author: PHILIP PRATT, District Judge.

text:
    INTERNATIONAL UNION, UNITED AUTOMOBILE, AEROSPACE AND AGRICULTURAL IMPLEMENT WORKERS OF AMERICA (UAW) and its Locals 104, 604 and 771 and Andrew Kinnear, Lawrence Galloway, Richard Stewart, Leo Rose, John C. Krust, and Mykola Chubenko, Plaintiffs, v. FACET ENTERPRISES, INC., a Delaware Corporation, and the Bendix Corporation, a Delaware Corporation, Defendants.
    No. 84-CV-0712.
    United States District Court, E.D. Michigan, S.D.
    Sept. 27, 1984.

      Leonard R. Page, Detroit, Mich., for plaintiffs.
    Frank T. Mamat, Bloomfield Hills, Mich., for defendants.
   MEMORANDUM OPINION AND ORDER

PHILIP PRATT, District Judge.

Plaintiffs are the International Unioa, United Automobile, Aerospace and Agricultural Implement Workers of America (“UAW”) and its Locals 104, 604 and 771, along with six individuals who are members of those locals and retired from employment with defendant Facet Enterprises, Incorporated (“Facet”). Plaintiffs commenced this action under Section 301, 29 U.S.C. § 185, and ERISA, 29 U.S.C. § 1132(a), seeking declaratory and injunctive relief as well as damages. Defendant Facet has moved for dismissal on the grounds that there is no “case or controversy” under Article III of the Constitution and that the remaining claims are matters within the exclusive jurisdiction of the National Labor Relations Board. In response, plaintiffs have filed a cross motion for summary judgment claiming that they are entitled to declaratory and injunctive relief.

I.

Prior to April of 1976, Facet was a wholly-owned subsidiary of defendant Bendix Corporation (“Bendix”). In April, a Federal Trade Commission decree required Bendix to divest itself of Facet. As part of the reformation, Facet gained independent control, among other items, over three plants: the Filter Products Division in Madison Heights, the Fuel Devices Division in Detroit, and the Motor Components Division in Elmira, New York. At the time of the decree until the present, the UAW and its locals have been the bargaining representatives for workers in the three plants. In conjunction with the spin off of Facet and with the urging and consent of the UAW, Bendix entered into a limited' guaranty of specified pension and insurance benefits for retirees and for employees who had ten years of service as of April of 1976 and who subsequently retired from Facet. The apparent purpose of the guaranty is to protect the aforementioned individuals’ rights to receive pension and insurance coverage in the event Facet did not provide such benefits.

After April of 1976, Facet and the UAW entered into a series of collective bargaining agreements. These agreements established pension and health plans for members of the bargaining unit. Under the plans, Facet was to make contributions for current employees as well as contributions for retirees.

The parties’ most recent collective bargaining agreement expired on October 31, 1983. Negotiations for a new bargaining agreement had begun in August of 1983. The UAW submitted the affidavit of John Mando, Director of the UAW’s Bendix and Facet Intracorporation Councils, in opposition to defendants’ motion. In his affidavit Mando states that in negotiations condueted in September of 1983 Facet proposed the possibility of reducing insurance coverage for its 1,400 retirees. Mando Affidavit If 11. The union rejected this suggestion. The parties were unable to agree on a new contract before the expiration date. Apparently, Facet demanded substantial concessions from the Elmira and Madison Heights employees which the UAW could not accept. Consequently, a strike commenced in early November of 1983. To this date, the parties have still been unable to reach an agreement and are continuing negotiations.

On November 15, 1983, Facet submitted a formal written proposal that included reductions in health and life insurance benefits for current employees and retirees of the Madison Heights and Elmira plants. The proposal contemplated that these changes would be implemented on December 1, 1983. According to Mando, “Facet threatened to implement these changes, absent agreement, on December 1, 1983.” Mando Affidavit If 12. The language of the proposal, however, does not suggest such unilateral action. Contemporaneous with the proposal of reductions for the Madison Heights and Elmira plants, Facet also proposed wage increases and insurance benefits better than those in the expired agreement for the financially stronger Fuel Devices Division in Detroit. Paul Dick Affidavit, 1f 12 (Director of Industrial Relations for Facet).

Facet did not effectuate any change in retiree benefits in December of 1983 or any other time. In fact, Facet withdrew its proposal to reduce insurance benefits in January, 1984. The parties disagree as to the facts surrounding Facet’s withdrawal of the proposal. According to Mando, on January 9, 1984, the UAW threatened to file unfair labor practice charges for bargaining to impasse over retiree insurance which is a “permissive" subject of bargaining. Mando further asserts that on January 10, 1984, the company only withdrew its proposal to reduce retiree benefits at the Elmira plant but not the Madison Heights location. Mando Affidavit 1113. Paul Dick, the defendant’s representative, in his affidavit, asserts that the proposal to narrow benefits was withdrawn for both plants and that there are no proposals before the parties concerning this issue. Dick Affidavit 1113. Facet’s counsel reiterated this assertion at the hearing and also stated that if there is any doubt, Facet again withdraws the proposal for both plants. Significantly, Mando further states in his affidavit that “[tjhere have been no further discussions regarding retiree insurance benefits during negotiations for a new master agreement,” since the withdrawal of Facet’s proposal in early January. Man-do Affidavit 1114.

On February 10, 1984 plaintiffs filed their complaint. The complaint consists of three counts. Count One seeks damages and declaratory and injunctive relief under § 301, 29 U.S.C. § 185, for an alleged breach of the collective bargaining agreement regarding health and insurance benefits of “retired employees and those who will retire and their eligible dependents.” Count Two is a claim under ERISA, 29 U.S.C. § 1132(a)(1)(B), which “seeks to recover benefits due and to clarify rights to future benefits under an employee health and life insurance benefit plan.” Count Three requests declaratory and injunctive relief and damages for breach of the “guaranty” contract entered into by the union and defendant Bendix Corporation.

Through the series of briefs concerning the instant motions and during oral argument at the hearing, plaintiffs have retreated from the broad language of their complaint and are now pursuing a narrower scope of claims. First, at the hearing, the plaintiffs agreed to dismiss Count Three of the complaint and Bendix as a party defendant. Plaintiffs admitted that not only has Bendix not breached the “guaranty” as plaintiffs averred in the complaint, but that Bendix has made no indication that it would not honor that agreement. Second, plaintiffs have likewise implicitly recognized that Facet has not breached the parties’ past collective bargaining agreement, despite plaintiffs’ allegations to the contrary. Plaintiffs have not presented any facts which suggest that Facet actually breached the contract. Moreover, all of plaintiffs’ proofs and arguments focus upon Facet’s alleged threatened breach of the agreement. Third, plaintiffs also concede explicitly in their briefs and implicitly by argument, that they are not pursuing claims of present employees in this action. Hence, stripped of the superfluous, plaintiffs are now only seeking relief from Facet’s alleged threatened breach of their obligation under past collective bargaining agreements for the approximately 1,400 current retirees.

Essentially, the claim of plaintiffs is that the benefits the 1,400 retirees are receiving pursuant to past collective bargaining agreements are vested and cannot be changed. Presumably, plaintiffs seek a declaration from this Court which sustains that proposition. Defendant Facet contends that this case should be dismissed since it is not seeking to change retiree benefits and, accordingly, no case or controversy exists. Facet also argues that dismissal is appropriate due to the pre-emptive jurisdiction of the NLRB.

The threshold issue concerns the appropriateness of adjudication of this controversy. The allegation of a threatened harm, as claimed by the plaintiffs here necessitates the application of two related doctrines of justiciability; standing and ripeness. The Supreme Court recently enunciated the test for Article III standing in Allen v. Wright, — U.S. -, 104 S.Ct. 3315, 82 L.Ed.2d 556 (1984). The Allen Court began its analysis by recognizing that “[i]n essence the question of standing is whether the litigant is entitled to have the Court decide the merits of the dispute or of particular issues.” Id. at 3324. The Court identified three components to the standing analysis which are to guide courts in this determination: “A plaintiff must allege personal injury fairly traceable to the defendant's allegedly unlawful conduct and likely to be repressed by the requested relief.” Id. at 3325.

As to the first prong, “personal injury”, the injury must be “distinct and palpable” to the plaintiff and not “abstract” or “conjectural” or “hypothetical”. 104 S.Ct. at 3325; Duke Power Co. v. Carolina Environmental Study Group, Inc., 438 U.S. 59, 72-73, 98 S.Ct. 2620, 2629-2630, 57 L.Ed.2d 595 (1978). Accord, Young v. Klutznick, 652 F.2d 617, 623-24 (6th Cir. 1981). The Court must consider: “Is the injury too abstract, or otherwise not appropriate, to be considered judicially cognizable?” Allen v. Wright, supra, 104 S.Ct. at 3325. Second, the injury “must be ‘fairly’ traceable to the challenged action ...” Id. The Court should determine whether “the line of causation between the illegal conduct and injury [is] too attenuated.” Id. Third, the “relief from the injury must be likely to follow from a favorable decision.” Id. In other words, “[i]s the prospect of obtaining relief from the injury as a result of a favorable ruling too speculative?” Id.

Unlike the standing doctrine, ripeness is not a condition of justiciability imposed by the Constitution, but is a doctrine of judicial self-restraint. Even though Article III can be technically satisfied and standing is present, “problems of prematurity and abstractness ... may prevent adjudication in all but the exceptional case.” Buckley v. Valeo, 424 U.S. 1, 114, 96 S.Ct. 612, 680, 46 L.Ed.2d 659 (1976); Young v. Klutznick, supra, 652 F.2d at 625. The Supreme Court has established two inquiries to be resolved in this regard. Courts must first “determine whether the issues tendered are appropriate for judicial resolution” and “assess the hardship to the parties if judicial relief is denied at this stage.” Toilet Goods Association v. Gardner, 387 U.S. 158, 162, 87 S.Ct. 1520, 1523, 18 L.Ed.2d 697 (1967); Young v. Klutznick, supra, 652 F.2d at 625.

