author: BRETT, District Judge.

text:
    UNITED STATES of America, Plaintiff, v. Warren F. YOUNG and Beverly A. Young, Defendants.
    No. 83-C-609-B.
    United States District Court, N.D. Oklahoma.
    Sept. 18, 1984.

      William W. Guild, Rick K. Disney, Michael Gibson, Attys. Tax Division, Dept, of Justice, Dallas, Tex., for plaintiff.
    Reece B. Morrell, Tulsa, Okl., for defendants.
   FINDINGS OF FACT AND CONCLUSIONS OF LAW

BRETT, District Judge.

This case was tried to the Court sitting without a jury on August 8 and 9, 1984. It is a civil action brought by the United States of America against the defendants, Warren F. Young and Beverly A. Young, for unpaid assessments of federal income tax liabilities for the years 1972 through 1974, inclusive. After consideration of the evidence, the applicable legal authorities, and the arguments of counsel, the Court enters the following Findings of Fact and Conclusions of Law:

FINDINGS OF FACT

1. The defendants are residents of Tulsa, Oklahoma and are within the jurisdiction of this Court.

2. Warren Young is presently a practicing attorney at law and was so during the years in issue.

3. On August 15, 1968, Warren Young filed Articles of Incorporation with the Oklahoma Secretary of State’s office for a corporation called Western Sanitation Company (“WSC”). WSC was a business formed by Warren Young and of which he was the principal owner, at the urging of one of his law business clients who owed him money, the purpose of which was to operate a residential and commercial refuse hauling business.

4. As part of the Articles of Incorporation, Warren Young signed an Affidavit as to Paid in Capital which swore that the amount of stated capital had been fully paid in.

5. Concerning WSC functioning as a corporation the evidence established the following:

A. No stock was ever actually issued to a stockholder and the $500.00 paid in capital, contrary to the affidavit of Warren F. Young, was not paid to the corporation. The bylaws were never signed by all of the directors of the corporation. The minutes of the first meeting of the shareholders and directors of WSC was only signed by Warren Young. Thereafter, no records of shareholders’ or directors’ meeting were maintained or kept.

B. WSC was operated for home office and accounting purposes out of the law office of Warren F. Young. There was occasional commingling of funds between Mr. Young’s law office account, personal account and that of WSC. Mr. Young’s legal secretary kept the accounting records and performed the administrative tasks for WSC. WSC’s only employees were individuals hired to drive WSC refuse collection trucks.

C. The annual city license for trash hauling was in the name of Warren F. Young, d/b/a Western Sanitation Company.

D. All operating capital was secured by Mr. Young and with him personally liable. Initial assets were not actually transferred or conveyed to the corporation.

E. Western Sanitation Company filed federal corporate income tax returns for at least the years 1968, 1969, 1972, 1973 and 1974.

F. On November 16,1970, Western Sanitation Company filed a Form 1139 Corporation Application for Tentative Refund From Carryback of Net Operating Loss and Unused Investment Credit.

G. Western Sanitation Company filed corporate employment tax returns on Forms 941 for at least the periods ended September 30, 1968; December 31, 1968; March 31, 1969; June 30, 1969; September 30, 1969; December 31, 1969; March 31, 1970; June 30, 1970; December 31, 1970; March 31, 1971; December 31, 1971; March 31, 1972; June 30, 1972; September 30, 1972; December 31, 1972; March 31, 1973; June 30, 1973; September 30, 1973; December 31, 1973; March 31, 1974; June 30, 1974; September 30, 1974; and December 31, 1974.

H. The Internal Revenue Service accepted all of these corporate tax returns.

I. On February 25, 1972, the Oklahoma Tax Commission entered its order directing the Secretary of State to enter of record the suspension of WSC’s corporate charter and the forfeiture of all rights thereunder for failure to comply with the requirements of the Oklahoma Franchise Tax Act. On February 28,1974, the Oklahoma Tax Commission entered an order directing reinstatement of WSC’s charter.

6. For federal tax purposes the Court concludes WSC was a corporation incorporated under the laws of the State of Oklahoma.

7. During the calendar year 1974, Revenue Agent Arthur Hale (“Hale”) came to defendant Warren F. Young’s law office to audit defendants’ tax return, Form 1040, for the calendar year 1971, and to secure returns for Western Sanitation Company and defendants’ Forms 1040 which at that time were delinquent. Hale spent considerable time at Young’s office until August 1975, assisting Young’s employees with the preparation of WSC’s tax forms and defendants’ Forms 1040.

8. During the month of August, 1975, because defendants had not completed and filed WSC’s returns FYE July 31, 1973 and FYE July 31, 1974, nor their Forms 1040 for the calendar years 1972, 1973 and 1974, Hale prepared returns for said periods pursuant to authority granted the Secretary under the Internal Revenue Code of 1954 (“Code”). Hale’s returns reflected, inter alia, the following:

(i) WSC’s Forms 1120:
FYE: 7/31/73 7/31/74
Taxable Income $ 9,611.67 [$ 62,075.00]
(ii) Defendants' Forms 1040:
Calendar Years: 1972 1973 1974
Taxable Income: $115,690.74 $ 107,262.92 $ 98,168.10
Tax: $ 48,830.37 $ 44,804.46 $ 40,436.85

9. WSC’s returns prepared by Hale were signed by Hale and dated August 20, 1975. Defendants’ returns prepared by Hale were signed by Hale and dated August 26, 1975.

10. Defendant Warren F. Young executed the return prepared by Hale for WSC’s FYE July 31, 1974, and filed it on October 14, 1975. Defendant Warren F. Young did not execute the return prepared by Hale for WSC’s FYE July 31, 1973, but executed and filed a return for that fiscal year on or about October 10, 1975, reporting a loss of $45,085.83, in contrast to Hale’s return showing income of $9,611.67. Defendant Warren F. Young added the following note to the return he executed and filed FYE July 31, 1973:

“Prepared from best available information at this time but will probably be amended.”

11. Before defendants were able to determine WSC’s losses allowable for each Form 1040 year, Hale advised defendants that he had no choice but to file Forms 1040 he had prepared unless defendants filed returns for those periods prior to January 1, 1976. Defendants neither executed nor filed any of the Forms 1040 prepared for them by Revenue Agent Arthur Hale.

12. On December 23, 1975, defendants filed their 1972 income tax return. That return reflected a balance due the IRS of $3,508.

13. On December 23, 1975, defendants filed their 1973 income tax return. That return reflected a balance due the IRS of $11,522.

14. On December 23, 1975, defendants filed their 1974 income tax return. That return reflected a balance due of $11,608.

15. All three of these returns were delinquent at the time they were filed.

16. Based on the information contained in those original returns, a delegate of the Secretary of the Treasury made assessments against Mr. and Mrs. Young according to the following schedule:

Tax Year Date of Assessment Type of Assessment Amount of Assessment Amount Unpaid
1972 8/22/77 Income Tax $ 3,508.00
Delinquency Pen. 627.00
Estimated Tax Pen. 95.33
Failure to Pay Pen. 564.30
Assessed Interest 738.43 $ 44.24
5,533.06 $ 44.24
1973 7/25/77 Income Tax 11.522.00 $10,522.00
Delinquency Pen. 2,630.50 2,630.50
Failure to Pay Pen. 1,841.35 1,841.35
Assessed Interest 2,409.34 2,409.34
18,403.19 $17,403.19
1974 7/18/77 Income Tax 11.608.00 $11,608.00
Delinquency Pen. 2,902.00 2,902.00
Failure to Pay Pen. 1,325.42 1,325.42
Assessed Interest 1,933.57 1,933.57
17,768.99 $17,768.99

17. After audit of defendants’ returns for the years 1972 through 1974, the Internal Revenue Service sent a Notice of Deficieney to Mr. and Mrs. Young on June 26, 1978.

18. As a result of that audit, additional taxes were assessed against the defendants according to the following schedule:

Tax Year Date of Assessment Type of Assessment Amount of Assessment Amount Unpaid
1972 11/06/78 Income Tax $ 251.02 $ 251.02
Delinquency Pen. 62.75 62.75
Negligence Pen. 187.95 187.95
Assessed Interest 93.17 93.17
$ 594.89 $ 594.89
1973 11/06/78 Income Tax $ 4,515,58 $ 4,515.58
Delinquency Pen. 1,129.00 ' 1,129.00
Negligence Pen. 801.90 801.90
Assessed Interest 1,405.23 1,405.23
$ 7,851.71 $ 7,851.71
1974 11/07/78 Income Tax $ 1,509.84 $ 1,509.84
Delinquency Pen. 377.46 377.46
Negligence Pen. 655.89 655.89
Assessed Interest 379.27 379.27
2,922.46 $ 2,922.46

19. The defendants’ 1971 tax return had been audited earlier and their 1971 taxable income had been increased. Defendants did not contest this adjustment.

20. The Internal Revenue Service adjustment to defendants’ 1972 income tax liability related solely to the correction of a math error and the use of the corrected 1971 taxable income in defendants' 1972 Schedule G — Income Averaging.

21. The Internal Revenue Service adjustment to defendants’ 1973 income tax liability related to two items: (1) The use of the corrected taxable incomes for 1971 and 1972 in defendants’ 1973 Schedule G— Income Averaging; and (2) the disallowance of a claimed nonbusiness bad debt deduction to Western Sanitation Company in the amount of $20,784.74.

22. The Internal Revenue Service adjustments to defendants’ 1974 income tax liability related to three items: (1) The use of the corrected taxable incomes for 1971, 1972 and 1973 in defendants’ 1974 Schedule G — Income Averaging; (2) the disallowance of a claimed deduction for a nonbusiness bad debt to Western Sanitation Company in . the amount of $12,733.96; and (3) the inclusion of an additional $1,000 in attorneys fees not reported on the original return.

23. On April 19, 1976, defendants filed an Amended Tax Return (Form 1040X) for 1972. On that return, defendants alleged that Western Sanitation Company was a sole proprietorship rather than a corporation. Therefore, defendants claimed that they were entitled to a Schedule C loss of $20,201 for 1972 resulting from the operation of Western Sanitation Company. Defendants claimed a resulting tax liability of $0 for 1972.

