author: STAPLETON, Chief Judge.

text:
    Earl BAZEMORE, Plaintiff, v. Margaret HECKLER, Secretary, Department of Health and Human Services, Defendant.
    Civ. A. No. 83-300-WKS.
    United States District Court, D. Delaware.
    Oct. 1, 1984.

      James S. Green, Connolly, Bove, Lodge & Hutz, Wilmington, Del., for plaintiff.
    Joseph J. Farnan, Jr., U.S. Atty., Richard G. Andrews, Asst. U.S. Atty., Wilmington, Del., Beverly Dennis, III, Regional Atty., David Hyman, Asst. Regional Atty., Dept, of Health and Human Services, Philadelphia, Pa., for defendant.
   OPINION

STAPLETON, Chief Judge.

Plaintiff, Earl Bazemore, brought this action under § 205(g) of the Social Security Act, 42 U.S.C. § 405(g), seeking judicial review of a final decision of the Secretary of Health and Human Services denying his application for Social Security disability benefits.

Bazemore was first denied disability benefits by the Department of Health and Human Services on May 14, 1981. His application for reconsideration was similarly denied on November 12, 1981. Thereafter, plaintiff’s case was considered de novo by Administrative Law Judge James W. Hunt (the “AU”), who denied disability benefits upon the finding that, although disabled as to his previous job, Bazemore retained the ability to perform sedentary work. On March 17, 1983, the Appeals Council rejected Bazemore's request for review of the AU’s determination, thereby making final the AU’s decision to deny Bazemore’s application for disability. Both parties filed motions for summary judgment that were referred to the Magistrate. In his Report and Recommendation, the Magistrate found that the AU erred primarily for two reasons: first, that the AU’s rejection of Bazemore’s complaint of disabling pain was not based upon substantial evidence; and second, that the AU’s excessive reliance on rules 201.24 and 201.25 of 20 C.F.R. 404, Subpart P, Appendix 2 (the “Grid”) in denying Bazemore’s claim was improper since Bazemore exhibited a nonexertional limitation — pain.

While I agree with the Magistrate that a remand is necessary in this case, I do so for reasons that are, at least in part, different from' those proposed by the Magistrate.

I.

The following carefully detailed account of the facts has been taken, with slight modification, from the Magistrate’s Report.

At the hearing before the ALJ, Bazemore was the only person to testify and presented the following. At the time of his injury, Bazemore’s job required him to perform general maintenance: working on machinery; shoveling walks; moving furniture; changing light bulbs; etc. (Tr. 24-5, 31). On April 30, 1980, he carried six one-hundred pound drums of freon up two flights of stairs for use in an air-conditioning system (Tr. 32). After carrying up the sixth drum, he noticed that his back was hurting (Tr. 32-33). He went to a doctor who referred him to Dr. Monteleone (Tr. 33). Dr. Monteleone sent him to St. Francis Hospital where he stayed for a week and was placed in traction twice daily (Tr. 33). Bazemore testified that he had constant pain in his back and that the pain had become worse since the initial injury of April 30, 1980. (Tr. 34, 37). He was in traction twice a day for two hours each session. (Tr. 33). He was taking two different medications for pain which did not offer significant relief, and both made him drowsy. (Tr. 34-37). Bazemore indicated he tried not to ride buses because he found the jarring of buses painful. (Tr. 39). He also preferred not to drive but indicated he would do so in an emergency (Tr. 70); his son drove him to his doctor appointments. (Tr. 40). When asked by the ALT what he did for most of the day, Bazemore stated, “I’m afraid to do most anything.” (Tr. 39). He reported engaging in few activities at home, performing no exercise, watching some television and reading little. (Tr. 39-40). Bazemore limited his walking to two visits per week to a local store one block from his house. Attendance at church once a month appeared to be the only activity he engaged in outside of his home. (Tr. 40).

Bazemore also testified that he had attempted to go back to work (Tr. 25-26). However, he was unable to do the work despite being given frequent opportunities to rest by his employer. Consequently, he was discharged (Tr. 26). He also wears a low back corset which provides some relief (Tr. 92, 98, 100, 111).

The medical records reveal the following. Bazemore was admitted to St. Francis Hospital on May 30, 1980, with spasm of the lumbar fascia with a positive lasegue bilaterally at 45 degrees and a tender notch bilaterally and tenderness noticed also at the L5-S1 level with decreased deep tendon reflexes of both legs (Tr. 83). An x-ray of the lumbosacral spine showed mild degenerative changes of the lumbar vertebral body and a myelogram showed a very slight asymmetry on the right at the L4, 5 level which was considered to be not typical in appearance (Tr. 84-86). He was discharged June 5, 1980 (Tr. 84).

On January 29, 1981, Bazemore’s treating physician, Dr. Italo Monteleone, reported that Bazemore was suffering from lumbar radiculitis, that he was restricted from bending, lifting, prolonged standing, or prolonged sitting, and that he had failed to respond to conservative therapy, including two courses of Trigger Block therapy (Tr. 88) . An electromyogram which had been done October 21, 1980, showed low motor neuron involvement at the L4-5 level (Tr. 89). On June 16, 1981, Dr. Monteleone expressed the opinion that Bazemore was totally disabled as a result of his lumbar radiculitis. On May 27, 1982, he reported that Bazemore could not perform manual labor because he was restricted from prolonged sitting, standing, and walking and is limited in squatting, forward bending, climbing, twisting, reaching over his head and reaching in front of his body. Dr. Monteleone also referred Bazemore to Dr. Boulos for consideration of possible surgery and Dr. Boulos recommended continuation of conservative treatment (Tr. 95, 111-12).

On April 15, 1981, Bazemore was examined by a neurology consultant for the Disability Determination Service, Dr. Coburn. His report concluded that Bazemore had chronic lumbo-sacral strain with radiculopathy, a possible herniated lumbar disc L4-5, and a psycholphysiological reaction (Tr. 92). He noted markedly decreased sensation over the entire left side, tenderness over the entire lumbar spine, weak reflexes in limbs, markedly decreased motor power in all limbs, and mild atrophy in the left leg (Tr. 92). Dr. Coburn examined Bazemore again on October 19, 1981, and noted improvement in his range of motion and continued tenderness over each sciatic nerve in Bazemore’s buttock (Tr. 98). His impression was of a probable herniated IV disc, lower lumbar (Tr. 98).

Bazemore was also examined by Dr. Arminio, an expert employed by the workmen’s compensation carrier for his former employer. On March 5, 1981, Dr. Arminio expressed his opinion that, based on his examination on March 3, Bazemore was totally disabled at that time (Tr. 103-04). On April 15, 1981, he stated that after reviewing additional medical records he was of the opinion that Bazemore’s condition had deteriorated between June 1980 and March 1981 (Tr. 102). On December 15, 1981, Dr. Arminio reported that a physical examination on December 3 revealed ongoing tenderness in the low back primarily on the left side and radiation of the discomfort from the low back into the groin and up into the upper back, that Bazemore’s attempts to extend his activities resulted in increased difficulties, and that while he could perform some activities in an eight hour day, they would be limited to short periods of time (Tr. 100-01).

There is also an evaluation report on Bazemore by Rehabilitation Consultants, Inc. in the transcript. The evaluation, dated March 25, 1982, shows a loss of strength in the right arm and left knee, diminished motor skills in the right arm and left leg, marked limitations for standing and walking, moderate limitations for sitting, marked limitations for squatting, and moderate limitations for forward bending, climbing, twisting and reaching above the head (106-110).

Also included in the transcript are the various disability determination and transmittal reports, disability reports, and papers relating to Bazemore’s workmen’s compensation claim. His disability claim was accepted by the workmen’s compensation carrier (Tr. 57, 60, 114-17). The two social security interviewers, whose reports are in the record, noted Bazemore’s discomfort and his difficulty walking (Tr. 74, 79). Both disability determination and transmittal reports recognize that Bazemore suffered from chronic lumbosacral strain with radiculopathy, but conclude that he could still perform light work (Tr. 48, 51). Both list as examples of jobs he could perform: air conditioning tester, telephone installer and repairman and telephone cable repairman (Tr. 48, 51). However, there is no indication in the record that the persons making these reports are qualified as vocational experts.

The AU summarized his findings as follows:

1. The claimant met the special earnings requirements of the Act on April 30,1980, the date the claimant stated he became unable to work, and continues to meet them through the date of this decision.
2. The claimant has not engaged in substantial gainful activity since April 30, 1980.
3. The medical evidence establishes that the claimant has severe chronic lumbar strain with radiculopathy, but that he does not have an impairment listed in, or medically equal to one listed in Appendix 1, Subpart P, Regulations No. 4.
4. Claimant’s allegation of disabling pain is not supported by the evidence of record.
5. The claimant has the residual functional capacity to perform work-related functions except for work involving prolonged sitting, standing, walking, or heavy lifting. (20 CFR 404.1545).
6. The claimant is unable to perform his past relevant work as maintenance man (20 CFR 404.1565).
7. The claimant has the residual functional capacity to perform sedentary work affording him the opportunity to sit or stand at will work [sic] (20 CFR 404.1567).
8. The claimant is 40 years old, which is defined as younger (20 CFR 404.-1563).
9. The claimant has a limited education (20 CFR 404.1564).
10. In view of the claimant’s age and residual functional capacity, the issue of transferability of work skills is not material.
11. Section 404.1569 of Regulations No. 4 and Rules 201.24 and 201.25 Table No. 1 of Appendix 2, Subpart P, Regulations No. 4 direct a conclusion that, considering the claimant’s residual functional capacity, age, education, and work experience, he is not disabled.
12. The claimant was not under a “disability,” as defined in the Social Security Act, at any time through the date of this decision (20 CFR 404.-1520(f)).

Based on the above, the ALJ determined that 20 C.F.R. 404.1569 and Rules 201.24 and 201.25 of the grid “direct a conclusion that, considering the claimant’s residual functional capacity, age, education, and work experience, he is not disabled.” (Tr. 10) (emphasis added).

II.

Under the Social Security Act, the Secretary’s findings as to any fact shall be conclusive if “supported by substantial evidence.” 42 U.S.C. § 405(g). Substantial evidence has been defined as “ ‘such relevant evidence as a reasonable mind might accept 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, 216-217, 83 L.Ed. 126 (1938)); Wallace v. Secretary of Health and Human Services, 722 F.2d 1150, 1152 (3d Cir.1983). While considerable deference is afforded to the Secretary’s decision, the Third Circuit has made clear that the decision must be “accompanied by a clear and satisfactory explication of the basis on which it rests.” Cotter v. Harris, 642 F.2d 700, 705 (3d Cir.1981). Thus, in basing his or her decision on substantial evidence, the AU must provide “not only an expression of the evidence s/he considered which supports the result, but also some indication of the evidence which was rejected.” Id. at 705. The substantial evidence hurdle is not overcome by a single piece of evidence if the ALJ ignores or fails to resolve conflicting evidence. Kent v. Schweiker, 710 F.2d 110, 114 (3d Cir.1983). Nor is evidence substantial if it is overshadowed by other evidence, or “if it really constitutes not evidence but mere conclusion.” Id.