As the Court of Appeals for the Sixth Circuit recognized in Young v. Klutznick, supra, 652 F.2d at 625, “[t]he question whether tendered issues are appropriate for judicial resolution clearly ‘bears close affinity’ to questions of standing.” Quoting, Warth v. Seldin, supra, 422 U.S. at 499, 95 S.Ct. at 2205. Essentially, the ripeness doctrine is a question of timing concerning the avoidance of passing upon “complex problems in the abstract and the general ...” Young v. Klutznick, supra, 652 F.2d at 626. See Regional Rail Reorganization Act Cases, 419 U.S. 102, 140, 95 S.Ct. 335, 357, 42 L.Ed.2d 320 (1974); Gardner v. Toilet Goods Association, 387 U.S. 167, 200, 87 S.Ct. 1526, 1530 (1967) (Fortas, J., concurring in part and dissenting in part). The question of abstractness or the concreteness of issues in the ripeness doctrine is closely akin to the specific personal injury component of the standing doctrine. This is particularly true in a case such as the instant one, where the claimed harm is allegedly threatened and has not actually occurred. In this situation the differences in the doctrines is a matter of degree. The Court must examine whether the threat of injury is beyond conjecture or speculation to constitute a distinct and palpable injury for Article III or standing purposes. Further, even if the threat of injury is sufficiently real to satisfy standing requirements, the Court must also determine whether the threat of injury is presented in a timely factual context which is not abstract or ill-defined.

In the case at bar, plaintiffs assert three related arguments or grounds which they contend establish that this matter is properly justiciable. First, plaintiffs argue that since Facet threatened unilateral implementation of reductions in retiree benefits in November of 1983, it is likely that Facet may attempt to do so in the future. Also, plaintiffs contend that since Facet does not recognize retiree benefits as vested and not subject to reduction even with UAW agreement, a threat to breach past bargaining agreements exists which is justiciable. Second, since retiree benefits are a permissible subject of negotiations and since the parties “appear to be at impasse on the issue,” according to the plaintiffs, “Facet may have the right under the NLRA to implement its final offer as it has done for the strikers who returned to work in February.” Plaintiff’s Brief in Support of Motion for Summary Judgment, at 12. Third, plaintiffs assert that 1,400 retirees have become “highly fearful” of Facet’s threat and that many current employees are prematurely retiring due to the threats.

Plaintiffs’ arguments do not establish that this case is presently at a proper stage for adjudication. Plaintiffs’ claims of threatened harm are too abstract to satisfy standing requirements, as well as too ill-defined for timely adjudication. Specifically, as to plaintiffs' first argument, there is no substantial threat that Facet will unilaterally implement reductions in retiree benefits independent of the union’s consent. Plaintiffs claim that because Facet threatened unilateral reductions in November of 1983, a likelihood exists that Facet will do so in the future. The Court cannot agree. Facet suggested reduction in retiree benefits as part of a proposal placed on the bargaining table in November of 1983. It may be, as Mando’s Affidavit asserts, that Facet “threatened” to implement the reductions absent UAW consent. However, no reductions occurred and Facet removed the proposal from consideration. Facet’s actions do not indicate that it is likely to implement unilateral changes. Facet placed the proposal on the bargaining table and sought UAW concurrence. The proposal was not drafted as a “threat” but as a plan for bargaining consideration. Thus, in itself, Facet’s past “threat” to implement reductions does not indicate a substantial likelihood that Facet will unilaterally reduce benefits and the injury to plaintiffs is too abstract for adjudication.

At most, the parties’ disagreement is a difference in contract interpretation which does not and cannot be addressed by this Court. It is Facet’s position that pension benefits for retirees under past collective bargaining agreements can be changed with union consent. Plaintiffs, on the other hand, contend that retiree benefits are vested and not subject to change. Presumably, plaintiffs claim that once an employee retires his right to benefits as provided in the collective bargaining agreement in existence at his retirement cannot be changed absent the retiree’s consent. According to the plaintiffs, the fact that Facet and the union negotiated these benefits in arriving at an agreement, does not mean that Facet and the union can later change the benefits.

Facet’s understanding would be of consequence but for the union’s posture in this regard. Not only does the union maintain that it lacks authority to agree to reductions in retiree benefits, the union firmly and unqualifiedly maintains that it will not consent to any reductions. In fact, the union’s counsel stated that it would be “over his dead body” that the union would ever affirm changes in retiree benefits. Therefore, since Facet apparently will not reduce benefits without the union’s consent and since there is no possibility of obtaining such consent, plaintiffs’ “injury” or potential “injury” is too abstract and speculative to satisfy standing requirements.

Furthermore, even if plaintiffs might technically satisfy such requirements, the present controversy is not “ripe” for adjudication. The ripeness doctrine directs an inquiry into the appropriateness of the issues presented for judicial resolution and the harm which might result from judicial abstention. Toilet Goods Association v. Gardner, supra. The circumstances before the Court do not present such a controversy. Despite the language in the complaint, the plaintiffs have suffered no injury from Facet’s position that the union can consent to changes in retiree benefits. No retiree benefits have been changed and Facet is unlikely to unilaterally implement changes. Such an ill-defined factual setting is inappropriate to carry to decision. The plaintiffs, themselves, demonstrate the speculative and undefined nature of the instant case in their arguments before the Court. Plaintiffs’ complaint seeks broad relief for all employees and retirees of defendant. The complaint asserts that defendant breached past collective bargaining agreements and even goes so far- as to seek damages. During the course of arguments in briefs for these motions, however, plaintiffs changed their position several times to dramatically reduce the scope of the case. Plaintiffs’ shifts in positions were apparent responses to the realization that they lacked factual support for their claims and arguments. Finally, at the hearing, plaintiffs presented the latest version of the instant “controversy” — one significantly different and most limited in scope. Plaintiffs’ difficulty in presenting the issues to be resolved reflects the speculative ill-defined factual setting of this case.

Proper judicial adjudication requires a factual context to ensure issue resolution. The facts before the Court do not indicate that this case is presently “ripe” for adjudication. The Court would be rendering a decision based upon speculation which is unlikely to properly resolve this matter. Hence, since no harm will be suffered by plaintiffs absent judicial determination, the Court must decline to adjudicate this case.

Plaintiffs’ two other contentions for the existence of standing are equally without merit. Plaintiffs argue that since retiree benefits are a permissible subject of negotiations and since the parties “appear to be at impasse” on the issue “that Facet may have a right under the NLRA to implement its final offer concerning retiree benefits.” This alleged controversy is a matter concerning negotiations for a collective bargaining agreement which falls under the NLRA and is not a dispute which can be resolved by this Court. Claims for violations of or obligations under the NLRA are within the exclusive jurisdiction of the NLRB. See Local 100 v. Borden, 378 U.S. 690, 83 S.Ct. 1423, 10 L.Ed.2d 638 (1963); NLRB v. Jones & Laughlin Steel Corp., 301 U.S. 1, 57 S.Ct. 615, 81 L.Ed. 893 (1937); Lexington Cartage Co. v. Teamsters, 713 F.2d 194, 195 (6th Cir.1983); Mayer v. Ordman, 391 F.2d 889 (6th Cir.), cert. denied, 393 U.S. 925, 89 S.Ct. 257, 21 L.Ed.2d 261 (1968). In fact, plaintiffs are presently pursuing a resolution of this issue — whether Facet has a right to refuse to bargain on retiree benefits or whether Facet can “force” the UAW to bargain over these benefits — before the NLRB. Therefore, plaintiffs’ assertion in this regard is without merit and does not establish proper standing of this case.

Plaintiffs’ third contention is that the 1,400 retirees of Facet have become “highly fearful” of Facet’s threat and that many current employees are prematurely retiring due to the threats. This argument is wholly without merit. First, plaintiffs’ position at the oral argument concerned only the rights of retirees. Plaintiffs admit that benefits of current employees are a matter of collective bargaining negotiations and exclusively within the jurisdiction of the NLRB. UAW Brief in Support of Motion for Summary Judgment at 16. Hence, the “fear” of current employees which allegedly caused or causes them to retire early is not an “injury” this Court can remedy.

Second, the early retirement of these fearful employees is not an injury “fairly traceable to the challenged action” as is required in the second prong of the standing test enunciated in Allen v. Wright, supra. In his affidavit, Mando asserts that since the commencement of the strike, many employees who are eligible to retire asked the union for advice. According to Mando, the union advised members that the parties had reached an impasse on the issue of retiree benefits, that the law permitted Facet to implement its final offer on such benefits, that Facet’s proposals were becoming steadily worse in this regard and that the prospects for negotiating a satisfactory labor agreement was remote. Mando Affidavit 1115. Mando further stated “[bjased on these factors, many Facet employees advised the UAW that they feared that delaying their retirement any longer would risk a loss of the existing level of benefits”. Id., 1116. This “injury” of premature retirement is not fairly traceable to the alleged wrongful conduct of defendant. Plaintiffs seek a declaration by this Court that retiree benefits are vested and not subject to change. Plaintiffs are attempting to cure the perceived volatile position of retirees — that Facet will reduce retiree benefits, either unilaterally or with union consent. The premature retirement of current employees cannot be attributed to Facet’s alleged “threats” to reduce past retiree benefits. The impetus for the premature retirements is not the “injury” plaintiffs have presented to this Court for resolution, but rather is a matter exclusively in the jurisdiction of the NLRB. Thus, plaintiffs’ third argument is also meritless.

In conclusion, plaintiffs’ cause of action does not present a “controversy” which has standing before this Court and is not timely for proper adjudication. Thus, plaintiffs’ complaint should be dismissed.

