author: LATCHUM, Senior District Judge.

text:
    SCOTT PAPER COMPANY, Plaintiff, and Chester Davis, Intervenor, v. MOORE BUSINESS FORMS, INC., Defendant.
    Civ. A. No. 77-199-JLL.
    United States District Court, D. Delaware.
    Oct. 2, 1984.

      Rudolf E. Hutz and John D. Fairchild of Connolly, Bove, Lodge & Hutz, Wilmington, Del., and John W. Kane, Jr., Philadelphia, Pa., of counsel, for plaintiff.
    Edward M. McNally of Morris, James, Hitchens & Williams, Wilmington, Del., and John J. Held, Jr., Edward W. Remus and Paul H. Berghoff of Allegretti, Newitt, Witcoff & McAndrews, Ltd., Chicago, 111., of counsel, for defendant.
   MEMORANDUM OPINION

LATCHUM, Senior District Judge.

Following a twelve-day bench trial and post-trial briefing, this Court entered its findings of fact and conclusions of law in the form of a 92-page opinion dated September 5, 1984. 594 F.Supp. 1051. (Docket Item [“D.I.”] 197.) The Court held that the patents in suit owned by Scott Paper Company (“Scott”) were valid, enforceable and had been wilfully infringed by Moore Business Forms, Inc. (“Moore”), and that the case was exceptional within the meaning of 35 U.S.C. § 285. (Id.) Judgment was entered in favor of Scott against Moore as of September 5, 1984, in the amount of $27,157,792.00. (D.I. 198 & 205.) Jurisdiction was retained for the purpose of awarding reasonable attorney fees to Scott. (D.I. 197 at ¶ 13.) In addition, Moore has moved to amend certain findings entered by this Court. These two remaining matters are now before the Court for disposition.

I. ATTORNEY FEES

Scott has requested that it be awarded the following items as attorney fees (D.I. 201):

For outside trial counsel $383,731.00
For in-house counsel 69,000.00
Direct litigation expenses 107,425.00
Total.................. $560,156.00
Prejudgment interest thereon $139,486.00
Grand Total............... $699,642.00

While Moore does not challenge the “reasonableness” of the amount of time and rates presented in the fee application by Scott’s outside counsel, it does object to six aspects of the fee application, i.e. (1) in-house attorney fees, (2) expenses as fees, (3) attorney fees in connection with the reissue proceedings, (4) fees in preparing the fee application, (5) fees generated by the Scott/Davis dispute, and (6) interest upon attorney fees. (D.I. 207.)

Section 285 provides that in “exceptional cases” a court “may award reasonable attorney fees to the prevailing party in a patent case.” 35 U.S.C. § 285. This Court has already found that this case was “exceptional.” (D.I. 197.) The Court agrees with Moore that the time expended and the rates charged by Scott’s outside counsel are entirely reasonable and clearly within the range normally charged by attorneys of comparable experience and expertise. Chromalloy American Corp. v. Alloy Surfaces Co., 353 F.Supp. 429, 431 (D.Del.1973).

The Court further finds that the time and rates sought for Scott’s in-house counsel are reasonably based and justified. Scott’s in-house counsel, John W. Kane, Jr., is a lawyer of extensive experience in patent prosecution and litigation. He participated throughout these proceedings, attended depositions and was involved in witness preparation, trial of the case and brief writing. Mr. Kane filled a position which would otherwise have been filled by outside counsel. The Court of Appeals for the Third Circuit awarded in-house counsel fees to an applicant in an insurance case, refusing to give the losing party the benefits of applicant’s choice to use in-house counsel.

If Pittsburgh’s attorneys had refrained from activity, the workload and consequently the fee application of [outside counsel] would have been increased. There is no reason in law or equity why the insurer should benefit from Pittsburgh’s choice to proceed with some work through its own legal department.

Pittsburgh Plate Glass Co. v. Fidelity & Casualty Co. of New York, 281 F.2d 538, 542 (3d Cir.1960). That principle applies here.

Awarding the value of in-house counsel’s services accomplishes two purposes. First, it discourages the frivolous defense of an infringement action. If in-house counsel is a primary participant in a lawsuit and not awarded fees, then the losing party will be undeterred by the threat of a fee award, knowing that in-house counsel will not be compensated.

Second, the award will compensate a prevailing party for the time that could have been spent by in-house counsel on other corporate matters. As stated by one court when assessing fees against opposing counsel for filing a frivolous suit:

A more realistic assessment of the situation would indicate that for every hour in-house counsel spent on this case defendants lost an hour of legal services that could have been spent on other matters. The value to defendants of this lost time is, of course, the amount it would require additional counsel to do the neglected work. Whether defendants actually hired additional counsel or went without legal advice on some matters is irrelevant as the value of the loss is the same. An award of reasonable fees will compensate defendants for this loss.

Textor v. Board of Regents of Northern Illinois University, 711 F.2d 1387, 1397 (7th Cir.1983).

Thus, the Court will award a portion of the fees requested by both Scott’s outside and in-house counsel. These fees, however, will be reduced by five percent for the time estimated to have been devoted to Scott’s dispute with the intervenor, Chester Davis (“Davis”). The Court realizes that these disputes were originally generated by Moore’s wilful termination of the Scott/Moore license agreement, but the extent of the dispute was in this Court’s opinion also caused by Mr. Davis’ distrust of Scott’s intention and motives. This dispute, even though unreasonable on Mr. Davis’ part as it turned out, should not be assessed against Moore. Therefore, the Court will reduce Scott’s fee application for outside counsel of $383,731.00 by 5% and award the sum of $364,545.00 for this item. A reduction of five percent will be applied to the in-house counsel fee request of $69,-000 and thereby award the sum of $65,-550.00 for that item.

The Court, however, will not apply any further reduction to these fees. These allowances will include the fee for the reasonable time expended in preparing the elaborate fee application and briefs filed herein. This ruling is based on Central Soya Co. v. Geo. Hormel & Company, 723 F.2d 1573, 1578 (Fed.Cir.1983), where the Court of Appeals for the Federal Circuit specially approved the District Court’s statement in Codex Corp. v. Milgo Electronic Corp., 541 F.Supp. 1198, 1201 (D.Mass.1982), which held that attorney fees for time spent on the issue of attorney fees was allowable.

The above allowances also will not be reduced for the time incurred in the reissue proceedings which took place after this action was filed. The detailed findings and conclusions reached by the PTO in those proceedings were crucial to this Court’s final determination. The Court finds that this activity in the peculiar circumstances of this litigation was “necessary to the case” within the concept set forth in Lam, Inc. v. Johns-Manville Corp., 718 F.2d 1056, 1067 (Fed.Cir.1983), and Codex Corp., supra at 1201.

In addition, Scott will be allowed litigation expenses disbursed in prosecuting this patent infringement suit in the amount of $107,425.00 because the Federal Circuit has concluded that an award of attorney fees under Section 285 should include expenses incurred during prosecution of the lawsuit. Looking to the rationale behind the fee award under Section 285, that Court for the Federal Circuit stated:

The purpose of § 285 is, in a proper case and in the discretion of the trial judge, to compensate the prevailing party for its monetary outlays in the prosecution or defense of the suit. We interpret attorney fees to include those sums that the prevailing party incurs in the preparation for and performance of legal services related to the suit.
When § 285 was adopted in its present form in the 1952 act, the only change from the prior statute, R.S. 4921, was the addition of the phrase “in exceptional cases,” which was added to discourage conduct which fell within the scope of “exceptional,” by requiring the party acting exceptionally to bear the expenses of the opposing party. It would be inconsistent with the intent of § 285 to limit the prevailing party to something less. Accordingly, we conclude that the award of expenses was properly within the scope of § 285.

Central Soya Co. v. George A. Hormel & Co., 723 F.2d 1573, 1578 (Fed.Cir.1983). See also Rohm and Haas Co. v. Crystal Chemical Co., 736 F.2d 688, 693 (Fed.Cir.1983) (“Section 285 also permits the prevailing party to recover certain disbursements incurred during preparation for the case.”); Lam, Inc. v. Johns-Manville Corp., 718 F.2d at 1069 (“Contrary to J-M’s contention that Lam’s disbursements were improperly granted, § 285 also permits the prevailing party to recover disbursements that were necessary for the case.”).

Finally, the Court, in its discretion, will deny an award of prejudgment interest in the amount of $139,486.00 on the attorney fee award granted. In the first place, the attorney fees and expenses would have been disbursed in any event during the prosecution of this case and would not have been recoverable until this Court determined that the case was “exceptional.” This determination was not made until September 5, 1984. Thus, it could not be said that Scott was out-of-pocket until that date. Secondly, the Court is of the opinion that by doubling the judgment under Section 284 for wilfulness has made Scott more than “whole” for all sums expended in this case and that should be sufficient.

In summary, an award of attorney fees and expenses will be awarded to Scott as follows:

All counsel fees $430,095.00
Litigation expenses 107,425.00
Total Award $537,520.00

II. MOORE’S MOTION TO AMEND FINDINGS

Moore seeks to amend the Court’s findings to add two 1975 letters from counsel to the trial record of this case which Moore claimed prior to trial were privileged. These two letters were identified by Moore during discovery, but based on the claim of privilege, they were not provided to Scott nor was any discovery permitted with respect to them. (D.I. 197 at 30.) In the pretrial order, Moore listed a host of potential trial exhibits but these two letters from counsel were never so identified which is a clear indication that Moore never intended to offer these documents in evidence.

At the trial, Moore’s witness, Downie, testified generally that he had received the two opinions, although they had not been offered in evidence. Scott’s attorney, Mr. Hutz, started to object, but the Court overruled Mr. Hutz and permitted Mr. Downie to continue with his explanation (Transcript [“Tr.”] 1353). The Court did not make any ruling at that time or at any other time during trial, substantive or otherwise, that the written opinions would not be received in evidence if they were offered by Moore. The fact is, Moore never offered the opinions in evidence and this action is completely consistent with its position in the Pretrial Order that it would not offer the opinions as trial exhibits.

Moore now faults the Court for the fact that the opinions are not part of the trial record. That is not accurate, because the decision not to offer them in evidence was made by Moore before the Pretrial Order was filed, and that decision was never changed until after the trial had been concluded, the record closed, and the present motion filed.

Moore cites the case of duPont v. United States, 385 F.2d 780 (3d Cir.1967), in support of its position for introducing the letters after trial. That case, however, is inapposite because the plaintiff in duPont was deprived by the trial court’s ruling of an opportunity to submit additional evidence. In duPont, the evidence in question was at least a part of the record in the court below, the only issue being the effect caused by the post-trial determination of its credibility. In the instant ease, this Court never ruled against admitting the opinion letters, and it was Moore that intentionally chose not to offer them. As the Court of Appeals indicated in duPont, at page 783, the parties should be entitled to rely on the record as it was closed, and in the present instance the record is totally devoid of the two letters which Moore is proffering at this late date.

