author: DAVID S. NELSON, District Judge.

text:
    KDT INDUSTRIES, INC., Plaintiff, v. The HOME INSURANCE COMPANY, Defendant.
    Civ. A. No. 81-2105-N.
    United States District Court, D. Massachusetts.
    Feb. 14, 1985.
    Daniel C. Sacco, Ronald B. Schwartz, Goulston & Storrs, Boston, Mass., for plaintiff.

      J. Owen Todd, Hale & Dorr, Boston, Mass., for defendant.
   MEMORANDUM AND ORDER

DAVID S. NELSON, District Judge.

This is an action commenced by plaintiff KDT Industries, Inc. (KDT), to recover sums allegedly due under a Directors and Officers Liability Policy (D & O policy) issued by defendant The Home Insurance Company (Home). Plaintiff alleges that coverage is afforded by Home’s policy for claims asserted against plaintiff’s directors and officers in two lawsuits brought by KDT stockholders. Defendant refused to honor the claims on the ground that the D & 0 policy expressly excluded from coverage the two suits brought against the KDT directors and officers. Accordingly, defendant Home has moved to dismiss the complaint for failure to state a claim upon which relief can be granted. Fed.R.Civ.P. 12(b)(6). Plaintiff KDT has opposed the motion and moved for summary judgment. Inasmuch as Home’s motion to dismiss relies on matters not contained in the pleadings, it is not properly a motion pursuant to Rule 12(b)(6) and must be treated as a cross-motion for summary judgment. Fed.R.Civ.P. 12(c).

I agree with the parties that this matter is appropriate, for summary judgment, as the submissions disclose no disputed issue of fact which is both genuine and material. Hahn v. Sargent, 523 F.2d 461, 464 (1st Cir.1975), cert, denied, 425 U.S. 904, 96 S. Ct. 1495, 47 L.Ed.2d 754 (1976). The primary issue before this Court is the legal interpretation of the insurance contract between the parties. For the following reasons, I find that summary judgment must enter for the plaintiff, KDT.

1. Facts

The undisputed facts reveal that from January 1, 1975, through December 31, 1981, KDT (through its predecessor King’s Department Stores, Inc., which was renamed KDT on June 4,1981, and which will be referred to as KDT throughout this memorandum) bought five D & 0 policies from Home. The 1978, 1979, 1980, and 1981 policies each had limits of five million dollars and excluded certain specified items from coverage.

Home bases its denial of coverage on an endorsement which states:

“In consideration of the premium charged, it is agreed that the Insurers shall not be liable to make payment for loss in connection Officers/Insureds directly or indirectly arising from any attempt to gain control or from any gaining of control of the Company or any claim made by any minority stockholder of the Company.
It is further agreed that in the event that control of the Company is acquired by any corporation, person or group of persons by merger, consolidation, acquisition of stock or assets or otherwise, this policy shall exclude any claim made by or in the right of any such corporation, person or group of persons.
The word ‘control’ as used herein should be defined as in the regulations issues by the S.E.C. under the S.E.C. Act of 1933.”

The endorsement was added to the 1978 policy under the following circumstances. When the 1977 policy came up for renewal, KDT’s insurance broker, Paul MacEachern, obtained two 10-day extensions. For some reason, KDT failed to renew the policy within the extended policy period and coverage lapsed. During the lapse in coverage, in January, 1978, W.R. Grace & Company (Grace) announced that it was considering acquiring control of KDT. After KDT completed its application for the policy’s renewal, Home’s underwriter, Peter Wood, informed MacEachern that he would not renew the policy unless it excluded coverage for any claims attributable to the so-called “Grace situation.” MacEachern told F. Walter Erich, the KDT officer in charge of insurance, that “[KDT] essentially had no choice but to accept Home’s terms and conditions” because “it would have been impossible to obtain alternative coverage on such short notice. (MacEachern Affidavit, ¶ 3). Erich agreed, on behalf of KDT, to accept the endorsement to the 1978 policy. Indeed, the identical endorsement appears in the 1979 and 1980 policies as well. Moreover, the premiums due in these policy periods were higher than the premiums that KDT had paid in the years from 1975 through 1977. (Erich Affidavit, ¶¶ 2, 6).

It seems reasonable to assume, therefore, that Home’s primary concern during the period 1978 through 1980 was with the increased risk of takeover attempts and the attendant expensive litigation. Defendant’s own submissions support this assumption:

“On or about January 24, 1978,1 learned from an article on that date in the Wall Street Journal that W.R. Grace & Co. was considering acquiring a controlling position in [KDT]....” “In my experience as an underwriter for directors and officers liability insurance, a situation involving a possible ‘takeover’ of one company by another company often leads to claims being made against directors and officers, including claims by minority shareholders. It was also my experience that if a company was a takeover target for one company, it might also be a target for other companies and that when a company is taken over, its entire character might change, leading to additional exposure to litigation by minority stockholders, the probability of which I, as an underwriter, could not anticipate in quoting premium terms. Consequently, I decided that I would not write a new policy without excluding litigation arising from claims of the type that might arise from an attempt to control [KDT] or litigation arising from claims by minority shareholders ....

(Wood Affidavit, ¶¶ 9, 11).

When I wrote the 1979 policy, I included, as Endorsement 7 to the 1979 policy, language identical to that which had been included by Peter D. Wood as Endorsement 8 to the 1978 policy.... because I was not satisfied that there would be no further efforts to acquire [KDT]. During the negotiations for the 1980 policy, it came to my attention that Cornwall Equities Ltd. was attempting to gain control of [KDT]. Consequently, I again included the language of Endorsement No. 7 to the 1979 Policy as Endorsement No. 6 to the 1980 Policy....”

(Bowers Affidavit, ¶ 6).

II. The Underlying Litigation

In December, 1979, the three founders of KDT announced their intention to sell their stock to Cornwall Equities Ltd. (Cornwall), a company that was also in the discount department store field. Cornwall was wholly-owned by Sol Kittay. After the sale, Kittay became chairman of KDT.

Shortly after the contemplated stock sale was announced, Esther Okun, a KDT minority stockholder, commenced a derivative action in Delaware Chancery Court, Okun v. Cornwall Equities, Ltd., (C.A. No. 6052) (Okun I). Mrs. Okun filed the suit on behalf of the corporation, naming the three founders, Cornwall, and KDT as defendants. The complaint alleged that the founders, who also happened to be directors of KDT, received a “control premium” when they sold their stock to Cornwall for an inflated price, together with additional consideration in the form of consulting contracts. Such a transaction, the complaint further alleged, amounted to an unfair sale of control, and thereby, a breach of the directors’ fiduciary duties. When KDT made a claim under the Home policy for its defense of the Okun I litigation, Home denied the claim on the grounds that it was expressly excluded by endorsement.

In the spring of 1980, the new KDT board decided to explore the feasibility of acquiring substantially all of the assets of Cornwall. Since Sol Kittay was the sole stockholder of Cornwall, a committee of three independent directors, one of whom had been the author of the acquisition proposal, was appointed to study the transaction. The three had all been directors of KDT for years before the Cornwall takeover and neither had any connection with Cornwall. That committee unanimously recommended that KDT proceed with the transaction. Subsequently, both the board (Kittay did not vote) and the KDT stockholders approved it.

Despite corporate approval of the transaction, in August, 1980, Sidney Wayne, another KDT minority stockholder, commenced a derivative action in Delaware Chancery Court, Wayne v. Cornwall Equities, Ltd. (C.A. No. 6258) (Wayne). Later, in October, 1980, Esther Okun renewed her battle with Cornwall and filed another derivative action in the chancery court, in which she made allegations substantially identical to those made in the Wayne suit, Okun v. Cornwall Equities, Ltd. (C.A. No. 6285) (Okun II). Those allegations were that the directors and officers of KDT had breached their fiduciary duties in permitting Cornwall to exercise its control and thereby cause KDT to agree to purchase substantially all of Cornwall’s assets. In addition, the Complaints alleged that the agreement was not entered into in good faith or achieved as a result of arms-length bargaining between KDT and Cornwall; was a self-dealing transaction between the corporation and its controlling sharehblder, Cornwall; was at a grossly excessive purchase price; was a waste of KDT’s assets; and served no legitimate corporate purpose. In short, Mr. Wayne and Ms. Okun claimed that KDT either should not have acquired the Cornwall assets or should have paid less for them. The Delaware Chancellor concluded that the underlying lawsuits were self-dealing cases:

As I see it, the plaintiffs’ case is based chiefly on a charge of self-dealing. Their charge of self-dealing is premised on their accusation that Cornwall, and thus the defendant, Kittay, are in control of [KDT’s] board of directors. This latter conclusion is based primarily on three factors, as best I can tell.
First, Cornwall acquired its stock interest in King’s by purchasing the stock of three former officers and directors of [KDT] who were themselves running and controlling the corporation at the time. Second, that Kittay himself as the sole owner of Cornwall, is also the chairman of the board and, I gather, chief executive officer of [KDT] at the present time. Third, that immediately upon Cornwall’s acquisition of its stock interest in [KDT] the three former officers and directors resigned, and [KDT’s] board was enlarged from 10 to 12, and seven of the 12 resulting directors, including Kittay, were named or recommended to the board by Cornwall.
Other factors occurring subsequently during the formulation of the contract in issue are said by the plaintiffs to substantiate and reinforce their conclusion that Kittay through Cornwall is in domination and control of King’s board, and that as a consequence, Cornwall, being the seller of the assets which [KDT] has agreed to buy, stands on both sides of the transaction.
The plaintiff’s theory of the case relies on this basic premise, as I see it, to remove the transaction from the realm of the business judgment of the [KDT] board of directors, and to place it in a posture where the legal burden is upon Cornwall to come forward and establish the fairness of the transaction to [KDT].
Plaintiffs then take the position that Cornwall cannot do this, and their proof is that when in 1978 the defendant, Kittay, through the tender offer merger process obtained all the outstanding shares of Cornwall, he did so on the basis of Cornwall having a shareholder equity of some $18,000,000. Under the proposed transaction here, [KDT] is to acquire all of Cornwall’s operating assets comprised mainly of 108 Franklin Specialty Stores and 63 Barkers Discount Department Stores for some $30,000,000. In addition, [KDT] is said to be assuming a $15,000,000 Cornwall obligation which was incurred so as to enable Cornwall to purchase its stock interest in [KDT] while Cornwall is at the same time retaining its stock ownership in [KDT].
From this the plaintiffs urge that they have made a sufficient preliminary showing that the price being paid by [KDT] is excessive since Kittay through Cornwall is receiving almost double what it cost him to acquire Cornwall only two years ago in addition to which [KDT] is picking up Cornwall’s tab for acquiring its stock interest in [KDT].
The trouble I have with this at this point is that the strength of the plaintiff’s showing, as I see it, as to the comparative values of Cornwall’s assets is dependent upon their showing that Cornwall is in control [KDT], or is dominating its board. Otherwise, it seems to me their argument is one lodged against the business judgment of the [KDT] board as to what the value of Cornwall assets are to [KDT] under present business conditions. In such event, the normal presumption of good faith to which a board of directors is entitled would seem to militate against the entry of a preliminary injunction, at least at this point.

