author: TENNEY, District Judge.

text:
    Francisco SOLER, et al., Plaintiffs, v. G & U, INC., Charles Gratz, d/b/a Charles Gratz Farm, Defendants. Jann S. FLING, et al., Plaintiffs, v. PEAT-GRO FARMS, INC., Defendant. Pablo LIVAS, et al., Plaintiffs, v. BIERSTINE FARMS, INC., Defendant. Gilberto GONZALEZ, et al., Plaintiffs, v. CEDAR VALLEY GROWERS, INC., Defendant. Freddy VALENTIN, et al., Plaintiffs, v. Raymund MYRUSKI, Defendant. Cecilio ENCARNACION, et al., Plaintiffs, v. W.K.W. FARMS, INC., Defendant. SOLAR, et al., Plaintiffs, v. U.S. SECRETARY OF LABOR, et al., Defendants. G & U, INC., et al., Plaintiffs, v. U.S. DEPARTMENT OF LABOR, et al., Defendants.
    Nos. 78 Civ. 6252 (CHT), 78 Civ. 6257 (CHT)-78 Civ. 6261 (CHT), 80 Civ. 3506 (CHT) and 83 Civ. 9122 (CHT).
    United States District Court, S.D. New York.
    June 14, 1985.

      Farmworker Legal Services of New York, Inc., Newburgh, N.Y., for plaintiffs; Howard Schell Reilly, of counsel.
    Keane & Beane, P.C., White Plains, N.Y., for defendants G & U, Inc., Charles Gratz, Bierstine Farms, Inc., Cedar Valley Growers, Raymond Myruski, and W.K.W. Farms, Inc.;, Edward F. Beane, Richard L. O’Rourke, of counsel.
    Rudolph W. Giuliani, U.S. Atty. S.D. of N.Y., New York City, N.Y., for the Government; Frederick M. Lawrence, Asst. U.S. Atty., Francis X. Lilly, Jay S. Berke, Theodore T. Gotsch, of counsel.
   OPINION

TENNEY, District Judge.

The plaintiffs, approximately 100 migrant farmworkers, instituted this action under the Fair Labor Standards Act of 1938, as amended, 29 U.S.C. § 201 et seq. (1982) (“FLSA”), against six farm owners in Orange County, New York (“defendants”). The plaintiffs seek to recover wage deductions made by the defendants for housing provided to the migrant workers in the defendants’ labor camps, during 1978-1983 growing seasons. The plaintiffs claim that by deducting housing costs, the growers violated the minimum wage provisions of the FLSA. See 29 U.S.C. § 206.

In a prior decision, this Court stayed the proceedings before it, pending an administrative ^hearing and a final determination by the Administrator (“Administrator”) of the United States Department of Labor (“Labor Department”). See 477 F.Supp. 102 (S.D.N.Y.1979). In November 1983, the Administrator issued his final decision. The plaintiffs and defendants now seek judicial review of that decision under the Administrative Procedure Act, 5 U.S.C. § 706(2) (1982) (“APA”), and both move for summary judgment under Federal Rule of Civil Procedure (“Rule”) 56(c). The government requests that both motions for summary judgment be denied, and that the Administrator’s decision be affirmed in all respects.

The plaintiffs argue, inter alia, that no housing costs should be computed as part of their wages because the housing in question was furnished primarily for the benefit and convenience of the growers. The defendants argue that the deductions for housing costs were appropriate, and that— even if the deductions were inappropriate— under the doctrines of statutory and equitable estoppel, the growers should not be held'liable for compensatory or liquidated damages.

After careful consideration of the extensive record in this case, the Court concludes that the housing in question was furnished primarily for the benefit and convenience of the growers, and, therefore, housing costs may not be included as part of the plaintiffs’ wages. If housing were not provided, the growers would not be able to secure an adequate workforce to operate their farms. Although there are benefits on both sides of the ledger, the benefit to the growers clearly outweighs the benefit to the workers.

The Court rejects the defendants’ arguments concerning estoppel, and rejects the government’s request that the Administrator’s decision be affirmed in all respects. For the reasons set forth below, summary judgment is granted in favor of the plaintiffs.

Background

The defendants in this action are engaged in the business of growing and harvesting crops such as onions, lettuce, and celery. They employ migrant workers on a seasonal basis and pay minimum wages on an hourly basis. The growers provide housing for most of the migrant workers while they are employed on the growers’ farms.

The record shows that there are not enough workers available in the neighboring area to satisfy the growers’ need for labor. In addition, the record shows that if housing were not provided it is unlikely the migrant workers would be able to obtain off-site housing. Both sides agree that the migrant workers could not afford to work for the growers if housing were not provided.

The record also indicates that the housing in the migrant labor camps is generally of poor quality: many buildings are structurally unsound, and the premises are often unsanitary; numerous buildings have no indoor toilets, and some housing has no indoor plumbing at all. The facilities are often overcrowded and lack proper light and ventilation. Workers generally have no access to telephones, laundromats, shopping centers, or recreational areas.

The minimum wage provisions of the FLSA were extended to include agricultural workers in 1978. Prior to that time, on-site housing had always been provided by the defendants without charge. When the FLSA became applicable to farm-workers, however, the defendants began to charge the migrant workers for the housing provided. From 1978 to 1983, the growers charged between $8.00 and $12.50 a week for the housing. The defendants generally deducted $.25 per hour from the cash wages of each worker for whom lodging was provided.

The FLSA, and the Regulations adopted thereunder, requite that all covered employees be paid a minimum wage. See 29 U.S.C. § 206(a) (1982); 29 C.F.R. § 531 (1984). The FLSA and the pertinent Regulations provide that the wage paid to an employee may include the reasonable cost to the employer of furnishing an employee with board, lodging, or other facilities. See 29 U.S.C. § 203(m); 29 C.F.R. §§ 531, 516. However, the Regulations also provide that “[t]he cost of furnishing ‘facilities’ found by the Administrator to be primarily for the benefit or convenience of the employer will not be recognized as reasonable and may not therefore be included in computing wages.” 29 C.F.R. § 531.-3(d)(1).

The crucial question in this case is whether, under the FLSA and its Regulations, the defendants may include the cost of housing as part of the plaintiffs’ minimum wage or whether the defendants are prohibited from doing so under the convenience-of-the-employer doctrine. The Administrator concluded that the defendants were entitled to treat the cost of housing as part of the wage paid to the plaintiffs. Because the Administrator failed to consider all the relevant factors, however, the Administrator’s decision must be set aside. Based on the record before the Administrator, the plaintiffs are entitled to judgment as a matter of law.

Discussion

I. STANDARD OF REVIEW

A. Summary Judgment

Summary judgment may be granted only if there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. Rule 56(c); see Heyman v. Commerce and Ind. Ins. Co., 524 F.2d 1317, 1319-20 (2d Cir.1975); 6 J. Moore, W. Taggart and J. Wicker, Moore’s Federal Practice ¶ 56.15 (1.-0) (2d ed. 1983). The party moving for summary judgment must show that there are no material facts in dispute. See Adickes v. S.H. Kress & Co., 398 U.S. 144, 157, 90 S.Ct. 1598, 1608, 26 L.Ed.2d 142 (1970); Quinn v. Syracuse Model Neighborhood Corp., 613 F.2d 438, 444 (2d Cir.1980). Summary judgment, however, will not be denied merely because of conclusory allegations or denials made by the opposing party; concrete particulars must be set forth in opposition to the motion. See Project Release v. Prevost, 722 F.2d 960, 968 (2d Cir.1983); SEC v. Research Automation Corp., 585 F.2d 31, 33 (2d Cir. 1978).

Summary judgment may be granted upon judicial review of an administrative decision when there is no genuine issue as to any material fact and the only dispute involves a question of law. See Doyle v. Behan, 670 F.2d 535, 539 (5th Cir.1982); Davis Bros., Inc. v. Marshall, 522 F.Supp. 628, 632 (N.D.Ga.1981). In the case at bar, sufficient uncontroverted facts have been established by the parties to permit determination of the legal questions presented.

B. The APA

The Administrator’s decision in this case is subject to judicial review in accordance with the APA, 5 U.S.C. § 706, and, therefore, the decision cannot stand if it is “arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with the law.” 5 U.S.C. § 706(2)(A). See Citizens to Preserve Overton Park v. Volpe, 401 U.S. 402, 413-14, 91 S.Ct. 814, 822-23, 28 L.Ed.2d 136 (1971). The scope of judicial review is narrow, and the court should not substitute its judgment for that of the agency. Id. at 416, 91 S.Ct. at 823; Connecticut v. E.P.A., 696 F.2d 147, 155 (2d Cir.1982).

Under the arbitrary and capricious standard, however, the reviewing court should set aside an administrative decision if the agency “failed to consider an important aspect of the problem [or] offered an explanation for its decision that runs counter to the evidence before the agency.” Motor Vehicles Mfrs. Ass’n v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 103 S.Ct. 2856, 2867, 77 L.Ed.2d 443 (1983). There must be “ ‘a rational connection between the facts found and the choice made.’ ” Id. (quoting Burlington Truck Lines v. United States, 371 U.S. 156, 168, 83 S.Ct. 239, 246, 9 L.Ed.2d 207 (1962)). The reviewing court must “ ‘consider whether the [administrative] decision was based on a consideration of the relevant factors and whether there has been a clear error of judgment.’ ” Id. (quoting Bowman Transp. Inc. v. Arkansas-Best Freight System, 419 U.S. 281, 285, 95 S.Ct. 438, 442, 42 L.Ed.2d 447 (1974)).

