source: Caselaw Access Project

author: TELESCA, District Judge.

license: Public Domain

text:
    Patrick D. CIOPPA, Plaintiff, v. UNITED STATES POSTAL SERVICE, Defendant.
    No. CIV-84-627T.
    United States District Court, W.D. New York.
    Oct. 4, 1984.
    Geiger & Rothenberg, Rochester, N.Y. (David Rothenberg, Rochester, N.Y., of counsel), for plaintiff.
    Salvatore R. Martoche, U.S. Atty., Rochester (Jonathan W. Feldman, Rochester, N.Y., of counsel), Vanessa A. Miree, Office of Labor Law, U.S. Postal Service, Washington, D.C., for defendant.
   MEMORANDUM DECISION AND ORDER

TELESCA, District Judge.

INTRODUCTION AND PROCEDURAL HISTORY

On February 3, 1984, plaintiff, Patrick Cioppa, was terminated from his employment with defendant, United States Postal Service, allegedly as a result of unsatisfactory performance during his probationary period. On February 23, 1984, plaintiff appealed his termination to the Merit Systems Protection Board. Since plaintiff was a probationary employee, his appeal was dismissed for lack of appellate jurisdiction. On May 30, 1984, plaintiff brought this action against defendant under 39 U.S.C. Section 409(a), alleging that his dismissal was “arbitrary and capricious” and occurred under suspicious circumstances pointing to fraud. The defendant moved for an order dismissing the action, or in the alternative for summary judgment, on the grounds that the Court lacks subject matter jurisdiction and that the complaint fails to state a claim upon which relief can be granted. After hearing the argument of counsel, this Court denied defendant’s motions in an oral decision on September 5, 1984.

On September 19, 1984, defendant brought the present motion, urging this Court to reconsider the defendant’s earlier motions, or in the alternative, to certify the question of law at issue in this case for interlocutory appeal pursuant to 28 U.S.C. Section 1292.

DISCUSSION

SUBJECT MATTER JURISDICTION

I.

At the outset, it would appear that subject matter jurisdiction over this action is proper under 39 U.S.C. Section 409(a), which provides that, with one exception not applicable here, “the United States district courts shall have original but not exclusive jurisdiction over all actions brought by or against the Postal Service.” Relying in part upon this general jurisdictional grant, plaintiff argues that this Court has the “inherent non-statutory power of judicial review” over administrative agency action to guard against “arbitrary and capricious” decisions. Defendant, relying principally upon Bishop v. Wood, 426 U.S. 341, 96 S.Ct. 2074, 48 L.Ed.2d 684 (1976), argues that a dismissal of a probationary employee is a matter strictly within the discretion of the federal agency and cannot be reviewed in federal court, even if plaintiff’s dismissal were in fact “arbitrary and capricious.” I disagree.

As a preliminary matter, it must be emphasized that the question before this Court is extremely narrow. Plaintiff does not allege that his dismissal violated any of his constitutional rights. Moreover, plaintiff frankly concedes that his dismissal complied with the minimal procedural requirements imposed by applicable federal law for probationary employees. Plaintiff contends simply that his discharge was “arbitrary and capricious” and that it was procured by fraud and urges this Court to exercise review only on that basis. Defendant, for its part, candidly acknowledges that there are several “limited exceptions” to the general rule which immunizes the discharge of a probationary employee from judicial review, but denies that this case falls within a recognized exception, even if plaintiff’s allegations are true. The only question of law to be resolved, therefore, is whether this Court has the non-statutory power to review administrative personnel decisions which are allegedly “arbitrary and capricious”.

39 U.S.C. Section 410(a) specifically exempts the Postal Service from the requirements of the Administrative Procedure Act (APA) 5 U.S.C. Section 701 et seq., including the provision of the APA authorizing judicial review over arbitrary and capricious agency action. 5 U.S.C. Section 706(2)(A). Although this Court is not empowered under the APA to determine whether a Postal employee’s dismissal was arbitrary or capricious, the question remains open as to whether Congress affirmatively intended to forbid such review.

The question is phrased in terms of “prohibition” rather than “authorization” because a survey of our cases shows that judicial review of a final agency action by an aggrieved person will not be cut off unless there is persuasive reason to believe that such was the purpose of Congress ... [O]nly upon a showing of “clear and convincing evidence” of a contrary legislative intent should the courts restrict access to judicial review.

Abbott Laboratories v. Gardner, 387 U.S. 136, 140, 141, 87 S.Ct. 1507, 1510, 1511, 18 L.Ed.2d 681 (1967) (Citations omitted).

Consequently, the mere absence of express statutory authorization does not necessarily foreclose this Court from exercising limited judicial review over Postal Service actions. As the Court reasoned in Burns v. United States Postal Service, 380 F.Supp. 623, 626 (S.D.N.Y.1974),

There is nothing in the legislative history of the [Postal] Reorganization Act which suggests that Congress either impliedly or expressly intended to commit [employee compensation] entirely to the Postal Service’s discretion. In fact, just the opposite conclusion may be inferred from the enactment of Section 409 which grants original jurisdiction to the District Court of “all actions brought by or against the Postal Service” ... The existence of a jurisdiction-conferring section like Section 409 provides the basis for maintaining a “ ‘nonstatutory’ review action”. Byse and Fiocca, Section 1361 of the Mandamus and Venue Act of 1962 and “Nonstatutory” Judicial Review of Federal Administrative Action, 81 Harvard Law Review 308, 321, 323, (1967).

As the Supreme Court observed in Christian v. New York State Department of Labor, 414 U.S. 614, 622, 94 S.Ct. 747, 751, 39 L.Ed.2d 38 (1974), an action brought by a probationary Postal employee challenging her dismissal, “the fact that the employing agency’s decision is not statutorily subject to judicial review does not preclude review of the agency’s procedure used to reach that determination.”

Despite the absence of express statutory authorization for judicial review, and the fact that the Postal Service enjoys the widest latitude in its personnel decisions, virtually every federal court confronting the issue has held that Postal Service employees are nonetheless entitled to non-statutory judicial review as a safeguard against arbitrary and capricious dismissal, in light of the “strong presumption in favor of judicial review of administrative action, especially in conjunction with the general jurisdictional grant of 39 U.S.C. Section 409(a).” Jordan v. Bolger, 522 F.Supp. 1197, 1202 (N.D.Miss.1981), affirmed, 685 F.2d 1384 (5th Cir.1982), cert. denied, 459 U.S. 1147, 103 S.Ct. 788, 74 L.Ed.2d 994 (1983). Although a federal court may not second guess the wisdom of administrative personnel decisions, federal courts routinely review dismissals of Postal Service employees for the limited purpose of ensuring that such decisions are neither arbitrary nor capricious — precisely the sort of review requested by plaintiff in this case. Book v. U.S. Postal Service, 675 F.2d 158 (8th Cir. 1982); Yacavone v. Bolger, 645 F.2d 1028 (D.C.Cir.1981), cert. denied, 454 U.S. 844, 102 S.Ct. 159, 70 L.Ed.2d 130 (1981); Adkins v. Hampton, 586 F.2d 1070 (5th Cir. 1978); Alsbury v. U.S. Postal Service, 530 F.2d 852 (9th Cir.1976), cert. denied, 429 U.S. 828, 97 S.Ct. 85, 50 L.Ed.2d 91 (1976); Ross v. U.S. Postal Service, 556 F.Supp. 729 (N.D.Ala.1983); Poole v. U.S. Postal Service, 540 F.Supp. 105 (S.D.Ohio 1982); Oates v. U.S. Postal Service, 444 F.Supp. 100 (S.D.N.Y.1978); Withers v. U.S. Postal Service, 417 F.Supp. 1 (W.D.Mo.1976).

Additionally, federal courts have also exercised their inherent power of review over “arbitrary or capricious” agency action in cases involving the dismissal of probationary Postal employees. Jordan v. Bolger, 522 F.Supp. 1197' (N.D.Miss.1981), affirmed, 685 F.2d 1384 (5th Cir.1982), cert. denied, 459 U.S. 1147, 103 S.Ct. 788, 74 L.Ed.2d 994 (1983); Neal v. U.S. Postal Service, 468 F.Supp. 958 (D.Utah 1979). Since this limited form of judicial review exists independently of any statutory grant, it applies equally to the dismissal of probationary and permanent employees, despite the vast difference in the procedural protections enjoyed by the two groups under applicable federal statutes.

Although the exercise of non-statutory judicial review over “arbitrary or capricious” administrative action may not be the universal rule in the federal courts, it is beyond question the rule prevailing in this circuit. In a case brought by a Postal employee challenging his dismissal, the Second Circuit long ago laid down the rule that “the taking of disciplinary action against Government employees, including the invocation of the sanction of dismissal, is a matter of executive discretion, and is subject to judicial supervision only to the extent required to insure ‘substantial compliance with the pertinent statutory procedures provided by Congress’ and to guard against arbitrary or capricious action.” McTiernan v. Gronouski, 337 F.2d 31, 34 (2d Cir.1964) (citations omitted). Accord, Burns v. U.S. Postal Service, 380 F.Supp. 623 (S.D.N.Y.1974). Apparently without exception, the courts of this circuit have consistently held that dismissals from the Postal Service are subject to this limited judicial review to guard against arbitrary or capricious action. Grebosz v. U.S. Civil Service Commission, 472 F.Supp. 1081 (S.D.N.Y.1979) (ordering reinstatement of Postal employee dismissed in arbitrary and capricious manner); Lee v. Bolger, 454 F.Supp. 226 (S.D.N.Y.1978); Oates v. U.S. Postal Service, 444 F.Supp. 100 (S.D.N.Y. 1978). See also, Lutz v. U.S. Postal Service, 538 F.Supp. 1129, 1134 (E.D.N.Y.1982) (federal courts may exercise limited review over the procedures used to reach postal service personnel decisions); McDowell v. Goldschmidt, 498 F.Supp. 598 (D.Conn. 1980) (applying “arbitrary and capricious” standard of review to dismissal of air traffic controller by FAA).

II.

Notwithstanding all of the foregoing, defendant argues that this Court has no jurisdiction to determine whether plaintiff’s discharge was “arbitrary or capricious”, in light of the Supreme Court’s decision in Bishop v. Wood, 426 U.S. 341, 96 S.Ct. 2074, 48 L.Ed.2d 684 (1976). According to defendant, Bishop held that, in the absence of a constitutional or statutory violation, a federal court can never review any aspect of personnel decisions made by a public employer, including the procedures used to reach the decision. In effect, the defendant urges this Court to adopt an interpretation of Bishop which would require the reversal of virtually every decision cited in part I of this opinion. That is an invitation which I cannot accept.

