author: MOTLEY, Chief Judge.

text:
    Joseph MONTAN, Plaintiff, v. Margaret M. HECKLER, Secretary of Health and Human Services, Defendant.
    No. 83 Civ. 7250 (CBM).
    United States District Court, S.D. New York.
    Nov. 19, 1984.

      Binder & Binder by Charles E. Binder, Hauppage, N.Y., for plaintiff.
    Rudolph W. Giuliani, U.S. Atty. for the S.D. of N.Y. by Donna Lieberman, Annette H. Blum, Michael Noorigian, New York City, for defendant.
   MEMORANDUM OPINION

MOTLEY, Chief Judge.

Plaintiff commences this action seeking judicial review, pursuant to section 205(g) of the Social Security Act, as amended (the “Act”), 42 U.S.C. § 405(g), of a final determination of the Secretary of the Department of Health and Human Services (the “Secretary”), which denied plaintiff’s application for federal disability insurance benefits. The case is before this court upon defendant’s motion for summary judgment on the pleadings dismissing the complaint, pursuant to Rule 12(c) of the Federal Rules of Civil Procedure. For the reasons set forth below, defendant’s motion is denied and this matter is remanded to the Secretary for further proceedings in accordance with this opinion.

FACTS

Plaintiff is a fifty-two year old male college graduate with a masters degree in special education. After serving in the armed forces during the Korean conflict, plaintiff worked as medical x-ray technician until 1966. He taught emotionally disturbed children from 1966 until 1978 when he was terminated due to his inability to handle such children. Plaintiff then taught at another school until he quit in 1980. From 1980 through November, 1982, when his teaching license expired, plaintiff taught children at his home. Plaintiff has not worked since November, 1982.

Plaintiff has no access to a car, travels by public transportation, and is usually accompanied by a friend when he travels. He receives disability compensation from the Veterans Administration.

Plaintiff filed an application for disability insurance benefits on December 24, 1981, seeking benefits as of February, 1980, due to a back injury and a nervous condition. The application was denied initially and on reconsideration. A hearing was held at plaintiffs request on September 28, 1982. The Administrative Law Judge (the “ALJ”), Robert Schwartz, before whom plaintiff and his attorney appeared, determined that plaintiff was not disabled and was capable of returning to his prior work within the field of education. The determination of the ALJ became the final decision of the Secretary when it was approved by the Appeals Council on August 5, 1983.

The medical evidence submitted to the AU may be summarized as follows:

Dr. Mario Mancheno examined plaintiff in February, 1982, concerning plaintiffs back injury. Plaintiff told Dr. Mancheno that he had sustained a back injury in 1950, and subsequently reinjured himself in 1978 and 1979. Dr. Mancheno’s examination of plaintiffs back failed to reveal any significant limitation of motion or neurological abnormalities. The diagnosis was low back syndrome and Dr. Mancheno opined that plaintiff could walk ten to twelve blocks at a time, sit for six hours at a time, and stand for four hours at a time.

In May, 1982, plaintiff was examined by Dr. Caleb Medley. Dr. Medley found no basis to substantiate plaintiffs claim of a decrease in physical activities and submitted a residual functional capacity evaluation similar to that of Dr. Mancheno.

With respect to plaintiffs nervous condition, plaintiffs treating physician, Dr. Antonio Parras, submitted two reports. One report, dated May, 1981, stated that plaintiff had been seeing another physician from 1951 until 1971. Plaintiff, however, denied this statement at his hearing. Dr. Parras found plaintiff to have a blunted affect and to suffer from depression, partially due to his inability to work. The diagnosis of Dr. Parras was that plaintiff suffered from chronic schizophrenia, paranoid type, with depression. Dr. Parras concluded his report by stating that plaintiff was psychiatrically disabled and unemployable. Dr. Parras’ second report, dated July, 1982, indicated no improvement in plaintiff’s condition.

In February, 1982, plaintiff was examined by Dr. Juan Fiks. Dr. Fiks diagnosed plaintiff as suffering from adjustment reaction to adult life, with depression. Dr. Fiks found plaintiff’s affect to be appropriate and was of the opinion that plaintiff was capable of taking care of his personal needs and doing household chores. He thought plaintiff’s claims were exaggerated.

Dr. Richard King examined plaintiff and issued a report in May 1982. His diagnosis was chronic undifferentiated schizophrenia. Dr. King found plaintiff to have a flat affect and suffer from hallucinations. He asserted that plaintiff’s claims were consistent with his own findings.

Subsequent to the hearing, but before the decision of the Appeals Council, plaintiff submitted two more physicians’ opinions concerning his nervous condition. Dr. Robert Goldstein diagnosed plaintiff as suffering from paranoid schizophrenia and stated that plaintiff was occupationally incapacitated. Dr. Marvin Stone diagnosed plaintiff as suffering from chronic schizophrenia, paranoid type, and opined that plaintiff was incapable of holding down any kind of job.

DISCUSSION

The issue before this court is whether the Secretary’s determination that plaintiff was not disabled, thereby denying plaintiff disability insurance benefits, is supported by substantial evidence. A claimant is considered disabled and therefore entitled to disability insurance benefits under the Social Security program where he is unable to “engage in any substantial activity by reason of any medically determinable physical or mental impairment which ... has lasted or can be expected to last for a continuous period of not less than twelve months.” 42 U.S.C. §§ 416(i)(1)(A) (Supp. V 1981); 1382-e(a)(3)(A)(1976). The burden of proving such disability rests upon the plaintiff. 42 U.S.C. § 423(d)(5) (Supp. IV 1980); Parker v. Harris, 626 F.2d 225, 231 (2d Cir.1980).

The regulations set forth a five step sequence for the Secretary to utilize in evaluating disability claims. 20 C.F.R. §§ 404.1520, 416.920 (1983); Rivera v. Schweiker, 717 F.2d 719, 722 (2d Cir.1983). The procedure is summarized in Berry v. Schweiker, 675 F.2d 464, 467 (2d Cir.1982) (per curiam), as follows:

First, the Secretary considers whether the claimant is currently engaged in substantial gainful activity. If he is not, the Secretary next considers whether the claimant has a “severe impairment” which significantly limits his physical or mental ability to do basic work activities. If the claimant suffers such an impairment, the third inquiry is whether, based solely on medical evidence, the claimant has an impairment which is listed in Appendix 1 of the regulations. If the claimant has such an impairment, the Secretary will consider him disabled without considering vocational factors such as age, education, and work experience; the Secretary presumes that a claimant who is afflicted with a “listed” impairment is unable to perform substantial gainful activity. Assuming the claimant does not have a listed impairment, the fourth inquiry is whether, despite the claimant’s severe impairment, he has the residual functional capacity to perform his past work. Finally, if the claimant is unable to perform his past work, the Secretary then determines whether there is other work which the claimant could perform.

Id. In the five step sequence, claimant bears the burden of proof as to the first four steps while the Secretary bears the burden of proof on the final step. Id. at 467.

The objective and subjective factors the Secretary must consider in assessing a claim of disability include: (1) objective medical facts; (2) diagnoses or medical opinions based on these facts; (3) subjective evidence of disability as testified to by the claimant or other witnesses; and (4) the claimant’s educational background, age and work experience. Rivera v. Schweiker, 717 F.2d at 723; Parker v. Harris, 626 F.2d at 231. These factors should be considered together and in combination with each other. Rodriquez v. Califano, 431 F.Supp. 421, 423 (S.D.N.Y.1977).

The Secretary’s determination must be upheld if it is supported by substantial evidence on the record as a whole; that is such relevant evidence as a reasonable mind might accept as adequate to support a conclusion. Richardson v. Perales, 402 U.S. 389, 401, 91 S.Ct. 1420, 1427, 28 L.Ed.2d 842 (1971); Donato v. Secretary of Health and Human Services, 721 F.2d 414, 418 (2d Cir.1983). Even if there is also substantial evidence for the plaintiff’s position, the Secretary’s determination must be upheld so long as the court finds that there is substantial evidence supporting the Secretary’s position. Schauer v. Schweiker, 675 F.2d 55, 57 (2d Cir.1982).

In the instant action, plaintiff has alleged eligibility for disability insurance benefits due to his nervous condition and a back injury. The back injury cannot be considered disabling since there is no medical evidence of record to support plaintiff’s contention that this injury severely impairs his ability to engage in substantial gainful activity. Indeed, two physicians’ reports attest to the contrary.

The evidence with respect to plaintiff’s nervous condition presents a much more difficult issue. The AU’s determination that plaintiff suffers from schizophrenia, which he termed cyclical in nature, and that such impairment does not significantly limit plaintiff’s ability to perform basic work-related functions is unsupported by substantial evidence. There is no medical evidence of record that suggests plaintiffs schizophrenia is cyclical in nature. In addition, no physicians’ report indicates that plaintiff is capable of returning to work in his prior capacity or in any capacity.

In general, the expert opinion of a treating physician as to the existence of a disability is binding upon the Secretary unless it is contradicted by substantial evidence. Donato v. Secretary of Health and Human Services, 721 F.2d at 419; Aubeuf v. Schweiker, 649 F.2d 107, 112 (2d Cir.1981). In the case at bar, Dr. Parras, plaintiff’s treating physician, diagnosed plaintiff as suffering from chronic schizophrenia, paranoid type, with depression. Dr. Parras opined that plaintiff was psychiatrically disabled and unemployable. Moreover, Dr. Parras’ opinion was supported by an independent diagnosis of Dr. Richard King.

In making his determination, the AU seems to have completely rejected the expert medical opinion of Dr. Parras. By failing to state his reasons for the rejection, the AU has made it impossible for this court to properly review his determination. Where, as here, the AU seemingly rejects the opinions and conclusions of the treating physician, he must make a clear finding to that effect and must “expressly state clear and convincing reasons for doing so.” Ghazibayat v. Schweiker, 554 F.Supp. 1005, 1016 (S.D.N.Y.1983), quoting Day v. Weinberger, 522 F.2d 1154, 1156 (9th Cir.1975). Moreover, the AU has “an obligation virtually amounting to an ‘affirmative duty’ to show clearly in the record that he is aware of the Second Circuit rules governing the opinions of treating physicians.” Ghazibayat v. Schweiker, 554 F.Supp. at 1016, citing Chiappa v. Secretary of H.E.W., 497 F.Supp. 356, 360 (S.D.N.Y.1980). The record in the instant case is completely devoid of any indication that the AU adhered to the Second Circuit’s rules concerning the opinions of treating physicians.

