author: CURTIN, Chief Judge.

text:
    VILLAGE OF WELLSVILLE, Plaintiff, v. ATLANTIC RICHFIELD COMPANY, a/k/a ARCO, Defendant.
    No. CIV-84-1327C.
    United States District Court, W.D. New York.
    May 8, 1985.
    Harris, Beach, Wilcox, Rubin & Levey, Rochester, N.Y. (Alan J. Knauf, Rochester, N.Y., of counsel), for plaintiff.
    Phillips, Lytle, Hitchcock, Blaine & Huber, Buffalo, N.Y. (David K. Floyd, Buffalo, N.Y., of counsel), for defendant.
   CURTIN, Chief Judge.

Plaintiff originally initiated this action in the Supreme Court of the State of New York, Allegany County. Defendant removed the suit to this court on the basis of the court’s diversity jurisdiction. Plaintiff seeks a remand to state court, challenging not the jurisdictional basis, but claiming that the petition for removal was prematurely filed.

Defendant filed its petition for removal on November 20, 1984, approximately 26 days after it was served with a summons and notice. No complaint had been served, nor had one been served at the time of submission of this motion for decision.

Plaintiff cites 28 U.S.C. § 1446(b), which provides that a

petition for removal of a civil action or proceeding shall be filed within thirty days after the receipt by the defendant, through service or otherwise, of a copy of the initial pleading setting forth the claim for relief upon which such action ... is based____

(Emphasis added.)

Plaintiff relies on this court’s decision in Manufacturers and Traders Trust v. Hartford Accident and Indemnity Co., 434 F.Supp. 1053 (W.D.N.Y.1977). In that case, defendant filed its petition to remove within 30 days after the complaint was served, but more than 30 days after the summons and notice were received. Plaintiff claimed that the petition was filed too late, since the summons and notice constituted an “initial pleading.” This court rejected plaintiffs argument, saying:

... I find that the summons with notice in this case provided insufficient information to qualify as an initial pleading under the statute. By filing its petition for removal within thirty days of service of the complaint, defendant has complied with the requirement of § 1446(b).

Id. at 1055.

In 1980, Judge Knapp of the Southern District of New York was faced with the same question — whether a petition for removal filed within 30 days of the complaint but more than 30 days after the service of summons with notice was timely. Judge Knapp, however, found that the summons with notice constituted an “initial pleading” and granted the plaintiff’s motion for a remand. DiMeglio v. Italia Crociere Intemazionale, 502 F.Supp. 316 (S.D.N.Y.1980).

Shortly after this court’s decision in Manufacturers and before Judge Knapp’s decision, Section 305(b) of New York’s Civil Practice Law and Rules was amended. Before the amendment, the service of a notice describing the case with the summons was optional. The amended section 305(b), which became effective January 1, 1979, requires that summons served without complaints “shall contain or have attached thereto a notice stating the nature of the action and the relief sought.” (Emphasis added.)

Based on this amendment, Judge Knapp found that a summons will now provide plaintiff with as much information bearing on removability as does a complaint. DiMeglio, at 318.

Both these cases were recently reviewed by Judge Glasser of the Eastern District of New York. Judge Glasser was confronted with a factually similar situation and chose to follow this court’s decision in Manufacturers, holding that the complaint was the initial pleading for the purposes of section 1446(b). E.W. Howell Co., Inc. v. Underwriters Laboratories, 596 F.Supp. 1517 (E.D.N.Y.1984).

In New York, the notice accompanying a summons is not recognized as a pleading. CPLR § 3011. Before the amendment to CPLR § 305(b), the notice had no legal effect except in cases of default. Everitt v. Everitt, 4 N.Y.2d 13, 171 N.Y.S.2d 836, 148 N.E.2d 891 (1958). And, as plaintiff points out, the legislative history accompanying the amendment reveals that it was primarily intended to enable plaintiffs to take a default judgment. The notice, however, now has an additional legal effect — a summons served with neither notice nor complaint is jurisdictionally defective. Parker v. Mack, 61 N.Y.2d 114, 472 N.Y.S.2d 882, 460 N.E.2d 1316 (1984).

State law, however, is not alone determinative of whether a document qualifies as an initial pleading for the purposes of 28 U.S.C. § 1446(b).