The APA also requires that the reviewing court determine whether the administrative decision is in accordance with the law. The court must ascertain the correct meaning of the relevant statute and give effect to the statute’s underlying purpose. See Donovan v. Red Star Marine Serv., Inc., 739 F.2d 774, 776 (2d Cir.1984), cert. denied, — U.S. —, 105 S.Ct. 1355, 84 L.Ed.2d 377 (1985). Although an administrative decision must be given due deference, the decision “cannot stand if it is inconsistent with the intent of Congress, or would defeat the purpose” of the relevant statute. New York v. Schweiker, 557 F.Supp. 354, 360 (S.D.N.Y.1983); accord Montres Rolex, S.A. v. Snyder, 718 F.2d 524, 533 (2d Cir.1983), cert. denied sub nom. Grand Jewels, Inc. v. Montres Rolex, S.A., — U.S. —, 104 S.Ct. 1594, 80 L.Ed.2d 126 (1984) (Deference “is unwarranted when the administering agency’s interpretation would cripple a statutory scheme in its inception.”). Reviewing courts must not rubber stamp administrative decisions that frustrate the congressional policy underlying the pertinent legislation. See Bureau of Alcohol, Tobacco and Firearms v. Federal Labor Rel. Auth., 464 U.S. 89, 104 S.Ct. 439, 444, 78 L.Ed.2d 195 (1983).

With this standard of review in mind, the Court concludes that the Administrator’s decision—holding that the defendants may include rent as part of the plaintiffs’ wages under the FLSA—must be set aside under the arbitrary and capricious standard and because the decision is not in accordance with the law.

II. THE FLSA

Congress enacted the FLSA to prevent inadequate wages and excessive hours, and to provide a standard of living that would promote the health and well being of workers covered by its provisions. See 29 U.S.C. § 202(a) (1982); Barrentine v. Arkansas-Best Freight System, 450 U.S. 728, 739, 101 S.Ct. 1437, 1444, 67 L.Ed.2d 641 (1981); Brooklyn Savings Bank v. O’Neil, 324 U.S. 697, 706-07, 65 S.Ct. 895, 902, 89 L.Ed. 1296 (1944). The humanitarian purpose of this legislation remains as valid a social goal today as it was in 1938. See Donovan v. I and J, Inc., 567 F.Supp. 93, 98 (D.N.M.1983).

Although the FLSA permits employers to include certain cash substitutes as part of an employee’s minimum wage, Congress was concerned that employers might overcharge their employees for facilities provided. See Davis Bros., 522 F.Supp. at 631. In order to prevent employers from avoiding the obligations imposed by the minimum wage provisions of the FLSA, certain safeguards and limitations were set forth in the Regulations, restricting the payment of wages in any form other than cash or its equivalent. See 29 C.F.R. § 531.28. The convenience-of-the-employer doctrine was one of the safeguards set forth to protect covered employees. See 29 C.F.R. §§ 531.-3(d)(1), 531.28.

The provisions of the FLSA should be construed broadly; they should not be applied “in a narrow, grudging manner.” Tennessee Coal Co. v. Muscoda Local No. 123, 321 U.S. 590, 64 S.Ct. 698, 88 L.Ed. 949 (1944); accord Tony and Susan Alamo Foundation v. Secretary of Labor, — U.S. —, 105 S.Ct. 1953, 1959, 85 L.Ed.2d 278 (1985) (The FLSA should be liberally construed “to apply to the furthest reaches consistent with congressional direction.” (quoting Mitchell v. Lublin McGaughy & Assoc., Inc., 358 U.S. 207, 211, 79 S.Ct. 260, 264, 3 L.Ed.2d 243 (1959)). In keeping with this approach, the FLSA Regulations—and, specifically, the provision which establishes the convenience-of-the-employer doctrine— should be liberally construed in order to prevent employers from making excessive inroads on an employee’s basic cash wage. In the case at bar, the Administrator’s decision fails to give proper effect to the FLSA’s underlying purpose.

A. The Balancing Test

The plain language of the pertinent Regulation—29 C.F.R. § 531.3(d)(1)—man-dates that a balancing test be applied to determine whether housing costs may be considered as part of the wages paid under the FLSA. The benefit to the employer must be weighed against the benefit to the employee, in order to determine which party received the primary benefit from the facilities provided. See Laffey v. Northwest Airlines, 642 F.2d 578, 588 (D.C.Cir. 1980); Donovan v. RFC Services, Inc., 547 F.Supp. 503, 508 (E.D.N.Y.1982); Marshall v. Sam Dell’s Dodge Corp., 451 F.Supp. 294, 304 (N.D.N.Y.1978). In the case at bar, the Administrator failed to apply the requisite balancing test.

The Administrator held that the housing in the labor camps was not provided primarily for the employer’s benefit or convenience, and that rent could be included as part of the plaintiffs’ minimum wage. Without articulating the reasons for his conclusion, the Administrator simply stated: “I concur with the ALJ that there is substantial evidence in the record to support his finding that the lodging was (and is) furnished primarily for the benefit of the migrant farm workers.” Administrator’s Decision (“Adm.Dec.”) at 11. The AU noted only two “clear[ly] identifiable benefits to the employee”: (1) “[t]he benefit of apparent worker comradeship and [(2)] nearness to the work place which thereby eliminates daily transportation costs----” AU’s Recommended Decision (“Rec.Dec.”) at 9. The fact that the plaintiffs did not have to obtain their own lodging implicitly constituted a third benefit. A careful reading of the Administrator’s decision reveals that the Administrator failed to balance these benefits against the benefits accruing to the growers.

The FLSA does not authorize employers to include housing costs as part of an employee’s minimum wage merely because the employee is convenienced by the facilities provided. The facilities “must also primarily serve the interest of the employee.” Laffey v. Northwest Airlines, 642 F.2d at 587-88. That some benefit accrued to the workers is not enough. Rather, the issue—which the Administrator did not address—is whether the primary benefit accrued to the workers. See Commissioner v. Kowalsky, 434 U.S. 77, 88 n. 21, 98 S.Ct. 315, 322 n. 21, 54 L.Ed.2d 252 (1977); Donovan v. KFC Services, 547 F.Supp. at 508; Adams v. United States, 585 F.2d 1060, 1065, 218 Ct.Cl. 322 (1978).

In Donovan v. KFC Services, 547 F.Supp. at 508, the court held that certain uniforms supplied to kitchen workers were provided primarily for the employer’s convenience and therefore the cost of supplying the uniforms could not be considered as part cf. the employees’ compensable wage under the FLSA. The court recognized that the employees received some benefit from the uniforms, since the employees were relieved of the obligation and expense of securing and cleaning their own uniforms. Nevertheless, the court concluded that the employer rather than the employees received the primary benefit. Similarly, in Marshall v. Sam Dell’s Dodge Corp., 451 F.Supp. at 304, the court found that a demonstrator car, supplied to a ear salesman by the employer, was furnished primarily for the employer’s benefit. Although the car was used by the employee for personal driving, the court found that the car was a valuable and necessary tool in the employer’s business, and that the employer’s business profited from having the employee drive a demonstrator car. The court concluded that the benefit to the employer’s business predominated over the personal benefit to the employees. See also Brennan v. Modern Chevrolet Co., 363 F.Supp. 327, 333 (N.D.Tex.1973), aff’d mem., 491 F.2d 1271 (5th Cir.1974) (Although ninety percent of the mileage driven on the demonstrator car was for personal use, the court held that the car was furnished primarily for the benefit of the employer.).

In the case at bar, the on-site housing arrangements undoubtedly satisfied certain personal wants and needs of the migrant farmworkers. Nevertheless, the record shows that the housing was furnished primarily to benefit the growers’ businesses, and the personal benefit accruing to the employees was secondary and incidental to the growers’ business interests. This conclusion is based on the factors set forth below.

B. Benefit to the Growers

The ALJ found that the on-site housing was not furnished primarily for the benefit of the growers because “the mere presence of the workers on the farm without more [was] not enough to identify the lodging as primarily for the benefit of the employer, especially [since] reporting for work was optional.” Rec.Dec. at 9. In reaching this conclusion, the AU clearly failed to consider the key issue here, which is the significant benefit that the growers derived from the employees “mere presence” on the farm. As discussed below, providing on-site lodging for the migrant workers (1) enabled the growers to secure an adequate workforce, (2) promoted efficiency, and (3) made it possible for the workers to harvest the crops for the growers. The need for on-site housing arises out of the nature of the job, and providing such housing has customarily been treated as an integral part of operating a farm.

1. An Adequate Workforce

If the growers did not provide housing, many of the migrant farmworkers would not work for the defendants. This point— which is not disputed—is of critical importance. The record shows that the local workforce is insufficient to meet the defendants’ need for labor.

A substantial number of the defendants’ employees are migrant workers. The record shows that migrant workers constitute 30% to 100% of the workers employed on the various farms owned by the defendants. The growers must harvest their crops within a very limited period of time— generally within a month or less—and therefore must have workers available when the crops are ready to be harvested. If migrant workers were unavailable because housing was not provided, the defendants would not be able to harvest their crops in the ordinary manner.

