author: ASPEN, District Judge:

text:
    EQUAL EMPLOYMENT OPPORTUNITY COMMISSION, Plaintiff, v. MTC GEAR CORPORATION, and Profile Gear Corporation, Defendants.
    No. 84 C 4413.
    United States District Court, N.D. Illinois, E.D.
    Oct. 3, 1984.

      Mary Brinas Manzo, E.E.O.C., Chicago, 111., for plaintiff.
    Shayle P. Fox, Vicki G. Lafer, Penny Nathan Kahan, Fox & Grove, Chicago, 111., for defendants.
   MEMORANDUM OPINION AND ORDER

ASPEN, District Judge:

The Equal Employment Opportunity Commission (“EEOC”) brought this action against defendants MTC Gear Corporation (“MTC”) and Profile Gear Corporation (“Profile”), alleging that defendants have maintained a discriminatory disability benefits policy in violation of Title VII of the Civil Rights Act of 1964. 42 U.S.C. § 2000e et seq. Profile has moved for summary judgment under Fed.R.Civ.P. 56(c). For the reasons stated below, we deny Profile’s motion.

Facts and Procedural Posture

Profile’s summary judgment motion raises two issues: (1) whether the Supreme Court’s decision in Newport News Shipbuilding & Dry Dock Co. v. EEOC, 462 U.S. 669, 103 S.Ct. 2622, 77 L.Ed.2d 89 (1983), should be applied retroactively to the discriminatory employment practices alleged in the complaint; and (2) whether Profile can be held liable under Title VII as a corporate “successor” to MTC.

For now we will only sketch the factual background. We will develop more facts later as they become relevant to the legal arguments. The complaint alleges that both Profile and MTC manufacture gears and other parts for use in motor vehicles. The parties do not dispute that on December 19, 1983, Profile, a new corporation, bought substantially all of MTC’s assets from ITT Industrial Credit Company, a secured creditor of MTC.

The substance of the complaint alleges that since 1979 MTC has violated Title VII by imposing special limitations on its coverage of the medical expenses incurred by its male employees, while imposing no such limitation on its coverage of the medical expenses incurred by its female employees for the medical expenses of their spouses. The complaint also alleges that since its birth in January 1984, Profile has continued MTC’s discriminatory medical coverage policy. The parties seem to agree that this policy falls within the embrace of Newport News. Below we will assume so, without finally deciding the issue, which we leave for a later motion for summary judgment.

The EEOC filed the complaint on May 23, 1984, following an investigation which dates back to 1981. On July 6, 1984, Profile filed its motion for summary judgment. No answer has been filed, and to our knowledge discovery has not begun. Although it is unusual for a defendant to move for summary judgment before answering the complaint (such motions are usually styled as ones to dismiss under Rule 12), we will consider Profile’s motion as one under Rule 56. See Fed.R.Civ.P. 56(b) (defendant may, “at any time,” move for summary judgment); generally 10 C. Wright, A. Miller & M. Kane, Federal Practice & Procedure, § 2718.

Retroactivity of Newport News

Before reaching the successorship issue, we must decide the threshold issue of whether the Newport News decision should apply retroactively to MTC’s alleged disability policy. “Generally, a decision which changes existing law or policy is given retroactive effect unless retroactive application would cause ‘manifest injustice.’ ” NLRB v. Lyon & Ryan Ford, Inc., 647 F.2d 745, 757 (7th Cir.1981), cert. denied, 454 U.S. 894, 102 S.Ct. 391, 70 L.Ed.2d 209 (1981), quoting Chevron Oil Co. v. Huson, 404 U.S. 97, 92 S.Ct. 349, 30 L.Ed.2d 296 (1971). The Supreme Court in Chevron created a three-part test to determine whether a civil, non-constitutional precedent should be applied prospectively only:

(1) Does the decision establish a new principle of law, either by (a) overruling clear past precedent on which litigants may have relied, or (b) deciding an issue of first impression whose resolution was not clearly foreshadowed?
(2) Will retrospective application of the rule further or retard its operation, considering the history of the rule, and its purpose and effect?
(3) Will retroactivity create substantial inequities, i.e., injustice or hardship for one of the parties?

404 U.S. at 106-07, 92 S.Ct. at 355; Lyon & Ryan Ford, 647 F.2d at 757. All three parts of the Chevron test must be met to preclude retroactivity; moreover, the Court must presume that a decision will be applied retroactively, and the party opposing retroactivity bears the burden of overcoming the presumption. Lyon & Ryan Ford, 647 F.2d at 757; Valencia v. Anderson Bros. Ford, 617 F.2d 1278, 1288-89 (7th Cir.1980), rev’d on other grounds, 452 U.S. 205, 101 S.Ct. 2266, 68 L.Ed.2d 783 (1981); Kumrow v. Teamsters General Local No. 200, 579 F.Supp. 393, 395 (E.D.Wis.1983). We hold that Profile has failed to meet its burden of satisfying the requirements of Chevron, and therefore Newport News may apply retroactively to this case.

Profile argues that Newport News “overruled clear past precedent on which” the defendants “may have relied.” On May 9, 1983, the Seventh Circuit decided EEOC v. Joslyn Mfg. and Supply Co., 706 F.2d 1469 (1983), which reached a conclusion opposite to the one in Newport News. The Supreme Court handed down Newport News just forty-two days later, on June 20, 1983, prompting the Seventh Circuit to vacate its earlier holding. 724 F.2d 52 (Dec. 13, 1983). Thus, if Joslyn can be considered “clear past precedent,” it achieved that status for only forty-two days. The EEOC argues that Joslyn was not “clear past precedent” because the Court itself knew that the Circuits were split on the issue and the Supreme Court’s decision was imminent. 706 F.2d at 1476. We need not decide whether Joslyn was clear past precedent, because even assuming that it is, Profile has failed to prove that it is one “on which the litigants may have relied.” Profile concedes it did not exist when Joslyn was decided, so it clearly could not have relied on that case. And Profile has presented no evidence that MTC “may have relied” on Joslyn during the opinion’s brief, forty-two day lifetime. The complaint alleges that MTC’s policies have continued with no gap from 1979 — well before Joslyn —until now. No evidence suggests that during the forty-two days MTC reassessed its policy and decided to keep it in reliance on Joslyn. Even if such evidence did exist, it would not affect liability in general, but could only shave a bit from possible damages arising from that time period. Moreover, if such evidence did exist, we do not believe that Profile could meet the third, or “hardship,” part of the Chevron test, since its reliance could only have lasted forty-two days, involving no change in policies or operations.

We agree with the EEOC that between 1979 and May 1983, there was no clear past judicial precedent on the disability benefits issue. Compare Newport News Shipbuilding & Dry Dock Co. v. EEOC, 667 F.2d 448 (4th Cir.1982), aff'd en banc, 682 F.2d 113 (1982) (finding Title VII violation), with EEOC v. Lockheed Missiles and Space Co., 680 F.2d 1243 (9th Cir.1982) (finding no Title VII violation), vacated, — U.S.-, 103 S.Ct. 3530, 77 L.Ed.2d 1383 (1983). Moreover, in 1979, EEOC guidelines declared that the pregnancy-related coverage at issue was unlawful under the 1978 Amendments to Title VII. See Newport News, 462 U.S. at-, nn. 8, 9, 103 S.Ct. at 2625-26. In sum, then, Profile has failed to meet its burden of showing that the first Chevron requirement is satisfied for the period before Joslyn was decided, as well as for the short gap between Joslyn and Newport News. Thus, Newport News may apply retroactively to cover the full time period of the Title VII violation alleged in the complaint. See also EEOC v. Atlanta Gas Light Co., No. C81-1090A (N.D.Ga. Dec. 14, 1983) (holding that Newport News applies retroactively).

The Succession Issue

On the issue of whether Profile is MTC’s “successor,” we must deny summary judgment unless the record shows that “there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.” Fed.R. Civ.P. 56(c). As the movant, Profile bears the burden of showing that no genuine issue of material fact exists. Korf v. Ball State University, 726 F.2d 1222, 1226 (7th Cir.1984). We must consider the evidence, and the reasonable inferences drawn from the evidence, in the light most favorable to the EEOC, the party opposing summary judgment. Big O Tire Dealers, Inc. v. Big O Warehouse, et al., 741 F.2d 160, 163, (7th Cir.1984). If Profile fails to meet its “strict burden of proof,” we must deny summary judgment. Id. But if Profile does meet its initial burden, we must see whether the EEOC has met its resulting burden of establishing a genuine issue as to that fact. To meet this burden, the EEOC must rely on more than the bare pleadings or bald assertions. Fed.R.Civ.P. 56(e); Big O, 741 F.2d at 163-164, slip op. at 6-7; Posey v. Skyline Corp., 702 F.2d 102, 105 (7th Cir.1983), cert. denied, — U.S. -, 104 S.Ct. 392, 78 L.Ed.2d 336 (1983). With these standards in mind, we turn to Profile’s motion.

