author: WEINER, District Judge.

text:
    Shirley A. LOJESKI v. Richard BOANDL, et al.
    Civ. A. No. 84-3591.
    United States District Court, E.D. Pennsylvania.
    Nov. 15, 1984.
    On The Merits Jan. 23, 1985.

      John R. Crayton, Bensalem, Pa., for plaintiff.
    Melody Moss, Tax Division, Dept, of Justice, Washington, D.C., for defendants.
   MEMORANDUM AND ORDER

WEINER, District Judge.

Presently before the court is the motion of defendants, all of whom are employees of the United States, Department of the Treasury, Internal Revenue Service (IRS), to dismiss, pursuant to Fed.R.Civ.P. 12(b)(5) and 12(b)(6) the complaint on the grounds that this court lacks jurisdiction over the defendants. In the alternative, defendants move for summary judgment pursuant to Fed.R.Civ.P. 56 on the grounds that there are no material issues of fact and that this court lacks jurisdiction over the defendants. For the reasons which follow the motions are denied.

Plaintiff Lojeski currently resides with a Thomas L. Treadway at plaintiff’s residence in Pipersville, Pennsylvania. Between 1979 and August 2, 1982, defendant Richard Boandl, a Revenue Agent in the Philadelphia District of the Internal Revenue Service, audited the 1977, 1978, 1979 and 1980 personal income tax returns of Mr. Treadway. Prior to August 2, 1982, defendant Boandl made a determination that Mr. Treadway had a personal income tax liability of $157,561.75, inclusive of penalties and interest, for the years 1977,1978, 1979, and 1980. At the same time, defendant Boandl further determined that Mr. Treadway was attempting to place his property beyond the reach of the government, either through transfers or by dissipating it. On the basis of these determinations, defendant Boandl recommended that a jeopardy assessment be made against Mr. Treadway in the amount of $157,561.75 pursuant to Section 6861 of the Internal Revenue Code. On August 2, 1982 defendant Boandl also recommended that a termination assessment be made against Mr. Treadway in the amount of $90,330.00 pursuant to Section 6851 of the Internal Revenue Code. The recommended assessments were approved by defendants Larry Rosenblum (Group Manager in the Examination Division, Philadelphia District of IRS), Theodore J. Machowski (Reviewer in the Philadelphia District of IRS), Carl Weiss (Chief of Quality Review Staff, Philadelphia District of IRS), Robert Hilgen (Chief of Examination Division, Philadelphia District of IRS), George Jessup (Revenue Officer, Philadelphia District of IRS), Raymond Pfeiffer (Group Manager in the Collection Division), Jennings West (Chief of Collection Division, Philadelphia District of IRS), Thomas Wise (Chief of Criminal Investigation Division, Philadelphia District of IRS) and James T. Rideoutte (District Director in Philadelphia District of IRS).

On August 2, 1982, defendant Boandl recommended that an identical assessment be made against plaintiff Lojeski in the amount of $247,891.57. Again the recommendation was approved by all of the remaining defendants, and on August 2, 1982, defendant Jessup seized the personal assets of plaintiff Lojeski by filing a nominee lien against her real property in the amount of $247,891.57, and by levying against her bank accounts in the amount of $247,891.57.

In a letter dated August 30, 1982 to the Appeals Office of the IRS, Mr. Treadway protested the termination assessment against him in the amount of $90,330.00 for the period January 1, 1982 through June 4, 1982, and the jeopardy assessments for the years 1977, 1978, 1979 and 1980 totaling $157,567.75. The Appeals Office made a determination that, “under the circumstances existing at the time of the administrative review, the termination and jeopardy assessments are not reasonable.” It recommended that the jeopardy and termination assessments against Mr. Treadway be abated in full, the liens and levies released, and the refunds processed.

Plaintiff Lojeski filed this complaint on July 25, 1984, claiming violations of her constitutional rights pursuant to the Fourth Amendment (unreasonable seizure of her property), the Fifth Amendment (deprivation of property without due process of law and defendants’ actions were gender based). She seeks compensatory and punitive damages in an amount in excess of $50,000.00, prejudgment interest, costs and attorney’s fees.

For purposes of a Motion to Dismiss under Fed.R.Civ.P. 12(b)(6) the Complaint must be construed in the light most favorable to the plaintiff and each of the allegations must be taken as true. Scheuer v. Rhodes, 416 U.S. 232, 94 S.Ct. 1683, 40 L.Ed.2d 90 (1974); Braden v. University of Pittsburgh, 552 F.2d 948 (3rd Cir.1977). A Motion to Dismiss is viewed with disfavor and should only be granted when it is clear that the pleadings do not establish a cause of action. Sosa v. Coleman, 646 F.2d 991 (5th Cir.1981); Swartz v. Eberly, 212 F.Supp. 32 (E.D.Pa.1962).

Defendants first argue that they are immune from suit under the doctrine of sovereign immunity. As a sovereign, the United States cannot be sued without its consent. United States v. Shaw, 309 U.S. 495, 500-501, 60 S.Ct. 659, 661-662, 84 L.Ed. 888 (1940); Hutchinson v. United States, 677 F.2d 1322 (9th Cir.1982). However, plaintiff Lojeski has brought suit against agents of the IRS in their individual capacity and not against the IRS or the United States. Specifically, plaintiff has brought constitutional claims under the Fourth and Fifth Amendments against certain federal government officials and thus may be entitled to recover damages against them under the judicially created tort established by Bivens v. Six Unknown Named Agents, 403 U.S. 388, 91 S.Ct. 1999, 29 L.Ed.2d 619 (1971). Although Bivens dealt with a violation of the Fourth Amendment, the Supreme Court has expanded the remedy to include a violation of the Fifth Amendment as well. Davis v. Passman, 442 U.S. 228, 99 S.Ct. 2264, 60 L.Ed.2d 846 (1979). A “Bivens” claim may be alleged against agents and employees of the IRS. G.M. Leasing Corp. v. United States, 429 U.S. 338, 97 S.Ct. 619, 50 L.Ed.2d 530 (1977). Therefore, defendants’ reliance on the sovereign immunity doctrine is misplaced.

Defendants next argue that they are entitled to the qualified immunity defense established by the Supreme Court in Scheuer v. Rhodes, 416 U.S. 232, 94 S.Ct. 1683, 40 L.Ed.2d 90 (1974). As officers of the executive branch, defendants can fall within the qualified immunity defense of Scheuer if they can show that their actions were executed reasonably and in good faith. Thompson v. Burke, 556 F.2d 231, 239 (3rd Cir.1977). However, it is the law of this circuit that the qualified immunity defense cannot be determined on a Fed.R.Civ.P. 12(b)(6) motion. Thompson, supra; Fidtler v. Rundle, 497 F.2d 794 (3rd Cir.1974); Safeguard Mutual Insurance Co. v. Miller, 472 F.2d 732 (3rd Cir.1973). Therefore, defendants’ 12(b)(6) motion must be denied.

Defendants next argue that this court does not have jurisdiction pursuant to 28 U.S.C. § 1331. Where a complaint seeks recovery directly under the Constitution or federal laws, federal jurisdiction is established pursuant to § 1331. Bell v. Hood, 327 U.S. 678, 681-682, 66 S.Ct. 773, 775-776, 90 L.Ed. 939 (1946). Defendants claim, however, that if a claim is found to be “wholly insubstantial and frivolous,” a suit under § 1331 may be dismissed for want of jurisdiction. Bell, supra. The test for frivolity is whether the claim is “so insubstantial, implausible, foreclosed by prior decisions of the court, or otherwise completely devoid of merit as not to involve a federal controversy.” Oneida Indian Nation v. County of Oneida, 414 U.S. 661, 666, 94 S.Ct. 772, 776, 39 L.Ed.2d 73 (1974); quoted in Duke Power Co. v. Carolina Environmental Study Group, Inc., 438 U.S. 59, 70-71, 98 S.Ct. 2620, 2628-2629, 57 L.Ed.2d 595 (1978). The question is whether “the cause of action alleged is so patently without merit as to justify the court’s dismissal for want of jurisdiction.” Duke Power Co., supra.

In the case sub judice, there is absolutely no evidence other than defendants’ personal affidavits that defendants acted reasonably and in good faith when they executed a nominee lien against plaintiff Lojeski. The agents rationalized their actions merely on the basis that plaintiff Lojeski’s residence and bank accounts appeared to be nothing more than a fraudulent transferral undertaken by taxpayer Treadway to avoid attachments for taxes owed. As has already been shown, the Appeals Office of the IRS determined that the defendants’ action in executing termination and jeopardy assessments against Mr. Treadway was not reasonable. Specifically, the real estate sales in 1982 were not shown to have been made for the purpose of hiding the sales proceeds; they were transacted in the normal manner with the involvement of realtors and banks; Mr. Treadway furnished details as to the disposition of the proceeds, and similar sales were made by Mr. Treadway throughout the period under audit. Based on this information it can hardly be maintained that plaintiff Lojeski’s claim is devoid of merit. “ ‘[Wjhere federally protected rights have been invaded, it has been the rule from the beginning that courts will be alert to adjust their remedies so as to grant the necessary relief.’ Bell v. Hood, supra, 327 U.S. at 684, 66 S.Ct. at 776 (footnote omitted); see Bemis Bros. Bag Co. v. United States, 289 U.S. 28, 36, 53 S.Ct. 454, 457, 77 L.Ed. 1011 (1933) (Cardozo, J.); The Western Maid, 257 U.S. 419, 433, 42 S.Ct. 159, 161, 66 L.Ed. 299 (1922) (Holmes, J.).” Thus, this court has jurisdiction under 28 U.S.C. § 1331.

Finally, defendants claim that they have not unlawfully discriminated against plaintiff Lojeski on the basis of her sex. We conclude that there is merit to this claim. There is absolutely no evidence to support an allegation that the actions taken by the IRS constitute discrimination against plaintiff based on her gender.