IT IS SO ORDERED.

      . The six individual plaintiffs are retirees who were formerly employed at the three plants which are covered by the collective bargaining agreements between the UAW and Facet. Plaintiffs Andrew Kinnear and Lawrence Galloway are alleged to have retired from the Detroit plant in December 1961 and December 1979, respectively. Plaintiffs Richard Stewart and Leo Rose are alleged to have retired from the Elmira plant in February of 1984 and July of 1975, respectively. Plaintiffs John C. Krust and Mykola Chubenko are alleged to have retired from the Madison Heights plant in May of 1975 and December of 1983, respectively.

      . In their complaint, plaintiffs averred that the proposal had been withdrawn for both plants. Plaintiffs now wish to rely on the Mando Affidavit in this regard and request the Court to view the complaint as amended where it is not in conformity with the facts alleged in the Mando Affidavit.

      . See e.g., Plaintiffs’ Brief in Support of Motion for Summary Judgment at 15-16.

      . Plaintiffs' counsel began his oral arguments by declaring that the 1,400 retirees are seeking to be freed “from threats of Facet to withdraw benefits.”
      It should be mentioned that the same counsel is representing both the UAW and the six individual plaintiff-retirees. A conflict of interest may exist in this representation, however, the Court's disposition of the instant motion makes that issue moot.

      . Quoting from City of Los Angeles v. Lyons, 461 U.S. 95, 103 S.Ct. 1660, 75 L.Ed.2d 675 (1983); Gladstone, Realtors v. Village of Bellwood, 441 U.S. 91, 99 S.Ct. 1601, 60 L.Ed.2d 66 (1979); Warth v. Seldin, 422 U.S. 490, 95 S.Ct. 2197, 45 L.Ed.2d 343 (1975); O'Shea v. Littleton, 414 U.S. 488, 94 S.Ct. 669, 38 L.Ed.2d 674 (1974).


source: Caselaw Access Project

author: HUYETT, District Judge.

license: Public Domain

text:
    SACRED HEART HOSPITAL, Muhlenberg Medical Center and Easton Hospital v. Margaret M. HECKLER, Secretary of Health and Human Services.
    Civ. A. No. 84-336.
    United States District Court, E.D. Pennsylvania.
    Oct. 9, 1984.
    Frederick J. Lanshe, Allentown, Pa., for plaintiffs.
    Steven J. Engelmyer, Asst. U.S. Atty., Philadelphia, Pa., for defendant.
   MEMORANDUM AND ORDER

HUYETT, District Judge.

Plaintiffs Sacred Heart Hospital, Muhlenberg Hospital and Easton Hospital (Hospitals) are non-profit, short term, acute care hospitals in Pennsylvania which are certified to participate in the Medicare program as “providers” of hospital care to Medicare beneficiaries, the national health insurance program for the elderly. Under Part A of the Medicare program, plaintiffs are entitled to reimbursement of their reasonable costs incurred in providing these services. 42 U.S.C. § 1395f(b). This case arose out of a dispute between plaintiffs and their designated fiscal intermediary, Blue Cross of Lehigh Valley, over plaintiff’s cost reports for their fiscal years ending 1979, 1980, and 1981.

The basic facts pertaining to these cost reports are not in dispute. During the past decade, each of the plaintiffs undertook capital construction projects directly related to their provision of patient care. To finance the projects, each plaintiff arranged tax-exempt financing through its local bonding authority. In each case, the hospital was required to establish a debt service reserve fund (DSFR) as protection for the bondholders. As required by the Trust Indentures, each DSFR was invested and earned a return.

In performing audits on the cost reports at issue, the intermediary offset the income earned by the DSFRs against plaintiffs’ otherwise allowable interest expenses. Under the Medicare regulations, providers are entitled to reimbursement for necessary and proper interest on both current and capital indebtedness. 42 C.F.R. § 405.-419(a). Plaintiffs are now contesting this action by the intermediary. Blue Cross, the intermediary, stated that the basis for the challenged adjustments was the offset rule which requires that interest expenses “be reduced by investment income except where such income is from gifts and grants, whether restricted or unrestricted, and which are held separate and not commingled with other funds. Income from funded depreciation or a provider’s qualified pension fund is not used to reduce interest expense.” 42 C.F.R. § 405.419(o)(3). Blue Cross stated its belief that the DSFRs do not qualify as funded depreciation.

Upon appeal of the plaintiffs, the Provider Reimbursement Review Board (PRRB) found that the DSFRs do not qualify as funded depreciation thereby affirming the intermediary’s actions. Following receipt of the PRRB’s decision, the Hospitals petitioned the Deputy Administrator of the Health Care Financing Administration, the Secretary’s delegate under 42 U.S.C. § 1395oo(f), to reverse the PRRB’s decision on the grounds that it was at odds with prior PRRB and Secretarial decisions on the issue and was unsupported by the regulations. The Deputy Administrator, on November 17, 1983, affirmed the decision of the PRRB; this decision is the final administrative decision of the Secretary. 42 U.S.C. § 1395oo(f).

Plaintiffs contend that the Secretary’s final decision should be reversed because it is contrary to governing regulation and the Secretary’s established previous policy and is, therefore, arbitrary and capricious. Defendant maintains that the Medicare cost principles require her to limit the amount of plaintiffs’ reimbursement to the actual or net cost of such borrowing less any benefit derived therefrom.

Before me now are the parties’ cross-motions for summary judgment.

Plaintiffs’ principal contention is that the Secretary erred when she concluded that the interest expenses plaintiffs incurred during their capital construction projects had to be offset by the interest earned by the debt service reserve funds. When examining plaintiffs’ contentions, it is necessary to keep in mind the limited scope of review of administrative decisions provided by statute. The federal courts are authorized to set aside agency findings, conclusions, and actions only if they are:

(A) arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law;
(B) contrary to constitutional right, power, privilege, or immunity;
(C) in excess of statutory jurisdiction, authority, or limitations, or short of statutory right;
(D) without observance of procedure required by law; or
(E) unsupported by substantial evidence.

5 U.S.C. § 706. While a reviewing court cannot totally abdicate its responsibility to the administrative agency, it is generally agreed that courts should afford considerable deference to the agency’s interpretation of its regulations. Cheshire Hospital v. New Hampshire-Vermont Hospitalization Service, 689 F.2d 1112, 1117 (1st Cir.1982); Psychiatric Institute of Washington, D.C., Inc. v. Schweiker, 669 F.2d 812, 813 (D.C.Cir.1981). Plaintiff cites several cases for the contention that federal courts owe little deference to an agency’s unofficial interpretation of a regulation. However, in each of these cases, the court simply noted that it would be inappropriate for the court to defer absolutely to the interpretation made by an agency, i.e., “interpretative rulemaking is not controlling upon the courts,” but that agency interpretations were certainly a source of guidance to which the court should give deference. How much deference is due to an interpretation depends upon “the thoroughness evident in its consideration, the validity of its reasoning, its consistency with earlier and later pronouncements, and all those factors which give it power to persuade, if lacking power to control.” Daughters of Miriam Ctr. for the Aged v. Mathews, 590 F.2d 1250, 1258 (3d Cir.1978), citing, Skidmore v. Swift & Co., 323 U.S. 134, 140, 65 S.Ct. 161, 164, 89 L.Ed. 124 (1944). A reviewing court, moreover, must determine whether the agency’s interpretation is consistent with the language of the regulation and with the purpose the regulation is intended to serve. Cheshire Hospital, supra, at 1117. These guidelines merely restate the statutory standard of review set forth in 5 U.S.C. § 706.

With these guidelines in mind it is now possible to turn to the merits of the parties’ contentions. Plaintiffs’ first argument is that the offset against a “necessary and proper” interest expense is not necessary because the income earned by the DSRFs does not constitute investment income under 42 C.F.R. § 405.419(b)(iii). Rather this income, plaintiffs contend, constitutes funded depreciation. Plaintiffs note that the DSRFs were limited to use in the event of default, or at maturity, to retire the bonds. In dismissing a similar argument, the court in Cheshire Hospital, supra, at 1118 noted that “[s]ince the interest earned on the DSRF will ultimately benefit [the plaintiff] we do not believe it is unreasonable to treat such interest as investment income of the hospital.” This rationale applies equally to this case; each hospital will benefit financially from the income earned on the DSRFs either because it will prevent the hospitals from defaulting on their bond payments or will be used towards retiring the bonds upon maturity.

Plaintiffs also contend that the source of the funds in the DSRFs is irrelevant and therefore, it makes no difference that the funds in the DSRFs were derived from bond proceeds or were “borrowed” funds. The Secretary ruled that the DSRFs did not qualify as funded depreciation because they were established with borrowed funds. Central to plaintiffs’ argument is the contention that the Secretary’s decision in this case constitutes a reversal of the agency’s longstanding interpretation of the regulation governing funded depreciation. In support of this contention, plaintiffs refer to a line of cases in which the PRRB and the Deputy Administrator, and therefore the Secretary, refused to offset interest income from a DSRF against interest expense on the grounds that the DSRFs qualified as funded depreciation.

After reviewing these prior decisions, it is clear that although the Secretary has frequently held that funds established to protect bondholders qualify as funded depreciation, the Secretary has consistently limited the amount of a provider’s reimbursement to the actual or net cost of such borrowing less any benefit derived therefrom. In other words, the Secretary has consistently held that providers are not entitled to both a reimbursement of interest expense attributable to a DSRF and an exemption from offsetting the investment income earned by the DSRF. Although the Secretary stated that the DSRFs were funded depreciation in the cases upon which plaintiffs rely, the Secretary also held that interest expense incurred on the loans used to fund the accounts is not an allowable cost for which reimbursement is required. In this case, the Secretary held that the interest paid on a loan attributable to the DSRFs was an allowable expense under 42 C.F.R. § 405.419, but these interest expenses had to be offset against the income the DSRFs earned. The result in each instance is the same; the provider may only recover the net cost of borrowing.