Wayne v. Cornwall Equities Ltd., No. 6258, slip op. at 3-6, (Del.Ch. Oct. 5, 1980).

The Wayne and Okun II lawsuits prompted KDT to file another claim for reimbursement under its policy with Home. In response, Home took the position that these lawsuits did not differ from Okun I and denied coverage for the same reasons that it had for losses incurred in the earlier lawsuit.

The resolution of this action, therefore, depends both upon a characterization of the underlying litigation and upon an interpretation of the insurance endorsement.

III. Summary of Arguments

Plaintiff KDT argues that the underlying litigation arises out of a sale of assets and not out of any attempt to gain control of the corporation. Thus, Wayne and Okun II were typical self-dealing cases, in which the challenge was to a transaction that was, allegedly, beneficial to the controlling stockholders, but detrimental to the corporation: “The gravamen of the 1980 lawsuits is the fairness of the transactions; the gaining of control is simply not an element of the plaintiffs’ claim.” (KDT’s Memorandum in Opposition to Defendant’s Motion to Dismiss and in Support of KDT’s Motion for Summary Judgment, at 11) (hereinafter, KDT’s Memo). Plaintiff further argues that the two cases challenged the “acquisition of assets,.... and did not have any effect whatsoever on the control of [KDT],” to support its position that the underlying lawsuits were simply self-dealing cases, and therefore, would not be barred by the “control” portion of the endorsement. (Erich Affidavit, ¶ 7).

Moreover, in plaintiff’s view, the “minority stockholder” portion of the endorsement does not bar coverage of the Wayne and Okun II suits. That portion of the endorsement applies to “any claim made by any minority stockholder of the Company.” KDT takes a narrow view of the provision in arguing that it should not apply to all minority stockholder suits. Rather, the argument goes, the bar against minority suits applies only to those aimed at “any attempt to gain control or from any gaining of control.”

In short, the plaintiff would have the Court construe the endorsement so as to bar only those cases, including those brought by minority shareholders, which are aimed at either attempts to gain or the actual gaining of control.

Defendant Home, on the other hand, contends that the Wayne and Okun II lawsuits fall within the terms of the endorsement for various reasons. First of all, Home points to the specific allegations of the complaints. But for the additional charges that Kittay and the directors used positions of control to cause the corporation to purchase the Cornwall assets at an inflated price, those allegations are identical to the ones in Okun I, which, both parties agree, is barred. In Home’s view, the additional allegations are insufficient to change the nature of the action from a dispute about “control” to a dispute about the sale of assets.

Secondly, the defendant relies upon the opinion of the Delaware Chancery Court. Since the Chancellor’s denial of preliminary injunctive relief was clearly based upon the plaintiffs’ failure to demonstrate control sufficient to support their allegation of self-dealing, Home argues that the Wayne and Okun II lawsuits were “control” cases.

Also, even if the lawsuits cannot be characterized as “control” cases in their entirety, the defendant suggests, the fact that the complaints raised the issue of control invokes endorsement provision. The endorsement applies because it encompasses cases which arise both directly and indirectly from disputes over control of KDT.

Finally, Home points out that both Sidney Wayne and Esther Okun were minority stockholders. The plain and unambiguous language of the endorsement, defendant argues, bars any suit by a minority stockholder, whether or not that stockholder’s suit raises the issue of control.

Thus, Home would have the Court interpret the endorsement very broadly. That interpretation would bar claims based upon suits which directly challenge the effort to gain control of the company. Likewise, it seems that the interpretation would extend the endorsement to suits in which control of the company is an issue, albeit, not a primary one. Finally, suits by minority stockholders, even if control is not an issue, would also be excluded under this interpretation.

IV. Discussion

The Court of Appeals for the First Circuit recently prescribed the methodology to be followed in interpreting insurance contracts. In Eagle-Picher Ind., Inc. v. Liberty Mut. Ins., 682 F.2d 12 (1st Cir.1982), cert. denied, 460 U.S. 1028-29, 103 S.Ct. 1279-80, 75 L.Ed.2d 500 (1983), the Court stated:

Insurance policies are generally interpreted in the same way as other contracts. In construing the policies at issue, [the] dominant purpose is to give effect to the intentions of the parties. Where the relevant language is unambiguous and the application of the policy to the relevant facts is clear, that intent must be ascertained by the plain and ordinary meaning of the contract language. Where, however, the policy terms are ambiguous and the coverage issue is reasonably disputed, a court may consider extrinsic evidence of the surrounding circumstances and of the parties’ intent. For example, evidence of the construction given to the language by the parties and of the customary usage of persons in the same commercial setting is normally admissible. If the meaning of the policy terms remains unclear, the policy is generally construed in favor of the insured in order to promote the policy’s objective of providing coverage. (footnote and citations omitted).

682 F.2d at 17.

This approach reflects the more general rule that exclusionary provisions in insurance policies are to be strictly construed. See generally, Duggan v. Travelers Indem. Co., 383 F.2d 871 (1st Cir.1967) (Massachusetts law); Howard, Weil, Labouisse, Friedrichs, Inc. v. Insurance Co. of North America, 557 F.2d 1055 (5th Cir. 1977) (Louisiana law); Sears, Roebuck and Co. v. Reliance Ins. Co., 654 F.2d 494 (7th Cir.1981) (Illinois law); Insurance Co. of North America v. Howard, 679 F.2d 147 (9th Cir.1982) (Oregon law).

The endorsement at issue in this case is ambiguous in the first instance, not because of the terms used, but because of the way that it is written. The provision begins and ends with references to claims made in connection with the acquisition of control of the company. Somewhere in the middle, however, the defendant inserted a reference to claims made by minority stockholders, and at least on the face of the endorsement, made no effort to disconnect the latter reference from the remainder of the provision. What the defendant left us with is an endorsement, which, in the main, purports to exclude claims based upon the acquisition of control.

Had the defendant intended, as it now contends, to exclude all minority stockholder claims, whether or not based upon control, then it would have been more reasonable, and indeed more precise, to place the minority stockholder exclusion in its own separate endorsement. Such a distinction was warranted because of the rule that insurers are required to express exclusions clearly, specifically, and unequivocally.

Furthermore, a distinction is necessary in light of the difference in corporations literature between a minority stockholder suit and derivative suit, both of which are likely to involve claims by minority stockholders. The law of corporations recognizes two types of stockholder suits: those in which the stockholder sues to enforce an individual claim, and those in which the stockholder sues, as a representative, to enforce a claim belonging to the corporation which the corporation has not enforced itself because the management is unwilling.

The latter is commonly called a “derivative” suit,- since the stockholder derives his claim from the corporation. For example, he has no individual legal right to recover the reduction in value of his shares due to directors’ misconduct or mismanagement, since the directors’ fiduciary obligations are not normally to the stockholder but to the corporation. Consequently, such rights must be enforced by derivative proceedings in the corporation’s behalf, unless there is direct fraud on or misrepresentation to the stockholder as an individual by the directors, in which case there may be a personal right of action. The common name for personal actions is “minority stockholder’s suits.”

Given that the essence of the defendant’s endorsement is “control”, and further, that the words “minority stockholder claims” are in no way segregated or specifically defined, I find that the exclusion does not extend to all such claims. Rather, only those claims by minority stockholders — whether individually or derivatively made — arising from the acquisition of control are excluded from coverage under the policy.

Inasmuch as I have concluded that “control” is the essence of the endorsement, it is important to address the significance of the words “directly or indirectly” as used therein. The defendant has argued that the effect of these words is to exclude cases in which the acquisition of control is directly in issue, and cases in which the issue arises, perhaps, only incidentally. While I agree with the first part of defendant’s argument, the second is troubling. It suggests that if a person gained control of KDT, and at some later point exercised that control to the detriment of the company, then a stockholder suit challenging the detrimental exercise of control would arise indirectly from the gaining of control and would be barred. This Court cannot approve such a sweeping interpretation. As used in the endorsement, the word “indirectly” is vague and ambiguous, and as a result, the insurer now seeks to “indirectly” broaden the reach of the endorsement. To do so would render the policy a nullity, for KDT would have paid substantial premiums for insubstantial coverage. Under the circumstances, a limiting construction of the provision is required.

It is no longer debated that majority controlling stockholders are fiduciaries. As such, they may not use their control for ulterior purposes adverse to the interests of the corporation or the minority stockholders. In the context of sales of stock, this rule translates into the view that, in most instances, these stockholders may sell their shares and control without liability for secret profits. As fiduciaries, however they may not transfer control under circumstances in which it would be reasonable to assume that the buyer will harm the corporation or its stockholders. These circumstances, generally referred to as “looting”, arise where it is apparent that the buyer intends to raid the corporate treasury, commit fraud upon the corporation after acquiring control, or implement business policies which would harm the corporation or its stockholders.