In the alternative, defendants move for summary judgment pursuant to Fed.R. Civ.P. 56. To prevail upon a motion for summary judgment the moving party must conclusively demonstrate to the court’s satisfaction that there exists no genuine issues as to any material fact, and that the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(c); Majors Furniture Mart, Inc. v. Castle Credit Corp., Inc., 602 F.2d 538, 539 (3rd Cir.1979); Drexel v. Union Prescription Centers, Inc., 582 F.2d 781, 784 (3rd Cir.1978). We must view the evidence in the light most favorable to the party opposing the motion. Bishop v. Wood, 426 U.S. 341, 347 n. 11, 96 S.Ct. 2074, 2079 n. 11, 48 L.Ed.2d 684 (1976); United States v. Diebold, Inc., 369 U.S. 654, 655, 82 S.Ct. 993, 994, 8 L.Ed.2d 176 (1962); Drexel v. Union Prescription Centers, Inc., supra at 784.

In the case sub judice, there exists a genuine issue as to whether defendants acted reasonably and in good faith when they seized the personal assets of plaintiff Lojeski by filing a lien against her real property in the amount of $247,891.57 and levying against her bank accounts in the amount of $247,891.57. See Thompson, supra. In his affidavit, defendant Boandl stated that the jeopardy assessment against Mr. Treadway was executed on reasonable grounds because Mr. Treadway “was apparently attempting to avoid his due and owing tax liabilities, through the sale and transfer of his assets.” In another affidavit, defendant Jessup stated that the lien be filed and a levy be served against any assets of plaintiff Lojeski “because of Mr. Treadway’s apparent attempts to remove assets from the reach of creditors and the discovery of the existence of a bank account in plaintiff’s name with Mr. Treadway’s social security number.” Plaintiff Lojeski refers to the decision of the Appeals Office of the IRS in alleging that defendants acted unreasonably and in bad faith. Thus, as certain issues of material fact exist as to whether defendants acted reasonably and in good faith, and because we have already held that this court has jurisdiction under 28 U.S.C. § 1331, defendants’ motion for summary judgment is denied.

ON THE MERITS

Plaintiff brought this action against agents of the Internal Revenue Service in their individual capacity for alleged violations of the rights afforded her under the United States Constitution. By agreement of the parties, all of the defendants except Richard Boandl, Larry Rosenblum, George Jessup, Raymond J. Pfeiffer and James T. Rideoutte were dismissed out of the case. The case was tried to the court sitting without a jury.

The witnesses called by the plaintiff were Richard Boandl, Larry A. Rosenblum, Harry Joseph Schmidt, Thomas L. Tread-way, Thomas Wise, John Peraccio, George Jessup, Shirley Ann Lojeski, Paul Sweterlitsch, Reed Denby, and Jennings L. West. The government called Ray Pfeiffer as its witness.

The facts of the case may be summarized as follows:

Plaintiff and a Thomas Treadway are companions and very best friends. Since 1980, Mr. Treadway has lived with the plaintiff on her farm in Pipersville, Pennsylvania. In December 1979, Agent Boandl was assigned to examine the 1977 tax return of Mr. Treadway. He subsequently examined the 1978, 1979 and 1980 tax returns of Mr. Treadway. In February 1982, Agent Boandl came to a final assessment against Mr. Treadway of approximately $247,000.00. Mr. Treadway did not agree to the assessment against him. Agent Boandl discussed the matter with his manager Agent Rosenblum, and they decided on a jeopardy assessment against Mr. Treadway because they were concerned that Mr. Treadway was selling his properties, and that the plaintiff was putting the funds from the sales into her personal bank accounts. Agents Boandl and Rosenblum recommended to their supervisors that the assessment be approved without informing the supervisors that they intended to take collection action against the plaintiff.

Agent Boandl testified that he never checked the grantor index nor the mortgage books in Doylestown, nor did he know what funds Treadway received from the sale of his two properties in March and June 1982. He also testified that he knew that Mr. Treadway had borrowed between $150,000.00 and $180,000.00 from El Paso, Inc.

On or about August 3, 1982, Agent Jess-up filed a nominee lien against the plaintiff in the amount of approximately $247,-000.00, and he seized plaintiffs bank accounts. Agent Jessup testified that he obtained no approval from his superior before filing the nominee lien. Prior to the seizure of plaintiffs property, no notice was given to her of the proposed action.

On September 23, 1982, an Internal Revenue Service appeals officer, John Percaccio, after conducting an administrative review, determined that the assessment against Mr. Treadway was not reasonable, and a letter was sent abating the assessment (see Plaintiffs Exhibit No. 11). Agents Boandl and Jessup attempted, without success, to have the decision of the appeals officer reversed.

The lien on plaintiffs farm was not released until November 30, 1982, and the seized funds not returned until January 1983. Agent Jessup testified that the delay was due to the lateness in his obtaining the abatement report, and for the manual cutting of checks for plaintiff. He excused it by stating “She got interest back on the moneys we had taken.”

The plaintiff testified that she was a horse breeder and owned the farm in Pipersville which was attached by Jessup. After the lien was filed by Jessup, the plaintiff was threatened with foreclosure by banks which held mortgages on her farm. She couldn’t run her horse business, had to borrow money to eat and pay the mortgages. She stated that she was humiliated, degraded, withdrawn and did not leave the farm because she was afraid that Jessup would come back and take something. She also testified that she lost two prospective purchasers of her farm because of the lien.

To prevail in this action the burden is on the plaintiff to prove by a preponderance of the evidence that the Internal Revenue personnel, defendants in this action, violated plaintiff’s constitutional rights. The court must determine whether the individual defendants had a reasonable ground for belief and a good faith belief that their actions were fully in accordance with the law and regulations. Butz v. Economou, 438 U.S. 478, 98 S.Ct. 2894, 57 L.Ed.2d 895 (1978). “Qualified or ‘good faith’ immunity is an affirmative defense that must be pleaded by a defendant official.” Harlow v. Fitzgerald, 457 U.S. 800, 815, 102 S.Ct. 2727, 2737, 73 L.Ed.2d 396 (1982), citing Gomez v. Toledo, 446 U.S. 635, 100 S.Ct. 1920, 64 L.Ed.2d 572 (1980). The “good faith” immunity is defeated if the official knew or reasonably should have known that his action would violate the plaintiff’s constitutional rights, or “if he took the action with the malicious intention to cause a deprivation of constitutional rights or other injury.” Harlow, 457 U.S. at 815, 102 S.Ct. at 2737, citing Wood v. Strickland, 420 U.S. 308, 322, 95 S.Ct. 992, 1000, 43 L.Ed.2d 214 (1975). Government officials performing discretionary functions are generally shielded from civil damages liability when their conduct does not violate clearly established statutory or constitutional rights of which a reasonable person would have known. Harlow, 457 U.S. at 818, 102 S.Ct. at 2738. Federal courts have the power to award damages for violation of constitutionally protected interests. Bivens v. Six Unknown Fed. Narcotics Agents, 403 U.S. 388, 399, 91 S.Ct. 1999, 2006, 29 L.Ed.2d 619 (1971).

We find that the plaintiff has sustained her burden of proving that her constitutional rights were violated by defendants Boandl and Jessup. The seizure of plaintiff’s bank accounts, and the lien placed against her real property were unreasonable and in violation of her rights under the Fourth Amendment. The seizure of plaintiff’s bank accounts and lien placed against her real property were made without due process of law and in violation of the Fifth Amendment.

We must now determine whether the defendants Boandl and Jessup satisfied their burden of proving the affirmative defense of “good faith” immunity. We find that they have failed to satisfy their burden. Their testimony failed to show that they had a reasonable ground for belief and a good faith belief that their actions were fully in accordance with the law and regulations. Internal Revenue Service regulations provide that extreme caution must be taken before filing a nominee lien. Neither Boandl nor Jessup used any caution. They acted on their own without obtaining approval from superiors. Their actions and tactics were certainly not in keeping with the rules and regulations of the Internal Revenue Service. Jessup repeatedly testified that he didn’t need authority from any superior to do what he did, and that he alone could make the determination. We find, therefore, that the plaintiff is entitled to an award of actual or compensatory damages.

We must now consider the elements of damages claimed by the plaintiff. She testified that the placing of the lien on her real property prevented her from selling the property, with resultant damage to her. We do not agree with that contention. The worst that would have happened if she sold the property would have been that title company would have withheld from the proceeds due her, the amount of the lien. The purchaser could have obtained clear title. Thus, we refuse that element of damage.

However, based on the uncontradicted testimony by the plaintiff, we find that the plaintiff’s constitutional rights were violated by the defendants Boandl and Jessup, and that plaintiff was injured as follows:

1. She lost two insurance policies, a health and life policy, because she did not have the funds to pay the premium.

2. She was threatened with foreclosure of her real estate because she didn’t have the funds to make her mortgage payment.

3. She couldn’t run her horse business because of the lack of funds to buy feed and other items.

4. She was sued by one supplier because she did not have the funds to pay her bill.

5. She had to borrow money for food and to pay her mortgage.

6. She was humiliated, degraded and withdrawn.

7. She didn’t leave the farm because she was ashamed to meet people, and for fear that Jessup would come back to the farm and remove her personal property.

The matter of resolving the amount of a damage award is always a troublesome problem since there is no precise formula for calculating damages. We must arrive at a figure which is based upon considerations of equity, reason and pragmatism. Mack v. Johnson, 430 F.Supp. 1139, 1151 (E.D.Pa.1977), aff’d. 582 F.2d 1275 (3d Cir. 1978).

Some courts have awarded prisoners the sum of $25.00 per day for each day of wrongful segregated confinement. Id.; United States ex rel Neal v. Wolfe, 346 F.Supp. 569 (E.D.Pa.1972); Sostre v. Rockefeller, 312 F.Supp. 863 (S.D.N.Y.1970), rev’d in part, sub nom., 442 F.2d 178 (2d Cir.1971), cert. denied, 404 U.S. 1049, 92 S.Ct. 719, 30 L.Ed.2d 740 (1972). In those cases, the plaintiffs were already incarcerated, but were awarded damages for wrongful segregated confinement.

