author: SWEET, District Judge.

text:
    INDEPENDENT UNION OF FLIGHT ATTENDANTS, Plaintiff, v. PAN AMERICAN WORLD AIRWAYS, INC., Defendant.
    No. 85 Civ. 7702 (RWS).
    United States District Court, S.D. New York.
    Oct. 18, 1985.

      Leaf Sternklar & Drogin, New York City, for plaintiff; Ira Drogin, New York City, of counsel.
    Morgan, Lewis & Bockius, Ernest F. Garb, New York City, for defendant; Harry A. Rissetto, Thomas E. Reinert, Jr., Robert D. Manfred, New York City, of counsel.
   OPINION

SWEET, District Judge.

Plaintiff Independent Union of Flight Attendants (“IUFA”) filed its complaint on October 1, 1985, charging the defendant Pan American World Airways, Inc. (“Pan Am”) with violating the Railway Labor Act, 45 U.S.C. § 151, et seq., by coercing and disciplining flight attendants to work in excess of their contractually-set maximum duty hours; by offering economic incentives to flight attendants who agree to waive maximum hour limitations and guaranteed rest periods, and by disciplining an IUFA bargaining representative who attempted to aid the flight attendants in this controversy, thereby chilling the representational rights guaranteed under the Railway Labor Act.

By order to show cause, IUFA moved this court for a preliminary injunction enjoining Pan Am’s practice of offering such waiver incentives and enjoining the discipline of flight attendants who exercise the maximum duty hour rights in dispute. The motion was heard in Part I, the assigned judge, the Honorable Leonard B. Sand being engaged in a criminal trial. Upon the facts found below and the conclusions set forth, IUFA’s motion for a preliminary injunction is granted in part and denied in part.

The Parties

IUFA is a labor union with its principal place of business in New York. IUFA has been duly certified and designated by the National Mediation Board, pursuant to the Railway Labor Act, as the collective bargaining representative of the flight service personnel of Pan Am for the purpose of collective bargaining representation under the Railway Labor Act.

Pan Am is a carrier by air as defined by the Federal Aviation Act of 1958, 49 U.S.C. §§ 1301-1542, and holds Certificates of Public Convenience and Necessity pursuant to that Act, and is subject to the provisions of the Railway Labor Act. Pan Am is a corporation duly organized and existing under the laws of the State of New York and maintains its principal place of business in New York.

The Facts

The bargaining relationship between IUFA and Pan Am has existed since IUFA was certified as the flight attendant bargaining representative in 1977. The parties’ second collective bargaining agreement became effective March 31, 1982 (“1982 Agreement”) and expired under its terms as amended on December 31, 1984. Pursuant to the directives of the Railway Labor Act, 45 U.S.C. § 156, the parties issued “Notices of Intended Changes” and negotiated between themselves and later under the auspices of the National Mediation Board, and reached an agreement formally executed by the parties on April 11 and April 12, 1985 (“1985 Agreement”). The three part claim in this dispute centers around two provisions of the 1985 collective bargaining agreement whose scope and meaning are hotly contested. It is generally conceded that the 1985 Agreement provided a number of “give-backs” to Pan Am from the Union in exchange for certain other provisions.

Section 6 of the 1985 Agreement deals with “Conditions of Work and Rest,” and part E of that section covers “Duty Day Limitations,” or the maximum number of consecutive hours that flight attendants may be required to remain on duty in connection with their flights. Section 6.E.2.d. contains the notification procedures required when the flight attendants wish to exercise the right to decline to depart or continue on a flight whose projected or actual duration has exceeded the duty day limitation formula set out in sections 6 E^.a. and 6.E.2.b. Section 6.E.2.d. of the 1985 Agreement reads as follows:

d. Notification

In the event a Flight Attendant has reported for a duty period and the Company notifies the Flight Attendant of a delay in the planned departure of the flight or flight segments), the Flight Attendant shall, in consideration of the Duty Day Limitations of paragraph E.2.a. and b., indicate to the Company the deadline after s/he does not intend to effect a departure of the delayed flight or segment. Based upon such advice, the Company may release such Flight Attendant at any time after receiving such advice.
In no event shall a Flight Attendant be required to remain on duty in excess of h/h application duty day limitations.

The second provision at issue in this dispute is the downline rest provision contained in section 6.G.I. of the 1985 Agreement which provides for a minimum crew rest period of nine and one-half hours at regularly scheduled downline (i.e., at a point other than the departure point for the flight) stops where flight crews are sent to hotels before their next scheduled departure. The relevant section of this provision is set out below:

G. DOWNLINE REST

1. Minimum crew rest at a layover station shall be normal travel time to the layover hotel facility beginning at release from duty, minimum off-duty time (see chart below) at the hotel facility, and normal travel time to the reporting point to arrive at the required report time. Minimum actual off-duty time at the hotel shall begin when the Flight Attendant arrives at the hotel or when the hotel, having properly prepared a room, has a room key available, whichever is later.

Minimum actual off duty time at the hotel facility in HKG after a Flight Attendant has completed a SFO/HKG sector shall be no less than thirty (30) hours.
Minimum actual off duty time at the hotel facility in NRT after a Flight Attendant has completed a JFK/NRT sector shall be no less than thirty (30) hours.
In the pattern NYC/RIO/NYC which involves back-to-back long haul operations, the minimum scheduled lay over time at RIO will be twenty-two (22) hours.

The Duty Day Limitation Controversy

The dispute concerning section 6.E.2.d. of the 1985 Agreement involves the scope of the flight attendants’ right to refuse to begin or refuse to continue (“walk off”) flight service on an aircraft when delays or diversions cause the projected or elapsed flight time to exceed an individual flight attendant’s duty day hour limitations as set out in section 6.E.2 of the 1985 Agreement. According to IUFA, the provisions in section 6, particularly section 6.E.2.d., give flight attendants the right to compute their duty day limits in cases of downline delays or unplanned diversions to alternative airports and that if the flight attendants’ actual or projected flight time exceeds the attendants duty day limits, he or she is entitled to “walk off” {i.e., leave the plane en-route) the aircraft despite the possible unavailability of a replacement flight crew to continue on the flight. According to IUFA, this is a contractual right guaranteed under section 6.E.2, and Pan Am’s disciplinary actions in retaliation for such walkoffs endanger the health and safety of the passengers and flight crew. In his affidavit Brian Moreau, the New York Base Chairperson of IUFA indicated that these disciplinary measures forced flight attendants to work beyond their duty day limits, impairing their mental and physical capacity to respond to aircraft emergencies. Pan Am, relying on the language of the provisions, contends that the provisions of section 6.E.2.d. apply only when flight attendants report for duty {i.e., at a “home base”) or stop at a layover point and interprets the duty day limitations as not permitting flight attendants to abandon their flights or refuse to work when a flight is diverted downline because of a situation developing subsequent to the initial flight departure or because of an enroute delay.

The duty day limitations contained in the 1985 Agreement first appeared in 1979 in response to flight attendants’ claim of fatigue in cases of extremely long duty days. Although the Federal Aviation Administration (“FAA”) set standards for maximum consecutive duty hours of pilots and flight mechanics, none were set for flight attendants, but Pan Am’s “Monthly Operating Bulletin” contained a fatigue procedure whereby flight attendants who complained of and who asked to be relieved from a flight would be required to have a conference with a supervisor to substantiate the claimed fatigue and would be required to see a physician for the same purpose. The 1982 Agreement contained a provision which awarded time and one-half pay for each hour over the thirteen hour duty day limit which a flight attendant worked. Flight attendants regularly worked such overtime hours when faced with downline delays or unanticipated diversions. There were, however, occasional refusals to continue on such a lengthened duty day, and no disciplinary action was taken against flight attendants who refused to accept the overtime option. This overtime provision was omitted from the 1985 Agreement negotiated by IUFA and Pan Am in April of 1985 and ratified on August 31, 1985.

Between April and August of 1985 the dispute over the scope of the section 6.E.2.-d. duty day limitations escalated, and many flight attendants chose to assert IUFA’s interpretation of their contract and exercise their rights to “walkoff” aircraft when or downline delays or diversions caused the actual flight time to exceed the applicable duty day limits. On July 3, Pan Am circulated a memorandum (the “July 3 Memo”) outlining its position that section 6.E.2.d. applies only when flight attendants report for a duty period, and does not apply during a flight in the event of a downline delay or diversion enroute. Pan Am articulated its belief that its own interpretation of section 6.E.2.d. would control, and that “walk-offs” in such situations would be “treated as acts of insubordination and handled accordingly.” During the months following the July 3 memo, suspensions, discharges and other disciplinary proceedings were instituted against both individual attendants and entire flight crews who exercised IUFA’s interpretation of their rights to “walkoff” aircraft if their flight time exceeded their maximum duty day hours under the Agreement.

One of defendants’ claims specifically arises from an instance of such discipline. Ms. Star Hesse, a Pan Am flight attendant and IUFA representative was suspended for a period of thirty days when she intervened in a dispute between Pan Am and certain flight attendants exercising IUFA’s “walkoff” interpretation of section 6.E.2.d. Ms. Hesse contacted the FAA as part of this intervention on behalf of the flight attendants, and she was suspended by Pan Am for violating its “Employee Rules of Conduct” by allegedly making false or misleading statements about the company. IUFA charges that this action against its union representative is an unlawful interference with the representational rights guaranteed under the Railway Labor Act and grievances have been initiated with respect to Pan Am’s disciplinary proceedings as well as its contract interpretations. After some delay, arbitrators have been selected and proceedings before an Adjustment Board have been scheduled.

