text:
    AIR LINE PILOTS ASSOCIATION INTERNATIONAL, Plaintiff, v. UNITED AIR LINES, INC., Defendant.
    No. 85 C 4765.
    United States District Court, N.D. Illinois, E.D.
    Sept. 5, 1985.

      Stephen P. Sawyer, Robert P. Casey, United Air Lines, Inc., Elk Grove Tp., Ill., Joel H. Kaplan, Valerie J. Hoffman, Gary S. Kaplan, Seyfarth, Shaw, Fairweather & Geraldson, Chicago, Ill., for defendant.
    Michael Abram, Cohen, Weiss and Simon, New York City, Michael Erp, Katz, Friedman, Schur & Eagle, Chicago, Ill., for plaintiff.
   ORDER

BUA, District Judge.

Before the Court are motions filed by both ALPA and United to amend the Court’s August 1, 1985 Order, 614 F.Supp. 1020. Also pending is a joint stipulation to amend submitted by the parties. For the reasons stated below, plaintiff’s motion to amend is denied and defendant’s motion is granted.

ALPA seeks to amend the Court’s Order to include an award of back pay for the Group of 500 student pilots ordered reinstated by the Court on August 1, 1985. United seeks to amend the Court’s Order, which required “immediate” reinstatement of the Group of 500, to allow United to place the Group of 500 on a preferential hiring list and reinstate Group members as positions become available in the future. United argues that the Group of 500 were permanently replaced during the strike and therefore should not be immediately reinstated to their former positions. United estimates that if Group members are placed on a preferential hiring list, all of the Group of 500 will be hired by August of 1986.

ALPA’s arguments in support of its motion and in opposition to United’s motion are without merit. First, the pilots’ strike was neither “caused” nor “prolonged” by an unfair labor practice by United. Although the Court has found that United violated the RLA by its treatment of the Group of 500 and its attempt to rebid the airline, those violations were not sufficient to constitute an unfair labor practice strike. Although United’s positions on these two issues undoubtedly “aggravated” the strike, they did not “prolong” it, as that term is defined. See Allied Industrial Workers Local No. 289 v. N.L.R.B., 476 F.2d 868, 882 (D.C.Cir.1973). See also Road Sprinkler Fitters Local No. 669 v. N.L.R.B., 681 F.2d 11, 20 (D.C.Cir.1982); N.L.R.B. v. Moore Business Forms, 574 F.2d 835, 840 (5th Cir.1978); N.L.R.B. v. Jackson Press, Inc., 201 F.2d 541, 546 (7th Cir.1953). Three other issues, in addition to the Group of 500 and the rebid, separated the parties following the tentative agreement on the economic package. See August 1, 1985 Order, Finding of Fact H 71.

Furthermore, United has not waived its right to raise the permanent replacement defense. First, the Smith affidavit, which is uncontradicted, is not new evidence but merely updates and clarifies testimony given at trial. Second, United argued before, during and after trial that it had the right to hire and retain permanent replacements in response to the strike. United’s failure to advance the permanent replacement issue with reference to the Group of 500 is understandable given that it was not until the Court issued its August 1 Order that the Group of 500 were first considered employees of United. Since there was sufficient evidence at trial to support United’s permanent replacement defense even without the later-filed Smith Affidavit, ALPA was not unfairly prejudiced by United’s post-trial permanent replacement argument. ALPA does not contest the accuracy of the evidence, but rather argues that the Group of 500 should be reinstated despite their permanent replacement because of an unfair labor strike. The unfair labor strike issue, however, was raised at trial and is now rejected by the Court. Since the Group of 500 were properly replaced during the strike, they are not entitled to back pay, but rather back-dated seniority and preferential hiring in the future.

Accordingly, the Court’s August 1, 1985 Order is amended. Finding of Fact 82 is amended as follows (bracketed text is deleted and underscored text is added):

82. United expects to expand and will need additional pilots. Tr. 121, 551. [United has already offered second officer jobs to nearly 700 additional pilots, of whom only about 300-350 entered training during the strike. Tr. 246-47.] Beginning on or about May 17, 1985 and continuing thereafter during the strike, United made offers of permanent employment to replacement pilots, 539 of which offers were accepted prior to the end of the strike. Tr. 246-48; Smith Affidavit, ¶ 2. Out of the 539 offers, 267 permanent replacements entered training during the strike. Smith Affidavit, ¶3. Although 114 of the permanent replacements have yet to begin their training, the delay in commencement of their training is due to the fact that United’s training facilities have been utilized to their maximum capacities. The remaining pilots would enter training after the strike was settled. Nonetheless, United’s position as expressed to the Court is that it will not employ any of the Group of 500 who refused to cross the picket lines during the strike. Tr. 56. United’s policy is that “this Group of 500 will not be employed by United.” Tr. 121. The only possible exception to this policy is that if the individual did not report on May 17 due to “personal hardship” or “extenuating circumstances,” he or she would be “offered employment.” Tr. 251. United, however, will not consider those who failed to report on May 17 “if their reason for failing to show up for work was a refusal to cross the picket line.” Tr. 366.

The following Conclusions of Law are added immediately following Conclusion of Law 24:

24a. Although the “Group of 500” were employees of United on May 17, 1985, beginning on that date and continuing through the strike United lawfully hired 539 permanent replacements for the striking members of the Group of 500. See Brotherhood of Ry. and Steamship Clerks v. Florida East Coast Ry. Co., 384 U.S. 238, 244 [86 S.Ct. 1420, 1423, 16 L.Ed.2d 501] (1966); NLRB v. Mackay Radio & Telegraph Co., 304 U.S. 333, 345-46 [58 S.Ct. 904, 910-11, 82 L.Ed. 1381] (1938); Flight Engineers Int’l. Ass’n. v. Eastern Airlines, Inc., 359 F.2d 303, 310-11 (2d Cir.1966); Air Line Pilots v. Southern Airways, 49 L.R.R.M. 3145, 3152 (S.D.Tenn.1962). Permanent replacements hired from outside the company, unlike striking pilots who cross over, need not actually begin working in order to retain their jobs following the conclusion of a strike. Cf. N.L.R.B. v. Cutting, Inc., 701 F.2d 659 (7th Cir.1983) with International Assoc. of Machinists v. J.L. Clarke Co., 471 F.2d 694 (7th Cir.1972). See also H. & F. Binch Co. v. N.L.R.B., 456 F.2d 357, 362 (2d Cir.1972). 24b. An employer may refuse to reinstate strikers if the employer establishes that replacements for the strikers were hired on a permanent basis before the employer received the strikers’ offer to return to work. Cutting, supra, 701 F.2d at 662. Although the replacement worker must have accepted the company’s offer of permanent employment, “actual arrival on the job should not be required if an understanding has been reached that this will occur at a reasonably early date.” H. & F. Binch Co., supra, 456 F.2d at 362.
United need not displace the 539 permanent replacements to create positions for members of the Group of 500 who elected to honor ALPA’s picket lines. Mack-ay Radio, supra, 304 U.S. at 345-46 [58 S.Ct. at 910-11]. Rather, the latter group of employees are entitled to preferential reinstatement for all positions which become available in the future. See N.L.R.B. v. Fleetwood Trailer Co., 389 U.S. 375, 381 [88 S.Ct. 543, 547, 19 L.Ed.2d 614] (1967). United presently estimates that it will be able to offer reinstatement to all members of the Group of 500 before August of 1986.

Conclusion 5(a) is amended as follows (bracketed text is deleted and underscored text is added):

5(a) directed and enjoined to restore the “Group of 500” pilots and members of the Class of ’79 who elected to respect ALPA picket lines to the status of employees on inactive status, [and to assign them immediately to line pilot service if they completed their training, and otherwise permit them] and to accord preferential rehire rights to them whereby they shall be entitled, upon the opening of positions for which they are qualified and upon the completion of their training, to be assigned to line pilot service. Such individuals shall be permitted to complete their training without discrimination, and then enter line service, with seniority in all cases accrued from May 17, 1985. Seniority for members of the Class of ’79 shall be determined by the adjusted seniority date established by their recall prior to May 17, 1985.

CONCLUSION

Plaintiffs motion to amend the Court’s August 1, 1985 Order is denied. Defendant’s motion to amend the Court’s August 1, 1985 Order is granted.

IT IS SO ORDERED.


source: Caselaw Access Project

author: MARQUEZ, District Judge.

license: Public Domain

text:
    TUCSON MEDICAL CENTER, et al., Plaintiffs, v. Margaret M. HECKLER, Defendant.
    No. CIV 84-0898 TUC ACM.
    United States District Court, D. Arizona, Tucson Division.
    Sept. 5, 1985.

      Tracy P. Nuckolls, Jones, Dickerman, Nuckolls, Edwards & Smith, Tucson, Ariz., Patrie Hooper, John R. Hellow, Weissburg & Aronson, Los Angeles, Cal., for plaintiffs.
    Don B. Overall, Asst. U.S. Atty., Tucson, Ariz., and Deborah M. Chaskes, Office of General Counsel, Dept. of Health and Human Services, Washington, D.C., for defendant.
   ORDER

MARQUEZ, District Judge.

This is a suit by eleven Arizona hospitals against the Secretary of Health and Human Services. The case is before the court on the defendant’s motion to dismiss.

Plaintiffs submitted claims for reimbursement under the Social Security Act, 42 U.S.C. § 1395 et seq. for services provided to elderly and disabled patients. The Intermediary calculated the reimbursement under the Provider Reimbursement Manual, Health Insurance Manual 15, Section 2345. That provision requires patients in the labor and delivery rooms at the census hour to be included in the total number of patients receiving general hospital benefits. The added costs of the labor and delivery rooms are not included in the figure of total patient services. It is the ratio of these figures that determines the amount of the reimbursement. Plaintiffs contend that the inclusion of these patients results in an inflated patient total and reduces the reimbursement contrary to the intent of Congress and the statute.

The hospitals appealed the decision to the Provider Reimbursement Review Board. That Board rejected the Intermediary’s determination and re-calculated the benefits. The Board also rejected affidavits submitted by the administration. Those affidavits tried to show that the inflated patient total would be offset by the later increase in costs incurred by post-delivery patients. The agency and Intermediary appealed the Board’s decision to the Administrator.