Nevertheless, the Court did acknowledge the existence of the unintroduced opinions when it found that “Moore’s Downie made it very clear on cross-examination that the opinions of counsel were nothing more than window dressing to his decision to terminate the agreement.” (D.I. 197 at 76.) The copies of the two opinions attached to Moore’s motion now confirm that “window dressing” is all they ever were, at best.

The letter from Mr. March of the Watson, Cole firm was not an opinion at all. It cautioned that the Watson, Cole activities “are insufficient to support any particular firm conclusions” and that the letter merely recites certain “preliminary beliefs.” It further explained that they had “the documents necessary to complete our study and provide a definitive opinion” if Moore should ever want one.

The letter from Allegretti of the Molinare, Allegretti firm is significant in four respects. First, there is no indication that counsel was informed by Moore or considered facts such as Moore’s lengthy search for a suitable precursor, which was a total failure until Moore learned at PTSMH from the Davis patent. (D.I. 197 at 76.) Second, it specifically warned on page 5 that claim 11 of the Davis ’327 patent is not “fully met by the Hinsberg article and the Green patents.” Claim 11 of the ’327 patent covers “[a] transfer sheet having upon its surface a coating containing ... substantially colorless” PTSMH. (Id. at 48.) That claim specifically describes Moore’s MCP business forms (id. at 70), and that claim was asserted by Scott throughout as the representative claim of the ’327 patent. (Id. at 27.) Third, the Allegretti opinion correctly cautioned Moore that a challenge to the validity of the patents “after cancellation of the license is, necessarily, a most difficult” posture for Moore to take. “I must, therefore, underscore my further view that such a course of action is inherently a hazardous one____” Fourth, all of this was in the context of an introductory paragraph by Mr. Allegretti acknowledging the “business judgments” which Moore was making. (Id. at 30-31, 77.)

The Allegretti opinion, despite its failure to evaluate all the facts, nevertheless warned Moore that claim 11 of the ’327 patent was not fully met by the prior art, and if Moore cancelled the Scott/Moore license and challenged the validity of the patents, then “most difficult,” inherently “hazardous” and “major” litigation would be involved. This substantiates the Court’s prior opinion that Moore’s infringement was a wilful and reckless business gamble.

Moore's motion to amend the Court’s findings will be denied. An order will be entered in accordance with this memorandum opinion.

      . The two letters now belatedly presented are: Letter of July 10, 1975 from Watson, Cole, Grindle & Watson (D.I. 204, Ex. A), and letter of September 26, 1975 from Molinare, Allegretti, Newitt & Witcoff (D.I. 204, Ex. B).


source: Caselaw Access Project

author: SCOTT O. WRIGHT, Chief Judge.

license: Public Domain

text:
    Gerald M. SMITH, By and Through his next friend, Eugene SMITH, Jr., Plaintiff, v. William ARMONTROUT, Warden, Missouri State Penitentiary, Defendant.
    No. 84-4379-CV-C-5.
    United States District Court, W.D. Missouri, C.D.
    Nov. 6, 1984.
    On Order for Expert Witness Jan. 31, 1985.

      Richard H. Sindel, Clayton, Mo., James Asher, ACLU, Eastern Mo., St. Louis, Mo., for plaintiff.
    John M. Morris, Asst. Atty. Gen., Jefferson City, Mo., for defendant.
   ORDER

SCOTT O. WRIGHT, Chief Judge.

The first execution in the State of Missouri since 1965 is scheduled to occur in approximately sixty hours. In 1981, Gerald Smith was convicted of capital murder for the 1980 bludgeoning of an ex-girlfriend. At trial, Smith admitted the killing but asserted that, by reason of mental disease or defect, he lacked the intent necessary to be convicted of capital murder. The jury rejected Smith’s diminished capacity defense and imposed the death penalty. The conviction and death sentence were upheld on appeal by the Missouri Supreme Court. State v. Smith, 649 S.W.2d 417 (Mo.1983) (en banc), cert. denied — U.S. -, 104 S.Ct. 262, 78 L.Ed.2d 246 (1983). Despite the pleas of his family, Smith has refused to pursue his post-conviction remedies in federal court. His execution is set for 12:01 A.M. on November 9, 1984.

Presently pending before the Court is a habeas corpus petition submitted by Gerald Smith’s brother, Eugene Smith, Jr., and a motion to permit Eugene Smith, Jr. (hereinafter “petitioner”) to proceed as “next friend” to Gerald Smith. See 28 U.S.C. § 2242 (application for writ of habeas corpus may be filed “by the person for whose relief it is intended or by someone acting in his behalf”). In considering a motion to proceed as “next friend” in a habeas corpus proceeding, the crucial issue is

“whether [Gerald Smith] has capacity to appreciate his position and make a rational choice with respect to continuing or abandoning further litigation or on the other hand whether he is suffering from a mental disease, disorder, or defect which may substantially affect his capacity in the premises.”

Rees v. Peyton, 384 U.S. 312, 314, 86 S.Ct. 1505, 1506, 16 L.Ed.2d 583 (1966) (per curiam); see, e.g., Lenhard v. Wolff, 443 U.S. 1306, 1311-12, 100 S.Ct. 3, 6-7, 61 L.Ed.2d 885 (1979) (Rehnquist, Circuit Justice, 1979); Evans v. Bennett, 440 U.S. 1301, 1304-06, 99 S.Ct. 1481, 1483-84, 59 L.Ed.2d 756 (Rehnquist, Circuit Justice, 1979); Gilmore v. Utah, 429 U.S. 1012, 1014-16, 97 S.Ct. 436, 437-39, 50 L.Ed.2d 632 (1976) (Burger, C.J., concurring); Hays v. Murphy, 663 F.2d 1004, 1008 (10th Cir.1981); Lenhard v. Wolff, 603 F.2d 91, 93 (9th Cir.), aff'd, 444 U.S. 807, 100 S.Ct. 29, 62 L.Ed.2d 20 (1979); Groseclose ex rel. Harries v. Dutton, 594 F.Supp. 949, 953 (M.D.Tenn.1984); Groseclose ex rel. Harries v. Dutton, 589 F.Supp. 362, 364 (M.D.Tenn.1984); Rumbaugh ex rel. Rumbaugh v. Estelle, 558 F.Supp. 651, 652 (N.D.Tex.1983); remanded with instructions, 730 F.2d 291 (5th Cir.1984); Clark v. Blackburn, 524 F.Supp. 1248, 1251 (M.D.La.1981); Davis v. Austin, 492 F.Supp. 273, 276 (N.D.Ga.1980); Evans v. Bennett, 467 F.Supp. 1108, 1110-11 (S.D.Ala.), rendered moot, 440 U.S. 987, 99 S.Ct. 1986, 60 L.Ed.2d 370 (1979). If Gerald Smith is competent to make the decision to abandon further litigation, then petitioner lacks standing to proceed as “next friend” and this Court lacks jurisdiction over any case or controversy concerning constitutional errors occurring at Smith’s murder trial. Gilmore v. Utah, 429 U.S. at 1016, 97 S.Ct. at 439 (Burger, C.J., concurring); see U.S. Const, art. III, § 2.

It is well-settled that federal courts always have jurisdiction to determine jurisdiction. E.g., Groseclose ex rel. Harries v. Dutton, 589 F.Supp. at 366. Here, petitioner’s allegations and accompanying exhibits are sufficient to raise a legitimate issue as to Gerald Smith’s competency. At present, the evidence is not conclusive one way or the other. Consequently, the Court will order further psychiatric evaluations of Gerald Smith to aid in a determination of whether he is competent to waive his right to a federal habeas corpus proceeding. In the meantime, the Court will stay Gerald Smith’s execution in order to protect its jurisdiction over this matter. 28 U.S.C. § 1651; see Gilmore v. Utah, 429 U.S. at 1016, 97 S.Ct. at 439 (Burger, C.J., concurring); Hays v. Murphy, 663 F.2d at 1013-14; Groseclose ex rel. Harries v. Dutton, 589 F.Supp. at 366.

The Court has conferred with the parties this date concerning the procedures which should be employed in evaluating Gerald Smith’s competency. Fortunately, the parties are in agreement that, in view of the conflicting psychological evaluations already in the record, it would be appropriate to perform a comprehensive psychiatric evaluation of Gerald Smith at the federal medical facility in Springfield, Missouri. In addition, each party has requested an opportunity to have its own expert examine Smith while he is in the Springfield facility. The Court concurs in these proposals. There certainly is no pressing need to rush to judgment on the issue of Smith’s competency. Indeed, rigid time constraints can only distort the perceptions and judgments of all those involved in this case. Therefore, the Court will stay the execution of Gerald Smith indefinitely pending a psychiatric evaluation of Smith and subsequent hearing.

Accordingly, it is hereby

ORDERED that the execution of Gerald Smith is stayed pending a determination by the Court of whether he is competent to abandon further litigation.

It is further

ORDERED that at the earliest opportunity Gerald Smith shall be transferred to the federal medical facility in Springfield, Missouri for a comprehensive psychiatric/psychological examination and evaluation. Each party shall submit to the Court within seven (7) days of this date a statement of the specific tests it wants to have conducted. Each party shall have an opportunity to have its own expert psychologist or psychiatrist examine Gerald Smith while he is at the Springfield facility. Discovery shall be available to either party upon application to the Court. A hearing will be scheduled after the Court has had an opportunity to review the reports of the examining experts.

ON ORDER FOR EXPERT WITNESS

Eugene Smith and The American Civil Liberties Union have brought this habeas corpus action pursuant to 28 U.S.C. § 2254 on behalf of Eugene Smith’s brother, Gerald Smith, who is currently incarcerated at the Missouri State Penitentiary. Gerald Smith was convicted of capital murder by a Missouri state court and sentenced to death. The conviction and sentence were upheld on direct appeal by the Missouri Supreme Court, State v. Smith, 649 S.W.2d 417 (Mo.1983). Gerald Smith subsequently refused to pursue his post-conviction remedies on his own behalf, and an execution date of November 9, 1984 was set.

On November 6, 1984, this Court stayed Gerald Smith’s execution in order to determine whether he is competent at the present time to waive his right to federal habeas corpus review. In order to make such a determination, the Court ordered that Gerald Smith be transferred to the Federal Medical Facility at Springfield, Missouri, for a comprehensive psychiatric/psychological examination and evaluation. The Court directed that each party had the opportunity to have its own expert psychologist or psychiatrist conduct an examination at the Springfield facility. In addition, the Court requested that the United States Bureau of Prisons perform a number of tests on Gerald Smith, and to issue an opinion as to Smith’s competency to waive his post-conviction remedies.

At the present time, the Bureau of Prisons has completed its examination and has submitted its report to the Court. The reports of the parties’ experts have yet to be completed.

