author: WEXLER, District Judge.

text:
    OMAHA INDEMNITY COMPANY as subrogee of San Mar Associates, Inc. and Marvin Singer, Plaintiff, and San Mar Associates, Inc. and Marvin Singer, Intervenors-Plaintiffs, v. JOHNSON & TOWERS, INC. and General Motors Corporation, Defendants.
    No. CV 83-0588.
    United States District Court, E.D. New York.
    Dec. 7, 1984.

      Rassner, Rassner & Olman by Donald Olman, New York City, for plaintiff.
    Deegan, Scibilia & Reardon by Marian C. Rice, Mineóla, N.Y., for defendant Johnson & Towers.
    Williamson & Williamson, P.C., New York City, for defendant General Motors Corp.
    Leiby & Welsh by Kenneth L. Leiby, Jr., New York City, for intervenors-plaintiffs Marvin Singer & San Mar Associates.
   MEMORANDUM AND ORDER

WEXLER, District Judge.

Plaintiff Omaha Indemnity Company (Omaha Indemnity) brings this suit as subrogee of San Mar Associates, Inc. (San Mar) and its president Marvin Singer after paying $27,580.86 for engine damages and breakdown under an all risk policy for marine insurance on the San Mar’s yacht the Sandie Lee III. Omaha Indemnity sues Johnson & Towers, Inc. (Johnson & Towers), the preparer and installer of the damaged yacht engines, and General Motors Corporation (GM), the builder of the engines. San Mar and Mr. Singer intervened after commencement of the action.

I.

In 1975 San Mar purchased the Sandie Lee III from its first owner. The vessel is a forty-seven foot 1972 Concorde pleasure motor yacht used to entertain San Mar clients. The yacht was powered by standard twin 6-71 diesel engines. Mr. Singer soon found the speed and power too low and complained to Johnson & Towers. On February 8,1977 Johnson & Towers agreed to rebuild the yacht’s engines, converting them to 6-71TI units. Nevertheless, Mr. Singer and defendants agreed not to replace the six-inch exhaust system. The work included a 500 hour warranty on the rebuilt engines. A post-conversion start-up inspection was performed in June 1977 and it was immediately apparent that the existing exhaust system was inadequate for the higher powered engines and was causing backpressure. Johnson & Towers refused to modify the exhaust system and in February 1978 Mr. Singer instituted suit against Johnson & Towers in New York Supreme Court. On May 19, 1978 Mr. Singer and Johnson & Towers entered into a Stipulation of Settlement and a General Release wherein defendant agreed to install an eight-inch exhaust system and pay Mr. Singer $2,367.00. In addition, the suit was discontinued with prejudice and all warranties on the engine ended on June 28, 1978. The discontinuance was contained in the Release, which also precluded any future legal action against Johnson & Towers.

By January 1979 the new exhaust system was installed. In the summer of 1980 the starboard engine failed and both engines were extensively repaired. In 1981 Omaha Indemnity paid $27,580.56 to San Mar for the engine damage. In February 1983 Omaha Indemnity commenced this action.

Plaintiff, as subrogee of San Mar, alleges that the engines were damaged and destroyed because Johnson & Towers used substandard internal parts in the engine modification that could not withstand the higher pressure and temperature. Omaha Indemnity sues for negligence, breach of implied warranty, breach of express warranty, products liability, and fraud. In October 1983 Magistrate Caden granted San Mar’s and Mr. Singer’s motion to intervene and they seek damages for breach of contract, breach of warranty, and fraud, all based on the engine conversion agreement of February 1977. Johnson & Towers now moves for dismissal of both complaints under Rule 12(b)(6), or summary judgment under Rule 56(b), Fed.R.Civ.P. Alternatively defendant asks that the intervenors be made third-party defendants.

Johnson & Towers offers two bases for dismissal or summary judgment. First, the defendant asserts that the Stipulation of Settlement and its accompanying General Release of May 19, 1978 extinguish all claims Mr. Singer and San Mar and its subrogees have against Johnson & Towers arising out of the rebuilt engines. Second, defendant argues that the suit is time-barred by the statute of limitations or laches. Plaintiff and intervenors contend that the May 19th Stipulation did not release Johnson & Towers from any warranties or claims and at the least gives rise to questions of fact that make it an inappropriate subject for summary judgment. They also argue that the action is not time-barred.

II.

It is clear that Omaha Indemnity as subrogee of Mr. Singer and San Mar is bound by the May 19th Stipulation of Settlement and General Release. A subrogee generally must take the subrogor’s rights and remedies “as they are, along with their burdens, and subject to any defenses which may be available either against” the subrogee or subrogor. 23 N.Y.Jur.2d, Contribution, Indemnity, and Subrogation § 40 at 63. Here, defendant has interposed the sound defense of the Stipulation and Release and so long as the original parties are bound by it, so is the subrogee, Omaha Indemnity.

The clause of the May 19th Stipulation concerning Johnson & Towers’ warranties reads as follows:

6. The parties mutually agree that the written warranty made or delivered to defendant to plaintiff in respect of the engines, transmissions and/or their component parts, whether mechanical or electrical, will expire and be of no further force or effect on June 28, 1978 and that aside from the same, there are no other warranties or contractual committments on the part of the defendant to plaintiff, whether oral or written, express or implied, except for defendant’s obligations contained in this stipulation.

Plaintiff and intervenors contend that Paragraph 6 does not vitiate the 500 hour warranty first given for the rebuilt engine. They assert that the language is not explicit and requires the Court to look behind the letter of the Stipulation for the purpose and intent of the parties in entering into it. The meaning and effect of the Stipulation, they argue, requires testimony and findings of fact and is not an appropriate subject for summary judgment.

It is axiomatic that where the language of an agreement is explicit and unambiguous the courts must give it its plain meaning. Paragraph 6 of the May 19th Stipulation is explicit and this Court declines to read in ambiguities or otherwise alter its plain meaning. The Stipulation was the product of negotiation and bargaining and was entered into with the advice of counsel. Consequently, the owner of the yacht and the subrogee are held to the Stipulation.

Paragraph 6 clearly states that all warranties on the yacht’s engines and component parts expire on June 28, 1978. It then makes the intent and effect of the warranty expiration pelucidly certain by declaring that there are no other warranties or contractual commitments between the parties aside from those that expire June 28th and those contained in other paragraphs of the May 19th Stipulation. There are no other warranties in the Stipulation. The language of Paragraph 6 could not be more explicit: all warranties are ended and all contractual obligations outside the Stipulation are terminated. The agreement must be given its full and plain effect as to both the intervenor and his subrogee. Accordingly, the plaintiff’s and intervenors’ claims based on breach of express and implied warranty and breach of contract are barred.

III.

In addition to the Stipulation of Settlement of May 19, 1984, Marvin Singer signed a General Release in consideration for which Johnson & Towers paid $2,327.00 and agreed to do the work outlined in the Stipulation. The May 19th Release is on a standard printed form used in the New York state courts. It has blanks for parties’ names and sums of money and these have been filled in by typewriter. It provides that Marvin Singer releases Johnson & Towers (the releasee) and

RELEASEE’S heirs, executors, administrators, successors and assigns from all actions, causes of action, suits, debts, dues, sums of money, accounts, reckonings, bonds, bills, specialties, covenants, contracts, controversies, agreements, promises, variances, trespasses, damages, judgments, extents, executions, claims, and demands whatsoever, in law, admiralty or equity, which against the RELEASEE, the RELEASOR, RELEASOR’S heirs, executors, administrators, successors and assigns ever had, now have or hereafter can, shall or may, have, for upon, or by reason of any matter, cause or thing whatsoever from the beginning of the world to the day of the date of this RELEASE, excepting only those rights as shall survive the execution of this general release as specifically contained in a stipulation attached hereto and incorporated herein by reference.

Most of this language is stock language pre-printed on the form. The underlined portion, however, was added by typewriter.

Again, it is axiomatic that the courts may not go' behind an agreement where its meaning is plain on its face. It is arguable that pre-printed forms do not reflect the full intent and purpose of the parties. Nevertheless, in this instance the Release was part of a negotiated settlement and was modified by the parties to reflect their agreement. It cannot be contended that the parties would modify the boilerplate language of the Release where needed in one respect and not in all respects. Where both parties were represented by counsel, bargained for the terms of settlement and release, and evidently could and did modify language to reflect the true terms of the agreement, they will be held to the plain meaning of their agreement. In this instance intervenor Singer released Johnson & Towers from all claims he had with respect to the Sandie Lee Ill’s engines and component parts. It is clear from a reading of the Stipulation of Settlement together with the General Release that in exchange for the new exhaust system and the $2,327.00 Johnson & Towers sought to place all further risk for the engines’ performance on the owner. This the owner accepted.