At the outset, it is clear that the defendant’s reading of Bishop draws no support from the actual holding of the case itself. The Court held that a probationary city policeman had no constitutional right to receive “a hearing to determine the sufficiency of the cause for his discharge.” Id. 342, 96 S.Ct. at 2076. That holding is irrelevant to the present action, for plaintiff has neither alleged a violation of his constitutional rights, nor requested a hearing to determine the sufficiency of the cause of his discharge. He argues only that the procedures used to evaluate his competence were “arbitrary and capricious”, and requests judicial review on that limited basis alone. The petitioner in Bishop made no such allegation, and the propriety of such review was not explicitly addressed anywhere in the Court’s opinion.

Despite the narrowness of the actual holding in Bishop, defendant argues that the possibility of judicial review in the present case is foreclosed by the expansive language of the opinion’s final paragraph, in which the Court stated that “the federal court is not the appropriate forum in which to review the multitude of personnel decisions that are made daily by public agencies.” Id., 349, 96 S.Ct. at 2080. Quite clearly, the Court did not intend to intimate that agency personnel decisions are always inappropriate matters for review in federal court. On the contrary, it is clear from the remainder of the opinion’s concluding paragraph that the Court had in mind only those situations in which a discharged employee requests a federal court to substitute its judgment for that of the agency on the merits of the dismissal decision.

We must accept the harsh fact that numerous individual mistakes are inevitable in the day-to-day administration of our affairs. The United States constitution cannot feasibly be construed to require federal judicial review for every such error. In the absence of any claim that the public employer was motivated by the desire to curtail or to penalize the exercise of an employee’s constitutionally protected rights, we must presume that official action was regular and, if erroneous, can best be corrected in other ways. The Due Process Clause ... is not a guarantee against incorrect or ill-advised personnel decisions.

Id. 349-350, 96 S.Ct. at 2080 (emphasis added). This understanding of the Bishop decision is fully consistent with the facts of that case, in which petitioner sought to prove “that he was a competent police officer” and that his discharge therefore must have been “a mistake and based on incorrect information.” Id. 348, 96 S.Ct. at 2079.

For the foregoing reasons, I conclude that Bishop v. Wood left entirely unaffected the longstanding and universal availability of limited federal judicial review over arbitrary and capricious agency conduct. Significantly, plaintiff has failed to cite a single subsequent case in which any Court has adopted a contrary interpretation of Bishop. Indeed, in one case relied upon by defendant, the D.C. Circuit Court of Appeals (perhaps the only Circuit Court to directly address the question) expressly held that the limitations imposed on federal court jurisdiction by Bishop have not foreclosed the availability of “arbitrary or capricious” review.

While the transition from unreviewability to reviewability of adverse personnel actions against federal employees has left a legacy of some disagreement and confusion in the reported cases, it is at least reasonably well settled that, whatever is at least reasonably well settled that, whatever its exact scope, judicial review in the federal courts is necessarily limited. Federal judges do not sit as ombudsmen for government employment relations [citing Bishop v. Wood ], nor do we indulge in the conceit of substituting our own judgment ad libitum for that of the agency. Rather, we concern ourselves in the personnel business only insofar as is necessary to assure that the action challenged (1) is not arbitrary or capricious; (2) was reached in conformity with relevant procedural requirements; and (3) was not otherwise unconstitutional.

Doe v. Hampton, 566 F.2d 265, 271-72 (D.C.Cir.1977) (emphasis added) (footnotes omitted).

Although the Supreme Court’s opinion in Bishop concludes with rather sweeping language (which might lend itself to some misinterpretation), one recent decision correctly observed that “many federal district courts and courts of appeals nevertheless have found that the decision in Bishop v. Wood does not preclude review of personnel decisions made by government employers, even in the absence of any allegation of a violation of constitutional rights.” Ross v. United States Postal Service, 556 F.Supp. 729, 732 (N.D.Alabama 1983). The Court noted that there is still ample precedent “for providing a narrowly limited review of personnel decisions made by the Postal Service” to determine “whether its actions were arbitrary or capricious” Id. 733 (citations omitted). On the basis of the foregoing review of the case law, I must agree.

III.

Defendant has made one further argument which is worthy of no more than passing comment. Defendant has placed great reliance on a number of circuit opinions which have reiterated the basic fact, irrelevant here, that probationary employees have no constitutional or statutory right to an administrative hearing on the merits of their dismissal. If plaintiff has no right to an administrative hearing, defendant reasons, it should follow with even greater force that there is no right to a hearing in federal court. But that line of reasoning misses the point entirely. Plaintiff does not (and could not) ask this court to conduct an independent investigation into the wisdom of an administrative agency’s discretionary decision as to his fitness for continued employment. On the contrary, he alleges in effect that there was no evaluation of his competence for this Court to review, because his dismissal was procured through fraud and deception for purely personal reasons. That is a different matter altogether, and it falls squarely within the jurisdiction of this Court’s inherent power of review.

The same response can also be made to defendant’s argument that, even if this Court has subject matter jurisdiction, “the plaintiff is not entitled to discovery or a trial de novo,” since “judicial review is strictly limited to a review of the administrative record.” (Brief for defendant, pages 9, 10.) In support of this proposition, defendant rather surprisingly cites four cases in which federal courts exercised judicial review over allegedly “arbitrary and capricious” agency action — precisely the sort of review which defendant argues is beyond the powers of this Court. In each of those cases, moreover, the courts were reviewing dismissals which had been previously examined at administrative hearings, typically before the Merit Systems Protection Board. In the present case, however, since plaintiff was only a probationary employee, his request for an administrative hearing was denied, and so there is no administrative record for this Court to review.

IV.

Finally, in the event that this motion should be denied, defendant has asked this Court to certify the question of law at issue in this case for interlocutory appeal under 28 U.S.C. section 1292(b). That request is also denied. Defendant has alleged that “there is a substantial difference of opinion with respect to the question of law” (Brief for defendant, page 11). Indeed there is, at least between the parties to this dispute. But the statute requires something more: there must be “substantial ground for difference of opinion” as to a controlling question of law, 28 U.S.C. section 1292(b), and that is something else altogether. It is established beyond dispute that this Court possesses the inherent power to grant the limited scope of review requested by plaintiff, and the grounds for defendant’s difference of opinion are “insubstantial” as best.

SUMMARY JUDGMENT

In its second motion, defendant argues in the alternative that it is entitled to summary judgment because there is no genuine question of fact as to whether plaintiff’s dismissal was “arbitrary or capricious.” Before that question can be resolved, it is necessary to flesh out the meaning of the applicable standard of review.

Under the most widely accepted formulation, administrative action is “arbitrary and capricious” when it is “willful and unreasoning action, without consideration and in disregard of the facts or circumstances of the case.” First National Bank of Fayetteville v. Smith, 508 F.2d 1371, 1376 (8th Cir.1974), cert. denied, 421 U.S. 930, 95 S.Ct. 1655, 44 L.Ed.2d 86 (1975). Accord, Jordan v. Bolger, 522 F.Supp. 1197, 1202 (N.D.Miss.1981), affirmed, 685 F.2d 1384 (5th Cir.1982), cert. denied, 459 U.S. 1147, 103 S.Ct. 788, 74 L.Ed.2d 994 (1983); Coleman v. Darden, 595 F.2d 533, 539 (10th Cir.1979), cert. denied, 444 U.S. 927, 100 S.Ct. 267, 62 L.Ed.2d 184 (1979). In the application of this standard, the Supreme Court has stated that:

The Court must consider whether the decision was based on a consideration of the relevant factors and whether there has been a clear error of judgment. Although this inquiry into the facts is to be searching and careful, the ultimate standard of review is a narrow one. The Court is not empowered to substitute its judgment for that of the agency.

Citizens to Preserve Overton Park, Inc. v. Volpe, 401 U.S. 402, 416, 91 S.Ct. 814, 824, 28 L.Ed.2d 136 (1971) (citations omitted).

In reviewing administrative decisions which call for specialized competence, the Supreme Court has stated that the agency’s order should stand unless the order represents a clear attempt to achieve ends other than those perceived by Congress when delegating the authority to make such findings. NLRB v. Seven-up Bottling Company, 344 U.S. 344, 346-47, 73 S.Ct. 287, 288-89, 97 L.Ed. 377 (1953). Defendant concedes that the purpose of the system of probationary employment is not to give the Postal Service discretion for its own sake, as an end in itself, but rather “is intended to enable a federal agency to determine whether a prospective career employee possesses the qualifications and character worthy of a permanent appointment.” (Brief for defendant, page 7.) Applying that standard to the instant situation, it has been held that when the discharge of a Postal employee was made in a genuine effort “to promote the efficiency of the service,” such action “does not constitute an attempt to achieve ends other than those perceived by Congress when delegating authority to the Postal Service over its personnel affairs,” and therefore is neither arbitrary nor capricious. Poole v. U.S. Postal Service, 540 F.Supp. 105, 111 (S.D.Ohio 1982). In Youtsler v. Koeppel, C-1-79-641 (S.D.Ohio March 20, 1981) affirmed, 81-3300 (6th Cir. May 24, 1982), the same Court held that a decision to discharge a Postal Service employee had been “a clear attempt to achieve some end other than the efficiency of the service” and was therefore arbitrary and capricious. Poole, supra, at 111.

Applying the foregoing standards to the instant case, it must be determined whether plaintiff has raised any genuine question of material fact in support of his allegation that his dismissal was arbitrary and capricious. This inquiry requires a brief review of the circumstances surrounding his discharge. On November 12, 1983, plaintiff was hired by the Postal Service for a ninety day probationary period of employment. Throughout his probationary employment, plaintiff worked for defendant six days each week, eleven hours every day.

On December 9, 1983, plaintiff received his required thirty day evaluation from Supervisor Moynihan. That evaluation rated plaintiff satisfactory (the best possible rating) in every category but one. He was not rated in the category of “progress in learning required schemes”, since he had not passed the required LSM training exam. On January 9, 1984, plaintiff received identical ratings from Supervisor Lamendola on his required sixty day evaluation. In addition, that second report recommended plaintiffs retention.

On January 25, 1984, plaintiff took his required training exam for the first time, but did not pass the exam. Later that day, he received his eighty day evaluation from Supervisor Lamendola, in which he once again was rated satisfactory in every category but one. For the first time, plaintiff was rated unsatisfactory for progress in learning required schemes, because he had failed the test.

The following day, January 26, plaintiff received a notice from the Postmaster indicating that he would be permitted to retake his LSM exam. The letter also reminded plaintiff that he was required to pass the exam sometime before the expiration of his probationary period on February 8,1984, or else he would be terminated on that date. Several days later, on January 31, 1984, plaintiff retook and passed the LSM exam.

On February 3, 1984, five days before the end of his probationary term, and allegedly without any prior warning whatsoever, plaintiff was advised that he was being fired. He was shown a letter from Postmaster Schubert dated that same day which stated that he was being terminated as a result of unsatisfactory performance. Although he was informed that he had been written up by some supervisors, he was not shown any copies of any adverse memoranda or evaluation.