Section 1446(b) provides two different methods for determining the date on which defendant has received adequate notice of the action and hence the date on which the time period for seeking removal begins to run; the statute specifies that the method producing an earlier termination of the removal period shall be used. According to the first measuring procedure, the time period begins to run when defendant receives a copy of the “initial pleading.” Since the purpose of the provision is to ensure that defendant will have adequate information on which to judge the availability and desirability of removal, a summons or similar writ that does not set forth the nature of the claim for relief against him, is not a “pleading” and does not commence the time period. As Judge Murrah noted in Ardison v. Villa, which held that the time period runs from the receipt of the complaint rather than the initial summons:
The manifest purpose of starting the period for removal from the date of the service of the “initial pleading” is to enable the defendant to intelligently ascertain removability from the face of such initial pleading, so that in his petition for removal, he can make a “ * * * short and plain statement of the facts which entitle him or them to removal * * * ” as required by 28 U.S.C. § 1446(a).

Wright, Miller and Cooper, Federal Practice and Procedure, Vol. 14A, pp. 516-17 (1985), citing Manufacturers, 434 F.Supp. 1053 (footnotes omitted).

The treatise went on to say that even when a defendant seeks removal before receiving an “initial pleading,” the petition will not be denied simply because it is too early. The defendant, however, might have difficulty in stating why he is entitled to remove in the absence of a complaint. Id. at 519.

In view of the above and the statute itself, it seems clear that Congress intended to protect defendants from being barred by the 30-day limit before they had a fair opportunity to determine whether the case was removable. (See the second paragraph of § 1446(b) which provides that, if the case stated by the initial pleading is not removable, a petition can be filed within 30 days after receipt by defendant of the first paper from which it can be ascertained that the case is removable.) Prompt removal is also a goal, as is apparent by the mandatory 30-day time limit.

As Judge Knapp pointed in DiMeglio, 502 F.Supp. 316, the requirements imposed by the new CPLR § 305(b) are in harmony with modern notions of notice pleading. The notice must state the nature of the action and the relief sought. This will frequently provide defendants with enough information to determine whether the case is removable.

Of course, there will be cases in which removability is not ascertainable from the summons with notice. For example, as plaintiff points out, complex claims which touch upon federal statutes or causes of action may not be apparent from the summons with notice. Additionally, plaintiffs might not specify their residency in terms which would enable defendants to determine whether there is diversity.

In Manufacturers, plaintiff bank listed its residence as Erie County but did not say where it was incorporated. In E.W. Howell Co. v. Underwriters Laboratories, 596 F.Supp. 1517, Judge Glasser emphasized that plaintiff did not include its residence in the summons with notice, making it “impossible to determine removability, on diversity grounds, from the face of the summons.” Id. at 1520.

There is no such ambiguity in the instant case. Plaintiff’s residence was clear on the face of the summons, since plaintiff is a municipality. Its notice told defendant that the civil action sought damages for $50,000,000, well in excess of the $10,000 minimum for diversity jurisdiction. Immediately on receipt of the summons with notice in this case, defendant knew the nature of the action and that it could be properly removed. As such, there was sufficient information in the summons with notice in this case to constitute an initial pleading for purposes of section 1446(b).

In DiMeglio, 502 F.Supp. 319, Judge Knapp noted that the residence of the plaintiff for diversity purposes was not apparent from the face of the summons. However, he held that defendant should have ascertained plaintiff’s residence within 30 days of receiving the summons. For resolution of this case, it is not necessary to determine the propriety of placing the burden on defendant when removability is not clear from the face of the summons and notice. The court declines to do so.

The action was properly removed. Plaintiff’s motion to remand is denied.

The court notes that there is another action pending on this docket between the same parties on the same facts but involving federal causes of action. Village of Wellsville v. Atlantic Richfield Co., d/b/a ARCO, CIV-84-1196C. There will be a telephone conference to discuss the status of both cases on May 29, 1985, at 1:30 p.m.

So ordered.


source: Caselaw Access Project

author: CLIFFORD SCOTT GREEN, District Judge.

license: Public Domain

text:
    Robert F. WALSH, Jr., by mother Mary WALSH v. Margaret HECKLER, Secretary of Health and Human Services.
    Civ. A. No. 84-5059.
    United States District Court, E.D. Pennsylvania.
    May 8, 1985.
    Stephen F. Gold, Philadelphia, Pa., for plaintiff.
    Susan D. Bricklin, Asst. U.S. Atty., Philadelphia, Pa., for defendant.
   MEMORANDUM

CLIFFORD SCOTT GREEN, District Judge.

This action to review denial of plaintiff’s application for child’s disability insurance benefits under the Social Security Act, as amended, 42 U.S.C. §§ 301-1396 (1982), is currently before the court on the parties’ cross motions for summary judgment.

Plaintiff has been confined to a mental institution since December, 1978; he has been diagnosed as suffering from paranoid schizophrenia. Plaintiff’s mental health problems were apparent as early as 1967 when he was treated for anxiety reaction. In order for plaintiff to be entitled to benefits, however, he must demonstrate that his mental illness became disabling prior to his twenty-second birthday. See 42 U.S.C. § 402(d)(1)(B) (1982). The operative date in this case is June 27, 1970. Plaintiff herein alleges a disability onset date of June 26, 1970.

