text:
    INTERNATIONAL BROTHERHOOD OF ELECTRICAL WORKERS, LOCAL UNION 1823, Plaintiff, v. WGN OF COLORADO, INC., Defendant.
    Civ. A. No. 84-K-1166.
    United States District Court, D. Colorado.
    Aug. 8, 1985.

      Jonathan Wilderman, Denver, Colo., for plaintiff.
    John D. Phillips, Jr., Denver, Colo., for defendant.
   ORDER

KANE, District Judge.

This is an action by plaintiff union to vacate an arbitration award. A dispute arose upon the termination of Charles Kirkeby, an employee of WGN and a member of IBEW local 1823, for alleged dishonesty. In accordance with the bargaining agreement between the parties, a three-member arbitration panel was selected, and a hearing before the three arbitrators was held. After the hearing, a decision signed only by the neutral arbitrator was issued. It is not disputed that the decision of the arbitration board was prepared entirely by the neutral arbitrator, and that no attempt was made to obtain the signatures of the other board members.

The union states three claims for relief based on the procedure by which the final award was rendered. First, the union alleges a violation of the collective bargaining agreement under Section 301 of the Labor Management Relations Act of 1947 (LMRA), 29 U.S.C. § 185. Second, the union contends the award does not meet the requirements of the Uniform Arbitration Act as adopted in Colorado, C.R.S. § 13-22-201 et seq. Finally, the union alleges that the arbitration award violates the Federal Arbitration Act, 9 U.S.C. § 1-11. The union requests vacation of the award and a rehearing de novo before a newly constituted arbitration board pursuant to C.R.S. § 13-22-214(3).

The parties have submitted cross-motions for summary judgment. The union’s second claim for relief under the Uniform Arbitration Act as adopted in Colorado is dismissed since it is preempted by the Federal Arbitration Act. Collins Radio Co. v. Ex-Cell-O Corp., 467 F.2d 995, 999 (8th Cir.1972). I will treat the first and third claims for relief together. For the reasons stated below, I conclude that the plaintiff is entitled to vacation of the award. I am remanding the case to the arbitration panel for compliance with the provision of the collective bargaining agreement requiring a majority decision by the board.

I.

Summary judgment is a drastic remedy and should only be employed where there is no genuine issue as to any material fact. Rawson v. Sears, Roebuck and Co., 554 F.Supp. 327 (1983). In addition, the evidence presented to the court supporting a motion for summary judgment must be construed in favor of the party against whom the motion is made and that party must be given the benefit of all favorable inferences that can be drawn from it. Bruce v. Martin-Marietta Corp., 544 F.2d 442 (10th Cir.1976). The fact that both parties argue simultaneously that there is no genuine issue of fact does not establish that a trial is unnecessary and that the case should be disposed of by summary judgment. Wright & Miller, Federal Practice and Procedure § 2720 (1983). Each motion must be considered separately and each party, as a movant for summary judgment, bears the burden of establishing that no genuine issue of material of fact exists and that he is entitled to judgment as a matter of law. Id.

II.

It is by now an axiom of federal labor law that judicial review of an award following properly conducted arbitration proceedings is severely circumscribed, and that such an award will not be set aside so long as it “draws its essence from the collective bargaining agreement.” Graphic Arts International Union, Local 97-B v. Haddon Craftsmen, Inc., 489 F.Supp. 1088 (M.D.Pa.1979). In the case at hand, no substantive or jurisdictional defect was alleged by plaintiff. Procedural irregularities, however, may also result in such fundamental unfairness as to warrant the vacation of an arbitral award. See Gorman, Labor Law (1976), p. 602, (citing Local 227, International Hod Carriers v. Sullivan, 221 F.Supp. 696 (E.D.Ill.1963)). Plaintiff contends that the neutral arbitrator did not have a sufficient basis for excluding the other two arbitrators from the decision making process after the hearing, or that it was incorrect for the neutral arbitrator to assume that further consultations with the partisan arbitrators after the hearing would not affect the final decision.

Section 10(d) of the Federal Arbitration Act provides for vacation of an arbitral award “[wjhere the arbitrators exceeded their powers, or so imperfectly executed them that a mutual, final, and definite award upon the subject matter was not made.” Section 301 of the LMRA, however, does not contain a specific provision concerning arbitration. A party has a remedy under section 301 if there has been a breach of the collective bargaining agreement. If an award does not draw its essence from the agreement, therefore, it is appropriate to bring an action under section 301. The real test, however, under either the LMRA, the Federal Arbitration Act, or the Railway Labor Act, is whether the arbitrator has exceeded the powers delegated to him by the parties. See Ethyl Corporation v. United Steelworkers of America, AFL-CIO-CLC, 768 F.2d 180 (7th Cir.1985); Loveless v. Eastern Air Lines, Inc., 681 F.2d 1272 (11th Cir.1982).

The labor agreement between the parties provides:

Any matter that is not adjusted by the Employer and the Union, as provided in Section 1 of this article, shall be referred to arbitration. Any demand for arbitration shall be in writing, shall specify the issue in detail and shall name an arbitrator. Within five (5) days after receipt of such demand, the party or representative receiving it shall also name an arbitrator. A third arbitrator shall promptly be chosen by the two named parties, or if they fail to agree within five (5) days shall be appointed by the Judge of any Federal or State Court mutually agreed upon. The majority decision of the Arbitration Board shall be final and binding on both parties. Each party shall defray the expenses of its representatives on the Board, and the fee and expenses of the third member shall be borne equally by the parties.

The question before us, then, is whether the arbitral award constitutes a “majority decision” as set forth in this provision. Plaintiff argues that there was essentially no participation by the partisan arbitrators after the hearing, and that a majority decision was never reached.

According to the neutral arbitrator and the arbitrator for the company, all three arbitrators met immediately following the conclusion of the hearing, at which time the two partisan arbitrators indicated that they would each support the position of the party appointing them to the board. The arbitrator for the union, however, recalls no such meeting. He maintains that he never said anything indicating that he had no comments to make on the merits, and that the neutral arbitrator never asked him whether he would take the union’s position.

Clearly, a dispute exists as to whether the neutral arbitrator asked this question of the two partisan arbitrators. It is not, however, a disputed material fact which will prevent me from granting summary judgment in this case. After examining the memoranda, depositions, and affidavits supporting the parties’ respective motions for summary judgment, I conclude that the procedural irregularities, regardless of whether the neutral arbitrator asked the other arbitrators this question, are such that I must vacate the award.

I make this decision fully aware of the strong policy in favor of upholding arbitration awards and after examining the case law cited by the parties, in particular International Hod Carriers Local 227 v. Sullivan, 221 F.Supp. 696 (E.D.Ill.1963) and Cities Service Oil Co. v. American Mineral Spirits Co., 22 F.Supp. 373 (S.D.N.Y. 1937).

Plaintiff relies on Hod Carriers, supra, in which the contract between the parties provided for submission of disputes to an arbitration board consisting of five members, two appointed by the employer, two appointed by the union, and a fifth chosen by those four if, and when, they found it necessary. The contract also provided that a “majority decision rendered by such board shall be final and binding on both parties.” Id. at 698. The court held that the arbitration award delivered by the fifth arbitrator did not comply with the provision of the collective bargaining agreement. One member essentially conducted the entire proceeding and rendered his decision without consultation or discussion with the other four arbitrators. Id. at 700. The court rejected plaintiff’s argument that it was unnecessary to have all five present or for three members of the board to sign the award, noting that not requiring participation by all the arbitrators would render the contract provision regarding arbitration meaningless.

Defendants rely on Cities Service Oil Co. v. American Mineral Spirits Co., 22 F.Supp. 373 (S.D.N.Y.1937). In accordance with the contract, a dispute was submitted to a board of three persons, hearings were held, and the arbitrators deliberated without reaching a decision. The neutral arbitrator then worked alone to draft a decision. He called the other arbitrators to his office, where one arbitrator signed the decision and the other dictated and signed a dissent. The dissenting arbitrator alleged a § 10(d) violation insofar as he was deprived of an opportunity to persuade the other arbitrators of the correctness of his views. The court, however, held “[although the court does not wish to encourage arbitrators to arrive at and decree awards without consulting their colleagues, it cannot be said in this case that sufficient joint consideration of the problems was not attained.” Id. at 376.

Of course, the facts before me are distinguishable. In Hod Carriers, the neutral arbitrator not only rendered the opinion, but also conducted the entire arbitration proceeding without the presence of the partisan arbitrators. Hod Carriers, 221 F.Supp. at 700. In the case at bar, both partisan arbitrators were present at the hearing and free to participate throughout. The partisan arbitrators, however, did not participate in post-hearing discussion of the case, did not review a draft of the neutral arbitrator’s decision, and were not asked to sign the award. Although the failure of the neutral arbitrator to call an executive session to review evidence presented at the hearing may not require invalidation of the decision of the board, the fact that the award was signed by only one arbitrator makes it clear that it is not a majority decision. I am not, convinced from the affidavits and depositions that the decision was arrived at by the majority of the arbitration board. The partisan arbitrators must at least be given the opportunity to offer comments and sign or dissent in the final decision. Although the courts have refused to vacate awards where, as in Cities Service, there was clear evidence that the parties had deliberated and been provided an opportunity to sign or dissent with the neutral arbitrator’s decision, the lack of evidence of any significant decision making process by the majority of the board compels me to vacate the award.

The award shall be remanded to the arbitration board for compliance with these procedural requirements. A new arbitration panel and a new hearing are unnecessary and will not be granted, as the Colorado provision providing for a new board is not applicable. The board need not rehear the evidence, but must merely meet and review the evidence, and reach a majority decision.

It is therefore ORDERED that plaintiff’s motion for summary judgment is granted and defendant’s motion for summary judgment is denied. The case shall be remanded to the original arbitration panel which shall take steps to ensure that the contract provision is complied with and a majority decision is reached.

IT IS ORDERED that this complaint and civil action are dismissed, each party to bear its own costs.

      . MacLean Deposition at 13.

      . See Agreement, Article II, § 3 at 13 (emphasis added).

      . See MacLean Deposition at 18, 30; Jurgens Affidavit, paragraph 6.

      . See Richardson affidavit, paragraph 5.

