author: ANN ALDRICH, District Judge.

text:
    ANHEUSER-BUSCH, INCORPORATED, Plaintiff, v. The FLORISTS ASSOCIATION OF GREATER CLEVELAND, INC., et al., Defendants.
    No. Civ. A. C83-1021.
    United States District Court, N.D. Ohio, E.D.
    Oct. 12, 1984.

      Leslie W. Jacobs, Thompson, Hiñe & Flory, Cleveland, Ohio, Paul L. Ahern, Leydig, Voit, Osann, Mayer & Holt, Chicago, 111., for plaintiff.
    Christopher B. Fagan, Patrick R. Roche, Cleveland, Ohio, for defendants.
   MEMORANDUM AND ORDER

ANN ALDRICH, District Judge.

This Memorandum and Order sets forth Findings of Fact and Conclusions of Law in support of this Court’s September 20, 1984 Order denying the plaintiff’s motion for a preliminary injunction, as required by Fed. R.Civ.P. 52(a).

Jurisdiction rests on 28 U.S.C. §§ 1331 and 1338 and 15 U.S.C. § 1121.

I. FINDINGS OF FACT

A.

The relevant facts are, for the most part, not in dispute. Plaintiff Anheuser-Busch, Incorporated (“A-B”) is a Missouri corporation, and the well known brewer of Budweiser beer, having adopted and used the trademark BUDWEISER for beer for over a century.

Defendant The Florists Association of Greater Cleveland, Inc. (“Florists”), is an Ohio not-for-profit organization representing some 300 members who are engaged in the business of selling fresh cut flowers. Under the direction of defendant, Shaffer-Shaffer-Shaffer, Inc., also an Ohio corporation, and Harry G. Shaffer, Jr., president of Shaffer-Shaffer-Shaffer, Inc., and executive secretary of the Florists, the Florists ran a promotional campaign for one week in October of 1982 under the slogan “THIS BUD’S FOR YOU — And 11 More Rosebuds”. The Florists’ “Sweetest Week” campaign featured advertising in Cleveland’s daily newspaper, The Plain Dealer, television commercials, and streamers placed in the windows of retail florists. On October 22, 1982, the campaign concluded with an advertisement in The Plain Dealer announcing the winners of the “Sweetest Week” contest.

On March 3, 1983, A-B filed a complaint against the Florists alleging trademark infringement, invasion of commercial rights, deceptive advertising, and unfair competition. On February 8, 1984 the Florists filed a motion for summary judgment claiming that there were no disputed issues of material fact, and no liability. On June 7, 1984, after several weeks of additional discovery by A-B, the Florists filed a motion for leave to file a counterclaim. The counterclaim alleges that in the third week of April of 1984 the Florists learned that Budweiser beer cans and “THIS BUD’S FOR YOU” floral cards were being offered to the floral trade by CP Products of Florida under a license between A-B and GRO-MAN. The Florists further allege that during settlement negotiations, they had proposed a licensing arrangement with A-B under which flowers could be sold in Budweiser cans as floral containers under the slogan “THIS BUD’S FOR YOU”. On June 11,1984 A-B filed a motion for voluntary dismissal without prejudice. A-B claimed that the Florists ceased the use of the “THIS BUD’S FOR YOU” slogan in October of 1982 and that the Florists did not intend to conduct further promotion with the slogan. The Florists opposed AB’s motion for a voluntary dismissal and announced their intention to use the slogan “THIS BUD’S FOR YOU” in connection with their “Sweetest Week” campaign in the fall of 1984. On August 28, 1984 A-B filed its opposition to the Florists’ motion for summary judgment and at the same time moved for a preliminary injunction.

Oral argument was held on September 11,1984. Both parties presented numerous affidavits and exhibits, and filed post-hearing pleadings.

B.

A-B is the owner of United States Trademark Registrations 64,125 for the mark “BUDWEISER” for beer; 922,481 for the mark “BUDWEISER” for beer; 952,277 for the mark “BUDWEISER” for beer and malt liquor and 66,367 for the mark “BUD” for beer.

Sometime prior to 1979 A-B adopted, and for about four years, has been began using the slogan “THIS BUD’S FOR YOU” in connection with the sale of beer. The slogan is not registered by A-B although a trademark application for beer is currently pending in the U.S. Patent and Trademark Office. A-B has expended substantial sums of money, time and effort in the advertising and promotion of beer under the marks “BUDWEISER”, “BUD” and “THIS BUD’S FOR YOU”, and the slogans have become well-known. In addition, A-B has developed a multimillion dollar trademark and brand name licensing program, using “BUD”, “BUDWEISER” and “THIS BUD’S FOR YOU” in promoting the sale of nearly every kind of conceivable product from t-shirts to tote bags. A-B’s licensees render royalty reports and payments on a quarterly basis to A-B in accordance with their license agreements. In August of 1984 there were some 290 active licensees whose merchandise included various decorative accessories, giftware, paper goods, clothing, housewares, sporting goods, artworks, novelties, desk accessories, toys, games, jewelry and luggage.

Annual revenues generated at the wholesale level have been in excess of $20,000,-000.00 annually since 1982, with retail sales in excess of $40,000,000.00. A-B’s licensing royalty revenues for 1983 were in excess of $570,000.00 and are expected to exceed $650,000.00 for 1984.

After viewing hundreds of pictures of various kinds of merchandise, this Court concludes that, although “BUD” and “BUDWEISER” have been used in floral-related promotions, prior to the commencement of this litigation the slogan, “THIS BUD’S FOR YOU”, had not been licensed for use in connection with the sale of fresh-cut flowers, nor has A-B ever sold fresh-cut flowers. In short, while there can be no doubt about the strength of A-B’s slogan with respect to beer, and its licensed use for the promotion of many other kinds of merchandise, there also can be no doubt about its lack of strength with respect to fresh-cut flowers.

The goods in question are totally unrelated. The dictionary defines beer as a “malted and hopped somewhat bitter alcoholic beverage,” a flower as “a shoot of the sporophyte of a higher plant that is modified for reproduction and consists of a shortened axis bearing modified leaves”, and the troublesome word “bud” as “a small lateral or terminal protuberance on the stem of a plant that is an undeveloped shoot.” It is absurd to believe that any consumer could confuse beer with flowers, even of the underdeveloped variety. Indeed, A-B admits that it suffered no loss of beer sales as a result of the Florists’ use of its slogan in connection with “Sweetest Week" in 1982.

Although the Florists intended to capitalize on the slogan which had been popularized by A-B, there is no evidence that they intended to deceive the public into believing that A-B was connected in any way with their product, namely fresh-cut flowers. Nor was there any evidence of actual confusion presented to the Court. No consumer called any florist asking to be delivered a six-pack; nor did any consumer call A-B seeking to purchase two dozen roses. The marketing channels for the products are totally different. The Florists, in selecting “THIS BUD’S FOR YOU,” did intend to capitalize on the familiarity of A-B’s slogan. But they did not intend to deceive consumers into believing that the fresh-cut flowers were in fact being marketed by A-B, or that they, the Florists, were marketing beer.

A-B relies heavily on a survey, conducted at a local shopping mall. A total of 472 representative members of the general consuming public (adults between 21 and 65) were shown either the Florists’ television commercial, or its July, 1984 newspaper advertisement. Each person was asked 1) who they believed sponsored or promoted the advertisement; and 2) what products they believed were sold by the business that sponsored or promoted the advertisement. Based on their tabulated responses, the study concluded 1) that the phrase “THIS BUD’S FOR YOU” is often perceived to be associated with AnheuserBusch or BUDWEISER beer; and 2) that when the phrase is used in connection with floral promotion, it is perceived by a significant number of people to be sponsored by BUDWEISER or Anheuser-Busch, specifically 54% of the television viewers, and 14% of the newspaper readers. This Court lends little credence to the results of the survey. While there is nothing inherently wrong with the method employed, the questions posed elicited anticipated, and essentially irrelevant, responses.