In the case sub judice, the plaintiff, prior to the levy, had free access to her bank accounts, and freedom to do what she wished with her real property. She had freedom of movement. The levy against her real property lasted approximately 118 days (from August 3, 1982 until November 30, 1982), and the money in her bank accounts was unavailable to her for approximately 150 days (from August 3, 1982 until the beginning of January 1983). Thus the plaintiff was deprived of her funds and/or her property for a total of 268 days. During that time she suffered from humiliation and degradation. Since the courts have approved a finding of $25.00 per day for an already incarcerated person whose constitutional rights are violated, we find that the sum of $250.00 per day is a reasonable per diem amount for a person of the plaintiff’s standing in life at the time of the violation of her rights by defendants Boandl and Jessup.

We, therefore, award the plaintiff the sum of $67,000.00 (268 days at $250.00 per day) as compensatory damages for the injuries which she suffered because of the conduct of defendants Boandl and Jessup.

The plaintiff has requested that she be awarded punitive damages as well as compensatory damages. Punitive damages “are never awarded as of right, no matter how egregious the defendant’s conduct.” Smith v. Wade, 461 U.S. 30, 52, 103 S.Ct. 1625, 1638, 75 L.Ed.2d 632 (1983). On the other hand, once liability is found, a compensatory damage award is required to compensate the plaintiff for her loss. Id. Punitive damages are awarded to punish the defendant for his outrageous conduct, and to deter him and others like him from similar future conduct. Id. at 54, 103 S.Ct. at 1639. “The focus is on the character of the tortfeasor’s conduct — whether it is of the sort that calls for deterrence and punishment over and above that provided by compensatory awards.” Id. We do not find that the defendants’ conduct here is of such character, and we therefore deny an award of punitive damages.

ORDER

The court finds in favor of the plaintiff against defendants Richard Boandl and George Jessup in the amount of $67,000.00.

Judgment is entered in favor of the plaintiff against defendants Richard Boandl and George Jessup in the amount of $67,000.00.

The court finds in favor of defendants Larry Rosenblum, Raymond J. Pfeiffer, and James T. Rideoutte against the plaintiff.

Judgment is entered in favor of defendants Larry Rosenblum, Raymond J. Pfeiffer, and James T. Rideoutte against the plaintiff.

IT IS SO ORDERED.


source: Caselaw Access Project

author: MYRON H. THOMPSON, District Judge.

license: Public Domain

text:
    Nellie P. THOMAS, et al., Plaintiffs, State of Alabama, etc., et al., Plaintiff-Intervenors, v. Margaret M. HECKLER, etc., Defendant.
    Civ. A. No. 83-T-826-N.
    United States District Court, M.D. Alabama, N.D.
    Nov. 16, 1984.

      Lawrence F. Gardella, Legal Services Corp. of Ala., Montgomery, Ala., Joseph E. Carr, IV and Gabrielle Wehl, Legal Services Corp. of Ala., Mobile, Ala., for plaintiffs.
    Herndon Inge, III, Inge, McMillan & Inge, Mobile, Ala., for Joseph Thames, Jr., member of Plaintiff Class.
    Rosa H. Davis, Russell C. Stoddard, Asst. Attys. Gen., Montgomery, Ala., for plaintiff-intervenors.
    John C. Bell, Ú.S. Atty., Calvin C. Pryor, Asst. U.S. Atty., Montgomery, Ala., Randolph W. Gaines, Deputy Asst. Gen. Counsel for Litigation, Gabriel L. Imperato and Anne Sirota, Dept, of Health & Human Services, Baltimore, Md., for defendant.
   MEMORANDUM OPINION

MYRON H. THOMPSON, District Judge.

This class-action lawsuit challenging the refusal of defendant Secretary of Health and Human Services to follow this circuit’s “medical improvement standard” in terminating Social Security benefits is again before the court on the Secretary’s October 15, 1984, motion for relief from judgment, etc., and October 25, 1984, request for stay. The issue presented by the motion and request is whether the newly-enacted Social Security Disability Benefits Reform Act of 1984, P.L. 98-460 (Oct. 9, 1984), requires this court to dissolve its preliminary injunction granting class-wide relief, rescind its schedule for compliance with the injunction and dismiss this lawsuit. For reasons that follow, the court is of the opinion that the Act does not require such steps.

I.

Plaintiffs Nellie P. Thomas, Mamie Johnson and Robert L. Benford brought this lawsuit on behalf of themselves and others similarly situated in the State of Alabama challenging the refusal of the Secretary to follow the settled law of the United States Court of Appeals for the Eleventh Circuit in terminating payment of benefits under Title II of the Social Security Act, 42 U.S.C.A. §§ 401-435, and Title XVI of the Act, 42 U.S.C.A. §§ 1381-1385. Thomas v. Heckler, 598 F.Supp. 492 (M.D.Ala.1984).

In the memorandum opinion issued along with its order of August 15, 1984, this court restated the law of this circuit, as announced in Simpson v. Schweiker, 691 F.2d 966, 969 (11th Cir.1982), as follows: “disability benefits [may] not be terminated without substantial evidence of improvement in the recipient’s condition.” Thomas v. Heckler, 598 F.Supp. at 495. The court found that “the Secretary refuses to apply the medical improvement standard except when directed to do so by a federal court in a specific case.” 598 F.Supp. at 496. The court then concluded that, “in refusing to follow the law of this circuit as announced in Simpson, the Secretary has acted and is acting outside the law, flouting both the statutory and constitutional law of this land.” 598 F.Supp. at 496-97.

The court further observed “that the Secretary’s policy is causing suffering and despair on a mass scale.” 598 F.Supp. at 499. The evidence reflected

that the plaintiffs and members of the class are now unable to pay for medicine, clothing, shelter, food and transportation because of the termination of their benefits. As a result, many have lost or are in danger of losing major possessions, many now suffer from anxiety, depression and a substantial decline in health, and some have even died.

598 F.Supp. at 497.

Based on these and other conclusions of law and findings of fact, the court issued a preliminary injunction on August 15, 1984, requiring, first, that the Secretary apply the Simpson standard in all future disability reviews in Alabama and, second, that she correct the effects of her violation by restoring benefits to those Alabama residents improperly terminated until she determines that they are not disabled according to the lawful standard. 598 F.Supp. at 501.

Later, the court met with counsel for the plaintiffs and the Secretary to establish a schedule for the speedy restoration of benefits. The court solicited proposed schedules from all counsel. The plaintiffs submitted a schedule requiring that on November 1, 1984, the Secretary begin notifying plaintiff class members that their benefits would be restored unless they declined or had become ineligible, and that on December 1, 1984, the Secretary begin restoring benefits accordingly. The Secretary failed to submit a proposed schedule. The court therefore issued an order largely adopting the plaintiffs’ schedule. The court is now informed that the Secretary has begun complying with this schedule.

II.

The court has thoroughly reviewed the Social Security Disability Benefits Reform Act of 1984 and its legislative history. The court now considers how this Act affects its prior orders and how the orders should accordingly be redrawn.

The Act’s provisions may be summarized as follows. First, the Act establishes a standard by which the Secretary is to review previous disability determinations. Sections 2(a) and (c). This standard is to be applied in all future cases, as well as those now at various stages of administrative and judicial review. Section 2(d). The Secretary is to redetermine the disability of all named members of class actions, such as this one. Section 2(d)(2)(C). She is to redetermine the disability of unnamed members of such class actions, certified before September 19, 1984, if they so request within 120 days of receiving notice from her. Section 2(d)(3). All of those whose cases are to be redetermined may elect to receive benefits pending redetermination, Section 2(e), and, if found still disabled, shall receive full retroactive benefits. Section 2(f). Finally, the Secretary is to apply these provisions of the Act according to regulations which she must promulgate within 180 days of the Act’s enactment. Section 2(g).

For its part, the court’s August 15, 1984, order, as amended, may be considered as follows. First, the court determined that the Secretary had violated applicable law in terminating disability benefits without substantial evidence of medical improvement. The Act clearly does not address or affect this determination.

Based on this determination, the court ordered two measures of relief. The first of these was that the Secretary apply this circuit’s medical improvement standard in ongoing disability reviews in Alabama. At the time, this standard was the applicable law. The Act obviously has changed matters by setting a standard designed to supersede this and other circuits’ medical improvement standards. After final submission in this cause, scheduled for January-11, 1985, the court will appropriately modify its order in this regard.

The second measure of relief the court ordered was the restoration of benefits to class members pending the Secretary’s determination that they are not disabled according to the applicable, lawful standard. Although the Act provides a new standard, it does not affect this restoration of benefits, since the restoration is designed to be temporary and limited and to expire upon the Secretary’s application of the Act’s standard.

The Secretary correctly contends that the Act provides a procedure by which she is to apply the Act’s standard to class members; this procedure is generally well-defined and, where undefined, lies within the Secretary’s discretion. Therefore, it would certainly be inappropriate for the court to interfere with this procedure. Heckler v. Day, _ U.S. _, 104 S.Ct. 2249, 81 L.Ed.2d 88 (1984). However, the court’s order in no way interferes with this procedure or any other application of the Act. To the contrary, the court’s order complements and promotes the Act and its procedure.

The court has set forth a procedure for the Secretary to follow until she decides to apply the Act’s procedure. According to the court’s order, the Secretary is to restore benefits until such time as she undertakes to apply a lawful standard to the plaintiffs’ disability, as she so far has not done. The Act now sets this standard. Thus, the Secretary is to provide benefits under the court’s order only until such time as she applies the Act.

At that time, by the terms of the Act, the Secretary will give class members the opportunity to elect to receive benefits pending redetermination, Section 2(e), making the court’s order beside the point. Obviously, if and when a class member decides not to undergo redetermination, such as by failing to request it within 120 days from receiving notice, Section 2(d)(3), the court’s order will no longer apply.

