author: DITTER, District Judge.

text:
    NATIONAL TEMPLE NON-PROFIT CORPORATION, Plaintiff, v. NATIONAL TEMPLE COMMUNITY FEDERAL CREDIT UNION, Defendant.
    Civ. A. No. 84-1229.
    United States District Court, E.D. Pennsylvania.
    Jan. 23, 1985.
    Harold R. Berk, Philadelphia, Pa., for plaintiff.

      R. David Danziger, Max D. Palitz, Stephen S. Pennington, Philadelphia, Pa., for defendant.
   MEMORANDUM AND ORDER

DITTER, District Judge.

In this action plaintiff seeks to recover funds which it alleges were wrongfully converted by defendant. These funds were on deposit in a share account plaintiff maintained with defendant. In defense, defendant, while admitting it has withheld the funds deposited by plaintiff, claims its actions were in accordance with the terms of a third-party loan guarantee binding upon plaintiff. Federal jurisdiction is asserted under the Federal Credit Union Act (the “Act”), 12 U.S.C. § 1751-1795i. Presently before me is defendant’s motion to dismiss the complaint. This motion is grounded in the assertion that the Act contains no express or implied cause of action for the conduct herein involved. For the reasons that follow, defendant’s motion will be granted.

Concededly no private right of action applicable to the facts of this case is expressly authorized by the Act. Therefore, I must determine whether one is implied. In Cort v. Ash, 422 U.S. 66, 95 S.Ct. 2080, 45 L.Ed.2d 26 (1975), the Court articulated a four-part test to determine when an implied private right of action exists under a federal statute. This test requires a court to consider, first, whether the plaintiff is a member of a class for whose especial benefit Congress enacted the statute; second, whether the legislative history of the statute indicates a congressional intent, explicit or implicit, to create or deny a private remedy; third, whether implying a remedy harmonizes with the legislative purpose; and fourth, whether state law has traditionally regulated the area addressed by the federal statute. Cort, 422 U.S. at 78, 95 S.Ct. at 2088.

Since announcement of the four-part Cort test, the Court has narrowed the availability of implied statutory causes of action to those where a congressional intent to create a particular right of action (the second prong of the Cort test) can be found. See Touche Ross & Co. v. Redington, 442 U.S. 560, 575-76, 99 S.Ct. 2479, 2488-89, 61 L.Ed.2d 82 (1979). See also Daily Income Fund, Inc. v. Fox, 464 U.S. 523, —, 104 S.Ct. 831, 839, 78 L.Ed.2d 645 (1984); Merrill Lynch, Pierce, Fenner & Smith v. Curran, 456 U.S. 353, 377-78, 102 S.Ct. 1825, 1838-39, 72 L.Ed.2d 182 (1982); Texas Industries, Inc. v. Radcliff Materials, Inc., 451 U.S. 630, 639, 101 S.Ct. 2061, 2066, 68 L.Ed.2d 500 (1981). Under Touche Ross and its progeny, the Cort analysis shifts more definitely from the desirability of providing remedies to statutory construction, Transamerica Mortgage Advisors, Inc. v. Lewis, 444 U.S. 11,15,100 S.Ct. 242, 245, 62 L.Ed.2d 146 (1979), with the remaining Cort factors serving as statutory interpretive aids to discern congressional intent. See Daily Income Fund, 104 S.Ct. at 839; Touche Ross, 442 U.S. at 568, 99 S.Ct. at 2485.

As plaintiff concedes, the legislative history is silent regarding congressional intent to create a private cause of action on behalf of a credit union member dissatisfied with a lien impressed against the member’s deposited funds. With the exception of private actions to recover usurious interest charges, my review of the legislative history has uncovered no discussion of any private enforcement rights. While not automatically fatal to an implied right of action, legislative silence on the matter does not favor creation of the right unless the language or structure of the statute, or the circumstances of its enactment, persuade otherwise. See Transamerica, 444 U.S. at 15-16, 23-24, 100 S.Ct. at 245-249; Touche Ross, 442 U.S. at 575-76, 99 S.Ct. at 2488-89. Furthermore, Congress’ explicit allowance of a private right of action to recover usurious interest charges weighs against finding an implied right of action in other sections of the Act. See Touche Ross, 442 U.S. at 571-72, 99 S.Ct. at 2486-87.

Turning to a review of the remaining Cort factors, it is apparent that Congress did not intend to create a private cause of action. The Act creates federal credit unions, grants these credit unions certain powers, provides for certain operating requirements, and establishes certain insurance funds. In this respect, the entire legislative scheme is a type of enabling legislation which creates federal credit unions and provides for their'internal operations. Nothing indicates the statute was intended to create privately enforceable rights in favor of credit union members or that the Act was intended to benefit members in any way aside from creating federal credit unions as an alternative to other financial institutions. This alternative, it was hoped, would protect workers from being forced to borrow money at usurious interest rates. See Barany v. Buller, 670 F.2d 726 (7th Cir.1982). Indeed, the only private cause of action expressly contained in the Act is to enable credit union members to recover usurious interest charges.

In a similar vein, nothing suggests creation of a private cause of action would harmonize with the legislative purpose in passing the statute. This statute was intended to create credit unions and its amendments were intended to broaden the powers of these associations. S.Rep. No. 814 (1959), reprinted in 1959 U.S.Code Cong. & Ad.News 2784, 2784-85. More generally, this statute sought to achieve both thrift among credit union members, and an increase in the availability of loans. Id. While not at odds with this purpose, the private cause of action plaintiff desires would not further this legislative scheme.

Focusing more directly on plaintiff’s assertion that section 1757(11) of the Act creates rights in favor of credit union members, I note that section 1757(11) simply allows a credit union to collect debts due from its members by way of enforcement of liens. Because federal credit unions are creatures created by federal statute, these institutions would most likely lack the authority to create and enforce liens absent § 1757(11). However, nothing indicates Congress was concerned with the mechanics of establishing a legally enforceable lien nor how to foreclose upon it. Similarly, there is no suggestion that Congress intended to dictate the manner in which members could challenge a lien foreclosure. For example, in Pennsylvania where automobile titles are required to be registered with the State Department of Transportation, Congress could not have intended to interfere with the well-established state procedure for recording encumbrances on the title. The same could be said for liens which take the form of a mortgage on real property. Simply stated, Congress has authorized an institution created by it, credit unions, to participate in each individual state’s system for securing debts through the creation of liens. This type of interplay between federal statutory enactments and state common law is at the core of our legal system. See P. Bator, P. Mishkin, D. Shapiro & H. Wechsler, Hart and Wechsler’s Federal Courts and the Federal System, 470-71 (2d ed. 1973).

For all the above reasons, I conclude Congress did not intend to create a private cause of action like that advocated by plaintiff. This view is buttressed by the holdings of other courts which have addressed the issue. For example, in Barany v. Buller, 670 F.2d 726 (7th Cir.1982), it was held that no private cause of action existed in favor of credit union members who alleged they were wrongfully removed from the credit union’s credit committee. Similarly, Heiskala v. Johnson Space Center Federal Credit Union, 474 F.Supp. 448 (S.D.Tex. 1979), held the Act did not provide for a private cause of action to redress the wrongful discharge of credit union employees. In so holding, the Heiskala court even noted that none of the Cort factors indicated that a private cause of action should be implied. Id. at 454.

If I find, as I have, that no federal statutory cause of action exists, plaintiff urges that I follow the analysis used in Barany v. Buller, 670 F.2d 726 (7th Cir.1982), and find a cause of action as a matter of federal common law. Initially, I note my agreement with Barany in its observation that Congress has not expressly given the courts power to develop federal common law in this area. See Barany, 670 F.2d at 731. Accordingly, like the Barany court, I am called upon to decide if national uniformity or some other uniquely federal interest necessitates application of federal common law to the facts at bar. See Banco Nacional de Cuba v. Sabbatino, 376 U.S. 398, 84 S.Ct. 923, 11 L.Ed.2d 804 (1964); Clearfield Trust Co. v. United States, 318 U.S. 363, 63 S.Ct. 573, 87 L.Ed. 838 (1943). Unlike Barany, however, I find no uniquely federal interest is implicated by the conduct complained of in this case.

The major distinguishing characteristic between this case and Barany is that Bar-any involved the internal administration of federal credit unions. Specifically, it was concerned with what procedures, if any, were required to remove from office members of the credit union’s credit committee. Because the Act was intended to establish federal credit unions, a compelling argument can be made for national uniformity in the appointment, and conversely in the removal, of credit union officers.

In this case, however, the internal operating procedures of the credit union are not at issue. Here, the dispute involves first, whether an enforceable lien was created by the document defendant characterizes as a third party loan agreement, and second, assuming the first question is answered in the affirmative, what are the rights and duties of the parties to the agreement. Stated briefly, the dispute concerns the contractual rights of a federally chartered institution and that institution’s members. Such disputes are often times regulated by state law. Cf. United States v. Yazell, 382 U.S. 341, 86 S.Ct. 500, 16 L.Ed.2d 404 (1966). There is no need for national uniformity, and consequently no authority for me to fashion a federal common law remedy.

For all of the above reasons, I conclude there is no federal subject matter jurisdiction over this case. An appropriate order follows.


source: Caselaw Access Project

author: SWEET, District Judge.

license: Public Domain

text:
    Northern J. CALLOWAY, individually and on behalf of LMN Productions, Inc., Plaintiff, v. The MARVEL ENTERTAINMENT GROUP, a DIVISION OF CADENCE INDUSTRIES CORPORATION, James Galton, Al Brodax, Michael S. Klein, Luis Quiros, Dumler & Girous, the Shukat Company, Ltd., Scott Shukat, Peter S. Shukat, Esq., and where necessary, LMN Productions, Inc., Defendants. The MARVEL ENTERTAINMENT GROUP, a DIVISION OF CADENCE INDUSTRIES CORPORATION, James Galton, Al Brodax, Michael S. Klein, Luis Quiros, and LMN Productions, Inc., Third-Party Plaintiffs, v. DUMLER & GIROUX, the Shukat Company, Ltd., Scott Shukat, Peter S. Shukat, Esq., Third-Party Defendants.
    No. 82 Civ. 8697 (RWS).
    United States District Court, S.D. New York.
    Jan. 29, 1985.
    See also 564 F.Supp. 107.