24. The Internal Revenue Service rejected this claim.

25. On June 22, 1976, defendants filed an Amended Tax Return (Form 1040X) for 1973. On that return, defendants alleged that Western Sanitation Company was a sole proprietorship rather than a corporation. Therefore, defendants claimed that they were entitled to a Schedule C loss of $52,188 resulting from the operation of Western Sanitation Company. They also claimed a casualty loss of $17,320 and an increase in their Schedule D income of $18,-911. Defendants claimed a resulting tax liability of $0 for 1973.

26. The Internal Revenue Service rejected this claim.

27. On July 2, 1976, defendants filed an Amended Tax Return (Form 1040X) for 1974. On that return, defendants alleged that Western Sanitation Company was a sole proprietorship rather than a corporation. Therefore, defendants claimed that they were entitled to a Schedule C loss of $38,216 resulting from the operation of Western Sanitation Company. They also claimed an adjustment to their self-employment tax. Defendants claimed a resulting tax liability of $674 for 1974.

28. The Internal Revenue Service rejected this claim.

29. Defendants advanced funds either to, or on behalf of, WSC in at least the following amounts (in excess of repayments) for the years in question: $87,-116.33 for 1972; $37,580.89 for 1973; and $37,713.88 for 1974. Most of these advances were in the form of checks written on the account of Warren F. Young, Attorney, and either payable to WSC or WSC’s creditors. (The issue is whether these advances were capital contributions or some form of properly deductible expense of the defendants on their personal income tax returns).

30. Due to the poor financial condition of WSC, its liabilities considerably exceeding its assets, it was apparent to Mr. Young in 1971 and 1972, that the business could not be salvaged. In late 1971 WSC had in excess of $200,000 in liabilities, including notes payable to banks of approximately $170,000. Since Mr. Young’s law practice was financed from the same principal source as WSC, the continued financial viability of Young’s law practice was being threatened.

31. Starting in 1971 Mr. Young made numerous attempts to sell WSC at any price in order to get the buyer to assume WSC’s debts.

32. Mr. Young was finally able to get rid of WSC in 1974. The only way he was able to get rid of the business was to let two trash haulers, who were making modest monthly salaries and who had questionable credit standing, take over the operations. Even then he had to go to the bank and borrow additional money to fix up the business before the trash haulers agreed to take over the operations.

33. The two trash haulers were supposed to assume the debt of WSC but the bank knew the two individuals could not afford to pay the liability and the bank continued to hold Mr. Young individually liable. When the two individuals did not pay on the debt, Mr. Young would go to the bank and make the payment. Mr. Young did not personally receive any money from the two trash haulers since the money was turned over to the bank to reduce the amount of the debt.

34. During this time period (late 1971 through 1974), Mr. Young was genuinely concerned that his reputation as an attorney would be adversely affected by either WSC’s failure to pay its obligations, or his failure to stand good for the debts of WSC.

35. In Mr. Young’s oil and gas law practice approximately three-fourths of his clientele and income was generated by two clients, Texaco, Inc. and Apache Oil Company. In his representation of these clients Mr. Young would purchase leases in his name for and on behalf of Texaco and/or Apache. Mr. Young would also perform the legal work in reference to the contracts, title search, and documents to consummate the transactions. Mr. Young would actually arrange financing for the leases through the bank he did business with, The First National Bank and Trust Company of Tulsa, Oklahoma. The financing of such mineral lease acquisitions in his name on behalf of Texaco and/or Apache ranged as high as $750,000. For Mr. Young to maintain and continue in his established oil and gas law practice, it was necessary for him to maintain a good credit rating because neither Texaco nor Apache would continue to employ him as an oil and gas attorney if he were unable to personally finance the lease acquisitions for and on behalf of his clients, Texaco and/or Apache.

36. Mr. Young made payments on behalf of WSC in order to preserve, protect, and continue his existing business as an oil and gas practicing attorney. The principal motivation of Young in making the payments on behalf of WSC in the years in question was not as a capital contribution or investment but essentially for the purpose of protecting his personal credit rating to prevent the collapse of his oil and gas law practice and loss of his principal clientele. It was apparent to Mr. Young in making these advances he was not adding to the salable value of WSC, because he had known since approximately 1971 the business was, for all practical purposes without any equity value.

37. Under the facts of this case, the Court concludes that defendants can deduct said advances and expenditures as ordinary and necessary business expenses from their personal income tax returns for the years in question under § 162 of the Internal Revenue Code.

38. Defendants did not have any unpaid tax liability for the years 1972 through 1974 and they are entitled to a refund on the amounts already paid on these assessments.

39. Defendants did keep reasonable books and records as required by law and therefore were not negligent in failing to do so.

40. Any Conclusion of Law which might be properly characterized a Finding of Fact is hereby incorporated herein.

CONCLUSIONS OF LAW

1. This Court has jurisdiction over the subject matter of the parties to this action.

2. The question of whether a corporation was formed in the first place is a question of local law. Skarda v. Commissioner, 27 T.C. 137, 144 (1956), aff'd 250 F.2d 429 (10th Cir.1957). However, whether the corporate entity (if found to exist) should be disregarded for federal tax purposes is a question of federal law. Carver v. United States, 412 F.2d 233 (Ct.Cl.1969); Stoody v. Commissioner, 66 T.C. 710, 715 (1976).

3. A corporation is subject to federal corporate income tax liability as long as it continues to do business in a corporate manner, even if its recognized status under state law is terminated. Messer v. Commissioner, 438 F.2d 774 (3rd Cir.1971).

4. Since WSC did business as a corporation, and was held out by its principal owner and defendant, Warren F. Young, to the federal taxing authorities to be a corporation, for federal tax purposes it should be considered a corporate entity. Moline Properties, Inc. v. Commissioner, 319 U.S. 436, 63 S.Ct. 1132, 87 L.Ed. 1499 (1943); Crouch v. United States, 692 F.2d 97 (10th Cir.1982).

5. A valid corporation will be disregarded for federal tax purposes only after the state has formally revoked a corporation’s charter. McDonnell v. Commissioner, 34 T.C.M. (P-H) para. 65,125 (1965); Wootan v. Commissioner, 24 T.C.M. (P-H) para. 55,191 (1955).

6. Since the 1968 amendment to 18 Okl. St.Ann. § 1.198a (1983 Supp.) there is no automatic revocation of a corporate charter for failure to pay franchise taxes in Oklahoma. Present law provides for unlimited suspension with the corporation having the right to reinstate its charter at any time before the expiration of its Articles of Incorporation. Simmons v. Alliance Corp., 79 F.R.D. 547, 548 (W.D.Okla.1978).

7. Although its charter was suspended from February of 1972 until it was reinstated in February of 1974, WSC was a corporation for federal tax purposes during calendar years 1972-1974.

8. Expenditures incurred by a taxpayer to protect or promote taxpayer’s business or business reputation or to preserve, protect, and promote the credit and goodwill of taxpayer’s business have been regarded as deductible. Marks v. Commissioner, 27 T.C. 464 (1956); Max Lutz and Ruth Lutz v. Commissioner, 282 F.2d 614 (5th Cir.1960); Harold L. and Temple M. Jenkins, 52 T.C.M. (P-H) para. 83,667; James O. Gould v. Commissioner, 64 T.C. 132 (1975); William A. Thompson, Jr. and Betty A. Thompson, 52 T.C.M. (P-H) para. 83,487; Samuel R. Milbank v. Commissioner, 51 T.C. 805 (1969); Cubbedge Snow v. Commissioner, 31 T.C. 585 (1958); Paul Draper v. Commissioner, 26 T.C. 201 (1956); William L. Butler v. Commissioner, 17 T.C. 675.

9. A taxpayer may properly recognize a moral obligation in paying the debt of another. Dunn & McCarthy, Inc. v. Commissioner, 139 F.2d 242 (2nd Cir.1943); C. Doris H. Pepper v. Commissioner, 36 T.C. 886 (1961). In this situation the jurisprudence does not require a precise similarity or strong connexity between the business benefited and the taxpayer making the payment. Robert Garland, Inc., 41 B.T.A. 119 (1940); Charles J. Dinardo v. Commissioner, 22 T.C. 430 (1954); Samuel R. Milbank v. Commissioner, 51 T.C. 805 (1969).

10. Payments to protect a business often involve situations where the taxpayer’s name, tradename, brand, patent, license or surname is involved. Canton Cotton Mills, 94 F.Supp. 561 (1951); U.S. v. E.L. Bruce, 180 F.2d 846 (6th Cir.1950); James L. Lohrke v. Commissioner, 48 T.C. 679 (1967); L. Heller and Son v. Commissioner, 12 T.C. 1109 (1949); Joseph J. McGee v. Nee, 113 F.2d 543 (8th Cir.1940).

11. The taxpayer sought to preserve, protect and promote defendant’s established trade and business as an attorney and is entitled to a deduction under Section 162 of the Internal Revenue Code.

12. Any Conclusion of Law herein which might be properly characterized a Finding of Fact should be incorporated as a Finding of Fact.

13. In keeping with these Findings of Fact and Conclusions of Law and contemporaneous herewith a separate judgment should be entered entering judgment in favor of the defendants, Warren F. Young and Beverly A. Young, and against the plaintiff, the United States of America.

      . The decision to run a trash hauling business from one’s law office has both ethical and practical considerations. Certainly it runs head on into the professional axiom, "the law is a jealous mistress.” There is enough unwitting refuse in the law business that one should not wittingly increase its scope.


source: Caselaw Access Project

author: FREEDMAN, District Judge.

license: Public Domain

text:
    Katherine BOUCHARD, et al., Plaintiffs, v. SECRETARY OF HEALTH AND HUMAN SERVICES, Defendant. Lillian PINNEX, Plaintiff, v. SECRETARY OF HEALTH AND HUMAN SERVICES, Defendant.
    Civ. A. Nos. 78-0632-F, 80-0319-F.
    United States District Court, D. Massachusetts.
    Sept. 19, 1984.

      Mary Ellen McCarthy, Western Mass Legal Services Inc., Holyoke, Mass., for plaintiffs.
    Joseph J. McGovern, Asst. U.S. Atty., Boston, Mass., for defendant.
   MEMORANDUM

FREEDMAN, District Judge.

