author: DIANA E. MURPHY, District Judge.

text:
    ST. JUDE MEDICAL, INC., Plaintiff, v. INTERMEDICS, INC. and Carbomedics, Inc., Defendants.
    Civ. No. 4-84-267.
    United States District Court, D. Minnesota, Fourth Division.
    June 28, 1985.
    See also D.C., 612 F.Supp. 962.
    R. Walter Bachman, Lindquist & Vennum, and John D. Levine, and Michael E. Bress, Dorsey & Whitney, Minneapolis, Minn., for St. Jude Medical, Inc.
    Edmund' McCabe, and Sydelle Pittas, McCabe and Gordon, Boston, Mass., and Leon Goodrich, Oppenheimer, Wolff, Foster, Shepard & Donnelly, St. Paul, Minn., for CarboMedics, Inc. and Intermedies, Inc.
   MEMORANDUM OPINION AND ORDER

DIANA E. MURPHY, District Judge.

This action arises from a manufacturing relationship involving St. Jude Medical, Inc. (St. Jude), Intermedies, Inc. (Intermedies), and CarboMedics, Inc. (CarboMedics). St. Jude, in its amended complaint, charges CarboMedics and Intermedies with violations of the Sherman and Clayton Acts, misappropriation of trade secrets by illegal means, conversion, and unfair competition. On October 10, 1984, this court granted St. Jude’s motion for a preliminary injunction and ordered CarboMedics to begin to manufacture and deliver carbon coated heart valve components to St. Jude; this order was affirmed by the Eighth Circuit Court of Appeals on June 10, 1985. The matter is now before the court on the motion of CarboMedics for partial summary judgment on the fifth cause of action, breach of the parties’ supply contract, in St. Jude’s amended complaint.

I.

In its fifth cause of action, St. Jude alleges that CarboMedics breached the parties’ 1983 supply contract in various ways. It charges that the supply contract specified that CarboMedics would sell it a minimum of 24,100 heart valve component sets during 1983, but that CarboMedics refused to deliver approximately 3,900 heart valve sets. St. Jude also alleges that CarboMedics breached the terms of the supply contract by its unilateral termination. It states in particular that CarboMedics violated paragraphs 10.1 and 11.0 of the agreement.

Paragraph 10.1 governs termination and provides that the “obligation of Manufacturer [CarboMedics] under this agreement may not be terminated unilaterally” by CarboMedics until such time as CarboMedics has:

1) informed St. Jude of CarboMedics’ intent to terminate:
2) determined from St. Jude an approximation of the length of time St. Jude will require to develop an alternative manufacturing source; and
3) supplied to St. Jude carbon-coated heart valve components of acceptable quality and in sufficient quantities to meet St. Jude’s requirements for the time St. Jude estimates will be necessary to develop an alternative manufacturing source.

Paragraph 11.0 contains limitations on CarboMedics due to its position as sole manufacturer of carbon components and provides:

Sole Source Limitation. Manufacturer hereby recognizes that, as a practical matter, it is currently the sole manufacturing source available to Buyer for the manufacture of coated mechanical heart valve components utilizing pyrolytic carbon as an essential manufacturing component. In view of this, Manufacturer hereby agrees not to utilize this position as unfair or unreasonable leverage in future negotiations with Buyer considering price and/or quantity of coated mechanical heart valve components to be manufactured and delivered, and further agrees not to discriminate against Buyer in comparison with other customers or manufacturers who purchase from Manufacturer various medical components manufactured by Manufacturer utilizing pyrolytic carbon.

St. Jude alleges that CarboMedics has breached this paragraph by unilaterally terminating its supply of products, making unreasonable demands for terms and prices of products, and offering discriminatorily favorable pricing to Hemex Scientific, Inc. (Hemex).

CarboMedics has submitted a statement of what it terms undisputed material facts concerning the history of the development of the double leaflet heart valve, the contractual relationship between it and St. Jude, and the rationale for and events of its termination of the 1983 supply agreement. It contends that summary judgment is appropriate because the plain language of the 1983 supply contract shows that it properly terminated the agreement and that it did not agree to supply components to St. Jude after December 31, 1983. It adds that if there is an agreement to supply components in 1984 and beyond, it is void for indefiniteness and lack of mutuality.

CarboMedics’ motion focuses mainly on the requirements of paragraph 10.1. It asserts that it gave St. Jude the requisite notice by a letter, dated October 19, 1983, that Dr. Jack C. Bokros, CarboMedics’ president, wrote to the president of St. Jude, Dr. Vern Rees. The letter informed Rees that St. Jude, by making pyrocarbon coated heart valve components, was infringing upon CarboMedics’ patents. The letter stated that such infringement was cause for CarboMedics to terminate, and that if the infringement did not cease, the supply contract would be terminated as of October 19, 1983. See CarboMedics Ex. R. CarboMedics asserts that the record shows that St. Jude’s response to this letter and its public admissions informed CarboMedics that St. Jude had enough components to last beyond the December 31, 1983 expiration date of the contract and up to the time at which alternative manufacturing sources could be expected. Thus, CarboMedics asserts that it satisfied the second and third requirement of paragraph 10.1.

CarboMedics also asserts that St. Jude acknowledged in an interim contract on May 2, 1984, that CarboMedics’ obligations to supply components in 1983 were completely satisfied.

St. Jude, on the other hand, contends that CarboMedics’ statement of undisputed facts contains “unsupported and vigorously disputed factual allegations.” It argues that CarboMedics must show not only that no fact issues exist as to its compliance with paragraph 10.1’s termination procedures, but that no fact questions exist as to its right to terminate St. Jude in the first instance. St. Jude notes that Bokros’ letter of October 14, 1983 referred to an alleged patent infringement as the sole reason for termination under paragraph 15.0. St. Jude maintains that there is no evidence before this court which shows that St. Jude has violated any CarboMedics’ patent. Nor, according to St. Jude, is there undisputed evidence of trade secret violations.

In addition, St. Jude claims that there are issues of material fact as to the validity of CarboMedics’ termination procedures. St. Jude states that Bokros’ termination letter did not refer to paragraph 10.1 and did not call for any estimate of supply. It asserts that the October 25,1983 letter of Dr. Rees to Intermedies’ board chairman G. Russell Chambers did not discuss any estimate by St. Jude of the time needed by St. Jude to locate an alternate source of supply, but informed Chambers, among other things, that St. Jude sought to develop a long-term business relationship with CarboMedics and requested a meeting to discuss that relationship. See CarboMedics Ex. S. St. Jude asserts that statements made by it in its securities filings, press releases, and other public documents were not its response to CarboMedics, and also were never intended to exclude supply from CarboMedics.

Further, St. Jude contends that the language of the 1983 contract clearly imposes on CarboMedics an obligation of good faith negotiation and orderly termination of St. Jude’s sole source of supply which extends beyond December 31, 1983. It also asserts that summary judgment is inappropriate when discovery is continuing.

II.

In passing upon a motion for summary judgment, the court is required to view the facts in a light most favorable to the non-moving party, and the movant has the burden of establishing that no genuine issue of material fact remains and that the case may be decided as a matter of law. Butter v. Buechler, 706 F.2d 844, 846 (8th Cir.1983); Ralph’s Distributing Co. v. AMF, Inc., 667 F.2d 670 (8th Cir.1981). The non-moving party is entitled to the benefit of all reasonable inferences to be drawn from the underlying facts disclosed in pleadings and affidavits. Vette Co. v. Aetna Casualty & Surety Co., 612 F.2d 1076 (8th Cir.1980). The nonmoving party may not merely rest upon allegations or denials of the party’s pleadings, however, but must set forth specific facts by affidavits or otherwise showing that there is a genuine issue for trial. Burst v. Adolph Coors Co., 650 F.2d 930, 932 (8th Cir.1981).

CarboMedics seeks summary judgment upon St. Jude’s fifth cause of action in its entirety, but it has not addressed that portion of the allegations which concerns discriminatory pricing structures in violation of paragraph 11.0 of the supply contract. Summary judgment is therefore inappropriate on that claim.

Nor has CarboMedics demonstrated that there is no genuine issue of material fact as to whether it had sufficient cause to cease supplying St. Jude. The language of paragraph 15.0 of the contract may be construed to limit any remedies an aggrieved party may have to initiate a judicial proceeding. An issue of material fact remains as to whether that was indeed the parties’, intent.

In the event of breach by either party of the terms and conditions of this Agreement to be performed by him, the other party shall be entitled, if it so elects, to institute and prosecute proceedings in any court of competent jurisdiction, either in law or equity, to obtain damages for any breach of this Agreement, or to enforce the specific performance thereof. Breach of the Agreement includes, but is not limited to, an infringement by one party of the patent(s) of the other.

Questions of material fact also remain as to whether CarboMedics complied with the termination procedures of the contract. The court cannot conclude as a matter of law, that various public statements made by St. Jude, some dating many months before the termination and some occurring many months after, informed CarboMedics of St. Jude’s estimate of time needed to develop an alternative manufacturing source. The relevance of these documents and the meaning of Dr. Rees’ letter to G. Russell Chambers cannot properly be resolved upon the current motion. . Moreover, the record at this point does not demonstrate that the parties clearly envisioned that all of the obligations of the contract would cease on December 31, 1983. Construing the language of the contract in a manner which grants St. Jude the benefit of all reasonable inferences, as it must on this motion, the court finds that various provisions of the parties’ 1983 contract raise substantial issues as to whether CarboMedics, as St. Jude’s sole source supplier, had an obligation to negotiate in good faith and to follow the termination procedures which continued past December 31, 1983.

While summary judgment is inappropriate on these matters, the court finds that one of St. Jude’s claims may properly be decided as a matter of law. St. Jude alleges that CarboMedics breached the supply contract by failing to deliver 3,900 heart valve sets. St. Jude signed an interim supply agreement dated May 2, 1984, however, which specifically stated:

SJM [St. Jude] acknowledges that CMI’s [CarboMedics’] agreement to supply SJM with these CMI Components completely satisfies CMI’s obligations to deliver, during calendar year 1983, CMI Components under the 1983 supply agreement.