As the court in Cheshire Hospital, supra, noted however, the Secretary may not be allowed to apply one rule in one case and another in a second case; the Secretary must adopt a consistent approach to the perceived problem. For this reason the court in Cheshire Hospital, supra, ordered a limited remand for the Secretary to clarify which of the two rules would be adopted for all cases of this type. In January 1983, the Secretary published her interpretation governing funded depreciation in which she adopted the position followed in this case, 1. e. that interest paid on a loan which is used to establish a funded depreciation account will be reimbursed, but the income earned by the borrowed funds will be used to offset the interest expense. PRM Transmittal No. 279.

Plaintiffs contend nevertheless that the Secretary’s decision is arbitrary and capricious because it is inconsistent with the established policy that the source of funded depreciation is irrelevant. I do not find this to be the case. First, as made clear by the preceding discussion, the Secretary has not suddenly shifted policies; rather, she has tried to effectuate the same policy, i.e. minimizing the need for borrowed funds and thereby reducing the amount of interest expense which have to be reimbursed by Medicare, by two different rules. The Secretary has now clearly adopted the one applied in this case.

Moreover, the Secretary’s determination that a DSRF created with borrowed funds does not qualify as funded depreciation is reasonable and adheres to the language and policy underlying funded depreciation. The regulation defining funded depreciation describes it “as a means of conserving funds for replacement of depreciable assets.” 42 C.F.R. § 405.415(e). As the court in Cheshire Hospital, supra, at 1125, noted, this suggests that depreciation is to be funded by conserving internal, operating funds rather than by borrowing, in order to reduce the amount of interest expense which should have to be reimbursed by Medicare. If the Secretary were to allow the providers to benefit from the interest earned on the DSRFs at the same time they are reimbursed for the interest expense incurred by funding the DSRFs, the Secretary would create an incentive in favor of borrowing when exactly the opposite is the desired result. Therefore, I believe the Secretary’s rule is consistent with her stated policy and not arbitrary and capricious.

In a related argument, plaintiffs contend that the Secretary’s decision constitutes a substantive change in medicare policy which was adopted without adherence to the requirements of the Administrative Procedure Act, 5 U.S.C. § 553. Under the Act, new substantive rules must be promulgated and published before they can become effective. Exception is made for “interpretative rules” which are “statements as to what the administrative officer thinks the statute or regulation means.” Gibson Wine Co. v. Snyder, 194 F.2d 329, 331 (D.C.Cir.1952). Applying this definition, I find that the Secretary’s decision in this case does not constitute a substantive change. Not only has the Secretary applied the rule in other cases but also the rule constitutes an interpretation of one of her regulations. While it is preferable that the Secretary publish such interpretations, it is not an abuse of discretion for her to develop an interpretation of the offset regulation which is completely consistent with the Medicare statute and regulations through administrative adjudication. Cheshire Hospital, supra, at 1123.

Finally, plaintiffs argue that the Secretary’s new interpretation exalts form over substance because the hospitals could have used their own resources to fund the DSRFs and used the borrowed funds to cover “upfront” costs such as feasibility studies. The Deputy Administrator, however, found that plaintiffs would not have been able to avoid the result reached by the Board because to borrow for “upfront” costs when they had adequate internal funds would have constituted unnecessary borrowing and would have rendered “the interest expense on the borrowed funds not allowable under 42 C.F.R. § 405.419.” (R. 5). Plaintiffs fail to respond directly, in their brief, to the Deputy Administrator’s finding, and I do not find his rejection of the “form over substance” argument to be an abuse of discretion. Similarly, in Cheshire Hospital, supra, at 1121, the court, rejecting plaintiff’s argument that the anti-borrowing rule should not apply because plaintiff could have used its own funds to establish the DSRF, noted that the Secretary’s refusal to resort to the tracing of funds was not an abuse of discretion.

Because the Secretary has now adopted a consistent approach which I do not find to be arbitrary, capricious, an abuse of discretion or unauthorized by law, the plaintiffs’ position necessarily fails.

      . Plaintiffs contend that the decision in Cheshire Hospital v. New Hampshire-Vermont Hospitalization Service, Inc., 689 F.2d 1112, 1117 (1st Cir. 1982) is neither binding upon this court nor persuasive for defendant’s position. Plaintiffs are correct that this decision is not binding on me; nevertheless, I find the Cheshire Hospital court’s analysis to be a carefully considered one and to be applicable to this case.

      . There have been several decisions in which the Secretary has held that a provider’s DSRF will not qualify as funded depreciation because it has been created with borrowed funds; therefore, there has not been the dramatic reversal in position that plaintiffs would lead me to believe. See, Albany Medical Center Hospital v. Blue Cross Ass’n., [1978] Medicare & Medicaid Guide (CCH) § 29,215 at 10,370 (PRRB Hearing Dec. No. 78-D43 June 16, 1978), aff'd [1978] Medicare & Medicaid Guide (CCH) § 19,242 at 10,520 (HCFA Dec. Aug. 15, 1978); [1977] Medicare & Medicaid Guide (CCH) § 28,520 at 9845 (PRRB Hearing Dec., No. 77-D40 June 10, 1977), aff’d [1977] Medicare & Medicaid Guide (CCH) § 28,-600 at 10,084 (HCFA Dec. Aug 7, 1977). ("Money cannot be borrowed to make deposits into the funded depreciation account." § 28,520 at 9850).


author: ASPEN, District Judge:

text:
    Louis J. HARCEG, Gilbert Farrow, William J. Alter, Donald E. Mason, Jr., John M. Jansky, Kenneth E. Maicke, Corporal Ralph E. Connard, Corporal Thomas W. Gardner, Corporal Stanley F. Iwan, Lieutenant James A. McGarvie, Jr., Stephen L. Bjorkquist, Jimmy W. Bryant, Charles Heinzelmann, Gregory H. Guntharp, Robert J. Schenck, Charles Chostner, Andrew J. Gradowski, Lieutenant Emerson R. Krapf, Corporal Chester Iwan, Corporal Terrance Cashmore, Steve M. Semenek, Daniel J. Dunn, Bruce A. Scottberg, Richard Mulder, Richard J. Haynesworth, Charles J. Muttshall, Individually and on behalf of all others similarly situated, Plaintiffs, v. Thomas BROWN, Individually, and as Sheriff of Lake County, The County of Lake and Donald Krok as the Chairman of the Lake County Sheriff's Office Merit Commission, Defendants.
    No. 80 C 6906.
    United States District Court, N.D. Illinois, E.D.
    Oct. 23, 1984.

      See also D.C., 512 F.Supp. 788.
    Louis S. Goldstein, Louis S. Goldstein & Assoc., Chicago, 111., for plaintiffs.
    Shayle P. Fox, Jeffrey A. Colby, Fox & Grove, Chartered, Chicago, 111., for Brown.
    Gail Tuler Friedman, State’s Atty. of Lake County, Waukegan, 111., for Lake County and Krok.
   MEMORANDUM OPINION AND ORDER

ASPEN, District Judge:

This civil rights action was filed in December 1980 by twenty-eight Lake County, Illinois, deputy sheriffs on behalf of themselves and others similarly situated seeking declaratory, injunctive and monetary relief on the ground that Lake County Sheriff Thomas Brown (“Brown”) had allegedly harassed and intimidated them for political reasons. The case was resolved by the entry of consent decrees between plaintiffs and each of the defendants on October 26, 1981. The consent decree entered into between plaintiffs and Sheriff Brown establishes, among other things, a grievance and arbitration procedure designed to resolve all disputes that arise out of personnel decisions made by the Sheriff which affect the deputy sheriffs. The decree also provides that this Court retains jurisdiction over the case for the purpose of determining the costs and attorney’s fees to be awarded and to enforce the decree or punish any violations of its provisions.

Presently before the Court are two motions arising from this action. First, fifteen Lake County deputy sheriffs seek an order compelling arbitration of their compensation grievance, according to the terms of the consent decree. Second, Brown’s counsel has filed a supplemental petition for attorney’s fees and expenses.

I.

On September 23, 1983, the deputy sheriffs (“grievants”) filed identical grievances with the Lake County Sheriff’s Department Grievance Committee, alleging that they were paid less than other deputies who did substantially similar work. The Grievance Committee, which was established under the consent decree with Sheriff Brown, granted the grievance on October 6, 1983. Sheriff Robert Babcox (“Babcox”), Brown’s successor, then filed a demand for arbitration. Babcox contended in this demand not only that the grievance was without merit, but also that the grievance had been improperly brought against him rather than against Lake County. An arbitrator, after conducting an extensive evidentiary hearing and considering the parties’ post-hearing briefs, decided on April 10, 1984, that the matters raised in the grievance were beyond the scope of the consent decree. He reasoned that because the underlying lawsuit that led to the consent decree was based on 42 U.S.C. § 1983, the Grievance Committee could only consider matters involving all the elements of a Section 1983 cause of action. The arbitrator noted that the grievants do not allege that they have been deproved of any federal constitutional or statutory right, and he therefore ruled that neither he nor the Grievance Committee had jurisdiction to consider the grievance and that the Committee’s decision must be reversed.

The grievants object strongly to the arbitrator’s limiting the grievance and arbitration procedure to matters actionable under Section 1983. They argue that the consent decree clearly provides for a broadly based procedure that applies to all personnel decisions. Indeed, the decree establishes a grievance process “to resolve all disputes or differences which arise out of or in connection with any personnel decision made by the Sheriff ... which affect any Deputy Sheriffs____” The term personnel decision is defined as “any decision by the ‘Sheriff’ with respect to all aspects of the employment of any Deputy Sheriff, including, but not limited to the firing, layoff, promotion, demotion, training, compensation, job assignments, transfer, employment benefits, suspension, reprimand, censure, and any other form of discipline.” The grievants contend that the arbitrator erred in restricting grievable matters to claims of federal civil rights violations and ask this Court to remand this matter to the arbitrator with an order to determine the merits of the grievance.

