author: SWEET, District Judge.

text:
    QUINTEL CORPORATION, N.V., Plaintiff, v. CITIBANK, N.A., Defendant. CITIBANK, N.A., Third-Party Plaintiff, v. H.R. GAJRIA, Arnold Alperstein, and Goldstick, Weinberger, Feldman, Alperstein & Taishoff, P.C., Third-Party Defendants. QUINTEL CORPORATION, N.V., and H.R. Gajria, Plaintiff, v. Arnold S. ALPERSTEIN, et al., Defendants.
    Nos. 80 Civ. 4936(RWS), 82 Civ. 4856(RWS).
    United States District Court, S.D. New York.
    Oct. 18, 1984.

      Carro, Spanboek, Fass, Geller, Raster & Cuiffo, New York City, for plaintiff and third-party defendant; Kenneth A. Lapatine, Charles D. Bock, Gilbert C. Ferrer, Vincent Lipari, Jeffrey K. Cymbler, New York City, of counsel.
    Sherman & Sterling, New York City, for defendant and third-party plaintiff; Mark P. Zimmett, Jonathan L. Greenblatt, Catherine Gallo, Henry A. Udow, New York City, of counsel.
    Wilson, Elser, Edelman & Dicker, New York City, for defendants and third-party defendants; Edward J. Boyle, Steven Kent, Thomas R. Manisero, Mary E. Reisert, New York City, of counsel.
   SWEET, District Judge.

These consolidated actions are once again on the eve of trial. Quintel Corporation, N.V. (“Quintel”), a Netherlands Antilles corporation, commenced the action against Citibank, N.A. (“Citibank”), on August 27, 1980, in connection with Quintel’s investment in Flag Associates, L.P. (“Flag”), a real estate limited partnership, alleging that Citibank violated section 10(b) of the Securities Exchange Act of 1934 (the “1934 Act”), 15 U.S.C. § 78j(b), and Rule 10b-5,17 C.F.R. 240.10b-5, breached fiduciary duties owed to Quintel, committed fraud and acts of negligence, and converted monies and property belonging to Quin-tel. Citibank, in turn, filed a third-party complaint against H.R. Gajria (“Gajria”), the sole beneficial owner of Quintel, and against Robert Ginsburg, Nelson C. Rising and John M. Rudey, the general partners of Flag (collectively “general partners”). Quintel and the general partners entered into a settlement agreement in June 1983, pursuant to which Quintel received $6,100,-000.

Quintel and Gajria commenced an action against Arnold S. Alperstein, Gajria’s attorney, and the law firm of Goldstick, Weinberger, Feldman, Alperstein & Taishoff, P.C. (collectively “Alperstein”) on July 28, 1982, alleging negligence. The two actions were consolidated, 100 F.R.D. 695, and Citibank, in turn, asserted a claim against Alperstein for contribution.

At the final pretrial conference on September 5, 1984, the parties raised certain substantive and evidentiary issues which were briefed and argued on September 21, 1984. These issues include: (i) whether an indemnity agreement precludes assertion of a claim of negligence against Citibank; (ii) whether evidence relating to Gajria’s sophistication and financial resources is admissible; (iii) whether Quintel may recover damages in excess of fees paid to Citibank and Alperstein; (iv) and whether post-closing evidence of the actual performance of the investment property is admissible. Facts

The underlying facts are fully described in the court’s prior opinions and the parties’ pretrial order filed on September 7, 1984. The actions arise from the parties’ involvement in a real estate transaction that took place in 1979. On August 8, 1979, Gajria entered into an acquisition agreement (“Acquisition Agreement”) with Citibank for the purpose of acquiring certain developed real property in Florida. The property was to be acquired by Flag, a limited partnership, of which Quintel was the limited partner. The acquisition was closed on August 14, 1979. Alperstein and his law firm performed legal services for Gajria and Quin-tel in connection with the acquisition.

The plaintiffs contend that, in advising Gajria to make the investment, Citibank, among other things:

(i) failed to disclose to Gajria that his capital contribution to Flag would be utilized not only to acquire the developed land but also for the acquisition by the Flag general partners of certain valuable undeveloped land of approximately 80 acres located adjacent to the developed land; and
(ii) presented to Gajria projections of income to be earned from the project which were derived without adequate due diligence and which omitted material facts and assumptions which would have been necessary to prevent Gajria from being misled.

In addition, they contend that Alperstein failed to inquire or learn of the undisclosed compensation the general partners would receive — i.e., the undeveloped land.

Citibank’s Liability for Negligence

Gajria and Citibank entered into the Acquisition Agreement on August 8, 1979. On the same date, Gajria assigned all of the rights and obligations contained in the Acquisition Agreement to Quintel which, in turn, accepted assignment of Gajria’s rights and duties. In the absence of consent by Citibank to a delegation of Gajria’s duties, Gajria remained liable for the obligations under the Acquisition Agreement. See Contemporary Mission, Inc. v. Famous Music Corp., 557 F.2d 918, 924 (2d Cir.1977) (applying New York law); Davidson v. Madison Corp., 257 N.Y. 120, 177 N.E. 393 (1931).

Clause 1(d) of the Acquisition Agreement provides that Citibank will coordinate the closing and will acquire property for the client, at the client’s sole risk and expense. Clause 9 of the Acquisition Agreement provides:

Indemnification

Any actions or lack of action taken by Citibank, its affiliates, or subsidiaries in any capacity whatsoever with respect to real estate investments made pursuant hereto will be solely at the Client’s risk and solely at the Client’s expense and Citibank will be under no liability for any such action or failure to take any action except for its gross negligence or willful misconduct. The Client hereby agrees to indemnify and keep indemnified Citibank, its affiliates and subsidiaries against all actions, claims or demands, including attorneys fees, arising out of Citibank’s exercise of any authority granted hereunder, except in cases of gross negligence and/or willful misconduct. Revocation by the Client of the powers granted to Citibank by this Agreement will not affect the Client’s responsibility for indemnification with respect to acts and/or failure to act occurring prior to receipt of such revocation.

According to Citibank, this Acquisition Agreement bars liability for negligence. Citibank also cites clause 15 of a Real Estate Investment Monitoring Agreement (“Monitoring Agreement”) between Quintel and Citibank, which provides:

(15) Indemnification

Any actions or lack of action taken by Citibank, its affiliates, or subsidiaries in any capacity whatsoever with respect to any property in connection with this Agreement will be solely at the Owner’s risk and expense and Citibank will be under no liability for any such action or failure to take any action except for its gross negligence or willful misconduct. The Owner hereby agrees to indemnify and keep indemnified Citibank, its affiliates and subsidiaries against all actions, claims or demands, including attorneys’ fees, arising out of Citibank’s exercise of any authority granted hereunder, except in eases of gross negligence and/or willful misconduct. Any such action, claim or demand may be settled at the discretion of Citibank, and its subsidiaries and affiliates after consultation with the Owner. The revocation of the powers granted to Citibank by this Agreement will not affect the Owner’s responsibility for indemnification with respect to acts and/or failure to act occurring prior to receipt of such revocation.

Quintel seeks to limit these agreements to suits by third parties. While the Monitoring Agreement is susceptible to such an interpretation because of the settlement language, the Acquisition Agreement unambiguously states that “Citibank will be under no liability ... except for its gross negligence or willful misconduct.” Gajria agreed, in addition, to indemnify Citibank “except in cases of gross negligence and willful misconduct.”

Although contracts indemnifying a party against his own negligence are generally disfavored and strictly construed against the drafter, Navieros Oceanikos, S.A. v. S.T. Mobil Trader, 409 F.Supp. 884, 890 (S.D.N.Y.1976), aff'd, 554 F.2d 43 (2d Cir.1978), “[cjontractual provisions which express a clear and unmistakable intent to indemnify a party against his own negligence are enforceable under New York law.” Simon v. Corbetta Construction Co., 391 F.Supp. 708, 709 (S.D.N.Y.1975); see, e.g., Levine v. Shell Oil Co., 28 N.Y.2d 205, 321 N.Y.S.2d 81, 269 N.E.2d 799 (1971); Dillon v. Riverso Construction Co., 39 A.D.2d 744, 332 N.Y.S.2d 432 (2d Dep’t 1972), affd, 33 N.Y.2d 530, 347 N.Y.S.2d 434, 301 N.E.2d 422 (1973). The Acquisition Agreement unambiguously absolves Citibank of liability for negligence, and therefore Gajria may not maintain a state cause of action charging Citibank with conduct less than gross negligence or willful misconduct.

Gajria is the sole beneficial shareholder of Quintel, a shell corporation that conducts no business. As a result, Gajria would be the direct beneficiary of any recovery obtained by Quintel in this action, and he is the real party in interest in this action. Since any recovery would devolve to Gajria, Quintel may not sue for less than gross negligence or willful misconduct. See First National City Bank v. Banco para el Comercio Extersos de Cuba, 462 U.S. 611, 103 S.Ct. 2591, 77 L.Ed.2d 46 (1983). To rule otherwise “would permit the real beneficiary of such an action ... to obtain relief in our courts that it could not obtain in its own right .... ” Id. at 2603.