The first conclusion establishes only that the slogan is, indeed, a famous mark, an irrelevant fact. The second conclusion establishes little more; the slogan is familiar, but responses such as “It sounds like Budweiser but when you see the flowers you think of FTD”, or “Budweiser; Florists; Florists; Budweiser” were counted in the 54% but not in the grand total of 31% attributed to “Flowers or Floral Arrangements”. A careful reading of the survey’s findings indicates that by far the larger percentage of interviewees, on reflection, realized that the Florists’ ads were for flowers, not beer.

There is no likelihood of expansion of either product into the other’s line. Even though A-B may license the slogan “THIS BUD’S FOR YOU” to other businesses who may sell flowers, this does not necessarily typify a natural expansion of A-B’s product line. Again, A-B did not so license any other business prior to the Florists’ use of the slogan.

II. CONCLUSIONS OF LAW

A.

To prevail on a motion for a preliminary injunction, a plaintiff must satisfy the four-part test originally formulated in Mason County Medical Association v. Knebel, 563 F.2d 256, 261 (6th Cir.1977):

(1) whether the plaintiff has shown a strong or substantial likelihood or probability of success on the merits;
(2) whether the plaintiff has shown irreparable injuries;
(3) whether the issuance of a preliminary injunction would cause substantial harm to others; and
(4) whether the public interest would be served by a preliminary injunction.

Warner v. Central Trust Co., N.A., 715 F.2d 1121, 1123 (6th Cir.1983). While these factors are not to be applied in excessively rigid fashion, neither should a court merely apply a “balance of hardships” test. Friendship Materials v. Michigan Brick, Inc., 679 F.2d 100 (6th Cir.1982).

B.

A-B failed to persuade this Court that it can possibly succeed on the merits of its claim. To prevail under either the provisions of the trademark laws of the United States, 15 U.S.C. § 1125(a), or under common law trademark infringement or unfair competition, as codified in Ohio Rev. Code § 4165.01 et seq., A-B must establish the likelihood of confusion, mistake, or deception.

1.

a.

The federal “unfair competition” law, § 43(a) of the Lanham Act, 15 U.S.C. § 1125(a), was never intended to embody the entire general common law of unfair competition. La Societé Anonyme des Parfums Le Galion v. Jean Patou, Inc., 495 F.2d 1265, 1270 n. 5 (2d Cir.1974). The Sixth Circuit recently has concluded that the proper test for a § 43(a) action is the “likelihood of confusion” standard. Carson v. Here’s Johnny Portable Toilets, 698 F.2d 831, 833 (6th Cir.1983), citing Frisch’s Restaurants, Inc. v. Elby’s Big Boy of Steubenville, Inc., 670 F.2d 642 (6th Cir.), cert. denied, 459 U.S. 917, 103 S.Ct. 231, 74 L.Ed.2d 182 (1982); see also Hyatt Corporation v. Hyatt Legal Services, 736 F.2d 1153 (7th Cir.1984).

In Carson, 698 F.2d at 833, and Frisch’s, 670 F.2d at 648, the court of appeals also established eight foundational factors to be considered in making findings of the likelihood of confusion. Those factors are:

(1) strength of the plaintiff’s mark;
(2) relatedness of the goods;
(3) similarity of the marks;
(4) evidence of actual confusion;
(5) marketing channels used;
(6) likely degree of purchaser care;
(7) defendant’s intent in selecting the mark; and
(8) likelihood of expansion of the product lines.

As indicated in the Findings of Fact, supra Part I-B, A-B’s mark is extremely strong with respect to beer and utterly anemic with respect to flowers; the Florists’ intent in selecting it for their campaign was undoubtedly to capitalize on its familiarity and popularity; and in appropriating the slogan in toto the resulting, alleging infringing language is not merely similar but identical to the original phrase. On the other hand, the goods are totally unrelated; there is no evidence of any confusion between beer and flowers; there is no evidence of any similarity in the marketing channels for the products; and there is no evidence that, but for the Florists’ action, A-B would have expanded its product line from beer to flowers. Not only do the factors favoring the Florists outnumber those favoring A-B by five to three, but the functional significance of those five vastly outweighs the facts favoring the brewer. While A-B may have appropriated the designation “BUD” and the slogan “THIS BUD’S FOR YOU” in connection with the sale of beer, this Court declines to hold that such an appropriation extends to the sale of fresh-cut flowers, an area where the designation “bud” has a widely-recognized meaning of its own. To hold otherwise would be tantamount to recognizing a right in gross, which is contrary to the principles of trademark law. See The University of Notre Dame du Lac v. J.C. Gourmet Food Imports Co., Inc., 703 F.2d 1372 (Fed.Cir.1983).

b.

It is not disputed that the parties in the present action are not in competition with each other. In situations where actual competition is not present, Ohio law does not allow an injunction against use of a mark by another unless it can be proved that “confusion of identity might result”. Wurzburger, Hofbrau Aktiengesellschaft v. Shoenling Brewing Company, Inc., 331 F.Supp. 497, 506 (S.D.Ohio 1971), citing National City Bank of Cleveland v. National City Window Cleaning Company, 174 Ohio St. 510, 190 N.E.2d 437 (1963). Accordingly, the common law claims of Count One are without merit.

2.

A-B’s Count Two appears to plead trademark dilution. Trademark dilution, however, is exclusively a creature of state statute, and there is no provision in the Lanham Act. Dilution statutes have been enacted in some thirty states, but not in Ohio. Such statutes represent a policy decision by a state to supplement the rights afforded to trademark owners under the federal statute and common law. Where Ohio has not seen fit to enact such legislation, this Court declines to provide such additional protection.

3.

With respect to the product disparagement claim of Count Three, this Court cannot find this case analogous to Chemical Corp. of America v. Anheuser-Busch, Inc., 306 F.2d 433, 437 (5th Cir.1962). There A-B was able to enjoin the defendant’s use of “Where There’s Life ... There’s Bugs” based upon the disparagement of A-B and its slogan. Certainly the promotion of something as wholesome, delectable, and appetizing as a dewy rosebud cannot be said to disparage A-B’s slogan or its product. Moreover, A-B alleges no loss of beer sales as a result of the Florists’ 1982 “Sweetest Week” campaign, nor any great damage to its $200,000,000 advertising and promotion business by what it describes as the Florists’ “scant two weeks worth of effort in a relatively small metropolitan area campaign”, which is scheduled to last a week.

In light of A-B’s complete failure to persuade this Court of the probability of success on the merits, the other portions of the preliminary injunction test need not be addressed, and the motion for a preliminary injunction is denied.

IT IS SO ORDERED.

      . “Sweetest Day” (the last day of "Sweetest Week”) appears to be endemic to northern Ohio. It occurs in the middle of October and provides an opportunity for those who have been remiss on Valentine’s Day, Mother’s Day, Father’s Day, or various and sundry birthdays, to make up for their omissions.

      . Neither the motion for summary judgment, nor the Florists’ counterclaim, are under consideration at this time.

      . There is a dispute as to whether A-B got the idea for licensing the slogan “THIS BUD’S FOR YOU" in connection with the sale of fresh-cut flowers from the Florists during settlement negotiations in connection with this lawsuit, as alleged in the Florists’ counterclaim, or whether such licensing was being negotiated between A-B and other parties prior to that time. It is clear, however, that A-B did not conclude a formal written license agreement with GRO-MAN (for whom CP Products serves as a distributor) until July of 1983.

      . See Webster’s Seventh New Collegiate Dictionary at 77, 108, 321 (1969).


source: Caselaw Access Project

author: DUNCAN, District Judge.

license: Public Domain

text:
    Nettie F. DECKER, Administrator, Plaintiff, v. UNITED STATES of America, Griffin Bell, and the Department of the Army; Prudential Insurance Company of America; Connie K. Carver; Cassandra Traci Carver, Defendants.
    No. C-2-79-41.
    United States District Court, S.D. Ohio, E.D.
    Oct. 24, 1984.