About one or two weeks later, plaintiff was shown for the first time a copy of the “special” evaluation which apparently was the basis for his termination. On the “special” evaluation, which was prepared by Supervisor Lamendola and dated January 30, plaintiff was rated unsatisfactory in eight out of eleven categories. This rather striking reversal was ostensibly based upon statements prepared by four of plaintiffs supervisors. In support of its instant motion, defendant has submitted copies of those reports, which were all dated January 28 and January 29 — ostensibly between the time plaintiff received his last favorable evaluation and the date on which he passed the LSM test. (Defendant’s Exhibit 6.)

Defendant now argues that it is entitled to summary judgment, because these reports represent the genuine and good faith judgment on the part of plaintiff’s supervisors that his dismissal would be in the best interest of the Postal Service. If there were no reasons to doubt that assertion, I would not concern myself with the wisdom of that judgment, and my inquiry would come to an end. Plaintiff argues, however, that several features of the circumstances surrounding his dismissal are sufficient to create at least some suspicion as to defendant’s good faith. For the following reasons, I must agree.

To begin with, it must be noted that the copies of the statements provided by the defendant are not in the form of either deposition or affidavit. They are not sworn, they are not originals, and they are not even certified as authentic by any sworn affidavit. Curiously, they are not included in the bound collection of defendant’s exhibits which were certified as “true and correct copies of original U.S. Government records ... in the official custody of the United States Postal Service” by Mr. Stephen Alpern. Indeed, it is not obvious that these statements can be properly considered by this Court under Federal Rules of Civil Procedure 56(c), although plaintiff has not contested their introduction. Two of the four statements complained of events which allegedly occurred before plaintiff received his last two favorable evaluations, and a third offers no clue as to the date of the incidents alleged therein.

Even though the alleged episodes of plaintiff’s poor work performance began as early as December 22, 1983, he apparently received no formal criticism or warning until the day of his termination. On the contrary, he received satisfactory evaluations on January 9 and again on January 25. He was formally encouraged in writing on January 26 to retake the LSM test, supposedly to avoid automatic termination on February 8. Although the negative reports of his supervisors, and the “special” evaluation based upon them, were allegedly prepared between January 28 and January 30, he received no notice of any of this action until February 3 — shortly after he passed the test which had stood as the final obstacle to his avoiding automatic termination. Oddly enough, one of the very few categories in which plaintiff was rated satisfactory in his special evaluation was “attendance — punctuality—reliability”, even though those were the very attributes about which each of his four supervisors had complained. It appears that the dates on some of the forms have been altered for some reason. Finally, in their sworn affidavits, plaintiff and his attorney contend that they possess a signed and written statement by an as yet anonymous coworker who was told by one of plaintiff’s supervisors that they “pulled a fast one” in procuring his dismissal.

Plaintiff has proposed the theory that the unsworn statement of his supervisors and the special evaluation based upon them do not constitute a genuine or good faith exercise of defendant’s administrative discretion. Rather, they were contrived immediately after he passed his LSM training exam, and had been backdated to conceal any evidence of irregularity. As it presently stands, the factual record contains abundant and clear evidence that plaintiff’s dismissal was highly irregular, although it remains to be determined whether his termination was indeed arbitrary and capricious. Plaintiff has surely raised sufficient questions of fact to survive a motion for summary judgment at this time.

CONCLUSION

For all of the reasons outlined above, and upon careful reconsideration of the arguments raised by counsel, I would be remiss if I were to grant defendant’s motion for dismissal or summary judgment. Defendant’s several motions are denied in all respects.

It is conceded that the institution of probationary employment is largely designed for the very purpose of permitting agencies like the Postal Service to quickly and efficiently exercise their specialized competence over personnel decisions, subject only to the most minimal procedural restrictions. Defendant has repeatedly and persuasively reminded this Court that those purposes would be substantially undermined if any significant number of probationary employees could routinely challenge their dismissals in Federal Court and survive a pre-answer motion for summary judgment. Given the highly unusual circumstances of the present case, however, it is abundantly clear that the limited scope of this decision does not carry with it any risk of exposing defendant to that possibility-

ALL OF THE ABOVE IS SO ORDERED.

      . Since the form of judicial review requested by plaintiff in this case has been widely obtained by nonprobationary employees as well, there is no merit to defendant’s argument that the relief sought by plaintiff would constitute a greater measure of protection than that afforded to career Postal employees.

      . I use the words "may not” advisedly, for defendant has not cited a single decision in which a court squarely confronted this particular question of law and reached a contrary result. The solitary exception to this otherwise universal rule may be Bartholomew v. United. States of America, Docket No. 81-C-5096 (N.D.Ill., 1983), affirmed on other grounds, slip opinion No. 83-1989 (7th Cir. July 18, 1984), in which the District Court apparently held (in an unpublished decision) that it lacked jurisdiction to determine whether a discharge was arbitrary and capricious, but that particular question of law was neither challenged on appeal nor addressed by the 7th Circuit.

      . Smith v. Lehman, 533 F.Supp. 1015 (E.D.N.Y. 1982), aff’d., 689 F.2d 342 (2d Cir.1982), cert. denied, 459 U.S. 1173, 103 S.Ct. 820, 74 L.Ed.2d 1018 (1983), upon which defendant places great reliance, is not to the contrary. In that case, the Court of Appeals held that a probationary employee of the United States Navy had no constitutional or statutory right to an administrative hearing prior to his termination. That holding is irrelevant in the present case, however, for plaintiff concedes that his constitutional rights have not been violated, and does not request a hearing upon the merits of his discharge. He merely seeks judicial review as to the question of whether the procedures used to determine his fitness for continued employment were "arbitrary and capricious”, an issue which was not before the Court of Appeals in Smith. (In fact, the plaintiff in Smith originally also alleged that his dismissal was “arbitrary and capricious” under the APA, but that claim was dismissed by the District Court on the grounds of sovereign immunity, for reasons not applicable here. That decision was not challenged on appeal, and therefore was not reviewed by the Second Circuit. 689 F.2d at 345, footnote 6.)
      In support of its motion to dismiss, defendant’s two memoranda of law cite only five other cases from this circuit. In two of those cases, as in Smith, the Courts held that probationary employees are not constitutionally entitled to a pre-termination administrative hearing on the merits of their discharge, but did not address the question of law before this Court. Chu v. Schweiker, 690 F.2d 330 (2d Cir.1982); Christian v. New York State Department of Labor, 347 F.Supp. 1158 (S.D.N.Y.1972), vacated on other grounds, 414 U.S. 614, 94 S.Ct. 747, 39 L.Ed.2d 38 (1974). In the other three cases, where the Courts were faced with the same question of law now before me, all three courts concluded that they had the power to exercise the sort of limited review requested by plaintiff in this case. Lutz v. U.S. Postal Service, 538 F.Supp. 1129 (E.D.N.Y.1982); McDowell v. Goldschmidt, 498 F.Supp. 598 (D.Conn.1980); Oates v. U.S. Postal Service, 444 F.Supp. 100 (S.D.N.Y.1978).

      . In its memorandum of law, defendant tacitly concedes that the quoted language from Bishop cannot be read too literally, for defendant acknowledges that there are at least three exceptions in which federal courts may properly exercise review over administrative agency personnel decisions.

      . In emphasizing the scope of its holding, the Court did state by way of dictum that the petitioner's discharge would not have violated his constitutionally protected "liberty" even if the reasons given for his dismissal had been deliberately falsified, and not merely incorrect. 426 U.S. 345, 349 at footnote 13, 96 S.Ct. 2077, 2080 at footnote 13. Although the Court stated that deliberate fraud would not affect “our analysis of the Federal Constitutional question”, Id., it gave absolutely no indication that such extreme circumstances would also leave unaffected the propriety of limited judicial review on nonconstitutional grounds.


author: TASHIMA, District Judge,

text:
    In re ALL ASBESTOS CASES.
    Civ. No. 79-0382, et al.
    United States District Court, D. Hawaii.
    Oct. 10, 1984.
    Amended on Denial of Reconsideration Nov. 23, 1984.

      Gary 0. Galiher, Stanford H. Masui, L. Richard DeRobertis, Gary Galiher & Associates, Honolulu, Hawaii, for plaintiffs.
    Paul Devens, Paula Devens, James H.Q. Lee, Ikazaki, Devens, Lo, Youth & Nakano, Honolulu, Hawaii, for defendant and third-party plaintiff Raymark Industries, Inc., Successor to Raybestos-Manhattan, Inc.
    William S. Hunt, Lawrence C. Foster, Paul, Johnson & Alston, Honolulu, Hawaii, Jeffrey Silberfeld, Charles J. Israel, Robert Rizzo, Rivkin, Leff, Sherman & Radler, Garden City, N.Y., for defendant and third-party plaintiff Pittsburgh Corning Corp.
    Michael F. O’Connor, Brian K. Yomono, Ezra, O’Connor & Moon, Honolulu, Hawaii, William J. Spriggs, Joe G. Hollingsworth, Donald W. Fowler, Edward M. Fogarty, Spriggs, Bode & Hollingsworth, Washington, D.C., for defendant and third-party plaintiff Eagle-Picher Industries, Inc.
    Mark Bernstein, Honolulu, Hawaii, for defendant and third-party plaintiff Flexitallic Gasket Co., Inc.
    Richard K. Willard, Acting Asst. Atty. Gen., Peter A. Nowinski, Sp. Litigation Counsel, Torts Branch, Harold Engel, Asst. Director, Torts Branch, Paul M. Honigberg, Trial Atty., Torts Branch, David Fish-back, Trial Atty., Torts Branch, U.S. Dept, of Justice, Washington, D.C., Daniel A. Bent, U.S. Atty., Theodore G. Meeker, Sp. Asst. U.S. Atty., Honolulu, Hawaii, for third-party defendant U.S.
   MEMORANDUM DECISION AND ORDER

TASHIMA, District Judge,

Sitting by Designation.

This is the motion of third-party defendant United States to dismiss the third-party complaints. The first of these was filed by defendant Raybestos-Manhattan, Inc., in December 1981. Similar complaints were later filed by defendants Pittsburgh Corning Corporation, Eagle-Picher Industries, Inc., and Flexitallic Gasket Company, Inc. (collectively “third-party plaintiffs” or “manufacturers”). The government’s motion is supported by plaintiffs.

The third-party complaints derive from the approximately 90 consolidated actions in this district, brought primarily by more than 100 present and former government employees, or their survivors, against third-party plaintiffs and approximately 85 other manufacturers of products containing asbestos. Plaintiffs allege that they have developed asbestos-related diseases as a result of their exposure to asbestos-containing products used at the government facilities where most plaintiffs worked. Plaintiffs allege that the manufacturers sold the products to the United States for use at federal facilities, that the manufacturers were negligent in designing and producing these products, that the products were defective and unsafe, and that the manufacturers failed to give adequate warnings of known or knowable dangers and/or failed to find safe substitutes.