The Seventh Circuit has not defined the standards for holding a successor liable for the Title VII violations of its predecessor. Indeed, it has never addressed whether a successor doctrine should apply to Title VII at all. The Sixth Circuit addressed this issue first, holding that a successor doctrine applies to Title VII cases. MacMillan v. Bloedel Containers, Inc., 503 F.2d 1086 (6th Cir.1974). The court considered the development of Supreme Court successorship doctrine under the National Labor Relations Act (“NLRA”), concluding that “the emphasis that both [the NLRA and Title VII] place on extending protection to and providing relief for the victims of prohibited practices” justified holding a corporate successor liable for the Title VII violations of its forebear. 503 F.2d at 1091. The Court then borrowed “a multiplicity of factors” from the labor context, which it held should be applied on a case-by-case basis to determine whether a corporate successor should be held liable:

(1) whether the successor company had notice of the charge;
(2) the ability of the predecessor to provide relief;
(3) whether there has been a substantial continuity of business operations;
(4) whether the new employer uses the same plant;
(5) whether he uses the same or substantially the same work force;
(6) whether he uses the same or substantially the same supervisory personnel;
(7) whether the same jobs exist under substantially the same working conditions;
(8) whether he uses the same machinery, equipment and methods of production; and
(9) whether he produces the same product.

Id. at 1094 (citations omitted). Two other circuits have adopted the MacMillan approach. Trujillo v. Longhorn Mfg. Co., Inc., 694 F.2d 221 (10th Cir.1982); Slack v. Havens, 522 F.2d 1091 (9th Cir.1975); see also Forde v. Kee Lox Mfg. Co., Inc., 584 F.2d 4, 6 (2d Cir.1978) (citing MacMillan with approval, but not explicitly applying all nine factors). We agree with the Tenth Circuit that the “reasoning of the Sixth Circuit is convincing,” Trujillo, 694 F.2d at 225, and accordingly we adopt the MacMillan approach in this case.

The nine-part MacMillan test is obviously fact based. Profile has not persuaded us that no genuine issue of material fact exists with respect to the nine-part test. We need only point to a few of the MacMillan factors. With regard to the first, or “notice,” factor, Profile has submitted an affidavit of its President, Alex Yucitech, stating that he had no notice of the EEOC charges filed against MTC. But Mr. Vucitech was admittedly also President of MTC when those charges were filed. We believe this fact creates strong inference — which we must consider in the light most favorable to the EEOC — that Vucitech did know of the EEOC charge against MTC, and thus a genuine issue of fact exists on the notice issue.

Moving to the second factor, the record is unclear as to whether MTC, the predecessor, can provide any relief. The complaint alleges that MTC sold all of its assets to Profile, which suggests it is no longer in business. This factor would seem to point against summary judgment for Profile.

Similarly, as to the other factors, either genuine issues exist or they weigh against Profile. Profile apparently uses the same plant as MTC, and now produces the same product. There are disputes in affidavits about the continuity of the work force, the supervisory personnel and the capital equipment. In short, this case is replete with genuine issues of material fact.

And this is no surprise. The EEOC filed the case only four months ago. It asserts that discovery has not yet begun. While the MacMillan factors should be readily ascertained through discovery, it would be a rare case that could resolve the issue without discovery. See Forde v. Kee Lox Mfg. Co., Inc., 584 F.2d 4, 5 (2d Cir.1978) (parties agreed about material facts). Indeed, the cases cited earlier all disposed of the issue after much more extensive factual development. Trujillo, 694 F.2d at 225 (deciding MacMillan issue after full trial); Slack, 522 F.2d at 1094-1095 (case also went to trial); see also MacMillan, 503 F.2d at 1094 (reversing district court’s granting of summary judgment because affidavits raised genuine issues of fact).

Because genuine issues of material fact exist, we must deny Profile’s motion for summary judgment. This holding does not imply that summary judgment will be inappropriate later in the case; it is only improper now. The parties should now proceed expeditiously through discovery, cooperating fully with an eye toward a possible summary judgment motion (or cross-motions) after the evidence is gathered in discovery.

Conclusion

Profile’s motion for summary judgment is denied. It is so ordered.

      . Newport News held that a pregnancy limitation in a health plan similar if not identical to the one challenged in this case discriminated against male employees in violation of Title VII. The Court surveyed the legislative history of the 1978 Amendment to Title VII, the so-called “Pregnancy Discrimination Act,” and concluded that Congress had overruled the holding and rationale of General Electric Co. v. Gilbert, 429 U.S. 125, 97 S.Ct. 401, 50 L.Ed.2d 343 (1976) (exclusion of disabilities caused by pregnancy from an employer’s general disability plan was not sex discrimination).

      . This threshold issue has a limited scope. The complaint alleges that Profile continues to maintain a discriminatory disability benefits policy. Thus, even if Newport News applied prospectively only, Profile could still be held liable. The affidavit of Profile’s president, which asserts that Profile does not currently maintain such a policy, does not warrant a different conclusion. As noted in the next section, some discovery is needed before we will decide any of the contested factual issues.

      . We need not address the second and third Chevron requirements, since all three must be met to preclude retroactivity.

      . See Golden State Bottling Co., Inc. v. NLRB, 414 U.S. 168, 94 S.Ct. 414, 38 L.Ed.2d 388 (1973); NLRB v. Burns Int'l Security Services, Inc., 406 U.S. 272, 92 S.Ct. 1571, 32 L.Ed.2d 61 (1972); John Wiley & Sons, Inc. v. Livingston, 376 U.S. 543, 84 S.Ct. 909, 11 L.Ed.2d 898 (1964).

      . Profile argues that it is developing a new process which will eventually account for 40% of its business later this year. However, it seems that Profile’s products are currently the same as MTC’s were. At a minimum, a genuine issue exists here, which can be resolved through discovery.

      . Profile asserts that we should discount or ignore the EEOC’s affidavits. Essentially, Profile argues that its affidavits are more credible than the EEOC’s. This argument misunderstands the Court’s role in deciding a motion for summary judgment. In general, we must defer our credibility judgments until trial. Right now we consider the evidence in the light most favorable to the EEOC. See generally 10A C. Wright, & Miller & M. Kane, Federal Practice and Procedure, § 2727.

      . In this regard, the parties should meet prior to the October 12, 1984 status hearing and prepare an agreed expedited discovery schedule for presentation at the status hearing. It is so ordered.


source: Caselaw Access Project

license: Public Domain

text:
    Morris CORNICK, Ken Barr, Albert Rosetti and Charles Jackson, Trustees of Local 46 Welfare Fund, and Morris Cornick, Ken Barr, George J. Morris and Gus Zapas, Trustees of Laundry, Dry Cleaning and Dye House Workers’ International Union Pension Fund, Plaintiffs, v. HI GRADE CLEANERS, INC., a corporation; Scientific Dry Cleaners, Inc., a corporation; and Ronald Harris, individually and doing business as Scientific Suede & Leather Cleaners, Defendants.
    No. 84 C 5513.
    United States District Court, N.D. Illinois, E.D.
    Oct. 3, 1984.

      Marvin Sacks, Marc J. Blumenthal, Marvin Sacks, Ltd., Chicago, 111., for plaintiffs.
    Sheldon A. Harris, Chicago, 111., for defendants.
   MEMORANDUM OPINION AND ORDER

ASPEN, District Judge:

Plaintiffs, trustees of the Laundry, Dry Cleaning and Dye House Workers’ International Union Pension Fund and the Local 46 Welfare Fund (“the Trustees”), have brought this action to recover contributions required by a collective bargaining agreement and multi-employer plan under the Employee Retirement Income Security Act of 1974, 29 U.S.C. § 1001 et seq. Jurisdiction is asserted pursuant to 29 U.S.C. § 1132(e)(1) and (e)(2). Presently before the Court are the motions to dismiss of defendants Hi Grade Cleaners, Inc. (“Hi Grade”), Scientific Dry Cleaners, Inc. (“SDC”) and Ronald Harris (“Harris”). For the reasons set forth below, the motions of Hi Grade and SDC are granted, and Harris’ motion is denied.

The complaint essentially alleges that Harris has been the sole shareholder, director and president of a series of corporations which are obligated to make payments to the pension and welfare funds. The Trustees claim that these entities are virtually identical except in name, and that Harris has changed the name of his business periodically in an attempt to defraud his creditors. The Trustees also assert that there is such a unity of interest, both among the different corporations and between the corporations and Harris, that Harris should be held personally liable for the payments.

Each defendant offers different reasons why he or it should be dismissed from this action. When considering the motions to dismiss, the Court must view the complaint’s allegations in the light most favorable to the plaintiffs. Scheuer v. Rhodes, 416 U.S. 232, 236, 94 S.Ct. 1683, 1686, 40 L.Ed.2d 90 (1974); Conley v. Gibson, 355 U.S. 41, 45, 78 S.Ct. 99, 102, 2 L.Ed.2d 80 (1957). Unless the plaintiffs cannot prove any set of facts in support of their claim that would entitle them to relief, the complaint should not be dismissed. Conley, 355 U.S. at 45-46, 78 S.Ct. at 102.

I. Hi Grade’s Motion

The Trustees allege in their complaint that the defendants are delinquent in their contributions to the pension and welfare funds for the period from October 1, 1983 through March 30, 1984. Hi Grade argues that it cannot be held liable for payments for this period because it had been dissolved in 1982. This argument is persuasive.