CarboMedics argues that this language shows that St. Jude cannot now claim damages for the components scheduled to be delivered in 1983. In its responsive materials, St. Jude has failed to argue or demonstrate that this language somehow reserved its claim for damages based on CarboMedics’ failure to deliver 3,900 heart valve sets in 1983. St. Jude merely noted that the interim agreement did not waive its claims regarding the “alternate source unilateral termination and remedy for breach of patent infringement provisions” of the 1983 supply contract. St. Jude’s Memorandum in Opposition at p. 18. Accordingly, the court finds that, as a matter of law, St. Jude waived its rights to claim damages because of the failure of CarboMedics to deliver the minimum number of components during the year 1983.

ORDER

Accordingly, based upon the above, and all the files, records, and proceedings herein,

IT IS HEREBY ORDERED that the motion of CarboMedics, Inc. for summary judgment is granted with respect to the allegations of St. Jude Medical, Inc. that CarboMedics breached the parties’ 1983 supply agreement by failing to supply 3,900 heart valve sets. That claim is dismissed with prejudice. In all other respects, the motion for summary judgment is denied.

      . Two other actions have arisen from this manufacturing relationship. On March 2, 1984, CarboMedics brought suit against St. Jude in the United States District Court, Western District of Texas, alleging that St. Jude had misappropriated CarboMedics’ trade secrets and breached several confidentiality agreements. This case was subsequently consolidated in Minnesota with the suit now before the court. On July 3, 1984, CarboMedics and GA Technologies, Inc. (GA) brought another action, Civil No. 4-84-643, against St. Jude, alleging patent infringement; St. Jude has counterclaimed. Civil No. 4-84-643 was then consolidated with the other two cases for pretrial management only.

      . Many motions have been subsequently decided. On April 3, 1985, the court denied the motion of CarboMedics and Intermedies to dismiss St. Jude’s first and second causes of action in the amended complaint. At the same time, the court dismissed the third and fourth causes of action for failure to state a claim upon which relief can be granted, but gave St. Jude leave to file a second amended complaint with respect to its Section 2 Sherman Act claims. The court also denied St. Jude's motion for sanctions relating to the Rule 12 motion. Subsequently, the court denied the motion of CarboMedics and Intermedies for partial summary judgment on the antitrust claims in St. Jude’s first and second causes of action in its amended complaint.

      . Arguments on CarboMedics’ motion were heard on an accelerated basis at a previously scheduled hearing concerning other matters. At the hearing, St. Jude requested and received additional time in which to submit a response. Both parties then submitted reply materials.

      . Paragraph 15.0 provides:


source: Caselaw Access Project

license: Public Domain

text:
    ST. JUDE MEDICAL, INC., Plaintiff, v. INTERMEDICS, INC. and Carbomedics, Inc., Defendants.
    Civ. No. 4-84-267.
    United States District Court, D. Minnesota, Fourth Division.
    June 28, 1985.

      R. Walter Bachman, Lindquist & Vennum, and John D. Levine, and Michael E. Bress, Dorsey & Whitney, Minneapolis, Minn., for St. Jude Medical, Inc.
    Edmund McCabe, and Sydelle Pittas, McCabe and Gordon, Boston, Mass., and Leon Goodrich, Oppenheimer, Wolff, Foster, Shepard & Donnelly, St. Paul, Minn., for CarboMedics, Inc. and Intermedies, Inc.
   MEMORANDUM OPINION AND ORDER

DIANA E. MURPHY, District Judge.

This action arises from a manufacturing relationship involving St. Jude Medical, Inc. (St. Jude), Intermedies, Inc. (Intermedies), and CarboMedics, Inc. (CarboMedics). On October 10, 1984, this court granted St. Jude’s motion for a preliminary injunction and ordered CarboMedics to begin to manufacture and deliver carbon-coated heart valve components to St. Jude.

CarboMedics appealed the injunction order to the Eighth Circuit Court of Appeals and also sought a stay of the injunction. The Eighth Circuit has recently affirmed the merits of the injunction. Before reaching the merits, however, it denied CarboMedics’ motion for a stay and remanded the matter to this court on December 14, 1984 to:

(1) Require St. Jude to make available to CarboMedics a loan in the sum of $1 million, at the prime rate of interest under normal commercial terms; this loan shall remain in effect until further order of the district court; and
(2) Determine the price at which CarboMedics should be required to sell the carbon components to St. Jude which would provide CarboMedics with a percentage of profit per unit approximately equal to the percentage of profit per unit reasonably anticipated under the 1983 supply agreement.

Subsequently, this court’s order was amended pursuant to the order of the Eighth Circuit and the parties were ordered to submit materials on the price issue and proposed terms and conditions of the loan agreement. Various materials were submitted, and after a lengthy appointment process for a suitable special master was completed, the loan terms and interim price issues were referred to him.

Special Master Morris M. Sherman held a hearing on these issues and then allowed the parties to submit memoranda and proposed findings of fact and conclusions of law. The Master then submitted his report to the court. He determined, among other things, that the interim price should be set at $600 per valve set, and that the loan should be unsecured with CarboMedics having the obligation to pay off the principal of the loan as a borrower in a normal commercial setting. The parties were given an opportunity to file their objections to his recommendations.

The court has carefully reviewed all the relevant materials and has made a de novo determination of those portions of the proposed findings of fact or conclusions of law to which objection has been made.

I.

St. Jude urges the court to adopt the recommendations of the Special Master in calculating an interim price, but it argues that the base price used to compute the inflation index price is too high. It also asks this court to reconsider the master’s recommendation that the loan be unsecured in light of an affidavit of G. Russell Chambers regarding “the collapse of CarboMedics’ earnings” and “Intermedies’ current financial crunch.” Chambers aff. at ¶ 8.

CarboMedics seeks to have the court reject the proposed findings of fact contained in paragraphs 12, 15, 16, 17, 18, 19, 20, 21, 23, and 31 of the report, as well as the proposed conclusions of law in paragraphs 2, 3, and the first and last sentence of paragraph 5. It argues that the master misinterpreted the Eighth Circuit’s remand order by determining that the marginal costs of hiring and training new personnel and buying new equipment should not exclusively be allocated to St. Jude’s valve production, but should be spread over all of CarboMedics’ projects in house now or in the reasonable future. CarboMedics contends that the master’s findings that it could eventually use its newly-hired personnel and newly-purchased equipment for other customers once it ceases to produce for St. Jude, finding of fact 16 and 15 respectively, are speculative and that the findings of fact which flow from this assumption are also unsupported by evidence (paragraphs 19, 20, and 21). CarboMedics contends that the master’s findings in paragraphs 17 and 18 are ambiguous and irrelevant as the issue of computation of costs is unrelated to that of allocation of resources. CarboMedics objects to the proposed price and seeks an interim price of $760 per valve set.

CarboMedics also objects to various provisions of the proposed loan terms. It argues that the source of repayment of the loan should be limited to proceeds it receives from sales to St. Jude with any amounts unpaid because of insufficient profit to be forgiven. It also objects to the terms requiring it to report financial information to St. Jude and requiring Intermedies to guarantee the loan.

III.

After careful consideration of the transcript, exhibits, the master’s report, the parties’ arguments and objections, and de novo review of the findings and conclusions objected to, the court concludes that the report and recommendation and the master’s proposed order should be adopted in their entirety. The master’s analysis and method of calculating the interim price is supported by the evidence and it complies with the Eighth Circuit’s direction. The record and the language of the Eighth Circuit’s December 14 order indicate that the master was justified in rejecting CarboMedics’ “actual cost” figures and in taking into account its allocation of its resources. The master’s conclusion that the interim price should be the highest price paid by St. Jude under the parties’ previously negotiated arms-length supply contracts, adjusted for inflation, is also supported by the evidence. The court concludes that $600 per valve set provides CarboMedics “with a percentage of profit per unit approximately equal to the percentage of profit reasonably anticipated under the 1983 supply agreement.”

Similarly, the court finds that the master’s findings of fact and conclusions of law concerning the loan terms are supported by the evidence and by common sense. The court concludes that the record shows that requiring CarboMedics to report financial information and Intermedies to guarantee the loan is justifiable as both are normal commercial terms. The master correctly rejected CarboMedics’ proposal that repayment be limited to proceeds it earns from its sales to St. Jude. Testimony shows that this term is unusual and inappropriate under the circumstances. St. Jude relies on an affidavit of G. Russell Chambers to support its objection to the lack of security, but the record shows that Intermedies had a net worth in excess of $92,000,000 in 1984. Considering the financial strength of Intermedies, the court concludes that no security is necessary.

ORDER

Accordingly, based upon this court’s independent determination and de novo review of the record, both as to questions of law and questions of fact to which objection has been made, and all the files, records, and proceedings herein, the court hereby adopts the proposed findings of fact and conclusions of law of the Special Master and

IT IS HEREBY ORDERED that

1. St. Jude shall purchase from CarboMedics and CarboMedics shall sell to St. Jude no fewer than 20,000 valve sets. If the court’s order to supply ceases before 20,000 valve sets have been supplied to St. Jude, CarboMedics may require St. Jude to purchase up to a total of 20,000 valve sets or may excuse St. Jude from its obligation to do so. CarboMedics may complete all work in progress at the termination of its obligation to sell valves to St. Jude and require St. Jude to purchase any such valve sets;

2. CarboMedics shall sell its carbon components to St. Jude for $600 per valve set until otherwise ordered by the court;

3. St. Jude shall make available to CarboMedics a loan in the sum of $1 million bearing interest from time to time at a rate equal to the average prime index rate publicly announced by First Bank Minneapolis and Norwest Bank Minneapolis. If CarboMedics chooses to borrow from St. Jude in accordance with the terms described below, CarboMedics and Intermedies shall obtain consent for the loan, if necessary, from its bank lenders under Intermedies’ Revolving Credit Agreement. The loan’s terms shall be as follows:

Availability: Advances will be made in multiples of $10,000 within five days after St. Jude Medical, Inc. receives a written request therefor from CarboMedics, Inc. Amounts repaid may not be reborrowed.
Interest Rate: A fluctuating rate equal to the average from time to time of the prime rate (or corresponding publicly announced rate) of First National Bank of Minneapolis and Norwest Bank Minneapolis, N.A. The interest rate on the loan shall change as said average changes, and shall be computed on the basis of actual days elapsed and a year of 360 days.
Security: Unsecured.
Repayment: The loan shall be a general obligation of CarboMedics, Inc. and shall be unconditionally guaranteed by its parent, Intermedies, Inc. Interest shall be payable monthly in arrears on the first of each month. All principal shall be payable in full upon termination of the litigation now pending between CarboMedics and St. Jude or upon cessation of CarboMedics’ obligation to provide valves, whichever event comes first.
Conditions: St. Jude Medical, Inc. shall not make any loans until it has received a promissory note, in form and substance satisfactory to St. Jude Medical, Inc. and duly executed by CarboMedics, Inc., and a guaranty in form and substance satisfactory to St. Jude Medical, Inc. duly executed by Intermedies, Inc. (collectively, the “Loan Documents”); certified copies of the Articles of Incorporation and bylaws of CarboMedics, Inc. and Intermedies, Inc.; certified copies of the resolutions of the Boards of Directors of CarboMedics, Inc. and Intermedies, Inc. authorized to execute and deliver the Loan documents; and opinions from counsel to each of the Intermedies, Inc. and CarboMedics, Inc., in form and substance satisfactory to St. Jude Medical, Inc., to the effect that CarboMedics, Inc. and Intermedies, Inc. are duly organized and validly existing corporations and that the Loan Documents are properly authorized and executed and constitute valid and binding obligations. St. Jude Medical, Inc. shall not make any particular loan requested by CarboMedies, Inc. unless the request is accompanied by a certificate executed by the president or vice president of CarboMedies, Inc. to the effect that each representation and warranty contained in the Loan Agreement is correct on and as of the date CarboMedies, Inc. is requesting the loan and that no default or event of default under the Loan Agreement shall have occurred and be continuing on such date or after giving effect to the loan being requested. Such certificate shall specify the use of the funds requested in sufficient detail to demonstrate that said funds are necessary to produce goods for St. Jude Medical, Inc.
Covenants: CarboMedies, Inc. shall pay, discharge or otherwise satisfy at or before maturity all taxes, indebtedness and other obligations of whatever nature; continue to engage in business of the same general type as now conducted by it, and preserve its corporate existence and all rights and privileges necessary or desirable in the conduct of its business; maintain all property useful and necessary in its business in good working order and condition, insured by reputable insurance companies; keep proper books of record and account in conformity with generally accepted accounting principles.
Prepayment: CarboMedies, Inc. may prepay at any time without penalty. Prepayment shall be applied first to accrued interest and then to principal.
Default: Any of the following shall be events of default: (i) failure to pay principal or interest on the loan when due; (ii) any representation or warranty made or deemed made by CarboMedics, Inc. is incorrect in any material respect on or as of the date made or deemed made, or any covenant or agreement contained in the Loan Agreement is breached, and such breach of incorrect representation or warranty is not cured within 30 days; (iii) CarboMedies, Inc. shall default in payment of any indebtedness to any other lender; (iv) either CarboMedies, Inc. or Intermedies, Inc. shall initiate any case or proceeding relating to bankruptcy, insolvency, reorganization or relief of debtors or seeking appointment of a receiver, trustee, custodian or similar official, or any such case shall be commenced against CarboMedics, Inc. or Intermedies, Inc. and not dismissed for 60 days; (v) a judgment or decree in excess of $100,000 shall be entered against CarboMedies, Inc. and not vacated, discharged or stayed pending appeal within 60 days; (vi) Intermedies, Inc. shall cease to own 100% of the issued and outstanding common stock of CarboMedies, Inc. Upon the occurrence of any event of default, St. Jude Medical, Inc. may declare its commitment to make loans to CarboMedies, Inc. to be terminated forthwith, whereupon that commitment shall immediately terminate; and by notice of default to CarboMedies, Inc. declare all amounts owing to St. Jude Medical, Inc. to be due and payable forthwith, whereupon the same shall immediately become due and payable.
Any event of default described in Clause (iv) above shall automatically terminate the loan commitment and make all amounts outstanding under the Loan Agreement due and payable, without any notice or demand by St. Jude Medical, Inc.
Costs and Expenses: The parties shall pay all of their own costs and expenses relating to the negotiation and preparation of the Loan Agreement. The defaulting party shall pay all costs and expenses of enforcing the terms of the Loan Agreement.


author: HAWKINS, District Judge.

text:
    Ronald Hendrix COURTNEY, Plaintiff, v. Albert N. REMLER, Devaul L. Henderson, Jr., Dwain E. Ball, Erling D. Speer, Bernie Hirsch, Bernie Slotin, Robert M. Crumley, James E. Wright, E.K. Van Winkle, Jr., d/b/a Hotel Investments, A Limited Partnership, Defendants.
    Civ. A. No. 2:83-2347-1.
    United States District Court, D. South Carolina, Charleston Division.
    June 29, 1985.
    Joel D. Bailey, Beaufort, S.C., for plaintiff.
    J. Rutledge Young, Jr., Charleston, S.C., for defendants.
   HAWKINS, District Judge.

The defendants move for summary judgment pursuant to Rule 56(c), Federal Rules of Civil Procedure. Summary judgment is appropriate when “there is no genuine issue as to any material fact and ... the moving party is entitled to a judgment as a matter of law.” Fed.R.Civ.P. 56(c). The burden is on the moving party to show the absence of any genuine issue of fact. Adickes v. H. Kress and Co., 398 U.S. 144, 153, 90 S.Ct. 1598, 1606, 26 L.Ed.2d 142 (1970). For the reasons stated below, this court is of the opinion that the defendants’ motion for summary judgment should be granted.

FACTS AND PROCEDURAL HISTORY

On October 1, 1979, Ronald Hendrix Courtney and his wife, Deborah Marie Courtney, were honeymooning at the Islander Inn, a hotel located on Hilton Head Island, South Carolina. Two black males armed with pistols and wearing coverings over their heads forced their way into the Courtney’s room, bound, gagged, and robbed them, ransacked their luggage and the room, assaulted Mr. Courtney, then raped and assaulted Mrs. Courtney.

On May 12, 1981, Mrs. Courtney brought an action in the Beaufort County Court of Common Pleas against the owners of the hotel. She alleged that the defendants were negligent and reckless in designing, constructing, maintaining, supervising and operating the hotel. Her case was removed to this court on June 9, 1981. See, Deborah Marie Courtney v. Albert N. Remler, et al., C/A # 81-1156-1. After extensive discovery, it was tried before this court without a jury on February 22-24, 1983. On June 29, 1983, this court issued its order finding that the defendants operated, maintained and reasonably supervised the Islander Inn, 566 F.Supp. 1225. In addition, this court held that the owners had taken reasonable measures to ensure the safety of the Inn’s guest, even though they should have foreseen the possibility of criminal attacks on those guests. This judgment was appealed to the United States Court of Appeals for the Fourth Circuit. It was affirmed and the appeal dismissed on September 25, 1984, 745 F.2d 50. A motion for a rehearing en banc was denied by the Fourth Circuit on October 25, 1984.

In the meantime, on August 25, 1983, Mr. Courtney brought suit against the same defendants in the Beaufort County Court of Common Pleas for the loss of his wife’s consortium. He also sought to recover for personal injuries sustained in the same incident. His case was likewise removed to this court. After answering and raising as a defense that Mr. Courtney was collaterally estopped from bringing his action, the defendants, on March 7, 1984, filed this motion for summary judgment. Oral arguments were heard on the motion on May 1, 1984. At that time the court held its decision in abeyance until the Fourth Circuit ruled in Mrs. Courtney’s appeal.

After her case was decided by the Fourth Circuit and the petition for rehearing denied, the court asked for additional briefs on the collateral estoppel issue. These briefs were subsequently filed on October 31, 1984, by Mr. Courtney, and on November 14, 1984, by the defendants. At that time, Mr. Courtney moved to amend his complaint to add John Hamilton and Stefan Simmons, the alleged perpetrators of the assault on the Courtneys, as additional party defendants. He also moved to remand the case to the Beaufort County Court on Common Pleas because the two new criminal defendants were residents of the State of South Carolina. If the amendment was allowed, it would destroy diversity jurisdiction. Finally, Mr. Courtney moved to have guardians ad litem appointed for Hamilton and Stefan.

On February 14, 1985, the court heard additional oral arguments on the defendants’ motion for summary judgment. Supplemental memoranda were received by the court from the defendants and the plaintiff on March 1 and 4, respectively.

DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT

Mr. Courtney brings this action in his own right and as a husband for loss of consortium and personal injuries received during the assault. The defendants argue that Mr. Courtney is collaterally estopped from litigating those issues of fact which were decided in Mrs. Courtney’s case. The defendants do not argue that the husband has no right to assert a claim. Their motion is not based upon the earlier adverse judgment. However, before reaching the merits of this argument, the court finds it necessary to canvas the long and somewhat confusing South Carolina case law on loss of consortium and collateral estoppel.

In South Carolina, loss of consortium as a severable action was first recognized in the case of Priester v. Southern Railway Company, 151 S.C. 433, 149 S.E. 226 (1929). In that case, an action was brought by the husband to recover damages sustained by him as a result of personal injuries received by his wife in an automobile-train collision. The defendant entered a general denial and the affirmative defense of res judicata based upon an earlier defense verdict in the wife’s case. The South Carolina Supreme Court held that an action earlier brought in the United States District Court by the wife, which resulted in a judgment for the defendant, was not a complete bar to the right of the husband to bring his action. The trial judge did not err in refusing to direct a verdict on the ground that a judgment had been entered in favor of the defendant in the United States Court. The court stated that the causes of action in the two cases were entirely different and distinct. A judgment in favor of a defendant in one action is not a bar to an action on the other. The applicability of collateral estoppel, however, was not raised in the Priester case nor was it even discussed by the court’s majority opinion.

In Gillespie v. Ford, 222 S.C. 46, 71 S.E.2d 596 (1952), the wife brought an action to recover for injuries sustained by her when her automobile collided with the defendant’s automobile at an intersection. The complaint alleged simple negligence. At the trial of the first action, the wife testified she was driving on the wrong side of the road. The court held that her testimony, uncontradicted, would be contributory negligence per se. For this reason, the trial court should have directed a verdict for the defendant.

