author: SHABAZ, District Judge.

text:
    Elaine M. GUZIAK, Plaintiff, v. John GUZIAK, Defendant. KRUEGER, THUMS, TLUSTY, HITTNER & KENNEDY, S.C., and River Valley State Bank, Garnishees, v. The UNITED STATES of America, Intervenor. TREMBATH, HESS & MILLER, S.C., Plaintiff, v. John GUZIAK, Defendant. KRUEGER, THUMS, TLUSTY, HITTNER & KENNEDY, S.C., Garnishee Defendant, v. The UNITED STATES of America, Intervenor, v. Elaine M. GUZIAK, Impleaded Defendant.
    Nos. 84-C-787-S, 84-C-795-S.
    United States District Court, W.D. Wisconsin.
    Feb. 19, 1985.

      Elaine Guziak, pro se.
    Richard Bolte, Bradley, Hoover & Brady, Richards & Hessert, Wausau, Wis., for John Guziak.
    George Richards, David Albright, Tinkham, Smith, Bliss, Patterson, Wausau, Wis., for Krueger Firm.
    Mary Bielefeld, Trial Atty., Tax Div. Dept, of Justice, Washington, D.C., for U.S.
   SHABAZ, District Judge.

This action is before the Court on the petition of the United States for removal from the Circuit Court of Marathon County, Wisconsin. The United States invoked the provisions of 26 U.S.C. § 7424 and 28 U.S.C. § 1444 for purposes of jurisdiction which the Court has previously found to |>e proper. Presently pending are numerous motions for summary judgment. The basic question these consolidated cases present is the priority of claims to a sum of money. The long and tortured history of this case is as follows:

FACTS

Elaine and John Guziak (hereinafter “Elaine” and “John”) had been husband and wife since 1946. Their son, James, who happens to be an attorney in Orange County, California, also has a bit part in this drama, although he is not a party.

On July 1, 1977, the story begins with Elaine’s retention of the law firm of Trembath, Hess & Miller (“Trembath”) of Wausau, Wisconsin, to represent her in a divorce action in the Circuit Court of Taylor County, Wisconsin. John was living in Little Rock, Arkansas by this time. Elaine was living in the family homestead in Med-ford, which is in Taylor County. The homestead was apparently encumbered by a mortgage to the Bank of Medford. Elaine was awarded a divorce by judgment entered on September 10, 1979.

The judgment awarded her some property, alimony (actually denominated “maintenance payments” under Wisconsin law) of $1,200.00 per month, and also ordered John to pay certain fees in excess of $60,000.00, which included Elaine’s attorney’s fees which at that time amounted to $14,746.00. The judgment was amended on June 8, 1982 on remand after an appeal by John which mandated modification of the property settlement. The new judgment provided for payment of Elaine’s attorney’s fees of $20,000.00 directly enforceable by the law firm against John, with Elaine to be responsible for any balance. The alimony award had been affirmed on appeal.

The judgment on remand was also appealed and was not finally disposed of until February 14, 1984, when the Wisconsin Supreme Court denied a petition for review.

The Trembath firm continued to represent Elaine in the divorce action, at least according to its records, through this second appeal, by which time its claim for attorney’s fees reached $46,792.08. No payment has ever been made. The 1982 judgment awarding $20,000.00 in fees was docketed and filed in Marathon County on April 19, 1984.

Meanwhile, the Guziaks, through the intervention of their son, James, were attempting to resolve their divorce-related financial disputes. The impetus for this attempt appears to have been dichotomous. On the one hand, Elaine was having financial problems. In April 1982 she retained the law firm of Krueger, Thums, Tlusty, Hittner & Kennedy (“Krueger”), of Schofield, Wisconsin, to represent her with respect to the Bank of Medford’s foreclosure on the homestead. Trembath was having no part of this action, as it hadn’t been paid. The Krueger firm would soon become a major supporting player.

On the other hand, John, by the fall of 1983, was very anxious to take part in Wisconsin’s Autumn Rite of Passage, also known as deer hunting season. But he was afraid that Elaine would have him arrested for nonsupport if he entered Wisconsin.

Entering from stage west was Son, James, who called Bradley Kennedy of the Krueger firm in mid-November 1983 with the news that his parents had worked out a settlement of their differences. According to a letter from Kennedy to John’s Wisconsin attorney, Richard Bolte, the settlement provided for the payment of $50,000.00 from John to Elaine; alimony of $500.00 per month commencing November 15,1983; an agreement by John to indemnify and hold harmless Elaine for state and federal tax liens; and an exchange of quit-claim deeds to various pieces of property as they had been awarded under the divorce decree.

Then things became very strange. While the details were being worked out, John and Elaine came to an agreement whereby John would deposit $30,000.00 with the Krueger firm and $20,000.00 with son James, and Elaine would, in return, not have John arrested during deer hunting season. This agreement was actually reduced to writing, and both Elaine and John signed it. Sometime in November or December, the Krueger firm gave $2,000.00 from the $30,000.00 deposited with it in its trust account to Elaine for living expenses, after first obtaining John’s consent.

During the same period, the stipulated settlement discussed above was reduced to writing, but John decided to back out, apparently because of reservations concerning how long he would have to pay the $500.00 per month alimony. This occurrence understandably caused the Krueger firm some concern. Krueger advised Elaine that it found itself in the middle of possibly conflicting claims, and that she ought to get herself another lawyer, which she did. James, being blessed with the same kind of vision, filed an interpleader action in California concerning the $20,-000.00 he was holding.

This brings us to the New Year, 1984. On January 19, 1984, Elaine, by her new attorney, filed, of all things, a garnishee complaint against.John as defendant and Krueger and the River Valley State Bank of Rothschild, Wisconsin (Krueger’s depository, presumably) as garnishees. An answer from the bank was apparently filed, but is not of record here and we will hear no more from it. This action was docketed as case number 84-CV-72 in the Circuit Court of Marathon County, Wisconsin. Elaine’s complaint was grounded on a June 1981 Taylor County Circuit Court judgment for her in the amount of $27,170.00, the source of this number being a mystery. Krueger, in answering the complaint, admitted that a judgment had been so entered and alleged that the $28,000 still in its hands was a “sum [which] was paid into said [trust] account by the principal defendant John Guziak.” John answered on March 20, 1984, having been served in Arkansas on February 16, that Krueger had $28,000.00 plus interest “belonging to John Guziak ... in a trust and fiduciary capacity and the garnishment is, therefore, ineffective and improper.” He also alleged that the judgment underlying the action was void due to the failure of Elaine to establish personal jurisdiction over him. He also alleged, as an affirmative defense, that the funds were being held “pursuant to negotiations for a stipulated settlement to a marital dispute” and that the funds were being held by Krueger in a fiduciary capacity “who accepted such funds in their capacity as the attorney for Elaine Guziak.” Thus, argues the answer, Elaine as plaintiff is trying to garnishee herself, disregarding, of course, the prior allegation that it was John’s money. The answer also set up a counterclaim and cross-complaint, alleging that Elaine and Krueger were conspiring to deprive John of the $28,000.00 with knowledge that the judgments were void. (John’s money again?) Elaine and Krueger filed general denials in response to the cross-complaint and counterclaim.

Then, on April 24, 1984, Trembath filed a garnishee complaint against John as defendant and Krueger as garnishee for $20,-000.00, representing the judgment for attorney fees which it had docketed and filed on April 19, 1984. This action, also filed in the Marathon County Circuit Court, was assigned case number 84-SC-1017. Krueger answered on May 15, admitting that John had paid the sum of $28,000.00 into Krueger’s trust account, but stating that the property was no longer under its control as Elaine had filed her action, and also because the account “had been attached by an Internal Revenue Service Notice of Levy served on the Garnishee Defendant [Krueger] on May 8, 1984.” This is the first hint of how a federal court comes to be involved in a divorce dispute and related garnishment actions.

John answered this complaint on May 23, 1984, generally denying that the money was subject to garnishment. On July 5, 1984, Trembath filed a reply to Krueger’s answer, asserting superiority of its claim to those of both Elaine and the IRS. On June 27, 1984, both garnishment actions were consolidated and assigned to Judge Ronald Keberle.

Things may have proceeded nicely to a reasonable and logical conclusion before Judge Keberle, who is well known for both attributes, but for the entry of a new player. On August 21, 1984, the United States, by the Tax Division of the Department of Justice, moved to intervene. Its complaint in intervention cited several Notices of Tax Lien filed against both Elaine, individually, and John and Elaine jointly, which had been filed at various times between 1980 and 1983 in the counties of Taylor and Sawyer in Wisconsin, and Pulaski in Arkansas. The total of the tax liens, according to the complaint, was $2,067.10 against Elaine, and $151,887.44 against John and Elaine jointly, both including interest and penalties through July 31, 1984. The complaint also alleges that a Notice of Levy was served on Krueger on May 8, 1984.