The “control premium” and “looting” cases provide reasonable guidelines for construing the phrase, “directly or indirectly arising from any attempt to gain control or the gaining of control of the Company,” as it appears in the policy endorsement at issue in the instant case. In particular, the “looting” cases strike a balance between Home’s argument that the mere exercise of control invokes the endorsement, and KDT's argument that once control is acquired, the endorsement’s bar is rendered inoperative. The typical “looting” case can be viewed as a situation in which the buyers allegedly have sought to acquire control for the very purpose of subsequently exercising that control so as to harm the corporation or stockholders. This view of “looting” cases is analogous to the undisputed intent of the parties here. That intent was to exclude coverage of claims arising from the tender offer or “Grace situation.” This situation has more to do with the price of shares or the immediate results of the takeover than with subsequent, unrelated exercise of control once acquired.

In light of this limiting construction, the question now becomes how to characterize the underlying litigation. This is not a difficult task since the Delaware Chancery Court found, and the parties agree that Wayne and Okun II were self-dealing cases. The complaints do not allege anything in the nature of a conspiracy to “loot” or waste KDT’s assets once control of the corporation passed to Sol Kittay and Cornwall. Rather, the primary allegation contained in the complaints is that the corporation was paying too high a price for the Cornwall assets. The Court assumes that the plaintiffs below would have been upset about this particular sale of assets even if there had been no preceding takeover. Furthermore, it seems unlikely that Mr. Wayne and Ms. Okun would have complained if the assets had been properly valued.

As the Delaware Chancery Court explained, in a self-dealing case, the primary issue is the fairness of the transaction. The burden is on the plaintiff to prove that one having a fiduciary relationship with the corporation stood on both sides of the transaction. In the Wayne and Okun II suits, plaintiffs had the initial burden of establishing, therefore, that the defendant held controlling influence of the corporation. The fiduciaries then had the burden of demonstrating that the Cornwall transaction was scrupulously fair. Their liability, of course, hinged on the fairness of the challenged transaction. Although control was an issue, it was only incidental in that it constituted an element of the plaintiffs burden.

Having found that the endorsement provision, strictly construed, does not exclude coverage for claims arising from the Wayne and Okun II lawsuits, summary judgment must enter for the plaintiff KDT.

SO ORDERED.

      . KDT, a Delaware corporation, is permitted by Del.Gen.Corp.L. § 145 to indemnify its directors and officers for any expenses, including attorney’s fees, incurred in defense of an action. The corporation may pay those expenses before the termination of the action and may purchase insurance from which it, in turn, is reimbursed.

      . 17 C.F.R. § 230.405(f) defines “control” as "the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a person, whether through the ownership of voting securities, by contract, or otherwise.”

      . See also, Reply Memorandum of the Defendant The Home Insurance Company, at 9:
      The “Grace situation” was, of course, a matter in the distant past by the time the claims which are the subject of this action were made under the 1979 or 1980 policy.... Nonetheless, the endorsement was attached to both, the 1979 and 1980 policies because of Homes continuing concern with the take-over attempts....

      . Although stockholder derivative actions are brought on behalf of the corporation, the corporation is usually a nominal defendant. See infra, Part IV.

      . The allegations as well as the defendants in the two actions were substantially identical. Named defendants included Cornwall, Kittay, and all but one of KDT’s directors. Of course the corporation itself was a nominal defendant, but the three founders of KDT were not named at all.

      . It should be noted that KDT eventually settled the Wayne and Okun II consolidated actions. As a result, the "control” issue was never tried.

      . See generally, Wilson v. Insurance Co. of North America, 453 F.Supp. 732 (N.D.Cal.1978); Ryder Truck Rental, Inc. v. St. Paul Fire & Marine Ins. Co., 540 F.Supp. 66 (D.Ga.1982); Garman v. New York Life Ins. Co., 501 F.Supp. 51 (D.Ill. 1980); Henning v. Metropolitan Life Ins. Co., 546 F.Supp. 442 (D.Pa.1982); River Services Co. v. Hartford Acc. & Indem. Co., 449 F.Supp. 622 (D.Ohio 1977).

      . 12 Fletcher, Cyclopedia Corporations §§ 5900-5914 (1980 ed.).

      . Id.

      . “Usually the controlling interest in a corporation is transferable at a premium, in the sense that the buyer is willing to pay more on a per-share basis than he would be willing to pay if the shares were not part of the controlling block.” Hill, The Sale of Controlling Shares, 70 Harv.L.Rev. 986 (1957). The article examines some leading sale of control cases, with particular emphasis on those which have held that the secret profit, or control premium, is a corporate asset that belongs to all stockholders. In these cases, courts have allowed the corporation, and indirectly, minority stockholders, to share in the premium or collect damages.

      . See generally, Fletcher, at §§ 5805, 5811.

      . See id.

      . See generally, cases cited at Fletcher, § 5805.


source: Caselaw Access Project

author: CARROLL, District Judge.

license: Public Domain

text:
    ACORN and Liz Wolff, Plaintiffs, v. CITY OF PHOENIX and the Chief of Police of the City of Phoenix, Defendants.
    No. CIV 83-870 PHX EHC.
    United States District Court, D. Arizona.
    Feb. 15, 1985.

      Stephen R. Bachmann, Bachmann & Weltchek, New Orleans, La., for plaintiffs.
    Richard J. Graci, City of Phoenix, Asst. City Atty., Phoenix, Ariz., for defendants.
   ORDER

CARROLL, District Judge.

The Court held a one-day trial in the above-captioned matter on February 5, 1985. After consideration of the testimony, exhibits and all memoranda submitted by the parties, the Court finds in favor of the Defendants for the reasons more fully discussed below.

Members of the non-profit association, ACORN, engage in a fund raising activity known as “tagging”. This entails members approaching cars stopped at traffic lights in intersections to solicit donations and to provide information in the form of a leaflet. The City of Phoenix has prohibited ACORN members from engaging in tagging activity.

At the time the Court denied cross Motions for Summary Judgment on March 12, 1984, there was no specific ordinance dealing with the tagging activity. Prior to trial, on May 9, 1984, the City of Phoenix adopted an ordinance (P.C.C. § 36-101.01) which states:

No person shall stand on a street or highway and solicit, or attempt to solicit, employment, business or contributions from the occupant of any vehicle.

At issue is whether this ordinance meets constitutional standards.

Plaintiffs (hereinafter collectively referred to as ACORN) rely heavily on U.S. Supreme Court cases which they argue explicitly hold that a “street” is a public forum, and that such holdings implicitly include an intersection. Members of the City Council v. Taxpayers for Vincent, — U.S. —, 104 S.Ct. 2118, 80 L.Ed.2d 772 (1984); Perry Education Assn. v. Perry Local Educators’ Assn., 460 U.S. 37, 103 S.Ct. 948, 74 L.Ed.2d 794 (1983); United States v. Grace, 461 U.S. 171, 103 S.Ct. 1702, 1706-07, 75 L.Ed.2d 736 (1983); Carey v. Brown, 447 U.S. 455, 460, 100 S.Ct. 2286, 2289, 65 L.Ed.2d 263 (1980); Hague v. C.I.O., 307 U.S. 496, 515, 59 S.Ct. 954, 963, 83 L.Ed. 1423 (1939). Admittedly, the Supreme Court has not directly addressed the question of whether an intersection is a public forum. The cases cited above by ACORN refer to “streets” as public forums, typically in the context of sidewalks and other locales traditionally reserved for public communication. It seems clear, however, that the reasoning and language of the relevant opinions lead to the logical conclusion that the term “streets” cannot be automatically extended to include traffic intersections.

Indeed, the only citation ACORN provides that is on point is to an unpublished opinion in ACORN v. The City of New Orleans, 606 F.Supp. 16 (D.La.1984). There the court held that soliciting funds at roadway intersections is protected First Amendment activity in a “traditional public forum.” We cannot agree. Analysis of the pertinent authority is simply to the contrary.

In places which by long tradition or by government fiat have been devoted to assembly and debate, the rights of the state to limit expressive activity are sharply circumscribed. At one end of the spectrum are streets and parks which ‘have immemorially been held in trust for the use of the public, and, time out of mind, have been used for purposes of assembly, communicating thoughts between citizens, and discussing public questions’ ... In these quintessential public forums, the government may not prohibit all communicative activity.
j}: sjt * Jjc * jje
[However] Public property which is not by tradition or designation a forum for public communication is governed by different standards. We have recognized that the ‘First Amendment does not guarantee access to property simply because it is owned or controlled by the government’ ... In addition to time, place, and manner regulations, the state may reserve the forum for its intended purposes, communicative or otherwise, as long as the regulation on speech is reasonable and not an effort to suppress expression merely because public officials oppose the speaker’s view ... As we have stated on several occasions, ‘the State, no less than a private owner of property, has power to preserve the property under its control for the use to which it is lawfully dedicated.’ (emphasis added).

Perry Education Assn. v. Perry Local Educators’ Assn., 103 S.Ct. at 954-55.

Here, the City of Phoenix argues that it does no more than that which Perry permits. Evidence at trial supports the City’s position.

Testimony showed that the essential purpose of a highway or roadway intersection is the movement of vehicular and pedestrian traffic. Clearly, “by long tradition or by government fiat” such areas are not designated as forums for public communication while in use by vehicular traffic. Testimony further demonstrated the reasonableness of the ordinance whereby the City is attempting to prevent any type of distraction, either on medians or adjacent roadways, which could create a safety hazard. Even ACORN’s expert acknowledged that tagging could be considered a distraction. Thus the City can consider traffic safety as a reasonable basis for regulating or prohibiting tagging. See Metromedia, Inc. v. City of San Diego, 453 U.S. 490,101 S.Ct. 2882, 2893, 69 L.Ed.2d 800 (1981). Even requiring the seven conditions suggested by ACORN to minimize the potential safety problems would be an inadequate solution. The evidence still showed that the mere presence of taggers on the roadway or intersection is a potential safety hazard.

