author: BRIMMER, Chief Judge.

text:
    Charles J. DUNN, Plaintiff, v. Tim E. McKINNEY, Sheriff, and Fremont County, Wyoming, Defendants.
    No. C85-0146-B.
    United States District Court, D. Wyoming.
    Nov. 22, 1985.
    Stephan L. Pevar, Staff Counsel, Denver, Colo., Daniel H. Blythe, Cheyenne, Wyo., for plaintiff.
    Bruce A. Salzburg and Elizabeth Z. Smith, Freudenthal, Salzburg & Bonds, Cheyenne, Wyo., for defendants.
   ORDER GRANTING MOTION FOR PARTIAL SUMMARY JUDGMENT

BRIMMER, Chief Judge.

The above-entitled matter came before the Court pursuant to plaintiff’s motion for partial summary judgment. The Court, having reviewed the pleadings and the evidence offered and now being fully advised in the premises, FINDS and ORDERS as follows:

Plaintiff Charles Dunn, a former Fremont County Deputy Sheriff, contends that he was forced to resign for violating the following rule enacted by Sheriff Tim McKinney, which prohibits deputies from:

voluntarily maintaining or establishing associations or dealing with known criminals except in the line of duty and with the knowledge of the Sheriff.

Plaintiff contends that this rule is unconstitutional on its face because it is vague and overbroad, and that in other words it was not drafted in a sufficiently narrow manner to protect the right of freedom of association guaranteed to all citizens by the First Amendment to the United States Constitution.

Defendants counter that the rule is not vague or overbroad, especially as applied to Mr. Dunn, that enforcement of the rule did not violate any protected First Amendment rights, and also that Mr. Dunn lacks standing to raise the question of the rule’s unconstitutionality. The Court is not convinced by any of these arguments.

First, it is clear that one of the reasons Mr. Dunn was forced to resign was because he violated Sheriff McKinney’s “anti-association” rule by maintaining a friendship with one Pete Stamper. The Sheriff’s November 26, 1984 letter, advising Mr. Dunn that he must resign or be terminated, cited Dunn’s relationship with Stamper and the resulting violation of the rule as one of two reasons for his termination. Also, Sheriff McKinney has admitted that it was plaintiff’s violation of the rule that “pushed him over the edge” and caused him to fire Mr. Dunn. McKinney deposition at 73. It is clear that if the rule infringes upon First Amendment rights, Mr. Dunn’s rights were affected by it.

It is well-established that a citizen whose rights are infringed by an ordinance is free to challenge that ordinance on the grounds that it is facially vague or over-broad. As recently as 1983, when faced with a claim that a California loitering ordinance was vague and overbroad, the United States Supreme Court allowed a person arrested under that statute to attack the statute not only as being unconstitutional as applied to him, but also as being unconstitutionally vague and overbroad on its face. In Kolender v. Lawson, 461 U.S. 352, 359, 103 S.Ct. 1855, 1859, 75 L.Ed.2d 903 (1983), the Court cited Hoffman Estates v. Flipside, Hoffman Estates, 455 U.S. 489, 102 S.Ct. 1186, 71 L.Ed.2d 362 (1982) in “reaffirming the validity of facial challenges in situations where free speech or free association are affected____” Since Mr. Dunn’s rights of free association were affected by the rule, he has standing to attack it on its face.

The Court believes that the First Amendment protects social associations such as the one between Mr. Dunn and Mr. Stamper. This Court agrees with the Maryland District Court:

It is too late in the day to doubt that this freedom of association extends only to political or conventional associations and not to the social or unorthodox. Burns v. Pomerleau, 319 F.Supp. 58, 65 (D.Md.1970). See also Griswold v. Connecticut, 381 U.S. 479, 483 [85 S.Ct. 1678, 1681, 14 L.Ed.2d 510] (1965).

Plaintiff was free to develop associations under protection of the First Amendment, absent a constitutionally valid prohibition. Even though there was valid reasoning behind its promulgation, Sheriff McKinney’s rule is not a valid prohibition. The Court does not imply that a narrowly drafted rule proscribing close relationships with felons by police officers could not pass constitutional scrutiny, because it has long been recognized that individuals who choose to engage in a government occupation may be subject to restrictions on the exercise of their First Amendment rights. CSC v. Letter Carriers, 413 U.S. 548, 93 S.Ct. 2880, 37 L.Ed.2d 796 (1973). This is particularly true of law enforcement officers who are held to extremely high codes of public conduct and discipline. Kelley v. Johnson, 425 U.S. 238, 96 S.Ct. 1440, 47 L.Ed.2d 708 (1975). However, it is also clearly established that if a law “interferes with the right of free speech or of association,” the law must be subjected to strict scrutiny. Hoffman Estates, supra, 455 U.S. at 499, 102 S.Ct. at 1193.

Sheriff McKinney’s rule, which prohibits maintaining or establishing any associations with known criminals, is surely unconstitutionally vague. The Supreme Court has stated that vague laws which impinge on constitutional rights are void because they offend important values:

First, because we assume that man is free to steer between lawful and unlawful conduct, we insist that laws give the person of ordinary intelligence a reasonable opportunity to know what is prohibited, so that he may act accordingly. Vague laws may trap the innocent by not providing fair warning. Second, if arbitrary and discriminatory enforcement is to be prevented, laws must provide explicit standards for those who apply them. A vague law impermissibly delegates basic policy matters to policemen, judges, and juries for resolution on an ad hoc and subjective basis, with the attendant dangers of arbitrary and discriminatory application. Third, but related, where a vague statute ‘abut(s) upon sensitive areas of basic First Amendment freedoms, it operates to inhibit the exercise of (those) freedoms.’ Uncertain meanings inevitably lead citizens to ‘ “steer far wider of the unlawful zone” ... than if the boundaries of the forbidden areas were closely marked.’ Grayned v. City of Rockford, 408 U.S. 104, 108 [92 S.Ct. 2294, 2298, 33 L.Ed.2d 222] (1972).

It is not clear what the word “criminal” in Sheriff McKinney’s rule is supposed to mean. Although the dictionary definition of “criminal” includes anyone who has broken a law, including a minor traffic ordinance, in his deposition, the Sheriff denies that this is the case.

Q. Now, again, the rule uses the word “criminal” instead of “felon.” Is it your understanding the word “criminal” includes someone who is convicted of any crime, including a traffic violation? Is that person a criminal?
A. Not to me he isn’t, no.
Q. He’s not a criminal?
A. Not to me.
McKinney Deposition, p. 32.

When asked how his deputies would know this, the Sheriff responded: “By asking, I guess”; he conceded that the rule did not define “criminal.” Id. at 33. Moreover, the Sheriff could not define how serious a crime must be in order for the rule to apply. When asked how deputies were supposed to gauge their conduct based on the rule, he answered: “By common sense, I guess.” Id. at 34. “By common sense I guess,” is not a constitutionally precise standard.

The Sheriff also could not define the word “known”; he wavered between whether it means a convicted criminal, a convicted criminal who the community knows was convicted, or just an “un-savory type individual” with a bad reputation. Id. at 28. The Sheriff also had trouble defining just what types of “associations” or “dealings” were prohibited by the rule, and stated several unwritten exceptions and qualifications to the rule. This Court has held that “[m]en of common intelligence are not required to guess at the meaning of an ordinance.” Love v. Mayor, City of Cheyenne, 448 F.Supp. 128, 133 (D.Wyo.1978). Because even Sheriff McKinney could only guess at the meaning of his own rule, the Court must conclude that it is unconstitutionally vague.

The rule is also overbroad. “A clear and precise enactment may nevertheless be ‘overbroad’ if in its reach it prohibits constitutionally protected conduct.” Grayned, 408 U.S. at 114, 92 S.Ct. at 2302. If Sheriff McKinney’s rule were taken at face value, and “criminal” really meant anyone who has violated the law, it is not difficult to contemplate the possible consequences. If a deputy’s spouse received a traffic ticket, the Sheriff could order the deputy to stop associating with the “criminal” spouse. There is no end to the types of “associations or dealings” the Sheriff could prohibit under a literal interpretation of his rule. The Court agrees with Sheriff McKinney’s own statement that the rule “is pretty broad”, and concludes that, on its face, the anti-association rule must be struck down as constitutionally overbroad.

The Court makes no finding here regarding whether plaintiff would have been fired anyway, for example, for insubordination, without considering the anti-association rule. Those are matters of fact to be decided by a jury. However, it is clear, as a matter of law, that the anti-association rule itself cannot withstand Constitutional scrutiny. If plaintiff was fired as a result of enforcement of this rule, as a matter of law his constitutional rights were violated. Indeed, the court is surprised that legal counsel advised the Sheriff to adopt such a vague and overreaching rule involving such a basic right as freedom of association. The McKinney anti-association rule must be struck down as unconstitutionally vague and overbroad. Therefore, it is

ORDERED that plaintiff’s motion for partial summary judgment be, and the same hereby is, granted.


source: Caselaw Access Project

author: YOUNG, District Judge.

license: Public Domain

text:
    George R. KIRANE, Jr., Plaintiff, v. CITY OF LOWELL, et al., Defendants.
    Civ. A. No. 84-0026-Y.
    United States District Court, D. Massachusetts.
    Nov. 25, 1985.

      Edward R. Gargiulo, Eileen D. Vodoklys, Framingham, Mass., Regina L. Quinlan, Boston, Mass., for plaintiff.
    Edward R. Dean, Jr., Charles Zaroulis, Lowell, Mass., for defendant Juknavorian.
    George Eliades, Lowell, Mass., for defendants.
    Philip Nyman, Donna L. Baron, Lowell, Mass., for defendant Campbell.
    David J. Fenton, Jr., Kevin Murphy, Thomas E. Sweeney, Asst. City Sols., Paul Callery, City Sol., Lowell, Mass., for defendants Hammar, Zaharoolis Kirkiles, Maynihan, Lalime and Samowski.
   MEMORANDUM AND ORDER

YOUNG, District Judge.

George Kirane (“Kirane”) brings this action against the City of Lowell (“Lowell”), the members of its Planning Board, the members of its Zoning Board of Appeals, the Assistant City Manager, and several building inspectors for violation of his civil rights under 42 U.S.C. §§ 1983 and 1985(3). Kirane alleges that Lowell denied him a special permit to operate a retail business (an adult bookstore) in violation of his First Amendment rights.

With reference to the instant case, Lowell attempted to depose Kirane on August 1,1985. Kirane appeared for his deposition but asserted a Fifth Amendment right against self-incrimination and refused to answer questions about the matters at issue in this action. In effect, Kirane’s blanket assertion of privilege obstructed any meaningful inquiry and blunted virtually all questions. In response, Lowell has refused Kirane further discovery.