Plaintiff’s father filed an application on his son’s behalf for disabled adult child’s benefits on March 22, 1983. The application was denied initially and on reconsideration by the Office of Disability Operations of the Social Security Administration. The case was subsequently considered dé novo by an Administrative Law Judge (“AU”) before whom plaintiff’s parents appeared unrepresented by counsel. The only testimony offered was that of the parents. Plaintiff was unable to appear due to his hospitalization at the Haverford State Hospital. The AU found that plaintiff did not have a severe mental impairment prior to his twenty-second birthday, and therefore, was not disabled as of such time. Thereafter, the Appeals Council denied plaintiff’s request for review so that the AU’s decision, finding plaintiff not disabled as of his twenty-second birthday and therefore not entitled to adult child’s benefits, became the final decision of the Secretary of Health and Human Services (“Secretary”). It is from this final decision that plaintiff appeals.

Plaintiff argues, that he was prejudiced by his lack of representation at the hearing before the AU. He argues further that as a result of this prejudice a remand is proper. I agree.

The Third Circuit has stated that “[w]hen [a] claimant has been informed of his right to counsel before an administrative hearing and knowingly waives it, his lack of representation is not, of itself, cause for remand. Lack of counsel is sufficient cause for remand only if supported by a showing of clear prejudice or unfairness at the administrative hearing.” Dobrowolsky v. Califano, 606 F.2d 403, 407 (3d Cir.1979) (citations omitted). Such prejudice was found by the court in Dobrowolsky where the AU failed to pursue the possibility that the claimant came within one of the per se qualifications for disability under the applicable regulations. Id. at 407-08; see also Livingston v. Califano, 614 F.2d 342, 345-46 (3d Cir.1980). Plaintiff urges that he was similarly prejudiced at this hearing before the ALJ.

Under 20 CFR Part 404, Appendix 1, § 12.03 (1984), a person is deemed to have a “functional psychotic disorder” and thereby disabled per se if both A. and B. are present:

A. Manifested persistence of one or more of the following clinical signs:
1. Depression (or elation) or
2. Agitation; or
3. Psychomotor disturbances; or
4. Hallucinations or delusions; or
5. Autistic or other regressive behavior; or
6. Inappropriateness of affect; or
7. Illogical association of ideas.
B. Resulting persistence of marked restriction of daily activities and constriction of interests and seriously impaired ability to relate to other people, (emphasis added)

There is evidence in the record which would support a finding that plaintiff falls within the above quoted per se qualification for disability. Dr. William J. Galligan, in a letter dated July 14, 1967, to Dr. Phillip S. Backus, noted plaintiffs “depressed affect” and “manic depressive type of swing” in mood. (Tr. 133). Dr. Galligan’s treatment notes for plaintiff reveal that on August 7, 1967, plaintiff was “still quite depressed”, causing Dr. Galligan to increase plaintiffs medication. (Tr. 147). The notes also reveal that on a date in 1969 (not precisely ascertainable due to the poor quality of the copies of the notes provided in the record) plaintiff was “extremely depressed [with] flattened affect.” (Tr. 148). These clinical observations clearly fit within the characteristics of “Depression (or elation)” and “Inappropriateness of affect” set forth in the above quoted regulation. This evidence is also uncontradicted in the record.

In light of the above listed uncontradicted evidence, I must conclude that, as in Dobrowolsky and Livingston, the AU failed to properly develop evidence that would assist him in determining whether plaintiff fell within the per se qualifications for disability listed in the regulations. This conclusion is based, inter alia, on the fact that the AU devoted substantial time at the hearing to the matter of plaintiffs grades and course load while away at college. See Tr. 34-38, 51-58. This issue was, however, of questionable relevance given that the ability to attend school does not automatically negate a finding of disability. See Detamore v. Schweiker, 569 F.Supp. 288, 290 (E.D.Pa.1983); see also Parish v. Califano, 642 F.2d 188 (6th Cir. 1981); 20 CFR § 404.1572(e) (1984). The AU did not, however, develop with plaintiffs parents issues such as plaintiffs “restriction of daily activities, constriction of interest”, or “impaired ability to relate to other people” prior to June 27, 1970. These factors are set forth in the per se qualifications for disability set forth in the regulation. Thus, this case is similar to Livingston where “the AU failed to inquire properly into claimants strongest argument and yet did inquire about arguably irrelevant matters.” Livingston v. Califano, 614 F.2d at 346.

