author: SCHWARZER, District Judge.

text:
    Paul KENDRICK, et al., Plaintiffs, v. Mark ZANIDES, et al., Defendants.
    No. C-84-6295-WWS.
    United States District Court, N.D. California.
    May 23, 1985.

      Quentin L. Kopp, William F. Fitzgerald, Kopp & Di Franco, San Francisco, Cal., for plaintiffs.
    Patrict S. Bupara, Asst. U.S. Atty., Julie K. Lutz, S.E.C., William Jacobson, Long & Levit, San Francisco, Cal., Linda A. Fienberg, S.E.C., Washington, D.C., for defendants.
   MEMORANDUM OF OPINION AND ORDER

SCHWARZER, District Judge.

This is an action charging violations of constitutional and common law rights. Plaintiffs are Paul Kendrick and the company through which he did business, Paul Kendrick & Company (collectively called “Kendrick”). In 1977 Kendrick, who was engaged in the securities business, came under investigation by the Securities and Exchange Commission (“SEC”) and the Internal Revenue Service (“IRS”). Later the Kendrick company was liquidated by the Securities Investor Protection Corporation (“SIPC”) and in 1983 Kendrick was tried and convicted of securities fraud and perjury. The complaint names the federal prosecutor, employees of the SEC, IRS, SIPC, and the United States Postal Service (“USPS”), the attorneys for Kendrick’s bankruptcy trustee and Bekins Record Storage Company (“Bekins”). It charges violations of Kendrick’s constitutional and common law rights and seeks damages of over thirty million dollars and other relief.

The action was commenced by the filing of an unverified complaint in state court. It was properly removed by the federal defendants pursuant to 28 U.S.C. §§ 1441 and 1442 to this Court which has jurisdiction. Defendants filed motions to dismiss, for summary judgment and for sanctions. After the filing of these motions, Kendrick filed an unverified amended complaint which, while adding a cause of action, makes no significant changes in the allegations.

Kendrick filed only a perfunctory response to the motions, stating that the amended complaint “moot[ed] the entire set of motions.” A hearing on these motions was held on December 10, 1984, at which time Kendrick’s request for a revised briefing schedule in light of the filing of the amended complaint was granted. Following this hearing, Kendrick voluntarily dismissed SIPC and its employees and Bekins.

A hearing on the motions of the remaining defendants was held on January 25, 1985. At that hearing the Court ruled as follows:

1. On the first and second causes of action, the Court informally indicated its intention to grant summary judgment but deferred ruling.

2. On the third cause of action, the Court dismissed the claim without prejudice as to those defendants who had not been properly served and granted leave to conduct discovery within ninety days following the hearing against the properly served defendants.

3. On the fourth cause of action, the Court granted the motion to dismiss for failure to state a claim with leave to amend within thirty days.

4. The application for sanctions was taken under submission.

Since the January hearing, Kendrick has filed two supplemental declarations but no amended pleading; the time to do so has expired. Kendrick noticed depositions of two Postal Service employees but failed to serve subpoenas on them; neither the depositions nor any other discovery was taken and the time allowed for discovery has expired.

The action is now before the Court for final ruling on the pending motions.

I

THE MERITS OF THE AMENDED COMPLAINT

The First Cause of Action

Kendrick charges defendants with having conspired, in violation of 42 U.S.C. § 1985, to punish Kendrick without due process of law “for his testimony in various federal proceedings and for his supposed crime.” Defendants are said to have been motivated by envy of Kendrick’s wealth. The allegation is that defendant Charles Burch, an assistant United States attorney, defendant Mark Zanides, an SEC attorney and later an assistant United States attorney, and defendant Edgar Hat-ton, an SEC investigator, wrongfully and in violation of a court order searched and seized files of Kendrick, removed documents from the files, and concealed their acts from Kendrick. As a result, Kendrick was impeded in the defense against criminal charges.

To the extent that the allegations purport to be based on 42 U.S.C. § 1985(3) and the second clause of § 1985(2), the conspiracy allegations are frivolous. Kendrick relies on “envy of plaintiff’s wealth” to supply the class-based discriminatory animus required by the statute. No authority is cited and the Court is aware of none upholding wealth-based discrimination against the wealthy (as opposed to the poor) as the type of discriminatory animus encompassed by these sections.

To the extent that the allegations are based on the first clause of § 1985(2), plaintiffs offer no facts from which it could be inferred that defendants acted to injure Kendrick for attending or testifying at his criminal trial.

Defendants have submitted extensive declarations denying the conspiracy charges and stating the material facts concerning the subject matter of the first cause of action. The facts established by their declarations and not disputed are in substance as follows:

On June 27, 1977, the SEC entered a formal order of investigation directing certain staff members to determine whether violations of the federal securities laws were occurring in connection with purchases and sales of securities by Kendrick. Defendant Rossen was the Associate Regional Administrator in charge of the SEC’s San Francisco branch office from May 1972 to February 1979. Defendant Lawyer had no involvement in the investigation until February 1979 when he replaced Rossen. The responsibilities of Rossen and Lawyer were purely supervisory. Defendant Hatton was employed by the SEC in its San Francisco branch office as a securities compliance examiner and participated in the Kendrick investigation and administrative proceeding. Defendant Zanides was the principal staff attorney assigned to the investigation. Zanides’ involvement in all proceedings before the SEC ended in 1979 when he left the SEC to join the U.S. Attorney’s Office in San Francisco. As an assistant U.S. Attorney he did not conduct any investigation or participate in the prosecution initiated by the U.S. Attorney’s Office against Kendrick in 1981.

After a one year investigation, the SEC staff recommended to the SEC that it institute administrative proceedings against Kendrick. Soon after the commencement of these proceeding, the SEC issued a subpoena for various business records of the company which were stored at Bekins in San Francisco. Bekins delivered approximately 70 boxes of records to the SEC office where defendant Hatton reviewed them and discussed their contents with Kendrick’s attorney.

In August, 1979, the SEC accepted a settlement offer from Kendrick in which he consented, without admitting or denying, to findings that he had wilfully violated anti-fraud provisions of the federal securities laws, and acknowledged that the S.E.C. had granted access to his files to the United States Attorney and the I.R.S. Pursuant to the order, the SEC revoked Kendrick’s broker-dealer registration and barred him from associating with any broker-dealer company for five years.

On April 17, 1979, while the SEC’s administrative proceeding was pending, the SIPC was appointed as liquidating trustee for Kendrick & Co. pursuant to the order of the bankruptcy court. As trustee, SIPC assumed ownership and control of all property of the company, including the business records stored at Bekins. The records that had been subpoenaed by the SEC were transferred to the Bekins storage facility. The defendant law firm of Murphy, Weir and Butler was appointed as counsel for the SIPC. Defendant Maly, a partner in that firm, was the attorney responsible for the liquidation.

During the summer of 1981, the U.S. Attorney’s Office initiated a criminal investigation into Kendrick’s securities activities. Defendant Burch was assigned to the case. He requested the assistance of defendant Hatton in the investigation which defendant Lawyer authorized.

On August 5 and 21, 1981, the U.S. Attorney’s Office served a subpoena on defendant Maly requiring him to turn over the Kendrick records then in the care of SIPC. Defendant Burch directed defendant Hatton to review these records. Defendant Hatton sought and received permission to do so from Maly.

On August 19,1981, Kendrick was indicted by a federal grand jury for securities fraud and perjury, charges arising out of the earlier SEC investigation. After trial in this Court in February, 1982, Kendrick was convicted on three counts. United States v. Paul Kendrick, CR-81-312WWS (N.D.Cal.1982) affd 692 F.2d 1262 (9th Cir.1982), cert, denied, 461 U.S. 914, 103 S.Ct. 1892, 77 L.Ed.2d 282 (1983).

Meanwhile, on September 24, 1981, the bankruptcy court entered an order authorizing SIPC to dispose of the company’s records “in such a manner and at such time as the Trustee may deem appropriate” after first offering them to Kendrick. Maly contacted Kendrick’s attorney and offered to return the documents to Kendrick. The attorney informed Maly “that Paul Kendrick was not in a position to assume responsibility for the records of [the Company].” SIPC continued to pay Bekins for storing the records until November 1, 1981, when this responsibility was assumed by the U.S. Attorney’s Office. SIPC was discharged as trustee by order dated March 31, 1982. In March and again in May, 1982, following the trial, defendant Burch advised Kendrick’s attorneys that the documents at Bekins would be destroyed unless Kendrick claimed them. No claim was made.

In 1978, while the SEC investigation was in progress, defendant Studabaker of the IRS was routinely assigned a batch of 1976 tax returns to review for possible audit. From these returns, Studabaker selected Kendrick’s corporate return. Studabaker does not remember what particular items caused him to select that return, but he was then unaware of the SEC investigation. Kendrick cooperated with the audit and allowed Studabaker access to his records. During a review of those records, an examination of Kendrick’s individual tax return showed no reported interest or taxable income. On this basis the IRS referred Kendrick’s tax matter to the Criminal Investigation Division (“CID”) for further investigation. Defendant Panacci, a special agent, was assigned by CID to the investigation and Studabaker was assigned as the cooperating agent since he had done the original audit.

In September, 1979, Panacci recommended prosecution of Kendrick for attempted evasion of estate tax liability of his mother-in-law’s estate of which he was the executor and for wilfully subscribing to false and fraudulent tax returns. The Department of Justice declined prosecution, however, and the cases were returned to the IRS for determination of civil liability. These matters are presently pending in the IRS Appellate Division.

During the IRS investigation Studabaker and Panacci disclosed no taxpayer return information to the SEC. Nor did the SEC disclose information to them, other than to allow, at Kendrick’s request, access to Kendrick’s records in the possession of the SEC.

The motions before the Court for summary judgment are governed by Rule 56(e), Fed.R.Civ.P., which provides in part:

When a motion for summary judgment is made and supported as provided in the rule, an adverse party may not rest upon the mere allegations or denials of his pleading, but his response, by affidavits or as otherwise provided in this rule, must set forth specific facts showing that there is a genuine issue for trial. If he does not so respond, summary judgment, if appropriate, shall be entered against him.