The claimant has the initial burden of establishing that he was unable to return to his customary occupation. Wallace, 722 F.2d 1153; Rossi v. Califano, 602 F.2d 55, 57 (3d Cir.1979). If the claimant satisfies his or her burden of proving disability with respect to past employment, the burden shifts to the Secretary to demonstrate that the claimant given his or her age, education and work experience, has the capacity to perform specific jobs existing in the national economy. Wallace, 722 F.2d at 1153; Rossi, 602 F.2d at 57.

In the present case, Bazemore introduced ample evidence demonstrating the extent to which his back injury prevented him from engaging in his former job as a maintenance person. Indeed, the ALJ explicitly found that Bazemore was disabled with regard to his past work. (Tr. 10). Bazemore further maintained that he was totally disabled as a result of pain from his back injury. The AU found, however, that Bazemore’s allegation of disabling pain was not supportable. (Tr. 9). The issue before this Court, therefore, is whether the AU’s rejection of Bazemore’s complaints of disabling pain was based on substantial evidence.

At the hearing, Bazemore was the only person to testify. He represented that he was in constant pain from his back injury and that the pain had grown worse since his injury in 1981. It is also apparent from Bazemore’s testimony that his pain had caused him to significantly restrict the scope of his daily routine. More importantly, Bazemore’s testimony about the extent to which his activities were circumscribed by his pain appears consistent throughout and stands unrepudiated by any contrary evidence of record.

As to the medical evidence, the various physicians who examined Bazemore generally agreed that he suffered from a significant lower back injury that restricted the physical activities that he could perform. It is less clear, however, what opinions, if any, the examining experts held concerning Bazemore’s complaints of disabling pain. Dr. Monteleone initially indicated in a letter dated June 16, 1981, that Bazemore was totally disabled as a result of lumbar radiculitis. Dr. Monteleone, however, did not opine as to the nature and extent of pain that Bazemore might be experiencing as a result of that injury. (Tr. 95). Subsequently, in a letter dated May 27, 1982, Dr. Monteleone rather cryptically stated that Bazemore was currently unable to perform “manual labor” as a result of the limitations upon the positions he could assume and the movements he could perform. (Tr. 127). Again Dr. Monteleone says nothing about plaintiff’s pain.

On April 15, 1981, Dr. Coburn examined Bazemore and found, in addition to a number of physical and medical abnormalities, “tenderness over the entire lumbar spine.” (Tr. 97). Dr. Coburn again examined Bazemore on October 19, 1981, and again found tenderness in the lumbar area as well as over both sciatic nerves in the buttocks. (Tr. 98).

Dr. Arminio first saw Bazemore on March 3, 1981, and found him totally disabled; he fully credited Bazemore’s complaints of pain, stating, “Examination at this time revealed that he does have exquisite tenderness in the low back with muscle guarding in the low back.” (Tr. 103). Subsequently, Dr. Arminio wrote that after reviewing additional medical records he believed Bazemore’s condition had worsened between June 1980 and his initial examination of March 3, 1981. Dr. Arminio’s last report of December 15, 1981, indicated that Bazemore continued to experience tenderness in the low back, primarily on the left side, that radiates into both the groin and upper back. Dr. Arminio also indicated, that at this time Bazemore could resume light work subject to a number of postural limitations. (Tr. 100-101).

In sum, the relevant medical testimony of record reveals that two of the three examining physicians explicitly acknowledged that Bazemore suffered from pain associated with his lower back condition. One of these two, Dr. Arminio, appeared to base his initial determination of total disability primarily upon a finding of “exquisite tenderness” in the lower back. The third physician, Dr. Monteleone, without referring to Bazemore’s pain, initially concluded that he was totally disabled and thereafter indicated that he was prohibited from performing manual labor.

In rejecting Bazemore’s allegation of disabling pain, the ALJ did not support his finding with any medical evidence of record, nor did he substantively challenge Bazemore’s testimony about his pain and its significant effects on his lifestyle. Rather, the ALJ stated in conclusory fashion:

In finding that claimant does have the capability of performing sedentary work, the undersigned is aware of claimant’s allegation of disabling pain. However, in view of the fact that claimant, at the hearing, did not exhibit any signs of incapacitating pain, the undersigned concludes that claimant’s allegation of pain of a disabling nature is not supportable. (Tr. 9).

The ALJ erred in so disposing of Bazemore’s allegations merely on the basis of his demeanor at the hearing. While physical appearance may be a factor that the Secretary can consider in denying disability, standing alone it does not constitute substantial evidence capable of supporting a finding of not disabled. Lewis v. Califano, 616 F.2d 73, 76 (3d Cir.1980). Indeed, in repudiating Bazemore’s testimony, the AU relied upon the notorious “sit and squirm test” which has been “roundly condemned” as a means of deciding disability cases. Van Horn v. Schweiker, 717 F.2d 871, 874 (3d Cir.1983).

The Third Circuit has made patently clear that the ALJ is not free to casually dispose of a claimant’s subjective complaints of pain solely on the basis of his or her behavior during a brief hearing. Pain itself may be a disabling condition, notwithstanding the difficulty in resolving questions of pain with any degree of certainty. Taybron v. Harris, 667 F.2d 412, 415 (3d Cir.1981). “[E]ven pain unaccompanied by objectively observable symptoms which is nevertheless real to the sufferer and so intense as to be disabling will support a claim for disability benefits.” Id. at 415 (quoting Ber v. Celebrezze, 332 F.2d 293, 299 (2d Cir.1964)). In this case, however, plaintiff was able to point to more than mere subjective evidence, for several of the physicians who treated him noted tenderness of varying degrees in his lower back region and surrounding area. “Testimony of subjective pain and inability to perform even light work is entitled to great weight, particularly when, as here, it is supported by competent medical evidence.” Dobrowolsky v. Califano, 606 F.2d 403, 409 (3d Cir.1979). Moreover, a claimant, such as Bazemore, is entitled to substantial credibility if he has a work record of continuous employment for a substantial duration of time. Dobrowolsky, 606 F.2d at 409. The Social Security Administration’s records for Bazemore show a continuous record of earnings for each year from 1960 through 1979. (Tr. 54-55).

It was simply not enough for the ALJ to reject Bazemore’s allegations of pain on the ground that Bazemore failed to exhibit a requisite degree of agony at the hearing. The substantial evidence burden imposes upon the AU the duty to scrutinize the whole record, Dobrowolsky, 606 F.2d at 407; see Wier v. Heckler, 734 F.2d 955, 961 (3d Cir.1984), and this includes a duty to explain not only evidence that supports the ALJ’s holding, but evidence that was rejected by the ALJ as well. Other than the AU’s summary invocation of the “sit and squirm test,” the record is devoid of any indication that the AU seriously considered Bazemore’s complaint of persistent and disabling pain as supported by objective medical findings and by Bazemore’s uncontradicted testimony. Further, there is no indication in the record that the AU considered Bazemore’s long work history as a factor enhancing his credibility.

III.

The regulations governing use of the grid clearly indicate that the grid is not to govern all disability cases. 20 C.F.R. § 404.1569 & Appendix 2, § 200.00(d). Section 200.00(d) of Appendix 2 states: “If an individual’s specific profile is not listed within this Appendix 2, a conclusion of disabled or not disabled is not directed.” Since the grid applies solely to disabilities manifesting themselves in strength or so-called “exertional” limitations, the grid has limited utility where a complainant manifests “non-exertional” limitations. Again, the regulations are explicit in this regard. Section 200.00(e) states:

Since the rules are predicated on an individual’s having an impairment which manifests itself by limitations in meeting the strength requirements of jobs, they may not be fully applicable where the nature of an individual’s impairment does not result in such limitations, e.g., certain mental, sensory, or skin impairments. In addition, some impairments may result solely in postural and manipulative limitations or environmental restrictions. Environmental restrictions are those restrictions which result in inability to tolerate some physical feature(s) of work settings that occur in certain industries or types of work, e.g., an inability to tolerate dust or fumes.

The Third Circuit has interpreted these rules according to the plain meaning of their language. In Santise v. Schweiker, 676 F.2d 925 (3d Cir.1982), the Court stated that “ ‘a conclusion of disabled or not disabled is not directed’ if an individual’s vocational profile is not precisely contained in Appendix 2.” Id. at 934 (quoting and construing 20 C.F.R. § 404.1569 & Appendix 2, § 200.00(d)). See Heckler v. Campbell, 461 U.S. 458, 103 S.Ct. 1952, 1953-55 & n. 5, 76 L.Ed.2d 66 (1983). The Court further indicated that the rules “ ‘may not be fully applicable’ when a claimant suffers from non-exertional, instead of or in addition to exertional, impairments.” Id. 676 F.2d at 934-35 (quoting and construing 20 C.F.R. part 404, Appendix 2, § 200.00(e)).

In Burnam v. Schweiker, 682 F.2d 456 (3d Cir.1982), the Third Circuit has more recently considered the meaning of Section 200.00(e)(2) of 20 C.F.R. § 404, Appendix 2, which states:

However, where an individual has an impairment or combination of impairments resulting in both strength limitations and nonexertional limitations, the rules in this subpart are considered in determining first whether a finding of disabled may be possible based on the strength limitations alone and, if not, the rule(s) reflecting the individual’s maximum residual strength capabilities, age, education, and work experience provide a framework for consideration of how much the individual’s work capability is further diminished in terms of any types of jobs that would be contradicted by the nonexertional limitations. Also, in these combinations of nonexertional and exertional limitations which cannot be wholly determined under the rules in this Appendix 2, full consideration must be given to all of the relevant facts in the case in accordance with the definitions and discussion of each factor in the appropriate sections of the regulations, which will provide insight into the adjudicative weight to be accorded each factor.

In Burnam, the ALJ had concluded that plaintiff’s nonexertional limitations standing alone did not warrant a finding of disability; the AU then relied solely on the grid to determine that plaintiff’s exertional injuries were not serious enough to bar him from sedentary work. Id. at 457. The Third Circuit held that the AU’s approach — first determining that the claimant’s nonexertional restrictions were not alone disabling and then basing a decision solely on the grid — was contrary to the directive of rule 200.00(e)(2). “The medical-vocational grids do not purport to establish the existence of jobs for persons like Burnam who are afflicted with both exertional and nonexertional impairments.” Id. at 458. Bumam held that where an individual is afflicted with both nonexertional and exertional limitations, the regulations require the AU to move beyond the grid and fully consider “all of the relevant facts in the case.” Id. at 458. Thus, the AU erred in Bumam because he failed to consider “whether work existed for a person with the combination of impairments Burnam possessed.” Id. (emphasis supplied by Court).