Further, testimony demonstrated one other significant factor. No other groups or individuals have been permitted by the City to solicit employment, business or contributions from drivers at intersections. Therefore, the prohibition against tagging is content-neutral in that it is not prohibited “merely because public officials disapprove the speaker’s view.” U.S. Postal Service v. Council of Greenburgh, 453 U.S. 114, 101 S.Ct. 2676, 2687, 69 L.Ed.2d 517 (1981).

Thus, the City’s prohibition against tagging in intersections is both reasonable and content-neutral. Where no public forum is involved these are the only First Amendment challenges to be considered. 101 S.Ct. at 2686 n. 7. Given the safety and traffic considerations, the City has reserved intersections for their intended purposes — movement of vehicular and pedestrian traffic. Under these circumstances, absolute prohibition of tagging in intersections amounts to a permissible regulation.

The City has filed a Motion to Strike ACORN’s argument that the ordinance is unconstitutionally vague and overbroad given it seeks to prohibit tagging everywhere, including purportedly safe locations and sidewalks. The City objects to its consideration because ACORN only first raised this argument in their Pre-Trial Brief Rebutting Defendants’ Pre-Trial Memorandum, and Opposing Defendants’ [second] Motion for Summary Judgment. This issue was not raised in the Pretrial Order.

The Court finds that the City’s motion is well taken. ACORN’s attempt to raise this issue immediately before trial in a pretrial reply brief and after the Pretrial Order is filed is untimely. Further, the Court previously denied the City’s filing on November 16, 1984 of the City’s second Motion for Summary Judgment. It was treated as a Pre-Trial Memorandum instead because it was also untimely filed as a Motion for Summary Judgment. On May 4, 1984, the Court ordered that any further Motions for Summary Judgment must be filed within 60 days. The City waited until November 16, 1984 to file their second Motion for Summary Judgment. Therefore, ACORN’s attempt at this late date to raise new issues in a pretrial reply memorandum is completely untimely.

In any event, there is no evidence to suggest that any activity other than tagging in an intersection was being curtailed as a result of this ordinance. Thus, the ordinance prohibits no more speech than is necessary to accomplish its objective. 104 S.Ct. at 2132.

Accordingly,

IT IS ORDERED that P.C.C. Section 36-101.01 is constitutional as applied to ACORN under the standards enunciated in this Order.

IT IS FURTHER ORDERED granting the City’s Motion to Strike.

       The ordinance at issue here was seemingly modeled after the one at issue in United States Labor Party v. Oremus, 619 F.2d 683 (7th Cir.1980).


author: EARL E. O’CONNOR, Chief Judge.

text:
    Lawrence C. GRAY, Plaintiff, v. CITY OF KANSAS CITY, KANSAS, and Chief Allan P. Meyers, Defendants.
    Civ. A. No. 84-2123.
    United States District Court, D. Kansas.
    Feb. 19, 1985.

      David J. Waxse of the firm of Shook, Hardy & Bacon, Overland Park, Kan., for plaintiff.
    Daniel B. Denk, James R. Goheen, of the firm of McAnany, Van Cleave & Phillips, Kansas City, Kan., for defendants City and Meyers.
    William S. Robbins, Jr., Steve A.J. Bukaty, of the firm of Blake & Uhlig, P.A., Kansas City, Kan., for non-party defendant F.O.P.
   MEMORANDUM AND ORDER

EARL E. O’CONNOR, Chief Judge.

With this Memorandum and Order we return to the issue first raised by defendants City of Kansas City, Kansas, and Chief Allan P. Meyers (the named defendants) in their August 15, 1984, “Motion to Allow Filing of Third Party Complaint or Joinder.” By that motion, the named defendants sought the joinder of Fraternal Order of Police, Lodge No. 4 (F.O.P.) as either a third-party defendant (under Fed. R.Civ.P. 14(a)) or as a primary party defendant (under Fed.R.Civ.P. 19(a)). If Rule 19 joinder were allowed, the named defendants sought to file a cross-claim against F.O.P.

On September 6, 1984, we ordered the joinder of F.O.P. as a third-party defendant. (Docket No. 22) Upon reconsideration, however, we modified that order to provide for the joinder of F.O.P. as a primary party defendant. Order of October 12, 1984. (Docket No. 25) In accordance with our October 12th order, the named defendants filed and served their cross-claim on F.O.P. We considered F.O.P.’s motion to dismiss that cross-claim in our order of December 20, 1984. (Docket No. 42) We concluded therein that, as to plaintiff’s Title VII claim, F.O.P. was not subject to joinder as either a third-party or primary party defendant. Our conclusion was based on the holding in Northwest Airlines, Inc. v. Transport Workers, 451 U.S. 77, 101 S.Ct. 1571, 67 L.Ed.2d 750 (1981), that an employer has no statutory or common law right to contribution from unions bearing partial responsibility for violation of an employee’s Title VII rights. We also asked the parties to brief the issue of whether such a contribution remedy was available as to plaintiff’s 42 U.S.C. §§ 1981 & 1983 claims. Both F.O.P. and the named defendants have submitted memoranda on this issue, and we are now prepared to rule on F.O.P.’s motion to dismiss the cross-claim.

Our analysis of this issue must obviously begin with the Court’s opinion in Northwest Airlines. In holding that an employer has no right to contribution from a union in these circumstances under either Title VII or the Equal Pay Act, the Court noted that such a right

may have been created in either of two ways. First, it may have been created by statute when Congress enacted the Equal Pay Act or Title VII. Even though Congress did not expressly create a contribution remedy, if its intent to do so may fairly be inferred from either or both statutes, an implied cause of action for contribution could be recognized on the basis of the analysis used in cases such as Cort v. Ash, 422 U.S. 66, 95 S.Ct. 2080, 45 L.Ed.2d 26, Cannon v. University of Chicago, 441 U.S. 677, 99 S.Ct. 1946, 60 L.Ed.2d 560, and Universities Research Assn., Inc. v. Coutu, 450 U.S. 754,101 S.Ct. 1451, 67 L.Ed.2d 662. Second, a cause of action for contribution may have become a part of the federal common law through the exercise of judicial power to fashion appropriate remedies for unlawful conduct.

451 U.S. at 90, 101 S.Ct. at 1580. The Court, of course, went on to reject both theories. This Northwest Airlines analysis was applied to section 1981 in Anderson v. Local 3, I.B.E.W., 582 F.Supp. 627, 630-32 (S.D.N.Y.1984). The Anderson court held that contribution was not an available remedy under section 1981. We agree with the analysis of that court and find it equally applicable to section 1983.

Neither statute makes express provision for a contribution remedy. A major factor in determining whether a statute creates an implied cause of action is whether that statute was enacted for the special benefit of a class which includes the party seeking to bring such an action. Northwest Airlines, 451 U.S. at 91-92, 101 S.Ct. at 1580-81. In this case, it cannot possibly be said that these defendants are members of the class for whose special benefit either section 1981 or 1983 was enacted. To the contrary, both statutes are expressly directed against anyone (such as these defendants) accused of the acts alleged in plaintiff’s complaint. Although these statutes are less comprehensive than either Title VII or the Equal Pay Act (a factor cited in Northwest Airlines as tending to negate any implied contribution remedy under those statutes), we attach little weight to this distinction. The federal antitrust laws are at least as skeletal as these civil rights statutes, and yet they have been held to create no implied cause of action for contribution. Texas Industries, Inc. v. Radcliff Materials, Inc., 451 U.S. 630, 101 S.Ct. 2061, 68 L.Ed.2d 500 (1981). Finally, no party has cited any legislative history which would suggest a congressional intent to create a contribution remedy under either of these statutes. Accordingly, we hold that there is no implied right to contribution under 42 U.S.C. §§ 1981 or 1983.

We must thus examine the second theory suggested in Northwest Airlines. That is, is there a federal common law right to contribution under either of these statutes? We begin this inquiry with the proposition that “[a]t common law there was no right to contribution among joint tortfeasors.” Northwest Airlines, 451 U.S. at 86, 101 S.Ct. at 1577-78. Moreover,

absent some congressional authorization to formulate substantive rules of decision, federal common law exists only in such narrow areas as those concerned with the rights and obligations of the United States, interstate and international disputes implicating the conflicting rights of States or our relations with foreign nations, and admiralty cases.

Texas Industries, 451 U.S. at 641, 101 S.Ct. at 2067. The Supreme Court found that none of these “narrow areas” provided authority for it to create a federal common law right to contribution under either Title VII or the Equal Pay Act. Northwest Airlines, 451 U.S. at 98, 101 S.Ct. at 1584. That analysis seems equally applicable to 42 U.S.C. §§ 1981 & 1983.

The named defendants cite the Third Circuit’s decision in Miller v. Apartments & Homes of New Jersey, Inc., 646 F.2d 101 (3d Cir.1981), for the proposition that there is a federal common law right to contribution in federal civil rights suits. Though that case does appear to stand for that proposition, we must disregard it entirely. Miller was decided prior to the Supreme Court’s decisions in Northwest Airlines and Texas Industries. Those subsequent decisions have entirely undermined the Miller analysis. For instance, the Miller court based its decision, in part, on its own holding in Glus v. G.C. Murphy Co., 629 F.2d 248 (3d Cir.1980). Glus held that federal common law does provide a contribution remedy under Title VII. The Miller court went on to say that “[n]othing in this case suggests that a different analysis or a different result should follow in civil rights cases.” 646 F.2d at 107. Given this latter statement, and the subsequent holding in Northwest Airlines, the Third Circuit would apparently now agree with us that federal common law does not provide a contribution remedy in civil rights cases. Moreover, the Miller court cited the Fifth Circuit’s decision in Texas Industries for the proposition that federal courts have fashioned common law contribution principles in anti-trust cases. Although the Fifth Circuit’s result was affirmed by the Supreme Court in Texas Industries, its analysis on this point was rejected. Because these subsequent decisions have rendered the Miller court’s decision fatally defective, we must ignore that court’s holding. Accordingly, the named defendants have no federal common law right to seek contribution from F.O.P. on plaintiff’s 1981 or 1983 claims.

