author: HUYETT, District Judge.

text:
    Thomas F. BENNIS and Roger J. MacLean v. Carson GABLE, Joseph Daddona and City of Allentown.
    Civ. A. No. 82-1277.
    United States District Court, E.D. Pennsylvania.
    Dec. 10, 1984.

      James T. Huber, Allentown, Pa., for plaintiffs.
    Robert G. Hanna, Jr., Philadelphia, Pa., for defendants.
   MEMORANDUM AND ORDER

HUYETT, District Judge.

On January 16, 1982, plaintiffs Thomas F. Bennis and Roger J. MacLean, two Allentown policemen, were demoted without a hearing by Mayor Joseph S. Daddona from the rank of detective to patrolman. This lawsuit was filed under 42 U.S.C. § 1983 and § 1985. Plaintiffs allege that the demotions violated their rights under the first amendment because they were politically motivated. Plaintiffs also assert that the demotions violated the fourteenth amendment because the demotions were made without cause, they were not given the opportunity of a hearing, and because the reduction in rank and salary constituted a taking of property. Plaintiffs’ final allegation is that the demotions violated state law.

Defendants Joseph Daddona, the newly elected mayor of Allentown; Carson Gable, the newly appointed Chief of Police; and the City of Allentown have filed a motion to dismiss and a motion for summary judgment. Under Fed.R.Civ.P. 12(b)(6), I will treat this as a motion for summary judgment.

Federal Rule of Civil Procedure 56(c) states that summary judgment is appropriate if there is no genuine issue as to any material fact and the moving party is entitled to a judgment as a matter of law. To prevail on a motion for summary judgment, the moving party must establish the absence of a genuine issue of material fact; “for these purposes the material it lodged must be viewed in the light most favorable to the opposing party ...” Adickes v. S.H. Kress and Co., 398 U.S. 144, 159-60, 90 S.Ct. 1598, 1609-10, 26 L.Ed.2d 142 (1970). Therefore, all reasonable doubts as to the existence of a genuine issue of material fact must be resolved against the moving party. Joe Regueira, Inc. v. American Distilling Co., 642 F.2d 826 (5th Cir.1981). For the reasons which follow, the motion for summary judgment will be denied in part and granted in part. I find that a genuine issue of material fact does exist with regard to the first amendment claim. I will, however, dismiss the fourteenth amendment claim and the other claims as a matter of law.

THE FACTS

Plaintiffs Thomas F. Bennis and Roger J. MacLean both became Allentown police officers in April of 1974 after placing near the top of a group of candidates taking the Civil Service test. Bennis was promoted to the rank of detective in July of 1979, and MacLean received his promotion to detective in December of 1981.

On or about January 14, 1982, the plaintiffs were demoted to patrolman, shortly after the election of Mayor Daddona and only nine days after the appointment of Carson Gable as Chief of Police. Mayor Daddona himself decided to demote plaintiffs. Daddona had been mayor of Allentown from 1973 to 1977, when he lost a bid for re-election. The plaintiffs had supported Daddona originally, but after a falling-out in the mid-70’s, they switched their allegiance to Daddona’s opposition in both the Democratic primaries and in the general election. The plaintiffs openly campaigned for Daddona’s political opponent in the 1981 general election which Daddona won.

After Daddona was elected, he immediately appointed Carson Gable as Chief of Police. Mr. Gable had served in this position from 1970 until 1977 when he retired at the same time Daddona left office. During his 1981 campaign, Daddona had expressed concern over poor morale and inefficiency in the police department. He felt that a “clique” of officers was undermining pride in the department. MacLean and Bennis were said to be part of this clique. After the election, Gable recommended that several officers be demoted and that several others be promoted as part of the solution to this problem. Daddona approved four of the demotions, two of whom are plaintiffs in this action.

The defendants have based their motion for summary judgment on several grounds. These include: (1) that the plaintiffs have not alleged a liberty or property interest sufficient to trigger the due process protections of the fourteenth amendment; (2) that the plaintiffs have failed to allege a cause of action under the first amendment; (3) that the plaintiffs have failed to allege sufficient grounds for their attack on defendant Gable’s appointment as Chief of Police, and, in addition, lack of standing to assert such a claim; (4) that defendant Daddona acted in good faith relative to the instant demotions and that such good faith requires dismissal of the claim; and (5) that the plaintiffs should have exhausted administrative remedies prior to filing a civil rights action. Each charge will be addressed in turn.

THE DUE PROCESS CLAIM

Plaintiffs assert that the demotions constituted a taking of property in violation of the fourteenth amendment. The fourteenth amendment prohibits state deprivations of life, liberty, or property without due process of law. In order to invoke thé protections of the fourteenth amendment, it must first be decided whether the asserted individual interests are encompassed within “life, liberty or pursuit of happiness.” Robb v. City of Philadelphia, 733 F.2d 286, 292 (3d Cir.1984). Property interests are not created by the Constitution per se, but rather “are created and their dimensions are defined by existing rules or understandings that stem from an independent source such as state law.” Board of Regents v. Roth, 408 U.S. 564, 577, 92 S.Ct. 2701, 2709, 33 L.Ed.2d 548 (1972). The sufficiency of the claim of entitlement must therefore be decided by reference to state law. Bishop v. Wood, 426 U.S. 341, 96 S.Ct. 2074, 48 L.Ed.2d 684 (1976).

It is undisputed that the City of Allentown has, since 1967, operated under the Optional Third Class City Charter Law. 53 Pa.Cons.Stat.Ann. § 41101 et seq. (Purdons Supp.1984). Prior to this time, the City operated under the Third Class City Code. (Pa.Cons.Stat.Ann. § 35101 et seq. (Purdons Supp.1984). The Optional Third Class City Charter provides for a Mayor-Council form of government, and places executive power in the hands of the mayor. The Third Class City Code and the Charter are meant to coexist and supplement each other, with the Charter superseding the Code only in so far as they are inconsistent. 53 Pa.Cons.Stat.Ann. § 41411 (Purdons Supp. 1984). Because the Optional Third Class City Charter is silent as to promotions and demotions of police officers, the Third Class City Code provisions pertaining to such matters govern such issues.

The defendants base their argument that no property right exists under state law in the rank of detective on the Third Class City Code, 53 Pa.Cons.Stat.Ann. § 37002 (Purdons Supp.1984) which reads:

The mayor shall designate, from the force, the chief and other officers who shall serve as such officers until their successors are appointed and qualified. The chief of police shall be designated by the mayor and may be demoted without cause in the same manner, but not to any rank lower than the rank which he held at the time of his designation as chief of police.

This statute has been interpreted as conferring upon the Mayor the right to promote and demote. Petrillo v. City of Farrell, 345 Pa. 518, 29 A.2d 84 (1942). In Petrillo, a police captain was demoted to the rank of patrolman without a hearing. In interpreting the Third Class City Code, the court held that the appointing authority had the power to demote police chiefs and officers to a lower rank provided that the person so demoted was kept on as a member of the force. In reaching this conclusion, the court recognized that the Civil Service provisions of the Third Class City Code gave the plaintiff a protected status as a patrolman, but created no right in any rank above that position. This protected status was conferred by 53 Pa.Cons.Stat. Ann. § 37001 which provides that “no member of the city police force having been promoted in conformity with the civil service provisions of this act shall be demoted in rank ... except upon proper cause shown as set forth under the civil service provisions of this Act.” Since Petrillo took a civil service examination only to acquire his position as a patrolman, and no other civil service provision governed appointment to higher ranks, he could be demoted without a hearing as long as he retained his status as a patrolman.

The Petrillo decision was followed by Sweeny v. Johns, 33 Pa.Commn. 209, 380 A.2d 504 (1977). The plaintiff was a patrolman who was reduced in rank for purely discretionary reasons. The court interpreted the statute as extending to the may- or the sole power to designate the chief of police and other officers, and to demote the chief and other officers without cause, and without a hearing or other civil service protection.

Plaintiffs argue that 53 Pa.Cons.Stat. Ann. § 37002 by its terms gives the mayor the right to demote only the chief of police. Because the statute is silent as to the may- or's power to demote other officers, the plaintiffs argue that police officers cannot be dismissed without cause. This argument is not persuasive in light of the case law and a reading of the statute itself. If the mayor can demote the chief of police without cause, it clearly follows that he can demote other police officers of lower rank without cause so long as their protected status as patrolmen under the civil service provisions is respected.

Under the appropriate statutory provisions, therefore, plaintiffs do not have a property right in the rank of detective, but only in that of patrolman. Thus they have no due process property interest in the rank of detective, and no right to a hearing. The demotions were therefore permissible.

Next plaintiffs argue that they had an entitlement to the rank of detective because it was a benefit conferred by a state agency and that due process protections were therefore necessary before demotion from that rank. A person’s interest in a public benefit is a property interest for due process purposes if there are rules or mutually explicit understandings that support his claim of entitlement to the benefit and give him the right to invoke a hearing. Board of Regents v. Roth, 408 U.S. 564, 577, 92 S.Ct. 2701, 2709, 33 L.Ed.2d 548 (1972). Plaintiffs allege that the entitlement was created in one of two ways: either through the existence of a “Just Cause” provision applicable to the employment relationship; or through an implied procedure governing promotions and demotions that existed in the Allentown Police Department, which conferred an entitlement to rank. They further assert that the attack upon their reputation and integrity entitles them to the protections of the due process clause. I will address these assertions seriatim.

