author: EDWARD C. REED, Jr., District Judge.

text:
    Ellanor Ann FONDREN, Plaintiff, v. R.D. SCHMIDT, R.D. Schmidt, Inc., Interplan, Inc., Interplan Leasing Corp., Research Analysis For Finances, S.A., Does I through 20, Corporations 1 through 20, Defendants.
    No. CV-R-83-43-ECR.
    United States District Court, D. Nevada.
    Jan. 7, 1986.

      Mark H. Gunderson, Reno, Nev., for plaintiff.
    C. Nicholas Pereos, Reno, Nev., and Am-ram & Hahn, James J. Gross, Washington, D.C., for defendants.
   ORDER

EDWARD C. REED, Jr., District Judge.

Plaintiff has objected to the June 28, 1985, Report and Recommendation of U.S. Magistrate Phyllis Halsey Atkins, wherein the Magistrate recommends that Plaintiff’s First Amended Complaint be dismissed in its entirety, without prejudice. The primary basis for the Magistrate’s recommendation is that the pleading doesn’t reasonably apprise each defendant (five are named) of the specific role each is alleged to have played in the transactions described in the federal question causes of action. Those claims for relief are grounded in purported misrepresentations and fraud in connection with securities transactions, and are the bases for the exercise of jurisdiction by this Court. Fed.R.Civ.P. 9(b), which mandates that the circumstances constituting fraud be stated with particularity whenever fraud is averred in a pleading, has not been satisfied by Plaintiff in the estimation of Magistrate Atkins. The other causes of action (a total of eleven comprise the First Amended Complaint) involve claims for relief arising under state law, and require the invocation of pendent jurisdiction.

It is Plaintiffs position that she has alleged the time, place and identity of the parties and the nature of the fraud with the specificity demanded by Rule 9(b). Part of the problem has arisen because individual defendant R.D. Schmidt is a “controlling person” as to three of the corporate defendants, according to Plaintiff. Each time he acted or spoke fraudulently, he didn’t necessarily specify on whose behalf he was acting or speaking.

The Magistrate also feels that Plaintiff has not complied with Fed.R.Civ.P. 8(e), which imposes on a pleader the duty to make her averments simple, concise and direct. In particular, Magistrate Atkins frowns on Plaintiff’s practice of referring to allegations contained in subsequent causes of action within the First Amended Complaint. By way of example, the Magistrate notes that in the Seventh Cause of Action Plaintiff alleges “Defendants were retained for the purposes specified in this Complaint” and “Plaintiff, relying on the representations of Defendants as alleged in this Complaint.” One must search through a 26-page pleading to try to ascertain exactly what purposes and representations Plaintiff is referring to. In addition, the Magistrate feels that Rule 8(e) has been violated by the failure of Plaintiff to attribute specific conduct to a specific defendant or defendants. Instead, the pleading sometimes alleges that “Defendants” breached or failed to exercise reasonable care or committed wrongful acts or falsely and fraudulently represented. Plaintiff’s objection contends that she merely is requiring the defendants to read the First Amended Complaint in its entirety, as one complete document. In her opinion, the direction of Rule 8(f) that all pleadings shall be construed as to effect substantial justice supports her position on this issue.

Plaintiff further objects to the Magistrate’s Report and Recommendation re her Eleventh Cause of Action, which is based on the Racketeer Influenced and Corrupt Organizations Act (RICO), 18 U.S.C. §§ 1961-1968. The holdings of a U.S. Supreme Court opinion handed down subsequent to the Magistrate’s Report and Recommendation render her reasoning erroneous, Plaintiff argues. The case, Sedima, S.P.R.L. v. Imrex Co., — U.S.-, 105 S.Ct. 3275, 87 L.Ed.2d 346 (1985), overrules Magistrate Atkins’ belief that a civil RICO action cannot lie until the defendants have been convicted of a criminal predicate act and that a RICO complaint must allege that the defendants constitute an enterprise organized solely for criminal purposes. However, the Magistrate also found that Plaintiff’s Eleventh Cause of Action should be dismissed because the averments concerning the defendants’ predicate fraudulent acts do not meet the particularity requirements of Fed.R.Civ.P. 9(b).

Discussion

Each cause of action set forth in the First Amended Complaint incorporates by reference all the allegations made under the causes of action earlier pleaded in that document. Fed.R.Civ.P. 10(c) specifies that statements in a pleading may be adopted by reference in a different part of the same pleading. Virtually always an earlier statement is adopted by reference later in the pleading, but Rule 10(c) does not prohibit adoption of statements to be found later in the pleading.

The particularity required for averments of fraud by Rule 9(b) must be satisfied in the complaint itself. Arroyo v. Wheat, 591 F.Supp. 136, 138 (D.Nev.1984); Hokama v. E.F. Hutton & Co., Inc., 566 F.Supp. 636, 646 (C.D.Cal.1983). On a motion to dismiss, such as is here involved, the complaint must be read as a whole. Yoder v. Orthomolecular Nutrition Institute, Inc., 751 F.2d 555, 562 (2nd Cir.1985). Thus, allegations made in state law claims for relief may be used to supply the particulars mandated by Rule 9(b) for causes of action relating to violations of federal securities laws. Id. at 561. The allegations that are pertinent to the federal question causes of action, as will be recounted immediately below, therefore are drawn from both the state law claims and the federal claims themselves. They shall be described in the order in which they are alleged in the First Amended Complaint.

Individual defendant R.D. Schmidt (Mr. Schmidt) is an officer, shareholder, director and “controlling person” of defendants R.D. Schmidt, Inc. (Schmidt Inc.), Inter-plan, Inc. (Interplan) and Interplan Leasing Corp. (ILC). Mr. Schmidt also was an aider, abettor and co-conspirator with all the other defendants named in the First Amended Complaint. Defendants Schmidt Inc., Interplan and ILC were “controlling persons” of each other named defendant, and aided, abetted and co-conspired with each other and all the other named defendants. Defendant Research Advisors for Finances, S.A. (RAFSA) knew or reasonably should have known of the acts of all the other defendants, as those acts are alleged in the pleading. Mr. Schmidt organized Interplan and Schmidt Corp. for the purpose of operating an investment advisory service. He is their principal officer, director and sole shareholder and is also their alter ego, in that he has been conducting, managing and controlling their affairs as his own business in disregard of their corporate entities.

In the Fall of 1979, at Incline Village, Nevada, Plaintiff entered into an oral agreement with Mr. Schmidt and Schmidt Inc., whereunder they were to prepare an estate plan, render investment advice and purchase and sell securities and commodities on Plaintiffs account, with the objectives of conserving and enhancing Plaintiffs assets and providing her with income commensurate with her lifestyle. Those two defendants did prepare an estate plan, but it was inadequate. Further, their investment advice violated the terms of the agreement.

Defendants Mr. Schmidt, Schmidt Inc. and Interplan have held themselves out to the public as skilled, trained and expert estate planners, investment advisors and securities and commodities brokers. In the Fall of 1979, however, defendant Interplan was unlicensed, although it engaged in the business of rendering investment advice and marketing and selling securities and commodities. To the date of the complaint, it still was not licensed as a security or commodity broker. Defendants Mr. Schmidt and Schmidt Inc. have not been licensed either as investment advisors or securities and commodities brokers, although they have been engaged in both businesses.

Defendants Mr. Schmidt, Schmidt Inc. and Interplan did not exercise reasonable care and skill in preparing an estate plan, rendering investment advice and purchasing and selling securities and commodities on Plaintiffs account. As a result, her estate has suffered diminution.

At the time said three defendants were employed by Plaintiff, she did not possess skill, training or expertise in the matters for which those defendants were retained. Plaintiff placed trust and confidence in the representations made by all three of those defendants that they were skilled, knowledgeable and licensed as to such matters. They also verbally represented that, through the use of sophisticated information gathering, information processing devices and international financial reporting contracts and information sources, they could forecast and predict with accuracy price changes of securities and commodities. As a result, they told Plaintiff, they could achieve large monetary gains for her with minimal risk. All of the aforesaid representations were false, and their falsity was known at the time to the defendants who made them. They failed to discharge their responsibilities in a competent manner consistent with Plaintiffs best interests, to her damage. Said defendants’ conduct was fraudulent, malicious and oppressive toward Plaintiff.

Between the Fall of 1979 and January 1, 1983, Plaintiff delivered substantial sums of money to defendants Mr. Schmidt, Schmidt Inc., Interplan and RAFSA for estate planning and investment purposes. During that period those four defendants purchased, sold and traded securities and commodities for Plaintiff’s account. On January 1, 1983, Plaintiff withdrew her authorization for them to act on her behalf. She has demanded an accounting from them, but they have not rendered any.

During that time period, the same four defendants conspired and agreed among themselves to commit the wrongs specified in the First Amended Complaint. Their acts were in furtherance of the conspiracy. Plaintiff was damaged thereby.

Plaintiff opened a securities and commodities account with defendants Schmidt Inc. and Interplan, to be handled by Mr. Schmidt. By reason of the account, Schmidt Inc. and Interplan purchased and sold various securities and commodities and were to act as Plaintiff’s broker and advis- or. During the time the account was open, Schmidt Inc. and Interplan failed properly to supervise Mr. Schmidt. It was their duty to supervise him because they were control persons within the meaning of federal securities laws. The acts of said three defendants were covered by those laws and were accomplished through use of the mail and other instrumentalities of interstate commerce.