The motion to intervene was granted by Judge Keberle on September 17, 1984, and the matter was proceeding to a trial on the briefs when the United States petitioned for removal to this Court on October 2, 1984. By this time, Judge Keberle had ordered that Elaine be impleaded as a defendant in 84-SC-1017 on September 28, 1984. Also on September 28, Trembath filed an amended garnishment complaint, alleging the same judgment for attorney’s fees against John, and also- alleging an attorney’s lien for the entire amount of its fees against the fund by virtue of the judgments obtained for Elaine. Also on file are answers to this amended complaint. Krueger had, pursuant to Judge Keberle’s order, moved for summary judgment, seeking to establish itself as a mere stakeholder and asking that it be dismissed upon payment of the fund to the Clerk of Court.

This Court has previously denied, with understandable misgivings, a motion by Trembath to remand this matter to the Marathon County Circuit Court, based in large part on Trembath’s view of the perfidy of the tax collector. These cases have been consolidated here as well, this Court’s case numbers 84-C-787-S and 84-C-795-S corresponding to the Marathon County Court’s 84-CY-72 and 84-SC-1017, respectively.

MEMORANDUM

The main issue before the Court on the four motions for summary judgment; filed by the United States, the Trembath law firm, the Krueger law firm, and John Guziak; is the priority to the fund held by the Krueger firm between the United States and Trembath. John Guziak essentially supports the claim of the United States.

With the exception of the cross-claim and counterclaim filed by John Guziak against Elaine Guziak and Krueger, it is conceded by all parties that the only interest of the Krueger firm in this case is as a mere stakeholder. It is holding a sum of money deposited by John which is the subject of conflicting claims, none of which Krueger has any interest in defending or supporting. Accordingly, it is proper to dismiss the garnishment claims against Krueger pending the payment of the funds as directed by the Court.

The cross-claim/counterclaim filed by John Guziak against Krueger and Elaine Guziak is grounded on a conspiracy between the two to deprive John of the money he paid into Krueger’s trust account. According to the brief filed by John Guziak, the theory of this claim is that Krueger received the funds as a trustee pending a stipulated settlement of the divorce. As will be seen below, the Court fully agrees with that characterization of the fund. The brief goes on, however:

A responsible trustee follows the terms and conditions of his trust, which in this case meant that he would distribute those funds pursuant to the stipulation if it had been worked out and, if not, he would return the funds to the party who deposited the same with his office. A responsible trustee does not have Mrs. Guziak go out and hire another attorney to garnishee him as her first attorney and ask him to breach the terms of the trust under which he obtained the funds, especially when those funds are not even subject to garnishment, as is spelled out hereinabove. Such an act constitutes collaboration and conspiracy and supports the cause of action for the same.

Brief of John Guziak, October 19, 1984, Docket No. 9, 84-C-787-S, page 5-6.

The Court finds this argument without any merit whatsoever. The Krueger firm may be faulted for lack of foresight, if not common sense, for putting itself in the position of receiving the funds in trust from John Guziak while its client, Elaine Guziak, had unassailable claims for back alimony against him. But its actions after receiving the funds bespeak of no wrongdoing. Krueger paid out $2,000.00 of the funds only after receiving the consent of John. And, after the conflict of interest in its representation of Elaine and its status as trustee over the funds became apparent with the failure of the settlement, it advised Elaine to obtain other counsel. There is no evidence that Krueger advised Elaine to file a garnishment action, as intimated by the brief, but even if Krueger did so, such an action allowed for a court to determine the right to the funds with notice to John. In other words, the conflicting claims of John and Elaine were apparent, regardless of the other claims which would arise later, and Krueger took the only action possible under the circumstances. If it had given the funds to either John or Elaine, the other would have had more than a colorable claim for violation of a duty. Accordingly, the cross-claim and counterclaim of John Guziak will be dismissed.

With respect to the issue of priority, the Court recognizes three claimants to the fund at issue here: Trembath, the United States, and, although she has made no motion for summary judgment, Elaine. When the United States is asserting a lien for unpaid taxes, federal law governs the resolution. of priorities among competing claims. United, States v. Pioneer American Insurance Co., 374 U.S. 84, 83 S.Ct. 1651, 10 L.Ed.2d 770 (1963). The provisions of the Federal Tax Lien Act, 26 U.S.C. §§ 6321-6326, is the source for deciding such questions, and generally recognizes the notion that “first in time is first in right.” Sgro v. United States, 609 F.2d 1259 (7th Cir.1979).

A federal tax lien arises and is enforceable upon assessment of the tax and demand for payment, 26 U.S.C. § 6322. This lien has priority over all subsequently filed liens arising under state law except for certain types of liens specified in 26 U.S.C. § 6323. Federal tax liens against John and Elaine jointly, sufficient when coupled with interest and penalties to consume the fund here, were assessed, and demand therefore made, on November 5, 1979.

Elaine’s claim appears to be based on an August 1981 judgment in Taylor County and is therefore clearly without priority over that of the federal government. Even if it is a judgment lien specified in § 6323(a), it lacks priority over the tax liens arising from the 1979 assessment since the United States filed notice of these tax liens in accordance with § 6323(f) and Wis.Stats. § 779.97(2), in sufficient amount to cover this fund in February, 1980, in the counties of residence of both John and Elaine.

Thus, it is clear that the government’s tax lien is effective against any judgment lien perfected subsequent to February 1980. Assuming that Trembath’s claim is based on nothing more than a judgment lien for $20,000.00 created by the August 1982 judgment on remand, its lien is also without priority over the federal lien perfected earlier. However, Trembath appears to be asserting collection of different theories. First, it asserts that it has a prior judgment lien in the amount of $14,-746.00 by virtue of the September 1979 judgment. Second, more importantly, it asserts that the $20,000.00 judgment and the claim for the entire $46,792.08 attorney’s fee charged to Elaine are attorney liens accorded superpriority by 26 U.S.C. § 6323(b)(8).

With respect to the $14,746.00 claim from September 1979, this amount, quite simply, was never perfected, at least until it received recognition in the judgment of June 1982. According to Wisconsin law:

A judgment is perfected by the taxation of costs and the insertion of the amount thereof in the judgment.

Wis.Stats., § 806.06(l)(c). Whatever judgment Trembath had with respect to the $14,746.00 claim for fees, that amount was never inserted in a judgment, as far as this record discloses, as early as February 1980, when the federal lien attached and established its priority. Therefore, to the extent that $14,746.00 can be accorded status as a judgment lien, its priority is secondary to the federal tax lien established by the filing of notices in February 1980. At any rate, the affidavit of Dale Miller, the Trembath attorney who apparently performed the services, discloses a fact which is manifest from the judgment itself: that the judgment of September 1979 was in favor of Elaine for the attorney’s fees incurred by her, not in favor of Trembath enforceable in its own name. Trembath did not become the holder of that kind of judgment until July 1982; that is, until after the federal tax lien was filed in accordance with § 6323(f).

The attorney lien presents a harder question. Section § 6323(b)(8) states:

(b) Even though notice of a lien imposed by section 6321 has been filed, such lien shall not be valid—
* * * * * *
(8) With respect to a judgment or other amount in settlement of a claim or of a cause of -action, as against an attorney who, under local law, holds a lien upon or a contract enforceable against such judgment or amount, to the extent of his reasonable compensation for obtaining such judgment or procuring such settlement ...

This is one of several “superpriorities” recognized under federal law. See generally, Overman, Federal Tax Liens: A guide to the Priority System of Section 6323 of the Internal Revenue Code, 16 Boston College Industrial & Commercial Law Review 729 (1975), cited in Sgro, supra, 609 F.2d at 1261. According to this commentator,

Where pursuant to local law an attorney is afforded a lien against any fund his efforts create for his client, or where the attorney holds a contract enforceable against such a fund, the attorney is accorded superpriority to the extent of his reasonable compensation.

Id. at 756. This lien is known as a superpriority because a tax lien is not valid against it regardless of the prior filing of notices of tax liens. However, the attorney lien must be perfected under state law. McKee-Berger Mansueto, Inc. v. Board of Education, 691 F.2d 828, 832 (7th Cir. 1982).

The United States has raised significant questions which are persuasive of the proposition that an attorney’s lien has never been perfected (and several other such questions which clearly lack merit). However, it is unnecessary to resolve these questions because Trembath misapprehends the meaning of the statute.

It is generally understood that the statutes according priority over federal tax liens are strictly construed against those relying on them. Anno: Priority of Federal Tax Liens, 2 L.Ed.2d 1823, 1841 (1957). In the context of § 6323(b)(8), it appears that the statute means to provide priority in favor of the attorney, vis a vis a federal tax lien, against his client’s funds which his efforts produced. The record in this case discloses that the funds never belonged to Elaine, Trembath’s client, since the settlement was never consummated. Her interest in this fund was contingent, at least until she filed a garnishment complaint, and was never perfected.

