author: DENNIS R. KNAPP, Senior District Judge.

text:
    APPALACHIAN POWER COMPANY, American Electric Power Company, Inc., Kentucky Power Company, Columbus and Southern Ohio Electric Co., Indiana & Michigan Electric Company, Ohio Power Company, Plaintiffs, v. PUBLIC SERVICE COMMISSION OF WEST VIRGINIA; Otis D. Casto, As a member of the Public Service Commission of West Virginia; Michael D. Greer, as a member of the Public Service Commission of West Virginia, Defendants.
    Civ. A. No. 85-0098.
    United States District Court, S.D. West Virginia, Charleston Division.
    Feb. 28, 1985.

      Charles R. McElwee, William C. Porth, Charleston, W.Va., A. Joseph Dowd, Edward J. Brady, Kevin F. Duffy, Marsha R. Schermer, Columbus, Ohio, for plaintiffs.

      Richard E. Hitt, Mark G. Thessin, Amy M. Lecocq, Billy Jack Gregg, Charleston, W.Va., for defendants.
   MEMORANDUM OPINION ON PRELIMINARY INJUNCTION ORDER

DENNIS R. KNAPP, Senior District Judge.

This case is presently before the Court on plaintiffs’ Motion for a Preliminary Injunction pursuant to Rule 65 of the Federal Rules of Civil Procedure.

Plaintiffs seek injunctive relief preliminarily to enjoin the Public Service Commission of West Virginia (PSC) and its individual commissioners from enforcing and implementing a portion of a PSC order entered on December 28, 1984, in Case No. 83-697-E-42T, which (1) requires Appalachian Power Company (Appalachian) to submit to the PSC for its approval under the provisions of W.Va. Code, 24-2-12, a transmission equalization agreement among Appalachian and four of its affiliated companies, all of which are subsidiaries of American Electric Power Company, Inc., and plaintiffs in this action, and (2) denies Appalachian recovery from its customers in West Virginia of $1.6 million in costs to be incurred under that agreement commencing January 22, 1985, until after the PSC has approved the agreement and has found the costs resulting therefrom to be reasonable for inclusion in Appalachian’s rates.

The issues herein having been fully briefed and argued, the Court now makes its Findings of Fact and Conclusions of Law based upon the stipulation of facts signed by the parties and the testimony adduced at the hearing.

FINDINGS OF FACT

1. The American Electric Power System consists of a parent holding company, American Electric Power Company, Inc. (AEP), and various subsidiary companies wholly owned by AEP. AEP’s subsidiaries include, among others, five electric utility operating companies, Appalachian, Kentucky Power Company (KPC), Columbus and Southern Ohio Electric Company (C & SOE), Indiana & Michigan Electric Company (I & M), and Ohio Power Company (OPC) (collectively the “AEP System companies” or “members”). AEP and the System companies are the plaintiffs in this action.

2. Appalachian, a Virginia corporation, operates in the states of West Virginia and Virginia and is subject to regulation of its intrastate rates for retail electric service provided to customers in West Virginia by the defendant PSC.

3. AEP, KPC, C & SOE, I & M and OPC are, respectively, New York, Kentucky, Ohio, Indiana and Ohio corporations and none is subject to the regulatory jurisdiction of the defendant PSC. The four last-named companies operate as electric utilities exclusively in the states in which they are incorporated except that I&M also operates as an electric utility in Michigan. The AEP System operating companies, including Appalachian, supply electric energy to residential, commercial and industrial customers and public authorities collectively in seven states, including Appalachian in its twenty-one county service area in Southern West Virginia.

4. Defendant PSC was established by the Legislature of West Virginia with power to sue and be sued, and under the provisions of Chapter 24 of the Code of West Virginia has regulatory jurisdiction over the intrastate activities of Appalachian in West Virginia. Defendants Otis D. Casto and Michael D. Greer, the new Chairman of the PSC, are members of and presently constitute the PSC and were members of the Commission at the time it issued its order of December 28, 1984, in PSC Case No. 83-697-E-42T. The third membership on the PSC was recently filled by Charlotte Lane.

5. The AEP System companies are parties to an Interconnection Agreement, dating back to July 6, 1951, which was designed to provide customers of members of the AEP System the benefits and advantages of large scale, coordinated operation and planning of electric supply facilities owned by, or available to, member companies. One of the features of this agreement is a primary capacity equalization charge. This charge fixes the rate at which AEP System companies purchase electric generating capacity from each other to supplement the generating capacity of their own systems to meet customer demands and reserve requirements. AEP System companies with generating capacity deficits make payments to those companies with surplus generating capacity in amounts in accordance with the methodology in the Interconnection Agreement. Thus, that Agreement essentially provides for an equalization of the AEP System companies’ investment in electric generation facilities.

6. The electric generation facilities and load centers of the AEP System companies are interconnected by means of an extensive interstate network of transmission lines. The interconnection of said generation facilities allows them to be planned and operated as a single, fully integrated electric system. This interstate network of transmission lines traverses the extensive geographic area in which the AEP System companies operate and stretches some 400 miles from the Illinois border in the west to the Pennsylvania border in the east, and some 500 miles from Southwest Michigan in the north to the North Carolina border in the south. Not only does this network of transmission lines tie together the various generating plants and load centers of the AEP System companies, but it also makes possible 142 interconnections with 25 unaffiliated utilities as of January 1, 1985.

7. Each of the five major AEP System companies owns and maintains that part of the AEP System interstate network of transmission lines that is physically located in its state or designated area, and with a single exception of one transmission line located in Indiana, the financial responsibility for each mile of this interstate network of transmission lines has been borne by the AEP System member in whose state or designated area the transmission facilities are located.

8. The disparity between the amount of investment made by each AEP System company in the Extra High Voltage (345 KV, 500 KV, and 765 KV) (EHV) transmission network and the usage of that network by each such company has grown in recent years and is expected to grow in the future. Because of the AEP System companies’ belief that fairness requires that they should begin to equalize the costs associated with ownership and operation of the AEP System interstate network of EHV transmission facilities by sharing the total cost of that System through appropriate monthly equalization payments under a concept of having its responsibility in proportion to its maximum load, similar to the equalization of the AEP System companies’ investment in electric generation facilities as embodied in the Interconnection Agreement, the AEP System members entered into a Transmission Agreement, dated April 1, 1984 (the “Transmission Agreement”).

9. The Transmission Agreement provides an equalization formula whereby each AEP System member having an investment in EHV transmission facilities (facilities operating at 765 KV, 500 KV or 345 KV) greater than its Member Load Ratio (MLR) share of the total system EHV investment will be reimbursed for its “surplus” investment by those “deficit” members (including Appalachian) having an investment less than their MLR share of the total system EHV investment.

10. The Transmission Agreement provides for a five-year phase-in for such equalization payments so that in the fifth year all of the parties to the Transmission Agreement will be carrying and will continue thereafter to carry their full MLR share of the total AEP System investment in EHV transmission facilities as calculated by AEP. The five-year phase-in was considered necessary by the parties to the Transmission Agreement to soften the financial and rate impact that otherwise would be immediately imposed on the deficit companies (including Appalachian) which would be required to make payments to the surplus companies under the Agreement.

11. On March 29, 1984, the Transmission Agreement was filed with the Federal Energy Regulatory Commission (FERC) in Docket No. ER84-348-000 (later renumbered and hereinafter referred to as ER84-348-001). A copy of the filing was served upon the PSC as required by the Federal Power Act (16 U.S.C. § 824a).

12. By order of August 21, 1984, in Docket No. ER84-348-001, the FERC accepted the Transmission Agreement for filing as a rate schedule, with the terms and conditions being suspended for five months, to become effective on January 22, 1985, subject to refund. Hearing on the matter of the justness and reasonableness of the Transmission Agreement was scheduled to commence on February 5, 1985.

13. Notice of the filing was made in the Federal Register with responses and notices to intervene due on or before April 23, 1984. The PSC and the Consumer Advocate Division of the PSC (CAD) filed separate interventions in FERC Docket No. ER84-348-001. Various groups and public bodies located in other states in the AEP service area also have intervened, including the utility regulatory commissions of Virginia, Ohio, Kentucky and Michigan, as well as publicly-funded consumer advocates in each of those states. In addition, wholesale customer groups from the states of Indiana and Ohio have intervened, as have representatives of industrial customers from the states of Kentucky and Virginia.

14. Pursuant to the procedural schedule established by the Administrative Law Judge in FERC Docket No. ER84-348-001, the PSC has in its intervenor status in that docket filed testimony and a pretrial brief with the FERC.

15. In its testimony and pretrial brief filed with the FERC, the defendant PSC has stated its total opposition to the Transmission Agreement and has characterized the Transmission Agreement as being unreasonable, unfair and unwarranted, and has urged the FERC to reject the Agreement. The PSC in its order of September 28, 1984 in its Case No. 83-697-E-42T stated that it was opposed to the concept embodied in the Transmission Agreement and that it had intervened in the FERC proceeding “to fight it.”

16. The testimony filed on behalf of the various intervenors in FERC Docket No. ER84-348-001 takes exception to elements of the Transmission Agreement on the grounds that they impose excessive cost responsibilities on the particular AEP operating company which provides service in the area where the particular intervenor is located or with which it is concerned. All of the state regulatory agencies which have submitted testimony in the FERC proceeding (being the utility regulatory commissions of Ohio, Michigan and West Virginia which have regulatory authority with respect to the intrastate rates of OPC, C & SOE, I & M and Appalachian in their respective jurisdictions) have charged that the Transmission Agreement, or proposed modifications thereof, favor AEP System Company ratepayers living in other states at the expense of their own AEP System Company ratepayers, and some have gone so far as to accuse other state regulatory agencies of being unable to place the principles of fairness and equity above their own parochial interests.

17. Subsequent to the FERC’s order of August 21, 1984, in its Docket No. ER84348-001, the defendant PSC issued an order on September 28, 1984 in its Case No. 83-697-E-42T, which case was initiated by Appalachian by a rate increase filing made on December 5, 1983. In its September 28, 1984 order, the PSC concluded that it had no authority under W. Va. Code, 24-2-12, to require Appalachian to submit the Transmission Agreement to the PSC for its approval or to deny Appalachian recovery of its costs to be incurred thereunder commencing January 22, 1985 per the FERC order of August 21, 1984, in FERC Docket No. ER84-348-001. Accordingly, the PSC in its order of September 28, 1984, included $1.6 million in Appalachian’s rates to be effective on January 22, 1985, so as to allow Appalachian to commence recovery of some of its costs to be incurred under the Transmission Agreement, which order was subject to certain conditions including refund protection.