On April 2, 1984, the Court issued a Memorandum and Order in two consolidated cases in which it held the Secretary of Health and Human Services (“Secretary”) incorrectly computed the optional state supplementary payment distributed under the Supplemental Security Income (“SSI”) Program, Title XVI of the Social Security Act, 42 U.S.C. §§ 1381 et seq., when income is “deemed” from an ineligible spouse to a categorically eligible individual. Bouchard v. Secretary of Health & Human Services, 583 F.Supp. 944 (D.Mass.1984). The plaintiffs sought an order reversing the final decision in each of their individual claims, as well as a similar order running to the entire class, and declaratory and injunctive relief. The Court declared the Secretary’s method of calculation erroneous at law, and declaratory and injunctive relief issued as to future benefits. The claims of two named plaintiffs, whom the Court assumed were still receiving benefits as members of a “mixed” couple, were reversed and remanded to the Secretary for recalculation of future state supplementary payments due them. However, the claims of the remaining named plaintiffs who were no longer receiving benefits as members of “mixed” couples under the program were not remanded, and retroactive class relief was denied, in accordance with the principles set forth in Chevron Oil Co. v. Huson, 404 U.S. 97, 92 S.Ct. 349, 30 L.Ed.2d 296 (1971).

The plaintiffs now move the Court to •alter or amend the judgment pursuant to Rule 59(e) of the Federal Rules of Civil Procedure. Sidney-Vinstein v. A-H Robins Co., 697 F.2d 880 (9th Cir.1983); Parks v. “Mr. Ford,” 68 F.R.D. 305 (D.Penn.1975). The motion requests the Court to alter its judgment denying recalculation of past benefits due both named plaintiffs and class members, and to amend it to require the Secretary to notify all class members of their right to have present benefits recalculated in compliance with the Court’s decision. In light of the arguments raised by plaintiffs in two memoranda submitted in support of the motion, the judgment will be altered to reverse and remand the claims of certain unnamed plaintiffs to whom underpayments are due, and to compel notice to all class members of the right to recalculation of benefits, both past and present.

The Named Plaintiffs

The named plaintiffs in these two consolidated cases have all received an unfavorable final decision of the Secretary. Bouchard v. Secretary, 583 F.Supp. at 946. Therefore, all have exhausted the administrative remedies available to them and have properly sought judicial review. 42 U.S.C. § 405(g). Katherine Bouchard and John Svoboda currently have income which exceeds the couple limits for benefits without regard to the computations at issue and thus no longer receive payments under the Social Security program. Midas Turgeon is now deceased, but his widow is currently a recipient under the program. George Stephens, Carolyn Barry and Lillian Pinnex are now receiving benefits as members of eligible couples, and Adolph DeDeurwaerder, recently widowed, now receives payments as an eligible individual. Therefore, none of the named plaintiffs benefited from the prospective relief awarded.

In Chevron Oil Co. v. Huson, 404 U.S. at 97, 92 S.Ct. at 350, the Supreme Court directed that a new rule of law should not be applied retroactively where a court found that three factors weighed against it. In the first factor, non-retroactivity is advised where a new principle of law overrules past precedent or where an issue of first impression has not been clearly foreshadowed. Id. at 106, 92 S.Ct. at 355. The Court concluded that the principle of law defined in its memorandum was not clearly foreshadowed and thus weighed against retroactive application. Bouchard v. Secretary, 583 F.Supp. at 955. Plaintiffs argue this finding is erroneous, but I have not altered my opinion. Cf. Simpson v. Director, Office Workers Compensation Programs, et al., 681 F.2d 81 (1st Cir.1982) (it remains for the court to determine whether recent decision weighs for or against retroactivity). I therefore continue to adhere to the original finding that the first Chevron factor weighs against a discretionary retroactive application of the Court’s decision. However, plaintiffs raise an argument which tempers the effect of the above finding and weighs in favor of remanding certain cases to the Secretary for recalculation.

Under the second Chevron test, a court must determine whether retroactivity would enhance or retard the operation of its decision. 404 U.S. at 106, 92 S.Ct. at 355. In the original Memorandum, this Court concluded that ordering recalculation of past benefits for all named plaintiffs and class members would frustrate the Congressional goal of fostering cooperation between the states and the federal government. Bouchard v. Secretary, 583 F.Supp. at 955. However, plaintiffs correctly point out a statutory provision which states:

[wjhenever the Secretary finds that more or less than the correct amount of benefits has been paid with respect to any individual, proper adjustment or recovery shall ... be made by appropriate adjustments in future payments to such individual ... or his eligible spouse.

42 U.S.C. § 1383(b)(1). Congress intended that

if less than the correct amount of benefits [has] been paid, the Secretary would pay the balance due the underpaid individual. If the individual dies before the amount due has been paid to him, ... the amount due would be paid to his eligible spouse, if there is one, and the payment would not be taken into account in determining the spouse’s need under the program. Underpayments, however, would not be paid to the estate of a deceased individual since it would not further the objective of meeting the current needs .of the individuals.

H.R. No. 231, 92d Cong., 2d Sess., reprinted in 1972 U.S.Code Cong. & Ad.News 4989, 5141. The Secretary incorporated this statutory mandate into a series of regulations. 20 C.F.R. §§ 416.535 through 416.550. Where an individual has applied for benefits and has met all conditions of eligibility, 20 C.F.R. § 416.536, “an underpayment adjustment ... is made where a recipient received less than the correct amount of supplementary security income benefits....” 20 C.F.R. § 416.535. Significantly, the Secretary has defined underpayments quite specifically.

An underpayment can occur only with respect to a period for which a recipient filed an application ... for benefits and met all conditions of eligibility thereof. An underpayment, including any amounts of state supplementary payments which are due and administered by the Social Security Administration, is: (a) nonpayment, where payment for a quarter (or month, where applicable) was due but hot made, and (b) payment of less than the amount due for any quarter (or month, where applicable).

20 C.F.R. § 416.536 (emphasis supplied). Thus, Congress and the Secretary herself recognized and provided for “retroactive” payment where benefits, both federal and state, had been denied or reduced because of erroneous calculation by the Secretary.

This Court concluded that the Secretary’s method of calculating optional state supplementary SSI payment for a recipient with deemed spousal income was erroneous at law. Bouchard v. Secretary, 583 F.Supp. at 953. The operation of that rule would be enhanced by remanding cases of applicants whose benefits were reduced or denied by virtue of the incorrect calculation. Chevron Oil Co. v. Huson, 404 U.S. at 106, 92 S.Ct. at 355. Additionally, remand would be consistent with the statutory and regulatory provisions directing adjustment for underpayment. Therefore, the second Chevron factor weighs heavily in favor of remanding the claims of the named plaintiffs to the Secretary.

In addition, the number of persons involved and the amounts due them are small. The recalculation of past benefits due, and the payment thereof, will benefit the intended beneficiaries of the federal program and will not unduly burden either the federal administrators or the Commonwealth of Massachusetts. Id. at 107, 92 S.Ct. at 355-356 (court may deny retroactive application of decision where to do so would produce substantial inequitable results). Therefore, this Court shall order reversal and remand for Midas Turgeon, George Stephens, Carolyn Barry, Lillian Pinnex and Adolph DeDeurwaerder, who, by the terms of both statute, 42 U.S.C. § 1383, and regulation, 20 C.F.R. § 416.-542, are entitled to receive the underpayments due them. The claims of those named plaintiffs who have neither current eligibility nor a current eligible surviving spouse, namely Katherine Bouchard and John Svaboda shall not be subject to remand.

Class Relief

These same arguments would seem to apply with equal force to the class at large. Certainly, the Court’s holding and the explicit statutory provision for adjustment of underpayment would be enhanced if the Secretary were ordered to recalculate benefits for all class members. Further, the equities, despite potentially large numbers of applicants and significant sums of money, must weigh in favor of an order to identify and recalculate benefits for all class members. Bouchard v. Secretary, 583 F.Supp. at 956. Upon reconsideration of the interests at stake, and in light of the data submitted by both parties, I believe that some relief must be extended to the class.

The class, as certified by Order of the Court on January 11, 1982, consists of all Massachusetts residents who subsequent to January 18, 1977:

a. Have applied to the secretary for or have received SSI benefits and have been found categorically eligible for SSI benefits; and
b. Have resided in the same household with an ineligible spouse whose income is subject to the statutory deeming requirements set out in 42 U.S.C. § 1382c(f)(l); and
c. Have “countable income” below the Massachusetts SSI standard for an eligible individual; and
d. Whose countable income, together with the countable income of their ineligible spouses is lower than the Massachusetts SSI standard for an eligible couple.

A court has a duty to fashion appropriate equitable relief for a class which prevails on the merits of the claim presented. Shannon v. United States Civil Service Commission, 444 F.Supp. 354 (N.D.Cal.1977), and this duty extends to class actions brought pursuant to the Social Security Act. Gray Panthers v. Schweiker, 716 F.2d 23 (D.C.Cir.1983); Liberty Alliance of the Blind v. Califano, 568 F.2d 333 (3rd Cir.1977); Mayburg v. Heckler, 574 F.Supp. 922 (D.Mass.1983), affirmed in part, reversed in part, subnom Mayburg v. Secretary of Health & Human Services, 740 F.2d 100 (1st Cir.1984). This Court has held that the Secretary erroneously calculated the optional state supplementary payments due class members. Bouchard v. Secretary, 583 F.Supp. at 953. Having so found, the relief which would best serve the interests of the class members- would be an order remanding all claims for recalculation of benefits from January 18, 1977 onward. However, a court’s duty to carve equitable class relief must take into account not only the needs of class members, but also the obstacles any relief may present to the governmental bodies who must comply with a court order. Shannon v. United States Civil Service Commission, 444 F.Supp. at 368 (appropriate relief requires consideration of fairness of retroactive relief, deprivations suffered by plaintiff class, and the burden of compliance on the government). In the case at bar, there are three such considerations: the difficulty of identifying all members of the class; the administrative burden which recalculation would entail; and the fiscal impact on the Commonwealth of Massachusetts.