We conclude that the arbitrator correctly found that he and the Grievance Committee were without jurisdiction to consider the present grievance; but we need not determine whether in this instance the arbitrator incorrectly limited the scope of the grievance procedure to Section 1983 causes of action, since the grievance and arbitration procedure is clearly limited to personnel decisions made by the Sheriff. Babcox and Lake County both argue that it is the County Board, not the Sheriff, which establishes all County job classifications and pay scales and which administers the County Pay Plan. Their contention is supported by the recent decision of the Illinois Appellate Court in County of Will v. Local 1028, Will County Employees Union, 79 Ill.App.3d 290, 34 Ill.Dec. 464, 398 N.E.2d 139 (3d Dist.1979), which discussed the salaries of all county employees. The court stated that

it is only the County Board which can set the wages for County employees. (Ill. Rev.Stat.1973, ch. 34, pars. 2101-2107.) Those statutory provisions place in the County Board’s hands budgetary decisions which encompass the decision as to County employee salaries____ That is, the fixing of County employees salaries is the sole, nondelegable duty of the County Board, which derives its authority and duty from the legislative mandate that the County adopt a budget. As the Board’s sole duty and responsibility, it may not delegate such duty and responsibility to another. If it were to do so, it would be an illegal delegation and without effect.

79 Ill.App.3d at 296-297, 34 Ill.Dec. at 468-469, 398 N.E.2d at 143-144 (citations omitted). Thus, any complaint which the grievants may now have concerning inequitable pay appears to lie with the County Board rather than with Sheriff Babeox.

Accordingly, for the reasons stated herein, we affirm the arbitrator’s decision that he and the Grievance Committee lacked jurisdiction to hear this particular grievance. The grievants’ motion for an order compelling arbitration is therefore denied.

II.

The second motion is the amended supplemental petition for attorney’s fees filed by Shayle P. Fox and Jeffrey A. Colby (“movants”) of Fox and Grove, Chartered, court-appointed Special State’s Attorneys for Sheriff Brown. In this petition, movants seek legal fees for work performed in three distinct periods: December 3, 1981 through January 19, 1982; October 1983; and April and May of 1984. Lake County opposes this motion, offering several reasons why movants should not recover any additional costs and fees.

First, Lake County argues that many of the billable hours itemized for late 1981 and early 1982 relate to the issue of attorney’s fees — an issue for which this Court has ruled that movants already have been sufficiently compensated. Indeed, in a memorandum opinion and order dated February 26, 1982, this Court awarded movants $48,453.59 in attorney’s fees and costs. Harceg v. Brown, 536 F.Supp. 125, 135-36 (N.D.Ill.1982). Included in this amount was an allowance for 12 hours of attorney’s fees attributable to the preparation and support of movants’ fee petition, the maximum amount of attorney’s time we decided was necessary for this task. Id. at 136. As Lake County points out, at least 11.75 of the 24.25 hours itemized for the 1981-1982 period in movants’ supplemental petition relate to attorney’s fees. These hours will not be reimbursed.

Lake County contends that the remaining costs and fees sought for late 1981 and early 1982 should be denied for additional reasons: there were no issues requiring movants to do any work after November 2, 1981; the fees should have been billed almost three years ago, when former Sheriff Brown could have verified the time and services, rather than now; and the time sheets do not contain enough detail, especially given the length of time that has elapsed. We agree. Movants have offered no good reason for their failure to seek these fees in early 1982, either with the fees the Court awarded them on February 26, 1982, or shortly thereafter. Moreover, it is far from clear that movants performed any services in this period which were required by their representation of Brown and were not compensated by the Court’s fee award of over $48,000.

Lake County offers a different reason why movants should not recover fees for the October 1983 and April-May 1984 periods. Brown was replaced by Sheriff Babeox in December of 1982 and movants were appointed to represent only Brown, not his successor. We agree with Lake County that there was no need for movants to perform any work after Babcox took office, so they will not be awarded any fees for the periods in late 1983 and early 1984.

We have previously awarded movants $48,453.59 in attorney’s fees and costs, which we determined had adequately compensated them for their work in this case. Although they now seek additional fees, we believe movants were paid sufficiently for all their services by our initial award.

Accordingly, movants’ amended supplemental petition for attorney’s fees is denied in its entirety. It is so ordered..

      . Some of the original plaintiffs in this action have also filed a petition objecting to this aspect of the arbitrator’s decision.

      . Movants initially filed a supplemental petition seeking almost twice as much money, but they amended that petition after realizing that it contained "several bookkeeping errors."

      . Lake County also asserts that movants accepted the County's "final payment” for legal services on March 28, 1983. If anything, this strengthens Lake County’s argument that movants may not now collect legal fees for later work in 1983 and 1984.


text:
    The BOARD OF REGENTS OF the UNIVERSITY OF OKLAHOMA and the University of Georgia Athletic Association, Plaintiffs, v. NATIONAL COLLEGIATE ATHLETIC ASSOCIATION, Defendant.
    Civ. No. 81-1209-BU.
    United States District Court, W.D. Oklahoma.
    Oct. 31, 1984.

      Andy Coats, Clyde A. Muchmore, Oklahoma City, Okl., Stanley M. Ward, Norman, Okl., for plaintiffs.
    Robert H. Harry, Denver, Colo., James D. Fellers, Oklahoma City, Okl., Richard K. Andrews, George H. Gangwere, Kansas City, Mo., for defendant.
   MEMORANDUM OPINION

BURCIAGA, District Judge, Sitting by Designation.

THIS COURT previously has dealt with the issue of the legality of the controls exercised by the National Collegiate Athletic Association [“NCAA”] over the televising of college football games. Board of Regents v. National Collegiate Athletic Association, 546 F.Supp. 1276 (W.D.Okla. 1982). Having made its findings of fact and conclusions of law, the Court entered its Declaratory Judgment and Permanent Injunction decreeing, inter alia, the following:

(1) The right to telecast college football games is the property of the institutions participating in the games, and that right may be sold or assigned by those institutions to any entity at their discretion;
(2) The contracts for the televising of college football for the 1982-1985 seasons between National Collegiate Athletic Association and American Broadcasting Companies, Columbia Broadcast System and Turner Broadcast System violate §§ 1 and 2 of the Sherman Antitrust Act, 15 U.S.C. §§ 1-2, and are therefore void and of no effect;
(3) National Collegiate Athletic Association, its officers, agents and employees, shall be and hereby are enjoined from enforcing or attempting to enforce the provisions of the contracts above described and from making any other contract of similar kind or nature in the future;
(4) National Collegiate Athletic Association, its officers, agents and employees, shall be and hereby are enjoined from prohibiting member institutions from selling or assigning their rights to telecast the college football games in which they participate, and from requiring as a condition of membership that those institutions grant to National Collegiate Athletic Association the power to control those institutions’ rights to telecast college football games;

The Court further declared that it would retain jurisdiction over this matter for the purpose of monitoring compliance with the Court’s order and for purposes of modifying the relief granted and granting further relief should circumstances so require. On appeal, the defendant argued, and plaintiffs agreed, that the Injunction is lacking in specificity and is overly broad. The matter was remanded to permit this Court to consider its Injunction in light of the views expressed in the majority opinion of the United States Court of Appeals for the Tenth Circuit. Board of Regents v. National Collegiate Athletic Association, 707 F.2d 1147 (10th Cir.1983) stay granted 463 U.S. 1311, 104 S.Ct. 1, 77 L.Ed.2d 1294. Following the remand, the defendant filed a motion to modify the Judgment and filed a brief in support of the motion with the attached affidavit of David E. Cawood, the Assistant Executive Director-Communications of the National Collegiate Athletic Association attesting to NCAA activities following the United States Supreme Court’s affirmance of this Court’s decision. National Collegiate Athletic Association v. Board of Regents of the University of Oklahoma, 468 U.S.-, 104 S.Ct. 2948, 82 L.Ed.2d 70 (1984). Plaintiffs filed a response to defendant’s motion and in their brief also made reference to the activities of defendant following the affirmance of this Court by both the Tenth Circuit Court of Appeals and by the United States Supreme Court., On September 28, 1984, defendant withdrew its original motion to modify the Judgment filed on July 3, 1984, and made an amended motion to modify the Judgment in the following manner:

a. To delete from 11 2 the reference to violations of §§ 1 and 2 of the Sherman Antitrust Act.
b. To amend 113 to delete the final phrase “of similar kind or nature in the future” and substitute therefor the phrase “under which the NCAA maintains exclusive control of the rights of its members to televise their football games.”
e. To add a new paragraph (7) reading as follows:
(7) Nothing herein contained shall be construed as prohibiting the National Collegiate Athletic Association, its officers, agents and employees, from
(a) restricting televising of its members’ football games on Friday evenings,
(b) imposing sanctions restricting televising of a members’ football games for violation of non-television rules and regulations,
(c) arranging for, selling or participating in the sale of the television rights to its own championship games in which member institutions participate,
(d) making a properly drawn system of pass-over payments, or
(e) commonly regulating the rights of its members to televise their football games so long as the NCAA does not maintain exclusive control of such rights.

Oral arguments were heard by the Court on October 11, 1984, and the matter is now before the Court for a decision.