      . See In re Duluth, Missabe and Iron Range Railway Co., 124 F.Supp. 923, 928 (D.Minn. 1954); Davey Tree Surgery Co. v. International Brotherhood of Electrical Workers, Local 1245, 135 Cal.Rptr. 300, 65 Cal.App.3d 440 (1976).


source: Caselaw Access Project

author: CRABB, Chief Judge.

license: Public Domain

text:
    In re the GRAND JURY APPEARANCE OF William C. CUMMINGS.
    No. 85-GJ-25.
    United States District Court, W.D. Wisconsin.
    Aug. 9, 1985.

      Grant Johnson, Asst. U.S. Atty., Madison, Wis., for Government.
    Ralph Kalal, Madison, Wis., for Witness Cummings.
   ORDER

CRABB, Chief Judge.

This is an objection to and appeal from an order of United States Magistrate James Groh directing witness Cummings to testify before the grand jury and granting him immunity from prosecution based on his testimony. Cummings contends that the magistrate lacked the authority to enter such an order, and that the order is therefore null and void.

The Federal Magistrates Act, 28 U.S.C. §§ 631-639, governs the authority and duties of United States magistrates. “In § 636, Congress authorized magistrates to act in three categories of matters. They may hear and determine all varieties of procedural pretrial motions in both criminal and civil cases, with only a few enumerated exceptions, subject to review by the district court on a “clearly erroneous and contrary to law” standard. 28 U.S.C. § 636(b)(1)(A). They may hear and submit proposed findings and recommendations on the matters excepted in (b)(1)(A), such as motions for injunctive relief or summary judgment, as well as applications for post-trial relief and prisoner petitions challenging conditions of confinement, with their recommendations subject to de novo review by a district judge. 28 U.S.C. § 636(b)(1)(B). Finally, magistrates may be assigned and may perform such additional duties as are not inconsistent with the Constitution and the laws of the United States.” 28 U.S.C. § 636(b)(3). A magistrate’s decision on a matter assigned under § 636(b)(3) must be subject to de novo determination by the district court. Aluminum Co. of America, Badin Works, Badin, North Carolina v. United States Environmental Protection Agency, 663 F.2d 499, 502 (4th Cir. 1981); Hill v. Duriron Co., 656 F.2d 1208, 1214 (6th Cir.1981); United States v. Miller, 609 F.2d at 339-40.

The government argues that the magistrate had authority to issue the order under both 28 U.S.C. § 636(b)(1)(A) and § 636(b)(3), but as Cummings points out, § 636(b)(1)(A) applies only to pretrial matters and grand jury proceedings cannot be considered to be “pretrial matters.” Grand juries play an investigatory role. Although they occur prior to trial, and may lead to a trial, they are entirely separate from trial proceedings. Some grand jury proceedings may never result in an indictment, or may extend well beyond the scope of any eventual indictment. See Blair v. United States, 250 U.S. 273, 39 S.Ct. 468, 63 L.Ed. 979 (1919); see generally Kamisar, W. LaFave & J. Israel, Modern Criminal Procedure, at 712-718 (5th ed. 1980). It is not likely that Congress intended to include matters arising in grand jury proceedings within the category of “pretrial matter[s]” that a magistrate may hear and determine under 28 U.S.C. § 636(b)(1)(A).

If there is authority for the magistrate’s handling of immunity requests, it must have its source in the “additional duties” language of subdivision (b)(3) of § 636. The threshold question is whether, in enacting (b)(3), it was Congress’ intent to authorize magistrates to issue immunity orders. The legislative history indicates that this provision incorporates only procedural and administrative matters. Banks v. United States, 614 F.2d 95, 97-98 (6th Cir.1980). In Banks, the court held that § 636(h)(3) does not authorize a magistrate to handle a probation revocation and resentencing, because those matters are not administrative or procedural matters. Rather, they are adjudicative functions requiring factfinding, credibility assessment, and the exercise of discretion. In the court’s view, subdivision (b)(3) provides no statutory authority for magistrates to perform adjudicative and factfinding functions. As the court noted, “with two exceptions, Congress has been careful to retain fact-finding functions in district judges. The two exceptions are evidentiary hearings in habeas corpus cases and hearings in prisoner suits challenging conditions of confinement. 28 U.S.C. § 636(b)(1)(B).” Id. at 98. The Court of Appeals for the Seventh Circuit adopted the Banks holding in a recent decision, United States v. Curry, 767 F.2d 328 (7th Cir.1985).

From Banks and from the numerous cases that have upheld the delegation to magistrates of a wide variety of procedural and administrative matters under § 636(b)(3), the general principle can be distilled: functions that involve “vital and traditional adjudicatory duties” are not comprehended in the § 636(b)(3) grant of authority; functions that are essentially administrative and procedural are included. United States v. Curry, id. at 330, quoting H.R. Rep. No. 1609, 94th Cong., 2d Sess. 12 (1976), reprinted in 1976 U.S.Code Cong. & Ad.News 6162, 6172; S.Rep. No. 625, 94th Cong., 2d Sess. 10-11 (1976).

Issuance of an order granting a witness immunity and directing the witness to testify is clearly an administrative matter rather than a vital adjudicatory function. Under 18 U.S.C. § 6003, the decision to grant immunity is given to the prosecutor. The court’s role is limited to the ministerial function of determining that the jurisdictional and procedural requirements have been satisfied. In re Perlin, 589 F.2d 260 (7th Cir.1978); In re Daley, 549 F.2d 469 (7th Cir.), cert. denied, 434 U.S. 829, 98 S.Ct. 110, 54 L.Ed.2d 89 (1977). The prosecutor’s decision to grant immunity is not subject to question unless there is substantial evidence of abuse of discretion by the prosecutor that would result in a violation of due process. United States v. Taylor, 728 F.2d 930, 934-35 (7th Cir.1984). Thus, the decision to order immunity is well within the scope of those types of decisions that can be delegated under § 636(b)(3).

Citing Taylor v. Oxford, 575 F.2d 152 (7th Cir.1978), Cummings argues that the Court of Appeals for the Seventh Circuit takes a restrictive view of § 636(b)(3) and would not read it as permitting the issuance of immunity orders. I disagree. Although there is some restrictive language in the case, the court held only that a magistrate may not decide dispositive motions under § 636(b)(3). Id. at 154. That authority is withheld expressly under 28 U.S.C. § 636(b)(1)(A). In Gilbert & Bennett Manufacturing, the court clarified its interpretation of § 636(b)(3), stating that magistrates’ duties under § 636(b)(3)

are not to be restricted to only specific grants of authority or limited to functions delineated in section 636(b), for example, duties only related to “any pretrial matter.” The only limitations on section 636(b)(3) are that the duties be consistent with the Constitution and federal laws and that they not be specifically excluded by section 636(b)(1).

Matter of Establishment Inspection of Gilbert & Bennett Manufacturing Co., 589 F.2d at 1340-41.

Since the magistrates who maintain an official station at Madison have been delegated “any additional duty which is not inconsistent with the Constitution or laws of the United States” by general order entered December 12, 1978, and since the issuance of an immunity order falls within the general category of functions Congress has authorized magistrates to perform, the only remaining question is whether the particular provisions of the statute at issue here precluded the magistrate from directing Cummings to testify and granting him immunity.

Cummings argues that allowing a magistrate to order a grant of immunity is inconsistent with 18 U.S.C. § 6003. 18 U.S.C. § 6003(a) provides that:

In the case of any individual who has been or may be called to testify ... before ... a grand jury of the United States, the United States district court for the judicial district in which the proceeding is or may be held shall issue ... an order requiring such individual to give testimony ..., such order to become effective as provided in section 6002 of this part.

(Emphasis supplied.) Cummings points out that the statute refers to a “district court” as the entity responsible for issuing the order, and that a magistrate is not the same as a district court. It is impossible to dispute this particular point. But the fact that a magistrate is not a district court is not dispositive of the question whether issuance by a magistrate of an order granting immunity, subject to de novo review in the district court, is inconsistent with 18 U.S.C. § 6003.

18 U.S.C. § 6003 was enacted prior to the 1976 Amendment to the Federal Magistrates Act under which 28 U.S.C. § 636(b) was enacted in its current form, Pub.L. No. 94-577, 90 Stat. 2729 (1976). Therefore, by use of the words “district court” in § 6003, Congress could not have specifically intended to preclude magistrates from issuing orders granting immunity. Nor is the issuance of such an order, subject to de novo review by the district court, necessarily inconsistent with § 6003. When a district judge refers a matter to a magistrate, the magistrate acts under the authority and supervision of the district judge, and the judge retains the ultimate responsibility at all times. United States v. Raddatz, 447 U.S. 667, 681, 100 S.Ct. 2406, 2415, 65 L.Ed.2d 424 (1980); Mathews v. Weber, 423 U.S. 261, 270, 96 S.Ct. 549, 554, 46 L.Ed.2d 483 (1976). When a matter is referred to a magistrate, “jurisdiction remains vested in the district court and is merely exercised through the medium of the magistrate.” Muhich v. Allen, 603 F.2d 1247, 1251 (7th Cir.1979). This fact is underlined by the availability of de novo review of the magistrate’s actions. Therefore, when a magistrate issues an order granting immunity pursuant to 28 U.S.C. § 636(b)(3), the magistrate is acting on behalf of the district court and there is no inconsistency with 18 U.S.C. § 6003.

Although Cummings has not requested review of the merits of the magistrate’s order, I will proceed to make a de novo determination whether the grant of immunity was proper. The procedural requirements for obtaining an order granting immunity under 18 U.S.C. § 6003(a) are set out in 18 U.S.C. § 6003(b). Under § 6003(b), a United States attorney must determine that the testimony “may be necessary to the public interest”; the individual must have refused or be likely to refuse to testify based on his privilege against self-incrimination; and the Attorney General, the Deputy Attorney General, or a designated Assistant Attorney General must approve the request. In an affidavit, United States Attorney for the Western District of Wisconsin John R. Byrnes averred that these requirements have been satisfied. Witness Cummings has not made any challenge to the accuracy or sufficiency of the affidavit. Therefore, I conclude that the magistrate acted properly in ordering witness Cummings to testify under a grant of immunity.

ORDER

IT IS ORDERED that the magistrate’s order directing witness Cummings to testify and granting Cummings immunity for his testimony is AFFIRMED.