For the above stated reasons, I find that plaintiff was prejudiced by lack of counsel and the AU’s failure to adequately develop the record. Accordingly, this ease will be remanded to the Secretary for a hearing at which counsel may appear and represent the interest of plaintiff.


author: PRICE, District Judge.

text:
    Donald F. HARRISON; Dorothy A. Harrison; Lowell W. Saunders; Bill Johnson Reece; Peggy Lorene Reece; Lee J. Richards, as Trustee for Bakersfield Panorama Medical Clinic Inc., Employees Defined Benefit Pension Plan and Trust; Shirley S. Teitsworth; Frederick C. Porter; Marie C. Porter; Austin J. Hunter; Alice M. Hunter; Dorothy Klavetter; Gary W. Klavetter; Michael P. McCrossen; Hugh H. Fullington; Marshall C. Hollingsead; Gladys T. Hollingsead; Edward W. Saunders; Sanders Associates; Cardex Investments; M.E. Walker; Dave Barber; Kenneth G. Anderson; Louis Frank; and Evelyn Frank, Plaintiffs, v. Jimmy M. SHEATS; Glenn Wood; Gary J. Sampson; Duane H. Goertz; Gerald T. Ramey, Jr.; David K. Ramey; the Treasury Vault of West Covina, a California Limited Partnership; Thomas H. Werdel, Jr.; Werdel and Werdel, a Professional General Legal Partnership; and Ramey Management, Inc., a California Corporation, Defendants.
    No. CV F 83-309-EDP.
    United States District Court, E.D. California.
    May 8, 1985.
    E. Terrence Woolf, Howe & Ness, Clovis, Cal, for plaintiffs.
    Michael J. Lampe, Tulare, Cal., for defendants Goertz, Sampson and The Treasury Vault of West Covina.
    Howard M. Jaffe, Jeffrey A. Tidus, Lewis, D’Amato, Brisbois & Bisgaard, Los Angeles, Cal., for individual Werdel defendants and Werdel and Werdel.
    Mark T. Mauerman, Borton, Petrini & Conron, Bakersfield, Cal., George E. Dalton, George E. Dalton & Associates, San Pedro, Cal., for defendant Jimmy Sheats.
    Gerald T. Ramey, Jr., in pro per.
    Frederick A. Cone, San Francisco, Cal., for defendant Glenn L. Wood.
   MEMORANDUM DECISION

PRICE, District Judge.

A complaint was filed on behalf of some thirty-seven (37) persons against the above-named defendants. The defendant Sheats, a certified public accountant, together with the defendants Wood, Goertz, Sampson and Ramey, and David K. Ramey, Jr., allegedly formed a limited partnership to engage in business, known as the Treasury Vault of West Covina. The Werdel defendants are attorneys, and their alleged participation consisted of preparing the certificate of limited partnership, the amendments thereto, and an offering circular, all of which were used to solicit customers to purchase an offering of 850 units of limited partnership interests.

Plaintiffs’ complaint contains ten counts predicated on the provisions of the Federal Securities Acts, two counts predicated upon violations of the California Corporations Code, a single count of intentional fraud, a single count of fraudulent omission of material fact, a single count of negligent misstatement, a single count of breach of contract, a single count alleging professional negligence by the attorney-defendants, and a single count for an accounting by the defendant general partners of the defendant Ramey Management, Inc.

Since the action was originally commenced, certain plaintiffs have been added, and other plaintiffs have entered voluntary dismissals.

We are here concerned with the fact that the plaintiffs have entered into a stipulated judgment with the defendant Sampson. In pertinent part, the parties to this agreement agree that:

(1) Sampson will consent to a default being entered against him in the instant action;

(2) Plaintiffs agree that they will not request the Court to enter a judgment on Sampson’s default in consideration of Sampson paying to the plaintiffs $75,000, payable as follows:

(a) $37,500 on the execution of the agreement, and
(b) $37,500 on or before March 15, 1986.

The parties further stipulate that the total damages sustained by the plaintiffs to date are $1.1 million, and that if Sampson does not pay the second installment as agreed in the compromise settlement, plaintiffs may request the Clerk to enter a default judgment against Sampson in the total sum of $1.1 million. The agreement is silent as to which particular cause or causes of action that Sampson concede are the basis of his liability. An examination of the file indicates that Sampson has not answered the plaintiffs’ complaint and no appearance, general or special, has ever been made on his behalf.

Plaintiffs noticed a motion requesting that the Court, by order, determine that the plaintiffs’ settlement with the defendant Sampson has been made in good faith, and that any other “joint tortfeasors” shall be barred from any further claim against Sampson for equitable, comparative contribution, or partial or comparative indemnity based on comparative negligence or comparative fault. Admittedly, plaintiffs’ motion is based on § 877.6 of the California Code of Civil Procedure.