Prior to the Fall of 1979 Plaintiff had little knowledge of securities and commodities, and had not engaged in significant transactions concerning them. This lack of knowledge and experience was known by defendants Mr. Schmidt, Schmidt Inc. and Interplan. Mr. Schmidt represented himself to be an experienced representative for the purchase and sale of securities and commodities when, in fact, his experience in commodity transactions had been limited. Schmidt Inc. and Interplan failed properly to instruct Mr. Schmidt or supervise his transactions on behalf of their customers.

Mr. Schmidt showed Plaintiff charts and graphs which he said represented movements in the price of gold. They, together with Schmidt Inc.’s and Interplan’s analyses of them, allowed the defendants to predict accurately in advance movement in the price of gold and gold-based investments, Mr. Schmidt said. This included the gold-based investments of defendant RAF-SA. Mr. Schmidt also represented that substantial gains and tax savings could be achieved by purchasing and selling security instruments issued by First Western Government Securities, Inc. (FWGSI), utilizing similar methodology. Such information, combined with the expertise of the defendants, Mr. Schmidt said, would enable Plaintiff to achieve substantial profits if she allowed Schmidt Inc. and Interplan to make stock and commodity investments on her behalf. In reliance on Mr. Schmidt’s claim of experience in trading such accounts and his promise to be “conservative,” Plaintiff engaged in a series of securities and commodities transactions through Schmidt Inc. and Interplan between the Fall of 1979 and January 1, 1983.

Mr. Schmidt told Plaintiff it would be in her best interest to allow Schmidt Inc. and Interplan to have “discretionary authority” over her account. He represented that her profits would be greater if it were not necessary to check with her as to individual transactions. In reliance on those representations, Plaintiff granted the requested discretionary authority to Schmidt Inc. and Interplan. The true purpose for inducing Plaintiff to grant such authority was to enable Mr. Schmidt, Schmidt Inc. and Inter-plan to generate excessive and unreasonable commissions and fees.

Subsequently, Mr. Schmidt requested Plaintiff to place further sums in her account, to cover losses previously sustained. Further, he represented to her that all losses sustained would be completely tax deductible and, if she maintained the account, it would become profitable. In reliance on the representations, Plaintiff invested further sums with Schmidt Inc. and Interplan. Mr. Schmidt, Schmidt Inc. and Interplan purchased gold debentures issued by RAF-SA. Those debentures were and are “illusory.” Through the purchase of the debentures, Mr. Schmidt, Schmidt Inc., Interplan and RAFSA earned a profit not disclosed to Plaintiff. This was in violation of contractual and fiduciary duties they owed Plaintiff. Further, RAFSA has conspired with the other said defendants. Their acts in furtherance of the conspiracy have prevented Plaintiff from liquidating, recovering or dealing with the gold debentures issued by RAFSA. Said defendants didn’t advise Plaintiff .that purchase agreements made without her authorization could be rejected by her. On the contrary, they all maintained that they were looking out for their clients’ best interests, and that additional investment would make up the losses. In addition, they told Plaintiff that all necessary elements were present for an up-turn. The result has been that Schmidt Inc. and Interplan have wrongfully and knowledgeably attended to the purchase by Mr. Schmidt of contracts for Plaintiff’s account on terms not specified by her. The purpose was to generate commissions and fees for Mr. Schmidt, Schmidt Inc. and Interplan, and to cover up the misappropriation of funds from Plaintiff’s account.

All four said defendants recommended extremely risky transactions for Plaintiff’s account, including investments in RAFSA and FWGSI securities and commodities. At the time they knew that Plaintiff was unaware of the extent of risk. Schmidt Inc. and Interplan failed properly to supervise Mr. Schmidt or to comply with requirements of the Exchanges and the National Association of Securities Dealers designed to protect customers without knowledge and experience in the purchase and sale of commodity contracts. Subsequent to these unlawful purchases, Mr. Schmidt, Schmidt Inc. and Interplan failed to advise Plaintiff that she could reject the purchases. Upon Plaintiff’s request for advice, said three defendants said nothing could be done about the purchases. Defendants Mr. Schmidt, Schmidt Inc., Interplan and RAF-SA concealed their wrongful acts, omissions and representations from Plaintiff. Their conduct, was fraudulent, intentional and in reckless disregard of Plaintiff.

Between the Fall of 1979 and January 1, 1983, Mr. Schmidt, Schmidt Inc. and Inter-plan falsely and fraudulently represented that investments in debenture certificates issued by RAFSA and securities issued by FWGSI were superior in rate of return and security to the securities portfolio held by Plaintiff in the Fall of 1979. In reliance on those representations, Plaintiff sold substantial portions of Her securities portfolio and transferred the proceeds to Mr. Schmidt, Schmidt Inc. and Interplan. They, in turn, used the money to make the above-described speculative investments for the purpose of defrauding Plaintiff.

The defendants, as aiders and abettors or as “controlling” or “controlled” persons used instruments of interstate commerce to defraud Plaintiff in violation of federal securities law. She, therefore, is entitled to and demands recission of her investments in RAFSA gold debentures and FWGSI securities. Those debentures and securities were unregistered, so that their sale violated federal securities law to Plaintiff’s damage.

The conduct of the defendants also violated Nevada statutes aimed at preventing fraud or deceit in the offer, purchase or sale of securities, thus entitling Plaintiff to rescind her RAFSA and FWGSI investments.

All of the defendants violated RICO by using interstate mails, telephone and telegraph in connection with racketeering activities involving fraud. The five defendants, as a group, constituted an “enterprise” while engaged in a pattern of “racketeering activity” consisting of the sale of fraudulent, unregistered and worthless securities in violation of securities fraud, mail fraud and wire fraud statutes considered to be predicate acts under RICO. They conspired with each other to commit the fraudulent and unlawful activities described in the First Amended Complaint.

This matter came before Magistrate Atkins, and is now before this Court, on the defendants’ motion to dismiss. In appraising the legal sufficiency of a complaint, the allegations therein are to be construed favorably to the plaintiff. De La Cruz v. Tormey, 582 F.2d 45, 48 (9th Cir.1978). The issue is not whether the plaintiff’s success on the merits is likely but, rather, whether it appears beyond doubt that she could prove no set of facts that would entitle her to relief. Id. Rule 9(b)’s particularity requirement mandates only that the circumstances constituting fraud be identified to the extent that the defendants will find sufficient information in the allegations to be able to prepare an adequate answer. Riley v. Brazeau, 612 F.Supp. 674, 678 (D. Ore.1985); Hokama v. E.F. Hutton & Co., Inc., 566 F.Supp. 636, 645 (C.D.Cal.1983). The purpose of the rule is to thwart charges of fraud from arising out of contractual relations that merely didn’t work out like the parties had anticipated. Arroyo v. Wheat, 591 F.Supp. 136, 139 (D.Nev.1984). By requiring a plaintiff to investigate and ascertain the facts before he or she files suit, it serves to protect defendants from unfounded charges that would tend to injure their reputations. Id.; In re Com. Oil/Tesoro Petroleum Corp. Sec. Lit., 467 F.Supp. 227, 250 (W.D.Tex.1979). While general conelusory allegations of fraud will not suffice, statements of the time, place and nature of the allegedly fraudulent activities will. Bosse v. Crowell Collier and MacMillan, 565 F.2d 602, 611 (9th Cir.1977). In cases involving multiple defendants, a plaintiff should specify the role of each defendant in the fraudulent activity. Lewis v. Sporck, 612 F.Supp. 1316, 1325 (N.D. Cal.1985); Woods v. Reno Commodities, Inc., 600 F.Supp. 574, 579 (D.Nev.1984). Where a category of defendants is allegedly responsible for a continuing course of conduct, however, group conduct may be pleaded. In re Equity Funding Corp. of Amer. Sec. Litigation, 416 F.Supp. 161, 181 (C.D.Cal.1976). Plaintiff appears to have satisfied both principles. Her alter ego and controlling and controlled person allegations tend to support the propriety of pleading group conduct in this instance. Nevertheless, the great bulk of her averments specify which particular defendants she contends participated in specific fraudulent activity.

The contents of the purported misrepresentations and the identities of the parties who made them are stated in the First Amended Complaint. See Riley v. Brazeau, supra at 612 F.Supp. 677. Riley also teaches that the pleading should state whether a particular defendant is being sued as a principal or as an aider and abettor. Id. Plaintiff has done this. Defendants’ purported claims that their expertise and special knowledge enabled them to predict whether prices of securities would rise has been held to meet the particularity standards of Rule 9(b). Gottreich v. San Francisco Inv. Co., 552 F.2d 866, 866 (9th Cir.1977).

Policywise, Rule 9(b) should not be used as a tool to require a plaintiff to repeatedly redraft her complaint where the defendants do, in fact, have notice of the matters about which she complains. In re Com. Oil/Tesoro Corp. Sec. Lit., supra at 467 F.Supp. 251. Justice is better served by reaching the merits. Michael v. Clark Equipment Co., 380 F.2d 351, 352 (2nd Cir.1967).