The Trustees do not seriously dispute Hi Grade’s contentions that the corporation discontinued its business operations on March 31, 1982, and was dissolved by the Illinois Secretary of State on December 1, 1982. Instead, the Trustees claim that Ill.Rev.Stat. ch. 32, § 157.94, a “survival statute” which provides for suits against dissolved corporations, allows them to proceed against Hi Grade in this case. However, the Illinois statute permits suits only for causes of action which accrued before the corporation was dissolved, Blankenship v. Demmler Manufacturing Co., 89 Ill.App.3d 569, 44 Ill.Dec. 787, 790-91, 411 N.E.2d 1153, 1156-57 (1st Dist.1980). In this case, the Trustees’ cause of action did not accrue until late 1983, long after Hi Grade’s dissolution. Thus, the Illinois survival statute is inapplicable to this situation, and Hi Grade’s motion to dismiss is granted.

II. SDC’s Motion

SDC argues first that the Trustees have failed to state a claim against it because SDC was not a party to any collective bargaining agreement with the Trustees and because the allegations concerning the relationship between Hi Grade and SDC are “vague and unclear.” However, the Trustees have alleged that on or about April 1, 1982, SDC consented to be bound by their agreement with Hi Grade, that SDC made some payments according to the agreement, and that SDC received benefits under the agreement. In addition to alleging that SDC expressly assumed Hi Grade’s obligations, the Trustees have also alleged that the substantial identity of the two corporations’ ownership, management, business operations and work force either warrants treating the corporations as the same legal entity or establishes SDC as a successor corporation obligated by the terms of the collective bargaining agreement. These allegations are certainly sufficient to withstand SDC’s motion to dismiss.

However, SDC also claims that the Trustees’ complaint should be dismissed because SDC filed a petition in bankruptcy on August 1, 1984. It is clear that under 11 U.S.C. § 362(a)(1), the petition operates as a stay of this action against SDC. Such a stay, however, does not apply to the claims against SDC’s nonbankrupt co-defendants. See, e.g., Almy v. Terrace Land Development, Ltd., 32 B.R. 390, 391 (N.D.Cal. 1983); Royal Truck & Trailer, Inc. v. Armadora Marítima Salvadorena, S.A. de C.V., 10 B.R. 488, 490-91 (N.D.Ill.1981). Thus, the suit should not be dismissed completely. SDC will be dismissed from this action for the present time, but the Trustees may reinstate their claims against SDC when the bankruptcy proceedings are concluded. Accordingly, SDC’s motion to dismiss is granted without prejudice.

III. Harris’ Motion

The Trustees have also named as a defendant Ronald Harris, “individually and doing business as Scientific Suede & Leather Cleaners.” Harris has stated that he is not doing business as Scientific Suede & Leather Cleaners. Rather, he is now president and general manager of an Illinois corporation named Scientific Leather, Suede & Fur, Inc. (“SLSF”), incorporated on November 10, 1983. The Trustees respond that they will request leave from the Court to join SLSF as a party defendant and “will plead successorship and disregard of corporate formalities against that company.” The Court hereby grants the Trustees leave to file an amended complaint which adds SLSF as a party and is otherwise consistent with this opinion.

Harris contends that the claims against him and his business fail to satisfy the requirement of Fed.R.Civ.P. 9(b) that “[i]n all averments of fraud or mistake, the circumstances constituting fraud or mistake shall be stated with particularity.” However, Rule 9(b) must be read together with the liberal notice pleading standard of Rule 8, which only requires a short, plain and concise statement of the claims. Tomera v. Galt, 511 F.2d 504, 508-09 (7th Cir. 1975). The Seventh Circuit has stated that when the two rules are read together, a complaint is sufficient if it alleges “a brief sketch of how the fraudulent scheme operated, when and where it occurred, and the participants.” Id. at 509.

Judged under this standard, the complaint provides the defendants with the notice to which they are entitled. Taking the Trustees’ allegations as true, it is possible that they may ultimately prove a fraudulent intent underlying the series of transfers of the defendants’ business from one corporation to another. The complaint leaves no doubt as to the events that the Trustees contend were fraudulent, when these events occurred and the participants in the events. Further specifics concerning the alleged fraudulent activities may readily be acquired through discovery. Tomera, 511 F.2d at 509.

Harris also asserts that the complaint fails to state a claim for “piercing the corporate veil” and holding him personally liable for the delinquent contributions. Under Illinois law, a corporation’s legal identity may be disregarded when there is: (1) such unity of ownership and interest that the individuality of the corporation no longer exists; (2) fraud or wrongdoing; and (3) unjust loss or injury to the plaintiff. Steven v. Roscoe Turner Aeronautical Corp., 324 F.2d 157, 160 (7th Cir.1963); see also People ex rel. Scott v. Pintozzi, 50 Ill.2d 115, 277 N.E.2d 844, 851-52 (1971).

Contrary to Harris’ assertions, the Trustees have sufficiently alleged the existence of each of these three conditions. They allege that Harris has been the sole shareholder, director and officer of at least three business entities, treating each as his own and forming new corporations to suit his personal financial needs. As discussed above, the Trustees allege that Harris has attempted to defraud his creditors. Moreover, the Trustees contend that unless the defendants’ legal identities are disregarded, they will have no remedy for the delinquent contributions. The recent filing of a bankruptcy petition by SDC supports this contention. Thus, the Trustees may well be able to prove a set of facts in support of their claims against Harris, and his motion to dismiss is denied.

Accordingly, the motions to dismiss Hi Grade and SDC are granted, and Harris’ motion to dismiss is denied. Plaintiffs are given leave to file an amended complaint within ten days naming SLFS as an additional defendant. Discovery shall be completed within thirty days as between plaintiffs and Harris. The status hearing is continued to December 7, 1984, at 10:00 a.m. It is so ordered.

      . The statute provides in pertinent part:
      The dissolution of a corporation * * * shall not take away or impair any remedy available to or against such corporation, its directors, or shareholders, for any right or claim existing, or any liability incurred, prior to such dissolution if action or other proceeding thereon is commenced within two years after the date of such dissolution.

      . The Trustees also argue that Section 1392 of ERISA provides for Hi Grade’s continuing obligation to make payments to the funds. However, the Trustees appear to have confused the concepts of “withdrawal liability" and "delinquent contributions”; the Trustees discuss the former in their memorandum but seek only the latter in their complaint. Moreover, nothing in Section 1392 relates to a suit against an already dissolved corporation, as in this case.

      . The automatic stay provision of 11 U.S.C. § 362(a)(1) prevents "the commencement or continuation ... of a judicial, administrative or other proceeding against the debtor that was or could have been commenced before the commencement of the [bankruptcy proceeding], or to recover a claim against the debtor that arose before the commencement of the [bankruptcy proceeding].’’

      . On information and belief, the Trustees allege that funds of the defendants have been commingled. Such an act indicates that the corporate entity should be disregarded. See, e.g., Central States Southeast and Southwest Areas Pension Fund v. Gaylur Products, Inc., 66 Ill.App.3d 709, 23 Ill.Dec. 487, 384 N.E.2d 123 (1st Dist.1978).


author: KIDD, District Judge.

text:
    Joseph H. FRAGMIN, Plaintiff, v. John WALKER, Clarksburg City Police Department, Robert Linville, Deputy Sheriff of Harrison County and Administrator of the Harrison County Correctional Center, and Hon. Nelson L. Blankenship, Sheriff of Harrison County, WV, individually and in their official capacities, and the City of Clarksburg, a municipal corporation, Defendants.
    Civ. A. No. 84-0002-C(K).
    United States District Court, N.D. West Virginia, Clarksburg Division.
    Oct. 3, 1984.

      Kenneth P. Simons, Simmons & Simons, Fairmont, W. Va., for plaintiff.
    Herbert G. Underwood and Frank E. Simmerman, Jr., Steptoe & Johnson, Clarksburg, W. Va., for Linville and Blankenship.
    Alfred J. Lemley, Furbee, Amos, Webb & Critchfield, Fairmont, W. Va., for Walker and City of Clarksburg.
   ORDER

KIDD, District Judge.

On July 17, 1984, the defendant City of Clarksburg filed its motion to dismiss and memorandum of law in support thereof. Pursuant to Rule 2.06 of the Local Rules of this Court, any memorandum of law in opposition shall be filed fourteen days thereafter and any reply brief ten days after the opposition memorandum has been filed. The plaintiff having failed to file a memorandum of law in opposition, the Court will rule upon the motion as presently before it.

Plaintiff’s complaint is pursuant to 28 U.S.C. § 1343(3) and 42 U.S.C. § 1983, and alleges a deprivation of plaintiff’s civil rights. The plaintiff also invokes this Court’s jurisdiction as to certain pendent common law claims against the defendants. A hearing was held on this motion on September 14, 1984. The Court found that in addition to the civil rights claims, pursuant to 42 U.S.C. § 1983, that plaintiff also pleads certain common law claims against the defendant City of Clarksburg under the pendent jurisdiction doctrine.