      Donald Lynn Billman, Columbus, Ohio, for plaintiff.
    Albert R. Ritcher, Asst. U.S. Atty., Roberta Y. Bavry, Larry J. McClatchey, Columbus, Ohio, for defendants.
   MEMORANDUM AND ORDER

DUNCAN, District Judge.

This matter is before the Court on remand from the United States Court of Appeals for the Sixth Circuit for reconsideration on the issue of whether plaintiff has met the jurisdictional requirements of the Federal Tort Claims Act (“FTCA”) 701 F.2d 176. More specifically, the question before the Court is whether plaintiff has satisfied 28 U.S.C. § 2675(a), which provides that final disposition of a claim against the government by the appropriate federal agency is a jurisdictional predicate to suit under the FTCA. A hearing thereon was held on September 21, 1984.

At the hearing, defendant objected to the admission of plaintiff’s exhibits 1, 4 and 5 on the basis of relevancy. The Court reserved ruling on those exhibits, but now rules that plaintiff’s exhibits are admitted in toto.

Findings of Fact

On March 15, 1977, Lonnie K. Decker was killed while on active duty with the United States Army. Nettie Decker, the natural mother of the decedent, with the aid of Major John S. Fulton, her appointed “Survivor Assistance Officer,” submitted claims for certain accrued death benefits, back wages, and benefits arising from decedent’s Servicemen Group Life Insurance coverage.

The Office of Servicemen’s Group Life Insurance (“OSGLI”), which administers the payment of the insurance benefits, is established as a part of the Prudential Life Insurance Company. Prudential provides coverage under contract with the Veterans Administration. OSGLI is responsible for the review of claims and resolution of controversial issues in regard to beneficiary entitlement.

On March 17, 1977, the Army issued a “Final Report of Casualty” which listed plaintiff Nettie Decker and Bernard Decker as “interested persons” with regard to decedent’s death. Plaintiff received copies of the report in a letter dated March 24, 1977. The letter informed plaintiff that OSGLI administers payment of life insurance benefits and that all relevant documentation would be sent to OSGLI. Thereafter, the Army received information that decedent was survived by an illegitimate daughter, Cassandra Carver. The Army obtained this information from an insurance policy application signed by decedent, which named Cassandra as decedent’s daughter and designated her a beneficiary.

On June 10, 1977, the Army issued a “Corrected Final Report of Casualty” which added Cassandra to the list of interested persons, and a Major W.L. England notified plaintiff of the change by letter dated June 23, 1977. Sometime in or around June of that year, Major Fulton contacted plaintiff and told her that he had lost the fight with Army higher-ups with regard to their decision to change the Report of Casualty, that he had done everything he could, and that plaintiff should consider obtaining private counsel.

Plaintiff thereafter contacted Vincent Ballard, an attorney practicing in Ohio. At the hearing, Ballard testified that he attempted to obtain a copy of the insurance application which listed Cassandra Carver as decedent’s daughter. Ballard made several telephone calls to Texas during which he spoke with a Lieutenant John King. Lt. King apparently told Ballard that Ballard would have to ask OSGLI for the insurance application, that the Army’s decision was final, and that plaintiff could sue if she was dissatisfied. Ballard then contacted OSG-LI. OSGLI responded in a series of letters in which it stated that it had determined that Cassandra was eligible to receive the insurance proceeds, and that it would not furnish any of the documents or evidence upon which the decision was based.

OSGLI concluded that it would pay Cassandra the benefits unless plaintiff commenced legal action against Prudential Insurance within 30 days. Thereafter, Prudential did in fact pay the proceeds to Cassandra, apparently in reliance upon the Army’s corrected casualty report and upon the insurance application and Cassandra’s birth certificate allegedly listing decedent as the father.

On January 15, 1979, plaintiff commenced this action against the United States, the Department of the Army and Prudential, alleging that defendants had wrongfully withheld the benefits of the insurance policy, to which she, as the only lawful heir to the deceased, was rightfully entitled. On April 9,1979, plaintiff filed an amended complaint which added Cassandra Carver and her guardian as defendants, and which for the first time alleged that by altering the decedent’s military records to reflect that Cassandra is decedent’s daughter, the Army violated § 1346(b) of the FTCA.

On June 13, 1980, this Court dismissed the portion of plaintiff’s complaint seeking relief under the FTCA, and granted summary judgment for the defendants on all other issues. The Sixth Circuit Court of Appeals has remanded the case solely for reconsideration of whether plaintiff filed a “claim” within the meaning of the FTCA. This Court now finds that plaintiff did not file a claim pursuant to 28 U.S.C. § 2675(a).

Federal Tort Claims Act Jurisdiction

In order to institute an action against the United States a claimant must first present the claim to the appropriate federal agency. Title 28 U.S.C. § 2675(a) provides:

An action shall not be instituted upon a claim against the United States for money damages for injury or loss of property or personal injury or death caused by the negligent or wrongful act or omission of any employee of the Government while acting within the scope of his office or employment, unless the claimant shall have first presented the claim to the appropriate federal agency and his claim shall have been finally denied by the agency in writing and sent by certified or registered mail. The failure of an agency to make final disposition of a claim within six months after it is filed shall, at the option of the claimant any time thereafter, be deemed a final denial of the claim for purposes of this section. (Emphasis added.)

The procedure outlined in § 2675 is jurisdictional, and no suit may be maintained under the Act absent compliance with this section. Executive Jet Aviation, Inc. v. United States, 507 F.2d 508 (6th Cir.1974).

The regulations promulgated under 28 U.S.C. § 2672 set forth the criteria for determining what constitutes a “claim” for purposes of complying with the administrative claim prerequisite of 28 U.S.C. § 2675. 28 C.F.R. § 14.2(a) reads as follows:

For purposes of the provisions of 28 U.S.C. 2401(b) and 2672, a claim shall be deemed to have been presented when a federal agency receives from a claimant, his duly authorized agent or legal representative, an executed Standard Form 95 or other written notification of an incident, accompanied by a claim for money damages in a sum certain for injury to or loss of property, personal injury, or death alleged to have occurred by reason of the incident. (Emphasis added.)

The principal tortious act alleged in plaintiff’s complaint is the Army’s issuance of a Corrected Final Report of Casualty on June 10, 1977. The issue at hand is whether plaintiff thereafter filed a “claim” for money damages incurred as a result of the report. Plaintiff does not contend that a Standard Form 95 was filed with the Army. The Court believes that the record is also devoid of evidence that any other written claim was thereafter filed with the Army. Plaintiff has introduced evidence that Attorney Ballard had several telephone conversations on plaintiff’s behalf with Lt. King, and that during those conversations the change in beneficiaries was discussed. Such oral conversations do not rise to the level of “written notification of an incident.” Plaintiff has also introduced into evidence three letters from OSGLI to Ballard stating that Cassandra would be recognized as decedent’s child, denying Ballard’s request for the documentation underlying that decision, and stating that Prudential would pay the insurance proceeds to the child unless plaintiff filed suit against it within 30 days. See plaintiff’s Exhibits 16-18.

Examination of the contents of these letters does not establish that plaintiff, through Attorney Ballard, did anything more than request the documents upon which OSGLI’s decision was based. In fact, at the hearing Ballard testified that he did not want to make any claims until after he had had a chance to see the evidence, particularly the insurance application. Evidence was not introduced to show that, following the issuance of the Corrected Report, Ballard sent either the Army or OSGLI “written notification.”

Additionally, plaintiff’s oral communications with Army personnel reflected a dispute of a contractual nature, i.e., plaintiff’s rights under the decedent’s Servicemen’s Group Life Insurance policy. Even should the Court assume that a written claim had been filed with the Army, the Court finds no reason from the evidence on record to expect the Army to have realized that plaintiff was accusing it of a tortious conduct. See Claxton v. Business Administration of U.S. Government, 525 F.Supp. 777 (D.C.Ga.1981). In fact, even plaintiff’s own legal counsel failed to consider such a claim, and it was not until the complaint was amended on April 9, 1979, that the issue of tortious activity was introduced into the present case.

