text:
    KEENE CORPORATION, Plaintiff, v. INSURANCE COMPANY OF NORTH AMERICA, et al., Defendants.
    Civ. A. No. 78-1011.
    United States District Court, District of Columbia.
    Nov. 19, 1984.
    As Amended Jan. 11, 1985.

      Harold D. Murry, Jr., Clifford & Warnke, Eugene Anderson, Jerold Oshinsky, Arthur S.' Olick, Anderson, Baker, Kill & Olick, Washington, D.C., for plaintiff.
    Dennis M. Flannery, Wilmer, Cutler & Pickering, Washington, D.C., Michael R. Gallagher, Thomas E. Betz, Gallagher, Shrap, Fulton, Norman & Mollison, Cleveland, Ohio, Frank W. Gaines, Jr., Robert L. Hoegle, Olwine, Connelly, Chase, O’Donnell & Weyher, Washington, D.C., Gerald V. Weigle, Jr., Dinsmore, Shohl, Coates & Depree, Cincinnati, Ohio, John F. Mahoney, Jr., James E. Rocap, Stephen L. Nightingale, John P. Arness, William J. Bowman, Hogan & Hartson, Washington, D.C., for defendants.
   MEMORANDUM OPINION

JUNE L. GREEN, District Judge.

This matter is before the Court on plaintiff Keene Corporation’s (“Keene”) motion for partial summary judgment regarding defendant Insurance Company of North America’s (“INA”) continuing duty to defend, defendant’s opposition thereto and cross-motion for partial summary judgment, plaintiff’s opposition thereto, the parties’ respective replies, and the entire record herein.

Keene contends that defendant INA’s duty to defend Keene in underlying asbestos cases continues after the exhaustion of aggregate policy limits. Specifically, Keene alleges that the defense duty under INA’s pre-1966 insurance policies continues for all present and future asbestos cases. Keene’s Statement of Points and Authorities in Support of Its Motion for Partial Summary Judgment With Respect to the Defendants’ Continuing Duty to Defend Keene and to Pay Keene’s Defense Costs (“Keene’s Motion”) at 1-2.

For the reasons stated below, the Court finds that defendant INA’s duty to defend Keene in underlying asbestos eases ceases upon the exhaustion of indemnity limits under the pre-1966 policies in question. Therefore, the Court denies Keene’s motion for partial summary judgment and grants the cross-motion of INA.

I.

Background

All pre-1966 policies were sold to Keene by INA, with policy periods from December 31, 1956 to January 1, 1968. Keene’s Motion at 4. The defense agreement set forth in Paragraph IV of the policies states in pertinent part:

With respect to such insurance as is afforded by this policy the company shall: (a) defend any suit against the insured ... even if such suit is groundless, false or fraudulent; but the company may make such investigation, negotiation and settlement of any claim or suit as it deems expedient; ...
* * * * * *
and the amounts so incurred, except settlements of claims and suits, are payable by the company in addition to the applicable limit of liability of this policy.

Appendix 2 to Keene’s Motion ¶ IV.

In 1966, the insurance industry revised the standard policy language to provide that “[the insurer] shall not be obligated to pay any claim or judgment or defend any suit after the applicable limit of [the insurer’s] liability has been exhausted by pay: ment of judgments or settlements.” Appendix 3 to Keene’s Motion ¶ I.

INA notified Keene that the indemnity limits of the pre-1966 policies were exhausted and that defense obligations would be transferred to Keene’s excess liability insurance carriers. Affidavit of Howard A. Mileaf (executed Aug. 21, 1984); INA’s Statement of Material Facts as to Which There is No Genuine Issue ¶ 4.

Under the excess policies, the carriers agreed to pay Keene’s “ultimate net loss,” which included indemnity and defense costs. In some cases, defense costs were charged against the aggregate policy limits rather than paid in addition to indemnity limits as they are under the primary insurance policies. Keene’s Motion at 7.

H.

Discussion

Summary judgment is appropriate under Rule 56 of the Federal Rules of Civil Procedure when no genuine issues of material fact exist and when the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56; Weiss v. Kay Jewelry Stores, Inc., 470 F.2d 1259, 1262 (D.C.Cir.1972) (quoting Traylor v. Black, Sivalls & Bryson, Inc., 189 F.2d 213, 216 (8th Cir.1951)).

The issue before the Court is whether INA’s duty to defend under its pre-1966 insurance policies terminates upon the exhaustion of the policies’ indemnity limits. Since no material facts concerning this issue are in dispute, the Court properly may consider the question on cross-motions for summary judgment. See supra note 2.

Keene contends that the standard pre1966 policy language creates an unqualified duty of INA to continue paying defense costs in all asbestos-related lawsuits now pending or subsequently brought against Keene. INA’s duty to defend would not terminate until the actions against Keene ceased and all cases were fully litigated.

Keene relies primarily on three cases interpreting the standard pre-1966 policy language as to the continuing duty to defend in underlying asbestos cases. After finding the language ambiguous, the courts construed the policies liberally in favor of the insured. The courts held the insurers to “an unqualified and unlimited as to dollar amount duty to ‘defend any suit against the insured.’ ” Zurich Insurance Co. v. Raymark Industries, Inc., No. 78 L 8760 at 6 (Ill.Cir.Ct. Cook. Cty. June 15, 1982); ACandS, Inc. v. Aetna Casualty and Surety Co., 576 F.Supp. 936, 942 (E.D.Pa.), appeals docketed, Nos. 83-1927, 1928 (3d Cir.1983); Commercial Union Insurance Co. v. Pittsburgh Corning Corp., 553 F.Supp. 425, 429 (E.D.Pa.1981).

After careful consideration, this Court disagrees with those decisions and finds that the intention of the parties was not to create a continuing duty of defense after the exhaustion of policy limits.

The Court agrees with Keene that Pennsylvania law applies to the duty-to-defend issue as to the pre-1966 policy language. The Court disagrees, however, that it is bound by the decisions of the Federal court for the Eastern District of Pennsylvania in which the defense duty was found to continue indefinitely. The Federal court merely predicted the outcome under Pennsylvania law; no State court has considered the issue at hand. In Commercial Union, the Federal court noted the lack of Pennsylvania authority on which to base its prediction. Commercial Union Insurance Co. v. Pittsburgh Corning Co., 553 F.Supp. at 430.

This Court must make its own prediction of what Pennsylvania State authority would hold in the instant controversy after consideration of all available data. Glassman Construction Co. v. Fidelity & Casualty Co. of New York, 356 F.2d 340, 342 n. 7 (D.C.Cir.), cert. denied, 384 U.S. 987, 86 S.Ct. 1890, 16 L.Ed.2d 1005 (1966). Decisions of other Federal courts are not conclusive and need not be followed if “contrary to the more cogent reasoning of the best and most wide-spread authority.” Ward v. Hobart Manufacturing Co., 450 F.2d 1176, 1180 n. 5 (5th Cir.1971); McKenna v. Ortho Pharmaceutical Corp., 622 F.2d 657, 662-63 (3d Cir.), cert. denied, 449 U.S. 976, 101 S.Ct. 387, 66 L.Ed.2d 237 (1980).

This Court believes that the Commercial Union and ACandS decisions failed to interpret the insurance policies in accordance with well-established rules of construction and wrongly predicted the trend of the Pennsylvania Supreme Court.

In interpreting the pre-1966 policy language, neither court attempted to ascertain the intent of the parties. The language simply was deemed ambiguous and construed in favor of the insured.

The interpretation of an insurance policy requires the same rules generally as the construction and interpretation of other written contracts. See 4 Williston on Contracts § 625 at 828 (3d ed. 1961). “[T]he task of the District Court is to determine the intention of the parties to [the contract]. ‘It is an elementary principle of contract interpretation that the plain and unambiguous meaning of a written contract is controlling, in the absence of some clear evidence indicating a contrary intention.’ ” Pennsylvania Avenue Development Corp. v. One Parcel of Land in the District of Columbia, 670 F.2d 289, 292 (D.C.Cir.1981) (quoting Vogel v. Tenneco Oil Co., 465 F.2d 563, 565 (D.C.Cir.1972)); Mellon Bank, N.A. v. Aetna Business Credit, Inc., 619 F.2d 1001, 1009 (3d Cir.1980). The Court must determine first whether the language is “plain and unambiguous” and therefore controlling as a matter of law or whether the words are ambiguous and in need of interpretation through rules of construction and objective evidence of the parties’ intent.

Courts have defined ambiguity as being “ ‘reasonably susceptible of different constructions or interpretations.’ ” Papago Tribal Utility Authority v. F.E.R.C., 723 F.2d 950, 955 (D.C.Cir.1983) (emphasis added); Mellon Bank, N.A. v. Aetna Business Credit, Inc., 619 F.2d at 1011. The reasonableness of different interpretations of an insurance policy is determined by the intent of the insured, rather than the insurer. “[T]he test is not what the insurer intended the words of the policy to mean but what a reasonable person in the position of an insured would understand them to mean.” St. Paul Fire and Marine Insurance Co. v. Thompson, 150 Mont. 182, 433 P.2d 795, 798 (1967); Keene v. INA, 667 F.2d 1034, 1041 (D.C.Cir.1981).