      Bushkin, Gaines, Gaines, Jones & Stream, New York City, for defendants Michael S. Klein and LMN Productions, Inc.; Jeffrey Strauss, New York City, of counsel.
    Brown, Wood, Ivey, Mitchell & Petty, New York City, for defendant Luis Quiros; Stuart J.M. Breslow, New York City, of counsel.
    Sonnenfeld, Busner & Weinstein, New York City, for defendants The Marvel Entertainment Group and James Galton; Philip H. Busner, New York City, of counsel.
    Arnoff & Merin, P.C., New York City, for third-party defendant Peter Shukat; Norman Arnoff, New York City, of counsel.
    D’Amato & Lynch, New York City, for third-party defendant Dumler & Giroux; Richard G. McGahren, New York City, of counsel.
    Brookman & Brookman, P.C., New York City, for third-party plaintiffs Klein and LMN Productions, Inc.
    Santera, McKay & Ranieri, New York City, for third-party plaintiff A1 Brodax; Robert McKay, New York City, of counsel.
   OPINION

SWEET, District Judge.

Motions by Dumler & Giroux (“Dumler”), The Shukat Company, Ltd. (“SCL”). Scott Shukat (“Scott”) and Peter Shukat (“Peter”) have been made under Rules 8, 9(b), 12(b), and 56 Fed.R.Civ.P. to dismiss the third party complaints brought by the defendants and third party plaintiffs The Marvel Entertainment Group, a division of Cadence Industries Corporation (“Marvel”), James Galton (“Galton”), Al Brodax (“Brodax”), Michael S. Klein (“Klein”) and LMN Productions, Inc. (“LMN”). For the reasons set forth below the motions will be granted in part and denied in part.

Prior pleadings and motions addressed to those pleadings, including motions for summary judgment were determined in opinions filed on June 30 and December 22, 1983 and July 3, 1984. As a consequence of those prior proceedings the parties and their claims have emerged in the following pattern. The plaintiff Northern J. Calloway (“Calloway”), individually and on behalf of LMN, has stated a copyright infringement claim against Marvel and its officer Galton and Brodax and LMN and its officers Klein and Quiros. Pendent state claims for improper use of Calloway’s name, violation of his privacy, and defamation have been alleged against these defendants and additional state claims for breach of fiduciary duty, breach of contract, fraud, and breach of shareholder and option agreements have been alleged against the LMN defendants. Similar state claims were initially made against additional defendants Dumler, SCL, Scott and Peter, but these pendent state claims were dismissed when those defendants were held not to be contributory infringers and Calloway’s federal cause against them was dismissed. Now the non-infringers have been brought back into the dispute as third party defendants by the third party plaintiffs, the LMN defendants and the Marvel defendants, on the basis of state claims of fraud, indemnity, and malpractice. The third party plaintiffs rely on ancillary jurisdiction, notwithstanding the earlier dismissal of the pendent state claims arising out of the same core of factual allegations.

Since the pendent state claims remain in the action against the allegedly infringing defendants, the LMN and Marvel defendants, it would be impractical and wasteful to all of the parties to require a redundant state court trial against the non-infringing defendants on the same facts in the event that Calloway were to be successful in his action in this court. In this setting the distinction between pendent and ancillary jurisdiction seems even more obscure than usual. See Aldinger v. Howard, 427 U.S. 1, 13, 96 S.Ct. 2413, 2419, 49 L.Ed.2d 276 (1976) (“Given the complexities of the many manifestations of Federal jurisdiction ... there is little profit in attempting to decide ... whether there are any ‘principled’ differences between pendent and ancillary jurisdiction.”) I conclude that proper ancillary jurisdiction exists here. Federman v. Empire Fire and Marine Ins. Co., 597 F.2d 798 (2d Cir.1979); Rogers v. Aetna Cos. and Sur. Co., 601 F.2d 840 (5th Cir.1979).

However, the exercise of ancillary jurisdiction requires a well pleaded cause of action. Here the third party plaintiffs have substantially repeated and realleged the amended complaint, which has been held to state various causes against them. More specifically, the third party plaintiffs allege (1) that all the third party defendants participated in changing the agreement of June 8, 1981, and executed agreements extending LMN’s rights and that Peter affixed Calloway’s signature, all without Calloway’s knowledge or consent, and (2) that Dumler knowingly released the agreement of February 1, 1982, without Calloway’s consent and contrary to Calloway’s agreement with Peter, the terms of which were known to Dumler. It is consequently alleged that if Calloway recovers judgment against the defendant-third party plaintiffs, then they in turn are entitled to judgment over against Scott, Peter, SCL and Dumler.

The fraudulent conduct of the first claim, that is, the alteration of Calloway’s initial agreement and the extensions, is adequately pleaded with respect to SCL, Scott, and Peter. However, in the December 22 opinion I found that with respect to the first count the only specific acts alleged by Dumler were that “as LMN’s attorneys. [Dumler] asked Calloway’s manager to grant an option on ‘The Skyrider’ to LMN, and participated in the negotiation, drafting and execution of the agreements to effectuate this option.” This is insufficient to support a fraud action, and the first count, to the extent it is founded on an allegation of fraud, must be dismissed with respect to Dumler.

The third party complaint does, however, set forth a claim for contribution against the Shukat interests and Dumler as joint tortfeasors. Finally, if the first claim speaks in terms of indemnity, the indemnity is not set forth.

The second count in the third party complaint alleges a knowing violation by Peter and Dumler of what has been referred to, somewhat loosely, as the escrow agreement. Dumler is alleged to have released the agreement to Marvel in violation of the understanding between Peter and Calloway. At best, what is alleged is the breach of the escrow agreement creating liability to Calloway, and absent some misrepresentation by Dumler, none of which is alleged, there is no basis for liability of Dumler to Marvel or LMN. Quintet v. Citibank, 589 F.Supp. 1235 (S.D.N.Y.1984); Mikropul v. Desimone, 599 F.Supp. 940 (S.D.N.Y.1984). Neither can establish a basis for indemnity as a result of Dumler’s violation of an escrow agreement'between Calloway and Peter with respect to documents signed by Calloway. As neither parties nor third party beneficiaries of the escrow agreement, Marvel and LMN cannot sue based upon the violation of that agreement. M.E.W.N., Inc. v. Village of Roslyn Estates, 78 A.D.2d 636, 432 N.Y. S.2d 115 (2d Dept.1980). Further, the uncontradicted affidavit of Egon Dumler establishes that Dumler, with Peter’s approval, forwarded the documents to Klein, not to Marvel. Although Dumler might be said under these alleged facts to have committed malpractice as far as his client LMN is concerned, such is not alleged.

Similarly, Peter owed no duty to Marvel or LMN, and absent a knowing misrepresentation Peter would have liability, if any, only to his client, Calloway. Quintel, supra; Mikropul, supra. Of course, that pendent state claim has been dismissed.

Therefore, the motion to dismiss the second count of the third party complaint is granted in its entirety. The motion to dismiss the first count is granted insofar as the count alleges a claim for indemnity and insofar as Dumler is alleged to be liable under a fraud theory. Discovery shall be completed by June 5, 1985 and a joint pretrial order submitted by June 12, 1985.

IT IS SO ORDERED.


author: ROSENBERG, District Judge. ROBERT C. MITCHELL, United States Magistrate.

text:
    Lawrence DRAGUN, Plaintiff, v. Margaret M. HECKLER, Secretary of Department of Health and Human Services, Defendant.
    Civ. A. No. 83-1341.
    United States District Court, W.D. Pennsylvania.
    Jan. 30, 1985.
    J. Alan Johnson, U.S. Atty., for defendant.
    Samuel S. Blaufeld, Pittsburgh, Pa., for plaintiff.
   ROSENBERG, District Judge.

This supplements the opinion of the United States Magistrate in the above entitled case.

The evidence in the case on the part of the medical experts is contradictory; the decision of the administrative law judge should determine the credibility of these expert opponents.

The plaintiff testified before the administrative law judge that he was 61 years of age and was injured on May 2, 1980 when he was struck by a beam; that he had pain in the back of his head where he was struck and becomes lightheaded several times during the week; that he has lost interest and is unable to concentrate; that he does not wish to associate with anyone; that he has memory problems and that he takes medication.

The plaintiffs wife testified that he was unable to perform household repairs; that he had become short tempered and sometimes stayed in his room when there were visitors.

Medical testimony was to the effect that he was treated at St. Margaret Memorial Hospital emergency room after a shelf hit him on the head; that he was treated after he had passed out; that he had had a CAT scan which was normal, and at the Harmarville Rehabilitation Center the neurological tests and examination were negative and it was determined he could return to work.

Dr. Allen E. Lebovitz, a psychiatrist, certified he was unable to work because of depression. Dr. David L. Spence reported that the diagnosis was post traumatic neurosis directly attributable to the plaintiff’s accident and that the plaintiff’s overall mood was one of depression with associated agitation and high anxiety level. Dr. R.J. Bender, a family physician, stated the plaintiff was unable to work due to headaches, dizziness and vertigo. Dr. Lebovitz’s diagnosis was depressive reaction and concluded that the plaintiff was totally incapacitated. Dr. Robert Baraff, a psychiatrist and neurologist, reported a normal neurological examination and that the plaintiff suffered from a cerebral concussion, vasovagal syncope, depression and chronic headaches. It was noted that the examination of the skull-X-ray, brain scan, electroencephalogram and back X-rays were normal. No aphasia, dysarthria or dementia were noted by the Secretary, and his daily activities, interests and ability to relate were not constricted.

The Secretary said, “The severity of these impairments does not meet or equal a listing in the listing of impairments.” The Secretary further noted, “Claimant retains the functional capacity for a limited range of light work.”

Where there are contradictions between medical experts, it would seem that the evidence of the plaintiff should be considered by the administrative law judge with great discernment. The plaintiff’s evidence should be considered with neutrality but with judicial concern for the plaintiff’s capability of performing gainful employment.

In the Secretary’s conclusion she said, “... the claimant by virtue of his symptomatology does show evidence of a conversion hysteria reaction, in particular in relation to his fears of significant climbing and fear of falling off a crane or cranes ... ”. She, nevertheless, accepts the evidence of the Board-Certified Neurologist and Psychiatrist, Dr. Baraff that “the claimant’s conditions are essentially normal”. She further recognized that the claimant “has been complaining of dizzy spells and of chronic headaches and depression and of upper back and neck pains ... ”.

She also finds that “Social Security disability purposes warrants a finding within the framework of Section 404.1520(c) that the claimant is not suffering from a sufficiently severe physical, neurological or mental status impairment so as to significantly limit his physical or mental ability to do basic work activities”. On this basis the Secretary affirms the finding of the administrative law judge and the Appeals Council.

In the Report and Recommendation of the Magistrate that this matter be referred back to the Secretary for “further evaluation and consideration”, it would seem that the Secretary should recognize the fact that the disease, from which she admits the claimant suffers, is depression.

Webster’s Third New International Dictionary, Unabridged, 1971, at page 606, defines the disease of depression of a human being as: “(4) a mental disorder of psycho-neurotic or psychotic proportions characterized by sadness, retardation of motor and certain vegetative processes, feelings of inadequacy and self-depreciation and often by suicidal attempts”.

