author: PATRICK F. KELLY, District Judge.

text:
    Katherine CROWE, an Incapacitated Minor, By and Through Her Parents, Natural Guardians and Next Friends, Sally A. CROWE and Frederick J. Crowe, Plaintiff, v. Anne WIGGLESWORTH, M.D., Maura Welch, M.D., Individually and as Co-Partners, d/b/a Kaw Valley Women’s Health Center, Defendants.
    No. 84-1792-K.
    United States District Court, D. Kansas.
    Aug. 2, 1985.

      Charles S. Fisher, Jr., Topeka, Kan., for plaintiff.
    Thomas L. Theis, Topeka, Kan., for defendants.
   MEMORANDUM AND ORDER

PATRICK F. KELLY, District Judge.

This is a medical malpractice action brought under the Court’s diversity jurisdiction. Plaintiff Crowe is an incapacitated minor residing in Oregon, suing through her parents as natural guardians and next friends. Defendants Wigglesworth and Welch are Kansas physicians, partners holding themselves out to the public as the Kaw Valley Women’s Health Center. Dr. Wigglesworth provided prenatal care to Sally Crowe, plaintiff’s mother, and attended plaintiff’s birth in August, 1983. Plaintiff now claims Dr. Wigglesworth was negligent during the labor and delivery, causing plaintiff numerous and severe permanent injuries. Her complaint was filed November 9, 1984, and trial was recently scheduled to begin August 6, 1985.

At the time plaintiff filed her complaint, the modified collateral source rule contained in K.S.A. 60-471 governed the admissibility of evidence of reimbursement or indemnification received by a party injured by the negligence of a health care provider. In late April 1985, the Kansas Legislature repealed K.S.A. 60-471 and, in the substitute for Senate Bill No. 110, enacted a new rule governing the admissibility of this evidence in medical malpractice liability actions. 1985 Kan.Sess.Laws, Ch. 197, Sec. 3. The parties to this case filed briefs addressing the applicability and constitutionality of this rule. For the reasons which follow, the Court concludes Section 3 of the new act applies to this case and that, notwithstanding the Court’s serious misgivings about this legislation, within the limited confines of that section, the infringement on plaintiff’s rights resulting from abolition of the collateral source rule does not rise to the level of an equal protection violation.

The new act contains three sections. The first is a definitional section. Section 2 establishes a bifurcated procedure for assessing punitive damages in medical malpractice liability actions. It places a ceiling on the total that can be assessed, limits a plaintiff’s recovery to 50% of the amount awarded in a given case, and requires the remaining 50% be paid to the state health care stabilization fund. Plaintiff Crowe does not seek punitive damages in the present case. Accordingly, issues concerning the applicability and constitutionality of Section 2 are not before the Court.

Section 3 of the new act, however, directly affects this case. That section abandons, for medical malpractice liability actions, the common law collateral source rule and provides instead defendants are entitled to the benefit of evidence of all reimbursement or indemnification “paid or to be paid to or for the benefit” of a party injured by the negligence of a health care provider. There is no question the section applies to this diversity action. Further, it is clear that even though the Legislature generally intended the entire act to take effect July 1, 1985, it specifically intended Section 3 to apply “to any action pending or brought on or after July 1, 1985, regardless of when the cause of action accrued. ” (Emphasis added.) 1985 Kan.Sess.Laws, Ch. 197, Sections 3(d), 6. Far more difficult is plaintiffs assertion Section 3 of the act violates her rights, under the federal and state constitutions, to equal protection of the law. Analysis of this issue requires a short historical review.

The common law collateral source rule excluded evidence showing damages claimed by a party were actually paid by someone else, or that services had been provided gratuitously. Doran v. Priddy, 534 F.Supp. 30, 35 (D.Kan.1981). In Grayson v. Williams, 256 F.2d 61, 65 (10th Cir.1958), the Court of Appeals addressed the public policy underlying this rule:

Where part of a wrongdoer’s liability is discharged by payment from collateral source ... the question arises who shall benefit therefrom, the wrongdoer or the injured person. No reason in law, equity or good conscience can be advanced why a wrongdoer should benefit from part payment from a collateral source of damages caused by his wrongful act. If there must be a windfall certainly it is more just that the injured person shall profit therefrom, rather than the wrongdoer shall be relieved of his full responsibility for his wrongdoing. We think we may judicially note that notwithstanding that the law contemplates full compensation, incidental losses and handicaps are suffered in a great number of personal injury cases which are not, and cannot be, fully compensated.

See also Restatement (Second) of Torts § 920A(2), Comment b (1979).

Responding to the so-called medical malpractice crisis in 1976, the Kansas Legislature enacted K.S.A. 60-471, which modified the common law collateral source rule. The new evidentiary rule contained in subsection (a) of the statute read:

In any action for damages for personal injuries or death arising out of the rendering of or the failure to render professional services by any health care provider, evidence of any reimbursement or
indemnification received by a party for damages sustained from such injury or death, excluding payments from insurance paid for in whole or in part by such party or his or her employer, and services provided by a health maintenance organization to treat any such injury, excluding services paid for in whole or in part by such party or his or her employer, shall be admissible for consideration by the trier of fact subject to the provisions of subsection (b). Such evidence shall be accorded such weight as the trier of fact shall choose to ascribe to that evidence in determining the amount of damages to be awarded to such party.

The federal courts of Kansas were the first to address the constitutionality of K.S.A. 60-471. Judge Rogers upheld the statute against equal protection challenges in Marlatt v. Hutton, No. 76-46-C5 (D.Kan. Apr. 3, 1979), and again in Holman v. The Menninger Foundation, No. 79-4090 (D.Kan. July 13, 1982) (order denying motion in limine). However, in Doran v. Priddy, 534 F.Supp. 30 (D.Kan.1981), Judge Theis ruled K.S.A. 60-471 violated the equal protection clauses of both the United States and Kansas Constitutions. He reached that conclusion largely because of the following hypothetical situation showing the inequitable treatment of two patients suffering similar injuries at the hands of the same health care provider:

One is wealthy, and has insurance, while the other has no resources to pay for medical care and is uninsured. The first is able to retain private nursing care, which is paid for by the insurance, while the second, needing the same continual care, is cared for by his wife, who was forced to quit her job to stay home and care for him. It is said the modified collateral source rule would exclude evidence that the private nursing care for the first patient was in fact paid for by the insurance company, while the jury would be apprised of the fact that the second patient’s care was provided free by his wife, and perhaps she had been earning only the minimum wage at the job she left.

534 F.Supp. at 36.

The Kansas Supreme Court was faced with a constitutional challenge to K.S.A. 60-471 only recently, and it agreed with Judge Theis’ analysis and conclusion. Wentling v. Medical Anesthesia Services, P.A., 237 Kan. 503, 701 P.2d 939, 950 (Kan.1985). That Court noted yet another situation highlighting the discriminatory effects of K.S.A. 60-471:

If the statute is to be applied according to its plain language, an even more invidious hypothetical example comes to mind. Assume a married couple is injured in the same catastrophe. They are both treated by the same health care provider with disastrous results. The husband is employed and his employer provides health insurance. The wife is not gainfully employed. In separate actions for similar treatment provided by the same health care provider as a result of the same catastrophe, the fact that the wife’s medical expenses were paid by insurance is proper evidence to submit to the jury but the same evidence as it applies to the husband is not. Such a distinction makes no sense whatsoever.

Wentling, 701 P.2d at 950.

Effective July 1, 1985, the Legislature repealed K.S.A. 60-471 and enacted the following rule governing the admissibility of evidence of collateral source benefits:

(a) In any medical malpractice liability action, evidence of the amount of reimbursement or indemnification paid or to be paid to or for the benefit of a claimant under the following shall be admissible:
(1) medical, disability or other insurance coverage except life insurance coverage; or (2) workers’ compensation, military service benefit plan, employment wage continuation plan, social welfare benefit program or other benefit plan or program provided by law.
(b) When evidence of reimbursement or indemnification of a claimant is admitted pursuant to subsection (a), the claimant may present evidence of any amounts paid to secure the right to such reimbursement or indemnification and the extent to which the right to recovery is subject to a lien or subrogation right.
(c) In determining damages in a medical malpractice action, the trier of fact shall consider: (1) The extent to which damages awarded will duplicate reimbursement or indemnification specified in subsection (a); and (2) the extent to which such reimbursement or indemnification is offset by amounts or rights specified in subsection (b).

1985 Kan.Sess.Laws, Ch. 197, Sec. 3.

Plaintiff Crowe argues Section 3 contains infirmities similar to those of the old statute and is therefore unconstitutional. Defendants respond the new enactment has eliminated the artificial distinctions drawn by K.S.A. 60-471 and works no violation of plaintiff’s equal protection rights.

Whether a state statute or regulation violates the equal protection clause depends on the facts and circumstances behind the law, the interests which the state claims to be protecting, and the interest of those who are disadvantaged by the classification. Williams v. Rhodes, 393 U.S. 23, 30, 89 S.Ct. 5, 10, 21 L.Ed.2d 24 (1968). In legislation of the type here at issue, out of the similarly situated group of persons injured by the tortious acts of others, the state has isolated for different treatment those persons injured by the negligent acts or omissions of health care providers.

The first issue concerns the standard of review used to test the constitutionality of Section 3. Constitutional equal protection analysis involves one of three levels of scrutiny, which have been often stated and need only quick review.

The most stringent standard of review is “strict scrutiny,” under which a statute or regulation is stripped of its presumption of constitutionality and the state must demonstrate a compelling governmental interest justifying the classification. The strict scrutiny test applies only to legislation regulating the exercise of a fundamental right or isolating for special treatment a suspect class of persons, i.e., on the basis of race, religion, national origin, etc. San Antonio Independent School District v. Rodriguez, 411 U.S 1, 16-17, 93 S.Ct. 1278, 1287-88, 36 L.Ed.2d 16 (1973). The class of persons injured by medical malpractice has never been recognized as “suspect” under constitutional analysis. There is conflicting authority on the question whether a plaintiffs right to sue and recover for the tortious acts of another is “fundamental” under the Constitution. See Duke Power Co. v. Carolina Env. Study Group, 438 U.S. 59, 93-94, 98 S.Ct. 2620, 2640-41, 57 L.Ed. 2d 595 (1978); Kenyon v. Hammer, 142 Ariz. 69, 688 P.2d 961 (1984); White v. State of Montana, 661 P.2d 1272 (Mont. 1983). However, that particular question need not be resolved here because the Court is faced only with a procedural rule governing the admissibility of evidence. Whatever the nature of plaintiffs right to maintain the action, her right to withhold from the trier of fact particular items of evidence is certainly not “fundamental.”