In the present case, the AU has similarly erred. It is clear from the record that Bazemore’s ability to maintain gainful employment was limited by a variety of postural restrictions, which are defined by the regulations as nonexertional. 20 C.F.R. 404, Appendix 2, § 200.00(e). See Aggen v. Schweiker, 553 F.Supp. 32, 35-36 (D.S.D.1982) (Reliance on grid inappropriate where claimant could only sit in a recliner due to pain).

Plaintiff’s treating physician, Dr. Monteleone, indicated that plaintiff was limited in “prolonged sitting, standing and walking” and also in “squatting, forward bending, climbing, twisting, reaching above his head and reaching in front of his body.” (Tr. 127). Dr. Arminio, pointed to similar limitations on plaintiff’s ability to move about the workplace:

Lifting, pushing, and pulling would have to be limited to 20 lbs., and it would help if he could be off of his feet for part of the time; but he could walk some distance. He can certainly manipulate and use his upper extremities without any restrictions. Partial stooping, not full stooping, could be performed occasionally. He should not be expected to kneel or crawl, and he should not do any climbing of ladders or work in high places. Throughout an eight hour day, he could perform some activities for short periods of time.

(Tr. 101). Bazemore was also examined by a rehabilitation specialist who found that he displayed “marked limitations for standing and walking and moderate limitations for sitting” and that when allowed to alternate between these activities, plaintiff “reports the ability to remain active for one and a half to two hours before requiring a rest period.” (Tr. 106). The record is devoid of any evidence that even suggests that Bazemore’s ability to return to work would not be hampered by his need to alternate between sitting and standing and his difficulty in assuming various other positions. Indeed, the AU appears to have fully accepted that Bazemore’s ability to maintain gainful employment was qualified by the postural limitations imposed by his back injury, for the AU stated in his findings that “the claimant has the residual functional capacity to perform work-related functions except for work involving prolonged sitting, standing, walking or heavy lifting.” The AU further found that “the claimant has the residual functional capacity to perform sedentary work affording him the opportunity to sit or stand at will.’’ (Tr. 10). (emphasis added).

Notwithstanding these findings, the AU relied solely on the grid in denying Bazemore’s disability claim, and did not consider the extent to which Bazemore’s work capability was further diminished by his nonexertional limitations. Since the AU failed to determine whether work existed for a person with the combination of nonexertional and exertional limitations possessed by Bazemore, the Secretary’s decision is not supported by substantial evidence. Burnam, 682 F.2d at 458.

On remand, the ALJ should solicit the advice of a vocational expert concerning the impact that Bazemore’s nonexertional impairment may have on his qualifications for sedentary work. While the Third Circuit has deemed this requirement unnecessary when the grid is fully applicable to an individual’s disability profile, Santise, 676 F.2d at 937-39, the Court appeared to indicate that testimony from a vocational expert is necessary when the applicant possesses nonexertional deficiencies. Id. at 935 (citing Walker v. Harris, 504 F.Supp. 806, 811 (D.Kan.1980)). Various district courts in this circuit have continued to require the opinion of a vocational expert when the grid is not fully applicable. E.g., Allen v. Schweiker, 567 F.Supp. 1204, 1210 (D.Del.1983); Wright v. Schweiker, 575 F.Supp. 538, 545 (E.D.Pa.1983).

IV.

Although the AU’s decision was infirm in several respects, the record does not warrant a grant of summary judgment to the claimant, since an appropriate development and analysis of the evidence in the case could possibly lead a reasonable trier of fact to conclude that Bazemore retains the residual capability to perform sedentary work. Kent, 710 F.2d at 116; Allen, 567 F.Supp. at 1211. This case will be remanded for reconsideration not inconsistent with this opinion.

      . This is not a situation, as in Hernandez v. Heckler, 704 F.2d 857, 862-63 (5th Cir.1983), where the ALJ expressly rejected the claimant’s contention that his work capability was further diminished by his nonexertional limitation, and the Third Circuit held that, therefore, the advice of a vocational expert was not necessary. Here the AU conceded that Bazemore's postural limitations restricted his work capability, but nevertheless relied exclusively on the grid.


source: Caselaw Access Project

author: HATFIELD, District Judge.

license: Public Domain

text:
    Charles WHEELER, Doing Business As Wheeler International, Plaintiff, v. VALLEY IMPLEMENT COMPANY, INC., Defendant.
    No. CV-83-150-GF.
    United States District Court, D. Montana, Great Falls Division.
    Oct. 1, 1984.
    Susan E. Broadbent, Yukon, Okl., Richard Thweatt, Helena, Mont., for plaintiff.
    James R. Walsh, Smith, Baillie & Walsh, Great Falls, Mont., for defendant.
   MEMORANDUM AND ORDER

HATFIELD, District Judge.

FACTS

The pertinent facts are as follows: On April 17, 1978, plaintiff and George Higgins, Sr., entered into a retail installment contract for the sale of two combines. A down payment of $23,000.00 was paid, and Higgins, Sr., agreed to pay the balance of $72,000.00 in eight installments. Plaintiff retained a security interest covering the remaining indebtedness. A financing statement covering the machines was properly filed in Oklahoma. The combines, were delivered to George Higgins, Jr., who utilized them in his custom harvesting business. The payment due on August 1, 1979, was not made. In either August of 1978 or August of 1979, Higgins, Jr., apparently without the knowledge or consent of Higgins, Sr., sold the combines to defendant. On March 19, 1982, Higgins, Sr. filed a voluntary petition in bankruptcy in the Bankruptcy Court in Oklahoma. That court, on April 29, 1983, decreed that said combines were deemed abandoned from the estate of Higgins, Sr. The instant action was commenced by plaintiff on September 8, 1983.

ISSUE

Plaintiff brings the present action to foreclose on its security interest, and for the proceeds of any resulting sale, or, in the alternative, makes a claim in assumpsit. The issues are, first, whether a claim lies in assumpsit, and second, whether the claims are barred by the applicable statute of limitations. Defendant has filed a motion to dismiss, claiming that the statute of limitations has run on plaintiffs claims.

DISCUSSION

The pending motion to dismiss shall be treated as a motion for summary judgment, because the parties have chosen to present, for the court’s consideration, matters outside the pleadings. Rule 12(b), Fed.R.Civ.P. A reasonable opportunity has been afforded the parties to submit the fruits of discovery for the court’s consideration. An interrogatory answer filed by defendant indicates that both combines have been sold by defendant to third parties. Thus, plaintiff has no claim in assumpsit against Valley Implement, either for the original debt or for the proceeds of resale. Beneficial Finance Co. v. Colonial Trading Co., 43 Pa.Dist. & Co.Rpts.2d 181, 4 UCC 672 (C.P.1967). Plaintiff may, however, under the circumstances of this case, state a claim for conversion against this defendant. Id.; ITT Industrial Credit Co. v. H & K Machine Service Co., 525 F.Supp. 170 (D.Mo.1981); and see, WHITE AND SUMMERS, Uniform Commercial Code, § 26-7, pp. 1103-4 (2d ed. 1980).

Applying Montana law, because this cause of action accrued here, a three year statute of limitations is indicated. § 27-2-204(1) M.C.A. (General Tort Actions). The critical inquiry centers on when the statute began to run, and whether it was tolled by George Higgins, Sr.’s petition in bankruptcy. The latter inquiry must be answered in the negative. The authority cited by plaintiff is unpersuasive, as it deals with a secured creditor’s attempt to repossess and sell property held by the debtor, and a stay of such proceedings following the debtor’s filing of a petition in bankruptcy. Here, however, as noted above, plaintiff could proceed against either Higgins, Sr., or defendant, once the latter purchased the collateral. An action against Higgins, Sr. would undoubtedly be affected by his petition in bankruptcy, though it is probable that a claim of this type could be extricated from the bankruptcy proceeding. Any stay brought about by Higgins, Sr.’s bankrupts cy, however, would be personal to him. Plaintiff cites no authority, and the court finds no authority, for the proposition that actions against purchasers of collateral from a bankrupt party are also stayed, or subject to a tolling of the statute of limitations.

When, therefore, did plaintiff’s conversion claim against defendant accrue? Plaintiff attempts to place the focus of that inquiry upon transactions between itself and George Higgins, Sr. This lawsuit, however, names Valley Implement as the defendant, and thus, it would be an act of that entity which would result in the accrual of this claim. Valley Implement did two things which are arguably actionable: it purchased the secured collateral from Higgins, Jr., and it later resold the combines. As already stated, the act of purchasing the collateral in an unauthorized sale was actionable. See, also, U.C.C. § 9-306(2); Strevell-Paterson Finance Co. v. May, 77 N.M. 331, 422 P.2d 366 (N.M.1967). There is a substantial dispute over when that sale occurred, plaintiff alleging August 1979 and Valley Implement alleging August 1978. That dispute may be substantial, but it is not material — precluding summary judgment — because a claim in conversion, with a three-year limitations period, is barred using either date. Plaintiff might argue that the conversion claim did not accrue until, or that a “new” claim accrued when, Valley Implement resold the collateral. Filed discovery indicates that the resale took place “immediately following” the initial sale to Valley Implement, and plaintiff has made no showing, as would be necessary to resist the instant motion, that such resale took place within three years of its September 8, 1983 complaint. Rather, the facts strongly suggest that the resale took place long before September 8, 1980.

Plaintiff advocates application of Montana’s eight year statute of limitations, under § 27-2-202(1) M.C.A., for actions upon contracts. Plaintiff contends that an action to foreclose on a security interest created by a retail installment contract is “an action upon a contract founded in writing.” Specifically, Wheeler argues that the right to enforce a security interest “coexists” with the right to enforce the contract which gave rise to the security interest. This court disagrees. The unauthorized sale by Higgins, Jr. did not divest the prior perfected security interest of plaintiff. U.C.C. § 9-306(2); Bank of Va. Central v. Taurus Constr. Co., 30 N.C.App. 220, 226 S.E.2d 685 (N.C.). Wheeler International’s contract was with George Higgins, Sr.; defendant was not a party to that contract. Wheeler could pursue its claims against Higgins, Sr. by virtue of that contract, but its claim against this defendant sounds in tort. See, ANDERSON, UNIFORM COMMERCIAL CODE, § 9-306:19 p. 313 (1st ed. 1971); ITT Indust. Credit Co. v. H & K Machine Service Co., supra. The general tort statute of limitations in Montana bars claims after three years. § 27-2-204(1), M.C.A. If this were classified as an action for the recovery of personal property, § 27-2-207, M.C.A. would prescribe a two year period of limitations. Since the claims here are in no sense “actions upon a contract”, they are clearly barred as untimely.