18. On October 9, 1984, the CAD filed with the PSC a Petition for Reconsideration, Rehearing, Reargument and Clarification of its final order of September 28, 1984. Therein, the CAD argued without citing any authority that the PSC was wrong in its analysis in that the PSC could require approval of the Transmission Agreement under the provision of W.Va. Code, 24-2-12. The PSC eventually agreed, and its order of December 28,1984, reversed in part its earlier decision of September 28, 1984, by requiring Appalachian to submit the Transmission Agreement to the PSC for approval under the provisions of W.Va.Code, 24-2-12, and further denied to Appalachian recovery of $1.6 million in costs previously allowed by the September 28, 1984 order under the terms of the Transmission Agreement unless and until Appalachian submits the Transmission Agreement to the PSC for its approval under W.Va.Code, 24-2-12, and the PSC grants such approval and finds the costs resulting from the Transmission Agreement to be reasonable.

19. The PSC, by reserving unto itself in its order of December 28, 1984, in case No. 83-697-42T, a decision-making role as to whether the terms and conditions of the Transmission Agreement are reasonable under the provisions of W.Va.Code, 24-2-12, and whether to allow Appalachian cost recovery thereunder, after having advocated before that federal agency that the Transmission Agreement is unwarranted, unfair, and unreasonable, has and will deprive the plaintiffs, particularly Appalachian, of an impartial and disinterested tribunal. Plaintiffs’ Civil Rights claim set forth in Count V of their Complaint is ripe for decision and plaintiffs have alleged material facts to support their claim.

CONCLUSIONS OF LAW

1. This Court has jurisdiction of this action pursuant to 28 U.S.C. §§ 1331, 1337, 1343, 2201 and 2202 and 42 U.S.C. § 1983, and the complaint states claims upon which relief can be granted.

2. The Court is not prevented by the Johnson Act of 1934 (28 U.S.C. § 1342) from exercising jurisdiction of this action for the following reasons:

(a) The required submittal is not an order “affecting rates chargeable by a public utility.”

(b) The Johnson Act of 1934 applies only when all four conditions of that Act are met. See, Aluminum Co. of America v. Utilities Commission of North Carolina, 713 F.2d 1024 (4th Cir.1983). Since plaintiffs “have based jurisdiction upon federal questions, preemption and impermissible interference with interstate commerce,” the first condition of the Johnson Act is not met because “jurisdiction is not based solely on diversity ... or repugnance ... to the federal constitution.” Id. at 1028; Cabot Corporation v. Public Service Commission of West Virginia, 332 F.Supp. 370 (S.D.W.Va.1971). Furthermore, plaintiffs’ civil rights claim under 42 U.S.C. § 1983 that they, and Appalachian in particular, have been and will be deprived of an impartial, disinterested tribunal guaranteed by the Fourteenth Amendment of the United States Constitution is not directed to a PSC order “affecting rates chargeable by a public utility;” and since jurisdiction of that claim is based upon federal statute, the first condition of the Johnson Act is not met because “jurisdiction is not based solely on diversity ... or repugnance ... to the federal constitution.” Plaintiffs have alleged that the PSC’s required submittal and denied recovery “interfere with interstate commerce which, if proven, would defeat the second condition of the Johnson Act.” Aluminum Co. of America, supra at 1028. The third condition of the Johnson Act is not met because the submittal requirement of the PSC’s order was not made after reasonable notice to and hearing opportunity for plaintiffs. The fourth condition of the Johnson Act is not met because plaintiffs, other than Appalachian, have no right to appeal the PSC’s December 28, 1984 order to the Supreme Court of Appeals of West Virginia. W. Va. Code, 28-5-1.

3. The abdication by this court of its obligation to decide this case can be justified under an abstention doctrine only in the exceptional circumstances where the order to the parties to repair to a state court would clearly serve an important countervailing interest. Moses H. Cone Hospital v. Mercury Construction Corporation, 460 U.S. 1, 14-15, 103 S.Ct. 927, 936-937, 74 L.Ed.2d 765, 779 (1983); Colorado River Water Conservation District v. United States, 424 U.S. 800, 96 S.Ct. 1236, 47 L.Ed.2d 483 (1976).

4. This court cannot under any of the abstention doctrines exercise its judicial discretion to dismiss this action merely because a state court could entertain it, and even the pendency of an action in a state court is no bar to proceedings concerning the same matter in this Court because “... the federal courts have a virtually unflagging obligation ... to exercise the jurisdiction given them.” Colorado River Water Conservation District v. United States, 424 U.S. at 817, 96 S.Ct. at 1246, 47 L.Ed.2d at 498; Moses H. Cone Hospital v. Mercury Construction Corporation, 460 U.S. at 15, 103 S.Ct. at 936, 74 L.Ed.2d at 779 (1983).

5. This Court is not justified in abstaining from exercising its jurisdiction over this action by any of the recognized doctrines of abstention.

(a) Pullman abstention (Railroad Commission v. Pullman Co., 312 U.S. 496, 61 S.Ct. 643, 85 L.Ed. 971 (1941)) is not appropriate with regard to either the federal preemption or civil rights claims because there is no unsettled state law question which must be resolved before a federal constitutional question can be decided or the resolution of which could moot a federal constitutional issue. Hawaii Housing Authority v. Midkiff, — U.S. -, 104 S.Ct. 2321, 81 L.Ed.2d 186 (1984).

(b) Younger abstention (Younger v. Harris, 401 U.S. 37, 91 S.Ct. 746, 27 L.Ed.2d 669 (1971), as embellished in Middlesex Ethics Committee v. Garden State Bar Association, 457 U.S. 423, 102 S.Ct. 2515, 73 L.Ed.2d 116 (1982)) is not appropriate with regard to either the federal preemption or civil rights claim because: (1) neither involves a state interest which relates to the health, safety and morals of the state’s population; (2) the source of the determining law is federal; (3) federal interests (preemption and due process) far outweigh whatever state interests are involved; and (4) only Appalachian, and not the other plaintiffs, may appeal the PSC’s order to the Supreme Court of Appeals of West Virginia. W.C.M. Window Co., Inc. v. Bernardi, 730 F.2d 486 (7th Cir.1984); Kruse v. Snowshoe Company, 715 F.2d 120 (4th Cir.1983); Baggett v. Dept. of Professional Regulation, 717 F.2d 521 (11th Cir.1983); Empire, Inc. v. Ashcroft, 524 F.Supp. 898 (W.D.Mo.1981). See, Gibson v. Berryhill, 411 U.S. 564, 93 S.Ct. 1689, 36 L.Ed.2d 488 (1973), as to the Civil Rights claim.

(c) Burford abstention (Burford v. Sun Oil Company, 319 U.S. 315, 63 S.Ct. 1098, 87 L.Ed. 1424 (1943)) is not appropriate with regard to the civil rights claim because: (1) it is not a local issue arising out of a complicated state regulatory scheme; and (2) the state appellate court does “not stand in any special relationship of technical oversight or concentrated review” to that issue. Educational Services, Inc. v. Maryland State Board for Higher Education, 710 F.2d 170 (4th Cir.1983); International Brotherhood of Electrical Workers v. Public Service Commission, 614 F.2d 206 (9th Cir.1980).

Neither is Burford abstention appropriate with regard to the federal preemption claim because (1) there is a direct, facial conflict between Part II of the Federal Power Act and W.Va.Code, 24-2-12 (the FERC and the PSC would be deciding identical issues with respect to the Transmission Agreement; See, Conclusion of Law No. 16, infra); (2) the PSC’s December 28, 1984 order does not on its face set only retail, intrastate rates; (3) evaluation of the preemption claim would not involve detailed factfinding because W.Va.Code, 24-2-12, is in direct, not indirect conflict, with Part II of the Federal Power Act; (4) there can be no impartial and fair administrative determination in the state regulatory scheme concerning any possible state policy; and (5) there is no state court possessing any special competence to decide the federal issues at hand which exceeds the competence of this court. Aluminum Co. of America, 713 F.2d at 1029-30.

(d) Exceptional circumstance abstention (Colorado River Water Conservation District v. United States, supra) is not appropriate with regard to either the federal preemption or civil rights claim because there has been no assumption by a state court of jurisdiction over property, the federal forum is not less convenient to the parties than any state forum, the assumption of federal jurisdiction would not result in piecemeal litigation, and the source of law which will decide the outcome of this case is federal not state. Kruse v. Snowshoe Co., 715 F.2d 120 (4th Cir.1983).

(e) Where, as here, the state regulatory body is not a disinterested, impartial tribunal, the Court may not order an abstention dismissal even though a state judicial review, de novo or otherwise, would be forthcoming at the end of the administrative proceedings. Gibson v. Berryhill, supra.

6. The recovery denied by the PSC in its order of December 28, 1984, in Case No. 83-697-E-42T, has and will cause Appalachian immediate and irreparable harm. If the FERC finally approves the financial arrangement under the Transmission Agreement and if the PSC’s order of December 28, 1984 in this particular is ultimately determined to be invalid, there would exist considerable doubt as to whether the PSC at a later date could lawfully authorize Appalachian subsequently to recover through its West Virginia retail rates its costs theretofore incurred under the Transmission Agreement.

7. If the Court were to enjoin defendants preliminarily from enforcing or implementing the denial of recovery by Appalachian of the $1.6 million in costs which Appalachian will incur commencing January 22, 1985, and reinstate the PSC’s September 28, 1984, order, there would be no resulting harm to defendants and any harm to Appalachian’s customers would be de minimis, in that Appalachian has made the commitment that, if the final judicial decision in this case and the PSC order on a W.Va.Code, 24-2-12, review of the Transmission Agreement are against the positions of plaintiffs and of Appalachian, it (Appalachian) will refund to its customers with interest as fixed by the Court such part of the $1.6 million as they have paid. The Court fixes that interest at 11%, which is the prime lending rate at the Charleston National Bank as of February 8, 1985.

