author: NORTHROP, Senior District Judge.

text:
    UNITED STATES of America v. LANDMARK FINANCIAL SERVICES, INC.
    Civ. A. No. N-84-3510.
    United States District Court, D. Maryland.
    June 5, 1985.

      J. Frederick Motz, U.S. Atty., D. Md., and Elizabeth H. Trimbell, Asst. U.S. Atty., D. Md., Baltimore, Md., and David A. Levitt, Office of Consumer Litigation-Civ. Div., U.S. Dept, of Justice, Washington, D.C., for plaintiff.
    Daniel R. Chemers, and William K. Meyer, and Weinberg and Green, Baltimore, Md., for defendant.
   MEMORANDUM

NORTHROP, Senior District Judge.

Currently pending is a motion for judgment on the pleadings filed by defendant, Landmark Financial Services, Inc. (“Landmark”), pursuant to Fed.R.Civ.P. 12(c). In this case of first impression, Landmark challenges the scope of the government’s enforcement powers under section 704 of the Equal Credit Opportunity Act (“ECOA” or “Act”), 15 U.S.C. § 1691c. The parties have thoroughly briefed the issues and no hearing is necessary. Local Rule 6(E). For the reasons set forth hereinbelow, Landmark’s motion is denied.

I.

This case is brought by the United States of America “acting upon the notification and authorization given to the Attorney General by the Federal Trade Commission.” Amended Complaint, Introductory Paragraph. The government alleges that Landmark has engaged in practices which provide elderly credit applicants with less favorable treatment than non-elderly applicants. Amended Complaint ¶¶ 9, 10. The government specifically alleges that Landmark’s policies and practices “discriminate against elderly applicants on the basis of age, in violation of section 701(a)(1) of the ECOA ... and Section 202.4 of Regulation B, 12 C.F.R. § 202.4.” Id. at 1113.

For relief, the government contends that these violations, if proven, warrant the imposition upon Landmark of civil penalties of up to $10,000 per violation, consumer redress and injunctive relief. Asserting that section 704 of the ECOA, 15 U.S.C. § 1691c, authorizes the Federal Trade Commission (“FTC”) to act through the Attorney General to seek and obtain these forms of judicial relief, the government contends that:

Section 704(c) of the ECOA, 15 U.S.C. § 1691c(c), empowers the [Federal Trade] Commission to enforce any regulation promulgated by the Federal Reserve Board under the ECOA, including Regulation B, in the same manner as if the violation had been a violation of a [Federal Trade] Commission trade regulation rule. Defendant [Landmark] is therefore liable for civil .penalties pursuant to section 5(m)(l)(A) of the FTC Act, 15 U.S.C. § 45(m)(l)(A), and for consumer redress pursuant to section 19(b) of the FTC Act, 15 U.S.C. § 57b(b).

Amended Complaint U14. The government’s prayer for an injunction is also premised upon the FTC’s authority under the Federal Trade Commission Act to seek an injunction itself or by reference to the Attorney General. 15 U.S.C. § 53, 56.

Landmark strenuously opposes the government’s efforts to impose the requested forms of relief arguing generally that the Federal Trade Commission, and thus the United States in this action, is not statutorily authorized under section 704(c) of the ECOA to seek civil penalties or consumer redress based upon the violation alleged. Landmark’s Answer, Third Affirmative Defense. Relying on its views of statutory construction, legislative history and the language of the ECOA, Landmark contends first that section 704(c) properly construed authorizes administrative enforcement only, and does not provide authorization for this judicial action; and second, that if the government’s interpretation of section 704(c) were accepted, it would create constitutionally impermissible disparity in judicial treatment of persons or entities covered by the ECOA. The narrow issue before this Court, therefore, is whether section 704(c) of the ECOA authorizes the FTC and, in turn, the Attorney General, to bring this action and to obtain the requested relief, including civil penalties and consumer remedies.

II.

The Equal Credit Opportunity Act, enacted in 1974, is designed to prevent discrimination in the area of consumer credit. The Act makes it “unlawful for any creditor to discriminate against any applicant, with respect to any aspect of a credit transaction on the basis of race, color, religion, national origin, sex or marital status, or age.” 15 U.S.C. § 1691(a). The ECOA contains two separate sections for enforcement of the statute, section 704, 15 U.S.C. § 1691c and section 706, 15 U.S.C. § 1691e.

Section 704, entitled “Administrative Enforcement,” empowers 12 agencies, including the FTC, to enforce the Act’s ban on discrimination. Each agency has enforcement powers over the various creditors subject to that agency’s regulatory authority. For example, the Federal Reserve Board, the Interstate Commerce Commission and the Small Business Administration are empowered to enforce the ECOA against federal reserve banks, common carriers and small business investment companies, respectively. Section 704(b), 15 U.S.C. 1691c(b), provides that a violation of the ECOA “shall be deemed to be a violation of a requirement imposed under [the] Act[s] [by which the creditors noted in subsection (a) are regulated].” Thus, for example, a violation of the ECOA by a bank would be considered a violation of the Federal Deposit Insurance Act, while a violation of the ECOA by a federal credit union would be considered a violation of the Federal Credit Union Act.

Section 704(c) provides that the FTC shall enforce the ECOA “except to the extent that enforcement under the Act is specifically committed to some other government agency.” 15 U.S.C. § 1619c(c). This means the FTC is the “enforcer of last resort” for any creditor not clearly falling within the responsibility of any other agency. That same section provides:

For the purpose of the exercise by the Federal Trade Commission of its functions and powers under the Federal Trade Commission Act, a violation of any requirement imposed under this title shall be deemed a violation of a requirement imposed under [the Federal Trade Commission Act]. All the functions and powers of the Federal Trade Commission under the Federal Trade Commission Act are available to the Commission to enforce compliance by any person with the requirements under this title, ... including the power to enforce any Federal Reserve Board regulation as if the violation had been a violation of a Federal Trade Commission regulation rule.

Id. (emphasis added). Because Landmark is not regulated by one of the other designated governmental agencies in section 704(a), enforcement of the ECOA rests with the FTC. It is the scope of the FTC’s grant of authority that is at the core of this dispute.

The second enforcement provision of the ECOA is section 706, 15 U.S.C. § 1691e, entitled “Civil Liability.” That section creates a private right of action against creditors for individuals and classes of aggrieved applicants, and authorizes recovery of actual damages, punitive damages, costs and attorneys’ fees. 15 U.S.C. § 1691e(a),(b),(d). Section 706 also authorizes the Attorney General to bring suit when the Act is violated. 15 U.S.C. § 1691e(g),(h). This is done in two ways:

(g) The agencies having responsibility for administration enforcement under section 704, if unable to obtain compliance with section 701, are authorized to refer the matter to the Attorney General with a recommendation that an appropriate civil action be instituted.
(h) When a matter is referred to the Attorney General pursuant to subsection (g), or whenever he has reason to believe that one or more creditors are engaged in a pattern or practice in violation of this title, the Attorney General may bring a civil action in any appropriate United States district court for such relief as may be appropriate, including injunctive relief.

Id.

Thus, under section 706, the Attorney General may bring a civil action to enforce the ECOA if the agency “having responsibility for administrative enforcement” is unable to obtain compliance and refers the matter to the Attorney General. 15 U.S.C. § 1691e(g). Beyond this, the Attorney General may sue on its own initiative if it has reason to believe the creditor is involved in a “pattern or practice” in violation of the Act. 15 U.S.C. § 1691e(h). In either situation, the Attorney General is authorized to seek only “appropriate” relief, including injunctive relief.

As stated, the Amended Complaint rests exclusively on the FTC’s broad grant of authority under section 704(c) of the ECOA, 15 U.S.C. § 1691c(c). Landmark argues that, consistent with the delegation of enforcement authority manifested by the structure and language of the Act, the government reads section 704(c) far too broadly. It is Landmark’s position that section 704 authorizes only administrative enforcement in an administrative forum, and that section 706 provides the sole explicit grant of judicial enforcement authority. By allowing the government to proceed in this action under section 704(c) of the ECOA, Landmark argues, it will not only destroy the orderly system of enforcement established by Congress, but will also permit the government to recover indirectly those forms of relief the Third Circuit found were not available under section 706 of the ECOA. United States v. Beneficial Corp., 492 F.Supp 682 (D.N.J.1980), aff'd without opinion, 673 F.2d 1302 (3d Cir.1981) (§ 706 authorizes equitable relief but not fines or consumer redress). Viewing this action as an end run on the limitation of relief imposed under section 706, Landmark urges this Court to bar the government’s attempt to use those judicial enforcement provisions which Congress, as interpreted by the Third Circuit, has stated are not available. Finally, Landmark contends that acceptance of the government’s interpretation of section 704(c) will create an unconstitutional classification which lacks any rational basis because those creditors subject to the FTC’s enforcement would be liable for fines and consumer redress while most other creditors covered by the Act would not.

The Court acknowledges the persuasive arguments advanced by Landmark; however, in the end, it is the specific language of section 704(c) of the ECOA that controls the disposition of this action. For the reasons more fully set out below, the Court concludes that section 704(c) allows the FTC and in turn the Attorney General to bring this action and to seek those forms of relief requested in the Amended Complaint.

