author: NANGLE, Chief Judge.

text:
    MONETARY MANAGEMENT GROUP OF ST. LOUIS, INC., Plaintiff, v. KIDDER, PEABODY & CO., INC., and William R. Martin, Defendants.
    No. 84-558C(1).
    United States District Court, E.D. Missouri, E.D.
    Aug. 16, 1985.
    See also D.C., 604 F.Supp. 764.

      Ellen E. Bonacorsi, St. Louis, Mo., for plaintiff.
    Jim J. Shoemake, Michael A. Fisher, F. Vincent Vatterott, St. Louis, Mo., for defendants.
   MEMORANDUM

NANGLE, Chief Judge.

This case arises out of plaintiffs purchase of two (2) sets of bonds from defendants. Plaintiff alleges that defendants agreed to provide “marginable” bonds and that the two (2) sets of bonds actually purchased were not marginable in accordance with Federal Reserve Regulation T, 12 C.F.R. § 220.2(i)(l)(i). Plaintiff’s complaint asserts three (3) counts and seeks rescission of the bond transactions in question. Count I alleges a violation of § 12(2) of the Securities Act of 1933, 15 U.S.C. § 111(2). Counts II and III are pendent state law claims alleging a violation of § 409.411(a)(2) of the Missouri Securities Act, 409.411(a)(2) Mo.Rev.Stat. (1980), and common law misrepresentation, respectively. Plaintiff seeks rescission of the transaction, refund of the purchase price, prejudgment interest, recovery of interest paid to defendants, reasonable attorney's fees, interest thereon and costs.

This case was tried to this Court sitting without a jury. This Court having considered the pleadings, the testimony of the witnesses, the documents in evidence, and the stipulations of the parties, and being fully advised in the premises, hereby makes the following findings of fact and conclusions of law, as required by Rule 52 of the Federal Rules of Civil Procedure. Fed.R. Civ.P. 52.

A. FINDINGS OF FACT

1. Plaintiff Monetary Management Group of St. Louis, Inc. (hereinafter “MMG”), is a Missouri corporation with its principal place of business in St. Louis County, Missouri.

2. Defendant Kidder, Peabody & Co., Inc. (hereinafter “Kidder, Peabody”), is a Delaware corporation with its principal place of business in New York, New York. Kidder, Peabody has a branch office located within this District in Clayton, Missouri.

3. Defendant William R. Martin (hereinafter “Martin”), is a citizen of the State of Missouri domiciled in St. Louis County, Missouri. At all times relevant herein, Martin was a duly licensed and registered representative employed by Kidder, Peabody, acting within the course and scope of his employment.

4. MMG is in the business of offering financial planning services for corporations and corporate executives. MMG often acts as an investment agent for its clients and invests the funds of said clients.

5. In the spring of 1983, MMG acquired Basler Electric Company, Inc. (hereinafter “Basler”), as a client. Pursuant to an agreement, MMG did financial planning and invested corporate funds for Basler. With respect to the investment of Basler’s corporate, funds, MMG opened three (3) separate accounts for Basler: 1) an equity account; 2) a capital preservation account; and 3) a leveraged bond account. The leveraged bond account is the account relevant herein. In this account, MMG sought to purchase discounted bonds on margin, or on credit, to obtain a high after-tax rate of return if held to maturity. Federal securities regulations establish limits on the types of bonds that may be margined. Federal Reserve Regulation T, 12 C.F.R. § 220.2(a)(l)(i), requires, inter alia, that an over-the-counter bond have a principal amount outstanding of not less than $25,-000,000.00 to be marginable.

6. In or around April, 1983, Martin contacted Ray C. Hayes, former portfolio manager of MMG, at MMG by telephone in an attempt to solicit business. Mr. Hayes of MMG specifically instructed Kidder, Peabody, through its agent, Martin, that MMG was interested only in purchasing bonds for use in a leveraged bond account, said bonds to possess particular price, maturity, yield and marginability characteristics. As a result of the discussions between Martin and Mr. Hayes, on or about May 11, 1983, Kidder, Peabody and MMG entered into a “Customer’s Agreement”. On the same date, MMG opened and thereafter maintained a margin account at the branch office of Kidder, Peabody in Clayton, Missouri, on behalf of MMG’s customer, Basler, for whom MMG acted as agent and with whom MMG had entered into an investment management contract. Martin was the registered representative who handled MMG’s leveraged bond account at Kidder, Peabody. Mr. Hayes was the only person at MMG with whom Martin communicated or otherwise dealt in connection with MMG’s leveraged bond account at Kidder, Peabody.

7. In May, 1983, Kidder, Peabody, through its agent, Martin, recommended that MMG purchase Puget Sound Power and Light Co. bonds (Feb. 1991, 4%) and Utah Power and Light Co. bonds (Apr. 1993, 4V2) for its leveraged bond account. On May 17,1983, Kidder, Peabody, through its agent, Martin, effected the purchase of $125,000.00 face value of Utah Power and Light Co. bonds for MMG, and on May 19, 1983, Kidder, Peabody, through its agent, Martin, effected the purchase of $75,000.00 face value of Puget Sound Power and Light Co. bonds for MMG. Kidder, Peabody acted as principal when it sold the Puget Sound Power and Light Co. bonds and Utah Power and Light Co. bonds to MMG. The purchase prices reflected on the sales tickets of the bonds were $83,-196.88 for the Utah Power and Light Co. bonds and $53,748.49 for the Puget Sound Power and Light Co. bonds.

8. MMG relied upon the representation of Kidder, Peabody and the knowledge and expertise of its registered representative, Martin, in making trades in the bond market.

9. Kidder, Peabody and Martin sold the Utah Power and Light Co. bonds and the Puget Sound Power and Light Co. bonds to MMG through means and instruments of transportation and communication in interstate commerce, including, but not limited to, the use of the telephone.

10. Prior to the purchase of the Utah Power and Light Co. bonds and the Puget Sound Power and Light Co. bonds, Kidder, Peabody, through its agent, Martin, represented to MMG that said bonds met all of MMG’s specifications, including marginability. Mr. Hayes of MMG believed, at the time of the purchase of said bonds, that said bonds were marginable.

11. Kidder, Peabody margined the Utah Power and Light Co. bonds and the Puget Sound Power and Light Co. bonds by requiring MMG to pay 30% of the purchase price of said bonds and loaning the balance of said purchase price to MMG by debiting MMG’s margin account.

12. At the time of the purchase of the bonds in question, both the Utah Power and Light Co. bonds and the Puget Sound Power and Light Co. bonds had only $15,-000,000.00 in principal amount outstanding. Thus, the bonds in question were not marginable under Federal Reserve Regulation T at the time of the sale and extension of credit to MMG.

13. On September 16, 1983, MMG informed Kidder, Peabody that plaintiff desired to close its account with Kidder, Peabody. In October, 1983, MMG closed its account with Kidder, Peabody. Pursuant to MMG’s request, MMG’s leveraged bond account at Kidder, Peabody was transferred to A.G. Edwards and Sons, Inc., another brokerage firm with an office in St. Louis. At that time, A.G. Edwards and Sons, Inc. refused to margin the Utah Power and Light Co. bonds and Puget Sound Power and Light Co. bonds because said bonds were not marginable under Federal Reserve Regulation T. The debit balance in MMG’s margin account at Kidder, Peabody was paid off at the time the account was transferred to A.G. Edwards and Sons, Inc. The bonds in question have been held at all times since October, 1983, in a cash account for MMG at A.G. Edwards and Sons, Inc., in street name, and said bonds have not been sold and their status has not otherwise changed since the time of transfer.

14. Prior to October, 1983, neither MMG nor Kidder, Peabody or Martin knew that the bonds in question were not marginable.

15. In October, 1983, Mr. Hayes of MMG contacted Kidder, Peabody, through its agent and employee Martin. Mr. Hayes informed Martin that A.G. Edwards and Sons, Inc. would not margin the bonds and requested that the trades in question be reversed. Kidder, Peabody and Martin refused to reverse the trades at that time. Through counsel, on November 23, 1983, MMG again requested that Kidder, Peabody reverse the trades, but Kidder, Peabody refused and has continued to refuse to do so. This action was filed in March, 1984.

16. Margin interest attributable to the Puget Sound Power and Light Co. bonds and the Utah Power and Light Co. bonds in the amount of $4,858.78 was charged to MMG’s margin account at Kidder, Peabody from May through October of 1983. MMG used Basler’s funds to purchase the bonds in question and to pay the margin interest charged by Kidder, Peabody. The income earned from the bonds in question was paid to Basler, but the precise amount of said income was not proven at trial. The event which precipitated the transfer of the bonds in question from Kidder, Peabody to A.G. Edwards and Sons, Inc. was Basler’s closing of its account with MMG. At the present time, Basler’s account with MMG is closed, with the exception of the bonds in question. Basler has released any claims it may have against plaintiff. Although Basler is not a party to this lawsuit and Basler has not assigned any claims it may have against defendants to MMG, Basler consented to and approved of MMG’s institution of the instant action and MMG’s efforts to have the bond trades rescinded. Basler is looking to MMG to resolve the situation and MMG has authority to tender the bonds in question back to Kidder, Peabody. MMG has, in fact, offered to tender said bonds to Kidder, Peabody and Martin.

17. At the time that Martin recommended the bonds in question to Mr. Hayes, Martin believed that said bonds were marginable. Martin’s belief was based on the advice of Kidder, Peabody’s New York margin department that said bonds were marginable. However, Martin made no independent investigation of said bonds’ margin ability. Nevertheless, both Martin and Kidder, Peabody’s New York margin department employees had available to them current Standard & Poor’s bond guides. Said guides, if consulted, would have indicated to both Martin and Kidder, Peabody’s New York margin department employees that the bonds in question were not marginable.

18. MMG has incurred actual attorney’s fees in the amount of $53,951.50 through March 18, 1985, in prosecuting its claims against defendants.