8. The required submittal, which the Court finds is an issue ripe for decision, will cause plaintiffs immediate and irreparabie harm in that, if allowed to stand, it will create grave uncertainty about whether the Transmission Agreement has or can become effective as to Appalachian until the PSC has granted its consent and approval of Appalachian to enter into and become a party to the Transmission Agreement. More particularly, that uncertainty will have the following immediate consequences, all of which demonstrate compelling and urgent need for issuance of the preliminary and permanent injunction requested in the complaint:

(a) If the Transmission Agreement is not or cannot become effective as to Appalachian without the PSC approval, the Agreement is rendered inoperative for the entire AEP System, and to that extent the PSC’s order of December 28, 1984, would have the effect of repealing the Federal Power Act;

(b) It creates grave uncertainty for plaintiffs in their conduct of the affairs of the AEP System on a continuing day-to-day basis; and

(c) It creates grave uncertainty for plaintiffs in their planning of the future construction or extension of EHV transmission lines.

9. If the Court were to enjoin defendants preliminarily from enforcing or implementing the required submittal, there would be no harm to defendants or to Appalachian’s West Virginia customers since the PSC and the Consumer Advocate Division of the PSC are both intervenors in FERC Docket No. ER84-348-001 representing the interests of Appalachian’s West Virginia customers in the proper forum and have made and can make such advocacy in that proceeding as they deem advisable in the interest of those customers as to why the Transmission Agreement should be rejected or modified by the FERC, an impartial tribunal.

10. To require Appalachian to submit the Transmission Agreement and its cost recovery thereunder to the PSC, which by its advocacy before the FERC in Docket No. ER84-348-001 has demonstrated that it has prejudged the facts and rendered it a partial, interested tribunal, for purposes of review of the Transmission Agreement, would cause Appalachian immediate and irreparable harm if such requirement of the PSC is not enjoined, whereas there would be no harm to the defendants or to Appalachian’s customers since, as noted supra, the PSC and the Consumer Advocate Division of the PSC are both intervenors in FERC Docket No. ER84-348-001 representing the interests of Appalachian’s West Virginia customers in the proper forum and have made and can make such advocacy in that proceeding as they deem advisable in the interest of those customers as to why the Transmission Agreement should be rejected or modified by the FERC, an impartial tribunal.

11. Defendants presented no evidence that either they or Appalachian’s customers would be harmed if a preliminary injunction were issued. The substantial and immediate injury that will be sustained by Appalachian should the Court not preliminarily enjoin defendants from enforcing or implementing the submittal required and the recovery denied outweigh any possible harm to defendants or to anyone else should defendants be so preliminarily enjoined. Under the balance-of-hardship test which this Court applies under Rule 65 of the Federal Rules of Civil Procedure, there is a much greater hardship on plaintiffs, particularly Appalachian, than on the defendants or other interested parties.

12. The proper tests to be applied in this case to determine if plaintiffs have justified the issuance of a preliminary injunction are those set forth in Blackwelder Furniture Co. v. Seilig Manufacturing Co., Inc., 550 F.2d 189 (4th Cir.1977), See, The Chesapeake and Potomac Telephone of Maryland v. Public Service Commission of Maryland, 748 F.2d 879 (4th Cir.1984); namely, the balance-of-hardship test and the likelihood-of-success test, together with a consideration of the public interest.

13. If in applying the balance-of-hardship test, the result is in favor of plaintiffs as the Court has found, it is enough that plaintiffs have presented grave or serious questions and they need not show a likelihood of success. Blackwelder, 550 F.2d at 196. The Court concludes that plaintiffs have presented in their complaint grave or serious questions.

14. If the Court has erred in its finding that in applying the balance-of-hardship test the result is in favor or plaintiffs, and that plaintiffs will only possibly suffer irreparable injury if a preliminary injunction is not granted, the issuance of a preliminary injunction as prayed for by plaintiffs is warranted because of the strong probability of plaintiffs’ success on the merits. Blackwelder, 550 F.2d at 196. That probability includes consideration of the public interest which motivated Congress to provide for the federal regulation of the transmission of electric energy in interstate commerce. Federal Power Act, § 201(a) [16 U.S. § 824(a)].

15. The involvement of the public interest has on occasion caused courts to “go much further both to give and withold relief in furtherance of the public interest than they are accustomed to go when only private interests are involved.” Virginia R. Company v. System Federation, 300 U.S. 515, 552, 57 S.Ct. 592, 601, 81 L.Ed. 789, 802 (1937); Yakus v. United States, 321 U.S. 414, 441, 64 S.Ct. 660, 675, 88 L.Ed. 834 (1944); Virginia Surface Mining and Reclamation Association, Inc. v. Andrus, 604 F.2d 312, 315 (4th Cir.1979); Texaco, Inc. v. Hughes, 572 F.Supp. 1, 3 (D.Md.1982). In granting the preliminary injunction as prayed for by the plaintiffs, the Court is furthering the public interest which Part II of the Federal Power Act has provided for in vesting the FERC with regulatory authority over the transmission of electric energy in interstate commerce.

16. Plaintiffs have demonstrated a likelihood that they will ultimately prevail on the merits of the claims which they have asserted in this action. It appears to the Court at this preliminary stage of this action that:

(a) The submittal of the Transmission Agreement to the PSC required by the PSC’s order of December 28, 1984 has been preempted by Part II of the Federal Power Act in that the only determinations of reasonableness, undue advantage to any party, and public interest which the PSC is empowered to make under W.Va.Code, 24-2-12, (United Fuel Gas Co. v. Public Service Commission, 154 W.Va. 221, 174 S.E.2d 304 [1970]) will be made by the FERC in its more comprehensive determinations of justness and reasonableness, undue advantage or disadvantage to any person, and public interest. Federal Power Act §§ 205(a), (b), and (c), and 206 [16 U.S.C. §§ 824d and 824e]; Pennsylvania Power and Light Co., 23 FERC ¶161,325 (June 2, 1983); Testimony of various parties to the FERC proceedings. See also, Public Service Commission of West Virginia v. The Federal Power Commission, 437 F.2d 1234 (4th Cir.1971); Cabot Corporation v. Public Service Commission of West Virginia, 332 F.Supp. 370 (S.D.W.Va.1971).

(b) The PSC’s December 28, 1984 denial of recovery of the transmission equalization costs which it had approved in its order of September 28, 1984 is an impermissible infringement on the FERC’s exclusive authority to regulate the transmission and sale of electric energy in interstate commerce.

(c) The PSC’s attempt to exercise an incompatible dual function of advocate before the FERC and decisionmaker in state administrative proceedings has deprived plaintiffs of their due process right to adjudication before an impartial, disinterested administrative body.

Accordingly, the Court is of the opinion that plaintiffs are entitled to the injunctive relief sought herein.

      . Which provides in pertinent part:
      Unless the consent and approval of the public service commission of West Virginia is first obtained: ... (f) no public utility subject to the provisions of this chapter ... may, by any means, direct or indirect, enter into any contract or arrangement for management, construction, engineering, supply or financial services or for the furnishing of any other service, property or thing, with any affiliated corporation, person or interest; ----

      . A member’s MLR in any month is the ratio of its maximum demand during the previous 12-month period to the sum of all members’ maximum demands during that same period.

      . The PSC’s September 28, 1984, order in Case No. 83-697-E-42T states (p. 53) that "the stipulation [among all parties of record except the Consumer Advocate Division of the PSC] provides that ... once [the $1.6 million is included] in APCO’s (Appalachian’s) rates, if FERC later reduces the allowed cost, Apeo will not only return to its West Virginia customers the difference between the amounts already collected and the amount finally approved but also will immediately reduce its retail rates to reflect the appropriate amount. (Stipulation, pp. 20-22).” As regards the $1.6 million, Appalachian considers itself bound by this refund provision.


source: Caselaw Access Project

author: ROBERT J. McNICHOLS, Chief Judge.

license: Public Domain

text:
    G. Wesley SODORFF, Jr., Plaintiff, v. UNITED STATES of America, Defendant.
    No. C-84-790 RJM.
    United States District Court, E.D. Washington.
    March 4, 1985.
    James J. Worland, Spokane, Wash., for plaintiff.
    John E. Lamp, U.S. Atty., Spokane, Wash., F. Michael Kovach, Trial Atty., Tax Div., U.S. Dept, of Justice, Washington, D.C., for defendant.
   MEMORANDUM DECISION

ROBERT J. McNICHOLS, Chief Judge.

The plaintiff commenced this action against the United States pursuant to 26 U.S.C. § 7426(b) to enjoin the tax sale of his residence.

Initially the plaintiff sought a Temporary Restraining Order, however, the Government agreed to postpone the sale pending a hearing on an injunction.

An evidentiary hearing was held on November 21, 1984 and November 27, 1984. Post trial memoranda were filed in late January, and the issues were submitted for decision.

The evidence establishes the following facts: Ralph and Angela Visintainer operated a business which became delinquent in tax obligations to the Government. Mr. Visintainer died on June 18, 1980 and probate proceedings were instituted in the Superior Court for Spokane County.

In December of 1981 a tax lien was filed against Mr. Visintainer’s estate based upon a 100% penalty for the failure to pay withholding taxes.

At the time of Mr. Visintainer’s death he and his wife were in the process of constructing a home in Spokane. The structure was not yet completed. The partially completed home was listed on the inventory in the probate initially at a value of $130,-000. Shortly thereafter, on April 29, 1982 it was reevaluated and inventoried at $80,-000. The real property was set aside to Mrs. Visintainer in lieu of homestead in accordance with Washington law. During the period following Mr. Visintainer’s death, Mrs. Visintainer continued to operate the business and made efforts to resolve the tax liabilities. She was unable to generate funds to meet the tax obligations or the penalties and interest which accrued thereon.

In March of 1982 Mrs. Visintainer agreed to sell the house to plaintiff, Mr. Sodorff, for the price of $62,500. I conclude that under all of the circumstances that was the fair market value of the partially completed house at that time. I further conclude that the sale from Mrs. Visintainer to Mr. Sodorff, although not placed of record, was a bona fide arms length sale. Mr. Sodorff, at that time, paid $2500 as earnest money, took possession of the property and commenced to restore and complete the structure.

Prior to March 11, 1983, Mr. Workland, a local tax lawyer, was in communication with representatives of the Internal Revenue Service (IRS) relating to the release of the tax lien insofar as it affected the residential property sold to Mr. Sodorff. The formal closing of the sale from Mrs. Visintainer to Mr. Sodorff was delayed. Mr. Sodorff testified that he was required to have the house more completely finished prior to obtaining a loan. The finishing took a substantial amount of time.