In Wilhelm v. United States, 257 F.Supp. 16, 21 (D.Wyo.1966), the court found that food and lodging provided by a ranch owner were primarily for the convenience of the ranch owner/employer, despite the benefits accruing to the employees. The court concluded that the facilities were furnished primarily for the employer’s benefit because there were no other facilities available in the area, and the employees were needed to operate the ranch. See also Setal v. Commissioner, 20 T.C.M. 780, 782 (1961); Olkjer v. Commissioner, 32 T.C. 464, 468-69 (1959).

In the instant ease, the growers had to provide housing in order to have the plaintiffs on the job at all. Thus, the defendants’ businesses depended upon the labor camps. Absent the on-site housing, the growers’ businesses would have suffered.

2. Increased Efficiency

The defendants also benefit from having the workers actually living on the farms because it increases the efficiency of the farm operations. Since the crops must be harvested within a limited period of time, the workers are required to be available to work long hours on a flexible schedule. Having the workers live on the premises facilitates this process. The plaintiffs often work twelve hours a'day, and they may work six or seven days a week. Lunch is eaten on-site, in the housing provided by the growers. If it rains, the workers usually wait in the labor camps until the employer signals that the weather has cleared enough for the workers to go into the fields. Thus, it is convenient for the defendants to have the workers at hand.

3. Nature of the Job

The plaintiffs’ need for housing arises as a result of the nature of the employment. Because the work is seasonal and transitory, the workers do not maintain full time residences near the farms. Ordinarily, the workers arrive just before the harvest begins and therefore have little or no time to look for and obtain lodging. In addition, the record indicates that many of the plaintiffs do not speak English well and have little education, so that it would be particularly difficult for them to secure off-site housing given the existing time constraints.

Moreover, as previously noted, both sides agree that the plaintiffs could not afford off-site housing. This conclusion is supported by the record, which shows that the plaintiffs generally have a low yearly income, often barely above the national poverty level. It would also be difficult, as the Administrator pointed out, for the plaintiffs to afford daily transportation costs from off-site housing to the farms.

The ALJ noted that none of the plaintiffs elected to secure off-site housing even after the growers began deducting rent from the plaintiffs’ cash wages. Given the existing circumstances and the nature of the job, however, it is not surprising that the workers did not obtain off-site housing.

4. Accomplishing the Job

Like farm equipment or tools, the housing in question was provided to enable the workers to carry out a job for the growers. The Regulations promulgated under the FLSA concerning the convenience-of-the-employer doctrine set forth several examples of “facilities” that have been found to be primarily for the employer’s convenience. See 29 C.F.R. § 531(d)(2). Essentially, all of the facilities listed are things that are ordinarily provided so that a worker can accomplish a designated job for the employer. The examples, which are intended to be illustrative rather than exclusive, include: “(i) Tools of the trade and other materials and services incidental to carrying on the employer’s business; (ii) the cost of any construction by and for the employer; [and] (iii) the cost of uniforms____” Id.; see also 29 C.F.R. § 531.32.

Although an employee may receive certain benefits from the facilities listed above, the facilities primarily benefit the employer. Where tools are furnished, for example, the employee benefits by not having to secure and maintain his own tools, and—depending on the type of work involved—-the worker may avoid physical strain or injury by using the tools. Indeed, the tools might even make the job more enjoyable. However, despite any benefits accruing to the worker, the tools are provided so that the employee can accomplish a job for the employer. In the instant case, housing is provided so that the migrant workers can harvest the crops for the growers.

5. Practice in the Trade

The record indicates that providing housing for migrant workers has customarily been treated by the defendants and other growers as an integral part of operating and maintaining a farm or orchard. Before the minimum wage provisions of the FLSA were extended in 1978 to include agricultural workers, the defendants charged no rent for the housing provided in the labor camps. The housing was generally considered part of basic overhead costs.

The record shows that most of the apple farmers in the defendants’ area still charge no rent for the facilities they provide for migrant workers. Moreover, according to testimony given at the hearing, migrant workers pay no rent for housing provided by employers in a number of other states, including Delaware, Maryland, Virginia, Pennsylvania, and New Jersey. Indeed, it appears to be a common practice in the industry to provide rent-free housing for migrant farm laborers. This practice is another factor which supports the conclusion that the defendants set up labor camps in order to ensure that their farms would run properly.

C. Benefit to the Workers

The Administrator found, and the record shows, that the plaintiffs received some benefit from the housing provided. A brief review of the benefit accruing to the plaintiffs is in order here, since the plaintiffs’ benefits must be measured against the growers’ benefits, pursuant to the FLSA Regulations.

The record indicates three identifiable benefits accruing to the plaintiffs. The most significant benefit was that the plaintiffs did not have to secure or maintain their own lodging while they were working on the growers’ farms. The ALJ identified two other benefits—the benefit of worker comradeship in the labor camps, and the benefit of avoiding daily transportation costs.

In evaluating the benefit that the plaintiffs received from the facilities provided, the quality of the housing should also be taken into consideration. The record shows that the housing in the migrant camps is generally of substandard quality. Many of the buildings are structurally unsound; some have wooden floors or steps that are rotted. Many buildings present fire hazards since they are highly flammable and have no smoke detectors. The existing conditions are generally unsanitary: there are uncovered garbage cans, windows without screens, flies, roaches, leaking pipes, and clogged drains. Many of the facilities have no indoor toilets and some have no indoor plumbing at all. The facilities are often surrounded by fields which are sprayed with pesticides, and dust is often a problem as well. The defendants’ farms are all located several miles from the closest towns; because the workers generally have no cars and there is no public transportation available, the workers often do not have access to a telephone, laundromat, shopping area, or recreational facilities.

D. Evaluation

Both the farmworkers and the growers received certain benefits from the facilities provided. When the correct balancing test is applied and all of the relevant factors are considered, however, it is evident that the housing in the labor camps was provided primarily for the benefit of the growers. Consequently, the cost of the housing may not be considered as part of the plaintiffs’ minimum wage under the convenience-of-the-employer doctrine. See 29 C.F.R. § 531.3(d)(1).

The Administrator’s decision lacks “a rational connection between the facts found and the choice made,” and therefore must be set aside under the arbitrary and capricious standard. Furthermore, because the Administrator failed to correctly apply the balancing test mandated by the FLSA Regulations, the Administrator's decision is not in accordance with the law.

III. ESTOPPEL

The defendants claim that the plaintiffs are estopped from recovering the wage deductions made by the defendants during 1978 and 1979, and therefore request that summary judgment be granted in their favor with respect to the deductions made in 1978 and 1979. The defendants argue that the 1978-1979 deductions were approved by the Bronx office of the Labor Department’s Wage and Hour Division, or—alternatively—that the deductions were approved by the Labor Department’s Employment and Training Division. Since there is no genuine issue of fact raised by the defendants’ estoppel arguments, and since these arguments are insufficient as a matter of law, they are rejected.

A. Statutory Estoppel

Section 10 of the Portal-to-Portal Act, 29 U.S.C. § 259 (1982) (“Section 10”), offers a limited defense to employers who rely on a government agency’s interpretation of the law. With respect to violations of the FLSA, this defense will succeed only if the defendant shows that it relied on an opinion in writing from the Administrator.

Section 10 provides, in relevant part, that “no employer shall be subject to any liability ... if he pleads and proves that the act or omission complained of was in good faith in conformity with and in reliance on any written administrative regulation, order, ruling, approval or interpretation” made by the specified agency. Section 10 also provides that in cases concerning the FLSA, the specified “agency” is the Administrator of the Wage and Hour Division of the Labor Department. Thus, in order to satisfy Section 10, any statement relied on must have been issued by the Administrator, and that statement must be in writing. A statement by a lesser official or employee will not suffice. See 29 C.F.R. § 790.13; National Automatic Laundry and Cleaning Council v. Shultz, 443 F.2d 689, 700 (D.C.Cir.1971).

In the instant case, the Administrator did not issue a written statement evaluating the wage deductions made by the defendants until 1983, when he rendered the decision currently being reviewed by this Court. In his 1983 decision, the Administrator rejected the defendants’ argument concerning statutory estoppel.

The defendants argue that in making the 1978-1979 wage deductions, they relied on the actions and representatives of the Bronx office of the Wage and Hour Division. The record shows that during 1978 and 1979, the Bronx office told the growers that a rental charge of $12.50 was “very reasonable.” In addition, the Bronx office took the position that—until a final determination was made by the Administrator— the growers would not be charged with violating the FLSA unless they deducted more than $12.50 a week. The growers assert that, in light of the position taken by the Bronx office, estoppel is appropriate under Section 10.

Because the representations allegedly relied on were oral and were not made by the Administrator, they do not provide a basis for an estoppel defense under Section 10. See E.E.O.C. v. Home Ins. Co., 672 F.2d 252, 263 (2d Cir.1982); Usery v. Godwin Hardware, Inc., 426 F.Supp. 1243, 1268 (W.D.Mich.1976). The Bronx office was not authorized under Section 10 to make a final determination of whether the 1978-1979 deductions violated the minimum wage provisions of the FLSA. That determination could be made only by the Administrator, and the Bronx office advised the growers of that fact. Moreover, the Bronx office never issued a written statement approving such deductions. Section 10 specifically states that reliance must be based on a written statement.

The growers have also failed to show that they relied on the Bronx office in good faith. The test for good faith is an objective one—whether the defendant acted as a reasonably prudent man would have acted under similar circumstances. See 29 C.F.R. § 790.15. “ ‘Good faith’ requires that the employer have ... no knowledge of circumstances which ought to put him upon inquiry.” Id.