Identification

The identification of class members entitled to relief would fall on the Secretary. 42 U.S.C. § 1382e(b)(2); Bouchard v. Secretary, 583 F.Supp. at 952 (under Federal-State agreement, Secretary accepts all administrative duties and costs associated therewith). The Secretary insists the task would be unduly burdensome. She represents that identification of all recipient-members of the class would require extensive computer reprogramming supplemented by a tedious manual search. As regards applicant members who were wrongfully denied benefits, she argues there is no method available to identify them with any certainty. Defendant’s Memorandum In Opposition To Plaintiff’s Motion at 5.

It has been held that the burdensomeness of any combined computer and manual search is insufficient to overcome the harm suffered by persons wrongfully deprived of benefits. Pope v. Railroad Retirement Board, 672 F.2d 972, 975 (D.C.Cir.1982) (retroactive relief ordered for class of 60,-000). Yet, this Court recognized the enormity of the task in its prior Memorandum, Bouchard v. Secretary, 583 F.Supp. at 955, and the potential impact on the Social Security Administration’s resources cannot be ignored.

Plaintiffs concede that the relief requested is essentially notice relief, for any recipient or past applicant who is apprised of the right to recalculation of past benefits would have to prove class membership before the Secretary would be required to process the claim. Plaintiffs’ Supplemental Memorandum In Support Of Motion at 19. The goal of any relief granted must be to ensure that all potential class members are aware of the right created by the Court’s Order. This goal may be met in a very simple, inexpensive manner.

The class actually encompasses two subclasses: present recipients whose benefits are now and have been less than what is due them, and applicants who were wrongfully denied benefits because of the Secretary’s incorrect calculation method. The Secretary maintains it is virtually impossible to identify all class members who presently receive benefits. But if the Secretary were to include appropriate written notice in the regular mailing of all benefit checks, the potential class members would be reached. A one-time-only, direct mail notification to all persons presently receiving benefits under the program ensures that all recipient-members of the class will receive appropriate notice of relief. It will not be costly, since written notification could be included as part of a regular agency mailing. It therefore represents the least expensive manner of notifying all potential class members of their right to have both present and past benefits recalculated in accordance with the Court’s Order.

The direct mailing, however, will not reach those who claimed but were denied benefits after January 18, 1977. Defendant maintains the impossibility of identifying all members of this subclass of applicants, and I must accept that representation. Therefore, I shall order the Secretary to provide reasonable notice to the general public by posting notices of the relief granted in prominent areas in all Social Security offices in the Commonwealth, and by causing the notice to be published in newspapers of general circulation throughout the Commonwealth for seven (7) consecutive days.

All notices, whether mailed, posted or published, shall inform the reader of the scope and impact of the Court Order, the class so benefited, the right of both recipients and applicants to have past and present benefits recalculated, and the steps the reader must take to bring his/her claim to the attention of the agency. The Secretary shall submit to the plaintiffs a sample notice within seven (7) days of the date of this Memorandum. If the plaintiff has substantial disagreement with the notice as offered, and if the parties are incapable of resolving any significant dispute which arises, they are to present their proposed notice to the Court within fourteen (14) days of the date of this Memorandum, at which time the Court shall determine the final form of notice. In any event, published and posted notice provisions shall be instituted within thirty (30) days of the date of this Order. Direct mailing of notices shall be included in the next regular agency mailing or within forty-five (45) days of the date of this Order.

I emphasize the written notice must state that the Court has ordered a permanent change in calculation methodology, effecting not only benefits received from January 18, 1977 to the present, but also future benefits as well. Defendant specifically objected to plaintiffs’ request for an order to notify class members of their right to have present benefits recalculated. She argues such an order is unnecessary since she has every intention of complying with the original order of prospective relief. Defendant’s Memorandum In Opposition To Plaintiffs’ Motion at 7. Plaintiffs have expressed concern as to these intentions. I share that concern. See Memorandum and Order issued this date on Plaintiffs’ Motion To Cite Defendant For Contempt. Therefore, I conclude the written notice must notify the reader of the right to have present benefits recalculated.

Recalculation

The Secretary further objected to any class-wide retroactive relief because recalculation of so many claims would unduly burden agency resources. In its original Memorandum, the Court expressed the same concern. Bouchard v. Secretary, 583 F.Supp. at 955-56. However, upon reconsideration, I conclude that the administrative cost involved in recalculating class members’ benefits is not so great as to outweigh the interests of the class. Pope v. Railroad Retirement Board, 672 F.2d at 975; Liberty Alliance for the Blind v. Califano, 568 F.2d at 355.

By the Secretary’s own reckoning, the total number of recipients and applicants affected by the Court Order for the years 1977 through 1983 amounts to 2,500. Defendant’s Memorandum In Opposition To Plaintiffs’ Motion at 6-7. The task of recalculation would at first seem overwhelming, were it not for two points. First, plaintiff suggests, and the Court concurs, that if recalculation of past benefits were conducted in conjunction with the Secretary’s periodic review of all recipients’ benefits (and, for that matter, in conjunction with the recalculation of present benefits the Secretary insists will be conducted), the administrative burden would be lessened, at least as regards recipient-members of the class. Secondly, it has been held that the administration cost associated with reinstating benefits to a class of over 16,000 would be de minimus. Foggs v. Block, 722 F.2d 933, 941 n. 6 (1st Cir.1983) (order reinstating food stamps not administratively burdensome). I believe this Court overestimated the task involved. I therefore conclude that the administrative burden of recalculating benefits for the class is not so great as to outweigh the right of class members to receive the amount by which they have been underpaid.

Impact

The final consideration to be addressed is the impact a class-wide order would have on the Commonwealth; it is a consideration which weighed heavily on the Court’s mind. Bouchard v. Secretary, 583 F.Supp. at 956. It is also a subject on which the parties are poles apart.

The Secretary insists the total amount of past state supplementary SSI payments at issue exceeds $12 million. This figure is based upon the maximum allowable amount of state supplementary benefits, assuming the class for those years consists of 1,100 recipients and 1,400 applicants. It also assumes a ratio of seven disabled class members to every one blind class member and every three aged class members. Defendant’s Memorandum In Opposition To Motion at 7. The plaintiffs, in contrast, estimate that for a class consisting of 1,600-1,800 recipients and an equal number of applicants, the figure is closer to $3.6 million. They base this lower estimate on a number of factors, all of which are persuasive.

First, all potential beneficiaries of the Order must prove membership in the class. The class is narrowly drawn, and any potential beneficiary would bear a heavy burden of proving entitlement. Second, in order to qualify for class membership, the potential beneficiary must still be a recipient under the program or be survived by an eligible spouse. 20 C.F.R. § 416.1152. If the named plaintiffs are any indication, this requirement will reduce significantly the number of persons entitled to receive adjustment of underpayments. Third, the Secretary’s regulations provide that recipients may receive no more under the deeming regulations than they would if their income had not been subject to the deeming of spousal income. 20 C.F.R. § 416.1163(c). This “windfall proviso” certainly will reduce the total amount of underpayments due. Fourth, the plaintiffs estimate that a significant number of past applicants applied for benefits more than once. Although' I find plaintiffs’ estimate of a 50% reduction very generous, I note that the Social Security Act does not limit the number of times an individual may apply for benefits; thus, the number of persons affected by the Court Order and therefore the amount of underpayments due is subject to reduction. Finally, not all class members will be entitled to the maximum amount of state supplementary payments. 20 C.F.R. § 416.1163(c)(2)(iii); Bouchard v. Secretary, 583 F.Supp. at 949.

For all these reasons, I find that the estimated amount submitted by plaintiffs, based on higher numbers of potential class members but reflecting factors which reduce the total amount due, is the more reasonable. The question remains as to whether even this reduced .amount would unfairly burden the Commonwealth.

Massachusetts had no hand in the calculations which gave rise to this lawsuit. By the terms of the statute, a participating state relinquishes all administrative control over the program. 42 U.S.C. § 1382e. This Court previously has expressed concern about the impact class-wide relief would have on a program designed, in part, to foster cooperation between state and federal authorities to the betterment of the programs’ intended beneficiaries. Bouchard v. Secretary, 583 F.Supp. at 955. But, under the Federal-State agreement, the Commonwealth agrees to accept the fiscal responsibility for all payments made pursuant to the statute and regulations. Id. at 948. As noted above, the regulations mandate the adjustment of benefits both underpaid and overpaid. 20 C.F.R. § 416.535. Plaintiffs argue that the Commonwealth has benefited from the regulatory recoupment provision. In 1978 alone, the Secretary recovered over $4 million which had been overpaid, and returned it to the state. Plaintiffs’ Supplemental Memorandum at 25, citing Attachments, Defendant’s Answers to Plaintiffs’ Second Set Of Interrogatories. As logic dictates, where a state accepts the benefit of recoupment of over-payments under the program, it must also accept the concomitant fiscal responsibility for the underpayments rightfully due its needy citizens. I therefore conclude that the potential financial impact upon Massachusetts will be neither unexpected nor excessive. Accordingly, it does not present an insurmountable obstacle to class relief. Cf. Liberty Alliance for the Blind v. Califano, 568 F.2d at 333 (recalculation of mandatory state supplementary payments for blind recipients ordered for class). Conclusion

In sum, I find the burdens of compliance with a class-wide order of notice relief do not outweigh the harm which would be suffered by class members if relief were withheld. Under an analysis identical to that undertaken for the named plaintiffs, all class members would benefit from adjustment for underpayments of optional state supplementary payments. Adjustment is consistent with the Secretary’s regulations, 20 C.F.R. § 416.536, and would be in keeping with the statutory mandate. 42 U.S.C. § 1383(b)(1). The SSI program was designed to meet the present needs of its beneficiaries. H.R. No. 231, supra p.-. That need is no less for an unnamed class member than for a named plaintiff. I therefore conclude that class relief is both appropriate and just. F.R.Civ.P. 23. The Secretary shall take steps to provide reasonable notice in accordance with the terms of this Memorandum.

An appropriate Order shall issue.

JUDGMENT AND ORDER

In accordance with the accompanying Memorandum issued this date, it is hereby Ordered, Adjudged and Decreed that the Judgment and Order of April 2, 1984, Bouchard v. Secretary of Health & Human Services, 583 F.Supp. 944 (D.Mass.1984), be altered and amended in the following manner.

