text:
    FEDERAL DEPOSIT INSURANCE CORPORATION, Plaintiff, v. Robert V. VESTRING, Nadine C. Vestring, Stephen J. Vestring, Louis B. Vestring, Defendants.
    Civ. A. Nos. 84-2486-0 to 84-2489-0.
    United States District Court, D. Kansas.
    Oct. 23, 1985.
    Michael C. Manning, Mark W. McGrory, Brian E. Gardner, Morrison, Hecker, Curtis, Kuder & Parrish, Overland Park, Kan., Christopher A. Byrne, Office of Gen. Counsel, Federal Deposit Ins. Corp., Washington, D.C., for plaintiff.
    Myron L. Listrom, Sloan, Listrom, Eisen-barth, Sloan & Glassman, Topeka, Kan., for defendants.
   MEMORANDUM AND ORDER

EARL E. O’CONNOR, Chief Judge.

Pending before the court in these consolidated actions are the FDIC’s motion for summary judgment and defendants’ motion for leave to amend. For the reasons that follow, leave to amend will be denied and summary judgment will be entered in favor of the FDIC.

Summary judgment is appropriate where “the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.” Fed.R. Civ.P. 56(c). In considering such a motion, the court must examine all evidence in the light most favorable to the opposing party. Mogle v. Sevier County School District, 540 F.2d 478, 482 (10th Cir.1976), cert. denied, 429 U.S. 1121, 97 S.Ct. 1157, 57 L.Ed.2d 572 (1976). Where different inferences could reasonably be drawn from conflicting affidavits and depositions, summary judgment should be denied. United States v. Diebold, Inc., 369 U.S. 654, 655, 82 S.Ct. 993, 994, 8 L.Ed.2d 176 (1962). However, when the movant has supported his motion with affidavits or other matters, the opponent’s response must, by affidavits or otherwise, set forth specific facts showing that there is a genuine issue for trial. “If he does not so respond, summary judgment, if appropriate, shall be entered against him.” Fed.R.Civ.P. 56(e). Finally, the Tenth Circuit requires a moving party to demonstrate its entitlement to summary judgment beyond a reasonable doubt. Madison v. Deseret Livestock Co., 574 F.2d 1027, 1037 (10th Cir.1978); Mustang Fuel Corp. v. Youngstown Sheet & Tube Co., 516 F.2d 33, 36 (10th Cir.1975).

Because a responsive pleading has been served and the FDIC objects to the proposed amendment, defendants may amend their answers only by leave of court. Fed. R.Civ.P. 15(a). Such leave “shall be freely given when justice so requires.” Id. The Supreme Court has emphasized that “this mandate is to be heeded.” Foman v. Davis, 371 U.S. 178, 182, 83 S.Ct. 227, 230, 9 L.Ed.2d 222 (1962). However, leave to amend may be denied if the amendment itself would be futile. Id.; Dickerson v. City Bank & Trust Co., 575 F.Supp. 872, 876 (D.Kan.1983).

Either with or without the requested amendment, defendants’ allegations are insufficient to defeat the FDIC’s motion for summary judgment. Because the amendment would be futile, it will be denied on that ground. Nonetheless, for purposes of the summary judgment motion, we will give the defendants the benefit of their amended allegations. As so amended, their allegations (in combination with the uncon-troverted facts set forth by the FDIC) are as follows.

On October 10, 1984, the Rexford State Bank was declared insolvent and the District Court of Thomas County, Kansas, appointed the FDIC as its receiver. Acting in its receivership capacity, the FDIC sold to the FDIC in its corporate capacity all assets of the bank not acquired by a successor bank. Among the assets sold to FDIC-Corporate were each of the notes underlying these actions.

All four defendants executed one of these notes on July 2, 1984. Defendants Robert, Nadine, and Louis Vestring executed notes in the amount of $50,000.00, while defendant Stephen Vestring executed a $46,459.74 note. All four notes were made payable to the bank and were due on October 2, 1984. Interest was to accrue at the rate of fifteen percent (15%) per annum until maturity, and at nineteen percent (19%) per annum thereafter until paid in full.

The notes were executed as a result of an oral agreement between Nasib Ed Kal-liel (as agent for the bank) and defendant Robert Vestring (for himself and as agent for the other three defendants). Through that agreement, the bank agreed to lend an amount of money to defendants. Those defendants then executed the promissory notes to temporarily evidence their obligation to repay that loan. At the same time, the bank, acting through its agent, agreed to rewrite those loans on a long-term basis and at a reduced interest rate, with a “new note” to be executed by each defendant before the original notes’ due date of October 2, 1984. The bank subsequently failed to adhere to its agreement to rewrite these notes on a long-term basis. The FDIC had no actual knowledge of this agreement before it purchased the notes.

(We note that the amendment requested by defendants and incorporated into the above recitation of facts raises no new legal issues. As originally framed, defendants’ respective answers and counterclaims contained essentially the same allegations, with the sole difference being that the bank’s agent was alleged to have been its chief executive officer, Mr. C.J. Moeder, rather than Mr. Kalliel. The following legal discussion would thus be equally applicable to defendants’ unamended answers and counterclaims.)

Unless defendants can point to a viable defense, they are obviously liable to the FDIC for the full amount of principal and accrued interest represented by these notes. Defendants do assert the following three affirmative defenses: (1) fraud in the inducement, (2) estoppel, and (3) failure of consideration. Each defendant also asserts a counterclaim based on a breach of the oral agreement between defendant Robert Vestring and Íír. Kalliel (Count I) and on Mr. Kalliel’s fraudulent misrepresentations (Count II). The FDIC correctly asserts, however, that none of defendants’ affirmative defenses or counterclaims is effective as against the FDIC.