The third-party complaints against the United States seek contribution and/or indemnity based on tort, contract and, in some cases, admiralty law theories. Jurisdiction is premised on the Federal Tort Claims Act, 28 U.S.C. §§ 1346 & 2671 et seq. (“FTCA”), the Tucker Act, 28 U.S.C. § 1346(a)(2), the Suits in Admiralty Act, 46 U.S.C. § 741 et seq., and the Public Vessels Act, 46 U.S.C. § 781 et seq.

Although the United States has moved, in the alternative, for summary judgment, it has submitted no evidentiary material in support of its motion. Therefore, the motion will be considered exclusively under F.R.Civ.P. 12(b). As explained below, the motion will be granted in part and denied in part.

I. FEDERAL TORT CLAIMS ACT

The manufacturers assert that the Court has subject matter jurisdiction under the FTCA over their third-party tort claims against the United States for indemnification and contribution. Under that act, the government is liable “under circumstances where the United States, if a private person, would be liable to the claimant in accordance with the law of the place where the act or omission occurred.” 28 U.S.C. § 1346(b). It is undisputed that the acts and omissions complained of occurred in Hawaii. Thus, the applicable substantive law is that which the state courts of Hawaii would apply in an analogous case involving private parties. Richards v. United States, 369 U.S. 1, 82 S.Ct. 585, 1 L.Ed.2d 492 (1962).

A. Longshoremen’s and Harbor Workers’ Compensation Act

All parties, save one, agree that the applicable substantive law with respect to potential liability to those plaintiffs who were or are shipyard workers at Pearl Harbor is the Longshoremen’s and Harbor Workers’ Compensation Act (“LHWCA”), 33 U.S.C. § 901 et seq. 33 U.S.C. § 903 provides for compensation under the LHWCA “in respect of disability or death of an employee, but only if the disability or death results from an injury occurring upon the navigable waters of the United States.” 33 U.S.C. § 902 defines an “employee” covered under the Act as

any person engaged in maritime employment, including any longshoreman or other person engaged in longshoring operations, and any harbor worker, including a ship repairman, shipbuilder and shipbreaker

and an “employer” covered under the Act as

an employer any of whose employees are employed in maritime employment, in whole or in part, upon the navigable waters of the United States (including any adjoining pier, wharf, dry dock, terminal, building way, marine railway, or other adjoining area customarily used by an employer in loading, unloading, repairing or building a vessel).

It is not disputed that these definitions encompass employment at Pearl Harbor.

Although in Hawaii, private employees normally are covered for work-related injuries by the Hawaii Workers’ Compensation Law, Haw.Rev.Stat. § 386-1 et seq. (the “Hawaii Law”), the Hawaii Law by its own terms applies only “to employees in maritime employment and their employers not otherwise covered by the laws of the United States.” Id. § 386-7 (emphasis added.) Thus, Hawaii courts would apply the LHWCA in respect to those employees covered by that Act, irrespective of the Hawaii Law, and would be bound to apply federal law to determine the merits of claims under the LHWCA. Scindia Steam Navigation Co. v. De Los Santos, 451 U.S. 156, 166 n. 13, 101 S.Ct. 1614, 1621 n. 13, 68 L.Ed.2d 1 (1981) (Congress anticipated that questions arising in LHWCA cases “shall be determined as a matter of federal law”); Johnson v. A/S Ivarans Rederi, 613 F.2d 334 (1st Cir.1980), cert. dismissed, 449 U.S. 1135, 101 S.Ct. 959, 67 L.Ed.2d 325 (1981).

The United States notes that as a private maritime employer, liability to its employees would be governed by the exclusivity provision of the LHWCA. That section provides:

The liability of an employer ... shall be exclusive and in place of all other liability of such employer to the employee, his legal representative, husband or wife, parents, dependents, next of kin, and anyone otherwise entitled to recover damages from such employer at law or in admiralty on account of such injury or death____

33 U.S.C. § 905(a). The government asserts that § 905(a) also bars third-party suits against it under the LHWCA. The difficulty with accepting this position is that it runs counter to the reasoning in Lockheed Aircraft Corporation v. United States, 460 U.S. 190, 103 S.Ct. 1033, 74 L.Ed.2d 911, that exclusivity provisions, such as those under FECA and LHWCA, are not concerned with the rights of unrelated third parties who do not benefit from the “quid pro quo” compromise that these workers’ compensation systems embody. Indeed, in its analysis of the exclusivity provision of FECA, the Court analogized to the LHWCA: “This compromise [embodied in the FECA exclusivity provision] is essentially the same as that found, for example, in the Longshoremen’s and Harbor Workers’ Compensation Act.-.7.” Lockheed, 103 S.Ct. at 1036. On the question of legislative intent in enacting the LHWCA’s exclusivity provision, the Court paraphrased its earlier decision in Weyerhaeuser S.S. Co. v. United, States, 372 U.S. 597, 601, 83 S.Ct. 926, 929, 10 L.Ed.2d 1 (1963):

There is no evidence whatever that Congress was concerned with the rights of unrelated third parties, much less of any purpose to disturb settled doctrines of [tort] law affecting the mutual rights and liabilities of private [parties] in [indemnity] cases.

Lockheed, 103 S.Ct. at 1037.

It is thus apparent that the Court reasoned, albeit in dicta, that the LHWCA’s exclusivity provision, like that of FECA, does not preclude third-party claims, and that the availability of such claims is governed by the underlying law of contribution and indemnity. We proceed to an examination of the underlying substantive law.

1. Third-Party Claims for Contribution

(a) Negligence as vessel owner

One basis of third-party liability for contribution is provided by the LHWCA. Recently, the Supreme Court held that, under 33 U.S.C. § 905(b), as amended, an LHWCA employee who is injured by the negligence of a vessel owner-employer may receive compensation under the Act and sue the employer in its capacity as vessel owner for negligence. Jones & Laughlin Steel Corp. v. Pfeifer, 462 U.S. 523, 103 S.Ct. 2541, 76 L.Ed.2d 768 (1983). The cases of many of the plaintiffs employed at Pearl Harbor involve alleged asbestos-related injuries which occurred on ships owned by the United States.

Claims for vessel owner negligence under § 905 were delineated in Scindia, where the Court held that a vessel owner may be liable in tort for injury to an LHWCA employee if the vessel owner (1) fails to warn the repairman’s employer of a hidden danger that is known, or should have been known in the exercise of reasonable care, 451 U.S. at 167, 101 S.Ct. at 1622; (2) actively involves itself in repair work and negligently causes injury, id.; or (3) fails to intervene upon discovering a dangerous condition and the employer’s failure to correct it. Id. at 175-78, 101 S.Ct. at 1626-28.

Contribution may be had against a person where the original plaintiff could have enforced liability against him. See United States v. Standard Oil Co., 495 F.2d 911, 919 (9th Cir.1974) (holding that “contribution will lie where no statute precludes recovery from the joint tortfeasor against whom contribution is sought”). Because, if the United States had been a private employer, plaintiffs could have sued the United States for negligence as a vessel owner under Jones & Laughlin, these “Scindia claims” also are available to third-party plaintiffs as claims for contribution. See also In re All Maine Asbestos Litigation, 581 F.Supp. 963, 975-77 (D.Me. 1984).

(b) Negligent failure of seller to warn

Third-party plaintiffs have alleged a duty of care owing to the federal employee plaintiffs by the United States as a seller of asbestos. This allegation apparently is tailored to a claim for contribution. However, the employees would be foreclosed from suing the United States directly on this tort theory under the LHWCA’s exclusivity provision. Therefore, there can be no claim for contribution, whether this claim is characterized as “negligent failure to warn,” or “breach of implied warranty.”

(c) Strict liability for sale of asbestos

Some of the third-party plaintiffs claim that the United States, as a seller of asbestos, sold a “defective” and “unreasonably dangerous” product. These manufacturers seek contribution and/or indemnity under a strict liability theory. However, it is well established that the FTCA does not extend to claims based on strict liability. Laird v. Nelms, 406 U.S. 797, 92 S.Ct. 1899, 32 L.Ed.2d 499 (1972); Dalehite v. United States, 346 U.S. 15, 73 S.Ct. 956, 97 L.Ed. 1427 (1953). Consequently, these claims must be dismissed.

(d) Breach of duties to manufactures

Certain manufacturers claim entitlement to contribution from the United States, based on duties allegedly owing to them. However, as indicated above, the right to contribution from a joint tortfeasor depends on whether there is potential liability to the original plaintiffs. Therefore, these claims also will be dismissed.

2. Third-Party Claims for Indemnity

Courts have used various terms to distinguish between the grades of faults attributable to the participating wrongdoers so as to justify the imposition of the entire loss on the one who is regarded as the principal offender. Tort or “equitable” indemnity will be recognized when the indemnitor is guilty of “active,” “primary” or “original” fault, as opposed to the merely “passive,” “secondary,” or “implied” fault of the indemnitee. See, e.g., White v. Johns-Manville Corp., 662 F.2d 243 (4th Cir.1981).

The right to indemnification is invoked where the indemnitee has been held absolutely liable for the wrongful acts of another, e.g., where liability is based solely on respondeat superior, the bailor-bailee relationship, or ownership of property (for injury resulting from a dangerous condition created by a third party). See Restatement of Restitution, §§ 94-96 (1936); White v. Johns-Manville, 662 F.2d at 249. Further, indemnity is available where the indemnitee was induced to act by misrepresentations by or directions of the indemnitor. The right is also recognized where the indemnitee has without fault or only through passive negligence failed to discover a dangerous condition created by the indemnitor.

Here, third-party plaintiffs’ allegations “simply do not invoke — except perhaps in conclusory legal terms which may properly be disregarded — any of these theories of indemnification based upon ‘primary’ as opposed to ‘secondary’ fault.” White v. Johns-Manville, 662 F.2d at 249. Successful assertion of plaintiffs’ claims against the manufacturers will result from the fact that the trier of fact has determined that their tortious conduct proximately caused plaintiffs’ injuries. As the Fourth Circuit stated in similar asbestos litigation:

Whether in that process [the manufacturers] are adjudged to have breached a duty to warn or an implied warranty, or whether they are held strictly liable, they would not then — under any conceivable circumstances — be able to characterize their resulting liability as being based upon technical, passive or secondary fault in relation to the fault they charge [to third-party defendant] in their third party complaint.

Id. at 250.

Thus, the manufacturers have no claim for non-contractual indemnification against the United States.

B. Hawaii Workers’ Compensation Law

Those plaintiffs not employed at Pearl Harbor i.e., not conceivably employed upon “navigable waters of the United States,” are not covered by the LHWCA. 33 U.S.C. § 902. Thus, those plaintiffs and their employers would be covered by the Hawaii Law, if the employers were private parties. Haw.Rev.Stat. § 386-7.

The Hawaii Law also has an exclusivity provision which provides:

The rights and remedies herein granted to an employee or his dependents on account of a work injury suffered by him shall exclude all other liability of the employer to the employee, his legal representative, spouse, dependents, next of kin, or anyone else entitled to recover damages from the employer, at common law or otherwise, on account of the injury-

Haw.Rev.Stat. § 386-5.