1. The cases of plaintiffs Midas Turgeon, George Stephens, Carolyn Barry, Lillian Pinnex and Adolph DeDeurwaerder are hereby REVERSED and REMANDED to the Secretary of Health and Human Services for calculation of underpayments due them, in accordance with the terms of the Social Security Act, 42 U.S.C. § 1383(b)(1), and the regulations promulgated thereunder, 20 C.F.R. §§ 416.535 through 416.550.

2. The Secretary is hereby Ordered:

a) to notify in writing all present recipients of Supplemental Security Income, 42 U.S.C. §§ 1381 et seq., of the right of class members, as defined by Order of the Court dated January 11, 1982, to have their optional state supplementary payment recalculated; notify them of the right to receive adjustment for underpayments due them, effective January 18, 1977; and further inform the reader of the steps necessary to bring a claim to the attention of the Social Security Administration, all in accordance with the Orders of the Court issued April 2, 1984, Bouchard v. Secretary, 583 F.Supp. 944, as amended this date. Written notice shall be included in the next regular mailing of benefit cheeks or within forty-five (45) days of the date of this Order if the Secretary chooses to provide written notice by separate mailing;

b) to post notices informing class members of their rights under the Orders of the Court. The notices shall be of adequate size and placed in prominent locations in all offices of the Social Security Administration in the Commonwealth of Massachusetts within thirty (30) days of the date of this Order;

c) to cause to be published notices informing class members of their rights under the Orders of the Court. The notices shall be published in newspapers of general circulation throughout the Commonwealth of Massachusetts for seven (7) consecutive days. Publication shall begin within thirty (30) days of the date of this Order;

d) to submit to the plaintiffs’ counsel within seven (7) days of the date of this Order, a draft of the notice ordered, to comply in full with the requirements set forth in the accompanying Memorandum. If the parties fail to agree substantially on the content of the notice, either party or both parties may submit the issue to the Court no later than fourteen (14) days from the date of this Order, at which time the Court will determine the final content of the required notice.

It is So Adjudged and Ordered.

MEMORANDUM AND ORDER

November 15, 1984

The Secretary of Health and Human Services (“Secretary”) has moved to stay the Orders of the Court of April 2, 1984, Bouchard v. Secretary, 583 F.Supp. 944 (D.Mass.1984) and September 19, 1984, pending their appeal to the United States Court of Appeals for the First Circuit. The Secretary alternatively requests the Court to grant an extension of the deadlines specified in the latter Order for the mailing, posting and publication of notice to class members. Fed.R.Civ.P. 62(c).

Under the standards of this Circuit, a court may exercise its discretionary power to stay its own orders if the movant makes

(1) a strong showing that he is likely to succeed on the merits of the appeal; (2) a showing that unless a stay is granted he will suffer irreparable harm; (3) a showing that no substantial harm will come to other interested parties; and (4) a showing that a stay will do no harm to the public interest.

Martinez Rodriguez v. Jiminez, 537 F.2d 1, 2 (1st Cir.1976) (citations omitted). The Secretary has raised several points addressing these four elements.

A. Irreparable Harm, Balance of Hardships and Public Interest

The Secretary’s arguments on the latter three elements rest largely on her contention that the Orders unduly burden an already overburdened agency. Essentially,' the Secretary maintains the relief ordered imposes a burden of such magnitude that any harm which may accrue to beneficiaries of the Orders were a stay granted is far outweighed by the harm which both the agency and the public interest would suffer if the Orders were allowed to stand.

This Court carefully considered the burden any affirmative order would have on the defendant’s agency and concluded that, on balance, the scales tipped in favor of the beneficiaries of the order. I see nothing in defendant’s present arguments to convince me otherwise.

Likewise, the Secretary’s attempt to equate the agency’s interest with the public interest, and her attempt to demonstrate irreparable harm falls short. This Court previously found that claims of administrative inconvenience and expense were not so compelling as to avoid the imposition of relief. Additionally, the data submitted to the Court on the issue of recoupment, Memorandum and Order of September 19, 1984 at 16, belies the Secretary’s insistence that her power to recoup overpayments is illusory.

Finally, the Secretary’s reliance on Lopez v. Heckler, infra, is misplaced. In Lopez, the district court ordered immediate reinstatement of interim benefits to all class members pending administrative review. Thus, the agency was obliged to institute payment prior to any determination of eligibility. In contrast, a potential member of the Bouchard class must prove entitlement before receiving underpayments. Therefore, insofar as defendant relies on Lopez to demonstrate irreparable harm, the case is inapposite.

In sum, I find the Secretary has failed to demonstrate that irreparable harm will accrue to either the agency or the public interest if the stay is not granted or that any harm her agency may suffer would sufficiently outweigh the harm incurred by class members if a stay were granted.

B. Likelihood of Success on the Merits

The Secretary cites three grounds on which she contends she will successfully appeal this case.

First, the Secretary attacks the basis of the Court’s decision. Her memorandum merely summarizes the same arguments the Court fully considered and rejected. Bouchard v. Secretary, 583 F.Supp. 944. Therefore, the argument based on deference to the Secretary’s interpretation of her own regulations does not provide sufficient grounds for the instant motion.

Second, the Secretary argues relief is not available to any class member who has not exhausted administrative remedies. I fully considered the issue of exhaustion over two years ago when the class was first certified. Memorandum and Order of January 11, 1982. The most recent Supreme Court case, Heckler v. Ringer, — U.S. -, 104 S.Ct. 2013, 80 L.Ed.2d 622 (1984) does not undermine the reasoning employed to certify the class. Therefore, the Secretary has not made a strong showing that she is likely to succeed in appealing the Orders on the basis of the exhaustion doctrine.

The Secretary’s final argument, however, raises a serious legal question. She argues the Court is without jurisdiction to award relief to individuals whose claims are time-barred by the sixty-day requirement of the Social Security Act. 42 U.S.C. § 405(g). Recent case law indicates that the sixty-day requirement is jurisdictional, see Heckler v. Lopez, — U.S. -, 104 S.Ct. 2164, 80 L.Ed.2d 548 (1984) (stay granted as to the relief awarded to those individuals whose claims were time-barred by the sixty-day requirement), and therefore overrides any equitable considerations. I believe the Secretary’s contention based on the sixty-day requirement raises an issue of sufficient seriousness to require a partial stay of the Court’s Orders.

The history of the Lopez case is complex and lengthy. Lopez v. Heckler, 572 F.Supp. 26 (C.D.Cal.1983); motion to stay denied, 713 F.2d 1432 (9th Cir.1983); partial stay granted, 463 U.S. 1328, 104 S.Ct. 10, 77 L.Ed.2d 1431 (Rehnquist, J.) (1983); motion to vacate stay denied, — U.S. -, 104 S.Ct. 221, 78 L.Ed.2d 217 (1983) (Justices Stevens and Blaekmun dissenting in part, concurring on the issue of the sixty-day requirement); preliminary injunction affirmed, 725 F.2d 1489 (9th Cir. 1984); partial stay granted, — U.S. -, 104 S.Ct. 2164, 80 L.Ed.2d 548 (1984) (stay granted as to the relief awarded to those individuals whose claims were time-barred by the sixty-day requirement). Yet, one principle emerges: the sixty-day requirement retains viability as a jurisdictional prerequisite even in class actions for which a court waives the requirement of exhaustion. See dissent of Justice Stevens, — U.S. at -, 104 S.Ct. at 221, 78 L.Ed.2d at 218 and Memorandum Order, — U.S. -, 104 S.Ct. 2164, 80 L.Ed.2d 548.

In the instant case, the named plaintiff Katherine Bouchard initiated legal action on March 17, 1978. The class as certified reached all Massachusetts residents who, subsequent to January 18, 1977, have applied to the Secretary for or have received benefits and have been categorically eligible for benefits under the Supplemental Security Income program. In light of the argument the Secretary now raises, the order of relief may well have extended to persons over whose claims the Court has no jurisdiction. Consequently, the Secretary has raised an issue of sufficient seriousness, and has demonstrated a strong likelihood of success on appeal of the issue of the effect the sixty-day requirement may have on the Court’s Order.

Accordingly, the motion to stay the Orders of the Court of April 2, 1984, Bouchard v. Secretary, 583 F.Supp. 944, and September 19, 1984 is hereby GRANTED insofar as the Orders extend to persons whose benefits under the Supplemental Security Income program were terminated or denied prior to January 16, 1978 and who did not initiate administrative remedies at all, or did not complete the administrative process by that date. In all other respects the motion is DENIED.

It is So Ordered.

      . Subsequent to their motion, plaintiffs moved to remove Lottie Sypulski from the named plaintiffs seeking relief. Plaintiff is now deceased, leaving no eligible widower.

      . The Secretary is free, of course, to provide written notice in a separate mailing.

      . The Court notes both parties based their estimates on underpayments due for the years 1977 through 1983. The retroactive application of the Court’s ruling, therefore, will be effective only as of January 18, 1977.

      . Of the eight original named plaintiffs, only five will be entitled to adjustment of underpayments.

      . The Ringer court found the respondents’ claims for Medicare reimbursement subject to the exhaustion requirement, but specifically noted the claimants failed to demonstrate the futility of pursuing administrative relief. - U.S. -, 104 S.Ct. at 2023, 80 L.Ed.2d at 638.

      . The Social Security Act provides:
      Any individual, after any final decision of the Secretary made after a hearing to which he was a party, ... may obtain a review of such decision by a civil action commenced within sixty days after the mailing to him of notice of such action____
      42 U.S.C. § 405(g).

      . On January 18, 1977, the Secretary’s regulations governing computation of benefits where spousal income is deemed became effective. 42 Fed.Reg. 3314.

      . January 16, 1978 is sixty days before the date on which Katherine Bouchard filed her action.


author: BARBOUR, District Judge.

text:
    Eddie Dwight SWAIN, Plaintiff, v. Vickie SWAIN, et al., Defendants.
    Civ. A. No. W83-0082(B).
    United States District Court, S.D. Mississippi, W.D.
    Oct. 11, 1984.
    John T. Green, Stratton Bull, Jr., Natchez, Miss., for plaintiff.

      George Phillips, U.S. Atty., Jackson, Miss., for Charles O. Guy and Sylvia H. Wren.
    Darold L. Rutland, State Dept, of Public-Welfare, Jackson, Miss., for State Dept, of Public Welfare.
    W. Bruce Lewis, Handy, Fitzpatrick, Gwin & Lewis, Natchez, Miss., for Health & Social Services Dept, of the State of New Mexico and Carrell Ray.
   ORDER AND MEMORANDUM OPINION

BARBOUR, District Judge.

