author: TODD, District Judge.

text:
    Kenneth THURMOND, et al., Plaintiffs, v. CITY OF UNION CITY, TENNESSEE, et al., Defendants.
    Civ. No. 80-1155.
    United States District Court, W.D. Tennessee, E.D.
    Feb. 13, 1986.
    Bruce Conley, of Conley, Campbell, Moss & Smith, Union City, Tenn., for plaintiffs.
    James M. Glasgow, of Elam, Glasgow, Tanner & Aeree, Union City, Tenn., and G. Ray Bratten, of Farris, Hancock, Gilman, Branan & Hellen, Memphis, Tenn., for defendants.
   ORDER DENYING SUMMARY JUDGMENT

TODD, District Judge.

Before the Court is Plaintiffs’ supplemental motion for summary judgment on the issue of whether Plaintiffs are entitled to the overtime and minimum wage provisions of the Fair Labor Standards Act as a matter of law. Although Plaintiffs’ supplemental motion may have been directed at other issues in this cause as well, Defendants have responded only to the question of whether the FLSA standards are applicablé as a result of the Supreme Court’s decision in Garcia v. San Antonio Metropolitan Transit Authority, infra. The Court finds this to be a fair reading of Plaintiffs’ motion, and today rules only as to this issue.

Plaintiffs assert that Garcia v. San Antonio Metropolitan Transit Authority, — U.S. -, 105 S.Ct. 1005, 83 L.Ed.2d 1016, reh’g denied, — U.S. -, 105 S.Ct. 2041, 85 L.Ed.2d 340 (1985), establishes the obligation of Union City to comply with the applicable provisions of the Fair Labor Standards Act, 29 U.S.C. § 207, which would in turn require Union City to comply with its own Personnel Rule 206.01(B)(4), providing Plaintiffs with certain overtime compensation Union City has heretofore refused to pay.

In response, Defendants assert that the 1985 amendments to the Fair Labor Standards Act immunize them from liability for failing to pay these benefits, and that in any event Garcia should not be applied retroactively so as to affect the result in this cause.

Under Garcia, the Fair Labor Standards Act (FLSA) standards relevant to this inquiry will clearly apply prospectively to states and their political subdivisions. In Garcia, the Supreme Court rejected the “traditional governmental functions” Tenth Amendment analysis of National League of Cities v. Usery, 426 U.S. 833, 96 S.Ct. 2465, 49 L.Ed.2d 245 (1976), and held that constitutional principles of state sovereignty did not preclude the application of FLSA overtime and minimum wage standards to state and municipal governments. Garcia, supra. Defendants apparently agree that the FLSA will apply to them prospectively, but do not believe that justice requires its retrospective application in the context of this action.

Defendants assert first that Section 2(c) of the Fair Labor Standards Amendments of 1985, Pub.L. No. 99-150, U.S.Code Cong. & Ad. News (99 Stat.) 787 (December 1985), prevents the application of the FLSA to “traditional government function” employees at any time prior to April 15, 1986, including the period contested in this action. Section 2(c) states, in pertinent part:

(1) No State, political subdivision of a State, or interstate governmental agency shall be liable under Section 16 of the Fair Labor Standards Act of 1938 for a violation of section 6 (in the case of a territory or possession of the United States), 7, or ll(c)(as it relates to section 7) of such act occurring before April 15, 1986, with respect to any employee of the State, political subdivision, or agency who would not have been covered by such act under the Secretary of Labor’s special enforcement policy on January 1, 1985, and published in sections 775.2 and 775.4 of title 29 of the Code of Federal Regulations.

Fair Labor Standards Amendments of 1985, § 2(c), supra.

Sections 775.2 and 775.4 of C.F.R. title 29 reflect the National League of Cities exemption of state and local traditional government functions from the coverage of the FLSA.

In view of the legislative history of the FLSA Amendments of 1985, the Court concludes that Section 2(c) has no bearing on whether states and municipalities should be liable as a result of the retrospective application of the Garcia decision. Senate Report No. 99-150 states:

In particular, in the wake of Garcia, the States and their political subdivisions have identified several respects in which they would be injured by immediate application of FLSA. This legislation responds to these concerns by adjusting certain FLSA principles with respect to employees of states and their political subdivisions and by deferring the effective date of certain provisions of the FLSA insofar as they apply to the States and their political subdivisions.
Jurisdictions that had relied for a decade upon the exemptions accorded under National League of Cities would be required to meet FLSA standards immediately under Garcia. Although many jurisdictions commendably and successfully have undertaken to do so, others have expressed an urgent need for lead-time in which to reorder their budgetary priorities while maintaining fiscal stability. As the Committee did under the 1974 amendments, it has again allowed for lead-time for state and local governments to comply with the FLSA requirements.

S.Rep. No. 99-150, 99th Cong. 1st Sess., reprinted in U.S.Code Cong. & Ad. News 651, 655-56 (December 1985).

Section 2(c) in effect gives state and local governments until April 15,1986, to comply with the FLSA. Nowhere in the legislation is retroactive noncompliance mentioned, and the Court does not believe the section can be fairly construed as insulating state and local governments from liability potentially incurred before the 1985 amendments were passed. This section looks forward, rather than backward, in providing a limited immunity from liability for noncompliance with the FLSA.

Defendants’ second contention, that judicial and equitable considerations preclude the retroactive application of the FLSA standards in this instance, is far more persuasive. Under the rationale of Chevron Oil Co. v. Huson, 404 U.S. 97, 92 S.Ct. 349, 30 L.Ed.2d 296 (1971), a three-factor analysis determines whether a ruling such as Garcia should be applied retrospectively. In reaching this decision a court should consider, first, whether the decision represents a clear break with past law; second, whether retrospective application would further or retard the operation and purposes of the new rule; and finally, whether retroactive application could produce “substantial inequitable results.” Smith v. General Motors Corp., 747 F.2d 372, 375 (6th Cir.1984); Casiano v. Heckler, 746 F.2d 1144 (6th Cir.1984).

In the case at bar, each of the three requirements for non-retrospective application of Garcia is met. Garcia overrules the clear past precedent of National League of Cities, supra, that the Tenth Amendment limited Congress’ power to require FLSA compliance of state and local governments in areas of traditional government functions. Retrospective application in this instance would not further the operation or purposes of the Garcia rule. Instead, retrospective application could “wreak havoc on municipal budgeting and create unanticipated financial liability for already strapped municipalities.” Brooks v. Village of Lincolnwood, 620 F.Supp. 24 (N.D.Illinois 1985). This result most likely would not further the intentions of the Garcia court, which were merely to “remove an unworkable standard of municipal immunity from federal law.” Id. Finally, this Court perceives a clear inequity in holding a municipality and its decisionmakers liable under a rule which was not in effect at the time the policies complained of were in use. Id. at 26.

Each of these three factors militates against retrospective application of the Garcia decision in the instant case. To summarize: Garcia represents a clear break with past precedent; its application here would present a serious threat of budgetary disruption unintended by the Garcia court; and finally, it would be unfair to hold Defendants to a rule not in force when they made the key decisions at issue in this cause.

Accordingly, Plaintiffs are not entitled to the minimum wage and overtime provisions of the FLSA solely as a result of the Supreme Court’s Garcia decision. Summary judgment on this issue is, therefore, DENIED. The Court expresses no opinion at this time regarding any other issues contested in this cause.

IT IS SO ORDERED.


source: Caselaw Access Project

author: DAVID V. O’BRIEN, District Judge.

license: Public Domain

text:
    Wendell CHEEK, Plaintiff, v. Jose DOMINGO, M.D. Defendant.
    Civ. No. 1984/275.
    District Court, Virgin Islands, D. St. Croix.
    Feb. 13, 1986.

      Vincent A. Colianni, Christiansted, St. Croix, V.I., for plaintiff.
    Patricia D. Steele, Christiansted, St. Croix, V.I., for defendant.
   MEMORANDUM OPINION

DAVID V. O’BRIEN, District Judge.

We are presented here with two issues peculiar to medical malpractice cases. First, can the defendant physician base a contributory negligence defense on the acts of the plaintiff which caused the injury necessitating treatment? And second, is a specialist competent to testify as to the general practitioner’s standard of care? We answer the first question in the negative and the second affirmatively.

I. FACTS

The plaintiff, Wendell Cheek, was involved in a barroom brawl while visiting St. Croix in January, 1980. He contends that he and two companions were provoked by five island residents as they enjoyed some post-golf cocktails. Cheek was bitten in the altercation and suffered a long gash between the third and fourth knuckles on his left hand.

A short while later, he was treated by the defendant, Dr. Jose Domingo, at St. Croix Hospital. In response to Cheek’s explanation that he had been bitten, Domingo sutured the wound closed and instructed Cheek to return for follow up care.

When the throbbing in his hand continued, Cheek visited another St. Croix doctor who removed the sutures and drained the wound. A virulent infection set in, necessitating eight surgeries and, ultimately, the amputation of Cheek’s middle finger.

Cheek sued Domingo for medical malpractice alleging that the infection resulted from the suturing of the wound. He further contends that infection and, therefore, the amputation, would have been averted had Domingo followed the universal treatment for human bite wounds — that is, cleansing, but not suturing, the wound and administering antibiotics.

Two issues are before us on the parties’ motions in limine. First, Cheek asks us to exclude evidence of the circumstances underlying the bite wound. Such a ruling would bar Domingo from raising the defense of the plaintiff’s contributory negligence. Domingo, on the other hand, seeks to bar the testimony of the plaintiff’s proposed expert witnesses on the grounds of incompetency.