Similarly, the attorney’s lien is effective “with respect to a judgment or other amount in settlement of a claim or cause of action.” While this fund was created in contemplation of settlement, it never became one. It is not enough to say that the fund would never have been created but for the judgment obtained in Elaine’s favor, as Trembath argues, because the fund never settled the case. Simply stated, this fund is not one against which an attorney lien could attach with priority over a federal tax lien.

It appears that the above resolves all issues in these cases with the exception of the prayer for relief in the complaint in intervention to reduce the claims for taxes to judgment. This matter will be addressed at trial as previously scheduled.

In accordance with the foregoing,

ORDER

IT IS ORDERED that the garnishment complaints of Elaine Guziak, in 84-C-787-S, and Trembath, Hess & Miller, S.C., in 84-C-795-S, are DISMISSED without prejudice and without costs.

IT IS FURTHER ORDERED that the cross claim and counterclaim of John Guziak in 84-C-787-S is DISMISSED with prejudice and without costs.

IT IS FURTHER ORDERED that Krueger, Thums, Tlusty, Hittner and Kennedy, S.C., pay to the. United States that sum of money deposited with it by John Guziak, together with accrued interest thereon, within ten days of entry of final judgment in this action, which is scheduled for trial to the Court on March 6, 1985, commencing at 8:30 A.M.

      . This amount was not separately stated in the September 1979 judgment. . However, the amount was explicitly recognized in the judgment of June 8, 1982, at which time a judgment enforceable against John in the law firm's own name for $20,000 (inclusive of the previous amount) was granted.

      . This amount represents a claim which is disputed, with respect to reasonableness, by Elaine.

      . It is, of course, possible that Krueger knew exactly what it was doing. Elaine, its client, was certain (at least as matters stood in November of 1-983) to benefit by receipt of the money, either through the settlement or, if that failed, by virtue of having her husband’s assets accessible in Wisconsin. At any rate, such shrewdness cannot be attacked afterward, since both John and his attorney participated in the creation of the fund with their eyes open. Whether or not they saw anything is anybody’s guess. Perhaps John actually wanted to go deer hunting that badly.

      . This judgment is not of record, but was presumably taken after the remand of the 1979 judgment.

      . As Elaine is also indebted to the government for back taxes, a determination of her rights is perhaps unnecessary. However, she is a plaintiff in one of these actions and, while disposal of the fund against which she claims would result in the dismissal of her claim, it is arguable that future proceedings may occur where the question of which claims are being satisfied from this fund will be important. It is clear that this fund has not, nor, after this decision, will it satisfy any claims by or against her, aside from the $2,000 she actually received.

      . Nor is the lien "choate” under federal law as of the September 1979 judgment, because it was unspecific as to amount. United States v. City of New Britain, 347 U.S. 81, 74 S.Ct. 367, 98 L.Ed. 520 (1954).


source: Caselaw Access Project

author: REGAN, District Judge.

license: Public Domain

text:
    Barbara QUARTANA, Plaintiff, v. John D. UTTERBACK, d/b/a All Star Dairy Association, Inc., Defendant.
    No. 85-286C(B).
    United States District Court, E.D. Missouri, E.D.
    Feb. 25, 1985.

      Terry Bond, Kaveny, Beach, Russell, Bond & Mittleman, Clayton, Mo., for plaintiff.
    Richard Scherrer, Wilbur Tomlinson, Armstrong, Teasdale, Kramer & Vaughn, St. Louis, Mo., for defendant.
   MEMORANDUM AND ORDER

REGAN, District Judge.

In this action seeking actual and punitive damages for allegedly libelous statements in a letter addressed to plaintiff’s employer, defendant has moved under Rule 12(b)(6) to dismiss the complaint for failure to state a claim for relief.

A 12(b)(6) motion raises only an issue of law. Hence, in testing the sufficiency of the statement of plaintiff’s claim for relief, we accept as true for purposes of the motion the facts alleged in the complaint.

Plaintiff alleges that at all relevant times she was employed by Sealright Co., Inc. as a sales representative and that defendant was a customer of Sealright purchasing large quantities of its packaging products on behalf of members of the All Star Dairy Association, Inc. As a high volume purchaser, doing some $2,000,000 business a year with Sealright, defendant was charged a lower price than that charged other (smaller) quantity customers.

With this background, plaintiff approached defendant and sought and obtained his permission to an arrangement whereby purchases by plaintiff’s customer, Mama Tish’s Enterprises, would be (and were) billed through All Star at the lower, quantity, price. As the result, All Star, as the nominal purchaser, became liable to Sealright for the Mama Tish’s purchases invoiced to it.

There is no allegation that Sealright was aware of this arrangement whereby, at plaintiff’s instance, Mama Tish’s was using All Star’s name and credit to obtain a lower price from Sealright than if the merchandise had been sold directly to it. The clear inference from the pleaded facts is to the contrary.

After All Star encountered problems in collecting from Mama Tish’s, defendant wrote a letter to the credit manager of Sealright seeking his aid in obtaining payment. It is in this letter, attached as an exhibit to the complaint, that the allegedly libelous statements were contained. As alleged in the complaint, the letter “generally reported the substance of Plaintiff’s contacts with (defendant) in regard to Mama Tish’s and the transactions which followed and further stated that Defendant All Star Dairy Associations, Inc. was encountering difficulties in collecting sums owed by Mama Tish’s on said transaction and that (defendant) was not going to let the Association lose money on an account that came about through your own sales person and her promises.”

The following are the only allegedly false and libelous statements in the letter which are pleaded in the complaint.

“She (plaintiff) stated to me ... Seal-right has a $5000.00 credit rating on Mama Tish so I know their credit is OK---- I’ll personally see that they pay their bills.”

Libel is defined in the Missouri cases as “the malicious defamation of a person made public by any printing [or] writing ... tending to expose him to public hatred, contempt or ridicule, or to deprive him of the benefits of public confidence and social intercourse.” Coots v. Payton, 365 Mo. 180, 280 S.W.2d 47, 53 (1955). And as held in Diener v. Star-Chronicle Pub. Co., 232 Mo. 416, 135 S.W. 6, 11 (1911), “There must be defamation in a libelous sense before there can be a libel.” To the same effect is Brown v. Kitterman, 443 S.W.2d 146, 149 (Mo.1969). What this means is that “the writing must itself amount to a defamation, and that if (and only if) it is, then if it exposes one to hatred or contempt, etc., it is libelous.” Coots, supra.

Although, as held in Missouri Church of Scientology v. Adams, 543 S.W.2d 776, 777 (Mo. banc 1976), it is desirable to attach the whole publication as an exhibit (as plaintiff did in this case) so that the Court may ascertain whether in the context they were used the words alleged to be libelous per se are in fact defamatory as a matter of law, nevertheless, in ruling the motion to dismiss, we must determine whether the particular words or statements are libelous.

As alleged, plaintiffs claim is simply that two statements in the letter which defendant attributed to her were not in fact made by her. These statements were (1) that Mama Tish’s had a $5,000 credit line with Sealright, so that its credit is OK, and (2) that plaintiff would personally see that Mama Tish’s paid the bills it incurred for the purchases.

Hence, the initial question for determination is whether the statements themselves amount to a “defamation.” Plaintiff asserts that the quoted words are defamatory in that they falsely impute fraud, lack of integrity or misconduct in the line of her calling. However, giving the words complained of “their plain and ordinarily understood meaning”, we find nothing in either of the statements which is defamatory of plaintiff.

Certainly, if plaintiff had actually stated (as the letter asserts) that she knows Mama Tish’s credit is OK because it has a $5,000 credit rating with Sealright, not even plaintiff would contend it is defamatory of her in her calling. The statement does not become defamatory merely because, as plaintiff alleges, the statement is falsely attributed to her. Nor does it become defamatory merely because, as plaintiff alleges, Mama Tish’s did not in fact have such a $5,000 rating. So, too,.we find no basis for plaintiff’s conclusion that the statements imputed to her a want of fitness to perform or discharge her duties as a sales representative, and thus tended to injury her in her “line of calling.”

Defendant’s other statement which she alleges defendant falsely attributed to her is a promise that she would personally see that Mama Tish’s pays its bills. Here, too, had plaintiff actually made this statement to defendant, there isn’t the slightest defamatory tinge therein. And in our judgment, the alleged “promise” by plaintiff would not become defamatory merely because plaintiff had been unsuccessful in effecting collection of the account or had not even attempted to obtain payment from Mama Tish’s.

We are convinced that the words complained of are not libelous per se. The remaining question is whether the words alleged to be defamatory could constitute libel per quod. For this purpose, it is essential that plaintiff plead an innuendo which would show, by reference to the facts pleaded in the inducement, that the words were used in a defamatory sense. 53 C.J.S. Libel and Slander § 162. We find no such innuendo in the complaint. In addition, there is no averment that the person to whom the letter was addressed understood the words in question as conveying the alleged defamatory meaning.