Lowell now moves to compel Kirane to answer, or in the alternative, moves to dismiss the action for failure to comply with the discovery procedures of the Federal Rules of Civil Procedure. At the same time, Kirane has moved for summary judgment claiming that Lowell’s obstruction of his discovery requests prevents him from filing the appropriate affidavits. At oral hearing, the Court denied Kirane’s motion for summary judgment without prejudice, pending the outcome of Lowell’s motion to compel Kirane’s testimony.

The Court must now rule on whether Kirane’s invocation of his Fifth Amendment privilege against compelled self-incrimination remains intact and, if so, whether Kirane may invoke the protections of the Fifth Amendment where he voluntarily initiated the suit in which now he refuses to be deposed.

I. Background

Significantly, this is not the only action to which Kirane is a party. In the courts of the Commonwealth of Massachusetts, Kirane goes forward with an appeal of his conviction on charges he failed to obtain the requisite building permits for renovations of his combination convenience store and adult bookstore at 219 Central Street from the City of Lowell. Further, Kirane has initiated a civil suit in the Superior Court for Middlesex County, charging three of the present defendants (Messrs. Brophy, Juknavorian, and Campbell) with the arbitrary and capricious denial of building permits. Kirane v. Brophy et at, Middlesex Superior Court, No. 83-4792.

In the state civil suit, Kirane submitted to discovery and was deposed on November 3, 1983. Kirane testified freely concerning the subject matter that gave rise to both the state action as well as this federal action. At no time during this deposition did Kirane invoke his Fifth Amendment privilege against compelled self-incrimination.

II. Discussion

In view of the pending criminal charges against Kirane, there can be little doubt but that Kirane has the right to invoke his Fifth Amendment privilege. The Supreme Court has broadly construed this privilege to assure that an individual is not compelled to produce evidence which later may be used against him as an accused in a criminal action. Maness v. Meyers, 419 U.S. 449, 461, 95 S.Ct. 584, 592, 42 L.Ed.2d 574 (1975); Arndstein v. McCarthy, 254 U.S. 71, 72-73, 41 S.Ct. 26, 26-27, 65 L.Ed. 128, reh’g denied, 254 U.S. 379, 41 S.Ct. 136, 65 L.Ed. 314 (1920). Prior disclosures should not be held to constitute a waiver of privilege against self-incrimination in subsequent proceedings when the reason for apprehension did not exist at the time the first testimony was given. Carter-Wallace, Inc. v. Hartz Mountain Industries, Inc., 553 F.Supp. 45, 49 (S.D.N.Y.1982). The privilege may properly be invoked when the individual reasonably apprehends a risk of self-incrimination. Marchetti v. United States, 390 U.S. 39, 53, 88 S.Ct. 697, 705, 19 L.Ed.2d 889 (1968) (where no criminal charges were yet pending); Hoffman v. United States, 341 U.S. 479, 486, 71 S.Ct. 814, 818, 95 L.Ed. 1118 (1951). Thus, Kirane’s protection does not merely encompass evidence which may lead to criminal conviction, but includes information which would furnish a link in the chain of evidence that could lead to prosecution, as well as evidence which Kirane might reasonably believe could be used against him in a criminal prosecution. Maness v. Meyers, 419 U.S. 449, 461, 95 S.Ct. 584, 592, 42 L.Ed.2d 574 (1975).

Thus, the Fifth Amendment will protect Kirane when he asserts a privilege against compelled self-incrimination. United States v. Doe, 465 U.S. 605, 104 S.Ct. 1237, 1241, 79 L.Ed.2d 552 (1984). Further, Kirane may assert this privilege in connection with civil litigation. Kastigar v. United States, 406 U.S. 441, 444, 92 S.Ct. 1653, 1656, 32 L.Ed.2d 212, reh’g denied, 408 U.S. 931, 92 S.Ct. 2478, 33 L.Ed.2d 345 (1972). However, the Fifth Amendment is not self-executing, and its privilege against self-incrimination can be waived if not asserted in a timely fashion. Maness v. Meyers, 419 U.S. 449, 466, 95 S.Ct. 584, 595, 42 L.Ed.2d 574 (1975). This privilege may be waived either by explicit act or by inference. Indeed, a witness who fails to invoke the Fifth Amendment in response to questions where he could have claimed it is deemed to have waived his privilege with regard to all questions on the same subject. Rogers.v. United States, 340 U.S. 367, 373, 71 S.Ct. 438, 442, 95 L.Ed. 344, reh’g denied, 341 U.S. 912, 71 S.Ct. 619, 95 L.Ed. 1348 (1951). Simply put, where incriminating facts are voluntarily revealed, the Fifth Amendment privilege cannot be invoked to avoid disclosure of the details. Rogers v. United States, 340 U.S. 367, 373, 71 S.Ct. 438, 442, 95 L.Ed. 344. This is so because:

[If] the witness himself elects to waive his privilege, as he may doubtless do, since that privilege is for his protection and not for that of other parties, and discloses his criminal connections, he is not permitted to stop, but must go on and make a full disclosure.

Brown v. Walker, 161 U.S. 591, 597, 16 S.Ct. 644, 647, 40 L.Ed. 819 (1896).

Beyond these conditions of explicit waiver, in appropriate cases, a waive of the Fifth Amendment privilege against self-incrimination may be inferred. Emspak v. United States, 349 U.S. 190, 197-98, 75 S.Ct. 687, 691-92, 99 L.Ed. 997 (1955). Even so, such waivers are not to be lightly inferred, and courts should indulge every reasonable presumption against finding “testimonial waiver.” Id. at 198, 75 S.Ct. at 692;; Smith v. United States, 337 U.S. 137, 150, 69 S.Ct. 1000, 1007, 93 L.Ed. 1264 (1949). Courts should conclude that the privilege has been waived only in the most compelling of circumstances, and such circumstances do not exist unless a failure to find waiver would prejudice a party. Klein v. Hams, 667 F.2d 274, 288 (2nd Cir.1981).

Lowell argues that Kirane explicitly waived his Fifth Amendment privilege by all or any of the following:

1. His Deposition dated November 30, 1983

2. His Affidavit of March 12, 1984

3. His Verified Complaint dated April 24, 1984

4. His Affidavit of December 30, 1984 The First Circuit has ruled that, where an affidavit was filed to prove predicate facts necessary to invoke the Fifth Amendment, to hold this a waiver of the privilege “would make a mockery of the substantive Constitutional right.” United States v. Doe, 628 F.2d 694, 696 (1st Cir.1980); see also E.F. Hutton & Co., Inc. v. Jupiter Development Corp. Ltd., 91 F.R.D. 110 (S.D.N.Y.1981) (Absent prejudice, even if the affidavit presented a distorted view of the facts, the affiant did not waive his privilege; the court denied the motion to compel discovery).

A waiver of the privilege at one stage of a proceeding is not a waiver of that right for other stages, United States v. Johnson, 488 F.2d 1206, 1210 (1st Cir.1973). Nor is a person who waives his privilege of silence in one trial estopped from asserting the privilege as to the same matter in a subsequent trial or proceeding. See Emspak v. United States, 349 U.S. 190, 201 n. 24, 75 S.Ct. 687, 694 n. 24, 99 L.Ed. 997; United States v. Cain, 544 F.2d 1113, 1117 (1st Cir.1976) (“It is hornbook

law that the waiver is limited to the particular proceeding in which the witness appears”); United States v. Johnson, 488 F.2d 1206, 1210 (1st Cir.1973). But see Ellis v. United States, 135 App.D.C. 35, 49; 416 F.2d 791, 805 (1969).

Several courts have specifically held that deposition testimony does not waive the privilege. See e.g., Re Beery, 680 F.2d 705 (10th Cir.), cert. denied, 459 U.S. 1037, 103 S.Ct. 449, 74 L.Ed.2d 604 (1982) (holding that debtor’s answering of questions at a state court deposition was not a waiver of the privilege in bankruptcy case because proceedings were independent, even though the state proceedings might involve similar issues; thus debtor was not barred fom asserting the privilege as to questions answered during the state court deposition); Carter-Wallace, Inc. v. Hartz Mountain Industries, Inc., 553 F.Supp. 45 (S.D.N.Y.1982) (executives of defendant corporation did not waive their right to invoke the privilege against self-incrimination by giving deposition testimony in another proceeding); Mertsching v. United States, 547 F.Supp. 124 (D.Colo.1982), aff'd 704 F.2d 505, aff'd 716 F.2d 907, cert. denied 464 U.S. 829, 104 S.Ct. 105, 78 L.Ed.2d 108 (1983) (Fifth Amendment privilege against self-incrimination is generally bona fide privilege against civil discovery requests).

The cases above generally speak in terms of witnesses and defendants. Here, Kirane is a plaintiff who has initiated two civil actions, one in state court and this action in federal court. On the one hand, “It would be uneven justice to permit the plaintiff to invoke the powers of this court for the purposes of seeking redress and at the same time to permit plaintiff to fend off questions, the answers to which may constitute a valid defense or materially aid the defense.” Independent Productions Corp. v. Loew’s Inc., 22 F.R.D. 266, 276 (S.D.N.Y.1958) (discussing the First rather than the Fifth Amendment). On the other hand, to penalize the assertion of the Fifth Amendment privilege effectively destroys the privilege, imposing a “cost.” See Spevack v. Klein, 385 U.S. 511, 515, 87 S.Ct. 625, 628, 17 L.Ed.2d 574 (1967); Griffin v. California, 380 U.S. 609, 614, 85 S.Ct. 1229, 1232, 14 L.Ed.2d 106 (1965), reh’g denied, 381 U.S. 957, 85 S.Ct. 1797, 14 L.Ed.2d 730 (1965). The Supreme Court admonishes that courts must “indulge every reasonable presumption against the waiver of fundamental constitutional rights.” Emspak v. United States, 349 U.S. 190, 198, 75 S.Ct. 687, 692, 99 L.Ed. 997, citing Johnson v. Zerbst, 304 U.S. 458, 464, 58 S.Ct. 1019, 1023, 82 L.Ed. 1461 (1938).

This Court simply will not order Kirane to choose between his privilege to avoid compelled self-incrimination and his privilege to utilize the courts to protect his rights. Although the Court concludes that Lowell’s need for certain information at trial may be substantial, there is available here a less drastic remedy than putting before Kirane this untenable choice during pre-trial proceedings.