II. DISCUSSION

A. The Contributory Negligence Defense in a Medical Malpractice Action

It is well established that the contributory negligence of a patient is a defense in a medical malpractice action. And it is equally clear that the defense is appropriate only where the patient’s negligent act occurred during the treatment. The defense may not be raised, therefore, where it is based on the occurrence of the injury which necessitated treatment. Skar v. City of Lincoln, Nebraska, 599 F.2d 253, 260 (8th Cir.1979) (patient’s refusal to provide personal information required for diagnosis held a contributing factor to self-inflicted injuries sustained in psychiatric hospital); Hunter v. United States, 236 F.Supp. 411, 415 (M.D.Tenn.1964) (failure to consent to second cancer test contributed to doctor’s failure to detect disease at an early stage); Meehan v. McLeay, 227 N.W.2d 829, 832-34 (Neb.1975); 50 ALR 2d Malpractice-Contributory Negligence, § 2[a].

Domingo proposes to defend on the grounds that Cheek contributed to the alleged malpractice injury by fighting, an act which Domingo claims was, in the least, negligent. We find Sendejar v. Alice Physicians & Surgeons Hospital, Inc., 555 S.W.2d 879 (Tex.Ct.Civ.App.1977), instructive on this issue. The Sendejar plaintiff wrecked his car and the failure of the defendant physician to detect a partial severance of the plaintiff’s spinal cord resulted in permanent paralysis. The court rejected the doctor’s claim that the plaintiff was contributorily negligent by wrecking his car, stating:

To constitute a bar to a suit for malpractice, the contributory negligence of the patient must have been an active and efficient contributing cause of the injury made the basis of the patient’s claim; it must have been simultaneous and co-operating with the alleged fault of the defendant, must have entered into the creation of the cause of action and must have been an element in the transaction which constituted it. (citations omitted).

Id. at 885.

As in Sendejar, the record is devoid of evidence showing that Cheek was guilty of any negligent act occurring simultaneously with Domingo’s treatment. Instead, the alleged negligence occurred prior to the treatment. It was the cause of the injury which Domingo treated. We adopt the Sendejar reasoning and hold that a physician may not raise the defense of contributory negligence where the plaintiff’s negligence occurred prior to the alleged act of malpractice. Consequently, evidence of Cheek’s fight is irrelevant to the proceeding and, therefore, we bar its admission.

Domingo also contends that the worsening of the infection and resulting need to amputate was caused by Cheek’s failure to obtain the necessary follow up treatment. Because these acts occurred subsequent to the treatment, a vastly different scenario is presented. The defense here, however, is not contributory negligence and, therefore, Domingo is not entitled to an apportionment of fault. Rather, if proved, the plaintiff’s negligent aggravation of the malpractice injury will serve only to mitigate damages. Brazil v. United States, 484 F.Supp. 986, 991 (N.D.Ala.1979); Santoni v. Schaerf 48 Md.App. 498, 428 A.2d 94, 99 (Md.Sp.App.1981) rev’d on other grounds 292 Md. 582, 441 A.2d 323 (Md.Ct.App.1982); Flynn v. Stearns, 52 N.J.Super. 115, 145 A.2d 33, 38 (N.J.App.Div.1958); 50 ALR 2d, supra, § 6.

A case virtually on point is Blair v. Eblen, 461 S.W.2d 370 (Ky.Ct.App.1970). The Blair plaintiff injured his hand in an industrial accident. An infection, the basis of the malpractice action, necessitated amputation of several fingers. The plaintiffs subsequent failure to exercise increased the hand’s disability. The court rejected the doctor’s defense of contributory negligence but held that the damages would be mitigated in accordance with the plaintiff’s culpability. The court reasoned:

Negligence on the part of the patient, which occurs wholly subsequently to the physician’s malpractice which caused the original injuries sued for, is not a complete defense to any recovery against the physician, but serves to mitigate the damages, preventing recovery to the extent the patient’s injury was aggravated or increased by his own negligence, although he is entitled to recover for the injuries sustained prior to his contributory negligence, (citations omitted).

Id. at 372.

We hold that any damages awarded to Cheek must be reduced by the amount of injury that Domingo proves to have resulted from Cheek’s post-treatment negligence.

B. The Competency of the Expert Witnesses

A medical expert is competent to testify in a malpractice proceeding if he or she has knowledge and familiarity with that standard of care and treatment commonly practiced by physicians engaged in the same specialty as the defendant. The requisite knowledge may be acquired through experience, observation, association or education. Charles and Kramer, Medical Malpractice, § 29.03 (1985 Supp.). Additionally, in the Virgin Islands, an expert must also have knowledge of the appropriate medical practice in either this, or a similar, community. Gittens v. Christian, 600 F.Supp. 146, 148 (D.V.I.1985), aff'd. 782 F.2d 1028 (3d Cir.1986).

Cheek plans to call two experts, one of whom is a neurologist and the other an infectious disease specialist. They will both testify as to the treatment of human bites, a purportedly universal procedure. Domingo claims that the proposed witnesses are incompetent to testify because they are neither general practitioners nor knowledgeable of the standard of care in Virgin Islands emergency rooms. We will address these claims separately.

There is no requirement in the Virgin Islands, as in most jurisdictions, that an expert practice the same specialty as the defendant. Gittens, supra at 149. (D.V.I.1985) (proctologist testified against a family practitioner); Lee v. Andrews, 545 S.W.2d 238, 245 (Tex.Civ.App.1976) (proctologist testified against a general practitioner); Siirila v. Barrios, 248 N.W.2d 171, 177 (Mich.1976) (pediatrician may testify against a general practitioner); Evans v. Ohanesian, 39 Cal.App.3d 121, 112 Cal.Rptr. 236, 240 (Cal.Ct.App.1974) (periodontist may testify against a dentist). Thus, a specialist may testify as to the standard of care of a general practitioner provided the proposed witness possesses the requisite knowledge. Siirila, supra at 177; Evans, supra at 240; Charles and Kramer, supra, § 29.03. The degree of that knowledge goes to the weight and not the admissibility of the expert’s testimony. Evans, supra at 240.

The competency of an expert is also established where a technique is either universal, as treatment of bites is purported to be, or the expert has previously performed the procedure. Gittens, supra at 149; Los Alamos Medical Center, Inc. v. Coe, 58 N.M. 686, 275 P.2d 175, 179 (1954); Charles and Kramer, supra, § 29.03.

Finally, it must also be shown that an expert is familiar with the standard of care as it is practiced in the defendant’s community or in a similar one. This is the so-called “similar community” rule which the Virgin Islands has adopted. Gittens, supra at 148.

It is not required that the proffered expert has actually practiced in the defendant’s community but it must be shown that the expert has practiced in a similar community. Ives v. Redford, 252 S.E.2d 315, 318 (Va.1979); Charles and Kramer, supra, § 29.03. Here too, an expert’s actual experience in a technique or its universality dispenses with the locality requirement. Gittens, supra at 149.

We hold, therefore, that Cheek’s experts are not automatically disqualified because they are specialists rather than general practitioners. It is, of course, incumbent upon Cheek to establish the witnesses’ competency with respect to knowledge of the applicable standard of care as it is practiced in the Virgin Islands or a similar community. In the alternative, competency may be established upon a showing that either the treatment for bite wounds is universal or the expert has previously performed the treatment.

IV. CONCLUSION

In conclusion, we hold that the acts of a patient in incurring an injury cannot be the basis of the medical malpractice defendant’s contributory negligence defense. This defense is limited to the negligent acts of the patient which occur simultaneously with the malpractice. Mitigation of damages is the defendant’s relief when subsequent acts of the patient aggravate the malpractice injury.

Moreover, we hold that a medical specialist is competent to testify as an expert against a general practitioner provided the witness has the requisite knowledge of the applicable standard of care as it is practiced in a community similar to the defendant’s. Competency may also be established where the medical procedure at issue is either universal or the witness has previously performed it.

      . We have no opportunity here to decide whether this rule applies to the assumption of risk defense. But see 50 ALR 2d, supra, § 7.


author: EDWARD WEINFELD, District Judge.

text:
    Irving APPEL, Michael Appel, and Gertrude Appel, as trustees for the Welling International Corporation Employees Pension Trust, Plaintiffs, v. KIDDER, PEABODY & CO. INC. and Angelo Grigoropoulos, Defendants.
    No. 84 Civ. 7359 (EW).
    United States District Court, S.D. New York.
    Feb. 14, 1986.

      Jeffrey Y. Boxer, New York City, for plaintiffs.
    Shanley & Fisher, P.C., New York City, for defendant Kidder, Peabody & Co.; Matthew Farley, Brian McDonough, of counsel.
   EDWARD WEINFELD, District Judge.

This action, centering about charges of securities fraud, has its inception in marital and family strife. Plaintiffs Irving and Gertrude Appel, husband and wife, and their son Michael are the trustees of the employee pension trust (“Trust”) of the Welling International Corporation, a closely-held Connecticut corporation. The plaintiffs are all residents of the state of Connecticut, as are all the beneficiaries of the Trust. From July 1980 until sometime after January 1982, the assets of the Trust were maintained in a brokerage account with defendant Kidder, Peabody & Co. (“Kidder”) in its New York office. Defendant Angelo Grigoropoulos is the divorced husband of Bonnie Appel, the daughter of Irving and Gertrude Appel, and now the general counsel of the Welling International Corporation. Grigoropoulos was married to Bonnie Appel in 1974, and was initially an employee of Welling. In 1977 he became an account executive at Blythe Eastman Dillon, where he handled the investment account of the trust. In the spring of 1980, Grigoropoulos moved to Kidder, bringing with him the trust account. Plaintiffs allege that between July 1980 and January 1982 defendants engaged in “churning” the pension trust account, resulting both in a loss in the value of the trust’s assets, and also in the charging of excess commissions. The complaint states causes of action under § 10(b) of the Securities Exchange Act of 1934, as well as actions for misrepresentation, breach of contract, breach of fiduciary duty, and violations of the New York General Business Law. Kidder moves to dismiss or for partial summary judgment on the federal securities claims on statute of limitations grounds, and seeks an order compelling arbitration of plaintiffs’ state law claims.

STATUTE OF LIMITATIONS

The 1934 Act does not provide a federal statute of limitations on claims brought under § 10(b); thus, in determining the statute of limitations issue, the Court must look to the law of the forum state, including New York’s borrowing statute, whose purpose is not only to secure for resident defendants the benefit of the shortest statute of limitations, but also to prevent forum shopping by non-resident plaintiffs. Kidder maintains that the applicable statute of limitations is the Connecticut two-year blue-sky limitations period; plaintiff maintains that the applicable statute is the six-year limitation period for fraud claims under New York law.