Nevertheless, even where the meaning of the Release is plain on its face, it can be attacked for substantive flaws in its execution. A release settling litigation is contractual in nature and is interpreted according to precepts and principles of contract law. E.g., Mt. Read Terminal, Inc. v. LeChase Construction Corp., 58 A.D.2d 1034, 396 N.Y.S.2d 959 (4th Dept.1977). To set it aside a party must establish fraud in the inducement, illegality, duress, or mutual mistake. IB Warren’s Negligence § 2.03 at 737 (Matthew Bender & Co.1976). No party here contends that there was fraud in the inducement, misrepresentation, duress, overreaching, or illegality in the entering into of the General Release. Plaintiff and intervenors do, however, seek to establish mutual mistake, claiming at the time of the Release Mr. Singer, at least, lacked knowledge as to the allegedly substandard components used to upgrade the yacht’s engines. In other words, they contend that lack of knowledge or awareness of facts giving rise to a cause of action amounts to mutual mistake and avoids the release at least as to the actions for negligence and fraud.

Lack of knowledge of an injury, damages, or a cause of action, however, is not the gross equivalent of mutual mistake. The law in New York has a more refined definition of mutual mistake sufficient to avoid a release. For example, in a personal injury action where the injury is known but at the time of release its gravity is thought to be less than eventually develops, generally the release is upheld. In contrast, where an injury is unknown at the time a release is signed, the law finds a mutual mistake of fact that avoids the release or creates a cause of action not included in or barred by the release. IB Warren’s Negligence § 2.04 at 738-39 (Matthew Bender & Co.1976).

This distinction also holds in an action for damages to property. In Rector of St. James Church v. City of New York, 261 A.D. 614, 26 N.Y.S.2d 762 (2d Dept.1941), a Brooklyn church suffered damage during the excavation of a subway and sued the subway contractor. In 1933 the church received $1,000.00 in consideration for a release containing the same wording as to future legal actions as the release signed by Mr. Singer. Later, additional damage from the excavation came to light, caused by the failure to underpin the structure of the church. The Appellate Division held that the general release barred the later action for negligence even though the additional damages were unknown at the time of the execution of the release.

Irrespective, therefore, of whether or not a cause of action had accrued for the damage which followed, the release served as a bar. Our opinion, however, upon this record, is that it cannot be claimed that such cause of action had not accrued at the time of the release. While recovery may be had for continuing or recurrent tortious invasions of the land of another ... in the absence of mistake on the one side or fraud, deceit and misrepresentation on the other, the effect of a release may not be avoided because of lack of knowledge of the true extent of injury sustained ... or even of the existence of a cause of action.

Id., 261 A.D. at 617, 26 N.Y.S.2d at 764 (citations omitted).

Similarly, in the more recent case of Mt. Read Terminal, Inc. v. LeChase Construction Corp., 58 A.D.2d 1034, 396 N.Y.S.2d 959 (4th Dept. 1977), the Appellate Division held that the general release would be construed against the releasor, and that the release could be asserted as a defense to claims arising both before and after its execution. In that case there was earlier litigation between plaintiff and defendant construction company over a building defendant was erecting for plaintiff. The earlier litigation concerned defendant’s mechanic’s lien and plaintiff’s counterclaim for negligent construction of the roof. A general release by the plaintiff was part of the settlement of the first litigation. Plaintiff later sued defendant for two instances of damage to the roof, one occuring before the release and one after. The Appellate Division reversed the lower court and held that the later action was barred, noting particularly the negotiations surrounding the release, its broad language, the retention of the concrete floor warranty only, and the intent of the builders to have an end to a “bad job.” In view of this the Mt. Read Court concluded:

The release may be asserted as a defense to all claims arising from the construction, not only the damages occasioned by the roof collapse prior to execution of the release, but also the roof damage after the execution even though no litigation had yet been started.

Id., 58 A.D.2d at —, 396 N.Y.S.2d at 961 (citations omitted).

The state court action in this case concerned the modification of ■ the yacht’s engines. That Mr. Singer was not fully aware of the problems connected with the rebuilding of the engines is not enough. Lack of awareness of elements of the damage, the true extent of the damage, or the existence of a cause of action is not a mutual mistake of fact sufficient to set aside the General Release. The Release in this case bars all claims against Johnson & Towers, those existing at the time of the Release, both known and unknown. This is dictated by both the law and the language of the Release. The result may seem harsh, but it is the result Mr. Singer bargained for. As noted earlier, the Stipulation and Release plainly rid the defendant of all further liability for the engines’ performanee. And plaintiff and intervenors have not presented any grounds why they should not be held to this effect. Accordingly, the claims for negligence and fraud are also barred.

IV.

There is no basis for disputing that Mr. Singer explicitly and unambiguously terminated all warranties and released defendant from all contract claims by his General Release and Stipulation of Settlement of May 19,1978. After reviewing the General Release and the case law of New York, it is equally clear that by the terms of the Release the negligence and fraud claims, and any warranty or product liability claims that might have survived under the Stipulation of Settlement, also were extinguished. As the defendant’s motion is decided on this ground, it is unnecessary to address the time bar issues.

Accordingly, defendant Johnson & Towers’ motion for summary judgment is granted, Rule 56(b), Fed.R.Civ.P., and all claims against it by Omaha Indemnity, San Mar, and Mr. Singer are dismissed.

SO ORDERED.


source: Caselaw Access Project

author: BLUMENFELD, Senior District Judge.

license: Public Domain

text:
    Jesus MALAVE v. William BOLGER.
    Civ. No. H-81-782.
    United States District Court, D. Connecticut.
    Dec. 7, 1984.

      Jonathan L. Gould, Kestell, Pogue & Deinhardt, Hartford, Conn., Verna Sanchez, Kenneth Kimerling, Puerto Rican Legal Defense and Education Fund, New York City, for plaintiff.
    Frank Santoro, Asst. U.S. Atty., New Haven, Conn., Howard J. Kaufman, R. Andrew German, United States Postal Service, Washington, D.C., for defendant.
   RULING ON MOTION TO AMEND COMPLAINT

BLUMENFELD, Senior District Judge.

This is an action brought under Title VII of the Civil Rights Act of 1964, 42 U.S.C. § 2000e et seq., in which the plaintiff employee alleges a continuing pattern of national origin discrimination and retaliation on the part of the defendant federal employer, William F. Bolger, Postmaster of the United States Postal Service. The plaintiff has moved for leave to file a Seventh Amended Complaint pursuant to Rule 15 of the Federal Rules of Civil Procedure, in which the plaintiff adds allegations of one more instance in which the defendant has engaged in discriminatory and retaliatory conduct by denying the plaintiff a promotion. The defendant opposes the motion. Oral argument was held before this court on November 19, 1984.

Rule 15(a) of the Federal Rules of Civil Procedure provides that “a party may amend his pleading by leave of court ... and leave shall be freely given when justice so requires.” While the defendant recognizes that leave to amend is generally liberally granted and is in the discretion of the court, he argues that in this case the plaintiff’s motion to amend “must be denied” because it is legally insufficient. The basis for the defendant’s argument is that the plaintiff’s motion to amend fails to allege that the plaintiff exhausted all of his administrative remedies concerning his claims of discrimination with respect to the July 1982 non-promotion newly pled in this latest amended complaint. Arguing that exhaustion of administrative remedies is a prerequisite to judicial cognizance over claims that plaintiff’s non-selection for the promotion was discriminatory, the defendant suggests that the ruling on this motion is not within the discretion of this court, but rather that an outcome favorable to the defendant is mandated by law.

The defendant, however, is mistaken. The newly amended portion of the plaintiff’s amended complaint simply adds facts which allege another instance of defendant’s discriminatory and retaliatory conduct against a background of many previous related allegations. Under the law of the Second Circuit, a Title VII claimant need not file additional claims with the federal administrative agency when those claims, arising subsequent to the initial filing, are reasonably related to the allegations of an initial claim that was properly filed. Goodman v. Heublein, Inc., 645 F.2d 127, 131 (2d Cir.1981). Similarly, a plaintiff is not required to exhaust remedies for an additional charge of retaliation where he has already filed a discrimination claim. Id.

The defendant would have this court reject the holding of Goodman v. Heublein, Inc. as not applying to this case on the ground that that case involved a claim against a private sector employer and this case involves the United States as the employer. He argues that sovereign immunity principles require that for every claim against the United States, including one of retaliatory discrimination, one must exhaust all administrative remedies as a precondition to suit. The basis for the defendant’s argument is the holding in a Seventh Circuit case, Sims v. Heckler, 725 F.2d 1143 (7th Cir.1984), which in turn depended upon a construction of the Supreme Court’s opinion in Zipes v. TWA, Inc., 455 U.S. 385, 102 S.Ct. 1127, 71 L.Ed.2d 234 (1982). In Zipes, the Supreme Court held that the statutory time limit for filing charges under Title VII of the Civil Rights Act of 1964, 42 U.S.C. § 2000e et seq., is not a jurisdictional prerequisite for a federal court action. Rather, the Court held, the timeliness requirement is like a statute of limitation and is subject to waiver and equitable estoppel. The Seventh Circuit in Sims interpreted Zipes as not extending to a case involving a federal defendant because it involved a private defendant where principles of sovereign immunity would not apply.

