author: WARREN, District Judge.

text:
    THOMAS INDUSTRIES, INCORPORATED, Plaintiff, v. WAGNER SPRAY TECH CORPORATION, Defendant.
    No. 84-C-1110.
    United States District Court, E.D. Wisconsin.
    Oct. 9, 1985.

      Glenn 0. Starke, Andrus, Sceales, Starke & Sawall, Milwaukee, Wis., for plaintiff.
    Wayne E. Babler, Jr., Quarles & Brady, Milwaukee, Wis., and Dennis A. Gross, Hill, Van Santen, Steadman & Simpson, Chicago, 111., for defendant.
   DECISION AND ORDER

WARREN, District Judge.

The plaintiff in this action, Thomas Industries, Incorporated (hereafter “Thomas”) has filed a motion for reconsideration of the Court’s March 8, 1985 decision granting the summary judgment motion of defendant Wagner Spray Tech Corporation (hereafter “Wagner”) on the issue of the validity of the patents involved in this case. Thomas also objects to the Court’s award to Wagner of its costs and attorneys’ fees incurred with respect to its summary judgment motion. In addition to these matters, four other motions are pending in this action, including three motions to compel discovery and Thomas' motion to amend the complaint. These motions will be addressed sequentially.

I. THOMAS’ MOTION FOR RECONSIDERATION

On December 10, 1984, Wagner filed a motion under Rule 11, Federal Rules of Civil Procedure, to strike and dismiss with prejudice certain portions of the complaint. Those portions of the complaint were paragraphs 11 and 13, in which the plaintiff alleged that Wagner’s United States Patents 3,899,134 and 4,036,438 werfe void and unenforceable. As an alternative to its request to strike and dismiss these paragraphs, Wagner moved for summary judgment on the issue of the validity of those patents.

Wagner’s motion was grounded on Thomas’ failure to supply any factual bases for its allegations in paragraphs 11 and 13 after such information had been requested by Wagner. In response to Wagner’s interrogatory requesting the factual bases for the allegations in paragraphs 11 and 13, Thomas replied that the patents “are invalid, void and unenforceable as being anticipated and/or obvious over the prior art.” (Plaintiff’s Response to Defendant’s Interrogatory No. 4). After Wagner filed its motion under Rules 11 and 56, it made repeated requests to Thomas to identify and/or produce the prior art Thomas was relying upon. No prior art was identified or produced by Thomas. Moreover, Thomas failed to produce or identify any such prior art in support of its brief in opposition to Wagner’s Rule 11/56 motion, which Thomas filed on January 4, 1985.

On February 25, 1985, twenty-four days after the briefing period on Wagner’s Rule 11/56 motion had ended, Thomas filed its brief in response to Wagner’s motion for a preliminary injunction. Wagner had filed this motion on December 26, 1984, and an extended briefing schedule was set by the Court.

Included with Thomas’ memorandum in response to Wagner’s preliminary injunction motion was the affidavit of Charles E. LaBelle, an employee of Thomas who participated in the design and development of its airless spray gun. In his affidavit, La-Belle described certain other patents, the subject matter of which he asserted would have been obvious to a person skilled in the art at the time Wagner’s ’134 and ’438 patents were invented. Attached to La-Belle’s affidavit were diagrams of this alleged prior art. None of this information had been provided to Wagner or to the Court prior to the filing of LaBelle’s affidavit on February 25, 1985.

On March 8, 1985, the Court heard oral argument on Wagner’s Rule 11/56 motion. The Court had originally scheduled a hearing on Wagner’s preliminary injunction for that date, but decided to change the sequence of those hearings when it became clear that Thomas had not produced any prior art in support of its invalidity allegations, thus presenting no factual issue which would preclude the granting of summary judgment. A letter to counsel notifying them that the March 8, 1985, date would be used for oral argument on Wagner’s Rule 11/56 motion was mailed on February 20, 1985.

During his argument on March 8, 1985, Wagner’s counsel, Dennis Gross, pointed out several instances in which Thomas had failed to identify or produce evidence of prior art in response to Wagner’s interrogatories and requests for production of documents. In addition, Mr. Gross referred to the deposition of Charles LaBelle taken on January 23, 1985, during which Thomas Wozny, counsel for Thomas, stated that the prior art would be delivered to Wagner when it was collected.

Mr. Gross also stated that following the initial appearance of the prior art attached to the LaBelle affidavit, Wagner subpoenaed Glenn Starke, counsel for Thomas, to determine the date on which that art became known to Thomas. Starke indicated that some of the documents had been in Thomas’ possession prior to the filing of this action. Starke also stated that the prior art had been in his law firm’s offices at the time the LaBelle deposition was conducted there.

At the conclusion of the parties’ arguments at the March 8 hearing, the Court issued an oral decision denying Wagner’s Rule 11 motion but granting its motion under Rule 56 on the issue of patent validity. The Court denied the Rule 11 motion primarily because, in its recently amended version, Rule 11 does not include a clear cut provision for striking unsupported pleadings. The Court felt, however, that Thomas clearly had failed to meet its burden of presenting prior art in order to demonstrate the existence of a factual dispute which would defeat Wagner’s summary judgment motion. Therefore, in view of the presumption of validity accorded to patents, the Court granted Wagner’s Rule 56 motion and awarded it its costs and attorneys’ fees.

A. Propriety of Court’s Order Granting Summary Judgment

Thomas argues that the Court should reverse its decision granting summary judgment because the prior art referred to in the LaBelle affidavit discloses a material issue of fact as to the validity of Wagner’s patents. Thomas further contends that even though this material was not submitted in response to Wagner’s motion for summary judgment, it was a part of the record of this case prior to the March 8,1985 hearing and therefore should have been considered by the Court.

The Court finds Thomas’ arguments unpersuasive. First, under Local Rule 6.01, Thomas was required to file any answering brief and supporting affidavits in response to Wagner’s motion within fourteen (14) days after receipt of that motion. Thomas did not file the LaBelle affidavit until February 25, 1985, long after the briefing period had closed. The mere fact that the Court heard oral arguments on the Rule 11/56 motion in March does not mean that Thomas was allowed to submit new evidence until that time. The March 8 meeting was clearly scheduled as an oral argument, not an evidentiary hearing, and the period for submitting anything but new evidence (which the Court will discuss below) closed at the time of the briefing deadlines.

The second reason the Court will not reconsider its decision is that the choice of materials considered with respect to a summary judgment motion lies within the sound discretion of the trial judge. Zenith Radio Corp. v. Matsushita Electric Industrial Co., Ltd., 494 F.Supp. 1161, 1168 (E.D.Pa.1980). The cases cited by Thomas in support of the proposition that a judge must consider all materials of record at the time a summary judgment motion is decided are not factually similar. In Higgenbotham v. Ochsner Foundation Hospital, 607 F.2d 653 (5th Cir.1979), Interlago A.G. v. F.A.O. Schwarz, Inc., 191 U.S.P.Q. 129 (N.D.Ga.1976), and E.H. Marhoefer, Jr. Co. v. Mount Sinai, Inc., 190 F.Supp. 355 (E.D. Wis.1961), the additional materials considered by the courts were on record at the time the summary judgment motions were filed. None of these cases involved a situation where parties submitted additional documents after the summary judgment materials had been received. Furthermore, in none of those cases was it apparent that the non-moving party had intentionally declined to present relevant materials in the course of the summary judgment briefing period, as Thomas did in this case.

The third reason the Court will not reconsider its decision is that Thomas failed in its duty to come forward with evidence in its possession which might have demonstrated a factual dispute. The party opposing a motion for summary judgment has an affirmative duty to demonstrate, by affidavit or otherwise, the existence of an eviden-tiary conflict. Publishers Resource, Inc. v. Walker-Davis Publications, Inc., 762 F.2d 557, 561 (7th Cir.1985); Barmag Barmer Maschinenfabrik A G v. Murata Machinery, Ltd., 731 F.2d 831, 836 (Fed.Cir.1984). Not only did Thomas fail to present the LaBelle affidavit and attached prior art to the Court in direct response to Wagner’s motion, it repeatedly failed to produce or identify that material in response to Wagner’s interrogatories and requests for production of documents. A party who refuses to substantiate its claims in this manner is subject to having its claims dismissed through summary judgment. Pirolo v. City of Clearwater, 711 F.2d 1006, 1012 (11th Cir.1983). Though the consequences of its tactical decisions are now apparent to Thomas, the predicament it created for itself is not just cause for reconsideration of the Court’s decision.

The fourth and final reason the Court will not reconsider its decision is that the LaBelle affidavit and attached prior art, upon which Thomas bases its motion for reconsideration, is not new evidence which was not in Thomas' possession at the time Wagner’s motion was in the briefing stage. Motions for reconsideration are not to be used as devices to introduce evidence which could have been proffered during the pendency of a summary judgment motion. Publishers Resource, 762 F.2d at 561; Keene Corp. v. International Fidelity Insurance Co., 561 F.Supp. 656, 665-66 (N.D. 111.1982). According to the deposition testimony of Thomas’ counsel, Glenn Starke, much of the material now introduced as grounds for reconsideration was in Thomas’ possession at the time this action was filed. Thomas has offered no explanation why these documents were not filed along with its brief in response to Wagner’s motion. Thomas’ attempt to have these materials considered by the Court after it had ample opportunity to present them at the appropriate time must be denied.

It should be noted that, on pages 6 and 7 of its reply brief in support of its motion for reconsideration, Thomas indicates that it received evidence on May 3, 1985, of the existence of European patents which constitute prior art with respect to the patents at issue. Upon a proper motion and showing under Rules 59 and 60, Federal Rules of Civil Procedure, the Court believes that this material may constitute new evidence which could reopen the validity question in so far as this material is concerned. In any event, the Court has no intention of reopening the validity question for the purpose of allowing Thomas to present prior art in its possession during the pendency of the summary judgment motion.

The Court is firmly convinced that its decision to grant Wagner’s motion for summary judgment was sound. While Thomas argues that courts rarely grant summary judgment motions declaring non-design patents to be valid, it is equally clear that Thomas utterly failed to present any evidence upon which the Court could have denied Wagner’s motion. The Federal Circuit Court of Appeals has stated that, as in any other case, summary judgment may be granted in patent cases. Barmag, 731 F.2d at 835. The Court has done so in this action, and it will stand by its decision.

The Court will also deny Thomas’ request that this matter be certified for immediate appeal under Rule 54(b), Federal Rules of Civil Procedure. Such a certification at this time would likely result in piecemeal appeals which would delay a final adjudication of this action. In the absence of further motions, the Court intends to proceed with a trial on the infringement question at a date to be established in the near future.