In the second action brought by the husband, Gillespie v. Ford, 225 S.C. 104, 81 S.E.2d 44 (1954), the complaint alleged fundamentally different and distinct acts on the part of the defendant. The simple negligence claim in the wife’s case became a wilfull, wanton and gross allegation. In the second case, the wife testified that she was on the correct, or right, side of the road, not on the left. The court held that this change in testimony, while a subject for cross-examination, became a factual question for the jury which was not presented in the first case. The issue of collateral estoppel was not raised by the parties and not discussed by the court. The actions remained separate and distinct and the bar of res judicata did not apply. The analysis turned on the “new” allegations against the defendant coupled with the “new” acts of the wife.

In 1982, there was a significant change in the South Carolina common law, and the South Carolina Supreme Court expressly recognized the doctrine of collateral estoppel as a distinct and severable principle from the doctrine of res judicata. In Irby v. Richardson, 278 S.C. 484, 298 S.E.2d 452 (1982), the court held that the doctrine of collateral estoppel precluded a party from relitigating a factual issue which was outcome determinative in previous litigation. The focus for the court deciding this legal issue is whether one had the full and fair opportunity to litigate the relevant issue effectively in a prior action. In that same year, the South Carolina Supreme Court decided Graham v. State Farm Fire and Casualty Ins., Co., 277 S.C. 389, 287 S.E.2d 495 (1982). The court expanded the rule on collateral estoppel to disregard any privity requirement. Res judicata was distinguished from collateral estoppel. The court noted that collateral estoppel “rested upon the wholesome principal which allows every litigant one opportunity to try it case on the merits, but limits him, in the interest of the public, to one such opportunity.” 277 S.C. at 391, 287 S.E.2d at 496, citing Jenkins v. Atlantic Coastline Railroad Company, 89 S.C. 408, 71 S.E. 1010 (1911).

In 1981, before the Irby and Graham decisions, this court held in the case of Watkins v. M & M Tank Line, Inc., 527 F.Supp. 290 (D.S.C.1981), that the husband of a woman injured in an automobile-truck collision could estop the employer of the truck driver from relitigating the issue of respondent superior by using the doctrine of offensive collateral estoppel. By permitting the offensive use of collateral estoppel, the court held that a finding of liability in the previous loss of consortium ease was dispositive of the scope of employment issue in the subsequent action.

The Fourth Circuit Court of Appeals reversed in Watkins v. M & M Tank Lines, 694 F.2d 309 (4th Cir.1982). It held that the South Carolina Supreme Court under Priester, Gillespie, and Hiott v. Contracting Services, 276 S.C. 632, 281 S.E.2d 224 (1981), would refuse to apply the doctrine of collateral estoppel to the facts of that case because it involved a consortium claim. It is significant, however, that the Watkins case involved no new allegations against the defendant. The plaintiff in Watkins did not seek to have the subsequent right of action or defense based on the earlier judgment. Instead, he sought to preclude the relitigation of factual issues fully and finally decided in the earlier action.

After the decision in Watkins, the South Carolina Court of Appeals squarely addressed the issue. In Beall v. Doe, 281 S.C. 363, 315 S.E.2d 186 (1984), the court found that an owner of an automobile that struck another auto was collaterally es-topped from asserting that he was not the driver of the automobile in a second case in which the identity of the driver was again in issue. The court held that non-mutual collateral estoppel may be used offensively. The doctrine was properly applied to preclude the factual issue of the identity of the driver of the automobile being relitigated in the second action. The court addressed the Priester line of cases and explicitly distinguished them. It agreed with the district court’s decision in Watkins v. M & M Tank Lines. Beall v. Doe, 281 S.C. at 369, 315 S.E.2d at 190.

The Court of Appeals noted that the defense of collateral estoppel was irrelevant on the issue of whether one could prosecute a claim when there had been an earlier judgment. The sole issue to be determined was whether a party adversely affected had a full and fair opportunity to litigate the issue in a prior action. It held that a fair rule regarding the application of issue preclusion and subsequent relitigation with different parties is the rule formulated in the Restatement (2d) Judgments, § 29.

The plaintiff argues that the decision in Beall is not binding on this court because it is not the decision of South Carolina’s highest appellate court, the Supreme Court. This argument carries no weight. The Supreme Court of the United States held that federal courts are bound to follow the holdings of the highest court in the state while sitting in diversity cases. Erie Railroad v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1938). In 1972, the Court addressed the issue of whether inferior courts of record should be entitled to the same deference. In Gooding v. Wilson, 405 U.S. 518, 92 S.Ct. 1103, 31 L.Ed.2d 408 (1972), the Court held that federal courts must follow the decisions of the Court of Appeals in Georgia in the absence of a conflicting decision of the Supreme Court of Georgia. This holding was premised upon the rationale that the Georgia Court of Appeals is a court of statewide jurisdiction and that the decisions of that court are binding on all trial courts in the absence of a conflicting decision of the Supreme Court of Georgia. The federal courts must, therefore, follow those decisions and apply them as Georgia law. 405 U.S. at 525, n. 3, 92 S.Ct. at 1107, n. 3. The Gooding case is merely the latest in a long line of decisions by the Court applying this principle. Fidelity Union Trust Company v. Field, 311 U.S. 169, 61 S.Ct. 176, 85 L.Ed. 109 (1940). See also, Ladnier v. Murray, 572 F.Supp. 544 (D.Md.1983) (absent decision of the highest court of the state, federal court should follow the decisions of the intermediate appellate court unless the federal court is convinced, by persuasive data, the highest court of the state would decide otherwise); Menzel v. County Utilities Corp., 501 F.Supp. 354 (E.D.Va.1979). See also, Brumley Estate v. Iowa Beef Processor, Inc., 715 F.2d 996 (5th Cir.1983), (court held that the latest and most authoritive expression of state law applicable to facts is controlling.) Cf. Louthien v. State Farm Mutual Insurance Company, 357 F.Supp. 894 (D.S.C.1973).

The South Carolina Court of Appeals was created by Act # 517 of the General Assembly in 1980. By Act #90, the General Assembly in 1983 directed that the Court of Appeals shall take effect following amendment to Article V of the South Carolina Constitution. The court was given statewide jurisdiction and was constituted as a court of record. The jurisdiction of the court is appellate and extended to all questions of law and equity. Section 14-8-200, Code of Laws of South Carolina (Cum.Supp.1984). The only cases excluded from the court’s jurisdiction are those involving the death penalty, public utility rates, elections, and the constitutionality of state or federal statutes. In all other matters the jurisdiction of the court is final, except by certiorari review by the South Carolina Supreme Court. For these reasons, the court finds that the decision of Beall v. Doe is binding on this court in the case at bar.

The court now turns its attention to applying the doctrine of collateral estoppel to this case. In the first action, Mrs. Courtney alleged that the defendants were careless and reckless in the following particulars:

In creating, through false, deceptive and misleading statements and actions, an image of the Islander Inn as being a safe and secure place for persons to stay, when they knew or, in the exercise of reasonable care, should have known that such misrepresentations would induce recipients thereof to stay in the Islander Inn, thereby exposing them to an unreasonable risk of harm.
In operating the said Islander Inn without taking such steps as were reasonably necessary in order to protect the Plaintiff and her husband from the harmful acts of others when they knew or, in the exercise of reasonable care, should have known, that similar acts were being committed in the vicinity of the Islander Inn, and were likely to occur at the Islander Inn.
In failing to provide a private security force for the protection of its business invitees, or, if such a force was provided, in selecting a force not competent to perform the necessary functions needed to insure security for guests, and in failing to properly and adequately supervise, instruct and/or train such force to take the steps necessary to protect its patrons.
In unreasonably designing, constructing and maintaining the Islander Inn in such a manner as to permit access to guest ■ rooms by persons with criminal motives and intentions, when they knew or, in the exercise of reasonable care, should have known that such conduct would substantially increase the likelihood of injury or harm to business invitees of the said Islander Inn.
In unreasonably failing to monitor and control the conduct of persons having access to guest rooms at the Islander Inn when they knew or, in the exercise of reasonable care, should have known that such failure would substantially increase the likelihood of injury or harm to persons rightfully staying in such guest rooms.
In unreasonably failing to equip the said Islander Inn with adequate and proper protective security devices when they knew or, in the exercise of reasonable care, should have known that such failure would substantially increase the likelihood of injury or harm to business invitees of the Islander Inn.
In unreasonably failing to adopt and utilize adequate and proper security and emergency procedures designed to insure the safety of guests at the Islander Inn. In failing to maintain the Islander Inn in a condition reasonably safe for its business invitees.
In unreasonably failing to provide adequate and proper instructions and warnings to business invitees of the Islander Inn relating to security deficiencies existing therein, when they knew or, in the exercise of reasonable care, should have known that such instructions and warnings were necessary in order to avoid the creation of an unreasonable risk of harm to such invitees, and that the absence of such warnings and instructions would prevent such invitees from taking actions necessary to insure their own safety and well-being.