“[N]ot every undesirable consequence which may follow from the exercise of the privilege against self-incrimination can be characterized as a penalty.” Flint v. Mullen, 499 F.2d 100, 104 (1st Cir.), cert. denied, 419 U.S. 1026, 95 S.Ct. 505, 42 L.Ed.2d 301 (1974). The most direct solution is promptly to bring this matter to trial where Kirane can properly be asked to choose between the invocation of his Fifth Amendment privilege and his need to produce evidence to prosecute the instant action. Wansong v. Wansong, 395 Mass. 154, 157-58, 478 N.E.2d 1270 (1985) (proper to balance any prejudice to other civil litigants against the potential harm to the party claiming the privilege). Kirane may not argue that this civil suit ought be continued until the ultimate conclusion of his state criminal appeal. The defendants have a substantial stake in the prompt resolution of this controversy and they will be prejudiced if it is stalled while memories dim and witnesses drop from sight. Nearly two years have passed since the complaint was filed herein. Further delay is intolerable. True, bringing the case to trial now forces the defendants to proceed without the somewhat ephemeral benefits of discovery from Kirane himself. In the context Of the present litigation, however, where the defendants need no discovery to explain their own official actions and where Kirane has earlier been deposed in the parallel state lawsuit, pre-trial discovery from Kirane himself is hardly essential.

Accordingly, Kirane may respond to discovery requests by claiming his Fifth Amendment privilege. His motion for summary judgment is denied. Lowell must respond to the discovery requests directed to it. Its motion to dismiss is denied. The case is ordered placed on the trial list as of December 16, 1985.

      . Specifically, the charges are violation of the state building code, working without a permit, and operating after license or right to operate has been suspended.


author: GARRITY, District Judge.

text:
    COMMONWEALTH OF MASSACHUSETTS, Plaintiff, v. Margaret HECKLER et al., Defendants.
    Civ. A. No. 85-2337-G.
    United States District Court, D. Massachusetts.
    Nov. 25, 1985.

      Thomas A. Barnico, Asst. Atty. Gen., Boston, Mass., for plaintiff.
    Edwin Meese, Atty. Gen., Washington, D.C., Karen M. Green and Andrew Hogeland, Asst. U.S. Attys., Boston, Mass., for defendants.
   MEMORANDUM AND ORDER ON CROSS-MOTIONS FOR SUMMARY JUDGMENT

GARRITY, District Judge.

This action has been filed as a related case, as it presents the same legal and factual questions as those at issue in Commonwealth of Massachusetts v. Heckler et al., Civil Action No. 83-2523-G. The court entered its memorandum and orders on cross-motions for summary judgment in that case on August 27, 1985. On the following day, the court entered an order in the instant action directing defendants to file any opposition, with an explanatory memorandum, to the same result in this case. Defendants’ response to the court’s order proposed that the case be decided on cross-motions for summary judgment based on the briefs filed in the 1983 case and on the administrative record in this case. As grounds for this procedure, defendants cited the similarity of the two cases and the fact that the court’s reasoning in the 1983 case would seem to apply equally here. The court adopted the procedure suggested by defendants which resulted in the cross-motions for summary judgment which are now before this court. After consideration of the briefs and the administrative record, the court grants plaintiff’s motion for summary judgment and denies defendants’ motion.

Defendants concede that the factual and legal issues in the instant action are “substantially identical” to those already litigated in the 1983 case and ruled on by this court. In the court’s opinion, the only differences between the two cases are the time period during which the Commonwealth provided the services at issue and the amount of federal financial participation which the Commonwealth asserts it is entitled to under the Medical Assistance Program (Medicaid) of the Social Security Act, 42 U.S.C. §§ 1396 et seq. While the court afforded defendants an opportunity to persuade the court that its ruling in the 1983 case should not govern the present action, neither defendants’ response to the August 28, 1985 order nor its present motion and supporting papers explain why a result different from that reached in the 1983 case is warranted here.

In this action, the Commonwealth seeks review of a March 29, 1985 decision of the Departmental Grant Appeals Board of the Health Care Financing Administration of the Department of Health and Human Services. The Board disallowed $4,908,994 in federal financial participation advanced to the Commonwealth from January 1, 1981 to June 30, 1982 on the ground that those costs were incurred in providing educational services and were therefore not reimbursable under the Medicaid program. However, the Board stated in its decision that the activities provided by the Commonwealth of Massachusetts from January 1, 1981 through June 30, 1982 are indistinguishable from previously disallowed activities provided by the Department of Education from July 1978 through December 1980. Those previously disallowed activities were found by the court to be the types of services that fall clearly within the category of habilitative services explicitly covered by Title XIX. 42 U.S.C. § 1396. Furthermore, the Board disallowed the present claim on substantially the same grounds as the previous claim at issue in the 1983 case. Thus, the reasons for the court’s decision in the 1983 case holding that the services at issue there were eligible for reimbursement under the Medicaid program, apply with equal force to the essentially identical factual and legal questions at issue in the instant action.

In granting plaintiff’s motion for summary judgment and denying defendants’ motion, the court relies on the findings of fact and conclusions of law in its order of August 27, 1985 in the related case of Commonwealth of Massachusetts v. Heckler et al., Civil Action No. 83-2523-G. Defendants have failed to make any showing that the instant action is distinguishable from the 1983 case on either factual or legal grounds. The briefs on which the parties rely and the administrative record compel the conclusion that there are no genuine issues of material fact and that plaintiff is entitled to a judgment as a matter of law.


author: STERN, District Judge.

text:
    UNIFOIL CORPORATION, Plaintiff, v. CHEQUE PRINTERS AND ENCODERS LIMITED, Defendant, and Aluminum Company of America, Third-Party Defendant.
    Civ. A. No. 84-345.
    United States District Court, D. New Jersey.
    Nov. 26, 1985.

      Waldman, Renda & McKinney, Hawthorne, N.J., by Thomas A. McKinney, for plaintiff.
    McCarter & English, Newark, N.J., by John L. McGoldrick, for defendant.
    Stryker, Tams & Dill, Newark, N.J., by Edith K. Payne, for third-party defendant.
   OPINION

STERN, District Judge.

This opinion is rendered on the motion of the third-party defendant Aluminum Company of America (“Alcoa”) to dismiss those crossclaims of defendant Cheque Printers and Encoders, Ltd. (“Cheque Printers”) which allege fraud, breach of warranty of fitness, breach of warranty of merchantability, and punitive damages. This Court’s jurisdiction is based on the diversity of citizenship of the parties; New Jersey law applies.

FACTS

Cheque Printers, an Australian company, purchased a product called “foilboard” from Unifoil, a New Jersey corporation for use in manufacturing “instant-winner” lottery tickets. Some of the tickets were defective, so that scratching the covering removed the prize information as well. At least one lottery had to be cancelled. Cheque Printers alleges that it suffered severe losses due to the need to recall the defective tickets from Australian lottery commissions.

The foilboard was made with aluminum foil purchased by Unifoil from Alcoa. Cheque Printers alleges that the foil was not “A-wettable” — that is, that its surface was slightly greasy — and that for this reason coating materials did not adhere to it properly. After discovery showed that Unifoil had specified A-wettable foil in its order from Alcoa, and that at least one Alcoa employee knew that the foil was not A-wettable, Cheque Printers moved to amend its answer to include crossclaims alleging fraud, breach of warranty of fitness for a particular purpose, breach of warranty of merchantability, and to demand punitive damages. The motion to amend was granted under the liberal standard of Rule 15(b) of the Federal Rules of Civil Procedure. Alcoa now moves to dismiss these counterclaims, pursuant to Rule 12(b)(6). For the purposes of this motion, of course, all allegations made in the crossclaims are taken as true. All that is at issue is whether these allegations state a valid claim under the applicable law.

DISCUSSION

I. Cheque Printer’s Fraud Claim.

Cheque Printers alleges the following facts:

1) Under its contract with Unifoil, Alcoa was required to supply Unifoil with A-wettable foil.
2) Alcoa supplied foil which was not A-wettable.
3) Alcoa knew that the foil was not A-wettable.
4) Cheque Printers manufactured defective lottery tickets from the Unifoil foilboard and sold them to Australian lottery commissions.
5) Cheque Printers was obliged to recall the tickets and suffered economic injury as a result.

Cheque Printers’ attempt to raise claims of fraud and negligent misrepresentation against Alcoa on these facts raises an interesting question: when — if at all — may a remote purchaser of a defective product recover from the manufacturer in tort, and when — if at all — in contract? The New Jersey Supreme Court has recently treated this question at length in Spring Motors Distributors, Inc. v. Ford Motor Company, 98 N.J. 555, 489 A.2d 660 (1985). Although the Spring Motors decision undoubtedly will be fleshed out in future cases, the opinion clearly indicates that when the remote purchaser is a commercial buyer suffering an economic loss, claims sounding in tort will not be heard; but claims based on an intermediate buyer’s contractual rights will lie, in spite of the fact that the remote purchaser is not in privity with the manufacturer.

Spring Motors concerned a leasing company which purchased a number of Ford trucks equipped with Clark transmissions. The transmissions were defective, and Spring Motors lost a considerable sum on its leases of the trucks. The New Jersey Supreme Court ruled that Spring Motors could not recover from Clark on theories of either strict liability or negligence. It could, however, assert contractual claims under the warranty provisions of the Uniform Commercial Code.

New Jersey does permit recovery in tort for economic loss suffered by an ultimate consumer, Santor v. A.C.M. Karagheusian, Inc., 44 N.J. 52, 207 A.2d 305 (1965). But Spring Motors holds that Santor does not apply to commercial buyers, 98 N.J. at 575, 489 A.2d 660. There, the relatively equal bargaining power of the parties and the better ability of the parties to gauge their ability to bear risk lead to the conclusion that contractual remedies are adequate.

New Jersey law also permits tort recovery for product defects which give rise to claims of either personal injury or property damages, e.g., Monsanto Co. v. Alden Leeds, Inc., 130 N.J.Super. 245, 326 A.2d 90 (Law Div.1974); Pabon v. Hackensack Auto Sales, 63 NJ.Super. 476, 164 A.2d 773 (App.Div.1960). These cases are held not to extend to purely economic loss. 98 N.J. at 578, 489 A.2d 660.

Spring Motors explicitly holds that a remote purchaser’s tort claims for economic loss will not be heard, even if negligence is alleged, 98 N.J. at 579, 489 A.2d 660. Thus, Cheque Printers’ crossclaim for negligent misrepresentation must be dismissed.