The administrator determined that the Board should have given more weight to the affidavits submitted by the agency and remanded the case to the Board for further development of this evidence. The hospitals then requested the Board to determine whether or not it had the authority to review the propriety of the remand order. The Board decided that it lacked the authority and granted the right for expedited review to the courts. This suit was then filed.

The defendant contends that this court lacks jurisdiction to decide this case because the remand order vacated any agency decision. Since no decision exists, the Secretary contends, this court has nothing to review.

Under 42 U.S.C. § 1395oo (f)(1), the Board can grant authority to file suit to expedite review of matters that are questions of law. The propriety of the remand order is a question of law and the Board determined its lack of authority in accordance with the statute. Accordingly, this court has jurisdiction to determine the issue of the propriety of the remand. The motion to dismiss is therefore denied.

The authority to remand is not found in the statutes. See, 42 U.S.C. § 1395oo (f)(1). Rather, the authority is found in the regulations, 42 C.F.R. § 405.1875. This is designed to allow the Secretary or as in this case, her designated administrator, the opportunity to reach a decision based on a full record. The regulations themselves detail the procedures for remand, the effect of a remand order and place limitations on the ability of the Secretary to issue a remand decision. A remand is not proper for the “Presentation of evidence existing at the time of the Board hearing that was known or reasonably could have been known.” 42 C.F.R. § 405.1875(h)(2)(i) (1984).

The remand order has been attached to the complaint. Although the order is framed so as to direct the “further development” of the evidence,' an examination of the order indicates to this court that the order is more in the nature of a reversal. Both the District of Columbia Circuit and the Ninth Circuit Courts of Appeal have rejected, as not relevant, the evidence that the administration asserts in this case through the affidavits. See, Mt. Zion Hospital and Medical Center v. Heckler, 758 F.2d 1346 (9th Cir.1985) and St. Mary of Nazareth Hospital Center v. Heckler, 760 F.2d 1311 (D.C.Cir.1985). The Board chose to follow these cases while the Administrator chose to follow decisions by other Circuits. The defendant indicated at oral argument of this motion that the Secretary was not bound by either the Ninth Circuit or D.C. Circuit opinion. This court will not determine at this time whether the Agency’s “non-acquiesence” in these cases is appropriate or not.

It is apparent that the remand was improper. It requires the Board to reconsider evidence that it has already considered and rejected. There can be no dispute that the evidence existed at the time of the Board hearing and that the evidence was known to everyone at that time. The remand is therefore beyond the scope of authority granted the Administrator through the agency’s own regulations.

This court will not engage in a “ping-pong” match with the Administrator as the plaintiffs have suggested will happen if a remand occurs here. From the record, it appears that this action has been stalled at the administrative level for several years and has gone back and forth between the Administrator and the Board at least one time before this instance. Under the law, however, the Administrator should be given the opportunity to review the propriety of the Boards decision on the merits before judicial intervention. Remand of this case is therefore appropriate for the limited purpose of allowing the Administrator to determine the merits and either affirm, reverse or modify the decision of the Board.

IT IS ORDERED that the defendant’s motion to dismiss is denied.

IT IS FURTHER ORDERED that the order of the Administrator remanding this case to the Provider Reimbursement Review Board dated September 18, 1984 is vacated.

IT IS FURTHER ORDERED that this action is remanded to the Administrator with instructions to reverse, affirm or modify the decision of the Provider Reimbursement Review Board of August 1, 1984 within 60 days from the date this order is filed or the decision of the Board will become final.


author: CALDWELL, District Judge.

text:
    Samuel E. BUSSARD, Jr., and John R. Bussard, Plaintiffs, v. Raymond E. NEIL, Charles Wheeler, Glen A. Walp, and Cyril Laffey, individually & in their official capacities, Defendants.
    Civ. A. No. 84-1531.
    United States District Court, M.D. Pennsylvania.
    Sept. 6, 1985.

      Paul J. Dellasega, Ira H. Weinstock, Markian R. Slobodian, Harrisburg, Pa., for plaintiffs.
    Gwendolyn Mosley, Dist. Atty. Gen., Harrisburg, Pa., for defendants.
   MEMORANDUM

CALDWELL, District Judge.

I. Introduction

Plaintiffs, Samuel E. Bussard, Jr. and John R. Bussard, filed a complaint under 42 U.S.C. § 1983 alleging that Raymond E. Neil, a Pennsylvania State Trooper, maliciously prosecuted plaintiffs in violation of their civil rights by issuing numerous traffic citations to plaintiffs without probable cause and with malice. Trooper Neil’s supervisors, Lieutenant Charles Wheeler, Captain Glen A. Walp and Acting State Police Commissioner Dellarciprete are named as defendants under the theory of respondeat superior. The complaint alleges that defendants’ actions entitle plaintiffs to injunctive, compensatory and punitive relief. Plaintiff also asserted a pendent state tort claim for malicious prosecution.

On July 25, 1985, defendants filed a motion for summary judgment. Plaintiffs concurred in the motion as it related to defendant Neil’s superiors. Accordingly, we will grant summary judgment for defendants Wheeler, Walp, and Dellarciprete. Trooper Neil, therefore, is the sole, remaining defendant in this action.

Summary judgment is only appropriate when there is no genuine issue of material fact and when the moving party is entitled to judgment as a matter of law. See Fragale & Sons Beverage Co. v. Dill, 760 F.2d 469 (1985). The material facts of this case are not in dispute. Accordingly, it is an appropriate one for summary judgment. Having reviewed the briefs filed on the motion, the pleadings and supporting affidavits, for the reasons set forth below, we grant summary judgment for defendant Neil on the civil rights claim and dismiss plaintiffs’ state law claim for lack of subject matter jurisdiction.

II. The Facts

Trooper Neil issued two citations to Samuel Bussard on September 2, 1983 because his tractor-trailer allegedly violated certain registration requirements of the Pennsylvania Motor Vehicle Code. On September 22, 1983, Trooper Neil stopped the same tractor-trailer and issued seven more citations to Samuel Bussard. On September 30, 1983, the District Justice found Samuel Bussard guilty of all of the cited violations except one.

On December 8, 1983, John Bussard, while driving the same tractor-trailer, was stopped by Trooper Neil and charged with four violations of the Motor Vehicle Code. On December 14, 1983, the District Justice found John Bussard guilty of the four violations. Plaintiffs appealed their convictions to the Court of Common Pleas of Bedford County. Upon a trial de novo, the court on March 12, 1984, found plaintiffs not guilty of the alleged violations. Subsequent to the court’s ruling, Trooper Neil issued additional citations against Samuel Bussard for different violations of the Pennsylvania Motor Vehicle Code. Upon these facts plaintiffs allege that Trooper Neil has maliciously prosecuted them in violation of their' rights under Pennsylvania law and their civil rights under 42 U.S.C. § 1983.

III. Discussion

A. Plaintiffs’State Law Claims

Plaintiffs assert that the doctrine of pendent jurisdiction empowers this court to rule upon their state law claim for malicious prosecution. We do not agree. The Supreme Court recently determined in Pennhurst State School and Hospital v. Halderman, 465 U.S. 89, 104 S.Ct. 900, 79 L.Ed.2d 67 (1984) (“Pennhurst II”), that the Eleventh Amendment bars suits in federal court against state officials brought on the basis of state law when, as here, the relief sought would have a direct impact on the state itself. Though pendent jurisdiction might otherwise be appropriate, “ ‘[t]he Eleventh Amendment is an explicit limitation on the judicial power of the United States.’ ” Id. at —, 104 S.Ct. at 918, 79 L.Ed.2d at 91 (quoting Missouri v. Fiske, 290 U.S. 18, 25, 54 S.Ct. 18, 20, 78 L.Ed. 145, 149 (1933)). This constitutional limitation on our jurisdiction renders insignificant the doctrine of pendent jurisdiction. Allegheny County Sanitary Authority v. United States Environmental Protection Agency, 732 F.2d 1167, 1173 (3d Cir.1984). Accordingly, we must dismiss plaintiffs’ state law claim for lack of subject matter jurisdiction.

B. Plaintiffs’ Civil Rights Claim.

Plaintiffs allege that defendant Neil has maliciously prosecuted them in violation of their civil rights under 42 U.S.C. § 1983 when he issued the traffic citations to them. It is clear in the Third Circuit that malicious prosecution is actionable under 42 U.S.C. § 1983. Losch v. Borough of Parkesburg, 736 F.2d 903, 907 (3d Cir. 1984). The tort rises to constitutional dimensions because it results in a denial of due process. See DiMaggio v. O’Brien, 497 F.Supp. 870, 878 (E.D.Pa.1980).

We must reject plaintiffs’ claims, however, because they have failed to establish all the elements of a malicious prosecution action. Malicious prosecution can be established only if plaintiffs can prove that (1) defendant initiated charges against them (2) without probable cause (3) out of malice or for a purpose other than bringing plaintiffs to justice and (4) that plaintiffs ultimately were acquitted of all charges. Curran v. Dural, 512 F.Supp. 699, 703 (E.D.Pa.1981).

The fatal defect in plaintiffs’ case lies in the element of probable cause. Plaintiffs cannot show an absence of probable cause for Trooper Neil’s actions because plaintiffs were summarily convicted of the charged violations by the District Justice. The summary convictions, though later reversed upon a trial de novo by the Court of Common Pleas, are sufficient proof of cause to defeat an action for malicious prosecution. Lynn v. Smith, 193 F.Supp. 887, 890 (W.D.Pa.1961), and in turn a civil rights action based upon it.