An evidentiary hearing has been set for March 5, 1985, in Jefferson City, Missouri, at which evidence relevant to Gerald Smith’s competency will be presented to the Court. In addition to the examination and reports prepared by the Bureau of Prisons and the experts retained by the parties, the examination and opinion of an expert appointed by the Court is warranted in light of the complex issues to be decided and the magnitude of the resulting consequences. Pursuant to Federal Rule of Evidence 706, the Court may appoint an expert witness of its own selection. The Court appointment of an expert witness is within the discretion of the trial court judge. Georgia-Pacific Corp. v. United States, 640 F.2d 328, 334, 226 Ct.Cl. 95 (1980). The Court may exercise its power to appoint an expert on its own motion. Fugitt v. Jones, 549 F.2d 1001, 1006 (5th Cir.1977). This power exists to aid the Court in a just disposition of a case. Scott v. Spanjer Bros. Inc., 298 F.2d 928, 930 (2d Cir.1962). Where mental competency is in issue, expert testimony is of great importance, and the Court has the inherent power to require a psychiatric examination. United States v. Bohle, 445 F.2d 54, 66 (7th Cir.1971).

An expert witness shall not be appointed unless he consents to act. Fed.R. Evid. 706(a). Apart from this limitation, the trial court has the authority to appoint an expert of its own choosing. See Dresser Industries, Inc. v. Ford Motor Co., 530 F.Supp. 303, 313 (D.C.Tex.1981). A court-appointed expert shall be informed in writing by the Court of his duties, and the expert is to advise the parties of his findings. Fed.R.Evid. 706(a). The expert’s deposition may be taken by any party, and he may be called to testify by the Court or any party. Id. In addition, the expert is subject to cross-examination by each party, including a party calling him as a witness. Id. Expert witnesses appointed under this rule are entitled to reasonable compensation as determined by the Court, and such compensation shall be paid by the parties in such proportion and at such time as the Court directs. Fed.R.Evid. 706(b).

The Court has requested Dr. William V. McKnelly, a psychiatrist affiliated with the Kansas University Medical Center, to serve as the Court's expert in this proceeding, and Dr. McKnelly has consented to the appointment. Pursuant to this order, Dr. McKnelly is authorized and directed to undertake any appropriate psychological, psychiatric or physical examination of Gerald Smith so that an informed opinion may be made concerning Smith’s competency. These tests will be conducted by Dr. McKnelly at the Missouri State Penitentiary on February 16 and February 17, 1985.

Following his examination, Dr. McKnelly will prepare a written report describing his examination and his findings. This report will be filed with the Court and submitted to the parties, and will include Dr. McKnelly’s opinion regarding Gerald Smith’s mental competency under each of the following standards:

(1) Whether Gerald Smith “has the capacity to appreciate his position and make a rational choice with respect to continuing or abandoning further litigation or on the other hand whether he is suffering from a mental disease, disorder or defect which may substantially affect his capacity in the premises.” Rees v. Peyton, 384 U.S. 312, 314 [86 S.Ct. 1505, 1506, 16 L.Ed.2d 583] (1966).
(2) Whether because of mental illness or disorder, Gerald Smith would be unlikely to make decisions about his own interests which would result in substantial damage to his mental or physical well-being.

The parties are directed to take all steps necessary to facilitate Dr. McKnelly’s examination. Dr. McKnelly may be reached at the following address:

Dr. William V. McKnelly
Kansas University Medical Center
39th and Rainbow
Building 11-G
Kansas City, Kansas 66103

The parties are advised that copies of any correspondence with Dr. McKnelly should be sent to the Court. Accordingly, it is hereby

ORDERED that Dr. William McKnelly is appointed as the Court’s expert witness pursuant to Fed.R.Evid. 706. It is further

ORDERED that Dr. McKnelly is authorized to perform tests and examinations consistent with this order on Gerald Smith at the Missouri State Penitentiary on February 16-17, 1985. It is further

ORDERED that the parties are to take all steps necessary so that Dr. McKnelly’s examination may be carried out in an efficient manner.

      . See 28 U.S.C. § 2254 (state prisoner may apply for a writ of habeas corpus on the ground that his state court criminal trial was infected with constitutional error.)

        . This petition was originally filed in the United States District Court for the Eastern District of Missouri on November 5, 1984. Judge Filippine of that Court immediately transferred the case to the Central Division of this Court as a more appropriate forum. See 28 U.S.C. § 2241(d). Petitioner has raised substantially the same challenges to Smith's conviction as were raised on direct appeal to the Missouri Supreme Court.

      . In 1983, Dr. Anasseril E. Daniel and Dr. Bruce Harry examined Gerald Smith at the request of the Missouri Department of Corrections. Both of these experts concluded that Smith suffered from a mental disorder which substantially affects "his capacity to appreciate his position and make a rational choice with respect to abandoning further litigation.” In 1984, Smith was examined at the request of the State by Dr. S.D. Parwatikar, Dr. Z.A. Ajans, and Richard Fontana, a clinical psychologist. Drs. Parwatikar and Ajans concluded that Smith was not incompetent to decide to abandon further litigation. Mr. Fontana’s report was more equivocal, concluding that Smith "is not adequately motivated to protect himself and to appropriately utilize legal safeguards to this end. Instead, he is actively self-destructive in using his knowledge of the legal system to receive the maximum penalty.” Finally, petitioner obtained a report from a non-examining psychiatrist, Dr. Ellis A. Perl-swig, who reviewed affidavits, medical records, psychiatric evaluations and newspaper clippings and concluded that Gerald Smith probably suffers from a psychotic disorder. Dr. Perlswig recommended that a thorough psychiatric evaluation should be performed.

      . See, e.g., Rees v. Peyton, 384 U.S. at 314, 86 S.Ct. at 1506; Hays v. Murphy, 663 F.2d at 1011-14; Rumbaugh ex rel. Rumbaugh v. Estelle, 558 F.Supp. at 652-53.

      . Considering the irreversible character of the death penalty, the Court believes that it is best to proceed with the utmost caution.

      . Cf. Evans v. Bennett, 467 F.Supp. at 1110 (rejecting conclusion of petitioner's non-examining expert that prisoner was incompetent and denying stay of execution in eleventh-hour attempt to file a “next friend” habeas corpus petition), rendered moot, 440 U.S. 987, 99 S.Ct. 1986, 60 L.Ed.2d 370 (1979).

      . The Bureau was directed to administer the following tests: the Minnesota Multiphasic Personality Inventory (MMPI); the Wexler Adult Intelligence Test (WAIT); the Thematic Apperception Test (TAT); the' Rorschach Test; the Sentence Completion Test; an EEG with photic stimulation and hyperventilation; a CAT scan; and a full neurological examination for organic brain disorders, including either the Halsted-Reitan or Luria Nebraska Test. All of these tests were administered with the exception of the Sentence Completion Test, which Gerald Smith refused to take.


text:
    TCI CABLEVISION, INC., Plaintiff, v. CITY OF JEFFERSON, MISSOURI, Defendant.
    No. 84-4312-CV-C-5.
    United States District Court, W.D. Missouri, C.D.
    Dec. 17, 1984.

      Harold R. Farrow, Richard D. Harmon, Oakland, Cal., Duane E. Schreimann, Jefferson City, Mo., for plaintiff.
    Lyndel H. Porterfield, City Counselor, Jefferson City, Mo., Robert S. Allen, Thomas M. Newmark, St. Louis, Mo., for defendant.
   ORDER

SCOTT O. WRIGHT, Chief Judge.

Presently pending before the Court is defendant’s motion to dismiss plaintiff’s complaint. Count I of the complaint alleges various violations of the anti-trust laws by defendant. Count II seeks contribution or indemnity from defendant in the event that plaintiff is adjudged liable in a pending lawsuit, Central Telecommunications, Inc. v. TCI Cablevision, Inc., No. 83-4068-CV-C-5 (W.D.Mo.1983). See 589 F.Supp. 85. For the reasons set forth below, defendant’s motion will be sustained and plaintiff’s complaint will be dismissed in its entirety.

Count I

Count I contains two related claims. First, plaintiff claims that it has been injured by defendant’s use of “its monopoly power and control over certain essential facilities to attempt to unreasonably restrain trade among horizontal competition in the cable television market in the City of Jefferson.” Second, plaintiff alleges that defendant and one of the plaintiff’s rivals for the Jefferson City cable television market conspired to harrass and damage plaintiff. These claims must be dismissed for two independent reasons.

First, Congress recently enacted the Local Government Antitrust Act of 1984, which expressly bars private damages actions against cities under the antitrust laws. This Act took effect on September 24, 1984. Although the complaint herein was filed seventeen days earlier, on September 7, 1984, the Act allows a district court to dismiss a pending case where it would be inequitable not to do so. The Court finds that the instant case easily meets this standard. On its conspiracy claim, plaintiff has alternative relief available against the alleged co-conspirator; indeed, plaintiff has been prosecuting such a claim against the alleged co-conspirator in this very Court. Moreover, there was absolutely no substantive development of this case on the effective date of the Act. Consequently, the Court finds that it clearly would be inequitable to allow this case to proceed merely because the complaint was by happenstance filed a few days before it would have been irreversibly barred by this recent federal legislation.

Moreover, the Court finds the claims raised in Count I to be defective in that they do not include the essential element of “antitrust injury.” In Associated General Contractors of California, Inc. v. California State Council of Carpenters, 459 U.S. 519, 103 S.Ct. 897, 74 L.Ed.2d 723 (1983), the Supreme Court stated that the existence of an actionable “antitrust injury” turns on the relationship between the plaintiff’s alleged damages and the alleged wrongdoing by the defendant. Id. 103 S.Ct. at 907. The Court noted that the plaintiff in Associated General Contractors was “neither a consumer nor a competitor in the market in which trade was restrained.” Id. at 909. Accordingly, the Court ruled that the plaintiff lacked standing to bring an antitrust action, notwithstanding an allegation that the defendants had violated the antitrust laws with the specific intent to injure the plaintiff. Id. at 912-13. Here, plaintiff claims that defendant attempted to exclude it from the cable television market in Jefferson City by adopting a bidding process to determine the next recipient of a cable television franchise. There is no allegation that this attempt came within dangerous proximity to success; in fact, plaintiff retained its position as the sole cable television operator in Jefferson City. Moreover, it bears emphasis that TCI is neither a competitor of Jefferson City, nor a consumer in any alleged relevant market served by Jefferson City. Nevertheless, plaintiff claims that it was injured by defendant’s “anticompetitive scheme” because it incurred “enormous costs” and other detrimental side-effects as it sought to challenge the bidding process initiated by the City. The Court finds that the harm claimed by plaintiff is too attenuated from the allegedly illegal activity undertaken by defendant to qualify as an actionable “antitrust injury.” See Gianna Enterprises v. Miss World (Jersey), Ltd., 551 F.Supp. 1348, 1355 (S.D.N.Y.1982).