Reading the complaint as a whole, what is clear is that plaintiff violated her duty to serve Sealright honestly, faithfully and in its best interests by devising and carrying out a scheme whereby, without the knowledge of her employer, Mama Tish’s was enabled to obtain Sealright merchandise at a price lower than that at which Sealright would have been willing to sell it to Mama Tish’s. Whatever may have been the representations and promises by means of which defendant was induced to cooperate with plaintiff in carrying out her scheme to benefit Mama Tish’s at the expense of Seal-right they were made, not in furtherance of any duty owing to her employer, but in contravention thereof. What plaintiff is really complaining about is that defendant’s letter “let the cat out of the bag” by informing her employer of plaintiff’s scheme. Hence, plaintiff’s conduct (or misconduct) which allegedly resulted in the termination of her employment by Seal-right was not in making the representations and promises attributed to her by defendant, but in carrying out the scheme of which she was admittedly guilty.

Defendant’s motion to dismiss is well taken. Accordingly, IT IS HEREBY ORDERED that said motion be and the same is HEREBY SUSTAINED.

        . In her Memorandum in Opposition to Defendant’s Motion to Dismiss, plaintiff calls attention to another, similar, earlier statement made in the letter:

        "She (plaintiff) stated to me ... your price is better than what I can sell them direct ... they are good people____ Sealright has a credit limit
      of $5000.00 with them so that their credit is OK, and I’ll see that they pay you all." (Emphasis supplied).


author: LEISURE, District Judge:

text:
    ORIENTAL COMMERCIAL AND SHIPPING CO., LTD. and Oriental Commercial and Shipping Co. (U.K.) Ltd., Plaintiffs-Respondents, v. ROSSEEL, N.V., Defendant-Petitioner.
    No. 84 Civ. 7173 (PKL).
    United States District Court, S.D. New York.
    March 4, 1985.

      Baker & McKenzie, New York City, for petitioner Rosseel, N.V., Nancy Nelson, New York City, of counsel.
    McLaughlin & Stern, Rallen and Bailen, New York City, for respondents Oriental Commercial and Shipping Co., Ltd. and Oriental Commercial and Shipping Co. (U.K.) Ltd., S. David Harrison, New York City, of counsel.
   ORDER

LEISURE, District Judge:

Defendant moves pursuant to Article 11(3) of the Convention on the Recognition of Foreign Arbitral Awards (“Convention”), 9 U.S.C. § 201 et seq. and 9 U.S.C. § 206 to compel arbitration, and pursuant to 9 U.S.C. §§ 206 and 208 for the appointment of an arbitrator.

Rosseel N.V. (“Rosseel”), a Belgian corporation, entered into a contract to purchase specified oil from Oriental Commercial and Shipping Co. (U.K.) Ltd. (“Oriental U.K.”). The oil was apparently never delivered and Rosseel alleges damages as a result. Oriental Commercial and Shipping Co., Ltd. (“Oriental S.A.”) is a Saudi Arabian company with headquarters in Jeddah, Saudi Arabia, and representative offices located throughout the world. The Bokhari family owns both Oriental S.A. and Oriental U.K. but neither corporation owns shares of the other. Oriental S.A. was not a signatory to the contract of sale between Oriental U.K. and Rosseel.

Rosseel served its Notice of Intention to Arbitrate upon Oriental U.K. and Oriental S.A. demanding arbitration under the contract. Oriental S.A. responded with a petition to stay arbitration in the Supreme Court of the State of New York. Rosseel removed the proceeding to this Court.

The arbitration provision in the contract is the only contract term here in dispute. Oriental U.K.’s telex to Rosseel stated the terms of the agreement which included the following provision: “Arbitration: If required in New York City.” Oriental U.K. and Oriental S.A. claim that the wording of the phrase is insufficient to create an enforceable arbitration provision and challenge the scope of the provision. Additionally, Oriental S.A. claims the arbitration clause is enforceable, if at all, between Oriental U.K. and Rosseel only. This Court has jurisdiction under the Convention, implemented in 9 U.S.C. §§ 201 et seq. Validity of the Arbitration Clause

According to the Convention, the threshold question is whether the alleged arbitration agreement is valid. Federal law governs the interpretation, validity and enforcement of an arbitration clause in contracts falling under the United States Arbitration Act, 9 U.S.C. §§ 1-14, 201-208 (1982). S.A. Mineracao Da Trindade-Samitri v. Utah International, Inc., 576 F.Supp. 566, 569 (S.D.N.Y.1983), affd, 745 F.2d 190 (2d Cir.1984) (citing Prima Paint Corp. v. Flood & Conklin Mfg., 388 U.S. 395, 403-405, 87 S.Ct. 1801, 1805-1806, 18 L.Ed.2d 1270 (1967)). Arbitration clauses must be interpreted broadly, and all doubts as to whether a dispute is encompassed by a particular clause must be resolved in favor of arbitration, even where the problem is the construction of the contract language itself. Moses H. Cone Memorial Hospital v. Mercury Construction Corp., 460 U.S. 1, 23-26, 103 S.Ct. 927, 941-942, 74 L.Ed.2d 765 (1983).

The parties to a contract can agree to settle disputes arising thereunder by arbitration. Federal law, which governs whether the parties have agreed to arbitrate, see Moses H. Cone Memorial Hospital, 460 U.S. at -23-26, 103 S.Ct. at 941-942, requires the Court to apply general contract principles and the federal policy favoring arbitration in contracts governed by the United States Arbitration Act. See Hart Ski Mfg. Co. v. Maschinenfabrik Hennecke, GmbH, 711 F.2d 845, 846 (8th Cir.1983); Atlanta Shipping Corp. v. Cheswick-Flanders & Co., 463 F.Supp. 614, 617 (S.D.N.Y.1978). Under the Convention, an agreement to arbitrate is “null and void” only when it is subject to internationally recognized defenses such as duress, mistake, fraud or waiver, or when it contravenes fundamental policies of the forum nation. Rhone Mediterranee Compagnia v. Lauro, 712 F.2d 50, 53 (3d Cir.1983). The “null and void” language of the Convention must be read narrowly, for the signatory nations have declared a general policy of enforceability of agreements to arbitrate. Id.

Oriental U.K.’s telex contained the terms of the contract, including, a provision for arbitration in New York City. In doing so, Oriental U.K. evidenced its intention to arbitrate disputes arising under that contract. In light of the strong federal policy favoring arbitration, and the duty of the courts to implement the intent of the parties at the time of contracting, this Court holds that the arbitration clause in the contract is valid.

The Scope of the Arbitration Clause

Arbitration is a matter of contract, and parties cannot be required to submit to arbitration any dispute which they have not agreed to submit. Refino v. Feuer Transportation, Inc., 480 F.Supp. 562, 567 n. 9 (S.D.N.Y.1979), affd, 633 F.2d 205 (2d Cir.1980). Here, the arbitration clause is broad, limited only by the terms of the contract and Oriental U.K.’s choice of location for the arbitration proceedings — New York City. Doubts as to whether a dispute is governed by an arbitration clause should be resolved in favor of coverage unless it may be said with positive assurance that the clause is not susceptible of an interpretation that covers the asserted dispute. McAllister Bros. v. A & S Transportation Co., 621 F.2d 519, 522 (2d Cir.1980). Certainly disputes concerning such fundamental aspects of the contract as alleged non-performance by a party and the resulting damages are within the scope of this arbitration clause.

The Parties to the Arbitration Proceeding

It is within the province of this Court to determine whether Oriental S.A., although not formally a party to the arbitration agreement, should be made a party to the arbitration proceeding in addition to Rosseel and Oriental U.K. See Orion Shipping and Trading Co. v. Eastern States Petroleum Corp., 312 F.2d 299 (2d Cir.1963). Ordinary contract and agency principles determine which parties are bound by an arbitration agreement, and parties can become contractually bound absent their signatures. McAllister Bros., 621 F.2d at 524; Fisser v. International Bank, 282 F.2d 231, 233 (2d Cir.1960).

Rosseel suggests two theories to support its contention that Oriental S.A. should be made a party to the arbitration proceeding. The first is that Oriental U.K. is mereiy the alter ego of Oriental S.A. The second alleges that Oriental U.K. acted as Oriental S.A.’s agent in contracting with Rosseel. Rosseel claims that either theory allows this Court to pierce the corporate veil and bind Oriental S.A. to the arbitration agreement.

To apply the alter ego doctrine to justify the disregard of a corporate entity, the court must determine that there is such unity of interest and ownership that separate personalities of the corporations no longer exist, and that failure to disregard the corporate form would result in fraud or injustice. Flynt Distributing Co. v. Harvey, 734 F.2d 1389, 1393 (9th Cir. 1984); accord FMC Finance Corp. v. Murphree, 632 F.2d 413, 422 (5th Cir.1980); Kirno Hill Corp. v. Holt, 618 F.2d 982, 985 (2d Cir.1980). However, a stringent showing is required before a court will pierce the corporate veil. Hidrocarburos y Derivados C.A. v. Lemos, 453 F.Supp. 160, 172 (S.D.N.Y.1977). The courts do not lightly disregard the separate existence of related corporations, even in deference to a strong policy favoring arbitration of private commercial disputes. Coastal States Trading, Inc. v. Zenith Navigation S.A., 446 F.Supp. 330, 337 (S.D.N.Y.1977).