Plaintiff’s pleading does state federal question claims upon which relief can be granted. For example, her Ninth Cause of Action alleges that the defendants practiced fraud and deceit upon her when selling to her unregistered securities of RAF-SA and FWGSI, in violation of section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 of the Securities and Exchange Commission. The U.S. Supreme Court has said that when there is a sale of a security and fraud “touches” the sale, there is redress under section 10(b), Arrington v. Merrill Lynch, Pierce, Fenner & Smith, 651 F.2d 615, 619 (9th Cir.1981); see also Herman & MacLean v. Huddleston, 459 U.S. 375, 382,103 S.Ct. 683, 687, 74 L.Ed.2d 548 (1983). When a broker engages in excessive trading, in disregard of his customer’s investment objectives, for the purpose of generating commissions, the broker may be held liable for churning in violation of Rule 10b-5. Mihara v. Dean Witter & Co., Inc., 619 F.2d 814, 820 (9th Cir.1980). Plaintiff has made such allegations in her First Amended Complaint. A broker may be held liable for making an expert’s prediction when, in fact, he has no basis for claiming expertise or special knowledge. Gottreich v. San Francisco Inv. Co., supra at 552 F.2d 867. The pleading contains such averments.

In her Eleventh Cause of Action, Plaintiff pleads violation of RICO, based on fraudulent use of interstate facilities and violations of security laws. If a defendant engages in a pattern of racketeering activity in a manner forbidden by the Act, arid the plaintiff is injured in her property thereby, she has a claim under RICO. Sedima, S.P.R.L. v. Imrex Co., Inc., — U.S.-, 105 S.Ct. 3275, 3285, 87 L.Ed.2d 346 (1985). This is not to prejudge whether Plaintiff herein will be able to prove her claim. However, she has stated a claim for relief under RICO.

From the foregoing it can be seen that-after de novo review, this Court rejects the Magistrate’s recommendation that Plaintiff’s First Amended Complaint be dismissed in its entirety. The allegations of the pleading sufficiently state claims based on federal questions. The claims for relief arising under state law properly should be considered by the Court at the same time in its exercise of pendent jurisdiction.

IT IS, THEREFORE, HEREBY ORDERED that the defendants’ Motion to Dismiss or in the Alternative, Motion to Strike, filed September 11, 1984, be DENIED.

IT IS FURTHER ORDERED that the defendants who have been served with process shall have twenty (20) days from the. date notice is given of this Order in which to respond to the plaintiff’s First Amended Complaint.


source: Caselaw Access Project

author: FRANK A. KAUFMAN, Chief Judge.

license: Public Domain

text:
    UNITED STATES of America v. Carlos Nikolai STRUSBERG-GONZALEZ a/k/a Nick, et al. UNITED STATES of America v. Mauro Laurent TAGINI a/k/a Laurent Mauro Tagini.
    Crim. Nos. K-85-0330, K-85-0374.
    United States District Court, D. Maryland.
    Jan. 7, 1986.

      J. Frederick Motz, U.S. Atty., Donna Helen Triptow, and James Savage, Asst. U.S. Attys., Baltimore, Md., for plaintiff.
    Richard Sharpstein, Coconut Grove, Fla., for defendant Carlos Nikolai StrusbergGonzalez.
    Douglas Kelly, and Mark A. McGrath, Minneapolis, Minn., for defendant Franklyn Strusberg-Gonzalez.
    Mark S. Wernick, and William J. Mauzy, Minneapolis, Minn., for defendant Jose Lenin Strusberg-Gonzalez.
    Stephen J. Cribari, Asst. Federal Public Defender, Baltimore,' Md., for defendant Roland Sokol.
    Robert G. Davis, Minneapolis, Minn., for defendant Mauro Laurent Tagini.
   MEMORANDUM AND ORDER

FRANK A. KAUFMAN, Chief Judge.

Following a trial by jury commencing on September 19, 1985, defendants Jose Lenin Strusberg-Gonzalez and Franklyn Strusberg-Gonzalez were convicted, in absentia, of conspiracy to import cocaine and methaqualone into the United States, 21 U.S.C. § 963, and conspiracy to distribute the said controlled substances within the United States, 21 U.S.C. § 846. Following his conviction, defendant Jose StrusbergGonzalez moved for a judgment of acquittal or for a new trial on the grounds that the Court erred in granting the Government’s motion for a trial in absentia, in denying that defendant’s motion for a severance, in allowing comment during trial with regard to the said defendant’s absence, and in giving a flight instruction. Defendant Franklyn Strusberg-Gonzalez also moved, after trial, for a judgment of aquittal or for a new trial, asserting that the verdict is contrary to the weight of the evidence and is not supported by substantial evidence, that that defendant’s motion for a judgment of acquittal at the close of the Government’s evidence and at the close of all evidence should have been granted, that the Court erred in holding trial of the two defendants in absentia, that the Court’s jury instructions were erroneous, that the verdict was contrary to law, and that the interests of justice require an acquittal or new trial.

The question arises as to whether this Court should rule at this time on the two absent defendants’ motions or should hold those motions sub curia for some period of time. Counsel for defendant Jose Strusberg-Gonzalez has asked this court to hold his aforedescribed motion sub curia until that defendant appears in person in this Court, and that this Court not sentence the said defendant until such time as well. Counsel for defendant Franklyn StrusbergGonzalez has taken those same positions. Counsel for the Government agrees that this Court should not sentence the said two defendants until they are apprehended and further concedes that to the extent the motions for acquittal or for a new trial relate to the propriety of holding trial in absentia the said motions should be held sub curia at this time. Counsel for the Government, however, urges that to the extent the said motions relate to other grounds, such as sufficiency of the evidence and propriety of refusing to sever the trials of the absent defendants, this Court should rule on those motions at this time.

The initial question presented is whether the defendants may be sentenced in absentia. The case law teaches that “a defendant must be present at sentencing. Only in the most extraordinary circumstances, and where it would otherwise work an injustice, should a court sentence a defendant in absentia, and then only under appropriate safeguards, as where the defendant has expressly waived his right to be present either by sworn affidavit or in open court on the record.” United States v. Brown, 456 F.2d 1112, 1114 (5th Cir. 1972), cert. denied, 415 U.S. 960, 94 S.Ct. 1490, 39 L.Ed.2d 575 (1974) (emphasis in original); see also United States v. Turner, 532 F.Supp. 913, 915-16 (N.D.Cal.1982); United States v. Pérsico, 87 F.R.D. 156, 157 (E.D.N.Y.1980); Fed.R.Crim.P. 43(a). As noted, the Government concedes that the defendants should not be sentenced in absentia. Accordingly, this Court will not sentence the said two defendants until such time as they are apprehended, or surrender and appear in this Court for sentencing, at least not without a further hearing and a further Order of this Court.

The second question is whether this Court should hold the pending motions for acquittal or for a new trial sub curia at this time, and if so to what extent and for how long. As noted supra, the Government agrees that to the extent the motions for a new trial relate to the in absentia issues, the motions should be held sub curia until the defendants are apprehended. However, the Government takes the position that the motions for acquittal and the motions for a new trial, insofar as those motions relate to non-irc absentia issues, should be fully considered and should be denied at this time. Seemingly, defendants' request that this Court hold their motions sub curia relates only to their motions for a new trial and not to their motions for judgment of acquittal.

In United States v. Muzevsky, 760 F.2d 83 (4th Cir.1985), the defendant failed to appear for trial, and was tried and convicted in absentia. On appeal following the defendant’s apprehension, Judge Murnaghan noted that:

[T]he court advised defense counsel that it would not rule on a motion for a new trial, which was based on the defendant's absence, until Muzevsky was in custody. This procedure, the court explained, would give Muzevsky ample opportunity to justify, if possible, why he failed to appear. Then even if the court ruled against him, his counsel would be able to note a timely appeal. The court also issued a bench warrant and ordered that Muzevsky be held without bail until it could ascertain the reason for his absence.

Id. at 84 (emphasis supplied). Judge Murnaghan stated that if a trial has been held in absentia:

[A] court should follow the procedure that the district judge adopted in Muzevsky’s case and withhold decision on the motion for a new trial and sentencing until it can learn whether the defendant voluntarily waived his right to be present.

Id. at 85. As indicated, in Muzevsky defendant’s motion for a new trial “was based on the defendant’s absence.” Id. at 84. Muzevsky does not appear to address the question of whether a post-trial motion should be held sub curia if it rests on grounds not related to the defendant’s absence.

Seemingly, the case law is silent as to the proper resolution of that latter question. In the absence of authority, this Court opts for deciding at this time the non-in absentia post-trial motions issues while the trial of the case is of rather recent vintage. If a ruling on such questions is not presently made, this Court and counsel will no longer have the benefit of that not too distant experience. Since the time for appeal by one or both of the said two defendants will not begin to run until entry of judgment following sentencing, multiple appeals will not be occasioned if this Court rules at this time with regard to the non -in absentia grounds for the said post-trial motions.

Accordingly, this Court will at this time reach the merits of those post-trial non-iw absentia issues. So doing, this Court denies relief based upon those grounds raised by counsel on behalf of the said two absent defendants before, during and/or after trial and holds to each of its previous rulings with regard to those matters, for the reasons previously stated by this Court on the record during pretrial and trial proceedings in this case.

As to the motions for judgments of acquittal or for a new trial filed by those two defendants on grounds of lack of weight and/or sufficiency of evidence, “[t]he test for deciding a motion for a judgment of acquittal is whether ‘the evidence and inferences therefrom most favorable to the prosecution would warrant the jury’s finding the defendant guilty beyond a reasonable doubt.’ Burks v. United States, 437 U.S. 1, 16, 98 S.Ct. 2141, 2150, 57 L.Ed.2d 1 (1978).” United States v. Dominguez, 604 F.2d 304, 310 (4th Cir. 1979), cert. denied, 444 U.S. 1014, 100 S.Ct. 664, 62 L.Ed.2d 644 (1980). Herein there was substantial evidence from which the jury could find beyond a reasonable doubt that each of the said two defendants was guilty of the charges brought against them. That evidence included the live testimony of Anthony Benanti, Walter Schieche, Fabio Bennetti, Ray Malcheski, as well as numerous tape recordings. Accordingly, defendants’ said contentions are denied.