In the Court’s view, plaintiff’s filing of the usual forms requesting benefits pri- or to the occurrence of any dispute thereon, and any oral inquiries made thereafter, simply do not rise to the level of formal written notice of a charge of tortious activity. See Best Bearings Co. v. United States, 463 F.2d 1177 (7th Cir.1972).

Estoppel

Plaintiff contends that, even if a claim was not filed, the Army is estopped from asserting the jurisdictional defect because various government personnel represented that the Army had made an irreversible decision and that plaintiff had no viable remaining alternative other than to file suit. The Court finds this argument without merit.

There is evidence on the record to suggest that Major Fulton, Lt. King and Major England told plaintiff or plaintiffs agents that a final decision had been made, and that Fulton and King stated that plaintiffs best bet at that point was to sue. Plaintiff admitted at the hearing that the duties and authority of these men was unknown. In the Court’s view, plaintiff, and plaintiff’s counsel, did not have a reasonable basis to assume that these men represented the ultimate and final authority within the United States Army, or that any formal presentation of a complaint would have been ultimately sent to those three men; reliance on informal communications with these individuals was simply unwarranted. “[I]t is well-settled that the Government may not be estopped on the same terms as any other litigant.” Heckler v. Community Health Services, — U.S. —, 104 S.Ct. 2218, 2224, 81 L.Ed.2d 42 (1984). “[T]he general rule [is] that those who deal with the Government are expected to know the law and may not rely on the conduct of government agents contrary to law.” Id. 104 S.Ct. at 2226. The record does not establish that the Army personnel with whom plaintiff spoke had the authority to exempt plaintiff from the statutory requirement that she file a claim, and any reliance by plaintiff upon any such representation was unreasonable.

Additionally, plaintiff has not alleged that anyone told her not to file a claim, only that the decision was final and that a lawsuit was her best bet. In other words, nobody represented to plaintiff that if she elected at that point to seek a legal remedy she would be exempt from the statutory prerequisite that she file a formal claim.

Finally, even if members of the Army with authority to do so had represented that plaintiff did not need to file a § 2675 claim, any estoppel created thereby was later erased — defendants United States and United States Army, in response to plaintiff’s amended complaint which added charges under the FTCA, stated in their motion to dismiss or, in the alternative, for summary judgment, filed May 8, 1979, that plaintiff had not yet filed a § 2675 claim. Pursuant to 28 U.S.C. § 2401(b), the statute of limitations for filing a FTCA claim is two years. Since defendant’s Army’s allegedly tortious act occurred on June 10, 1977, plaintiff had until June 10, 1979 to perfect her claim. Therefore, when defendants gave plaintiff actual notice of the jurisdictional defect in their May 8 motion, plaintiff still had over one month in which to file a claim. Under the circumstances, plaintiff’s estoppel argument is not well taken.

Futility

Finally, plaintiff relies on a Fifth Circuit Court of Appeals decision, Patsy v. Florida International University, 634 F.2d 900 (5th Cir.1981), for the proposition that administrative exhaustion is not required if it would be futile to comply with the administrative procedures because it is clear that the claim will be rejected. Assuming that such a doctrine is applicable to the FTCA “claim” requirement, the Court simply does not believe that the evidence establishes that filing a formal claim with the Army in this case would have been clearly futile. More specifically, the Court is unconvinced that informal communications with three Army individuals whose authority in the realm of adjudicating formal claims was completely unknown established a sufficient basis for plaintiff to conclude that filing a formal claim was futile.

The Court finds that plaintiff’s claim against defendants United States and United States Army alleging tortious conduct must be dismissed for failure of Federal Tort Claims Act jurisdiction. Defendants’ motion to dismiss is GRANTED. This action is DISMISSED.


text:
    Ronald A. HALLETT, et al., Plaintiffs, v. UNITED STATES of America, Defendant.
    Civ. A. No. 84-16-NN.
    United States District Court, E.D. Virginia, Newport News Division.
    Nov. 1, 1984.

      Robert B. Halkowich, Newport News, Va., for plaintiffs.
    John P. Kane, U.S. Atty., Norfolk, Va., Sarah Hunt, Tax Div., U.S. Dept, of Justice, Washington, D.C., for defendant.
   MEMORANDUM

WALTER E. HOFFMAN, Senior District Judge.

This cause was tried upon stipulated facts. The central issue is whether certain payments received by plaintiffs, Doris L. Hallett, Olivia D. Zorumski, Peggy H. Smith, Jane P. Reilly and Deborah G. Tanner were a scholarship or fellowship and therefore excludable from gross income under § 117 of the Internal Revenue Code.

For the years in question, plaintiffs were enrolled at the College of William and Mary seeking a Masters Degree in school psychology. The Master’s program at William and Mary was a three year program requiring the completion of sixty credit hours. The first two years of the program candidates were required to take various courses at William and Mary for which they received credit. In the third year, all candidates for the degree were required to participate as an intern school psychologist in a Virginia public school. Twelve of the sixty credits were awarded for this internship.

The internship ran for one academic school year and the candidates received a monetary amount from the school system to which they were assigned. The amounts received by the plaintiffs were deemed taxable income by the Internal Revenue Service and federal income taxes were paid by the plaintiffs. They have instituted this suit to obtain a refund for the taxes collected.

Doris Hallett, while a full-time graduate student in the intern program during the 1978-79 academic year received a total of $8,900.00 from the Poquoson School System. She entered into an employment contract with the Poquoson City School Board for the 1978-79 school year which states that she accepts the position of teacher. The School Board agreed to pay Ms. Hallett $8,900.00, an amount equal to that paid first-year teachers. In addition, Ms. Hallett earned sick leave, participated in a retirement plan, and federal income tax and social security were withheld from this amount by the School System. She, along with plaintiff, Ronald A. Hallett, paid $722.00 in income tax on April 15, 1979 based upon the portion of the amount received in 1978, and paid $1,979.00 in income taxes on April 15, 1980 based upon the portion of the amount received in 1979.

Olivia D. Zorumski, while a full-time graduate student in the intern program during the 1977-78 academic school year received a total of $8,650.00 from the Newport News School System, and federal income tax and social security tax were withheld from this amount beginning in January 1978 by the School System. She, along with plaintiff, William E. Zorumski, paid $1,272.41 in income taxes on April 15, 1978 based upon the portion of the amount received in 1977, and paid $2,666.23 in income taxes on April 15, 1979 based upon the portion of the amount received in 1978.

Peggy H. Smith, while a full-time graduate student in the intern program during the 1978-79 academic year received a total of $9,450.00 from the Newport News School System, and federal income tax and social security tax were withheld from this amount by the School System. She, along with plaintiff, Douglas M. Smith, paid $2,314.00 in income taxes on April 15, 1980 based upon the portion of the amount received in 1979.

Jane P. Reilly, while a full-time graduate student in the intern program during the 1978-79 academic year received a total of $9,277.00 from the Surry County School System. She entered into an employment contract with the Surry County School Board for the 1978-79 school year which states that she accepts the position of “School Psychologist Intern.” The School Board agreed to pay Ms. Reilly $9,277.00, an amount equal to that paid first-year teachers. In addition, federal income tax and social security tax were withheld from this amount by the School System. She, along with plaintiff, Charles R. Toomajian, paid $686.00 in income taxes on April 15, 1979 based upon the portion of the amount received in 1978, and paid $1,878.00 in income taxes on April 15, 1980 based upon the portion of the amount received in 1979.

Deborah G. Tanner, while a full-time graduate student in the intern program during the 1977-78 academic year received a total of $8,825.00 from the Norfolk School System. She entered into an employment contract with the Norfolk City School Board for the 1977-78 school year which states that she accepts the position of “School Psychologist.” The School Board agreed to pay Mrs. Tanner $8,825.00, an amount equal to that paid first-year teachers. In addition, Mrs. Tanner earned sick leave, annual leave, participated in a retirement plan. Federal income tax and social security tax were withheld from the amount by the School System. She, along with plaintiff, Allen C. Tanner, Jr., paid $1,002.00 in income tax on April 15, 1979 based upon the portion of the amount received in 1978.

