author: EDELSTEIN, District Judge:

text:
    AMERICAN FEDERATION OF STATE, COUNTY and MUNICIPAL EMPLOYEES, AFL-CIO (AFSCME), Chappelle, et al., Plaintiffs, v. The CITY OF NEW YORK, et al., Defendants.
    No. 84 Civ. 4529 (DNE).
    United States District Court, S.D. New York.
    Dec. 27, 1984.

      Winn Newman & Associates, Washington, D.C., Beverly Gross, General Counsel, New York City, for plaintiffs; Lisa M. Newell, Washington, D.C., and Audrey Browne, New York City, of counsel.
    Frederick A.O. Schwarz, Jr., Corporation Counsel, New York City, for defendants; Elissa Hutner, New York City, of counsel.
   MEMORANDUM OPINION AND ORDER

EDELSTEIN, District Judge:

Plaintiffs brought this class action, pursuant to Title VII of the Civil Rights Act of 1964, 42 U.S.C. § 2000e et seq., against the City of New York, the Mayor of New York and certain departments of the city government (the “city defendants”), alleging sex and race based discrimination in wages, promotion and other terms and conditions of employment. The named plaintiffs are representatives for a class of “all employees employed within the applicable limitations period by the City of New York in the classifications of Police Communications Technician (PCT) and Supervising Police Communications Technician (SPCT).” Complaint at ¶ 3. The acts of discrimination alleged are that defendants: (1) maintain job classifications and assign jobs on the basis of race and sex; (2) discriminate on the basis of race and sex “by compensating PCTs and SPCTs who are predominantly female and minority less than Fire Alarm Dispatchers (FADs) and Supervisory Fire Alarm Dispatchers (SFADs) who are predominantly male and white and whose duties are substantially equal and/or require an equivalent or lesser composite of skill, effort, responsibility and working conditions ... ”; (3) discriminate on the basis of race and sex in determining promotions from PCT to SPOT; and (4) discriminate on the basis of race and sex in other terms and conditions of employment. Complaint at ¶ 4(a)-(d).

On August 1, 1984, defendants filed an answer to the complaint. The answer includes a counterclaim for contribution or indemnification against the unions. The counterclaim alleges:

In the event the City is found liable to have discriminated against plaintiffs in violation of Title VII, union plaintiffs are responsible in whole or part in that they caused or attempted to cause defendants to discriminate against plaintiffs in that it caused or attempted to cause defendants to discriminate [sic] in violation of 42 U.S.C. Section 2000e-2(a) and (c).

Answer at 1128. The plaintiff unions have moved to dismiss the counterclaim.

DISCUSSION

Under the doctrine of contribution, one tortfeasor seeks to avoid paying more than his proportionate share of liability by joining another tortfeasor who is also partly liable for the plaintiffs loss. In Northwest Airlines, Inc. v. Transport Workers Union of America, 451 U.S. 77, 101 S.Ct. 1571, 67 L.Ed.2d 750 (1981), the Supreme Court held that an employer found liable to its employees under the Equal Pay Act of 1963, 29 U.S.C. § 206(d), and Title VII of the Civil Rights Act of 1964, has no statutory or common law right to contribution from unions which allegedly bear partial responsibility for the statutory violations. The Court stated that an employer’s right to contribution could only arise under two theories: (1) as an implied right of action under the statute; or (2) under federal common law.

Defendants do not have an implied right of action for contribution under Title VII. In Northwest Airlines, the Supreme Court examined the “language of the statute itself, the legislative history, the underlying purpose and structure of the statutory scheme, and the likelihood that Congress intended to supercede or to supplement existing state remedies.” Northwest Airlines, supra, 451 U.S. at 91, 101 S.Ct. at 1580. The Court found no manifestation of a congressional intent to create an implied right to contribution under Title VII. Accordingly, the statute does not provide the defendants herein with an implied right to contribution against the unions.

Defendants contend that the court, under its equitable powers, should fashion a common law cause of action for contribution against the unions. In Northwest Airlines, however, the Court expressly declined to “add a [common law] right to contribution to the statutory rights that Congress created in the Equal Pay Act and Title VII.” Id. at 98, 101 S.Ct. at 1584. The Court stated that Title VII constitutes “a comprehensive legislative scheme” that includes “an integrated system for enforcement,” id. at 97, 101 S.Ct. at 1584, and “[t]he Judiciary may not, in the face of such comprehensive legislative schemes, fashion new remedies that might upset carefully considered legislative programs.” Id.

Defendants contend that Northwest Airlines is distinguishable because the defendant there brought an independent action for contribution against the union. In contrast, the employer in this case has counterclaimed against the unions. Defendant refers the court to the unpublished opinion in Connecticut State Employees Ass’n [CSEA] v. Connecticut, Civ. Action No. H79-197 (D.Conn. November 18, 1981) (Claire, C.J.). In CSEA the court stated:

The Supreme Court’s reasoning in Northwest Airlines does not support the plaintiffs’ claim that defendants’ counterclaim should be dismissed at this state of pretrial discovery. The teaching of Northwest Airlines does not extend to situations where the employer counterclaims in a suit establishing liability between it and the plaintiff union. The Court will not permit the union, merely by bringing the employment discrimination action on behalf of its female members to insulate itself from liability for sex discrimination.

Id. at 4.

The court does not find the reasoning of CSEA persuasive. There is no danger of the union “insulating” itself from claims of employees for sex discrimination, by bringing an employment discrimination action on behalf of the employees. By merely taking the initiative in filing suit against the employer, the union is not immune to liability either in the same action or in a separate action for its own wrongdoing. All the union is insulated from is a claim for contribution by the defendant employer. According to the Supreme Court in Northwest Airlines, this is exactly the legislative scheme Congress enacted. If no claim can be asserted for contribution against unions in a separate action, Northwest Airlines, supra, and no claim for contribution may be asserted when the union is a defendant in the same action, Anderson v. Local 3 IBEW, 582 F.Supp. 627, 630-32 (S.D.N.Y. 1984), then there is no basis, either implicit in the statute or under federal common law, for fashioning a different rule when the union is a plaintiff.

Defendants’ counterclaim based on indemnification is also dismissed. As the court stated in Anderson, supra, 582 F.Supp. at 633, “the rationale of [Northwest Airlines] would equally bar claims for indemnity.”

Defendants alternatively contend that they have an independent cause of action against the unions based on Section 703(c) of Title VII, which provides:

(c) ... it shall be an unlawful practice for a labor organization—
(3) to cause or attempt to cause an employer to discriminate against an individual in violation of this section.

42 U.S.C. § 2000e-2(c)(3).

Section 706(f)(1) of the Civil Rights Act, 42 U.S.C. § 2000e-5(f)(l), provides that the “aggrieved party” may bring a civil action “against the respondent named in the charge ...,” after exhausting administrative remedies. There are two prerequisites to the filing of Title VII action in federal court: the timely filing of an administrative charge of discrimination with the EEOC and the filing of a complaint in the ■ district court within ninety days from the receipt of the right-to-sue letter. See 42 U.S.C. §§ 2000e-5(e) and (f)(1). Defendants concede that they have failed to meet both requirements.

Defendants contend that their failure to meet the jurisdictional prerequisites should be excused. They contend that the court should exercise ancillary jurisdiction over the employers’ claim against the union because it arises out of the same set of circumstances as the plaintiffs’ claims. See Newton v. Kroger Co., 501 F.Supp. 177, 178 (E.D.Ark.1980).

The general rule is that a party who has not been named in an EEOC charge or a right-to-sue letter may only be named as a defendant if the unnamed party had a substantial identity of interest with a party who was named as a respondent in the EEOC action, received notice of the charge and an opportunity to conciliate on that charge. Women in City Government United v. City of New York, 515 F.Supp. 295, 299 (S.D.N.Y.1981); Schick v. Bronstein, 447 F.Supp. 333, 336 (S.D.N.Y.1978). In this case, the union plaintiffs have no substantial identity of interest with the parties named in the EEOC charge, the city defendants. Moreover, the union plaintiffs were parties to the State Division proceedings only in their capacity as plaintiffs. They had no notice of the city defendants’ proposed charge against them. Any conciliation efforts occurring at the State Division involve only the defendants’ liability to the plaintiff employees. The unions’ liability either to the employees or to the defendants herein was not at issue. The fact that the unions participated in conciliation efforts vis-a-vis the employees’ claims against the city defendants is not sufficient under the statute to allow this court to exercise jurisdiction over the city defendants’ claim against the unions.

Moreover, the defendants do not have standing to assert a claim under Section 703(c) of Title YII against the unions. Although, a union’s role in ratifying a discriminatory practice could be enough to compel a finding of union liability, Donnell v. General Motors Corp., 576 F.2d 1292, 1300 (8th Cir.1978), that claim can only be brought by the person “aggrieved by the alleged unlawful employment practice,” 42 U.S.C. § 2000e-5(f)(l). Defendants’ counterclaim alleges that the unions “... caused or attempted to cause defendants to discriminate against plaintiffs____” If the union has in fact engaged in an unlawful employment practice, the only persons “aggrieved” under this allegation are the plaintiff-employees. An employer cannot be the victim of its own discriminatory employment practices. Alexander v. Gardner-Denver Co., 415 U.S. 36, 54, 94 S.Ct. 1011, 1022, 39 L.Ed.2d 147 (1974); Jersey Central Power and Lighting Co. v. Local Unions 327, etc., of I.B.E.W., 508 F.2d 687, 698 n. 31 (3d Cir.1975), vacated without opinion on other grounds, 425 U.S. 987, 96 S.Ct. 2196, 48 L.Ed.2d 812 (1976), on remand, 542 F.2d 8 (3d Cir.1976). The statute’s proscription of a union’s causing or attempting to cause an employer to discriminate was enacted for the benefit of employees; the statute does not create a right of action in favor of the discriminating employer. See Brennan v. Emerald Renovators, Inc., 410 F.Supp. 1057, 1060 (S.D.N.Y.1975).

Defendants further request that if the motion to dismiss is granted, the counterclaim should be dismissed without prejudice to allow them to file an administrative charge with the EEOC. However, it is too late in the day for the court to grant such relief. EEOC charges were filed by the plaintiffs almost one year ago. Moreover, this is a class action involving the interests of over 600 class members, not just the unions and the city defendants. The case involves relatively complicated and uncharted areas of “comparable worth.” These proceedings should not be delayed while the defendants file an EEOC charge and wait 180 days or more to receive a right-to-sue letter, particularly in view of the defendants’ failure to articulate the nature of the unions’ alleged unlawful conduct.

