author: DAN M. RUSSELL, Jr., District Judge.

text:
    MISSISSIPPI POWER & LIGHT COMPANY, Plaintiff, and Mississippi Public Service Commission, Plaintiff-Intervenor, v. UNITED GAS PIPE LINE COMPANY, Defendant.
    Civ. A. No. J83-0267(R).
    United States District Court, S.D. Mississippi, Jackson Division.
    March 21, 1984.

      Wise, Carter, Child & Caraway, Jackson, Miss., Anderson, Brown, Orn & Jones, Houston, Tex., for plaintiff.
    Bennett E. Smith, Mississippi Public Service Com’n., Jackson, Miss., for plaintiff-intervenor.
    Brunini, Grantham, Grower & Hewes, Jackson, Miss., for defendant.
   OPINION

DAN M. RUSSELL, Jr., District Judge.

This case is before the Court at the present time upon the motion for preliminary injunction by the plaintiff, Mississippi Power & Light Company (MP & L) and by the plaintiff-intervenor, Mississippi Public Service Commission (the Commission).

MP & L is - a public utility incorporated under the laws of the State of Mississippi and engaged in the generation, transmission, and distribution of electricity principally in the western half of Mississippi, where it serves over 300,000 customers in forty-five counties. The Commission is an agency of the State of Mississippi which is charged with the statutory duty of assuring, among other things, that the rates charged by public utilities in the State of Mississippi are reasonable while providing at the same time a fair rate of return to the utilities. The defendant, United Gas Pipe Line Company (United), is an interstate natural gas transmission company incorporated under the laws of the State of Delaware and has its principal place of business in Texas. It purchases gas for sale to customers, such as MP & L, along United’s pipe line system located in the states of Texas, Louisiana, Mississippi, Alabama and Florida.

Jurisdiction is vested in the Court by 28 U.S.C. § 1332. There is complete diversity of citizenship between the plaintiffs and defendant, and the matter in controversy exceeds the sum or value of $10,000.00, exclusive of interest and costs.

MP & L commenced this action on April 22, 1983. It charges United with violating the pricing provisions of a contract between MP & L and United dated December 8, 1967, as amended (herein referred to as the Agreement). MP & L alleges that United had already overcharged and collected from MP & L at the time of suit in excess of $31,000,000.00 and that future overcharges, if continued, will range from one to two million dollars per month, or up to $120,000,000.00 during the remaining life of the pricing provisions of the contract (through December 31, 1987). MP & L seeks a preliminary injunction, restitution of the alleged overcharges, interest, a declaratory order, a permanent injunction and attorneys’ fees. United filed an answer in which it denies that MP & L is entitled to any of the relief sought and raises certain specific defenses including bar by statute of limitations, estoppel, and laches. United has also filed a counterclaim in which it demands interest and attorneys’ fees in connection with the alleged untimely payment of bills.

The Commission moved to intervene on August 31, 1983, and the United States Magistrate granted the motion. As permitted by the local rules of this Court, United filed an application for review of the Magistrate’s ruling. However, this Court found that the Magistrate’s order was neither clearly erroneous nor contrary to law and denied United’s application.

MP & L filed its motion for preliminary injunctive relief on September 26, 1983. Under the local rules of this Court, a mo-. tion may not be filed until a hearing date' has been obtained from the Court. The October 31, 1983 setting was the first date MP & L obtained to bring before the Court the preliminary injunctive relief sought in the complaint, and MP & L filed its motion upon obtaining this hearing date. United sought by motion ore terms to delay this setting, but the Court declined to do so.

The Commission filed its motion for preliminary injunctive relief on October 4, 1983, immediately after the hearing in which it was allowed to intervene by the United States Magistrate but before this Court denied United’s application for review of the Magistrate’s ruling.

The hearing on the plaintiffs’ motions for a preliminary injunction was conducted on October 31 — November 2 and December 19 —21, 1983. Oral argument was heard February 15, 1984. After having reviewed the evidence presented by the parties and in accordance with Fed.R.Civ.P. 52(a), the Court makes the following findings.

GAS SALES AGREEMENT

On December 8, 1967, United and MP & L entered into the Gas Sales Agreement, under which United agreed to sell and deliver and MP & L agreed to purchase and receive large volumes of natural gas. MP & L uses the gas as fuel in generating electricity at two of its power stations in Mississippi.

Article XIV of the Gas Sales Agreement set forth the various base rates MP & L agreed to pay United for different-sized blocks of gas purchased each month. Such rates which MP & L would pay were to be adjusted up or down based on the “weighted average purchase price” per thousand cubic feet (mcf) which United paid monthly for gas purchased in the Jackson Area and in United’s five other “areas” in Louisiana and Texas described in the contract.

In early 1969, United drafted and submitted to MP & L for signature an amendment to Article XIV of the December 8, 1967 contract. MP & L accepted the amendment with minor changes, in the wording. MP & L and United executed this amendment on April 29, 1969.

The 1969 Amendment provided, generally, that the price of the gas which United sold to MP & L would be based on the average price United paid for gas which it purchased in two specific “areas” — the “South Louisiana Area” and the “Jackson Area” — instead of all of the “areas” in which United was purchasing gas.

The amendment specified that the price of gas sold by United to MP & L would be based upon United’s “weighted average purchase price of gas” [WAPOG] for the preceding month in the Jackson Area. That “weighted average purchase price of gas in the Jackson Area” would be derived by:

(1) adding together all the volumes of gas which Seller purchased in the area and transferred into the area during the preceding billing month;
(2) adding together the cost payable by Seller for the gas it purchased in the area and the cost assignable to the gas transferred into the area during the preceding billing month; and
(3) dividing the total of said costs payable by the total of said volumes purchased in and transferred into the area. The resulting quotient shall be the weighted average purchase price of gas in the area.
The 1969 Amendment then stated:
(a) Subject to the provisions of paragraph (b) hereof, the cost of gas purchased by Seller shall be the amount payable by Seller to the producer, pipeline or other seller____

The 1969 Amendment allowed one other item of cost to be included for certain United purchases of gas in the Gulf of Mexico, namely, the cost of delivering that gas onshore from the Gulf of Mexico:

... the cost of gas purchased on the seaward side of the shorelines of Florida, Alabama, Mississippi, Louisiana, and Texas ... shall be the amount payable to the producer, pipeline or other seller thereof, plus the amount, if any, payable by Seller to others for delivery of the gas onshore____

Thus, for Gulf of Mexico gas whose cost United could include in the MP & L price computation, United could include both the purchase price and the amount paid to others to deliver that gas to shore.

Next, the Amendment provided that the “cost assignable to gas transferred into the Jackson Area,” which was one element of the “Seller’s weighted average purchase price of gas in the Jackson Area,” was to be the average price paid by United for gas which it purchased in only one specific area, the “South Louisiana Area” as depicted on the map incorporated into that Amendment, or which was purchased by United in the Gulf of Mexico and delivered onshore in the “South Louisiana Area”:

(c) Cost assignable to gas transferred into the Jackson Area shall be the result obtained by multiplying the weighted average price paid by Seller for gas purchased in its South Louisiana Area, as outlined in Exhibit B (Drawing UB21566 1-1-69) attached hereto, and in the. Gulf of Mexico for delivery onshore in the South Louisiana Area, by the volume of gas transferred into the Jackson Area.

Finally, the Amendment provided that, for purposes of this computation, the cost of gas purchased by United also would include all taxes which would be levied on that gas at any time prior to the receipt of that gas by Seller “in its Main Pipe Line System.”

In summary, the Amendment based the price of gas to MP & L on the purchase price paid by United for gas which it purchased in the “South Louisiana Area” and in its “Jackson Area.” United and MP & L in this amended Article XIV made one exception for gas which was purchased outside of either of these areas, and that exception was keyed to one of those two defined areas. Under the exception, allowable costs for gas purchased by United in the Gulf of Mexico — namely, the purchase price and the cost of getting that Gulf gas onshore — could be included in the calculation of the MP & L WAPOG if that gas came onshore in the South Louisiana Area.

EXCHANGE AGREEMENT

James Haynes, Executive Vice President of United, testified that United did not know in 1969 it was going to be buying gas on land outside of its existing districts, and that there was no specific provision in the amendment that would allow United to include in the MP & L WAPOG calculations gas that it purchased on land outside of the areas designated on the map attached to the amendment (Exh. P-3 (Haynes Dep.), 146-47). Other than gas purchased in the Gulf of Mexico, United did not begin to purchase gas from outside its existing “areas” until the mid-1970’s (Exh. P-3 (Haynes Dep.), 109-112), when it began to include such purchases in rates billed to MP & L. (United’s Answer, para. 31).

There is no evidence that anyone at United told MP & L, at any time before February 28, 1979, that United was including or intended to include in the price of gas to MP & L any costs for gas purchased outside the areas specified in the contract. Mr. Norris Stampley of MP & L testified that MP & L was not told this information even during a February 28, 1979 meeting with Mr. James Haynes, when United unsuccessfully sought to amend Article XIV. By the time of that meeting, United already had committed itself to both the purchase of the Canadian gas and the exchange of that gas with Northern Natural. (Exh. P-3 (Haynes Dep.), 163-66; Exh. P-4 (Bourque Dep.), 127-28, 224). The monthly invoices sent by United to MP & L for gas purchases under the Agreement do not indicate where United has purchased the gas (,see Exh. P-14).