The plaintiffs first assert that a property right protectable under the due process clause exists when an employee’s position is protected by a “Just Cause” provision in his or her employment relationship. They rely on 53 Pa.Cons.Stat.Ann. § 37001, which provides that no member of the city police force who is promoted in conformity with the civil service provisions of the Act can be demoted except upon proper cause shown as set forth under the Civil Service Act. In Abraham v. Pekarski, 537 F.Supp. 858 (E.D.Pa.1982), Judge Becker concluded that an employee who cannot be dismissed except upon a showing of just cause has a property right based upon Local Agency Law, 2 Pa.Cons.Stat.Ann. §§ 501-508 (Purdons Supp.1984). Plaintiffs argue that this decision taken in conjunction with § 37001 creates a sufficient entitlement in the rank of detective so as to afford them due process protection.

This argument is without merit. Promotions to the rank of detective are not made in conformance with the civil service provisions of the Third Class City Code. Since promotions are not made through civil service procedures, demotions do not have to be made in conformance with the Civil Service Act. Abraham does not control as the court in that case was construing a Township Ordinance which contained a “just cause” provision governing all township employees. In the present case, there is no such explicit ordinance and the Third Class City Code allows the mayor to demote the chief of police and other officers without cause. Petrillo. Furthermore, the local agency law, upon which the property right in Abraham rested, is superseded by the Third Class City Code in matters concerning personnel and administrative policies. Greenberg v. Bradford, 432 Pa. 611, 614, 248 A.2d 51 (1968).

Plaintiffs also assert that an implied procedure governing promotions and demotions in the Allentown Police Department existed at the time of their dismissal, conferring upon them an entitlement to their rank as detective. They cite Perry v. Sindermann, 408 U.S. 593, 92 S.Ct. 2694, 33 L.Ed.2d 570 (1972), for the proposition that a procedure which has been followed over a period of time may have “created ... a system in practice.” 408 U.S. at 602, 92 S.Ct. at 2700. Thus, a plaintiff might be able to show from the circumstances of his or her employment that there may be an “unwritten common law” in a particular agency. Id.

Plaintiffs contend that such a procedure applicable to promotions does exist in the Allentown Police Department. This procedure included notice of the availability of a position, the right of all employees to apply for that position by submitting resumes, and the administration of a series of oral tests and interviews. The plaintiffs argue that if such a right to be heard exists relative to promotions, then a right to be heard must exist relative to demotions. They conclude that this established procedure created a “common law” within the department which they came to rely on, conferring on them an entitlement to the position of detective and the right to a hearing prior to any demotion from that position. Plaintiffs also point to the regulations promulgated by defendant Gable which took effect on July 21, 1982, as evidence that the putative former procedure existed. They claim that the new guidelines essentially codified prior practice and explicitly provided for hearings in the case of demotions.

I cannot accept plaintiffs’ theory for several reasons. First, the procedure referred to in Perry that created a “common law” entitling the plaintiff therein to public employment consisted of a series of written guidelines promulgated by the state and contained in a set of printed handbooks. While the Perry opinion does not limit the creation of an entitlement through an implied procedure to a situation involving printed guidelines, I conclude that Perry should not be extended to situations like the one presented here where the implied procedure consisted of an informal loosely structured system governing only promotions. The plaintiffs have failed to demonstrate that any implied procedure relative to demotions exists.

Plaintiffs also argue that certain provisions of the governing labor contract provide an express written entitlement beyond the implied common law procedure. They assert that the inclusion of a grievance procedure in the contract implies that conflicts will be resolved through arbitration and that dismissals and demotions will be evaluated based upon considerations of “just cause.” They allege that if the grievance arbitration provisions are to have any meaning, demotions may only be made for just cause. This, they allege, is the equivalent of a formal understanding which creates a claim of entitlement.

I cannot accept this argument. Nowhere in the contract is it specifically stated that issues involving demotions are subject to the grievance and arbitration machinery. Only disputes “arising under this contract” or “involving the interpretation or application of this agreement” are subject to arbitration. Demotions of police officers are not governed by the labor contract but by statute, and are therefore not subject to the grievance machinery of the contract. Thus, no express written entitlement has been created through the inclusion of grievance and arbitration provisions in the collective bargaining agreement.

To accept plaintiffs’ line of reasoning would mean that by entering into a collective bargaining agreement containing a grievance-arbitration provision, a local government entity would effectively repeal that aspect of the Third Class City Code vesting the mayor with the authority to promote or demote police officers. I find that this result flies in the face of logic and would result in localities being able to repeal acts of the Pennsylvania legislature at their whim. I refuse to accept this result.

Plaintiffs’ final argument — that “attacks” on their reputation and integrity entitle them to the protection of the due process clause — must also be rejected. They assert that public announcements that they “deserved” demotion because of their participation in a “clique” that was undermining morale and efficiency in the department put the “good name, reputation, honor and integrity” of each of them in jeopardy, and entitled them to a hearing on the allegations. See Board of Regents v. Roth, 408 U.S. 564, 573, 92 S.Ct. 2701, 2707, 33 L.Ed.2d 548 (1972). Plaintiffs have thus attempted to implicate the liberty interest protected by the fourteenth amendment. If they are correct and liberty interests protected by the fourteenth amendment are implicated, “the right to some kind of prior hearing is paramount.” Id. at 569-570, 92 S.Ct. at 2705.

The Supreme Court has often emphasized that the concept of liberty for due process purposes should be given a broad interpretation. Roth at 570, 92 S.Ct. at 2705; See also Bolling v. Sharpe, 347 U.S. 497, 499-500, 74 S.Ct. 693, 694-695, 98 L.Ed. 884 (1954); Stanley v. Illinois, 405 U.S. 645, 92 S.Ct. 1208, 31 L.Ed.2d 551 (1972). In Roth, however, the Court refused to find that the state’s failure to rehire the plaintiff implicated his liberty interests. Id. 408 U.S. at 573, 92 S.Ct. at 2707. The Court recognized that liberty interests might be implicated in some termination cases, but found that the state’s failure to rehire the plaintiff, a professor of political science at a state university, did not involve charges that might “seriously damage his standing and association in the community” nor impose on him a “stigma or other disability that foreclosed his freedom to take advantage of other employment opportunities.” Id. “Stigma to reputation alone, absent some accompanying deprivation of present or future employment is not a liberty interest protected by the Fourteenth Amendment.” Robb v. City of Philadelphia, 733 F.2d 286, 294 (3d Cir.1984) citing Roth, 408 U.S. at 574, 92 S.Ct. at 2707.

Plaintiffs’ attempt to implicate the liberty interest protected by the due process clause must fail because they cannot demonstrate that they have been deprived of present or future employment or that the charges leveled against them have seriously damaged their standing in the community. Plaintiffs were demoted, not fired, and are not foreclosed from taking advantage of other employment opportunities. Allegations that they were demoted for being part of a “clique” that undermined morale and efficiency are not equivalent to a charge of “dishonesty or immorality” that would justify the right to a hearing. Roth, 408 U.S. at 574, 92 S.Ct. at 2707.

I therefore find that no liberty interest was implicated by the demotions of the plaintiffs under the fourteenth amendment and they are not entitled to a hearing on this ground.

To summarize, plaintiffs have failed to establish that a genuine issue of material fact exists with regard to their due process claims. Since they have failed to demonstrate that they had a protectable property or liberty interest in the rank of detective under the fourteenth amendment, they had no right to a pre-demotion hearing. I therefore grant defendants’ motion for summary judgment on this issue.

FIRST AMENDMENT CLAIM

Plaintiffs assert that they were demoted for political reasons in violation of the first amendment rights. It is well settled that a state may not condition “hiring or discharge of an employee in a way which infringes on his right of political association.” Keyishian v. Board of Regents, 385 U.S. 589, 87 S.Ct. 675, 17 L.Ed.2d 629 (1967); Elrod v. Burns, 427 U.S. 347, 96 S.Ct. 2673, 49 L.Ed.2d 547 (1976). Defendants, however, argue that there is no authority holding that a demotion for political reasons, unlike a dismissal, rises to the level of a first amendment violation. Secondly, defendants assert that they have articulated legitimate reasons for the demotion of each plaintiff thereby justifying the demotions under the applicable standard.

For the reasons which follow, I will reject defendants’ first argument as a matter of law. I also find that a genuine issue of material fact exists as to whether plaintiffs were demoted for political reasons. Defendants’ motion is therefore denied.

The defendants argue that violations of the first amendment violations should be found only in situations in which a party has been discharged because of his or her political belief or association. Such a narrow interpretation of first amendment protection is not acceptable. “Political belief and association constitute the core of the activities protected by the First Amendment.” Elrod v. Burns, 427 U.S. 347, 356, 96 S.Ct. 2673, 2681, 49 L.Ed.2d 547 (1976). As Justice Brennan emphasized in Elrod, “[R]egardless of the nature of the inducement, whether it be by denial of public employment or, as in Board of Education v. Barnette, 319 U.S. 624, 63 S.Ct. 1178, 87 L.Ed. 1628 (1943), by the influence of a teacher over students ...” these beliefs should be protected. Id. 427 U.S. at 356, 96 S.Ct. at 2681. The Elrod opinion also discusses the impact of patronage dismissals on first amendment rights noting that these had the effect of imposing an “unconstitutional condition on the receipt of a public benefit” thereby implicating the rule of cases like Perry v. Sindermann, Id. at 358-59, 96 S.Ct. at 2682-83.