For the reasons set forth above, IT IS TTF.RF.TiY ORDERED AND ADJUDGED that defendant’s motion for summary judgment be, and the same hereby is, GRANTED, and this action is DISMISSED.


author: RICHARD L. WILLIAMS, District Judge.

text:
    NEW YORK STATE TEACHERS RETIREMENT SYSTEM, Plaintiff, v. Peter KALKUS, et al., Defendants.
    Civ. A. No. 84-0139-A.
    United States District Court, E.D. Virginia, Alexandria Division.
    Oct. 2, 1984.

      Rodney F. Page, Joseph M. Fries, Russell M. Blau, Arent, Fox, Kintner, Plotkin & Kahn, Washington, D.C., for plaintiff.
    Grayson P. Hanes, Hazel, Beckhorn & Hanes, Mark W. Wasserman, Fairfax, Va., Paul C. Madden, Rawle & Henderson, Philadelphia, Pa., for defendants.
   MEMORANDUM OPINION

RICHARD L. WILLIAMS, District Judge.

I. Findings of Fact

A. Introduction

1. In this action, many of the facts are undisputed. The parties established them by entering into a stipulation of facts (“Stipulation”) and by agreeing to admit into evidence a large number of documents (“Exhibits”).

2. The Parties

a. Plaintiff New York State Teachers Retirement System (“Teachers”) is a public pension system created and existing pursuant to Article 11 of the Education Law of the State of New York and having the powers and privileges of a corporation pursuant to Section 502 thereof. Teachers’ principal place of business is in Albany, New York. It administers a system of retirement and pension benefits for retired public school employees in New York.

b. Defendant Peter Kalkus (“Kalkus”) is an individual resident and citizen of the State of New Jersey. He is engaged in the business of real estate investment individually and through various entities, including all of the other defendants in this action. Kalkus is the chairman and sole stockholder of defendant Lamar Properties, Inc.; general partner of defendant Arlington Alliance, Ltd.; general partner of defendant Polk & Taylor Associates; and sole stockholder of Lamar Financial, Inc.

c. Defendant Lamar Properties, Inc. is a Delaware corporation, having its principal place of business in New Jersey.

d. Defendant Arlington Alliance, Ltd. (“Arlington Alliance”) is a limited partnership established under the laws of the Commonwealth of Virginia. Its general partners are defendants Kalkus and Lamar Properties, Inc.

e. Defendant Polk & Taylor Associates (“PTA”) is a limited partnership established under the laws of Virginia. Its sole general partner is defendant Kalkus. Several dozen limited partners are residents of numerous states, including New York.

f. Defendant Lamar Financial, Inc., is a Delaware corporation, having its principal place of business in New Jersey.

g. Defendant Lamar Financial Partnership (“Lamar”) is a limited partnership established under the laws of Virginia. Its sole general partner is defendant Lamar Financial, Inc.

3. The Properties

a. This action involves a controversy over the interpretation of particular terms in mortgage agreements pertaining to the James Knox Polk Building and the Zachary Taylor Building (“the properties”), located on adjacent parcels of land in Arlington County, Virginia. See Stipulation No. 1.

b. The properties are commercial office buildings in the Crystal City area of Arlington County. Most of the office space of both buildings is subject to long-term, below-market rental leases held by the United States government. These leases will expire in 1990. See Testimony of Lowell Blom.

B. The Modification Agreements

1. Royal National Bank of New York (“Royal”) provided the original construction financing for the properties, obtaining first mortgages on both of the properties. In 1970, Royal assigned the two mortgages and the notes they secure to plaintiff Teachers. See Stipulation No. 2.

2. In 1972, as a result of events not relevant to this action, Cabot, Cabot and Forbes Land Trust (“Cabot”) acquired title to the properties. At present, Cabot is known as Bay Colony Property Company, Inc. See Stipulation No. 14.

3. On October 31, 1972, Teachers and Cabot entered into two Modification Agreements, modifying the terms of the outstanding notes and mortgages on the properties held by Teachers. See Stipulation No. 3. The agreements are nearly identical. One relates to the James Knox Polk Building, the other to the Zachary Taylor Building. See Exhibits D-30 and D-33.

4. Both Modification Agreements provide that the maker of the agreement shall pay the holder of the notes fifteen percent (15%) of the “Gross Receipts” from the properties in excess of $3,500,000 per year. Id.

5. In addition, both agreements include an “Excess Refinancing Proceeds” provision, which reads as follows in the Modification Agreement relating to the James Knox Polk Building:

As additional interest to be paid to the Holder of this Note, Maker shall pay to the Holder of this Note, immediately upon receipt, fifteen percent (15%) of any Excess Refinancing Proceeds from the Property (as defined herein). Excess Refinancing Proceeds from the Property shall mean the excess of (i) the principal amount of the first new mortgage placed upon the Property prior to the expiration of one year from the date (hereinafter referred to as the ‘Final Payment Date’) of the discharge and release of the Deeds of Trust, over (ii) the sum of (a) the unpaid principal balance of the Deeds of Trust immediately prior to the Final Payment Date plus (b) any prepayments of principal without penalty on the Deeds of Trust paid after the date hereof beyond the regular monthly installments of principal and interest plus (c) Four Hundred Thousand Dollars ($400,000.00). For purposes hereof, the term “mortgage” includes deeds of trust, security deeds, or other similar security instruments.

See Exhibit D-30.

6. The Modification Agreement relating to the Zachary Taylor Building contains the same Excess Refinancing Proceeds provision as that set forth above, except that the $400,000.00 amount is changed to $600,000.00. See Exhibit D-33.

7. Both Modification Agreements provide that the mortgage balance on the James Knox Polk Building is to be paid in full by June 20, 1985; and the balance on the Zachary Taylor Building is to be paid in full by October 20, 1985. See Exhibits D-30 and D-33.

8. If no prepayments are made between now and 1985, except for scheduled amortization payments, the mortgage balance due to Teachers on June 20, 1985 is $5,581,378.58. The mortgage balance due on October 20, 1985 is $7,403,246.84. See Testimony of James Campbell.

9. The Modification Agreements were properly executed by Teachers and Cabot, and were properly recorded as required by the applicable laws of Virginia. See Stipulation No. 12.

C. The 1973 and 197k Transactions

1. On May 15, 1973, Cabot conveyed the Properties to Jefferson Plaza Management Corporation (“Jefferson”). Jefferson delivered to Cabot its note in the amount of $6,306,248.16, secured by a deed of trust on the properties (“Jefferson Mortgage”). Teachers consented to this conveyance and to the terms of this sale. See Stipulation No. 4 and Exhibits D-36 through D-42.

2. On February 5, 1974, Jefferson conveyed the properties to defendant Arlington Alliance. In connection with this sale, Arlington gave Cabot its note dated February 5, 1974, in the amount of $17,087,765.43. This note was secured by a wraparound deed of trust on the properties dated February 5, 1974 (“Arlington Wrap Mortgage”). In addition, Arlington Alliance agreed to assume Jefferson’s liability on the $6,306,248.16 note and to increase the amount of this note to $8,142,865.48. The increased amount of this note was secured through an agreement of amendment of deed of trust, which was placed on the properties (“Arlington Morgage”). Teachers consented to the conveyance to Arlington Alliance and to the terms of this sale. See Stipulation No. 5 and Exhibits D-43 through D-54.

3. Throughout the period that it owned the properties, Arlington Alliance complied with the Gross Receipts provisions of the Modification Agreements. See Testimony of Peter Kalkus.

D. The 1983 Transactions

1. Because the Cabot and Teachers loans became due in 1984 and 1985 respectively, in the fall of 1982 defendant Kalkus began seeking additional financing for the properties. He desired to maintain ownership of the properties at least through 1990 when the federal government’s below-market rental leases expired. See Testimony of Peter Kalkus.

2. In the fall of 1982, Kalkus planned a series of transactions with two lenders, Aeneas Venture Corporation (“Aeneas”, an affiliate of the Harvard University endowment fund) and InterFirst Bank of Dallas, N.A. (“InterFirst”). These transactions were designed to replace all of the existing mortgages on the properties as follows:

(1) An advance of $7,000,000.00 from Aeneas, an interim loan of $12,000,000.00 from InterFirst and proceeds of a syndication of limited partnership interests in defendant PTA were to be used to discharge the Jefferson and Arlington Wrap Mortgages, and to provide operating funds for the defendants.

(2) In 1984, a second advance of $12,000,000.00 from Aeneas would be used to repay the InterFirst interim loan.

(3) In 1985, a third advance of $12,000,000.00 from Aeneas would be used to repay Teachers’ mortgages on the properties. All the Aeneas loans were to be made in exchange for a note and deed of trust in the amount of $69,000,000.00. See Testimony of Peter Kalkus and Exhibit D-78.

3. In November 1982, defendant Kalkus approached Teachers, requesting Teachers’ consent to the terms of the above described financing transactions. Kalkus submitted his request in writing on November 17, 1982. See Exhibit D-58. Following the receipt of this letter, Teachers requested additional information about the proposed financing, which Kalkus supplied. See Testimony of James Campbell and Peter Kalkus, and Exhibits D-62 through D-64.

4. On January 4, 1984, Kalkus met with Lowell Blom (head of the mortgage department of Teachers) and James Campbell (a Teachers’ mortgage department employee) to discuss the defendants’ secondary financing of the properties. At the meeting, the participants discussed the applicability of the Excess Refinancing Proceeds provisions (contained in the earlier Modification Agreements) to the proposed transactions. Kalkus offered to pay some monetary consideration to Teachers in exchange for a waiver of the provisions. Teachers neither accepted Kalkus’ offer nor consented to the proposed transactions. See Testimony of Lowell Blom, James Campbell and Peter Kalkus.

5. A few days after the January 4, 1984 meeting, in a telephone conversation between James Campbell and Kalkus, Teachers denied the defendants’ request for consent regarding the proposed financing of the properties. Defendants did not receive a written denial of their request. See Testimony of James Campbell.

6. On January 14, 1983, Kalkus released a supplement to the Private Placement Memorandum earlier used to solicit prospective limited partners in PTA. In the supplement, Kalkus advised potential investors that Teachers had refused to consent to the proposed transactions, and that the transactions would be consummated regardless of whether Teachers granted its consent. The supplement advised potential purchasers of a substantial risk that Teachers could accelerate its first mortgage on the properties, and that the Excess Refinancing Proceeds provisions may apply to the proposed transactions. See Exhibit P-2.

7. On January 24, 1983, the following transactions took place:

a. Arlington Alliance conveyed the properties to Lamar.

b. Aeneas entered into a loan agreement with Lamar, agreeing to loan $31,-000,000.00 in four installments:

(1) $7,000,000.00 at closing
(2) $12,000,000.00 on June 1, 1984
(3) $5,130,000.00 on June 1, 1985
(4) $6,870,000.00 on October 1, 1985.