The court’s temporary restoration of benefits pending application of the. Act is justified on several grounds, discussed in the court’s prior opinion and recognized in the legislative history of the Act. First, it is based on the court’s finding that the Secretary violated the law. Congress repeatedly acknowledged this fact, as this example shows:

... the disability review process was being conducted in a manner contrary to the intent of Congress, in defiance of court mandates and without any regard for the pain and hardship that was being placed upon the disability recipient.

130 CONG.REC. S11469 (daily ed. September 19, 1984) (remarks of Sen. Pell).

As Congress recognized, such unlawful conduct compels a remedy. The Act is this remedy, and the court’s order is a means to prevent further hardship until Congress’ remedy takes effect. The existence of hardship cannot be denied. “Obviously, some people were removed from the rolls who should not have been.” 130 CONG. REC. S11453 (daily ed. September 19, 1984) (remarks of Sen. Dole).

Though Congress did give the Secretary discretion to apply the Act, its conferees also expressed an expectation that the Secretary would “act expeditiously.” Joint Explanatory Statement of the Committee of Conference. Even so, “the conferees recognize that there will be considerable administrative difficulty in identifying and notifying individuals who are eligible to have their cases redetermined — ” Id. In addition, the Secretary has until late April or early May 1985 to promulgate regulations. Section 2(g). Without doubt, while the Secretary is interpreting the Act and prescribing regulations by which to apply it, disability benefits recipients, including class members here, will suffer ongoing and extreme hardship, contrary to the purpose of the Act, unless the court’s order of restored benefits remains in effect. Once the Secretary applies the Act, its provisions will alleviate the hardship, as Congress intended.

The court’s order is thus consistent with the balance Congress struck between avoiding further hardship and allowing the Secretary ample time to respond. The Secretary retains control over this balance. If she begins applying the Act tomorrow, the court’s order will thereupon cease to bind her. It remains wholly for the Secretary to decide when to apply the Act. Her discretion is unabridged.

HI.

The Secretary appears to take particular exception to the schedule the court has set for the restoration of benefits. The basis for her exception seems to be somewhat of a speculative afterthought. The Secretary has not objected to the court’s order for several months and in fact has begun to follow the schedule. There is therefore no reason to interrupt this compliance, since again the court’s order is inherently temporary and limited, subject to abrogation by the Secretary’s own steps in applying the Act.

The court’s schedule in no way replaces or alters the Act’s procedure described above for redetermination of disability. By its own terms, the schedule concerns events that precede application of the Act. This is a schedule for restoring benefits pending application of the Act. It does not concern the Secretary’s redetermination of disability, nor her notification to unnamed class members of the opportunity to redetermination. Once the Secretary undertakes these steps and class members respond or fail to respond within the set period, the schedule will be without force or effect. Thus, the Secretary’s discretion to take these steps is in no way infringed.

That the court’s schedule imposes little if any burden on the Secretary has been evident from her regard toward it. The Secretary first had notice of the court’s order to restore benefits on August 15, 1984. According to the order, restoration was to be immediate. Nevertheless, the court provided all parties several opportunities over a two-month period to propose a schedule for compliance and thereby to account for any burdens that the order presented. The Secretary actively participated in these discussions through the office of her general counsel. She did not propose an alternative schedule to the plaintiffs’, and the only burden she mentioned was the difficulty of compiling a list of the plaintiff class members. The Secretary now appears to have resolved this difficulty, since she has begun sending notices to class members in accordance with the court’s schedule. Only on October 25,1984, by the instant request for stay, did the Secretary suggest that any other burden might result from the court’s schedule.

. Based on this evidence and in due deference to the Secretary, the court finds that the Secretary’s concerns regarding the court’s schedule are not warranted. There is nothing to be gained and much to be lost from interrupting the schedule at this late stage.

In this regard, the schedule is not an “unwarranted judicial intrusion into [a] pervasively regulated area ... with respect to future disability claims ...” Heckler v. Day, _ U.S. _, 104 S.Ct. 2249, 2258, 81 L.Ed.2d 88 (1984). Rather, the court has simply established temporary, limited measures for the transition from the Secretary’s past unlawful conduct to her impending lawful application of the Act.

On this basis, an appropriate order will be entered.

      . In light of the Secretary’s October 12, 1984, notice of appeal in this cause, the court has on its own considered whether it has jurisdiction over the instant motion. The court has determined that it has jurisdiction, whether the Secretary’s motion properly lies under Fed.R.Civ.P. 60(b), as it purports, Parrott v. Wilson, 707 F.2d 1262, 1266-67 n. 8 (11th Cir.1983), cert. denied, _ U.S. _, 104 S.Ct. 344, 78 L.Ed.2d 311 (1984); Wilson v. Thompson, 638 F.2d 799, 803 (5th Cir.1981) (Unit B), or the motion should be taken to lie under Fed.R.Civ.P. 62(c), as a motion to modify an injunction. Plaquemines Parish Community Council v. U.S., 416 F.2d 952, 954 (5th Cir.1969); Hamer v. Campbell, 358 F.2d 215, 223 (5th Cir.1966).

      . The Secretary’s request for a stay seeks only to postpone compliance with the court's August 15, 1984, order, as amended, pending determination of her motion for relief from judgment, etc. The court makes this determination by this order, therefore rendering the request for a stay moot.

      . As of yet, the parties have not specifically requested that the court modify this aspect of its order. There is no great need for haste since “it is still not entirely clear how the [Act's] medical improvement standard will be implemented." 130 CONG.REC. H9837 (daily ed. September 19, 1984) (remarks of Rep. Gradison). The Secretary presumably is now in the process of devising regulations for such implementation.

      . In this regard, the court would note that it and other courts in this district have already begun to remand to the Secretary the individual cases of unnamed plaintiff class members, according to Section 2(d)(3) of the Act. To the extent that further steps to satisfy this provision may be appropriate, the court will consider them at final submission. As this opinion indicates, the court considers the Secretary free to apply the Act to all the plaintiff class members at any time.

      . In the recent case of Heckler v. Kuehner, _ U.S. _, 105 S.Ct. 376, 83 L.Ed.2d 312 (1984), vacating, 717 F.2d 813 (3rd Cir.1983), the Supreme Court instructed the Third Circuit Court of Appeals and the United States District Court for the Eastern District of Pennsylvania to "make any necessary clarifications in the definition and scope of the class ... and ... take other actions appropriate in light of that Act.” Id. Such are the actions that this court has taken here.


author: EDELSTEIN, District Judge:

text:
    UNITED STATES TRUST COMPANY OF NEW YORK, as Trustee, The Chase Manhattan Bank, N.A., as Trustee, Sharon Steel Corporation, Inc., UV Industries, Inc. Liquidating Trust, and David Finkelstein, Arthur R. Gralla, Paul Kolton, Theodore W. Kheel, Edwin Jacobson and Martin Horowitz, as Trustees of the UV Industries, Inc. Liquidating Trust, Plaintiffs, v. EXECUTIVE LIFE INSURANCE CO., OCCI & Co., Staniels & Co., Nest & Co., Agway Insurance Company and First Missouri Bank & Trust Co., on Behalf of themselves and as representatives of a class of former Holders of 9¼% Senior Subordinated Notes Due April 15, 1987, Mimi Shapiro, Mortimer A. Shapiro, Pacific & Co., Cede & Co. and North Star Oil Company, on behalf of themselves and as representatives of a class of Holders of 9¼% Senior Subordinated Notes Due April 15, 1987, Butcher & Co., William W. Humphrey, Trustee, and Louis H. Spiner, Trustee, on Behalf of themselves and as representatives of a class of former Holders of 5⅜% Subordinated Debentures Due November 15, 1995, and Bear Stearns & Co., Cede & Co., Julian S. Goldberg, Mericka & Co., Mutual Shares Corp. and Mutual Qualified Income Fund, Saxon & Co., on Behalf of themselves and as representatives of a class of Holders of 5⅜% Subordinated Debentures Due November 15, 1995, Defendants.
    No. 83 Civ. 8723 (DNE).
    United States District Court, S.D. New York.
    Nov. 20, 1984.

      See also, 602 F.Supp. 942.

      Carter, Ledyard & Milburn, Louis L. Stanton, New York City, of counsel, for plaintiff United States Trust Company of New York.
    Dewey, Ballantine, Bushby, Palmer & Wood, John L. Collins, New York City, of counsel, for plaintiff Chase Manhattan Bank, N.A.
    Shea & Gould, Ronald Lefton, New York City, of counsel, for plaintiff ÚV Industries, Inc. Liquidating Trust.
    Shearman & Sterling, Robert Hausen, New York City, of counsel, for plaintiff Sharon Steel Corporation.
    Donovan, Leisure, Newton & Irvine, Sanford M. Litvack, New York City, of counsel, for defendant Bear Stearns & Co.
    Tenzer, Greenblatt, Fallon & Kaplan, William Klein, II, P.C., New York City, of counsel, for defendants Mutual Shares Corp. and Mutual Qualified Income Fund.
    Davis Polk & Wardwell, Thomas J. Aquilino, Jr., New York City, of counsel, for defendant Butcher & Co. and the 5%% Selling Class.
    Crystal & Driscoll, P.C., Stephen L. Crystal, New York City, of counsel, for defendants Mimi Shapiro and Mortimer A. Shapiro.
    Danziger, Bangser, Klipstein, Goldsmith & Greenwald, Jonathan Fink, New York City, of counsel, for defendant Agway Insurance Company.
    Fine & Ambrogne, Michael B. Roitman, Boston, Mass., of counsel, for defendant Nest & Co.
    Milbank, Tweed, Hadley & McCloy, Carol J. Patterson, New York City, of counsel, for defendant Cede & Co.