Evidence of Gajria’s Sophistication as an Investor and Financial Resources

Citibank and Alperstein seek to admit evidence of Gajria’s sophistication as an investor, his financial resources and his course of dealings with Citibank and Alperstein. Quintel and Gajria contend that evidence of Gajria’s sophistication as an investor is irrelevant and inadmissible, arguing that the sophistication of the investor does not obviate the need for full disclosure.

Sophisticated investors are entitled to the protection of section 10(b) of the Securities Exchange Act of 1934 (the “1934 Act”), 15 U.S.C. § 78j(b) and Rule 10b-5,17 C.F.R. § 240.10b-5. See, e.g., Scherk v. Alberto-Culver Co., 417 U.S. 506, 94 S.Ct. 2449, 41 L.Ed.2d 270 (1974); Hanley v. SEC, 415 F.2d 589, 596 (2d Cir.1969); Stier v. Smith, 473 F.2d 1205, 1207 (5th Cir. 1973); Carroll v. First National Bank of Lincolnwood, 413 F.2d 353, 357 (7th Cir.), cert. denied, 396 U.S. 1003, 90 S.Ct. 552, 24 L.Ed.2d 494 (1969); Lehigh Valley Trust Co. v. Central National Bank, 409 F.2d 989, 992 (5th Cir.1969); Miller v. Schweickart, 405 F.Supp. 366, 369 (S.D.N.Y.1975); Welch Foods Inc. v. Goldman, Sachs & Co., 398 F.Supp. 1393, 1398 (S.D.N.Y.1974); Barthe v. Rizzo, 384 F.Supp. 1063, 1066-67 (S.D.N.Y.1974). However, the sophistication of Gajria is relevant to the adequacy of disclosure, see Scarfarotti v. Bache & Co., 438 F.Supp. 199, 302-03 (S.D.N.Y.1977); Berger v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 505 F.Supp. 192, 194 (S.D.N.Y. 1981), and the extent of the reliance of Gajria on any alleged misrepresentation, see Pittsburgh Coke & Chemical Co. v. Bollo, 560 F.2d 1089, 1092 (2d Cir.1977). Therefore, such evidence is admissible.

Quintel’s Damages

Section 28(a) of the 1934 Act, 15 U.S.C. § 78bb(a) limits recovery in a suit under the 1934 Act to “actual damages.” The Court of Appeals has explained that the purpose of section 28(a) is “to compensate civil plaintiffs for economic loss suffered as a result of wrongs committed in violation of the 1934 Act.” Osofsky v. Zipf, 645 F.2d 107, 111 (2d Cir.1981).

Absent special circumstances, the actual damages of a defrauded purchaser are his out-of-pocket losses, defined as the excess of what he paid over the actual value of what he received. See Levine v. Seilon, Inc., 439 F.2d 328, 334 (2d Cir. 1971); Freschi v. Grand Coal Venture, 588 F.Supp. 1257 at 1259 (S.D.N.Y.1984). Actual value is generally defined as the fair market value of a security on the date of purchase or at a subsequent date when the fraud was or should have been discovered. See Steinberg v. Carey, 470 F.Supp. 471, 476 n. 19 (S.D.N.Y.1979).

The Court of Appeals has recently recognized that in some cases the appropriate measure of damages is the benefit of the bargain. Osofsky v. Zipf, supra, 645 F.2d at 109. This measure of damages gives the plaintiff the benefit of what was promised and permits recovery of the difference between the represented value and the actual value of what the plaintiff received. Id. In addition, the court has held that a plaintiff suing under Rule 10b-5 may recover consequential damages if he can “establish the causal nexus with a good deal of certainty.” Zeller v. Bogue Electric Manufacturing Corp., 476 F.2d 795, 803 (2d Cir.), cert. denied, 414 U.S. 908, 94 S.Ct. 217, 38 L.Ed.2d 146 (1973); Freschi v. Grand Coal Venture, supra, 588 F.Supp. at 1259-1260.

Quintel seeks $2,974,192 in damages under either measure. It claims that the benefit of the bargain is the appropriate measure of damages in this case, the benefit of the bargain being the total investment obtained by the general partners, 50% of the value of the undeveloped land, which was valued at $1,486,000, plus the $2,231,192.00 difference between the projected cash flow and the cash flow actually realized by Flag between August 14, 1979 and June 30, 1983. Alternatively, Quintel seeks its out-of-pocket loss, the difference between what it paid and the value of what it received, which it asserts is $2,974,192. Quintel maintains that the value of what it received in return for its investment was $4,100,000 less 50% of the value of the undeveloped land and the value by which its investment was diminished as a result of Citibank’s false projections. Citibank and Alperstein, on the other hand, contend that Quintel is not entitled to recover more than $617,509, the amount of the fees Quintel paid to Citibank and Alperstein.

A claim for the benefit of the bargain may be appropriate where damages “can be established with reasonable certainty.” Osofsky v. Zipf, supra, 645 F.2d at 111; see Barrows v. Forest Labor atories, Inc., 742 F.2d 54 (2d Cir.1984). Even if Quintel can establish its benefit of the bargain damages with sufficient certainty, however, the benefit of the bargain is not the appropriate measure of damages in the particular circumstance of this action. A defrauded plaintiff has the option of rescinding a transaction and being restored to his prior position, or of affirming the transaction and suing for damages suffered. See Occidental Life Insurance Co. v. Pat Ryan & Assocs., 496 F.2d 1255, 1267 (4th Cir.), cert. denied, 419 U.S. 1028, 95 S.Ct. 499, 42 L.Ed.2d 297 (1974). Rescission and restitution are alternatives to money damages; a plaintiff cannot both rescind a transaction and ask for the benefit of the bargain rescinded. Instead, if a transaction is rescinded a plaintiff is only entitled to that which is necessary to restore him to his earlier position.

In this case, Quintel’s settlement with Flag returned the amount of his investment, plus interest and operated to rescind the transaction. Once Quintel became aware of the fraud, it had the option of affirming its contract and demanding its fair share of the undeveloped land. Whether by characterizing the entire transaction as implicitly including the undeveloped property or by seeking reformation of the contract so that the undeveloped land would be included as part of the contract, Quintel would have been in a position to argue that it was entitled to benefit of the bargain damages that included the value of the undeveloped land. Quintel, however, chose not to affirm its contract, and instead by its June 1983 settlement agreement with the general partners liquidated its investment in Flag at its current value, $4,100,-000, plus interest of $2,100,000. Although the agreement stated that it shall not “be deemed to constitute a recission of the Partnership Agreement or of the investment made by the Limited Partner,” 1112, and that “nothing contained herein is intended or shall be deemed to affect, alter or interfere in any manner with claims now asserted in the action by the Limited Partner against Citibank, N.A.,” U 9, the settlement agreement operated as a recission. The agreement was expressly intended “to effect a liquidation of the interest in the Partnership of [Quintel].” ¶ 1. Quintel elected to receive a return of all that it had paid, except for fees, and to return all that it had received.

Quintel disputes the characterization of the liquidation as a recission because the settlement did not take into account the undeveloped land and did not compensate Quintel for the amount by which its investment was diminished by the allegedly fraudulent projections. The projections were merely projections, however, not a guaranteed return, and Quintel bargained only to acquire the developed property, not the undeveloped land. Neither the general partners nor Citibank represented that the cash flow was guaranteed as projected or that the undeveloped land would be part of Quintel’s investment. Paragraph 6.03 of the partnership agreement stated that the general partners would cause all of the assets “excluding, however, the property described on Exhibit A annexed hereto ... to be acquired by [Flag].” Exhibit A described the undeveloped land. Because the transaction as it was struck was rescinded, Quintel is entitled only to those out-of-pocket damages that will return it to the position it was in before the transaction.

Quintel’s computation of out-of-pocket damages, although inventive, does not withstand scrutiny. The out-of-pocket measure of damages permits Quintel to recover the difference between what it paid and what it received. Levine v. Seilon, Inc., supra, 439 F.2d at 334. Quintel invested $4,100,000 and received back $4,100,000, plus $2,100,000 in interest when it settled with the general partners. The only expenses for which Quintel has not received reimbursement, and, therefore, its only out-of-pocket loss, are the fees it paid Citibank and Alperstein which total $617,-500.

Even if part of Quintel’s investment was used to purchase something it did not receive, Quintel has been fully compensated by the return of what it paid plus interest. There is no difference between the value of what it paid and what it received, regardless of the value of the Flag investment at the time of purchase. Therefore, Quintel has no out-of-pocket loss other than the unreimbursed fees.

