source: Caselaw Access Project

author: SWEET, District Judge.

license: Public Domain

text:
    EQUAL EMPLOYMENT OPPORTUNITY COMMISSION, Plaintiff, v. COLGATE-PALMOLIVE COMPANY, Defendant.
    No. 81 Civ. 8145 (RWS).
    United States District Court, S.D. New York.
    June 26, 1985.
    See also, D.C., 586 F.Supp. 1341.

      E.E.O.C., New York City, for plaintiff; Robert L. Williams, Regional Atty., Jean L. Schmidt, Supervisory Trial Atty., James L. Lee, Alane C. Probst, Senior Trial Attys., New York City, of counsel.
    Kelley Drye & Warren, New York City, for defendant; Martin D. Heyert, Paul L. Bressan, Israel E. Kornstein, Ellen B. Silverman, New York City, of counsel.
   OPINION

SWEET, District Judge.

After a fourteen day trial on allegations of age discrimination in promotions in violation of 29 U.S.C. § 621 et seq. (“ADEA”), on March 26, 1985 a jury returned a Special Verdict Form, annexed hereto as an Appendix (the “Verdict”), for the plaintiff Equal Employment Opportunity Commission (“EEOC”), with respect to certain allegations of two claimants and in favor of defendant Colgate-Palmolive Company (“Colgate”) with respect to certain allegations of four others. As to certain allegations of two claimants, the jury was unable to reach a verdict. Left for resolution by the court were the calculation of damages with respect to the claims on which EEOC prevailed, appropriate injunctive relief on that claim, if any, the determination of EEOC’s claim of discriminatory hiring practices by Colgate and any resultant injunctive relief, and Colgate’s motion to set aside the Verdict and to dismiss the unresolved claims.

The EEOC complaint alleging discriminatory hiring practices will be dismissed. An injunction will be issued to prohibit future age discrimination in promotions in the Northeastern Region of Colgate’s Personal Care Products Division, the Colgate motion for a directed verdict is denied with respect to Short’s claim and is granted with respect to Branscomb’s claim, and damages for the claims of Burke and Gallup will be awarded as set forth below. The facts and conclusions upon which these determinations have been reached follow.

According to the Verdict, Colgate violated the ADEA (a) by not making William Burke (“Burke”) the District Manager of the Philadelphia District in January 1979, and (b) by not promoting Raymond Gallup (“Gallup”) to three Key Account Manager positions, to wit: (i) in the Philadelphia District in January 1979—the position into which Colgate laterally transferred Randy Ward, (ii) in the Philadelphia District in January 1981—the promotion Sandy Russell received, and (iii) in the New York District in January 1981—the position Peter Marchioni received. Damages for these violations are calculated by measuring the difference between the amounts of salary and bonus Burke and Gallup would have earned in these positions and the amounts of salary and bonus they actually earned as Area Manager and Unit Manager, respectively. Montoya v. Anderson, 511 F.Supp. 523 (D.Colo.1981); Berke v. Ohio Department of Public Welfare, 30 FEP Cases 387 (S.D.Ohio 1978), aff'd, 628 F.2d 980 (8th Cir.1980).

Since Burke and Gallup would have been paid pursuant to Colgate’s Salary and Bonus Programs had they received the jobs the jury found they did not receive because of their ages, the appropriate differences in salary and bonus compensation are based on these Programs. Koyen v. Consolidated Edison Co., 560 F.Supp. 1161 (S.D.N.Y. 1983). Thus, the relevant consideration is the amount the discriminatees would have received in the positions, not the amounts others received in those positions.

In determining the specific merit salary increase for an individual employee, the following factors are considered, according to the unrebutted affidavit of Robert Burg sworn to April 23, 1985 (the “Burg affidavit”): (i) The company’s merit increase budget, which is the maximum aggregate percentage merit increase allowed for Colgate’s total employee complement for a given year, (ii) the employee’s current position in the range of salaries for his salary grade, and (iii) the employee’s performance evaluation for the preceding year. These factors determine the percentage increase a particular employee gets and the time of that increase.

In addition, Colgate gives a percentage salary increase to employees who receive promotions based on such factors as the date of the employee’s last merit increase, the current and probable future performance, the new base salary in relation to peers, subordinates and superiors, and the position in the salary range for the new job after promotion. In addition to its Salary Program, Colgate has a Bonus Compensation Plan, which is designed to reward sales personnel for attaining quota. Colgate computes each employee’s bonus quarterly, based on the Region’s performance. Thus, the bonus is identical for all employees in the Region in each salary grade.

Had Burke become Philadelphia District Manager on January 1, 1979, rather than Area Manager, he would have earned an additional $11,488 in base salary and an additional $24,172 in bonus compensation, for a total of $35,660, through the end of calendar year 1984, assuming a “satisfactory” performance rating.

EEOC has challenged Colgate’s calculations, not as to accuracy, but as to method. While Colgate’s calculation used average figures, EEOC proposed an earnings figure roughly midway between the average and the amounts actually received by Stephen Frenda (“Frenda”) who in fact was promoted to become Philadelphia District Manager. Aside from citing the general proposition that uncertainties in this area be resolved against the discriminating employer, Cohen v. West Haven Bd. of Police Commissioners, 638 F.2d 496, 502 (2d Cir.1980), EEOC v. Enterprise Association Steamfitters, 542 F.2d 579, 587 (2d Cir.1976), EEOC offers no reasoned basis for using its above-average figure. Obviously no empirical evidence was offered which could be said to demonstrate that Burke’s performance would have equalled Frenda’s. Consequently, the average figures used by Colgate will be adopted.

Since there will be no injunction requiring Colgate to promote Burke at the expense of an existing District Manager, Patterson v. American Tobacco Co., 535 F.2d 257, 268-69 (4th Cir.), cert. denied, 429 U.S. 920, 97 S.Ct. 315, 50 L.Ed.2d 286 (1976), it is appropriate to consider what EEOC refers to as “front pay,” that is, the continuation of pay at a determined level in the event that reinstatement is not possible. See, Whittlesey v. Union Carbide Corp., 742 F.2d 724, 727 (2d Cir.1984). In Whittlesey, in lieu of reinstatement resulting from an unlawful compulsory retirement, the discriminatee was entitled to continued receipt of his pay as if reinstatement had occurred. Similarly, in order to be compensated fully for the discrimination, Burke is entitled not only to damages up to the entry of judgment, but also to front pay until found qualified for promotion as a district manager or equivalent position, or disqualified for reasons other than age. Front pay will equal the differential between the actual salary earned and the salary that would have been earned with the promotion.

The same considerations apply to the calculations applicable to the failure of Colgate to promote Gallup to Key Account Manager in the Philadelphia District on January 1, 1979. The Colgate calculations will be accepted, and front pay as defined above required until Gallup is promoted or disqualified for age-neutral reasons.

In Gallup’s case, an additional issue was raised by a post-trial submission which by affidavit presented evidence that Gallup in the summer of 1981 refused to move out of his assigned geographical district because of personal and family reasons. When asked upon direct examination in EEOC’s rebuttal case if he ever made a statement refusing to relocate in the summer of 1981, his unequivocal, monosyllable answer was, “no”. There was no attack on this testimony. The conflict between the affidavit of Paul Manning and the trial testimony of Gallup must be resolved in the latter’s favor. There is consequently no 1981 cut-off. Gallup is entitled to a $34,-641.00 recovery representing $15,846 in base pay and $18,795.00 in bonus compensation through December 31, 1984, as well as “front pay.”.

The Verdict found Colgate’s action to be wilful and the back pay awards are thus doubled. The front pay awards, however, are not subject to doubling, since the current inability to promote Burke and Gallup is not a consequence of established wilful discrimination but is a result of there being no vacancies in the relevant job levels.