B. Propriety of Award of Costs and Attorneys’Fees

At the pretrial conference held on September 24, 1985, the Court indicated to the parties that it would reconsider its award of costs and attorneys’ fees to Wagner. Had the Court granted Wagner’s motion under Rule 11, it would have been appropriate to award Wagner its reasonable expenses incurred in bringing its motion. Since the Court denied Wagner’s Rule 11 motion but granted its Rule 56 motion, reasonable expenses should only be awarded to Wagner upon a finding that Thomas submitted affidavits in bad faith or for purposes of delay. Rule 56(g), Federal Rules of Civil Procedure. Such a finding would not be appropriate in this instance. Accordingly, the Court will reverse its decision to award costs and attorneys’ fees to Wagner.

II. DISCOVERY MOTIONS

A. Thomas’ Motion Filed April 2, 1985

There are three motions to compel discovery pending. On April 2, 1985, Thomas filed a motion for an order directing Wagner to produce:

(1) The following documents in the files of Josef Wagner inventor of the ’134 patent:
(a) Published documents relating to or illustrating nozzles and/or nozzle guards for paint sprayers and dated prior to July 21, 1974;
(b) Published documents relating to or illustrating airless or air-type paint sprayers and dated prior to June 13, 1972;
(c) Documents referring in any way to the ’134 or ’348 patents;
(d) Documents referring in any way to the present litigation;
(e) Documents referring in any way to the alleged infringement by the plaintiff of the ’134 and ’348 patents.
(2) The following documents in the possession of Wagner AG and/or Wagner GmbH:
(a) Published documents relating to or illustrating nozzles and/or nozzle guards for paint sprayers and dated prior to July 21, 1974;
(b) Published documents relating to or illustrating airless or air-type paint sprayers and dated prior to June 13, 1972;
(c) Documents referring in any way to the ’134 or ’348 patents;
(d) Documents referring in any way to the present litigation;
(e) Documents referring in any way to the alleged infringement by the plaintiff of the ’134 and '348 patents.
(3) Copies of all foreign patent applications and patents including abandoned applications and patents, corresponding to patent 3,899,134 and copies of all office actions, amendments, and references cited.
(4) All documents relating to any infringement action brought by the defendant or any affiliate of the defendant, i.e. Wagner AG or Wagner GmbH, based on any foreign patent corresponding to the ’134 patent.
(5) All documents relating to any opposition or cancellation proceedings brought by any third party against any foreign patent corresponding to the ’134 patent.
(6) All documents relating to any search made by or on behalf of defendant, or on behalf of Wagner AG or Wagner GmbH, regarding the ’134 and/or ’348 patents, including all references located in the search.

Wagner objects to the request to produce documents in the files of Josef Wagner, Wagner AG and Wagner GmbH. According to Wagner, Josef Wagner is an elderly German citizen who has no connection with Wagner Spray Tech and who has not been in the United States for seven years. Wagner GmbH is a German corporation which assigned the ’134 patent, invented by Josef Wagner, to Wagner Spray Tech more than sixteen months prior to the institution of this litigation. Finally, Wagner AG is the Swiss parent corporation of Wagner Spray Tech which operates entirely independent of its American subsidiary. Wagner AG’s only continuing interaction with Wagner Spray Tech is in connection with certain component parts supplied by the former to the latter.

Based on the representations made by Wagner, the Court will decline to order the production of documents held by Josef Wagner, Wagner AG and Wagner GmbH. Neither Josef Wagner nor the two foreign corporations are parties to this action, and there does not exist a relationship between them and Wagner Spray Tech which would justify an order such as the one Thomas seeks. The present situation is unlike that in Perini America, Inc. v. Paper Converting Machine Co., 559 F.Supp. 552 (E.D. Wis.1973), where Judge Reynolds granted a discovery request for information in the possession of a non-party foreign corporation. In Perini, the plaintiff corporation was owned 100% by Fabio Perini, who also owned 95% of the non-party foreign corporation. Thus, Judge Reynolds found that both corporations were the “alter egos” of Fabio Perini. 559 F.Supp. at 553.

In this action, it is not the case that Wagner Spray Tech and the foreign entities are “alter egos” of a single individual, nor does it appear that the connection which does exist between these corporations justifies an order enforcing Thomas’ discovery request. Therefore, Wagner need not produce any of the documents sought to be obtained from the files of Wagner AG, Wagner GmbH, or Josef Wagner.

B. Wagner’s Motion Filed April 2, 1985

The second motion to compel was filed by Wagner, also on April 2, 1985. Wagner seeks an order compelling Thomas to respond to Request Nos. 18 and 19 of Wagner’s Second Request for Production of Documents. In those requests, Wagner seeks the following:

Request 18
All documents and things establishing (i) the cost of each of the components incorporated in the airless paint spray cup gun sold by Thomas to Sears and (ii) all documents establishing the cost of assembly and (iii) all documents establishing the final cost of the airless paint spray cup gun sold by Thomas to Sears.
Request 19
All documents and things establishing the profits made or losses incurred by Thomas in its manufacture and sale of airless paint spray cup guns sold to Sears.

Wagner claims that this information is relevant to its counter claim for damages since, should it prevail on the infringement issue, it would be entitled to its damages or a reasonable royalty under 35 U.S.C. § 284. Wagner asserts that Thomas’ costs and profits would reflect not only the reasonableness of any royalty awarded to Wagner, but also Thomas’ willingness to infringe upon Wagner’s trademark. As an alternative to its motion to compel, Wagner requests that Thomas be barred from introducing any testimony or exhibits relative to its income, costs or profits.

Section 284 of 35 U.S.C. provides that Upon finding for the claimant the court shall award the claimant damages adequate to compensate for the infringement, but in no event less than a reasonable royalty for the use made of the invention by the infringer, together with interest and costs as fixed by the court. When the damages are found by a jury, the court shall assess them. In either event the court may increase the damages up to three times the amount found or assessed.
The court may receive expert testimony as an aid to the determination of damages or of what royalty would be reasonable under the circumstances.

The history of § 284 was recounted by the Supreme Court in Aro Manufacturing Company, Inc. v. Convertible Top Replacement Company, Inc., 377 U.S. 476, 84 S.Ct. 1526, 12 L.Ed.2d 457 (1964), where the Court also discussed the difference between the alleged infringer’s profits and the patent owner’s damages:

“In patent nomenclature what the in-fringer makes is ‘profits’; what the owner of the patent loses by such infringement is ‘damages’ ” Duplate Corp. v. Triplex Safety Glass Co., 298 U.S. 448, 451 [56 S.Ct. 792, 793, 80 L.Ed. 1274 (1936) ]. Profits and damages have traditionally been all-inclusive as the two basic elements of recovery. Prior to 1946, the statutory precursor of the present § 284 allowed recovery of both amounts, reading as follows:
“[U]pon a decree being rendered in any such case for an infringement the complainant shall be entitled to recover, in addition to the profits to be accounted for by the defendant, the damages the complainant has sustained there-by____” R.S. § 4921, as amended, 42 Stat. 392.

By the 1946 amendment, Act of August I, 1946, c. 726, § 1, 60 Stat. 778, 35 U.S.C. (1946 ed.), §§ 67, 70, the statute was changed to approximately its present form, whereby only “damages” are recoverable. The purpose of the change was precisely to eliminate the recovery of profits as such and allow recovery of damages only.

“The object of the bill is to make the basis of recovery in patent-infringement suits general damages, that is, any damages the complainant can prove, not less than a reasonable royalty, together with interest from the time infringement occurred, rather than profits and damages.” H.R.Rep. No. 1587, 79th Cong., 2d Sess. (1946), to accompany H.R.5311, at 1-2; S.Rep. No. 1503, 79th Cong., 2d Sess. (1946), to accompany H.R.5311, at 2.
There can be no doubt that the amendment succeeded in effectuating this purpose; it is clear that under the present statute only damages are recoverable. See, e.g., Ric-Wil Co. v. E.B. Kaiser Co., 179 F.2d 401, 407 (C.A. 7th Cir.1950), cert. denied, 339 U.S. 958 [70 S.Ct. 981, 94 L.Ed. 1369]; Livesay Window Co. v. Livesay Industries, Inc., 251 F.2d 469, 471-472 (C.A. 5th Cir.1958); Laskowitz v. Marie Designer, Inc., 119 F.Supp. 541, 554-555 (D.C.S.D.Cal.1954); Cullen, 28 J.Pat.Off.Soc. 838 (1946); Wolff, 28 J.Pat.Off.Soc. 877 (1946).

377 U.S. at 505-506, 84 S.Ct. at 1542. The Supreme Court went on to define the patent owner’s damages as “compensation for the pecuniary loss he (the patentee) has suffered from the infringement, without regard to the question whether the defendant has gained or lost by his unlawful acts.” 377 U.S. at 507, 84 S.Ct. at 1543, quoting Coupe v. Royer, 155 U.S. 565, 582, 15 S.Ct. 199, 206, 39 L.Ed. 263 (1895).

The question presented by Wagner’s motion is whether a patentee’s damages, or in lieu thereof a reasonable royalty, can be based upon the alleged infringer’s profits. Clearly, the Supreme Court’s decision in Aro Manufacturing compels the conclusion that Wagner’s damages are unrelated to Thomas’ profits. It follows that the reasonableness of any royalty awarded to Wagner should also be determined without reference to Thomas’ profits. If otherwise, the potential exists for Wagner to collect an amount unrelated to the harm it incurred due to the infringement. Such an award would be not only inequitable, but would frustrate the apparent purpose of Congress to allow a pat-entee to recover an amount based on its losses, whether those losses be actual damages or potential license fees denominated as “reasonable royalties.”

In support of its motion, Wagner has cited Square Liner 360°, Inc. v. Chisum, 691 F.2d 362, 375 (8th Cir.1982), in which the Eighth Circuit approved the district court’s jury instruction that damages and/or a reasonable royalty could be based on the patent infringer’s profits. The Eighth Circuit evidently chose to ignore the Supreme Court’s decision in Aro Manufacturing, which this Court deems controlling. Accordingly, this Court will not follow Square Liner.

For the foregoing reasons, the Court will DENY Wagner’s motion for an order compelling Thomas to respond to Request Nos. 18 and 19 in Wagner’s Second Request for Production of Documents. The relevance of Thomas’ costs and profits to the issue of its intent to infringe is questionable, and does not outweigh the burdensomeness to Thomas of Wagner’s request. The Court also sees no reason at this time for an order precluding Thomas from introducing any evidence of its costs or profits at trial. That matter is better resolved through a motion in limine.

C. Thomas’ Motion Filed August 26, 1985

On August 26, 1985, Thomas filed a motion for an order compelling Wagner to respond to Thomas’ Interrogatory No. 19. By means of that interrogatory, Thomas seeks the identification of the numbers of any prior art patents collected during a search conducted by Wagner’s counsel relative to the nozzle structure of spray guns. Wagner claims that this information is protected as the work product of Attorney Dennis Gross and by the attorney-client privilege.