All of the plaintiffs timely filed claims for refund of the aforesaid amounts of income tax with the Internal Revenue Service, and timely and properly filed claims before this Court after their respective claims for refund were finally denied.

The internship program was initiated by Dr. Ruth K. Mulliken who is a Professor of Education at the College of William and Mary. In 1975, the first year the Master’s Degree in school psychology was offered, Dr. Mulliken contacted several public school systems in the vicinity of William and Mary. As a result of this action, several school systems agreed to participate in the internship program which was to begin in the 1977-78 academic year. Dr. Mulliken stated in her de bene esse deposition, which was a part of the stipulated record, that the purpose of the program was to provide a hands-on experience to the students.

William and Mary retained extensive control over the program. The students were interviewed by the school system after which William and Mary assigned the students to a particular school system. The students were required to attend meetings at William and Mary once every other week. Although there was no restriction placed on the amount of time the College could use in supervising or critiquing the students, it was expected that the students would be at their assigned schools during the school day. The students worked during the school system’s academic year, not William and Mary’s.

The plaintiffs were compensated by the school systems at the rate they paid first year teachers. This was substantially less than the amount paid to school psychologists, but the plaintiffs were not, at that time, fully qualified to be school psychologists. Dr. Mulliken stated that she had suggested the rate of compensation because she felt that was all the school systems could afford. She stated that it bore no relationship to the worth of the services provided by the students or their financial need.

The plaintiffs were in no way promised nor expected future employment with the school systems they worked for, but four of the five did obtain employment with the same school system they interned with.

Both the Newport News and Norfolk school systems had other full time school psychologists. But Surry County and Poquoson school systems had no other school psychologists. Dr. Mulliken stated that she felt a mandate to place the internships where they were needed.

There has been presented substantial evidence that the purpose of the program went to train the plaintiffs to become school psychologists. The great emphasis upon this evidence was misplaced since it is relevant only “insofar as it might possibly shade the purpose for which payments are made to taxpayers.” Parr v. U.S., 469 F.2d 1156, 1157 (5th Cir.1972). The Fourth Circuit has held that it is the primary purpose of the payments made to the taxpayer which is controlling. Hembree v. U.S., 464 F.2d 1262, 1264 (4th Cir.1972).

In order to establish the primary purpose of the payment, the grantor must first be identified. The money received by the plaintiffs was paid directly to them by the school systems. Plaintiffs contend that the reason for this was administrative convenience and that the' true grantor was William and Mary. The Sixth Circuit in Shaffer v. Block, 705 F.2d 805 (6th Cir. 1983), was faced with the same question of how to determine who was the grantor. The Sixth Circuit had to determine if the funds were specifically earmarked by the grantor for education expense and therefore excluded from income in determining whether Shaffer was eligible for food stamps. The term grantor was not defined in the relevant statute in Shaffer, just as it is not defined by the Internal Revenue Code.

The court in Shaffer held that “the proper approach is to examine the duties and powers of the institution, and if the institution has such discretionary power enabling it to restrict the use of the funds it is a grantor ...” Id. at 817. The crucial question is whether William and Mary was given discretionary power over the funds paid to the plaintiffs. There is no evidence that William and Mary was given such broad authority over the funds. In fact, by statute in Virginia, the School Board is charged with the duty to manage and control the funds made available to the School Board for public schools. Va.Code § 22.1-89 (1950). Therefore, William and Mary is not the grantor. It is the school systems which are the grantors and their purpose in making the payments is controlling.

It would have made the task of this court much simpler if either counsel had submitted evidence as to the agreement between the school systems and the College of William and Mary. There was, however, sufficient evidence presented to determine that the purpose of the payments was to compensate the plaintiffs for the services they provided to the school system.

The plaintiffs as intern school psychologists performed many duties. These duties were agreed to by the participating school systems and William and Mary. They were outlined in an exhibit entitled “General Principles Regarding the School Psychology Internship.” According to that exhibit the plaintiffs were to perform the following activities:

(1) Administration and interpretation of individual tests of personality, intelligence, achievement and other special tests.
(2) Report writing and recommendations.
(3) Teacher and parent conferences.
(4) Observation of students in classrooms.
(5) In-service training of teachers.
(6) Participation in administrative and staff meetings.
(7) Assist in special programs such as those for the blind, gifted, retarded, emotionally disturbed, etc.
(8) Gain experience in group testing programs utilized by the system.
(9) Participate in activities such as PTA, etc.
(10) Facilitate and encourage interaction of the intern with other professionals in the school: nurses, social workers, counselors, etc.

These duties performed for the school system were valuable to the school system. Dr. Mulliken recognized their value since she felt a mandate to place the internships in school systems where they did not have any school psychologists and they were needed. The fact that they were paid the salary of a first year teacher and not that of a school psychologist reflected their lack of experience and that it was necessary to have added supervision.

Dr. Mulliken stated that William and Mary determined how much time an intern spent in each activity, but that the particular children to be tested, counseled, etc., was determined by the school systems. The children selected to be tested, counseled, etc., are chosen because they need it. The school system obviously derives some benefit from having these duties performed.

Plaintiffs dual responsibility to the school systems and to William and Mary does not alter the fact that the school systems’ purpose in paying the plaintiffs was to compensate them for services rendered. Dora Aileen Chase TCM P-H ¶ 81,162.

The Supreme Court in Bingler v. Johnson, 394 U.S. 741, 89 S.Ct. 1439, 22 L.Ed.2d 695 (1969), stated that scholarships and fellowships were “relatively disinterested, ‘no-strings’ educational grants, with no requirement of any substantial quid pro quo from the recipients.” Id. at 751. In this case there was a substantial quid pro quo. The plaintiffs performed valuable services for the school systems for which they were compensated. Therefore the payments received by the plaintiffs did not constitute a scholarship or fellowship and are not ex-cludable under § 117 of the Internal Revenue Code.

A judgment order in favor of the defendant has this day been entered.

      . Plaintiffs, Ronald A. Hallett, William E. Zorumski, Douglas M. Smith, Charles R. Toomajian and Allen C. Tanner, Jr., are joined as parties only by reason of having filed joint returns with their wives. Jane Reilly was formerly Jane Toomajian. Any reference to plaintiffs herein shall be in reference to Doris L. Hallett, Olivia D. Zorumski, Peggy H. Smith, Jane P. Reilly and Deborah S. Tanner.

      . 26 U.S.C. § 117 provides in pertinent part: § 117. Scholarships and fellowship grants
      (a) General rule. — In the case of an individual, gross income does not include
      (1) any amount received
      (A) as a scholarship at an educational organization described in section 170(b)(I)(A)(ii), or
      (B) as a fellowship grant, including the value of contributed services and accommodations; and
      (2) any amount received to cover expenses for
      (A) travel,
      (B) research,
      (C) clerical help, or
      (D) equipment,
      which are incident to such a scholarship or to a fellowship grant, but only to the extent that the amount is so expended by the recipient.

      . Jane P. Reilly is the only one not now working for the school system with which she interned.

      . Olivia Zorumski and Peggy Smith interned at Newport News.

      . Deborah Tanner interned at Norfolk.

      . Jane Reilly interned at Surry County.

      . Doris Hallett interned at Poquoson.

      . Dr. Mulliken stated that reports prepared by the plaintiffs were first reviewed and revised by members of the faculty at William and Mary before being passed on to the school systems. This, however, shows only that the students had dual responsibilities to both the school systems and William and Mary.


author: DONALD J. PORTER, District Judge.

text:
    W.J. ASMUSSEN and Alice Asmussen, Plaintiffs, v. UNITED STATES of America, Defendant.
    Civ. No. 82-3015.
    United States District Court, D. South Dakota, C.D.
    Nov. 2, 1984.