FACTUAL HISTORY

On March 13, 1973) the Plaintiff, Eddie Dwight Swain, and one of the Defendants, Vickie Swain, were granted a divorce in the Chancery Court of Adams County, Mississippi, Cause No. 23,912. This divorce decree granted custody of the couple’s daughter to Vickie Swain and set child support payments at $35.00 a month for the first six months, and $50.00 a month thereafter. Subsequently, Vickie Swain left the State of Mississippi and went to the State of New Mexico with the couple’s daughter. On May 2, 1978, the Health and Social Services Department of the State of New Mexico, allegedly without notice to the Plaintiff, declared an arrearage of $1,835.00 due from Plaintiff. Proceedings were certified to the Chancery Court of Adams County, Mississippi, under the Uniform Reciprocal Enforcement of Support Act, in Cause No. 27,736. On August 17, 1979, the Chancery Court of Adams County entered an order in the URESA action, Cause No. 27,736, declaring payments of $50.00 a month due from Plaintiff, starting on September 1, 1979. One weék thereafter, on August 24, 1979, the Chancery Court of Adams County entered its Supplemental Order stating that the Plaintiff was not in default of child support payments under the 1973 divorce decree. This Order was signed for approval by the attorney for the Mississippi State Department of Public Welfare, K. Maxwell Graves. No appeal was taken from this Order by either party.

On September 22, 1980, an “Application for Internal Revenue Collection of Child Support” was filed with the Federal Department of Health, Education and Welfare by the New Mexico Office of Child Support Enforcement based presumably on the August 17, 1980 URESA Order from the Adams County Chancery Court for arrearage of $4,350.00 due from Plaintiff. On October 22, 1980, the Department of Health, Education and Welfare certified the Application to the Internal Revenue Service under 26 U.S.C. Section 6305 (Supp.1984). On November 24, 1980, the Internal Revenue Service made an assessment against the Plaintiff in the amount of $4,355.00, representing the arrearage claimed of $4,350.00 plus a $5.00 fee imposed by the IRS. Sometime thereafter the Plaintiff was given credit for certain payments and the arrearage was reduced to $3,505.00. On March 24, 1982, an agent of the Internal Revenue Service wrote to the Plaintiff with a demand for payment of this arrearage. Subsequently, a final demand for payment was made by the IRS to the Plaintiff. On May 31, 1982, a Notice of Levy was served by the IRS on the Plaintiff’s employer, I.B.M. On June 1, 1982, the Plaintiff paid $3,505.00 to the IRS to release this Lien. On October 5, 1982, the IRS District Director, Charles O. Guy, disallowed the Plaintiff’s claim for 'a refund of this $3,505.00.

On April 4, 1983, the Plaintiff filed a complaint in the Chancery Court of Adams County, Mississippi, against Vickie Swain, the Health and Social Services Department of the State of New Mexico, Carrell Ray (Assistant Attorney for the State of New Mexico), the State Department of Public Welfare of the State of Mississippi, Charles O. Guy (ex-District Director of the IRS in Jackson, Mississippi) and Sylvia H. Wren (present District Director for the IRS in Jackson, Mississippi). This action was removed by the U.S. Attorney’s Office to this Court pursuant to 28 U.S.C. § 1442(a). On July 26, 1983, the Plaintiff filed an Amended Complaint adding as a Defendant Margaret Heckler, Secretary of Health and Human Services.

ISSUES RAISED IN PLEADINGS

The Plaintiffs Complaint quite simply alleges that the IRS, acting on a void URE-SA proceeding, filed a tax lien on the Plaintiff’s employer in the amount of $3,505.00, which the Plaintiff immediately paid. The Complaint also alleges that a tax refund due the Plaintiff for the year 1982 was temporarily held up by the IRS but subsequently sent to the Plaintiff. The Complaint alleges that all of the Defendants acted wrongfully to deny the Plaintiff of due process of law, and the Complaint sought a refund of the $3,505.00 paid by the Plaintiff and damages in the amount of $30,000.00 for the wrongful withholding of his 1982 tax refund, the levy resulting from the wrongful URESA proceeding and the social and emotional humiliation and embarrassment suffered by the Plaintiff as a result of the alleged wrongful actions of the Defendants. The Complaint also seeks $5,000.00 in attorneys fees under the Equal Access to Justice Act.

On September 22,1983, the State Department of Public Welfare of Mississippi filed a Motion to Dismiss under F.R.Civ.P. 12(b) based on six grounds, only two of which were argued in their Brief in support of this Motion: (1) that the action was barred by the eleventh amendment, and (2) that service of process on a former, and on a present duly appointed staff attorney of the Child Support Unit of the State Department of Public Welfare was insufficient service of process upon the State Department of Public Welfare.

On October 11, 1983, the Health and Social Services Department of New Mexico and Carrell Ray filed their Motion to Dismiss under F.R.Civ.P. 12(b) based upon the same grounds raised in the Motion to Dismiss of the Department of Public Welfare of Mississippi. Again, only two of these grounds were argued by brief: (1) the action was barred by the eleventh amendment, and (2) lack of in personam jurisdiction over these defendants by virtue of insufficient service of process upon a former and present attorney of the Child Support Unit of the State Department of Public Welfare of Mississippi, as “agents” for the Department of Health and Social Services of the State of New Mexico and Carrell Ray, and by service on the Secretary of State of the State of Mississippi pursuant to Mississippi’s “long-arm statute”, Ik. Code Ann. § 13-3-57 (1972).

On October 11,1983, the Federal Defendants, Charles O. Guy, Sylvia H. Wren, and Margaret Heckler filed their Motion to Dismiss under F.R.Civ.P. 12(b), raising the following grounds, all of which were argued in their brief: (1) the action is barred by the doctrines of sovereign immunity and official immunity, (2) lack of subject matter jurisdiction, (3) the claim is barred by 26 U.S.C. Section 6305(b), and (4) the Complaint fails to state a claim against the Federal Defendants upon which relief can be granted.

ANALYSIS OF ARGUMENTS

The United States Congress enacted several statutory provisions for using the Internal Revenue Service to reimburse state welfare agencies for payments made to dependent children in situations where the parent or parents of the children owed court ordered child support payments in support of these children. 26 U.S.C. § 6402 (Supp.1984) grants the IRS the right, upon proper notification from the state welfare agency and the department of HEW to intercept tax refunds due defaulting parents and forward them to the state welfare agency which had been making welfare payments to dependent children and which had received an assignment of the child support rights concerning that child. This procedure is known as the “transfer” collection method. 26 U.S.C. § 6305 (Supp.1984) grants the IRS the right, again upon proper certification from the state and federal agencies, to assess a tax against the defaulting parent to make up the delinquency in child support payments. This method is known as the “assessment” collection method. What is at issue in this case is the Section 6305 “assessment” statute. Although there have been a few recent challenges to the Section 6402 “transfer” collection statute, there appear to have been no suits involving direct interpretation of Section 6305. Suits challenging Section 6402 have generally been allowed to proceed over immunity objections by defendants, and have often resulted in decisions declaring Section 6402 unconstitutional. See, e.g., Nelson v. Regan, 731 F.2d 105 (2d Cir.1984); Marcello v. Regan, 574 F.Supp. 586 (D.R.I.1983); Sorenson v. Secretary of Treasury of the United States, 557 F.Supp. 729 (W.D.Wash.1982). These suits sought declaratory relief rather than money damages from the public agencies involved. In Vidra v. Egger, 575 F.Supp. 1305 (E.D.Pa.1983) the complaint sought repayment of the intercepted refund. This suit was dismissed, the court holding that repayment was barred by the eleventh amendment.

The reason for a lack of federal court judicial action with regard to Section 6305 is clear upon examination of sub-section (b) of that statute. This sub-section provides as follows:

No court of the United States, whether established under Article I or Article III of the Constitution, shall have jurisdiction of any action, whether legal or equitable, brought to restrain or review the assessment and collection of amounts by the Secretary under subsection (a), nor shall any such assessment and collection be subject to review by the Secretary in any proceeding. This sub-section does not preclude any legal, equitable, or administrative action against the State by an individual in any State court or before any State agency to determine his liability for any amount assessed against him and collected, or to recover any such amount collected from him under this section.

Treasury Regulations Section 301.6305 — 1(d) reiterate that neither the federal courts nor the Secretary of the Treasury have jurisdiction to review the assessment or collection of certified amounts in any legal, equitable or administrative proceeding. The regulation specifically provides that the state court or state agency is the only forum for reviewing the assessment for collection of the certified amounts. The reasoning behind this jurisdictional limitation is apparent. The individual state agencies make the original certification of amounts due from the defaulting parents and these agencies ultimately receive the disputed money as reimbursement for funds they have spent in aid to dependent children. Any action to test the validity of the original certification and to recover any funds wrongfully withheld should logically be brought against the state agency involved. It is the congressional intent that these actions be heard in the individual state court systems, and not in the federal court system.

For whatever reason, the Chancery Court of Adams County declared the Plaintiff in compliance with the 1973 divorce decree, thereby effectively absolving him of liability for the past due child support payments. Whether acting with or without knowledge of this Order, the Department of Health and Social Services of the State of New Mexico filed an “Application for Internal Revenue Collection of Child Support” with the Department of HEW on September 22, 1980. The assessment of this tax under Section 6305 directly followed this certification by the Department of Health and Social Services of New Mexico. The gravamen of the Plaintiffs Complaint is that the Department of Health and Social Services should not have obtained the $3,505.00 from the Plaintiff because the Chancery Court of Adams County had absolved the Plaintiff of liability for the arrearage through September 1, 1979. (It seems worthy of note, however, that the Plaintiff would still be liable for any arrearage occurring between September 1, 1979, and the date of the Application for Collection, on September 22,1980, conceivably as much as $600.00).

This lawsuit quite clearly seeks the review of an assessment made under Section 6305 and is, therefore, barred in this Court pursuant to Section 6305(b). The proper forum for bringing this action is before the state courts of New Mexico, or, if appropriate, before the Department of Health and Social Services of the State of New Mexico as an administrative proceeding. The Court is therefore of the opinion that this action must be dismissed for lack of subject matter jurisdiction.