In addition, EEOC seeks prejudgment interest, noting candidly that there is strong authority against its position. Even assuming that there is discretion to award prejudgment interest, contrary to those authorities which hold that prejudgment interest cannot be awarded in the absence of statutory authority, see Hill v. J. C. Penney Co., Inc., 688 F.2d 370 (5th Cir.1982); Barcellona v. Tiffany English Pub, Inc., 597 F.2d 464, 469 (5th Cir.1979), it will not be awarded where Congress has made the discriminatee whole through the award of liquidated damages. See O’Donnell v. Georgia Osteopathic Hospital, Inc., 748 F.2d 1543, 1552 (11th Cir.1984); Rose v. National Cash Register Corp., 703 F.2d 225, 230 (6th Cir.), cert. denied, — U.S.-, 104 S.Ct. 352, 78 L.Ed.2d 317 (1983); Kolb v. Goldring, Inc., 694 F.2d 869, 875 (1st Cir.1982); Spagnuolo v. Whirlpool Corp., 641 F.2d 1109, 1114 (4th Cir.), cert. denied, 454 U.S. 860, 102 S.Ct. 316, 70 L.Ed.2d 158 (1981); Putterman v. Knitgoods Workers Union Local 155, No. 78 Civ. 6000 (S.D.N.Y. Feb. 19, 1985).

As to Colgate’s hiring practices, it is virtually undisputed that no one over forty was hired by Colgate at its entry level, except for one New York resident, whose name drifted in and out of the testimony but who never appeared in the flesh. It was also undisputed that Colgate hired its sales force only at the entry level.

No evidence was presented by EEOC to contradict Colgate’s claim that its entry level hiring was based on its policy of in-house training rather than age discrimination. There was no evidence connecting the Colgate policy to age considerations, even though it is obvious that the entry level salaries would discourage those whose responsibilities have matured as well as their ages. There was isolated, challenged testimony that two managers stated that they favored young, aggressive salesmen. Indeed, no serious attack was made on the repeated testimony of Colgate managers that their hiring, albeit always at the entry level, was age neutral. There is no evidence as to the number of persons over age forty who applied for the low-paying entry-level sales position and, of these applicants over forty, whether the Company rejected any who were qualified. The proof with respect to age discrimination by Colgate in hiring was simply not preponderant, nor was there any evidence that Colgate’s professed policy was pretextual. Since EEOC failed to meet its burden of proving discrimination in hiring, no injunctive relief in that regard is appropriate.

However, by definition that burden was met with respect to the discrimination in failing to promote Burke and Gallup because of age. An injunction against such a practice in the region where it occurred is appropriate here as part of the overall relief to which EEOC, Burke and Gallup are entitled, despite the fact that such discrimination was found to occur with respect to only two of some five hundred employees. Further, Rafferty’s self-characterized “shooting off my mouth” as captured on the Hertenstein tape, cannot be brushed aside. The statement “... I don’t think between you and I with the way the Company’s going there’ll be any sales managers appointed over fifty—any place. Off the record. I would deny it,” made by the National Sales Manager, reverberated through the trial and echoes even now loudly enough to require injunctive relief for a three year period from the date of its entry.

No evidence has been presented upon which it could be inferred that Colgate will retaliate against employees who assisted EEOC in this proceeding. Since such retaliation would give rise to yet another cause of action, and because Colgate is extremely well advised, an injunction forbidding such retaliation is not only unwarranted upon the proof presented but is unnecessary in view of existing statutory protection.

Of course, no injunction against discriminatory promotions would be appropriate if Colgate’s motion to set aside the verdict as to Burke and Gallup were well-founded.

The standard was set forth in Penn v. Brattleboro Retreat, 702 F.2d 322 (2d Cir.1983):

The Supreme Court has stated, regarding motions for directed verdicts and judgments n.o.v.,
When the evidence is such that without weighing the credibility of the witnesses there can be but one reasonable conclusion as to the verdict, the court should determine the proceeding ... without submission to the jury ... By such direction of the trial court the result is saved from the mischance of speculation over legally unfounded claims.
Brady, Administratrix v. Southern Railway Co., 320 U.S. 476, 479-80, 64 S.Ct. 232, 234-35, 88 L.Ed. 239 (1943). The standard in this circuit is whether “the evidence, viewed in the light most favorable to the non-movants without considering credibility or weight, reasonably permits only a conclusion in the movants’ favor.” Sirota v. Solitron Devices, Inc., 673 F.2d 566, 573 (2d Cir.1982); ...

702 F.2d at 323. The Rafferty statement, the history of the promotional process, and the jury’s assessment of all the employees involved, raise sufficient issues to require the denial of Colgate’s motion to set aside the verdict as to Burke and Gallup.

However, the evidence with respect to the second instance of alleged discrimination against Lionel Branscomb (“Branscomb”), upon which the jury was unable to agree, stands in a different posture. The jury in the Verdict held, in effect, given the testimony before it and the charge of the court, that there was a reason, other than age, on which Colgate based its decision not to promote Branscomb to Regional Manager in October 1978. The jury was unable to reach a verdict, however, with respect to the failure to promote Branscomb to the same post in February 1984, a promotion which entered the action, over Colgate’s objections, after its filing in 1981.

The only direct evidence of any discriminatory intent was Rafferty’s recorded confidential comment to Hertenstein on January 5, 1981, already quoted above. Yet by 1984, this action had been filed, and Rafferty had been removed from the sales organization and the promotion process for salesmen in the Personal Care Products Division. There was direct evidence on Branscomb’s evaluation forms which classified him as having performed satisfactorily, or in 1981 very satisfactorily, and having only an average potential for advancement. In 1982 he was rated as marginal, and in 1983 he was recommended for National Accounts Manager.

In addition, there was clear and convincing evidence that Branscomb during the pre 1978 period violated Colgate’s policy with respect to sales which assisted diverters (in the lexicon of the litigation, merchants selling Colgate products outside customary trade areas or at special prices), snowbirds (anticipatory orders entered for internal quota purposes rather than as a result of customer commitments and which are cancelled after the accounting period), promotional allowances, personnel policies, entertainment and travel expenses, and interviewing practices. Colgate narrowly averted a charge of racial discrimination as a result of Branscomb’s interview of Diane Marie White in 1981. These derelictions of Branscomb’s were known to his superiors and made the subject of reports or interviews.

In 1984 Alan Kendall was appointed to the Northeast Regional Manager position. There was no evidence submitted upon which it could be inferred that Alan Kendall was inferior to Paul Manning, who received the 1978 appointment. Indeed, the argument was never made. Of course, both men were under fifty when appointed. Kandall’s record contained no breaches of policy similar to Branscomb’s, and his evaluations were consistently better than Branscomb’s. Although Kendall was under fifty, there was no relevant evidence to establish that but for his age Branscomb would have received the appointment.

The evidence of the Rafferty-Hertenstein conversation of January 5, 1981 is insufficient to raise a factual issue concerning the 1984 promotion in the face of the uncontroverted written records of the two men at issue and the absence of any evidence upon which it could be inferred that any age discrimination policy continued in face of this litigation. To reach a contrary conclusion would be to condemn Colgate to findings of eternal age discrimination based on Rafferty’s comments and would mandate the selection of fifty year old managers in order to prove him wrong. Given the undisputed aspects of Branscomb’s record and his delinquencies, EEOC has failed to raise a factual issue that Colgate’s stated explanation for the failure to promote was pretextual.

The jury also failed to agree on EEOC’s claim that James Short (“Short”) would have been promoted to District Manager in Philadelphia in October of 1978 but for his age. Colgate has also moved to dismiss his claim. It is indisputable that Short’s evaluations were inferior to Steven Frenda’s, who received the post, and that Short was unaware of any age bias on the part of Colgate. The high water mark of Short’s qualifications was the statement in his 1977 and 1978 appraisals that he “should ... be ready” for a District Manager assignment. Certainly there was sufficient evidence upon which one could conclude that there was an age neutral basis for the decision.

On the other hand, the Verdict established on a not dissimilar record that during this period Colgate did discriminate against Burke and Gallup and in that connection undoubtedly gave weight to the Hertenstein tape. On all the evidence a factual issue has been presented meriting jury resolution.

However, Colgate persuasively presents the problem of double discrimination, citing Patterson v. Greenwood School District 50, 696 F.2d 293 (4th Cir.1982), in which the Fourth Circuit reversed a district court’s award of promotion and back pay to an employee who, even absent discrimination, would not have been promoted. There, an employee claimed she was the object of sex discrimination in violation of Title VII when she was passed over for a promotion. The district court found that there had been discrimination and awarded her back pay and promotion to the next available position. The Fourth Circuit found that other female applicants who were also the objects of sex discrimination would have been hired ahead of her based on their qualifications, and thus reversed the district court’s award. Id. at 296. Similarly, Pollard v. Grinstead, 741 F.2d 73 (4th Cir.1984), stands for the proposition that when two claimants for the same job opening have been unlawfully discriminated against, only one may recover damages. Id. at 75-76. The applicant who is denied the job because the other alleged discriminatee has superi- or qualifications has not been denied a job as a consequence of her race, age, or sex.