The threshold question is whether the New York borrowing statute should be applied, and this determination depends upon where the cause of action accrued. For the purposes of the New York borrowing statute, the cause of action accrued where the loss was sustained. Where, as here, the harm claimed is economic, the loss is sustained where the economic impact of the defendant’s conduct is felt, usually but not invariably at the plaintiff’s place of residence.

Plaintiffs argue that the loss was sustained in New York, where the corpus of the trust was located, where the securities transactions at issue occurred, and “where all the operative conduct occurred.” These facts, undisputed as they are, are not relevant to the determination of the legal issue, which is where the economic loss, if any, resulting from defendant’s alleged conduct was felt. The pension trust at issue here was the source of pensions to the officers and employees of a small, closely-held corporation. In 1981, according to the trust’s filings with the Internal Revenue Service, there were eighteen beneficiaries, all of whom it is conceded were residents of the State of Connecticut. Moreover, the trust’s financial statements for the 1981 fiscal year showed that plaintiffs Irving, Gertrude, and Michael Appel, along with Bonnie Appel and another member of the Appel family, were beneficiaries of 81.5% of the trust’s assets; the affidavit of Irving Appel concedes that the members of the Appel family were the beneficiaries “of in excess of 90% of the value of the trust assets.”

Upon this record of undisputed fact, . it is clear that any financial harm sustained by the trust was felt in the State of Connecticut and, not, as plaintiffs maintain, at the offices of Kidder, Peabody & Co. in New York. Plaintiffs rely upon Maiden v. Biehl, in which the location of the trust corpus, New York, was found to be the locus of harm. Although at the time of the decision in Maiden, all the trust beneficiaries were residents of a single state, this was fortuitous; they had previously resided in several different jurisdictions, as had the trustee. As Judge Stewart wrote, “the thrust of the inquiry” is “who became poorer, and where did they become poorer” as a result of the conduct complained of. In this case, the clear answer is that the trust beneficiaries, predominantly the plaintiffs and members of their family, became poorer in Connecticut, if anywhere, and under the New York borrowing statute it is Connecticut’s limitation period which applies.

Kidder next argues that Connecticut’s two-year blue-sky limitation period should govern, while plaintiffs maintain that the more appropriate period is the three-year limitation on common-law fraud claims. The District Court for the District of Connecticut has repeatedly held that the two-year period is the appropriate limitation on § 10(b) claims under Connecticut law, as have the other federal courts which have considered the issue. Connecticut having chosen to enact a statute of limitations specifically directed to securities claims, it should be given effect in preference to the general common-law fraud statute urged by plaintiffs.

Having determined that it is the two-year period set by Connecticut law which determines the limitation of this action, it is federal law which determines when the period began to run. As our Court of Appeals has said with respect to the commencement of the limitation period for actions under § 10(b):

the time from which the statute begins to run is not the time at which the plaintiff becomes aware of all of the various aspects of the alleged fraud, but rather the statute runs from the time at which plaintiff should have discovered the general fraudulent scheme.

It is not disputed that throughout the period in which plaintiffs allege that “churning” was taking place in the trust’s account at Kidder, from July 1980 through January 1982, the trustees were receiving monthly statements and daily confirmation slips which accurately reflected the trading activity in the account. Plaintiff Irving Appel, the active trustee, states that “[d]uring 1980 and 1981,1 traveled considerably, and obviously during this period of time did not review the daily confirmations or month-end statements that were being sent____ It was not until the Spring of 1984, as a matter of fact, when I had an opportunity to review and analyze the statements on a month by month basis.” Although Irving Appel, as the active trustee, signed the trust’s tax return in November 1981, and reviewed at that time the trust’s assets, he states that “[w]hile I saw that there was a diminution, it was not apparent to me at this time that the diminution occurred as a result of overtrading ..., churning, ... excessive, commissions, or anything like that.”

On this basis, plaintiffs argue that “the statute would begin to run at this time, from November 30, 1981, or the end of the month.” Even if this proposition were accepted, the federal causes of action would be barred under the applicable two-year statute of limitations; the action was not commenced until October 19, 1984. But the uncontested factual record warrants the conclusion that, as a matter of law, the statute began to run at an earlier date. As our Court of Appeals has said, “the statute commences to run when the plaintiff has actual knowledge of the alleged fraud or knowledge of facts which in the exercise of reasonable diligence should have led to actual knowledge.”

Plaintiffs do not contend that the churning engaged in by Kidder was conducted in a secretive fashion; according to the complaint, “[t]he defendants entered into in excess of 300 transactions, generating in excess of $250,000 in a nineteen month period. The portfolio was turned over more than nineteen times.” It is not disputed that each of these trades was reflected on the daily confirmations and monthly statements sent to and received by the plaintiffs. Irving Appel’s argument that his frequent travels prevented him from reading the monthly statements for almost four years does not alter the fact that reasonable diligence would have disclosed the allegedly excess trading in the account, which was detailed on the face of the confirmations and monthly state-merits. If it is correct that Appel, who describes himself as the sole active trustee, did not review the confirmation slips and monthly statements issued by the asset manager of the trust, then this was sheer dereliction of duty, as it was on the part of the other trustees. Plaintiffs may not close their eyes and say they do not see what is perfectly obvious. By November 1981, which plaintiffs urge was the start of the limitation period, the trustees had received sixteen monthly statements, and would in the exercise of reasonable diligence long since have discovered churning at a rate which was allegedly turning over the entire portfolio once a month. Even allowing the liberal period of one year in which to discover from the confirmations and monthly statements any churning in the account, the statute of limitations began to run in July or August of 1981, and not in November, as plaintiffs claim. This action was filed in October 1984, and under the two-year limitation period is clearly time-barred. Defendant Kidder’s motion to dismiss the plaintiffs’ causes of action under the federal securities laws is granted.

ARBITRATION OF STATE CLAIMS

The brokerage agreement between the trust and Kidder contained an arbitration clause requiring the submission to arbitration of “any controversy arising out of or relating to accounts of or transactions with” the plaintiffs. Kidder moves to compel arbitration of plaintiffs’ claims of misrepresentation, breach of fiduciary duty, breach of contract, and violations of statutory duties under New York law. Plaintiffs contend that Kidder waived its right to arbitration by commencing in this court, before the filing of the present action by plaintiffs, an action for return of securities mistakenly delivered to plaintiffs by Kidder.

The short answer to this contention is that Kidder’s commencement of an action, before the filing of the instant suit by plaintiffs, has nothing whatever to do with its right to arbitration under the agreement between the parties. Plaintiffs have cited to the Court no authority for the proposition that once a party commences litigation, at any time and for any claim, it has permanently waived its right to arbitrate any future disputes on unrelated matters with the same adversary. Nor can Kidder be said to have waived its right to arbitration by its conduct in this litigation. Kidder raised its claim for arbitration at the earliest possible time, upon initial motion to dismiss the complaint. Our Court of Appeals has repeatedly held that, “in view of the ‘overriding federal policy favoring arbitration,’ waiver ‘is not to be lightly inferred.’ ” Plaintiffs’ claim of waiver must fail; the motion to compel arbitration of plaintiffs’ state law claims to arbitration is granted.

Accordingly, plaintiffs’ federal causes of action will be dismissed as barred by the applicable statute of limitations; the parties are directed to proceed to arbitrate plaintiffs’ state law claims.

So ordered.

      . Grigoropoulos and Bonnie Appel were divorced sometime after the events at issue here; the date of the divorce is not a matter of record in this action.

      . 15 U.S.C. § 78j(b).

      . UAW v. Hoosier Cardinal Corp., 383 U.S. 696, 703-04, 86 S.Ct. 1107, 1112-13, 16 L.Ed.2d 192 (1966); Cope v. Anderson, 331 U.S. 461, 67 S.Ct. 1340, 91 L.Ed. 1602 (1947); Sack v. Low, 478 F.2d 360, 365 (2d Cir.1973).

      . N.Y.C.P.L.R. § 202:
      An action based upon a cause of action accruing without the state cannot be commenced after the expiration of the time limited by the laws of either the state or the place without the state where the cause of action accrued, except that where the cause of action accrued in favor of a resident of the state the time limited by the laws of the state shall apply.

        See Arneil v. Ramsey, 550 F.2d 774, 779 (2d Cir.1977).

      . Antone v. General Motors Corp., 64 N.Y.2d 20, 27-28, 484 N.Y.S.2d 514, 517, 473 N.E.2d 742, 745 (1984); Martin v. Julius Dierck Equip. Co., 52 A.D.2d 463, 384 N.Y.S.2d 479 (2d Dept.1976), aff’d, 43 N.Y.2d 583, 403 N.Y.S.2d 185, 374 N.E.2d 97 (1978).

      . Stafford v. International Harvester Co., 668 F.2d 142, 149 (2d Cir.1981); Industrial Consultants Inc. v. H.S. Equities, 646 F.2d 746, 747 (2d Cir.), cert. denied, 454 U.S. 838, 102 S.Ct. 145, 70 L.Ed.2d 120 (1981); Avagliano v. Sumitomo Shoji America, Inc., 614 F.Supp. 1397, 1404-05 (S.D.N.Y.1985); Maiden v. Biehl, 582 F.Supp. 1209, 1212 (S.D.N.Y.1984).

      . Industrial Consultants, 646 F.2d at 747; Sack v. Lowe, 478 F.2d 360, 368 (2d Cir.1973).

      . Affidavit of Irving Appel, at ¶ 14.

      . See Freschi v. Grand Coal Venture, 551 F.Supp. 1220, 1225-26 (S.D.N.Y.1982) (residence of trustee held locus of harm to trust where trustee was also trust’s major beneficiary).

      . 582 F.Supp. 1209, 1217-18 (S.D.N.Y.1984).