      . See, e.g., United States v. Rivera-Sola, 713 F.2d 866 (1st Cir.1983) (jury selection and preliminary instructions); United States v. Miller, 609 F.2d 336 (8th Cir.1979) (order compelling compliance with summons); United States v. Jones, 581 F.2d 816 (10th Cir.1978) (same); Matter of Establishment Inspection of Gilbert & Bennett Manufacturing Co., 589 F.2d 1335 (7th Cir.1979) (issuance of inspection warrant).


author: GUNN, District Judge.

text:
    C.H. BETTERTON, Plaintiff, v. FIRST INTERSTATE BANK OF ARIZONA, N.A., et al., Defendants.
    No. 84-0871C(6).
    United States District Court, E.D. Missouri.
    Aug. 12, 1985.
    Norman A. Seiner, Leonard Komen, Seiner, Glaser & Komen, St. Louis, Mo., for plaintiff.
    Joseph E. Rebman, St. Louis, Mo., Jeffrey L. Willis, Streich, Lang, Weeks & Car-don, Phoenix, Ariz., for defendants.
   MEMORANDUM

GUNN, District Judge.

This case is before the Court on defendants’ motion for summary judgment. Plaintiff, an over-the-road driver and resident of Missouri, brought an action in five counts against defendants, an Arizona bank and a loan officer of the bank. The suit arises out of the repossession and sale by the bank of a tractor and trailer purchased by plaintiff with funds loaned to him by the bank and in which the bank maintained a security interest.

The following facts are not disputed: In July 1982 and in November 1982, defendant bank loaned plaintiff a total of $51,900.00 for the purchase of a commercial truck-tractor and trailer. On each date, plaintiff executed an installment note in favor of the bank for the amount due and a security agreement granting the bank a security interest in the vehicles as collateral for the two loans. The bank also advanced to plaintiff an unsecured loan in the amount of $5,000.00 which was used to pay taxes and license costs incident to the operation of the truck.

Plaintiff immediately failed to make payments as called for by the notes and was declared in default. In January 1983 and again in September 1983, following meetings between plaintiff and defendant Stiles, who had been assigned by the bank to handle plaintiffs loan account, the parties entered into written revision agreements extending the terms of the notes. Plaintiff, however, failed to meet the revised terms and remained in default. Sometime prior to the September 1983 revision agreement, defendant Stiles ordered repossession of the tractor and trailer through Auto Recovery Bureau, a repossession company.

On February 15,1984, plaintiff and Stiles again met at the bank in Phoenix to discuss plaintiffs indebtedness. It is what plaintiff contends transpired at this meeting that forms the gravamen of his action. It is not disputed that defendant Stiles handed plaintiff a letter demanding payment in full of the principal and interest due on the three loans and stating that unless such amount was immediately paid in full, the bank would proceed with whatever action it deemed necessary to enforce collection of the debt. Plaintiff informed Stiles that the vehicles were in a repair shop in Tucson. Plaintiff asserts that Stiles then told him that if he would have the truck repaired and recover it from the shop and further agree to have his broker make payments on his behalf directly to the bank, the bank would forego repossession. Plaintiff agreed to have the necessary repairs made and to arrange with the broker to make the payments on the notes.

Stiles telephoned the broker, who was aware that plaintiff was in default and that repossession was imminent. Plaintiff directed the repair shop to fix the vehicles at a cost of $627.62. Plaintiff asserts that Stiles made the above statements knowing that the repossession order was in effect. Plaintiff further asserts that they were made for the purpose of locating the vehicles and facilitating repossession.

On the following day, February 16, 1984, after plaintiff had retrieved his tractor and trailer, the vehicles were repossessed from him in Phoenix by Auto Recovery Bureau. They were sold in March 1984 by public sale, and the proceeds were applied to the three loans.

Plaintiff then filed this suit alleging in Count I that defendant Stiles’ February 15, 1984 statement to him that the bank would forego repossession was a fraudulent misrepresentation; in Count II that the bank breached an oral contract not to repossess the truck; in Count III that the repossession constituted a conversion; and in Count V that the bank breached its duty, imposed by the Arizona Commercial Code, to exercise good faith in enforcing collection of its loans.

In considering defendants’ motion for summary judgment the Court is required to view the facts and the inferences reasonably drawn therefrom in the light most favorable to plaintiff. See Butter v. Buechler, 706 F.2d 844, 846 (8th Cir.1983). For purposes of this review, therefore, the Court will assume that defendant Stiles made the disputed statements and that she made them for the purpose of facilitating repossession of the truck.

The substantive law of Arizona applies to our inquiry in the present case. See Potter v. St. Louis-San Francisco Ry., 622 F.2d 979 (8th Cir.1980); Farm Bureau Co-op Mitt & Supply v. Blue Star Foods, 238 F.2d 326 (8th Cir.1956).

Count I—Fraud

Under Arizona law, actionable fraud requires the concurrence of the following elements: a representation, its falsity, its materiality, speaker’s knowledge of its falsity or ignorance of its truth, his intent that it should be acted upon by hearer and in a manner reasonably contemplated, hearer’s ignorance of its falsity, his reliance on its truth, his right to rely thereon, and his proximate and consequent injury. Wagner v. Casteel, 136 Ariz. 29, 663 P.2d 1020, 1022 (Ct.App.1983). A failure to prove any one of these elements is fatal to a case sounding in fraud. Smith v. Don Sanderson Ford, Inc., 7 Ariz.App. 390, 439 P.2d 837, 840 (1968).

This Court does not accept defendants’ argument that Stiles’ statement was a promise to perform in the future and, as such, could not constitute actionable fraud. A promise, when made with the present intention not to perform it, is a misrepresentation which can give rise to an action of fraud. Pinnacle Peak Developers v. TRW Investment Corp., 129 Ariz. 385, 631 P.2d 540, 543-44 (Ct.App.1980). But plaintiff’s action for fraud must fail, because he cannot establish the essential element of damages.

Plaintiff claims injury in that, in reliance on Stiles’ representations, he incurred a debt in the amount of $627.62 for the repair of the vehicles. The security agreements provide that “(s)o long as any Indebtedness remains unpaid, Debtor ... will keep the collateral in good condition and repair.” There can be no recovery in fraud for a deception by which a person is induced to do something which he is already bound to do. Berry v. Robotka, 9 Ariz.App. 461, 453 P.2d 972, 979 (1969). Under the security agreements, plaintiff was contractually obligated to make the repairs which he ordered. Hence, he has incurred no damage by ordering vehicle repairs for which he was contractually compelled to make irrespective of defendant Stiles’ alleged representations.

Plaintiff also asserts injury to his business reputation and credit as a result of Stiles’ telephone conversation with the broker. It is undisputed, however, that the broker already knew that plaintiff had defaulted on his loans and was threatened with repossession. Other alleged damages (lost income, lost title to the truck) are not proximate and consequent results of plaintiff’s reliance on Stiles’ statements.

Count II—Breach of Contract

Plaintiff asserts that the February 15, 1984 meeting between him and Stiles effectively modified the terms of his written agreements with the bank, and that the repossession breached this new oral contract. Under Arizona law, a written contract may be modified by subsequent oral changes when the changes are supported by new consideration. Coronado Co. v. Jacome’s Dept. Store, 129 Ariz. 137, 629 P.2d 553, 555 (Ct.App.1981). Such consideration cannot be something which a party is already bound to do. Perry v. Farmer, 47 Ariz. 185, 54 P.2d 999, 1001 (1936). The Court concludes that the bank’s alleged promise to forego immediate repossession is unsupported by any consideration running from plaintiff to the bank. He was contractually bound to make the payments, and he gave up nothing for the alleged oral promise which he says was exacted from the bank.

Count III—Conversion

Although the Uniform Commercial Code as adopted by Arizona, Ariz.Rev.Stat. Ann. § 47-1101 et seq. (1984), does not expressly provide for an action in conversion arising out of the improper sale of repossessed property, Arizona courts have construed the statute as permitting such an action. See Day v. Schenectady Discount Corp., 125 Ariz. 564, 611 P.2d 568 (Ct.App. 1980). The Court has concluded above that the repossession of plaintiff’s tractor-trailer was not fraudulent or in breach of contract. Thus, any action in conversion by plaintiff must be based on the impropriety of the sale itself. As Count IV pleads no facts upon which such a finding could be based, it is ripe for summary judgment.

Count V—Bad Faith

Plaintiff argues that defendants’ actions breached the duty to exercise good faith imposed by the Uniform Commercial Code and that such breach has been recognized by various courts as tortious. The Court’s discussion on plaintiff’s fraud claim disposes of this argument.

Accordingly, summary judgment is entered in favor of defendants on Counts I, II, III and V of plaintiff’s petition.

      . Count IV, which is not subject to this summary judgment, alleged that the bank breached the security agreements by not conducting the public sale in a commercially reasonable fashion. Also not under consideration now is defendant bank’s counterclaim for the deficiency not covered by the proceeds of the public sale.

      . The Court notes that the record is destitute of evidence that the item of repair has ever been paid or that a mechanic’s lien has been asserted.


author: ZIEGLER, District Judge.

text:
    PENNSYLVANIA HUMAN RELATIONS COMMISSION, Plaintiff, v. USAIR, INC., Defendant.
    Civ. A. No. 85-806.
    United States District Court, W.D. Pennsylvania.
    Aug. 12, 1985.

      Michael Foreman, Pittsburgh, Pa., for plaintiff.
    Jeffrey S. Blum, Pittsburgh, Pa., and Susan S. Sauntry, Washington, D.C., for defendant.
   MEMORANDUM OPINION

ZIEGLER, District Judge.

(1) Defendant, USAir, filed a petition for removal to this court following proceedings before the Pennsylvania Human Relations Commission. Pending before the court is the motion of the Commission to remand.

(2) On December 28, 1978, pursuant to Section 9(a) of the Pennsylvania Human Relations Act, the Commission, through its executive director, Homer Floyd, filed a charge against USAir alleging age discrimination in the hiring of flight crews in violation of Section 5(a) of the PHRA. 43 Pa. S.A. § 955(a). After an investigation, the Commission found probable cause to believe that defendant had violated the Act and defendant was served with a formal probable cause finding on October 13,1983. Conciliation was unsuccessful and defendant was notified on March 7, 1985 that a public hearing would be held. USAir petitioned for removal on April 4, 1985.

(3) Defendant contends that removal is appropriate under 28 U.S.C. § 1441(a) because “any civil action brought in a state court of which the district courts of the United States have original jurisdiction, may be removed by defendant or defendants to the district court of the United States ...” Defendant’s assertion of original jurisdiction is based on 28 U.S.C. § 1332. The Commission rejoins that the action is not removable and that subject matter jurisdiction is lacking because, as an instrumentality of the state, the Commission is not a “citizen” within the meaning of the diversity statute. Plaintiff also claims that USAir is actually a “citizen” of Pennsylvania; the Commission is not a “state court” from which actions can be removed; and that removal was untimely. Furthermore, plaintiff urges that significant state law issues are involved and therefore we should abstain, even if jurisdiction does exist.