      Joe H. Neumayr, Gettysburg, S.D., David L. Knudson, Davenport, Evans, Hurwitz & Smith, Sioux Falls, S.D., for plaintiffs.
    Philip N. Hogen, U.S. Atty., Sioux Falls, S.D., Lawrence E. Meuwissen, Trial Atty., Tax Div., Dept, of Justice, Washington, D.C., for defendant.
   MEMORANDUM OPINION

DONALD J. PORTER, District Judge.

W.J. and Alice Asmussen, plaintiff taxpayers, seek to recover $43,368.65 plus interest paid as federal income tax for calendar year 1976. The central issue in this action is whether a gain recognized by the taxpayers on the sale of rye in 1976 is long-term capital gain or ordinary income. The rye was originally produced by taxpayers on their South Dakota grain farm, then pledged to the Commodity Credit Corporation (CCC) as security for a loan, and later redeemed. Although Section 1221 of the IRC would generally preclude capital gains treatment of a gain made by a farmer on the sale of his crops, the taxpayers’ participation in the CCC program combined with facts indicating an investment intent with regard to the redeemed rye leads this court to conclude that the gain was a long-term capital gain. Accordingly, defendant is ordered to fully refund to plaintiffs the disputed taxes, with interest.

FACTS

The facts of this case have been stipulated by the parties. Plaintiffs, cash basis taxpayers, are grain farmers in central South Dakota. They raise a number of crops: primarily wheat, but also in certain years; rye, flax and oats. In 1972, plaintiffs pledged 96,635 bushels of rye from their 1971 rye crop with the CCC as security for a parity price support loan. The loan rate per bushel for the pledged rye was 83 cents. Pursuant to Section 77 of the IRC, plaintiffs elected to treat the loan proceeds, which amounted to $80,198.63, as ordinary income on their 1972 joint income tax return.

While the rye was pledged as security for the CCC loan, it was stored in twenty-three separate storage bins identifiable from plaintiffs’ other existing inventory of approximately 110,000 bushels of rye never pledged to the CCC. In 1973, CCC required that the price support loans be either redeemed or forfeited. The per bushel redemption rate for the rye at that time, including interest, was 86.3 cents. At the same time, the price per bushel at a local grain elevator was 88 cents. After redemption, the redeemed rye remained in the same twenty-three storage bins until it was sold in a single transaction in 1976. The rye sold for over $2 a bushel and plaintiffs recognized a gain of $135,554.54 which they reported as a long-term capital gain on their joint return for 1976. For this gain, plaintiffs reported a deduction of $67,777.27 pursuant to Section 1202 of the IRC.

Following an audit of plaintiffs’ 1976 return, in a letter dated January 2, 1980, the IRS notified plaintiffs that it did not consider the redeemed rye to be a capital asset, and therefore disallowed their long-term capital gain deduction. This resulted in a deficiency of $43,368.63. In response to the IRS audit, plaintiffs filed a protest letter on January 29, 1980 objecting to the disallowance of their long-term capital gain deduction. Plaintiffs paid the assessed deficiency on July 9, 1980 under protest, and on October 2, 1980, plaintiffs paid accrued interest on the deficiency in the amount of $9,895.48, also under protest. On November 10, 1980, plaintiffs filed a claim for refund of the taxes and interest. It is this claim for refund that is now before this court.

DECISION

Essentially, this is a case in which a farmer seeks capital gain treatment on the sale of a crop raised on his farm. Section 1221 of the IRC would appear to run contrary to such a proposition. It excludes from the definition of capital asset

(1) stock in trade of the taxpayer or other property of a kind which would properly be included in the inventory of the taxpayer if on hand at the close of the taxable year, or property held by the taxpayer primarily for sale to customers in the ordinary course of his trade or business.

Thus, it seems fundamental that a farmer would receive ordinary income when he sells his crop even if he stored it for a period before selling it in order to speculate on the market price. Further, a farmer would presumably receive ordinary income if he first pledged the crop to the CCC, later redeemed, and then sold the crop. The taxpayers contend, however, that their participation in the CCC program, coupled with facts clearly showing an investment intent, qualifies the rye’ in this case as a capital asset entitling them to the deduction.

I.

Because the rye was raised on the plaintiffs’ farm, without the CCC redemption, there could be no capital gains treatment. The rye would be property held by the plaintiffs “primarily for sale to customers in the ordinary course of [their] trade or business”, and plaintiffs would not be entitled to a refund despite the presence of other facts indicative of investment intent. Moreover, for plaintiffs to prevail, the redemption must be viewed as a “repurchase” of the rye following “sale” to the CCC rather than a loan transaction as the Government now seeks to characterize it. The proper characterization of the CCC program, then, is a threshold issue in this case.

Plaintiffs’ characterization of the redemption as a repurchase of the crops from the CCC is consistent with Section 77(a) of the IRC. This section provides that “[a]mounts received as loans from the Commodity Credit Corporation shall, at the election of the taxpayer, be considered as income and shall be included in gross income for the taxable year in which received.” Thus, it is at least clear from the statute itself that a taxpayer can choose to treat the initial pledge of crops to the CCC as a sale for tax purposes. See United States v. Isaak, 400 F.2d 869 (9th Cir.1968). According to plaintiffs, it follows that where there is a sale, a subsequent redemption should be treated as a repurchase. The parties cite, and the court’s research reveals, only two published opinions relevant to this issue.

In Thompson v. Commissioner of Internal Revenue, 322 F.2d 122 (5th Cir.1963), the Fifth Circuit was confronted with the issue of whether a farmer who had made a binding Section 77 election had to include in his taxable income a CCC price support loan made for wheat which was pledged and redeemed in the same tax year. Ironically, the Government’s position in the Thompson case was the same as the taxpayers’ in this case. The Thompson court summarized that position as follows:

Applying literally the “as if” aspect of § 77 the loan in 1958 was a vicarious “sale.” When the loan was redeemed there was another “as if” transaction with the tables now reversed — the farmer now being the buyer, the CCC the seller.

Id. at 130. The Government contended that the taxable event was the loan regardless of what took place thereafter, including complete or partial redemption of the pledged crop within the tax year. In rejecting the Government’s argument, the Thompson court focused first on the general purpose of the CCC program. The court stated that the program’s paramount aim was “to enable the farmer to obtain as a minimum, and in cash, the support price for his crop while giving him a free ride of the market for possible market advances until expiration of the redemption period.” Id. at 129. The court then examined the legislative history underlying Section 77. The legislative history revealed that until Section 77, a cash basis farmer could only have income when the pledged crop was sold. Depending on the maturity dates of the loans, this produced a bunching of income in a single year. It also meant the farmer could lose the deduction for costs incurred in the year of harvest for production of the pledged commodity. Congress cured these problems by enacting Section 77. In sum, Section 77 was designed to remedy the problems associated with loan and redemption or sale occurring in overlapping tax years. It was not enacted, according to the Thompson court, to have any application to a crop pledged and redeemed within a single tax year. The Government’s argument, continued the court, was hostile to the “free ride to market” concept of the CCC in that it would mean “Congress has unwittingly withdrawn from that farmer the right to ride the market to the year’s end.” Id. at 130. In other words, the CCC’s purpose of providing the CCC program farmer with a choice — forfeit the pledged crops if the market price goes down or remains stable, redeem if the market price goes up — is rendered meaningless by adverse tax consequences.

A second problem with the Government’s argument perceived by the Thompson court was that it did not adhere to the annual accounting concept of income tax law. The farmer taxpayer pledged wheat to the CCC in July, 1958. In December, 1958 he redeemed the wheat. The redeemed wheat was sold in January, 1959 and reported as income for that year. The Thompson court decided that as between 1958 and 1959, the preferable year to report the income was 1959, the year in which the income was realized and the taxpayer had the wherewithal to pay.

