author: ROBERT J. WARD, District Judge.

text:
    Savino LOSCO, Plaintiff, v. Margaret M. HECKLER, Secretary of Health and Human Services, Defendant.
    No. 84 Civ. 3971 (RJW).
    United States District Court, S.D. New York.
    March 12, 1985.

      Tomkiel & Tomkiel, P.C., Yonkers, N.Y., for plaintiff; Stanley A. Tomkiel, III, Yonkers, N.Y., of counsel.
    Rudolph W. Giuliani, U.S. Atty., S.D. N.Y., New York City, for defendant; Donna H. Lieberman, New York City, of counsel.
   OPINION

ROBERT J. WARD, District Judge.

This is an action brought pursuant to section 205(g) of the Social Security Act as amended (the “Act”), 42 U.S.C. § 405(g), to review a final determination of the Secretary of Health and Human Services (the “Secretary”). That decision denied plaintiff’s application for federal disability insurance benefits. Plaintiff moves for summary judgment pursuant to Rule 56, Fed.R. Civ.P. The Secretary cross-moves for judgment on the pleadings, pursuant to Rule 12(c), Fed.R.Civ.P. For the reasons hereinafter stated, plaintiffs motion is granted insofar as it seeks a remand to the Secretary. The Secretary’s cross-motion is denied.

BACKGROUND

Plaintiff is currently fifty-eight (58) years old. He has completed formal education through only the ninth grade. According to the administrative record, plaintiff has not worked since January 1981. (Tr. 23). He was last employed as a driver-chauffeur. Prior to that time he worked as a machine operator and thereafter as an insurance agent.

Plaintiff first applied for disability insurance benefits in July 1981, alleging that he had been disabled since January 1981 as a result of a severe back impairment. That application was denied on September 14, 1981, and plaintiff did not appeal that denial within the prescribed period. Subsequently, on October 22, 1982, plaintiff filed a second application for disability insurance benefits, alleging that he had been disabled since January 1981 as a result of a severe back impairment. After plaintiff’s application was denied initially and on reconsideration, he filed a timely request for an administrative hearing. Such a hearing was held on September 13, 1983, before Administrative Law Judge Ralph A. Celentano (the “ALJ”). Plaintiff appeared pro se at this hearing. In a decision dated January 13, 1984, the AU determined that plaintiff was not “disabled” within the meaning of the Act because plaintiff had retained the residual functional capacity for sedentary work, and therefore, that plaintiff was not entitled to disability insurance benefits. This determination became the final decision of the Secretary when it was adopted by the Appeals Council on April 5, 1984.

DISCUSSION

I.

The legal principles that govern the Court’s decision on the instant motions are well settled. “Disability” is defined in the Act as the “inability to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or which has lasted or can be expected to last for a continuous period of not less than 12 months.” 42 U.S.C. § 423(d)(1)(A). The mere presence of an impairment is not disabling within the meaning of the Act. Rather, a person may be determined to be under a disability only if his or her impairment is of such severity that the claimant is not only unable to do his or her previous work, but cannot engage in any kind of substantial gainful work that exists in the national economy. 42 U.S.C. § 423(d)(2)(A).

The initial burden of proving disability is on the claimant. 42 U.S.C. § 423(d)(5), 20 C.F.R. § 404.1520; see Bluvband v. Heckler, 730 F.2d 886, 891 (2d Cir.1984); Ferraris v. Heckler, 728 F.2d 582, 584 (2d Cir.1984); Rivera v. Schweiker, 717 F.2d 719, 722 (2d Cir.1983); Schauer v. Schweiker, 675 F.2d 55 (2d Cir.1982); Carter v. Schweiker, 649 F.2d 937, 940 (2d Cir.1981); Gold v. Secretary of HEW, 463 F.2d 38, 41 (2d Cir.1972). The claimant satisfies this burden by making out a prima facie case, that is, by showing that his or her impairment prevents return to his or her prior employment, Parker v. Harris, 626 F.2d 225, 231 (2d Cir.1980); Bastien v. Califano, 572 F.2d 908, 912-13 (2d Cir.1978). The burden then shifts to the Secretary, who must produce evidence to show the existence of alternative substantial gainful work that exists in the national economy that the claimant could perform. Heckler v. Campbell, 461 U.S. 458, 103 S.Ct. 1952, 1954, 76 L.Ed.2d 66 (1983); Bluvband v. Heckler, supra, 730 F.2d at 891; Ferraris v. Heckler, supra, 728 F.2d at 584; Rivera v. Schweiker, supra, 717 F.2d at 722-23; Parker v. Harris, supra, 626 F.2d at 231; Bastien v. Califano, supra, 572 F.2d at 912-13.

In reaching a conclusion as to disability, both objective and subjective factors are to be considered. These include objective medical facts, diagnoses or medical opinions based on such facts, subjective evidence of pain or disability testified to by the claimant or other witnesses, and the claimant’s educational background, age, and work experience. Ferraris v. Heckler, supra, 728 F.2d at 585; Carroll v. Secretary of HHS, 705 F.2d 638, 642 (2d Cir.1983); Rivera v. Harris, 623 F.2d 212, 216 (2d Cir.1980); Bastien v. Califano, supra, 572 F.2d at 912; Gold v. Secretary of HEW, supra, 463 F.2d at 41 n. 2. These factors need not be given equal weight. The expert opinion of the claimant’s treating physician is entitled to particular weight, and “in the absence of substantial contradictory evidence, the opinion of the claimant’s treating physician is binding on the Secretary.” Hankerson v. Harris, 636 F.2d 893, 896 (2d Cir.1980); see Ferraris v. Heckler, supra, 728 F.2d at 585; Donato v. Secretary of HHS, 721 F.2d 414, 419 (2d Cir.1983); Rivera v. Schweiker, supra, 717 F.2d at 723; Carroll v. Secretary of HHS, supra, 705 F.2d at 642; Aubeuf v. Schweiker, 649 F.2d 107, 112 (2d Cir.1981); Eiden v. Secretary of HEW, 616 F.2d 63, 64 (2d Cir.1980); Alvarado v. Califano, 605 F.2d 34, 35 (2d Cir.1979); Bastien v. Califano, supra, 572 F.2d at 912. Moreover, in making any determination as to a claimant’s disability, the Secretary must explain what physical functions the claimant is capable of performing. See Ferraris v. Heckler, supra, 728 F.2d at 585; Kerner v. Flemming, 283 F.2d 916, 921 (2d Cir.1960); Deutsch v. Harris, 511 F.Supp. 244, 249 (S.D.N.Y.1981).

The Secretary has the duty of making the determination of disability under the principles set out above. It is not the function of this Court, which sits in the present context as a reviewing court, to determine de novo whether the claimant is disabled. Assuming the Secretary has applied proper legal principles, judicial review is limited to an assessment of whether the findings of fact are supported by substantial evidence. If they are so supported, they are conclusive. 42 U.S.C. § 405(g). See Bluvband v. Heckler, supra, 730 F.2d at 891; Aponte v. Secretary of HHS, 728 F.2d 588, 591 (2d Cir.1984); Donato v. Secretary of HHS, supra, 721 F.2d at 418; Berry v. Schweiker, 675 F.2d 464, 467 (2d Cir.1982) (per curiam). Thus, absent legal error by the Secretary, her decision cannot be set aside if it is supported by substantial evidence. Bluvband v. Heckler, supra, 730 F.2d at 891; Dumas v. Schweiker, 712 F.2d 1545, 1550 (2d Cir.1983); Aubeuf v. Schweiker, supra, 649 F.2d at 112; Marcus v. Califano, 615 F.2d 23, 27 (2d Cir.1979). “Substantial evidence” means “more than a mere scintilla. It means such relevant evidence as a reasonable mind might accept as adequate to support a conclusion.” Richardson v. Perales, 402 U.S. 389, 401, 91 S.Ct. 1420, 1427, 28 L.Ed.2d 842 (1971) (quoting Consolidated Edison Co. v. NLRB, 305 U.S. 197, 229, 59 S.Ct. 206, 216, 83 L.Ed. 126 (1938)). See also De Leon v. Secretary of HHS, 734 F.2d 930, 933 (2d Cir.1984); Donato v. Secretary of HHS, supra, 721 F.2d 418; Parker v. Harris, supra, 626 F.2d at 231-32.

II.

Applying these principles to the instant case, the Court concludes that the decision of the Secretary denying plaintiffs application for disability insurance benefits is not supported by substantial evidence, and that the case must be remanded. In particular, the Secretary failed properly to evaluate the credibility and legal effect of the medical reports and plaintiff’s testimony that extreme pain rendered plaintiff disabled within the meaning of the Act. In addition, the Secretary also failed to satisfy her statutory duty to consider the effect on plaintiff’s functional capacity of all of plaintiff’s impairments — both individually and in combination. Moreover, the record reveals that the AU failed to provide plaintiff with an adequate hearing, or to perform his duty affirmatively to develop the record.

A.

In his decision dated January 13, 1984, the AU briefly summarized the medical evidence relevant to plaintiff’s claims of disability due to back pain. The AU then concluded:

The medical evidence establishes that the claimant has severe disc disease, but that he does not have an impairment or combination of impairments listed in, or medically equal to one listed in Appendix 1, Subpart P, Regulations No. 4.

(Tr. 10).

In so concluding, however, neither the AU nor the Secretary evaluated the credibility of plaintiff’s claims that extreme pain rendered plaintiff unable to engage in substantial gainful activity and, thus, disabled within the meaning of the Act. However, it is well settled both in the Second Circuit and in others, that “subjective pain may serve as the basis for establishing disability, even if such pain is unaccompanied by positive clinical findings or other ‘objective’ medical evidence.” Marcus v. Califano, supra, 615 F.2d at 27 (emphasis in original). See also Aubeuf v. Schweicker, 649 F.2d 107, 112 (2d Cir.1981); Northcutt v. Califano, 581 F.2d 164, 166-67 (8th Cir.1978); Cutler v. Weinberger, 516 F.2d 1282, 1286-87 (2d Cir.1975); Stark v. Weinberger, 497 F.2d 1092, 1097 (7th Cir.1974); Sayers v. Gardner, 380 F.2d 940, 948 (6th Cir.1967); Celebrezze v. Warren, 339 F.2d 833, 837-38 (10th Cir.1964); Page v. Celebrezze, 311 F.2d 757, 762-63 (5th Cir.1963). This principle was recently reaffirmed by the Second Circuit in Mimms v. Heckler, 750 F.2d 180, 185-86 (2d Cir.1984).