Finally, the defendants request leave to amend their answer to assert a pendent State claim under Sections 296 and 297 of the New York State Executive Law. Under Fed.R.Civ.P. 15(a), leave to amend a pleading “shall be freely given when justice so requires.” In deciding whether to grant leave to amend an answer the court will consider the degree of fairness to the plaintiff in terms of time, money, and legal resources necessary to respond to the amended answer, availability of evidence, and the amount of time that has passed before the motion to amend has been made. Brodvin v. Hertz Corp., 487 F.Supp. 1336, 1339 (S.D.N.Y.1980).

The unions contend that leave to amend should be denied for three reasons: (1) defendants lack standing to sue as “persons aggrieved” under Section 297(1) of the state Executive Law; (2) claims for contribution are limited under New York State law to “... personal injury, injury to property or wrongful death”; and (3) defendants’ failure to articulate specifically what their claim would be under New York State law warrants the denial of pendant jurisdiction, in order to avoid “exploration [by a federal court] of uncharted areas of state law.” 3A Moore’s Federal Practice ¶ 18.07, at 18-63 to 18-64. Plaintiffs’ Reply Memorandum at 4-5.

Consideration of defendants’ request for leave to amend the Answer at this stage in the litigation and based upon the record before the court is premature. Defendants have not submitted a proposed amended Answer. Moreover, the parties have not fully briefed the issue of the propriety of amendments to the Answer based on pendant state law claims. Accordingly, the counterclaim is dismissed without prejudice to defendants’ right to move, pursuant to Fed.R.Civ.P. 15(a), for leave to amend their answer to assert pendant state law claims against the unions.

CONCLUSION

The unions’ motion to dismiss the counterclaim is granted, without prejudice to the defendants’ right to move for leave to amend their answer to assert pendant state law claims against the. unions. Counsel for the plaintiffs are ordered to prepare a proposed notice of this decision, which, if approved, will be sent to all class members in this action, and to file it with the court on or before January 21, 1984.

SO ORDERED.

      . This case, originally assigned to Judge Ward, was reassigned to me on July 26, 1984. On July 11, 1984, counsel for the union plaintiffs and the city defendants stipulated as to the propriety of class certification in this case. They also stipulated “that the class should be defined as all employees of Defendants who since March 5, 1983 have worked or do work in the titles of [PCTs] or [SPCTs].” Of course, this court is not bound by any such stipulation and will determine after considering all the factors in Fed.R. Civ.P. 23 and all of the facts in this case whether certification is appropriate.. At a pre-trial conference held on October 3, 1984, the court, after considering the affidavits, memorandum and arguments of the parties, orally certified the class. Transcript of Proceedings of October 3, 1984 at 10. However, the court has not yet filed an opinion as to class certification and will reconsider the propriety of class certification after the completion of discovery.

      . The allegations in the complaint herein are similar to the allegations in two other cases pending before me. The case of Scotti et. al. v. City of New York, et. al., No. 84 Civ. 3503 (DNE) (Scotti I) was filed before the present AFSCME action was filed. After the AFSCME action was filed, the Scotti I plaintiffs filed another action which was assigned to me, Scotti et. al. v. City of New York, et. al., No. 84 Civ. 5462 (DNE). The unions are not parties to either Scotti case.
      The members of the class in the Scotti I are "all women who were employed by the City of New York as [SPCTs] and/or [PCTs] on or any time after three years prior to the commencement of this action or who will be employed by the City of New York in those positions in the future." Scotti/Complaint at If 16. The Scotti I plaintiffs allege that the city defendants pay other city employees, who are predominantly white and male, more money for performing jobs of equivalent or less skill, effort and responsibility. The Scotti I claims are brought under 42 U.S.C. §§ 1981 and 1983, the Equal Pay Act, 29 U.S.C. § 206(d), and various provisions of New York State law.

        Scotti II is brought “on behalf of all persons employed in the job classification of PCT and SPCT during the relevant statutory period.” Scotti II Complaint at ¶ 19. The allegations in Scotti II are virtually identical to those contained in Scotti I. In Scotti II, however, plaintiffs also state causes of action under Title VII of the Civil Rights Act of 1964. At a pre-trial conference held on September 10, 1984, the court refused to consolidate the three cases and ordered that discovery run in tandem. The court also ordered that counsel for the unions and counsel for the Scotti plaintiffs, Janice Goodman, act as joint counsel for the classes in all three cases. Transcript of Proceedings of September 10, 1984 at 17-19.

      . As noted supra, this action filed by the union plaintiffs is not the only action pending for redress of the defendants' alleged discrimination against the PCTs and SPCTs. See supra, note 2. What is noteworthy is that the plaintiffs in the two Scotti cases have not named the unions as defendants. Nor did they file any charges with the EEOC against the unions. See Northwest Airlines, supra, 451 U.S. at 93 n. 28, 101 S.Ct. at 1581 n. 28 (court may not use its broad power to fashion relief against unions against whom no charges were filed).

      . Defendants still have not informed the court or the unions as to the exact nature of the unions' alleged misconduct. Defendants contend that they “must be given an opportunity to prove that the union violated § 703(c) through the discovery process.” Defendants’ Memorandum at Law at 5. This proposed fishing expedition into the lawfulness of the unions’ conduct is precisely what Congress sought to prevent in enacting the jurisdictional prerequisites to a Title VII action.

      . In Northwest Airlines, supra, the Court stated in dicta that Section 703(c)(3) of Title VII "arguably [was] intended to provide special protection for employers, ...” Northwest Airlines, supra, 451 U.S. at 92-93, 101 S.Ct. at 1581. In this context, the Court stated that Section 703(c)(3) could not serve as a basis for inferring a right to contribution, even if "construed most favorably to petitioner [employer].” Id. at 93, 101 S.Ct. at 1581. The Court did not reach the issue of whether Section 703(c)(3) provides a cause of action to an employer found to have discriminated in violation of the statute.

      . Defendants are directed to read carefully Fed. R.Civ.P. 11 and to take note of the consequences for filing a frivolous motion.


source: Caselaw Access Project

author: LUONGO, Chief Judge.

license: Public Domain

text:
    ATLANTA INTERNATIONAL INSURANCE CO. v. The SCHOOL DISTRICT OF PHILADELPHIA.
    Civ. A. No. 83-4737.
    United States District Court, E.D. Pennsylvania.
    Dec. 27, 1984.

      Jonathan Dryer, Wilson, Elser, Edelman & Dicker, Philadelphia, Pa., for plaintiff.
    Andrew Rosen, Law Dept., School Dist. of Philadelphia, Philadelphia, Pa., for defendant.
   OPINION

LUONGO, Chief Judge.

In May of 1980, two teachers employed by the School District of Philadelphia planned and supervised a weekend trip from Philadelphia to Richmond, Virginia. Loren Davis, a junior high school pupil who went on the trip, drowned during the course of the weekend. His parents subsequently brought two wrongful death and survival actions in the Court of Common Pleas of Philadelphia County. The School District of Philadelphia was ultimately made a defendant in both actions on the basis of allegations that Loren’s death was caused by the negligence of School District employees acting within the scope of their employment. The School District joined the teachers as additional defendants, alleging that they had acted outside the scope of their employment in organizing the trip. The state court, dealing with the two actions together, has "held that the claims against the School District are barred by the doctrine of governmental immunity. Davis v. Holiday Inns, Inc., No. 3075 (C.P. Philadelphia County Feb. 2, 1984). The lawsuits, however, are still pending against the remaining defendants, including the teachers.

Plaintiff in this action is an insurance company which, pursuant to its contract with the Philadelphia Federation of Teachers, defended the teachers in the state court actions. Plaintiff alleges that the School District was obligated by statute to provide for the teachers’ defense. Thus, since plaintiff’s insurance contract requires it to defend its insured only if they are not entitled by law to defense or indemnification from another source, plaintiff seeks reimbursement from the School District for the costs of defending the teachers. The parties have filed cross-motions for summary judgment, which they agree should be treated as motions for a declaratory judgment, on the issue of whether the School District was obligated to pay for the teachers’ defense when it joined them as additional defendants in the state suits.

The School District’s responsibilities to employees who are sued are set forth in the Political Subdivision Tort Claims Act. The statute provides in relevant part:

(a) Mandatory provision of legal assistance generally. — When an action is brought against an employee of a political subdivision for damages on account of an injury to a person or property, and it is alleged that the act or omission of the employee which gave rise to the claim was within the scope of the office or duties of the employee, the political subdivision shall, upon the written request of the employee, defend the action, unless or until there is a judicial determination that such act or omission was not within the scope of the office or duties of the employee.
(b) Optional provision of legal assistance generally. — When an action is brought against an employee of a political subdivision for damages on account of an injury to a person or property, and it is not alleged that the act or omission of the employee which gave rise to the claim was within the scope of his office or duties, the political subdivision may, upon the written request of the employee, defend the action, and such undertaking to defend thereafter may be withdrawn only with the approval of the court. If the political subdivision has refused a written request to defend the action, and it is judicially determined that the act or omission was, or that the employee in good faith reasonably believed that such act or omission was, within the scope of the office or duties of the employee and did not constitute a crime, actual fraud, actual malice or willful misconduct, the political subdivision shall reimburse the employee for the cost of his legal defense in such amounts as shall be determined to be reasonable by the court.

53 P.S. § 5311.303(a) & (b) (current version at 42 Pa.C.S.A. § 8547(a) & (b)).

Under the statute, a political subdivision’s duty to defend an employee against whom a lawsuit is brought depends upon the allegations made in the lawsuit. If the pleading against the employee alleges that he acted within the scope of his employment, § 303(a) requires the political subdivision to provide a defense. This duty will terminate only when a court determines that the employee was not, and did not reasonably believe that he was, acting within the scope of his employment. If the pleading does not allege that the employee acted within the scope’ of his office, the employee may still request a defense under § 303(b). The employer in such a case need not comply unless a court finds that the employee was, or reasonably believed he was, acting within the scope of his employment:

Resolution of the parties’ motions for summary judgment depends upon whether § 303(a) or § 303(b) governs in this case. Plaintiff points to the complaints in the state cases, which allege that the teachers acted in the course of their employment in organizing the trip. These allegations, according to plaintiff, trigger the application of § 303(a). Defendant argues that only allegations made directly against the employees should be considered in applying § 303. Since the teachers were not original parties, and the School District in joining them specifically charged that they had acted outside the scope of their employment, the School District argues that § 303(b) should apply.

