author: BALDOCK, District Judge.

text:
    Gary BRASHAR, Plaintiff, v. MOBIL OIL CORPORATION and Mobil Producing Texas and New Mexico, Inc., Defendants, and MOBIL OIL CORPORATION and Mobil Producing Texas and New Mexico, Inc., Defendants and Third-Party Plaintiffs, v. George E. COLEMAN, Coleman Drilling Company and Reliance Insurance Company, Third-Party Defendants.
    Civ. No. 83 1226BB.
    United States District Court, D. New Mexico.
    Dec. 19, 1984.
    David Pittard, Briones & Pittard, P.A., Farmington, N.M., Alfred L. Green, Jr., Shaffer, Butt, Thornton & Baehr, P.C., Albuquerque, N.M., for plaintiff.
    Rodey, Dickason, Sloan, Akin & Robb, P.A., Jackson G. Akin, James O. Browning, Albuquerque, N.M., for defendants.

      Shaffer, Butt, Thornton & Baehr, Paul Butt, Alfred L. Green, Jr., Albuquerque, N.M., for Reliance Ins. Co.
    Tansey, Rosebrough, Roberts & Gerding, PC, Richard L. Gerding, Farmington, N.M., for third-party defendants Coleman & Coleman Drilling Co.
   MEMORANDUM OPINION AND ORDER

BALDOCK, District Judge.

THIS MATTER comes on for consideration of the Motion for Partial Summary Judgment against Coleman Drilling Company submitted by defendants and third-party plaintiffs Mobil Oil Corporation and Mobil Producing Texas and New Mexico, Inc., filed May 30, 1984. The court, having considered the accompanying memoranda and the relevant law, and otherwise being advised fully in the premises, finds that the motion is well taken in part and should be granted in part.

George E. Coleman, on behalf of Coleman Drilling Company and Mobil Producing Texas and New Mexico, Inc. entered into a written drilling contract dated January 9, 1981, and amended on May 26, 1981. According to the terms of the written contract, Coleman, in pertinent part, agreed to the following: to indemnify and hold harmless Mobil for claims arising from personal injury to Coleman’s employees “growing out of, incident to, or resulting directly or indirectly from the work to be performed by contractor hereunder.” If 18 of the January 9, 1981, drilling contract. Coleman agreed to carry employer’s liability insurance (¶ 18 of the drilling contract, ¶ 16 of Exhibit A of the contract, and the Minimum Insurance Requirement schedule which is Exhibit D of the contract), and to include Mobil as an additional insured under the policy (Minimum Insurance Requirement schedule). Coleman also agreed to insure its contracts, including the hold harmless agreement. Exhibit A of the drilling contract, 1116. Coleman agreed to reimburse Mobil for expenses and attorney’s fees in investigating or defending any claims. 1118 of the drilling contract.

By its motion, Mobil seeks (1) a declaration that the contract provisions are valid and enforceable, (2) that Coleman breached certain agreements, and (3) that Coleman is, therefore, liable either on the contract or for breach of contract for any judgment obtained by the plaintiff against defendant Mobil and for any expenses and attorney’s fees incurred in defending against plaintiff’s claims and in prosecuting its third-party action. It does this via Rule 56 of the Federal Rules Civil Procedure. There is no doubt, however, that summary judgment is appropriate when there is a request for declaratory relief, if there is no genuine factual dispute. 6 (Part 2) Moores Federal Practice § 5617 [19], at 56-841 (2d ed. 1948). It is appropriate, therefore, to determine who is entitled to judgment as a matter of law as long as there is no genuine issue of material fact.

Before considering any other matters raised by Mobil, it is necessary to determine whether the drilling contract between Mobil and Coleman is valid and enforceable. There is no question of fact that Coleman entered into a contract with Mobil in 1981 covering certain wells to be drilled in the State of Colorado. The fact that a contract was formed is not disputed. The primary matter that is in dispute pertains to when the contract was formed and where it was formed.

Because this is a contract dispute in a diversity case, this court is bound by the dictates of Erie Railroad Co. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1938), and its progeny, and must apply whatever law would be applied by the courts of New Mexico. This, of course, includes the conflicts law of New Mexico. Klaxon Co. v. Stentor Electric Manufacturing Co., 313 U.S. 487, 61 S.Ct. 1020, 85 L.Ed. 1477 (1941). Before the court can apply New Mexico conflicts law, it must determine whether the contract is a New Mexico contract or a Texas contract. If it is a New Mexico contract, then the court will apply pertinent New Mexico substantive law. If it is a Texas contract, then it will apply New Mexico conflict law. New Mexico follows the traditional conflicts of law analysis of the Restatement of Conflicts of Law (1934). See, e.g., Miller v. Mutual Benefit Health & Ace. Association, 76 N.M. 455, 415 P.2d 841 (1966); Eichel v. Goode, Inc., 101 N.M. 246, 680 P.2d 627 (Ct.App.1984).

To determine what law is applicable to contracts, it is necessary to establish where the contract is made. According to New Mexico law, a contract is made “at the time when the last act necessary for its formation is done, and at the place where the final act is done.” Merriman v. Harter, 59 N.M. 154, 158, 280 P.2d 1045 (1955). New Mexico conflicts law indicates that a contract shall be interpreted in reference to the laws of the place where the final act was performed which created the contract. Miller v. Mutual Benefit Health, 76 N.M. at 457, 415 P.2d 841.

The evidence supports the conclusion that the drilling contract was executed in the State of Texas. Mobil prepared the contract and mailed it to Coleman in New Mexico. Coleman signed the contract, mailed it back to Mobil in Texas where it was signed by Glen W. Barb in Midland, Texas, on behalf of Mobil Producing Texas and New Mexico, Inc. A copy of the fully executed contract was returned to Coleman. The issue, therefore, can be reduced further to whether the last signature on the contract was the last act necessary for its formation.

Coleman argues that the last act necessary for the formation of the contract was his signing the contract in New Mexico. The drilling contract itself specifically required that it be executed by a representative of Mobil. 1120 of the January 9 drilling contract. Under traditional contract law, if the contracting parties do not intend a contract to become effective unless and until reduced to a signed, integrated writing, that interpretation will be given effect, and the contract will not bind either party until the writing is executed. The contract, therefore, was not binding on either party until Mobil countersigned the contract, which it did in Texas.

The drilling contract has a signature line for both parties. When Coleman received the contract, no signatures appeared on the contract. Mobil made its signing the contract a condition precedent to its being bound. There is little New Mexico case law directly on point, but it appears that New Mexico has adopted the general proposition that a written contract is not consummated until executed by the last signatory. Transradio Press Service, Inc. v. Whitmore, 47 N.M. 95, 99,137 P.2d 309 (1943); Cessna Finance Corp. v. Mesilla Valley Flying Service, 81 N.M. 10, 13, 462 P.2d 144 (1969), cert. denied, 397 U.S. 1076, 90 S.Ct. 1521, 25 L.Ed.2d 811 (1970); Alexander Film Co. v. Pierce, 46 N.M. 110, 112, 121 P.2d 940 (1942). It is apparent, therefore, that the cover letter and the terms of the drilling contract indicate a clear intention that the contract would not be consummated until all signatures appeared on the contract. Because the last act in executing the drilling contract took place in Midland, Texas, New Mexico choice of law rules dictate that Texas law governs the validity of the indemnification clause.

Although there does not appear to be any New Mexico law on this point, it is likely that New Mexico has adopted the “public policy” exception as provided in the First Restatement of Conflicts. Section 612 of the Restatement of the Law of Conflicts of Laws (1934) states: “No action can be maintained upon a cause of action created in another state the enforcement of which is contrary to the strong public policy of the forum.” New Mexico enacted 56-7-2 in 1971 which states that an agreement which purports to indemnify the indemnitee for damages “arising from the sole or concurrent negligence of the indemnitee” is void and unenforceable. This simply means that Mobil cannot contract away liability for its own negligence, or its own percentage of negligence. Thus, under New Mexico law, Coleman can indemnify Mobil only for Coleman’s percentage of negligence. The indemnity agreement is enforceable to that extent under New Mexico law. Coleman has agreed to this interpretation in its Memorandum in Opposition to Third-Party Plaintiff Mobil’s Motion for Partial Summary Judgment, at 12. See also Guitard v. Gulf Oil Co., 100 N.M. 358, 362, 670 P.2d 969 (Ct.App.1983). Furthermore, the statutory prohibition against indemnification does not affect the validity of any insurance contract. 56-7-2(A)(4) N.M.S.A. (1978). Thus, in New Mexico, one may provide for indemnification through insurance.

A careful analysis of Texas law fails to indicate any conflict with New Mexico public policy. Like New Mexico’s statute, the Texas law declares indemnity provisions in oil and gas agreements, where there is negligence attributable to the indemnitee, void and unenforceable as against Texas public policy. Texas Revised Statutes Annotated, Art. 2212b (Vernons Supp.1984). Contractual indemnity is permitted, however, if covered by liability insurance, and then only to the limits of the insurance. Art. 2212b, § 4(c). See also Gulf Offshore Co. v. Mobil Oil Co., 594 S.W.2d 496, 505 (Texas Ct. of Civ.App.1979). The same result may be achieved under New Mexico law through an insurance contract. 56-7-2(A)(4) N.M.S.A. (1978). Application of Texas law to this case, therefore, would not be contrary to New Mexico public policy.

Applying Texas law to the drilling contract, it is clear that the indemnification provision is valid if it was covered by liability insurance. If Coleman indemnified through insurance, the indemnification is enforceable up to the amount provided by the insurance policy. The indemnification clause may properly indemnify Mobil for Coleman’s negligence and may indemnify Mobil for its own negligence to the extent of coverage provided by insurance. If the indemnity agreement is not supported by liability insurance, the agreement is void and unenforceable as to the negligence attributable to Mobil.

I am unable to determine from the pleadings whether or not the indemnification agreement is supported by insurance coverage. It is clear, however, that Coleman agreed to provide insurance to cover the indemnity agreement. See the Minimum Insurance Requirement schedule attached to the drilling contract as Exhibit D, and ¶ 18 of the drilling contract. If Coleman failed to provide such insurance, he would be liable for resulting injury to Mobil for breaching its promise to provide such insurance.

Additionally, I am unable to determine from the drilling contract whether Coleman intended to agree to pay for Mobil’s attorney’s fees and costs expended in enforcing the indemnity agreement. Therefore, I reserve judgment on that matter.

