reason.

Jones made no inquiry of the Personnel Board and took no other steps until he learned that Tony Champion, a white male, had been promoted on July 1, 1981, to the position for which he had applied. During the next month, Jones discussed with James Harris, a penitentiary personnel officer, the fact that the job vacancy announcement had not mentioned a requirement of one and one-half years’ experience as sergeant. Harris made inquiry of the State Personnel Board. On instructions from his superior, Hardy James, he prepared a letter stating that, effective July 1, 1981, the minimum qualifications for the lieutenant’s position had been revised by the State Personnel Board to require one year and six months’ employment as a sergeant to be eligible for a lieutenant’s position.

In September 1981, Jones talked to Associate Warden Upchurch and wrote to the Personnel Board complaining that Champion had less education, experience and work seniority than Jones and that the experience requirement set forth in Harris’ directive had not been contained in the vacancy announcement. Jones also went to Jackson, where he conferred with J. Terrell May, an official with the State Personnel Board. May offered plaintiff an opportunity to submit supplemental data in order that the Personnel Board might re-evaluate him for the lieutenant’s position; however, by that time the vacancy had been filled.

The evidence shows that on June 4, 1980, the Mississippi Classification Commission, the state agency having the authority and responsibility to promulgate policies, rules, and regulations for the hiring and promotion of state employees, including MDOC employees, had established a job description for the position of CA-II, or lieutenant, requiring, among other things, one year and six months’ employment as a CO-II or CA-I (i.e., sergeant). On February 1, 1981, by change in Mississippi statute, the functions of the Classification Commission were taken over by the State Personnel Board, which adopted the same policies, rules, and regulations governing the employment, promotion, and termination of state employees, including the job descriptions and minimum requirements which the Classification Commission had previously adopted. No applicant could be accepted for employment or promotion unless he was found to be eligible and was certified by the State Personnel Board. At the time Jones submitted his application, he had served for one year and three months as a sergeant, and thus fell three months short of the minimum qualifications prescribed by the State Personnel Board. “The revision” which Harris referred to as effective July 1, 1981, was merely a restatement of the requirements established in 1980 for the lieutenant’s position.

Eddie Lucas, black, the penitentiary warden, reviewed the several applicants for lieutenant who were certified as eligible by the Personnel Board and selected Champion as the applicant most qualified to be recommended to the Commissioner for promotion. Champion had been employed by MDOC since January 1974 and had been named sergeant on July 1, 1978. He had completed the MDOC basic and supervisory training and Mississippi law enforcement officer’s training. His personnel file contained evaluations of satisfactory job performance. At the time Champion submitted his application, he had satisfied the one and one-half years’ requirement as a sergeant.

On September 9, 1981, Jones filed a charge with the Equal Employment Opportunity Commission (EEOC) alleging racial discrimination because of his failure to be promoted since the position was awarded to a white person less qualified than he. The EEOC on February 18, 1982, issued a right-to-sue letter and advised Jones that it was unable to investigate and conciliate the charge within the time prescribed by law. The present action was timely filed.

At trial Jones testified that he felt that he had been discriminated against on account of race and was of the opinion that white applicants were more readily promoted than blacks. He also testified that he actually served as lieutenant from November 1981 to March 1982 at Unit 24, where he performed the duties of unit administrator but received no increase in salary. He estimated that a lieutenant’s compensation was 5% to 10% more than a sergeant’s.

The rules and regulations of the State Personnel Board, placed in evidence by Jones, specified in section 3.21(b), dealing with Applicant Processing, that “Incomplete Experience and Training Records shall be returned to individuals with instructions concerning proper completion.” Jones did not timely receive instructions from the State Personnel Board on how to complete his application for lieutenant. He had, however, disclosed his work experience in earlier applications. Had such instructions been given, Jones could not have satisfied the prescribed minimum requirement. The court finds as a fact that Jones was not qualified for the lieutenant’s position at the time he applied for it in March 1981.

Jones is still employed as sergeant by MDOC. He is of the opinion that his work shift was changed and that he has been harassed in other ways by the penitentiary officials because of this suit.

John Wilchie

Plaintiff Wilchie was initially employed by MDOC in May 1977 as a CO-I, or guard. On August 24, 1981, he applied for the position of CO-II/CA-I, or sergeant, at Unit 29. He met the minimum requirements, was certified by the State Personnel Board as eligible for promotion, and appeared before a panel for oral interview on September 1, 1981. The promotion panel consisted of James Upchurch, Jerry Upton, and Kenneth Wayne Fleming, whites, and Thomas McDaniel, black. Each of the fifty-two applicants received an individual hearing at which questions were asked about the duties of sergeant and the penitentiary rules and regulations. At the commencement of the interview, James Up-church, associate warden, handed each member of the panel a list of questions and a sheet headed “Promotion Scoring Profile,” specifying nine criteria, to be rated on a score of one to five, enumerated as follows:

1. Attendance and Punctuality
2. Self-improvement efforts
3. Prior performance of duties at MDC [sic]
4. Current job knowledge
5. Knowledge of new grade responsibilities
6. Command presence/leadership qualities
7. Personal appearance and overall manner
8. Educational level
(1 pt.-Complete high school; 2 ptssome college; 3 pts.-complete college; 4 pts.-some graduate work; 5 pts.complete graduate school.)