With regard to the plaintiff’s claims pursuant to 42 U.S.C. § 1983, plaintiff’s complaint fails to allege any cause of action against the City of Clarksburg. It is clear that municipalities and other local governmental units are not liable under the theory of respondeat superior for unconstitutional acts committed by their employees. Monell v. Department of Social Services, 436 U.S. 658, 98 S.Ct. 2018, 56 L.Ed.2d 611 (1978). The United States Supreme Court in Monell held that a municipality may be sued, “like every other 1983 ‘person’,” for constitutional deprivations resulting from custom, policy statement, ordinance, regulation, or decision officially adopted and promulgated by the body’s officers. Monell v. Department of Social Services, Id. at 690-91, 98 S.Ct. at 2035-36. Unsupervised acts of individual or lower level officers would not come within the guise of official “policy” or “custom.” Richardson v. City of Indianapolis, 658 F.2d 494 (7th Cir.1981), cert. denied, 455 U.S. 945, 102 S.Ct. 1442, 71 L.Ed.2d 657 (1982). See also: Herrera v. Valentine, 653 F.2d 1220 (8th Cir.1981); Delcambre v. Delcambre, 635 F.2d 407 (5th Cir.1981); Owens v. Haas, 601 F.2d 1242 (2d Cir.), cert. denied, 444 U.S. 980, 100 S.Ct. 483, 62 L.Ed.2d 407 (1979)). Judge Robert E. Maxwell in Leland W. Ramley, Jr. v. Joseph F. Merendino, et al., 82-0104-C (1982), held that municipalities could not be held liable solely on the theory of respondeat superior and that “simple negligence” is insufficient to support liability of municipalities for inadequate training, supervision, and control of individual police officers. Judge Maxwell, in the Ramley case, cited City of Newport v. Fact Concerts, 453 U.S. 247, 101 S.Ct. 2748, 69 L.Ed.2d 616 (1981), which held that municipalities are immune from punitive damages under 42 U.S.C. § 1983.

Plaintiff’s complaint does not allege any acts committed by the City of Clarksburg. Further, plaintiff does not contend that his constitutional rights have been deprived due to official custom, policy statement, ordinance, regulation, or decision. In fact, plaintiff’s complaint fails to allege any claim against the City of Clarksburg even though it is named as a defendant. It is clear that municipalities are not liable under the theory of respondeat superior and further are not liable for unsupervised acts of its employees. Richardson v. City of Indianapolis, 658 F.2d 494 (7th Cir.1981).

Based upon the foregoing reasons the claims based upon 42 U.S.C. § 1983 against the defendant City of Clarksburg are hereby DISMISSED.

The next issue is whether the common law claims against the defendant City of Clarksburg would properly be before this Court once any civil rights claims, pursuant to 42 U.S.C. § 1983, against the defendant have been dismissed.

Federal courts, under the pendent jurisdiction doctrine, have the power to adjudicate state law claims that may arise from facts underpinning the federal cause of action. Therefore, the plaintiff may plead state claims that parallel federal claims (i.e., excessive force and assault and battery (state)), in the area of police abuse. Paul v. Davis, 424 U.S. 693, 96 S.Ct. 1155, 47 L.Ed.2d 405 (1976). United Mine Workers v. Gibbs, 383 U.S. 715, 86 S.Ct. 1130, 16 L.Ed.2d 218 (1966) provides that the court must make two determinations in deciding whether to exercise pendent jurisdiction. The Court must first determine if the federal claim is substantial and whether the state claim arises from the same “nucleus of operative facts.” Then the court must decide whether the circumstances before it weigh against exercising its discretion. Since pendent jurisdiction is discretionary the court should consider such factors as convenience, fairness to the litigants and judicial economy. Moos v. County of Alameda, 411 U.S. 693, 711-12, 93 S.Ct. 1785, 1796-97, 36 L.Ed.2d 596 (1973).

The United States Supreme Court in UMW v. Gibbs, supra, set forth certain instances where the exercise of discretionary jurisdiction would be improper:

Needless decisions of state law should be avoided both as a matter of comity and to promote justice between the parties by procuring for them a surer-footed reading of applicable law. Certainly, if the federal claims are dismissed before trial, even though not insubstantial in a jurisdictional sense, the state claims should be dismissed as well. Similarly, if it appears that the state issues substantially predominate, whether in terms of proof, of the scope of the issues raised, or of the comprehensiveness of the remedy sought, the state claims may be dismissed without prejudice and left for resolution to state tribunals. There may, on the other hand, be situations in which the state claim is so closely tied to questions of federal policy that the argument for exercise of pendent jurisdiction is particularly strong. In the present case, for example, the allowable scope of the state claim implicates the federal doctrine of pre-emption; while this interrelationship does not create statutory federal question jurisdiction, Louisville & N.R. Co. v. Mottley, 211 U.S. 149, 29 S.Ct. 42, 53 L.Ed. 126, its existence is relevant to the exercise of discretion. Finally, there may be reasons independent of jurisdictional considerations, such as the likelihood of jury confusion in treating divergent legal theories of relief, that would justify separating state and federal claims for trial, Fed.Rule Civ.Proc. 42(b). If so, jurisdiction should ordinarily be refused.

UMW v. Gibbs, supra.

In Monell v. Department of Social Services, 436 U.S. 658, 98 S.Ct. 2018, 56 L.Ed.2d 611 (1976), the Court rejected a pendent claim against a municipal defendant holding that since the municipality could not be sued under 42 U.S.C. § 1983, there was no basis for federal jursidiction against the municipality.

In this instance the court dismissed the civil rights claims pursuant to 42 U.S.C. §. 1983, prior to trial. Further, there are no other federal claims pending against the City of Clarksburg and only those common law claims addressed herein remain against this defendant. Based upon the foregoing reasons and law the Court hereby DISMISSES the plaintiff’s common law claims against the defendant City of Clarksburg. It is accordingly so ORDERED.

Therefore, the defendant City of Clarksburg should be dismissed from this action and it is so ORDERED.


author: LYNCH, District Judge.

text:
    David C. OWENS, Plaintiff, v. UNITED STATES of America, Defendant.
    No. C-84-0020 EFL.
    United States District Court, N.D. California.
    Oct. 3, 1984.
    Stephen A. Chase, Chase & Winslow, Mil-brae, Cal., for plaintiff.
    Kimberly Reiley, Asst. U.S. Atty., San Francisco, Cal., for defendant.
   MEMORANDUM DECISION

LYNCH, District Judge.

The above-entitled case was tried by the Court, sitting without a jury. The matter was submitted on stipulated facts and legal briefs.

The sole issue, as agreed upon by the parties, is whether the plaintiffs September 5, 1979 claim for veterans’ benefits constituted a proper claim under the Federal Tort Claims Act (FTCA). If it does not, the plaintiff agrees that he has failed to file a timely claim and the statute of limitations has run.

Under the FTCA, a claim must be filed with the proper administrative agency within two years of the date from when the cause is known or it is forever barred. 28 U.S.C. § 2401(b). This claim required is jurisdictional and cannot be waived. 28 U.S.C. § 2675; Rooney v. United States, 634 F.2d 1238, 1242 (9th Cir.1980).

The Ninth Circuit has set out the requirements for a valid claim in Warren v. U.S. Department of Interior, 724 F.2d 776 (9th Cir.1984). These requirements are:

1. A written statement sufficiently describing the injury to enable the agency to begin its own investigation; and

2. A sum certain damages claim. Plaintiffs September 5, 1979 paper stated as follows:

“While ... duck hunting — the gun discharged and injured my great right toe ... During June 1979 surgery was performed at Veterans Medical Center ... The surgery was not performed correctly and necessitated a second operation for the amputation of my right great toe.”

The Court finds that these allegations, although quite general, are sufficient to meet the first requirement of a written statement sufficiently describing the injury.

As to requirement number two, to wit, the sum certain requirement, to meet this requirement, a value must be placed on the claim or the requirements of the FTCA are not satisfied. Warren v. U.S. Department of Interior, 724 F.2d 776 (9th Cir. 1984); Avril v. United States, 461 F.2d 1090 (9th Cir.1972); Canton v. United States, 495 F.2d 635 (9th Cir.1974); Bailey v. United States, 642 F.2d 344 (9th Cir. 1981). Plaintiff’s handwritten note on the government form which constitutes his claim and which is Exhibit One says absolutely nothing about a sum certain. It mentions no figures at all either specific or general. It merely states that “the surgery was not performed correctly and necessitated the second operation for the amputation of my right great toe.”

It is clear that plaintiff must state a sum certain and by not mentioning a figure at all, he has not met the second prong of the test set forth by the Ninth Circuit in Warren v. U.S. Department of Interior, 724 F.2d 776 (9th Cir.1984).

Plaintiff makes two further arguments:

1. That the Veterans Administration has in effect waived statutory requirements because it took two years to deny a second claim.

This is a somewhat difficult argument to follow but in any event it is clear that the requirement that a valid claim be submitted within the two years is jurisdictional and cannot be waived. Rooney v. United States, 634 F.2d 1238 (9th Cir.1980).

2. That the Veterans Administration has an administrative mandate to furnish information to each person who inquires as to the procedures for filing against the United States and that here the Veterans Administration was on notice of the potential federal tort claim and that it should have instructed the plaintiff on the proper tort claim procedure.

The only legal support he cites for this argument are two cases, namely, Bialowas v. United States, 443 F.2d 1047 (3rd Cir. 1971) and Molinar v. United States, 515 F.2d 246 (5th Cir.1975). However both these cases relate to whether or not the claimant has factually complied with the sum certain requirement and not whether the agencies involved had a duty to inform the claimant upon the filing of his claim that he had not put a sum certain down and must do so. Plaintiff submits no legal authority for his argument.

For reasons stated above, the Court finds that the claim of September 5, 1979 was not a valid claim and that therefore the statute of limitations has run. Accordingly, judgment is entered in favor of the defendant with each side to bear their own attorney’s fees and costs.

The above shall constitute the required findings of fact and conclusions of law required under Rule 52 of the Federal Rules of Civil Procedure.