This section has been interpreted by the Hawaii Supreme Court to preclude third-party suits for contribution for an employee’s injuries. Kamali v. Hawaiian Elec. Co., 54 Haw. 153, 504 P.2d 861 (1972). However, in Kamali the court indicated that it might recognize third-party actions between “indemnitor and indemnitee.” Id. at 159, 504 P.2d 861. The availability of indemnification under Hawaii law, as under federal law, depends on the underlying tort indemnity principles of active and passive fault. See Lee v. Brooks, 315 F.Supp. 729 (D.Haw.1970). As indicated, the manufacturer defendants cannot be considered as passive wrongdoers if the trier of fact determines that they are liable. Therefore, indemnity also is unavailable under Hawaii law in these eases. Because neither contribution nor indemnity is available to third-party plaintiffs in respect to the claims of plaintiffs not employed upon navigable waters, the third-party claims regarding those plaintiffs must be dismissed.

In summary, third-party plaintiffs’ claims under the FTCA must be dismissed, except for claims for contribution arising from the injuries to plaintiffs employed upon the navigable waters of the United States, while engaged in work on vessels, by the alleged negligence of the United States as a vessel owner.

II. ADMIRALTY JURISDICTION

The manufacturers assert admiralty jurisdiction as an alternative basis for federal jurisdiction. The United States has waived its sovereign immunity in admiralty and maritime actions under both the Suits in Admiralty Act, 46 U.S.C. § 741 et seq., and the Public Vessels Act, 46 U.S.C. § 781 et seq. The government argues, however, that admiralty jurisdiction does not lie in these cases.

In Executive Jet Aviation v. City of Cleveland, 409 U.S. 249, 268, 93 S.Ct. 493, 504, 34 L.Ed.2d 454 (1972), the Supreme Court held that a tort action is within admiralty jurisdiction if there is a maritime locality of the injury and the injury bears a “significant relationship to traditional maritime activity.” The government concedes that most of the complaints allege that plaintiffs incurred their injuries while working on ships on navigable waters. Therefore, the “maritime locality” test is met for the manufacturers’ claims related to such work.

The government argues, however, that the work plaintiffs performed at Pearl Harbor does not bear a “significant relationship to traditional maritime activity,” and thus fails to meet the second prong of the Executive Jet test. Although it involved an aviation tort claim, Executive Jet’s analysis is applicable to admiralty cases in general. Foremost Ins. Co. v. Richardson, 457 U.S. 668, 102 S.Ct. 2654, 73 L.Ed.2d 300 (1982).

Recently, the Ninth Circuit has twice considered the “maritime activity” test in the context of shipyard asbestos litigation. In Owens-Illinois, Inc. v. United States District Court, 698 F.2d 967 (9th Cir.1983) (per curiam), the court held that tort claims arising out of exposure to asbestos products during construction of ships on navigable waters did not satisfy the maritime relationship requirement of admiralty jurisdiction. The court indicated that four factors must be considered in determining whether an alleged tort bears such a relationship: “(1) traditional concepts of the role of admiralty law; (2) the function and role of the parties; (3) the types of vehicles and instrumentalities involved; and (4) the causation and nature of the injury suffered.” Id. at 970. Noting the traditional distinction in admiralty between construction and repair contracts, the court determined that exposure to asbestos products during the construction of ships lacked the “maritime flavor” necessary to invoke admiralty jurisdiction. Id. The court did indicate in dicta that a contract dispute relating to the repair of a vessel lies within admiralty jurisdiction. Id.

More recently, in Myhran v. Johns-Manville Corp., 741 F.2d 1119 (9th Cir.1984), the Ninth Circuit considered alleged asbestos exposure during the repair of ships on navigable waters. It rejected its own dicta and held that such circumstances did not invoke admiralty jurisdiction under the four-factor test of Owens-Illinois. First, the court found that admiralty law has not traditionally been concerned with tort claims such as those arising from the shipyard asbestos cases:

“the issues that this litigation presents are identical to those presented in countless other asbestos suits; they involve questions of tort law traditionally committed to local resolution.” Harville v. Johns-Manville Prod. Corp., 731 F.2d 775, 786 (11th Cir.1984). Resolution of Myhran’s tort claims does not require the special expertise of a court in admiralty as to navigation or water-based commerce, nor is there any federal interest in uniformity of decision requiring the application of federal substantive law. See Owens-Illinois, 698 F.2d at 971.

At 1122.

Second, the court found that the “function and role” of plaintiff as a pipefitter engaged in the repair and renovation of vessels on navigable waters did not justify invoking admiralty jurisdiction over his tort claims; plaintiff “was not a seaman, nor did he perform work traditionally done by seamen.” Id. at 1122 (citation omitted).

Third, although plaintiff’s exposure to asbestos was aboard ships, the court found that

the involvement of the ships is at most tangential to the nature of Myhran’s tort claims. Apart from the advantages of admiralty jurisdiction, Myhran’s claims would be exactly the same if all of his exposure to asbestos occurred during the construction of ships or during the construction or repair of buildings on land.

Myhran, at 1122 (citation omitted).

Finally, the court stated that “exposure to asbestos does not bear any inherent relationship to maritime activity, nor is it unique to maritime service. Rather, asbestos-related injuries affect thousands of land-based workers as well who have no relationship to maritime activity.” Id. Quoting from Owens-Illinois, 698 F.2d at 971, the Myhran court reasoned:

Both the injury and its cause are far more closely affiliated with the clearly land-based negligence arising in the construction industry generally than with the negligence taking place in commerce and navigation on the navigable waters.

Id. See also, Austin v. Unarco Indus., Inc., 705 F.2d 1 (1st Cir.), cert. dismissed, — U.S. —, 104 S.Ct. 34, 77 L.Ed.2d 1454 (1983); Keene Corp. v. United States, 700 F.2d 836, 844 (2d Cir.), cert. denied, — U.S. —, 104 S.Ct. 195, 78 L.Ed.2d 171 (1983).

It is evident that Owens-Illinois and Myhran are controlling here and preclude the exercise of admiralty jurisdiction over the third-party complaints. Third-party plaintiffs allege admiralty jurisdiction over claims against the United States for (1) contractual liability for purchase and sale of asbestos products used in “construction and/or repair of vessels; ” and (2) torts arising from the United States’ activities involving “construction and/or repair of vessels.” There is no basis in the complaints, third-party complaints or the memoranda on this motion from which to conclude that any of the plaintiffs employed at Pearl Harbor were engaged in anything other than construction and repair work involving the use of asbestos-containing products. Myhran is clear that injuries arising out of such work, as opposed to more traditional maritime employment, are not cognizable under maritime law. It is unnecessary to embark on an analysis of the four-part test enunciated in Owens-Illinois, as the pleadings and memoranda herein do not factually distinguish these cases from Myhran. Therefore, I conclude that the third-party admiralty claims must be dismissed for want of subject matter jurisdiction.

III. TUCKER ACT CLAIMS

The manufacturers also assert claims for contractual indemnification, predicated on the Tucker Act. 28 U.S.C. § 1346(a)(2). The Tucker Act, like the FTCA, is a limited waiver by the United States of its sovereign immunity, conferring on the district courts concurrent jurisdiction with the United States Claims Court over, inter alia,

civil action[s] or claim[s] against the United States, not exceeding $10,000 in amount, founded ... upon any express or implied contract with the United States, or for liquidated or unliquidated damages in cases not sounding in tort....

28 U.S.C. § 1346(a)(2). The manufacturers’ claims under the Act are three: (1) breach of implied warranties as seller; (2) breach of implied warranties to provide a safe work place and to provide specifications which were safe or “risk free” and which could be used in a safe “risk-free” manner; and (3) breach of implied contracts of which the manufacturers were third-party beneficiaries. Neither the purported warranties nor the contracts are alleged to be express. Contracts implied-in-law are not actionable under the Tucker Act. See Hatzlachh Supply Co. v. United States, 444 U.S. 460, 465 n. 5, 100 S.Ct. 647, 650 n. 5, 62 L.Ed.2d 614 (1980); Merritt v. United States, 267 U.S. 338, 45 S.Ct. 278, 69 L.Ed. 643 (1925). Claims under the Tucker Act require an agreement founded upon a meeting of the minds, which, although not necessarily embodied in an express contract, must be inferable as a fact from the conduct of the parties showing, in light of surrounding circumstances, their tacit understanding. Hargrove v. United States, 1 Cl.Ct. 228 (1982). Each of the manufacturers’ contract claims will be analyzed under this standard.

A. Breach of Seller’s Warranties of Merchantability and Fitness for Particular Purpose

The third-party complaints allege that the United States stockpiled asbestos and asbestos-containing products and, at certain times, sold asbestos to purchasers in the private sector, including many of the defendants in these actions. It is further alleged that the United States did not warn purchasers regarding the hazards of asbestos exposure. Third-party plaintiffs allege that by this conduct, the government breached its implied warranties of merchantability and fitness for a particular purpose, i.e., that the asbestos and asbestos-containing products could be safely used. As indicated above, it is insufficient for Tucker Act purposes for this claim to be implied in law; thus, the manufacturers claim, as they must, that the United States actually, albeit impliedly, warranted that the products it sold were safe.

The government argues that these claims should be dismissed because the asbestos was sold “as is,” without any express or implied warranty that the products were safe. However, in the posture of this motion, the government has presented no evidence which would support this conclusion; we consider here only an attack on the face of the pleadings. The government relies on In re All Maine Asbestos Litigation, 581 F.Supp. 963, in support of its contention. However, it is clear that the determination there was made on a summary judgment record. Id. at 970-71. On the “as is” Tucker Act claim, the court concluded that:

defendants fail to point to any evidence that the United States represented that asbestos could be used safely in ship construction. To the contrary, the uncontroverted evidence is that the government sold the asbestos “as is” with an express disclaimer of any warranty, express or implied.

Id. at 972 (emphasis added). See also, Stewart v. United States, 486 F.Supp. 178, 184 (C.D.Ill.1980).

This Court cannot conclude, on the basis of the pleadings alone, that the government sold asbestos in Hawaii on the same terms as the All Maine court found with respect to sales in Maine. On this motion to dismiss, the Court cannot reach the government’s factual contention, in derogation of third-party plaintiffs’ allegations, that it sold asbestos and asbestos-containing products “as is.” Thus, the manufacturers’ claims for breach of implied warranties as seller are not subject to dismissal under Rule 12(b).

B. Breach of Implied Warranty of Specification

The manufacturers allege that the United States, by promulgating specifications requiring the use of asbestos in connection with the construction and repair of vessels at Pearl Harbor, impliedly warranted that the asbestos-containing products sold by the manufacturers, which conformed to the specifications, were safe. The manufacturers’ theory appears to be that the specifications themselves create a basis of liability. In support of their position, the manufacturers rely on United States v. Spearin, 248 U.S. 132, 39 S.Ct. 59, 63 L.Ed. 166 (1918), and its progeny.