Two other federal circuit court decisions, however, have applied the holding of Zipes to suits brought under Title VII against federal defendants. See Milam v. United States Postal Service, 674 F.2d 860 (11th Cir.1982) and Saltz v. Lehman, 672 F.2d 207 (D.C.Cir.1982). Prior to the Zipes decision, the Ninth Circuit also held that the 30-day filing requirement of 5 C.F.R. § 713.214(a)(1) was not a jurisdictional prerequisite to federal court action. Cooper v. Bell, 628 F.2d 1208, 1212-14 (9th Cir.1980). While none of these cases considered the significance of the sovereign immunity with which a federal employer is clothed, in a more recent employment discrimination case against the United States Postal Service, which did consider the sovereign immunity issue, the United States District Court for the Southern District of Ohio held, in light of those cases and contrary to Sims v. Heckler, that the 30-day limit of 29 C.F.R. § 1613.314(a)(l)(i) is not jurisdictional. Curry v. United States Postal Service, 583 F.Supp. 334 (S.D.Ohio 1981). Furthermore, in a recent ruling by Judge Clarie of this court, Sims v. Heckler, was rejected and the Eleventh and District of Columbia Circuits were followed. Dimaggio v. United States Postal Service, Civil No. H-83-455, Ruling on Federal Defendants’ Motion for Partial Dismissal, or, in the Alternative For Partial Summary Judgment (filed March 28, 1984). This court will not depart from Judge Clarie’s ruling. With three other circuits disagreeing with the Seventh Circuit on this jurisdictional question, as well as a district court out of yet another circuit which squarely faced the issue raised here, the weight of authority lies heavily against the proposition that the holding in Zipes v. TWA, Inc. applies only to private employers and not federal employers. Since the Second Circuit has not directly addressed the issue presented here, the holding of Goodman v. Heublein, Inc. is still the controlling law, and this court is not convinced that the authority of Sims v. Heckler is sufficient to carve out an exception to the Goodman holding.

Furthermore, the holding of the Sims case is clearly distinguishable on its facts from this case. The key fact in Sims was that the plaintiff had failed to file a timely complaint on his underlying action, as well as on his retaliation claim. Therefore, if the court had allowed the retaliation claim, despite plaintiff’s failure to exhaust administrative remedies, this claim would have been the only cause of action before the court. Under these circumstances, the court held that to allow the retaliation claim to stand in the absence of any other timely complaint would violate sovereign immunity principles requiring courts to strictly construe the administrative exhaustion provision of Title VII for cases involving government defendants.

Since in the instant case the plaintiff has filed a number of timely causes of action establishing a pattern of discriminatory and retaliatory conduct and hence has given the defendant ample notice of the legal issues arising out of the additional incident described in the amendment, the facts here are clearly distinguishable from Sims. By filing his initial administrative complaints, as well as the court complaints previous to the seventh amended complaint, the plaintiff here, unlike Sims, sufficiently complied with the exhaustion requirements of Title VII so as to obviate the need for further exhaustion of administrative remedies over one additional incident of retaliatory conduct. Accordingly, this court rejects the defendant’s argument that the plaintiff’s motion to amend must be denied as legally insufficient and this court will proceed under the usual legal standard of Rule 15(a) of the Federal Rules of Civil Procedure, that whether to grant leave to amend is within the discretion of the court.

The main factors a court must consider when deciding a motion to amend under Rule 15 are whether the amendment will prejudice the opposing party, and whether that party has previously been given notice of the substance of the amendment. Foman v. Davis, 371 U.S. 178, 83 S.Ct. 227, 9 L.Ed.2d 222 (1962). Since it is the opinion of this court that allowing the plaintiff to amend his complaint will not prejudice the defendant, and that the amendment merely adds allegations of one more instance of defendant’s discriminatory conduct against a background of many other similar allegations, the motion to amend the complaint is granted.

This court is cognizant of the fact that there is a motion for summary judgment pending in this case. However, any additional discovery in this case or supplementary efforts required on that motion, which arise out of this latest amendment to the complaint, should not be unduly burdensome.

SO ORDERED.


author: CARRIGAN, District Judge.

text:
    James P. JOHNSON, as Equity Receiver for the Chilcott Futures Fund, Plaintiff, v. Thomas D. CHILCOTT, Boettcher & Company, Shearson/American Express, Inc., Donald Cunningham, Sid Anders, Ross Bagully, and One or More John and/or Jane Does, and/or Doe Entities, Defendants.
    Civ. A. No. 82-C-889.
    United States District Court, D. Colorado.
    Dec. 7, 1984.

      Arthur E. March, Jr., March, March, Myatt, Korb & Carroll, Fort Collins, Colo., Kenneth C. Groves, Denver, Colo., Rodney Patula, Elaine Menter, Frederick Haines, Pryor, Carney & Johnson, Englewood, Colo., for plaintiff.
    Gary J. Malone, Anthony F. Phillips, James L. Condren, Willkie, Farr & Gallagher, New York City, David Ebel, Elizabeth Montgomery, Davis, Graham & Stubbs, David G. Palmer, Holland & Hart, Stephen Waters, Richard P. Slivka, Bosworth & Slivka, Denver, Colo., for defendants.
   ORDER

CARRIGAN, District Judge.

I. General Background.

Thomas D. Chilcott was the president of Chilcott Portfolio Management, Inc. (CPMI), a Colorado corporation located in Ft. Collins, Colorado. From the mid-1970’s through June 15, 1981, Chilcott obtained tens of millions of dollars from hundreds of investors by representing to them that their money would be pooled in a highly profitable investment fund. Plaintiff asserts that this fund or pool was first known, informally, as Chilcott Portfolio, and later was known as the Chilcott Futures Fund (CFF).

A Commodities Futures Trading Commission (CFTC) investigation revealed that Chilcott had lied brazenly about the pool’s performance and profitability. Actually he had been operating a classic Ponzi scheme. He induced a constant stream of new investments by misrepresenting the alleged pool’s performance and profitability and used some of the incoming new funds to pay investors who desired to “cash-out” their investments, often paying them substantial “profits.” Ultimately the scheme lost momentum, and in its crash most of the investors’ money was lost.

In CFTC v. Chilcott Commodities Corp., et al. (Civil Action No. 81-F-999), Chief Judge Finesilver appointed the plaintiff as equity receiver to collect and administer Chilcott’s assets. The receiver instituted the present action and sues on behalf of the CFF for dissipation of its assets. The CFF’s capacity, standing and very existence as an entity cognizable in law are challenged by the defendants’ instant motions.

The receiver, in his original complaint, alleged that Chilcott directly violated, and that the remaining defendants aided and abetted him in violating, federal antifraud provisions of the Commodity Exchange Act and the Securities Exchange Act of 1934. On July 10, 1984,1 granted the defendants’ motions to dismiss these federal antifraud claims. 590 F.Supp. 204.

The remaining claims, all state law claims, are for common law fraud, conversion, negligence, negligent supervision, and breaches of fiduciary duties. For reasons of judicial economy, convenience of parties and witnesses, and fundamental fairness, I retained jurisdiction over these state law claims at least until the issues of the plaintiff’s capacity and standing to sue have been resolved.

Defendants Shearson and Boettcher are brokerage firms through which Chilcott traded commodities during his fraudulent activity. Defendants Ross Bagully, Donald Cunningham and Sid Anders at various times were employed by either Shearson or Boettcher as brokers handling the ill-fated investments. The sixth defendant is Thomas D. Chilcott. He is presently incarcerated.

II. The Pending Motions to Dismiss.

Defendants Boettcher & Company (Boettcher), Shearson Lehman/American Express, Inc. (Shearson), Ross Bagully, and Donald Cunningham have filed motions to dismiss asserting that this court lacks jurisdiction over the subject matter. Fed.R. Civ.P. 12(b)(1). "Specifically, the defendants contend that the plaintiff lacks the standing, capacity to sue and real party in interest status required by Fed.R.Civ.P. 17(a) & (b). The issues have been exhaustively briefed. An evidentiary hearing and oral arguments were held July 16-20, 1984.

For purposes of these motions to dismiss, all material facts alleged in the complaint must be assumed to be true and the complaint must be construed liberally, giving the plaintiff the benefit of the doubt. Gladstone, Realtors v. Village of Bellwood, 441 U.S. 91, 109 n. 22, 99 S.Ct. 1601, 1612, 13 n. 22, 60 L.Ed.2d 66 (1979); Warth v. Seldin, 422 U.S. 490, 95 S.Ct. 2197, 45 L.Ed.2d 343 (1975). In ruling on these motions, I express no opinion on the merits of the plaintiff’s claims.