In sum, the absent defendants’ said motions for a judgment of acquittal or for a new trial are hereby denied, except that to the extent those said motions are based upon the grounds that this Court erred by holding trial in absentia, those motions will be held sub curia as to each of the said absent defendants until such time as such defendant appears in this Court for a hearing on those motions.

      . Defendants Jose Strusberg-Gonzalez and Franklyn Strusberg-Gonzalez remained absent throughout the trial of this case. Bench warrants were issued by this Court, well prior to trial, for their arrest; however, to date defendants have not surrendered or been .apprehended and have not appeared in this Court. Thus, to the extent the within Memorandum and Order refers to motions of the said absent defendants, those references are to motions made on behalf of the said two defendants by their respective counsel. The reasons why this Court proceeded to trial without delay and without permitting additional time to elapse during which efforts to apprehend one or both of the two absent defendants could have continued, were fully explored, considered and set forth in rulings by this Court, prior to commencement of trial, as required by the case authorities cited in the first unnumbered paragraph of n. 8 infra.

      . Defendant Carlos Nikolai Strusberg-Gonzalez was also charged with violations of 21 U.S.C. §§ 846 and 963. Defendant Mauro Laurent Tagini was charged only with a violation of 21 U.S.C. § 846. Defendants Carlos Strusberg-Gonzalez and Mauro Laurent Tagini were present for trial and were tried jointly in a jury trial with defendants Jose Lenin Strusberg-Gonzalez and Franklyn Strusberg-Gonzalez, over the objection of counsel for Jose Lenin Strusberg-Gonzalez and counsel for Franklyn Strusberg-Gonzalez. Paper No. 110. Defendant Mauro Laurent Tagini was found not guilty. Defendant Carlos Strusberg-Gonzalez was found guilty of violating § 963 and not guilty in connection with the § 846 charge.

      . Paper No. 119.

      . Paper No. 118.
      Defendant Carlos Nikolai Strusberg-Gonzalez also moved for a judgment of acquittal or for a new trial. Paper No. 120. By a marginial Order, Paper No. 130, this Court denied that motion during a sentencing proceeding held on the record in open Court on November 18, 1985 for the reasons set forth on the record during that proceeding and prior thereto during other record proceedings in this case.

      . Paper Nos. 123, 124.

      . Paper No. 122.

      . Paper No. 125.

      . As to the propriety of holding trial in absentia, see Taylor v. United States, 414 U.S. 17, 94 S.Ct. 194, 38 L.Ed.2d 174 (1973); United States v. Muzevsky, 760 F.2d 83 (4th Cir.1985); United States v. Schocket, 753 F.2d 336, 339-40 (4th Cir.1985); United States v. Beltran-Nunez, 716 F.2d 287, 289 (5th' Cir.1983); United States v. Powell, 611 F.2d 41 (4th Cir.1979); United States v. Peterson, 524 F.2d 167, 182-86 (4th Cir.1975), cert. denied, 424 U.S. 925, 96 S.Ct. 1136, 47 L.Ed.2d 334 (1976); United States v. Tortora, 464 F.2d 1202, 1208-10 (2d Cir. 1972), cert. denied, 409 U.S. 1063, 93 S.Ct. 554, 34 L.Ed.2d 516 (1972).
      As to the propriety of a flight instruction when given, as in the within case, when a defendant is tried in absentia, see United States v. Touchstone, 726 F.2d 1116, 1118-20 (6th Cir. 1984); United States v. Schwartz, 535 F.2d 160, 165 (2d Cir.1976), cert. denied, 430 U.S. 906, 97 S.Ct. 1175, 51 L.Ed.2d 581 (1977); United States v. Lobo, 516 F.2d 883 (2d Cir.1975), cert. denied, 423 U.S. 837, 96 S.Ct. 65, 46 L.Ed.2d 56 (1975); see also United States v. Beahm, 664 F.2d 414, 419-20, 422 (4th Cir.1981); United States v. Hernandez-Miranda, 601 F.2d 1104, 1106-07 (9th Cir.1979).
      As to the propriety of joint trials when a claim of antagonistic defenses is asserted, as it was herein on behalf of several of the defendants, see United States v. Becker, 585 F.2d 703, 707 (4th Cir.1978), cert. denied, 439 U.S. 1080, 99 S.Ct. 862, 59 L.Ed.2d 50 (1970).


author: MIHM, District Judge.

text:
    Charles ERTELL, Plaintiff, v. The DEPARTMENT OF the ARMY, Defendant.
    No. 83-4065.
    United States District Court, C.D. Illinois, Rock Island Division.
    Jan. 7, 1986.
    Kary Love, Moline, Ill., for plaintiff.
    L. Lee Smith, Asst. U.S. Atty., Peoria, Ill., for defendant.
   ORDER

MIHM, District Judge.

Plaintiff, Charles Ertell, is a former employee of the Department of the Army, currently receiving disability retirement benefits. He is seeking re-employment with the Army and, as an employee on disability and a ten point veteran, is entitled to preference. Mr. Ertell has had an application on file with the Department of the Army since July of 1977.

According to the allegations of the complaint, several jobs have been available between July of 1977 and the present time for which Mr. Ertell is qualified. He has been offered none of them and he blames three documents in his file for this failure to be re-employed. The first is a “Memorandum for Record” dated March 12, 1976, authored by Arnold Kublin; second, an appraisal of past performance, also by Mr. Kublin; and third, an appraisal by Nora Hughes.

This Court, by order dated January 22, 1985, dismissed two counts of Plaintiff’s three count complaint, leaving only the Privacy Act claims intact. In that portion of his complaint, Plaintiff has alleged numerous violations of the Privacy Act ranging through inclusion of the documents in his files; failure to maintain his record in an accurate, relevant, timely, and complete fashion; failure to protect the integrity of the documents; failure to notify Plaintiff of the existence of the controverted documents; and failure to correct the erroneous records as required by the Privacy Act and requested by the Plaintiff.

Pending before the Court at the time of the hearing were Plaintiff’s motion to amend and Defendant’s motion for summary judgment pursuant to Rule 56 of the Federal Rules of Civil Procedure. The motion to amend was granted by the Court at the hearing on November 14,1985, over the objection of Defendant. The amended complaint has since been answered and the Court feels no need to address it further in this Order. Therefore, the only motion which will be considered herein is that of the Defendant for summary judgment. Position of the Defendant

The Army argues, in support of its motion, that summary judgment is warranted on three grounds: (1) failure to exhaust administrative remedies, (2) expiration of the statute of limitations, and (3) a claim that appraisals of performance are opinion rather than fact and are, therefore, exempt from the statute.

Defendant contends that the claim for non-monetary relief is barred by Plaintiff’s failure to exhaust his administrative remedies. The Department suggests that the Court erred in its order of January 22, 1985 in finding that Plaintiff had alleged the filing of a Privacy Act Notice on July 2, 1982 or that he had requested information. Absent proper findings to that effect, Defendant maintains that Plaintiff cannot show sufficient exhaustion to give the Court jurisdiction for his non-monetary relief. Defendant claims that Plaintiff has never sought to have the records amended and further claims that there is nothing in the record to indicate that he ever requested information as to the existence of negative records to which request Defendant failed to respond.

Defendant points out that there is a reviewing procedure, set out at 32 C.F.R. § 505.2(h). Pursuant to this section, the Army maintains a three-person Privacy Review Board which hears requests to amend personnel files and permits a party, upon denial of an appeal, to make additions to his records explaining the nature of his dispute. Plaintiff failed to submit such statements.

The Army contends that Plaintiff’s failure to inquire about the existence of negative evaluations in his file, request deletion of such material or other amendment of the record, and seek amendment or addition through “appeal” to the Privacy Review Board constitute an absence of administrative exhaustion which should mandate a summary judgment against Plaintiff and in favor of the Army.

The Court has already determined, in its order of January 22, 1985, that it found no reason not to follow the finding of the Court in Nagel v. United States Department of Health, Education and Welfare, 725 F.2d 1438 (D.C.Cir.1984) to the effect that: “An individual who states a claim for damages under the Act need not exhaust his administrative remedies.” Accordingly, the Army acknowledges that this argument does not apply to the claim for monetary damages.

The monetary claims are barred, the Army contends, by the statute of limitations. Defendant has presented exhibits to show that Mr. Ertell kne\y in 1976 that the Memorandum was in his file, that he was aware of its contents, and that he recognized that it was hindering his chances for re-employment. This is, they argue, well beyond the one year period after which Plaintiff claims he believed the Kublin Memorandum had been destroyed. Therefore, the Department of the Army believes that Plaintiff was in possession of all of the facts giving rise to his cause of action for monetary damages in December of 1979 and that the statute of limitations began to run at that time. It was not, however, until August 1983 that he filed his complaint and the statute had allegedly run by December of 1981. Although the Army concedes that its misrepresentations in response to inquiries made on Plaintiffs behalf may preclude the erection of a limitations bar to the non-monetary claims, it makes no similar concession with respect to the monetary damages alleged. In addition, Defendant argues that it has been substantially prejudiced by having to develop a current defense to events occurring approximately ten years ago. For these reasons, the Department maintains that it is entitled to summary judgment on the monetary claims.