Quintel argues that it is entitled to recover the profit obtained as a result of the fraudulent use of its money. In addition to the usual measure of damages, defrauders will be required to disgorge windfall profits. See Zeller v. Bogue Electric Manufacturing Corporation, supra; Janigan v. Taylor, 344 F.2d 781, 786-87 (1st Cir.), cert. denied, 382 U.S. 879, 86 S.Ct. 163, 15 L.Ed.2d 120 (1965); cf Affiliated Ute Citizens v. United States, 406 U.S. 128, 154-55, 92 S.Ct. 1456, 31 L.Ed.2d 741 (1972). In Zeller, the Court of Appeals held that the repudiation of the benefit of the bargain measure of damages for defrauded buyers in Levine v. Seilon, Inc., supra, did not bar a defrauded buyer from recovering windfall profits, stating:

Such repudiation does not necessarily call for a rule that, if a fraudulent seller can be shown to have made a windfall profit, principles of the law of restitution do not require that he be made to disgorge it. See 6 Loss, Securities Regulation 3923. (Supp.1969). The reason why the remedy has been applied for the benefit of defrauded sellers but not of buyers is not any decisive legal difference by the difficulty generally confronting the defrauded buyer in showing that the fraudulent seller has in fact reaped such a profit.

Zeller, 476 F.2d at 802. In addition, the Court stated that “absent unusual circumstances, when a buyer has been induced to surrender consideration because of fraudulent conduct of a seller, it seems appropriate to require the seller to disgorge any profits he would otherwise have been in a position to realize if there can be traced with sufficient certainty.” Id. at n. 10.

In this case, however, Quintel seeks to recover from Citibank windfall profits received by the general partners. Citibank received no benefit from or interest in the undeveloped land. Although joint tort feasors are jointly liable for actual damages, it is not appropriate to impose windfall damages, the purpose of which is to prevent unjust enrichment, on a defendant who did not receive the windfall profits. See Nelson v. Serwold, 687 F.2d 278, 281 (9th Cir.1982) (“[Serwold] should not be made to disgorge the profit from the sale of the stock owned by other members of the control group because [he] did not benefit from that profit ... ”), see also Norte & Co. v. Huffines, 288 F.Supp. 855 (S.D.N.Y.1968), affid in part, remanded in part, 416 F.2d 1189 (2d Cir.1969), cert. denied sub. nom. Muscat v. Norte & Co., 397 U.S. 989, 90 S.Ct. 1121, 25 L.Ed.2d 396 (1970); Thomas v. Duralite Co., 386 F.Supp. 698, 726-27 (D.N.J.1974), rev’d on other grounds, 524 F.2d 577 (3d Cir.1975).

As a result, the appropriate measure of damages in the action against Citibank is Quintel’s out-of-pocket loss which, after settling with the general partners and receiving a return of his investment plus interest, is limited to the fees paid by Quin-tel to Citibank and Alperstein, a total of $617,000.

Post-Closing Evidence

Quintel and Gajria seek to admit evidence of Flag’s post-closing actual performance. Insofar as such evidence relates to the determination of the value of the Flag investment at the time of closing, it is not material for the reasons just stated. Insofar as the post-closing evidence of Flag’s performance relates to the discrepancies between Citibank’s projections and Flag’s actual result, however, it is relevant to the issue of Citibank’s negligence in investigating those projections. While the mere fact that the projections were not realized is not in itself relevant evidence, see, e.g., Marx v. Computer Science Corp., 507 F.2d 485, 490 n. 7 (9th Cir.1974), because only the circumstances and factors in existence at the time Citibank reviewed the projections must be considered, see Chase Manhattan Bank, N.A. v. Perla, 65 A.D.2d 207, 208, 411 N.Y.S.2d 66, 68 (4th Dept. 1978), the post-closing evidence as to the discrepancies between the projections and the result goes directly to the question of what factors were in existence at that time.

Citibank cites Pipe Welding Supply Co. v. Haskell, Connor & Frost, 61 N.Y.2d 884, 462 N.E.2d 1190, 474 N.Y.S.2d 472 (1984), in which the court held that evidence of an unexplained and substantial discrepancy between defendant-architect’s projection of cost and the actual bids received was not sufficient proof of negligence, to support its proposition that the post-closing evidence is not probative of negligence. In Pipe Welding, however, the plaintiff relied solely on evidence of this discrepancy to prove negligence. In this case, Gajria seeks to introduce post-closing evidence to reveal the existence of specific factors that should have been considered in making the projections. Evidence as to the actual results of the Flag investment is relevant and probative of Citibank’s negligence because it may serve to reveal circumstances and factors that Citibank should have taken into account at the time that it reviewed the projections. Furthermore, the probative value of the evidence is not outweighed by the danger of unfair prejudice to Citibank from admitting the evidence. The possibility that the jury will be misled by the post-closing evidence is considerably alleviated because the evidence will no longer be relevant to the issue of damages.

Conclusion

Therefore, neither Gajria nor Quintel may sue Citibank for less than gross negligence or willful misconduct; evidence relating to Gajria’s sophistication and financial resources is admissible; the appropriate measure of damages is Quintel’s out-of-pocket loss which is limited to the fees paid by Quintel to Citibank and Alperstein; and post-closing evidence of the actual performance of the Flag property is admissible as to the issue of Citibank’s negligence.

IT IS SO ORDERED.

      . Alperstein sought leave to file a third party complaint against the general partners and the law firm that represented them. In an opinion and order dated December 23, 1983, the court permitted the assertion of a third party complaint against the law firm but not the general partners. The third party complaint was subsequently dismissed by opinion and order dated June 4, 1984. 589 F.Supp. 1235.


source: Caselaw Access Project

author: SEAR, District Judge.

license: Public Domain

text:
    Mrs. Joe J. TOUCHSTONE, et al., Plaintiffs, v. G.B.Q. CORPORATION, et al., Defendants.
    No. 82-1613 “G”.
    United States District Court, E.D. Louisiana.
    Oct. 19, 1984.

      Lawrence D. Wiedemann, Wiedemann & Fransen, New Orleans, La., for plaintiffs.
    Gene S. Palmisano, Exxon Corp., New Orleans, La., for defendants.
   MEMORANDUM AND ORDER

SEAR, District Judge.

Plaintiff, Mrs. Joe J. Touchstone, brought this action, individually and as a personal representative of the estate of her husband, Joe J. Touchstone, and on behalf of their major children, Shirley Touchstone Tillman and Joe J. Touchstone, Jr., to recover damages for the wrongful death of her husband, which she alleges was caused by silicosis, a disease she contends he contracted during his employment with several sandblasting and painting companies.

Plaintiff sued 29 defendants, including her husband’s employers during the years 1959 to 1978, certain companies that supplied equipment and materials to his employers, certain companies that contracted with Touchstone’s employers for services, and certain insurers of all of these companies. Jurisdiction was alleged under the Jones Act, 46 U.S.C. § 688, the General Maritime Law and under the Court’s diversity jurisdiction pursuant to 28 U.S.C. § 1332.

Plaintiff alleged that her husband had sandblasted on oil drilling platforms owned by various oil companies including Exxon Corporation, and that Exxon “knew or should have known of the dangers involved in the use of sand for sandblasting purposes, knew or should have known that the equipment being furnished to deceased was not adequate to protect him from the dangers of contracting silicosis and should have warned deceased of the dangers on a timely basis.” Plaintiff prayed for damages of twelve million five hundred thousand dollars ($12,500,000.00).

In June and July of 1984, several of the platform owners moved for summary judgment on the ground that plaintiff had failed to provide to them during the more than two years of discovery any evidence that Touchstone had ever sandblasted on any of the platforms owned by them. Exxon first moved for summary judgment on June 12, 1984. Exxon contended that plaintiff had not responded to interrogatories, a request for admissions and a request for production of documents, all of which were intended to discover whether any relationship existed between Touchstone and Exxon. Consequently, Exxon argued that there was no evidence that Touchstone ever sandblasted on an Exxon platform. As part of its opposition to Exxon’s motion and despite the fact that the time for responding to Exxon’s request for admissions had expired, plaintiff requested that it be permitted to respond to the admissions by denying them and attached the transcript of Touchstone’s testimony given three years before in the case of a fellow employee, William A. Scarborough. William A. Scarborough v. Northern Assurance Company of North America, No. 77-2523 (E.D.La.1981) (Heebe, J.) appealed in part sub nom Scarborough v. Travelers Insurance Co., 718 F.2d 702 (5th Cir.1983) (“Scarborough”). In the Scarborough case, Touchstone testified that he had sandblasted on Exxon platforms. On the basis of that testimony I found a material issue of fact existed and therefore denied Exxon's motion for summary judgment.