Because the claimant’s doctors asserted under oath that his condition was of such a character as to prevent him from performing gainful employment, the claimant’s complaint should be more thoroughly researched in order to determine the kind and character of depression from which the claimant suffers and what there is that would prevent him from performing any kind of gainful employment.

While conflicting medical evidence and credibility of the experts rests with the Secretary, Gober v. Matthews, 574 F.2d 772, C.A.3, 1978, this of necessity in large measure must be resolved by subjective evidence, Baerga v. Richardson, 500 F.2d 309, C.A.3, 1974.

In The Merck Manual, Fourteenth Edition (1982), at page 1448, Chapter 146, Affective Disorders, there is a long and thorough discussion of psychiatric conditions “in which a disturbance of affect or mood is either a primary determinant of the psychopathologic state or constitutes its core manifestations”.

This is not a matter in which a layman can have understanding or make instantaneous conclusions from the testimony of an expert in this field. As for instance, when a person takes alcohol and sedatives in a sufficient amount, it may debilitate that person and make that person incapable of performing any kind of employment. Likewise, it may be that this mental disease of depression may be of such a character as to incapacitate a person not only in varying degrees but totally, and that is a matter which should be set to rest by experts, and from the testimony of the one afflicted by the disease.

It is, therefore, for this reason that I accept the determination of the Magistrate to remand the matter to the Secretary for further inquiry, evaluation and consideration.

MAGISTRATE’S REPORT AND RECOMMENDATION

January 8, 1985

ROBERT C. MITCHELL, United States Magistrate.

I. Recommendation

It is respectfully recommended that the defendant’s motion for summary judgment be denied, without prejudice, and that the matter be remanded to the Secretary of Health and Human Services for further evaluation and consideration.

II. Report

Presently before the Court for disposition is the defendant’s motion for summary judgment.

On June 3, 1983, Lawrence Dragun, by his counsel, filed a complaint pursuant to Section 205(g) of the Social Security Act, as amended, 42 U.S.C. § 405(g) for review of the Secretary’s final determination disallowing his claim for a period of disability or for disability insurance benefits under Sections 216(i) and 223 of the Social Security Act, as amended, 42 U.S.C. §§ 416(i) and 423.

On April 13, 1982, the plaintiff filed an application for disability benefits alleging that he had been disabled since May 2, 1980, as a result of head, back and neck injuries, blackouts and nervousness (R. 92-95), and benefits were denied on June 3, 1982 (R. 98-99). On July 21, 1982, the plaintiff requested reconsideration of this decision (R. 100) and upon reconsideration and in a decision dated September 15, 1982, benefits were again denied (R. 103-104). On October 21, 1982, the plaintiff requested a hearing (R. 105), and pursuant to that request a hearing was held on November 30, 1982 (R. 24-91). In a decision rendered on January 21, 1983, an Administrative Law Judge denied benefits (R. 9-18). On January 31, 1983 the plaintiff requested reconsideration of this determination (R. 8) and on April 27, 1983 the Appeals Council affirmed the prior determination (R. 4-5). The instant complaint was filed on June 3, 1983.

In reviewing an administrative determination of the Secretary, the question before any court is whether there is substantial evidence in the agency record to support the findings of the Secretary that the plaintiff failed to sustain his burden of demonstrating that he was disabled within the meaning of the Social Security Act. Richardson v. Perales, 402 U.S. 389, 91 S.Ct. 1420, 28 L.Ed.2d 842 (1971); Torres v. Schweiker, 682 F.2d 109 (3d Cir.1982).

It is provided in 42 U.S.C. Section 405(g) that:

“The Court shall have power to enter upon the pleadings and transcript of the record, a judgment affirming, modifying or reversing the decision of the Secretary, with or without remanding the cause for a rehearing. The findings of the Secretary as to any fact, if supported by substantial evidence, shall be conclusive. ..”

Substantial evidence is “ ‘more than a mere scintilla. It means such relevant evidence as a reasonable mind might accept as adequate to support a conclusion.’ Consolidated Edison Co. v. NLRB, 305 U.S. 197, 229 [59 S.Ct. 206, 217, 83 L.Ed. 126] (1938),” Richardson v. Perales, supra, 402 U.S., at page 401, 91 S.Ct. at 1427; Daring v. Heckler, 727 F.2d 64 (3d Cir.1984).

At the hearing held on November 30, 1982 (R. 24-91), the plaintiff appeared with counsel (R. 26) and testified that he was born on November 5, 1923 (R. 34); that he graduated from high school and has a technical background (R; 34); that he did electrical maintenance work and crane repair work (R. 35, 59-63); that he was injured at work on May 2, 1980, when he was struck by a beam (R. 37-38) and that he is receiving Workmen’s compensation benefits (R. 39).

In addition, the plaintiff testified that he experiences pain in the back of his head where he was struck and becomes lightheaded about four times a week (R. 40-41, 80); that he does not care about anything and is unable to concentrate (R. 42); that he does not want to associate with anybody (R. 43); that he has some memory problems (R. 83-84) and that he takes medication (R. 41-42).

The plaintiff’s wife testified that since the accident, the plaintiff is unable to perform household repairs (R. 85); that he has become short tempered (R. 85) and that sometimes he stays in his room when visitors come (R. 86).

The issue before the Court for immediate resolution is a determination of whether or not there is substantial evidence to support the findings of the Secretary that the plaintiff is not disabled within the meaning of the Act.

The term “disability” is defined in 42 U.S.C. Section 423(d)(1)(A) as:

“inability to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or which has lasted or can be expected to last for a continuous period of not less than 12 months.”

For purposes of the foregoing, the requirements for a disability determination are provided in 42 U.S.C. Section 423(d)(2)(A):

“an individual ... shall be determined to be under a disability only if his physical or mental impairment or impairments are of such severity that he is not only unable to do his previous work, but cannot, considering his age, education and work experience, engage in any other kind of substantial gainful work which exists in the national economy regardless of whether such work exists in the- immediate area in which he lives or whether a specific job vacancy exists for him, or whether he would be hired if he applied for work. For purposes of the preceding sentence ... ‘work which exists in the national economy’ means work which exists in significant numbers either in the region where such individual lives or in several regions of the country.”

A “physical or mental impairment” is “an impairment that results from anatomical, physiological or psychological abnormalities which are demonstrable by medically acceptable clinical and diagnostic techniques.” 42 U.S.C. Section 423(d)(3). These provisions are also applied for purposes of establishing a period of disability. 42 U.S.C. Section 416(i)(2)(A).

While these statutory provisions have been regarded as “very harsh”, nevertheless, they must be followed by the courts. NLRB v. Staiman Brothers, 466 F.2d 564 (3d Cir.1972); Choratch v. Finch, 438 F.2d 342 (3d Cir.1971); Woods v. Finch, 428 F.2d 469 (3d Cir.1970). Thus, it must be determined whether or not there is substantial evidence in the record to support the conclusion of the Secretary that the plaintiff was not disabled within the meaning of the Social Security Act.

For this purpose certain medical evidence was reviewed by the Secretary.

The plaintiff was treated at the St. Margaret Memorial Hospital emergency room on May 2, 1980 after a shelf hit him on the head (R. 141-142).

The plaintiff was treated at the St. Margaret Memorial Hospital emergency room on September 30, 1980 after he passed out (R. 143-145).

A CAT scan performed on January 16, 1981 was normal (R. 147).

The plaintiff was treated as an out patient at the Harmarville Rehabilitation Center between March 10, 1981 and July 28, 1981 (R. 149-160), when it was determined that as a result of the plaintiff’s negative neurological tests and examination, he could return to work. In addition, there were no objective range of motion limitations.

The plaintiff’s employer’s insurance carrier terminated the plaintiff’s Workmen’s Compensation award on August 7, 1981 because the plaintiff was able to return to work (R. 109).

An EEG performed on May 20, 1981 was interpreted as within normal limits (R. 188).

The plaintiff was awarded a Veteran’s disábility pension from December 7, 1981 (R. 107).

On February 19,1982, Dr. Allen E. Lebovitz certified that the plaintiff was unable to work because of depression (R. 161). Dr. Lebovitz specializes in psychiatry (R. 181).

In a report of a psychiatric evaluation on March 25, 1982 (R. 195-196), Dr. David L. Spence diagnosed post traumatic neurosis directly attributable to the plaintiff’s May 2, 1980 accident. The plaintiff’s overall mood was one of depression with associated agitation, and high anxiety level.

In a statement dated April 8, 1982 (R. 163-164), Dr. R.J. Bender noted that the plaintiff was unable to work due to headaches, dizziness and vertigo. Dr. Bender specializes in family practice (R. 178).

In a report covering the period from June 23, 1981 through May 14, 1982 (R. 173, 176), Dr. Lebovitz diagnosed depressive reaction, and concluded that the plaintiff was totally incapacitated.

In a report of an examination on May 17, 1982 (R. 170-172), Dr. Robert Baraff reported a normal neurological examination and diagnosed a cerebral concussion on May 2, 1980, vasovagal syncope, depression and chronic headaches. Dr. Baraff specializes in psychiatry and neurology (R. 179).

After reviewing the medical evidence, and in a report dated June 1, 1982, the Secretary concluded,

“Claimant has a history of head injury. At time of injury, skull x-ray, brain scan, electroencephalogram and back x-rays were normal. Neurological examination was normal. Claimant continues to complain of periodic blackouts and nervousness. Rehabilitation at local facility resulted in recommendation that claimant return to previous employment. Recent neurological examination revealed no abnormal findings. Claimant was alert and oriented. Mental status was normal. There was no aphasia, dysarthria or dementia. Claimant appeared to be minimally depressed. Daily activities, interests and ability to relate are not constricted. Claimant cares for his own needs. The severity of these impairments does not meet or equal a listing in the listing of impairments. Claimant retains the functional capacity for a limited range of light work. He can lift up to 20 lbs. and stand and walk up to 6 hours a day. He should avoid climbing and working at heights due to periodic dizzy spells. Claimant is 58 years old with 12 years of education and 31 years experience as an electrician maintenance man which is skilled heavy work with climbing required. This work has skills that would transfer to such light and sedentary jobs as electrician radio (Radio & TV), Electrical Repairman (Aircraft) and Control Panel Assembler (Mfg). Using vocational rule 202.07 as a framework, claimant is found to be not disabled and able to perform other than relevant past work.” (R. 97).

On July 16, 1982, it was determined that the plaintiffs award of Workmen’s Compensation benefits should continue (R. 190-194).

After reviewing the medical evidence, and in a report dated September 14, 1982, the Secretary concluded,

“The claimant suffered a cerebral concussion in 1980. Recent neurological exam was normal. Romberg is negative. Gait is normal. Mental status is within normal limits, although he is depressed. EEG is normal. He reports occasional loss of consciousness, but there are no physical findings to support this. There is no marked restriction of daily activities, constriction of interests, or seriously impaired ability to relate to other people. Range of motion is full in all joints. There is no evidence of an impairment that significantly restricts any work-related functions. The claim is denied on medical factors alone.” (R. 102).