CONCLUSIONS OF LAW

This Court has subject matter jurisdiction over plaintiff’s claims pursuant to 15 U.S.C. § 77v(a), 28 U.S.C. § 1331, and the doctrine of pendent jurisdiction. Venue in this District is proper pursuant to 15 U.S.C. § 77v(a) and 28 U.S.C. § 1391(b), because the sales of the securities at issue herein took place in this District and both defendants are found, reside and/or transact business in this District.

1. Liability

MMG’s federal claim in Count I is brought under § 12(2) of the Securities Act of 1933, 15 U.S.C. § 771 (2), and its state law claims in Counts II and III are brought under Mo.Rev.Stat. § 409.411(a) (1980) and the common law of negligent misrepresentation, respectively. To prevail on its § 12(2) claim in Count I, plaintiff must prove the following elements:

1) Defendants offered or sold a security;
2) By the use of any means of communication in interstate commerce;
3) Through a prospectus or oral communication;
4) By making a false or misleading statement of a material fact or by omitting to state a material fact necessary in order to make the statements, in light of the circumstances under which they were made, not misleading;
5) Plaintiff did not know of the untruth or omission; and
6) Defendants knew, or in the exercise of reasonable care, could have known of the untruth or omission.

Alton Box Board Co. v. Goldman, Sachs and Co., 560 F.2d 916 (8th Cir.1977); Gridley v. Sayre & Fisher Co., 409 F.Supp. 1266 (D.S.D.1976). The elements of plaintiffs claim in Count II are essentially identical to those of plaintiff's federal securities claim in Count I. See Dunn v. Bemor Petroleum, Inc., 680 S.W.2d 304, 306-07 (Mo.Ct.App.1984). In addition, the elements of plaintiffs claim in Count III of its complaint are arguably encompassed by those in Counts I and II. See Hudspeth v. Zorn, 292 S.W.2d 271 (Mo.1956); Osterberger v. Hites Construction Co., 599 S.W.2d 221 (Mo.Ct.App.1980).

As discussed in a prior Memorandum, defendants do not seriously contend that elements 1, 2, 3 and 5 are not established in the case at bar. Defendants offered or sold a security. See Findings of Fact No. 7. Said offer and sale was made by means of communication in interstate commerce. See Findings of Fact No. 9. Said offer and sale was made through oral communication. See Findings of Fact Nos. 7 and 10. In addition, plaintiff did not know that the bonds in question were not marginable. See Findings of Fact No. 14.

In this Court’s March 18, 1985, Order and Memorandum, this Court denied plaintiff’s motion for summary judgment for the reason that issues of fact seemed to exist with respect to elements 4 and 6. Having given all parties every reasonable opportunity to fully develop the record in this case, it is now clear that plaintiff established both of these remaining elements. Defendants did not even address element 6 in their post-trial memorandum. This Court concludes that defendants could have known that the bonds in question were not marginable if they had exercised reasonable care in determining the marginability of said bonds. See Findings of Fact No. 18. If Kidder, Peabody’s employees or Martin had consulted their readily available Standard & Poor’s bond guides, they would have known that the bonds in question were not marginable. Id.

Defendants do address element 4 in their post-trial memorandum. Defendants falsely represented that the bonds in question were marginable, see Findings of Fact No. 10, but they argue that their misstatement was not “material” within the meaning of § 12(2) of the Securities Act of 1933. The materiality requirement in § 12(2) of the Securities Act of 1933 must be judged by an objective standard. The standard is whether, taking into consideration the surrounding circumstances, there is a substantial likelihood that a reasonable investor would attach importance to the alleged misrepresentations or omissions. Austin v. Loftsgaarden, 675 F.2d 168, 176 (8th Cir. 1982); In re Home-Stake Production Co. Securities Litigation, 76 F.R.D. 351, 372 (N.D.Okla.1977).

In light of the circumstances surrounding the purchase and sale of the bonds in question, there is more than a substantial likelihood that a reasonable investor would attach importance to the marginability of said bonds. The bonds in question were purchased specifically for a leveraged bond account according to a strict set of criteria that was communicated to defendants. See Findings of Fact No. 6. Because of the investment strategy underlying the account in question, marginability was an essential attribute of the bonds to be purchased for said account. See Findings of Fact No. 5. Defendants’ arguments that margining is a “service performed by a broker” and that there is no private right of action for violation of Federal Reserve Regulation T are to no avail. Margining may be a service, but marginability was as important an attribute of the bonds in question as their price or interest yield. It is also irrelevant that Kidder, Peabody in fact margined the bonds in question for the short period of time during which MMG maintained an account with Kidder, Peabody. See Findings of Fact No. 11. Plaintiff purchased these bonds on behalf of its client as an investment on credit. Regardless of the fact that Kidder, Peabody in fact margined these bonds for several months, the bonds are now essentially useless to plaintiff or its client as an investment on credit. Further, this Court’s conclusion that marginability was material in the circumstances of this case does not amount to creating a private cause of action for violation of Federal Reserve Regulation T. As discussed in an earlier Memorandum by this Court, plaintiff’s claim is not that Federal Reserve Regulation T was violated, but that defendants falsely represented to plaintiff that the bonds in question were marginable in accordance with Federal Reserve Regulation T.

Accordingly, this Court concludes that plaintiff established all the elements of a § 12(2) violation. It follows that plaintiff also carried its burden of proof on Counts II and III. Plaintiff is entitled to a judgment in its favor on all three counts finding defendants liable to plaintiff.

2. Relief

The relief sought by plaintiff is rescission of the sales of the bonds in question, recovery of the purchase prices, prejudgment interest on the purchase prices, recovery of interest charges associated with the bonds in question, attorney’s fees, interest thereon and its costs. The question of attorney’s fees is considered in the next section.

In the opinion of this Court, plaintiff is entitled to rescission of the sales of the bonds in question. The reasons for this opinion were stated in this Court’s Order and Memorandum of March 18, 1985, and need not be repeated here. However, it bears noting that the evidence at trial clearly established that, aside from the question of title, plaintiff is in a position to effectuate the tender of the bonds in question. See Findings of Fact No. 17. Defendants must return the purchase price of said bonds to plaintiff upon plaintiff’s tender of said bonds. Plaintiff is also entitled to prejudgment interest at the applicable annual rate on the amount of the purchase prices, because the amount due plaintiff is a liquidated amount. Bank of Mulberry v. Firemen’s Fund Insurance Company, 720 F.2d 501, 503-04 (8th Cir.1983). In addition, § 12(2) expressly provides for the recovery of interest on the amount of the consideration paid. 15 U.S.C. § 111(2). Defendants object to plaintiff’s request for return of the interest charges associated with the bonds in question. Defendants’ objection is well-taken. The interest charges in question were incurred by MMG, because Kidder, Peabody in fact margined the bonds in question. During the period of time that MMG had an account with Kidder, Peabody, MMG received exactly what it bargained for, namely, marginable bonds or an investment on credit. In this regard, Kidder, Peabody and Martin did not make any misrepresentations with respect to what MMG was receiving for its interest payments. Plaintiff is entitled to interest on the amount of the judgment entered herein this day and its costs. Plaintiff shall file an appropriate bill of costs to determine the amount of costs that is taxable to defendants. In addition, defendants are entitled to an offset for the amount of income received by MMG or Basler from the bonds in question. Defendants did not prove with specificity the amount of said income, but MMG is in a position to determine said amount and provide defendants with said information. Mo.Rev.Stat. § 409.411(a) (1980) expressly provides, inter alia, for the return of any income received on the security. MMG’s communication of said amount to defendants is a condition precedent to defendants’ duty to refund the net purchase prices.

In sum, upon plaintiff’s tender of the bonds in question to defendants, MMG is entitled to rescission of the sale of said bonds, recovery of the full purchase prices paid therefor, prejudgment interest on the full purchase prices at the applicable rate, together with interest thereon and its costs. Plaintiff is not entitled to recovery of the interest charges associated with the bonds and debited to MMG’s account. Defendants are entitled to an offset for the amount of income received by MMG’s client, Basler, and plaintiff must determine and provide defendants with said amount.

3. Attorney’s Fees

a. Right To An Award Of Fees

MMG rests its claim for an award of attorney’s fees on two (2) independent grounds. First, MMG relies on § 11(e) of the Securities Act of 1933, 15 U.S.C. § 77k(e), which provides for a discretionary award of attorney’s fees to a prevailing plaintiff in a suit brought under the Securities Act if the court determines that the defense advanced was frivolous, without merit, or brought in bad faith. Junker v. Crory, 650 F.2d 1349 (5th Cir.1981); Aid Auto Stores, Inc. v. Cannon, 525 F.2d 468 (2d Cir.1975); Can-Am. Petroleum Co. v. Beck, 331 F.2d 371 (10th Cir.1964). The statute uses the phrase “without merit” and this phrase has been interpreted to require a defense bordering on frivolity. Can-Am. Petroleum Co., 331 F.2d at 374. In the opinion of this Court, MMG is not entitled to an award of attorney’s fees under § 11(e) of the Securities Act of 1933. While defendants’ defenses were ultimately unsuccessful, this Court is not convinced that they bordered on frivolity or were asserted in bad faith.

The second bases is § 409.411(a)(2) of the Missouri Securities Act, Mo.Rev. Stat. § 409.411(a)(2) (1980), which expressly provides for an award of “reasonable attorney’s fees” to a prevailing plaintiff thereunder. Because this Court has held that plaintiff is entitled to relief under each of the three (3) counts asserted by it, including its Missouri Securities count, MMG is entitled to an award of fees under § 409.-411(a)(2).

b. Amount Of Award

MMG seeks an award in the amount of $53,951.50 plus the fees incurred by it during the post-trial period. In the opinion of this Court, MMG’s requests for an award of attorney’s fees was the sole reason that this case was tried and not amicably settled. Although the evidence was not entirely clear as to the current market value of the bonds in question, it was not seriously disputed that the difference between the purchase price of the bonds in question and their market value was and is approximately $8,500.00. Accordingly, if defendants had taken the bonds back, returned the amount of the purchase price to plaintiff, and sold the bonds on the market, defendants would have been out a net amount of $8,500.00. However, this point cuts two ways. MMG could also have sold the bonds on the open market and sued defendants for damages in the amount of $8,500.00. Thus, this Court is faced with a request for more than $53,000.00 in attorney’s fees in a case where the net financial risk was approximately $8,500.00.