A conviction, upon examination by a judicial officer, conclusively establishes the existence of probable cause, regardless of whether the conviction is subsequently reversed on appeal. See Cramer v. Crutchfield, 648 F.2d 943, 945 (4th Cir. 1981) (interpreting Virginia law); Gowin v. Altmiller, 455 F.Supp. 743, 746 (D.C.Idaho 1978), aff’d 663 F.2d 820 (9th Cir.1981) and Diminnie v. United States, 522 F.Supp. 1192, 1195 (E.D.Mich.1981), aff’d 728 F.2d 301 (6th Cir.1984). But see Williams v. City of New York, 508 F.2d 356 (2d Cir. 1974) (a conviction ultimately upset is accorded only the force of prima facie evidence of probable cause which can be overcome in a suit for malicious prosecution). The neutral and experienced opinion of a judicial officer, here a District Justice, that a person was guilty of the charges establishes the presence of probable cause. Since probable cause has been established, plaintiffs’ claim of malicious prosecution must fail. Accordingly, we will enter judgment for defendant on the civil rights claim.

      . Dellarciprete is the successor in office to the original defendant, Cyril Laffey.

      . Significantly, plaintiffs do not allege that the convictions were obtained by fraud, perjury or other corrupt means. See Martinez v. E.J. Korvette, 335 F.Supp. 886 (E.D.Pa.1971), aff’d, 477 F.2d 1014 (3d Cir.1973).


author: NANGLE, Chief Judge.

text:
    Faisal Rafat GHOSEIN, Plaintiff, v. UNITED STATES DEPARTMENT OF AGRICULTURE, Defendant.
    No. 84-1384C(1).
    United States District Court, E.D. Missouri, E.D.
    Sept. 11, 1985.

      Donald V. Nangle, St. Louis, Mo., for plaintiff.
    Henry J. Fredericks, Asst. U.S. Atty., St. Louis, Mo., for defendant.
   MEMORANDUM

NANGLE, Chief Judge.

Plaintiff, Faisal Rafat Ghosein, brought this action in the form of a trial de novo. He seeks reversal of the decision of the Secretary of Agriculture which disqualified him from participation in the Food Stamp Program. 7 U.S.C. § 2011 et seq.

This case was tried to the Court sitting without a jury. The Court having considered the pleadings, the testimony, the documents and evidence, and the stipulations of the parties, and being fully advised in the premises, hereby makes the following findings of fact and conclusions of law, as required by Rule 52 of the Federal Rules of Civil Procedure. Fed.R.Civ.P. 52.

A. FINDINGS OF FACT

1. Plaintiff Faisal Rafat Goshein was a resident of the State of Missouri and is the owner of a store, North and South Market. He is a participant in the Food Stamp Program under 7 U.S.C. § 2011 et seq.

2. Defendant United States Department of Agriculture is an agency of the Federal Government which is charged with administering and enforcing the Food Stamp Program.

3. In 1977, plaintiff purchased a store with his brother-in-law, Shawqui Jaouni, known as the Joe and Brother Market, Inc. The owners made an application to the Department of Agriculture for participation in the Food Stamp Program. The application was accepted and the North and South Market became an eligible recipient of food stamps.

4. In February, 1980, plaintiff purchased the entire business from Jaouni, and renamed the store North and South Market.

5. Plaintiff informed the Department of Agriculture of the name change. The Government’s records do not reflect the change in ownership, however. Mr. Ghosein did not intentionally conceal the change in ownership from the Government or purposefully evade any of the Government’s regulations regarding the change in ownership.

6. On August 19, 1982, Detective Michael Williams of the University City, Missouri Police Department entered plaintiff’s store carrying ten $50.00 books of food stamp coupons. Detective Williams was dressed in street clothes.

7. Williams approached plaintiff, displayed the food stamps and proposed that plaintiff purchase the stamps for a specified sum. Williams delivered the coupons to plaintiff, but plaintiff returned them all to Williams immediately. In addition, plaintiff instructed Williams to leave the store.

8. A few minutes later Shawqi Jaouni entered the store. Williams approached Jaouni and a conversation ensued. The two men retreated to the back room of the store where an exchange of food stamps for cash took place. Thereafter, Jaouni and Williams exited the market and continued their conversation in the parking lot.

9. Throughout the Jaouni/Williams discussions, plaintiff was attendant to his store. He had no knowledge of the food stamp transaction at the rear of his store.

10. The following day Detective Williams returned to the North and South Market to find an acquaintance of plaintiff, Najeib Jabber, in the store. A few minutes later Jabber followed Williams out of the store and transferred some cash and jewelry to Williams in exchange for food stamps. Plaintiff did not participate in the transaction, and had no knowledge of it. Nor did plaintiff stage the meeting.

11. Upon learning of the Jabber transaction, several police officers entered the North and South Market and retrieved an empty food stamp coupon cover from Mr. Ghosein’s desk. In addition, two $1.00 food stamp coupons bearing'serial numbers of coupons which Detective Williams had previously carried into the store were discovered in the cash register. The evidence is not convincing that Mr. Ghosein was responsible for depositing the coupons and the cover in their respective localities, however.

12. The Food and Nutrition Service (FNS) disqualified plaintiff from participation in the Food Stamp Program for a period of one year on the basis of its finding that food stamp trafficking occurred at the store on August 19,1982, in violation of the Food Stamp Act of 1977, 7 U.S.C. § 2011, et seq. A subsequent review by the Secretary’s Administrative Review Office upheld the initial decision of FNS.

13. Plaintiff filed an action for reversal of the FNS decision in the Circuit Court of St. Louis County. The Government removed the action to this Court.

B. CONCLUSIONS OF LAW

This Court has jurisdiction of this case pursuant to 28 U.S.C. §§ 1331, 1441, 1442, and 7 U.S.C. § 2023(a). Plaintiff asks this Court to reverse the decision of FNS calling for his disqualification from the Food Stamp Program for a period of one year. Plaintiff is entitled to a trial de novo under 7 U.S.C. § 2023 and 7 C.F.R. § 279.10(c). See also Abdel v. United States, 670 F.2d 73 (7th Cir.1982).

The sole issue before this Court is whether FNS justifiably disqualified plaintiff from his participation in the Food Stamp Program under 7 U.S.C. § 2021(b). Plaintiff was accused by FNS of violating the provisions of 7 C.F.R. § 278.2, or accepting coupons for cash. This Court may set aside the agency action upon a finding that it is invalid. Modica v. United States, 518 F.2d 374, 376-77 (5th Cir.1975). Furthermore, this Court’s review in a trial de novo is broader than under the Administrative Procedure Act. The Court must reach its own legal and factual conclusions based upon a preponderance of the evidence. The party seeking the judicial review has the burden of proof. Id. at 377; Ramirez v. United States, 514 F.Supp. 759 (D.P.R. 1981).

This Court concludes that FNS improperly disqualified plaintiff from his participation in the Food Stamp Program. He was clearly the sole owner of North and South Market at the time of the incidents involved, and thus only those incidents in which Mr. Ghosein participated or had knowledge of can serve as a basis for the disqualification of North and South Market from food stamp participation. This Court is not convinced that Mr. Ghosein was responsible for, or had knowledge of any of the alleged instances of food stamp trafficking in his store.

The evidence in support of this conclusion is Mr. Ghosein’s testimony that he ordered Williams out of his store when Williams offered the food stamps to plaintiff in exchange for money. The Detective even concedes that Ghosein twice refused the proffered sale. With respect to the accusation that Ghosein retained one $50.00 book of food stamps, Williams could not verify that he observed Mr. Ghosein retain the book. The Court is not convinced that plaintiff observed any of the transactions in question or had knowledge as to how the two marked food stamps or book cover entered his possession. Thus, plaintiff has established by a preponderance of the evidence that the Secretary of Agriculture wrongfully disqualified him from participation in the Food Stamp Program. Modica v. United States, 518 F.2d at 377; Ramirez v. United States, 514 F.Supp. at 763.

Finally, plaintiff filed a motion in limine prior to trial to exclude any evidence concerning the Jabber incident because the Secretary did not rely upon that incident in disqualifying plaintiff from food stamp participation. In a trial de novo, however, the Government is not restricted to the evidence presented at the administrative level. United States v. Texas Pipe Line Co., 528 F.Supp. 728, 731-32 (E.D.Okla.1978), aff’d 611 F.2d 345 (10th Cir.1979). The Government asserts that the Jabber incident establishes an attempt to violate the Government regulations and to show an absence of mistake under 7 C.F.R. § 278.6(d). This Court concludes that the evidence of the Jabber incident is admissible for the purpose of establishing Mr. Ghosein’s intent to violate the statute. In view of the judgment of the Court, plaintiff was not prejudiced by the admissibility of the evidence, however.

For these reasons, this Court concludes that plaintiff has established that the agency improperly disqualified him from participation in the Food Stamp Program.

ORDER

Pursuant to the memorandum filed herein this day,

IT IS HEREBY ORDERED, ADJUDGED and DECREED that judgment be and is entered for plaintiff, and the decision of the United States Department of Agriculture disqualifying plaintiff from participation in the Food Stamp Program be and is reversed.


author: GUNN, District Judge.

text:
    Patsy L. MILLER, Plaintiff, v. LINDENWOOD FEMALE COLLEGE, Defendant.
    No. 83-1432C(6).
    United States District Court, E.D. Missouri, E.D.
    Sept. 12, 1985.
    D. Eric Sowers, St. Charles, Mo., for plaintiff.
    Hollye Stolz Atwood, Steven D. Korenblat, Bryan, Cave, MePheeters & McRoberts, St. Louis, Mo., for defendant.
   MEMORANDUM

GUNN, District Judge.

This case comes before the Court on defendant’s motion for summary judgment on Count II of plaintiff’s complaint.

Plaintiff’s complaint arises out of three alleged incidents of sexual harassment by Lawrence Elam acting in his capacity as agent of Lindenwood College. Counts I and III assert claims under Title VII of the Civil Rights Act of 1964, 42 U.S.C. §§ 2000e, et seq. In her second count, plaintiff seeks recovery for infliction of emotional distress caused by the “outrageous conduct” of Elam in allegedly making sexual overtures to plaintiff.