Payments to Induce Waiver of Duty Day Limits and Rest

IUFA also contends that Pan Am has violated the Railway Labor Act and is endangering the health and safety of the flight crew and passengers by offering economic incentives to induce flight attendants to waive their contractual duty day limitations contained in section 6.E.2. and to waive their downline rest time contained in section 6.G.1 of the 1985 Agreement. It is IUFA’s position that these inducements to waive reporting stage duty day limits and mandatory rest endanger both the passengers and crew of the aircraft and the flight attendants themselves by prompting flight attendants to work extremely long duty days. The Moreau affidavit documents IUFA’s belief that the mental and physical stresses associated with a normal flight, disruptive passengers, cumbersome equipment and turbulent conditions, make these inducements an inappropriate consideration in the individual attendant’s decision whether to exceed normal working hours. In June, 1985, IUFA received reports that Pan Am began the practice of offering flight attendants extra hourly payments and other valuable benefits in exchange for waiving their duty day hour limitations when reporting for duty on certain flights. A flight crew scheduled to fly from Hong Kong to San Francisco was given pay equal to double their flight time after waiving their duty day limitations. Pan Am codified its offer of financial incentives on September 6 and 7, in a wire which authorized Pan Am supervisory personnel to offer an extra $100 per hour for every hour worked over the duty day limitation of section 6.E.2.a. or b. and $100 per hour in exchange for waivers of the downline rest provisions contained in section 6.G.1 of the 1985 Agreement. Pan Am made no attempt to secure these waivers by acting through IUFA representatives, despite the fact that IUFA System Scheduling director Anne B. Miltmore cautioned Pan Am official Ed Biland that Pan Am would be acting illegally if it negotiated individual “deals” with flight attendants. IUFA has made no allegations that refusals to accept these financial inducements were met with any disciplinary actions whatsoever.

Conclusions

Sanctions for the Downline Exercise of Duty Day Limitations

IUFA seeks to enjoin Pan Am from continuing the practice of coercing, disciplining and suspending flight attendants for exercising their right (according to IUFA’s understanding of the scope of section 6.E.2.) to “walkoff” flights delayed down-line and to enjoin Pan Am from disciplining any IUFA representatives who counsels flight attendants in such matters on behalf of the flight attendants whom they represent.

In order to succeed in its plea for a preliminary injunction, IUFA must establish that this court has jurisdiction to grant such relief under the applicable provision of the Railway Labor Act, 45 U.S.C. § 151 et seq., which governs the contractual relationship between the parties. Jurisdiction to enjoin Pan Am’s actions can be established in two ways. First, the plaintiffs can demonstrate that the dispute is considered a “Major” dispute under the Railway Labor Act, and that the court may enjoin one side to prevent a violation of the status quo provisions contained in section 156 of the Railway Labor Act. Detroit and Toledo Shore Line Railway Co. v. United Transport Union, 396 U.S. 142, 90 S.Ct. 294, 24 L.Ed.2d 325 (1969). Second, the plaintiff may prove that although the disputes are best characterized as a “minor” dispute under the Railway Labor Act, failure to grant an injunction would prevent the Adjustment Board from giving a significant remedy to the side which prevails before the board. Local 553 Transport Workers Union of America v. Eastern Airlines, Inc., 695 F.2d 668, 674 (2d Cir.1982).

The Railway Labor Act does not use the terms “Major” and “Minor” disputes to determine the jurisdiction of the federal courts to issue injunctions in cases under its statutory umbrella. The Supreme Court introduced these concepts in Elgin, Joliet & Eastern Railway Co. v. Burley, 325 U.S. 711, 722-28, 65 S.Ct. 1282, 1289-92, 89 L.Ed. 1886 (1945), and categorized “Major” disputes as those which “relate to disputes over the formation of collective agreements or efforts to secure them” and “Minor” disputes which “contemplate the existence of a collective bargaining agreement already concluded or, at any rate, a situation in which no effort is made to bring about a formal change in terms or to create a new one.” Id. at 723, 65 S.Ct. at 1290.

While this test remains the central inquiry in the Major/Minor dispute arena, the Second Circuit has supplemented this inquiry with a more fluid examination of the bargaining relationship of the parties. The Second Circuit has instructed courts to examine the collective bargaining agreement to determine whether a “plausible interpretation” of the agreement would justify the carriers’ action. “A dispute is major if the carriers’ contractual justification for its actions is ‘obviously insubstantial’ (citations omitted). On the other hand, a dispute is minor if the contract is ‘reasonable susceptible’ to the carriers’ interpretation.” Local 553, Transport Workers Union v. Eastern Airlines, Inc., supra, at 673. If the court determines that a dispute is “Minor” (other than in the rare instance of an injunction to insure the Board will be able to award the prevailing party) an Adjustment Board has exclusive jurisdiction to resolve the merits of the controversy under Railway Labor Act Section 204, 45 U.S.C. § 184. Airline Pilots Association v. Trans World Airlines, 713 F.2d 940, 949 (2d Cir.1983), aff'd in part, rev. in part sub nom, Trans World Airlines v. Thurston, — U.S. —, 105 S.Ct. 613, 83 L.Ed.2d 523 (1985). Applying these standards to IUFA’s claims, the controversy over the scope and meaning of the duty day limitations in section 6.E.2. is a Minor dispute under the Railway Labor Act and should be resolved by an Adjustment Board and not by this court.

Measuring this dispute by the Elgin standards, the interpretation of the duty day limitation provision is a Minor dispute concerning an already existing collective bargaining agreement and a disagreement over the meaning or proper application of this provision to a specific or omitted case. Indeed, section 6.E.2. (or one of its precursors) has existed as part of the IUFA-Pan Am contractual relationship since its introduction in the 1979 agreements, and has been the subject of negotiation between the parties. Pan Am’s interpretation formalized in the July 3 memo, that the duty day limitation provisions of section 6.E.2. do not apply to downline delays or diversions, is at the least a “plausible interpretation” of the provisions.

The language of section 6.E.2.d. (notification) applies by its own terms to a situation in which the flight attendant “reports for duty” at the beginning of a duty day. It is possible to read this “reporting” preamble as limiting the scope of the entire paragraph, including the underlined sentence which prohibits Pan Am from requiring flight attendants to remain on duty in excess of applicable duty day limits. IUFA’s contention that Pan Am’s interpretation of 6.E.2.d. added a new limiting term for downline delays is a semantic device to satisfy the Elgin standard for a “Major” dispute — the formation of creation of new contract provisions.

The plausibility of Pan Am’s reading of the duty day limitations appears to be buttressed by the fact that prior to June of 1985, flight attendants routinely flew through downline duty day limitations and were paid time and one-half for those extra hours under the 1982 Agreement. Apparently it was the withdrawal of these overtime payments which precipitated exposure of this ambiguity in the duty day limitations in situations of downline delay or diversion, and caused the flight attendants to exercise IUFA’s interpretation of their “walkoff” rights. This bargaining context demonstrates that Pan Am’s justification for its interpretation of section 6 is not “obviously insubstantial” and that the duty day limitation controversy remains a Minor dispute under the jurisdiction of the Adjustment Board under the Railway Labor Act.

The use of disciplinary proceedings against flight attendants who exercise downline duty day limits fails to raise the level of this controversy to a Major dispute under the Railway Labor Act. If Pan Am's section 6.E.2. interpretation is a Minor dispute under the Railway Labor Act, then taking disciplinary measures to enforce its interpretation is also a Minor dispute. See International Ass’n of Machinists v. Northwest Airlines, 673 F.2d 700 (3d Cir.1982). In instances of such disagreements between IUFA and Pan Am over the interpretation of a contract provision, the union had agreed to “work now, grieve later,” and any refusal to do so was legitimately met with disciplinary sanctions pending mediation of the dispute.

IUFA correctly points out that under limited circumstances courts have issued in-junctive orders in disputes considered to be “Minor” under the jurisdictional standards used to determine the scope of the arbitration procedures of the Railway Labor Act. For example, in Brotherhood of Locomotive Engineers v. Missouri Kansas-Texas Railroad Co., 363 U.S. 528, 534, 80 S.Ct. 1326, 1330, 4 L.Ed.2d 1379 (1960) the Supreme Court endorsed the granting of injunctions against a carrier when that injunction “rather than defeating the Board’s jurisdiction, would operate to preserve that jurisdiction by preventing injury so irrepa-rabie that a decision of the Board in the union’s favor would be but an empty victory.” The Second Circuit has endorsed this “empty victory” principle in numerous opinions. See e.g., Local 533, Transport Workers v. Eastern Air Lines, supra, 695 F.2d at 675; Airline Pilots Association v. Trans World, Air Lines, supra, 713 F.2d at 949.

However, the exercise of this power to enjoin actions in the context of “minor” disputes would be inappropriate in this case, because IUFA has not demonstrated that preserving the status quo at this juncture would put the Adjustment Board in a better position to repair any damage to the status of IUFA as the flight attendants’ bargaining representative which the Pan Am incentives may have caused.