Because sections 1981 and 1983 were enacted in the immediate post-Civil War era, we must consider a statute that was not relevant in either Northwest Airlines or Texas Industries. 42 U.S.C. § 1988 provides, in pertinent part, that

the jurisdiction in civil and criminal matters conferred on the district courts by the provisions of [various post-Civil War statutes, including the present 42 U.S.C. §§ 1981 & 1983], for the protection of all persons in the United States in their civil rights, and for their vindication, shall be exercised and enforced in conformity with the laws of the United States, so far as such laws are suitable to carry the same into effect; but in all cases where they are not adapted to the object, or are deficient in the provisions necessary to furnish suitable remedies and punish offenses against law, the common law, as modified and changed by the constitution and statutes of the State wherein the court having jurisdiction of such civil or criminal came is held, so far as the same is not inconsistent with the Constitution and laws of the United States, shall be extended to and govern the said courts in the trial and disposition of the cause.

(Emphasis added.) Arguably, then, we may also examine the law of Kansas to determine whether the named defendants have a right to seek contribution from F.O.P. on the plaintiff’s section 1981 and 1983 claims. See Sager v. City of Woodland Park, 543 F.Supp. 282, 297 n. 19 (D.Colo.1982) (applying Colorado statutory and common law contribution remedies in section 1983 action); but cf. Moor v. Alameda County, Calif, 411 U.S. 693, 703-04, 93 S.Ct. 1785, 1792-93, 36 L.Ed.2d 596 (1973) (“But we do not believe that the section, without more, was meant to authorize the wholesale importation into federal law of state causes of action.”).

It is clear from the complaint in this case that plaintiff is alleging an intentional tort. Indeed, an employment discrimination action could not be maintained under either of these statutes unless the allegedly wrongful conduct were intentional. General Building Contractor Ass’n v. Pennsylvania, 458 U.S. 375, 102 S.Ct. 3141, 73 L.Ed.2d 835 (1982) (section 1981); Smith v. District of Columbia, 29 FEP Cases 1129, 1132 (D.D.C.1982) (section 1983). Under Kansas law, a distinction is drawn between intentional and negligent torts. Negligent torts are subject to the Kansas comparative fault statute, K.S.A. 60-258(a); but that statute “has done nothing to change the common-law rule of joint and several liability for defendants in intentional tort actions.” Sieben v. Sieben, 231 Kan. 372, 378, 646 P.2d 1036, 1041 (1982). At common law, “there is no right of contribution in favor of any tortfeasor who has intentionally caused the harm.” Restatement (Second) Torts, § 886A(3). See also Prosser, Handbook of the Law of Torts § 50 (4th ed. 1971) (“there is no contribution in favor of those who commit intentional torts”).

The named defendants’ reliance on K.S.A. 60-2413(b) is misplaced. That “limited statutory exception” to “the common law rule of no contribution between joint tortfeasors,” Ellis v. Union Pacific R.R. Co., 231 Kan. 182, 185, 643 P.2d 158, 162 (1982), provides that:

(b) Judgment debtors. A right of contribution or indemnity among judgment debtors, arising out of the payment of the judgment by one or more of them, may be enforced by execution against the property of the judgment debtor from whom contribution or indemnity is sought.

Prior to enactment of the comparative fault statute, the quoted provision was held to permit contribution among joint tortfeasors. See McKinney v. Miller, 204 Kan. 436, 440, 464 P.2d 276, 280 (1970). However, the comparative fault statute has made contribution among non-intentional tortfeasors “no longer necessary.” Kennedy v. City of Sawyer, 228 Kan. 439, 454, 618 P.2d 788, 799 (1980); and K.S.A. 60-2413(b) has never been applied to intentional tortfeasors. If the issue were before them, we believe the Kansas courts would hold that the legislature did not intend by this provision to modify the common law rule against contribution among intentional joint tortfeasors. In any event, the statute applies only where “the party against whom the right to contribution is sought to be enforced was initially sued by the injured part[y] and became a judgment debt- or of [that party].” McKinney, 204 Kan. at 438, 464 P.2d at 278. Because no judgment has yet been obtained in this case, any contribution action would now be premature.

Therefore, even if Kansas law were applicable to this contribution issue, the named defendants could not seek contribution from F.O.P. It then follows that 42 U.S.C. § 1988 would not stay our hand in dismissing this cross-claim.

The named defendants have cited numerous other authorities in opposing this motion to dismiss the cross-claim. We have considered those authorities and have found them to be either irrelevant or incorrect. We agree, for instance, that F.O.P. would be subject to suit by the plaintiff under either of these two statutes. Such an option, however, is irrelevant to the question of contribution. Defendants also cite numerous cases for the proposition that “in situations where potentially liable unions have not been sued, the courts have generally been quite amenable to various devices by which defendant employers bring such unions before the court.” All these cases, however, were decided prior to the Supreme Court’s decision in Northwest Airlines. To the extent they would permit contribution in the situation now before us, such cases are incorrect statements of the law.

As noted above, the named defendants’ original motion was in the alternative — relying on either Fed. R. Civ. P. 14 or 19. Whether obtained by way of a third-party suit or by a cross-claim against a primary party defendant, any money the named defendants might receive from F.O.P. would be “contribution.” Our holding today is thus applicable to either Rule.

IT IS THEREFORE ORDERED that the motion of Fraternal Order of Police, Lodge No. 4, to dismiss the cross-claim filed against it by defendants City of Kansas City, Kansas, and Chief Allan P. Meyers is granted.


author: CLIFFORD SCOTT GREEN, District Judge.

text:
    TEAMSTERS PENSION TRUST FUND OF PHILADELPHIA AND VICINITY and Teamsters Health and Welfare Trust Fund of Philadelphia and Vicinity and Schaffer, Charles J., Jr., v. PHILADELPHIA FRUIT EXCHANGE and Campese, Armand.
    Civ. A. No. 83-4921.
    United States District Court, E.D. Pennsylvania.
    Feb. 20, 1985.
    Stephen F. Ritner, Philadelphia, Pa., for plaintiffs.
    John C. Wright, Jr., Robert M. Goldich, Philadelphia, Pa., for defendants.
   MEMORANDUM

CLIFFORD SCOTT GREEN, District Judge.

This is an action commenced by the plaintiffs, Teamsters Pension Trust Fund of Philadelphia and Vicinity and Teamsters Health and Welfare Trust Fund of Philadelphia and Vicinity (“Pension Fund”, “Welfare Fund” or collectively “Funds”) against Philadelphia Fruit Exchange, Inc. and Armand Campese (“Defendants”) to collect unpaid fringe benefit contributions allegedly due to the Funds from Defendants. Presently pending before this court are cross motions for summary judgment. The issue presented herein is, where it is discovered by audit that an employer has made overpayments to a pension or welfare fund in certain years and it is also discovered in the same audit that the employer has been delinquent to the same fund in certain other years, can that employer, consistent with the Employee Retirement Income Security Act of 1974, as amended, 29 U.S.C. §§ 1001a-1461 (Supp. IV 1980) (“ERISA”), set off the delinquent amounts by the amount overpaid. For the reasons discussed infra, I conclude that the employer cannot. The facts, as stipulated by the parties, are set forth below.

Jurisdiction is based on sections 502 and 515 of ERISA, 29 U.S.C. §§ 1132 and 1145 (Supp. IV 1980), Section 301(a) of the Labor Management Relations Act of 1947, as amended, 29 U.S.C. § 185(a) (Supp. IV 1980) (“LMRA”) and, on Section 9.1(a) and (b) of the Pennsylvania Wage Payment and Collection Law of 1961, as amended, Pa. Stat.Ann. tit. 43 § 260.9a(a) and (b) (Purdon Supp.1984-1985) (“WPCL”).

Plaintiff Pension Fund is a “multiemployer plan” and an “employee benefit plan” within the meaning of subsections 3(2), (3) and (37) of ERISA, 29 U.S.C. § 1002(2), (3) and (37) (Supp. IV 1980). The Pension Fund was established and is maintained pursuant to the provisions of Section 302(c)(5) of the LMRA, 29 U.S.C. § 186(c)(5) (Supp. IV 1980) for the sole and exclusive purpose of providing retirement benefits for eligible employees (and their dependents) who are in collective bargaining units covered by collective bargaining agreements between labor organizations affiliated with the International Brotherhood of Teamsters, Chauffeurs, Warehousemen and Helpers of America (“Teamsters”) and various participating employers.

Plaintiff Welfare Fund is a “multiemployer plan” and an “employee benefit plan” within the meaning of subsections 3(1), (3) and (37) of ERISA, 29 U.S.C. § 1002(1), (3) and (37) (Supp. IV 1980). The Welfare Fund is a trust fund established and maintained pursuant to the provisions of Section 302(c)(5) of the LMRA, 29 U.S.C. § 186(c)(5) (Supp. IV 1980), for the purpose of providing medical, hospitalization and other health benefits to eligible employees (and their dependents) who are in collective bargaining units covered by collective bargaining agreements with labor organizations affiliated with the Teamsters and various participating employers.

This action is brought on behalf of the Funds by Charles J. Schaffer, Jr., the Funds’ Administrator, who is a “fiduciary” as that term is defined in Section 402(a)(2) of ERISA, 29 U.S.C. § 1102(a)(2) (Supp. IV 1980).