Mr. Courtney, in his case, makes the same allegations of negligence. This court, after affording Mrs. Courtney a full opportunity to litigate these issues in a trial that lasted three days, found the following facts in its order of June 29, 1983:

12. There had been no assaults or any other crimes against any person occurring on the Islander Inn premises prior to the subject assault.
17. ... Quality Inns inspected and approved the property pursuant to its franchise agreement____
18. The plaintiff and her husband arrived at the Islander Inn during the early morning hours of September 30, 1979. Upon checking in, they noticed a uniformed security guard at the reception desk.
21. Above each guest room door was a fluorescent light which provided the illumination of the hallways and the ability to see through the “observation port” located within the room side of the door.
22. The motel room (Room 220) in which the assault occurred, as all rooms, had a fire-rated steel entrance door with a steel door frame. The steel door frame was constructed with a solid metal doorstop which prevented the opening of the door by the insertion of any object between the doorstop and the balance of the frame.
23. The doors were equipped with a doorlatch with an automatic locking device. The doors closed and locked automatically.
24. The doorknob on the door was a motel security type which required the use of a key to open the door from the hall. The exterior or hallway-side portion of the doorknob contained “security lips,” a mechanism utilized to deter the possible picking of the lock. The interior or room-side portion of the doorknob contained a push button whereby, when engaged, the entire exterior locking mechanism of the doorknob was secured against the possible opening of the door with either a room key or an employee’s master key. For emergency situations, the management did maintain an emergency key which could override this double locking mechanism.
25. The steel doors contained a separate “dead bolt” security lock which was activated by a latch on the interior or room-side of the steel door. On the exterior of the door a “room number” plaque was secured to the door and concealed an aperture in the door that allowed the “dead bolt” to be released from the hallway.
26. The doors contained an “observation port” whereby a guest in the room could look through the same and identify a person knocking outside the door or attempting to gain entrance. This observation port contained optics providing for magnification and wide vision when looking from the inside to the outside.
29. It was the further policy of management to have the maids, when cleaning a room, leave all drapes covering the sliding glass door halfway open to allow sunlight to enter the room, and, consequently, [a] warning decal could easily have been seen. The maids were also instructed by management to replace any decals that either wore off or were torn off.
30. Room 220, on the date and time complained of, also had a telephone located therein, which was in proper working order, with instructions on the phone indicating numbers to dial direct to the front desk, the manager, and other motel offices.
31. Quality Management Co. had a planned, on-going security system which included both “in-house” personnel, as well as the utilization of a private security patrolman.
32. On a twenty-four (24) hour basis, security was provided by “in-house” personnel, including specific staff members and a security conscious awareness program extending to all employees. Housekeeping employees were charged with the responsibility of cleaning guest rooms and checking to see that the rooms were in order.
33. Certain employees were permitted to reside in efficiency units located on the Islander Inn premises.
34. Exterior lighting on the premises originally consisted primarily of low level pathway lights. The main parking area was illuminated by high intensity mercury vapor lights. There were no exterior lights on the buildings themselves. In 1978, light poles were added around the perimeter of the premises and 150 watt light bulbs were used.
35. At the time of the rape incident, only Mr. Richard Kwaiser, the general manager of the motel, and Beverly Martin, his replacement as general manager, were assigned living quarters in the complex. Prior to the incident, as many as three to four people lived on the premises.
36. In addition to the employee security, a private security guard company, Preventor Security, was hired to provide extra security during nighttime hours. At the time of the incident, one Preventor Security uniformed guard was on duty from approximately 10:00 p.m. until 7:30 am.

Based on the foregoing findings of fact, the court concluded as a matter of law that:

Based on the lack of criminal activity on the premises in the past, one uniformed guard during the nighttime hours is reasonable security for a guest at the motel.
The entire security program was reasonable under all the circumstances.
[T]he design of the building is reasonable.
The guest room doors, with all their locking mechanisms, provided reasonable protection for the safety of the guests.
The warning system or procedure was reasonable.
The Islander Inn, as a whole, was operated and supervised reasonably. The Inn obviously felt a need to protect its guests from criminal attacks by third persons, and measures were taken to ensure their safety. The measures were reasonable. The rape incident was a truly unfortunate and horrible experience, but the defendants cannot be held responsible. For this court to hold otherwise would be equivalent to making all motels the insurer of their guests’ safety.

In essence, the present plaintiff is merely attempting to relitigate issues of fact previously adjudicated by this court. None of the factors listed in Restatement (2d) Judgments, § 29, mitigate in favor of the plaintiff. Accordingly, Mr. Courtney must be collaterally estopped from proceeding. This result is dictated notwithstanding the lack of privity between the parties. Collateral estoppel is a broad rule, which unlike res judicata, does not require technical privity between the parties or a requirement that the causes of action in the two suits be the same. The only requirement is that the party against whom collateral estoppel is asserted, “had a full and fair opportunity to litigate the relevant issues effectively in the prior action.” Graham, 277 S.C. at 391, 287 S.E.2d at 496. Applying this definition of collateral estoppel to the instant case, it is apparent that the consortium and personal injury claims should be barred because in the prior judgment, exonerating all defendants, all the issues presented in the instant case were fully and fairly litigated. See e.g., Parkland Hosiery Co., Inc. v. Shore, 439 U.S. 322, 99 S.Ct. 645, 58 L.Ed.2d 552 (1979). It is, therefore,

ORDERED, that judgment be, and the same is hereby, entered in favor of the defendants, and that each party shall bear its own costs of this action.

AND IT IS SO ORDERED.

      . On January 8, 1985, the South Carolina Court of Appeals affirmed the holding of Beall in the case of Liberty Mutual v. Shropshire, 284 S.C. 234, 325 S.E.2d 566 (1985).


author: JAMES M. BURNS, District Judge.

text:
    Ernest W. BOTEFUR, Plaintiff, v. Margaret HECKLER, Secretary, Department of Health and Human Services, Defendant.
    No. Civ. 84-6520.
    United States District Court, D. Oregon.
    July 2, 1985.

      Craig J. Casey, Asst. U.S. Atty., Portland, Or., Richard W. Wetmore, U.S. Atty, Seattle, Wash., for defendant.
   OPINION AND ORDER

JAMES M. BURNS, District Judge.

Ernest Botefur seeks judicial review pursuant to 42 U.S.C. 405(g) of a decision of the Secretary of Health and Human Services (“Secretary”), denying his application for disability benefits. Because the Secretary’s decision failed to address certain key factual matters regarding transferability of skills, the case must be remanded for further proceedings.

FACTS

Botefur is a 60 year old male with a 12th grade education. (A.R. 14). His vocationally relevant work history consists of work as a municipal maintenance man. (A.R. 11, 14). This job involved manual labor such as shoveling dirt and asphalt, welding, pouring cement, and operating heavy equipment. (A.R. 78).

On December 10, 1981 Botefur was injured on the job when he was struck by a backhoe boom, injuring his back. (A.R. 10, 92). A chiropractor diagnosed his condition at that time as back sprain and strain. (A.R. 98). X-rays taken in March, 1982 indicated lumbar scoliosis, with a possible interverterbral narrowing at L2-L3. A herniated disc was ruled out at that time. (A.R. 90, 99).

On April 1, 1982, Dr. Wichser, Botefur’s treating physician, noted restrictions in Botefur’s physical movements and stated that it was “quite clear that he is fairly disabled.” (A.R. 93). He made some improvement with medication and conservative treatment and on April 30 Botefur was released to return to “light duty” work. (A.R. 94).

On May 6, 1982, Botefur was examined by Dr. Degge for disability purposes. Dr. Degge found the claimant to be suffering from osteoarthritis, spondylosis and scoliosis, which were described as degenerative changes. Dr. Degge felt that the job injury, a pelvic contusion, had resolved itself and the patient’s condition was stationary. (A.R. 101). An EMG test on May 17 was normal, with nothing to suggest nerve damage. (A.R. 104, 105).

Botefur showed some improvement in motion by July, 1982, although he still complained of intermittent pain. (A.R. 96). In August he was examined by a Dr. Wasner, who found no evidence of rheumatic disease. (A.R. 119).

By November, 1982 Botefur was still having occasional pain in his arms, lower back, and right leg. His attorney referred him to Dr. Campagna, who recommended full myelography. (A.R. 109). Another EMG test was normal. (A.R. 110). The procedure showed cervical spondylosis, with mild defects in the lumbar region. Disc herniation was not revealed, but could not be absolutely excluded. (A.R. 113-115). No nerve root sleeve defects appeared. (A.R. 122).

Botefur was examined by a panel of physicians in January, 1983. They reported some restrictions in his flexibility, little strength impairment, and “no evidence of disturbance or interference from a functional standpoint.” (A.R. 122). The general conclusion was reached that Botefur’s condition had been stable for some months, and that he could return to work with some restrictions, or perhaps to another occupation. No surgery was indicated. (A.R. 123).

On February 8, 1983 Dr. Degge repeated his earlier conclusion that the hip contusion had resolved itself, and that Botefur’s continuing problems were due to degenerative changes. He further opined that Botefur “is totally disabled for gainful employment within the scope of his educational background and training____” (A.R. 129). Medical records admitted after the hearing show another myleogram was taken in March, 1984, which indicated further degenerative changes, stenosis of the L4-L5 intervertebral space, and a moderate amount of cervical spondylosis. (A.R. 139, 143, 144).

The hearing was held on May 18, 1984. Botefur described his pain as emanating from his shoulders, hips, back, and legs. (A.R. 28-32). He stated that he could not sit for more than an hour or two. (A.R. 30). A vocational consultant was also present at the hearing, and identified 5 unskilled jobs that were thought to be within the physical capacities of the claimant. (A.R. 42). The vocational expert classified Botefur’s former work as semi-skilled and of the “medium” exertion level. (A.R. 44). The expert also stated that if he were to accept Botefur’s description of his symptoms and limitations as accurate, then he could not perform the alternative jobs which were identified. (A.R. 45).

The Administrative Law Judge (“AU”) discounted Botefur’s allegations of pain, noting that the claimant appeared well-rested, well-nourished, and able to communicate and ambulate, and perform household chores. (A.R. 13). Benefits were denied on the ground that Botefur could perform the job alternatives identified by the expert. This appeal followed.

DISCUSSION

The plaintiff’s opening brief in this court properly notes some confusion in the AU’s opinion, as to whether the decision was based on the absence of a “severe” impairment as that term is used in 20 C.F.R. § 404.1521. However, the Secretary’s brief clarifies the agency’s position that such a finding was not intended by the AU. Certainly the medical evidence would not support such a finding in any event.

The parties are thus in agreement up through the conclusion that Botefur is disabled from performing his former vocationally relevant work. The reports of Drs. Wichser and Degge (A.R. 93, 129) are in accord. At that point, the burden of proof shifts to the Secretary to demonstrate the existence of other suitable jobs, given the claimant’s age, transferable skills, exertional and non-exertional limitations. See, e.g., Maounis v. Heckler, 738 F.2d 1032, 1034 (9th Cir.1984); Perry v. Heckler, 722 F.2d 461, 464 (9th Cir.1983). The dispute in this case centers on whether the Secretary has met this burden.

Applicable regulations classify Botefur as a person of “advanced age, close to retirement”. 20 C.F.R. § 404.1563(d). The medical evidence mentioned above generally supports the proposition that Botefur is restricted from performing the full range of physical demands of his former job. Further, as reflected in the jobs listed by the vocational expert, he is limited to sedentary or light work as defined by 20 C.F.R. § 404.1567.