Pennsylvania law does not limit the court to a “four corners” approach in determining whether the language is ambiguous. Rather, the role of the judge is “to consider the words of the contract, the alternative meaning suggested by counsel, and the nature of the objective evidence to be offered in support of that meaning.” Mellon Bank, N.A. v. Aetna Business Credit, Inc., 619 F.2d at 1011. “If no ‘reasonable’ alternative meanings are put forth, then the writing will be enforced as the judge reads it on its ‘face.’ ” Id. at 1012 n. 13 (citing International Systems, Inc. v. Personnel Data Systems, slip op. (Pa. Jan. 18, 1980)).

In the instant case, the Court finds the policy language unambiguous. INA agreed to' “defend any suit” brought against Keene, but specifically limited that duty “with respect to such insurance as is provided by. [the] policy.” The language unquestionably limits the insurer’s duty to defend. The issue is whether that duty is limited only by the nature of the .claim or also by the amount of indemnity provided under the policy. The Court finds the language susceptible of only one reasonable interpretation: the policies limit the duty to defend to both the nature and the amount of insurance provided.

Reference only to the nature of insurance provided is an unreasonably narrow construction. “Insurance is composed not only of type of coverage, but also amount of coverage. To be insured only as to type of coverage is no protection at all. Another dimension is involved, the amount of that coverage.” Liberty Mutual Insurance Co. v. Mead Corp., 219 Ga. 6, 131 S.E.2d 534, 536 (1963) (emphasis in original); see also Denham v. LaSalle-Madison Hotel Co., 168 F.2d 576, 584 (7th Cir.1948) (Standard pre-1966 insurance policy language “cannot reasonably be ... construed” to continue insurer’s defense duty after exhaustion of policy limits.).

The Court is bound to give insurance policies “a practical, reasonable, and fair construction consonant with the apparent object and intent of the parties____ Strained or forced constructions ... are to be avoided.” 43 Am.Jur.2d Insurance § 276 (1982). The primary objective of the insurance policies in question was to provide Keene with indemnification coverage up to a certain monetary limit. Keene Corp. v. Insurance Co. of North America, 667 F.2d at 1041. The parties agreed to a supplemental duty to defend Keene, which reasonably continued as long as INA’s duty to pay damages. Without offering any objective evidence of a contrary intent, Keene suggests that it reasonably could have expected the defense duty to continue long past INA’s payment of the policy limits. This construction would remove any connection between the duty to defend and the payment of insurance premiums. Therefore, an insured paying higher premiums would receive no more defense protection. To alleviate its future financial burden, Keene is offering the Court a strained construction which the Court cannot accept in good faith.

The Court of Appeals for the District of Columbia recognized the limiting effect of the pre-1966 policy language in Knippen v. Glens Falls Insurance Co., 564 F.2d 525 (D.C.Cir.1977). That case involved a question of whether the duty to pay supplementary costs continued after the exhaustion of policy limits. In holding that the duty did continue, the court relied in part on the absence of similar limiting language. The court found that the Glens Falls insurance policy lacked the “general limitation” of the pre-1966 policies and thus “required the company to ‘defend- any suit ... ’ without any other limitation.” Id.

We do not read the phrase “in any such suit” as permitting the company to avoid its liability for costs by withdrawing from the suit prior to the entry of judgment, particularly where, as here, this duty is not subject to the “[wjith respect to such insurance as is afforded by this policy” limitation of the contract in National Union.

Id. at 530 (citing National Union Insurance Co. of Washington, D.C. v. Phoenix Assurance Co. of New York, 301 A.2d 222 (D.C.1973)) (Insurer’s duty to defend under pre-1966 policy language terminated upon payment of policy limits into court.).

In the instant case, the duty to defend is limited additionally by the policies’ introductory sentence, which provides that the parties enter into the insurance contract “subject to the limits of liability, exclusions, conditions and other terms of [the] policy.” Appendix 2 to Keene’s Motion. The Court may not disregard this clause in interpreting the policy language. “Under general contract law, ... the Court determines the intention of the parties from the language used by the parties to express their agreement____ In performing this task the Court should construe the contract as a whole so as to give meaning to all of the express terms.” Washington Metropolitan Area Transit Authority v. Mergentime Corp., 626 F.2d 959, 961 (D.C.Cir.1980) (citations omitted); O’Brien & Gere Engineers, Inc. v. Taleghani, 525 F.Supp. 750, 760 (E.D.Pa.1981). The introductory language clearly notified Keene that all rights and duties under the policy were “subject to the limits of liability,” including the duty to defend.

The asbestos-related cases cited by Keene failed to mention similar introductory language. This Court finds that such language, together with the limiting phrase immediately preceding the defense agreement, clearly and unambiguously terminates the duty to defend upon the exhaustion of policy limits.

This interpretation is supported by a majority of well-reasoned opinions. E.g., Denham v. LaSalle-Madison Hotel Co., 168 F.2d 576 (7th Cir.1948); National Union Insurance Co. of Washington, D.C. v. Phoenix Assurance Co. of New York, 301 A.2d 222 (D.C.App.1973); Liberty Mutual Insurance Co. v. Mead Corp., 219 Ga. 6, 131 S.E.2d 534 (1963); Travelers Indemnity Co. v. New England Box Co., 102 N.H. 380, 157 A.2d 765 (1960); Lumbermen’s Mutual Casualty Co. v. McCarthy, 90 N.H. 320, 8 A.2d 750 (1939).

In Lumbermen’s Mutual Casualty Co. v. McCarthy, the New Hampshire Supreme Court held that “upon performance of [an insurer’s] duties of payment its duty to defend ceases to exist and the further defense of any action pending thereafter must be conducted and may be controlled by the insured.” 8 A.2d at 752. To hold otherwise, the court said, would create an anomaly.

[T]o construe [the provisions concerning settlement and defense] as independent of that duty to pay would result, in view of the provisions of the policy which give the insurer full control over the settlement of claims and the conduct of litigation, in placing the duty of defense upon the shoulders of one not obligated to pay, and in removing control over settlement and litigation from the hands of the insured who, in the event of a verdict and final judgment against him, would have to pay damages.

Id.; see also Denham v. LaSalle-Madison Hotel Co., 168 F.2d at 584 (“Defendant’s theory would produce the incongruous situation that plaintiff would have a continuing obligation to defend, notwithstanding its obligation to pay has been exhausted.”).

In contrast, other courts have held that the pre-1966 policy language creates a continuing duty to defend after the exhaustion of policy limits. American Casualty Co. of Reading, Pa. v. Howard, 187 F.2d 322 (4th Cir.1951); Anchor Casually Co. v. McCaleb, 178 F.2d 322 (5th Cir.1950); St. Paul Fire and Marine Insurance Co. v. Thompson, 150 Mont. 182, 433 P.2d 795; Kocse v. Liberty Mutual Insurance Co., 159 N.J.Super. 340, 387 A.2d 1259 (1978); American Employers Insurance Co. v. Goble Aircraft Specialties, Inc., 205 Misc. 1066, 131 N.Y.S.2d 393 (1954).

These decisions can be distinguished on their facts, however. None involved an insurer who had defended the insured in good faith until the policy limits were paid by judgment or settlement. Rather, the insurer in most cases tendered the policy limits into court before conducting any defense.

The courts’ concern was that by tendering the limits, the insurer would avoid all burdens of defense, even those associated with the payment of the policy limits. Thus, the insured would receive no defense coverage as provided by the policy. “The defense of such suits by the insurer is a' valuable right of the insured for which he pays and to which he is entitled by the very words of the policy.” American Casualty Co. of Reading, Pa. v. Howard, 187 F.2d at 327; see also Simmons v. Jeffords, 260 F.Supp. 641, 642 (E.D.Pa.1966) (“[A] most significant protection afforded by the policy — that of defense — is rendered a near nullity” if the duty to defend terminates upon tendering the limits); 7C Appleman Insurance Law and Practice § 4682 at 36 (rev. ed. 1979) (The decisions that required a continuing duty to defend were “a way to make sure the insurer would not abandon the insured by simply depositing its limits in court.”).

Similarly, in American Employer’s Insurance Co. v. Goble Aircraft Specialties, Inc. the insurer sought a declaratory judgment that once the policy limits were exhausted, the insurer could abandon its defense of the insured in multiple-related tort actions. The New York Supreme Court refused to permit the insurer “to withdraw counsel and cease to defend such actions.” 131 N.Y.S.2d at 400.

Goble, however, involved several tort actions arising from the same set of facts and a request for a declaratory judgment. The insurer had not yet defended the insured in good faith in any of the actions. The insurer, therefore, could have settled quickly up to the policy limits to avoid further defense costs. In addition, the transfer of defense duties for related claims may have been unreasonably time-consuming and expensive.

Unlike Goble, the underlying asbestos claims in the instant case are unrelated, the number of future claims is unknown, and INA has defended Keene in good faith up to the policies’ limits. Likewise, unlike the tendering case, INA is not trying to avoid its defense duty for which Keene paid. Under the pre-1966 insurance policies, Keene contracted for the protection of indemnification and defense up to the policies’ limits, and no more. INA has paid in defense costs several times the $6 million expended in indemnity payments on Keene’s behalf. INA’s Statement of Points and Authorities in Support of Its Cross-Motion for Partial Summary Judgment and in Opposition to Keene’s Motion for Partial Summary Judgment With Respect to the Duty to Defend and to Pay Defense Costs at 3. This Court may not read the policy language to create an ambiguity and thereby provide greater coverage to Keene than that intended by the parties at the time of contracting. Tookmanian v. Safe Harbor Water Power Corp., 505 F.Supp. 920, 922 (E.D.Pa.1981).