Plaintiff subsequently responded to defendant’s request for admissions, but without moving for leave of the court. At the pre-trial conference held on August 27, 1984, counsel for Exxon stated that plaintiff had not yet responded to Exxon’s interrogatories and request for production of documents. Following the pre-trial conference, plaintiff’s counsel orally informed counsel for Exxon that every fact witness on plaintiff’s list of witnesses would testify at trial that Touchstone had sandblasted on Exxon platforms. Exxon was surprised by this untimely and informal revelation. Because the trial was only eight days away, Exxon immediately moved to continue the trial to permit it to discover the testimony of each fact witness listed by plaintiff as it pertained to Exxon.

I sought to avoid continuing the trial by requiring plaintiff within two days to produce the witnesses in New Orleans so that they could be interviewed or deposed in the hope that Exxon could adequately prepare its defense. Following these depositions, counsel for Exxon argued that it was impossible for him to prepare properly in the time remaining and it was therefore necessary that the trial be continued.

In the meantime, on September 4, 1984, Exxon moved for either summary judgment or for dismissal of plaintiff’s claims or alternatively for sanctions under Rule 11 of the Federal Rules of Civil Procedure. It is difficult to separate the grounds asserted by Exxon in support of its motion into the divisions implied by its title, but it appears that Exxon argues for dismissal as an appropriate sanction (1) for the failure of plaintiff’s counsel to make the “reasonable inquiry” of the factual basis of its allegations against Exxon in any pleading or document filed with the Court as required by Rule 11 of the Federal Rules of Civil Procedure; or (2) for the failure of plaintiff to comply with discovery requests to the prejudice of Exxon. Dismissal is also the remedy sought by Exxon because, it argues, plaintiff has already received a sufficient amount of money in settlement of its claims against other defendants and that the “maximum recovery rule” would moot any judgment against Exxon.

Exxon also seeks dismissal in its motion of September 4, 1984 on the further grounds that Touchstone’s employers were independent contractors of Exxon and that it could not be liable because it owed no duty to Touchstone. Whether the grounds for dismissal are asserted as a motion to dismiss under Federal Rule 12(b)(6) or as a motion for summary judgment pursuant to Federal Rule 56, the motion must necessarily be treated as one for summary judgment because I have been asked to and must consider evidence extrinsic to the record to decide the motion.

Finally Exxon argues, in the event that both dismissal and summary judgment are denied and the trial to proceed without continuance, plaintiff should not be allowed to present any testimony regarding Touchstone’s employment on Exxon platforms other than that about which counsel for plaintiff had informed counsel for Exxon prior to the pre-trial conference. Specifically, Exxon asked that plaintiff be limited to Touchstone’s own testimony in the Scarborough case, and that of Granville Yawn, another co-worker of Touchstone whose deposition counsel for Exxon had attended.

1. Rule 11 Sanctions

Exxon asserts that counsel for plaintiff persistently violated the requirement of Rule 11 of the Federal Rules of Civil Procedure that pleadings be signed only after a reasonable inquiry. Rule 11 provides, in relevant part:

The signature of an attorney or party constitutes a certificate by him that he has read the pleading, motion, or other paper; that to the best of his knowledge, information, and belief formed after reasonable inquiry it is well grounded in fact and is warranted by existing law or a good faith argument for the extension, modification, or reversal of existing law, and that it is not interposed for any improper purpose, such as to harass or to cause unnecessary delay or needless increase in the cost of litigation.

Fed.R.Civ.P. 11. The remedy provided by Rule 11 for violation of this requirement is that:

the court, upon motion or upon its own initiative, shall impose upon the party who signed it, a represented party, or both, an appropriate sanction, which may include an order to pay to the other party or parties the amount of the reasonable expenses incurred because of the filing of the pleading, motion, or other paper, including reasonable attorney’s fees.

Fed.R.Civ.P. 11. Exxon cites a Ninth Circuit case, Rhinehart v. Stauffer, 638 F.2d 1169 (9th Cir.1979), as holding that dismissal is an appropriate remedy for violations of Rule 11. While dismissal may be an appropriate remedy in some cases, it is inappropriate here.

The extent of “reasonable inquiry” required by Rule 11 varies from case to case. This case involves events occurring as many as twenty-five years ago of which the principle witness, Touchstone, is now deceased. In such a case, before discovery, the facts available that may be inquired into may be limited. On the other hand, there comes a time after discovery has progressed that counsel should have knowledge of the specific facts that would support the conclusion that the action is “well grounded in fact.”

Exxon alleges that counsel for plaintiff filed pleadings or motions without this knowledge and therefore without making the reasonable inquiry required by Rule 11, but it appears Exxon incurred no undue expense as a result. Sanctions may, nevertheless, be appropriate.

2. Plaintiff’s Failure to Comply with Discovery Requests

Exxon contends that it is entitled to a dismissal of plaintiff’s claims against it because plaintiff failed to respond in a timely manner to its discovery requests, all served on plaintiff on January 20, 1984, well before the discovery cutoff date. The interrogatories specifically asked plaintiff to state any fact and to identify any witnesses and documents or other evidence that tended to show that Touchstone at any time performed services for Exxon. Exxon asserts that the failure of plaintiff to provide any of this information until after the pretrial conference, one week before the scheduled trial date, severely compromised its ability to prepare a defense, and is therefore prejudicial.

Plaintiff does not deny that Exxon’s discovery requests were not answered in accordance with the Federal Rules of Civil Procedure. In fact, plaintiff seeks to shift its discovery burden to the defendant and require Exxon to search the record, documents and testimony of another case, one in which defendant’s counsel did not participate, to find its own answers to its discovery requests. Indeed, in plaintiff’s opposition memorandum, plaintiff’s counsel cavalierly states:

It is obvious that counsel for Exxon, who so strongly urges prejudice in this matter, had no difficulty obtaining the testimony in preparation for this Motion because he quoted from the deposition of Joe J. Touchstone in the Scarborough case at length in his Memorandum.

Yet plaintiff’s counsel blithely neglects to mention that it was he who provided the transcript of testimony from the other case to defendant’s counsel.

The Federal Rules of Civil Procedure impose no duty upon a defending party to consult the court record of another case to learn the substance of his opponent’s case. The Rules do, however, impose a duty upon a party to answer appropriate discovery requests made of him. Rules 33, 34, and 36, governing interrogatories, requests for production of documents and requests for admission, each require that written answers or objections to discovery requests be served within 30 days of service of the request. If a party fails to answer, the requesting party may apply to the court to compel discovery. While a plaintiff may find it necessary to compel discovery to obtain evidence necessary to sustain his burden of proof, there is nothing in the rules that requires either party to compel the other to respond. Instead, the rules protect a party seeking timely discovery and impose penalties upon an opponent who fails to respond or who seeks to use evidence improperly withheld during discovery.

With respect to requests for admission, Rule 36 provides that:

The matter is admitted unless, within 30 days after service of the request ... the party to whom the request was directed serves upon the party requesting admission a written answer or objection addressed to the matter----

Fed.R.Civ.P. 36(a). Thus, the questioning party can rely on the silence of the non-responsive party to establish conclusively the matter, unless the court on motion permits amendment or withdrawal of the admission. Fed.R.Civ.P. 36(b). Rule 36 provides no further sanction. Therefore, plaintiff’s failure to comply with Rule 36 discovery is not properly a ground for dismissal.

Where a party fails to answer interrogatories or a request for production of documents, it risks far more severe sanctions. Rule 37(d) provides, in relevant part, that:

If a party ... fails (2) to serve answers or objections to interrogatories submitted under rule 33, after proper service of interrogatories, or (3) to serve a written response to a request for inspection submitted under Rule 34, after proper service of the request, the court in which the action is pending on motion may make such orders in regard to the failure as are just, and among others it may take any action authorized under paragraphs (A), (B), and (C) of subdivision (b)(2) of this rule. In lieu of any order or in addition thereto, the court shall require the party failing to act or the attorney advising him or both to pay the reasonable expenses, unless the court finds that the failure was substantially justified or that other circumstances make an award of expenses unjust.

Fed.R.Civ.P. 37(d). The actions authorized under Rule 37(b)(2) include:

(A) An order that the matters regarding which the order was made or any other designated facts shall be taken to be established for the purpose of the action in accordance with the claim of the party obtaining the order;
(B) An order refusing to allow the disobedient party to support or oppose designated claims or defenses or prohibiting him from introducing designated matters in evidence;
(C) An order striking out pleadings or parts thereof, or staying further proceedings until the order is obeyed, or dismissing the action or proceeding or any part thereof, or rendering a judgment by default against the disobedient party.

A court therefore has broad discretion to impose sanctions on a party for failing to answer interrogatories or requests for the production of documents. See Eastway General Hospital v. Eastway Women’s Clinic, 737 F.2d 503 (5th Cir.1984) (discovery sanctions including striking of abortion clinic’s defenses, entry of adverse judgment on the merits and assessment of $1,000 in attorney fees justified by repeated failure of party to appear for deposition and to produce documents as scheduled; In re Liquid Carbonic Truck Drivers Chemical Poisoning Litigation, M.D.L. Docket No. 252, 580 F.2d 819 (1978) cert. denied sub nom, Strain v. Turner, 441 U.S. 945, 99 S.Ct. 2165, 60 L.Ed.2d 1047 (1979). (Affirming my order of dismissal entered for failure of plaintiff over a protracted period to answer interrogatories or to comply with discovery orders.)