These cases provide that, “When the government issues design specifications of a detailed nature ... it warrants the sufficiency and efficacy of those specifications to produce the desired product in a satisfactory manner.” Ordinance Research v. United States, 609 F.2d 462, 479, 221 Ct.Cl. 641 (1979). However, the warranty extends only to those parties in direct privity with the government. See Correlated Dev. Corp. v. United States, 556 F.2d 515, 214 Ct.Cl. 106 (1977); Housing Corp. of America v. United States, 468 F.2d 922, 199 Ct.Cl. 705 (1972). Thus, in Spearin, the Court awarded damages resulting from faulty specifications to a building contractor who had contracted directly with the government for the construction of a dry dock. And, in Ordinance Research, the plaintiff contractor was awarded an equitable adjustment in its contract receipts on the theory that the damages it suffered as a result of explosions caused by faulty government specifications increased the price of performance under the contract.

The cases at bench are different in kind. Here, although the government was in privity with the contractors who performed the repair and construction work, it was not in privity with the manufacturers. The manufacturers merely sold the asbestos-containing products to the government; they did not perform the contracted construction work. The Spearin line of cases in inapposite to this litigation; the manufacturers’ claims based on implied warranty for specifications will be dismissed.

To the extent that the manufacturers contend that the government impliedly agreed to indemnify them for tort liability arising out of asbestos used at Pearl Harbor and elsewhere in Hawaii, the argument is without merit. The Comptroller General consistently has taken the position that a government agent may not make any oral or written agreements to indemnify or “hold harmless” a contractor for future losses under a contract, absent specific authorization or appropriation. 35 Comp.Gen. 85 (1955); 33 Comp.Gen. 90 (1935); see also, California-Pacific Utilities Co. v. United States, 194 Ct.Cl. 703 (1971). Similarly, the Anti-Deficiency Act, 31 U.S.C. § 1341(a)(1)(B), provides, in relevant part, that

An officer or employee of the United States Government or the District of Columbia may not ... involve either government in a contract or obligation for the payment of money before an appropriation is made unless authorizated by law.

(Emphasis added.)

Here, the manufacturers do not contend that any appropriation to indemnify them for tort liability was made by the government or that any law authorized a guarantee of indemnification. To the extent the manufacturers argue that a tacit, mutual understanding existed between the parties which would give rise to an implied contractual right of indemnity, the argument also fails. One who deals with a government agent is charged with notice of the limits of the agent’s authority. California-Pacific Utilities, supra; Richards & Associates v. United States, 177 Ct.Cl. 1037 (1966). Thus, even if the manufacturers could show representations on the part of government agents that the government would indemnify the manufacturers for prospective tort losses, those representations would not be binding on the government. The manufacturers’ claims based on any such implied agreement to indemnify therefore must be dismissed.

C. Third-Party Beneficiary Theory

Jurisdiction exists under the Tucker Act to adjudicate suits brought on government contracts by intended third-party beneficiaries to those contracts. Hebah v. United States, 428 F.2d 1334, 192 Ct.Cl. 785 (1970). However, a third-party beneficiary for purposes of the Tucker Act is a third-party expressly or impliedly intended by one of the contracting parties to be a beneficiary of the contract. Penn Towne Builders v. United States, 4 Cl.Ct. 677 (1984).

One third-party plaintiff alleges that there was an agreement between the United States and plaintiffs to provide the plaintiffs with a safe workplace, and that the agreement was breached by the government in various ways. Without citing any precedent, the manufacturer argues in conclusory fashion that it was a third-party beneficiary of the agreement. Because there exists no legal support for this novel theory that the manufacturer was an intended beneficiary of any employment agreements between the government and plaintiffs, the claim for indemnity as a third-party beneficiary of such a contract will be dismissed.

On this claim, as on the others subject to dismissal, no contention is advanced that leave to amend would not be futile. The manufacturers do not contend that the allegations of the third-party complaints can be improved on.

IV. ORDER

For the foregoing reasons, IT IS ORDERED:

1. The motion of the United States to dismiss the third-party complaints is DENIED as to:

(a) Third-party plaintiffs’ claims under the Federal Tort Claims Act for contribution for injuries to plaintiffs employed upon the navigable waters of the United States, while engaged in work on vessels, caused by the alleged negligence of the United States as a vessel owner.

(b) Third-party plaintiffs’ claims under the Tucker Act for the alleged breach by the government as a seller of asbestos and asbestos-containing products of the implied warranties of merchantability and fitness for a particular purpose.

2. In all other respects, the motion of the United States to dismiss the third-party complaints is GRANTED, without leave to amend.

3. To the extent it has not already done so, third-party defendant is granted 30 days to answer the remaining claims in the third-party complaints.

      . Out of a total of 127 plaintiffs, 118 allege that they were exposed to asbestos-containing thermal insulation products used on board ships while they were federal civilian employees, employed at Pearl Harbor Naval Shipyard (“Pearl Harbor"). Others were federal civilian employees at Hickam Air Force Base (Lopez, Civil No. 84-0122; Carvalho, Civil No. 80-0473) or Schofield Barracks (Skimada, Civil No. 80-0382). Most of the remaining plaintiffs were employed by civilian insulation companies as "outside insulators" (Tacub, Civil No. 83-0368; Kanemori, Civil No. 80-0464; Penn, Civil No. 80-0472; Frederick, Civil No. 80-0471; Plunkett, Civil No. 80-0467). Finally, Ito, Civil No. 83-1279, involves alleged exposure to a brake and clutch mechanic employed in the private sector.

      . Similarly, 28 U.S.C. § 2674 provides that "The United States shall be liable ... in the same manner and to the same extent as a private individual under like circumstances....”

      . It is not disputed that all plaintiffs who are former or current federal civilian employees are covered for work-related injuries by the Federal Employees’ Compensation Act, 5 U.S.C. § 8101 et seq. (“FECA”). Direct suits by these plaintiffs against the United States would be barred by FECA’s exclusivity provision. 5 U.S.C. § 8116.
      In Lockheed Aircraft Corp. v. United States, 460 U.S. 190, 103 S.Ct. 1033, 1038, 74 L.Ed.2d 911 (1983), the Supreme Court held that § 8116 “does not directly bar a third-party indemnity suit against the United States.” Lockheed did not affirmatively confer upon third parties an indemnity remedy against the United States; rather, as the Court made clear, the existence of such a remedy is governed by the "underlying substantive law.” Id. 103 S.Ct. at 1037-38 n. 8. Although in Lockheed, the Court was concerned only with a third-party indemnity claim, it is clear that the holding is equally applicable to third-party contribution claims. See In re All Maine Asbestos Litigation, 589 F.Supp. 1571 at 1574 n. 1 (D.Me.1984); Johns-Manville Sales Corp. v. United States, No. C-81-4561, slip op. at 10 (N.D.Cal. Jan. 6, 1984), reprinted in Asbestos Litigation Reporter 7,721, 7,724 (Jan. 20, 1984).
      Here, under FECA, the applicable underlying substantive law of indemnity and contribution is the law which Hawaii courts would employ in analogous suits involving private parties. To the extent the government or plaintiffs argue that FECA’s exclusivity provision precludes such application of the underlying substantive law of indemnity or contribution, the argument is rejected.

      . Third-party plaintiff Eagle-Picher argues that, in light of Lockheed, no federal or state workers’ compensation statute should apply in these actions. First, it notes that Congress excluded from the LHWCA’s coverage, injuries "to an officer or employee of the United States or any agency thereof.” 33 U.S.C. § 903(a)(2). Consequently, it argues, a "private individual in like circumstances” to the government in this action is not, as the government contends, a private employer covered by the LHWCA but not FECA, but rather is a tortfeasor who is not insulated from third-party claims by any workers’ compensation scheme. Eagle-Picher also contends that analysis of third-party liability should be made according to federal rather than state law. See Travelers Ins. Co. v. United States, 493 F.2d 881 (3d Cir.1974); Wallenius Bremen v. United States, 409 F.2d 994 (4th Cir.1969). I understand but reject the argument.
      The FTCA provides that the United States will only be liable as if a "private person.” Therefore, provisions of workers’ compensation statutes, such as § 903(a)(2) of the LHWCA, which exclude coverage of federal employees, are inapplicable in the analysis. Further, inviting this Court to analogize to a private party not covered by workers’ compensation laws applicable to private parties would be to ask the Court to apply the principles of indemnity and contribution in a vacuum of substantive law. This is both infeasible and contrary to the intent of Congress in enacting the FTCA to determine liability "in accordance with the law of the place where the act or omission occurred.” Giannuzzi v. Doninger Metal Products, CV 585 F.Supp. 1306, 1308 (W.D.Pa. May 16, 1984). Finally, even assuming, as Eagle-Picher argues, that third-party liability should be determined "according to federal law," the most recent federal law on the subject of third-party liability under the FTCA is Lockheed. There, the Court clearly indicated that the “underlying substantive law” in the state where the act or omission occurred is to be applied. See Note 3, ante.

        Lockheed held that third-party claims under the FTCA are not barred by the exclusivity provision of FECA, reasoning that the “quid pro quo" compromise embodied in the federal employee compensation system was intended to govern “only the rights of employees, their relatives, and people claiming through or on behalf of them.” 103 S.Ct. at 1037. Congress was not concerned with the rights of "unrelated third parties.” Id. To be sure, such reasoning could be applied to other workers’ compensation systems. However, the Court did not purport to evaluate other systems; rather, it merely held that FECA’s exclusivity provision did not preclude third-party actions and expressly indicated that the availability of such actions is governed by the underlying substantive law.

      . The government's reliance on Halcyon Lines v. Haenn Ship Ceiling & Refitting Corp., 342 U.S. 282, 72 S.Ct. 277, 96 L.Ed. 318 (1952), and subsequent cases interpreting Halcyon, is misplaced. In Lockheed, the Court stated with respect to these cases:
      Since the validity of the substantive indemnity claim is not before us, the LHWCA cases on which the dissent relies ... are entirely irrelevant. In Halcyon ... decided 11 years before Weyerhaeuser, the Court merely held that a substantive right of contribution did not exist in the circumstances of that case. The Court explicitly left open the issue whether such a right to contribution, if it were to exist, would be subject to LHWCA’s exclusive liability provision.

        Lockheed, 103 S.Ct. at 1037-38 n. 8 (emphasis added).

      . 33 U.S.C. § 905(b) provides:
      In the event of injury to a person covered under this chapter by the negligence of a vessel, then such person, or anyone otherwise entitled to recover damages by reason thereof, may bring an action against such vessel as a third party in accordance with the provision of section 933 of this title, and the employer shall not be liable to the vessel for such damages directly or indirectly and any agreements or warranties to the contrary shall be void. If such person was employed by the vessel to provide stevedoring services, no such action shall be permitted if the injury was caused by the negligence of persons engaged in providing stevedoring services to the vessel____ The liability of the vessel under this subsection shall not be based upon the warranty of seaworthiness or a breach thereof at the time the injury occurred. The remedy provided in this subsection shall be exclusive of all other remedies against the vessel except remedies available under this chapter.