The AU apparently relied heavily upon the opinion of Dr. Fiks in rejecting the opinion of the treating physician. Dr. Fiks, who interviewed plaintiff once, diagnosed plaintiff as suffering from adjustment reaction to adult life, with depression. In Dr. Fik’s opinion plaintiff’s allegations were exaggerated. This report, standing alone, does not provide the substantial evidence necessary for rejecting the expert medical opinion of the treating physician. This is particularly true since the treating physician’s diagnosis is substantiated by the diagnosis of an independent physician.

In conjunction with the fact that the AU did not specifically articulate his reasons for rejecting the expert medical opinion of the treating physician and Dr. King, the AU’s reliance on Dr. Fiks’ report for his determination that plaintiff is not severely disabled and is capable of returning to work in the field of education is unwarranted. Dr. Fiks was of the opinion that plaintiff was capable of taking care of his money and certain of his personal needs. Dr. Fiks does not state that plaintiff is capable of returning to work in his former capacity or that plaintiff even is capable of gainful employment in any capacity. The courts of the Second Circuit “have not hesitated to remand for the taking of additional evidence, on good cause shown, where relevant, probative, and available evidence was either not before the Secretary or was not explicitly weighed and considered by him, although such consideration was necessary to a just determination of a claimant’s application. Cutler v. Weinberger, 516 F.2d 1282, 1285 (2d Cir.1975). This void in the medical testimony of the AU relied upon in the instant case precludes this court from fully reviewing the determination of the AU.

It is not the function of the reviewing court to try the case de novo, but rather, assuming the Secretary has applied the correct legal standards, to decide whether the Secretary’s determination is supported by substantial evidence. 42 U.S.C. §§ 405(g), 1383(c)(3) (Supp. IV 1980); Mathews v. Eldridge, 424 U.S. 319, 329 n. 21, 96 S.Ct. 893, 900 n. 21, 47 L.Ed.2d 18 (1976); Monguer v. Heckler, 722 F.2d 1033, 1038 (1983). However, a reviewing court is not required to accept the Secretary’s decision where the Secretary failed to apply proper legal principles or failed explicitly to consider evidence necessary to a fair determination of plaintiff’s application. Parker v. Harris, 626 F.2d at 231; Cutler v. Weinberger, 516 F.2d at 1285.

Accordingly, defendant’s motion for judgment on the pleadings dismissing the complaint is denied and this matter is remanded to the Secretary for further proceedings consistent with this opinion. A further evaluation of the medical evidence is necessary and, if it be found that plaintiff is disabled, then a further determination is to be made concerning the residual functional capacity of plaintiff to return to work in the field of education or to engage in other gainful employment.


source: Caselaw Access Project

author: HILLMAN, District Judge.

license: Public Domain

text:
    MICHIGAN STATE EMPLOYEES ASSOCIATION, a non-profit Michigan corporation; and Sheila Strunk and Shirley Kindt, on behalf of themselves and all other Michigan State Employees Association Members similarly situated, Plaintiffs, v. Duane MARLAN, Michigan Civil Service Employee Benefits Director, the Michigan Department of Civil Service, and the Michigan Civil Service Commission, Defendants.
    No. G83-1507 CA5.
    United States District Court, W.D. Michigan, S.D.
    Nov. 28, 1984.

      Fraser, Trebilcock, Davis & Foster by Michael E. Cavanaugh, Lansing, Mich., for plaintiffs.
    Frank J. Kelley, Atty. Gen. by Robert S. Welliver, Lansing, Mich., for defendants.
   OPINION RE MOTION TO DISMISS

HILLMAN, District Judge.

This is a class action filed on behalf of the Michigan State Employees Association (MSEA) and its members challenging the interpretation of certain Internal Revenue Code (IRC) provisions and Treasury regulations by defendants, Michigan Department of Civil Service (MDCS), Michigan Civil Service Commission (MCSC), and Duane Marian, Michigan Civil Service Employee Benefits Director. At issue is section 105(a) of the IRC, 26 U.S.C. § 105(a), and Treasury Regulations 1.105-1(c)(2) and (c)(3). Those provisions govern income reporting to the Internal Revenue Service (IRS) by the State of Michigan, as an employer, with respect to Long Term Disability (LTD) plan benefits received by the State’s employees.

Defendant MCSC maintains a LTD plan covering all Civil Service employees of the State. The LTD plan is an insured group policy purchased with combined premium contributions of the State, as employer, and the State’s employees. Plaintiff class of MSEA members are state employees covered by the LTD plan.

Section 105(a) of the IRC provides, in pertinent part, that such LTD benefits received by an employee must be included in the employee’s gross income and are taxable to the extent the benefits are attributable to employer contributions. F.I.C.A. withholding for the employer’s portion of the LTD premium is required.

The LTD plan provides benefits to sick and disabled individuals once all their sick leave has been utilized, and hence the amount of employer and employee contributions toward the LTD premium varies depending upon the amount of sick leave the employee has accumulated, as reflected in three subplans under the policy based on accumulated sick leave. Subplan I employees are those with 184 or less hours of accumulated sick leave; subplan II employees are those with 184 to 528 hours of accumulated sick leave; and subplan III employees are those with more than 528 hours of accumulated sick leave. The sub-plans recognize that the more accumulated sick leave an employee has, the less likely it is that the plan will have to pay out benefits to the employee, and the employee’s percentage contribution toward the LTD premium is accordingly reduced.

In 1979, the MCSC ordered the State to pay 50% of the cost of the LTD policy with the employee paying the remaining 50%. Where, under the subplans referenced above, the State had been paying less than 50% of the LTD premium, it was required to supplement the amounts contributed by the employees in the subplan so that the State’s actual share of the contribution was brought up to 50%.

Treasury Regulation 1.105-1(c)(2) provides that where different classes of employees make different contributions to such a plan, the employer must, for IRS reporting purposes, make a separate determination for each class of employees of the portion of the amounts received under the LTD plan which is attributable to employer contributions. Treasury Regulation 1.105-1(c)(3), however, provides that if the respective contributions of the employer and its employees can’t be ascertained, then the employer is permitted to calculate the employer/employee contribution determination under Treasury Regulation 1.105-1(d)(2) for all employees under the LTD plan without regard to different classes. Defendants have historically taken the view that the State’s contribution toward the LTD premium cannot be “individualized,” and thus treat the plan as contemplating one indivisible group and one fixed “employer contribution” of 50%. Thus, under Regulation 1.105-1(d)(2), F.I.C.A. is withheld on 50% of the LTD benefits paid to an employee and 50% of the LTD benefits are reported as taxable “other compensation” on the employee’s W-2 form.

Plaintiffs argue that because subplan I, II and III employees contribute different amounts toward the LTD plan premium, they constitute different classes of employees under Regulation 1.105-1(c)(2) and the State is therefore required to make a separate determination of the amounts contributed to the LTD plan premium by the State and each class of employees. Plaintiffs contend that defendants have refused to do so in direct violation of the stated IRC section and regulation.

Plaintiffs seek declaratory and injunctive relief, specifically a judgment declaring that, for purposes of IRC § 105(a), there are different classes of MSEA member employees under the plan and its subplans, and directing defendants to make the employer-employee contribution determination required by Regulation 1.105-1(c)(2) for each such employee class under the LTD plan. Plaintiffs further seek reasonable attorney fees under 42 U.S.C. § 1983 for defendants’ alleged violations of plaintiffs’ rights under the IRC. Federal question jurisdiction as to Count I purportedly rests on the conflicting interpretations of the IRC and its regulations, and jurisdiction as to Count II rests on a purported violation of plaintiffs’ federally secured rights under the IRC in violation of 42 U.S.C. § 1983.

The matter is now before the court on defendants’ motion to dismiss pursuant to Fed.R.Civ.P. 12(b)(1) and 12(b)(6) for alleged lack of subject matter jurisdiction and alleged failure to state a claim upon which relief can be granted. For the reasons stated below, defendants’ motion to dismiss is granted.

I.

A motion to dismiss under Rule 12(b)(1) raises the question of the court’s subject matter jurisdiction, its authority or competence to hear and decide a case. When a motion is based on more than one ground, the court should consider the Rule 12(b)(1) challenge first since, if it must dismiss the complaint for lack of. subject matter jurisdiction, the other defenses and objections become moot and need not be determined. In deciding the Rule 12(b)(1) motion, which challenges the actual existence rather than the sufficiency of the aliegations of subject matter jurisdiction, the general rule is that a pleading’s allegations of jurisdiction are taken as true unless denied or controverted by the movant. Once denied or controverted by the movant, however, the allegations of the complaint are not controlling and are merely evidence. Wright & Miller, Federal Practice & Procedure: Civil §§ 1350, 1363.

Defendants claim that this court lacks subject matter jurisdiction over both counts of plaintiffs’ complaint because the Eleventh Amendment of the United States Constitution bars an action against the State, its departments, agencies and officials, absent an express waiver of sovereign immunity by the State. Although the State of Michigan has not been expressly named as a defendant, plaintiffs have sued the MDCS and the MCSC, the MCSC being a legislatively created agency of the State of Michigan, which sets policy for the MDCS.

“Because of the problems of federalism inherent in making one sovereign appear against its will in the courts of the other,” the United States Supreme Court has long viewed the Eleventh Amendment as an appropriate restriction on the exercise of federal judicial power. Employees v. Missouri Public Health & Welfare Dept., 411 U.S. 279, 294, 93 S.Ct. 1614, 1622, 36 L.Ed.2d 251 (1973). Current law on the interpretation and scope of the Eleventh Amendment was recently catalogued by the Supreme Court in Pennhurst State School and Hospital v. Halderman, 465 U.S. 89, 104 S.Ct. 900, 79 L.Ed.2d 67 (1984), as follows:

“This Court’s decisions thus establish that ‘an unconsenting State is immune from suits brought in federal courts by her own citizens as well as by citizens of another state.’ Employees, supra, 411 U.S., at 280, 93 S.Ct., at 1616. There may be a question, however, whether a particular suit in fact is a suit against a State. It is clear, of course, that in the absence of consent a suit in which the State or one of its agencies or departments is named as the defendant is proscribed by the Eleventh Amendment. See, e.g., Florida Department of Health v. Florida Nursing Home Assn., 450 U.S. 147, 101 S.Ct. 1032, 67 L.Ed.2d 132 (1981) (per curiam); Alabama v. Pugh, 438 U.S. 781, 98 S.Ct. 3057, 57 L.Ed.2d 1114 (1978) (per curiam). This jurisdictional bar applies regardless of the nature of the relief sought. See, e.g., Missouri v. Fiske, 290 U.S. 18, 27, 54 S.Ct. 18, 21, 78 L.Ed. 145 (1933) (‘Expressly applying to suits in equity as well as at law, the Amendment necessarily embraces demands for the enforcement of equitable rights and the prosecution of equitable remedies when these are asserted and prosecuted by an individual against a State’).”