As stated by the Court at the hearing on October 11, 1984, in its initial opinion, the Court acknowledged that the Injunction as issued could well lead to circumstances which could not at that time be foreseen. It is for this precise reason that the Court retained continuing jurisdiction in this matter. And it was surely not the Court’s intention to have its Injunction intrude into areas or activities which were not presented in the original litigation. For example, there was nothing in the record to warrant the Court’s prohibiting the NCAA from imposing television sanctions on schools that violate regulations unrelated to the television plan. Nor was it the Court’s intention to preclude the NCAA from prohibiting games on Friday nights. The Court echoes the observation of the Tenth Circuit Court of Appeals that neither of these effects is warranted by the violations found in the original cause of action.

At the hearing on defendant’s motion on October 11, 1984, the Court informed the parties that, in its view, it was inappropriate to consider additional evidence in complying with the mandate of the Court of Appeals; that, therefore, the Court would not consider additional evidence sought to be presented by both parties regarding what has occurred since the Court entered its Declaratory Judgment and Permanent Injunction on September 15, 1982. And, although the Court will adhere to this original pronouncement, the Court deems it appropriate to make some additional observations regarding these activities since it affords the Court an insight to what may be future conduct of the NCAA.

The Court is concerned by the lengths to which the NCAA has apparently gone in its zeal to impress upon its membership that somehow the NCAA prevailed in this action. Indeed, in reviewing defendant’s counsel’s explanation to the NCAA membership of the effect of the appellate court decisions, this Court wondered whether the membership was being given a report of a case different from the one this Court heard. The Court makes this observation because it is consistent with the concern it expressed in its original Memorandum Opinion. There, the Court expressed its reservations regarding the insistence of the NCAA that it would cease all illegal conduct and that it would voluntarily abandon its antitrust activities. The Court also declared that it needed to act because the Court had little faith that the NCAA could be expected to conform its conduct to the law in the absence of an Order. The course of conduct which the NCAA apparently still seems intent on pursuing bears witness to the seemliness of those reservations. It also now appears from the material submitted by defendant in support of its original motion that efforts were undertaken which, at least at first blush, would suggest a persistence on the part of the NCAA to restrict output and stifle competition. Again, I cannot recount all the subtle ways which the NCAA may still pursue in attempts to restrict output of football television and otherwise seek to reimpose the very activity this Court, as well as the appellate courts, have found to be illegal. I say this in order to forcefully impress upon the parties that the Court found illegal conduct on the part of the NCAA; that this same or similar conduct, however veiled, will not be condoned by this Court.

This having been said, the Court will now address the defendant’s amended motion to modify the Court’s Judgment.

First, the Court will not amend ¶ 2 of the Permanent Injunction. While I can understand the concern of the NCAA in the reference to its having violated §§ 1 and 2 of the Sherman Antitrust Act, that remains the law of the case, notwithstanding the appellate courts’ having refrained from reviewing this Court’s conclusions of law relative to § 2 violations.

The Court will not amend ¶ 3 as requested by the NCAA. It is clear to me, and it should be clear to everyone, that the NCAA is enjoined from similar activities which were found to be illegal by this Court, the Tenth Circuit Court of Appeals and the United States Supreme Court. Also, this particular paragraph must be read with ¶ 1 of the Judgment which states that the right to telecast football games is the property of the institutions and that that right may be sold or assigned by those institutions to any entity at their discretion. Indeed, if there is any institution that wishes to assign this important property right to any entity, including the NCAA, it is that institution’s right to do so under whatever terms it deems appropriate. But under no circumstances may such an assignment be brought about by the coercive measures which have previously been detailed by this Court. And the Court should add something further. The Tenth Circuit Court of Appeals made the observation that while the NCAA could not lawfully maintain exclusive control of football rights, the question of how far the rights could be commonly regulated remained open. This is as it should be. Moreover, there was no evidence before this Court regarding a “voluntary” relinquishment of football television rights by the member institutions to the NCAA. To again repeat a word which this Court used throughout the original opinion, the NCAA previously had “commandeered” the property rights of the institutions. And this Court is not prepared today, on the present record, to fashion a scheme under which the Court would impose upon any institution the obligation to share its property rights with any entity and particularly the NCAA. Again, what the Court is attempting to do is to prohibit illegal activity by the NCAA within the broad context of the original Memorandum Opinion issued in this matter.

The Court will partially grant defendant’s motion to add a new paragraph 7. This paragraph will read as follows:

(7) Nothing herein contained shall be construed as prohibiting the National Collegiate Athletic Association, its officers, agents and employees, from
(a) Restricting televising of its members’ football games on Friday evenings,
(b) Imposing sanctions restricting televising of a member’s football games for violation of non-television rules and regulations,
(c) Arranging for selling or participating in the sale of the television rights of its own championship games in which its member institutions participate.

The Court finds it essential to insure that the Judgment does not intrude into areas not contemplated, nor into areas upon which the Court did not receive evidence. It should also be noted that the parties have already stipulated to the entry of an Order allowing the participation of the NCAA in the sale of its own television rights for its own championship games.

It appears from the opinion of the Court of Appeals that the NCAA made some argument regarding arrangements “such as a membership-wide contract with opt-out and pass-over payments provisions.” These terms are totally foreign to this Court. I also might add, no evidence on such arrangements was presented to this Court. It would therefore be improper for this Court to amend its Injunction to pass on some type of activity about which this Court has no knowledge and upon which no evidence was presented.

The Court has already expressed its hope that an open and competitive market will find its permanent place in the field of college football. But the Court cannot divine what arrangements will achieve these desirable ends. It must be left to the experts and, indeed, to the institutions themselves, to determine what will ultimately serve their best interests and, most importantly, the interests of the viewers of college football television.

In closing, I believe that the Court has complied with the mandate of the Tenth Circuit Court of Appeals. But so that I will not be misunderstood, I am confined in amending the Permanent Injunction by the evidence originally presented to the Court. It would serve no purpose to repeat the egregious conduct which the Court found to exist. And by my Permanent Injunction, I did not seek to prohibit the NCAA from openly and competitively participating in the college television market. What the Court does prohibit is the illegal activity pursued by the NCAA and the illegal manner in which it pursued its own interests.

I will express another hope. I sincerely hope that the NCAA, through its officers and officials and good counsel, accurately perceive what the Court already has said in a lengthy opinion. For I am left with the clear impression that at least up to the hearing of October 11, 1984, it was the intent of the NCAA to test this Court’s resolve. The Court has stated what it hopes to achieve in this litigation. It will be accomplished by voluntary compliance or otherwise. I assume the defendant is well aware of the resources available to this Court to achieve its stated purpose should the defendant seek to avoid compliance with this Court’s Injunction.


author: MAZZONE, District Judge.

text:
    In re DIGITAL EQUIPMENT CORPORATION SECURITIES LITIGATION.
    Master File No. CA 83-3255-MA.

    United States District Court, D. Massachusetts.
    Nov. 5, 1984.

      Stanley Grossman, Marc Gross, Pomerantz, Levy, Haudek, Block & Grossman, Robert S. Skirnick, Robert Kornreich, Wolf, Popper, Ross, Wolf & Jones, New York City, Glen DeValerio, Berman, DeValerio & Pease, Thomas G. Shapiro, Shapiro & Grace, Edmund C. Case, Testa, Hurwitz & Thibeault, Boston, Mass., for plaintiff.

       THIS DOCUMENT RELATES TO: 83-3255, 83-3308, 83-3318, 83-3319, 83-3320, 83-3432 and 83-3581.

   MEMORANDUM AND ORDER

MAZZONE, District Judge.

This case involves alleged violations of section 10(b) of the Securities Exchange Act of 1934 (the Act) (15 U.S.C. § 78j(b)) and Rule 10b-5 promulgated as a result of that Act (17 C.F.R. 240.10b-5). Jurisdiction is proper pursuant to 15 U.S.C. § 78aa.

The plaintiffs are individuals who purchased common stock or options to purchase the stock of defendant Digital Equipment Corporation (Digital) between August 9, 1983 and October 18, 1983, shortly before a major drop in value of Digital’s stock. The plaintiffs’ various claims have been consolidated in a single complaint. Briefly stated, the plaintiffs claim Digital issued false and misleading statements regarding (1) its projected sales of personal computers, as well as profits in the quarter ending October 1, 1983, and (2) its financial and operating condition.

Pursuant to a pre-trial order dated January 25, 1984, briefing has begun as to whether this Court should certify a class action. Digital has filed the following motions: (1) a motion to dismiss the complaint for failure to state a claim upon which relief can be granted; and (2) a motion to dismiss the optionholder claims for lack of standing. In support of its first motion, Digital has filed an affidavit by Bruce J. Ryan, its Acting Controller, which sets forth numerous relevant facts as to Digital’s method of operating during the period in question. Digital explicitly states that it does not wish this Court to convert its motion into one for summary judgment, as permitted by Fed.R.Civ.P. 12(b). The plaintiffs oppose Digital’s motion and have further moved to strike the Ryan affidavit. I address these motions below.

I. Motion to Strike the Ryan Affidavit

Since the statements contained in the Ryan affidavit might affect a decision on the other pending motions, I turn first to plaintiffs’ motion to strike the affidavit. Under Rule 12(b)(6), if “... matters outside the pleading are presented to and not excluded by the court, the motion shall be treated as one for summary judgment____” Fed.R.Civ.P. 12(b)(6). I agree with the plaintiffs that it would be inappropriate at this stage of the pleadings for me to consider the facts contained in the affidavit. Digital has specifically requested that I refrain from converting its 12(b)(6) motion into a motion for summary judgment, as permitted under Fed.R.Civ.P. 12(b). Therefore, the affidavit is excluded at this time and the plaintiffs’ motion to strike is granted.