There are insufficient facts before the Court to determine whether Oriental S.A. should be made a party to the arbitration proceeding. Consequently, by June 1, 1985 the parties shall complete discovery on the issue of whether Oriental S.A. is a party to the arbitration agreement with regard to this transaction. At that time the Court shall conduct an evidentiary hearing on this issue.

The Court notes that an alternative procedure suggested in McAllister Bros., 621 F.2d at 524, may be useful to expedite resolution of this matter. With the assistance of this Court, if required, the parties may stipulate that á final determination of whether Oriental S.A. is bound by the arbitration agreement would be stayed pending arbitration of Rosseel’s claims against both companies. Oriental S.A. would fully participate in the arbitration proceedings. If Rosseel prevails in its claim, and Oriental U.K. alone is unable or unwilling to satisfy the arbitration award, this Court, upon Rosseel’s motion, will order discovery to proceed in the manner set forth above. An evidentiary hearing would then be held to determine whether Oriental S.A. was a party to the arbitration agreement and thus bound by the arbitration award.

If the parties agree to this latter procedure, the matter will be referred to the American Arbitration Association. Otherwise, Rosseel’s motion for appointment of an arbitrator is stayed pending this Court’s determination of the identity of the parties to the arbitration proceeding, and discovery shall proceed as set forth above.

SO ORDERED

       Article 11(3) of the Convention provides:
      The Court of a Contracting State, when seized of an action in a matter in respect of which the parties have made an agreement within the meaning of this article, shall, at the request of one of the parties, refer the parties to arbitration, unless it finds that the agreement is null and void, inoperative or incapable of being performed. (Emphasis added).


author: KOCORAS, District Judge.

text:
    Michael C. ANTONELLI, Plaintiff, v. DRUG ENFORCEMENT ADMINISTRATION, Defendant.
    No. 84 C 6973.
    United States District Court, N.D. Illinois, E.D.
    March 5, 1985.

      Michael C. Antonelli, pro se.
    Dan K. Webb, U.S. Atty., Elizabeth Stein, Asst. U.S. Atty., Chicago, Ill., for defendant.
   ORDER

KOCORAS, District Judge.

This action under the Freedom of Information Act is before the court on defendant United States Drug Enforcement Administration’s (“DEA”) motion to vacate this Court’s order of August 29, 1984 granting plaintiff Michael Antonelli leave to file and proceed in forma pauperis. For the reasons that follow, the motion is granted.

Antonelli brought this action seeking information the DEA maintained in its records on three individuals. He initiated the action with a complaint, and a motion for leave to file in forma pauperis accompanied by a financial affidavit executed under penalty of perjury on July 12, 1984. In his financial affidavit Antonelli stated he received $50 a month from the United States Bureau of Prisons for his job as Mechanical Services Clerk. He also declared that he received numerous gifts and donations from friends and relatives for basic needs. Although Antonelli maintained he had no money in a checking or savings account including his prison trust fund account, the certificate completed by a counselor at the Metropolitan Correctional Center indicated he had $3.69 on account at the prison. Read as a whole, the financial affidavit indicates that Antonelli is sufficiently impecunious to merit waiver of prepayment of filing fees.

The DEA, however, presents a far different picture of Antonelli’s finances. According to the affidavits and documents the DEA has filed in support of its motion to vacate, Antonelli has filed more than 100 cases in this district since April 1979. More than half of these cases were filed under the Freedom of Information Act. In the course of pursuing his administrative remedy to acquire access to records maintained by three federal agencies — DEA, the Federal Bureau of Investigation, and the Bureau of Alcohol, Tobacco and Firearms — Antonelli has on several occasions during the six-month period prior to the commencement of this action paid substantial amounts of money for costs, of searching for and copying requested information. Between January 10, and July 3, 1984, Antonelli deposited in his prison trust fund $839.14. Assuming Antonelli received $50 a month in prison pay, only $300 of this is attributable to Antonelli’s prison job. Antonelli used some of this money to pay for government records. In the six months prior to his suit, Antonelli signed money orders totalling $338.65. But most of Antonelli’s payments came from outside sources. Third parties acting oh behalf of Antonelli paid another $1,226.83 to acquire federal records. Of this amount, the Bureau of Alcohol, Tobacco and Firearms refunded $106.85. Thus, almost $2,000 not accounted for in the financial affidavit can be traced to Antonelli. In addition, in a July 1, 1984 letter to the FBI, Antonelli indicated a willingness to pay copying fees of $1,099.30. Because Antonelli, as a prisoner, need not worry about the cost of food, housing, clothing, and other essentials, the amounts at his disposal in the period preceding the filing of this case clearly disqualify him as a pauper. See Zaun v. Dobbin, 628 F.2d 990, 993 (7th Cir.1980); Carter v. Telectron, Inc., 452 F.Supp. 939, 942 (S.D.Tex.1976).

Antonelli does not clearly explain or identify the source of the funds he used to pay the various agencies for the records he obtained through his Freedom of Information requests. In his responsive brief, Antonelli apparently contends that he is getting money from those whose records he is attempting to obtain. If true, such practice subverts the purpose of the in forma pauperis statute, to open the federal courts to all, rich or poor. The Freedom of Information Act is a statutory right which is not limited by the requirement of standing. Thus, unlike most cases, a prisoner without funds can take advantage of the benefits of the pauper statute and litigate claims on behalf of another who is financially capable of paying court costs. Even assuming Antonelli has a legitimate purpose in obtaining the records for his own use, he should not be able to sue at government expense when a non-indigent party stands to benefit directly if Antonelli is successful in his litigation.

Accordingly, the Court grants the DEA’s motion to vacate the order granting Antonelli leave to proceed in forma pauperis and dismisses this case. It appearing from the discrepancies between the financial affidavit submitted by Antonelli and the records supplied by the DEA that Antonelli may have intentionally misled the Court, dismissal shall be with prejudice unless Antonelli files within thirty (30) days a sworn affidavit identifying the source of each receipt of more than $10 credited to his prison trust fund account between January 10 and August 1, 1984, the source or sources of money orders #392668, # 394876, #398532, and #400433 drawn on the Midwest Bank and Trust Company of Elmwood Park, Illinois, and the source or sources of all funds that the law firm of Jurek & Melaned paid to the DEA, FBI, and BATF on Antonelli’s behalf between January 1, and August 1, 1984. See Harris v. Cuyler, 664 F.2d 388 (3d Cir.1981).

      . Antonelli filed these cases pursuant to. 28 U.S.C. § 1915. As 28 U.S.C. § 1915 only waives of prepayment of fees and costs, Antonelli owes the government at least $6000 just for the costs incurred in the filing of his cases. Costs of service and appeals would add substantially to that figure.


author: GAGLIARDI, District Judge.

text:
    Allan TAKEALL, By His Next Friend, Kenneth RUBINSTEIN, Plaintiff, v. Gordon M. AMBACH, Individually and as Commissioner of the New York State Department of Education; and the Board of Education of the City of White Plains, and Jerry Marcus, Individually and as Superintendent of Schools of the City of White Plains, New York, and James P. Jones, Individually and as Director of Pupil Services of the White Plains Schools, Defendants.
    No. 83 Civ. 9443.
    United States District Court, S.D. New York.
    March 21, 1985.

      Gerald A. Norlander, Westchester Legal Services, White Plains, N.Y., for plaintiff.
    Leslie Ruff, Hart & Hume, New York City, for White Plains defendants.

      Lillian Cohen, Asst. Atty. Gen., New York City, for defendant Ambaeh.
   MEMORANDUM DECISION

GAGLIARDI, District Judge.

Plaintiff Allan Takeall, an eighteen-year-old who now resides in White Plains, commenced this action on December 29, 1983 pursuant to 42 U.S.C. § 1983. Plaintiff claims that defendants violated his state law rights by refusing him admission to the White Plains public schools and violated his constitutional rights by failing to accord him due process in reaching that decision. Plaintiff has moved pursuant to Rule 56, Fed.R.Civ.P., for partial summary judgment on the issue of defendants’ liability for nominal damages for the alleged violation of due process. Defendant Ambaeh has moved for dismissal of the suit against him, on grounds of improper service and failure to state a claim. The other defendants have cross-moved for dismissal for failure to state a claim.

Background

The following facts are not in dispute. At this time, plaintiff lives in White Plains, New York, in the home of an unrelated adult who is not his legal guardian. Plaintiff’s mother resides in Ossining. Plaintiff has been considered a resident of White Plains for educational purposes since a decisión on the issue was rendered on June 1, 1984, by Commissioner Ambach.