Furthermore, the transfer of defense duties to Keene’s excess insurers has been accomplished without prejudice to Keene. Plaintiff contends that it may suffer damages if excess indemnity limits are consumed by defense costs. Keene’s Motion at 7-8. The possible financial burden of which Keene complains’, however, does not constitute the legal prejudice required to invoke judicial protection. See Liberty Mutual Insurance Co. v. Mead Corp., 131 S.E.2d at 536 (“There is no allegation that the insured suffered any prejudice of its rights by the insurer’s withdrawal; the only damage of which it complains is monetary.”); Commercial Union Insurance Co. v. Pittsburgh Corning Corp., 553 F.Supp. at 432. Keene has not alleged that its rights in any of the underlying asbestos cases have been sacrificed by the transfer of defense duties.

Even if the Court found the policy language ambiguous, its ruling would not differ. The Court’s foremost task is to determine the intent of the parties from the language and surrounding circumstances. Only if that intent cannot be ascertained, may the Court apply the rule of construction in favor of the insured. See Mellon Bank, N.A. v. Aetna Business Credit, 619 F.2d at 1009 (citing O’Farrell v. Steel City Piping Co., 266 Pa.Super. 219, 403 A.2d 1319, 1324 (1979)). In construing ambiguous language, a court must consider objective evidence of the insured’s intent. Id. at 1011.

The most important evidence is “[t]he interpretation that the parties themselves give a contract, as manifested by their conduct subsequent to formation.” Barcelona v. Fox Grocery Co. Employees’ Pension Plan, 483 F.Supp. 1128, 1132 (W.D.Pa.1980). Keene’s conduct in the instant case belies Keene’s assertion that INA’s duty to defend continues after the exhaustion of policy limits. Keene purchased excess insurance coverage that included an obligation to defend, which indicates no reliance on INA’s continuing duty. No reasonable insured would pay twice for the same coverage. In view of the policy language and plaintiff’s conduct, Keene could not reasonably have understood INA’s defense duty to be limitless.

Keene urges the Court to ignore its reasonable expectations under the specific circumstances of the instant case and, instead, blindly follow the two asbestos-related cases in which the United States District Court for the Eastern District of Pennsylvania found the pre-1966 language ambiguous and strictly construed the policy against the insurer. Commercial Union Insurance Co. v. Pittsburgh Corning Corp., 553 F.Supp. 425; ACandS, Inc. v. Aetna Casualty and Surety Co., 576 F.Supp. 936.

As stated previously, the actual intention of the parties was ignored. The courts failed to consider any objective evidence of the insureds’ intentions.

Furthermore, this Court disagrees with their prediction of Pennsylvania law. In Commercial Union, the court held that Pennsylvania would find for the insured “because of Pennsylvania’s protection of insureds generally, and its rule of strict construction against the insurers, generally.” Commercial Union Insurance Co. v. Pittsburgh Corning Corp., 553 F.Supp. at 431. The court fails to cite any State authority to support its conclusion other than cases dealing with the duty of insurers to defend types of claims potentially within the policy’s coverage. Gedeon v. State Farm Mutual Automobile Insurance Co., 410 Pa. 55, 188 A.2d 320 (1963); Brugnoli v. United National Insurance Co., 284 Pa.Super.Ct. 511, 426 A.2d 164 (1981); Seaboard Industries, Inc. v. Monaco, 258 Pa.Super.Ct. 170, 392 A.2d 738 (1978). None of the cases involves the defense of claims after the exhaustion of policy limits, as the court in Commercial Union notes. Commercial Union Insurance Co. v. Pittsburgh Corning Corp., 533 F.Supp. at 430.

The courts in Commercial Union and ACandS failed to recognize the language of Pennsylvania courts limiting the insurer’s duty to defend to claims in which the insurer would be “bound to indemnify” or which are “potentially within the scope of the policy.” Wilson v. Maryland Casualty Co., 377 Pa. 588, 105 A.2d 304, 307 (1954); Casper v. American Guarantee & Liability Insurance Co., 408 Pa. 426, 184 A.2d 247, 250 (1962); see also Warner v. Employers’ Liability Assurance Corp., 390 Pa. 62, 133 A.2d 231, 233 (1957).

In addition, the Pennsylvania Supreme Court has held that the pre-1966 standard policy language limits the duty to defend as to the type of claim.

Appellants further contend that appellee was under a duty to defend by the provision that the insurer would defend “even if such suit is groundless, false or fraudulent.” But this applies only “as respects insurance afforded by this policy.” It does not require defense of any suit brought, but only suits involving claims within the scope of the policy

Warner v. Employers’ Liability Assurance Corp., 133 A.2d at 233 (emphasis in original).

The State courts’ language in limiting the duty to defend is broad enough to encompass the amount of liability as well as the type of claim. An insurer is “bound to indemnify” only for certain types of claims and up to a certain amount. The “scope of the policy” includes the type of claims and the amount of indemnification.

Pennsylvania’s strict construction of ambiguous lanjguage against insurers when the parties’ intentions cannot be ascertained does not lead automatically to a conclusion that insureds will be protected. The courts’ recognition of the pre-1966 policies’ limiting clause and their use of broad language to limit the duty to defend, more clearly implies a tendency to terminate the defense duty upon the exhaustion of policy limits.

The Court, therefore, denies Keene’s motion for- partial summary judgment and grants the cross-motion of INA.

      . Keene originally filed its motion for partial summary judgment regarding the continuing duty to defend against all four defendants in this case. Before the Court’s decision, however, Keene withdrew all claims against Aetna Casualty and Surety Company, Hartford Accident and Indemnity Company, and Liberty Mutual Insurance Company. Keene also withdrew its claim against INA except for the alleged continuing duty to defend under defendant’s pre-1966 insurance policies.

      . In deciding these cross-motions, the Court need not address the issue of whether the policies’ limits have been exhausted in fact.

      . The "duty to defend” involves both the obligations to control litigation and pay defense costs. Tampa Electric Co. v. Stone & Webster Engineering Corp., 367 F.Supp. 27, 32 (M.D.Fla.1973). Keene does not seek to transfer the management of pending cases, but only to obligate INA to pay defense costs. Keene’s Motion at 3 n. 3.

      . Only INA sold insurance policies to Keene or its predecessor subsidiaries before 1966. INA is a Pennsylvania corporation with its principal place of business in Pennsylvania. The policies at issue were executed in Pennsylvania, and sold and issued by a Pennsylvania insurance broker. Keene's Reply in Further Support of Its Motion for Partial Summary Judgment and in Opposition to Defendants’ Cross-Motions for Partial Summary Judgment Regarding Defendants’ Duty to Pay Defense Costs at 4 ("Keene’s Reply"), quoting Memorandum of INA in Support of Its Motion for Summary Judgment as to Keene's Claims for Punitive Damages at 4 n. 7. Under the District of Columbia’s "interest analysis,” Mazza v. Mazza, 475 F.2d 385, 388 (D.C.Cir.1973), Pennsylvania has the most substantial interest in the interpretation of the insurance policies. INA does not dispute the application of Pennsylvania law.

      . Keene argues that the language of the defense agreement requiring the insurer to pay defense costs "in addition to” indemnity limits creates a defense duty entirely independent of the duty to indemnify. This language, however, simply prohibits the insurer from reducing indemnity limits by defense costs, as permitted under some of Keene’s excess insurance policies.

      . Extrinsic evidence of intent ordinarily is a question of fact to be resolved by the factfinder. But “where the evidence and resulting inference are uncontroverted,” the issue is appropriate for summary judgment consideration. Fox v. United States Department of Housing, 680 F.2d 315, 319 (3d Cir.1982).

      . Keene argues that the insurance industry’s revision in 1966 of the standard policy language demonstrates the ambiguity of the pre-1966 language and INA’s capability to clarify the language. The effect of the revision, however, was to prohibit the tendering of policy limits into court to avoid the defense duty, thus limiting the termination of the defense duty to the exhaustion of policy limits by the payment of judgments or settlements. See Conway v. Country Casualty Insurance Co., 92 Ill.2d 388, 65 Ill.Dec. 934, 937, 442 N.E.2d 245, 248 (1982).


source: Caselaw Access Project

author: SHAPIRO, District Judge.

license: Public Domain

text:
    Ronnie EASLEY v. NORTHERN SHIPPING COMPANY.
    Civ. A. No. 81-2449.
    United States District Court, E.D. Pennsylvania.
    Oct. 4, 1984.

      Gamita M. Selby, Philadelphia, Pa., for plaintiff.
    Goncer M. Krestal, Blank, Rome, Comisky & McCauley, Philadelphia, Pa., for Northern Shipping Co.
   FINDINGS OF FACT and CONCLUSIONS OF LAW

SHAPIRO, District Judge.

FINDINGS OF FACT

1. Defendant Northern Shipping Company (“Northern”) operates a stevedoring and terminal service at 7777 State Road in Philadelphia, Pennsylvania and employs in excess of 75 employees.

2. Northern operates a maintenance department at its facility. Maintenance work is primarily performed in the Company’s machine shop and in the Company’s warehouse. Peter Bushman (“Bushman”) has been the maintenance foreman since January 3, 1975.