In the instant case, the record shows that the defendants had notice that a hearing was pending and that a final determination had to be made by the Administrator. Thus, the defendants could not have reasonably relied on the Bronx office.

In an effort to by-pass the lack of a written statement by the Administrator, the defendants assert that they relied on various written statements made by the Labor Department’s Employment and Training Division (“ETA”). The ETA is a national employment service established pursuant to the Wagner-Peyser Act, 29 U.S.C. §§ 49-49K (1982).

This argument cannot succeed. The ETA is not empowered to approve or disapprove wage deductions under the FLSA. As previously discussed, rulings on wage deductions can be made only by the Administrator.

Moreover, the defendants cannot argue that they believed—in good faith—that ETA approval of their requests for workers constituted approval of the wage deductions. The ETA acts as a national labor exchange. See 20 C.F.R. § 652.2. Employers submit job orders which contain certain information about the job being offered, such as the type of work available, and the wage that will be paid. It was not intended that the ETA regulate all disputes involving migrant workers and the employers who make use of the ETA’s services. See 29 Puerto Rican Migrant Farm Workers v. Shade Tobacco Growers Agric. Ass’n, 352 F.Supp. 986, 993 (D.Conn.), aff’d, 486 F.2d 1052 (2d Cir.1973). The record indicates that the ETA was not in a position to verify or evaluate the information contained in the job orders submitted by the growers. Approval of the job orders did not constitute approval of the information contained in those orders, and the ETA never represented that it did.

B. Equitable Estoppel

The defendants also assert the defense of equitable estoppel, again claiming reliance on the conduct and representations of the Bronx office and the ETA. This argument fails for essentially the same reasons the statutory estoppel defense failed.

The defense of equitable estoppel can succeed only if the party asserting the defense had no knowledge of the true facts, and reasonably relied on another’s conduct to his detriment. See Heckler v. Community Health Services, 467 U.S. 51, 104 S.Ct. 2218, 2223, 81 L.Ed.2d 42 (1984); Sweeten v. United States Dep’t of Agriculture, 684 F.2d 679, 682 n. 5 (10th Cir.1982); Russell Corp. v. United States, 537 F.2d 474, 484, 210 Ct.Cl. 596 (1976), cert. denied, 429 U.S. 1073, 97 S.Ct. 811, 50 L.Ed.2d 791 (1979). In addition, where—as here—the defense of estoppel is based on a party’s reliance on government conduct, it must be shown that there was serious misconduct on the part of the government or its agents. See Schweiker v. Hansen, 450 U.S. 785, 788, 101 S.Ct. 1468, 1470, 67 L.Ed.2d 685 (1981); Sweeten v. Dep’t of Agriculture, 684 F.2d at 682; Corniel-Rodriquez v. I.N.S., 532 F.2d 301, 307 (2d Cir.1976).

The defendants have failed to show that there was any misconduct whatsoever on the part of the government. Moreover, in light of the information known by the growers, they had no legitimate reason to believe that the 1978-1979 wage deductions had been approved by either the Bronx office or the ETA.

The Bronx office repeatedly advised the growers that the Bronx office personnel did not have the authority or ability to make a final determination of whether the 1978-1979 rent' deductions violated the FLSA minimum wage provisions. In January 1978, at a meeting held to discuss the minimum wage provisions, a Bronx area compliance officer advised the growers that the final determination concerning wage deductions had to be made by the Administrator. The record shows that various other compliance officers repeated that same information to the defendants throughout 1978 and 1979. In June 1979, the Bronx office sent a letter to each of the defendants, requesting information concerning the cost of supplying housing in the labor camps and stating that the “Administrator must make a final determination as to the applicability of the [wage] deduction.” As previously discussed, the growers also had no reasonable basis for believing that the action taken by the ETA constituted approval of the rent deductions. Thus, neither the argument concerning statutory estoppel nor the argument concerning equitable estoppel has merit.

Conclusion.

The defendants’ motion for summary judgment based on the defense of estoppel is denied, as is the government’s request that the Administrator’s decision be affirmed in all respects. The Administrator’s decision is set aside in relevant part, and the plaintiffs motion for summary judgment is granted.

The record indicates that although the plaintiffs received some benefit from the housing provided, the labor camps were set up primarily for the growers’ benefit since the housing was needed to ensure an adequate workforce to operate the farms. Thus, under the convenience-of-the-employer doctrine, the growers violated the minimum wage provisions of the FLSA by deducting housing costs from the cash wages paid to the plaintiffs. The Administrator’s decision to the contrary was arbitrary and capricious, and was not in accordance with the law.

Because the growers violated the FLSA minimum wage provisions, the plaintiffs are entitled to reasonable attorneys’ fees, and costs, pursuant to 29 U.S.C. § 216(b).

Counsel for the parties are hereby ordered to compute the amount due to the plaintiffs as a result of the defendants’ violation of the FLSA, and are directed to submit judgment within thirty days. Attorneys’ fees and costs are to be determined separately.

So ordered.

      . The former United States Secretary of Labor, Raymond J. Donovan, and the United States Department of Labor are also defendants in this action, and are hereinafter referred to collectively as the "government.”

      . For a more detailed history of this case, see 568 F.Supp. 313 (1983) and 86 F.R.D. 524 (1980).

      . Although the plaintiffs moved for partial summary judgment, the disposition of their motion resolves the entire action. For simplicity, the Court refers to the plaintiffs' motion herein simply as a motion for summary judgment. It should also be noted that in their motion, the plaintiffs raised numerous issues. In light of this decision, it was not necessary to address all of the issues raised by the plaintiffs.

      . The record in this case is quite voluminous. The Administrative Law Judge (“ALJ”) conducted a hearing in which 26 witnesses testified. There were 29 days of testimony. The Administrator noted in his decision that all parties were represented by counsel, had the opportunity to call and examine witnesses, and were free to present evidence. See Adm.Dec. at 3.

      . Except to the extent indicated, the facts set forth in this opinion are uncontroverted or are derived from the findings of the Administrator, or the findings of the ALJ that were adopted by the Administrator.

      . As previously noted, this action involves approximately 100 migrant farmworkers as plaintiffs. This number does not comprise all the migrant farmworkers employed by the defendants since 1978.
      Although the discussion in this Opinion is framed in terms of migrant farmworkers generally, since all plaintiffs are migrant farmworkers, the factors discussed are, of course, applicable to the plaintiffs.

      . See Plaintiffs' 3(g) Statement ¶ 35, and Defendants’ 3(g) Statement ¶ 15.

      . The type of housing provided ranged from cabins designed for one person, to dormitory-type facilities designed to accommodate a number of people.

      . It is undisputed that the plaintiffs in the instant action are covered employees under the FLSA.

      . All references to the C.F.R. are based on the 1984 edition of the C.F.R.

      . Section 203(m) provides in relevant part:
      [The] “[w]age” paid to an employee includes the reasonable cost, as determined by the Administrator, to the employer of furnishing such employee with board, lodging, or other facilities, if such ... facilities are customarily furnished by such employer ... Provided further, [t]hat the Secretary is authorized to determine the fair value of ... [the] facilities____
      Section 203(m) vests the Administrator of the Labor Department and the Secretary of Labor with authority to determine the reasonable cost and the fair value, respectively, of facilities provided by the employer. The Secretary of Labor has delegated his authority to the Administrator, 29 C.F.R. § 531.1(g), and the Administrator has promulgated Regulations pertaining to Section 203(m) accordingly. See 29 C.F.R. §§ 531, 516.

      . “It appears to have been the clear intention of Congress to protect the basic minimum wage ... from profiteering or manipulation by the employer____’’ 29 C.F.R. § 531.28.

      . The government argues that "[s]ince housing ... is a basic necessity for human existence, it should be regarded as being for the primary benefit of the employee except in special circumstances____" Reply Memo, on Behalf of Federal Defendants, at 48. Although this interpretation of the convenience-of-the-employer doctrine may be consistent with the Administrator’s decision, it is not consistent with the policy underlying the FLSA. Indeed, adopting such a restrictive interpretation would essentially create a presumption in favor of employers and against employees, and would undermine the congressional purpose of protecting the wages of covered workers.

      . The Administrator adopted certain findings and conclusions made by the ALJ. See Adm. Dec. at 17. The Court has therefore carefully reviewed and considered not only the Administrator’s decision, but also the ALJ’s recommended decision where appropriate. Accordingly, any reference made to the Administrator’s decision also includes those findings and conclusions of the ALJ which were adopted by the Administrator.

      . In Laffey, the court noted that as a general rule, the cost of providing accommodations will not constitute wages under the FLSA. 642 F.2d at 587 (dictum).

      . The convenience-to-the-employer doctrine appears to have originated under tax law. See Commissioner v. Kowalski, 434 U.S. at 84, 98 S.Ct. at 319; see also 26 U.S.C. § 119(a) (1982). Tax cases are cited herein because they set forth factors to be considered in evaluating whether facilities are furnished primarily for the benefit of the employer.

      . See supra note 7.

      . The government retained a real estate appraiser in connection with this action, at the direction of the ALJ. In his report, the appraiser stated that the housing in the labor camps served "a special purpose necessary to the overall operation of the defendants’ farms.”