The Court believes that Thomas’ request must be denied for the reason that the information requested is irrelevant and immaterial to the issues presently remaining in this lawsuit. The information sought relates only to the issue of validity, which has already been decided. Thus, while Wagner’s attorney/client work/product argument may also be meritorious, the Court will DENY Thomas’ motion for an order compelling Wagner to respond to Thomas’ Interrogatory No. 19 on the grounds that the information sought is irrelevant and immaterial.

III. THOMAS’ MOTION TO AMEND THE COMPLAINT

On July 17, 1985, Thomas filed a motion to amend the complaint, along with a proposed amended complaint. Thomas wishes to add a new paragraph to the complaint alleging invalidity and unenforceability of Wagner’s ’134 and ’438 patents. Wagner objects to the proposed amendment on the grounds that the validity issue has been resolved against Thomas, that the motion is untimely, and that there is no legal or factual basis for the additional allegations.

The Court agrees with Wagner that the validity issue has been resolved in this action by means of the Court’s decision on Wagner’s summary judgment motion. While Thomas asserts that validity and unenforceability are two separate issues, Thomas failed to provide any factual basis for either claim in response to Wagner’s summary judgment motion and discovery requests. Outside of the materials Thomas intentionally concealed from Wagner and the Court during the pendency of the Rule 11/56 motion, no showing has been made that any factual basis exists for these additional allegations.

For these reasons, the Court will DENY Thomas’ motion to amend the complaint

IV. ADDITIONAL MATTERS

At present, a two-week trial on the question of patent infringement is scheduled to begin November 4, 1985. For a number of reasons, some of which were discussed at the pretrial conference, that final date now appears to be unfeasible. For the purpose of discussing further scheduling in this matter, the Court will conduct a status conference at 9:00 a.m. on Monday, October 21, 1985, in Room 390 of the Federal Building, 517 East Wisconsin Avenue, Milwaukee, Wisconsin. The status conference will be conducted in place of the final pretrial conference originally scheduled for that time. The November 4,1985 trial date is hereby cancelled, and a new date will be set at the status conference.

V. CONCLUSION

In conclusion, the Court hereby:

(1) DENIES plaintiff’s motion for reconsideration of the Court's March 8, 1985 decision granting defendant’s motion for summary judgment;

(2) GRANTS plaintiff’s motion for reconsideration of the Court’s decision awarding defendant costs and attorneys’ fees;

(3) DENIES plaintiff’s motion filed April 2, 1985, to compel discovery;

(4) DENIES defendant’s motion filed April 2, 1985, to compel discovery;

(5) DENIES plaintiff’s motion filed August 26, 1985, to compel discovery; and

(6) DENIES plaintiff’s motion to amend the complaint.


source: Caselaw Access Project

author: GENE CARTER, District Judge.

license: Public Domain

text:
    Kenneth SPRAGUE, et al., Plaintiffs, v. Margaret M. HECKLER, Secretary, United States Department of Health and Human Services, Defendant.
    Civ. No. 83-0038 P.
    United States District Court, D. Maine.
    Oct. 9, 1985.
    See also 595 F.Supp. 1380.

      Jack Comart, Linda Christ, Pine Tree Legal Assistance, Augusta, Me., for plaintiffs.
    Paula D. Silsby, Asst. U.S. Atty., Portland, Me., Donald A. Gonya, Asst. Gen. Counsel, Baltimore, Md., for defendant.
   MEMORANDUM OF DECISION AND ORDER ON PLAINTIFF’S MOTION FOR AN AWARD OF ATTORNEY’S FEES

GENE CARTER, District Judge.

I. Procedural Background

Plaintiffs move for an award of counsel fees pursuant to the Equal Access to Justice Act (EAJA), 28 U.S.C. § 2412(a), (b), and (d)(1)(A).

Plaintiffs brought this class action suit in February 1983 to challenge the Secretary’s policies for adjudicating disability claims involving certain mental impairments. Plaintiffs allege that the Secretary had applied policies to the evaluation of such claims that conflicted with Title II and Title XVI of the Social Security Act. 42 U.S.C. §§ 401, et seq., and §§ 1381, et seq. Specifically, Plaintiffs allege that the agency, instead of following the five-step determination process set out in its regulations at 20 C.F.R. §§ 404.1520 and 416.920, cut short that process if the individual applicant did not have a mental impairment meeting or equaling those listed in 20 C.F.R. Part 404, Subpart P., App. I. Under the regulations, applicants whose impairments do not meet “the listings” must still be evaluated as to their residual functional capacity to work. Plaintiffs allege that residual functional capacity in all younger persons and most older applicants not meeting the listings was effectively presumed, even though many such persons cannot work.

Plaintiffs sought to certify a class consisting of all Maine residents who are suffering from a mental illness whose Social Security benefits have been terminated since April 1,1980, or whose application for benefits had been denied since April 1, 1980, on the basis that such persons were or are capable of substantial gainful employment despite their mental illness. They sought, among other things, an Order declaring that the Secretary’s policies were unlawful, instructing the Secretary to reopen and reconsider the claims of all mentally disabled Title II and Title XVI applicants who have been denied benefits since April 1, 1980, and instructing the Secretary to reinstate benefits to all class members whose benefits were terminated pending reconsideration.

During the pendency of this action, Congress enacted the Social Security Disability Benefits Reform Act of 1984, Pub.L. No. 460, 98 Stat. 1794 (1984), Section 5 of which requires the Secretary to revise her criteria for evaluating mentally impaired claimants and confers certain rights upon mentally impaired persons whose claims were denied or whose benefits were terminated after March 1, 1981. On April 1, 1985, this Court entered a consent decree prepared by the parties. In addition to the rights conferred upon class members by the Social Security Disability Benefits Reform Act of 1984, the consent order provides, among other things, that the Secretary shall grant retroactive benefits to those reapplying under the Act for up to one year prior to the new application and that the Secretary shall individually notify class members of their right to reapply. The Plaintiffs thus obtained some of the relief they initially sought, partly through the enactment of the Reform Act and partly through the consent order.

II. Prevailing Party

Under 28 U.S.C. § 2412(d)(1)(A) counsel fees may be awarded in actions against the United States if the claimant is the prevailing party, unless the position of the United States was substantially justified or special circumstances make an award unjust. The enactment of the Reform Act during the pendency of this action complicates resolution of the question as to whether Plaintiffs are the prevailing parties for purposes of 28 U.S.C. § 2412(d)(1)(A). The Court need not decide that question, however, because it has determined that, even assuming that Plaintiffs are the prevailing parties, the United States has met its burden of proving its position was substantially justified.

III. Substantial Justification

The standard for determining whether the position of the United States was substantially justified has been thoroughly set out as follows:

The determinative issue on the motion for counsel fees under the EAJA is whether the Secretary’s position, i.e., the Secretary’s decision denying benefits, see Cornelia v. Schweiker, 728 F.2d 978, 983 (8th Cir.1984), was substantially justified, which essentially turns upon the reasonableness in law and fact of the action taken. On this issue the government bears the burden. Washington v. Heckler, 756 F.2d 959, 961 (3d Cir.1985); Wolverton v. Heckler, 726 F.2d 580, 583 (9th Cir.1984). Although an adverse decision on the merits does not preclude a finding of substantial justification, Martin v. Heckler, 754 F.2d [1262] at 1264 [(5th Cir.1985) ], the Secretary’s position is unreasonable where she presents no evidence to support her position, e.g., Hicks v. Heckler, 756 F.2d 1022, 1025 (4th Cir. 1985), or where she applies an erroneous legal standard, see Washington v. Heckler, 756 F.2d at 967-68; Howard v. Heckler, 581 F.Supp. 1231, 1233 (S.D.Ohio 1984). Similarly, substantial justification does not mean “nonfrivolous,” McDonald v. Schweiker, 726 F.2d 311, 316 (7th Cir.1983), and will not be found where the Secretary merely relies on “some evidence” of nondisability, see Tressler v. Heckler, 748 F.2d 146, 150 (3d Cir.1984). Rather, to meet her burden the Secretary must make a “strong showing” that her position was justified. Washington v. Heckler, 756 F.2d at 961; Cornelia v. Schweiker, 728 F.2d at 982 & 983 n. 9. But see Guthrie v. Schweiker, 718 F.2d 104, 108 (4th Cir.1983) [Secretary’s position is substantially justified although she does no more than rely on an arguably defensible administrative record] (footnote numbers omitted).

Aldrich v. Heckler, 609 F.Supp. 863, 865 (D.Me.1985).

In this litigation, the Secretary has taken the position that the unlawful policy alleged by Plaintiff to exist has not been applied in Maine. The Secretary asserts that she was required to complete discovery in order to make this determination. In support of her argument that this position was justified, the Secretary relies upon an affidavit and policy memorandum by the Director of Maine Disability Determination Services (DDS), an agency within the Maine Department of Human Services which makes disability determinations for the Social Security Administration pursuant to 20 C.F.R. § 404.1503 and § 416.903, and upon the alleged failure of Plaintiff to produce evidence that an unlawful policy was applied in Maine, despite extensive discovery.

Ann D. DeWitt is the Director of DDS. In a Memorandum to the Professional Staff of DDS, titled “Medical Vocational Considerations for Young Mentally Impaired Claimants,” issued February 5, 1980, Ms. DeWitt made clear that, even if the Social Security Administration had intended to apply the policy Plaintiffs described in Maine, that policy was repudiated by the Maine DDS. In her affidavit, Ms. DeWitt stated that the policy reflected in the memorandum “is the current Social Security policy, and this memo is still in effect in the Maine DDS.” Affidavit of Ann D. DeWitt, IT 14.

Thus, despite findings of courts in other jurisdictions, the Secretary has proffered substantial evidence that an unlawful policy was not applied in Maine and that, to the contrary, the Director of the Maine program had specifically directed her staff to the effect that persons with mental disabilities not meeting the listings may nonetheless be unable to work and therefore should be allowed benefits. Without rebuttal, this policy memorandum supports the Secretary’s position that she was substantially justified in pursuing this litigation on the basis that no unlawful policy was applied in Maine.

Plaintiffs have not produced any direct evidence to rebut the affidavit and memorandum of Ann DeWitt. Plaintiffs rely on two cases in which the courts found that the Department of Health and Human Services (HHS) applied unlawful policies identical or similar to that allegedly applied in Maine. Mental Health Ass’n of Minnesota, 554 F.Supp. 157; City of New York, 578 F.Supp. 1109. In both cases, the district courts found that HHS had disseminated an unlawful policy from its central office under which younger mentally ill persons whose illnesses were not listed in agency regulations as per se meeting the requirements for benefits, could not be allowed benefits because they were presumed to have residual functional capacity. City of New York, 578 F.Supp. at 115; Mental Health Ass’n of Minnesota, 554 F.Supp. at 160-61.