Under its agreement with Northwest Alaskan Pipe Line Company, United has agreed to purchase 450,000 mcf per day. The gas is purchased at the Canadian border and transported from there to Ventura, Iowa, by Northern Border Pipe Line Company and there delivered to Northern Natural Gas Pipe Line Company. United owns a 124/4% equity interest in Northern Border Pipe Line Company (Exh. D-35 (Smith Dep.), 24) but is obligated to pay approximately 40% of the cost involved in the operation of the pipe line, based upon an allocation of capacity of the pipe line (Exh. D-35 (Smith Dep.j, 18).

Pursuant to an Exchange Agreement with Northern Natural Gas Pipe Line Company, United obtains equivalent volumes of gas delivered by Northern Natural to delivery points designated by United in Louisiana, Mississippi and Texas. The Canadian gas began to flow through the Northern Border Pipe Line in September 1982 (Exh. D-35 (Smith Dep.), 23-24).

The testimony reveals that the Canadian gas is the most expensive gas in United’s System. Exhibit P-23 reflects not only a significant difference between the cost of the Canadian gas and the North High Island gas but also the very large transportation charges incurred by United in delivering the Canadian gas to Northern Natural, which transportation charges are being included in rates billed to MP & L.

MP & L’S AUDIT

Pursuant to a provision in the Agreement, MP & L requested an audit of United’s books and records in the summer of 1982. MP & L alleged they had learned that the Canadian gas United had contracted to purchase was expected to start flowing in the near future, and MP & L wanted to make certain that United was not including the cost of the Canadian gas in United’s calculation of MP & L’s rates.

MP & L commenced its audit of United in September 1982. The audit revealed that United was including the cost of Canadian gas and associated transportation charges in rates billed to MP & L. The audit also revealed that United had included the cost of gas purchased in Utah, Colorado, Wyoming, New Mexico, Oklahoma, Texas, Kansas and in that part of southwest Louisiana outside of the South Louisiana Area, in the calculation of rates billed to MP & L. According to MP & L, the audit specifically revealed that United had included, in calculating rates billed to MP & L, gas purchases made outside of the areas specified in the agreement totalling 219,061,303 mcf of gas at a cost of $705,567,841 for the period October 1976 through January 1983 and 27,736,181 mcf at a cost of $205,518,076 for the period February 1983 through August 1983 (Exh. P-21). MP & L’s auditors also claimed that United was including other costs not allowed under the Agreement in rates billed to MP & L. They were of the opinion that for the period October 1976 through August 1983 United had overbilled MP & L more than $44,000,000.00, before calculation of any interest (Exh. P-16A at p. 42 and Exh. P-21). MP & L complained to United about these billing practices, demanded that they be discontinued, and requested a refund of all overcharges.

United agreed to refund overcharges relating to the use of an incorrect pressure base for which it made refunds to MP & L on October 29, 1982 and December 15, 1982 totalling $2,924,643.26. It also made refunds totalling $111,784.50 for overcharges relating to the improper calculation of volumes of gas sold to MP & L and made a partial refund totalling $836,270.87 for overcharges in 1979 involving the Natural Gas Policy Act of 1978. (Exh. P-33).

United informed MP & L during the audit that it would assert the six-year statute of limitations and refused to provide MP & L’s auditors access to any of United’s records prior to September 1976. In order to prevent the statute of limitations from barring further claims, MP & L filed suit. MP & L’s auditors issued an audit report on August 9,1983 which covered the period September 1976 through January 1983. In a supplemental audit report dated October 25, 1983, which brought forward the earlier report and covered the period February through August. 1983, MP & L claimed that United had overcharged MP & L $44,182,-219.99 for the period October 1976 through August 1983, and that MP & L was entitled to interest of $5,848,942.66 through September 30, 1983. After deducting refunds made as of September 30, 1983, totalling $3,872,698.63, MP & L’s claim as of that date amounted to $46,158,464.02. (Exh. P-16A, p. 42).

At the time of the continuation of the hearing on December 19, 1983, United had made refunds of overcharges to MP & L totalling $11,457,853.76 (Exh. P-33). Further, United noted during the December hearing that MP & L was due an additional sum of $1,214,621.26 for overcharges made during the period October 1982 to August 1983 relating to the allocation of transportation charges for certain offshore gas, changes in depreciation of certain offshore facilities of United and a change in the figures used in the calculation of MP & L’s WAPOG for volumes transferred into the Jackson Area. (Exh. D-36 (Underwood Dep.), 30).

MP & L’s auditors have projected over-billings by United to MP & L of $6,583,822 for the period September 1983 through December 1983 (Exh. P-24). MP & L’s auditors have further projected an average annual overbilling of $21,144,205 for the years January 1, 1984 through December 31, 1987 (the date on which the current pricing provision expires), assuming that MP & L purchases only the minimum amount of gas under the take-or-pay provision of the contract (34,674,000 mcf per year). Based on these figures, MP & L claims that projected overbilling for the four-year period would be $84,576,820.

ANALYSIS OF STANDARDS FOR PRELIMINARY INJUNCTION

In the Fifth Circuit, Canal Authority v. Callaway, 489 F.2d 567 (5th Cir.1974) provides the criteria to be applied in order to determine whether a preliminary injunction should be granted. A plaintiff, is entitled to preliminary injunctive relief when there is a showing that there is:

(1) a substantial likelihood that plaintiff will prevail on the merits, (2) a substantial threat that plaintiff will suffer irreparable injury if the injunction is not granted, (3) that the threatened injury to plaintiff outweighs the threatened harm the injunction may do to defendant, and (4) that granting the preliminary injunction will not disserve the public interest.

Id. at 572. This Court finds that MP & L and the Commission have met their burden of persuasion on each of these four factors.

1. Substantial Likelihood of Success on the Merits

A. The Contract Terms

While the pricing provisions of the Agreement are complex, at the present time it appears to the Court that there is a limitation on the charges which may be included in the computation of the price of gas to MP & L. United may include in the computation the purchase price of gas only if that gas is purchased in defined geographical areas — the “South Louisiana Area” and the “Jackson Area.” The exception found in the Agreement to this rule is gas purchased in the Gulf of Mexico and delivered onshore in the “South Louisiana Area.” Also, the transportation charges which may be included in the computation are those related to bringing Gulf of Mexico gas from offshore to onshore in the South Louisiana Area. The Court with the proof before it presently, can discover no other exceptions in the Agreement for the inclusion of other costs in the computation of the price of gas to MP & L.

It appears from the pricing provisions of the Agreement that the purchase price of gas which United has been purchasing at the Canadian border or in Utah, Wyoming, Colorado, Texas, New Mexico, Oklahoma or Kansas may not be included in that price computation, since this purchase price is not paid for gas which United purchases in one of the areas defined by the Agreement.

It further appears to the Court that the Agreement does not allow United to include in the computation certain transportation charges which United pays to have gas transported from the Canadian border to Ventura, Iowa or which result from other land to land transmissions. Such transportation charges are not paid for bringing Gulf of Mexico gas onshore in the South Louisiana Area.

B. TJnited’s Canadian Gas Formula

United has placed the price which it pays for gas purchased at the Canadian border and elsewhere into the MP & L price computation. Evidently, United’ first began this practice in the fall of 1982, when United began purchasing the Canadian gas.

However, Ms. Phyllis Bourque testified at the hearing that this formula is not found in the Agreement between United and MP & L. Also, United has allegedly changed and revised this formula several times since its implementation in the fall of 1982, including changes in the last bill to MP & L before the hearing began on October 31, 1983.

Ms. Bourque and Mr. Haynes testified that in none of United’s many other exchanges does it assign to gas it receives the cost it pays for gas it purchases and delivers, as it does in the exchange with Northern Natural involving Canadian gas. (Exh. P-4 (Bourque Dep.), 85, 87, 88; Exh. P-3 (Haynes Dep.), 204-05). According to Ms. Bourque, United developed a formula for assigning a “price” to this gas because of the “magnitude” of the gas costs in the exchange involving the Canadian gas.

C. Transportation Costs

MP & L urges that the Agreement allows United to include transportation charges only for delivering Gulf of Mexico gas from offshore to onshore in the South Louisiana Area with no land transportation charges includable. United contends that under the Agreement it is allowed to include the cost of gas purchased in the Gulf of Mexico and all associated transportation costs for the delivery of gas onshore into its main pipeline system in the South Louisiana Area, regardless of where the gas is delivered onshore. MP & L maintains that the Agreement, however, does not ascribe to the word “onshore” a meaning other than its ordinary, accepted meaning, and does not state that it means “onshore in United’s Main Pipe Line System.” Words employed in a contract will be assigned their ordinary meaning unless it is shown that the parties used them in a different sense. See, e.g., Owen v. Gerity, 422 So.2d 284, 288 (Miss.1982); Continental Casualty Co. v. Hester, 360 So.2d 695, 697 (Miss. 1978). Miller v. Fowler, 200 Miss. 776, 28 So.2d 837, 838 (1947).