104 S.Ct. at 908. In addition to those general principles, the Supreme Court has expressly ruled that an unconsenting state cannot be joined as a defendant to a 42 U.S.C. § 1983 action because of the state’s eleventh amendment immunity. See Alabama v. Pugh, 438 U.S. 781, 98 S.Ct. 3057, 57 L.Ed.2d 1114 (1978), and Quern v. Jordan, 440 U.S. 332, 99 S.Ct. 1139, 59 L.Ed.2d 358 (1979). Furthermore, this court has recently held that the Michigan Public Service Commission, as an integral state agency, is entitled to the same immunity as the state itself, ANR Pipeline Co. v. Michigan Public Service Commission, 608 F.Supp. 43 (W.D.Mich.1984), and it follows that the MDCS, as an arm of the state, and the MCSC, as an integral state agency, are also entitled to that immunity. See also Pennhurst, supra; Savage v. Pennsylvania, 475 F.Supp. 524 (E.D.Pa.1979); Ward v. Hekman, 497 F.Supp. 454 (W.D.Mich.1980). Accordingly, plaintiffs’ Count I and II claims against defendants MDCS and MCSC are dismissed on the basis that sovereign immunity leaves this court without subject matter jurisdiction as to those claims.

The immunity as to defendants MDCS and MCSC does not necessarily extend to defendant Duane Marian, Michigan Civil Service Employee Benefits Director. In summarizing current law as to suit against state officials, the Pennhurst court stated:

“When the suit is brought only against state officials, a question arises as to whether that suit is a suit against the State itself. Although prior decisions of this Court have not been entirely consistent on this issue, certain principles are well established. The Eleventh Amendment bars a suit against state officials when ‘the state is the real, substantial party in interest.’ Ford Motor Co. v. Department of Treasury, 323 U.S. 459, 464, 65 S.Ct. 347, 350, 89 L.Ed. 389 (1945). See, e.g., In re Ayers, 123 U.S. 443, 487-492, 8 S.Ct. 164, 173-176, 31 L.Ed. 216 (1887); Louisiana v. Jumel, 107 U.S. 711, 720-723, 727-728, 2 S.Ct. 128, 135-137, 141-142, 27 L.Ed. 448 (1882). Thus, ‘[t]he general rule is that relief sought nominally against an officer is in fact against the sovereign if the decree would operate against the latter.’ Hawaii v. Gordon, 373 U.S. 57, 58, 83 S.Ct. 1052, 1053, 10 L.Ed.2d 191 (1963) (per curiam). And, as when the State itself is named as the defendant, a suit against state officials that is in fact a suit against a State is barred regardless of whether it seeks damages or injunctive relief. See Cory v. White, 457 U.S. 85, 91, 102 S.Ct. 2325, 2329, 72 L.Ed.2d 694 (1982).
The Court has recognized an important exception to this general rule: a suit challenging the constitutionality of a state official’s action is not one against the State. This was the holding in Ex parte Young, 209 U.S. 123, 28 S.Ct. 441, 52 L.Ed.2d 714 (1908), in which a federal court enjoined the Attorney General of the State of Minnesota from bringing suit to enforce a state statute that allegedly violated the Fourteenth Amendment. This Court held that the Eleventh Amendment did not prohibit issuance of this injunction. The theory of the case was that an unconstitutional enactment is ‘void’ and therefore does not ‘impart to [the officer] any immunity from responsibility to the supreme authority of the United States.’ Id., at 160, 28 S.Ct., at 454. Since the State could not authorize the action, the officer was ‘stripped of his official or representative character and [was] subjected to the consequences of his official conduct.’ Ibid.
While the rule permitting suits alleging conduct contrary to ‘the supreme authority of the United States’ has survived, the theory of Young has not been provided an expansive interpretation. Thus, in Edelman v. Jordan, 415 U.S. 651, 94 S.Ct. 1347, 39 L.Ed.2d 662 (1974), the Court emphasized that the Eleventh Amendment bars some forms of injunctive relief against state officials for violation of federal law. Id., at 666-667, 94 S.Ct., at 1357-1358. In particular, Edelman held that when a plaintiff sues a state official alleging a violation of federal law, the federal court may award an injunction that governs the official’s future conduct, but not one that awards retroactive monetary relief. Under the theory of Young, such a suit would not be one against the State since the federal law allegation would strip the state officer of his official authority. Nevertheless, retroactive relief was barred by the Eleventh Amendment.”

104 S.Ct. at 908-909. Plaintiffs in the case at bar seek a declaratory judgment that there are different classes of MSEA member/employees under the LTD plan for purposes of IRC § 105(a) and related regulations, as well as an injunction directing defendant Marian to make, as to each such class of employees, a separate determination of employer/employee contributions to the plan’s premium, allegedly in conformance with the requirements imposed by the IRC and its regulations. Plaintiffs emphasize that they are not seeking money damages, conceding that such money damages would not be recoverable from the State treasury. Furthermore, even if the expenditure of state funds became necessary in order to force defendant Marian to conform his conduct to a prospective injunctive decree, “such an ancillary effect on the state treasury is a permissible and often an inevitable consequence of the principle announced in Ex parte Young,” Edelman v. Jordan, 415 U.S. 651, 668, 94 S.Ct. 1347, 1358, 39 L.Ed.2d 662 (1974). See also Milliken v. Bradley, 433 U.S. 267, 288-89, 97 S.Ct. 2749, 2761, 53 L.Ed.2d 745 (1977). Accordingly, I hold that defendant Marian is not immune from this suit under the Eleventh Amendment and defendants’ motion to dismiss for lack of subject matter jurisdiction over the claims against defendant Marian is hereby denied.

II.

When a motion to dismiss is brought under Rule 12(b)(6) for failure to state a claim upon which relief can be granted, the court is called upon to determine if the plaintiffs’ pleadings set forth allegations sufficient to make out the elements of a right to relief. “[W]ell pleaded facts are taken as true, and the complaint is construed liberally in favor of the party opposing the motion.” Davis H. Elliot Co. v. Caribbean Utilities Co., Ltd., 513 F.2d 1176, 1182 (6th Cir.1975). See also Hospital Building Co. v. Rex Hospital Trustees, 425 U.S. 738, 746, 96 S.Ct. 1848, 1853, 48 L.Ed.2d 338 (1976). “[A] complaint should not be dismissed for failure to state a claim unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief.” Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 102, 2 L.Ed.2d 80 (1956). However, mere conclusions will not save a complaint from dismissal. See Blackburn v. Fisk University, 443 F.2d 121, 125 (6th Cir.1971).

Defendants’ Rule 12(b)(6) motion contends that plaintiffs have failed to state a claim under 42 U.S.C. § 1983 because (a) the State, its agency and officials are not “persons” within the meaning of that statute, and (b) plaintiffs have neither challenged the constitutionality of a state official’s actions nor articulated a federally protected right. For the reasons stated below, I find that plaintiffs have failed, in Count II, to state a claim upon which relief can be granted under 42 U.S.C. § 1983. I further find that plaintiffs have failed, in

Count I, to state a claim upon which relief can be granted under 26 U.S.C. § 105.

I recently ruled that the Michigan Public Service Commission is an arm of the State protected by the eleventh amendment and is not a “person” for purposes of section 1983. ANR Pipeline Co. v. Michigan Public Service Commission, supra, at n. 1. By analogy, neither defendant MDCS nor defendant MCSC are “persons” within the meaning of section 1983. As to defendant Marian, there can be no serious question that he qualifies as a “person” within the meaning of section 1983, and that he may be sued under that statute if it is shown that he acted under color of state law to deprive plaintiffs of a federally protected right. Scheuer v. Rhoades, 416 U.S. 232, 94 S.Ct. 1683, 40 L.Ed.2d 90 (1974).

Plaintiffs have not challenged the constitutionality of defendant Marian’s actions but have alleged that his conduct has deprived them of rights secured by IRC § 105(a) and related regulations. Therefore, the question remains whether plaintiffs may sue defendant Marian under 42 U.S.C. § 1983 for a purported violation of 26 U.S.C. § 105(a) and related Treasury regulations.

Despite the apparent holding of Maine v. Thiboutot, 448 U.S. 1, 100 S.Ct. 2502, 65 L.Ed.2d 555 (1980), that rights provided by federal law almost always may be vindicated through actions under section 1983, the following discussion from Middlesex Cty. Sewerage Auth. v. Nat. Sea Clammers, 453 U.S. 1, 19-20, 101 S.Ct. 2615, 2626, 69 L.Ed.2d 435 (1981), clearly indicates that section 1983 does not apply to all federal statutory violations:

“The claim brought here arguably falls within the scope of Maine v. Thiboutot because it involves a suit by [private parties] claiming that a federal statute has been violated under color of state law, causing an injury. The Court, however, has recognized two exceptions to the application of § 1983 to statutory violations. In Pennhurst State School and Hospital v. Halderman, 451 U.S. 1 [101 S.Ct. 1531, 67 L.Ed.2d 694] (1981), we remanded certain claims for a determination (i) whether Congress had foreclosed private enforcement of that statute in the enactment itself, and (ii) whether the statute at issue there was the kind that created enforceable ‘rights’ under § 1983. Id., at 28 [101 S.Ct. at 1545]. In the present case, because we find that Congress foreclosed a § 1983 remedy under [the Federal Water Pollution Control Act and the Marine Protection, Research, and Sanctuaries Act], we need not reach the second question whether these Acts created ‘rights, privileges, or immunities’ within the meaning of § 1983.
When the remedial devices provided in a particular Act are sufficiently comprehensive, they may suffice to demonstrate congressional intent to preclude the remedy of suits under § 1983. As Justice Stewart, who later joined the majority in Maine v. Thiboutot, stated in Chapman v. Houston Welfare Rights Organization, 441 U.S. 600, 673, n. 2 [99 S.Ct. 1905, 1909, n. 2, 60 L.Ed.2d 508] (1979) (dissenting opinion), when ‘a state official is alleged to have violated a federal statute which provides its own comprehensive enforcement scheme, the requirements of that enforcement procedure may not be bypassed by bringing suit directly under § 1983.’ ”

The court need not reach the question of whether IRC § 105(a) created “rights” within the meaning of section 1983 because the court finds that Congress, in drafting the IRC, foreclosed a section 1983 remedy under the IRC. IRC § 7422 provides a private cause of action to taxpayers to recover any internal revenue tax alleged “to have been erroneously or illegally assessed or collected, or any sum alleged to have been excessive or in any manner wrongfully collected.” The right of action for refund is expressly limited to suits only against the United States, IRC § 7422(f)(1), and no such action is maintainable until a claim for refund or credit has been duly filed with the Secretary according to his regulations, IRC § 7422(a). 28 U.S.C. § 1346(a)(1) gives the United States District Courts original jurisdiction over such suits. The prevailing party in any civil proceeding brought by or against the United States in the United States District Court or the Tax Court in connection with the determination, collection or refund of any tax under Title 26 is entitled to recover reasonable litigation costs, as long as IRS administrative remedies have been exhausted prior to filing of suit. IRC § 7430. On the reasoning expressed in Middlesex, supra, I am satisfied that Congress did not intend to preserve a section 1983 right of action when it created such specific statutory remedies to vindicate rights provided by the IRC. I, therefore, conclude that the existence of these express remedies demonstrates that Congress intended to supplant any remedy that otherwise would be available under section 1983. See also Sanders by Sanders v. Marquette Public Schools, 561 F.Supp. 1361 (W.D.Mich.1983), and Meyerson v. State of Arizona, 507 F.Supp. 859 (D.Ariz.1981).