At first blush, the disparity between the “value” of this case and the amount of fees requested is shocking and appears to be unconscionable. A closer look at this case only serves to confirm this reaction.

The two primary components in assessing the reasonableness of a request for an award of attorney’s fees are the number of hours spent working on the case and the rates at which said time was charged. In the ease at bar, there is little question that the rates charged by plaintiff’s counsel were reasonable. These rates ranged from $45.00 per hour to $130.00 per hour. This Court is convinced that given the level of experience and skill of the various persons who worked on this case on behalf of plaintiff, said rates were reasonable. Moreover, Kidder, Peabody does not question the reasonableness of said rates. However, it is the number of hours for which plaintiff seeks compensation that both this Court and Kidder, Peabody object to as unreasonable.

Unreasonably large amounts of time were spent on various aspects of this case. This is true, even though plaintiff’s counsel has always represented to this Court that this was a painfully simple case. For example, before defendants had even filed their motion to dismiss plaintiffs complaint, plaintiff's counsel had spent 77.4 hours on this case at a cost of $6,012.86. With respect to answering defendants’ motion to dismiss, a motion plaintiff’s counsel characterizes as “frivolous”, plaintiff’s counsel spent 22 hours at a cost of $1,568.08. The period from June, 1984, through the end of October, 1984, was the period during which the parties attempted to engage in discovery. This primarily consisted of both parties exchanging written discovery materials and objecting to same. During this period, plaintiff’s counsel spent 75.6 hours at a cost of $6,022.77. During the month of November, 1984 alone, plaintiff’s counsel spent 328.1 hours at a cost of $21,792.62. The activities during this month consisted of additional written discovery, filing a motion to compel and opposing defendants’ motion to compel, trial preparation and taking six (6) short depositions. From December, 1984 through March 18, 1984, the date the trial of this action began, plaintiff’s counsel spent 302.3 hours at a cost of $22,544.59. The primary activity during this period consisted of preparing a tardy motion for summary judgment, battling over the deposition of Basler’s Ray Vollett, and preparing for trial. In the opinion of this Court, these figures are unreasonable and a reduced award is appropriate.

Much of the discovery dispute which occurred in November, 1984, centered around obtaining facts concerning the present ownership of the bonds in question. Plaintiff’s counsel vigorously opposed said discovery and continued to obfuscate that question at every stage of the proceedings. Indeed, at the trial itself, plaintiff still did not willingly present a clear picture of the current status of the ownership of the bonds. The time spent on research in this case appears to be greatly disproportionate to the number and complexity of the legal issues raised herein. Moreover, having spent a great deal of time presiding over the numerous small battles that broke out in this case, this Court is left with the firm impression that the excessive number of hours spent on this case is due in large part to the belligerent and combative attitude of plaintiff’s counsel. This is not to say that defendants’ counsel was any more cooperative or intent upon efficiently resolving this case. Nevertheless, this Court is convinced that plaintiff’s counsel’s approach to the prosecution of this case was clearly inefficient. This is especially true given the small monetary amount at risk. In addition, this Court agrees with Kidder, Peabody’s argument that MMG repeatedly hampered defendants in their efforts to depose Basler Electric Company. The positions taken by plaintiff, especially its extremely narrow view of relevance in this case, are especially unreasonable in view of the fact that plaintiff had little to gain by opposing discovery on said question and very little to lose by defendants gaining information on said question.

The real losers in this case are not the defendants, but the public which must bear the cost of providing the resources to maintain and operate the forum in which the parties attempted to resolve this dispute. In a recent speech at the Annual Meeting of the American Law Institute, Chief Justice Warren Burger pointed out that “a federal district court costs approximately $565 per hour to operate during a trial.” 53 U.S.L.W. 2582. In view of the lack of complexity of the issues in this case and the unreasonableness of the hours expended on this case by plaintiff's counsel, a reduction of plaintiff’s request for an award of fees is warranted. In the opinion of this Court, plaintiff’s fee request should be and is reduced by 40%. Plaintiffs’ total fee request presently before this Court is approximately $55,000.00. When reduced by 40%, plaintiff is entitled to an award of $33,000.00.

      . Defendants previously objected to plaintiff’s standing or real party in interest status to prosecute this action. Defendants raised this issue again in their proposed conclusions of law. This Court previously rejected defendants' position in an Order and Memorandum dated March 18, 1985. The evidence admitted at the trial of this action did not alter the correctness of this Court’s holding that MMG is a proper plaintiff. Accordingly, that issue will not be considered herein.


source: Caselaw Access Project

author: GLASSER, District Judge:

license: Public Domain

text:
    Robert LATZER, Petitioner, v. Robert ABRAMS, Attorney General of the State of New York, Respondent.
    No. 84 Civ. 3693.
    United States District Court, E.D. New York.
    Aug. 16, 1985.
    Patrick M. Wall, New York City, for petitioner.
    Anthony J. Gírese, Bruce E. Whitney, Asst. Dist. Attys., Nassau County, Mineola, N.Y., for respondent.
   GLASSER, District Judge:

On February 21, 1985, I conditionally granted a writ of habeas corpus in this matter. Latzer v. Abrams, 602 F.Supp. 1314 (E.D.N.Y.1985). That order was based on a determination that petitioner’s rights under the Sixth and Fourteenth Amendments of the United States Constitution were violated at his trial on a charge of committing sodomy in the second degree. I concluded that petitioner’s conviction on that charge must be set aside. Petitioner now moves for a final unconditional order granting the petition for a writ of habeas corpus and precluding his re-trial on the charge described in the petition. Background

The facts underlying this action are set forth in my earlier Memorandum and Order, 602 F.Supp. at 1314-17. That Memorandum and Order, dated February 21, 1985, provides that the “petition for a writ of habeas corpus is granted unless the state affords petitioner a new trial within sixty (60) days of the issuance of the order herein.” Id. at 1321. On March 20, 1985, respondent filed a notice of appeal to the Second Circuit, but subsequently withdrew the appeal. Thereafter, on consent of respondent, I revoked an earlier order requiring petitioner to post bail as a condition of his release pending the final determination of this petition.

On April 9,1985, a Nassau County grand jury heard evidence against petitioner, including evidence pertaining to the crime involved in this petition. On April 11, 1985, the grand jury returned a six-count indictment against him. The second count of that indictment charged petitioner with committing the same crime which was the subject of this petition. Petitioner was arraigned on the new indictment on April 22, 1985, exactly sixty days after the issuance of my initial order granting the conditional writ. He entered a plea of not guilty to all counts.

Discussion

This motion presents two related issues. First, whether the order granting the conditional writ required that petitioner actually be re-tried within the sixty day period to avoid issuance of the final writ, or whether it was sufficient that petitioner was only arraigned within the prescribed period. Second, whether the final writ should include an order precluding the re-trial of petitioner on the charge addressed in the petition (i.e., the second count of the new indictment).

1. The Sixty Day Period

In issuing a writ of habeas corpus, a federal court has the power to “dispose of the matter as law and justice require.” 28 U.S.C. § 2243; Irvin v. Dowd, 366 U.S. 717, 729, 81 S.Ct. 1639, 1646, 6 L.Ed.2d 751 (1961). There is no absolute requirement that the court delay issuance of a final writ until after the state has been afforded a specific period of time in which to re-try the petitioner. The Supreme Court has indicated, however, that the state should be allowed a “reasonable time” for conducting a re-trial. Irvin, 366 U.S. at 729, 81 S.Ct. at 1646. Accordingly, most courts allow some time between thirty and sixty days for re-trial, P. Sokol, Federal Habeas Corpus, § 15.1, at 132 (1969), though longer periods are occasionally permitted. See, e.g., Tifford v. Wainwright, 588 F.2d 954, 957 (5th Cir.1979) (ninety days); Baily v. Henslee, 309 F.2d 840, 842 (8th Cir.1962) (en banc) (nine months).

With these considerations in mind, I conditioned the issuance of the writ in the present case on the event that petitioner was not “afford[ed]” a new trial within sixty days. Respondent now argues that the arraignment of petitioner on the sixtieth day was sufficient to “afford” petitioner a new trial within the prescribed period. While the order may not have been the epitome of clarity, respondent’s interpretation flies in the face of the order’s intent to insure that petitioner was either promptly retried or relieved of the strictures imposed by his constitutionally flawed conviction. The order was intended to mean that petitioner should be brought to trial within sixty days, and will be so applied by the Court.

If respondent had any doubts as to the meaning of the order, he could have sought clarification from the Court, or avoided any potential problems by bringing petitioner to trial before the expiration of the sixty day period. Alternatively, respondent could have applied for an extension of the time for re-trial. Instead, respondent chose to file a notice of appeal, withdraw the appeal, and then seek the indictment of petitioner on five new counts, as well as re-indictment on the count in question. In light of the failure to bring petitioner to trial within the prescribed period and respondent’s election not to pursue the options discussed above, I am constrained to conclude that the final writ of habeas corpus must be granted. 2. The Remedy

The far more difficult question is what relief, if any, should be granted to petitioner at the present time. Historically, the writ of habeas corpus was viewed as lying to

enforce the right of personal liberty, when that right is denied and a person is confined, the federal court has the power to release him. Indeed, it has no other power; it cannot revise the state court judgment; it can act only on the body of the petitioner.

Fay v. Noia, 372 U.S. 391, 430-31, 83 S.Ct. 822, 844-45, 9 L.Ed.2d 837 (1963).