(4) It is settled that a state or its alter ego is not a “citizen” for diversity purposes. Stone v. South Carolina, 117 U.S. 430, 6 S.Ct. 799, 29 L.Ed. 962 (1886), State Highway Commission of Wyoming v. Utah Construction Co., 278 U.S. 194, 49 S.Ct. 104, 73 L.Ed. 262 (1929). Hence, diversity jurisdiction is absent in a suit between a state or its alter ego and a citizen of another state. Postal Telegraph Cable Co. v. Alabama, 155 U.S. 482, 15 S.Ct. 192, 39 L.Ed. 231 (1894); Ramada Inns v. Rosemount Memorial Park Association, 598 F.2d 1303 (3d Cir.1979). In the present case, if the Commission is an alter ego of the Commonwealth of Pennsylvania, the state is the real party in interest and plaintiffs motion to remand must be granted.

(5) Questions concerning the citizenship of state agencies for purposes of diversity are unavoidably linked to questions of agency immunity under the Eleventh Amendment. Despite the differing policies underlying the two inquiries, they are almost identical. Blake v. Kline, 612 F.2d 718, 726 (3d Cir.1979). The only recognized distinction is that a state may waive immunity but lack of subject matter jurisdiction may never be waived. State Highway Commission, supra, 278 U.S. at 199-200, 49 S.Ct. at 105-106. Therefore, determination of the Commission’s citizenship is similar to an analysis of Eleventh Amendment sovereign immunity.

(6) When analyzing the citizenship or immunity status of state agencies, the inquiry narrows to the question whether the state is the real party in interest or, phrased another way, whether the agency is an arm or alter ego of the state. Factors involved include: the possibility that state resources may be used to satisfy a judgment against the agency; the degree of agency autonomy, Blake, supra at 722; and the extent of the state’s interest in the outcome of the litigation. Ramada Inns, supra at 1303. The first factor is not helpful to the present analysis, being more suited to litigation in which an agency is a defendant. Since the present suit is an enforcement action brought by the Commission, and USAir is not seeking money damages, the first factor must be accorded little weight.

(7) The factors for determining the degree of autonomy of a state agency were articulated in Urbano v. Board of Managers of New Jersey State Prison, 415 F.2d 247, 251 (3d Cir.1969) as follows: Whether the agency performs a proprietary or a governmental function; whether the agency is separately incorporated, has the power to sue and enter contracts, and has autonomy over its operations; whether agency property is immune from state taxation; and whether the state has immunized itself from responsibility for agency operations.

(8) The relevant information concerning the Commission is provided by the appropriate Pennsylvania statutes. Plaintiff’s powers and duties are set forth in the Pennsylvania Human Relations Act, 43 Pa. S.A. §§ 956-960, and the agency is also subject to the provisions of Administrative Code of 1929. 71 Pa.S.A. § 51 et seq.

(9) Plaintiff is a bipartisan body located within the Office of the Governor. The Governor appoints all members and chooses its chairman. 43 Pa.S.A. § 956. The Commission’s primary function is to enforce the provisions of the PHRA, an act defined by the General Assembly as “an exercise of the police power of the Commonwealth.” 43 Pa.S.A. § 952(c). In executing its mandate, plaintiff has the authority to promulgate rules and formulate enforcement policies; to investigate either a citizen’s complaint, or otherwise, any Pennsylvania employer including the Commonwealth and subdivisions for alleged violations of the PHRA; to conduct hearings to determine whether violations have occurred; and to issue judicially enforceable orders commanding compliance with the Act. Plaintiff is also required to file annual reports and to investigate certain matters at the request of the Governor. 43 Pa.S.A. §§ 956-960. The Administrative Code of 1929, 71 Pa.S.A. §§ 501-507, also forbids plaintiff from entering contracts for certain purchases, repair of buildings, bonds, or insurance without prior approval. The PHRC is entirely dependent on Commonwealth for its funding because the PHRA makes no provision for the collection of fines.

(10) We hold that, in exercising state police power, the Commission is performing a governmental and not a proprietary function. It is not separately incorporated. It may not freely enter contracts and its power to sue is limited to filing “petitions in court” to secure enforcement of its orders. 43 Pa.S.A. § 960. While it may investigate on complaint and employ necessary counsel, autonomy over its operations is limited by legislative control of funding and the executive’s power to order certain kinds of investigations. There is no statutory manifestation that Pennsylvania has immunized itself from responsibility for the agency’s actions. There is also no indication that agency property is immune from state taxation. From the foregoing, we conclude that the Commission’s degree of autonomy is less than state agencies that have been determined not to be alter egos of the Commonwealth, such as the Pennsylvania Turnpike Commission which was held to be a “legislatively ordained municipal corporation.” Gerr v. Emrick, 283 F.2d 293, 296 (3d Cir.1960).

(11) For a state to be a real party in interest, the extent of interest must be more than a general governmental interest in the welfare of all citizens and in securing compliance with its laws. Missouri, Kansas, & Texas Ry. Co. v. Missouri Railroad & Warehouse Commission, 183 U.S. 53, 61, 22 S.Ct. 18, 21, 46 L.Ed. 78 (1901); Ramada Inns, supra, at 1303. Defendant, relying on Missouri Railroad, contends that Pennsylvania has little more than a general governmental interest in this case and that the real parties in interest are defendant and an unspecified class of pilot applicants.

(12) The Commission argues that it is an enforcement arm of the Commonwealth, has no separate existence and, as such, Pennsylvania has an interest in all agency actions. Further, plaintiff relies on the recent pronouncement of the Pennsylvania Supreme Court. In Murphy v. Commonwealth of Pennsylvania Human Relations Commission, 506 Pa. 549, 486 A.2d 388 (1985), the state court observed that with respect to a complaint initiated by plaintiff, “while often benefiting individual claimants, [it] is filed on behalf of the Commonwealth as opposed to individual claimants with the intent of vindicating the public interest by eliminating discriminatory practices.” 486 A.2d at 393 (Emphasis in original).

(13) Considering the Murphy view and the functions of the PHRC, we conclude that the Commonwealth has a specific and direct interest in securing compliance with the PHRA. The state created the Commission to enforce the PHRA, and the sovereign’s interest in enforcing the act is not diminished by creation of a special enforcement-mechanism. Moreover, if the Pennsylvania Attorney General had brought the present action against USAir, no question of removal would exist. Shifting the enforcement apparatus of an act from the state government at large to a specialized state agency should have no effect upon the nature of the state’s interest.

(14) We conclude that the PHRC, within the context of this litigation, is an alter ego of the Commonwealth of Pennsylvania: The PHRC has a low degree of autonomy and is financially dependent on the state government. As the alter ego of the Commonwealth, it cannot be considered a “citizen” within the meaning of the federal diversity statute. We lack subject matter jurisdiction and plaintiff’s motion to remand must be granted. In reaching this conclusion, we need not consider and we express no opinion on the other claims advanced by the Commission in support of its motion.


author: SWEET, District Judge.

text:
    UNI-PETROL GESELLSCHAFT FUR MINERALOEL PRODUKTE M.B.H., Plaintiff, v. M/T LOTUS MARU, her tackle, boilers, engines, etc.; Norsk Oljen A.S.; Lagon Overseas Ltd.; Ebisho Shipping KK; and Sumitomo Shintaku Ginko KK, Defendants.
    No. 84 Civ. 2104 (RWS).
    United States District Court, S.D. New York.
    Aug. 12, 1985.

      See also, 607 F.Supp. 108.
    Halley & Chalos, New York City (Richard J. Deely, New York City, of counsel), for plaintiff.
    Kirlin, Campbell & Keating, New York City (Arthur E. Hoffmann, Jr., Jeffrey M. Aquilante, New York City, of counsel), for defendants.
   OPINION

SWEET, District Judge.

The defendant Sumitomo Shintaku Ginko KK (“Sumitomo”) has moved under Rule 56, Fed.R.Civ.P. for summary judgment on the ground that Sumitomo had no possession and control of the navigation and operation of its vessel, the M/T LOTUS MARU, and that Sumitomo, as owner of the vessel M/T LOTUS MARU being operated under a demise or “bareboat” charter bears no in personam liability for loss suffered during the demise. On the findings and conclusions set forth below, the motion is granted and judgment will be entered dismissing the complaint against Sumitomo.

This motion was previously denied on the ground that discovery concerning the bare-boat charter at issue had not been completed. Leave was granted to renew the motion upon the completion of discovery. An affidavit stating that the necessary’ discovery was completed, to which the charter is annexed as an exhibit, was submitted by Sumitomo. Although Uni-Petrol submitted a letter to the court stating that it had not had its discovery requests complied with, it has not challenged the affidavit.

The M/T LOTUS MARU was chartered by Sumitomo,'as registered owner, to Toni-chi Sangyo Kabushikigaisha and Tokyo Kaiji Kabushikigaisha (“Toniehi” and “Tokyo”), as charterers on June 5, 1981. The period of the charter as set forth in Article 3, was from June 5, 1981 through June 5, 1989. Plaintiff’s claim for an alleged shortage in a shipment of gasoline arises out of a voyage which commenced in Amsterdam, Netherlands to New York, New York on or about March 11, 1983. Accordingly, at all material times, the M/T LOTUS MARU was under charter to Toniehi and Tokyo.

The charter party contract is denominated as “Certificate of Ship Lease Contract.” The charter party calls for a complete surrender of the possession and control of the vessel to charterers. Specifically, under the terms of the charter party, charterers:

(1) assume the risk that the vessel will remain operable during the pendency of the charter party,
(2) must perform all necessary repairs on the vessel,
(3) must secure vessel damage insurance and war risk insurance,
(4) must appoint, dismiss and otherwise supervise crew members,
(5) must operate the vessel for the Government of Japan if it is requisitioned during the period of the charter; and must assume the risk of damage to the vessel while the vessel is under requisition in war conditions,
(6) must pay the public taxes and imposts levied against the vessel,
(7) has the option to purchase the vessel at the end of the demise; and
(8) remain responsible for damage to the vessel during the period of the demise.