Meanwhile, Mr. Workland was in communication to one extent or another with Mrs. Weisenbach, one of the local revenue officers, who often acted in a supervisory capacity, as well as with other Internal Revenue agents. On March 11, 1983, for example, Mr. Workland wrote to the closing attorney, Mr. Clausen, indicating what obligations should be paid out of the purchase price and instructing that the balance of the sale proceeds should be held to abide appropriate claims, including the Internal Revenue Service lien. A copy of that letter went to Mrs. Weisenbach in the Internal Revenue Service. Again, on April 22,1983, a similar letter was written by Mr. Work-land to Agent Weisenbach. It is true that neither of these letters constituted a formal request for a release of the lien nor a formal agreement that the Government would release its lien. It is clear however, at least as of March 11, 1983, that the IRS was aware that a sale of the property was in progress. The deed from Mrs. Visintainer to Mr. Sodorff was executed on June 2, 1983 and was recorded on June 15, 1983. Meanwhile, on June 14, 1983, the Internal Revenue Service filed its lien against Mrs. Visintainer. Subsequently, an agent of the Internal Revenue Service communicated with Mr. Clausen, the closing attorney, and determined the details of the sale, including the prior claims against the property which had been paid at the closing. That agent instructed Mr. Clausen that the balance of the proceeds should be held to abide the IRS lien.

Meanwhile, Mr. Sodorff had expended over $100,000 completing the house. This was in addition to the $62,500 purchase price. The Government does not dispute the fact that the other claims, which were paid out of the sale proceeds were superior to the claims of IRS. In July of 1984 the IRS decided to enforce its tax lien and sell the residential property at a forced tax sale. Subsequently, the tax sale was scheduled, triggering this action by Mr. Sodorff. I will now address the issues.

The plaintiff contends:

1. That this court has jurisdiction under 26 U.S.C. 7426(b) to enjoin the sale.

2. That Mrs. Visintainer acquired title and ownership of the residential property by virtue of the order of the Spokane County Superior Court setting it aside to her in lieu of homestead.

3. That this procedure transferred the property free of the lien which had been filed by the IRS against the estate in December of 1981.

4. That the interest of Mr. Sodorff under his purchase agreement with Mrs. Visintainer in March of 1982 was superior to any rights which the IRS acquired by virtue of its lien filed June 14, 1983 and that, at best the Government would have a lien upon the net proceeds of sale after satisfaction of various obligations superior to the IRS lien. Those prior liens totalled approximately $50,000.

5. That the IRS lien extended only to the taxpayer’s interest in the property and that Mrs. Visintainer’s interest was the difference between the sale price of $62,500 (which I have concluded was a fair and reasonable price) and the obligations which were superior to the IRS lien.

6. That under the circumstances the IRS is estopped from proceeding against any interest of Mr. Sodorff in the property.

Government’s Contentions

1. That this court has no jurisdiction to enjoin the tax sale since the levy against Mrs. Visintainer is presumptively valid and cannot be challenged in this court.

2. That since the deed to Mr. Sodorff was recorded subsequent to the date of the IRS lien of June 14, 1983 and since the deed conveyed subject to that lien, the Government has an interest prior to any interest of Mr. Sodorff.

3. That the equities have nothing to do with the case. In that regard, it is the government’s position that the fact that Mr. Sodorff’s funds were used to pay off some $50,000 in claims which were superior to those of the government and that he invested substantial funds in the property after his purchase are totally irrelevant.

Discussion

The government’s argument that the court has no jurisdiction under the statute is tenuous at best. 26 U.S.C. 7426(b) provides:

(b) Adjudication. The district court shall have jurisdiction to grant only such of the following forms of relief as may be appropriate in the circumstances:
(1) Injunction. — If a levy or sale would irreparably injure rights in property which the court determines to be superior to the rights of the United States in such property, the court may grant an injunction to prohibit the enforcement of such levy or to prohibit such sale. (Emphasis added).

The only logical interpretation of the quoted section is that if the court determines that the rights in property of one other than the taxpayer are superior to the United States and a sale would irreparably injure that person’s right, the court may enjoin the sale. Consequently, I conclude that this court has jurisdiction.

I am satisfied that the lien against the estate of Mr. Visintainer (the December 1981 lien) was defeated by the action of the superior court in setting the property aside to Mrs. Visintainer in lieu of homestead. R.C.W. 11.52.016

Consequently, at the time Mr. Sodorff made the agreement with Mrs. Visintainer in March of 1982 to purchase the property and paid the earnest money, he acquired an interest in the property superi- or to anyone other than a bona fide purchaser for value. The IRS was not in that category. Consequently, I conclude that Mr. Sodorff s rights in the property were superior to the rights of the United States under its lien of June 14, 1983. The tax lien was filed after the deed was executed in favor of Mr. Sodorff and only the day before that deed was recorded. When the tax lien was recorded on June 14, 1983 the IRS was fully aware that a sale was in progress and that it was the intention of the seller that the net proceeds to which the IRS might be entitled would be held to abide that lien. Whether that legal obligation existed or not need not be decided since the net proceeds have been tendered to the government to apply to certain tax claims against Mrs. Visintainer. Moreover, for what bearing it has, the IRS advised the closing attorney to hold all remaining funds after the payment of prior claims because the IRS had a lien thereon.

In my judgment Section 7426 was enacted by the Congress to cover precisely situations such as exist here. The legislative history (1966 U.S.Code Cong. & Adm.News, pp. 3722, 3751) provides:

Where a person brings a wrongful levy action, or an action claiming an interest in either surplus or substituted sale proceeds, the relief the Federal district court can grant is limited by one of the four types described below.
First, the bill provides that a court can enjoin the Government from proceeding once it has levied, where it determines that a seizure or surrender of property under a levy, or a sale or property following a levy, makes injunctive relief appropriate. Injunctive relief is limited to cases where the court determines the Government’s action is wrongful and, if completed, would irreparably injure the rights of another in the property which are prior to the rights of the Government.

Had the IRS perfected and foreclosed a tax lien prior to Mr. Sodorff’s purchase, it would have recovered no more than the net proceeds of the sale after payment of prior encumbrances. Based on the evidence, such recovery would have been no more (and probably less) than the net proceeds presently being held by the closing attorney.

Now the Government seeks the benefits provided by Mr. Sodorff in satisfying approximately $50,000 in prior encumbrances and improving the property to the tune of $100,000 plus. Such a result would be wrongful and [if allowed] would irreparably injure the rights of another in the property which are prior to the rights of the Government. 26 U.S.C. § 7426(b).

I conclude that a permanent injunction should issue. The Government is hereby enjoined from selling the property. Moreover, the net proceeds of the Sodorff sale should be applied to the tax liability of Mrs. Visintainer — those for which she may be personally responsible.

This memorandum shall constitute the Findings of Fact pursuant to Rule 52(a), Federal Rules of Civil Procedure.

IT IS SO ORDERED.

      . R.C.W. 11.52.016
      The order of judgment of the court making the award or awards provided for in R.C.W. 11.52.010 through 11.52.024 shall be conclusive and final, except on appeal and except for fraud. The awards in R.C.W. 11.52.010 through 1.1.52.024 provided shall be in lieu of all homestead provisions of the law and of exemptions. The said property, when set aside as herein provided, shall be exempt from all claims for the payment of any debt of the deceased or of the surviving spouse existing at the time of death, whether such debt be individual or community. Under R.C.W. 11.52.010 through 11.52.024, the court shall not award more property than could be awarded under the law in effect at the time of the granting of the award.

      . Between the time of Mr. Visintainer’s death and the sale of the house to Mr. Sodorff the house had deteriorated badly. It had not been closed in against the elements. There was. extensive damage from water and apparent vandalism.


author: RICE, District Judge.

text:
    Cynthia SCHNEBLE, Plaintiff, v. UNITED STATES of America, et al., Defendants.
    No. C-3-84-951.
    United States District Court, S.D. Ohio, W.D.
    March 13, 1985.

      Richard W. Divine, Dayton, Ohio, and Alfred W. Schneble, III, Kettering, Ohio, for plaintiff.
    Gerald Kaminski, Asst. U.S. Atty., Dayton, Ohio, for defendants.
   DECISION AND ENTRY DENYING PLAINTIFF’S MOTION FOR PRELIMINARY INJUNCTION; DISSOLUTION OF TEMPORARY RESTRAINING ORDER; PLAINTIFF’S MOTION FOR PROTECTIVE ORDERS OVERRULED; FURTHER PROCEDURES SET

RICE, District Judge.

I. FACTS

A medical student selected to participate in the Armed Services Health Professions Scholarship Program (HPSP), 10 U.S.C. § 2120 et seq., is commissioned as an officer in the reserve component of a branch of the armed services while he or she is still in school. The Department of Defense may pay all of a participant’s educational expenses, including tuition, as well as paying each participant a monthly stipend. In exchange for these benefits, an HPSP participant incurs certain obligations, among them being an active duty obligation of at least one year in the appropriate branch of the armed services for each year of participation in the HPSP.

Plaintiff, Cynthia Schneble, signed an HPSP contract with the United States Air Force on July 11, 1978 (Doc. # 21, Exh. A), and began a four-year medical degree program at Wright State University on September 5, 1978. Plaintiff completed two years of her medical education, and was then granted a leave of absence from the HPSP for the period from July 8, 1980, to July 1, 1981. She received no benefits under the HPSP during this leave of absence.

Subsequent to her return from her initial year-long leave, health problems prompted Plaintiff to take two additional leaves of absence — from November 1, 1981 to January 4, 1982 and from August 1, 1982 to September 1, 1982 — from Wright State. In August or September, 1982, Plaintiff learned that the Air Force, under its reading of pertinent HPSP regulations, had prorated her tuition for the two quarters affected by these latter two leaves of absence, by paying her tuition only for the time she actually spent in school during those semesters, thus leaving Plaintiff with an outstanding balance of tuition owed to Wright State. Plaintiff took out a loan of $863 from Wright State to pay her outstanding tuition balance. She simultaneously informed officials of the Air Force Institute of Technology (AFIT), which monitors HPSP participants while they are in medical school, of her belief as to the responsibility of the Air Force to pay the portion of her tuition which had been left outstanding.

By the fall of 1982, AFIT officials had begun speculation that Plaintiff’s chronic lack of communication as to her status in medical school, coupled with other infractions, made her a candidate for withdrawal from the HPSP. Plaintiff’s participation in the program, however, continued in 1983. Plaintiff failed to repay her $863 loan from Wright State when it became due in March of 1983. As a result, although Plaintiff completed the academic requirements for her medical degree in July, 1983, and began a one-year medical internship at Kettering Medical Center during that same month, Wright State refused to issue Plaintiff’s diploma due to her outstanding financial obligations.