In May, 1983, plaintiff was living in a White Plains group home which previously had been located in Tarrytown, New York. During May, an official of the home contacted the White Plains public school system and informed Jones that the plaintiff was living at the home and wished to enroll in school. Because there was some evidence that plaintiff suffered from emotional problems and might require a special education program, he was provided with group home instruction from May 19, 1983, to June 17, 1983, pending a placement decision by the Committee on the Handicapped of the White Plains public school system.

Defendants Jones, Marcus, and Board of Education of the City of White Plains (the “White Plains defendants”) arranged for a psychiatric evaluation of plaintiff during the summer of 1983. In the course of arranging that evaluation, the White Plains defendants learned that plaintiff no longer lived at the group home, but had moved into the house where he currently lives. On September 29, 1983, the Committee on the Handicapped for the White Plains school system decided that plaintiff was emotionally disturbed and should be placed in the New York Hospital program. Thereafter the White Plains defendants sent a copy of the decision to plaintiff’s mother. Plaintiff received group home instruction from September 22, 1983 until October 7, 1983, when the White Plains defendants purportedly reached a determination that plaintiff was not a resident of White Plains.

During the fall of 1983, defendant Jones spoke on several occasions with plaintiff and with adults who were assisting plaintiff in his dealings with the school system. In these conversations, Jones told plaintiff that he was ineligible to attend the White Plains public schools because (1) he did not qualify as an emancipated minor, (2) he had no court-appointed legal guardian residing in White Plains, and (3) his mother did not reside in White Plains. Plaintiff repeatedly asserted that he was emancipated and therefore a resident of White Plains. According to Jones’s affidavit, Jones “listened to the plaintiff’s views on the subject.” Plaintiff never received written notice of the reasons for the White Plains defendants’ decision- regarding his eligibility. Plaintiff received no notice of a right to a hearing or to review before the Commissioner of Education. He was never informed of the specific statute, casé, rule, regulation or policy relied upon by the White Plains defendants. The White Plains defendants afforded plaintiff no opportunity to present evidence or argument other than his conversations with defendant Jones.

On January 13, 1984, the White Plains defendants denied the request of plaintiffs counsel for a written decision regarding plaintiffs eligibility for admission to the White Plains schools and, if determined ineligible, for a written statement of the reasons therefore and notice of administrative remedies.

Discussion

1. Ambach’s Motion to Dismiss

Commissioner Ambach has moved to dismiss the claim against him in its entirety. Ambach claims immunity from suit in his official capacity. He also argues that service was insufficient to establish jurisdiction in the suit against him in his individual capacity.

A. Claim Against Ambach In His Official Capacity

The Eleventh Amendment bars suit in federal court against a state official in his official capacity where the claim is that the official violated state law in carrying out his duties, and the relief sought would operate against the state. See Pennhurst State School & Hosp. v. Halderman, 465 U.S. 89, 104 S.Ct. 900, 79 L.Ed.2d 67 (1984). Where a suit challenges the constitutionality of a state official’s actions, however, the Eleventh Amendment does not mandate dismissal. Rather, the Eleventh Amendment operates to preclude certain forms of relief, particularly damages. See Pennhurst State School & Hosp. v. Halderman, supra, 104 S.Ct. at 909; Edelman v. Jordan, 415 U.S. 651, 94 S.Ct. 1347, 39 L.Ed.2d 662 (1974).

In this case, plaintiff’s submissions can be read to allege that Ambach violated plaintiff’s right to due process by establishing a custom of approving local school district reliance on informal oral notice of residency determinations. Since this raises a question of federal constitutional law, and the complaint includes requests for prospective relief, it would be premature to dismiss the action against Ambach in his official capacity.

B. Claim Against Ambach In His Individual Capacity

Under Rule 4(e)(2)(C)(i), Fed.R. Civ.P., service of a summons and complaint is effective if accomplished in accordance with the law of the state in which the district court is held “for the service of summons or other like process upon such defendant in an action brought in the courts of general jurisdiction of that [s]tate — ” In this case, plaintiff asserts that Ambach was properly served in his individual capacity under N.Y.Civ.Prac.Law § 308(2) (McKinney Supp.1983-84), which provides:

Personal service upon a natural person shall be made by any of the following methods:
2. by delivering the summons within the state to a person of suitable age and discretion at the actual place of business, dwelling place or usual place of abode of the person to be served and by mailing the summons to the person to be served at his last known residence; proof of such service shall be filed within twenty days thereafter with the clerk of the court designated in the summons; ____

■ Nothing in the record indicates that the summons and complaint were mailed to defendant Ambach at his last known residence. There is no allegation of such a mailing in either the affidavit of service or the opposition papers, in which plaintiff makes only the ambiguous allegation that “a copy of the summons and complaint was also mailed by plaintiff’s attorney directly to the Commissioner____”

Accordingly, the complaint against Ambach in his individual capacity should be dismissed.

II. Plaintiffs Motion for Partial Summary Judgment

Summary judgment is appropriate where the pleadings, affidavits and other evidence on record indicate that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law. Rule 56, Fed.R.Civ.P. In opposing a motion for summary judgment supported by affidavits, a party “may not rest on the mere allegations or denials of his pleadings, but ... must put forth specific facts to show that there is a genuine issue for trial.” Rule 56(e), Fed.R.Civ.P.

In this case, the facts material to the issue of whether plaintiff’s right to due process was violated are not in dispute. Accordingly, the question is ripe for determination here. As to the question of liability for damages, however, material facts are unresolved. Accordingly, decision on several issues must be reserved for trial.

A. Due Process

Plaintiff contends that due process requires that he be afforded written notice of the school system’s decision on his eligibility to enroll, including, where applicable, a statement of the legal and factual basis for denial of admission to the White Plains public schools, and notice of available administrative remedies. It is undisputed that plaintiff has an interest in his right to a public education, see N.Y.Educ.Law § 3202 (McKinney 1981 & Supp.1984-85), which is protected by the Due Process clause. See Goss v. Lopez, 419 U.S. 565, 572-76, 95 S.Ct. 729, 735-37, 42 L.Ed.2d 725 (1975). The question which remains is what process is due.

In Mathews v. Eldridge, 424 U.S. 319, 335, 96 S.Ct. 893, 903, 47 L.Ed.2d 18 (1975), the Supreme Court set forth the factors a court must weigh in determining what process the Constitution requires in any given instance: 1) “the private interest that will be affected”; 2) “the risk of an erroneous deprivation ... and the probable value, if any, of additional or substitute procedural safeguards”; and 3) “the Government’s interest including ... fiscal and administrative burdens that the additional or substitute procedural requirement would entail.” In Goss v. Lopez, supra, 419 U.S. at 579-81, 95 S.Ct. at 738-39, which required oral or written notice and an informal hearing for students threatened with brief suspension from public school, the Court emphasized a minor’s significant interest in receiving an education and the significant risk of erroneous deprivation absent those procedural protections. Here, where the threatened deprivation is more permanent in nature, the risk of erroneous deprivation significant, and the administrative burden imposed by written decisions minor, the Eldridge factors weigh heavily in favor of requiring written notice. See Vitek v. Jones, 445 U.S. 480, 494-96,100 S.Ct. 1254, 1264-65, 63 L.Ed.2d 552 (1980); Wolff v. McDonnell, 418 U.S. 539, 563-65, 94 S.Ct. 2963, 2978-79, 41 L.Ed.2d 935 (1974); Goldberg v. Kelly, 397 U.S. 254, 267-69, 90 S.Ct. 1011, 1020-21, 25 L.Ed.2d 287 (1970).

A statement of the factual and legal basis of a decision may significantly reduce the risk of lengthy erroneous- deprivation. Such a statement “helps to insure that administrators, faced with possible scrutiny by state officials and the public, and perhaps even the courts, where fundamental constitutional rights may have been abridged, will act fairly. Without written records, the [affected party] will be at a severe disadvantage in propounding his own cause to or defending himself from others.” Wolff v. McDonnell, supra, 418 U.S. at 565, 94 S.Ct. at 2979; see Morrissey v. Brewer, 408 U.S. 471, 487, 92 S.Ct. 2593, 2603, 33 L.Ed.2d 484 (1972); Goldberg v. Kelly, supra, 397 U.S. at 271, 90 S.Ct. at 1022; see also Ellender v. Schweiker, 575 F.Supp. 590 (S.D.N.Y.1983). Preparation of written notice of the basis for decision in this case might have alerted the school board to the potential for error in its view of state law. Review of the law would have revealed that at the time of the White Plains defendants’ decision, an unemancipated minor without a court-appointed legal guardian residing in the school district nevertheless could qualify as a resident for educational purposes.