Kendrick has not come forward with facts to support this claim, relying only on the conclusory allegations of the amended complaint. No declarations to support the conspiracy charges have been submitted so as to permit even an inference that defendants had an agreed plan to achieve the alleged objectives of the conspiracy. See Bennett v. Campbell, 564 F.2d 329, 331 (9th Cir.1977) (summary judgment properly granted where the plaintiff in a Bivens action alleging violations by federal law enforcement officials of his Fourth and Fifth Amendment rights failed to set forth specific facts refuting the defendants’ sworn allegations disclaiming any knowledge of the alleged wrongdoing.) Nor has Kendrick sought to conduct discovery or indicated how discovery might lead to the discovery of evidence raising a triable issue. Quite the contrary, in the opposition to defendants’ motions filed January 9, 1985, Kendrick states that “Counts One and Two of the Amended Complaint were predicated on facts which plaintiffs have now concluded they cannot prove — though plaintiffs continue to believe them.” (p. 30) Summary judgment must therefore be granted on this claim.

Second Cause of Action

This cause of action charges defendants Burch, Zanides and Hatton with having wrongfully and secretly removed, secreted and destroyed documents from the Kendrick files, and concealed from the Court and from counsel the fact that documents Kendrick had been unable to locate had been deliberately removed or destroyed by them. As a result, Kendrick was denied due process and the effective assistance of counsel in the defense of the criminal action.

As shown in the preceding discussion under the First Cause of Action, the contemporary written record refutes these charges conclusively and Kendrick has conceded he cannot prove them. Nevertheless Kendrick has submitted two declarations of Boone, his attorney in the 1982 criminal trial. In the first declaration Boone states generally that he believes the facts alleged in the amended complaint to be true. He also states, however:

5. It was only in late December, 1984 that I discovered, and informed Kopp & DiFranco, that the strategy of proof on which their complaints were based was faulty. Only after consulting with my partner and reviewing our files did I remember that we were given, by the United States Attorney, access to the specific boxes that he had removed from Bekins storage. While this fact makes the complaints’ allegations unprovable, I have told Kopp & DiFranco, and I believe that many documents contained in those boxes were removed before they were delivered to me.
(Decl. of Jan. 9, 1985; emphasis added)

Boone does not identify a single document allegedly removed from the boxes; even if documents were removed, however, it would not follow that Kendrick was denied access to them and Boone makes no such assertion. Elsewhere in his declaration he makes clear that his belief is simply based on what Kendrick told him: that there would be “copious documents” but that he had been unable to find them at Bekins or elsewhere. These “missing documents were dispositive of Kendrick’s defense” but nowhere in his declaration does Boone (or Kendrick) give a clue as to what they might be, where they were last seen, how defendants might be responsible for them, or how they were “dispositive of Kendrick’s defense.”

On April 30, 1985, nearly four months later, Boone filed a supplemental declaration. In it he states that he now “specifically remember[s] five (5) documents which are listed, described and explained below.” (Decl. p. 2) The following are the “five documents” discussed in the declaration:

(a) The first is a report to Kendrick from the Congregation of the Passion (one of Kendrick’s defrauded customers). That document recapitulates the state of the accounts between the Congregation and Kendrick. Kendrick does not claim to have asked for it before the time when it was produced by the government at trial. It is not exculpatory since it merely confirms the evidence at trial supporting the charge against Kendrick that he was using the Congregation’s funds entrusted to him for his own purposes, i.e. to capitalize his company. Even if it was, it was made timely available to Kendrick while the trial was in progress.

(b) A November 12, 1973, Subordinated Debenture Agreement between Kendrick and the Congregation. Boone states that Kendrick told him it existed. No other proof is offered of its existence or of defendants’ possession of it if it did exist. It is not claimed that Kendrick asked that it be produced in connection with the trial. Moreover, Boone’s declaration, in asserting that the document would have been exculpatory, misstates the issue at trial; as the cited portions of the transcript clearly show, the issue was not whether Kendrick had “discretionary authority” (Decl. p. 4-5), but whether he had authority to withdraw Congregation funds for his own personal use (Decl. Ex. B, Tr. 215 (15-21); 223(13)(17); 261(12)-262(2); 265(15)-(21)). See Kendrick, supra, 692 F.2d at 1264-1266.

(c) Additional corporate documents said by Kendrick to exist which would have documented four “implied authorization transactions.” No facts are offered to show what these documents were, where they were kept, what they would have shown, whether they were requested before trial or how defendants might be responsible for them.

(d) Documents relating to the purchase of $300,000 of Treasury notes. Again these documents are neither identified nor described nor is there a statement that such documents existed. The declaration is based essentially on an October 22, 1984, declaration by a former Kendrick employee in which he appears to recant some of his trial testimony. These statements have no more probative force than those in the preceding paragraph.

In sum, Kendrick has come forward with no facts creating even a shadow of a triable issue under this cause of action, and summary judgment must therefore be granted.

The Third Cause of Action

In this cause of action, Kendrick alleges that defendants Julianna Nedd, Jerry Holtz, R.A. Larrison and B.M. McClanahan, all employees of defendant USPS, unlawfully delayed and opened mail addressed to Kendrick and members of his family and that they did so at the instance of Burch and Zanides.

The individual defendants Nedd, Holtz and McClanahan and Fletcher have heretofore been dismissed for lack of proper service, and Kendrick has made no attempt to perfect service on them.

Kendrick states no claim against USPS. The exclusive remedy for wrongful acts by a government agency is under the Federal Tort Claims Act, 28 U.S.C. § 1346, 2671 et seq. See Insurance Company of North America v. United States Postal Service, 675 F.2d 756 (5th Cir.1982). USPS must be dismissed.

Accordingly only Larrison, Burch and Zanides remain. The defendants’ declarations establish the following undisputed facts:

Burch requested an investigation by the USPS of possible mail fraud by Kendrick. In December, 1983, Nedd was assigned as the investigator on this matter. She initiated a formal request through channels pursuant to 39 C.F.R. § 233.3 to conduct two mail covers. The first mail cover was for Kendrick’s post office box and the second was for mail received by Kendrick or any of his companies at his residence. Neither lasted longer than thirty days. The purpose of the mail cover was to record information contained on the outside cover of first class mail matter addressed to Kendrick or his companies. Under the terms of 39 C.F.R. § 233.3(c)(1), a mail cover does not involve opening of mail. Defendants deny having opened any mail addressed to Kendrick or his family.

In their response, plaintiffs have submitted declarations of Kendrick and members of his family asserting the receipt of delayed and allegedly previously opened mail. Attached as exhibits are examples of envelopes which allegedly were previously opened and then re-sealed.

Because these declarations raised the potential of an issue of fact, the Court at the January 25 hearing granted Kendrick leave to conduct discovery during a period of ninety days. None has been conducted.

On the present record the denials of defendants stand uncontradicted. Kendrick elected to forego the opportunity, provided under Rule 56(e), to conduct discovery to develop facts with which to counter defendants’ declarations. Summary judgment must therefore be granted on this claim.

The Fourth Cause of Action

In the fourth cause of action, Kendrick claims that certain of the defendants acted to destroy his and his family’s business and employment opportunities and credit. They did so by visiting unnamed persons and institutions, relaying disparaging information about Kendrick and warning them against dealing with Kendrick.

Inasmuch as the named defendants were all responsible for investigating potential civil and criminal violations by Kendrick (which in fact culminated in the trial and conviction of Kendrick on mail fraud charges in 1985), it is inevitable that in the course of performing their duties they would make contacts with persons which could have the effect of disparaging Kendrick. Without more, therefore, this cause of action alleges no wrongful conduct and therefore fails to state a claim on which relief can be granted.

On January 25, the Court gave Kendrick thirty days’ leave to amend. No amendment has been filed. This claim must therefore be dismissed with prejudice.

II

SANCTIONS

Defendants have moved for sanctions under Rule 11, Fed.R.Civ.P. The rule provides in relevant part that the signature of an attorney on a pleading certifies:

that he has read the pleading ...; that to the best of his knowledge, information, and belief formed after reasonable inquiry it is well grounded in fact and is warranted by existing law or a good faith argument for the extension, modification, or reversal of existing law, and that it is not interposed for any improper purpose, such as to harass____

The Federal Rules of Civil Procedure “govern the procedure in the United States district courts.” Rule. 1. A complaint initially filed in the state court and removed by the defendant to the federal court should not be subjected to scrutiny under Rule 11 because it was not governed by the rule when signed and filed. An amended complaint, however, filed in an action following removal to the district court is governed by the Federal Rules just as any other federal pleading. Thus, this action having been removed to the district court from the state court, only the subsequently filed amended complaint is appropriately examined for compliance with Rule 11.

The amended complaint was filed on December 3, 1984. The defendants’ various motions to dismiss, for summary judgment and for sanctions were filed between November 1 and 27, 1984, one to four weeks before the filing of the amended complaint. Attached to those motions were documents which bore directly on the critical factual allegations made in the original complaint and renewed with embellishments in the amended complaint.