In City of New York, Chief Judge Wein-stein found that in 1978 the central office of the Social Security Administration reversed virtually all the determinations of the New York Office of Disability Determination in which younger applicants with psychiatric impairments not meeting the listings were allowed benefits. 578 F.Supp. at 1115. In that case, the Court stated, “Evidence of the fixed clandestine policy against those with mental illness is overwhelming.” Id. The Court also found that SSA officials conducted sample reviews of state determinations on a sufficient basis to ensure, with what SSA contended was 95% accuracy, that the uniform policies of the SSA were being followed by the states. Id. at 1114.

The findings of the courts in Mental Health Ass’n of Minnesota and City of New York may justify an inference that the policy alleged here was disseminated on a national basis and therefore that it was in effect in Maine. However, the Secretary has produced direct evidence to the contrary (supra at 1292). In addition, in Mental Health Ass’n of Minnesota and City of New York the plaintiffs produced evidence of communications from the central office to the regional or state agency directing them to follow the illegal policy. 578 F.Supp. at 1116, 554 F.Supp. at 163. In addition, in City of New York, the director of the state agency testified that regional and central office reviews by the Secretary were carefully analyzed and followed by the state agency. 578 F.Supp. at 1114. In this case, Plaintiffs have produced no documents nor any other direct evidence that such a policy was disseminated to the Boston Region or the Maine DDS to rebut the state agency’s written policy directive to the contrary.

Plaintiffs also rely on portions of the deposition of Frances Silsby, a claims supervisor at DDS. Pertinent excerpts from that deposition follow:

Q I’m going to ask you about the one final document, which is a memorandum, again, from Sandy Crank to the Regional Commissioner in Atlanta. Again, in the last paragraph, a restatement of the principal [sic] that: “When the Listing is determined to be not met or equalled, it is expected that the individual would have the mental capacity to perform at least unskilled work.
I would like to ask you, based on your experience at the DDS as Adjudicator, would it seem to you that Social Security was sending either explicit or implicit messages that mentally impaired individuals who didn’t meet the listing could perform unskilled work?
A If that’s what they’re saying. I never heard it. We were never privy to the information.
Q But you were given the Informal Digest?
A Yes.
Q Would you say that there was confusion at DDS about that? I believe you stated earlier in fact there was confusion?
A It has been very difficult to evaluate the medical and vocational aspects of mentally impaired people.
Q Why would you say that is?
A Because of the subjective nature of the impairment and the doctors involved on the adjudicative level, both the assigning physicians, the reviewing physicians here and in Boston. They don’t agree.
Q What sort of problems would be created, for example, by the review physician? How would that become a problem in adjudication?
A It is very difficult, you take two cases that appear to be similar to us. One would go one way and one the other. We could not get a good handle on how to handle these cases.
Q When you say one would go one way and one the other, are you referring to returns you received from Boston or Baltimore?
A Yes. We might send down two cases that seemed very similar and allow them both, and they would send one back and request a denial or vice ver-sa, to deny them. We got many returns in that area.
Q Were you ever familiar with the case that DDS allowed, a mental impairment case, which DDS may have allowed based on some medical vocational factors that was returned by DAB?
A I know we have had them, certainly.
Q Were any of those returns taking place between 1980 and 1983?
A I would say yes.
Q Can you recall examples of why those claims were returned?
A Disagreements in assessing residual functional capacity. Sometimes a difference in assessing severity.
Q Did any of the returns raise the issues that have been raised in the mem-oranda and documents we just used?
A Short of being impairment they were capable of doing unskilled work?
Q Yes?
A I don’t specifically remember it stated that, but it was difficult to allow young people with impairment short of a listing level.
Q Was it difficult to allow them also based on residual functional capacity?
A That’s what I’m saying, short of the listing level.
Deposition of Frances Silsby at 19-21.
Q Now, do you believe that there are plenty of people who are capable of say, for example, cooking, shopping, fishing, watching TV, who can’t work?
A I would say yes, there must be.
Q But that’s not how Social Security looks at it?
MS. McCARTHY: I object, leading question.
MS. CHRIST: You are asking she answer the question, and your objection is noted for the record.
THE DEPONENT: I think now, as opposed to ’79 and '80, the quality of the claimant’s activities and daily living are much closer scrutinized than they were in ’79 and ’80.
Q Would you say in general there has been a liberalizing of the adjudicatory climate in this area since 1983?
A Yes.

Id. at 28.

A review of this testimony reveals that Ms. Silsby did not apply an unlawful policy in her capacity as a Maine DDS claims supervisor. Nor was she aware of the existence of such a policy promulgated by the Social Security Administration. Her testimony was that, due to SSA returns, “it was difficult to allow young people with impairment short of the listing level.” Deposition of Frances Silsby at 21. Further, Ms. Silsby’s testimony indicates that returns from the regional and central offices did not follow a pattern but were inconsistent. Id. at 20. Although the testimony may be viewed as some evidence that ah unlawful policy may have been applied to claims by Maine applicants, it is entirely circumstantial in nature and it is not ultimately persuasive to that end, particularly in light of Ms. DeWitt’s memo to the contrary.

Thus, given the strong evidence that SSA’s unlawful policy was repudiated by DDS, if it was disseminated to that office, and the lack of conclusive evidence that such a policy was in effect here, the Secretary was substantially justified in relying on her position that no unlawful policy was being applied or had been applied in Maine.

IV. Common Benefit Theory

Plaintiffs also seek attorney’s fees pursuant to 28 U.S.C. § 2412(b). That section states:

Unless expressly prohibited by statute, a court may award reasonable fees and expenses of attorneys, in addition to the costs which may be awarded pursuant to subsection (a), to the prevailing party in any civil action brought by or against the United States or any agency and any official of the United States acting in his or her official capacity in any court having jurisdiction of such action. The United States shall be liable for such fees and expenses to the same extent that any other party would be liable under the common law or under the terms of any statute which specifically provides for such an award.

The legislative history of the Equal Access to Justice Act, which added this subsection, makes clear that Congress’ intent in enacting this provision was to waive sovereign immunity so as to permit fee awards against the United States to the same extent they may be awarded against a private party at common law.

As outlined in Alyeska Pipeline Service Co. v. Wilderness Society, 421 U.S. 240, 95 S.Ct. 1612, 44 L.Ed.2d 141 (1975), the common law exceptions to the American Rule that each party bear the cost of its legal expenses include the “bad faith,” “common fund,” and “common benefit” doctrines, id. at 258, 95 S.Ct. at 1622, and these were clearly contemplated by Congress in amending 28 U.S.C. § 2412(b). H.R.Rep. No. 1418, 96th Cong. 2d Sess. 9, 17, reprinted in 1980 U.S.CODE CONG. & AD. NEWS 4987, 4996. Plaintiffs’ assert that they are entitled to fees under the common benefit exception because they have conferred important nonpecuniary benefits on all class members.

The Supreme Court has spoken on the prerequisites for a fee award under the common benefit theory. In Mills v. Electric Auto-Lite Co., 396 U.S. 375, 90 S.Ct. 616, 24 L.Ed.2d 593 (1970), the Court stated that such an award may be made only where plaintiffs have conferred “a substantial benefit on the members of an ascertainable class, and where the court’s jurisdiction over the subject matter of the suit makes possible an award that will operate to spread the costs proportionately among them.” Id. at 393-94, 90 S.Ct. at 626. The Court further made clear in Alyeska that the common benefit theory does not extend to cases where plaintiffs have achieved results benefiting the general public. In Alyeska the Court stated, “[I]n this Court’s common-fund & common-benefit decisions, the classes of beneficiaries were small in number and easily identifiable. The benefits could be traced with some accuracy, and there was reason for confidence that the costs could indeed be shifted with some exactitude to those benefiting.” Alyeska, 421 U.S. at 264, n. 39, 95 S.Ct. at 1625 n. 39.

Plaintiffs assert that they have conferred a substantial benefit on members of an ascertainable class consisting of SSI and Social Security applicants and recipients. Plaintiffs further assert that by taxing the Secretary for Plaintiffs’ fees the award will operate to spread the costs proportionately among those benefited. However, there are several problems with the application of the common benefit theory to this case.

First, it is questionable whether those benefiting from this lawsuit can be readily ascertained. Second, it is clear that a fee award against the Social Security Administration will only shift the costs of this lawsuit to the general public or to those persons who pay Social Security taxes and not to those upon whom a benefit has been conferred.

A review of the case law in which common benefit awards have been made reveals that they are almost wholly confined to lawsuits against corporations or unions where an assessed fee is borne by all shareholders or union members who have benefited from the litigation. 1 Derfner, Wolf, Court Awarded Attorney Fees, § 3.01, 3-6. It is difficult to find any cases applying a common benefit theory against the government absent exceptional circumstances such as the existence of a common fund out of which the relief desired is to be paid.

In Pealo v. Farmers Home Administration, et al., 562 F.2d 744 (D.C.Cir.1977), plaintiffs sought a court order requiring the FmHA to implement an interest credit loan program. The district court ordered the defendants to implement the program and the government appealed. Before oral argument, the FmHA decided to continue the program. The appeal was dismissed as moot and remanded to the district court with directions to vacate the judgment. The district court vacated the judgment but, after briefing and argument, awarded plaintiffs attorneys’ fees.

The district court held that plaintiffs had incurred costs in conferring a benefit on the members of the class by releasing monies for their use, and therefore, plaintiffs were entitled to be reimbursed. 412 F.Supp. 561 at 564 (D.D.C.1976). The court concluded that no common fund had been created but that an award could be made under the common benefit theory. Id. at 564-65. However, because section 2412 prohibited fee awards against the United States “except as otherwise specified by statute,” the court found that the method of payment could not diminish the Treasury or increase the debt of the United States, id. at 565, and so suggested that payment be made from interest accrued on the principal which normally would have been used for loans. The Court of Appeals reversed, holding that the United States had not waived immunity for a fee award under the common benefit theory, but further held such doctrine inapplicable even absent a bar of sovereign immunity, because the costs were charged to the federal government and all citizen-taxpayers rather than to interest credit borrowers alone.

Plaintiffs allege that by citing this case in the House Report accompanying the EAJA, Congress made clear its intent to reverse the result in Pealo by passage of the EAJA. A thorough review of the legislative history does not convince the Court that such is the case. The House Report states:

It has been generally held that existing section 2412 prevents an award of attorney fees against the United States, even under the common law exceptions, in the absence of express statutory authority. The issue, however, continues to be the subject of litigation. See, e.g., Pealo v. Farmers Home Administration of the United States, 562 F.2d 744 (D.C.Cir. 1977) (reversing lower court’s application of “common benefit” exception); Rhode Island Committee on Energy v. General Services Administration, 561 F.2d 397 (1st Cir.1977) (refusing to apply “bad faith” conception). This subsection reflects the belief that at a minimum, the United States should be held to the same standard in litigating as other parties and that no justification exists for exempting the United States from fee awards in these limited situations. H.R.