      . The nature of the employment is one factor to be considered under the convenience-of-the-employer doctrine. See 29 C.F.R. § 531.32 (Uniforms were found to be primarily for the employer’s convenience "where the nature of the business require[d] an employee to wear a uniform.”). Another factor to be considered is whether the particular item or service provided by an employer "is an incident of and necessary to the employment.” See 29 C.F.R. § 531.32. In the instant case, the record indicates that the on-site housing is an incident of the employment because of the nature of the work.

      . Although the ALJ stated that housing was available in the general area for at least many of the workers, the record indicates that very little off-site housing suited to the plaintiffs’ needs was available. A report by the Orange County Planning Department was submitted in evidence, which showed that there was only a 4% vacancy rate in rental properties in the relevant area in 1979. The testimony indicated that 4% was a low vacancy rate. The record also shows that the plaintiffs need furnished housing since they do not bring furniture with them for the short period of time that they work for the growers. This requirement effectively limits the choice of housing even further.

      . It would be inappropriate to conclude that housing was furnished primarily for an employee’s benefit merely because the employee occupied the facilities provided, rather than seeking alternative housing. Such a conclusion would effectively eliminate the protection offered to employees by the FLSA Regulations.
      The convenience-of-the-employer doctrine does not mandate that an employee seek alternative housing in order to avoid having deductions made - from his wages, and the doctrine should not be unreasonably construed. See United States Junior Chamber of Commerce v. United States, 334 F.2d 660, 664, 167 Ct.Cl. 392 (1964) (“Even ... where the employment was at a construction jobsite 40 miles from Anchorage ... it would presumably be possible for the employer to require the employees to furnish their own housetrailers to live near the jobsite. We believe [however, that the convenience-of-the-employer doctrine] should be given a reasonable interpretation.").

      . Past practices present another factor to be considered. Cf. Allen v. Atlantic Richfield Co., 724 F.2d 1131, 1136 (5th Cir.1984) (The court looked at past practices to determine whether certain work was primarily performed for the benefit of the employer.).

      . The Administrator made note of the ALJ’s finding that the facilities provided by the defendants "are similar in nature to lodgings furnished to farm worker employees by a variety of farming interests throughout the U.S.” Adm. Dec. at 8.

      . The poor condition of the housing is another indication that the facilities were provided to serve the business interests of the growers rather than to serve the personal interests of the farmworkers.

      . Burlington Truck Lines v. United States, 371 U.S. at 168, 83 S.Ct. at 245.

      . Section 216(b) provides in pertinent part:
      Any employer who violates the provisions of section 206 ... of this title shall be liable to the ... employees affected in the amount of their unpaid minimum wages and in an additional equal amount as liquidated damages____ The court ... shall, in addition to any judgment awarded to the ... plaintiffs, allow a reasonable attorney’s fee to be paid by the defendant, and costs of the action.


source: Caselaw Access Project

author: DUHE, District Judge.

license: Public Domain

text:
    PLANTERS TRUST & SAVINGS BANK v. W.T. LANGLEY, et al.
    Civ. A. No. 83-2612 L.
    United States District Court, W.D. Louisiana, Lafayette-Opelousas Division.
    June 20, 1985.

      William C. Shockey, Baton Rouge, La., for W.T. and Mary Langley.
    David S. Rubin, Baton Rouge, La., for Federal Deposit Ins. Corp.
    W. Shelby McKenzie, Baton Rouge, La., for Federal Land Bank of Jackson.
   MEMORANDUM RULING

DUHE, District Judge.

On March 8, 1982, W.T. Langley and Mary Ann Langley executed a promissory note in the amount of $468,124.41, made payable to Planters Trust and Savings Bank. The Langleys defaulted and Planters Bank instituted an action in state court in September 1983 to recover the balance due on the note. That action was subsequently transferred to this Court, and consolidated with other actions arising out of the collapse of the Planters Bank in May 1984. Among those actions were certain claims by the Langleys against Planters Bank.

In May 1984, Planters Bank was closed by the Commissioner of Financial Institutions for the State of Louisiana. The Federal Deposit Insurance Corporation (FDIC) was appointed receiver of Planters Bank. Subsequent to its appointment as receiver of the Planters Bank, the FDIC in its corporate capacity acquired all of the assets of Planters, including the note at issue in this matter. The FDIC now moves for summary judgment against the Langleys as to their liability on the note.

I. THE CLAIM ON THE NOTE

The Langleys contend that they are not liable on the note because of fraudulent inducement by officers of Planters. Specifically, they allege that officers of Planters misrepresented certain essential facts about real property which was the consideration for the note. In response, the FDIC argues that 12 U.S.C. § 1823(e) shields it from any affirmative defenses the Langleys might have on the note.

12 U.S.C. § 1823(e) provides:

No agreement which tends to diminish or defeat the right, title, or interest of the Corporation in any asset acquired by it under this section, either as security for a loan or purchase, shall be valid against the Corporation unless such agreement (1) shall be in writing, (2) shall have been executed by the bank and the person or persons claiming an adverse interest thereunder, including the obligor, contemporaneously with the acquisition of the asset by the bank, (3) shall have been approved by the board of directors of the bank or its loan committee, which approval shall be reflected in the minutes of said board or committee, and (4) shall have been, continuously, from the time of its execution, an official record of the bank.

The question presented to this Court is whether § 1823(e) bars extrinsic proof that a written document in fact does not reflect any valid agreement.

The Fifth Circuit has not yet answered this question. In FDIC v. Lattimore Land Corporation, 656 F.2d 139 (5th Cir.1981), the defendants-makers on a promissory note alleged fraud in the inducement which vitiated the obligation. The Court concluded that the defendants had not made a sufficient showing of fraud in the inducement under state law and avoided resolving the question of whether § 1823(e) protects the FDIC from such affirmative defenses. The Court, however, noted that:

Our failure to put this case on that ground does not indicate that our answer to that question would be negative. Although there is authority holding that the FDIC is subject to the defense of fraud in the inducement, FDIC v. Webb, 464 F.Supp. 520, 525 (E.D.Tenn.1978), there is also authority holding that the FDIC takes its interest free of such defenses either because § 1923(e) gives the FDIC the same protection available to a holder in due course, FDIC v. Rockelman, 460 F.Supp. 999, 1002 (E.D.Wis. 1978). ... Without entering a holding on this ground we simply note that, to this Court, an assertion of this defense against the FDIC seems merely to convert a claim of breach into a claim of fraud. If an obligor may successfully void a note and recoup damages against the FDIC based on claim of fraudulent inducement from an unwritten agreement, he will have made an end run around § 1823(e) by asserting as fraudulent the same unwritten agreement of which a breach resulting in damages may not under § 1823(e) be asserted against the FDIC. 656 F.2d at 146, f.n. 13.

This dicta by the 5th Circuit is in accord with a number of lower court cases. See, e.g., FDIC v. Rodenberg, 571 F.Supp. 455 (D.Md.1983).

However, there is authority for the Langleys’ proposition that § 1823(e) does not encompass situations where the makers assert fraud in the inducement of the underlying obligation. In Gunter v. Hutcheson, 674 F.2d 862 (11th Cir.1982), the Court declared that:

[T]he common thread running through these cases [where the FDIC prevailed] has been the assertion by the obligor that an oral side agreement with the bank controlled the rights of the parties. The cases, therefore, came squarely within the “no agreement ... shall be valid” language of § 1823(e). The claim asserted by the Gunters, in contrast, is quite different. The essence of their argument is that no agreement existed because of the fraud of Chattanooga Hamilton’s officers. While certain of the alleged misrepresentations could be construed as “agreements” to perform certain acts in the future, such as deferring interest on the Gunters’ notes, others clearly are not agreements of any sort. For example, the Gunters alleged that the chairman of the board of Chattanooga Hamilton fraudulently represented that the Hamilton banking system was in “sound financial condition.” Far from claiming that an oral agreement is “valid” and controls the rights of the parties, the Gunters assert that the entire transaction was invalid from the beginning. As the district court notes, this claim is directly opposite the “shall be valid” language of § 1823(e). Consequently, we agree with the trial court that the fraud claims at issue here are not barred by the statutory language in § 1823.

Id. at 867.

Given that there exists no controlling precedent on this difficult question, and that what persuasive authority which exists is conflicting, what becomes decisive for this Court is the clear policy of Congress to assist the FDIC in restoring stability after a bank failure. Permitting “end-runs” around § 1823(e) would not aid the FDIC in its efforts to avert local—and possibly broader—crises stemming from bank failures.

Accordingly, this Court holds that 12 U.S.C. § 1823(e) bars defenses of fraud in the inducement where the FDIC has assumed and is attempting to collect on a promissory note valid on its face. It is thus unnecessary to examine the question of whether the Federal common law permits the Langleys’ defense.

The motion for summary judgment by the FDIC against W.T. Langley and Mary Langley is therefore granted.


text:
    PLANTERS TRUST AND SAVINGS BANK v. W.T. LANGLEY, et ux. W.T. LANGLEY, et ux. v. PLANTERS TRUST AND SAVINGS BANK OF OPELOUSAS, et al.
    Civ. A. Nos. 83-2612 L, 84-0557 L.
    United States District Court, W.D. Louisiana, Lafayette-Opelousas Division.
    Aug. 12, 1985.

      William C. Shockey, Baton Rouge, La., for W.T. and Mary Langley.
    David S. Rubin, Baton Rouge, La., for Federal Deposit Ins. Corp.
    W. Shelby McKenzie, Baton Rouge, La., for Federal Land Bank of Jackson.
   MEMORANDUM RULING

DUHE, District Judge.