Ill

The Court begins its analysis with the language of the section in dispute. Section 704(c) of the ECOA provides, in pertinent part, that:

[A] violation of any requirement imposed under this subchapter [the ECOA] shall be deemed a violation of a requirement imposed under [the Federal Trade Commission Act]. All of the functions and powers of the Federal Trade Commission Act are available to the Commission to enforce compliance by any person with the requirements imposed under [the ECOA], ..., including the power to enforce any Federal Reserve Board regulation promulgated under this title in the same manner as if the violation had been a violation of a Federal Trade Commission trade regulation rule.

15 U.S.C. § 1691c(c) (emphasis added).

By its explicit terms, the FTC has all the functions and powers to enforce the ECOA that it has to enforce the FTC Act. The FTC Act expressly provides that:

The Commission may commence a civil action to recover a civil penalty in a district court of the United States against any person, partnership, or corporation which violates any rule under this Act respecting unfair or deceptive acts or practices____

15 U.S.C. § 45(m)(l)(A). The FTC is also authorized to seek consumer redress, 15 U.S.C. § 57b(b), and injunctive relief, 15 U.S.C. § 53(b). Finally, the FTC has the option of suing for rule violations either directly or through the Attorney General. 15 U.S.C. § 56.

Notwithstanding the plenary grant of power from Congress to the FTC, Landmark contends that the authority conferred on the FTC and other agencies under section 704 is administrative authority only, not the authority to bring judicial actions. Landmark finds support for its argument in selective quotes from the ECOA itself, as well as its implementing Federal Reserve Board Regulation B. The Court has considered these quotes in the context of the ECOA’s enforcement scheme, but is not persuaded that they emasculate the FTC’s clear authorization to use “all of [its] powers” to enforce the ECOA. For the same reason, the captioning of section 704 as “Administrative Enforcement,’’ even when read in context with section 706 captioned “Civil Liability,” does not, in this Court’s opinion, limit the FTC’s broad grant of authority to administrative proceedings only. Section 704(c), read literally, gives the FTC authority to enforce a violation of the ECOA the same as if the violation were that of the Federal Trade Commission Act. And that authority clearly includes the power to bring a civil action in a United States district court to seek penalties, consumer redress and injunctive relief. 15 U.S.C. §§ 45(m)(l)(A), 57b(b) and 53(b).

Recognizing the adverse effect of a literal reading of section 704(c), Landmark urges the Court to disregard this literal interpretation and to construe the section contextually in light of Landmark’s views of Congress’ enforcement scheme under sections 704 and 706 of the ECOA. The Fourth Circuit has mandated the construction urged by Landmark whenever a literal reading of a statute “is irreconcilably at war with the clear congressional purpose ...” Food Town Stores, Inc. v. E.E.O.C., 708 F.2d 920, 924 (4th Cir.1983), cert. denied, — U.S. -, 104 S.Ct. 996, 79 L.Ed.2d 229 (1984). However, as discussed infra, this Court concludes that a literal interpretation is not at “war,” but rather in harmony with, the congressional purpose of strong enforcement of the Act. Furthermore, as a matter of statutory construction, where the language of a statute is clear and unambiguous and a literal reading does not do violence to the purposes or policies of the Act, alternate readings of the statute, such as the one urged by Landmark, must be rejected. See Howe v. Smith, 452 U.S. 473, 483, 101 S.Ct. 2468, 2475, 69 L.Ed.2d 171 (1981) (clear meaning of statute prevails); Consumer Product Safety Commission v. GTE Sylvania, Inc., 447 U.S. 102, 108, 100 S.Ct. 2051, 2056, 64 L.Ed.2d 766 (1980).

The legislative history of the ECOA lends some support to this Court’s interpretation of the proper breadth of the FTC’s authority in this case, but it is not explicit enough to dispose of the issue. Indeed, both parties are able to choose selective quotes from that history to support their respective positions. For example, Landmark cites for support of its argument the following passage from the Senate Banking, Housing and Urban Affairs Committee Report:

Since discrimination is inherently insidious, almost presumptively intentional, yet often difficult to detect and ferret out, the Committee believed that strong enforcement of this Act is essential to accomplish its purposes. The bill therefore provides enforcement opportunities of three kinds. Under Section 704 (which remains unchanged) various federal agencies are given administrative enforcement responsibility. Under the revised Section 706, the United States Attorney General is also authorized to bring enforcement actions, either on referral of cases from the administrative agencies, or on the Attorney General’s own initiative where there are patterns or practices in violation of the Act. The entrusting of enforcement responsibility [in § 706] to the Attorney General is premised on the assumption that that office’s experience in the enforcement of other civil rights legislation can be effectively expanded and built on to achieve maximum compliance with the anti-discrimination policies of the Equal Credit Opportunity Act.
The Chief enforcement tool, however, will continue to be private actions for actual and punitive damages.

S.Rep. 589, 94th Cong., 2d Sess., reprinted in 1976 U.S.Code Cong, and Ad.News 403, 415 (emphasis added). For its part, the government cites the following statement from Sheldon Feldman, Assistant Director for Special Statutes of the FTC, to support its position:

On January 4, 1985, the MagnusonMoss Warranty—FTC Improvements Act [Public Law 93-637] was signed into law. The FTC improvement provisions of this law are designed to remedy well-documented inadequacies in the FTC’s enforcement authority which have hampered the Commission’s consumer protection activities for many years. Among the provisions added [to the FTC Act] is a new section which permits the Commission to seek civil penalties in a United States district court whenever there is a violation of a trade regulation rule promulgated under the Federal Trade Commission Act. While the existing language of Section 704(c)—and the same language in Section 198(c) of the Truth-in-Lending Act—can reasonably be interpreted to permit use of the new FTC powers in connection with Federal Reserve Board regulations as well as FTC trade regulation rules, this is not clear. Therefore, we propose the addition of a provision to the Equal Credit Opportunity Act—in Section 704(c)— which would specifically state that the Commission’s authority to enforce the regulations issued by the Federal Reserve Board under the Equal Credit Opportunity Act is the same as its authority to enforce FTC rules.

Hearing on S. 483, S. 1900, S. 1927, S. 1961, and H.R. 6516, 94th Congress, 1st Sess., July 17, 1975, p. 213 (emphasis added).

Despite these conflicting passages, the Court can glean several illuminating observations from the ECOA legislative history. First, it is clear that Congress believed “that strong enforcement of [the ECOA] is essential to accomplish its purposes.” S.Rep. 589. 94th Cong., 2d Sess., reprinted in 1976 U.S.Code Cong, in Ad.News 415. Second, that section 704(c) was amended in 1976, as Mr. Feldman seems to suggest, to clarify that:

[T]he enforcement powers of the Federal Trade Commission include the power to enforce any Federal Reserve Board regulation under this title as if the violation were a violation of a Federal Trade Commission trade regulation rule.

Id., at 418. The goal of strong enforcement, coupled with the 1976 amendments clarifying the FTC’s broad grant of authority under section 704(c), supports a literal reading of section 704(c) and thus the FTC’s authority to bring this action in a judicial forum.

It is true, as Landmark suggests, that nothing in the legislative history expressly states that judicial enforcement is available to the agencies, including the FTC, under section 704. It is equally true, however, that nothing in the legislative history prohibits the agencies, including the FTC, from using all of their powers, including civil actions, to obtain compliance with the ECOA. Allowing the FTC to bring this action under section 704(c) not only comports with the plain language of the statute, but is harmonious with Congress’s goal of “strong enforcement” of the Act. See R. Clontz, Jr., Equal Credit Opportunity Manual, II 2.01[3] at pp. 2-5 (3d ed. 1979 and Cum.Supp.1984) (interpreting section 704(c) to include the FTC’s broad authority to bring civil actions and to seek penalties and consumer redress for violations of ECOA). Moreover, while not dis-positive, it is worth noting that since the enactment of the 1976 amendments to the ECOA, including the language at issue in section 704(c), the FTC has consistently used its authority under section 704 to obtain consent decrees and civil penalties in the federal district courts. Id., at App. F[l] p. F-12 and App. F[2] p. F-23 (1979) and ¶ 2.01[3] at pp. 2-33-2-36 (1984 Cum. Supp.); see A. Fortney, Consumer Credit Compliance and the Federal Trade Commission: Sketching the New Directions, 39 Bus.Law. 1305, 1311-1312 (1984) (listing actions brought by FTC under the ECOA); cf. Chevron, U.S.A., Inc. v. Natural Resources Defense, — U.S. -, 104 S.Ct. 2778, 2783, 81 L.Ed.2d 694 (1984) (“We have long recognized that considerable weight should be accorded to an executive department’s construction of a statutory scheme it is entrusted to administer.”)

Furthermore, the government's interpretation of section 704 of the ECOA does not violate the equal protection clause of the Constitution. Recognizing that this Court’s scope of review of economic classification which involves neither a suspect class nor a fundamental right is exceedingly limited, Landmark nonetheless argues that a statutory enforcement scheme cannot constitutionally impose different penalties on different kinds of business enterprises engaged in the same credit activities. Landmark argues that all creditors stand on equal footing before the Court and thus there is no rational basis for distinctions in the judicial, as opposed to administrative, enforcement of the Act.