NOW, THEREFORE, IT IS ORDERED that the Motion for Partial Summary Judgment against Coleman Drilling Co. submitted by the defendants and third-party plaintiffs Mobil Oil Corp. and Mobil Producing Texas and New Mexico, Inc. is granted in part and denied in part.


source: Caselaw Access Project

author: HILLMAN, District Judge.

license: Public Domain

text:
    GENERAL TEAMSTERS LOCAL NO. 406; Philip Viviano, individually and as President of General Teamsters Local No. 406; and Mark Crane, individually and as Secretary-Treasurer of General Teamsters Local No. 406, Plaintiffs, v. Karl SCHOBEY, Durwood Young, Lyle Baker, Larry Haisma; Michigan Teamsters Joint Council No. 43; and the International Brotherhood of Teamsters, Chauffers, Warehousemen and Helpers of America, Defendants.
    No. G85-30CA.
    United States District Court, W.D. Michigan, S.D.
    Jan. 18, 1985.

      Roger W. Boer, Daniel L. Elve, Rhoades, McKee & Boer, Grand Rapids, Mich., for plaintiffs.
    Gary S. Witlen, Washington, D.C., for defendant Intern.
    Gerry M. Miller, Goldberg, Previant, Uelmen, Gratz, Miller & Brueggeman, Milwaukee, Wis. (James P. Hoffa, Hoffa, Chodak & Robiner, Detroit, Mich., of counsel), for Mich. Teamsters Joint Council No. 43.
    Kleiner & Fayette by Michael L. Fayette, Grand Rapids, Mich., for Karl Schobey, Durwood Young, Lyle Baker & Larry Haisma.
   OPINION

HILLMAN, District Judge.

Plaintiffs in this action are General Teamsters Local No. 406 (“Local 406”), a labor organization headquartered in Grand Rapids, and chartered by the International Brotherhood of Teamsters, Chauffeurs, Warehousemen and Helpers of America (“International”); Philip Viviano, who was elected President of Local 406 on October 27,1984; and Mark Crane, who was elected Secretary-Treasurer of Local 406 on October 27, 1984. Defendants are Karl Schobey, Durwood Young, Lyle Baker, Larry Haisma, Michigan Teamsters Joint Council No. 43 (“Joint Council”), a local governing body within the International; and the International itself.

Through internal union procedure, the individual defendants protested to the Joint Council the conduct of the election, in which the individual plaintiffs were elected to office. Following a hearing, the Joint Council, on November 29, 1984, ordered that a new election be held on the grounds that, due to defects in the October 27, 1984, election procedures, 743 eligible voters had not received election ballots when those ballots were mailed. Following the procedures set forth in the International’s constitution, the individual plaintiffs timely filed an appeal from the Joint Council’s decision to the General Executive Board of the International. Meanwhile, the Joint Council has ordered a new election to commence on January 28, 1985.

The matter is before the court on plaintiffs’ motion for a temporary restraining order seeking to enjoin the January 28, 1985, election. A hearing was held on plaintiffs’ motion on January 16,1985, with all of the parties represented by counsel, except the International.

A plaintiff seeking preliminary injunctive relief must ordinarily demonstrate irreparable harm and a likelihood of success on the merits with the balance of hardship decidedly in his favor. Jackson Dairy, Inc. v. H.P. Hood & Sons, 596 F.2d 70, 72 (2d Cir.1979). I find injunctive relief unwarranted at this time because plaintiffs have not demonstrated that they will suffer irreparable harm if the relief is not granted. In addition, plaintiffs have failed to exhaust their intra-union remedies or their administrative remedies.

In short, plaintiffs’ request is premature. As of this date, the appeal to the International is undecided. The January 9, 1985, notice of the January 28, 1985, election, sent to all Local 406 members, states that the re-run election will not be held if the International reverses the decision of the Joint Council. The International, by a mail-gram to the Joint Council dated December 19,1984, stated its intention to decide plaintiffs’ appeal during January, 1985. Accordingly, internal union procedures undertaken pursuant to the International’s constitution may well obviate any harm to the plaintiffs if the International reverses the decision of the Joint Council.

Additionally, plaintiffs have failed to seek a stay of the Joint Council’s decision from the International pending their appeal, which plaintiffs are entitled to do pursuant to the International’s constitution. That constitution also provides that, in the event no stay is requested, the Joint Council’s decision is to take immediate effect. Having failed to seek a stay, plaintiffs are in no position to object to the Joint Council proceeding in accordance with the International constitution. Plaintiffs seek to have this court supervise internal union affairs before resort to equivalent relief under the International’s own constitution. The court has been presented only with plaintiffs’ speculation that a stay would not be granted if requested. This is not sufficient to tip the balance of equities in plaintiffs’ favor.

Finally, plaintiffs request that this court refer the matter to the United States Secretary of Labor (“Secretary”) for investigation and supervision. Section 482 of the Labor Management Reporting and Disclosure Act of 1959, 29 U.S.C. § 401, et seq. provides for the investigation by the Secretary of complaints regarding union elections. However, that section also states unequivocally that the protesting labor organization member must exhaust remedies available under the union’s constitution and by-laws before filing a complaint with the Secretary. As discussed supra at 439, plaintiffs have not exhausted those internal remedies at this time. To grant plaintiffs’ request for a referral to the Secretary at the present time would circumvent the clear procedural requirements of 29 U.S.C. § 482(a) and (b). Additionally, section 482 provides that plaintiffs are to seek relief from the Secretary in the first instance, which plaintiffs have failed to do.

Accordingly, plaintiffs’ motion for a temporary restraining order and for referral to the United States Secretary of Labor is denied.


text:
    GENERAL MOTORS CORPORATION, et al., Plaintiffs, v. CALIFORNIA STATE BOARD OF EQUALIZATION, et al., Defendants.
    No. CV 83-6801-DWW (KX).
    United States District Court, C.D. California.
    Feb. 4, 1985.

      See also 600 F.Supp. 76.
   AMENDED ORDER DENYING DEFENDANTS’ MOTION FOR JUDGMENT ON THE PLEADINGS AND GRANTING PLAINTIFFS’ MOTION FOR SUMMARY JUDGMENT

DAVID W. WILLIAMS, Senior District Judge.

Plaintiffs, General Motors Corporation (“GMC”) and the American National Red Cross (“Red Cross”), in their capacities as sponsoring employers and administrators of certain employee disability and health care plans established pursuant to collective bargaining agreements, and current trustees of the Motion Picture Health and Welfare Fund (“MPF”), are suing defendants, The California State Board of Equalization (“Board”), Board members, and certain state officials, for declaratory, injunctive, and remedial relief.

Both GMC and Red Cross entered into excess risk arrangements with the Metropolitan Life Insurance Company (“Metropolitan”) providing that they would remain responsible for payments of all benefits from their respective plans below a trigger point. This trigger point was to be established annually based on a projected level of aggregate benefit payments. Local GMC units were to maintain claim records and evaluate and pay claims below the trigger amount for sickness and accident coverage. Metropolitan would perform these functions for other forms of coverage. The funds used to pay the pretrigger claims are drawn from GMC accounts. Similarly, the funds used to pay pretrigger claims for Red Cross are drawn by Metropolitan from a Red Cross account, and Metropolitan is authorized to draw on that account only to satisfy pretrigger claims.

Defendants levied taxes upon Metropolitan on benefits paid out of the GMC Disability Trusts, the GMC Plan, and the Red Cross Plan. As Metropolitan was indemnified by GMC and Red Cross for the tax payments, these costs were passed onto them.

The MPF entered into an excess risk arrangement with the Union Labor Life Insurance Company (“Union Labor”) whereby MPF assumed the risk of paying benefits up to a defined trigger point. A year or so later the trustees of the fund resolved to terminate their excess risk policies and become completely self-insured with respect to those components covered by it. MPF now believes defendants will levy a tax on benefits paid out during the year in which the excess risk arrangement was in existence. It too has an existing indemnity agreement, so the MPF assumes it will incur the cost for the tax.

Plaintiffs bring this action because defendants’ interpretation of “gross premiums” was upheld by the California Supreme Court in Metropolitan Life Ins. Co. v. State Board of Equalization, 32 Cal.3d 649, 186 Cal.Rptr. 578, 652 P.2d 426 (1982). In that action, for the years 1967-1969 Metropolitan was assessed an insurance franchise tax based upon the amount of Metropolitan’s gross premiums. The Employee Retirement Income Security Act of 1974 (“ERISA”), 29 U.S.C. § 1001, et seq., was not at issue then, however, because the years involved were prior to ERISA’s passage in 1974. Metropolitan has now raised that issue, and it has filed refund claims for the 1975-1982 years alleging that the franchise tax has been preempted by ERISA. These claims were denied, and Metropolitan has filed suit in San Francisco Superior Court.

The predominant legal issues raised in this action involve this court’s jurisdiction, the plaintiffs’ standing to sue, the State of California’s power to tax in the manner at issue here, and ERISA’s possible preemptive effect. The courts have favored a broad interpretation of ERISA’s preemption provision. State taxation is not one of the enumerated exceptions to ERISA’s preemptive reach. A recent ERISA amendment and relevant legislative history also indicate Congress’ intent to preempt any state tax law which relates to employee benefit plans. Defendants’ characterization of “gross premiums” in this context runs afoul of ERISA. Therefore, this court must rule that defendants’ tax practice as described in this action is preempted by ERISA.

JURISDICTION AND STANDING

Jurisdiction is conferred upon this court through ERISA, 29 U.S.C. § 1132(a)(3) and (4). Plaintiffs are fiduciaries of employee welfare benefit plans. As such, they have a direct and explicit statutory basis for standing. Section 1132(a)(3) provides that a fiduciary may bring a civil action to enjoin any act or practice which violates any provisions of a plan’s terms. A participant or beneficiary may bring an action to recover benefits under the terms of his plan in state court, but plan fiduciaries must bring their preemption cases exclusively in federal court. Furthermore, defendants’ interpretation of “gross premiums” and their assessment and collection orders based upon such an interpretation are “state action having effect of law.” So, they are state laws within the meaning of ERISA’s section 1144(c)(1).

Defendants contend that any injury suffered by plaintiffs results solely from plaintiffs’ agreement with an insurance company to reimburse it for its tax payments. They cite EMI Ltd. v. Bennett, 738 F.2d 994 (9th Cir.1984) and Shell Petroleum, N.V. v. Graves, 709 F.2d 593 (9th Cir.1983) for the proposition that a third party who is not being taxed does not have standing to sue the taxing authority because his injury is neither direct, individual, distinct, nor palpable. See also Allen v. Wright, 468 U.S. 737, 104 S.Ct. 3315, 82 L.Ed.2d. 556 (1984). Plaintiffs’ jurisdictional and standing foundation, however, arises under ERISA provisions as they bring this action as plan fiduciaries seeking to preempt a practice that relates to their employee benefit plans. ERISA expressly empowers fiduciaries to seek relief in federal court against “any act or practice” which violates ERISA’s provisions. 29 U.S.C. § 1132(a)(3) and (f).