In a report dated November 5, 1982 (R. 182), Dr. Bender diagnosed depression, light headedness, and occipital pain. He concluded that the plaintiff is totally disabled.

In a report dated November 24,1982, Dr. Lebovitz concluded,

“under treatment the quality of his life has improved, but his inability to work remains. I consider him to be totally disabled at this time. Efforts at rehabilitation would be counter productive.” (R. 183).

In reviewing a disability claim, in addition to considering the medical and vocational evidence, the Secretary must consider subjective symptoms. Baerga v. Richardson, 500 F.2d 309 (3d Cir.1974). As the court stated in Bittel v. Richardson, 441 F.2d 1193, 1195 (3d Cir.1971):

“Symptoms which are real to the claimant although unaccompanied by objective medical data may support a claim for disability benefits, providing, of course, the claimant satisfies the requisite burden of proof.”

In Good v. Weinberger, 389 F.Supp. 350, 353 (W.D.Pa.1975), the Court stated:

“... Bittel seeks to help those claimants with cases that so often fall within the spirit — but not the letter — of the Act. That plaintiff did not satisfy the factfinder in this regard, so long as proper criteria were used, is not for us to question.”

On February 26, 1979, regulations became effective which require more explicit findings concerning the various vocational factors which the Act requires to be considered in making findings of disability in some cases. The regulations, published at 20 C.F.R. §§ 404.1501-1539, set forth an orderly and logical sequential process for evaluating all disability claims. In this sequence, the Administrative Law Judge must first decide whether the plaintiff is engaging in substantial gainful activity. If not, then the severity of the plaintiff’s impairment must be considered. If the impairment is severe, then it must be determined whether he meets or equals the “Listings of Impairments” in Appendix 1 of the Regulations which the Secretary has deemed of sufficient severity to establish disability. If the impairment does not meet or equal the Listings, then it must be ascertained whether he can do his past relevant work. If not, then the residual functional capacity of the plaintiff must be ascertained, considering all the medical evidence in the file. The finding of residual functional capacity is the key to the remainder of findings under the new regulations. If the plaintiffs impairment is exertional only, (i.e. one which limits the strength he can exert in engaging in work activity), and if his impairment enables him to do sustained work of a sedentary, light or medium nature, and the findings of age, education and work experience, made by the Administrative Law Judge coincide precisely with one of the rules set forth in Appendix 2 to the regulations, an appropriate finding is made. If the facts of the specific case do not coincide with the parameters of one of the rules, or if the plaintiff has mixed exertional and non-exertional impairments, then the rules in Appendix 2 are used as guidelines in assisting the Administrative Law Judge to properly weigh all relevant medical and vocational facts.

Based on the evidence presented, the Secretary concluded that:

“In the opinion of the undersigned Administrative Law Judge although the claimant has been reinstated in Workmen’s Compensation benefits and accordingly is reasonably deemed for such purposes to be incapable of returning to his job as a maintenance man involved in electrical and mechanical repair work around cranes and which involved heavy lifting and considerable climbing, and although Doctor Lebovitz, the claimant’s treating Psychiatrist, and Doctor Bender, the claimant’s treating Physician, concluded that the claimant is totally disabled, the totality of the available evidence is more reasonably supportive of the opinions and findings of Doctor Amayo whose staff conducted extensive evaluations of the claimant’s physical, neurological, psychological and mental status impairments and the findings and opinions of Doctor Robert Baraff, a Board-Certified Neurologist and Psychiatrist and accordingly warrants a finding that the claimant for secondary gain purposes has been exaggerating the severity of his symptomatology and that within the framework of Section 404.1520(c) the claimant is neither suffering from a sufficiently severe physical, neurological or mental status impairment so as to be entitled to disability benefits under the Social Security Act. Although the claimant by virtue of his symptomatology does show evidence of a conversion hysteria reaction, in particular in relation to his fears of significant climbing and fear of falling off of a crane or cranes which he would be required to maintain and repair, the available medical evidence including electroencephalograms which repeatedly have been normal, normal brain scans and essentially normal x-ray studies is supportive of the conclusion of Doctor Amayo that the claimant is exaggerating his symptoms, for secondary gain purposes, and indeed the evaluation of another Board-Certified Neurologist and Psychiatrist, Dr. Baraff, that neurologically and mentally the claimant’s conditions are essentially normal. Thus although the claimant has been complaining of dizzy spells and of chronic headaches and depression and of upper back and neck pains and has been reinstated in Workmen’s Compensation benefits, the more reasonable evaluation of all the evidence even in the absence of a psychiatric report by Doctor Spence, for Social Security disability purposes warrants a finding within the framework of Section 404.1520(c) that the claimant is not suffering from a sufficiently severe physical, neurological or mental status impairment so as to significantly limit his physical or mental ability to do basic work activities, and accordingly for Social Security disability benefit purposes may not be found to be under a 'disability’ at any time on or before the date of this decision for any continuous period of not less than twelve months.” (R. 15-16).

The medical evidence indicates that the plaintiff is suffering from some form of mental condition. His treating psychiatrist diagnosed the condition as depression and concluded that it was totally disabling, and that efforts at rehabilitation would be counter-productive. This evidence is largely uncontradicted in the record. Nevertheless, the Secretary concluded that the plaintiff was not disabled. While the Secretary is charged with resolving issues of credibility, she is not an expert. Wallace v. Secretary, 722 F.2d 1150 (3d Cir.1983). Nor may the Secretary ignore uncontradicted evidence. Walden v. Schweiker, 672 F.2d 835 (11th Cir.1982).

On the state of the record, doubt exists as to whether the Secretary’s conclusion that the plaintiff is not disabled as a result of his mental condition is supported by substantial evidence. Accordingly, it is recommended that the defendant’s, motion for summary judgment be denied, without prejudice, and that the matter be remanded to the Secretary for further evaluation and consideration.


text:
    Peter GIAMARINO, Petitioner, v. UNITED STATES of America, Respondent.
    No. M-11-188.
    United States District Court, S.D. New York.
    Jan. 30, 1985.
   MEMORANDUM OPINION

SWEET, District Judge.

Peter Giamarino (“Giamarino”) has brought this motion to quash a grand jury subpoena. The motion is granted in part and denied in part.

The facts surrounding this motion are undisputed. Giamarino was served with a subpoena on or about November 27, 1984. Giamarino, not a target of the grand jury investigation, stated that he would not testify without the benefit of immunity. Such immunity has not been conferred. Giamarino, on or about January 7, 1985, was told by an agent of the Federal Bureau of Investigation that he should present himself so that he could be fingerprinted and photographed. Giamarino was also told that he would be asked “pedigree” questions relating to his name, address, aliases, social security number, and occupation. Giamarino has moved to quash the subpoena, claiming that his Fifth Amendment privilege shields him from the necessity of providing the information sought by the government.

Counsel at oral argument narrowed the dispute: Giamarino conceded that he could be photographed and fingerprinted. This conclusion is necessitated by In re Rosahn, 671 F.2d 690 (2d Cir.1982). The Second Circuit there held:

An individual called before a grand jury to submit to photographing and fingerprinting and to provide handwriting exemplars and hair samples has no right under the Fifth Amendment to refuse to comply with the request, nor need the government make any showing that the request is reasonable.

Id. at 694.

Counsel for the government also narrowed the scope of the proposed “pedigree” questions to either Giamarino’s date of birth or his social security number. Giamarino maintains that he cannot be forced to respond to even these questions. I agree. The scope of Fifth Amendment privilege encompasses only that which is “testimonial.” In Schmerber v. California, 384 U.S. 757, 86 S.Ct. 1826, 16 L.Ed.2d 908 (1966), Justice Brennan explained:

It is clear that the protection of the privilege reaches an accused’s communications, whatever form they might take, and the compulsion of responses which are also communications, for example, compliance with a subpoena to produce one’s papers____ On the other hand, both federal and state courts have usually held that it offers no protection against compulsion to submit to fingerprinting, photographing, or measurements, to write or speak for identification, to appear in court, to stand, to assume a stance, to walk, or to make a particular gesture. The distinction which has emerged, often expressed in different ways, is that the privilege is a bar against compelling “communications” or “testimony,” but that compulsion which makes a suspect or accused the source of “real or physical evidence” does not violate it.

Id. at 763-64, 86 S.Ct. at 1832. See Gilbert v. California, 388 U.S. 263, 87 S.Ct. 1951, 18 L.Ed.2d 1178 (1967); United States v. Wade, 388 U.S. 218, 87 S.Ct. 1926, 18 L.Ed.2d 1149 (1967).

Although the government seeks responses only to one or two questions, the questions are in the form of direct oral testimony, entirely different from the physical and public attributes of a witness, such as hair samples, voice exemplars, and handwriting exemplars, which are beyond the protection of the Fifth Amendment. Giamarino’s motion is therefore granted to the extent that he seeks protection from responding to “pedigree” questions and denied to the extent that he seeks protection from fingerprinting and photography.

IT IS SO ORDERED.


author: ROBERT H. HALL, District Judge.

text:
    Douglass G. WHITNEY, M.D., et al., Plaintiffs, v. Margaret HECKLER, Secretary of the Department of Health and Human Services, Defendant.
    Civ. A. No. C84-1926.
    United States District Court, N.D. Georgia, Atlanta Division.
    Feb. 4, 1985.

      Kent Masterson Brown, Greenebaum, Young, Trei, Lexington, Ky., Henry Angel, Saveli, Williams, Cox & Angel, Atlanta, Ga., for plaintiffs.
    Dina Lassow, Dept, of Justice, Civil Div., Washington, D.C., Larry Thompson, U.S. Atty., Atlanta, Ga., for defendant.
   ORDER

ROBERT H. HALL, District Judge.

This case came to be heard on the merits on November 2, 1984. The parties have stipulated to the relevant facts. The court hereby makes this order, incorporating the agreed-upon facts and setting out the court’s conclusions of law.

I. FACTUAL BACKGROUND

1. The three plaintiffs in this case, Douglass G. Whitney, M.D., W.D. Jordan, M.D., and Fred Shessel, M.D., are duly licensed and practicing private physicians in the Atlanta, Georgia area, who challenge the constitutionality of certain provisions of the Deficit Reduction Act of 1984, P.L. 98-369, which affect the Medicare Program.