First, the FDIC claims holder in due course status as to each of these four notes. Because FDIC-Corporate purchased these notes as part of a bulk transaction not in the regular course of business of the bank, it failed to obtain holder in due course status under the Kansas Uniform Commercial Code. K.S.A. 84-3-302(3)(c); see also id., Official U.C.C. Comment 3, If 2; Gunter v. Hutcheson, 674 F.2d 862, 872 (11th Cir.1982), cert. denied, 459 U.S. 826, 103 S.Ct. 60, 74 L.Ed.2d 63 (1982). However, the federal courts have not confined the FDIC to reliance on applicable state holder in due course rules. Rather, they have enunciated as a matter of federal common law a holder in due course rule that abandons the “regular course of business” requirement. The Sixth Circuit, for example, has phrased the federal rule as follows: FDIC v. Wood, 758 F.2d 156, 161 (6th Cir.1985); see also Gunter, 674 F.2d at 873.

When the FDIC in its corporate capacity, as part of a purchase and assumption transaction, acquires a note in good faith, for value, and without actual knowledge of any defenses against the note, it takes the note free of all defenses that would not prevail against a holder in due course.

As indicated above, the FDIC had no actual knowledge of the oral agreement between the bank and defendants to substitute long-term, low interest notes for the notes sued upon in this action. The FDIC thus qualifies as a holder in due course as to each of these four notes. Since the affirmative defenses raised by defendants are not among the “real” defenses listed in K.S.A. 84-3-305 (“Rights of a holder in due course”), those defenses are ineffective as against the FDIC.

The second basis on which the FDIC may escape the effect of the affirmative defenses pleaded by defendants is the doctrine first enunciated by the Supreme Court in D’Oench, Duhme & Co., Inc. v. F.D.I.C., 315 U.S. 447, 62 S.Ct. 676, 86 L.Ed. 956 (1942). The Court there held that, as against the FDIC, the maker of a note may not plead as a defense his own scheme to deceive bank regulators (i.e., by asserting that a secret agreement existed between himself and the failed bank). Estoppel under such circumstances does not require proof of actual intent to deceive on the part of the note’s maker. Rather, “one who gives such a note to a bank with a secret agreement that it will not be enforced must be presumed to know that it will conceal the truth from the vigilant eyes of the bank examiners.” 315 U.S. at 460. The elements of D’Oench, Duhme estoppel are thus as follows: “(1) the FDIC must be the party against whom the claim or defense is asserted, and (2) the party asserting the claim or defense must have lent himself (3) to a secret agreement (4) that deceived or would tend to deceive the FDIC.” In Re Longhorn Securities Litigation, 573 F.Supp. 278, 280-81 (W.D.Okla.1983).

Under defendants’ view of the facts, of course, there was no actual intent to deceive bank regulators. However, it is clear that by entering into an oral agreement which contradicted the terms of the written note, the defendants did lend themselves to a deceptive secret agreement. Under the D’Oench, Duhme doctrine, then, all of the three affirmative defenses based on that agreement are barred.

As a third ground for rejecting these three affirmative defenses, the FDIC properly relies on the statutory provision found at 12 U.S.C. § 1823(e). That subsection provides as follows:

No agreement which tends to diminish or defeat the right, title or interest of the [Federal Deposit Insurance] Corporation in any asset acquired by it under this section, either as security for a loan or by purchase, shall be valid against the Corporation unless such agreement (1) shall be in writing, (2) shall have [been] executed by the bank and the person or persons claiming an adverse interest thereunder, including the obligor, contemporaneously with the acquisition of the assets by the bank, (3) shall have been approved by the board of directors of the bank or its loan committee, which approval shall be reflected in the minutes of said board or committee, and (4) shall have been, continuously, from the time of its execution, an official record of the bank.

Thus, any affirmative defense that flows from an oral agreement is barred by this statute — even if phrased in terms of fraud in the inducement. F.D.I.C. v. Rodenberg, 571 F.Supp. 455, 459 (D.Md.1983). That is obviously the case here.

Finally, the FDIC is also entitled to summary judgment on both counts of defendants’ counterclaims. The most obvious ground for entering summary judgment on the counterclaims is the fact that they have been brought against an entity (FDIC-Corporate) that is not even a successor to the bank. Only FDIC-Receiver would fit that description. FDIC-Corporate merely purchased certain assets from FDIC-Receiver subsequent to the bank’s failing. As a mere purchaser of selected assets, FDIC-Corporate could not possibly be held liable for any contracts entered into, or fraud perpetrated by, agents of the bank.

Moreover, even if the counterclaim allegations had taken the form of third-party complaints against FDIC-Receiver, they would have been unsuccessful. Citing the language used in the D’Oench, Duhme opinion, the Ninth Circuit has expressly held that that doctrine applies to the FDIC in both its corporate and receivership capacities. F.D.I.C. v. First National Finance Co., 587 F.2d 1009, 1012 (9th Cir. 1978) (citing D’Oench, Duhme, 315 U.S. at 458, 62 S.Ct. at 679-80).

IT IS THEREFORE ORDERED that defendants’ motion for leave to amend is denied.

IT IS FURTHER ORDERED that plaintiff’s motion for summary judgment is granted as against all four defendants.

The clerk is directed to enter judgment in favor of plaintiff Federal Deposit Insurance Corporation and:

(a) against defendant Robert B. Vestring in the amount of $50,000.00, plus interest thereon at the rate of 15% per annum from July 2, 1984, to October 2, 1984, and at the rate of 19% per annum thereafter until that judgment is paid in full;
(b) against defendant Nadine C. Vestring in the amount of $50,000.00, plus interest thereon at the rate of 15% per annum from July 2, 1984, to October 2, 1984, and at the rate of 19% per annum thereafter until that judgment is paid in full;
(c) against defendant Stephen J. Vestr-ing in the amount of $46,459.74, plus interest thereon at the rate of 15% per annum from July 2,1984, to October 2,1984, and at the rate of 19% per annum thereafter until that judgment is paid in full; and
(d) against defendant Louis B. Vestring in the amount of $50,000.00, plus interest thereon at the rate of 15% per annum from July 2, 1984, to October 2, 1984, and at the rate of 19% per annum thereafter until that judgment is paid in full.