Plaintiffs have also failed to state a claim upon which relief can be granted under Count I, where they have alleged federal question jurisdiction under 28 U.S.C. § 1331 because of the questioned interpretation of IRC § 105(a). As indicated above, a taxpayer’s statutory remedy under the IRC to recover any tax “erroneously or illegally assessed or collected, or any sum alleged to have been excessive or in any manner wrongfully collected” is the private cause of action provided by IRC § 7422. Such suit, however, may only be filed against the United States and only after a claim for refund has been filed administratively with the Secretary. The essence of plaintiffs’ claim is that defendant Marian’s conduct has resulted in the assessment and reporting of taxable earnings from the LTD plan which were five to thirteen percent higher than in actuality for MSEA employees who collected LTD benefits under subplans I and II. In order to state a claim upon which relief could be granted, plaintiffs would have to file suit against the United States alone, and then only if they had exhausted their administrative remedies. It is instructive that the IRC does not specifically make provision for the type of declaratory and injunctive relief sought by plaintiffs in this action. The IRC does specifically authorize at IRC §§ 7428, 7476, 7477 and 7478, respectively, declaratory judgment actions relating to status and classification of organizations under IRC § 501(c)(3), relating to qualification of certain retirement plans, relating to transfers of property from the United States, and relating to the status of certain governmental obligations.

Further, 28 U.S.C. § 2201, in the case of an actual controversy within the United States District Court’s jurisdiction, creates a declaratory judgment remedy “except with respect to Federal taxes other than actions brought under Section 7428 of the IRC.”

It, therefore, appears that plaintiffs’ remedy for the purported violation of IRC § 105 is limited to a refund suit against the United States as defendant, wherein the propriety of the reporting practices at issue under section 105 could be litigated.

CONCLUSION

Defendants’ motion to dismiss plaintiffs’ complaint is hereby granted, without prejudice to plaintiffs’ rights to pursue appropriate remedies under the IRC.


text:
    J.C. PRODUCTS, INC., Plaintiff, v. The UNITED STATES of America, United States Department of Defense, Defense Logistics Agency, and Sheldon A. Kaye, Contracting Officer, Defendants.
    No. G84-42 CA1.
    United States District Court, W.D. Michigan, S.D.
    Dec. 2, 1984.
    Clary, Nantz, Wood, Hoffius, Rankin & Cooper by Donald M. Bailey and Patrick R. Sughroue, Grand Rapids, Mich., for plaintiff.
    John A. Smietanka, U.S. Atty. by Anne VanderMale Tuuk, Asst. U.S. Atty., Grand Rapids, Mich., for defendants.
   OPINION RE MOTION TO DISMISS

HILLMAN, District Judge.

Plaintiff, J.C. Products, Inc., a Michigan corporation, brings this action against the United States of America; its Department of Defense; the Defense Logistics Agency, a sub-agency of the Defense Department; and Sheldon A. Kaye, an individual employed by the Defense Logistics Agency. The case is before the court on defendants’ motion to dismiss pursuant to Fed.R.Civ.P. 12(h) for lack of subject matter jurisdiction. Defendants assert as grounds for their motion that the United States Claims Court has exclusive jurisdiction of this controversy.

Between October 16, 1981, and October 4, 1982, plaintiff was awarded two defense contracts (A586 and 0593) for the production and delivery of approximately 14,000 pump assembly parts. These two contracts, after modifications, had a total contract price of approximately $777,815.00. Both contracts contained provisions for termination at the convenience of the government. Each incorporated by reference 32 C.F.R. § 7-103.21(b), the Department of Defense regulation prescribing the procedures to be followed when a contract is terminated for the convenience of the government. On July 27, 1983, plaintiff received a mailgram from defendants stating that plaintiff’s contracts A586 and 0593 had been terminated for the convenience of the government.

Plaintiff claims that from the time of the contracts’ award until their termination on July 27, 1983, it satisfactorily performed and fully complied with all terms, obligations and provisions of contracts A586 and 0593. Plaintiff further alleges that all parts actually producéd and delivered under the contracts were satisfactory, consistent with applicable specifications and otherwise in conformity with all terms and provisions of the contracts.

Defendants, on the other hand, claim deliveries of pump assemblies in April, 1983, were tested and that a 60% failure rate was found. In any event, these disputed facts are not pertinent to resolution of defendants’ motion. The merit of plaintiff’s case or defendants’ defense is not at issue. First, the jurisdiction of this court to hear the case must be resolved.

Defendants argue that even accepting plaintiff’s version of the facts as true, the only proper forum for resolution of plaintiff’s claim is the United States Claims Court. In support of their position, defendants argue that plaintiff’s underlying claim is based on contracts with the United States and that the Tucker Act (28 U.S.C. §§ 1346, 1491) excludes this action from the jurisdiction of this court. Section 1346(a)(2) provides in pertinent part:

“(a) The district courts shall have original jurisdiction, concurrent with the United States Claims Court, of:
(2) Any other civil action or claim against the United States, not exceeding $10,000 in amount, founded either upon the Constitution, or any Act of Congress, or any regulation of an executive department, or upon any express or implied contract with the United States, or for liquidated or unliquidated damages in cases not sounding in tort, except that the district courts shall not have jurisdiction of any civil action or claim against the United States founded upon any express or implied contract with the United States or for liquidated or unliquidated damages in cases not sounding in tort which are subject to sections 8(g)(1) and 10(a)(1) of the Contract Disputes Act of 1978.”

(Emphasis added).

28 U.S.C. § 1491(a)(1) provides in pertinent part:

“The United States Claims Court shall have jurisdiction to render judgment upon any claim against the United States founded either upon the Constitution, or any Act of Congress or any regulation of an executive department, or upon any express or implied contract with the United States, or for liquidated or unliquidated damages in cases not sounding in tort.”

(Emphasis added). Defendants maintain that the explicit language of these statutes prohibits the concurrent jurisdiction of this court with the United States Claims Court.

Plaintiff argues, however, that its claims are not contract claims. It asserts rather that its cause of action is: (a) a challenge to arbitrary and capricious action by an agency of the federal government, and (b) a constitutional claim based on the fifth amendment to the United States Constitution. Further, plaintiff argues that it does not claim a breach of contract and seeks no money damages against the United States. Instead, it seeks review of arbitrary and unconstitutional agency action pursuant to 28 U.S.C. § 1331 and section 702 of the Administrative Procedure Act (5 U.S.C. § 702), and, as a remedy, only injunctive and/or declaratory relief.

After careful review of plaintiff’s complaint, consideration of the arguments advanced by the parties, as well as cases cited to support those arguments, I am persuaded that plaintiff’s cause of action is founded on its express contract with the United States and further that it is a claim against the United States for an amount in excess of $10,000 and is, therefore, subject to the exclusive jurisdiction of the United States Claims Court, pursuant to 28 U.S.C. §§ 1346 and 1491(a)(1). The practical result of granting plaintiff’s request for declaratory and injunctive relief would be reinstatement of the terminated contracts. Defendants’ performance under the terminated contracts would be the payment of money, the contract price, in excess of $10,-000. Additionally, the Contract Disputes Act of 1978, 41 U.S.C. § 601, et seq., was expressly incorporated into the parties’ contract. Claims based on a contract subject to the Contract Disputes Act are explicitly excluded from the jurisdiction of this court.

The Sixth Circuit has affirmed the principle that the exclusive jurisdiction of the Court of Claims cannot be avoided by couching a prayer for monetary relief in terms of a request for injunctive or declaratory relief. Chelsea Community Hospital v. Michigan Blue Cross, 630 F.2d 1131, 1136 (6th Cir.1980). See also Rowe v. United States, 633 F.2d 799 (9th Cir.1980), cert. denied, 451 U.S. 970, 101 S.Ct. 2047, 68 L.Ed.2d 349 (1981); Laguna Hermosa Corp. v. Martin, 643 F.2d 1376, 1379 (9th Cir.1981); Sellers v. Brown, 633 F.2d 106 (8th Cir.1980); Alamo Navajo School Bd. Inc. v. Andrus, 664 F.2d 229 (10th Cir.1981), cert. denied, Apachito v. Watt, 456 U.S. 963, 102 S.Ct. 2041, 72 L.Ed.2d 487 (1982); Portsmouth Redevelopment and Housing Authority v. Pierce, 706 F.2d 471 (4th Cir.1983). The Court of Claims itself has held that where the prime effort of the complaining party is to obtain money from the federal government, the Court of Claims' exclusive jurisdiction over non-tortious claims, in excess of $10,000, cannot be evaded or avoided by framing a district court complaint to appear to seek only injunctive, mandatory or declaratory relief. Hoopa Valley Tribe v. United States, 596 F.2d 435, 219 Ct.Cl. 492 (1979).