      . The certification order was filed by Judge Duffy. The case was transferred to me on May 24, 1984. Judge Duffy’s order did not specify which provision of Fed.R.Civ.P. 23(b) was applicable. However, the factual background, infra, shows that the classes are certifiable under Fed. R.Civ.P. 23(b)(1)(A). The prosecution of separate actions by individual class members, the bondholders, would create the risk of inconsistent or varying adjudications with respect to the bondholders which would establish incompatible standards of conduct for the trustees in the disbursement of the interest funds. The class is also certifiable under Fed.R.Civ.P. 23(b)(1)(B) because adjudications with respect to the class representatives would, as a practical matter, be dispositive of the interests of the members of the classes and would not substantially impair or impede the ability of the other class members to protect their interests. Moreover, the motions for class certification before Judge Duffy sought certification under Fed.R.Civ.P. 23(b)(1). Accordingly, the court deems the classes to have been certified under Fed.R.Civ.P. 23(b)(1).
      No notice, at this point in the litigation, has been given to the individual class members. Under Fed.R.Civ.P. 23(c)(2), notice is only required for a class certified under Fed.R.Civ.P. 23(b)(3). Because this class was certified under Fed.R.Civ.P. 23(b)(1), no notice was required. However, notice will be given to the class members upon final disposition of the action. See Fed.R.Civ.P. 23(d).

   OPINION AND ORDER

EDELSTEIN, District Judge:

This is an interpleader class action, pursuant to 28 U.S.C. § 1335(a) and Fed.R. Civ.P. 23, brought, inter alia, by United States Trust Company of New York (“U.S. Trust”) and the Chase Manhattan Bank, N.A., (“Chase”) in their capacities as trustees for 9V4% Notes and 5%% Debentures issued by the now defunct UV Industries, Inc. (“UV”). U.S. Trust and Chase are holders of interest installments, together with accumulated earnings thereon, paid to the banks by UV’s successor corporation, Sharon Steel Corporation (“Sharon”). The named defendants are sued on behalf of themselves and as representatives of four classes of debtholders who have possible claims to the interest installment funds held by the stakeholders, U.S. Trust and Chase. On March 9, 1984, the court certified the four classes. At a pretrial conference in late May of 1984, all parties agreed that this case is appropriate for disposition on a motion for summary judgment because there are no material disputed issues of fact. The court then instructed the parties to submit cross motions for summary judgment.

FACTUAL BACKGROUND

The facts of this case have previously been set forth in two opinions by Judge Werker and the opinion of the United States Court of Appeals for the Second Circuit. See Sharon Steel Corp. v. Chase Manhattan Bank, N.A., 521 F.Supp. 104 & 521 F.Supp. 118 (S.D.N.Y.1981), aff'd in part, 691 F.2d 1039 (2d Cir.1982), cert. denied, 460 U.S. 1012, 103 S.Ct. 1253, 75 L.Ed.2d 482 (1983).

Between 1965 and 1979, UV issued five separate indentures, two of which are the subject of this motion. The U.S. Trust Indenture was issued on April 15, 1977, under which UV borrowed approximately $25 million by issuing 94/4% Senior Subordinated Notes due in 1987. The Chase Indenture was issued on September 1, 1965, under which UV borrowed approximately $23 million by issuing 5%% Subordinated Debentures due 1979-1995.

In March 1979, the stockholders of UV approved a plan of complete liquidation involving the eventual sale of UV’s assets and distribution of the proceeds to UV’s stockholders. UV set aside a $155 million fund to provide for its long term debt obligation. On November 26, 1979, after UV had disposed of most of its assets, UV reached an agreement with plaintiff Sharon for the sale of UV’s remaining properties in exchange for cash, Sharon debentures and an assumption by Sharon of all UV’s outstanding liabilities, including the two indentures at issue here, and the Manufacturers Indenture, which was the senior indebtedness.

By letter dated December 24, 1979, the trustees issued notice of default to Sharon. The Manufacturers Indenture provides that a successor corporation can be substituted for UV as obligor only if the successor purchases all or substantially all of UV’s assets. The trustees argued that because UV earlier had sold most of its assets, Sharon’s purported assumption of the UV debenture obligations did not constitute a sale of “all or substantially all” of UV’s property.

Also on December 24, 1979, Sharon filed suit against the trustees seeking a declaration that the trustees’ notice of default was improper and that Sharon was a valid assignee under the Manufacturers Indenture.

The Selling Classes.

During the pendency of the litigation, Sharon declared semi-annual interest payments under both the U.S. Trust Indenture (the 9V4% Notes) and the Chase Indenture (the 5%% Debentures). Under Section 2.03 of the U.S. Trust Indenture and Section 2.05 of the Chase Indenture, payment was to be made to the then owners of the bonds. Sharon then deposited with U.S. Trust and Chase the full amounts of the semi-annual interest installments. The two Selling Classes are those bondholders who were record owners of the bonds at the time Sharon declared semi-annual interest payments, and who subsequently transferred those bonds to a member of the respective Holding Class.

Both U.S. Trust and Chase refused to distribute the interest payments deposited by Sharon to the Selling Class members because both indentures prohibited the payment of any monies on the subordinate indebtedness if there is a default on the senior indebtedness, the Manufacturers Indenture. Because the Trustees had issued notices of default under the senior indebtedness and the issue of its default was before the United States District Court, U.S. Trust and Chase could not distribute the interest payments on the subordinate indebtedness. On each regularly scheduled payment date, both banks sent notice to the bond holders that the interest installments received from Sharon would be held in separate accounts and invested in high-yielding money market instruments pending a determination of the persons entitled to the funds.

On May 29, 1981, the district court held that Sharon’s attempted assumption of UV’s obligations was invalid and that UV was in default under the Chase Indenture and the Manufacturers Indenture, the senior indebtedness. This ruling was affirmed by the Court of Appeals for the Second Circuit on September 28, 1982 and Sharon’s petition for writ of certiorari was denied on February 28, 1983. On June 8, 1983, the district court filed an Amended Judgment, which concluded the declaratory judgment action instituted by Sharon. ■ See Exhibit E to Chase Affidavit. The Amended Judgment, however, did not make any provision for the disposition of the funds deposited by Sharon.

The Holding Classes.

On May 5, 1983, the Manufacturers Indenture, UV’s senior indebtedness, was fully paid. Thus, because the default on the senior indebtedness was cured, under the terms of the indenture U.S. Trust was able to disburse the interest installments on the 9V4% Notes previously deposited by Sharon. Pursuant to the terms of the U.S. Trust Indenture, U.S. Trust declared a special record date of June 30, 1983, for payment of the accrued interest. The 974% Holding Class consists of those persons or entities who, as of June 30, 1983, held of record 974 % Notes transferred by a member of the 974% Selling Class.

Similarly, payment on the Manufacturers Indenture freed Chase, under Article IY of the Chase Indenture, to distribute the interest installments on the 5%% debentures. Pursuant to the terms of the Chase Indenture, Chase declared June 9, 1983 as the special record date for payment of the accrued interest. The 5sh% Holding Class consists of those persons or entities who, as of June 9, 1983, held of record 53/s% debentures transferred by a member of the 5%% Selling Class.

To summarize, the Selling Classes in this case consist of those persons or entities who were .holders of the bonds in 1980 when Sharon declared semi-annual interest payments on the bonds and deposited such interest with the trustees, and who sold the bonds prior to the special record date declared by the trustee for payment of the accrued interest. The Holding Classes consist of those persons or entities who obtained bonds transferred by members of the Selling Classes, and held those bonds on the special record date.

DISCUSSION

This case involves interpretation of indentures which is ordinarily well-suited for a motion for summary judgment. See, e.g., Sharon Steel Corp. v. Chase Manhattan Bank, N.A., supra; Zeiler v. Work Wear Corp., 450 F.Supp. 891 (S.D.N.Y.1978); Buchman v. American Foam Rubber Corp., 250 F.Supp. 60 (S.D.N.Y.1965). Based on the parties’ affidavits, memorandum and statements submitted pursuant to Rule 3(g) of the civil rules for the Southern District of New York, this court finds that there are no material disputed issues of fact. Accordingly, summary judgment is appropriate in this case. See Fed.R.Civ.P. 56(c).

Although the provisions of the U.S. Trust and Chase Indentures are similar, they are not identical and the court will discuss the provisions of each separately.

THE U.S. TRUST 97j% INDENTURE

Section 2.03 of the U.S. Trust Indenture provides that “[t]he person in whose name any outstanding Note was registered at the close of business on the Regular Record Date” (the Selling Class) is entitled to receive the interest payable on the Interest Payment Date. Section 2.03 provides one exception to this general rule:

“if and to the extent the Company shall default in the payment of the interest due on such Interest Payment Date, such defaulted interest shall be paid to the Persons in whose names outstanding Notes are registered at the close of business on a subsequent special record date established by notice given by mail by or on behalf of the Company to the holders of Notes ...”

Thus, if Sharon “defaulted” on the 974% Notes as that term is defined in the U.S. Trust Indenture, the members of the 974% Holding Class are entitled to the interest fund. Conversely, if Sharon did not “default” on the 974% Notes, the members of the 974% Selling Class are entitled to the interest fund.

Section 6.01 of the U.S. Trust Indenture defines “Event of Default” to include:

“(a) default in the payment of any installment of interest upon any of the Notes as and when the same shall become due and payable, and continuance of such default for a period of 30 days (it being understood that if the entire amount of such payment of interest is deposited by the Company with the Trustee ... before the expiration of such period of 30 days, such default shall no longer be considered to be continuing under this Indenture); ...”

Although the interest payments were not made to the Note Holders within the 30 day grace period, Sharon had duly deposited “the entire amount of such payment of interest” with U.S. Trust, the trustee. Therefore, the Selling Class contend that under Section 6.01 there was no “default” on the 974% Notes.

Under New York law, however, the entire contract must be considered and the court will favor an interpretation that gives effect to every part of the contract. Broad v. Rockwell Int’l. Corp., 642 F.2d 929, 947 (5th Cir.), cert. denied, 454 U.S. 965, 102 S.Ct. 506, 70 L.Ed.2d 380 (1981) (interpreting an indenture under New York law); Prescott, Ball & Turben v. LTV Corp., 531 F.Supp. 213, 218 (S.D.N.Y.1981) (interpreting an indenture). Section 13.03 of the U.S. Trust Indenture provides that if the Company shall default on “any Senior Indebtedness, then during the continuance of any such default, the Company shall not pay, and neither the Trustees nor any holder of Notes shall be entitled to receive, any amount in respect of the principal of or interest on any Note.” The Court of Appeals held and it is now undisputed that Sharon defaulted on the senior indebtedness, the Manufacturers Indenture. Thus, under Section 13.03, Sharon was prohibited from paying anything on the U.S. Trust indenture. Moreover, U.S. Trust, the trustee, and the holders of the Notes, the Selling Class, were “not entitled to receive” any interest payments.