On the fraud claim, Cheque Printers argues that Spring Motors does not directly address allegations of intentionally tortious conduct. That is true; but the reasoning of Spring Motors leads us to conclude that, as between commercial parties, New Jersey will not countenance such claims:

The demarcation of duties arising in tort and those arising in contract is often indistinct, but one difference appears in the interest protected under each set of principles. Prosser & Keeton, supra, § 92 at 655-56. The purpose of a tort duty of care is to protect society’s interest in freedom from harm, i.e., the duty arises from policy considerations formed without reference to any agreement between the parties. A contractual duty, by comparison, arises from society’s interest in the performance of promises. Generally speaking, tort principles, such as negligence, are better suited for resolving claims involving unanticipated physical injury, particularly those arising out of an accident. Contract principles, on the other hand, are generally more appropriate for determining claims for consequential damage that the parties have, or could have, addressed in their agreement.

98 N.J. at 579-80, 489 A.2d 660.

Cheque Printers also argues that case law demonstrates that an action for fraud will lie, even in the presence of a contract. But such cases deal with fraud in the inducement, not the performance, of a contract, e.g., Jewish Center of Sussex County v. Whale, 86 N.J. 619, 432 A.2d 521 (1981). This Court, moreover, has construed the law of New Jersey to prohibit fraud claims when the “fraud contemplated by the plaintiff ... does not seem to be extraneous to the contract, but rather on fraudulent performance of the contract itself.” Foodtown v. Sigma Marketing Systems, Inc., 518 F.Supp. 485, 490 (D.N.J.1980) (alleged misrepresentation of costs contractually passed through to plaintiff is ground for claim of breach of contract, but not of fraud).

Cheque Printers’ crossclaims based on fraud and intentional misrepresentation, therefore, must be dismissed.

II. Cheque Printers’ Claim of Breach of Implied Warranty of Fitness for a Particular Purpose.

The Uniform Commercial Code, codified at N.J.S.A. § 12A:2-315, describes the implied warranty of fitness for a particular purpose in the following words:

Where a seller at the time of contracting has reason to know any particular purpose for which the goods are required and that the buyer is relying on the seller’s skill or judgment to select or furnish suitable goods, there is unless excluded or modified under the next section an implied warranty that the goods shall be fit for such purpose.

Cheque Printers attempts to make out a claim under the provision by asserting that Alcoa knew what the foil was to be used for and that it, Cheque Printers, relied on Alcoa’s skill in providing suitable foil. Alcoa responds that Cheque Printers was not in privity with Alcoa, and so, under traditional contract principles, cannot rely on this warranty.

Both parties seem to misconstrue the statutory provision. It is not Cheque Printers but Unifoil who is the buyer with whom the seller, Alcoa, contracted. There is no allegation that Unifoil relied on Alcoa to provide suitable goods, as is required to create an implied warranty of fitness. Thus no viable claim has been asserted under the statute.

I will add that, had Cheque Printers alleged such reliance on the part of Unifoil, I would have been inclined to deny Alcoa’s motion to dismiss this claim. It is true that Pawelec v. Digitcom, Inc., 192 NJ.Super. 474, 477-78, 471 A.2d 60 (App.Div.1984), observed in passing that while privity was not required in the context of warranties of merchantability, it could not be dispensed with in a claim asserting a breach of a warranty of fitness. It is also true that the Spring Motors court expressly declined to comment on the viability of Pawelec, even as it ruled that privity is not in fact required for claims concerning an implied warranty of merchantability.

I read Spring Motors, however, to say that remote commercial purchasers — although they are denied tort remedies — are to be permitted to assert the contractual rights of intermediate parties regardless of traditional conceptions of privity. After discussing the possible applicability of strict liability and warranty theories to persons down the distributive chain, the court observed, “the problem is ascertaining where on the spectrum to place a cause of action brought by a commercial entity, or even a consumer, for purely economic loss.” 98 N.J. at 571, 489 A.2d 660. The court did not suggest that such purchasers should have no remedy at all.

In addition, the court justified its decision to eliminate privity in the context of warranty of merchantability by citing Aronsohn v. Mandara, 98 N.J. 92, 484 A.2d 675 (1984), which predicated the right of a subsequent homeowner to sue the builder on an implied covenant to the original owner. It said: “[0]ur decision in Aronsohn creating an implied assignment of contract rights to a subsequent purchaser comports with the present decision to abolish vertical privity and to allow an ultimate purchaser to sue a remote manufacturer under the Code.” 98 N.J. at 588, 489 A.2d 660. This analysis applies equally well to warranties of fitness.

Alcoa’s objections to the abolition of privity in this context focus on the lack of contact and communication between the remote purchaser and the manufacturer. As the remote purchaser may assert only the rights of the immediate purchaser, which does have contact with the manufacturer, the objections are inapposite.

The doctrinal trends evidenced by Spring Motors thus point to the extinction of the privity requirement in warranties of fitness. See Becker v. Interstate Properties, 569 F.2d 1203, 1206 (3d Cir.1977), cert. denied, 436 U.S. 906, 98 S.Ct. 2237, 56 L.Ed.2d 404 (1978). I would have been required to allow Cheque Printers to raise a claim based on a warranty of fitness impliedly made by Alcoa to Unifoil, had such a claim been pleaded. Because Cheque Printers has failed to plead Unifoil’s reliance on Alcoa’s expertise, however, the crossclaim must be dismissed. Of course, if Cheque Printers believes it can allege facts sufficient to state the claim properly, the Court will entertain a motion to amend the pleadings.

III. Cheque Printers’ Claim of Breach of Implied Warranty of Merchantability.

Cheque Printers alleges Alcoa’s breach of an alleged implied warranty of merchantability to Unifoil. This is exactly the sort of claim recognized by Spring Motors. Alcoa raises as a defense that the sales order for the foil contained a printed disclaimer of this warranty.

The short answer to this argument is that motions to dismiss are to be decided purely on the pleadings. If Alcoa had wanted to introduce matters outside the pleadings, such as the sales order, it should have made a motion for summary judgment.

In order to alleviate the delay that would be incurred by requiring Alcoa to make yet another motion on this point, I will note that there is a factual issue concerning the sales order which, given the materials presently put before this Court, would preclude the granting of summary judgment.

It appears from the face of the sales order that it was typed up at Alcoa, by an Alcoa employee, and not by Unifoil. (For example, the order specifies that “Cust. requests we not use A.B.F. Trucking.”) There is no indication, therefore, that Uni-foil ever saw the sales order or was aware of the disclaimer. Pawelec, 192 N.J.Super. at 479, 471 A.2d 60 (disclaimer not seen by buyer not effective). Furthermore, the sales order has typed on it: “Foil must be A-wettable. This is absolutely critical.” This requirement raises a question of fact as to the actual agreement between Alcoa and Unifoil, which perhaps supersedes the pre-printed disclaimer. Had a motion for summary judgment been made, therefore, I would have been constrained to deny it.

IV. Cheque Printers’ Punitive Damages Claim.

Cheque Printers demands punitive damages on its fraud, negligent misrepresentation, and warranty claims. As the fraud and negligence claims are hereby dismissed, there is no need to determine whether punitive damages on such claims are available. As to warranty, it is theoretically possible to obtain punitive damages on a contract claim, given sufficiently “aggravated circumstances.” Sandler v. Lawn-A-Mat Chemical and Equipment Corp., 141 N.J.Super. 437, 449, 358 A.2d 805 (1976); Mayer v. Development Corp. of America, 541 F.Supp. 828, 829, 862 (D.N.J.1981). Kubiak v. Allstate Insurance Co., 198 N.J.Super. 115, 486 A.2d 879 (1984), cited by Alcoa at oral argument, does not hold otherwise. Cheque Printers’ demand for punitive damages, therefore, may not be disposed of on a motion to dismiss.


author: MILTON POLLACK, Senior District Judge.

text:
    FEEL THE HEAT, INC., t/a Rock City, Plaintiff, v. CENTURION AGENCY, INC., Defendant.
    No. 82 Civ. 4161 (MP).
    United States District Court, S.D. New York.
    Nov. 26, 1985.
    Mallow, Konstam & Hager by Abe H. Konstam, New York City, for plaintiff.
    Wilson, Elser, Moskowitz, Edelman & Dicker by William D. Hand, New York City, for defendant.
   MEMORANDUM

MILTON POLLACK, Senior District Judge.

Plaintiff Feel The Heat moves for prejudgment interest, under New York’s Civil Practice Law and Rules (“CPLR”) § 5001, on a jury verdict of $100,000 rendered on October 29, 1985, after a trial solely on the issue of damages. For the reasons stated below, the motion will be granted.

Plaintiff Feel The Heat opened a discoteque on December 26, 1980, called Rock City, that featured “rock” music. Immediately prior to that time, at the same location, 157 Hudson Street, New York, New York, plaintiff had operated a discoteque, called Feel The Heat, featuring “disco” music. The discoteque was destroyed by vandals on March 1, 1981. On November 17, 1982, plaintiff filed a complaint against defendant Centurion Agency, Inc., an insurance broker, for failure to obtain “business interruption” insurance for the plaintiff’s enterprise, allegedly after being instructed to do so. Although the complaint alleged several theories of recovery, including negligence, fraud, and breach of contract, it was clear from the evidence presented at trial that the thrust of the claim was based on a negligence theory.

Plaintiff recovered for the property damage occasioned by the vandalism under a separate property insurance policy. The discoteque, however, never reopened. Despite this fact, the complaint sought recovery for “business interruption” from March 1, 1981, until a reasonable date thereafter.

A jury trial was held on April 22, 1985, and the jury returned a $232,712.20 verdict in favor of plaintiff and against defendant. This Court ordered a remittitur of all but $50,000 of that amount or, in the alternative, a new trial solely on this issue of damages. Plaintiff did not agree to the remittitur and on October 28, 1985, a new trial on the damages issue was held. The second jury rendered a verdict of $100,000 in plaintiffs favor.

Although the plaintiff did request prejudgment interest from March 1, 1982, in its complaint, it did not request a jury charge on the issue. Plaintiff now brings this motion pursuant to Rules 59(e) and 60, Federal Rules of Civil Procedure, to have this Court apply prejudgment interest to the jury verdict.

Discussion

On the issue of prejudgment interest, federal courts look to the law of the forum state to supply the federal rule of decision. See 1A (Part 2) J. Moore, W. Taggart, A. Vestal & J. Wicker, Moore’s Federal Practice ¶ 0.310, at 3140 (2d ed. 1985). To determine whether plaintiff is entitled to prejudgment interest, therefore, this Court must look to New York law. Adams v. Lindblad Travel, Inc., 730 F.2d 89, 93 (2d Cir.1984); Lee v. Joseph E. Seagram & Sons, Inc., 592 F.2d 39, 41 & n. 2 (2d Cir.1979).