Because the Pennsylvania courts have not yet dealt with the issue raised in this case, I must predict how the Pennsylvania Supreme. Court would interpret § 303. McKenna v. Ortho Pharmaceutical Corp., 622 F.2d 657, 661 (3d Cir.), cert. denied, 449 U.S. 976, 101 S.Ct. 387, 66 L.Ed.2d 237 (1980). I conclude that the supreme court would adopt defendant’s interpretation as consistent with the language and purposes of the statute. Under § 303(a), a political subdivision must provide for an employee’s defense only if the employee is sued and it is alleged that the employee was acting within the scope of his employment. These two prerequisites must be satisfied concurrently. The state plaintiffs’ allegation that the teachers were acting within the scope of their employment was made in the context of a suit against the School District. At the time no action was pending against the teachers. When the School District brought the teachers in as additional defendants, it charged that they had acted outside the scope of their employment. Neither the state plaintiffs’ original complaint nor the School District’s complaint against the teachers satisfied the two conjunctive requirements of § 303(a).

Pa.R.Civ.P. 2255(d) provides: “The plaintiff shall recover from an additional defendant found liable to him ... as though such additional defendant had been joined as a defendant and duly served and the initial pleading of the plaintiff had averred such liability.” Under this rule, the allegations in an additional complaint are incorporated into the original complaint. Incollingo v. Ewing, 444 Pa. 263, 291, 282 A.2d 206, 221 (1971). The School District’s complaint against the teachers therefore gave the state plaintiffs an additional, but alternative, ground for recovery: Plaintiffs could recover against the School District if the teachers acted within the scope of their employment, or they could recover against the teachers if the teachers acted outside the scope of their employment. No party has attempted to recover from the teachers for acts within the scope of their employment. Since the prerequisites of § 303(a) have not been satisfied, § 303(b) applies. Under § 303(b), the School District need not provide for its employees’ defense unless or until a court determines that they were, or reasonably believed they were, acting within the scope of their employment.

This result is consistent with the general design of the Political Subdivision Tort Claims Act. The statute gives extensive protection to political subdivision employees when they act within the scope of their employment. For instance, such employees are immune from tort liability to the same extent as their employer. 53 P.S. § 5311.301 (current version at 42 Pa.C.S.A. § 8545). If an employee is found liable for acts within his authority, his employer must reimburse him for the amount of any judgment against him. Id. § 5311.304 (current version at 42 Pa.C.S.A. § 8548). Section 303 provides employees with an additional benefit: If they are sued for acts specifically alleged to be within the scope of their employment, their employer must also provide for their defense. If the allegation is proved, the political subdivision must pay the amount of the ultimate judgment. The legislature apparently made a policy decision that the political subdivision should be involved in such suits from the outset. Under the statute, therefore, the employer must pay for the defense and, in return, may control litigation strategy. Id. § 5311.303 (current version at 42 Pa.C.S.A. § 8547).

When a complaint against an employee avers that he acted outside the scope of his employment, the analysis is different. If the allegation is proved, the employer will have no obligation to indemnify the employee. The employee is therefore not entitled to an up-front payment of the costs of his defense. This result is not affected by the fact that the state plaintiffs alleged, in support of an alternative theory of recovery against a different party, that the employees did act within their authority. If the School District were still a party in the state lawsuits and the plaintiffs’ allegations had prevailed, plaintiffs would have recovered against the School District. The state trial court has held that the School District is immune from liability in the underlying actions. If this ruling is upheld, the teachers should also be found immune if they acted within the scope of their employment. 53 P.S. § 5311.301 (current version at 42 Pa.C.S.A. § 8545). Thus, the only viable claims remaining against the teachers are the School District’s allegations, incorporated in the state plaintiffs’ complaints, that they acted outside their employment. If these allegations prevail, the teachers will be liable and the School District will have no obligation to indemnify them. Under the statutory scheme, therefore, the School District should not be forced to pay the teachers’ legal costs at this time. Of course, if the state court ultimately determines that the teachers were, or reasonably believed that they were, acting within the scope of their employment, the School District will be obliged to reimburse the costs of the teachers’ defense.

The allegation required by § 303(a) has not been made in the context of a suit against the teachers. The School District is thus not required to provide the teachers with legal assistance in advance of a court determination- that the teachers acted within the scope of their employment. Accordingly, a declaratory judgment will be entered in favor of the School District.

      . The first lawsuit was brought directly against the School District. The second was brought against Holiday Inns, Inc., which brought the School District in as an additional defendant. In both suits, the pleading against the School District alleged that the teachers had acted within the scope of their employment.

      . The Political Subdivision Tort Claims Act, 53 P.S. §§ 5311.101-.803, has been repealed and recodified at 42 Pa.C.S.A. §§ 8541-64. Since the cause of action in the state cases arose prior to the effective repeal date, the original Act controls the disposition of this lawsuit. Close v. Voorhees, 67 Pa.Commw.Ct. 205, 208 n. 5, 446 A.2d 728, 730 n. 5 (1982).

      . The School District does not dispute plaintiffs allegation that it is a political subdivision and therefore covered by § 303.

      . Section 301 provides that an employee of a political subdivision can be held liable for acts within the scope of his employment only to the extent that the political subdivision can be held liable.


author: NANGLE, Chief Judge.

text:
    Robert and Mary YARIS, on their own behalf and as next friends of Michael Yaris, and on Behalf of all those similarly situated, and Stephen and Marilyn Stubbs, next of friend to Adam Stubbs v. SPECIAL SCHOOL DISTRICT OF ST. LOUIS COUNTY, Arthur L. Mallory, Leonard W. Hall, Department of Elementary and Secondary Education and State Board of Education.
    No. 81-423C(1).
    United States District Court, E.D. Missouri, E.D.
    Dec. 28, 1984.

      Kenneth M. Chackes and Michael J. Hoare, St. Louis, Mo., for plaintiff.
    Ramon J. Morganstern and Michael J. McKitrick, St. Louisj Mo., Jerry Short and Nancy D. Kelley, Jefferson City, Mo., for defendant.
   MEMORANDUM

NANGLE, Chief Judge.

This case is once again before this Court on the petition of plaintiffs and defendant Special School District of St. Louis County (hereinafter SSD) for a funding order. In addition, plaintiffs’ application for an award of attorney’s fees is presently before this Court.

I. PETITION FOR A FUNDING ORDER

The parties have eliminated many of the evidentiary deficiencies noted by this Court in the Order and Memorandum dated April 10, 1984. This has been achieved by filing a joint “Stipulation ” and separate supplemental memoranda. Perhaps the most useful part of this new material is the enumeration by plaintiffs and the SSD of five (5) specific types of relief that they seek from this Court. Plaintiffs and the SSD seek an order directing the State of Missouri to provide the following relief:

(1) That exceptional pupil aid under § 162.975 also be available for summer programming, adjusted equitably on the basis of the proportion of hours of instruction in the summer program as compared to the hours of instruction during the regular school year. For example, if a local school district is entitled to $10,-000 per class during the regular school year of 1,080 hours, a local school district with a class during the summer with 120 hours would be reimbursed on the basis of 120/1,080 X the $10,000 per class amount.
(2) That aid for contractual services be provided on the same proportionate per diem basis for summer programs as such aid is provided for regular school programs.
(3) That the State not be permitted to use discretionary P.L. 94-142 federal funds to defray the total cost of its summer programming to its severely handicapped children, but rather, any such funds be distributed directly to local school districts in the same manner as prior to the Yaris decision, in which the State provided 85% of its federal funds to local school districts.
(4) That the foregoing State aid be provided retroactive to the summer of 1983.
(5) For reasonable attorneys’ fees and costs, and for such other and further relief as this Court deems just and appropriate.

Supplemental Memorandum Of Plaintiffs And The Special School District Of St. Louis County In Support Of Petition For Funding Order at 13-14. In the opinion of this Court, the above five (5)-point request is an appropriate basis for analyzing the need for a funding order in this case. A brief outline of the current educational fiscal structure in the State of Missouri will be helpful in such analysis.

During the regular nine (9)-month school year, local districts are eligible for State aid for both handicapped and non-handicapped students under the foundation formula, Mo.Rev.Stat. §§ 163.011, 163.031 (1978 as amended), and under provisions for transportation reimbursement, Mo.Rev. Stat. § 163.161 (1978 as amended). The foundation formula calculates State aid on the basis of the number of students in attendance and the number of days classes are held on a full-time basis. Adjustments are made to include part-time students and summer school students in the calculation of the “average daily attendance” figure.

Handicapped children are treated differently, fiscally speaking, than non-handicapped children during both the regular and summer terms. During the summer term handicapped children are eligible for foundation formula aid so long as the summer session consists of a minimum of sixty (60) clock hours. 5 CSR 50-340.050(1). Summer programs for non-handicapped children are required to have a minimum of one hundred twenty (120) clock hours to be eligible for foundation formula aid. Id. Also, during the summer term handicapped children are eligible for transportation aid, whereas non-handicapped children are not. 5 CSR 50-340.050(7). During the regular school year handicapped children in local districts receive exceptional pupil aid, Mo. Rev.Stat. § 162.975 (1978), and aid for contractual services, Mo.Rev.Stat. § 162.980 (1978). Non-handicapped children, on the other hand, receive neither type of aid.

A. EXCEPTIONAL PUPIL AID

The first item, exceptional pupil aid under Mo.Rev.Stat. § 162.975 (1978), is the most difficult one to analyze. Section 162.-975 provides, in pertinent part, as follows:

1. Each school district or special school district maintaining one or more approved special programs for handicapped or severely handicapped children under the provisions of sections 162.670 to 162.-995 shall receive state aid at the rate of six thousand dollars for each approved class of children per term of one hundred eighty days as provided by section 168.021, RSMo, except that approved classes for the educable mentally retarded shall be funded at four thousand five hundred dollars per approved class, and approved classes of remedial reading shall be funded at three thousand five hundred dollars per approved class. The rates of reimbursement for approved classes in this subsection shall be adjusted annually by the same percent that the appropriation of state funds for the school foundation program is changed from the previous year.

(emphasis added). The statute defines a “class” as a “group of not less than ten children____” Mo.Rev.Stat. § 162.975(6) (1978). In the opinion dated March 2,1983, this Court commented on § 162.975, as follows:

[Sjtate aid for the education of the handicapped, in the form of funds provided by class, staff members and staff aid, is limited to a “term of one hundred eighty days” by Missouri State law. Mo.Rev. Stat. § 162.975.