2. The Medicare Program was enacted in 1965 as Subchapter XVIII of the Social Security Act. This program is divided into two parts. Part A provides reimbursement for covered hospital and related post-hospital services. 42 U.S.C. §§ 1395c; 1395d. Persons who are eligible for Medicare may elect to enroll in Part B, which establishes a program of supplementary medical insurance providing reimbursement for covered physicians’ and other related medical services. 42 U.S.C. §§ 1395k, 1395l, 1395x(s). This case involves Part B exclusively.

3. Under Part B, Medicare enrollees obtain benefits in return for the payment of monthly premiums, the amount of which is determined by the Secretary of Health and Human Services (the “Secretary”). 42 U.S.C. § 1395r(b)-(c). These premiums and contributions from the Federal Government make up the Federal Supplementary Medical Insurance Trust Fund, out of which payment is made for the benefits provided under Part B. 42 U.S.C. § 1395t.

4. Medicare Part B payments are made on a “reasonable charge” basis. This “reasonable charge” is computed according to a formula set out by statute. Under 42 U.S.C. § 1395u(b)(3), a physician’s (1) actual billed charge for each service is compared with (2) what he or she customarily charges for that service — the “customary” charge — and with (3) the charge made for similar services by most physicians in the billing physician’s locality — the “prevailing” charge. (The “prevailing” charge is the “level that, on the basis of statistical data ..., would cover 75 percent of the customary charges made for similar services in the same locality....” 42 U.S.C. § 1395u(b)(3).) The Medicare program then recognizes the lowest of these three as the “reasonable charge.”

5. Prior to the enactment of the Deficit Reduction Act, payment for physicians’ services was made in one of two ways. The beneficiary could pay the physician directly and then request reimbursement of the “reasonable charge” from Medicare. 42 U.S.C. § 1395u(b)(3)(B)(i). Alternatively, the beneficiary could, if the physician were willing, assign to the physician the beneficiary’s right to reimbursement. 42 U.S.C. § 1395u(b)(3)(B)(ii). The physician could then collect payment from Medicare as assignee of the beneficiary. As assignment did not affect the amount that Medicare paid for the physician’s services, but did preclude the physician from charging the beneficiary more than the 20 percent coinsurance on Medicare payments.

6. Prior to the enactment of the Deficit Reduction Act, Medicare’s “customary” and “prevailing” charge data were updated on July 1 of each year based on the prior year’s data. Physicians were permitted to accept or not accept assignment on a claim-by-claim basis, and if a physician chose not to accept assignment, Medicare placed no limitation on the amount that he or she could charge a Medicare beneficiary. Patients of physicians not accepting assignment received Medicare reimbursement only to the extent of the physician’s “reasonable charge.” The beneficiary was responsible for the difference between the physician’s actual charge and 80 percent of Medicare’s “reasonable charge.”

7. Section 2306 of the Deficit Reduction Act, which was signed by President Reagan on July 18, 1984, makes several changes that affect physician reimbursement. First, § 2306(a) modifies 42 U.S.C. § 1395u(b) by adding a new subsection (4). The new provision freezes both Medicare’s “prevailing” and “customary” charge levels for “the 15-month period beginning July 1, 1984” at levels no higher than the levels that were set for “the 12-month period beginning July 1, 1983.”

8. Second, § 2306(c) of the Deficit Reduction Act amends 42 U.S.C. § 1395u by adding a new subsection (h). Subsection (h) requires physicians to decide before October 1 of each year whether they will be “participating” or “non-participating physicians.” A “participating physician” enters into an agreement with the Secretary to accept payment on an assignment basis for all items or services furnished to Medicare beneficiaries during the 12-month period beginning October 1. A “participating physician” may not charge any Medicare patient on any basis other than on an assignment basis during the 12-month period covered by the agreement. “Non-participating physicians,” those who do not enter into an agreement with the Secretary to accept payment on an assignment basis for all items or services furnished to Medicare beneficiaries, may continue to 'accept assignment on a claim-by-claim basis.

9. Third, § 2306(c) of the Deficit Reduction Act adds a new subsection (j) to 42 U.S.C. § 1395u which freezes the actual amount “non-participating physicians” may charge Medicare patients for the fifteen month period which began on July 1, 1984. Subsection (j) requires the Secretary to monitor each “non-participating physician’s” actual charges to beneficiaries for services rendered during that period. If a “non-participating physician” “knowingly and willfully bills ... [beneficiaries] ... for actual charges in excess of such physician’s actual charges for the calendar quarter beginning on April 1, 1984,” the physician may be sanctioned by the Secretary. The Secretary may bar said physician from participation in the Medicare program for up to five years, or may impose a civil penalty of up to $2,000 per violation. 42 U.S.C. § 1395u(j)(1) and (2).

10. Finally, § 2306 of the Deficit Reduction Act directs that the Secretary publish a directory of “participating physicians” to be made available to Medicare beneficiaries; maintain toll-free telephone numbers at which beneficiaries may obtain the names, addresses, telephone numbers and specialties of “participating physicians”; publish a list containing the name, address, specialty and percent of claims submitted with respect to each physician paid on an assignment basis; and provide for the electronic receipt by carriers of claims from “participating physicians,” thereby enabling those physicians to have their claims processed more quickly. 42 U.S.C. §§ 1395u(h)(2)-(3) and 1395u(i). Congress also created a new subsection (4)(D) to 42 U.S.C. § 1395u(b), which specifies that in determining the customary charges of “non-participating physicians” for the 12-month periods beginning October 1, 1985 and October 1,1986, the Secretary shall not “recognize increases in actual charges for services furnished” during the 15-month freeze period. The Secretary shall, on the other hand, recognize increases in the actual charges of “participating physicians” during that period. Although their reimbursement is limited by the customary and prevailing charge freeze while the freeze is in effect, “participating physicians’ ” increased actual charges during the freeze will form the data base for computing their “customary” charge levels once the freeze is lifted.

11. In their Verified Complaint for Injunctive Relief and Declaration of Rights, as amended, plaintiffs allege, inter alia, that they did not elect to become “participating physicians” under the Deficit Reduction Act prior to October 1, 1984; that they plan to raise their fees to their patients enrolled under Medicare Part B within the 15-month period beginning July 1, 1984; that 50 to 60 percent of their patients are Medicare Part B enrollees; that 85 percent of these patients have supplemental health insurance; and that the Deficit Reduction Act of 1984 as applied to them violates the Fifth Amendment to and Article I, Section 9 of the United States Constitution.

12. The defendant, the Secretary of the Department of Health and Human Services, maintains that § 2306 of the Deficit Reduction Act is a constitutional exercise of Congress’ authority which comports fully with the due process guaranteed by the Fifth Amendment and does not violate Article I, Section 9 of the Constitution. She has filed a motion under Rule 12(b)(6) of the Federal Rules of Civil Procedure to dismiss the plaintiffs’ complaint for failure to state a claim upon which relief can be granted.

13. This Court, after considering the plaintiffs’ pleadings and hearing argument from both sides, denied plaintiffs’ motion for a temporary restraining order on September 26, 1984. By Stipulation and Order dated October 15, 1984, the parties agreed to present this case on the merits, without presenting live testimony, as to whether the questioned portions of the Deficit Reduction Act of 1984 are unconstitutional and should be permanently enjoined. On November 2, 1984, this court heard oral arguments on the merits by counsel for each party.

II. CONCLUSIONS OF LAW

1. In 1984, Congress was faced with skyrocketing costs in the Medicare Program, which, along with numerous other factors, were contributing to the rapidly increasing federal deficit. Accordingly, along with many other measures in the Deficit Reduction Act, it curtailed the increase in certain federal outlays by freezing the customary and prevailing charges recognized by Medicare for physicians’ services for the 15-month period running from July 1, 1984 to September 30, 1985. However, Congress did not want the burden of the freeze to be borne by the elderly beneficiaries of the Medicare Program. As stated by Senator Dole, Chairman of the Senate Committee on Finance:

Under section 2306, $2.5 billion will be saved by freezing for 15 months the customary and prevailing charge levels used to determine what medicare will pay for physician services. Needless to say, there has been a great deal of concern about how physicians can be prevented from shifting the burden of such a freeze to beneficiaries. Simply freezing what we pay for physician services provides little protection to program beneficiaries. If a physician does not elect to take assignment, beneficiaries can be held responsible for the full difference between what the program pays and what the physician charges.
Mr. President, the conferees spent a great deal of time in discussions with the administration trying to address this concern. As a result, the conferees agreed to a provision which works in concert with organized medicine’s voluntary freeze.

130 Cong.Rec.S. 8373, 8375 (daily ed. June 27, 1984) (emphasis added), reprinted in 1984 U.S.Code Cong. & Admin.News, Deficit Reduction Act Legislative History at 2156 (hereinafter “Legislative History”). Similarly, Congressman Rostenkowski, Chairman of the House Committee on Ways and Means, stressed that the measure included “protection for beneficiaries.”

There is a 15-month freeze on medicare-recognized physician fee increases, with protection for beneficiaries. Under this provision, doctors who become medicare “participating physicians” would accept the medicare fee allowance as payment in full. Other physicians would be prohibited from raising their medicare fees. Thus, beneficiaries would have full protection against the possibility that they rather than the physicians, might bear the effect of the fee freeze. The fee freeze provisions are intended to work in concert with the efforts — which are to be commended — of the American Medical Association and many individual medical societies which have urged their members voluntarily to freeze their fees.

130 Cong.Rec.H. 7085, 7086 (daily ed., June 27,1984) reprinted in Legislative History at 2144 (emphasis added). Accord, H.Conf. Rep. No. 98-861, reprinted in Legislative History at 2001.

2. The temporary freeze on the fees non-participating physicians may charge their Medicare patients is an integral, reasonable part of Congress’ exercise of its undisputed authority to control federal spending. Congress did not want the burden of its fiscal measure to be shifted to the elderly Medicare beneficiaries.

3. Plaintiffs contend that the contested portions of § 2306 deprive them of their liberty in violation of the Fifth Amendment to the United States Constitution. However, the substantive due process cases on which they rely, such as Adair v. United States, 208 U.S. 161, 28 S.Ct. 277, 52 L.Ed. 436 (1908) and Coppage v. Kansas, 236 U.S. 1, 35 S.Ct. 240, 59 L.Ed. 441 (1915), have long been “sapped ... of their authority.” Phelps Dodge Corp. v. National Labor Relations Board, 313 U.S. 177, 187, 61 S.Ct. 845, 849, 85 L.Ed. 1271 (1941). The authorities cited by plaintiff belong to an overruled “vintage of decisions which exalted substantive due process by striking down state [and federal] legislation which a majority of the Court deemed unwise.” North Dakota State Board of Pharmacy v. Snyder’s Drug Stores, Inc., 414 U.S. 156, 164, 94 S.Ct. 407, 412, 38 L.Ed.2d 379 (1973).