Had the trial not been continued, I would have limited plaintiff, on the issue of Touchstone’s connection with Exxon, to the testimony of Touchstone in the Scarborough ease and that of Granville Yawn.

3. Exxon’s Duty to Employees of an Independent Contractor

Exxon contends that because Touchstone’s employers were its independent contractors Exxon owed no duty to Touchstone for their negligent acts and therefore as a matter of law is not liable to plaintiff and is entitled to summary judgment. Exxon also argues that it was granted a directed verdict on just that ground in William A. Scarborough v. Northern Assurance Company of America, supra, and that under a theory of estoppel it should be dismissed from this case.

Summary judgment is appropriate only if the pleadings, affidavits, depositions, and other papers in the record indicate that there is no genuine issue as to any material fact and that movant is therefore entitled to judgment as a matter of law. Fed.R. Civ.P. 56(c); e.g., Poller v. Columbia Broadcasting System, Inc., 368 U.S. 464, 467, 82 S.Ct. 486, 488, 7 L.Ed.2d 458 (1962); Kellerman v. Askew, 541 F.2d 1089 (5th Cir.1976). Moreover, the burden is on the movant to demonstrate affirmatively the absence of any issue of material fact on all issues raised in the pleadings. Chavez v. Noble Drilling Corp., 567 F.2d 287, 289 (5th Cir.1978); 10A C. Wright, A. Miller & M. Kane, Federal Practice and Procedure § 2727, at 121 (1983). The party opposing a motion for summary judgment, however, may not rest on allegations or denials in his pleadings; once the movant has made his showing under Rule 56, the opposing party must present evidence that there is a material issue of fact in the case. Fed.R.Civ.P. 56(e); Wright, Miller & Kane, supra, § 2721 at 42-43. If he does not so respond, summary judgment, if appropriate, shall be entered against him. Fed.R.Civ.P. 56(e); e.g., Ferguson v. National Broadcasting Company, 584 F.2d 111 (5th Cir. 1978).

a. The Material Facts

In support of its motion and pursuant to Local Rule 3.9, Exxon has submitted a “statement of material facts not in dispute” in which it states that an independent contractor relationship existed between Exxon and Joe Touchstone’s employers, Coating Specialists, Inc. and Land and Marine Applicators, Inc. Exxon has also submitted the sworn deposition testimony of four of plaintiff’s witnesses who allegedly were co-workers of Joe Touchstone, as well as a portion of the trial transcript of Touchstone's testimony in the Scarborough case. Exxon submitted this testimony to show the limited nature of Exxon’s contacts with and control over the operation of sandblasting contractors on its platforms. Exxon has also included “the written contract between Exxon and Coating Specialists, Inc.” and “the written contract between Exxon and Land and Marine Applicators, Inc.”

Ordinarily, documents are not admissible unless they are authenticated by and attached to an affidavit in which the affiant is a person through whom the exhibits could be admitted into evidence. Fed.R.Civ.P. 56(e); Wright, Miller & Kane, supra, § 2772 at 58-60. Exxon’s motion is not accompanied by an affidavit, and the documents appended are not otherwise authenticated. However, inadmissible documents may be considered by the court if they are not challenged. Wright, Miller & Kane, supra, at 60; Auto Drive-Away Co. of Hialeah, Inc. v. ICC, 360 F.2d 446 (5th Cir.1966); Lawson v. American Motorists Ins. Co., 217 F.2d 724, 726 (5th Cir.1954); Townsend v. Columbia Operations, 667 F.2d 844 (9th Cir.1982). Because plaintiffs “Response to Exxon Corporation’s Motion for Summary Judgment” contains no challenge to the documents relied upon by Exxon I have considered them in deciding Exxon’s motion.

Further, the local rules of court for the Eastern District of Louisiana provide that all facts set forth by the moving party under Local Rule 3.9 will be deemed admitted unless contested. Plaintiff has not filed the statement of material contested facts required by Local Rule 3.10 and accordingly is deemed to have admitted that Touchstone’s employers were independent contractors of Exxon.

In any case, plaintiff’s response does not mention much less challenge Exxon’s characterization of Touchstone’s employers as independent contractors. Although plaintiff’s pre-trial memorandum, incorporated by the plaintiff in its response to Exxon’s motion, addressed “the platform owner (oil company) liability in this case” it does not challenge seriously Exxon’s characterization. The only challenge is plaintiff’s onetime use of the word “alleged” to modify “independent contract-employer” when it referred to Touchstone’s former employers.

Plaintiff assumes or concedes that an independent contractor relationship existed between Exxon and Touchstone’s employers but argues nevertheless that the existence of such a relationship does not shield Exxon from liability in this case.

Nevertheless, “[w]here the evidentiary matter in support of the motion does not establish the absence of a genuine issue, summary judgment must be denied even if no opposing evidentiary matter is presented.” Judicial Conference Advisory Committee on Federal Rules of Civil Procedure Note to the 1963 amendments to Rule 56. E.g., Adickes v. S.H. Kress & Company, 398 U.S. 144, 90 S.Ct. 1598, 26 L.Ed.2d 142 (1970). In this case Exxon has included copies of its contracts with Touchstone’s employers in which those employers are specifically denominated as independent contractors. Those contracts alone, apart from the depositions Exxon has submitted that corroborate them, are sufficient to justify a finding that Touchstone’s employers were in fact independent contractors. See e.g. Alexander v. United States, 605 F.2d 828, 832 (5th Cir.1979) (finding that the government was not liable to an injured employee because his employer was denominated as an independent contractor in its contract with the government); Copeland v. Gulf Oil Corp., 672 F.2d 867, 871 (11th Cir.1982) (finding employer of injured employee to be independent contractor of oil well owner because the contract established the employer as such, even though in his deposition Gulf’s safety supervisor stated that he had the power to hire and fire employees of the contractor; therefore the well owner was not liable to the employee).

Moreover, where the party opposing summary judgment has failed to present affidavits under Rule 56, as plaintiff has failed to do here, the court may accept the facts alleged by movant as true and grant summary judgment. Liberty Leasing Co. v. Hillsum Sales Corp., 380 F.2d 1013, 1015 (5th Cir.1967) (summary judgment proper where movant’s motion supported by affidavit and numerous exhibits and opposing party filed no response). Thus, there is no genuine issue as to the material fact of the nature of the relationship between Exxon and Touchstone’s employers: they were independent contractors of Exxon. What remains is to determine whether Exxon is entitled to judgment as a matter of law.

b. The Law

Exxon contends that it owes no duty to the employees of its independent contractors for the negligent acts of those independent contractors. That contention, limited by two exceptions, is indeed the law of Louisiana and of the Fifth Circuit. Ewell v. Petro Processors of Louisiana, Inc., 364 So.2d 604, 606 (La.App.1978); Wallace v. Oceaneering Intern., 727 F.2d 427, 437 (5th Cir.1984); Moser v. Texas Trailer Corp., 623 F.2d 1006, 1015 (5th Cir.1980).

i.) Exception for Ultrahazardous Activities

The first exception, which plaintiff argues is applicable in this case, is for ultrahazardous activities. If the activities in which the injured worker was engaged are ultrahazardous, the principal is liable for injuries incurred by him even though he was an employee of an independent contractor.

Whether an activity is ultrahazardous is a question of law. O'Neal v. International Paper Co., 715 F.2d 199, 201 (5th Cir.1983) (per curiam) (applying Louisiana law); Ashland Oil, Inc. v. Miller Oil Purchasing Co., 678 F.2d 1293, 1308 (5th Cir. 1982) (same). The identifying feature of an ultrahazardous activity is one in which there is a risk of harm that cannot be eliminated through the exercise of due care. O'Neal v. International Paper Co., supra at 202; Kent v. Gulf States Utilities Co., 418 So.2d 493, 498 (La.1982) (“[t]he activity, by its very nature, simply cannot be done without a high degree of risk of injury”). See Ashland Oil, Inc. v. Miller Oil Purchasing Co., supra at 1307-08.

In Kent v. Gulf States Utilities Co., supra, 418 So.2d 493 (La.1982), the Louisiana Supreme Court surveyed the Louisiana cases in which particular activities had been found to be ultrahazardous. These activities include “pile driving, storage of toxic gas, blasting with explosives, crop dusting with airplanes, and the like____” Id. at 498 (citing Louisiana cases and to W. Prosser, The Law of Torts § 78 (4th ed. 1971). The Louisiana Supreme Court determined that an ultrahazardous activity is one that is so inherently dangerous that absolute liability is properly imposed on the principal. Specifically, in Kent, the court found that the transmission of electricity over high tension power lines was an everyday occurrence that could be done without a high degree of risk of injury. Id. at 498-99. Therefore, the court ruled that it was not an ultrahazardous activity. Id. at 499. But see Orr v. United States, 486 F.2d 270, 274-76 (5th Cir.1973) (holding that under Florida law, an employee of an independent contractor working near government owned and operated power lines could recover under the Federal Tort Claims Act because the work was sufficiently hazardous and the relation between the government and the contractor was sufficiently close).