Plaintiff’s allegations that it was deprived of property without due process of law and that the Department of Defense acted in an arbitrary or capricious manner do not compel a different result. In American Science & Engineering, Inc. v. Califano, 571 F.2d 58 (1st Cir.1978), the court faced a similar argument by a scientific research and development corporation which had entered into a contract with the Department of Health, Education and Welfare (HEW) for the development of a new X-ray system. Plaintiff brought a three-count complaint in the district court alleging breach of contract and breach of applicable HEW regulations and conduct violative of plaintiff’s right to due process of law. It sought injunctive and declaratory relief as well as damages in the amount of $100,000,000.00. As alternative bases for jurisdiction, plaintiff invoked 5 U.S.C. § 701, et seq. (Administrative Procedure Act), 28 U.S.C. § 1331 (federal question jurisdiction), 28 U.S.C. § 1343 (civil rights jurisdiction), and 28 U.S.C. § 1361 (mandamus jurisdiction). Id. at 60.

The court found that the essence of plaintiff’s claim was that HEW breached its contract with the manufacturer to produce devices developed. The court held that jurisdiction of the action was in the Court of Claims, rather than the federal district court, despite the manufacturer’s characterization of the action as one where the agency had acted outside its authority, in violation of its regulations and in violation of due process of law. The court in American Science and Engineering also rejected an argument, similar to that made by J.C. Products in the instant action, that payment of money after judgment by the Court of Claims would not adequately protect its interest. The court stated:

“That the Court of Claims cannot provide the precise relief requested is no grounds for denying its jurisdiction over the claim ... the remedy for breach of a contractual obligation is money damages which the Court of Claims is fully capable of assessing.”

(Citations omitted). Id. at 62.

Plaintiff here has not alleged a breach of contract nor requested any monetary relief. However, I am persuaded that the gravamen of plaintiffs complaint is that the United States did not honor the terms of its contract with plaintiff. I am also convinced that to grant plaintiff the injunctive and declaratory relief requested would be equivalent to a money judgment against the United States in excess of $10,000. “That the complaint is cast in terms of a declaratory judgment cannot alter the fact that what in substance is sought is a money judgment against the United States ...” Carter v. Seamans, 411 F.2d 767, 777 (5th Cir.1969), cert. denied, 397 U.S. 941, 90 S.Ct. 953, 25 L.Ed.2d 121 (1970).

Accordingly, exclusive jurisdiction of this action lies in the Court of Claims. To find otherwise on the instant facts would seriously undermine the Tucker Act and the jurisdiction of the Court of Claims. It is difficult to imagine a situation where a party whose contract with a government agency has allegedly been breached, could not assert that the breach constituted arbitrary and capricious agency action and deprivation of property without due process of law. In Megapulse, Inc. v. Lewis, 672 F.2d 959 (D.C.Cir.1982), relied on by plaintiff in the instant action, the court recognized the danger in allowing this type of circumvention of the Tucker Act. The Megapulse court quoted International Engineering Co., Division of A-T-O, Inc. v. Richardson, 512 F.2d 573, 580 (D.C.Cir.1975), cert. denied, International Engineering Co., Division of A-T-O, Inc. v. Rumsfeld, 423 U.S. 1048, 96 S.Ct. 774, 46 L.Ed.2d 636 (1976), as follows:

“[I]t is hard to conceive of a claim falling no matter how squarely within the Tucker Act which could not be urged to involve as well agency error subject to review under the APA. Little imagination is needed to foresee the consequences of a holding that such claims as this may be reviewed either in a court having power to grant equitable relief against the United States or in one having none. We refuse to believe that Congress intended, in enacting the APA, so to destroy the Court of Claims by implication.”

Id. at 967, n. 34.

Plaintiff relies primarily on two cases in support of its position that this court may properly assert jurisdiction over its claim for declaratory and injunctive relief. In Megapulse v. Lewis, 672 F.2d 959, a government contractor filed an action seeking to enjoin an alleged violation of the Trade Secrets Act (18 U.S.C. § 1905). The district court granted the government’s motion for summary judgment on the ground that it had no subject matter jurisdiction over the action. The court of appeals reversed and held that the district court did have jurisdiction over the suit which sought injunctive relief to prevent the alleged Trade Secrets Act violation, which alleged violation consisted of disclosure of information provided to the government pursuant to plaintiff’s contract with the government. The court found that the contract’s existence did not render the claims automatically within the scope of the Tucker Act and that the district court had the authority to grant the injunctive relief requested.

However, the facts in Megapulse, and the factors relied on by the court in that case, are distinguishable from those in the instant action. First, in Megapulse, plaintiff was asserting a proprietary right in intellectual property under a statutory basis of jurisdiction independent and alternative to the Tucker Act, i.e., the Trade Secrets Act; a claim validly based on grounds other than a contractual relationship with the government.” Id. at 968. Second, in Megapulse, the court was convinced that plaintiff’s claims against the government were not “disguised contract claims.” Instead, it was the government which was relying on the contract to defend against those claims. While the government’s defense raised contractual issues, plaintiff’s claim was not founded on the contract. Finally, granting plaintiff’s requested relief would not have required the government to pay a sum of money, but would have enjoined the government from disclosing certain information which plaintiff claimed belonged to it.

I find plaintiff’s assertion that the instant action is analogous to Megapulse unconvincing for the following reasons. The gist of plaintiff’s complaint here is the government’s termination of its contract with plaintiff. Despite plaintiff’s attempt to characterize it as a review of arbitrary and capricious agency action and as a constitutional claim, I am persuaded it is a disguised contract claim. Not only is the contract the source of plaintiff’s rights against the government, but granting the relief requested would require the government to pay money, namely the contract price, to plaintiff. Thus, both the heart of plaintiff’s claim against the government and the relief requested are based on its contract with the government. The Mega-pulse court was itself careful to re-emphasize that an action against the United States, which at its essence is a contract claim, must be adjudicated in the Court of Claims. Id. at 967.

The case of Vibra-Tech v. United States, 567 F.Supp. 484 (D.Col.1983), also relied on by plaintiff, is likewise distinguishable. In that case, plaintiff’s contract was terminated for the convenience of the government. The court granting the equitable and declaratory relief requested would result in a money judgment against the United States in an amount in excess of $10,000. Accordingly, exclusive jurisdiction of plaintiff’s claim lies in the Court of Claims pursuant to 28 U.S.C. § 1346(a)(2) and 28 U.S.C. § 1491(a)(1). Defendant’s motion to dismiss for lack of subject matter jurisdiction is, therefore, granted.


author: BUA, District Judge.

text:
    UNITED STATES of America ex rel. Albert Claude PARKER, Petitioner, v. Jim FAIRMAN, et al., Respondents.
    No. 84 C 2564.
    United States District Court, N.D. Illinois, E.D.
    Dec. 3, 1984.

      Albert Claude Parker, pro se.
    Neil F. Hartigan, Atty. Gen. by Marcia L. Friedl, Mark L. Rotent, Asst. Attys. Gen., State of Ill., Chicago, Ill., for respondents.
   MEMORANDUM AND ORDER

BUA, District Judge.

Following a bench trial in the Circuit Court of Cook County, Albert Parker (“petitioner”) was convicted of armed robbery and aggravated battery. The Illinois Appellate Court rejected both petitioner’s claims that he was not proven guilty of armed robbery or aggravated battery beyond a reasonable doubt and that the state failed to establish his sanity at the time of the offenses and affirmed the conviction. People v. Parker, 116 Ill.App.3d 1172, 78 Ill.Dec. 940, 462 N.E.2d 1294 (1983).

Parker filed a petition for a writ of habeas corpus with this court claiming, first, that his indictments and convictions resulted from perjured testimony and conspiratorial state action and, secondly, that the preponderance of the evidence before the trial court established that he was insane at the time the offenses were committed. In response, the State (“respondent”) has filed a motion to dismiss petitioner’s first claim and grant summary judgment in their favor regarding petitioner’s second claim. This Court’s jurisdiction is invoked pursuant to 28 U.S.C. § 2254 (1976). For the reasons stated below, this Court grants respondent’s motion to dismiss and motion for summary judgment and denies petitioner’s writ.

DISCUSSION

Petitioner seeks federal habeas corpus relief based upon claims of perjury and conspiracy on the part of state officials. A writ of habeas corpus may be granted, however, only where the grounds upon which that relief is sought have not been “waived” by the petitioner in state court. The principle of waiver in habeas corpus law holds that if a failure to present a defense at trial may be construed as an intentional forfeiture or abandonment of that defense, such a failure constitutes a waiver of the defense and therefore it may not be used later in a habeas petition. United States ex rel. Broadnax v. DeRobertis, 565 F.Supp. 327, 330 (N.D.Ill.1983). The standard for determining whether such a failure constitutes a waiver of the defense is a showing of cause for failing to raise the issue in a timely manner and a showing of actual prejudice from the errors alleged. Davis v. United States, 411 U.S. 233, 242-5, 93 S.Ct. 1577, 1582-4, 36 L.Ed.2d 216 (1973). Although petitioner knew of the purported circumstances of conspiracy and perjury at trial, he did not raise the issues there or in his appeal. The Court finds that the petitioner has not shown cause for failing to raise those issues and therefore they must be considered waived for the purpose of habeas review.

As the second ground of his habeas petition, Parker claims that the preponderance of the evidence before the trial court established that he was insane at the time the offenses were committed. This Court has stated in United States ex rel. Banks v. McGinnis, 563 F.Supp. 819 (N.D.Ill.1983), aff'd, 746 F.2d 1482 (7th Cir., 1984) that a federal court on habeas must apply the “presumption of correctness” to state appellate court factual determinations, although it may draw different conclusions as to those facts found. Unless the contested matter falls within the exceptions of paragraphs (1) through (7) of 28 U.S.C. § 2254(d) (1976), this Court must defer to the state court findings. Sumner v. Mata, 449 U.S. 539, 547, 101 S.Ct. 764, 769, 66 L.Ed.2d 722 (1981). Thereupon the burden rests upon the petitioner to “establish by convincing evidence that the factual determination by the state court was erroneous.” Sumner, 449 U.S. at 550, 101 S.Ct. at 770. (Footnote omitted.)

The question of the defendant’s sanity at the time of the offense is a question of fact. People v. Rockamann, 79 Ill.App.3d 575, 35 Ill.Dec. 328, 399 N.E.2d 162, 168 (5th Dist.1979). Since the petitioner has not rebutted the state courts’ factual determinations with “convincing evidence” and since none of the statutory exceptions exist, the Court will apply the “presumption of correctness” to these findings and uphold the trial and appellate courts’ findings.

CONCLUSION

For the reasons stated above, the state’s motion to dismiss and motion for summary judgment are granted, and Parker’s petition for a writ of habeas corpus is hereby denied.