The terms of the contract reveal that it is, in effect, a demise or “bareboat” charter party. The test for recognizing a demise charter party is set forth in G. Gilmore and C.L. Black, Jr., the Law of Admiralty (2d Ed., 1975):

The test is one of “control”; if the owner retains control over the vessel, merely carrying the goods furnished or designated by the charter, the charter is not a demise; if the control of the vessel itself is surrendered to the charterer, so that the master is his man and the ship’s people are his people, then we have to do with a demise. As the Supreme Court has said, “To create a demise the owner of the vessel must completely and exclusively relinquish ‘possession, command, and navigation’ thereof to the demisee.” (id. at p. 240)

See also Guzman v. Pichirilo, 369 U.S. 698, 699, 82 S.Ct. 1095, 1096, 8 L.Ed.2d 205 (1962); Schnell v. United States, 166 F.2d 479, 480 (2d Cir.1948); Fitzgerald v. A.L. Burbank & Co., 451 F.2d 670, 676 (2d Cir.1971).

The effect of the bareboat charter party arrangement is that a charterer is considered the owner of the vessel pro hac vice. The Yaka, 373 U.S. 410, 83 S.Ct. 1349, 10 L.Ed.2d 448 (1963); Bergan v. Int. Freighting Corp., 254 F.2d 231, 232 (2d Cir.1958); Klishewich v. Mediterranean Agencies, Inc., 302 F.Supp. 712 (E.D.N.Y. 1969). The consequences of a charterer’s assumption of the owner’s position are described in The Law of Admiralty, supra, at p. 242:

... In general, all in personam liabilities arising out of the ship’s operation are brought home to the demise charterer.' ... The vessel, so far as third persons are considered, is his vessel, and the men are his men; such of their defaults as are attributable to the owner and employer under respondeat superior doctrines are his to answer for. See, e.g., the Barnstable, 181 U.S. 464, 21 S.Ct. 684 [45 L.Ed. 954] (1901), where the demise charter was held primarily held liable for collision damage.

The liability of the ship owner is limited;

... An owner who has demised his ship is not indeed liable to anyone but the demisee under his warranty of seaworthiness for any loss or injury suffered during the demise. Such liabilities sound in contract and he has not made any contract with anyone else.

Cannella v. Lykes Bros. S.S. Co., 174 F.2d 794, 796 (2d Cir.1949). See also In re Marine Sulphur Queen, 460 F.2d 89 (2d Cir.1972) (“... an owner-demiser is generally only liable where the injury results from unseaworthiness or negligence which existed prior to the delivery of the vessel to the demised charterer.”); Santiago v. United States, 102 F.Supp. 425, 426 (S.D. N.Y.1952).

The subject matter of the instant action is an alleged shortage in a shipment of gasoline transported from Amsterdam to New York. This potential liability unquestionably arises out of the operation of the vessel by charterers. As such, charterers must bear what liability, if any, there is for the alleged loss. The owner has no other contractual arrangement with the charterers, Tokyo and Tonichi, other than the contract of charter party. The contract delegated complete control of the vessel to charterers. Sumitomo thus bears no in personam liability for plaintiffs alleged loss of cargo and, accordingly, plaintiff has not asserted a claim upon which relief can be granted against Sumitomo.

IT IS SO ORDERED.


author: MYRON L. GORDON, Senior District Judge.

text:
    Clayton BROESCH, Petitioner, v. John R. GAGNON, et al., Respondents.
    No. 85-C-568.
    United States District Court, E.D. Wisconsin.
    Aug. 13, 1985.

      Thomas J. Balistreri, Asst. Atty. Gen., Madison, Wis., for petitioner.
    Jack E. Schairer, Asst. State Public Defender, Madison, Wis., for respondents.
   DECISION and ORDER

MYRON L. GORDON, Senior District Judge.

In February 1983, the petitioner was convicted of burglary in violation of Wis.Stat. § 943.10(l)(a) for the theft of a gasoline can and a flashlight. He was sentenced to six years imprisonment to be served consecutive to a sentence imposed on him for a previous conviction. The trial court denied the petitioner’s motion for postconviction relief in June 1983. The petitioner’s conviction was affirmed by the Wisconsin Court of Appeals on August 23, 1984, and his petition for review subsequently was denied by the Wisconsin Supreme Court.

The petitioner now seeks habeas corpus relief, pursuant to 28 U.S.C. § 2254, contending that the trial court’s instruction concerning the possession of recently stolen property created a conclusive presumption on this factual issue which invaded the province of the jury and substantially reduced the state’s burden of proof in violation of the due process clause of the fourteenth amendment. The petition will be denied.

The state does not argue that the petitioner has failed to exhaust his state remedies, but instead asserts that any further presentation of the petitioner’s claim to the state courts would be futile in light of the state court’s conclusion that the contested instruction did not create a conclusive presumption regarding the possession of recently stolen property; I concur in the state’s assessment. Because it is clear that further state court review of the petitioner’s claim would be futile, his state remedies will be deemed exhausted for purposes of 28 U.S.C. § 2254(b). See Williams v. Duckworth, 724 F.2d 1439, 1443 n. 5 (7th Cir.), cert. denied, — U.S. —, 105 S.Ct. 143, 83 L.Ed.2d 82 (1984). The court, therefore, will proceed to the merits of the habeas corpus petition.

In its charge to the jury, the trial court stated:

“In this case there is evidence that the defendant possessed recently stolen property. This is circumstantial evidence from which you may reasonably find, in light of all the evidence in the case, that the defendant participated in some way in the taking of the property. However, the weight to be accorded such evidence is solely for you, the jury, to determine, and should depend upon the time and place of the possession as well as all the other facts in the case.”

R. 1019; Wis. JI-Criminal 173. The petitioner contends that this instruction invaded the province of the jury in contravention of due process by predetermining that the gas can and flashlight found in the petitioner’s possession were, in fact, the items stolen, and allowing the jury to infer the petitioner’s guilt based on this allegedly predetermined fact.

The due process clause of the fourteenth amendment “prohibits the State from using evidentiary presumptions in a jury charge that have the effect of relieving the State of its burden of persuasion beyond a reasonable doubt of every essential element of a crime.” Francis v. Franklin, — U.S. —, 105 S.Ct. 1965, 1970, 85 L.Ed.2d 344 (1985). Initially, the court must determine whether the challenged instruction creates a mandatory presumption or only a permissive inference. Id., 105 S.Ct. at 1971. A mandatory presumption, which may be either conclusive or rebuttable, tells the jury that they must find the presumed fact if the state proves certain predicate facts. Id. A permissive inference, on the other hand, suggests a possible conclusion that the jury might draw from the evidence but does not require the jury to draw that conclusion. Id.

A permissive inference violates due process “only if the suggested conclusion is not one that reason and common sense justify in light of the proven facts before the jury.” Id. More specifically, due process is satisfied if the fact to be inferred is “more likely than not to flow from” the basic facts on which it depends. Ulster County Court v. Allen, 442 U.S. 140, 165, 99 S.Ct. 2213, 2229, 60 L.Ed.2d 777 (1979).

In evaluating a challenged instruction, the court must consider what a reasonable juror could have understood the charge to mean. Sandstrom v. Montana, 442 U.S. 510, 514, 99 S.Ct. 2450, 2454, 61 L.Ed.2d 39 (1979). Toward this end, a single jury instruction may not be viewed in isolation, but must be considered within the context of the entire jury charge. Cupp v. Naughten, 414 U.S. 141, 146-47, 94 S.Ct. 396, 400, 38 L.Ed.2d 368 (1973).

The petitioner asserts that the trial court’s instruction to the jury that “there is [circumstantial] evidence that the defendant possessed recently stolen property,” could have been interpreted by reasonable jurors as creating a conclusive, or mandatory, presumption that the petitioner, in fact, did possess such property. The petitioner’s reasoning proceeds through several steps.

He first notes that the trial court defined “circumstantial evidence” as “the proof of certain facts from which a juror may logically infer the existence of other facts----” R. 208. He then contends that a reasonable juror in this case could have interpreted “proof” to mean “evidence sufficient to establish a thing as true, or to establish belief in its truth.” The petitioner draws this definition from one of the several definitions of “proof” contained in the Random House Dictionary of the English Language. The trial court did not expressly define “proof” in its charge to the jury.

Next, by substituting his proffered definition of “proof” in the trial court’s definition of “circumstantial evidence,” and then substituting the modified definition of “circumstantial evidence” for that phrase in the contested instruction, the petitioner asserts that reasonable jurors could have interpreted the instruction as conclusively establishing that the petitioner possessed recently stolen property. Based on this alleged conclusive presumption, he claims the jurors reasonably could have believed that they had been instructed that there was sufficient evidence to find him guilty of burglary.

The linchpin of the petitioner’s argument is that reasonable jurors could have read the proffered definition of “proof” into the court’s definition of “circumstantial evidence,” and essentially interpreted “circumstantial evidence” in this case to mean evidence sufficient to establish that the petitioner possessed recently stolen property. Reading the trial court’s charge as a whole, the court rejects the petitioner’s construction.

In instructing the jury about circumstantial evidence, the trial court cautioned that:

“Circumstantial evidence may be so weak as to not meet the standard of proof required____
“To warrant a finding of guilt on circumstantial evidence, facts necessary for the conclusions sought to be established must be proven by competent evidence beyond a reasonable doubt, and these facts must be consistent with each other and with the guilt of the defendant, and the circumstances must lead you to conclude beyond a reasonable doubt that the defendant committed the offense.”

R. 208; Wis. JI-Criminal 170. The jury also was instructed that “the weight to be accorded such [circumstantial] evidence is solely for you, the jury, to determine____” R. 209. Moreover, the jury was repeatedly told that the burden was on the state to prove the petitioner’s guilt beyond a reasonable doubt. R. 204, 205, 206, 208-09.

In sum, the jury was told, in very clear terms, that it was their responsibility to determine whether to believe circumstantial evidence. More importantly, they were instructed that if they based a guilty verdict on circumstantial evidence, such evidence had to be established beyond a reasonable doubt. Reasonable jurors, therefore, would have understood the challenged instruction as telling them that if they were convinced beyond a reasonable doubt that the petitioner possessed recently stolen property, they then could, but were not required to, infer from this circumstantial evidence, when considered in the context of all the evidence, that the petitioner participated in the theft of the property. In other words, “proof” as used in the jury charge reasonably means no more than evidence that the factfinder may rely on in making a factual determination. The challenged instruction, in effect, creates a permissive inference, rather than a mandatory presumption, concerning the possession of recently stolen property.