Taking into consideration the above factors, along with Botefur’s educational level, the Secretary’s medical-vocational guidelines dictate a finding of disabled under Appendix 2, §§ 201.06 and 202.06 if Botefur’s skills are found to be “not transferable” to other work. Other regulations make clear that the tests for finding skills to be transferable for persons of Botefur’s age are more stringent than for those of younger individuals. In particular, 20 C.F.R. § 404.1564(d) states that a claimant will not be expected to adjust to sedentary or light work unless he has skills which are “highly marketable”. See also Appendix 2, § 201.00(f), which requires that “very little, if any, vocational adjustment” be involved in terms of tools, work processes, work settings, and the like.

The term “highly marketable” is not defined elsewhere in the regulations, but Social Security Ruling 82-41, “Disability-Transferable Skills”, Unemployment Insurance Reporter (CCH Transfer Binder) ¶14,168 (July, 1982) sheds additional light on the proper method of determining whether skills are transferable. This ruling provides, in part,

To find that an individual who is age 55 or over and is limited to sedentary work exertion has skills transferable to sedentary occupations, there must be very little, if any, vocational adjustment required in terms of tools, work processes, work settings or the industry. The same is true for individuals who are age 60 and older and are limited to light work exertion. Individuals with these adverse vocational profiles cannot be expected to make a vocational adjustment to substantial changes in work simply because skilled or semi-skilled jobs can be identified which have some degree of skill similarity with their PRW (Past Relevant Work). In order to establish transferability of skills for such individuals, the semi-skilled or skilled job duties of their past work must be so closely related to other jobs which they can perform that they could be expected to perform these other identified jobs at a high degree of proficiency with a minimal amount of job orientation.

SSR 82-41 § 4(c), (CCH Transfer Binder at p. 2199-46). The ruling goes on to require specific findings of fact, supported with documentation, identifying the claimant’s retained skills and how they are applicable to the proposed alternative jobs. Id. at p. 2199-47-48.

In this case the AU’s decision states the conclusion that Botefur’s past work included semi-skilled work, and that his skills were transferable to the 5 “unskilled” jobs identified by the vocational expert. (A.R. 13). This is insufficient. First, the decision does not identify in detail the types of skills that are found to be transferable. Much of Botefur’s past experience consists of unskilled manual labor as a maintenance worker, and by definition no transferable skills are acquired as a result of such work. Presumably, then, the AU was referring to Botefur’s experience operating heavy machinery. Yet there is no explanation of how such skills relate to such jobs as “small parts assembler” or “bindery worker”. Thus the decision does not seem to comply with SSR 82-41.

Second, there is no discussion of whether Botefur's skills, whatever they may be, are “highly marketable” as that term is used in 20 C.F.R. § 404.1564(d). The vocational expert, when asked by counsel, was unable to offer an opinion on the issue. (A.R. 45). This is understandable considering the vagueness of the term, but even in its commonplace meaning there is nothing in the AU’s decision supporting such a conclusion as to Botefur.

Third, there are no findings in the ALJ’s decision regarding the extent of the vocational adjustment that would be required of Botefur. One doesn’t need an expert to observe that there is a world of difference between working on street repairs and assembling small parts in a factory, in terms of the “tools, work processes, work settings, or the industry.” 20 C.F.R. Part 404, Subpart P, Appendix 2 § 201.00(f).

Fourth, it is not clear that the regulations even contemplate a transition to unskilled work for an individual with Botefur’s vocational profile. The jobs identified by the expert were all “unskilled” jobs. (A.R. 42). By definition, these are jobs that require no particular skills or preparation, and can be learned in 30 days. 20 C.F.R. § 404.1568(a). If the regulations contemplated asking a person of Botefur’s age and background to make the transition to unskilled work, there would never be any need to decide the issue of skill transferability. In other words, no matter what an individual’s background was, his or her skills would always be “transferable” to “unskilled” jobs, since none are required for the latter. But considering the wording of § 404.1564(d), combined with the obvious intent of SSR 82-41 (quoted in part above), it seems clear that the types of jobs which are to be considered are limited to those of similar skill levels, and similar industrial settings. The existence of unskilled jobs in completely different fields should be legally irrelevant to individuals of Botefur’s age and background. See, e.g., Belton v. Schweiker, 535 F.Supp. 1319, 1322-23 (D.D.C.1982) (skills as cook not transferable to job as cashier); Whitehead v. Califano, (Fed. Transfer Binder March 1982-Feb. 1983) Unemployment Ins. Rep. (CCH ¶ 14,289 (E.D.Mich. April 21, 1982) (semi-skilled work as a hi-lo driver not transferable to work in photo processing, jewelry or electronic assembly). It should also be noted that the claimants in these cases were 58 and 54 years old respectively, and had not come within the special provisions for those of “advanced age” as has Botefur in this ease.

The above analysis, regarding transferability, is strongly buttressed by a decision of the Secretary’s own Appeals Council. In that case the claimant was a dental technician who could no longer perform fine hand manipulations. The AU denied benefits because the claimant’s skills were found to be “transferable” to certain unskilled, sedentary jobs. The Appeals Council reversed, noting:

Section 416.968(D)(1) defines transferability as using skilled or semi-skilled work activities from past work to meet the requirements of skilled or semiskilled work activities of other jobs or kinds of work. There can be no transferability to unskilled work.

6 O.H.A.L.Rep. No. 3, (SSA Pub. @70-002), p. 19 (May, 1982) (emphasis added).

In all of the above decisions the matter was remanded back to the agency to permit supplementation of the record in accordance with the principles set out in the regulations and SSR 82-41. I find such a course to be appropriate here because the Secretary may be able to carry her burden if expert vocational testimony indicates the availability of other semi-skilled jobs to which Botefur’s skills are transferable, as that word is used in this opinion. The AU should identify particularly the skills that are transferable and should make explicit findings regarding the marketability of Botefur’s skills, the extent of vocational adjustment involved, and how the transferable skills relate to the suggested other work.

CONCLUSION

Because the record as developed below is inadequate for the reasons specified herein, the case is remanded to the Secretary for further proceedings. 42 U.S.C. § 405(g); Lewin v. Schweiker, 654 F.2d 631, 635 (9th Cir.1981).

IT IS SO ORDERED.

      . Page references are to the Administrative Record.

      . At the same time, counsel for Botefur may wish to supplement the record with certain medical information. It should be noted that the vocational expert stated that Botefur could not perform any of the specified jobs if the limitations claimed by Botefur, namely the need to rest frequently, were taken into account. Yet none of the medical reports that discuss the objective material findings (spondylosis, arthritis, etc.) explain how the medical diagnoses support the subjective complaints and limitations claimed by Botefur. Such evidence could be critical if further review in this case is ever required.


author: MORAN, District Judge.

text:
    COMMONWEALTH EDISON COMPANY, Plaintiff, v. DECKER COAL COMPANY, Defendant.
    No. 84 C 9573.
    United States District Court, N.D. Illinois, E.D.
    July 2, 1985.

      Paul W. Schroeder, Pamela B. Strobel, Isham, Lincoln & Beale, Chicago, 111., for plaintiff.
    Stephen R. Patton, Kirkland & Ellis, Chicago, 111., for defendant.
   MEMORANDUM AND ORDER

MORAN, District Judge.

Commonwealth Edison Company’s (Edison) motion for judgment on the pleadings raises the question whether Decker Coal Company (Decker) repudiated two contracts between the parties covering the purchase, mining and delivery of 462,000 tons of coal. Because it is far from clear as a matter of law that Decker repudiated the contracts, Edison’s motion is denied.

FACTS

On June 4, 1982, Decker and Edison entered into two related contracts. In the Coal Lease Purchase Agreement, Edison agreed to purchase in five annual installments Decker’s lease interest in 2.15 million tons of unmined coal. The Coal Mining Agreement gave Decker the exclusive right to mine and deliver the coal.

The coal covered by the agreements is known as “Reserve Coal”. Edison was originally obligated to purchase, and Decker to mine and deliver this coal in the years 1981-1985, under a June 20, 1974 contract. The 1982 agreements modified this arrangement by (1) obligating Edison to purchase Decker’s lease interest in the Reserve Coal on July 1 of the year in which it had originally been scheduled to receive delivery of the coal and (2) deferring mining and delivery of each annual installment for five years, to the 1986-1990 period.

The 1982 Coal Mining Agreement provided the following delivery schedule:

Year Reserve Coal Delivered (tons)
1986 370,000
1987 308,000
1988 548,000
1989 462,000
1990 462,000

The Agreement provided that the Reserve Coal “shall be scheduled for delivery on a monthly basis, ratably over the year for which it is scheduled.” (Subpar. 2.)

Subparagraph 1(b) of the Agreement provided that the year of delivery of the Reserve Coal could be modified at Edison’s option upon proper notice. The provision at issue here reads:

... Edison may on notice to Decker on or before September 1 of the year six years preceding that in which deliveries are scheduled in accordance with subparagraph (a) above, accelerate in whole or in part the deliveries of Reserve Coal to the year five years preceding that in which it is scheduled, and with the consent of Decker, which shall not be unreasonably withheld, to any other year preceding that for which it is scheduled under sub-paragraph (a)____

There is no indication that the coal that Edison ordered on an accelerated basis was not to be delivered on a monthly basis ratably over the course of the year, in accordance with subparagraph 2.

In an August 22, 1984 letter to Decker, Edison stated that pursuant to subparagraph 1 of the 1982 Mining Agreement it elected to accelerate the delivery of the 462,000 tons of 1990 Reserve Coal to 1985. On August 31, 1984 Edison sent another letter to Decker which read in its entirety:

Please refer to the Coal Mining Agreement dated June 4, 1982, as amended (1982 Mining Agreement) between Decker Coal Company and Commonwealth Edison Company.
Edison in accordance with subparagraph 1(b) of the 1982 Mining Agreement hereby elects to accelerate the deliveries of 462,000 tons of Reserve Coal from 1990 to 1984.
In the event that Decker is unable to deliver any of those tons of Reserve Coal in 1984, Edison elects to accelerate to 1985 delivery of those tons not delivered in 1984.
Please consider 115,500 tons of the Reserve Coal as ordered for the month of September 1984 and 115,500 tons as included in estimated orders for each of October and November 1984.
This letter supersedes Edison’s letter dated August 22, 1984 regarding the acceleration of the 1990 Reserve Coal.