In order to fully comprehend Landmark’s constitutional challenge it must be understood that, of the twelve agencies given enforcement powers in section 704, only five have authority to seek civil penalties and only one, the FTC, has the authority to seek consumer redress. Moreover, of the five agencies authorized to seek civil penalties, the size of the penalties vary from $100 to $20,000 per violation. All of the other agencies have administrative enforcement authority only, but they can, if unable to obtain compliance with the ECOA, refer the matter to the Attorney General for civil enforcement under section 706. So, at least initially, enforcement of the ECOA depends in part on the offenders and the corresponding jurisdiction of the agency charged with enforcement.

Landmark’s argument that a statute cannot impose different penalties on different kinds of business enterprises engaged in the same activity has been consistently rejected by the courts and loses even more force in light of the varying characteristics that businesses engaged in the same basic activities might possess. See, e.g., Otero Savings and Loan Association v. Federal Reserve Bank, 665 F.2d 279, 283 (10th Cir.1981)(“Congress ... may make reasonable distinctions between its treatment of commercial banks and savings and loans”). In Morey v. Doud, 354 U.S. 457, 77 S.Ct. 1344, 1 L.Ed.2d 1485 (1957), the Supreme Court stated that:

[Distinctions in the treatment of business entities engaged in the same business activity may be justified by genuinely different characteristics of the business involved. This is so even where the discrimination is by name.

Id., 466, 77 S.Ct., 1350 (footnotes omitted). Furthermore, the ECOA enforcement scheme rests on the rational basis that compliance could best be achieved by subjecting each business to the enforcement mechanisms to which it was already subject through the regulatory control exercised by its primary regulatory agency. Congress has followed a policy similar to that adopted in the Truth-In-Lending Act, 15 U.S.C. § 1607, of dividing the enforcement and the administration of the ECOA among twelve federal agencies. It was hoped that the specialized expertise of these agencies could best be used in the enforcement of the ECOA. Congress could have rationally believed that court-imposed penalties were necessary to deter some ECOA violators while the imposition of administrative penalties are sufficient to deter others. The fact that some creditors, like Landmark, are essentially unregulated by the federal government and thus fall within the FTC’s strong enforcement powers does not make the statute unconstitutional, and Landmark’s equal protection challenge must therefore be rejected.

Finally, the Court rejects Landmark’s argument that a civil action brought by an agency under section 704 is inconsistent with the Attorney General’s authority to bring a civil action under section 706(g) of the ECOA on the referral of an agency. Landmark contends that because Congress authorized the Attorney General to file a civil suit for appropriate relief under some circumstances, Congress must have intended to restrict all agencies to administrative remedies and to preclude them from employing any judicial enforcement authority in court.

The problem with this argument is twofold. First, in this case, acceptance of the argument would render nugatory the plain language of section 704(c) that the FTC has “all powers ... under the Trade Commission Act” to enforce the ECOA (emphasis added). Second, the grant of authority to agencies in section 704 is not necessarily inconsistent with 706(g) nor does it render section 706(g) meaningless. On the contrary, section 706(g) can reasonably be construed as providing those agencies additional authority, beyond what may be contained in their own statutes, to request the assistance of the Attorney General in enforcing the ECOA. This would allow the agencies which chose to refer a matter to draw upon the litigation expertise of the Attorney General in civil rights matters. Indeed, the legislative history previously cited by Landmark supports this position:

The entrusting of enforcement responsibility [in § 706] to the Attorney General is premised on the assumption that the office’s experience in the enforcement of other civil rights legislation can be effectively expanded and built on to achieve maximum compliance with the antidiscrimination policies of the Equal Credit Opportunity Act.

S.Rep. 589, 94th Cong., 2d Sess., reprinted in 1976 U.S.Code Cong. and Ad.News 415.

IV.

The Court recognizes that by allowing this matter to proceed under section 704(c) of the ECOA it will allow the government to seek those remedies (civil penalties and consumer redress) that the Third Circuit has held are unavailable under section 706 of the same Act. United States v. Beneficial Corp., 492 F.Supp. 682 (D.N.J.1980), aff'd, 673 F.2d 1302 (3d Cir.1981). The Court also recognizes the thoughtful arguments advanced by Landmark in support of its interpretation of administrative versus judicial enforcement of the Act. Nevertheless, the Court is compelled by the plain language of the statute as well as its legislative history to deny Landmark’s motion for judgment on the pleadings. A separate Order confirming the within decision will be entered.

      . Administrative enforcement of the ECOA is assigned to the Comptroller of the Currency, Board of Governors of the Federal Reserve System, Board of Directors of the Federal Deposit Insurance Corporation, Federal Home Loan Bank Board, (acting directly or through the Federal Savings and Loan Insurance Corporation), Administrator of the National Credit Union Administration, Interstate Commerce Commission, Civil Aeronautics Board, Secretary of Agriculture, Farm Credit Administration, Securities and Exchange Commission, Small Business Administration and the Federal Trade Commission. 15 U.S.C. 1691c; 12 C.F.R. P 202.1(b).

      . In United States v. Beneficial Corp., 492 F.Supp. 682 (D.N.J.1980), aff'd without opinion, 673 F.2d 1302 (3d Cir.1981), one of the few cases decided under the ECOA, the Third Circuit held that the term "appropriate relief" did not encompass fines or consumer redress and was limited to those remedies that are equitable in nature.

      . For example, section 706(g) of the ECOA states that "agencies having responsibility for administrative enforcement under section 704, if unable to obtain compliance, are authorized to refer the matter to the Attorney General ..." (emphasis added); section 202.1(b) of Regulation B states that the 12 agencies enumerated in § 704 are assigned "administrative enforcement of the Act and this Part” (emphasis added).

      . See, e.g., U.S. R.R. Retirement Board v. Fritz, 449 U.S. 166, 175, 101 S.Ct. 453, 459, 66 L.Ed.2d 368 (1980); United States v. Maryland Savings-Share Insurance Corp., 400 U.S. 4, 6, 91 S.Ct. 16, 17, 27 L.Ed.2d 4 (1970); Dandridge v. Williams, 397 U.S. 471, 485-86, 90 S.Ct. 1153, 1161-62, 25 L.Ed.2d 491 (1970).

      . The five agencies empowerd to seek civil penalties for violations of the ECOA or Regulation B are: Federal Home Loan Bank Board, 12 U.S.C. § 1425b(b); Interstate Commerce Commission, 49 U.S.C. § 11901; Federal Aviation Administration, 49 U.S.C. § 1471(a)(1); Secretary of Agriculture, 7 U.S.C. §§ 193(b) and 213(b); and Federal Trade Commission, 15 U.S.C. § 45(m)(l)(A).

      . Of the twelve agencies given enforcement authority under the ECOA, eleven have independent authority under their enabling acts to seek judicial enforcement of their agency actions. See Exhibit A to Landmark's Reply Memorandum in Support of Motion for Judgment on the Pleadings.


source: Caselaw Access Project

author: BARTLETT, District Judge.

license: Public Domain

text:
    Donald L. LEFTRIDGE, Plaintiff, v. UNITED STATES of America, Defendant.
    No. 84-1271-CV-W-9.
    United States District Court, W.D. Missouri, W.D.
    June 7, 1985.

      Timothy L. Brake, Kansas City, Mo., for plaintiff.
    Larry Coleman, Asst. U.S. Atty., Kansas City, Mo., for defendant.
   ORDER GRANTING DEFENDANT’S MOTION FOR SUMMARY JUDGMENT

BARTLETT, District Judge.

Plaintiff’s complaint asserts a claim against the United States under the Federal Tort Claims Act (FTCA), 28 U.S.C. § 1346, for injuries suffered during an explosion and fire at ADM Milling Company (ADM) on April 10, 1979. Plaintiff alleges that the explosion and fire were the result of hazardous and dangerous conditions which the Occupational Safety and Health Administration (OSHA) negligently failed to discover or report.

Defendant has filed a motion for summary judgment alleging that plaintiff did not file his claim within two years after April 10, 1979, as allegedly is required by 28 U.S.C. § 2401(b). Plaintiff responded by asserting that under the doctrine of blameless ignorance, his claim did not “accrue” until he learned on June 14, 1982, that defendant performed a negligent inspection.

Rule 56(c), Federal Rules of Civil Procedure, provides that summary judgment shall be rendered if the “pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.” In ruling on a motion for summary judgment, it is the Court’s obligation to view the facts in the light most favorable to the plaintiff and to allow plaintiff the benefit of all reasonable inferences to be drawn from the evidence. Adickes v. S.H. Kress & Co., 398 U.S. 144, 157, 90 S.Ct. 1598, 1608, 26 L.Ed.2d 142 (1970); Inland Oil and Transport Co. v. United States, 600 F.2d 725, 728-28 (8th Cir.1979), cert. denied 444 U.S. 991, 100 S.Ct. 522, 62 L.Ed.2d 420 (1979).

If there is no genuine issue about any material fact, summary judgment is proper because it avoids needless and costly litigation and promotes judicial efficiency. Roberts v. Browning, 610 F.2d 528, 531 (8th Cir.1979). However, summary judgment is an extreme remedy which should not be granted, unless defendant has established his right to judgment beyond controversy. Ozark Milling Co., Inc. v. Allied Mills, Inc., 480 F.2d 1014, 1015 (8th Cir.1973); Oskey Gasoline and Oil Co., Inc. v. Continental Oil Co., 534 F.2d 1281, 1285 n. 9 (8th Cir.1976).