Aeneas advanced the first installment, secured by a deed of trust on the properties in the principal amount of $69,000,000.00. The principal amount of the Aeneas loan is $31,000,000.00. The loan also contains $38,000,000.00 of original issue discount interest. See Testimony of Peter Kalkus and Exhibits D-78 through D-81.

c. InterFirst entered into a loan agreement with Lamar, agreeing to advance $12,000,000.00, secured by a deed of trust on the properties.

d. Lamar conveyed the properties to PTA. In exchange, PTA executed and delivered to Lamar a note of $55,000,000.00, secured by a deed of trust on the properties. See Stipulation Nos. 6 through 9, Exhibits D-70 through D-75 and D-79 through D-86.

8. On or about January 25, 1983, the Jefferson, Arlington and Arlington Wrap Mortgages were paid in full and cancelled. The Certificates of Satisfaction were properly recorded. See Stipulation Nos. 10 and 12, and Exhibits D-76 and D-77.

9. In June 1984, Aeneas advanced to Lamar the second installment of its loan in the amount of $12,000,000.00, which was used to satisfy the indebtedness to Inter-First.

10. At present, PTA owns the properties. See Stipulation No. 11.

11. Since it acquired title to the properties in January 1983, PTA has paid (and Teachers has accepted) mortgage payments under the 1972 Modification Agreements, excluding sums owed under the Excess Refinancing Provisions at issue in this case. See Testimony of Lowell Blom.

II. Conclusions of Law

1. This Court has jurisdiction over this action pursuant to 28 U.S.C. § 1332(a).

(a) Plaintiff Teachers is a citizen of New York for jurisdictional purposes. It is not an “alter ego” of the State of New York, but a separate entity. See N.Y. Educ.Law §§ 501, et seq. (McKinney 1969 & Supp.1983). Public school employees, not the state treasury, will benefit from any recovery obtained by plaintiff. Blease v. Safety Transit Co., 50 F.2d 852 (4th Cir.1931); Morrison-Knudsen Co., Inc. v. Massachusetts Bay Transportation Authority, 573 F.Supp. 698 (D.Idaho 1983); Bowen v. Hackett, 387 F.Supp. 1212 (D.R.I. 1975). Moreover, Teachers is not performing an essential government function. Idaho Potato Com’n v. Washington Potato Com’n, 410 F.Supp. 171 (D.Idaho 1976); Morrison-Knudsen, at 701, 703-4. But see 21 Properties, Inc. v. Romney, 360 F.Supp. 1322 (N.D.Tex.1973).

(b) All the defendants, for jurisdictional purposes, are citizens of New Jersey or Delaware. Although there is a split between courts on the issue, this Court holds that the citizenship of a limited partnership is determined by the citizenship of all of its general partners, without regard to the citizenship of any limited partners. See Colonial Realty Corp. v. Bache & Co., 358 F.2d 178 (2d Cir.), cert. denied, 385 U.S. 817, 87 S.Ct. 40, 17 L.Ed.2d 56 (1966); Wroblewski v. Brucher, 550 F.Supp. 742 (W.D.Okla.1982); Sixth Geostratic Energy Drilling Program v. Ancor Exploration Co., 544 F.Supp. 297 (N.D.Okla.1982); Williams v. Sheraton Inns, Inc., 514 F.Supp. 22 (E.D.Tenn.1980); C.P. Robinson Construction Co. v. National Corp. for Housing Partnerships, 375 F.Supp. 446 (M.D.N. C.1974). Contra Elston Investment, Ltd. v. David Altman Leasing Corp., 731 F.2d 436 (7th Cir.1984); Carlsberg Resources Corp. v. Cambria Savings & Loan Ass’n., 554 F.2d 1254 (3d Cir.1977); Conroy v. Winn, 581 F.Supp. 1280 (D.D.C.1984); Hereth v. Jones, 544 F.Supp. 111 (E.D.Va. 1982); Grynberg v. B.B.L. Associates, 436 F.Supp. 564 (D.Colo.1977). Accordingly, the citizenship of the limited partnership PTA cannot be New York. The presence of New York limited partners has no effect on its citizenship for diversity purposes.

(c) Teachers failure to join Cabot as a party in this action does not interfere with this Court’s subject matter jurisdiction. Cabot is not an indispensable party. Determining indispensability of parties is an issue of federal law, within this Court’s discretion. Provident Tradesmens Bank & Trust Co. v. Patterson, 390 U.S. 102, 88 S.Ct. 733, 19 L.Ed.2d 936 (1968), Northrop Corp. v. McDonnell Douglas Corp., 705 F.2d 1030 (9th Cir.), cert. denied, — U.S. -, 104 S.Ct. 156, 78 L.Ed.2d 144 (1983). By failing to join Cabot, Teachers has not prejudiced Cabot’s interest nor will any judgment rendered in Cabot’s absence be inadequate. See Federal Rule of Civil Procedure 19(b). Cabot no longer owns the properties. Its present rights and obligations under the 1972 Modification Agreements are not at issue in this case.

2. There is an actual controversy between the parties, which is ripe for adjudication. See, e.g. John Hancock Mutual Life Ins. Co. v. Webcor, Inc., 311 F.2d 701 (7th Cir.1962).

3. As present or past owners of the properties, defendants PTA, Lamar and Arlington Alliance are each subject to the obligations of the “Maker” as defined in the 1972 Modification Agreements. These defendants did not personally assume any of the obligations set forth in the agreements; however, they took subject to those obligations to the extent of their respective interests in the properties. G. Glenn, Mortgages, §§ 252, 262 (2d Ed.1970); G. Osborne, Mortgages, § 252 (2d ed. 1970); R. Tiffany, Law of Real Property, § 1435 (1939 & Supp.1984); Owen v. Lee, 185 Va. 160, 37 S.E.2d 848 (1946); C.B. Van Nostrand & Co. v. Virginia Zinc & Chemical Corporation, 126 Va. 131, 101 S.E. 65 (1919).

The defendants have recognized their obligations Under the Modification Agreements by complying, as the “Maker”, with the Gross Receipts provisions of the contracts. Moreover, defendant Kalkus noted in the supplement to the Private Placement Memorandum regarding PTA that the properties could be subject to foreclosure if defendant Lamar did not comply with the terms of Teachers’ first mortgages. See Exhibit P-2.

4. Because they took subject to the obligations of the “Maker” under the 1972 Modification Agreements, defendants PTA, Lamar and Arlington Alliance must comply with the Excess Refinancing Proceeds provisions found in both agreements or risk foreclosure of the first mortgage by Teachers.

5. Under the Excess Refinancing Provision, the “first new mortgage” referred to is the earliest-in-time financing agreement designed to replace plaintiff Teachers’ first mortgage on the properties.

(a) This Court’s function in construing the 1972 Modification Agreements is to give effect to the intention of the parties as determined by the language in the contracts. Hotchkiss v. National City Bank, 200 F. 287, 293 (S.D.N.Y.), aff'd, 201 F. 664 (2d Cir.1912), aff'd, 231 U.S. 50, 34 S.Ct. 20, 58 L.Ed. 115 (1931). Moreover, it is this Court’s duty to look at the whole instrument when determining that intent. Short v. A.H. Still Investment Corp., 206 Va. 959, 147 S.E.2d 99 (1966), Brand Distribu tors, Inc. v. Insurance Co. of North America, 532 F.2d 352, 353 (4th Cir.1976).

(b) Both Modification Agreements require the maker to pay additional interest upon the receipt of the “first new mortgage”. The phrase “first new mortgage” is not synonymous with the phrase “any subsequent mortgage”, as the defendants in essence argue. Rather, the choice of the word “new” denotes the parties’ intent to describe a mortgage designed to begin anew the financing process, discharging the previous debt to Teachers.

(c) In addition, the use of the word “Refinancing” in the provisions at issue supports this Court’s reading of the phrase “first new mortgage”. According to Black’s Law Dictionary, “refinance” means “To finance again or anew ... The discharge of an obligation with funds acquired through the creation of a new debt.” See Black’s Law Dictionary, p. 1152 (5th ed. 1979). This Court must turn to the common and ordinary usage of language when construing an agreement. American Casualty Co. v. Gerald, 369 F.2d 829 (4th Cir.1966); Bolin v. Laderberg, 207 Va. 795, 153 S.E.2d 251 (1967). Accordingly, the “first new mortgage” referred to in the Excess Refinancing Proceeds provisions is that earliest-in-time mortgage obtained to discharge the preexisting debt to Teachers.

(d) This Court also finds that the parties intended the Excess Refinancing Proceeds provisions to be a means by which Teachers would share in the appreciation of the properties. See Testimony of Lowell Blom. The parties had a reasonable expectation that the properties would increase in value as the expiration of the below-market government leases grew closer in time. Tying the amount of additional interest owed to Teachers to the amount of new financing obtained by the maker of the agreements was a reasonably reliable measure of the expected appreciation. The additional interest owed to Teachers would only accrue upon the maker’s refinancing of the property.

(e) Similarly, the formula stated in the Excess Refinancing Proceeds provisions (used to calculate the additional interest owed) supports this Court’s interpretation of the phrase “first new mortgage”. The additional interest is based primarily on the difference between the principal amount of the new mortgage and the principal amount of Teachers’ loans. Such a comparison is meaningless unless the new mortgage is intended to replace the Teachers mortgage.

6. To be a “first new mortgage” (as that phrase is defined in the Excess Refinancing Proceeds provisions), new financing must be placed upon the properties prior to the expiration of one year from the date of the discharge and release of the Teachers Deeds of Trust. See Exhibits D-30 and D-33. This Court holds that a new mortgage, recorded prior to the actual discharge of Teachers’ loans, satisfies the provision, for a refinancing mortgage must be recorded at least a short time before funds can be disbursed to pay off and discharge a prior debt.

7. The Aeneas loan agreement of January 24, 1983 constitutes the “first new mortgage” placed upon the properties. As defendant Kalkus testified, the purpose of entering into the Aeneas loan agreement was to obtain long term financing for the properties. Defendants intend to discharge Teachers’ first mortgages with the third installment of the Aeneas loan. See Testimony of Kalkus.

8. In contrast, the earlier Jefferson, Arlington Wrap and Arlington Mortgages were not designed to advance funds to discharge the Teachers mortgage. Rather, these earlier loans were subordinate mortgages, not falling within the scope of the Excess Refinancing Proceeds provisions of the 1972 Modification Agreements.

9. The principal amount of the Aeneas mortgage is $31,000,000.00, for that is the amount defendant Lamar is to receive under the Aeneas loan agreement. See Exhibit D-74. The remainder of the $69,000,000.00 amount of the loan is the original issue discount or, in other words, the interest on the mortgage note. See Microdot, Inc. v. United States, 728 F.2d 593 (2d Cir.1984).