In February 1979, almost a year after United had signed a contract to purchase the Canadian gas but before United began taking delivery of that gas, United proposed to MP & L an amendment to the pricing provisions of the MP & L Agreement. (Exh. P-9). The proposed amendment would have allowed United to base the price of gas to MP & L on United’s weighted average monthly cost for all gas which United purchased plus transportation charges, regardless of where that gas was purchased. Under this proposed contract, the purchase price and transportation charges of the Canadian gas which United had agreed to purchase, could have been included in the MP & L price calculation. MP & L declined to execute the proposed amendment.

From all of the evidence presented at the hearing on the motion for preliminary injunction, the Court finds that there is a substantial likelihood that MP & L and the Commission will prevail on the merits.

2. Irreparable Injury

The plaintiffs’ evidence demonstrates that there is a substantial likelihood that the injury suffered by the public will be irreparable. The Court finds that the plaintiffs have met their burden of showing a substantial threat of irreparable injury, the second prerequisite of Canal Authority.

Lynn Havens, Chairman of" the Public Service Commission, testified that the fuel costs of MP & L flow directly through to the customers of MP & L by virtue of MP & L’s filed tariffs. These customers are the real plaintiffs in this case. Commissioner Havens testified that this Court is the last resort to protect the public interest. The Commission has no jurisdiction over United’s performance of the Agreement.

Commissioner Havens also stated that refunds made years down the road are not an adequate remedy for the alleged overcharges of United. He was concerned about the adequacy of refunds which can only be obtained after a lengthy trial on the merits and the potential delay occasioned by resort to the appeal process.

But aside from the question of the delay, the Commissioner believes that neither credits to customers’ bills nor refunds by check will adequately redress the harm. Commissioner Havens testified that simply issuing credits on future bills will fail to reach those who are no longer customers of MP & L. A refund by check is similarly unacceptable, he stated. The process is enormously expensive, and as with issuing credits, a refund does not repair the harm suffered by customers who have moved, have died or cannot be located for other reasons. Commissioner Havens testified that in a recent refund by MP & L pursuant to a Commission order, the cost of processing checks to MP & L’s more than 300,000 customers was in excess of $5 per check. This administrative expense significantly reduced the total amount available to be refunded to MP & L’s customers. Moreover, more than 20,000 checks representing a total of over $1 million were returned as undeliverable, even after an extensive and costly campaign was made to locate through newspaper, television, and radio advertisements those customers to whom a refund was due. - Commissioner Havens stated that the Commission must continue to monitor the refund process for years until all efforts to reach missing customers are exhausted and then decide the disposition of the unclaimed refunds.

The testimony of Commissioner Havens is supported by case law which holds that refunds are inadequate to remedy the harm caused by excessive rates. FPC v. Tennessee Gas Transmission Co., 371 U.S. 145, 154-55, 83 S.Ct. 211, 216, 9 L.Ed.2d 199 (1962). See also City of Chicago v. FPC, 385 F.2d 629, 644 (D.C.Cir.1967), cert, denied, 390 U.S. 945, 88 S.Ct. 1028, 19 L.Ed.2d 1133 (1968) (refunds are an inadequate substitute for an immediate rate reduction).

United presented Mr. E.C. Moore as an expert witness to show that United’s overcharges have a negligible impact on MP & L’s customers. However, Mr. Moore acknowledged that all of the large customers of MP & L were omitted from his analysis. Many of these large customers, including hospitals, schools, and scores of public agencies, provide services to the public. Moreover, Mr. Moore did not measure the impact of United’s overcharges on low-income customers. Mr. Jim Schimpf, Director of Rates for MP & L, testified that low income families in Mississippi can and do consume relatively large amounts of electricity.

In the State of Mississippi the magnitude and effect of the potential harm to MP & L’s customers should no injunction be granted and MP & L does eventually prevail on the merits is pervasive. Mississippi has the lowest per capita income of the fifty states. Forty-four of the forty-five counties served by MP & L had an average per capita income of only $6,723 in 1981. This figure is below the already low state average of $7,049.

The impact of the alleged overcharges by United would be exacerbated by its position that it owes no interest on the overcharges, even on those it has admitted. The effect of United’s position is that MP & L and its customers could never recover any amount for the use of the money paid in wrongful overcharges. Since the legal rate of interest is well below prevailing rates, the harm to MP & L’s customers will not be corrected by a refund out of damages which United is ordered to pay at a future trial on the merits of this case.

One other factor on the issue of irreparable injury must be considered. The testimony of Ms. Bourque raises a question, whether United will be able to pay a judgment for overcharges if MP & L and the Commission ultimately succeed on the merits. United’s officials testified that United faces enormous potential liability. United’s Executive Vice-President, Lamar Smith, testified by deposition that by early December 1983, United’s suppliers already had made claims of approximately two hundred million dollars against United under take-or-pay contract provisions. Ms. Bourque said that the potential liability from these claims could grow by domino effect to one billion dollars by the end of 1984.

In addition, United’s latest Form 10K reveals that United has potential liabilities through existing curtailment lawsuits of 1.43 billion dollars (Exh. P-10 (dated March 30, 1983), 2, 41). United paid $112 -million to one such curtailment claimant in 1982. Moreover, United has stated in its recently amended answer to the curtailment lawsuit brought by MP & L in this Court that a loss of that lawsuit would threaten United’s ability to operate as a viable company.

The Court concludes that MP & L and the Commission have sustained their burden of showing a substantial threat of irreparable harm if an injunction is not granted.

3. Balance of Hardships

In comparison to the harm to the customers of MP & L and to the economic vitality of the State of Mississippi as a result of United’s overcharges, the harm to United should, a preliminary injunction issue is minimal and can be readily corrected by damages should United prevail on the merits. At the present time, United can afford the cost of the injunction, and no evidence is before the Court casting doubt upon MP & L’s ability to pay damages to United. Commissioner Havens testified that if MP & L is later required to pay the disputed charges to United, MP & L will pass the charges on to its customers at that time.

It is the opinion of the Court that the balance of hardships in this case is on the side of the plaintiffs.

4. The Public Interest

The evidence offered by the Commission and MP & L leads the Court to a conclusion that a preliminary injunction would protect the interests of the public. Obviously, it is the public who will either pay or benefit from the Court’s decision. Indeed, Commissioner Havens testified that relief from this Court represents the only available remedy for the public, since United’s performance under the contract is not subject to the Commission’s jurisdiction.

Although this case is founded upon a claim for breach of contract, the involvement of a public interest is particularly important to the considerations which a court of equity weighs:

[T]he rights of parties are not governed by comparing the pecuniary loss to one party and the benefit to another, where, as here, the rights of the parties are founded in contract and are sufficiently explicit, [citation omitted] If the rights and duties of the parties are fixed by contract, it is not the question of convenience or inconvenience, or the comparative amount of damage or injury resulting from the enforcement of the right. It is the specific performance by the court of that bargain which the parties have made, with their eyes open, [citation omitted] This is especially true, we think, when the contract the parties have made, and which is sought to be enforced, is affected with a public interest.

West Edmond Hunton Line Unit v. Stanolind Oil & Gas Co., 193 F.2d 818, 825 (10th Cir.1951), cert, denied, 343 U.S. 920, 72 S.Ct. 678, 96 L.Ed. 1333 (1952).

Were the Court to have any doubt that the plaintiffs have met their burden under Canal Authority, the dominant presence of the public interest in this case convinces the Court that a preliminary injunction is warranted.

STATUS QUO

The status quo to be preserved by a preliminary injunction is universally defined as the last uncontested status which preceded the pending controversy. See, e.g., District 50, United Mine Workers of America v. International Union, United Mine Workers of America, 412 F.2d 165, 168 (D.C.Cir.1969); Westinghouse Electric Corp. v. Free Sewing Machine Co., 256 F.2d 806, 808 (7th Cir.1958). The Court’s decision today will restore that condition.

In United’s Answer filed in this cause on May 16, 1983, at paragraph 31, United states the following: “Beginning in the mid-1970’s and continuing to date, United has billed to MP & L under the Gas Sales Agreement the cost assignable to gas transferred into the Jackson Area in the manner that MP & L now contends is wrongful, unlawful, and an overcharge.” Since the prohibitions sought by MP & L and the Commission focus upon ceasing the overcharges made by United, the Court’s decision will restore the state of affairs which existed prior to the time in approximately 1976 when United admits it began the practices which are the subject of this lawsuit.

United’s assertion that its billing practices continued until 1982 without protest from MP & L does not argue against restoring the status quo which obtained before those practices began, because MP & L claims it was unaware that United had changed its methods of calculating the cost of gas to MP & L. MP & L’s Senior Vice President and Special Assistant to the President, Mr. Norris J. Stampley, testified that no one from United advised him that United had changed its billing practices to in-elude the cost of gas purchased in areas outside those specified in the Agreement. Also, in the late summer of 1982, when MP & L attempted to find out from United whether costs associated with the Canadian purchase would be included in MP & L’s bills, Burt Bonassin of United said they would not be included.