It is also clear, however, that the Secretary is not obliged to accept without question the credibility of such subjective evidence. Rather, the AU has the discretion to evaluate the claimant’s credibility and to arrive at an independent judgment, in light of the medical findings and other evidence, regarding the true extent of the pain alleged by the claimant. See McLaughlin v. Secretary of HEW, 612 F.2d 701, 705 (2d Cir.1980); Marcus v. Califano, supra, 615 F.2d at 27; Reyes Robles v. Finch, 409 F.2d 84, 87 (1st Cir.1969). Nonetheless, to make this evaluation properly, the AU must first weigh “the objective medical evidence in the record, [the claimant’s] demeanor, and other indicia of credibility.” Marcus v. Califano, supra, 615 F.2d at 27; Rivera v. Secretary of HEW, 513 F.Supp. 194, 199 (S.D.N.Y.1981). As the Circuit court has recently explained:

While an AU “has the discretion to evaluate the credibility of a claimant and to arrive at an independent judgment [regarding that pain, he must do so] in light of medical findings and other evidence, regarding the true extent of the pain alleged by the claimant.” McLaughlin v. Secretary of Health, Education and Welfare, 612 F.2d 701, 705 (2d Cir.1980), quoting Marcus v. Califano, 615 F.2d 23, 27 (2d Cir.1979).

Mimms v. Heckler, supra, at 186 (brackets in original).

In the instant case, both the clinical reports of examining and treating physicians and plaintiffs own subjective testimony dwell upon plaintiffs complaints of disabling pain. See, e.g., Tr. 28-32. The Secretary failed not only to assess the credibility of plaintiffs claims of disabling pain, but even to consider the issue of plaintiffs pain and the evidence — both objective and subjective — that relates to that issue. Consequently, the Secretary’s determination that plaintiff was not disabled because he had retained the residual functional capacity for sedentary work was premised upon an erroneous application of the law and must be reversed. See, e.g., Marcus v. Califano, supra, 615 F.2d at 27 (quoting Northcutt v. Califano, supra, 581 F.2d at 166) (“Disregard of a claimant’s subjective complaints of pain ... is not justified solely because there exists no objective evidence in support of such complaints”).

B.

The Secretary’s failure to consider the effect of the combination of plaintiff’s impairments on plaintiff’s ability to engage in substantial gainful activity supplies an additional reason for reversing the Secretary’s decision in the instant case. As the Second Circuit recently explained “[i]t is the clear rule in this circuit that ‘all complaints ... must be considered together in determining ... work capacity.’ Gold v. Secretary, supra, 463 F.2d at 42 (quoting Burns v. Celebrezze, 234 F.Supp. 1019, 1020 (W.D.N.C.1964); see also Cutler v. Weinberger, 516 F.2d 1282, 1285 (2d Cir.1975).” De Leon v. Heckler, supra, 734 F.2d at 937 (ellipses in original). See also Crespo v. Harris, 484 F.Supp. 1167, 1174 (S.D.N.Y.1980); Storyk v. Secretary of HEW, 462 F.Supp. 152, 156 (S.D.N.Y.1978).

In the instant case, the record reveals that plaintiff suffered from herpes simplex in his eyes which has left him with blurred vision. This condition was reported by Dr. Gerald A. Mennin in a letter dated September 12, 1983, (Tr. 145), which was handed up to the AU at the administrative hearing and made part of the administrative record. (Tr. 16). Dr. Mennin reported that he had been treating plaintiff since May 28, 1983 for herpes simplex and that plaintiff’s treatment was expected to last indefinitely. Moreover, at the administrative hearing, plaintiff testified that he continues to experience blurred vision in his right eye despite extensive medical treatment and that this impairment prevents him from engaging in activities such as work involving computers or even watching television. (Tr. 33-35, 40-41). Nevertheless, neither the AU nor the Secretary evaluated the factual relevance and legal effect of this evidence in the instant case. In particular, the record is devoid of any analysis on the part of the Secretary of the effect of the combination of plaintiff’s claimed impairments on plaintiff’s ability to engage in substantial gainful activity. For this reason, too, the Secretary’s decision must be reversed and the case remanded. See, e.g., De Leon v. Heckler, supra, 734 F.2d at 937; Romero v. Heckler, 586 F.Supp. 840, 847 (S.D.N.Y.1984).

C.

The Court is also troubled by an additional aspect of the Secretary’s decision in this case. A review of the record reveals that the administrative hearing provided to plaintiff was simply inadequate. It is well established in the Second Circuit that a claimant for disability benefits is entitled to “a full hearing under the Secretary’s regulations and in accordance with the beneficent purposes of the Act.” Lopez v. Secretary of HHS, 728 F.2d 148, 149 (2d Cir.1984); Hankerson v. Harris, supra, 636 F.2d at 895; Gold v. Secretary of HEW, supra, 463 F.2d at 43. Although the Secretary is not obligated to furnish a benefits claimant with counsel, the AU has a special duty to protect the rights of a pro se claimant. See Lopez v. Secretary of HHS, supra, 728 F.2d at 196; Echevarria v. Secretary of HHS, 685 F.2d 751, 755 (2d Cir.1982); Hankerson v. Harris, supra, 636 F.2d at 895; Gold v. Secretary of HEW, supra, 463 F.2d at 43. Because hearings on disability claims are not adversary proceedings, the AU is under the general duty affirmatively to develop the record and to ensure that all the necessary and relevant information is produced. Echevarria v. Secretary of HHS, supra, 685 F.2d at 755; Schauer v. Schweiker, supra, 675 F.2d at 57. Cutler v. Weinberger, supra, 516 F.2d at 1286. Where, as here, the claimant is unassisted by counsel at the administrative hearing, “the AU is under a heightened duty ‘to scrupulously and conscientiously probe into, inquire of, and explore for all the relevant facts.’ ” Echevarria v. Secretary of HHS, supra, 685 F.2d at 755 (quoting Gold v. Secretary of HEW, supra, 463 F.2d at 43). See also Mimms v. Heckler, supra, at 185. Hankerson v. Harris, supra, 636 F.2d at 895. Failure to satisfy this duty may leave gaps in the administrative record which demonstrate that the claimant did not have a fair and adequate hearing before the Secretary. Lopez v. Secretary of HHS, supra, 728 F.2d at 149-50; Hankerson v. Harris, supra, 636 F.2d at 895; Rodriguez v. Schweiker, 520 F.Supp. 666, 671 (S.D.N.Y.1981).

In the instant case, the AU’s questioning of plaintiff at the administrative hearing did not satisfy the AU’s statutory obligations and, indeed, may have exacerbated the problem. Plaintiff, who had completed school through only the ninth grade, underwent questioning by the AU without the benefit of the assistance of counsel or even a friend or associate. Plaintiff was the only witness at the hearing. Most of his answers to the AU’s questions were terse and some were confused. Although the AU sought information concerning plaintiff’s personal and medical circumstances, the questions were generally cursory and rarely were the necessary followup questions asked. In particular, the AU never questioned plaintiff about the medical reports of plaintiff's chest pains, (Tr. 135), nor about the problems plaintiff had suffered with his left hand and arm. (Tr. 140-42). Additionally, although the objective medical evidence reveals and plaintiff testified at length that he experienced substantial difficulty walking, standing or even sitting for prolonged periods, the AU focused only superficially upon plaintiff’s capacities in this regard. Similarly, despite the letter from Dr. Mennin and plaintiff’s testimony that plaintiff suffered blurred vision as a result of herpes simplex in plaintiff’s eyes and was forced to consult an eye specialist, the AU inquired only briefly about the condition of plaintiff’s eyes and the effect of his impairment on his general functional capacity. In fact, it appears that the AU deliberately abreviated this line of questioning. (Tr. 35).

In addition, the AU did not adequately inquire into why plaintiff was not represented by counsel despite plaintiff’s notice of his right to have an attorney present at the administrative hearing. Nor did the AU adequately ensure that plaintiff fully and knowingly waived his right to counsel or appreciated the role that legal representation would play at that stage of the proceedings. The Court must therefore conclude that plaintiff has not received “a full hearing under the Secretary’s regulations and in accordance with the beneficent purposes of the Act,” and the case must be remanded to the Secretary. Lopez v. Secretary of HHS, supra, 728 F.2d at 149; Echevarria v. Secretary of HHS, supra, 685 F.2d at 755; Hankerson v. Harris, supra, 636 F.2d at 895; Gold v. Secretary of HEW, supra, 463 F.2d at 43.

CONCLUSION

The Secretary’s determination that plaintiff is not disabled because he can perform sedentary work is not supported by substantial evidence and cannot stand. The Secretary has failed properly to discharge her duties to: assess the credibility and legal significance of the reports — both objective and subjective — of disabling pain, to evaluate the effect on plaintiff’s functional capacity of his claimed impairments — both individually and in the aggregate, and properly and conscientiously to develop the record. Accordingly, plaintiff’s motion for summary judgment is granted insofar as it seeks a remand. The Secretary’s cross-motion for judgment on the pleadings is denied. The case is remanded to the Secretary for a redetermination of plaintiff’s eligibility for disability benefits consistent with this opinion. The action is dismissed subject to being reopened by either party within a reasonable time following further proceedings by the Secretary.

It is so ordered.

      . Although styled as a motion for summary judgment pursuant to Rule 56, Fed.R.Civ.P., plaintiffs motion is directed at only the pleadings, which include the administrative transcript appended to the Secretary’s answer. See Goldman v. Belden, 754 F.2d 1059, 1065-66 (2d Cir.1985) (and citations thereat). Consequently, plaintiff's motion more properly should be and hereby is construed as a motion for judgment on the pleadings under Rule 12(c), Fed.R.Civ.P.

      . The ALJ declined to reopen or revise the Secretary’s determination of September 14, 1981. Such decisions may be reopened within four (4) years from the date of the notice of the Secretary’s decision upon a finding of "good cause." 20 C.F.R. § 404.988. Good cause to reopen a decision of the Secretary will be found to exist if:
      (1) New and material evidence is furnished;
      (2) A clerical error in the computation or recomputation of benefits was made; or
      (3) The evidence that was considered in making the determination or decision clearly shows on its face that an error was made.
      20 C.F.R. § 404.989.
      It is well settled that a decision by the Secretary not to reopen a prior final decision is not subject to judicial review. As the Court of Appeals for the Second Circuit has observed:
      In Weinberger v. Salfi, 422 U.S. 749 [95 S.Ct. 2457, 45 L.Ed.2d 522] (1975), the Supreme Court held that section 205(h) [of the Act] precludes judicial review of any "finding[ ] of fact or decision of the Secretary" except as provided in section 205(g). 422 U.S. at 757 [95 S.Ct. at 2462]. In Califano v. Sanders, 430 U.S. 99 [97 S.Ct. 980, 51 L.Ed.2d 192] (1976), the Supreme Court further held that the Secretary's refusal to reopen a prior final decision was a "decision of the Secretary" within the meaning of section 205(h), but was not a “final decision of the Secretary made after a hearing" within the meaning of section 205(g). Salfi and Sanders, when read together, compel the conclusion that, at least in the absence of a constitutional claim, the District Court lacked subject matter jurisdiction over the matters raised in Latona's complaint.

