source: Caselaw Access Project

author: REDDEN, District Judge:

license: Public Domain

text:
    Karen M. GOWAN, Guardian and CONSERVATOR FOR Jerry M. GOWAN, protected person, Plaintiff, v. The UNITED STATES of America, Defendant.
    Civ. No. 83-1703-RE.
    United States District Court, D. Oregon.
    Jan. 22, 1985.

      Dennis H. Elliott, Stephanie S. Freedman, Elliott & Freedman, Portland, Or., for plaintiff.
    Charles H. Turner, U.S. Atty., Jack C. Wong, First Asst. U.S. Atty., Herbert C. Sundby, Asst. U.S. Atty., Portland, Or., for defendant.
   OPINION

REDDEN, District Judge:

This action was brought by Karen M. Gowan in her capacity as guardian and conservator for her father, Jerry Gowan, against the Veterans Administration Hospital for psychiatric malpractice. Jerry presently suffers from severe dementia due to prolonged cerebral anoxia. Cerebral anoxia is the deprivation of oxygen to the brain which, if sustained in excess of four minutes, will result in brain cell necrosis and irreversible damage. Jerry’s condition is the result of an unsuccessful attempt at suicide by hanging on November 17, 1982. Jerry, who will never again be a productive citizen, is presently cared for at the Oregon State Hospital. It is necessary for him to remain in that, or a similar facility for the rest of his natural life. Jerry’s life expectancy has not been shortened by his condition.

Jerry was admitted to the Providence Hospital psychiatric unit on June 8, 1982, and discharged on June 22, 1982. On June 30, 1982, he was admitted to Ward 5A of the Veterans Administration (VA) Hospital because he could not afford the high cost of private care at Providence. Ward 5A is the psychiatric unit of the VA facility in Portland. Throughout the summer and fall of 1982 Jerry was admitted and discharged from the VA facility on three separate occasions:

1. Admission June 30, 1982
Discharge August 13, 1982
2. Admission August 17, 1982
Discharge September 17, 1982
3. Admission October 1, 1982
Discharge November 12, 1982

His attempted suicide was on November 17, 1982, five days after his third discharge. Plaintiff challenges the adequacy of the treatment as well as the inadequacy of the planning prior to the final discharge.

BACKGROUND

For most of his adult life Jerry had been a successful businessman employed in the lumber industry. In 1971 he began working for Boise Cascade as a plywood salesman, and by 1977 he had progressed to a management position. His annual earnings in 1979 exceeded $50,000 and had been in that general area for several years.

He had two children by his first wife who died in 1966. This was a serious blow to Jerry, but one from which he had recovered. In 1968 Jerry married a co-worker, Teddy, and they had a son, Jeff, in 1970.

The first record of Jerry’s emotional problems surfaced in 1974 when he reported problems with impotence to his family physician. A physical examination indicated that Jerry, then 46 years old, had the lung capacity and endurance of a 70 year old man. He was overweight, smoked heavily, drank to excess and rarely exercised. He was instructed to change his lifestyle but did not do so at that time. However, he did quit smoking and drinking in 1982 prior to his admission to Ward 5A. His problem with impotence continued and at the time of his first admission for psychiatric care he was totally impotent.

In 1980 and 1981 Jerry’s personal problems escalated. He was terminated from his management position at Boise Cascade in 1981. Although he was offered a sales position (which was considered a demotion) Jerry rejected that option. Instead he purchased a small floor covering business in the fall of 1981. The business was unsuccessful from the beginning and ultimately failed.

During these troubled times Jerry and Teddy’s marriage began to falter. Divorce was discussed in the spring of 1982 in conjunction with a possible bankruptcy filing. Jerry began to become depressed and unable to function effectively in a routine daily fashion. The family’s financial resources became strained in late spring 1982. The marriage problems continued to deepen and Jerry’s depression worsened. By June 1982 Jerry was hospitalized, and as previously noted, he remained hospitalized almost continuously until his suicide attempt in November 1982.

While Jerry was in the hospital Teddy began to seriously consider divorce. She spoke with the hospital staff and Jerry about ending the marriage. She became involved with another man and, at one point, told Jerry of the affair. Teddy testified that she thought that this revelation might shock Jerry into reality and force him into taking some positive action towards recovery. By the end of the summer Teddy had decided that the marriage was over and informed Jerry that she wanted a divorce. She filed for divorce in October 1982, but then withdrew the petition following the suicide attempt.

On each of his admissions Jerry was diagnosed as severely depressed. He was also considered a suicide risk and on two of his admissions to the VA facility he had been put on “close” status. Close status requires the patient to remain in pajamas and under certain restrictions which will discourage departure and avoid suicide. Prior to his first admission to Providence, Jerry was found with an empty gun in one hand and bullets in another. Additionally, while he was at Providence he “slashed” his fingertips, sustaining a minor injury. He discussed death and suicide with other patients while at the VA facility. Some of these remarks and conversations were passed along to the staff. During his last hospitalization he asked patients to obtain cyanide for him. These requests were conveyed to the hospital staff and Jerry was promptly placed on close status on October 29, 1982. He was removed from that status on November 2, 1982, and discharged ten days later on November 12, 1982. As noted above, his suicide attempt occurred on November 17, 1982. It is noteworthy that the final attempt at suicide was the first actual attempt he had made to kill himself.

TREATMENT AND DISCHARGE

Plaintiffs case alleges negligence in one or more of several areas. First, plaintiff claims that although the Veterans Administration prescribed the correct medication, they did not prescribe sufficient dosages, nor did they continue those dosages for a sufficient length of time. Secondly, it is alleged that the Veterans Administration negligently failed to prescribe electro-convulsive therapy. Thirdly, plaintiff claims that the Veterans Administration failed to provide adequate psychotherapy while he was hospitalized. Finally, plaintiff alleges that the VA failed to live up to the standard of care in planning Jerry’s final discharge. As to the latter claim, it is plaintiff’s theory that Jerry should not have been discharged at that particular time, that if he was to be discharged then it should have been to a group home, and that the discharge to his 76 year old mother was made without adequate evaluation and instructions to her.

MEDICATION

Trazadone was prescribed for Jerry at Providence Hospital and he was still on that medication when admitted for the first time to the VA facility on June 30, 1982. He was continued on Trazadone throughout his first stay and after that discharge. When he returned and asked for readmission on August 17, 1982, Trazadone was discontinued. Defendant’s agents testified that apparent liver problems, coupled with his improvement, prompted the decision to discontinue the medication. He was discharged for the second time on September 17, 1982 and again readmitted on October 1, 1982. When admitted on the third occasion, Imiprimine was prescribed and Jerry remained on that medication until the time of his suicide attempt. Plaintiff contends that Trazadone was appropriate, but that the amount should have been increased over the treatment period and that it should not have been withdrawn on August 17th. Plaintiff claims that it is well known that Trazadone cannot damage the liver and equally well known that such a medication should be continued and, that under the circumstances here, the dosage should have been increased. Knowledgeable and reputable physicians testified contra on this point.

The most significant testimony was that the dosage given followed the Physicians Desk Reference (PDR). This work is a recognized authority in the medical profession and consistently followed by physicians and surgeons in prescribing medications. It was not malpractice for the VA staff to follow the recommendations of the PDR.

Plaintiff failed to sustain the burden of proof that insufficient amounts of Trazadone were given and also failed the burden of proof that it was negligent to discontinue the treatment, and give no alternative medication for the period August 17, 1982 to October 1, 1982. The physicians who made the decision to discontinue the Trazadone properly believed that it might have an unfortunate and secondary effect on the liver. They also noticed that his condition had improved and continued to improve while he was off medication during his second hospital stay. It was only when Jerry presented himself for his third admission on October 15, 1982, that the doctors noted any deterioration in his condition. He was then immediately started on the Imiprimine treatment. I also note that during the period between his second and third hospital stays at the VA facility, and while he was not on any medication, Jerry stayed at home in the care of his daughter. It was at this time that he became concerned about harming himself and sought help at the VA by asking for readmission.

ELECTROCONVULSIVE THERAPY

Plaintiff also claims that defendant is negligent for failing to consider or prescribe electroconvulsive therapy (ECT). The plaintiffs theory is that Jerry’s improvement, as charted, was so insignificant that ECT should have been considered and prescribed. Defendant’s agents testified that they did consider such treatment, but concluded it was not warranted. They also contend that Jerry did show improvement during each stay. The records do not reflect their decision regarding ECT, but I have no reason to believe that defendant’s agents were untruthful. I believe that it was discussed and considered, and that the appropriate decisionmakers rejected that option.

ECT is not available at the Portland unit and plaintiff would have found it necessary to travel to Roseburg for such treatment. ECT is not in disrepute as a treatment, but it is agreed that it is not used to the extent that it was several years ago. Failure to require the treatment was not malpractice. As is the case in all other areas, respected and competent physicians testified on each side of this issue.

I find that plaintiff has failed to sustain the burden of proof on this theory.