IT IS SO ORDERED.


author: THEIS, District Judge.

text:
    Bruce A. WYNN, Plaintiff, v. BOEING MILITARY AIRPLANE COMPANY, Defendant.
    Civ. A. No. 83-1983.
    United States District Court, D. Kansas.
    Oct. 3, 1984.
    James S. Phillips, Jr., Wichita, Kan., for plaintiff.
    Ñola Tedesco Foulston, Foulston, Siefkin, Powers & Eberhardt, Wichita, Kan., for defendant.
   OPINION AND ORDER

THEIS, District Judge.

I. NATURE OF THE CASE

The plaintiff, Bruce A. Wynn, a former employee of the defendant, Boeing Military Airplane Company (Boeing), has instituted this action to recover damages for alleged racial discrimination in employment. Specifically, the first, second, third and seventh causes of action allege unlawful racial discrimination in termination, pay, and promotions, and racial harassment in violation of 42 U.S.C. § 1981. In addition to these claims, plaintiff, in his fourth cause of action, contends that defendant Boeing expressly and/or impliedly covenanted that it would treat plaintiff fairly and in good faith and that defendant breached this contract.

In his fifth cause of action, Wynn asserts a claim for a breach of a tort duty. Plaintiff asserts that this Court has pendent jurisdiction to consider these latter two claims. Plaintiff has voluntarily abandoned his sixth cause of action. The case is currently before the Court on defendant’s motion to dismiss and/or for more definite statement.

II. PLAINTIFF’S FOURTH CAUSE OF ACTION

Regarding plaintiff's fourth claim, that Boeing breached both an express and an implied covenant to treat plaintiff fairly and in good faith, defendant contends that this jurisdiction adheres to the employment at will doctrine: that, in the absence of a specific contract covering the duration of employment and in the absence of any statutory violation, an employment relationship is terminable at the will of either party with or without cause. Mitchell v. Stanolind Pipeline Co., 184 F.2d 837 (10th Cir. 1950). Defendant’s construction of the employment at will theory is incomplete, however, as will be explained below. Plaintiff responds that there are both express and implied covenants that must be considered.

A. EXPRESS CONTRACTUAL PROVISIONS

As to the express contractual provision, found in section 21.3 of the collective bargaining agreement between employer, employee and union, defendant argues that even if this provision did give rise to an actionable breach of contract claim, plaintiff’s failure to exhaust his contractual remedies prior to suit bars any recovery on that theory. Defendant’s position regarding the express contractual provision is meritorious.

The collective bargaining provision cited by plaintiff specifically states that “a grievance alleging a violation of this section 21.3 shall be subjected to the grievance procedure and arbitration ... if it is filed on behalf of and pertains to a single employee.” Defendant is correct in asserting that courts enforce provisions in collective bargaining agreements that provide for grievance procedures by refusing to assert jurisdiction over an action in which an employee has failed even to attempt exhaustion of contractual remedies. Republic Steel Corp. v. Maddox, 379 U.S. 650, 652-53, 85 S.Ct. 614, 616, 13 L.Ed.2d 580 (1965).

Plaintiff alleges exhaustion of state administrative remedies. This sort of exhaustion is not the exhaustion required by the collective bargaining agreement. Plaintiff's claim of a violation of section 21.3 must be exhausted through internal union grievance procedures. Absent exhaustion, this Court has no jurisdiction to decide the merits of plaintiff’s claim of breach of express contract. Vaca v. Sipes, 386 U.S. 171, 184, 87 S.Ct. 903, 913, 17 L.Ed.2d 842 (1967).

B. IMPLIED CONTRACTUAL PROVISIONS

Independently, plaintiff contends that defendant breached the covenant of good faith implied from public policy. Plaintiff more accurately characterizes the contours of the employment at will doctrine. In absence of a specific contractual provision, an employer may terminate an employee at will for any reason or for no reason, but not for a discriminatory reason. See, e.g., Tims v. Board of Education, 452 F.2d 551, 552 (8th Cir.1971); Slack v. Havens, 7 FEP Cases 885 (S.D. Cal.1973), aff'd as modified, 522 F.2d 1091 (9th Cir.1975). The essence of plaintiffs complaint is that Boeing terminated Wynn for discriminatory reasons.

Plaintiff correctly cites Murphy v. City of Topeka, 6 Kan.App.2d 488, 630 P.2d 186 (1981), for the proposition that Kansas recognizes public policy limitations on the traditional contract rule of terminability at will. In Murphy an employee at will who was fired in retaliation for filing a workers’ compensation claim had a cause of action for retaliatory discharge. In short, public policy supported protecting the workers’ compensation laws.

Defendant argues that Murphy must be read to establish two requirements for an exception to the parameters of the employment at will doctrine: first, that the discharge must violate public policy; and second, that there is no other remedy to protect the discharged employee. Defendant cannot seriously contend that plaintiff’s allegations of race discrimination would not be violative of public policy. Instead, defendant suggests that because plaintiff has federal remedies available, he should not be allowed to state a claim under the reasoning in Murphy.

Although defendant cites Murphy, Tarr v. Riberglass, Civil Action No. 83-4234 (D.Kan., unpublished, February 8, 1984), and other cases cited within the Tarr opinion, all of these cases involved age discrimination. Boeing is correct in its contention that some courts have held that the Age Discrimination in Employment Act (ADEA), 29 U.S.C. § 621 et seq., provides an exclusive remedy for complaints of age discrimination; however, defendant cites no cases that have extended this principle to race discrimination cases. This Court is unwilling to engraft such a requirement onto the law of race discrimination.

Plaintiff suggests a salient reason why the “remedy available” requirement should not apply to race discrimination claims. As plaintiff points out, state and federal race discrimination law is not coextensive. The Kansas common law action may provide remedies not available under federal law and does not have requisites that the federal law possesses. Portions of the language of the state statute, K.S.A. 44-1009 (1981) (Kansas Acts Against Discrimination), are more particular and different than the wording of § 1981 and Title VII of the Civil Rights Act of 1964, 42 U.S.C. § 2000e et seq. In addition, Kansas courts in cases such as McCabe v. Board of Johnson County Commissioners, 5 Kan.App.2d 232, 236-37, 615 P.2d 780 (1980), have chosen to interpret the Kansas statute in ways different than some of the federal courts have interpreted the aforementioned federal statutes. Thus, even though plaintiff may have a federal remedy available, it is not necessarily duplicative of the state remedy. The Court, therefore, is unwilling to make § 1981 and Title VII plaintiff’s exclusive avenues of relief.

Since the Court has determined that the other remedy available exception of Murphy and Tarr should not apply in race discrimination cases, the next question is whether plaintiff's case fits within the public policy requirement of Murphy. The cases decided under the Kansas Acts Against Discrimination, upon which plaintiff bases one of his state law claims, and the very existence of the Acts themselves indicate that elimination of racial discrimination is a significant public policy objective in Kansas. See, e.g., Hutchinson Human Relations Commission v. Midland Credit Management, Inc., 213 Kan. 308, 811, 517 P.2d 158 (1973). Thus Wynn’s case fits squarely within the ambit of Murphy: a discharge based on the impermissible consideration of race is prohibited by the public policy of Kansas.

Furthermore, the allegations of plaintiff’s complaint come within the general rule that employment at will may be terminated for any reason or for no reason but not for a discriminatory reason. Thus, under the standard for the grant of a motion to dismiss for failure to state a claim, that plaintiff “can prove no set of facts in support of his claim which would entitle him to relief,” Kennedy v. Meachum, 540 F.2d 1057, 1060 (10th Cir.1976), the Court finds plaintiffs fourth cause of action does not fail to state a claim upon which relief may be granted.

III. PLAINTIFF’S FIFTH CAUSE OF ACTION

To the extent that defendant urges the same arguments regarding the fifth cause of action as it did regarding the fourth cause of action, the above analysis applies. Boeing’s only additional argument concerning the fifth cause of action, which is premised in tort upon the Kansas Acts Against Discrimination, K.S.A. 44-1009 (1981), is that the Court should not exercise pendent jurisdiction. Defendant cites Davis v. Modine Manufacturing Co., 526 F.Supp. 943 (D.Kan.1981), in which this Court declined to exercise pendent jurisdiction over a state civil rights claim brought under K.S.A. 44-1009. The reasons this Court found that pendent jurisdiction was not appropriate in Modine are not apposite here.

First, in Modine the Court relied on the reasoning of Judge Rogers in Brown v. Frito-Lay, Inc., 15 FEP Cases 1055 (D.Kan.1976), in which the court stated that the scope of remedies under the Kansas Acts Against Discrimination was essentially uncharted. Much has happened in the eight years since the Brown decision; even in the three years since the Modine decision, a number of cases and law review articles have been published concerning the scope of relief afforded by the Act. See, e.g., Webb v. City of Leavenworth, 8 Kan. App.2d 525, 661 P.2d 1 (1983); Woods v. Midwest Conveyor Co., 231 Kan. 763, 648 P.2d 234 (1982); U.S.D. No. 259 v. Kansas Commission on Civil Rights, 7 Kan. App.2d 319, 640 P.2d 1291 (1982); Byrd, Limiting the Employer’s Absolute Right of Discharge: Can Kansas Courts Meet the Challenge? 29 Kan.L.Rev. 267 (1981).