(P.Ex. 23).

For purposes of scoring each applicant, panel members were instructed that a “five” was the highest possible score in any category, with “one” being the lowest. Panel members were given no standard criteria regarding the meaning of each rating. For example, a “three” might denote a rating of “average” performance in the opinion of one panel member, while it might mean only “fair” in the opinion of another interviewer. Moreover, the panel members received no guidance as to what criteria they should look for in answers given by the interviewees. Warden Eddie Lucas testified that, in fact, there were really no definitively correct or incorrect answers to the questions.

The evidence shows that each panel member made an independent judgment in each category that resulted in a combined score for Wilchie of 102.

In August 1981, there were twenty-nine positions of lieutenant to be filled in Unit 29, a new inmate facility scheduled to open in the fall of 1981. The State Personnel Board determined from the applications submitted that there were fifty-two applicants, including Wilchie, who were eligible for the positions. All fifty-two applicants were, as Wilchie, granted oral interviews and scored on the basis of their records, the information in their personnel files and their answers to questions. The highest score was 149 and the lowest score 61 (D.Ex. 10). After interviews, Warden Lucas made the selections for recommendation to the commissioner. He selected the twenty-nine applicants with the highest scores. Of this number, nineteen were black and ten were white.

Eventually, four of the twenty-nine selected applicants declined promotion. In an attempt to fill those four vacancies, Lucas reviewed the applicants who ranked thirty to thirty-three numerically on the list. One white and one black, numbers thirty and thirty-two, respectively, were not selected because of problems reflected in their personnel files. Numbers thirty-one and thirty-three, a white and a black, were selected for promotion, thus filling two of the four remaining vacancies. William Turner, black, was the lowest-scoring applicant promoted from the pool of fifty-two, with a score of 107.

Lucas, who held a master’s degree and had nine years’ experience at the prison before being named warden, testified that he decided that scores below 107 were unsatisfactory; therefore, Wilchie, with a score of 102, was not considered further for promotion. The remaining two vacancies were filled with two blacks from another applicant pool on January 1, 1982. Lucas affirmed that he did not consider race as a factor in the selection process.

No white applicant having a score lower than Wilchie was recommended by Lucas for promotion.

In 1981, MDOC had 1,152 employees, 78% of whom were black, 21% of whom were white and 1% of other race. At that time, MDOC had a warden, who was black, two associate wardens, one white and the other black, a white deputy warden, five white majors and two black majors, six white lieutenants and one black lieutenant, fourteen white sergeants and twelve black sergeants. After Unit 29 was opened in the fall of 1981, the staff was substantially enlarged with seven black lieutenants and five white lieutenants added. Also, thirteen white sergeants and thirty-two black sergeants were added. A large number of the black administrative personnel was assigned to Unit 29.

Plaintiff Wilchie filed a charge with the EEOC on February 16, 1982, alleging that he felt that he was discriminated against because of race since he had four years’ experience as a CO-I and met the job requirements and, further, that a white officer, Herman Parker, with less experience was selected for the vacancy. On May 11, 1982, the EEOC made a determination that no reasonable cause was found to believe that the allegations in Wilchie’s charge were true and issued the right-to-sue letter. The present action was timely filed.

At trial, Wilchie testified that he had four and one-half years’ experience as a justice court judge, a part-time position he held while serving as a correctional officer, and that he had training at the University of Mississippi Judicial College for Justice Court Judges. He stated that the questions asked of him at the time of interview did not relate to the duties of the job that he was seeking. He felt that Upton, a member of the panel interviewing him, was biased against him since he had filed an incident report against Upton and another officer regarding an assault on an inmate. Wilchie stated that he was never called to testify although an investigator had looked into the matter. Jerry Upton testified that he was unaware of the charge at the time he served on the interview panel and affirmed that race had no part in the scoring he made of Wilchie or other applicants. Upton served only once on the promotion board and was obviously inexperienced in the task to which he had been assigned. Major McDaniel, the black member of the panel, who had veteran service on fifteen to twenty promotion panels, testified impressively as to the questions asked and that the scoring was on the basis of independent perception without prior consultation with other panel members. McDaniel also stated that race played no part in the scores he assigned to Wilchie and other applicants. In Wilchie’s case, McDaniel gave Wilchie a score of twenty-nine points as compared to a range of twenty-two to twenty-six points by the white members of the panel.