PSYCHOTHERAPY

Although plaintiff alleged defendant’s failure to provide adequate psychotherapy while Jerry was hospitalized, there was a paucity of evidence supporting this theory. The staff at the VA facility uses a “team approach” utilizing different disciplines within the mental health field. Dr. David Reaves, Chief of Inpatient Care, testified that in 1982 Ward 5A had two treatment teams. Each team was responsible for approximately twelve to fifteen patients, and was composed of a staff psychiatrist, a psychiatric resident doctor, a psychology intern, two medical students, two registered nurses and two or three nursing students. Ward 5A also employed a full time psychiatric social worker who was not a member of either team, but assisted all patients and staff as needed. .

Each member of the team participated in the patient’s treatment; however, one team member was designated the case manager. Jerry’s case manager was Janelle McLeod, a registered nurse with a Master’s Degree emphasizing mental health care. Ms. McLeod had the primary responsibility for “one-on-one” discussion sessions with Jerry and with coordinating his treatment with other team members.

There was a weekly therapy schedule for Ward 5A that was more or less followed by all patients. On Mondays treatment review group was held. Here the patients were able to review and assess their treatment and progress from their own point of view. Tuesdays and Thursdays were devoted to skills group meetings. The patients participated in either a communication or a daily living skills group depending upon their individual level of recovery. Also, ward government meetings were held on Tuesdays and Thursdays. Ward government is a procedure whereby patients are encouraged to become involved in the treatment of fellow patients, such as evaluating another patient’s pass request.

Wednesdays and Fridays were spent in the more traditional type psychotherapy groups, with the patients discussing their problems and the staff offering advice and encouragement. There was also time set aside throughout the week for staff and team meetings. This type of therapeutic approach, wherein other patients as well as the staff participate in group sessions, is termed “milieu” therapy.

There was some criticism of the team’s resident physician, Dr. Rosen, by a student nurse but, generally, plaintiff’s witnesses did not fault the team approach. They did testify to the obvious: that the combination of treatment was not ultimately and completely successful. However, an unsuccessful result does not mean a doctor has committed medical malpractice. Willard v. Hutson, 234 Or. 148, 378 P.2d 966 (1963); Moulton v. Huckleberry, 150 Or. 538, 46 P.2d 589, 592 (1935). All experts testified that complete success or a “complete cure” rarely occurs by the time of discharge for any severely depressed patient.

Again, plaintiff failed to sustain the burden of proof on this issue.

DISCHARGE

Plaintiff’s strongest theory for recovery is that the defendant failed to perform its duty to provide an adequate discharge plan, and that its failure to so do was a substantial contributing factor to the attempted suicide. Some additional background information is needed here.

Jerry’s first two discharges were to Teddy and he attempted to live at the family home with her and Jeff. It must be recalled that even prior to the first hospitalization this marriage was a troubled one and divorce had been discussed. Teddy desired a divorce and Jerry was strongly opposed to one. According to VA staff, Teddy was giving “mixed signals” to Jerry because she told him she desired divorce, but continued to visit him and to provide encouragement and support to him. One can be somewhat critical as well as sympathetic to Teddy and her conduct and dilemma. In any event, she finally filed for divorce prior to the third admission and made it clear that Jerry should not be discharged to her or their home.

It was felt by the treating team members that a final decision regarding divorce was necessary so that Jerry would finally realize he must rebuild his life independent of his marriage. The filing of the divorce was not regarded by those involved as a signal that Teddy would no longer be involved in Jerry’s support structure.

In preparation for discharge, Jerry visited and evaluated several group care homes. These are residences where one or more individuals live in a somewhat structured environment with others who might have similar adjustment problems. Typically, a lay person rents rooms to such individuals and, for a monthly payment, provides bed, board and limited support. Jerry did not desire to be discharged to such a home. The staff felt he rejected it partially because this would admit the end of his marriage. Further, all witnesses agreed that Jerry did not feel he needed such support, and that this failure to recognize his needs was one of his problems. In any event, Jerry visited several homes and rejected all but one. The one which he selected did not accept him. He chose that placement because it was the least expensive.

Finally, Armine Balloun, who was supervising this part of the discharge plan, discussed another care facility. This one, referred to as the “Tupper” home, was under consideration by Jerry when Ms. Balloun left on a short vacation. Although Jerry had not rejected the “Tupper” option, it was clear that he was not enthused about the prospect. Then, shortly before the third discharge, Jerry, Teddy and Anne came up with their own plan which would see Jerry discharged to live in Chehalis with Anne, his 76 year old mother. It was understood that his base of operations would ultimately be Portland, and that he would travel from Chehalis to Portland at least twice a week for out-patient care and to seek employment. All three of these individuals urged this plan of action. Again, it is to be remembered that Teddy was still active in this phase of the decision-making process.

Anne was aware of her son’s problems and knew that he had been hospitalized on several occasions for a severe depressed condition. She had visited him in the hospital and at his home while he was on furlough or between admissions. All of the team, except Ms. Balloun who was on vacation, expressly approved the plan. Upon her return, Ms. Balloun discovered what occurred and could find no fault with the decision. At the time of discharge all members of the team thought that this option was superior to a group care home. Although Jerry was not enthusiastic about anything, he did express satisfaction with this plan.

With the encouragement of team members, Jerry had written of his plans and schedule which would follow discharge. His plans concentrated on the area of obtaining employment. He was receiving unemployment compensation and was not desperate, but employment was necessary both for his support and for his ultimate recovery.

None of the VA personnel talked to Anne, although they were aware that she was his mother and that she agreed to the plan. They knew that she had visited Jerry when he was hospitalized. Staff members did discuss the plan with Jerry and Teddy. Defendant acknowledges that it would have been “better” to have talked with Anne personally, and that the VA guidelines suggest that individuals in Anne’s role be evaluated and instructed. Defendant’s personnel admit they were relying on Teddy and Jerry to advise Anne and to do what they could to see that the plan worked. Jerry was discharged on the 12th of November with an outpatient appointment with Dr. Esther Gwinnell scheduled for the 16th.

There was considerable discussion at trial regarding Jerry’s out-patient appointment. The only reference to this appointment in Dr. Gwinnell’s book was the notation “*intake.” Dr. Gwinnell testified that she always sets aside a period of time on certain days for appointments with patients that have been recently discharged from the hospital. She indicated that sometimes she writes the patient’s name in her book and sometimes she does not. Dr. Gwinnell also testified that in 1982 these “intake” appointments were generally arranged by Mary Farrell, a liaison person between the out-patient clinic and Ward 5A. Ms. McLeod, Jerry’s case manager, testified that she had set the appointment up with Ms. Farrell. Ms. Farrell did not testify at trial, and thus it is unclear whether the out-patient clinic was specifically informed that the intake appointment for Tuesday, November 16, 1982 was for Jerry Gowan. As indicated earlier, he attempted his suicide on the 17th, five days post discharge.

On the day of discharge, Jerry was anxious and concerned about the discharge and his future. His basic concerns about his marriage and employment status continued. On the night before discharge he had trouble sleeping and demonstrated anxiety and concern about departure. On the morning of discharge he remained concerned and did not leave the facility immediately. His pickup truck was parked outside and he had loaded it with the possessions he was to take to Chehalis. He was ambivalent about whether or not he should leave or remain at the hospital.

The chart reflects that, at one point, Dr. Rosen inquired as to whether he planned to “stay forever” in the Portland facility. Other team members also talked with him that morning. Finally, after remaining for lunch, he left. Team members testified that by the time he left he was reasonably cheerful and optomistic. They describe this as a “bright affect.”

Plaintiff’s experts opined that Dr. Rosen was specifically negligent to make the comment about “staying forever.” One or more testified they assume the comment was made cruelly or sarcastically. Dr. Rosen and others refute this. Plaintiff’s experts contend that Dr. Rosen had effectively “locked Jerry out” of the ward by that comment. Defendant refutes this. Dr. Rosen specifically denies his comment was made either cruelly or sarcastically. He states that he did so inquire, and that an inquiry of that nature was appropriate. He said the remark was made in a kindly fashion and was designed to point out to Jerry what options existed. It was understood that the VA facility in Portland was short term, and that it was important not to contemplate staying any great length of time. Dr. Rosen insists that Jerry understood his comment and reacted appropriately-

Defendant testifies that Dr. Rosen, Dr. Reaves, Ms. McLeod and Ms. Stein (another team member) talked to Jerry at length that morning, separately and together. They stated that they encouraged him and discussed the discharge plan with him. They also state that they discussed other options, including “the Roseburg option.” This option would mean admission to a long term mental health care facility maintained by the Veterans Administration in Rose-burg, Oregon. Jerry was not eager for that alternative and the staff felt that it would be damaging to him and would end any hope for a return to productivity.

Defendant’s witnesses testified that although Jerry was reluctant to leave and did express anxiety and concern, the discharge was proper on that day. All witnesses agreed that it is common for a patient to become dependent on such a facility and the care afforded there. This leads to anxiety upon discharge and also means that the staff must be aware of the possibility of a patient becoming overly dependent. Witnesses agreed that the staff should encourage discharge. It was also agreed that few, if any, patients with Jerry’s condition are discharged “cured” or “well.”

The staff evaluated Jerry’s condition on the morning of November 12th. Two of them specifically discussed suicide with him. Jerry told Dr. Reaves that he was not considering suicide and would never do so because he had “too much to live for” and that he would not do so because of his son. The staff admits that Jerry was a suicide risk, but specifically found that he was not imminently suicidal at discharge.