Rep. No. 1418, 96 Cong., 2d Sess., at 17, reprinted in 1980 U.S.Code Cong. & Ad. News 4996.

The legislative history does not speak to the applicability of the common benefit exception in Pealo but rather to the idea that should the theory be found applicable, EAJA lifts the bar of sovereign immunity. Congress sought to place the United States on the same footing as private parties under the common benefit theory, not to rewrite its prerequisites as propounded by the Supreme Court in Mills and Alyeska.

The only circuit to address this issue in a lawsuit against the Social Security Administration concluded the common benefit fund to be inapplicable. In Jordan v. Heckler, 744 F.2d 1397 (10th Cir.1984), the Tenth Circuit overturned a district court decision awarding fees under the common benefit theory where plaintiffs had challenged the accounting procedure used by the Secretary to resolve allegations of representative payee misuse of funds. The Court found that the costs of litigation would not be spread out only among the group benefited but would be borne by all Social Security taxpayers. Id. at 1400. Most other courts have reached similar conclusions in cases involving litigation against government bodies. See Cantwell v. County of San Mateo, 631 F.2d 631 (9th Cir.1980); American Association of Marriage & Family Counselors v. Brown, 593 F.2d 1365 (D.C.Cir.1979); Hander v. San Jacinto Junior College, 519 F.2d 273 (5th Cir.1975); Satoskar v. Indiana Real Estate Commission, 517 F.2d 696 (7th Cir. 1975); Lebanks v. Spears, 417 F.Supp. 169 (E.D.La.1976). Cases where fees have been allowed involve unusual circumstances, such as a common fund from which those benefiting can be taxed, as well as a common benefit. See National Treasury Employees Union v. Nixon, 521 F.2d 317 (D.C.Cir.1975).

It is clear that Congress intended the federal government to be subject to fee awards under the common benefit exception where applicable. But the standard for that exception, as set out in Alyeska, requires that costs be shifted “with some exactitude to those benefiting,” 421 U.S. at 264, n. 39, 95 S.Ct. at 1625, n. 39, and that standard can not be met in this case. If an award is charged against the Social Security Administration it will be paid by all taxpayers or by all who pay Social Security taxes, not by those who receive mental disability benefits in Maine. Therefore, an award to Plaintiffs cannot be made on the common benefit theory basis.

V. Order

For the foregoing reasons the Plaintiffs’ Motion for an Award of Counsel Fees Pursuant to the Equal Access to Justice Act, 28 U.S.C. § 2412(a), (b) and (d)(1)(A) is hereby DENIED.

So ORDERED.

      . 98 Stat. 1801-2, to be codified in 42 U.S.C. §§ 421, 1381.

      . The Memorandum provided:
      Returns from DAB have begun to show consideration for medical vocational allowances in younger workers with a history of a severe mental illness such as schizophrenia or manic depression. We have, in the past, been under the impression that if a young claimant did not meet or equal the listing, there was very little chance that he would be allowed as a medical vocational case. We have not given full consideration to Dr. Rosenberg’s talk on functional impairments. If a mentally impaired worker has a moderately severe rating in regard to functional restrictions, the consideration of peer and authority relationships, accommodation to work stress, concentration on tasks and understanding of instructions must be made. If the consulting physician finds that the above criteria show a functional restriction of marked degree, the worker cannot be expected to carry out a regular job.
      We must remember that the nature of mental illness is that it does not vary directly in proportion to age. It is not like arthritis which frequently develops to a greater degree of severity as an individual ages. Experience has shown us that some of the most functionally impaired persons we have seen have been young schizophrenic claimants.
      This concept has been discussed thoroughly with Dr. Page, and at his suggestion, it is being shared with all persons who are responsible for making decisions.

      . See City of New York v. Heckler, 578 F.Supp. 1109 (E.D.N.Y.1984), aff’d 742 F.2d 729 (2d Cir. 1984); Mental Health Association of Minnesota v. Schweiker, 554 F.Supp. 157 (D.Minn.1982), aff'd with modification 720 F.2d 965 (8th Cir. 1983).

      . Plaintiffs also rely on the high percentage of reversals by ALJs of initial DDS denials of benefits. This is not necessarily probative and does not persuade the Court in the absence of any evidence as to the stated reasons underlying any such reversals.

      . H.R.Rep. No. 1418, 96th Cong.2d Sess. 9, reprinted in 1980 U.S.Code Cong. & Ad.News 4984, 4987.
      The EAJA has an unusual legislative history. The only Congressional Report on the bill enacted that contains any reference to the EAJA provisions is the House Conference Report, H.R.Rep. No. 1434, 96 Cong., 2d Sess. (1980), reprinted in 1980 U.S.Code Cong. & Ad.News 4953, 5003. The Act was added to a Small Business Assistance Bill by a floor amendment in the House of Representatives. The provisions of the floor amendment were virtually identical to those of S. 265, a bill that had been reported favorably by the House Judiciary Committee the day before, H.R.Rep. 1418, 96th Cong., 2d Sess. 15 (1980). With minor differences, S. 265 also had been reported favorably by the Senate Judiciary Committee, S.Rep. 253, 96th Cong., 1st Sess. 17 (1979), and passed overwhelmingly by the Senate. 125 Cong.Rec. 21,445. Our references to the legislative history of the EAJA are taken from H.R.Rep. No. 1418, 96th Cong.2d Sess. reprinted in 1980 U.S.Code Cong. & Ad.News 4984. We note that there has been subsequent amendment to the statute, with an explanatory legislative report. Pub.L. No. 99-80, 99 Stat. 183 (1985), H.R.Rep. No. 120, 99th Cong., 1st Sess. (1985), U.S.Code Cong. & Admin.News 1985, p. 132.

      . The same is true of the House Report’s citation of Natural Resource & Defense Counsel v. Environmental Protection Agency, 484 F.2d 1331 (1st Cir.1973). H.R.Rep. No. 1418, 96th Cong., 2d Sess. 9, reprinted in 1980 U.S.CODE CONG. & AD.NEWS 4987. Subsequent courts have questioned whether the award under NRDC, absent its statutory basis in the Clean Air Act, 42 U.S.C. § 1857c-5, et seq., in addition to the common benefit theory, would have survived Alyeska. See Save Our Sound Fisheries Ass'n v. Callaway, 429 F.Supp. 1136 (D.R.I.1977).


author: SELYA, District Judge.

text:
    William DELLA VALLE d/b/a Potters Avenue Supermarket, Plaintiff, v. UNITED STATES of America, DEPARTMENT OF AGRICULTURE, et al., Defendants.
    C.A. No. 85-0527-S.
    United States District Court, D. Rhode Island.
    Oct. 9, 1985.
    As Amended Oct. 28, 1985.

      Donald R. Lembo, No. Providence, R.I., for plaintiff.
    Michael P. Iannotti, Asst. U.S. Atty., Providence, R.I., for defendants.
   Memorandum and Order

SELYA, District Judge.

This case presents, in its early stages, an important question as to the meaning and intendment of a federal statute, 7 U.S.C. § 2023. Resolution of this question in turn impacts upon the manner in which the United States Department of Agriculture may enforce sanctions against retail food vendors under the federal Food Stamp Act (Act), 7 U.S.C.A. §§ 2011-2029 (West Supp. 1985).

1. TRAVEL OF THE CASE

Effective April 17,1985, the Potters Avenue Supermarket (Market), a retail food store, was suspended by the Rhode Island Health Department from participation in the special supplemental food program for women, infants, and children (WIC). The Market chose not to appeal this suspension. By letter dated May 2, 1985, the Food and Nutrition Service (FNS) of the United States Department of Agriculture notified the Market that its authorization to participate in the food stamp program was being withdrawn in consequence of its WIC suspension. See 7 C.F.R. §§ 278.1(b)(3)(ii), 278.2(k). The Market pursued an administrative appeal, but to no avail; on July 9, 1985, the Secretary of Agriculture (Secretary), acting through an administrative review officer, confirmed the Market’s exile from the food stamp program. The period of disqualification (three years) was timed to coincide with the duration of the Market’s earlier suspension as a WIC vendor.

William Pella Valle, the owner and sole proprietor of the Market, seasonably prosecuted an action against the United States Department of Agriculture in the Rhode Island superior court seeking judicial review of the final FNS order. Under 7 U.S.C. § 2023(a), state and federal courts have concurrent jurisdiction anent judicial review of food stamp program disqualifications. His verified complaint was filed in that court on August 9, 1985. On the same date, the plaintiff obtained an ex parte restraining order from a judge of the state superior court permitting the Market’s continuing participation in the food stamp program pendente lite. On August 16, 1985, before the scheduled state court hearing on preliminary injunction could be held, the government removed Della Valle’s action to this court. 28 U.S.C. § 1446 (1982).

The plaintiff, little daunted, promptly moved for a stay of the final administrative decision. 7 U.S.C. § 2023(a). A hearing was held on August 28, 1985. In view of the delicately-balanced legal questions which surfaced at that time, see text post, this court granted a stay of limited duration, on condition that the Market, during the currency of the stay, meticulously observe and abide by the pertinent regulations of the food stamp program. A briefing schedule was set in place, and each party has now made its submissions. This rescript comprises the court’s findings and conclusions with regard to the issues sub judiee.

II. ISSUES PRESENTED

The statute which is at play here, 7 U.S.C. § 2023, permits judicial review of FNS decisions of this ilk. It intones in material part that

During the pendency of such judicial review, or any appeal therefrom, the administrative action under review shall be and remain in full force and effect, unless an [sic] application to the court ..., and after hearing thereon and a showing of irreparable injury, the court temporarily stays such administrative action pending disposition of such trial or appeal.

7 U.S.C. § 2023(a) (emphasis supplied).

The plaintiff reads this statutory language quite literally: he contends that, if “irrepa-rabie injury” is demonstrated, no further showing must be made to justify issuance of the stay. The government scans the statute from a broader vista. It urges that the traditional quadrat of factors which are applicable to other requests for preliminary injunctive relief, Fed.R.Civ.P. 65(a), must all be surveyed and that, for a § 2023 stay to issue, a showing tantamount to one which would be required under Rule 65 must eventuate. That traditional four-part analysis includes, over and above any irretrievable damage to the movant, consideration of (i) the plaintiff’s likelihood of success on the merits, (ii) the harm which the restraint will work on the defendant, and (iii) the public interest. See, e.g., Planned Parenthood League of Massachusetts v. Bellotti, 641 F.2d 1006, 1009 (1st Cir.1981); Calenda v. Rhode Island Board of Medical Review, 565 F.Supp. 816, 818 (D.R.I. 1983). Cases precisely in point are in short supply and are divided on the question. Compare Factor v. United States, 556 F.Supp. 567 (D.Mass.1983) (stay may be granted upon a showing of irreparable harm alone) with Gurtzweiler v. United States, 601 F.Supp. 883 (N.D.Ohio 1985) (stay may not be issued without a finding of probability of success on the merits) and Pepsi Cola Bottling Co. of Puerto Rico v. United States, 500 F.Supp. 304 (D.P.R. 1980) (same).