The second reason this Court adopted in Modine was that exercise of pendent jurisdiction would require resolution of many substantive issues concerning the Kansas Act not yet considered in state courts. It must be remembered, however, that the Modine case concerned both claims of race and handicap discrimination and this Court focused on the latter in determining that the Act then had not been interpreted by the state courts. The handicap provisions were added only recently, 1974 Kan.Sess. Laws 542. The claim of plaintiff Wynn is solely one of race discrimination, and the Kansas courts have had more time to give this Court guidance concerning race discrimination cases decided under the Act. See, e.g., Hutchinson Human Relations Commission v. Midland Credit Management, Inc., 213 Kan. 308, 517 P.2d 158 (1973); Londerholm v. Unified School District, 199 Kan. 312, 430 P.2d 188 (1967).

An additional reason offered by defendants for the Court to deny pendent jurisdiction is the possibility of jury confusion. In a case cited by defendants, Cancellier v. Federated Department Stores, 672 F.2d 1312, 1318 (9th Cir.1982), the Court of Appeals for the Ninth Circuit held that jury confusion may result from divergent legal theories. Yet defendant’s position has been that the remedies available under state and federal law are coterminous rather than divergent. It is inconsistent for Boeing to advance the argument that plaintiff should be relegated to federal remedies because the state law is coextensive with federal law and at the same time to claim a divergence of state and federal law which might confuse a jury. Whatever the differences may be between state and federal law, defendant presents no reasons why a jury might be confused in the present case. For these reasons, the Court will exercise pendent jurisdiction in the instant case.

IV. CONCLUSION

Motions to dismiss for failure to state a claim are not favored and dismissal under Rule 12(b)(6) should be granted with care to avoid improperly denying plaintiff the opportunity to have his claim adjudicated on the merits. Scheuer v. Rhodes, 416 U.S. 232, 236-37, 94 S.Ct. 1683, 1686, 40 L.Ed.2d 90 (1974). Given the foregoing analysis, the Court can not say as a matter of law that plaintiff has failed to state a claim upon which relief may be granted.

Finally, regarding Boeing’s alternative motion for a more definite statement, plaintiff Wynn clearly is not trying to camouflage his arguments. In plaintiff’s memorandum in response to defendant’s motion to dismiss, plaintiff has given all the particulars which would meet defendant’s request for a more definite statement. Accordingly, the motion for a more definite statement is denied.

IT IS THEREFORE ORDERED that defendant’s motion to dismiss regarding plaintiff’s claim of explicit contractual provisions be granted and that plaintiff be required to exhaust internal grievance procedures before this Court can assume jurisdiction. After plaintiff has exhausted this claim, depending upon the status of the remainder of the case, the Court would consider leave to amend to reassert the claim.

IT IS FURTHER ORDERED that defendant’s motion to dismiss for failure to state a claim and in the alternative for a more definite statement is denied.


author: JOE J. FISHER, District Judge.

text:
    UNITED STATES of America v. 8.41 ACRES OF LAND, SITUATE IN ORANGE COUNTY, TEXAS, KWW Associates, et al. UNITED STATES of America v. 5.00 ACRES OF LAND, SITUATE IN ORANGE COUNTY, TEXAS, the Firestone Tire & Rubber Co., et al. UNITED STATES of America v. 6.90 ACRES OF LAND, SITUATE IN ORANGE COUNTY, TEXAS, the Firestone Tire & Rubber Co., et al.
    Civ. A. Nos. B-78-169-CA-1547-3, B-78-170-CA-1547-3 and B-78-176-CA-1547-3.
    United States District Court, E.D. Texas, Beaumont Division.
    Oct. 4, 1984.

      Robert J. Wortham, U.S. Atty., and George Phair, Asst. U.S. Atty., Beaumont, Tex., for plaintiff.
    George W. Brown, Beaumont, Tex., for defendants.
   ORDER

JOE J. FISHER, District Judge.

CAME ON TO BE HEARD the motion of the Defendants, FIRESTONE TIRE & RUBBER COMPANY and KWW ASSOCIATES, Motion for New Trial, in the above-styled and numbered causes, and the Court, having considered the Motion, set the matter for hearing, whereupon argument of the parties was heard.

The history of these troublesome condemnation cases appears in the reported opinions and need not be recited again. See U.S. v. 5.00 Acres of Land, Etc., 507 F.Supp. 589 (E.D.Tex.1980); 680 F.2d 388 (5th Cir.1982); 576 F.Supp. 685 (E.D.Tex. 1983); 731 F.2d 1207 (5th Cir.1984); 592 F.Supp. 829 (E.D.Tex.1984). After the Court entered the latest final judgment, the landowners timely filed their Motion for New Trial.

The landowners assert they suffered a manifest injustice because the final judgment awards them only a small fraction of the compensation willing buyers in the free market pay for the same property rights.

The district court finds itself in a troubling position: respectfully deferential to the decisions of the Court of Appeals which specified the law of this case, yet convinced that errors committed by the trial court caused a manifest miscarriage of justice.

The initial, and perhaps farthest reaching, error of the trial court was its failure ab initio to remand the case to the condemnation commission for further findings as to both the highest and best use of the land . and the after-taking value thereof. The landowners had offered extensive evidence of “comparable sales” of the res taken, i.e., pipeline easements. The commission erroneously found the highest and best use of the land to be as a “pipeline corridor,” rather than as industrial plant sites. The commission’s erroneous finding that the taken tracts were “effectively severed” from the parent tracts led it and the trial court to further err “in rejecting the ‘before-and-after’ method of valuation of the larger tract.” U.S. v. 8.41 Acres, 680 F.2d at 394.

The district court had instructed the commissioners to the effect that: “The best evidence of market value is comparable sales — i.e., sales from a willing seller to a willing buyer of similar property in the vicinity of the taking at or about the same time as the taking.” Id., 680 F.2d at 395, citing United States v. Trout, 386 F.2d 216, 222-23 (5th Cir.1967). The commission apparently based its award on the “comparable sales” of pipeline easements.

The commissioners can be excused for incorrectly believing that recent sales of nearby pipeline easements were “comparable sales” which were the best evidence of market value of the property rights condemned. The government did, after all, condemn a pipeline easement. The crucial error, however, was the unjustified finding that the taken tracts were severed. If nothing else, the common sensical, albeit naive, approach of the commissioners points up a problem with the merchanistic application of the before-and-after method of valuation in such situations: that the government pays but a small fraction of the price private buyers pay for the same thing in the marketplace.

Notwithstanding that problem, the Court must properly apply the law to the facts in reaching a determination of just compensation. And that the Court failed to do, resulting in a manifestly unfair result.

The initial mistake, explained above, was the district court’s clearly erroneous finding of effective severance of the taken tracts from the parent tracts. Having made that error, the Court neglected to make a finding that the parent tracts had lower values after the taking. The record, however, was replete with evidence to that effect, and the trial court further erred in not considering that evidence.

The Court of Appeals, in reviewing the initial judgment of the trial court, concluded that “[t]he landowners had an opportunity to prove the market value of the tracts was higher than established by the Government, but failed to meet this burden,” U.S. v. 8.41 Acres, 680 F.2d at 395. Of course, the landowners had conceded the before taking value of the parent tracts and the after taking value of the easement areas. U.S. v. 5.0 Acres, 731 F.2d at 1209. The crucial and still contested fact issue, however, was the after taking value of the easement burdened parent tracts, of which the easements’ value was but a small part. Unlike the Government, the landowners failed to offer comparable sales of easement burdened tracts to prove a lower after-taking value of the parent tracts. Instead, they offered comparable pipeline easement sales.

The Court of Appeals rejected the landowners’ evidence and considered only the Government’s comparable sales on appeal. Apparently, the Court of Appeals was unaware that the principal sale of the landowners’ was not subject to the Slattery exclusion rule which excludes evidence of sales negotiated by one having power to condemn. See Transwestern Pipeline co. v. O’Brien, 418 F.2d 15, 17-19 (5th Cir. 1969), quoting Slattery Co., Inc. v. United States, 231 F.2d 37 (5th Cir.1956). On remand the trial court erroneously compounded the unintentional oversight of the Court of Appeals by ignoring both the admissible sales of the landowners and their expert witnesses’ opinion testimony.

Aware that in Transwestern, the Court of Appeals “explicitly upheld the appropriateness of the [before-and-after] method for valuing pipeline easements,” 418 F.2d at 21, the district court reexamined the record and applied “the proper measure of damages.” 8.41 Acres, 680 F.2d at 392. Concerned lest it violate the clear mandate of the Court of Appeals, the district court exclusively relied upon the government’s only credible evidence of the market value of the land as burdened with the easements. That evidence consisted of a single comparable sale of an easement-burdened plant site. On appeal, the Court of Appeals reversed the judgment and held the damage award “unsupported by evidence [in the record].” U.S. v. 5.00 Acres, 731 F.2d at 1208.

The apparent rejection of the trial court’s factual finding as clearly erroneous — a finding predicated upon the government’s sole comparable sale probative of after-taking value — made the further error of the trial court suddenly significant. That error, committed due to this court’s misapprehension that it was compelled by the mandate, was the utter failure to consider the admissible, credible evidence originally offered by the landowners simply because it was presented under the wrong valuation theory. That omission violated the crystal clear rule in this circuit that, although comparable sales are often the most reliable form of evidence in determining market value, “other forms of evidence are also admissible on that issue,” even though not based on an accepted method of valuation. United States v. 329.73 Acres, Etc., 666 F.2d 281, 283 (5th Cir.1982); citing United States v. Toronto, Hamilton and Buffalo Navigation Co., 338 U.S. 396, 70 S.Ct. 217, 94 L.Ed. 195 (1949); United States v. Smith, 355 F.2d 807 (5th Cir.1966). Although the pipeline easement sales testified to by the landowners do not directly establish the value of either the parent tracts or the easement strips, that evidence overwhelmingly indicates a reduction in the parent tracts’ after-taking value due to the easement burden.