Plaintiff's correspondence with AFIT officials in the first half of 1983 continued to reflect her belief as to their responsibility for the amount of the disputed tuition. She also indicated repeatedly to AFIT that the date of her receipt of her medical degree remained uncertain, perhaps as late as January, 1984, due to academic as well as financial considerations. Plaintiff began to communicate with AFIT solely through her lawyer in November, 1983. Not surprisingly, AFIT officials continued to discuss throughout 1983 Plaintiffs possible withdrawal from the HPSP.

Plaintiffs inability to tell the Air Force when she would receive her medical degree had further implications with respect to her relationship with the Air Force Manpower and Personnel Center (AFMPC), the branch of the Air Force which monitors the graduate medical education of Air Force physicians. Typically, an HPSP participant begins his or her active duty commitment with the Air Force after completing a yearlong internship subsequent to receipt of the medical degree, unless further deferment is requested.

Plaintiff was initially scheduled to begin her active duty obligation in July, 1984. Communication between AFIT officials and AFMPC officials, however, left the AFMPC unclear as to when Plaintiff would receive her medical degree and complete her internship. Plaintiff failed, moreover, to respond to a series of AFMPC requests from April, 1983 on to submit applications with respect to her plans for graduate medical education. Coupled with those requests from AFMPC was a warning that Plaintiffs failure to respond could result in a deferment of her active duty obligation to July, 1985. By November, 1983, Plaintiff still had not been awarded her degree from Wright State. Nor had she informed the Air Force that she was already enrolled in an internship program. As a result of her failure to respond, and in the belief that Plaintiff would require additional time to complete the prerequisites for active duty, Major John Sheehan of the AFMPC informed Plaintiff on November 15, 1983, that her active duty obligation was deferred until July, 1985. (Doc. #21, Exh. E).

After an initial flurry of communications following Major Sheehan’s letter, Plaintiff’s attorney did not respond to the efforts of AFIT officials from mid-January, 1984, through May, 1984, to settle Plaintiff’s medical school situation as well as her status as an HPSP participant. Plaintiff’s involuntary separation from the HPSP was discussed with increasing frequency by AFIT officials as a result. In May, 1984, AFIT proposed that Plaintiff either immediately rectify the situation with Wright State, receive her degree, and be called to active duty, or that she seek voluntary separation from the Air Force. Plaintiff showed interest in the latter option, and her attorney began negotiations on May 15, 1984, to secure Plaintiff’s voluntary resignation from active duty participation.

At the end of May, 1984, AFIT officials alerted the AFMPC that Plaintiff had in fact completed the requirements for her medical degree and that she was enrolled in a one-year internship which would terminate on July 31, 1984. On June 7, 1984, Colonel McGough of AFIT, acting at the direction of Colonel Mauk of the AFMPC, contacted Plaintiff by telephone at Kettering Memorial Hospital. Colonel McGough suggested to Plaintiff that the dispute as to Plaintiff’s prorated tuition be resolved in Plaintiff’s favor. His offer to Plaintiff was that the Air Force pay Plaintiff’s outstanding loan to Wright State — which by that time was the subject of a lawsuit by Wright State against Plaintiff — in return for additional months of active duty service on Plaintiff’s part equal to the length of time which had comprised her second and third leaves of absence from medical school, which the Air Force was then offering to pay. Plaintiff did not accept Colonel McGough’s proposal, but referred him to her attorney.

In a letter to Plaintiff dated June 11, 1984, Colonel Mauk himself urged Plaintiff to settle her account with Wright State. Acknowledging the earlier offer made to Plaintiff by Colonel McGough, Colonel Mauk informed Plaintiff that, whether or not she accepted that proposal, the tuition dispute would not stand in the way of Plaintiff’s being called to active duty. (Doc. # 21, Exh. B). In a subsequent letter of July 31, 1984, Colonel Mauk informed Plaintiff’s attorney that, notwithstanding AFIT’s earlier suggestion that Plaintiff voluntarily separate from the Air Force, Plaintiff’s resignation would not be an acceptable resolution of the situation. He stated that the Air Force was in the process of settling Plaintiffs account with Wright State, and that Plaintiffs orders to active duty would be issued promptly.

On August 8, 1984, the Air Force paid off Plaintiffs loan from Wright State, including all late fees. The lawsuit by Wright State against Plaintiff for repayment of the loan was subsequently terminated. On August 14, 1984, Plaintiff was finally awarded her medical degree from Wright State. On August 17, 1984, Extended Active Duty Orders were issued to Plaintiff, directing her to appear at Sheppard Air Force Base in Texas on September 8, 1984. These orders were later returned by the United States Post Office as unclaimed. On August 20, 1984, Plaintiff tendered a formal letter of resignation to the Air Force.

A second set of Extended Active Duty Orders, directing Plaintiffs appearance at Sheppard Air Force Base, with end assignment to Grissom Air Force Base, Indiana, was hand-carried to Plaintiff on September 26, 1984. Like the earlier August 17th set of orders, the September 26, 1984 orders indicated that the term of Plaintiffs extended active duty was 54 months, rather than the 48 months called for under Plaintiffs HPSP contract. Plaintiff failed to appear at either Sheppard or Grissom Air Force Base as called for in the second set of orders.

Due to her failure to comply with her orders, Plaintiff was placed in an absence without leave (AWOL) status on October 23, 1984, with an effective date of October 9, 1984. On November 6, 1984, Plaintiffs attorney alerted the AFMPC to the error in Plaintiff’s orders with respect to the length of her active duty service. Plaintiff’s active duty service was accordingly recalculated on the basis of new documentation not previously in Plaintiff’s file, and the error was admitted by the AFMPC. Based on the revised calculations, on November 7, 1984, the Air Force issued an amendment to Plaintiff’s Extended Active Duty Orders of September 26, 1984, indicating that Plaintiff’s active duty commitment was in fact 48 months rather than 54 months. The amendment was forwarded to Plaintiff through her attorney.

The Air Force changed Plaintiff’s status to that of a deserter on November 8, 1984. On November 16, 1984, Plaintiff filed her suit in this Court, seeking damages, declaratory relief, and rescission (Doc. # 1), and filed motions seeking a temporary restraining order and preliminary injunction. (Docs. #2, 3). On November 19, 1984, a military pick-up order was issued for Plaintiff’s arrest. On November 20, 1984, this Court sustained Plaintiffs Motion for a Temporary Restraining Order (Doc. # 2), directing that Defendants refrain from executing the military pick-up order or subjecting Plaintiff to any proceedings under the Uniform Code of Military Justice for a period of ten days. (Doc. # 4). On December 10, 1984, upon agreement of counsel, this Court extended its Temporary Restraining Order until the time of its ruling on Plaintiff’s Motion for Preliminary Injunction. (Doc. # 12).

11. SUBJECT MATTER JURISDICTION

Defendants do not dispute that the Tucker Act, 28 U.S.C. § 1346(a), affords this Court subject matter jurisdiction over Plaintiff’s claim for damages stemming from Defendants’ alleged breach of her HPSP contract. Their position is, rather, that this Court lacks jurisdiction over Plaintiff’s claim for injunctive and declaratory relief. Upon scrutiny of the potential jurisdictional bases for Plaintiff’s equitable claims, however, this Court is persuaded that said claims “arise under” the laws of the United States within the meaning of 28 U.S.C. § 1331, the “federal question” statute.

The HPSP was established by Congress for the purpose of obtaining an adequate number of commissioned officers for active duty who .are qualified physicians or other health professionals. 10 U.S.C. § 2121(a). The statutory scheme utilized to implement this goal, 10 U.S.C. § 2120 et seq., sets forth the obligations and duties of each HPSP participant as well as the responsibilities of the relevant armed services branch towards a complying HPSP participant. It further requires that each HPSP participant sign an agreement with the United States that summarizes these reciprocal statutory burdens and benefits. 10 U.S.C. § 2122(2). As noted previously, Plaintiff signed an HPSP contract with Defendant United States Air Force on July 11, 1978.

Defendants emphasize that Plaintiffs action herein is merely a suit for breach of contract and as such is outside the jurisdiction of this Court. Yet, plainly, the agreement between Plaintiff and Defendant United States. Air Force is closely intertwined with, if not inseparable from, the federal statutory scheme described above. Local Div. 1285, Etc. v. Jackson Transit Auth., 650 F.2d 1379, 1382 (6th Cir.1981), rev’d on other grounds, 457 U.S. 15, 102 S.Ct. 2202, 72 L.Ed.2d 639 (1982). The HPSP contract is the mandatory vehicle for preserving and furthering the rights and obligations so created by Congress. Id. As the rights asserted by Plaintiff herein derive from these federal statutes, Plaintiffs claim must be found to “arise under” the laws of the United States, as required for federal jurisdiction under 28 U.S.C. § 1331. Accord Allen v. Weinberger, 546 F.Supp. 455 (E.D.Mo.1982); Mansfield v. Orr, 545 F.Supp. 118 (D.Md.1982); Acko v. Brown, 489 F.Supp. 216 (D.Minn.1980).

The Court is also not persuaded by Defendants’ argument that the Court should refrain from reaching the merits of the instant case on the basis of the doctrine in Younger v. Harris, 401 U.S. 37, 91 S.Ct. 746, 27 L.Ed.2d 669 (1971). There were no pending court-martial proceedings against Plaintiff when she sought injunctive relief from this Court, unlike the situation which compelled application of the Younger doctrine in Schlesinger v. Councilman, 420 U.S. 738, 95 S.Ct. 1300, 43 L.Ed.2d 591 (1975). Nor has the Court been alerted to any prosecutorial process which might render at all analogous herein the case of Hicks v. Miranda, 422 U.S. 332, 349, 95 S.Ct. 2281, 2291, 45 L.Ed.2d 223 (1975), which held that Younger is applicable when state criminal proceedings are begun against the federal plaintiff, after the filing of the complaint, but before any proceedings of substance on the merits. In sum, the Court concludes that it has subject matter jurisdiction in the instant case and that it may proceed accordingly with a resolution on the merits of Plaintiff’s Motion for Preliminary Injunction.

III. PLAINTIFF’S ENTITLEMENT TO PRELIMINARY INJUNCTIVE RELIEF

As noted by the Sixth Circuit in Warner v. Central Trust Co., N.A., 715 F.2d 1121 (6th Cir.1983), four factors are to be considered by the district court in exercising its discretion to grant a preliminary injunction, namely:

(1) Whether the Plaintiff has shown a strong or substantial likelihood or probability of success on the merits;
(2) Whether the Plaintiff has shown the threat of irreparable injury(ies);
(3) Whether the issuance of a preliminary injunction would cause substantial harm to others;
(4) Whether the public interest would be served by issuing a preliminary injunction.