The court finds as a fact that the scoring procedure of the promotion panel was based in part on objective factors such as punctuality and attendance, education, training, work experience, and seniority of service. It also included subjective factors like current job knowledge, knowledge of new grade responsibilities, command presence, personal appearance, self-improvement efforts, and prior performance of duties at MDOC. Necessarily, a determination in these areas rested upon the perception of each interviewer. The court finds as a fact that the selection process was without racial bias or discriminatory intent. Defendants, however, failed to establish what were the specific questions and whether they were job related and were necessary to fairly assess one’s ability to perform the duties of the sergeant’s job.

Wilchie contended that a white male, Herman Parker, who had scored 127 in the oral interview, was less qualified than he. According to Warden Lucas, Parker was promoted to sergeant after being employed by MDOC since May 1980 and was promoted to CA-I on October 1, 1981. Although Parker had not received academy training for a correctional officer, that requirement was not in effect at the date of his promotion. He had, however, several times attended the Mississippi Law Enforcement Training Academy, had served four years as a deputy sheriff of Sunflower County, and as the Ruleville police chief. His personnel file reflects that he had received excellent job performance evaluations.

Had Wilchie been promoted to the rank of sergeant, he would have begun work in that position when Unit 29 opened on November 1, 1981. His earnings as a CO-I were $1,081.14 per month. As a sergeant, Wilchie would have earned $1,211.00 per month, amounting to a monthly increase of $129.86. On June 29, 1983, Wilchie was terminated for cause due to matters unrelated to his present suit.

CONCLUSIONS OF LAW

Oliver Jones

In a disparate treatment case involving allegations of discrimination in promotion employment practices, a Title VII plaintiff carries the initial burden of establishing a prima facie case of discrimination. See Texas Department of Community Affairs v. Burdine, 450 U.S. 248, 252-53, 101 S.Ct. 1089, 1093, 67 L.Ed.2d 207 (1981). Generally, the plaintiff must show that (1) he belongs to a group protected by the statute; (2) he was qualified for- the position to which he sought promotion; (3) he was not promoted; and (4) after his non-promotion, the employer continued to seek applicants not in plaintiffs protected class or promoted those, having comparable or lesser qualifications, not in plaintiffs protected class. See McDonnell Douglas Corp. v. Green, 411 U.S. 792, 802, 93 S.Ct. 1817, 1824, 36 L.Ed.2d 668 (1973).

Once a plaintiff has established a prima facie case, the defendant must attempt rebuttal by clearly articulating a legitimate, nondiscriminatory reason for the employment decision. Burdine, 450 U.S. at 254, 101 S.Ct. at 1094. A defendant does not bear the burden of persuading the court that he was actually motivated by the proferred reasons; rather, an employer need only raise a genuine issue of fact as to whether there was illegal discrimination involved in plaintiffs discharge. If an employer satisfies its burden of production, the burden again shifts to the plaintiff to prove that the proffered reasons are not merely pretextual. Id. at 254-56, 101 S.Ct. at 1094-1095.

When Title VII and 42 U.S.C. § 1983 are used as parallel remedies in a disparate treatment suit, the same substantive elements are applicable for recovery under both statutes. Nilsen v. City of Moss Point, 701 F.2d 556, 559 n. 3 (5th Cir.1983). The same principles also apply when Title VII disparate treatment claims are brought in conjunction with claims under 42 U.S.C. § 1981. Adams v. McDougal, 695 F.2d 104, 109 (5th Cir.1983).

As regards the instant suit, we conclude that Oliver Jones did not present a prima facie case of disparate treatment as defined under Title VII. Clearly, at the time that he applied for promotion to lieutenant, Jones lacked the requisite one year and six months’ experience as a sergeant; therefore, he was not qualified for the position to which he sought promotion. Plaintiffs failure to meet the experience requirement for the lieutenant’s position was the sole reason given by the Personnel Board for his non-certification.

Although Jones suggests that the one year and six months’ requirement was arbitrary and not job-related, the record is devoid of evidence to support such a contention. A cursory review of the job description for the position of CA-II, or lieutenant, discloses the many responsible duties required of one holding that position and the need for a well-rounded experience in dealing with penitentiary inmates. We hold that the experience requirement was reasonable and was job-related.

Upon plaintiffs failure to establish a prima facie case under Title VII, we must also conclude that no recovery is available under 42 U.S.C. §§ 1981 and 1983.

Defendants moved, in the event that judgment was granted in their favor, that plaintiff be required to pay their attorneys’ fees and expenses pursuant to 42 U.S.C. § 1988. The motion is not well taken and is denied. Jones’s suit was not frivolously brought. To the contrary, it was brought in good faith based on the omission of the one and one-half years’ experience requirement from the vacancy announcement which prompted plaintiffs application for a lieutenancy. See E.E.O.C. v. Christianburg Garment Co., Inc., 550 F.2d 949, 951-52 (4th Cir.1977).