The landowners offered sales of single pipeline easements, including sales to buyers lacking condemnation power. As is the custom in the industry, the sales were negotiated on the basis of a certain number of dollars per rod. Of course, “the price per rod is not a useful figure in determining fair market value of the easement area because sales based on a per-rod basis include the value and damages to the strip of land plus damages to the remainder of the tract." Transwestern, 418 F.2d at 18 (emphasis added).

The per-rod prices of the admissible “comparable sales,” i.e., those negotiated absent the power of condemnation, significantly exceed the undisputed values of and damages to the actual easement strips. Clearly, the sales do not establish fair market value of the easement area under the before-and-after method of valuation. U.S. v. 8.41 Acres, 680 F.2d at 395. But even though offered under an “unorthodox theory,” the evidence has considerable probative value under the correct theory. And the magnitude of those marketplace values shows “damages to the remainder of the tract.” Transwestern, 418 F.2d at 18. Moreover, the testimony of the landowners’ expert witnesses was that such damage was substantial.

Of course, the per-rod prices reflect the damage of a single pipeline. The government easement, however, perpetually allows installation of unlimited lines, entailing repeated loss of access to the tracts, a fact suggesting greater damage to the remainder of the tracts. See Transwestern, 418 F.2d at 20. Indeed, it was in part for that reason the trial court explicitly rejected as implausible the unsupported opinion of the government valuation witness: that the after-taking values of the remainders were not affected by the easements. U.S. v. 8.41 Acres, 576 F.Supp. at 689.

In sum, the protraction of this litigation reflects a series of errors committed by the trial court. The original judgment was flawed by the erroneous characterization of the easement strips as separate parcels. U.S. v. 8.41 Acres, 680 F.2d at 394. On remand, the district court erred in ultimately basing its second judgment on the government’s evidence of a single comparable sale. U.S. v. 5 Acres, 731 F.2d at 1208. The trial court further erred in not considering the admissible evidence of pipeline sales offered by the landowners. And the third and final judgment of the district court is in all important respects supported exclusively by testimony rejected by the trial court as implausible.

The court is mindful of the longstanding precedent in this Circuit that “a motion for new trial is addressed to the trial judge’s discretion. He may grant a new trial if he thinks he has committed error ...” Telfair v. Zim Israel Navigation Co., 428 F.2d 127, 128 (5th Cir.1970); quoting Marsh v. Illinois Central Railroad Co., 175 F.2d 498, 500 (5th Cir.1949). In addition, Rule 59 empowers the trial judge to grant a new trial in order to prevent a miscarriage of justice. Delta Engineering Corp. v. Scott, 322 F.2d 11, 15-16 (5th Cir.1963). The trial judge feels compelled to grant such relief. “It is his right, and indeed his duty, to order a new trial if he deems it in the interest of justice to do so.” 11 C. Wright & A. Miller, Federal Practice and Procedure, sec. 2803 (1973).

Admittedly, the landowners presented their case under a novel theory of law and failed. The trial court rejected the landowners’ unorthodox theory despite their persuasive argument that it more realistically reflects the free marketplace and, therefore, more accurately reveals the value reasonable businessmen place upon pipeline easements. Because the trial court rejected the landowners’ method of valuation, the judge ignored all their evidence, as well. Their reliance on a flexible approach to valuation was not without justification, however, as at least two other circuits permit an expert to reach his opinion of an award “in a way that any man of intelligence would have arrived at a valuation for ordinary business purposes.” United States v. 77,819.10 Acres, Etc., 647 F.2d 104, 108 (10th Cir.1981); quoting United States v. 97.19 Acres, Etc., 582 F.2d 878, 883 (4th Cir.1978). Even in the Fifth Circuit, “market value is not an absolute standard, nor an exclusive method of valuation.” United States v. 329.73 Acres, Etc., 666 F.2d at 283; citing United States v. Virginia Electric and Power Co., 365 U.S. 624, 633, 81 S.Ct. 784, 790, 5 L.Ed.2d 838 (1961). “Perhaps no warning has been more repeated than that the determination of value cannot be reduced to an inexorable rule.” United States v. 329.73 Acres, Etc., 666 F.2d at 283; quoting United States v. Toronto, Hamilton and Buffalo Navigation Co., 388 U.S. 396, 402, 70 S.Ct. 217, 221, 94 L.Ed. 195 (1949). In rigidly applying the before and after method, the trial court did not heed that warning.

Fundamental fairness requires that the trial court not allow the infliction of a gross miscarriage of justice upon the litigants. In view of the harsh result imposed upon the landowners, and considering the relatively small inconvenience of further proceedings, it is, therefore

ORDERED, ADJUDGED AND DECREED that in the interest of justice the Motion for New Trial should be and is hereby GRANTED, and it is further ORDERED that a new trial be held before the original condemnation commission with the suggestion that the parties stipulate to such facts as are no longer in dispute.


author: GENE CARTER, District Judge.

text:
    Harry E. JACOBS, Plaintiff, v. Margaret M. HECKLER, in her capacity as Secretary of the United States Department of Health & Human Services, Defendant.
    Civ. No. 83-0472 P.
    United States District Court, D. Maine.
    Oct. 4, 1984.
    Henry J. Meyer, Lewiston, Me., for plaintiff.
    Paula D. Silsby, Asst. U.S. Atty., Portland, Me., for defendant.
   MEMORANDUM OF DECISION AND ORDER

GENE CARTER, District Judge.

This is an action under 42 U.S.C. § 405(g), for review of the final decision of the Secretary of Health & Human Services, which denied Plaintiff’s application for disability insurance benefits. Plaintiff is a 46-year-old man who alleges that he became disabled on May 28, 1982, as a result of arthritis and a knee impairment. Plaintiff’s application was denied administratively and, after hearing, by an Administrative Law Judge (ALJ). The ALJ found that Plaintiff had a severe impairment, but found that he was able to do his past relevant work as an industrial arts teacher and, therefore, denied the claim. The Appeals Council declined to review the ALJ’s decision. The case is before this Court on Plaintiff’s Motion for Summary Judgment and Defendant’s Motion for Order Affirming the Decision of the Secretary.

In reviewing the denial of disability benefits, the standard of this Court’s review is whether the determination made by the ALJ is supported by substantial evidence. 42 U.S.C. § 405(g); Lizotte v. Secretary of Health & Human Services, 654 F.2d 127, 128 (1st Cir.1981). In other words, the determination must be supported by such relevant evidence as a reasonable mind might accept as adequate to support the conclusions drawn. Richardson v. Perales, 402 U.S. 389, 401, 91 S.Ct. 1420, 1427, 28 L.Ed.2d 842 (1971).

The Court thoroughly reviewed the entire record, including the transcript of the hearing below, the exhibits, and the briefs submitted by counsel. After careful consideration, the Court finds that the AU’s decision is not supported by substantial evidence.

The medical evidence establishes that Plaintiff has a long history of knee impairment with numerous surgical procedures to both knees. Plaintiff was first injured in approximately 1971. He did not work for nine years. In 1980, he began work as a high school industrial arts teacher. He resigned from that position in May of 1982 due to pain and the effects of pain medication. Plaintiff also worked part-time as a clerk at a variety store from June 1981 to May 1982.

At the hearing, Plaintiff testified that he suffers pains in both his knees, the left hip, his neck, and his back. He testified that his pain gradually increased and that ultimately he was unable to perform his work as an industrial arts teacher. He also testified that he felt that his prescribed pain medication was interfering with his concentration and memory and, thus, his ability to teach.

The ALJ found Plaintiff’s testimony as to the existence of his pain to be “entirely credible.” However, he found that the pain was not so severe as to prevent him from working as an industrial arts teacher. This latter finding is supported by substantial evidence. Plaintiff’s treating physician, Dr. Melissa A. Weekley, felt that Plaintiff’s musculoskeletal problems “per se are not totally disabling and should allow employment.” Dr. John W. Barrett, an orthopedic surgeon who was consulted by the AU, concluded that Plaintiff’s physiological impairments would not prevent him from frequently lifting objects in the range of 20 to 25 pounds, nor from sitting, handling, reaching, pulling or pushing. These findings were corroborated by Dr. John Greene, an orthopedic surgeon who examined Plaintiff upon the request of the Maine Department of Human Services Disability Determination Services. In short, the following observation by Dr. Barrett is amply supported by the record:

All examiners have agreed that physically he is capable of performing his job and that the biggest problem which prevents his working is his inability to cope. From an orthopedic standpoint, then, there is nothing to particularly interfere with his gainful employment.

The more difficult question in this case is whether Plaintiff’s “psycophysiologic” reaction to his physical problems is disabling. The ALJ found that it was not. The ALJ noted that Plaintiff had worked for a year and one half despite his pain and that he was able to perform basic housework chores such as washing dishes, vacuuming, and dust-mopping. The AU found that there was no evidence that his job performance had been less than satisfactory or that medical exacerbation of his conditions occurred at the time that Plaintiff stopped working. Thus, the AU found that Plaintiff’s psychological exaggeration of his pain was not disabling. This finding is not supported by substantial evidence.