IT IS SO ORDERED.


source: Caselaw Access Project

author: GONZALEZ, District Judge.

license: Public Domain

text:
    Curtis L. SHERROD, Plaintiff, v. PALM BEACH COUNTY SCHOOL BOARD, Kelly Brown, Jr., Paul La-Chance and J. Kenneth Schrimsher, Defendants.
    No. 85-8338-Civ.
    United States District Court, S.D. Florida, N.D.
    Oct. 24, 1985.

      Curtis L. Sherrod, pro se.
    Abbey G. Hairston, West Palm Beach, Fla., for defendants.
   ORDER

GONZALEZ, District Judge.

THIS CAUSE has come before the court upon the cross motions for summary judgment filed by the parties. For the reasons set forth below, the defendants’ Motion for Summary Judgment will be GRANTED, and the plaintiff’s Motion for Summary Judgment will be DENIED.

The pro se plaintiff filed this action pursuant to Title 42 U.S.C., section 1983. The gravamen of his allegations is that the failure to grant a continuing employment contract, tenure, violated his rights under the sixth and fourteenth amendments to the Constitution of the United States.

The facts in this case are not complex and will not be repeated herein. The court does adopt the statement of facts set forth in the defendants’ Memorandum of Law in Support of Motion to Dismiss and Motion for Summary Judgment.

The defendants contend, inter alia, that this case is barred by Florida's two year limitations statute governing wages and overtime claims. Fla.Stat.Ann. § 95.-ll(4)(c) (West 1982).

This assertion is incorrect.

The United States Supreme Court recently determined that section 1983 actions are governed by the state limitations statute applicable to negligence or personal injury claims. Wilson v. Garcia, — U.S. -, 105 S.Ct. 1938, 85 L.Ed.2d 254 (1985). In Florida, a four year limitations statute applies. Fla.Stat.Ann. § 95.11(3) (West 1982). Thus, as the plaintiff’s asserted causes of action accrued within the four year period, his complaint was filed timely.

The plaintiff’s claims, however, cannot withstand the Motion for Summary Judgment.

To state a cause of action under section 1983, the plaintiff must show that he had a valid property interest; that the defendants, acting under color of state law, deprived him of that interest; and that the deprivation was accomplished without due process. Parratt v. Taylor, 451 U.S. 527, 101 S.Ct. 1908, 68 L.Ed.2d 420 (1981).

In the case sub judice, the opportunity for tenure is not a viable property right to which constitutional protections are attached. At most, the plaintiff had a mere expectation that a continuing contract would be offered. This expectation is insufficient to create a constitutionally protected property right. Perry v. Sindermann, 408 U.S. 593, 92 S.Ct. 2694, 33 L.Ed.2d 570 (1972); Board of Regents v, Roth, 408 U.S. 564, 92 S.Ct. 2701, 33 L.Ed.2d 548 (1972); Sullivan v. School Board of Pinellas County, 773 F.2d 1182 (11th Cir.1985).

This court acknowledges that a constitutionally protected property right may be created by law or an express understanding between the parties. Perry v. Sindermann, supra; Sullivan v. School Board of Pinellas County, supra. In this case, Florida law does not create a guaranteed right for a nontenured instructor to receive tenure. Although the plaintiff was initially informed he would be recommended for tenure if he maintained a high level of professionalism, (Memorandum in Support of Motion to Dismiss and Motion for Summary Judgment, Exhibit 2), this statement was not a guarantee of tenure. It merely presented a condition for recommendation which he failed to maintain.

The plaintiff also argues that the defendants’ actions and statements impaired his protected liberty interests. When a nontenured employee is not rehired, constitutional protections may be infringed when his “good name, reputation, honor, or integrity is at stake because of what the government is doing to him ...” and when the employer “imposes ‘a stigma or other disability that forecloses his freedom to take advantage of other employment opportunities.’ ” Sullivan v. School Board of Pinellas County, id. at 1187 (quoting Board of Regents v. Roth, 408 U.S. at 573, 92 S.Ct. at 2707) (quoting Wisconsin v. Constantineau, 400 U.S. 433, 437, 91 S.Ct. 507, 510, 27 L.Ed.2d 515 (1971)).

At first blush, it would appear that the plaintiff’s claims create a viable liberty interest cause of action. The unrefuted evidence reveals that no information concerning the defendants’ decision to not rehire the plaintiff is contained within his personnel file. Information relevant to the investigation is maintained in a separate file but is not subject to disclosure except as mandated by law. Thus, any damage or stigma was caused not by the defendants’ actions but by the plaintiff who made their actions public by commencing this litigation. Section 1983 relief, therefore, is inappropriate.

Finally, the plaintiff argues that he was dismissed without notice or explanation and thereby denied equal protection and due process. This argument is without a scintilla of merit and refuted not only by the defendants’ evidentiary material but by the plaintiff’s own submissions.

Accordingly, it is hereby

ORDERED AND ADJUDGED that the defendants’ Motion for Summary Judgment be and the same is GRANTED and the plaintiff’s Motion for Summary Judgment be and the same is DENIED. Within ten (10) days of the filing of this Order, the defendants shall submit a proposed final judgment.

      . As the parties have submitted documentary material outside the complaint, the defendants’ Motion is properly considered a motion for summary judgment pursuant to Rule 56 of the Federal Rules of Civil Procedure.


author: WARREN, District Judge.

text:
    UNITED STATES of America, Plaintiff, v. Gary M. GAVRAN and Richard W. Ehrlich, Defendants.
    No. 85-CR-77.
    United States District Court, E.D. Wisconsin.
    Oct. 24, 1985.
    As Amended Oct. 29, 1985.