        Latona v. Schweiker, 707 F.2d 79, 81 (2d Cir.1983) (parallel citations omitted).

      . At the administrative hearing, plaintiff testified that he experienced pain also in his eyes as a result of herpes simplex (Tr. 33-35).

      . The Secretary argues that, in an attempt to fulfill his duty to develop the record, the ALJ left the record open after the hearing in order to provide plaintiff with an opportunity to examine the evidence and to submit any additional evidence relevant to plaintiffs claim. However, in view of plaintiff’s pro se status, his level of education and general experience, and his actual performance at the administrative hearing, it is both unrealistic and unfair to expect that such measures will in practice yield a fully developed administrative record. Moreover, this Court holds as a matter of law that the AU cannot satisfy his "heightened duty to scrupulously and conscientiously probe into, inquire of, and explore for all relevant facts,” Echevarria v. Secretary of HHS, supra, 685 F.2d at 755, merely by extending to a pro se claimant the opportunity to present relevant evidence.


source: Caselaw Access Project

author: BECHTLE, District Judge.

license: Public Domain

text:
    Neil DINCES, Esquire v. Thomas ROBBINS, Gary Robbins, Music Magazine Foundation for Education & Communication, Inc., and GRAC, Inc. v. Michael W. UNTERMEYER.
    Civ. A. No. 84-4430.
    United States District Court, E.D. Pennsylvania.
    March 13, 1985.

      Cletus P. Lyman, David Huyett, Philadelphia, Pa., for plaintiff.
    Charles G. Resnick, Philadelphia, Pa., for defendants.
    Cletus P. Lyman, Philadelphia, Pa., for third-party defendant.
   MEMORANDUM AND ORDER

BECHTLE, District Judge.

Presently before the court are (1) defendants’ motion for summary judgment on plaintiff’s complaint, (2) plaintiff’s motion to enlarge time to oppose summary judgment, (3) plaintiff’s motion to strike certifications of Gary Robbins and Thomas Robbins, (4) plaintiffs motion to dismiss defendants’ counterclaim, (5) third-party defendant’s motion for summary judgment on defendants’ third-party complaint, and (6) defendants’ motion for summary judgment on third-party defendant’s counterclaim. For the reasons stated herein, defendants’ motion for summary judgment on plaintiff’s claim will be granted.

I. FACTS

In December, 1982, defendant Thomas Robbins and third-party defendant Michael Untermeyer founded Music Magazine Foundation for Education and Communication, Inc. (“Music Magazine”) and Michael Untermeyer Syndications, Inc. for the purpose of producing a television show which would consist of music videos made by record companies. Robbins was Music Magazine’s president. Untermeyer was the venture’s attorney. Untermeyer also arranged broadcasts of Music Magazine’s television show with television stations. Music Magazine’s show was called the “Houghton/Worth Show, A Music Magazine.”

In May, 1983, some of Untermeyer’s family members and friends, after being solicited by Untermeyer, invested money in Music Magazine. The plaintiff Neil Dinces was among those whom Untermeyer solicited. Dinces invested $2500.00 in Music Magazine on May 1, 1983. As evidence of that investment, Robbins, on behalf of Music Magazine, gave a note promising to pay Dinces $2500.00 at 18% interest per annum on or before December 31, 1983. Subsequently, on May 6,1983, Robbins, on behalf of Music Magazine, signed a letter of intent with respect to Dinces’ investment in Music Magazine. That letter provided in pertinent part:

You shall make a loan to the Music Magazine Foundation for Education and Communication, Inc. (hereinafter referred to as “Foundation”), in the amount of Two Thousand Five Hundred ........ Dollars, on or before May 1, 1983. The loan shall be paid in full on or before December 31, 1983, by the Foundation, with simple interest due and payable on that date at the rate of one and one-half (1M¡%), percent per month for a total payment of $2,500 + $300.00 = $2,800.00. In the event that the loan is paid in full prior to December 31, 1983, the amount repaid shall be adjusted so that the money earns interest at a monthly rate of one and one-half (l!4%) percent per month.
After the principal amount of your investment has been repaid, you may, in lieu of receiving interest, elect to receive 1/4% (one quarter) percent (sic) of all gross receipts received by the Foundation for the sale of time in The Houghton/Worth Show, A Music Magazine. In the event that you make this election, you shall be entitled to lk% (one quarter) percent (sic) of the gross receipts of The Houghton/Worth Show, A Music Magazine, for its original term (26 weeks) and for all renewals of it as a once-a-week barter show.
In the event that your loan is not repaid on or before December 31, 1983, the due date of your note, you may conclude that the show has not been successful and you may elect either to grant an extension to the Foundation for repayment of the loan at a later date, with interest continuing to accrue at the rate of one and one-half (1V2%) percent per month, or to request a letter from the Foundation stating that the debt will not be repaid and you should be entitled to a bad debt deduction from your federal income taxes for the entire amount of the loan.

Music Magazine did not pay principal or interest on or before December 31, 1983. Thereafter, on January 16, 1984, plaintiff, by letter, inquired as to the status of his loan and the condition of Music Magazine. In particular, plaintiff sought a statement from Music Magazine’s accountants setting forth the company’s prospects and a statement from Robbins as to the company’s need for loan extensions.

Defendants’ attorney responded in a letter dated January 31, 1984, on behalf of, the court presumes, all of the defendants. Defendants did not seek an extension on plaintiff’s loan, but, instead, tendered to plaintiff a check for the principal amount owed plus 1V2% per month computed on the remaining outstanding principal balance effective through the date on which the check was drawn. On the check were written the words “payoff of loan.” In a letter accompanying the check, defendants set forth their expectations with regard to this check:

In review of your demand for payment, the Foundation has elected to satisfy your obligation in full at this time rather than request an extension as has been done with other creditors. Please find enclosed herewith a Music Magazine Foundation for Education and Communication, Inc. check in the amount of $2066.64 as your full and final payment in satisfaction of the loan made April 30, 1983 which was greatly appreciated and for which we deeply thank you. You will note that the amount of the check exceeds the amount of the principal balance remaining due to account for the additional interest to which you are entitled at the rate of 1V2% per month computed on the remaining outstanding principal balance effective through the date this check is drawn.

Plaintiff deposited the check.

Subsequently, on February 28, 1984, plaintiff wrote defendants seeking to exercise his “option to receive lk% (one quarter) percent (sic) gross receipts____”

Defendants refused to honor plaintiffs election. Defendants’ position is that at some time prior to February 28,1984, plaintiff’s option terminated.

II. DISCUSSION

1. Plaintiff’s motion to strike certifications of Gary Robbins and Thomas Robbins will be denied as moot; Gary Robbins and Thomas Robbins have remedied the defects of which plaintiff complains.

2. Plaintiff’s motion to enlarge time to oppose summary judgment will be denied. Plaintiff’s answer was due January 17, 1985. Plaintiff has still not filed an answer within 25 days since January 17, 1985. The court believes that the time allowed under the Federal Rules of Civil Procedure plus 25 days granted by the court is more than enough time for plaintiff to respond to defendants’ motion. It must be noted, however, that plaintiff argued the motion to dismiss in a court hearing on January 22, 1985.

3. Defendants’ motion to dismiss.

The issue before the court is whether plaintiff had the option, in addition to retaining the 18% interest payment, to elect to receive .25% of Music Magazine’s gross receipts on February 28, 1984. Resolution of this issue turns on the nature and extent of plaintiff’s contractual rights as set forth in the May 6, 1984 letter of intent.

That letter characterized plaintiff’s original status as that of a lender. If plaintiff did nothing, he had the right to receive his principal amount plus 18% interest per annum on or before December 31, 1983. The letter, however, also gave plaintiff two options by which plaintiff could alter, modify, or amend his status as a lender and remain a lender entitled to interest or become an investor and forgo it.

Plaintiff argues that on February 28, 1984, as set forth in the letter of intent, he possessed two options which were independent of each other and provided two separate benefits, one to follow the other. Plaintiff construes those options as follows. The first option (hereinafter referred to as the “default option”) provided that when Music Magazine failed to repay the loan on or before December 31, 1983, he had the choice to either grant an extension to Music Magazine for repayment of the loan at a later date with interest continuing to accrue at the rate of one and one-half (lVz%) percent per month, or the choice of requesting a letter from Music Magazine stating that the debt would not be repaid and that he would be entitled to claim a bad debt deduction from his federal income taxes for the entire amount of the loan. The second option (hereinafter referred to as the “repayment option”) was that after Music Magazine repaid the principal amount on his loan, he could elect to forgo the payment of interest on that principal and receive instead one-quarter (lh%) percent of the gross receipts received by Music Magazine for the sale of time in The Houghton/Worth Show, A Music Magazine for its original term (26 weeks) and for all renewals of it as a once-a-week barter show. Plaintiff argues from this analysis that he had the right to receive principal and interest under the default option until such time as the principal was paid and, thereafter, principal as well as percentage of future gross receipts in place of interest on his $2500.00 loan.

While the loan document suggests that the failure to repay the $2500.00 principal by December 31, 1983, was a basis that would cause plaintiff to conclude the show was a failure which renders plaintiff’s expectation of future profits of questionable reasonableness, that phrase is not the controlling feature of this dispute, although it lends weight to the defendants’ position.

The court concludes that under the default option, the plaintiff did not have two choices, but had three. The first was at the time of the default on December 81, 1988, when the principal payment was not made by the defendants, the plaintiff could have granted an extension for the repayment that would carry with it interest at one and one-half (llk°/o) percent per month. The second choice was to request a letter from the defendant suggesting that the plaintiff could seek a bad debt deduction on his federal income tax return. The third choice the plaintiff had at this time was to do nothing. That is, plaintiff could neither expressly grant any form of extension for repayment nor request a letter for the Internal Revenue Service.