When a court grants a writ of habeas corpus and orders a petitioner released from custody, the petitioner is ordinarily “still subject to custody under the indictment and may be re-tried on this or another indictment.” Irvin v. Dowd, 366 U.S. 717, 728, 81 S.Ct. 1639, 1645, 6 L.Ed.2d 751 (1961). See also United States ex rel. Leeson v. Damon, 496 F.2d 718, 722 (2d Cir.), cert. denied 419 U.S. 954, 95 S.Ct. 215, 42 L.Ed.2d 172 (1974) (writ granted to permit petitioner to withdraw improper guilty plea, but the state could presumably still try petitioner on the offense charged). Perhaps the most extreme example of this concept is presented in United States ex rel. Craig v. Myers, 329 F.2d 856, (3d Cir. 1964). In Craig, the Third Circuit, acting in 1964, affirmed the grant of a writ of habeas corpus that freed the petitioner from custody on a 1931 indictment and conviction. The court explained that the 1931 indictment was not invalidated by the grant of the writ: “[granting the writ] does not preclude a new arraignment and trial, or the taking of proper steps to hold the defendant in custody or under bail pending trial.” Id. at 860.

These principles have been applied in a case that is closely analogous to this one. In United States ex rel. Lowry v. Case, 283 F.Supp. 744 (E.D.Pa.1968), the court originally granted a conditional writ which stayed issuance of the final writ for 60 days to permit re-trial or appeal. An appeal was not taken and the petitioner was not re-tried within sixty days. The court then issued the final writ, ordering release of the petitioner. Upon release, the petitioner was immediately re-arrested on the original indictment and confined pending his re-trial. The court denied the petitioner’s subsequent application seeking release from custody on the grounds that he was not re-tried within sixty days. The court stated that the only effect of granting the writ was to release the petitioner “from custody springing from a constitutionally unfair trial____ This release, however, did not impede the Commonwealth’s right to re-arrest, re-arraign and re-try defendant on the [original] indictment.” 283 F.Supp. at 744.

In the present case, petitioner’s bail obligations in federal court have been discharged, and the state court indictment underlying the petition was dismissed by operation of law when petitioner was arraigned on the new indictment. N.Y.Crim.Proc. Law § 200.80 (McKinney 1982). As a result, petitioner is no longer in “custody” in any sense due to the constitutionally infirm conviction. The question of release is, therefore, moot. See Mizell v. Attorney General of the State of New York, 586 F.2d 942, 947-48 (2d Cir. 1978). Petitioner, nonetheless, seeks further relief from this Court in the form of an order precluding the state from re-trying him on the charges which ultimately gave rise to this petition.

Petitioner is correct when he argues that under the federal habeas corpus statute, 28 U.S.C. §§ 2241-2254, as amended in 1966, 80 Stat. 1104, federal courts have the power to grant relief other than immediate release from custody. The Supreme Court has observed that the federal habeas corpus statute

does not limit the relief that may be granted to discharge of the applicant from physical custody. Its mandate is broad with respect to the relief that may be granted. It provides that “[t]he court shall ... dispose of the matter as law and justice require.” 28 U.S.C. § 2243. The 1966 amendments to the habeas corpus statute seem specifically to contemplate the possibility of relief other than immediate release from physical custody. At one point, the new § 2244(b) (1964 ed., Supp. II) speaks in terms of “release from custody or other remedy.”

Carafas v. LaVallee, 391 U.S. 234, 239, 88 S.Ct. 1556, 1560, 20 L.Ed.2d 554 (1968) (citations omitted). A court may, for example, grant relief to a petitioner who has been released from custody after fully serving a sentence on an illegal conviction. E.g., Carafas, 391 U.S. at 237-40, 88 S.Ct. at 1559-61; Mizell, 586 F.2d at 948. Under such circumstances, the remedy may include a declaration that the conviction is void and an order directing the state prosecutor to seek a state court order vacating the conviction and expunging all references to it in the records. Mizell, 586 F.2d at 948. Likewise, a federal court may review the legality of a conviction under which the petitioner will not be detained until some time in the future. Peyton v. Rowe, 391 U.S. 54, 67, 88 S.Ct. 1549, 1556, 20 L.Ed.2d 426 (1968) (prisoner incarcerated under consecutive sentences can challenge a sentence that he is scheduled to serve in the future).

In the present case, however, the issue is not simply whether this court can grant any relief to petitioner. Rather, the question is whether this Court should impose the extraordinary remedy of barring further state court criminal proceedings because of the state’s failure to comply with the time limits set by this Court in the exercise of its discretion. After carefully reviewing the cases cited in petitioner’s memorandum, and conducting my own research, I cannot find any authority for such a broad order. To the contrary, the closest authority on the issue expressly declined to grant such relief. See Gardner v. Pitchess, 731 F.2d 637 (9th Cir.1984).

In Gardner, the district court ordered the petitioner’s release from custody and dismissal of all pending state charges against the petitioner after the state had failed to comply with the court’s earlier conditional order that a writ of habeas corpus would issue if the petitioner’s state court appeal was not reinstated within 120 days. The Ninth Circuit affirmed as to the grant of the writ and the petitioner’s release, but held that the district court’s order was “overly broad” insofar as it directed dismissal of the underlying charges with prejudice:

Federal habeas relief usually accomplishes its purpose by ordering the petitioner’s release from state custody. Some authorities suggest federal courts lack power to revise the underlying state judgment directly. See Fay v. Noia, 372 U.S. 391, 431, 83 S.Ct. 822, 844, 9 L.Ed.2d 837 (1963) (dicta); Ex parte Medley, 134 U.S. 160, 173, 10 S.Ct. 384, 388, 33 L.Ed. 835 (1890). But see Palmer v. Judge and District Attorney General, 411 F.Supp. 1029, 1035 (W.D.Tenn.1976) (quashing sixteen-year-old state indictment on grounds of denial of speedy trial). We need not decide whether, in an appropriate case, a district court might order dismissal of state charges, because we find no circumstances justifying dismissal here.

731 F.2d at 640.

I question this Court’s authority, in a case such as this, to bar petitioner’s re-indictment and re-trial. In any event, I find it unnecessary to determine the precise limits of the Court’s power because here, as in Gardner, there are no circumstances that could justify an order barring re-trial. This is not a case where the very act of re-trying petitioner would infringe upon his constitutional rights, such as where re-trial would subject him to double jeopardy, Mizell, 586 F.2d at 945, or where the petitioner has been denied the right to a speedy trial. Palmer v. Judge and District Attorney General of the Thirteenth Judicial District of Tennessee, 411 F.Supp. 1029 (W.D.Tenn.1976). The illegality in petitioner’s first trial, the improper restrictions on cross-examination, was peculiar to that trial and can be fully remedied on re-trial. Nor has petitioner articulated any prejudice flowing from the state’s failure to re-try him within sixty days. The sixty day order was intended to prevent the unnecessary prolongation of petitioner’s detention on the basis of an unconstitutional conviction. The potential for such harm was eliminated when the original indictment was dismissed. Consequently, I can see no reason to preclude the retrial of petitioner, upon the new indictment within a reasonable time, in accordance, of course, with the constraints imposed by the state’s statute of limitations and speedy trial law, and the overriding Sixth Amendment guarantee of a speedy trial.

The cases cited by petitioner are not inconsistent with this conclusion. Those cases essentially fall into three groups. The first group, discussed and distinguished earlier, consists of cases where the very act of retrial would impair the petitioner’s constitutional rights. See Mizell, 586 F.2d at 945; Palmer, 411 F.Supp. at 1035.

The largest group of cases merely stand for the undeniable proposition that a federal court may order that a state release a petitioner from custody when the petitioner has not been re-tried within the period of time prescribed by the court. Contrary to petitioner’s contention, none of those cases expressly precluded re-trial after release from custody.

The third group includes two cases where the petitioners had served extended and potentially unjustifiable periods of incarceration before the writ was granted. One case involved a series of events that were so shocking and abhorrent that the Second Circuit analogized the petitioner’s plight to the story revealed in Solzhenitsen’s The Gulag Archipelago. United States ex rel. Shuster v. Vincent, 524 F.2d 153, 154 (2d Cir.1975). -Without belaboring this opinion with a description of the complex facts of that case, it should suffice to note that the issues addressed in Shuster are not even remotely analogous to those presented here.

In the final case, Alim v. Smith, 474 F.Supp. 54 (W.D.N.Y.1979), the court concluded that a writ of habeas corpus should be granted in light of several substantial errors in the petitioner’s state court trial, including improper joint representation by counsel and prosecutorial misconduct in summation. The district court noted that at the time of its order, only five months remained on the petitioner’s maximum sentence of seven years. The court ordered that “unless further proceedings on the original indictment are initiated within 20 days of the filing of this order, the indictment is ordered dismissed with prejudice, and petitioner is ordered released from custody.” 474 F.Supp. at 54. That case is plainly distinguishable in that the petitioner, Alim, had already served almost the maximum period to which he could have been sentenced if convicted on re-trial. By contrast, the petitioner here, Latzer, has not served any time in prison on the challenged conviction. In any event, the court in Alim, did not refer to any authority for its order and, as discussed above, it is highly questionable whether- a federal court can or should so interfere with state court proceedings.

For all of these reasons, I conclude that petitioner is not entitled to an order precluding his re-trial on the charges that gave rise to this petition. Furthermore, while it would be appropriate to grant a final writ of habeas corpus in light of respondent’s failure to re-try petitioner within the prescribed period, the question of release from custody is moot. Petitioner’s motion, is therefore, denied.

SO ORDERED.

      . Petitioner has presumably been released on bail under the new indictment, but the Court has not been apprised as to his precise bail status. In any event, even if he is presently in "custody” by virtue of such bail restrictions, those restrictions would be the result of the new indictment, not the improper conviction. Consequently, those restrictions should not be discharged by the present writ.