III. Capacity to Sue.

The CFF’s capacity to commence this action is governed by Fed.R.Civ.P. 17(b). That rule provides that capacity to sue is determined by the law of the state in which the district court is located. In Colorado, a “partnership or other unincorporated association” has the capacity to sue or be sued in its own name and right. Colo.Rev.Stat. § 13-50-105 (1973). Plaintiff contends that the CFF is or at the material times was, a “partnership or other unincorporated association” under Colorado law. Thus the threshold inquiry is whether the plaintiff has met his burden of establishing that status for the collective interests he purports to represent.

A. Partnership.

First to be considered is whether there was a partnership under Colorado law. A partnership is created by persons agreeing orally or in writing to “place their money, effects, labor, and skill, or some or all of them, in lawful commerce or business and to divide the profit and bear the loss in certain proportions.” Roberts v. Roberts, 113 Colo. 128, 155 P.2d 155 (1945). The Uniform Partnership Act, Colo.Rev.Stat. § 7-60-106 (1973) defines a partnership as “an association of two or more persons to carry on, as co-owners, a business for profit.”

As co-owners, all partners must intend to share losses of the partnership as well as profits. Colo.Rev.Stat. § 7-60-107 (1973); Quier v. Rickly, 116 Colo. 5, 177 P.2d 549 (1947). General partners are jointly liable for any claims against the partnership and any wrongful acts of any partner acting in the ordinary course of partnership business. Colo.Rev.Stat. § 7-60-113 (1973). It is not required, however, that every partner participate in the day-today management of the partnership business. Management and control of the business may be delegated by agreement, express or implied.

If the parties have placed themselves in a relation which constitutes a partnership, it is not determinative that they call, or do not call, themselves a partnership, or that they expressly deny that a partnership exists. Richardson v. Keely, 58 Colo. 47, 142 P. 167 (1914); Cf. Heinhold Hog Market, Inc. v. McCoy, 700 F.2d 611, 615 (10th Cir.1983).

Moreover, where a partnership exists, each partner at all times has the right of access to partnership books and records. Colo.Rev.Stat. § 7-60-119 (1973). Finally, it is characteristic of partnerships that a new partner cannot join the partnership without the consent of all who already are partners. Colo.Rev.Stat. § 7-60-118(g) (1973).

To determine whether the CFF was a partnership these elements must be considered in relation to the instant facts. Here, there was an agreement between Chilcott and the investors to combine the investors’ money with Chilcott’s investment skill and services in a business where profits and losses would be proportionately shared. Further, the CFF is an association of two or more persons to carry on a business for profit. It is doubtful, however, whether the investors and Chilcott are, or were, “co-owners” of the CFF in the sense of partnership co-ownership.

Certainly the investors intended to share profits and losses from the CFF’s collective investments. The investors appear to have had no intention, however, of forming an organization which could expose them to liability for claims against the CFF or Chilcott. That limitation on their role in the CFF detracts from a finding that they are co-owners.

Defendants argue that the investors are not co-owners because Chilcott retained control of the CFF’s operations. As mentioned above, however, management of a partnership may be vested in a single partner. The agreement between the investors and Chilcott placed control of the CFF in Chilcott as the managing agent. The fact that investors did not believe the CFF was, or is, a partnership is not determinative. As stated, if the elements of partnership are present, the label of partnership is not required, nor is its absence significant.

Defendants assert that there was no partnership because Chilcott denied investors access to the CFF’s books and records. The investors’ right of access to records was expressly stated in the investment agreements signed by them and by Chilcott. Any efforts by Chilcott to prevent detection of his wrongdoing by not allowing investors to see the CFF books cannot negate the existence of this partnership element. Investors had an enforceable legal right to examine the records and could have required Chilcott to open them for ■nspection.

Finally, the element that all partners must consent before a new partner may join the partnership was not present in the arrangement under scrutiny. Chilcott, unilaterally, had and exercised the power to determine who entered the CFF as an investor. Eventually he required a minimum CFF investment to remain in the CFF. Solicitations to join the CFF were in large part prompted by Chilcott’s discovery, from time to time, that a particular prospective investor was laden with money ripe for the plucking. His decisions to terminate various investors’ CFF participation frequently were prompted by the investors’ asking him too many probing questions. As a practical matter, investors entered or left the CFF at Chilcott’s sole discretion, but there was no agreement by the CFF investors delegating that power to Chilcott.

In summary, I find and conclude that while the CFF had some requisite characteristics of a partnership, it did not have them all, and therefore it was not and is not a partnership under Colorado law.

B. Unincorporated Association.

Next to be considered is whether, under Colorado law, the CFF is, or was, an unincorporated association with capacity to sue. The elements of an unincorporated association with capacity to sue are not defined by statute.

An instructive case on this purely state law question is Hidden Lake Development Co. v. District Court, 183 Colo. 168, 515 P.2d 632 (1973). There an association of neighboring landowners sued to set aside the rezoning of certain land. After the statutory time limitation for seeking review of the county commissioners’ rezoning decision had passed, two individual landowners were substituted as plaintiffs. The two new plaintiffs attempted to adopt the association’s petition and to take advantage of its timely filing date. The Colorado Supreme Court held that the association was not an entity with capacity to sue, and therefore, its petition and timely filing could not be adopted by the new plaintiffs. Id. at 515 P.2d 632, 634. The court declared:

“Rule 17 is procedural, providing how a legally constituted entity may bring its action; it does not however, grant the right to sue to a loosely formed group. The status of an unincorporated association must be founded on more than a bald allegation. To sue as an unincorporated association in name only is insufficient. Such legal entity must in fact exist. Colorado has no statutes pertaining to such associations, so the common law must govern their existence. It is usually characterized by having by-laws governing its organization and operation, a stated purpose for its existence, and providing for its continuity though its membership may change. There should also be responsible officers elected according to the by-laws, whose duties and responsibilities may be ascertained and upon whom valid process may be had.” Id. at 515 P.2d 632, 634-35. (emphasis added) (citations omitted).

Here the CFF had no by-laws. There was, however, a very specific printed original investment agreement which governed the CFF no later than 1980 and an amended investment agreement effective April, 1981. Chilcott’s frequent and blatant violation of those agreements does not render them ineffective to establish an unincorporated association.

The provisions of the original agreements and the amended agreement clearly meet and exceed the criteria described in Hidden Lake for establishment of a legally constituted entity.

The original agreement, a three-page investment document, expressly recognizes the CFF as a common investment fund. Although no officers were elected as mentioned in Hidden Lake the agreement provided for a managing agent. It further provided that investors make capital contributions to this entity or fund.

Another- element of the Hidden Lake criteria is met by a statement in the original agreement of a purpose for the entity’s existence. Each investor agreed that the “principal purpose” was “to invest in the commodity and stock markets” through the CFF and to have the investments managed in the sole and complete discretion of the managing agent. The managing agent’s duties were spelled out in detail and a management fee was provided.

The original agreement also established procedures for individual investors to “cash-out” of the CFF. The CFF retained its continuity though its membership was fluid, thus meeting another Hidden Lake criterion.

In the “Amendment to Investment Agreement” the investors reinforced the CFF’s legal status by expressly confirming their intent to participate in a commodities pool. The amended agreement was prompted by a CFF reorganization and a desire to conform with CFTC commodity pool operator regulations. The name “Chilcott Futures Fund” was formally adopted in connection with this reorganization.

The investors acknowledged in the amended agreement that they were investors in a continuing entity known as a commodity pool operated by a pool “operator” or an affiliated company, Chilcott Portfolio Management, Inc. (CPMI). Paragraph one of the amendment contains a clause stating that the purpose of the CFF is “to trade, buy, sell, spread or otherwise acquire, hold or dispose of commodity futures contracts..... [T]he objective of the Fund is appreciation of its assets through speculative trading and the receipt of interest and earnings thereon.” The amended agreement establishes a principal place of business for the CFF at the CPMI offices in Ft. Collins.

The investors’ ownership interests in the CFF received further clarification in the amended agreement. Investors owned “units” in the CFF with each unit valued at $1,000. The amended agreement went on to define the pool operator’s powers and responsibilities, to refine management procedures, and to confirm prior profit distribution practices.

I find and conclude that the CFF meets the Hidden Lake standards and at all material times, both before and after the name Chilcott Futures Fund was officially adopted, the CFF was an unincorporated association having capacity to sue. That finding is supported by the holding in Heinhold Hog Market, Inc. v. McCoy, 700 F.2d 611 (10th Cir.1983). In Heinhold, the Tenth Circuit addressed the question whether the National Commodity Exchange (NCE) was a partnership or other form of unincorporated association under either federal or Colorado law. The NCE acted as a “private warehouse exchange bank” for members of a tax protestors group. Members would send federal reserve notes to the NCE for conversion into silver or gold. The NCE would convert the silver and gold back to reserve notes at a member’s direction and then pay creditors designated by the member. In effect, the NCE was a bill paying service intended to conceal the paper trail of the member’s financial dealings.