Other decisions in which the activity involved was found not to be ultrahazardous include: O’Neal v. International Paper Co., supra (cutting up a dilapidated boiler); Ewell v. Petro Processors of Louisiana, Inc., 364 So.2d 604 (La.App.1978) cert. denied 366 So.2d 575 (La.1979) (dumping of toxic waste); Fitzgerald v. Compania Naviera La. Molinera, 394 F.Supp. 413 (E.D.La.1975) (Rubin, J.) (loading of grain onto a ship).

Although the determination of whether an activity is ultrahazardous is a question of law, the answer to that question appears to turn on the factual question of whether the activity can be made safe. In the determination of whether an activity is ultrahazardous, however, judicial decisions do not rest on factual evidence presented by the parties. The Fifth Circuit in O’Neal v. International Paper Co., supra, premised its holding that the demolition of a boiler was not ultrahazardous on a comparison of boiler demolition with the dumping of toxic waste that was found not to be ultrahazardous in Ewell v. Petro Processors of Louisiana, Inc., supra. The O’Neal court reasoned that if “dumping toxic chemicals in waste pits is not an ultra-hazardous activity [citing to EwelUj, then cutting up a dilapidated boiler with a blow torch is not one either.” 715 F.2d at 202. Similarly, the Louisiana Supreme Court in Kent v. Gulf States Utilities Co., supra, determined that the transmission of electricity was not ultrahazardous based on the court’s observation that such transmission was an everyday occurrence in which injury almost always is the result of someone’s substandard conduct. 418 So.2d at 498-99.

Thus, it does not appear that Exxon need provide evidence as to the nonultrahazardous nature of sandblasting. The decision is one to be made by the court based on a comparison with activities previously held to be ultrahazardous and nonultrahazardous.

Plaintiff admits in its pre-trial memorandum that sandblasting can be accomplished under safe conditions. Plaintiff concedes that the platform owners could have insured that the work was done under safe conditions “very easily by specifying that the required [plaintiff does not disclose by whom required] air-fed hoods be used ... or that non-silica producing blasting material be used.” An ultrahazardous activity is one that by definition cannot be conducted safely. The fact that safety can be so easily achieved in sandblasting as plaintiff suggests necessarily makes sandblasting a non-ultrahazardous activity. Even if it were Exxon’s burden to show the absence of contested fact with respect to the nature of sandblasting, plaintiff has conceded that no issue of fact exists. Plaintiff challenges only the legal conclusion to be drawn from those facts. Therefore, the exception for ultrahazardous activities does not apply in this case.

ii.) Exception Where Principal Is In Control

The second exception to the general rule, which plaintiff does not contend is applicable to this case, is for instances where the principal exercises operational control over the work performed by its independent contractor. In a recent Fifth Circuit case, Wallace v. Oceaneering Intern., supra, 727 F.2d 427, an offshore oil field diver brought suit against his employer, a diving contractor; the drilling contractor; and the owner of an oil well for injuries sustained while on a diving assignment in support of a drilling operation at the oil well. The court stated that:

This Court has consistently held on similar facts that a principal, such as [the well owner], who hires independent contractors over which he exercises no operational control has no duty to discover and remedy hazards created by its independent contractors.

(citing Moser v. Texas Trailer Corp., supra, 623 F.2d 1006 at 1014-15; McCormack v. Noble Drilling Corp., 608 F.2d 169, 175 (5th Cir.1979)).

In Wallace, there was only one employee of the well owner at the drill site. The court observed that:

His role was that of the usual ‘company man’ in the offshore oil patch. He monitored the progress of the work of the independent contractors, making sure that the result was what the oil company [and well owner] had bargained for. This would include a concern whether the well was drilled in the proper location but not in detail how it was done. Although he could have ordered the work stopped if he observed an obviously dangerous situation, inspections of equipment and the choice of safe work methods were understood by all to be the responsibility of [the drilling contractor], and as to diving equipment and procedures, [the diving contractor]____ [The company man] had no actual control or responsibility for the details of the drilling and diving work, but merely inspected progress.

Id. at 436-37. On these facts and on evidence reflecting that the well owner did not retain control over the particular operation in which the diver was injured, the Court of Appeals held that the well owner could not be held liable for the negligence of the contractors and was therefore entitled to a directed verdict. Id. at 437.

Similarly, in McCormack v. Noble Drilling Corp., supra, 608 F.2d 169, an employee of a company that had contracted with a well owner to install metal casing in the well brought an action against the drilling contractor and the well owner to recover for injuries suffered while installing the casing. The Court of Appeals held that the well owner’s representative at the job evidenced no responsibility for and no knowledge of the specific procedures used by the contractors at the time of the accident and was therefore not liable for the injuries sustained by the injured employee of the drilling contractor. Id. at 174. Accord Bourg v. Texaco Oil Co., Inc., 578 F.2d 1117 (5th Cir.1978) (affirming decision of Heebe, J. not to instruct jury that Texaco could be held liable to Bourg for the negligence of his employer, who was an independent contractor to Texaco).

In this case, according to the deposition testimony submitted by Exxon, it was the practice of Exxon’s representatives to visit Exxon’s platforms on the order of several times each week to check the progress and quality of the work being performed by Exxon’s sandblasting contractors. During these inspections, the Exxon representative spoke only to the foreman of the sandblasting crew. This description accurately tracks that of the “company man” in Wallace v. Oceaneering Intern., supra, and supports the conclusion that in this case, Exxon was not in control and therefore is not liable for the offenses of its independent contractors.

iii.) Alleged Exception Where Principal Has Knowledge

Although there are only two recognized exceptions to the rule that the principal employer owes no duty to the employees of its independent contractors for the negligent acts of those independent contractors, plaintiff urges a third. Plaintiff argues that Exxon knew of the hazards of sandblasting “long before 1968” when it “directed that no subcontractor should be allowed to permit its sandblasters to blast on Exxon platforms without air-supplied respirators.” In support, plaintiff cites two exhibits contained in its book of trial exhibits. One is a copy of a letter dated May 24, 1968, to and from individuals named, but not otherwise identified, stating that “contractors for Humble [Exxon’s predecessor] should be required to furnish their sandblasters abrasive blasting respirators of the type approved by the United States Bureau of Mines.” The other is a copy of what appears to be the cover page and two inside pages of a document entitled, “Safety Manual, Production Department, 1969.” The two inside pages list suggestions or requirements with regard to sandblasting. Plaintiff does not state so expressly, but implies that Exxon should be held liable for the negligence of its independent contractors because Exxon allegedly knew that the work practice of those contractors was not safe.

Before reaching the substance of the extent of Exxon’s knowledge, if it could in fact be determined from such “exhibits”, it is necessary to determine the legal effect of knowledge of unsafe work practices of its independent contractors of safety rules promulgated by Exxon and any safety inspections that it may have conducted. Alexander v. United States, 605 F.2d 828 (5th Cir.1979) involved a claim under the Federal Tort Claims Act against the government arising from the death of plaintiff’s husband while he was employed in a government owned munitions factory. Although the case involved interpretation of Texas law, the law as interpreted is not different from Louisiana law.

The munitions factory was operated by the decedent’s employer under contract to the government. The government instituted and supervised safety in the plant to ensure compliance with the contract and with safety regulations of the United States. Government employees performed analyses of and approved all proposed testing and manufacturing devices and procedures before they were put into operation at the plant. The contract also authorized certain government employees to stop any activity at the plant that failed to conform to the government’s safety rules.

Nevertheless, because the contract expressly stated that the operator of the plant was an independent contractor, the Court of Appeals ruled that absent some showing of day-to-day control over plant operations by the United States, there was no basis for finding that operation of the plant was a joint endeavor. Therefore, the United States could not be held liable for any negligence of the independent contractor. Id. at 835. See LeSuer v. United States, 617 F.2d 1197, 1199 (5th Cir.1980) (“the law appears settled ... that employees of independent contractors cannot recover from the government under the Federal Tort Claims Act on the basis of contractual obligations requiring vigorous safety measures and the presence of government safety inspectors in the area); Copeland v. Gulf Oil Corp., supra, 672 F.2d at 871 (11th Cir.) (because contract labeled injured employee’s employer an independent contractor, the employer was an independent contractor and safety manuals of the principal were irrelevant).