John Wilchie

Plaintiff Wilchie attacks the MDOC oral examination and scoring procedure on the basis of its disparate impact upon blacks seeking promotions. To establish a prima facie case of disparate impact as defined under Title VII, a plaintiff must show that the challenged facially neutral employment practice operates more harshly on one group than another. Carpenter v. Stephen F. Austin State University, 706 F.2d 608, 621 (5th Cir.1983). See also, Dothard v. Rawlinson, 433 U.S. 321, 329, 97 S.Ct. 2720, 2726-27, 53 L.Ed.2d 786 (1977). The employer then bears the burden of showing that the specific procedure bears “a demonstrable relationship to successful performance of the jobs for which it was used,” Griggs v. Duke Power Co., 401 U.S. 424, 431, 91 S.Ct. 849, 853, 28 L.Ed.2d 158 (1971), for if “an employment practice which operates to exclude [the protected class] cannot be shown to be related to job performance, the practice is prohibited.” Id. Besides providing evidence of the business necessity of an examination process, and thereby validating it, an employer may also attack the plaintiffs case by showing that the statistical proof is unacceptable. Johnson v. Uncle Ben’s, Inc., 628 F.2d 419, 424 (5th Cir.1980), vacated on other grounds, 451 U.S. 902, 101 S.Ct. 1967, 68 L.Ed.2d 290 (1981).

In the present case, plaintiff has presented a prima facie case under the Title VII disparate impact theory. The statistics for the promotion applicant pool of which Wilchie was a part show a significant 32.6% selection differential between blacks and whites. Also significant is the fact that the promotion rate for black applicants was only 58% that of white applicants. That more blacks than whites were actually promoted does not adversely affect Wilchie’s prima facie case, since “bottom-line” adequate minority representation does not validate selection procedures that disproportionately exclude individual members of the protected class. See Connecticut v. Teal, 457 U.S. 440, 453-56, 102 S.Ct. 2525, 2533-35, 73 L.Ed.2d 130 (1982). Defendants have not attacked these statistics’ acceptability.

The court concludes further that the defendants have not met their burden of showing that the oral examination process was job-related. Although Major McDaniel testified that the questions asked during the oral interview were job-related, the evidence of record as a whole highlights serious deficiencies in the interview process used by MDOC. Minimal evidence was available as to what questions were actually asked of each applicant for promotion, thereby making content validation of the process virtually impossible. Moreover, no evidence was presented as to the criterion validity of the questions and scoring methods, i.e., their relationship to job performance.

Defendants contend that any deficiencies in the oral examination process are remedied by the warden’s independent examination of applicants’ scores and personnel files prior to making his recommendations of candidates for promotion. We disagree. Few standards were provided by which the panel members could score interviewees consistently, and no criteria were set out to define proper and improper answers. Warden Lucas admittedly relied heavily on the scores reached in this manner in choosing those applicants who would be promoted. A further infirmity exists in the fact that there was no particular cutoff score for determining who had passed the oral exam and who had failed. No particular correlation was shown between scores lower than 107, the lowest score selected by Warden Lucas, and poor job performance.

Having determined that Wilchie has prevailed on his Title VII disparate impact claim, we conclude that declaratory relief, back pay, and attorney’s fees constitute reasonable remedial measures in this case. However, reinstatement will not be granted since Wilchie was terminated for cause unrelated to the instant suit. An award of back pay is appropriate for the twenty months between November 1, 1981, and June 29, 1983, the date of Wilchie’s termination; therefore, the recoverable sum amounts to $2,597.20.

Wilchie has made no showing of disparate treatment and thus is not entitled to relief under 42 U.S.C. §§ 1981 and 1983, which require proof of intentional discrimination.

Let an order issue accordingly.

JUDGMENT

Pursuant to Memorandum of Decision .this date issued, it is ORDERED as follows:

1. Plaintiff Oliver Jones take nothing from his suit, and his complaint is hereby DISMISSED with prejudice.

2. Plaintiff John Wilchie shall have of and recover from the defendants, Mississippi Department of Corrections and Morris Thigpen, Commissioner of Corrections, the sum of $2,597.20, together with interest from June 29,1983, at the rate of 8.18% per annum until paid, and reasonable attorneys’ fees against the defendants as the prevailing party, motion therefor to be made pursuant to Local Rule C-13 unless the parties can agree within ten (10) days on the amount of such award. Plaintiff Wilchie is further granted declaratory relief that the use of oral interviews which are not validated or directly related to the job in question as a selection device for promotion of Mississippi Department of Corrections employees is invalid because of racially discriminatory impact. Plaintiff Wilchie, however, is DENIED reinstatement or other injunctive relief.

3. The costs of this action, other than attorneys’ fees assessed to plaintiff Wilchie against the defendants, shall be borne as follows: one-half by plaintiff Jones and one-half by defendants.