EEOC failed to respond to Colgate’s citation of these authorities or to comment upon the problem thus created. EEOC failed to cite any other courts which have dealt with a similar problem. In an exercise of judicial creativity, in the event that a retrial is held on Short’s claim and a verdict is obtained in his favor, I conclude that the jury will also be asked to determine whether Burke or Short would be entitled to the post. Because of this uncertainty, execution of the judgment in Burke’s favor will be stayed, the amount of the judgment will be placed in an escrow interest bearing account by Colgate pending a further determination in accordance with this decision.

Settle judgment on notice in accordance with these findings and conclusions, extending calculations of back pay to March 26, 1985, and establishing a proper mechanism for the annual calculation of appropriate front pay.

IT IS SO ORDERED.


author: FRANCIS J. BOYLE, Chief Judge.

text:
    DIAL MEDIA, INC. v. Arthur SCHIFF.
    C.A. No. 84-0195B.
    United States District Court, D. Rhode Island.
    June 27, 1985.

      David A. Schechter, Providence, R.I., for plaintiff.
    Richard P. McMahon, William F. McMahon, McMahon & McMahon, Providence, R.I., for defendant.
   OPINION

FRANCIS J. BOYLE, Chief Judge.

The Plaintiff brought this action to enforce a restrictive covenant in an employment contract, requesting injunctive relief and damages. Defendant counterclaimed seeking, in the alternative, an injunction against the enforcement of the restrictive covenant or a declaratory judgment that the covenant is unenforceable. Defendant also seeks damages for wrongful termination of his employment in violation of the terms of the written agreement.

Defendant filed a motion for preliminary injunction which was denied by this Court for lack of showing of irreparable harm.

FACTS

Defendant, Arthur D. Schiff, received a degree in broadcasting in 1961 and has been employed since then in the capacity of Assistant Creative Director with Beau Bernstein, and as Creative Director with Berrison and Isham. He has also performed direct response advertising work for the Morton Company. Beginning in 1976, he did freelance work, including twenty-nine jobs for the Plaintiff, Dial Media, Inc., of which seventeen were direct response television ads.

Plaintiff, Dial Media, Inc. is a corporation which engages in the advertising business. Ninety (90) percent of the dollar volume of Dial Media is involved in the purchase of advertising time on television, principally involving two minute spots which commence with an attention getting introduction and proceed to seek to sell a product to the television viewer. The viewer can then order the product either by telephone call or by mail, and the product will be delivered by mail. Dial Media traces its success in the direct response mailorder advertising industry to its methods which require that a product (1) have universal appeal, (2) be highly demonstrable, and (3) be priced right. In addition, this type of advertising requires a frequency and a rotation on certain programs.

Dial Media hired Mr. Schiff in January, 1978 as a Creative Director, and a few days later an employment contract was discussed. Mr. Schiff objected to, among other items, a five hundred mile area of limitation of competitive employment after the termination of the employment contract and no contract was executed at that time. On October 17, 1979, twenty-one months after Mr. Schiff’s hiring date, Mr. Schiff and Dial Media entered into a one year employment agreement continuing from year to year thereafter which, in paragraph seven, contained a restrictive covenant limiting Mr. Schiff’s employment for a period of five years after termination of his employment with Dial Media. Paragraph seven also related to an agreement not to disclose information or knowledge acquired during his employment relative to the management, operation, marketing, sales, distribution of product, advertising and creative methods of the employer or the employer’s clients. Paragraph seven provides:

For a period of five (5) years after the termination of this Agreement, the Employee will not, within the radius of five hundred (500) miles from the present place of business of the Employer, directly or indirectly, own, manage or operate, control, or be employed by, participate in, or be connected in any manner with the ownership, management, operation, or control of any business that deals in direct response mailorder advertising. Further, during the term of this Agreement and for a period of five (5) years thereafter, the Employee shall not disclose any information or knowledge to any third party, either directly or indirectly, which said Employee has acquired during his employment with the Employer relative to the management, operation, marketing, sales, distribution of product, advertising and creative methods of products of the Employer and its clients. The Employee agrees that the remedy at law for any breach of the provisions of this paragraph will be inadequate, and that the Employer, its successors and assigns, shall be entitled to temporary and permanent injunctive relief, including reasonable attorneys’ fees, as well as any other relief or damages to which it may be entitled at law, in equity or otherwise; and that, if any suit or other litigation is brought against the Employee alleging breach of the restrictions contained in this paragraph, then in such event, the Employee will not in such affirmatively raise or assert as a defense that said restrictions are invalid, illegal or otherwise unenforceable. The parties further agree that if, notwithstanding the foregoing, any court of competent jurisdiction shall at any time in the future find that said restrictive covenant is overlong in time, or over-broad in scope, or otherwise impermissible, then in such event, such court shall have full and plenary right and authority to modify the terms of such covenant so as to limit parameters thereof, or both, so as better to perfect and carry out the intentions of the parties as expressed herein.

With respect to termination of employment, the agreement provided in paragraph six:

“Termination. The Employer may terminate this Agreement if after written notice to the Employee, the Employee continuously fails to perform the responsibilities and the duties assigned to said Employee by the Employer.”

On January 17, 1983, Mr. Schiff submitted a letter of resignation under the provisions of the agreement effective October 16, 1983. On January 19, 1983, Mr. Crocker, Mr. Schiff’s direct supervisor, wrote a letter to Mr. Schiff terminating his employment as of that date.

Plaintiff's witnesses and Defendant gave different accounts of circumstances preceding Mr. Schiff’s termination. According to Plaintiff’s witnesses, Mr. Schiff always had difficulty with his memory, his attitude, bad hygiene, and interpersonal relationships with employees, and these problems were repeatedly brought to his attention. Plaintiff contends that Mr. Schiff’s performance deteriorated during the last six to eight months before he left Dial Media, culminating in disorderly behavior at the 1982 company Christmas party. During this time Mr. Schiff failed to show up for television commercials, said he was ill and needed to get away for awhile to think, and took a few days off to live in a tent in Florida.

Mr. Schiff's version of events leading to his termination depicted increasingly unreasonable pressures exerted by Dial Media on a conscientious employee, who continued, in the main, to live up to his responsibilities and duties. Mr. Schiff pointed out that his wages increased from $384 to $775 per week as of May 30, 1982, and that he was promoted to the position of vice-president of Dial Media in May, 1982.

Mr. Schiff contended that his termination by Dial Media resulted because Mr. Valenti, president of the corporation, was hurt that Mr. Schiff'resigned without prior consultation which might have resolved the matter.

Following his termination the Defendant formed a company, Direct Response Associates, Inc., which is incorporated in Florida. This company competes for the same television time that Dial Media competes for, and has clients in the northeast states, among them Urban General, one of Plaintiff's largest competitors.

The principal issues in this ease are: (1) has the Defendant violated a valid agreement which is limited to participation in any business that deals in “direct response mailorder advertising”; (2) is the form of the covenant unreasonable under Rhode Island ease law; and (3) was Defendant’s termination a violation of paragraph six of the agreement.

I. TERMS OF THE AGREEMENT

Jurisdictions have split on the question whether continuation of the employment relationship constitutes sufficient consideration for a restrictive covenant in a contract signed subsequent to employment. See, e.g., George W. Kistler, Inc. v. O’Brien, 464 Pa. 475, 485, 347 A.2d 311, 316 (1975) (continued employment alone insufficient as consideration for restrictive covenant). Because there is no Rhode Island case on point, and because this case can be decided on other issues, this Court does not reach the issue whether continued employment itself could constitute sufficient consideration for the October 17, 1979 agreement. This Court does find as a fact that continued employment was the only consideration present, despite Plaintiff’s contention that Mr. Schiff was granted increased responsibilities in exchange for signing the agreement. Mr. Schiff received no promotion as of October 17, 1979, and no increase in pay. Mr. Schiff had received regular pay increases prior to signing the restrictive covenant, and he continued to receive increases subsequent to October 17,1979; however, there was no change in duties, responsibilities, or benefits, as of that date, which could be attributed to his signing of the agreement. Testimony for Plaintiff was that only after signing the restrictive covenant was Defendant permitted to become involved with product selection. Defendant contends that from his first week of work for Dial Media, he was involved in product selection, and that even before hiring him, Dial Media gave him a test run to evaluate his instincts regarding product selection. This Court resolves this conflict in favor of Defendant and finds that involvement in product selection did not constitute new consideration for the October 17,1979 agreement.