The inference of possession is thoroughly reasonable and “more likely than not to flow from” the predicate facts in this case. See Ulster, supra, 442 U.S. at 163-65, 99 S.Ct. at 2227-29. First, the arresting officer, having stopped to assist the petitioner start his truck, saw him with a red gas can and a flashlight only about 80 yards from the complainant’s farm. Later that same morning the complainant discovered that his flashlight and red gas can were missing from his shed. At trial he identified the two items seized from the petitioner’s truck as the items stolen from him. Evidence also was presented that a heelprint found in the complainant’s shed matched the heel pattern of the shoes the petitioner was wearing when he was arrested. The petitioner, in addition, had an ample motive to take the gas can and flashlight, his truck having run out of gas on a rural road in the middle of the night. Finally, two months after his arrest, the petitioner told a detective that he had taken a flashlight and a gas can filled with gasoline. Accordingly, the court finds that the suggested conclusion that the petitioner possessed recently stolen property did not violate the due process clause of the fourteenth amendment.

The petitioner also contends that the challenged instruction “misstated the law” by permitting the jury to infer the petitioner’s guilt for burglary based solely on the possession of recently stolen property. The bulk of the petitioner’s argument in support of this contention is directed to the validity of the instruction under Wisconsin law. The challenge to the instruction under Wisconsin law will not be considered by the court; the petitioner may seek habeas corpus relief only for the deprivation of federal rights. Engle v. Isaac, 456 U.S. 107, 119, 102 S.Ct. 1558, 1567, 71 L.Ed.2d 783 (1982).

The petitioner, however, supports this contention by relying on several federal cases which employ a due process analysis of the issue. Also, the state, in its brief, has addressed this contention so as to indicate an understanding of its federal constitutional basis. The court, therefore, will read this habeas corpus petition as encompassing the contention that it violated due process to permit the jury to infer the petitioner’s guilt based on his possession of recently stolen property.

The inference of burglary from the possession of recently stolen property has been widely accepted for centuries and has solid judicial acceptance. Cosby v. Jones, 682 F.2d 1373, 1379 (11th Cir.1982) (citations therein). In Dunlop v. United States, 165 U.S. 486, 502, 17 S.Ct. 375, 380, 41 L.Ed. 799 (1897), the Supreme Court affirmed its support of this inference when it stated, “if property recently stolen be found in the possession of a certain person, it may be presumed that he stole it, and such presumption is sufficient to authorize the jury to convict, notwithstanding the presumption of innocence.”

In the present ease, the jury was instructed that based on the circumstantial evidence that the petitioner possessed recently stolen property, they might “reasonably find, in light of all the evidence in the case, that [he] participated in some way in the taking of the property.” R. 209. The jury was instructed further that the weight to be accorded this circumstantial evidence depended “upon the time and place of the possession as well as all the other facts in the case.” Id.

Fairly construed, this language told the jury that the conclusion of participation in the theft was only a suggested, or permissive, one. The instruction did not direct the jury to consider the evidence of possession of the stolen property in a void but, quite the opposite, instructed them to consider such evidence in light of all the evidence in the case, including the time and location of the possession. The jury also was advised that the burden rested on the state to establish guilt beyond a reasonable doubt of every essential element of burglary, and that the petitioner was presumed innocent. R. 204-06.

The challenged instruction, in fact, is very similar to the pattern federal instruction concerning the possession of recently stolen property contained in E. Devitt and C. Blackmar, Federal Jury Practice and Instructions § 15.29 (3d ed. 1977). The Devitt and Blackmar instruction provides in relevant part:

“[Possession of property recently stolen, if not satisfactorily explained, is also ordinarily a circumstances from which the jury may reasonably draw the inference and find, in the light of surrounding circumstances shown by the evidence in the case, that the person in possession not only knew it was stolen property, but also participated in some way in the theft of the property.”

This instruction, and substantially similar ones, have been consistently upheld by federal courts. See, e.g., United States v. Ferro, 709 F.2d 294 (5th Cir.1983); United States v. Johnson, 563 F.2d 936 (8th Cir. 1977), cert. denied, 434 U.S. 1021, 98 S.Ct. 746, 54 L.Ed.2d 768 (1978); United States v. Johnson, 433 F.2d 1160 (D.C.Cir.1970).

The Supreme Court in Ulster, supra, 442 U.S. at 162-63, 99 S.Ct. at 2227, specified that in determining whether a permissive inference violates due process, the rationality of the inference should not be judged in the abstract but in light of the record in the case. In view of the previously cited evidence in this case, the inference of the petitioner’s participation in the theft, including his commission of the burglary, is rational and “more likely than not to flow from” the predicate facts. See id. at 165, 99 S.Ct. at 2229. The court, therefore, concludes that the permissive inference contained in the challenged jury instruction that the petitioner participated in the theft did not violate his right to due process.

Therefore, IT IS ORDERED that the petition for a writ of habeas corpus be and hereby is denied.


author: TOM S. LEE, District Judge.

text:
    UNIFIRST BANK FOR SAVINGS, F.A., Plaintiff, v. BROADMOOR APARTMENTS OF TUPELO, Broadmoor Apartments of Meridian, Grandview Realty, Inc., Southmark Realty Partners, San Jacinto Savings Association, Defendants.
    Civ. A. No. J85-0409(L).
    United States District Court, S.D. Mississippi, Jackson Division.
    Aug. 20, 1985.

      Dalton McGee, Jr., Patrick F. McAllister, Scott, Hetrick and McGee, Jackson, Miss., for plaintiff.
    L.F. Sams, Jr. and Jean Magee Young, Tupelo, Miss., for defendants.
   MEMORANDUM OPINION AND ORDER

TOM S. LEE, District Judge.

Plaintiff, Unifirst Bank for Savings, F.A. (Unifirst), a federally chartered savings bank organized under the laws of the United States of America and the State of Mississippi, brought this suit against the defendants for judgment that due-on-sale clauses in deeds of trust executed by Broadmoor Apartments of Tupelo (Broadmoor Tupelo) and by Broadmoor Apartments of Meridian (Broadmoor Meridian) and Grandview Realty, Inc. (Grandview) are valid and enforceable, that those defendants are in default and the notes secured by the respective deeds of trust are now due and payable in full, and that the plaintiff is entitled to compensatory damages, attorney fees and costs. Unifirst also names as defendants Southmark Realty Partners, Ltd. and San Jacinto Savings Association, the purchasers of the property covered by the deeds of trust. Defendants have filed a renewed motion to dismiss alleging that this court has neither federal question jurisdiction under 28 U.S.C. § 1331 nor diversity jurisdiction under 28 U.S.C. § 1332.

Plaintiff asserts that this court has federal question jurisdiction in that its right to enforce the due-on-sale clauses arises under federal law and regulations of the Federal Home Loan Bank Board. In First Federal Savings and Loan Association v. Brown, 707 F.2d 1217 (11th Cir. 1983), the Eleventh Circuit affirmed the district court’s dismissal for lack of federal question jurisdiction in actions brought by federal savings and loan associations for declaratory judgment that due-on-sale clauses in the mortgages were valid and enforceable and to foreclose mortgages. The court stated:

A case does not present a federal question of the sort necessary to confer subject matter jurisdiction pursuant to these statutes where it merely anticipates a federal question defense which the defendant might raise; nor does a case present such a federal question where it anticipates a federal question response to a non-federal defense which the defendants might raise.

707 F.2d at 1220 (citations omitted). Here, as in First Federal, the plaintiffs complaint merely anticipates a federal question defense or a federal response to a non-federal defense. Accordingly, this court is of the opinion that it does not have federal question jurisdiction.

Plaintiff also asserts that this court has diversity jurisdiction under 28 U.S.C. § 1332. The parties agree that Unifirst, which has its principal place of business in Jackson, Mississippi, is a resident of the State of Mississippi for diversity purposes. Defendants’ motion to dismiss focuses on the citizenship of Southmark, which is a limited partnership whose sole general partner is a resident of the State of New York; however, five of Southmark’s limited partners are citizens of the State of Mississippi. Plaintiff relies on Navarro Savings Association v. Lee, 446 U.S. 458, 100 S.Ct. 1779, 64 L.Ed.2d 425 (1980), for the use of a “real party in interest” test to determine the citizenship of a limited partnership. The Navarro Court cited with approval its earlier decision in Great Southern Fire Proof Hotel v. Jones, 177 U.S. 449, 20 S.Ct. 690, 44 L.Ed. 842 (1900), wherein it had held that the citizenship of all members of a limited partnership must be considered in determining whether diversity jurisdiction exists. In his dissent from the majority opinion in Navarro, Justice Blackmun noted this distinction, stating:

I am particularly troubled by the Court’s intimation that business trusts are to be treated differently from functionally analogous business associations—partnerships, limited partnerships, joint stock companies, and the like.

446 U.S. at 475, 100 S.Ct. at 1789 (Blackmun, J., dissenting). This court is of the opinion that, because defendant Southmark has limited partners who are citizens of Mississippi and plaintiff is a citizen of Mississippi for diversity purposes, it lacks jurisdiction of this action under 28 U.S.C. § 1332.

Accordingly, the court is of the opinion that defendants’ motion to dismiss should be granted. A separate judgment shall be submitted in accordance with the local rules.

      , Grandview is the successor in interest to Jug Land Factory, Inc. which actually executed the deed of trust.

      . The Eleventh Circuit’s opinion dealt with 11 cases consolidated for appeal which the court divided into 3 categories: the two addressed above in text and cases brought by prospective purchasers for declaratory judgment that the due-on-sale clauses were not enforceable. The district court had found federal question jurisdiction in the last category and the Eleventh Circuit reversed.

      . In the cases brought for declaratory judgment, the savings and loan associations raised the questions of whether the due-on-sale clauses were enforceable and whether 12 C.F.R. § 545.-8—3(f) (1982) preempted state law which did not allow enforcement of due on sale clauses.

      . Defendants’ renewed motion to dismiss states that five of Southmark’s limited partners are Mississippi residents. In its brief in opposition to the motion, plaintiff states that those Mississippi residents are included as limited partners in Southmark’s certificate of registration filed with the Mississippi Secretary of State.


author: REGAN, District Judge.

text:
    COTTON BLOSSOM CORP., INC., Jere Wilmering, Sr., and Starr Wilmering, Plaintiffs, v. LEXINGTON INSURANCE COMPANY, Defendant.
    No. 84-2955C(B).
    United States District Court, E.D. Missouri, E.D.
    Aug. 22, 1985.

      John J. Frank, Hullverson, Hullverson & Frank, St. Louis, Mo., for plaintiffs.
    Gary T. Sacks, Goldstein & Price, St. Louis, Mo., for defendant.
   MEMORANDUM

REGAN, District Judge.