Although MPF is also a fiduciary under ERISA, no indication has been given that defendants’ actions have had an adverse effect upon its employee benefit plan. Unlike GMC and Red Cross, there is no tax deficiency to speak of which has been asserted against Union Labor, MPF’s insurer. MPF can assert ERISA in defense of actions affecting its plan, but it cannot be allowed to do so when the alleged effect is speculative, too remote, or too tenuous.

Therefore, this action is dismissed on the independent grounds of lack of subject matter jurisdiction and lack of standing as to plaintiff MPF, but not as to plaintiffs GMC and Red Cross.

THE STATES’ AUTHORITY TO TAX

Defendants contend that the Tax Injunction Act, 28 U.S.C. § 1341, precludes plaintiffs’ request for this court to enjoin the assessment and/or collection of a tax. That provision does hold that the district court shall not interfere with the assessment, levy, or collection of any tax under state law where a plain, speedy, and efficient remedy may be had in state court.

The McCarran-Ferguson Act, 15 U.S.C. . § 1011, et seq., provides that the regulation and taxation of the business of insurance shall be subject to state law, and any state law effecting this purpose shall not be impaired unless a federal act specifically relates to the business of insurance.

Defendants in this action are plan fiduciaries, and the tax has not been levied directly upon them. Therefore, a state court remedy may not be available to them; but, ERISA does allow these defendants to bring an action in federal court. ERISA broadly preempts “any and all” state laws which relate to any employee benefit plan. 29 U.S.C. § 1144(a). Furthermore, in Hewlett-Packard Co. v. Barnes, 571 F.2d 502, 505 (9th Cir.), cert. denied, 439 U.S. 831, 99 S.Ct. 108, 58 L.Ed.2d 125 (1978) the Ninth Circuit determined that where the McCarran-Ferguson Act applies ERISA falls within the clause excepting federal laws that “specifically relate” to the business of insurance. The court recognized the policy of reserving to the states the power to regulate insurance unless an Act such as ERISA specifically relates to it. It then determined that ERISA was such an excepting Act. Therefore, ERISA was removed from the scope of prohibition against construing any federal law so as to impair or invalidate state law regulating insurance.

ERISA’s PREEMPTIVE EFFECT

Two cases which discussed the relationship of state tax provisions to ERISA's preemption mandate are not Ninth Circuit cases, but they relate important legislative history relevant to the instant action. Northwest Airlines, Inc. v. Roemer, Empl. Benefit Cas. 1307 (BNA) (D.C.Minn.1984) held that ERISA preempts states’ authority to levy a state income tax on ERISA-covered pension plans since the statutory language and legislative history indicated a congressional intent to'preempt state tax laws as they relate to employee benefit plans. National Carriers’ Conf. Comm v. Heffernan, 454 F.Supp. 914 (D.C.Conn. 1978) stated that a tax imposed upon an employee welfare benefit plan was void and unenforceable insofar as it applied to such plans covered by ERISA.

The Northwest Airlines defendant argued for a narrow construction of section 1144(a) contending that state law “relates to” an employee benefit plan only if it regulates the terms and conditions of the plan. The court noted that such a narrow reading was rejected by the Supreme Court in Alessi v. Raybestos-Mcmhattan, Inc., 451 Ü.S. 504,101 S.Ct. 1895, 68 L.Ed.2d 402 (1981). There, the Court held that ERISA makes clear that even indirect state action bearing upon private pensions may encroach upon the area of exclusive federal concern. Similarly, in Shaw v. Delta Airlines, 463 U.S. 85, 103 S.Ct. 2890, 77 L.Ed.2d 490 (1983) the Supreme Court carefully reviewed the legislative history of ERISA and concluded that Congress intended the words “relate to” to be construed in a “broad sense.” The Shaw Court then held that ERISA preempts any law that has a connection with or reference to an employee benefit plan unless it falls within one of the exceptions — state laws regulating insurance, banking, or securities, or state criminal laws.

In National Carriers’ the fiduciaries of an employee benefit plan sought injunctive and declaratory relief from the assessment and collection of a Connecticut tax on the plan. The court reasoned that the phrase “any and all” plainly indicated an intention to reach every state statute that fits the description of “relating to” an employee benefit plan. 454 F.Supp. at 915.

As the Northwest Airlines court acknowledged, any contention that ERISA preemption should be narrowly construed is undermined by Congress’ specific identification of state legislation areas which were to be excepted from ERISA’s preemption provision. When ERISA was originally considered, Congress rejected a request by the Secretaries of Labor and Treasury to exempt state taxation from preemption. In 1983, when ERISA’s preemption language was amended to exclude Hawaii’s experimental health benefit statute from ERISA’s preemption provision, Congress specifically endorsed the preemption of state tax laws. That amendment added section 1144(b)(5)(B)(i) which reads in part:

Nothing in subparagraph (A) shall be construed to exempt from subsection (a) [§ 1144(a)] — any State tax law relating to employee benefit plans----

In the Conference Report which discussed this particular amendment, it was stated that

[t]he provision generally exempts the Hawaii Prepaid Health Care Act from preemption by ERISA. Under the provision, however, preemption is continued with respect to ... any State tax law relating to employee benefit plans ...
H.R.Rep. No. 97-984, 97th Cong., 2d Sess. 18 (1982), U.S.Code Cong. & Admin. News 1982, pp. 4580, 4603.

In addition, the legislative history of “Tax and ERISA Provisions,” as related in 1982 U.S. Code Congressional and Administrative News at pages 4595-96, gives some indication of Congress’ intent. It states:

Also, the provision [the amendment] does not affect the status, under the preemption provisions of ERISA, of any state tax law relating to employee benefit plans.

These excerpts convey the impression that section 1144(b)(5)(B)(i) was directed to all state tax laws and was not just in response to Hawaii’s plan.

The gravamen of ERISA’s preemption thrust derives from some determination as to how the challenged law relates to the ERISA plan. Defendants characterize the gross premium tax as an assessment against Metropolitan for doing business in California. Yet, in fact, it is the amount which is paid out by the plaintiffs below the trigger point which is being treated as a premium received by Metropolitan and is being taxed. Under ERISA this taxation practice is preempted because it “relates to” or bears some connection or reference to the plans by using the plans’ payments as a means for measuring taxable premiums. The defendants are indirectly taxing benefit payments and they are impeding the discretion of plan sponsors to fund their plan guarantees through a combination of general assets and excess risk insurance.

This court recognizes the important state interests which are involved in this action, and balances that consideration in its ruling. The strong congressional intent, however, to preempt those actions which affect ERISA plans directs this court to find that ERISA prevents the taxation practice which has taken place here.

It is ordered, therefore, that defendants’ motion for judgment on the pleadings be denied as to plaintiffs GMC and Red Cross, but granted as to plaintiff MPF because it lacks standing. Plaintiffs’ motion for summary judgment is granted. It is further ordered that defendants and their agents, employees, successors, and all persons in concert with them cease and refrain from taxing indirectly the employee benefit plans of plaintiffs GMC and Red Cross based upon defendants’ interpretation of “gross premiums,” which includes, in the amount subject to tax, benefit payments from employee benefit plans to their participants.

AMENDED JUDGMENT

On the basis of all the evidence before me, I hereby declare, adjudge, and decree that:

1. Plaintiffs are fiduciaries of employee welfare benefit plans covered by the Employee Retirement Income Security Act of 1974 (“ERISA”).

2. Defendants are officials of the State of California responsible in different capacities for imposing a franchise tax on insurance companies doing business in the State.

3. The California Constitution provides for taxation of insurance companies based on the “gross premiums received” by the insurance companies. Cal. Const., Art. XIII, § 28.

4. Defendants include in the “gross-premiums” amount subject to tax benefit payments from employee benefit plans to their participants based on the fiction that these amounts are “received”, by insurance companies offering excess-risk insurance contracts to plan sponsors of employee benefit plans.

5. This characterization of benefit payments as “premium” payments was endorsed by the California Supreme Court in Metropolitan Life Insurance Company v. State Board of Equalization, 32 Cal.3d, 649,186 Cal.Rptr. 578, 652 P.2d 426 (1982).

6. ERISA preempts all “State laws,” including state tax laws, “insofar as they ... relate to” employee benefit plans. In Shaw v. Delta Airlines, 463 U.S. 85, 103 S.Ct. 2890, 77 L.Ed.2d 490 (1983), the Supreme Court made clear that the “relate to” language must be construed broadly to preempt all “State laws” that have “some reference to or connection with” employee benefit plans. Id., 103 S.Ct. at 2899-2900.

7. The taxing practice at issue in the Metropolitan Life case is a “State law” which “relates to” employee benefit plans because it measures the “gross premiums” subject to tax by reference to employee benefit plan payments to participants and beneficiaries. This reference to plans is preempted by ERISA, since it results in indirectly taxing benefit plans and impeding the discretion of plan sponsors to purchase excess-risk policies.

Accordingly, it is hereby ordered that defendants and their agents, employees, successors, and all persons in concert with them cease and refrain from taxing indirectly the employee benefit plans of plaintiffs General Motors Corporation and the American Red Cross based upon defendants’ interpretation of “gross premiums,” which includes, in the amount subject to tax, benefit payments from employee benefit plans to their participants.

The court adopts as its findings of fact and conclusions of law the order issued for this action dated February 4, 1985.


author: NEALON, Chief Judge.

text:
    Robert T. PATTON, Jr., Plaintiff, v. FEDERAL BUREAU OF INVESTIGATION, et al., Defendants.
    No. 84-0481 Civil.
    United States District Court, M.D. Pennsylvania.
    Feb. 26, 1985.

      Arthur L. Piccone and Ronald V. Santera, Hourigan, Kluger, Spohrer & Quinn, Wilkes-Barre, Pa., for plaintiff.
    Mary C. Spearing, Asst. U.S. Atty., Harrisburg, Pa., Barbara L. Gordon and Anthony W. Norwood, Dept. of Justice, Civil Div., Washington, D.C., for defendants.
   MEMORANDUM AND ORDER

NEALON, Chief Judge.

Plaintiff, Robert T. Patton, Jr., after having been rejected for employment by the Federal Bureau of Investigation (FBI), on July 2, 1982, requested access to the file maintained by the FBI concerning his application. On November 24, 1982, the FBI released eighty-one pages of material in response to plaintiffs request but withheld approximately ten pages contending they were exempt from release under the provisions of the Freedom of Information Act (FOIA), 5 U.S.C. § 552 and the Privacy Act, 5 U.S.C. § 552a. Plaintiff filed this action on April 9, 1984, alleging that he was entitled to the information under FOIA and the Privacy Act and asked the court to order such disclosure. On October 9, 1984, the defendants filed a motion for summary judgment, together with a personal public affidavit of James S. Tatman, in which he set forth the basis for nondisclosure based upon his review of the records. Subsequently, defendants filed three In Camera Declarations in support of their motion. The court has carefully reviewed the public documents, the In Camera Declarations,' as well as the documents withheld from plaintiff, and will grant the defense Motion for Summary Judgment.