10. The amount of “Excess Refinancing Proceeds” under the Modification Agreements equals $31,000,000.00 (the principal amount of the first new mortgage) less $13,984,625.42 (the sum of the unpaid principal balances at maturity plus $1,000,-000.00), which equals $17,015,374.58. Fifteen percent of the Excess Refinancing Proceeds is $2,552,306.19, which is the amount of additional interest Teachers is entitled to receive based on the loan agreement between Aeneas and the defendants.

11. The additional interest calculated above does not account for the possibility of partial prepayments of the mortgage balance. If the defendants choose to make prepayments, the additional interest owed by defendants to Teachers must be calculated in accordance with section (ii)(b) of the Excess Refinancing Proceeds provisions.

12. The additional interest computed above is also not due and payable until the Teachers’ loans are actually discharged. This assures that the “first new mortgage” is in fact obtained and used to satisfy the indebtedness to Teachers, as intended by the language of the Excess Refinancing Proceeds provisions. The additional interest will be due on June 20, 1985 for the James Knox Polk Building and on October 20, 1985 for the Zachary Taylor Building, or at such earlier date upon which the defendants choose to discharge Teachers’ first mortgages. See Finding of Fact B-7.

13. Until the sums become due and payable, no interest attaches to the additional sums owed by the defendants to Teachers under the Excess Refinancing Proceeds provisions of the 1972 Modification Agreements.

14. Defendants have failed to establish any affirmative defenses against Teachers’ entitlement to the additional interest computed above.

(a) Teachers did not waive its right to additional interest by accepting payments of principal and interest after the transactions on January 24, 1983. Defendants’ failure to comply with the Excess Refinancing Proceeds provisions was a continuing default, not cured by making other payments of principal and interest. Moreover, the first mortgage provides that acceptance of monthly payments by the holder of the notes shall not constitute a waiver of the right to declare a default and accelerate payment. See Exhibit D-2. The cases cited by the defendants in opposition to this Conclusion of Law are not on point. Neither involves the acceptance of payments distinct from those at issue in the particular cases.

(b) Defendants waived the benefit of the provisions of the Modification Agreements requiring Teachers to respond in writing within 30 days to any request for consent to a transaction involving the properties. At the January 4, 1983 meeting, defendant Kalkus demonstrated his continued desire to obtain Teachers’ express consent to the proposed transactions. And, the supplement' to the Private Placement Memorandum reflects the defendants’ acquiescence to Teachers’ oral denial of consent.

(c) Defendants’ arguments of laches and estoppel also are not affirmative defenses to Teachers’ entitlement to the additional interest. Again, on January 4, 1983, defendant Kalkus was aware of Teachers’ opposition to his proposed transactions. And, in the Private Placement supplement not only did he acknowledge Teachers' position, but also indicated his willingness to proceed with the transactions, risking the possibility of foreclosure on the properties.

15. Finally, defendant Kalkus is not personally liable for the judgment herein declared. As noted in Conclusion of Law no. 3, the defendants did not personally assume any of the obligations set forth in the 1972 Modification Agreements. Rather, they took subject to those obligations to the extent of their respective interests in the properties.

16. A declaratory judgment is appropriate in this case to define the respective rights of the parties in and to the properties. 28 U.S.C. §§ 2201, 2202 (1982). Therefore, the Court declares a judgment consistent with the Findings of Fact and Conclusions of Law set forth above.

FINAL ORDER

This declaratory judgment proceeding comes before the Court for resolution following a full bench trial on September 12, 1984. Based upon the stipulations of fact entered into by the parties, the exhibits, evidence and argument of counsel at trial, and for the reasons set forth in the accompanying memorandum opinion, this Court declares the rights of the parties to be as follows:

1. Plaintiff New York State Teachers Retirement System (“Teachers”) is entitled to receive additional interest under the Excess Refinancing Proceeds provisions of the 1972 Modification Agreements at issue in this case, based upon the loan agreement between the defendants and Aeneas Venture Corporation.

2. Plaintiff Teachers is entitled to receive additional interest in the amount of $2,552,306.19, if no prepayments other than the scheduled amortization payments are made by the defendants to Teachers between the date of this order and the dates upon which the mortgage balances are due in full.

3. If the defendants choose to make prepayments, the additional interest owed by the defendants to Teachers must be calculated in accordance with section (ii)(b) of the Excess Refinancing Proceeds provisions of the 1972 Modification Agreements.

4. Plaintiff Teachers is not entitled to receive the additional interest hereby declared to be owed until such time that the defendants discharge Teachers’ first mortgage on the properties focused upon in this case.

5. Therefore, until such time of discharge, no interest attaches to the additional sums owed by the defendants to Teachers.

6. The defendants’ rights and interests in the properties will become subject to, subordinate to and conditioned upon the payment of the additional interest when that interest becomes due and payable. At that time, plaintiff Teachers may foreclose upon the properties if the additional interest is not paid.

7. Defendant Peter Kalkus is not personally liable for the additional interest declared to be owed to Teachers.


author: SWEET, District Judge.

text:
    METRO KANE IMPORTS, LTD., Plaintiff, v. ROWOCO, INC., Defendant.
    No. 84 Civ. 6099 (RWS).
    United States District Court, S.D. New York.
    Oct. 2, 1984.

      Weiss, Dawid, Fross, Zelnick & Lehrman, P.C., New York City, for plaintiff; Richard Lehv, New York City, of counsel.
    McAulay, Fields, Fisher, Goldstein & Nissen, New York City, for defendant; Terry Sue Zisowitz, Lloyd McAulay, New York City, of counsel.
   OPINION

SWEET, District Judge.

Plaintiff, Metro Kane Imports, Ltd. (“MKI”) has moved for a preliminary injunction against defendant Rowoco, Inc. (“Rowoco”) pursuant to section 43(a) of the Lanham Act, 15 U.S.C. § 1125(a), New York Common Law, and the “Mold Statutes” of California, Michigan, and Tennessee, to bar Rowoco’s continued importation and sale of a hand operated orange juice squeezer allegedly identical to that imported and sold by MKI. The motion is denied upon the following findings and conclusions.

Prior Proceeding

The action was commenced on August 24, 1984. Expedited discovery was had, and the motion was heard on September 21, 1984. No factual dispute was presented, and no surveys of consumer loyalty to the products involved were submitted. Consequently, no evidentiary hearing was required.

Facts

Since September, 1982, MKI, a New York corporation, has been the exclusive wholesale distributor in the United States of a manual orange juice squeezer produced in Mexico. Through the end of August 1984, sales totalled 32,929 units, producing $823,243 in gross revenues from this product for MKI, 90% of MKI's total income. MKI has spent in excess of $100,000 on advertising and promotion in numerous trade publications, gourmet periodicals, and the general press. The juicer, which is based on a rack and pinion mechanism similar to that of other juicers, has a rather distinctive exterior. MKI does not mark its juicer with any source — identifying label on the product itself, although the seven inch cube-box in which the product is packaged has one-half inch lettering naming the product “Mighty OJ.” The name Metro Kane Imports appears only in one-eighth inch black lettering barely visible against a blue background in the bottom corner of each facade of the box. The .packaging features a picture of one juicer, a glass of orange juice, and three and one-half oranges.

Rowoco is a New York corporation that imports and distributes kitchen products. Rowoco purchased an MKI juicer in September 1983, and in April 1984 Rowoco was approached by the representative of a Taiwanese Trading Company who attempted to interest Rowoco in a Taiwanese produced juicer identical in all visible respects to MKI’s product. Rowoco placed its first order for the Taiwanese product (“Rowoco Juicer”) in April, 1984. Rowoco has now contracted with the Taiwanese Trading Company for 5,400 juicers and plans to distribute the juicers nationwide, although it has as yet not undertaken to advertise the juicer in any way other than by including it in Rowoco’s catalogue of over 1,800 items.

The President and Vice-President of Rowoco claim to have no knowledge of how the Rowoco juicer is produced, although there has been no denial of MKI’s claim that the “Mighty OJ” was used as a “plug” for a mold from which the Rowoco juicer was created, and MKI has introduced affidavit evidence to that effect. Certain pieces of the Rowoco juicer, however, have not been produced from molds of the Mighty OJ.

The Rowoco juicer is packaged in a seven-inch cube box which pictures two juicers on each of four facades, surrounded by a glass of orange juice and various citrus fruits. The box is labeled “Rowoco Juicer,” with the “Rowoco” lettering in one-quarter inch high white letters against a dark green background at the top of the box, and the “Juicer” lettering in one and one-half inch high white lettering against a green background immediately below. Although the Rowoco juicer itself does not have any permanent source identification, it is sold with a three and one-half inch long white piece of tape with the red printed words “The Rowoco Juicer” attached on the front of the mechanism. This label is attached to the removable receptacle into which oranges are placed and presumably will be detached as the juicer is used. Unpacked and subsequent to being washed, the two products are therefore identical in all observable respects.

Conclusions

MKI in this action seeks a preliminary injunction and must persuade the court that: 1) either a) there is a likelihood of success on the merits or b) there are sufficiently serious questions going to the merits to make them a fair ground for litigation and the balance of hardships tips decidedly in favor of the moving party, and 2) irreparable harm will result in the absence of the injunction. United States v. Bedford Assoc., 618 F.2d 904, 912 (2d Cir.1980), Caulfield v. Board of Ed. of New York City, 583 F.2d 605, 610 (2d Cir.1968).

1. Success on the Merits

A. Lanham Act

For a product’s configuration and design to be protectable under § 43(a) of the Lanham Act the moving party must establish 1) that the design features allegedly copied are non-functional and 2) that these design features had acquired secondary meaning in the marketplace by which the product is identified with the maker or producer of the goods. Industria Arredamenti Fratelli Saporiti v. Chas. Craig, Ltd., 725 F.2d 18, 222 U.S. P.Q. 754, 755 (2d Cir.1984); Vibrant Sales v. New Body Boutique, 652 F.2d 299, 303 (2d Cir.1981), cert. denied, 455 U.S. 909, 102 S.Ct. 1257, 71 L.Ed.2d 448 (1982).

A feature of a product which is “functional” cannot constitute a protectable trade design under § 43(a) of the Lanham Act. Dallas Cowboy Cheerleaders Co., Inc. v. Pussycat Cinema, Ltd., 604 F.2d 200 (2d Cir.1979); Upjohn Co. v. Schwartz, 246 F.2d 254 (2d Cir.1957). Defining those aspects or attributes of a design that are functional, and therefore capable of replication, rather than arbitrary, and therefore protected, is the necessary starting point.