Yaris v. Special School District of St. Louis County, 558 F.Supp. 545, 550 (E.D. Mo.1983) (emphasis added). Plaintiffs and defendant SSD also interpret § 162.975 as “limiting” exceptional pupil aid to a term of one hundred eighty (180) days and argue that the “unavailability” of exceptional pupil aid during the summer months has the effect of discouraging local districts from providing summer programs. This Court previously agreed with this argument, as follows:

[I]n the event a local district wishes to provide handicapped children with education beyond the traditional 180 days, the local agency must bear the additional cost. The responsibility for this financial burden may very well deter a local district from considering the needs of handicapped children for school in excess of 180 days. Therefore, although the state defendants’ policy toward summer programming of children in Missouri is perhaps neutral on its face, it has the effect of providing services to non-handicapped children, which are denied to the handicapped and severely handicapped.

Id. at 550-51.

The State defendants, however, argue that “[petitioners’ criticism is meaningless in the context of the statute.” State Defendants’ Supplemental Memorandum In Opposition To Petitions For Funding Order at 5. The basis of their argument is that, unlike foundation formula aid which is calculated by the number of students and days of attendance, exceptional pupil aid is a lump sum. The State defendants interpret the language, “per term of one hundred eighty days”, Mo.Rev.Stat. § 162.975 (1978), as merely a “minimum number of days a school district must have in their regular school calendar in order to qualify for state aid.” Id. In addition, the State defendants argue that § 162.975 does not deter local districts from considering the needs of handicapped children for school in excess of 180 days, because “[n]othing prevents a local district from allocating its resources so as to utilize a percentage of the exceptional pupil aid it receives for summer school.” Id. at 6.

This Court is persuaded by the arguments of the State defendants. To criticize § 162.975 as “limiting” exceptional pupil aid to one hundred eighty (180) days is somewhat meaningless because of the manner in which the aid is distributed. A lump sum for each class of ten (10) children is far different from aid distributed on the basis of a formula that utilizes the total number of students and the total number of days or hours that they are in attendance. A true “limit” would exist if instructional time beyond one hundred eighty (180) days were not compensable or could not be included in the calculation. The one hundred eighty (180) day figure in § 162.-975 is not a true “limit” on the amount of aid available because time is simply not a variable in the calculation. Indeed, the amount of aid available is not subject to variation at all. In addition, the State defendants’ reading of the one hundred eighty (180) day term as a minimum standard is reasonable and is also buttressed by the statute’s reference to § 163.021. That section is entitled “Eligibility for state aid —requirements,” and it sets out a host of minimum standards that must be met to be eligible for any state educational aid. Mo. Rev.Stat. § 163.021 (1978 as amended). Finally, this Court is also persuaded that any deterrence which results from the way § 162.975 is structured is not significant enough to warrant interference with the state’s fiscal decisions. A significant deterrent would exist if foundation formula aid were limited to one hundred eighty (180) days. In that situation, the State would be treating summer school different from the regular school year for handicapped children and the local districts would be receiving aid during the regular year that they wouldn’t receive during the summer. Because exceptional pupil aid is distributed as a lump sum, however, the only significant deterrent which results from § 162.975 is that a local district that provides summer instruction may have to stretch its lump sum over twelve (12) months rather than nine (9) months.

Focusing on this latter type of deterrence also suggests an important reason why the request of plaintiffs and SSD must be denied. At the trial on the merits in this case, this Court did not try or purport to decide what amount of aid is necessary to provide an adequate education for handicapped children. Implicit in plaintiffs’ and SSD’s request that this Court proportionately increase the amount of exceptional pupil aid to account for summer school hours is the premise that the current lump sum is the amount needed to provide an adequate education for only nine (9) months. For example, in their brief plaintiffs and SSD assert that the fact that the State provides exceptional pupil aid and contractual services during the regular school year evidences “the Missouri Legislature’s acknowledgment that such additional aid is needed in order to provide handicapped children the same basic level of educational opportunity as non-handicapped children.” Supplemental Memorandum Of Plaintiffs And The Special School District Of St. Louis County In Support Of Petitions For Funding Order at 4. While the fact that exceptional pupil aid exists may “evidence” said “acknowledgment” on the part of the State, it by no means establishes any given lump sum as the minimum amount of aid needed to provide handicapped children with an adequate education. Indeed, the lump sum provided as exceptional pupil aid has fluctuated over the past few years. In 1977 the amount was $6,000.00 for each class and in 1984 the amount,is approximately $10,000.00 for each class. Bécause this Court did not try to decide what minimum level of State spending is required to comply with federal law, this Court lacks the power to prevent the State from reducing this amount to $9,000.00 or $8,000.00 in 1985. It follows that the relief requested by plaintiffs and SSD would ultimately prove ineffectual— even if this Court were to order the State to provide exceptional pupil aid in an amount that would be for summer school only, by proportionately increasing the lump sum based on the number of summer school hours, nothing would prevent the State from reducing the regular year lump sum to regulate the twelve (12) month total exceptional pupil aid. In addition, the request by plaintiffs and SSD injects a time variable into the distribution of exceptional pupil aid. However, neither plaintiffs nor SSD have directed this Court’s attention to any authority that requires the State to allocate its educational dollars on the basis of hours or days.

Two additional reasons support this Court’s conclusion to refrain from altering the State’s exceptional pupil aid scheme. The first is that two (2) summers have passed since this Court issued its opinion on the merits in this case, and no evidence was presented that any handicapped child identified as needing summer programming has been denied summer programming by a local district or by the State defendants. In the absence of such evidence, the efforts of plaintiffs and SSD herein must be viewed as an attempt to “bootstrap” from this Court that which they cannot obtain from the Missouri Legislature.

The second reason is an amplification of the first. The sensitive balance of federal and state powers is seriously implicated whenever a federal court purports to regulate a state’s fiscal decisions. Such an entanglement should not be created except where clearly necessary. In the absence of evidence that the State’s current fiscal scheme results in the denial of summer school to any handicapped child who needs it, there is no clear necessity for this Court to tip the balance of state and federal power as it relates to educational funding.

Accordingly, plaintiffs’ and SSD’s request that this Court adjust the amount of exceptional pupil aid provided under § 162.-975 be and is denied.

B. CONTRACTUAL SERVICES AID

The second item requested by plaintiffs and SSD is that so-called “contractual services aid” be available during the summer on the same basis that it is available during the regular school year. Contractual services aid is markedly different from exceptional pupil aid. Paragraph 21 of the stipulation filed herein states, as follows:

State aid for contracted services, reimbursed during the regular school year at $22.40 per student per day for approved programs, is not available for summer program contracted services.

Stipulation at 10. Thus, contractual services aid differs from exceptional pupil aid in that the former is distributed as a given amount per unit of time and the time component is limited to the nine (9)-month academic year, whereas neither is true of exceptional pupil aid.

The State defendants have not suggested any rational basis for distinguishing between summer school and the regular term for purposes of distributing contractual services aid. Because it is so limited, it is likely to produce a significant deterrent to local districts who must provide summer school to handicapped children who need extended programming. By making this distinction the State defendants have not met their “responsibility ... to make sure that local agencies provide adequate services to handicapped children____” Yaris v. Special School District of St. Louis County, 558 F.Supp. 545, 560 (E.D.Mo.1983). Unlike exceptional pupil aid, there is a clear necessity to order the State defendants to make contractual services aid availability to local districts for summer programming.

Accordingly, the State defendants shall be ordered to provide contractual services aid to local districts for summer programming on the same basis as they do for the regular year. If summer programming consists of less than full-time classes, then the aid may be adjusted proportionately, such as by using hours rather than days for purposes of the calculation in the summer. To prevent the State from evading the purpose of this relief, it may not reduce the reimbursement rate of $22.40 per student per day between now and December 31, 1986, except by leave of Court.

C. DISCRETIONARY P.L. 94-142 FUNDS

The third .item requested by plaintiffs and SSD is that this Court order the State defendants to provide 85% of its discretionary P.L. 94-142, 89 Stat. 773 funds to local districts. The factual basis for this request is summarized in ¶ 5 of the stipulation, as follows:

5. Federal regulations require the State to distribute 75 percent of P.L. 94-142 federal funds to local educational agencies; up to 5 percent may be used for administrative purposes; the remaining 20 percent are discretionary funds. During FY 83 $19,001,680 was distributed to local educational agencies through the P.L. 94-142 entitlement formula. This represented 85 percent of the total P.L. 94-142 funds included in the FY 83 grant award. The FY 84 budget amount for local agency entitlement is $19,398,400. This represents 81 percent of the total P.L. 94-142 funds included in the FY 84 grant award.

Stipulation at 3. There are several reasons why plaintiffs’ and SSD’s third request must be denied.

First, ■ if this Court were to order the State defendants to give 85% of their P.L. 94-142 funds to local districts, this Court would be obviating federal regulations which require the State to distribute only 75% of said funds to local districts. By giving 81% to local districts in 1984, the State gave 6% more than it was required to give. The portion labeled “discretionary” would no longer be discretionary if this Court granted the request at issue.

Second, although in 1984 the State reduced the percentage of P.L. 94-142 funds that it distributed to local districts from 85% to 81%, the total amount distributed actually increased significantly.

Third, the State’s use of P.L. 94-142 funds is more like exceptional pupil aid. for purposes of analyzing the request of plaintiffs and SSD. The State does not make any arbitrary distinction between the regular year and summer school with respect to P.L. 94-142 funds and there is no persuasive evidence that the State’s handling of P.L. 94-142 funds results in local districts refusing to consider the needs of handicapped children for summer school.

Finally, part of plaintiffs’ and SSD’s objection to the State’s use of P.L. 94-142 funds stems from the fact that subsequent to this Court’s decision on the merits, the State began using a portion of discretionary P.L. 94-142 funds to finance its own summer programming for severely handicapped children. However, plaintiffs’ and SSD’s objection is without merit. Not only did this Court’s decision not preclude the State from providing summer programming on its own, but this Court expressly anticipated such an occurrence:

[I]t is the conclusion of this court that it is the responsibility of the state educational agencies either to make sure that local agencies provide adequate services to handicapped children, or to provide these services.

Yaris v. Special School District of St. Louis County, 558 F.Supp. 545, 560 (E.D. Mo.1983) (emphasis added) (citations omitted).

Accordingly,. the third request of plaintiffs and SSD is denied.