Defendants identify seven full pages and portions of three other pages of plaintiffs file that involve confidential source material for which exemption is sought under Section (k)(5) of the Privacy Act and Sections (7)(C) and (D) of FOIA. Exemption is also claimed for three and one-half (3'A) pages of testing or examination material and related information allegedly exempt under Section (k)(6) of the Privacy Act and Section (b)(2) of FOIA. Finally, three lines of one document have been deleted as third-party information which may not be released under the Privacy Act without the consent of the third party and is exempt under Sections (6) and (7)(C) of FOIA because such release would constitute an unwarranted invasion of personal privacy. Defendants' concede that the recently enacted Central Intelligence Information Act, Pub.L. No. 98-477, 98 Stat. 2209, (1984) amended the Privacy Act so that no agency can withhold from an individual any record to which he is entitled under FOIA. Consequently, defendants cannot withhold any information from plaintiff unless there is an applicable exemption provision in each statute.

DISCUSSION

A. Confidentiality

Section (k)(5) of the Privacy Act exempts disclosure of material which would reveal the identity of a source who was expressly promised that his identity would be held in confidence. Similarly, Sections (7)(C) and (D) of FOIA exempt records where disclosure would constitute an unwarranted invasion of personal privacy or reveal the identity of a confidential source. An examination of the In Camera Declarations persuades me that the requirements of both statutes have been satisfied. Confidentiality has been specifically requested by the sources of the seven full pages previously described in this memorandum. The notations on parts of the three remaining pages for which confidentiality is sought make reference to the seven full pages in such a manner that the sources of those pages could be identified by reference to the notations. It is obvious that the background, nature and circumstances surrounding the making of the notations is such that an express promise of confidentiality would be necessary before the comments would be made. Accordingly, the exemption requirements of (k)(5) of the Privacy Act were satisfied. Moreover, the deletions were appropriate under either the balancing analysis of (7)(C) or the specific language of (7)(D) of FOIA. In arriving at this result, while the Public Tatman declaration was helpful, it was the In Camera submissions which convinced me that nondisclosure was appropriate under both statutes.

B. Testing Material

5 U.S.C. § 552a(k)(6), the Privacy Act, specifically exempts from disclosure

“(6) testing or examination material used solely to determine individual qualifications for appointment or promotion in the Federal service the disclosure of which would compromise the objectivity or fairness of the testing or examination process.”

Additionally, 5 U.S.C. § 552(b)(2) of FOIA states that the Act does not apply to matters that are

“(2) related solely to the internal personnel rules and practices of any agency;”

The testing material involved herein clearly satisfies the requirements of the Privacy Act. It implicates the applicant evaluation system and public notice of the details of the criteria utilized would give future applicants an unfair advantage and would impair the usefulness and value of the system. While there is commentary in the withheld material, it can be considered as a part and extension of the criteria and its release would reveal how the criteria is applied. Under these circumstances, it fits comfortably within the (k)(6) requirements.

The (b)(2) FOIA exemption is broader than that contained in the Privacy Act but it appears to encompass within its proscription the type of testing data utilized here. The rationale supporting the legitimacy of nondisclosure under the Privacy Act would be equally applicable under FOIA. Internal personnel rules and practices of the FBI would be seriously undermined if all the factors that go into internal evaluation of interviewees for sensitive Special Agent positions became available to every future applicant.

C. Third-Party Information

The third-party information consists of three half lines of material and, to my mind, constitutes an insignificant item. This view is apparently shared by plaintiff’s counsel as it is not addressed in his brief. In any event, defendants are not willing to disclose it voluntarily and it appears that their position finds support in the applicable statutes. Nondisclosure of this information is in keeping with the statutory purpose of protecting third parties enunciated in 5 U.S.C. § 552a(b) and also under the specific personal privacy provisions, 5 U.S.C. § 552(b)(6) and (7)(C). The information involved is such that its disclosure would not shed any light on the suitability determination by the FBI and, therefore, would be of no meaningful interest to plaintiff or the public. Under the circumstances, the privacy interests of the individuals involved warrant protection and will be respected.

The statutory contentions discussed above and those advanced in the In Camera declarations justify the granting of defendants’ motion for summary judgment. However, after reviewing all the disputed documents, the court believes that, in fairness, plaintiff is entitled to know that the withheld documents do not address acts or attitudes that reflect adversely on moral turpitude or patriotism, or concern criminal activities. The documents involve only the determination by the FBI that plaintiff was not a suitable candidate for employment by that agency. They would not reflect a blanket disapproval of him for governmental employment in some other capacity. Nonetheless, the applicable statutes justify the government’s position and an order will be entered granting defendants’ motion.

      . 5 U.S.C. § 552a(k)(5) exempts investigatory material compiled solely for the purpose of determining Federal civilian employment eligibility "... but only to the extent that the disclosure of such material would reveal the identity of a source who furnished information to the Government under an express promise that the identity of the source would be held in confidence ____”

      . 5 U.S.C. § 552(b)(7) exempts investigatory records compiled for law enforcement purposes to the extent that such records would “(C) constitute an unwarranted invasion of personal privacy, (D) disclose the identity of a confidential source____” In the broad sense, the investigation in this case was for law enforcement purposes.

      . The court believes it would be self-defeating to recount the additional statutory arguments advanced in the In Camera papers because it would unnecessarily complicate the result reached and may require discussion that would reveal the sources the government seeks to protect. The court will merely state that other sections of both statutes separately support the government's contentions and the court’s conclusions.


author: ALEXANDER HARVEY, II, District Judge.

text:
    M. Hafeez CHAUDHRY, Plaintiff, v. PRINCE GEORGE'S COUNTY, MARYLAND, et al., Defendants.
    Civ. No. H-83-1692.
    United States District Court, D. Maryland.
    April 17, 1985.

      Glenn M. Cooper and Paley, Rothman & Cooper, Chevy Chase, Md., for plaintiff.
    Sherrie L. Krauser, Associate Co. Atty., Upper Marlboro, Md., for defendants.
   MEMORANDUM AND ORDER

ALEXANDER HARVEY, II, District Judge.

This civil action has been filed in this Court as a result of a dispute between a physician and former members of the Board of Directors of a community hospital in Prince George’s County, Maryland. Various motions are presently pending before the Court. The essential question presented by these motions is whether federal jurisdiction exists so that this Court may hear and decide the claims asserted by the plaintiff. Having concluded that subject matter jurisdiction does not exist and that this dispute should be or should have been resolved in a state court, the amended complaint will be dismissed without prejudice, and plaintiff will not be permitted to further amend his complaint..

Dr. M. Hafeez Chaudhry, plaintiff herein, is a physician engaged in the private practice of cardiology. Among the hospitals where he practices is Greater Laurel Beltsville Hospital (hereinafter “the Hospital”), which is located in Laurel, Prince George’s County, Maryland. The Hospital is owned by Price George’s County (hereinafter “the County”). In July of 1981, plaintiff Chaudhry became Chairman of the Hospital’s Department of Internal Medicine (hereinafter the “Department”). Later in January of 1982, he became a member of the Hospital’s Board of Directors. While serving in these positions, plaintiff became embroiled in a controversy which touched the Hospital, its Board of Directors, its administrators, its professional staff and the rules under which members of that staff secure privileges to practice at the Hospital.

As a result of certain actions, including his testimony before the Prince George’s County Council, plaintiff was censured by the Board of Directors at a meeting held on February 4, 1983. In this suit, plaintiff asserts that this censure was stigmatizing and improper and that he was thereby deprived of his constitutional right to due process of law. In his amended complaint, plaintiff has sued under 42 U.S.C. § 1983 and under the Fifth and Fourteenth Amendments to the Constitution of the United States. In addition, relying on the doctrine of pendent jurisdiction, plaintiff has asserted claims under the Maryland Declaration of Rights and under the common law of the State of Maryland.

Named as defendants in the original complaint were the County, the Hospital Commission of the County, the former Chairman of the Hospital’s Board of Directors, and nine former Hospital directors. At the request of the plaintiff, an Order was entered herein on July 21, 1983, dismissing the Hospital Commission as a defendant.

Extensive discovery has been undertaken by the parties since this action was initially filed. When the facts as developed by discovery are analyzed, it is apparent that plaintiff is essentially claiming first that he has been defamed by statements and actions of members of the Hospital Board and secondly, that the Hospital has breached several contracts with him. After a review of the record developed to date in this case, this Court concludes that claims of this sort are not cognizable in federal court under § 1983 or under the Fifth and Fourteenth Amendments to the Constitution.

Presently pending before the Court are the following motions:

1. Plaintiff’s motion for partial summary judgment;
2. The motion of the individual defendants for summary judgment;
3. Plaintiff’s motion for leave to amend his pleadings;
4. The renewed motion of all defendants for summary judgment;
5. Plaintiff’s renewed motion for summary judgment; and
6. Defendants’ motion to strike a supplemental affidavit.

Voluminous memoranda, as well as affidavits, exhibits and other discovery materials, have been filed by the parties in support of and in opposition to the pending motions. No hearing is necessary for a decision. See Local Rule 6. For the reasons to be stated herein, plaintiff’s motions for summary judgment and plaintiff’s motion for leave to amend his pleadings will be denied; defendants’ motions for summary judgment will be granted, and this civil action will be dismissed without prejudice.

This suit has had a long and tortuous history. The complaint was initially filed on May 20, 1983. Defendants responded by moving to dismiss and for a more definite statement. An amended complaint was then filed on July 12, 1983. After defendants had answered the amended complaint, the Court entered a Scheduling Order on August 29, 1983. Pursuant to this Scheduling Order, a pretrial conference was scheduled in the case for February 6, 1984.

Discovery was then undertaken by the parties and on October 17, 1983, plaintiff filed a motion for partial summary judgment. On January 24, 1984, the individual defendants also filed a motion for summary judgment. Plaintiff then sought an extension of the time to complete discovery and with the consent of defendants, the pretrial conference was cancelled. An Order was entered on February 9, 1984, extending the time for the completion of discovery until April 30, 1984. Various discovery disputes then arose between the parties requiring several conferences with the Court. In a letter opinion dated July 5, 1984, the Court considered and ruled on plaintiff’s motion to compel discovery and for sanctions, which was granted in part and denied in part.