      . At the very least, there is a serious question as to whether such an order would violate the principles of federal-state comity set forth in Younger v. Harris, 401 U.S. 37, 91 S.Ct. 746, 27 L.Ed.2d 669 (1971). See Pitchess v. Davis, 421 U.S. 482, 485 n. 2, 95 S.Ct. 1748, 1751 n. 2, 44 L.Ed.2d 317 (1975); Sparks v. Garrison, 446 F.Supp. 649 (M.D.N.C.1978), aff'd mem., 612 F.2d 1310 (4th Cir.1979).

      . Re-trying a successful habeas corpus petitioner will not ordinarily subject him to double jeopardy. Shear v. Boles, 263 F.Supp. 855, 859 (N.D.W.Va.1967), rev’d on other grds 391 F.2d 609 (4th Cir. 1967); R. Sokol, Federal Habeas Corpus § 15.1 at 133 (1969). See also Graham v. Smith, 602 F.2d 1078, 1082 (2d Cir.1979) (dictum), cert. denied 444 U.S. 995, 100 S.Ct. 531, 62 L.Ed.2d 426 (1979).

      . If the delay will in some other way preclude a fair trial, that issue should be raised at the time of re-trial. Gardner, 731 F.2d at 640. Cf. Pitchess, 421 U.S. at 490, 95 S.Ct. at 1753 (petitioner’s claim of unfairness in re-trial due to the unavailability of evidence should have been first raised and exhausted in the state courts).

      . Tifford v. Wainwright, 588 F.2d 954 (5th Cir. 1979); United States ex rel. Barnwell v. Rundle, 461 F.2d 768 (3d Cir.1972); Bailey v. Henslee, 309 F.2d 840 (8th Cir. 1962) (en banc); Tyler v. Croom, 288 F.Supp. 870 (E.D.N.C.1968); Homan v. Sigler, 283 F.Supp. 404 (D.Neb.1968).

      . Citing A. Solzhenitsen, The Gulag Archipelago (1973).


author: BELL, District Judge.

text:
    Pamela D. GREEN, Plaintiff, v. Dorothy J. ARN, Supt., Defendant.
    No. C84-3026.
    United States District Court, N.D. Ohio, E.D.
    Aug. 16, 1985.
    Paul Mancino, Jr., Cleveland, Ohio, for plaintiff.
    Stuart A. Cole, Ass’t Atty. Gen., Columbus, Ohio, for defendant.
   ORDER

BELL, District Judge.

Presently before the court is Pamela Green’s petition for a writ of habeas corpus filed pursuant to 28 U.S.C. § 2254. Green challenges her convictions of two counts of kidnapping and three counts of gross sexual imposition. On January 24, 1985, Magistrate Laurie filed his report and recommended that the petition be denied. Thereafter, on January 31, 1985, the petitioner timely filed her objections to the magistrate’s report.

The petitioner raised six separate grounds in the petition for the writ; however, only that relating to petitioner’s right to counsel under the sixth amendment was noted in the objections filed on January 31, 1985. In this regard, the court has reviewed the other five grounds in the petition and finds that the record does not support the granting of the writ of habeas corpus on any of those grounds. In addition, the court has reviewed the magistrate’s report and recommended decision and finds that the report fully addresses each of them. Thus, the court’s inquiry shall be directed to the petitioner’s right to counsel claims under the sixth amendment.

The record in this action reveals an unusual series of facts concerning the conduct of Green’s counsel, Mr. Carlin, during the course of trial. Green was a co-defendant at trial with two other defendants who were represented by separate counsel, Mr. Shaughnessy.

On the morning of June 2, 1983,- the petitioner’s trial to a jury commenced and opening statements were given by the prosecutor and both defense attorneys. Immediately thereafter the state called, as its first witness, one Maureen McNea, who was alleged to have been a victim of the defendant’s criminal acts. This witness testified on direct examination that Green was an active participant in her kidnapping and the sexual imposition visited upon her. At the conclusion of the state’s examination, Mr. Shaughnessy commenced his cross-examination of the witness; this questioning continued for approximately forty-five minutes until the lunch recess.

After the ninety minute lunch recess, Mr. Shaughnessy resumed his cross-examination of Miss McNea. At this point in the proceedings, the record reflects that Green’s counsel, Mr. Carlin, was no longer in the courtroom and had not returned after the lunch recess for any of the afternoon session. Instead, Mr. Carlin was attending a scheduled hearing in another courtroom on behalf of a different client. The trial court did not discuss Carlin’s absence with the petitioner nor was Carlin’s absence discussed or explained in the presence of the jury. After approximately two hours of additional cross-examination by Mr. Shaughnessy, and a short re-direct by the prosecutor, the witness was dismissed and a short afternoon recess was given to the jury.

During the recess and outside of the presence of the jury, Mr. Shaughnessy requested that the court detain the witness until Mr. Carlin could be present and able to cross-examine. The trial judge responded to the request as follows:

THE COURT: Let the record reflect the Court, in anticipation of this problem with Mr. Carlin, discussed it with him prior to the lunch break, and he informed me that he would be content with Mr. Shaughnessy's cross-examination on behalf of all three defendants, so with that assurance, the Court feels that one cross-examination is sufficient.

(Trial Transcript at 299.) Thereafter, the trial judge informed the prosecutor that the witness would not have to be available for any further proceeding connected with the trial.

At this point in the proceedings, the defendant requested, and was permitted, the opportunity to address the court; the following dialogue occurred:

DEFENDANT GREEN: I would like to find out if we could have this case continued until I have the benefit of my attorney being here in the courtroom with me while this trial is going on?
MR. SHAUGHNESSY: Can he come back?
THE COURT: Why?
MR. SHAUGHNESSY: Do you know where your attorney is, Miss Green?
DEFENDANT: He is in another trial at this time.
MR. SHAUGHNESSY: Why don’t you just hold the girl here until—
THE COURT: We will go until 4:30. When Mr. Carlin come [sic] back, maybe we can go back into that.
Well, Miss Green, do you feel that by virtue of the fact your attorney, Mr. Carlin, has been in and out the last several days, do you feel that this is not according to the way you want it to go? You prefer to have Mr. Carlin present at all times?
DEFENDANT GREEN: Yes, I do prefer to have him.
THE COURT: Well, then, I suppose she certainly has the right to counsel, Mr. Carlin.

(Trial Transcript at 305-306.) At no time during the above dialogue was Mr. Carlin present in the courtroom. After further discussions in the judge’s chambers which are not on the record, an adjournment was taken until the next day.

The next morning, June 3, 1983, Green’s counsel was present for the proceedings and the following statements were placed on the record prior to the taking of any further testimony.

THE COURT: All right, Mr. Carlin, I understand you want to go on the record.
MR. CARLIN: Yes, Your Honor. I have no questions of the witness, Maureen McNea, and I have been informed by my client, Pamela Green, that she wishes to have me withdraw and find new counsel. I have to inform the Court of that.
THE COURT: All right. Miss Green, the Court will not permit that at this stage of the trial. This trial must proceed. All right. Call the jury.

(Trial Transcript at 308.)

Later that morning the defendant wrote her attorney a note and had counsel move for a mistrial on the stated grounds that her attorney was “not being present during trial.” (TR. 403). This motion was denied by the trial court and the judge sua sponte and without any explanation in the record immediately revoked her bond. (TR 404).

The basic issue before this court is whether the absence of Green’s counsel during the examination of a witness by counsel for the co-defendants constitutes a violation of her sixth amendment right to counsel. The sixth amendment to the Constitution provides:

In all criminal prosecutions, the accused shall enjoy the right to a speedy and public trial, by an impartial jury of the State and district wherein the crime shall have been committed, which district shall have been previously ascertained by law, and to be informed of the nature and cause.of the accusation; to be confronted with the witnesses against him; to have compulsory process for obtaining witnesses in his favor, and to have the Assistance of Counsel for his defence.

The assistance of counsel language in this amendment has been construed by the courts to provide the accused in a criminal action with various fundamental rights. These rights include the right to have counsel appointed if the defendant is financially unable to afford counsel, Gideon v. Wainwright, 372 U.S. 335, 83 S.Ct. 792, 9 L.Ed.2d 799 (1963); and the right of self-representation if the accused elects to fore-go the assistance of counsel. Faretta v. California, 422 U.S. 806, 95 S.Ct. 2525, 45 L.Ed.2d 562 (1974). In addition, the defendant is entitled to have the effective assistance of counsel, Strickland v. Washington, 466 U.S. 668, 104 S.Ct. 2052, 80 L.Ed.2d 674 (1984); McMann v. Richardson, 397 U.S. 759, 90 S.Ct. 1441, 25 L.Ed.2d 763 (1970); Martin v. Rose, 744 F.2d 1245 (6th Cir.1984); and the right to retain and consult with counsel of her choice, Geders v. United States, 425 U.S. 80, 96 S.Ct. 1330, 47 L.Ed.2d 592 (1976); United States v. Reese, 699 F.2d 803 (6th Cir.1983); Linton v. Perini, 656 F.2d 207 (6th Cir.1981), cert. denied 454 U.S. 1162, 102 S.Ct. 1036, 71 L.Ed.2d 318 (1982). This action requires an examination of the petitioner’s right to consult with counsel of her choice and whether counsel was ineffective.

Recently the Supreme Court rendered two decisions which are relevant to the petition before this court. In Strickland v. Washington, supra, the petitioner claimed that his counsel was ineffective at trial since he failed to present character witnesses on behalf of the accused and failed to obtain various psychiatric reports. There were no claims at the trial proceedings that defense counsel was incompetent nor was any request made by the accused or on his behalf to have the action continued.

The Strickland Court rejected the petitioner’s claims and defined a two-pronged test to be applied when reviewing most claims of ineffective assistance of counsel in a habeas corpus petition. Under the Strickland test a petitioner must first demonstrate that counsel’s performance failed to meet a minimum objective standard of reasonableness, and second the petitioner must demonstrate that the deficient performance of counsel resulted in prejudice to the defense. 104 S.Ct. at 2065, 80 L.Ed.2d at 695. This prejudice to the accused is determined by assessing the entire record to see “whether there is a reasonable probability that, absent the errors, the factfinder would have had a reasonable doubt respecting guilt.” 104 S.Ct. at 2069, 80 L.Ed.2d at 698.