Where the action is at law, New York CPLR § 5001(a) mandates the inclusion of prejudgment interest as a matter of right in property damage cases. Although prior to the effective date of this CPLR provision, New York courts held that prejudgment interest was not recoverable as a matter of right in negligent property damage actions and was therefore waived if not requested of the trier of fact, Purcell v. Long Island Daily Press Publishing Co., 9 N.Y.2d 255, 173 N.E.2d 865, 213 N.Y.S.2d 425 (1961); cf. De Long Corp. v. Morrison-Knudsen Co., 14 N.Y.2d 346, 200 N.E.2d 557, 251 N.Y.S.2d 657 (1964), CPLR § 5001(a) changed this common law rule. See Morris v. New York Central Railroad, 20 A.D.2d 753, 753, 247 N.Y.S.2d 293, 294 (4th Dep’t 1964). Based on CPLR § 5001(a), the New York courts now apply prejudgment interest as a matter of right in actions involving negligent property damage as well. See e.g., Delulio v. 320-57 Corp., 99 A.D.2d 253, 254, 472 N.Y.S.2d 379, 381 (1st Dep’t 1984); Quintel Corp. v. Citibank, N.A., 606 F.Supp. 898, 913 (S.D.N.Y.1985).

In a case on all fours with this case, Dalrymple v. Ed Shults Chevrolet, Inc., 51 A.D.2d 884, 380 N.Y.S.2d 189 (4th Dep’t 1976), aff'd, 41 N.Y.2d 957, 363 N.E.2d 587, 394 N.Y.S.2d 881 (1977), the court held that plaintiff was entitled to prejudgment interest in an action against a car salesman for his negligence in failing to obtain collision insurance on plaintiff’s car after the salesman had promised to do so. The Court of Appeals affirmed, without opinion, on the basis of the Appellate Division Memorandum.

Plaintiff is, therefore, entitled to prejudgment interest on the jury award.

Waiver

Although entitled to prejudgment interest if recovery is obtained in a property damage case, the prevailing party must request that entitlement at some point or will lose it. Lee v. Joseph E. Seagram & Sons, Inc., 592 F.2d 39 (2d Cir.1979) (request for prejudgment interest almost two years after judgment is too late).

As noted above, plaintiff did not request a jury instruction on prejudgment interest. Plaintiff’s counsel did, however, shortly after trial, request that this Court add prejudgment interest to the jury verdict.

Although this Court has located only one New York case on this issue, it appears to be the law in New York that a party’s failure to request a jury instruction on prejudgment interest does not waive its claim for prejudgment interest, see Buffalo Oil Terminal, Inc. v. William B. Kimmins & Sons, Inc., 42 Misc.2d 499, 501, 248 N.Y.S.2d 499, 501 (1964), aff'd without opinion, 23 A.D.2d 970, 260 N.Y.S.2d 621 (4th Dep’t 1965), but merely waives the right to have the jury, rather than the judge, fix the date from which the interest is to be computed. Mallis v. Bankers Trust Co., 717 F.2d 683, 694 (2d Cir.1983); Julien J. Studley, Inc. v. Gulf Oil Corp., 425 F.2d 947, 949 (2d Cir.1969).

The effect of such a rule applied to this case is to grant the plaintiff approximately an additional $30,000 to $40,000 on top of the jury award of $100,000. Had the jury been made aware of this fact, through a properly requested jury instruction, it may well be that they would have declined to award the generous amount of $100,000, and would instead have awarded a smaller amount. In other words, since the issue of prejudgment interest was not mentioned at all to the jury, it surely is possible that the jury took the time value of money into account when awarding the $100,000 to the plaintiff and that plaintiff is now effectively recovering twice for the same prejudgment interest. Plaintiff’s hope of double recovery would explain its counsel’s behavior of remaining silent concerning prejudgment interest until immediately after the trial.

Analytically framed, this waiver issue concerns which party, plaintiff or defendant, should bear the risk that the jury award already fully compensates the plaintiff for damages incurred (i.e., the award already includes an implicit time value of money determination) when the jury has not been instructed on the prejudgment interest issue. Because in property damage cases, the New York legislature apparently has placed that risk on the defendant, plaintiff is entitled to prejudgment interest.

All that remains is to fix the date from which to compute the prejudgment interest. Since plaintiff has requested prejudgment interest from March 1, 1982, see supra note 2, this Court fixes the date for computation of prejudgment interest as March 1, 1982.

      . The result on this motion would remain unchanged even if this action was construed as a contract, see Adams v. Lindblad Travel, Inc., 730 F.2d 89, 93 (2d Cir.1984), or as a fraud one. See Mallis v. Bankers Trust Co., 717 F.2d 683, 694-95 (2d Cir.1983).

      . Plaintiff requested prejudgment interest from March 1, 1982, and not earlier because “[p]ayments to the Plaintiff under a business interruption policy based on the evidence presented at trial would have been spread over approximately six (6) months from the date of loss [March 1, 1981].” Plaintiff’s Memorandum In Support of Its Post-Trial Motion For Prejudgment Interest, at 6.


author: FEIKENS, Chief Judge.

text:
    COMMUNICATIONS WORKERS OF AMERICA, AFL-CIO, Plaintiff, v. MICHIGAN BELL TELEPHONE COMPANY, Defendant.
    Civ. A. No. 84-CV-4207-DT.
    United States District Court, E.D. Michigan, S.D.
    Nov. 27, 1985.

      Bruce M. Miller, Duane Ice, Peter Kaplan, Miller, Cohen, Martens & Ice, Detroit, Mich., Michael T. Mulcahy, Cleveland, Ohio, for plaintiff.
    Thomas G. Kienbaum, Theodore R. Opperwall, Dickinson, Wright, Moon, Van Du-sen & Freeman, Detroit, Mich., for defendant; Anthony A. Haisch, Mark S. Doman, Detroit, Mich., of counsel.
   OPINION

FEIKENS, Chief Judge.

The Communications Workers of America (CWA) brings this action against Michigan Bell Telephone Company (MBT) to compel arbitration of grievances arising under a collective bargaining agreement between the parties. In answer, MBT alleges that the dispute between the parties is not

arbitrable. Further MBT counterclaims to enjoin arbitration, alleging that the Grievants seek payments proscribed by § 302 of the Labor Management Relations Act (LMRA), 29 U.S.C. § 186. Both parties move for Summary Judgment. I have jurisdiction pursuant to § 301 of the LMRA, 29 U.S.C. § 185.

The Grievants, Florine Anderson and Charles Echlin, work full-time as representatives of CWA. They have done so since 1980, when CWA Vice President, Martin Hughes, appointed the Grievants to their posts. Prior to their appointment in 1980, the Grievants worked full-time for MBT under a collective bargaining agreement between CWA and MBT. When the Grievants began working for CWA, MBT granted them “time off” pursuant to Article 8 of the agreement. Sometime after their appointment, Echlin and Anderson grieved their leave treatment under the contract between CWA and MBT. The Grievants want MBT to treat them as if on “absent union time” (“AU time”); MBT refuses to do so, and continues to treat them as if on “class one leave.”

It has not been entirely clear why the Grievants seek “AU time” treatment. At the outset of the lawsuit, and up through the first hearing on the parties’ motions for Summary Judgment, the Grievants seemed to be seeking additional benefits associated with “AU time.” But in a supplemental brief, and during a second hearing on the motions, Plaintiff's Counsel made it clear that the Grievants are seeking “AU time” for the sole purpose of extending their total allowable leave time from fifteen years to thirty years. The underlying dispute between the parties, then, is whether total allowable leave time for full-time CWA Staff Representatives is fifteen calendar years, or thirty calendar years.

The question I must decide is whether this underlying dispute is arbitrable. Arbitrability is essentially a question of contractual interpretation, “and a party cannot be required to submit to arbitration any dispute which he has not agreed to submit.” United, Steelworkers v. Warrior & Gulf Navigation, 363 U.S. 574, 582, 80 S.Ct. 1347, 1353, 4 L.Ed.2d 1409 (1960). In most labor cases the presumption of arbitrability created by the Steelworkers Trilogy' guides interpretation of the parties’ agreement, but Schneider Moving & Storage Co. v. Robbins, 466 U.S. 364, 104 S.Ct. 1844, 80 L.Ed.2d 366 (1984), prevents a mechanical application of the Steelworkers presumption in labor cases presenting facts that do not justify use of the presumption.

The presumption of arbitrability rests upon the reasonable ’proposition that parties in a collective bargaining relationship want to settle their disputes as inexpensively as possible. Arbitration is cheaper and less disruptive than economic warfare involving strikes and lockouts. It is therefore sensible to presume that the parties intend to arbitrate their contractual disputes. In addition, the presumption serves the national policy of settling labor disputes with minimal disruption to the national economy. But when parties involved in a collective bargaining relationship disagree over a matter that cannot lead to economic disruption, there is no justification for applying the Steelworkers presumption.

Using this reasoning, the Supreme Court refused in Schneider to apply the presumption of arbitrability in a pension dispute between the trustees of the pension fund and the contributing employer. The Court stated:

Arbitration promotes labor peace because it requires the parties to forego the economic weapons of strikes and lockouts. Because the trustees of employee-benefit funds have no recourse to either of those weapons, requiring them to arbitrate disputes with the employer would promote labor peace only indirectly, if at all. We conclude, therefore, that the presumption of arbitrability is not a proper rule of construction in determining whether arbitration agreements between the union and the employer apply to disputes between trustees and employers, even if those disputes raise questions of interpretation under the collective-bargaining agreements.

Schneider, 104 S.Ct. at 1849 (footnotes omitted).

The Supreme Court’s rationale is not confined to disputes between trustees and employers. In Anderson v. Alpha Portland Industries, Inc., 752 F.2d 1293 (8th Cir.1985), cert. denied, — U.S.-, 105 S.Ct. 2329, 85 L.Ed.2d 846 (1985), the Court of Appeals applied Schneider and refused to use the presumption of arbitrability in a dispute between an employer and some of its retired employees. The Court reasoned:

We cannot agree [with the defendant employer] that Schneider divides the world of labor plaintiffs into “trustees” and “non-trustees” with the presumption of arbitrability applying to all but the former; the issue instead is whether the retirees here are more similarly situated with the trustees in Schneider or with active employees and their unions as to whom arbitration generally has been required.
... Retirees have no recourse to economic weapons other than a hope that active employees will strike in their behalf, a hope that was also available to the trustees in Schneider, who were similarly seeking to protect future interests of present employees and to enforce a contract to which the union was a party. The Supreme Court there, however, held this to be “no recourse.” 104 S.Ct. at 1849. We must conclude that retirees are more similarly situated with trustees than with active employees and are equally “outside the collective bargaining relationship.”