At a telephone status conference held with the Court on June 20, 1984, the parties indicated that they wished to file further motions for summary judgment. At that same telephone conference, a briefing schedule was fixed for these restated motions for summary judgment. On July 16, 1984, plaintiff moved for leave to again amend his complaint. The proposed second amended complaint sought to reinstate the Hospital Commission as a defendant, to delete as defendants all of the former members of the Hospital’s Board of Directors except for Chairman Frederick and to add a new federal claim based on the First Amendment.

Because of difficulties encountered by counsel in completing discovery, the schedule for the filing of the renewed motions for summary judgment was thereafter extended. After all memoranda had been submitted in support of and in opposition to the pending motions for summary judgment, plaintiff, on November 14, 1984, filed a supplemental affidavit. Defendants have moved to strike that affidavit on the ground that it was not timely filed. The final pleading in the file is an opposition to defendants’ motion to strike filed by plaintiff on December 6, 1984.

I

The Background Facts

Differences between plaintiff Chaudhry and the Hospital arose as a result of several different incidents. The first controversy between the parties was the result of certain testimony given by plaintiff as Chairman of the Hospital's Department of Internal Medicine. On September 23, 1981, plaintiff testified before the Prince George’s County Council concerning the efficacy of the Hospital as a provider of health care. His testimony on that occasion included several statements concerning the Hospital staff and its equipment. Members of the Hospital community believed that plaintiff’s testimony was in part untrue and was in any event unfair. Plaintiff asserts that his testimony was true and was presented for constructive purposes.

Secondly, a dispute arose concerning plaintiff’s review of privileges extended to physicians who practiced at the Hospital. As a part of his duties as Chairman of the Department, plaintiff believed that it was his responsibility to review the granting by the Hospital to physicians of privileges to practice at that institution. During the latter part of 1981, plaintiff undertook a review of the privileges which the Hospital had extended to other doctors. Believing that some privileges to practice had been granted in violation of rules of the Hospital and of the Department, plaintiff submitted a written report to the Credentials Committee of the Hospital. This report detailed plaintiff’s evaluation of the professional qualifications of some of the physicians who practiced at the Hospital and further made recommendations concerning the scope of the privilege to practice which should be accorded to some of these physicians. Members of the Board of Directors questioned whether plaintiff had exceeded his responsibilities in submitting this report.

Thirdly, in November of 1981, plaintiff undertook to change some of the rules and regulations of his Department. In particular, some of these rules set forth the requirements which physicians must fulfill in order to enjoy the privilege of practicing at the Hospital. Plaintiff asserts that he signed a document which he believed to be a copy of the amended rules and regulations and which incorporated certain changes he had asked a secretary to make. Copies of the amended rules and regulations were then distributed to various physicians and administrators at the Hospital. Plaintiff contends that the version of the rules and regulations which he signed was not the version which subsequently was reproduced and distributed. He asserts that his signature was fraudulently affixed to the distributed document.

As a result of the dispute which arose concerning the distribution of amended rules and regulations, the then Chairman of the Board of Directors of the Hospital, S.G. Fred Frederick, one of the defendants herein, asked the Executive Committee of the Hospital’s medical staff on July 8, 1982 to determine whether the version of the rules and regulations as distributed was in fact the proper version. Following an investigation, which plaintiff characterizes as “stigmatizing” and devoid of due process, the matter was taken up at a meeting of the Board of Directors of the Hospital. During that meeting, which was held on February 4, 1983, the Board voted to censure plaintiff. By letter dated February 7, 1983, from defendant Frederick as Chairman of the Board, plaintiff was advised that a letter of censure was being placed in his credential file. That letter stated in part:

The Board of Directors have sufficient evidence to indicate that you have not been acting in the best interests of the Greater Laurel Beltsville Hospital and the Hospital Commission of Prince George’s County, as evidenced by your:
1. disloyalty to the Greater Laurel Beltsville Hospital and its Medical Staff, as well as the Hospital Commission of Prince George’s County;
2. discouragement of other physicians to utilize the Greater Laurel Beltsville Hospital through disparaging remarks about the hospital, Medical Staff members, employees, and equipment without supporting documentation being presented to the Board of Directors;
3. disruptive actions and abuse of power within the Medical Staff organization, and specifically, your leadership/authority position within the Department of Internal Medicine, and the failure to follow proper procedures as outlined in the Medical Staff Bylaws, Article XIV, as related to the conduct of departmental meetings;
4. intimidation of other Medical Staff members, Board members, Administration and hospital employees.
Your personal actions are considered by some of your peers to represent abuse of power, disruptive behavior and interference in other physicians’ activities. These actions have compromised the day-to-day operations of the Medical Staff and this hospital, along with the provision of quality patient care.

In his amended complaint, plaintiff asserts that the Board’s censure of him on February 4, 1983 was stigmatizing and improper and constituted a deprivation of his rights without the attendant safeguards required by due process of law. In addition, plaintiff claims that defendants wrongfully terminated the contract whereby the Hospital had promised to retain him as an interpreter of electrocardiograms for the fiscal year beginning July 1, 1982. Finally, he claims that the Hospital breached another contract whereby it had agreed to pay plaintiff certain fees in exchange for the use of medical equipment owned by plaintiff. As relief, plaintiff is seeking a declaratory decree, an injunction, compensatory and punitive damages, attorneys’ fees and costs.

In seeking to further amend his amended complaint, plaintiff asserts that his First Amendment rights have been infringed. Plaintiff claims that the censure of him by the Board of Directors constituted impermissible action by defendants in response to his exercise of his right of free speech.

II

The Pending Motions for Summary Judgment

Both the plaintiff’s and the defendants’ motions for summary judgment were filed pursuant to allegations contained in the amended complaint. Although the amended complaint named the Hospital Commission as one of the defendants, at plaintiff’s request, the Commission was later dismissed as a defendant, and is therefore not at this time a party to this suit. The County is a party and presumably has been named as a defendant because it owns the Hospital.

This case is particularly well suited for disposition by way of motions for summary judgment. Pursuant to Rule 56(c), F.R. Civ.P., a motion for summary judgment should be granted “forthwith” if the pleadings, discovery and affidavits filed in a case show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law. Since the facts material to a decision in this case are not in dispute, the pending motions for summary judgment have presented essentially legal issues.

Clearly, plaintiff’s claims that his constitutional rights have been infringed by the County must fail. It is well established that a municipality cannot be vicariously liable under § 1983 pursuant to a theory of respondeat superior for the acts of its employees or agents. Monell v. Department of Social Services, 436 U.S. 658, 690-95, 98 S.Ct. 2018, 2035-38, 56 L.Ed.2d 611 (1978). A local governing body can be sued directly under § 1983 only where the allegedly unconstitutional action implements or executes a policy statement, ordinance, regulation or decision officially adopted and promulgated by that body’s officers. Id. at 690, 98 S.Ct. at 2035. In order to recover under the principles of the Monell case, a plaintiff must establish both a municipal policy or custom and a causal link between such policy or custom and the alleged constitutional injury. Hector v. Weglein, 558 F.Supp. 194, 200 (D.Md.1982).

The record here establishes as a matter of law that there was no County policy or custom that caused injury to the plaintiff. The County can hardly be held responsible for acts taken by the Board of Directors of one of its hospitals. Nothing in the record indicates that the County had a policy, procedure or custom which caused the alleged injury of which the plaintiff is complaining in this case. In the amended complaint, plaintiff has done no more than allege that defendant Frederick was acting as an agent of the County when he issued the letter of censure. Since the County cannot be held responsible for acts of its agents, the County is entitled to summary judgment as to plaintiff’s claims asserted against it under § 1983 and directly under the United States Constitution.

The remaining defendants named in the amended complaint are the former Chairman and nine former members of the Board of Directors of the Hospital. Apparently conceding that he may not here sue former members of the Hospital’s Board other than the former Chairman, plaintiff in his proposed amendment to the amended complaint, has deleted all individual defendants except for defendant Frederick. Whether defendant Frederick is viewed as the sole remaining individual defendant or whether all of the individual defendants named in the amended complaint are considered as being still in the case, it is apparent from the record here that the plaintiff has not alleged a claim which would entitle him to the relief he is seeking under § 1983 or directly under the Fifth and Fourteenth Amendments.

In seeking damages and other relief under § 1983, plaintiff is here claiming that the Chairman and other members of the Board of Directors of the Hospital, acting under color of state law, deprived him of his constitutional right to due process. See Adickes v. Kress & Co., 398 U.S. 144, 150, 90 S.Ct. 1598, 1604, 26 L.Ed.2d 142 (1970). The parties agree that plaintiffs due process claim in this case is grounded upon the assertion that he has been deprived of a liberty interest protected by the Fourteenth Amendment. The decision of the Supreme Court in Paul v. Davis, 424 U.S. 693, 96 S.Ct. 1155, 47 L.Ed.2d 405 (1976) is dispositive here. In that case, the Supreme Court discussed at some length the limits of a protected liberty interest and held that a claim of defamation is not in and of itself actionable under § 1983. In Paul, the Supreme Court ruled that a loss or injury could not constitute the deprivation of a liberty interest unless that loss involved a removal, extinguishment or significant alteration of an interest recognized and protected by law. 424 U.S. at 710-11, 96 S.Ct. at 1164-65. Any harm or injury to a plaintiff’s interest in his reputation does not result in a deprivation of “liberty” or “property” guaranteed against state deprivation without due process of law. Id. at 712, 96 S.Ct. at 1166.

In this particular case, it is apparent that plaintiff is primarily seeking damages and other relief because he was “stigmatized” and otherwise injured by the censure action taken by the Board of Directors of the Hospital on February 4, 1983. Under Paul v. Davis, a claim of this sort is not maintainable under § 1983.

In attempting to define a liberty interest which might permit him to sue under § 1983, plaintiff argues that there have been additional deprivations besides an injury to his reputation. He asserts that he has suffered (1) a loss of income because of defendants’ breach of a contract whereby he had agreed to read electrocardiograms, (2) a loss of income as a result of defendants’ breach of a contract for the rental of medical equipment owned by him, and (3) a loss of income caused by a decrease in the number of patient referrals made to him. But such losses would not constitute a liberty or property interest the deprivation of which would permit plaintiff to seek relief under § 1983. Section 1983 is to be interpreted against a “background of tort liability.” Monroe v. Pape, 365 U.S. 167, 187, 81 S.Ct. 473, 484, 5 L.Ed.2d 492 (1961). Liability is imposed under this statute for subjecting a person to the deprivation of rights secured by the Constitution of the United States and not for breach of contract. Braden v. Texas A & M University System, 636 F.2d 90, 92 (5th Cir.1981); Bleeker v. Dukakis, 665 F.2d 401 (1st Cir. 1981). Moreover, plaintiff's contention that he has lost income because of a decrease in the number of patient referrals is no more than a claim for consequential damages resulting from an injury to his reputation. Plaintiff has not alleged and cannot allege on this record that any decrease in referrals was caused by the loss or alteration of a legal status recognized and protected by state law. See Mosrie v. Barry, 718 F.2d 1151, 1161-62 (D.C.Cir. 1983).