II. Motion to Dismiss the Complaint for Failure to State a Claim

This Court’s decision on whether the consolidated complaint states a claim is governed by Conley v. Gibson, 355 U.S. 41, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957) and Jenkins v. McKeithen, 395 U.S. 411, 89 S.Ct. 1843, 23 L.Ed.2d 404 (1968). The rule is that a complaint “should not be dismissed for failure to state a claim unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief.” Conley, 355 U.S. at 45-46, 78 S.Ct. at 101-102. All factual allegations must be deemed admitted. Jenkins, 395 U.S. at 421, 89 S.Ct. at 1848. Further, the complaint must be liberally construed in favor of the plaintiffs. Id. See 5 C. Wright & A. Miller, Federal Practice and Procedure § 1357 at 598-99 (1969).

This case involves a claim under Rule 10b-5 (the Rule) and section 10(b) of the Act. There are three basic elements of a 10b-5 claim: (1) use of a jurisdictional means; (2) in connection with the purchase or sale of any security; (3) by any person to perform a prohibited act. 5 A. Jacobs, The Impact of Rule 10b-5 § 36 at 2-4 (1980). The defendant has not and likely could not dispute the existence of the first element. Further, there is no dispute that at least some of the transactions involved the purchase of securities. Whether the optionholders’ claims involved the purchase of securities within the meaning of the Rule is discussed below. For purposes of a 12(b)(6) motion, therefore, my focus must be on the third element of a 10b-5 claim, namely whether it is sufficiently alleged that a person has performed a prohibited act.

The consolidated complaint presents only one count. The pertinent part of that count, for purposes of this memorandum, is the following:

Throughout the Class Period, Digital knowingly or recklessly engaged in a plan, scheme and common course of conduct to inflate the market price of its common stock and call options by issuing false and misleading statements concerning the company’s financial and operating condition and outlook. Pursuant thereto, Digital issued the statements referred to in paragraphs 26 to 30 which contained materially misleading information which artifically inflated the price of Digital common stock and call options.
In ignorance of their false and misleading nature, plaintiffs and other members of the class relied upon the false and misleading public statements and on the integrity of the market when they purchased their Digital common stock and call options.

(Complaint, paragraphs 39, 40, emphasis added). Digital has argued at length that this fails to allege intentional misconduct. Digital’s brief in support of its motion to dismiss focuses virtually exclusively on Digital’s earnings projection and the reasonableness of that projection. I believe that Digital has misperceived the nature of the inquiry this Court must make on this motion. Digital’s arguments would be appropriate and helpful to my decision on a motion for summary judgment. In the context of a 12(b)(6) motion, however, instead of looking at the reasonableness of the earnings estimate, I must look at all the alleged facts to determine whether they support the allegation that the statements were false, misleading, material, and that the plaintiffs might have relied upon them.

The complaint alleges that the following statements were made:

Paragraph 26 (statements by Bertocchi):
1. Fourth quarter order rates have improved.
2. There is an increased availability of products.
3. There is an increased demand for new and established products.
4. The demand is especially strong for automation products.
5. There has been a successful introduction of the very popular personal computers.
6. The corporation is anticipating improved operating results in fiscal 1984.
Paragraph 27 (statements by Olsen):
7. The corporation is well on its way to achieving sales projections of 100,000 personal computers sold by the end of the year.
8. Things have never been better.
9. There has been a slight drop off in earnings, but no layoffs.
10. He sees no real problems with “our business.”
Paragraph 28 (statements in 1983 Annual Report):
11. Volume shipments of personal computers have been achieved.
12. There has been a recent improvement in the order rate.
Paragraph 29 (Additional statements to the press on 9/27/83):
13. Digital expects to sell 100,000 personal computers before the year’s end.
Paragraph 30 (Statements throughout the class period made to analysts and investors):
14. The first quarter 1984 earnings would be equal to those achieved in the first fiscal quarter of 1983.
15. (Statements made by Mark Steinkrauss, Digital’s manager of investor relations): “Our guidance to the street had been it wasn’t unreasonable to assume flattish results.”

I note first that many of the above statements are so vague that even if knowingly made and false, they would not support a cause of action under the Rule. See, e.g., statements number 1, 2, 3, 4, 5, 6, 8, 10, 11, and 15. Statement number 9, allegedly made by Kenneth Olsen, in fact cuts against the plaintiffs’ argument since it contains a warning about a drop in earnings. Two of the remaining four allegedly false or misleading statements are also so vague that it is at least questionable whether they would support a 10b-5 claim. See statements number 7 and 12. Finally, then, the only two statements that the plaintiffs can point to as forming a likely basis for their claim are those numbered 13 and 14. I note that the truthfulness or falsity of statement 13 (that Digital expected to sell 100,000 personal computers before the year’s end) could likely be resolved on a motion for summary judgment with the assistance of a re-filed Ryan Affidavit and any counter affidavits. As to statement number 14, that too could probably be resolved on a motion for summary judgment. I note that this, the clearest and most material of the alleged false statements, is the only one for which the plaintiffs have failed to specify a speaker or date. Having read the Annual Report and other documents furnished in connection with this motion, I note that this statement is out of character with the careful and general statements that the defendant usually issued to the public. Whether the statement was made, however, is an issue of fact that must await resolution at least until any motion for summary judgment.

Viewing the allegations in the light most favorable to the plaintiffs, it is clear that, if false and made with knowledge of falsity (as alleged in paragraph 39 of the complaint), statement 14 (that Digital’s earnings for the first fiscal quarter of 1984 would be equal to those achieved in the first fiscal quarter of 1983) would be an untrue statement of a material fact within the meaning of 10b-5.

I reiterate that I do not and should not at this time consider the likelihood that the plaintiffs will be able to prove the requisite facts. At this stage of the pleading it is appropriate only to consider whether the complaint alleges any facts that, if true, could constitute a violation of the securities law. I find that the complaint states a cause of action under the securities law and therefore deny Digital’s motion to dismiss for failure to state a claim.

III. Motion to Dismiss Optionholders’ Claims for Lack of Standing

Digital argues that the optionholders in this case lack standing to complain about the allegedly false statements. Digital bases its argument on two opinions, Laventhall v. General Dynamics Corp., 704 F.2d 407 (8th Cir.), cert. denied, — U.S. -, 104 S.Ct. 150, 78 L.Ed.2d 140 (1983), and In re McDonnell Douglas Corporation Securities Litigation, 567 F.Supp. 126 (E.D.Mo.1983). Neither case persuasively supports Digital’s position. Both cases involve a corporation’s liability to option holders for “insider” trading occurring in connection with a failure to disclose material, non-public information in the corporation’s possession. The Laventhall court discussed the lack of any fiduciary relationship between a corporation and optionholders and then stated:

[P]laintiff fails to demonstrate that General Dynamics as an insider owed any special duty to the plaintiff who merely held an option to buy General Dynamics’ stock from a third party. There simply existed no relationship of trust and confidence between the parties. As Chiarella makes clear, “liability is premised upon a duty to disclose arising from a relationship of trust and confidence between parties to a transaction.”

Laventhall, 704 F.2d at 411-12, quoting Chiarella v. United States, 445 U.S. 222, 230, 100 S.Ct. 1108, 1115, 63 L.Ed.2d 348 (1980).

The other case cited by Digital, In re McDonnell Douglas, also deals only with nondisclosure. In its reply brief, Digital rather caustically refers to plaintiffs’ counsel’s role in an appeal from the McDonnell Douglas decision. Apparently both nondisclosure and affirmative misrepresentation claims were made in the course of that appeal. Defendant’s Reply Brief at 3 n. 2. Although Digital cites a page of the brief in the appeal from the McDonnell Douglas decision, it has failed to give me a copy of the brief or the apparently unpublished appellate decision. Since the district court decision mentions only nondisclosure and insider trading claims, I find the decision inapplicable to this case. Even if Digital is correct that misrepresentation claims were involved in that case, I would, on the basis of other authority, respectfully disagree with a rule that deprives optionholders of standing in an affirmative misrepresentation case.

The better rule is one that recognizes that optionholders have standing to sue for affirmative misrepresentations. Most importantly, 10b-5 is phrased in terms of prohibited acts that occur in connection with the purchase or sale of “any security.” Digital has admitted, as it must, that the Act specifically defines “security” to include options. Defendant’s Reply Brief at 1-2. See 15 U.S.C. § 78c(a)(10) (1983). I also note that this Court has specifically held that optionholders have standing even in an insider trader situation. Backman v. Polaroid Corp., 540 F.Supp. 667, 671 (D.Mass.1982). See also Lloyd v. Industrial Bio-Test Laboratores, Inc., 454 F.Supp. 807 (S.D.N.Y.1978). Digital’s motion to dismiss the optionholder claims for lack of standing is therefore denied.

Conclusion

For the reasons stated above, the affidavit of Bruce J. Ryan is stricken; defendant’s motion to dismiss the complaint for failure to state a claim is denied; and defendant’s motion to dismiss the optionholders’ claims is denied.

SO ORDERED.

APPENDIX

UNITED STATES DISTRICT COURT

DISTRICT OF MASSACHUSETTS Plaintiff v. Defendant

CIVIL ACTION NO.

Memorandum to Counsel

Subject: Motions for Summary Judgment and Analogous Motions to Dismiss

This memorandum concerns motions for summary judgment and motions to dismiss under Fed.R.Civ.P. 12(b)(6) that rely on matters outside the pleadings.

In view of the heavy backlog of cases and the serious delay in disposition of cases that the backlog causes, I am asking your help in reducing what I have found to be a very substantial expenditure of the time of counsel and the court on motions that, after consideration, must be denied because some essential factual assertion is in dispute.

I.

If, as counsel for a moving party, you know that even one of the facts essential to a motion for summary judgment is in dispute, you cannot properly file the motion. In accordance with Fed.R.Civ.P. 11, your signature on a motion is a certificate that to the best of your “knowledge, information, and belief there is good ground to support it.” See Fed.R.Civ.P. 7(b)(2). If you know that some essential fact is in dispute, you cannot properly make this certificate, even if you believe that the evidence is heavily weighted in favor of a fact finding that would support your position.