The Werdel defendants oppose the motion, particularly the portion of the motion that would bar them from seeking contribution and/or indemnity from Sampson should plaintiffs prevail. Counsel for the defendants Wood and Sheats appeared in support of plaintiff’s position.

All counsel concede that this is an issue of first impression in the federal courts.

Common Law Background

At common law, a release or dismissal of one tortfeasor for consideration, released all of the others, even though an express reservation was retained by the plaintiff to pursue the remaining joint tortfeasors. The theory of the common law rule was that there could be but one compensation for the joint wrong; since each joint tortfeasor in contemplation of the law was responsible for the whole damage, that once the injured party has been paid by any of them for the injury that he had suffered, the plaintiffs cause of action was satisfied. Under the common law theory, the amount of payment received was immaterial; the claim being unliquidated, any payment in consideration of a release or dismissal operated as full compensation. Attempts to circumvent the perceived harshness of this rule resulted in considerable litigation and distinctions of form rather than substance, i.e., use of. the covenant not to sue or the covenant not to execute in place of a release or dismissal. In 1957 the California legislature enacted Code of Civil Procedure § 877, which provided in pertinent part as follows:

Where a release, dismissal with or without prejudice, or a covenant not to sue or not to enforce judgment is given in good faith before verdict or judgment to one or more of a number of tortfeasors claimed to be liable for the same tort—
(a) It shall not discharge any other such tortfeasor from liability unless its terms so provide, but it shall reduce the claims against others in the amount stipulated by the release, the dismissal or the covenant, or in the amount of the consideration paid for it whichever is greater; and
(b) It shall discharge the tortfeasor to whom it is given from all liability for any contribution to any other tortfeasors. Immediately, the California courts were

flooded with litigation that had as its purpose judicial determination of whether a particular settlement was in good faith. The leading case on this subject was River Garden Farms, Inc. v. Superior Court (1972) 26 Cal.App.3d 986, 103 Cal.Rptr. 498. In order to stem the flood of this litigation, the California legislature adopted C.C.P. § 877.6:

(a) Any party to an action wherein it is alleged that two or more parties are joint tortfeasors shall be entitled to a hearing on the issue of the good faith of a settlement entered into by the plaintiff or other claimant and one or more alleged tortfeasors, upon giving notice thereof in the manner provided in Sections 1010 and 1011 at least 20 days before the hearing. Upon a showing of good cause, the court may shorten the time for giving the required notice to permit the determination of the issue to be made before the commencement of the trial of the action, or before the verdict or judgment if settlement is made after the trial has commenced.
(b) The issue of the good faith of a settlement may be determined by the court on the basis of affidavits served with the notice of hearing, and any counteraffidavits filed in response thereto, or the court may, in its discretion, receive other evidence at the hearing.
(c) A determination by the court that the settlement was made in good faith shall bar any other joint tortfeasor from any further claims against the settling tortfeasor for equitable comparative contribution, or partial or comparative indemnity, based on comparative negligence or comparative fault.
(d) The party asserting the lack of good faith shall have the burden of proof on that issue.

Admittedly, it is under this statutory scheme that plaintiffs’ motion proceeds.

Issue Before the Court

In their opposing papers, the Werdel defendants succinctly limit the issues presently before the Court.

As will be discussed in more detail below, the attorney defendants do not dispute that the amount proposed to be paid by Sampson to plaintiffs in connection with the proposed settlement, although grossly disproportionate to his actual proportion of liability to plaintiffs, falls within the definition of “good faith” as used in California Code of Civil Procedure Section 877.6____
The only dispute which the attorney defendants have with the motion brought by plaintiffs and defendant Sampson is that plaintiffs and defendant Sampson seek to extinguish the attorney defendants’ right to contribution or total or partial indemnity for claims arising under the federal securities laws by use of a California state statute (C.C.P. § 877.6).

The Applicable Law — State or Federal?

From the recital of the pendent state causes of action, it is abundantly clear that the current federal jurisprudence requires the fraud counts, the omission of material fact count, the negligent misrepresentation count, attorneys’ negligence count, the breach of contract count, and the partnership accounting count to be determined by California state substantive law. Of these, the fraud, intentional omission and negligent misrepresentation counts sound in tort.

The right of contribution among joint tortfeasors is also an abrogation of the common law. At common law there was no right of contribution among persons jointly or severally liable in tort, i.e., among joint, concurrent or successive tortfeasors. Severe criticism by legal scholars led to the adoption of a Uniform Contribution Among Tortfeasors Act in 1939, and revised in 1955. However, California did not adopt such an act until 1957, when Section 875 was added to the Code of Civil Procedure. The statute as adopted, differed substantially from the Uniform Act, and certain features of that section should be noted.