      . 582 F.Supp. at 1218.

      . See Conn.Gen.Stats. § 36-498.

      . See Conn.Gen.Stats. § 52-577.

      . See Dandorph v. Fahnestock & Co., 462 F.Supp. 961 (D.Conn.1979); Long v. Abbott Mortgage Corp., 424 F.Supp. 1095, 1097 (D.Conn.1976); Hitchcock v. De Bruyne, 377 F.Supp. 1403 (D.Conn.1974).

      . See Maiden v. Biehl, 582 F.Supp. 1209, 1213-14 (S.D.N.Y.1984); Campbell v. Upjohn, 498 F.Supp. 722, 726 (W.D.Mich.1980), aff’d, 676 F.2d 1122 (6th Cir.1982). Plaintiffs’ reliance upon Klock v. Kuhn Loeb Inc., 584 F.Supp. 210 (S.D.N.Y.1984), and Bache Halsey Stuart Inc. v. Namm, 446 F.Supp. 692 (S.D.N.Y.1978) is misplaced. Both cases held simply that the claims at issue were barred whether the two-year or three-year statute was applied. See Klock, 584 F.Supp. at 216 n. 9; Bache, 446 F.Supp. at 697-98.

      . Arneil v. Ramsey, 550 F.2d 774, 780 (2d Cir.1977); Moviecolor Ltd. v. Eastman Kodak Co., 288 F.2d 80, 83 (2d Cir.), cert. denied, 368 U.S. 821, 82 S.Ct. 39, 7 L.Ed.2d 26 (1961).

      . Berry Petroleum Co. v. Adams & Peck, 518 F.2d 402, 410 (2d Cir.1975); see also Stull v. Bayard, 561 F.2d 429, 432 (2d Cir.1977), cert. denied, 434 U.S. 1035, 98 S.Ct. 769, 54 L.Ed.2d 783 (1978); Arneil v. Ramsey, 550 F.2d 774, 780-81 (2d Cir.1977); Klein v. Bower, 421 F.2d 338, 343 (2d Cir.1970).

      . Affidavit of Irving Appel, at ¶ 12.

      . Id.

      . Plaintiffs’ Memorandum in Opposition, at 12.

      . Stull v. Bayard, 561 F.2d 429, 432 (2d Cir.1977).

      . Complaint, ¶ 16.

      . See Bache Halsey Stuart Inc. v. Namm, 446 F.Supp. 692 (S.D.N.Y.1978) (receipt of confirmations and statements put claimants "clearly on notice of the volume of trading in their accounts” for statute of limitations purposes).

      . Kidder, Peabody & Co. v. Welling Int'l Corp., 83 Civ. 8136 (RLO).

      . Sweater Bee by Banff v. Manhattan Indus., 754 F.2d 457 (2d Cir.1985), quoting Carcich v. Rederi A/B Nordi, 389 F.2d 692, 696 (2d Cir.1968); see also Erving v. Virginia Squires Basketball Club, 468 F.2d 1064 (2d Cir.1972).

      . Plaintiffs also argue in opposition to the motion to compel arbitration that their request for punitive damages, which may not be awarded by the arbitrators, prevents arbitration of their claims. This proposition would mean that any party seeking unilaterally to avoid an otherwise valid arbitration clause would need only to plead a claim for punitive damages. This is not the law. Cf. Sweater Bee by Banff v. Manhattan Indus., 754 F.2d 457, 463 (2d Cir.1985) (loss of potential punitive damage remedy not prejudicial to party compelled to arbitrate).


author: CHARLES SCHWARTZ, Jr., District Judge.

text:
    Marguerite Petz, wife of/and John G. BOURGEOIS, the Louisiana Manufactured Housing Association, Inc., a Louisiana Corporation v. PARISH OF ST. TAMMANY, LOUISIANA.
    Civ. A. No. 84-1364.
    United States District Court, E.D. Louisiana.
    Feb. 18, 1986.
    Thomas F. Daley, Law Offices of Thomas Daley, Metairie, La., for plaintiff.
    Steven M. Lozes, Lozes, Cooper & Lozes, New Orleans, La., for defendant.
   ORDER AND REASONS

CHARLES SCHWARTZ, Jr., District Judge.

This matter is before the Court on the motion of defendant, Parish of St. Tammany, for summary judgment as to plaintiff’s claims regarding violation of federal antitrust laws and 42 U.S.C. § 1983 and plaintiffs’ motion for summary judgment as to their claims under 42 U.S.C. § 1983. Neither party has addressed the plaintiffs’ claims regarding federal preemption of the Parish’s ordinance.

Upon a review of the memoranda, the depositions and the record in this matter, the Court finds that there exists an issue of material fact as to plaintiffs’ claims for relief based on anti-trust violations. Accordingly, summary judgment as to these claims is DENIED. However, the Court finds that there is no genuine issue of material fact as to the plaintiffs’ claims for relief under 42 U.S.C. § 1983. For the reasons which follow, plaintiffs’ motion for summary judgment as to their § 1983 claim is GRANTED; and the defendant’s motion for summary judgment as to the § 1983 claims is DENIED.

Plaintiffs, John and Marguerite Bourgeois, bought a doublewide mobile home from U.S. Mobile Homes in Slidell, Louisiana. This mobile home was towed to the Bourgeois’ property on Berry Todd Road near Lacombe, Louisiana, and placed on a cement slab. The slab, although purchased separately, was also purchased from U.S., Mobile Homes. See Deposition of Marguerite Bourgeois, at pps. 7-8. The two halves of the home were joined together at that time. See Defendant’s Statement of Uncontested Facts No. 2. Subsequent to the installation of the home, St. Tammany Parish denied Mr. and Mrs. Bourgeois a building permit to erect a garage as an attachment to the property in question. See Defendant’s Statement of Uncontested Facts No. 6. Additionally, St. Tammany Parish filed suit No. 77687 in the 22nd Judicial District Court of the State of Louisiana in an effort to enforce the zoning ordinance, excluding structures like that erected by the plaintiffs.

The parties agree that the Bourgeois property is zoned “A-2” pursuant to the St. Tammany Parish Land Use Ordinance. See Defendant’s Statement of Uncontested Facts No. 3; Plaintiffs’ Statement of Uncontested Facts No. 4. St. Tammany Parish classifies “mobile homes” (homes towed to a site on their axles) as “trailers,” which are not permitted in an “A-2” zone. However, the Parish does allow modular housing in “A-2” zones. See Plaintiffs’ Statement of Uncontested Facts No. 5.

The parties have provided the Court with a copy of the Comprehensive Land Use Regulations, Zoning Ordinance No. 523 of St. Tammany Parish, as revised in November, 1985 (hereinafter referred to as “St. Tammany Zoning Ordinance”). Section 2.401 of the St. Tammany Parish Zoning Ordinance states that an “A-2 suburban district [allows] only the following uses of property ...; single family dwelling, municipal and non-profit recreational use; schools offering general education courses; churches; household agriculture; signs not exceeding twelve square feet in area pertaining to the rental, lease, or sale of the above shall be permitted on any lot; golf courses. All buildings shall be erected with a main floor level in compliance with the requirements set forth in Flood Ordinance No. 791. [citation omitted].” St. Tammany Zoning Ordinance, Sections 2.401 and 2.402, provides that all uses not permitted by Section 2.4 are prohibited. St. Tammany Zoning Ordinance Section 2.402.

Part 9 of the St. Tammany Zoning Ordinance is entitled “Definitions.” In Section 9.26, “Building” is defined as “a structure which is designated and suitable for the habitation or shelter of human beings or animals, or the shelter or storage of property, or for use in occupation for some purpose of trade or manufacture.” St. Tammany Zoning Ordinance, Section 9.26. Section 9.63 defines a single family dwelling as a “building designed for or occupied exclusively by one family.” St. Tammany Zoning Ordinance, Section 9.63. A “mobile home” is defined as “any vehicle or similar portable structure mounted or designed for mounting on wheels, used or intended for use for dwelling purposes, including structural additions, except parked and unoccupied camping-type trailers. Any such vehicle or structure shall be deemed to be a mobile home whether or not the wheels have been removed therefrom and whether or not resting upon a temporary or permanent foundation.” St. Tammany Zoning Ordinance, Section 9.147 [emphasis added]. Similarly, a “trailer” is defined as a “vehicle equipped for use as [a] dwelling and designed to be hauled along a highway. A trailer is not to be classified as a dwelling in this ordinance. A vehicle standing on wheels or rigid supports which is used for living or sleeping purposes.” St. Tammany Zoning Ordinance, Section 9.222 [emphasis added].

In this case, we are confronted with the overlap of the above ordinance sections. The home in question, because it was moved to the property on wheels to which it was, at that time, attached, falls under the zoning ordinance definition of mobile home and trailer. See St. Tammany Zoning Ordinance, Sections 9.147 and 9.222; Deposition of Allen Cartier at pp. 12-14 (discussing the distinction between a “modular” and a “mobile” home).

The plaintiffs particularly focus their attack on the Ordinance on the distinction between modular homes, which the Parish considers permissible in an “A-2” zone, and mobile homes, which the Parish does not permit in an “A-2” zone. They also point out that St. Tammany Parish has no building ordinance. Accordingly, as the defendants readily admit, a tar shack and many other buildings of inferior construction to the home in question could be constructed on the instant property. See Deposition of Allen Cartier at page 29.