The Supreme Court has stated that a functional feature is one that “is essential to the use or purpose of the article or [that] affects the cost or quality of the article.” Inwood Laboratories, Inc. v. Ives Laboratories, Inc., 456 U.S. 844, 850-51 n. 10, 102 S.Ct. 2182, 2186 n. 10, 72 L.Ed.2d 606 (1982). In Industria Arredamenti, supra, the Second Circuit elaborated on these terms, and specifically defined the relationship between aesthetic and functional elements of a design:

It is not functional if it is an “arbitrary embellishment — primarily adopted for purposes of identification and individuality,” but “an important ingredient in the commercial success of the product” is clearly functional. Ives Laboratories, Inc. v. Darby Drug Co., 601 F.2d 631, 643, 202 USPQ 548, 558 (2d Cir.1979).
In the context of § 43(a) of the Lanham Act, “functional” is not synonymous with “utilitarian,” nor is it the antonym of “ornamental.” Indeed, ornamentation may be the thing that sells the product. Thus, it was held that the words “Damn I’m Good,” inscribed on flat metal bracelets, were functional and could not be treated as a trademark. Damn I'm Good, Inc. v. Sakowitz, 514 F.Supp. 1357, 212 USPQ 684 (S.D.N.Y.1981). Similarly, the design on hotel china is the principal thing that attracts potential buyers, for it makes the china aesthetically appealing. As an important ingredient in the saleability of the goods, it is functional and may not be treated as an unregistered trademark. See Pagliero v. Wallace China Co., 198 F.2d 339, 95 USPQ 45 (9th Cir.1952).

Id. 725 F.2d 18, 222 U.S.P.Q. at 755-56.

MKI in its argument has emphasized exclusively the first aspect of the Supreme Court’s definition of functionality — that bearing on the feature’s being essential to the use of the article. MKI has consequently argued that the rack and pinion mechanism which is the heart of the juicer can be encased in an unlimited array of facades. There is little doubt that the choice of a particular casing for the rack and pinion system is not mandated by the mechanism itself. Indeed, other juicers are on the market in this country that feature the same rack and pinion gear system and are identical in general layout and mechanical operation yet have markedly different appearances. Were I free to do so, I would be tempted to accept this definition of functionality in the context of Lanham Act claims, and I would find that the Rowoco juicer copies non-functional elements of the MKI juicer.

The Second Circuit definition of “functional,” however, has recently emphasized in Industria Arredamenti, supra, the scope of the second element stated by the Supreme Court — the aesthetic contribution a feature makes to the quality of a product. Therefore, just as a pattern on china or the lack of a seam on a sofa constitute merely aesthetic attributes of the product, yet are considered functional because they contribute to the saleability of the good, so the modern, robotesque appearance of the MKI juicer must be considered a functional attribute of the product. As such it may not become an unregistered trademark whose replication is unlawful under § 43(a) of the Lanham Act.

Although the finding that the attributes of the Mighty OJ that were copied were functional would be sufficient to dispose of the Lanham Act claim, the conclusion is buttressed by the further finding that no secondary meaning has been acquired by MKI’s product.

The doctrine of secondary meaning holds that “a descriptive or geographical mark receives protection against copying only if consumers have come to associate it with a particular manufacturer or source. When this association is established and the mark has thus acquired secondary meaning, a second comer is barred from using it because such use is virtually certain to create confusion in the public mind as to the source of the product.” Perfect Fit Industries, Inc. v. Acme Quilting Co., 618 F.2d 950, 953 (2d Cir.1980), cert. denied, 459 U.S. 832, 103 S.Ct. 73, 74 L.Ed.2d 71 (1983). The connection that the consumer must recognize and value is that between the product and a particular producer. In finding such secondary meaning in another context the Second Circuit concluded that “[b]y secondary meaning we mean that romance readers associate the Harlequin Presents cover with a particular series and publisher ... Harlequin’s extensive national advertising, its phenomenal sales success, and the results of a consumer survey indicate that romance readers correlate the Harlequin Presents cover with Harlequin and the Harlequin Presents Series.” Harlequin Enterprises Ltd. v. Gulf and Western Corp., 644 F.2d 946, 949-50 (2d Cir. 1981). Judge Hand wrote that for a party to demonstrate secondary meaning it was necessary that it be demonstrated that “the appearance of his wares has in fact come to mean that some particular person — the plaintiff may not be individually known— makes them, and that the public cares who does make them, and not merely for their appearance and structure.” Crescent Tool Co. v. Kilborn & Bishop Co., 247 F. 199, 300 (2d Cir. 1917).

Proof of secondary meaning is consequently difficult, since it is necessary to establish a public desire for the product of a particular manufacturer. Popularity and sales alone cannot establish this secondary meaning, and advertising expenditures are demonstrative only of an effort to establish secondary meaning, not success of the effort. Eli Lilly and Co. v. Revlon, Inc., 577 F.Supp. 477, 483 (S.D.N. Y.1983); Ralston Purina Co. v. Thomas J. Lipton, Inc., 341 F.Supp. 129, 134 (S.D.N. Y.1972). Although copying of a product is considered evidence of secondary meaning, Harlequin, supra, at 950, assuming without deciding that such is the ease, MKI has not submitted evidence that establishes an affirmative link in the public mind to the particular producer. Moreover, the advertising in catalogues and newspapers submitted as exhibits by the parties shows that the name of MKI was often eliminated or if present was only barely visible. The advertisements focused on the “appearance and structure” of the juicer only. The product itself does not have MKI’s name on it, and the box in which the juicer is packaged likewise emphasized the structure of the object, not the name of the producer. On these facts, I conclude that MKI has failed to demonstrate that the juicer has acquired secondary meaning.

Because an examination of the likelihood of confusion necessitates a prior finding that the product at issue has acquired secondary meaning, see Eli Lilly, supra, at 482-83, Vibrant Sales, supra, at 304, the issue of consumer confusion need not be dealt with at length. It is worth observing, however, that Rowoco’s juicer does have a label — though temporary — affixed to it and the packaging for the Rowoco juicer clearly exhibits the name Rowoco. Such labeling has been held in certain circumstances sufficient to eliminate fears of consumer confusion. See Bose Corporation v. Linear Design Labs, Inc., 467 F.2d 304 (2d Cir. 1972); Le Sportsac, Inc. v. Dockside Research, Inc., 478 F.Supp. 602, 609 (1979).

I conclude that MKI has not demonstrated either likelihood of success on the merits or serious questions providing a basis for litigation with respect to the Lanham Act claim. Neither the copying of non-functional elements nor the acquisition of secondary meaning in the marketplace have been established.

B. New York Statutory and Common Law Claims

Whether MKI’s claim is brought under §§ 368-d or 349 of New York’s General Business Law or under common law unfair competition principles, MKI cannot prevail unless it demonstrates a protectable interest in the design of the juicer. Although a showing of secondary meaning is not essential, MKI still must establish the misappropriation of a property interest in the design. Perfect Fit Industries, supra, at 953; Flexitized, Inc. v. National Flexitized Corp., 335 F.2d 774, 781-82 (2d Cir. 1964), cert. denied, 380 U.S. 913, 85 S.Ct. 899, 13 L.Ed.2d 799 (1965). Since New York cannot “give protection of a kind that clashes with the objectives of the federal patent laws,” Sears, Roebuck & Co. v. Stiffel Co., 376 U.S. 225, 231, 84 S.Ct. 784, 788, 11 L.Ed.2d 661 (1964), the analysis undertaken above with respect to MKI’s ability to protect the juicer applies here as well.

C. “Mold” Statutes

MKI also brings an action based upon statutory provisions in California, Michigan, and Tennessee to enjoin the sale of Rowoco’s product in those states. These statutes, California Business and Professions Code §§ 17300 and 17301; Michigan Compiled Laws Annotated §§ 445.621—445.624; and Tennessee Code Annotated § 47-15-115, make it unlawful to duplicate through direct molding processes a manufactured item made by another without the permission of the initial producer. The relevant testimony, with respect to this claim consists solely of the affidavit of Edward Arnao, President of Advance Pressure Castings Corp., submitted by MKI; the deposition of Arnao by Rowoco; and Rowoco’s claim of no information with respect to the manufacturing process used.

Based on the evidence, I conclude that MKI has demonstrated a substantial likelihood of success in establishing a violation of the mold statutes. With respect to the Lanham Act and New York State claims, however, I find that MKI has shown neither a likelihood of success nor that serious issues for litigation exist.

2. Irreparable Harm to MKI

MKI asserts two grounds for a finding that irreparable harm will result in the absence of a preliminary injunction. First, MKI claims that consumer confusion in trademark cases constitutes irreparable harm. Second, MKI claims that the competition threatened by the larger Rowoco could drive MKI into bankruptcy. Since I have concluded that there has not been a showing of a likelihood of success on the merits under the Lanham Act or New York Statutory or Common Law claims, I need not address the general assertion of irreparable harm. I note, however, that founding a claim of irreparable harm on the assertion of consumer confusion is unlikely to succeed given my preliminary finding above with respect to consumer confusion. Further, an unsupported claim that competition from a larger entity will drive MKI into bankruptcy cannot be the basis of a finding of irreparable harm.

Since I have found that there is a likelihood of success with respect to the mold statutes, however, MKI could obtain a preliminary injunction against sales in these three states if it demonstrated irreparable harm from the failure to issue an injunction on sales in those states. MKI has introduced no evidence relating to the harm that will result from the failure to issue such an injunction. Extending my evaluation of MKI’s claims of irreparable harm in the Lanham Act claim, I do not conclude that sales in those three states will produce irreparable harm.

Conclusion

MKI has failed to demonstrate likelihood of success on either the Lanham Act or New York State claims. MKI did, however, establish a likelihood of success under the mold statutes of California, Michigan, and Tennessee. However, since MKI failed to establish that irreparable harm will result should an injunction not be granted with respect to Rowoco’s sales in those states, no preliminary injunction is granted with respect to that claim. MKI’s motion is denied.

IT IS SO ORDERED.


author: NAUMAN S. SCOTT, District Judge.

text:
    Ida TURNER, et al. v. UNITED STATES of America.
    Civ. A. No. 84-1534.
    United States District Court, W.D. Louisiana, Monroe Division.
    Oct. 2, 1984.

      Raymond L. Cannon, Tallulah, La., for plaintiffs.
    Joseph S. Cage, Jr., U.S. Atty., John R. Halliburton, Asst. U.S. Atty., Shreveport, La., for defendant.
   RULING

NAUMAN S. SCOTT, District Judge.

This matter is before the Court on defendant’s Motion to Dismiss pursuant to Rules 12(b)(1) and (6) of the Federal Rules of Civil Procedure or, in the alternative, on a Motion for Summary Judgment pursuant to Rule 56, Fed.R.Civ.P.

The plaintiffs contend that due to the assault and battery, trespassing and invasion of privacy by an employee of the United States Army, as well as the negligence of the United States Army, they sustained damages in the amount of Four Hundred Forty Thousand ($440,000.00) Dollars. After their claim was administratively denied on December 22, 1983, the plaintiffs filed this action on June 7, 1984.