Assuming that continued employment alone provided valid consideration for the restrictive covenant, has the Defendant violated the terms of that agreement? Deciding whether a violation has occurred requires construction of the language in paragraph seven which prohibited Mr. Schiff from owning, operating, being employed by, participating in, or being connected with the operation of any business which deals in “direct response mailorder advertising”.

The question of what constitutes “direct response mailorder advertising” within the context of the employment contract is a hotly contested issue. Defendant contends that only advertising which reaches potential customers through the mails and which requires a response by mail falls within the definition of “direct response mailorder advertising.” In other words, Defendant argues that television direct response advertising is excluded from the terms of the agreement.

Plaintiff, on the other hand, while admitting that the phrase was inartfully drafted, takes the position that some meaningful sense must be made of the phrase, and argues that the understanding of the parties at the time of execution should determine the meaning of the phrase. Testimony shows that 90% of Plaintiff’s business is made up of television direct response advertising, and Plaintiff points out that Mr. Schiff was aware that it was that area of advertising which Dial Media sought to protect. Plaintiff would construe the words “direct response” as descriptive of the method by which products are advertised (i.e. television media directly in the home, with no middleman retailer). Plaintiff would construe “mailorder” as describing the method by which the product is delivered to the customer. When ambiguity as to terms of a contract exists, the Court should consider the situation and all accompanying circumstances to determine the meaning of the terms. See Hill v. M.S. Alper & Son, Inc., 106 R.I. 38, 256 A.2d 10 (1969); Massasoit Housing Corp. v. N. Kingstown, 75 R.I. 211, 65 A.2d 38 (1949). If the words of a contract taken literally defeat the intention, the Court should interpret them consistent with the general intent of the parties, as gathered from their relative positions and surrounding circumstances. Massasoit, supra at 216, 65 A.2d at 40; Pawtucket Machinery and Supply Corp. v. Monroe, 73 R.I. 162, 164, 54 A.2d 399, 400 (1947). An interpretation which gives reasonable and effective meaning to all manifestations of intent is to be preferred to one which leaves part of the manifestation of no effect. Hill, supra 106 R.I. at 47, 256 A.2d at 14. To interpret “direct response mailorder” as Defendant urges, would assign the phrase no practical applicability, since Plaintiffs business is only peripherally concerned with non-television advertising, and Plaintiff could therefore have no motive for protecting that area of advertising. Defendant by his own admission was aware of the nature of Plaintiffs business, and it is unlikely that he would misunderstand Plaintiffs purpose in including paragraph seven in the employment agreement. In fact, Defendant’s testimony that he refrained from engaging in direct response television advertising in the New England area for several months, due to Plaintiff’s warning that paragraph seven would be enforced, indicates that Defendant and Plaintiff mutually understood the phrase to mean the type of business in which Dial Media was engaged, namely television direct response advertising. Since the parties’ intention governs in construing contract terms this Court accepts Plaintiff’s definition' of “direct response mailorder advertising” and finds that Defendant violated the terms of paragraph seven.

There is no evidence that Defendant is using talents and techniques acquired by reason of his employment by Plaintiff after the agreement was executed on October 17, 1979, twenty-one months after he began his employment with Plaintiff. It is not suggested that the October 17,1979 agreement is retroactive in the sense that it precludes Defendant from using talents and techñiques acquired before that date either from his prior employment by others, his “freelancing” activities on behalf of Plaintiff, or his employment by Plaintiff for twenty-one months before the employment agreement was executed, or that such a result was even contemplated by the parties. Clearly, such an intent is not stated in the employment agreement itself.

II. REASONABLENESS

Non-competitive covenants are not favored by the courts, and are carefully scrutinized. Koppers Products Co. v. Readio, 60 R.I. 207, 215, 197 A. 441, 444-445 (1938). Since equitable jurisdiction is being invoked, these covenants are subject to a reasonableness standard. Id. Rhode Island law is generally adoptive of the provisions contained in § 515 of the Restatement of Contracts (First) in determining whether the terms of a covenant are reasonable. See Mento v. Lanni, 106 R.I. 683, 687-688, 262 A.2d 839, 841 (1970); Max Garelick, Inc. v. Leonardo, 105 R.I. 142, 148, 250 A.2d 354, 357 (1969). Section 515 states that a covenant in restraint of trade is unreasonable if it “(a) is greater than is required for the protection of the person for whose benefit the restraint is imposed, or (b) imposes undue hardship upon the person restrained.” Restatement of Contracts § 515(a) and (b) (1932).

Since the adoption of § 515(a) and (b) in Mentó v. Lanni, supra and Max Garelick, Inc. v. Leonardo, supra the Restatement (Second) of Contracts has been published. The issues addressed in § 515(a) and (b) of the First Restatement appear in § 188(l)(a) and (b) of the Second Restatement. Section 188(l)(a) and (b) states that a promise to refrain from competition which imposes an ancillary restraint is unreasonably in restraint of trade if, “(a) the restraint is greater than is needed to protect the promisee’s legitimate interest, or (b) the promisee’s need is outweighed by the hardship to the promisor and the likely injury to the public.” Restatement (Second) of Contracts § 188(l)(a) and (b) (1979). Sections 188(l)(a) and (b) of the Second Restatement are substantially §§ 515(a) and (b) rewritten, which have been adopted by the Rhode Island Supreme Court.

In deciding what level of restriction is warranted to protect Dial Media’s legitimate interests, the issue of exactly what constitutes those interests must first be resolved.

Courts have upheld protection of good will which was acquired in a transaction involving the sale of a business, where competition by the seller would deprive the buyer of part of the consideration paid. See, e.g. Koppers, supra. Courts have also enforced restrictive covenants when the plaintiff had trained the defendant in unique or novel services in exchange for which the defendant agreed not to use those unique skills to compete against the original employer. See, e.g., Max Garelick, supra, at 148, 250 A.2d at 357 (citing Welcome Wagon, Inc. v. Haschert, 125 Ind. App. 503, 506, 127 N.E.2d 103, 105 (1955)). The absence of special, peculiar services performed by a defendant has also been used by a court to defeat enforcement of a restrictive covenant. See, e.g., Timenterial, Inc. v. Dagata, 29 Conn.Supp. 180, 277 A.2d 512 (1971) (covenant involved non-competition in the sale and rental of mobile homes). Frequently, cases which upheld enforcement of restrictive covenants against former employees involved the employee’s misuse of trade secrets to give the employee an unfair competitive advantage over the former employer. See, e.g., American Eutectic Welding v. Rodriguez, 480 F.2d 223 (1st Cir.1973) (employee used confidential price lists and special relationship established with former customers to deliberately undercut his former employer). Even where trade secrets were involved, however, the court narrowly tailored the enforcement of the covenant to a precise protection of a specifically defined interest of the former employer, such as confidential information. Id. at 228-29. (court limited protection only to abuse of privileged information acquired while personally servicing specific customers, and even then only as to specific products).