The NCE’s structure was in many ways similar to that of the CFF. There was no principal officer of the NCE. Testimony indicated that the operator’s authority and control over the NCE was absolute and irrevocable. There was no contact between members; a member acted only through the NCE as his or her sole agent.

Notwithstanding these facts, the Court of Appeals affirmed Judge Weinshienk’s holding that the NCE was a partnership or other form of unincorporated association.

The CFF’s procedures and governing framework are far more definite than the NCE’s structure. As the court stated in Heinhold, “[wjhenever people band together for a particular purpose, the law determines what obligations they owe one another and what rights are possessed by outsiders who deal with the organization or who have a lawful interest in a participant’s property held by the organization.” Id. at 615. It is clear from Hidden Lake and Heinhold, that Colorado state law has recognized the capacity to sue of entities far • less formalized or elaborate in their structure and organization than the CFF.

Defendants argue that the CFF is a fiction because the plaintiff has not categorized some investors as CFF members even though they signed investor agreements. That argument is not determinative on the capacity issue. It will be the plaintiff’s burden at the trial on the merits to establish which individual investors became CFF members before the plaintiff will be allowed to seek damages for dissipation of those investors’ funds.

Defendants further argue that no entity could have existed because there was no common intent among the investors. Defendants point out that some CFF investors believed that Chilcott was investing their money- in conservative treasury bills, whereas others believed that their money was being invested in high-risk commodities.

Defendants err in focusing solely on Chilcott’s fraudulent misrepresentations. It is undisputed that Chilcott painted different pictures for different investors as to the scope, profitability and performance of their supposed investments. Chilcott would represent that the CFF’s funds were pooled in low risk investments if he felt that was what a prospective investor wanted to hear before he would invest. An entirely different representation might be made to the next unfortunate investor.

The focus of this inquiry is not on the flood of falsehoods unleashed by Chilcott. Rather, the concern here is with the intent of the investors to participate in an investment pool. The investors had a common intent to comingle their money for collective investment with the common purpose of reaping greater profit through pooled investment. The CFF was the vehicle for that common intent and purpose. In complex fraud cases, courts cannot allow themselves to be diverted or confused by the camouflage of details which merely sidetrack the main inquiry.

That inquiry is whether the CFF is an unincorporated association under Colorado law. It should be noted that the trend in other jurisdictions “has been the rejection of legal niceties to assure full recognition of the unincorporated association as a separate legal entity.” Barr v. United Methodist Church, 90 Cal.App.3d 259, 153 Cal. Rptr. 322 (1979), cert. denied 444 U.S. 973, 100 S.Ct. 468, 62 L.Ed.2d 388 rehearing denied 444 U.S. 1049, 100 S.Ct. 742, 62 L.Ed.2d 737 (1980).

“We must recognize that the society of today rests upon the foundation of group structures of all types, such as the corporation, the cooperative society, the public utility. Such groups must, of course, operate successfully within the society; one of the prerequisites to that functioning is generally, liability to suit and opportunity for suit. To frustrate that viability by the imposition of outmoded concepts would be to impair the institutions as well as to impede the judicial process.” Daniels v. Sanitarium Assn., Inc., 59 Cal.2d 602, 607-608, 30 Cal.Rptr. 828, 832, 381 P.2d 652, 656.

See also Marshall v. International Longshoremen’s & Warehousemen’s Union, 57 Cal.2d 781, 22 Cal.Rptr. 211, 371 P.2d 987 (1962).

The California courts have followed this trend by formulating a liberal definition of an unincorporated association.

“The criteria applied to determine whether an entity is an unincorporated association are no more complicated than (1) a group whose members share a common purpose, and (2) who function under a common name under circumstances where fairness requires the group be recognized as a legal entity.” Barr v. United Methodist Church, 90 Cal.App.3d 259, 153 Cal-Rptr. 322 (1979) (holding that the United Methodist Church was an unincorporated association which could sue or be sued).

The Barr opinion pointed out that a variety of organizations have been held to be unincorporated associations under California law. See Friends of Mammoth v. Board of Supervisors, 8 Cal.3d 247, 104 Cal.Rptr. 761, 502 P.2d 1049 (1972) (environmental society); Jardine v. Superior Court, 213 Cal. 301, 307-08, 2 P.2d 756, 759 (1931) (stock exchange); California State University, Hayward v. National Collegiate Athletic Assn., 47 Cal.App.3d 533, 121 Cal. Rptr. 85 (1975) (athletic organization); White v. Cox, 17 Cal.App.3d 824, 95 Cal. Rptr. 259 (1971) (condominium owners); Herald v. Glendale Lodge, No. 1289, B.P. O.E., 46 Cal.App. 325, 189 P. 329 (1920) (lodge).

A similarly liberal definition of an unincorporated association is found in Heifetz v. Rockaway Point Volunteer Fire Department, 124 N.Y.S.2d 257, 260 (1953) aff'd, 282 App.Div. 1062, 126 N.Y.S.2d 604 (1983). In Heifetz, an unincorporated association was defined as “an organization composed of a body of persons united without a charter for the prosecution of some common enterprise. The court held that a volunteer fire department met that definition.

In State of Alaska v. Aleut Corporation, 541 P.2d 730 (Alaska 1975), the court relied on the Hidden Lake standard to find that several native villages in the Aleutian Islands had capacity to sue. Because the villages had identifiable officers who could be held accountable for the litigation, the Hidden Lake standard was met.

In Health Care Equalization Committee v. Iowa Medical Society, 501 F.Supp. 970 (S.D.Iowa 1980) the court stated that the Iowa and federal definitions of an unincorporated association were similar and very broad. The court defined an unincorporated association as “a body of persons united without a charter, but upon the methods and forms used by incorporated bodies for the prosecution of some common enterprise.” Id. at 976. The court went on to hold that the plaintiff was an unincorporated association with capacity to sue merely on the basis that its common goal was the prosecution of the underlying case and it had the power to make by-laws, compensate members, and conduct activities in furtherance of its purpose. Id. at 976.

The federal cases follow the trend of broadly defining an unincorporated association. In Associated Students of the University of California at Riverside v. Kleindienst, 60 F.R.D. 65, 67 (C.D.Cal. 1973) the court stated that an unincorporated association is “a voluntary group of persons, without a charter, formed by mutual consent for the purpose of promoting a common enterprise or prosecuting a common objective.” The court held that a student body organization met that definition. The same definition was approved in Testa v. Janssen, 482 F.Supp. 1195 (W.D.Pa. 1980). In Testa, however, the court found that the defendant Wes Farrell Organization was not an unincorporated association but merely a label to identify numerous companies.

I find and conclude that the CFF identity was not a mere label but the name of a distinct entity. It meets the broad definition of an unincorporated association used in Colorado as well as in other jurisdictions. The CFF investors used a common name, had a common intent and purpose, signed identical documents which governed the organization, had an identifiable managing agent and had a specific set of operating procedures.

Finally, as stated in Barr v. United Methodist Church, 90 Cal.App.3d 259, 266, 153 Cal.Rptr. 322, 327 (1979), “[o]n a national basis, the trend continues to assure legal status to organizations where in fairness it is appropriate.” Fundamental fairness requires that the CFF be recognized as having capacity to sue as an unincorporated association. If the CFF is found not to have capacity to sue, the investors’ only remedy would be to bring individual suits against the defendants. At the hearing on these motions to dismiss, it was represented that 90 to 95 percent of such individual investor suits now would be time barred by applicable statutes of limitations. It is obvious that the investors have chosen to rely on this receivership action rather than to pursue separately their individual suits and therefore, have been lulled to sleep on their rights during the time this suit has been pending. Unfortunately, a substantial amount of that time was consumed by the order staying individual investor suits while this case proceeded. That stay order was eventually reversed by the Tenth Circuit Court of Appeals. See Commodities Futures Trading Commission v. Chilcott Portfolio Management, Inc., 713 F.2d 1477 (10th Cir.1983). It would be grossly inequitable to dismiss this case, thus barring any relief to most of the investors, in light of that mistaken stay order.

I find and conclude that under Colorado law the CFF is an unincorporated association with capacity to sue.

III. Standing.

The United States Constitution, Article III, limits the jurisdiction of federal courts to “cases” and “controversies.” An association may have standing if it seeks judicial relief for injuries to the association. Warth v. Seldin, 422 U.S. 490, 95 S.Ct. 2197, 45 L.Ed.2d 343 (1975). In other words, the association must have a “personal stake in the outcome of the controversy.” Id. at 498-99, quoting, Baker v. Carr, 369 U.S. 186, 82 S.Ct. 691, 7 L.Ed.2d 663 (1962).