D. RETROACTIVE FUNDING ORDER

The fourth request of plaintiffs and SSD is that any funding order issued by this Court be retroactive to the summer of 1983. In the opinion of this Court retroactivity is not warranted in this case and therefore the fourth item is denied.

E. ATTORNEY’S FEES AND COSTS

The final item is the request of plaintiffs and SSD for an award of attorney’s fees and costs incurred in connection with their request for a funding order. As explained more fully infra, plaintiffs’ counsel is not entitled to an award of attorney’s fees for his work on the case in chief due to the Supreme Court’s recent decisions in Smith v. Robinson, — U.S. -, 104 S.Ct. 3457, 82 L.Ed.2d 746 (1984), and Irving Independent School District v. Tatro, — U.S. -, 104 S.Ct. 3371, 82 L.Ed.2d 664 (1984). The essence of these decisions is that the Rehabilitation Act of 1973, as amended, 29 U.S.C. § 794, “is inapplicable when relief is available under the Education of the Handicapped Act [EHA] to remedy a denial of educational services.” Tatro, — U.S. at -, 104 S.Ct. at 3379. With respect to the only relief granted herein to plaintiffs and SSD as a result of their petition for a funding order, i.e., contractual services aid, the basis of said relief is the EHA and not the Rehabilitation Act. Moreover, the evidence submitted in the stipulation convinces this Court that the State of Missouri is not discriminating against handicapped children in favor of non-handicapped children with respect to summer school funding by State or Federal dollars. See Stipulation ¶ 11. The State’s allocation of contractual services aid violates the EHA because it deters local districts from considering the needs of handicapped children for summer programming. Because a funding order with respect to contractual services aid “is available under the Education of the Handicapped Act”, the Rehabilitation Act is “inapplicable” and attorney’s fees are not recoverable. Tatro, — U.S. at -, 104 5. Ct. at 3379.

II. ATTORNEY’S FEES

In February of 1984, the Eighth Circuit, in a per curiam opinion, affirmed this Court’s judgment in the case at bar. Shortly thereafter, plaintiffs filed their petition for an award of attorney’s fees. This Court held a hearing on said petition in late Spring of 1984. Post-hearing briefs, including plaintiffs’ reply, were filed by July 6, 1984. However, on July 5, 1984, the Supreme Court handed down two decisions which impact heavily on plaintiffs’ petition for attorney’s fees: Smith v. Robinson, — U.S. -, 104 S.Ct. 3457, 82 L.Ed.2d 746 (1984); Irving Independent School District v. Tatro, — U.S. -, 104 S.Ct. 3371, 82 L.Ed.2d 664 (1984). The parties have addressed the significance of these two (2) cases in letters to this Court. It is the opinion of this Court that Smith and Tatro prevent plaintiffs from recovering attorney’s fees in the case at bar.

In Smith, the parents of a child suffering from cerebral palsy contested a school district’s refusal to fund the child’s placement in a special education program. The parents challenged the constitutionality of the procedure utilized to make the school district’s decision and the substance of that decision. Their suit in federal District Court sought declaratory and injunctive relief based on state law; the Education of the Handicapped Act (EHA), 20 U.S.C. §§ 1401 et seq.; § 504 of the Rehabilitation Act of 1973, as amended, 29 U.S.C. § 794; and 42 U.S.C. § 1983. The District Court declared that the procedure violated federal due process requirements and that, as a. matter of state law, defendants were obligated to pay for the child’s education. Although the District Court did not decide plaintiffs’ federal statutory and constitutional claims relating to his substantive challenge, it awarded attorney’s fees to plaintiffs under 42 U.S.C. § 1988 and § 505 of the Rehabilitation Act of 1973, as amended, 29 U.S.C. § 795, because the unaddressed federal claims were substantial and nonfrivolous. On plaintiffs’ appeal from the Court of Appeals’ reversal of the attorney’s fees award, the Supreme Court held that plaintiffs were not entitled to fees under either § 1988 or § 505, because the relief obtained by plaintiffs was available under the EHA.

The Supreme Court in Smith reasoned that Congress intended the EHA to be the exclusive avenue for litigating a handicapped child’s right to a free appropriate public education. Smith, — U.S. at -, 104 S.Ct. at 3468. The Court further reasoned that by creating a comprehensive remedial scheme in the EHA, which did not include a right to attorneys’ fees, Congress did not intend for litigants to circumvent that scheme by bringing EHA claims together with analogous § 1983 and Rehabilitation Act claims and then claiming attorneys’ fees under the latter two (2) statutes. Id. 104 S.Ct. at 3469, 3472. With respect to the Smith plaintiffs’ equal protection claim under § 1983, the Court concluded:

that where the EHA is available to a handicapped child asserting a right to a free appropriate public education, based either on the EHA or on the Equal Protection Clause of the Fourteenth Amendment, the EHA is the exclusive avenue through which the child and his parents or guardian can pursue their claim.

Id. at 3470.

With respect to the Rehabilitation Act claim, the Court employed a similar, but different, analysis. Id. at 3472. The Court noted that although the Rehabilitation Act and the EHA are different substantive statutes, both statutes, “as applied to the right of a handicapped child to a public education, have been interpreted to be strikingly similar.” Id. However, the Court stated that “[t]he significant difference between the two, as applied to special education claims, is that the substantive and procedural rights assumed to be guaranteed by both statutes are specifically required only by the EHA.” Id. (emphasis added). From this specificity, the Court concluded that “Congress did not intend a handicapped child to be able to circumvent the requirements or supplement the remedies of the EHA by resort to the general antidiscrimination provision of § 504.” Id. at 3473. The Court summarized its holding, as follows:

[Wjhere, as here, whatever remedy might be provided under § 504, is provided with more clarity and precision under the EHA, a plaintiff may not circumvent or enlarge on the remedies available under the EHA by resort to § 504.

Id. at 3474. In Smith, because the relief obtained by the plaintiffs was available under the EHA and, thus, § 504 was not available as an alternative basis for said relief, the plaintiffs were not entitled to attorney’s fees under § 505 of the Rehabilitation Act. Id.

In Tatro, the companion case to Smith, a handicapped child was being educated at public expense by defendants. .However, defendants did not make provision for school personnel to administer a procedure to plaintiff, which she required to avoid injury to her kidneys, known as “clean intermittent catheterization” (CIC). The plaintiff brought suit in federal District Court alleging that defendants’ refusal to provide CIC services violated the EHA and § 504 of the Rehabilitation Act. The District Court held that defendants’ refusal violated both statutes and awarded attorney’s fees under § 505 of the Rehabilitation Act. On appeal, the Supreme Court applied Smith' and reversed the award of attorney’s fees, as follows:

We hold today, in Smith v. Robinson, ..., that § 504 is inapplicable when relief is available under the Education of the Handicapped Act to remedy a denial of educational services. Respondents are therefore not entitled to relief under § 504, and we reverse the Court of Appeals’ holding that respondents are entitled to recover attorney’s fees.

Tatro, — U.S. at -, 104 S.Ct. at 3379.

In the case at bar, plaintiffs initially relied on the EHA, the Rehabilitation Act, § 1983 (the Equal Protection and Due Process Clauses of the Fourteenth Amendment), and Missouri constitutional and statutory provisions. Yaris, 558 F.Supp. 545, 546 (E.D.Mo.1983). This Court granted injunctive relief to plaintiffs under the EHA and the Rehabilitation Act, but declined to pass on plaintiffs’ other asserted bases for relief. Id. at 563. This Court held that the state defendants’ policy of limiting education for handicapped children to nine (9) months violated both the EHA and the Rehabilitation Act and granted declaratory and injunctive relief. Id. at 564. Plaintiffs seek an award of attorney’s fees under 42 U.S.C. § 1988 on the basis of their unaddressed constitutional claims and under 29 U.S.C. § 795 on the basis of their successful Rehabilitation Act claim.

Even though this Court did not pass on plaintiffs’ Equal Protection and Due Process claims, pre-Smith decisions in the Eighth Circuit support an award of attorney’s fees. In Monahan v. State of Nebraska, 687 F.2d 1164 (8th Cir.1982), cert. denied, 460 U.S. 1012, 103 S.Ct. 1252, 75 L.Ed.2d 481 (1983), the Court of Appeals stated:

It does not matter that the constitutional, or § 1983, ground was not actually reached, and that the complainant prevailed, to the extent that he did at all, on his [EHA] ground. Where a non-fee claim is joined with a non-frivolous claim under a statute providing for the award of fees, and the plaintiff prevails with respect to his non-fee claim, thus making it unnecessary to reach the § 1983 claim, an award of fees is nevertheless appropriate.

Id. at 1172. See also Robert M. v. Benton, 671 F.2d 1104 (8th Cir.1982). However, as the Eighth Circuit recently acknowledged, the validity of Monahan and Benton has been undermined by Smith with respect to Equal Protection claims where relief is available under the EHA. See Rose v. State of Nebraska, 748 F.2d 1258 at 1263 (8th Cir.1984). Smith held that “Congress intended the EHA to be the exclusive avenue through which a plaintiff may assert an equal protection claim to a publicly financed special education.” Smith, — U.S. at -, 104 S.Ct. at 3468. With respect to Due Process claims, on the other hand, the Smith Court declined to decide “whether the procedural safeguards set out in the EHA manifest Congress’ intent to preclude resort to § 1983 on a due process challenge____” Id. at -, 104 S.Ct. at 3470. Smith disposed of the right to attorney’s fees for the Due Process claim therein by holding that the “due process claim and the substantive claim on which petitioners ultimately prevailed involved entirely separate legal theories and, more important, would have warranted entirely different relief.” Id. at -, 104 S.Ct. at 3471. The Eighth Circuit recently interpreted dicta in Smith to conclude that a successful EHA plaintiff can recover attorney’s fees where: 1) a substantial, but unaddressed, Due Process claim was asserted; and 2) the facts and theory of the Due Process claim were the same as those of the EHA claim. Rose v. State of Nebraska, 748 F.2d 1258 at 1263-1264 (8th Cir.1984). The plaintiffs in Rose, as in Monahan and Benton, challenged the impartiality of the EHA hearing process and sought a second hearing for themselves.