Admission to the ward, to Roseburg or to a group care home is voluntary. Jerry could not have been kept on the ward involuntarily without a court order, nor could he have been sent to a group home without his consent. His consent was also necessary for admission to the facility in Roseburg. Defendant’s agents testified that they would have obtained a court order had they determined Jerry was imminently suicidal, yet insistent upon leaving.

Jerry did act reluctant to leave on November 12th although he had expressed eagerness to leave on earlier occasions throughout his third hospitalization. I believe that if the staff had urged him to remain a few more days, or if they had strongly urged the Roseburg option, he would have complied. Hindsight tells us that that would have been a better course of action. Defendant’s key personnel admit, in retrospect, that a course of action other than discharge would have been better. I find that it was not malpractice to discharge Jerry on November 12, 1982 any more than it had been to do so earlier.

Jerry had been discharged on two earlier occasions and had twice voluntarily returned when he felt he needed help. On one of the readmissions he specifically expressed concern about suicidal thoughts, and gave that as his reason for readmission. VA personnel were, therefore, aware that Jerry was concerned about his own future and was capable of assisting in his own rehabilitation. The better course of action is to urge patients such as Jerry back into the community. The alternative to community living (and available out-patient care) is warehousing in long term care facilities.

As earlier observed, defendant’s witnesses agree that it would have been better to have evaluated and instructed Anne in some detail. As it turned out, Anne would have been evaluated very highly. She was able to and did provide loving care and attention for the five days Jerry remained with her. A thornier question arises about whether the failure to instruct or warn Anne was a substantial contributing factor in the tragedy of November 17th.

When Jerry left the hospital on November 12, he drove to the home he had, until recently, shared with Teddy. Teddy stated that he appeared despondent upon his arrival. She told him he could not stay and that he would have to go to his mother’s home in Chehalis according to the discharge plan. Teddy went to phone the VA for advice, and Jerry wandered about the house. At this time Teddy had taken in a boarder, Mary Anne Kappes, to help with expenses.

Ms. Kappes stated that while Teddy was occupied on the telephone Jerry picked up a pen knife and began making jabbing gestures towards his body. This disturbed Ms. Kappes and she repaired to her room. After speaking with the VA, Teddy convinced Jerry that he should go to Chehalis and offered to drive him there. It wasn’t until they were outside that Teddy noticed the knife. She testified that he continued the jabbing gestures while she was driving. Fearing that he would actually stab himself, Teddy pulled off the road and told Jerry he would have to drive the rest of the way himself. She remained behind and Jerry drove on to Chehalis alone.

The testimony is clear that the defendant’s agents did not tell Anne that her son had suicidal ideations. They did not ascertain whether medical or mental health care was easily available — it was not. They did not tell her that the appointment on the 16th was important and that she should call them if and when she realized Jerry was not planning to keep his appointment. She had no phone number for the VA. It was known, however, that she was and would be in daily contact with Teddy. Anne had both Teddy’s home and work phone numbers. Jerry, Teddy and Anne talked by phone every day during his stay in Chehalis.

Anne is not clear as to whether or not she had heard about suicidal ideations prior to Jerry’s arrival on the 12th. Whether or not someone had advised her of the risk, she obviously was aware of it. She testified that she watched him carefully, stayed with him constantly and monitored his medications so that he would not “harm himself.” Because of her concern she insisted on accompanying him to Portland on the 16th. She testified that she knew he had some sort of appointment in Portland on the 16th, but was uncertain as to whether it was with**a doctor or was for a job. She was afraid to allow him to go alone for fear he would deliberately injure himself by driving off the road. He decided not to go to Portland if Anne insisted on going with him.

Anne testified that she invited other family members from Chehalis to visit, but that Jerry was not enthused about those visits. On one occasion he asked her to have one of the relatives bring his rifle with him when he came. Anne testified that he said he wanted the rifle “for hunting” but that because she was concerned she ignored the request. Anne and Jerry discussed a visit to other relatives in Alaska, but he was unenthusiastic about it. Anne did not think it was appropriate to discuss suicide with him, although some witnesses say it might have been helpful. She testified that she did not feel free to discuss her concerns with Teddy in detail, because Jerry was generally in the room when she talked to Teddy. He conversed with Teddy, as well, on those daily phone calls.

Anne testified that if she had been instructed to call the VA if she became concerned, she would have done so. She also testified that she would have been insistent that he keep the appointment with the outpatient clinic on the 16th, or at least to call them. In short, she would have followed any instructions given, but none were.

This is the plaintiff’s strongest theory but plaintiff has again failed to sustain the burden of proof. I find that I must speculate in answering the “what would have happened if” questions. These are some of the reasons I would be forced to speculate:

It is not known when Jerry decided to attempt to hang himself. Experts have testified that he could have made a conscious decision before he left the hospital. However, it is equally as likely that he made the decision on the 17th. If the decision were made several days in advance, who can say whether he would have changed his mind because of a telephone call or visit with a qualified team member? If it were a “last minute” decision, would not the earlier concern have been misplaced and would a visit to the out-patient clinic on the 16th have been helpful? It is as easy to speculate that an attempt at suicide would have simply been postponed, rather than abandoned.

Plaintiff theorizes that discharge to a group care home would have been superior and should have been the course of action followed. It is speculation to conclude that Jerry was less likely to commit suicide in the group care home had he been discharged to such. Testimony at trial revealed that some patients actually commit suicide while hospitalized.

It is also impossible to know whether Anne could have done more if she had the total information available and, if she had done more, whether that would have made any difference. The fact of the matter is that Anne could hardly have increased her vigilance. As it was, Jerry went into the garage while Anne went to check the mail, and after ten or fifteen minutes she went looking for him. She found him hanging by the neck and was able to cut him down and call for help. As one of defendant’s witnesses admitted, she saved his life because of her vigilance. Had Jerry been discharged to Teddy’s custody he would have been in the family home alone during the day. He would not have had such concerned scrutiny in a group care home. If he had decided to commit suicide, he could have done so while a patient at a VA facility, at home or in a group care home.

It should be noted that the defendant’s agents had the right to and did rely upon the assistance of others. In this case, they relied upon the help and support of Anne and Teddy, and also relied upon Jerry himself. It was known that Teddy had encouraged his admission to hospitals earlier and that on one occasion, Jerry had readmitted himself when staying alone because he had begun to think about suicide. The defendant, under these circumstances, can never be totally and solely responsible for the well being of the patient.

Hindsight is not the test of due care, and none of these parties had the requisite crystal ball. To arrive at a verdict for the plaintiff, I would be required to speculate on the crucial issue of causation, and this I cannot do.

Defendant prevails, a judgment shall enter accordingly.

      . There are five Gowans who will be frequently mentioned herein and, for clarity, given names will be used. Jerry and Karen have already been identified. Anne is Jerry’s mother, Teddy is his wife and Jeff is his fourteen year old son.

      . Dr. Reaves testified that oftentimes the patients are discharged to single occupancy hotels in the Burnside area. These patients have no money, no family, no friends and virtually no emotional support.

      . Dr. Colbach, one of defendant's experts, testified that on one occasion he had spoken with a patient just five minutes before he committed suicide. Dr. Colbach stated that the patient had a "bright affect" when he spoke with him and denied any suicidal ideations. Nevertheless, the patient committed suicide almost immediately after Dr. Colbach counseled him. Dr. Colbach also noted that it is not uncommon for a patient to commit suicide shortly after speaking with a mental health care professional.

      . In the latter part of September 1982, Teddy went to Hawaii for a business convention. She took Jeff with her, which left Jerry alone in the family home. Karen, who was preparing to move to San Francisco, came and stayed with her father during Teddy and Jeff's absence.


text:
    AGRISTOR CREDIT CORPORATION, Plaintiff, v. George SCHMIDLIN and Enola Schmidlin, Defendants and Third Party Plaintiffs, v. A.O. SMITH CORPORATION, Harvestore Products, Inc., 4-J Harvestore Systems, Inc., and Dennis Messoline, Third Party Defendants. AGRISTOR LEASING, Plaintiff, v. Robert H. LARSON and Loretta Larson, Defendants and Third Party Plaintiffs, v. A.O. SMITH CORPORATION, Harvestore Products, Inc., 4-J Harvestore Systems, Inc., and Theodore (Ted) Williams, Third Party Defendants.
    Civ. Nos. 83-1847-RE, 83-1848-RE.
    United States District Court, D. Oregon.
    Jan. 23, 1985.

      John P. Davenport, William N. Stiles, Sylvia E. Stevens, Sussman, Shank, Wapnick, Caplan & Stiles, Portland, Or., for plaintiffs.
    Kenneth Evans, Jr., Portland, Or., for defendants and third party plaintiffs George Schmidlin, Enola Schmidlin, Robert H. Larson and Loretta Larson.
    Jan K. Kitchell, Schwabe, Williamson, Wyatt, Moore & Roberts, Portland, Or., for third party defendants A.O. Smith Corporation and Harvestore Products, Inc.
    E. Richard Bodyfelt, Bodyfelt, Stroup, Mount & Chamberlain, Portland, Or., for third party defendants 4-J Harvestore Systems, Inc., Dennis Messoline and Theodore Williams.
   AMENDED OPINION

REDDEN, District Judge:

These two actions have been consolidated for pretrial purposes. Plaintiff in No. 83-1847, Agristor Credit Corporation (ACC), brought this action for breach of contract and replevin. Plaintiff in No. 83-1848, Agristor Leasing (AL), is suing for breach of a lease and replevin. Plaintiffs and various third-party defendants have now moved for summary judgment.