4. Plaintiffs’ denial of liberty argument is readily disposed of under the law of substantive due process which now governs. This case is similar to the recent case of Minnesota Association of Health Care Facilities v. Minnesota Department of Public Welfare, 742 F.2d 442 (8th Cir. 1984), which upheld the constitutionality of a Minnesota statute limiting the rates nursing homes which participate in the Medicaid Program may charge residents who do not receive Medicaid benefits. The Minnesota Association of Health Care Facilities contended that regulation of the fees they could receive from private sources denied them their constitutional right to due process of law. The Eighth Circuit found that the Minnesota statute satisfied substantive due process requirements:

“If the laws passed are seen to have a reasonable relation to a proper legislative purpose, and are neither arbitrary nor discriminatory, the requirements of due process are satisfied, and judicial determination to that effect renders a court functus officio.” Nebbia v. New York, supra 291 U.S. [502] at 537 [54 S.Ct. 505 at 516, 78 L.Ed. 940 (1934) ]; see North Dakota State Board of Pharmacy v. Snyder’s Drug Stores, Inc., 414 U.S. 156, 164-67 [94 S.Ct. 407, 412-14, 38 L.Ed.2d 379] (1973); Ferguson v. Skrupa, 372 U.S. 726, 728-32 [83 S.Ct. 1028, 1030-32, 10 L.Ed.2d 93] (1963); Williamson v. Lee Optical Co., 348 U.S. 483, 488 [75 S.Ct. 461, 464, 99 L.Ed. 563] (1955). The Minnesota legislature could reasonably find that differences in rates for the same nursing home services, depending wholly upon whether or not a resident receives medical assistance, are inimical to the public welfare, and thus it could properly choose to regulate the rates that nursing homes participating in Medicaid charge to residents who do not receive medical assistance. The statute enacted to achieve this purpose has a rational relationship to the end sought and is not arbitrary or impermissibly discriminatory.

742 F.2d at 447.

5. The finding of Minnesota Association is equally applicable here. Congress has reasonably found that limiting the increase in Medicare payments without also limiting the total fees which may be charged to Medicare beneficiaries would be harmful to the public welfare. Section 2306 is constitutional because it is a reasonable means of reducing the federal budget without burdening Medicare beneficiaries. It is neither arbitrary nor impermissibly discriminatory. Non-participating physicians are the only ones who will be treating Medicare beneficiaries on a non-assigned basis, so it is only necessary to limit and monitor their fees to achieve Congress’ intent. Lists of participating physicians will be created not to harm non-participating physicians, but to provide important information to Medicare beneficiaries seeking to minimize their medical expenditures.

6. In its decision, the Eighth Circuit relied on Nebbia v. New York, 291 U.S. 502, 54 S.Ct. 505, 78 L.Ed. 940 (1934), the case which marks the demise of the use of the substantive due process doctrine to invalidate state and federal regulations in the economic sphere. In Nebbia, the Supreme Court held that it was constitutional for a state to fix the selling price of milk. “[N]either property rights nor contract rights are absolute ... Equally fundamental with the private right is that of the public to regulate it in the common interest.” Id. at 523, 54 S.Ct. at 510 (footnotes omitted). The Court went on to state:

The Fifth Amendment, in the field of federal activity, and the Fourteenth, as respects state action, do not prohibit governmental regulation for the public welfare. They merely condition the exertion of the admitted power, by securing that the end shall be accomplished by methods consistent with due process. And the guaranty of due process, as has often been held, demands only that the law shall not be unreasonable, arbitrary or capricious, and that the means selected shall have a real and substantial relation to the object sought to be attained.'

Id. at 525, 54 S.Ct. at 510 (footnotes omitted).

7. Here, Congress reasonably found that a freeze on federal Medicare payments would harm Medicare beneficiaries unless it also acted to place a cap upon the total fees which could be charged to these beneficiaries by their physicians. Congress also reasonably determined that the interests of Medicare patients would be served if more physicians limited their fees and took cases on an assigned basis. Therefore, it established incentives for physicians to “participate,” and agree to take all cases on an assigned basis for a one-year period. These aspects of § 2306 are reasonable in relation to the Medicare program, and were adopted in the interests of the community. Therefore, due process has been satisfied.

8. Plaintiffs next claim that the freeze on their fees and the alleged encouragement to Medicare beneficiaries to use participating physicians constitutes a taking of their property without due process of law in violation of the Fifth Amendment. However: “It has long been recognized that the Fifth Amendment prohibitions [sic] against the taking of property for public use without just compensation or due process of law refers only to direct appropriation and not to consequential injuries resulting from the exercise of lawful regulations.” Condor Operating Co. v. Sawhill, 514 F.2d 351, 361 (Temp.Emer.Ct.App.), cert. denied, 421 U.S. 976, 95 S.Ct. 1975, 44 L.Ed.2d 467 (1975), citing Bowles v. Willingham, 321 U.S. 503, 64 S.Ct. 641, 88 L.Ed. 892 (1944). Moreover, price controls are “one of the means available ... to the Congress ... for the protection and promotion of the welfare of the economy.” Sunshine Anthracite Coal Co. v. Adkins, 310 U.S. 381, 394, 60 S.Ct. 907, 913, 84 L.Ed. 1263 (1940). Since § 2306 is a lawful exercise of Congress’ power, any consequential injuries to plaintiffs do not constitute a “taking.”

9. The nursing homes who were plaintiffs in Minnesota Association, supra, also argued that their property was being taken without just compensation, relying, like plaintiffs here, on Bluefield Water Works & Improvement Co. v. Public Service Commission, 262 U.S. 679, 43 S.Ct. 675, 67 L.Ed. 1176 (1923). The Eighth Circuit found public utilities cases “inapposite, however, because the present case simply does not involve a forced taking of property by the state.” Minnesota Association, 742 F.2d at 446. The nursing homes had argued that “business realities” prevented them “from leaving the Medicaid program voluntarily.” The court held that “[d]espite the strong financial inducement to participate in Medicaid, a nursing home’s decision to do so is nonetheless voluntary.” Id. The Eighth Circuit went on to state: “This voluntariness forecloses the possibility that the statute could result in an imposed taking of private property which would give rise to the constitutional right of just compensation, and thus it is unnecessary in this case to employ the adequacy standards applicable to state regulation of public utility rates.” Id.

10. This holding also applies to the case at hand. While plaintiffs seek to distinguish Minnesota Association on the ground that they have not voluntarily agreed to accept regulation because they have chosen not to “participate” in the Medicare Program, plaintiffs have the further option of not treating Medicare patients at all and thus being able to raise fees to all their patients without penalty. While they, like the nursing homes, may have a “strong financial inducement” to serve Medicare beneficiaries, their decision to do so is nonetheless voluntary. Thus, § 2306 cannot be found to have effected an unconstitutional taking of property.

11. Plaintiffs’ final argument is that the challenged portions of § 2306 of the Deficit Reduction Act are a bill of attainder which is proscribed by Article I, Section 9 of the United States Constitution. They contend that § 2306 inflicts punishment on non-participating physicians without a judicial trial. The alleged punishment has two aspects: (1) subjecting non-participating physicians to civil money assessments and barring them from participating in the Medicare Program for a prescribed period if they raise their fees to Medicare beneficiaries while the 15 month freeze is in effect; and (2) depriving these physicians of the right to be listed in the directories of participating physicians mandated by the Act. However, the burdens which plaintiffs perceive to flow from Congress’ efforts to reduce the federal deficit while at the same time protecting Medicare beneficiaries simply do not constitute a bill of attainder.

12. Historically, a bill of attainder was an Act of the English Parliament sentencing a specified individual or group of individuals to death. Article I, Section 9 of the United States Constitution is also considered to prohibit “bills of pains and penalties,” i.e. legislative Acts inflicting punishment other than death. See Nixon v. Administrator of General Services, 433 U.S. 425, 473-74, 97 S.Ct. 2777, 2805-06, 53 L.Ed.2d 867 (1977). While Supreme Court cases have given a “broad and generous meaning to the constitutional protection against bills of attainder,” Id. at 469, 97 S.Ct. at 2803, plaintiffs here seek an impermissibly broad interpretation.

13. A bill of attainder is defined as a law which legislatively determines guilt and imposes punishment upon a designated person or class of persons without benefit of judicial trial. Nixon v. Administrator of General Services, supra; United States v. Brown, 381 U.S. 437, 85 S.Ct. 1707, 14 L.Ed.2d 484 (1965); Cummings v. Missouri, 71 U.S. 277 (4 Wall. 277), 18 L.Ed. 356 (1866). In determining whether § 2306 is a bill of attainder “[t]he judicial function is ‘not to destroy the Act if we can, but to construe it, if consistent with the will of Congress, so as to comport with constitutional limitations....’ ” Selective Service System v. Minnesota Public Interest Research Group, — U.S. —, 104 S.Ct. 3348, 3355, 82 L.Ed.2d 632 (1984), quoting CSC v. Letter Carriers, 413 U.S. 548, 93 S.Ct. 2880, 37 L.Ed.2d 796 (1973).

14. Section 2306 cannot reasonably be construed as a legislative determination of guilt and imposition of punishment. As described above, this provision of the Deficit Reduction Act freezes the reasonable charges which will be paid by Medicare for physicians' services for a 15-month period. To avoid the shifting of the burden of the freeze to elderly Medicare beneficiaries, Congress also froze the actual charges which physicians taking cases on a non-assigned basis may bill their patients. To enforce the latter aspect of the freeze, the Secretary is directed to monitor non-participating physicians’ actual charges, and is authorized to impose civil sanctions on physicians who knowingly and willfully raise their charges to Medicare enrollees. Thus, non-participating physicians are not legislatively determined to be guilty of an offense. Furthermore, Congress has not deprived plaintiffs of any right to participate in what they call a referral program. The plaintiffs have voluntarily chosen not to be participants.

15. Congress has properly exercised its authority to temporarily freeze the fees of non-participating physicians, and has given the executive branch the authority to enforce the legislation. It is common practice for the executive branch to be authorized to impose civil penalties in aid of its enforcement powers. In 1979, there were “some 348 statutory civil penalties enforced by 27 federal departments and independent agencies.” Diver, The Assessment and Mitigation of Civil Money Penalties by Federal Administrative Agencies, 79 Colum.L.Rev. 1435, 1438 (1979).

16. In addition, plaintiffs cannot satisfy the following three inquiries established by the Supreme Court for determining “whether a statute inflicts forbidden punishment”:

(1) whether the challenged statute falls within the historical meaning of legislative punishment; (2) whether the statute, “viewed in terms of the type and severity of burdens imposed, reasonably can be said to further nonpunitive legislative purposes”; and (3) whether the legislative record “evinces a congressional intent to punish.” Nixon, supra, 433 U.S. at 473, 475-76, 478 [97 S.Ct. at 2805, 2806-07, 2808]....