In Perry, the Supreme Court emphasized that even though a person had no right to a valuable governmental benefit, the government could not deny a benefit to a person because of his constitutionally protected interests, especially his interest in freedom of speech. Perry, 408 U.S. at 593, 92 S.Ct. at 2695. The Court explained its position as follows:

For if the government could deny a benefit to a person because of his constitutionally protected speech or associations, his exercise of those freedoms would in effect be penalized and inhibited. This would allow the government to “produce a result which [it] could not produce directly.” Speiser v. Randall, 357 U.S. 513, 526 [78 S.Ct. 1332, 1342, 2 L.Ed.2d 1460], Such interference with constitutional rights is impermissible. Id. at 597, 92 S.Ct. at 2697.

It is clear from a reading of these cases that the rationale underlying the rule forbidding dismissal of a non-policymaking public employee on patronage grounds extends to the situation where such an employee is demoted for his political belief and association. Such an action constitutes denial of a benefit because of the exercise of a person’s constitutionally protected rights. The plaintiffs’ demotions to patrolmen, with loss of rank, a reduction in salary, and loss of prestige and responsibility certainly constitutes loss of a benefit. Furthermore, the Third Circuit recently sanctioned such an interpretation of the first amendment in holding that an employer’s action in transferring and refusing a promotion to an employee was sufficient to trigger a first amendment claim. Robb v. City of Philadelphia, 733 F.2d 286, 295 (3d Cir.1984). Plaintiffs are not, therefore, precluded as a matter of law from asserting a first amendment violation because they were only demoted and not dismissed.

Plaintiffs must still demonstrate, however, that a genuine issue of material fact exists with regard to this issue to survive the motion for summary judgment.

A plaintiff alleging a denial of a benefit in violation of his or her first amendment rights must first demonstrate that he or she engaged in protected activity. It is not necessary for the plaintiff to demonstrate that his political affiliation was the sole reason for his discharge, but rather that the protected conduct was a “substantial or motivating factor” in the decision to deny the benefit. Mount Healthy Board of Education v. Doyle, 429 U.S. 274, 287, 97 S.Ct. 568, 576, 50 L.Ed.2d 471 (1977). Once a plaintiff meets this initial burden the burden then shifts to the defendant to prove by a preponderance of the evidence that the decision would have been the same in the absence of the protected right. Id. at 284, 97 S.Ct. at 574.

Plaintiffs contend that they were demoted for political reasons. They have submitted various affidavits supporting their contention. In their affidavits, plaintiffs cite specific incidents and statements to support their position. Included in these affidavits are their version of conversations each had with defendant Gable after learning of their dismissals; statements made by other individuals involved with, or with knowledge of the realignment in the police department, and information in support of their position that the promotions made during the realignment were also politically motivated.

Defendants contend that the demotions of Bennis and MacLean were made to break up a “clique” that was adversely affecting morale and efficiency in the police department. They rely for support on the depositions of defendants Gable and Daddona, who both deny that the demotions were politically motivated. In his deposition, Daddona alleges that the “clique” was involved in such undesirable activities as “beating up on others,” “spying on other police officers,” and “doing things that other police officers either can’t do or shouldn’t do.” Deposition of J. Dad-dona at 20-24. Daddona was unable to recall any specific incidents in support of his allegations. Gable alleges that they were involved in “intimidating other officers," “spying on other policemen,” and that they had “free reign to do pretty much what they pleased.” Deposition of C. Gable at 26, 50-51. Gable was also unable to link the plaintiffs with specific incidences of misconduct.

I find that a genuine issue of material fact exists with regard to the specifics of plaintiffs’ claim. On a motion for summary judgment, the facts should be interpreted in a light most favorable to the non-moving party. Defendants have not, by their presentation, dispelled the possibility that the demotions were politically motivated. Plaintiffs and defendants have presented two equally plausible accounts of the causes of the demotions and the issue should therefore be submitted to a jury for resolution.

IMMUNITY

I have concluded that plaintiffs have stated a valid claim under the first amendment and that genuine issues of material fact exist with regard to that claim. Defendants, however, argue that the defense of good faith immunity should absolve them of any liability if plaintiffs’ claims were found to have merit. They assert that under Harlow v. Fitzgerald, 457 U.S. 800, 102 S.Ct. 2727, 73 L.Ed.2d 396 (1982), officials are shielded from liability for civil damages insofar as their conduct “does not violate clearly established statutory or constitutional rights of which a reasonable person might know.” Id. at 818, 102 S.Ct. at 2738. Thus, even defendants who violate the constitutional rights of others enjoy a qualified immunity that protects them from liability for damages unless it is found that their conduct was unreasonable under the applicable standard. Davis v. Scherer, — U.S. -, 104 S.Ct. 3012, 82 L.Ed.2d 139 (1984). Defendants rely on Harlow and Davis to argue that the applicable law was either unclear or in their favor at the time of the demotions. They claim the law was unclear because of Connick v. Myers, 461 U.S. 138, 103 S.Ct. 1684, 75 L.Ed.2d 708 (1983), which they read as giving the defendants the authority to move promptly to deal with employees who are disruptive. They argue that Connick gives them great discretion in dealing with employees, and because they had legitimate business reasons for taking the actions they did, they should be immune from damages.

I must reject this argument for several reasons. In no way can it be said that the Connick opinion compromises the constitutional protection afforded freedom of speech and association. Indeed, the Court reasserted the primacy of such a policy and allowed dismissal of the disruptive employee because the controversy centered on activity pertaining solely to internal office policy. Furthermore, defendants cannot possibly assert that they were not aware of the protection afforded by the first amendment. Moreover, even if, as defendants claim, they believed that they had a right to dismiss plaintiffs for political reasons under Connick and 53 Pa.Cons. Stat.Ann. § 37002, the defense of good faith immunity would be available in this situation on a motion for summary judgment only when the record establishes that no material issue of fact exists as to whether a defendant acted in good faith. Detz v. Hoover, 539 F.Supp. 532, 534 (E.D.Pa.1982). I believe that plaintiffs’ assertions of malice on Daddona’s part raise such genuine issues of fact.

EXHAUSTION

Defendants also assert that plaintiffs in civil rights actions must exhaust administrative remedies before pursuing their claim in federal court. It has been held that the availability of state remedies will defeat a civil rights claim, but this has been limited to actions based solely upon procedural due process claims where there is no allegation of any other constitutional violation. See, e.g., Parratt v. Taylor, 451 U.S. 527, 101 S.Ct. 1908, 68 L.Ed.2d 420 (1981); Cohen v. City of Philadelphia, 736 F.2d 81 (3d Cir.1984), cert. denied, — U.S. -, 105 S.Ct. 434, 83 L.Ed.2d 360 (1984). Once another constitutional right is implicated, as first amendment rights are in this case, a plaintiff may bring a civil rights action in federal court.

APPOINTMENT OF DEFENDANT GABLE AS CHIEF OF POLICE

Plaintiffs charge that defendant Gable was illegally appointed Chief of Police because he was not chosen from the force as required by the Third Class City Code. 53 Pa.Cons.Stat.Ann. § 37002. The defendants claim that the plaintiffs do not have standing to raise the issue, and, even if they did, Gable was merely an inactive member of the force while on retirement and was simply restored to his previous position. I conclude, for the reasons which follow, that plaintiffs do not have standing to attack the appointment of Gable as Chief of Police and that the claim must be dismissed as a matter of law.

In William Penn Parking Garage, Inc. v. City of Pittsburgh, 464 Pa. 168, 346 A.2d 269 (1975), the Supreme Court of Pennsylvania discussed in detail the requirements that must be met by an individual in order to have standing to sue a state actor or agency. A person seeking to challenge governmental action must first show that he or she has a direct and substantial interest in the action. Id. 346 A.2d at 282. In this context, substantial simply means that there must be some “discernible adverse effect to some interest other than the abstract interest of all citizens in having others comply with the law.” Id. In this context, direct means that the person must show that harm resulted from the matter of which he or she complains. Id. In addition to these requirements, the person must also demonstrate that a sufficient causal connection exists between the challenged action and the asserted injury. Id. at 283. This requirement is satisfied if it can be shown that the challenged action is the immediate rather than the remote cause of the injury. Id.

Plaintiffs argue that although the actual demotions were made by Mayor Daddona, they were injured in fact by Gable’s appointment because he was involved in the decision to demote them. In applying the William Penn standards to their claim, it must first be determined if the injury is substantial. This requirement is satisfied in that the injury complained of involves an interest other than the “abstract interest of all citizens in having others comply with the law.” Plaintiffs fail, however, to satisfy the requirement that the injury be direct, since it cannot be said that their demotions resulted from the appointment of Gable. The mayor has sole authority to demote police officers. Gable may have recommended their demotions, but it was the mayor and not Gable who made the changes. Plaintiffs have also failed to satisfy the requirement that the action complained of be an immediate rather than a remote cause of the injury. The appointment of Gable was not the immediate cause of the action taken against the plaintiffs. If plaintiffs were demoted for their political beliefs as they claim, Mayor Daddona would have taken this action regardless of whom he appointed as Chief of Police. The causation requirement is simply not satisfied because the injury in fact flows from the mayor and. not Gable. Moreover, if Gable were involved in that decision at all, the decision is not one in the same event as Gable’s appointment by Dad-dona, rather it is a separate act.

The plaintiffs have therefore failed to satisfy the prerequisites necessary to establish standing to challenge the appointment of defendant Gable as chief of police. Because they do not have standing, the rest of their argument need not be addressed.

An appropriate order follows.

ORDER

NOW, December 10,1984, upon consideration of defendants’ motion to dismiss or for summary judgment, the memoranda of law submitted by the parties and for the reasons stated in the accompanying memorandum, IT IS ORDERED that:

1. Defendants’ motion for summary judgment as to the fourteenth amendment claim is GRANTED.

2. Defendants’ motion to dismiss or for summary judgment as to the first amendment claim is DENIED.

3. Defendants’ motion to dismiss or for summary judgment as to plaintiffs’ challenge to the appointment of defendant Gable as Chief of Police is GRANTED.