Plaintiff himself has even recognized that his claim for breach of contract is one that may be presented to a state court under Maryland common law. He has previously sued the County seeking recovery of rental fees due him because of the breach by the Hospital of a contract whereby he was to be paid for the use of his equipment. Chaudhry v. Prince George’s County, Maryland, 626 F.Supp. 448 (Md.1985) (Circuit Court for Prince George’s County, Maryland). That suit was filed by the plaintiff in August of 1983, and a trial is now scheduled for June of 1985.

For all these reasons, this Court concludes that plaintiff has not alleged or shown that he has a protectable liberty interest which would permit him to seek relief against the defendants under § 1983. Accordingly, plaintiffs motions for summary judgment will be denied, and defendants’ motions for summary judgment will be granted.

Ill

The Motion to Further Amend the Amended Complaint

Under Rule 15(a), F.R.Civ.P., once a responsive pleading has been filed, a party may amend his pleading only by leave of court. Although the rule states that such leave is to be “freely given when justice so requires,” it is well settled that the decision whether to grant an amendment to a pleading rests within the sound discretion of the trial court. Zenith Radio Corp. v. Hazletine Research, Inc., 401 U.S. 321, 330, 91 S.Ct. 795, 802, 28 L.Ed.2d 77 (1971). In Foman v. Davis, 371 U.S. 178, 182, 83 S.Ct. 227, 230, 9 L.Ed.2d 222 (1962), the Supreme Court held that although leave to amend should ordinarily be freely given, an amendment should not be allowed if, inter alia, it will cause undue delay or prejudice to the opposing party, or if the amendment would be futile.

In this case, it is clear that, if this case were to go forward, the proposed amendment would delay the trial, would prejudice defendants and would probably prove to be futile. Plaintiff has already amended his complaint once. The pending motion, which seeks to further amend the amended complaint, was filed some fifteen months after suit was instituted, was filed after the date initially set by the Court for the pretrial conference, and was filed at a time when substantially all of the discovery had been completed by the parties. Plaintiff is now seeking to add a new federal claim, namely that his First Amendment rights were infringed by the defendants as a result of which he has suffered loss and damage. This new federal claim raises a number of legal and factual questions which differ from those presented by the federal claim asserted by plaintiff in the amended complaint. Indeed, there is a serious question whether an implied right of action exists directly under the First Amendment whereby plaintiff would be entitled to recover damages and an injunction against defendants. In any event, if the requested amendment were permitted, additional discovery would be necessary, additional motions and briefing could be expected, additional expenses would be incurred and the trial of this case would be further delayed. Moreover, there is no apparent reason why plaintiff was required to wait until discovery was substantially completed before seeking to add this new federal claim. The background facts were well known from the outset, and there is no reason why plaintiff’s First Amendment claim could not have been included in the amended complaint.

This Court further concludes that plaintiff’s proposed amendment would probably be futile. This is not a case in which an employee of a state agency has alleged under § 1983 that he has not been hired or that he has been discharged because of the exercise by him of his First Amendment rights. See Cherry v. Burnett, 444 F.Supp. 324 (D.Md.1977); Oilman v. Toll, 518 F.Supp. 1196 (D.Md.1981). Plaintiff voluntarily resigned as Chairman of the Department of Internal Medicine. However, he still retains his hospital privileges and continues to practice there. Any economic loss sustained by him would be the result of his allegations that he has been defamed and that the Hospital has breached agreements between the parties. As discussed hereinabove, claims of this sort are not cognizable under § 1983, and plaintiff is therefore not entitled to seek a recovery in this case either under allegations of a denial of due process rights or allegations of a denial of First Amendment rights.

IV

Plaintiffs Claims Under State Law

In addition to the federal claims which plaintiff has attempted to allege in his amended complaint, he has asked this Court to exercise pendent jurisdiction over several additional claims asserted under state law. On the record here, this Court concludes that the state claims likewise should be dismissed, without prejudice to plaintiffs right to assert them in a state court.

Pendent jurisdiction is a doctrine of discretion and not one of a plaintiffs right. United Mineworkers v. Gibbs, 383 U.S. 715, 86 S.Ct. 1130, 16 L.Ed.2d 218 (1966). The Supreme Court has cautioned that “needless decisions of state law should be avoided both as a matter of comity and to promote justice between the parties, by procuring for them a surer footed reading of applicable law. Certainly if the federal claims are dismissed before trial ... the state claims should be dismissed as well.” Id. at 726, 86 S.Ct. at 1139.

In this case, the federal claim asserted in the amended complaint has now been dismissed pursuant to defendants’ motions for summary judgment. As Judge Friendly stated in Kavit v. A.L. Stamm & Co., 491 F.2d 1176, 1180 (2d Cir.1974):

If it appears that the federal claims are subject to dismissal ... or could be disposed of on a motion for summary judgment under F.R.Civ.P. 56, the Court should refrain from exercising pendent jurisdiction absent exceptional circumstances.

Since summary judgment has been granted as to plaintiffs federal claim and since there are no exceptional circumstances here, this Court will not exercise pendent jurisdiction in this case. If plaintiff wishes to assert claims against defendants under state law, he should file an appropriate suit in a state court. For these reasons, plaintiff’s state law claims will likewise be dismissed.

Accordingly, it is this 17th day of April, 1985, by the United States District Court for the District of Maryland,

ORDERED:
1. That plaintiff’s motions for summary judgment be and the same are hereby denied;
2. That plaintiff’s motion for leave to amend his pleadings be and the same is hereby denied;
3. That defendants’ motions for summary judgment be and the same are hereby granted; and
4. That the amended complaint is hereby dismissed, without prejudice, with costs to be assessed against the plaintiff.

      . Plaintiff did not sue the Hospital itself. It is not entirely clear from the record in this case whether or not the Hospital is a separate entity.

      . The Hospital Commission was created by County legislation and charged with the overall supervision and operation of County hospitals. However, the suable entity is the County itself. In any event, the Hospital Commission was dissolved by County legislation effective June 30, 1983.

      . Defendants’ motion to strike will be denied. The supplemental affidavit in question has been considered as a part of the record in this case.

      . The Board of Directors was in any event ultimately responsible in 1982 and early 1983 for the Hospital and its operations, activities and actions.

      . Even if the Hospital Commission were a defendant, plaintiff’s claims against it would likewise be subject to dismissal under Monell.

      . The Board of Directors was dissolved by County legislation, effective June 30, 1983.

      . Even if plaintiff were entitled to assert a claim against defendants directly under the Fifth Amendment or the Fourteenth Amendment, such a federal cause of action would likewise fail for the reasons stated by the Supreme Court in Paul v. Davis, supra.

      . At the telephone status conference held on June 20, 1984, the Court set a schedule for the ■ filing of renewed motions for summary judgment. Although indicating that plaintiff wished to further amend the amended complaint, counsel did not advise either the Court or defendants’ attorney that the proposed amendment would include a new and additional federal claim.

      . Affidavits of six physicians who also practice at the Hospital establish as a matter of law that defendants' acts and conduct did not cause other doctors to stop making patient referrals to plaintiff and did not cause other doctors to change their opinions concerning plaintiffs professional standing.


author: ELFVIN, District Judge.

text:
    John D. Di PASQUALE, Plaintiff, v. BOARD OF EDUCATION, WILLIAMSVILLE CENTRAL SCHOOL DISTRICT, Defendant.
    No. CIV-82-677E.
    United States District Court, W.D. New York.
    May 8, 1985.
    Richard J. Rosche, Buffalo, N.Y., for plaintiff.
    Craig L. Miller, Buffalo, N.Y., for defendant.
   MEMORANDUM and ORDER

ELFVIN, District Judge.

In this action brought pursuant to 42 U.S.C. § 1983 alleging a violation of plaintiff’s free exercise of religion rights under the First Amendment, the parties have stipulated the controlling facts and have moved for summary judgment.

Plaintiff is a school teacher who has been employed by defendant for the last nine years. The terms and conditions of his employment in all regards and at all times pertinent to this case were governed by a collective bargaining agreement (“the cba”) between the Williamsville Teaching Association and defendant. Plaintiff is a practicing Roman Catholic. The Roman Catholic Church recognizes certain “Days of Obligation” on which practitioners of the faith are expected to attend Mass. These days include the “Feast of the Immaculate Conception” in December and the “Feast of the Ascension” in May. The Church does not require that adherents refrain from work on such days; rather Masses are generally provided outside of working hours. (Such is true of the various parishes of the Diocese of Buffalo.) Plaintiff asserts, however, that his personal beliefs as a Catholic prevent him from working on either of these days. In effect, the central issue in this case concerns the extent to which defendant is.compelled, as a matter of law, to accommodate this personal religious view of the plaintiff.

On December 7, 1981 plaintiff requested a paid leave of absence under section 5.14 of the cba in order to observe the Feast of the Immaculate Conception on December 8, 1981. Section 5.14 permits an employee six days leave (“family days”) during a school year for sickness or death in the immediate family and certain religious holidays. Defendant denied plaintiff’s request as inappropriate under section 5.14 on the grounds that it was possible for plaintiff to attend Mass during non-working hours. Defendant granted plaintiff’s subsequent request for paid leave December 8 as a “personal day” under section 5.15 of the cba and plaintiff accordingly was absent from school on that date. He thereafter initiated a grievance under the cba but later abandoned it.

On May 14, 1982 he similarly requested paid leave under section 5.14 to observe the Feast of Ascension on May 20, 1982. His request again was denied but he was again granted a personal day under section 5.15 and was absent from work May 20th. He grieved anew and a hearing was held before an arbitrator September 22, 1982. In a decision dated October 22, 1982, the arbitrator held that the term “religious holidays” under section 5.14 of the cba encompassed only those days where an employee’s religion required absence from work. The arbitrator further held that the determination as to when a religion so required was intended under the cba to be objective, that plaintiff's views regarding the days at issue were subjective and not mandated by Catholic orthodoxy and, accordingly j that defendant’s failure to grant plaintiff’s requests did not violate the cba.

Plaintiff in his Amended Complaint contends that defendant’s actions violated the free exercise and the establishment clauses of the First Amendment. He further asserts that his equal protection rights under the Fourteenth Amendment have been violated because defendant permits Jewish employees to take paid leaves of absence pursuant to section 5.14 for Rosh Hoshanah and Yom Kippur.