The Suspension of Star Hesse

IUFA also claims that the disciplinary measure taken against IUFA’s representative and Pan Am flight attendant Star Hesse should be enjoined by this court because it constitutes the unlawful retaliation and interference with representative’s rights in violation of Sections 152 Third and Fourth of the Railway Labor Act and thus is outside the scope of the Railway Labor Act’s scheme for dispute resolution through arbitration. Pan Am contends that this disciplinary action is a conventional and Minor dispute arising out of the same disagreement over the meaning of the duty day limitation sections and should be referred to arbitration under the procedures outlined in section 153 of the Railway Labor Act.

IUFA has failed to demonstrate that the discipline of Ms. Hesse was a violation of the Section 152 representational rights guaranteed under the Act, rather than part of the general dispute over the scope and meaning of the duty day limitations in the 1985 Agreement.

Sections 152 Third and Fourth by their own terms apply to the designation and choice of representatives, and section Fourth specifically prohibits employer interference with formation of the labor organization. Courts generally have given limited scope to this special statutory protection for the formation of labor organizations, and have held that section 152 Third and Fourth give limited rights outside the context of a representation contest. International Association of Machinists and Aerospace Workers v. Northwest Airlines, Inc., 673 F.2d 700, 707 (3d Cir.1982). In the case of IUFA representative Hesse, no representational contest was involved, and reliance on the protections of Section 152 is misplaced since this dispute is outside the pre-certification context.

IUFA contends, however, that invocation of sections 152 Third and Fourth is warranted in this case because the suspension of Ms. Hesse was an attempt to impair her effectiveness as ■ a flight attendants’ bargaining representative and that her discipline had a chilling effect on the flight attendants’ willingness to exercise their contract rights. While there is authority for the proposition that Section 152 does apply in instances in which employer retaliation or discipline is part of an effort to destroy the effectiveness of the chosen representative, Brotherhood of Railroad Trainmen v. Central of Georgia Railway Company, 305 F.2d 605, 609 (5th Cir.1962), there is no evidence to indicate that Ms. Hesse’s suspension was different in motivation from the discipline meted out to other flight attendants who disagreed with Pan Am’s interpretation of section 6.E.2. On the contrary, the events leading up to her suspension resulted from the same duty day limitation dispute and occurred because of Ms. Hesse’s efforts to intervene in one such dispute to aid the flight attendants in the exercise of rights accruing to them under IUFA’s interpretation of the duty day limitation provisions. It is Pan Am’s belief that Ms. Hesse violated specific sections of the company’s “Employee Rules of Conduct” and the company asserted that it had “just and sufficient cause” for disciplining her because she allegedly made false or misleading statements about Pan Am to the FAA during the course of the aforementioned incident. IUFA failed to prove that this suspension was a predetermined effort to “frustrate and undermine the effectiveness of such bargaining agent by securing his discharge for unfounded, false, or baseless charges.” Id. at 608. Ms. Hesse’s suspension must therefore be considered part of the “Minor” dispute over the scope and meaning of section 6.E.2. and should be handled according to the arbitration provisions of section 153 of the Railway Labor Act.

Deals With Flight Attendants

IUFA claims that Pan Am’s offer of economic inducements to flight attendants in exchange for their waiver of duty day limitations at the departure point for the flight or their waiver of mandatory rest provisions at downline crew layover stops was a unilateral change in the terms and conditions of employment contained in the 1985 Agreement. IUFA contends that these individual “deals” with flight attendants thus violated section 152 Seventh of the Railway Labor Act which provides in relevant part that “No carrier, its officers, or agents shall change the rates of pay, rules, or working conditions of its employees ... except in the manner prescribed in such agreements or in section 156 of this title,” and that the courts have jurisdiction to enjoin such violations of the Act. According to Pan Am, nothing in the 1985 Agreement prohibits the company from offering flight attendants incentives to waive their maximum hour limitations and rest periods, and because such provisions are concededly waiveable, the contract preserves Pan Am’s right to solicit such waivers. However, an individual negotiation with flight attendants bypassing IUFA representatives on issues of terms and conditions of employment is a Major dispute and violates IUFA’s rights under the Railway Labor Act and will be enjoined.

Pan Am’s negotiation of private arrangements with flight attendants is a Major dispute under the Railway Labor Act for two reasons. First, bypassing the union with offers of financial inducements to flight attendants unilaterally alters the “rates of pay, rules or working conditions” of the employees contrary to the dictates of Section 152 Seventh of the Railway Labor Act. The Act prescribes detailed mediation procedures under Section 156 before carriers are permitted to make unilateral changes in rates of pay, rules, or working conditions. These individual “deals” do not present a question of bargaining agreement interpretation as was at issue in the dispute over the scope of the duty day limitations contained in Section 6.E.2. Rather they seek to undermine the existing and bargained-for limits on the working hours and rates of pay for flight attendants. In the language of the Elgin formula, these inducements are Major disputes under the Act because “they arise where there is no such agreement or where it is sought to change the terms of one, and therefore the issue is not whether an existing agreement controls the controversy.” Elgin, Joliet & Eastern Railway Co. v. Burley, supra, 325 U.S. at 723, 65 S.Ct. at 1290.

Although Pan Am contends that these economic inducements are consistent with its interpretations of the 1985 Agreement, the company offers no “plausible” contractual basis for its belief that the Agreement permits the company to offer individual economic bonuses to flight attendants to solicit waivers of their contractual rights. The bargaining history between IUFA and Pan Am from 1982 to 1985 demonstrates that similar economic incentives in the form of hourly overtime payments existed in the 1982 Agreement and they were specifically excluded from the 1985 Agreement after Pan Am’s extensive negotiations with IUFA. It is thus implausible to suggest that raising the same bargaining issue with individual flight attendants was “compatible” with the 1985 Agreement. “Compatibility” according to Pan Am’s suggested definition would undermine all of the contractual provisions of the 1985 Agreement, with its philosophy of “If it isn’t there, we must be able to offer it.”

In addition, such solicitations of individual “deals” is contrary to the fundamental labor law principle that the solicitation of individual contracts is prohibited when a union is present as the collective bargaining agent of the employees. As the Supreme Court stated in J.I. Case Co. v. National Labor Relations Board, 321 U.S. 332, 337, 64 S.Ct. 576, 580, 88 L.Ed. 762 (1944), “Individual contracts, no matter what the circumstances that justify their execution or what their terms, may not be availed of to defeat or delay the procedures prescribed by the National Labor Relations Act looking to collective bargaining ...; nor may they be used to forestall bargaining or to limit or condition the terms of the collective agreement.’’ (emphasis added) Pan Am’s construction of the 1985 Agreement would both condition the agreement into non-existence, and would institutionalize a bypassing of IUFA’s representatives and a unilateral change in the flight attendants’ term and conditions of employment. See, e.g., Lodge 743, International Association of Machinists, AFL-CIO v. United Aircraft Corp., 337 F.2d 5 (2d Cir.1964). As the Supreme Court reiterated in National Labor Relations Board v. Allis-Chalmers Mfg. Co., 388 U.S. 175, 180, 87 S.Ct. 2001, 2006, 18 L.Ed.2d 1123 (1967) the policy of pooling economic strength and acting through a labor organization “therefore extinguishes the individual employees' power to order his own relations with his employer and creates a power vested in the chosen representative to act in the interests of all employees.” Bypassing IUFA representatives and negotiating individually with flight attendants violates the Railway Labor Act and is contrary to fundamental labor law principles and must be characterized as a Major dispute under the Act.

In addition to meeting its jurisdictional burdens under the Railway Labor Act, IUFA has also met the standards applicable to a plaintiff seeking the award of injunctive relief. In the Second Circuit, a party seeking injunctive relief must show “(a) irreparable harm and (b) either (1) likelihood of success on the merits or (2) sufficiently serious questions going to the merits to make them a fair ground for litigation and a balance of hardships tipping decidedly toward the party requesting the preliminary relief.” Jackson Dairy, Inc. v. H.P. Hood & Sons, Inc., 596 F.2d 70, 72 (2d Cir.1979). Cf., Air Line Pilots Association, International v. Trans World Airlines, Inc., 713 F.2d 940 (2d Cir.1983).

IUFA has demonstrated that Pan Am’s individual agreements with flight attendants will cause irreparable injury to its status as the employees certified bargaining representative. Pan Am deliberately bypassed IUFA representatives with these offers of ex-contractual benefits to flight attendants, conduct constituting a challenge to union strength timed to coincide precisely with the union’s negotiation of what was concededly a “concessionary” collective bargaining agreement with Pan Am. As the Supreme Court stated in J.I. Case Co. v. National Labor Relations Board, supra, 321 U.S., at 338, 64 S.Ct. at 580:

But except as so provided [by express provision in the collective bargain to leave certain areas open to individual bargaining], advantages to individuals may prove as disruptive of industrial peace as disadvantages. They are a fruitful way of interfering with organization and choice of representatives; increased compensation, if individually deserved, is often earned at the cost of breaking down some other standard thought to be for the welfare of the group ... Such discriminations not infrequently amount to unfair labor practices.