Finally, Defendant claims that personnel evaluations are statements of opinion not of fact and, therefore, the Privacy Act does not apply. Because of this alleged inapplicability, the Army asserts a right to judgment as a matter of law. The Department further claims that Plaintiff must, in order to prevail, prove that he would be a good employee, that he was the applicant best qualified, and that the only factor preventing his rehiring was the existence of the documents in his record. Moreover, the Army asserts that a finding for Plaintiff on a claim of this nature would chill the Government’s efforts to hire and maintain competent employees.

Position of the Plaintiff

Charles Ertell denies that his claim for non-monetary damages is barred by a failure to exhaust administrative remedies. In support of this contention, he sets out a series of activities undertaken by others on his behalf which allegedly constitute requests for amendment of his personnel record. He apparently claims that the failure of the Army to remove the disputed documents constituted a refusal and that their failure to notify him of his right to seek review of the refusal to amend was a violation of 5 U.S.C. § 552a(d)(2)(B)(ii). Plaintiff believes that this particular violation of the Privacy Act estops Defendant from making its exhaustion argument.

In addition, Plaintiff points to the fact that the Army apparently maintained dual records — one an official personnel record and the other a record in an applicant file— but that he was not apprised of that fact or that statements made concerning the existence of certain materials in the files may have related to one and not the other. This allegedly deliberate confusion misled him, he claims, into believing that amendatory deletions had occurred in his files and that he had no further cause for worry. Consequently, he claims to have pursued his administrative remedies to the point which appeared to him to be necessary in view of assurances that had been given by the Army. Plaintiff concludes that he repeatedly requested amendment, even though not stated specifically in those terms, and that the Army failed either to make amendments or to advise him of his appeal rights. For these reasons, Charles Ertell believes that the motion for summary judgment on the grounds of failure to exhaust administrative remedies should be denied.

Turning to the statute of limitations argument, Plaintiff claims that there is a material fact in dispute as to whether or not he knew that the two Kublin documents were in his file prior to 1979. Plaintiff further argues that he received assurances on May 9, 1980 and in July 1981 that no derogatory employment information was present in his records. He maintains that these assertions renew the statute of limitations and raise a material factual issue with respect to knowledge making summary judgment inappropriate.

The existence of a material factual dispute is also the basis on which Plaintiff urges the Court to deny summary judgment on the Army’s asserted grounds that the evaluations represent opinions rather than facts. He cites the opinion of the Seventh Circuit Court of Appeals in DeBold v. Stimson, 735 F.2d 1037, 1040-41 (7th Cir.1984) stating:

“The privacy act merely requires an agency to attempt to keep accurate records, and provides a remedy to a claimant who demonstrates that facts underlying judgments contained in his records have been discredited.”

Plaintiff contends that, even if the final assessments are opinions or judgments, they are made on an underlying factual basis and the Privacy Act is, therefore, applicable.

DECISION

Some review of the factual background is necessary at this point.

Apparently Plaintiff was aware of the negative personnel documents. He has, however, asserted his belief that the Kublin Memorandum for Record (MFR) which stated “destroy after one year or upon transfer” had been destroyed in 1977 and that the Kublin appraisal had never been placed in his file because he, Charles Ertell, had refused to sign it. It is not totally clear whether Plaintiff was aware of the Hughes document prior to 1982.

After having been referred and interviewed for several possible job assignments and failing to be hired despite what he considered to be excellent credentials, Plaintiff began to suspect the existence of negative evaluative material in his file. On April 23, 1976, he enlisted the aid of Congressman Edward Mezvinsky in getting the two Kublin documents removed from his file. The Congressman sent Ertell’s request for a thorough investigation and ex-pungement of the record to the Department of the Army and received a response from Charles Smith, Special Assistant for Congressional Affairs. Mr. Smith denied several charges made in Plaintiffs letter, only one of which arguably related to Mr. Ertell’s personnel complaints, and made no response to his request to have the records expunged. Nor was any mention made of any review or grievance procedure. Plaintiff contends that this request by Congressman Mezvinsky was his first request for amendment.

Congressman Mezvinsky was followed by Congressman Jim Leach and Senator John Culver. The former wrote a letter to the Department of the Army to which he received a reply in November of 1979. In that response, William Lawrence, Chief of Civilian Personnel Office, stated:

“Mr. Ertell has been referred to selecting officials on 17 occasions since he first made application in July, 1977. Each time the Rock Island Arsenal Civilian Personnel Office was notified by the selecting official that the candidate chosen was someone other than Mr. Ertell____
Applicable regulations do not require the selecting official to specify in writing the reasons for not selecting individual candidates; rather, a written reason is provided supporting the selection of the individual to be offered the position. However, a review of Mr. Ertell’s file reveals that it contains a negative recommendation from one of his former supervisors, which may explain why he is not being selected.’’ (Emphasis added).

Then Plaintiff asked the Congressman to request removal of the documents and Leach received the following response on March 24, 1980 to his follow-up request:

“Mr. Ertell’s OPF [Official Personnel Folder] is being retained in the custody of the Federal Records Center (FRC) in St. Louis, not at RIA. Although the Memorandum for Record (MFR) contains instructions that it is to be removed and destroyed after one year, the FRC has no authority to remove any document contained in the personnel folders of Federal employees. RIA has been instructed to request Mr. Ertell’s folder from the FRC, to screen it upon receipt, and destroy the MFR. That document has not and is not being considered by RIA in their consideration of Mr. Ertell for re-employment. RIA will continue to consider him for each position for which he is qualified.”

On May 6, 1980 Charles Smith reported to Congressman Leach that:

“An extensive search was undertaken to locate the OPF of Mr. Ertell. It was located in the Office of Workmen’s Compensation Program, Department of Labor (DOL), Chicago, Illinois. Mr. Tom Hunter, DOL, screened the entire OPF and determined that the Memorandum for Record dated 12 March 1976, had been withdrawn and destroyed. The screening further revealed the absence of any derogatory employment information in Mr.,Ertell’s OPF. Since Mr. Ertell has an active compensation claim, DOL prefers to retain his OPF until final litigation.” (Emphasis added).

A letter from Plaintiff to Congressman Leach on June 6, 1980 demonstrates his confusion about the interplay of two personnel files — one in Rock Island and the other apparently, and obscurely, in both Chicago and St. Louis. He also requested Leach to contact the Director of the Office of Personnel Management urging Ertell’s immediate placement. Congressman Leach apparently made that request. The reply, dated July 21, 1981, from that office contained the following:

“We experienced some difficulty in locating the OPF. However, we have obtained the file from the Department of Labor, Branch of Hearing and Review in Washington, D.C. where Mr. Ertell has a compensation case pending. We have thoroughly reviewed the OPF and did not find the March 12, 1976 Memorandum among the records in the file. Certainly, the Memorandum should have been removed■ one year after its date or upon transfer or separation from the agency whichever came first. Failure to remove such a non-permanent document from the OPF constitutes an administrative error. The extent of the corrective action, however, would have been removal of the Memorandum from the OPF. In this case the document had already been removed from the file.
Upon further investigation, the document has been determined to be a supervisory appraisal of Mr. Ertell’s work performance. Since supervisors have an obligation to appraise employee performance, there is nothing irregular about the memorandum provided it is not retained in the employee’s OPF beyond the expiration date or the employee’s transfer or separation from the agency.’’ (Emphasis added).

The letter further advised Congressman Leach that since Mr. Ertell was registered in the applicant supply file there was nothing to prevent his former supervisors from submitting additional negative evaluation reports. He also indicates that the negative documents are being returned to Mr. Ertell for his records.

Following a refusal of access to some documents in his “Personnel File” at the Rock Island Arsenal in the spring of 1982, Charles Ertell filed a Privacy Act Request on May 13, 1982. That request was granted and he found all three personnel documents in his file there.

Later, on July 2, 1982, in response to an inquiry from James Pierce of the National Federation of Federal Employees, Plaintiff learned that the Memorandum had been removed from his applicant file as well as his OPF.

“Since shortly after his [Ertell’s] departure, his Official Personnel Folder (OPF) has not been maintained at this activity. As with the OPF’s of all former employees, his was sent to the records-holding center in St. Louis. This activity does not believe, but does not know for certain, that the document of concern is in his OPF in St. Louis.
Mr. Ertell is continuing to receive consideration for employment through our applicant supply file for positions in which he has indicated an interest. His application file no longer contains the Memorandum to which you referred. While we do not share your belief that this agency is required by law or regulation to remove the document, it was determined to be the prudent action to take.” (Emphasis added).

Finally, on September 20, 1982, Ertell, by letter, acknowledged the removal of the Kublin Memorandum “which had been in [his] file for over six years” and requested the removal of the two negative appraisals. Plaintiff has asserted that he requested an opportunity to add corrective documents, however, the Court is unable to read such a request into the letter.

It is clear from the documents submitted that the Army never advised Plaintiff of his right to appeal any failure to clear his record. Mr. Ertell specifically sought such information only once — when he made his Privacy Act Request in May 1982 — but the inquiry became moot on that particular matter when access was granted.