IT IS SO ORDERED.


text:
    Lora LUX, Widow and Personal Representative of Walter H. Lux, Deceased, Plaintiff, v. McDonnell Douglas CORPORATION, Defendant.
    No. 79 C 2487.
    United States District Court, N.D.Illinois, E.D.
    Dec. 11, 1984.

      Philip Howard, William J. Harte, Chicago, Ill., for plaintiff.
    Norman J. Barry, Daniel Cummings, Rothschild, Barry & Myers, Chicago, Ill., for defendant.
   ORDER

BUA, District Judge.

Before the Court is defendant’s motion for a new trial. For the reasons stated herein, defendant’s motion for a new trial will be denied if plaintiff agrees to remit $1,000,000 of the jury’s $4,150,000 verdict. Should plaintiff refuse remittur, defendant’s motion for a new trial will be granted.

I. FACTS

This diversity case was brought by Lora Lux, the widow of Walter Lux and personal representative of his estate, under the Arizona Wrongful Death Act, A.R.S. § 12-613. On May 25, 1979, Walter Lux was killed while piloting American Airlines Flight # 191, which crashed shortly after takeoff at Chicago’s O’Hare International Airport. The sole defendant in this case is the McDonnell Douglas Corporation, manufacturer of the American Airlines’ DC-10 aircraft. Since McDonnell Douglas agreed to not contest liability, the case was tried to the jury on the issue of compensatory damages only. On February 28, 1984, the jury returned a verdict in favor of plaintiff and against defendant and assessed damages in the amount of $4,150,000. The jury allocated $4,000,000 in damages to Lora Lux and $150,000 in damages to Michael Lux, Walter Lux’ son.

In its motion for a new trial pursuant to Fed.R.Civ.P. 59, McDonnell Douglas advances several reasons this Court should grant a new trial. First, defendant argues that plaintiff’s argument to the jury was improper and prejudicial; second, defendant argues that the Court erred when it refused to instruct the jury that its award was not subject to taxation; third, defendant argues that the Court erred by excluding evidence of the effect of taxation on decedent’s income; fourth, defendant argues that evidence relating to insurance proceeds was improperly excluded from the jury; fifth, defendant argues that the jury was not properly instructed; sixth, defendant argues that the Court erred by admitting twelve irrelevant and cumulative photographs of Walter Lux and his family; and finally, defendant argues that the evidence is insufficient to support a verdict of $4.15 million dollars.

On the date of the accident, Walter Lux was 52 years old; Lora Lux was 49 years old, and their only son, Michael, was 22 years old. Walter and Lora Lux had been married 24 years. Walter Lux’ income from American Airlines as a captain pilot was $78,954 in 1978. In addition to his annual income, Walter Lux enjoyed various fringe benefits from his employment with American Airlines. These benefits included life insurance, medical and dental insurance, and pension benefits. At trial, plaintiff claimed a total of $1,589,930 in economic loss, of which approximately $1,000,000 represented lost income. Defendant, on the other hand, argued that any amount in excess of $1,000,000 for economic loss would be unfair and excessive. See Tr. 525.

Under Arizona law, Lora Lux’ non-economic loss includes her “loss of love, affection, companionship, consortium, and her personal anguish, sorrow, suffering and pain, and shock which resulted from her husband’s death.” Southern Pacific Transportation Co. v. Lueck, 111 Ariz. 560, 535 P.2d 599, 611 (1975). Lora Lux testified as follows regarding her noneconomic damages.

Walter and Lora Lux had been married 24 years at the time of the accident. Walter was killed six months before their 25th anniversary. The Luxes had bought a summer home in Wisconsin and later remodeled the home into a year-round residence. Walter performed all of the electrical and plumbing work on the house. The Lux family lived year-round in the Wisconsin residence from 1965 until 1972. In 1972, they moved to Phoenix, Arizona. After 1972, the Luxes continued to use the Wisconsin home for vacations and holidays.

On the morning of Walter’s death, Lora accompanied her husband to work at the airport in Phoenix. Walter was scheduled to pilot a plane from Phoenix to Chicago. Lora understood that Walter would fly to Chicago and then travel to the Wisconsin home to spend the Memorial Day weekend putting up wallpaper and carpeting the house. At about 1:00 p.m. that afternoon, Lora received a call at work from Walter’s sister. Walter’s sister informed Lora that a plane had crashed in Chicago. Lora responded that Walter was safe because he was on his way to the Wisconsin home. Unknown to Lora, however, Walter had been reassigned at the last minute to pilot Flight # 191 from Chicago to Los Angeles. Minutes after Lora spoke with Walter’s sister, a friend called and told Lora that American Airlines had just informed her that Walter was the pilot on the airline which crashed. Lora immediately went home and was met by a sales representative of American Airlines.

At the house, Lora took a tranquilizer and watched reports of the crash on the television. Michael soon arrived and the sales representative then drove Lora and Michael to the Phoenix airport. Michael and Lora flew to Chicago, arriving at 6:30 a.m. on Saturday. They were met by the chief pilot for American Airlines and immediately they were introduced to the pilot originally scheduled to pilot Flight # 191. Later that morning, Lora and Michael traveled to their Wisconsin home.

In Wisconsin, Lora made plans for a memorial service for Walter because she understood that Walter’s body had been burned in the crash. The evening before the scheduled service, however, the funeral director informed Lora that American Airlines had sent Walter’s remains for burial. Upon such short notice, Lora decided to have Walter’s remains cremated.

About one month after the funeral, Lora returned to her work in Phoenix as a realtor. During this period Lora became depressed and began grinding her teeth. Lora’s dentist first prescribed braces for her teeth and later surgery was required. After the surgery, however, Lora continued to grind her teeth. Lora was also treated by a psychiatrist for about one year. The psychiatrist prescribed tranquilizers in an effort to control Lora’s depression.

On one occasion after the accident, Lora was flying from Chicago to Phoenix and was seated next to the Chicago fireman who first arrived at the scene of the crash. Not knowing Lora’s identity, the fireman mentioned that he was the first fireman at the crash and that he “found the captain’s body.” On several occasions since the accident, Lora has been reminded of the crash by news reports and conversations with friends and acquaintances.

Since the accident, Lora has incurred about $13,000 in dental expenses and $1,900 in psychiatric expenses. She also has incurred the expense of hiring outside help for maintaining the Wisconsin house.

II. DISCUSSION

A. Improper Argument to the Jury

Defendant argues that a new trial is warranted because the Court “repeatedly throughout the trial instructed the jury or permitted plaintiff to argue that defendant’s liability for the accident was at issue, when in fact defendant had only stipulated not to contest liability for compensatory damages.” Defendant’s Motion at ¶ 1. This argument, however, is without merit.

Before trial, defendant amended its Answer to state: “[Defendant] does not contest liability for compensatory damages in this action.” Defendant’s Amendment to Answer, filed December 8, 1981. In addition, at Attachment G of the Final Pretrial Order, defendant states: “The defendant has abandoned and waives its denial of liability for compensatory damages and does not contest such liability.” (emphasis supplied) Therefore, to the extent that plaintiff’s counsel, or the Court in plaintiff’s Instruction No. 1, referred to defendant’s admission of liability, no error occurred. In fact, defendant’s counsel repeatedly informed the jury that his client has admitted liability in this case. See, e.g., Tr. 28 (“... we acknowledge responsibility to Mrs. Lux____”) (defendant’s opening; Tr. 473 (“There has been an admission of liability.”) (Defendant’s closing argument).

Defendant also argues that plaintiff’s counsel improperly argued to the jury that defendant should punish defendant for its conduct and that the jury should return a punitive verdict. Defendant refers primarily to the following statements made by plaintiff’s counsel during closing arguments:

The nature of this lawsuit is what I would call a consumer protection type case.
******
... the defendant has now admitted their [sic] responsibility for having caused this accident.
******
... McDonnell Douglas was at fault in bringing about the crash____
******
His dad [Walter Lux] was killed because of their [McDonnell Douglas] responsibility.
******
Walter Lux went, you know, because of the responsibility of this company, and that’s why he went, and not as he [defendant’s attorney] said, “Oh, people have heart attacks,” or anything. We’re here because of the responsibility of McDonnell Douglas in the manufacture of this aircraft. That’s why we’re here.
******
It is bad enough that they are responsible for the death of her husband____

Tr. 473-74; 475; 497; 511; 533; 540. Defendant theorizes that these statements aroused the passions and prejudices of the jurors and resulted in “at least” an extra $2.5 million being awarded in this case.

Having reviewed the record in its entirety, however, the Court is convinced that the jury’s award was not the result of passion or prejudice. With the exception of the “consumer protection” statement, plaintiff's argument to the jury simply stated that defendant had admitted liability for damages, a fact which defendant stipulated before trial. The jury was properly instructed on the issue of damages and was further instructed that neither sympathy nor prejudice should influence its decision. Tr. 545. Regarding the “consumer protection” statement, defendant was not prejudiced by this statement even assuming the statement constitutes an improper argument. Defendant’s counsel had ample opportunity to rebut any improper inference the jury might have made from plaintiff’s statement. In fact, during defendant’s closing argument, defendant’s attorney stressed:

Now, there is no issue of consumer protection. That was thrown out to you, ladies and gentlemen, in a most unfair fashion to make you think that by bringing back a large and unfair verdict, this would protect the consumers. That isn’t what this case is about. The protection of consumers, if, in fact, McDonnell Douglas had violated the FAA Regulations, that would have been the FAA’s problem, and they have tremendous ways of punishing. And that is what [plaintiff’s] counsel asked you to do, quietly and insidiously, but he asked you to protect the public, and that is not what we are here for.

Tr. 513.

Defendant’s reliance upon Gonzalez v. Volvo of American Corp., 734 F.2d 1221, 1222 (7th Cir.1984), is misplaced. Plaintiff’s argument to the jury comes nowhere close to the inflammatory and prejudicial statements in Gonzalez, which required the Seventh Circuit to reverse for a new trial. In this case, no suggestion of criminality was made against McDonnell Douglas, no references to defendant’s wealth were made, and plaintiff’s counsel did not personally comment on the credibility of witnesses. Since the facts of Gonzalez are clearly distinguishable from this case, Gonzalez does not compel a new trial here.