As a subsidiary question, the parties also contest the character of the “irreparable injury” which is necessary to uncap the unguent of § 2023(a). The Market claims that substantial prospective loss of customers (and consequently, the threatened devastation of its business) is enough; the government asseverates that, at a minimum, the perceived detriment must be more broadly focused.

The court will deal with these issues seriatim.

III. SUFFICIENCY OF IRREPARABLE INJURY ALONE

Unlike Fed.R.Civ.P. 65(a), where the rule itself is silent as to the criteria upon which a preliminary injunction is to be founded, and caselaw has formulated the traditional four-part test, § 2023(d) on its face seems to embody a flat legislative directive that the presence or absence of “irreparable injury” should control abatement (or not) of the administrative order pending judicial scrutiny of the merits of the appeal. And, the implementing regulation, 7 C.F.R. § 279.10(d), conduces to the same view. (Section 2013(c) of the Act authorizes the Secretary to “issue such regulations consistent [therewith] as the Secretary deems necessary or appropriate____”) The regulation reads:

Pending the judicial review, or any appeal from the judicial review, the administrative action under review shall remain in force, unless the firm makes application to the court and, after a hearing on the action showing irreparable injury, the court temporarily stays the administrative action under review pending disposition of the de novo trial or an appeal from the trial.

7 C.F.R. § 279.10(d) (emphasis supplied).

Although the regulation is not controlling, it sheds further light on the statutory scheme. E.g., Ford Motor Credit Co. v. Milhollin, 444 U.S. 555, 566, 100 S.Ct. 790, 797, 63 L.Ed.2d 22 (1980); Citizens Savings Bank v. Bell, 605 F.Supp. 1033, 1041-42 (D.R.I.1985). The fact that the Secretary, in formal rulemaking, has focussed exclusively on the need for a movant to “show[] irreparable injury,” 7 C.F.R. § 279.10(d), clearly implies that his understanding of § 2023 was of a piece with the premise which Della Valle exhorts this court to adopt. Accord Factor, 556 F.Supp. at 568-69. A similar implication can be read into the omission from the regulation of any reference to a showing of likelihood of success. Cf. Bank of New York v. Hoyt, 617 F.Supp. 1304, 1314 n. 9 (D.R.I. 1985) (construing 12 C.F.R. § 590.2(f)). The true measure of the deference due to the language of 7 C.F.R. § 279.10(d) depends upon how persuasive the interpretation appears to be in light of all the attendant circumstances. See Skidmore v. Swift & Co., 323 U.S. 134, 140, 65 5. Ct. 161, 164, 89 L.Ed. 124 (1944); Citizens Savings Bank, 605 F.Supp. at 1042. Where, as here, the regulation tracks in precisely the same direction as the language of the governing statute itself and is consistent with the most natural reading thereof, the measure of such deference is great.

Furthermore, the Market's interpretation of 7 U.S.C. § 2023 is superior to the government’s on other grounds as well. Section 2023 contains plain and seemingly unambiguous language. The canons of statutory construction dictate, therefore, that a court apply such an ordinance without embroidery, according to its explicit terms. Caminetti v. United States, 242 U.S. 470, 485, 37 S.Ct. 192, 194, 61 L.Ed. 442 (1917); Ciampa v. Secretary of Health and Human Services, 687 F.2d 518, 524 (1st Cir.1982); Bank of New York, 617 F.Supp. at 1309. “Given the absence of the slightest hint of any legislative intention to the contrary, the sweep of the enactment should be allowed to operate unfettered by judicial editing.” Id. See also American Tobacco Co. v. Patterson, 456 U.S. 63, 68, 102 S.Ct. 1534, 1537, 71 L.Ed.2d 748 (1982); Lane v. United States, 727 F.2d 18, 20 (1st Cir.1984).

A second, equally important, canon of construction likewise favors the plaintiffs literalistic reading of § 2023. In divining the legislative will, no clause or verbiage of a statute should be construed as meaningless or as surplusage, if a construction can legitimately be deduced which will preserve, and give effect to, all of the words of the Act. Blue Cross of Rhode Island v. Cannon, 589 F.Supp. 1483, 1491 (D.R.I.1984). It is settled beyond peradventure that the court’s generic power to grant a stay, apart from any statute, is to be exercised in the ambience of several elements, including “[w]hether or not denial of the stay will cause irreparable harm to the movant.” Chang v. University of Rhode Island, 107 F.R.D. 343, 344, (D.R.I. 1985). See also Morgan v. Kerrigan, 509 F.2d 618, 619 (1st Cir.1975); Adams v. Walker, 488 F.2d 1064, 1065 (7th Cir.1973); Beverly v. United States, 468 F.2d 732, 740-41 n. 13 (5th Cir.1972); Long v. Robinson, 432 F.2d 977, 979 (4th Cir.1970). But, more than the prospect of irremediable harm is necessary to trigger a garden variety judicial stay: factors reminiscent of those which grace the preliminary injunction standard, see text ante at Part II, must routinely be considered. E.g., Adams, 488 F.2d at 1065; Beverly, 468 F.2d at 740-41 n. 13; Chang, 107 F.R.D. at 344 slip op. at 3. Thus, if Congress intended that the traditional elements for the issuance of a stay should be considered in their ensemble by a reviewing court when a motion was filed pursuant to 7 U.S.C. § 2023, the statutory reference to “a showing of irreparable injury” was pleonastic at best; unembellished allusion to the availability of a stay would have directed inquiry to precisely the four-part test now hawked by the United States. The only way in which that phrase can be invigorated is if it is viewed, as the Market contends, as setting a special benchmark for the appropriateness vel non of a food stamp program stay. On the defendant’s interpretation of the legislation, those five words would be aimless surplusage. Thus, to give effect to the “irreparable injury” reference in § 2023, the construction of the statute urged by the government must be rejected.

This conclusion is bolstered by a review of the Act as a whole. The Congress plainly knew how to bring the standards of injunctive redress into play. See, e.g., 7 U.S.C. § 2020(g) (courts authorized to afford “appropriate injunctive relief” to correct noncompliance by participating state agencies). The custom-tailored stay mechanism limned in § 2023(a) and pinpointed in 7 C.F.R. § 279.10(d) stands in stark contrast to the direct references to injunctive relief; the government’s effort to treat these diverse choices of language as differences shorn of any distinction seems to this court to be the merest of vellieties.

Lastly, the interpretation of § 2023(a)’s stay provision urged by the plaintiff comports with the overall congressional intent. The Food Stamp Act not only renders disqualification orders subject to judicial review, see 7 U.S.C. § 2021(c), but also mandates “a trial de novo by the court in which the court shall determine the validity of the questioned administrative action in issue.” Id. § 2023(a). As Judge Keeton has noted:

The interpretation of the statute [limiting the stay inquiry to the presence or absence of irreparable injury] is consistent with its apparent purpose of providing for a genuine opportunity for de novo hearing in the district court. The stay, in effect, is designed to protect the statutory right to such a hearing.

Factor, 556 F.Supp. at 569.

This court recognizes that Judge Walinski’s decision in Gurtzweiler v. United States, 601 F.Supp. 883 (N.D. Ohio 1985), stands squarely for an opposing view. Yet, with respect, Gurtzweiler is unconvincing. The court’s reliance on the statutory directive “that an administrative action ‘shall remain in full force and effect’ until a showing is made for the need of a stay,” id. at 884, quoting 7 U.S.C. § 2023, is tautological; it wholly fails to address the pivotal question: what must a grocer demonstrate to merit a stay? And, the authorities cited in Gurtzweiler do not bear the weight assigned to them. Hamlin Testing Laboratories, Inc. v. United States Atomic Energy Commission, 337 F.2d 221, 222 (6th Cir.1964), relied on by the Gurtzweiler court, involves rules applicable to a traditional stay, and does not speak to the intendment of the specially-crafted language of 7 U.S.C. § 2023 and its accompanying regulations. The second authority upon which Gurtzweiler relies, Sitto v. United States, No. 82-8029 (6th Cir. June 1, 1982) (unpublished order), is closer to the point. The Sitto court refused to reverse a district court’s denial of a stay under 7 U.S.C. § 2023. The Sixth Circuit did not discuss the presence or absence of irreparable harm, the unusual phraseology of 7 U.S.C. § 2023, or the language of 7 C.F.R. § 279.10(d). Although the court of appeals plainly believed that the movant had an obligation “to demonstrate that he is likely to prevail on the merits in the district court’s de novo review,” Sitto, Order at 2, the etiology of that conclusion is obscure. This court, unlike the Gurtzweiler court, is not bound to follow Sitto, and declines to do so.

Disqualification from the food stamp program is a substantial sanction. Congress, had it chosen to do so, might have made an administrative decision of this sort essentially unreviewable. See 5 U.S.C. § 701(a). See generally Abbott Laboratories v. Gardner, 387 U.S. 136, 137, 139-41, 87 S.Ct. 1507, 1509, 1510-12, 18 L.Ed.2d 681 (1967). It elected, instead, to provide judicial review of such determinations and not to limit such oversight to the confines of the administrative record. By granting a trial de novo to an aggrieved grocer — a trial “at which the parties may introduce new evidence concerning the violations,” Broad Street Food Market, Inc., 720 F.2d at 220 — Congress went to unusual lengths. And, it not only ceded to the district courts the power to hold the administrative order in abeyance pending the outcome of the trial de novo, but it singled out “a showing of irreparable injury,” 7 U.S.C. § 2023(a), as the sine qua non for the issuance of such a detainer. Given the statutory mosaic as a whole, and the tenor of the Secretary’s implementing regulation, 7 C.F.R. § 279.10(d), it would necessitate a quantum leap to assume that Congress expected the courts to read between the lines and to stack additional preconditions atop the particularized showing which the legislation and the regulation expressly require.

This court hesitates to adopt the vision of a fissilingual Congress which is inherent in the government’s reading of 7 U.S.C. § 2023. A stay may be granted under the statute so long as the movant makes out “a showing of irreparable injury.” Id. Any other conclusion would fly in the face of settled canons of construction and would rob the de novo trial (which Congress thought to be appropriate) of any real meaning.

IV. DIMENSIONS OF THE IRREPARABLE INJURY

The government contends that, even if irreparable harm is the key requirement for postponing the effective date of the administrative order, such a detriment must amount to more than “mere proof of the loss of the business of food stamp customers.” Defendant’s Brief at 8. This argument, too, rests largely on the authority of Gurtzweiler. There, Judge Walinski noted that “[i]f a showing of economic loss was sufficient to invoke a stay under 7 U.S.C. § 2023, ... issuance of a stay would be automatic.” 601 F.Supp. at 885.