715 F.2d at 1123.

A. Probability of Success on the Merits

The Court has found considerable federal authority to the effect that traditional principles of contract law are applicable to claims that an enlistment contract is invalid or has been breached. Pence v. Brown, 627 F.2d 872, 874 (8th Cir.1980); Peavy v. Warner, 493 F.2d 748, 750 (5th Cir.1974). Application of such contract principles firmly persuades this Court as to Plaintiff’s almost total lack of probability of success on the merits of this case. Having scrutinized Plaintiff’s allegations as to the various means by which Defendants breached her enlistment contract, this Court finds itself unable to agree that Defendants in fact committed a breach of the contract.

Plaintiff’s theory as to Defendants’ breach in the First Claim for Relief, contained in her Second Amended Complaint, turns on the Defendants’ allegedly unlawful proration of her tuition and the links which said proration had to the fifty-four month active duty requirement contained in her September 26, 1984 Extended Active Duty Orders. This Court finds that Defendants reasonably construed the language of the enlistment contract as well as the government AFIT Regulations, particularly AFIT Regulation 53-7, Par. 4-10, to the effect that it could prorate an HPSP participant’s tuition expenses for those portions of the academic term during which a participant enjoyed a leave of absence and was hence not an “active” HPSP participant. Colonel Mauk’s letter of June 11, 1984, was thus, at most, reflective of an offer by Defendants to modify Plaintiff’s contract for the consideration stated, namely, payment of the disputed tuition. Moreover, the deposition of Franklin L. Fisher persuades the Court that the initial determination of Plaintiff’s active duty commitment as 54 months rather than 48 months was a clerical error due in no small part to Plaintiff’s own inability to keep Defendants properly abreast of the status of her medical education. Once alerted to the mistake, Defendants amended Plaintiff’s orders to reflect a 48 month commitment, even though the Air Force had already paid off Plaintiff’s outstanding tuition balance to Wright State.

Nor is this Court any more persuaded as to Plaintiff’s probability of success on the merits of her Second Claim for Relief. The facts in this case reveal Plaintiff’s own failure to abide by Air Force regulations and requests for information and applications pertaining to her plans for graduate medical education. The facts further reveal the confusion of officials of AFIT, in turn communicated to AFMPC officials, as to Plaintiffs date of graduation from medical school, due largely to Plaintiff’s own communications and lack thereof. Plaintiff was put on notice that without proper processing and information, her active duty obligation stood to be deferred until July, 1985. This Court thus finds it difficult to construe Plaintiff’s deferment from active duty, as reflected by Major Sheehan’s November 10, 1983 letter, as constituting an actual breach by Defendants.

Even assuming that Defendants had breached their contract with Plaintiff, the Court does not find that rescission, the primary relief sought by Plaintiff, would be proper. In order for a court to find grounds to order the equitable remedy of rescission, a breach must be found so substantial and fundamental as to go to the very root of the contract. United States v. Southern Construction Co., 293 F.2d 493, 498 (6th Cir.1961). In this case, even assuming, arguendo, a breach of the contract, such a breach would be minor, negligible, and de minimis. Plaintiff elected to forego rescission upon learning of Defendants’ proration of her tuition in the early fall of 1982, and continued to receive the benefits of the contract through July, 1983. It would be unconscionable (not to mention inequitable), even assuming that Defendants’ conduct rose to the level of a breach, to award rescission in such a situation as this.

In sum, the Court finds that Plaintiff has not established any probability of success on the merits. While this finding alone would permit this Court to deny Plaintiffs Motion for Preliminary Injunction, the Court will briefly consider the remaining portions of the four-part test outlined in Warner for purposes of completing the record.

B. Irreparable Injury to Plaintiff

While continued performance of her enlistment contract, entailing at this stage a report for active duty at Grissom Air Force Base in Indiana, may well prove inconvenient for Plaintiff, this Court finds no irreparable injuries sufficient to merit the granting of injunctive relief. Any damages suffered by Plaintiff are easily quantifiable. In short, this factor also militates against the granting of the preliminary injunction sought by Plaintiff.

C. Substantial Harm to Others

The Court finds that the equities in this case strongly favor Defendants and, indeed, that the pursuit of injunctive relief by Plaintiff borders on the fraudulent. The government spent tens of thousands of dollars fulfilling its obligations to Plaintiff while she was in medical school. Now that Plaintiff has completed her medical education and internship and is in a position to begin to fulfill her obligations under the HPSP program to serve as an Air Force physician, Defendants would be substantially harmed by Plaintiffs procurement of an injunction from this Court to stymie her active duty commitment. Defendants have pointed to the current shortage of physicians at Grissom Air Force Base, to which Plaintiff has been ordered to report, and the strain which Plaintiff’s refusal to report for active duty has created for other personnel, both enlisted and medical, at said air force base. The Court concludes that issuance of a preliminary injunction in the instant case would indeed cause substantial harm to others.

D. Public Interest

In establishing the HPSP, Congress made the judgment that tax dollars would be well spent in training individuals in the health professions in order to overcome the shortage of health care professionals in the military. To allow Plaintiff to avoid her obligations under the HPSP contract at this point in her medical career would be a grave disservice to the end which the HPSP is designed to serve, and would in no small way violate the public trust. This Court plainly cannot find that the public interest would be served by issuing Plaintiff the injunctive relief which she seeks.

For the reasons aforesaid, Plaintiff’s Motion for Preliminary Injunction (Doe. # 3) is overruled. Plaintiff’s Motion for Temporary Restraining Order (Doc. # 2), sustained on November 20, 1984 and extended on December 12, 1984 until the date of this decision, is hereby dissolved.

IV. PLAINTIFF’S MOTION FOR PROTECTIVE ORDER

In her Motion for Protective Orders (Doc. # 27), filed after the Court’s oral ruling on her Motion for Preliminary Injunction, Plaintiff seeks the Court’s continued involvement in her relationship with Defendants. For the reasons outlined in this opinion, the Court believes that there has been no breach by Defendants in this matter, and that Plaintiff is contractually obligated to discharge to Defendants the remainder of her duties as outlined in the HPSP contract. This Court thus overrules Plaintiff’s Motion for Protective Orders in its entirety, and refuses to grant in the guise of a Protective Order any or all of the relief which it herein refuses to issue in the form of an injunction.

Y. FURTHER PROCEDURES SET

Upon the parties’ receipt of this Decision and Entry dissolving the earlier-issued Temporary Restraining Order in this matter and denying Plaintiff’s Motion for Preliminary Injunction and Motion for Protective Orders, a telephone conference call with the parties will be convened to discuss the status of this litigation. Said conference call will be held at 4:15 p.m. on Thursday, March 21, 1985.

      . Some circuit courts have intimated that the Tucker Act may empower a district court to award equitable relief in the narrow circumstance where it is merely incidental to and in aid of a primary request for monetary damages. Sheehan v. Army and Air Force Exchange Service, 619 F.2d 1132, 1138 n. 10 (5th Cir.1980); Werner v. U.S. Dept. of Interior, Fish and Wildlife, 581 F.2d 168, 171 (8th Cir.1978); Larionoff v. United States, 533 F.2d 1167, 1181 (D.C.Cir.1976). In the present action, however, Plaintiffs claim for damages is clearly incidental to her primary quest for injunctive relief, rescission and declaratory relief.

      . Defendants have acknowledged that 5 U.S.C. § 702 waives the defense of sovereign immunity in actions for non-monetary relief under 28 U.S.C. § 1331. Warin v. Director, Dep’t of Treasury, 672 F.2d 590, 591 (6th Cir.1982).

      . Indeed, Plaintiff continued to receive an HPSP stipend through November 3, 1983, due to the confusion as to the date of her completion of requirements for the medical degree.

      . The Court's conclusion with respect-to the public interest in the issuance of the injunction sought by Plaintiff, and indeed with respect to the substantial harm caused to others by any such injunction, is not altered by Plaintiff’s tender to this Court of a cashier's check in the sum of $12,828.93 at the time of her filing of her original Complaint. Plaintiff contends that this sum represents "the full amount of expenses paid out by Defendant United States for the Plaintiffs medical education." (Doc. # 1). What Plaintiff fails to mention, however, is that she has also received $26,662.82 in stipend and non-education related expenses under the HPSP program. (Doc. # 17, at 32). On February 1, 1985, by order of this Court, a check in the sum of $12,828.93 was issued by the Clerk of Courts, payable to Plaintiff’s trial counsel. (Doc. #26).


author: GILBERTO GIERBOLINI, District Judge.

text:
    FEDERAL HOME LOAN MORTGAGE CORPORATION, Plaintiff, v. Andrea JIMENEZ SOLER, Defendant.
    Civ. No. 83-054 GG.
    United States District Court, D. Puerto Rico.
    March 13, 1985.
    Fernando J. Fornaris, Santurce, P.R., for plaintiff.
    Emiliano Irizarry Castro, P.R.L.S., Inc., Camuy, P.R., for defendant.
   ORDER

GILBERTO GIERBOLINI, District Judge.

Pending before us is a motion filed by defendant Andrea Jiménez Soler requesting that the Special Master who sold the property subject of the present foreclosure proceedings be ordered to deposit the sum of $1,500 in favor of defendant for homestead.

Plaintiff has filed an opposition alleging that defendant waived all homestead and similar rights in favor of H.F., Inc. when she assumed the mortgage executed by the prior owners of the property in question.

As per our Order of January 27,1984, we ordered that the sum of $1,500 be immediately deposited by the officer who made the sale in the Clerk’s Office pending further proceedings to resolve the legitimacy of such claim.

A brief history of the facts is necessary to resolve the present issue. It appears that on February 21, 1980 defendant bought the property subject of the present foreclosure proceedings from Juan A. Rosales Marcel and Natividad Vélez. Said property had a first mortgage in the amount of $23,400 to the order of H.P., Inc. who endorsed it to the plaintiff in this case, Federal Home Loan Mortgage Corp. In clause number nineteen of the mortgage deed evidencing the mortgage assumed by the defendant, the borrower waived all homestead and similar rights in favor of the lender.