In distinguishing between those interests which were protectable and those undeserving of protection, Rhode Island courts have been governed by “considerations of extensiveness or localism, of protection of interests sold and paid for, of mere deprivation of public rights for private gain, of proper advantage on one side or useless oppression on the other.” Mento, supra 106 R.I. at 687, 262 A.2d at 841 (citing Oakdale Manufacturing Co. v. Garst, 18 R.I. 484, 489-90, 28 A. 973, 974-75 (1899)). In the present case, the Plaintiff has not asserted that Mr. Schiff used trade secrets to acquire an unfair advantage to Dial Media’s detriment, nor has Plaintiff demonstrated any unique or novel training of Mr. Schiff. Thus, the only interest which Plaintiff could assert is the desire to be free of competition from its former employee, who had engaged in the activity which Plaintiff seeks to prohibit before coming to work for Dial Media. This interest is not a protectable one since in the absence of trade secret abuse, misappropriation of good will, or other damage Plaintiff is simply attempting to restrain competition which is in this instance an unreasonable restraint on trade. See Max Garelick, supra 105 R.I. at 147-49, 250 A.2d at 356-358. (contract which prohibited defendant from purchasing grain from Plaintiff’s supplier for five years after expiration of plaintiff/defendant’s supply contract found excessive, since plaintiff had no interest to protect other than a desire to be free of competition); Mento, supra 106 R.I. at 688-89, 262 A.2d at 842 (seller of barbershop who opened new shop within 2 miles of original business was not unreasonably in competition with plaintiff/buyer in any manner different than any other barbershop would compete). Plaintiff competes with other advertisers for available commercial time. Defendant is simply another competitor, among others, for that same time. Plaintiff has demonstrated no other possible interference with its business.

Sections 515 of the Original Restatement of Contracts and 188 of the Restatement (Second) of Contracts both presuppose a legal interest worthy of protection on the part of the promisee. Plaintiff has shown no legitimate distinct interest worthy of protection. Therefore, the question which arises from § 515(a) and § 188(l)(a) is easily answered. If no legitimate interest exists, a restraint is unreasonably in restraint of trade.

When a divisible covenant is found unreasonable, Rhode Island courts have held that the portion of the covenant which is reasonable may be enforced. Max Garelick, supra 105 R.I. at 146, 250 A.2d at 356. If an unreasonable clause may be “blue-lined” out, leaving a reasonable clause intact, the reasonable section will be enforced. Id. The Rhode Island State Supreme Court in Max Garelick, supra held,

[T]hat where restrictive covenants contained in an agreement are divisible, the restraints set out therein will be valid to the extent that they are reasonably necessary for the protection of the interest of the person for whose benefit they are intended, are not unreasonably restrictive of the rights of the person who is restrained, and are not contrary to public policy. This in our opinion, is consistent with the majority view in this country.

Max Garelick, Inc. v. Lanni, supra at 148, 250 A.2d at 357 (citing Welcome Wagon, Inc. v. Haschert, 125 Ind.App. 503, 127 N.E.2d 103 (1955)). The covenant between Dial Media and Arthur Schiff is indivisible, however, because it does not contain discrete time or area restrictions, such that one restriction may be eliminated, and another retained. Rhode Island has not yet ruled on whether indivisible terms of an unreasonable restrictive covenant may be rewritten by the court so as to be reasonable. See Mentó, supra 106 R.I. at 690, 262 A.2d at 843 (explicitly did not reach issue whether excessive unseverable non-competition covenant could be rewritten). Other jurisdictions are divided on a court’s power to rewrite the terms of a contract for the parties. Compare, e.g., Rector-Phillips Morse, Inc. v. Vroman, 253 Ark. 750, 489 S.W.2d 1 (1973) (indivisible, unreasonable covenant may not be modified) with American Eutectic, supra (modified time and areas limitations as well as activities restricted in employment contract, when original terms were excessive). In rewriting the employment agreement the American Eutectic court narrowly protected only the original employer’s interests in preserving its business secrets and the good will built up with specific customers as to particular products. See American Eutectic, supra.

In the present case, however, the Plaintiff has not shown that any protectable interest such as trade secrets or good will has been abused. The only proof which Plaintiff has presented is that Defendant is now engaged in the same type of business as that carried on by Plaintiff and therefore competes with Plaintiff for a limited amount of available television advertising time. There is no evidence or suggestion that Defendant is using trade secrets acquired while employed by Plaintiff or Plaintiff’s customer lists, or trading on Plaintiff’s reputation and good will. It is Plaintiff’s argument that if Defendant is permitted to ply his trade within 500 miles of Providence, Rhode Island, there will be less appropriate television advertising time available to it to sell its wares. To grant Plaintiff’s request for injunctive relief would not protect a legitimate interest. Rather, it would merely prohibit competition by the Defendant, who is in substantially the same business position as other would be competitors who are strangers to the Plaintiff. Thus, any rewriting of the covenant in an effort to bring about a reasonable restriction would be futile.

III. TERMINATION CLAUSE

Defendant has counterclaimed that his termination was wrongful and claims damages in the amount of his salary for the remainder of the year specified in the employment agreement. In order for the Defendant to prevail, he must show that his termination violated the terms of paragraph six of the October 17, 1979 agreement. That paragraph specifies that “[t]he Employer may terminate this agreement if after written notice to the Employee, the Employee continuously fails to perform the responsibilities and the duties assigned to said Employee by the Employer.” Defendant received a number of written notices of dissatisfaction with his performance, over a period of time from April, 1982 through January, 1983. Mr. Schiff does not deny receipt of these notices and therefore, procedurally the termination was not in violation of the terms of the contract. Between April 1, 1982 and January 13, 1983, Mr. Schiff received more than twenty such notices in the form of “inter-office correspondence” from Mr. Crocker, Executive Vice President of Dial Media, Mr. Schiff’s superior. Those notices expressed dissatisfaction with several aspects of Defendant’s work performance as well as his failure to execute responsibilities and duties assigned to him. The dissatisfaction expressed in those notices ranged from the Defendant’s failure to follow proper procedure in having art work done and not completing work in a timely manner to directly disobeying commands of his superior, Mr. Crocker. The notices show a continuing dissatisfaction on the part of Dial Media with Mr. Schiff’s work. While Defendant disputed the correctness of certain notices, he has shown only the possibility of mistake as the source of certain problems for which Dial Media held him accountable, while other instances of Defendant’s shortcomings are essentially undisputed. Therefore, this Court finds that Defendant did continuously fail to perform the responsibilities and duties assigned to him by Dial Media.

Defendant presented evidence of various promotions and raises during the period over which he received the required written notices of dissatisfaction. He also points to a Tokyo trip given him and his wife in lieu of a Christmas bonus, as evidence that his performance was satisfactory, despite the notices. An employer, however, need not discharge an employee immediately, once it has become dissatisfied with the employee’s performance of his duties, but may avail itself of the employee’s performance under the contract at a later date, even if no new cause of dissatisfaction arises. Hanaford, v. Stevens & Co., 39 R.I. 182, 191, 98 A. 209, 212 (1916). Consequently, Dial Media’s retention of Mr. Schiff over a period of time after expressing dissatisfaction with his performance does not preclude it from terminating him and from basing the termination on the earlier laxness in performance of duties. Mr. Schiff’s failure to appear for some important appointments, his mistakes which cost the company time and money, along with his behavior at a December company function show a continuing failure to perform his assigned duties. These shortcomings could well have led Dial Media to believe that his conduct of his duties would continue to decline after he had made a decision to leave the company upon the expiration of his contract. Tn any event, the deficiencies in Mr. Schiff’s performance which were noted in writing and given to him were adequate grounds for termination under the terms of the contract.

Accordingly, Defendant’s counterclaim for an injunction and damages is denied. Plaintiff’s claims for injunctive relief and damages is also denied.

      . A creative director is one who creates commercial materials for use in the advertising business.

      . The Court finds Defendant's argument that his business is not “operated” or "situated" in New England of no value since Defendant admits soliciting customers and using production facilities in the area.

      . The Court finds spurious Plaintiffs implication that Mr. Schiff s participation in production selection at Dial Media gave him invaluable information to which he was not otherwise privy. The factors which Dial Media uses in its product selection and advertising are nothing more than well-known advertising techniques. (e.g. use an attention-getting device early in the ad). Plaintiff disclosed nothing of a confidential nature which could have been used by Defendant to Plaintiff’s detriment.

      . The covenant in Welcome Wagon, supra restrained the promisor from competing against the promisee in three (3) discrete geographically designated areas. Welcome Wagon, supra at 506, 127 N.E.2d at 105.

      . Despite Defendant’s admission that he does business with Urban General, one of Plaintiff’s biggest competitors, Plaintiff has not demonstrated that Defendant gained any unfair competitive advantage due to his former employment at Dial Media, any more than a stranger would have, who had Mr. Schiff’s background and experience. Since an employee is entitled to use general knowledge and expertise learned during his employment to continue his livelihood, Plaintiff has no interest in Defendant’s future productivity to protect.


author: GONZALEZ, District Judge.

text:
    UNITED STATES of America, Plaintiff, v. CERTAIN REAL ESTATE PROPERTY LOCATED AT 4880 S.E. DIXIE HIGHWAY, etc., Defendants.
    No. 85-8353-CIV.
    United States District Court, S.D. Florida, N.D.
    July 3, 1985.