In Delaware River Port Authority v. United States Lines, Inc., 331 P.Supp. 441 (E.D.Penn.1971), a district court granted a preliminary injunction prohibiting an ocean carrier from continuing to import material bound for the Philadelphia area through some other port, despite the defendant carrier’s argument that it had been following the practice for twenty years without protest from the plaintiffs. Id. at 446. The court found that the plaintiffs had no knowledge of the practice until just before suit was brought. Id. at 447. Hence the court found that the status quo to be maintained pending a final determination of the merits of the claim was that which existed prior to the carrier’s alleged illegal practices. Id. at 447-48.

The parties to this lawsuit are in a similar situation. If MP & L did not learn of the United practices which are now in dispute until the audit of late 1982 which led to this suit, and the Commission did not learn of them until the lawsuit commenced, it is proper for this Court to frame a preliminary injunction to restore the status quo which existed between MP & L and United in the mid-1970’s immediately prior to the time United admits it changed its billing practices.

CONCLUSION

For the reasons stated above, the Court will approve an order granting the Commission and MP & L a preliminary injunction

(1) enjoining United from including in the calculation of rates billable to MP & L

(a) the cost of gas and associated transportation charges for Canadian gas and other purchases made outside of the Jackson Area, the South Louisiana Area or the Gulf of Mexico for delivery onshore in the South Louisiana Area;

(b) the cost of gas and associated transportation charges for gas purchased by United in the Gulf of Mexico and delivered onshore outside of the South Louisiana Area; and

(c) transportation charges incurred by United for transporting gas from one point on land to another point on land.

The Court will entertain argument on the appropriate amount of the requisite bond.

An order in accordance with the foregoing opinion of the Court shall be submitted as set forth in the Local Rules.

      . An interoffice Memorandum of United dated April 23, 1969 states in pertinent part: “We [United’s representatives] submitted to [MP & L] a proposed amendment to our contract substituting language as to the manner in which our weighted average cost of gas will be determined---- Mr. Wilson [attorney for MP & L] requested a minor change in the wording of the agreement to which Mr. Woods [of United] is agreeable." (Exh. P-5 (Exh. 62 to Dep. of Haynes)).

      . Exh. P. 8: Amendatory Agreement Between United Gas Pipe Line Company and Mississippi Power & Light Company dated April 29, 1969. This amendment altered the pricing provision in Artide XIV of the original contract.

      . The parties have abbreviated the term “weighted average purchase price of gas" as both WA-POG and WACOG. The terms are used interchangeably and mean virtually the same thing.

      . United contracted to purchase Canadian gas from Northwest Alaskan Pipe Line Company in 1978 and in February 1979 sought to amend the Agreement so that rates billed to MP & L would be calculated on a system-wide basis rather than on a limited geographic basis as provided in the 1969 amendment. MP & L did not agree to the proposed amendment.

      . The difference between the cost of Canadian gas and the cost of Jackson Area and South Louisiana Area gas is depicted on Exhibit P-34. For the period September 1982 through July 1983 the cost of Canadian gas exceeded the cost of Jackson Area gas by as much as $7.5480 per mcf and exceeded the cost of South Louisiana Area gas by as much as $9.0569 per mcf. The difference between the cost of Canadian gas and North High Island gas produced in the Gulf of Mexico is also illustrated in Exhibit P-23. The North High Island gas is being delivered onshore in the South Louisiana Area but is excluded in calculating rates billed to MP & L. However, the transportation charges incurred by United in delivering that gas are included in rates billed to MP & L.

      . For example, in May 1983 the transportation cost associated with the Canadian gas was $5.92 per mcf compared with $.55 per mcf for transporting the North High Island gas from the Gulf of Mexico to the South Louisiana Area. The difference between the total cost of the Canadian gas and the North High Island gas ranged from $3.44 per mcf in September 1982 to $7.91 per mcf in May 1983. While United was contracting in 1978 to purchase Canadian gas and exchange it for gas belonging to Northern Natural, Northern Natural was contracting to purchase gas in the Gulf of Mexico for $2 and $3 per mcf. (See Exh. P-25).

      . Article V, paragraph 6 of the Agreement provides:
      Access to Billing Data — Buyer and Seller shall have the right to examine the books, records and charts of the other party at all reasonable times to the extent necessary to verify the accuracy of any statement, charge or computation made pursuant to the provisions of any. article of this agreement.

      . Mississippi has a six year statute of limitations applicable to claims based upon written contracts. See Mis.Code Ann. § 15-1-49 (1972).

      . Article XIV, paragraph (1), of the Agreement provides in part:
      "It is recognized that upon the completion and placing into operation of Buyer's said new 750,000 KW Unit at said Baxter Wilson Plant, Buyer will purchase a portion of its fuel requirements from other sources. In recognition thereof, Buyer agrees, effective on the first day of the month following the placing into commercial operation of said new 750,000 KW unit, to take or pay Seller for, whether taken or not, a minimum annual quantity of gas of 34,674,000 mcf during any calendar year.” (Emphasis added).

      . The Commissioner compared United’s over-billings to a utility’s practice of implementing rates under bond, a practice halted by the 1983 Public Utilities Act. Commissioner Havens testified that the public policy behind the Act is to require judicial scrutiny before rates are implemented.

      . The monthly report of civil cases by the Clerk of the Court for the month of December, 1983 shows that a total of 3,576 civil cases are pending in the Southern District of Mississippi. These are roughly divided among the three district judges such that each judge currently carries approximately 1,200 cases. This District, it should go without saying, is one of the busiest, if not the busiest, per Judge, in the country. The most recent comparison of work loads in the United States district courts is found in the Federal Court Management Statistics 1983 prepared by the Administrative Office of the United States Courts. The statistics contained in this report contain information through June 30, 1983. At that time the pending civil cases per judge in the Southern District of Mississippi was 1,118. This case load was the highest of any district in the Fifth Circuit or, indeed, the United States or its territories. As of this writing, this Judge has over 1300 pending civil cases.

      . Commissioner Havens testified that there is a 6-7% turnover in MP & L’s customers annually.

      . See Exh. P-32.

      . See Exhs. P-37 through P-39.

      . Mr. Moore testified that the prevailing rate of interest is 12%.

      . "United further avers that the rendition of a monetary judgment in favor of MP & L would seriously threaten the ability of United to function as a natural gas transmission company ....” United's Second Amended Answer, p. 28 (filed October 21, 1982) in Mississippi Power & Light Company and State of Mississippi v. United Gas Pipe Line Company and Pennzoil Company, U.S. District Court, Southern District of Mississippi, CA No. J74-185(R).

      . United has annual revenues exceeding three billion dollars, according to its latest 10K report. In 1982 United paid a $66 million dividend to its parent, United Energy Resources, Inc. Exh. No. P-10 at 35.

      . Since the balance of hardships is in favor of MP & L and the Commission, the burden of showing a substantial likelihood of success on the merits is correspondingly lighter. Canal Authority, supra, at 576.
      [Although a showing that plaintiff will be more severely prejudiced by a denial of the injunction than defendant would be by its grant does not remove the need to show some probability of winning on the merits, it does lower the standard that must be met. 11 C. Wright & A. Miller, Federal Practice and Procedure § 2948, at 455 (1973) (quoted in Canal Authority, supra, at 576).


source: Caselaw Access Project

author: ORRICK, District Judge.

license: Public Domain

text:
    EQUAL EMPLOYMENT OPPORTUNITY COMMISSION, Plaintiff, v. FREMONT CHRISTIAN SCHOOL, Defendant.
    No. C-83-2619 WHO.
    United States District Court, N.D. California.
    April 16, 1984.

      David T. Kelley, E.E.O.C., San Francisco, Cal., Office of General Counsel, E.E.O.C., Washington, D.C., for plaintiff.
    William B. Ball, Ball & Skelly, Harrisburg, Pa., for defendant.
   OPINION

ORRICK, District Judge.

The issue in this case raised by plaintiff, Equal Employment Opportunity Commission’s (the “EEOC”), motion for summary judgment against defendant, Fremont Christian School (the “School”), is whether the School, which is owned and operated by the First Assembly of God Church (the “Church”), can, with impunity, discriminate against female employees by failing to provide them with health insurance benefits allowed male employees. Holding such discrimination violates Title VII of the 1964 Civil Rights Act, 42 U.S.C. § 2000e et seq. (“Title VII”), as well as the Equal Pay Act of 1963, 29 U.S.C. § 206(d) (the “Act”), and that the School’s policy is not protected by the Free Exercise or Establishment Clauses of the First Amendment, the Court grants the EEOC’s motion for summary judgment.

I

The material facts in this case, as to which there is no genuine issue, are simple and may be briefly summarized as follows. The School is a private school providing instruction from preschool through the twelfth grade for approximately 1,500 students. There are 111 faculty members. The School curriculum emphasizes religious training, but also includes secular education such as math, science, history, english, home economics, and other courses available to students in nonsectarian schools.

Personnel policies for the School are set by the governing board of the Church upon the recommendation of the school board. Each of these boards is comprised of nine elected members belonging to the Church plus a secretary, treasurer, and the senior church pastor, tyho serves as chairperson of the governing board.

Since March, 1975, the School has provided health insurance coverage to its full-time teachers and other employees. This insurance, however, is limited to employees who are the “head of the household,” a role the Church believes, citing Scripture, can only be performed by the husband. The Church has chosen certain ways to give recognition to the husband as “head of the household.” Among those is its provision for medical coverage for its employees. In effect, the restriction deprives female employees of health insurance benefits.