Anderson, 752 F.2d at 1296, 1298 (footnote omitted).

After considering Schneider and Anderson, I hold that the case before me is one in which the presumption of arbitrability does not apply. The Grievants are outside of the collective bargaining relationship between CWA and MBT. They are members of their own bargaining unit of CWA employees who negotiate with CWA over the terms and conditions of employment with CWA. They receive their wages and primary benefits from CWA, not MBT. Furthermore, they receive their daily work instructions from CWA, not MBT. Active employees of MBT, in contrast, bargain with MBT over their terms and conditions of employment, receive their wages and benefits from MBT, and receive their work instructions from MBT. In short, traditional indicia of employment reveal that the Grievants are really employees of CWA and not of MBT. Cf. Reinforcing Iron Workers Local Union 426 v, Bechtel Power Corp., 463 F.Supp. 643 (E.D.Mich.1978), aff'd, 634 F.2d 258 (6th Cir.1981) (“Industry steward” working under the direction and supervision of the Union is employee of the Union).

In addition, this case does not present a risk of economic disruption. These Grievants may not wield economic weapons against MBT on their own behalf. Like Anderson’s retirees and Schneider’s trustees, they can only hope that active employees will intervene for them. This is not a risk sufficient to warrant application of the presumption of arbitrability. Schneider, 104 S.Ct. at 1489; Anderson, 752 F.2d at 1298.

The question I must now decide without a presumption of arbitrability is whether the parties agreed to submit to arbitration their underlying dispute over maximum leave time. The arbitration clause in the parties’ agreement is broad, covering controversies “between the Union and the Company regarding the true intent and meaning of any provision of this Agreement between the parties.” But without a presumption of arbitrability, a broad arbitration clause is only one factor to consider in construing the parties’ intent. After considering this clause in light of the factors discussed below, I hold that the parties did not agree to send their underlying dispute to arbitration.

First, the bargaining unit to which the contract in this case applies includes only “employees of the Company whose job title appears in Appendix B to Part 1 of this Agreement.” The job of Union Staff Representative does not appear in the Appendix. This is as it should be, because (as noted earlier) the Grievant Staff Representatives are members of their own bargaining unit which negotiates with CWA over terms and conditions of CWA employment. Since the Grievants are evidently not members of the bargaining unit to which the contract applies, it is reasonable to conclude that the parties did not intend to apply the contractual arbitration machinery to them.

Second, according to both Plaintiff and Defendant, the underlying dispute in this case has arisen on prior occasions. On such occasions, the parties resolved their differences by negotiating at the bargaining table a new and longer maximum leave period. In this fashion, the maximum leave period has steadily lengthened over the years of the collective bargaining relationship between the parties. This prior practice of the parties is further evidence of the parties’ intention not to submit this particular dispute to arbitration.

Third, the contractual language used to describe the leave limit evidences an intent to foreclose manipulative calculations designed to extend the stated leave limit. The August 10, 1980, contract (attached to the complaint) states that “[t]he total period of the leave of absence granted to any employee pursuant to this Article, whether such period is continuous or intermittent, shall not exceed twelve (12) years.” Particularly considering the parties’ history of negotiating over this issue, the quoted language reveals an intention to fix a definite time limit on allowable leave, subject to extension only by the historical method of periodic negotiation.

Since I hold that the parties did not agree to submit this matter to arbitration, I need not consider the issue of illegality raised by Defendant’s counterclaim,

Plaintiff’s Motion for Summary Judgment is DENIED. Defendant’s Motion for Summary Judgment is GRANTED.

An appropriate order may be submitted.

      . By letter dated October 21, 1985, Plaintiffs Counsel informed the Court that one of the Grievants, Charles Echlin, retired from his work with CWA during May, 1985.

      . Article 8 is entitled "Time Off for Union Business."

      . Supplemental briefs indicate that the term "class one leave” actually refers to a "leave of absence for union business.” Thomas Diekman, Administrative Assistant to the Vice President of CWA, used "class one leave” in his deposition as shorthand for "leave of absence for union business.” Diekman Depo. 18, 38, 43-44. I will use the shorthand term in this opinion.

      . Diekman stated that "AU time” includes more benefits than does “class one leave.” Diekman Depo. 38-39, 47-48. In addition. Plaintiff originally argued that I should defer decision on the illegality issue raised by Defendant’s counterclaim until after arbitration. Plaintiff argued that I would be better situated to consider the illegality question after knowing concretely what benefits, if any, the arbitrator awarded the Grievants. Only after receiving an October 21, 1985, letter from Plaintiffs Counsel did I learn that the Grievants seek only leave time extension, and not additional benefits.

      . The August 10, 1980, contract (attached to the complaint) provides a leave limit of twelve years. The parties inform me that the contract currently in force contains a limit of fifteen years. In either case, Plaintiffs contractual argument is that it can double the effective length of the stated limit by classifying Grievants as on “AU time” for 120 working days per year, and on "class one leave” for the year’s remaining 120 working days.

      . Although the parties are litigating fervently, there has been no showing that the Grievants are in danger of running up against the leave limit, however calculated.

      . Warrior & Gulf, supra; United Steelworkers v. American Mfg. Co., 363 U.S. 564, 80 S.Ct. 1343, 4 L.Ed.2d 1403 (1960); United Steelworkers v. Enterprise Wheel & Car Corp., 363 U.S. 593, 80 S.Ct. 1358, 4 L.Ed.2d 1424 (1960).

      . These propositions are developed at length in the Steelworkers Trilogy. Cf. Schneider, 104 S.Ct. at 1489 n. 14 (justifying application of the presumption of arbitrability where it “serves the national labor policy and fully accords with the probable intent of the parties”).

      . Diekman Depo. 18-21, 27.

      . August 10, 1980, contract, § 15.12.

      . In Schneider the Court concluded ultimately that the parties did not agree to submit the dispute to arbitration despite a broad arbitration clause, requiring "arbitration of any ‘differences ... between the Company and the Union or any employee of the Company as to the meaning or application of the provisions of [the collective-bargaining] agreement.' ” Schneider, 104 S.Ct. at 1848 (quoting contract).

      . August 10, 1980, contract, § 1.1.

      . Cf. United Steelworkers of America, Local No. 1617 v. General Fireproofing Co., 464 F.2d 726 (6th Cir.1972) (reversing an arbitration order in a dispute involving a supervisor where the contract’s recognition clause excluded supervisors from coverage); General Telephone Co. v. Communications Workers, 402 F.2d 255 (9th Cir.1968) (same).
      Defendant relies on these cases in arguing that the underlying dispute in this matter is not arbitrable even if the presumption of arbitrability applies. Because I hold that the presumption does not apply, I need not evaluate this argument.

      . August 10, 1980, contract, § 8.25 (emphasis added).


author: SENTELLE, District Judge.

text:
    UNITED STATES of America, Appellant, v. John J. CANANE, Appellee.
    No. B-CR-85-95.
    United States District Court, W.D. North Carolina, Bryson City Division.
    Nov. 27, 1985.

      R. Phillip Haire, Sylva, N.C., for appellee John J. Canane.
    Charles R. Brewer, U.S. Atty., W.D.N.C. (Asst. U.S. Atty. Jerry W. Miller), Ashe-ville, N.C., for appellant U.S. of America.
   MEMORANDUM OF OPINION AND ORDER

SENTELLE, District Judge.

THIS MATTER is before the Court on the appeal by the United States from the opinion of the Honorable J. Toliver Davis, United States Magistrate, entered on the 30th day of July, 1985. The facts found by the magistrate indicate that defendant was stopped by an officer of the Cherokee Indian Police Department at or about 3:35 a.m. on the morning of April 6, 1985 and given field sobriety tests by the officer. The officer thereafter placed the defendant under arrest and transported him to the Swain County Jail where a breathalyzer test was administered showing a blood alcohol content of .12 per cent. The complaint in this case charges the defendant with operating a motor vehicle while under the influence of an impairing substance in violation of Title 18, United States Code, Section 13 assimilating North Carolina General Statutes Section 20-138.1.

Defendant was offered the opportunity to have someone present on his behalf to observe the administration of the breathalyzer test and declined but after the test requested permission to telephone his father. This permission was granted and the defendant called his father to ask him to come to the jail and post bail. On coming to the jail prepared to post $500.00 cash bail which defendant had been incorrectly advised has been set, the father was advised by a jail official that no magistrate was available, bond had not been set and the father could not put up the bail or obtain his son’s release until the magistrate came in at 9:00 a.m. that morning. At that time (approximately 4:30-4:35 a.m.), the father requested permission to see his son. Permission was denied and he was told that his son was “upstairs and that he wasn’t available and that I could see him when I got him out at 9:00 in the morning.”

Upon defendant’s motion for dismissal the magistrate dismissed this cause, relying on State v. Hill, 277 N.C. 547, 178 S.E.2d 462 (1971). In that case the defendant was arrested for driving under the influence and taken into police custody. His brother-in-law, an attorney, arrived shortly after the breathalyzer test and asked permission to see the defendant. As in the case at bar this permission was denied. The North Carolina Supreme Court held in that case that, “(The defendant) is also entitled to consult with friends and relatives and to have them make observations of his person. The right to communicate with counsel and friends necessarily includes the right of access to them.” It further held that:

“When one is taken into police custody for an offense of which intoxication is an essential element, time is of the essence. Intoxication does not last. Ordinarily a drunken man will ‘sleep it off in a few hours. Thus, if one accused of driving while intoxicated is to have witnesses for his defense, he must have access to his counsel, friends, relatives, or some disinterested person within a relatively short time after his arrest. The statute says he is entitled to communicate with them immediately, and this is true whether he is arrested at 2:00 in the morning or 2:00 in the afternoon.
“Defendant’s guilt or innocence depends upon whether he was intoxicated at the time of his arrest. His condition was then the crucial and decisive fact to be proven. Permission to communicate with counsel and friends is of no avail if those who come to the jail in response to a prisoner’s call are not permitted to see for themselves whether he is intoxicated. In this factual situation, the right of a defendant to communicate with counsel and friends implies, at the very least, the right to have them see him, observe and examine him, with reference to his alleged intoxication.”