      . The government contends that the 1972 amendment to the LHWCA exclusivity provision and its legislative history indicate that the provision is intended to bar third-party suits against employers. Supreme Court dicta rejects this argument:
      The most relevant changes since Weyerhaeuser have been in the LHWCA Amendments of 1972, 88 Stat. 1251. While these changes are illuminating, they do not help the Government’s position. Under the amended LHWCA, an injured longshoreman's employer is no longer liable to a shipowner for tort damages that the shipowner has paid the employee. See 33 U.S.C. § 905(b). Congress thus overruled the result in Ryan [Stevedoring Co. v. Pan-Atlantic S.S. Corp., 350 U.S. 124, 76 S.Ct. 232, 100 L.Ed. 133 (1956)], and abolished the shipowner's indemnity action. But in so doing, Congress also abolished the injured employee’s seaworthiness remedy against the shipowner — a strict-liability action that the Court had recognized in Seas Shipping Co. v. Sieracki, 328 U.S. 85, 66 S.Ct. 872, 90 L.Ed. 1099 (1946). In other words, Congress abolished the third-party indemnity action only in conjunction with a “quidpro quo" to benefit the third parties. Here there has been no FECA amendment to abolish the third-party indemnity action recognized in Weyerhaeuser. The Government nevertheless invites us to abolish the action without the benefit of an amendment. We are requested to do this even though Congress has provided no "quid pro quo” as it thought appropriate in the LHWCA context. We decline the invitation.

        Lockheed, 103 S.Ct. at 1038 (emphasis added). It is evident from this language that the Court has given a narrower interpretation to the compromise enacted in § 905 than that urged by the United States. The exchange of the strict liability "warranty of seaworthiness" claim for the indemnity action against the LHWCA employer did not persuade the Court that Congress intended to outlaw third-party suits in the FECA context. The language also suggests that the Court considered § 905(b) to apply to a limited class of third-party vessel owners in their relationship with LHWCA employers.

      . E.g., Simpson Timber Co. v. Parks, 390 F.2d 353 (9th Cir.1968) (shipowner liable on unseaworthiness claim, awarded indemnity against third party whose negligence caused unsafe condition resulting in injury to seaman).

      . E.g., Radcliffe v. Hilton Inn, 119 Ariz. 306, 580 P.2d 767 (1978); Gardner v. Murphy, 54 Cal. App.3d 164, 126 Cal.Rptr. 302 (1975).

      . See generally, Restatement (Second) of Torts § 886B (1979). Cf. County of Alameda v. Southern Pac. Co., 55 Cal.2d 479, 11 Cal.Rptr. 751, 360 P.2d 327 (1961) (breach of common law duty to maintain railroad grade crossing in safe condition).

      . Eagle-Picher’s argument that the Court should not look to the Hawaii Supreme Court’s interpretation of indemnity and contribution under the Hawaii Law is rejected for the same reasons expressed in regard to the LHWCA. See n. 4, ante.

      . Third-party complaint of defendant Raybestos-Manhattan, Inc. (Fifth through Eighth Counts). Raybestos is the only third-party plaintiff who affirmatively claims admiralty jurisdiction. The remaining third-party plaintiffs contend that (/admiralty jurisdiction is found to apply, they are entitled to recover for all of their claims under maritime law.

      . Because admiralty jurisdiction does not lie over the third-party complaints, it is unnecessary to address the parties’ arguments with respect to the “maritime but local” and "Good Samaritan” rules.

      . The prayers in all third-party complaints, save one, expressly limit the damages sought under the Tucker Act claims to 110,000 per plaintiff. While the third-party complaint of Raybestos-Manhattan, Inc., sets forth no specific prayer, it does allege that the Tucker Act counts "assert claims for less than $10,000.” In light of that allegation, I construe the allegation in the Third and Fourth Counts that the United States "is liable to Raybestos for indemnification for all sums Raybestos may be required to pay plaintiff(s)," as being similarly limited to a claim of $10,000 per plaintiff.

      . To the extent the government relies on the discretionary function exception to the FTCA, 28 U.S.C. § 2680(a), to preclude the manufacturers’ claims of breach of implied warranty as a seller, see Gov’t Memo, in Support at 39 n. 35, that argument also must be rejected. Determining whether conduct of the government falls within the discretionary function exception requires a factual analysis of the circumstances and the government policy involved. See United States v. S.A Empresa de Viacao Aerea Rio Grandense (Vang Airlines), — U.S. —, 104 S.Ct. 2755, 81 L.Ed.2d 660 (1984). Determination of the applicability of the exception cannot be made on the basis of the pleadings here. Some showing by the government of its policy with respect to the sale of asbestos products is required and that showing is absent. For example, in All Maine, the determination that the discretionary function exception applied was made on the basis of "uncontroverted evidence concerning the policy and procedures used by the government in its strategic materials stockpiling program,” including the affidavits of those with first-hand knowledge of that policy and those procedures. 581 F.Supp. at 970-71.

      . The manufacturers argue that 31 U.S.C. § 1304(a) contradicts the government’s position with respect to the Anti-Deficiency Act. However, the effect of § 1304(a) is simply that the Anti-Deficiency Act does not bar payment of valid judgments against the United States. Thus, § 1304(a) is irrelevant to the issue of whether, in these cases, the legal predicate for judgment against the government exists.

      . There is no allegation of an express agreement containing such a term, such as a collective bargaining agreement. It is highly doubtful, assuming that a duty existed requiring the government to provide its employees with a safe place to work, that such duty arose from an implied-in-fact contract. More importantly, the allegation that third-party plaintiff “was a third-party beneficiary of the United States’ agreement to provide plaintiff(s) with a safe place to work," is nothing more than a bald legal conclusion. Even assuming, arguendo, that such a contract existed, nothing in the record on this motion gives rise to the slightest suggestion that material suppliers, such as third-party plaintiffs, were intended beneficiaries of such a contract.


author: FRYE, District Judge.

text:
    PAULSON INVESTMENT COMPANY, INC., Plaintiff, v. NORBAY SECURITIES, INC., a New York corporation; North Hills Investors, Inc., a New York corporation; Marvin Cooper; Harvey Rubenstein; Walwyn, Stodgell, Cochran, Murray, Limited, a Canadian corporation; Gerald F. McCall; and James McGorman, Defendants. PAULSON INVESTMENT COMPANY, INC., Plaintiff, v. Marvin COOPER and Harvey Rubenstein, Defendants.
    Civ. Nos. 82-1543-FR, 82-1611-FR.
    United States District Court, D. Oregon.
    Oct. 16, 1984.

      Randolph C. Foster, Joyce A. Harpole, Stoel, Rives, Boley, Fraser & Wyse, Portland, Or., for plaintiff.
    Harvey Rubenstein, Bosio & Associates Ins. Agency, Inc., Agent for defendants Cooper and Rubenstein.
    James R. Moore, Schwabe, Williamson, Wyatt, Moore & Roberts, Portland, Or., for defendants Walwyn, Stodgell, Cochran, Murray, Ltd.
    Gary Berne, Portland, Or., Franklin D. Ormsten, New York City, for Norbay Securities.
    Donald H. Marmaduke, Tom Fenner, Tonkon, Torpe, Galen, Marmaduke & Booth, Portland, Or., Guy P. Lander, Law Offices of Leonard R. Glass, New York City, for North Hills.
    Gary M. Georgeff, Waggoner, Chapman, Farleigh, Wada & Bogrand, Portland, Or., for BMI Capital, Inc.
    James McGorman, pro se.
   OPINION AND ORDER

FRYE, District Judge.

Before the court are defendant BMI Capital, Inc.’s (BMI) motion to dismiss for lack of jurisdiction, filed pursuant to Fed.R. Civ.P. 12, and alternative motions.

Facts Before the Court by Way of Allegations in Plaintiffs Complaint or by Affidavit

Plaintiff Paulson Investment Company, Inc. (Paulson) claims damages for the sale of unregistered securities based on federal, state, and common laws. Paulson is an Oregon brokerage firm that buys and sells securities. BMI is a Canadian corporation with its principal place of business in Toronto, Ontario, Canada. BMI stock is not registered with the Securities and Exchange Commission (SEC) or the Oregon Corporation Commissioner.

In October and November, 1982, Paulson purchased BMI stock from defendants Nor-bay Securities, Inc. (Norbay) and North Hills Investors, Inc. (North Hills), both New York corporations and brokerage firms. Paulson purchased BMI stock pursuant to orders placed by defendants Marvin Cooper and Harvey Rubenstein.

The BMI stock made its way from Canada to Oregon through a series of transactions involving Rubenstein. In January, 1982, Rubenstein met George Sukornyk, Chairman of the Board of BMI, at a party in New York. Rubenstein told Sukornyk that he owned Black Hills, a Canadian corporation, along with Cooper and others and that Black Hills had a controlling interest in Western Consortium, an American corporation. BMI was interested in acquiring an interest in Western Consortium.

Thereafter, Sukornyk and others from BMI met with Rubenstein in New York. At the meeting Rubenstein proposed that BMI acquire an interest in Western Consortium by exchanging BMI stock for Black Hills stock. Sukornyk and others from BMI met with Rubenstein again in February and March, 1982 in New York to negotiate the proposed exchange of stock. Sukornyk met with Rubenstein again in September, 1982 to discuss the transaction. The parties agreed that Rubenstein would go to Canada to meet with BMI’s Board of Directors and execute a letter of intent which would confirm BMI’s offer to buy Black Hills stock.

In mid-September, 1982, Rubenstein met with the Board of Directors in Canada and signed a letter of intent relating to the proposed purchase of Black Hills stock by BMI. This deal was never approved by BMI’s shareholders and was never finalized. However, at the time the Black Hills deal was being discussed, Rubenstein offered to buy all of Sukornyk’s shares of BMI. Sukornyk rejected the offer. Rubenstein also approached McGorman, president of BMI and a defendant in this action, about purchasing BMI stock.

McGorman met with Rubenstein on a regular basis during a six-week period in Canada after Rubenstein’s execution of the letter of intent regarding the Black Hills deal. McGorman proposed a transaction to Rubenstein that would enable him to acquire BMI stock.

McGorman and two associates owned a controlling interest in a Canadian corporation, which for purposes of simplicity will be called “OL I.” All of the stock of “OL I” was in turn owned by another Canadian corporation, “OL II.” McGorman proposed to sell “OL I” to BMI in exchange for BMI stock. Apparently BMI was indebted to McGorman, and McGorman thought that if BMI was willing to purchase OL I stock in exchange for BMI stock, then BMI would be converting debt into equity.

BMI agreed to buy all of the OL I stock in exchange for 417,600 shares of BMI stock. Then in late September, 1982, McGorman, on behalf of OL II sold 417,600 shares of BMI stock to Rubenstein. Rubenstein was to pay $313,000 (Canadian) to McGorman for the stock.