First, the right to contribution does not arise until a money judgment has been rendered against two or more defendants in a tort action.

Second, the right of contribution may be enforced only after one tortfeasor has discharged the entire joint judgment, or has paid more than his pro rata share of the same.

Third, there shall be no right of contribution in favor of any tortfeasor who has intentionally injured the plaintiff.

Fourth, a liability insurer shall be subrogated to the rights of a tortfeasor judgment debtor.

Fifth, the right of contribution is independent of the right of indemnity. Where one tortfeasor judgment debtor is entitled to indemnity, there shall be no contribution between them.

The causes of action predicated upon the California Securities Act present a different problem. California Corporations Code, Section 25505, specifically creates a limited right of contribution between persons jointly liable:

A corporation which is liable under this chapter shall have a right of indemnification against any of its principal executive officers, directors, and controlling persons whose willful violation of any provision of this law gave rise to such liability. All persons liable under this chapter shall have a right of contribution against all other persons similarly liable, except that no person whose willful violation of any provision of this law has given rise to any liability shall have any right of contribution against any other person guilty merely of negligent violation, and except that no principal executive officer, director, or controlling person whose willful violation has given rise to any liability shall have any right of contribution against the corporation to which he sustains that relationship.

Since this section was added to the California code eleven years after Sections 875 and 877, it may be inferred that the legislature intended this section to govern all actions founded on the California Corporate Securities Act, and that said action would not be controlled by Sections 875, et seq., of the Code of Civil Procedure.

The Federal Law

The concept of contribution is not unknown in federal jurisprudence. It is permitted in admiralty, Halcyon v. Haenn Ship C. & R. Corp., 342 U.S. 282, 72 S.Ct. 277, 96 L.Ed. 318 (1952), and under the Federal Tort Claims Act, United States v. Yellow Cab Co., 340 U.S. 543, 71 S.Ct. 399, 95 L.Ed. 523 (1951) (the Federal Tort Claims Act carries the government’s consent to be sued for contribution, not only in a separate proceeding, but also as a third-party defendant, seven Justices concurring).

15 U.S.C. § 77k(f), reads as follows:

All or any one or more of the persons specified in subsection (a) [Title 11 Registration violations], shall be jointly and severally liable, and every person who becomes liable to make any payment under this section may recover contribution as in cases of contract from any person who, if sued separately, would have been liable to make the same payment, unless the person who has become liable was, and the other was not, guilty of fraudulent misrepresentation.

In Heizer Corp. v. Ross, 601 F.2d 330 (7th Cir.1979), the Seventh Circuit held that:

However, although neither Section 14(a) nor 10(b) of the Securities Exchange Act of 1934 by their terms create an express civil remedy for their violation, and there is no indication that Congress, or the Securities and Exchange Commission when adopting Rule 10b-5, contemplated such a remedy, the existence of an implied private cause of action for violation of the statute and the rule is well established. J.I. Case Co. v. Borak, 377 U.S. 426, 84 S.Ct. 1555, 12 L.Ed.2d 423 (1964) (§ 14(a)); Superintendent of Insurance v. Bankers Life & Casualty Co., 404 U.S. 6, 13 n. 9, 92 S.Ct. 165 [169 n. 9], 30 L.Ed.2d 128 (1971) (§ 10(b)); Affiliated Ute Citizens v. United States, 406 U.S. 128, 150-54, 92 S.Ct. 1456 [1470-72], 31 L.Ed.2d 741 (1972) (§ 10(b)). Blue Chip Stamps v. Manor Drug Stores, 421 U.S. 723, 730, 95 S.Ct. 1917 [1922], 44 L.Ed.2d 539 (1975) (§ 10(b)); Ernst & Ernst v. Hochfelder, 425 U.S. 185, 196-97, 96 S.Ct. 1375 [1382-83], 47 L.Ed.2d 668 (1976) (§ 10(b)).
Once it has been established that private remedies may be implied under the securities laws, “a ‘more equal distribution of justice’ can best be achieved by ameliorating the common-law rule against contribution which permits a plaintiff to force one of two wrongdoers to bear the entire loss, though the other may have been equally or more to blame.” Cooper Stevedoring Co. v. Fritz Kopke, Inc., 417 U.S. 106, 111, 94 S.Ct. 2174, 2177, 40 L.Ed.2d 694 (1974).
This result is buttressed by the fact that of the seven express civil remedies provided in the Securities Act of 1933 and the Securities Exchange Act of 1934, three of those provide expressly for contribution. This indicates that when it occurred to Congress to do so, it expressed its desire that contribution be available among joint securities tortfeasors. Inasmuch as three specific liability provisions include the remedy of contribution, that ancillary remedy should be implied when the remedy itself has been implied as under Section 10(b) of the 1934 Act and Rule 10b-5.
“The existence of a statutory right implies the existence of all necessary and appropriate remedies.” Sullivan v. Little Hunting Park, Inc., 396 U.S. 229, 239, 90 S.Ct. 400, 405, 24 L.Ed.2d 386 (1969). “[T]he power to make the right of any recovery effective implies the power to utilize any of the procedures or actions normally available to the litigant according to the exigencies of the particular case.” Deckert v. Independence Shares Corp., 311 U.S. 282, 288, 61 S.Ct. 229, 233, 85 L.Ed. 189 (1940).