In the opinion of this Court, however, neither Rose nor Monahan and Benton entitle plaintiffs herein to attorney’s fees on the basis of their Due Process claim. Unlike Rose, this was not a case “where plaintiffs ... had to resort to judicial relief to force the agencies to provide them the process they were constitutionally due.” Smith, — U.S. at -, 104 S.Ct. at 3471 n. 17. Plaintiffs herein did allege that the SSD should have paid for the costs of a copy of the record and transcript of the panel level hearing for review by the State Board of Education, but that claim was far from being the same as plaintiffs’ EHA claim. Plaintiffs’ EHA claim was that the nine (9)-month policy deprived them of a free appropriate education and discriminated against them. While this claim could arguably be characterized as an Equal Protection claim, it is not a substantial Due Process claim. Unlike a “due process challenge to state procedures,” a nominal Due Process challenge to state substantive criteria is clearly “inconsistent with the EHA’s comprehensive scheme.” Smith, — U.S. at -, 104 S.Ct. 3471 n. 17. Accordingly, plaintiffs’ constitutional claims do not entitle them to an award of attorney’s fees under 42 U.S.C. § 1988.

Turning to plaintiffs’ right to an award of fees under the Rehabilitation Act, it is the opinion of this Court that because the relief obtained by plaintiffs was available under the EHA, Smith and Tatro render § 504 of the Rehabilitation Act inapplicable and, thus, plaintiffs are not entitled to attorney’s fees. Plaintiffs argue that two passages in Smith warrant a contrary result. The first passage was, as follows:

We emphasize the narrowness of our holding. We do not address a situation where the EHA is not available or where § 504 guarantees substantive rights greater than those available under the EHA.

Smith, — U.S. at -, 104 S.Ct. at 3474. This passage, however, does not support plaintiffs’ argument. The EHA was available to remedy plaintiffs’ allegation that the state defendants were discriminatorily denying services to handicapped children that were being provided to non-handicapped children. Indeed, this Court’s opinion expressly held that said discrimination violated the EHA. Yaris, 558 F.Supp. at 559. Moreover, the Rehabilitation Act did not guarantee substantive rights “greater” than those available under the EHA. Here, the discriminatory actions of the state defendants violated both the EHA and the Rehabilitation Act, but plaintiffs would have obtained exactly the same relief if the Rehabilitation Act claim had not been made. It is precisely this type of remedial overlap that triggers application of the Smith rule in cases concerning the educational rights of handicapped children. Plaintiffs argue that under the Rehabilitation Act they asserted “substantive rights greater than those available under the EHA,” because under the EHA they challenged the nine (9) month policy whereas under the Rehabilitation Act they challenged the State’s discriminatory funding policy. However, there is no meaningful distinction between these two claims because the funding policy was merely a manifestation of the nine (9) month policy.

The second passage that plaintiffs rely on was, as follows:

Of course, if a state provided services beyond those required by the EHA, but discriminatorily denied those services to a handicapped child, § 504 would remain available to the child as an avenue of relief.

Smith, — U.S. at - n. 22, 104 S.Ct. at 3473 n. 22. This passage also does not support plaintiffs’ position. The allegations and findings in this case were that the state defendants were not meeting their EHA obligations and that said default also violated the Rehabilitation Act. This case is clearly not the type of situation, contrary to plaintiffs’ argument, countenanced by footnote 22 in Smith.

This Court is mindful of the hardship imposed on plaintiffs’ counsel as a result of Smith and Tatro. Said counsel is a highly skilled practitioner and reasonably expended over one thousand (1000) hours in litigating this action. The result achieved provided and will provide substantial benefits to plaintiffs and other similarly situated handicapped children. Nevertheless, it is the intention of Congress, as construed by the Supreme Court in Smith and Tatro, that said efforts not be compensated monetarily. Such a result may seem harsh, and perhaps illogical, but Congress struck the balance between encouraging private enforcement of the educational rights of handicapped children and ensuring that dollars earmarked for education actually are spent on education rather than attorney’s fees in favor of the latter. Accordingly, plaintiffs’ petition for an award of attorney’s fees be and is denied.

      . Originally, plaintiffs’ petition also included a motion to hold the state defendants in contempt. Said motion raised various non-monetary issues regarding the conduct of the state defendants subsequent to this Court’s decision on the merits of this case. See Yaris v. Special School District of St. Louis County, 558 F.Supp. 545 (E.D.Mo.1983). However, as a result of the parties’ continuing negotiations plaintiffs moved to withdraw the non-monetary portions of their contempt motion. Because this Court previously granted said motion to withdraw, the only remaining aspect of plaintiffs’ petition is their request for a funding order.

      . In fact, a footnote in one of plaintiffs' memoranda concerning attorney’s fees indicates that the two (2) primary handicapped children plaintiffs in this case, Michael Yaris and Adam Stubbs, received summer school programming at public expense in 1983 and 1984. Plaintiffs' Reply Memorandum Regarding Attorneys’ Fees And Expenses at 2 n. 1.


author: GENE CARTER, District Judge.

text:
    KENDLAND COMPANY, INC., Plaintiff, v. DEPARTMENT OF the NAVY, Defendant.
    Civ. No. 84-0044 P.
    United States District Court, D. Maine.
    Dec. 28, 1984.
    Robert J. Sberer, Rodhe, Carens & De-Ciacomo, Boston, Mass., David P. Ray, John Amerling, Amerling & Burns, Portland, Maine, for plaintiff.

      Paula D. Silsby, Asst. U.S. Atty., Portland, Maine, for defendant.
   MEMORANDUM OF DECISION

GENE CARTER, District Judge.

Plaintiff Kendland Company, Inc. performed work as a subcontractor in connection with a contract between the Navy and general contractor Arnold M. Diamond, Inc. for the installation of hot water mains at Pease Air Force Base in Portsmouth, New Hampshire. On July 22, 1983, Kendland addressed a request, pursuant to the Freedom of Information Act (F.O.I.A.), 5 U.S.C. § 552 to the Navy for documents relating to the project. Kendland required the documents in order to prosecute a claim for damages and additional compensation against Diamond. The request, and subsequent requests, were not fully complied with. Kendland filed a complaint on December 7, 1983, in the United States District Court, District of New Hampshire, requesting, among other things, that the Navy be ordered to produce the withheld documents. The New Hampshire Court transferred the case to this Court in accordance with 28 U.S.C. § 1406 on February 1, 1984.

All of the requested documents were produced voluntarily by the Navy on June 1, 1984, and June 15, 1984. Accordingly, Plaintiff moved to dismiss the action pursuant to Fed.R.Civ.P. 41(a). The motion was granted on June 17, 1984.

Before this Court now is Plaintiffs Motion for Costs and Attorney Fees, brought pursuant to 5 U.S.C. § 552(a)(4)(E), which provides:

(E) The court may assess against the United States reasonable attorney fees and other litigation costs reasonably incurred in any case under this section in which the complainant has substantially prevailed.

In Crooker v. United States Department of Justice, the First Circuit set forth the analysis to be employed by a district court in deciding a request for attorney’s fees under the F.O.I.A.:

In ruling upon any request under section 552(a)(4)(E), a district court should first determine whether a party has in fact “substantially prevailed.” This determination must be guided by the particular circumstances of each case; to substantially prevail, there must be a showing both that the suit was necessary and that it had a causative effect on the disclosure of the requested information. When such allegations have been made, the government, in opposing the request, must do more than merely deny them.

632 F.2d 916, 922 (1st Cir.1980) (citation omitted).

The Navy concedes that “the argument can be made that the suit was necessary since NAVFAC Counsel Robert Little had made an initial determination that portions of the request could not be released.” Defendant’s Memorandum in Opposition to Plaintiff's Motion for Attorney Fees and Costs, 4. The Navy denies, however, that the action had a causative effect on the disclosure. The Navy stated:

The only effect the action had upon the disposition of the problem was that it drew into the dispute government counsel who served the function of administrator or arbitrator and who expedited the delivery of the necessary information.

Defendant’s Memorandum at 4. This statement amounts to a concession that the suit, at the very least, expedited the release of information. The Navy contends that the true cause of the disclosure was a determination subsequent to the filing of the action that the reasons for withholding the information were no longer applicable and that Diamond did not object to the release. It is apparent from the record, however, that the role played by Paula Silsby, Esq., the Assistant United States Attorney who was assigned to defend against the suit, was at least a substantial factor causing the release of the information. The determination that the documents could be released was made only after Ms. Silsby requested Robert E. Little, Jr., Esq., Associate Counsel for the Navy, who initially decided to withhold the documents, to visit the shipyard and review the entire contract file. See Affidavit of Robert E. Little, Jr., at 2 (July 13, 1984).

The chain of causation thus may be briefly summarized: Kendland’s suit caused Ms. Silsby to review Kendland’s F.O.I.A. request; Ms. Silsby requested Mr. Little to review the file; Mr. Little’s review led to the release of the information. The Navy does not argue that the information would have been released as quickly, or at all, if Ms. Silsby had not become involved. The First Circuit’s statement in Crooker is pertinent here:

What our reading of the record does show is that, faced with a colorable claim of cause-and-effect, the Government has not demonstrated that .the complainant’s success in obtaining the requested documents was due more to its responsible compliance with the provisions of the Act than to the complainant’s pending suit. Unless it can do so in a concrete manner, a court would have to conclude that the complainant had “substantially prevailed” within the meaning of the Act.

632 F.2d at 919. Kendland has made out a “colorable claim of cause-and-effect,” and the Government has not affirmatively demonstrated that Kendland’s success “was due more to its responsible compliance with the provisions of the Act than to the complainant’s pending suit.” See id. Therefore, Kendland has “substantially prevailed” within the meaning of the Act.

The second step in the analysis to be applied in deciding a request for attorney’s fees under the F.O.I.A. is set forth in Crooker:

Second,' if the court determines that a complainant has “substantially prevailed,” it must consider whether the suit was of the type that advanced the policy considerations of the Act, which include: “the benefit to the public deriving from the case, the commercial benefit to the complainant and the nature of his interest in the Federal records sought, and whether the Government’s withholding of the records sought had a ‘reasonable basis in law.’ ” See Conf.Rep. No. 1200, supra. See also Nationwide Bldg. Maintenance, Inc. v. Sampson, 559 F.2d 704, 712-13 (D.C.Cir.1977).