This matter is a consolidation of several suits arising out of the 1984 collapse of the Planters Trust and Savings Bank in Opelousas. The Planters Bank brought an action against W.T. Langley and Mary Langley on a promissory note. The Langleys asserted fraud in the inducement as an affirmative defense and brought a separate action for damages against the bank and various individuals, including one Elmer Landry. The Langleys subsequently amended that action to add the Federal Land Bank of Jackson (“FLBJ”) as a co-defendant. Elmer Landry promptly cross-claimed against the FLBJ. The FLBJ in turn counterclaimed against the Langleys on a second promissory note.

The FLBJ now moves for summary judgment against W.T. and Mary Langley. The FLBJ also moves for judgment on the pleadings against Elmer Landry’s cross-claim.

I. THE MOTION FOR SUMMARY JUDGMENT AGAINST THE LANGLEYS

A. The Langleys’ Liability on the Note

W.T. and Mary Langley executed a $1.35 million promissory note payable to the Federal Land Bank of New Orleans (which subsequently changed its name to the Federal Land Bank of Jackson). This loan was secured by a mortgage on certain property which was purchased with the loan. That note is now in default, with interest accruing daily.

The Langleys assert as an affirmative defense to the note, and as a basis for their damage claims against the FLBJ, that material misrepresentations amounting to fraud in the inducement were made to them by Elmer Landry, the president of the Federal Land Bank Association of Opelousas. The question thus posed is whether Elmer Landry, by virtue of his office as president of the Opelousas Federal Land Bank Association, was the statutory agent of the FLBJ.

1. Statutory Agency

Federal land banks (“FLBs”) and federal land bank associations (“FLBAs”) are distinct entities. The FLBJ was originally established pursuant to § 4 of the Federal Farm Loan Act of 1916 and continued under the Farm Credit Act of 1971 (12 U.S.C. § 2011 et seq.). FLBAs are chartered under § 7 of the Farm Loan Act of 1916, as revised by the Farm Credit Act of 1971 (12 U.S.C. § 2031 et seq.).

FLBAs are local corporations, and shareholding is limited to borrowers. As an association, it recommends loan applications to the appropriate FLB. That FLB in turn exercises certain limited supervisory functions over the FLBA. 12 U.S.C. 2012(13) provides that a FLB will:

“Approve the salary scale of officers and employees of the Federal land bank associations and the appointment and compensation of the chief executive officer thereof and supervise the exercise of such associations [sic] of the functions vested in or delegated to them.”

12 U.S.C. § 2020 provides that FLBs are to make loans through FLBAs unless there is no active association for the territory where the immovable property subject to the loan is located.

In the facts at bar, the Langleys’ loan was processed through the Baton Rouge FLBA, and made by the FLB of New Orleans (which, of course, has since become the FLBJ). Nevertheless, Elmer Landry was involved in the negotiations leading up to the loan even though he had no reason or authority to be so involved in his capacity as president of the FLBA of Opelousas.

There is very little authority on the question of whether FLBAs are the statutory agents of FLBs. Supporting that proposition is dicta from Miller v. Federal Land Bank of Spokane, 587 F.2d 415 (9th Cir. 1978):

“As we have seen, the Railroad’s Check assigns $4,708.00 to the value of the land taken, and in the Millers’ complaint they assert that two officers of the Association in Billings agreed to accept as the Bank’s portion of any settlement one-half of the amount paid for the land taken and to waive whatever claim the bank might have to any part of the amount assigned to damages to the remaining lands. The Bank does not admit that such an agreement was made but ... we think that if such an agreement had been made in this case, it would be a reasonable agreement and one enforceable against the Bank.
The record indicates that borrowers customarily apply for loans through the local association. Indeed, they are required to do so and to become members themselves, and the loans are ‘serviced’ by the associations. Under these circumstances, it appears to us that the Association had actual, or at least ostensible, authority to vary the policy in the case of the Miller loan. If, therefore, on a trial, the Millers can persuade a fact finder that the officers of the Association did agree, as the Millers claim, then the Bank can be held to that bargain, and it would be entitled to receive only $2,354.00 out of the settlement and the Millers would be entitled to the balance.” 587 F.2d at 423 (emphasis added).

On the other hand, there is a 1933 Supreme Court case, Federal Land Bank of Columbia v. Gaines, 290 U.S. 247, 54 S.Ct. 168, 78 L.Ed. 298, in which the Court stated:

“The State court rested its decision on the characterization of the association as a public agent, but it did not hold that the association was in any sense an agent for the lender bank. It could not well have done so, for neither the provisions of the Farm Loan Act nor the particular circumstances which attended the loan in the present case gave to the [FLB] any right of control over the association or any power to recall the check after its delivery and collection. The association was controlled by directors, elected by its own members, who, like the respondent were borrowers.” 290 U.S. at 254, 54 S.Ct. at 171 (emphasis added).

This case was decided under the provisions of the Farm Loan Act of 1916. Although this act has been superceded by the Farm Credit Act of 1971, the Court has failed to discover any provisions of the latter which would effectively overrule Gaines. See also Federal Land Bank of New Orleans v. Jones, 456 So.2d 1 (Ala. 1984), wherein it was squarely held that FLBAs are not the statutory agents of FLBs.

This Court is compelled to hold that FLBAs are not the statutory agents of FLBs. The command of Gaines is clear, and the Congress having failed in the Farm Credit Act of 1971 to provide an unequivocal statutory agency relationship between FLBs and FLBAs, this Court is not empowered to create one.

The Langleys also argue that even if the officers of FLBAs are not the statutory agents of FLBs, in the facts of this case Elmer Landry was the agent-in-fact of the FLBJ.

2. Agency-In-Fact

Under Louisiana law, an agency relationship is created by either express appointment of a mandatory under Civil Code Article 2985 or by implied appointment arising from apparent authority. Robertson Advertising Service v. Winnfield Life Insurance Co., 453 So.2d 662 (La.App. 5th Cir.1984). An express agency is created by the written or oral agreement between the parties. AAA Tire and Export, Inc. v. Big Chief Truck, 385 So.2d 426 (La.App. 1st Cir.1980). However, a mandate must be express and special when it is for the purpose of contracting a loan or to acknowledge a debt. Louisiana Civil Code Article 2997. See also Ward v. Pennington, 434 So.2d 1131 (La.App. 1st Cir.1983). There being no evidence of any written or oral agreement between the FLBJ and Elmer Landry appointing the latter as FLBJ’s mandatory, the FLBJ is entitled to summary judgment.

Even if an agency relationship could be created by implied appointment for the purpose of contracting a loan, in the facts at bar there is no genuine issue of material fact as to whether an implied agency has been established. To establish an implied agency, there must be a showing that the FLBJ, as principal, made some manifestation to the Langleys, and (2) the Langleys reasonably relied upon Landry’s purported authority as a direct consequence of the FLBJ’s representations. Cheramie v. Mt. Airy Refining Co., 708 F.2d 156, 158 (5th Cir.1983). There is no evidence of any communication from the FLBJ to the Langleys pertaining to Elmer Landry. The only evidence, as such, is the Langleys’ allegations about Landry’s purported statements. Agency, though, “may not be established by the words of the purported agent.” Cheramie, Id.

Since Elmer Landry was not the statutory agent or agent-in-fact of the FLBJ, the Langleys’ affirmative defense of fraud in the inducement fails and the FLBJ’s motion for summary judgment as to the Langleys’ liability on the note will be granted.

B. The Langleys’ Delictual Claims Against FLBJ

The Langleys’ delictual claims against the FLBJ are based on the purported misrepresentations of Elmer Landry. As discussed above, however, there was no agency relationship between FLBJ and Landry which would permit imputing Landry’s torts to the FLBJ. Accordingly, movant’s motion for summary judgment against the Langleys’ delictual claims will be granted.

II. THE FLBJ’S MOTION FOR JUDGMENT ON THE PLEADINGS

The FLBJ now moves pursuant to FRCP 12(c) for judgment on the pleadings against Elmer Landry’s cross-claim. Such a motion can be granted only if there is no issue of material fact and if the pleadings show that the defendant is entitled to prevail as a matter of law. For purposes of this motion, all well-pleaded factual allegations in the plaintiff’s complaint must be assumed to be true. DreFchinski v. Regan, 589 F.Supp. 1516 (W.D.La.1984).

Elmer Landry’s cross-claim against the FLBJ provides “in the event that plaintiffs obtain any relief against this defendant [Elmer Landry] based upon the actions of the FLBJ, then Elmer Landry is entitled to recover from the FLBJ the full amount of any such relief granted plaintiffs.” There is no factual or legal explanation for this assertion. Nor is there any claim of wrongful conduct on the part of the FLBJ.

The motion is well taken. Furthermore, it is unopposed. Accordingly, it will be granted.


author: HAIGHT, District Judge:

text:
    UNITED STATES of America, Plaintiff, v. Joseph Patrick Thomas DOHERTY, Defendant.
    No. 85 Civ. 935-CSH.
    United States District Court, S.D. New York.
    June 25, 1985.

      Rudolph W. Giuliani, U.S. Atty., New York City, for United States; Thomas E. Moseley, Asst. U.S. Atty., New York City, of counsel.
    Somerstein & Pike, New York City, for defendant; Mary Boresz Pike, New York City, of counsel.
   MEMORANDUM OPINION AND ORDER

HAIGHT, District Judge:

In this action the United States, on behalf of the Government of the United Kingdom of Great Britain and Northern Ireland (“U.K.”), seeks by the vehicle of declaratory judgment a collateral review of an order denying extradition.