This matter is before the Court on plaintiffs’ motion for partial summary judgment on their claim under Section II of the insurance policy at issue in this lawsuit, and on defendant Lexington Insurance Company’s motion for partial summary judgment in its favor as to plaintiffs’ claim under Section I of the insurance policy.

Section I of the policy contains a standard “hull and contents” provision. Lexington claims it is entitled to summary judgment in its favor on plaintiffs’ claim under Section I for these reasons:

1) there was an express “watchman’s warranty” provision applicable to Section I of the policy;
2) that express warranty was breached by plaintiffs;
3) that as a result of this breach coverage under the policy was suspended during the existence of the breach; and,
4) therefore, no material issue of fact remains and Lexington is entitled to judgment as a matter of law.

Plaintiffs respond that the “watchman’s warranty” was not material to the issuance of the insurance policy and, therefore, breach of that warranty does not void or suspend coverage under this section of the policy.

We must first determine what law is to be applied in this case. The Wilburn Boat case does little to aid our decision here. There is no Act of Congress which controls the interpretation of warranties in marine insurance policies. There does appear to be a judicially established federal admiralty rule governing the type of warranty at issue here which has validity post-Wilburn Boat. In the single case cited by defendant in support of the proposition that there is a judicially-established federal admiralty rule applicable to this case, F.B. Walker & Sons, Inc. v. Valentine, 431 F.2d 1235 (5th Cir. 1970), the Court found Mississippi and federal law to be the same, namely, that where an express “watchman’s warranty” in a policy of marine insurance is not complied with in any real particular, the policy is voided and there is no liability, 431 F.2d at 1239, 1240. The entrenched federal policy then is to follow the common-law rule which mandates strict compliance with warranties.

Missouri law is less clear. Neither the Missouri Courts nor the Missouri Legislature have recently addressed the issue of construction of a warranty in a marine insurance policy, particularly of a watchman’s warranty. Missouri has two statutes concerning the construction of warranties of fact in insurance policies: 1) warranties made in an application for insurance against loss by fire, tornado, or cyclone (§ 379.165 RSMo.); and 2) warranties of fact incorporated into any fire, tornado, or cyclone policy of insurance (§ 379.170 RSMo.). These provisions, however, do not apply either expressly or by implication to marine insurance policies.

In determining Missouri law, then, we are guided by the maxim of construction “Expressio unius est exclusio alterius. ” The exclusion of warranties made in fire, tornado, and cyclone policies of insurance by these two statutes from the workings of the common law rule of strict compliance implies that marine insurance policies are subject to the rule, namely, that breach of an express warranty voids a policy of marine insurance whether or not the fact warranted is material to the issuance of the policy or the risk insured against. Gilmore & Black, Admiralty Law 2d Ed., Section 2-7; Wilburn Boat, supra, 348 U.S. at 320, 75 S.Ct. at 373; 7 Couch on Insurance 2d § 35:B. Missouri has required strict compliance with other warranties in marine insurance policies. See e.g. Schaefer v. Home Insurance Co., 239 Mo.App. 586, 194 S.W.2d 718 (1946) (breach of warranty that ship be laid upon shore during certain period suspends coverage of policy during existence of breach). Therefore, we believe that Missouri and federal law are the same and that breach of an express warranty in a policy of marine insurance suspends the coverage of the underlying policy during the existence of the breach.

There is no question here that plaintiffs have breached the terms of the watchman’s warranty. Therefore, since no question of material fact remains and defendant is entitled to summary judgment as a matter of law on plaintiffs’ claim under Section I of the insurance policy at issue herein. Accordingly, defendant’s motion for partial summary judgment will be SUSTAINED.

We now consider plaintiffs’ motion for summary judgment on its claim under Section II of the policy, the “wreck removal” provision. This provision “covers cost or expenses of, or incidental to, the removal of the wreck of the vessel named herein when such removal is compulsory by law; provided, however, that there shall be deducted from such claim the value of any salvage recovered from the wreck by the assured.”

Having fully considered the matter, we have concluded that we cannot confidently hold that there is no genuine issue as to any material fact and that plaintiffs are entitled to judgment as a matter of law. Accordingly, plaintiffs’ motion for summary judgment will be denied.

An order will be entered in accordance with this Memorandum.

      . We agree that Fireman’s Fund Ins. Co. v. Wilburn Boat Co., 348 U.S. 310, 75 S.Ct. 368, 99 L.Ed. 337, merely held that state law is to be applied in the field of marine insurance only where "entrenched federal precedent is lacking” with respect to a specific issue. This is the interpretation which the Supreme Court itself and the Court of Appeals for the Second Circuit has placed on that decision. See Kossick v. United Fruit Co., 365 U.S. 731, 742, 81 S.Ct. 886, 894, 6 L.Ed.2d 56, and Purofied Down Products Corp. v. Travelers Fire Ins. Co. (2 Cir.) 278 F.2d 439, 441, n. 1. Fireman’s Fund Insurance Co. v. Wilburn Boat Co., 300 F.2d 631, at 647, fn. 12., cert denied, 370 U.S. 925, 82 S.Ct. 1562, 8 L.Ed.2d 505 reh'd denied, 371 U.S. 854, 83 S.Ct. 17, 9 L.Ed.2d 92 (1962) (5th Cir.).

        . See, e.g. Wilburn Boat Co. v. Fireman’s Fund Ins. Co., 348 U.S. 310, 320, 75 S.Ct. 368, 373, 99 L.Ed. 337 reh’g denied, 349 U.S. 907, 75 S.Ct. 575, 99 L.Ed. 1243 (1955) which stated: "We could adopt the old common-law doctrine of forfeiting all right of recovery in the absence of strict and literal performance of warranties, but that is a harsh rule.” Wilburn Boat, however, did not expressly overrule the pre- Wilburn Boat federal rule of strict compliance with warranties in marine insurance policies. See, e.g. Insurance Co. v. Thwing, 80 U.S. 672, 20 L.Ed. 607 (1871); Ciconett v. Home Ins. Co., 179 F.2d 892, 894 (5th Cir.1950); Aetna Insurance Co. v. Houston Oil and Transport Co., 49 F.2d 121, 124 (5th Cir.1931); Shamrock Towing Co. v. American Insurance Co., 9 F.2d 57, 60 (2d Cir.1925). See also, Salts v. Prudential Insurance Co., 140 Mo.App. 142, 120 S.W. 714, 716 (1909):
      A warranty in the law of insurance is not matter collateral to the contract, stated as an inducement to the other party to enter into the agreement, as a representation is. It is parcel of the contract, and, in the absence of a statute to the contrary, invalidates the obligation if not strictly true; and this though the thing warranted does not affect the risk.
      (Note: this was a life insurance case and there was a statute concerning the effect of misrepresentations made to obtain and secure a policy of life insurance).

      . Our holding here is not inconsistent with footnote 3 of Wilmering v. Lexington Insurance Company, 678 S.W.2d 865 (Mo.App.1984) at 868. Additionally, the cases cited by plaintiffs concerning the materiality of warranties and substantial compliance with warranties are not on point because none of them concerns a policy of marine insurance.


author: GERALD J. WEBER, District Judge.

text:
    Michael H. FERRY, Plaintiff, v. D. BERGBIGLER, Defendant.
    Civ. A. No. 84-1451.
    United States District Court, W.D. Pennsylvania.
    Aug. 26, 1985.
    Michael Ferry, Butler, Pa., for plaintiff.
    Jean 0. Davin, Deputy Atty. Gen., Pittsburgh, Pa., for defendant.
   OPINION

GERALD J. WEBER, District Judge.

This civil rights action was filed in for-ma pauperis against defendant Bergbigler, a Pennsylvania State Trooper, alleging a violation under 42 U.S.C. § 1983. Defendant has moved to dismiss the action pursuant to Fed.R.Civ.P. 12(b)(6) for failure to state a claim upon which relief can be granted. Defendant has filed a brief in support of this motion. Plaintiff has responded pro se with a brief in opposition to defendant’s motion to dismiss.

THE COMPLAINT

Plaintiff’s complaint alleges the following factual scenario. On May 9, 1984, plaintiff saw a manual lawn mower sitting near some rubbish at the curbside. Since it was raining and no one was using the lawn mower, plaintiff assumed that it was intended to be hauled away. He therefore placed the mower in the trunk of his car and drove away. Later in the day, he and the driver of the ear, Marsha Tillander, were stopped at the Clearview Mall in Butler, PA by Trooper Bergbigler, ordered not to move, and accused of stealing the lawn mower. Trooper Bergbigler attempted to have a passerby phone for more state police. Plaintiff attempted an explanation of events and offered the lawn mower to Trooper Bergbigler. When Officer Hunter arrived a few moments later, Trooper Bergbigler talked with Hunter, then retrieved the lawn mower and drove away. Officer Hunter indicated to plaintiff that defendant had accused him of stealing. Plaintiff explained what happened to Officer Hunter. No arrest followed and plaintiff was free to leave. A few weeks later, on June 4, 1984, Trooper Bergbigler accused plaintiff of driving while his license was under suspension on May 9, 1984, the date of the incident. Plaintiff says that the charges are false, and alleges that defendant has begun personal harassment of the plaintiff by filing this charge. Plaintiff seeks a restraining order prohibiting defendant from any further harassment as well as damages in excess of $10,000. Plaintiff indicates that he has suffered mental anguish and interference with his freedom of movement, peace of mind, privacy and reputation.

SECTION 1983 CLAIM

Since 42 U.S.C. § 1983 does not itself contain any substantive provisions, but provides a cause of action against certain violations of federal constitutional rights, we must examine the facts alleged to determine whether any federally protected right of plaintiff has been violated.

Defendant argues that plaintiff suffered no deprivation of any constitutionally protected right. Defendant indicates that the language of the complaint potentially alleges common law tort claims of defamation, false arrest, false imprisonment, and/or malicious prosecution. Defendant points out that plaintiff cannot utilize 42 U.S.C. § 1983 as a mechanism for raising non-constitutional tort claims.

We would agree with defendant’s latter statement. Federal courts must perform a careful screening of actions against state officials where state law provides the substantive right and must dismiss those that should properly be heard in state court. 42 U.S.C. § 1983 was designed to enforce due process and equal protection rights afforded under the Fourteenth Amendment from deprivations “under color of state law.” We believe that the only claims which would potentially state a Section 1983 cause of action in this case are those for false arrest or false imprisonment. However, assuming that there was an intentional deprivation of plaintiff’s physical liberty, (when plaintiff was told during the original incident not to move after Trooper Bergbigler stopped plaintiff’s ear at the mall) there was no use or threat of force; no official arrest was made; nor was plaintiff taken into custody. We doubt that these facts describe the deprivation of any constitutionally protected right.