BACKGROUND

I. No. 83-1847

Plaintiff ACC brought this action against defendants George and Enola Schmidlin. Defendants are dairy farmers who live in Banks, Oregon. Plaintiff contends that defendants are in default under the terms of a contract for the sale of a “Harvestore system,” an automated dairy feeding system. Plaintiff has previously repossessed the Harvestore system, and now seeks damages for defendants’ failure to make payments under the contract between the parties.

Defendants responded to this action by filing a counterclaim against plaintiff, as well as a third-party complaint against A.O. Smith Corporation (A.O. Smith), A.O. Smith Harvestore Products, Inc. (AOSHPI), 4-J Harvestore Systems, Inc. (4-J) and Dennis Messoline. In their counterclaim and third-party complaint, the Schmidlins allege that what they bought from ACC was a feeding system for their cattle, and that use of the system led to a significant decline in the milk production of their dairy herd and caused many of their cattle to become sick or die. The Schmidlins assert claims against ACC and the various third-party defendants on the following theories: strict liability, deceit, breach of warranties and negligence.

II. No. 83-1848

Plaintiff AL brought this action against Robert and Loretta Larson, who are also Oregon dairy farmers. Plaintiff contends that defendants are in default under the terms of two leases of Harvestore feeding systems. As in No. 83-1847, defendants have acquiesced in the repossession of the feeding systems, but have filed a counterclaim and a third-party complaint. The third-party defendants are A.O. Smith, AOSHPI, 4-J and Ted Williams. The Larsons raise the same claims that the Schmidlins raise in the other action.

FACTS

I. No. 83-1847

In June 1982, the Schmidlins purchased a dairy feeding system from West Coast Agri Systems, Inc. (West Coast) under a retail installment contract. West Coast’s interest was assigned to ACC.

AOSHPI manufactured the feeding system purchased by the Schmidlins. At the time of the sale, West Coast operated an Albany, Oregon dealership, and employed defendant Messoline as a salesman. West Coast had previously purchased the dealership from 4-J. 4-J has since reacquired the dealership.

The Schmidlins began discussing the possible purchase of a Harvestore system with representatives of West Coast in February 1982. The Schmidlins signed a contract to purchase the equipment from West Coast on June 14, 1982. The agreed purchase price was 84,906.30, payable in 120 monthly installments beginning July 14, 1982. The Schmidlins have not made payments under the contract since November 1982. ACC brought this action in December 1983.

II. No. 83-1848

In March 1980, the Larsons leased a Harvestore system from AL, which system AL acquired from Columbia Harvestore Systems, Inc. (Columbia) pursuant to the Larsons’ purchase order. In November 1981, the Larsons leased a second Harvestore system from AL, which system AL acquired from West Coast, pursuant to the Larsons’ purchase order. Ted Williams was the salesman involved in the 1980 lease arrangements, while he was employed by Columbia. 4-J is the current operator of a dealership previously operated by Columbia and West Coast.

In March 1980, the Larsons applied to AL for credit and authorized AL to purchase a feeding system. AL accepted the credit application and the system was installed on the Larsons’ farm. AL and Larsons entered into a second lease in the fall of 1981.

The Larsons made the monthly payments required under the lease agreements through September 1982. In November 1982, AL and Larsons entered into Lease Payment Deferral Agreements deferring rental payments to July 1, 1983. Defendants failed to make the payments due on that date, and have made no subsequent payments.

DISCUSSION

I. The Standard

A motion for summary judgment should be granted where (1) there is no genuine issue as to any material fact, and (2) the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(c). The moving party has the burden of establishing the absence of a genuine issue of material fact. Securities and Exchange Commission v. Murphy, 626 F.2d 633, 640 (9th Cir.1980). All reasonable doubts as to the existence of a genuine issue of material fact should be resolved against the moving party. Hector v. Weins, 533 F.2d 429, 432 (9th Cir.1976). In addition, the inferences to he drawn from the underlying facts must be viewed in the light most favorable to the party opposing the motion. United States v. Diebold, 369 U.S. 654, 655, 82 S.Ct. 993, 994, 8 L.Ed.2d 176 (1962). Where different ultimate inferences can be drawn, summary judgment is inappropriate. Sankovich v. The Life Insurance Company of North America, 638 F.2d 136 (9th Cir.1981).

II. Analysis

As noted previously, the legal claims asserted in these cases are virtually identical. I therefore consider both cases together, except where particular issues require that they be analyzed individually.

A. Plaintiffs’ Claims

ACC seeks summary judgment on its claim for breach of contract. The Schmidlins have admitted that they executed the contract and failed to make the payments required under it. Defendants assert the validity of their counterclaims against plaintiff, but have failed to come forward with any evidence suggesting that plaintiff is not entitled to judgment on its breach of contract claim. Therefore I grant plaintiff ACC’s motion for summary judgment on this claim. I will determine the amount of the judgment following the sale of the repossessed equipment.

AL seeks summary judgment on its claim for breach of the two leases. The Larsons admit the execution of the leases and their failure to make all of the payments required under them. They, too, have failed to show that there is a question of fact as to plaintiff’s claims. I grant plaintiff AL’s motion for summary judgment as to these two claims. I will determine the amount of the judgment following the sale of the repossessed equipment. I note that it is not clear whether, under the leases, plaintiff is entitled to payment of all unpaid rental installments to the end of each lease term, as prayed for.

B. Counterclaims and Third-Party Claims

1. A. O. Smith

A.O. Smith moves for summary judgment on all claims against it on the grounds of corporate immunity. It has submitted the affidavit of Joseph MichaelKenney, a company employee, who states that AOSHPI is a wholly-owned subsidiary of A.O. Smith, but that A.O. Smith does not manufacture, promote or advertise the Harvestore equipment sold and leased here. Michael-Kenney further states that no employees of A.O. Smith were involved with the Schmidlins or Larsons prior to the time they entered into these transactions. In response, defendants assert that A.O. Smith is AOSHPI’s “alter ego,” and therefore is liable for its acts.

This is a diversity case, and I apply Oregon law. See Stoddard v. Stoddard, 641 F.2d 812, 813 n. 1 (9th Cir.1981). Shareholders’ liability to corporate creditors is limited to the full consideration for which their shares were issued or to be issued. O.R.S. 57.131(1). This “wall of immunity” is to be respected unless (1) the parent corporation exercises actual control of the subsidiary, and (2) there is a showing of improper conduct. Amfac Foods, Inc. v. International Systems & Controls Corporation, 294 Or. 94, 107, 654 P.2d 1092 (1982). Thus, “the corporate entity of a subsidiary corporation should be disregarded only to prevent fraud or injustice and to protect persons whose rights have been jeopardized by the conduct of the parent corporation.” Schlecht v. Equitable Builders, Inc., 272 Or. 92, 96, 535 P.2d 86 (1975).

Defendants point to the close relationship between A.O. Smith and AOSHPI, and to at least one person who was simultaneously an officer in both companies. Defendants have pointed to no conduct by A.O. Smith sufficient to make it liable here, however. Moreover, there is no indication that AOSHPI will be unable to pay any judgment defendants may ultimately be entitled to. A.O. Smith’s motions for summary judgment are granted as to all claims against it.

To the extent that defendants’ counterclaims against plaintiffs rest on a similar theory, they cannot succeed. Defendants have presented no evidence of a relationship between AOSHPI and ACC or AL, or of conduct by ACC or AL, sufficient to treat them as other than separate entities.

2. 4~J and Williams

Third-party defendant 4-J moves for summary judgment in No. 83-1847 and for partial summary judgment in No. 83-1848 on the grounds that subsequent to the first lease agreement with the Larsons, it sold certain of its assets to West Coast, making West Coast the sole Harvestore dealer in Oregon. 4-J has submitted the affidavit of its president, Robert Horneck, who states that 4-J was not involved in the sale or installation of either the equipment purchased by the Schmidlins or the equipment leased to the Larsons in 1981. Defendants have not presented any facts showing that 4-J is not entitled to summary judgment in No. 83-1847 and to partial summary judgment in No. 83-1848.

Ted Williams has moved for partial summary judgment in No. 83-1848 on the grounds that he was not employed by any Oregon Harvestore dealer after June 1980, and was not involved in any way in the 1981 lease of a Harvestore system to the Larsons. He has filed an affidavit to this effect. Defendants have not responded by pointing to any fact indicating Williams’ connection with the 1981 lease to the Larsons. Williams’ motion for partial summary judgment is therefore granted.

3. Remaining Parties

Claim I: Strict Liability Under § 402B of the Restatement

Defendants acknowledge that a claim under § 402B of the Restatement (Second) of Torts is unavailable on the facts of these cases. ACC’s, AL’s and AOSHPI’s motions for summary judgment are granted as to defendants’ § 402B claims.