A child’s residence is presumed to be that of her parents (Matter of Schwartz, 12 Ed.Dept.Rep. 187 [1973], and a determination by a board of education that a child is not a resident of its school district will not be set aside unless it is arbitrary, capricious or unreasonable (Matter of Buglione, 14 Ed.Dept.Rep. 220 [1975]. However, the presumption that a child's residence is that of her parents is rebuttable, and the court appointment of a legal guardian is unnecessary to establish residence in the district other than that of the residence of the student’s parents (Simms et al. v. Roosevelt Union Free School District et al, 100 Misc.2d 827, 420 N.Y.S.2d 96 [1979]; Matter of Tiger and Talasko, 16 Ed. Dept.Rep. 178 [1977]).

Matter of Takeall (N.Y.Comm’r of Educ., June 4, 1984), quoting Matter of Staulcup (20 Ed.Dept.Rep. 11, 13). The court concludes that these factors outweigh whatever minor administrative inconvenience is entailed in the preparation of a statement of reasons as part of the notice of defendants’ decision.

Finally, plaintiff asserts that he also was entitled to notice of available administrative remedies for appeal of the White Plains defendants’ decision. New York provides a right to a hearing before the Commissioner of Education to review contested school board decisions. See N.Y. Educ.Law § 310 (McKinney 1969 & Supp. 1984-85). A review proceeding is quasi-judicial in nature; the Commissioner acts as a neutral decision-maker. But to obtain review, plaintiffs generally must file petitions within thirty days of the disputed decision or action. See Matter of Takeall, supra.

In Memphis Light, Gas & Water Division v. Craft, 436 U.S. 1, 14-15, 98 S.Ct. 1554, 1562-63, 56 L.Ed.2d 30 (1978), the Supreme Court held that due process required that notice of a proposed utility service cut-off advise consumers of administrative procedures for contesting such decisions. Without information about remedies, any notice would not be “reasonably calculated to inform [plaintiffs] of the availability of ‘an opportunity to present their objections’ ” to the proposed administrative action. “The purpose of notice under the Due Process Clause is to apprise the affected individual of, and permit adequate preparation for, an impending ‘hearing.’ ” Where notice is addressed to recipients with varying “levels of education, experience and resources” only notice specifying administrative remedies assures the possibility of such preparation. Memphis Light, supra, 436 U.S. at 14, 98 S.Ct. at 1562, quoting Mullane v. Central Hanover Trust Co., 339 U.S. 306, 314, 70 S.Ct. 652, 657, 94 L.Ed. 865 (1950).

When applied to the present case, Memphis Gas & Light suggests that notice of the availability of review was essential. The administrative statute of limitations was short, plaintiff was not represented by counsel in his prior dealings with the school board, and there was no previous meaningful review and reconsideration of the school board’s decision. A simple statement of the available avenues of administrative relief, such as appeal to the Commissioner, is calculated to assure that individuals such as plaintiff can respond in a meaningful way to notice regarding their eligibility for a public education. Cf. Ellender v. Schweiker, supra (notice of SSI overpayment to OASDI recipient must identify waiver and appeal rights); Finberg v. Sullivan, 634 F.2d 50, 62 (3rd Cir.1980) (notice of execution to judgment debtor must list exemptions which may be available and procedures for exerting exemptions); Deary v. Guardian Loan Co., 534 F.Supp. 1178, 1187 (S.D.N.Y.), modified, 550 F.Supp. 642 (S.D.N.Y.1982) (same); Nelson v. Regan, 560 F. Supp. 1101 (D.Conn.1983), affd, 731 F.2d 105 (2d Cir.1984) (parent delinquent in support payment must be notified that tax refund will be applied to those arrearages and of procedures for contesting such application).

Accordingly, the court concludes that plaintiff was entitled to written notice of the school system’s decision, including a statement of reasons and of available administrative remedies.

B. Nominal Damages

Plaintiff seeks ' summary judgment on the issue of defendants’ liability for nominal damages.

Under the rule of Carey v. Piphus, 435 U.S. 247, 266, 98 S.Ct. 1042, 1053, 55 L.Ed.2d 252 (1978), plaintiffs in suits under 42 U.S.C. § 1983 who are deprived of procedural due process may recover nominal damages without proof of actual injury. Plaintiff has established that the actions of defendant Board of Education of the City of White Plains denied him due process. Accordingly, plaintiff is entitled to nominal damages. Defendants Marcus and Jones, however, both claim qualified immunity from damages. Since they may establish qualified immunity from damages under the principles of Harlow v. Fitzgerald, 457 U.S. 800, 102 S.Ct. 2727, 73 L.Ed.2d 396 (1982) and Davis v. Scherer, — U.S.—, 104 S.Ct. 3012, 82 L.Ed.2d 139 (1984), summary judgment against them with respect to damages is denied. In his reply papers, plaintiff does not dispute that nominal damages cannot be awarded against Ambach in his official capacity without violating the Eleventh Amendment and the rule of Edelman v. Jordan, supra. Accordingly, summary judgment is denied on defendant Ambach’s liability for damages in the claim against him in his official capacity.

Conclusion

For the foregoing reasons, Ambach’s motion to dismiss the complaint is granted with respect to the suit against him in his individual capacity and denied in all other respects. The White Plains defendants’ cross-motion for summary judgment is denied. Plaintiff’s motion for summary judgment is granted with respect to the liability of the Board of Education of the City of White Plains for nominal damages and denied in all other respects.

So Ordered.

      . Because he is a minor, plaintiff brought this action through his next friend, Kenneth Rubinstein. See Fed.R.Civ.P. 17(c). Named as defendants are: Gordon M. Ambaeh, Commissioner of the New York State Department of Education; the Board of Education of the City of White Plains; Jerry Marcus, Superintendent of Schools of the City of White Plains; and James P. Jones, Director of Pupil Services of the White Plains Schools.

      . Cf. Hall v. Ohla, No. B-80-407 (D.Conn. Feb. 24, 1983) (removal of student from school pursuant to determination of non-residence raises issues of due process).

      . The complaint includes a request for declaratory relief against Ambach. Although the Commissioner has determined that plaintiff is to be considered a White Plains resident, there is no indication of any change in the alleged custom of permitting reliance on informal oral notice.


author: SWEET, District Judge.

text:
    ULRICH AMMANN BUILDING EQUIPMENT LTD., and Gothaer Versicherungs Bank A.G. for and on Behalf of itself and all other concerned underwriters, Plaintiffs, v. M/V MONSUN, her engines, boilers, etc. in rem, K.G. Zyklon Schiffahrtsges mbh & Co., Hugo Stinnes Zweigniederlassung, Saudi National Lines, Costa Armatori S.P.A. and Caterpillar Tractor Company, Defendants.
    No. 83 Civ. 2752 (RWS).
    United States District Court, S.D. New York.
    March 21, 1985.

      Hill, Rivkins, Carey, Loesberg, O’Brien & Mulroy, New York City, for plaintiffs.
    Haight, Gardner, Poor & Havens, New York City, for defendants M/V MONSUN, K.G. Zyklon Schiffahrtsges mbh & Co. and Hugh Stinnes Zweigniederlassung.
    DeOrehis & Partners, New York City, for defendants Saudi National Lines and Costa Armatori, S.p.'A.
   OPINION

SWEET, District Judge.

Plaintiffs Ulrich Ammann Building Equipment Ltd. and Gothaer Versicherungs Bank A.G. (collectively “Ammann”) brought this , action to recover for damage to and loss of Caterpillar tractors shipped from Wilmington, Delaware to the Port of Aqaba, Jordan on the M/V MONSUN. Defendant in rem M/V MONSUN and defendants K.G. Zyklon Schiffahrtsges mbH & Co., Hugo Stinnes Zweigniederlassung, Saudi National Lines and Costa Armatori S.p.A. (collectively “the Ship Defendants”) have now moved for partial summary judgment pursuant to Fed.R.Civ.P. 56 limiting Ammann’s damages to the $500 limitation contained in the United States Carriage of Goods by Sea Act (“COGSA”). The parties agree that all evidence as to this matter was before the court. Ammann opposes the motion for partial summary judgment and has moved to strike the Ship Defendants’ assertion of this limitation of liability as an affirmative defense. For the reasons stated below, the Ship Defendants’ motion for partial summary judgment is granted and Ammann’s motion is denied.

Facts

The cargo which is the subject of the present action was carried from Wilmington, Delaware to the Port of Aqaba, Jordan on the M/V MONSUN pursuant to the terms of an ocean bill of lading. The M/V MONSUN is owned by K.G. Zyklon Schiffahrtsges mbH & Co. (“Schiffahrtsges”), the managing agent was Hugo Stinnes Zweigniederlassung (“Zweigniederlassung”), the time charterer of the vessel was Saudi National Lines (“Saudi National”), and the general agent for Saudi National was Costa. The shipping agent of Kuehne and Nagel (“Kuehne”) acted as shipping and forwarding agent for Ammann.