      . The suit was commenced as a Rule 23 class action on behalf of all past, present and future black applicants for employment and employees of the Mississippi State Department of Corrections. The class action allegations were abandoned by plaintiffs and the court has heretofore ordered that plaintiffs proceed in their individual capacities only. Also dismissed from the original suit are the individual members of the Board of Corrections.

      . The statistics reflecting promotions made from Wilchie's applicant pool are as follows:

        This indicates a 32.6% selection differential between blacks and whites. The promotion rate for black applicants was 58% that of white applicants.

      . Defendants argued at trial that Wilchie had asserted a disparate treatment, rather than a disparate impact, claim. However, the issues of law listed in the pretrial order do not so limit plaintiffs case, and the court believes that Wilchie has properly stated an impact claim.

      . The statistics cannot be viewed in terms of how many blacks passed or failed the oral examination as compared to whites since MDOC did not designate any particular cutoff score.

      . Content validity concerns the relationship of the interview questions to the knowledge/skills/abilities of an applicant at entry for successful performance of job duties.

      . Twenty months X 1129.86 (the difference in pay per month between the rank of CO-I and sergeant).


source: Caselaw Access Project

author: LEE R. WEST, District Judge.

license: Public Domain

text:
    FEDERAL DEPOSIT INSURANCE CORPORATION, as Receiver of Penn Square Bank, N.A., Plaintiff, v. Bill P. JENNINGS; Eldon L. Beller; William G. Patterson; John R. Preston; Carl W. Swan; and C.F. Kimberling, Sr., Defendants, and Peat Marwick Mitchell & Co., a partnership, Additional Party-Defendant.
    No. CIV-84-1612-W.
    United States District Court, W.D. Oklahoma.
    Aug. 15, 1985.

      Richard B. Noulles, Charles C. Baker, David L. Bryant, Gable & Gotwals, Tulsa, Okl., Ted N. Pool, Sherman, Pool, Thompson & Coldiron, Del City, Okl., for plaintiff.
    Charles C. Green and Robert Turner, Turner, Turner, Green & Braun, Oklahoma City, Okl., for Jennings.
    Richard Talley and L. Keye Farrar, Norman, Okl., for Beller.
    Burck Bailey, Warren F. Bickford, IV, Fellers, Snider, Blankenship, Bailey & Tip-pens, Oklahoma City, Okl., for Patterson.
    John Goodman, Oklahoma City, Okl., for Preston.
    John W. Vardaman, Jr., Washington, D.C., Peter B. Bradford, Bradford, Haswell & Jones, Oklahoma City, Okl., for Swan.
    John E. Green, Asst. U.S. Atty., Oklahoma City, Okl., for the U.S.
    Ross Arbiter, Stanley W. Levy, Weinberg, Zipser, Arbiter & Heller, Los Angeles, Cal., Erwin E. Adler, Carol Lynch, Richards, Watson, Dreyfuss & Gershon, Los Angeles, Cal., Gene A. Castleberry, Robert A. Wiener, Oklahoma City, Okl., for Professional Asset Management, Inc.
    Gary A. Bryant, G. Blaine Schwabe, III, Mock, Schwabe, Waldo, Elder, Reeves & Bryant, Oklahoma City, Okl., Larry K. Griffis, Butzell, Keidan, Simon, Myers & Graham, Detroit, Mich., for Michigan Nat. Bank, N.A.
    J. William Conger, James C. Prince, Hartzog, Conger & Cason, Earl D. Mills, Mills, Whitten, Mills & Mills, Oklahoma City, Okl., Edwin D. Scott, Peat, Marwick, Mitchell & Co., New York City, William E. Hegarty, Mathias E. Mone, Dean Ringer, Cahill, Gordon & Reindel, New York City, for Peat, Marwick, Mitchell & Co.
    David T. Hedges, Jr., Vinson & Elkins, Houston, Tex., James E. Work, Shirk, Work, Robinson & Williams, Oklahoma City, Okl., for Coe, Cook, Haugland, Richardson, Smelser, Kenworthy, Randolph and Ross.
    James A. Kirk, Kirk & Chaney, Oklahoma City, Okl., for Stubbs.
    Robert C. Margo, Oklahoma City, Okl., for Marvin K. Margo, M.D.
    Harold M. Durall, Oklahoma City, Okl., for Murphy.
    K. Phillip Knierim, Mark S. Simonian, Wood, Lucksinger & Epstein, Los Angeles, Cal., Joan M. Bernott, Special Litigation Counsel, Torts Branch, Civ. Div., U.S. Dept. of Justice, Washington, D.C., for James and Roe.
    James W. Bill Berry, Oklahoma City, Okl., Wilmer Cutler Pickering, Washington, D.C., for Burks.
    Phillip F. Horning, Horning, Johnson & Grove, Judson M. Fink, Oklahoma City, Okl., for Dunn.
   ORDER

LEE R. WEST, District Judge.