II

A

At the outset, the Court considers the School’s position that there are genuine issues of material fact and, therefore, summary judgment will not lie.

In ruling on a motion for summary judgment under Federal Rule of Civil Procedure 56(a), the court’s function is to determine whether genuine issues of material fact are in dispute, and to grant summary judgment if no such issue exists, and if the movant is entitled to judgment as a matter of law. Federal Deposit Insurance Corp. v. First Finance Corp., 587 F.2d 1009 (9th Cir.1978); Fruehauf Corp. v. Royal Exchange Assurance of America, Inc., 704 F.2d 1168 (9th Cir.1983).

The School argues strenuously that a number of factual issues allegedly remain for adjudication, namely, that it must be allowed to show how it is shielded from the application of Title VII and the Act by the Free Exercise and Establishment Clauses of the First Amendment. First, the School must show that its employment practices are based on religious belief, i.e., that the policy at issue is rooted in the School’s Free Exercise rights. Second, in conjunction with those rights, the School alleges that it must be accorded the opportunity to demonstrate the “injury to religious exercise” resulting from application of Title VII and the Act to its personnel policies. And, third, in seeking to assert the protection of the Establishment Clause, the School contends that the degree to which it is, or is not, a religious institution is a matter of fact, thus precluding summary judgment.

B

As authority for its overall position, the School relies on the precedent in Wis consin v. Yoder, 406 U.S. 205, 215, 92 S.Ct. 1526, 1533, 32 L.Ed.2d 15 (1972) (it is necessary to show that the activity prohibited by the governmental activity is rooted in religious belief), and in Sherbert v. Verner, 374 U.S. 398, 83 S.Ct. 1790, 10 L.Ed.2d 965 (1963).

Subsequent to Yoder and Sherbert, however, the courts formulated a three-part test for determining whether a neutrally based statute, such as Title VII and the Act, may be applied to an institution that raises a Free Exercise claim to justify an otherwise discriminatory policy. EEOC v. Mississippi College, 626 F.2d 477 (5th Cir. 1980), cert, denied, 453 U.S. 912, 101 S.Ct. 3143, 69 L.Ed.2d 994 (1981), citing Wisconsin v. Yoder, supra, and Sherbert v. Verner, supra; EEOC v. Pacific Press Publishing Ass’n, 676 F.2d 1272 (9th Cir. 1982). And, in a similar vein, Lemon v. Kurtzman, 403 U.S. 602, 612-13, 91 S.Ct. 2105, 2111, 29 L.Ed.2d 745 (1971), sets forth a three-prong test for determining if a statute obstructs rights under the Establishment Clause.

1

The School alleges that Title VII and the Act do not apply to a policy grounded in religious belief, insofar as the School’s personnel practices are shielded by the Free Exercise Clause. To determine whether a neutrally-based statute, such as Title VII and the Act, violates the Free Exercise Clause the court weighs three factors: (1) the magnitude of the statute’s impact on the exercise of a religious belief; (2) the existence of a compelling state interest justifying the burden imposed upon the ex-ercise of the religious belief; and (3) the extent to which recognition of an exemption from the statute would impede objectives sought to be advanced by the statute. Pacific Press, supra, 676 F.2d at 1279, citing EEOC v. Mississippi College, supra, 626 F.2d at 488, cert, denied, 453 U.S. 912, 101 S.Ct. 3143, 69 L.Ed.2d 994 (1981), citing Wisconsin v. Yoder, supra, and Sherbert v. Verner, supra.

As to the first prong of the Mississippi College test, the School alleges that subjecting its employment practices to Title VII and Equal Pay provisions will have a •major impact on the exercise of its religious beliefs. The Court finds, however, that requiring the School to refrain from discriminating against female employees does not infringe the School’s free exercise of its religious beliefs. This is particularly so in view of the fact that the female employees at the School are eligible for group life and disability insurance. If those practices do not undermine the School’s religious goals, then it is inconceivable that providing health benefits to female employees will have the opposite effect.

Moreover, the School’s wages and other usual conditions of employment are comparable for all employees, regardless of sex. Similarly, in Pacific Press, the nonprofit religious publishing house had a policy of paying wages without discrimination on the basis of sex, race, or national origin. Pacific Press, supra, 676 F.2d at 1279. Yet, in practice, the publishing house used a sexually discriminatory wage scale. In view of the disparity between policy and practice, the court held that:

“[EJnforcement of Title VII's equal pay provision does not and could not conflict with Adventist religious doctrines, nor does it prohibit an activity ‘rooted in religious belief.’ ”

Id. at 1279, citing Wisconsin v. Yoder, supra, 374 U.S. at 215, 92 S.Ct. at 1533.

Likewise, the School’s policy of providing comparable wages to male and female employees, an implicit nondiscriminatory policy, coupled with female eligibility for group life and disability insurance, renders meritless the School’s allegation of interference with its religious-based health insurance plan.

The second prong of the Free Exercise test, i.e., the existence of a compelling state interest, is readily apparent. By enacting Title VII and the Act, Congress clearly targeted the elimination of all forms of discrimination as a “highest priority.” See S.Rep. No. 872, 88th Cong., 2d Sess. pt. 1, at 11, 24 (1964), U.S.Code Cong. & Admin.News 1964, 2355; see also Alexander v. Gardner-Denver Co., 415 U.S. 36, 47, 94 S.Ct. 1011, 1019, 39 L.Ed.2d 147 (1974).

“Congress’ purpose to end discrimination is equally if not more compelling than other interests that have been held to justify legislation that burdened the exercise of religious convictions. E.g., Braunfeld v. Brown, 366 U.S. 599 [81 S.Ct. 1144, 6 L.Ed.2d 563] (1961) (state law prohibiting retail sales on Sunday).”

Pacific Press, supra, 626 F.2d at 1280.

Finally, to permit the School to selectively distribute health insurance benefits, specifically on the basis of sex, would defeat Congress’ intention to protect employees of religious institutions. 42 U.S.C. § 2000e-1, Title VII § 702. Furthermore, the underlying purpose for enacting Title VII and the Act would be thwarted. As noted by the Pacific court, the effect would be to “withdraw Title VII’s [and the Act’s] protection from employees * * * affiliated with the * * * Church,” including those who run the schools. Pacific Press, supra, 626 F.2d at 1280.

Altogether, equitable disbursement of health insurance coverage is not an impediment to the free exercise of the School’s religious convictions. Thus, the School’s allegation of immunity from Title VII and the Act is unfounded.

2

The School’s second religious claim arises from the Establishment Clause. Contending that Title VII and Equal Pay liability would unduly entangle church and state, the School argues that the religious-based “head of the household” policy is immune from government regulation because the policy represents the School’s Establishment Clause rights.

Examining statutes for Establishment Clause violations involves yet another three-part test: (1) the statute must have secular purpose; (2) the primary effect of the statute must neither advance nor inhibit religion; and (3) the statute must not foster excessive entanglement with religion. Pacific Press, supra, 626 F.2d at 1281, citing Lemon v. Kurtzman, supra, 403 U.S. at 612, 91 S.Ct. at 2111. See also, St. Elizabeth Community Hospital v. NLRB, 708 F.2d 1436, 1440 (9th Cir.1983).

It is well settled that Title VII, and by analogy, the Act, have a secular purpose and do not have the primary effect of inhibiting religion. Pacific Press, supra, 626 F.2d at 1282. The major inquiry is the third element of the test, that is, the degree to which a finding for the EEOC would result in “excessive entanglement” with the School. Accord, Id.; Mississippi College, supra; EEOC v. Southwestern Baptist Theological Seminary, 651 F.2d 277 (5th Cir.1981).

In Southwestern, the court ordered the seminary to comply with EEOC filing requirements. While recognizing that “the character and purposes of the seminary are wholly sectarian,” the court nevertheless found that such a status did not support a complete exemption from EEOC regulations, nor did it constitute “excessive entanglement” between church and state. Id. at 281.

The School, although operated as a sectarian educational institution, offers a range of courses resembling other nonsectarian private and public schools. Thus, the School’s character is arguably less sectarian than the Southwestern seminary, which is devoted exclusively to training ministers. A fortiori, applying Title VII and the Act to the School’s personnel policies does not involve “excessive entanglement” any more than does compliance with EEOC filing requirements by a wholly sectarian institution like the Southwestern seminary.

Moreover, Pacific Press found that a publishing house involved solely in producing religiously-oriented materials is “somewhat less sectarian than * * * a seminary.” Pacific Press, supra, 626 F.2d at 1282, citing Southwestern, supra. Consequently, the court saw minimal risk of entanglement between the EEOC and Pacific Press, particularly given the holding in Southwestern. Compared, then, to a seminary for theological ministers, a school with secular as well as sectarian training, or a religiously-oriented publishing house, is as free of burdensome entanglement as is a wholly sectarian seminary.

The present case is also distinguishable from NLRB v. Catholic Bishop of Chicago, 440 U.S. 490, 99 S.Ct. 1313, 59 L.Ed.2d 533 (1979), because neither the judgment nor Title VII’s enforcement mechanisms result in any ongoing scrutiny of the School’s operations. In Catholic Bishop, the court found a serious risk of excessive entanglement because the enforcement of the National Labor Relations Act’s collective bargaining provisions “would have empowered the NLRB to judge the good faith beliefs of clergy-administrators * * Pacific Press, supra, 626 F.2d at 1282. The EEOC’s reach over the School’s operations does not entail, in any manner, the degree of entanglement noted in Catholic Bishop.