A local zoning ordinance is a valid exercise of police power unless “clearly arbitrary and unreasonable, having no substantial relation to the public health, safety, morals or general welfare,” Village of Euclid v. Ambler Realty, 272 U.S. 365, 47 S.Ct. 114, 71 L.Ed. 303 (1929). Cf. Maher v. City of New Orleans, 516 F.2d 1051 (5th Cir.1975); Folsom Road Civic Assn. v. Parish of St. Tammany, 407 So.2d 1219 (La.1981). Proper state purposes under the police power may encompass the goals not only of abating undesireable conditions, i.e., nuisances, but also of fostering the ends which a community deems worthy. Maher v. City of New Orleans, supra, 516 F.2d at 1060. It is also clear that the police power covers aesthetic as well as safety and health concerns. See Stone v. City of Maitland, 446 F.2d 83 (5th Cir.1971); Mayer, supra; Berman v. Parker, 348 U.S. 26 at 32-33, 75 S.Ct. 98 at 102, 79 L.Ed. 27. Accordingly, the courts are to give extreme deference to legislative determinations of community needs and solutions, Maher v. City of New Orleans, 516 F.2d at 1060, and a plaintiff is to bear a heavy burden to show that an ordinance is invalid. Id. Additionally, where the legislative determination is “fairly debatable, the legislative judgment must be allowed to control.” Euclid, supra, 272 U.S. at 388, 47 S.Ct. at 118; Stone, supra; Maher, supra.

Notwithstanding the foregoing, even though a zoning ordinance is presumptively valid, if it is clearly arbitrary and unreasonable, having no substantial relation to the public health, safety, morals or general welfare, it can be invalidated as violative of the fourteenth amendment. See Town of Chesterfield v. Brooks, 489 A.2d 600 (N.H.1985); Luczynski v. Temple, 203 N.J.Super. 377, 497 A.2d 211 (N.J.1985); Tyrone v. Crouch 129 Mich.App. 388, 341 N.W.2d 218 (1983). The equal protection clause requires that “the classifications drawn in a statute [be] reasonable in light of its purpose.” McLaughlin v. Florida, 379 U.S. 184, 85 S.Ct. 283, 13 L.Ed.2d 222 (1964); E.B. Elliott Adv. Co. v. Metropolitan Dade County, 425 F.2d 1141, 1153 (5th Cir.1970).

The instant ordinance declares its purposes to be “promoting the health, safety, morals, or general welfare of the Parish____” St. Tammany Zoning Ordinance at p. 1. It also declares that considerations underlying the ordinance are “among other things ... the character of the districts and their peculiar suitability for particular uses, with a view toward conserving the value of buildings and encouraging the most appropriate use of land throughout the Parish”. Id.

We are confronted here with a very narrow legislative distinction. The zoning ordinance in question distinguishes a “structure mounted or designed for mounting on wheels, used or intended for use for dwelling purposes ... whether or not the wheels have been removed therefrom and whether or not resting upon a temporary or permanent foundation” (see St. Tammany Zoning Ordinance, Section 9.147) from any other structure to be used as a dwelling. Site-built and pre-fabricated modular housing transported to a site on a truck or other conveyance other than its own axles or wheels are defined as a dwelling, and are distinguished from a “trailer.” St. Tammany Zoning Ordinance, Section 9.222 (“A trailer is not to be classified as a dwelling in this ordinance.”). The question, therefore, is whether or not this classification or distinction is reasonable in light of the purpose of the ordinance.

Apparently, the Parish concedes that this ordinance does not serve any health or safety purpose. This is evidenced not only by the failure of St. Tammany Parish Director of the Department of Development, Mr. Allen Cartier, to articulate a health or safety reason for the ordinance, see Deposition of Allen Cartier at p. 30, but also by the fact that the structure in question would have been acceptable under the ordinance but for the fact that it was transported to the site on its own axles, see Deposition of Allen Cartier at p. 9 (discussing the acceptability of a structure of this constructive floor plan), p. 11 (discussing the acceptability of this structure in terms of appearance) and at p. 13 (discussing the difference between modular housing and mobile homes), as well as the fact that the Parish lacks a building code; see Deposition of Allen Cartier at pp. 28-29.

Accordingly, the only rationale the City actively argues in favor of upholding this ordinance is that it promotes the welfare of Parish residents by preservation of aesthetic and property values.

Although we begin with the proposition that the police power covers aesthetic as well as health and safety concerns, see Maher v. City of New Orleans 516 F.2d 1051; Stone v. City of Maitland, 446 F.2d 83; Berman v. Parker, 348 U.S. 26, 75 S.Ct. 98, 99 L.Ed. 27; see, also, Costonis, Law and Aesthetics, 80 Mich.L.Rev. 353, 361 (1982) (the citing cases nationwide discussing zoning based on asthetic considerations), a zoning ordinance that does not preserve the values in pursuit of which it was enacted cannot be validated. See Summerell v. Phillips, 282 So.2d 450 (La.1973); Hankins v. Borrough of Rockleigh, 55 N.J.Super. 132, 158 A.2d 63 (N.J.1959); Nectow v. Cambridge, 277 U.S. 183, 48 S.Ct. 447, 72 L.Ed. 842 (1928). In this regard, the Parish urges that “when there are mobile homes in a subdivision that are adjacent or within a block of the traditional brick and mortar homes, that the value of the traditional goes down as far as much as $5000.00.” Deposition of Allen Cartier at p. 30). However, the Parish concedes that other than title covenants, there are no Parish regulations of community aesthetics. See Deposition of Allen Cartier at p. 31. In addition, other than flood control ordinances, the Parish has no building code. See Deposition of Allen Cartier at pp. 28-29. Indeed, the Parish concedes that a landowner “could build a tar paper shack[,] if he wanted to” so long as the structure was site-built. See Deposition of Allen Cartier at p. 29. When viewed against the backdrop of this general lack of regulations, the rationale for the Parish’s prohibition of the erection of mobile homes in an “A-2” residential zone is substantially undercut. Even recognizing that “the power to classify in the adoption of police laws ... admits of the exercise of a wide scope of discretion,” Lindsley v. National Carbonic Gas Company, 220 U.S. 61, 78-79, 31 S.Ct. 337, at 340, 55 L.Ed. 369 (1910) the failure of the Parish officials to engage in any other regulative activity aimed at promoting aestietic values makes it difficult to accept the argument that the exclusion of the type of homes here in question is other than arbitrary. This is additionally supported by the fact that not only would a dwelling like that of the plaintiffs be acceptible if it had been carried to the site by a truck rather than on its own axles, but also by the fact that structurally inferior and less aesthetically pleasing structures could be constructed on the land so long as they were site built.

Consequently, when evaluating the degree to which the ordinance in question contributes to the preservation of property values, the general lack of regulation in this area and the failure of the Parish to regulate in other areas which might be more fruitful, i.e., a building code or other aesthetic regulations, makes it difficult to find that this zoning ordinance is “reasonable” in light of the purposes urged by the Parish. Cf. McLaughlin v. Florida, 379 U.S. 184, 85 S.Ct. 283, 13 L.Ed.2d 222 (1964) (discussing the requirements of the Equal Protection Clause).

Having reviewed the ordinance in question, the application of the ordinance to the facts of this case and the applicable law, we are left with the firm conviction that the ordinance is ill-conceived, arbitrary and unreasonable. As the Michigan Supreme Court has noted: “[t]he mobile home today can compare favorably with site-built housing in size, safety and attractiveness. To be sure, mobile homes inferior in many respects to site-built homes continue to be manufactured. But the assumption that all mobile homes are different from all site-built homes with respect to criteria recognizable under the police power can no longer be accepted.” Robinson Township v. Knoll, 410 Mich. 293, 302 N.W.2d 146 at 150-51, (Mich.1981). The ordinance in question here does not address itself to the characteristics of the mobile home as it exists on the land, but as to its characteristics at the time of delivery. Accordingly, we find, in conformity with the findings of the Michigan Supreme Court, that the characteristics specified in the ordinance do not constitute a basis for the disparate treatment of “mobile homes” as applied to the structures in question. See Robinson Township v. Knoll, 302 N.W.2d at 152.

In light of the foregoing, we find that the ordinance, insofar as it defines structures like those of the plaintiff as trailers and, as a consequence thereof, does not allow such structures to be classified as dwellings, is not reasonably related to a police power purpose. Consequently, the plaintiffs' motion for summary judgment is granted insofar as it seeks to- invalidate the ordinance provisions that allow multi-sectional manufactured housing to be classified as modular housing and, accordingly, capable of serving as a dwelling, and yet provide that “mobile homes” are not classifiable as a dwelling because the structure is mobile in its assembled form, the complete package including a chassis.

The Court finding that there is no just reason for delay, the Clerk of Court is directed to enter judgment pursuant to Rule 54(b) in favor of plaintiffs as to their 42 U.S.C., § 1983 claim. The plaintiffs are directed to meet with the defendant and to submit a joint proposed form of judgment to the Clerk on or before February 25, 1986.

      . Because neither party has set forth any facts showing or denying the existence of a contract or a conspiracy, as required by 15 U.S.C. § 1, the anti-trust claim is not ripe, at this juncture, for summary judgment.

      . Although the parties disagree over the application of the term "manufactured home” or "mobile home” to the structure in question, we will use the term mobile home to refer to the type of structure in question.

      . While there is substantial disagreement between the parties as to the exact scope of relief sought in this action, both parties agree that the purpose of the action was to enforce the St. Tammany Parish zoning ordinance in question. Compare defendant's Statement of Uncontested Facts No. 7 with Plaintiffs’ Response to Defendant's Statement of Uncontested Facts No. 7.

      . The Deposition read, in part:
      “Q: Are there any regulations on asthetics in St. Tammany Parish as to structures?
      A: Yes, there are in certain subdivisions but not parishwide as well as police jury ordinances, no.
      Q: So you are referring to title covenants?
      A: Yes, other than that, there is not.
      Q: So the Parish does not regulate aesthetics?
      A: No.”


author: MATSCH, District Judge.

text:
    TORWEST DBC, INC., a Colorado corporation, Plaintiff, v. John W. DICK, Werner C. Heinrichs, William B. Pauls, Canusa Investments (CI) Ltd., a Jersey, Channel Islands corporation, and Barclays Bank of Canada, a Canadian corporation, Defendants.
    Civ. A. No. 85-M-625.
    United States District Court, D. Colorado.
    Feb. 18, 1986.