The Act, however, does not support such a limited view of the dimensions of irreparable injury. To be sure, an endurable deprivation of modest revenues during the pendency of judicial review might not amount to irredeemable harm. Courts have, in analogous contexts, so found. Cf. Sampson v. Murray, 415 U.S. 61, 90-92, 94 S.Ct. 937, 952-54, 39 L.Ed.2d 166 (1974) (court overturned order requiring that federal employee be reinstated to her former employment because “temporary loss of income, ultimately to be recovered, does not usually constitute irreparable injury”); Ekanem v. Health & Hospital Corporation of Marion County, 589 F.2d 316, 321-22 (7th Cir.1979) (order granting reinstatement reversed because loss of pay and difficulty in finding other employment does not show irreparable injury). Thus, contrary to the bugbear postulated in Gurtzweiler, a stay will not be an “automatic” aftermath to every program disqualification.

The case at bar, far from depending upon run-of-the-mine economic loss, presents a compelling picture of the prospect of irreparable harm. The plaintiff has asserted in his verified complaint that “his store is located in a ... low income neighborhood” and that “between 90% to 95% of [the Market’s] business emanates from food stamp households.” The defendant does not dispute these allegations. In short, the results of the suspension are likely, in this instance, to be catastrophic; the Market may well be forced to close its doors. In such circumstances, the de novo judicial trial which 7 U.S.C. § 2023 assures to Della Valle will be reduced to the emptiest of promises unless the court defers the effective date of the administrative order.

The plaintiff has met his burden of showing a sufficient threat of irremediable damage so as to warrant the issuance of a stay.

V. CONCLUSION

The court is mindful of the public interest which underlies vigilant monitoring and enforcement of the Food Stamp Act. Violators should be punished. But, there is no justification for a headlong rush to judgment in a manner which denies to participating vendors the rights of review secured to them by the Congress.

In fealty to the statute, the regulations, and the facts before this court, an interim stay of the final administrative order is granted. The effective date of the defendant’s ruling disqualifying the Market from participation in the food stamp program for a period of three years is postponed sine die pending the judgment of this court on the merits of this action. If not sooner vacated, the stay shall expire upon the entry of any judgment in this court affirming the action of the Secretary.

It is so ordered.

      . WIC is a federal program designed primarily to furnish supplemental foodstuffs and nutrition education to pregnant, postpartum, and breastfeeding women and to infants and young children. 7 C.F.R. § 246.1 (1985). The administration and enforcement of the WIC program has been entrusted, in the main, to the states. 7 C.F.R. § 246.10(g). In Rhode Island, this responsibility has devolved upon the state health department. The state inspectors determined, as a basis for the suspension, that the Market was guilty of eleven separate violations of the regulations, including altering of WIC program vouchers and permitting such vouchers to be used for the acquisition of prohibited items.

      . Della Valle named the state health department as a codefendant. Inasmuch as the state agency, from aught that appears of record here, has neither been served nor appeared, this court merely takes note of the attempted joinder. It is, for present purposes, beside the point.

      . Originally, the interim stay was to expire on September 30, 1985. The grace period has since been extended, with the acquiescence of the parties, to coincide with the date of this decision.

      . Although Judge Torruella’s comments in Pepsi Cola Bottling Co. of Puerto Rico, 500 F.Supp. at 305-06, squarely support the government's view of the quantum of proof required to secure a judicial stay, those remarks appear to be obiter dicta. The plaintiff in that case did not deny the existence of the state of facts upon which the disqualification order was bottomed, id. at 506, and its complaint therefore "failed to state a cause of action.” Id.

      . Rule 65(b), which speaks to temporary restraining orders, does specify that such an anodyne may be had without notice to the adverse party if "irreparable injury, loss, or damage" will otherwise result. But, as Judge Keeton pointed out, such transient relief is not fairly analogous to a § 2023 stay. See Factor, 556 F.Supp. at 569 n. 3.

      . The First Circuit has acknowledged that regulations promulgated under the food stamp program can have convincing force in deciphering the congressional will. See Broad Street Food Market, Inc. v. United States, 720 F.2d 217, 221 (1st Cir.1983) (utilizing 7 C.F.R. § 278.6(f) to illumine 7 U.S.C. § 2021 as to the extent of the Secretary’s discretion vis-a-vis choice of sanction).

      . Hamlin involved an effort to stay an order of the Atomic Energy Commission denying a request for renewal of a license to perform industrial radiography. 337 F.2d at 221. Inasmuch as the applicable provision for judicial oversight, 42 U.S.C. § 2239(b), did not provide for a de novo trial, Hamlin is distinguishable for that reason as well. Certainly, the narrower the scope of available judicial review, the easier it becomes (as a general rule) to justify giving immediate effect to the final administrative order.

      . The order in Sitto issued over the signature of the clerk of court. It is unclear if more than one judge participated in its formulation.

      . Each judge of this court has the power and authority to determine priorities on his trial calendar "consistent with the just, efficient performance of the business of the court.” D.R.I. L.R. 9(a). To insure that administrative appeals of this sort are not used for purposes of delay, expedited consideration is appropriate. Therefore, • this case is advanced upon the court’s docket, and will be called for trial on the December, 1985 calendar at the latest. A status/scheduling conference, Fed.R.Civ.P. 16, will be held in chambers on Tuesday, October 15, 1985 at 8:30 a.m. Counsel shall be governed accordingly.


text:
    Mara ARENAS and Jan Arenas, Plaintiffs, v. LADISH COMPANY and Clifford Jarvis, Defendants.
    No. 81-C-1187.
    United States District Court, E.D. Wisconsin.
    Oct. 10, 1985.

      Nola Hitchcock Cross, Podell, Ugent & Cross, Milwaukee, Wis., for plaintiffs.
    Fred G. Groiss, Quarles & Brady, Milwaukee, Wis., for defendants.
   DECISION AND ORDER

WARREN, District Judge.

On September 4, 1981, plaintiffs Mara and Jan Arenas brought this action pursuant to Title VII of the Civil Rights Act of 1964, 42 U.S.C. §§ 2000 et seq., alleging sexual discrimination and harassment. Furthermore, plaintiffs seek redress for injuries inflicted pursuant to defendants’ allegedly defamatory statements and conduct. Plaintiffs’ causes of action arise out of Mara Arenas’ employment at defendant Ladish Company (“Ladish”) and, specifically, pursuant to her work relationship with her supervisor, defendant Clifford Jarvis (“Jarvis”). Presently before the Court are defendants’ motions (1) to dismiss Jan Arenas for lack of subject matter jurisdiction; (2) to dismiss Mara Arenas’ Title VII claim against Jarvis for lack of subject matter jurisdiction; (3) to dismiss Mara Arenas’ state law defamation claim against Jarvis; (4) to dismiss or grant summary judgment in favor of Ladish on Mara Arenas’ state law defamation claim; and (5) to dismiss the claims for punitive damages.

BACKGROUND

Mara Arenas has been employed by Ladish since approximately October, 1978. From October, 1979 to March, 1980, Jarvis was Mara Arenas’ supervisor on the third shift in the Steel Stores Department at Ladish. Mara Arenas’ causes of action arise out of actions transpiring during this time. Mara Arenas alleges that Jarvis initiated physical contact with her and made comments to her which contained sexual content. Pursuant to these physical contacts and sexual comments, Mara Arenas claims that she suffered physical and mental injuries. Accordingly, Mara Arenas seeks recovery for these injuries pursuant to a Title VII sexual discrimination claim and a state law defamation claim. Jan Arenas, Mara’s husband, seeks recovery pursuant to the state law defamation claim for lack of companionship and sexual relations with his wife and for medical and hospitalization expenses incurred. Mara Arenas seeks $50,000.00 in actual damages and $50,000.00 in punitive damages. Jan Arenas seeks $10,000.00 in actual damages and $5,000.00 in punitive damages. The plaintiffs have completed the appropriate administrative requirements prior to this lawsuit’s initiation.

DISCUSSION

I. Motion To Dismiss Jan Arenas.

Defendants move to dismiss Jan Arenas on the ground that this Court lacks subject matter jurisdiction over his claims. Jan Arenas seeks recovery from the defendants for loss of consortium and companionship and for medical and hospitalization expenses. These claims stem from injuries suffered by his wife allegedly pursuant to defendants’ defamation. Mr. Arenas asserts that he is a proper party to this case based on the doctrine of pendent jurisdiction. Defendants contend that the present case’s circumstances should dissuade the Court from exercising pendent jurisdiction over Mr. Arenas’ claims.

“Pendent jurisdiction usually refers to the case where a plaintiff having a claim based on federal law joins with it a closely related state law claim against the same defendant but without an independent fed-

eral jurisdictional basis.” Hixon v. Sher-win-Williams Company, 671 F.2d 1005, 1007 (7th Cir.1982). This is termed “pendent claim jurisdiction.” However, in the present case, Mr. Arenas seeks joinder of his state law claim with his wife’s related claims against the same defendants. Consequently, Mr. Arenas requests this Court to exercise “pendent party jurisdiction.” The doctrine of pendent party jurisdiction has been viewed with increasing disfavor by the Seventh Circuit Court of Appeals. Bernstein v. Lind-Waldock & Company, 738 F.2d 179, 187 (7th Cir.1984); Thomas v. Shelton, 740 F.2d 478, 487 (7th Cir.1984). In Bernstein, the court stated:

The recent cases permit the following generalization: if the pendent party concept retains any vitality today when there is a greater concern with avoiding unnecessary federal inroads into state jurisdiction than when the concept first emerged, it survives as a convenience to a party who has a substantive federal claim rather than as a service to the cause of judicial economy. It makes it cheaper for such a party to proceed in federal court by allowing him to bring in related claims against different parties.

738 F.2d at 187 (citations omitted). Further, “in general, pendent party jurisdiction, to the extent recognized at all, allows only defendants to be added.” Thomas v. Shelton, supra at 487.

In the present case, Mr. Arenas seeks to be allowed to pursue his claims as a plaintiff pursuant to the Court’s exercise of pendent party jurisdiction. As stated above, considering the general disfavor towards exercising pendent party jurisdiction and its use being primarily limited to adding defendants, Mr. Arenas’ status as a plaintiff in this case will be shortlived. Moreover, Mr. Arenas’ claims derive from his wife’s state law claims of slander and defamation rather than her claims based on federal question jurisdiction. This too militates against exercising pendent party jurisdiction. That is, because Jan Arenas’ cause of action derives from his wife’s state law claim, rather than her Title VII claim, there is no compelling reason for this Court to exercise pendent party jurisdiction. Cf. Hixon, supra at 1008. Accordingly, the Court GRANTS defendants’ motion to dismiss Jan Arenas as a plaintiff in this case.