The second, middle-level analytical approach is variously referred to as the “substantial relationship” or “means-scrutiny” test, under which the statutory “classification must be reasonable, not arbitrary, and must rest upon some ground of difference having a fair and substantial relationship to the object of the legislation, so that all persons similarly circumstances shall be treated alike.” Reed v. Reed, 404 U.S. 71, 76, 92 S.Ct. 251, 254, 30 L.Ed.2d 225 (1971). However, the Supreme Court has applied this intermediate level of inquiry only to gender-based classifications, see Craig v. Boren, 429 U.S. 190, 97 S.Ct. 451, 50 L.Ed.2d 397 (1976), and Reed v. Reed, supra; and to classifications based on legitimacy, see Trimble v. Gordon, 430 U.S. 762, 97 S.Ct. 1459, 52 L.Ed.2d 31 (1977). Although Judge Theis relied on the substantial relationship test to strike down K.S.A. 60-471 in Doran v. Priddy, 534 F.Supp. 30, with all respect to its learned colleague, this Court does not agree an injured plaintiffs right to exclude particular items of evidence in a medical malpractice liability action stands on the same constitutional footing as the right to freedom from discrimination based on one’s sex or legitimacy-

The third and most permissive standard is the “rational basis” or “reasonable relationship” test set forth in McGowan v. Maryland, 366 U.S. 420, 425-26, 81 S.Ct. 1101, 1104-05, 6 L.Ed.2d 393 (1961). Under this standard, a statute is presumed constitutional and the challenger bears the burden of proving the classification “rests on grounds wholly irrelevant to achievement of the state’s objective.” If there exists a rational reason for the disparate treatment, that is, if the classification is rationally related to furthering a legitimate state interest, there is no denial of equal protection. Vance v. Bradley, 440 U.S. 93, 97, 99 S.Ct. 939, 942, 59 L.Ed.2d 171 (1979).

Defendants direct this Court’s attention to a host of decisions from other jurisdictions holding all manner of medical malpractice crisis relief statutes, including remedies such as that contained in Section 3, subject only to the rational basis test to determine their' constitutionality under the equal protection clause. But blind adherence to this most permissive constitutional standard and the consequent over-indulgence of state legislatures in these matters have been properly criticized as an abdication of judicial responsibility. Jones v. State Board of Medicine, 97 Idaho 859, 555 P.2d 399, 411 (1976). The Supreme Court of Arizona correctly recognized that the various legislative remedies granted to the insurance industry and the medical profession will differently affect a variety of rights held by an injured plaintiff, and that the level of scrutiny employed to test the constitutional sufficiency of a statute depends not on the fact it was enacted in response to the purported crisis but on the nature of the injured party’s right which is affected by the particular legislation at issue. See Kenyon v. Hammer, 142 Ariz. 69, 688 P.2d 961, 975 (1984) (holding the rational basis test applies only to those portions of a statute not affecting plaintiffs fundamental right to bring the action).

This Court agrees with the Kenyon v. Hammer analysis and emphatically rejects defendants’ suggestion it is bound to apply the most permissive constitutional standard to any and all legislative responses to the alleged crisis. However, at issue in this case is merely a procedural enactment, a rule of evidence, and the Court is satisfied the rational basis test is the appropriate level of inquiry. The question of what level of scrutiny properly applies to other statutes or enactments more directly affecting the right to maintain an action to recover for medical malpractice is reserved for future cases.

Does the new evidentiary rule contained in Section 3 perpetuate the same distinctions for which K.S.A. 60-471 was declared unconstitutional? The fundamental problem with 60-471 was that it excluded all evidence of reimbursement or indemnification received by an injured party whenever that party, or any employer acting on the party’s behalf, had made payments in any amount for the insurance. That exception gave rise to the different treatment between wealthy and indigent plaintiffs (Doran v. Priddy, supra) and between employed persons who pay for their insurance and homemakers who do not (Wentling v. Medical Anesthesia Services, P.A., supra). Section 3 does not operate in the same manner as did 60-471. It begins with the principle that evidence of any and all reimbursement or indemnification received by an injured plaintiff is admissible in a medical malpractice liability action, regardless of whether the plaintiff or her employer paid for the insurance or whether it was provided free of cost. If a plaintiff has contributed toward the insurance, evidence of amounts paid to receive the protection may then be admitted to show the net benefit received, as may be evidence of a lien or subrogation right held by the insuror.

Applying Section 3 to the hypothetical fact situation which concerned Judge Theis in Doran leads this Court to believe both wealthy and indigent plaintiffs will now receive substantially similar treatment. Evidence that insurance paid for private nursing care received by a wealthy plaintiff would be admissible, as would evidence that the indigent’s care was provided “free” by his wife. The wealthy plaintiff would in turn be entitled to show amounts paid as premiums to receive the insurance, and the indigent plaintiff would be entitled to show wages lost by his wife because of the necessity of caring for him. Nor does Section 3 result in different treatment between persons employed outside of the home and those who are not, the distinction which disturbed the Kansas Supreme Court in Wentling. In the hypothetical situation of that case involving the injured married couple, Section 3 would now require admission of evidence of all insurance benefits received by both husband and wife. If the husband’s employer provided his insurance, the husband would be entitled to no offset, but if the husband paid for the family policy covering his wife, she would be entitled to admit evidence showing those amounts paid. The absurd distinctions drawn by K.S.A. 60-471 are no longer apparent in the new rule.

Does Section 3 draw new or different distinctions violating plaintiff’s equal protection rights? The inquiry required under the rational basis test is whether any state of facts reasonably may be conceived to justify the statutory discrimination. McGowan v. Maryland, 366 U.S. 420, 426, 81 S.Ct. 1101, 1105, 6 L.Ed.2d 393 (1961). Three courts faced with this question and applying the rational basis test have concluded abolition of the collateral source rule in medical malpractice liability actions does not violate the equal protection clause. In Eastin v. Broomfield, 116 Ariz. 576, 570 P.2d 744 (1977), the Arizona Supreme Court stated the purpose and constitutionality of a similar legislative enactment in the following terms:

The purpose of this rule is to inform the fact finder of the true extent of the plaintiff’s economic loss in order to avoid the inequity of windfall recoveries. The resulting judgments will no doubt reflect a setoff for the benefits the plaintiff has already received and these lower judgments would be reflected in lower malpractice insurance premiums, one of the objectives of the legislation. It should be noted that admission into evidence of plaintiffs’ collateral benefits in no way guarantees any reduction in the damages awarded by the trier of fact. The jury may still choose to ignore the collateral benefits in making its decision as to the damages sustained by the plaintiffs.
* sjc * * * *
... Abolition of the collateral source rule does not deprive the medical malpractice claimant of any property interest accorded protection by the due process clause of the United States Constitution. Nor is the application of the rule only to malpractice actions so arbitrary and unreasonable as to deny to medical malpractice claimants equal protection of the laws. The rule was intended by the legislature to give the jury the true extent of damages sustained by the plaintiff thereby. By scaling down the size of jury verdicts by the amount of collateral benefits the plaintiff may have received, the legislature could reasonably assume that a reduction in premiums would follow. This was one of the reasons for the Act. The legislature is entitled to proceed “one step at a time, addressing itself to the phase of the problem which seems most acute to the legislative mind.” Williamson v. Lee Optical Co., 348 U.S. 483, 489, 75 S.Ct. 461, 465, 99 L.Ed. 563, 573 (1955).

570 P.2d at 753. See also Barme v. Wood, 122 Cal.App.3d 395,176 Cal.Rptr. 42 (1981); and Pinillos v. Cedars of Lebanon Hospital Corp., 403 So.2d 365 (Fla.1981).

Legislative attempts to abolish or modify the collateral source rule in medical malpractice liability actions have not been successful in all states, however. The Supreme Court of North Dakota struck down that state’s Medical Malpractice Act on constitutional grounds in part because it “nearly abolished” the collateral source doctrine. Ameson v. Olson, 270 N.W.2d 125, 137 (N.D.1978). In Ohio, a legislative provision closely resembling K.S.A. 60-471 was declared a violation of equal protection because there was found to be no compelling governmental interest in conferring benefits on medical malpractice defendants unavailable to other defendants in tort cases. Graley v. Satayatham, 74 Ohio Ops.2d 316, 343 N.E.2d 832, 836 (1976). Notably, the courts in both cases applied tests other than the rational basis test this Court deems appropriate.

After reviewing these cases and the legislation here at issue, this Court is satisfied the discriminatory treatment required by Section 3 is rationally related to the purported legislative goals. The Legislature could reasonably conclude that insofar as the size of medical malpractice verdicts allegedly affects the so-called crisis, an effort to more closely relate those verdicts to the actual loss suffered by plaintiffs would offer the malpractice insurance companies some relief. To this extent it was deemed reasonable to isolate and require special treatment for medical malpractice plaintiffs. .Furthermore, Section 3 does not perpetuate the patent discrimination among various medical malpractice plaintiffs that existed previously under K.S.A. 60-471. All such persons are now subject to a possible reduction of their verdicts for benefits received from collateral sources, after credit for payments made and existing liens or subrogation rights.

This, however, is not to say that the legislation at issue isn’t riddled with problems of a very prejudicial nature. Regarding the application of Section 3, the Legislature wholly failed to account for its impact in cases where a plaintiff seeks recovery for injuries in addition to medical malpractice. Judge Theis recognized the same problem with K.S.A. 60-471:

Another possible scenario involves the plaintiff injured in some kind of accident. His or her injuries are then allegedly aggravated by the negligence of a health care provider. Said provider is joined as a third party defendant, or as a co-defendant in the original action. Particularly because of the comparative negligence law of Kansas, with its abolition of joint and several liability, and its requirement of joinder of claims, plaintiff would of necessity have to assert his or her claims against the health care provider once joined, if at all. Health care provider would be entitled to offer and benefit from evidence of collateral sources, while the original tortfeasor would not. Similar difficulties arise if a defective product, such as an intrauterine birth control device is alleged to be involved, since the manufacturer would not be entitled to benefit from the collateral source evidence.