The magistrate applied State v. Hill and ordered the case dismissed. In seeking to overturn that decision the United States argues that the magistrate improperly applied state rather than federal procedure and asserted three (3) alleged distinctions between Hill and the case at bar:

(a) In Hill, the defendant was illegally arrested. The arrest here was entirely legal.
(b) In Hill, the defendant was held in custody away from his attorney after bond had been set and posted. Here, the defendant was released the moment a magistrate was available.
(c) In Hill, the court found that the defendant had been denied access to friends and relatives who might witness his condition. Here, the defendant was specifically given the opportunity to have witnesses examine his condition and observe the breathalyzer test and the defendant told the officers that he wanted no other witnesses present.

A review of the Hill decision and the record in the present case reveals that the alleged distinctions found in paragraphs (a) and (c) are inapposite. The decision in Hill in no way turned on the illegality of the arrest. The distinction in paragraph (c) simply does not exist. The defendant in Hill, as the defendant in the instant case, was given the opportunity to have witnesses examine his condition and observe the breathalyzer test and asked for none.

The distinction in paragraph (b) is that the defendant in Hill was concededly in custody after the posting of bail while in the present matter bond had never been set because of the unavailability of the magistrate and defendant was released as soon as a magistrate was available. However, this court does not find that distinction to be controlling. Rather it seems to the court that the most important distinction here is that involving the differing state and federal procedure. The Hill case was a state prosecution for violation of the North Carolina Drunk Driving Statute. Canane is charged not with a violation of North Carolina law but of Title 18, United States Code, Section 13. While this section adopts the substantive law of the state, the procedural law of the United States remains binding. Kay v. United States, 255 F.2d 476 (4th Cir.1958). The statutes cited by the North Carolina Supreme Court as creating the right protected in the Hill decision are statutes of criminal procedure and not statutes affecting the substantive definition of an offense. (Cf. Kay v. United States, supra at 479.) However, this holding is not dispositive of the case. The question becomes then one of federal law and could be restated: Was the defendant brought before a magistrate without undue delay:

“Words ‘without unreasonable delay,’ as used in federal rule (sic) of criminal procedure that person accused of violation of federal law shall be taken without unreasonable delay before commissioner empowered to commit such persons does not mean ‘instantly,’ but means ‘as quickly as possible,’ which means as quickly as possible after certain matters, such as ‘booking’ of suspect, quick verification through third parties of ‘story’ volunteered by accused, and search of accused, have been attended to.” Muldrow v. United States, 281 F.2d 903 (9th Cir.1960) (citations omitted).

or, on the other hand, did the detention of the defendant incommunicado deprive him of constitutional rights:

“On the basis of Webb, both the third and the sixth circuits have stated that they would not require a finding of prejudice in order to reverse a conviction because of this type of due process violation.” United States v. Hammond, 598 F.2d 1008 (5th Cir.1979) (citations omitted).

On this question the decision in Hill, supra, while not binding, is persuasive. As stated by the court in Hill:

“ ‘The evidence of intoxication dissipates with the passage of time ... It will not do to say that a person who is denied an opportunity to secure the most convincing kind of evidence has been deprived of a constitutional right but that such deprivation did not harm him.’ ” (Citations omitted.)

That analysis is more compelling on the facts of the case at bar than in Hill. In Hill defendant conceded the breathalyzer reading was between .23 and .24: twice the level in the instant case.

It is not sufficient to say that the defendant’s breathalyzer reading is high enough in the instant case to convict him because it is now impossible to say what other evidence might be available to rebut the presumption created by North Carolina General Statute 20-138.1 because of the deprivation of contact of which the defendant now complains.

The court notes that delays created in the holding of a defendant are viewed not only as to their length but as to the use of the time. Had the record contained some development of the reasons for the unavailability of a magistrate to set bond and/or the reasons why the father could not see the son at the jail a dismissal might not have been warranted. Unfortunately, this evidence was not developed for the record.

Therefore, while this court holds that State v. Hill is not binding upon federal officials applying Title 18, United States Code, Section 13, this court nonetheless finds the logic of State v. Hill to be compelling and the decision of the magistrate dismissing this prosecution is affirmed.

Accordingly, the prosecution is DISMISSED.


author: ANNA DIGGS TAYLOR, District Judge.

text:
    In re LONG DISTANCE TELECOMMUNICATIONS LITIGATION. Marshal SANDLER, Plaintiff, v. GTE SPRINT COMMUNICATIONS, Defendant.
    Civ. A. No. 85 72822.
    United States District Court, E.D. Michigan, S.D.
    Nov. 27, 1985.

      Henry Kantor, Delo, Kantor & Stamm, Portland, Or., for plaintiff.
    Richard Gray, Jenner & Block, Chicago, 111., for defendant.
    Fay Clayton, Sachnoff Weaver & Rubemstein, Ltd., Chicago, 111., for plaintiffs in multi-district litigation.
   . MEMORANDUM OPINION AND ORDER

ANNA DIGGS TAYLOR, District Judge.

This class action alleges breach of contract and unjust enrichment, pursuant to the common law of the State of Oregon, and violation of Oregon state statutes regulating trade practices in advertising. Plaintiffs allege that GTE Sprint Communications (GTE) published an advertisement in Oregon which proclaimed that GTE would save money for its subscribers on every long distance call.

Plaintiffs contend that GTE failed to disclose in its advertising that subscribers would be charged for each call regardless of whether the call was completed. Many Oregonians subscribed to GTE and were, because of this charging practice, charged more than the Bell System would have charged for the same services. Plaintiffs allege that this conduct was violative of Oregon’s fair advertising laws and a breach of GTE’s agreement with its subscribers which resulted in GTE’s unjust enrichment.

The case was initially filed in the Circuit Court of the State of Oregon for Multonamah. It was then removed by defendant to a United States District Court pursuant to 28 U.S.C. § 1441 which permits removal of any action based on a claim or right arising under federal law. It was thereafter transferred to this court by the Panel for Multidistrict Litigation. The matter is presently before this court on plaintiff’s motion to remand the case to the state court. For reasons stated in this opinion, plaintiffs’ motion is denied.

The case was assigned to this court pursuant to 28 U.S.C. § 1407(a) which provides in part that:

when civil actions involving one or more common questions of fact are pending in different districts, such actions may be transferred to any district for coordinated or consolidated pretrial proceedings.

On August 14, 1984, the Multidistrict Panel, exercising its authority under that statute, determined that there were several actions in several U.S. District Courts across the country, which involved common questions pertaining to billing and advertising practices in the long distance telecommunications industry. The Panel wrote in its order transferring those actions to this court that centralization of the actions under section 1407 “will best serve the convenience of the parties and witnesses and promote the just and efficient conduct of the litigation.” This court has since served as transferee court for those proceedings, as well as for the numerous others subsequently filed.

In disposition of the first two cases concerning improper billing disclosure practices, this court deferred to the primary jurisdiction of the Federal Communications Commission and dismissed the complaints. See Control Electronics v. Southern Pacific Communications Co., Civil No. 83-1010 (5/24/84) (Taylor, J.); Retail Recruiters of N.Y., Inc., v. MCI Telecommunications Corp., Civil No. 83-8048 (5/24/84) (Taylor, J.). Since that time, this court has resolved twelve other cases in the same manner. The instant case is one of five “tag-along” cases which subsequently have been transferred to this court. All of these cases, including plaintiffs’ case, are substantially similar factually and raise the same issues under federal law.

Plaintiffs argue that their motion to remand must be granted because this court lacks subject matter and diversity jurisdiction. GTE's argument against remand is that removal was proper as the action necessarily arises under and must be governed by the Federal Communications Act of 1934, 47 U.S.C. § 151 et seq. (1962), (the Act) and diversity of citizenship. Plaintiffs further argue that GTE’s assertion of diversity jurisdiction on grounds that GTE is a Delaware corporation and all the class members are from Oregon is incorrect because the jurisdictional amount-requirement of $10,000.00 is not satisfied by each individual plaintiff as required by 28 U.S.C. § 1332(a). In this action, plaintiffs claim, each plaintiff claims only $3,000.00 at a maximum, in damages.

This court does not have diversity jurisdiction over this matter. In a class action, separate and distinct claims of two or more plaintiffs cannot be aggregated in order to satisfy the jurisdictional amount requirement. Each plaintiff must individually satisfy this prerequisite. The prayer for relief by these plaintiffs does not conform to the jurisdictional amount needed in order for a federal district court to retain jurisdiction. Zahn v. International Paper Co., 414 U.S. 291, 293-94, 94 S.Ct. 505, 507-08, 38 L.Ed.2d 511 (1973); Snow v. Ford Motor Co., 561 F.2d 787, 789-90 (9th Cir.1977).

A suit is removable, however, under 28 U.S.C. § 1441(a) if it could have originally been filed in a federal forum. Guinasso v. Pacific First Fed. Sav. & Loan Ass’n., 656 F.2d 1364, 1365 (9th Cir.1981). As there is no diversity jurisdiction, this court may only exercise federal question jurisdiction over this case. GTE has met its burden of establishing federal jurisdiction as a basis for removal that is evident from the face of plaintiffs’ complaint. Salveson v. Western States Bankcard Ass’n., 731 F.2d 1423, 1426 (9th Cir.1984). Although plaintiffs vehemently protest that they have phrased their complaint wholly in terms of Oregon contract law, unjust enrichment and violations of Oregon’s Unlawful Trade Practices Act, 646.608(1) and (2), 646.636 and 646.638(1), the court finds that plaintiffs' state law claims have been totally preempted by the federal law which regulates the charges and practices of common carriers such as that complained of in this lawsuit.

Recently, in Lazar v. MCI Communications, 598 F.Supp. 951 (E.D.Mich.1984), this court decided whether a California class action filed in a California state court must be remanded to that court unless federal law preempted claims which purported to be based solely upon state law. Defendant had removed the action claiming MCI’s alleged fraud and deceit, negligent misrepresentation and unlawful, unfair and/or fraudulent business practices (under California law) to the district court, arguing that plaintiffs’ claims all derived from the federal Act. Lazar was one of the several cases which had been transferred to this court by the Panel. Like the plaintiffs in the case at bar, Lazar plaintiffs alleged, under California law, that they were being charged wrongfully for incompleted long distance calls without notice. They challenged the removal to a federal court.

This court found that the factual allegations of the Lazar complaint were “materially indistinguishable” from other cases comprising the federal multidistrict litigation that was before this court. The parties in Lazar made the same arguments as the parties in the instant case have presented. In Lazar, as here, plaintiffs alleged that they had not made allegations under the Act and that their state law claims could not be preempted as defendant alleged.