Background

The Federal Deposit Insurance Corporation, as Receiver for Penn Square Bank, on behalf of the Bank’s depositors and shareholders, has filed suit against the Bank’s officers, directors and independent auditors. As to the auditors, Peat, Marwick, Mitchell & Co. (“Peat”), the Receiver alleged negligence, malpractice, and breach of common law duties and professional standards. Peat responded by filing a third-party action against the FDIC, in its corporate capacity, and the Office of the Comptroller of Currency (“OCC”), alleging that the Comptroller’s examination and declaration of the Bank’s insolvency, and the FDIC’s determination to liquidate the Bank, constituted common law negligence, breach of statutory duties to depositors and creditors, and concurrent liability for any damages recovered from Peat. Presently before the Court is the motion of the United States, on behalf of OCC and FDIC as third party defendants, to dismiss Peat’s counterclaim and third party action.

DISCUSSION

The Federal Tort Claims Act is a limited waiver of sovereign immunity allowing certain enumerated kinds of lawsuits to proceed against the government. 28 U.S.C. § 1346(b). The Act contains express exceptions for suits which remain barred by sovereign immunity. The exceptions include:

“(a) Any claim based upon an act or omission of an employee of the Government, exercising due care, in the execution of a statute or regulation, whether or not such statute or regulation be valid, or based upon the exercise or performance or the failure to exercise or perform a discretionary function or duty on the part of a federal agency or an employee of the Government, whether or not the discretion involved be abused;”

and

“(h) Any claim arising out of misrepresentation ...” 28 U.S.C. § 2680(a), (h).

The Act’s legislative history indicates that Congress did not intend to create liability for errors by government agencies or officials in administration, policy judgments or exercise of “discretionary functions”. Dalehite v. United States, 346 U.S. 15, 33-37, 73 S.Ct. 956, 966-69, 97 L.Ed. 1427 (1953); Emch v. United States, 630 F.2d 523 (7th Cir.1980). The Court finds that Peat’s third-party claims fall within the “discretionary function” exceptions to the Tort Claims Act. The Court also finds that Peat’s claims in Counts I and II of its third-party complaint are premised on concepts of governmental duty that case law does not recognize. Accordingly, for the reasons explained below, Peat’s third party complaint is dismissed.

Liquidation and Receivership

Counts III and IV

Peat critizes the FDIC for “refusing” to arrange a purchase and assumption of Penn Square and for failing to devise other means of financially assisting the Bank and protecting its depositors. Peat alleges that the FDIC’s decision to liquidate the Bank, rather than attempt to “revive” it, was a concurrent cause of the Bank’s losses for which Peat is being sued. (Although Peat has targeted the FDIC as the defendant on these counts, presumably because of the Corporation’s authority to arrange emergency loans and “purchase and assumption” transactions (12 U.S.C. § 1823(c), (e), the Comptroller of the Currency, who is empowered to declare a national bank insolvent and appoint a receiver (12 U.S.C. § 192, 1821(c)) seemingly would also be involved.)

It is evident that the decisions of whether and how to intervene in failing banks is discretionary with the FDIC. 12 U.S.C. § 1823 provides that:

“(c) The Corporation is authorized, in its sole discretion and upon such terms and conditions as the Board of Directors may prescribe, to make loans to, to make deposits in, to purchase the assets or securities of, to assume the liabilities of, or to make contributions to, any insured bank—
(A) if such action is taken to prevent the closing of such insured bank;
(B) if, with respect to a closed insured bank, such action is taken to restore such closed insured bank to normal operation; or
(C) if, when severe financial conditions exist which threaten the stability of a significant number of insured banks or of insured banks possessing significant financial resources, such action is taken in order to lessen the risk to the Corporation posed by such insured bank under such threat of instability.
(2)(A) In order to facilitate a merger or consolidation of an insured bank described in subparagraph (B) with an insured institution or the sale of assets of such insured bank and the assumption of such insured bank’s liabilities by an insured institution, or the acquisition of the stock of such insured bank, the Corporation is authorized, in its sole discretion and upon such terms and conditions as the Board of Directors may prescribe—
(i) to purchase any such assets or assume any such liabilities;
(ii) to make loans or contributions to, or deposits in, or purchase the securities of, such insured institution or the company which controls or will acquire control of such insured institution;
(iii) to guarantee such insured institution or the company which controls or will acquire control of such insured institution against the loss by reason of such insured instution’s merging or consolidating with or assuming the liabilities and purchasing the assets of such insured bank or by reason of such company acquiring control of such insured bank; or
(iv) to take any combination of the actions referred to in subparagraphs (i) through (iii).”