Defendant has once before sought summary judgment on this count, arguing, that the alleged acts of Elam, viewed in the light most favorable to plaintiff, could not as a matter of law constitute such “outrageous conduct” as would support recovery for intentional infliction of emotional distress under Missouri law. See generally 2d Restatement § 46 comment d (actionable conduct must be “so outrageous in character, and so extreme in degree, as to go beyond all possible bounds of decency, and to be regarded as atrocious, and utterly intolerable in a civilized community”). See also Rooney v. National Super Markets, Inc., 668 S.W.2d 649 (Mo.App.1984). Defendant’s motion was denied by order of Court 2 on November 19, 1984.

Defendant now moves again for summary judgment, arguing that any injury plaintiff may have suffered as a result of actions by Elam while in the course of his employment are uniquely compensable under the Missouri Worker’s Compensation Law, § 287.020 RSMo 1978. Section 287.-020-1 provides:

Every employer subject to the provisions of this chapter shall be liable, irrespective of negligence, to furnish compensation under the provisions of this Chapter for personal injury or death of the employee by accident arising out of and in the course of his employment, and shall be released from all other liability therefor whatsoever, whether to the employee or any other person. The term “accident” as used in this section shall include, but not be limited to, injury or death of the employee caused by the unprovoked violence or assault against the employee by any person.

The Missouri courts have held that emotional injuries are compensable under the Worker’s Compensation Law, Todd v. Goostree, 493 S.W.2d 411 (Mo.App.1973), and that the intentional acts of fellow employees causing emotional distress to a complainant fall within the statutory definition of “accident.” Hood v. Trans World Airlines, Inc., 648 S.W.2d 167, 168 (Mo. App.1983). See also Russell v. United Parcel Service, Inc., 666 F.2d 1188 (8th Cir.1981).

Plaintiff seeks recovery against Lindenwood College on a theory of vicarious liability for the wrongful acts of Elam as its agent. It remains a disputed issue whether Elam was acting within the scope of his employment at the time of the alleged tortious conduct, but even viewing the facts in the light most favorable to the plaintiff, Buller v. Buechler, 706 F.2d 844, 846 (8th Cir.1983), “[t]o maintain that the injuries were suffered in the course of employment for the purpose of vicarious liability but not for purposes of workmen’s compensation legislation would seem to be inconsistent reasoning.” Sands v. Union Camp Corp., 559 F.2d 1345 (5th Cir.1977) (assault by fellow employee compensable “accident” under Georgia Worker’s Compensation statute). Either Elam acted within the scope of his employment, in which case plaintiff’s relief lies under the Worker’s Compensation Law, or he acted as an independent agent, in which cáse plaintiff has no cause of action against Lindenwood College under Count II.

Defendant’s motion for summary judgment on Count II is therefore granted without prejudice to any claim plaintiff may have in state court against Elam individually-


text:
    AETNA CASUALTY & SURETY COMPANY v. CURRENT COMPONENTS, INC., Reptron/Michigan Electronics, Serge Mandell, Herbert Myers, Anthony Benanti, Robert Ruesing, Michael Musto, Terry Gibbs, Noel Hutchins, Edward Escobedo, Prime Source, Inc., D-Mont Distributors Corp., Components Plus, Inc., Arnold Goodrich, Paul Weinstein.
    No. 83-2310C(6).
    United States District Court, E.D. Missouri, E.D.
    Sept. 16, 1985.
    Daniel E. Wilke, Brinker, Doyen & Kovacs, Clayton, Mo., for plaintiff.
    John L. Boeger, St. Louis, Mo., Anthony B. Ramirez, Coleman, Ross, Carey, Goetz & Schaaf, Inc., Clayton, Mo., Burton Green-burg, London, Greenberg & Pleban, Tim Kellett, Walter M. Clark, John F. Cowling, Armstrong, Teasdale, Kramer & Vaughan, Donald J. Stohr, Thompson & Mitchell, St. Louis, Mo., John F. Triggs, Slade & Pellman, New York City, R. Timothy Hanlon, Shaw, Pittman, Potts & Trowbridge, Washington, D.C., Michael B. McKinnis, J. Thomas Archer, Bryan, Cave, McPheeters & McRoberts, St. Louis, Mo., for defendants.
   MEMORANDUM

GUNN, District Judge.

This case is before the Court on defendant Frank Fernandez’s motion to dismiss plaintiff’s second amended complaint against him. The Court has considered the exhibits and supplementary affidavits filed by defendant with its motion, and hence has treated the motion as one for summary judgment pursuant to Rule 56, F.R.C.P.

As grounds for dismissal Fernandez asserts that plaintiff’s cause of action against him is time-barred. For the following reasons, the Court accepts defendant’s argument and holds that the statute of limitations ran on plaintiff’s complaint no later than October 23, 1983.

Plaintiff filed its first complaint in this Court on September 29, 1983, alleging that defendant employees of plaintiff’s assign- or, Emerson Electric Company (Emerson), engaged in a scheme of bid-rigging and payment of kickbacks to secure the awarding of purchase contracts by Emerson to certain electrical components manufacturers also named as defendants in this action. Plaintiff in its original complaint sought recovery on the basis of unjust enrichment, fraud, and under the Racketeer Influenced Corrupt Organizations Act (RICO), 18 U.S.C. § 1961, et seq.. Defendant Fernandez is an associate of Components Plus, Inc., one of the manufacturers allegedly involved in the bid-rigging scheme. He was not named as a defendant in plaintiffs original complaint.

From the pleadings, affidavits and exhibits filed with the Court, it appears that Emerson was aware of the conduct giving rise to the complaint at the latest on October 23, 1978. For purposes of this action as it has proceeded to this point, the cause of action on each count has been deemed to have accrued on that date. The statute of limitations, which is five years on all three counts, § 516.120, RSMo 1978; arid see Alexander v. Perkin Elmer Corp., 729 F.2d 576, 579 (8th Cir.1984) (RICO statute, which does not contain limitations period, authorizes federal courts to apply “the most applicable statute of limitations”), ran on October 23, 1983.

Plaintiff opposes the motion of defendant Fernandez, asserting that although it was aware of the general scheme of defendants by October 23, 1978, it did not know of Fernandez’s involvement until plaintiff had an opportunity to speak with defendant Terry Gibbs after filing its original complaint. Relying on the equitable tolling doctrine, plaintiff argues that the statute of limitations on the fraud and RICO counts against defendant Fernandez did not begin to run until plaintiff “discovered” Fernandez’s fraud through its conversations with defendant Gibbs, § 516.120(5), RSMo 1978. Alternatively, plaintiff argues that whether or not plaintiff had knowledge of Fernandez’s role in the alleged scheme by October 23,1978 is a question of fact not properly determinable by the Court on motion for summary judgment.

On the basis of evidence in the paper record, the Court rejects plaintiff’s arguments. In late 1978 Emerson commissioned McGinn & Agnew, Inc., a professional legal corporation, to undertake an independent investigation of contracting practices of the Emerson procurement department. McGinn & Agnew presented a preliminary report to Emerson on October 3, 1978, notifying the company of the ongoing fraud. This report identified Fernandez as a “secondary suspect” in the alleged fraudulent scheme, see Exhibit C in support of defendant’s motion to dismiss. Employees of Emerson verified the fraudulent practices on October 23, 1978, which is the date Emerson as assignor cited to plaintiff as assignee as the date of “discovery” by Emerson. See Exhibit E in support of defendant’s motion to dismiss. The statute of limitations began to run as of this “discovery”.

The above-cited exhibits document that plaintiff had grounds for suspicion of Fernandez at the time the statute began to run. Under Missouri law, suspicion of fraudulent activity commences the running of the statute where the means of discovery exist. Burr v. National Life & Accident Insurance Company, 667 S.W.2d 5 (Mo.App.1984); Briece v. Bosso, 158 S.W.2d 463, 467 (Mo.App.1942). Suspicion of fraud imposes a duty on the plaintiff to exercise “reasonable diligence” to discover the facts. Shelter Mutual Ins. Co. v. Public Water Supply Dist., 569 F.Supp. 310 (E.D.Mo.1983). “ ‘The statutory period ... [does] not await appellant’s leisurely discovery of the full details of the alleged scheme.’ Klein v. Bower, 421 F.2d 338, 343 (2d Cir.1970),” Koke v. Stifel, Nicolaus & Co., Inc., 620 F.2d 1340, 1343 (8th Cir. 1980).

Fernandez was identified as a suspect in the alleged bid-rigging scheme on October 3, 1978. Even viewing the facts in the light most favorable to the plaintiff, as we are bound to do on motion for summary judgment, Buller v. Buechler, 706 F.2d 844, 846 (8th Cir.1983), the Court finds that no genuine issue exists as to whether plaintiff was on notice as to Fernandez’s involvement. “The standard is an objective one. Hupp v. Gray, 500 F.2d 993, 997 (7th Cir.1974). What acts would alert a reasonable person to the possibility of wrongdoing? Long v. Abbott Mortgage Corp., 459 F.Supp. 108, 116 (D.Conn.1978 ),” Koke, supra at 1343.

Plaintiff has pleaded concealment of the fraud by Fernandez. The Court finds, however, that plaintiff had adequate notice of Fernandez’s involvement to name him in its original complaint. Any subsequent concealments by Fernandez cannot serve to allay plaintiff’s suspicion which commenced the running of the statute. See Harding v. Modern Income Life Insurance Company, 593 S.W.2d 568 (Mo.App.1979).

The statute of limitations ran on October 23, 1983 against defendant Fernandez as it did against the other defendants. Plaintiff’s action against him is therefore time-barred and must be dismissed.

MOTION FOR SANCTIONS

Defendant Fernandez has filed with the Court copies of letters exchanged between the parties prior to the filing of plaintiff’s second amended complaint. The correspondence discusses the applicable statute of limitations. Defendant Fernandez requested plaintiff in this exchange to forebear prosecution of its claims, suggesting that filing the time-barred actions would represent abuse of the judicial system.

In view of this extensive exchange and defendant’s forewarning of its intention to request sanctions, the Court finds that defendant’s motion for the latter has merit. Plaintiff will be assessed the costs to defendant of preparing its motion and supporting memoranda.


author: CARRIGAN, District Judge.

text:
    Thomas R. HARBERSON, Plaintiff, v. HILTON HOTELS CORPORATION, Defendant.
    Civ. A. No. 83-C-2468.
    United States District Court, D. Colorado.
    Sept. 17, 1985.