Only part of the purchase price of the BMI stock was ever paid. Rubenstein asked McGorman to have OL II open an account at North Hills, and also requested McGorman to order certain Western Consortium stock for which Rubenstein agreed to pay as part of the purchase price of the BMI stock. Rubenstein thereafter paid $55,000 (U.S.) on OL II’s account for the Western Consortium stock and also paid to OL II $120,000 (U.S.).

In October and November, 1982, Ruben-stein sold BMI stock through Walwyn, Stodgell, Cochran & Murray, a Canadian brokerage firm. Rubenstein’s account at Walwyn was handled by a Mr. Bond. McGorman had referred Rubenstein to Bond. Thereafter, Rubenstein directed Bond to sell the BMI stock to Norbay and North Hills. Plaintiff purchased the stock from Norbay and North Hills pursuant to orders placed by Cooper and Rubenstein. Plaintiff has not been paid for its purchase of BMI stock.

BMI asserts that this court does not have personal jurisdiction.

Discussion and Ruling

Paulson claims that this court has personal jurisdiction over BMI under section 22 of the Securities Act of 1933, 15 U.S.C. § 77v, and section 27 of the Securities Exchange Act of 1934, 15 U.S.C. § 78aa, both of which allow service of process “wherever defendant may be found.” These sections give federal district courts exclusive “subject matter” jurisdiction over securities law cases, set certain venue requirements, and provide for worldwide service of process.

While the worldwide service of process provision extends a plaintiff’s ability to effect service of process, Belke v. Merrill Lynch, Pierce, Fenner & Smith, 518 F.Supp. 602, 605 (S.D.Fla.1981), rev’d on other grounds, 693 F.2d 1023 (11th Cir. 1982), it does not extend the court’s jurisdiction beyond the limits imposed by the due process clause of the fifth amendment to the United States Constitution. Leasco Data Processing Equipment Corp. v. Maxwell, 468 F.2d 1326 (2nd Cir.1972). .

When a federal statute authorizes worldwide service of process, a court must decide whether the party which has been served has had minimum contacts with the United States as a whole. A federal district court can obtain personal jurisdiction over a defendant even if that defendant has never set foot inside the state where the federal court is located, provided that venue requirements are met. The relevant question is whether the defendant has committed acts anywhere in the United States. Alco Standard Corporation v. Benalal, 345 F.Supp. 14, 24-25 (E.D.Pa.1972).

BMI maintains that it does not have sufficient minimum contacts with the United States for this court to exercise jurisdiction. Paulson has the burden of coming forward with evidence of “jurisdictional facts” sufficient to support the exercise of personal jurisdiction by this court. Taylor v. Portland Paramount Corp., 383 F.2d 634, 639 (9th Cir.1967). The court’s exercise of personal jurisdiction must be measured by the constitutional standard set out in International Shoe v. Washington, 326 U.S. 310, 66 S.Ct. 154, 90 L.Ed. 95 (1945). Personal jurisdiction is permissible only if defendant has sufficient minimum contacts with the United States.

Since International Shoe, two principles have emerged:

1. Where an entity has “continuous and systematic” contacts with a forum, the entity is “present” there and a court may exercise personal jurisdiction over it even if the claim is unrelated to the forum activities.

2. Where an entity does not have “continuous and systematic” contacts, there must be some act related to the cause of action, by which the entity has personally availed itself of the privilege of conducting activities with the forum. Wells Fargo & Co. v. Wells Fargo Express Co., 556 F.2d 406, 412 (9th Cir.1977).

The issue before the court is whether BMI has sufficient minimum contacts with the United States to satisfy either of these two tests.

BMI’s only contacts with Oregon are:

1. It is a defendant in Omega Northwest, Inc. v. Norbay Securities, Inc., et al., No. 83-115 (D.Or. filed 1984). BMI has not consented to personal jurisdiction in this action.

2. Ed Dryden of Omega Northwest, Inc. placed a telephone call on October 15, 1982, requesting financial information. None of the stock which is the subject of this action was ever sold to Dryden or Omega Northwest, Inc.

3. The presence of BMI stock in Oregon.

BMPs only contacts with the United States are:

1. A private placement of BMI stock pursuant to section 144 of the Securities and Exchange Act occurred in 1980 in the United States. All of these securities are still in the hands of the original purchasers and are not involved in this action.

2. There are 500-600 BMI shareholders in the United States out of a total of 1700 shareholders.

3. There are four dormant subsidiaries of BMI incorporated in either Delaware or Georgia.

4. There were negotiations in New York between Sukornyk and other BMI associates and Rubenstein regarding the proposed acquisition by BMI of Black Hills stock.

Continuous and Systematic Contacts

None of BMPs contacts suggest that it has either continuous or systematic involvement in Oregon or other parts of the United States. The BMI stock privately placed pursuant to section 144 of the Securities and Exchange Act is still in the hands of the original investors. This has, in fact, been a one-time transfer of stock and has not generated any continuing involvement by BMI. The fact that BMI has subsidiary corporations in the United States is alone insufficient. The parent corporation, in this case BMI, is not necessarily considered to be “present” here merely because it has subsidiaries which do business here. Williams v. Canon, Inc., 432 F.Supp. 376 (E.D.Ca.1977). Finally, plaintiff does not argue that the negotiations between Sukornyk and Rubenstein regarding the Black Hills deal were either continuous or systematic.

Acts Related to the Cause of Action

Where an entity does not have continuous and systematic contacts, a plaintiff may show it has availed itself of the privilege of conducting activities in the forum in order to establish personal jurisdiction. Paulson has presented the following facts in an effort to establish that BMI purposely availed itself of the privilege of conducting activities within the United States:

1. BMI stock is present in Oregon.

2. BMI issued stock to Rubenstein through a “straw man” company which BMI knew Rubenstein would market in the United States.

Paulson claims that the presence of BMI unregistered stock in Oregon satisfies the requirement that BMI purposely availed itself of the privilege of conducting activities within the forum and cites Black & Company v. Nova-Tech, Inc., 333 F.Supp. 468 (D.Or.1971) in support of its argument.

The Black case involved an action by Oregon residents who bought unregistered securities from a California corporation. The main issue was whether the court had personal jurisdiction over the California lawyers alleged to have participated in the sale of the unregistered stock. The court in Black followed the traditional view of quasi in rem jurisdiction which recognized that the physical presence of defendant’s property in the forum is a sufficient basis for personal jurisdiction. Although the quasi in rem doctrine has not been formally abrogated, the mere presence of stock in Oregon is not sufficient given the Supreme Court’s decision in Shaffer v. Heitner, 433 U.S. 186, 97 S.Ct. 2569, 53 L.Ed.2d 683 (1977).

Paulson asserts that BMI issued stock to Rubenstein in Canada knowing that Rubenstein would market the stock in the United States. Foreign acts having an effect in a forum may satisfy the minimum contact standard. Kramer Motors, Inc. v. British Leyland, Ltd., 628 F.2d 1175, 1177 (9th Cir.1980).

Here, BMI transferred 417,600 shares of BMI stock to OL II in exchange for all the shares in OL I. McGorman, on behalf of OL II, then sold the 417,600 shares of BMI stock to Rubenstein. McGorman stated that this transaction was intended to benefit BMI by changing its debt into equity. Paulson does not allege that BMI was to receive any money or payment from Rubenstein as a result of this transaction. More importantly, Paulson does not submit any facts to show that BMI had any control over the transfer of the stock once it was sold to OL II.

For the foreign-acts-with-forum-effects principle to apply in this case, the person sought to be charged must know, or have good reason to know, that his conduct will have effects in the state seeking to assert jurisdiction over him. Leasco Data Processing Equipment Corp. v. Maxwell, 468 F.2d 1326 (1972). Paulson asserts that BMI “knew” Rubenstein would market the stock in the United States. In fact, McGorman’s deposition suggests that McGorman may have been aware that Rubenstein would market the stock in the United States. The issue then is whether McGorman’s knowledge, as president of BMI is imputed to the corporation. Paulson does not address this issue in its memorandum, but assuming that such knowledge is imputed to BMI, Paulson has failed to present any facts which would suggest that BMI had any control over Rubenstein’s disposition of BMI stock. The only thing BMI appears to have knowingly done is sell its stock in exchange for OL I with the intent of converting its debt into equity.

This court concludes that facts sufficient to justify invoking the foreign-acts-with-forum-effects principle have not been shown here. Moreover, in Kramer, the United States Court of Appeals for the Ninth Circuit recognized that the foreign-acts-with-forum-effects principle must be applied with caution, particularly in an international context. Id.

BMI had some “contacts” in the United States. Personal jurisdiction can also be obtained where acts occur within the forum. The negotiations between Sukornyk and Rubenstein regarding BMI’s proposed purchase of Black Hills were held in New York. These negotiations did not involve the issuance of BMI stock, the subject matter of this action. Although these negotiations did ultimately lead to Rubenstein’s introduction to McGorman in Canada, the connection between the Black Hills deal and the eventual sale of BMI stock by McGorman to Rubenstein is too tenuous to satisfy the minimum contacts standard.

Conclusion

Because this court finds personal jurisdiction to be lacking, this court need not reach defendant’s other contentions.

IT IS ORDERED that defendant BMI Capital, Inc.'s motion to dismiss is GRANTED. The complaint is dismissed as to this defendant.

      . Paulson cites two cases in support of its argument that personal jurisdiction over BMI does not offend due process. Grunenthal GMBH v. Hotz, 712 F.2d 421 (9th Cir.1983); Securities & Exch. Com’n v. United Financial Group, Inc., 474 F.2d 354 (9th Cir.1973). Both of these cases deal exclusively with the issue of subject matter jurisdiction in transnational securities cases.

      . In some cases, the activities of a subsidiary corporation can be attributed to the parent corporation for jurisdictional purposes. In Wells Fargo & Co. v. Wells Fargo Exp. Co., 556 F.2d 406 (9th Cir.1977), the court listed several factors to be considered in determining whether the corporate entity should be disregarded. Among the factors considered were whether the officers and directors are the same, whether separate books and financial statements are kept, and whether the parent corporation holds the subsidiary out as an agent. Paulson does not present any facts about BMI’s subsidiaries for the court to consider whether or not the activities of these subsidiaries in the United States could have been attributed to BMI.

      . BMI in its reply memorandum refers to the stock transaction between BMI and OL II and Rubenstein as Paulson’s “conspiracy theory.” Under a conspiracy theory, personal jurisdiction is established if an absent defendant "conspires” with someone in the forum. Paulson does not cite any authority in support of this theory, nor does it appear to rely on this theory as a basis for establishing personal jurisdiction. Paulson does rely on cases which recognize the principle that foreign acts which cause an effect in the forum can be a sufficient basis for personal jurisdiction. Because this district has previously rejected the conspiracy theory and because Paulson does not appear to rely on this theory, this court will not address this issue here. Cascade Steel Rolling Mills, Inc. v. C. Itoh & Co., Inc., 499 F.Supp. 829 (D.Or.1980).