It is unnecessary to reach the other grounds raised by the Defendants in their Motions to Dismiss. The Court notes, however, that the Complaint does not allege any individual actions by the named Defendants, outside the scope of their official duties, and therefore does not state a claim against these Defendants for their actions unless they knew, or should have known by established authority existent at the time of making the action, that their actions were wrongful. See, e.g., Harlow v. Fitzgerald, 457 U.S. 800, 102 S.Ct. 2727, 73 L.Ed.2d 396 (1982).

Furthermore, with regard to the state defendants’ eleventh amendment claims of immunity, Edleman v. Jordan, 415 U.S. 651, 94 S.Ct. 1347, 39 L.Ed.2d 662 (1974) limits federal judicial remedial power to prospective injunctive relief and prohibits retroactive awards from a state’s treasury. The case relied upon by the Plaintiff in response to the eleventh amendment immunity argument is Berk v. Laird, 429 F.2d 302 (2d Cir.1970). Berk dealt with a complaint seeking injunctive relief to prevent the government from sending the plaintiff, a soldier, to the Viet Nam conflict. The principal case upon which Berk relied for authority in allowing the injunctive action to proceed against the government was Larson v. Domestic and Foreign Commerce Corp., 337 U.S. 682, 69 S.Ct. 1457, 93 L.Ed. 1628 (1948). Larson dealt with an action seeking injunctive relief declaring that the War Assets Administration sell certain coal to the plaintiff. Both Berk and Larson dealt with injunction actions against the government, not requests for monetary relief. The Berk court stated:

Sovereign immunity is no bar to this action, since the complaint alleges that agents of the Government have exceeded their constitutional authority while purporting to act in the name of the sovereign. ... The requested relief does not require affirmative governmental action, but only that the agent involved cease certain allegedly improper conduct.

Id. at 306. Neither of these cases appear to circumvent the Edleman prohibition against actions for monetary relief against governmental entities.

Accordingly, the Court is of the opinion that this action must be dismissed for lack of subject matter jurisdiction.


author: MUECKE, Chief Judge.

text:
    The WHITE MOUNTAIN APACHE TRIBE, Plaintiff, v. William P. CLARK, et al., Defendants.
    No. CIV 83-2045 PCT CAM.
    United States District Court, D. Arizona.
    Oct. 12, 1984.

      Russell A. Kolsrud, Asst. Atty. Gen., Phoenix, Ariz., for Corbin.
    G. Eugene Neil, Phoenix, Ariz., for Goodfarb.
    Richard S. Allemann, Asst. U.S. Atty., Phoenix, Ariz., and Pauline H. Milius, U.S. Dept, of Justice, Washington, D.C., for federal defendants.
   ORDER

MUECKE, Chief Judge.

Having received and considered Plaintiffs’ Complaint for Declaratory Judgment and for Permanent Injunction, filed October 20, 1983; Federal Defendants’ Motion to Dismiss, filed February 9, 1984; Plaintiffs’ Response to Motion to Dismiss, filed March 30, 1984; Defendants’ Reply Memorandum in Support of Federal Defendants’ Motion to Dismiss, filed April 10, 1984; Federal Defendants’ Supplemental Memorandum in Support of Motion to Dismiss, filed June 14, 1984; Plaintiffs’ Memorandum Pursuant to May 11, 1984 Order, filed June 21, 1984; Federal Defendants’ Final Memorandum in Support of Motion to Dismiss, filed July 16, 1984; and Plaintiffs’ Response to Federal Defendants’ Supplemental Memorandum, filed July 16, 1984; and having heard oral argument on the Motion on April 16, 1984, this Court finds and concludes as follows:

This action is a continuation of a long history of disputes between the United States Government and Indian Tribes located in the various states across the country. Many of these claims, including the one before this Court, consist of alleged wrongs inflicted upon the tribes since the time pioneers first ventured across the Western Plains. While it is clear that the Indians were previously quite limited in their access to the judicial system to seek redress for these wrongs, times have indeed changed.

In 1946, Congress created the Indian Claims Commission and vested it with jurisdiction “[bjroad enough to include all possible claims.” Act of August 13, 1946, Pub.L. No. 726, 1946 U.S.Code Cong.Serv. (60 Stat.) 1347, 1355 (hereinafter cited as Congressional Comments). The language of the Act, 60 Stat. 1049; 25 U.S.C. § 70 et seq. (1976), illustrates the breadth of the jurisdiction:

Sec. 2. The Commission shall hear and determine the following claims against the United States on behalf of any Indian tribe, band, or other identifiable group of American Indians residing within the territorial limits of the United States or Alaska: (1) claims in law or equity arising under the Constitution, laws, treaties of the United States, and Executive orders of the President; (2) all other claims in law or equity, including those sounding in tort, with respect to which the claimant would have been entitled to sue in a court of the United States if the United States was subject to suit; (3) claims which would result if the treaties, contracts, and agreements between the claimant and the United States were revised on the ground of fraud, duress, unconscionable consideration, mutual or unilateral mistake, whether of law or fact, or any other ground cognizable by a court of equity; (4) claims arising from the taking by the United States, whether as the result of a treaty of cession or otherwise, of lands owned or occupied by the claimant without the payment for such lands of compensation agreed to by the claimant; and (5) claims based upon fair and honorable dealings that are not recognized by any existing rule of law or equity.

It is obvious that Congress intended to cover all claims: “If any class of claims is omitted, we may be sure that sooner or later that omission will lead to appeals for new special jurisdictional acts.” Congressional Comments, supra, at 1355-1356.

Therefore, based upon the grant of jurisdiction in the Act as well as its legislative history, all claims arising prior to 1946 were to have been brought before the Indian Claims Commission or were forever barred. See 60 Stat. 1049, 1052. The above discussion is dispositive of one of the issues before this Court.

Plaintiff makes several allegations in its complaint. First, the Tribe claims that the Secretary of Agriculture has refused to restore approximately 14,000 acres to which it believes it is entitled.

The White Mountain Apache Reservation was granted to the Tribe by Executive Orders on November 9, 1871 and December 12, 1872. The northern boundary of the reservation borders what are now the Sitgreaves and Apache National Forests. In 1887, Deputy Surveyor C. Wallace, under contract with the United States Government, surveyed the area, thereby delineating the boundary of the reservation. The reservation, as originally defined by the above orders, was reduced several times after its creation by various Executive Orders until the early 1900’s.

Plaintiff here alleges that the Wallace Survey of 1887 erroneously excluded from the reservation 14,000 acres of land, which is now National Forest area. As previously mentioned, the Indian Claims Commission was created in 1946 for the express purpose of providing a forum for all Indian grievances against the Federal Government.

In 1959, Plaintiff availed itself of this opportunity to seek redress for the previous alleged wrongs committed upon the Tribe by the United States; namely, the loss of properties contained within and without the present White Mountain Apache Reservation {see Plaintiffs’ Complaint filed before the Indian Claims Commission, hereinafter referred to as “Docket No. 22-D”, attached as Exhibit 1 to Federal Defendants’ Supplemental Memorandum in Support of Federal Defendants’ Motion to Dismiss, filed June 14, 1984). Shortly thereafter, Plaintiff filed a second action alleging trespass and mismanagement, and requested an accounting (see Exhibit 4, attached to Federal Defendants’ Supplemental Memorandum in Support of Federal Defendants’ Motion to Dismiss, filed June 14, 1984, hereinafter referred to as “Docket No. 22-H”). This second action has survived the extinguishment of the Indian Claims Commission and is presently pending in the United States Claims Court.

Subsequent to the filing of the two complaints before the Indian Claims Commission, Plaintiffs requested a reconsideration of the boundary lines of the reservation, as described in the allegedly erroneous Wallace Survey. In a memorandum dated June 12, 1967, the Solicitor for the Department of the Interior reviewed this request and after thorough examination, determined that the survey “accurately delineated” the boundary of the reservation and found “no ‘gross error’ requiring a resurvey.” Appendix C, attached to Plaintiffs’ Complaint, filed October 20, 1983.

With knowledge of that ruling, Plaintiff continued to pursue its claims in Docket No. 22-D without specific mention of the Wallace Survey boundary dispute. The Indian Claims Commission issued Findings of Fact and an Order in Docket No. 22-D on June 27, 1969. In its Order, the Commission stated, inter alia, the following conclusions of law:

4. That on May 1, 1873, the United States extinguished, without the payment of compensation, said Indian title to the lands exclusively used and occupied by the Western Apache Indians outside the enlarged White Mountain Indian Reservation established by the Executive Orders of November 7, 1871, and December 14, 1872.
5. That by the Executive Orders of August 5, 1873, July 21, 1874, April 27, 1876, January 26, 1877, March 31, 1877, and December 22, 1902, the United States successively extinguished, without the payment of compensation, said Indian title to lands exclusively used and occupied by the Western Apache Indians inside the said enlarged White Mountain Indian Reservation as of the above dates.
6. That under Sec. 2(4) of the Indian Claims Commission Act plaintiffs are entitled to recover from the defendant on behalf of the Western Apache Indians the fair market value of the area set forth in Finding of Fact No. 11 as of the dates when said Indian title was extinguished by the United States.

Interlocutory Order, June 27, 1969; page 221 of Exhibit 3 attached to Reply Memorandum in Support of Federal Defendants’ Motion to Dismiss, filed April 10, 1984.

In order to make this Finding, the Commission necessarily had to focus upon the very Wallace Survey boundary that is at issue in this action. Subsequent to this order, the parties reached in 1972 a Stipulation for Entry of Final Judgment, which provided the Tribe with a settlement in the amount of $4.9 million.