      Ajai Khandke, Denver, Colo., for plaintiff.
    James C. Ruh, Denver, Colo., for defendant.
   ORDER

CARRIGAN, District Judge.

Plaintiff Thomas R. Harberson was discharged from his job as an electrician with the defendant Hilton Hotel Corporation (Hilton). He brought this action alleging age discrimination, violation of 18 U.S.C. § 1503 (1982), outrageous conduct, and slander. Harberson has voluntarily dismissed his slander claim. Hilton has moved to dismiss the three remaining claims and Harberson has responded. The parties have briefed the issues thoroughly, and oral argument would not assist in resolving them. Jurisdiction is based on 28 U.S.C. §§ 1331 and 1332 (1982).

On July 1, 1982, the International Union of Operating Engineers (IUOE) commenced an economic strike against Hilton. Although Harberson was not a member of that union, he honored the picket line. Hilton settled its labor dispute with the IUOE on July 12, 1982. Part of the settlement agreement provided that Hilton would not discipline its non-IUOE employees for their refusal to cross the picket line.

A letter dated July 15, 1982, informed Harberson that he had been permanently replaced. Harberson’s union filed a complaint with the National Labor Relations Board (NLRB). The regional administrative law judge held in favor of Harberson, but the NLRB’s General Counsel reversed that decision. Harberson’s appeal is currently pending. Harberson has alleged that in the course of the NLRB proceedings Hilton employees forged records and committed perjury.

Harberson’s first claim alleges that Hilton discriminated against him because of his age. Hilton contends that Harberson’s failure to timely file a charge with the EEOC precludes him from asserting this claim here. Hilton’s argument requires consideration of facts not in the complaint and will therefore be treated as a motion for summary judgment.

As noted, Hilton informed Harberson of his discharge on July 15, 1982. Under 29 U.S.C. § 626(d) (1982), Harberson had 180 days after occurrence of the alleged unlawful practice to file a charge with the EEOC. He did not, however, file his EEOC age discrimination charge until February 10, 1983, more than 180 days after his discharge. See Defendant’s Ex. A. Since timely EEOC filing is a prerequisite to jurisdiction, Harberson’s age discrimination claim must be dismissed for lack of jurisdiction.

Harberson has asserted a civil claim based on allegations that Hilton committed perjury and forgery and thereby violated the public policies embodied in 18 U.S.C. § 1503 (1982). Section 1503 provides criminal sanctions against individuals who interfere with the administration of justice. It provides,

“Whoever corruptly, or by threats or force, or by any threatening letter or communication, endeavors to influence, intimidate, or impede any witness, in any court of the United States or before any United States commissioner or other committing magistrate, or any grand or petit juror, or officer in or of any court of the United States, or officer who may be serving at any examination or other proceeding before any United States commissioner or other committing magistrate, in the discharge of his duty, ... or corruptly or by threats or force, or by any threatening letter or communication, influences, obstructs, or impedes, or endeavors to influence, obstruct, or impede, the due administration of justice, shall be fined not more than $5,000 or imprisoned not more than five years, or both.”

All the courts that have considered the issue have held that § 1503 does not create a private claim for relief. Odell v. Humble Oil & Refining Co., 201 F.2d 123, 127 (10th Cir.1953); Burch v. Snider, 461 F.Supp. 598 (D.Md.1978); Mainelli v. Providence Journal Co., 207 F.Supp. 453 (1962). Accordingly, Harberson’s claim based on § 1503 must be dismissed.

Hilton asserts that Harberson’s outrageous conduct claim should be dismissed because it fails to allege sufficiently “outrageous” conduct and because the National Labor Relations Act (NLRA) preempts Harberson’s state-law claim. Taking the allegations in Harberson’s complaint as true for the purpose of deciding this motion to dismiss, I find and conclude that a reasonable person could find the asserted perjury and forgery to be outrageous conduct.

Moreover, the NLRA does not preempt state law claims for outrageous conduct. In Farmer v. Carpenters, 430 U.S. 290, 97 S.Ct. 1056, 51 L.Ed.2d 338 (1977), the Supreme Court held that the NLRA did not preclude the plaintiff from bringing an outrageous conduct claim based on intentional infliction of emotional distress. In Viestenz v. Fleming Co., Inc., 681 F.2d 699 (10th Cir.1982), the Tenth Circuit interpreted the Farmer exception to the preemption doctrine. The Court held that the Farmer exception only applies where the conduct is truly outrageous, so as to invoke a strong state interest in preventing that kind of conduct, and where the claimed injury results, not from the employment discharge, but from the particularly “outrageous” circumstances in which that discharge occurred. Id. at 703-04.

Here, Harberson has alleged that Hilton’s committed perjury and forgery that caused him severe and continuing emotional distress. I have already determined that a reasonable jury could find that Hilton’s alleged conduct was outrageous assuming the allegations are proved. Moreover, based on the allegations in Harberson’s complaint I cannot conclude, as a matter of law, that Harberson’s injury resulted from his loss of employment rather than from the allegedly outrageous manner in which he was discharged. Accordingly, Hilton’s motion to dismiss Harberson’s outrageous conduct claim is denied.

IT IS ORDERED that

(1) Defendant’s motion to dismiss the plaintiff’s age discrimination claim, treated as a motion for summary judgment on that claim, is granted; the plaintiff’s first claim is dismissed with prejudice.

(2) Defendant's motion to dismiss the plaintiff’s § 1503 claim is granted; the plaintiff’s second claim is dismissed with prejudice; and

(3) Defendant’s motion to dismiss the plaintiff’s outrageous conduct claim is denied.


author: WEINER, Judge.

text:
    STATE OF NEW YORK DEPARTMENT OF TRANSPORTATION, Rockrose Development Corporation and Chelsea Property Owners, Petitioners, v. INTERSTATE COMMERCE COMMISSION, United States of America and West Side Rail Line Development Foundation, Inc., Respondents. CHELSEA PROPERTY OWNERS FOR the REMOVAL OF the WEST 30TH STREET TRACK, Petitioner, v. INTERSTATE COMMERCE COMMISSION and United States of America, Respondents.
    Civ. A. Nos. 85-1, 85-6.
    Special Court, Regional Rail Reorganization Act.
    Aug. 9, 1985.
    John L. Oberdorfer, Timothy J. May, Scott N. Stone, Claudia Deering, Patton, Boggs & Blow, Washington, D.C., for intervenor petitioner Chelsea Property Owners.

      Robert J. Grady, Atty., Robert S. Burk, Acting General Counsel, John J. McCarthy, Jr., Deputy Associate General Counsel, I.C.C., Washington, D.C., for respondent I.C.C.
    Alan E. Kleinburd, Atty., Richard K. Willard, Asst. Atty. Gen., Dept. of Justice, Washington, D.C., for respondent U.S.
    John D. Heffner, Sedam, Herge & Reed, Washington, D.C., for intervenor respondent West Side Rail Line Development Foundation, Inc.
    Thomas E. Zemaitis, Pepper, Hamilton & Scheetz, Philadelphia, Pa., Charles E. Me-chem, Consol. Rail Corp., Philadelphia, Pa., for amicus curiae Consol. Rail Corp.
    Fritz R. Kahn, Verner Liipfert, Bern-hard, McPherson and Hand, Chartered, Washington, D.C., Carmine J. Clemente, Darrell W. Harp, Counsel to Com’r, State of New York Dept. of Transp., Albany, N.Y., for petitioner New York Dept. of Transp.
    Walter M. King, Washington, D.C., Harold L. Fisher, Fisher & Fisher, Brooklyn, N.Y., for intervenor petitioner Rockrose Development Corp.
    Before GASCH, Presiding Judge, and BRYANT and WEINER, Judges.
   MEMORANDUM OPINION

WEINER, Judge.

Presently before the court is a petition to review a decision of the Interstate Commerce Commission (ICC) the effect of which would permit Consolidated Rail Corporation (Conrail) to sell an elevated railroad line in Manhattan to the West Side Rail Line Development Foundation, Inc. (West Side). The issues have been extensively briefed and oral argument was held before the court on May 14, 1985. For the reasons which follow, we set aside the decision of the ICC and remand the case to that agency for further proceedings.

Section 1156 of the Northeast Rail Service Act of 1981 (NRSA) amended the Regional Rail Reorganization Act of 1973 by adding a new section 308 (45 U.S.C. § 748) to provide an expedited procedure to enable Conrail to dispose of unprofitable rail lines. Pursuant to this section, Conrail filed an application to abandon 1.45 miles of elevated track, known as the West 30th Street Branch, which runs from approximately 33rd Street to Bank Street in Manhattan. Under Section 308(b), the ICC is required to grant the application for abandonment unless an offer of financial assistance is made. Such an offer was made by West Side.

Section 308(d) makes the provisions of 49 U.S.C. § 10905(d)-(f) applicable to offers of financial assistance. These provisions require the ICC to determine whether the offeror is financially responsible and whether the offer is reasonable. The New York Department of Transportation (NY-DOT) opposed West Side’s offer and participated in proceedings before the ICC. In a decision served on July 12, 1984, Richard Lewis, Acting Director of the ICC’s Office of Proceedings, found that West Side was financially responsible and that it submitted a bona fide offer of financial assistance.

The administrative appeal of NYDOT was denied in a decision by Acting ICC Chairman Andre served on September 4, 1984. Based on Conrad’s estimation of the net liquidation value of the line, Conrail agreed to sell and West Side agreed to buy the line for $10.00. West Side, however, exercised its statutory right to request that the ICC establish the remaining terms of closing the purchase. The full ICC set forth such terms in a decision served on September 28, 1984.

On October 2, 1984, NYDOT petitioned the United States Court of Appeals for the Second Circuit for review of the ICC decision. However, in a Memorandum-Order filed on December 20, 1984, this court declared that it has original and exclusive jurisdiction to review orders of the ICC entered pursuant to Section 308 and enjoined NYDOT from pursuing its petition for review of the ICC decision in the Second Circuit. Interstate Commerce Com mission v. State of New York Department of Transportation, No. 84-10 (Regional Rail Reorg. Ct., December 20, 1984). NY-DOT subsequently petitioned this court for review of the ICC decision.