In summation, subjecting the School to the mandate of Title VII and the Act does not involve abridgement of rights guaranteed by the Establishment Clause. More significantly, however, is the Court’s presumption in favor of the School’s contention that the “head of the household” policy is based upon religious belief. In doing so, the School benefits from a full constitutional examination of its religious claims, whereas Pacific Press supports dismissal of those claims as a matter of law.

There, the disparity between a nondiscriminatory wage policy and Pacific Press’ actual practice of paying females less than males moved the court to hold that Title VII’s provisions did not “prohibit an activity ‘rooted in religious belief’.” Pacific Press, supra, 626 F.2d at 1279, citing Wisconsin v. Yoder, supra Similarly, Pacific Press would support the conclusion that the School, in paying comparable wages to employees of both sexes, in addition to providing female employees with group life and disability insurance, does not base its “head of the household” policy on religious belief.

3

In light of the foregoing case law, the Court has examined the School’s factual contentions with respect to the Free Exercise and Establishment Clauses. See discussion, infra. Although the Court assumes the School’s insurance policy to be based upon religious belief, the controlling law nevertheless holds that application of Title VII in the present context is not violative of the School’s constitutional right to promote its spiritual doctrines. And, the Act, a statute clearly analogous to Title VII, is likewise devoid of statutory directives that impede the religious character of the School. In short, whether the School’s health insurance policy is predicated on religious belief or not, the religion claims are immaterial to the resolution of this motion.

Accordingly, the Court finds that no material issue of fact remains in dispute, and turns to the substantive merits of the partial summary judgment motion.

Ill

A

At the very threshold of determining whether the School has violated Title VII, the Court, must consider the School’s argument that § 702 of the Act exempts it from compliance with the mandate of the statute solely because it is a religious educational institution.

Section 702 of Title VII, 42 U.S.C. § 2000e-1 provides in pertinent part:

“This subchapter shall not apply to an * * * educational institution * * * with respect to the employment of individuals of a particular religion to perform work connected with the carrying on by such * * * educational institution * * * of its activities.”

The School’s interpretation of § 702 conflicts with the Congressional purpose for enacting that section of Title VII. Rather than creating a blanket exemption for religious educational institutions, § 702 is simply a means of 'acknowledging the right of such an institution to employ individuals who share common religious beliefs. In other words, the School is entitled to hire only members of its faith for teaching positions and the like, but may not, under the § 702 exemption, discriminate against its employees thereafter.

“The legislative history of this exemption shows that although Congress permitted religious organizations to discriminate in favor of members of their faith, religious employers are not immune from liability for discrimination based on race, sex, [or] national origin * *

Pacific Press, supra, 676 F.2d at 1276.

Thus, § 702 of Title VII does not pertain to the School’s policy of providing only male employees with health insurance coverage.

B

Title VII forbids intentional employment discrimination based on disparate treatment. International Brotherhood of Teamsters v. United States, 431 U.S. 324, 335 n. 15, 97 S.Ct. 1843, 1854 n. 15, 52 L.Ed.2d 396 (1977); Wambheim v. J.C. Penney Co., 705 F.2d 1492, 1494 (9th Cir. 1983). Specifically, 42 U.S.C. § 2000e-2 provides in pertinent part as follows: .

“(a) it shall be an unlawful employment practice for an employer—
(1) to * * * discriminate against any individual with respect to [the individual’s] compensation, terms, conditions, or privileges of employment, because of such individual’s * * * sex * *

Although a typical disparate treatment case must pass through three stages for the plaintiff to prevail, it is possible that a plaintiff’s prima facie case is so conclusive that as a matter of law the defendant cannot rebut it. Muntin v. State of California Parks & Recreation Dept., 671 F.2d 360, 362 (9th Cir.1982) (manager of state historic shipyard admitted his preference not to hire women as deck hands); Gerdom v. Continental Airlines, Inc., 692 F.2d 602, 609 (9th Cir.1982) (airline’s weight-limit policy for female flight attendants discriminatory as a matter of law).

Here, the School’s policy is to provide health insurance only to a full-time employee who is the “head of the household.” However, the “head of the household” is conclusively presumed to be the husband, thus depriving females similarly situated from the benefits of health coverage.

As justification for the policy, the School again invokes its religious beliefs regarding “differentiated roles of the sexes.” Yet, such a justification is not the equivalent of a “business necessity,” the standard upon which the opposing party rebuts the charge of discrimination. Wambheim, supra, 705 F.2d at 1494. '

Wambheim and the present case are factually alike in that both deal with a “head of the household” policy for providing health insurance. However, the similarity ends there. In Wambheim, the Ninth Circuit found that Penney’s “business justification” for a “head of the household” policy was sufficient to overcome a presumption of discrimination, a presumption arising from a clear case of disparate impact on female employees. Here, the School offers no business justification; only its religious beliefs are presented, but the religion claims have been dismissed as a matter of law.

Accordingly, in the absence of a business justification for its “head of the household policy,” and because the policy expressly discriminates . against female employees, the EEOC has made a prima facie case of discrimination by the School against its female employees that is neither justified nor rebutted.

C

Besides an allegation of disparate treatment, the EEOC also contends that the impact of the School’s policy on female employees is so great as to constitute discrimination in violation of Title VII.

In Wambheim, supra, 642 F.2d 362, at 365 (9th Cir.1981), which is commonly referred to as “Wambheim I,” the court found a prima facie case of disparate impact inasmuch as the company’s “head of the household” medical insurance policy translated into coverage for 95 percent of the male employees compared to coverage, for only 35 percent of the female employees. Those figures, in the court’s view, were sufficient to sustain a showing of disparate impact.

The statistical spread in the present case is more glaring than in Wambheim I. Because of the School’s “head of the household” policy, 100 percent of the male employees receive health insurance, whereas only 9 percent of the female employees benefit therefrom. In short, the impact on female employees at the. School is of a magnitude approaching a total disparity between male and female individuals employed by the School. Thus, the EEOC has come forth with evidence creating a rebuttal presumption of disparate impact.

Such a presumption, however, may be overcome by a showing that the School’s policy was adopted for legitimate business reasons. Wambheim v. J.C. Penney Co., 705 F.2d 1492, 1494 (9th Cir.1983). As noted in the foregoing section regarding a prima facie case of disparate treatment, the School offers no business justification for its policy. Rather, the School chooses to rely solely on religion claims. . Those claims, however, do not suffice to overcome the clear presumption of disparate impact present in the School’s personnel policies.

IV

The School also violates the Equal Pay Act, 29 U.S.C. § 206(d), which provides that employers may not pay different “wages” to employees whose performance requires equal skill and effort. The term “wages,” moreover, has been found to include fringe benefits. Laffey v. Northwest Airlines, 567 F.2d 429, 455 n. 175 (D.C.Cir. 1976), cert, denied, 434 U.S. 1086, 98 S.Ct. 1281, 55 L.Ed.2d 792 (1978) (overnight accommodations for stewards/stewardesses held to be a benefit within the meaning of “wages” for purposes of the Act). Additionally, regulations define “wages” broadly to include all payments made “to or in behalf of the employee.” 29 C.F.R. § 800.-110 (1975).

Here, health insurance benefits, or one of several fringe benefits offered to the School employees, are distributed unequally to individuals whose skills and efforts are comparable. For example, a female School teacher, who is eligible for group life and disability insurance, and who is paid commensurate with her skills and efforts, is nonetheless denied access to health insurance benefits. Yet, for a male teacher at the School, all benefits are available. The policy is clearly an unlawful departure from the mandate of the Act, and thus creates a presumptive violation of 29 U.S.C. § 206(d). See Corning Glass Works v. Brennan, 417 U.S. 188, 195, 94 S.Ct. 2223, 2228, 41 L.Ed.2d 1 (1974).

The presumption may be overcome, similar to the presumption of disparate impact noted in Wambheim, supra, by a showing of a “business reason for the policy.” Kouba v. Allstate Insurance Co., 691 F.2d 873, 876 (9th Cir.1982) (differential wages for salespeople with' varying degrees of experience not violative of the Act, although females impacted more than males). And, the “business reason” must be based on a “factor other than sex.” 29 U.S.C. § 206(d)(1).

The School has no grounds to overcome the presumption. Not only does the School not offer a “business reason” for the policy, but the rationale for the policy is explicitly based upon sex in contravention of § 206(d)(1). Accordingly, the School’s practices are in violation of the Act.

V

This Court finds that the School has violated Title VII, 42 U.S.C. § 2000e et seq., and the Equal Pay Act, 29 U.S.C. § 206(d), and is barred from raising the Free Exercise and Establishment Clauses as a defense for its personnel policies. For the foregoing reason, the EEOC’s motion for partial summary judgment on liability is hereby granted.

      . The summary of facts has been prepared from the uncontroverted declarations of Pastor Gore and Reverend Rankin provided by the Church, and declarations provided by the EEOC. As is proper, they have been summarized in a manner most favorable to the party opposing the motion, namely, the School.