IUFA has demonstrated that irreparable injury also may result from Pan Am’s efforts to induce flight attendants to waive the contractually set limits on the number of consecutive hours which they must work. As the Moreau affidavit detailed, flight attendants who work extremely long duty days are less able to respond to aircraft emergencies and are less able to handle the physical and mental stresses of a normal flight. The risk of such injury is increased by Pan Am’s tactic of negotiating “on the spot” waivers with flight attendants whenever they are needed, injecting an element of urgency into a health and safety calculus which should measure flight attendant fatigue. As was discussed above, IUFA has more than demonstrated its likelihood of success on the merits of its claim to enjoin Pan Am’s practice of offering financial incentives in exchange for the waiver of contract provisions, and has thus met both requirements for the granting of injunctive relief.

For the foregoing reasons, Pan Am is preliminarly enjoined from negotiating individual waivers of duty day limitations or rest periods as provided in the 1985 Agreement pending final resolution of the dispute at trial. The remaining claims for preliminary injunctive relief are denied. IT IS SO ORDERED.

      . Section 6.E.2.a. of the 1985 Agreement reads as follows:

        Except as provided in paragraph 2.b. below, a Flight Attendant who reports for duty shall not be required to remain on duty in excess of fifteen (15) consecutive hours or scheduled duty day plus two (2) hours whichever is greater.

        . Section 6.E.2.b. of the 1985 Agreement reads as follows:
      A Flight Attendant who reports for a nonstop flight which is scheduled in excess of thirteen (13) hours shall not be required to exceed h/h scheduled applicable duty day by more than three hours.

      .Note that sections 6.G.I. and 6.E.2.d. as printed above are contained in the 1982 Collective Bargaining Agreement between IUFA and Pan Am. The first page of the 1985 Agreement provides that the 1982 Agreement remains in full force and effect if not specifically modified by the Memorandum of Agreement entered into by the parties in 1985. The above part of 6.G.I. remained unaltered after the 1985 Agreement was negotiated.

      . IUFA has not demonstrated that financial incentives were negotiated between flight attendants and Pan Am representatives in situations of downline delays or diversions to alternate airports.

      . Section 156 of the Railway Labor Act reads as follows:
      § 156. Procedure in changing rates of pay, rules, and working conditions
      Carriers and representatives of the employees shall give at least thirty days’ written notice of an intended change in agreements affecting rates of pay, rules, or working conditions, and the time and place for the beginning of conference between the representatives of the parties interested in such intended changes shall be agreed upon within ten days after the receipt of said notice, and said time shall be within the thirty days provided in the notice. In every case where such notice of intended change has been given, or conferences are being held with reference thereto, or the services of the Mediation Board have been requested by either party, or said Board has proffered its services, rates of pay, rules, or working conditions shall not be altered by the carrier until the controversy has been finally acted upon, as required by section 155 of this title, by the Mediation Board, unless a period of ten days has elapsed after termination of conferences without request for or proffer of the services of the Mediation Board.

      . The agreement between the parties to “work now/grieve later" was set out in the so-called “Mary Ellen King letter" of May 30, 1978 in which Ms. King, then IUFA President, stated in her letter to Mr. Donald Hunt, Staff Vice-President for Labor Relations, “That is, even if the individual questions an order, policy, or procedure, s/he will "obey now, grieve later." The Company and the Union understand that in the event the individual fails to comply with orders, policies, or procedures as indicated above, the measure of discipline, if any, up to and including discharge, shall be consistent with the nature of the act and the reason for refusal.”

      . Sections 152 Third and Fourth provide as follows:
      Designation of representatives
      Third. Representatives, for the purposes of this chapter, shall be designated by the respective parties without interference, influence, or coercion by either party over the designation of representatives by the other; and neither party shall in any way interfere with, influence, or coerce the other in its choice of representatives. Representatives of employees for the purposes of this chapter need not be persons in the employ of the carrier, and no carrier shall, by interference, influence, or coercion seek in any manner to prevent the designation by its employees as their representatives of those who or which are not employees of the carrier.
      Organization and collective bargaining; freedom from interference by carrier; assistance in organizing or maintaining organization by carrier forbidden; deduction of dues from wages forbidden
      Fourth. Employees shall have the right to organize and bargain collectively through representatives of their own choosing. The majority of any craft or class of employees shall have the right to determine who shall be the representative of the craft or class for the purposes of this chapter. No carrier, its officers, or agents shall deny or in any way question the right of its employees to join, organize, or assist in organizing the labor organization of their choice, and it shall be unlawful for any carrier to interfere in any way with the organization of its employees, or to use the funds of the carrier in maintaining or assisting or contributing to any labor organization, labor representative, or other agency of collective bargaining, or in performing any work therefor, or to influence or coerce, employees in an effort to induce them to join or remain or not to join or remain members of any labor organization, or to deduct from the wages of employees any dues, fees, assessments, or other contributions payable to labor organizations, or to collect or to assist in the collection of any such dues, fees, assessments, or other contributions: Provided, That nothing in this chapter shall be construed to prohibit a carrier from permitting an employee, individually, or local representatives of employees from conferring with management during working hours without loss of time, or to prohibit a carrier from furnishing free transportation to its employees while engaged in the business of a labor organization.

      . There was no dispute between the parties as to the attendants’ right to cancel from a flight at its departure point if the projected flight time would exceed the maximum duty day limitations contained in section 6.E.2.

      . The Supreme Court made these principles equally applicable to actions brought under the Railway Labor Act in Order of Railroad Telegraphers v. Railway Express Agency, Inc., 321 U.S. 342, 64 S.Ct. 582, 88 L.Ed. 788 (1944).


source: Caselaw Access Project

author: COHILL, Chief Judge.

license: Public Domain

text:
    Michael Gene KIRK, Plaintiff, v. ALLEGHENY TOWING INCORPORATED and Allegheny Marine Salvage Incorporated, Defendants.
    Civ. A. No. 83-1908.
    United States District Court, W.D. Pennsylvania.
    Oct. 21, 1985.

      Gary Robert Fine, Greensburg, Pa., Robert A. Chaffin, Friedman and Chaffin, Houston, Tex., for plaintiff.
    Gerald C. Paris, Reed, Smith, Shaw & McClay, Pittsburgh, Pa., for defendants.
   OPINION

COHILL, Chief Judge.

Presently before us is Plaintiff’s Motion to Dismiss Defendants’ counterclaim brought in Admiralty for the return of maintenance and cure paid by Defendants under a mistaken belief that the Plaintiff was entitled to it. This action arises from an accident which occurred on November 4, 1981. Plaintiff, while moving railroad cars loaded with coal and dumping that coal from the cars into bins to be placed onto river barges owned by the Defendants, received a serious and disabling leg injury. As a result of that accident, Defendants paid Plaintiff maintenance and cure at the rate of $180 per week from November 18, 1981 through November 15, 1982. These payments totalled $9,360. From November 4, 1981 through March 31, 1983, Plaintiff also received Workmen’s Compensation benefits from Defendants’ insurance carrier at the rate of $131 per week. Those benefits totalled $9,619.13.

After Defendants terminated Plaintiff’s maintenance and cure, Plaintiff filed a complaint in this court alleging that Defendants had failed to fulfill their obligation to make maintenance and cure payments in accordance with general maritime law. In addition, Plaintiff alleged that Defendants had been negligent in inspecting and maintaining the equipment on which he was injured, in violation of the Jones Act, 46 U.S.C. § 688. Defendants denied liability on the grounds that Plaintiff was not a seaman and filed a counterclaim to recover the maintenance and cure already paid.

In an order dated November 19,1984, we granted Defendants Motion for Summary Judgment, finding that, as a matter of law, Plaintiff was not a seaman, and was therefore not entitled to either maintenance and cure or damages under the Jones Act. After we granted summary judgment on the complaint, Defendants filed a request for entry of default based on Plaintiffs failure to plead or otherwise respond to the Defendants’ counterclaim. Plaintiff immediately responded with a motion to dismiss the counterclaim for failure to state a claim upon which relief can be granted. Having denied Defendants’ request for entry of default, we now address Plaintiff’s motion to dismiss.

The Defendants’ counterclaim is based on the theory that the Plaintiff, if he is allowed to keep the money paid, will be unjustly enriched because he was not entitled to the payments in the first place. In the alternative, Defendants maintain that the money paid under maintenance and cure constitutes a double recovery, since Plaintiff also received Workmen’s Compensation. Both arguments rely on a theory of unjust enrichment and appeal to the court’s equitable powers for relief in the form of restitution.

Plaintiff argues that Defendants paid Plaintiff maintenance and cure under a mistake of law and not of fact, thus no restitution is required. Plaintiff points out that the Defendants knew that the Plaintiff’s employment did not involve a permanent connection with this particular vessel and did not require Plaintiff to be aboard the vessel for navigational purposes. Plaintiff also argues that repayment of the maintenance and cure would be contrary to public policy and the purpose behind imposing the duty on shipowners to make those payments. Finally, Plaintiff denies having recovered twice for the same injury in that maintenance and cure and Workmen’s Compensation are distinct remedies serving different beneficial functions.