The U.K. sought the extradition from the United States of defendant Joseph Patrick Thomas Doherty. It based that extradition request upon Doherty’s conviction in Northern Ireland for murder, attempted murder, alleged possession of firearms and ammunition, and other crimes. The matter came before District Judge John E. Sprizzo of this Court, sitting as an “extradition magistrate,” First National City Bank of New York v. Aristeguieta, 287 F.2d 219, 220 (2d Cir.1960), vacated as moot, 375 U.S. 49, 84 S.Ct. 144, 11 L.Ed.2d 106 (1963), pursuant to 18 U.S.C. § 3184. Judge Sprizzo refused to certify Doherty to the Secretary of State for extradition. Matter of Doherty by Government of United Kingdom, 599 P.Supp. 270 (S.D.N.Y.1984). Finding that Doherty committed the underlying acts as a member of the Provisional Irish Republican Army (“PIRA”), Judge Sprizzo concluded that Doherty’s extradition was barred by the “political offense” exception contained in the relevant extradition treaty.

The U.K. was dissatisfied with that result. But it did not appeal Judge Sprizzo’s order, unquestionably because grants or denials of requests for extradition are not appealable by either party under federal law. Matter of Mackin, 668 F.2d 122 (2d Cir.1981).

The proposed extraditee Mackin, like Doherty a PIRA member, was sought for extradition by the U.K. under circumstances identical to those at bar. Following a magistrate’s decision denying the request, the United States on behalf of the U.K. took an appeal, which the Second Circuit dismissed for lack of appellate jurisdiction.

In Mackin Judge Friendly wrote, during the course of a comprehensive and scholarly opinion:

“The extraditee may seek a writ of habeas corpus, the denial or grant of which is appealable, see note 8, supra, and the requesting party may refile the extradition request. Collins v. Loisel, 262 U.S. 426, 43 S.Ct. 618, 67 L.Ed. 1062 (1923); Hooker v. Klein, supra, 573 F.2d [1360] at 1365-66 [9th Cir.1978]; In re Gonzalez, 217 F.Supp. 717 (S.D.N.Y.1963); Ex parte Schorer, 195 F. 334 (E.D.Wis. 1912). Both these remedies are inconsistent with the notion that the original orders were appealable. If the grant of a request were appealable, habeas corpus would not lie since that writ cannot be used as a substitute for an appeal. Stone v. Powell, 428 U.S. 465, 477 n. 10, 96 S.Ct. 3037, 3044 n. 10, 49 L.Ed.2d 1067 (1976); Sunal v. Large, 332 U.S. 174, 178-79, 67 S.Ct. 1588, 1590-91, 91 L.Ed. 1982 (1947). If denial of a request were appealable, a second request would ordinarily be defeated by the principle of res judicata. See Hooker v. Klein, supra, 573 F.2d at 1367-68.”
668 F.2d at 128 (emphasis in original).

Nor has the U.K. sought the assistance of the United States in refiling its extradition request with another judge, as Mackin points out it can. Rather, the U.K. seeks collateral review in this Court of Judge Sprizzo’s order by invoking the Declaratory Judgment Act, 28 U.S.C. § 2201 et seq. Subject matter jurisdiction is posited upon 28 U.S.C. § 1331.

Invocation of the Declaratory Judgment Act will lead, the Government contends, “to an authoritative construction of key treaty provisions.” I do not flatter myself that this is a reference to me. Clearly what the U.K. is aiming for is a decision on the merits of the extradition request rendered by an Article III judge, whose decision is appealable under existing statutes to higher courts.

Doherty’s contention is that the U.K. as requesting party may not avail itself of the Declaratory Judgment Act to seek collateral review of Judge Sprizzo’s denial of extradition. In consequence, in addition to challenging subject matter jurisdiction (fn. 3, supra), Doherty argues that the complaint fails to state a claim upon which relief can be granted. I directed that these questions be first considered before briefing or consideration of the merits.

The Government places primary reliance upon Wacker v. Bisson, 348 F.2d 602 (5th Cir.1965), in which an extraditee whose extradition had been ordered, after unsuccessfully petitioning for a writ of habeas corpus, was permitted by the majority of a Fifth Circuit panel to invoke the Declaratory Judgment Act. Proceeding from that holding, the Government, argues that it “seeks literally nothing more than the same right to obtain judicial review of an adverse extradition decision by declaratory judgment that Doherty would have had if the matter had gone the other way.” Brief at 2.

That argument raises two questions: (1) was Wacker correctly decided; and (2) assuming that it was, is the converse proposition for which the Government contends a sound one? In the vernacular, is sauce for the goose also sauce for the gander?

I am at liberty to consider the first of these questions, because the Fifth Circuit’s decision in Wacker is not binding upon this Court. There is apparently no case directly on point in the Second Circuit. Accordingly I may choose between Judge Wisdom’s opinion for the Wacker majority and Judge Rives’s dissent. As for the converse proposition now urged by the Government— whether the requesting party may obtain collateral review by declaratory judgment if its extradition request is denied—the case at bar is evidently one of first impression in any court.

In Wacker, the government of Canada sought the extradition of one J. Samuel Wacker. Wacker was arrested under the complaint for extradition and held without bail pending preliminary examination. That detention was tested by a writ of habeas corpus which the district court denied. A United States ..Commissioner then held an extradition hearing pursuant to § 3184, and certified to the Secretary of State that the evidence was sufficient to sustain the specified charges and thus justify extradition. Wacker brought another writ of habeas corpus, which the district court rejected. At that point Wacker invoked the Declaratory Judgment Act, a procedural remedy which the majority of the Fifth Circuit panel (reversing the district court) held was available to him. Judge Wisdom wrote:

“The underlying policies of the Declaratory Judgment Act support the use of declaratory judgments in extradition cases. It is a useful remedy permitting a direct confrontation between the two real parties in interest, the extraditee and the demanding government, without the triangular complications of habeas corpus.” 348 F.2d at 608.
Judge Rives dissented, stating in part: “The point of holding that the Declaratory Judgment Act has opened a backdoor to review of an extradition order escapes me when the front door provided by the Great Writ grants access to the same court of justice and provides the same scope of relief.”
“It is important that the treaty obligations of the United States be honored without unnecessary delay, and this case well illustrates how permitting review by declaratory judgment in addition to habeas corpus may result in unreasonable, if not interminable delay, not consistent with the prompt performance of our treaty obligations.”

Id. at 612-13.

On the issue of the availability of declaratory judgment in extradition proceedings, I prefer Judge Rives’s analysis. The extradition statute is an amalgam of law and diplomacy, but with an emphasis upon the latter. “The substantive right of a foreign country to request the return of a fugitive and the duty of the United States to deliver the fugitive depends entirely on the existence of a treaty between the requesting nation and the United States.” In re United States, 713 F.2d 105, 107-08 (5th Cir.1983). “Under 18 U.S.C. § 3186, the Secretary of State may not surrender any person to a foreign government unless the person has been found extraditable by a magistrate at a hearing held under 18 U.S.C. § 3184____ These statutory provisions safeguard the fugitive’s due process rights.” Escobedo v. United States, 623 F.2d 1098, 1105 (5th Cir.), cert. denied, 449 U.S. 1036, 101 S.Ct. 612, 66 L.Ed.2d 497 (1980). Once the magistrate determines that the fugitive is subject to extradition and so certifies to the Secretary of State, “[t]he decision to surrender the fugitive then rests in the discretion of the Secretary of State.” In re United States, supra, at 108. “The ultimate decision to extradite is a matter within the exclusive prerogative of the Executive in the exercise of its powers to conduct foreign affairs.” Escobedo v. United States, supra, at 1105; see also Sindona v. Grant, 619 F.2d 167, 174 (2d Cir.1980). Given the paramount importance of foreign affairs in extradition proceedings, it is not surprising that Congress provided limited (albeit meaningful) due process rights of judicial review. Extradition under § 3184 does not involve a trial court docketing a judgment for possible review by a court of appeals. Rather, it involves the certification of findings and

the underlying record by a judge for forwarding to the Secretary of State, so that, in the latter’s discretion, further proceedings may be had “according to the stipulations of the treaty or convention.” The distinction between “court” and “judge” is central to the concept of extradition; see Judge Friendly’s analysis in Mackin, supra, at 668 F.2d 129 n. 11, where the diplomatic elements of extradition are stressed: “However, extradition has international aspects far more serious than naturalization” (thus discounting the Government’s contention that appeals of naturalization orders should be analogized to extradition orders).

The Congress cannot be regarded as having fashioned such precisely divided responsibility in this sensitive area of international relations by accident. Rather, one must conclude it was by design; and the design contemplates a balance between limited judicial review and unfettered executive discretion. The extradition magistrate tests the legality of the extradition proceedings; and if the fugitive is disappointed in the result, habeas corpus is available to him, and consequent appellate review. Even that appellate review represents something of a judicial gloss upon the statute, although it is by now well established; but the nature of an extradition proceeding is in my view entirely inconsistent with permitting either an extraditee or a requesting foreign government, by means of a civil declaratory judgment action, to place the legality of the request not before a district “judge” or “extradition magistrate” (as expressly directed by Congress) but rather before a district court, with a consequent full panoply of statutory appellate review.