Rule 56(e), Federal Rules of Civil Procedure, provides that “[w]hen a motion for summary judgment is made and supported as provided in this rule, an adverse party may not rest upon the mere allegations or denials of his pleading, but his response, by affidavits or as otherwise provided in this rule, must set forth specific facts showing that there is a genuine issue for trial. If he does not so respond, summary judgment, if appropriate, shall be entered against him.”

The relevant facts are not in dispute. In March and April, 1978, OSHA inspected the ADM facility and cited numerous safety violations which were contested by ADM. The contested safety violations were presented to the Occupational Safety and Health Review Commission in an action brought by the Department of Labor against the ADM Milling Company. On April 10, 1979, plaintiff was injured in an explosion and fire at the ADM plant in North Kansas City, Missouri. News reports in the Kansas City Star on April 11, 1979, and the Kansas City Times on April 12, 1979, reported the explosion and fire. In addition, the news reports referred to the pending safety violations cited by OSHA in 1978. On September 28, 1979, ADM and the Department of Labor entered into a settlement agreement on the contested safety violations. On October 1, 1979, the settlement agreement was served on plaintiffs union representative. On October 18,1979, the settlement agreement was approved by the Occupational Safety and Health Review Commission.

Pursuant to the Freedom of Information Act (FOIA), plaintiff requested on May 17, 1982, the investigation file pertaining to the 1978 OSHA citations for safety violations at ADM. The requested information was forwarded to plaintiff by letter dated June 14, 1982. No other FOIA request was ever filed by plaintiff. Plaintiff submitted his claim to the United States Department of Labor, the appropriate agency within the meaning of 28 U.S.C. § 2401(b), on May 22, 1984. Plaintiff initiated this lawsuit by filing his complaint on December 19, 1984.

The applicable statute of limitations provides that “[a] tort claim against the United States shall be forever barred unless it is presented in writing to the appropriate Federal agency within two years after such claim accrues____” 28 U.S.C. § 2401(b). Compliance with this statute of limitations is a jurisdictional prerequisite to claims brought under the FTCA. Radman v. United States, 752 F.2d 343, 344 (8th Cir.1985).

Plaintiff's complaint was not filed within two years after April 10, 1979, the date of the explosion. Therefore, plaintiff's claim is barred by the statute of limitations in § 2401(b) unless plaintiff’s claim did not “accrue” until plaintiff received the OSHA investigation mailed on June 14, 1982.

“When a particular claim ‘accrues’ within the meaning of the FTCA is a question of federal law which must be determined by the court in light of the surrounding circumstances.” Radman, 752 F.2d at- 344. “The general rule under the Act is that a tort claim accrues, for statute of limitations purposes, at the time of plaintiff’s injury.” Snyder v. United States, 717 F.2d 1193, 1195 (8th Cir.1983).

The doctrine of blameless ignorance (also called the due diligence rule) is a recognized exception to this general accrual rule. This doctrine, which has been applied primarily in medical malpractice cases, provides that a cause of action accrues when the plaintiff knows or reasonably should have known of both the existence and the cause of his injury. Snyder, 717 F.2d at 1195; Wollman v. Gross, 637 F.2d 544 (8th Cir.1980), reh. denied 646 F.2d 1306 (8th Cir.1981), cert. denied 454 U.S. 893, 102 S.Ct. 389, 70 L.Ed.2d 207 (1981); Hulver v. United States, 562 F.2d 1132 (8th Cir.1977), cert. denied, 436 U.S. 923, 98 S.Ct. 2275, 56 L.Ed.2d 765 (1978).

The doctrine of blameless ignorance was enunciated in Urie v. Thompson, 337 U.S. 163, 170, 69 S.Ct. 1018, 1025, 93 L.Ed. 1282 (1949). The plaintiff in Urie contracted silicosis as a result of continuous inhalation of silica dust over a period of approximately thirty years. Based on the fact that plaintiff did not know he was ill and due to his “blameless ignorance” of the fact of his injury, the Supreme Court held that plaintiff’s claim did not accrue until the disease manifested itself. Urie, 337 U.S. at 169-70, 69 S.Ct. at 1024-25.

Subsequently, the Supreme Court further defined the doctrine of blameless ignorance by holding that a medical malpractice claim accrued when the claimant learned of the existence and cause of the injury, not when the claimant learned that the act inflicting the injury constituted malpractice. United States v. Kubrick, 444 U.S. 111, 100 S.Ct. 352, 62 L.Ed.2d 259 (1979).

We are unconvinced that for statute of limitations purposes a plaintiffs ignorance of his legal rights and his ignorance of the fact of his injury or its cause should receive identical treatment. That he has been injured in fact may be unknown or unknowable until the injury manifests itself; and the facts about causation may be in the control of the putative defendant, unavailable to the plaintiff or at least very difficult to obtain. The prospect is not so bleak for a plaintiff in possession of the critical facts that he has been hurt and who has inflicted the injury. He is no longer at the mercy of the latter. There are others who can tell him if he has been wronged, and he need only ask. If he does ask and if the defendant has failed to live up to minimum standards of medical proficiency, the odds are that a competent doctor will so inform the plaintiff.

Kubrick, 444 U.S. at 122, 100 S.Ct. at 359.

Relying on Kubrick, courts addressing the question of whether the doctrine of blameless ignorance should be extended beyond the medical malpractice area have done so only when plaintiff’s injury does not manifest itself for some time after the allegedly negligent act or when the injury is known but facts about causation were concealed or inaccessible to the plaintiff. See Dyniewicz v. United States, 742 F.2d 484, 486-87 (9th Cir.1984); Diminnie v. United States, 728 F.2d 301, 304-06 (6th Cir.1984), cert. denied — U.S. -, 105 S.Ct. 146, 83 L.Ed.2d 85 (1984) (plaintiff must show fraudulent concealment of the critical facts before accrual will be postponed); Barrett v. United States, 689 F.2d 324 (2nd Cir.1982), cert. denied sub nom. Cattell v. Barrett, 462 U.S. 1131, 103 S.Ct. 3111, 77 L.Ed.2d 1366 (1983) (intentional concealment of defendant’s responsibility warrants application of diligence discovery rule); Stoleson v. United States, 629 F.2d 1265, 1268-69, (7th Cir.1980), appeal after remand 708 F.2d 1217 (7th Cir.1983) (doctrine of blameless ignorance extended to any plaintiff whose injury is not readily apparent); Liuzzo v. United States, 485 F.Supp. 1274 (E.D.Mich.1980) (misrepresentations and concealment justifiably led plaintiffs to believe that those responsible for their parents’ death had been punished); Peck v. United States, 470 F.Supp. 1003 (S.D.N.Y.1979) (due diligence rule extended to non-medical malpractice case only if defendant has concealed its acts or plaintiff’s injury was inherently unknowable at time of injury).

In Wo liman v. Gross, 637 F.2d at 547, an automobile collison case, plaintiff argued that the accrual date for his personal injury claim should not be the date of the accident but instead the date he discovered facts which put him on notice that the defendant may have been a federal employee acting within the scope of his employment.

The Court declined to address the question whether the doctrine of blameless ignorance extends beyond the malpractice area. Id. at 549. Nevertheless, the Court analyzed whether the plaintiff came within the doctrine as enunciated in Kubrick.

Kubrick prohibits the postponement of the accrual date in the instant action. Wollman was aware at the time of the accident that Gross was employed by the ASCS. He was unaware only of the legal significance of this fact. The purpose of the statute of limitations is to require the reasonably diligent presentation of tort claims. This may require a plaintiff to obtain appropriate legal counsel and together with counsel discover the facts and their possible legal ramifications so as to enable plaintiff to bring the suit within a reasonable time. As stated by the Court in Kubrick,
A plaintiff such as Kubrick, armed with the facts about the harm done to him, can protect himself by seeking advice in the medical and legal community. To excuse him from promptly doing so by postponing the accrual of his claim would undermine the purpose of the limitations statute, which is to require the reasonably diligent presentation of tort claims against the Government.

Id. 444 U.S. at 123, 100 S.Ct. at 360. Wollman, 637 F.2d at 549.

The Court concluded that Wollman had failed to demonstrate that he was entitled to the benefit of an exception to the operation of the statute of limitations because “Wollman has not alleged, nor has a careful examination of the record revealed, activities of the defendant or the United States which would lull the plaintiff into a false sense of security.” Id.

Applying the principles enunciated in Kubrick and Wollman, plaintiffs claim accrued on the date of his injury, unless plaintiff establishes that his injury was not known within the two years provided in § 2401(b) or that the United States concealed facts regarding the OSHA investigation. Plaintiff bears the burden of showing that his claim comes within the blameless ignorance doctrine. Wollman, 637 F.2d at 549.

There is no dispute that plaintiffs injury was known on April 10, 1979, the date of the explosion and fire at the ADM plant. Furthermore, plaintiff has not presented any facts from which this Court could reasonably infer that the United States concealed information relating to the OSHA investigation.

Plaintiffs claim is barred by the statute of limitations because it accrued the date plaintiff was injured—April 10, 1979—and this case was not filed within two years.