In evaluating a motion to dismiss a counterclaim, the allegations of the counterclaim and all reasonable inferences drawn therefrom must be accepted as true and viewed in the light most favorable to the nonmoving party. Miree v. DeKalb County, 433 U.S. 26, 27 n. 2, 97 S.Ct. 2490, 2492 n. 2, 53 L.Ed.2d 557 (1977); Kugler v. Helfant, 421 U.S. 117, 125 n. 5, 95 S.Ct. 1524, 1531 n. 5, 44 L.Ed.2d 15 (1975); Empire Abrasive Equipment Corp. v. HH Watson Inc., 567 F.2d 554, 557 (3d Cir.1977); Amanto v. Withlin, 544 F.Supp. 140, 141 (E.D.Pa.1982). A counterclaim should not be dismissed unless it appears that the non-moving party could prove no set of facts that would entitle him to relief. Conley v. Gibson, 355 U.S. 41, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957).

As far as we can tell, this case is one of first impression with regard to the return of maintenance and cure paid under a mistaken belief that Plaintiff was a seaman. Although no statutory authority governs this situation, Defendants argue that general principles of restitution and unjust enrichment should be applied to resolve the counterclaim in their favor.

Generally, a person who has been unjustly enriched at the expense of another is required to make restitution to the other. Shipping Co. of India v. Sun Oil, 569 F.Supp. 1248 (E.D.Pa.1983). Courts have carved out certain specific exceptions to this rule. For instance, it has long been held that money voluntarily paid on a mistake of law cannot be recovered on the ground that the party supposed he was bound in law to pay it when in truth he was not. Gulf Refining Co. v. City of Philadelphia, 31 F.Supp. 587, aff'd, 110 F.2d 661 (3d Cir.1940); PLM, Inc. v. Consolidated Rail Corp., 490 F.Supp. 194, 196 (E.D.Pa.1980); AAA Trucking Corp. v. Teamsters Pension Trust Fund, 480 F.Supp. 579, 580-81 (E.D.Pa.1979) vacated, 633 F.2d 209 (3d Cir.1980). A mistake of law is a mistake “as to the legal consequences of an assumed state of facts.” Acme Markets v. Valley View Shopping Center, 342 Pa.Super. 567, 493 A.2d 736, 737 (1985) (citing Betta v. Smith, 368 Pa. 33, 36, 81 A.2d 538, 539 (1951). Where, under a mistake of law, one voluntarily and without duress or fraud pays money to another with full knowledge of the facts, the money paid cannot be recovered. Acme 493 A.2d at 737 (citing Ochiuto v. Prudential Ins. Co. of America, 356 Pa. 382, 384, 52 A.2d 228, 230 (1947)).

Defendants argue that Vella v. Ford Motor Company, 421 U.S. 1, 95 S.Ct. 1381, 43 L.Ed.2d 682 (1975) leaves open the possibility of restitution of mistakenly paid maintenance and cure. In Vella, a seaman received a permanent injury which was not diagnosed as permanent until sometime later. Maintenance and cure is not to be paid once an injury is declared permanent. Farrell v. United States, 336 U.S. 511, 517, 69 S.Ct. 707, 710, 93 L.Ed.2d 850 (1949). The question at issue in Vella was whether payment of maintenance and cure should end when the injury became permanent, or when it was diagnosed as permanent. The Court reasoned that denial of maintenance and cure when the seaman’s injury, though in fact permanent immediately after the accident, is not medically diagnosed as permanent until long after its occurrence, would frustrate the purpose of imposing the duty as well as the ease of administering it. 421 U.S. at 4, 95 S.Ct. at 1383. Employers would be encouraged to withhold payments until the illness or injury had been thoroughly examined. Also, if forced to reimburse amounts improperly paid, seamen would be discouraged from accepting any payments until certain that the injury was not permanent. Either way, the Court concluded that the object of the payments, protection of the seamen’s interests, would be impaired. Id.

Defendants’ arguments are both factually and philosophically inconsistent with the situation occurring in Vella. Here, Defendants knew what the Plaintiff’s job entailed and made an erroneous conclusion as to whether those job requirements made him a seaman entitled to maintenance and cure, or a longshoreman whose sole remedy lay in the Longshore and Harbor Workers Compensation Act (“LHWCA”). 33 U.S.C. §§ 901-950 (Supp. II 1972). Unlike the medical information required to determine the permanence of an injury, the Defendants here were not required to consider factors unknown to them at the time of initial payment.

In its analysis, the Court in Vella repeatedly asserts that the purpose of maintenance and cure is to protect the seaman who is a ward of the Admiralty. Even under the facts of Vella, which we believe are more sympathetic toward the plight of the employer than are the facts of the present case, we believe that the Court indicates an unwillingness to impose the burden of restitution upon the employee. Instead, Vella seems to favor burdening the shipowner with the obligation of determining which of his employees are seamen and the risk of making improper payments of maintenance and cure when he has not done so.

Defendants next contend that Plaintiff has recovered twice for his medical expenses, once through the payment of maintenance and cure, and again through the payment of Workmen’s Compensation by the Defendants’ insurance company, thus arguing that Plaintiff has received a “double recovery.”

In order to address this argument, we must examine the origin and purpose of maintenance and cure, a remedy unique to admiralty. The ancient duty of a vessel and her owner to provide maintenance and cure for a seaman who becomes ill or is injured while in the service of the vessel arises from the contract of employment and not from any negligence on the part of the owner. Calmar S.S. Corp. v. Taylor, 303 U.S. 525, 527, 58 S.Ct. 651, 652-53, 82 L.Ed. 993, 996 (1938). It is completely separate from any liability which may be imposed under the Jones Act for negligence or under general maritime law for unseaworthiness of the vessel. Likewise, it has no relationship to any duty of indemnification which may arise. Cox v. Dravo Corp., 517 F.2d 620, 622-23 (3d Cir.), cert. denied, 423 U.S. 1020, 96 S.Ct. 457, 46 L.Ed.2d 392 (1975).

The reasons behind imposing the obligation to provide maintenance and cure on the shipowner, without regard to his culpability, were graphically stated by Justice Story and later summarized by Justice Stone as follows:

the protection of seamen, who, as a class, are poor, friendless and improvident, from the hazards of illness and abandonment while ill in foreign ports; the inducement to masters and owners to protect the safety and health of seamen while in service; the maintenance of a merchant marine for the commercial service and maritime defense of the nation by inducing men to accept employment in an arduous and perilous service.

Calmar, 303 U.S. at 528, 58 S.Ct. at 653 (citing Harden v. Gordon, 11 F.Cas. 480, 483 (No. 6,047) (C.C.D.Me.1823)).

Essentially, the shipowner’s duty stems from an early policy decision to promote the “combined objective of encouraging marine commerce and assuring the well-being of seamen,” who are by nature of their employment, dependent upon their ships. Aguilar v. Standard Oil Co., 318 U.S. 724, 63 S.Ct. 930, 87 L.Ed. 1107 (1943). As the Vella Court pointed out, maintenance and cure was designed to be a broad and inclusive duty, free of uncertainty, complexity and administrative burdens. 421 U.S. at 4-5, 95 S.Ct. at 1383-1384 (citing Farrell, 336 U.S. at 516, 69 S.Ct. at 709).

Maintenance and cure benefits are intended to provide a seaman with the food, loding and medical services to which he is entitled normally during his service on board a ship. Vaughan v. Atkinson, 369 U.S. 527, 82 S.Ct. 997, 8 L.Ed.2d 88 (1962). Maintenance is a substitute for the seamen’s free shipboard food and lodging. Cure is the equivalent of the medical attention the seaman would be entitled to receive while at sea. Calmar, 303 U.S. at 528, 58 S.Ct. at 653; Cox, 517 F.2d at 623. Maintenance and cure is not a substitute for lost wages. Shaw v. Ohio River Co., 526 F.2d 193, 199 (3d Cir.1975).

Workmen’s Compensation, which is paid on behalf of the employer by his insurance carrier, is intended to provide benefits to employees who suffer loss of earnings as a result of work-related injuries. U.S. Steel Corp. v. Workmen’s Compensation Appeal Bd., 62 Pa.Cmwlth. 502, 437 A.2d 92 (1981). While Workmen’s Compensation can also cover medical expenses incurred due to injury on the job, 77 Pa.Cons.Stat. Ann. § 531 (1952 & Supp.1985), Defendants allege no facts supporting an inference that any medical expenses were paid to Plaintiff. In fact, Defendants provide no evidence that medical expenses were paid to Plaintiff as part of the maintenance and cure either. Plaintiff, however, alleges that he received Workmen’s Compensation only for his lost wages and not for any medical expenses. He supplies a breakdown of his salary times the number of work weeks missed, which total equals the amount of compensation he received. Likewise, Plaintiff maintains that he received only maintenance representing a weekly allowance for subsistence and no amount for cure. He provides computations demonstrating that the subsistence rate times the weeks for which Defendants voluntarily paid maintenance under a mistaken belief that Plaintiff was a “seaman” total the sum received as maintenance and cure.