Heizer Corp. v. Ross, supra, at 331-332.

There is no doubt, therefore, that the Werdel defendants, depending upon what basis their liability may be determined, may be entitled to contribution from any other person jointly found liable with them for violation of the Federal Securities Acts. The final resolution of that question, however, must await the trial of the action.

IT IS THE ORDER OF THE COURT THAT:

1. There being no opposition, the Court determines that the settlement with the defendant Sampson is a good faith settlement and that the same is governed by the provisions of §§ 875, et seq., of the California Code of Civil Procedure as to the state law tort causes of action.

2. The Court determines that the causes of action based upon California Corporate Securities Act are governed by the provisions of § 25505 of the California Corporations Code.

3. The Court determines that the rights of the Werdel defendants to contribution and indemnity on the causes of action based upon the Federal Securities Act and based upon federal law and depending upon the facts to be elicited at the trial, said defendants may have rights of contribution and/or indemnity.

4. The rights of the respective parties under the remaining causes of action are based upon California substantive law.

      . These Federal Securities counts are the basis for this Court’s jurisdiction.

      . In the papers submitted by counsel for Sheats and Wood, it appears that similar settlements are contemplated with regard to the defendant Goertz.

      . In 1980 subdivision (e) was added to this section to provide for immediate review by the next level appellate court of a good faith détermination by writ of mandate.

      . In their moving papers, the Werdel defendants seem to assume that the settlement in question would automatically bar them from asserting any rights of indemnity. As demonstrated above, Sections 875 and 877 of the Code of Civil Procedure are mutually exclusive; hence, the settlement per se would not affect the Werdel defendants' entitlement to indemnity.


author: BARBOUR, District Judge.

text:
    UNITED STATES of America, Plaintiff, v. Wallace DABBS, Defendant.
    Civ. A. No. J84-0506(B).
    United States District Court, S.D. Mississippi, Jackson Division.
    May 8, 1985.

      Dan Lynn, Asst. U.S. Atty., Jackson, Miss., Charles L. Schlumberger, John W. Schowalter, J. Christopher Kohn, U.S. Dept. of Justice, Washington, D.C., for plaintiff.
    Wallace Dabbs, pro se.
   MEMORANDUM OPINION AND ORDER

BARBOUR, District Judge.

This matter is before the Court on the Motion for Summary Judgment of the United States. The material facts are not in dispute.

On February 10, 1981, the Defendant, Wallace Dabbs, entered into a contract with the United States to construct and lease a Post Office building in Schlater, Mississippi. Dabbs defaulted on his obligations under the contract and on November 20, 1981, the Contracting Officer issued his final decision terminating the contract for default and informing Dabbs of his liability to the Government for any excess reprocurement costs. On December 3, 1982, the Contracting Officer reiterated his final decision terminating the contract for default and informed Dabbs of his right to appeal the decision to the Board of Contract Appeals. On May 9, 1983, the Contracting Officer wrote to inform Dabbs of his liability for $16,380.00, representing the increased cost of procurement incurred by the United States. On May 18, 1983, the Contracting Officer wrote to Dabbs confirming a telephone call from Dabbs of May 12, 1983, concerning the May 9 letter advising him of his liability for the excess costs. The May 18, 1983, letter reiterated Dabbs’ right to appeal the notice of default within ninety days from receipt of the May 9, 1983, letter. No appeal was taken by Dabbs.

Suit was filed by the United States on or about June 28, 1984, seeking the excess procurement costs of $16,380.00. In his response to the Complaint, Dabbs raised two defenses. First, he argues that he had not received notice of the final decision of the Contracting Officer placing him in default. Secondly, Dabbs argued that he lacked “the mental capacity to enter into a binding contract prior to and since the time of the execution of the contract.”