Doran v. Priddy, 534 F.Supp. at 36.

The recent case of Wooderson v. Ortho Pharmaceutical Corp., 235 Kan. 387, 681 P.2d 1038 (1984), best exemplifies Judge Theis’ concerns. In 1972, plaintiff Wooderson’s physician prescribed for her an oral contraceptive, Ortho-Novum 1/80, manufactured by Ortho Pharmaceutical Corporation (Ortho). Plaintiff ingested the contraceptive for a number of years and ultimately suffered acute renal failure with a variety of complications. The defendants originally named in the suit were Ortho and plaintiffs gynecologists. After pretrial conference, plaintiff settled her claims against the physicians, and the case went to trial solely on the product liability claims against Ortho. Wooderson, 235 Kan. at 412-13, 681 P.2d 1038. Had the medical malpractice claims not been settled, however, under Section 3 the physicians would have been entitled to present evidence at trial of all reimbursement or indemnification paid to or on behalf of plaintiff, while the same evidence would have been inadmissible for the benefit of co-defendant Or-tho. In addition to the patent unfairness of isolating, the physicians for preferential treatment as against the manufacturer, the situation would clearly create an atmosphere of confusion and consequent prejudice in which any instruction on the narrow purposes for which the jury could consider such evidence would be ineffectual.

Obviously those are not the facts of the present case, and the Court reserves judgment on the question of whether these serious problems in the application of Section 3 will, in a case such as Wooderson, rise to the level of a constitutional violation.

On a more fundamental level, this Court is not at all persuaded this discriminatory legislation is needed or that it will achieve its stated goals. Regarding need, defendants cavalierly refer to the “obvious” medical malpractice crisis justifying this legislation. What is apparently so clear to the medical profession, the insurance industry, their respective lobbyists, and the Legislature is a matter of deep and growing concern to this Court as well as a number of commentators and other courts across the country. In the Legislature’s haste to remedy the situation, it has overlooked or, more likely, ignored the fundamental cause of the so-called crisis: it is the unmistakable result not of excessive verdicts, but of excessive malpractice by health care providers.

Further, some courts have found that the highly touted malpractice insurance crisis of 1975-76 was limited to that time period, is no longer an “obvious” crisis, and may not now continue to be used to justify imposing separate and unequal treatment on medical malpractice litigants. Boucher v. Sayeed, 459 A.2d 87, 93 (R.I.1983). Others have rightfully questioned the complicity of the insurance industry in this situation. Citizens of Idaho were treated to the spectacle of medical malpractice insurers insisting on legislative relief in part because of “ ‘abnormally low earnings from investments.”’ (Emphasis added.) Jones v. State Board of Medicine, 97 Idaho 859, 555 P.2d 399, 413 (1976). The absurdity of that situation is akin to a products manufacturer requesting and receiving a limitation on liability because of low sales in a previous year. In 1976, the Travelers Insurance Companies faced billion dollar litigation instituted by a physicians’ council after Travelers demanded a 486% rate increase; the company ultimately returned 50 million dollars in excess premiums. Carlova, How Doctors Forced a Malpractice Carrier to Refund $50 Million, Medical Economics, July 20, 1981, at 171, 172.

Admittedly, plaintiff has submitted no evidence of similar abuses in the State of Kansas, but neither have defendants put forth any proof whatsoever of a current “crisis” justifying the legislation at issue. Other courts have refused to uphold the constitutionality of a particular enactment until such supporting evidence is produced. See Jones v. State Board of Medicine, supra, 555 P.2d at 416. Nevertheless, because the statute presently at issue is simply a procedural rule of evidence, the Court is willing to accept at face value the Legislature’s insistence the situation is such as to require this relief, with the caveat that in future cases concerning more fundamental denials of a plaintiff’s rights strict proof thereof may be demanded.

Assuming there exists a bona fide malpractice crisis, as this Court now assumes for the purposes of this issue, other courts have questioned whether it even justifies this type of legislative response. Although the constitutional analysis of Graley v. Satayatham, 74 Ohio Ops.2d 316, 343 N.E.2d 832 (1976), has been rejected in the present case, that court’s observations on the justification of similar legislation merits careful consideration:

There is no satisfactory reason for this separate and unequal treatment. There obviously is “no compelling governmental interest” unless it be argued that any segment of the public in financial distress be at least partly relieved of financial accountability for its negligence. To articulate the requirement is to demonstrate its absurdity, for at one time or another every type of profession or business undergoes difficult times, and it is not the business of government to manipulate the law so as to provide succor to one class, the medical, by depriving another, the malpracticed patients, of the equal protection mandated by the constitution. Even remaining within the area of the professions, it is notable that the special consideration given to the medical profession by these statutes is not given to lawyers or denists or others who are subject to malpractice suits.
Additionally, assuming a valid legislative purpose to enact laws relating to protection of the public’s health, this legislation may be counter-productive. The extending of special litigation benefits to the medical profession certainly cannot be considered as relating to protection of the public health. On the contrary, the quality of health care may actually decline. To the extent that in tort actions of the malpractice type if the medical profession is less accountable than formerly, relaxation of medical standards may occur with the public the victim.

343 N.E.2d at 837-38 (emphasis added).

Even courts which have upheld such legislation under the rational basis test have expressed doubt about whether the challenged legislation will accomplish the aims of lowering the cost of and assuring the availability of medical care for citizens of the state. See Seoane v. Ortho Pharmaceuticals, Inc., 472 F.Supp. 468, 472 (D.La.1979).

These concerns noted, the Court is of course aware that normally questions regarding the wisdom or likely success of a legislative enactment are not grounds for concluding it violates the Constitution. It is nevertheless possible that in an appropriate case concerning other such legislation the Court could conclude any conceivable “benefits” are sufficiently remote that the statutory discrimination is indeed wholly irrelevant to achievement of the state’s ostensible objective.

IT IS THEREFORE ORDERED this 2nd day of August, 1985, that 1985 Kan.Sess. Laws, Ch. 197, Sec. 3, shall apply to the trial of this action and the parties are entitled to the admission of all evidence thereby permitted. Counsel for all parties shall appear before this Court on August 5, 1985, at 4:00 P.M., for a status conference in anticipation of trial.


source: Caselaw Access Project

author: SHAPIRO, District Judge.

license: Public Domain

text:
    UNITED STATES of America v. AMERICAN BANK & TRUST COMPANY OF PENNSYLVANIA.
    No. 84-5624.
    United States District Court, E.D. Pennsylvania.
    Aug. 9, 1985.
    Rachel Shao, Asst. U.S. Atty., Philadelphia, Pa., Michael J. Kearns, Tax Div., U.S. Dept, of Justice, Washington, D.C., for U.S.
    Thomas W. Ostrander, Duane, Morris & Heckscher, Philadelphia, Pa., for American Bank & Trust Co. of Pa.
   MEMORANDUM and ORDER

SHAPIRO, District Judge.

Pending before this court is the motion of defendant American Bank & Trust Company of Pennsylvania (“American Bank”) for summary judgment. This civil action was brought by the United States to recover a portion of unpaid employment taxes from a supplier of funds to the employer under § 3505(b) of the Internal Revenue Code (the “Code”). Jurisdiction over this action is conferred by § 7402 of the Code.

During the period July 1, 1978 through December 31, 1978, an employer, Eastern Asphalt Company (“Eastern”), failed to make timely payments of income and FICA taxes required to be deducted and withheld from the wages of its employees. Eastern was assessed by the Internal Revenue Service (“IRS”) on two occasions for amounts representing income and employment taxes required to be withheld from Eastern’s employees. In November, 1978, Eastern was assessed $142,426.24 for taxes for the third quarter of 1978 and in February, 1979, $21,117.46 for taxes for the fourth quarter of 1978. In an effort to recover this $160,-000 in unpaid taxes, the IRS made assessments under § 6672 of the Code against two allegedly responsible Eastern officers, Harlan Conly (“Conly”) and William Peck-ham (“Peckham”). Section 6672 provides in part:

Failure to collect and pay over tax, or attempt to evade or defeat tax
(a) General rule.— Any person required to collect, truthfully account for, and pay over any tax imposed by this title who willfully fails to collect such tax, or truthfully account for and pay over such tax, or willfully attempts in any manner to evade or defeat any such tax or the payment thereof, shall, in addition to other penalties provided by law, be liable to a penalty equal to the total amount of the tax evaded, or not collected, or not accounted for and paid over. No penalty shall be imposed under section 6653 for any offense to which this section is applicable.

The penalty was assessed against Conly in December, 1980, and against Peckham in November, 1981. Conly paid a portion of the assessed amounts and then sought re: lief from the penalty by filing a claim for refund with the IRS; the claim was denied. On October 25, 1983, Conly brought an action for refund; the United States filed a counterclaim against Conly and a third party complaint against Peckham for the assessed amounts. That action, Civil Action No. 83-5177, is pending as a related case.

From July 1, 1978 through December 31, 1978, American Bank supplied funds to or for Eastern’s account for the purpose of paying wages of Eastern employees. The Government claims that such funds were supplied by American Bank with actual notice and knowledge that Eastern did not intend to, or would not be able to, make timely payments of the amount of federal taxes required to be deducted and withheld from such wages. The Government claims that American Bank is, therefore, liable for a portion of the assessed amounts under § 3505(b) of the Code:

(b) Personal liability where funds are supplied.—If a lender, surety, or other person supplies funds to or for the account of an employer for the specific purpose of paying wages of the employees of such employer, with actual notice or knowledge (within the meaning’ of section 6323(i)(l)) that such employer does not intend to or will not be able to make timely payment or deposit of the amounts of tax required by this subtitle to be deducted and withheld by such employer from such wages, such lender, surety, or other person shall be liable in his own person and estate to the United States in a sum equal to the taxes (together with interest) which are not paid over to the United States by such employer with respect to such wages. However, the liability of such lender, surety, or other person shall be limited to an amount equal to 25 percent of the amount so supplied to or for the account of such employer for such purpose.