As this court stated in Mountain States Legal Foundation v. City and County of Denver, 567 F.Supp. 476, 478 (D.Colo.1983), the constitutional requirement of a personal stake in the controversy has two prongs. First, the plaintiff must show that it has suffered or will incur some injury in fact that is both distinct and palpable. Duke Power Co. v. Carolina Environmental Study Group, 438 U.S. 59, 98 S.Ct. 2620, 57 L.Ed.2d 595 (1978). Second, the plaintiff also must prove a “fairly traceable” causal relationship between the defendants’ challenged conduct and that injury. Arlington Heights v. Metropolitan Housing Development Corp., 429 U.S. 252, 97 S.Ct. 555, 50 L.Ed.2d 450 (1977).

As to the first prong, the Tenth Circuit Court of Appeals elaborated on the injury in fact requirement in Citizens Concerned for Separation of Church and State v. City and County of Denver, 628 F.2d 1289 (10th Cir.1980), cert. denied, 452 U.S. 963, 101 S.Ct. 3114, 69 L.Ed.2d 975 (1981):

“[T]he ‘injury in fact’ test requires more than an injury to a cognizable interest. It requires that the party seeking review be himself among the injured.” Id. at 1296, quoting Sierra Club v. Morton, 405 U.S. 727, 734-35, 92 S.Ct. 1361, 1365-66, 31 L.Ed.2d 636 (1972).

The court went on to hold that the plaintiff had not:

“established standing to sue in its own right____ There is no contention that Citizens will suffer any economic loss or injury____ The record is devoid of any demonstrable identification of Citizens in an organizational sense which could bring it within the realm of an ‘aggrieved person’ suffering an invasion of a legal right.” Id. at 1297.

Plaintiff in this case has made ample showing that the CFF incurred grievous economic loss. There is injury to the association; alleged dissipation of $50 million in CFF assets more than adequately satisfies the requirement that the injury in fact be distinct and palpable.

Similarly, as to the second personal stake prong, the injury to the CFF is fairly traceable to the challenged conduct of the defendants and the injury in fact asserted here is redressable by the claims remaining in this case.

None of the prudential considerations recognized as limitations upon standing to sue in federal court are present here. Plaintiff does not assert any “generalized grievance” or seek relief for persons or entities other than the CFF. The interests that the plaintiff seeks to vindicate are “arguably within the zone of interests to be protected or regulated” by the law governing the remaining claims. Association of Data Processing Services Organization v. Camp, 397 U.S. 150, 153, 90 S.Ct. 827, 829, 25 L.Ed.2d 184 (1970).

I find and conclude that the plaintiff possesses standing to sue. I further find and conclude that, based on the plaintiff’s capacity and standing to sue, the real-party-in-interest requirement has been met.

“Every civil action in the federal courts must, of course, be prosecuted in the name of the real party in interest. And, the ‘real party in interest’ is the one who, under applicable substantive law, has the legal right to bring the suit. See: Hoeppner Construction Company v. United States, 10 Cir., 287 F.2d 108.” Boeing Airplane Co. v. Perry, 322 F.2d 589, 591 (10th Cir.1963).

Accordingly,

IT IS ORDERED that the defendants’ motions to dismiss are denied.

IT IS FURTHER ORDERED that the defendants shall answer the second amended complaint within twenty days.

      . The investment agreement expressly provides, in part, as follows:
      "THIS AGREEMENT, made and entered into this _ day of _, among THOMAS D. CHILCOTT, hereinafter called 'Managing Agent,’, [and _], hereinafter called 'Investor'.
      WHEREAS, the Investor has agreed to make contributions to a common investment fund, hereinafter called the ‘investment fund', and
      WHEREAS, said investment fund is established for the purpose of trading in the commodities and stock market exclusively, and
      WHEREAS, the Investor is desirous of obtaining management services and investment advice from the Managing Agent and said Agent has agreed to render said services and manage the investment fund.”

      . Even if the CFF did not qualify as an unincorporated association, it has capacity to sue because it emobodies the essential characteristics of a commodity pool governed by federal commodity law and regulations.


author: O’KELLEY, District Judge.

text:
    Ann BLISS v. COBB COUNTY.
    Civ. No. C-84-170-A.
    United States District Court, N.D. Georgia, Atlanta Division.
    Dec. 7, 1984.
    Gregory T. Jones, James M. Anderson, III, Atlanta, Ga., for plaintiff.
    Theodore Freeman, Atlanta, Ga., for defendant.
   ORDER

O’KELLEY, District Judge.

Presently pending is the motion of defendant Cobb County for summary judgment. The facts are not disputed. Plaintiff, a citizen of Ohio, was walking along the northern side of Windy Hill Road in Cobb County, Georgia, on March 29, 1983. She stepped on a manhole cover, which tilted up. Plaintiff fell into the manhole, sustaining injuries. At the time of the incident, defendant Cobb County owned and maintained the manhole cover, and attendant storm sewer. Additionally, defendant had a policy of general liability insurance in effect on March 29, 1983.

Plaintiff brought this diversity action claiming that defendant was negligent in the construction and maintenance of the manhole, which proximately caused her injuries. Defendant’s motion is based on its claim of sovereign immunity. Upon review, the court grants defendant’s motion for summary judgment.

The sole issue in the instant action is whether the 1983 Georgia Constitution provides for waiver of sovereign immunity for counties to the extent of liability insurance coverage. To fully analyze and understand this issue, a discussion of sovereign immunity’s history in Georgia is necessary. The state itself possessed sovereign immunity at common law. Revels v. Tift County, 235 Ga. 333, 219 S.E.2d 445 (1975). In 1974, an amendment to the Georgia Constitution provided for a “State Court of Claims with jurisdiction to try and dispose of cases involving claims for injury and damage ... against the State of Georgia, its agencies or political subdivision ____” Ga. Const.Art. VI, § V, 111 (1976). The amendment also stated that it did not “constitute a waiver of the immunity of the State ... but such sovereign immunity is expressly reserved” except as set forth in the Constitution or by the General Assembly. Id. Georgia courts interpreted this provision to elevate sovereign immunity to constitutional status. See, e.g., Revels v. Tift County, 235 Ga. 333, 219 S.E.2d 445 (1975). Thus only the legislature, and not the courts, could erode sovereign immunity-

Sovereign immunity covered counties pursuant to Ga.Code Ann. § 23-1502 (Harrison 1971) (now codified as O.C.G.A. § 36-1-4), since 1895. Revels, 235 Ga. at 334, 219 S.E.2d at 446. Article VI, § V, 111 was held to elevate a county’s claim of sovereign immunity to a constitutional level as well, even though the amendment stated that it did not constitute a waiver of a “state” claim of immunity. Nelson v. Spalding County, 249 Ga. 334, 290 S.E.2d 915 (1982). This interpretation is supported by the amendment’s language authorizing a court of claims for the state and its political subdivisions.

Prior to the 1983 Constitution, sovereign immunity clearly protected a county except where the Code or the Constitution expressly provided for waiver. See e.g., Art. I, § III, 111 (no immunity for the taking of property), O.C.G.A. § 33-24-51 (liability insurance for motor vehicles constitutes waiver). The 1983 Constitution provides that “sovereign immunity extends to the state and all of its departments and agencies.” It can be waived for contractor actions and for damage actions “for any claim against the state or any of its departments and agencies for which liability insurance protection ... has been provided but only to the extent of any ... insurance provided.” Ga. Const. Art. I, § II, ¶ IX (1983). Sovereign immunity “of the state or any of its departments and agencies may ... be waived further by Act of the General Assembly which specifically provides that ... immunity is hereby waived and the extent of the waiver.” Id. Another provision of the new Constitution, found in the article on local government, provides that “[t]he General Assembly may waive the immunity of counties, municipalities, and school districts by law.” Art. IX, § II, IIIX (1983) (the Immunity Provision).

Plaintiff contends that Art. I, § II, ¶ IX (the Waiver Provision) applies to counties; defendant argues that it does not. It’s language is “the state and any of its departments and agencies.” Although this language is clear, the court has examined definitions of departments and agencies found in the Georgia Code to interpret these provisions; the Constitution does not define them. A review of the definitional provisions in the statutes indicates that “department” and “agency” does not include “county.” Section 50-4-1, the definitions section of the title on state government, states that

[ujnless otherwise required by context, as used in this Code when related to the executive branch of state government, the term: ... (2) “Agency” means any officer, department, division, bureau, board, commission, or agency in the executive branch of the state government ... (4) “Department” means a principal, functional, and administrative entity and its divisions within the executive branch of the state government.

O.C.G.A. § 50-4-1. Statutory provisions define agency and department, and county differently. See e.g., O.C.G.A. § 50-5-143 (political subdivisions defined as county, municipal corporation, or board of education); id. § 50-13-2 (in that chapter agency is each state board, bureau, committee, department, activity or official authorized by law to make rules or decide cases, with exceptions); id. (agency, as used only in that chapter, defined as inter alia departments, bureaus, boards, of the state, county, et al.) The court thus will not interpret “departments and agencies” differently than the legislature’s definitions, which comport with the Waiver Provision’s plain meaning.