Therefore, generalized knowledge regarding safety and required procedures to implement that knowledge are neither by themselves a source of liability of the principal, nor sufficient to invoke the “control” exception to the general rule protecting the principle from liability for the negligence of its independent contractors. Similarly, the Louisiana Supreme Court in Kent v. Gulf States Utilities Co., supra, held that specific knowledge of a dangerous work practice of an employee of an independent contractor was not a sufficient basis for liability of the principal. In Kent, plaintiff was an employee of an independent contractor who had been hired by the state to build a road. The employee was involved in grooving the road surface which required that he pull a rake with a thirty foot handle across sections of freshly poured concrete. The metal rake handle came into contact with an overhead power-line and plaintiff was electrocuted. The project inspector of the State of Louisiana Department of Highways was present at the time of the accident. The court rejected plaintiff’s contention that the inspector owed a duty to the employee to insure that he used proper tools and a safe method to perform his work. The court found:

The duty to provide [plaintiff] with a safe place to work, including proper tools, equipment and methods for safely performing his duties, was primarily on his employer and the employer’s executive officers. [The inspector] arguably could have prevented the accident by interjecting himself and demanding that [plaintiff’s employer] furnish [plaintiff] with a fiberglass rake, but he had no such duty to [plaintiff] and is not liable for failing to do so.

418 So.2d at 500.

Together, the Fifth Circuit in Alexander v. United States, supra and the Louisiana Supreme Court in Kent v. Gulf States Utilities Co., supra reinforce the conclusion that there are only two exceptions to the general rule: one for ultrahazardous activities and the other for exercise of control by the principal over the work performed by its contractors.

In any case, plaintiff has proffered no evidence that Exxon knew of the dangerousness of silica abrasive material and failed to warn. There is no affidavit — only two exhibits of unknown authenticity, veracity, relevance, and meaning. Exxon has carried the burden of showing that Touchstone’s employers were independent contractors over which Exxon exercised no control and plaintiff has not offered any evidence to controvert this.

4. Party In Interest

While plaintiff brought this action on behalf of herself and her major children, an action for wrongful death is intended to compensate only the surviving spouse and dependents of a decedent. Sea-Land Services, Inc. v. Gaudet, 414 U.S. 573, 579 & n. 5, 584, 94 S.Ct. 806, 811 & n. 5, 814, 39 L.Ed.2d 9 (1974); see Moragne v. States Marine Lines, 398 U.S. 375, 382, 90 S.Ct. 1772, 1778, 26 L.Ed.2d 339 (1970). Major children are presumed not to be dependents and are therefore not entitled to maintain a wrongful death action. There is no evidence in this record that these major children were in any way dependent upon the decedent. Moreover, even if they were, Rule 17(a) of the Federal Rules of Civil Procedure requires that actions be brought by the real party in interest. Therefore, if plaintiff’s major children indeed had a cause of action, it is they who are the parties in interest and must assert those claims.

Consequently, I find plaintiffs claims on behalf of her major children must be dismissed and that summary judgment is appropriate in favor of Exxon. Accordingly,

IT IS ORDERED that the motion of Exxon Corporation for summary judgment be GRANTED.

IT IS FURTHER ORDERED that the claims of plaintiff on behalf of Shirley Touchstone Tillman and Joe J. Touchstone, Jr. be DISMISSED.

IT IS FURTHER ORDERED that counsel for plaintiff show cause on Wednesday, November 14, 1984 at 9:15 a.m. why sanctions should not be imposed for failure to comply with Rule 11 of the Federal Rules of Civil Procedure.

Let judgment be entered accordingly.

      . ¶ XII of plaintiffs complaint. Document No. 1.

      . Plaintiffs request is found in her opposition memorandum; she did not then, and has not since, moved for leave to amend or withdraw the admissions, she was deemed until that time to have made because of her failure to respond in accordance with the Federal Rules of Civil Procedure. See infra note 8 & accompanying text.

      . See supra note 2.

      . Fed.R.Civ.P. 12(b).

      . The request for admissions was not answered until July, 1984, and then without leave of court. The interrogatories and request for production of documents were not answered until the day after the pre-trial conference, one week before trial.

      . Fed.R.Civ.P. 33(a), 34(b), 36(a).

      . Fed.R.Civ.P. 37(a).

      . One of the requests that plaintiff failed to answer within the 30 day period prescribed by the rule was to admit that it had no evidence of any kind that Touchstone had performed services for Exxon for any more than two weeks, if at all. Although plaintiff did eventually answer Exxon’s request for admission, she did not move to amend or withdraw the admission deemed to have been made because of the failure to answer within the 30 day period. Thus, plaintiff could be deemed to have admitted that she possesses no evidence that Touchstone sandblasted on an Exxon platform for more than two weeks, if at all.
      Notwithstanding plaintiffs failure to respond in a timely manner or to move for leave to amend or withdraw before she did respond, I must consider the entire record in deciding a motion for summary judgment and this record contains Touchstone’s testimony in the Scarborough case that contradicts the admissions I would otherwise deem plaintiff to have made.

      . Pltfs Mem.Sup. Motion Sum.J. at 9.


author: MERHIGE, District Judge.

text:
    Joseph M. GIARRATANO v. Gary L. BASS, Warden, et al.
    Civ. A. No. 83-0794-R.
    United States District Court, E.D. Virginia, Richmond Division.
    Oct. 22, 1984.
    Joseph M. Giarratano, pro se.
    Richard F. Gorman, III, Asst. Atty. Gen., Richmond, Va., for defendants.
   MEMORANDUM

MERHIGE, District Judge.

On August 22, 1984, plaintiff, proceeding pro se and in forma pauperis, filed this motion for a preliminary injunction to prohibit officials at Mecklenburg Correctional Center from further censorship and interference with legal correspondence between plaintiff and Ms. Marie Deans, a paralegal employed by J. Lloyd Snook, III, (plaintiff’s pro bono counsel in a collateral habeas corpus proceeding currently before the United States District Court for the Eastern District of Virginia, Norfolk Division). By order of August 27, defendants were given twenty days to respond to plaintiff's motion. On September 7 defendants requested an extension of time within which to respond. This extension was granted by order of September 17 and defendants’ responses, submitted on September 12 were deemed timely filed. Plaintiff submitted his rebuttal to defendants’ response on September 27. This motion is now ripe for consideration.

As a preliminary matter, the Court notes that plaintiff is a named party in Brown v. Landon, Civil Action No. 81-0853-R. On September 27, this Court held a hearing in that action-to address a motion for a preliminary injunction to enjoin defendants from unreasonably interfering with inmates’ access to attorneys at Mecklenburg Correctional Center. Pursuant to plaintiff’s request, the factual allegations underlying the instant motion for a preliminary injunction were not consolidated with the motion in Brown v. Landon.

By order of October 2, the Court granted plaintiff’s motion in Brown and enjoined defendants and “their agents, employees, and persons acting in concert with them” from interfering with the attorney-client relationship between plaintiff and their counsel at Mecklenburg Correctional Center. Although the order in Brown is not directly dispositive of the issue presented herein, it appears that defendants may be bound by principles of collateral estoppel based on this Court’s finding that there was improper interference with legal correspondence at Mecklenburg Correctional Center. Brown v. Landon. Findings of Fact of October 2, 1984, at 16, Line 21-24.

The standard concerning the granting of a preliminary injunction is one of a “balance of the hardships.” The Court must consider four factors: the plaintiff’s probability of success on the merits, plaintiff’s irreparable injury if the relief is denied, the harm to the defendants of issuing an injunction, and finally the public interest. Blackwelder Furniture Co. v. Seilig Manufacturing Co., 550 F.2d 189 (4th Cir. 1977). Applying the “irreparable injury” standard to the facts of the instant petition, the Court notes that plaintiff is alleging not merely an isolated incident of censorship concerning a letter addressed to plaintiff from Marie Deans on August 20 but, rather, plaintiff asserts that there is a concerted effort by officials at Mecklenburg Correctional Center to hamper his correspondence with paralegal Deans. Plaintiff’s Affidavit at 2, paragraph 3.

Defendants respond that the letter of August 20 was not clearly marked as attorney-client correspondence and, therefore, was properly treated as general correspondence. In support of their position, defendants cite Wolf v. McDonnell, 418 U.S. 539, 576, 94 S.Ct. 2963, 2984, 41 L.Ed.2d 935 (1974), in which the United States Supreme Court stated “We think it entirely appropriate that the State require any such communication to be specifically marked as originating from an attorney with his name and address being clearly given if they are to receive special treatment.” The purpose of such a standard, however, is to insure that such correspondence is “actually from members of the Bar.” Id.

The evidence indicates that this is not an isolated incident of legal censorship; defendants’ interference with legal correspondence from paralegal Deans was causing plaintiff concern as early as November, 1983. Affidavit of Marie Deans, Filing No. 39 at 1. Given the voluminous documentation of the ongoing dispute between officials at Mecklenburg Correctional Center, plaintiff, his attorney, and paralegal Deans on this precise issue, this Court is unconvinced that the defendants were unaware that Mr. Snook is a member of the Virginia State Bar and that Ms. Deans is a paralegal working at his behest. As the defendants admitted in their response to plaintiff’s grievance petition, “The Operations Officer knows who Mrs. Deans is.” Plaintiff’s Enclosure A, at 1, paragraph 4.