Selective Service System, supra, 104 S.Ct. at 3355-56.

17. In Selective Service System, the Supreme Court upheld the constitutionality of § 1113 of the Department of Defense Authorization Act of 1983 (“§ 1113”), which denies federal financial assistance under Title IV of the Higher Education Act of 1965 to male students who fail to register for the draft. The Court found that under these criteria § 1113 was not a bill of attainder. With regard to the first question, the Court found that the denial of a non-contractual benefit did not approach “ ‘the infamous punishment of imprisonment’ or other disabilities historically associated with punishment.” Id. at 3356. Moreover, the denial of benefits was not even permanent, since the students could become eligible for Title IV aid “simply by registering late.” Id.

18. Here too, the alleged punishments do not fall within the “historical meaning of legislative punishment.” In addition, plaintiffs may avoid punishment by not raising their fees. They may also remove themselves from the class allegedly being punished by becoming participants. While they did not meet the deadline of October 1, 1984 for the current year, they may become participants for any subsequent year.

19. With regard to the second and third inquiries, the Supreme Court found that § 1113 furthered the nonpunitive goals of encouraging young men to register for the draft, and furthered a “fair allocation of scarce federal resources....” Id. at 3357. Section 2306 is also designed to further non-punitive goals. The freeze was not designed to punish non-participating physicians, but to protect Medicare beneficiaries. The publication of a directory of participating physicians was intended to encourage participation, and enable beneficiaries to avail themselves of the services of physicians who will not charge them more than the “reasonable” rate recognized by Medicare.

20. Plaintiffs recognize Congress’ unambiguous statement of intent, but seek to read other motives into the statute. However, this court must look only at the language of § 2306 and the reasons Congress gave for its enactment in determining whether the section is valid: “In judging the constitutionality of the Act, we may only look to its terms, to the intent expressed by Members of Congress who voted its passage, and to the existence or nonexistence of legitimate explanations for its apparent effect.” Nixon, supra, 433 U.S. at 484, 97 S.Ct. at 2811. The terms of § 2306, the consistent, explicit statements of legislative intent, and the existence of legitimate explanations for the statute, make it clear that § 2306 is not a punitive bill of attainder.

21. Congress has properly exercised its constitutional authority in enacting § 2306(c) of the Deficit Reduction Act of 1984, and judgment is hereby entered for defendant.

      . Because the parties stipulated that the court should decide the case on the merits, rather than on a procedural motion, the court DENIES defendant’s motion to dismiss.

      . The Medicaid Program was created in 1965 as Title XIX of the Social Security Act, 42 U.S.C. §§ 1396 et seq. It authorizes grants to the states to help fund medical assistance programs for the needy.

      . If anything, the case at hand is stronger, since Congress is regulating only the fees which may be charged to Medicare beneficiaries. Moreover, this regulation is only a temporary one.


text:
    SYGMA PHOTO NEWS, INC., Plaintiff, v. HIGH SOCIETY MAGAZINE, INC., Drake Publishers, Inc. and Dorjam Publications, Inc., Defendants.
    No. 83 Civ. 7517 (RWS).
    United States District Court, S.D. New York.
    Feb. 5, 1985.

      Ben C. Friedman, P.C., New York City, for plaintiff; Ben C. Friedman, New York City, of counsel.
    Abelman, Frayne, Rezac & Schwab, New York City, for defendants; Norman S. Beier, New York City, of counsel.
   OPINION

SWEET, District Judge.

Summary judgment has been entered against the defendants Dorjam Publications, Inc. (“Dorjam”) and Drake Publishers, Inc. (“Drake”) as infringers of the copyright of a photograph of Raquel Welch (the “Photograph”) owned by plaintiff Sygma Photo News, Inc. (“Sygma”). The facts relating to the controversy are set forth in the opinions of this court of April 30 and September 27, 1984 and in the stipulation between the parties dated November 15, 1984. What remains is the calculation of damages to be awarded to Sygma. An award of $59,283.00 results from the following findings and conclusions.

Since no claim is being made under Section 504(b) of the Copyright Act of 1976 (17 U.S.C. 504(b)) for actual damages, the relevant language of the section is as follows:

The copyright owner is entitled to recover ... any profits of the infringer that are attributable to the infringement ... In establishing the infringer’s profits, the copyright owner is required to present proof of the infringer’s gross revenue, and the infringer is required to prove his or her deductible expenses and the elements of profit attributable to factors other than the copyrighted work.

Under this scheme, once gross revenues from the infringing work are established, the burden rests upon the infringer to prove those expenses that should be deducted to establish profit. 17 U.S.C. 504(b); Lottie Joplin Thomas Trust v. Crown Publishers, 592 F.2d 651 (2d Cir. 1978); Aitken, Hazen, Hoffman v. Empire Const. Co., 542 F.Supp. 252 (D.Neb.1982).

The parties do not dispute Dorjam’s gross revenues of $340,661.00 resulting from the sale of 52% of the printed copies of the February, 1983 issue of “High Society’s Celebrity Skin.” There is also no disagreement that the prior issue of the magazine had been published in November 1981 and the subsequent issue was published in October 1984.

Expenses of $51,288.00, including salaries, editorial costs, freight and transportation, and other miscellaneous expenditures are agreed upon deductions from revenues.

The parties stipulate that printing, laminating, wrapping and binding expenses totalled $165,070.00. According to Sygma, however, only 52% of that amount is properly deductible on the theory that only expenses attributable to the copies sold may be deducted. According to Dorjam, all expenses relating to the issue are deductible in view of the recognized trade practice of printing excess copies in the expectation that unsold copies will be returned, a practice followed here with respect to all unsold copies. In my view, generally accepted trade practices should prevail and all printing and related expenses are deductible.

The sum of $42,882.00 was paid for “separations” of which $1,280.00 was attributable to the cover using the infringed, and impressive, photograph of Ms. Welch. Sygma urges the inequity of permitting the infringer to deduct expenses in any way related to the photograph, as opposed to those expenses attributable to the entire issue. However, the statute speaks in terms of profits, and if the infringement consisted of simply the use of the Photograph alone, the expenses for acquiring, reproducing, and selling the Photograph would still serve to reduce the infringer’s profit. Consequently, the entire $42,882.00 is deductible from the gross revenue.

The “retouching” expenses of $20,-266.00, however, stand on a different footing. Ketouching of the Photograph was necessary to conceal the infringement, and retouching of the Photograph was therefore not-an expense in the regular course of conventional business. Further, there is no way of determining what portion of the $20,266.00 was attributable to retouching the Photograph. The stipulation provides that “it is impossible based on defendants’ record to give a precise amount.” The defendant has therefore not carried his burden of proof with respect to those retouching expenses not attributable to the Photograph. The $20,266.00 is not deductible.

Dorjam also fails to establish that the $22,873.00 paid for photographs is related to the infringing publication. The best that can be claimed is that 50-75% of the photo-’ graphs purchased as a general practice were used in a particular issue. In my view that fails to meet the infringer’s burden to establish the costs for the issue in question, and therefore the $22,873.00 for the photographs is not deductible.

The direct payments to the vicarious infringer, Drake, for type, stats, art supplies and royalties, in the amount of $2,377.00, are deductible. The overhead expenses of depreciation, rent, and legal fees, however, are not established to have been properly allocated to the issue containing the Photograph and are not therefore deductible. Although general overhead expenses may be deducted, see Aitkin, supra; Wilkie v. Santly Bros., 139 F.2d 264, 265 (2d Cir.1943), “the burden is upon the defendant infringer to prove the actual expenditures for ordinary overhead and a fair method of allocating the overhead to the particular infringing activity.” Aitkins, supra, at 264. This burden has not been met.

Therefore, the profit achieved by Dorjam is $79,044.00. It is necessary to determine what portion of the profit is allocable to the cover, that is, the Photograph. Upon review of the expert deposition testimony submitted, I conclude that 75% of the sales were attributable to the Photograph. I reach this conclusion based on the nature of the Photograph, the reputation and fame of Ms. Welch, the absence of any established readership for the publication and its intermittent publication schedule.

Determining the precise impact of a magazine cover on the sales of that magazine is necessarily an imprecise venture. See Expert Transcripts at 81-82; 117-119; 173-74; 242-44. Where the reputation of the magazine plays only a small role in promoting circulation, such as here, however, the impulse nature of a purchase of this sort is accentuated. In Playboy Enterprises, Inc. v.. Chuckleberry Pub., 486 F.Supp. 414 (S.D.N.Y.1980) the Court, relying on the testimony of Ronald Scott, a magazine publishing consultant, held that “[c]overs are designed to attract a consumer’s attention. The consumer looks first at the subject on the cover, then to the cover lines, and then, in the case of a sex-oriented magazine, to the center or centerfold if one exists. The decision to buy or not is then made as an emotional response, usually in a matter of seconds.” Id. at 427. Given all these factors, I find that 75% of sales were attributable to the cover photograph.

Judgment will be entered in the amount of $59,283.00.

IT IS SO ORDERED.


author: RICE, District Judge.

text:
    James BONNANO, Plaintiff, v. CHRYSLER CORPORATION, et al., Defendants.
    No. C-3-82-53.
    United States District Court, S.D. Ohio, W.D.
    Feb. 5, 1985.
    Howard P. Krisher, Arthur J. Kepes, Dayton, Ohio, for plaintiff.

      Roger J. Makley, John A. Cumming, Dayton, Ohio, for defendants Chrysler Corporation, Marketing Investment, and intervenor-appellant, Arena Dodge, Inc.
    Mark Foster, Jack J. Mayl, Dayton, Ohio, for defendant Chrysler Credit Corporation.
   DECISION AND ENTRY OVERRULING DEFENDANT CHRYSLER CREDIT CORPORATION’S MOTION TO DISMISS PLAINTIFF’S' FIRST AND SECOND CLAIMS FOR RELIEF

RICE, District Judge.

Defendant Chrysler Credit Corporation (hereinafter “Chrysler Credit”) was named as a party Defendant in all three Counts of Plaintiff’s original Complaint, which was filed with this Court on February 18, 1982. (Doc. # 1). Although Plaintiff has since filed two Amended Complaints, the most recent one on August 1, 1983 (Doc. # 29), the allegations involving Chrysler Credit have remained unchanged. Defendant Chrysler Credit filed the instant Motion that it be dismissed as a party Defendant from Counts 1 and 2 on March 31, 1982 (Doc. # 10).