Accordingly I conclude that, contrary to the majority decision in Wacker, declaratory judgment has no legitimate office to perform in extradition proceedings. Doherty’s motion to dismiss the complaint for failure to state a claim must therefore be granted.

If I am wrong in that, so that the Second Circuit if asked would follow the majority holding in Wacker, the question arises whether a foreign government whose extradition request was denied should be afforded the same ability to obtain collateral review by declaratory judgment that Wacker sanctions for an extraditee. For the reasons which follow, I answer that question in the negative.

“Extradition proceedings have been referred to by the Supreme Court as being of a criminal nature.” First National City Bank of New York v. Aristeguieta, supra, at 287 F.2d 226 n.7 (citing cases). As in criminal prosecutions, the requesting nation (which may be analogized to the prosecutor) brings formidable resources and advantages to bear upon its pursuit of a fugitive. These are summarized in Aristeguieta at 226-27; one is compelled to agree with Judge Moore: “An examination of the extradition treaties, statutes, and decisions reveals that the procedural framework of international extradition gives to the demanding country advantages most uncommon to ordinary civil and criminal litigation.” Id. at 226. Given that imbalance, this Court is not troubled by granting to an extraditee broader rights of judicial review than to the demanding country. Again, analogies may be found in the criminal law. If the trial judge improperly admits or excludes evidence, the defendant may appeal in the event of conviction, but the government may not if defendant is acquitted.

If declaratory judgment, a feature of federal practice since 1934, 6A Moore’s Federal Practice ¶ 57.02[2] at 57-8 (1984), furnishes an appropriate remedy to a foreign nation disappointed in extradition proceedings, it has escaped the attention of the Departments of Justice and State for a considerable time. In Mackin, supra, Judge Friendly discusses in some detail a proposed Extradition Act of 1981 which on September 19 of that year Senator Thurmond and several colleagues introduced “to modernize the extradition laws of the United States.” See 668 F.2d at 128. The statute provided for direct appeal in extradition matters, on behalf of the extraditee or the requesting foreign government; Secretary of State Haig praised the bill, including that provision “which for the first time permit[s] appeal from a district court’s decision on an extradition request.” Ibid. A Department of Justice spokesman praised the bill because of its appellate provisions:

“It permits both a fugitive and the United States, on behalf of the requesting country, to directly appeal adverse decisions by an extradition court. Under present law a fugitive can only attack an adverse decision through habeas corpus, and the only option available to the United States, on behalf of a requesting country, is to refile the extradition complaint.”

Id. at 129.

The Deputy Legal Advisor of the Department of State added:

“Under present law there is no direct appeal from a judicial officer’s finding in an extradition proceeding. A person found extraditable may only seek collateral review of the finding, usually through an application for a writ of habeas corpus. The foreign government that is dissatisfied with the results of the hearing must institute a new request for extradition. The lack of direct appeal in extradition matters adds undesirable delay, expense and complication to a process which should be simple and expeditious. Section 3195 [of the proposed bill] remedies this defect in current procedure by permitting either party in an extradition ease to appeal directly to the appropriate United States court of appeals from a judge or magistrate’s decision.” Ibid.

If in fact the Declaratory Judgment Act permitted the foreign government to obtain prompt collateral review from a district court in respect of an unfavorable extradition ruling by the extradition magistrate, it is surprising that neither the Department of State nor the Department of Justice advised the Congress of that alternative vehicle for review when urging the 1981 extradition statute upon the Congress.

In the case at bar the U.K. faces a comparable obstacle in the Second Circuit’s Mackin decision. I say “comparable” because, as the Government correctly observes in its brief, the availability vel non of declaratory judgment to the requesting nation was not argued in Mackin. But Judge Friendly’s careful analysis of extradition—its nature, and the limitations traditionally placed upon appellate review at the behest of either party—furnishes guidance in the area of collateral review by declaratory judgment as well, and militates against extension of the remedy to the disappointed requesting nation.

Accordingly, I conclude that even if (contrary to my prior ruling) declaratory judgment is available to an extraditee, it is not available to a requesting foreign nation.

I have considered the other arguments and authorities put forward by the Government in support of the present action. I find no merit in them, and they require no discussion.

CONCLUSION

The motion of defendant Doherty to dismiss the complaint for failure to state a claim is granted. The Clerk of the Court is directed to dismiss the complaint with prejudice.

It is SO ORDERED.

      . The statute provides:
      "Whenever there is a treaty or convention for extradition between the United States and any foreign government, any justice or judge of the United States, or any magistrate authorized so to do by a court of the United States, or any judge of a court of record of general jurisdiction of any State, may, upon complaint made under oath, charging any person found within his jurisdiction, with having committed within the jurisdiction of any such foreign government any of the crimes provided for by such treaty or convention, issue his warrant for the apprehension of the person so charged, that he may be brought before such justice, judge, or magistrate, to the end that the evidence of criminality may be heard and considered. If, on such hearing, he deems the evidence sufficient to sustain the charge under the provisions of the proper treaty or convention, he shall certify the same, together with a copy of all the testimony taken before him, to the Secretary of State, that a warrant may issue upon the requisition of the proper authorities of such foreign government, for the surrender of such person, according to the stipulations of the treaty or convention; and he shall issue his warrant for the commitment of the person so charged to the proper jail, there to remain until such surrender shall be made.”

      . Treaty of Extradition between the United States of America and the United Kingdom of Great Britain and Northern Ireland, 28 U.S.T. 227, T.I.A.S. No. 8468 (effective January 21, 1977). Article V(l)(c)(i) provides in pertinent part:
      "(1) Extradition shall not be granted if: * * * (c)(i) the offense for which extradition is requested is regarded by the requested Party as one of a political character;...”

      . “The Declaratory Judgment Act is not a grant of jurisdiction to the federal courts. It merely makes available an additional remedy in cases of which they have jurisdiction by virtue of diversity and the requisite amount in controversy, or because of a federal question.” Wright, Handbook of the Law of Federal Courts (3d ed. 1976) at 500-01. 28 U.S.C. § 1331(a) grants the district courts original jurisdiction if a civil action "arises under the Constitution, laws, or treaties of the United States.” T reject Doherty's contention that the case at bar does not “arise under” the extradition treaty between the United States and the U.K. While earlier judicial formulations of "arising under” cannot be wholly reconciled, more recent commentators stress pragmatic criteria. One has urged the test that for original federal jurisdiction there must be "a substantial claim founded ‘directly’ upon federal law.” Mishkin, The Federal “Question" in the District Courts, 53 Col.L.Rev. 157, 165, 168 (1953). See also Wright, op. cit., at 67. More recently, the Supreme Court has said that federal question jurisdiction extends to cases where “the plaintiff’s right to relief necessarily depends on resolution of a substantial question of federal law,” Franchise Tax Board v. Construction Laborers Vacation Trust, 104 S.Ct. 2841, 2856 (1983). The case at bar turns upon the proper construction of a treaty between the United States and a foreign nation. I conclude that subject matter jurisdiction is present.

        Dreyfus v. Von Finck, 534 F.2d 24 (2d Cir.1976), upon which Doherty relies, is not to the contrary. Plaintiff, a Swiss citizen and resident, sought recovery from West German citizens and residents for allegedly wrongful confiscation of property in Nazi Germany in 1938. The action was commenced in this Court by attachment of defendants’ property. For his substantive rights plaintiff relied inter alia upon four general treaties or pacts to which the United States was a party or adherent: the Hague Convention of 1907; the Kellogg-Briand Peace Pact of 1928; the Versailles Peace Pact (to which the United States adhered in 1921); and the Four Power Occupation Agreement of 1945. The Second Circuit, affirming the district court, held that none of these treaties “dealt with the expropriation by Germans of the property of German citizens, and none conferred any private rights with regard to such property which were enforceable in American courts.” 534 F.2d at 30. The Court of Appeals’ opinion relied on 13 Wright, Miller & Cooper, Federal Practice and Procedure § 3563 at 424 (1975) for the proposition that: "Rarely is the relationship between a private claim and a general treaty sufficiently direct so that it may be said to ‘arise under’ the treaty,” id. at 29. Dreyfus is not at all instructive in the case at bar, where the U.K. sues to enforce an extradition treaty with the United States of which it is a sovereign signatory and party.

      . Ultimately Wacker’s procedural victory availed him nothing. The majority also held that "the scope of review is the same in habeas corpus and declaratory judgment proceedings,” so that if the district court concluded that Wacker received "a full and fair hearing in the two habeas proceedings on those issues in this case which are serious, there is no necessity for holding any additional evidentiary hearing." 348 F.2d at 610-11. On remand the district court tendered an additional evidentiary hearing to the parties, who consented that the case be decided on the prior record. District Judge Ainsworth thereupon dismissed Wacker’s declaratory judgment action, 256 F.Supp. 542 (E.D.La.1966), and the Fifth Circuit affirmed per curiam, 370 F.2d 552 (5th Cir.1967).

      . The analogy is not complete, since as noted supra the demanding country may refile its extradition request before another judge. The Government recognizes that option in the case at bar; its brief (at 17) warns that "accepting Doherty’s view [of declaratory judgment] would literally compel the Government to continue refiling the request until a favorable decision is obtained, however long that might take.” If this statement was intended to intimidate this Court, it does not; and quaere whether unlimited repetitions of judicially rejected contentions comport with the dignity of the United States Attorney’s office. But I will leave that determination for, say, judge number 14 on the list.