Although the language of the Waiver Provision demonstrates clearly that it does not apply to counties, the court also has reviewed other statutory provisions dealing with immunity See Undercofler v. L.C. Robinson & Sons, Inc., 111 Ga.App. 411, 141 S.E.2d 847, aff'd, 221 Ga. 391, 144 S.E.2d 755 (1965). Most of these provisions show that “department and agency” and “county” often are treated differently regarding immunity. Some of these provisions include O.C.G.A. § 36-1-4 (“a county is not liable to suit ... unless made so by statute.”) (formerly Ga.Code Ann. § 23-1502); O.C.G.A. § 36-33-1 (municipal corporation liable for official’s acts in certain circumstances); id. 32-2-5 (actions by or against Georgia DOT authorized; does not waive immunity); id. 45-9-1 (purchase of liability insurance for public officials and employees of any agency; board, bureau, commission, department, or authority of state); id. 45-9-5 (the former provision not a waiver of immunity); id. 45-9-20 (purchase of liability insurance for members of municipal corporations, counties, and other public bodies:); id. 45-9-22 (counties, municipal corporations, other public bodies may pay claims); id. 45-9-23 (provision not waiver of immunity for county, municipal corporations, other public body, official or member of, or by any other public body, board, agency, or political subdivision of state); id. 33-24-51 (authorizing liability insurance purchase regarding motor vehicles by counties, municipal corporations); id. 45-9-40 (State Department of Administrative Services authorized to purchase automobile liability insurance for all departments, boards, bureaus, agencies, and instrumentalities of state) (not a waiver of immunity of state or any of its agencies or instrumentalities); id. 45-9-60 (indemnification of public officer or official out of funds available to his department or office); id. 45-9-62 (former section applies to all state public officials holding statewide office); id. 50-21-1 (sovereign immunity waived as to actions regarding contracts entered into by state, departments and agencies of state, and state authorities).

These statutes’ separate schemes for state departments and agencies and for counties or local entities indicates that the Waiver Provision could have included the phrases county, political subdivision, or a similar unambiguous term. That the provision did not mention the latter terms demonstrates lack of intent to include counties.

Finally, the relationship between the Waiver Provision and the Immunity Provision supports the court’s interpretation of the immunity issue. The latter specifically refers to counties. Reading the provisions together demonstrates that the Waiver Provision applies to agencies and departments of the state government, and the Immunity Provision concerns counties. A different interpretation would render the latter superfluous, which is contrary to rules of construction. See Butterworth v. Butterworth, 227 Ga. 301, 180 S.E.2d 549 (1971). Former Art. VI, § V, ¶ I applied to counties, Nelson, 249 Ga. at 335, 290 S.E.2d at 917, but its language stated “political subdivision” which included counties. The court will not interpret the Waiver Provision as applicable to counties, which ignores its plain meaning, and renders unnecessary the Immunity Provision.

Plaintiff cites two recent Georgia cases concerning county immunity. In Wilmoth v. Henry County, 251 Ga. 643, 309 S.E.2d 126 (1983), the Georgia Supreme Court held that a personal injury action against the county was barred because the incident occurred prior to the January 1, 1983 effective date of the Waiver Provision. The Georgia Court of Appeals followed Wilmoth in Hill v. McClure, 171 Ga.App. 588, 320 S.E.2d 562 (1984). In Hill, the court held that a wrongful death action against Cobb County Board of Education members was barred because the provision was not in effect when the cause of action accrued. Both, cases were decided on the principle that this constitutional provision could not be retroactively applied, and neither stated that the provision applied to counties. Thus, that issue was not before the courts.

This court believes that when confronted with the exact question at issue here, the Georgia courts will look to the plain meaning of the Waiver and Immunity provisions, and hold that the Waiver Provision does not apply to counties. Any problems with sovereign immunity for counties must await the action of the legislature, because in Georgia only the Constitution or Statute may erase the concept that “the sovereign can do no wrong.”

The court grants defendant’s motion for summary judgment.


author: GARRITY, District Judge.

text:
    Ernest AVERY et al., Plaintiffs, v. Margaret M. HECKLER, Secretary of Health and Human Services, Defendant.
    Civ. A. No. 82-3963-G.
    United States District Court, D. Massachusetts.
    Dec. 10, 1984.

      Sarah Anderson,' Linda. Landry, Neighborhood Legal Services, Inc., Lynn, Mass., Judith Saltzman, Greater Boston Legal Services, Boston, Mass., Jack Fisher, Cambridge and Somerville Legal Services, Cambridge, Mass., Laura Rosenthal, Mass. Law Reform Institute, Boston, Mass., for plaintiffs.
    Jamie W. Katz, Asst. Atty. Gen., Boston, Mass., for defendant.
   MEMORANDUM OF DECISION

GARRITY, District Judge.

Plaintiffs brought the instant action seeking declaratory and injunctive relief against the Secretary of Health and Human Services (“the Secretary”) for violating Title II of the Social Security Act (“the Act”), 42 U.S.C. § 401 et seq., Title XVI of the Act, 42 U.S.C. § 1381 et seq., the regulations promulgated thereunder, and the Fifth and Fourteenth Amendments to the United States Constitution. On April 12, 1984, this court held that it had jurisdiction under § 205(g) of the Social Security Act, 42 U.S.C. § 405(g), over plaintiffs’ challenges to the Secretary’s policy of refusing to adhere to a medical improvement standard when terminating disability benefits, her use of a restrictive psychiatric standard for younger persons, and her failure to give adequate weight to claimants’ complaints of pain. Avery v. Heckler, D.Mass. 1984, 584 F.Supp. 312. The court then certified the following class under F.R. Civ.P. 23(b)(2) with respect to the medical improvement issue:

All SSI and SSDI beneficiaries residing in Massachusetts who have been or are receiving disability benefits and who, haying presented claims of continuing disability, have been or will be disqualified from receiving benefits as a result of the Secretary’s failure to adhere to a medical improvement standard when evaluating claims of continuing disability-

Plaintiffs’ certification motion was denied with respect to the psychiatric standard and evidence of pain issues because plaintiffs failed to meet the numerosity requirement of Rule 23(a), F.R.Civ.P. Therefore, the named plaintiffs were left to litigate their claims on these two issues on an individual basis.

On October 9, 1984, the President signed the Social Security Disability Benefits Reform Act of 1984 (“Disability Reform Act”), Pub.L. No. 98-460, 98 Stat. 1794 et seq. Section 2 of the new Act adopts a medical improvement standard as the standard of review for the termination of disability benefits. Under Section 2(d)(3) of the Act, the cases of all members of classes (other than named plaintiffs) certified on or before September 19, 1984 in class actions relating to medical improvement are to be remanded by the courts to the Secretary. The Act further requires that the Secretary notify these unnamed, class members by certified mail that they may request a review of the Secretary’s earlier determination that they were no longer disabled. Section 2(e) provides for the election of interim benefits by individuals while they await a redetermination by the Secretary.

The Disability Reform Act also addresses the pain and mental impairment issues raised by plaintiffs in this action. Section 3 of the Act contains a standard for the evaluation of pain and orders the Secretary to appoint a commission to study the evaluation of pain in determining whether an individual is under a disability. Section 5 provides that any individual who was found to be not disabled pursuant to an initial disability determination or a continuing eligibility review between March 1, 1981 and October 9, 1984 may reapply and be evaluated under a new mental impairment standard which must be promulgated by the Secretary within 120 days of October 9, 1984.

Subsequent to the statute’s enactment, the parties filed numerous motions and extensive memoranda of law on both new and pending motions. The court heard oral argument on the following motions:

1) The Secretary’s and plaintiffs’ motions to remand.
2) The Secretary’s motion to dismiss.
3) The Secretary’s motion to alter or amend the definition of the class.
. 4) The Secretary’s and plaintiffs’ motions concerning notification procedures.
5) Motion to intervene as plaintiff by Frances Teague.
6) Plaintiffs’ motion to amend complaint.

I. Cross-motions for Remand

Pursuant to section 2(d)(3) of the Disability Reform Act, the parties have both moved that the court remand the cases of all unnamed class members to the Secretary. The Secretary’s motion further seeks an end to the court’s jurisdiction over the class action once it orders remand. Plaintiffs’ motion to remand asks for con-' tinuation of jurisdiction and various court orders implementing the provisions of the new Act.

Because the Act requires that the cases of the unnamed class members be remanded to the Secretary, the court grants the parties’ motions to the extent that they request remand. However, the court rejects the Secretary’s claim that it now lacks jurisdiction over the class action (see infra pp. 239-240). Furthermore, the court adopts plaintiffs’ notification procedures in part only (see infra p. 241).