On the same date Edison sent an identical letter seeking accelerated delivery of 182,-650 tons of 1991 Reserve Coal to the last four months of 1984.

Decker responded to Edison’s letter on September 26, 1984. The heart of its response was in the following paragraph:

Edison’s notice to accelerate 462,000 tons of Reserve Coal from the year 1990 to 1984 or 1985 involves Reserve Coal that, pursuant to paragraph 1 of the parties’ Coal Lease Purchase Agreement dated June 4, 1982, is scheduled to be sold to Edison on July 1, 1985. Since Edison does not have any interest in that Reserve Coal until said date, and since Edison has not paid the Purchase Price for that Reserve Coal, Decker regards Edison’s notice as ineffective. It should also be noted that the earliest year into which that Reserve Coal can be accelerated is 1986, and that deliveries thereof should be scheduled ratably each month.

Decker did, however, agree to waive its objections to notice and scheduling requirements with respect to the 182,650 tons of 1991 Reserve Coal and deliver this coal within the last four months of 1984.

The last paragraph of Decker’s September 26, 1984 letter stated that:

If Edison desires to make other arrangements for the purchase of coal during 1984 or 1985, whether Reserve Coal, coal that may be subject to pending claims of force Majeure or otherwise, please contact me. We are interested in discussing these matters with Edison, as well as all of our unresolved matters. Hopefully, our companies will seek pragmatic solutions to our mutual problems as we have in the past.

On October 18, 1984 Edison responded to Decker’s letter. Edison stated that it “considers that Decker’s rejection of Edison’s right to accelerate 462,000 tons of Reserve Coal from 1990 to 1984 or 1985 is a repudiation of Decker’s obligations under both the 1982 Coal Mining Agreement and the 1982 Coal Lease Purchase Agreement____” In a November 2, 1984 letter Edison stated that Decker had repudiated the two agreements and that Edison considered this repudiation to be final. Edison also filed its complaint on November 2, 1984.

Decker sent a letter to Edison on November 10, 1984, stating that it had not repudiated the 1982 agreements covering the 462.000 tons of coal slated for 1990 delivery. The letter explained why Decker did not agree to accelerate delivery of both the 462.000 tons of 1990 coal and the 182,650 tons of 1991 coal to the last four months of 1984:

Edison telecopied to Decker two letters on August 31, 1984 which in the aggregate accelerated delivery of 644,650 tons of Reserve Coal into the last four months of 1984 at the rate of 161,163 tons per month. These notices revoked Edison’s prior notice that 462,000 tons of Reserve Coal would be purchased in 1985, and were received by Decker only one day prior to the month that Edison desired to commence its purchase of these additional quantities. Decker has been operating without a collective bargaining agreement since the expiration of Decker’s prior agreement with the Progressive Mine Workers of America and was in the midst of negotiating with the United Mine Workers of America (“UMW”) with respect to a new agreement. The UMW membership at Decker has voted in favor of striking, but has recently reversed its plans for an immediate walkout (although it remains a possibility). For these and other reasons Decker cannot agree to deliver the entire 161,163 additional tons per month sought by Edison. Decker did agree to deliver 45,662 additional tons during the remainder of 1984 [the 1991 coal] in spite of these obstacles and the lack of any contractual obligation to do so.

In the concluding paragraph of the letter, Decker expressed its willingness to deliver the 1990 Reserve Coal to Edison in 1985:

As stated in Decker’s letter dated September 26, 1984, arrangements other than those demanded by Edison for the delivery of 462,000 tons of Reserve Coal at issue are possible, including delivery of 38,500 tons per month during 1985. Decker is ready, willing and able to deliver the 462,000 tons of Reserve Coal on the foregoing basis, or any other basis mutually agreed by the parties.

DISCUSSION

Edison’s motion for judgment on the pleadings is based on a theory that Decker’s actions constituted a breach of the two 1982 Reserve Coal Agreements by anticipatory repudiation. Under the doctrine of anticipatory repudiation, if one party to a contract declares in advance that it will not perform at the time set for performance, the other party may bring an immediate action for total breach of the contract. Edison seeks a declaratory judgment that it is relieved of all of its obligations with respect to the 462,000 tons of 1990 coal. Such a judgment would not affect the remaining terms of the 1982 agreements. Decker has moved for summary judgment.

The official comment to section 2-610 of the Uniform Commercial Code describes anticipatory repudiation as

... an overt communication of intention or an action which renders performance impossible or demonstrates a clear determination not to continue with performance.

The Code retains a common law requirement that a statement repudiating a contract must be “positive and unequivocal.” J. White & R. Summers, Handbook of the Law Under the Uniform Commercial Code, § 6-2 at 213. See also Dingley v. Oler, 117 U.S. 490, 501-02, 6 S.Ct. 850, 853-54, 29 L.Ed. 984 (1886); City of Fairfax v. Montgomery County, 582 F.2d 1321, 1325-26 (4th Cir.1978), cert. denied 440 U.S. 914, 99 S.Ct. 1229, 59 L.Ed.2d 463 (1979) (citing cases). Because the doctrine of anticipatory repudiation represents a harsh remedy, Marr Enterprises, Inc. v. Lewis Refrigeration, 556 F.2d 951, 956 (9th Cir.1977), the requirement that the repudiating statement be clear and absolute is a strict one, City of Fairfax, 582 F.2d at 1326.

Dfecker’s September 26, 1984 letter was not a clear and positive statement repudiating the 1982 agreements with respect to the 462,000 tons of 1990 coal. In fact, the letter shows that Decker intended to adhere to the agreements, but misunderstood the acceleration terms and was willing to discuss with Edison acceleration of the delivery of the 1990 coal.

It is far from clear that the acceleration of the delivery of the 1990 coal to the last four months of 1984 was within the terms of the 1982 Mining Agreement. First, sub-paragraph 1(b) of the Agreement provides that coal deliveries could be accelerated to five years preceding the scheduled date “and with the consent of Decker, which shall not be unreasonably withheld, to any other year preceding that for which it is scheduled____” Decker interprets this as permitting Edison, as an unconditional right, to accelerate shipments no more than five years from the scheduled year. Edison does not contest this interpretation, even though 1984 shipments would have been six years before 1990. Second, the Mining Agreement also calls for monthly deliveries of coal ratably over the course of the delivery year. In order to meet Edison’s request for 1984 delivery, Decker would have been forced to treble the amount of 1990 coal it delivered each month.

The most damaging portion of Decker’s September 26, 1984 letter states that “the earliest year into which [1990] Reserve Coal can be accelerated is 1986.” This interpretation of the agreement is erroneous, as Decker recognized in its November 10, 1984 letter, and freely admits now. A party that briefly errs in interpreting a contract while manifesting an intention to abide by its terms cannot be said to have clearly and unequivocally repudiated the contract. Repudiation only occurs when a party with an accurate understanding of its contractual obligations indicates clearly that it will not honor those obligations or, perhaps, refuses to recognize what the contract requires when its erroneous interpretation is called to its attention.

The suggestion of repudiation that might be distilled from this statement is, moreover, greatly diminished by the rest of the September 26, 1984 letter. Decker agreed to accelerate delivery of the 182,652 tons of 1991 coal to the last four months of 1984, waiving notice and scheduling objections. At a minimum, this act suggests that Decker was seeking to accommodate Edison’s desire for accelerated delivery of a portion of the Reserve Coal. Moreover, Decker also expressed its willingness to discuss “other arrangements” for accelerated delivery of the 1990 Reserve Coal and its desire to seek “pragmatic solutions” to the problems posed by Edison’s sudden request for rapidly accelerated deliveries of the 1990 Reserve Coal.

Commonwealth makes much of its announcements on October 18, 1984 and November 2, 1984 that it considered Decker to have repudiated its obligations with respect to the 1990 coal. Stating that another party has repudiated a contract, however, does not make it so. It is clear that anticipatory repudiation is determined with reference to the statements and actions of the repudiating party and not to those of its contractual counterpart.

Similarly, Edison’s filing of a complaint on November 2, 1984 does not somehow transform Decker’s September 26,1984 letter into a repudiation. It is true that a party having repudiated a contract cannot revoke its repudiation if the other party has materially changed its position. It is also true that the filing of a complaint for anticipatory breach constitutes such a material change. See e.g., J. White & R. Summers, sec. 6-2 at 215. However, filing a complaint for anticipatory breach can do no more than make an existing repudiation irrevocable. A condition precedent for irrevocability, absent here, is a clear and unequivocal repudiation of contractual obligations by the defendant.

Edison’s August 31, 1984 letter stated that “Edison elects to accelerate the 1985 delivery of those tons not delivered in 1984.” Edison argues that Decker’s September 26, 1984 response was thus a rejection of not only 1984 delivery of the 1990 coal, but also 1985 delivery. This argument, however, ignores the fact that Decker did not reject Edison’s August 22, 1984 request for 1985 delivery of the 1990 coal. Decker’s September 26, 1984 letter, rather, was prompted by Edison’s superseding request on August 31, 1984 for delivery during the last four months of 1984. In any event, Decker’s September 26, 1984 letter does not represent repudiation of the agreements even if it is understood as responding primarily to a request for 1985 delivery.

Decker’s motion for summary judgment covers much of the same ground as Edison’s motion for judgment on the pleadings. Edison’s memorandum in response notes that if its motion for judgment on the pleadings is denied, it intends to file evidence in opposition to the summary judgment motion and perhaps a summary judgment motion of its own. Edison has 21 days from the date of this memorandum and order to file such materials. Decker’s reply memorandum in support of its motion for summary judgment and in response to Edison’s motion for summary judgment (if any) is due 14 days thereafter.

CONCLUSION

Edison’s motion for judgment on the pleadings is denied. Decision on Decker’s summary judgment motion is deferred.