The application of the two-pronged test set forth above does not automatically apply to all cases involving the right to counsel or the effective assistance of counsel. As acknowledged in Strickland, the prejudice to the accused is legally presumed to result when there has been an “actual or constructive denial of the assistance of counsel.” 104 S.Ct. at 2067, 80 L.Ed.2d at 696.

In United States v. Cronic, 466 U.S. 648, 104 S.Ct. 2039, 80 L.Ed.2d 657 (1984), decided on the same date as Strickland, the Court identified some of the circumstances that present violations of the accused right to counsel as a matter of law without any showing of actual prejudice. The Court stated:

Most obvious, of course, is the complete denial of counsel. The presumption that counsel’s assistance is essential requires us to conclude that a trial is unfair if the accused is denied counsel at a critical stage of his trial. Similarly, if counsel entirely fails to subject the prosecution’s ease to meaningful adversarial testing, then there has been a denial of Sixth Amendment rights that makes the adversary process itself is presumptively unreliable. No specific showing of prejudice was required in Davis v. Alaska, 415 U.S. 308, 39 L.Ed.2d 347, 94 S.Ct. 1105 (1974) because the petitioner had been “denied the right of effective cross-examination” which “ ‘would be constitutional error of the first magnitude and no amount of showing of want of prejudice would cure it.’ ” Id, at 318, 39 L.Ed.2d 347, 94 S.Ct. 105 (citing Smith v. Illinois, 390 U.S. 129, 131, 19 L.Ed.2d 956, 88 S.Ct. 748 (1968), and Brookhart v. Janis, 384 U.S. 1, 3, 16 L.Ed.2d 314, 86 S.Ct. 1245 (1966)).
Circumstances of that magnitude may be present on some occasions when although counsel is available to assist the accused during trial, the likelihood that any lawyer, even a fully competent one, could provide effective assistance is so small that a presumption of prejudice is appropriate without inquiry into the actual conduct of the trial. (Footnote omitted.)

United States v. Cronic, supra at —, 104 S.Ct. at 2047, 80 L.Ed.2d at 668.

It is clear from the above decisions that a petitioner asserting a claim of ineffective assistance of counsel must demonstrate either that he was denied counsel at a critical stage of the proceedings or establish the requirements set forth in Strickland. However, once the record reveals that the accused was denied counsel at a critical stage of the proceedings, this court must find, as a matter of law, that a constitutional error was committed. See United States v. Cronic, supra 104 S.Ct. 2047 at n. 25.

In this action the magistrate applied the two-pronged test enunciated in Strickland in his report to this court. The magistrate found that a review of the entire record demonstrated that the petitioner did not show how counsel’s absences resulted in any actual prejudice. In essence, the magistrate found that the evidence in the record clearly demonstrated the guilt of the accused and that she would have been so found by the jury regardless of the attendance practice of her counsel. This court, however, must disagree with the application of the Strickland test in this action. Instead, the record must first be reviewed to determine whether the petitioner was denied her right to counsel during a critical stage in the proceedings.

The Supreme Court has found that the denial of access to counsel prior to trial at a preliminary hearing, Coleman v. Alabama, 399 U.S. 1, 90 S.Ct. 1999, 26 L.Ed.2d 387 (1970), a custodial interrogation, Miranda v. Arizona, 384 U.S. 436, 86 S.Ct. 1602, 16 L.Ed.2d 694 (1966), or an arraignment, Hamilton v. Alabama, 368 U.S. 52, 82 S.Ct. 157, 7 L.Ed.2d 114 (1961), violates the sixth amendment rights of the accused because each of these proceedings is a critical step in the prosecution of the defendant. The Court has also held that the accused’s fundamental rights are violated by the denial of assistance of counsel at the trial, Argersinger v. Hamlin, 407 U.S. 25, 92 S.Ct. 2006, 32 L.Ed.2d 530 (1972), or at the appellate level, Anders v. California, 386 U.S. 738, 87 S.Ct. 1396, 18 L.Ed.2d 493 (1967). It is undisputed that the trial itself must be considered to be a critical stage of the proceedings.

In this action, the petitioner had access to her retained counsel during most of the trial proceedings unlike those cases in which the accused was tried without any representation whatsoever. However, the petitioner was not represented by counsel during the one afternoon session of the trial because counsel had left the courtroom to appear in another court. This absence of counsel during the taking of evidence at her trial must be found, as a matter of law, to violate the petitioner’s fundamental constitutional right to assistance of counsel. Thus, the petitioner does not have to demonstrate any actual prejudice as defined in the two-pronged test in Strickland v. Washington, supra.

As the trial itself constitutes a critical stage of the total proceedings in which defendant was involved, the presentation of the testimony of an alleged victim of defendant’s criminal activity constitutes a critical stage of the trial. At the risk of stating a fact too obvious to mention, one of the duties of trial counsel is to be with and afford representation to his client during the course of the trial. The simplest form of representation—and the very least to which the client is entitled—is the physical presence of counsel in the courtroom while testimony is being given. It is axiomatic that the trial not proceed absent the presence of the attorney for the defendant, Geders v. United States, supra at 88; Javor v. United States, 724 F.2d 831, 834 (9th Cir.1984); or absent some effective waiver of his presence by the client Martin v. Rose, supra at 1251; United States v. Reese, supra at 805.

But, the question posed by counsel’s voluntary absenteeism from the courtroom—in this instance because he was actively representing another defendant in another courtroom—is but half the question raised by petitioner in this cause. What of the responsibility of the trial judge, who with knowledge of counsel’s absence, allows the trial to continue. Surely it cannot be said that defendant was in control of the trial proceedings; the trial judge was. Neither can it be argued that the deprivation claimed by petitioner because of her lack of representation was one which was self-invited. The facts here illustrate clearly that the trial judge knew Ms. Green’s attorney would not be present and why. With such knowledge, he did not advise petitioner that counsel would not be in court; did not ask for or discuss her waiver of counsel’s presence and did allow the state’s witness to leave after her testimony was completed even though she had not been subjected to Ms. Green’s cross-examination. It could not be said that the error discussed can be categorized in any manner as being harmless in nature. It can be said that the continuation of the trial proceedings in the manner briefly described above constitute a deprivation of petitioner’s rights and that deprivation is of constitutional proportion. Rulings by a trial court which prevent defense counsel from assisting a defendant during a critical stage of the proceedings are not subject to review under a harmless error standard. See, United States v. Cronic, supra at —, 104 S.Ct. at 2047, 80 L.Ed.2d at 668; McKaskle v. Wiggins, 465 U.S. 168, 104 S.Ct. 944, 79 L.Ed.2d 122 (1984); Geders v. United States, supra; Herring v. New York, 422 U.S. 853, 95 S.Ct. 2550, 45 L.Ed.2d 593 (1975); Siverson v. O’Leary, 764 F.2d 1208 (7th Cir.1985); Wilson v. Mintzes, 761 F.2d 275 (6th Cir.1985).

The absence of counsel for a period of more than two hours under the circumstances referred to above constitutes, in my opinion, ineffectiveness of counsel per se. Under these circumstances it is not necessary to prove that defendant was prejudiced; it is enough to prove the fact, to which the prejudice attached. Logic guides us to the thought that if we were to suggest otherwise, the absence of counsel for a day—or three days—would not constitute ineffectiveness of counsel unless it were somehow shown that defendant had been actually prejudiced by the absence.

The right of the accused to have access to counsel at all critical stages of the proceedings includes the right to have counsel present during the presentation of all of the evidence at the trial proceedings. Each part of the trial must be deemed to be a critical stage of the proceedings and mandates that the accused have access to her counsel.

In this action the trial judge clearly had a responsibility to protect the constitutional rights of the accused. The judge was informed of the petitioner’s counsel's scheduling problem prior to recessing that morning and chose to proceed with the prosecution of the action without counsel. This decision to proceed without defense counsel was done without the expressed consent or waiver of the defendant. Thus, a constitutional error was committed which violated the rights of the accused.

Accordingly, the writ of habeas corpus shall issue and the petitioner shall be released unless within ninety days of this order the State of Ohio begins new trial proceedings against her.

IT IS SO ORDERED.


text:
    Clinton A. REPH, Plaintiff, v. UNITED STATES of America, Defendant.
    No. C84-3024.
    United States District Court, N.D. Ohio, E.D.
    Aug. 16, 1985.

      Terry S. Shilling, Blaszak, Shilling, Coey & Bennett, Elyria, Ohio, for plaintiff.
    John M. Siegel, Asst. U.S. Atty., Cleveland, Ohio and Robin L. Greenhouse, Tax Div., U.S. Dept. of Justice, Washington, D.C., for defendant.
   ORDER

BELL, District Judge.

Plaintiff Clinton A. Reph filed this action for recovery of federal income taxes paid pursuant to a penalty assessed against him for failure to file Form 941 returns for the fourth quarter of 1978 and the first two quarters of 1979. Jurisdiction is founded on 28 U.S.C. § 1346(a)(1). The United States counterclaimed against plaintiff for the total amount of the tax penalty.

Currently before the court is the United States’ motion for partial summary judgment on the issues of responsibility and willfulness. Plaintiff has responded in opposition contending that there are issues of fact in dispute in this matter.

Pursuant to Rule 56(c) of the Federal Rules of Civil Procedure, the party moving for summary judgment has the burden of showing that no genuine issue of material fact exists and that as a matter of law, it is entitled to summary judgment. In reviewing a motion for summary judgment, a court must consider the pleadings, related documents and evidence and all reasonable inferences in a manner most favorable to the non-moving party. Adickes v. S.H. Kress & Co., 398 U.S. 144, 90 S.Ct. 1598, 26 L.Ed.2d 142 (1970); Smith v. Hudson, 600 F.2d 60 (6th Cir.1979); cert. dismissed, 444 U.S. 986, 100 S.Ct. 495, 62 L.Ed.2d 415 (1979); Board of Ed. Cincinnati v. Department of H.E.W., 532 F.2d 1070 (6th Cir.1976). The pleadings and evidence related to this motion establish the following facts.