The IRS never acquiesced in the Thompson decision, and made the same argument five years later when the Ninth Circuit decided United States v. Isaak, 400 F.2d 869 (9th Cir.1968). Confronted with essentially the same facts and issue disposed of in Thompson, the Isaak court adopted the repurchase approach. In deciding the case, the court found helpful Section 1016(a)(8) of the IRC relating to change of basis for property pledged to the CCC “to the extent of any deficiency on such loan with respect to which the taxpayer has been relieved from liability.” The court stated that Section 1016(a)(8) extended Section 77’s sale analogy “to redemption which is treated a repurchase with the redeemed crop taking as its basis the amount of loan received.” (Emphasis added). Id. at 870.

At first glance, it would appear that for this court to adopt plaintiffs’ Isaak-type characterization would necessarily constitute a rejection of Thompson. Upon closer scrutiny, however, this is clearly not true. The facts of both Thompson and Isaak are distinguishable from this case, and consequently, Thompson’s rationale for rejecting the repurchase-redemption analogy is inapplicable to the facts of this case. Thompson and Isaak are cases in which a farmer who had previously made the Section 77 election to treat a CCC loan as income in the year the loan was received sought to avoid inclusion of a loan as income on the ground that the pledged crop had been redeemed within the tax year. Stated differently, the taxpayers were urging that the redemption canceled the need for reporting the loan proceeds as income in the year of the loan’s receipt. In this case, there is no controversy as to whether the loan should have been included in the taxable year of its receipt. The parties have stipulated that plaintiffs reported their CCC loan proceeds on their 1972 income tax return as ordinary income, and that plaintiffs did not redeem the rye until the next tax year. Thus, the Thompson court’s rationale to the effect that the “repurchase” analogy interferes with the free ride to market policy behind the CCC program is inapposite. Second, to hold that plaintiffs in this case effectively repurchased the rye in no way contravenes the annual accounting concept of income tax law. The plaintiffs paid ordinary income tax on the loan proceeds pursuant to Section 77 election in the year of receipt. They did not redeem that year. They redeemed in a subsequent tax year, and in 1976, when they finally sold the rye, they paid taxes on the gains made from that sale. This court reads Thompson and Isaak as directly conflicting, but it does not read Thompson as conflicting with the decision in this case. Thompson seems to reject the redemption-repurchase analogy in the particular case of a loan made and redeemed in the same year.

Under this analysis, Isaak would, of course, not be direct precedent for holding that the rye in this case was “repurchased” either. Like Thompson, it dealt with a loan and redemption occurring within the same tax year. This court is, however, persuaded by the consistency offered by the Isaak redemption-repurchase analysis. As the Isaak court noted, Section 1016(a) providing for an adjustment to basis for redemptions would seem to imply extending the sale analogy to the redemption. See Isaak, supra at 870. This court views the sale-repurchase theory advanced by the Government in Thompson and Isaak and by the taxpayers in this ease as the more reasonable under the circumstances in this action. However, this in no way is intended to mean that mere redemption of crops pledged to the CCC necessitates their becoming capital assets. That issue is not before the court. The issue here is whether, under all the circumstances objectively indicative of taxpayers’ intent, taxpayers had a subjective intent to treat the rye as an investment. This court believes that they did have such intent.

II.

A commodity producer, including a farmer, is not automatically barred from holding as a capital asset a commodity he produced. Case law is replete with instances where a court permitted producers to take an investment position in the commodity which they produced or dealers in a commodity in which they dealt. See, e.g., United States v. Bondurant, 245 F.2d 265 (6th Cir.1957) (cotton shipper in cotton); Hufford v. United States, 254 F.Supp. 272 (E.D.Wash.1965) (barley jobber in barley seed); Stefka v. United States, 2 A.F.T. R.2d 5538 (W.D.Tex.1958) (cotton farmers in cotton). The determination of whether property is held or sold in the ordinary course of a trade or business is a question of fact. Investors Diversified Services v. Commissioner of Internal Revenue, 325 F.2d 341, 354 (8th Cir.1963).

One fact considered an earmark of a capital asset in cases such as this one is whether the taxpayer sufficiently segregated the investment property from the taxpayer’s ordinary course of trade or business property. See e.g., United States v. Bondurant, supra, 245 F.2d at 268; Carl Marks & Co. v. Commissioner of Internal Revenue, 12 T.C. 1196, 1202 (1949). In this case, following redemption the rye was stored in twenty-three storage bins readily identifiable from plaintiffs’ other bins of rye. The parties have stipulated that the rye remained in those same twenty-three bins until it was sold in a single transaction in July, 1976.

Added to this objective indicator of the taxpayers’ intent, this court views as important the fact that when plaintiffs redeemed, the difference between the redemption price for the rye and the market price was slight. It has been stipulated that the redemption rate for rye, including interest, was 86.3 cents per bushel. At the time of redemption, the market price was only 88 cents per bushel. This difference is even slighter when the costs of hauling the rye to the marketplace are considered. Thus, it seems reasonable that taxpayers, who had never before redeemed a pledged crop, did not seek an immediate economic advantage by redeeming in this case. Moreover, there is no evidence suggesting that the taxpayers needed the grain for some other reason such as feed for livestock. Indeed, this seems rather implausible in light of the stipulated fact that plaintiffs had 110,000 bushels of rye never pledged to the CCC on hand when they redeemed.

Apparently, it was the taxpayers’ personal opinion that rye was a “tag-along” to wheat in regard to price. At the time the taxpayers redeemed, wheat prices had begun to go up, and taxpayers believed rye prices would follow. Statements by one of the taxpayers or an agent of theirs to the effect that taxpayers intended to hold the rye for an indefinite period based on a belief that the market price would go up would ordinarily be afforded little evidentiary weight. Such statements, made after the IRS has assessed a deficiency, are vulnerable because they are self-serving. But in this case, these statements are buttressed by other, more objective evidence. Plaintiffs consulted their tax counsellors regarding the tax consequences of redeeming. Their attorney received a letter from a local IRS office indicating that the IRS would not follow the Thompson decision. This letter, dated prior to the redemption, is in evidence. Plaintiffs’ accountant of thirty years, using as a basis for his advice the IRS letter and his own knowledge of the tax law, informed plaintiffs of the favorable capital gains tax treatment they would receive on a subsequent sale of the rye. All of this renders more believable evidence that the taxpayers thought they were effectively investing in the redeemed rye. See generally Hufford v. United States, supra, 254 F.Supp. at 273 (purpose for which asset was acquired, i.e., for sale or investment, is a factor in determining character of assets). It also indicates that the taxpayers proceeded in good faith. See United States v. Bondurant, supra, 245 F.2d at 268 (“Whether they are actually capital assets ... is a question of fact, depending upon all the facts in the case, including ... good faith.”).

Finally, the “isolated nature” of the redemption in this case is an additional fact in favor of labeling the rye a capital asset. See Hufford v. United States, supra, 254 F.Supp. at 275. It is additional proof that the rye was not sold or held in the taxpayers’ ordinary course of business.

CONCLUSION

It is the opinion of this court that the taxpayers’ redemption of rye in 1973 was for tax purposes a “repurchase” of the rye. This redemption did not by itself entitle taxpayers to capital gains treatment. Rather, redemption merely afforded the taxpayers the opportunity to take an investment position in a commodity they produced on their own farm. Having examined all the relevant facts, this court believes the taxpayers demonstrated a good faith intention to treat the rye as an investment rather than property held primarily for sale in the ordinary course of their business. Consequently, they were entitled to capital gains treatment on the rye in 1976, and are now entitled to the claimed refund, with interest.

The foregoing memorandum opinion represents the findings and conclusions of this court.

      . 26 U.S.C. § 77 provides:
      (a) Election to include loans in income. Amounts received as loans from the Commodity Credit Corporation shall, at the election of the taxpayer, be considered as income and shall be included in gross income for the taxable year in which received.
      (b) Effect of election on adjustments for subsequent years. If a taxpayer exercises the election provided for in subsection (a) for any taxable year, then the method of computing income so adopted shall be adhered to with respect to all subsequent taxable years unless with the approval of the Secretary a change to a different method is authorized.