      J. Brian McCormick, Diana L.W. Fernandez, Sp. Attys., U.S. Dept, of Justice, Ft. Lauderdale Field Office, Ft. Lauderdale, Fla., for plaintiff.
    Ronald B. Ravikoff, John J. Evans, G. Richard Strafer, Zuckerman, Spaeder, Taylor & Evans, Coral Gables, Fla., for defendant.
   ORDER

GONZALEZ, District Judge.

The issue presented in this case is whether the Attorney General’s seizure of real property pursuant to 21 U.S.C. § 881(b) and the Supplemental Rules for Certain Admiralty and Maritime Claims without a prior ex parte judicial determination that the property is subject to forfeiture violates the due process clause of the Fifth Amendment.

This court has jurisdiction of the matter pursuant to 28 U.S.C. §§ 1345 and 1355; venue in this forum is proper under 28 U.S.C. § 1395.

I.

Section 301(a)(6) of the Comprehensive Drug Abuse Prevention and Control Act of 1970 (“Act”), Pub.L. No. 95-633, 92 Stat. 3777 (codified as amended at 21 U.S.C. § 881(a)(6) (1978)), provides for the forfeiture of moneys traceable to, intended for use, or used in the unlawful exchange of a controlled substance. Section 881(b) authorizes the seizure of property subject to forfeiture under the Act “upon process issued pursuant to the Supplemental Rules for Certain Admiralty and Maritime Claims”. Rule C(2), which sets forth the procedures for in rem proceedings, provides that in statutory forfeiture actions a verfied complaint shall be filed containing “such allegations as may be required by the statute pursuant to which the action is brought.” Thus Rule C(2) directs one back to Section 881(b), which requires that the United States allege and later establish probable cause for its belief that a substantial connection exists between the property to be forfeited and the exchange of a controlled substance. See United States v. $364,960.00 in United States Currency, 661 F.2d 319, 323 (5th Cir. Unit B 1981). Upon the filing of a proper complaint, Rule C(3) instructs the clerk of the court to “forthwith issue a warrant for the arrest of the vessel or other property that is the subject of the action____”

On Friday, 21 June 1985, attorneys from the United States Department of Justice invoked these forfeiture procedures to seize certain real property located in Port Salerno, Florida. Named in the verified complaint, Appendix A, is a hotel/motel known as the Manatee Resort (“Resort”), which is owned by Joseph Spina through his corporation, Atlantic Coast Investments, Inc. (“Atlantic”); Charlie’s Locker, Inc., a boat company owned by Joseph Spina and his son, Steven; and Charlie’s Riverboat, Inc. d/b/a Charlie’s-in-the-Pocket, a restaurant corporation whose President and Director is Joseph Spina, but whose sole stockholder is Donna Sanders. The boat company and the restaurant both lease space in the Resort from Atlantic, and operate independently of the Resort.

The only reason stated in the complaint for the seizure was the attorneys’ belief “based upon reports and information furnished to [them] by the Federal Bureau of Investigation” that the “real property is subject to forfeiture to the United States of America” pursuant to 21 U.S.C. § 881(a)(6). The complaint fails to recite a single fact which might allow one to objectively conclude that the government had reason to believe that the Resort, the boat company or the restaurant had been purchased with the proceeds of drug transactions.

The government was not without reason to suspect that the Resort and accompanying complex was purchased with money traceable to narcotics deals. If claimants pleadings are taken as true, then Mr. Spina’s Atlantic Coast Investments, Inc. was originally owned by a William Keen, who was convicted of federal drug violations, Mr. Spina served as Atlantic’s accountant and eventually purchased all of the corporation’s stock and assumed its debt in August 1981 as part of a compensation arrangement with Mr. Keen. After investing over one million dollars in the complex, and turning it into a thriving business, Mr. Spina successfully negotiated the sale of the Resort, the boat company and the restaurant for approximately four million dollars. The closing date was set for 3 August 1985, and was contingent upon Mr. Spina’s completion of certain construction at the Resort. Fearing that Mr. Spina would sell the complex to a buyer who was unaware of the complex’s ties to drug transactions and then leave the country with the proceeds, the government filed its complaint for forfeiture in rem.

Assuming these allegations are sufficient to justify the government's action, the Attorney General’s complaint nevertheless fails to recite a single one of these facts.

Upon receipt of the complaint, notice of lis pendens and warrants of arrest in rem for the subject properties, the deputy clerk of the court randomly assigned the case to the undersigned Judge, rubber stamped his name, and affixed the court’s seal to each warrant.

The next day—June 22nd—the United States Marshal Service seized the subject properties and ejected the owners and operators of the Resort, the boat company and the restaurant, along with the guests vacationing there. Among the guests forced to leave were persons participating in the Martin County Teachers Retreat. As the guests left the premises, government agents stopped and searched their vehicles to make certain that the visitors did not abscond with Resort property.

Despite the government’s retention of a former Resort employee to manage the seized properties, by all indications business there has been severely damaged. The government’s action also has jeopardized the impending sale of all these properties by interrupting the aforementioned construction project. (The government has since represented that it has agreed in principle to permit the construction to resume.)

Unable to either operate their businesses or complete what would be a profitable sale, Joseph Spina, Atlantic, Charlie's Riverboat, Inc., Charlie’s Locker, Inc., Steven Spina and Donna Sanders (collectively referred to herein as “claimants”) filed an emergency motion for retention of the seized properties, or alternatively to appoint Joseph Spina to manage the Resort, permit its sale to go forward, and release Charlie’s Riverboat, Inc. from the scope of the forfeiture (dk # 8 Jun. 25, 1985). On June 26th, this court heard oral argument on claimants’ motions.

II.

Section 881(b) of Title 21 of the United States Code provides as follows:

Any property subject to forfeiture to the United States under this subchapter may be seized by the Attorney General upon process issued pursuant to the Supplemental Rules for Certain Admiralty and Maritime Claims by any district court of the United States having jurisdiction over the property, except that seizure without such process may be made when—
(1) the seizure is incident to an arrest under a search warrant or an inspection under an administrative inspection warrant;
(2) the property subject to seizure has been the subject of a prior judgment in favor of the United States in a criminal injunction or forfeiture proceeding under this subchapter;
(3) the Attorney General has probable cause to believe that the property is directly or indirectly dangerous to health or safety; or
(4) the Attorney General has probable cause to believe that the property has been used or is intended to be used in violation of this subchapter.
In the event of seizure pursuant to paragraph (3) or (4) of this subsection, proceedings under subsection (d) of this section shall be instituted promptly.

Section 881(b) thus enables the Attorney General to commence civil forfeiture proceedings in one of two ways. First, if the government lacks probable cause to believe that the subject property has been or is intended to be used in violation of Title 21, then it may initiate the forfeiture proceeding by filing a verfied complaint under the maritime rules, supra p. 1493, and effect seizure pursuant to a warrant of arrest in rem. An owner who believes the seizure unjustified may later contest it in court, at which time the government must establish a reasonable basis for its belief that the property was used or purchased in contravention of the federal drug laws.

Second, the Attorney General may effect a seizure without either a warrant or exigent circumstances provided he determines there is probable cause to believe that the property has been or is intended to be used in violation of the Act. United, States v. One 1978 Mercedes Benz, 711 F.2d 1297, 1302 (5th Cir.1983); United States v. One 1977 Lincoln Mark V Coupe, 643 F.2d 154, 158 (3d Cir.), cert. denied, 454 U.S. 818, 102 5. Ct. 97, 70 L.Ed.2d 88 (1981). Forfeiture proceedings must be instituted “promptly” thereafter.

In this case, the government seized claimants’ property only after obtaining a warrant pursuant to the supplemental maritime rules. It is the procedure by which the clerk issued that warrant that troubles the court. The court views with displeasure the Attorney General’s ability to seize real property based on a pro forma complaint and admiralty warrant that does not recite even basic facts which would enable a dispassionate observer to objectively conclude that the property may be subject to forfeiture. This is a defect of constitutional proportions which invalidates the seizure process ab initio.