In March of 1981, on Ammann’s behalf, Kuehne booked thirty Caterpillar tractors, known as scrapers, for ocean carriage with Saudi National through its agent Costa, in Genoa, Italy. In accordance with 46 U.S.C. § 817(b)(1), Saudi National had a tariff on file with the Federal Maritime Commission and maintained rates for the transportation of commodities pursuant to such tariff. Instead of applying a rate from Saudi National’s tariff, which would have provided for freight on a weight or measurement basis, a lump sum rate was negotiated covering the entire shipment. On March 13, 1981, a tariff amendment setting forth this lump sum rate was filed. The tariff shows the following reference to the scrapers:

Scrapers — 30 units to move on 1 or 2 vessels Aprox. 866 LT/156,690 cu ft. (Wilmington/Aqaba) (& thru 4/12/81) L/S 289,877.00 +

The rate basis in effect for this tariff item was “L/S,” which is defined in the tariff as lump sum. The tariff on file listed the normal rate for scrapers at a minimum of $173.00 per measurement ton.

Subsequently, twenty Caterpillar tractors were carried under Saudi National’s short form ocean bill of lading. The bill of lading described the twenty scrapers and listed both the gross weight in kilograms and the measurement in centimeters. The bill of lading also stated “Freight Prepaid” and, under the area for computation of freight charges, “Freight as Agreed.” During the course of the shipment, several of the tractors were allegedly damaged or lost.

Discussion

Because the shipment was carried under an ocean bill of lading, it was subject to the provisions of the Carriage of Goods by Sea Act. 46 U.S.C. § 1304 states:

§ 1304. RIGHTS AND IMMUNITIES OF CARRIER AND SHIP
(5) Neither the carrier nor the ship shall in any event be or become liable for any loss or damage to or in connection with the transportation of goods in an amount exceeding $500 per package lawful money of the United States, or in ease of goods not shipped in packages, per customary freight unit or the equivalent of that sum in other currency, unless the nature and value of such goods have been declared by the shipper before shipment and inserted in the bill of lading. This declaration, if embodied in the bill of lading, shall be prima facie evidence, but shall not be conclusive on the carrier.
By agreement between the carrier, master,' or agent of. the carrier, and the shipper another maximum amount than that mentioned in this paragraph may be fixed: Provided, That such maximum shall not be less than the figure above named. In no event shall the carrier be liable for more than the amount of damage actually sustained.
Neither the carrier nor the ship shall be responsible in any event for loss or damage to or in connection with the transportation of the goods if the nature or value thereof has been knowingly and fraudulently misstated by the shipper in the bill of lading.

The “guiding policy” of COGSA is “to limit liability of common carriers for damaged cargo where the value of the cargo is not known to the carrier.” THE MORMACOAK, 451 F.2d 24, 26 (2d Cir.1971). The, statute was designed “to protect the shipping industry and to throw the burden to the shipper to declare the value of the goods and pay a higher tariff if he wished to have higher liability on the part of the carrier.” Caterpillar Americas Company v. Steamship Sea Roads, 231 F.Supp. 647, 650 (S.D.Fla.1964), affd, 364 F.2d 829 (5th Cir.1966).

The words “customary freight unit”, which describe the unit as to which the shipper’s liability is limited to $500, refer not to the physical shipping unit but to the unit of cargo “customarily used as the basis for the calculation of the freight rate to be charged.” The MORMACOAK, supra, 451 F.2d at 25; The Edmund Fanning, 201 F.2d 281, 286 (2d Cir.1953). Thus, where a freight charge is computed on a lump sum basis for each of several pieces of equipment, the relevant customary freight unit is each piece of equipment. Caterpillar Americas Co., supra, 231 F.Supp. at 650. If a freight charge is computed on a lump sum basis for an entire shipment, the relevant customary freight unit is the entire shipment.

In the case at hand, the parties agree that the tractors were shipped in an unpackaged form and are in a disagreement only as to the relevant customary freight unit. If the customary freight unit is held to be the entire shipment of thirty tractors, Ammann’s recovery is limited to $500 under both COGSA and the terms of the bill of lading. Similarly, if the customary freight unit is held to be each piece of equipment shipped, Ammann’s recovery is limited to $500 for each tractor. If, however, the customary freight unit is per measurement ton, as it would be if the ordinary tariff rates rather than the amended rates were held to control, Ammann would be entitled to recover $500 for each measurement ton shipped or approximately $65,000 per tractor.

The Ship Defendants assert that the parties agreed to a lump sum rate for the entire shipment of thirty scrapers on one or more vessels. They contend that there, was no weight or measurement basis for the freight charge and that the customary freight unit agreed upon by the parties was instead the entire shipment. They point to both the filed amended tariff and the freight list, which states that the twenty tractors were shipped under a lump sum rate, as evidence of this agreement. They argue that Ammann took a calculated risk in agreeing to the lump sum freight basis because while it reduced the amount of COGSA coverage to which Ammann would be entitled, it also gave them a considerable savings on freight cost.

In response, Ammann asserts that the Ship Defendants have failed to prove that the customary freight unit to be applied was the special amended rate rather than the regular weight/measurement tariff. It claims that there is no evidence as to what the phrase “Freight as Agreed” was intended to mean. The thrust of Ammann’s argument is that because the shipment in question was for twenty rather than thirty tractors, this court cannot assume that the shipment was covered by the rates listed in the amended tariff. It argues that while the lump sum rate was for thirty units, the bill of lading covers a shipment of only twenty units and that there is no actual evidence of the freight actually charged for the shipment. It also points to the fact that like the regular tariff, the bill of lading used kilograms and centimeters to describe the shipment, whereas the filed amended tariff used tons and feet.

Despite Ammann’s contentions, the Ship Defendants have successfully met their burden of establishing that the shipment of twenty tractors was made on a lump sum basis. The amended tariff expressly lists the tractors as being on a lump sum rather than weight/measurement rate basis. See The MORMACOAK, 327 F.Supp. at 669 (flat rate in filed amended tariff applied despite plaintiff’s claim that missing bill of lading computed freight on weight basis). Ammann claims that because of the discrepancies in numbers the amended tariff pertaining to thirty tractors should not be applicable to a shipment of only twenty tractors. However, there is an express statement in the tariff that the tractors were to be shipped on one or two vessels. Furthermore, there is nothing on either the bill of lading or the freight list or in this record to suggest that the parties intended the shipment to be dealt with on a different basis than that listed in the amended tariff. The listing of weight and measurement and a measurement different from that on the tariff, does not obviate the implications of a lump sum payment. See Freedman & Slater, Inc. v. M. V. TOFEVO, 222 F.Supp. 964, 973 (S.D.N.Y. 1963). Courts have held that even where a lump sum rate is arrived at by using weight and measurement, the weight/measurement does not become the freight unit for the transaction. See General Motors Corp. v. Moore-McCormack Lines, Inc., 451 F.2d 24, 25-26 (2d Cir.1971); Barth v. Atlantic Container Line, 597 F.Supp. 1254 (D.Md.1984). In addition, there is no validity to Ammann's claim that a temporary rate cannot be a “customary” rate. A customary freight unit is one that is “known to the immediate parties.” Freedman & Slater, Inc. v. M/V TOFEVO, 222 F.Supp. 964 (S.D.N.Y.1963).

A tariff validly filed “is not a mere contract but is the law ...” The Peisander, 648 F.2d 415, 421 (5th Cir.1981). Thus the rate basis listed in the amended tariff, which was in effect at the time of the shipment, must be applied. Because the freight charged-for the shipment of twenty tractors was computed on a lump sum for the entire shipment rather than for each piece of equipment or on a weight/measurement basis, the relevant customary freight unit is the entire shipment. Ammann is therefore limited under both COG-SA and the bill of lading to a recovery of $500. While this result seems harsh given the actual value of the cargo, it is consistent with the intent of the statute. Ammann could have paid a higher tariff if it wished to impose a higher liability on the carrier. See Caterpillar Americas Co. v. Steamship Sea Roads, supra, 231 F.Supp. at 650; Petition of Isbrandtsen, 201 F.2d 281 (2d Cir.1953). Because the bill of lading contained language providing for limitation of liability and also incorporated COGSA, the burden is on Ammann to prove that an opportunity to declare a higher value did not exist. Barth v. Atlantic Container Line, supra, at 1257. Ammann has not met this burden.

For the reasons discussed above, the Ship Defendants’ motion for partial summary judgment is granted and Ammann’s motion to strike the Ship Defendants’ affirmative defense is denied.

IT IS SO ORDERED.

      . According to the Ship Defendants’ calculations, Ammann would have paid $677,684.25 in freight charges and received $1,958,625 worth of "COGSA” cover if the ordinary tariff rate had been applied. In order to get full coverage of the $6,750,000 cargo value alleged in the complaint, by declaring ad valorem, Ammann would have had to pay an additional $359,-353.13 in freight for a total freight charge of $1,037,037.38. The lump sum actually paid by Ammann was $289,877.00, a savings of $747,-160.38 over the freight inclusive of ad valorem and a savings of $387,807.25 over the freight per tariff.