Count II

Count II, which seeks "contribution or indemnity from defendant in the event that plaintiff is adjudged liable in Central Telecommunications, Inc. v. TCI Cablevision, Inc., clearly fails to state a claim upon which relief can be granted. The claims asserted by Central Telecommunications against TCI Cablevision are: (1) antitrust conspiracy; (2) § 1983 violation; and (3) tortious interference with business expectations. There is no right of contribution under the antitrust laws. Texas Industries v. Radcliff Materials, Inc., 451 U.S. 630, 101 S.Ct. 2061, 2070, 68 L.Ed.2d 500 (1981). Nor is there a right of contribution under 42 U.S.C. § 1983. See Northwest Airlines v. Transport Workers Union, 451 U.S. 77, 101 S.Ct. 1571, 67 L.Ed.2d 750 (1981); Anderson v. Local Union No. 3, 582 F.Supp. 627 (S.D.N.Y.1984); Pennsylvania v. Local Union 542, 507 F.Supp. 1146 (E.D.Pa.1980). Nor does Missouri law allow a party who was adjudged liable under an intentional tort theory to bring a separate action for contribution. Porter v. Crawford & Co., 611 S.W.2d 265, 273 (Mo.App.1980). In addition, the Court notes that Jefferson City, which was a named defendant in Central’s lawsuit against TCI, has settled with Central; thus, plaintiff’s claim for contribution herein also is barred by Mo.Rev.Stat. § 537.060, which provides that a settlement immunizes the settling defendant “from all liability for contribution or non-contractual indemnity to any other tort-feasor.”

In its response to defendant’s motion to dismiss, plaintiff purports to distinguish the authorities cited above by arguing that it is seeking indemnity, not contribution. However, the authority upon which plaintiff relies in constructing this argument undermines its position. As plaintiff points out, it is well-established that

“a right of indemnity exists whenever one party is exposed to liability by the action of another who, in law or in equity, should make good the loss of the other ... [I]n the area of noncontractual indemnity the right rests upon the fault of another which has been imputed to or constructively fastened upon him who seeks indemnity.”

41 Am.Jur.2d, Indemnity § 19, at 705 (1968) (emphasis added). In view of this definition, it is apparent that plaintiff’s claim herein does not arise out of a right of indemnity. Central’s claims against TCI are based on a conspiracy between TCI and Jefferson City. If TCI is adjudged liable to Central, it will be on the basis of TCI’s own wrongdoing. There is no claim in Central’s lawsuit which is predicated on the imputation of Jefferson City’s wrongdoing to TCI. Thus, TCI’s characterization of Count II as a claim for indemnity is wholly fallacious; it is clearly a claim for contribution, a claim which it has no right to bring.

In accordance with the foregoing, it is hereby

ORDERED that defendant’s motion to dismiss plaintiff’s complaint in its entirety and with prejudice is sustained. Plaintiff shall bear costs.


author: VAN SICKLE, District Judge.

text:
    Odd A. OSTEROOS and Dorothy E. Osteroos, individually and d/b/a Hesnault Ranch and Hesnault Irrigation; and Odd L. Osteroos and Garvin Osteroos, individually and d/b/a Hesnault Irrigation, Debtors and Appellees, v. NORWEST BANK MINOT, N.A., f/k/a First National Bank in Minot, Appellant.
    Civ. No. A4-84-201.
    United States District Court, D. North Dakota, Northwestern Division.
    Dec. 18, 1984.
    Michael G. Sturdevant, Minot, N.D., for debtors and appellees.
    Max D. Rosenberg, Bismarck, N.D., for appellant.
   MEMORANDUM AND ORDER

VAN SICKLE, District Judge.

Norwest Bank Minot (Norwest) appeals from an August 8, 1984 order of the Bankruptcy Court for the District of North Dakota. In that order, the Bankruptcy Court determined that the Debtors were entitled to proceeds of grain received under the federal Payment-In-Kind (PIK) program free of any claim of Norwest.

FACTS

The parties entered into a stipulation of the following relevant facts. In a May 19, 1982 security agreement, the Debtors pledged to Norwest as security for loans “[a]ll farm products of Debtor, whether now owned or hereafter acquired, including but not limited to all crops, whether annual or perennial, and the products thereof, and all feed, seed, fertilizer, medicines and other supplies used or produced by Debtor in farming operations.” In a financing statement filed April 26, 1982, Norwest claimed a security interest in “[a]ll crops or other plant products now planted, growing or grown, or which are hereafter planted or become growing crops and the proceeds and products of such crops.”

The Debtors harvested 86,735 bushels of corn from their 1982 farming operation, which they entered into the federal grain storage program. In 1983, the Debtors enrolled in the PIK program. Under the PIK program, in return for their agreement not to raise corn during the 1983 season, the Debtors received the corn which they had put into the federal grain storage program in 1982. The Debtors then sold that corn.

On May 9, 1983, the Debtors filed a voluntary petition under Chapter 11 of the Bankruptcy Code. On September 28, 1983, the Debtors initiated an adversary proceeding to obtain a determination of the nature and extent of Norwest’s claims against the Debtors. By stipulation of the parties, that proceeding was limited to a determination of Norwest’s interests in payments received under the 1983 PIK program.

The Bankruptcy Court determined that, because it held no security interest in the Debtors’ “general intangibles,” Norwest was entitled to none of the proceeds of the 1983 PIK payments.

DISCUSSION

On appeal, Norwest advances four theories in support of reversal of the Bankruptcy Court’s order: 1). that Norwest is entitled to the PIK payments solely by reason of its lien on the Debtors’ 1982 crops, 2). that Norwest is entitled to the PIK payments under that portion of the security agreement that covered “all farm products ... and the products thereof,” 3). that Nor-west is entitled to the PIK payments as “substitution or replacement” for the Debtors’ 1983 crop, and 4). principles of equity.

The Bankruptcy Court, in reaching its decision, relied on In Re Sunberg, 729 F.2d 561 (8th Cir.1984). In Sunberg, the court found that a security interest in “existing or hereafter acquired ... crops, growing crops, livestock, farm products, equipment, inventory, fixtures, contract rights, accounts and general intangibles” gave the creditor a security interest in PIK payments. The Bankruptcy Court interpreted Sunberg to give a secured creditor an interest in PIK payments only if a security agreement covered “general intangibles.” While the court in Sunberg relied on a clause in the security agreement covering “general intangibles” in determining that a creditor held a valid security interest in PIK payments, the Sunberg decision does not preclude finding a valid security interest in PIK payments where the security agreement does not apply to “general intangibles.”

Norwest asserts that its lien attached to the Debtors’ crop when it was grown in 1982, and that the PIK payments were in effect proceeds of the 1982 crop. This theory does not account for an intervening event: when the Debtors placed the 1982 crop in storage, they received payment for it. Norwest may have had a lien on that payment. But the PIK payments were not received as proceeds of the 1982 crop; rather, they were received under an agreement that applied to the 1983 crop year.

Norwest also argues that it is entitled to the PIK payments since the security agreement covered “all farm products ... all crops ... and the products thereof.” This Court agrees. Had the Debtors grown corn during the 1983 season, it would have been covered by the security agreement. The PIK payments were received as a substitute for the corn the Debtors would otherwise have planted. See In Re Lee, 35 B.R. 663 (Bankr.N.D.Ohio 1983). The PIK payments, though different in form, are analogous to cash payments received under federal deficiency and disaster programs; such cash payments have been determined to be covered by a security agreement covering “crop proceeds.” See In Re Munger, 495 F.2d 511, 513 (9th Cir.1974); In Re Nivens, 22 B.R. 287, 291-92 (Bankr.N.D.Tex.1982). The language of the instant security agreement covering “all crops ... and the products thereof” and the language of the instant financing statement covering “the proceeds and products of such crops” are sufficient to give Norwest a security interest in the PIK payments. See also In Re Judkins, 41 B.R. 369 (Bankr.M.D.Tenn.1984) (PIK payments constitute “crop proceeds”); In Re Cupp, 38 B.R. 953, 955 (Bankr.N.D.Ohio 1984) (PIK payments covered by security agreement which applied to “all products of crops”); In Re Preisser, 33 B.R. 65 (Bankr.D.Colo.1983) (PIK payments determined to be rents or profits of the land and so covered by deed of trust). But see In Re Kruse, 35 B.R. 958 (Bankr.D.Kan.1983) (no security interest in PIK payments where security agreement did not apply to “general intangibles”).

In light of the foregoing conclusion, it is unnecessary to address the other theories advanced by Norwest.

CONCLUSION

For the foregoing reasons, IT IS ORDERED:

That the August 8, 1984 order of the Bankruptcy Court is reversed.


author: LOUIS H. POLLAK, District Judge.

text:
    Shirley MAYHEW, et al. v. Walter COHEN, et al.
    Civ. A. No. 84-3963.
    United States District Court, E.D. Pennsylvania.
    Dec. 21, 1984.

      Catherine C. Carr, Community Legal Services, Inc., Philadelphia, Pa., for plaintiffs.
    John G. Knorr, III, Deputy Atty.. Gen., Harrisburg, Pa., for defendants.
   MEMORANDUM

LOUIS H. POLLAK, District Judge.

In this action, plaintiffs, recipients of federal or state welfare assistance who reside in the Philadelphia area, challenge the process by which the state Department of Public Welfare (“DPW”) recoups alleged benefit overpayments. Specifically, plaintiffs contend that the series of three letters through which the state informs affected individuals about the recoupment process do not provide constitutionally sufficient notice of (1) what DPW seeks and why, and (2) what steps a welfare recipient should take to address DPW’s claims. Plaintiffs seek to enjoin the state from proceeding with recoupment based on that allegedly insufficient notice. An evidentiary hearing was held on plaintiffs’ motion for a preliminary injunction on November 26-27, 1984. In addition, the parties have submitted extensive briefs on the question whether the notice satisfies constitutional requirements.

On December 19, 1984, I issued an Order on the three motions outstanding in this case: plaintiffs’ motion to amend, plaintiffs’ motion for class certification, and plaintiffs’ motion for a preliminary injunction. The motion to amend was granted as unopposed. The following discussion explains my rulings on the class certification and preliminary injunction motions. I will begin by summarizing the relevant facts, and will then proceed to consider plaintiffs’ motions.

I. STATEMENT OF FACTS

Under the Omnibus Budget Reconciliation Act of 1981, states are required to make some provision for the recoupment of overpayments of AFDC benefits. 42 U.S.C. § 602(a)(22). See also 45 C.F.R. § 233.20(a)(13) (regulations promulgated by the Secretary of Health and Human Services implementing the statute). By way of complying with this statute, the DPW has promulgated regulations which outline the procedure to be followed in recouping over-payments. See 55 Pa.Code § 255.1 et seq. These procedures are applied to overpayments both of federally funded AFDC benefits and of state funded General Assistance (“GA”) benefits. In addition, the overpayments themselves may be the result of any of a number of factors, ranging from the recipient’s failure to report income to the state’s own administrative error.

Neither state nor federal regulations prescribe a specific notice form for use in the recoupment program. The state has adopted such a form as a matter of administrative practice, however.

The state’s practice has been to send three letters to those recipients determined, as a preliminary matter, to have received overpayments. These three letters are reproduced as appendices to this Opinion. The first letter (Appendix A) (1) tells the recipient that he has received an overpayment and the amount of the alleged overpayment, and (2) provides a form on which the recipient may specify any of three methods of repayment. (The three methods are payment of the full amount at once, partial payment combined with a 10% reduction in the recipient’s benefit checks until the full debt is repaid, and the 10% benefit reduction alone.) The letter states that if the recipient does not respond within fourteen days, the state will automatically select the 10% benefit reduction as the method of repayment. Below the form on which the recipient is to choose his method of repayment, the letter states that “[y]ou will have the opportunity to request an appeal and to have a fair hearing when you receive your advance notice notifying you when recoupment will start.”