Following are the principal relevant documents served on Kendrick and his counsel before they filed the amended complaint:

1. An offer of settlement, signed by Kendrick and by his attorney, Geoffrey Knudsen of Boone & Knudsen, dated June 29, 1979, and findings and order by the S.E.C. accepting it, dated August 13, 1979. The offer acknowledges that Kendrick “ha[s] been advised that the United States Attorney ... and the Internal Revenue Service have requested that the Commission grant access to its investigative files related to this matter and that the Commission granted access.” (Hatton deck Exs. C, D)

2. An order of the district court filed April 17, 1979, consented to by Kendrick and Knudsen, appointing the SIPC as trustee for the liquidation of the Kendrick company’s business, appointing Murphy, Weir & Butler as the trustee’s counsel, and turning over to the SIPC possession and control of all of the company’s assets and property. (Memo, of Burch, et ah, Ex. D-l)

3. An order of the bankruptcy court, filed September 24, 1981, in the SIPC proceeding, ordering that the SIPC as trustee

shall be authorized and empowered to use, destroy or otherwise dispose of the books and records of the debtor [Kendrick & Co.] which are in the possession or under the control 'of the Trustee in such manner and at such time as the Trustee may deem appropriate, after offering the books and records to the former principals of the firm____
(Id. Ex. C)

4. A letter from Boone to Burch, dated October 8, 1981, re U.S.A. v. Kendrick, requesting “to initially review ... boxes: Nos. 164, 165, 166, 169, 170, 171, 188, 190, 191, 194, 198, 199, 200, 203, 204, 205, 219, 220, 223, 224, 226, 227, 228, 229, 230, 236, 237, 239, 241, 242, 246, 247 and 249,” in storage at Bekins. (Id. Ex. E-2)

5. A letter from Knudsen to Burch, dated November 5, 1981, in the same matter, stating that “we will take responsibility for the integrity of materials being delivered to us from Bekins,” and identifying 25 boxes of Kendrick records. (Id. Ex. E-3)

6. A letter from Knudsen to Burch, dated November 4, 1981, in the same matter, accepting responsibility for an additional 8 boxes being delivered from Bekins and requesting review of Box 222 in Burch’s possession. (Id. Ex. E-4)

7. A letter from Knudsen to Burch dated January 26, 1982, in the same matter, accepting responsibility for 40 identified boxes being delivered from Bekins. (Id. Ex. E-5)

8. A letter from Burch to Boone, dated March 15, 1982, advising that the Kendrick records at Bekins would be destroyed and that any records Kendrick wished to retain should be obtained before April 1. (Id. Ex. E-6)

9. A letter from Burch to Boone, dated May 7, 1982, advising him that instructions had been given to Bekins to destroy the Kendrick records. (Id. Ex. E-7)

10. Subpoenas issued by the district court in August 1981 at the request of the United States Attorney and directed to defendant Maly for the production of Kendrick’s records. (Maly decl. Exs. A, B)

In addition to these documents, the motions were supported by a number of declarations setting forth the facts summarized in part I of this opinion.

In the face of the foregoing documentary record, Kendrick and his counsel on December 3, 1984, filed an amended complaint (“A.C.”). Simultaneously they filed a response memorandum addressed to defendants’ motions, confirming that they had been served with the motions and had read them before they filed the amended complaint. In the paragraphs below the Court lists the crucial allegations of the amended complaint (some but not all made on information and belief), followed by a reference to the previously described documents attached to defendants’ motions which refute them.

1. That the boxes of files and records stored at Bekins “have at all times been the property of plaintiffs.” (A.C. 10 (11)-(12)) (See Item # 2, p. 16 supra)

2. That “[a]t no time were plaintiffs ever asked, or would they ever have consented, to review of these documents by the Office of the United States Attorney ...” (A.C. 10 (17H21)) (See Item # 1, p. 16, supra)

3. That “in the spring of 1979 ... ended whatever legal authority any SEC representative or officials of that or any other federal agency had to review any of these files without probable cause or a search warrant.” (A.C. 10 (24)-ll (2)) (See Item # 1, p. 16, supra)

4. That in July 1981 “defendant Maly instructed Bekins to allow Hatton to collect evidence from plaintiffs’ stored materials without necessity of any warrant, writ, subpoena, or investigative order and without showing any cause at all.” (A.C. 12 (19)-(22)) (See Item # 10, p. 18, supra)

5. That the “September 25 and September 30 [1981] incursions [into] Kendrick’s récords occurred in direct contravention of an ... order of this Court ... issued September 24, 1981, [which] required that the Bekins records be returned to plaintiffs, or destroyed, at their option.” (A.C. 13 (14)-(19)) (See Item # 3, p. 17, supra)

6. That “defendants Burch, Zanides, Hatton and their co-conspirators knowingly violated this September 24, 1981, court order.” (A.C. 13 (20)-(22), A.C. 14 (6)-(10)) (Id.)

7. That “defendants Burch, Hatton and Zanides ... seized the entire corpus of the Bekins records without either warrant or other authority.” (A.C. 14 (10)-(12)) (See items # 1, 2, 3, 10, pp. 16-18, supra).

8. That “plaintiffs had no knowledge of the enormous seizures from their records until December 2, 1983.” (A.C. 14 (18)-(19)) (See Items # 2, 4, 5, 6, 7, 8, 9, pp. 16 — 18, supra).

9. That “the other defendant conspirators concealed from them the invasion of the Bekins documents.” (A.C. 14 (23)-(25)) (Id.)

10. That “when plaintiff, in the course of the criminal proceeding specifically requested all records, documents, etc. within the possession of the government which had been obtained from him, defendant Burch’s answer failed to mention his seizure of the Bekins documents he sequestered in July and September, 1981.” (A.C. 14 (25)-15 (4)) (See Items # 4, 5, 6, 7, p. 17, supra)

11. That “defendants Burch, Zanides and Hatton destroyed the seized documents immediately after the trial, pursuant to the conspiracy ... in violation of the Fifth Amendment.” (A.C. 16 (10)-(16)) (See Items # 8, 9, p. 18, supra)

12. That “when plaintiff filed a request in the criminal action for an enumeration of all records, documents, etc. in the government’s possession, defendant Burch filed with this Court a purportedly complete answer which deliberately failed to mention any of the Bekins documents seized in July ...” (A.C. 16 (21) — (17) (1)) (See Items # 4, 5, 6, 7, p. 17, supra)

Examination of these allegations which are central to the first and second causes of action, described by Kendrick’s counsel as “the heart and soul of the amended complaint” (Kopp decl. Jan. 25, 1985, 2 (9)), compels the conclusion that not only are they false but, also, that Kendrick and his counsel knew that they were false when they filed the amended complaint.

Kendrick and his counsel filed several declarations in opposition to the motions for sanctions. The declarations are more notable for what they do not say than for what they say:

They do not address the fact that Kendrick and his counsel had in their possession before filing the amended complaint the above described documents, as well as declarations refuting its central allegations;
They do not address the fact that even before receiving those documents, Kendrick and his former lawyers had knowledge of the material facts, having personally participated in the SEC, SIPC and criminal proceedings which are the subject of the action;
They do not set forth a single fact that would support an allegation of conspiracy against defendants;
They do not set forth a single fact that would support a charge that any defendant concealed, withheld or destroyed any document belonging to Kendrick;
They do not identify any file or record that counsel examined before filing either the complaint or amended complaint with a single exception, the Bekins entry log, but they do not state how the log supports any of the allegations.

What the declarations state in substance is:

That Kendrick told Boone and Knudsen in the earlier proceedings that there were copious (but unidentified) documents that would exonerate him but they were never found; and
That Knudsen and Boone read the complaint and amended complaint and that they believed the allegations to be true until late December 1984 when, having reviewed their files and discussed it, they concluded that the allegations were “unprovable.”

The balance of the declarations is devoted to lengthy argument which appears to the Court to be evasive, disingenuous and irrelevant.

These declarations do not show that Kendrick and his lawyers complied, or even made an effort to comply, with Rule 11. Quite the contrary, they perpetuate the defamatory attacks on various defendants even after conceding that they are “unprovable” and they seek to justify them to the Court by declarations lacking candor.

In the light of this record, it is clear that the motions for sanctions must be granted. Not a semblance of a “reasonable inquiry” was made to determine whether the allegations were well-grounded in fact. Neither Kendrick nor his counsel conducted a pre-filing investigation to discover a factual basis for the allegations or did they obtain supporting facts from Kendrick’s prior counsel. While it is not necessary for Kendrick’s present lawyers to have conducted their own inquiry, if someone else has done so, Rule 11 requires that they have in hand sufficient credible information (as opposed to opinions or conclusions) from whatever source to enable them to form a reasonable belief that the allegations to which they put their signature are well-grounded in fact. See Rhinehart v. Stauffer, 638 F.2d 1169, 1171 (9th Cir.1979). Statements such as that “[i]n general the facts set forth in the original complaint are confirmed by the recollection of ... Boone” (Kopp decl. 2), without more, do not satisfy the duty of inquiry, particularly where at the time counsel has in hand documents refuting those allegations. See Wold v. Minerals Engineering Co., 575 F.Supp. 166, 167 (D.Col.1983); Viola Sportswear, Inc. v. Mimum, 574 F.Supp., 619, 621 (E.D.N.Y.1983); Miller v. Schweic kart, 413 F.Supp. 1059, 1061 (S.D.N.Y. 1976).

The amended complaint before the Court is no ordinary pleading. It makes the gravest charges against federal prosecutors and investigators and attorneys, impugning their honesty and professional integrity and implying criminal wrongdoing. Neither Kendrick nor his counsel have come forward with facts to lend the slightest support to these charges. Moreover, they renewed those charges in the amended complaint, when they knew they were false, and they persisted in them in their subsequent declarations after they admitted them to be “unprovable.”

The only reasonable conclusion is that Kendrick and his attorneys filed the amended complaint, and the subsequent declarations, not to prevail in the action, which they knew they could not, but to serve their vindictive purpose to damage the defendants’ reputations and subject them to personal harassment. Sanctions must therefore be imposed.

Rule 11 states that the Court “shall impose upon the person who signed [a pleading in violation of the rule], a represented party, or both, an appropriate sanction.” The sanction may include an order to pay to the other parties the amount of the reasonable expenses including attorney’s fees incurred “because of the filing of the pleading.” Permissible sanctions, however, are not so limited. The rule gives the Court discretion to determine what shall be appropriate.

Because of the egregiousness of the conduct involved, the sanctions imposed will not be limited to expenses and attorneys’ fees incurred as a result of the filing of the amended complaint.

Kendrick and his attorneys will therefore be ordered to pay all of the reasonable expenses, including reasonable attorneys’ fees, incurred by defendants in the defense of this action. Such an order is not only within the scope of the Court’s discretion under Rule 11, but is also supported by other authority. The Court has inherent power to award attorneys’ fees to the prevailing party in an action, such as the one before the Court, brought in bad faith, vexatiously, wantonly and for oppressive reasons. See F.D. Rich Co. v. Industrial Lumber Co., 417 U.S. 116, 129, 94 S.Ct. 2157, 2165, 40 L.Ed.2d 703 (1974); Alyeska Pipeline Co. Wilderness Society, 421 U.S. 240, 258-59, 95 S.Ct. 1612, 1622-23, 44 L.Ed.2d 141 (1975). In addition, the maintenance of this action in the face of the facts known or available to Kendrick both before and after the filing of defendants’ motions multiplied the proceedings unreasonably and vexatiously, entitling defendants to recover the resulting costs, expenses and attorneys’ fees under 28 U.S.C. § 1927.