      . A similar lawsuit was filed by the other two officers demoted by Mayor Daddona. The suit, Sames v. Gable, 542 F.Supp. 51 (E.D.Pa.1982), cert. denied, — U.S. -, 104 S.Ct. 241, 78 L.Ed.2d 231 (1983) was dismissed by Judge Troutman. The Third Circuit reversed and remanded, and a subsequent request for a rehearing was denied. No decision has been made on the merits of that case.

      . Petrillo was decided under Section 2002 of the Code, Act of June 23, 1931, which was amended in 1976 and became § 37002. The earlier statute simply gave the appointing power the right to promote and was silent as to demotions.

      . Sweeny was decided after the 1976 amendments to the Third Class City Code, see supra, note 2.

      . In Greenberg, the Pennsylvania Supreme Court recognized that local laws must give way to "powers granted by the acts of the General Assembly applicable in every part of the commonwealth or to all the cities of the Commonwealth." Id. 432 Pa. at 611, 248 A.2d at 54, citing Lennox v. Clark, 372 Pa. 355, 378, 93 A.2d 834, 845 (1953). It noted, however, that this limitation concerned only laws in relation to matters of statewide concern such as health, safety, and security and not to matters affecting merely the personnel and administration policies which are of no concern to citizens elsewhere in the state.

      . In support of their position, plaintiffs rely on defendants’ argument that the plaintiffs be required to exhaust available grievance and arbitration procedures before pursuing this claim in federal court. As I have concluded that defendants’ position is without support, I will not place weight on plaintiffs’ reliance upon it.

      . Defendants argue that the existing labor contract not only does not create any entitlements but specifically allowed demotions without cause. They rely on the Managements Rights Clause, which states that the city retains its right to "hire, promote, retain, transfer, and assign employees in positions, the right to suspend, discharge, demote or take other disciplinary action.” Plaintiffs counter that this language does not state that these actions can be taken without cause but simply allocates authority over these decisions between the city and the union. I agree with the plaintiffs’ interpretation. Nevertheless, I agree with defendants that demotions could be made without cause.

      . Defendants concede that plaintiffs are entitled to a name-clearing hearing if they feel their reputations were somehow tarnished, but note that plaintiffs have never asked for one.

      . It should be noted here that this conclusion does not conflict with my dismissal of the due process claims as a clear distinction exists between the entitlement to a benefit that gives rise to a property interest protected under the fourteenth amendment due process clause and a benefit that is protected under the first amendment. Perry v. Sindermann, 408 U.S. 593, 597, 92 S.Ct. 2694, 2697, 33 L.Ed.2d 570 (1972). A person cannot be denied a benefit on a basis that infringes on his or her constitutionally protected interest in freedom of speech, regardless of whether the person has a right to the benefit. Id.

      . Defendants also raised this defense with regard to the due process claims. Their position is more defensible in relation to that claim, but need not be addressed since I have already resolved the issue.

      . Plaintiffs rely on my opinion in Cerva v. Fulmer, 596 F.Supp. 86 (1984) for the proposition that adequate state remedies may satisfy the due process requirement and thereby foreclose a plaintiff from bringing an action in federal court only when the sole violation claimed is one of procedural due process. This is a correct interpretation. In Cerva, I held that no deprivation of a liberty interest under the fourteenth amendment had occurred without due process where adequate state post-deprivation remedies were available to compensate a plaintiff who alleged that excessive force was used by police officers in arresting him. The conduct complained of in Cerva could be adequately remedied under state tort law by the filing of an assault and battery charge for damages. I found that the state remedies were adequate to compensate the plaintiff for his loss. Clearly, my holding in Cerva does not apply to the instant case which involves a first amendment claim as well as a due process claim. Plaintiffs do not have adequate remedies under state law once other substantive rights are implicated.

      . This points out the inconsistency in defendants’ argument as a whole, since they claim on the one hand that the collective bargaining agreement applies to this situation and that plaintiffs must exhaust its provisions, while on the other hand they argue that plaintiffs are not protected by the agreement and can be dismissed without cause and without due process protections. Such a contradictory position must be rejected. If plaintiffs may be demoted for any reason, the right to file a grievance or demand arbitration becomes a meaningless exercise.


source: Caselaw Access Project

author: HAROLD H. GREENE, District Judge.

license: Public Domain

text:
    UNITED STATES of America, Plaintiff, v. WESTERN ELECTRIC COMPANY, INC., and American Telephone and Telegraph Company, Defendants.
    Civ. A. No. 82-0192.
    United States District Court, District of Columbia.
    Dec. 14, 1984.

      Jeffrey Blumenfeld, Kevin R. Sullivan, Michael F. Altschul, Luin P. Fitch, J. Philip Sauntry, Jr., Antitrust Division, U.S. Dept, of Justice, Washington, D.C., for U.S. Dept, of Justice.
    Richard C. Schramm, Vice President and Associate Gen. Counsel, Bell Atlantic, Arlington, Va., John M. Goodman, Joseph E. Murphy, Michael J. Shortley, III, Washington, D.C., for Bell Atlantic.
    Kenneth E. Millard, Ameritech, Jeffrey J. Kennedy, William F. Dolan, Kirkland & Ellis, Chicago, Ill., Allan J. Arlow, Sehaunburg, Ill., for Ameritech Mobile Communications, Inc.
    Robert V.R. Dalenberg, Robert M. Ralls, Lucille M. Mates, Marion J. Stanton, San Francisco, Cal., Stanley J. Moore, Washington, D.C., Mary B. Cranston, Pillsbury, Madison & Sutro, San Francisco, Cal., for Pacific Telesis and Pacific and Nevada Bell.
    Raymond F. Burke, Gerald M. Oscar, Sandra Dilorio Thorn, White Plains, N.Y., for NYNEX.
    Robert B. McKenna, Jr., Leon T. Knauer, Wilkinson, Barker, Knauer & Quinn, Washington, D.C., for U S West.
    Joseph C. O’Neil, Dwight M. Whitley, Jr., Bellevue, Wash., for New Vector.
    J. Richard Teel, Gen. Counsel, Bell South Advanced Systems, Inc., Birmingham, Ala., Daniel J. Thompson, Jr., Gen. Atty., Bell South Corp., Atlanta, Ga., for Bell South.
   MEMORANDUM

HAROLD H. GREENE, District Judge.

This Memorandum and the accompanying orders dispose of all thirteen pending petitions for waivers of the “line of business” restrictions of the decree.

The decree in this case restricts the Regional Holding Companies primarily to the provision of local telephone service, by providing in section 11(D):

After completion of the reorganization ..., no [Operating Company] shall, directly or through any affiliated enterprise:
1. provide interexchange telecommunications services or information services;
2. manufacture or provide telecommunications products or customer premises equipment (except for provision of customer premises equipment for emergency services); or
3. provide any other product or service, except exchange telecommunications and exchange access service, that is not a natural monopoly service actually regulated by tariff (emphasis added).

These line of business restrictions were part of the decree when it was submitted by the Department of Justice and AT & T to this Court for its approval. As the parties’ submissions show, and as the Court subsequently stated, the restrictions were required in order to prevent the occurrence or recurrence of anticompetitive conduct, on the theory, proved by experience, that if a company maintains a bottleneck monopoly on an essential gateway (i.e., here the local telephone monopoly), it has the means to discriminate in various ways against, and hence to disadvantage, those in competitive markets which also depend on that gateway.

At the demand of the Court, the parties added to the proposed decree a provision (section VIII(C)) which stipulates that “the [line of business] restrictions ... shall be removed upon a showing by the petitioning [Operating Company] that there is no substantial possibility that it could use its monopoly power to impede competition in the market it seeks to enter.” The Court has since stated that, in determining whether a particular line of business restraint must be maintained, it will consider the likelihood that a Regional Holding Company could use its monopoly power to impede competition in the market it seeks to enter, as well as other public interest factors underlying the decree, including the necessity of implementing equal access and the maintenance of quality telephone service.

Against these factors which support tight restrictions on the Regional Holding Companies, the Court has also always been mindful of the need to maintain the viability of the providers of local telephone service and the contribution the Regional Holding Companies could make to competition in markets they might enter. It is with these principles in mind that the waiver petitions have been considered.

I

Following divestiture, some of the Regional Holding Companies began to file requests for waiver of the line of business restrictions as they sought to enter a wide variety of markets, ranging all the way from computer sales to foreign operations and to real estate investment. In order to promote certainty and uniformity, to reduce repeated and intrusive judicial involvement, and to facilitate the efficient processing of waiver requests, the Court, on July 26, 1984, established general guidelines it expected to follow in reviewing such requests. The Court stated at that time that four safeguards would generally be necessary to ensure that the decree’s policies were not violated: (1) the establishment of separate subsidiaries to carry out the new line of business; (2) independent financing by the subsidiary without recourse to the parent; (3) agreements that the monitoring and visitorial provisions of Section VI of the decree will apply to the proposed competitive activities; and (4) a limit on the line of business investment not to exceed ten percent of a Regional Holding Company’s estimated net revenues.

The procedure established for consideration of the requests consisted of a review by the Department of Justice, followed by a report by the Department to the Court and an opportunity for interested parties to object or otherwise to comment. This process was designed to provide to the Court the benefit of the Department of Justice’s expertise; to minimize direct Court involvement, particularly with respect to noncontroversial requests; and to give the Department and the Regional Holding Companies an opportunity to negotiate for appropriate conditions and safeguards in advance of submission to the Court.