Plaintiffs, Pension and Welfare Funds are organizations or parties to whom any type of wages are payable within the meaning of subsections 9.1(a) and (b) of the WPCL, Pa.Stat.Ann. tit. 43 § 260.9a(a) and (b) (Purdon Supp.1984-1985).

Defendant Philadelphia Fruit Exchange, Inc. (“PFE”) at all times relevant hereto was engaged in conduct and/or was doing business in the Commonwealth of Pennsylvania, and continues to engage in conduct and/or do business within the Commonwealth of Pennsylvania, and has employed and continues to employ persons to engage in conduct and do business on behalf of said Defendant, and, as such, is an employer within the meaning of Section 2.1 of the WPCL, Pa.Stat.Ann. tit. 43 § 260.2a (Purdon Supp.1984-1985).

At all times relevant hereto, defendant Philadelphia Fruit Exchange, Inc. was and remains a party to a collective bargaining agreement between itself and Teamsters Local Union No. 929 (“Union”) pursuant to which PFE is obligated to make certain monthly contributions to the plaintiff Pension and Welfare Funds in contractually-designated amounts.

The collective bargaining agreements between PFE and the Union cover the time periods:

(a) July 23, 1976 through July 23, 1979;
(b) July 23, 1979 through July 24, 1982; and,
(c) July 25, 1982 through July 27, 1985.

Defendant Armand Campese was the controller and Vice-president of PFE during the period November 24, 1975 through June 30,1983, and, as such, was an employer within the meaning of section 2.1 of the WPCL, Pa.Stat.Ann. tit. 43 § 260.2a (Purdon Supp.1984-1985).

In or about June, 1983, the Funds conducted a routine randomly-selected field audit of the payroll books and records of PFE for the period of January 1, 1978 through December 31, 1982. The audit revealed unpaid contributions for certain years and overpayments for other years as follows:

DELINQUENCIES
Welfare
1979 $ 16.78
1981 209.38
1982 540.08
Total Unpaid Welfare Contributions $ 766.24
Pension
1980 $ 348.00
1981 442.00
1982 1,536.00
Total Unpaid Pension Contributions $2,326.00
Total Unpaid Welfare & Pension Contributions $3,092,24
OVERPAYMENTS
Welfare
1978 $1,165.98
1980 16.80
Total Welfare Overpayment $1,182.80
Pension
1978 $1,095.00
1979 370.00
Total Pension Overpayment $1,465.00
Total Welfare & Pension Overpayment $2,647.78

The unpaid contributions and overpayments were discovered by the Funds as a result of the audit and were revealed to the defendants when the Funds forwarded copies of the audit to PFE.

The employees listed on the audit are, or were, during the period of time covered by the audit, working in covered employment as defined by the various collective bargaining agreements; and, defendants were obligated to make contributions to the Funds on behalf of said employees. Prior to the conduct of the random audit, the Funds had neither actual nor constructive knowledge of either the unpaid or overpaid contributions.

As noted previously, both plaintiffs and defendants have moved for summary judgment in this case. However, summary judgment cannot be granted unless it can be shown “that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.” Fed.R.Civ.P. 56(c). See Poller v. Columbia Broadcasting System, 368 U.S. 464, 467, 82 S.Ct. 486, 488, 7 L.Ed.2d 458 (1962). After careful consideration of the record in this case, including, but not limited to the stipulation of facts entered into by all parties, I find there to be no genuine dispute of fact. Thus, the critical question to be determined is whether plaintiffs or defendants have shown that they are entitled to judgment as a matter of law. Plaintiffs have so demonstrated, while defendants have not. Accordingly, plaintiffs’ motion will be granted, while defendants’ motion will be denied.

Section 502(a)(3) of ERISA, 29 U.S.C. § 1132(a)(3) (Supp IV 1980) provides in pertinent part that “[a] civil action may be brought by a ... fiduciary to enforce any provision of this subchapter ...” In that same subchapter at section 515, 29 U.S.C. § 1145, ERISA provides:

Delinquent contributions
Every employer who is obligated to make contributions to a multiemployer plan under the terms of the plan or under the terms of a collectively bargained agreement shall, to the extent not inconsistent with law, make such contributions in accordance with the terms and conditions of such plan or such agreement.

Defendants herein have claimed no illegality which would preclude them from making the full contribution to the Funds as required by the collective bargaining agreements in this case. Defendants have in fact stipulated to the validity of the audit which shows, inter alia, certain delinquencies. Thus, defendants have stipulated to behavior which was not in compliance with section 515 of ERISA.

Plaintiffs have brought suit under the above quoted section 502(a)(3) of ERISA to enforce section 515. Since defendants concede, by stipulation, non-compliance with section 515, and plaintiffs seek to enforce section 515, plaintiffs are entitled to judgment as a matter of law as to the delinquent amounts.

Additionally, subsection (g)(2) of section 502 ERISA provides:

In any action under this subchapter by a fiduciary for or on behalf of a plan to enforce [section 515, 24 U.S.C. § 1145,] in which a judgment in favor of the plan is awarded, the court shall award the plan—
(A) the unpaid contributions,
(B) interest on the unpaid contributions,
(C) an amount equal to the greater of—
(i) interest on the unpaid contributions, or
(ii) liquidated damages provided for under the plan in an amount not in excess of 20 percent (or such higher percentage as may be permitted under Federal or State law) of the amount determined by the court under subparagraph (A),
(D) reasonable attorney’s fees and costs of the action, to be paid by the defendant, and
(E) such other legal or equitable relief as the court deems appropriate.
For purposes of this paragraph, interest on unpaid contributions shall be determined by using the rate provided under the plan, or, if none, the rate prescribed under [26 U.S.C. § 6621].

29 U.S.C. § 1132(g)(2) (Supp. IV 1980). Thus, plaintiffs are also entitled to the relief set forth in the above quoted provision as a matter of law.

Moreover, since plaintiffs have also brought suit under the WPCL, they are similarly entitled to judgment as a matter of law as to the unpaid contributions and reasonable attorney’s fees under state law. See Pa.Stat.Ann. tit. 43 §§ 260.3(b) and 260.9a(f) (Purdon Supp.1984-1985). By stipulation, defendant Armand Campese, Controller and Vice-President of defendant PFE, was at all relevant times an employer within the meaning of the WPCL. See Pa.Stat.Ann. tit. 43 § 260.2a (Purdon Supp. 1984-1985). Thus, defendants Campese and PFE are jointly and severally liable under WPCL. See Philadelphia Carpenters Health and Welfare Fund v. Ambrose, 727 F.2d 279, 283 (3d Cir.1983).

Defendants, while conceding statutory violations in the form of unpaid contributions, argue that they are entitled, as a matter of law, to set overpayments made to the Funds in different years against those unpaid contributions. In support of their position, defendants rely on section 403(c)(2)(A) of ERISA, as amended, 29 U.S.C. § 1103(c)(2)(A) (Supp. IV 1980). That section provides in pertinent part that “[i]n the case of a contribution ... made by an employer to a multi-employer plan by mistake of fact or law ... [ERISA] shall not prohibit the return of such contributions ... to the employer...” 29 U.S.C. § 1103 (c)(2)(A) (Supp. IV 1980) (emphasis added).

While the language that defendants rely on may reasonably be read to permit, not require, the return of overpaid contributions, see Crown Cork & Seal v. Teamsters Pension Fund, 549 F.Supp. 307, 311 (E.D. Pa.1982), aff’d mem., 720 F.2d 661 (3d Cir. 1983), it can in no way be read to require the deduction of such overpaid contribution amounts from underpaid contribution amounts which are affirmatively required (by section 515 ERISA) to be paid in full. The language of section 403(c)(2)(A) has been interpreted to allow an action against pension or welfare funds by employees for the return of monies based on an unjust enrichment theory. See e.g. Peckham v. Board of Trustees of the International Brotherhood of Painters, 719 F.2d 1063, 1066 (10th Cir.), reaff’d as modified, 724 F.2d 100 (10th Cir.1983). These employees’ suits are based on the federal common law of pension plans. See Murphy v. Heppenstall Co., 635 F.2d 233, 237 (3d Cir.1980), cert. denied, 454 U.S. 1142, 102 S.Ct. 999, 71 L.Ed.2d 293 (1982).

Based on the same language at least one court has recognized a statutory cause of action for employers seeking the return of overpaid pension fund contributions. See E. M. Trucks, Inc. v. Central States, 517 F. Supp. 1122 (D.Minn.1981), but see Crown Cork & Seal v. Teamsters Pension Fund, supra, see also Pressrooms Union — Printers League Income Security Fund v. Continental Assurance Co., 700 F.2d 889 (2d Cir.), cert. denied, — U.S. —, 104 S.Ct. 148, 78 L.Ed.2d 138 (1983).

In both situations, suits by employees and suits by employers, the action permitted was one for the return of monies mistakenly overpaid. However, no decision has been called to my attention where a court permitted an employer to deduct overpayment amounts, which might eventually be subject to return, from then delinquent contributions. Thus, the mere fact that the defendants might ultimately be entitled to the return of mistakenly overpaid contributions under section 403 does not demonstrate that defendants are entitled to set off as a matter of law.

Moreover, a violation of section 515 by an employer not only vests the fiduciary plan administrator, suing to enforce that provision, with the right to receive the unpaid contribution, but also the right to receive attorney’s fees, interest and/or liquidated damages. See 29 U.S.C. § 1132(g), quoted supra. Thus, to allow an employer to deduct the amount of the mistakenly overpaid contribution from the amount owed to the fund would not only reduce the aggregate amount owed to the administrator under the statute, without any authority, but also reduce the amount of liquidated damages and/or interest to which said administrator is statutorily entitled. Defendants have similarly not pointed to any authority which would allow, much less require, this concomitant abrogation of the pension plan fiduciary administrator’s rights under the statute. Thus, defendants are not entitled to judgment as a matter of law in this case. Conversely, plaintiffs are entitled to such judgment. Accordingly, plaintiffs’ motion will be granted, while defendants’ motion will be denied.