Nothing in the record indicates that as between client and counsel, one should be regarded as less blameworthy than the other. Accordingly, the order to be entered will impose joint and several liability for the amount to be assessed.

On or before June 21, 1985, counsel for defendants shall serve and file their applications for attorneys’ fees and expenses with appropriate supporting declarations and other data. Plaintiffs shall serve and file any opposition by July 11, 1985. A hearing on the applications will be held on July 18, 1985, at 11 a.m.

Attorneys also have obligations as officers of the court. On the face of it, the conduct of plaintiffs’ counsel in this matter reflects so egregious an abuse of the processes of the court as to raise questions concerning their fitness to practice in the federal district court. Accordingly, plaintiffs’ attorneys Quentin L. Kopp and William F. Fitzgerald are ordered to show cause on Thursday, July 18, 1985, at 11 a.m., why they should not be suspended from practice in the United States District Court for the Northern District of California until further order of this Court. Any written opposition to this order shall be served and filed by June 21, 1985.

IT IS SO ORDERED.

      . Shortly before the filing of this opinion and order, the Court was advised that plaintiffs had stipulated to dismiss all claims with prejudice. Because the issue of whether sanctions should be imposed remained, the Court considers it necessary and appropriate to address the merits of the action, notwithstanding the stipulation.

      . Defendants have raised various other defenses, including immunity and the statute of limitations. In view of the patent baselessness of the first two causes of action, and Kendrick’s abandonment of the claims, it would extend this memorandum unnecessarily to discuss those defenses.

      . See also the discussion of the Boone declarations at pp. 1167-1168, supra.


source: Caselaw Access Project

author: ROBERT D. MORGAN, District Judge.

license: Public Domain

text:
    Charles S. CHRISTIANSON and International Trade Services, Inc., Plaintiffs, v. COLT INDUSTRIES OPERATING CORP., Defendant.
    No. 84-4056.
    United States District Court, C.D. Illinois.
    May 24, 1985.

      Stuart R. Lefstein, Rock Island, 111., John C. McNett, Indianapolis, Ind., Richard I. Fine, Los Angeles, Cal., for plaintiffs.
    Anthony M. Radice, Joseph C. Markowitz, Kim J. Landsman, New York City, N.Y., John V. Patton and James D. Mowen, Moline, 111., Robert L. Harmon, Chicago, 111., for defendant.
   MEMORANDUM DECISION AND ORDER

ROBERT D. MORGAN, District Judge.

Plaintiffs, Charles R. Christianson and essentially his corporation, filed this complaint against Colt for damages, injunctive and equitable relief, under §§ 4 and 16 of the Clayton Act (15 U.S.C. §§ 15 and 26), upon their allegations that Colt has violated Sections 1 and 2 of the Sherman Act (15 U.S.C. §§ 1 and 2). Colt has answered denying violation and asserting numerous affirmative defenses and counterclaims. Venue exists in this district under 15 U.S.C. § 15 and 28 U.S.C. § 1391(b) and (c).

The complaint is grounded on allegations that Colt achieved and now attempts to maintain an unlawful monopoly on the manufacture and sale of parts for the M-16 standard military rifle. In the 1950’s Colt obtained a patent for a gas-operated, automatic rifle which was adopted in 1964 by the United States as its standard military firearm. The Government designated it as the M-16. In ensuing years, Colt obtained several other patents on improvements of parts for that weapon. With a few exceptions, not critical to this decision, all such patents have now expired. Over the years, Colt entered into a licensing agreement with the Government for Government production of the M-16 for its use and for sale to foreign governments under the patents and drawings and technical data supplied by Colt. It also entered into agreements with the government of the Philippines, and with certain other foreign governments, authorizing the manufacture of the rifles to arm each such nation’s military forces. It further entered into contracts with various suppliers in the United States for the manufacture and sale of component parts for the rifle. Those licenses restricted the sale of such parts to Colt and the United States Government only. With each such agreement, defendant supplied drawings and technical data for use by the various licensees. All agreements contained restrictive clauses which prohibited the sale of parts to all except the authorized clients, and which prohibited the disclosure of defendant’s drawings and technical data to anyone not specifically authorized by the agreement to see them. As to domestic licenses, the proscription excluded only defendant and the Government. The proscription in the foreign licenses limited sale to each nation’s own military force and disclosure only to appropriate government officials. The complaint alleges that Colt has employed those restrictive clauses in an attempt to deny to any others the right to manufacture such rifles and parts notwithstanding the fact that Colt’s patents have been expired for several years. It is alleged that Colt attempts, by such practices, to foster and maintain its monopoly position in the manufacture and merchandising of the products as if its patents still remained in force.

In 1983, Colt filed in this court a suit against Springfield Armory, Inc., and others, under docket no. 83-4072, to enjoin the performance of a contract of those named defendants for the sale of M-16-type rifles to a Central American government. A preliminary injunction was issued following a hearing. These plaintiffs were ultimately joined, and that decision was affirmed by the Court of Appeals for the Federal Circuit. Further discussion of the latter decision appears in a later context. The ground for complaint in that ease was that Colt would be irreparably damaged by the unauthorized use of Colt’s drawings and proprietary information which Colt claimed were trade secrets and its exclusive property. That case has heretofore been settled by the parties and closed.

Plaintiffs filed the pending complaint against Colt in 1984. The cause was scheduled for trial late in that year. That schedule was cancelled on the representation by the parties that cross motions for summary judgment would be filed. Those motions are now before the court for decision.

The thrust of plaintiffs’ motion is the position that Colt cannot assert its claims of trade secrecy against plaintiffs because it had, in its now-expired patents, failed to make the full disclosures of its claims of invention as required by 35 U.S.C. § 112.

Plaintiff Christianson has been marketing M-16 components for approximately eight years. Initially, Colt acquiesced to his use of drawings obtained from a Colt foreign licensee. It also appears that during that period other suppliers advertised for the sale of M-16 parts, as well as some M-16 drawings. It further appears that significant M-16 manufacturing not authorized by Colt licenses was conducted by Colt’s foreign licensees and domestic sup.pliers, all without serious objection from Colt. Plaintiffs argue, not implausibly, that Colt was not concerned with such activities so long as its U.S. position was protected by its basic patents. Plaintiffs assert that Colt resorted to legal action to try to restore its monopoly position only after its basic patents had expired.

A critical factor here clearly is the unique character of the product involved. A key criterion of a military weapon is that there be complete interchangeability of parts between all weapons of the same general kind which have ever been produced for use by a military force. Critical to that requirement is the ability to scavenge weapons from a battlefield for parts replacement in all other like weapons. That critical factor was emphasized by Colt before this court in the hearing for a preliminary injunction in the Springfield case. Colt took the position that the M-16 had an absolutely essential feature of parts interchangeability which was critical to the use of the rifle on the battlefield, and that that feature could be satisfied only by the use of Colt’s drawings and trade secrets. It asserted that the M-16 was not reverse enginerable. In that context plaintiffs assert:

“Thus [Colt] avoided Syntex Ophthalmics, Inc. v. Novicky, 591 F.Supp. 28, 221 U.S.P.Q. 860 (N.D.Ill.1983), affd 28 Pat. Trademark and Copyright J. (BNA) 717 (Fed.Cir.1984), and cases before it, which stand for the proposition that if a product is reverse enginerable, injunctive relief against theft of trade secrets is limited in time. Thus, to extend its exclusive position well beyond the expiration of its patents, Colt had to argue that the M-16 was not reverse enginerable.”

To a degree, as plaintiffs argue, Section 112 places Colt on the horns of a dilemma. To sustain its claim for an injunction in case 83-4072, Colt had to take the position that interchangeability of parts was a must, and that such interchangeability could be fully obtained only by the use of Colt’s drawings and other claimed trade secrets. In that context, a Colt expert testified that it would be possible from the base patents for a person skilled in the art to make a rifle similar to that claimed by the patent and by use of reverse engineering of a Colt firearm, but that would be a “massive” task. In the context of these motions, that same expert has executed an affidavit which asserts that the making of an M-16, using the patents by a person skilled in the art, would not entail undue experimentation.

A review of Colt Industries Operating Corp. v. Springfield Armory, Inc., et al., (Fed.Cir., April 19, 1984, unpublished), in which this court’s issuance of a preliminary injunction was affirmed, seems appropriate in this context. The single issue before that court was the appropriateness of the preliminary injunction upon the record made in that hearing. It did affirm the judgment of this court. Pertinent to these motions now, the there court said:

“Although Springfield’s 35 USC 112 arguments, particularly related to best mode, have an appearance of validity (See White Consolidated Industries, Inc. v. Vega Servo-Control, Inc., 713 F.2d 788, * * * (Fed.Cir.1983), the evidence of record is totally lacking in specifics. * * *”

Although obviously that statement cannot be read as a predetermination by the Federal Circuit of the issues now before this court, it can and should be accepted as the statement of a recognition by that court that possibly serious issues of Colt’s compliance with Section 112 could exist, subject to substantiation by adequate evidence. To that extent, and to that extent only, that statement does have a bearing on the issues now before this court.

The crux of the issues presented by these motions is the language of 35 U.S.C. § 112, which provides that a patent to be valid must:

“ * * * contain a written description of the invention, and of the manner and process of making it, in such full, clear, concise, and exact terms as to enable any person skilled in the art to which it pertains, or with which it is most nearly connected, to make and use the same, and shall set forth the best mode contemplated by the inventor of carrying out his invention.”

In re Gay, 309 F.2d 769, 50 C.C.P.A. 725 (1962), said that Section 112 imposed both an enabling requirement and a best mode requirement to sustain the validity of a patent. The court there said that the enabling requirement was designed to ensure that the printed patent disclose an invention in sufficient detail to enable persons skilled in the art to make and utilize the invention, and that the best mode requirement was designed to preclude inventors from applying for patents while at the same time concealing from the public the preferred embodiment of the inventive concept. The “enablement” requirement of the statute is satisfied if a person of ordinary skill in the art is able to make and use, without undue experimentation, a functioning version of the invention from the disclosures of the patent coupled with information which is already publicly known. White Consolidated Industries, Inc., v. Vega Servo-Control, Inc., 713 F.2d 788 (Fed.Cir.1983).