Claims II and III: Fraud (Misrepresentation and Concealment)

In their second claims for relief, defendants allege that plaintiffs and third-party defendants, through salesmen Williams and Messoline and “their other agents and representatives,” made certain misrepresentations of material facts, including: that the systems were oxygen-limiting; that they would prevent spoilage of silage stored in them and produce higher quality feed and a higher milk production rate; and that farm profits would increase. In their third claim for relief, defendants allege that plaintiffs and third-party defendants, again through their salesmen and other agents, concealed material facts from defendants, specifically that “[t]he Harvestore feeding system was inherently defective in that rather than limiting oxygen to the silo-like structures, oxygen was actually forced into the structure resulting in a substantial deterioration in the nutrient content of the silage contained therein.” Defendants also contend this alleged defect was known to plaintiffs and third-party defendants and has resulted in numerous other claims and lawsuits around the country.

In No. 83-1847, ACC and AOSHPI seek summary judgment on these claims. In No. 83-1848, AL and AOSHPI seek summary judgment on these claims.

AOSHPI first urges that defendants’ fraud claims are merely disguised warranty claims, and that to permit a tort action for deceit in the case of a sale of goods would frustrate the policies behind the Uniform Commercial Code. The cases cited by AOSHPI are distinguishable, however. Thus, in Circuit Corp. of America v. Jerrold Electronics, 426 P.Supp. 361 (E.D.Pa.1977), the Court held no more than that mere non-performance of a contract is not fraud. The Court found that the plaintiff had shown no more than noncompliance with the terms of the contract and was alleging fraud only because the statute of limitations had run on its contract claims. Similarly, in Investors Premium Corp. v. Burroughs Corp., 389 F.Supp. 39 (D.S.C. 1974), the Court stated that no facts had been stated in support of a fraud claim, and that plaintiffs allegations amounted to no more than claims for breach of contract and breach of warranties. Finally, in Westfield Chemical Corp. v. Burroughs Corp., 21 U.C.C.Rep.Serv. 1293 (Mass.Sup.Ct. 1977), the Court’s dismissal of the plaintiff’s fraud claims was based in large part on the defendant’s failure to misrepresent the nature of the computer being sold. Rather, the representations only involved the future performance of the computer.

Here, plaintiffs’ allegations, for which they have provided some factual support, do amount to a claim that third-party defendants made certain statements about the Harvestore system that they knew to be untrue. A number of those allegations relate only to assertions about the system’s future performance. Defendants have also alleged, however, that the representations about the system’s oxygen-limiting feature were untrue. This is sufficient to support an action in fraud.

AOSHPI raises an additional argument, however, that is convincing. The written contract signed by George Schmidlin contains a merger clause that states in part: “I rely on no other promises or conditions and regard that as reasonable because these are acceptable to me.” The agreements entered into by the Larsons contain identical language. Third-party defendants argue that defendants cannot now dispute the truth of these statements, citing O.R.S. 42.300, which provides in part:

Except for the recital of the consideration, the truth of the facts recited from the recital in the written instrument shall not be denied by the parties thereto, their representatives or successors in interest by subsequent title.

AOSHPI asserts that there is thus a conclusive presumption that defendants relied only on the statements in the contracts they signed, which say nothing about the systems being oxygen-limiting and make none of the other alleged misrepresentations defendants point to.

A merger clause such as this one is valid only if it is conspicuous. Seibel v. Layne & Bowler, Inc., 56 Or.App. 387, 641 P.2d 668 (1982). The merger clause here is in bold letters, and in each case defendants signed their initials directly below it. The clause is conspicuous. The clause may therefore be disregarded only if its enforcement here “would be unconscionable or ... its specific inclusion was due to duress, overreaching, undue influence or fraud.” Galego v. Knudsen, 282 Or. 155, 164, 578 P.2d 769 (1978). In Galego, the Court held that the merger clause had to be considered, although it was not conclusive because the party asserting it was not a party to the contract. As applied to these facts, though, the clause is conclusive, since defendants have made no showing that it is unconscionable or that its specific inclusion in the contract was due to any of the factors cited in Galego.

AOSHPI is entitled to summary judgment on claims two and three.

ACC and AL have each moved for summary judgment on defendants’ fraud claims on the grounds that they were not involved in defendants’ decisions to purchase the Harvestore systems. This assertion is borne out by defendants’ deposition testimony. Plaintiffs did not employ the salesmen with whom defendants dealt, and there is no evidence suggesting that they had either express, implied or apparent authority to act on plaintiffs’ behalf. Plaintiffs’ are entitled to summary judgment on defendants’ first two claims against them.

Claims IV, V and VI: Breach of Warranties

Defendants’ fourth, fifth and sixth claims are for breach of express warranties, as well as implied warranties of merchantability and fitness for particular purpose.

AOSHPI seeks summary judgment on these claims on the grounds that the parties contracted to limit third-party defendants’ liability to the warranties and remedies provided for in the purchase agree-merits. The relevant language is the same in each purchase agreement. On the back of each agreement, above the initials and signature of the purchaser, is the following language:

WARRANTY OF MANUFACTURER AND SELLER
If within the time limits specified below any product sold under this purchase order, or any part thereof, shall prove to be defective in material or workmanship upon examination by the Manufacturer, the Manufacturer will supply an identical or substantially similar replacement part f.o.b. the Manufacturer’s factory, or the Manufacturer, at its option, will repair or allow credit for such part____

Further down the page is the following language:

SECOND DISCLAIMER
NO OTHER WARRANTY, EITHER EXPRESS OR IMPLIED AND INCLUDING A WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE HAS BEEN OR WILL BE MADE BY OR IN BEHALF OF THE MANUFACTURER OR THE SELLER BY THE OPERATION OF LAW WITH RESPECT TO THE EQUIPMENT AND ACCESSORIES OR THEIR INSTALLATION, USE, OPERATION, REPLACEMENT OR REPAIR. NEITHER THE MANUFACTURER NOR THE SELLER SHALL BE LIABLE BY VIRTUE OF THIS WARRANTY, OR OTHERWISE, FOR ANY SPECIAL OR CONSEQUENTIAL LOSS OR DAMAGE (INCLUDING BUT NOT LIMITED TO THOSE RESULTING FROM THE CONDITION OR QUALITY OF ANY CROP OR MATERIAL STORED IN THE STRUCTURE) RESULTING FROM THE USE OR LOSS OF THE USE OF EQUIPMENT AND ACCESSORIES. THE MANUFACTURER MAKES NO WARRANTY WITH RESPECT TO ERECTION OR INSTALLATION OF THE EQUIPMENT, ACCESSORIES, OR RELATED EQUIPMENT BY THE HARVESTORE DEALER, WHO IS AN INDEPENDENT CONTRACTOR. IRRESPECTIVE OF ANY STATUTE, THE BUYER RECOGNIZES THAT THE EXPRESS WARRANTY SET FORTH ABOVE, [sic] IS THE EXCLUSIVE REMEDY TO WHICH HE IS ENTITLED AND HE WAIVES ALL OTHER REMEDIES, STATUTORY OR OTHERWISE.

Under Oregon law, a disclaimer of warranties is valid if it is in writing and conspicuous. O.R.S. 72.3160(2). It is for the court to decide whether the disclaimer is conspicuous. O.R.S. 71.2010(10). This disclaimer is conspicuous. It is labelled a disclaimer, it is in large, bold face print and it is entirely in capital letters.

Such a clause will be enforced “when it is part of a bargain in fact between business concerns that have dealt with one another at arm’s length in a commercial setting.” Atlas Mutual Insurance Company v. Moore Dry Kiln, 38 Or.App. 111, 114, 589 P.2d 1134 (1979) (upholding clause limiting liability). The clause is part of the bargain in fact where it is conspicuous. Id. The parties here are business concerns and entered into these contracts in commercial settings. That one party in fact possessed greater financial resources does not require that the clause be voided. See K-Lines v. Roberts Motor Co., 273 Or. 242, 252-53, 541 P.2d 1378 (1975). The provisions in the parties’ contracts disclaiming warranties are valid and must be enforced.

Defendants argue, however, that AOSHPI is not entitled to summary judgment on these claims because the warranty that is contained in the contracts is wholly inadequate under the circumstances of these cases. O.R.S. 72.7190(2) states that “[w]here circumstances cause an exclusive or limited remedy to fail of its essential purpose, remedy may be had as provided in the Uniform Commercial Code.”

Defendants did not raise this issue prior to filing its response to the motions for summary judgment, and AOSHPI argues that it should not be able to do so at this late hour. Defendants’ new contention, however, is related to their previous allegations that the equipment was defective, and I conclude that permitting defendants to amend their third-party complaint to reflect this claim will not result in undue prejudice to other parties. See Howey v. United States, 481 F.2d 1187, 1190 (9th Cir.1973).

Defendants’ allegations that the Harvestore systems were defectively designed have not been controverted by any factual submissions. I do not find any Oregon cases applying O.R.S. 72.7190(2) to a factual situation such as this one. I must anticipate how an Oregon court would resolve this issue. See Westchester Fire Insurance Company v. Sperling, 421 F.2d 141, 142 (9th Cir.1970).