Having thus reviewed the factual sequence of events, the Court first turns to the request for summary judgment on the monetary damages premised on the existence of a statute of limitations bar. It is clear from the documents summarized above and from Plaintiff’s own pleading that Charles Ertell knew in July of 1981 that there had been negative evaluations in his file which “may explain why he is not being selected;” (William Lawrence letter of November 19, 1979); that the MFR was still in his OPF on March 18, 1980; that an examination of the OPF in May of 1980 revealed the “absence of any derogatory employment information” therein; that failure to remove the documents “constitutes an administrative error;” and that there were two different files one of which (“applicant supply file”) would be opened to admit appraisals from the same supervisors each time Plaintiff was reached for referral. Moreover, documents “inappropriate for permanent retention in the OPF” were no longer there because they were “returned for Mr. Ertell’s records” (Steven Cohen letter of July 21, 1981) so he knew the content of the appraisals. A stamped date on the latter letter suggests that it was received on July 30, 1981. It is clear that on that date Charles Ertell knew that he had a cause of action against the Army for money damages. It was then that the statute of limitations began to run giving him until July 30, 1983 to file a complaint.

Plaintiff contends that his discovery of the negative evaluations in his applicant supply file in 1982 should start the statute running anew. While this may be a plausible contention, the Court does not believe it to be a correct one. Logically, Plaintiff’s discovery would have had the effect of confirming his belief that he had been wronged and giving added strength to the existence of a cause of action. Since his prayer for damages could always be amended to reflect additional injury subsequent to those asserted in his complaint, the discovery is not such as should toll the running of the statute on a damage claim— it only improved the case he already had.

The Court believes that Plaintiff’s position would be much more tenable in the context of his non-monetary claims where argument may be made that the injury is ongoing and still subject to agency remediation or that the running of the statute is equitably tolled by Defendant’s active misrepresentations leading him to forego judicial action. Because he was seeking monetary damages for past injury, equitable tolling would not be applicable. Also, as indicated above, the discovery that the records were still in the applicant supply file does not give Plaintiff a new cause of action but merely enhances any damages which may accrue to him on the original cause of action.

For these reasons, the Court finds that summary judgment should be granted on the monetary claims because they are barred by the statute of limitations. The Court also believes, according to the foregoing analysis, that the statute of limitations does not preclude an action on the non-monetary claims because Defendant’s misrepresentations would lead Plaintiff to believe that further action to correct the records was unnecessary.

Turning next to the issue of exhaustion of remedies with regard to the non-monetary claims, the Court would be hard pressed to find, in view of the extensive correspondence from Congressmen Mezvinsky and Leach to the Department of the Army, that a request for amendment of the record was not made. It seems clear from an examination of the letters themselves that the two Congressmen were acting as representatives of Charles Ertell — much as an attorney would in the same circumstances — and that they were requesting examination and amendment of the records on Mr. Ertell’s behalf. Moreover, it appears equally clear in examining the correspondence that the Army personnel who received them viewed these letters as requests to amend and responded accordingly. The Court believes that to find that this correspondence does not constitute requests to amend would exalt form over substance. The Court, therefore, holds that a written request for amendment was made to the agency by representatives of the Plaintiff.

After much delay and several contradictory letters, Plaintiff was assured in 1981 that the offending material had been removed from his record. When he was still not hired he began to suspect that he had been misinformed and that his personnel record still contained negative evaluations. He filed a Privacy Act Notice to see the records for himself. In the spring of 1982, he discovered that the very same material that he had been assured had been removed from his file was still present in it.

By this time, Plaintiff had become understandably skeptical about representations and reassurances from Army personnel and he made no further attempts to have the Army amend, correct, or remove any records either by way of correspondence or by filing a request with the Privacy Review Board. The Army has asserted that this election not to pursue agency review is a failure to exhaust administrative remedies and that Plaintiff is, therefore, barred from pursuing this judicial action. Defendant has further asserted that futility does not excuse a failure to exhaust.

In general, the remedies available through the established procedures of a state or local government or an administrative agency must be claimed in that forum before an aggrieved party seeks judicial review. Myers v. Bethlehem Ship Building Corp., 303 U.S. 41, 50-51, 58 S,Ct. 459, 463-64, 82 L.Ed. 638 (1938); Janowski v. International Brotherhood of Teamsters, Local No. 710 Pension Fund, 673 F.2d 931 (7th Cir.1982). Such exhaustion can be statutorily mandated; if it is not, the applicability of the doctrine is committed to the sound discretion of the court. Janowski v. International Brotherhood of Teamsters, etc., supra. The Court does not read the Privacy Act (5 U.S.C. § 552a) as mandating exhaustion. However, as the Seventh Circuit Court of Appeals held in City of Peoria v. General Electric Cablevision Corp. (GECCO), 690 Fi2d 116 (7th Cir. 1982):

“The two doctrines, exhaustion and primary jurisdiction, are of course closely related — so much so that it is perhaps pedantic to insist on a distinction. Both seek to carry out a Congressional purpose, inferred from the language or history of a regulatory statute, or from the nature of the regulatory agency’s responsibilities, of enabling the agency to make a record and a decision on a matter before the courts put their oar in.”

This kind of informed discretion led the court of appeals for the District of Columbia to determine in Nagel v. United States Department of Health, Education and Welfare, 725 F.2d 1438 (D.C.Cir.1984) that exhaustion of administrative remedies is, in fact, a prerequisite to bringing a civil suit under the Privacy Act to compel amendment of records maintained by a federal agency on the grounds that they are not accurate, relevant, timely, or complete. The Nagel court examined the statute carefully and determined that Congress intended to require exhaustion. This Court has repeated that exercise and concurs with the conclusion reached by the District of Columbia Court of Appeals.

The doctrine of exhaustion of administrative remedies is a judicially created one and is not absolute; it is also within the discretion of the Court to waive the exhaustion requirement when application of the doctrine would be unjust (Goodrich v. U.S. Department of the Navy, 686 F.2d 169 (1982)): when the established administrative procedures would prove unavailing or futile (Continental Can Co., USA v. Marshall, 603 F.2d 590 (7th Cir.1979)); or where there has been a denial of meaningful access (Harper v. Kobelinski, 589 F.2d 721 (D.C.Cir.1978)). In other words, the exhaustion doctrine is to be applied flexibly, with an eye toward achieving its underlying purposes. Hormel v. Helvering, 312 U.S. 552, 556-59, 61 S.Ct. 719, 721-22, 85 L.Ed. 1037 (1941); McKart v. United States, 395 U.S. 185, 193, 89 S.Ct. 1657, 1662, 23 L.Ed.2d 194 (1969); Etelson v. Office of Personnel Management, 684 F.2d 918 (D.C.Cir.1982).

As the Court reads the record, the case at bar is quite similar to Harper v. Kobelinski, supra, in which plaintiff Harper sought an injunction against continued use of information regarding him in the file of a co-worker and a judicial determination that some of the material in that file was false and should be expunged or amended. He had sought removal of the information at issue by letter addressed to the Small Business Association’s (SBA) director of personnel. He was advised that his request could not be accommodated because the material was not in a file under their control. At that point, Harper filed suit and the SBA raised the doctrine of exhaustion of remedies as a defense.

Citing the requirements of § 552a(d)(2)(B)(ii) that a person be informed of the refusal, the reasons therefor, and “the procedures established by the agency for the individual to request a review of that refusal by the head of the agency or an officer designated by the head of the agency, and the name and business address of that official;” the District of Columbia Court of Appeals held that the district court could retain jurisdiction of the pending action finding that the employee did not pursue an administrative appeal because he was not apprised of the availability of such an appeal.

The Court has searched the record and finds nothing in any of the correspondence to indicate that Plaintiff was ever informed of the existence of the Privacy Review Board or of its function as an appellate body. The Army has contended that Plaintiff never requested this information or, alternatively, that the one request he made in a slightly different context indicated that he recognized the existence of appellate procedures. In light of the clear statutory language, neither of these arguments provides Defendant with sufficient support to permit it to invoke the doctrine of exhaustion of remedies.

It should be noted, as held by the Association of National Advertisers, Inc. v. F.T.C., 627 F.2d 1151, cert. denied 447 U.S. 921, 100 S.Ct. 3011, 65 L.Ed.2d 1113 (D.C. Cir.1979) that: “jurisprudential concerns, such as those embodied in exhaustion of administrative remedies doctrine, do not bear on whether a court has jurisdiction but only on whether it should exercise that jurisdiction.” The Court, therefore, holds that the requirement that Plaintiff exhaust all administrative remedies should not be employed to foreclose this action and this Court elects to exercise jurisdiction over the non-monetary claims.

Finally, the Court turns to the issue of opinion versus fact to determine whether summary judgment for the Defendant is warranted based on the allegation that these appraisals, as expressions of opinion, are not covered by the Privacy Act.

The Court has read the cases cited on this issue by the parties. It was clearly held by the court in Blevins v. Plummer, 613 F.2d 767, 768 (9th Cir.1980) that the Privacy Act provisions and the Air Force regulations set out in 33 C.F.R. § 806b.17 permit amendment of factual matters and not matters of opinion. In Fagot v. FDIC, 584 F.Supp. 1168 (D.P.R.1984), the court reviewed the case law and noted the holding of Blevins v. Plummer as set out above and implied some agreement. However, because it held that the absence of a “concrete, adverse determination based on those records” was fatal to plaintiffs Privacy Act claim, the Fagot court did not have to rule on that issue.

On the other hand, the quotation cited by Plaintiff from DeBold v. Stimson, 735 F.2d 1037 (7th Cir.1984), gives some evidence that the Seventh Circuit, in which this Court sits, believes that at least some opinion statements can give rise to Privacy Act claims.