Thus Section 112 provides the quid pro quo for the grant of a patent monopoly under the Act. The Patent Act was designed to foster and enhance the development and disclosure of new ideas and the technical advancement of knowledge. Upon a determination that a patent claim does contain the elements of inventive novelty, the claimant becomes entitled to a monopoly on the right to practice and exploit the patented invention for a substantial but limited period of time. At the same time, the issued patent becomes a part of the public domain, subject only to the patentee’s exclusive right to exploit the patented invention as defined by him during the limited monopoly period. Others are free during the period of that monopoly to devise improvements upon the patented concept, without redress to the patentee, so long as those improvements do advance the state of the art and public knowledge. Yet the patentee can assert his monopoly rights against those who adopt only superficial modifications which fall short of a true advancement of the art. In exchange for his limited monopoly position, the patentee must disclose in his patent sufficient information to enable others skilled in the art to employ and profit from the invention after the period of limited monopoly has expired. Section 112 simply delineates the scope of the disclosures which are necessary to accomplish and protect those public purposes by requiring that the patent applicant fully describe the subject matter as to which he is asserting a claim to a statutory right to a monopoly.

CONCLUSION

It is necessary here to conclude, from the voluminous exhibits, pertinent patents, affidavits, depositions and other materials submitted to the court, and in keeping with the patent concept, that plaintiffs are entitled to judgment in their favor. The disclosures made by Colt in obtaining its patents satisfied neither the enablement nor best mode requirements of 35 U.S.C. § 112.

DISCUSSION

The enablement requirement is fulfilled if a person of ordinary skill in the art is able, without undue experimentation, to make and use some mode of the invention from the disclosures of the patent and from what was previously publicly known. White, supra; Engelhard Industries, Inc. v. Sel-Rex Corp., 253 F.Supp. 832 (D.N.J. 1966), aff’d 384 F.2d 877 (3d Cir.1967). Engelhard points up the distinction between enablement and best mode by its holding that the enabling requirement was satisfied, but that there had been a failure to disclose the best mode for carrying out the invention.

To a large degree, Colt, in opposition to the plaintiffs’ motion, has attempted to create a question of fact from conflicting sworn statements of its own expert witnesses. It employed a Seth Bredbury who now states in his affidavit as to the bolt assist patent (No. 3,236,155) that a person of ordinary skill in the firearms art could design and produce a gas-operated firearm of the type shown, incorporating the invention defined in the patent, without undue experimentation. Yet, Mr. Bredbury, in his prior testimony based upon his review of the Colt patents, stated that a person skilled in the art could design a rifle very much like the M-16, which could perhaps function as well, but that that would be a massive undertaking. While he did not define the word “massive,” it must be recognized that that term means unusually large, or, as defined in Webster’s New Collegiate Dictionary, “large in comparison to what is typical.” The use of the word “massive” must imply the use of undue experimentation before any practical result could be achieved.

Harold Waterman, the head of Colt’s firearm product engineering, testified, in reviewing the same bolt assist patent, that “you could not” make a weapon by the use of that patent. “You could get an idea of the mechanism, and that would just about be it.” The question presumed a person skilled in the field of manufacturing firearms who had available all tools and equipment for firearms manufacture, but not including any gauges in which Colt claims a proprietary interest as trade secrets.

Mr. Bredbury’s current statement that no “undue experimentation” would be required is not substantiated by any statement of fact. There is no evidence that any weapon other than the Colt weapons could or do use any of the inventions. It seems both reasonable and unavoidable to presume that those skilled in the art would have devised a weapon to compete with the Colt product in the 20 years elapsed since the M-16 became the adopted weapon of the United States military, if a comparable weapon could be made without undue experimentation and without access to Colt drawings and technical information. The bare statement of the conclusion that it could, without any factual substantiation, cannot create an issue of fact. The question of enablement has been held to be a question of law. Raytheon Co. v. Roper Corp., 724 F.2d 951, 960 (Fed.Cir.1983). An issue of fact is not created by the statement of an unsubstantiated legal conclusion. E.g., Application of Brandstadter, 484 F.2d 1395 (CCPA 1973).

Consideration of the best mode requirement of § 112 should begin with the distinction between the two requirements of the statute. The enablement requirement is designed to allow the public to practice the invention in a generalized fashion. The concern of the best mode requirement is the prevention of abuse of the patent monopoly by its extension beyond the limited period which the statute permits. In re Gay, supra. Failure of disclosure of the best mode for practicing the invention could have that effect when the patentee fails to disclose essential information. Upon expiration of the limited patent monopoly, the public is entitled to practice the invention without restriction, including the right to produce and market the patentee’s commercial product without modification. The patent statute contemplates that, in exchange for the grant of a limited monopoly, the patentee will make a full disclosure of the patented idea to such extent that it may be fully utilized by those skilled in the art once the patent monopoly has expired. Whether or not the best mode contemplated by the inventor for carrying out his invention was disclosed, is a question of fact. McGill Incorporated v. John Zink Company, 736 F.2d 666, 673, 221 U.S.P.Q. 944, 951 (Fed.Cir.1984).

The disclosures required by § 112 can impose a burdensome task on both the patent applicant and the patent examiner, but that does not excuse, as Colt tends to argue, the necessity for disclosure of whatever information is required to satisfy the statutory command. A party is free to disclose whatever it wishes and in any suitable manner, provided that the disclosures made are sufficient to satisfy the statutory requirement. Weil v. Freitz, Evans and Cooke, 202 U.S.P.Q. 447, 450 (CCPA 1979). The courts must be vigilant, in consideration of § 112 issues, against the, perhaps natural, desire of patentees to disclose as little as possible. Flick-Reedy Corp. v. Hydro-Line Mfg. Co., 351 F.2d 546, 550-51 (7th Cir.1965), cert, denied, 383 U.S. 958, 86 S.Ct. 1222, 16 L.Ed.2d 301. Satisfaction of § 112 may require voluminous disclosures as demonstrated in Honeywell, Inc. v. Sperry Rand Corp., 180 U.S.P.Q. 673 (D.Minn.1973), in which a computer patent contained 91 sheets of drawings and 232 columns of printed text.

There is no objective standard by which to judge the adequacy of a best mode disclosure. Application of Sher wood, 613 F.2d 809 (CCPA 1980), cert, denied, 450 U.S. 994, 101 S.Ct. 1694, 68 L.Ed.2d 193 (1981). The scope and magnitude of what must be disclosed is also influenced by the character of the particular art involved. The disclosures required in a patent related to an internal combustion engine, for example, are limited by the fact that such would deal with a standardized product which is well known to practitioners in the art. By contrast, there is no standardization of military weaponry since each weapon is unique unto itself. Though weapons are characterized by certain conventional details which are well known to those in the weapons art, there is much which is unique to every particular weapon. Bearing that distinction in mind, it is plaintiffs’ position that it was incumbent on Colt to fully disclose the interchangeability specifications for the M-16 and its component parts to satisfy the best mode requirement of § 112.

Of the many reported cases, the following are deemed to articulate the application of the best mode requirement. In the absence of countervailing evidence, the best mode for carrying out the claimed invention can be presumed to be the existing commercial embodiment. Union Carbide Corp. v. Borg-Wamer Corp., 550 F.2d 355 (6th Cir.1977).

In Phillips Petroleum Co. v. Richardson Carbon Co., 293 F.Supp. 555 (W.D. Tex.1968), the best mode of practicing the claimed invention was embodied in Phillips’ commercial product which could not be produced from information disclosed in its patent. That finding was fortified by the existence of licensing agreements negotiated by Phillips, which required the licensees to keep the process for manufacturing its commercial product a closely guarded secret. To that degree, the factual background of Phillips closely parallels what the evidence in this cause reveals.

A patent which only mentioned a critical material by commingling it with other materials failed, by that commingling, to disclose the best mode for practicing the invention. Dale Electronics, Inc. v. R.C.L. Electronics, Inc., 488 F.2d 382 (1st Cir. 1973).

There is a failure of the best mode requirement if information which is essential to production of the product is not disclosed. Flick-Reedy Corp. v. Hydro-Line Mfg. Co., 351 F.2d 546, 550-51 (7th Cir.1965), cert, denied, 383 U.S. 958, 86 S.Ct. 1222, 16 L.Ed.2d 301 (1966).

There was a failure to disclose the best mode when, even though, as the patentee argued, other programs were available, it had retained as a trade secret that which it employed in its commercial product. White Consolidated Industries, Inc. v. Vega Servo-Control, Inc., 214 U.S.P.Q. 796 (S.D. Mich.1982), affd 713 F.2d 788 (Fed.Cir. 1983).

The disclosure of the second best embodiment, where the patentee had a better embodiment, failed to disclose the best mode. Engelhard Industries, Inc. v. Sel-Rex Corp., 253 F.Supp. 832 (D.N.J.1966), affd 384 F.2d 877 (3d Cir.1967).

The cases principally relied on by Colt arose when § 112 was pleaded as a defense to a suit for patent infringement by defendants who had copied and were competing in the sale of the patented product. The argument in In re Gay, supra, was that there was no best mode disclosure because the patent failed to specify the number, size and placement of perforations in a rice cooker. The court said that, despite that omission, any person skilled in the art would know that a number of perforations were necessary, and that the patented product could be produced by following the patent without undue experimentation, or perhaps with no experimentation. The court in In re Strahilevitz, 668 F.2d 1229 (CCPA 1982), found that the undisclosed information was already known in the prior art. The accused infringer in Trio Process Corp. v. L. Goldstein’s Sons, Inc., 461 F.2d 66 (3d Cir.1972), cert, denied, 409 U.S. 997, 93 S.Ct. 319, 34 L.Ed.2d 262 had employed a metal worker to copy the patentee’s patented product.

The court in Standard Oil Co. v. Montedison S.p.A., 494 F.Supp. 370 (D.Del. 1980), affd 664 F.2d 356 (3d Cir.1981), cert, denied, 456 U.S. 915, 102 S.Ct. 1769, 72 L.Ed.2d 174 (1982), said that the best mode requirement is satisfied if the specification is sufficient to guide one skilled in the art to its successful application. The accused infringer argued in International Telephone and Telegraph Corp. v. Raychem Corp., 538 F.2d 453 (1st Cir.1976), cert, denied, 429 U.S. 886, 97 S.Ct. 238, 50 L.Ed.2d 167, that the best mode for production of an improved type of wire designed for use in the F-lll military fighter plane was not disclosed because the patentee had failed to disclose a secret compound employed in production of the patented wire.