It is clear that the repair remedy fails where the manufacturer cannot cure substantial defects. See S.M. Wilson & Co. v. Smith International, Inc., 587 F.2d 1363, 1375 (9th Cir.1978). Defendants here argue that because the equipment was inherently defective, the repair remedy was inevitably inadequate. I conclude that if defendants can show that effective repairs were not performed, or were impossible to perform, then the exclusive remedy under the contract failed. See Soo Line Railroad Company v. Fruehauf Corporation, 547 F.2d 1365 (8th Cir.1977).

This presents the question of whether or not consequential damages would then be available, notwithstanding the contractual language barring them. The courts that have addressed this issue have reached contrary decisions. Compare Soo Line, supra (consequential damages available), with American Electric Power Co. v. Westinghouse Electric Corp., 418 F.Supp. 435 (S.D.N.Y.1976) (enforcing separate provision barring recovery of consequential damages). The Ninth Circuit, in a case involving California law, has enforced a limitation on consequential damages even where the repair remedy failed. S.M. Wilson, 587 F.2d at 1375. The Court emphasized that its ruling was based only on the particular facts of that case. Similarly, I conclude that the availability of consequential damages should be determined in light of the relevant facts of this case. They have not yet been established. I therefore decline to rule on this issue at this time.'

In conclusion, defendants’ claims for breach of implied and express warranties must be rejected in light of the contractual disclaimers of such warranties. AOSHPI is entitled to summary judgment on these claims but defendants may amend their third-party complaints against AOSHPI to allege a warranty claim based on a failure of their exclusive remedy.

ACC and AL also seek summary judgment on these three claims. I consider their arguments individually.

ACC is the assignee of West Coast’s rights under its contract with the Schmidlins. ACC contends that the Schmidlins agreed, in the contract between them and West Coast, not to assert against ACC any defenses it might have against West Coast. Such a clause is contained in the contract, and is enforceable “by an assignee who takes his assignment for value, in good faith and without notice of a claim or defense____” O.R.S. 79.2060(1). Defendants have presented no evidence that would lead the court to reject enforcement of this provision of the contract. ACC is entitled to summary judgment on these claims.

AL first contends that because the Larsons entered into leases, they cannot establish the existence of any warranties arising under the Uniform Commercial Code (UCC), which applies only to the sale of goods. I find it unnecessary to analyze these leases to determine whether they are “pure” leases or ones intended to be security. Whether the UCC applies or not, AL disclaimed all warranties, either express or implied. The disclaimers are conspicuous and are valid under Oregon law. See Atlas Mutual, 38 Or.App. at 114, 589 P.2d 1134.

In addition, no claim arising out of the alleged failure of defendants’ exclusive contractual remedy can be asserted against either ACC or AL. The limited remedy provided here was made only by the manufacturer, AOSHPI. If the remedy failed of its essential purpose, that does not render plaintiffs liable. See Crume v. Ford Motor Company, 60 Or.App. 224, 228, 653 P.2d 564 (1982).

Claim VII: Strict Liability Under O.R.S. 30.920

Defendants’ seventh claim is based on their allegations that the Harvestore systems were defectively designed. AOSHPI, ACC and AL seek summary judgment on this claim.

Movants argue that defendants cannot maintain an action brought on a strict products liability theory because they have not alleged that the Harvestore systems’ conditions presented an unreasonable danger to human life. They rely on Brown v. Western Farmers Association, 268 Or. 470, 521 P.2d 537 (1974), for this proposition, even though the Court in Brown specifically declined to so hold.

O.R.S. 30.920(1) provides that:

One who sells or leases any product in a defective condition unreasonably dangerous to the user or consumer or to his property is subject to liability for physical harm or damage to property caused by that condition.

Whether a strict tort liability claim is available depends on the type of defect, not the type of injury. See Russell v. Ford Motor Company, 281 Or. 587, 575 P.2d 1383 (1978). A defect is not “unreasonably dangerous” merely because it may in some way decrease the value of property. Brown, 268 Or. at 480, 521 P.2d 537. The defect alleged here, however, clearly involves a danger to property other than the product itself. The Oregon Supreme Court has not specifically ruled that a defect unreasonably dangerous to property but not to persons is a sufficient basis for strict liability, but I conclude that it would so rule if confronted with the issue. See Russell, 281 Or. at 594 n. 4, 575 P.2d 1383. See also Restatement (Second) of Torts § 402A (1965).

ACC also seeks summary judgment on this claim on the grounds that it is not a seller or lessor of Harvestore systems. Under Oregon law the seller or lessor of a defective product is strictly liable only if it is “engaged in the business of selling or leasing such a product____” O.R.S. 30.920(l)(a). ACC merely financed the purchase of the Harvestore system by the Schmidlins. It has submitted the affidavit of Stan Fettig, its credit manager, who states that ACC is not in the business of selling the equipment purchased by the Schmidlins. Defendants have failed to respond with any factual materials of their own. ACC is thus entitled to summary judgment on this claim.

AL also seeks summary judgment on this claim on similar grounds. AL emphasizes that it merely leased the Harvestore systems to the Larsons. Under Oregon law, however, a lessor may be subject to strict liability if it is in the business of leasing the product. O.R.S. 30.920(l)(a). AL asserts that it is not in the business of leasing Harvestore systems. It has submitted the affidavit of Stan Fettig, who is also its director-credit manager, and also relies on Tillman v. Vance Equipment Company, 286 Or. 747, 596 P.2d 1299 (1979), in arguing that it must have made some representation as to the quality of the product in order to make it strictly liable to defendants here. In response, defendants argue that in 1981, before they leased the second Harvestore structure, a representative of AL came to their farm and encouraged them to lease the second structure. It is clear from Robert Larson’s deposition testimony, however, that at the time of this visit the terms of the lease had already been negotiated. The only purpose of the visit was to determine whether the Larson’s farming operation could support the lease payments. I conclude that there is no factual question as to whether or not AL can be considered to be in the business of leasing such equipment.

In conclusion, AOSHPI’s motion for summary judgment is denied as to defendants’ seventh claims, and plaintiffs’ motions with respect to those claims are granted.

Claim VIII: Negligence

Defendants’ eighth claims are for negligent design and manufacture of the Harvestore system. AOSHPI, ACC and AL move for summary judgment on these claims.

AOSHPI asserts that the limitations on liability contained in the contracts bar defendants’ negligence claims. The relevant language in the contracts states that:

IRRESPECTIVE OF ANY STATUTE, THE BUYER RECOGNIZES THAT THE EXPRESS WARRANTY SET FORTH ABOVE [providing for repair or replacement of defective parts], IS THE EXCLUSIVE REMEDY TO WHICH HE IS ENTITLED AND HE WAIVES ALL OTHER REMEDIES, STATUTORY OR OTHERWISE.

A limitation on liability such as this is valid. Atlas Mutual, 38 Or.App. at 114-15, 589 P.2d 1134. The language is explicit and must be enforced. AOSHPI is therefore entitled to summary judgment on defendants’ negligence claims.

ACC and AL have both moved for summary judgment on defendants’ negligence claims. Defendants’ allegations are not directed against plaintiffs. Plaintiffs’ motions for summary judgment are granted as to these claims.

III. Conclusion

Plaintiffs’ motions for summary judgment are granted as to their claims against defendants, as well as on defendants’ counterclaims. Third-party defendant A.O. Smith’s motions for summary judgment are granted as to all claims against it in both cases. Third-party defendant 4-J’s motions for summary judgment in 83-1847 and for partial summary judgment in 83-1848 are granted. Third-party defendant Ted Williams’ motion for partial summary judgment is granted.

With respect to the individual third-party claims, AOSHPI’s motion for summary judgment is granted on claims I, II, III and VIII. It is also granted with respect to claims IV, V and VI of the Third-Party Complaints, except that defendants may amend their complaints to state claims against AOSHPI based on the alleged failure of their exclusive remedy under the contracts. AOSHPI’s motion for summary judgment is denied as to claim VII.

      . Such a determination would not, in any event, establish either that the transactions were sales or whether the UCC applies to them directly or by analogy. See All-States Leasing v. Ochs, 42 Or.App. 319, 333-36, 600 P.2d 899 (1979).

      . The 1980 lease contains the following language: "Lessee acknowledges and agrees ... that lessor has not made and does not hereby make, any representation or warranty or covenant of any kind with respect to the equipment or the design, value, merchantability, fitness, condition, quality of material or workmanship or conformity of the equipment to the specifications of any purchase order relating thereto, durability or suitability of the equipment in any respect or in connection with or for the purposes and uses of lessee, or any other representation or warranty or covenant of any kind or character, express or implied, with respect thereto.”
      The 1981 lease contains the following language: "Lessor has not made and does not make any representation or warranty, either express or implied, as to the equipment, and expressly disclaims the implied warranties of merchantability and fitness for any particular purpose.”

      . It also appears that the limitations on liability contained in the leases would bar liability on this claim. See K-Lines, 273 Or. 242, 541 P.2d 1378. Although plaintiff has not raised this argument as yet, it appears that such a motion, when made, would be granted.