      R. Jeffrey Wagner, Asst. U.S. Atty., Milwaukee, Wis., for plaintiff.
    Jeffrey A. Kaufman, Milwaukee, Wis., for defendant Gavran.
    Janice A. Rhodes, Milwaukee, Wis., for defendant Ehrlich.
   DECISION AND ORDER

WARREN, District Judge.

On August 30, 1985, Magistrate Robert L. Bittner filed a Memorandum and Order recommending denial or denial in part of numerous motions filed by defendant Richard Ehrlich. The Magistrate denied Ehrlich’s motion for Jencks Act materials; denied Ehrlich’s motion for production of grand jury minutes; denied Ehrlich’s motion to compel production of agency documents; denied in part Ehrlich’s motion for a bill of particulars; and denied Ehrlich’s motion for severance. A supplementary order was issued on September 3, 1985, correcting two clerical errors in the original memorandum.

Pursuant to 28 U.S.C. § 636(b)(1) and Local Rule 13.02(b), Ehrlich appeals from the Magistrate’s Memorandum and Order dated August 30, 1985, as corrected.

BACKGROUND

Richard Ehrlich is charged with eight counts of mail fraud (18 U.S.C. § 1341) and twelve counts of wire fraud (18 U.S.C. § 1343), either on a theory that he directly violated those provisions or that he acted as an aider and abettor (18 U.S.C. § 2). The charges stem from Ehrlich’s work as a contractor specializing in clean-up and repair of damaged properties. Ehrlich has done a substantial amount of business on insurance losses generated by fires, water damage, and the like. He has worked for the insureds of numerous insurance companies, including Fireman’s Fund Insurance Companies.

Richard Ehrlich is charged in all counts with one co-defendant, Gary Gavran. Gav-ran is a former insurance adjuster for Fireman’s Fund. As an employee of Fireman’s Fund, Gavran supervised the repair of losses suffered by Fireman’s Fund’s insureds, evaluated the work that needed to be done and oversaw the charges made by firms doing the restoration work.

The government charges that Gavran and Ehrlich concocted a two-fold scheme: (1) to defraud Fireman’s Fund of Gavran’s honest and faithful services; and (2) to obtain money and property from Fireman’s Fund by means of false representation. Over a five-year period from December 24, 1979 to February 9, 1984, Gavran allegedly took “kick-backs” from Ehrlich and diverted restoration work to him. Gavran supposedly approved payment of Ehrlich’s bills containing charges for work never performed, multiple charges for the same work, charges for work not authorized under the insurance policy, and charges in excess of prevailing rates. Additionally, as part of the scheme to defraud, Gavran allegedly approved payments to Ehrlich for work done under corporate names other than “Ehrlich Construction.”

DISCUSSION

I. Jencks Act Material

Ehrlich seeks a copy of a document termed a “special agent’s report” pursuant to the provisions of the Jencks Act, 18 U.S.C. § 3500. Ehrlich asserts that the Magistrate erred in failing to order the government to turn over this report. The government declines to furnish the special agent’s report considering it to be an internal government memorandum not required to be disclosed by the Jencks Act. Furthermore, the government represents that it is unaware of any such special agent’s report in this case.

The Magistrate refused to order the government to furnish the special agent’s report prior to the agent’s testifying at trial. Section 3500(a) of Title 18 states:

in any criminal prosecution brought by the United States, no statement or report in the possession of the United States which was made by a Government witness or prospective Government witness (other than the defendant) shall be the subject of subpoena, discovery, or inspection until said witness has testified on direct examination in the trial of the case.

Ehrlich cites no authority which indicates that the government should be ordered to produce the report before trial. The Court agrees with the Magistrate’s determination that delaying the government’s disclosure of a single report until the time of trial will not result in “substantial delays.” Magistrate’s Memorandum and Order at 14 (August 30,1985). Accordingly, the Magistrate’s decision to deny Ehrlich’s motion for discovery of the special agent’s report is AFFIRMED.

II. Grand Jury Minutes

Ehrlich seeks disclosure of the grand jury transcripts in this prosecution to determine if the government presented exculpatory evidence to the grand jury. Ehrlich asserts that there exists evidence that he consulted with an accountant, an attorney and other professionals regarding the legality of giving commissions to Gavran and that these persons considered such a scheme to be legal. Such evidence, Ehrlich contends, tends to negate his criminal intent and should have therefore been presented to the grand jury. The government responds by asserting that exculpatory evidence concerning Ehrlich’s seeking advice of counsel does not rise to the level of “clearly negating” his guilt which would require its disclosure to the grand jury. Moreover, the government contends that its affidavit moots this issue. This affidavit states that the grand jury was presented with information that “at one point in time [defendant] had spoken with an attorney generally regarding payment of money to co-defendant Gavran and that the attorney had advised him that it might be unethical but it wasn’t illegal.”

In denying Ehrlich’s motion to inspect the grand jury minutes, the Magistrate adopted his reasoning used in denying “the virtually identical motion of Gavran’s.” Magistrate’s Memorandum and Order at 17 (August 30, 1985). This reasoning was that the defendant made no showing of “particularized need” for disclosing the transcripts and evidence showing that the defendant consulted with an attorney regarding his business relationship with Gav-ran does not “clearly negate” his guilt. Id. at 13, 17.

In determining whether to disclose the minutes of the grand jury proceedings, the district court “must exercise substantial discretion, weighing the need for secrecy against the need for disclosure of specified documents and testimony occurring before the grand jury.” United States v. Lisinski, 728 F.2d 887, 893-94 (7th Cir.1984). Disclosure of these proceedings “will be had only upon demonstration by the party seeking disclosure of a ‘compelling necessity’ or ‘a particularized need’.” Id.. Finally, the proper procedure is for the district court judge to inspect the grand jury transcripts in camera if the Court determines that the allegedly exculpatory evidence in the government’s possession “clearly negates” his guilt. United States v. Edelson, 581 F.2d 1290, 1292 (7th Cir.1978) (proper procedure for the district judge to examine the minutes in camera and determine whether there was prosecu-torial misconduct); United States v. Flomenhoft, 714 F.2d 708, 712 (7th Cir.1983), cert. denied, 465 U.S. 1068, 104 S.Ct. 1420, 79 L.Ed.2d 745 (1984) (Seventh Circuit adopts the “clearly negates” standard).