Apparently accepting the findings of the trial court in International Telephone and Telegraph Corp. v. Raychem Corp., 188 U.S.P.Q. 214 (D.Mass.1975), that the accused infringer had obtained a sample of the patentee’s wire through which, after an analysis of its structure, it had been able to produce the patented product with “no difficulty,” the court held that § 112 disclosures were sufficient. Illinois Tool Works, Inc. v. Solo Cup Co., 179 U.S.P.Q. 322 (N.D.Ill.1973), presents a situation comparable to that in Raychem. Similarly, the court in Atlas Powder Co. v. E.I. Du Pont de Nemours & Co., 588 F.Supp. 1455, 221 U.S.P.Q. 426 (N.D.Tex.1983), said that the ease with which the infringer had formulated the patented product was an indication that the patent disclosures were sufficient.

None of those cases derogates at all from the determinative inquiries of, what did the inventor know? what did he consider the preferred embodiment for using his invention? and did he withhold information known to him which would enable the public to reap the full benefits of competition upon the expiration of the patent?

The preferred embodiment of the invention in each of Colt’s patents was the improvement of the M-16 military weapon, with the essential requirement that each of the parts modifications be fully interchangeable with the corresponding part in every M-16 ever produced. Plaintiffs assert the position that the mandate of § 112 could be satisfied only by the disclosure of the critical interchangeability specifications. This court has expressly recognized the criticality of interchangeability in its preliminary injunction issued in the Springfield case, when it said:

“3. The evidence is clear and convincing that the use of the designation ‘M-16’ in Springfield’s contract with the government of El Salvadore amounts to a representation that the Springfield XM-15 rifle is in all respects the equivalent and fully interchangeable with the U.S. Army M-16, with full parts interchangeability, when none of such is now shown by the evidence to be the case in any important respect.”

There appears a sharp contrast between Colt’s position, taken in pursuit of the Springfield preliminary injunction, that complete interchangeability was the one factor of extreme importance, and that failure of full interchangeability could be fatal to the combat infantryman, and its present position that parts interchangeability is a common feature of all mass produced products. Of Colt’s present position, plaintiffs observe that, “What Colt Industries assiduously avoids is the fact that interchangeability is not a means for maintaining a monopoly in those other industries as it is for the standard U.S. military rifles.” Colt's present position ignores the fact that the firearms industry is not standardized, as, for example, the automobile industry. Mr. Waterman recognized that distinction when he testified:

“I think one of the things that has happened over a period of time in the firearms business is you normally try and utilize, if possible, standard parts, and almost 100 percent of the time it’s not possible.”

Thus Colt’s present position that M-16 parts can be produced without undue experimentation is rejected by statements by its own experts in Springfield and in the posture of the present case. M-16 parts might be produced through reverse engineering, but, if so, that would entail a massive undertaking. Use of reverse engineering is also hindered by provisions in Colt’s contracts with the Government, that no scrap parts be sold to unauthorized persons unless such parts are damaged and unrepairable.

The situation in Wilden Pump & Engineering v. Pressed & Welded Products, 199 U.S.P.Q. 390 (N.D.Cal.1978), affd 213 U.S.P.Q. 282 (9th Cir.1981), is interesting. The patent involved had omitted disclosure of dimensions and tolerances for an activator valve employed in the patentee’s pump. The court rejected a § 112 defense upon its findings that the accused infringers had been able to mass produce that valve by using ordinary engineering practices to supply that information and permit the mass production of the part. That accused infringer had no substantial difficulty in duplicating the patented item by reverse engineering. That same consideration is doubtless present in almost all situations which deal with standardized products. Standardization tends to produce a field of prior knowledge essential to permit the copying of the patentee’s commercial product with little effort by the application of reverse engineering. The totality of the undisputed evidence indicates that that is not true in the art of military weaponry. As plaintiffs argue, this is a unique situation which must be resolved independently by this court, guided, however, by the precedent of decided and controlling decisions.

Plaintiffs’ statement is deemed to fully and clearly present the issue of “best mode” involved here, and the conclusion. Framed in their language, it is:

To consider the issue [of best mode] in proper perspective, we must look to the facts to clearly sort out the unique fact situation we have here:

1. First, we have here the uncommon situation where the critical dimensions and tolerances cannot be reverse engineered;

2. Second, we also have here the uncommon situation where interchangeability is an absolutely essential requirement of the customers, amounting to a situation of life and death on occasion;

3. Third, we have the uncommon situation that this absolutely essential requirement must be maintained for production extending of (sic) a period of very many years;

4. Fourth, we also have here the situation where the dimension and tolerances necessary for interchangeability were known by the inventor to be important at the time of filing the patent applications; and

5. Fifth, we have the situation where the patent applications are on an improved component which is interchangeable with and serves as a replacement for a corresponding component of a much larger standard U.S. product, which even more uniquely has the U.S. standards privately and secretly owned by the patent applicant.

Applying the above facts under the standard of Section 112 must [lead to] the conclusion that at least the crucial interchangeability specifications should have been in the patent.

There can be no question that the preferred embodiment of each of the patents is the incorporation of the patented structure into the standard M-16 military rifle. That is the only mode for practicing the invention since it seems clear that the parts could not be employed in any other existing weapon. That finding and conclusion merely fortifies the uniqueness of this situation, which was previously noted. As also previously noted, a Colt expert said that the arms manufacturer seeks a standardized embodiment for general use which is unattainable almost 100 percent of the time.

Plaintiffs’ careful analysis of Colt’s receiver and bolt assist patent (No. 3,236,-155), trigger mechanism patent (No. 3,292,-492), and magazine patent (No. 3,619,929) is seen to apply to all of the patents in issue. Each describes the claimed invention in a generalized way, without disclosing the critical details of construction and, most importantly, the elements of structural detail and tolerances required to achieve the paramount requirement of full interchangeability of parts among all M-16 weapons produced over more than 20 years. That information was essential if the patent disclosures were to satisfy the § 112 requirement that the best mode for practicing the invention be disclosed. There can be no doubt that all of this critical information was known to Colt’s patent applicants when the patent applications were processed.

A consistent pattern emerges when the several patents are compared. In each, Colt failed to disclose that information which was essential to disclosure of the best mode then known to the patentee for practicing the claimed invention. Colt obviously sought to insulate its position by the provisions in its licensing agreements which were designed to forestall disclosure of such concealed information which Colt claimed as its proprietary property under the laws related to trade secrecy. To that end, it has transmitted threatening correspondence to some of its licensees to further insulate that information from disclosure to other persons. It seems obvious that such actions were designed to perpetuate Colt’s monopoly on the production of the M-16 rifle and its component replacement parts. The picture which emerges is that Colt reaped the benefits of its limited monopoly under the patents and seeks to extend it by means of planned subterfuge and a near total failure of compliance with the requirements imposed by § 112.

Plaintiffs rely on both equity and the doctrine of federal supremacy'as supporting their position that the claimed trade secrets are invalid and unsupportable. Colt’s response to that argument is its assertion, in effect, that if there was noncompliance with § 112, the only available remedy is the invalidation of its patents, most of which have already expired. Its corollary argument is that its misuse of the patent laws cannot affect its proprietary interest in its claimed trade secrets under state law. That argument is unsound.

Under the doctrine of federal supremacy, the patent laws do preempt application of state trade secrecy laws whenever enforcement of the state law would conflict with the accomplishment and execution of the full purpose and objectives of the patent laws as enacted by Congress. Hines v. Davidowitz, 312 U.S. 52, 67, 61 S.Ct. 399, 404, 85 L.Ed. 581 (1941). The patent laws enacted under the Constitution are the supreme law of the land which cannot be set at naught and the benefits thereof denied by the application of state law. Sears, Roebuck & Co. v. Stiffel Co., 376 U.S. 225, 229, 84 S.Ct. 784, 787, 11 L.Ed.2d 661 (1964). A state may not apply its own laws in such a way as would extend the monopoly of an expired or invalid patent or afford any protection which is inconsistent with the objectives of the federal patent laws. Ibid, at 231, 84 S.Ct. at 788. The nature and extent of the legal consequences of the expiration or invalidation of a patent are federal questions which must be answered by the-application of the patent laws and the policy which they adopt. Scott Paper Co. v. Marcalus Mfg. Co., 326 U.S. 249, 255-256, 66 S.Ct. 101, 104-105, 90 L.Ed. 47 (1945). “Hence any attempted reservation or continuation in the patentee * * * of the patent monopoly, .after the patent expires, whatever the legal device employed, runs counter to the policy and purpose of the patent law.”

Both Aronson v. Quick Point Pencil Co., 440 U.S. 257, 99 S.Ct. 1096, 59 L.Ed.2d 296 (1979), and Kewanee Oil Co. v. Bicron Corp., 416 U.S. 470, 94 S.Ct. 1879, 40 L.Ed.2d 315 (1974), upon which Colt relies, are inapposite. In Aronson, no patent had been issued although a patent application had been filed, while in Kewanee there had been no application for a patent. Thus, the court was not dealing with any potential conflict between the patent laws and the state laws of trade secrecy.

As stated above, the court finds that the disclosures made in Colt’s several M-16 parts patents are insufficient to satisfy either the enablement or best mode requirements of § 112. It follows that each of those patents was invalid from its inception and that any claim of trade secrecy as to the nondisclosed information is likewise invalid.

REMEDY

The remaining issues devolve into a determination as to the appropriate remedy. Plaintiffs assert that Colt should be required to disgorge its claimed trade secrets. Its argument is not limited to those items which were required to be disclosed. It also argues that Colt should disgorge all material which it claims as its trade secrets, because of its misuse of the patent system and because of its unjust enrichment by use of the invalid patents for which it had wholly failed to provide the consideration which the patent laws require. Reiterating, that consideration is full and complete disclosure which would enable the public to freely practice the invention once a patent has expired.