As indicated, presently pending before the Court are thirteen requests for waiver of the line of business restrictions. In its July 26, 1984 Opinion the Court stated that if the Department of Justice concluded that the particular Regional Holding Company had met its burden under that Opinion, and if the Department otherwise concurred in the proposed waiver, it was to submit to the Court a proposed consent order. That order would be entered as the order of the Court unless an interested party filed an objection within fourteen days or the Court sua sponte expressed reservations.

Six of the waiver requests forwarded to the Court have received no negative com-merits, and they are before the Court with the Department’s favorable recommendation. See Part II, infra. The remaining seven requests were likewise recommended for approval by the Department of Justice, but various interested parties have submitted substantive comments or objections. These seven requests are discussed and decided in Part III, infra.

II

Each of the uncontested waiver requests explicitly adopts the four safeguards set forth in the July 26, 1984 Opinion. In addition, the Regional Holding Companies and the Department of Justice have agreed on limitations of some of the requests and on additional conditions which are designed to ensure that the particular enterprises will not operate in an anticompetitive manner.

A. Equipment Leasing

Bell Atlantic seeks a waiver to permit it to enter the equipment leasing market. Specifically, the Company proposes to purchase, through- a subsidiary, the assets of Tri-Continental Leasing Corporation (Tricon), an existing equipment leasing company, which would provide third-party financing by purchasing equipment at the request of a customer and leasing it to that customer. The enterprise would lease customer premises equipment (CPE) for which no waiver is required, but it would also lease other equipment — such as word processing, data processing, and photocopying equipment — for which a waiver is necessary.

In addition to the four safeguards set out in the July 26, 1984 Opinion, Bell Atlantic has agreed to three conditions proposed by the Department of Justice, as follows: (1) in support of the Court’s independent financing requirement, Tricon will not finance the equipment or the activities of any Bell Atlantic Operating Company; (2) to prevent Bell Atlantic from becoming involved in the provision of information or interexchange services, Bell Atlantic personnel will not operate or maintain leased equipment; and (3) to avoid disadvantaging its interexchange competitors, Bell Atlantic will not lease equipment or facilities used in the provision of interexchange services.

The Court holds that Bell Atlantic’s request for a waiver contains adequate safeguards to ensure that it will not use its monopoly position in local telephone service to obstruct competition in other markets or otherwise to deviate from compliance with the decree. Indeed, Bell Atlantic’s ability to finance its CPE offerings through the new enterprise will enhance its competitive position in the CPE market, and the lease of other equipment will not damage the competitive market for equipment financing. The Court will therefore grant the Bell Atlantic request.

B. Foreign Business Enterprises

Five of the pending waiver requests seek permission to enter into various foreign business ventures in the main related to telecommunications.

One of Ameritech’s two foreign business requests would permit that company to furnish consulting services to foreign governments, companies, and other entities with respect to foreign operations on lines of business not foreclosed to Ameritech by the decree. The other Ameritech request would permit that company to provide cellular services and invest in cellular systems outside the United States.

Pacific Telesis, NYNEX, and U S West have filed broader requests, seeking waivers to permit them to engage in the following activities in foreign countries: consulting services; training, production, and distribution of printed materials; engineering, design, construction, and product management; sale of telecommunications, computer, and electronic products; data processing services; sale or licensing of software; and the provision of other telecommunications and information services within foreign nations.

All of these requests include specific commitments to the four safeguards described in the July 26, 1984 Opinion, and the Regional Holding Companies have also agreed to additional conditions, proposed by the Department of Justice, which are designed to ensure that the proposed foreign activities will not impinge upon the domestic market. Thus, the proposed orders limit the activities to products or services which will be sold outside of the United States; they do not permit the foreign enterprises to engage in telecommunications and information services activities within North America; they prohibit the manufacture of telecommunications equipment and the provision of telecommunications services between nations; and they limit the ability of the Regional Holding Companies to offer software to their foreign business ventures on terms more favorable than those offered to non-affiliated entities.

These requests for waivers meet the standards of the decree. All the activities will solely affect foreign markets, and they will have no negative impact on domestic competitors of the Regional Holding Companies which are entitled to be shielded from competition having its basis in a monopoly enterprise. At the same time, the proposed activities will benefit the foreign trade of the United States and contribute to a more favorable balance of payments. The public policy considerations underlying the decree therefore support the grant of waivers. Accordingly, all the requests will be granted.

Ill

A number of waiver requests which have received a favorable Department of Justice recommendation are opposed by other interested parties. It is appropriate at the outset of the discussion of the contested applications to trace the standards the Court has followed in passing upon such applications.

In accordance with its statement in the July 26, 1984 Opinion, the Court has considered all third-party comments in determining whether to approve or disapprove a request for a line of business waiver. Most of the comments were filed by potential competitors, that is, by participants in the market which the Regional Holding Companies seek to enter. Contrary to the suggestions of some of the Regional Holding Companies, such comments will not be discounted on that basis; to the contrary, they are useful to the Court in its consideration of the potential for anticompetitive conduct by the Regional Holding Companies. The Court notes, however, that the line of business restrictions are not intended as barriers to legitimate competition, and it will not permit the comment procedure itself to be used to that end.

In addition to its scrutiny of the comments filed by third parties, the Court has, of course, had the benefit of the views of the Department of Justice. The Court has treated the Department’s recommendations with some deference, and it has proceeded on the basis of the assumption that, unless there are substantial indications to the contrary, the Department has conducted an adequate review of the requests. Furthermore, to the extent that a Regional Holding Company has explicitly committed itself to abide by certain conditions, the Court has considered that the commitment was made in good faith. Breach of such commitments at a later date would, of course, become the subject of Court action, but vague speculation regarding potential breaches is not a sufficient basis for a denial of an otherwise meritorious waiver request.

The Court will now consider specific contested applications.

A. Real Estate Services

U S West and Pacific Telesis seek authorization to provide real estate services to the public. Both companies have agreed to the four conditions set forth in the July 26, 1984 Opinion, as well as to additional conditions, proposed by the Department of Justice, to prevent improper cross-subsidization or discrimination. In addition, to meet concerns that the real estate subsidiaries might engage in the interexchange telecommunications or the information business through shared tenant services arrangements, the companies have agreed that their real estate subsidiaries will not provide such services.

Homequity, Inc., a firm which provides employee relocation management services, opposes the grant of both waivers, on two principal grounds.

First. Homequity claims that the U S West Operating Companies will award employee relocation, property management, and building maintenance services on the basis of a competitive bidding process which can readily be abused to the advantage of Beta West, U S West’s subsidiary. However, the Court has concluded that there is no reason to believe that the conditions agreed to by U S West, particularly the separate subsidiary provisions, will not sufficiently protect Homequity and other entities in the real estate market from unfair bidding practices and unfair competition in general. The special conditions demanded by Homequity as an alternative to denials of the waiver requests are not necessary, and in addition they would embroil the Court unduly in the day-to-day operations of the Regional Holding Companies and their subsidiaries.

Second. Homequity argues that the link between the Regional Holding Companies and their real estate subsidiaries would give these subsidiaries unfair advantages because of “special access to information regarding new technological advances in the telecommunications field, as well as goods and services.” That argument proves too much. Telecommunications are significant in almost every market, and the advantage cited by Homequity could, if accepted as a basis for denial here, bar subsidiaries of the Regional Holding Companies from entering almost any line of business — an outcome inconsistent with the decree. In this case, where the new line of business is remote from the field of telecommunications proper, where it will be operated through separate subsidiaries, and where other safeguards required by this Court and the Department of Justice were accepted by the petitioning company, there is no basis for a denial of entry on these grounds.

The U S West and Pacific Telesis requests for authority to provide real estate services to the public meet the standards for waiver of the line of business restrictions, and they will be granted.

B. Offshore Cellular Radio Systems

U S West and its subsidiary NewVector Communications, Inc., seek a waiver which would permit the latter to proceed in a joint venture with Fluor Engineers, Inc., to construct and operate a cellular radio system covering primarily offshore areas in a portion of the Gulf of Mexico. The system would handle calls between offshore points, such as oil rigs and pleasure boats, as well as calls between offshore and onshore points which would be interconnected at Venice, Louisiana. Local traffic in the Venice area would be transmitted by way of the landline local network; traffic beyond that area would be transmitted by interexchange carriers. Because this venture would involve communications between two points outside a LATA or between a point within a LATA and another outside a LATA, it is not considered “exchange telecommunications and exchange access service,” and NewVector may participate in it only pursuant to a waiver.

NewVector has agreed to the four conditions established in this Court’s July 26, 1984 Opinion, and it has also agreed to the conditions proposed by the Department of Justice (1) that it will not provide service between LATAs or between a point in the Gulf of Mexico and any point on land other than the cell site in Venice, Louisiana, (2) that it will offer equal access to any interested interexchange carrier, and (3) that it will not engage in least cost carrier or route selection.

Petroleum Communications, Inc. (Petro Com), which has also filed an application with the Federal Communications Commission for the operation of an offshore cellular system in the Gulf of Mexico, objects to the U S West application on a number of grounds.

First. Petro Com claims that New-Vector is not “a satisfactory subsidiary” of U S West because it will conduct operations some of which require a waiver, some of which do not, and it therefore requests that a separate subsidiary be established for the activities for which the waiver is being sought. There is no warrant for such a requirement. NewVector will not combine activities in which it has monopoly power with competitive activities; all of its activities will be subject to competition. Thus, the concerns that led the Court to require the Regional Holding Companies to establish separate subsidiaries for their new lines of business do not apply. Accordingly, the Court will not require U S West to establish a separate subsidiary for the cellular system in the Gulf of Mexico.