In Plaintiff’s First and Second Claims for Relief, Chrysler Corporation, Marketing Investment Division of Chrysler Corporation (hereinafter “MID”), and Chrysler Credit are named as Defendants. (Doc. #29). Plaintiff alleges that Defendant Chrysler Credit, a wholly-owned subsidiary of Defendant Chrysler Corporation, is engaged in the financing of Chrysler dealerships. (Doc. # 29, 115). Plaintiff further contends that Defendant Chrysler Credit was a party to his franchise agreement with Defendant Chrysler Corporation, and that Defendant Chrysler Credit refused to lend him money to buy Defendant Chrysler Corporation’s preferred stock holding in Arena Dodge, Inc. Plaintiff contends that this refusal, as well as his inability to secure profit distributions from Arena Dodge, Inc. and his subsequent termination as President, General Manager, and Director of the agency, states a claim against Defendant Chrysler Credit under the Automobile Dealers’ Day in Court Act (hereinafter “ADD-CA”). 15 U.S.C. § 1221, et seq.

In a Motion to Dismiss pursuant to Rule 12(b)(6), this Court must accept as true all well-pleaded allegations in Plaintiff’s Second Amended Complaint. Such a motion may only be sustained if it appears beyond doubt that Plaintiff can prove no set of facts in support of his claim which would entitle him to relief. Neal v. Bergland, 646 F.2d 1178, 1184 (6th Cir.1981).

The language and definitions employed in the ADDCA are central to Defendant Chrysler Credit’s Motion to Dismiss. Section 2 of the Act provides:

An automobile dealer may bring suit against any automobile manufacturer engaged in commerce, in any district court of the United States in the district in which said manufacturer resides, or is found, or has an agent, without respect to the amount in controversy, and shall recover the damages by him sustained and the cost of suit by reason of the failure of said automobile manufacturer from and after August 8, 1956 to act in good faith in performing or complying with any of the terms or provisions of the franchise, or in terminating, canceling, or not renewing the franchise with said dealer: Provided, That in any such suit the manufacturer shall not be barred from asserting in defense of any such action the failure of the dealer to act in good faith.

15 U.S.C. § 1222. Section 1 of the ADDCA in turn provides the following definitions:

(a) The term “automobile manufacturer” shall mean any person, partnership, corporation, association, or other form of business enterprise engaged in the manufacturing or assembling of passenger cars, trucks, or station wagons, including any person, partnership, or corporation which acts for and is under the control of such manufacturer or assembler in connection with the distribution of said automotive vehicles.
(b) The term “franchise” shall mean the written agreement or contract between any automobile manufacturer engaged in commerce and any automobile dealer which purports to fix the legal rights and liabilities of the parties to such agreement or contract.

15 U.S.C. § 1221(a), (b).

Section 2 of the ADDCA requires that an “automobile manufacturer” be party to a “franchise” before it can properly be charged by an automobile dealer with a breach of good faith under the ADDCA. Pertinent case law, some of which is more recent than the dates of the parties’ memoranda, indicates a variety of interpretations as to when these requirements of Section 2 are satisfied. Defendant’s contention in the instant Motion is that it is not subject to the ADDCA’s substantive provisions since it is not an “automobile manufacturer” under 15 U.S.C. § 1221(a).

Even Defendant concedes that the Tenth Circuit’s decision in Colonial Ford, Inc. v. Ford Motor Co., 592 F.2d 1126, 1129 (10th Cir.1979), cert. den., 444 U.S. 837, 100 S.Ct. 73, 62 L.Ed.2d 48 (1979), supports Plaintiff’s allegation that Defendant is an “automobile manufacturer” subject to the ADD-CA. (Doc. # 15). In Colonial Ford, Ford Motor Credit Company (“Ford Credit”) was not a party to Ford Motor Company’s franchise agreement with Plaintiff, but it had financed Plaintiff’s purchases of automobiles from Defendant Ford Motor Company. In its first consideration of the case, the Tenth Circuit held that the question of whether the wholly-owned finance company had “acted for” or was “under the control” of Ford Motor Company, thus rendering it an “automobile manufacturer” under 15 U.S.C. § 1221(a), had properly been submitted to the jury by the trial court. 577 F.2d 106, 108 (10th Cir.1978).

On petition for rehearing in Colonial Ford, the Tenth Circuit reconsidered its position. It ruled instead that, in light of the ADDCA’s broad remedial purpose, a wholly-owned subsidiary such as Ford Credit, whose involvement with a dealer was exclusively for the purpose of facilitating distribution of automobiles manufactured by its parent, was as a matter of law under the “control” of the parent automobile company and thus conclusively an “automobile manufacturer” for purposes of liability under the ADDCA. The court observed:

The most obvious point of leverage in the manufacturer-dealer relationship is financing. When, as in this case, a manufacturer uses a wholly owned subsidiary to facilitate that financing, it brings the subsidiary within the remedial purposes of the Act whether or not it is shown that the manufacturer ordered the specific conduct complained of. It would be unrealistic to suppose that a wholly owned subsidiary working to facilitate the parent’s distributive activities would act other than to promote the desires of its parent. Thus the Act’s “control” requirement is satisfied by showing corporate ownership and confluence of interest.

592 F.2d at 1129. The professed mutual goal of Plaintiff herein and Chrysler Corporation was that Plaintiff eventually become the sole owner of Arena Dodge, Inc. Plaintiff’s allegation that Defendant Chrysler Credit denied him adequate financial assistance in continuing with the dealership and meeting that goal would appear to state a claim under the ADDCA against Chrysler Credit under the Tenth Circuit’s logic in Colonial Ford that a wholly-owned subsidiary works only to facilitate the parent company’s true distribution objectives.

While this Court is appreciative of the Tenth Circuit’s desire to promote the ADD-CA’s broad remedial objectives, it also recognizes the hesitance of other federal courts in the wake of Colonial Ford to presume as a matter of law that a wholly-owned subsidiary such as Ford Credit or Defendant Chrysler Credit “acts for or is under the control of” its parent. See Olson Motor Co. v. General Motors Corp., 703 F.2d 284, 287 n. 3 (8th Cir.1983), cert. den., — U.S. —, 104 S.Ct. 240, 78 L.Ed.2d 231 (1983); DeValk Lincoln Mercury, Inc. v. Ford Motor Co., 550 F.Supp. 1199 (N.D.Ill.1982). The latter courts have instead interpreted Section 1221(a)’s broad definition of “automobile manufacturer” through application of general principles of agency or corporate law.

In Olson Motor Co. v. General Motors Corp., Plaintiffs contended that the failure of their automobile company was directly attributable to the conduct of General Motors Corporation in dictating Plaintiffs’ capital structure and financing needs. Plaintiffs further contended that General Motors Acceptance Corporation (“GMAC”), which was not a party to the franchise agreement, had also violated the ADDCA through its active participation in Defendant General Motors Corporation’s financing scheme and its subsequent impoundment of Plaintiffs’ automobile inventory. 703 F.2d at 286. Like Chrysler Credit, GMAC is a wholly-owned subsidiary of General Motors Corporation which finances the distribution of the automobiles manufactured by its parent.

Rather than addressing the issue of whether a finance company like GMAC was an “automobile manufacturer” under 15 U.S.C. § 1221(a), the district court in Olson ruled that GMAC could not be held independently liable under the ADDCA since it was not a party to a franchise agreement as required by 15 U.S.C. § 1221(b). The Eighth Circuit, after noting but avoiding judgment as to the merits of the Tenth Circuit’s ruling in Colonial Ford, affirmed the district court’s ruling as to GMAC’s independent liability as an “automobile manufacturer.” It went on to note, however, that a party may be liable under the ADDCA, even if it is not an “automobile manufacturer” or a party to the franchise agreement, if the party contracting with the dealer is the manufacturer’s agent. 703 F.2d at 287. The Olson court then affirmed the finding of the jury below that GMAC had acted as the agent of General Motors Corporation when it repossessed Plaintiffs’ inventory. The agency relationship found by the jury was thus deemed by the Eighth Circuit to have been a sufficient basis for GMAC’s liability under the ADD-CA, notwithstanding the absence of grounds for GMAC’s independent liability under the statute. 703 F.2d at 287-88.

Unlike Olson, the issue presented by Plaintiff herein is whether Defendant Chrysler Credit’s refusal to deal with Plaintiff was due to the control exerted over it by its parent, Defendant Chrysler Corporation. The logic of the Olson opinion nonetheless appears applicable. The essence of the Eighth Circuit’s position was that, if a wholly-owned finance company was indeed subject to the control of its parent automobile manufacturer, the subsidiary’s insulation from liability under the ADDCA would permit the parent to do indirectly what it could not do directly. Such an approach promotes the broad remedial purpose of the ADDCA, yet retains for the trier of fact the question as to whether the finance company “act[ed] for or is under the control of” the manufacturer “in connection with the distribution of said automotive vehicles.”

Based on the aforesaid, this Court cannot say that Plaintiff can prove no set of facts in support of his claim which would entitle him to relief. Accordingly, Defendant Chrysler Credit Corporation’s Motion to Dismiss Plaintiff’s First and Second Claims for Relief is overruled.

      . In his Third Claim for Relief, Plaintiff focuses on Defendant Chrysler Credit’s refusal to provide him the financing with which to buy out Defendant Chrysler Corporation’s interest in Arena Dodge, Inc. Defendant Chrysler Credit has admitted that it made such a denial of financing. (Doc. #31, ¶ 3). Plaintiff alleges that Defendants Chrysler Credit and Chrysler Corporation conspired to prevent his acquisition of said stock in violation of the Sherman Antitrust Act, 15 U.S.C. § 1 et seq. Defendant Chrysler Credit has raised no objection to its inclusion as a party Defendant in said Third Claim for Relief.

        . The Court notes that Plaintiff contends in his Second Amended Complaint that Defendant Chrysler Credit is a party to its franchise agreement. (Doc. # 29, ¶ 10). Sworn documents and affidavits which have been submitted to this Court render that allegation somewhat doubtful.

      . In DeValk Lincoln Mercury, Inc. v. Ford Motor Co., 550 F.Supp. at 1199, the district court engaged in an analysis quite similar to that of the Olson court in overruling a Motion to Dismiss filed by Defendant Ford Motor Credit Company. Noting the broad remedial purpose of the ADD-CA, the court noted that the statute’s goal could be thwarted by manufacturers transacting business "through alter-egos, agents or wholly owned subsidiaries.” 550 F.Supp. at 1202. The DeValk court further observed:
      The definition [of "manufacturer”] is a broad one, and cases interpreting it have properly recognized that there exist situations in which one not a manufacturer in the traditional sense may nonetheless fall within its scope. For example, if a non-manufacturer is but an "instrumentality" of the manufacturer, in the sense that "instrumentality” is used in corporation law, that entity may properly be sued under the Act. Volkswagen Interamericana, S.A., v. Rohlsen, 360 F.2d 437, 441-442 (1st Cir.1966). Similarly, applying general agency principles, if a nonmanufacturer is subject to the manufacturer’s control or right to control, a suit against the nonmanufacturer may proceed. Id.

      550 F.Supp. at 1201 (footnote omitted).