Even if the blameless ignorance doctrine were applied, this suit was not filed timely. As in Kubrick, plaintiff here learned that he had been injured on the date of the explosion. The OSHA investigation was a matter of public knowledge having been reported in Kansas City newspapers on April 11, 1979, and April 12, 1979. Accrual of plaintiffs claim does not await awareness that possibly the OSHA investigation was negligently done. Kubrick, 444 U.S. at 123, 100 S.Ct. at 360; Wollman, 637 F.2d at 549. Plaintiff, armed with the facts about the harm done to him, can protect himself by seeking legal advice. “To excuse him from promptly doing so by postponing the accrual of his claim would undermine the purpose of the limitations statute which is to require the reasonably diligent presentation of tort claims against the Government.” Kubrick, 444 U.S. at 123, 100 S.Ct. at 360.

For the reasons stated above, plaintiff’s claim is barred by the statute of limitations set forth in 28 U.S.C. § 2401(b). Therefore, it is hereby ORDERED that summary judgment is granted in favor of defendant and against plaintiff.

      . The claim in Urie was brought under the Federal Employers' Liability Act. The doctrine of blameless ignorance was subsequently applied to medical malpractice claims under the Federal Tort Claims Act. Casias v. United States, 532 F.2d 1339 (10th Cir.1976); Reilly v. United States, 513 F.2d 147 (8th Cir.1975); Portis v. United States, 483 F.2d 670 (4th Cir.1973); Tyminski v. United States, 481 F.2d 257 (3rd Cir.1973); Toal v. United States, 438 F.2d 222 (2nd Cir.1971); Hungerford v. United States, 307 F.2d 99 (9th Cir.1962); Quinton v. United States, 304 F.2d 234 (5th Cir.1962).


author: GOETTEL, District Judge:

text:
    PAUL MARSH, INC., Plaintiff, v. EDWARD A. GOODMAN CO., INC., Federal Insurance Company and Utica Mutual Insurance Company, Defendants.
    No. 84 Civ. 1493 (GLG).
    United States District Court, S.D. New York.
    June 11, 1985.

      Badiak & Will, New York City (Roman Badiak, New York City, of counsel), for plaintiff.
    Lanzone & Kramer, New York City (Myron Martynetz, New York City, of counsel), for defendant Edward A. Goodman Co., Inc.
    Bigham Englar Jones & Houston, New York City (Joseph J. Magrath III, New York City, of counsel), for defendant Federal Ins. Co.
    Halley & Chalos, New York City (Craig English, New York City, of counsel), for defendant Utica Mut. Ins. Co.
   OPINION

GOETTEL, District Judge:

It is one of the sacred commandments of federal jurisprudence that the federal courts must protect their subject matter jurisdiction. Ordinarily, one of the parties is more than willing to point out a jurisdictional defect. But when, as here, the parties remain silent, it is the Court’s duty to dismiss the action sua sponte if it lacks subject matter jurisdiction. Fed.R. Civ.P. 12(h).

I. Background

Because the pleadings are of the most cursory sort, the facts giving rise to this litigation are somewhat obscure. All that appears is that some years ago the plaintiff, Paul Marsh, Inc., imported a shipment of hog bristles. The plaintiff left the bristles at the Pittston warehouse in Brooklyn, New York, and the bristles remained in storage there for many years. At some point, the parties do not tell us precisely when, defendant Utica Mutual Insurance Company (“Utical Mutual”) insured the bristles against all risks of loss during storage at the warehouse. When the Utica Mutual policy expired in late August 1981, the plaintiff approached its insurance broker, defendant Edward A. Goodman Co., Inc. The plaintiff alleges that Edward A. Goodman Co., Inc. was then a general agent for defendant Federal Insurance Company (“Federal Insurance”). On August 28, 1981, the broker issued a binder on a Federal Insurance policy of marine insurance. That policy, which had a warehouse endorsement covering goods when warehoused, took effect on November 1, 1981.

On or about November 22, 1981, the plaintiff learned that Pittston had filed for reorganization under Chapter 11 of the Bankruptcy Code. It immediately gave the warehouse written instructions to release all of its goods. Although certain goods, including some hog bristles, were released to the plaintiff, 202 cartons of bristles were not delivered. A subsequent search of the warehouse failed to uncover the missing bristles. This suit against the broker and the two insurance companies followed.

Several legal and factual issues present themselves in this case. For example, resolution of this dispute necessitates a determination as to when the loss occurred and which insurance policy, if either, covered the loss. Further, if the plaintiff cannot recover under either policy, an issue arises as to whether the broker can be held responsible. Fascinating as these issues may be, this Court must have jurisdiction before it can address them.

In its complaint, the plaintiff alleged that this is an admiralty and maritime claim within the meaning of Rule 9(h) of the Federal Rules of Civil Procedure. The plaintiff rests this contention on the fact that the Utica Mutual and Federal Insurance policies were policies of ocean marine insurance and that, therefore, this is a maritime claim.

Although this contention is highly questionable, the defendants have evinced little concern about the Court’s subject matter jurisdiction. One has not denied the plaintiff’s jurisdictional allegation; another has denied information or belief sufficient to respond to that claim, and the third has characterized the plaintiff’s jurisdictional allegation as a conclusion of law that requires no answer. At a final pretrial conference on April 11, 1985, the Court asked the parties why a loss of this nature constituted a maritime claim. The plaintiff’s counsel responded that the Utica Mutual policy and the policy that should have been issued under the binder were ocean marine type policies and that such policies are the proper subject of suit in the federal courts. The Court pointed out that the goods in question had not traveled the seas in many years and that the warehousing was part of the plaintiff’s inventory process. The parties responded by noting that there undoubtedly was a question as to the existence of admiralty jurisdiction. But all of the parties, the defendants included, were happy to leave the matter in the federal courts, since, as admiralty lawyers, they were most comfortable here. Moreover, the parties noted, the action, if dismissed, would simply be recommenced in a state court. Given the cavalier attitude of the parties, the Court is obliged to analyze its subject matter jurisdiction sua sponte.

II. Discussion

Section 1333 of Title 28 of the United States Code establishes the admiralty jurisdiction of the federal courts. That section provides, in pertinent part, that “[t]he district courts shall have original jurisdiction, exclusive of the courts of the States, of: (1) Any civil case of admiralty or maritime jurisdiction, saving to suitors in all cases all other remedies to which they are otherwise entitled.” 28 U.S.C. § 1333 (1982).

The boundaries of the admiralty and maritime jurisdiction over contractual disputes, including claims on contracts of insurance, defy easy definition. Kossick v. United Fruit Co., 365 U.S. 731, 735, 81 S.Ct. 886, 890, 6 L.Ed.2d 56 (1961). The fountainhead consideration of the subject was Justice Story’s opinion in DeLovio v. Boit, 7 F.Cas. 418 (C.C.D.Mass.l815) (No. 3,776). The admiralty and maritime jurisdiction, Justice Story wrote, comprehended all maritime contracts “which relate to the navigation, business or commerce of the sea.” Id. at 444. In New Jersey Steam Navigation Co. v. Merchant’s Bank, 47 U.S. (6 How.) 344, 391, 12 L.Ed. 465, 486 (1848), the Supreme Court adopted Justice Story’s formulation. The Court also held that the admiralty jurisdiction encompassed contracts “to be performed upon the sea, or upon waters within the ebb and flow of the tide.” Id. Three years later, the Court extended the admiralty jurisdiction to include all navigable waters. The Propeller Genesee Chief v. Fitzhugh, 53 U.S. (12 How.) 443, 13 L.Ed. 1058 (1851). People’s Ferry Co. v. Beers, 61 U.S. (20 How.) 393, 15 L.Ed. 961 (1857), summarized the Supreme Court’s collected learning on the scope of the admiralty jurisdiction over maritime contracts. It was there stated, “The admiralty jurisdiction, in cases of contract, depends primarily upon the nature of the contract, and is limited to contracts, claims, and services, purely maritime, and touching rights and duties appertaining to commerce and navigation.” Id. at 401, 15 L.Ed. at 964. To this day, it remains difficult to trace the contours , of the admiralty jurisdiction over maritime contracts.

Despite the dearth of generalized guidance, the precedents are helpful in a variety of specific cases. These precedents aid the Court in easily disposing of several aspects of this action. According to Professor Black, “[T]he contracts involved tend to fall into a not-too-great number of stereotypes, the proper placing of which can be learned, like irregular verbs, and errors in grammar thus avoided.” C. Black, Admiralty Jurisdiction: Critique and Suggestions, 50 Colum.L.Rev. 259, 264 (1950). For example, Delovio v. Boit, supra, established that marine insurance policies are maritime contracts that may subject a party to the admiralty jurisdiction of a federal court. 7 F.Cas. at 444. Other cases definitively establish that an action on a contract or agreement to obtain marine insurance is not a maritime claim within the admiralty jurisdiction of the federal courts. F.S. Royster Guano Co. v. W.E. Hedger Co., 48 F.2d 86, 87 (2d Cir.), cert. denied, 283 U.S. 858, 51 S.Ct. 651, 75 L.Ed. 1464 (1931). This rule forecloses suit against the broker, Edward A. Goodman Co., Inc., whose only connection with the action was arranging the plaintiff’s purchase of a marine insurance policy. Another steadfast rule of admiralty jurisdiction forecloses the exercise of such jurisdiction in an action to reform a policy of marine insurance. Williams v. Providence Washington Insurance Co., 56 Fed. 159 (S.D.N.Y.1893). Although this jurisdictional limitation has been criticized, J. Moore, 7A Moore’s Federal Practice 11,255[2] at 3027, n. 4 (“[The Providence Washington ] decision seems erroneous insofar as it provides that an action to reform is not upon the policy itself.”), it is clearly the law. Consequently, to the extent that the plaintiff demands a reformation of the Federal Insurance binder or insurance contract, this action is outside of the maritime jurisdiction of this Court.