The complaint in this action claiming $109,000 from American Bank was filed on November 15, 1984 and served by mail on or about November 29, 1984. American Bank contends that this was the first notice given to the Bank that the Government sought to hold it liable for taxes due from Eastern for the third and fourth quarters of 1978. American Bank also asserts that, prior to the commencement of this action, the Peckhams had guaranteed certain obligations owed to the Bank by Eastern and Granite Industries (“Granite”). In 1979, American Bank agreed to compromise and settle its claims and judgments against the Peckhams by a substantial compromise of its rights; American Bank assigned the judgments held by the Bank to the use of Peckhams’ counsel in return for payment to the Bank of only $30,000.. American Bank asserts that had it been notified of its possible liability for unpaid taxes of Eastern, for which Peckham as a responsible officer was primarily liable, it would not have released its other claims against Peck-ham.

American Bank claims that the Government may not maintain this action because it failed to provide the Bank with notice of the assessment of the unpaid withholding tax as required by § 6303(a):

§ 6303. Notice and demand for tax
(a) General rule.—Where it is not otherwise provided by this title, the Secretary or his delegate shall, as soon as practicable, and within 60 days, after making of an assessment of a tax pursuant to section 6203, give notice to each person liable for the unpaid tax, stating the amount and demanding payment thereof. Such notice shall be left at the dwelling or usual place of business of such person, or shall be sent by mail to such person’s last known address.
(b) Assessment prior to last date for payment.—Except where the Secretary or his delegate believes collection would be jeopardized by delay, if any tax is assessed prior to the last date prescribed for payment of such tax, payment of such tax shall not be demanded under subsection (a) until after such date. Aug. 16, 1954, c. 736, 68A Stat. 775.

The Government maintains that § 6303(a) requires that notice is to be given only to the specific taxpayer or taxpayers on whom the tax is imposed, not third parties who might be liable for the taxes. Alternatively, the Government argues that even if § 6303(a) requires notice, failure to provide it precludes only administrative levies or liens, but not the institution of civil proceedings.

For the reasons set forth in United States v. Associates Commercial Corporation, 721 F.2d 1094 (7th Cir.1983) and United States v. Jersey Shore State Bank, 628 F.Supp. 15 (M.D.Pa.1985), the Govern-(M.D.Pa. March 20, 1985), the Government’s failure to provide American Bank with timely notice of the taxpayer assessment precludes it from maintaining this action. American Bank is a person liable within the definition of § 6303(a) and nothing in § 3505(b) exempts lenders from § 6303(a) notice. The court rejects the Government’s argument that requiring § 6303 notice for lenders subject to § 3505(b) liability will impose a prohibitory investigatory and economic burden on the Government and make § 3505(b) unenforceable as speculative. The Government has offered no proof that it could not have provided American Bank with notice of the assessment against Eastern. Even if there is an administrative burden to the Government in providing notice, any potential burden is outweighed by the possibility of prejudice to the lender not receiving notice. In this case the possibility is an undeniable reality.

The Government argues that even if the statute requires that the Government provide American Bank with notice of the assessment, failure to provide such notice does not preclude suit against the Bank under § 3505. The United States has essentially two methods available to collect taxes. One method is the administrative collection of taxes by the IRS through use of liens and levies. The second method is by suit brought by the United States in federal district court for the collection of tax debts owed to the United States. The Government maintains that the notice requirement of § 6303(a) applies only to administrative proceedings, not to actions in federal court. It contends that its right of action in district court is independent of the assessment process; Jenkins v. Smith, 99 F.2d 827 (2d Cir.1938) and United States v. Erie Forge, 191 F.2d 627 (3d Cir.1951). In those cases, the courts interpreted 26 U.S.C. § 1545, the predecessor to § 6303, and held that failure to give notice did not bar the United States from instituting civil proceedings.

However, those cases were decided under a statutory scheme different from the present Code. Under the prior statute, the tax collector was required to give notice of assessment. However, the tax collector had the power to collect taxes only by administrative levy. Civil proceedings for the collection of taxes were instituted by a different official, the tax commissioner. Since the notice requirement applied only to the tax collector, not to the commissioner, the courts found that the failure to provide notice did not bar the institution of civil proceedings by the commissioner.

Under the current Code, the Secretary of the Treasury or his delegate may collect the unpaid tax by levy or civil proceeding. “By necessary implication, then, where ... the same official ... has power both to collect the levy and to authorize civil collection proceedings, Jenkins supports the conclusion that failure to provide statutorily required notice bars both recovery methods.” United States v. Associates Commercial Corporation, 751 F.2d at 1100. We agree with the view expressed in Associates that there is no sound basis for making a distinction between administrative levies and civil collection proceedings. Nothing in § 6303(a) nor any other statute suggests the present notice requirement is limited to administrative collection proceedings.

American Bank has presented an even more compelling case for requiring notice than the defendant in Associates. American Bank has shown actual prejudice as a result of the Government’s failure to provide notice. The Bank did not learn until more than six years after it provided money to Eastern that the Government claimed it was liable for a portion of Eastern’s unpaid taxes. After six years, records and personnel may no longer be available. The obligation to mitigate damages by voluntary payment is lost and interest is assessed. Also, the possibility of indemnification from the borrower diminishes. In this case, American Bank compromised and settled rights against the Peckhams who would have been liable over to it. Such claims may not have been settled had the Bank been aware of its potential secondary tax liability for which Eastern, Conly and Peckham were primarily liable. American Bank has suffered actual prejudice as a result of the Government’s failure to provide timely notice.

Because the court finds that the Government was required to give timely notice to American Bank of its potential liability under § 6303(a) of the Code and because the Bank suffered prejudice as a result of not learning of its potential liability until six years after the assessment, summary judgment will be granted in favor of American Bank.


author: VAN SICKLE, Senior District Judge.

text:
    Rosie M. WEBER, Plaintiff, v. LOGAN COUNTY HOME FOR THE AGED, a corporation, Defendant.
    Civ. No. A1-82-37.
    United States District Court, D. North Dakota, Southwestern Division.
    Sept. 13, 1985.
    Jerome C. Kettleson, Asst. U.S. Atty., Bismarck, N.D., for plaintiff.
    Gerald A. Kuhn, Napoleon, N.D., for defendant.
   MEMORANDUM AND ORDER

VAN SICKLE, Senior District Judge.

INTRODUCTION

The Plaintiff, Rosie M. Weber, brought this suit against the Defendant, Logan County Home for the Aged, under provisions of the Vietnam Era Veterans’ Readjustment Act of 1974 (Act), 38 U.S.C. § 2021, et. seq. Plaintiff alleges that Defendant, her former employer, discharged her because of her membership in the National Guard in violation of the Act. Defendant claims that it discharged Plaintiff for good cause unrelated to her National Guard membership. Plaintiff seeks compensatory damages in the form of back pay and prejudgment interest. This Court has jurisdiction pursuant to section 2022 of the Act. The case was tried before the Court without a jury. The sole issue in this case is whether Plaintiff was discharged by Defendant because of her membership in the National Guard.

FACTS

Weber is forty-five years of age, is a licensed practical nurse, is married to a music teacher, and has elected to subordinate her professional life to his. While her husband taught in Strasburg, North Dakota (a town of 650 population), she worked in the Strasburg Retirement Home, an eighty-three bed facility offering minimal, intermediate, and extensive care, where she served for about thirteen years with approval and without difficulty.

After thirteen years in Strasburg, the Weber family moved to Napoleon, North Dakota (a town of 1,100 population), where Weber’s husband had found a better job. Weber became employed by the Logan County Home for the Aged (Home) in Napoleon, a facility of forty-four beds, offering intermediate and minimal care only. She worked at the Home from 1977 to March 18, 1981, when she was discharged from her employment.

In 1974, she entered the United States Army Reserve and was appointed, with a private first class rank, to the Evacuation Hospital, Bismarck, North Dakota, as a ward master. February 14, 1980, she transferred into the National Guard with the rank of staff sergeant. She is now a first sergeant in the National Guard. Her training duties require one weekend every month and two full weeks of summer camp. In Strasburg and Napoleon she was able to meet those requirements on her weekends off and to make arrangements among the staff to cover her summer camp duty.

The Home experienced personnel difficulties and lost its director of nurses, who resigned, on September 20, 1980. On October 7, 1980, although she did not want the responsibility of supervising the other nurses and knew that as a licensed practical nurse she was not qualified under state and federal standards, Weber, after urging by the Home’s Board of Directors (Board), took the job of director of nurses on a temporary basis. The understanding was that when a registered nurse was available to be director of nurses, Weber would revert to her previous position as a licensed practical nurse with ward duties.

February 26, 1981, Don Kleppe became acting administrator of the Home. March 18, 1981, Weber was discharged by Kleppe.

Weber had known who Kleppe was since 1976. She had no social or business contacts with him. He farmed with his father, had previously owned a bar in Napoleon, and had a bachelor’s degree in social science.

On August 21, 1980, after attending the monthly training session in Bismarck, Kathy Brunner (DeWald), another member of the National Guard, and Weber drove home from Bismarck to Napoleon, and, wearing their military fatigues, went into the Korner Bar to buy a package of cigarettes and a glass of beer. Kleppe was at the bar, as were John Englehardt, the bartender, and Randy Hall, who taught school with Weber’s husband and was a friend of Kleppe’s. Kleppe admittedly was drunk. Englehardt teased the women about their apparel and they explained that they were in the “military.” Kleppe told them that “no decent woman would be in the military.” He then stated that women in the military were “whores, sluts, prostitutes, and lesbians.” He also told them that they were not fit to live in Napoleon. The women responded that they were proud to be in the military and one didn’t have to be a “loose woman” to be in the military.

Kleppe then told Kathy Brunner (DeWald) he would pay her $25.00 to go with him to the farm to check his father’s cattle. She told him to “go to hell.” He then told her if she was scared, he would pay $50.00 for both of them to go with him, adding, “I’m man enough to handle you both.” Then, apparently realizing he had gone too far, be bought them both a second glass of beer. The two women shoved the drinks back at him and left.