B. Taxation Instruction

Before trial, the Court granted plaintiff’s motion in limine and refused to instruct the jury that its award would not be subject to taxation. Lux v. McDonnell Douglas, 579 F.Supp. 1036 (N.D.Ill.1984). Defendant argues that the Seventh Circuit’s decision in In Re Air Crash Near Chicago, Illinois, 701 F.2d 1189 (7th Cir.1983) (“Air Crash ”), mandates the cautionary instruction. In Air Crash, the Seventh Circuit held that a federal court sitting in Illinois and applying the Illinois Wrongful Death Act in a diversity suit should instruct the jury that its award would not be subject to taxation. The court reasoned that since the Illinois practice of refusing the instruction was “either procedural or based on a mistaken view of federal law,” the federal cautionary instruction should be given. Air Crash, supra, 701 F.2d at 1200.

This Court is convinced that the Arizona courts, unlike the courts of Illinois, have clearly expressed a “substantive interest” in this issue. The Court, therefore, adheres to its original view articulated before trial:

This case, however, is distinguishable from the Seventh Circuit’s comments in Air Crash. Arizona’s concerns are neither procedural nor based on a mistaken view of federal law. In Mitchell v. Emblade, 80 Ariz. 398, 298 P.2d 1034 (1956), opinion modified on other grounds, 81 Ariz. 121, 301 P.2d 1032 (1956), the Arizona Supreme Court clearly held that the effect of income taxes on an award has “no part” in the correct measure of damages under Arizona law. Id. at 1038. This view remains the law in Arizona today. Young v. Environmental Air Products, Inc., 136 Ariz. 206, 665 P.2d 88, 95 (Ariz.Ct.App.1982), modified on other grounds, 136 Ariz. 158, 665 P.2d 40 (Ariz.1983). Unlike the Illinois courts, the Supreme Court of Arizona has clearly expressed a “substantive” interest in this issue. Having reviewed the Arizona cases, this Court holds that Arizona’s interest in this issue is “so closely linked with [Arizona’s] view of the measure of damages,” that it binds this Court, under the Erie doctrine, to follow the Arizona rule. See Air Crash, 701 F.2d at 1194. The rule against admitting evidence concerning the income tax consequences of a judgment, as viewed by the Arizona courts, is “so ‘outcome determinative’ as to be inseparable from the substantive law, and must be applied in diversity eases by federal courts.” Id. at 1200.

Lux v. McDonnell Douglas, 579 F.Supp. 1036, 1036-37 (N.D.Ill.1984). In summary, the Court correctly refused to instruct the jury that its award would not be subject to taxation under Arizona law.

C. Evidence Relating to the Effect of Taxation Upon Decedent’s Lost Income

Defendant argues that this Court erred by not permitting defendant to introduce evidence of the effect of taxation upon decedent’s lost income. Defendant claims that the verdict is excessive by approximately $500,000 in pecuniary losses due to the jury’s inability to consider the effect of taxation upon the decedent’s lost income. As the Ninth Circuit recently commented regarding this issue, “[t]he law of Arizona on the incidence of income taxes in tort damage awards is not as clear as it might be.” Felder v. United States, 543 F.2d 657, 666 (9th Cir.1976).

In Air Crash, the Seventh Circuit predicted that the Illinois Supreme Court, if presented with the issue, would hold that a decedent’s lost income should be reduced by the amount it would have been taxed. Air Crash, supra, 701 F.2d at 1197-99. In this case, defendant’s argument that the jury should have been allowed to consider evidence of taxation presupposes a similar prediction of Arizona law by this Court. Reviewing the Arizona precedents, however, no such prediction can be made.

In Mitchell v. Emblade, 80 Ariz. 398, 298 P.2d 1034 (1956), the Arizona Supreme Court held that a jury should not be instructed that an award for personal injuries is not subject to income taxes. More recently, the Arizona Court of Appeals extended Mitchell and held, also in a personal injury case, that “gross pay and not net or ‘take home’ pay is the proper basis for computing loss of future earnings, and that evidence of income taxes or deductions should not be allowed for the purpose of reducing the amount of damages.” Seely v. McEvers, 115 Ariz. 171, 564 P.2d 394, 397 (Ariz.Ct.App.1977). The Seely court referred to the “gross pay” measure of damages as the “majority rule,” a characterization which the editors of the American Law Reports apparently agree. See 16 A.L.R. 4th 589, 605-16 (1982 and 1984 Supp.). Since the rationale cited by the Seely court for the "gross pay” measure of damages in personal injury cases applies with equal force to wrongful death cases, this Court predicts that the Arizona Supreme Court, if faced with the issue, would extend the Seely “gross pay” measure of damages to pecuniary damage awards in wrongful death cases. In fact, federal courts construing the Arizona Wrongful Death Act have applied the Seely “gross pay” measure of damages for a considerable time. See, e.g., McCauley v. United States, 470 F.2d 137, 139 (9th Cir.1972); United States v. Becker, 378 F.2d 319, 324 (9th Cir.1967). In summary, defendant’s argument that this Court erred by excluding evidence of taxation on decedent’s future income is without merit under Arizona law.

D. Excessiveness of the Verdict

Plaintiff does not deny that the $4.15 million award in this case far exceeds any prior award under the Arizona Wrongful Death Act. In fact, the Court’s research has failed to discover any reported decision awarding wrongful death compensatory damages under the Arizona Act in excess of $2,000,000. Accordingly, the Court is required to consider whether the award of $4.15 million, under the facts of this case, is excessive.

In reviewing a jury verdict for damages to determine whether it is excessive, the Court must defer to the judgment of the jury unless the award is “monstrously excessive” or “so large as to shock the conscience of the court.” Mary Beth G. v. City of Chicago, 723 F.2d 1263, 1275 (7th Cir.1983). One factor the Court may consider in determining whether an award is excessive is whether the award is “out of line compared to other awards in similar cases.” Levka v. City of Chicago, 748 F.2d 421, 425 (7th Cir.1984). Should the Court conclude that an award is excessive under this standard, the Court may condition the denial of a new trial on the plaintiffs agreement to remit part of the award. See Levka, supra, 748 F.2d 421; Mary Beth G. v. City of Chicago, 723 F.2d 1263, 1275 (7th Cir.1983); Huff v. White Motor Corp., 609 F.2d 286, 296-97 (7th Cir.1979); Dorin v. Equitable Life Assurance Society, 382 F.2d 73 (7th Cir.1967). The Court, however, must grant a new trial unconditionally if the excessive verdict is the result of passion, prejudice or caprice. Dorin, supra, 382 F.2d at 77. See also Gulf Coast Building & Construction Trades Council v. F.R. Hoar & Son, Inc., 370 F.2d 746, 749 (5th Cir.1967); Gibbs v. United Mine Workers, 343 F.2d 609, 616-17 (6th Cir.1965), rev’d on other grounds, 383 U.S. 715, 86 S.Ct. 1130, 16 L.Ed.2d 218 (1966).

Having reviewed the record, arguments of counsel at trial, and the Court’s instructions to the jury, the Court is convinced that the jury’s award is not the result of passion, prejudice or caprice. The jury was instructed properly as to the scope of damages which it could award, and was further instructed that neither sympathy nor prejudice should influence its verdict.

In comparing the $4.15 million award in this case, however, with awards in other Arizona wrongful death cases, this award stands out as excessive. This Court’s research indicates that the highest reported wrongful death verdict for compensatory damages upheld on appeal in Arizona is a $2,000,000 verdict for the wrongful death of a husband with two children. Southern Pacific Transportation Co. v. Lueck, 111 Ariz. 560, 535 P.2d 599 (1975). Other reported decisions reflect even smaller awards. See, e.g., Grant v. Arizona Public Service Co., 133 Ariz. 434, 652 P.2d 507 (1982) ($1,250,000 compensatory award for wrongful death of husband); Fulton v. Johannsen, 3 Ariz.App. 562, 416 P.2d 983 (1966) ($200,000 compensatory award for wrongful death of 29-year-old husband); Merritt-Chapman & Scott Corp. v. Frazier, 289 F.2d 849 (9th Cir.1961) ($200,000 compensatory award for wrongful death of husband); Welch v. McClure, 123 Ariz. 161, 598 P.2d 980 (1979) ($125,000 for compensatory award for wrongful death of husband); City of Phoenix v. Whiting, 10 Ariz.App. 189, 457 P.2d 729 (1969) ($100,-000 compensatory award for wrongful death of 29-year-old wife).

In this case, Walter Lux was 52 years old at the time of his death. Mrs. Lux testified extensively as to her personal anguish, grief, sorrow and anxiety. See discussion supra, at 100-102. As a result of her husband’s death, Mrs. Lux began grinding her teeth (which caused teeth and jaw damage) and she required psychiatric treatment. The evidence of pecuniary damages amounted to approximately $1.6 million. The Court is convinced, however, that the evidence does not support a damage award of this magnitude. Considering the evidence at trial and other awards in similar cases, the Court is of the opinion that a remittitur of $1,000,000 is appropriate. A compensatory award of $3,150,000 comports with verdicts returned in similar cases and compensates plaintiff for the damages she is entitled to recover under Arizona law.

III. CONCLUSION

Defendant’s motion for a new trial will be denied if plaintiff agrees to remittitur of $1,000,000 within 30 days of entry of this order. Should plaintiff agree to remittitur, judgment will be entered in favor of plaintiff and against defendant in the amount of $3,150,000 ($3,000,000 allocated for Lora Lux; $150,000 allocated for Michael Lux). Should plaintiff refuse remittitur, defendant’s motion for a new trial will be granted.

IT IS SO ORDERED.

      . A.R.S. § 12-613 reads as follows:
      In an action for wrongful death, the jury shall give such damages as it deems fair and just with reference to the injury resulting from the death to the surviving parties who may be entitled to recover, and also having regard to the mitigating or aggravating circumstances attending the wrongful act, neglect or default. The amount recovered in such action shall not be subject to debts or liabilities of the deceased, unless the action is brought on behalf of the decedent’s estate.

      . To the extent that the Court’s February 22, 1984 Order combined the taxation instruction issue with the effect of taxation upon decedent’s lost income issue (see Section C infra), the Court clarified any confusion at trial. See Tr. 143-154. In any event, this opinion will treat the two issues separately.

      . The fourteen jurisdictions listed which exclude evidence of taxation upon lost income are: Alaska, Arizona, Arkansas, California, Colorado, Delaware, Maryland, Pennsylvania, Texas, Virginia, Virgin Islands, Washington, West Virginia, and Wisconsin. Only eight states are listed which admit such evidence: Connecticut, District of Columbia, Illinois (as predicted by the Seventh Circuit), Iowa, Nebraska, New Jersey, New York, and Rhode Island. In Louisiana, the appellate courts have split on the issue. 16 A.L.R. 4th 589, 605-16 (1982 and 1984 Supp.).