Therefore, Sharon’s deposit of the interest installments with U.S. Trust did not avoid a default under Section 6.01 of the U.S. Trust Indenture. U.S. Trust was duty-bound not to forward Sharon’s interest payments to the Note holders. Sharon could not avoid default under the 97j% Notes by depositing with the trustee interest payments that were expressly prohibited by Section 13.03 of the indenture. Only on May 5, 1983, when Manufacturers received full payment on the senior indebtedness, was Sharon permitted to pay, and the bondholders permitted to receive, the interest payments on the 974% Notes. Under Section 2.03, those holding the Notes at the later special record date, the 974% Holding Class, then became entitled to the interest payments.

Section 2.03 is similar to Section 307 of the Model Indenture Provisions — All Registered Issues — 1967, which is considered in the American Bar Foundation’s Commentaries On Indentures. The Commentaries explain that record dates and special record dates in the event of default are mechanisms that became necessary when notes began to be sold in large volume. See American Bar Foundation, Commentaries on Indentures 189 (1971) (“Commentaries”). See also id., app. D at 4 (“[i]n dealing with payment of defaulted interest, the indenture should contain provisions to permit establishment of a record date for such payment on notice to holders”). The record date mechanism allows the trustee to perform the ministerial function of paying interest to the bondholders in an orderly and uniform manner. U.S. Trust correctly utilized the special record date mechanism in this case, entitling the 974% Holding Class to the interest fund.

The motion for summary judgment of the 974% Holding Class is granted and the motion of the 974% Selling Class is denied.

THE CHASE 5%% INDENTURE

Section 2.05 of the Chase indenture provides that payment of interest is to be made to the owner of the debenture at the time payment was due, “except if and to the extent the Company shall default in the payment of interest due on such interest payment date, in which case such defaulted interest shall be paid to the person in whose name such Debenture is registered on the date of payment of such defaulted interest____” As with the U.S. Trust Indenture, the issue is whether Sharon “defaulted” as that term is defined in the Chase Indenture.

Section 9.01 of the Chase Indenture defines default to include: “(b) failure duly and punctually to pay interest on any Debenture for a period of 30 days after such interest shall have become due and payable, whether default arises as a result of the provisions of Article IV or otherwise." (Emphasis supplied). Article IV, Section 4.02, prohibits any interest payments on the debentures if the company defaults on any senior indebtedness. It is undisputed that Sharon defaulted on the senior indebtedness, the Manufacturers Indenture. Thus, under Section 9.01(b), Sharon’s failure to make interest payments to the bondholders “arose as a result of the provisions of Article IV” of the Chase Indenture. Sharon, therefore, “defaulted” as that term is defined in the Chase Indenture. Accordingly, the 5%% Holding Class is entitled to the interest pool.

It is clear that Sharon’s deposit of the interest installments with Chase did not avoid default under Section 9.01(b). The emphasized phrase in Section 9.01(b) is similar in purpose and effect to one of the examples of “events of default” in Section 501 of the American Bar Foundation’s Model Indenture provisions. Commentaries, § 501, at 204. Referring to this section, the Commentaries state that the clause has the purpose of refuting any argument that events resulting from force majeure were not intended to be treated as defaults. Id. at 205. Similarly, the purpose and effect of Section 9.01(b) of the Chase Indenture is that failure to pay the bondholders as a result of the provisions of Article IV constitutes a default. For purposes of this motion, the result would be the same under Section 9.01(b), whether or not Sharon deposited the interest payments with Chase.

The 5%% Selling Class contend that certain communications made by Chase to the members of the Selling Class constitute “circumstances surrounding the withholding” indicating that the funds were supposed to be paid to the Selling Class. Specifically, in a letter dated May 9, 1980, Chase informed the members, of the Selling Class: “we are for the present time contractually prohibited from paying to you any part of the semi-annual interest installment due on the Debentures on May 15, 1980 that may be tendered or paid to us.” Exhibit G to Chase Affidavit (emphasis supplied). The 5%% Selling Class contend that these and other communications “indicate a recognition and intent that the money paid by Sharon would eventually be released to the persons to whom it was owed, not to the persons who later acquired the 5%% Debentures ____” Memorandum in Support of Motion for Summary Judgment of 5%% Selling Class, at 12. The 5%% Selling Class is wrong for two reasons.

First, under New York law, matters extrinsic to an unambiguous indenture agreement may not be considered. Teitlebaum Holdings, Ltd. v. Gold, 48 N.Y.2d 51, 56, 396 N.E.2d 1029, 1031, 421 N.Y.S.2d 556, 559 (1979); West, Weir & Bartel, Inc. v. Mary Carter Paint Co., 25 N.Y.2d 535, 540, 255 N.E.2d 709, 712, 307 N.Y.S.2d 449, 452 (1969). For purposes of determining “default” and those persons entitled to the interest installments in the event of default, this court finds that the Chase Indenture is unambiguous. It is clear that under Section 9.01(b), “default” includes failure to make interest payments because of a default on the senior indebtedness. It is also clear that under Section 2.05, payment of the interest installments is to be made to those who are record holders when the defaulted interest is eventually paid.

Chase’s communications with the Selling Class members cannot alter the express provisions of the indenture. “Indenture Trustees do not have power to compromise with the borrower or to vary the terms of the indenture.” Sharon Steel Corp. v. Chase Manhattan Bank, N.A., 691 F.2d 1039, 1052 (2d Cir.1982), cert. denied, 460 U.S. 1012, 103 S.Ct. 1253, 75 L.Ed.2d 482 (1983). If the Selling Class’s claim is that Chase by its communications misled them into selling prematurely, their remedy is to sue Chase for breach of its fiduciary obligations.

Second, in the case of corporate notes, the general rule is that “accrued interest goes with an interest bearing obligation. It passes as an incident to the main obligation, unless expressly reserved.” Hudson Valley R.R. Co. v. O’Conner, 95 A.D. 6, 10, 88 N.Y.S. 742 (3d Dep’t 1904). See also Commentaries, § 3-7, at 190 (“conceptually the new owner of the debenture is considered to be the beneficial owner of the interest installment”). The Selling Class members sold their bonds at the risk that their right to the interest payments would necessarily be sold along with the principal amount of the notes. They were not compelled to sell; indeed some of the original holders of the Debentures did not sell. Those who sold at all times had it within their power expressly to reserve their right to the interest payments. For purposes of the present motion, the communications by Chase have no probative value as to who is entitled to the interest payments under the terms of the indenture.

The 5%% Selling Class also contend that the sequence of payments made to Selling Class members constitutes a “circumstance surrounding the withholding” indicating that the interest fund at issue here was supposed to be paid to the Selling Class members. In the original judgment entered by the district court on August 19, 1981, the court ordered, inter alia, that during the pendency of the appeal to the Second Circuit, amounts equal to the semiannual interest payments due on the debentures were to be paid to the debentureholders from earnings on the $155 million fund Sharon earlier had set aside to satisfy UV’s long term debt obligation. These court ordered payments were made on November 15, 1981, May 15, 1982 and November 15, 1982. The 5%% Selling Class contend that there thus has been “an anomolous gap” in the payments to the Class. That is, the 5% % Selling Class received interest payments on the debentures up until 1979 and then subsequently began receiving the court ordered “payments in lieu of interest” in November 1981. The interest installments at issue here would have been made during this “gap,” but for Sharon’s default on the senior indebtedness. The 5%% Selling Class contend that this gap in payments during a continuous period of debenture ownership “is a result too unnatural to have been the intent of any of the parties to the interest payment transactions.” Memorandum of the 5%% Selling Class, at 14.

The 5%% Selling Class’s reliance on the intent of the parties “to the interest payment transactions” is misplaced. Under New York law, the key issue is the intent of the parties to the indenture agreement and the manner in which that intent is reflected in the language of the indenture. Broad v. Rock well Int’l Corp., 642 F.2d 929, 946 (5th Cir.), cert. denied, 454 U.S. 965, 102 S.Ct. 506, 70 L.Ed.2d 380 (1981) (interpreting an indenture under New York law). As expressed in Sections 4.02 and 9.01 of the Chase Indenture, the parties to the indenture agreement intended that during a period of default on the senior indebtedness, no interest payments were to be made on the 5%% Debentures. The payments in lieu of interest were ordered by the court to protect the interests of the 5%% bondholders during the pendency of the appeal. The 5%% Selling Class cannot transform court ordered payments for a period not in dispute into a right to be paid the interest for the defaulted interest period.

Moreover, under the terms of the indenture, “gaps” in the payment of interest during a continuous period of ownership were clearly contemplated by the parties to the indenture. A simple example will illustrate. Assume there are three interest installments to be made. The company promptly pays the first and third installments but defaults on the second. After the third installment is made, the bondholder sells. Subsequent to the sale the company pays the defaulted installment. Under Section 2.05 of the Chase Indenture, payment on installment number two is to be made, not to the original owner, but to the person who subsequently became the record owner. Thus, in the event of default, the indenture clearly contemplates the possibility of a “gap” in interest payments during a period of continuous ownership.

The motion for summary judgment of the 5%% Holding Class is granted and the motion of the 5%% Selling Class is denied.

COSTS AND ATTORNEYS’ FEES

The plaintiffs and defendant class representatives have requested costs, including attorneys’ fees.