Because the parties have stipulated to the relevant facts in this case, the matter is particularly appropriate for summary judgment. See generally American Intern. Group, Inc. v. London Am. Intern., 664 F.2d 348 (2d Cir.1981); but see footnote 1, supra. The heart of plaintiff’s case is his claim under the free exercise clause. As the United States Court of Appeals for the Second Circuit stated in Brandon v. Board of Ed. of Guilderland Cent. Sch., 635 F.2d 971 (1980) cert. denied, 454 U.S. 1123, 102 S.Ct. 970, 71 L.Ed.2d 109 (1981), reh. denied, 455 U.S. 983, 102 S.Ct. 1493, 71 L.Ed.2d 694 (1982):

“To demonstrate an infringement of his free exercise rights, an individual must show ‘the coercive effect of the [state] enactment as it operates against him in the practice of his religion.’ School District of Abington Township v. Schempp, * * * 374 U.S. [203,] at 223, 83 S.Ct. [1560] at 1572 [10 L.Ed.2d 844 (1963)]. The analysis need not involve a court in determining the sincerity of one’s religious beliefs, United States v. Ballard, 322 U.S. 78, 64 S.Ct. 882, 88 L.Ed. 1148 (1944), but it does require that the court inquire into the relative importance of a particular religious ritual and the degree to which exercise of that practice is infringed by government action.” Id. at 976.

Taking into consideration the kind of balancing alluded to in that case, it is clear that the facts in this case overwhelmingly support defendant. As a general rule it would be unreasonable to dispute that there must be some limitation of the extent to which employees, acting out of subjectively asserted religious beliefs, can claim exemption from the normal demands of their jobs. The question is not whether such a limitation is constitutionally acceptable but rather what degree of limitation is acceptable. In the present case the reasonableness of defendant’s attempt to accommodate religious pluralism among employees with the practical need to control the employees’ absenteeism is evidenced by the minimal nature of any infringement on plaintiff’s rights. Plaintiff’s allegation notwithstanding, section 5.14 provides an objective, evenhanded method of making determinations in an area prone to controversy — i.e., religious beliefs. The alternative to this system would require either blanket accession to any employee claiming subjective religious imperatives — and not merely with regard to leaves of absence — or some kind of case by case decision making, with all of the obvious burdens such would entail. The present system has evolved out of collective bargaining at which plaintiff, as a union member, was represented. There is no evidence that his religious views have been stigmatized by this process. Indeed, he was permitted to observe his religious holidays, albeit under the guise of a personal day. (This Court recognizes that plaintiff was thereby deprived of a day’s leave that he might have used otherwise; but such imposition is minimal under the circumstances.) There is no evidence, for example, that plaintiff has lost a day’s pay, been threatened with termination or faced any kind of retaliation or more than the most indirect pressure from defendant. Whatever minimal infringement on plaintiff’s free exercise of religion might be discernible on the facts of this ease, it cannot be said to rise to the level of a Constitutional violation.

Plaintiff’s claim under the establishment clause is similarly without merit. Although he refers to the establishment clause in his Amended Complaint and refers loosely in the plural to religious freedoms in his memoranda, he never articulates a basis for his claim. He does not assert, for example, that a particular religion is being advanced or suppressed by defendant’s actions. Whatever the case may be, it is clear from the facts that defendant’s action is not a “purposeful or surreptitious effort to express some kind of governmental advocacy of a particular religious message.” Lynch v. Donnelly, 465 U.S. 668, 104 S.Ct. 1355, 1363, 79 L.Ed.2d 604 (1984). It is more accurately stated that “whatever benefit to one faith or religion or to all religion,” is involved in defendant’s application of the cba to plaintiff, “is indirect, remote and incidental.” Id. at 1364.

Plaintiff has not vigorously pursued the equal protection argument found in the second cause of action of his Amended Complaint. Because this Court has found plaintiff’s First Amendment claims without merit, his equal protection claim — subject as it is to a less stringent standard of review in this situation — must similarly be denied. See McGovern v. Maryland, 366 U.S. 420, 425-26, 81 S.Ct. 1101, 1104-05, 6 L.Ed.2d 393 (1961).

Accordingly, it is hereby ORDERED that plaintiff’s motion for summary judgment is denied and that defendant’s motion for summary judgment of dismissal is granted.

      . While I have decided to grant summary judgment here, such result is not mandated by the circumstances that the parties have stipulated to the facts and that both have moved for summary judgment. See Sckwabenbauer v. Board of Ed., Etc., 667 F.2d 305 (2d Cir.1981).

      . Plaintiffs allegation is misleading. Defendant has not singled out Jewish teachers for preferential treatment. Rather, the two days in question happen to fit within the definition of religious holidays under section 5.14 of the cba. Plaintiff's other vague reference to differences between "religious holidays" as applied to teachers and as applied to students (Amended Complaint ¶ 14) is inapt. Defendant’s interest in regulating the vacation time of its employees is in no way identical to its interest in regulating that of its students.

      . It should be noted that Ronald Philbrook v. Ansonia Board of Education, et al., 757 F.2d 476 (2d Cir.1985), a similar case brought under Title VII of the Civil Rights Act of 1964, 42 U.S.C. § 2000e-2, and the First Amendment, does not hold to the contrary. One of various factors distinguishing that case from the matter at bar was the offer by plaintiff (also a school teacher) to take the dates at issue in that case as personal days or, alternatively, to pay the school district the full cost of a substitute teacher rather than be docked a pro rata share of his salary.


author: NEESE, Senior District Judge,

text:
    AMERICAN NATIONAL FIRE INSURANCE COMPANY, Plaintiff, v. James C. CHICK, Defendant.
    Civ. A. No. 3:85-0561.
    United States District Court, M.D. Tennessee, Nashville Division.
    May 16, 1985.

      Arthur McClellan, McClellan, Powers & Ehmling, Gallatin, Tenn., for plaintiff.
    James C. McBroom, Finch & McBroom, Nashville, Tenn., for defendant.
   MEMORANDUM OPINION, ORDER, ALLOWANCE AND STAY

NEESE, Senior District Judge,

Sitting by Designation and Assignment.

The plaintiff undertook to invoke the limited jurisdiction of this Court on two grounds. One was under “ * * * the terms and provisions of 28 U.S.C. § 2201 * * This is a section of the federal Declaratory Judgment Act; it is only procedural in nature and does not serve as a required independent basis of federal jurisdiction, Shelly Oil Co. v. Phillips Petroleum Co., 339 U.S. 667, 671, 70 S.Ct. 876, 878, 94 L.Ed. 1194 (1950).

The other ground of jurisdiction alleged was on the basis of the purported diverse citizenships of the respective parties hereto and the matter in controversy. The plaintiff alleged in conclusory fashion inter alia that “ * * * the original [sic] [p]laintiff and [defendant are citizens of different states * * *.”

This is insufficient. In such a situation, the facts which, in legal intendment, constitute the respective citizenships of the parties must “ * * * be distinctly and positively averred. * * * ” Robertson v. Cease, 7 Otto (97 U.S.) 646, 649-650, 25 L.Ed. 1057, 1058 (1878).

The plaintiff alleged distinctly and positively that its principal place of business is in Ohio, but it did not so allege the state or states by which it has been incorporated. This Court’s jurisdiction in such a case is limited, as follows:

“The district courts shall have original jurisdiction of all civil actions where the matter in controversy exceeds the sum or value of $10,000 exclusive of interest and costs, and is between— * * * citizens of different states.”

28 U.S.C. § 1332(a)(1).

“For the purposes of this section * * *, a corporation shall be deemed a citizen of any State by which it is incorporated and of the State where it has its principal place of business * * *.”

28 U.S.C. § 1332(c).

The allegations of the plaintiff aforementioned being defective, this Court is not at liberty to “ * * * assume the existence [in fact] of [its] jurisdiction * * * [for] without a finding that there is federal jurisdiction over a particular claim for relief the federal courts are without power to proceed. * * * ” Memphis Am. Fed. of Tchrs., L. 2032 v. Bd. of Ed., 534 F.2d 699, 701[1] (6th Cir.1976), citing Ex parte McCardle, 7 Wall. (74 U.S.) 506, 514, 19 L.Ed. 264, 265 (1868). It is “ * * * mandatory for a court to inquire [sua sponte ] into its subject matter jurisdiction. * * * ” Rauch v. Day & Night Mfg. Co., 576 F.2d 697, 699, n. 1 (6th Cir.1978).

(Apart from the foregoing, the plaintiff has not made “ * * * a short and plain statement of the claim showing that [it] is entitled to relief * * Rule 8(a)(2), F.R.Civ.P. That Rule does not sanction the setting-out in the complaint of a detailed accounting of all the facts or theory on which the plaintiffs claim is based. Taylor v. Nichols, 409 F.Supp. 927, 932[4] (D.C.Kan.1976), judg. affd., 558 F.2d 561 (10th Cir.1977).)

It appearing that this Court lacks jurisdiction of the subject-matter hereof under the present defective allegations of the plaintiff, this action hereby is

DISMISSED. Rule 12(h)(3), F.R.Civ.P. However: “Defective allegations of jurisdiction may be amended, upon terms, in the trial * * * Court.” 28 U.S.C. § 1653.

On the condition that the complaint herein is amended properly within 10 days herefrom, id., if the facts permit, to invoke properly the subject-matter jurisdiction of this Court, such amendment(s) will be considered; this order of dismissal hereby is STAYED for 10 days to allow such.

       (The complaint should be redrafted in complianee with Rule 8(a)(2), supra.)


author: GRADY, District Judge.

text:
    COMMUNITY CONSOLIDATED SCHOOL DISTRICT NO. 59, an Illinois municipal corporation, Plaintiff, v. UNITED STATES FIDELITY AND GUARANTY COMPANY, Defendant.
    No. 85 C 328.
    United States District Court, N.D. Illinois, E.D.
    May 22, 1985.
    John A. Relias, Gwenda M. Burkhardt, Vedder, Price, Kaufman & Kammholz, for plaintiff.
    Lawrence R. Moelmann, Eric Blomquist, Hinshaw, Culbertson, Moelmann, etc., for defendant.
   MEMORANDUM OPINION

GRADY, District Judge.

This case is before us on the motion of defendant United States Fidelity & Guaranty Co. (“USF & G”) to stay or dismiss plaintiff’s complaint because plaintiff’s suit is duplicative of litigation now pending in state court. For the reasons given below, proceedings in this case are stayed.

BACKGROUND

Plaintiff Community Consolidated School District No. 59 (“the District”), an Illinois municipal corporation, contracted with F.J. Richter Construction Co., Inc. (“Richter”), an Illinois corporation, to construct an administrative office building. Defendant USF & G, a Maryland corporation, executed payments and performance bonds in connection with the project as surety: Richter is the principal on the bonds and the District is the obligee.