Similarly, the FDIC can issue cease and desist orders if, in its “opinion”, the Bank is engaging in unsafe and unsound practices. 12 U.S.C. § 1818(b)(1). This determination is also a matter of agency discretion. Davis v. Federal Deposit Insurance Corporation, 369 F.Supp. 277 (D.Colo.1974).

Just as the Comptroller and FDIC have been attacked for not giving adequate assistance to some banks, they have been critized for giving too much to others. In the Franklin National Bank situation, “rescue attempts” through emergency reserve infusions and merger efforts were unsuccessful. Appellants in Huntington Towers Ltd. v. Franklin National Bank, 559 F.2d 863 (2d Cir.1977), argued that the Comptroller’s rescue attempts were “in effect throwing good money after bad (and) should not have been made,” but the Second Circuit held that such claims based on the Comptroller’s decision and manner of intervention were barred. Observing that under the Federal Reserve Act the Comptroller “may” appoint a Receiver “whenever ... he shall become satisfied of the insolvency of a national banking association,” the Court noted that “needless to say, the powers of determining the point at which a bank is no longer able to meet its obligations as they fall due involves a substantial amount of discretion”, 559 F.2d at 870. Accord, Matter of American City Bank & Trust Co., 402 F.Supp. 1229, 1231 (D.Wis.1975) (Comptroller’s discretion in insolvency determinations). As explained by the Second Circuit:

“Both the fixing of the date of declaration of insolvency by the Comptroller and the granting of rescue funds to FNB (Franklin) by the Federal Reserve Board were exercises of judgment by the public officials concerned and were well within their competence and authority. Absent clear evidence of grossly arbitrary or capricious action on the part of either or both of them ... it is not for the courts to say whether or not the actions taken were justified in the public interest, particularly where it vitally concerned the operation and stability of the nation’s banking system.” Huntington Towers, 559 F.2d at 868.

The FDIC’s discretion in electing between liquidation of an insolvent bank and executing a purchase and assumption agreement is manifest in the Federal Reserve Act, 12 U.S.C. § 1823(c). While some courts have identified policy advantages from purchase and assumption transactions rather than liquidations (Gunter v. Hutcheson, 492 F.Supp. 546 (N.D.Ga.1980) aff’d 674 F.2d 862, 865-66 (11th Cir.1982)), none have declared the FDIC liable for choosing one course of action over another. Washington Federal Savings & Loan Asso. v. Federal Home Loan Bank Bd., 526 F.Supp. 343, 401-02 (N.D.Ohio 1981). In fact, analogous claims of wrongful liquidations and receiverships of savings and loan associations have been rejected, based on the discretionary function exception. First Federal Savings and Loan Assn., 531 F.Supp. 251, 254-55 (D.Hawaii 1981), Newberg v. Federal Savings and Loan Insurance Corp., 317 F.Supp. 1104 (N.D. Ill.1970).

As the Supreme Court explained in Dalehite v. United States:

“the ‘discretion’ protected by (the Tort Claims exception) ... is the discretion of the executive or administrator to act according to one’s judgment of the best course ... It also includes determinations made by executives or administrators in establishing plans, specifications or schedules of operations. Where there is room for policy judgment and decision, there is room for discretion.” 346 U.S. at 34-36, 73 S.Ct. at 967-968.

The decision to liquidate Penn Square may have been unpopular; but in any event it was a discretionary governmental function within the meaning of § 2680(a). Accordingly, the government’s liability is barred by the Act as to Counts III and IV and they are dismissed.

Bank Examination

Counts I and II

Peat complains that the Comptroller’s examinations and reports of the Bank’s financial situation were negligent and misleading; that Peat based its audit on the Comptroller’s misinformation; and therefore that the Comptroller is liable to Peat, either for the damages which Peat may be found owing to the Bank’s shareholders or for Peat’s costs of defense (if the Receiver’s suit is unsuccessful). Without regard to Peat’s rather tenuous theory of causation, we find that these counts do not state a claim for relief.

The FDIC, in exercising it’s statutory mission to administer the federal deposit insurance fund, is authorized to appoint and assign bank examiners who “shall have (the) power to make a special examination of any ... national bank ... whenever in the judgment of the (FDIC’s) Board of Directors such special examination is necessary to determine the condition of any such bank for insurance purposes.” 12 U.S.C. § 1820(b). The Comptroller reports the examiners’ findings to the examined bank. Peat claims that the Comptroller expected Penn Square’s directors to publicize the reports to Peat and knew, or should have known, that Peat would rely upon them.

Federal regulations concerning the Comptroller’s reports state that:

“The Comptroller of the Currency makes available to each national bank and, in some cases to holding companies thereof, a copy of the report of examination of such bank or company. The report of examination is the property of the Comptroller and is loaned to the bank or holding company for its confidential use only. Under no circumstances shall the bank or holding company or any director, officer or employee thereof make public or disclose in any manner the report of examination or any portion of the contents thereof to any person or organization not officially connected with the bank as officer, director, employee, attorney, auditor or independent auditor. Any other disclosure or use of this report except as expressly permitted by the Comptroller of the Currency may be subject to the penalties provided in 18 U.S.C. § 641.” 12 CFR § 4.19(c).