        . Health coverage has been extended to females, who otherwise do not qualify under the School’s policy, because of extenuating circumstances such as a husband is in jail or is a student. Rankin deposition, 18:25, 24:13. Of particular significance is the fact that the School’s married female employees are eligible for disability and group life insurance.

      . In EEOC v. Mississippi College, 626 F.2d 477, 485 (5th Cir. 1980), cert, denied, 453 U.S. 912, 101 S.Ct. 3143, 69 L.Ed.2d 994 (1981), the court expressly held that Title VII is applicable to a religious institution primarily engaged in education. That conclusion was reached after extensive review of the College’s Free Exercise and Establishment Clauses claims. Similarly, in EEOC v. Pacific Press Publishing Ass’n, 676 F.2d 1272, 1277 (9th Cir.1982), the Ninth Circuit ruled that a religious publishing house is not exempt from Title VII, nor does the statute infringe upon rights guaranteed by the religion clauses.

      . See note 2, supra.

      . See Section IIIB of this Opinion.

      . Penney’s explanations for its rule that permitted medical coverage for an employee’s spouse only if the employee earned more than the spouse, that dependent children and spouses covered under the "head of the household” rule had the greatest need for dependent coverage, that qualifying spouses were less likely to have medical insurance, and that it sought to keep costs for the plan to its employees as low as possible, were legitimate and overriding business justifications, and therefore did not conflict with Title VII's requirement of nondiscriminatory employment practices. Wambheim v. J.C. Penney Co., 705 F.2d 1492, 1495 (9th Cir.1983).

      . The figures supportive of a prima facie case of disparate impact were presented by the EEOC. The School does not dispute those figures.


author: GILES, District Judge.

text:
    Kim W. MEYERS v. GENERAL SERVICES ADMINISTRATION. Kim W. MEYERS v. GENERAL SERVICES ADMINISTRATION.
    Civ. A. Nos. 83-1021, 83-2383.
    United States District Court, E.D. Pennsylvania.
    June 22, 1984.

      Kim W. Meyers, pro se.
    Virginia R. Powel, Asst. U.S. Atty., Philadelphia, Pa., for General Services Admin.
   FINDINGS OF FACT AND CONCLUSIONS OF LAW

GILES, District Judge.

Mrs. Kim W. Meyers, pro se, instituted suit against the General Services Administration (GSA) in two civil actions alleging that various acts of discrimination ultimately led to her removal from employment. The actions were brought pursuant to Title VII of the Civil Rights Act of 1972, 42 U.S.C. § 2000e et seq.

FINDINGS OF FACT

1. Plaintiff is a twenty-seven year old black female who was hired as a custodial laborer by the GSA on July 5, 1978. She was initially given a Veterans Readjustment Appointment having completed three years active duty with the United States Army from October 1974 to October 1977.

2. Plaintiff developed a service-connected disability known as Raynauds Disease. It is an abnormal compromise of the circulatory system.

3. GSA was not informed by the Army, the Veterans’ Administration or plaintiff of the nature of the disability or of any physical limitations upon work assignment associated with the disease.

4. Plaintiff’s job performance as custodial laborer was satisfactory.

5. On August 14, 1980 and pursuant to its upward Mobility Program, GSA advertised two electronics technician positions in the Office of Real Property, Federal Protective Service, System Section which could be filled at the GS-6, 7 or 8 level. Applicants without specialized experience could qualify through the provisions of the Training and Advancement Development Agreement (TADA) which is part of the agency’s Upward Mobility Development System.

6. Plaintiff applied for one of these positions and, on October 5, 1980, was promoted to the trainee position of Electronics Technician, GS-6 in the Security Systems Section of the Federal Protective Service. Plaintiff did not have the requisite specialized experience to enter the program at the GS-7 level.

7. Consequently, on or about December 31, 1980 plaintiff and the agency entered into a training and advancement developmental agreement. Under TADA plaintiff would receive on-the-job training and formal instruction for a period of eighteen months. Upon successful completion of the prescribed training program, plaintiff would be eligible for promotion to the GS-7 level. If the training program was not successfully completed, GSA had the option of returning plaintiff to her former custodial job or the nearest equivalent vacancy for which she was qualified.

8. The parties subsequently entered into a revised TADA on or about February 25, 1981.

9. Plaintiffs first several months in training were uneventful. Her first evaluation was satisfactory. Her immediate supervisor was Walter Wesley, chief of the security systems section of the Federal Protective Service. Wesley is black. He subsequently left the GSA for a more advantageous position with another federal agency.

10. Plaintiff contends that when Wesley was there she was fairly treated but that soon after he left she was discriminated against by his successors to the position of section chief, who are white. The alleged discrimination is characterized as race, sex and handicap discrimination.

11. Since plaintiff was the only female staff employee in the section, she contends that there must have been a prior purposeful exclusion of women from employment by Federal Protective Service and, with her, there was a determined effort to cause her to fail to complete the training program and, hence, to be demoted from the security systems section.

12. Plaintiff claims that she was the only black staff employee in the system section. This is not entirely accurate inasmuch as the former chief of the section, Wesley, is black. After Wesley left, she was the only black staff member in the systems section. However, she was not the only black staff member in the Federal Protective Service. The systems section was a comparatively new and very small part of Federal Protective Services. The system is too small a unit upon which to base inferences of race or sex discrimination from raw statistical data. Moreover, it appears from the record evidence that Federal Protective Services, during plaintiffs employment, experienced various job freezes. For many employees, then, the systems section was probably not an attractive branch of government in terms of career advancement.

13. Plaintiff’s complaint of race discrimination rests upon allegations that the other trainee was white, was brought into the training program as a GS-7, was accorded better training and courtesies by the supervision, and was given a promotion upon completion of the program whereas she was denied a promotion and the opportunity to complete the training.

14. The court finds that plaintiff’s claims of harassment by supervision are not borne out by the evidence. Rather, the evidence is compelling that plaintiff was an enigma to supervision, who tried repeatedly and unsuccessfully to decipher, understand and correct plaintiff’s poor job performance. Equally persuasive is the evidence that suggests that plaintiff’s poor performance was in substantial part attributable to her medical conditions. These included severe migraine headaches, resort to medication for her circulatory problems, and the need for extended periods of sick leave. These medical problems manifested themselves quite often in a lack of concentration, inability to focus on work assignments and communications difficulties with her immediate supervisors and fellow employees.

15. Plaintiff well knew her medical problems. It is equally clear that she never fully acknowledged all of their effects upon her work performance or demeanor. She did appreciate that the “stress” of the job was making her sick. In this, her physician concurred. Further, the doctor recommended to plaintiff and to her section chief that she be reassigned to less stressful duties. When Lester Sitzes, Acting Chief of the Section, asked plaintiff to put such a request in writing she refused. I do not find plaintiff was subjected to any extraordinary work-place stress. What she experienced was no more than that which would be expected in causing an employee to perform the job properly and to comply with established work rules. Even assuming that there were mistakes of judgment in plaintiff’s supervision, I do not find that such were motivated by race, sex or handicap discrimination.

16. Plaintiff chose not to tell her supervisors what specific medical conditions she had or exactly how they were impacting upon her. What she regarded as stressful could not be eliminated either from her training or from the expected job duty of interrelating with other workers and supervision. Consequently, it cannot be said that plaintiff was discriminated against on the basis of her handicap.

17. On or about October 9, 1981, plaintiff submitted a revised Personal Qualification Statement (Standard Form 171) to the Personnel Office. On the basis of the newly submitted information, an agency Personnel Staffing Specialist recommended that the length of plaintiffs TADA be reduced from 18 months to 12 months.

18. Due to a mistake by the GSA, plaintiff was not given a training agreement which would have lasted for twelve months instead of eighteen. This error was discovered after she was in the training program. Plaintiffs training program was not shortened since the program had been planned for an eighteen month period and she could not have received the required training in twelve months. Plaintiff contends that she was denied a promotion because she completed twelve months of training. Part of the training agreement was that upon successful completion of the training program there would be an automatic promotion. The mistake in the length of training in the TADA was not prompted by anyone in Federal Protective Service and it was not motivated by sex, race, or handicap discrimination. The mistake could have worked to plaintiffs advantage because, given her problems in learning the job, she would have had a longer period within which to demonstrate her abilities and competency.

19. An evaluation panel met to discuss plaintiff’s possible promotion to the GS-7 level on December 21, 1981. After reviewing the available information on plaintiff’s progress under the training agreement, the panel declined to promote plaintiff.

20. Plaintiff was not denied the training specified in the training agreement on the basis of .race, sex or handicap. She was given training opportunities which paralleled those of her white counterpart.

21. The white trainee had more prior experience related to electronics and, therefore, qualified for a GS-7 upon entry into training whereas plaintiff qualified for a GS-6.

22. Plaintiff’s training supervisors did not discriminate against her in terms of congeniality.

23. Plaintiff received a letter of counselling on August 6, 1981 concerning extended lunch breaks. On October 28, 1981, plaintiff consulted an Equal Employment Opportunity Counselor, alleging that she had been discriminated against because of her race and- sex. The final interview by the EEO Counselor was held on December 14, 1981. On that same day, plaintiff was advised of her rights to file a formal complaint of discrimination within fifteen days.