      . For the above reasons, the Court also rejects defendant’s argument that it was error to exclude the effect of taxation on decedent’s post-retirement income.

      . Defendant’s remaining arguments are without merit. Evidence relating to plaintiff s insurance proceeds was inadmissible under Fed.R.Evid. 403. The twelve photographs of decedent and his family were properly admitted. See Waldron v. Hardwick, 406 F.2d 86 (7th Cir.1979). Finally, the jury was properly instructed as to the measure of damages under Arizona law. See Southern Pacific Transportation Co. v. Lueck, 111 Ariz. 560, 535 P.2d 599 (1975); Fluor Corp. v. Sykes, 3 Ariz.App. 211, 413 P.2d 270 (1966).


text:
    Durgham HAWWAT, Plaintiff, v. Margaret HECKLER, Secretary of Health and Human Services, Defendant.
    No. 84 C 0914.
    United States District Court, N.D. Illinois, E.D.
    Dec. 12, 1984.

      Gerald B. Saltzberg, Fishman & Fishman & Saltzberg, P.C., Chicago, Ill., for plaintiff.
    Dan K. Webb, U.S. Atty. by William T. Clabault, Asst. U.S. Atty., Donna Morros Weinstein, Regional Atty., Dept, of Health and Human Services, Chicago, Ill., for defendant.
   ORDER

BUA, District Judge.

Before the Court are the parties’ cross-motions for summary judgment. For the reasons stated below, both motions are denied and this cause is remanded for further proceeding consistent with this opinion.

FACTS

Durgham Hawwat is 63 years old with four years of schooling in Palestine. He cannot read or write English and he speaks very little English. In order to understand English-speaking persons, plaintiff requires an interpreter.

Plaintiff claimed disability by reason of asthma and breathing impairments. One of plaintiff’s treating physicians, Dr. Isa Ziadek, concluded that plaintiff has “advanced obstructive airway disease with severe respiratory insufficiency which is fully disabling him.” Tr. 129. Another treating physician, Dr. J. Lafair, concluded that plaintiff suffers from “severe chronic asthma and a degree of respiratory insufficiency which would limit his ability to be fully active.” Tr. 122. The AU, however, rejected these reports and, instead, relying upon the report of a consulting physician, Dr. B. Stevens, the AU concluded that plaintiff “does not have any breathing impairment which would preclude his past relevant light machine work.” Tr. 9.

At a hearing before the AU on August 11, 1983, plaintiff was not represented by an attorney, and since he is unable to communicate in English, an interpreter was necessary. Even with the aid of the interpreter, however, the record reveals obvious communication difficulties. Shortly after the hearing began, the AU noted:

AU: ... since he stopped working in ’73, his insured status for disability purposes ends in 1978. Therefore, it’s very important for us to find out what was going on before 1978. Okay?
INTERPRETER: Okay, your honor.
AU: All right, does he understand that now?
INTERPRETER: He wants me to repeat it again.
AU: Is he saying he doesn’t understand it or he does?
INTERPRETER: He said, “What does he say,” so this means he is asking you again, your honor.
AU: All right, tell him this: This is not a charity program, okay. This is a program where people have to work to get insured status. If they don’t work, they can’t make the kind of claim that he’s making. All right? I’ll tell you what — let’s go off the record on this.
(At this point, there ensued an off-the-record discussion.)
Sfc * * * * *
AU: All right, see if you can get it across to him, then.
CLAIMANT: You have the report, your honor, so you go ahead with the case if you’d like to.
INTERPRETER: You do have the report?
AU:. I have the report, right, okay. All right. As long as he understands what we’re talking about, and why I ask these questions. Okay, tell him even though these are informal hearings, he would be entitled to have a lawyer in these hearings with him, if he wants one. If he thinks that he can tell us all about what his problem is, and what’s going on with him, and what his difficulty is, we probably can do without it. Ask him if he thinks he can do that.
CLAIMANT: Do I need a lawyer, your honor?
AU: Tell him as far as I’m concerned, I can’t make that decision for him. He does not require a lawyer, and far as I’m concerned, we will help him any way that we can, as long as he can tell us what his problem is... Tell him to listen to what I’m saying first — he can talk to those gentlemen any time he wants.
As long as he can tell me what his problem is, what his difficulty is, when he’s been in the hospital, what doctors have taken care of him, things like that, we probably can do without it, but I’ll do it any way he wants. If he thinks it’s important, I will continue the case for him, any way he wants to do it.
CLAIMANT: All right, your honor. I do not need any attorney. I would like to speak for myself.
AU: Okay, let’s go off the record.
(At this point there ensued an off-the-record discussion.)

Tr. 17-18. Later in the hearing, a witness informed the AU that the plaintiff was “hard to translate.” Tr. 33. Some of the plaintiff’s and witnesses’ testimony at the hearing was reported as “inaudible” by the court reporter. See Tr. 21, 25, 33, 34, 37, 38, 39. Finally, three medical reports from physicians were accepted by the AU which contain various foreign language notations. The record does not indicate whether these reports were ever translated into English before the AU rendered his decision.

DISCUSSION

A claimant in a Social Security hearing must be informed of the statutory right to have an attorney present at the administrative hearing. Smith v. Schweiker, 677 F.2d 826, 828 (11th Cir.1982). The claimant, however, may waive this right if given sufficient information to enable him to intelligently decide whether to retain counsel or proceed pro se. Id. The information necessary to ensure an intelligent and knowing waiver of counsel includes an explanation of the valuable role that an attorney could play in the proceedings, the possibility of free counsel, and the limitations on attorneys’ fees to 25 percent of any eventual awards. Smith v. Schweiker, 677 F.2d at 829; Clark v. Schweiker, 652 F.2d 399, 403 (5th Cir.1981). When there is a possibility that a claimant may be incompetent or have a mental illness, the AU should explain the right to counsel and the role of an attorney in the hearing in even greater detail and with greater attention toward ensuring that the claimant understands these issues. Smith v. Secretary of HEW, 587 F.2d 857, 860 (7th Cir.1978).

The showing of a violation of a claimant’s statutory right to counsel is not, by itself, cause for remand unless prejudice or unfairness to the claimant can also be shown. Smith v. Secretary of HEW, 587 F.2d at 860; Sykes v. Finch, 443 F.2d 192, 194 (7th Cir.1971). Prejudice to the claimant may be demonstrated by showing that the AU did not fulfill his or her obligation to develop a full and fair hearing. Smith v. Secretary of HEW, 587 F.2d at 860. The AU has a duty in all cases to develop a full and fair record but, where the right to counsel has not been effectively waived, the AU’s obligation is heightened. Smith v. Schweiker, 677 F.2d at 829; Cowart v. Schweiker, 662 F.2d 731, 735 (11th Cir.1981); Clark v. Schweiker, 652 F.2d 399, 404 (5th Cir.1981); Cannon v. Harris, 651 F.2d 513, 519 (7th Cir.1981); Smith v. Secretary of HEW, 587 F.2d at 860. This heightened duty requires the AU “to scrupulously probe into, inquire of and explore for all of the relevant facts.” Cannon v. Harris, 651 F.2d at 519; Smith v. Secretary of HEW, 587 F.2d at 860; Gold v. Secretary of HEW, 463 F.2d 38, 43 (4th Cir.1972). The ALT must be “especially diligent in ensuring that favorable as well as unfavorable facts and circumstances are elicited.” Thompson v. Schweiker, 665 F.2d 936, 941 (9th Cir.1982) (quoting Rosa v. Weinberger, 381 F.Supp. 377, 381 (E.D.N.Y.1974)). “[T]he AU’s failure to pursue relevant avenues of inquiry, or to assist the claimant, who appeared pro se, deprive[s] [the claimant] of his right to an impartial decision based on an inadequate record.” Thompson, 665 F.2d at 939. Therefore, a showing that the AU failed to fully develop the record by not eliciting all of the relevant information is a showing of prejudice to the claimant and a cause for remand.

In this ease, the AU did not stress the function and importance of having counsel to plaintiff, nor did he inform plaintiff that there was a possibility of obtaining free counsel or that there are limitations on attorneys’ fees to 25 percent of any eventual award. The information regarding the cost of any attorney is particularly relevant in disability cases where shortage of funds is likely to be an issue for the claimants. Therefore, in light of plaintiff’s limited education and the AU’s discouraging statements regarding plaintiff’s right to an attorney, this Court finds that plaintiff did not knowingly and intelligently waive his right to counsel at the hearing.

As stated previously, however, the showing of a violation of claimant’s statutory right to counsel is not, by itself, sufficient to cause the AU’s decision to be prejudicial to plaintiff. The next issue in this case then is whether the AU fulfilled his duty to develop a full and fair record and to “scrupulously probe into, inquire of and explore for all relevant facts.” See Gold v. Secretary of HEW, 463 F.2d 38 (2nd Cir.1972).

In this case, the AU failed to explore or probe for all relevant facts. Although the AU was informed by plaintiff that plaintiff was currently under the care of Dr. Yasher, the AU made no attempt to obtain current medical reports from Dr. Yasher. Instead, the AU disregarded the conclusions of two other treating physicians, and instead relied upon a consulting physician’s report. Although a claimant’s own personal physician’s testimony or records are not necessarily the definitive word on the claimant’s medical status, those records should be given greater weight than other consulting physicians’ recommendations. Bowman v. Heckler, 706 F.2d 564, 568 (5th Cir.1983).

Without considering the above, and perhaps other, relevant evidence, the AU found that plaintiff was not under a disability as that term is defined under the Social Security Act and therefore not entitled to disability benefits. In doing so, the AU failed to meet the heightened duty of developing a full and fair record which he incurs when the claimant is unrepresented by counsel. Since plaintiff was not given enough information regarding the right to have an attorney present at his hearing to ensure a knowing and intelligent waiver of this right, and the AU did not meet his obligation to assist plaintiff in developing the record, it is clear that plaintiff was prejudiced due to his lack of counsel. This is sufficient cause for remanding this case to the Secretary for a new hearing. Smith v. Secretary of HEW, 587 F.2d at 860; Jeralds v. Richardson, 445 F.2d 36, 39 (7th Cir.1971).

CONCLUSION

Accordingly, cross-motions for summary judgment are denied. This case is remanded to the Secretary for further proceedings consistent with this opinion.

IT IS SO ORDERED.