Specifically plaintiffs allege that on September 25, 1981, SFC William B. Suddth, while serving as a recruiter on behalf of the Louisiana National Gúard, deceived four of them, all adult women, into believing that in order to join the Guard, they had to submit to complete physical examinations conducted on the spot by him as the recruiter, including examination of the rectum and genitals. Plaintiffs also claim that later, the mother of the four young women, and her husband, upon learning of these examinations, suffered great trauma and humiliation. All the plaintiffs seek monetary damage for assault and battery, and pain and humiliation because of the Government’s negligence in the selection, training and supervision of Sgt. Suddth.

Defendant contends that this Court lacks subject matter jurisdiction over plaintiffs’ claims. We agree.

Plaintiffs cite 28 U.S.C. § 1343(3) and (4) and 28 U.S.C. § 1346(b) (Federal Tort Claims Act) as bases of jurisdiction for the Court to entertain this controversy. We find their reliance on these statutes misplaced.

Section 1343 of Title 28 U.S.C. only creates jurisdiction in the district courts to hear certain cases involving 42 U.S.C. § 1983 or Civil Rights violations. Absent an allegation of deprivation of rights under color of State law or a violation of any Act of Congress which protects civil rights, jurisdiction pursuant to § 1343 does not lie. Howard v. State Dept. of Hwys. of Colorado, 478 F.2d 581 (10th Cir.1973); Karlin v. Clayton, 506 F.Supp. 642 (D.Kan.1981). The plaintiffs herein have not alleged any deprivation of rights under color of State law nor violation of any Act of Congress which protects civil rights. Thus, this Court does not have jurisdiction pursuant to 28 U.S.C. § 1343.

Section 1346(b) of Title 28 U.S.C. states in pertinent part:

"... the district courts ... shall have exclusive jurisdiction of civil actions on claims against the United States for money damages ... for personal injury or death caused by the neglect or by wrongful act or omission of any employee of the Government while acting within the scope of his office or employment under circumstances where the United States, if a private person, would be liable to the claimant in accordance with the law of the place where the act or omission occurred.”

At first glance, it would appear that plaintiffs’ claim would fit under this section. However, Congress in 28 U.S.C. § 2680(h), specifically excepted acts from the Federal Tort Claims Act:

“... Section 1346(b) ... shall not apply to any claim arising out of assault, battery ... misrepresentation (or) deceit.”

Therefore, since plaintiffs’ claims arise out of an assault, battery, misrepresentation or deceit, this Court lacks jurisdiction. Lambertson v. United States, 528 F.2d 441 (2nd Cir.1976), cert. denied, 426 U.S. 921, 96 S.Ct. 2627, 49 L.Ed.2d 374 (1976).

That plaintiffs have also asked for damages for negligence on the part of the Government is of no moment. As defendant correctly contends, this is a case dealing exclusively with assault, battery, misrepresentation and/or deceit. One cannot escape these exceptions to the waiver of sovereign immunity under 28 U.S.C. § 2680(h) by merely labeling the cause of action something which it is not. United States v. Faneca, 332 F.2d 872, 875 (5th Cir.1964), cert. denied, 380 U.S. 971, 85 S.Ct. 1327, 14 L.Ed.2d 268 (1965); Goodman v. United States, 324 F.Supp. 167, 172 (M.D.Fla.1971), aff'd, 455 F.2d 607 (5th Cir. 1971).

Furthermore, the United States could only be held liable for negligence if Sgt. Suddth was acting within the scope of his office or employment. 28 U.S.C. § 1346(b). Clearly, the Sergeant was acting for purely personal reasons in giving the offending physical examinations. He has no such duty under Army regulations. Dept, of the Army Documents NGR 40-501 p. 2, NGR 600-200 p. 5-18.5. Thus we find he was acting outside the scope of his employment. See, Mays v. Pico Finance Co., 339 So.2d 382, 385 (La.App. 2nd Cir. 1976).

Accordingly, since defendant’s Motion to Dismiss for lack of subject matter jurisdiction is hereby GRANTED, we need not rule on its alternate theories.

ORDER

For written reasons assigned this date, it is hereby

ORDERED, ADJUDGED AND DECREED that the above captioned action be DISMISSED with prejudice.

Alexandria, Louisiana, this 2d day of October, 1984.


author: AUBREY E. ROBINSON, Jr., Chief Judge.

text:
    Martha S. FREEMAN, Plaintiff, v. Elizabeth DOLE, et al., Defendants.
    Civ. A. No. 76-1587.
    United States District Court, District of Columbia.
    Oct. 2, 1984.

      Robert Seldon, Asst. U.S. Atty., Washington, D.C., for defendants.
    June Kalijarve, Washington, D.C., for plaintiff.
   MEMORANDUM AND ORDER

AUBREY E. ROBINSON, Jr., Chief Judge.

Before the Court is Defendant’s Motion for Leave to File a Notice of Appeal, time having otherwise expired. Defendant seeks to appeal from this Court’s Order directing it to pay $23,961.57 in attorney fees and expenses incurred by Plaintiff in advancing her successful claim of sex discrimination. For the reasons discussed below, Defendant’s Motion is denied.

The time in which one may appeal as of right from a district court order in a civil case is governed by Fed.R.App.P. 4. This rule provides in part that “the notice of appeal required by Rule 3 shall be filed with the clerk of the district court within 30 days after the date of entry of the judgment or order appealed from; but if the United States or an officer or agency thereof is a party, the notice of appeal may be filed by any party within 60 days after such entry.” Fed.R.App.P. 4(a). The date of entry of the order directing defendant to pay the attorney fees was May 24, 1984. Because the Department of Transportation is the defendant in this action, it could have appealed as of right prior to July 24, 1984.

Defendant did not note an appeal within the required time. Defendant now seeks to file out of time on the ground that its failure to file was due to “excusable neglect.” See Fed.R.App.P. 4(a)(5) (leave to file after the time for an appeal has run is discretionary in the district court “upon a showing of excusable neglect or good cause____”). Defendant explains that the notice of appeal was “apparently inadvertently misplaced during its administrative handling____” Defendant’s Motion for Leave to File at 2.

Excusable neglect exists where the moving party attempts timely delivery of the notice of appeal, but intervention of an unpredictable event delays receipt of the notice. Fallen v. United States, 378 U.S. 139, 143, 84 S.Ct. 1689, 1692, 12 L.Ed.2d 760 (1964) (pro se prisoner who could not have known of infrequent mail pick up at prison was permitted to file late); Marshall v. Hope Garcia Lancarte, 632 F.2d 1196, 1197 (5th Cir.1980) (excusable neglect existed where notice of appeal was originally filed on time, but erroneous filing of the docket number of another, similar, case caused the delay); Airline Pilots in the Service of Executive Airlines, Inc., Counsel Number 2, Union of Professional Airmen v. Executive Airlines, Inc., 569 F.2d 1174-75 (1st Cir.1978) (secretary mistakenly informed attorney that the filing deadline was ten days later than the actual deadline; held, “[a] mistake made by an attorney or his staff is not, except in unusual or extraordinary circumstances not present here, such excusable neglect as to invoke the rule”); Marshall v. Truland Corporation, 24 Fed.R.Serv.2d (Callaghan) 1443, 1444 (4th Cir.1978) (Solicitor of Labor mailed notice of appeal to United States Attorney in a timely fashion but, due to mistaken rerouting, United States Attorney did not receive the notice in time to meet the deadline; held, excusable neglect existed because “[t]he responsible government officials had acted in a timely manner, but through no fault of theirs, the papers were inadvertently misdirected”); Craig v. Garrison, 549 F.2d 306, 307 (4th Cir.1977), cert. denied, sub nom. Shah v. Hutto, — U.S. -, 104 S.Ct. 2354, 80 L.Ed.2d 827 (1984) (pro se prisoner held to lower standard of care in adhering to Fed.R.App.P. 4 than would be an attorney); Spound v. Mohasco Industries, Inc., 534 F.2d 404, 411 (1st Cir.1976), cert. denied, 429 U.S. 886, 97 S.Ct. 238, 50 L.Ed.2d 167 (1976) (excusable neglect exists only under unique or extraordinary circumstances; “[i]f this includes a mere palpable mistake by experienced counsel, the requirement would be meaningless”); Doctor v. Seaboard Coast Line Railroad Company, 540 F.2d 699, 704 (4th Cir.1976) (excusable neglect exists only in the “extraordinary” case where injustice would otherwise result); Pasquale v. Finch, 418 F.2d 627, 629-30 (1st Cir.1969) (no excusable neglect found where notice of appeal was mistakenly mislaid and not filed on time); Maryland Casualty Company v. Conner, 382 F.2d 13 (10th Cir. 1967) (unexpected delay in delivery of mail would constitute excusable neglect, but not a delay due to the death of principal attorney).

The facts in Pasquale v. Finch, 418 F.2d 627 (1st Cir.1969), are particularly analogous to this case. In Pasquale, the district court’s final judgment was entered on March 11, 1969. The government did not appeal by the May 12, 1969 deadline. The excuse given was that the notification of the March 11 judgment “was mislaid due to a mistake in the handling of the mail after it was received by the Justice Department.” 418 F.2d at 630. In Pasquale, as in the present case, the neglect was a result of internal error, not an unpredictable event.

Defendant attempts to distinguish Pasquale because in that case the government’s error was undisputed. In this case, the government surmises that the notice may have been lost at the courthouse. Were this the case, the facts more readily would lend themselves to a finding of excusable neglect. See Fallen v. United States, 378 U.S. 139, 84 S.Ct. 1689, 12 L.Ed.2d 760 (1964); Marshall v. Truland Corporation, 24 Fed.R.Serv.2d (Callaghan) 1443 (4th Cir.1978); Craig v. Garrison, 549 F.2d 306 (4th Cir.1977), cert. denied sub nom. Shah v. Hutto, — U.S. -, 104 S.Ct. 2354, 80 L.Ed.2d 827 (1984); Maryland Casualty Company v. Conner, 382 F.2d 13 (10th Cir.1967). However, defendant should have been alerted that the notice of appeal was not filed when it did not receive a copy of the notice from the clerk of the court.

Moreover, defendant’s narration of the facts belies its assertion of “diligence on counsel’s part____” Defendant’s Motion for Leave to File at 2. Defendant admits it became aware no notice of appeal had been filed by August 2, 1984, yet defendant’s motion for leave to file, along with the late notice of appeal, was not filed until August 7, 1984. This delay was required by the necessity that counsel “confirm that he had been authorized to file a notice of appeal____” Defendant’s Reply to Plaintiff’s Opposition to Motion for Leave to File at 2. Once counsel filed the notice of appeal pri- or to the July 24, 1984 deadline, there was no need to spend five days confirming that he had been authorized so to file. This further delay was without justification.

Because defendant’s explanation does not meet the standard of “excusable neglect,” and because of the additional delay involved, Defendant’s Motion for Leave to File an Appeal is denied.