Presumably, Peat is claiming “independent auditor” status entitling it to receive the Comptroller’s reports on Penn Square. It is one thing to receive reports, however, and quite another to rely on them. In essence, Peat is claiming that its license for receipt was an excuse for reliance. FDIC counters that Peat had a professional duty to conduct its audit without relying on the Comptroller’s findings.

Regardless of the arguable aspect of causation and reliance, Peat’s theory of liability vis-a-vis the government is defective because it is premised on a non-existent duty. The FDIC and the Comptroller, in their governmental functions, had no obligation to Peat, the Bank’s privately retained auditors. Indeed, some courts have found that the FDIC, in examining a bank, has no duty to the Bank’s directors or holding company (In re Southern Industrial Banking Corp. v. Tennessee, 49 B.R. 811 (Bkry.E.D.Tenn.1985); Emch v. U.S., supra), and some courts have held that the agency’s allegiance is owed solely to maintaining the fiscal integrity of its deposit insurance fund. In re: Franklin Nation al Bank Securities Litigation, 445 F.Supp. 723, 730-31 (E.D.N.Y.1978); supp. op. 449 F.Supp. 574 (E.D.N.Y.1978); First State Bank of Hudson Co. v. U.S., 599 F.2d 558 (3d Cir.1979).

As articulated by the Third Circuit,

“The purpose of the bank examinations by the FDIC under 12 U.S.C. § 1820(b) is to prevent losses that would result in claims against the insurance fund. Nothing in the Act purports to establish any duty requiring that the FDIC warn banks of irregularities perpetrated by their officials. When the FDIC carried out its responsibilities under the Act by examining the Bank, its purpose was to safeguard this system of insurance ... The FDIC was not acting for the benefit of the Bank or even of the Bank’s depositors and other creditors. If bank examinations by the FDIC reveal any irregularities or fraud, such examinations, though they may inure incidentally to the benefit of a bank, are intended primarily for the protection of the insurance fund.” First State Bank of Hudson Co., 599 F.2d at 563, see also 565.

In Emch v. United States, the plaintiff was a stockowner in the holding company of an insolvent national bank. He sued the Comptroller and the FDIC, claiming that bank examinations had been performed negligently and that as a result of the examiners’ failure to take proper and adequate measures to correct the bank’s deficiencies, the value of holding company’s stock became worthless. Finding that “the essence of the claims is the allegation of negligent performance of regulatory and statutory supervision or monitoring of the bank entities,” the Seventh Circuit held that such claims “cannot be sustained in light of the provisions of section 2680(a).” 630 F.2d at 528. The Circuit also held that:

“Attempt(s) to saddle the government with liability on the basis of its failure, in the course of statutory regulatory activities, to anticipate the financial difficulties of (the) Bank, to insure the honesty and competency of its officers, and to successfully prevent the losses to (the Bank’s) shareholders” were “claims of the type which sec. 2680(a) was designed to preclude.” 630 F.2d at 528-29.

Peat’s case against the government falters on its threshold assumption that the Comptroller’s and FDIC’s statutory duties embrace common law tort concepts of foreseeable reliance by third parties, i.e. bank auditors. This theory is defective for two reasons: first, as discussed above, 28 U.S.C. § 2680(a) and (h) supplant common law tort theories by expressly negating the government’s liability for discretionary functions or misrepresentations. Second, the statutory scheme for deposit insurance and bank examinations does not create a governmental duty to a national bank’s independent auditors. Conceptually, these two reasons are different: one goes to the absence of duty while the other goes to a bar against recovery. In this ease, however, their impact is the same: assuming, arguendo, that Peat in fact relied on the Comptroller’s reports and examinations, this reliance was misplaced and did not give rise to compensable injuries.

Peat stands in the same shoes as the rest of the general public, which has no basis in law to recover against the FDIC or Comptroller for failing to publicly disclose a bank’s deteriorating financial condition. Davis v. Federal Deposit Insurance Corp., 369 F.Supp. 277, 280 (D.Colo.1974). Since there was no duty of disclosure to Peat or to the public and since recovery against the government is barred in any event, supra, the third party claims in Counts I and II are not actionable. Davis v. Federal Deposit Insurance Corp.

CONCLUSION

The government’s motion is granted and the third party action by Peat, Marwick, Mitchell & Co. against the United States is dismissed.

The United States’ motion for a protective order is hereby rendered MOOT. If Peat, Marwick, Mitchell & Co. intend to pursue the documents previously requested from the United States, they must do so by subpoena prior to the discovery cut-off date of September 1, 1985.