That position is supported by Dow Chemical Co. v. American Bromine Co., 210 Mich. 262, 177 N.W. 996 (1920), which held that a patentee cannot, in equity, claim trade secrecy for conventional information which could readily have been discovered had the required disclosures been made in its patent. The trade secrecy laws cannot be invoked to protect production specifications which could have been reverse engineered had the critical interchangeability specifications been properly disclosed. See Rototron Corp. v. Lake Shore Burial Vault Co., Inc., 712 F.2d 1214 (7th Cir. 1983); ILG Industries, Inc. v. Scott, 49 Ill.2d 88, 273 N.E.2d 393 (1971). Moreover, the period for the enforcement of the claimed trade secrets, which could have been discovered by reverse engineering, would doubtless have ended years ago had the essential specifications been disclosed. See Syntex Ophthalmics, Inc. v. Novicky, 591 F.Supp. 28 (N.D.111.1983), affd 28 Patent, Trademark & Copyright J. (BNA) 717 (Ped.Cir.1984).

The clean hands doctrine also bears upon this phase of the case. As stated by the Court in Precision Instrument Manufacturing Co. v. Automotive Machinery Co., 324 U.S. 806, 814, 815, 65 S.Ct. 993, 997, 998, 89 L.Ed. 1381 (1945):

“Thus while equity does not demand that its suitors shall have led blameless lives, as to other matters, it does require that they shall have acted fairly and without fraud or deceit as to the controversy in issue.”

Colt must bear the consequences of its flagrant abuse of the patent laws.

Colt’s assertion that Christianson is guilty of having induced the breach of its licensing agreements, both as a defense to plaintiffs’ motion and as the basis for its counterclaims, is not sustained. Although Christianson is a former Colt employee, it is not alleged that he has been guilty of corporate espionage, theft, bribery, or deception in his obtaining the Colt specifications which he has used. They were supplied to him by the governments of the Philippines and Singapore.

Moreover, the license agreements themselves are tainted by Colt’s misuse and evasion of the patent laws. As plaintiffs suggest, had the required disclosures been made in the patents, the supplementary information would probably have been discovered by others long before the now-elapsed time of about twenty years. Secrecy would thus have evaporated with the issuance of the patents. Forest Laboratories v. Pillsbury Co., 452 F.2d 621, 624 (7th Cir.1971). Colt’s failure to make the required disclosures not only invalidates its patents but also its present claims of trade secrecy. The licensing agreements themselves can stand in no better stead without undermining the purposes of the patent laws.

The cases cited by Colt are deemed inapposite. E.g., American Can Co. v. Mansukhani, 728 F.2d 818 (7th Cir.1984); Syntex Ophthalmics, Inc. v. Tsuetaki, 701 F.2d 677 (7th Cir.1983); E.I.M. Co. v. Philadelphia Gear Works, Inc., 102 F.Supp. 14 (S.D.Tex.1951), affd 205 F.2d 28 (5th Cir. 1953). None of those cases involved a situation such as this in which the claimed trade secrecy information had been withheld from disclosure by the patentee in violation of § 112.

Little need be said about Colt’s cross-motion for summary judgment. As the court said in First National Bank v. Insurance Company of North America, 606 F.2d 760, 766 (7th Cir.1979), the moving party must present admissible evidence showing its entitlement to judgment, not just contentions, assertions of counsel, or hearsay. It cannot be found that Colt has met that burden.

Plaintiffs’ motion for summary judgment must be allowed as to liability on Counts I and II, and Colt’s cross-motion for summary judgment must be denied.

IT IS ORDERED, therefore, that plaintiffs’ motion for summary judgment is AD LOWED as to liability on Counts I and II of the Complaint, and defendant’s motion for summary judgment is DENIED.

IT IS FURTHER ORDERED that plaintiffs shall submit to the court and serve on defendant, within 30 days hereafter, its proposed final judgment order on liability, which shall be consistent with this opinion, on which the defendant shall file and serve any comments as to form within 10 days after service.

      . In this context, plaintiffs assert that the opinion in Colt Industries v. Springfield Armory, supra, should be accepted as the law of the case, citing Gindes v. United States, 740 F.2d 947 (Fed.Cir.1984). The reference is to language in that opinion that courts generally refuse to reopen what has already been decided. See Messenger v. Anderson, 225 U.S. 436, 444, 32 S.Ct. 739, 740, 56 L.Ed. 1152 (1912). Previous discussion of Springfield herein delimits this court’s interpretation of that opinion, which clearly indicated that it will not be presumed that the Federal Circuit did decide an issue which was not before it. Plaintiffs’ reliance on the doctrine of the law of the case is thus misplaced.


author: GLASSER, District Judge:

text:
    Robert THORNTON, Plaintiff, v. Margaret M. HECKLER, Secretary of Health and Human Services, Defendant.
    No. 81 Civ. 1369.
    United States District Court, E.D. New York.
    May 28, 1985.

      William J. Eppig, West Islip, N.Y., for plaintiff.
    Anne E. Stanley, Asst. U.S. Atty., E.D. N.Y., Brooklyn, N.Y., for defendant.
   MEMORANDUM AND ORDER

GLASSER, District Judge:

This challenge to the defendant Secretary’s denial of plaintiff’s claim for disability insurance benefits is before me for the second time, following a remand to the Secretary. At this juncture the parties have cross-moved for judgment on the pleadings. For the reasons set forth below, plaintiff’s motion is granted and defendant’s motion is denied. This action is remanded to the Secretary for the sole purpose of calculating benefits due to the plaintiff.

Background

Plaintiff, who is now 60 years old and has a limited education, alleges disability due to a heart condition. On December 9, 1980, the Administrative Law Judge (“AU”) rendered a decision that plaintiff was not entitled to receive benefits because he could perform his former work as the operator of a vacuum cleaner repair business. The decision of the AU became the final decision of the Secretary when it was affirmed by the Appeals Council on March 13, 1981.

Plaintiff thereafter timely commenced an action in the district court. In a Report and Recommendation dated May 4, 1983, Magistrate Chrein found that the medical evidence in the record supported the conclusion that plaintiff was severely impaired, but retained the residual functional capacity to perform sedentary work. However, the Magistrate recommended that this action be remanded to the AU for a determination of the exertional requirements of plaintiff’s past work, which were not specified at all in the record originally before the AU. By Memorandum and Order dated February 2, 1984, I accepted the Magistrate’s Report and Recommendation in its entirety, notwithstanding the timely objection of the plaintiff.

At the hearing on remand on June 20, 1984, the AU received testimony from the plaintiff and from David Vandergoot, a vocational expert (“VE”). The AU accepted the VE’s conclusion that the plaintiff’s past work was heavy and skilled in nature, Tr. 152, and the AU thus concluded that plaintiff could not return to his former work. Tr. 130. However, the AU went on to complete the sequential analysis, i.e., to determine whether plaintiff possessed the residual functional capacity to engage in any other form of substantial gainful activity. The AU found that plaintiff could perform the semi-skilled sedentary job of electrical inspector.

At this point it is relevant to note that in evaluating whether this plaintiff can perform any type of work, transferability of skills is the determinative factor. This requirement is dictated by the relevant medical-vocational guidelines (“the grid”) promulgated by the Secretary which are set forth in the margin. Section 201.00(f) accompanying the grid regulations further limits the Secretary’s ability to determine that a claimant such as Mr. Thornton can perform substantial gainful activity. That section provides:

In order to find transferability of skills to skilled sedentary work for individuals who are of advanced age (55 and over), there mut be very little, if any, vocational adjustment required in terms of tools, work processes, work settings, or the industry.

(emphasis added). See infra at 1188. With respect to these factors, VE Vandergoot testified at several points that this plaintiff would likely have more than “very little” vocational adjustment to the sedentary occupation of electrical inspector. Specifically, the VE felt that plaintiff would require some adjustment with respect to two aspects of that position: (1) plaintiff would require approximately 30 days of training to adjust to the different types of products and different skills necessary for that job, and (2) plaintiff would experience more than very little psychological adjustment to (a) being an employee and co-worker, instead of an employer, (b) production and time requirements, and the inability to control his time and activities. Tr. 155, 156, 159, 161-2, 168, 169. In the terms of § 201.00(f) supra note 3, the VE described the areas where plaintiff would need more than very little adjustment to be “industry” and “work settings.” Tr. 156, 168-69.

The AU received no other testimony or documentary evidence regarding the transferability of plaintiff’s skills to the occupation of electrical inspector. However, he rejected the VE’s opinion that plaintiff would require more than “very little” adjustment to such work within the meaning of § 201.00(f). The AU therefore concluded that plaintiff was not under a disability because he could perform that job.

Plaintiff asserts two bases for his appeal from the Secretary’s denial of benefits on remand. First, he asserts that the abilities which the VE and AU determined him to have, supra note 3, are not “skills” but are merely “aptitudes;” thus, plaintiff urges, he cannot be found to have transferable skills. Second, plaintiff contends that even if his abilities are deemed to be skills, he should be found disabled under § 201.00(f) because he would require more than very little vocational adjustment within the meaning of that regulation.

Discussion

The only issue to be decided by this Court is whether the Secretary’s determination that plaintiff is not disabled because he can perform sedentary, semi-skilled work as an electrical inspector is supported by substantial evidence. Richardson v. Perales, 402 U.S. 389, 91 S.Ct. 1420, 28 L.Ed.2d 842 (1971). It is well settled that once a claimant has establisshed that he is severely impaired, the burden of proof shifts to the Secretary to demonstrate that there is other work which the plaintiff can perform. Parker v. Harris, 626 F.2d 225 (2d- Cir.1980). I will address the two bases of plaintiff’s argument seriatim.

A. Applicability of § 201.00(f)

Although not raised by either party to this action, I must first address the applicability of § 201.00(f) to the plaintiff here. As indicated supra at 1187, that provision sets forth a standard for the determination of transferability of skills to skilled sedentary work. The position of electrical inspector, which the AU found that plaintiff could perform, is semi -skilled sedentary work. The courts have differed as to whether § 201.00(f) is applicable when the issue presented is whether the plaintiff’s skills are transferable to other than “skilled” work. Compare Richardson v. Secretary of Health & Human Services, 735 F.2d 962, 964 (6th Cir.1984) (discussion of applicability of § 201.00(f) to “other” sedentary work) with Brown v. Secretary of Health & Human Services, Unempl.Ins.Rep. (CCH) ¶ 17,025 (E.D.Mich. 1980) (cited in Blake v. Secretary of Health & Human Services, 528 F.Supp. 881, 887 n. 15 (E.D.Mich.1981)) (holding § 201.00(f) to be applicable only “if skills are to be transferred to skilled sedentary work”).