Because of dissension among the staff, the Board discharged one Ellen Johnson as administrator about November, 1980. This discharge was precipitated because, after an investigation, the Social Service Board notified the Board that the Home would lose its license unless the problem of employee dissension was resolved. After Ellen Johnson’s discharge and before Weber’s discharge, the state’s examiners informed the Board that the situation in the Home had improved but further improvement was necessary.

During this time, Mike Schumacher, a farmer near Napoleon who had previously served on the Board, was reelected to the Board. It was he who persuaded Kleppe to apply for the position of administrator. He also conferred with Kleppe regarding administration problems, including the problem of employee dissension. In these conversations Schumacher told Kleppe that someone might have to be terminated, and it would be Kleppe’s job to find out whom.

The Home had no procedure for notice or disclosure of the reasons for discharge. While the Board had not expressly addressed the matter, it is clear that the Board members felt that the administrator had the duty and authority to hire and fire.

Kleppe became the administrator February 21, 1981. On March 17, 1981, Kleppe stopped at the nurses station where Weber and another nurse were working. Kleppe asked if Weber was still in the military, Weber said “yes.” Kleppe asked “when are you leaving?” Weber said “April 1st.” Kleppe said “no, for the longer period.” Weber said “that is in the summer ...” Kleppe then left the nurses station.

About 7:30 a.m. the next morning, March 18, 1981, Kleppe called Weber into his office and told her to close the door. He then told her she was fired and free to go home. Weber asked for a reason and was told “I don’t have to give any fuckin’ reason.” Weber left. Later the same day, the Board called a special meeting to discuss Kleppe’s decision. Weber attended part of that meeting. At another special meeting on March 23, 1981, the Board decided to support Kleppe despite his refusal to disclose to the Board the factual basis for his decision (he claimed he had a duty to his informants to protect their anonymity).

The Home presented evidence to show that Weber was a source of personnel problems at the Home. Various employees testified and accused her of taking all the credit for successful group employee ventures, of fermenting strife by carrying tales to the administrator, of reading novels while on duty, of playing favorites in job assignments, of falsifying her hours worked on her timecards, of garnering excess wages by taking most of the after-hours calls (each after-hours call netted a $5.00 fee to the nurse who responded), and of being heavy-handed with patients.

Although evidence of misconduct on the part of Weber was presented at trial, it is undisputed that she was a nurse with approximately seventeen years experience working in nursing homes, that she recently had been asked by the Board to serve as director of nurses, which she agreed to do on a temporary basis, and that she was told by the Board only eight days before she was fired that when the new director of nurses was hired she would return to her previous position with a raise above her previous salary. (Exhibit 5.)

Furthermore, it is undisputed that Weber had an unblemished personnel record, that the administrators and the Board knew of complaints but took no action as to those complaints, and that neither a Board member nor an administrator ever informed Weber of any problems.

Weber’s wage scale as a practical nurse was $4.50 per hour, for 50 weeks of each year (two weeks in National Guard camp). When Weber had completed her duties as temporary director of nurses and returned to her former position she was entitled to a raise of $0.30 per hour at her previous position. (Exhibit 5.) The Home granted its employees the following raises: 1) January 1, 1982, $0.20 per hour; 2) January 1, 1983, $0.25 per hour; 3) January 1, 1984, $0.15 per hour; and 4) January 1, 1985, $0.10 per hour. (Exhibit 7.)

Following her discharge from employment with the Home, Weber earned, in part as an on-call steel building assembler:

1981 $1,695.00
1982 $1,062.00
1983 $1,205.00
1984 $1,550.00
1985 (no figure given)

Weber has abandoned her demand for reinstatement. She has not been employed as a licensed practical nurse since her discharge from the Home, although she has pursued that employment.

DISCUSSION

From the facts recited above, this Court concludes: Weber’s difficulties, once they had been investigated, could have been handled by adequate administrative leadership. Probably some discipline was in order. Possibly the problems could have justified discharge after less extreme remedies had been attempted. The Court finds, however, that Weber’s misconduct was not a factor in the decision to discharge her. The Court finds the claim that Weber was fired because of her misconduct to be a mere pretext. This Court concludes that the actual cause for the discharge was not any misconduct on Weber’s part but Kleppe’s animosity tov/ard her because of her service in the National Guard.

Kleppe gave no rational justification for the discharge to Weber or the Board. As to the complaints which surfaced against Weber at trial, Kleppe admitted that he did not investigate the basis for any of the charges against Weber before he discharged her. In fact, he investigated none of the charges until the litigation began. Also, on cross-examination Kleppe described Weber as a “superior” director of nurses. And in his June 28, 1983, deposition Kleppe admitted that Weber was not a discipline problem. (Exhibit 20.) Kleppe inquired about her military service obligation within twenty-four hours of the discharge. When he discharged her he gave no reason, but instead reverted to the boorish language pattern he had used when he accosted her in the Korner Bar. He gave no reason even though the discharge was contrary to the position the Board had taken eight days earlier at its regular meeting. (Exhibit 5.)

Section 2021(b)(3) of the Act provides in part that an employee shall not be denied retention in employment because of any obligation as a member of a reserve component of the armed forces. 38 U.S.C. § 2021(b)(3)(1976).

Members of the National Guard are members of the armed forces within the meaning of section 2021. Monroe v. Standard Oil Co., 452 U.S. 549, 552 n. 2, 101 S.Ct. 2510, 2512 n. 2, 69 L.Ed.2d 226 (1981).

The purpose of 38 U.S.C. § 2021(b)(3) was “ ‘to prevent reservists and National Guardsmen not on active duty who must attend weekend drills or summer training from being discriminated against in employment because of their Reserve membership ____’ S.Rep. No. 1477, 90th Cong., 2d Sess. 1-2 (1968).” Id. at 557, 101 S.Ct. at 2515.

While the statute is to be liberally construed for the benefit of reservists and guardsmen, see Coffy v. Republic Steel Corp., 447 U.S. 191, 196, 100 S.Ct. 2100, 2104, 65 L.Ed.2d 53 (1980); Dyer v. Hinky Dinky, Inc., 710 F.2d 1348, 1350 (8th Cir. 1983), the Supreme Court has held that the Act only protects members of the Armed Forces from discharge motivated solely by their military obligations. Monroe, 452 U.S. at 559, 101 S.Ct. at 2516.

The Act, then, was designed to protect members of the National Guard from discharge other than for good cause unrelated to their Guard membership. See id. at 560, 101 S.Ct. at 2516. Once the employee has presented evidence that the discharge was due to his or her membership in the military, the burden shifts to the employer to prove that the employee was discharged for good cause. Chesna v. International Fueling Co., 753 F.2d 1067 (1st Cir.1984) 115 L.R.R.M.(BNA) 3465, 3466 (D.Mass.1983), aff'd, 117 L.R.R. M.(BNA) 2912 (1st Cir.1984); Henry v. Anderson County, Tennessee Office of the Sheriff, 522 F.Supp, 1112, 1114 (E.D.Tenn. 1981). See also Subcomm. No. 3 Consideration of H.R. 11509, To Amend and Clarify the Reemployment Provisions of the Universal Military Training and Service Act, and for Other Purposes: Hearings on H.R. 11509 Before Subcomm. No. 3 of the House Comm, on Armed Services, 89th Cong., 1st Sess. 5320 (statement of Hugh W. Bradley, Chief of the Bureau of Reemployment Rights, Department of Labor) (the statute would place the burden on the employer to show that the reservist was discharged for cause).

This Court finds that Weber was discharged without cause and solely because of her National Guard affiliation in violation of 38 U.S.C. § 2021(b)(3).

Having established that she was discharged in violation of the Act, Plaintiff is entitled to back pay from the date of discharge. See 38 U.S.C. § 2022 (1976). Allowable damages must be adequate to compensate Plaintiff fully for her economic losses as a result of Defendant’s unlawful acts. See Hembree v. Georgia Power Co., 637 F.2d 423, 430 (5th Cir.1981). The only way Plaintiff can be fully compensated is to award her prejudgment interest. Id.

This Court finds that the Plaintiff is entitled to damages as follows:

a. Recovery of interest paid or due on all loans made by Plaintiff to cover living expenses from date of discharge to date of this Memorandum and Order.

b. As to 1981: An amount equal to her salary as director of nurses, from the date of her discharge to the date a qualified director of nurses, i.e., a registered nurse, came on duty at the Home, with interest thereon from the date her salary payments would have been due to the date of payment.

c. As to the remainder of 1981 (after a registered nurse came on duty as director of nurses): Her wages computed at $4.80 per hour, less the amount of her actual earnings for that year subsequent to her discharge. As to 1982: Her wages computed at $5.00 per hour, less the amount of her actual earnings for that year. As to 1983: Her wages computed at $5.25 per hour, less the amount of her actual earnings for that year. As to 1984: Her wages computed at $5.40 per hour, less the amount of her actual earnings for that year. As to that portion of 1985 to date of this Memorandum and Order: Her wages computed at $5.50 per hour, less the amount of her actual earnings to date of this Memorandum and Order.

Interest under item (c) shall be computed in accordance with the interest scale of the Department of Treasury for the compensation of postjudgment interest, from the last day of each year until paid.

Counsel for Plaintiff shall present the balances claimed due, with the rate of interest thereon, by affidavit within fifteen days. Counsel for Defendant shall respond to any claimed error by counter-affidavit within 30 days and before final judgment is entered on this Memorandum and Order.

IT IS SO ORDERED.

      . Because the Court finds that Weber’s misconduct was not a factor in Kleppe’s decision to discharge her, it need not discuss whether the discharge could be upheld as a “discharge for cause” had Weber’s conduct been the actual reason for the termination.


author: HAIGHT, District Judge:

text:
    Rufo O. GONZALEZ, Petitioner, v. UNITED STATES of America, Respondent.
    No. 85 Civ. 4312-CSH.
    United States District Court, S.D. New York.
    Sept. 19, 1985.