      . AOSHPI has not argued that defendants’ strict products liability claims are foreclosed, although there seems to be no reason why they would not be. See K-Lines, 273 Or. 242, 541 P.2d 1378.


author: PRICE, District Judge.

text:
    UNITED STATES of America, Plaintiff, v. Joe B. ANAYA, and Henry Zavala, Defendants.
    CR F 83-151-EDP.
    United States District Court, E.D. California.
    Jan. 23, 1985.
    Donald B. Ayer, U.S. Atty., David F. Rodriguez, Asst. U.S. Atty., Fresno, Cal., for plaintiff.
    Jacob M. Weisburg, Fresno, Cal., for defendant Joe Anaya.
    Roger Spaulding, Fresno, Cal., for defendant Henry Zavala.
   MEMORANDUM DECISION

PRICE, District Judge.

The defendants stand charged in this court in a three-count indictment as follows:

Count 1 alleges that the defendant Ana-ya willfully procured the defendant Zavala to use and/or endeavor to use an electronic and mechanical device to intercept oral communications between the participants in a closed executive session of the Parlier City Council, in violation of 18 U.S.C. § 251 l(l)(b)(ii).

Count 2 alleges that the defendant Zavala willfully used and/or willfully endeavored to use an electronic and mechanical device to intercept the oral communications that are described in Count 1, again a violation of 18 U.S.C. § 2511(l)(b)(ii).

Count 3 charges the defendants jointly with disclosing or endeavoring to disclose to another person the contents of the above-described oral communications, alleged to be a violation of 18 U.S.C. § 2511(l)(c).

Since there was little dispute on the facts, the defendants, through their counsel, and counsel for the United States, agreed, with the approval of the Court, to dispose of the matter by filing a settled statement of facts upon which the Court would determine the defendants’ formal motions to dismiss. The settled statements of facts signed by the parties is as follows:

On or about October 27,1981, a Parlier City Council executive session took place during the evening hours. This executive session of the City Council was held at 580 Tulare Street, Parlier, California, in the courtroom of the Parlier Justice Court, which then also served as the City Council Chambers. The Parlier Police Department was also located in the same building adjoining the Justice Court/City Council Chambers.
Prior to the commencement of the City Council session referenced to above, a Radio Shack brand FM wireless miniature microphone was surreptitiously taped under the counsel table of the courtroom, which table was also where the City Council sat when in session. The miniature microphone measures l3/i" X 3/4" X 5/8". It operates on a tunable 88-108 MHz FM band and is powered by a 1.4 volt disc battery. The transmission range of the microphone does not exceed 250 feet.
Before the microphone was taped under the courtroom counsel table, an FM radio with built-in cassette player had been adjusted to somewhere in the middle of the band range to receive transmissions from the microphone. The radio/eassette player was located in the Parlier Police Department. The radio was some 90 to 100 feet from the microphone located under the courtroom table.
The entire City Council session was overheard through the microphone and recorded using the FM radio/eassette player located at the Parlier Police Department adjoining the Parlier Justice courtroom, approximately 90 to 100 feet away.
The government cannot establish there was any radio interference with any radio broadcast or reception as a result of the monitoring and broadcasting of the City Council session utilizing the FM miniature microphone.

The section under which the defendants are here charged was enacted as part of the Omnibus Crime Control and Safe Streets Act of 1968. An extensive legislative history of the entire act is set forth in [1968] 2 U.S.Code Cong. & Admin.News, 90th Cong., pp. 2112, et seq.

In considering the statutory scheme, it is critical to consider the statutory definitions applicable to this action, (see 18 U.S.C. § 2510):

(2) “oral communication” means any oral communication uttered by a person exhibiting an expectation that such communication is not subject to interception under circumstances justifying such expectation.
(4) “intercept” means the aural acquisition of the contents of any wire or oral communication through the use of any electronic, mechanical, or other device.
(5) “electronic, mechanical, or other device” means any device or apparatus which can be used to intercept a wire or oral communication other than—
(a) any telephone or telegraph instrument, equipment or facility, or any component thereof, (i) furnished to the subscriber or user by a communications common carrier in the ordinary course of its business and being used by the subscriber or user in the ordinary course of its business; or (ii) being used by a communications common carrier in the ordinary course of its business, or by an investigative or law enforcement officer in the ordinary course of his duties;
(b) a hearing aid or similar device being used to correct subnormal hearing to not better than normal;

We now turn to the precise sections under which the defendants are charged:

(1) Except as otherwise specifically provided in this chapter [18 U.S.C. §§ 2510, et seq.] any person who—
(b) willfully uses, endeavors to use, or procures any other person to use or endeavor to use any electronic, mechanical, or other device to intercept any oral communication when—
(ii) such device transmits communications by radio, or interferes with the transmission of such communication, or
(c) willfully discloses, or endeavors to disclose, to any other person the contents of any wire or oral communication, knowing or having reason to know that the information was obtained through the interception of a wire or oral communication in violation of this subsection;

The legislative history is notable:

Subparagraph (a) establishes a blanket prohibition against the interception of any wire communication. Since the facilities used to transmit wire communications form part of the interstate or foreign communications network, Congress has plenary power under the commerce clause to prohibit all interception of such communications, whether by wiretapping or otherwise. (Weiss v. United States, 60 S.Ct. 269, 308 U.S. 321 [84 L.Ed. 298] (1939)). (emphasis added)

The broad prohibition of subparagraph (a) is also applicable to the interception of oral communications. The interception of such communications, however, does not necessarily interfere with the interstate or foreign communications network, and the extent of the constitutional power of Congress to prohibit such interception is less clear than in the case of interception of wire communications. The Supreme Court has indicated that Congress has broad power to protect certain rights under the Equal Protection Clause of the 14th amendment against private interference. (United States v. Guest, 86 S.Ct. 1170, 383 U.S. 745 [16 L.Ed.2d 239] (1966) (concurring and dissenting opinions).) The right here at stake — the right of privacy — is a right arising under certain provisions of the Bill of Rights and the due process clause of the 14th amendment. Although the broad prohibitions of subparagraph (a) could, for example, be constitutionally applied to the unlawful interception of oral communications by persons acting under color of State or Federal law, see Katzenbach v. Morgan, 86 S.Ct. 1717, 384 U.S. 641 [16 L.Ed.2d 828] (1966), the application of the paragraph to other circumstances could in some cases lead to a constitutional challenge that can be avoided by a clear statutory specification of an alternative constitutional basis for the prohibition.

Therefore, in addition to the broad prohibitions of subparagraph (a), the committee has included subparagraph (b) which relies on accepted jurisdictional bases under the commerce clause and other provisions of the Constitution to prohibit the interception of oral communications.

Subparagraphs (c) and (d) prohibit, in turn, the disclosure or the use of the contents of any intercepted communication by any person knowing or having reason to know the information was obtained through an interception in violation of this subsection. The disclosure of the contents of an intercepted communication that had already become “public information” or “common knowledge” would not be prohibited. The scope of this knowledge required to violate either subparagraph reflects existing law (Pereira v. United States, 74 S.Ct. 358, 347 U.S. 1 [98 L.Ed.2d 435] (1954)). A violation of each must be willful to be criminal (United States v. Murdock, 54 S.Ct. 223, 290 U.S. 389 [78 L.Ed. 381] (1933)). Each prohibition strikes not only at the prohibited action but also at endeavors. (Osborn v. United States, 87 S.Ct. 429, 385 U.S. 323 [17 L.Ed.2d 394] (1966)) and procurements (Nye & Nissen v. United States, 69 S.Ct. 766, 336 U.S. 613 [93 L.Ed. 919] (1949)). There is not intent to preempt State law.

[1968] 2 U.S. Code Cong. & Ad.News 2180, 2181.

We first turn to the citation of authority upon which Congress rested their presumed authority to legislate in this field. In Weiss v. United States, 308 U.S. 321, 60 S.Ct. 269, 84 L.Ed. 298, the defendants were charged with using the mails to defraud, and a conspiracy to so use them. Their conviction was based in part upon the introduction of evidence that had been obtained by wire taps. The government argued that since these interceptions were intrastate messages only, Congress could not have intended to prohibit their interception by federal agents. The Supreme Court disagreed and reversed.

United States v. Guest, 383 U.S. 745, 86 S.Ct. 1170, 16 L.Ed.2d 239, was a civil right case. Defendants were indicted for a criminal conspiracy under 18 U.S.C. § 241, which prohibited conspiracy by two or more citizens to injure, oppress, threaten or intimidate any citizen in the free exercise or enjoyment of any right or privilege secured to him by the Constitution and laws of the United States. Fairly read, Guest stands for the proposition that the Court which heard Guest was sharply divided on the power of Congress to enact laws in this area. The working plurality in each instance expressed the opinion that Congress was powerless to act, except in those areas where agents of the' state were involved, or alternately, the right involved was an area over which Congress had exclusive jurisdiction, such as the right of interstate passage. In the latter instance, the plurality held that interference with such a right could be criminally proscribed by Congress, even though the denial was not the result of state action.