The Court finds itself in philosophical accord with Judge Gesell’s opinion in R.R. v. Department of the Army, 482 F.Supp. 770 (D.C.D.C.1980) which includes the following:

“Accuracy of government-recorded personnel information is particularly important in our complex and breaucratieallyinterrelated society, where an individual’s rights and benefits may well be influenced or determined by what some government agency has to say about him. The prejudice resulting from inaccuracy may affect determinations reached by third parties, public or private, as well as those made by the record keeping agency. Of course, no individual is entitled to shape or color such information according to his own whims or preferences. On occasion accuracy is achieved only by allowing a disputed question of fact or judgment previously recorded to remain in the record, qualified by subsequent data. On the other hand, it may be necessary to eliminate clear mistakes of fact or irresponsible judgment from an individual’s file so as not to prejudice prospects for a fair determination of his rights or benefits.
The language of the act establishes that an individual may bring a civil action to compel the correction of inaccurate records. See 5 U.S.C. § 552a(g)(l) (1976). Although defendant would confine the scope of this cause of action to amending purely factual misrepresentations, the court does not so narrowly interpret the statute. Remedial legislation should be liberally construed in order to effect its obvious purpose. In this instance, the statute vests broad discretion in the district court to ‘... order the agency to amend the individual’s record in accordance with its request or in such other way as the court may direct.’ 5 U.S.C. § 552a(g)(2)(A) (1976). It would defy common sense to suggest that only factual erroneous assertions should be deleted or revised while opinions based solely on these assertions must remain unaltered in the individual’s official file.”

The court then goes on to say that once all of the underlying facts for such judgments have been discredited an agency may not refuse a request to revise or expunge. This difference between Judge Gesell’s case and the one. presently before this Court will be addressed shortly.

It is the opinion of this Court that the spirit of the Act, if not its letter, dictates that opinions maintained in and freely disseminated through a system of records, apparently (perhaps admittedly) causing concrete, adverse determinations, and allegedly grounded on demonstrably (although not proven) erroneous factual bases, are amenable to review with respect to Privacy Act issues. The Court cannot find, as did Judge Gesell, that the facts underlying prior professional judgments have been thoroughly discredited. However, at the very least, the Court believes that Plaintiff has demonstrated the existence of a material factual dispute which makes summary judgment inappropriate.

It is, therefore, ordered that Defendant’s Motion for Summary Judgment is GRANTED on the issue of monetary damages and DENIED as to the non-monetary relief sought. Additionally, summary judgment rejecting the latter claims based on the two appraisals as statements of opinion is also DENIED.


author: ENSLEN, District Judge.

text:
    Roy MABRY, Plaintiff, v. COUNTY OF KALAMAZOO, a Michigan Government Entity, Eric Dunithan, Individually and as a Deputy Sheriff of the County of Kalamazoo, Defendants.
    No. K84-530.
    United States District Court, W.D. Michigan, S.D.
    Jan. 7, 1986.

      Richard D. Stroba of Marovich & Stroba, Kalamazoo, Mich., for plaintiff.
    Ronald E. Baylor of Miller, Canfield, Paddock & Stone, Kalamazoo, Mich., for defendants.
   OPINION

ENSLEN, District Judge.

This case is before the Court for the second time on the question of whether it should grant summary judgment for one of the parties. In a bench opinion rendered on December 9, 1985, the Court dismissed the complaint as against defendants Epitome Corporation, d/b/a Doughertys Corner Market, and William Gorman; denied defendants County of Kalamazoo and Eric Dunithan’s motion for summary judgment, except as to the issue of whether defendant Dunithan had probable cause to arrest the plaintiff, on which issue the Court granted defendant Dunithan’s motion; and, acting sua sponte, set a hearing for December 23, 1985, at 4:00 p.m., to consider whether it should grant summary judgment for the plaintiff on the issue of the remaining defendants’ liability. The Court’s bench opinion of December 9th, and the briefs the parties filed pursuant to that opinion, present three issues for the Court to resolve: (1) did plaintiff’s detention over the 1983 fourth of July weekend without a determination of probable cause by a judicial officer violate his rights under the fourth and fourteenth amendments to the United States Constitution; (2) if it did, can plaintiff hold defendants County of Kalamazoo and Eric Dunithan liable for such detention; and (3) if plaintiff can hold defendant Dunithan liable for an unconstitutional detention, can defendant Dunithan escape liability under the doctrine of qualified immunity. The standard under which the Court shall resolve these issues on this motion for summary judgment is well-established and will not be repeated in detail here. See Adickes v. S.H. Kress Co., 398 U.S. 144, 157, 90 S.Ct. 1598, 1608, 26 L.Ed.2d 142 (1970); Watkins v. Northwestern Ohio Tractor Pullers Association, 630 F.2d 1155, 1158 (6th Cir.1980); Federal Rules of Civil Procedure (“FRCP”) 56(c). As Rule 56(c) states, the Court must determine whether there is a genuine issue as to any material fact and, if not, whether either plaintiff or defendant is entitled to judgment as a matter of law.

The following facts are undisputed. Defendant Dunithan arrested plaintiff on the evening of July 2nd, 1983, at around 7:10 p.m. on a charge of felonious assault. This Court held at the December 9th hearing that such arrest was made pursuant to probable cause. Defendant Dunithan proceeded to have plaintiff taken to the Kalamazoo County Jail and to process the charge against him, or to “book” him. Plaintiff was detained at the jail for the rest of the day on Saturday and all day Sunday and Monday. An assistant prosecuting attorney reviewed the charge against plaintiff sometime on Tuesday and decided that no charges should be formally filed. Plaintiff then was released from the jail. He alleges he was not released until approximately 6:00 p.m., while defendants indicate he was released sometime during the day. Regardless of which party is correct, it is undisputed that plaintiff was detained for at least sixty (60) hours before being released.

As the Court discussed at the December 9th hearing, the governing standards for this type of case were established by the Supreme Court in Gerstein v. Pugh, 420 U.S. 103, 95 S.Ct. 854, 43 L.Ed.2d 54 (1975). The Court held in Gerstein that the Fourth Amendment “requires a judicial determination of probable cause as a prerequisite to extended restraint of liberty following arrest.” Id. at 114. In the case of an arrest made pursuant to a warrant, that determination would have been made when the warrant was issued. In the case of a warrantless arrest, however, such as what occurred in this case, that determination must necessarily be made after the suspect has been taken into custody. The Supreme Court thus recognized that persons may be detained for a brief period without violating the Fourth Amendment until a judicial officer can make a determination of whether there is probable cause to justify continued detention. The Court defined this brief period as the time necessary “to take the administrative steps incident to arrest.” Id.; see Bernard v. City of Palo Alto, 699 F.2d 1023, 1025 (9th Cir.1983) (per curiam). Once that time period has passed, however, and the arresting officials have completed the “administrative steps incident to arrest,” an arrestee cannot be detained further absent “a determination of probable cause by a neutral magistrate.” Id.; Pugh, 420 U.S. at 113-14, 95 S.Ct. at 862-63.

The parties have not suggested to the Court how long it took defendant Dunithan, or other personnel of the Sheriff Department or the Jail, to complete the administrative steps incident to plaintiff's arrest. Defendants do not argue, however, that plaintiff’s lengthy detention was required for them to complete such steps. Even given, moreover, the liberal interpretation of “administrative steps” the district court for the Southern District of Texas used in Sanders v. City of Houston, 543 F.Supp. 694, 700 (S.D.Tex.1982) (steps included “completing paperwork, searching the suspect, inventorying property, fingerprinting, photographing, checking for prior records, laboratory testing, interrogating the suspect, verifying alibis, ascertaining similarities to other related crimes, and conducting line-ups”), affd mem., 741 F.2d 1379 (5th Cir.1984), I find that defendants’ confinement of plaintiff for over 60 hours violated the standard established in Ger-stein.

As I stated at the December 9th hearing, several courts have found that holding a person for longer than 24 hours without a determination of probable cause by a judicial officer violates the Fourth Amendment. E.g., Bernard, 699 F.2d at 1025-26; Sanders, 543 F.Supp. at 702; Dommer v. Hatcher, 427 F.Supp. 1040, 1045 (N.D.Ind. 1975), rev’d in part on other grounds, 653 F.2d 289 (7th Cir.1981) (per curiam). Since this ease involves only the complaint of a single individual and thus does not require a determination that would affect the entire class of persons detained at the Kalamazoo County Jail, the Court need not determine whether a “twenty-four hour rule” is constitutionally required in order to find that plaintiff’s detention of 60 plus hours was unconstitutional.

Defendants raise a number of arguments in an attempt either to justify their action or to forestall a decision against them at this time. They argue first that the case law is distinguishable on two grounds: (1) prior cases establish only the proposition that “detention prior to establishing probable cause for the purpose of completing an investigation or eliciting inculpatory statements is improper”; and (2) in those cases, judicial officers were readily available. Defendants' Brief at 3. The Court finds these distinctions to be unpersuasive.

The Supreme Court’s decision in Ger-stein established a per se rule, without regard to why the person is being held, that detention beyond the time needed to take “the administrative steps incident to arrest” requires a judicial determination of probable cause. Holding a person merely for the purpose of completing an investigation or eliciting inculpatory statements without according him a prompt determination of probable cause is improper. The rationale for the detention, however, is not material: it is equally improper to hold a person without a prompt determination of probable cause when the responsible officials have no ulterior motives for the detention. In other words, a defendant’s right under Gerstein to a prompt determination of probable cause does not vary with the good faith or bad faith of the arresting and holding officers.