      Gary T. Cornwell, F. Kelly Smith, Robert Blakey, McGuire, Cornwell & Blakey, Denver, Colo., for plaintiff.
    David A. Zisser, O’Connor & Hannan, Denver, Colo., for defendant John W. Dick.
    James A. Clark, Bruce D. Pringle, Baker & Hostetler, Denver, Colo., for defendants Werner Heinrichs and Canusa Investments (Cl) Ltd.
    Charles F. Brega, Roath & Brega, Denver, Colo., for defendant William B. Pauls.
    Craig R. Maginness, Sherman & Howard, Denver, Colo., for defendant Barclays Bank of Canada.
   MEMORANDUM OPINION AND ORDER

MATSCH, District Judge.

The complaint alleges that the defendants John W. Dick, Werner C. Henrichs and William B. Pauls secretly purchased real property and resold it at a substantial profit to Torwest DBC, Inc., (Torwest DBC) a corporation in which they were directors. Torwest DBC invoked this court’s jurisdiction by claiming under provisions of the Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. §§ 1961-1968 (RICO). The first claim brought under section 1962(d) alleges a conspiracy to violate RICO provisions; the second claim based on section 1962(c) alleges that the defendants conducted the affairs of an enterprise through a pattern of racketeering activity within the meaning of section 1961(1)(B) and (5). The complaint also alleges thirteen other claims for relief based on Colorado law, including Colorado’s statutory analogue to RICO. Jurisdiction is alleged under the RICO statute, 18 U.S.C. § 1965, and 28 U.S.C. § 1331.

Now before the court are defendants’ motions to dismiss upon the contention that the RICO claims are time-barred and for the failure to state claims for relief under RICO. At oral argument held on November 19, 1985, the parties agreed that the court may proceed under F.R.Civ.P. 56, by accepting the statement of facts contained in the plaintiff’s brief filed September 26, 1985 as the factual support for the RICO claims.

In summary, the plaintiffs assert that in 1974, defendants Dick, Heinrichs and Pauls, operating through Vace Securities (Vace), entered into an agreement with Great-West Life Assurance Company (Great-West) for the purpose of acquiring and developing real property. Vace was to find new properties for development, while Great-West’s primary role was to finance the ventures. As part of the agreement, a third corporation, Torwest Properties Limited (Torwest) was formed. Vace appointed defendants Dick, Heinrichs and Pauls to the Torwest board of directors, and Great-West appointed three other members.

In 1977, Dick, Heinrichs and Pauls formed Canusa Investments Limited (Canusa) in Jersey, Channel Islands, for the purpose of secretly acquiring an interest in commercial property known as the Denver Business Center (DBC). The purchase was made by Canusa for $5,400,000. The defendants then proposed to the other members on the Torwest board that Torwest purchase the property from Canusa. Acting on the recommendations of Dick, Heinrichs and Pauls, the Torwest board voted in favor of the DBC purchase. Torwest then formed Torwest DBC to acquire and develop the property, and the sale was consummated. It is alleged that the defendants received an immediate secret profit of $1,250,000, plus a potential $6 million additional profit through a participation agreement.

To recover on the section 1962(c) claim, Torwest DBC must show the defendants’ (1) conduct (2) of an enterprise (3) through a pattern (4) of racketeering activity. Sedima v. IMREX Company, — U.S. -, 105 S.Ct. 3275, 3285, 87 L.Ed.2d 346 (1985). For the purposes of these motions, it is assumed that the defendants committed numerous acts of mail fraud, 18 U.S.C. § 1341, wire fraud, 18 U.S.C. § 1343, and transportation of money taken by fraud, 18 U.S.C. § 2314. Thus, racketeering activity is assumed.

A “pattern of racketeering activity” as defined in the statute “requires at least two acts of racketeering activity, one of which occurred after the effective date of this chapter ... and the last of which occurred within ten years (excluding any period of imprisonment) after the commission of a prior act of racketeering activity.” 18 U.S.C. § 1961(5). The principal question left open in the Sedima opinion is whether the courts may develop a more complete definition of a pattern of racketeering activity in applying RICO. It is the view of this court that the Supreme Court strongly suggested that this element is an appropriate area for further consideration by the language of footnote 14, as follows:

As many commentators have pointed out, the definition of “pattern of racketeering activity” differs from the other provisions in § 1961 in that it states that a pattern “requires at least two acts of racketeering activity.” § 1961(5) (emphasis added), not that it “means” two such acts. The implication is that while two acts are necessary, they may not be sufficient. Indeed, in common parlance two of anything do not generally form a “pattern.” The legislative history supports the view that two isolated acts of racketeering activity do not constitute a pattern. As the Senate Report explained: “The target of [RICO] is thus not sporadic activity. The infiltration of legitimate business normally requires more than one ‘racketeering activity’ and the threat of continuing activity to be effective. It is this factor of continuity plus relationship which combines to produce a pattern.” S.Rep. No. 91-617, p. 158 (1969) (emphasis added). Similarly, the sponsor of the Senate bill, after quoting this portion of the Report, pointed out to his colleagues that “[t]he term ‘pattern’ itself requires the showing of a relationship____So, therefore, proof of two acts of racketeering activity, without more, does not establish a pattern____” 116 Cong.Rec. 18940 (1970) (statement of Sen. McClellan). See also id., at 35193 (statement of Rep. Poff) (RICO “not aimed at the isolated offender”); House Hearings, at 665. Significantly, in defining “pattern” in a later provision of the same bill, Congress was more enlightening: “criminal conduct forms a pattern if it embraces criminal acts that have the same or similar purposes, results, participants, victims, or methods of commission, or otherwise are interrelated by distinguishing characteristics and are not isolated events.” 18 U.S.C. § 3575(e). This language may be useful in interpreting other sections of the Act. Cf. Iannelli v. United States, 420 U.S. 770, 789 [95 S.Ct. 1284, 1295, 43 L.Ed.2d 616] (1975).

Sedima, supra, 105 S.Ct. at 3285, n. 14. The Senate report referred to in footnote 14 includes the following language:

The concept of “pattern” is essential to the operation of the statute. One isolated “racketeering activity” was thought insufficient to trigger the remedies provided under the proposed chapter, largely because the net would be too large and the remedies disproportionate to the gravity of the offense.

S.Rep. No. 617, 91st Cong., 1st Sess. 159 (1969)

Courts should look to the purposes, results, participants, victims and methods of commission to determine whether a pattern of racketeering activity exists. The number of predicate acts, if more than one, is irrelevant. The question is the nature of the conduct under all of the circumstances.

The plaintiff’s statement of facts does not show a pattern of racketeering activity. First, the defendants’ conduct had a single purpose — to obtain a secret profit in the sale of one parcel of commercial property. Second, the conduct had a single result— Torwest DBC paid more for the property than it would have paid had the fraud not occurred. Third, there was only one set of participants. Fourth, there is a single victim, Torwest DBC. Fifth, there was one method of commission — an elaborate scheme, that included the formation of Camisa and the secret purchase of DCB. Where there is only one purpose, one result, one set of participants, one victim and one method of commission, there is no continuity and, therefore, no pattern of racketeering activity.

RICO also requires that the predicate acts must be related to the statutorily proscribed conduct. There must be “continuity plus relationship.” The required relationship will be different, depending upon the prohibited conduct. Under section 1962(a), the predicate acts must be related in the sense that they produce proceeds which are then invested in an enterprise. Under section 1962(b), the predicate acts must be related to the objective of acquiring or maintaining control of an enterprise. Section 1962(c) requires all of the acts to be related to the conduct of the affairs of the enterprise. See United States v. Elliott, 571 F.2d 880, 899 n. 23 (5th Cir.), cert. denied, 439 U.S. 953, 99 S.Ct. 349, 58 L.Ed.2d 344 (1978).

In United States v. Zang, 703 F.2d 1186 (10th Cir.1982), cert. denied, 464 U.S. 828, 104 S.Ct. 103, 78 L.Ed.2d 107 (1983), a case decided prior to Sedima, the court examined the RICO pattern requirement in the context of a criminal prosecution under section 1962(a). There, the defendants purchased lower tier priced controlled crude oil, fraudulently recertified it as more expensive higher tier oil, and sold it at a substantial profit from December of 1976 through September of 1978. The scheme depended upon the mailing of fraudulent invoices containing tier certifications.

The result in Zang is consistent with the continuity requirement of Sedima. In Zang, the government proved that the defendants altered many invoices, each involving different shipments of oil. Every time oil was sold, the purchaser paid more than the seller was legally entitled to charge under applicable government regulations, and the fraud affected downstream purchasers. There were a series of results attributable to methods that were employed again and again, which was sufficient to satisfy both the continuity and relationship requirements for a pattern of racketeering activity.

Similarly, in Illinois Department of Revenue v. Phillips, 771 F.2d 312 (7th Cir.1985), the state department of revenue sued a retailer under RICO for filing nine fraudulent tax returns over a nine month period. The court held that each mailing could constitute mail fraud and that an adequate pattern was alleged for a violation of section 1962(c). Under Illinois law, retailers are required to pay sales taxes monthly. The fraud had a different result every month, i.e. the defendant used the same methods to defraud the state out of a different sum of money many times over. Thus, while there was a single victim, the retailer conducted his business enterprise through multiple mail frauds in an established pattern.

At oral argument, plaintiff suggested that the DBC sale should not be considered a single transaction because courts previously have held that the racketeering acts must be interrelated. See, e.g., United States v. Weatherspoon, 581 F.2d 595, 601 n. 2 (7th Cir.1978). Therefore, argues the plaintiff, the RICO statute would be emasculated since if it is alleged that the acts are separate, a defendant will contend that the acts are not related, and conversely, if a plaintiff contends that the acts are related, a defendant will argue that there must be more than one transaction.

In this court’s view there is no dilemma. First, section 1962(c) requires that predicate acts need only be related to the conduct of the affairs of the enterprise, not that they necessarily be closely related to each other. Second, a focus on the issue of the number of transactions is misleading. The inquiry should be concerned with whether the conduct establishes a reliable sample of traits or other observable features that can be said to constitute a pattern of behavior. This inquiry should be pursued by examining all of the factors suggested by footnote 14 in Sedima.