Second. Petro Com claims that the financing of the cellular venture does not comply with the Court’s order; that New-Vector will engage in the resale of interexchange telecommunications services; and that the Department of Justice failed to give adequate consideration to various factors. None of these objections has merit. NewVector and U S West have agreed to comply with the Court’s financing conditions as well as with the Justice Department’s proposals designed to prevent the provision of interexchange telecommunications services. As the Court noted above, absent concrete factual evidence to the contrary, it will assume that agreements will be honored and the Court’s orders obeyed. Petro Corn’s claim that the Department of Justice failed to give adequate consideration to various factors is also without any basis. The Department’s submission indicates that it considered this proposal in May of 1984, and subsequently scrutinized it again for compliance with the terms of the July 26, 1984 Opinion. Nothing in Petro Corn’s submission raises issues or facts the Department overlooked, and the objection must therefore be rejected.

Finally, Offshore Telephone Company, a company which provides toll network service to subscribers in the Gulf of Mexico, has also filed comments objecting to the NewVector request. Offshore’s principal objection is that this waiver would permit competition in an area served by a small, existing telephone common carrier. That objection is not compelling. The Federal Communications Commission has authorized the establishment of two competing cellular systems in the Gulf of Mexico. There is no reason why NewVector should be prevented from being one of the cellular suppliers, particularly since the separate financing requirements will protect U S West from any associated risk.

The request of U S West and NewVector for a waiver will be granted.

C. Office Products

NYNEX, Pacific Telesis, and BellSouth seek waivers to enter the office products business — an enterprise that requires a waiver because it does not constitute the provision of customer premises equipment within the meaning of section VIII(A) of the decree. Additionally, Bell Atlantic has requested permission to enter the computer sales and services business through the acquisition of the Sorbus Service Division of Management Assistance, Inc.

All four companies have agreed to the conditions specified in the July 26, 1984 Opinion as well as to two additional conditions recommended by the Department of Justice to prevent cross-subsidization between the operating telephone companies and the office equipment business. These additional conditions restrict the subsidiaries from marketing the products of the office equipment business jointly with the products and services of an Operating Company, and they prohibit the office products business from procuring goods and services for resale through a procurement organization that also purchases goods and services for an Operating Company.

TRW, Inc. filed an objection to the requests insofar as they would permit the Regional Holding Companies to provide computer maintenance services, suggesting that such services are inextricably tied to the provision of exchange and exchange access services, and that, if the waivers were granted, there would be a danger that the Regional Holding Companies will abuse their bottleneck monopoly in various ways. According to TRW, the companies could favor their affiliated computer maintenance companies with respect to such essential services as exchange diagnostics, installation services, and access to technical information; they could cross-subsidize their computer maintenance businesses from revenues from their local monopolies; and they could obtain marketing advantages from the known link between them and their computer maintenance subsidiaries. Accordingly, TRW requests that the Court either deny the waiver requests altogether insofar as they relate to computer maintenance services or impose strict additional conditions.

Exclusion of the subsidiaries of these Regional Holding Companies from providing computer maintenance services would effectively bar them from computer sales as well, for it is unlikely that consumers would purchase complex, sophisticated equipment such as computers without associated maintenance plans, particularly when competitors do offer maintenance. So drastic a prohibition would obviously not be warranted unless there existed a substantial possibility of anticompetitive consequences.

In view of the conditions already imposed upon the waiver, the Court concludes that such consequences are unlikely. Any Operating Company incentive to discriminate in favor of a subsidiary affiliated with a Regional Holding Company is significantly attenuated by the separate subsidiary relationship and the separate financial structure. Furthermore, such discrimination would have to be relatively open if it were to have an impact upon customer preferences, and it would thus be readily apparent to competitors.

That is not to say that TRW’s concerns are without force or validity; they are not. However, after carefully analyzing the TRW arguments, the Court has ultimately come to the same result as the Department of Justice, that is, that sufficient safeguards exist in the waiver order, as modified by the various conditions, to prevent improper discrimination. Nevertheless, because the issue is a close one, and because some potential for anticompetitive activity by the Regional Holding Companies is present, the Court urges the Department of Justice to be particularly vigilant in the exercise of its monitoring and inspection authority with respect to these enterprises, and to take prompt action, by a report to the Court and otherwise, if violations are detected.

For the reasons stated, the Court will approve the NYNEX, Pacific Telesis, and BellSouth requests to provide office equipment and Bell Atlantic’s request to enter the computer sales and services business.

IV

In deciding line of business waiver requests, the Court must maintain a careful balance in two respects. Substantively, the Court must ensure, on the one hand, that the Regional Holding Companies — which are monopolies in their respective areas, having control of the local switching gateways through which many of their potential competitors must pass — are not given the opportunity to establish an anticompetitive position in a competitive market similar to that which the Bell System enjoyed prior to its break-up. On the other hand, however, the Court must take care not to prevent these companies from entering markets where such entry would not be inconsistent with the policies underlying the decree but might actually support such policies. Procedurally, the Court must maintain a similar balance: it has the obligation to permit all interested parties to submit their views, comments, and objections, especially those parties which might be injured by unfair competition from the monopolists; yet it must also take care not to become unduly and repeatedly involved in the details of many requests for waivers.

The solution the Court adopted to deal with these dilemmas was the establishment of general guidelines in the July 26, 1984 Opinion. These guidelines embody the various policy objectives of the decree, they are applicable to potential waiver requests generally, and they assign to the Department of Justice a significant role for the negotiation of specific conditions pertinent to specific situations.

The requests for waiver now before the Court and the process which brought them here have borne out the Court’s expectations when the July 26, 1984 procedure was announced. The orders submitted to the Court are the product both of third-party comments and of negotiations between the respective applicants and the Department of Justice; all of them conform to the guidelines previously announced by the Court; and all of them are here with favorable Department of Justice recommendations.

It appears therefore that the procedure, the guidelines, and the Department’s intensive participation have resulted in a system which appropriately takes account of the competing interests, promotes negotiation and flexibility as to the proper scope of any proposed enterprise, and permits the expeditious resolution of the issues.

On the merits of the various requests, it is clear that, but for the conditions to which the various petitioning Regional Holding Companies have agreed, the Court could not have permitted them consistently with its responsibilities under the decree, to enter the broad and varied lines of business to which they are now' committed, going far beyond those to which they were explicitly restricted as of January 1, 1983 by section 11(D) of the decree (see page 258, supra). The Court is confident, however, that these conditions will adequately protect the public from anticompetitive practices as well as from infringement of the other policies underlying the decree in this case.

Accordingly, for the reasons stated above, the Court is this day approving all of the requests for waivers submitted to it, in accordance with the consent orders agreed to by the parties.

      . The first eight of these requests became ripe for Court consideration (after interested parties had an opportunity for comment) on October 10, 1984; the most recent request (that of Bell Atlantic to enter the computer sales and service business) became ripe four days ago, on December 10, 1984.

      . United States v. Am. Tel. & Tel. Co., 552 F.Supp. 131 (D.D.C.1982), aff’d sub nom. Maryland v. United States, 460 U.S. 1001, 103 S.Ct. 1240, 75 L.Ed.2d 472 (1983).

      . While the decree refers specifically to the Bell Operating Companies, the restrictions apply equally to the Regional Holding Companies.

      . Under sections VIII(A) and (B), the companies may market customer premises equipment and they may publish the “Yellow Pages” directories.

      . Opinion of July 26, 1984, 592 F.Supp. 846, 851, 852-855; 552 F.Supp. at 186-95. See also United States v. Terminal R.R. Ass'n of St. Louis, 224 U.S. 383, 32 S.Ct. 507, 56 L.Ed. 810 (1912); Otter Tail Power Co. v. United States, 410 U.S. 366, 93 S.Ct. 1022, 25 L.Ed.2d 359 (1973); United States v. AT & T, 524 F.Supp. 1336, 1352-53 (D.D.C. 1981).

      . July 26, 1984 Opinion at 852-855; see 552 F.Supp. at 187.

      . The Tunney Act (15 U.S.C. § 16(e)) required the Court to determine whether entry of the decree in this case was "in the public interest.” In making this determination, the Court sought to achieve such objectives as the promotion of competition and the protection of universal telephone service. Opinion of July 26, 1984 at 16; see also United States v. Western Electric Co., 569 F.Supp. 1057, 1120 (D.D.C.), aff'd sub nom. California v. United States, - U.S. -, 104 S.Ct. 542, 78 L.Ed.2d 719 (1983).

      . July 26, 1984 Opinion at 860, 863.

      . 552 F.Supp. at 187-88. To the extent that the local Operating Companies are in a sound financial position, they should not be under pressure to raise local telephone rates, and low rates are, of course, a prime means for achieving the congressionally-mandated objective of universally-available, affordable telephone service.

      . Id. at 187 n. 230.

      . See July 26, 1984 Opinion, page 850, note 3, summarizing the initial waiver requests.

      . July 26, 1984 Opinion at 870-872. The ten percent limitation was designed, inter alia, to ensure that the Regional Holding Companies will not neglect their primary purpose: the maintenance of high-quality, low-cost telephone service.

      . Obviously, various business and other interests could substantially be affected by the Court’s action on the requests, and, in conformity with the Tunney Act’s broad mandate, the Court has concluded that the views of these interests are entitled to be considered.

      . Two additional requests (one by NYNEX, the other by Ameritech) were reviewed by the Department of Justice and transmitted to the Court with negative recommendations. Both requests have since been withdrawn from consideration, at least temporarily. The Court, accordingly, does not consider these two requests at this time.