II. The Secretary’s Motion to Alter or Amend the Definition of the Class

The Secretary has moved that the definition of the certified class be amended by the court in two respects. Firstly, the Secretary requests that the class be limited to those persons who were terminated after March 1, 1981, at which time periodic eligibility reviews commenced. Secondly, the Secretary asks that the class be redefined to exclude those persons who have received an adverse decision from the United States District Court or the First Circuit Court of Appeals and who do not have an appeal pending before the First Circuit Court of Appeals.

The Disability Reform Act requires that the court remand to the Secretary the cases of all unnamed members of classes relating to medical improvement certified on or before September 19, 1984. This statutory remedy indicates that Congress intended to provide relief to all class mem-, bers participating in class actions then pending before the courts. As noted in the Joint Explanatory Statement of the Committee of Conference, Congressional Record, H. 9828 (September 19, 1984), ’ “[the new Act] provides that the existing certified classes will be covered by the new standard in order to resolve the existing controversy over the medical improvement issue in the courts.” By redefining the class at this late date, we would frustrate congressional intent, as well as the justified expectations of class members. Therefore, the Secretary’s motion to alter or amend the definition of the class is denied.

III. The Secretary’s Motion to Dismiss

The Secretary has also moved to dismiss the complaint, claiming that the Disability Reform Act disposes of the three outstanding issues in this action: medical improvement, pain, and mental impairment.

A. Medical Improvement

According to the Secretary, the new Act’s adoption of a medical improvement standard, in conjunction with the provision for remand of plaintiff class members’ cases and payment of interim benefits, moots plaintiffs’ claims concerning the medical improvement issue. Furthermore, the Secretary argues that once the court remands these cases to the Secretary, it lacks jurisdiction over the class or, alternatively, lacks the authority to impose procedures and deadlines on the Secretary for the implementation of the statute.

We agree that Congress’ adoption of a medical improvement standard and statutory remedy for those claimants previously injured by the Secretary’s failure to follow such a standard moots one of plaintiffs’ claims, viz., that the Secretary has illegally refused to use a medical improvement standard. However, the new Act’s remedial, provisions do not completely moot plaintiffs’ cause of action. Nor does the Act limit this court’s jurisdiction over the present action or its authority to ensure that plaintiffs’ rights under .the statute are fully protected.

As stated above, section 2 of the Disability Reform Act was enacted in response to .the controversy in the courts surrounding the medical improvement issue. In the •new Act, Congress adopted a standard similar to those adopted by most courts addressing this issue, but adamantly opposed by the Secretary, ánd provided a remedy for those plaintiffs and plaintiff class members whose benefits had been terminated without a finding by the Secretary of medical improvement. However, Congress failed to provide for the different problems which have and will continue to arise with respect to the complete implementation of this remedy, particularly with respect to the notification of unnamed plaintiff class members and the payment of interim benefits to plaintiffs who elect to receive them. Therefore, we conclude that plaintiffs’ claims are not entirely moot.

' The court’s jurisdiction over this action continues to exist under section 205(g) of the Social Security Act. Nothing in the new Act has altered the basis for our finding of jurisdiction in this case. Courts retain jurisdiction during remand and may exercise their equitable powers during remand. Zambrana v. Califano, 2 Cir.1981, 651 F.2d 842, 844. Therefore, we have jurisdiction to oversee the implementation of the Congressional remedy in this case. Furthermore, since the statute does not indicate any Congressional intent to preclude the courts from exercising their general equitable powers in order to ensure the proper implementation of the new Act, Califano v. Yamasaki, 1979, 442 U.S. 682, 705, 99 S.Ct. 2545, 2559, 61 L.Ed.2d 176, we do not lack the authority to impose procedures and deadlines on the parties.

B. Pain

The Secretary has moved for dismissal as moot that part of plaintiffs’ complaint which alleges that the Secretary has improperly refused to find claimants to be disabled on the basis of subjective complaints of pain and its intensity unless objective or clinical medical evidence demonstrates that there is a medical condition that could be reasonably expected to produce those symptoms. The Secretary argues, and we agree, that section 3 of the Disability Reform Act establishes a standard for evaluating pain which, according to the legislative history of the Act, adopts the Secretary’s present regulations and policies.

Plaintiffs argue that they now challenge only Social Security Ruling 82-58, which they claim is inconsistent with the standard established both in the new Act and the Secretary’s own regulations because it requires that claimants present clinical evidence of the intensity of their pain. However, the statute itself requires that statements of the claimant or his physician as to the intensity and persistence of pain be reasonably accepted as consistent with the medical signs and findings. Furthermore, the legislative history indicates that all of the Secretary’s policies with respect to the pain issue were ratified by Congress in the new Act. Finally, we think that it would be premature to evaluate the Secretary’s policies before she has had the opportunity to ensure that her regulations and policies comport with the new statutory standard. Therefore, we hold that plaintiffs’ claims concerning the pain issue are moot. The court also denies Frances Teague’s motion to intervene, since the basis of her complaint is a challenge to the Secretary’s pain policy. Similarly, plaintiffs’ motion to amend their first amended complaint to add a class action concerning the pain issue is also denied.

C. Mental Impairment

The next issue to address is whether this court should dismiss plaintiffs’ complaint with respect to their claim that the Secretary has refused to find 18-49 year old .claimants, whose sole impairments are mental, to be disabled unless their mental impairments fall within the listed impairments in Appendix 1 to the Secretary’s regulations. According to the legislative history, section 5 of the Disability Reform Act was enacted in response to claims that the Secretary has been evaluating these claimants under an illegal standard. Under section 5, any individual with a mental impairment who was found to be not disabled between March 1, 1981 and October 9, 1984 may reapply and be evaluated under a new mental impairment standard which must realistically evaluate that individual’s ability to work. This new standard must be enacted by the Secretary within 120 days of October 9, 1980. Claimants who are determined to have been wrongfully denied benefits will receive one year of retroactive benefits.

Plaintiffs oppose dismissal on the grounds that the Disability Reform Act does not provide plaintiffs, nor their proposed class, with all of the relief they seek, namely, notification procedures to inform claimants of their rights under the new Act, retroactive benefits extending back in time further than one year, and relief for persons wrongfully terminated prior to March 1, 1981. True, plaintiffs’ claims are not mooted on these issues. However, for this court to go beyond the statutory remedy by granting plaintiffs’ further requests for relief would, in our opinion, violate the intent of Congress, which was to provide a legislative remedy in response to contentions that the Secretary employed an illegal standard in evaluating mentally impaired persons. See, Remarks of Senator Moynihan, Congressional Record, S. 11463 (September 19, 1984). Therefore, we dismiss plaintiffs’ claims with respect to this issue. We also deny plaintiffs’ motion to amend their complaint to add a class action which would contest the Secretary’s policies concerning mental impairment.

IV. Cross-motions Concerning Notification Procedures

It is undisputed that in order to preserve the plaintiff class members’ rights under the new Act, notification of the unnamed class members and the payment of interim benefits must be done expeditiously. However, the statute does not provide that uniform notification and reinstatement procedures be established by the Secretary. Congress clearly intended to establish a uniform standard of review for the termination of disability benefits which would incorporate a medical improvement standard. On the other hand, it did not indicate that the implementation of its statutory remedy must be uniform. After reviewing the parties’ memoranda and proposed orders, we adopt the timetable for notification of class members proposed in plaintiffs’ version, with modifications. Therefore, the Secretary is ordered to notify by January 15, 1985 those class members whose benefits were terminated on or after March 1, 1981, and by February 15,. 1985 those class members whose benefits were terminated between June 1, 1976 and March 1, 1981. We further order that the parties negotiate with each other concerning procedures for notification and for determining class membership. The court has not adopted plaintiffs’ proposals regarding the payment of interim benefits, but orders the parties to negotiate with respect to that issue as well.

V. Summary

The court grants the parties’ motions to remand the cases of all unnamed class members to the Secretary. The Secretary’s motion to alter or amend the definition of the class is denied. Her motion to dismiss is denied with respect to the medical improvement issue, but granted with respect to the pain and mental impairment standard. The motion to intervene as plaintiff by Frances Teague is denied. Plaintiffs’ motion to amend their complaint is also denied. Finally, the court adopts plaintiffs’ motion for notification of class members in part, as delineated in the court’s procedural order filed today, and denies the Secretary’s motion relating to this issue.

      . All named class members are currently receiving benefits or have been ordered into payment status. Therefore, their cases need not be remanded pursuant to Section 2(d)(2)(C) of the new Act.

      . Therefore, we also find that plaintiffs’ motion for partial summary judgment on the medical improvement issue is moot.

      . If at a later date plaintiffs believe that the Secretary has not complied with the standard adopted by Congress, they would certainly be free to bring a new action.

      . Additionally, on April 12, 1984 class certification on the mental impairment issue was denied for failure to meet the numerosity requirement of Rule 23(a), F.R.Civ.P. Plaintiffs have not sought to add any new plaintiffs contesting the Secretary’s policies, nor provided the court with any new basis for certifying a class at this time.