The second letter (Appendix B) arrives approximately three weeks after the first. The second is shorter than the first, and states simply that the recipient’s check will be reduced by a stated amount until the overpayment is fully recouped. The second letter also states that one additional notice will be forthcoming and will provide additional information regarding both the benefit reduction and the recipient’s hearing rights:

Shortly you will receive an advance notice that your check will be reduced. The advance notice form will inform you of the semi-monthly recoupment amount and the date of the check that grant reduction will begin. When you receive the advance notice form, you have the right to request an appeal and a fair hearing.

The third letter (Appendix C), which the parties agree arrives in the same envelope as the second, begins by restating the fact and amount of the overpayment and the amount by which the recipient’s benefits will be reduced in order to repay it. Then, under the heading “YOUR RIGHT TO APPEAL AND TO A FAIR HEARING,” the letter states that if the recipient disagrees with the state’s decision the recipient may appeal, and goes on to describe how to request such an appeal. At the bottom of the letter is a form for that purpose, which must be signed and mailed in to the Bureau of Claim Settlement. The form asks the recipient to state his name, address, telephone number, and the reason for his appeal. None of the three letters states either the cause of the overpayment or how the amount of the overpayment was calculated.

At the hearing held November 26-27, 1984, plaintiffs introduced evidence tending to show a substantial possibility of error in those calculations, stemming largely from the detailed regulations which govern the calculation of the recipient’s income, which in turn determines the level of benefits for which the recipient is eligible. Defendants did not deny the fact that such error occasionally occurred, focusing instead on the costliness of providing more detailed notice.

Plaintiffs allege that the notice used in the state’s recoupment program is constitutionally inadequate, in that it fails adequately to advise recipients of their hearing rights, and, as to those plaintiffs who requested hearings, fails to give them sufficient information to prepare for their appeals. Named plaintiffs include individuals at all stages of the recoupment process.

II. MOTION FOR CLASS CERTIFICATION

Named plaintiffs seek to represent a class which they define as follows:

All AFDC and GA recipients in the Commonwealth of Pennsylvania who
(a) have received one or more assistance overpayment recoupment notices and who have recoupment claims pending against them but have not yet had any checks reduced to recoup an overpayment;
(b) have received assistance overpayment recoupment notices and who have had one or more checks reduced to recoup the alleged past overpayment;
(c) have not yet received assistance overpayment recoupment notices, but will in the future.

Plaintiffs’ Modified Class Definition at 1-2. Defendants do not oppose certification.

In order to obtain certification for their proposed class, plaintiffs must satisfy the court that they can represent the proposed class in accordance with the requirements of Rules 23(a) and 23(b)(2). Rule 23(a) states:

Prerequisites to a Class Action. One or more members of a class may sue or be sued as representative parties on behalf of all only if (1) the class is so numerous that joinder of all members is impracticable, (2) there are questions of law or fact common to the class, (3) the claims or defenses of the representative parties are typical of the claims or defenses of the class, and (4) the representative parties will fairly and adequately protect the interests of the class.

Fed.R.Civ.P. 23(a). Under Rule 23(b)(2), a class action may be maintained if it satisfies these four criteria and if:

the party opposing the class has acted or refused to act on grounds generally applicable to the class, thereby making appropriate final injunctive relief or corresponding declaratory relief with respect to the class as a whole.

Fed.R.Civ.P. 23(b)(2).

Turning first to the four requirements of Rule 23(a), it appears that the first two — numerousness of the class and the existence of common questions of law or fact — are self-evidently satisfied here. The class which plaintiffs seek to represent includes all AFDC and GA recipients in Pennsylvania who have in the past been, or will in the future be, subject to or threatened with a reduction of their assistance benefits because of an alleged past overpayment of such benefits. Defendants, in their Answer, acknowledged that the class numbered in the thousands and that joinder was therefore impracticable. As to the common questions criterion of 23(a)(2), plaintiffs assert that the notice used in the recoupment process is inadequate. This claim is one which all those who have received — or, indeed, may receive — such notice would share.

The third and fourth requirements look to whether the named representatives are able properly to represent the interests of the proposed class. Named plaintiffs meet this test also. In particular, the named plaintiffs include individuals at each possible stage of the recoupment process. See Amended Complaint at ¶¶ 21-105. Thus, named plaintiffs represent the full range of interests of those who have received or will receive the notice challenged here.

The greatest potential for adverseness of interest, and the greatest cause for hesitation in certifying the proposed class, lies in the potential conflict between (1) welfare recipients who claim that the notice prevented them from preparing adequately for their hearing, and (2) welfare recipients who, for whatever reason, have not yet received a hearing on their alleged overpayment. These two categories of plaintiffs share the contention that the state’s notice was constitutionally defective; however, the different consequences of the defective notice may lead to different legal results for those who have had hearings than for those who have not. This problem is, in my view, resolved by the fact that the named plaintiffs include (1) recipients who have had a hearing for which they allegedly could not prepare adequately (e.g., Deborah Lebrón), (2) recipients who have not yet had a hearing but have one scheduled (e.g., Shirley Mayhew), and (3) a recipient (Leonard Pickens) who had no hearing because he allegedly could not understand the notice and therefore did not request a hearing in time. See Amended Complaint ¶¶ 30, 39, 78-80.

The Rule 23(b)(2) requirement that the opposing party have acted “on grounds generally applicable to the class” is satisfied by the very nature of plaintiffs’ claim. The proposed class includes all who have received or will receive the set of notices challenged as constitutionally inadequate. As to all such parties, the government has “acted” — sent the notices (or is prepared to send the notices) — in a common fashion for a common purpose.

Accordingly, I will grant plaintiffs’ motion for class certification, reserving the option of either revising the definition of the class or certifying sub-classes under Rule 23(c) should such changes become necessary at a later stage of the litigation.

III. MOTION FOR PRELIMINARY INJUNCTION

The parties do not dispute the standard I must apply in deciding whether to grant plaintiffs’ motion for preliminary injunctive relief. Plaintiffs must show (1) a reasonable probability of success on the merits and (2) irreparable harm if relief is withheld until the conclusion of the litigation; in addition, I must consider (3) the harm which the requested relief will cause the government and (4) the public interest. Oburn v. Shapp, 521 F.2d 142 (3d Cir.1975); Hill v. O’Bannon, 554 F.Supp. 190, 194 (E.D.Pa.1982). A discussion of how these factors apply in this case follows.

A. Probability of Success on the Merits

The parties (correctly) agree that the recoupment program implicates a property interest under the Fourteenth Amendment. Mattern v. Mathews, 582 F.2d 248, 254 (3d Cir.1978), cert. denied, 443 U.S. 912, 99 S.Ct. 3101, 61 L.Ed.2d 876 (1979). See Goldberg v. Kelly, 397 U.S. 254, 90 S.Ct. 1011, 25 L.Ed.2d 287 (1970); Mathews v. Eldridge, 424 U.S. 319, 332, 96 S.Ct. 893, 901, 47 L.Ed.2d 18 (1976). The dispute therefore centers on the adequacy of the process by which plaintiffs’ Fourteenth Amendment “property” has been, or is in danger of being, “denied.” Specifically, plaintiffs contend that the series of three letters by which the state notifies a recipient of an overpayment and its consequences offers inadequate notice of (1) the nature and scope of the recipient’s right to contest the recoupment, and (2) the reasons for the government’s action.

I derive the standard by which the state’s notice must be judged from Memphis Light, Gas & Water Division v. Craft, 436 U.S. 1, 98 S.Ct. 1554, 56 L.Ed.2d 30 (1978). In Memphis Light, the Supreme Court held that a municipal utility could not terminate service without providing notice designed to inform the terminated customer of the means by which he could contest the termination. 436 U.S. at 14-15, 98 S.Ct. at 1562-1563. The Court began its discussion of the notice issue by quoting the standard used in Mullane v. Hanover Trust Co., 339 U.S. 306, 70 S.Ct. 652, 94 L.Ed. 865 (1950):

An elementary and fundamental requirement of due process in any proceeding which is to be accorded finality is notice reasonably calculated, under all the circumstances, to apprise interested parties of the pendency of the action and afford them an opportunity to present their objections.

Mullane, supra, 339 U.S. at 314, 70 S.Ct. at 657 (quoted in Memphis Light, supra, 436 U.S. at 13, 98 S.Ct. at 1562). Because the “notice” given in Memphis Light — a statement that payment was overdue and service would be terminated if it was not forthcoming — gave no information about how one could appeal the termination, the Court found it inadequate. Memphis Light, 436 U.S. at 14-15, 98 S.Ct. at 1562-1563. Such notice, the Court reasoned, could not possibly achieve the twin purposes of notice under the due process clause: “to apprise the affected individual of, and permit adequate preparation for, an impending ‘hearing.’ ” Id. at 14, 98 S.Ct. at 1562.

Memphis Light suggests that constitutionally adequate notice (1) must be reasonably calculated to inform recipients of the availability of a hearing, and (2) must offer recipients the opportunity to prepare adequately for that hearing. See also Mennonite Board of Missions v. Adams, 462 U.S. 791, 103 S.Ct. 2706, 2712, 77 L.Ed.2d 180 (1983); Landon v. Plasencia, 459 U.S. 21, 103 S.Ct. 321, 331, 74 L.Ed.2d 21 (1982); Wolff v. McDonnell, 418 U.S. 539, 564, 94 S.Ct. 2963, 2978, 41 L.Ed.2d 935 (1974). These broad principles will necessarily yield different notice processes in different circumstances, as the following discussion in Memphis Light shows:

The Crafts were told that unless the double bills were paid by a certain date their electricity would be cut off. But— as the Court of Appeals held — this skeletal notice did not advise them of a procedure for challenging disputed bills. Such notice may well have been adequate under different circumstances. Here, however, the notice is given to thousands of customers of various levels of education, experience, and resources. Lay consumers of electric service, the uninterrupted continuity of which is essential to health and safety, should be informed clearly of the availability of an opportunity to present their complaint. In essence, recipients of a cutoff notice should be told where, during which hours of the day, and before whom disputed bills appropriately may be considered.

436 U.S. at 14-15 n. 15, 98 S.Ct. at 1562-1563 n. 15. Whatever particular form the notice takes, however, the state must inform affected parties in such a manner that the hearing process is effective. Hence the Court’s two-pronged definition of notice’s purpose, covering both knowledge of the existence of a hearing and the opportunity to prepare so that the hearing might be meaningful.