The remainder of this action falls within that area of the maritime jurisdiction that defies strict definition or rigid rules. Simply put, the issue is whether a claim on a contract of marine insurance carrying a warehouse endorsement can be the subject of a federal action when any damage, for which recovery is sought, occurred long after the completion of the transport of the goods. The law is unsettled on most issues that resemble this one. Thus, whether a contract of marine insurance covering a vessel that is no longer engaged in commerce or navigation is within the admiralty jurisdiction is an open question. 7A Moore’s Federal Practice, supra, 11.255[1] at 3022. The law is also unsettled as to “whether quasi-contract claims based on maritime transactions or occurrences wholly unrelated to an underlying maritime contract ... can be enforced in a federal district court.” C. Wright, A. Miller & E. Cooper, 14 Federal Practice and Procedure § 3675 at 488 (2d ed. 1985).

This Court’s necessarily limited research, has failed to unearth any admiralty case involving a claim for a warehouse loss that occurred long after the ocean transport of the lost goods. However, one analagous case from this district provides some much needed guidance. In that case, Hillcrea Export & Import Co. v. Universal Insurance Co., 110 F.Supp. 204 (S.D.N.Y.1953), aff'd, 212 F.2d 206 (2d Cir.), cert. denied, 348 U.S. 834, 75 S.Ct. 57, 99 L.Ed. 657 (1954), the plaintiff sought to recover on a policy of marine cargo insurance covering the transport of government war surplus goods from the Aleutian Islands to the continental United States. After the plaintiff signed a contract to purchase the goods, the government moved them from storage to a structure located at the water’s edge. When moved, the plaintiffs property had not been segregated, banded for shipment, or otherwise made ready for transport by sea. The goods remained in that state until they were destroyed by fire.

The plaintiff sued on a policy of marine cargo insurance issued by the defendant. The policy contained a “warehouse to warehouse” clause extending coverage to risks prior to loading and after unloading. The issue was not whether federal jurisdiction was present but whether the marine insurance policy covered the loss. The court’s findings are, nevertheless, instructive. The court determined that the policy contemplated marine cargo insurance for an ocean voyage. It also noted that, at the time of the fire, the goods were still within the seller’s control. The ship that was to deliver the goods to the plaintiff had not yet arrived nor had the goods been segregated, sorted, or banded for delivery to the plaintiff. Taking stock of all of these factors, the court determined that, at the time of the fire, the plaintiffs cargo was not subject to the insurance contract. Notwithstanding the “warehouse-to-warehouse” clause, the court made a factual finding that the goods insured had not commenced their transit contemplated by the policy of ocean marine insurance. See also City Stores Co. v. Sun Insurance Co., 357 F.Supp. 1113 (S.D.N.Y.1972), aff'd, 475 F.2d 1393 (2d Cir.1973) (policy of marine cargo insurance did not cover goods destroyed before reaching warehouse from which they would be shipped to the United States).

Similar reasoning leads this Court to conclude that it lacks subject matter jurisdiction over the remaining claims against Utica Mutual and Federal Insurance. Once the hog bristles arrived in the United States, were moved inland, and placed with the plaintiffs general inventory of bristles, they became a simple inventory item in a warehouse. The bristles were then no longer a part of a marine shipment. Regardless of whether they were still covered by the Utica Mutual policy, a policy insuring ocean transport as well as storage, the existence of such coverage would not subject Utica Mutual to this Court’s admiralty jurisdiction. Subject matter jurisdiction is also wanting as to the claim against Federal Insurance. The rider to the Federal Insurance policy that extended that policy to cover warehouse losses, at least as to this loss, concerned property that had long since ceased to be marine cargo. This warehouse endorsement cannot be fairly characterized as a marine insurance policy that would subject an insurer to this Court's admiralty jurisdiction.

The primary rationale for the existence of admiralty jurisdiction is the national interest in unified judicial supervision of the maritime industry. In the words of Professor Black,

The main thing is that if the court of admiralty is to exist at all, it should exist because the business of river, lake, and ocean shipping calls for supervision by a tribunal enjoying a particular expertness in regard to the more complicated concerns of that business. If the federal government maintains such a court, it must be because the providing of such a tribunal, and the seeing it function, is a federal concern.

C. Black, Admiralty Jurisdiction: Critique and Suggestions, supra, at 280. The claims before this Court bear only the most attenuated relationship to this federal concern. To entertain these claims would be to subvert the purposes underlying our admiralty and maritime jurisdiction.

III. Conclusion

Since the Court lacks subject matter jurisdiction to hear any and all aspects of this case, the action is dismissed.

SO ORDERED.

      . Another issue is whether the statute of limitations bars the loss, which may have occurred some years ago.

      . Rule 9(h) provides that "[a] pleading or count setting forth a claim for relief within the admiralty and maritime jurisdiction that is also within the jurisdiction of the district court on some other ground may contain a statement identifying the claim as an admiralty or maritime claim.” Fed.R.Civ.P. 9(h). Since the parties are not diverse, or at least have not been alleged to be such, the Court does not understand why the plaintiff included the statement about Rule 9(h) in its pleading.

      . The Court suggested that the parties brief the issue of subject matter jurisdiction. One attorney for Federal Insurance responded to that suggestion. His one-page letter stated that the Court lacked jurisdiction over the suit against the broker. He also conceded that there was some question as to the Court’s jurisdiction over the plaintiff’s other claims.

        . Delovio v. Boit rejected the English rule that emphasized the location of the making of the contract.

      . The courts reason that a contract to procure insurance is preliminary to the maritime contract, which is the insurance contract. J. Moore, 7A Moore's Federal Practice ¶ .255(2) at 3027 (2d ed. 1983).

      . The rule rests on the longstanding principle that, although admiralty courts determine cases upon equitable principles, they do not grant equitable relief. 7A Moore’s Federal Practice, supra, ¶ .255[2] at 3027 n. 4.

      . Moore has urged that contracts of marine insurance unrelated to commerce or navigation should be “beyond the jurisdiction of the admiralty. ..." 7A Moore's Federal Practice, supra, ¶ ,255[1] at 3024.

      . Counsel in an analagous case "failed to call attention to a single case even remotely in point.” Hillcrea Export & Import Co. v. Universal Insurance Co., 110 F.Supp. 204, 207 (S.D.N.Y.1952), aff'd, 212 F.2d 206 (2d Cir.), cert. denied, 348 U.S. 834, 75 S.Ct. 57, 99 L.Ed. 657 (1953) (discussed infra at pp. 639-640).


author: GLEN M. WILLIAMS, District Judge.

text:
    UNITED STATES of America, Plaintiff, v. Cecil A. McCONNELL, et al., Defendants.
    Civ. A. No. 81-0222-B.
    United States District Court, W.D. Virginia, Big Stone Gap Division.
    June 12, 1985.

      E. Montgomery Tucker, Asst. U.S. Atty., Roanoke, Va., for plaintiff.
    William J. Sturgill, Norton, Va., for defendants.
   MEMORANDUM OPINION

GLEN M. WILLIAMS, District Judge.

Plaintiff filed this suit alleging that defendants trespassed upon lands owned by the United States of America (USA) granted to USA by deed dated April 1, 1936 by Virginia Coal and Iron Company. Jurisdiction is pursuant to 28 U.S.C. § 1345. USA seeks declaratory relief asserting that it is the fee simple owner of the property in dispute and moves that defendants (1) be required to remove fences, signs and other encroachments to the property, (2) pay damages for cutting trees and (3) be permanently enjoined from encroaching on the land. Defendants ask that the boundary line be established by the court and that defendants be declared the owners of the “disputed area.” Both sides filed motions for summary judgment; both motions were denied. The court viewed the disputed property with counsel and representatives of the parties on May 24, 1985 and held a nonjury trial on May 29, 1985. This case is now ready for a ruling on the merits.

FINDINGS OF FACT

The parties stipulated that corner 24 in the line between USA and defendants is correctly located and expert witnesses on both sides gave their opinions based on the assumption that the position of corner 24 is accurate. The disputed line in this case is the course and distance between corner 24 and the location of corner 25. In the deed dated April 1, 1936, whereby the USA obtained title, the line is described as follows: “Corner 24, a point between the stumps of two (2) chestnuts called for, set a stone marked with a cross (+); S39°45'W 26.24 chains, crossing a county road to corner 25, a hickory with old marks, called for, set a F.S. standard concrete post marked 652 alongside.”

Cecil A. McConnell and Orville H. McConnell acquired their land by deed dated September 18, 1956 from M.D. Clay. The deed to the McConnells described the disputed line as follows: “S61°-30'E 443 feet to a hickory (gone) in gap of ridge, corner to Virginia Coal and Iron Company Land, thence with same N41°E 1231 feet to a stake.” Thus, there is a variation of 1°15' between the USA deed and the McConnells’ deed which, according to all the experts, is insignificant and does not create the dispute in this case. Indeed, since 1887, there have been nine conveyances in the McConnell chain of title in which the call between corners 24 and 25 is given as N41°E while the USA chain of title has listed the disputed call as S39°-45'W since 1882.