In deciding a motion for summary judgment, a court cannot properly make findings on disputed issues of fact. It cannot weigh evidence. If evidence must be weighed, that must be done at trial, and the motion for summary judgment must be denied.

II.

Also, a motion for summary judgment cannot be granted when, given the state of discovery, it is not yet certain whether essential assertions of fact made by the moving party will be genuinely in dispute. In these circumstances, a motion for summary judgment is premature. From the court’s perspective, at least, it is a wasteful misuse of the time of counsel and the court for a party to file a motion for summary judgment before using requests for admissions or other discovery devices to ascertain whether the factual assertions on which the motion must be based are in dispute.

I have become concerned that counsel are in many instances filing early 12(b)(6) motions to dismiss that depend on factual assertions or motions for summary judgment, where they cannot demonstrate that no essential fact is in dispute. Perhaps this is done because they fear that the court or opposing counsel may assert that they have waived their opportunity to present such a motion. Fed.R.Civ.P. 56 makes it clear that motions for summary judgment may be filed later.

The purpose of a motion to dismiss under Fed.R.Civ.P. 12(b)(6) is to test the formal sufficiency of the statement of the claim for relief. 5 Wright & Miller, Federal Practice and Procedure § 1356 (1969). If matters outside the pleadings are to be relied upon, the proper motion to be made is a motion for summary judgment under Fed.R.Civ.P. 56. The proper time for making a motion under Fed.R.Civ.P. 56 is when it is clear there are no genuine issues of material fact. In cases pending before me, I urge counsel to defer filing motions for summary judgment in every instance in which there is any doubt, before discovery is completed, whether some fact on which the legal argument for the motion is premised will be disputed. Unless I have entered a specific order to the contrary, a motion for summary judgment will be timely if filed before the expiration of 30 days after the date fixed for completion of discovery.

III.

My comments in Part II above are not intended to discourage filing of an early motion for summary judgment, before expenses have been incurred in extended discovery, if the motion is grounded on a legal theory under which the many factual controversies in the case are irrelevant. If you file such a motion, however, it is improper, under Rule 11, to add to it other grounds as to which facts are, or as far as you can then tell may be, in dispute. You may file later a motion for summary judgment on those other grounds if it becomes apparent, after full discovery, that the essential facts on which they are based are not in dispute.

IV.

In some instances adjudication of a controversy requires evaluative application of a legally defined standard to the “pure” facts in the case at hand. These kinds of issues are sometimes referred to as mixed questions of law and fact; ordinarily these issues are not resolved by the court as determinations of law but instead are decided by the factfinder. Whenever this is so, regardless of whether the factfinder is the judge or a jury, summary judgment cannot be granted unless reasonable fact-finders correctly understanding the legally defined standard would necessarily come to the conclusion supporting the moving party’s position. Thus, no reasonable ground exists for filing a motion for summary judgment in a case involving application of such a standard unless counsel believes there is reasonable ground for arguing that different factfinders, correctly understanding the applicable legal standard, could not reasonably come to different conclusions on the issue.

V.

Expressed another way, the central point stated in parts I-IV, supra, is that motions for summary judgment are supposed to present legal questions only. In deciding such motions, the court rules on questions of law only and does not weigh evidence. See O’Neill v. Dell Publishing Co., Inc., 630 F.2d 685, 687 (1st Cir.1980) (ultimate issue of “substantial similarity” in copyright case is mixed question of fact and law, not to be decided on summary judgment if evidence must be weighed).

VI.

In the procedure prescribed in the attached procedural order, counsel for a party moving for summary judgment is asked to prepare a concise statement of the facts that are undisputed and essential to judgment on each legal theory advanced. In most instances, the facts that are essential to a single legal theory can be stated in a page or two. If, as the moving party, you are tempted to think that your case is one in which a longer statement is required, bear in mind that as you lengthen your fact statement you make it more and more likely that your opponent will find something in it to dispute on factual grounds. If your opponent does dispute any part of your statement of facts, you must either retract your assertion that this is an essential fact, or else you must establish that your opponent has no evidence (not just less weighty evidence than you have) to support the assertion that the questioned fact is one in genuine dispute. When the court has requested of you a concise statement of the essential and undisputed facts, the court is not likely to treat the fact as nonessential if you have not retracted your assertion that it is essential. Rather, the court is more likely to focus on the question whether it is genuinely disputed, and a genuine dispute on one essential fact defeats a motion for summary judgment.

VII.

Your case is one of many in which I am asking counsel to review pending motions for summary judgment to consider whether counsel believe they present questions of law only and no questions of fact.

If you are counsel for the moving party and are not prepared to certify that there is no genuine dispute as to any of the facts on which your legal theory is founded, please notify the clerk and opposing counsel, and your motion will be treated as withdrawn (without prejudice to your opportunity to renew it if, at a later time, you are able to certify that it then appears that there is no genuine dispute as to any of the facts on which your legal theory is founded). Please give this notice on or before

If you are counsel for the opposing party and you contend there is genuine dispute as to some material fact, please file a brief statement identifying at least one material fact as to which there is dispute and, if possible, citing to affidavits, depositions, or other sources confirming the dispute. Please file this statement on or before -, - [ordinarily one week after the date specified in the preceding paragraph].

Any counsel wishing the case set for a conference with the court before entry of the procedural order referred to in the next paragraph may so advise the clerk on or before the latter of the dates specified above.

If no communication from any of counsel is received on or before the latter of the above dates, the court expects to enter an order in the form attached, for the purpose of enabling the court, with the assistance of counsel, to focus precisely on the legal theories at issue and the question whether there is any dispute as to any material fact.

United States District Judge

      . The text of the Rule is as follows:
      It shall be unlawful for any person, directly or indirectly, by the use of any means or instrumentality of interstate commerce, or of the mails, or of any facility of any national securities exchange,
      (1) To employ any device, scheme, or artifice to defraud,
      (2) To make any untrue statement of a material fact or to omit to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading, or
      (3) To engage in any act, practice, or course of business which operates or would operate as a fraud or deceit upon any person,
      in connection with the purchase or sale of any security.

      . Through its extensive briefs and letters, Digital has repeatedly requested that this Court rule on several “key issues," namely (1) what conduct short of intentional deception, if any, satisfies the 10b-5 scienter requirement when an earnings estimate is the alleged misrepresentation; and (2) whether the fraud on the market theory should be approved in this Circuit. While I understand the defendant’s desire to obtain an early ruling on what it believes will be the central issues of the case, I do not believe that I am at liberty to issue what would be at this time an advisory opinion on abstract questions of law. A 12(b)(6) motion serves only one purpose, and that is to test the legal sufficiency of the allegations, not of the evidence likely to be introduced at trial or on a motion for summary judgment. The plaintiffs have alleged that the defendant knowingly issued false statements of material fact and that the plaintiffs actually relied upon those statements. The only issue before me, and the only issue upon which I rule, is whether those statements, if true, form the basis of a claim under the Rule.

      . Given the rate at which the pleadings to date have multiplied, the increasingly perjorative tone of the pleadings, and the predictable course of extensive and expensive discovery, it seems appropriate to remind counsel of their responsibilities under Fed.R.Civ.P. 56. For guidance, counsel are directed to Hahn v. Sargent, 523 F.2d 461, 464 (1st Cir.1975) where the Court stated:
      In determining whether summary judgment is appropriate the court must "look at the record ... in the light most favorable to ... the party opposing the motion____” Poller v. Columbia Broadcasting System, 368 U.S. 464, 473, 82 S.Ct. 486, 491, 7 L.Ed.2d 458 (1962). Similarly the court must indulge all inferences favorable to the party opposing the motion. United States v. Diebold, Inc., 369 U.S. 654, 655, 82 S.Ct. 993, 8 L.Ed.2d 176 (1962); Rogen v. Ilikon, 361 F.2d 260, 266 (1st Cir.1966). These rules must be applied with recognition of the fact that it is the function of summary judgment, in the time hallowed phrase, "to pierce formal allegations of facts in the pleadings...,” Schreffler v. Bowles, 153 F.2d 1, 3 (10th Cir.1946), and to determine whether further exploration of the facts is necessary. Briggs v. Kerrigan, 431 F.2d 967, 968 (1st Cir. 1970).
      Further, I adopt the very clear and detailed Memorandum to Counsel drafted by my colleague, Judge Robert E. Keeton, a copy of which is attached for counsel's use should motions for summary judgment be filed.

      . Fed.R.Civ.P. 12(b) authorizes the court to treat a motion to dismiss under Fed.R.Civ. 12(b)(6) for failure to state a claim upon which relief can be granted as a motion for summary judgment under Fed.R.Civ.P. 56 if matters outside the pleadings are presented to the court. For convenience both these motions and motions under Fed.R.Civ.P. 56 are herein referred to as motions for summary judgment.

      . Negligence cases, for example, require the application of the standard of ordinary care to the "pure" facts. The factfinder (judge or jury) considers all the evidence of the circumstances and determines whether the conduct violated the standard. Though this determination is often referred to as a finding of fact, it differs essentially from a finding of “pure” fact, the kind of finding that determines what happened — the finding, for example, of the speed at which a car was proceeding. It requires the factfinder to exercise discretion in evaluating what happened as well as finding which among conflicting versions of what happened is correct.

      . Cf. Sweeney v. Board of Trustees of Keene State College, 604 F.2d 106, 109 n. 2 (1979) ("clearly erroneous" standard of Fed.R.Civ.P. 52(a) applied on appeal to conclusions involving mixed questions of law and fact except where some indication exists that court misconceived legal standards).

      . Withdrawal of a motion to dismiss under Fed. R.Civ.P. 12(b)(6) will not result in a waiver of the defense of failure to state a claim upon which relief can be granted. Fed.R.Civ.P. 12(h)(2).