After NYDOT filed its petition in this court, several parties sought, and were granted, leave to intervene in this matter. The Chelsea Property Owners for Removal of the West 30th Street Secondary Track (Chelsea) and the Rockrose Development Corporation (Rockrose) have intervened as petitioners. West Side has intervened as a respondent. Furthermore, leave was granted for Conrail to file a brief as amicus curiae.

Section 1152(c) of NRSA (45 U.S.C. § 1105(c)) establishes the extent of this court’s review of administrative agency action under that Act. It incorporates the provisions of Section 706(2) (A-D) of the Administrative Procedure Act. Thus, the court shall set aside agency action that is found to be, inter alia, “arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law.” 5 U.S.C. § 706(2)(A). The arbitrary and capricious standard of review requires the court to inquire as to whether the agency considered all of the relevant factors in reaching its decision and whether it committed a clear error of judgment. Citizens to Preserve Overton Park v. Volpe, 401 U.S. 402, 416, 91 S.Ct. 814, 816-17, 28 L.Ed.2d 136 (1971); Trailways, Inc. v. ICC, 673 F.2d 514, 517 (D.C.Cir.), cert. denied, 459 U.S. 862, 103 S.Ct. 137, 74 L.Ed.2d 117, reh’g denied, 459 U.S. 983, 103 S.Ct. 320, 74 L.Ed.2d 296 (1982).

In order to apply this standard in a proper context, it is necessary to review the chronology of events which led to the final decision of the ICC. West Side submitted its offer of financial assistance on June 29, 1984, three days before the statutory period for filing such offers expired. On July 6, 1984, the day it received notice of West Side’s offer, NYDOT petitioned the ICC to hold a determination on the offer in abeyance until it had an opportunity to review and comment upon the matter. NYDOT’s petition was filed on July 9, 1984. On July 12, 1984, the Commission served a decision rendered by the Acting Director of the Office of Proceedings on July 9, 1984 finding West Side financially responsible and its offer bona fide and reasonable. Thus, the Acting Director reached his decision on the same day that the Commission received NYDOT’s request to hold the matter in abeyance.

NYDOT subsequently filed an administrative appeal. The Commission, however, ruled that NYDOT failed to meet its rigorous burden of establishing that the Acting Director’s decision constituted a clear error of judgment or a manifest injustice. NY-DOT was, therefore, placed in the almost impossible position of meeting such a burden based upon a record in which it was permitted no role in developing.

Chelsea and Rockrose represent various property owners who hold interests in real estate underneath the elevated rail line. Conrail holds easements to operate rail line over these properties. West Side would become the holder of the easements if allowed to purchase the line. The petitioning intervenors assert that under the terms of the easements, the easement holder is obligated to remove the elevated structure at its own expense. Neither of the intervening petitioners received notice of the proceeding before the ICC.

The court is mindful that the streamlined procedures of Section 308 are intended to permit Conrail to expeditiously abandon unprofitable rail lines in order to facilitate its economic recovery. Consolidated Rail Corp. v. Pennsylvania Public Utility Comm., 565 F.Supp. 153, 154 (Regional Rail Reorg.Ct.1983). Section 308 does not contemplate that the ICC hold a full evidentiary hearing permitting all interested parties the'opportunity to present evidence with respect to an offer of financial assistance. However, when offers of financial assistance are filed, the proceedings before the ICC should not be so inflexible so as to effectively prohibit the meaningful participation of all interested parties except for the offeror and the offeree.

The notice that NYDOT received pursuant to ICC regulations was rendered of little value due to its lack of opportunity to comment upon or present evidence regarding the offer. Furthermore, although the regulations do not provide for the intervening petitioners to have received notice to the ICC, they have a significant interest in the outcome of this matter. Under these circumstances we do not believe that the ICC could have considered all the relevant factors in reaching its decision. Accordingly, this matter will be remanded to the ICC to allow the interested parties to comment and present evidence on West Side’s offer.

ORDER

The decision of the ICC in Docket No. AB-167 (Sub-No. 493N), Conrail Abandonment of a Portion of the West 30th Street Secondary Track in New York, NY, served September 4, 1984 is set aside. The consolidated cases, Nos. 85-1 and 85-6 are remanded to the ICC to allow intervening petitioners and other interested parties to comment upon and present evidence regarding the offer of financial assistance of West Side Rail Line Development Foundation, Inc.

The ICC may determine the manner in which it shall receive such comment and evidence.

      . Chelsea petitioned the ICC to intervene and reopen the administrative proceedings. In a letter decision of March 6, 1985, the ICC rejected Chelsea’s petition. Chelsea sought review of this decision by filing a petition with this court on April 8, 1985. That action, No. 85-6, was ordered consolidated with the action brought by NYDOT, No. 85—1.


author: EARL E. O’CONNOR, Chief Judge.

text:
    David G. COLE, Plaintiff, v. Margaret M. HECKLER, Secretary of Health and Human Services, Defendant.
    Civ. A. No. 82-2349.
    United States District Court, D. Kansas.
    April 25, 1984.
    Richard H. Anton, Kansas City, Mo., Lori Klarfeld, Mission, Kan., for plaintiff.
    Benjamin L. Burgess, Jr., U.S. Atty., Amanda S. Meers and Robert A. Olsen, Asst. U.S. Attys., Kansas City, Kan., Paul P. Cacioppo of counsel, Regional Atty., Region VII, Dept. of Health and Human Services, Kansas City, Mo., for defendant.
   MEMORANDUM AND ORDER

EARL E. O’CONNOR, Chief Judge.

This matter comes before the court on defendant’s motion for an order affirming the Secretary’s decision, and plaintiff’s motion for summary judgment.

This is an action under § 205(g) of the Social Security Act, 42 U.S.C. § 405(g), for judicial review of the final decision of the Secretary of Health and Human Services. Plaintiff filed his application for disability insurance benefits as provided by 42 U.S.C. § 423, on October 26, 1977. The claim was allowed and benefits were awarded beginning May 4, 1977. The Social Security Administration determined that as of July 19, 1980, plaintiff’s condition no longer prevented him from engaging in substantial gainful activity. As a result, therefore, plaintiff received his last disability payment in September 1980. Upon reconsideration, a hearing was held on March 1, 1982, before an Administrative Law Judge (AU), at which hearing plaintiff appeared with counsel and testified. On April 26, 1982, the AU rendered a decision finding that plaintiff was not under a “disability,” as defined in the Social Security Act, at any time after July 1980. Plaintiff appealed, and on August 18, 1982, the Appeals Council affirmed the decision of the AU. On January 31, 1983, the Appeals Council modified the decision of the AU to reflect that disability entitlement ended the last day of October, 1980. This stands as the final decision of the Secretary.

When the Secretary’s decision is before the court for judicial review, the decision must be upheld if it is supported by “substantial evidence.” 42 U.S.C. § 405(g); Richardson v. Perales, 402 U.S. 389, 91 S.Ct. 1420, 28 L.Ed.2d 842 (1971). Substantial evidence is such evidence that a “reasonable mind might accept as adequate to support a conclusion.” Perales, 402 U.S. at 401, 91 S.Ct. at 1427. It is the function of the Secretary, not the court, to weigh the evidence, resolve conflicts and determine the case accordingly. Trujillo v. Richardson, 429 F.2d 1149 (10th Cir.1970); Garrett v. Califano, 460 F.Supp. 888, 890 (D.Kan.1978). We do not fulfill our duty, however, with mechanical acceptance of the Secretary’s findings. Cellner v. Heckler, No. 82-2311 (D.Kan., unpublished, 10/21/83); see, also, Mitchell v. Weinberger, 404 F.Supp. 1213, 1215 (D.Kan. 1975). The Social Security Act should be construed liberally to aid the disabled whom it was designed to protect. Mandrell v. Weinberger, 511 F.2d 1102, 1103 (10th Cir.1975); Keef v. Weinberger, 404 F.Supp. 1193, 1195 (D.Kan.1975); Devorak v. Celebrezze, 345 F.2d 894, 897 (10th Cir. 1965).

The first step in evaluating any disability claim under the regulations promulgated by the Social Security Administration begins with 20 C.F.R. § 404.1520, Evaluation of disability in general. That regulation provides in part:

(a) Steps in evaluating disability. We consider all material facts to determine whether you are disabled. If you are doing substantial gainful activity, we will determine that you are not disabled. If you are not doing substantial gainful activity, we will first consider your physical or mental impairment(s). Your impairment must be severe and meet the duration requirement before we can find you to be disabled. We follow a set order to determine whether you are disabled. We review any current work activity, the severity of your impairments), your residual functional capacity and your age, education, and work experience. If we can find that you are disabled or not disabled at any point in the review, we do not review further____
(d) When your impairment meets or equals a listed impairment in Appendix 1. If you have an impairment that meets the duration requirement and is listed in Appendix 1, where we determine that the impairment is equal to one of the listed impairments, we will find you disabled without considering your age, education, and work experience.

20 C.F.R. § 404.1525(a) states:

The Listing of Impairments describes, for each of the major body systems, impairments which are considered severe enough to prevent a person from doing any gainful activity....

Thus, the AU is required to determine whether the disability claimed by plaintiff is listed in Appendix 1. Although there is no explicit finding that the impairment suffered by plaintiff does not fall within the listing, the AU’s determination, based on the medical vocational guidelines, makes that determination unescapable. Furthermore, the AU found that “the claimant had the following medically determinable physical impairments: residuals of back surgeries with degenerative changes of the lumbar spine.” An examination of the medical evidence contained in the record convinces the court that the AU ignored or discounted evidence which was unfavorable to the Secretary.