Plaintiffs’ request for costs is denied. The provisions of the indentures do not warrant an award of attorneys’ fees to plaintiffs in this case. Section 7.06 of the U.S. Trust Indenture and Section 10.06 of the Chase Indenture provide for reimbursement by the company of the trustee for all reasonable expenses, advances and disbursements of the trustee. Under these provisions, the expenses incurred by the trustees in this litigation should be reimbursed, if at all, by the company. That reimbursement should not come from the defendants in this action, the bondholders.

Furthermore, this interpleader action was brought primarily in Sharon’s and the trustees’ self interests. It relieved them of multiple suits and has resulted in the discharge of their obligations. See Companion Life Ins. Co. v. Schaffer, 442 F.Supp. 826, 830 (S.D.N.Y.1977). The determination of entitlement to interest payments is a cost of doing business that plaintiffs cannot, by the use of interpleader, transfer to the bondholders.

The defendant class representatives also have requested costs. Under Section 6.09 of the U.S. Trust Indenture and Section 9.10 of the Chase Indenture, all parties to the indentures agree that a court may in its discretion require “in any suit for the enforcement of any right or remedy under this indenture, ... the filing by any party litigant in such suit of an undertaking to pay the costs of such suit, and ... such court may in its discretion assess reasonable costs, including reasonable attorneys’ fees against any party litigant in such suit, having due regard to the merits and good faith of the claims or defenses made by such party litigant____” The indentures further provide that this provision shall not apply “to any suit instituted by the trustee or to any suit instituted by any Noteholder or group of Noteholders ... for the enforcement of the payment of the principal of, or interest on any Note on or after the due date expressed in such Note.”

This suit, brought, inter alia, by the trustees, falls within the proviso to Section 6.09 of the U.S. Trust Indenture and Section 9.10 of the Chase Indenture. This suit was brought by the trustees and will result in the “payment of ... interest on any Note on or after the due date expressed in such Note.” Thus, under the indentures the parties have not “agreed” to a court assessment of attorneys’ fees against any party litigant in this case. The court, however, under its general equitable powers, still has the power to award attorneys’ fees to the class representatives. Oppenlander v. Standard Oil Co., 64 F.R.D. 597, 605 (D.Colo.1974).

A class representative who protects or “recovers a common fund for the benefit of persons other than himself or his client is entitled to a reasonable attorneys’ fee from the fund as a whole.” Boeing Co. v. Van Gemert, 444 U.S. 472, 478, 100 S.Ct. 745, 749, 62 L.Ed.2d 676 (1980); Mills v. Electric Auto-Lite Co., 396 U.S. 375, 90 S.Ct. 616, 24 L.Ed.2d 593 (1970). As the Supreme Court stated in Boeing:

The doctrine rests on the perception that persons who obtain the benefit of a lawsuit without contributing to its costs are unjustly enriched at the successful litigant’s expense---- Jurisdiction over the fund involved in the litigation allows a court to prevent this inequity by assessing attorneys’ fees against the entire fund, thus spreading fees proportionately among those benefitted by the suit.

Boeing, supra, 444 U.S. at 478, 100 S.Ct. at 949.

In this case, the representatives of the two Holding Classes have recovered the interest funds for their respective class members. The interest payments, originally due in 1980, have been held in high yielding money market instruments for the last four years. It would be inequitable for the Holding Class members to recover the money without having to pay the Holding Class representatives a reasonable attorneys’ fee, proportionate to the benefit each class member has received.

The representatives of the 9V4% Holding Class and the 5%% Holding Class are thus ordered to submit fee applications. The court will carefully review the applications to determine whether the request represents reasonable compensation to the attorneys for their work, and whether the award would preserve the rights of the class members to the proceeds of the interest funds. See Galdi Sec. Corp. v. Propp, 87 F.R.D. 6, 13 (S.D.N.Y.1979). The class representatives are further ordered to send notice to the class members of the court’s decision on the cross motions for summary judgment.

CONCLUSION

The motions for summary judgment of 9V4% Holding Class and the 5%% Holding class are granted. The motions of the 9V4% Selling Class and the 5%% Selling Class are denied. The representatives of the 9x/4% Holding Class and the 5%% Holding Class are awarded costs, including a reasonable attorneys’ fee to be paid out of the class funds. The class representatives are ordered to send notice to the class members of this opinion and order.

SO ORDERED.

      . U.S. Trust is trustee for the 9Va% Senior Subordinated Notes. Chase is trustee for the 53/s% Subordinated Debentures.

      . The four classes are as follows:
      (a) 9Va% Selling Class — All those persons or entities who held of record 9Va% Notes on April 1, 1980 and/or October 1, 1980 and/or April 1, 1981, and who subsequently transferred of record 9Va% Notes so held;
      (b) 9Va% Holding Class — All those persons or entities who, as of June 30, 1983, held of record 9Va% Notes that were transferred of record by a member of the 9Va% Selling Class after April 1, 1980;
      (c) 5/s% Selling Class — All those persons or entities who held of record 5/s% Debentures on May 5, 1980 and/or November 5, 1980 and/or May 5, 1981, and who subsequently transferred of record 5/s% Debentures so held;
      (d) 5

        /s% Holding Class — All those persons or entities who held of record as of June 9, 1983, 5/s% Debentures that were transferred of record by a member of the 5/s% Selling Class after May 5, 1980.

      . Both indentures were subordinated to the Manufacturers Hanovers Trust Company Indenture ("Manufacturers Indenture"), which was UV's senior indebtedness. Under the Manufacturers Indenture, issued April 15, 1977, UV borrowed approximately $75 million by issuing 8/s % debentures due 1982-1998.

      . See supra note 4.

        . On January 15, 1981, U.S. Trust and Sharon entered into a settlement agreement which was approved by the majority of the holders of the 91/4°/o Notes prior to the conclusion of the Sharon action. By supplemental indenture dated May 6, 1981, Sharon succeeded UV as the obligor under the U.S. Trust Indenture.

      . Sharon declared semi-annual interest payments under the 9Vi% Notes on April 1, 1980, October 1, 1980 and April 1, 1981. Sharon declared interest payments under the 53/s% Notes on May 15, 1980, November 15, 1980 and May 15, 1981.

      . Section 13.03 of the U.S. Trust Indenture provides in part:
      "In case any default shall occur in the payment of principal, whether at the expressed maturity thereof or upon acceleration (including any required sinking fund payments or required prepayments), of, or premium, if any, or interest on, any Senior Indebtedness, then during the continuance of any such default, the Company shall not pay, and neither the Trustees nor any holder of Notes shall be entitled to receive, any amount in respect of the principal of or interest on any Note.” Section 4.02 of the Chase Indenture provides
      in part:
      “In the event and during the continuation of default in the payment of principal, sinking fund or interest with respect to any Senior Indebtedness or in the event and during the continuation of any default under any instrument constituting Senior Indebtedness or pursuant to which any Senior Indebtedness is issued, and continuing beyond the period of grace therefor, if any, specified in such instrument, no payment on account of principal, premium or interest on the Debenture shall be made.”

      . On May 27, 1980, in the declaratory judgment action instituted by Sharon, the court denied Sharon’s motion for an order compelling Chase to distribute the May 15, 1980 interest payment on the 53/s% Debentures. The court stated:
      “The provisions of the indentures under which Chase and U.S. Trust are acting as trustees prohibit the payment of any monies on the subordinate indebtedness if there is a default on the senior indebtedness____ If there is a default and if the trustees were to make the payments, they would subject themselves to a charge of breach of fiduciary duty.”

        Sharon Steel Corp. v. Chase Manhattan Bank, N.A., No. 79 Civ. 6996 (S.D.N.Y. May 27, 1980).

      . Section 2.03 of the U.S. Trust Indenture provides in part:
      "if and to the extent the Company shall default in the payment of the interest due on such Interest Payment Date, such defaulted interest shall be paid to the Persons in whose names outstanding Notes are registered at the close of business on a subsequent special record date established by notice given by mail by or on behalf of the Company to the holders of the Notes not more than 45 days and not less than fifteen days preceding such special record date, such record date to be not less than ten days preceding the date of payment of such defaulted interest.”

      . Section 2.05 of the Chase Indenture provides in part:
      “if and to the extent the Company shall default in the payment of interest due on such interest payment date, ... such defaulted interest shall be paid to the person in whose name such Debenture is registered on the date of payment of such defaulted interest____”

      . See supra note 9.

      . See Infra note 8.

      . The example cited provides:
      '"Event of Default’, wherever used herein means any one of the following events (whatever the reason for such Event of Default and whether it shall be voluntary or involuntary or be affected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body).”

      . The court had earlier imposed a constructive trust on the fund.
      The payments ordered were not "interest payments," but payments "in lieu” of semi-annual interest on the 5Vs% Debentures. See Exhibit E to Chase Affidavit Amended Judgment, Sharon Steel Corp. v. Chase Manhattan Bank, N.A., No. 79 Civ. 6996 at ¶ 4(b)(ii) (S.D.N.Y. June 6, 1983).


text:
    UNITED STATES TRUST COMPANY OF NEW YORK, as Trustee, the Chase Manhattan Bank, N.A., as Trustee, Sharon Steel Corporation, Inc., UV Industries, Inc. Liquidating Trust, and David Finkelstein, Arthur R. Gralla, Paul Kolton, Theodore W. Kheel, Edwin Jacobson and Martin Horowitz, as Trustees of the UV Industries, Inc. Liquidating Trust, Plaintiffs, v. EXECUTIVE LIFE INSURANCE CO., OCCI & Co., Staniels & Co., Nest & Co., Agway Insurance Company and First Missouri Bank & Trust Co., on behalf of themselves and as representatives of a class of former Holders of 9¼% Senior Subordinated Notes Due April 15, 1987, Mimi Shapiro, Mortimer A. Shapiro, Pacific & Co., Cede & Co. and North Star Oil Company, on behalf of themselves and as representatives of a class of Holders of 9¼% Senior Subordinated Notes Due April 15, 1987, Butcher & Co., William W. Humphrey, Trustee, and Louis H. Spiner, Trustee, on behalf of themselves and as representatives of a class of former Holders of 5⅜% Subordinated Debentures Due November 15, 1995, and Bear Stearns & Co., Cede & Co., Julian S. Goldberg, Mericka & Co., Mutual Shares Corp. and Mutual Qualified Income Fund, Saxon & Co., on behalf of themselves and as representatives of a class of Holders of 5⅜% Subordinated Debentures Due November 15, 1995, Defendants.
    No. 83 Civ. 8723 (DNE).
    United States District Court, S.D. New York.
    Feb. 5, 1985.