Most of the medical evidence in the record deals exclusively with Plaintiffs physiological problems. As noted above, this evidence amply supports the AU’s finding with respect to Plaintiffs physiological capabilities. This evidence has little bearing, however, upon Plaintiffs alleged psycophysiological impairment. Plaintiff was administered psychological testing by Dr. Robert L. Gallon, Ph.D., on September 23, 1982. Dr. Gallon found “a very high level of psychological contribution to his overall pain disability.” Dr. Gallon observed:

His pain tolerance, which is tested by a tourniquet on his upper arm, revealed an extremely low tolerance to pain at only 4:23. During this test he seemed to be strongly over-preoccupied and to over estimate the pain. A pain drawing test further shows an extreme elaboration of his pain complaint.
It appears quite certain that Mr. Jacobs is strongly caught up and reinforced in the disability role and his condition is strongly influenced by a great number of psychosomatic components____ It seems clear that he has over the past twelve years developed a painful coping style which is compatible to his personality. He seems very dependent both on pain medications and on the support of the people.

Dr. Gallon concluded that Plaintiffs psychological and physical problems rendered him unable to maintain employment.

The results of the psychological testing were corroborated by Plaintiffs treating physician, Dr. Weekley:

[W]hile Mr. Jacobs is physically able to perform a variety of potentially gainful occupations, I feel he is totally disabled at the present time due to his psychic intolerance of the chronic pain syndrome. This is compounded by psychic and physical side effects of chronic high dose medication. The irritability and limited attention span observed in my last two visits would certainly make him unfit for a teaching position at the present time.

Dr. Barrett, the medical advisor to the ALJ, diagnosed Plaintiff as suffering from “psychophysiologic reaction, severe, manifested by multiple somatic complaints, severe chronic pain syndrome, migraine headaches, colitis, narcotic addiction, and dependence on outside support.” It is important to note that Dr. Barrett’s conclusion that Plaintiff was able to work was made strictly from “an orthopedic standpoint.” See supra. Plaintiff’s testimony supports the diagnosis of severe psychophysiologic pain reaction. Thus, evidence regarding the disabling effect of this impairment stands uncontradicted. The fact that Plaintiff was able to work for a year and a half has little bearing upon the current disabling effect of his psychophysiologic impairment. In light of the uncontradicted evidence of Plaintiff’s psychophysiological pain reaction and the AU’s finding that Plaintiff’s testimony is credible, the AU’s determination that Plaintiff can perform his past relevant work is not supported by substantial evidence. See Davis v. Califano, 599 F.2d 1324 (5th Cir.1979).

Missing from the record in this case is any evidence regarding the prospects for treatment of Plaintiff’s psychophysiologic impairment or that such treatment has ever been attempted. The case will be remanded to the Secretary for the taking of further evidence and specific findings on these matters. In light of these findings, the Secretary must determine whether Plaintiff can perform his past relevant work. If not, she must determine whether the impairment prevents him from doing any other work as required by 20 C.F.R. § 404.1520(f).

Accordingly, it is ORDERED that Plaintiff’s Motion for Summary Judgment be, and is hereby, GRANTED, and the Secretary’s Motion for Order Affirming the Decision of the Secretary is DENIED. The case is REMANDED to the Secretary for

further proceedings in accordance with this Order.

So ORDERED.


author: SWEET, District Judge.

text:
    Dorothy MOYE, Plaintiff, v. Clyde GARY, Defendant.
    No. 84 Civ. 2460 (RWS).
    United States District Court, S.D. New York.
    Oct. 4, 1984.
    Dorothy E. Moye, plaintiff, pro se.
    Rudolph W. Giuliani, U.S. Atty., S.D. N.Y., New York City, for defendant; Bernard W. Bell, Asst. U.S. Atty., New York City, of counsel.
   OPINION

SWEET, District Judge.

Plaintiff Dorothy E. Moye (“Moye”) commenced this action in New York Civil Court on March 7, 1984, seeking $25,000 for mental anguish. On April 6, 1984, defendant Clyde Gary (“Gary”), an officer of the Department of Health and Human Services, removed the action to this court. Gary has now moved for an order pursuant to Fed.R. Civ.P. 12(b)(6) dismissing the complaint for failure to state a claim upon which relief may be granted, or, in the alternative, for summary judgment pursuant to Fed.R. Civ.P. 56. Moye, proceeding pro se submitted no papers in opposition and did not appear for oral argument on August 24, 1984. For the following reasons, the motion is granted and the complaint is dismissed.

The complaint alleges that on February 2, 1984, Gary verbally harassed and insulted Moye in front of her daughter, and on March 5, 1984, Gary called Moye a “fag” and a “poor woman.” The facts with respect to the first incident are undisputed. There is, however, a material issue of fact with respect to the second conversation.

On February 28 and March 5, 1984, Moye was a clerical employee in the Disability Inquiry Staff-Disability Program Branch Unit (the “Unit”) of the Social Security Administration, Department of Health and Human Services. On February 28, 1984, Gary was Acting Supervisor of the Unit. One of his duties was to make sure that letters concerning social security claims filed by members of the public were properly recorded and distributed to claims examiners. Moye was responsible for recording and distributing such letters to claims examiners.

On February 28, 1984, Gary noticed that written inquiries from members of Congress, State Legislators and other public officials had not been recorded or distributed. When Moye returned from lunch, Gary spoke to her about these letters and informed her that they should be given priority. Moye’s daughter and some member of the Unit were in the area and could hear his comments. Gary later apologized for discussing the matter in the presence of Moye’s daughter and others.

On March 5, 1984, while Gary was not Acting Supervisor, Gary and Moye had a private conversation. Gary maintains he initiated the conversation to dissipate Moye’s apparent animosity toward him. Gary claims he told Moye that someone had started a rumor that he had called her a poor woman but in fact he had never done so. In addition, he claims to have informed her that someone had asked him if Moye were “gay.” Gary denies asking Moye if she were “gay” or saying that she was “gay.”

Conclusions of Law

The complaint appears to assert a claim for intentional infliction of emotional distress. In New York, “ ‘one who by extreme and outrageous conduct intentionally or recklessly causes severe emotional distress to another is subject to liability for such emotional distress.’ ” Fischer v. Maloney, 43 N.Y.2d 553, 402 N.Y.S.2d 991, 992, 373 N.E.2d 1215, 1217 (1978) {quoting Restatement (Second) of Torts § 46). A person is liable for intentional conduct intended to cause emotional distress “only where the conduct has been so outrageous in character and so extreme in degree as to go beyond all possible bounds of decency, and to be regarded as atrocious and utterly intolerable in a civilized community.” Id., 402 N.Y.S.2d at 993, 373 N.E.2d at 1217. The allegedly actionable conduct “must be more than insults, indignities, threats and annoyances,” Nestlerode v. Federal Insurance Co., 66 A.D.2d 504, 414 N.Y.S.2d 398 (4th Dep’t 1979). The misconduct must be of the most egregious nature. Murphy v. American Home Products Corp., 58 N.Y.2d 293, 461 N.Y.S.2d 232, 236, 448 N.E.2d 86, 90 (1983). As the Restatement (Second) of Torts explains:

Liability clearly does not extend to mere insults, indignities, threats, annoyances, petty oppressions, or other trivialities. The rough edges of our society are still in need of a good deal of filing down, and in the meantime plaintiffs must necessarily be expected and required to be hardened to a certain amount of rough language, and to occasional acts that are definitely inconsiderate and unkind. There is no occasion for the law to intervene in every case where someone’s feelings are hurt. There must still be freedom to express an unflattering opinion, and some safety value must be left through which irascible tempers may blow off relatively harmless steam.

Assuming the truth of Moye’s allegations concerning the February 28 incident, they do not reach the level of severity required to state a cause of action for intentional infliction of emotional distress. See, e.g., Belanoff v. Grayson, 98 A.D.2d 353, 471 N.Y.S.2d 91, 94 (1st Dep’t 1984) (criticism of job performance). Similarly, the March 5 incident involved, at most, insults or indignities, not conduct “so outrageous in character and so extreme in degree as to go beyond all possible bounds of decency and to be regarded as atrocious and utterly intolerable in a civilized community.” Fischer v. Maloney, supra, 402 N.Y.S.2d at 993, 373 N.E.2d at 1217.

Some New York courts have held that words constitute slander per se if they impute homosexual behavior. Privitera v. Town of Phelps, 79 A.D.2d 1, 435 N.Y.S.2d 402, 404 (4th Dep’t 1981); Mazart v. New York, 109 Misc.2d 1092, 441 N.Y.S.2d 600, 604 (Ct. Claims 1981) (letter indicating claimants were “members of the gay community” was libel per se); Matherson v. Marchello, 100 A.D.2d 233, 473 N.Y.S.2d 998, 1001 n. 2 (2d Dep’t 1984); but see Stein v. Trager, 36 Misc.2d 227, 232 N.Y. S.2d 362 (1962). However, the complaint does not state a cause of action for slander because the complaint alleges that the March 5 conversation was private. Derogatory words must be communicated to a third person to support a claim for libel or slander. See W. Prosser, The Law of Torts § 111, at 737 4th ed. (1971).

For the foregoing reasons, Gary’s motion is granted. The clerk of the court is directed to enter judgment dismissing the complaint.

IT IS SO ORDERED.