III.

The court’s analysis begins with the Supreme Court’s decision in Sniadach v. Family Finance Corp., 395 U.S. 337, 89 S.Ct. 1820, 23 L.Ed.2d 349 (1969). The Court there held unconstitutional on due process grounds a Wisconsin prejudment statute which permitted a creditor’s lawyer to seize and effectively freeze a debtor’s wages before the debtor was given notice of the action and an opportunity to be heard. Justice Douglas, writing for the Court, reasoned that Wisconsin’s prejudgment garnishment law constituted an unlawful taking of property in violation of the due process clause of the Fourteenth Amendment.

The Court employed the Sniadach logic to strike down Florida and Pennsylvania prejudgment replevin statutes in Fuentes v. Shevin, 407 U.S. 67, 92 S.Ct. 1983, 32 L.Ed.2d 556 (1972). A writ of replevin could be obtained under the Florida statute upon the creditor’s bare assertion to a court clerk that he was entitled to the property, and under the Pennsylvania law upon filing an affidavit fixing the value of the property without alleging legal entitlement thereto. The Court held that both statutes violated the procedural due process requirement of the Fourteenth Amendment because they failed to provide for notice or an opportunity to be heard before the seizure. Id. at 80, 92 S.Ct. at 1994.

Fuentes made clear, however, that in limited circumstances, immediate seizure of ' a property interest without an opportunity for a prior hearing is constitutionally permissible.

[First], the seizure has been directly necessary to secure an important governmental or general public interest. Second, there has been a special need for very prompt action. Third, the State has kept strict control over its monopoly of legitimate force: the person initiating the seizure has been a government official responsible for determining, under the standards of a narrowly drawn statute, that it was necessary and justified in the particular instance.

407 U.S. at 91, 92 S.Ct. at 2000.

Thus, procedural due process is not denied when postponement of the notice and hearing is necessary to protect the public from contaminated food, North American Cold Storage Co. v. Chicago, 211 U.S. 306, 29 S.Ct. 101, 53 L.Ed. 195 (1908); a bank failure, Coffin Brothers & Co. v. Bennett, 277 U.S. 29, 48 S.Ct. 422, 72 L.Ed. 768 (1928); misbranded drugs, Ewing v. Mytinger & Casselberry, Inc., 339 U.S. 594, 70 S.Ct. 870, 94 L.Ed. 1088 (1950); or to aid the collection of taxes, Phillips v. Commissioner, 283 U.S. 589, 51 S.Ct. 608, 75 L.Ed. 1289 (1931).

The Supreme Court’s decision in Calero-Toledo v. Pearson Yacht Leasing Co., 416 U.S. 663, 94 S.Ct. 2080, 40 L.Ed.2d 452 (1974), extends the Fuentes exception to the seizure and forfeiture of property involved in drug smuggling. In Calero-Toledo, Puerto Rican law enforcement authorities discovered marijuana on board a sailboat and seized the boat pursuant to a Commonwealth statute which permitted the Police to confiscate vessels used to transport, or to facilitate the transportation of, controlled substances. The Police seized the vessel without prior notice and without a prior adversary hearing, a combination found constitutionally defective in Fuentes and Sniadach. Despite the holdings in those cases, however, Justice Brennan held the Puerto Rican law constitutional based on the limited Fuentes exception enunciated above. The Court reasoned:

First, seizure under the Puerto Rican statutes serves significant governmental purposes: Seizure permits Puerto Rico to assert in rem jurisdiction over the property in order to conduct forfeiture proceedings, thereby fostering the public interest in preventing continued illicit use of the property and in enforcing criminal sanctions. Second, preseizure notice and hearing might frustrate the interests served by the statutes, since the property seized—as here, a yacht—will often be of a sort that could be removed to another jurisdiction, destroyed, or concealed, if advance warning of confiscation were given. And finally, unlike the situation in Fuentes, seizure is not initated by self-interested private parties; rather, Commonwealth officials determine whether seizure is appropriate under the provisions of the Puerto Rican statutes. In these circumstances, we hold that this case presents an “extraordinary” situation in which postponement of notice and hearing until after seizure did not deny due process.

416 U.S. at 679-80, 94 S.Ct. at 2089-90 (footnotes omitted) (emphasis added).

Calero-Toledo frames the issue before this court: whether the confiscation of real property suspected of being purchased with the proceeds of drug transactions is an “extraordinary” situation which justifies postponement of a hearing until after the seizure.

To be sure, the seizure of any property pursuant to 21 U.S.C. § 881(b) serves a significant government purpose, for it deters drug smuggling by depriving the trafficker of the fruits of his evil: money and the property purchased therewith. Additionally, the government and not a private party seizes the property pursuant to statutory guidelines designed to minimize abusive behavior by law enforcement officials.

But Fuentes—and Calero-Toledo for that matter—make clear that some sort of preseizure hearing is necessary as long as there is a reasonable likelihood that the res is not going to disappear. Certainly, where the property is large and immovable (e.g., land and the buildings thereon), and the likelihood of it being concealed or destroyed is remote, there is no overriding need for “prompt action” which would sacrifice the property owner’s right to procedural due process.

Of course, the objectives of section 881(b) might be frustrated were the government required to give the property owner prior notice of the hearing and seizure. Often times when the government seeks preliminary relief in these matters, it is based on information supplied by confidential informants or undercover agents the disclosure of whose identity would jeopardize the safety of the source and the success of the operation. Thus, just as in the case of a government application for a wiretap of a search warrant, policy and prudence may require that the government’s request for a warrant for arrest in rem be held ex parte.

The ex parte nature of the preseizure hearing does not violate the teachings of Fuentes and its progeny. The language in those decisions reflect an obvious sensitivity to government law enforcement objectives. Procedural due process in this context is a fluid concept shaped by

the private interest that will be affected by the official action; ... the risk of an erroneous deprivation of such interest through the procedures used, and the probable value, if any, of additional or substitute procedural safeguards; and finally, the [government's interest, including the function involved and the fiscal and administrative burdens that the additional or substitute requirement would entail.

Mathews v. Eldridge, 424 U.S. 319, 335, 96 S.Ct. 893, 903, 47 L.Ed.2d 18 (1976); see cases cited in Mathews at 424 U.S. at 332-35, 96 S.Ct. at 901-03; Wofford v. Wainwright, 748 F.2d 1505, 1507 (11th Cir.1984).

In this case, the government’s seizure of the Resort, boat company and restaurant has had a serious impact on business and jeopardized—if not made impractical—the planned sale of the properties. No post-seizure hearing will cure the government’s action given the extensive and possibly permanent damage suffered by the claimants. The government ousted the owners and occupants of the property based on the barest of allegations. And for what reason? The Resort property was not going to disappear; the marina did not threaten to sink into the sea.

Upon balancing these interests, the court finds, based on the facts in this case, that the Fifth Amendment minimally requires that no warrant for the arrest in rem of real property should issue unless and until a judicial officer has reviewed the complaint in an ex parte proceeding and has concluded that said complaint sets forth a reasonable basis for believing that the property is subject to forfeiture under section 881(b).

The hearing itself need be no more involved than that commonly held before a search warrant or wiretap is issued. The only delay the government might encounter is finding a judicial officer before whom the complaint can be presented. If the government is required to submit an application for a warrant or wiretap to a judge given the obvious danger to government agents presented by premature notice of the search of wiretap, then clearly the Attorney General should submit his complaint for forfeiture of real property to some form of judicial scrutiny considering the often devestating consequences of seizure to the landowners and the probable minimal danger to government agents.

Requiring pre-seizure judicial review of the government’s complaint before the clerk issues the warrant also provides an important check on over-zealous law enforcement.

As section 881(b) is currently interpreted, the Attorney General plays two roles: he first decides whether a violation of Title 21 may have occurred; he then orchestrates the seizure of the property and the defense of the government’s actions. Although such dual responsibilities are an inherent part of the government attorney’s job, in other areas there exist important institutional safeguards to prevent abuses violative of constitutional rights. In criminal prosecutions, for example, the Grand Jury decides whether there is probable cause to believe the government’s accusations. Under the Fourth Amendment, absent exigent circumstances, an impartial, neutral magistrate determines whether a specific search or seizure is justified.