The essential issue presented in this motion is the question of whether the legal correspondence of paralegals and other agents of licensed attorneys is to be afforded the same constitutional status as that afforded to direct correspondence from an attorney. Relying on the analysis set forth in Procunier v. Martinez, 416 U.S. 396, 419-20, 94 S.Ct. 1800, 1814-1815, 40 L.Ed.2d 224 (1974), this Court is of the opinion that the status of protected attorney legal correspondence should be extended to para-professionals employed by attorneys. The thrust of Procunier is to ensure reasonable access to attorneys and their agents in order to afford adequate counsel to indigent prisoners; “allowing law students and para-professionals to interview inmates might well reduce the cost of legal representation for prisoners.” Id. at 420, 94 S.Ct. at 1814.

The Court notes that Virginia’s Division Guideline # 851, as amended on March 15, 1984, states:

Incoming special purpose correspondence, packages of legal material and mail from lawyers, law schools, legal service groups, and the parole board will be opened in the presence of the inmate.

The plaintiff provides the Court with evidence that on at least six (6) separate occasions, letters properly marked as attorney-client legal correspondence were improperly opened between June 1, 1984, and the present date. Plaintiff’s Enclosures C, E, F, G, H, and Exhibit I, with Attachments, provide compelling evidence that the defendants are not complying with their own guidelines. In addition, plaintiff submits correspondence containing only the letterhead American Civil Liberties Union and avers that this correspondence was given special correspondence status on July 30, 1984. See Enclosure B and Plaintiff’s Rebuttal to Defendants’ Response at 5, n. 2. In light of these facts, this Court can only conclude that, indeed, defendants “know who Mrs. Deans is” and have singled her correspondence out for “special treatment.”

Defendants argue that the current procedures and treatment of Ms. Deans’ legal correspondence is necessary in order to insure security at Mecklenburg Correctional Center. The Court notes that prior to the May 31 escape, correspondence from Ms. Deans was afforded special purpose status. Defendants have not advanced any specific factual information regarding the nature of the threat that Ms. Deans presently imposes upon security at the institution; this Court is unpersuaded that the security of the institution depends on censoring this paralegal’s correspondence.

Defendants rely on the Supreme Court’s opinion in Wolf v. McDonnell to justify their “perusal” of plaintiff’s legal correspondence. 418 U.S. at 576, 94 S.Ct. at 2984. Given defendants’ broad reading of the term “perusal” (“to read through, to read with attention, to observe, to examine with careful survey”, Defendants’ Response to Preliminary Injunction at 5, n. 1), to adopt defendants’ position would be to authorize a blanket policy permitting prison officials to engage in a leisurely ex parte examination of all incoming legal correspondence. This Court rejects such a proposal.

Applying the Blackwelder “balance of the hardships” test to these facts as presented, this Court is of the opinion that a preliminary injunction is warranted. Accordingly, plaintiff’s motion shall be GRANTED. Defendants shall be ENJOINED from opening clearly marked legal correspondence from Marie Deans outside the presence of the plaintiff, and then only for the purpose of inspecting for contraband.

An appropriate order shall issue.

ORDER

For the reasons set forth in the accompanying memorandum, the Court hereby GRANTS plaintiff’s motion for a preliminary injunction and ENJOINS the defendants, their agents, employees, and persons acting in concert with them from interfering with legal correspondence between the plaintiff and paralegal Marie Deans. Specifically, clearly-marked legal correspondence shall not be opened outside the presence of the plaintiff nor shall it be opened for any other purpose than to inspect for contraband.


author: GENE CARTER, District Judge.

text:
    George E. KINNEY, Plaintiff-Appellant, v. Margaret HECKLER, Defendant-Appellee.
    Civ. No. 83-0284 P.
    United States District Court, D. Maine.
    Oct. 22, 1984.
    Michael A. Bell, Bell & Geores, Lewiston, Me., for plaintiff-appellant.
    Paula D. Silsby, Asst. U.S. Atty., Portland, Me., for defendant-appellee.
   ORDER OF REMAND

GENE CARTER, District Judge.

This case is before the Court on Plaintiffs appeal from an Order of the Magistrate of June 8, 1984, affirming the Secretary’s decision that terminated Plaintiff’s Social Security disability benefits. Defendant filed a Motion for Extension of Time in which to file Defendant’s appeal brief on September 27, 1984, the date her brief was due. Plaintiff filed a brief in opposition to Defendant’s motion on October 10, 1984.

The ground for Defendant’s Motion for Extension of Time was the impending enactment of the Social Security Disability Benefits Reform Act of 1984, Pub.L. 98-460 (hereinafter the Reform Act). The Reform Act was signed by the President and thereby enacted on October 9, 1984. The Reform Act changes the standard of review for termination of disability benefits. Pub.L. 98-460, § 2(a) (1984). Cases to which the new standard applies include those in which a request for judicial review was pending on September 19, 1984. Id., § 2(d)(2)(C). The Act provides that “the court shall remand such cases to the Secretary for review in accordance with the provisions of the Social Security Act as amended by this section.” Id., § 2(d) (emphasis added).

Plaintiff argues in his memorandum, filed the day after the enactment of the Reform Act, that the Court should not remand this case because only one of the five issues he raises on appeal would implicate the new standard of review for termination of benefits. He urges the Court to retain jurisdiction so that all the issues raised may be decided by the Court. This option, however, is not open to the Court. There is no question that this is a ease to which the new standard of review for termination of disability benefits is to be applied since a request for judicial review was pending on September 19, 1984. See Pub.L. 98-460, § 2(d)(2)(C). In such a ease, the statute clearly commands the court to remand to the Secretary. See Id., § (2)(d) and supra. The Court is obligated to obey this command. Should Plaintiff be denied benefits after review by the Secretary under the new standard, he will have an opportunity to obtain judicial review of all the issues properly raised.

Finally, Plaintiff argues that, in the event the case is remanded, the Court should order the Secretary to reinstate Plaintiffs benefits retroactive to the date of termination and continue paying them until final decision by the Secretary. Plaintiff cites two recent decisions of the Court in support of his request. Longley v. Heckler, Civil No. 84-0088-P (D.Me. June 29, 1984) (unpublished order); Dionne v. Heckler, 585 F.Supp. 1055 (D.Me.1984). In these cases, the Court relied upon its power to remedy prejudicial delay attributable to the Secretary to restore benefits retroactively pending final adjudication of the case. Cf. Alameda v. Secretary of Health, Education and Welfare, 622 F.2d 1044 (1st Cir.1980) (court has inherent power to remedy failure of Secretary to file memoranda in support of her decisions); Montrose v. Heckler, 579 F.Supp. 240 (D.Me.1984) (Alameda gives court authority to order Secretary to file administrative record within ten days).

In this case, the Court does not order retroactive and continuing payments of benefits because, first, delay caused by the Secretary has been minimally prejudicial and, second and most important, the Reform Act of 1984 specifically addresses the question of the availability of benefits pending review.

The Defendant was hardly a paragon of promptness in this action. Defendant failed to file an appeal brief within 20 days, and, instead, filed a Motion for Extension of Time. However, the Court finds that, even had Defendant timely filed an appeal brief, it is likely that the Court would have applied the Reform Act of 1984 and remanded the case. Thus, the Secretary’s delay has not prejudiced Defendant.

Second, the Reform Act of 1984 deals specifically with the eligibility for benefits of claimants whose cases are remanded pursuant to Section 2(d)(2) of the Reform Act. Pub.L. 98-460, § 2(e). The Act provides that a claimant whose case is in such a posture may elect to have payments recommenced starting from the time of the election. Id., § 2(e). Should he be found eligible for continued benefits under the new standard of review, benefits must be restored retroactively. Id., § 2(f). In light of these provisions, the Court declines to order the reinstatement of benefits, in the absence of prejudicial delay by the Secretary, in a manner inconsistent with the express method for payment of benefits pending review dictated by Congress in the Reform Act of 1984.

Because the Reform Act dictates that the Court shall remand this case to the Secretary, the Court need not rule on the Secretary’s Motion for Extension of Time to file an appeal brief.

Accordingly, it is

ORDERED that this case be, and is hereby, REMANDED to the Secretary of Health and Human Services pursuant to Pub.L. 98-460, § 2(d)(2).

So ORDERED.

      . The Court does not at this time intend to indicate that sections 2(e) and (f) of the Reform Act impliedly displace its authority to order retroactive and continuing payment of benefits pending review where the Secretary’s dilatory conduct causes financial prejudice to the claimant. See Longley v. Heckler, Civil No. 84-0088-P (D.Me. June 29, 1984) (unpublished order).