24. There was an established rule that lunch periods were not to exceed thirty (30) minutes. Employees who exceeded this time period were excused if they had work-related reasons acceptable to supervision. Plaintiff was excused from time to time for excessive lunch breaks. However, on other occasions she was reprimanded and warned whén she had no excuse or where repeated unexplained latenesses reasonably appeared to be in defiance of recent admonitions by her supervisor. Other employees who abused lunch breaks were similarly treated. Plaintiff’s periodic excessive lunch breaks were not the reason for her removal from the training program.

25. Plaintiff was absent from work on a number of occasions due to illness. This affected the time available within which she could be trained. She was never reprimanded or penalized in any way for use of her sick leave. She does complain that John Ramos, her immediate supervisor, once called her at home during one such absence and told her that she was out too much on sick leave. If this statement was made, I find that it was in the context that plaintiff should try to get well as soon as possible because time away from training was not helpful to her.

26. Plaintiff complained at trial on another occasion that Ramos, who is Hispanic, told her that women should not have the electronics technician job. I do not credit plaintiffs testimony in this regard. At the Merit Systems Protection Board (MSPB) hearing, plaintiff asked Ramos if he had ever told her that she should find another job. I find that this is the more likely question or statement. First, had the statement ascribed to Ramos at trial been made, it would have been used by plaintiff at the MSPB hearing. Second, the supervisors knew plaintiff believed that she was under abnormal stress and blamed them for it. Therefore, it is unlikely that Ramos would have made such a direct statement of discrimination, especially if he had a discriminatory intent. Third, Ramos was not in control of the sex of the personnel who would be assigned to the section. Fourth, there was no personnel authorization to replace plaintiff in the program. Hence, there was no incentive to remove plaintiff so that she could be replaced by a male.

27. A second evaluation panel was held in April and decided to remove plaintiff from the training program, effective April 5, 1982. Plaintiff informally complained of discrimination to an EEO Counselor on April 26, 1982. When informal counselling did not resolve the problem, plaintiff filed a formal complaint on May 18, 1982, alleging discriminatory treatment in connection with receipt of the letter of counselling, removal from the training program, disparate treatment in regard to lunch breaks and the training agreement, and not receiving a promotion in October 1981.

28. The decision to remove plaintiff from the training program was due to her inability to do the required work and was not based upon prohibited criteria. The reassignment to the position of GS-6 technician, without automatic promotion, was also without animus. Plaintiff sought removal from that position for health reasons. The only available position for which she qualified was that of custodial laborer. It was determined by her physician that that job involved physical duties beyond her capabilities. Consequently, plaintiff was removed from the service of GSA because there was no available work for her to do.

29. On June 16, 1982, the agency issued a final decision on that portion of the formal complaint which alleged discrimination in connection with the letter of counselling dated August 6, 1981, rejecting the allegations as untimely in accordance with 29 C.F.R. § 1613.215. Plaintiff was advised of her right to appeal that final agency decision of the Equal Employment Opportunity Commission (EEOC) or to file a civil action in federal district court. Plaintiff appealed the final agency decision to the EEOC on June 22, 1982.

30. In an opinion dated January 25, 1983, the EEOC affirmed the agency determination on the letter of counselling. The opinion included a notice to plaintiff of her right to file a civil action within thirty (30) days after receipt of the Commission’s decision..

31. On November 22, 1982, the agency issued a proposed disposition of the balance of the allegations of plaintiff’s formal charge filed on May 18, 1982, having determined there was insufficient evidence to support plaintiff’s allegations of discrimination based on race and sex, with respect to her removal from the TADA, withholding of training, disparate treatment on lunch breaks and failure to promote in October 1981. Plaintiff did not respond to the proposed agency decision. The agency adopted this proposed decision as the final agency decision on December 15, 1982 and notified plaintiff of her right to appeal within 30 days of receipt of the final decisions. Plaintiff did not file her complaint in United States District Court until March 1, 1983, with respect to the various allegations contained in the initial May 18, 1982 EEO charge.

32. By advance notice dated September 1, 1982 the agency notified plaintiff of a proposal to change her position and grade from Electronics Technician, GS-6, to that of Custodial Laborer, WG-01, for failure to meet the requirements of the TADA and unsatisfactory performance as an electronics technician. On September 21, 1981, plaintiff met with the Regional Personnel Officer and objected to the proposed reduction on the grounds that physical problems with her arms and head would prevent her from performing duties as a custodial laborer. Plaintiff contacted the agency counselor on September 22, 1982 alleging discrimination based on a handicapping condition because she would be required to undergo a fitness for duty physical examination. The fitness for duty examination was performed on September 30, 1982.

33. After the fitness for duty examination was performed, the physician notified the agency that the plaintiff could not perform the duties of a custodial laborer without it aggravating her physical condition. As plaintiffs unsatisfactory performance as an electronics technician required her return to her old position of custodial laborer under the terms of the TADA and as she was unfit to perform the duties of the custodial laborer position, and as there was no other position within the agency for which the plaintiff was qualified, the agency proposed to remove plaintiff. Advance notice of the proposed removal was given plaintiff on October 15, 1982. By notice of final agency action dated November 18, 1982, plaintiff was removed, effective November 19, 1982.

34. Plaintiff appealed her removal to the MSPB on November 23, 1982. She alleged racial and sex discrimination in connection with the systematic withholding of training, disparate treatment, discrimination based upon a handicapping condition and reprisal for having filed a formal complaint of discrimination. A hearing was scheduled to be held before the MSPB on or about March 16, 1983. That was later continued to April 4, 1983. The MSPB’s final decision upholding the agency’s motion was issued December 21, 1983. No separate appeal was taken by plaintiff since she had a pending civil action.

35. On March 1, 1983, plaintiff filed the first of two civil actions, alleging discrimination based on race and sex in connection with her employment with the General Services Administration. Specifically, the complaint alleged disparate treatment in regard to plaintiff’s pay level and lunch schedule, issuance of a letter of counsel-ling, and termination of employment. Plaintiff’s second complaint dated May 18, 1983 included the same allegations as those raised in the first complaint, with two additional instances of alleged discriminatory conduct; namely, removal from the training program and denial of a promotion to the GS-7 level.

CONCLUSIONS OF LAW

1. The court has jurisdiction over plaintiff’s discrimination charges contained in her November 23,1982 appeal to the MSPB by reason of the Civil Rights Act of 1964, as amended, 42 U.S.C. § 2000e-6.

2. The court has jurisdiction over plaintiff’s handicap discrimination claim under 5 U.S.C. § 7703(b)(2) since it is “mixed” with the claims of race and sex discrimination. Williams v. Department of the Army, 715 F.2d 1485, 1491 (Fed.Cir.1983).

3. The court does not have jurisdiction respecting the issues addressed in the agency’s adverse ruling on December 15, 1982, because plaintiff failed to file timely administrative charges and also failed to file a complaint in this court within thirty (30) days of receipt of the agency’s final decision.

4. A plaintiff in a Title VII case must carry the initial burden under the statute of establishing a prima facie case of intentional discrimination. Texas Department of Community Affairs v. Burdine, 450 U.S. 248, 101 S.Ct. 1089, 67 L.Ed.2d 207 (1981); McDonnell Douglas Corp. v. Green, 411 U.S. 792, 93 S.Ct. 1817, 36 L.Ed.2d 668 (1973).

5. If the plaintiff succeeds in proving by a preponderance of the evidence a prima facie case, the burden then shifts to the defendant to articulate some legitimate, nondiscriminatory reason for the employee’s rejection. Burdine, supra.

6. If the defendant carries this burden, the plaintiff then has an opportunity to prove by a preponderance of the evidence that the legitimate reasons offered by the defendant were not its true reasons, but were a pretext for discrimination. Bur-dine, supra; McDonnell Douglas, supra.

7. Title VII does not demand that an employer give preferential treatment to minorities or women. Nor was Title VII intended to diminish “traditional management prerogatives,” such as an employer’s discretion to determine the proper functions and responsibilities of a particular government position, provided that decision is not based 'upon unlawful criteria. Burdine, 450 U.S. at 259,101 S.Ct. at 1096, quoting Steelworkers v. Weber, 443 U.S. 193, 207, 99 S.Ct. 2721, 2729, 61 L.Ed.2d 480 (1979).

8. Plaintiff met her burden of proving a prima facie case of race or sex discrimination. However, the defendant articulated through the introduction of oral and written testimony, legitimate, non-discriminatory reasons for the issuance of the letter of counselling, failure to promote, removal from training and ultimately her removal from employment, namely, unsatisfactory performance under the TADA, and unavailability of other positions for which plaintiff was qualified and capable of performing.

9. The defendant has rebutted the plaintiff’s prima facie case.

10. The plaintiff has failed to demonstrate that the reasons articulated by the defendant were a pretext for unlawful discrimination.

11. Plaintiff has failed to show that “but for” sex or race discrimination she would have received promotions, completed the TADA and not been removed from employment. See 42 U.S.C. § 2000e-5(g); Richerson v. Jones, 551 F.2d 918, 923-925 (3d Cir.1977).

12. Plaintiff failed to prove by a preponderance of the credible evidence that the GSA’s actions were motivated by handicap discrimination.