Dr. William O. Hopkins, plaintiff’s treating physician, stated that claimant has chronic lumbar spine disc disorder. This is consistent with medical evidence showing that plaintiff had a herniated nucleus pulposus, for which he has had two laminectomies and one other surgery. In December 1980, Dr. James Lipsey, an associate of plaintiffs treating physician, treated the plaintiff while he was hospitalized for back pain. Dr. Lipsey’s report on the x-rays indicates that plaintiff had degenerative changes at L4-5 and L5-S1 with narrowing, sclerosis, and spur formations. His impression of plaintiffs condition was that of an “old lumbar disc disease with multiple previous surgical procedures.” Dr. Gary Boston, a physician who examined the plaintiff at the behest of the Social Security Administration, sent him to Dr. Fenton A. Williams, a radiologist. The findings of Dr. Williams are very general and quite brief. He found minimal degenerate disease involving the L4-5 and the L5-S1 disc spaces with slight narrowing. He also found osteophytes on the anterior vertebral body of L5. All of these findings indicate that plaintiff has a vertebrogenic disorder, specifically, herniated nucleus pulposus, which has not been completely corrected by surgery.

Both Dr. Hopkins and Dr. Boston note that plaintiff reports persistent lower-back pain, bilateral leg pain, and numbness and cramping in the lower left leg. This pain is exacerbated by any physical activity. Neither doctor took issue with these complaints of pain and muscle spasms. Both have made detailed findings as to the range of plaintiffs low back motion. Plaintiffs treating physician characterized his ability to move as “quite restricted.”

Dr. Hopkins further states that plaintiff has weakness of the left peroneus longus and brevis of a moderate degree and almost complete loss of the extensor hallucis longus on the left. Dr. Boston found that muscle strength was decreased in the left lower extremity involving the quadriceps, hamstrings and the extensor of the great toe. Both physicians indicated that plaintiff had an absence of certain reflexes in his leg, and a decrease of sensation or hypoesthesia. These findings are not contradicted in the record.

Section 1.05(C) of Appendix 1 directs a finding of disability when plaintiff has:

Other vertebrogenic disorders (e.g., herniated nucleus pulposus, spinal stenosis) with the following persisting at least 3 months despite prescribed therapy and expected to last 12 months. With both 1 and 2:
1. Pain, muscle spasm, and significant limitation of motion in the spine; and
2. Appropriate radicular distribution of significant motor loss with muscle weakness and sensory and reflex loss.

The medical evidence contained in the record reveals that plaintiff has chronic lumbar spine disc disorder. Plaintiffs herniated nucleus pulposus has not been corrected by multiple surgeries. Plaintiff continues to experience pain, muscle spasms, and significant limitations of motion, as well as muscle weakness and sensory and reflex loss. These symptoms have persisted for the required twelve months. Thus, plaintiff has an impairment listed in Appendix 1.

Although 20 C.F.R. § 404.1520(d) directs the finding of disability once we have determined the plaintiffs impairment meets the requirements set out in Appendix 1, we will also examine the findings made by the AU in determining that there was no disability. The AU found that plaintiffs complaints of pain were not credible and that such complaints did not preclude sedentary work. Apparently, the AU based his conclusion on two factors. The first factor cited was that plaintiff was not taking medications when hospitalized in December 1980 for his back pains. While there is some support in the record for the proposition that plaintiff was taking no medication immediately prior to his hospitalization, the record consistently shows that plaintiff took medication for his injuries. In fact, plaintiffs physician hospitalized him because of his severe pain. The medical records indicate that various doses of Demerol, Valium and Dalmane were given upon admission and during his stay. Dr. Boston reports that plaintiff was'taking Tylenol # 3 for pain, as well as Norflex for muscle spasms. Dr. Hopkins’ notes, made at the time of the examinations, support that plaintiff was given prescriptions for Tylenol with Codeine and other drugs. Plaintiff testified at the hearing that he takes Tylenol # 3, Norflex, sleeping pills, Nytol, and extra-strength Tylenol. The findings of the AU are clearly erroneous and are in complete disregard of the medical evidence. Although the AU determines the credibility and weight of a witness’ testimony, Adams v. Richardson, 336 F.Supp. 983 (D.Kan.1972), there must be a basis in the record for the judge’s disbelieving the testimony of a witness. Lund v. Weinberger, 520 F.2d 782 (8th Cir.1975). There is no basis in the record for disbelieving the plaintiff, and we find the AU’s contrary decision incredible.'

The second factor cited by the AU was that the plaintiff’s treating physician did not indicate that the back pain was totally disabling. Dr. Hopkins stated in his report that plaintiff is permanently partially disabled. Unfortunately, the AU failed to consider the doctor’s next finding that he would be “restricted to sitting and standing and walking to a limit of three hours for each of these activities.” The inability of plaintiff to sit for three hours a day would preclude him from doing many, if not all, sedentary jobs. If a claimant cannot perform work falling within the definition of sedentary work contained in 20 C.F.R. § 404.1567, for more than a brief period, then it is improper to apply the rules set forth in Appendix 2 of Subpart P of Social Security Regulation No. 4. Cavitt v. Schweiker, 704 F.2d 1193, 1195 (10th Cir. 1983). Therefore, the application of the medical vocational guidelines, i.e. grids, would be inappropriate here.

While we realize that the court cannot weigh the evidence and substitute its judgment for that of the agency, Cagle v. Califano, 638 F.2d 219 (10th Cir.1981), we find that, as a matter of law, the AU’s decision was not based upon the record as a whole. Broadbent v. Harris, 698 F.2d 407 (10th Cir.1983).

The decision of the Secretary is reversed, and the case is remanded for further proceedings consistent with this opinion.


author: HAIGHT, District Judge.

text:
    JEFFERSON INSURANCE COMPANY OF NEW YORK, Plaintiff, v. FORTRESS RE, INC., and Calvert Fire Insurance Company, Defendants.
    No. 82 Civ. 8167 (CSH).
    United States District Court, S.D. New York.
    July 11, 1984.
    On Motion to Reargue Sept. 25, 1984.

      Leonard A. Sheft and Associates, New York City (Jeffrey A. Marshall, New York City of counsel), for plaintiff.
    Layton & Sherman, New York City (Frederick E. Sherman, Thomas L. Abráms, New York City, of counsel), for defendants.
   MEMORANDUM OPINION AND ORDER

HAIGHT, District Judge.

Plaintiff Jefferson Insurance Company of New York (“Jefferson”) agreed to insure a New York taxicab company against that part of its accident liability exceeding $100,000 and under $1,000,000 dollars. The cab service apparently was self-insured against losses under $100,000. Jefferson then entered into a reinsurance agreement with defendant Fortress Re, Inc. (“Fortress”), acting on behalf of defendant Calvert Fire Insurance Company (“Calvert”), which covered any liability of Jefferson to the cab service exceeding $100,000. Thus Fortress was required to pay only if the cab service’s liability exceeded $200,000. The contract of reinsurance contained a notice clause which read:

Prompt notice shall be given to the Reinsurer by the Company of any occurrence or accident which appears likely to involve this reinsurance and while the Reinsurer does not undertake to investigate or defend claims or suits it shall nevertheless have the right and be given the opportunity to associate with the Company and its representatives at the Reinsurer’s expense in the defense and control of any claim, suit or proceeding involving this reinsurance, with the full cooperation of the Company.

Under another provision of the policy, Jefferson “warranted] to retain for its own account” the $100,000 of liability above the cab service’s self-insurance and below Fortress’s level of liability. In other words, Jefferson agreed not to contract for reinsurance of this $100,000 layer of liability. The purpose of such a provision is apparently to insure that the reinsured retains a stake in keeping claims below the level of the reinsurance.

On June 28, 1975, a date when both policies were in effect, a cab driver injured two pedestrians. One victim received a concussion; the other suffered severe leg injuries. Jefferson was informed of the. accident on October 3, 1975. Soon thereafter it was provided with details of the lawsuit filed by the accident victims. The ad damnum clause of the complaint requested $450,000, plainly implicating Fortress’s reinsurance policy. The facts as disclosed to Jefferson made it clear that the victims would almost certainly prevail on the issue of liability. Despite the ad damnum and the description of the victims’ injuries as “substantial,” Jefferson apparently decided that the accident would not be likely to involve Fortress’s coverage, for it put aside $10,000 of its own money and sent no notice to Fortress. Two years later, on the basis of an independent medical examination of the victims, plaintiff put aside an additional $25,-000 to cover the accident. Again, it did not notify Fortress.

Finally, three years after the accident, the case was ready for trial. At a pretrial conference in June, 1978, a Jefferson representative for the first time examined the victims’ physical condition. The Jefferson representative quickly concluded that, based on scarring of one of the victim’s legs, a jury verdict could easily reach $400,-000, and the case was settled for $235,000. Soon after, Jefferson asked Fortress for its $35,000 share of the settlement, but Fortress refused on the ground that Jefferson failed to comply with the notice requirement. It was also later disclosed that, in violation of the warranty to retain $100,000 of liability for its own account, Jefferson had farmed out $50,000 of its layer of liability through a reinsurance treaty.

Jefferson brings this action to enforce the reinsurance agreement and to recover the $35,000. Defendants move for summary judgment, claiming that Jefferson breached both the warranty and notice provisions of the contract. Compliance with both of these, it is claimed, was a condition precedent to Fortress’s liability.

The issues are complicated slightly by the presence of a decision in a prior lawsuit between Jefferson and Fortress. A North Carolina federal court concluded, in Fortress Re, Inc. v. Jefferson Insurance Co. of New York, 465 F.Supp. 333 (E.D.N.C.1978), aff’d, 628 F.2d 860 (4th Cir.1980), in circumstances very similar to these that under North Carolina law Fortress was entitled to prevail independently on both issues. Fortress claims preclusive effect for the prior decision.

I.

Defendants contend that North Carolina law applies to this action. Plaintiff argues that application of New York law is proper. The question is significant, for only if North Carolina law is applicable in New York will the North Carolina decision have collateral estoppel effect.