No such mechanism exists under the section 881(b) civil forfeiture procedure. Fuentes and Calero-Toledo both evince a concern for “strict control” over the government’s use of force. The Constitution requires, at a minimum, at least an ex parte preseizure hearing to ensure that the government force employed is neither unreasonable nor unconstitutional.

Public policy clearly favors prosecution of drug dealers and the forfeiture of their property. While such policy is certainly laudable, it should not be enforced based on naked allegations which, when acted upon, threaten individual liberties. Neither Congress nor the people intended that the Bill of Rights be a fatality in the war on drugs. For that reason, Fuentes instructs and the Constitution demands that the Attorney General first submit to at least an ex parte judicial review of the documents setting forth the government’s right to forfeiture before a warrant of arrest may issue.

There will be times when the government, lacking probable cause, still seeks to seize a movable res (e.g., vehicle or vessel). Calero-Toledo teaches that in such cases it is constitutionally permissible for the government to act first and seek judicial approval later. In the context of this decision, Calero-Toledo does create an “exigent circumstances” exception to the hearing requirement.

It should be noted that most of the decisions interpreting section 881 have held that subsection (b)(4) allows a warrantless seizure without exigent circumstances provided the Attorney General has probable cause to believe the subject property was used in violation of the drug control laws. See United States v. One 1978 Mercedes Benz, 711 F.2d 1297, 1302 (5th Cir.1983); United States v. Bush, 647 F.2d 357, 367 (3rd Cir.1981); United States v. One Lincoln Mark V Coupe, 643 F.2d 154, 158 (3rd Cir.), cert. denied, 454 U.S. 818, 102 S.Ct. 97, 70 L.Ed.2d 88 (1981). But those decisions are inapposite because they involved movable property. The nature of the property involved was, in and of itself, however, an “exigent circumstance.”

IV.

Whether an Act of Congress is unconstitutional is a question which no court should address if the case can be decided on nonconstitutional or statutory grounds. See Ashwander v. Tennessee Valley Authority, 297 U.S. 288, 346-48, 56 S.Ct. 466, 482-83, 80 L.Ed. 688 (1936) (Brandeis, J., concurring); Palmore v. Superior Court, 515 F.2d 1294 (D.C.Cir.1975). In the instant case, however, no reading of the first portion of section 881(b) can avoid its due process problems. Arguably, the court could have decided this case on the narrower ground that the government’s verified complaint fails to establish that claimants’ property is subject to forfeiture. Such a result would not correct the constitutional defect because the clerk of the court, not a judicial officer, would still be the one reviewing the pleading.

To require judicial review, absent exigent circumstances, before a warrant will issue, will make it impossible for the government to seize real property based on bald assertions, rumor, innuendo and mere speculation.

Accordingly, the court holds that the Constitution forbids the Attorney General from seizing real property pursuant to 21 U.S.C. § 881(b) and the Supplemental Rules for Certain Admiralty and Maritime Claims absent exigent circumstances, without prior judicial review.

Because the government failed to follow this procedure in seizing claimants’ property, the warrants previously issued herein are hereby quashed, and plaintiff’s complaint is hereby dismissed for failure to properly and objectively allege a claim for which relief may be granted. The plaintiff is granted leave to amend within ten days.

APPENDIX A

COMES NOW the United States of America, Plaintiff in the above-styled cause, by and through its undersigned United States Attorney for the Southern District of Florida, in a civil cause of forfeiture and alleges upon information and belief:

1. That this Court has jurisdiction of this matter pursuant to 28 U.S.C. § 1345 and 1355.

2. That the Court has venue pursuant to Title 28, United States Code, Section 1395. The defendant real property is within the jurisdiction of this Court.

3. The United States seeks forfeiture of the real and personal property located at:

Certain real estate property located at 4880 S.E. Dixie Highway, 4882 S.E. Dixie Highway, 4884 S.E. Dixie Highway, 4888 S.E. Dixie Highway, and 4889 S.E. Dixie Highway, Port Salerno, Martin County, Florida, more specifically described as being Lots 13 through 27, Block 1 and Lots 19 through 36, both inclusive Block 69. According to revised plat of Blocks 9, 71 and 1 and first addition to Port Salerno, as recorded in Plat Book 8, Page 28, Palm Beach County, Florida public records; and that certain 15 foot alley lying between above lots and any and all lands lying between above lots and alley, lying easterly of the R/W of A1A and waters of the yacht basin of Manatee Bay or Manatee Pocket, and any and all lands lying between above lots on the one-hand, and waters of the canal reserve of said Block 69, lying easterly of the right of way of State Road A1A and the waters of the yacht basin of Manatee Bay or Manatee Pocket, on the other hand, and all of mortgagor’s right title and interest in Cleveland Avenue, lying easterly of State Road A1A right of way, now or hereafter acquired and including the Manatee Resort and Marina, Charlie’s in the Pocket Restaurant and Charlie’s Locker together with furnishings, furniture and contents.

4. The subject real property is titled in the name of Atlantic Coast Investments, Inc., and has a value of approximately $3,500,000.

5. By reason of the aforegoing and pursuant to the provisions of Title 21, United States Code, Section 881(a)(6), the subject real property is subject to forfeiture to the United States of America.

WHEREFORE, the plaintiff prays that process in due form of law, according to the procedure of this Court in cases of actions in rem, issue against the subject real property, that any person or persons having any interest therein be cited to appear herein and answer the Complaint, that this Court decree the condemnation and forfeiture of the real and personal property and improvements thereon to the United States, and that the plaintiff have such other and further relief as the case may require.

Respectfully submitted,
STANLEY MARCUS
UNITED STATES ATTORNEY
J. BRIAN McCORMICK
Special Attorney
U.S. Department of Justice
Ft. Lauderdale Field Office
299 E. Broward Blvd, RM 309E
Ft. Lauderdale, FL 33301
(305) 527-7392
DIANA L.W. FERNANDEZ
Special Attorney
U.S. Department of Justice
Ft. Lauderdale Field Office
299 E. Broward Blvd, RM 309E
Ft. Lauderdale, FL 33301
(305) 527-7392

VERIFICATION

We, Diana L.W. Fernandez and J. Brian McCormick, Special Attorney, United States Department of Justice for the Southern District of Florida, declare under penalty of perjury as provided by 28 U.S.C. § 1746, the following:

That the foregoing Complaint for Forfeiture In Rem is based upon reports and information furnished to me by the Federal Bureau of Investigation and that everything contained therein is true and correct to the best of my knowledge and belief.

Executed on 6/22/85

      . Section 881(a)(6) provides:
      (а) The following shall be subject to forfeiture to the United States and no property right shall exist in them:
      (б) All moneys, negotiable instruments, securities, or other things of value furnished or intended to be furnished by any person in exchange for a controlled substance in violation of this subchapter, all proceeds traceable to such an exchange, and all moneys, negotiable instruments, and securities used or intended to be used to facilitate any violation of this subchapter, except that no property shall be forfeited under this paragraph, to the extent of the interest of an owner, by reason of any act or omission established by that owner to have been committed or omitted without the knowledge or consent of that owner.
      21 U.S.C. § 881(a)(6).

      . See infra p. 1495.

      . The government at oral argument repeatedly made much of the fact that the Resort was being managed by a former Resort employee. This reminded the court only of the ancient English practice of hanging the nobility with a silk rope.

      . On Sunday, 23 June 1985, government officials returned Charlie's Locker, Inc. to its owners. The boat company is included among the claimants because the court has not entered an order effecting the formal return of this business.

      . Claimants also filed an Emergency Motion for Protective Order, which the court need not consider because of the threshold unconstitutionality of the warrant procedure itself.

      . In his concurring opinion, Justice Harlan explained that the "property" of which the debtor was deprived was the use of her wages between the garnishment and culmination of the suit. 395 U.S. at 342, 89 S.Ct. at 1823.

      . The government argues that "prompt action” was necessary to prevent Mr. Spina from leaving the country with certain of the Resort's assets. The court discounts this concern for three reasons. First, Mr. Spina is not charged with violating any laws, and by all accounts he is free to leave the United States. Second, even if Mr. Spina did leave the country, his presence here may be necessary to finalize the sale of the properties on August 3rd. Third, even if Mr. Spina did leave the country, the government could still attach the subject properties and/or garnish the proceeds of business from or the sale of the real estate.