      Carter, Ledyard & Milburn, Louis L. Stanton, New York City, of counsel, for plaintiff United States Trust Company of New York.
    Dewey, Ballantine, Bushby, Palmer & Wood, John F. Collins, New York City, of counsel, for plaintiff Chase Manhattan Bank, N.A.
    Shearman & Sterling, Robert Hausen, New York City, of counsel, for plaintiff Sharon Steel Corporation.
    Donovan, Leisure, Newton & Irvine, David S. Versfelt, New York City, of counsel, for defendant Bear Stearns & Co.
    Tenzer, Greenblatt, Fallon & Kaplan, William Klein, II, P.C., New York City, of counsel, for defendants Mutual Shares Corp. and Mutual Qualified Income Fund.
    Davis Polk & Wardwell, Philip C. Potter, Jr. and Thomas J. Aquilino, Jr., New York City, of counsel, for defendant Butcher & Co. and the 5%% Selling Class.
    Crystal & Driscoll, P.C., Stephen L. Crystal, New York City, of counsel, for defendants Mimi Shapiro and Mortimer A. Shapiro.
    Fine & Ambrogne, Michael B. Roitman, Boston, Mass., of counsel, for defendant Nest & Co.
   MEMORANDUM OPINION AND ORDER

EDELSTEIN, District Judge:

This motion involves a determination of the propriety of awarding attorneys’ fees to the representatives of the losing classes in an interpleader class action. The inter-pleader class action was brought by the trustees and issuer of bonds under two indentures for the determination of the rights of the bondholders to certain interest payments. The facts giving rise to the interpleader action are set forth in this court’s Opinion and Order dated November 20,1984, and the court will not repeat them here. In the November 20th Opinion and Order, this court: (1) granted the motions for summary judgment of the 9Vi% Holding Class and the 5%% Holding Class; (2) denied the cross motions for summary judgment of the 9V4% Selling Class and the 5%% Selling Class; (3) awarded the Holding Classes the interest installment funds held by the stakeholders, United States Trust Company of New York (“U.S. Trust”) and The Chase Manhattan Bank, N.A. (“Chase”); and (4) awarded the representatives of the two Holding Classes costs, including reasonable attorneys’ fees, to be paid out of the class funds. The court also ordered the class representatives to send notice to the class members of its decision.

The Selling Classes have moved on two grounds for “partial reargument,” or, more appropriately, for modification of judgment, see Transcript of Proceedings, December 27, 1984 (“Tr.”) at 4. The Selling Classes requested that the trustees and the issuer, Sharon Steel Corporation (“Sharon”), be ordered to bear the burden of sending notice to the class. At a hearing held before the court on December 27, 1984, attended by counsel for the representatives of the four classes, counsel for the trustees and counsel for the issuer, all parties agreed that the trustees should bear the burden of notice. Furthermore, the court finds that the trustees are best suited to send notice to the class members, because they have easy access to the names and addresses of the class members and because they have been keeping the bondholders informed as to the status of litigation involving these indentures since Sharon succeeded the original issuer in 1979. By Stipulation and Order dated January 22, 1985, the court modified the November 20, 1984 order and directed the trustees to send notice to their respective bondholders.

The second ground of the motion for modification of judgment involves attorneys’ fees. The representatives of the two Selling Classes have requested leave to file applications for attorneys’ fees. For the reasons set forth below, this request is denied.

DISCUSSION

There are two possible sources for payment of the requested attorneys’ fees: (1) the accumulated interest fund awarded to the Holding Classes; or (2) Sharon, the interpleader plaintiff and issuer. The representatives of the two Selling Classes are not entitled to an award of attorneys’ fees from either source.

The court will not charge the Holding Class funds for the attorneys’ fees of the Selling Classes. The court, in its November 20th ruling, awarded attorneys’ fees to the Holding Class representatives based on the “common fund” doctrine; the principle that a class representative who protects or recovers a common fund for the benefit of persons other than his client is entitled to a reasonable attorneys’ fee from the fund. Boeing Co. v. Gemert, 444 U.S. 472, 478, 100 S.Ct. 745, 749, 62 L.Ed.2d 676 (1980). See also Hall v. Cole, 412 U.S. 1, 5-6 & n. 7, 93 S.Ct. 1943, 1946 & n. 7, 36 L.Ed.2d 702 (1973) (courts “have traditionally awarded attorneys’ fees to the successful plaintiff when his representative action creates ... a ‘common fund,’ the economic benefit of which is shared by all members of the class.”). There is no basis under the common fund doctrine, however, for taxing the fund for attorneys’ fees to the unsuccessful litigants. The Selling Class representatives have not bestowed any benefit on the members of the Holding Classes warranting dilution of the funds. Indeed, the Selling Class representatives, by their cross-motions for summary judgment, have strenuously attempted to defeat the claims of the Holding Class members.

The Selling Class representatives rely on a number of cases for the proposition that even non-prevailing parties are entitled to attorneys’ fees. In the cases cited, however, the unsuccessful objectors awarded attorneys’ fees were, in fact, members of the class that recovered under the settlement agreements. See, e.g., Elliot v. Sperry Rand Corp., 680 F.2d 1225, 1226-27 (8th Cir.1982); Frankenstein v. McCrory Corp., 425 F.Supp. 762, 764 (S.D.N.Y.1977). As members of the class that received the settlement proceeds, they were entitled to attorneys’ fees out of the class funds. In contrast, the Selling Class representatives here seek a share of funds that the court has already determined them not entitled to.

At the hearing held on December 27, 1984, counsel for Sharon stated that “there is a substantial fund there, several million dollars of interest, and during the course of just this interpleader action the fund has appreciated substantially.” Tr. 14. The trustees, however, oppose any further dilution of the interest funds by the award of attorneys’ fees to the Selling Class representatives. Id. at 15. The representatives of the two Holding Classes also have objected to the award of attorneys’ fees out of the Holding Class fund. Id. at 17. The Holding Class members are entitled to the earnings on their interest installments. These funds should not be diluted by the fees of attorneys who bestowed no benefit on the Holding Class members.

Moreover, the court finds no basis for assessing attorneys’ fees against the interpleader plaintiff, Sharon. Ordinarily, the interpleader plaintiff is awarded attorneys’ fees from the stake deposited with the court. See 3A Moore’s Federal Practice, § 22.16[2], at 22-166 to 22-169. The rationale for this general practice is as follows:

the retention of counsel [by the stakeholder] has in all likelihood been necessitated not because of the stakeholder’s wrongdoing but rather because he is the mutual target in a dispute which is not of his own making. Moreover, the stakeholder is often viewed as having performed a service to the claimants by initiating a proceeding which will expeditiously resolve their claims and by safeguarding the disputed fund by deposit in court, which at the same time guarantees the prevailing claimant immediate satisfaction without the need for execution proceedings.

Id. at 22-170 to 22-171.

In the November 20, 1984 order, the court departed from the general practice and refused the interpleader plaintiffs’ request for attorneys’ fees. The court found that, under the circumstances, it would be inequitable for the bondholders to bear the stakeholders’ costs. It would also be inequitable, however, to tax the stakeholders for the Selling Class’s costs. This inter-pleader action has benefitted all of Sharon’s bondholders. It has resulted in the speedy and relatively inexpensive resolution of this matter. It was in the interests of all concerned to have the bondholders’ rights adjudicated in one forum.

Counsel for the Selling Class representatives contend that “to deny our request [for attorneys’ fees] is going to act as encouragement to issuers and indentured trustees to bring any doubts they have before the court, and put the court to work and let the parties spend their money on it.” Tr. 9. This court, however, will not discourage the use of interpleader. The Selling Class representatives do not contend, nor can they, that this interpleader action was frivolous or that the interpleader plaintiffs acted in bad faith. Had the trustees acted unilaterally and paid the Holding Class members the interest installments, the Selling Class representatives undoubtedly would have raced to the courthouse to sue the trustees for breach of fiduciary duty. Through use of the inter-pleader-class action approach, all parties were assured that their rights and interests would be fully represented. The inter-pleader plaintiffs are not to be penalized for making the appropriate choice.

Counsel for the Selling Class representatives further contend that at a pre-trial conference before Judge Duffy, the Judge “forced” counsel to represent the Selling Class. Tr. 7. Accordingly, counsel contend that they performed services in this case analogous to a master, appointed pursuant to Fed.R.Civ.P. 53(a) and, therefore, they should be compensated. Assuming, arguendo, that Judge Duffy ordered counsel to represent the Selling Classes, the Selling Class representatives still are not entitled to attorneys’ fees from the interpleader plaintiffs. Fed.R.Civ.P. 53 specifically states that a master is entitled to counsel fees. In this case, however, the Selling Class representatives were chosen pursuant to Rules 22 and 23. These provisions contain no explicit provision for the payment of attorneys’ fees to class representatives, and the Selling Class representatives were on notice of the risk that their costs would not be reimbursed. Indeed, under Rule 23, class representatives are chosen, in part, based on their ability to bear the burden of the litigation. Moreover, if the Selling Class representatives felt that they had been treated unfairly by Judge Duffy or that they lacked the wherewithall to adequately represent the interests of the Selling Classes, their remedy was to move for reconsideration or for withdrawal either before Judge Duffy or before me after the case was reassigned.

In sum, the court finds no basis for assessing either the Holding Class fund or the interpleader plaintiffs for the attorneys’ fees of the representatives of the Selling Classes.

CONCLUSION

The motions of the representatives of the 9V4% Selling Class and the 5%% Selling Class to submit applications for costs, including attorneys’ fees are denied.

SO ORDERED.