In essence, this Court must employ a two-step review process. First, the Court will determine whether the exculpatory evidence in the government’s possession during the grand jury proceedings was of a type tending to clearly negate Ehrlich’s guilt. Second, if the evidence possesses such a characteristic, the Court will examine the grand jury minutes in camera to determine whether the government fulfilled its obligation to present the exculpatory evidence to the grand jury.

Ehrlich proffers the following exculpatory evidence: (1) an FBI report containing a statement by Gary Forseth, Ehrlich’s former employee, that Ehrlich consulted with an attorney regarding the legality of giving kickbacks to Gavran and that Ehrlich was advised that such action was not illegal; (2) affidavits from Ehrlich, Calene Ehrlich and Juanita Ehrlich stating that Ehrlich was advised by his attorneys that his dealings with Gavran were not illegal; (3) Ehrlich’s statement in his affidavit that his accountant, Carl Nickel, advised that his dealings with Gavran were legal and tax deductible; and (4) a letter to Nickel, from Nickel’s attorney stating, inter alia, that “there is no present Wisconsin Criminal Law prohibiting ‘commercial kickbacks’.”

The affidavits of defendant, Calene Ehrlich and Juanita Ehrlich were prepared for a related civil proceeding. Ehrlich does not assert that during the grand jury proceedings, the government possessed the letter to Carl Nickel from Nickel’s attorney. The only exculpatory evidence that the government possessed during the grand jury proceedings was Forseth’s statement contained in the FBI report.

The Court first notes that the “clearly negates” standard for determining whether exculpatory evidence must be disclosed to the grand jury is quite high. The concern is that “[i]f prosecutors were required to present what was in essence the target’s defense, then the grand jury process would be distorted into a second trial on the merits.” United States v. Dorfman, 532 F.Supp. 1118, 1132 (N.D.Ill.1981). Another concern is the difficulty in determining what evidence is exculpatory. Id. The desired effect of the “clearly negates” test is to “eliminate most of the problems involved with having to determine what might be considered exculpatory in the abstract, while still not permitting prosecutors to undermine completely the grand jury’s function as a check on prosecutorial power.” Id. at 1133.

The present case’s exculpatory evidence concerns Forseth’s statement that Ehrlich consulted with an attorney regarding his business dealings with Gavran and was advised that these business dealings were not illegal. The pertinent Devitt and Blackmar jury instruction states:

§ 14.12 Action on Advice of Counsel
The defendant claims that he is not guilty of willful wrongdoing because he acted on the basis of advice from his attorney.
If the defendant before taking any action sought the advice of an attorney whom he considered competent, in good faith and for the purpose of securing advice on the lawfulness of his possible future conduct, and made a full and accurate report to his attorney of all material facts of which he has the means of knowledge, and acted strictly in accordance with the advice of his attorney given following his full report, then the defendant would not be willfully doing wrong in doing (omitting) something the law forbids (requires), as that term is used in these instructions.
Whether the defendant acted in good faith for the purpose of seeking guidance as to questions about which he was in doubt, and whether he made a full and complete report to his attorney, and whether he acted strictly in accordance with the advice received, are questions for you to determine.

E. Devitt and C. Blackmar, Federal Jury Practice and Instructions § 14.12 (1977).

The Court finds that Forseth’s statement regarding Ehrlich’s seeking advice of counsel does not rise to the level of exculpatory evidence clearly negating Ehrlich's guilt. Rather, it is evidence supporting an affirmative defense of reliance on the advice of counsel which Ehrlich may proffer at trial. Consequently, there is no need for the Court to review the grand jury minutes in camera. The Magistrate’s denial of Ehrlich’s motion to inspect the grand jury minutes is AFFIRMED.

III. Production of Agency Documents

Pursuant to the Freedom of Information Act (“FOIA”), 5 U.S.C. § 552, Ehrlich moves for an order requiring the government to produce all documents in the possession of “any agency of the United States pertaining to the defendant, the institution of this prosecution, and Fireman’s Fund.” Alternatively, Ehrlich seeks an order requiring the government to file with the Court a detailed index of all documents concerning the aforementioned matters possessed by government agencies, and FOIA exemptions claimed for any documents withheld.

The Magistrate denied this motion finding that the district court’s holding in United States v. Wahlin, 384 F.Supp. 43 (W.D.Wis.1974) (C.J. Reynolds) did not govern the present case. Wahlin concerned an accused’s attempts to obtain IRS private letter rulings to prepare for defending against criminal charges. The government’s position in Wahlin was that it was necessary for the defendant to commence an independent civil suit under the FOIA for disclosure of the desired information. The Wahlin court determined that “the applicability of the Freedom of Information Act to specific documents or information sought can be determined by the court in a discovery motion filed in a pending criminal case as easily as it can be determined in an independent civil suit.” 384 F.Supp. at 47. Accordingly, the Wahlin court ordered the government to produce the requested private letter rulings. Id. at 48.

The Magistrate identified two critical differences between the instant case and Wahlin. First, here the government is not demanding that Ehrlich commence a separate civil action to obtain the desired documents; rather, it has forwarded the defendant’s request to the Department of Justice for processing. Second, unlike the request in Wahlin for IRS private letter rulings, Ehrlich requests unspecified information rendering it impossible for a court to determine whether any of the materials sought are exempt from disclosure under the FOIA or exempt from discovery under Rule 16 of the Federal Rules of Criminal Procedure. The Magistrate found these differences dispositive and accordingly denied Ehrlich’s motion. Magistrate’s Memorandum and Order at 19 (August 30, 1985).