1. Notice of the Availability of a Hearing

Each of the three notification letters states that the recipient has the right to an appeal and a fair hearing. The first of the letters (Appendix A), however, refers to this right in a single sentence at the bottom of the form on which the recipient is invited to check the preferred means of recoupment.. The body of the first letter — the portion above the repayment form — never mentions the availability of a hearing. Instead, the letter gives the distinct impression that the state’s determination is final. It uses mandatory language — “you must repay,” “if you do not return the bottom portion of this notice, Claims Settlement will use Option C automatically” — which suggests that the only open question is the method, not the fact, of recoupment. Nor does the provision of a toll-free number to call for questions offer much help: the reader of the letter might plausibly assume that the questions referred to concern the three methods of repayment. Finally, when at the bottom of the form the letter does mention the recipient’s right to appeal, it is unclear whether benefits will continue to be paid while the recipient appeals. Nothing in the letter itself would lead the recipient to conclude that the hearing to be offered is pre- rather than post-reduction.

The second letter (Appendix B) is only marginally more informative. It states that the recipient’s benefits will be reduced and by what amount, and then recites that when an “advance notice form” is received, the recipient may request a hearing. The letter does not say when or where the hearing will take place, or how to request it, implying that such information will be received “shortly,” when the advance notice form arrives.

The third letter (Appendix C), which arrives together with the second and not afterward as the second letter suggests, explains the appeal process in much greater detail, stating both when and how to request a hearing in the event that the recipient wishes to challenge recoupment.

Defendants contend that the letters fulfill their obligation to inform recipients of their appeal rights, for two reasons. First, defendants argue that each of the letters expressly states that the recipient has a right to a “fair hearing” if he objects to the state’s overpayment decision. Second, defendants note that the third letter explains in detail how and when that hearing may be requested. Both arguments are strong, but they do not address the letters’ critical deficiencies. The third letter tells recipients that “[i]f you disagree with our decision, you have the right to appeal and a fair hearing.” That promise is, however, empty if the recipient cannot possibly know whether he “disagrees” with the state’s decision. It is difficult to imagine how the recipient, knowing only that his checks are to be reduced and by how much, is to decide whether the state has made a mistake or not. The state compounds this problem by requiring the recipient, on the hearing request form, to “state the reason for your appeal.” This appears to ask the impossible, given that the recipient is not told the “reason” for the initial determination.

In addition, the letters in some respects provide too much in the way of information which may mislead when taken out of the context of the recipient’s rights. Thus, the state invites recipients to pay all or part of their claim right away, in the form at the bottom of the first letter. Such payments must be rare, and none of the named plaintiffs alleges that he or she paid in this manner, but those who do are unquestionably paying the state before being notified that they have a right to a pre-reduction hearing. Moreover, even as to those who do not pay upon receipt of the first two notices, those early notices may have a confusing or intimidating effect that deters a recipient from pursuing appeal rights as purposefully as if the recipient had gotten one notice which fully informed him of his status.

Constitutionally adequate notice must not only contain the necessary minimum amount of relevant data, it must also not mislead its recipient about that data’s significance. Jackson v. O’Bannon, CCH Medicare and Medicaid Guide ¶ 31,108 (E.D.Pa.1980). Useful information may be drowned out by either superfluous or premature disclosures. Id.

There is a reasonable probability that such is the case with regard to the three notices at issue here. I know of no good reason (and defendants have offered none) which justifies the sequence of forms described above. Moreover, the confusion engendered by multiple (and somewhat inconsistent, at least in emphasis) notices can be remedied at no great expense to the state. Indeed, combining notice forms would, one might suppose, actually save the state money. Defendants are therefore in a poor position to argue that the confusing form of notice they now employ is necessary as a matter of administrative convenience. For these reasons, I find it reasonably probable that plaintiffs will succeed on their argument that the notices inadequately inform recipients of their right to a hearing.

2. Adequacy of Recipients’ Opportunity to Prepare

The parties have largely framed the issue in this case as whether or not the state must, in the notice forms, explain in detail the reasons for its overpayment determination. A series of decisions by the Court of Appeals for the Seventh Circuit hold that a statement of reasons, including the calculations the government used to arrive at the amount of the benefit reduction, is constitutionally required in a case such as this one. Dilda v. Quern, 612 F.2d 1055, 1056-57 (7th Cir.) (per curiam), cert. denied, 447 U.S. 935, 100 S.Ct. 3039, 65 L.Ed.2d 1130 (1980); Banks v. Trainor, 525 F.2d 837, 842 (7th Cir.1975), cert. denied, 424 U.S. 978, 96 S.Ct. 1484, 47 L.Ed.2d 748 (1976); Vargas v. Trainor, 508 F.2d 485, 489 (7th Cir.1974), cert. denied, 420 U.S. 1008, 95 S.Ct. 1454, 43 L.Ed.2d 767 (1975). Other judges in this district have cited the Seventh Circuit cases approvingly. Hill v. O’Bannon, 554 F.Supp. 190, 197 (E.D.Pa.1982) (burden should not be placed on recipients to contact caseworkers to find out why aid was being cut, citing Vargas v. Trainor, supra); Philadelphia Welfare Rights Organization v. O’Bannon, 525 F.Supp. 1055, 1060-61 (E.D.Pa.1981) (notice deemed constitutionally inadequate because it did not state reasons for cutback in benefits, citing Banks v. Trainor, supra, and Vargas v. Trainor, supra). Defendants concede that they do not meet the standard which these cases impose, arguing that the proper standard is much less severe.

There is a good deal of uncertainty about just what information the state must provide in notices of benefit reductions. Courts often conclude that some kind of statement of reasons is necessary. See, e.g., LeBeau v. Spirito, 703 F.2d 639, 643-44 (1st Cir.1983); Garrett v. Puett, 557 F.Supp. 9, 14 (M.D.Tenn.1982), affirmed, 707 F.2d 930 (6th Cir.1983); Willis v. Lascaris, 499 F.Supp. 749, 757 (N.D.N.Y.1980). When one examines the cases, however, it quickly becomes clear that the word “reasons” covers a very wide territory indeed. In Garrett v. Puett, supra, for example, the court upheld the use of notices which did little more than recite the fact that a “new federal law” had changed the way in which the recipient’s income had to be calculated. See 557 F.Supp. at 11-12. Such cases stand in sharp contrast to the Seventh Circuit cases cited above, which require the state to give the recipient the worksheets on which the state’s calculations were made. See Dilda v. Quern, supra. In this case, the parties argue chiefly about whether the state must, as the Seventh Circuit would require, include in the notice the calculations by which it arrived at the amount of the overpayment.

The presence or absence of a detailed statement of reasons, with attendant calculations, is not before me now. The issue before me is whether there is a reasonable probability that the notices used in this case did not allow recipients to prepare adequately for their hearings. That question is necessarily somewhat context-specific: the nature of the government action, the educational level of the affected parties, and the practicality of various alternatives are all relevant to the question whether a given notice was sufficient for constitutional purposes. See Memphis Light, supra, 436 U.S. at 14-15 n. 15, 98 S.Ct. at 1562-1563 n. 15. At the very least, however, a recipient must know how to obtain the information he needs to challenge the state’s decision in order to prepare for his hearing. I find that the letters used here fail to meet even this minimum standard. The third letter states that the recipient can “meet with the Claim Settlement staff to discuss the matter informally or to present information which might change the proposed action.” Read in light of the first and second letters, that statement seems to invite the informal presentation of the recipient’s evidence, not the provision to the recipient of the government’s evidence or calculations. Absent some sort of offer to provide the data on which the state relied — and easy access to the source of that data — the notices here provide a statement of a proposed government action that may be incomprehensible to affected parties, with no explanation and no self-evident way to get one. Along these same lines, I note that the third letter invites phone calls to the Claim Settlement staff as a means of setting up a meeting, perhaps implying that information will not be freely given over the phone. To poor and poorly educated recipients, this presents an important and unnecessary obstacle to obtaining needed information.

An invitation to seek information is, of course, valueless unless that information is in fact readily available. Defendants argue that information is available to anyone who calls the toll-free number listed in the notices, but testimony taken at the hearing suggested that only the most persistent recipients would reach anyone at the other end of the toll-free number. Moreover, there was testimony that the information available to those who got through was sketchy, because the personnel on the other end had only incomplete access to the recipient’s file. Finding this testimony credible, I cannot conclude that the necessary information was available to recipients in this case.

My conclusion makes it unnecessary for me to decide whether a detailed statement of reasons, of the sort plaintiffs seek, is constitutionally required in this case. At this stage, I hold only that, on the record before me, there appears a substantial probability that plaintiffs will be able to show that the notice employed by the state does not allow recipients to pursue their hearing rights in a meaningful way.

B. Irreparable Harm

The parties devote undue space in their briefs to arguing about the degree of harm plaintiffs in this case will suffer if wrongfully deprived of 10% of their benefit checks for the duration of this litigation. It is established that such harm is both irreparable and substantial. See, e.g., Philadelphia Welfare Rights Organization v. O’Bannon, 525 F.Supp. 1055, 1058-59 (E.D.Pa.1981). Because I have now held that plaintiffs have shown a probability of success on the merits, such harm suffices for purposes of issuing a preliminary injunction.

C. Harm to the State and the Public Interest

There is unquestionably a cost to the state in ceasing recoupment of overpay-merits as to those individuals who received improper notice. That cost does not, however, loom large in this case. The parties agree that the recipients whose benefits have been cut under the recoupment program number in the hundreds. And, as defendants argue in minimizing the potential harm of erroneous cuts to plaintiffs, the dollar amounts involved here are not great.

The remaining factor in my preliminary injunction determination is the public interest. Plaintiffs and defendants disagree on the proper definition of the public interest, plaintiffs stressing the importance of providing for those in need, defendants emphasizing the strong policy in recovering money due the state. Both these positions ignore the strong interest in following constitutional procedures, which themselves balance the private and state interests at stake. Thus, for purposes of deciding plaintiffs motion for a preliminary injunction, I find the public interest coextensive with the merits determination.

IV. CONCLUSION

For the foregoing reasons, I have determined that plaintiffs’ motion for class certification should be granted, and plaintiffs’ motion for preliminary injunctive relief should be granted insofar as the relief sought is consistent with the views expressed in this Memorandum.

APPENDIX A

APPENDIX C

      . Plaintiffs initially submitted a somewhat different class definition. See Plaintiffs’ Motion for Class Certification. For reasons stated on the record on November 26, 1984, I found this initial definition unclear, and ordered the parties to undertake to reach agreement on a modified class definition; the resultant revision is the proposed class definition I consider in this Memorandum.
      Plaintiffs also seek certification of a sub-class defined to exclude only AFDC recipients, but which is identical in all other respects to the class. Plaintiffs' Modified Class Definition at 2. Plaintiffs do not explain how the interests of class members who are AFDC recipients differ from the interests of other class members. Accordingly, I decline to certify the proposed subclass at this time.

      . Defendants object only to the absence of a specific statement that class members seek injunctive and declaratory relief and not money damages. Defendants contend that, under Edelman v. Jordan, 415 U.S. 651, 94 S.Ct. 1347, 39 L.Ed.2d 662 (1974), plaintiffs may not recover damages in any event. Further, defendants argue that a damage award would be inconsistent with Federal Rule of Civil Procedure 23(b)(2), under which plaintiffs seek class certification. To the extent defendants maintain that any money award would violate Rule 23(b)(2), they are in error. See Christy v. Hammel, 87 F.R.D. 381, 393 n. 26 (M.D.Pa.1980) (court may certify class action on injunction issue and treat damages claim as incidental); Anderson v. Rizzo, 80 F.R.D. 72, 75 n. 6 (E.D.Pa.1978) (actions in which classwide declaratory or injunctive relief is sought may be maintained under 23(b)(2) even though damages are also sought); 7A C. Wright & A. Miller, Federal Practice and Procedure: Civil 2d § 1775, at 22-23.
      Defendants’ Eleventh Amendment argument is more substantial, but that argument is more properly addressed to the remedies which ought to be provided than to class certification.