3. The employees who work in Northern’s maintenance department are classified as maintenance helpers, second class mechanics, first class mechanics, electricians and painters.

4. Plaintiff Ronnie Easley is a black male employed by Northern as a first class mechanic.

5. Plaintiff was first employed by Northern on April 19, 1977 as a forklift operator and was assigned to the warehouse.

6. During plaintiff’s employment in the warehouse, he was neither issued any warnings nor subjected to any disciplinary actions.

7. Plaintiff began working in Northern’s maintenance department on August 28, 1978 and was assigned to the machine shop upon the recommendation of the defendant's President, Jack Rose. Plaintiff was classified as a. maintenance helper.

8. Plaintiff was promoted to the position of second class mechanic by defendant on September 25, 1978.

9. Plaintiff was promoted to the position of first class mechanic by defendant on December 13, 1978.

10. Throughout his employment in the machine shop, plaintiff was supervised by Bushman, a white male.

11. Since December, 1978, the Company has regularly employed four first class mechanics, including plaintiff. The other first' class mechanics have been Louis Montuoro, Arthur Santos and Guillermo Moreno.

12. Since December, 1978, plaintiff has been the only black first class mechanic in defendant’s machine shop.

13. Northern’s hourly employees, including plaintiff and the other employees who worked in the maintenance department, were represented for purposes of collective bargaining by the Northern Metal Company Employees’ Association (“Association”) from July 1, 1979 until approximately October 5, 1980. Northern and the Association were parties to a collective bargaining agreement (“Association Agreement”), effective July 1, 1979.

14. Since approximately October 6, 1980, Northern’s hourly employees, including plaintiff and the other employees who worked in the maintenance department, have been represented for the purposes of collective bargaining by Warehouse Employees’ Union Local 169 (“Local 169”). Northern and Local 169 were parties to a collective bargaining agreement (“Local 169 Agreement”). Plaintiff was a shop steward for Local 169.

15. The Company’s supervisors were responsible for assigning overtime work. Since January 13, 1975, Bushman has been responsible for assigning overtime work to Northern’s employees who work in the maintenance department.

16. Between January, 1975 and December, 1980, Bushman assigned overtime work to the first class mechanics based on his personal assessment of their relative ability to perform the assigned work tasks.

17. In the Fall of 1980, representatives of Local 169, including plaintiff, approached Company representatives and requested that the method of assigning overtime be changed. The Union requested that overtime assignments for maintenance employees be made on a rotation system.

18. Commencing in the Fall of 1980, the Company implemented a rotation system for the assignment of overtime for maintenance department employees. Under this rotation system, all overtime was assigned in turn. After an employee was offered overtime work, he would be put to the bottom of the- overtime rotation list and would not be offered overtime work again until all other first class mechanics had been offered the opportunity for overtime work.' The rotation system implemented in December, 1980 applied to all overtime work.

19. In October, 1982, representatives of Local 169, and the employees who worked in the maintenance department, requested that the Company modify the rotation system. The Union and the employees requested that there be separate rotations for weekday and weekend overtime assignments. Commencing in October, 1982 the Company modified the overtime rotation system to include separate rotation systems for weekday and weekend work.

20. Since the first rotation system was implemented- in December, 1980, the Company has consistently made overtime assignments based on the rotation system. Where, however, it was determined that the individual employee was not qualified to perform a certain overtime assignment, another employee was assigned to perform that overtime.

21. Article VII, Section 1 of the Association Agreement, which became effective July 1, 1979, states:

When it becomes necessary to work overtime, such overtime shall be divided as equally as possible among the employees involved.

22. . Article XI, Section 11.3 of the Local 169 Agreement states, in relevant part, that:

Overtime shall be distributed according to classifications as heretofore on the basis of skill and ability and divided as equally as possible among the employees within the classification, starting with the most senior employee. (Emphasis added)

23. In 1979, plaintiff began regular complaints to Bushman regarding failure to assign him overtime work equal to the other first class mechanics.

24. Overtime hours worked by Easley and the other first class mechanics were as follows:

Easley Montuoro Santos Moreno
1979 494.00 544.25 559.75 742.50
1980 350.00 403.00 626.00 793.00
1981 441.50 342.25 492.00 538.75

Defendant’s Exhibits 31, 33, 36.

25. The total number of days each first class mechanic was unavailable for overtime work:

Easley Montuoro Santos Moreno
1979 54.00 6.00 20.00 9.00
1980 155.00 67.50 8.50 17.50
1981 17.00 85.00 6.00 6.00

Defendant’s Exhibits 32, 34, 37.

26. Maintenance department employees were not required to work overtime. Employees lost the opportunity to work overtime if they refused an assignment or were absent at the time that overtime was assigned. An employee who was absent because of sickness, injury, disciplinary suspension, vacation, or for any other reason, would not be assigned overtime for the day, or days, they were absent from work.

27. Plaintiff has refused overtime work on approximately four occasions during his employment as a first class mechanic.

28. On at least one occasion, Bushman assigned plaintiff overtime work only to call him at home and cancel the assignment in favor of another first class mechanic.

29. Plaintiff was assigned 91.125 less hours of overtime in 1979 and 193 less hours in 1980, a total of 284.125 less hours of overtime than the average, of all first class mechanics in 1979 and 1980. In 1981, plaintiff was assigned only 12.125 less hours than the average of all first class mechanics. Even allowing for the difference in days unavailable for overtime, it is clear that changing to a rotation system increased the overtime hours assigned to Easley in comparison to other first class mechanics.

30. Plaintiff was assigned less overtime than the average of all first class mechanics throughout the relevant period of his employment as a first class mechanic. After the effective date of the negotiated rotation system, the disparity in overtime hours was the result of a non-discriminatory system.

31. Plaintiffs rate of pay as a first class mechanic was as follows:

(a) December, 1978 -June, 1979 $5.75 per hour
(b) July, 1979 -March, 1980 $6.35 per hour
(c) April, 1980 -June, 1980 $6.65 per hour
(d) July, 1980 -December, 1980 $7.25 per hour

32. In addition to being a mechanic, plaintiff was a welder and forklift operator.

33. Plaintiff has been held to stricter compliance with rules regarding clocking in and out and observing lunch times than other first class mechanics.

34. Plaintiff has used vulgar, abusive language toward Bushman but there was sometimes provocation; Bushman was not intimidated by it. The language was similar to if somewhat stronger than the profanity used by Bushman. Bushman’s vulgar language was unfortunately common in the workplace but not racially discriminatory.

35. Between 1979 and January 20,1982, plaintiff was issued approximately ten warning notices.

36. Guillermo Moreno is the only other first class mechanic who was issued a warning notice by Bushman. Moreno received one notice.

37. Between 1979 and January 20, 1982, plaintiff filed approximately eight grievances protesting disciplinary actions taken against him by Bushman.

38. The Association Agreement contained a grievance procedure. The grievance procedure was contained in Article IX of the Association Agreement. The Association Agreement provided that an employee, through the Union, could arbitrate any complaint, dispute or grievance which arose under the contract.

39. The Local 169 Agreement contains a grievance and arbitration procedure. The grievance and arbitration procedure is contained in Articles XVI and XVII of the Local 169 Agreement. Under the Local 169 Agreement, the Union can arbitrate any grievance concerning the meaning of, application of, or compliance with the-terms of the Agreement.

40. Bushman’s suspensions of plaintiff were overturned following grievance hearings.

41. Bushman fired plaintiff on October 24, 1980, and on January 20, 1982. The former firing was overturned following a grievance hearing. The latter firing was overturned following a hearing before an arbitrator of the American Arbitration Association.

42. On June 6, 1980, plaintiff filed a charge of discrimination with the Equal Employment Opportunity Commission (“EEOC”). In his charge of discrimination, plaintiff alleged that the other first class mechanics were permitted to work more overtime hours than he was. Plaintiff also alleged that the Company issued him warning notices and did not issue other mechanics such warning notices.

43. The EEOC deferred the investigation of plaintiff’s charge of discrimination to the Philadelphia Human Relations Commission (“PHRC").

44. After investigating plaintiff's charges, PHRC, on April 21, 1981, notified the parties that plaintiff’s charge was being dismissed with a finding of “Charge Not Substantiated.”

45. On March 19, 1981, the EEOC issued plaintiff a notice of right to sue letter.

46. This action was commenced by plaintiff on June 17, 1981.

DISCUSSION

This action was brought pursuant to 42 U.S.C. § 2000e for alleged racial discrimination. Plaintiff claims that his employer, Northern, has discriminated against him in three respects: 1) plaintiff was granted significantly less overtime work than white first class mechanics employed by defendant; ' 2) plaintiff was disciplined more frequently and more harshly than the other white first class mechanics; and 3) plaintiff’s supervisor, Peter Bushman, verbally abused and harassed him.