The government filed a Motion for Summary Judgment on November 5, 1984, attaching copies of the letters sent to Dabbs informing him of default and of his right to seek review of the default decision. After the Defendant failed to respond to the Motion for Summary Judgment, an Order was entered on January 8, 1985, imposing sanctions against the Defendant’s attorney and giving the Defendant until January 18, 1985, to respond to the Motion for Summary Judgment. On January 18, 1985, Defendant’s counsel filed a Motion for Leave to Withdraw as Counsel and to Set Aside Sanctions. A hearing on the Motion to withdraw and set aside sanctions was noticed for February 19, 1985, and notice of the hearing was sent to the Defendant. On February 19, 1985, a hearing was held with no appearance by the Defendant, Wallace Dabbs. On March 5, 1985, an order was entered allowing Defendant’s counsel to withdraw and setting aside sanctions.

On March 5, 1985, the Government re-noticed its Motion for Summary Judgment and submitted a supplemental affidavit by the Contracting Officer setting forth the letters sent to Dabbs concerning his default and his appellate rights. The notice and supplemental affidavit of the Contracting Officer were sent to the Defendant. In addition, the Court personally wrote to the Defendant on March 13, 1985, informing him that if he wished to respond to the Motion for Summary Judgment he must do so on or before March 26, 1985'^ On March 26, 1985, the Defendant filed a pro se response to the Motion for Summary Judgment in which he did not deny receiving the notices of default but essentially alleged that he was unable to perform the contract due to personal family problems. Having reviewed the information in support of, and in opposition to the Motion for Summary Judgment the Court is prepared to rule on the Motion at this time.

Under the Contract Disputes Act of 1978 (CDA), 41 U.S.C. §§ 601 et seq., contracting parties may contest the final decision of the contracting officer by appealing to the Postal Service Board of Contract Appeals (PSBCA), or by filing a direct action in the United States Claims Court (Claims Court). 41 U.S.C. §§ 606, 609(a)(1). Under the CDA, an appeal to the PSBCA must be effected within ninety days after receipt of the final decision. 41 U.S.C. § 606. A direct action in the Claims Court must be filed within twelve months after receipt of the final decision. 41 U.S.C. § 609(a)(3). Unless either such action is timely filed, the Contracting Officer’s decision is “final and conclusive and not subject to review by any forum, tribunal or government agency.” 41 U.S.C. § 605(b).

The Contracting Officer stated in his affidavit that each of the letters referenced herein were mailed to Wallace Dabbs. The December 3, 1982, and May 9, 1983, letters have signatures on the return receipt indicating receipt. Furthermore, the final letter dated May 18, 1983, references a telephone call of May 12 from Wallace Dabbs in reference to the May 9 letter specifying the amount of reprocurement costs for which Dabbs was liable. Dabbs’ response to the Motion for Summary Judgment does not deny receiving the notice of default and the explanation of his appellate rights. There is no genuine issue as to any material fact with regard to Dabbs’ default, notice of default and liability for the excess reprocurement costs. In United States v. Ulvedal, 372 F.2d 31 (8th Cir.1967) the Government was granted a summary judgment based upon the defendant contractor’s failing to seek administrative review of the contracting officer’s final decision within the thirty-day time limit prescribed in the disputes clause of the contract. Accord, United States v. Hammer Contracting Corp., 331 F.2d 173 (2d Cir.1964). In Lichter v. United States, 334 U.S. 742, 68 S.Ct. 1294, 92 L.Ed. 1694 (1948), a case decided under the War Contracts Negotiation Act which contained a clause virtually identical to the mandatory appellate process set out in the CDA, the Court stated:

We uphold the decisions below and the contentions of the Government to the effect that the statutory provision thus made for a petition to the Tax Court was not, in any case before us, an optional or alternative procedure. It provided the one and only procedure to secure a redetermination of the excessive profits which had been determined to exist by the orders of the respective Secretaries or of the Board in the cases before us. Failure of the respective petitioners to exhaust that procedure has left them with no right to present here issues such as those as to the coverage and the amount of profits which might have been presented there____

Id. at 792, 68 S.Ct. at 1319-20.

It is clear that the CDA provides the exclusive method for challenging the final decision of the Contracting Officer, and that this Court is without jurisdiction to consider challenges to such decisions. It is conclusively established that the Defendant received notice of the default and of his rights under the CDA to seek review of that decision. Any defenses or challenges to the Contracting Officer’s final decision, including the Defendant’s mental capacity during the contract period, must by law be pursued under the appellate procedures contained in the CDA. This Court lacks jurisdiction to consider these challenges at this time.

Accordingly, the Motion for Summary Judgment of the Government is well-taken and is hereby granted.