      . Recipients who have not had hearings on their alleged overpayments fall into two categories: those for whom the time for a hearing has not yet arrived, e.g., Amended Complaint at ¶¶ 43-49 (named plaintiff Kathleen Westerfer), and those who failed to timely request a hearing. E.g., Amended Complaint at ¶¶ 68-81 (named plaintiff Leonard Pickens).

      . Plaintiffs claim that the notice was defective both for failing adequately to inform recipients of their hearing rights, and for failing to provide enough information for recipients to prepare for their appeals. Only the second of these claims applies to recipients who have had hearings. Moreover, a recipient’s inability to prepare adequately for his hearing may or may not have prejudiced him at the hearing. It is possible, for instance, that some recipients, on arriving at the hearing, received answers to their questions about the alleged overpayment and realized that they had no grounds for challenging the state’s action. Such persons may stand on different legal footing than those who were deterred from ever requesting a hearing because of the confusing nature of the state’s notice letters.

      . The parties address these concerns in terms of the balancing test applied in Mathews v. Eldridge, 424 U.S. 319, 96 S.Ct. 893, 47 L.Ed.2d 18 (1976). A number of judicial decisions also apply Mathews ’ balance of private and public interests and the risk of adjudicatory error to notice questions like the one presented here. See, e.g., Foggs v. Block, 722 F.2d 933, 938 (1st. Cir.1983), cert. granted sub nom. Atkins v. Parker, — U.S. -, 104 S.Ct. 3532, 82 L.Ed.2d 838 (1984); Hill v. O’Bannon, 554 F.Supp. 190, 196-97 (E.D.Pa.1982); Philadelphia Welfare Rights Organization v. O’Bannon, 525 F.Supp. 1055, 1058-61 (E.D.Pa.1981). I do not disagree with the approach these courts have taken, for I find that the Mathews balance must in any event yield a formula identical to the one suggested by Memphis Light. In particular, notice which does not, in a meaningful way, inform affected parties of their hearing rights creates an enormous risk of adjudicatory error: notice, after all, is antecedent to any adjudication at all. See Mennonite Board of Missions v. Adams, 462 U.S. 791, 103 S.Ct. 2706, 77 L.Ed.2d 180 (1983). Thus, whether (1) Memphis Light states a separate standard for notice cases or (2) Memphis Light is an example of how Mathews’ formula works in notice cases, one reaches the same destination: notice must both tell recipients of their hearing rights and allow them meaningfully to exercise those rights.

      . Defendants argue that the fact that the toll-free number has fielded some 1200 calls, an indeterminate number of which concerned overpayments, establishes that the toll-free number is a "significant source of information” for recipients. Defendants’ Supplemental Brief at 3. The number of calls does not, however, establish the nature of the information provided recipients.
      Moreover, it is not enough for defendants to show that some lucky recipients were able to obtain the information they needed in order to challenge the state’s decision. Rather, the state has the burden of providing effective notice to all those who are deprived of "property” within the meaning of the Fourteenth Amendment. Mennonite Board of Missions v. Adams, 462 U.S. 791, 103 S.Ct. 2706, 2712, 77 L.Ed.2d 180 (1983). And the testimony at the hearing suggested that while some recipients get through on the toll-free number, other frustrated callers get no information at all.

      . Any other conclusion would necessarily stray beyond the issues presented by plaintiff's motion. Plaintiffs argue that a statement of reasons which includes the state’s calculations is the only way in which the state can give recipients the information they must have to prepare for their hearings. I am not presented, however, with a case in which the state has gone as far as possible in providing notice short of a detailed statement of reasons. I cannot conclude that some intermediate alternative does not adequately notify recipients when no such intermediate alternative is before me. Nor is it clear that the Constitution requires a detailed and individualized statement of reasons. Memphis Light supports no such inference; indeed, the Court suggested that it would suffice if the municipal utility involved in that case offered to provide the necessary information upon request in a manner convenient for consumers. 436 U.S. at 14-15 n. 15, 98 S.Ct. at 1562-1563 n. 15. Moreover, there is authority for the proposition that this flexibility extends to the welfare context; that, in other words, notice that allows for a meaningful hearing process suffices even if no detailed written statement of reasons is provided. See Wilson v. Heckler, 580 F.Supp. 1387, 1393 (D.D.C.1984); Garrett v. Puett, 557 F.Supp. 9 (M.D.Tenn.1982), affirmed, 707 F.2d 930 (6th Cir.1983). It would be inappropriate for me to address such an unsettled and difficult constitutional question when the decision on the motion before me does not require it.


author: LEE R. WEST, District Judge.

text:
    UNITED STATES of America, Plaintiff, v. CHILDREN’S SHELTER, INC., an Oklahoma corporation; the Estate of W.H. Pat O’Bryan, Sr.; W.H. O’Bryan, Jr., individually and as the Personal Representative of the Estate of W.H. Pat O’Bryan, Sr.; Donald L. O’Bryan, individually and as the Personal Representative of the Estate of W.H. Pat O’Bryan, Sr.; Patricia Pearl O’Bryan Etherton; the Estate of Virginia Harper O’Bryan; Donald A. Harper, Personal Representative of the Estate of Virginia Harper O’Bryan; and Teresa K. Etherton Goff, Defendants.
    No. CIV-84-1369-W.
    United States District Court, W.D. Oklahoma.
    Jan. 7, 1985.
    Richard K. Willard, Acting Asst. Atty. Gen., Washington, D.C., William S. Price, U.S. Atty., Richard Freeman, Roger Stuart, Sp. Asst. U.S. Attys., Oklahoma City, Okl., for plaintiff.
    Robert J. Turner, Richard J. Goralewicz, Turner, Turner, Green & Braun, Jack G. Bush, Gary R. Underwood, Bush, Underwood & West, Oklahoma City, Okl., for defendants.
   ORDER

LEE R. WEST, District Judge.

This matter comes before the Court on the Motion to Dismiss or Strike and the Motion to Make More Definite and Certain of the defendants, the Estate of Virginia Harper O’Bryan, deceased, and Donald A. Harper, Personal Representative of the Estate of Virginia Harper O’Bryan. The plaintiff, the United States, has responded in opposition to the motions and based upon the parties’ submissions and the allegations in the complaint, the Court makes the following determination.

This action is brought against these defendants pursuant to the False Claims Act, 31 U.S.C. §§ 3729-3731, and pursuant to common law to recover certain damages. The plaintiff in its first three causes of action seeks recovery for alleged fraud, payment by mistake and unjust enrichment. In Count 7, the plaintiff seeks an equitable accounting of the proceeds received by the defendants due to the allegedly false drug claims they submitted.

The defendants have challenged Counts 1, 2 and 3 for failure to state a claim against Virginia Harper O’Bryan upon which relief can be granted. The defendants have argued that no allegations against Mrs. O’Bryan are set forth in these counts except by incorporation of general allegations that she is an officer, director and stockholder of the defendant Children’s Shelter, Inc., and that she is the surviving spouse of W.H. Pat O’Bryan, Sr. The defendants have argued that nominal officers such as Mrs. O’Bryan are not liable for damages under section 3729 merely by virtue of their status or merely because they knew that their company was attempting to receive benefits to which it was not entitled. In this connection the defendants have relied upon United States v. American Precision Products Corporation, 115 F.Supp. 823 (D.N.J.1953), and on Woodbury v. United States, 232 F.Supp. 49 (D.Ore.1964), aff'd in part, rev’d on other grounds, 359 F.2d 370 (9th Cir.1966), and United States v. Aerodex, Inc., 469 F.2d 1003 (5th Cir.1972), in support of their argument that in order to allege a cause of action under this statutory section the plaintiff must allege proof of specific intent and that in the instant case such allegation is lacking.

In Aerodex, the United States Court of Appeals for the Fifth Circuit recognized that there was a split among the circuit courts regarding the requirement of specific intent and whether to prove a “violation of the False Claims Act the evidence must demonstrate ‘guilty knowledge of a purpose on the part of [the defendant] to cheat the Government,’ or ‘knowledge or guilty intent.’ ” Id. at 1007 (quoting United States v. Priola, 272 F.2d 589, 594 (5th Cir.1959); United States v. Ridglea State Bank, 357 F.2d 495, 498 (5th Cir.1966). See Annot., A.L.R.Fed. 307 (1976 & 1984 Supp.).

The Fifth Circuit also recognized however that the United States Court of Appeals for the Tenth Circuit had reached a result contrary to its decision concerning this issue in Fleming v. United States, 336 F.2d 475 (10th Cir.1964). Accord, United States v. Hughes, 585 F.2d 284 (7th Cir.1978); United States v. Cooperative Grain & Supply Co., 476 F.2d 47 (8th Cir.1973). This Court also recognizes the differing conclusions reached by the appellate courts but is bound to follow the Tenth Circuit’s holding in Fleming.

Thus allegations of specific intent are unnecessary and in reviewing the plaintiff’s allegations in Counts 1, 2, and 3 and in finding that said counts incorporate by reference the allegations that all defendants, including Mrs. O’Bryan, participated in the alleged fraud by preparing and submitting the allegedly false drug claims and that said allegations seek to attach liability to Mrs. O’Bryan due to her role as an active participant and not a nominal corporate officer, the Court concludes that such allegations are sufficient at this stage to survive the defendant’s challenge.

The defendants have also argued that the plaintiff has failed to set forth its allegations of fraud or conspiracy to defraud with sufficient particularity as required by Rule 9, Fed.R.Civ.P. The defendants have challenged specifically the alleged absence of allegations demonstrating that Mrs. O’Bryan personally participated in any fraudulent activities or conspiracy to defraud.

The plaintiff has responded in opposition to this argument and upon reviewing the requirements of Rule 9 which must be read in conjunction with Rule 8, Fed.R. Civ.P., and the allegations in the complaint, the Court finds that plaintiff’s allegations are sufficiently specific as to the participation of all defendants including Mrs. O’Bryan in the alleged fraudulent activities and conspiracy to defraud.

The defendants have challenged also Counts 5, 6, and 7 on the grounds that the causes of action alleged therein are barred by the applicable statutes of limitations, 12 O.S. §§ 95 Second and 95 Third. It is well established however that this plaintiff is not barred by state statutes of limitations and thus the statutory sections upon which the defendants have relied are inapplicable to the instant proceeding. Chevron, U.S.C., Inc. v. United States, 705 F.2d 1487 (9th Cir.1983) (citing United States v. Summerlin, 310 U.S. 414, 60 S.Ct. 1019, 84 L.Ed. 1283 (1940); United States v. Weintraub, 613 F.2d 612 (6th Cir.1979)); Roberts v. Morton, 549 F.2d 158 (10th Cir.1977).