The Supreme Court of Puerto Rico has adopted the following definition for the concept of homestead in Masa v. Registrar of Caguas, 30 P.R.R. 88, 90 (1922):

The word ‘homestead’ has both a popular and a legal signification. In its popular sense it signifies the place of the home— the residence of the family; it represents the dwelling house in which the family resides, with the usúal and customary appurtenances, including the outbuildings of every kind necessary or convenient for family use, and lands used for the purposes thereof. While the term is nearly as old as the English language, its use in a legal sense is quite modern, and is peculiarly American. As used in the various statutes, the word ‘homestead’ may be defined as meaning not only the property — the real estate — occupied as the home, but also the right to have it exempted from levy and forced sale. In this sense, a homestead is the land not exceeding the prescribed amount, upon which is the dwelling house, or residence, or habitation, or abode of the owner thereof and of his family; and includes the dwelling house as an indispensable part. 13 Ruling Case Law 540.

The extent to which the homestead of a householder is protected has been clearly delineated as follows:

Exemption is only from ordinary debts contracted after the date of its beginning. It.protects the homestead property from such debts, but does not relieve the debtor, either directly or by operation of law, from any indebtedness he may have incurred. He continues liable for all his debts; and they may be prosecuted to judgment as though he were not a householder with a family, and although no homestead law had ever been •enacted.
No state attempts, by homestead legislation to exonerate the debtor from the duty of meeting his obligations. Homestead exemption statutes are not bankrupt laws. They offer no discharge. Everywhere the debtor may be sued for his ordinary debts as well as for any others, contracted at any time, and judgment recorded against him will create a general lien bearing all his real estate except his homestead.
In most of the states, it is simply by excepting the homestead from general judgment liens from ordinary debts contracted after notice, that its protection is effected. The law does not inhibit the rendition of the judgment, but saves the homestead from any property liability resultant. No valid writ can be issued or executed against the favored property. The family cannot be disturbed or deprived of the home. Rufus Waples, A treatise on Homestead and Exemption, at p. 8, n. 4.

The right to homestead has been created by the legislature of the Commonwealth of Puerto Rico pursuant to 31 L.P.R.A. §§ 1851-1857. Specifically Section 1851 provides in the pertinent as follows:

The right of homestead is unrenounceable; and any pact to the contrary is declared null, except that said right of homestead may be renounced in all cases of mortgages secured by or executed on behalf of the Federal Housing Administrator, or in cases of loans to veterans secured ... by the United States Veterans Administration, and in all cases of mortgages ... executed or made in behalf of the Federal Land Bank of Baltimore, the Puerto Rico Production Credit Association, the National Farm Loan Association of San Juan, Puerto Rico, the Small Business Administration ... and of loans and mortgages secured or granted by the Housing Bank of Puerto Rico, and the Farm Credit Corporation and the Farmers Home Administration.

In interpreting the above cited section, the Supreme Court of Puerto Rico expressed that the homestead right may not be waived, except in the eases expressly permitted by law, and any agreement to the contrary is void. Vega Acosta v. Superior Court, 89 P.R.R. 400 (1963). Moreover, the buyer of a mortgaged property has no better right than his predecessor in title when the right to homestead has been legally renounced. Carlo v. Junghams, 47 P.R.R. 409 (1934). A buyer’s position cannot be better than the seller’s.

In the present case, the previous owners of the mortgaged property expressly renounced their rights to homestead in a mortgage deed secured by H.F., Inc., but since H.F., Inc. is not among those agencies expressly listed by law, the waiver was null and void. Consequently, when defendant assumed the mortgage, she received the right to the exemption of $1,500.

WHEREFORE, in view of the foregoing, defendant’s motion dated December 18, 1984, is hereby granted. Accordingly, the Special Master appointed in this case is hereby ordered to deposit in the Clerk’s Office the sum of $1,500 within the next five (5) days for the benefit of the defendant.

SO ORDERED.

      . For a more detailed and thorough discussion of the right to homestead see Apuntes sobre el Derecho de "Homestead", por L. Muñoz Morales, IV Rev.Jur.U.P.R. 78.


text:
    Elizabeth M. BROWN, Plaintiff, v. FLORIDA KEYS AQUEDUCT AUTHORITY, Defendant.
    No. C-3-83-429.
    United States District Court, S.D. Ohio, W.D.
    March 28, 1985.

      Roger J. Makley, John G. Witherspoon, Jr., Dayton, Ohio, for plaintiff.
    Charles J. Faruki, D. Jeffrey Ireland, Dayton, Ohio, James T. Schoenbrod, Key West, Fla., for defendant.
   DECISION AND ENTRY SUSTAINING DEFENDANT’S MOTION TO DISMISS FOR REASON OF LACK OF THIS COURT’S IN PERSONAM JURISDICTION; ALTERNATIVE MOTION TO TRANSFER DEEMED MOOT; CASE DISMISSED; TERMINATION ENTRY

RICE, District Judge.

The Defendant, Florida Keys Aqueduct Authority, is a political subdivision of the state of Florida, created by the state legislature for the purpose of operating a pipeline system for the distribution of potable water to the Florida Keys and distributing that water to its residential and commercial customers. On July 11, 1980, the Defendant offered for sale more than $62 million worth of 9V4 percent Water Revenue and Refunding Bond Anticipation Notes (“Notes”). The entire issue was purchased from- the Defendant by an underwriting syndicate headed by Bache Halsey Stewart Shields, Inc. (“Bache”) in New York and Southeastern Municipal Bonds, Inc. (“Southeastern”) in Orlando, Florida. This Purchase Agreement was not executed in the state of Ohio. The Purchase Agreement provided that the Notes themselves were to be delivered to the purchaser group on a specified date in a location within the city of New York, New York. The Agreement specifically provided that it “shall be construed under the laws of the State of New York.” Prior to the sale of the Notes to the Bache group, a “Blue Sky” memorandum was prepared by legal counsel for the Defendant, as the issuer, which provided in pertinent part as follows:

This will advise you that no action is being taken to qualify the proposed offering of the captioned Notes (the ‘Notes') for sale to the public in the State of Mississippi, New Hampshire and Ohio. Accordingly, the Notes may not be offered or sold in any amount to the public in such jurisdictions.” (Emphasis added)

By some unknown route and for some unknown reason, a portion of these Notes, issued by the Defendant, was sold by the Dayton, Ohio, office of Merrill Lynch, Pierce, Fenner and Smith, Inc., to the Plaintiff on October 22, 1980. The gist of the Plaintiffs lawsuit stems from the fact that after she had received several interest payments, pursuant to the terms of the Notes in question, the Defendant redeemed all of these Notes, without knowledge to the Plaintiff, by causing to be published a notice of redemption in a publication of less than general circulation. The Plaintiff contends that the notice was ineffective and improper under the terms of the Agreement set forth in the Notes and that, even if proper, same was inadequate to give her the notice required under the law. The Plaintiff did not receive notice from the Defendant of the redemption until nine months following the date of same (one interest payment had been sent to her in error, following the date of redemption). Accordingly, she claims, inter alia, a loss of interest payments to which she deems herself entitled and also the loss of the use of her principal sum for investment purposes. In her Complaint, filed May 11, 1983, the Plaintiff sets forth two claims for relief, to wit: a breach of the Agreement set forth in the Note, itself, by virtue of the Defendant’s intentionally, willfully and maliciously affecting an unreasonable notice of the purported redemption, thus depriving her of her entitlement to certain interest payments and the use of her principal amount for investment opportunities, and a second cause of action setting forth a violation of 42 U.S.C. Section 1983, claiming that the Defendant’s failure to pay Plaintiff the full amount of the interest owed deprived her of her property right secured under the fourth amendment to the United States Constitution, without the compliance either with the redemption provisions of the Agreement or without notice reasonably calculated to apprise her of the purported redemption.

The Defendant has never conducted business in the state of Ohio, owns no property in the state of Ohio, maintains no office there and has no employee or agent in that state. Additionally, it maintains no bank account and owns no property of any description within the state of Ohio. It has made no purchase in the state of Ohio from an Ohio vendor. In short, the Defendant has had no contact in or with the state of Ohio. Affidavit of Bernard L. Schattner, appended to Defendant’s Motion to Dismiss, Doc. # 7.

The Defendant has filed a three-branched Motion to Dismiss, upon the following grounds:

1. lack of in personam jurisdiction, Fed.R.Civ.P. 12(b)(2), over the person of the Defendant;
2. insufficiency of process and insufficiency of service of process, Fed.R. Civ.P. 12(b)(4), (5), over the Defendant; and
3. improper venue over this action, Fed. R.Civ.P. 12(b)(3).

As an alternative, the Plaintiff has requested that, in the unlikely event that this Court finds that it has in personam jurisdiction over the Defendant and that service and venue are proper, the captioned cause be transferred to the United States District Court for the Southern District of Florida, pursuant to the provisions of 28 U.S.C. Section 1404(a).

1. The captioned cause must be dismissed for the reason that this Court lacks in personam jurisdiction over the Defendant. Fed.R.Civ.P. 12(b)(2).

A motion calling into question this Court’s lack of in personam jurisdiction' over a defendant requires the Court to examine, as the law of the forum, Ohio’s long-arm statute, Ohio Revised Code Section 2307.382, and its counterpart found in the Ohio Rules of Civil Procedure, Rule 4.3(A). The Supreme Court of the United States requires minimum contacts between the forum state and the defendant. Han son v. Denckla, 357 U.S. 235, 78 S.Ct. 1228, 2 L.Ed.2d 1283 (1958). The Ohio long-arm statute is co-extensive with the constitutional limits of personal jurisdiction stated by the Supreme Court in Hanson v. Denckla, supra, and International Shoe Co. v. Washington, 326 U.S. 310, 66 S.Ct. 154, 90 L.Ed. 95 (1945). The constitutional limit on personal jurisdiction is that the defendant must have “minimum contacts” with the forum state. International Shoe Co., supra, at 316, 66 S.Ct. at 158. In Ohio, a non-resident transacting business in this state may be subject to an Ohio court’s jurisdiction or the jurisdiction of a federal court sitting in Ohio, under the facts set forth above, only if the cause of action arises from that business transaction. As stated in Ohio Revised Code Section 2307.-382:

[A] court may exercise personal jurisdiction over a person who acts directly or by an agent, as to a cause of action arising from the person’s:
1. transacting any business in this state.

None of the other seven scenarios set forth in Ohio Revised Code Section 2307.382 and Ohio R.Civ.P. 4.3(A) are applicable herein.