      Rufo Gonzalez, pro se.
    Rudolph W. Giuliani, U.S. Atty., S.D. N.Y., New York City, for U.S.; Kenneth I. Schacter, Asst. U.S. Atty., of counsel.
   MEMORANDUM OPINION AND ORDER

HAIGHT, District Judge:

The habeas corpus petition of Rufo Gonzalez pursuant to 28 U.S.C. § 2255 raises one question of substance. That is whether his sentence should be vacated and Gonzalez resentenced on his conviction following jury trial, because of this Court’s failure at the time of sentencing to comply with the 1983 amendments to Rule 32, F.R. Crim.P.

The 1983 amendments to Rule 32, in effect at the time petitioner was sentenced, provide in pertinent part as follows:

“(a) Sentence.
“(1) Imposition of Sentence. Sentence shall be imposed without unreasonable delay. Before imposing sentence the court shall
“(A) determine that the defendant and his counsel have had the opportunity to read and discuss the presentence investigation report made available pursuant to subdivision (c)(3)(A) or summary thereof made available pursuant to subdivision (c)(3)(B);....”
******
“(3) Disclosure.
“(A) At a reasonable time before imposing sentence the court shall permit the defendant and his counsel to read the report of the pre-sentence investigation exclusive of any recommendation as to sentence, but not to the extent that in the opinion of the court the report contains diagnostic opinions which, if disclosed, might seriously disrupt a program of rehabilitation; or sources of information obtained upon a promise of confidentiality; or any other information which, if disclosed, might result in harm, physical or otherwise, to the defendant or other persons. The court shall afford the defendant and his counsel an opportunity to comment on the report and, in the discretion of the court, to introduce testimony or other information relating to any alleged factual inaccuracy contained in it.”
******
“(D) If the comments of the defendant and his counsel or testimony or other information introduced by them allege any factual inaccuracy in the presentence investigation report or the summary of the report or part thereof, the court shall, as to each matter controverted, make (i) a finding as to the allegation, or (ii) a determination that no such finding is necessary because the matter controverted will not be taken into account in sentencing. A written record of such findings and determinations shall be appended to and accompany any copy of the prsentence investigation report thereafter made available to the Bureau of Prisons or the Parole Commission.”

The record in this case demonstrates noncompliance by this Court with the Rule. The Court did not determine, by directly questioning Gonzalez, whether or not he had read the presentence report prepared by the Probation Department. That omission violated Rule 32(a)(1)(A). Secondly, although as appears infra the Court stated that it did not take into consideration in sentencing certain disputed aspects of the presentence report, the Court did not append a written record of that determination to the presentence report. That omission violated Rule 32(e)(3)(D). Those omissions, as the Government contends and as petitioner gracefully acknowledges, were inadvertent.

In point of fact, the record on the present petition makes it clear that Gonzalez had not read the presentence report,prior to sentencing. He attempted to read it, about a month before he was sentenced, but ran afoul of a local Probation Department rule which denies a defendant access to his presentence report unless he is accompanied by counsel.

The Government points out accurately that defendant’s counsel obtained access to the presentence report. Counsel addressed perceived inaccuracies and inequities in the report at length in his sentencing speech. But that does not meet the points that petitioner had not read the report, or that the Court failed to ascertain that he had not done so.

The Government, resisting the present petition, argues that it makes no difference because, during the month between his unsuccessful effort to read the report and the sentencing, petitioner had ample opportunity to arrange an appointment with his attorney to gain access. Petitioner, a novice to the law, plausibly explains that he was not aware of the importance of doing so. In view of this Court’s omissions at the time of sentencing—omissions which the Assistant TJnited States Attorney also failed to observe or correct—I am not inclined to conclude that petitioner waived rights which Rule 32, speaking in the conjunctive rather than the disjunctive, quite clearly confers upon him as well as upon his attorney.

. It is of course the fact that, at the sentencing hearing, petitioner’s counsel took issue with a number of aspects of the presentence report. The Court made it clear, in passing sentence, that to the extent disagreements with the contents of the report were called to its attention, the disputed issues were not taken into account in arriving at a sentence. At Tr. 12-13 the following appears:

“THE COURT: I have considered the presentenee report and what has been said this afternoon, and Mr. Feldberg refers to his letter of March 26, 1984 on the subject of costs of prosecution. I’ve considered that as well.
“I should say preliminarily, I think that Mr. Gonzalez’ concerns and those of Mr. Amoroso [counsel for petitioner] with respect to the wording of the presentence report and the slant or bias or twist which they perceive in it should not concern them. I do not take into consideration whatever personal views one may detect in the presentence report as far as the Probation Officer is concerned. In saying that, I do not mean to suggest that I agree with Mr. Amoroso and with Mr. Gonzalez that the presentence report is unfairly worded. I mean to say only that I think that the trial evidence and the jury verdict form a sufficient basis for the Court's sentence. And in focusing my gaze and my thoughts upon that, I find it unnecessary to be influenced in any way, and am in fact not influenced in any way, by whatever personal perceptions of the Probation Officer that may have crept into the Probation Report. “I am concerned then with the charges made against Mr. Gonzalez and the jury verdict after the evidence in response to those charges.”

That determination, so far as it goes, constitutes compliance with the second of the two alternative courses of action required of the trial judge by Rule 32(c)(3)(D) in the event of disputed statements in a presentence report. But it is not sufficient to dispose of that, or of other aspects, of the case at bar, because petitioner claims in his present papers that during sentencing “petitioner’s counsel objected to some, but not all, of the false allegations of Probation Officer Kenneth Greenblatt which clearly demonstrated Mr. Greenblatt’s negative bias against the petitioner.” Reply Memorandum of July 22, 1985 at 2. Petitioner then goes on to give specific examples. The conclusion follows that, had petitioner read the presentence report, he would have raised specific points of objection and dispute that were not addressed by his counsel.

Even to the extent that the Court stated on the record its determination that certain controverted matters would not be taken into account in sentencing, there was noncompliance with Rule 32(c)(3)(D) because a written report of those determinations was not appended to the presentence report, so that it could accompany that document into the hands of the Bureau of Prisons or the Parole Commission. That is significant because the amendments to the rule and the cases construing it, cited infra, recognize that a presentence report has a life of its own which survives sentencing. The report follows the defendant and may influence his future treatment. The Government now suggests that the omission can be cured by sending those authorities a copy of the sentencing transcript at this time. I need not decide whether, in a case where it was clear that all disputed areas of the report had been called to the judge’s attention and dealt with by him at the time of sentencing (albeit not appended to the report), such a curative action would do away with the need for resentencing. In the case at bar, for the reasons stated, that basic premise is not present.

Apparently there is no Second Circuit authority addressing the consequences of the district court’s failure to comply with Rule 32 as amended. However, there is a growing body of authority in other circuits which, in order to further the salutary purposes of the amendments, requires resentencing in the event of non-compliance. United States v. Petitto, 767 F.2d 607 (9th Cir.1985); United States v. Velasquez, 748 F.2d 972 (5th Cir.1984); United States v. Travis, 735 F.2d 1129 (9th Cir.1984); United States v. Rone, 743 F.2d 1169 (7th Cir.1984).

I appreciate that the cited cases involved direct appeals from a sentence, whereas in the case at bar Gonzalez is prosecuting a habeas corpus collateral attack under § 2255. At least in the context of an alleged non-compliance with Rule 11, F.R.Crim.P., it is now clear that the petitioner must demonstrate actual prejudice rising to the level of a “complete miscarriage of justice” or a proceeding “inconsistent with the rudimentary demands of fair procedure.” United States v. Timmreck, 441 U.S. 780, 782, 99 S.Ct. 2085, 2086, 60 L.Ed.2d 634 (1979). Assuming arguendo that these strict criteria apply equally to allegations of non-compliance with Rule 32, Gonzalez has demonstrated prejudice—he would have objected to certain aspects of the presentence report which he had not read—and I regard the purposes of Rule 32 as sufficiently important to require that, in the interests of justice, Gonzalez be resentenced so that a full record, and full compliance with the rule, may be accomplished.

For the foregoing reasons, the Courts judgment and sentence of April 24, 1984 is vacated. Of course, petitioner will not be released from custody. On the contrary, he will remain in custody pending further proceedings on the petition. In aid of those proceedings, the Government is directed to produce petitioner before this Court forthwith for resentencing.

It is SO ORDERED.

      . The petition also reargues Gonzalez’s contention that, because of onerous bail conditions, his time at liberty on bail pending trial and appeal should count as time served against his sentence. I have rejected that contention in the context of Gonzalez’s prior Rule 35 motion, and adhere to that view. I also regard as immaterial to this petition Gonzalez’s claim that his bail conditions were unfair when contrasted to pretrial conditions recently imposed upon an assistant United States Attorney in an unrelated case.

      . In the light of the 1983 amendments to Rule 32, the Probation Department might do well to reconsider that policy.


author: NORMA HOLLOWAY JOHNSON, District Judge.

text:
    Robert HAMMERMAN, Plaintiff and Counter-Defendant, v. Thomas A. PEACOCK, Defendant and Counterclaimant, v. SMITH BARNEY, HARRIS UPHAM & COMPANY, INC., Additional Defendant on Counterclaim.
    Civ. A. No. 84-2724.
    United States District Court, District of Columbia.
    Sept. 20, 1985.
    Morris Kletzkin, Washington, D.C., for plaintiff and counter-defendant.
    Robert L. Cope, Washington, D.C., for defendant and counterclaimant.

      James H. Schropp, Washington, D.C., for additional defendant on counterclaim.
   MEMORANDUM OPINION

NORMA HOLLOWAY JOHNSON, District Judge.

By Memorandum Opinion and Order entered herein on July 31, 1985, this Court denied the motion of the counterdefendants, Robert Hammerman and Smith Barney, Harris Upham & Company, Inc., to compel arbitration of the federal securities law claims presented in the counterclaim of defendant-counterclaimant Thomas A. Peacock. Thereafter, on August 26, 1985, the counterdefendants filed a notice of appeal from the aforesaid order denying their motion to compel arbitration and, on August 27, 1985, the counterdefendants filed with this Court what has been styled as a “request for clarification concerning counter-defendants’ notice of appeal or, in the alternative, motion to stay proceedings” which is presently before the Court for determination.