STATEMENT OF FACTS

1. This is a federal tax case involving the unpaid federal withholding (withheld income and social security) taxes of Reph Solar Manufacturing Corporation (Reph Solar) during the fourth quarter of 1978 and the first and second quarters of 1979.

2. Reph Solar was in the business of manufacturing solar heating equipment and small fiberglass boats for the recreation industry. Plaintiff’s Answers to the United States’ Interrogatories No. 1(e) (hereinafter Interrogatory No.__).

3. On January 1, 1981, a delegate of the Secretary of the Treasury made an assessment of $30,328.24, pursuant .to section 6672 of the Internal Revenue Code of 1954, against the plaintiff, Clinton A. Reph. On the same date the Secretary of the Treasury gave notice of the assessment and demand for payment to the plaintiff. On February 26, 1981, the Secretary of the Treasury assessed an additional fees cost of $5.00 against the plaintiff. Form 4340.

4. The 100-percent penalty assessment was based upon a determination by the United States that:

(a) Clinton A. Reph was a person responsible for collecting, truthfully accounting for, and paying over to the United States, federal income and FICA taxes withheld from the wages of employees of Reph Solar for the fourth quarter of 1978 and the first and second quarters of 1979.

(b) Mr. Reph’s failure to collect, truthfully account for, and pay over to the United States the withheld federal income and FICA taxes was willful.

Plaintiff disputes this determination but presumably does not dispute that this was the basis upon which the government made the determination.

5. Reph Solar was incorporated in the State of Ohio on or about July, 1977. Interrogatory No. 1(a).

6. Mr. Reph was one of the original directors and shareholders of the corporation. Interrogatory Nos. 2(a) and 1(d).

7. During the periods at issue in this suit, the following were the officers of Reph Solar:

(a) President—Clinton A. Reph.
(b) Vice President—Bruce Delong and Don Church.
(c) Secretary—Tom Fog
(d) Treasurer—Edna Fog

Interrogatory No. 2(a).

8. In or about October, 1978 a management team was formed consisting of the five officers. The responsibilities of each officer are as follows:

(a) Clinton A. Reph—Sales.
(b) Bruce Delong—Production.
(c) Tom Fog—Inventory.
(d) Edna Fog—Treasurer.
(e) Don Church—Building and Grounds.

Deposition of Clinton A. Reph at 6 (hereinafter Dep. at-).

9. From the date of incorporation until January, 1979, Clinton Reph owned 50 percent of the outstanding stock of Reph Solar. Dep. at 5.

10. The stockholders of Reph Solar and their respective ownership after January, 1979, were as follows:

(a) Clinton A. Reph—185.5 shares or 37 percent;
(b) Don Church—58.5 shares or 11.7 percent;
(c) Bruce Delong—69 shares or 13.8 percent;
(d) Tom Fog—45 shares or 9 percent;
(e) Edna Fog—27 shares or 5.5 percent;
(f) Tom Flegge—50 shares or 10 percent;
(g) Martin Heberling—22.5 shares or 4.5 percent;
(h) Joe Boncek—9 shares or 1.8 percent;
(i) Debbie King—10 shares or 2 percent; and

(j) Regan King—10 shares or 2 percent. Interrogatory No. 1(d).

11. Two checking accounts for Reph Solar were maintained during the periods in issue at the City Bank Co. of Lorain, Ohio; a payroll account (# 072-00043-3) and a general account (# 012-02722-3). Clinton A. Reph and Carolyn Strama were the signatories on the payroll account and Mr. Reph and Edna Fog were the authorized signatories on the general account. Only one signature was required to negotiate a check on both accounts. Interrogatory No. 8(b); Dep. at 16; Exhibits 1, 2 annexed to Deposition of Clinton A. Reph (hereinafter Dep. Ex.-).

12. Carolyn Strama was authorized by the board of directors to sign Mr. Reph’s name on checks from the general account, and did in fact on numerous occasions sign Mr. Reph’s name. Dep. at 16-17, 29-31; Dep.Exs. 3, 4, 9, 10.

13. Mr. Reph signed checks on the general account during the periods in issue. Dep.Exs. 5-8, 11.

14. Mr. Reph received a salary from the corporation until early 1978. Dep. at 3.

15. The corporate checkbooks were kept in a locked filing cabinet in Ms. Strama’s office. Mr. Reph, Ms. Strama and Carol Kaye were the only individuals possessing keys to the filing cabinet. Dep. at 15.

16. Mr. Reph had an office on the business premises and devoted between 20 and 50 hours per week to the corporation. Dep. at 8, 22, 63; Dep.Ex. 18.

17. Mr. Reph was also employed by Atlas Insulation during the periods in issue. This company leased a portion of Reph Solar’s building for office space. Dep. at 9, 10, and 17.

18. Mr. Reph interviewed for hire the bookkeeper, Carolyn Strama, and the plant manager, Ted Allen. Dep. at 12. After Ted Allen was hired, he was in charge of hiring and firing employees. Dep. at 12. Deposition of Donald Church at 11 (hereinafter Church Dep. at-).

19. Mr. Reph contacted insurance companies to submit bids for a fire insurance policy for the corporate building. Once the bids were submitted, he took them before the management team for a decision on bid selection. Dep. at 27.

20. Mr. Reph was involved in the application for a $500,000.00 Small Business Administration loan on behalf of Reph Solar in October, 1978. Reph Solar received a loan of $300,000.00 from this source in February, 1979. Dep. at 42-43.

21. Mr. Reph reviewed financial documents prepared by the corporation’s accountant. Dep. at 10.

22. In order for Reph Solar to meet its payroll, Mr. Reph on several occasions loaned the corporation enough money to cover the net payroll but did not loan the corporation the amount required to be withheld and paid over to the Internal Revenue Service. Dep. at 25-26.

23. When he made these loans Mr. Reph was aware of the duty to make timely deposits of withheld federal income and social security taxes. Dep. at 26.

24. Mr. Reph reviewed bills along with the other members of the management team to determine which creditors would be paid during the periods in issue. Dep. at 24, 51.

25. Mr. Reph at times disagreed with decisions made by the management team concerning which creditors would be paid. Nonetheless, he signed the checks to creditors once the management team made the decision that they would be paid. Dep. at 51-52.

26. Mr. Reph was the person who was responsible for signing (and did sign) the Quarterly Employment Tax Returns (Forms 941) on behalf of Reph Solar. Dep. at 46 and Dep.Exs. 13, 14.

27. Mr. Reph first became aware of the tax liability on March 26, 1979. Dep. at 56.

28. Notwithstanding this knowledge, Mr. Reph, as a member of the management team, continued to direct and/or allow the payment to other corporate creditors, including the employees of Reph Solar, in preference to the United States. Dep. at 51, 52, 56, 75, 76; Church Dep. at 5, 7, 9-10. Mr. Reph, as president, presided over meetings of the management team. He had no independent authority to direct payments to creditors, however. Dep. at 76; Church Dep. at 10. He could make purchases up to $300.00 without authorization from the management team. Dep. at 73.

29. From April 1, 1979 through June 19, 1979, Reph Solar paid out more than $286,-700 to creditors other than the United States, far in excess of the amount of the withholding tax liability. Dep.Ex. 12. During this time, the Internal Revenue Service had made an assessment of the unpaid taxes for the periods ending December 31, 1978 and March 31, 1979. These assessments were made on March 26, 1979 and June 11, 1979. Exhibit A annexed to Plaintiff’s Brief in Opposition to Motion for Partial Summary Judgment.

30. On January 16, 1979, Reph Solar Manufacturing Corporation paid the Internal Revenue Service $17,365.99. Dep.Ex. 5.

31. In the final counseling report prepared by the Small Business Institute at the Cleveland State University for the spring quarter of 1979, the counseling team stated that: “Clinton Reph heads the team, manages sales and also oversees the cash flow (approximately $50,000/week).” Furthermore, the counseling team concluded that Mr. Reph should “be relieved of the duty of monitoring cash flow.” Dep.Ex. 20 at 1, 9. Mr. Reph attested to having read and understood the report by his signature, dated “5-19-79.” Dep.Ex. 20 at 13. Mr. Reph believes he was monitoring the cash flow only in conjunction with the management team. Dep. at 70.

POSITION OF THE PARTIES

In its motion, the United States contends that there are no material issues of fact in dispute as to Mr. Reph’s responsibility to pay the tax assessment and that he willfully failed to collect and turn over the federal income and social security taxes due and owing from Reph Solar. Additionally, the evidence attached to the United States’ motion is argued to establish Mr. Reph’s liability as a' matter of law under 26 U.S.C. section 6672 in that he has failed to raise a material issue of fact as to a valid defense. Numerous cases are cited to this court where it has been held that summary judgment in favor of the United States is appropriate when there are no such material issues of fact as to a taxpayer’s liability. Barnett v. United States, 594 F.2d 219 (9th Cir.1979); Teel v. United States, 529 F.2d 903 (9th Cir.1976); Howard v. United States, 83-2 U.S.T.C., ¶ 9528 (5th Cir.1983); Mazo v. United States, 591 F.2d 1151 (5th Cir.1979); High v. United States, 506 F.2d 755 (5th Cir.1975); Wyner v. United States, 50 A.F.T.R.2d 82-5031 (E.D.Mich. 1982); United States v. Fago, 81-1 U.S.T.C., ¶ 9275 (W.D.N.Y.1981); United States Fidelity and Guaranty Co. v. United States, 81-1 U.S.T.C., ¶ 9104 (N.D.Ala. 1980); Houston v. United States, 492 F.Supp. 574 (C.D.Cal.1980); Rabedeaux v. United States, 80-1 U.S.T.C., ¶ 9334 (S.D. Iowa 1980); Dradi v. United States, 77-2 U. S.T.C., ¶ 9729 (C.D.Cal.1977); Lonergan v. United States, 76-1 U.S.T.C., ¶ 9176 (W.D.Wash.1975).