When the court’s in personam jurisdiction over a defendant is called into question by a motion to dismiss, the plaintiff has the burden of proving specific facts that show that the court has personal jurisdiction over the defendant. Chattanooga Corp. v. Klinger, 704 F.2d 903, 906 (6th Cir.1983). As this Court has held in Stewart Coach Industries, Inc. v. Moore, 512 F.Supp. 879, 883 (S.D.Ohio 1981):

However, where a motion to dismiss for improper service and lack of personal jurisdiction is filed, pursuant to Fed.R. Civ.P. 12(b)(2), ..., and said motion is supported by affidavit, it is well settled that ‘the non-moving party [herein, Plaintiff] may not rest upon allegations or denials in his pleading but his response by affidavit or otherwise must set forth specific facts showing that the Court has jurisdiction.’

Citations omitted. In this case, the Plaintiff has failed to allege and to show (by affidavit or otherwise) specific facts which link the Defendant with the state of Ohio. Plaintiff alleges only that she is a resident of Ohio, that she paid for the Notes in Ohio, that she sent her interest coupons from Ohio and received payment from the Defendant’s Trustee in the state of Ohio.

The Sixth Circuit has set forth a three-part test for determining whether personal jurisdiction exists over an out of state defendant. Southern Machine Co. v. Mohasco Industries, Inc., 401 F.2d 374, 381 (6th Cir.1968):

First, the defendant must purposely avail himself of the privilege of acting in the forum state or causing a consequence in the forum state. Second, the cause of action must arise from the defendant’s activities there. Finally, the acts of the defendant or consequences caused by the defendant must have a substantial enough connection with the forum state to make the exercise of jurisdiction over the defendant reasonable.

Accord: In-flight Devices Corp. v. Van Dusen Air, Inc., 466 F.2d 220, 226 (6th Cir.1972).

This Court has determined that Plaintiff’s Complaint must be dismissed as to the Defendant herein, because the Plaintiff has failed to show that the Defendant purposefully availed itself of the privilege of acting in the state of Ohio or of causing a consequence in this state. The Defendant did not act freely or intentionally in Ohio. As stated in In-flight Devices v. Van Dusen, supra, 466 F.2d at 228:

... [T]he purposeful action test is merely base line requirement, designed to insure that the defendant has become involved with the forum state through actions freely and intentionally done. It seeks to avoid the assertion of jurisdiction in a situation where all contacts result from a decision made by plaintiff [as herein, where Plaintiff has made the decision to purchase the Notes from a wholesale distributor of same to whom said Notes were distributed by the Defendant’s underwriter] as was the case in Hanson v. Denckla.

In World-wide Volkswagen Corp v. Woodson, 444 U.S. 286, 100 S.Ct. 559, 62 L.Ed.2d 490 (1980), plaintiffs brought a products liability action in an Oklahoma State Court to recover for personal injuries sustained in Oklahoma in an accident involving an automobile that had been purchased by them in New York, while they were New York residents. The defendants included the automobile retailer and its wholesaler, New York corporations that did no business in Oklahoma. The Supreme Court concluded that there was a total absence in the record of the affiliating circumstances set forth in International Shoe Co. v. Washington, supra, that are a necessary predicate to any exercise of state court jurisdiction, to wit: the existence of minimum contacts, such that maintenance of the suit in the forum does not offend traditional notions of fair play and substantial justice, where the relationship between the defendant and the forum state is such that it is reasonable to require the corporation to defend the particular suit which is brought there. The Court noted that the defendants carried on no activity whatsoever in Oklahoma; they closed no sales and performed no services there, availed themselves of none of the benefits of Oklahoma law, and solicited no business there either through sales persons or through advertising reasonably calculated to reach that state; nor did the record show that they regularly sold cars to Oklahoma residents or that they indirectly, through others, served or sought to serve the Oklahoma market. Although it is foreseeable that automobiles sold by the defendants would travel to Oklahoma, and that the automobile might cause injury in Oklahoma, “foreseeability” alone is not a sufficient benchmark for personal jurisdiction under the Due Process Clause. The foreseeability that is critical to due process analysis is not the mere likelihood that a product will find its way into the forum state; rather, it is that the defendant’s conduct in connection with the forum is such that he should reasonably anticipate being haled into court there. The Court concluded that jurisdiction cannot be supported on the theory that the defendants earned substantial revenue from goods sold in Oklahoma.

Applying World-wide Volkswagen to the facts of the instant action, and construing these facts most strongly in favor of the non-moving party herein (the Plaintiff), the most that can be argued is that when the Defendant sold Notes in question to an underwriter, with nationwide sales outlets and contacts, it was not only foreseeable that a Note could have been sold in Ohio, but also that the Defendant’s action in setting the Notes in question into the stream of commerce was such that it should have reasonably anticipated being brought into court in any state (such as Ohio) in which its Notes were sold. However, such an argument would run afoul of the Supreme Court’s decision in World-wide Volkswagen Corp. v. Woodson, supra. In addition, such an argument, weak to begin with, would be destroyed by the fact that the Defendant’s legal counsel, prior to the sale of the Notes to the underwriter, specifically stated that “the Notes may not be offered or sold in any amount to the public in such jurisdictions [such as Ohio, wherein the Defendant had taken no action to qualify the proposed offering of the Notes for sale in such states].” Such a caveat, disclaimer or notification clearly shows that the Defendant had no reasonable anticipation, based upon its non-dealings with the state of Ohio, of being brought into court in this state. In addition, and most importantly, the caveat, disclaimer or notification clearly shows that the Defendant took no purposeful actions to avail itself of the privilege of acting in Ohio, to freely and willingly act within the state of Ohio, as is required by the first prong of the three-part test in Mohasco, supra. In the captioned cause, the Plaintiff has not acted within the forum state. Plaintiff, by purchasing the bond from a retail customer of the underwriter to whom Defendant sold the Notes, has acted unilaterally. The Defendant has had no contacts with the forum state and, accordingly, should not reason- , ably anticipate being brought into court in said state. The Defendant has not become involved with the state of Ohio through actions taken purposefully, freely and intentionally. In fact, Defendant took what actions it could to guard against the possibility that its Notes would be sold within the state of Ohio.

Since the Court has concluded that the Plaintiff has failed to satisfy the first prong of the three-part test set forth in Southern Machine Co. v. Mohasco, the Court need not dwell upon the second and third prong, save and excepting to say that even if it could be argued that the cause of action arose from the Defendant’s activities in setting certain Notes into the stream of commerce, which were eventually sold to an Ohio Plaintiff, by no stretch of the imagination could it be argued that the Defendant had a substantial enough connection with the state of Ohio to make the exercise of jurisdiction over the Defendant therein reasonable. Such an exercise of jurisdiction would offend traditional notions of fair play and substantial justice.

Although the first prong of the Defendant’s Motion to Dismiss (coupled with an alternative motion to transfer, should the Motion to Dismiss be granted) has been sustained, this Court will address the other prongs of the Defendant’s Motion to Dismiss.

2. The Defendant’s Motion to Dismiss the Plaintiff’s Complaint, pursuant to Fed.R. Civ.P. 12(b)(4) and (5), due to insufficiency of process and insufficiency of service of process, would have been deemed by this Court to be not well taken and same would, therefore, be overruled in its entirety.

It is clear (and the Plaintiff does not contend otherwise) that process in this case was improper, having been effected pursuant to Fed.R.Civ.P. 4(e)(2)(C)(ii), rather than pursuant to Fed.R.Civ.P. 4(d)(6), in view of the fact that the Defendant is a governmental body established by the state of Florida. Neither is it contested that the period of 120 days following the date of the filing of the Complaint, within which a plaintiff has to make proper service, Fed.R. Civ.P. 4(j), has elapsed without such proper service having been made. However, this Court interprets Fed.R.Civ.P. 4(j) in such a way to allow a tolling of the running of the 120 days, upon the filing of either a motion to quash service or the filing of a motion to dismiss for insufficiency of process or insufficiency of service of process; said 120-day period not to continue to run until such time as the Court has taken action on the motion. Should the captioned cause have survived the Motion to Dismiss for lack of in personam jurisdiction and the Motion to Dismiss for improper venue, this Court would have allowed the Plaintiff that number of days (of the 120) that had not elapsed, prior to the filing of the Motion to Dismiss for insufficiency of process or insufficiency of service of process, to make proper service pursuant to Fed.R.Civ.P. 4(d)(6). Such a ruling would have caused no prejudice to a defendant which, after all, was well aware of the pendency of the lawsuit and the allegations therein; sufficiently aware that it could file and argue a very sophisticated motion to dismiss.

3. The Defendant’s Motion, seeking an Order of the Court dismissing the captioned cause for improper venue, pursuant to Fed.R.Civ.P. 12(b)(3) and 28 U.S.C. Section 1406(a), would have been deemed to be well taken. The Court would have, accordingly, adopted Plaintiff’s suggestion and dismissed Count II of the Complaint, an action which would have made venue in this district proper in view of the fact that the Plaintiff’s Complaint would have been based on diversity jurisdiction alone.

Not much is to be said for the Plaintiff’s argument to the effect that the captioned cause, as presently pleaded, is really a diversity action, with this Court taking jurisdiction over the 42 U.S.C. Section 1983 action set forth in the second cause of action by means of pendent jurisdiction, except to say that such a theory is both novel and not well taken.

4. The Defendant’s alternative motion, seeking an Order of the Court transferring the captioned cause to the United States District Court for Southern District of Florida, pursuant to 28 U.S.C. Section 1404(a), is deemed by this Court to be moot and same will, therefore, not be ruled upon. In ruling as aforesaid, this Court concludes that a case can be transferred pursuant to Section 1404(a) only if the Court finds that it had jurisdiction over the person of the Defendant and that venue was proper within the district. Within the Sixth Circuit, the transferor court must have both personal jurisdiction and venue in order to transfer an action under Section 1404(a). Martin v. Stokes, 623 F.2d 469 (6th Cir.1980). In the absence of either or both, the district court can transfer an action only under Section 1406(a). Id.

Had the aforementioned motion not been rendered moot, this Court would have required the Plaintiff to set forth specific facts, by affidavit, demonstrating that the United States District Court for the Southern District of Ohio was the more convenient forum. As the pleadings now stand, the only such “specific facts” are those facts contained in the memorandum of the Plaintiffs attorney opposing the Defendant’s Motion to Transfer.

WHEREFORE, based upon the aforesaid, this Court concludes that the captioned cause must, upon Defendant’s motion, be dismissed for this Court’s lack of in personam jurisdiction over the person of the Defendant. Fed.R.Civ.P. 12(b)(2).

The captioned cause is hereby ordered terminated upon the docket records of the United States District Court for the Southern District of Ohio, Western Division, at Dayton.