In appealing the Magistrate’s decision, Ehrlich has reiterated his arguments previously made to the Magistrate. The government asserts that it is aware of no documents possessed by any agency which fall within Ehrlich’s broad, unspecified request. This Court, like the Magistrate, is stymied as to how it can apply the Wahlin court’s mandate of expedited determination of whether “specific documents or information sought” should be disclosed, to the present case’s general request for information possessed by any governmental agency. Considering the character of Ehrlich’s request, the government’s present processing of the request is proper. If the processing has not been completed by the time of trial, Ehrlich may seek a continuance asserting that the information sought is necessary for his defense. Accordingly, the Magistrate’s denial of Ehrlich’s motion to compel production of agency documents is AFFIRMED.

IV. Bill of Particulars: Parts 1-7, 12

Ehrlich appeals the Magistrate's partial denial of his twelve-part motion for a bill of particulars. The Magistrate granted Ehrlich’s motion as to Parts 8-11 requesting specification of the instances where Ehrlich allegedly charged for work: unperformed; multiple times; at a price exceeding the prevailing rates; and at a price not authorized by a particular insurance policy’s terms. The Magistrate reasoned that this requested information was necessary for Ehrlich to analyze the various bills provided by the government pursuant to its “open file policy.” Magistrate’s Memorandum and Order at 21 (August 30, 1985). Parts 1-7 and 12 of Ehrlich’s request were denied by the Magistrate. Part 1 requests specification of the false and fraudulent pretenses, representations and promises to further the scheme to defraud Fireman’s Fund. The Magistrate found that these items were “set forth in sufficient detail in the indictment to enable the defendant to prepare his defense.” Id. at 20.

Parts 2-7 of Ehrlich’s request seek specification of the manner in which (1) Gavran did not honestly and faithfully perform his services as an employee; (2) Ehrlich caused the creation of various construction corporations which received restoration work from Fireman’s Fund; and (3) Ehrlich caused restoration work on insurance losses reported on Fireman’s Fund insurance policies to be awarded to his created construction companies. The Magistrate denied each of these requests finding that they attempted to obtain evidentiary detail to which the defendant was not entitled. Id.

Part 12 of Ehrlich’s request asks the government to specify the occasions where Ehrlich knew the particular insurance policy’s terms. The Magistrate denied the request finding that this information was “more readily obtained by the defendant than the government, and moreover, if known by the government, it is evidentiary detail which the defendant is not entitled to acquire by means of a bill of particulars.” Id. at 21-22.

On appeal, Ehrlich asserts that the Magistrate should have granted his motion for a bill of particulars in its entirety because the requests denied by the Magistrate are similar to those that he granted. Further, Ehrlich contends that the denied requests seek specification of areas where the government has numerous avenues of proof open to it and that he will be forced to guess how the government is going to proceed at trial.

This Court does not find the Magistrate’s findings to be clearly erroneous or contrary to law. The thirty-page, twenty-nine count indictment sufficiently details Ehrlich’s alleged scheme to defraud Fireman’s Fund. Ehrlich’s requests granted by the Magistrate concern information necessary for understanding the items obtained pursuant to the government’s “open file policy.” Consequently, these requests are necessary for understanding the theory of the government’s case. However, the requests denied by the Magistrate do not seek to ascertain the government’s theory. Rather, they seek evidentiary detail which cannot be discovered with a bill of particulars. United States v. Johnson, 504 F.2d 622, 627 (7th Cir.1974). A defendant is not entitled to know all the evidence that the government intends to produce, but rather, only the theory of the government’s case. The Magistrate’s ruling sufficiently ensures that this was done. Accordingly, the Magistrate’s partial denial of Ehrlich’s motion for a bill of particulars is AFFIRMED.

V. Severance

Ehrlich moved for severance from his co-defendant Gary Gavran on two grounds: First, Ehrlich claimed that he would suffer prejudice in a joint trial because of the disparity in the nature and quantity of the government’s proof as between the case against him and the case against Gavran; and second, Ehrlich claimed that he would suffer prejudice in a joint trial with Gavran because his defense was completely antagonistic to Gavran’s defense. The Magistrate denied this motion. Regarding Ehrlich’s first ground for the motion, the Magistrate determined that “instructions directing the jury to assess each defendant’s guilt or innocence solely on the basis of the evidence admissible against him would be effective to prevent evidentiary spillover.” Magistrate’s Memorandum and Order at 23 (August 30, 1985). As to Ehrlich’s second ground, the Magistrate found that Ehrlich “has alerted the Court to the potentiality of mutually antagonistic defenses, he has not established them as an actuality_ Accordingly, at this juncture of the case, the defendant has not met his burden of showing that he will be prejudice [sic] by joinder so that in effect he will be denied a constitutionally fair trial.” Id. at 24-25. On appeal, Ehrlich reasserts both grounds for his severance motion.

As stated by the Magistrate:

A trial court’s ruling on a Rule 14 motion for severance is committed to its sound discretion. United States v. Hattaway, 740 F.2d 1419 (7th Cir.), cert. denied, — U.S. -, 105 S.Ct. 599 [83 L.Ed.2d 373] (1984). In exercising its discretion, the Court should balance the interests of the defendant against the needs of judicial economy. United States v. Tedesco, 7236 [726] F.2d 1216, 1219 (7th Cir.1984). A strong judicial policy favors joint trials where largely the same evidence would be admitted in separate trials for each defendant. United States v. Hattaway, 740 F.2d at 1424; United States v. Burton, 724 F.2d 1283, 1286 (7th Cir.1984); United States v. McPartlin, 595 F.2d 1321, 1333 (7th Cir.), cert. denied, 444 U.S. 833 [100 S.Ct. 65, 62 L.Ed.2d 43] (1979). A defendant must show that without severance he would be so prejudiced that, in effect, he would be denied a constitutionally fair trial. United States v. Alpern, 564 F.2d 755, 758 (7th Cir.1977).