Even assuming that Defendants had alleged any facts in support of the argument that Plaintiff received a double recovery, the relief requested is not supported by the weight of case law. Many courts have permitted set off where a seaman received equivalent coverage from another source, but we have discovered no cases where actual restitution of maintenance and cure was required of the seaman. Sun Ship, Inc. v. Pennsylvania, 447 U.S. 715, 100 S.Ct. 2432, 65 L.Ed.2d 458, reh’g denied, 448 U.S. 916, 101 S.Ct. 37, 65 L.Ed.2d 1179 (1980) (citing Calbeck v. Travelers Ins. Co., 370 U.S. 114, 82 S.Ct. 1196, 8 L.Ed.2d 368 (1962)) (Concurrent coverage state compensation statute and LHWCA does not create danger of double recovery since an award under one would be setoff against any recovery under the other); Shaw, 526 F.2d at 200-01 (Blue Cross Blue Shield payments under policy paid for by employer setoff from recovery for maintenance and cure); Haughton v. Blackships, Inc., 462 F.2d 788, 791 (5th Cir.1972) (Benefits payable to seaman under health insurance policy purchased by employer set off from maintenance and cure payments); Cheuvront v. Pennsylvania and Lake Erie R.R. Co., 477 F.Supp. 193, 197 (W.D.Pa.1979) (Cohill, J) (Maintenance and cure recovery set off by amount paid under LHWCA). See also, Boatel, Inc. v. Delamore, 379 F.2d 850 (5th Cir.1967); Harney v. William M. Moore Building Corp., 359 F.2d 649 (2d Cir.1966); Sims v. Marine Catering Service, Inc., 217 F.Supp. 511 (D.La.1963); Schellenger v. Zubik, 170 F.Supp. 92, 93 (W.D.Pa.1959); Chesser v. General Dredging Co., 150 F.Supp. 592, 595-96 (S.D.Fla.1957).

Defendants cite one case, American Export Isbrandtsen Lines, Inc. v. Valiente, 1975 AMC 1805 (N.Y.Sup.1943), in support of their argument for restitution on the grounds of double recovery. That case, however, is readily distinguishable factually from the present case and does not permit restitution to be had from the seaman of money already received by him. In American Export, a third party tortfeasor was held liable to the seaman for a personal injury. The damage award included a sum for medical and related expenses which had already been paid for by the innocent employer through maintenance and cure. Consequently, the court held that equity required the tortfeasor to pay a portion of the judgment to the employer as reimbursement for the maintenance and cure payments previously made. American Export, 1975 AMC at 1805-06.

Requiring reimbursement of the maintenance and cure by third party tortfeasor is quite different from requiring the seaman personally to repay money received as maintenance and cure. Reimbursement by a third party causes no hardship to the seaman who has probably already spent the money dispensed by his employer to pay off medical bills. In essence, the relief from double recovery which American Export and other similar cases provide is more in the form of indemnification than restitution. See Wisconsin Barge Line, Inc. v. The Barge Chem 301, 390 F.Supp. 1388, 1393-94 (M.D.La.1975); Richardson v. St. Charles—St. John the Baptist Bridge & Ferry Authority, 284 F.Supp. 709, 716 (E.D.La.1968) (citing Jones v. Waterman S.S. Corp., 155 F.2d 992, 999 (3d Cir.1946)). These cases grant the employer, shipowner, who pays maintenance and cure to an injured employee, seaman, a right over against the third party wrongdoer whose negligence caused the seaman’s injury.

In conclusion, we do not believe that Defendants have stated a cause of action for restitution of maintenance and cure payments voluntarily made under a mistake of law. Nor do we find grounds to impose restitution under a theory of double recovery. Consequently, we will grant the Plaintiff’s Motion to Dismiss the Counterclaim.


author: ALAIMO, Chief Judge.

text:
    UNITED STATES of America, Plaintiff, v. BLUE DOLPHIN ASSOCIATES, INC., and Alvin S. Hirsch, Kay T. Hirsch, in personam, and F/V BLUE DOLPHIN, Official No. 610154, in rem, Defendants.
    Civ. A. No. 483-344.
    United States District Court, S.D. Georgia, Savannah Division.
    Oct. 21, 1985.

      Melissa Mundell, Asst. U.S. Atty., Savannah, Ga., for plaintiff.
    Barnard Portman, Savannah, Ga., for defendants.
   ORDER

ALAIMO, Chief Judge.

The United States of America brought this action in rem against the fishing vessel BLUE DOLPHIN (“BLUE DOLPHIN”) and in personam against Blue Dolphin Associates and the Hirsches to foreclose on a preferred ship mortgage and to collect amounts due under two promissory notes. Before this Court is plaintiff’s motion for summary judgment against the Hirsches. Having read and considered the parties’ briefs in support of their respective positions, the Court is of the opinion that summary judgment should be granted.

FACTUAL BACKGROUND

On August 28, 1979, Coastal Production Credit Association (“Coastal”) loaned Blue Dolphin Associates $97,300 toward the purchase of the BLUE DOLPHIN. Plaintiffs Complaint, Ex. B. The United States guaranteed payment of the loan and, as security for its guaranty, obtained a preferred ship mortgage on the vessel. Plaintiff’s Complaint, Ex. D. The United States also required Blue Dolphin Associates to execute a promissory note for the amount of the loan. This note was signed by Gene Couch, president of the corporation, and attested by Alvin Hirsch, secretary of the corporation. Plaintiff’s Complaint, Ex. C. In addition, plaintiff required Alvin and Kay Hirsch to guarantee unconditionally the promissory note and mortgage executed by Blue Dolphin Associates. The Hirsches signed the guaranty agreement in their personal capacities. Plaintiff’s Complaint, Ex. H.

Evidently, the fishing business produced more tall tales than catch, for Blue Dolphin Associates soon found itself in deep financial waters. On April 22, 1981, the corporation borrowed an additional $18,828 directly from plaintiff in order to keep up the payments to Coastal on the BLUE DOLPHIN. Plaintiffs Complaint, Ex. K. This note was also signed by Couch in his corporate capacity and attested by Alvin Hirsch. As security for the second loan, plaintiff took out a second preferred ship mortgage on the BLUE DOLPHIN. Plaintiff’s Complaint, Ex. L. Plaintiff again required Alvin and Kay Hirsch to personally guarantee payment of the note. Plaintiffs Complaint, Ex. 0.

The Blue Dolphin Associates’ fishing venture ran aground for the last time in March 1983, when the corporation fell behind in its payments to Coastal. Coastal timely demanded that the United States pay the loan in full in accordance with its guaranty, and plaintiff did so. Plaintiff’s Complaint, Ex. F. Plaintiff, in turn, demanded that Blue Dolphin Associates pay its indebtedness in full and instituted the present action to collect the amounts owed it under the two promissory notes. Plaintiff’s Complaint, Ex. G. As defendants, plaintiff named the BLUE DOLPHIN, Blue Dolphin Associates as the principal, and the Hirsches as guarantors.

The BLUE DOLPHIN was arrested in August 1983 and sold at auction on December 6,' 1983, for $66,000. The sale was confirmed by Order of this Court on January 10, 1984. A final decree of foreclosure was issued on March 19, 1984. Blue Dolphin Associates never answered the complaint nor otherwise mounted a defense, and on July 1, 1985, default judgment was entered against that defendant for the deficiency remaining unsatisfied after the sale of the BLUE DOLPHIN. Now, by motion for summary judgment, plaintiff seeks a deficiency judgment against the Hirsches as guarantors of the two promissory notes Blue Dolphin Associates executed. DISCUSSION

The Hirsches mount four arguments in opposition to the motion for summary judgment. They contend the guaranty agreements must fail for want of consideration. They also maintain that any guaranty by Kay Hirsch is invalid because it violated former Ga.Code Ann. § 53-503 (Harrison 1982). The Hirsches further contend they should be- discharged from liability on their guaranties because plaintiff failed to pursue the principal upon demand, as required by O.C.G.A. § 10-7-24 (Michie 1982). Finally, these defendants argue they should be released from liability under O.C.G.A. § 10-7-22 (Michie 1982) because plaintiff took acts which increased the risk of the guarantors. The Court finds these arguments unpersuasive.

To be enforceable, a guaranty agreement must show a consideration flowing to the guarantor. Jackson v. First Bank, 150 Ga.App. 182, 256 S.E.2d 923 (1979); Bearden v. Ebcap Supply Co., 108 Ga.App. 375, 133 S.E.2d 62 (1963). However, the benefit to the guarantor need not be direct. Musgrove v. Luther Publishing Co., 5 Ga.App. 279, 63 S.E. 52 (1908). A benefit to the principal, such as an extension of credit, is sufficient to bind a guarantor under O.C. G.A. § 10-7-1 (Michie 1982). Delta Diversified, Inc. v. Citizens & Southern National Bank, 171 Ga.App. 625, 320 S.E.2d 767 (1984); Griswold v. Whetsell, 157 Ga. App. 800, 278 S.E.2d 753 (1981); Tennille Banking Co. v. Ward, 29 Ga.App. 660, 116 S.E. 347 (1923); Jordan v. First National Bank, 19 Ga.App. 118, 91 S.E. 287 (1917),

In light of the foregoing authorities, any argument that the Hirsches received no consideration for their guaranties is patently frivolous. Alvin Hirsch was a 10% stockholder in Blue Dolphin Associates, served as secretary of the corporation and acted as captain of the BLUE DOLPHIN. Blue Dolphin Associates could not have obtained the loan which enabled it to buy the BLUE DOLPHIN were it not for the Hirsches’ personal and unconditional guaranty of the debt. In return for their guaranty, plaintiff guaranteed the loan from Coastal to Blue Dolphin Associates. Essentially, plaintiff financed the Hirsches’ business, thereby conferring a direct benefit on Blue Dolphin Associates and an indirect benefit on the Hirsches.