In Lazar, this court held that plaintiffs’ alleged state law claims were preempted by the Act which states at section 201(b) that “all charges, practices, classifications and regulations for and in connection with a carrier’s communications service shall be just and reasonable.” In these cases, the plaintiffs are challenging unjust and unreasonable tariffs by interstate telecommunication carriers. Ivy Broadcasting v. American Telegraph and Telephone Co., 391 F.2d 486 (2d Cir.1968), is cited in the Lazar opinion. Ivy Broadcasting held that the federal interest in curtailing AT & T’s alleged negligent operation of its lines and discriminatory billing was so great that the cases must be controlled by federal law: “questions concerning the duties, charges and liabilities of telegraph or telephone companies with respect to interstate communications service are to be governed solely by federal law ... the states are precluded from acting in this area.” Id. at 491.

The court holds, as it did in Lazar, that the claims made by plaintiffs in this case are preempted by federal law. GTE provides interstate communications services for a vast network of customers across this country. “[T]he federal statutory scheme for the regulation of interstate communications service indicates a congressional policy requiring that the duties and liabilities under contracts for the provision of such service be determined according to federal rules in order to assure uniformity of rates and service.” Ivy Broadcasting, 391 F.2d at 490. There is a compelling need for consistency of determinations regarding matters concerning this service which will have impact upon the service and charges to millions of telephone customers across America. The practices of such common carriers must be governed by uniform standards and penalties for failure to comply with the standards. Id. at 491.

Plaintiffs and GTE agree that Hunter v. United Van Lines, 746 F.2d 635 (9th Cir.1984), is controlling, but they disagree on the application of the holding. In Hunter, plaintiffs filed claims under the Carmack Amendment, 49 U.S.C. § 11707 (Supp. V. 1981), and state law claims of fraud, bad faith, and intentional infliction of emotional distress. Plaintiffs contested defendant’s removal to the federal court on grounds that the Amendment claims preempted the state claims. Plaintiffs appealed the district court’s denial of the motion to remand.

The Court of Appeals for the Ninth Circuit reversed and remanded the case based on its finding that the federal court did not have jurisdiction. The Court of Appeals followed Garibaldi v. Lucky Food Stores, Inc., 726 F.2d 1367 (9th Cir.1984), and ruled that “a state-law claim may be recharacterized as a federal claim only when the state-law claim is preempted by federal law and when it is apparent from a review of the complaint that federal law provides plaintiff a cause of action to remedy the wrong he asserts he suffered.” Hunter, 746 F.2d at 642-43. The court states that there was a lack of jurisdiction based on preemption because the case did not arise under federal law as no federal question appeared on the face of the complaint. It also found jurisdiction lacking under the principle of “artful pleading” because no federal action existed. The court finds that the Hunter decision is not inconsistent with the Lazar holding and the holding in this case.

In this case plaintiffs also assert that the savings clause in the Act, 47 U.S.C. § 414 (1962), preserves the state law claims alleged in his complaint. But all state law claims are not preserved by that section of the Act. Plaintiff relies upon Clothesrigger, Inc. v. GTE Corp., No. 84-0598-S(M) (6/20/84) (Schwartz, J.). In Clotkesrigger, Judge Schwartz granted the motion to remand in a class action against GTE for intentional and negligent misrepresentation and unfair advertising. The court found that the claim involved failure to disclose based upon the state law. The court stated that the action did not involve quality of telephone services, improper rate changes or misuse of regulations that would bring it within the ambit of a federal claim. So Clothesrigger also supports our holding.

Ordinarily, a preempted claim is not removable; but, the “artful pleading” doctrine is a basis for establishing federal jurisdiction after a perusal of the true nature of the complaint when there is a likelihood that plaintiff might have attempted to avoid bringing a federal claim by relying solely on state law. Garibaldi, 726 F.2d at 1370.

In support of their motion to remand, the plaintiffs allege that they did not engage in “artful pleading” to avoid alleging a federal claim and that all three claims made by them are solely state law claims. But the fact that Oregon law might also be available to the resolution of this case is of no moment. “It is not peculiar for a federal judge to be faced with applying law of a state other than the one wherein his or her district is located, and thus the presence of foreign state law in multi-district litigation is of no particular consequence.” In re R.H. Robins Co., Inc., 438 F.Supp. 942, 943 (Jud.Pan.Mult.Lit.1977).

After a review of plaintiffs’ complaint, the court must find that plaintiffs have cloaked a federal claim with the elements of state claims. Plaintiffs have stated repeatedly that they raise issues of state law only in their complaint. However, the issues raised are those raised in other cases that are and have been before this court during the pendency of this multidistrict litigation, all of which must be resolved by applicable federal communications law. The claims made by plaintiffs have a “sufficient federal character to support removal.” Salveson, 731 F.2d at 1429. The gravamen of plaintiffs’ claim is improper charging and billing practices by a common carrier whose practices are governed absolutely by federal law.

The Hunter court further ruled that removal is not appropriate even if there is preemption unless federal law affords plaintiff a remedy. 746 F.2d at 642. Plaintiffs argue that the remedy provided by the Act will not satisfy the relief plaintiffs seek in this case. Plaintiffs have requested an accounting, restitution, prejudgment interest and punitive damages. Plaintiffs claim that if their claims are recharacterized as federal claims they will be unable to obtain this relief. The court holds, as it held in Lazar, that the Act does provide an adequate remedy for plaintiffs in sections 202-07.

IT IS HEREBY ORDERED that removal was proper and that plaintiffs’ motion to remand is denied.

IT IS SO ORDERED.


author: JOSEPH H. YOUNG, District Judge.

text:
    FEDERAL DEPOSIT INSURANCE CORP. v. Robert R. RODENBERG.
    Civ. No. Y-81-3057.
    United States District Court, D. Maryland.
    Nov. 29, 1985.

      Steven K. Fedder, and Leslie C. Bender, Baltimore, Md., for plaintiff.
    E. Stephen Derby, George A. Nilson, and Karen L. Myers Zauner, Baltimore, Md., for defendant.
   MEMORANDUM

JOSEPH H. YOUNG, District Judge.

Plaintiff in this case has moved for a writ of attachment before judgment for garnishment of specified real property, bank accounts, and securities and commercial paper pursuant to Rule 64, Fed.R.Civ.P. and Sections 3-302 and 3-303, Mt.Cts. & Jud.Proc.Code Ann. (1974). Under Rule 64, the District Court should apply the law of the state in which the case is pending when providing remedies for the purpose of securing satisfaction of a judgment. The relevant Maryland statute is Section 3-303 which provides in part:

“An attachment before judgment may issue ... if the debtor is a nonresident individual, or a corporation which has no resident agent in this State, and:
(1) The debtor is a person over whom the court could exercise personal jurisdiction pursuant to §§ 6-102, 6-103 and 6-104 of this article; or
(2) The action involves claims to property in this State which property is to be attached; or
(3) The action is any other in which the attachment is constitutionally permitted.”

Plaintiff, Federal Deposit Insurance Corporation (“FDIC”), argues that the requisites for the issuance of a writ of attachment are present because defendant is a nonresident over whom the court has jurisdiction and also because the attachment is constitutionally permitted. FDIC also argues that the attachment is appropriate in this case, in which partial summary judgment has been granted which resolved questions of liability, and the only remaining issues concern damages which could amount to $900,000. Furthermore, defendant’s assets are liquid and readily transferable.

Defendant Rodenberg argues that the writ of attachment should be denied on three separate bases: (1) plaintiff has not shown that attachment would serve the purpose of the Maryland statute and has not shown that the defendant has attempted to dispose of, conceal, or remove his assets as required by the Maryland statute; (2) plaintiff has not demonstrated a prima facie case of indebtedness as required by the Maryland statute; and (3) this Court lacks the jurisdiction to issue a writ of attachment before judgment on assets located outside of the State of Maryland.

Plaintiff’s final contention on the limits of jurisdiction has merit and on that basis plaintiff's motion should be denied. Under Rule 64, Fed.R.Civ.P., the Maryland law on attachment procedures should be applied by this Court under the same circumstances and in the same manner as in the Maryland state courts, unless an existing federal statute governs. Maryland’s rule gives its courts the authority to issue an attachment at the commencement of the action or while it is pending against any property or credits belonging to the debtor upon application of the plaintiff. Md.Cts. & Jud.Proc.Code Ann. § 3-302 (1974). The only stated limitations are that the court must act within the limits of its jurisdiction, Section 3-302, and attachment may be issued in any of the circumstances described in Section 3-303. No particular elaboration is provided as to what the limits of a court’s jurisdiction are, and therefore it is safe to assume that territorial limitations of the State are intended. Md. Cts. & Jud.Proc.Code Ann. § 1-501 (1974) (Jurisdiction and powers in general). In contrast to Maryland’s long-arm statute extending personal jurisdiction, Md.Cts. & Jud.Proc.Code Ann. § 6-103 (1974), no specific extension of jurisdiction is established under Sections 3-302 and 3-303.

This interpretation of the Maryland statute is consistent with Maryland case law, which views a court’s authority in attachment proceedings as derived from a “special and limited statutory power,” Belcher v. Government Employees’ Ins. Co., 282 Md. 718, 387 A.2d 770 (1978), and which has described the attachment procedures as applying against property within this State. Overmyer v. Lawyers Title Ins. Corp., 32 Md.App. 177, 359 A.2d 260 (1976), cert. denied, 429 U.S. 1123, 97 S.Ct. 1159, 51 L.Ed.2d 573; 3 M.L.E. Attachment § 32 (1984). Although the statute interpreted in Overmyer has been superseded, the general language is unchanged and there is no indication that the legislature intended to substantially extend the scope of jurisdiction over property in the revised statute. The superseded statute authorized attachment of property of a nonresident individual, without the additional qualifications specified under the current statutory scheme. See Md.Ann.Code, Rule G40(a) (1957) (superseded).

Although the plaintiff argues that this Court may apply Maryland’s attachment procedures extraterritorially to accomplish the objectives of Rule 64, Fed.R.Civ.P., the cases relied upon do not support this proposition. As stated above, state law applies under Rule 64 to the extent that there is no applicable federal law. In United States v. Thornton, 672 F.2d 101 (D.C.Cir.1982), the court attached out of state property contrary to state law, but was acting pursuant to a federal statute giving the United States special collection rights. See also United States v. Lord Electric Co., 43 F.Supp. 12 (W.D.Pa.1942). Additionally, this attachment was postjudgment, which, arguably, is a more expansive provision. Thus, the Thornton case is not helpful to the plaintiff.

Plaintiff also relies upon a number of cases which hold that state venue statutes cannot limit federal venue provisions. The issue here, however, is jurisdiction, not venue, and plaintiff's authorities are not on point.

Therefore, this Court should not expand the application of the Maryland attachment statute, and plaintiff’s motion for writ of attachment before judgment must be denied.