The plaintiff also contended at oral argument that the continuity plus relationship requirement is satisfied in this case because the defendants were general agents of the enterprise. The relationship requirement concerns the nexus between the predicate acts and the proscribed conduct. The relationship of the defendants to the enterprise is not controlling. It is obviously true that the defendants were in a position to undertake additional schemes to defraud the plaintiff. But there is no suggestion in this case that the defendants did so. What is important is the proven pattern of behavior, not the possibility of a future pattern of behavior based upon the positions of the parties.

This court is aware of the decision in R.A.G.S. Couture, Inc. v. Hyatt, 774 F.2d 1350 (5th Cir.1985). There, a corporation sued two former employees and stockholders, including an ex-president, for allegedly preparing false invoices and submitting them to the corporation after they left its employ. Two mailings were alleged — one by the defendant to the plaintiff containing the invoices, the second a letter from plaintiff’s counsel to defendants’ counsel. The Fifth Circuit held that the complaint alleged a sufficient pattern of racketeering activity to state a claim under 18 U.S.C. § 1964(c).

At oral argument counsel for Torwest DBC stated that the Hyatt court reached the wrong result. This court agrees, but there is no convincing distinction between the position plaintiff would have this court adopt and the Hyatt decision. If the continuity requirement can be satisfied by the mere number of acts, or by the agency status of a defendant, then the defendants in Hyatt are little different from the defendants here. This court would dismiss the complaint in Hyatt because all that was alleged was a scheme to defraud R.A.G.S. by submitting false invoices claiming money for repairs made to sewing machines. The conduct had a single purpose, result, set of participants, victim, and method of commission. Accordingly, no pattern of behavior cognizable under RICO was alleged. If RICO requires nothing more than multiple predicate acts, the simplest mail fraud schemes would be brought within it because multiple mailings are involved in almost all such cases.

Because of the conclusion that the plaintiff has not asserted a sufficient pattern of racketeering activity to support a section 1962(c) claim, it is not necessary to decide whether the plaintiff’s allegation that “[t]he activities of Great-West, Torwest and Torwest DBC in the acquisition and development of commercial properties” (Complaint para. 72) constitute a cognizable enterprise. It can be noted, however, that an enterprise requires a showing of an association of persons or entities, not simply a collection of activities. The plaintiff’s apparent difficulty in defining the enterprise is not unrelated to its difficulty in alleging a pattern of racketeering activity.

The first claim for relief in the complaint is under the conspiracy section of the RICO statute, section 1962(d), which provides: “It shall be unlawful for any person to conspire to violate any of the provisions of subsection (a), (b), or (c) of this section.” After a careful review of the accepted statement of facts provided by the plaintiff, it appears that there is no basis for contending that the defendants contemplated fraudulent schemes other than the sale of the DBC. Indeed, all claims in the complaint are based upon the single “SCHEME TO DEFRAUD” described in the complaint on pages 3-11. Accordingly, no facts or inferences support a contention that the defendants conspired to conduct additional activities to harass the plaintiff in a manner which would meet the requirement. Accordingly, no claim for relief is stated under section 1962(d).

Because the first and second claims in the complaint must be dismissed, there is no basis for exercising pendent jurisdiction over the state law claims. United Mine Workers of America v. Gibbs, 388 U.S. 715, 726, 86 S.Ct. 1130, 1139, 16 L.Ed.2d 218 (1966).

Upon the foregoing, it is

ORDERED, that the defendants’ motions for summary judgment under F.R.Civ.P. 56 are granted, and the Clerk' shall enter judgment of dismissal of the first and second claims for relief, and it is

FURTHER ORDERED, that the third through fifteenth claims for relief are dismissed without prejudice. No costs are awarded.


author: PATRICK F. KELLY, District Judge.

text:
    UNITED STATES of America, Plaintiff, v. Robert J. HARGROVES, Defendant.
    No. 86-10005-01.
    United States District Court, D. Kansas.
    Feb. 19, 1986.
    Robin Fowler, Asst. U.S. Atty., Wichita, Kan., for plaintiff.
    W. Thomas Gilman, Redmond, Redmond, O’Brien & Nazar, Wichita, Kan., for defendant.
   MEMORANDUM AND ORDER

PATRICK F. KELLY, District Judge.

This matter is before the Court on the defendant’s motion to suppress. The defendant, Robert J. Hargroves, is charged with fraudulently receiving Social Security benefits in violation of 42 U.S.C. § 408(d). Defendant moves to suppress evidence of certain admissions he made to Social Security agents. Defendant contends his Fifth Amendment rights were violated, as those statements were obtained from him during a custodial interrogation without the benefit of Miranda warnings. The Court finds the defendant was not in “custody” as that term has been defined by Miranda and its progeny. Accordingly, no Miranda warnings were required and the defendant’s motion to suppress is denied.

In June of 1976, the defendant suffered a heart attack and subsequently underwent triple bypass surgery. In August of 1978, he applied for Social Security disability benefits as he was unable to work due to his cardiac disease. In June, 1979, an administrative law judge allowed his claim and ordered that the defendant receive benefits from and after March 7, 1978. The defendant received benefits until June 3, 1983, at which 'time the Social Security Administration terminated the benefits due to their investigation of the defendant.

At this point the facts become controverted. The defendant claims that prior to February, 1985, he received several “threatening” letters asking him to repay the benefits he had received. On February 27, 1985, he received a letter from the Social Security Administration requesting that he report to the Social Security Offices in Wichita, Kansas, on March 6, 1985, for an investigative interview. On March 5, Special Agent Max Kern (Department of Health and Human Services) phoned the defendant at his place of employment to remind him of the meeting.

The defendant reported for his interview on March 6. He claims he was taken into an “interrogation” room with “bare walls” and “only a table and chairs” for furnishings. Pictures of this room introduced at the hearing show a window and several pictures on the walls. Special Agent Kern, another Social Security agent, and the defendant were the only people present. The interview lasted for approximately one hour. The defendant claims Max Kern showed him his badge at the beginning of the session, but the government contends this is impossible as agent Kern did not (and does not) have a badge. At the hearing on this motion, Mr. Hargroves conceded that he was shown identification rather than a badge. In his memorandum in support of his motion, the defendant alleges that agent Kern informed him that it was “a good thing” he appeared voluntarily, otherwise “he would have come to the defendant’s place of business and brought him to the investigation involuntarily.” The government denies the validity of this allegation. The defendant also claims in his motion that agent Kern repeatedly advised him that he did not believe the defendant would be subjected to any criminal prosecution. However, at the hearing on this motion, the defendant testified that no statements were made to him about the likelihood of criminal prosecution.

In the course of the interview, the defendant gave a statement in which he ad.mitted that he had been gainfully employed during the time he was receiving Social Security benefits. After making and signing the statement, the defendant left the Social Security Office alone. The defendant testified that during the interview Agent Kern was extremely cordial and shook hands with him at the beginning and the end of the interview.

On January 7, 1986, the defendant was indicted for fraudulently receiving Social Security disability benefits, in violation of 42 U.S.C. § 408(d). The defendant has pled “not guilty.”

Miranda safeguards are implicated only when a suspect is subjected to interrogation in a custodial setting. Miranda v. Arizona, 384 U.S. 436, 477-78, 86 S.Ct. 1602, 1629-30, 16 L.Ed.2d 694 (1966). The sole issue before this Court is whether the defendant was “in custody” for purposes of Miranda.

The Court in Miranda held that “[b]y custodial interrogation we mean questioning initiated by law enforcement officers after a person has been taken into custody or otherwise deprived of his freedom in any significant way.” 384 U.S. at 444, 86 S.Ct. at 1612 (emphasis added). Accordingly, the custody element of Miranda is found where there are significant restrictions on the individual’s freedom of action, or on the individual’s freedom to depart. See Oregon v. Mathiason, 429 U.S. 492, 495, 97 S.Ct. 711, 713, 50 L.Ed.2d 714 (1977). In these situations, the behavior of law enforcement officers may be such as to bear on the individual’s will to resist and bring about involuntary confessions to crime. The Supreme Court recently stated that, “the ultimate inquiry is simply whether there is a ‘formal arrest or restraint on freedom of movement’ of the degree associated with a formal arrest.” California v. Beheler, 463 U.S. 1121, 1125, 103 S.Ct. 3517, 3519, 77 L.Ed.2d 1275 (1983) (quoting Mathiason, 429 U.S. at 495, 97 S.Ct. at 714).

Although a suspect may be “in custody” without a formal arrest, the standard is very high for a non-arrest situation. As the Supreme Court recently stated in Minnesota v. Murphy, 465 U.S. 420, 430, 104 S.Ct. 1136, 1144, 79 L.Ed.2d 409, 421, “... custody for Miranda purposes has been ... narrowly circumscribed.” The facts of Mathiason are illustrative of this. In Mathiason, the police suspected a parolee in a burglary. A police officer left his card at the parolee’s apartment along with a note requesting that he call the officer in order to discuss something. The parolee did call, and they agreed to meet at a state patrol office. The parolee went to the meeting voluntarily, was taken into an interview room and informed that he was not under arrest but was suspected in the burglary. He was not advised of his Miranda rights. The officer falsely told the parolee that his fingerprints had been found at the crime scene. The parolee then confessed. The Supreme Court held that the confession should not have been suppressed because the parolee had voluntarily come to the police station, had been informed that he was not under arrest, and had been allowed to leave at the close of the interview without hindrance — this despite the fact that the officer had made the false statement about the fingerprints.

Beheler and Mathiason require that the totality of the circumstances of each ease be examined by the Court in deciding whether or not a defendant was “in custody.” Beheler, 463 U.S. at 1125, 103 S.Ct. at 3519. The standard is whether a reasonable person in the defendant’s position would have believed he was in custody and unable to leave if he so desired. Yount v. Patton, 710 F.2d 956 (3d Cir.1983); United States v. Hall, 421 F.2d 540 (2d Cir.1969).