In the instant case, however, the Secretary has applied § 201.00(f) to plaintiff Thornton at both the administrative level and before this Court. See, e.g., Tr. 131; Defendant’s Brief at 7. Because of this position and because the Secretary has apparently interpreted § 201.00(f) to apply to sedentary work generally, I find that application of that regulation to plaintiff is appropriate in this case.

B. Skills vs. Aptitudes

The scant legal authority interpreting § 201.00(f) for the most part addresses whether certain abilities are skills or aptitudes under that provision. See, e.g., Ellington v. Secretary of Health & Human Services, 738 F.2d 159 (6th Cir.1984) (capacity to exercise "independent judgment” not a transferable skill); Richardson, supra (abilities to maintain a production standard and to use hand tools not skills); Weaver v. Secretary of Health & Human Services, 722 F.2d 310 (6th Cir.1983) (“average intelligence, high average space relations, average form relations, above average finger dexterity, and manual dexterity in terms of the tools he used” held to be aptitudes and not transferable skills); Pfalz v. Heckler, 589 F.Supp. 653, 656 (S.D.Ohio 1984) (where ALJ made no finding as to transferability of plaintiff's skills and there was no evidence that plaintiff had a “particular learned ability” to perform a specific job, Secretary had not met burden of proving that plaintiff was not disabled); Blake, supra, 528 F.Supp. at 884-85 (good visual activity, general intelligence, hand-eye-foot coordination and manual dexterity held to be aptitudes and not skills).

Perhaps the most clear comparison between aptitudes and skills is that set forth in Blake, supra:

Webster defines “skill” as the “learned power of doing something competently; a developed or acquired aptitude or ability.” A skill, unlike a simple aptitude, is acquired and relates to doing a specific act. Although the regulations never explicitly define either skill or aptitude, this distinction is implicit. The regulations repeatedly assume that skills are acquired. Skills relates [sic] to specific “vocationally significant work activities,” while aptitudes involve only “basic work activities ... necessary to do most jobs.”

528 F.Supp. at 885 (emphasis in original) (footnotes omitted). Accord, Weaver, supra, 722 F.2d at 311 (“an aptitude is an innate ability while a skill is a learned ability”).

At the hearing on remand, plaintiff testified that his former activities as manager of his vacuum cleaner and sewing machine repair business included doing all of the repair work (mostly electrical), selling, preparing advertisements and keeping the books of the company. Tr. 141-46. Plaintiff also testified that prior to going into that business, he apprenticed for one and one half years in order to learn specifically how to repair vacuum cleaners and sewing machines. Tr. 141, 146. While not all of plaintiff’s activities at his former work may be “skills” within the meaning of the Social Security Act and case law, I find that the extensive training and managerial and technical aspects of his work would be best characterized as skills and not aptitudes.

C. “Very Little” Vocational Adjustment

As discussed supra, the uncontradicted opinion of VE Vandergoot was that the plaintiff here would require more than “very little” vocational adjustment to adapt to the position of electrical inspector. Although the AU disregarded the VE’s assessment of the degree of plaintiff’s adjustment under § 201.00(f), the rejection of that part of the VE’s opinion is not based upon any other evidence considered by the AU. It is well settled that a vocational expert’s opinion may be a reliable assessment of a claimant’s ability to perform substantial gainful activity if his evaluation is based upon substantial evidence present in the record. See, e.g., Dumas v. Schweiker, 712 F.2d 1545, 1553-54 (2d Cir. 1983). The parties here do not dispute the evidence relied upon by VE Vandergoot, but do disagree with respect to Vandergoot’s assessment of the transferability of plaintiff’s skills under § 201.00(f). Where the uncontraverted testimony of the VE supports the conclusion that a claimant’s skills are not transferable with the minimal degree of adjustment specified in § 201.-00(f), a finding of disability is appropriate. See Piechucki v. Heckler, 613 F.Supp. 45 at 47-48 (E.D.N.Y. March 28, 1985). The Secretary has clearly failed to meet her burden of proving that plaintiff possesses the residual functional capacity to perform substantial gainful activity. Parker v. Harris, supra.

Conclusion

For the reasons set forth above, plaintiff’s motion for judgment on the pleadings is granted and defendant’s motion is denied. This case is remanded to the Secretary solely for the computation of benefits due to the plaintiff.

SO ORDERED.

      . The Magistrate alternatively recommended that the AU establish a basis for his conclusion that the plaintiff was currently working as a manager of the vacuum repair business. On remand, the AU did not reconsider this matter and it was not presented by the parties on appeal.

      . The skills which the vocational expert considered plaintiff to have are: ability to use hand tools, run equipment, work with specifications, use precise measurements and apply arithmetic functions. Tr. 153.

      . In order to determine whether a claimant is entitled to receive disability insurance benefits, the Secretary must employ the sequential analysis set forth in 20 C.F.R. § 404.1520. Using that method of evaluation, the Secretary must determine in the following order: (1) whether the claimant is working; (2) if not, whether the claimant is severely impaired; (3) if so, whether the claimant has a "listed" impairment; (4) if not, whether the claimant can perform his past relevant work; and (5) if not, whether the claimant can perform any other type of work. The fifth step of the sequential analysis, which is the provision relevant to the case at bar, states:
      Your impairment must prevent you from doing any other work. (1) If you cannot do any work you have done in the past because you have a severe impairment, we will consider your residual functional capacity and your age, education and past work experience to see if you can do other work. If you cannot, we will find you disabled.
      20 C.F.R. § 404.1520(f).

      . The relevant grid regulations are set forth in 20 C.F.R., Subpart P, Appendix 2, Table 1, which provides:
      Table No. 1 — Residual Functional Capacity: Maximum Sustained Work Capability Limited to Sedentary Work as a Result of Severe Medically Determinable Impairment(s)_
      Rule_Age_Education_Previous Work Experience_Decision
      201.01 Advanced age Limited or less Unskilled or none Disabled
      201.02 ...do..........do......... Skilled or semiskilled — skills not trans- Do ferable
      201.03 ...do..........do......... Skilled or semiskilled — skills transiera- Not disabled ble
      (footnotes omitted) Application of the grid regulations has been upheld as constitutional by the Supreme Court in Heckler v. Campbell, 461 U.S. 458, 103 S.Ct. 1952, 76 L.Ed.2d 66 (1983).

      . Although counsel for the government urged at oral argument of the instant motion that the VE stated that plaintiff's psychological adjustment to this position would take 30 days, the record does not support this conclusion. The time period discussed by the VE referred to adjustment to the technical aspects of the position of electrical inspector.

      . Although the VE first vascillated with respect to categorizing plaintiffs anticipated psychological adjustment in terms of § 201.00(f), he eventually concluded that this problem would most likely fall within the "work settings” category. Tr. 168-69.

      . This is apparent from Social Security Ruling 82-41, "Titles II and XVI: Work Skills and Their Transferability as Intended by the Expanded Vocational Factors Regulations Effective February 26, 1979,” reprinted in West’s Social Security Reporting Service (Rulings) (1975-82) at 853-54, which states in relevant part:
      c. Special provisions made for transferability. To find that an individual who is age 55 or over and is limited to sedentary work exertion has skills transferable to sedentary occupations, there must be very little, if any, vocational adjustment required in terms of tools, work processes, work settings or the industry. The same is true for individuals who are age 60 and older and are limited to light work exertion. Individuals with these adverse vocational profiles cannot be expected to make a vocational adjustment to substantial changes in work simply because skilled or semiskilled jobs can be identified which have some degree of skill similarity with their PRW [past relevant work]. In order to establish tranferability of skills for such individuals, the semiskilled or skilled job duties of their past work must be so closely related to other jobs which they can perform that they could be expected to perform these other identified jobs at a high degree of proficiency with a minimal amount of job orientation.
      Generally, where job skills are unique to a specific work process in a particular industry or work setting, e.g., carpenter in the construction industry, skills will not be found to be transferable without the need for more than a minimal vocational adjustment by way of tools, work processes, work settings, or industry. On the other hand, where job skills have universal applicability across industry lines, e.g., clerical, professional, administrative, or managerial types of jobs, transferability of skills to industries differing from past work experience can usually be accomplished with very little, if any, vocational adjustment where jobs with similar skills can be identified as being within an individual’s RFC.

      . The Secretary’s definition of skills is found in SSR 82-41, supra note 7, at 847-56. The relevant portion of that ruling provides:
      2. Skills, skill levels, and their potential for being transferred to other occupations, a. What a “skill” is. A skill is knowledge of a work activity which requires the exercise of significant judgment that goes beyond the carrying out of simple job duties and is acquired through performance of an occupation which is above the unskilled level (requires more than 30 days to learn). It is practical and familiar knowledge of the principles and processes of an art, science or trade, combined with the ability to apply them in practice in a proper and approved manner. This includes activities like making precise measurements, reading blueprints, and setting up and operating complex machinery. A skill gives a person a special advantage over unskilled workers in the labor market. Skills are not gained by doing unskilled jobs, and a person has no special advantage if he or she is skilled or semiskilled but can qualify only for an unskilled job because his or her skills cannot be used to any significant degree in other jobs. The table rules in Appendix 2 are consistent with the provisions regarding skills because the same conclusion is directed for individuals with an unskilled work background and for those with a skilled or semiskilled work background whose skills are not transferable. A person’s acquired work skills may or may not be commensurate with his or her formal educational attainment.

        Id. at 848-49.

      . While the Government might urge that a remand would be appropriate in order for the ALJ to receive further evidence that would establish that plaintiffs skills are transferable under § 201.00(f), I find that a remand would only cause delay and give the Secretary a "last chance” to meet the burden of proof which she has twice failed to meet. See e.g., Parker v. Harris, supra. Plaintiff filed this action in 1981 and has already been sent back to the administrative level once.