An appropriate order follows.

ORDER

AND NOW, this 20th day of February, 1985, for the reasons set forth in the foregoing memorandum, IT IS ORDERED that plaintiffs’ motion for summary judgment is GRANTED, and defendants’ motion for summary judgment is DENIED.

IT IS FURTHER ORDERED that judgment will be entered in favor of the Teamsters Health and Welfare Fund of Philadelphia and Vicinity and Teamsters Pension Trust Fund of Philadelphia and Vicinity and against Philadelphia Fruit Exchange, Inc. and Armand Campese jointly and severally for reimbursement for all costs, including reasonable attorneys’ fees, incurred in connection with the collection of all unpaid contributions, upon the filing of a certification of attorneys’ fees, costs and expenses within fifteen (15) days from the date of this order.

      . As noted previously, the overpayments were discovered in the same audit as the unpaid contributions.

      . Whether this section permits an independent cause of action for employers against pension or welfare funds, by way of claim or counterclaim, for the return of mistakenly overpaid contributions is not before this court. Therefore, I cannot and do not make any determination in that regard.


author: JAMES R. MILLER, Jr., District Judge.

text:
    GENERAL ELECTRIC COMPANY v. UNITED STATES of America, et al.
    Civ. A. No. M-84-3834.
    United States District Court, D. Maryland.
    Feb. 21, 1985.

      Edward C. Mackie, Patrick G. Cullen, and Rollins, Smalkin, Richards & Mackie, Baltimore, Md., for plaintiff.
    Richard K. Willard, Acting Asst. Atty. Gen., John J. Farley, III, Director, Civ. Div., Torts Branch, John Lodge Euler, Asst. Director, Civ. Div., Torts Branch, Richard Tolies and Timothy P. Garren, Attys., Torts Branch, Dept, of Justice, Washington, D.C., and J. Frederick Motz, U.S. Atty., D. Md., Baltimore, Md., for defendants.
   MEMORANDUM AND ORDER

JAMES R. MILLER, Jr., District Judge.

General Electric Company filed the instant action against the United States, pursuant to the Federal Tort Claims Act, 28 U.S.C. §§ 2671-2680, alleging jurisdiction under 28 U.S.C. § 1346(b), and against five federal employees individually for negligence, alleging diversity jurisdiction (Paper No. 1). All defendants have moved to dismiss the complaint in its entirety (Paper Nos. 5 & 8), and the plaintiff has responded (Paper Nos. 7 & 9). No hearing is necessary to decide the issues herein. Local Rule 6E.

Factual Background

On July 27,1982, Mr. James Layman and Mr. Lloyd Thompson, employed by the National Institute of Health (NIH) as electricians, were sent to Building 29 at NIH to replace burned out resistors in a transformer designed and manufactured by General Electric (Paper No. 1, ¶¶ 10-11). While Layman and Thompson were working on the transformer, a short circuit occurred causing a surge of electric current accompanied by an arc which enveloped Thompson and Layman seriously injuring both of them (id. ¶¶ 12-14). Mr. Thompson died within one month of his injury. Mr. Layman remains alive but permanently injured and disfigured (id. ¶¶ 13-14).

A civil action against General Electric was filed in this court by Mr. Thompson’s representative and by Mr. Layman and his wife to recover for the injuries sustained by both men. See Thompson, et al. v. General Electric Co., No. M-83-1293. General Electric settled the claims of the plaintiffs in that action (Paper No. 1, ¶ 23).

In the present action, General Electric seeks contribution and indemnity from the United States and the five individual defendants. As to the United States, General Electric alleges that the United States, as the employer of Layman and Thompson, breached its duty to provide a safe work place for them (id. ¶ 17). Against the five federal employees, General Electric alleges that while acting in the scope of their employment, they failed to carry out their duties to use reasonable care for the safety of their fellow employees, specifically Mr. Layman and Mr. Thompson (id. ¶¶ 19-20).

The alleged breaches of duty on the part of both the United States and the five individual defendants are detailed in the complaint as:

“a. Failure to provide and require the use of adequate protective clothing, including protective gloves, by personnel working with high voltage electrical equipment. '
b. Failure to require that high voltage electrical equipment be de-energized when work was done on equipment which could be de-energized without interrupting service to the facility.
c. Failure to require that the two components of the fuse assembly each be removed separately from the network protector.
d. Failure to take measures to inspect and examine high voltage electrical equipment for possible modifications to make it safer for use.
e. Failure to instruct adequately personnel respecting (i) the hazards of working with or coming into contact with high voltage electrical equipment, (ii) the means of avoiding injury from such hazards, (iii) the use of the load side switch to de-energize the equipment, (iv) the safer method for installing fuse bars, (v) the construction of the network protector and (vi) the use of one hand rather than two as the safer technique for electricians to use.
f. Failure to implement and require personnel working with or coming into contact with high voltage electrical equipment to adhere to prescribed safety standards and regulations.
g. Failure to take other reasonable and necessary precautions against injury to personnel employed in working with or coming into contact with high voltage electrical equipment.”

(Id. ¶¶ 18 and 20).

Legal Analysis

A) Is the United States Immune from this Suit under Maryland Workmen’s Compensation Law?

The Federal Tort Claims Act, 28 U.S.C. § 2671 et seq., is a limited waiver of the United States’ sovereign immunity to suits in tort. See United States v. Orleans, 425 U.S. 807, 813, 96 S.Ct. 1971, 1975, 48 L.Ed.2d 390 (1976). Pursuant to 28 U.S.C. § 1346, federal courts have exclusive jurisdiction for |claims for money damages for negligence of employees of the United States, acting within the scope of their employment, “under circumstances where the United States, if a private person, would be liable to the claimant in accordance with the law of the place where the act or omission occurred.” 28 U.S.C. § 1346(b); see also 28 U.S.C. § 2674.

Since the negligent acts or omissions alleged herein occurred in Maryland, Maryland law governs the United States’ liability in this case. See, e.g., Richards v. United States, 369 U.S. 1, 8-9, 82 S.Ct. 585, 590, 7 L.Ed.2d 492 (1962); Garrett v. Jeffcoat, 483 F.2d 590, 592 (4th Cir.). The United States “... stands in the shoes of a private person in like circumstances ...” for the purposes of liability. Hunt v. United States, 636 F.2d 580, 585 (D.C.Cir.1980); see also United States v. Muniz, 374 U.S. 150, 153, 83 S.Ct. 1850, 1853, 10 L.Ed.2d 805 (1963). If Maryland statutes immunize a private employer in like circumstances from suit, the United States is likewise shielded from liability in this action.

Under the Maryland Workmen’s Compensation Act, “[e]very employer subject to the provisions of this article shall pay or provide ... compensation according to the schedules of this article for disability or death of his employee arising out of ... his employment....” Md.Ann.Code, Art. 101 § 15. If the employer secures compensation to his employees as set forth in § 16 of the Article 101, his liability under the workmen’s compensation laws “shall be ex-clusive....” Md.Code Ann., Art. 101 § 15. Thus, “the Workmen’s Compensation Act is a substitute for the employer’s common law liability for negligence.” Flood v. Merchants Insurance Co., 230 Md. 373, 377, 187 A.2d 320 (1963); see also Knoche v. Cox, 282 Md. 447, 452-53, 385 A.2d 1179 (1978); Baltimore Transit Co. v. State to Use of Schriefer, 183 Md. 674, 677, 39 A.2d 858 (1944).

The exclusivity provision of Maryland law precludes liability of the employer for contribution, see Mason v. Callas Contractors, Inc., 494 F.Supp. 782, 784 (D.Md.1980) citing Baltimore Transit Co. v. State, 183 Md. 674, 39 A.2d 858 (1944) or indemnity, see American Radiator Corp. v. Mark Co., 230 Md. 584, 588-90, 187 A.2d 864 (1963).

The plaintiff argues, however, that the Maryland statute excludes some employers from its provisions and that those employers cannot take advantage of the exclusivity provisions of the statute even if they provide workmen’s compensation to their injured employees.

Under the statute, “[t]he following shall constitute employers subject to the provisions of this Act: (1) Every person that has in the State one or more employees subject to this Act.” Md.Code Ann., Art. 101 § 21(a)(1). Seven classes of employees are exempted from coverage under the Act. Md. Code Ann., Art. 101 § 21(c)(1-7). One of the groups exempted is “[a]ny person for whom a rule of liability for injury or death is provided by the laws of the United States.” Md.Ann. Code, Art. 101 § 21(c)(3). Obviously, then the United States does not have employees subject to the Act. The plaintiff argues that, as a result, the United States is not an employer subject to the Act and is, therefore, not immune from suit herein.

The plaintiff relies on Keeney v. Beasman, 169 Md. 582, 182 A. 566 (1936), to support its assertion that if an employee is exempted from the Act, even the employer’s unilateral purchase of Workmen’s Compensation insurance will not subject the employer to the Act and its protection.

Not cited by the plaintiff, but also relevant to the issue, is Congressional Country Club, Inc. v. Baltimore & Ohio Railroad Co., 194 Md. 533, 71 A.2d 696 (1950). In that case, two employees of the Congressional Country Club [hereinafter the Club] were injured and one was killed when a bus owned by the Club and transporting them to work, collided with a train. Id. at 539, 71 A.2d 696. The injured passenger and the personal representatives of the deceased passengers filed suits against the Railroad. The Railroad notified the Club of the pendency of the suits and requested its participation in settlement. The Club declined to participate. The Railroad settled the claims and thereafter sued the Club for indemnity and contribution.

The Club defended on the basis that it was a conforming employer under the Workmen’s Compensation Act and that its liability under the Act was exclusive. Whether the Club was entitled to that defense depended on whether the employees were covered by the Act. Id. at 541, 71 A.2d 696.