Thus, in both chains of title, the call has remained constant for approximately 100 years. Corner 25 during all these years has consistently called for a hickory in the gap of a ridge. Furthermore, the court found when it viewed the property that the corner now claimed by the government as corner 25 lies in the gap of a ridge where two gravel (unpaved) roads intersect. The point claimed by McConnells as corner 25 is not in a gap of a ridge. If the dispute rested here, clearly the government would prevail because the line was relatively undisputed by calls for 100 years and the corner call is “in the gap of a ridge,” where the USA now positions the corner.

However, McConnells’ title chain is based on a survey contained in a deed dated November 18, 1844 from Joseph Hagan to Henry Ramey in which this line is described as: “Beginning at a small hickory on a dividing ridge ... N33°E 100 poles.” The defendants’ witness, surveyor R. Stanley Trent, uses the call N33°E from corner 24 and establishes a corner 241.70 feet from the USA corner with a call of N60.01°W, thus constituting a triangular piece of land containing 4.27 acres. Trent is of the opinion that the land belongs to the McConells, rather than the USA. In an affidavit filed in this case, Trent testified as follows:

We’re not sure exactly that it will be 33 degrees southwest, but it would certainly closer conform to the original 1844 deed. It is conceded that the 1844 deed is not a good deed from today's standards, but it is what we had to work with then and based on overlays, it could be seen that there are certain consistencies in the deed and the fact that we not only have a call on the deed that’s approximately in that direction, but we also have a description of a point which is not easily moved and that is a top of a ridge.

Trent, after sitting in court and listening to two government expert witnesses (one of whom plotted the 1844 deed to show that if the 1844 deed were followed in its entirety the McConnells would own less land) agreed with the other witnesses that the 1844 deed was unreliable. Trent also acknowledged that the 1844 survey was a magnetic compass survey which might change three or four degrees but would not change eight degrees. Trent further testified that surveys of the property at issue conducted in the late 1800’s were adjusted in order to compensate for the faulty survey of 1844. Thus, Trent was of the opinion that it was best to accept the present location of corner 24 as accurate and use the old 1844 call to corner 25.

Trent’s opinion is flawed in three important aspects. First, the present location of corner 24, which is agreed upon, is not the location of corner 24 as per a plotting of the 1844 deed. It makes little sense to accept part of the calls of an inaccurate deed and reject the rest of it. Second, Trent concedes that there is at least a three- to four-degree error in this line added to the errors in the other calls. Third, he utilizes an obvious error to support his conclusion. In his affidavit, he says corner 25 is “a top of a ridge.” Therefore, he says it should not be placed in a “gap” as was done in the late 1800’s. The deed relied on by Trent at no time places the corner at the “top” but rather “on a dividing ridge.” As this court’s view of the property revealed and as the two government experts testified, corner 25 as now located by the USA is “on a dividing ridge.”

The reasoning of the two government experts is more soundly based than the survey of the defendants. The court’s view of the property and the lay of the land support the government’s position. Therefore, the court finds that the facts favor the plaintiff in this case.

CONCLUSIONS OF LAW

The McConnells claim that, under an older deed, where the tract of land interlocks with another, the elder grantee acquires constructive seisin in all the land within its boundaries. Green v. Pennington, 105 Va. 801, 54 S.E. 877 (1906). This is a correct statement of the law but it has no application when applied to the facts of this case. In this case, all three expert witnesses agree that when the 1844 deed is plotted in its entirety, it gives the McConnells less land than the USA actually claims and does not interlock the government lands.

There is conflict in this case as to the distance and course between corners 24 and 25 in the McConnell chain of title and the USA chain of title. In Virginia Law, a course does not take precedence over a distance, nor does distance take precedence over a course, as mistakes can be made in either. Smith v. Chapman, 51 Va. (10 Gratt.) 445 (1853). On the other hand, a court should look to the topography of the land at the corner, the “manifest intent of the parties,” and all the circumstances of the case. Green v. Pennington, 105 Va. at 808, 54 S.E. 877, citing Smith v. Chapman, 51 Va. 445.

Defendants’ surveyor, as heretofore noted, was in error in basing his opinion on an incorrect topographical interpretation when he located the corner on top of a ridge, whereas the deed he relied upon placed the corner “on a dividing ridge near a path.” A divide by definition is a “dividing ridge between draining areas: Watershed.” Webster’s New Collegiate Dictionary, 334 (1977). This definition is in accord with the plaintiff’s expert witnesses who testified that a divide was an area of land, not just the “top” of a ridge; therefore, the gap in the ridge also qualifies as a divide, as does the entire ridge. A “path” also would be less likely to follow the top of a ridge but would normally follow a gap. A watershed is defined as “a region or area bounded peripherally by a water parting and draining ultimately to a particular water course.” Id. at 1324. Thus, a divide or watershed is an area and does not designate a specific area as does “gap.” The metes and bounds of the 1844 deed are inaccurate and, since the hickory is gone, there is nothing in the 1844 deed relating to the topography which marks the disputed corner. The court therefore considers the intent of the parties for over 100 years to place the corner in a “gap” at a “county road” as being the best evidence of the corner. Where there is an inconsistency between natural monuments and courses and distances, generally course and distance yield to natural monument. West Virginia Pulp & Paper Co. v. J. Natwick Co., 123 W.Va. 753, 21 S.E.2d 368 (1941); Newkirk v. Porter, 237 N.C. 115, 74 S.E.2d 235 (1953).

Early surveys in the United States were made by running the lines on the ground according to the magnetic rather than the true meridian. The evidence in this case indicates that the 1844 deed was done in this manner. Where a magnetic meridian is used, an allowance for deviations in directions will not be permitted if natural monuments or other controlling calls can be located. Taylor v. Fomby, 116 Ala. 621, 22 So. 910 (1897). In this case, there is no positive evidence as to the magnitude of the magnetic variance. Trent based his survey on the old call without magnetic variance which he estimated at three or four degrees, and without the variances of the other calls. The “gap” constitutes a natural monument which controls the other evidence. It is also the best evidence of the intent of the parties.

Accordingly, an Order will be entered granting judgment to the plaintiff.


author: THOMAS F. HOGAN, District Judge.

text:
    I.A.M. NATIONAL PENSION FUND, et al., Plaintiffs, v. WAKEFIELD INDUSTRIES, INC., et al., Defendants.
    Civ. A. No. 82-2187.
    United States District Court, District of Columbia.
    June 13, 1985.

      Denis F. Gordon, David M. Ermer, Gordon & Barnett, Washington, D.C., Robert T. Osgood, Joseph P. Martocci, Jr., I.A.M. Nattional Pension Fund, Washington, D.C., for plaintiffs.
    Joseph Sharlitt, Washington, D.C., for defendants.
   MEMORANDUM OPINION

THOMAS F. HOGAN, District Judge.

The matter before the Court involves the interplay of a recent federal statute, the Deficit Reduction Act of 1984, with a well settled principle of constitutional law, the separation of powers between the legislative and judicial branches of government. To place the matter in context, the Court will first trace the history of this litigation and the corresponding history of the statute involved.

The I.A.M. National Pension Fund (the Fund) brought the present lawsuit in August, 1982 to collect from the defendants the “withdrawal liability” imposed by the Employment Retirement Income Security Act of 1974 (ERISA), 29 U.S.C. § 1001, et seq., as amended by the Multiemployer Pension Plan Amendments Act of 1980 (MPPAA), 29 U.S.C. § 1381, et seq. Under the MPPAA, Congress established this new statutory liability, known as “withdrawal liability,” for any employer who withdraws from a multiemployer pension fund. Even though the MPPAA did not become effective until September 26, 1980, liability was imposed retroactively to include any withdrawal occurring after April 28,1980. This retroactive liability in the so-called “window period” (from April 28 to September 26, 1980) was upheld as constitutional in Pension Benefit Guarantee Corp. v. R.A. Gray, — U.S. -, 104 S.Ct. 2709, 81 L.Ed.2d 601 (1984).

On November 23, 1983, this Court entered summary judgment for the plaintiffs against all corporate defendants for withdrawal liability occurring in the window period. The Court denied plaintiffs’ motion for summary judgment against defendant Margolis on the grounds that the factual record was insufficient to impose personal liability. On December 12, 1983 a final judgment was docketed jointly and severally against all corporate defendants. No appeal was ever noticed.

The parties then continued discovery concerning Margolis’ personal liability under the corporate veil doctrine. Before the close of discovery, however, Congress enacted the Tax Reform Act of 1984 (the Act), Pub.L. No. 98-369, 98 Stat. 494 (1984). Section 558 of that Act purports to extinguish all withdrawal liability for withdrawals occurring during the window period established by the MPPAA.

According to defendant Margolis, the enactment of Section 558 eliminates any potential liability in this case and justifies the immediate dismissal of this action. Plaintiffs argue that Section 558 cannot be applied in a fashion that would “effectively nullify” the final judgment of this Court. The Court will now turn to these arguments.

Congressional Authority to Modify Federal Court Jurisdiction

The debate over congressional authority vis-a-vis the federal courts has raised some difficult and controversial questions in recent times. See e.g., Sager, Foreword: Constitutional Limitations on Congress’ Authority to Regulate the Jurisdiction of Federal Courts, 95 Harv.L.Rev. 17 (1981); Redish, Constitutional Limitations on Congressional Power to Control Federal Jurisdiction: A Reaction to Professor Sager, 77 Nev.U.L.Rev. 143 (1982). Fortunately, the issues posed by this case follow a better-worn path of precedent.