What actually happened was he made inquiry about the status of the loan and after some discussion with the defendants he elected to receive, and he did receive, payment on February 1, 1984, of the balance of principal due him, together with interest to that date at the agreed rate. The defendants conclude that this was his election under the default option which he exercised and which the defendants honored in satisfaction of all obligations to the plaintiff. The plaintiff, on the other hand, concludes that in effect he simply was repaid his principal and interest and under the loan documents the instant the principal is repaid he had the right to claim a one-quarter interest in future gross receipts in lieu of interest on that principal loan.

It is unclear what the status of the parties was in the month of January, 1984, under the default option. It is likely that this month was an extension month that entitled the plaintiff to receive interest at the agreed rate, together with principal, which obligation was honored by the defendants on February 1,1984. It is equally reasonable that the plaintiff simply pondered the matter for a brief time and ultimately the parties came to some understanding that the plaintiff was to receive principal plus interest for a one month additional period at the agreed rate, which payment was made on or about February 1, 1984.

The real difference between the plaintiff and the defendants is that the plaintiff believes his options are separate options that follow each other that gives him two cumulative claims, whereas the defendants’ view is that the plaintiff can seek one or the other option, but not both. The court believes that the defendants are correct. This must be so because if at the time the principal is repaid the plaintiff is to receive a percentage of future profits in lieu of interest, the only interest that can be of sufficient consideration for the promise of a percentage of future gross receipts is either interest that has accrued or interest that will accrue. Inasmuch as the interest that had accrued to February 1, 1984, when the plaintiff was repaid his principal, was paid with the principal, the promise of future profits cannot be supported by'a forgiveness of accrued interest. Also, inasmuch as the principal was repaid on February 1, 1984, there can be no principal to support an obligation to pay interest in the future. The plain meaning of what the parties agreed to can only be that when the principal was repaid on February 1, 1984, the plaintiff had a choice of either accepting interest at that time which had accrued on that sum, or allowing the defendants to keep that interest payment and promise in exchange to pay a percentage of future gross receipts. The plaintiff cannot have it both ways. He elected to receive and did accept the accrued interest and he received the principal as well. There was nothing left to forgo and accordingly his claim on future profits disappeared with his acceptance of principal and accrued interest to February 1, 1984.

The court holds that on February 28, 1984, plaintiff did not have the right to elect a percentage of gross receipts. Accordingly, defendants’ motion for summary judgment will be granted.

4. Third-party defendant’s motion for summary judgment on defendants’ third-party complaint.

The third-party complaint will be dismissed. Owen Equipment & Erection Co. v. Kroger, 437 U.S. 365, 98 S.Ct. 2396, 57 L.Ed.2d 274 (1978).

5. Plaintiff’s motion to dismiss defendants’ counterclaim.

Defendants’ counterclaim will be dismissed. Baird v. Aluminum Seal, 250 F.2d 595 (3d Cir.1957).

6. Defendants’ motion for summary judgment on third-party defendant’s counterclaim.

Third-party plaintiffs and third-party defendant had been parties in an earlier lawsuit in state court. That litigation had terminated in a settlement agreement, dated September 27, 1983, which was incorporated into the consent judgment of the state court. Under a provision in that agreement, third-party plaintiffs were required to pay third-party defendant 10% of gross receipts of Music Magazine’s Houghton/Worth Show. According to third-party defendant, third-party plaintiffs evaded an accurate accounting by diverting business from the Music Magazine show to different shows. Thus, third-party defendant asserts a counterclaim against third-party plaintiffs for the percentage of gross receipts which he would have received but for third-party plaintiffs’ impropriety. In his pleading, third-party defendant prays for the following relief:

WHEREFORE, Untermeyer demands judgment in his favor against defendants, jointly and severally, dismissing the third-party complaint and providing for an accounting of the Houghton/Worth Show by all its names and corporate affiliations, and awarding compensatory and punitive damages, and such other relief the court may deem appropriate, including interim relief, such as a preliminary injunction and the appointment of a receiver, and costs of suit.

Third-party plaintiffs have moved for summary judgment with respect to third-party defendant’s counterclaim. In support of their motion, third-party plaintiffs assert three grounds: (1) this court does not have subject matter jurisdiction over the counterclaim; (2) the September 22, 1983, settlement agreement precludes the counterclaim; and (3) the doctrine of laches bars the counterclaim.

Whether this court has subject matter jurisdiction over the counterclaim depends upon the nature of the counterclaim. If, on the one hand, the counterclaim is a compulsory one, the court may have federal question or diversity subject matter jurisdiction or ancillary subject matter jurisdiction. Baker v. Gold Seal Liquors, Inc., 417 U.S. 467, 469 n. 1, 94 S.Ct. 2504, 2506 n. 1, 41 L.Ed.2d 243 (1974). If, on the other hand, the counterclaim is merely a permissive one, the counterclaim must, generally, be supported by an independent basis of subject matter jurisdiction. Aldens, Inc. v. Packel, 524 F.2d 38, 52 n. 21 (3d Cir.1975), cert. denied, 425 U.S. 943, 96 S.Ct. 1684, 48 L.Ed.2d 187 (1976). Many courts have recognized an exception to the rule requiring an independent basis for jurisdiction in permissive counterclaims. See Curtis v. J.E. Caldwell & Co., 86 F.R.D. 454 (E.D.Pa.1980). Chief Judge Joseph S. Lord, III, who wrote the Curtis opinion, summarized this exception as follows:

Assertion of a defensive set-off is the one generally recognized exception to the rule that a permissive counterclaim requires an independent basis for jurisdiction. United States v. Heyward-Robinson, [430 F.2d 1077 (2d Cir.1970)], supra; Herrmann v. Atlantic Richfield Co., 72 F.R.D. 182, 185 (W.D.Pa.1976); 6 Wright & Miller, Federal Practice & Procedure, Civil § 1422 at 122 (1971). But see, Robinson Brothers & Co. v. Tygart Steel Products Co., 9 F.R.D. 468 (W.D.Pa.1949). A defensive set-off may be asserted solely to defeat or diminish the adverse party’s recovery, it must arise from a transaction extrinsic to the original claim, and it must be based on a contract or judgment and be capable of liquidation. Binnick v. Avco Financial Services of Nebraska, Inc., 435 F.Supp. 359, 367 (D.Neb.1977); 3 Moore’s Federal Practice ÍI 13.19(1) at 13-481.

86 F.R.D. at 457-458.

With this background in mind, the court turns to the initial question of whether third-party defendant’s counterclaim was a compulsory or a permissive one.

When a claim is filed against a party, that party may assert a counterclaim in its responsive pleading. If the counterclaim “arises out of the transaction or occurrence that is the subject matter of the opposing party’s claim and does not require for its adjudication the presence of third parties of whom the court cannot require jurisdiction,” it is termed a compulsory counterclaim. Fed.R.Civ.P. 13(a). See Great Lakes Rubber Corp. v. Herbert Cooper Co., 286 F.2d 631, 634 (3d Cir.1961). If the counterclaim is not a compulsory counterclaim, it is a permissive one. Specifically, a permissive counterclaim is “any claim against an opposing party not arising out of the transaction or occurrence that is the subject matter of the opposing party’s claim.” Fed.R.Civ.P. 13(b).

In this case, the court must compare the transactions or occurrences from which the third-party plaintiffs’ claim against the third-party defendant arises with the transactions or occurrences from which the third-party defendant’s claim against the third-party plaintiffs arises. Third-party plaintiffs allege in their complaint that if they are liable to plaintiff for breach of the contract, which was manifested in the May 6, 1983, letter of intent, then the third-party defendant, the attorney who drafted the letter of intent, is liable for contribution or indemnity to third-party plaintiffs. The court construes the third-party complaint to assert three theories of recovery for contribution or indemnity: (1) plaintiff and third-party defendant were friends and, thus, third-party defendant had a conflict of interest when he drafted the letter of intent. He acted on behalf of both parties to the contract — his client and his friend; (2) third-party defendant, and not defendant third-party plaintiffs, was responsible for any fraud perpetrated on the plaintiff; and (3) third-party defendant acted in violation of federal securities law. In contrast, third-party defendant’s counterclaim is that third-party plaintiffs failed to honor their obligations under the September 22, 1983, agreement of settlement. The transactions or occurrences of which the third-party defendant complains is breach of the settlement agreement by third-party plaintiffs. After comparing the transactions or occurrences of which the parties complain, the court determines that the claim asserted by the third-party defendant against the third-party plaintiffs does not arise out of a transaction or occurrence that is the subject matter of the third-party plaintiffs’ claim against the third-party defendant. Third-party defendant’s counterclaim is therefore a permissive counterclaim.

Since third-party defendant’s counterclaim is a permissive one, the court must next consider carefully whether there is an independent basis of jurisdiction upon which the counterclaim may be entertained by this court. Since the third-party plaintiffs and the third-party defendant are citizens of Pennsylvania, this court cannot assert subject matter jurisdiction based on diversity. Also, this court cannot assume jurisdiction based on a federal question because third-party defendants’ counterclaim is merely for breach of contract.

Having determined that this court has no independent basis upon which it can assert subject matter jurisdiction, the court turns finally to the exception to the general rule. The second and third requirements of the exception are met. Third-party defendant’s claim is based on a contract. Also, as discussed above, third-party defendant’s claim arises from a transaction extrinsic to the third-party plaintiffs’ original claim of indemnity or contribution.

The first and fourth elements of the exception are not met here, however. First, third-party defendant seeks an affirmative recovery and does not assert his claim solely to defeat or diminish third-party plaintiffs’ recovery. It is not a mere set-off. The fourth element is, also, not met. Third-party defendant’s claim is not liquidated and is not capable of liquidation without aid of evidence presented at trial. Jones v. Sonny Gerber Auto Sales, Inc., 71 F.R.D. 695 (D.C.Neb.1976).

Accordingly, no basis of subject matter jurisdiction exists by which this court can assert jurisdiction over the third-party defendant’s counterclaim. That counterclaim will be dismissed.

An appropriate Order will be entered.

      . Defendants do not assert an independent claim that third-party defendant violated federal securities law. Defendants’ assertion that third-party defendant violated federal securities law is merely a basis upon which they claim indemnity and contribution. It is, therefore, not a separate claim based on a federal statute upon which this court can assert federal question subject matter jurisdiction.


author: SPELLMAN, District Judge.

text:
    UNITED STATES of America, Plaintiff, v. Hernan BOTERO, Defendant.
    No. 81-6018-Cr.
    United States District Court, S.D. Florida, Miami Division.
    March 14, 1985.