In their “request for clarification”, the counterdefendants contend that the Order of July 31, 1985, denying their motion to compel arbitration, is appealable under 28 U.S.C. § 1292(a)(1) and that the filing of the notice of appeal from that order divests this Court of jurisdiction and effectively stays all further proceedings in this action. Counterdefendants, therefore, request that the Court enter an order confirming that all further proceedings herein have been stayed. Alternatively, in the event that the Court does not agree with counterdefendants’ contention respecting the effect of the filing of the aforesaid notice of appeal and concludes that it is not thereby divested of jurisdiction, the counterdefendants move to stay any and all further proeeedings in this action pending resolution of their appeal. A pretrial conference before the Magistrate has been set for October 11, 1985, and trial has been set for October 21, 1985.

The defendant and counterclaimant, Thomas A. Peacock, has filed a “motion to ignore counterdefendants’ notice of appeal” and an opposition to the counterdefendants’ alternative motion for a stay. Counterclaimant Peacock maintains that the Order of July 31, 1985, is an interlocutory one not subject to appeal, that this Court has not, therefore, been divested of jurisdiction, and that the Court should not, in any event, stay further proceedings herein.

Upon consideration of the counterdefendants’ “request for clarification” and alternative motion to stay proceedings, the counterclaimant’s motion to ignore counter-defendants’ notice of appeal, the oppositions thereto, and the parties’ respective memoranda of points and authorities, the Court concludes, for the reasons set forth below, that the order of July 31, 1985, is not appealable, that proceedings in this action have not, therefore, been stayed by the appeal noticed by counterdefendants on August 26, 1985, and that the alternative motion of the counterdefendants to stay further proceedings in this action must be denied.

As a general rule, the filing of a timely notice of appeal has the effect of transferring jurisdiction from the district court to the court of appeals, with regard to any matters involved in the appeal. The district court is, by the filing of the notice of appeal, thus divested of authority to proceed further as to such matters. 9 Moore’s Federal Practice, 11203.11. An exception to this general rule has been recognized, however, in cases where an appeal is noticed from an order which is not appealable. In such cases, the district court can disregard the notice of appeal and proceed with the case. Id., at 3-51 and cases cited therein. Thus, before continuing proceedings in the instant case, the Court must determine whether its order of July 31, 1985, is an appealable order.

In arguing that the July 31, 1985, order is appealable, counterdefendants rely on Lee v. Ply*Gem Industries, Inc., 593 F.2d 1266 (D.C.Cir.1979), cert. denied, 441 U.S. 967, 99 S.Ct. 2417, 60 L.Ed.2d 1073 (1979). In that case, our Court of Appeals held that an order disposing of a motion for a stay is to be treated as a ruling on a motion for an injunction and, as such, is immediately appealable pursuant to 28 U.S.C. § 1292(a)(1), provided certain conditions are satisfied. Counterdefendants essentially maintain that the Court’s order of July 31, 1985, denying their motion to compel arbitration, is analogous to a denial of a motion for a stay because, had the Court granted the motion to compel arbitration, the effect would have been to stay further proceedings herein pending completion of the arbitration process. The Court believes that this reasoning is faulty and that the counterdefendants’ reliance on Ply*Gem is misplaced. The order entered herein on July 31, 1985, was not one ruling on a motion for a stay. It was, rather, plainly and simply a ruling that counterdefendants do not have a right to arbitration of the federal securities law claims in this case for the reasons set forth therein. Moreover, it has been recognized that an interlocutory order denying a motion to compel arbitration is not appealable. Ohio-Sealy Mattress Mfg. Co. v. Duncan, 714 F.2d 740 (7th Cir.1983), cert. denied, 464 U.S. 1044, 104 S.Ct. 712, 79 L.Ed.2d 176 (1984). For these reasons, the Court concludes that the appeal noticed by counterdefendants from the July 31, 1985, order has not divested this Court of jurisdiction over this action and that the proceedings herein can be continued, unless, of course, there exists adequate reason for granting, at this time, the counterdefendants’ alternative motion for a stay.

In deciding whether to grant a stay pending appeal, the Court must consider whether the moving party is likely to prevail on the merits of his appeal, whether, without a stay, the moving party will be irreparably injured, whether the issuance of a stay will substantially harm other parties interested in the proceeding, and, finally, wherein lies the public interest. Wisconsin Gas Company v. Federal Energy Regulatory Commission, 758 F.2d 669, 674 (D.C.Cir.1985); McSurely v. McClellan, 697 F.2d 309 (D.C.Cir.1982). The method of analysis is the same as that applied in determining whether to grant an injunction. National Assoc, of Farmworkers Organizations v. Marshall, 628 F.2d 604 (D.C.Cir.1980). Application of this analysis to the instant case requires denial of counterdefendants’ motion for a stay. Counterdefendants claim that they will be irreparably injured by “all of the time, effort and money expended ... in conducting further discovery, preparing pretrial submissions and conducting the trial”, in the event that the Court of Appeals rules in their favor and holds that the federal securities law claims herein are subject to arbitration. This does not, however, constitute “irreparable injury” warranting the issuance of a stay pending appeal. Our own Court of Appeals has recognized that litigation costs do not rise to the level of irreparable injury. McSurely, supra. Not only have the counterdefendants failed to show that they will be irreparably injured unless this action is stayed pending appeal, they have also failed to demonstrate a likelihood of success on the merits of their claim that they have a right to arbitration for the reasons fully set forth in the Memorandum Opinion entered July 31, 1985, together with the order denying counterdefendants’ motion to compel arbitration. As the counterdefendants have failed to make the requisite showing in these respects, the Court need go no further in determining whether to stay further proceedings in this action. The motion of the counterdefendants for a stay must be denied.

For the foregoing reasons and consistent with the foregoing opinion, the Court shall, by separate order entered together herewith, deny the motion of the counterdefendants for a stay of this action pending the appeal of its order of July 31, 1985.

      . The amended counterclaim contained both federal securities law claims and pendent state law claims. By order entered herein on May 1, 1985, the defendant-counter-claimant’s state law claims were dismissed and referred to compulsory arbitration. Subsequently, on May 28, 1985, the parties filed a stipulation dismissing the complaint of plaintiff-counterdefendant Robert Hammerman. Thus, only counterclaim-ant’s federal securities law claims remain pending at this time.

      . Counterclaimant Peacock has also filed, on August 28, 1985, a motion to compel deposition, which is not presently before the Court for determination.


author: HORTON, District Judge.

text:
    AMERICAN FIDELITY FIRE INSURANCE COMPANY, Plaintiff, v. UNITED STATES of America, Defendant.
    No. 84-2381-H.
    United States District Court, W.D. Tennessee, W.D.
    Sept. 24, 1985.
    Paul E. Steen, Less & Seroggs, Memphis, Tenn., for plaintiff.
    Betsy E. Burke, U.S. Dept, of Justice, Tax Div., Washington, D.C., for defendant.
   ORDER GRANTING DEFENDANT’S MOTION FOR SUMMARY JUDGMENT

HORTON, District Judge.

American Fidelity Fire Insurance Company, plaintiff, brought the above styled action, pursuant to 26 U.S.C. § 7426, to recover retainage funds previously held by Allen & O’Hara, Inc., and levied upon by the Internal Revenue Service. The funds were due Norris Contractors, Inc., upon completion of a subcontract with Allen & O’Hara, Inc., but Norris ultimately defaulted. Plaintiff, as surety for Norris, was required to complete the contract at a cost of $7,241.57 and then claimed the retainage funds by right of subrogation. In the interim, the Internal Revenue Service had already levied upon and seized the funds to satisfy delinquent taxes owed by Norris.

In response to the complaint, defendant moved to dismiss claiming this Court lacked jurisdiction because the claim was barred by the applicable statute of limitation contained in 26 U.S.C. § 6532. It is further argued that because the plaintiff’s claim under § 7426 is time-barred and the doctrine of sovereign immunity precludes pursuit of the action under any other jurisdictional authority, the complaint must be dismissed.

Following a response by plaintiff in which it was argued the application of the nine month statutory limitation period would be inequitable in that the plaintiff’s claim would be barred prior to any payment having been made pursuant to the surety agreement, the parties, by consent, submitted a pretrial order. In that order, the parties agreed that no issues of fact were contested and that if the Court has jurisdiction over the action, plaintiff is entitled to recover. It was further agreed that a trial would not be necessary in that the Court’s ruling on defendant’s motion to dismiss would be dispositive of the action. The Pretrial Order was entered as an order of this court on September 19, 1985.

The Court, after opting to treat defendant’s motion to dismiss as one for summary judgment pursuant to Rule 12(b), Federal Rules of Civil Procedure, has reviewed the entire record in this case and concludes the plaintiff’s claim is barred by the statute of limitation. Thus, defendant is, as a matter of law, entitled to entry of judgment in its favor.

Discussion

Under 26 U.S.C. § 7426, persons other than the taxpayer are authorized to bring a civil action against the United States to contest a tax levy upon property to which such persons claim an interest. However, that right is limited by 26 U.S.C. § 6532(c) that requires an action brought by third persons must be commenced within nine months of the date of levy. It is undisputed that plaintiff did not commence this action within nine months of the levy. Plaintiff did submit a claim to the Internal Revenue Service asserting its right to the retainage funds but again it is undisputed that the claim was made outside the nine month period following the levy.

This Court concedes, as apparently does the defendant, that plaintiff had priority to the retainage funds by virtue of the surety agreement. The only issue before the Court is whether the plaintiff lost its right by failing to assert its claim within nine months of the levy. Plaintiff argues the application the statute of limitations in this case would be inequitable in that the period expired prior to any payment by the plaintiff pursuant to its obligation as surety of Norris Contractors, Inc. It is further asserted, and this Court agrees, the case law cited by defendant illustrating the applicability of the nine month statutory period is distinguishable from the present case. However, the plaintiff offers no case authority, nor did the Court’s investigation reveal any, precisely analogous to the present action.

In addressing the issue presented by this case as one of first impression, this Court must be mindful of the strict construction in favor of the government given to statutes of limitation regarding the collection of taxes. See Kahn v. United States, 444 F.Supp. 388 (S.D.N.Y.1977) aff'd., 590 F.2d 48 (2d Cir.1978). It is also important to consider the rationale underlying the imposition of the short statute of limitations for actions brought under § 7426. The Court of Appeals for the Fifth Circuit in United Sand and Gravel Contractors, Inc. v. United States, 624 F.2d 733 (5th Cir.1980) explained that rationale.