Plaintiff argues here that a taking of the area in dispute could not have occurred solely on the basis of an erroneous survey, and as such, it was not, and could not have been, the subject of a claim before the Indian Claims Commission. Plaintiffs’ position is unsound. The Indian Claims Commission did rule that there had been a taking of all lands lying outside of the boundary of the reservation. Conclusion of Law #4, Interlocutory Order, June 27, 1969, supra. That boundary is the Wallace Survey boundary. Memorandum of Solicitor, supra. Plaintiff did not challenge the Solicitor’s ruling in its Docket No. 22-D action. If Plaintiff disagreed with that ruling, the Tribe had knowledge thereof, and could and should have raised the issue in their Docket No. 22-D action. The legislative history of the Indian Claims Commission Act clearly illustrates that the Commission was created expressly for the resolution of the type of claim Plaintiff attempts to raise here:

Some Indian claims go back many years in their origins, but the years do not always wipe out past mistakes. Thus, in 1894, a boundary line was drawn around the Warm Springs Reservation in Oregon which was supposed to define accurately the lands guaranteed to the Indians by treaty in 1855. A mistake was made in drawing this line. The result is that there is a piece of national forest which is outside the Indian boundary that should be inside the Indian boundary. There is no dispute about the facts. The Indians look over the erroneous boundary line to the timber and grass on the land that was promised them. The fact that the error was made many years ago does not make the present generation of Indians any less eager to correct a mistake which the Federal Government admits it made but for which no adequate' judicial remedy has yet been provided.

Congressional Comments, supra, at 1351.

The Act clearly contemplates, and in fact demands the submission of such claims to the Indian Claims Commission. Plaintiffs brought their claims before the Commission in Docket No. 22-D as well as Docket No. 22-H, just as Congress had intended.

Further, and most significantly, the Stipulation for Entry of Final Judgment in Docket No. 22-D provided that:

3. Entry of final judgment in said amount shall finally dispose of all rights, claims or demands which the plaintiffs have asserted or could have asserted with respect to the subject matter of the suit in Docket No. 22-D, and plaintiffs shall be barred thereby from asserting any such rights, claims or demands against defendant in any other or future action.

Findings of Fact on Compromise Settlement, September 12, 1972; p. 402 of Exhibit 2, attached to Reply Memorandum in Support of Federal Defendants’ Motion to Dismiss, filed April 10, 1984 (emphasis added).

In reaching their settlement, Plaintiff relied upon the allegedly erroneous boundary in obtaining a $4.9 million settlement; it should now be held to such a boundary by its own stipulation as well as under the principles of res judicata.

In summary, the Indian Claims Commission was created for the purpose of hearing all Indian grievances arising prior to 1946. The boundary dispute presently before this Court is exactly the type of claim Congress intended the Commission to hear. The present claim arose from a survey occurring in 1887. Plaintiff was not unaware of this boundary dispute during the pendency of its Docket No. 22-D action, as is evidenced by its request for a decision on the matter by the Solicitor for the Department of the Interior. Neither the findings by the Commission nor the stipulation entered into by the parties reflect any dispute by Plaintiff in regard to the boundary of the reservation. Any claims concerning this boundary could and should have been brought in that action. Furthermore, Plaintiff agreed to accept $4.9 million which disposed of “all rights, claims or demands which [the Tribe] asserted or could have asserted____” Plaintiff is barred from bringing this action in Federal Court.

Based upon -the above discussion, this Court will grant Defendants’ Motion to Dismiss as to the portion of Plaintiff’s Complaint concerning the 14,000 acres. Plaintiff’s request for injunctive relief to prevent further trespass is therefore denied as moot.

Plaintiff further alleges in its Complaint that the Secretary of the Interior and other federal government officials are unable to adequately represent the Tribe in its water adjudication in the state court due to a conflict of interest between the Government’s representation of the Tribe’s interest and the representation of the various federal reclamation projects. They allege that the conflict of interest has resulted in gross mismanagement of the reservation by the Secretary of the Interior, causing serious damage to their lands.

The above issue is well-settled. Two recent decisions by the United States Supreme Court clearly reject any notion of such a conflict of interest. In Nevada v. United States, 463 U.S. 110, 103 S.Ct. 2906, 77 L.Ed.2d 509 (1983), the Court stated: “The Government does not ‘compromise’ its obligation to one interest that Congress obliges it to represent by the mere fact that it simultaneously performs another task for another interest that Congress had obligated it by statute to do.” Id. at 2906. See also Arizona v. California, 460 U.S. 605, 103 S.Ct. 1382, 1396, 75 L.Ed.2d 318 (1983). Thus, Plaintiff has failed to state a sufficient claim upon which relief may be granted regarding any alleged mismanagement due to a conflict of interest in representation by the Government.

The above-cited eases are also germane to the question of Plaintiff’s request for an injunction preventing the United States Attorney General from representing the Tribe (as is this official’s duty) in state water adjudications. Plaintiff argues that adequate representation of their water rights is not possible due to a conflict of interest.

The Plaintiff Tribe has previously attempted to bar such representation by filing an action in the United States District Court for the District of Columbia. The Court determined that no statute exists under which the Court could exercise jurisdiction over the Attorney General’s exercise of litigating judgment. This decision was affirmed by the Court of Appeals of that circuit in White Mountain Apache Tribe v. Smith, 675 F.2d 1341 (D.C.Cir.1982), cert. denied, White Mountain Apache Tribe v. Smith, — U.S. --, 103 S.Ct. 3569, 77 L.Ed.2d 1410 (1983). Based upon the decisions in Nevada v. United States, supra, and Arizona v. California, supra, regarding conflicts of interest, as well as the decision in the District Court for the District of Columbia which rejected Plaintiff’s previous attempt to prevent such representation, that portion of Plaintiff’s Complaint requesting injunctive relief prohibiting representation by the Attorney General of the Indian water rights in the state adjudication is dismissed.

In regard to Plaintiff’s final claim that the state court has no jurisdiction to adjudicate its federally reserved water rights, this Court awaited the ruling in Arizona v. San Carlos Apache Tribe of Arizona, 463 U.S. 545, 103 S.Ct. 3201, 77 L.Ed.2d 837 (1983), prior to deciding the case at hand. In that case, the U.S. Supreme Court held:

[Ajssuming that the state adjudications are adequate to quantify the rights at issue in the federal suits, and taking into account the McCarran Amendment policies we have just discussed, the expertise and administrative machinery available to the state courts, the infancy of the federal suits, the general judicial bias against piecemeal litigation, and the convenience to the parties, we must conclude that the District Courts were correct in deferring to the state proceedings.

Id. at 3215.

This Court, in its Order of May 11, 1984, requested that the parties file supplemental briefs discussing the adequacy of the state court proceedings in adjudicating federal water rights, a question left open by the U.S. Supreme Court in Arizona v. San Carlos, supra, 103 S.Ct. at 3215, n. 20. Having considered those briefs, this Court will follow the mandate of the U.S. Supreme Court and the Ninth Circuit Court of Appeals by dismissing this action in favor of a state court determination of jurisdiction. In Northern Cheyenne Tribe v. Adsit, 721 F.2d 1187 (9th Cir.1983), the Ninth Circuit cited and applied the Supreme Court’s ruling in Arizona v. San Carlos, supra, in stating:

The question of jurisdiction under state law is one to be definitively resolved by the state courts, as the Supreme Court has held. Id. [103 S.Ct.] at 3210; see also id. at 3215 n. 21 (contemplating a state court ruling on the jurisdictional question). Any state court desiring to adjudicate Indian water rights would of necessity rule on its jurisdiction to do so; there is thus no need for us, or the district court, to reach that issue. Moreover, the question of adequacy of the state proceedings is one best decided by the state courts in the first instance. This course of actions seems to be what the Court contemplated when it stated, ‘State courts, as much as federal courts, have a solemn obligation to follow federal law. Moreover, any state court decision alleged to abridge Indian water rights protected by federal law can expect to receive ... a particularized and exacting scrutiny____' Id. at 3216. We therefore will not consider the question of adequacy prior to conclusion of the state court proceedings, and we instruct the district courts to do the same.

Id. at 1188. While it is apparently undecided whether the Tribe will have future access to the federal district court for the purposes of contesting the state court’s adjudication, see Arizona v. San Carlos Apache Tribe of Arizona, supra, 103 S.Ct. at 3220 (Stevens, J., dissenting), which point of view does not specifically seem to have been disposed of by the majority opinion, the majority opinion in that case did state: “[R]esort to the federal forum should remain available if warranted by a significant change of circumstances, such as, for example, a decision by a state court that it does not have jurisdiction over some or all of these claims after all.” Arizona v. San Carlos Apache Tribe of Arizona, supra, 103 S.Ct. at 3215, n. 20.

Pursuant to the mandate set forth in Northern Cheyenne, supra, as well as the decision in Arizona v. San Carlos Apache Tribe of Arizona, supra, this Court will dismiss Plaintiff’s Complaint as to its allegations of lack of jurisdiction in the state court to make determinations concerning federal water rights. Plaintiff may, if it so chooses, attempt to adjudicate such claims of inadequacy before the state tribunal.

In conclusion, this Court will dismiss Plaintiff’s Complaint in its entirety, thereby granting Federal Defendants’ Motion to Dismiss.

Based upon the foregoing:

IT IS ORDERED that the Federal Defendants’ Motion to Dismiss, filed February 9, 1984 is granted. Plaintiff’s Complaint, filed October 20, 1983, is dismissed.

      . In Docket No. 22-H, a pending Court of Claims action, Plaintiff has brought a claim for monetary damages based upon almost identical allegations as those presented herein. The similarity of the claims is reflected in Exhibit 2, attached to the Supplemental Memorandum in
      Support of Federal Defendants’ Motion to Dismiss, filed June 14, 1984, which consists of the Response of Plaintiff White Mountain Apache Tribe to Interrogatories Submitted by Defendant United States of America, filed in Docket No. 22-H. Plaintiff there states:

        To each question, Plaintiff Tribe makes an affirmative reply. Yet the inquiries fail to approach the real issue presented here: Is the United States Trustee liable for the destruction, through its maladministration, of the once fine grazing lands and for the sheet and gully erosion endemic throughout the White Mountain-Fort Apache Indian Reservation which is literally being washed away due to the malfeasance of the Trustee?
      The Tribe refers to the law set forth above and declares that there is an absolute liability owing to Plaintiff Tribe which carries with it two obligations: (1) to pay monetary damages for the continuing wrongs, and (2) to rehabilitate and restore the Reservation, all in keeping with the Covenant entered into between Plaintiff Tribe and Vincent Colyer.
      In view of the similarity of these claims with those presently before this Court, dismissal of this action does not leave Plaintiff without a possibility of recovery for such claims.