      Gerald Houlihan, Asst. U.S. Atty., Miami, Fla., for plaintiff.
    Neal Sonnett, Miami, Fla., for defendant.
   MEMORANDUM OPINION AND ORDER AFFIRMING PRETRIAL DETENTION

SPELLMAN, District Judge.

This is an appeal of a pretrial detention order issued by the Honorable Samuel J. Smargon, United States Magistrate. For the reasons detailed below, this Court agrees with Magistrate Smargon’s conclusion that the Defendant, Hernán Botero, poses a serious risk of flight and that no condition or combination of conditions would reasonably assure his appearance at trial. Accordingly, this Court affirms the order of pretrial detention.

BACKGROUND

The defendant, Hernán Botero, is a fifty-two year old Colombian citizen. He was educated in the United States and, prior to the instant indictment, frequently traveled to the United States for business and for pleasure. In February 1981, a federal grand jury, sitting in Miami, Florida, returned an eighteen count indictment charging Hernán Botero and others with a “money laundering” scheme involving some fifty-seven million dollars. At the time that the indictment was returned, Mr. Botero was in Colombia.

Mr. Botero has acknowledged, through counsel, that he was aware of the indictment shortly after it was returned. He refused, however, to return to the United States voluntarily to face these charges. At one point in 1981, it appears that he was willing to return to the United States pursuant to an agreement that he would be permitted to be released on bond. The negotiations for his return broke down when the government insisted that as a condition of his bond, he would not be permitted to leave the United States.

The United States Government formally requested the Government of the Republic of Colombia to extradite Hernán Botero pursuant to the Treaty of Extradition of 1979. Mr. Botero was arrested in Colombia in May 1984, pursuant to the request for extradition, and was detained by his country of origin without bond. He successfully resisted extradition on ten counts of the indictment because the offenses charged in those counts were not subject to extradition under the treaty. Thus, when Mr. Botero was returned by the Colombian Government to the United States in January 1985, he faced seven counts — one count of conspiracy, one count of false statements and five counts of mail fraud.

Mr. Botero has continued to challenge his extradition and the jurisdiction of this Court to try him even on the seven counts that he is presently facing. At his arraignment, he refused to enter any plea as to the seven counts that are before this Court.

The Government moved for pretrial detention pursuant to the Bail Reform Act of 1984 and a detention hearing was held on January 16, 1985 before Magistrate Smargon. In an Order issued the following day, Magistrate Smargon, applying the factors enumerated in 18 U.S.C. § 3142(g), found that Mr. Botero posed a serious risk of flight and that no condition or combination of conditions would reasonably assure his appearance at trial. He therefore ordered that Mr. Botero be detained without bond.

Mr. Botero moved for reconsideration and on February 12, 1985 further hearings were held before Magistrate Smargon. At that time, counsel for Mr. Botero presented additional conditions of release which he argued would reasonably assure Mr. Botero’s appearance at trial. Magistrate Smargon, however, again found that these conditions were inadequate and that pretrial detention was warranted. The pretrial detention order has been appealed to this Court.

Mr. Botero has raised two primary challenges to the order. First, he argues that application of the Bail Reform Act violates the constitutional prohibition against ex post facto laws. Next, he argues that even if the statute can constitutionally be applied to him, the Magistrate erred in finding that he posed a substantial risk of flight and that no conditions of release could reasonably assure his appearance at trial.

EX POST FACTO

Botero contends that application of the Bail Reform Act of 1984 to him violates the prohibition against ex post facto laws because the law in effect at the time of the alleged offense permitted bail in his situation.

At least two other courts have visited this issue and have found that the application of the pretrial detention statute to defendants whose alleged crimes occurred before the active date of the statute is not violative of the ex post facto provision of the Constitution. See United States v. Payden, 598 F.Supp. 1388, 1391-92 (S.D.N.Y.1984); United States v. Hazzard, 598 F.Supp. 1442, 1454-55 (N.D.Ill.1984). This Court agrees.

The ex post facto prohibition applies to “any law which imposes a punishment for an act which was not punishable at the time it was committed; or imposes additional punishment to that then prescribed.” Weaver v. Graham, 450 U.S. 24, 28, 101 S.Ct. 960, 963, 67 L.Ed.2d 17 (1981) (quoting Cummings v. Missouri, 4 Wall (71 U.S.) 277, 325-326, 18 L.Ed. 356 (1867)). There is no ex post facto violation, however, “if the change effected is merely procedural, and does ‘not increase the punishment nor change the ingredients of the offense or the ultimate facts necessary to establish guilt.’ ” Weaver, 450 U.S. at 29 n. 12 (quoting Hopt v. Utah, 110 U.S. 574, 590, 45 S.Ct. 202, 210, 28 L.Ed. 262 (1884)).

The first step in analyzing whether the ex post facto clause prohibits the application of the Bail Reform Act of 1984 to Mr. Botero is to determine whether the pretrial detention provisions of the statute are punitive. If the provisions are merely procedural or regulatory rather than punitive, there is no ex post facto violation even if the operation of the Act disadvantages the defendant.

Although the differences between punitive and regulatory measures can be elusive, the Supreme Court has offered some guidance in this area. In the absence of a showing of express intent by the government to punish, the relevant inquiry will usually turn on “whether an alternative purpose to which [the restriction] may rationally be connected is assignable for it, and whether it appears excessive in relation to the alternative purpose assigned [to it].” Schall v. Martin, — U.S. -, 104 S.Ct. 2403, 2413, 81 L.Ed.2d 207 (1984) (quoting Kennedy v. Mendoza-Martinez, 372 U.S. 144, 168-69, 83 S.Ct. 554, 567-68, 9 L.Ed.2d 644 (1963)). Moreover, “if a particular condition or restriction ... is reasonably related to a legitimate governmental objective, it does not, without more, amount to ‘punishment.’ ” Bell v. Wolfish, 441 U.S. 520, 539, 99 S.Ct. 1861, 1874, 60 L.Ed.2d 447 (1979).

The legislative history of the Bail Reform Act clearly indicates that pretrial detention was intended to prevent flight and to protect the safety of the community. See S.Rep. No. 225, 98th Cong., 2d Sess. 8 (1984), U.S.Code Cong. & Admin.News 1984, 1. S.Rep. No. 147, 98th Cong., 1st Sess. 34-35 (1983); S.Rep. No. 317 97th Cong., 2d Sess. 21 (1982). Pretrial detention was not intended to promote either of the “traditional aims of punishment — retribution and deterrence.” Kennedy v. Mendoza-Martinez, 372 U.S. at 168, 83 S.Ct. at 567. Similarly, it was not designed to rehabilitate, another purpose frequently associated with punishment. Rather, the Act reaffirms that pretrial detention should not be construed as modifying the presumption of innocence, 18 U.S.C. § 3142(j) and provides that detainees must be confined, to the extent practicable, separate from those persons who have been convicted of crimes. 18 U.S.C. § 3142(i)(2).

In the present case, the “alternative purpose” for which pretrial detention has been invoked is to protect the judicial process by compelling the defendant’s attendance at trial. Certainly, the detention of a defendant to prevent flight is rationally related to this purpose.

Nor is the pretrial detention authorized by the statute “excessive” in relation to this “alternative purpose.” A judicial officer can only order pretrial detention based on substantial risk of flight if he or she finds that no condition or combination of conditions of release would reasonably assure the defendant’s appearance at trial. Thus, pretrial detention can only be ordered after a judicial officer has concluded that it is the only way to achieve the “alternative purpose.” Although the statute does not place explicit limits on the length of pretrial detention, the Speedy Trial Act, 18 U.S.C. § 3161, et seq., ensures that a defendant will be brought to trial within a reasonable time and that a person who is detained “shall be accorded priority” in scheduling trials.

In light of this, the Act must be considered a regulatory measure rather than penal. It does not make conduct criminal which was innocent when done. It does not change the elements of the crime nor does it deprive a defendant of any •defenses. Accordingly, application of the Act to a defendant whose alleged crimes were committed before the Act was enacted does not violate the constitutional prohibition against ex post facto laws.

Indeed, the Court notes that Mr. Botero may not even be disadvantaged by the application of the Bail Reform Act of 1984. Mr. Botero is being detained because the Magistrate found, without the aid of any statutory presumptions, that he posed a substantial risk of flight. He is not being detained under the provisions of the statute providing authority to the courts to detain individuals prior to trial to protect society from particularly dangerous offenders who, if released, might pose a threat to the safety of others or engage in conduct endangering the safety of the community. While this latter provision does create new authority for detention, pretrial detention to prevent flight is not a new concept and even under the previous bail statute courts have upheld a complete denial of bail when they have found that there is no other way to reasonably assure a defendant’s appearance at trial. See e.g., United States v. Abrahams, 575 F.2d 3 (1st Cir.), cert. denied, 439 U.S. 821, 99 S.Ct. 85, 58 L.Ed.2d 112 (1978); United States v. Ramirez, 589 F.Supp. 137 (D.Minn.1984); United States v. Meinster, 481 F.Supp. 1117 (S.D.Fla.1979).

In Meinster, Judge King held that in order to hold a defendant without bond:

[t]he government must demonstrate by the totality of the circumstances in the case and the evidence adduced in the bond hearing that there is no reasonable assurance that the defendant will continue to appear for trial and at sentencing if convicted.

481 F.Supp. at 1122.

The standard provided for in the Bail Reform Act of 1984 is virtually identical to that of Meinster, since it permits the court to enter a detention order only if it finds, “that no condition or combination of conditions will reasonably assure the appearance of the person as required.” Thus, the new Act does not newly subject Mr. Botero to detention; it merely codifies the existing authority to detain persons who are serious flight risks.

APPLICATION OF THE STATUTE

Section 3142(g) sets forth the factors a Court must consider in determining whether a defendant should be detained pretrial. These factors are:

(1) the nature and circumstances of the offense charged including whether the offense is a crime of violence or involves a narcotic drug;

(2) the weight of the evidence against the person;

(3) the history and characteristics of the person, including—

(A) his character, physical and mental condition, family ties, employment, financial resources, length of residence in the community, community ties, past conduct, history relating to drug or alcohol abuse, criminal history, and record considering appearances at court proceedings; and

(B) whether, at the time of the current offense or arrest, he was on probation, on parole, or on other release pending trial, sentencing, appeal or completion of sentence for an offense under Federal State or local law; and

(4) the nature and seriousness of the danger to any person or the community that would be posed by the person’s release ...

When these factors are considered, it is plain to this Court that Mr. Botero poses a serious risk of flight.