The obvious reason for a short statute of limitations is to resolve doubts concerning the status of the taxpayer’s account swiftly. If someone else successfully claims property already credited against the taxpayer’s tax liability, the United States must look to other assets of the taxpayer to satisfy the taxpayer’s liability. I.R.C. § 6532(c) protects the legitimate interest of the United States in requiring other claimants of the seized property to bring their claims quickly.

624 F.2d at 739.

Plaintiff argues that equity requires this Court to forego a strict application of § 6532 to the present case. The Court cannot agree.

In its memorandum opposing defendant’s motion to dismiss, plaintiff argues it “had no right to the funds during the nine (9) month statute of limitations and any attempt to enforce its rights would have proved fruitless and meaningless during said period.” Plaintiff claims that application of the statute would bar its remedy before its right of action accured. While the argument is facially appealling, this Court is of the opinion that the plaintiff did indeed have an available remedy during the nine month period following the levy.

Section 7426(b)(1) provides:
If a levy or sale would irreparably injure rights in property which the court determines to be superior to rights of the United States in such property, the Court may grant an injunction to prohibit the enforcement of such levy____

In Myers v. United States, 647 F.2d 591 (5th Cir.1981), the court in construing § 7426 stated: “A levy is wrongful within the meaning of the Act if ... the levy ... will destroy or irreparably injure the plaintiffs interest in the property that is superi- or to the federal tax lien.” Id. at 603 n. 18. The court expressly stated that a “third person is permitted immediate access to the court on his claim of wrongful levy including the right to seek injunctive relief.” Id. at 602-03.

This Court concludes that plaintiff had knowledge of the tax lien and could have sought relief during the nine month périod under § 7426(b)(1). Failure to do so defeats the plaintiff’s argument that application of the nine month statute of limitations would be inequitable. Therefore, it is the decision of this Court, defendant is entitled to judgment as a matter of law in that plaintiff’s claim is barred by the statute of limitations. Defendant’s motion for summary judgment is hereby granted.

      . Fed.R.Civ.P. 12(b) states in relevant part: "If, on a motion ... to dismiss for failure of the pleading to state a claim upon which relief can be granted, matters outside the pleading are presented to and not excluded by the Court, the motion shall be treated as one for summary judgment and disposed of as provided in Rule 56...."

      . Plaintiff alleged in its complaint that it notified the Internal Revenue Service of its claim of priority to the funds shortly after the levy. If such a notification is construed as a request for the return of the property, § 6532(c)(2) would extend the statutory filing period for 12 months from the date of such request. Since the complaint was not filed within 12 months of that date the Court need not address the question of whether the notification was a sufficient request to trigger § 6532(c)(2).


author: BROOKS, District Judge.

text:
    EQUAL EMPLOYMENT OPPORTUNITY COMMISSION, Plaintiff, v. The CITY OF LINTON, INDIANA, and State of Indiana, Defendants.
    Cause No. TH 82-266-C.
    United States District Court, S.D. Indiana, Evansville Division.
    Sept. 30, 1985.

      Laurie A. Young, Regional Atty., E.E. O.C., Ellen K. Thomas, Sr., Trial Atty., E.E.O.C., David B. Hunter, Trial Atty., E.E.O.C., Sharon L. Groeger, Trial Atty., E.E.O.C., Indianapolis, Ind., for plaintiff.
    Linley E. Pearson, Atty. Gen. of Ind., by Ronald D. Buckler, Deputy Atty. Gen., Indianapolis, Ind., for State of Ind.
    Brian Smith, Linton, Ind., for City of Linton.
   ORDER

BROOKS, District Judge.

This cause having come before this Court on a Motion for Summary Judgment from plaintiff and having fully considered this motion and defendants’ motion moving the Court to grant the same, and being fully advised of all the accompanying matters, it is hereby

ORDERED that summary judgment shall be entered in favor of the plaintiff on the State of Indiana’s First Affirmative Defense of bona fide occupational qualification, and further

ORDERED that defendant, State of Indiana, is prohibited from enforcing or causing to be enforced the hiring age limit of age Thirty-five (35) contained in Indiana Code 36-8-4-7 and 36-8-8-7, and that the same prohibition is ORDERED as to the City of Linton, a previous defendant in this case wherein the Court approved a partial consent decree against the defendant, the City of Linton.

The Court therefore GRANTS the plaintiff’s motion for Summary Judgment and Orders this cause dismissed.

MEMORANDUM

The plaintiff is a proper party to bring this action and is expressly authorized to do so by statute, and the Court has jurisdiction over the subject matter of this action and over the defendant.

All administrative prerequisites to the institution of this lawsuit have been met by the plaintiff.

The defendant is a political subdivision of the State of Indiana, and the State has enacted and enforced the State statutes relevant to this action, i.e. Indiana Code 36-8-4-7 and 36-8-8-7, by refusing to hire persons to the city police force after they reach their thirty-sixth birthday. The defendant has adopted and acquiesced in enforcing these statutes.

Neither the defendant nor the State require any physical or psychological examination of municipal police officers subsequent to a pre-employment examination.

On June 9, 1980, the defendant hired Jesse Martin as a Utilities Security Guard and a reserve police officer, but would have hired him as a regular member of the city police force had the State statutes cited herein not been in full force and effect. Mr. Martin was fifty-eight (58) years old at the time the city refused to hire him as a regular member of the city police force.

Neither the State nor the defendant require a periodic physical examination of municipal police officers to determine their continuing fitness to perform their job. Nor has the State or the City established any type of physical fitness program for municipal police officers to ensure or encourage their continuing physical fitness so as to perform their job more effectively and safely. No medical evidence or empirical data was relied upon by the State or City when enacting, enforcing or acquiesing the statutes cited herein.

Prior to the institution of the lawsuit, neither the City nor the State conducted any studies, medical or otherwise, to determine if an age thirty-five (35) limitation for hiring was desirable or necessary to the successful fulfillment of the duties and responsibilities of a police officer.

Both the City and the State permit police officers to remain on the police force after their thirty-sixth (36th) birthday and I.C. 36-8-3.5-20 provides that municipal police officers must retire when they reach their sixty-fifth (65th) birthday.

This is an action pursuant to Section 7(b), 29 U.S.C. Section 626(b) of the Age Discrimination in Employment Act of 1967 (hereinafter the “ADEA”) as amended, 29 U.S.C. Section 621, et seq., which provides that the plaintiff is authorized to initiate this action.

This Court has jurisdiction pursuant to 28 U.S.C. Sections 451, 1337, 1343 and 1345.

Section 4(f)(1) of the ADEA, 29 U.S.C. Section 623(f)(1), provides a defense to otherwise prohibited employment practices based on age where age is a bona fide occupational qualification (BFOQ) reasonably necessary to the normal operation of the particular business.

In order to prevail in a BFOQ defense, an employer must show that the challenged age qualification is reasonably necessary to the essential operation of its business, and must demonstrate either that there is a factual basis for believing that all or substantially all persons above the age limit would be unable to effectively perform the duties of the job, or that it is impossible or impracticable to determine job fitness on an individual basis. Usery v. Tamiami Trial Tours, Inc., 531 F.2d 224, 235-236 (5th Cir.1976); see also, Orzel v. City of Wauwatosa, 697 F.2d 743, 753 (7th Cir.) cert. denied, 464 U.S. 992, 104 S.Ct. 484, 78 L.Ed.2d 680 (1983).

In order to prevail in a BFOQ defense where an employer’s objective in asserting the defense is the goal of public safety, the employer must prove that the challenged practice does indeed effectuate that goal and that there is no acceptable alternative which would better advance it or equally advance it with less discriminatory impact. Orzel v. City of Wauwatosa, 697 F.2d 743, 754, n. 21 (7th Cir.), cert. denied, 464 U.S. 992, 104 S.Ct. 484, 78 L.Ed.2d 680 (1983). 29 C.F.R. Section 1625.6(b).

When an employer seeks to justify denying employment on the basis of a BFOQ which relates to the safety of persons, a particular inquiry into age is called for. Tuohy v. Ford Motor Co., 675 F.2d 842, 844 (6th Cir.1982).

The commission’s regulations governing the establishment of a BFOQ defense in cases involving public safety are entitled to great weight. Griggs v. Duke Power Co., 401 U.S. 424, 433-434, 91 S.Ct. 849, 854-855, 28 L.Ed.2d 158 (1971).

The Commission’s regulations governing the establishment of a BFOQ defense in public safety cases require that an employer prove, (1) that the age limit is reasonably necessary to the essence of the employer’s business, and (2) that all or substantially all individuals excluded from the job involved are in fact disqualified, or (3) that some of the individuals so excluded possess a disqualifying trait that cannot be ascertained except by reference to age. 29 C.F.R. Section 1625.6(b).

Defendants have not provided a scintilla of evidence in support of their asserted BFOQ defense and, therefore, as a matter of law, it must fail. Orzel, supra.

Indiana Code 36-8-4-7 and 36-8-8-7, insofar as they prevent any person from being hired as a municipal police officer after he/she has reached his/her thirty-sixth (36th) birthday, violates the ADEA.

Indiana Code 36-8-4-7 and 36-8-8-7 insofar as they prevent any person being hired as a municipal police officer after he/she has reached his/her thirty-sixth (36th) birthday, violates Commission Regulation 29 C.F.R. Section 1625.6(b) because the uncontroverted facts show that there are acceptable alternatives to the hiring age restriction which would better or equally advance the goal of public safety.

The State’s BFOQ defense fails to meet the standard established under the first prong of the test in Usery v. Tamiami Tours, Inc., 531 F.2d 224, 235 (5th Cir.1976) because the uncontroverted facts show that the challenged age restriction is not reasonably necessary to the promotion of public safety.

The Commission is accordingly en Li Lied to an injunction prohibiting the State and the City from enforcing Indiana Code 36-8-4-7 and 36-8-8-7.

To the extent that any of the statements of material facts set forth above are deemed to be conclusions of law or to the extent that any of the foregoing conclusions of law are deemed to be statements of material facts or conclusions of law as the case may be.