632 F.2d at 922. The policy considerations listed in Crooker were drawn from the Congressional Conference Report on the F.O.I.A. Conf.Rep. No. 1200, 93d Cong., 2d Sess., reprinted in 1974 U.S.Code Cong. & Admin.News, 6267, 6285, 6288. The Senate Judiciary Committee Report contains an enlightening explication of the policy considerations:

Under the first criterion a court would ordinarily award fees, for example, where a newsman was seeking information to be used in a publication or a public interest group was seeking information to further a project benefitting the general public, but it- would not award fees if a business was using the FOIA to obtain data relating to a competitor or as a substitute for discovery in private litigation with the government.
Under the second criterion a court would usually allow recovery of fees where the complainant was indigent or a nonprofit public interest group versus [sic] but would not if it was a large corporate interest (or a representative of such an interest). For the purposes of applying this criterion, news interests should not be considered commercial interests.
Under the third criterion a court would generally award fees if the complainant’s interest in the information sought was scholarly or journalistic or public-interest oriented, but would no do so if his interest was of a frivolous or purely commercial nature.
Finally, under the fourth criterion a court would not award fees where the government’s withholding had a colorable basis in law but would ordinarily award them if the withholding appeared to be merely to avoid embarrassment or to frustrate the requester.

S.Rep. No. 93-854, 93d Cong., 2d Sess. 19 (1974) (quoted in Nationwide Building Maintenance, Inc. v. Sampson, 559 F.2d 704, 712 (D.C.Cir.1977)). The Committee summarized:

there will seldom be an award of attorneys’ fees when the suit is to advance the private commercial interests of the complainant. In these cases there is usually no need to award attorneys’ fees to insure that the action will be brought. The private self-interest motive of, and often pecuniary benefit to, the complainant will be sufficient to insure the vindication of the rights given in the FOIA. The court should not ordinarily award fees under this situation unless the government officials have been recalcitrant in their opposition to a valid claim or have been otherwise engaged in obdurate behavior.

Id.

Applying the first criterion to this case, it is not contended and the record in no way indicates that release of the information sought would in any way accrue to the public benefit.

With respect to the second criterion, it is clear that the information is sought solely for use in private litigation concerning Kendland’s business interests. As such, the information is to be used only for Kendland’s individual, pecuniary benefit.

Third, Kendland does not contend that the nature of its interest in the information is anything but purely commercial.

The only policy consideration that arguably may support Kendland’s request for attorney’s fees is whether the Government’s withholding of the documents had a “reasonable basis in law.” The Court is satisfied that the refusal to release at least some of the documents was justifiable under a statutory exemption for “trade secrets and commercial or financial information obtained from a person and privileged or confidential.” 5 U.S.C. § 552(b)(4). The Navy specifically relied upon a regulation promulgated pursuant to the statute, exempting from disclosure:

(1) Commercial or financial information received in confidence in connection with loans, bids, contracts or proposals, as well as other information received in confidence or privileged, such as trade secrets, inventions and discoveries, or other proprietary data.

32 C.F.R. § 701.24(d)(1) (1984). The record would also support the conclusion that at least some of the requested information not falling into an exemption was improperly withheld due to bureaucratic ineptitude or some other undiscernible reason. The record contains no evidence, however, that the Government had a direct interest in withholding the information. The information was not withheld “to avoid embarrassment or frustrate the requester,” nor was the Government “recalcitrant in opposition to a valid claim” or “otherwise engaged in obdurate behavior.” See S.Rep. No. 93-854, supra, at 19.

In sum, this is a case in which the private self-interest of the complainant was sufficient to insure the vindication of rights under the F.O.I.A., see id., and an award of attorney’s fees is unnecessary to advance the policies of the Act.

Accordingly, it is ORDERED that the Plaintiff’s Motion for Costs and Attorney’s Fees be, and is hereby, DENIED.

So ORDERED.

      . The listed criteria were included in the Senate’s version of the bill and subsequently eliminated. The conferees explained:
      . By eliminating these criteria, the conferees do ' not intend to make the award of attorney fees automatic or to preclude the courts, in exercising their discretion as to awarding such fees, to take into consideration such criteria. Instead, the conferees believe that because the existing body of law on the award of attorney fees recognized such factors, a statement of the criteria may be too delimiting and is unnecessary.
      Conf.Rep. No. 1200, supra, at 6288. Thus, courts, including the First Circuit, have relied upon the criteria in determining whether an award of attorney’s fees would advance the policies of the Act.


author: SWEET, District Judge.

text:
    MIKROPUL CORPORATION, Plaintiff, v. DESIMONE & CHAPLIN-AIRTECH, INC. and Vincent J. Desimone and James E. Chaplin, doing business as Desimone, Chaplin and Associates, Consulting Engineers, Defendants.
    No. 83 Civ. 8445 (RWS).
    United States District Court, S.D. New York.
    Dec. 28, 1984.

      Olwine, Connelly, Chase, O’Donnell & Weyher, New York City, for plaintiff; Peter Aron, New York City, of counsel.
    Wilson, Elser, Edelman & Dicker, New York City, for defendants; Stephen M. Marcellino, Eugene H. Goldberg, New York City, of counsel.
   OPINION

SWEET, District Judge.

This diversity action arises from contractual disputes surrounding the construction of an air pollution control facility at United States Steel’s (“USS”) Fairless, Pennsylvania plant. Defendants Vincent DeSimone (“DeSimone”) and James Chaplin (“Chaplin”), doing business as DeSimone, Chaplin and Associates (“DSC”), have moved for summary judgment pursuant to Fed.R. Civ.P. 56 dismissing that portion of Mikropol’s (“Mikropol”) fourth and fifth causes of action that seeks recovery of money for an alleged failure of DSC to design piles for tension and also, separately, dismissing the fourth cause of action in its entirety. DSC also seeks an order pursuant to Fed. R.Civ.P. 12(f) striking paragraph 36 of Mikropol’s fifth cause of action. All motions are denied.

Alleged Facts

Mikropol seeks damages for defendants’ fraudulent inducement and breach of contract, negligence, and professional malpractice in connection with a contract awarded by Mikropol to DeSimone & Chaplin-Air-tech (“Airteeh”). Mikropol, a Delaware corporation with its principal place of business at Summit, New Jersey, provides services and equipment to industrial customers to aid in insuring compliance with air pollution requirements. Airteeh is a New York corporation with its principal place of business in New York, New York. DSC is a partnership whose partners, DeSimone and Chaplin, reside in New York. The principal place of business of DSC is New York, New York.

On April 1, 1980 Mikropol entered into a contract with USS for the design and construction of an air pollution control system at USS’ steel manufacturing facility in Fairless, Pennsylvania. Mikropol invited competing bids from vendors and subcontractors in response to specifications provided by Mikropol.

One of the competing bids submitted for the design and engineering subcontract was from Airteeh. Mikropol alleges that the Airteeh bid claimed that Airteeh had been in business since 1969, that Airteeh employed eighteen engineers, designers, and consultants, that DeSimone and Chaplin were primary technical personnel of Air-tech, and that both would be active on the Fairless project. Mikropol also alleges that these representations were reinforced by statements made and appearances set forth by DeSimone in a visit to Airtech’s offices by Mikropol officials. Mikropol, in reliance on these statements granted Airteeh the subcontract.

Mikropol now asserts that Airteeh has been in business since 1976, not 1969, that Airteeh employed fewer than eighteen professionals, that any work performed by DeSimone and Chaplin was not performed directly for Airteeh but was performed for DSC in its capacity as a “subcontractor” of Airteeh, despite the prior representation that DeSimone and Chaplin were primary employees of Airteeh. Mikropol maintains further that although Airteeh was presented as a viable engineering firm, it was really an under-capitalized, virtually asset-less shell corporation designed to shield DSC from primary liability.

Mikropol also alleges that Airteeh and the other defendants, as “subcontractors,” did not use reasonable and professional care in designing the piles for the Fairless plant, causing $650,000 in damage. Mikropol maintains that subsequent to discovering the nature of the design error, Mikropol and USS reached an agreement designed to allocate the immediate costs of corrective measures so that completion of the Fairless plant could be as expeditious as possible. Mikropol maintains that this agreement did not constitute a settlement of the liability resulting from the design errors nor did it contain a release from any further effort by USS to recover damages.

DSC asserts that no contract existed between DSC and Mikropol and that any work done by DSC in connection with the Fairless project was done in DSC’s capacity as a subcontractor of Airtech. DSC also alleges that the agreement between USS and Mikropol allocating repair costs represented a resolution and settlement of the liabilities resulting from the improper design of the piles for the Fairless plant.

Discussion

Motions for summary judgment cannot be granted when material issues of fact remain to be resolved, and the burden is on the moving party to establish that no relevant facts are in dispute. Sobering Corp. v. Home Ins. Co., 712 F.2d 4 (2d Cir.1983). The court cannot try issues of fact, and “[ijndeed, the court must resolve all ambiguities and resolve all inferences in favor of the party against whom summary judgment is sought.” Quinn v. Syracuse Model Neighborhood Corp., 613 F.2d 438, 445 (2d Cir.1980) (quoting Heyman v. Commerce & Industry Ins. Co., 524 F.2d 1317, 1319 (2d Cir.1975)).

An initial hurdle in this case is to determine which state’s substantive law to apply. The decision to apply either New York, Pennsylvania, or New Jersey law is not dispositive of these motions, given the near equivalence of these states’ laws in the relevant areas and the major factual issues that remain to be resolved. For the reasons set forth below, New York law will be applied, but this conclusion is subject to change upon further evidence concerning the interest and contacts involved. See Am. Elec. Power Co. v. Westinghouse Elec. Corp., 418 F.Supp. 435, 455 n. 36 (S.D.N.Y.1976).

The New York substantive law, of course, includes choice of law rules. Day and Zimmerman, Inc. v. Challoner, 423 U.S. 3, 96 S.Ct. 167, 46 L.Ed.2d 3 (1975); Klaxton Co. v. Stentor Electric Mfg. Co., 313 U.S. 487, 61 S.Ct. 1020, 85 L.Ed. 1477 (1941). The general rule in New York tort cases is still that of lex loci delicti. Cousins v. Instrument Flyers, Inc., 44 N.Y.2d 698, 405 N.Y.S.2d 441, 376 N.E.2d 914 (1978). The place of the wrong in this case is New York: any alleged negligence or malpractice in the design work occurred either at Airtech or DSC, both located at 20 Waterside Plaza, New York. Moreover, although the Fairless plant is in Pennsylvania, a grouping of contacts test, Miller v. Miller, 22 N.Y.2d 12, 290 N.Y. S.2d 734, 735, 237 N.E.2d 877 (1968), requires that New York law be applied. The defendants reside in New York; the DSC subcontract was executed in New York; the defendants are licensed professionals in New York; and Airtech is incorporated in New York. Finally, the interests of New York in regulating the conduct involved are greater than those of the other states. Delbrueck & Co. v. Mfrs. Hanover Trust Co., 464 F.Supp. 989, 993 (S.D.N.Y.) aff'd, 609 F.2d 1047 (2d Cir.1979); Babcock v. Jackson, 12 N.Y.2d 473, 240 N.Y.S.2d 743, 191 N.E.2d 279 (1963). New York has the greatest interest in insuring that professionals licensed to practice in this state comply with the standard of care imposed by New York, and New York has a paramount interest in preserving the integrity of the corporate form under New York law by regulating the standards which control piercing the veil of New York corporations.