Even if consideration existed for the first guaranty agreement, the Hirsches argue that new and independent consideration was necessary for their guaranty of the direct loan from the Secretary of Commerce to Blue Dolphin Associates. It is true that past consideration will not support a contract of guaranty. Gwinnett Community Bank v. Flake, 151 Ga.App. 578, 260 S.E.2d 523 (1979); Jackson v. First Bank, supra; Bearden v. Ebcap Supply Co., supra. However, an indulgence to the principal, such as an extension of time to pay a debt, is sufficient consideration to support a guaranty agreement. Hollingshead v. American National Bank, 104 Ga. 250, 30 S.E. 728 (1898); Oliver v. Citizens DeKalb Bank, 150 Ga. App. 437, 258 S.E.2d 204 (1979). In the instant case, the second loan gave defendants an opportunity to get their fishing business on its feet when it looked like it might founder on the rocks of financial hardship. Seen in this light, it is clear that the Hirsches obtained a benefit from the second guaranty.

These defendants also assert that Kay Hirsch is not liable on her guaranties because they violated former Ga.Code Ann. § 53-503. Section 53-503 provided:

The wife is a femme sole as to her separate estate, unless controlled by the settlement. Every restriction upon her power in it must be complied with; but while the wife may contract, she may not bind her separate estate to any contract of suretyship nor by any assumption of the debts of her husband, and any sale of her separate estate, made to a creditor of her husband in extinguishment of his debts shall be absolutely void.

This statute was repealed effective April 4, 1979. See Act No. 86, 1979 Ga.Laws 466, 496. No laws restricting a married woman’s power to act as a surety or guarantor for her husband’s debts were enacted in place of § 53-503. Both guaranty agreements at issue here were executed after the repeal of § 53-503, and its provisions are thus wholly inapplicable and irrelevant to Kay Hirsch’s liability on her two guaranty agreements.

The Hirsches next contend they should be discharged from liability on their guaranties because plaintiff failed to pursue the principal upon demand, as required by O.C. G.A. § 10-7-24. Section 10-7-24 provides, in pertinent part:

Any surety, guarantor, or endorser, at any time after the debt on which he is liable becomes due, may give notice in writing to the creditor, his agent, or any person having possession or control of the obligation, to proceed to collect the debt from the principal...; and, if the creditor or holder refuses or fails to commence an action for the space of three months after such notice (the principal being within the jurisdiction of this state), the endorser, guarantor, or surety giving the notice ... shall be discharged. No notice which does not state the county in which the principal resides shall be considered a compliance with the requirements of this Code section.

This section is in derogation of the common law and should be strictly construed. Howard v. Brown, 3 Ga. 523 (1847). Prior to its enactment in 1821, a surety or guarantor had no right to demand that the holder pursue the principal and no right to release from liability if the holder failed to do so. Thomas v. Clarkson, 125 Ga. 72, 54 S.E. 77 (1906); Preston Carroll Co. v. Morrison Assurance Co., 173 Ga.App. 412, 326 S.E.2d 486 (1985) (citing Howard). The sole purpose of § 10-7-24 is to accord sureties a means to compel creditors to sue the principal upon accrual of a cause of action. A.J. Kellos Construction Co. v. Balboa Insurance Co., 661 F.2d 402 (5th Cir. Unit B 1981).

Because the guarantor derives his right to release from the statute rather than his contract, § 10-7-24 acts as an extinguishment of a remedy and is in the nature of a limitation of actions. Sally v. Bank of Union, 150 Ga. 281, 103 S.E. 460 (1920). Accordingly, since the section operates as a restriction upon the rights of holders, strict compliance with the statutory requirements is a prerequisite to discharge. Glasser v. Decatur Lumber & Supply Co., 95 Ga. App. 665, 99 S.E.2d 330 (1957). One statutory requisite is that the creditor be given written notice. Absent unusual circumstances, an oral demand that the holder pursue the principal will not trigger the protection of § 10-7-24. Johnson v. Longley, 142 Ga. 814, 83 S.E. 952 (1914); Tim-mons v. Butler, Stevens & Co., 138 Ga. 69, 74 S.E. 784 (1912); Gettis v. Gormley, 49 Ga.App. 339, 175 S.E. 393 (1934). Another requisite is that the principal either reside or be amenable to suit in Georgia. Glasser v. Decatur Lumber & Supply Co., supra; Fricks v. J.R. Watkins Co., 88 Ga.App. 276, 76 S.E.2d 518, rev’d on other grounds, 210 Ga. 83, 78 S.E.2d 2 (1953). Finally, the notice must state the county of the principal’s residence.

Other than the Hirsches’ bare assertion that they did in fact encourage plaintiff to pursue Blue Dolphin Associates and its president, Gene Couch, the record here gives no indication that the Hirsches have complied with the statutory prerequisites to discharge under § 10-7-24. The Court has before it no written document commanding plaintiff to pursue the principal and identifying its county of residence. Indeed, it is not even clear whom the Hirsch-es would like plaintiff to sue — Blue Dolphin Associates or Gene Couch. Blue Dolphin Associates was the maker of both notes in question, and plaintiff has already obtained a default judgment against that entity for the amount of the deficiency remaining after the BLUE DOLPHIN was sold. Assuming arguendo that plaintiff had a duty under § 10-7-24 to pursue the principal, plaintiff has fulfilled its obligation by proceeding against Blue Dolphin Associates.

Gene Couch’s personal liability, if any, on the two promissory notes is not properly before this Court because Couch resides in Ridgeland, South Carolina, well outside the jurisdiction of the United States District Court for the Southern District of Georgia. Couch is not a party to this lawsuit. Moreover, since Couch is a South Carolina resident who apparently is not amenable to suit in Georgia, § 10-7-24 is inapplicable as to him. By its very terms, the statute affords protection to sureties only when the principal resides or can be sued in Georgia. Glasser v. Decatur Lumber & Supply Co., supra; Fricks v. J.R. Watkins Co., supra. In sum, § 10-7-24 affords the Hirsches no relief.

The Hirsches’ final argument is that they should be discharged from liability under § 10-7-22 because plaintiff took acts which increased their risk as guarantors. Section 10-7-22 provides:

Any act of the creditor, either before or after judgment against the principal, which injures the surety or increases his risk or exposes him to greater liability shall discharge him; a mere failure by the creditor to sue as soon as the law allows or neglect to prosecute with vigor his legal remedies, unless for a consideration, shall not release the surety.

This section is merely a codification of the common law rule relating to the discharge of sureties. Timmons v. Butler, Stevens & Co., supra; Toomer v. Dickerson, 37 Ga. 428 (1867); Jones v. Whitehead, 4 Ga. 397 (1848); Brown v. Executors of Riggins, 3 Ga. 405 (1847).

This argument need not detain the Court long. To the extent that the Hirsch-es found their risk increased because plaintiff failed to pursue the principal upon demand as required by § 10-7-24, their claims have been addressed earlier in this Order and do not bear repeating. To the extent that the Hirsches complain that the seizure and sale of the BLUE DOLPHIN increased their risk in violation of § 10-7-22, their arguments must fail.

The commission of some act authorized by law, even one which tends to increase the risk of the guarantor, will not operate as a discharge under § 10-7-22. Timmons v. Butler, Stevens & Co., supra; Stewart v. Barrow, 55 Ga. 664 (1876). As the Georgia Supreme Court explained over a century ago: “It will not do to hold that because a creditor in the prosecution of his remedy to collect his debt against several joint promissors, does an act which the statute law of the state expressly authorized him to do, that such an act will operate as a discharge of a surety.” Stewart v. Barrow, supra, at 667.

Plaintiff had every right under its first and second preferred ship mortgages to bring an in rem foreclosure action against the BLUE DOLPHIN, which it did. See also Ship Mortgage Act of 1920, 46 U.S.C. § 911 et seq. (1982). The proper time to challenge the circumstances surrounding the auction was when plaintiff filed its motion to confirm the sale. At the very latest, any objections to the handling of the sale should have been raised before the final decree of foreclosure was entered in March 1984. It is readily apparent that the Hirsches’ claims about increased risk are nothing more than a thinly disguised effort to relitigate the propriety of the foreclosure sale. The Court, therefore, finds no grounds for discharge under § 10-7-22.

CONCLUSION

Having determined that no genuine issue of material fact remains to be tried and that plaintiff is entitled to judgment as a matter of law, plaintiffs motion for summary judgment against Alvin and Kay Hirsch is hereby GRANTED.

IT IS ORDERED that judgment be entered against Alvin and Kay Hirsch, jointly and severally, in the amount of $44,138.73, together with interest at 12% per annum, at a daily rate of $12.99 from February 14, 1985, until this date, and at this Court’s judgment rate of interest from this date forward until paid in full.

IT IS FURTHER ORDERED that judgment be entered against Alvin and Kay Hirsch, jointly and severally, in the amount of $19,929.69, together with interest at the maximum legal rate from May 23, 1983, until this date, and at this Court’s judgment rate of interest from this date forward until paid in full.