In the same vein, it is irrelevant in this particular case that plaintiff has not demonstrated that a judicial officer was actually available over the fourth of July weekend to make a determination of probable cause. Plaintiff satisfies his burden of proof once he shows that he was detained for longer than the period of time allowable under Gerstein. If a person is arrested during the evening, such period of time would generally include not only the time required to take the administrative steps incident to arrest but also the time needed to have a magistrate or other judicial officer make a determination of probable cause. If this case presented a close question of whether defendants had violated plaintiffs fourth amendment rights, e.g., if the period of detention had been approximately twenty-four (24) hours, then the Court may consider the question of whether a judicial officer was actually available to make a determination of probable cause to be part of plaintiffs burden of proof.

The violation in this case is too clear, however. Defendants are constitutionally obligated to ensure that a judicial officer is available to make a probable cause determination within the requisite period of time. A person’s fourth amendment rights are no less extant and binding on defendants on a fourth of July weekend than any other time of the year. “[T]he availability of the necessary judicial officers is an unresolved issue,” Defendants’ Brief at 5, but in this case it is not a material issue. Even the court in the case on which defendants rely most heavily, Sanders, held that persons arrested without a warrant “must be brought before a judicial officer ... not later than twenty-four (24) hours after the arrest” and stated that its holding would “apply ... on a weekend or holiday” as well as during the week. Sanders, 543 F.Supp. at 702.

Defendants also argue that “[wjhether the plaintiff’s detention constituted an unreasonable delay is a question for the fact-finder to determine after considering all of the circumstances.” Defendants’ Brief at 5. Defendants misconstrue the nature of the right plaintiff enjoys under Gerstein. The Supreme Court in Gerstein sharply limited the “balancing”, “consideration of all the circumstances”, or determination of “reasonableness” a court or finder-of-fact should engage in such cases when it stated that the existence of probable cause justifies only the arrest and “a brief period of detention to take the administrative steps incident to arrest.” Gerstein, 420 U.S. at 113-14, 95 S.Ct. at 863. “Once the suspect is in custody ... the reasons that justify dispensing with the magistrate’s neutral judgment evaporate.” Id. at 114, 95 S.Ct. at 863. The onus is then on the arresting and holding officers to ensure that the suspect receives a prompt determination of probable cause.

The only determination of reasonableness that may be required is whether such officers took a “reasonable” amount of time in completing the requisite administrative steps and securing a probable cause determination from a judicial officer. In that limited context, there may be a question of fact for the finder-of-fact to resolve. In this case, however, as I stated previously, plaintiff’s length of detention was clearly unreasonable and violated his rights under Gerstein as a matter of law. See Llaguno v. Mingey, 763 F.2d 1560, 1567-68 (7th Cir.1985) (en banc). The availability of a judicial officer to make a determination of probable cause may be a factor, particularly in a small town/rural area such as that covered by the eighth judicial district, for a court to consider in determining whether a suspect was held for longer than the time required to complete the requisite administrative steps and to locate a judicial officer. There is an outside limit, however, to the length of time a suspect can be held without a probable cause determination that defendants in this case surpassed. The Court will also note for the convenience of interested readers that the Supreme Court also discussed in Gerstein the procedures a state should follow in making the requisite determination of probable cause. Gerstein, 420 U.S. at 119-26, 95 S.Ct. at 865-69.

The Court must now determine whether defendants can be held liable for this violation of plaintiffs constitutional rights. I will first discuss the potential liability of the County of Kalamazoo. With respect to the County, the governing standard' is whether the injury plaintiff suffered resulted from “execution of a [county] policy or custom, whether made by its lawmakers or by those who edicts or acts may fairly be said to represent official policy.” For the County to be held liable, the Court must find that plaintiff was unlawfully detained pursuant either to “a policy statement, ordinance, regulation, or decision officially adopted and promulgated by” the County’s officers or to a County “custom”. Monell v. New York City Department of Social Services, 436 U.S. 658, 690-91 & 694, 98 S.Ct. 2018, 2035-36 & 2037 (1978). Plaintiff thus must demonstrate that his unlawful detention was the result of a policy decision or custom not to have a magistrate available on the 1983 fourth of July weekend.

Although it is difficult for the Court to conceive of how the constitutional injury plaintiff suffered could have been anything but the result of a policy decision or custom, plaintiff has not provided the requisite support for the Court to so rule on this motion for summary judgment. Provided plaintiff does provide such support, either at trial or on a motion for summary judgment, the Court believes that the County would be liable. The County argues that it should not be held liable for the actions of the prosecutor, the sheriff department, and the district court since those governmental bodies operate independently and are not subject to the County’s control. The Court finds, however, that the actions of these bodies can “fairly be said to represent official policy” of the County, making the County liable for their constitutional misdeeds in this case.

With respect in particular to the district courts, Michigan law establishes a peculiar situation where such courts are under the control of both the County and the judicial branch. The County is responsible for the operation, financing, and maintenance of the district courts. See M.C.L. §§ 600.-8103, .8104, .8117, & .8501. The courts, however, also are subject to the control of the state supreme court. M.C.L. § 600.-8101. The County, or other “district control unit,” thus has responsibility for the courts in some areas but not in others. See generally Judges of the 74th Judicial District v. Bay County, 385 Mich. 710, 190 N.W.2d 219 (1971); Kain v. State of Michigan, 109 Mich.App. 290, 311 N.W.2d 351 (1981). In many respects the relationship between the district courts and the County in this case is similar to the relationship between the Sheriff Department and the County. In Márchese v. Lucas, 758 F.2d 181, 188-89 (6th Cir.1985), petition for cert. filed, 54 U.S.L.W. 3153 (U.S. Aug. 29, 1985), the Sixth Circuit found that a County could be held liable for actions that constituted the official policy of the Sheriff Department. Similarly, in this case the County can be held liable for actions that constitute the policy or custom of the district courts. The County may not be the only party that could or should be held liable for the injury plaintiff suffered, but it is a proper party.

The issues regarding the liability of defendant Dunithan are two-fold. The first is whether defendant Dunithan can be said to have “caused” plaintiff’s constitutional injury. The second issue is if defendant Dunithan did cause such injury, whether he can claim the benefit of qualified immunity from monetary relief. Defendant Dunithan argues that although he initiated plaintiff’s confinement, he did not cause plaintiff’s continued confinement because he had no authority under Michigan law to take action to release plaintiff or to secure a probable cause determination from a judicial officer. He thus did not “cause” the unconstitutional delay between arrest and a determination of probable cause by a judicial officer. Under Michigan law, however, defendant Dunithan was responsible for taking plaintiff “without unnecessary delay” before a magistrate. M.C.L. § 764.13. He thus cannot wash his hands completely of responsibility for plaintiffs unconstitutional confinement. As with the County, however, there are unresolved questions of material fact, specifically whether and to what extent defendant Dunithan retained control over the plaintiff after the arrest, that preclude a grant of summary judgment at this time for either party. See Lambert v. McFarland, 612 F.Supp. 1252, 1262 (N.D.Ga. 1985).

The Court does find that defendant Dunithan cannot claim the benefit of qualified immunity. Defendant Dunithan would be immune from civil damages, even if he “caused” plaintiff’s constitutional deprivation, if his conduct did not “violate [a] clearly established statutory or constitutional right[ ] of which a reasonable person would have known.” Harlow v. Fitzgerald, 457 U.S. 800, 818, 102 S.Ct. 2727, 2738, 73 L.Ed.2d 396 (1982). Although defendant makes a cogent argument to the contrary, I believe that his conduct did violate “clearly established law” and that he has not shown that he “neither knew nor should have known of the relevant legal standard.” Id. at 818-19, 102 S.Ct. at 2738. Gerstein was decided in 1975 and the principle that “the Fourth Amendment requires a judicial determination of probable cause as a prerequisite to extended restraint of liberty following arrest” thus was clearly established law by the time of plaintiff’s detention in 1983. Gerstein, 420 U.S. at 114, 95 S.Ct. at 863.

Defendant argues that though this principle was clearly established, he could not have been expected to know that detention for more than one or two days would violate Gerstein since most of the cases holding such were decided only shortly before the incident in this case occurred. Plaintiff’s detention in this case, however, far exceeded the 24 hours the courts cited previously in this opinion found unconstitutional, and Gerstein itself states that once “the administrative steps incident to arrest” are completed, the State’s justification for holding a suspect without a determination of probable cause evaporates and it must make such a determination. Id. The fact that other Michigan officials, such as the prosecutor and district court officials, apparently were unaware of Gerstein is a factor the Court must consider in determining defendant’s qualified immunity defense, but it is not determinative. Ger-stein was decided too long ago and the violation in this case was too egregious for the Court to find that defendant Dunithan is entitled to claim the benefit of the doctrine of qualified immunity.

In summary, the Court finds that plaintiff’s detention for 60 plus hours over the 1983 fourth of July weekend without a judicial determination of probable cause violated his rights under the fourth amendment, as interpreted by the Supreme Court in Gerstein v. Pugh. I also find, however, that I cannot rule as a matter of law on the basis of the undisputed facts before me that either defendant County of Kalamazoo or defendant Dunithan should be held liable for this violation. The Court thus will not grant plaintiff summary judgment at this time. I will enter an order in accordance with this opinion. The Court also notes that this written opinion is intended to memorialize and to supplant the bench opinion rendered at the hearing held on December 23, 1985.