In United States v. Brown, 531 F.Supp. 37 (D.Mont.1981), the court focused on four factors in evaluating the totality of the circumstances: (1) the language used to summon the defendant; (2) the physical surroundings; (3) the manner in which the interview was conducted; and (4) the pressure exerted to detain the defendant. In Brown, the court found the defendant was in custody because: (1) the police went to the defendant’s house to summon him; (2) the interview was conducted in a jail building; (3) two FBI agents and two police officers were present and conducted the interview; and (4) the defendant was told that if he did not cooperate he would be kept all day.

In the instant case, the defendant was summoned by letter and a follow-up phone call. He came to the meeting voluntarily and left freely. The defendant was never placed under arrest, nor was he threatened with arrest. The statement he gave was in his own words, and there is no allegation that it was “suggested” to him. The agent’s alleged statement to the defendant that “it was a good thing he appeared because otherwise he would have been subpoenaed” was arguably intimidating to this defendant. However, the situation herein involved was no more “intimidating” than the situation in Mathiason, where the interview took place in a jail and the police officer lied to the suspect. Moreover, Agent Kern’s conduct in the instant case was clearly less coercive than the police officer’s conduct in Brown, where the suspect was interviewed in a jail building and was threatened with day-long custody if he did not cooperate. Mr. Hargroves was never threatened.

The defendant implies that the physical appearance of the interview room (bare walls, etc.) created the atmosphere of a “police station” interrogation room. He also notes that prior to the interview he was a suspect and the investigation was already under way. These factors are unpersuasive, however. In Beheler, the court stated: “... We have explicitly recognized that Miranda warnings are not required ‘simply because the questioning takes place in the station house, or because the questioned person is one whom the police suspect.’ ” 463 U.S. at 1125, 103 S.Ct. at 3520 (quoting Mathiason, 429 U.S. at 495, 97 S.Ct. at 714). The site of the interview is only one factor to be considered. In Beckwith v. United States, 425 U.S. 341, 347, 96 S.Ct. 1612, 1616, 48 L.Ed.2d 1 (1976), the court clarified that the “in custody” requirement is not satisfied merely because the police interview a person who is the “focus” of a criminal investigation. (Beck-with was being investigated by the IRS for tax evasion). In fact, “focus” was implicitly defined in Miranda as questions initiated by law enforcement officers after a person is “in custody.” See Minnesota v. Murphy, 465 U.S. 420, 104 S.Ct. 1136, 79 L.Ed.2d 409 (1984); United States v. Leach, 749 F.2d 592 (10th Cir.1984).

The defendant cites United States v. Dickerson, 291 F.Supp. 633 (N.D.Ill., E.Div., 1968), as authority that “intimidation” by federal authorities is sufficient to invoke the need for constitutional safeguards. The defendant’s reliance on this case is misplaced, as the Seventh Circuit has explicitly held that Dickerson was overruled by the Supreme Court’s holding in Beckwith, 425 U.S. 341, 96 S.Ct. 1612. See United States v. Fitzgerald, 545 F.2d 578 (7th Cir.1976). The Supreme Court does not follow the subjective test used in Dickerson.

Having reviewed the totality of the circumstances, the Court finds that the interview involved herein was not conducted in such a way so as to have restrained the defendant’s freedom of movement to the degree associated with a formal arrest. Accordingly, no Miranda warnings were necessary.

IT IS THEREFORE ORDERED this 19 day of February, 1986, that defendant Hargroves’ motion to suppress is denied.


author: WEINSTEIN, Chief Judge:

text:
    In the Matter of the Application of David WILLIAMS and Michael Arnold for an order directing the release of $53,040 in U.S. Currency or in the alternative, directing that forfeiture proceedings be instituted.
    No. CV-85-3219.
    United States District Court, E.D. New York.
    Feb. 19, 1986.
    Irving Cohen, New York City, for plaintiff.
    Raymond J. Dearie, U.S. Atty., E.D.N.Y., Brooklyn, N.Y. by Kevan Cleary, for U.S.
   WEINSTEIN, Chief Judge:

David Williams and Michael Arnold bring this petition to compel the release of $53,-040 seized at LaGuardia Airport. The United States had not instituted a forfeiture proceeding because, in its view, petitioners failed to comply with the bond requirements established by the Drug Enforcement Administration. The government now moves to dismiss the petition on the ground that this court lacks subject matter jurisdiction.

FACTS

David Williams was stopped by DEA agents on April 1, 1985, while waiting to board a flight from LaGuardia Airport in New York to Miami. The parties dispute the reason for the stop. Williams contends that the stop was unauthorized. The government’s position is that Williams was detained on a marijuana charge even though, according to Williams, the agents did not mention marijuana until hours after the stop and a search of Williams’ luggage.

The DEA agents arrested Williams. A search of his luggage revealed $53,040 in cash. It was seized. In the ensuing weeks Williams’ and Arnold’s attorney attempted to have the DEA commence forfeiture proceedings. On May 22, the DEA informed Williams’ and Arnold’s attorney that his clients would have to file a claim, together with either a 10% cost bond of $5,304 or an in forma pauperis petition. On June 19, the DEA received a notice of claim from David Williams as owner of $15,040 and Michael Arnold as owner of the balance, $38,000, with pauper’s affidavits from both men.

The affidavits reflected modest assets. Williams claimed a salary of $1000 per month, $900 in a bank account, and a house valued at $14,800 on which he owed $11,000 in taxes. Arnold claimed $300 per week in salary, $14,440 a year in rent payments, $3400 in a bank account, and a $90,000 house, approximately two-thirds owned free and clear. Both men claimed four dependents each.

Five weeks after receiving the claim, the DEA rejected the paupers’ affidavits as lacking in merit. Shortly thereafter, Williams and Arnold sued to obtain the release of the $53,040.

LAW

The Drug Enforcement Administration may seize money that is “furnished or intended to be furnished by any person in exchange for a controlled substance.... ” 21 U.S.C. § 881(a)(6). Process is governed by United States Customs Service laws. 21 U.S.C. § 881(d).

When it seizes property valued at $100,-000 or less, the DEA must publish, for at least three weeks, notice of the seizure and its intention to have the property forfeited. 19 U.S.C. § 1607. Within 20 days of the first publication of the notice, a person claiming an interest in the property must file a notice of claim and a bond of $2500 or ten percent of the claimed property, whichever is less:

Any person claiming such [property] may at any time within twenty days from the date of the first publication of the notice of seizure file with the appropriate customs officer a claim stating his interest therein. Upon the filing of such claim, and the giving of a bond to the United States in the penal sum of $2,500 or 10 percent of the value of the claimed property, whichever is lower, but not less than $250, with sureties to be approved by such customs office ... such customs officer shall transmit such claim and bond ... to the United States attorney for the district in which seizure was made, who shall proceed to a condemnation of the merchandise or other property in the manner prescribed by law.

19 U.S.C. § 1608.

DEA regulations concerning claimed property do not provide for in forma pauperis petitions. 21 C.F.R. 1316.71-1316.81. The Customs Service regulations control. 21 U.S.C. § 881(d). “Upon satisfactory proof of financial inability to post the bond, the district director shall waive the bond requirement for any person who claims an interest in the seized property.” 19 C.F.R. 162.47(e).

As a result of the combination of statutes and regulations, if a bond or a pauper’s affidavit, together with a notice of claim is presented to the DEA agency, formal condemnation proceedings must be commenced by the government. 19 U.S.C. § 1608. Due process then requires a determination of the ownership of seized property within a reasonable period of time after the seizure. See United States v. Von Neumann, — U.S. -, -, 106 S.Ct. 610, 613, 88 L.Ed.2d 587 (1986); United States v. $8,850, 461 U.S. 555, 103 S.Ct. 2005, 76 L.Ed.2d 143 (1983).

The network of statutes and regulations governing the handling and disposition of seized property exist to protect the constitutional right not to be deprived of property without due process of law. In forma pauperis provisions are thus constitutionally mandated for the indigent. See Wiren v. Eide, 542 F.2d 757, 763 (9th Cir.1976) (forfeiture laws must not be enforced so as to create “a profitable or self-supporting operation by denying the fifth amendment rights of the poor”).

In forma pauperis claims raise practical as well as constitutional issues. The forfeiture situation is one of inherent tension, with an individual’s rights temporarily suspended. Action favors the person claiming rights to seized property; inaction the government, which has the property. Cf. United States v. United States Coin & Currency, 401 U.S. 715, 91 S.Ct. 1041, 28 L.Ed.2d 434 (1971).

The government’s argument is essentially that an in forma pauperis petition must be meritorious in the eyes of the DEA. Petitioners maintain that a pauper’s affidavit alone complies with the bond requirement, even if the DEA concludes that the affidavit lacks merit, for to allow any discretion to the agency would unite the functions of adversary and arbiter.

An appropriate balance requires a reasonable or good faith claim of indigency. Where there is a doubt, the claimant must be afforded the right to have the court determine good faith. 5 U.S.C. §§ 705-706.

The DEA does not warn a claimant of adverse consequences if the affidavit is deemed not meritorious. It does not give notice that compliance with the technical requirements must satisfy the agency director as to its overall merit and honesty. Should the DEA reject a pauper’s affidavit that is not facially unreasonable, procedural fairness dictates that it must allow petitioners to subsequently file the bond.

APPLICATION OF LAW TO THE FACTS

Both parties are content to rely on their submission of a written record. No hearing is required.

Williams’ and Arnold’s affidavits, taken at face value, demonstrate a borderline economic station. Arnold might have been able to afford a pro rata share of the bond. Williams probably could not. It should be noted that the DEA misinformed petitioners as to the amount of the bond: The sum mentioned was $5,304, or ten percent of the amount seized, rather than the statutory maximum of $2,500. It was not unreasonable for Williams and Arnold to believe that a bond was beyond their means. CONCLUSION

Williams and Arnold, now apprised of the correct amount needed, shall post the $2500 bond within ten days or waive their right to a forfeiture proceeding.

Upon timely posting, the government shall promptly commence a forfeiture proceeding or return the cash to the person from whom it was seized.

SO ORDERED.