Magistrate’s Memorandum and Order at 22-23 (August 30, 1985).

The Court agrees with the Magistrate’s decision that a jury instruction will cure any prejudice flowing to Ehrlich because of evidence admissible against Gavran. Essentially, Ehrlich asserts that he will be prejudiced by evidence that Gavran was an employee of Fireman’s Fund and was expected to be loyal and to follow their policies, whereas Ehrlich was not in a similar position. Limiting jury instructions will sufficiently protect against this small possibility of prejudice. See United States v. Moschiano, 695 F.2d 236, 247 (7th Cir.1982); United States v. Papia, 560 F.2d 827, 837 (7th Cir.1977).

Regarding Ehrlich’s second ground for his severance motion, Ehrlich contends that he and Gavran have mutually antagonistic defenses. Counsels’ affidavits show that Gavran will contend that Ehrlich offered him commissions, while Ehrlich will contend that Gavran demanded kickbacks as a condition of doing business with Fireman’s Fund. Severance based on inconsistent defenses may be granted only if the defenses conflict to the point of being irreconcilable and mutually exclusive. United States v. Hasting, 739 F.2d 1269, 1274 (7th Cir.1984); cert. denied, — U.S. -, 105 S.Ct. 1199-1200, 84 L.Ed.2d 343 (1985). A defense is not mutually antagonistic if the defenses can all be accepted by the jury. United States v. Petullo, 709 F.2d 1178, 1182 (7th Cir.1983).

The defendants’ stated defenses are not mutually antagonistic to a degree requiring severance. The jury could find that Ehrlich did not intend to defraud Fireman’s Fund even if it accepts Gavran’s defense that Ehrlich offered him commissions. The jury could find that Ehrlich’s actions were pursuant to a business strategy, the legality of which was approved by his attorney and accountant. The defenses are therefore not mutually antagonistic. Accordingly, the Magistrate’s denial of Ehrlich’s motion for severance is AFFIRMED.

In sum, the Magistrate’s Memorandum and Order of August 30, 1985, is AFFIRMED in its entirety.


author: BRAMWELL, District Judge.

text:
    Sonia BARRACANO, Petitioner, v. Elaine LORD, Superintendent, Bedford Hills Correctional Center; Elizabeth Holtzman, District Attorney, Kings County; and Robert Abrams, Attorney General of the State of New York, Respondents.
    No. 85-CV-2937.
    United States District Court, E.D. New York.
    Oct. 24, 1985.

      Sonia Barracano, pro se.
    Elizabeth Holtzman, Dist. Atty., Kings County, Brooklyn, N.Y., Robin Bernstein, Asst. Dist. Atty., for respondents.
   DECISION AND ORDER

BRAMWELL, District Judge.

By petition dated July 27, 1985, Sonia Barracano requests habeas corpus relief pursuant to Title 28, United States Code, section 2254. Petitioner alleges that (1) the State of New York has reneged on its plea bargain, and (2) that the State of New York is “holding 45 days of [her] time.” For the reasons set forth below, petitioner’s application is dismissed for failure to exhaust state remedies.

I. FACTUAL AND PROCEDURAL BACKGROUND

On January 22, 1982, petitioner pled guilty in the Supreme Court of the State of New York, Kings County, to one count of grand larceny in the second degree and seven counts of forgery in the second degree. As a result, petitioner was sentenced on May 10, 1982 to imprisonment for concurrent terms of two to six years. At the time, petitioner and the prosecutor, with the trial judge’s approval, apparently agreed that petitioner’s sentence would run concurrently with a four-year sentence of imprisonment that this Court had imposed in a federal matter. The agreement further contemplated that petitioner’s sentence would be served in federal prison, rather than in state prison.

Petitioner was incarcerated at Lexington Correctional Facility, a federal prison, until January 4, 1985, during which time a New York State detainer was kept on file against her. She became eligible for parole on her federal sentence on October 20, 1983. However, petitioner waived her federal parole release date because, had she been released, she would have had to serve time in New York State custody, which she apparently did not want to do.

On January 10, 1984, the Appellate Division, Second Department, unanimously denied petitioner’s pro se Article 78 application, which requested relief from her state detainer on the grounds that her plea agreement contemplated release by both jurisdictions whenever parole was granted on the federal sentence.

Subsequently, on May 18, 1984, petitioner applied to this Court for a writ of habeas corpus, alleging that her return to New York state custody would violate her plea agreement. This Court denied her application on December 18, 1984, finding that petitioner had failed to exhaust her state remedies.

Upon expiration of petitioner’s federal sentence, petitioner was transferred to Bedford Hills Correctional Facility, a New York state prison, where she has been incarcerated since January 4, 1985. She is scheduled to be released in November, 1985.

On May 6, 1985, defendant moved, in New York State Supreme Court, Kings County, to vacate her judgment of conviction on the grounds that her plea agreement was violated. The trial court denied this motion, disagreeing with petitioner’s interpretation of the plea agreement, even though the state prosecutor agreed with petitioner’s version. Petitioner did not appeal this decision, nor has she pursued any further relief in the New York courts. The present petition for habeas corpus relief followed.

II. DISCUSSION

It is axiomatic that a state prisoner is required to exhaust available state remedies before filing for federal habeas corpus relief. See 28 U.S.C. § 2254(b), (c) (1982); Rose v. Lundy, 455 U.S. 509, 515-16, 102 S.Ct. 1198, 1201-02, 71 L.Ed.2d 379 (1982); Duckworth v. Serrano, 454 U.S. 1, 3, 102 S.Ct. 18, 19, 70 L.Ed.2d 1 (1981). In the present ease, petitioner clearly has not exhausted her state remedies. She failed to seek any appeal or review of the state trial court’s denial of her motion to vacate her conviction. Moreover, her present petition raises a claim that she never presented in state court, namely, that New York State is “holding 45 days of [her] time.” Therefore, the Court ordinarily would dismiss the petition without further hesitation.