Plaintiff had the initial burden of proving a prima facie case of discrimination by a preponderance of the evidence. Texas Department of Community Affairs v. Burdine, 450 U.S. 248, 101 S.Ct. 1089, 67 L.Ed.2d 207 (1981). Once a prima facie case has been shown, the burden shifts to defendant to articulate some non-discriminatory reason for the challenged action. McDonnell Douglas Corp. v. Green, 411 U.S. 792, 802, 93 S.Ct. 1817, 1824, 36 L.Ed.2d 668 (1973); Lewis v. University of Pittsburgh, 725 F.2d 910, 914 (3d Cir.1983). If such a facially legitimate reason is proffered, plaintiff then bears the burden of demonstrating that the reason given by defendant is merely a pretext. “The ultimate burden of persuading the trier of fact that the defendant intentionally discriminated against the plaintiff remains at all times with the plaintiff.” Texas Department of Community Affairs, 450 U.S. at 253, 101 S.Ct. at 1093-94. In a disparate treatment case, the plaintiff must prove that such treatment was caused by purposeful or intentional discrimination. “[P]roof of discriminatory motive is critical although it can in some situations be inferred from the mere fact of differences in treatment.” International Brotherhood of Teamsters v. United States, 431 U.S. 324, 335 n.15, 97 S.Ct. 1843, 1854, 1855 n.15, 52 L.Ed.2d 396 (1977), quoting Village of Arlington Heights v. Metropolitan Housing Development Corp., 429 U.S. 252, 265-66, 97 S.Ct. 555, 563-64, 50 L.Ed.2d 450 (1977).

Plaintiff established a prima facie case by showing that he belonged to a racial minority, that he was assigned less overtime hours than other first class mechanics because of his race and that he was subjected to racial discrimination with respect to terminations, suspensions, warnings and other disciplinary actions.

Plaintiff has sustained his burden of proving that he was treated differently from the other white first class mechanics with respect to overtime hours in 1979 and 1980, prior to Northern’s implementation of a rotation system in December, 1980. Northern’s records demonstrate that plaintiff was assigned 289 hours less overtime than the average of all first class mechanics. (Defendant’s Exhibits 31 and 33). Northern asserts that there was a legitimate non-discriminatory reason for the disparity in assignment of overtime work. It claims that plaintiff was assigned fewer overtime hours because he was continually absent when overtime work was assigned because of sickness and disciplinary,,.suspensions. It also contends that plaintiff refused overtime work on numerous occasions.

The reasons offered by defendant for the disparity in treatment with respect to overtime are rejected. Even allowing for the differences in days unavailable for overtime, it is evident that plaintiff was assigned significantly less overtime hours than the other first class mechanics. In 1981, after Northern had instituted a neutral rotation system that did not involve Bushman’s discretion, plaintiff’s overtime hours compared favorably to those of other first class mechanics.

Plaintiff has also contended that he was discriminated against with respect to terminations, suspensions, warnings and other disciplinary actions. Plaintiff claims that he was disciplined more harshly than the other first class mechanics for committing infractions of Company rules; he was held more strictly to the rules requiring clocking in and out and observing exact lunch hours than other first class mechanics. For example, Bushman took no disciplinary action, against an employee who displayed and fired a gun on Company property. Plaintiff, on the other hand, was given a three-day suspension for being absent from his assigned work area without the foreman’s permission, a much less serious offense. (Defendant’s Exhibit 3).

Defendant contends that plaintiff created greater disciplinary problems than the other first class mechanics, that he had been provocative and aggressive and had used abusive language towards Bushman. The court has considered the non-discriminatory reasons offered by defendant for the severity of discipline imposed upon plaintiff and it has rejected them. There is no doubt that plaintiff was occasionally aggressive or hostile in language and attitude towards Bushman. Bushman may also have resented plaintiff because he did not personally select him to come to the shop from the warehouse and because he was a young leader and a Union shop steward. However, even considering all of these factors, the court concludes that Bushman would not have treated plaintiff as he did but for his race.

During plaintiff’s employment at the warehouse prior to his transfer to the machine shop, no disciplinary actions had been taken against him. It was only under the direction of Bushman that disciplinary problems arose. Moreover, Easley’s father, a long-time respected employee of Northern, had warned the President of the Company, Jack Rose, that Bushman and the plaintiff would have problems. Bushman claimed that he was not prejudiced against plaintiff because of his race and that he never discriminated against him. Although it may be true .that Bushman never consciously or maliciously acted in a discriminatory fashion, nonetheless it is clear that he over-reacted to plaintiff and did in fact discriminate by reason of plaintiff’s race.

Plaintiff’s third contention, that Bushman verbally abused and harassed him in a racially discriminatory fashion, has not been substantiated. The fact is that plaintiffs language towards Bushman was just as strong, if not stronger, than the profanity used by Bushman. Bushman has contended that he felt threatened by plaintiff’s abusive language. It is impossible to believe, however, that Bushman, with the language that he himself used, took plaintiff’s threatening remarks seriously or for other than what they were — curse words. Both plaintiff and Bushman need to curb their abusive language but plaintiff has not proven that Bushman’s language was in fact racially discriminatory or motivated by racial discrimination.

The court has determined that plaintiff is entitled to an award in an amount equal to the number of overtime hours lost due to discrimination. Neither of the parties has offered the usual statistical analysis of the deviation of the overtime hours worked by plaintiff from the overtime hours worked by the other first class mechanics. Plaintiff has submitted as the appropriate measure of damages the discrepancy of plaintiff’s overtime hours from the average of all first class mechanics’ overtime hours. The court has accepted this method as fair under the circumstances. In calculating damages, the court has made the simplifying assumption that plaintiff lost an equal number of overtime hours in each month. Using this assumption, plaintiff’s damages are calculated as follows:

January-June, 1979 45.56 hours x $ 8.63 = $ 393.20
July-December, 1980 45.56 hours x $ 9.52 = $ 434.00
January-March, 1980 54.09 hours x $ 9.52 = $ 514.90
April-June, 1980 54.09 hours x $ 9.98 = $ 539.80
July-November, 1980 90.15 hours x $10.88 = $ 980.80
TOTAL $2,862.70

Although plaintiff has proven that he was subjected to actionable racial discrimination with respect to disciplinary actions, he has submitted no evidence of the amount of back pay or benefits lost as a consequence of this discrimination. Therefore, plaintiff will be awarded nominal damages of $1 in addition to his award for lost overtime hours.

In conclusion, it should be noted that Northern might have avoided this difficult situation had it been more sensitive to racial relations at its facility. The President of the Company had been warned of Bushman’s tendency to over-react to young blacks and yet did nothing to ease the tensions between Bushman and the plaintiff. The Company needs to become more sensitive to the potential for racial tensions between its employees and to take affirmative action with the help of expert consultants to improve interpersonal relationships and ihorale at its facility.

Any additional facts stated in this discussion are specifically adopted as findings of fact.

CONCLUSIONS OF LAW

1. Plaintiff claims that Northern discriminated against him because of his race and bases his claims on Title VII of the Civil Rights Act of 1964, 42 U.S.C. § 2000e, et seq. and the Civil Rights Act of 1866, 42 U.S.C. § 1981. The court has personal jurisdiction over the parties and subject matter jurisdiction under Title VII and 28 U.S.C. § 1343(4). Venue is proper in this court.

2. Northern is an employer within the meaning of 42 U.S.C. § 2000e(b).

3. Plaintiff’s charge of discrimination has been timely filed.

4. All conditions required for the institution of this lawsuit have been satisfied.

5. Plaintiff has met his burden of proving a violation of Title VII.

6. Plaintiff was subjected to actionable racial discrimination with respect to overtime work and pay prior to the institution of the rotation system for assigning overtime.

7. Under Title VII, 42 U.S.C. § 2000e, plaintiff is entitled to back pay for lost overtime prior to December, 1980 in the amount of $2,862.70, calculated as follows:

January-June, 1979 45.56 hours x $ 8.63 = $393.20
July-December, 1980 45.56 hours x $ 9.52 = $434.00
January-March, 1980 54.09 hours x $ 9.52 = $514.90
April-June, 1980 54.09 hours x $ 9.98 = $539.80
July-November, 1980 90.15 hours x $10.88 = $980.80

8. Plaintiff was subjected to actionable racial discrimination with respect to disciplinary actions but has proved no loss of pay or benefits as a consequence.

9. Under 42 U.S.C. § 1981, plaintiff is entitled to nominal damages in the amount of $1.00 and reasonable attorneys’ fees.

10. Plaintiff was not subjected to racial discrimination with respect to harassment and verbal abuse.

11. Plaintiff is entitled to judgment in the amount of $2,863.70 plus such reasonable attorneys’ fees as shall be approved by the court.


author: CONTI, District Judge.

text:
    Earl HARRIS, Plaintiff, v. Margaret M. HECKLER, Secretary of Health and Human Services, Defendant.
    No. C-84-0002 SC.
    United States District Court, N.D. California.
    Oct. 4, 1984.
    Kim Malcheski, Malcheski, Parker & Randolph, San Francisco, Cal., for plaintiff.
    Joseph P. Russoniello, U.S. Atty., Patrick S. Bupara, Chief Civ. Div., Asst. U.S. Atty., San Francisco, Cal., for defendant.
   ORDER RE MOTIONS FOR SUMMARY JUDGMENT AND REMAND .

CONTI, District Judge.

Plaintiff brings this action pursuant to section 205(g) of the Social Security Act, 42 U.S.C. § 405(g), to obtain judicial review of a final decision of the Secretary of Health and Human Services (“Secretary”) denying his claim for disability insurance benefits. The Secretary’s findings must be supported by substantial evidence and the Secretary must have applied the proper legal standards in denying plaintiffs claims. Delgado v. Heckler, 772 F.2d 570, 572 (9th Cir.1983).