      . The common law distinction between guarantors and sureties was abolished by the Georgia General Assembly in 1981. See 1981 Ga.Laws 870; Balboa Insurance Co. v. A.J. Kellos Construction Co., 247 Ga. 393, 276 S.E.2d 599 (1981).


author: McMANUS, District Judge.

text:
    Mulinda CAMPBELL, Individually and on Behalf of all other similarly situated individuals, Plaintiffs, v. Margaret HECKLER, Secretary of Health and Human Services, Defendant.
    No. C 84-2085.
    United States District Court, N.D. Iowa, E.D.
    Oct. 21, 1985.
    John S. Allen, Waterloo, Iowa, Martin Ozga, Des Moines, Iowa, for plaintiffs.
    Robert L. Teig, Asst. U.S. Atty., Cedar Rapids, Iowa, for defendant.
   FINDINGS OF FACT AND CONCLUSIONS OF LAW

McMANUS, District Judge.

In this action, submitted on the administrative record, the plaintiff class seeks declaratory and injunctive relief against defendant for improperly denying disability benefits based on determinations that plaintiffs’ impairments were not severe. Proposed findings of fact, conclusions of law, briefs and arguments have been received and the court now makes the following:

FINDINGS OF FACT

1. The plaintiff class consists of all persons residing in the State of Iowa,

a) who have presented a claim for Social Security Income (SSI) or Old Age Survivors’ Disability Insurance (OASDI) disability benefits to the Secretary;

b) whose claims for SSI or OASDI benefits have been denied or whose benefits have been terminated on the basis of a finding of no severe impairment, without consideration of multiple impairments in combination in determining severity, or without a finding as to whether the claimant is able to do his past relevant work or whether, considering vocational factors, the claimant can do other work; and

c) who are pursuing or will pursue timely administrative or judicial appeals, or, if not pursuing timely appeals, who have received or will receive an adverse decision at any level of the administrative review process on or after July 1, 1984.

2. Defendant Margaret Heckler administers both the OASDI and SSI programs which provide benefits to disabled persons.

3. The definition of disability states that an individual is disabled if he is unable:

to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or which has lasted or can be expected to last for a continuous period of not less than 12 months....

42 U.S.C. §§ 423(d)(1)(A), 1382c(a)(3)(A). This definition is limited so that

an individual ... shall be determined to be under a disability only if his physical or mental impairment or impairments are of such severity that he is not only unable to do his previous work but cannot, considering his age, education, and work experience, engage in any other kind of substantial gainful work which exists in the national economy....

42 U.S.C. §§ 423(d)(2)(A), 1382c(a)(3)(B).

4. Defendant has established regulations which provide steps for evaluating disability. 20 C.F.R. §§ 404.1520(a), 416.-920(a). At step one, if the claimant is doing substantial gainful activity, defendant determines that the claimant is not disabled. If the claimant is not doing substantial gainful activity, defendant considers the claimant’s physical and mental impairment(s) in step two. 20 C.F.R. §§ 404.-1520(e), 416.920(c) (1984) provides:

You must have a severe impairment. If you do not have any impairment(s) which significantly limits your physical or mental ability to do basic work activities, we will find that you do not have a severe impairment and are, therefore, not disabled. We will not consider your age, education, and work experience. However, it is possible for you to have a period of disability for a time in the past even though you do not now have a severe impairment.

5. The regulations provide that an impairment is not severe if it does not significantly limit one’s physical or mental ability to do basic work activities such as standing, walking, lifting, handling, seeing, speaking, hearing, understanding and following simple instructions. 20 C.F.R. §§ 404.1521, 416.921.

6. Prior to the passage of the Social Security Disability Benefits Reform Act of 1984, Pub.L. No. 460, 98th Cong., 2d Sess., 98 Stat. 1794, the Secretary did not consider the combined effects of unrelated impairments unless all were severe and expected to last 12 months. 20 C.F.R. §§ 404.1522, 416.922 (1984).

7. Defendant has published Social Security Rulings (SSRs) which are binding on all components of the Social Security Administration. 20 C.F.R. § 422.408.

8. SSR 82-55 provides that at step 2 of the evaluation process:

when we may decide that an impairment is not severe, we do not consider the effects of age, education, and work experience (i.e., the vocational factors) since in such cases the determination is based on medical considerations alone. Similarly, the individual’s RFC is not assessed in cases in which the individual’s impairment is determined to be not severe. In such cases, the RFC assessment is not relevant because it is based upon functional limitations which result from a severe impairment, and thus, it only comes into play at a later stage in the sequential evaluation process.
Inasmuch as a nonsevere impairment is one which does not significantly limit basic work-related functions, neither will a combination of two or more such impairments significantly restrict the basic work-related functions needed to do most jobs.

9. SSR 82-56 provides that:

[w]hen there is no significant limitation in the ability to perform ... basic work-related functions, an impairment will not be considered to be severe even though it may prevent the individual from doing work that the individual has done in the past. Inasmuch as a nonsevere impairment is one which does not significantly limit basic work-related functions, neither will a combination of two or more, such impairments significantly restrict the basic work-related functions needed to do most jobs.

10. The named plaintiff, Mulinda Campbell, was found “not disabled” by defendant under the severity regulations.

11. The Administrative Law Judge (ALJ) serially discussed Ms. Campbell’s various impairments. The AU, without considering Ms. Campbell’s residual functional capacity, vocational factors, or the combined effect of the impairments, concluded that she did not have any impairment that significantly restricted her ability to perform basic work activities, and stated that “[i]n the absence of a severe impairment, the claimant must be found 'not disabled’ as defined in the Social Security Act, as amended.”

12. Upon agreement of the parties, Ms. Campbell's case was remanded to the Secretary for payment of benefits on May 6, 1985.

13. Ms. Campbell has been and continues to be an adequate representative of the plaintiff class.

CONCLUSIONS OF LAW

1. The court has jurisdiction over the parties and subject matter under 42 U.S.C. § 405(g) and 28 U.S.C. § 1361.

2. Under 42 U.S.C. §§ 423(d)(2)(A) and 1382c(a)(3)(B), the severity of an impairment cannot be assessed without reference to an individual’s past work or other vocational factors. Baeder v. Heckler, 768 F.2d 547, 553 (3d Cir.1985).

3. The regulations at 20 C.F.R. §§ 404.1520(c), 404.1521, 416.920(c), 416.-921, SSR 82-55 and SSR 82-56 are in conflict with 42 U.S.C. §§ 423(d)(2)(A) and 1382c(a)(3)(B) insofar as the regulations and rulings do not allow for consideration of vocational factors, or a claimant’s residual functional capacity in determining the severity of an impairment. Johnson v. Heckler, 769 F.2d 1202, 1213, 1215 (7th Cir.1985). The regulations and rulings are invalid because they are beyond defendant’s statutory authority. Id.

4. The failure of defendant to consider vocational factors in determining severity violates the Eighth Circuit’s burden of proof rule which requires that, after a claimant has shown that he can no longer perform his former job, the burden shifts to the Secretary to prove that the claimant is able to do other work in a competitive work setting. Douglas v. Schweiker, 734 F.2d 399, 400 (8th Cir.1984).

5. Defendant’s former policy enunciated in 20 C.F.R. §§ 404.1522, 416.922 (1984), SSR 82-55, and SSR 82-56, whereby defendant refused to consider the combined effects of impairments which were individually found not to be severe was contrary to the plain meaning of 42 U.S.C. §§ 428(d)(2)(A) and 1382c(a)(3)(B). Johnson v. Heckler, 769 F.2d 1202, 1215 (7th Cir.1985).

It is therefore

ORDERED

1. It is declared that the regulations at 20 C.F.R. §§ 404.1520(c), 404.1521, 416.-920(c), 416.921 and SSR 82-55 and those portions of SSR 82-56 relating to non-severe impairments are in conflict with 42 U.S.C. §§ 423(d)(2)(A) and 1382c(a)(3)(B) and are invalid. Defendant’s former policy of refusing to consider the combined effect of impairments which were individually found not to be severe violated the Social Security Act.

2. Defendant is enjoined from applying the following regulations and rulings: 20 C.F.R. § 404.1520(c); 20 C.F.R. § 404.1521; 20 C.F.R. § 416.920(c); 20 C.F.R. § 416.-921; SSR 82-55; and those portions of SSR 82-56 relating to non-severe impairments.

3. By not later than Friday, October 25, 1985, defendant shall transmit a copy of this order and instructions to comply herewith to adjudicators within Iowa responsible for determining disability, including all federal judges, magistrates, personnel in state and district offices, and personnel within the Social Security Administration, ALJs, and the Appeals Council.

4. By not later than Wednesday, November 6, 1985, defendant shall issue instructions for compliance with this order including procedures to be used in identifying class members and evaluating claims of •plaintiff class members.

5. Defendant shall immediately provide plaintiffs’ attorneys with copies of all mem-oranda, notices, instructions, directives and like documents issued to effect compliance with this order as those documents are issued.

6. Defendant shall notify all class members that their claim for benefits is being reviewed, that the prior denial or termination may have been in error and that the claimant will be entitled to retroactive benefits if it is determined that the prior determination was erroneous.

7. Defendant shall hold new disability hearings for all class members.

8. Class members who have actions pending in federal court may elect to have' their cases remanded to the Secretary for re-evaluation.

9. Defendant shall reinstate benefits commencing with the date of this order to all class members whose benefits had been terminated as a result of defendant’s determination that they did not suffer from a “severe” impairment.

10. Defendant shall grant retroactive benefits to class members who, after a new hearing, are found to be disabled.

11. Plaintiffs are entitled to their costs.

12. The Clerk shall order judgment to be entered in accordance with the above which is approved as to form.