It has been established, at least since United States v. Klein, 80 U.S. (13 Wall.) 128, 20 L.Ed. 519 (1871), that Article III of the Constitution places some limits on congressional authority to intrude on the decisional independence of the judiciary. In particular, Klein holds that Congress may not enact jurisdictional limitations in order to control or reverse the results in a particular case.

This principle of separation was clearly enunciated by this Circuit in Daylo v. Administrator of Veterans Affairs, 501 F.2d 811 (D.C.Cir.1974). In Daylo, the plaintiff, a veteran’s widow had her statutory benefits cancelled because of a Veterans Administration (V.A.) finding that she had not met her administrative burden of proving that she had “not remarried.”

Under the law in effect prior to 1962 the term widow was defined by statute as a “woman who was the wife of a veteran ... and who has not remarried____” 38 U.S.C. § 101(3). The V.A. followed an administrative practice of shifting the burden of proof on the issue of remarriage to any “widow” who was living with another man. This practice was not approved by this Court. See Daylo at 813.

In 1962 Congress amended the V.A. statute to provide that a “widow” would be ineligible for benefits if she “lived with another man and held herself out openly to the public to be the wife of such other man.” Act of Sept. 19, 1962, Pub.L. 87-674, 76 Stat. 558 (amending 38 U.S.C. § 101(3)). This bright-line rule went beyond the V.A. practice of merely shifting the burden on the “remarriage” issue to widows who lived with other men. However, the statute was given only prospective application.

In 1969, Mrs. Daylo filed her suit in this Court, seeking to compel payment of the benefits that had been denied her since 1951. In 1970, the District Court entered judgment for Mrs. Daylo for all benefits payable prior to September 19, 1962, the effective date of the amendment discussed above.

This partial summary judgment had become final and unappealable by the time the V.A. statute was amended again by the Act of August 12, 1970, Pub.L. 91-376, 84 Stat. 787. The 1970 amendments made two crucial changes in the existing law. First, it provided that there would be no payment of benefits “because of a widow's relationship with another man before enactment of [the 1962 amendments]” that would not have been payable by the V.A. under the “standard for determining remarriage applied by that agency before said enactment.” 38 U.S.C. § 3111. This language ratified the V.A.’s burden shifting rule and, in effect, reversed the judicial rule of decision in Mrs. Daylo’s case. Second, the 1970 amendments retroactively reversed the jurisdictional position of the District of Columbia Circuit by making clear that the decision of the V.A. was absolutely unreviewable.

The V.A. claimed that the new act, 38 U.S.C. § 211(a), conflicted with Mrs. Day-lo’s judgment both by “retroactively withdrawing the jurisdiction of the court” and by providing a rule for determining remarriage “directly contrary” to that applied by the District Court. Daylo at 815. The court refused to accept the V.A.’s reading of the statute, noting that any attempt “to upset final judgments” would present a serious constitutional dilemma.” Id. at 816.

The court then quoted the “long standing” rule in such cases:

It is not within the power of a legislature to take away rights which have been once vested by a judgment. Legislation may act on subsequent proceedings, may abate actions pending, but when those actions have passed into judgment the power of the legislature to disturb the rights created thereby ceases.

Id. (quoting McCullough v. Virginia, 172 U.S. 102, 123-24, 19 S.Ct. 134, 141-42, 43 L.Ed. 382 (1898)). The Court held that the rule was based on the constitutional principle of “independence of the judicial branch of government,” id. at 816, but noted that there were limited “exceptions to the general rule.”

Those “exceptions,” in cases such as Pennsylvania v. Wheeling & Belmont Bridge Co. (Wheeling Bridge case), 59 U.S. (18 How.) 421, 15 L.Ed. 435 (1855), and Hodges v. Snyder, 261 U.S. 600, 43 S.Ct. 435, 67 L.Ed. 819 (1923), all involved cases where the eongressionally modified judgment was not an award of money damages but rather an “injunctive decree ... directly affect[ing] public rights.” Id. at 817. Thus the court was able to summarize that the “general, constitutional rule” was that “rights vested in final judgments, no longer subject to appeal, are immune from legislative alteration”; the only major exception depended on the characterization of the remedies involved. Judicial decrees in equity were generally “vulnerable” to legislative modification because of the “legislative” nature of the decrees: their prospective effect on the rights of persons not privy to the judgment. Id. at 818. Faced with this potential constitutional conflict the court declined to adopt the V.A.’s construction of the statute, and therefore declined to modify Mrs. Daylo’s judgment.

Statutory Construction of Section 558 of the Tax Reform Act of 198k

The Court has before it a case which is virtually on all fours with Daylo— at least in reference to the constitutional question raised. Defendant has asked that this action be dismissed because Section 558 of the 1984 Tax Reform Act has rendered the previously-entered final judgments “void.” However, the Court finds that Section 558 may be construed in a way that will avoid the constitutional confrontation inherent in defendants’ position.

Section 558, titled “Elimination of Retroactive Application of Amendments Made by Multiemployer Pension Plan Amendments Act of 1980,” provides as follows:

(1) LIABILITY.—Any withdrawal liability incurred by an employer pursuant to [ERISA] as a result of the complete or partial withdrawal of such employer from a multiemployer plan before September 26, 1980, shall be void.
(2) REFUNDS.—Any amounts paid by an employer to a plan sponsor as a result of such withdrawal liability shall be refunded by the plan sponsor to the employer____

Tax Reform Act of 1984, § 558, Pub.L. 98-369, 98 Stat. 494, 899 (1984). It is certainly possible to read the words of this statute in several ways that appear to fulfill the intent of Congress. In this situation, it is a “cardinal principle” that courts must “first ascertain whether a construction of the statute is fairly possible by which the [constitutional] question may be avoided.” Johnson v. Robison, 415 U.S. 361, 367, 94 S.Ct. 1160, 1165, 39 L.Ed.2d 389 (1974). “[W]hen one interpretation ... would create a substantial doubt as to the statute’s constitutional validity, the courts will avoid that interpretation absent a ‘clear statement’ of a contrary legislative intent.” United States v. Thompson, 452 F.2d 1333, 1337 (D.C.Cir.1971). See also United States Civil Service Comm’n v. National Association of Letter Carriers, AFL-CIO, 413 U.S. 548, 93 S.Ct. 2880, 37 L.Ed.2d 796 (1973); Palmore v. Superior Court of the District of Columbia, 515 F.2d 1294 (D.C.Cir.1975).

In brief, the statute provides that “[withdrawal] liability ... shall be void” and “any amounts paid ... shall be refunded.” The Court finds that it is both reasonable and consistent to read this provision as excluding any such liability that is reduced to final judgment.

Of course, withdrawal liability is supposed to be paid voluntarily by the employer. See 29 U.S.C. § 1399(c)(2). Thus, in the majority of cases—where the employer voluntarily complies with the law—Section 558 provides that window period payments must be refunded. The statute can be fairly interpreted as “voiding” that liability and requiring a refund of such voluntary payments. Such an interpretation is also consistent with a dismissal of any civil action in which the pension fund sued to collect such withdrawal liability but had not yet reduced its claims to final judgment. See I.A.M. National Pension Fund v. Allied Corp., 596 F.Supp. 481, 483 (D.D.C. 1984), appeal docketed, No. 184-5869 (D.C. Cir.); LAM. National Pension Fund v. Stockton TRL Industries, 598 F.Supp. 267, 269 (D.D.C.1984), appeal docketed, No. 84-5944 (D.C.Cir.); I.A.M. National Pension Fund v. Jerry Nuzum Chevrolet, Inc., No. 81-2772 (D.D.C. March 8, 1985), appeal noticed on March 11, 1985. In addition, there is nothing in the admittedly slight legislative history which conflicts with this interpretation of Section 558. See Deficit Reduction Act of 1984: Explanation of Provisions Approved by the Committee on March 21, 1984; Senate Committee on Finance, 98th Cong., 2d Sess., 337; 130 Cong. Rec. H7091-94 (daily ed. June 27, 1984).

Accordingly, the Court will adopt the interpretation of Section 558 urged by the plaintiffs and hold that the statutory language “voiding” withdrawal liability does not reach any such liability which has been reduced to final judgment. An appropriate order will issue in accordance with the terms of this opinion.

      . The defendants included Wakefield Industries and the alleged corporate alter egos of Wake-field including Capehart Corporation, Wakefield Industries, Inc. (Delaware), Sprague Industries, Inc., and the individual defendant, Marvin Margolis.

      . The statute had always contained a "no review" provision but the D.C. Circuit had construed the statute to allow review of benefit terminations, but not of denials of benefit claims. See e.g., Tracy v. Gleason, 379 F.2d 469 (D.C.Cir.1967).

      . Cf. Battaglia v. General Motors Corp., 169 F.2d 254 (2d Cir.1948) (upholding dismissal of claims which had "not ripened into final judgment” where subsequent amendment of legislation modifies statutory rule of decision).

      . Of course, any part of this action which relied on pending issues involving window period liability would have to be dismissed. However, all of the remaining issues in this case involve counterclaims or questions of derivative liability (i.e., Margolis' personal liability for the corporate acts) not dependent on the character of the underlying action.