Because the Act extended liability to an employer, in this case, on the basis of extra-hazardous employment, the Club would have been liable to the employees for workmen’s compensation under the Act only if their employment was found to be extra-hazardous. Id. The court found that the employees were not engaged in extra-hazardous work, and, therefore, the Club was not liable to them for workmen’s compensation under the Act. Id. at 542-43, 71 A.2d 696. The Club could have elected to insure employees in non-extra-hazardous work and thus become liable to them under the Act, but it chose not to do so. Id. at 544, 71 A.2d 696. Therefore, the Club was es-topped from raising the defense of exclusivity in the suit brought by the Railroad for contribution and indemnity. Id. at 543, 71 A.2d 696. The trial court’s award to the Railroad against the Club was accordingly affirmed. Id. at 545, 71 A.2d 696.

On the surface, Keeney and Congressional Club appear dispositive of the issue herein. In both cases the court looked to whether employees involved were exempted from the Act. In Congressional Club, the court found that because the employees were not covered by the Act, the employer could not shield itself behind the Act to preclude liability to a third party for contribution and indemnity. The critical fact in Congressional Club, however, was the fact that the employer, under the Act, could have insured the injured employees, i.e., employees not engaged in extra-hazardous employment, by the joint election procedure set out in the Act, but the employer did not so do. Thus, it was held reasonable that that employer should not benefit from the protection of exclusivity in the Act.

The case at bar presents a different kind of problem. The United States has provided to its employees, through the Federal Employment Compensation Act, 5 U.S.C. § 8101, et seq., a system whereby federal employees in Maryland may be compensated for their injuries. Those Maryland employees need not look to the Maryland Workmen’s Compensation Act for coverage or compensation. Indeed, it appears that a state legislature “is without power to compel the federal government to participate in a state workmen’s compensation program.” See Giannuzzi v. Doninger Metal Products, 585 F.Supp. 1306, 1306 (W.D.Pa.1984).

Thus, the plaintiff is arguing that, because the federal government did not make payments to the Maryland Workmen’s Compensation system, but chose instead to provide coverage to its employees through a federal compensation system, it cannot be shielded from liability under the Maryland Workmen’s Compensation Act. That argument relies on too technical a reading of the definition of employer in the Maryland Act.

In two recent decisions on this issue federal courts have considered, but have not found dispositive, the fact that federal employees are exempt from coverage in state workmen’s compensation acts. In Giannuzzi v. Doninger Metal Products, supra at 1310, the court stated:

“Congress enacted the Federal Employees Compensation Act to assist the federal government achieve its goal of becoming a ‘model employer.’ See S.Rep. No. 1081, 93rd Cong., 1st Sess., reprinted in (1974) U.S.Code Cong. & Ad.News 5341. In a realistic sense, the Act is the government’s ‘answer to Workman’s Compensation, ... first enacted in Pennsylvania three years prior to the passage of the F.E.C.A.’ Lorenzetti v. United States, 710 F.2d 982, 985 (3d Cir.1983). That the federal program rather than the state program paid benefits to plaintiff is not significant. Because Pennsylvania law requires private employers to pay premiums to the workmen’s compensation fund and because federal law requires the United States to be a private employer in tort case, it can be assumed for litigation purposes that the requirement of a ‘quid pro quo’ has been satisfied. We hold the fact that the federal government did not make payments to the Pennsylvania workmen’s compensation fund does not affect the bar of state law in á tort suit against the United States as an employer.”

Similarly, in In re All Asbestos Cases, 603 F.Supp. 599 (D.Hawaii 1984) (Paper No. 5, Ex. 1), the court stated:

“The FTCA provides that that the United States will only be liable as if a ‘private person.’ Therefore, provisions of workers’ compensation statutes, such as § 903(a)(2) of the LHWCA, which exclude coverage of federal employees, are inapplicable in the analysis. Further, inviting this Court to analogize to a private party not covered by workers’ compensation laws applicable to private parties would be to ask the Court to apply the principles of indemnity and contribution in a vacuum of substantive law. This is both infeasible and contrary to the intent of Congress in enacting the FTCA to determine liability in accordance with the law of the place where the act or omission occurred.” Id., at 603.

The Maryland Workmen's Compensation Act “should not be defeated by technical construction,” see Slacum v. Jolley, 153 Md. 343, 138 A. 244, passim (1927), but should receive practical construction, see, e.g., Rumple v. Henry H. Meyer Co., Inc., 208 Md. 350, 360, 118 A.2d 486 (1955).

In all practical ways, the law of Maryland envisions that a private person who conforms to the Act by obtaining workmen’s compensation insurance to cover his employees injured on the job shall be shielded from common law liability to the employee and liability to third parties on indemnity and contribution claims. In fact, private employers from outside the state are provided with the shield of immunity, in certain circumstances, if the out-of-state workman’s compensation scheme covers the non-resident employee injured while on the job in Maryland. Md.Code Ann., Art. 101 § 21(c)(4).

In Kelly v. Eclipse Motor Line, 305 F.Supp. 191 (D.Md.1969), Judge Kaufman decided that even though the Pennsylvania Workman’s Compensation statute did not extend reciprocal extra territorial effect to the Maryland compensation law, the out-of-state employee who obtained compensation from his Pennsylvania employer in the Pennsylvania system could not sue that same employer in Maryland for negligence. Id. at 197-205. The Pennsylvania compensation award was the employee’s exclusive remedy. Id. at 205.

It would be anomalous to allow out-of-state private employers to raise the bar of exclusivity and yet to deny that right to the federal government. Employees of both are exempt from the Act. If exclusivity applies to one, it logically should apply to the other.

It follows that the United States stands in the shoes of those private persons shielded by the Maryland Workmen’s Compensation Act from direct actions and third party actions for contribution and indemnity. The motion to dismiss of the United States will be granted.

B) Are the Individual Defendants Absolutely Immune from Suit?

The five individual defendants herein argue that they are absolutely immune from suit.

If the alleged tortious acts of federal employees were within the “outer perimeter of [their] line of duty” and were “an appropriate exercise of the discretion which an officer of [their] rank must possess if the public service is to function effectively,” the employees are absolutely immune from common law tort liability. Barr v. Matteo, 360 U.S. 564, 575, 79 S.Ct. 1335, 1341, 3 L.Ed.2d 1434 (1958); see also, Butz v. Economou, 438 U.S. 478, 488, 98 S.Ct. 2894, 2901, 57 L.Ed.2d 895 (1978).

The Fourth Circuit has “read Barr to extend absolute immunity to lower as well as upper level federal officials exercising discretion.” George v. Kay, 632 F.2d 1103, 1105 (4th Cir.1980). For federal employees, “[t]herefore, wrongful activity incidental to an otherwise proper exercise of authority must fall within the immunity claim.” Wallen v. Domm, 700 F.2d 124, 126 (4th Cir.1983).

Based on the allegations in the complaint, there is no dispute that these employees were acting within the outer perimeter of their lines of duty, but the plaintiff contends that the employees herein were not exercising discretionary duties, but solely ministerial ones.

A decision on whether the acts or omissions herein were an appropriate exercise of discretion requires a review of the duties of the five individual defendants. There are no allegations in the complaint regarding those duties. Therefore, disposition of this issue on a motion to dismiss would be inappropriate.

Accordingly, it is this 21st day of February, 1985, by the United States District Court for the District of Maryland, ORDERED:

1) That the motion to dismiss of the United States is GRANTED.

2) That the motion to dismiss of the individual defendants is DENIED.

      . The employer shall secure compensation to his employees in one of the following ways:
      (1) By insuring and keeping insured the payments of such compensation in the State Accident Fund, or
      (2) By insuring and keeping insured the payments of such compensation with any stock corporation or mutual association authorized to transact the business of workmen’s compensation insurance in this State.

      . In Keeney v. Beasman, the employee was injured and subsequently died from those injuries. His widow submitted a claim to the State Industrial Accident Commission. 169 Md. at 584. His employer had purchased an insurance policy from Maryland Casualty Co. under which the insurer agreed to pay promptly any person entitled to payment under the Workmen's Compensation Law. Id. 169 Md. at 589, 182 A. 566.
      The issue before the court was whether the decedent, a dairy farm laborer, was entitled to payment. The court decided that because farm laborers were excluded from the statute, the decedent was not engaged in work covered by the statute, and that the employer and his insurer could raise that fact as a defense to payment under the insurance policy. Id. at 589, 595, 182 A. 566.
      Exempted employees could only be included under the statute, at that time, if there was a joint election by the employer and employee to be included and if the Industrial Accident Commission approved that joint election. Id. at 591, 182 A. 566. Those conditions had not been met in Keeney, and, therefore, his widow had no recourse under the statute.
      After the decision in Keeney, the statute was amended to preclude the defense that an employee was not covered by the Act if the insurer had accepted payments on the workmen’s compensation insurance policy. Md.Code Ann., Art. 101 § 65.

      . The statute reads:
      "An employee and his employer who are not residents of this State and whose contract of hire is entered into in another state shall be exempted from the provisions of this article while such employee is temporarily or intermittently within this State doing work for such nonresident employer, if such employer has furnished workmen’s compensation insurance coverage under the workmen’s compensation or similar laws of such other state, so as to cover such employee’s employment while in this State; provided the extraterritorial provisions of this article are recognized in such other state and provided employers and employees who are covered in this State are likewise exempted from the application of the workmen's compensation or similar laws of such other state. The benefits under the workmen's compensation act or similar laws of such other state shall be the exclusive remedy against such employer for any injury, whether resulting in death or not, received by such employee while working for such employer in this State.”

        Md.Code Ann., Art. 101 § 21(c)(4).

      . If in fact the acts or omissions alleged herein were performed by the five individual defendants as discretionary functions, the United States would not be liable to the plaintiff in this action. Under 28 U.S.C. § 2860(a) the provisions of the FTCA and 28 U.S.C. § 1346(b) are not applicable to “any claim ... based upon the exercise or performance or failure to ... perform a discretionary function____”