Nature and Circumstances of the Offense

The defendant is charged with a “money laundering” scheme involving some fifty-seven (57) million dollars over a ten month period. According to the Government, Hernán Botero entered into an agreement with employees at the Landmark First National Bank to open five fictitious accounts. Large amounts of cash, in excess of $10,-000 for each deposit, were to be deposited in these accounts. Hernán Botero and his brother Roberto allegedly directed the distribution of these funds through wire transfers and conversion into cashier’s checks. No currency transaction reports were ever filed with the Internal Revenue Service.

The maximum sentence Hernán Botero could receive if he were convicted on all seven counts he is presently facing is thirty-five years.

The defendant is not charged with any violations of the narcotics laws which would give rise to the presumption of section 3142(e). Section 3142(e) provides, in part, that there is a rebuttable presumption that “no condition or combination of conditions will reasonably assure the appearance of the person and the safety of the community if the judicial officer finds there is probable cause to believe that the person committed an offense for which a maximum term of imprisonment of ten years or more is prescribed under the Controlled Substances Act (21 U.S.C. 801 et seq.), the Controlled Substances Import and Export Act (21 U.S.C. 951 et seq.) [or] section 1 of the Act of September 15, 1980 (21 U.S.C. 955a).” However, the Government has consistently maintained — and this Court agrees — that “money laundering” is an integral part of the narcotics business. The same factors which create an unusually high risk of flight in narcotics offenses and which form the basis for the statutory presumption are present here — the business is extremely lucrative and those involved have established substantial ties outside the United States. Thus, persons involved in money laundering, just as those involved in narcotics trafficking, have the resources and foreign contacts to escape to other countries to avoid prosecution.

Weight of the Evidence

The weight of the evidence against Hernán Botero is strong. Hernán Botero’s brother, Roberto Botero, was tried and convicted on substantially the same evidence that the Government will offer against Hernán Botero. During the trial, the Government’s two main witnesses testified that Hernán Botero was the mastermind of the entire laundering scheme. Moreover, even Roberto Botero acknowledged that Hernán was involved with the five fictitious accounts used to transfer the 57 million dollars.

History and Characteristics of the Person

Hernán Botero is a prominent Colombian citizen of enormous wealth and stature. He has no previous arrests and until this case, enjoyed a fine reputation in Colombia.

Physical and Mental Condition

Mr. Botero does not have a history of physical or mental problems.

Family Ties

The only family ties that Hernán Botero has in the United States are his brother, Roberto Botero; and Hernan’s family that recently relocated to South Florida to be near him during these proceedings. As pointed out above, Roberto Botero has been convicted of crimes charged in the same indictment and is presently released on bond pending appeal.

Employment

Hernán Botero has never been employed in the United States. His businesses and other financial resources are all based in Colombia.

Financial Resources

The Botero family has vast financial resources in Colombia. They own a grain importing business, a fashionable Medellin hotel and a professional soccer team. Although these assets are in corporate or family names, Hernán Botero testified that he “controlled” a number of these interests. The only property Mr. Botero owns in the United States is the subject of a tax lien.

Length of Residence in the Community

Prior to the instant indictment, Mr. Botero and his immediate family would come to South Florida three or four times a year. He has not been in the United States since the instant indictment was returned in 1981.

Community Ties

At this time, Mr. Botero has no ties to this community.

Past Conduct and Record of Past Appearances

Mr. Botero admits that he has known about the charges pending against him and has purposely absented himself from this country because of these charges. He has resisted extradition and continues to dispute the validity of the extradition process. He has refused to enter a plea and refuses to recognize this Court’s jurisdiction. Because Mr. Botero was only extradited on seven counts of the indictment, he continues to be a fugitive on the, remaining ten counts.

Mr. Botero strenuously argues that his fight against extradition cannot be used by this Court in considering whether there is a serious risk that he will flee prior to trial. The defendant points out that he did not leave the United States when the indictment was returned — he was already in his native Colombia and simply sought to avail himself of his legal rights in Colombia. According to Mr. Botero, when he learned the Government of Colombia was going to comply with the request by the United States for his extradition, he contacted an attorney who advised him to fight the extradition. The attorney advised him that a waiver of extradition would expose him to trial on all seventeen counts of the indictment, whereas even if the extradition treaty were enforced, Mr. Botero would face fewer charges if he resisted extradition.

While Mr. Botero may now have entirely legitimate tactical reasons for resisting extradition, the fact remains that the defendant has absented himself from this jurisdiction and has refused to answer these charges. This Court recognizes that Colombia is Mr. Botero’s native country. But prior to the indictment in this ease, the defendant frequently travelled to the United States for business and travel. It is clear that Mr. Botero was aware of the charges pending in this country and that his motivation for not voluntarily returning over the past few years was to avoid facing these charges. Certainly, these facts can and should be considered by this Court in determining whether he poses a serious risk of flight. At a minimum, Mr. Botero’s refusal to voluntarily return is indicative of a mental state which could easily rationalize flight on legal, moral or intellectual grounds.

In the context of determining whether a defendant poses a substantial risk of flight, this Court does not find any meaningful distinction between a person who left the country when he learned of pending charges and one who already outside the country refuses to return to face these charges. The intent is the same — the avoidance of prosecution. See Jhirad v. Ferrandina, 536 F.2d 478, 483 (2d Cir. 1976) (finding an intent to flee from prosecution when a person declines to return to his native country to face charges). See also United States v. Ballesteros-Cordova, 586 F.2d 1321, 1323 (9th Cir.1978) (to prove that a person intended to escape prosecution, the Government “need only prove that he was wanted by the police and that he failed to submit to arrest”).

Nature and Seriousness of the Danger to the Community

This Court does not find that Mr. Hernán Botero poses a danger to the community if he were released pending trial. The Government has suggested that it has reason to believe that Mr. Botero’s personal safety may be in danger and therefore his presence in the community could be potentially dangerous to those in proximity to him. Because the Court is convinced of its conclusion without considering this factor, it has declined to require any details of this alleged danger.

Conclusion as to Risk of Flight

When all of these factors are considered, it is clear that Hernán Botero poses a substantial risk of flight. Notwithstanding his past history of good character, he is a man facing serious charges with possible penalties of thirty-five years imprisonment. The evidence against him apparently is strong — his brother was convicted on substantially the same evidence. He has not been in the United States since 1981 and even then he did not have significant ties to this country. For three years he attempted to avoid prosecution by not returning to this country. Even after his extradition, he continues to challenge the jurisdiction of this Court as to seven counts. As to the remaining counts, he continues to be a fugitive. He has considerable means and foreign connections which would make it possible for him to escape to other countries with relative ease in order to avoid prosecution for offenses punishable by lengthy prison sentences.

Finding that Mr. Botero poses a serious risk of flight does not, however, end this Court’s inquiry. Pretrial detention can only be ordered if the Court finds that no condition or combination of conditions will reasonably assure the appearance of the defendant at trial.

The Proposed Conditions

The defendant has proposed a combination of conditions of release which include the following: a two million dollar personal surety bond secured by commercial property in Florida and Colombia, the home of his daughter-in-law’s parents in Massachusetts and Mr. Botero’s home in Medellin, Colombia; release to the custody of a person approved by the United States Attorney and deputized by this Court who shall maintain around the clock custody of Mr. Botero; a curfew which would be tantamount to house arrest; an electronic monitoring device; and execution of a waiver of extradition applicable to any country to which he may flee.

Given the serious risk of flight posed by Mr. Botero, these conditions are inadequate to reasonably assure his appearance at trial. The property in the United States offered to collateralize the bond may be worth a considerable amount of money, but a man of Mr. Botero’s means could flee the jurisdiction and then reimburse those persons whose property would be forfeited. Repaying those family and friends would be an incidental cost compared to his freedom. This Court will not consider property outside the jurisdiction of the Court of the United States as collateral.

Similarly, the defendant’s proposal of a strict curfew and house arrest, even under twenty-four hour guard and an electronic tracking system is inadequate to reasonably assure this Court of Mr. Botero’s future appearance. It must be remembered that wherever Mr. Botero stays in the Miami area, he will be only minutes away from a private airfield. Thus, even a short delay in notifying the authorities would permit Mr. Botero to successfully flee. Mr. Botero need only wait for the appropriate time — when his guard was out of the room, asleep or had his attention elsewhere — to get the head start he would need. Moreover, it is not entirely clear what authority and what duty a private guard would have to prevent Mr. Botero’s flight. Certainly, this Court would be reluctant to hold such a guard in contempt if it appeared that he was unable to physically prevent Mr. Botero’s flight.

Finally, this Court doubts that a waiver of extradition executed by Mr. Botero under these circumstances could ever be considered voluntary and enforceable. Mr. Botero contests the jurisdiction of this Court to conduct these proceedings. Any waiver he executes here in an effort to secure his release would have to be considered suspect.

In sum, at this point, the Court finds that even the stringent conditions proposed by the defense would not be sufficient to reasonably assure Mr. Botero’s appearance at trial. The order of pretrial detention is therefore affirmed.

      . The Government subsequently dismissed one count of the indictment which alleged that Mr. Botero and others imported cocaine into this country in violation of 21 U.S.C. § 952(a).

      . The detention order issued by Magistrate Smargon on January 17, 1985 erroneously included the application of the rebuttable presumption under 18 U.S.C. § 3142(e) that no condition or combination of conditions will reasonably assure the defendant’s appearance as required. The statutory presumption, of course, is not applicable because Mr. Botero1 is not charged, with any offense to which it applies. During the February 12th hearing Magistrate Smargon stated that the reference to the statutory presumption was a typographical error and was not a factor in the issuance of the detention order. A review of transcript of the January 16, 1985 hearing and the oral order issued by Magistrate Smargon at that time confirms this.


author: ACOSTA, District Judge.

text:
    Francisco VARGAS, et al., Plaintiffs, v. The ROYAL BANK OF CANADA, Defendant. Oscar TEJERA, et al., Plaintiffs, v. The ROYAL BANK OF CANADA, Defendant.
    Civ. Nos. 84-1502(RLA), 84-1503(RLA).
    United States District Court, D. Puerto Rico.
    March 14, 1985.

      A.J. Amadeo-Murga, Hato Rey, P.R., for plaintiffs.
    Charles P. Adams, Brown, Newsom & Córdova, Hato Rey, P.R., for defendant.
   OPINION AND ORDER

ACOSTA, District Judge.

These consolidated actions were filed by two dismissed employees of The Royal Bank of Canada (hereinafter referred to as “the Bank”). Defendant has moved for summary judgment alleging there is no valid claim for either breach of contract or defamation.