In deciding that North Carolina law applied, the Eastern District of North Carolina of necessity applied North Carolina choice of law rules. Klaxon Co. v. Stentor Electric Manufacturing Co., 313 U.S. 487, 61 S.Ct. 1020, 85 L.Ed. 1477 (1941). By the same token, I must apply New York’s. If the two states choice of law rules were identical, I would assume Jefferson to be collaterally estopped on the issue of choice of law. They are not. North Carolina applies to contract actions the law of the place where the contract was made. Tanglewood Land Co. v. Byrd, 299 N.C. 260, 261 S.E.2d 655, 656 (1980). New York applies a “contacts” analysis, applying the law of the state with the greatest interest in the litigation. Intercontinental Planning, Ltd. v. Daystrom, Inc., 24 N.Y.2d 372, 300 N.Y.S.2d 817, 825, 248 N.E.2d 576, 581 (1969); United States v. Sonal, Inc., 573 F.Supp. 1126, 1128 (S.D.N.Y.1983).

The law at issue is that governing the provisions of a contract of reinsurance. The parties made no choice of law in the contract. The certificate of reinsurance was issued in North Carolina, and the obligation to perform arose upon presentation of the claim to Fortress in North Carolina, where its offices are located. Plaintiff is a New York corporation, and the risks insured against arose there.

Based on these contacts, North Carolina’s interest appears greater. That state plainly has an interest in guiding the interpretation of contracts formed and to be performed there. Although New York might have an interest in protecting its insureds under ordinary contracts of insurance, it has manifested no particular interest in protecting parties to contracts of reinsurance. Indeed, these are not so much contracts of insurance but of indemnity. Great American Insurance Co. v. Fireman’s Fund Insurance Co., 481 F.2d 948, 950 (2d Cir.1973). Plaintiff emphasizes the presence of the risk in New York. If this was a suit on the underlying contract of insurance, this factor would weigh heavily. However, the interest of New York becomes more attenuated when the suit is premised solely on the reinsurance contract. Then the question of place of risk must be weighed against other traditional factors such as place of formation and performance—here North Carolina. Plaintiff points to no manifest New York interest which would be furthered by application of its law; North Carolina is inevitably interested in guiding interpretation of contracts made and performed there. Application of its law is appropriate.

II.

Fortress brought a declaratory judgment action against Jefferson in North Carolina district court in 1978 which raised issues similar to those raised here. In an opinion of December 20, 1978, Judge Dupree decided both questions against Jefferson. At issue now is the collateral estoppel effect of that decision.

A party given a full and fair opportunity to litigate an issue of law in one action may be estopped from relitigating it in a subsequent action. Kremer v. Chemical Construction Corp., 456 U.S. 461, 467 n.6, 102 S.Ct. 1883, 1890 n.6, 72 L.Ed.2d 262 (1982). The doctrine of collateral estoppel is designed to “relieve parties of the cost and vexation of multiple lawsuits, conserve judicial resources, and, by preventing inconsistent decisions, encourage reliance on adjudication.” Allen v. McCurry, 449 U.S. 90, 94, 101 S.Ct. 411, 414, 66 L.Ed.2d 308 (1980), quoted in Kremer, supra, 456 U.S. at 467, n.6, 102 S.Ct. at 1890 n.6.

Despite the similarity of the two actions, Jefferson argues that preclusion is inappropriate here. With regard to the question of notice, it argues that the circumstances are sufficiently different that the “issues” presented by the two lawsuits are not the same. Concerning the question of liability kept for its own account, Jefferson claims to have uncovered new evidence which calls into question the correctness of the prior decision.

In the North Carolina action, Jefferson’s insured was involved in a fatal accident. The complaint requested damages of $550,-000, plainly invoking Fortress’s reinsurance of any Jefferson liability from $25,000 to $300,000, yet without explanation Jefferson waited for one year before notifying Fortress of the accident. The notice provision in that contract was identical to that in this one. Judge Dupree held that this one-year delay as a matter of law barred Jefferson’s recovery under the contract of insurance.

I agree with plaintiff that the issue presented to Judge Dupree is not wholly identical to the one before me. In that action, there was no question that the accident would involve Fortress’s reinsurance. Its liability began at $25,000, and the ad damnum clause requested $550,000. For that reason, Judge Dupree did not bother to consider the issue. Here, the question requires more discussion. Jefferson is es-topped, however, from litigating issues of whether failure to give prompt notice bars recovery under the contract and whether a delay of one year can be “prompt” notice. These issues were clearly presented by Judge Dupree, and there is no dispute that Jefferson had a full and fair opportunity to litigage them.

III.

Jefferson argues that under the notice provision it was not required to notify Fortress of a claim until it became apparent to Jefferson that the claim was likely to involve Fortress’s reinsurance. In the case at hand, that did not happen until a Jefferson agent walked into a room containing the accident victim and instantly recognized the large exposure created by her disfiguring injuries. Fortress counters that such an interpretation effectively reads out of the notice provision the clause which gives Fortress “the right ... to associate with [Jefferson] ... in the defense and control of any claim, suit or proceeding involving this reinsurance____”

I agree with the defendants that to accept plaintiff’s argument would entirely undercut the notice provision. Plaintiff argues essentially that it may act as an entirely passive observer of the litigation. Only if, in its judgment based upon whatever facts happen to come its way, a claim is likely to involve Fortress must it notify Fortress. There is nothing in the notice provision which supports application of such a subjective standard. Although it is true that Jefferson is the only party to whom it can “appear” likely that a claim will involve Fortress, that fact does not automatically vest unfettered discretion in Jefferson to determine when a claim appears likely to involve Fortress. To adopt such a reading would insulate Jefferson entirely from any effective duty of notice. Unless Jefferson had no excuse for delaying in giving notice, as in the North Carolina action, it could always defend its decisions as to the timing of notice by reference to its failure to perceive likelihood.

The requirement that Fortress be given an opportunity to participate in the defense of the action places a limit on Jefferson’s discretion. At a minimum, Jefferson must give notice soon enough to Fortress to give Fortress an effective opportunity to participate in a claim’s defense. Fulfillment of the duty of notice requires Jefferson to make active inquiries into the merits of a particular claim, rather than sit back and base its judgment solely on the information given to it. In furtherance of that duty, Jefferson must make reasonable inquiry into the likelihood that the claim will involve Fortress. These are bargained—for provisions in the contract of reinsurance which adhere to the benefit of Fortress. Only if reasonable inquiry cannot reveal facts which make involvement of reinsurance likely is Jefferson relieved of its duty to give Fortress an effective opportunity to participate in the defense of an action. No other reading of the notice provision gives effect to both the “appearance” and the “defense” clauses.

In this case, it is beyond dispute that reasonable inquiry would have put Jefferson on notice that reinsurance might be involved. The ad damnum clause requested well over twice the amount necessary to involve Fortress. The lawyers’ report stated that the injuries were substantial. This alone should have alerted Jefferson. Further, it is clear from the later report of Jefferson’s agent that the serious nature of one of the victim’s injuries was apparent from looking at her. If the magnitude of this scarring was immediately apparent nearly three years after the accident, it could undoubtedly have been easily ascertained within months of the accident. It is no defense for Jefferson to claim, as it does, that it was relying on the reports of others who misinformed it. It must take responsibility for the failures of those on whom it relies to carry out its contractual duties.

Reasonable inquiry would have revealed to Jefferson that this accident was likely to involve Fortress at a time when Fortress still had an effective opportunity to participate in the defense of the action. Jefferson failed, however, to give such timely notice. It cannot now defend that failure by arguing that it did not timely recognize the magnitude of the injuries. To permit such a defense would effectively read the “opportunity to defend” clause out of the contract and leave Fortress at the mercy of Jefferson’s passive perceptions. Since Jefferson is collaterally estopped from arguing that the failure to comply with the notice provision is no bar to its recovery, Fortress and Calvert are entitled to summary judgment.

Because I reach this result, I need not consider defendants’ other ground for summary judgment.

CONCLUSION

The undisputed evidence demonstrates that Jefferson could have, but failed to, give prompt, effective notice to Fortress of the accident underlying this claim. This failure was a breach of a condition precedent to Jefferson’s recovery under the contract of reinsurance. Defendants are entitled to summary judgment dismissing the complaint in its entirety. The Clerk is directed to dismiss the complaint with prejudice and costs.

SO ORDERED.

ON MOTION TO REARGUE

Plaintiff has moved for reargument of my July 11, 1984 Memorandum Opinion and Order dismissing its claims under a contract of reinsurance. Since the facts are adequately presented there, I will not restate them.

In that opinion I held that a decision rendered in a prior action between the same parties, reported as Fortress Re, Inc. v. Jefferson Insurance Co. of New York, 465 F.Supp. 333 (E.D.N.C.1978), aff’d, 628 F.2d 860 (4th Cir.1980), collaterally es-topped plaintiff from contesting the issue of whether its failure to provide timely notice of an accident likely to involve defendants’ reinsurance relieved defendants of their obligations under the reinsurance contract. Plaintiff now calls to my attention a 1981 decision by the North Carolina Supreme Court, Great American Insurance Co. v. C.G. Tate Construction Co., 303 N.C. 387, 279 S.E.2d 769 (1981), which, plaintiff claims, substantially altered the interpretation of insurance contract notice provisions in North Carolina. It argues that this superseding change in law should remove any collateral estoppel effect which the 1978 Eastern District of North Carolina decision might have had and that the law established in Great American requires that I reverse my decision on the motion.

I refuse to alter the result of my July opinion. Assuming arguendo that the Great American ease controls here, I find that its application would not change the result reached in that opinion. The Great American court adopted a “prejudice” test for determining whether a long, unexcused delay in providing notice to an insurer removed the obligation to insure under a contract requiring notice “as soon as practicable.” Under the new test, if an insured demonstrates that it acted in good faith in giving tardy notice, the insurer must demonstrate that “its ability to investigate and defend was materially prejudiced by the delay” in order to escape liability. 279 S.E.2d 776.

In this action, the reinsurer was not informed of the claim until after the action on which it was based had been settled. By that time, the reinsurer had no opportunity to investigate or defend; its liability was presented as a fait accompli. There could be no plainer example of the prejudice which the Great American court held relieves the insurer of liability.

In this circumstance, further argument is pointless. Applying Great American will not change the outcome of the motion. The motion to reargue is denied.

It is SO ORDERED.