The term “disability” is defined by section 223(d)(1)(A) of the Social Security Act as the “inability to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment” lasting at least one year. 42 U.S.C. § 423(d)(1)(A). The impairment must be “of such severity that [the claimant] is not only unable to do his previous work but cannot, considering his age, education, and work experience, engage in any other kind of substantial gainful work which exists in the national economy.” 42 U.S.C. § 423(d)(2)(A). The claimant has the initial burden of establishing that he is unable to do his previous work, but once the claimant has made such a showing the burden shifts to the Secretary to show that there is other substantial gainful activity that the claimant can perform. Bonilla v. Secretary of HEW, 671 F.2d 1245, 1246 (9th Cir.1982). Under certain “medical-vocational guidelines” (“grids”) promulgated by the Secretary, see Appendix 2 of Sub-part P, 20 C.F.R. § 404.1501 et seq., a claimant will be found capable of “other substantial gainful employment” if he meets certain age, educational, skill and exertional requirements.

Plaintiff applied for disability insurance benefits on December 15, 1981, alleging August 18, 1976, as the date he became disabled to the point that he could no longer work. The application was denied initially, and plaintiff filed for reconsideration. The request for reconsideration was subsequently denied, and plaintiff then filed a request for a hearing. The hearing was held before an AU on March 14, 1983. In a decision dated June 28, 1983, the AU concluded that plaintiff was not under a disability as defined by the Social Security Act. Plaintiff requested review of the decision by the AU. On November 4, 1983, the Appeals Council affirmed the AU’s decision and the decision then became the final decision of the Secretary. Plaintiff filed his complaint with the court in timely fashion on January 3, 1984 seeking judicial review pursuant to 42 U.S.C. § 405(g).

Plaintiff has twice previously applied for and been denied disability insurance benefits after administrative hearings. He did not seek judicial review in either case. Plaintiff first applied on March 30, 1977, and that application was denied on May 8, 1979. He then applied again on February 7, 1980, and that application was denied on July 20, 1981.

Plaintiff was born on May 28, 1927. He last worked as a San Francisco “Muni” bus driver in August, 1976, when he was taken off work and placed on disability pension because of his diabetes mellitus and chest pain. Plaintiff began working this job on July 1,1957. He previously worked for the U.S. Postal Service from January, 1955 until June 30, 1957 as a truck driver. Plaintiff served in the U.S. Army from August, 1952 until July, 1954 as an automobile maintenance mechanic. Plaintiff has completed the eleventh grade of high school. Other than attending auto mechanic maintenance school in the Army, he has no other special job training or vocational schooling.

Plaintiffs medical difficulties began in May, 1976 when he was diagnosed as having diabetes mellitus. In 1976 he reported experiencing dizziness, blurred vision, double vision, and ringing in his ears (tinnitus). At a VA hospital in 1977, plaintiff was diagnosed as having hypertension and possibly angina, and he was prescribed medicine, including nitroglycerin, dramamine, and valium.

On February 26, 1979, Dr. Robert A. Blau stated of plaintiff that:

Mr. Harris is totally disabled to perform gainful employment. He has diagnoses of hypertension, chronic atherosclerotic heart disease with coronary insufficiency, diabetes mellitus which is not controlled and labyrinthine disease, bilateral, possible secondary to atherosclerois producing lightheadedness, dizziness and in-coordination. Obviously, Mr. Harris is an individual who has a myriad of medical problems most of which are on-going and will inter-relate adversely with one another. This particularly relates to the hypertension and diabetes which will undoubtedly contribute to further progression of the coronary atherosclerosis and ischemia, and also to continuing problems with balance and coordination. Emotional stress, which he would experience in a job situation, would most probably adversely effect his hypertension, angina, diabetes and the dizziness which he continues to experience.

Plaintiffs current treating physician, Dr. Gerald Charles, diagnosed plaintiffs impairments in March, 1983 to include the following: hypertension; diabetes mellitus; arteriosclerotic heart disease; headaches variously diagnosed as tension, migraine, cluster or facial neuralgia; jaw pain; tinnitus; and abnormality of eye movement.

In April, 1983 plaintiff underwent a psychiatric examination. Dr. Joseph Karis diagnosed plaintiffs emotional condition as including psychological factors affecting his physical condition, a moderate and chronic dysthymic disorder, and a passive-aggressive personality disorder.

Plaintiff had surgery in June, 1982 for colon polyps. In July, 1982 he underwent a hemicolectomy on a portion of his right colon. Plaintiff suffers from irregular bowel movements, and experiences swelling in his rectum if he sits or stands for 20 to 30 minutes.

At his hearing before the AU in this action, plaintiff testified that his diabetes is “up and down” and that he feels “bad” all of the time. Plaintiff stated that he conducts a sugar test of his urine every morning. He testified that he suffers from mild headaches practically every day, and that he has “attacks” two or three times a month when he must go to bed. Plaintiff further stated that he gets dizzy, loses his balance, and has blurred vision.

Plaintiff also indicated that he gets chest and back pain when he tries to clean up around the yard. He stated that he walks for exercise every day, but that he gets chest and back pain if he walks for too long or has to carry packages. Plaintiff further testified that he suffers from shortness of breath along with his chest pain, and that he takes nitroglycerin tablets for the chest pain.

The AU in this action determined that plaintiff was not disabled by finding that plaintiff had the residual functional capacity to perform light work as defined in 20 C.F.R. § 404.1567. The Secretary urges that this finding was supported by substantial evidence, especially in light of the prior two administrative decisions denying plaintiff disability benefits. The Secretary contends that the previous administrative decisions of October 13, 1978 and July 20, 1981 are res judicata and are non-reviewable decisions establishing that plaintiff was not disabled at any time up to the latter date. The court agrees, as the Secretary accurately relies on Lyle v. Secretary of HHS, 700 F.2d 566, 568 (9th Cir.1983), for this proposition. Lyle further establishes that the July 20, 1981 decision which found that plaintiff was capable of performing light work creates a presumption that plaintiff continues to possess this capability, and plaintiff thus has the burden of presenting evidence of change in his medical condition such that he no longer is able to do light work. Id. at 568-69.

The Secretary also argues that the court should not consider any evidence of plaintiffs change of medical condition subsequent to March 31, 1982, the date plaintiff last met the special earnings requirement of the Social Security Act. This contention is also meritorious, as Steimer v. Gardner, 395 F.2d 197, 198 (9th Cir.1968), establishes that the pertinent date for determining a claimant’s right to disability benefits is the date when the claimant’s insured status terminates. Consequently, plaintiff has the burden of establishing that his medical condition worsened between July 21, 1981 and March 31, 1982 such that he is no longer able to perform light work. The decision of the AU in plaintiff’s second case, dated July 20, 1981, recognized that plaintiff had the following impairments: diabetes mellitus, hypertension, coronary artery disease with angina pectoris, and anxiety and depression. Nevertheless, the AU concluded as final up to that time that plaintiff was not disabled and was capable of performing light work. Accordingly, plaintiff must demonstrate that these conditions worsened, or that he has developed new medical conditions, in the above intervening time period which preclude him from doing light work.

Light work is defined by 20 C.F.R. § 404.1567(b) as follows:

Light work involves lifting no more than 20 pounds at a time with frequent lifting or carrying of objects weighing up to 10 pounds. Even though the weight lifted may be very little, a job is in this category when it requires a good deal of walking or standing, or when it involves sitting most of the time with some pushing and pulling of arm or leg controls. To be considered capable of performing a full or wide range of light work, you must have the ability to do substantially all of these activities. If someone can do light work, we determine that he or she can also do sedentary work, unless there are additional limiting factors such as loss of fine dexterity or inability to sit for long periods of time.

Three items of medical evidence principally speak to the evolution of plaintiffs medical condition between July 21, 1981 and March 31, 1982. On September 23, 1981 a medical report from Dr. Charles Simonton revealed that plaintiff had angina pectoris, hypertension, and diabetes mellitus. Dr. Simonton also noted that plaintiff had multiple somatic complaints, including headaches evaluated by neurology without obvious etiology, dizziness, intermittent blurred vision and diplopia, and multiple arthralagias with neck and back pains. Dr. Simonton found no evidence of congestive heart failure, acute cardiopulmonary disease, or cardiomegaly. Dr. Simonton mentioned that plaintiffs exertional capacity was limited to a sedentary level, but the court concludes that this medical report does not bring to light any change in plaintiffs medical condition that was not before the AU in plaintiffs last case, and that this report thus does not overcome the presumption that plaintiff can perform light work.

On January 27, 1982, a cardiac stress test was performed on plaintiff. This test revealed pain consistent with angina, but it did not suggest ischemic ST changes or arrhythmias. This evidence reports no change in plaintiff’s condition that was not before the AU in the previous case.

Finally, plaintiff was examined by Dr. Fredric Mintz on January 21, 1982. Plaintiff reported that he was walking five to six blocks daily, but complained of occasional shortness of breath even when not exerting himself. Dr. Mintz reviewed the cardiac stress test of January 27, 1982, and it was his opinion that the test indicated left axis deviation, consistent with left anterior vascular block, a right sided conduction delay, and non-specific ST segment and T wave abnormalities. Dr. Mintz noted that during the treadmill testing and during the post-treadmill rest period, there were no significant increases in ST segment abnormalities and no arrhythmias were observed. Dr. Mintz concluded that although in his opinion plaintiff could not return to work as a bus driver, plaintiff could engage in light work in a standing or walking position, with a minimum demand for physical effort. This evidence and Dr. Mintz’ conclusions do not indicate such a worsening in plaintiff’s condition that he is no longer able to do light work. Thus, it is the court’s conclusion that plaintiff has not presented sufficient evidence from July 21, 1981, to March 31, 1982, that rebuts the Lyle presumption that plaintiff continues in his ability to do light work.