The Court, having reviewed the arguments set forth by all parties involved in these proceedings, hereby finds as follows.

THE FACTS

1. On August 15, 1980, the Bank issued Disciplinary Procedures-Guidelines (Form Jl-61-15) setting forth internal procedures to be followed in cases where disciplinary action against an employee was being considered.

2. On July 28, 1982, the Bank issued Employee Rules governing the conduct of persons working at the Bank (Form Jl-6111).

3. The Bank issued a Policy Statement dated May 23,1983 (Form J0-21-01) whereby it advised of its right to terminate the services of any person in its employ. Notice in writing or payment was to be made depending on the grounds for termination.

4. On May 28, 1983, plaintiff Oscar Tejera (hereinafter referred to as “Tejera”) was given an overall performance rating of “very good” in an evaluation form ranging from excellent, very good,' good, improvement required, and not acceptable. Tejera’s evaluation form included a statement from his reviewing officer to the effect that he was “a very responsible employee who by his own initiative collects and makes calls without remuneration.”

5. On November 26, 1983, the overall work performance for plaintiff Francisco Vargas (hereinafter referred to as “Vargas”) was rated “good”. In the form, the evaluating officer stated Vargas was very helpful and cooperative and “could be considered for a position that bears more responsibility ...”

6. By letters dated February 29, 1984 and subscribed by M.G. Payn, Regional Manager, both Vargas and Tejera were suspended from their duties and responsibilities at the Bank without pay until further notice, effective that same day. The reason given for the suspension was that the defendant had become aware of violations to its Code of Conduct and to the Personnel Manual Regulations.

7. By letters dated March 30, 1984 and April 23, 1984, Tejera and Vargas, through their counsel, requested to be informed of the precise grounds for their suspension pursuant to the Rules and Regulations then in effect at the Bank in order to be in a position to defend themselves against any charges.

8. Approximately three weeks later, on May 15, 1984, defendant’s counsel responded to plaintiffs’ legal representative advising him as follows:

As a consequence of a reorganization of the Bank’s operations, positions are not available for the subject employees and the Bank has decided to terminate their employment effective May 15,1984. The Bank will pay the employees all salaries and benefits for the period of their suspension, as well as severance compensation, as provided by the law ...

9. Plaintiffs were also sent a letter dated May 15, 1984 whereby they were informed by the Bank that it had decided to cease their employment effective that day.

10. At the time they were discharged on May 15, 1984, both Vargas and Tejera had been employed with the Bank for approximately seventeen years.

11. Plaintiffs’ employment with the Bank had no fixed term.

FIRST ISSUE

BREACH OF CONTRACT

The issue presently before us is whether the Rules and Regulations of the Bank establishing internal procedures for termination of its employees can serve as a basis for a cause of action for alleged breach of contract.

Act No. 80

The ever present interest of the Government of Puerto Rico in protecting individuals in their employment led to the enactment of what is presently Act No. 80 of May 30, 1976, 29 L.P.R.A. § 185a-i, which provides for indemnity in cases of dismissal without cause.

Since its original enactment, this legislation sought to strike a balance between the freedom of choice inherent to an employer and the social need to do away with arbitrary terminations of employment. Srio. del Trabajo v. I.T.T., 108 D.P.R. 536, 540-41 (1979), citing a report prepared by the Civil Rights Commission in August of 1959.

The statute provides that employees, hired for an indefinite period of time and dismissed without “just cause” as defined in 29 L.P.R.A. § 185b, shall be liable for an indemnity computed on the basis of the length of their service. 29 L.P.R.A. § 185a.

Dismissal compensation is an important event of social justice due to man as a factor of production, insofar as he, as a worker, is a minor participant of the fruits of the enterprise, and is not entitled to the liquidation of dividends, benefits, or accrued interests in the worthy task of earning, with his effort, the daily bread he shares with his family and for whom the act of saving is a mere dream devoured by privation. When unemployment dooms a human being and his family to hunger or to indignity, we must be very demanding before depriving him of the protection he has gained through our social legislation. Only a very serious offense would justify the suspension of the modest relief directed to support a family in the transition to a new job without becoming a burden for the State. There must be a very clear justification to dismiss him from his job without giving him this minimal payment for his years of service which represent his only asset to the structure of production: his energy, his intellectual and physical capacity during his most fruitful years, in short, his health which time deteriorates.

Srio. del Trabajo, supra, 108 D.P.R. at 547 (Official Translations of the Opinions of the Supreme Court of Puerto Rico, Vol. 8, pp. 573-74).

Act No. 80 has been construed as providing an exclusive legal remedy. The employer’s liability for an unjust dismissal is limited to the payment of the monies owed under the formula established by Section 185a, which is comprised of one month’s salary plus “an additional progressive indemnity equivalent to one week for each year of service.”

An employer shall not be amenable to suits for dismissals other than under Act No. 80 actions, unless he has incurred in some type of tortious conduct separate or independent from the termination of employment as such. Rivera v. Security Nat. Life Ins. Co., 106 D.P.R. 517, 527 (1977) (Official Translations of the Opinions of the Supreme Court of Puerto Rico, Vol. 6, p. 727, 738). The Supreme Court of Puerto Rico has held that: “In the cases of ordinary suspension from work without cause, no civil liability is imposed on the employer. He is merely under the obligation of paying ... one month’s salary as indemnity.” Id.

Act No. 80 does not even provide for reinstatement in situations of dismissal without just cause. Id.

Rules and Regulations

Act No. 80 sanctions the use of internal rules and regulations by employers in their day-to-day operations to assist them with the normal functioning of the enterprise and even allows for dismissal of employees based on violations to reasonable regulations. See, Srio. del Trabajo, supra, 108 D.P.R. at 542. However, it is our understanding of Act No. 80 that departure by an employer from its internal regulations can only give rise to liability under the terms of Act No. 80 if the termination is found tantamount to a dismissal without cause and not to a suit for breach of contract.

In Srio. del Trabajo, supra, the Supreme Court of Puerto Rico held that a dismissal for a first offense based on grounds that did not affect the safety or normal operation of the establishment was not for cause even if provided for by the employer’s internal regulations.

The employee in Srio. del Trabajo, supra, was dismissed because he sought an eight-day leave of absence on false grounds although he had been employed with the company for seventeen years with a clean record. The employer applied Rule 34 of its Disciplinary Regulations which penalized “making a false or fraudulent statement on employment application forms or company records” with dismissal. The Supreme Court of Puerto Rico found that such drastic remedy for a single, isolated offense was disproportionate in a case where the lie posed no threat to the normal operation of the establishment. The Court found that, under such circumstances, the dismissal had been “unreasonable and arbitrary”.

The employer, who has the burden of proving the existence of just cause, did not fulfill his obligation because Rule 34, on which he grounded his case, was basically insufficient. Said Rule does not meet the reasonability requirement established by /29 L.P.R.A. § 185b(c)/ for the rules and regulations of an establishment. Hence, it is ineffective.

Srio. del Trabajo, supra, 108 D.P.R. at 545 (Official Translations of the Opinions of the Supreme Court of Puerto Rico, Vol. 8, pp. 572-73) (footnotes omitted).

We see no difference between the circumstances present in Srio. del Trabajo, supra, and our case. If the misapplication of an internal regulation by the employer could only give grounds to an Act No. 80 relief, departure by defendant herein from the internal procedures established for dismissal can only be tantamount to a discharge without cause if no justification is established by the employer that meets the 29 L.P.R.A. § 185b standards.

Other Jurisdictions

Plaintiffs’ argument for a cause of action for violation of their contractual rights is based on the existence of procedures at the Bank providing employees with the right to notice and opportunity to be heard when subject to disciplinary action. Other jurisdictions have addressed this same issue but have reached contradictory results.

An analysis of the pertinent cases in other states seems to indicate that, in certain instances, employment policies embodied in employee manuals will entail responsibility based on the principles of either an implied contractual obligation, tort or equitable estoppel. See, Annot., 33 A.L.R. 4th 120 (1984) and Annot., 12 A.L.R. 4th 544 (1982). These theories, however, respond to the interest of these particular States in providing employees hired at will with a certain degree of security against being dismissed except for cause.

The common-law rule regarding the termination of an at-will employment contract is that if the employment is not for a definite term, and if there is no contractual or statutory restriction on the right of discharge, an employer may lawfully discharge an employee whenever and for whatever cause, without incurring liability for wrongful discharge. New legal principles have been better settled than the at-will concept, whose roots date back to the 19th century laissez-faire policy of protecting freedom to contract. In recent years, however, there has been a growing trend toward a restricted application of this rule in order to comport with express and implied public policy, as well as statutory concerns. Some jurisdictions have been willing to depart from the traditional contract rule of terminability at will and to impose an implied contractual duty not to discharge an employee for reasons regarded as violative of public policy or to recognize the tortious nature of a discharge violative of public policy, whether such policy is expressly codified or implied.

Annot., 33 A.L.R. 4th, supra at 123 (footnotes omitted).

CONCLUSION

This being an issue of State law, we are forced to apply the legal and public policy principles embodied in the pertinent local statute. It appearing this matter has been taken care of within our jurisdiction by special legislation, we must defer to the judgment of the legislature in establishing fixed remedies for dismissals without cause.

Plaintiffs in this action were hired for indefinite periods of time. No evidence has been presented to controvert defendant’s allegations that they were serving at the will of the Bank.

Accordingly, it is our finding that in this action the exclusive remedy for dismissal without cause lies with Act No. 80 and not on the basis of a contractual liability arising from internal rules and regulations.

SECOND ISSUE

DEFAMATION

Each complaint at Paragraph 9 avers plaintiffs’ termination from employment was based on false grounds and that defendant “maintained publicly and stated to third persons that the dismissal was due to plaintiffs’ wrongful conduct.” Plaintiffs then requested monetary relief at Paragraph 11 for loss of reputation allegedly caused by their suspension, dismissal and the manner in which these took place.

In their respective opposition to defendant’s motion for summary judgment, at Page 7 Tejera and Vargas contend that a controversy exists as to whether or not they were “libeled, defamed, or injured” in their dignity and honor by the defendant.

Upon reviewing the allegations of both complaints, plaintiffs’ opposition to the defendant’s motion for summary judgment and the documents in file submitted by all parties, the allegations pertaining to defamatory communications can be summarized as follows: (1) suspension and dismissal; (2) communication to fellow workers, (3) communication to the Department of Labor and Human Resources of the Commonwealth of Puerto Rico, (4) communication to a certain Héctor Diaz.