In Katzenbach v. Morgan, 384 U.S. 641, 86 S.Ct. 1717, 16 L.Ed.2d 828, the Court was faced with the question as to whether a particular section applicable to those who had obtained their early education in Puerto Rico overrode contrary provisions of state statutes pertaining to voter eligibility. The Court held that the Voting Rights Act was an appropriate exercise of legislative authority by Congress granted to them under Section 5 of the 14th Amendment. An interesting facet of the decision was the Court’s holding that having decided that the section of the Voting Rights Act under review prohibited the application of the state laws as to the group protected by that Act, that the Court need not go further and decide that the state law was per se unconstitutional.

It would not appear that the Congressional concern about their power to legislate acts occurring solely in intrastate commerce is answered in any substantial part by the above cases.

A survey of the annotations found in 43 L.Ed.2d, at 871, and the supplement to that volume, contains an exhaustive review of the instances in which the United States Supreme Court has dealt with the individual’s right of privacy. A careful reading of those materials indicates that the Court had never specifically addressed the problem at issue here — namely, the right of Congress to legislate broadly to protect the right of privacy of individuals from invasion by other citizens.

In Gelbard v. United States, 408 U.S. 41, 92 S.Ct. 2357, 33 L.Ed.2d 179, the Court was dealing with contempt of witnesses before a Federal Grand Jury who refused to comply with Court orders to testify. The refusals were based upon the witnesses’ allegations that their interrogations were based upon information obtained by illegal wire taps by federal agents. Although not necessary to the decision, the Court noted:

Except as expressly authorized in Title III, however, all interceptions of wire and oral communications are flatly prohibited. Unauthorized interceptions and the disclosure or use of information obtained through unauthorized interceptions are crimes, 18 U.S.C. § 2511(1), and the victim of such interception, disclosure, or use is entitled to recover civil damages, 18 U.S.C. § 2520.

Gelbard v. United States, 408 U.S. at p. 46, 92 S.Ct. at p. 2360.

United States v. Kahn, 415 U.S. 143, 94 S.Ct. 977, 39 L.Ed.2d 225 (1974), as did most of the cases in this area, dealt with the validity of application for wire taps. Indeed, at the outset, the Court in Kahn observed: “At the outset, it is worth noting what issues are not involved in this case. First, we are not presented with an attack upon the constitutionality of any part of Title III of the Omnibus Crime Control and Safe Streets Act of 1968.” (415 U.S. at 150, 94 S.Ct. at 981.)

The section with which we are concerned was exhaustively dealt with in United States v. Burroughs. The different aspects of that case are variously reported at 379 F.Supp. 736 (1974), 510 F.2d 967 (1975), 537 F.2d 1156 (1976), and 564 F.2d 1111 (1977). The factual background in the litigation history of this case is best summarized as follows:

Defendants were management employees of J.P. Stevens & Company, the owner of a certain textile plant against which the Textile Workers Union of America initiated an attempt to unionize the employees in 1972. During the organizational drive, the union organizers registered at a motel across the street from the plant. At sometime during January of 1973, the defendants allegedly arranged to have the telephone instrument in the union organizers room converted into a listening device so that conversations in that room could be overheard in certain other motel rooms used by the motel’s internal telephone system, and with the cooperation of the motel telephone switchboard operator. At the trial, the government showed only the attempted interception of oral communications. The telephone was not rigged in such a way so as to permit the interception of a telephone conversation, and could only be used to eavesdrop on the conversation between individuals in the organizer’s motel room.

After a jury verdict of guilty, the court, upon motion of the defendants, granted a judgment of acquittal. The district court determined that there was a failure of proof of any state action or any action under color of state or federal law in the attempt to intercept the communications. Although no state action was alleged in the information, and the statute in question does not specifically require such state action, the trial court concluded that such an interpretation was necessary to preserve the constitutionality of the statute. United States v. Burroughs, 379 F.Supp. 736 (D.S.C.1974).
The government filed a notice of appeal from the judgment of acquittal and thereafter the defendants moved that the appeal be dismissed. Concluding that the judgment of acquittal was not properly appealable by the government, we granted defendants’ motion and dismissed the appeal. United States v. Burroughs, 510 F.2d 967 (4 Cir.1975) (Table). Thereafter the government filed a petition for rehearing and, based upon a more recent decision of the Supreme Court in United States v. Wilson, 420 U.S. 332, 95 S.Ct. 1013, 43 L.Ed.2d 232 (1975), we held that the government could appeal the judgment; we then reinstated the appeal.

United States v. Burroughs, 564 F.2d 1111, 1112-13.

Pertinent to our purpose here, the Court decided that:

In our view, this portion of the legislative history indicates that Congress intended subsection (l)(a) to overlap with subsection (l)(b) and that (l)(a) could be applied to persons other than those acting under color of state or federal law who intercepted oral communications. Congress expressed concern for the constitutionality of subsection (l)(a) in “some cases,” but it did not limit the subsection’s application merely to persons acting under color of state or federal law. Thus the district court’s reading of § 2511(l)(a) as it applies to oral communications was overly restrictive.
Undeniably, subsections (l)(b)(i)-(iv) are based upon the power of Congress to regulate interstate commerce and require a specific showing of the effect upon interstate commerce. But because subsection (l)(a) does not specify any particular basis for jurisdiction, we are of the opinion that proof of any rational basis would be adequate. See Perez v. United States, 402 U.S. 146, 91 S.Ct. 1357, 28 L.Ed.2d 686 (1971). The essential element is that some basis for federal jurisdiction be established at trial.

United States v. Burroughs, 564 F.2d at 1115.

In reaching this conclusion, i.e., that some basis for federal jurisdiction must be established before Congress can validly enact a federal criminal statute, the Burroughs court was strongly influenced by United States v. Bass, 404 U.S. 336, 92 S.Ct. 515, 30 L.Ed.2d 488. In Bass, the defendant was convicted of possessing a firearm in violation of 18 U.S.C.App. § 1202(a). After his conviction, the defendant unsuccessfully moved for arrest of judgment in the district court on the grounds that the statute did not reach possession of a firearm not shown to have been in commerce or affecting commerce, and that if it did, Congress had overstepped its constitutional powers under commerce clause. The court of appeals reversed the conviction on the grounds that if the government’s construction of the statute were accepted, there would be substantial doubt about the statute’s constitutionality. After interpreting the text of the statute to mean that any conviction of Bass must fall because of the government’s failure to show the requisite nexus with interstate commerce, the Supreme Court went on to base its decision upon a second point.

Parenthetically, it should be noted that in 1967, the California legislature adopted Chapter 1.5 of Title 15 of the California Penal Code. Although many of these sections were contained in prior statutory enactments going back as far as 1911, the California Legislature stated, in Penal Code § 630 its policy to be that:

The Legislature hereby declares that advances in science and technology have led to the development of new devices and techniques for the purpose of eavesdropping upon private communications and that the invasion of privacy resulting from the continual and increasing use of such devices and techniques has created a serious threat to the free exercise of personal liberties and cannot be tolerated in a free and civilized society.
The Legislature by this chapter intends to protect the right of privacy of the people of this state.
The Legislature recognizes that law enforcement agencies have a legitimate need to employ modern listening devices and techniques in the investigation of criminal conduct and the apprehension of law-breakers. Therefore, it is not the intent of the Legislature to place greater restraints on the use of listening devices and techniques by law enforcement agencies than existed prior to the effective date of this chapter.

Elsewhere in that chapter, the Legislature prohibited unauthorized wiretaps, eavesdropping on confidential communications, trespass for the purpose of invading privacy, the sale of eavesdropping devices, the interception of a privileged conversation of a prisoner, interception and divulgence of police radio communication, the disclosure of wire communication, and the unauthorized opening of a wire communication, and provided appropriate penalties for such acts. The title further exempts the lawful activity of law enforcement officers and specifically regulates the interception of such messages as part of law enforcement activities.

On the basis of the analysis of the United States Supreme Court in United States v. Bass, supra, and Burroughs III, the Court is satisfied that before 18 U.S.C. § 2511(l)(b)(ii) may form the basis for a federal prosecution, the appropriate factual nexus must be found. Clearly, none can be gleaned from the settled statement of facts upon which this motion proceeds.

As pointed out above, the defendants are jointly charged with a violation of 18 U.S.C. § 2511(l)(c) in the third count. The elements of this crime appear to be:

1. The disclosure or attempt to disclose to another person;

2. The contents of any wire or oral communication;

3. ' Knowing or having reason to know that the information was obtained through the interception of a wire or oral communication in violation of this section.

The government case under this subsection fails on two grounds:

First, as was previously pointed out, it is the ruling of the Court that the interceptions of the conversations in this case were not illegal under the section which forms the basis for the charge, i.e., 18 U.S.C. § 2511(l)(b)(ii).

More importantly, even on appeal if the appellate court should conclude that the Court’s determination of the interpretation of the applicable section in counts one and two was incorrect, there is certainly no fact contained in the settled statement of facts from which it could logically be inferred that these intercepted conversations were disclosed to “another person.”

For all of the foregoing reasons, the defendants’ motion to dismiss based upon the settled statement of facts is granted.

      . Here, the defendants were members of the Parlier Police Department and presumably acting in that capacity. If the intercepted communications became the basis of criminal charges against the communicants, a different result would issue.

      . Again, the foregoing quotation must be read in the light of the facts: The interceptors were federal agents, and the interceptions form the basis of prosecutorial action.