The gravamen of DSC’s motion for summary judgment on the tension/compression element of the fourth and fifth causes of action is that Mikropol effected a settlement with USS and therefore is precluded by General Obligation Law § 15-108 from bringing an action for contribution. DSC argues that the interchange of letters and the series of meetings which preceded the agreement to divide the costs of correcting the design error constitute a release and final compromise of the claim.

Both a settlement and release are contracts to which the ordinary rules of contract interpretation apply. See e.g., Macy v. United States, 557 F.2d 391, 393 (3d Cir.1977) (“It is hornbook law that a release is the relinquishment, concession or giving up of a right, claim or privilege ... and it has been held to be a contract or a species of a contract.”) Mt. Read Terminal, Inc. v. LeChase Const. Corp., 58 A.D.2d 1034, 396 N.Y.S.2d 959, 960 (4th Dept.1977) (“Releases are contractual in nature, and whether a release is general ... depends upon the intention of the parties.”) In order for there to be a settlement or a release, therefore, the parties must intend to terminate or discharge the claims being asserted, see Martin v. Traver, 19 A.D.2d 571, 239 N.Y.S.2d 781 (1963); Macy, supra.

Mikropol asserts vigorously that the letters which constituted the parties’ agreement was neither a settlement nor a release. Indeed, Mikropol claims that the intent of the parties was that Mikropol would continue to be liable for any defects or improper performance.

Because a factual dispute exists as to the intent of the parties at the time they concluded the interim agreement, this court cannot, for the purposes of a motion for summary judgment, accept as a premise that a settlement for the purposes of GOL § 15-108 exists. This Circuit has stated that “[wjhere contractual language is susceptible of at least two fairly reasonable interpretations, this presents a triable issue of fact, and summary judgment would be improper.” Heyman v. Commerce and Industry Insurance Co., 524 F.2d 1317, 1320 (2d Cir.1975). See Putnam v. Ostego Mutual Fire Ins. Co., 41 A.D.2d 981, 343 N.Y.S.2d 736, 778-9 (3d Dept.1973) (“[Tjhere is a conflict concerning the intention of the parties [with respect to the alleged compromise and settlement] and, since the parties did not waive the right to a resolution of questions of fact by a jury ... summary judgment should not have been granted.”) Shindler v. Lamb, 25 Misc.2d 810, 211 N.Y.S.2d 762, 766 (S.Ct. 1959), aff'd, 10 A.D.2d 826, 200 N.Y.S.2d 346 (1st Dept.), aff'd, 9 N.Y.2d 621, 210 N.Y.S.2d 226, 172 N.E.2d 79 (1961) (“[The] claim of release is a question of fact to be raised ... and decided at the trial.”)

DSC’s second motion for summary judgment seeks to dismiss the fourth count in its entirety on the theory that there is no privity between Mikropol and DSC. In support of this motion DSC argues that as a subcontractor of Airtech with no contractual obligations to Mikropol, DSC is immune from Mikropol’s action. This motion fails on two grounds: first, material issues of fact exist with respect to Mikropol’s motion to pierce Airtech’s corporate veil and recognize DSC as the real party in interest in the contract, thereby creating privity, and second, under New York law a professional may, in certain circumstances, be liable to a foreseeable plaintiff even in the absence of privity.

In New York, several criteria are paramount in determining whether to pierce a corporate veil: 1) the absence of the formalities which are part and parcel of normal corporate existence, i.e., the election of directors, keeping of corporate records; 2) inadequate capitalization; 3) personal use of corporate funds; and 4) the perpetration of fraud by means of the corporate vehicle. Walter E. Heller & Co. v. Video Innovations, Inc., 730 F.2d 50, 53 (2d Cir.1984), citing Bartle v. Finkelstein, 19 A.D.2d 256, 241 N.Y.S.2d 655 (1963), Quaid v. Ratkowsky, 183 A.D. 428, 170 N.Y.S. 812 (1918). Further, a corporation’s form maybe disregarded where the corporation has been a mere shell “dominated and controlled by the individuals to carry on their own personal business.” England Strohl/Denigris, Inc. v. Weiner, 538 F.Supp. 612, 613, 614 (S.D.N.Y.1982), citing Astrocom Electronics v. Lafayette Radio, 63 A.D.2d 765, 404 N.Y.S.2d 742 (3d Dept. 1978).

Mikropol alleges that Airtech is a “mere dummy for its individual shareholders who are in reality carrying on the business in their personal capacities for personal rather than corporate ends,” quoting Walkouszky v. Carlton, 18 N.Y.2d 414, 276 N.Y.S.2d 585, 223 N.E.2d 6 (1966). Mikropol claims that since Airtech’s formation DeSimone and Chaplin have controlled and dominated Airtech’s operations in such a way that its primary function was to shield DSC from prospective liability. Mikropol claims that Airtech was purposely under-capitalized, has filed no income tax returns since 1978, maintains no malpractice insurance, and used DSC’s resources in a supposed “contractor-subcontractor relationship” to cover Airtech’s lack of substance. Further, Mikropol alleges that Airtech failed to observe requisite corporate formalities and misled clients with respect to the scope of Airtech’s resources and capitalization. Mikropol further claims that DSC, because of its control and domination of Airtech, should be recognized as a principal bound by the ratified actions of its agent. See Walkousky v. Carlton, 18 N.Y.2d 414, 276 N.Y.S.2d 585, 587, 223 N.E.2d 6 (Ct.App.1966).

Although DSC disputes both the factual allegations and the conclusions based upon them, genuine issues of materi-. al fact have been raised which must be resolved before legal certainty can attach to a decision with respect to the existence of privity. On this basis alone, DSC’s second motion for summary judgment can be denied.

Mikropol has also asserted a negligence cause of action against DSC based upon Mikropol’s status as a foreseeable plaintiff, even in the absence of privity. In Quintel v. Citibank, 589 F.Supp. 1235 (1984), I examined the negligence liability of professionals to persons not in privity. There I concluded that White v. Guarante, 43 N.Y.2d 356, 401 N.Y.S.2d 474, 372 N.E.2d 315 (1977), in which an accountant was found liable to the limited partners although he was retained by the general partners, did not extend to make a lawyer retained by general partners liable in negligence to limited partners. I emphasized that the privity requirement had been more stringently observed in the context of a lawyer’s liability, in part because of the particular ethical restraints imposed on an attorney representing a client. Those restraints effectively create a narrow range of foreseeable clients. “To hold that a limited partner is automatically a foreseeable client of the attorney representing the general partners or even the limited partnership, in the absence of any affirmative assumption of duty by the attorney, would ignore Ethical Consideration 5-18 which specifically defines the attorney’s allegiance to the entity that retained him rather than to any person connected with the entity.” At 1241-42.

No such ethical restraints distinguish architects or engineers from accountants, who were the subject of analysis in White, supra, and Ultramares Corp. v. Touche, 255 N.Y. 170, 174 N.E. 441 (1931). I find that on the facts of this case architects and engineers fall within the rule established by White, supra, and Glanzer v. Shepard, 233 N.Y. 236, 135 N.E. 275 (1922). In White the Court of Appeals concluded:

Defendant Andersen’s contention, that plaintiff falls beyond the bounds of protected parties, rests primarily on the theory that its contract with the limited partnership circumscribed the extent of its obligation and the outer limits of its care. This reasoning fails to recognize that “[t]he duty of reasonable care in the performance of a contract is not always owed solely to the person with whom the contract is made * * * It may inure to the benefit of others.” While Ultra-mares made it clear that accountants were not to be liable in negligence on the generalized basis that a contract for professional services creates liability in favor of the general populace, this plaintiff seeks redress, not as a mere member of the public, but as one of a settled and particularized class among the members of which the report would be circulated for the specific purpose of fulfilling the limited partnership agreed upon arrangement.

See Calamari v. Grace, 98 A.D.2d 74, 469 N.Y.S.2d 942, 946 (1983) (recognizing as an exception to requirement of privity situations “where the abstracter should have foreseen that a third party would rely on the abstract.”)

In J. McKinney & Son v. Lake Placid 1980 Olympic G., 92 A.D.2d 991, 461 N.Y.S.2d 483 (3d Dept.1983) the Court used the White formulation to determine the liabilities of various parties in a construction setting. In holding a project manager liable to a subcontractor the Court stated: “As project manager, Gil-bare was required to 'manage, supervise, and inspect the construction.’ ... These duties can reasonably be said to inure to the benefit of subcontractors as well as the owner for the former are ‘members of a limited class’ whose reliance upon the project manager’s ability is clearly foreseeable.” Citing White, McKinney, 461 N.Y. S.2d at 486. On the facts as presented to the court, it appears that Mikropol was within the range of foreseeable beneficiaries defined by White. An action in negligence brought by Mikropol against DSC therefore survives.

DSC also seeks, pursuant to Fed.R. Civ.P. 12(f), to strike paragraph 36 of the complaint. The standard that must be met in order to strike material pursuant to 12(f) is a stringent one. “A motion to strike immaterial or impertinent matter from a pleading will ordinarily not be granted unless the matter sought to be stricken clearly can have ‘no possible relation’ to the matter in controversy.” Gleason v. Chain Service Restaurant, 300 F.Supp. 1241, 1257 (S.D.N.Y.1969), aff'd, 422 F.2d 343 (2d Cir.1970). The circuit courts have also suggested delay in determining whether material in the pleadings deserves to be stricken, recommending that only as a trial unfolds can a determination of relevance be properly made. See IApsky v. Commonwealth United Corp., 551 F.2d 887 (2d Gir.1976). Whether, or under what circumstances, the material relating to Airtech’s failure to obtain malpractice insurance will be presented to the jury is an evidentiary question that best awaits later determination.

Conclusion

DSC’s motions for summary judgment and to strike paragraph 36 are denied. Discovery shall be completed by April 3 and a joint pretrial order submitted by April 10, 1985.

IT IS SO ORDERED.