Plaintiff disputes that he is a responsible person for the payment of the assessment based on the position advanced by the Internal Revenue Service’s own Internal Memorandum No. 56-46, which provides that the assertion against responsible officers is to be made only when it is determined that the taxes involved cannot be collected from the corporation itself. McCarty v. United States, 437 F.2d 961, 194 Ct.Cl. 42 (1971). Plaintiff asserts the defense to the tax assessment that the Internal Revenue Service abused its discretion in failing to collect the unpaid federal income and social security taxes from Reph Solar itself.

Plaintiff further contends that there remain material issues of fact as to his responsibility for payment of the tax assessment. Specifically, he claims that the extent of his control over financial matters is disputed.

STATEMENT OF THE LAW

Pursuant to the Internal Revenue Code of 1954, an employer is required to withhold federal income and social security taxes from the wages of his employees. 26 U.S.C. §§ 1302(a), 3402(a). The taxes so withheld “shall be held to be a special fund in trust for the United States.” 26 U.S.C. § 7501; Slodov v. United States, 436 U.S. 238, 243, 98 S.Ct. 1778, 1783, 56 L.Ed.2d 251 (1978).

Every quarter, the employer is required to file a Form 941, the Employer’s Quarterly Tax Return, reporting the amount of income and social security tax withheld during the period. A Federal Tax Deposit Form must be filed with the remittance of the withholding taxes the month following the close of each quarter. See Treas.Regs. §§ 31.6011(a)-l(a)(l), 31.6011(a)-4, 31-607(a)-l, '31-6302(c)-l, 31.6151-l(a), 26 C.F.R. §§ 31.6011(A)(a)(l), 31-6011(a)-4, 31-6071(a)-l, 31.6302(c)-l, 31.615-l(a) (1983).

Once net wages are paid to an employee, he is credited with the withheld taxes regardless of whether his employer pays the government at the end of the quarter. Slodov v. United States, 436 U.S. at 243, 98 S.Ct. at 1783. The Internal Revenue Service’s recourse for unpaid taxes is then possible only against the employer. Id. It follows that an employer who fails to pay taxes withheld is liable for the taxes which should have been paid pursuant to the Internal Revenue Code. 26 U.S.C. §§ 3102(b) and 3404.

Pursuant to section 6672 of the Internal Revenue Code, the responsibility for paying the withheld taxes is shifted from the corporation to the person responsible for nonpayment. 26 U.S.C. § 6672. An officer or employee who is under a duty to pay the withheld taxes and fails to do so, is liable for the full amount not paid over. Monday v. United States, 421 F.2d 1210 (7th Cir.1970); Braden v. United States, 318 F.Supp. 1189 (S.D.Ohio 1970), aff’d, 442 F.2d 342 (6th Cir.1971), cert. denied, 404 U.S. 912, 92 S.Ct. 229, 30 L.Ed.2d 185 (1971). Section 6672 provides:

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

Section 6672 liability attaches upon a showing of two factors: (1) that the subject was a responsible person for the collection, truthful accounting and paying over of the employment taxes; and (2) that the subject willfully failed to pay over the trust funds. Monday v. United States, 421 F.2d 1210 (7th Cir.1970). More than one person may be liable as a person responsible for the payment of withholding taxes; existence of this liability as to one person does not affect the liability of another person having the same duty in relation to the withheld taxes. Id. The liability imposed if more than one person is found to be a responsible person under section 6672 is joint and several liability for the entire amount which was not paid. The United States is entitled to collect the non-remitted taxes only once, however. Brown v. United States, 591 F.2d 1136 (5th Cir. 1979); Spivak v. United States, 370 F.2d 612 (2d Cir.1967).

The Internal Revenue Service need not attempt collections of the tax assessment from the corporate employer before asserting the personal liability of a responsible person. Bernardi v. United States, 74-1 U.S.T.C., ¶ 83, 216 (N.D.Ill. 1973) , aff’d, 507 F.2d 682 (7th Cir.1974). In addition, as the liability of the employer is separate and distinct from that of the responsible person, the United States’ lack of due diligence against the employer would not relieve the responsible person’s liability. Id.

Plaintiff and counterclaim defendant in this case claims that he is not a responsible person under section 6672 for the collection of the taxes which- were not paid. Among the criteria used by courts in determining whether individuals were responsible persons for paying withheld employment taxes are:

(1) The duties of the officer is outlined by the corporate by-laws.
(2) The ability of the individual to sign checks of the corporation.
(3) The identity of the officers, directors and shareholders of the corporation.
(4) The identity of the individuals who hired and fired employees.
(5) The identity of the individuals who were in control of the financial affairs of the corporation.

Braden v. United States, 318 F.Supp. at 1194 (citation omitted). Moreover, “[ljiability is not limited to those employees performing merely mechanical functions of collection and payment, ... but extends to all with responsibility and authority to avoid the default which constitutes a violation of the statute.” Harrington v. United States, 504 F.2d 1306, 1312 (1st Cir. 1974) .

Before section 6672 liability attaches, it must also be shown that the responsible person acted willfully in failing to exercise their responsibility. It is not necessary to show a bad or criminal motive in this regard. To satisfy this requirement, it must only be shown that the responsible person made a conscious and deliberate choice to pay other creditors instead of paying the government. Newsome v. United States, 431 F.2d 742, 747 (5th Cir.1970); Monday v. United States, 421 F.2d at 1216. “A responsible'person’s use of funds, or his knowledge of the use of funds for payments to other creditors after he is aware of the failure to pay the withholding tax, is willful conduct within the scope of section 6672.” Garsky v. United States, 600 F.2d 86, 91 (7th Cir.1979).

RESOLUTION OF THE MOTION

Based upon this legal framework, the court finds that there is no material issue of fact in dispute as to Mr. Reph’s liability as a person responsible for the taxes of Reph Solar and that his conduct in failing to pay the taxes was willful. Even assuming that all final decisions as to disbursements were made by the management team, Mr. Reph was a part of that team and is individually liable under section 6672 even if there are others who may be also liable. Spivak v. United States, 370 F.2d at 615. Further, he was a person who had the responsibility and authority to avoid the default and, as such, is liable. Harrington v. United States, 504 F.2d at 1312.

It is undisputed that Mr. Reph exercised significant control over financial and other corporate business. He was an original director and major shareholder of the company. Statements of Fact 6, 10. He was the president, and, as such, presided over the meetings of the management team. Statements of Fact 7, 28. Mr. Reph had access to and signature authority on both corporate checking accounts. Statements of Fact 11, 15. He had an office in the building and devoted a significant amount of time to corporate affairs. Statement of Fact 16. He interviewed potential employees and initiated negotiations for an insuranee policy and loan on behalf of the corporation. Statements of Fact 18, 19, 20. He reviewed the corporations financial documents. Statement of Fact 21. As part of the management team, he reviewed the bills of the corporation and made decisions as to payment to creditors. Statement of Fact 24. Mr. Reph was the person responsible for signing the Quarterly Employment Tax Returns on behalf of Reph Solar. Statement of Fact 26. On the basis of these undisputed facts, the court concludes that Mr. Reph is clearly a responsible person under section 6672 under the Braden criteria.

The court must also conclude that there is no material issue of fact as to the willfulness of his failure to pay the taxes on behalf of Reph Solar. He was aware that the taxes were unpaid as of March, 1979. Statement of Fact 17. He thereafter continued to participate in decisions to pay creditors in preference to the United States. Statements of Fact 28, 29. Further, Mr. Reph made loans to the corporation for only the net amount of employee wages while fully aware of the duty to make timely deposits of withheld federal income and social security taxes. Statement of Fact 23. The court finds that there is no material issue of fact as to the issue and that this constitutes willful conduct under section 6672. Garsky v. United States, 600 F.2d at 91.

The remaining issue is whether the failure of the United States to pursue collection of the tax from the corporate employer before the individual responsible person pursuant to its policy as contained in Internal Revenue Service Internal Memorandum No. 56-46 was an abuse of discretion which bars collection of the tax from Mr. Reph. Mr. Reph cites McCarty v. United States, 437 F.2d 961, 973, 194 Ct.Cl. 42 (1971) for the proposition that the Internal Revenue Service has a duty to attempt collection of the tax from the corporation when assets are available before asserting the penalty against the individuals. While the Court of Claims did so find in McCarty, the law as this court understands it is that any failure of the United States to use due diligence in collection efforts against the employer does not relieve a responsible person from his liability as each liability is separate and distinct. Datlof v. United States, 370 F.2d 655, 656 (3d Cir.1966); Bernardi v. United States, 74-1 U.S.T.C., ¶ 83, 216 (N.D.Ill.1973); In re Gregory Mobile Homes, 347 F.Supp. 528, 532 (M.D.Ga. 1972). These rulings are not inconsistent with the rulings in Spivak v. United States, 370 F.2d at 615, and Monday v. United States, 421 F.2d at 1217-18, as plaintiff suggests.

Furthermore, the Sixth Circuit Court of Appeals has ruled that guidelines adopted solely for the internal administration of the Internal Revenue Service rather than for protection of the taxpayer, do not confer any rights upon the taxpayer. United States v. Will, 671 F.2d 963, 967 (6th Cir. 1982) (citing United States v. Arthur Andersen & Co., 598 F.2d 610 (2d Cir.1979)); Cleveland Trust Co. v. United States, 421 F.2d 475, 481-82 (6th Cir.1970). Examination of Internal Memorandum No. 56-46 indicates that it contains an administrative policy only and, as such, confers no right at all upon Mr. Reph.

Accordingly, it is the order of the court that the United States’ motion for partial summary judgment on the issues of responsibility and willfulness is granted.

IT IS SO ORDERED.