      . These requests are:
      1. Bell Atlantic motion to enter the equipment leasing market;
      2. Bell Atlantic motion to enter computer sales and services business;
      3. NYNEX motion to enter foreign business ventures;
      4. NYNEX motion to provide office equipment and related services through retail stores;
      5. Bell South motion to provide office equipment;
      6. Pacific Telesis motion to establish a real estate subsidiary;
      7. Pacific Telesis motion to provide office equipment through retail stores;
      8. Ameritech motion to provide foreign consulting services;
      9. Ameritech motion to provide cellular services and invest in cellular systems outside the U.S.;
      10. Pacific and Nevada Bell motion to enter into foreign business ventures;
      11. US West motion to enter foreign business ventures;
      12. U S West/NewVector motion to construct and operate a cellular radio system in the Gulf of Mexico;
      13. U S West motion to provide real estate services and engage in real estate transactions and investments. ’

      . Three of the waiver requests were filed by U S West which, on September 24, 1984, filed a notice of appeal of the Court's July 26, 1984 Opinion. On October 30, 1984, this Court sua sponte raised the question of its continued jurisdiction in view of the appeal, and it requested the parties to brief this issue. All the parties agreed that the Court could properly retain jurisdiction to decide the requests despite the pend-ency of an appeal, either because the U S West appeal is premature and subject to dismissal or because the Court has equitable authority to administer the decree notwithstanding the appeal. The Court has concluded that it has jurisdiction to decide these requests, and it is accordingly making the substantive decisions requested by U S West.

      . Under section VIII(A) of the decree, the Regional Holding Companies may provide customer premises equipment.

      . As indicated above, the Regional Holding Companies are explicitly prohibited from providing such services. For an explanation of the reasons for that prohibition, which will remain in effect until there is real competition in the local telephone business, see July 26, 1984 Opinion at 867-868; see also 552 F.Supp. at 188-89.

      . It may be noted that Tricon’s share of the existing market is approximately 0.04 percent of all plant and equipment leased.

      . Two of these requests are by Ameritech which has also claimed, however, that it does not require a waiver to provide the same type of exchange telecommunications services in foreign countries that it is permitted to provide in the United States. Since the Court finds that Ameritech’s requests meet the standards for waiver, it need not and does not make a finding on that issue.

      . This condition is designed to ensure that these activities will not have an impact on domestic competitors of the Regional Holding Companies.

      . This condition is designed to prevent the Operating Companies from providing rate-based subsidies in software development in competition with United States exporters.

      . Under the Foreign Antitrust Improvements Act of 1982, 15 U.S.C. § 6a, the antitrust laws do not apply to conduct involving trade or commerce with foreign nations unless such conduct has a "direct, substantial, and reasonably foreseeable effect on commerce in the United States or on the export commerce of United States businesses.” Accordingly, the Court need not and does not consider the effect of these foreign business ventures on competitive markets abroad, except insofar as they may have an impact on commerce in the United States or on the export commerce of the United States.

      .. See generally, 552 F.Supp. at 150-51, 191-94. A major benefit to be expected from divestiture is that the spur of competitive pressures will generate broad innovation in telecommunications technology and that this, in turn, will assist the United States economy through improvements in telecommunications and other information products and services for internal consumption and in the American trade position vis-a-vis foreign nations and their economies. See also, 552 F.Supp. at 180 (removal of the 1956 restrictions on AT & T itself are “likely to benefit the American consumer, American foreign trade, and national defense”).

      . The decree recognized that the line of business restrictions are "in one sense, directly anti-competitive because they prevent a potential competitor from entering the market. The Court must accordingly also consider the extent to which the participation of the Operating Companies would contribute to the creation of a competitive market.” See 552 F.Supp. at 187.

      . NYNEX and Pacific Telesis claim that TRW’s delayed opposition to their requests for waiver to enter the office products business — -that opposition was filed ten days after the comment period had expired — arises out of that company's frustration at losing its bid to take over Sorbus and in an effort to delay or frustrate the waiver applications. While the Court has permitted TRW to file after the deadline, and while it has considered that company's objections notwithstanding the late filing, it will not take similar action in the future.

      . Petro Com claims that the Department of Justice did not fully evaluate whether NewVector is a "satisfactory" subsidiary for the purpose of granting a line of business waiver. That is not an adequate response to the careful Department filing. See infra.

      . Both TRW and Petro Com have made such claims. See infra.

      . Pacific Telesis' request does not cover employee relocation services. Nevertheless, as indicated in note 33, infra, at least some of Homequity’s objections apply to that request.

      . The separate subsidiary and financial conditions will, inter alia, remove the U S West incentive to engage in such practices.

      . These safeguards also dispose of the Homequity argument that there would be a substantial potential for cross-subsidization.

      . Homequity would, among other things, require the establishment of a special court-supervised competitive bid process.

      . Homequity’s concern that the real estate subsidiaries of the Regional Holding Companies may eventually join forces to form an interconnected nationwide real estate service is entirely speculative at this juncture. It will be time enough to consider that problem if a move in that direction is made.

      . Section 11(D)(3) of the decree.

      . Such selection would be a means by which NewVector could allocate the interexchange segment of its cellular business to an interexchange carrier or carriers of its choice.

      . NewVector operates cellular systems in its own area (at Phoenix, Arizona and Denver, Colorado) for which no waiver was required because these activities are part of U S West’s line of business. The system in the Gulf of Mexico would constitute a different line of business, however, and for that reason a waiver of Section 11(D) restrictions is required.

      . Conceptually it makes no difference that one activity requires a waiver while others do not; the important consideration is that monopoly operations arc not implicated.

      . Indeed, a denial of the NewVector request would not insulate Offshore from competition; it would merely shift that competition to a different company.

      . This would entail the sale, lease, installation, maintenance, repair, and training for the use of such equipment as computers, peripherals, electronic typewriters, answer and recording devices, office security systems, desk-top copiers, inside wiring, and various incidental products and services.

      . After first taking a different position, the Department of Justice is apparently now of the view that computer products and systems inter-connectable to telecommunications facilities constitute CPE. It is unnecessary to decide that issue inasmuch as the requests meet the standard for a waiver of the line of business restrictions.

      . TRW makes these objections even more emphatically with respect to Bell Atlantic’s request for a waiver to enter the computer sales and services business through the acquisition of Sorbus. Sorbus does not manufacture telecommunications products or customer premises equipment, and it does not provide interexchange telecommunications services or information services. However, it does provide third-party maintenance for computers and peripheral equipment of various manufacturers, and it sells items used in computers and computer related equipment.

      . These conditions would include explicit prohibitions on the offering by the Regional Holding Companies of computer maintenance services within any exchange area served by an affiliated Operating Company; on the provision of local exchange service to their computer maintenance subsidiaries on terms or conditions more favorable than those available to independent computer maintenance organizations; and on any other practice that might give the affiliated computer maintenance organizations a marketing advantage over their independent competitors.

      . For the same reason, the Court will not impose the additional conditions requested by TRW.

      . It may be expected, moreover, that, as precedents are set by action on specific applications, the result will be both increasing certainty and decreasing judicial involvement.

      . See, e.g., page 258 and notes 7, 9, 12, and 24, supra.


author: OBERDORFER, District Judge.

text:
    Charles C. KEECHI, Plaintiff, v. UNITED STATES of America, et al., Defendants.
    Civ. A. No. 84-2085.
    United States District Court, District of Columbia.
    Dec. 14, 1984.
    As Corrected Feb. 11, 1985.

      Hans Walker, Jr., Ellen Rhona Kemper, Washington, D.C., for plaintiff.
    Edward J. Snyder, Patricia A. Scott-Clayton, Tax Div., U.S. Dept, of Justice, Washington, D.C., for defendants.
   MEMORANDUM

OBERDORFER, District Judge.

Plaintiff, an American Indian, is a successor in interest to the Wichita Indians who, in 1891, by treaty, ceded tribal lands in Oklahoma to the United States to be held in trust in accordance with the General Allotment Act of 1887. Pursuant to the terms of the treaty and the Act, the Bureau of Indian Affairs (“Bureau”) of the Interior Department holds in trust for the benefit of the plaintiff certain land located in Oklahoma. In 1971, the Bureau entered into an oil and gas lease for the land. The lease requires the lessee to pay royalties earned from oil production on the land to the Bureau, which maintains an Individual Indian Money Account (“IIM”) for the benefit of the plaintiff.

On January 24, 1984, February 28, 1984, and March 14, 1984, the Internal Revenue Service (“IRS”) served on the Bureau three Notices of Levy on Wages, Salary, and Other Income. The notices asserted that plaintiff owed $16,465.87 to the IRS on account of assessments made in 1982 for tax periods ending June 30, 1978. The alleged liabilities did not arise from income realized from the land lease, but from another business activity of plaintiff. On June 7, 1984, the IRS served on the Bureau a final demand for the $16,465.87 which had been subject to the levy. By letter dated June 7, 1984, the Bureau advised the IRS that plaintiff did “not have any funds” in his account with the Bureau.

Nevertheless, on July 12, 1984, plaintiff filed a complaint alleging that the Bureau held $283.03 in his account, and that the IRS sought to levy on that sum and on any future royalties paid into the Bureau for the account of plaintiff. The complaint invokes this Court’s jurisdiction under 28 U.S.C. § 1353 and 25 U.S.C. § 345, and prays for a declaratory judgment that income from the land — like the land itself — is not subject to any charge or encumbrance and that any liens or levies thereon are unlawful. The complaint also seeks injunctive relief that would implement such a declaratory judgment, including a preliminary and permanent injunction that would protect the plaintiff’s account at the Bureau from future IRS lien, levy, and demand.