Although plaintiff has not overcome the presumption that he retains the capacity to perform light work and is not disabled, because the AU in this case acknowledged that plaintiff is unable to perform his past relevant work as a bus driver, the Secretary nevertheless has the burden of proving that other substantial gainful activity exists in the national economy which plaintiff can perform. Bonilla v. Secretary of HEW, 671 F.2d 1245, 1246 (9th Cir.1982).

Under Rule 202.03 of 20 C.F.R. § 404, Appendix 2, Subpart P, the AU found, as required by this rule, that plaintiff had “skilled” or “semiskilled” skills that were transferable to light work situations. The AU stated in his decision of June 29, 1983:

Under Rule 202.03 of the Medical/Vocational guidelines as set forth at Appendix 2, a finding of “not disabled” is required regardless of the adversity of age or whether the individual’s formal education is commensurate with his or her demonstrated skill level. The acquisition of work skills demonstrates the ability to perform work at the level of complexity demonstrated by the skill level attained regardless of the individual’s formal edueational attainments. The claimant has a twenty year work history as a Muni bus driver, a 3 year work history as a post office driver and a 2 year work history as an Army maintenance mechanic. These skills are readily transferable to occupations such as truck/bus dispatcher, self-service gas station attendant, truck/car rental agent.

The AU concluded that “there are other jobs which the claimant could perform and that such jobs exist in significant numbers in the national economy”.

“Transferability of skills” is defined in 20 C.F.R. § 404.1568(d) as depending “largely on the similarity of occupationally significant work activities among different jobs.” Transferability is , most probable and meaningful among jobs where (1) the same or lesser degree of skill is required; (2) the same or similar tools and machines are used; and (3) the same or similar materials, products, etc., are involved. 20 C.F.R. § 404.1568(D)(2). The Secretary has not adequately demonstrated to the court that the plaintiff has the skills the AU identified (“the ability to work with various types of individuals, pay close attention to details, understand truck and bus operations, etc.”), nor that these skills are transferable to the three specific jobs the AU identified (“truck/bus dispatcher, self-service gas station attendant, and truck/car rental agent”), nor that plaintiff is qualified and able to meet the requirements of these specific jobs.

It is the court’s conclusion that the use of a vocational expert would have aided the AU in addressing the above issues. Although vocational expert testimony is not required, “[o]rdinarily, the better method to demonstrate [transferability of skills to specific jobs] is through testimony of a vocational expert.” Hall v. Secretary of HEW, 602 F.2d 1372, 1377 (9th Cir.1979). The court so concludes because the AU failed to show specifically what types of skills plaintiff acquired as a bus driver and whether he still retains these skills. Furthermore, the AU failed to indicate the specific requirements of the three jobs that plaintiff allegedly has the ability to perform, and whether plaintiff is able to meet, those requirements.

The importance of vocational testimony is demonstrated by scrutinizing the job (transit) bus dispatcher, which the AU suggested plaintiff can perform. The Dictionary of Occupational Titles defines the occupation of (transit) bus dispatcher as “light” indoor' work, but it has specific math, language, and vocational training time requirements. Vocational testimony would clarify whether plaintiff meets these specific requirements.

Thus, the court reasons that even though plaintiff is not disabled and is capable of performing light work, this case must be remanded, pursuant to 42 U.S.C. § 405(g), to the Secretary for further proceedings involving the use of a vocational expert to determine whether plaintiff’s skills are transferable to “light work” occupations that exist in the national economy.

In accordance with the foregoing, it is hereby ordered that this case is remanded to the Secretary for further proceedings.


author: SANDERS, District Judge.

text:
    James HEARN, et al., Plaintiffs, v. INTERNAL REVENUE AGENTS, et al., Defendants.
    Civ. A. No. 3-84-0820-H.
    United States District Court, N.D. Texas; Dallas Division.
    Oct. 9, 1984.

      Merle R. Flagg, Dallas, Tex., Donald W. MacPherson, Phoenix, Ariz., for plaintiffs.
    Louise P. Hytken, Atty., Tax Div., Dept, of Justice, Dallas, Tex., for defendants.
   MEMORANDUM OPINION AND ORDER

SANDERS, District Judge.

This ease is before the Court on Plaintiffs’ Application for a Preliminary Injunction, filed July 31, 1984. A hearing was held on the Application September 26,1984, with counsel for both sides presenting evidence.

Factual Background

This matter concerns a search by a team of Internal Revenue Service agents of the premises of Plaintiff Worldwide Capital Management Corporation, a tax shelter planning consultant, on May 8, 1984, and the seizure of a large quantity of documents. Plaintiffs have raised several constitutional objections to the search. These protests include:

1. that the warrant was not supported by probable cause;
2. that the warrant was a general warrant and defective on its face;
3. that the warrant was improperly executed because the supporting affidavits were not supplied to Plaintiffs prior to and during the search; and
4. that items were seized that were beyond the scope of the warrant.

Plaintiffs are seeking an order compelling return of all of the seized documents and an injunction against the I.R.S. preventing any future use of the information gathered in the search.

Jurisdiction

Defendants have hinged their presentation to this Court on the issue of subject matter jurisdiction. They contend that a showing of “callous disregard of the rights of the taxpayer” is required to invoke the “anomalous jurisdiction” of a federal district court to order the return of property unlawfully seized by federal officers, following Richey v. Smith, 515 F.2d 1239, 1243 (5th Cir.1975).

The Fifth Circuit has most recently analyzed the haze surrounding “anomalous jurisdiction” in Linn v. Chivatero, 714 F.2d 1278 (5th Cir.1983). The Court observed that the continued vitality of the doctrine was questionable in the face of the repeal of the amount-in-controversy requirement for federal jurisdiction. While Judge Clark, concurring, urged the doctrine to be explicitly put to rest, the majority avoided the final determination by finding that jurisdiction was appropriate under routine 28 U.S.C. § 1331 provisions by virtue of the fourth amendment claims. 714 F.2d at 1281. Given this result, anomalous jurisdiction exists only as a theoretical construct for jurisdictional trivia fans and does not present a heightened threshold to the entertaining of this case.. This Court has jurisdiction under 28 U.S.C. § 1331.

The Anti-Injunction Act

The next sequential issue is whether the Anti-Injunction Act, 26 U.S.C. § 7421(a) (Supp. V 1981), precludes the Court from entertaining the suit.

Plaintiffs are seeking an injunction barring Defendants from making any use of the property illegally searched and seized in any future civil or criminal proceedings. The Act states:

... No suit for the purpose of restraining the assessment or collection of any tax shall be maintained in any court by any person, whether or not such person is the person against whom such tax was assessed.

The principal purpose of the Act is to protect the Government’s “need to assess and collect taxes as expeditiously as possible with a minimum of preenforcement interference, and to require that the legal right to the disputed sums be determined in a suit for refund. Bob Jones University v. Simon, 416 U.S. 725, 736, 94 S.Ct. 2038, 2045, 40 L.Ed.2d 496 (1974) (quoting Enochs v. Williams Packing & Navigation Co., 370 U.S. 1, 7, 82 S.Ct. 1125, 1129, 8 L.Ed.2d 292 (1962)). In Linn, the Court instructed that the Act was to be interpreted broadly: it is applicable not only to the assessment and collection of taxes, but to “activities which are intended to or may culminate in the assessment or collection of taxes” as well.

The easting of the lawsuit in constitutional terms does not necessarily evade the talons of the Act. The inquiry is whether the “primary purpose” of the suit is to recover the property, irrespective of the involvement of. the IRS agents, or whether it is a suit to restrain the collection of information that would aid in the assessment of taxes.

In the opinion of the Court, this action is both. Much of Plaintiffs’ arguments are concerned with the tenability of the seizure under the fourth amendment. The procedural posture of the ease argues to the contrary. This is a preliminary injunction application. The Government, per order of this Court, has returned copies of all of the material seized to the Plaintiffs. Plaintiffs’ purpose in pursuing this injunction at this time is solely to prevent the use of the information in the IRS investigation that may culminate in the assessment of tax liability. See Linn, 714 F.2d at 1283 (Clark, J., concurring); Black v. United States, 534 F.2d 524, 526 (2d Cir.1976) (“... [I]t is obvious that if the IRS is enjoined .from continuing its investigation, it will be hindered in its efforts to uncover, correct and remedy improper deductions. It is precisely this kind of interference which the Anti-Injunction Act is designed to prevent”; Plaintiffs asserted fourth and fifth amendment violations). But cf. Lowrie v. United States, 558 F.Supp. 1029, 1034 (D.Colo.1983).

The next step in the analysis is the determination of whether the Enochs exception to the Anti-Injunction Act is applicable. First, it must be clear that under no circumstances could the Government ultimately prevail. Second, equity jurisdiction must otherwise exist. Plaintiffs must prove that they will suffer irreparable injury for which no legal remedy is adequate. If both prongs are met, then despite the Anti-Injunction Act, the court may grant the requested injunctive relief.

The analysis under the first prong requires a fourth amendment inquiry under “the most liberal view of the law and the facts.” If there is a tenable argument for the legitimacy of the search, the requested relief must be denied.