The defendants have argued further that these counts, 5, 6, and 7, are cumulative and redundant and should be stricken from the lawsuit. The Court finds that such counts allege separate and distinct grounds for recovery and are neither redundant nor cumulative.

The Court finds in consideration of the defendants’ alternative motion that their request for a more definite statement of the plaintiff’s allegations is without merit in light of the specificity contained in the complaint as a whole and in particular since defendants have answered in this action. Accordingly, the Court finds that the defendants’ Motion to Dismiss or Strike and Motion to Make More Definite and Certain are DENIED.


text:
    STATE OF OKLAHOMA ex rel. DEPARTMENT OF HUMAN SERVICES, an agency of the State of Oklahoma, Plaintiff, v. CHILDREN’S SHELTER, INC., an Oklahoma corporation; the Estate of W.H. Pat O’Bryan, Sr.; W.H. O’Bryan, Jr., individually and as the Personal Representative of the Estate of W.H. O’Bryan, Sr.; Donald L. O’Bryan, individually and as the Personal Representative of the Estate of W.H. Pat O’Bryan, Sr.; Patricia Pearl O’Bryan Etherton; the Estate of Virginia Harper O’Bryan; Donald A. Harper, Personal Representative of the Estate of Virginia Harper O’Bryan; and Teresa K. Etherton Goff, Defendants.
    No. CIV-84-364-W.
    United States District Court, W.D. Oklahoma.
    Jan. 7, 1985.

      See also, D.C., 604 F.Supp. 871.

      Charles L. Waters, General Counselor, Richard Freeman, Roger Stuart, Sp. Asst. U.S. Attys., Dept, of Human Services, Oklahoma City, Okl., Richard K. Willard, Acting Asst. Atty. Gen., Washington, D.C., William S. Price, U.S. Atty., Oklahoma City, Okl., Michael F. Hertz and Vincent B. Terlep, Jr., Steven J. Riegel, Commercial Litigation Branch, Civil Div., Dept, of Justice, Washington, D.C., Richard Freeman and Roger Stuart, Sp. Asst. U.S. Attys., Oklahoma City, Okl., for plaintiff.
    Robert J. Turner and Robert J. Goralewicz, Turner, Turner, Green & Braum, Gary R. Underwood, Bush, Underwood & West, Oklahoma City, Okl., for defendants.
    Donald L. O’Bryan, pro se.
    W.H. O’Bryan, Jr., pro se.
    Patricia Pearl O’Bryan Etherton, pro se.
    Teresa Etherton Goff, pro se.
   ORDER

LEE R. WEST, District Judge.

This matter comes before the Court on the Motion to Dismiss or Strike ■ of the defendants, Estate of Virginia Harper O’Bryan, deceased, and Donald Harper, Personal Representative of Virginia Harper O’Bryan. The defendants have moved the Court in the alternative to require the plaintiff, the State of Oklahoma ex rel. the Department of Human Services, to make more definite and certain its allegations. The plaintiff has responded in opposition to the motions and based upon the parties’ submissions and the allegations in the amended complaint, the Court makes the following determination.

The plaintiff’s amended complaint sets forth four causes of action alleging violations of the Racketeer Influenced and Corrupt Organizations Act (RICO), 18 U.S.C. §§ 1961-1968 (Counts I-IV), one count alleging a civil conspiracy to defraud (Count V), one count alleging fraud (Count VI), and one count alleging conversion (Count VII). The defendants have challenged first the allegations that Mrs. O’Bryan violated RICO and have argued that since Mrs. O’Bryan was not involved with organized crime and since she was never convicted of the predicate criminal offenses upon which the alleged RICO violations are based, the RICO action cannot be maintained.

The first argument is without merit in light of decisions rendered in this judicial district which firmly establish that in order to pursue a civil RICO claim, a plaintiff need not allege that the defendant was affiliated with, or engaged in, some type of organized crime. See, e.g., In re Longhorn Securities Litigation, 573 F.Supp. 255 (W.D.Okla.1983); Doyle v. Trinity Savings & Loan Ass’n, No. CIV-83-1736-W (W.D.Okla. October 29, 1984). Thus, the absence of such allegations in the amended complaint are not fatal to plaintiff’s causes of action.

The Court finds that the absence of allegations that Mrs. O’Bryan was convicted of the underlying predicate acts is likewise not fatal to maintaining these causes of action. The Court has adopted certain portions of Sedima, S.P.R.L. v. Imrex Company, 741 F.2d 482 (2d Cir.1984), but has not adopted that portion of Sedima which requires conviction of the underlying offenses despite defendants’ request that the Court do so. See Rother v. La Renovista, 603 F.Supp. 533 (W.D.Okla.1984).

The defendants have also challenged the plaintiffs’ Fifth Cause of Action which is entitled “Civil Conspiracy to Defraud” and Fourth Cause of Action which alleges a conspiracy under RICO.. The defendants have argued that the Fifth Cause of Action must fail since the predicate tort for the conspiracy, namely presentation of false and fraudulent claims, is the subject of another cause of action. The defendants have challenged this cause of action not only as insufficient for failure to state a claim but also as redundant. The Court finds the allegations are set forth with sufficient specificity to state a claim for relief at this stage of the pleadings and that in the absence of any state authority to the contrary, the damages resulting from a civil conspiracy are recoverable in a cause of action which is separate and distinct from a cause of action based upon the independent underlying tort and thus the Fifth Cause of Action is not redundant.

With regard to the alleged conspiracy under RICO the defendants have argued that the plaintiff has failed to allege that Mrs. O’Bryan either conspired or agreed to commit the predicate acts. After incorporating a detailed description of the circumstances underlying the plaintiff’s cause of action, the plaintiff has alleged in its amended complaint that Mrs. O’Bryan was an officer, director and stockholder of the defendant, Children’s Shelter, Inc.; that all defendants, including Mrs. O’Bryan conspired and agreed in violation of 18 U.S.C. § 1962(d) to violate 18 U.S.C. §§ 1962(a), 1962(b), and 1962(c) from February 1968 to August 1983 by devising a schedule for monthly charges for certain items for which defendants would claim reimbursement from the Department of Human Services (DHS); that defendants compiled false information and records showing the amounts and costs of these items; that defendants mailed to the DHS these false and fraudulent claims; and that said defendants received payment therefor from the DHS.

The Court finds these allegations to be sufficient to state a cause of action at this stage of the proceeding against Mrs. O’Bryan for conspiring to violate RICO particularly since the particular violations of sections 1962(a), 1962(b), and 1962(c) are set forth in preceding cause of action.

The defendants have also argued that plaintiff’s causes of action alleging fraud are deficient since the necessary specificity required by Rule 9, Fed.R.Civ.P., is lacking. The defendants have in particular challenged the amended complaint with regard to its lack of allegations demonstrating that Mrs. O’Bryan attempted to defraud the plaintiff.

As the Court stated in Longhorn, “Rule 9(b) does not require detailed fact pleading of claims of fraud.” 573 F.Supp. at 263 (citations omitted). It “ ‘merely requires that the circumstances constituting the fraud ... be pleaded with particularity.’ ” Id. (quoting Nolan Brothers, Inc. v. United States ex rel. Fox Brothers Construction Co., 266 F.2d 143, 145-46 (10th Cir.1959) (emphasis deleted). Rule 9(b) must be read in conjunction with the system of notice pleading contemplated by the federal rules and specifically codified in Rule 8, Fed.R.Civ.P., and “the Court will not sustain an attack on a pleading of fraud unless absolutely necessary to protect the purposes underlying Rule 9(b)’s particularity requirement.” 573 F.Supp. at 263-64.

The amended complaint sets forth the dates the alleged fraudulent activities occurred and alleges that all defendants, including Mrs. O’Bryan, presented to the DHS 1446 drug claims (explained in more detail on Exhibit A to amended complaint) when in fact said claims were false, that these claims were made with the intention that the DHS act upon the same, and that the DHS did act upon said claims and made payment to the defendants.

The Court has reviewed the defendants’ arguments and the plaintiff’s responses and after applying the foregoing standard to these allegations as they pertain to activities of all defendants, including Mrs. O’Bryan, the Court finds that the circumstances constituting the alleged fraudulent conduct are sufficiently pled to withstand the defendants’ attack.

The defendants have also argued that the plaintiff’s Sixth and Seventh Causes of Action or at least those allegations contained in said causes of action which describe events occurring prior to 1982 are barred by the applicable statute of limitations, 12 O.S. § 95 Third. The plaintiff has responded to this argument by contending that the statute of limitations does not operate to bar the instant actions.

In State ex rel. Cartwright v. Tidmore, 674 P.2d 14 (Okla.1983), the Oklahoma Supreme Court reaffirmed the long-recognized rule “that statutes of limitations do not operate against the state when it is acting in its sovereign capacity to enforce a public right.” Id. at 15 (citing Charles Banfield Co. v. State ex rel. Fallis, 525 P.2d 638 (Okla.1974); Sears v. Fair, 397 P.2d 134 (Okla.1964); State ex rel. Oklahoma Employment Securities Comm’n v. Eddie, 195 Okla. 26, 154 P.2d 763 (1945); Herndon v. Board of Comm’rs for Pontotoc County, 158 Okla. 14, 11 P.2d 939 (1932)). The state court held that “[t]he determining factor as to whether the statute of limitations runs against a cause of action to which the state or a subdivision is a party, is determined by whether the right affected is a private right or a public right. The test is whether the right is such as to affect the public generally or merely affects a class of individuals.” 674 P.2d at 16.

The Court has reviewed the plaintiff’s allegations in its amended complaint and finds under the circumstances set forth therein that the plaintiff is acting in its sovereign capacity to recover money allegedly paid by the state due to the tortious conduct of the defendants and that the recovery of such money will benefit the public in general. Accordingly, the Court finds that the statute of limitations is no bar to the plaintiff's Sixth and Seventh Causes of Action.

The defendants’ final argument presupposes that the Court has dismissed the federal causes of action from this litigation and has pending before it only state claims. Since federal questions do exist, the Court has subject matter jurisdiction pursuant to 28 U.S.C. § 1331. The Court likewise has jurisdiction over the state claims under the doctrine of pendent jurisdiction since the state and federal claims rise “from a common nucleus of operative fact.” United Mine Workers v. Gibbs, 383 U.S. 715, 86 S.Ct. 1130, 16 L.Ed.2d 218 (1966).

With regard to the defendants’ contention that the plaintiff should be required to set forth in more definite terms its allegations, the Court finds that said allegations are neither so vague nor so ambiguous, that defendants are unable to frame a responsive pleading particularly since an answer has already been filed.

Based upon the foregoing, it is hereby Ordered that the first Motion to Dismiss filed on behalf of Mrs. O’Bryan is rendered MOOT by the filing of the amended complaint, that the defendants’ subsequent Motion to Dismiss or Strike is DENIED and that Motion to Make More Definite and Certain is likewise DENIED.