      . The 1991 Reserve Coal was apparently covered by a separate agreement.


author: JUNE L. GREEN, District Judge.

text:
    John F. “Jack” WALSH, et al., Plaintiffs, v. FORD MOTOR COMPANY, Defendant.
    Civ. A. No. 81-1998.
    United States District Court, District of Columbia.
    July 2, 1985.
    Beverly C. Moore, Jr., Law Offices of Beverly C. Moore, Jr., Washington, D.C., Landon Gerald Dowdey, Law Offices of Landon Gerald Dowdey, Washington, D.C., Wallace J. Smith and Ben Schiebel, Wallace J. Smith, Inc., Sacramento, Cal., Barry Schwartz, Wolf, Block, Schorr and Solis-Cohen, Philadelphia, Pa., William H. McDonald, David A. Childers, John E. Price and Robert M.N. Palmer, Woolsey, Fisher, Whiteaker, McDonald & Ansley, Springfield, Mo., for plaintiffs.
    William T. Coleman, Jr., Richard C. Warmer, Carl R. Schenker, Jr. and John H. Beisner, O’Melveny & Myers, Washington, D.C., for defendant; Henry R. Nolte, Jr., James M. MacNee, Ford Motor Co., Dear-born, Mich., of counsel.
   MEMORANDUM ORDER

JUNE L. GREEN, District Judge.

This matter is before the Court on plaintiffs’ motion to expand the certified classes and to amend this Court’s order on the motion to dismiss to include purchasers of subject Ford vehicles in New Jersey; defendant’s opposition thereto; plaintiffs’ reply to defendant’s opposition, and the entire record herein. For the reasons set forth below, the Court grants plaintiffs’ motion.

On March 28, 1985, the New Jersey Supreme Court issued a decision in Spring Motors Distributors, Inc. v. Ford Motor Co., 98 N.J. 555, 489 A.2d 660 (1985). That case held specifically that where “a commercial buyer seek[s] damages for economic loss resulting from the purchase of defective goods [he] may recover from an immediate seller and a remote supplier in the distribution chain for breach of warranty under the U.C.C.” Id. at 663. The court in Spring Motors further held “that the buyer need not establish privity with the remote supplier to maintain an action for breach of express or implied warranties.” Id.

Plaintiffs aver that this holding by the New Jersey Supreme Court effectively eliminates the requirement of vertical privity for claims of breach of implied warranty under the Uniform Commercial Code (“U.C. C.”). They further argue that in light of the decision in Spring Motors, this Court should amend its decision on defendant’s motion to dismiss, see Walsh v. Ford Motor Co., 588 F.Supp. 1513 (D.D.C.1984), to reflect the fact that New Jersey no longer requires the presence of vertical privity to pursue claims of breach of implied warranty. Finally, plaintiffs move to have this Court amend its decision on defendant’s motion to dismiss to include those named plaintiffs who purchased their vehicles in New Jersey and were found originally not to have a valid claim for breach of implied warranty because of the lack of vertical privity.

In examining the decision in Spring Motors, the Court agrees with plaintiffs’ conclusion that the New Jersey Supreme Court effectively abolished the requirement of vertical privity between a buyer and supplier or manufacturer for claims for breach of implied or written warranties.

In opposition to plaintiffs’ motion, defendant argues that the decision in Spring Motors is not applicable to the present action.

Defendant first argues that the Spring Motors decision is limited in application to only commercial purchasers and not consumers. The Court declines to read that decision so narrowly. The holding in the case is not limited to abolishing vertical privity for merely commercial buyers. Because the decision involves a commercial buyer with claims against a remote supplier, that court naturally applies its reasoning to the parties that are before it. The decision in Spring Motors specifically states:

We conclude that the absence of privity between a remote supplier and ultimate purchaser should not preclude the extension to the purchaser of the supplier’s warranties made to the manufacturer. We reach that conclusion notwithstanding our recognition that the Code generally applies to the parties in privity ... and that no privity exists between [plaintiff] and [defendant].

Spring Motors Distributors v. Ford Motor Co., 489 A.2d at 674 (citations omitted).

The decision in Spring Motors eliminates the privity defenses in claims arising from breach of warranty under the U.C.C. It provides for breach of warranty claims arising under the U.C.C., a right of action for economic loss “without regard to vertical privity.” Id. at 676. The New Jersey Supreme Court states that this “conclusion ... is consistent with the proposition that the Code drafters have left it to the courts to determine whether vertical privity should be required in a warranty action between a seller and a remote buyer.” Id. Comparing this claim to a consumer’s right to pursue claims for economic loss under the principle of strict products liability in tort, the Néw Jersey court found that they should be treated similarly. It explained that:

a plaintiff in a suit for breach of warranty against a remote seller, like a plaintiff in a strict liability action, need not establish privity with or negligence by the defendant. To this extent, our recognition of a warranty action for economic loss by a commercial buyer parallels our recognition in Santor[] of a similar claim by a consumer. One significant difference, of course, is that the plaintiff in a warranty action need not establish the existence of a defect; the failure of the goods to perform as warranted is sufficient. By bringing the action within the ambit of the Code, we believe we come closer to fulfilling the expectations of the parties and the intention of the Legislature that the Code [not claims arising under Tort] shall govern commercial transactions.

Id. at 676.

This language recognizes that claims of economic loss should arise properly under U.C.C. warranty law and not be transformed into actions arising under strict liability in tort. This is particularly true when applied to commercial transactions. By eliminating the requirement of vertical privity in U.C.C.-based claims, the court appears, in turn, to eliminate the need to convert claims of economic injury or property damage from genuine contract-based claims to claims arising in tort. What this decision leaves open is whether a consumer may continue to pursue breach of warranty claims for economic injury arising in tort, now that a means has opened to pursue these claims under the U.C.C. without regard to the issue of privity.

Although the Spring Motors decision is couched in terms of “commercial buyer” transactions, the Court does not read the holding so narrowly. The New Jersey Supreme Court, through its decision in Spring Motors, seems intent to expand potential claims for breach of warranty for economic loss while at the same time placing correctly these causes of action in the “appropriate vehicle for resolving commercial disputes arising out of business transactions between persons in a distribution chain.” Id. at 668. The Court can find no justification for concluding that this decision is limited exclusively to commercial purchasers. It accordingly finds that New Jersey has eliminated the requirement of vertical privity for claims of breach of implied or written warranty arising under the U.C.C.

Ford also argues that the holding in this action was based on the buyer’s direct dealings with a remote supplier. Although it is true that the parties in Spring Motors did have direct dealings with each other, that was not the basis of the court’s holding. The New Jersey Supreme Court found its decision “particularly appropriate” where there were direct dealings between the parties. Id. at 676. Accordingly, the argument that the abolition of vertical privity is applicable only where there were direct dealings, is without merit.

Finally, Ford argues that the decision in Spring Motors may be applied only prospectively. This Court also disagrees with this contention.

In order to determine whether a decision should be applied retroactively, the New Jersey Supreme Court has enunciated a standard on which to approach this question. It concluded that:

The question of which approach to retroactivity will be taken in a given case is not answered by any constitutional mandate____ Rather, under the view adopted by the United States Supreme Court, the competing considerations in each case are weighed by examining (1) the purpose of the rule and whether it would be furthered by a retroactive application, (2) the degree of reliance placed on the old rule by those who administered it, and (3) the effect a retroactive application would have on the administration of justice. This weighing process has generally been followed in New Jersey.

New Jersey v. Nash, 64 N.J. 464, 317 A.2d 689, 692 (1974) (citations omitted), cited with approval in Turner v. Aldens, Inc., 179 N.J.Super. 596, 433 A.2d 439, 444 (App.Div.1981). The factor that has most significance here is the issue of reliance. Surely, Ford cannot argue that it relied on the requirement of vertical privity when it determined to sell its vehicles in New Jersey. It is undisputed that defendant markets and chooses to sell its vehicles in every State regardless of the presence of vertical privity. Further, as outlined in the Spring Motors decision, New Jersey has slowly erroded its vertical privity requirements by creating exceptions and new causes of action for claims arising from breach of implied or written warranty. Spring Motors Distributors v. Ford Motor Co., 489 A.2d at 666-67 (citing Henningsen v. Bloomfield Motors, Inc., 32 N.J. 358, 161 A.2d 69 (1960); Santor v. A & M Karagheusian, Inc., 44 N.J. 52, 207 A.2d 305; Rosenau v. City of New Brunswick & Worthington Gamon Meter Co., 51 N.J. 130, 238 A.2d 169 (1968); Heavner v. Uniroyal, Inc., 63 N.J. 130, 305 A.2d 412 (1973)). As Messrs. White and Summers have noted: “It is possible that lack of privity as a defense to a cause of action will be only a historic relic in the year 2000. It is a doctrine in hasty retreat.” White, James J., Summers, Robert S., Uniform Commercial Code at 411 (2d ed. 1980). Certainly, in light of the above, the issue of reliance is of minimal significance, here, when determining the retroactive effect of the Spring Motors decision.

Finally, the Court notes that by specifically abolishing the requirement of privity, the New Jersey Supreme Court has classified the cause of action for breach of implied warranty for claims of property damage or economic loss which should arise under the U.C.C. instead of strict liability in tort.

Accordingly, it is by the Court this 2nd day of July 1985,

ORDERED that plaintiffs’ motion to expand the certified classes and to amend this Court’s order on the motion to dismiss to include purchasers of subject Ford vehicles in New Jersey is granted; and it is further

ORDERED that the following named plaintiffs listed in the second amended complaint may pursue their claims for breach of implied warranty: Martha D. Meidinger (¶ 19(I)(s)); Thomas A. and Alice L. Burns (¶ 19(II)(k)); Menorah Chapels at Millburn, Inc. and Herbert Ross (119(II)(s)); George Pradarits (¶ 19(II)(uuu)); Robert Mahler (¶ 19(III)(b)); and Adrienne C. Thurston (II 19(III)(r)).

      . In Santor v. A & M Karagheusian, Inc., 44 N.J. 52, 207 A.2d 305 (1965), the New Jersey Supreme Court found that a consumer could bring a claim for economic loss against a remote manufacturer despite the lack of vertical privity. Although the action was stated as a claim for breach of implied warranty of reasonable fitness, id. at 310, the decision later stated that this action actually arose under strict liability sounding in tort. Id. at 311-313.