Furthermore even if a deprivation does exist, we believe that state court tort action will provide plaintiff with adequate due process protections. See Ingraham v. Wright, 430 U.S. 651, 97 S.Ct. 1401, 51 L.Ed.2d 711 (1977). We, therefore grant defendant’s motion to dismiss plaintiff’s action.

An appropriate order will issue.

      . Defendant spells his last name Birckbichler in his brief.

      . Plaintiff provides evidentiary material attached to his brief to show that he was found not guilty of the charge as of August 17, 1984.

      . Malicious prosecution does not provide a basis for a Section 1983 civil rights action. Brainerd v. Potratz, 421 F.Supp. 836, 840 (N.D.Ill.1976); see also Rosales v. Lewis, 454 F.Supp. 956, 960 (S.D.Iowa 1978); Paskaly v. Seale, 506 F.2d 1209, 1212 (9th Cir.1974); Curry v. Ragan, 257 F.2d 449, 450 (5th Cir.1958), cert. denied 358 U.S. 851, 79 S.Ct. 78, 3 L.Ed.2d 85 (1958). Defamation, standing alone, does not invoke constitutional protections. Paul v. Davis, 424 U.S. 693, 701, 96 S.Ct. 1155, 1160, 47 L.Ed.2d 405 (1976).

      . Trooper Bergbigler was off duty at the time and was not said to be carrying or using a gun.


author: BARRINGTON D. PARKER, District Judge.

text:
    PRACTICAL CONCEPTS, INC., Plaintiff, v. REPUBLIC OF BOLIVIA, Defendant.
    Civ. A. No. 82-3706.
    United States District Court, District of Columbia.
    Aug. 29, 1985.

      Neil I. Levy, Melrod, Redman & Gartlan, Washington, D.C., for plaintiff.
    William R. Joyce, Jr., Thomas T.F. Huang, Vance, Joyce, Carbaugh & Huang, Washington, D.C., for defendant.
    L. Marc Zell, Topf, Zell, Kolodny & Goldlstein, Bethesda, Md., for garnishee.
   MEMORANDUM ORDER

BARRINGTON D. PARKER, District Judge.

This matter comes before the Court upon the motion of plaintiff, Practical Concepts, Inc. (“PCI”), to reconsider its Memorandum Opinion and Order of July 11, 1985, 613 F.Supp. 863. In that ruling the Court decided, among other issues, whether the action was based upon a “commercial activity” within the meaning of the Foreign Sovereign Immunities Act (“FSIA” or “the Act”), 28 U.S.C. § 1605(a)(2) (1982). The Court applied the test of Texas Trading & Milling Corp. v. Federal Republic of Nigeria, 647 F.2d 300 (2nd Cir.1981, cert. denied, 454 U.S. 1148, 102 S.Ct. 1012, 71 L.Ed.2d 301 (1982) and held that the activity at issue was not commercial since “mány of the obligations undertaken by Bolivia in the contract contemplated activity in which, by nature, a private party could not engage.” Mem.Op. at 18, citing Gibbons v. Udaras na Gaeltachta, 549 F.Supp. 1094, 1110 n. 6 (S.D.N.Y.1982). PCI believes that these obligations are “incidental” to the contract and “do not affect the essence of the bargained-for exchange, namely, consulting services for payment.” Pl.Mem. at 3. Since the Act itself does not define “commercial activity,” PCI relies almost entirely upon the legislative history. H.Rep. No. 94-1487, 94th Cong., 2d Sess. 16 (1976), U.S.Code Cong. & Admin.News 1976, pp. 6604, 6614 (hereinafter “House Report”).

The Court adheres to its decision. The House Report states that “a single contract, if of the same character as a contract which might be made by a private person, could constitute a [commercial activity].” Id. (emphasis added). This is exactly the analysis undertaken by the Court in its Memorandum Opinion. Stated only somewhat differently, a court presented with a contract action against a foreign state must determine whether the state, in entering the contract, “acted in a sovereign or essentially private capacity.” Transamerican Steamship Corp. v. Somali Democratic Republic, 767 F.2d 998, 1002 (D.C.Cir.1985). Where, as here, a state exempts a private party from taxation, grants preferential bureaucratic treatment, and diplomatic privileges, it is acting in a sovereign capacity.

To hold, as PCI urges, that because they are “essentially” private acts, contracts are per se actionable under the FSIA, would be to read the underscored qualification out of the House Report. This is precisely the sort of wooden approach which Congress rejected when it left the term “commercial activity” deliberately vague and instead entrusted the) courts with “a great deal of latitude” to define it. H.Rep. at 16. In executing that commission, the Court has given a purposive, rather than a mechanical, construction to the Act.

The Act confers jurisdiction where the action is “based upon a commercial activity.” The basis of the present action is the contract between PCI and Bolivia. Therefore, as PCI recognizes, that contract must be viewed “as a whole,” Pl.Mem. at 2, and it would be wrong to sift out whichever of its terms do not support a certain preconceived characterization of its nature.

Although contracts for goods or services may presumptively be “commercial activity,” courts have not, as mentioned in the Memorandum Opinion, shown any reflexive tendency to treat all contractual activity as “commercial” without first examining whether the activity is of a kind in which a private party might engage. E.g., Gittler v. German Information Center, 95 Misc.2d 788, 408 N.Y.S.2d 600 (gup.Ct.1978) (no FSIA jurisdiction over suit on contract to produce motion pictures). The same point has been made by a commentator:

A section-by-section analysis of the Act published in a House Report implies that the sale of a service is an inherently commercial act. Nevertheless, cases indicate that courts will make fine distinctions in this area.

Note, Establishing Jurisdiction Under the Commercial-Activities Exception to the Foreign Sovereign Immunities Act of 1976, 19 Hous.L.Rev. 1003, 1013 (1982), citing, inter alia, Castro v. Saudi Arabia, 510 F.Supp. 309, 312 (W.D.Tex.1980). The Note goes on to observe that where, as here, the contract pertains to development of a nation’s natural resources, courts have examined the jurisdictional question with special care. Id. at 1014.

The Court is unaware of any case, other than the hypothesis in Gibbons, supra, that decides whether a contract for goods or services loses its presumptively commercial character by the associated exercise of fundamental sovereign powers. It is not true, as PCI suggests, that a foreign state could easily evade the intended jurisdiction of American courts by incorporating promises to perform sovereign acts into otherwise commercial contracts. A foreign state could not unilaterally change a “commercial” contract into a “governmental” one, any more than a private party could unilaterally insert a waiver of immunity or arbitration clause into the same contract. The essence of contract is mutuality. Since the commercial activity exception is rooted in the concepts of estoppel and reliance, it is reasonable to say that when a private party bargains for and agrees to accept the benefit of a state’s exercise of its sovereign powers, that party should not be surprised when the state invokes its sovereign right of immunity.

PCI argues that “Congress clearly intended to subject AID grant contracts to the jurisdiction of the United States courts” and that the Court’s holding defeats that intention since the provisions on which it relied “are required as an integral part of the AID program.” Pl.Mem. at 6-7. First, the Court divines no such Congressional intention. The only direction of the House Report is that AID participation is irrelevant to the nature of the activity. If Congress had so clearly intended American courts to have jurisdiction, it could easily have mandated, through regulation, a waiver of immunity clause in all AID grant contracts. Second, the Court finds it significant that PCI cannot cite AID regulations requiring most of the provisions of this contract on which the Memorandum Opinion relied, such as the provisions for tax exemption, duty free clearance through customs, and bureaucratic preferences. Even if it could, the Court is not sure what relevance they would have, since one of the few things that the FSIA clearly states is that it is the nature, and not the purpose, of the defendant state’s activity that is relevant. 28 U.S.C. § 1603(d). It should not matter, then, whether Bolivia exercised its sovereignty in this case voluntarily or as a condition of the grant.

The Court believes that its decision is just, as well as legally accurate. As noted in the Memorandum Opinion, PCI chose to ignore its agreement to submit disputes to arbitration, and sought instead to hale Bolivia into a non-neutral forum. The Court has already discussed its reasons and authorities for viewing that course of conduct with extreme disfavor. Mem.Op. at 20 n. 8, 21-22. It is sufficient to add here only that the Supreme Court has very recently reiterated those concerns in Mitsubishi Motors v. Soler Chrysler-Plymouth, — U.S. —, 105 S.Ct. 3346, 87 L.Ed.2d 444 (1985). There the Court noted “the emphatic federal policy in favor of arbitral dispute resolution” and that “that policy applies with special force in the field of international commerce.” Id. at —, 105 S.Ct. at 3356-3357. That policy must be even stronger where one of the parties to the arbitration is a co-equal sovereign nation. It is therefore proper to “require this representative of the American business community to honor its bargain.” Id. at —, 105 S.Ct. at 3361.

ORDERED

That Plaintiff’s Motion to Reconsider the Court’s Memorandum Opinion and Order of July 11, 1985, as amended July 15, 1985, be and hereby is denied.

      . PCI also observes that the Court’s ground of decision was not argued by Bolivia. Ideally, where the adversarial model of equally capable counsel and equally vigorous argument is applicable, judges may act solely in their role as neutral arbiters. The Court regrets that that model has not prevailed in this case.

      . PCI takes issue with the other cases which the Court cites for this proposition because only two of them, Tuck v. Pan American Health Organization, 668 F.2d 547 (D.C.Cir.1981) and Broad-bent v. Organization of American States, 628 F.2d 27 (D.C.Cir.1980), asserted breach of contract claims, and the other cases asserted tort claims based on contractual activity. Section 1605, however, does not distinguish between claims sounding in tort and those in contract, the only question being the nature of the activity on which the action is based.

      . Birch Shipping Corp. v. Embassy of United Republic of Tanzania, 507 F.Supp. 311 (D.D.C. 1980) did not involve distinguishing commercial from non-commercial activity. That case applied a section of the Act which subjects to execution assets “used for a commercial activity.” 28 U.S.C. § 1610(a). The issue was only “whether it is proper to attach an account which is not used solely for commercial activity,” 507 F.Supp. at 313 (emphasis in original). The court was not troubled by which uses of the account were commercial and which were noncommercial. The issue was only whether the word "solely" ought to be read into the section.