The District became dissatisfied with Richter’s performance and eventually terminated it pursuant to their contract for failure to perform. This alleged failure to perform, termination and its consequences have resulted in the filing of multiple lawsuits in the Circuit Court of Cook County, Illinois. In July 1984, Richter sued the District for breach of contract, and the District counterclaimed, also for breach of contract. Subsequently, USF & G sued the District in state court for an accounting and declaratory judgment. Finally, one subcontractor is suing Richter, USF & G and the District. The first three state suits (Richter v. District, USF & G v. Richter, and USF & G v. District) have been consolidated in state court.

The District’s federal suit claims that due to Richter’s breach of its obligations under its contract with the District, USF & G must pay the District in excess of $380,-000.00, pursuant to the bond. USF & G has indicated that its defense will be that the District materially breached its contract with Richter, and that the underlying contract between Richter and the District is void because the District failed to obtain voter approval for the project pursuant to Ill.Rev.Stat. ch. 22, 1110-22.36. Memorandum in Support of USF & G’s Motion to Dismiss or Abate at 3.

DISCUSSION

USF & G has moved for a dismissal or stay on the grounds that this suit is duplicative of the above multiple state court proceedings. The District concedes that at least one of the state suits (USF & G v. District) involves issues identical to those found in the federal suit. Memorandum in Opposition to United States Fidelity and Guaranty Company’s Motion to Dismiss or Abate at 3, n. 1. Richter’s suit against the District, combined with the District’s counterclaim, also presents the same breach of contract issues that the District seeks to litigate in this court. See Memorandum in Support of USF & G’s Motion, Exhs. A, B.

When identical suits are pending in state and federal court, the federal court under certain circumstances may invoke what is commonly termed “type four abstention,” or “abstention to avoid duplicative litigation.” See Thompsen v. Ashner, 601 F.Supp. 471, 474 (N.D.Ill.1985). This type of abstention was first treated in depth by the Supreme Court in Colorado River Water Conservation District v. United States, 424 U.S. 800, 96 S.Ct. 1236,' 47 L.Ed.2d 483 (1976). There, the Court reversed the Tenth Circuit’s reversal of the district court’s dismissal of a federal suit on abstention grounds. While recognizing the district court’s “virtually unflagging obligation” to exercise the jurisdiction given it, the Court stated that there are exceptional situations in which a court may abstain in order to avoid the waste of duplicative litigation. Id. at 817-18, 96 S.Ct. at 1246. Although it stated that the determination whether to abstain cannot rest on a “mechanical checklist,” the Court did note several factors which may be taken into account: (1) the order in which jurisdiction was obtained by the concurrent forums; (2) inconvenience of the federal forum; (3) desirability of avoiding piecemeal litigation; (4) absence of progress in the federal court litigation; (5) presence in the suit of extensive rights governed by state law; and (6) the parties’ previous willingness to litigate similar suits in state court. Id. at 818, 820, 96 S.Ct. at 1246, 1247. See Moses H. Cone Hospital v. Mercury Construction Corp., 460 U.S. 1, 16, 103 S.Ct. 927, 937, 74 L.Ed.2d 765 (1983).

Recently, the Court confirmed its position that the abstention doctrine as expounded in Colorado River should guide lower courts in determining whether to abstain in order to avoid duplicative litigation. See Arizona v. San Carlos, 463 U.S. 545, 103 S.Ct. 3201, 3215, 77 L.Ed.2d 837 (1983); Cone, 460 U.S. at 13-19, 103 S.Ct. at 935-39. San Carlos and Cone express the Court’s position that abstention is warranted in exceptional situations. For example, as in Colorado River, the issue in San Carlos related to water rights, which the Court found to be a state oriented subject under the McCarran Act. Therefore, in San Carlos, as in Colorado River, the Court found that the federal interest evinced in the McCarran Act of having the state adjudicate water rights issues called for abstention by the federal court, even when the rights of the United States or Indians were involved. San Carlos, 103 S.Ct. at 3215. In contrast, the Court found abstention unwarranted in Cone, because the state remedy could be inadequate, and because the case involved the issue of arbitrability, which would be governed by federal law. Cone, 460 U.S. at 24,103 S.Ct. at 941. The Court noted in Cone that this state versus federal law issue was only of ambiguous relevance in Colorado River, but that the issue must always be a “major consideration” in determining whether to abstain. Id. at 26, 103 S.Ct. at 942.

The Seventh Circuit has followed Colorado River and Cone in several recent cases, e.g., Illinois Bell Telephone Co. v. Illinois Commerce Commission, 740 F.2d 566 (7th Cir.1984); Board of Education of Valley View Community Unit School District No. 365U v. Bosworth, 713 F.2d. 1316 (7th Cir.1983); Evans Transportation Co. v. Scullin Steel Co., 693 F.2d 715 (7th Cir. 1982); Voktas, Inc. v. Central Soya Co., Inc., 689 F.2d 103 (7th Cir.1982); and Microsoftware Computer Systems v. Ontel Corp., 686 F.2d 531 (7th Cir.1982). In Illinois Bell, the court found that the district court had not abused its discretion in denying a stay, noting that issues of federal law, deemed a major consideration in Cone, were involved. Illinois Bell, 740 F.2d at 570. In Bosworth, the court affirmed abstention, citing significant progress in the state court. Bosworth, 713 F.2d at 1322. In Evans, the court remanded the district court’s decision to stay because the district court had only cited the fact that the state suit had been filed one month prior to the federal suit, and this factor alone could not be determinative. Evans, 693 F.2d at 105. In Voktas, the court affirmed denial of a stay, noting that the state court had stayed state proceedings because of its expressed disinclination to try the case due to its complexity. Voktas, 689 F.2d at 105. Finally, in Microsoftware, the court reversed the district court’s denial of a stay, noting that the case involved no federal question, the state suit was filed first, and “there would be a grand waste of efforts by both the courts and the parties in litigating the same issues regarding the same contract in two forums at once.” Microsoftware, 686 F.2d at 538. The court in Microsoftware also took into account the fact that the ordinary justification for having diversity jurisdiction was not present, since the Illinois corporation, not the out-of-state party, had filed the federal suit. Id. at 537.

While no clear guideline emerges from these Supreme Court and Seventh Circuit opinions, we believe that certain generalizations can be made. First, we must be biased against abstention — abstention is warranted only in “exceptional” cases. Second, in order to determine whether the instant case fits within the exception, we can begin by applying the six factors found in Colorado River and Cone:

(1) Order in which jurisdiction was obtained. This factor favors abstention. While the completely duplicative actions were filed at approximately the same time, the first case relating to this matter was filed in state court six months before the federal case was filed, and the District’s counterclaim to that initial suit is basically duplicative of its position in the federal suit;

(2) Inconvenience of the federal forum. There is no particularized inconvenience, such as location distant from witnesses and other evidence. See Mechanical Systems, Inc. v. Cadre Corp., 567 F.Supp. 948, 950 (N.D.Ill. 1983);

(3) Piecemeal litigation. This factor favors abstention, as we discuss below;

(4) Absence of progress in the federal litigation. The federal suit is at an early stage, since the complaint has not yet been answered;

(5) Presence of state law issues. This case involves exclusively state law claims;

(6) The parties’ previous willingness to litigate in state court. The District has counterclaimed against Richter in state court, the significance of which is also discussed below.

Using these factors as a checklist, abstention appears desirable. But as the Supreme Court indicated, these factors are not to be mechanically applied, and, therefore, our next step is to determine which of these factors carry greater weight, and what additional factors, if any, should influence our decision in this particular case.

One general point which does appear consistently in the cases is that the absence of a federal question carries some weight. The Supreme Court called this a “major consideration,” and the Seventh Circuit seemed to find this factor highly significant in Microsoftware. While we must be careful not to treat diversity litigants as “second class” plaintiffs, see Evans, 693 F.2d at 717, as also is noted in Evans, a diversity plaintiff’s position is considerably weakened when he is not the out-of-state party. See id. at 719. See also Microsoft-ware, 686 F.2d at 537.

Ultimately, the issue of abstention must hinge on the facts of each particular case. The individualized facts of this case, coupled with the general factors cited above, call for abstention.

While Richter, the contractor, is probably not an indispensable party to this case, see Fidelity & Deposit Co. of Maryland v. Sheboygan Falls, 713 F.2d 1261, 1268 (7th Cir.1983), its presence would greatly facilitate the proceedings. The basic issue in dispute is whether Richter breached its contract with the District. The District will argue that Richter did breach, while USF & G will defend Richter’s performance. It appears that the only reason Richter is not in this suit is because its presence as a defendant would destroy diversity. Therefore, the District seems to be bypassing an obvious party in order to obtain jurisdiction in a case duplicative of an already pending state case in which Richter is a party and in which all the parties’ claims can be fully adjudicated. The Supreme Court has cautioned against unseemly forum shopping, San Carlos, 103 S.Ct. at 3214, and while the District’s behavior is not obviously vexatious, its filing of a federal suit that cannot determine the rights of the interested parties as fully as an already pending state action does appear to be the type of conduct subject to scrutiny under the Seventh Circuit’s reasoning in Calvert Fire Insurance Co. v. American Mutual Reinsurance Co., 600 F.2d 1228, 1234 (7th Cir.1979). In Calvert, the court affirmed abstention because of the district court’s finding that the plaintiff had filed federal suit as a reactive defensive maneuver for the purposes of delay. Id. at 1234. See Voktas, 689 F.2d at 108-09.

Richter’s absence also underlines the presence in this case of Colorado River’s piecemeal litigation factor. Moreover, as indicated, subcontractors have filed suit in state court against the District and USF & G. While these suits apparently have not been consolidated with the Distriet-RichterUSF & G suits, it may be that USF & G and the District’s liability in the already consolidated cases hinges on aspects of the subcontractors’ performances. Therefore, these subcontractors’ cases could be consolidated with the District-Richter-USF & G suits, and this possibility further suggests the inadequacy of the federal forum in comparison to the state court’s ability to thoroughly litigate all interested parties’ claims.

Therefore, because abstention is warranted by the factors enumerated in Colorado River — including the major factors relating to piecemeal litigation and adjudication of purely state law claims — and because the state court can make a more complete adjudication, we will stay this case pending resolution of the state court proceedings.

CONCLUSION

Further proceedings in this case are stayed pending resolution of state court proceedings.

      . The Seventh Circuit has indicated that a stay is more appropriate than dismissal in "type four” abstention cases. In re Ohio River Co. v. Carrillo, 754 F.2d 236 (7th Cir.1985); Bosworth, 713 F.2d at 1322.