The Libel and Slander Statute of 1902, 32 L.P.R.A. §§ 3141-3149, provides for a civil action for damages due to libel and slander.

Where pertinent, Section 3142 defines libel as “the malicious defamation of a person made public by writing, ... tending to subject him to public hatred or contempt, or to deprive him of the benefit of public confidence and social intercourse, or to injure him in his business, or in any other way to throw discredit, contempt or dishon- or upon him ...”

Slander, on the other hand, is defined in Section 3143 as “a false and unprivileged publication other than libel, which imputes to any person the commission of a crime, or tends directly to injure him in respect to his office, profession, trade or business, or which by natural consequences causes actual damages.”

Libel refers in general terms to the written communication, whereas slander is applied to oral defamation. W.L. Prosser, Handbook of the Law of Tort, Sec. 111 at 739 (1971); Robert D. Sack, Libel, Slander, and Related Problems, Sec. II.3 at 43 (1980).

Libel and slander are involved with defamation, or the invasion in the interest of reputation by means of a communication “which tends to hold the plaintiff up to hatred, contempt or ridicule, or to cause him to be shunned or avoided.” Prosser, supra at 739 (footnote omitted). “Defamation deals with expression ... that injures reputation.” Sack, supra at 45 (footnote omitted). Accordingly, only those communications which in some manner injure plaintiffs’ reputation will serve as grounds for a suit for defamation.

Another prerequisite for a defamation suit is that the information be either •read by a third party in a libel suit or heard in a slander action. This is called “publication” and is explained as follows:

Since the interest protected is that of reputation, it is essential to tort liability for either libel or slander that the defamation be communicated to some one other than the person defamed. This element of communication is given the technical name of “publication,” but this does not mean that it must be printed or written; it may be oral ...

Prosser, supra at 766 (footnote omitted).

According to Torres Silva v. El Mundo, Inc., 106 D.P.R. 415, 427 (1977), a libel suit filed by a private individual will require that the defamatory information be false, the publication negligently made, and that real damages to the plaintiff ensue.

Suspension/Termination

It is important to note that plaintiffs refer to their suspension and dismissal interchangeably in their complaint, as well as in their opposition to summary judgment. However, within the context of their defamation claim, these two occurrences must be kept separate since only the suspension letter contains purportedly defamatory statements. The termination notice has no information that may be deemed injurious to their reputation.

The February 29, 1984 correspondence makes reference to certain violations of the Code of Conduct and Personnel Manual as grounds for suspension until further notice. On the other hand, the termination letter dated May 15, 1984 simply states that the Bank had decided to cease their employment at the Bank effective that same day. The only additional information in the termination letter was to the effect that their severance compensation would be available upon request.

The Bank s counsel, on May 15, 1984, informed that the discharge was caused by a reorganization of the Bank’s operations as a result of which no positions were available for plaintiffs. Once again, defendant made clear that it would pay plaintiffs “all salaries and benefits for the period of their suspension, as well as severance compensation, as provided by law.” We see no derogatory information in the May 15, 1984 correspondence. Therefore, we will limit our review for purposes of the defamation claim to the communication informing plaintiffs herein they had been indefinitely suspended.

Communication to Fellow Workers

Plaintiffs claim their indefinite suspension was revealed to fellow-workers, which caused them emotional and mental anguish.

The only evidence to support this contention appears at Paragraph 8 of the affidavit subscribed by both plaintiffs and attached to their opposition to defendant’s motion for summary judgment. In their joint statement, plaintiffs stated that because they were dismissed for alleged violations of the Rules of Conduct, they suffered mental anguish, loss of self-esteem, shame, and loss of face in front of their fellow employees “who were informed” of plaintiffs’ suspension. Fellow employees made a collection on plaintiffs’ behalf and two weeks after their suspension delivered Fifty-Nine Dollars ($59.00) to each.

Even assuming it was the Bank who informed the other employees of plaintiffs’ suspension, we find that this communication cannot, without any further evidence, give rise to a slander action.

The statute specifically provides that malice shall not be presumed in communications “between persons having business in partnership, or other similar association”. 32 L.P.R.A. § 3145. This provision embodies conditional or qualified privileges for communications made under specific circumstances. Chico v. Editorial Ponce, Inc., 101 D.P.R. 759, 768 (1973); Díaz v. Puerto Rico Railway, Light and Power Co., 63 D.P.R. 808 (1944).

Two types of privileges exist in defamation cases, commonly known as absolute privileges or immunities and conditional or qualified privileges.

Absolute privileges are properly classified as immunities since they are based on the personal position or status of the actor. They have been described as follows:

These “absolute privileges” are based chiefly upon a recognition of the necessity that certain persons, because of their special position or status, should be as free as possible from fear that their actions in that position might have an adverse effect upon their own personal interests.

3 Restatement (Second) of Torts § 584 at 243 (1977).

Conditional or qualified privileges, on the other hand, seek to protect the circumstances in which the statement is made.

They are more properly to be classified as privileges, since they arise out of the particular occasion upon which the defamation is published. They are based upon a public policy that recognizes that true information be given whenever it is reasonably necessary for the protection of the actor’s own interests of a third person or certain interests of the public.

Id.

It is our understanding that Section 3145 covers communication to fellow workers of reasons for disciplinary action taken against an employee and, thus, they are privileged. Once the privilege attaches, it is incumbent upon plaintiffs to establish by extrinsic evidence the elements for their defamation claim. Quiñones v. J.T. Silva Banking and Commercial Co., 16 P.R.R. 661, 665, 667 (1910); Jiménez v. Díaz Caneja, 14 P.R.R. 9, 17-18 (1908). Plaintiffs then had the burden of establishing, that the privilege was lost by abuse on the part of the employer. Annot., 60 A.L. R.3d 1080, 1088-89 (1974).

Plaintiffs have failed to produce any evidence to justify striking down the qualified privilege applicable to the purported communication between persons in the working environment. Apart from this conclusory allegation of the affidavit, there is no evidence in the record to sustain this allegation.

This particular privilege seeks to protect the necessary flow of information within a place of employment, and given the lack of evidence in this case, we are not persuaded that the policy it seeks to protect should give way to a defamation claim.

Department of Labor

At his deposition, Tejera testified defendant had informed the reasons for his suspension to the Department of Labor. However, the agency learned about this matter at Tejera’s request when he submitted the suspension letter for collection of unemployment benefits. It is evident that it was Tejera who presented the evidence and grounds for his suspension to the State agency.

The only other instance of publication claimed by Vargas was the Department of Labor. Vargas admitted under oath, however, that the Bank supplied the information pertaining to the alleged irregularities as grounds for suspension after he filed the request for unemployment benefits.

“Ordinarily the defendant will not be liable for any publication made to others by the plaintiff himself ...” Prosser, supra at 771 (footnotes omitted). Accordingly, Tejera cannot assert a defamation claim based on his own publication.

As to Vargas, defendant supplied the details of the suspension only after plaintiff filed his application with the Department of Labor. Defendant merely complied with a petition from a State agency responsible for processing requests for unemployment benefits, and we are reluctant to impose liability under such circumstances.

Furthermore, the local statute specifically provides that communications will not be held or deemed malicious when made in “any judicial proceeding or in any other proceeding authorized by law” if made “in the proper discharge of an official duty” or anything said during the course of a judicial, official or other proceeding. 32 L.P. R.A. § 3144.

We find that the proceedings before the Department of Labor fall within this exception, and Vargas has failed to produce any evidence to justify the departure from this provision allowing for a qualified privilege.

Third Parties

At Pages 29-30 of his deposition, Tejera related an alleged incident whereby one of defendant’s employees informed a certain Hector Diaz that plaintiff was no longer employed there and upon being asked why, the employee stated that he had been suspended.

Even assuming this particular communication was defamatory, plaintiff still has the burden of establishing that it was negligently made and it caused him real damages. Torres Silva, supra, 106 D.P.R. at 427.

We find the allegations on this point are overbroad and conclusory and not sufficient to defeat a request for summary judgment.

Tejera further assumed other persons may have called the Bank. This allegation is totally speculative and cannot serve as grounds for opposing a summary judgment request.

Vargas made no allegation as to publication to third parties. His arguments were limited to the communication to the Department of Labor and Human Resources of the Commonwealth of Puerto Rico and to fellow employees.

CONCLUSION

Based on the foregoing, we find the defamation claims are not legally sufficient to defeat a motion for summary judgment and should be dismissed.

SUMMARY JUDGMENT

In ruling on motions for summary judgment, the Court must look at the record in the light most favorable to the opposing party. The purpose of a summary judgment is to determine whether or not further exploration of the facts is needed, and it is the burden of the party opposing the motion to show that genuine issues of material fact remain in controversy. Raskiewicz v. The Town of New Boston, et al., 754 F.2d 38 (1st Cir.1985).

A party opposing a summary judgment has the burden of presenting evidence to justify its position and cannot rest on the allegations in the pleadings. Emery v. Merrimack Valley Wood Products, Inc., 701 F.2d 985, 991 (1st Cir.1983). Legal arguments by counsel in his memorandum of law are not sufficient to defeat a summary judgment request. Transurface Carriers v. Ford Motor Co., 738 F.2d 42 (1st Cir.1984).

Accordingly, defendant’s motion for summary judgment filed on September 19,1984 in these consolidated actions is granted and the complaints in Civil Action Nos. 84-1502 and 84-1503 are hereby dismissed.

IT IS SO ORDERED.

      . 29 L.P.R.A. § 185b provides, in pertinent part, as follows:
      Good cause for the discharge of an employee of an establishment shall be understood to be:
      ... (c) Repeated violations by the employee of the reasonable rules and regulations established for the operation of the establishment, provided a written copy thereof has been timely furnished to the employee.

      . The Court having reached this conclusion, it is not necessary to go into the merits of whether or not the Bank complied with its internal regulations for the suspension and dismissal of these two employees.

      . At Page 8 of their opposition to the motion for summary judgment, plaintiffs also point to an inspection report of the Installment Loan Department conducted on February 15, 1984 prepared by S.A. Crookston which refers to plaintiffs’ integrity as being “open to question.” However, there is no evidence in the record that the contents of this document were ever revealed to any persons. Thus, the requirement of publication is not met.

      . Deposition, p. 27.

      . Deposition, pp. 32-35.

      . In some cases, claims for unemployment compensation have been held privileged as if made in quasi-judicial proceedings. Annot., 45 A.L. R.2d 1296, 1303 (1956).

      . Deposition, p. 29.

      . Deposition, p. 37, and affidavit submitted with opposition to motion for summary judgment.