On October 2, 1984, the Court — treating certain additional pleadings filed by the plaintiff as a request for more immediate injunctive relief, and after conducting a hearing thereon — issued a temporary restraining order barring the IRS from enforcing the levy issued January 24, 1984, against any money or profits received by the Bureau for the benefit of plaintiff after the date of the levy. Although that order has expired and the motion for a preliminary injunction is under advisement, defendants “do not contest the entry of a preliminary injunction barring defendants from retaining any of the funds received by the Bureau of Indian Affairs after the date of the levy.” Memorandum in Support of Motion to Dismiss at 5.

Meanwhile, defendants have moved to dismiss on jurisdictional and venue grounds. In support of the motion, defendants assert that the tax assessments underlying the lien and levies in question derive from tax obligations of plaintiff as the responsible officer of Pacific Northwest Corporation, Ltd. Therefore, defendants argue, a challenge to the lien and levies is barred by 26 U.S.C. § 7421, which forbids the bringing of any action to restrain the assessment or collection of any federal tax. Defendants also argue that 26 U.S.C. § 7426(a)(1), which might otherwise allow plaintiff to sue to challenge the levy on his property, does not provide a basis for bringing suit because that section is unavailable to “the person against whom is assessed the tax out of which such levy arose.” In addition, defendants assert that subsequent to the temporary restraining order the Bureau in fact disbursed to plaintiff all funds that it held in plaintiffs account, and has returned, in the absence of a new levy, to its “normal[ ]” practice of disbursing to plaintiff all income payments “on the same day they are credited to the account, or as soon thereafter as possible.” Declaration of Jack D. Smith; see Memorandum in Support of Motion to Dismiss at 6-7. Thus, defendants argue, a present, live controversy is absent and the case is moot. Furthermore, defendants argue, plaintiff has an independent and adequate remedy at law for any wrongful collection: a civil suit for a refund under 26 U.S.C. § 7422. Defendants also claim that the action should be dismissed as against all the individually-named defendants because suits under § 7426 can be brought, pursuant to § 7426(d), only against the United States. Finally, defendants contend that venue is improper because an action under § 7426 can be prosecuted, pursuant to 28 U.S.C. § 1402(c), only in the district where the property is situated at the time of the levy — in this case, Oklahoma.

Plaintiff replies by emphasizing that he is not suing to enjoin the collection of taxes, but rather that he is suing pursuant to 25 U.S.C. § 345 and 28 U.S.C. § 1353 as beneficiary of a trust created by the General Allotment Act and the Wichita treaty, and that he is doing so to clear a cloud on his beneficial title to the land allotted to him and the royalties derived from it. He asserts that the levies in question and the threat of future levies illegally deny him the full benefits to which the General Allotment Act and the Wichita treaty entitle him. Contrary to defendants’ contention that this action is moot, plaintiff urges that the lien and levies to date are “capable of repetition,” Plaintiff’s Response to Defendants’ Motion to Dismiss at 7; specifically, plaintiff points to the assertion in defendants’ own pleadings that defendants are not inhibited by the Court’s Order of October 2, 1984 from levying on plaintiff’s account at some future time. Plaintiff’s Response at 4-5. Plaintiff additionally contends that this action would not be barred by 26 U.S.C. § 7421 in any event: the Bureau of Indian Affairs, a trustee for plaintiff, is, according to plaintiff, obligated to protect plaintiff’s interest from the IRS lien and levies, so that plaintiff is a third party exempt by 26 U.S.C. § 7426(a)(1) from the jurisdictional bar against injunctions of tax collections that 26 U.S.C. § 7421 otherwise imposes. Plaintiff further asserts that the Tax Court has no jurisdiction over a claim such as the one asserted here. Because, according to plaintiff, his claim under 25 U.S.C. § 345 and 28 U.S.C. § 1353 for the full benefit of an allotment is not a case respecting tax liability, it is — plaintiff contends — an appropriate subject for a declaratory judgment and an injunction from a federal district court. For this same reason, plaintiff argues that the individual defendants have been properly named as such, and that venue is not impaired by 28 U.S.C. § 1402(c) because actions under 25 U.S.C. § 345 and 28 U.S.C. § 1353 may be brought in this district pursuant to 28 U.S.C. § 1391(e).

If this were a suit to restrain the collection of taxes, it would be barred by 26 U.S.C. § 7421. However, plaintiff persuasively contends that this is not such a suit, but is rather an action by plaintiff as beneficiary of a “spendthrift” trust to protect it and the income it generates from unauthorized encumbrance.

The General Allotment Act, 25 U.S.C. §§ 331 et seq., obligates the United States as trustee ultimately “to convey [the allotted land] to said Indian, or his heirs as aforesaid, in fee, discharged of said trust and free of all charge or incumbrance whatsoever.” The land is thus held by the United States as trustee and is “not subject to alienation or encumbrance by [the Indian beneficiary], except with the consent of the United States Government.” See Squire v. Capoeman, 351 U.S. 1, 4, 76 S.Ct. 611, 614, 100 L.Ed. 883 (1956). The Court quoted with approval expert opinion that

“It is clear that the exemption accorded tribal and restricted Indian lands extends to the income derived directly therefrom.”

Id. at 9, 76 S.Ct. at 616, citing F. Cohen, Handbook of Federal Indian Law 265 (1942). Thus, the Squire Court concluded that the Indian plaintiff in that case was not subject to capital gains tax on the proceeds from the sale of timber from land held in trust for his benefit by the United States.

It is noteworthy that in Squire the taxpayer brought his tax liability to issue by paying the capital gains tax assessed by the IRS and suing for a refund. See id. at 5, 76 S.Ct. at 614. He did not, as here, seek injunctive relief. It could be argued, therefore, that even if this is not an impermissible suit to restrain a tax collection, the availability of a civil action by which plaintiff can recover any funds illegally seized is an adequate remedy at law which, under traditional principles of equity, precludes the declaratory and injunctive relief that plaintiff seeks.

But such a result would denigrate the broad protections that the General Allotment Act contemplated. See Squire v. Capoeman, supra at 6-8, 10, 76 S.Ct. at 614-615, 617. Otherwise, any creditor seeking to attach funds held by the Bureau for the benefit of an Indian allottee could circumvent the Act by arguing that if the attachment were illegal the beneficiary could sue at law to recover. The General Allotment Act affords more protection than that. It contemplates protection for the Indian beneficiary along the lines afforded to a beneficiary of a spendthrift trust. See, e.g. County of Thurston, State of Nebraska v. Andrus, 586 F.2d 1212, 1220 (8th Cir.) (“the trust established by the federal government was akin to a spendthrift trust ... ”), cert. denied, 441 U.S. 952, 99 S.Ct. 2181, 60 L.Ed.2d 1057 (1978); Stevens v. Commissioner of Internal Revenue, 452 F.2d 741, 747 n. 12 (9th Cir.1971). The trust property is simply not accessible to creditors, at least until after the trustee has delivered it, free of encumbrance, to the beneficiary. See County of Thurston, State of Nebraska v. Andrus, supra, 586 F.2d at 1221-22. 1224-25. Nor is there any indication that Congress gave the United States or its agencies any greater right than any other creditor to attach, encumber, or levy upon money or property held by the Bureau as trustee for an Indian allottee. See Stevens v. Commissioner of Internal Revenue, supra at 747.

In view of the foregoing, defendants’ reliance on the anti-injunction provision of the Internal Revenue Code, 26 U.S.C. § 7421, is misplaced. The IRS is not proceeding here to determine plaintiff’s tax liability on account of income realized from the allotted land. The IRS long ago determined the liability. The IRS is here attempting simply to collect an old and unrelated claim, indistinguishable from any other claim that the United States might assert as a creditor. The complaint makes out a case for enforcement of the General Allotment Act’s spendthrift trust provisions as against the Bureau, and may not be dismissed as if it were an injunction against a tax collection effort by the IRS.

Since this is not a suit about a tax claim so much as it is a suit by plaintiff to protect his beneficial interest in property held in trust for him by an agency of the United States, neither jurisdiction nor venue is governed by the tax laws. Plaintiff is not barred from naming as individual defendants the individual officers of the various federal agencies involved in this dispute. Also, under the general jurisdiction statutes well pleaded by plaintiff, venue lies in this district pursuant to 28 U.S.C. § 1391(e).

Nor does defendants’ contention that the case is moot require much discussion. The IRS has never abandoned its theory that it is entitled to levy upon and subject to lien any royalty income held by the Bureau for the benefit of plaintiff, if the IRS can serve the levy or lien after the Bureau has received royalty income for plaintiff’s benefit, but before the Bureau disburses that income to plaintiff. The letters and actions of the IRS toward the Bureau are sufficiently threatening and the responses of the Bureau are sufficiently acquiescent to support the conclusion that the threat to encumber allotment income held by the Bureau is quite capable of repetition. The latent threats keep the controversy alive and justiciable. See, e.g., United States v. Hougham, 364 U.S. 310, 312-13, 81 S.Ct. 13, 15-16, 5 L.Ed.2d 8 (1960); Southern Pacific Terminal Co. v. ICC, 219 U.S. 498, 515 (1911); United States v. Trans-Missouri Freight Ass’n, 166 U.S. 290, 17 S.Ct. 540, 41 L.Ed. 1007 (1897).

In view of the foregoing, the accompanying order will deny defendants’ motion to dismiss.

       Plaintiff conspicuously fails, however, to deal with his legal right to sue in federal court under 26 U.S.C. § 7422 for refund of any tax erroneously collected.