II. Motion To Dismiss The Title VII Claim Against Jarvis.

Defendants move to dismiss plaintiff Mara Arenas’ Title VII claim against Jarvis. This motion is based on Mara Arenas naming only Ladish, and not Jarvis, as a respondent in her EEOC Charge of Discrimination. A prerequisite to initiating a Title VII action is that the plaintiff file a charge of discrimination with the EEOC. 42 U.S.C. §§ 2000e-5(f)(1). If other conditions are met, the plaintiff may then bring a civil action in federal court “against the respondent named in the charge____” Id. Defendants’ position is that since Jarvis was not named as a respondent in the charge, no civil action can be commenced against him.

On February 22, 1980, Mara Arenas filed a charge of discrimination with the EEOC. On the “Charge of Discrimination” form completed by Mara Arenas, there was a line designated “RESPONDENT” wherein the complainant was to identify “[t]he employer, labor organization, employment agency, landlord, manager, or other person, agency or business, who discriminated against you.” Mara Arenas only listed Ladish as a respondent. However, in a later portion of the charging form, Mara Arenas described the alleged discrimination by detailing various incidents in which Jarvis was the perpetrator of the discrimination. Mara Arenas was not represented by an attorney when she filed the charge.

Mara Arenas contends that Jarvis should not be dismissed from this action. Her position is that since Jarvis was repeatedly identified in the body of the discrimination charge, he had sufficient notice of any future civil action against him. Further, Mara Arenas asserts that the traditional liberal interpretation of Title VII filing requirements preclude Jarvis’ dismissal.

Ordinarily a party not named in an EEOC charge may not be sued under Title VII. Eggleston v. Chicago Journeymen Plumbers, etc., 657 F.2d 890, 905 (7th Cir. 1981), cert, denied, 455 U.S. 1017, 102 S.Ct. 1710, 72 L.Ed.2d 134 (1982). The reason for this requirement is that “the charge serves to notify the charged party of the alleged violation and also brings the party before the EEOC, making possible effectuation of the Act’s primary goal of securing voluntary compliance with its mandates.” Id. However, “where an unnamed party has been provided with adequate notice of the charge, under circumstances where the party has been given the opportunity to participate in conciliation proceedings aimed at voluntary compliance, the charge is sufficient to confer jurisdiction over that party.” Id. This exception’s purpose is to prevent frustrating Title VII’s goals by requiring procedural exactness in stating the charges.

First, the Court must determine whether Mara Arenas’ charge of discrimination adequately served to notify Jarvis of the alleged Title VII violation. In the filed charge, Mara Arenas described the alleged discrimination. This description named Jarvis as the perpetrator of several incidents of alleged discrimination. Various courts have held that a party not named in the charge, but who is fairly apprised of the charges against him, can be maintained as a defendant in a Title VII civil action. Eg. Eggleston, supra; Romero v. Union Pacific Railroad, 615 F.2d 1303, 1311-12 (10th Cir.1980); Dickey v. Greene, 603 F.Supp. 102,106 (E.D.N.C.1984). Here it is clear that Jarvis received actual notice of the charge. Jarvis was repeatedly named in the descriptive portion of the charging document and, further, Jarvis personally testified before the Equal Rights Division m a hearing concerning the charge. Accordingly, the Court finds that the first prong of the Eggleston test is met since Jarvis did have notice of the charge.

The second prong requires this Court to determine whether Jarvis was given an opportunity to participate in conciliation proceedings aimed at obtaining voluntary compliance with Title VII. Subsequent to filing the charge, Mara Arenas left the department where Jarvis worked. It is difficult to see how, under these circumstances, an individual respondent, as opposed to an institutional respondent, could achieve fruitful conciliation with a complainant. Furthermore, because Jarvis did have notice of the charge and since his employer was the named respondent, Ladish’s conciliation interests were commensurate with Jarvis’. See Eggleston, supra, at 907. The Court finds that even though Jarvis was not formally charged, he received adequate notice and opportunity to engage in conciliation efforts.

Because of these factors and in light of the liberal construction given to Title VII filing requirements, especially where a complainant is not represented by counsel at the time of filing, see Eggleston, supra, at 905-06; Vanguard Justice Society, Inc. v. Hughes, 471 F.Supp. 670, 688 (D.Md. 1979); Stevenson v. International Paper Company, 432 F.Supp. 390, 395 (W.D.La. 1977), the Court DENIES defendants’ motion to dismiss Jarvis.

III. Motion To Dismiss The Defamation Claim.

Defendants move to dismiss Mara Arenas’ defamation claim on the ground that her complaint fails to state a claim in defamation. The substantive law of the forum state governs defamation claims brought in federal court. Thompson v. Kiekhaefer, 71 F.R.D. 115, 116 (E.D.Wis. 1976). Defendants contend that Mara Arenas failed to set forth in her complaint “the particular words complained of” as required by Wis.Stat. § 802.03(6), and to allege that the particular words spoken were false. Olston v. Hallock, 55 Wis.2d 687, 700, 201 N.W.2d 35 (1972). Because of this failure, defendants assert that the defamation claim should be dismissed.

In paragraph 15 of her complaint, Mara Arenas alleges as follows:

15. Defendant Clifford Jarvis acting independently and as an agent of Ladish Company and Defendant Ladish Company through its agent Clifford Jarvis slandered and defamed the character of Plaintiff Mara Arenas by making a [sic] obscene gestures and comments to Plaintiff Mara Arenas in the presence of others during the course of her employment and stating in the presence of others that Jarvis had a good time in a motel with Mara Arenas and making reference to obtaining her house keys during the period October, 1979 through March, 1980.

The allegations that Jarvis stated he “had a good time in a motel with Mara Arenas” and his reference to obtaining Mara Arenas’ house keys sufficiently set forth the substance of the defamatory remarks. Defendants have not advanced any, nor is the Court aware of any, Wisconsin law requiring a plaintiff, in circumstances such as the present, to submit a verbatim recitation of allegedly defaming remarks in a Complaint. The allegations in paragraph 15 of Mara Arenas’ Complaint, albeit not enclosed in quotation marks, sufficiently set forth the particular words allegedly defamatory. Moreover, the context of the Complaint’s allegations display Mara Arenas’ assertion that these remarks by Jarvis were false.

Defendants also seek to dismiss the defamation claim on the ground that by resolving the claim, the Court would be dealing in an unsettled area of Wisconsin law. Defendants assert that there is a strong possibility that when presented with a defamation action brought by an employee against an employer and a co-employee, a Wisconsin court would decide that the plaintiff’s sole remedy is pursuant to Wisconsin’s worker’s compensation laws. Wis. Stat. § 102.03(2) provides that worker’s compensation is the “exclusive remedy” against an employer or co-employee for injuries arising out of employment. Since Mara Arenas’ injuries allegedly resulted from her being defamed by her supervisor while she was at work, defendants contend that worker’s compensation is her sole remedy.

Defendants offer no precedent for this novel theory. Indeed, defendants concede that the Wisconsin Supreme Court has not specifically addressed the issue of a claim against an employer for defamation by a co-employee and its relationship to the worker’s compensation statute. Defendants seek to have this Court refuse to resolve the defamation claims because the Wisconsin Supreme Court might someday find such a relationship.

The Court does not consider this present issue to be in an area of unsettled state law precluding its resolution in federal court as envisioned by the United States Supreme Court in Moor v. County of Alameda, 411 U.S. 693, 93 S.Ct. 1785, 36 L.Ed.2d 596 (1973). Rather, since the Wisconsin Supreme Court has never been presented with this issue, it may more reasonably appear that it is settled in Wisconsin that the alleged defamation in the present case is not covered by worker’s compensation law. Nevertheless, the law is not in such a state of flux or evolution precluding the Court from resolving this issue. Accordingly, defendants’ motion to dismiss Mara Arenas’ defamation claim is DENIED. Furthermore, defendants’ motion to dismiss Mara Arenas’ claim for punitive damages is likewise DENIED since the defamation claim remains intact.

IV. Motion For Partial Summary Judgment.

Ladish moves for partial summary judgment on Mara Arenas’ defamation claims. Ladish asserts that, as a matter of law, it cannot be held liable for defamatory acts by Jarvis. Ladish claims that it is free from liability pursuant to a respondeat superior theory since Jarvis’ allegedly defamatory remarks were not spoken within the scope of his employment. Mara Arenas argues that respondeat superior is inapplicable. However, she contends that Ladish can be held liable pursuant to an agency theory whereby Ladish ratified the actions of its agent — Jarvis. Mara Arenas asserts that as a supervisor, Jarvis spoke for management. Furthermore, she contends that management’s alleged countenancing of Jarvis’ remarks constituted ratification which thereby subjects it to liability.

In support of their position, defendants cite Mandel v. Byram, 191 Wis. 446, 211 N.W. 145 (1926) wherein the Wisconsin Supreme Court stated:

“When there is no original liability for the act of a servant, because at the time of the negligence the servant was acting in his own personal business, the master does not become liable merely by reason of the fact that he thereafter retains the servant in his employ.”

191 Wis. at 452, 211 N.W. 145. Based on Mandel, the Court finds that Ladish cannot be held vicariously liable for Jarvis’ actions prior to receiving notice of these actions merely because Ladish retained Jarvis in its employ.

However, this finding does not necessarily preclude holding Ladish vicariously liable for Jarvis’ actions occurring subsequent to it being informed of Jarvis’ alleged defamation of Mara Arenas. Furthermore, Ladish’s assertions that it investigated Mara Arenas’ complaints and found no improprieties does not conclusively refute Mara Arenas’ “ratification” theory of recovery. Rather, factual issues persist regarding the adequacy of this investigation and whether Ladish’s failure to take admonitory or corrective action against Jarvis was warranted under the circumstances. Ladish has presented no authority, and the Court is aware of none, indicating that Mara Arenas’ “ratification” theory of recovery is forbidden as a matter of law. Accordingly, summary judgment is DENIED as to the issue of whether Ladish is liable pursuant to the theory that it ratified Jarvis’ defamatory conduct.

SUMMARY OF FINDINGS

The Court hereby Orders that:

(1) defendants’ motion to dismiss Jan Arenas for lack of subject matter jurisdiction is GRANTED;

(2) defendants’ motion to dismiss Mara Arenas’ Title VII claim against Jarvis for lack of subject matter jurisdiction is DENIED;

(3) defendants’ motion to dismiss Mara Arenas’ state law defamation claim against Jarvis is DENIED;

(4) defendants’ motion to grant summary judgment in favor of Ladish on Mara Arenas’ state law defamation claim is DENIED.

In order to ensure that this matter proceeds apace, the Court hereby schedules a pretrial/settlement conference in this matter for Monday, October 28, 1985, at 1:30 p. m. in Room 390, Federal Building, 517 East Wisconsin Avenue, Milwaukee, Wisconsin. Counsel who are expected to try this case are required to attend this conference. Further, at this conference, counsel should be able to inform the Court of their clients’ positions regarding settlement.