      . For purposes of this case, the parties stipulated that the redeemed rye was sold in a single transaction, in 1976. Actually, of the 96,635 bushels of rye pledged and redeemed, 76,635 bushels were sold in the 1976 sale. At a hearing held October 3, 1984, it was disclosed that taxpayers sold the other 20,000 bushels in previous years and took capital gains deductions. The Government objected to these deductions also, but eventually compromised with the taxpayers.

      . There is no dispute in this case that the taxpayers properly elected to report such transactions under Section 77 or that they had previously reported amounts received from the CCC in return for crop pledges under this section.

      . This argument was accepted by the Tax Court which flatly stated, "[w]here the receipt of a Commodity Credit Corporation loan is considered as a sale of wheat, certainly a payment in redemption of the wheat should be considered as a repurchase of that wheat.” Fritz Thompson, 38 T.C. 153, 168 (1962).

      . Either conventionally, or sold to the CCC at the time it exercised its option to require the farmer to redeem or forfeit the pledged crop.


author: JOHN GARRETT PENN, District Judge.

text:
    Joanette SCONION, Plaintiff, v. Clarence THOMAS, Chairman, Equal Employment Opportunity Commission, Defendant.
    Civ. A. No. 83-3440.
    United States District Court, District of Columbia.
    Nov. 9, 1984.

      Joanette Sconion pro se.
    Patricia Carter, Asst. U.S. Atty., Washington, D.C., for defendant.
   MEMORANDUM

JOHN GARRETT PENN, District Judge.

The plaintiff filed this action pursuant to Title VII of the Civil Rights Act of 1964, as amended, 42 U.S.C. § 2000e et seq., and the Rehabilitation Act of 1973, as amended, 29 U.S.C. §§ 791 and 794a. She contends that the defendant discriminated against her because of her race, sex or handicap. The case is now before the Court on defendant’s motion to dismiss, or to transfer on the grounds of improper venue.

I

The Court had previously ordered this case transferred to the Northern District of Georgia on the grounds of improper venue in this district. See Order filed February 7, 1984. Actions brought under Title VII and the Rehabilitation Act must be filed in the district in which the unlawful employment practice is alleged to have been committed, or in the district where the complainant would have worked but for the alleged unlawful practice, or in the district where the relevant employment records are administered or maintained. 42 U.S.C. § 2000e-5(f)(3) (the Rehabilitation Act in corporates the remedies, procedures and rights of Title VII, 29 U.S.C. § 794a). Plaintiff concedes that the alleged unlawful practice took place in the Northern District of Georgia and she further concedes that she would have worked in that district but for that action. Thus, the only grounds upon which venue may be found in this district is in the event her relevant employ ment records are administered or maintained here.

After this Court ordered the case transferred, plaintiff petitioned for a writ of mandamus which was granted. See Petition of Sconion, No. 84-5146 (D.C.Cir April 27, 1984). In an accompanying memorandum, the Court of Appeals noted that this Court had ordered the case transferred based upon an unsworn statement in the pleadings filed by the defendant alleging that during the relevant periods, the records were either in the Northern District of Georgia or the Eastern District of Missouri. See Memorandum in Support of Defendant’s Motion to Dismiss filed January 26, 1984. The appellate court also observed that on remand this Court should consider whether counsel should be appointed to represent the plaintiff.

The first issue which must be addressed is whether the Court should appoint noun sel to represent the plaintiff. Plaintiff has sought the appointment of counsel and the Court has referred her to several organizations which often provide attorneys who have agreed to take cases on a pro bono basis. Her attempts to find counsel who would satisfy her have proved unsuccessful. Indeed, plaintiff indicated at one hearing that she had considered filing a griev anee complaint against one attorney who had discussed representing her in this case.

In determining whether to appoint counsel, the Court must consider the ability of the plaintiff to afford an attorney, the merits of plaintiffs case, the efforts of plaintiff to obtain counsel, and the capability of the plaintiff to present the case without the aid of counsel. Poindexter v. FBI, 737 F.2d 1173, 1185 (D.C.Cir.1984). This Court is satisfied that plaintiff cannot afford counsel. It is, of course, difficult to judge the merits of her discrimination claim at this stage of the proceedings. But, the “merits” for the purposes of the matter before the Court should be the merits of the venue question rather than the merits of the discrimination claim. To state it differently, the Court concludes that in this case, the Court should gauge first whether the plaintiff has a strong or a weak argument on the merits of the venue question and if it determines that it is probable that venue lies in this district, then consider the merits of plaintiffs discrimination claim.

Here, the Court must conclude that plaintiff has little or no chance of prevailing on the venue issue. The only issue is whether her employment records were administered or maintained in this district. The defendant contends that they were not and defendant’s counsel has filed an affidavit in support of that contention. See Thurmond Affidavit filed May 7, 1984. Defendant states that plaintiff’s records are in her Official Personnel Folder (OPF), that the OPF was in Atlanta, Georgia from September 1979 to March 1981, and that on March 16, 1981, the plaintiff’s OPF was transferred by the Atlanta District Office to the Federal Records Center (FRC) in St. Louis, Missouri, pursuant to the agency’s records disposition program. Id. TTTT 5-8. The records were transferred to the FRC pursuant to EEOC Order No. 201 and the GSA General Records Schedule. Id. ¶ 9. “At no time has the plaintiff’s OPF been maintained in Washington, D.C.” Id. ¶ 10. If the above statements are true, it follows that this case must be dismissed or transferred.

As to the capacity of plaintiff to present arguments on the venue issue without the aid of counsel, it would seem that she should be able to do so. She is intelligent and knowledgeable and is a former- employee of the EEOC. Her pro se complaint is indicative of her skill and knowledge in this area and she is familiar with the venue requirements. Yet, at no time has she raised a true factual issue by filing any pleadings, papers or affidavits demonstrating that the records in question have ever been administered or maintained in this district.

After considering all of the above facts, the Court concludes that it should not appoint counsel to represent the plaintiff. She has, at most, a very weak argument on her venue claim and she has not made a showing that her discrimination complaint is particularly strong. Moreover, on the limited issue of venue, she is familiar with the law and can certainly present her own case. If she were to prevail on venue, then the Court would appoint counsel to represent her on the merits. Considering all of these factors the Court concludes that plaintiff’s request for the appointment of counsel at this stage should be denied. See Poindexter v. FBI, supra.

Ill

Turning to the pending motion, the Court notes that the plaintiff has not demonstrated any reason for the Court to disbelieve the sworn affidavit of defendant’s counsel. Defendant knows that the case is not going to be dismissed by the Court; rather, if defendant prevails on its motion, the case will be transferred to the Northern District of Georgia where the parties can litigate the issues. The affidavit filed by the defendant sets forth in detail the dates upon which the records were in Georgia, and the dates the records were transferred to the Federal Records Center. Nothing about the actions of the defendant in the handling of the records appears to be unusual and nothing filed by the plaintiff suggests that the defendant’s affidavit was executed or filed in bad faith. .Nothing filed by the plaintiff raises a factual issue in this case. In response to questions from the Court on this issue, the plaintiff merely relies on the statements of the Court of Appeals indicating that she is entitled to a hearing, which she apparently misinterprets as a trial on the merits. Moreover, although plaintiff does not make such a contention, the fact that a portion of her employment record may have been sent to this district for her perusal does not mean that the records were “transferred” for the purposes of the venue statute. To so hold would mean that a Title YII complainant may bring a discrimination action in any district in the United States.

After weighing all of the above factors, the Court concludes that plaintiffs request for the appointment of counsel should be denied and the Court further concludes that the defendant’s motion to dismiss should be denied, and that this case should be transferred to the Northern District of Georgia. 28 U.S.C. § 1406(a). Additionally, it appears that the witnesses and relevant records are in Atlanta and that this case should be transferred to the Northern District of Georgia on those grounds. 28 U.S.C. § 1404(a).

An appropriate Order has issued.

      The present motion is essentially a renewal of defendant’s motion to dismiss. The Court treats the motion as being one to dismiss or to transfer based upon the arguments defendant has made in court.