1. Probable cause to support the warrant.

Finely tuned standards such as proof beyond a reasonable doubt or by preponderance of the evidence, useful in formal trials, have no place in the magistrate’s decision. It is clear that only the probability, and not a prima facie showing, of criminal activity is the standard of probable cause. Illinois v. Gates, 462 U.S. 213, 103 S.Ct. 2317, 2330, 76 L.Ed.2d 527 (1983), rehearing denied, — U.S.-, 104 S.Ct. 33, 77 L.Ed.2d 1453 (1983). Reasonable minds may differ on the question whether a particular affidavit establishes probable cause; great deference should be accorded a magistrate’s determination. United States v. Leon, — U.S. -, 104 S.Ct. 3405, 3417, 82 L.Ed.2d 677 (1984). This deference, however, is not boundless. A reviewing court should not defer to a warrant based on an affidavit that does not “provide the magistrate with a substantial basis for determining the existence of probable cause.” Gates, 103 S.Ct. at 2332.

On this issue, the Court finds that the Government is likely to prevail. The issuance of the warrant was supported by 71 pages of sworn affidavits, discussing in elaborate depth the nature of the suspected criminal activity and containing a particularized enumeration of the materials relevant to the schemes. Given the flexibility of the probable cause standard, the required deference, and the Magistrate’s opportunity to question Affiant Kunze, it cannot be said that the warrant was void for lack of probable cause. See Klitzman, Klitzman and Gallagher v. Krut, 744 F.2d 955, 959 (3rd Cir., 1984).

2. Search warrant as general warrant.

Plaintiffs claim that the warrant as issued constituted a general warrant that did not describe the documents to be seized with sufficient particularity to satisfy the fourth amendment. Specifically, Plaintiffs contend, the warrant authorized the seizure of all records reflecting all credit card transactions and all client files without a necessary link to any suspected illegal activity.

The Government is again certainly not without an argument to validate the warrant. The warrant did apparently contemplate the seizure of all client files. This objective, however, does not render it general and defective. No discretion is left to the executing officer in deciding which files to seize, or what constitutes client files. See Marron v. United States, 275 U.S. 192, 196, 48 S.Ct. 74, 76, 72 L.Ed. 231 (1927).

There is ample support in the case law for what the Court assumes the Government’s position would be. See Klitzman at 960 (warrant authorizing search of all client files was particular); United States v. Offices known as 50 State Distributing Co., 708 F.2d 1371, 1374-75 (9th Cir.1983), cert. denied, — U.S.-, 104 S.Ct. 1272, 79 L.Ed.2d 677 (1984), (all business records of firm may be seized, if accurately described, if there is probable cause of a pervasive scheme to defraud and suspected records not segregable; distinguishes Application of Lafayette Academy, 610 F.2d 1 (1st Cir.1979), relied on by Plaintiffs here, as involving suspected wrongdoing pertaining only to small segments of business searched); United States v. Dennis, 625 F.2d 782, 792 (8th Cir.1980) (upholding warrant calling for seizure of “certain books or records relating to the extortionate credit transaction business”); United States v. Brien, 617 F.2d 299, 306 (1st Cir.1980), cert. denied, 446 U.S. 919, 100 S.Ct. 1854, 64 L.Ed.2d 273 (1980) (all records can be seized if affidavits could justify belief that all documents were likely to constitute evidence); United States v. Abrams, 615 F.2d 541, 544 (1st Cir.1980) (seizing all records acceptable if warrant directed it, not acceptable if decision of seizing agents).

The affidavits supporting the warrant describe pervasive schemes manifested in various forms and disguises. It is not impossible to surmise that all client files or foreign-related credit card transactions were likely to contain evidence of wrongdoing. Whether or not upon subsequent examination and investigation that surmise was correct is immaterial; the warrant authorizing their seizure is not to be judged with the greater clarity of hindsight. See U.S. v. Martinez-Fuerte, 428 U.S. 543, 96 S.Ct. 3074, 49 L.Ed.2d 1116 (1976).

3. Contemporaneous Service of Affidavit with Warrant.

Plaintiffs maintain that the search was invalid because copies of the referenced affidavits were not delivered to them before the search commenced. It is unclear what, if any, benefit would accrue to Plaintiffs from having'immediate possession of the affidavits; certainly it would not grant them authority to obstruct the progress of the search by disputing the coverage of various items by the warrant.

It is clear that the fourth amendment requires some sort of notice of a search warrant. Berger v. New York, 388 U.S. 41, 60, 87 S.Ct. 1873, 1884, 18 L.Ed.2d 1040 (1967). The “sound practice” is to require the issuing Magistrate to annex the affidavit to the warrant and to deliver both at the time of search. United States v. Thompson, 495 F.2d 165, 170 n. 4 (D.C.Cir.1974). But even a failure to deliver a copy of the warrant to the party whose premises were searched until a day after the search does not invalidate a search in the absence of a showing of prejudice. United States v. Marx, 635 F.2d 436, 441 (5th Cir.1981); United States v. Cafero, 473 F.2d 489, 499 (3d Cir.1973), cert. denied, 417 U.S. 918, 94 S.Ct. 2622, 41 L.Ed.2d 223 (1974); United States v. McKenzie, 446 F.2d 949, 954 (6th Cir.1971). In order to show prejudice in this context, Plaintiffs must show that they were subjected to a search that might not have occurred or would not have been so abrasive had [Rule 41(d), Fed.R.Crim.P.] been followed. United States v. Marx, 635 F.2d at 441; United States v. Burke, 517 F.2d 377, 386 (2d Cir.1975).

In light of this legal framework, it would be baseless to conclude that under no circumstances could the Government prevail on this point.

4. Overbreadth of search.

Plaintiffs contend that material was seized beyond even the broadest reading of the warrant, including the now-notorious Connoisseur’s Guide to Cigar Smoking, literature concerning quarterhorses and Plaintiff Williams’ enumeration of personal goals for the year 1984 for each member of his family. The Court has no difficulty agreeing with Plaintiffs that personal materials such as these were improperly seized. Indeed, the Government agrees, and has returned to Plaintiffs all of the originals of what it believes to be personal material. The overbreadth of the seizure, however, does not compel the return of items clearly or arguably within the scope of the warrant. Scott v. United States, 436 U.S. 128, 98 S.Ct. 1717, 56 L.Ed.2d 168 (1978); United States v. Cook, 657 F.2d 730, 735 n. 5 (5th Cir.1981), reh. denied, 664 F.2d 289 (5th Cir.1981).

If Plaintiffs have reason to believe that the Government is in possession of original materials personal in nature and not subject to the warrant, they may make an application to the Court describing such items and from where they were seized. This is a non-tax aspect of the case from which the Court is not barred from acting. Linn, 714 F.2d at 1285.

Plaintiffs are also seeking a determination from this Court that certain of the files involve clients whose complex “tax planning” activities do not involve any potentially illegal offshore activities. That is a determination that can only be made after the completion of the investigative process. For now, the Court only finds that under the most liberal view of the law and facts, it cannot be said the Government cannot possibly prevail on the question of whether all client files were covered under the warrant.

Lest one has forgotten the point of this fourth amendment odyssey, the Court concludes that Plaintiffs have not satisfied the first prong of the Enochs exception to the Anti-Injunction Act. This is not to suggest that Plaintiffs’ concerns and contentions are frivolous. It is merely that this Court finds mandatory or injunctive relief is inappropriaté at this stage of the tax collection and investigation process.

The reluctance of most courts to issue anticipatory relief in the nature of a request for suppression of evidence relates to the desirability of letting the administrative process run its course, particularly when the matter is merely at the investigatory stage. If the evidence in question were solely to be used in a civil action, suppressing such evidence by injunction would run afoul of the clearly expressed congressional policy that courts should not intervene in the tax collection process. See Brittingham v. Commissioner, 451 F.2d 315 (5th Cir.1971); 26 U.S.C. § 7421. [T]he recent tax record cases indicate that fourth amendment claims should not be used to prevent investigative institutions from determining whether there is cause to believe that violations of the law have occurred.

Kelley v. Godbout, 379 F.Supp. 532, 536 (N.D.Ga.1974).

Accordingly, this Court is of the opinion that all requested relief should be, and hereby is, DENIED.

SO ORDERED.

      . It will be assumed that Plaintiffs Hearn and Williams possess the requisite standing. The facts were not adduced at the hearing, but the pleadings contain sufficient allegations..

      . The Act is applicable even where, as here, the injunction is sought by a third party rather than the taxpayer. Educo, Inc. v. Alexander, 557 F.2d 617 (7th Cir.1977).

      . Even if no probable cause existed, suppression would not necessarily follow, and, thus, neither would Plaintiffs’ requested relief. See Leon at 3421.

      . Even if portions of the warrant were not sufficiently particular, the entire warrant is not void. United States v. Cook, 657 F.2d 730, 735 (5th Cir.1981). It is also unclear to what extent any of this constitutes a fourth amendment violation after Massachusetts v. Sheppard, -U.S. -, 104 S.Ct. 3424, 82 L.Ed.2d 737 (1984).

      . If it was the Magistrate who failed to attach the affidavit, exclusion of the evidence would not necessarily follow. Massachusetts v. Sheppard, — U.S. -, 104 U.S. 3424, 82 L.Ed.2d 737 (1984).