In this case, however, the state prosecutor has expressly stated that she will not assert the exhaustion defense. Thus, the Court is faced with the question of what effect the prosecutor’s attempted waiver of the exhaustion defense has in this federal habeas proceeding. As will be discussed more fully below, the Court is of the opinion that the prosecutor may not waive the exhaustion defense, and that such a purported waiver of the defense has no effect upon the Court’s general obligation to dismiss habeas petitions where state remedies are not exhausted.

The exhaustion doctrine is primarily intended to protect the state court’s role in the enforcement of federal law and prevent disruption of state judicial proceedings. See Braden v. 30th Judicial Circuit Court of Kentucky, 410 U.S. 484, 490-91, 93 S.Ct. 1123, 1127-28, 35 L.Ed.2d 443 (1973). It is a rule not of jurisdiction, but of comity, see, e.g., Silverstein v. Henderson, 706 F.2d 361, 365, n. 9 (2d Cir.), cert. denied, 464 U.S. 864, 104 S.Ct. 195, 78 L.Ed.2d 171 (1983), and is based upon the notion that in our federal system, federal and state courts are “equally bound to guard and protect rights secured by the Constitution.” Rose v. Lundy, 455 U.S. 509, 518, 102 S.Ct. 1198, 1203, 71 L.Ed.2d 379 (1982) (quoting Ex parte Royall, 117 U.S. 241, 251, 6 S.Ct. 734, 740, 29 L.Ed. 868 (1886)). Thus, it is well-settled that federal courts should interfere with the administration of justice in the state courts, by entertaining non-exhausted claims, only under the most exceptional circumstances where justice so requires. See Ex parte Hawk, 321 U.S. 114, 117, 64 S.Ct. 448, 450, 88 L.Ed. 572 (1944); United States ex rel. Graham v. Mancusi, 457 F.2d 463, 468 (2d Cir.1972).

The petitioner in the instant case, as noted above, has clearly failed to exhaust her state remedies. In its affirmation in opposition to the petition, the state has indicated that it “do[es] not assert this bar.” This Court holds, however, that the state’s attempt to waive the exhaustion defense is improper. Whether a habeas petition should be in federal district court is not a decision for the state prosecutor. It is a determination “that can be made only by that [district] court, after measuring the claim against the mandate of 28 U.S.C. § 2254.” United States ex rel. Trantino v. Hatrack, 563 F.2d 86, 96 (3d Cir.1977), cert. denied, 435 U.S. 928, 98 S.Ct. 1499, 55 L.Ed.2d 524 (1978).

For § 2254(b) purposes, both concession and waiver amount to nothing more than notice to the court that the state is unopposed to a federal court reaching the merits of a petitioner’s claim. But by the same token, neither concession nor waiver relieves the federal court of its responsibility to decide only those habeas claims which Congress has authorized it to hear under § 2254(b).

Id.

The Court is aware that the federal circuit courts are split on this issue. The First, Third, Sixth, Ninth, and Tenth Circuits have indicated that the exhaustion defense should not be waivable by the state prosecutor. See, e.g., Needel v. Scafati, 412 F.2d 761, 766 (1st Cir.), cert. denied, 896 U.S. 861, 90 S.Ct. 133, 24 L.Ed.2d 113 (1969); Trantino, supra, at 95-98 (3d Cir.1977); Parker v. Rose, 728 F.2d 392, 394 (6th Cir.1984) (dictum); Batchelor v. Cupp, 693 F.2d 859, 862-63 (9th Cir.1982), cert. denied, 463 U.S. 1212, 103 S.Ct. 3547, 77 L.Ed.2d 1395 (1983); Naranjo v. Ricketts, 696 F.2d 83, 87 (10th Cir.1982) (per curiam). By contrast, the Fourth, Fifth, Eighth, and Eleventh Circuits have permitted waiver or concession of the exhaustion defense, particularly where the waiver is express, rather than by default. See, e.g., Jenkins v. Fitzberger, 440 F.2d 1188, 1189 & n. 2 (4th Cir.1971); McGee v. Estelle, 722 F.2d 1206, 1212-13 (5th Cir.1984); Batten v. Scurr, 649 F.2d 564, 568-69 (8th Cir.1981); Thompson v. Wainwright, 714 F.2d 1495, 1500-01 (11th Cir.1983).

In our own circuit, the Second Circuit, the issue has not been definitively decided. In perhaps its first mention of the issue, the Second Circuit suggested in dictum that it “[did] not consider that the statutory requirement of exhaustion of state remedies can be waived by the State.” United States ex rel. Sostre v. Festa, 513 F.2d 1313, 1314 n. 1 (2d Cir.), cert. denied, 423 U.S. 841, 96 S.Ct. 72, 46 L.Ed.2d 60 (1975). Nevertheless, in that case, and again in Colon v. Fogg, 603 F.2d 403, 407 (2d Cir.1979), the Second Circuit refused to dismiss on exhaustion grounds because the issue had been raised after lengthy proceedings at the district court level. In two subsequent cases, however, the Court again suggested in dicta that strict compliance with the exhaustion rule would prevent the Court from accepting a waiver of the exhaustion defense by the State. See Silverstein v. Henderson, 706 F.2d 361, 365 n. 9 (2d Cir.) (Court places “no weight” on State’s failure to assert exhaustion defense because “the state executive branch may not ordinarily have the power to waive the deference due state courts”), cert. denied, 464 U.S. 864, 104 S.Ct. 195, 78 L.Ed.2d 171 (1983); Gayle v. LeFevre, 613 F.2d 21, 22 n. 1 (2d Cir.1980) (Court should require “strict compliance with the exhaustion doctrine ... in the interests of comity”). Finally, in an even more recent case, the Second Circuit expressly refused to decide this issue in affirming a district court’s grant of a consensual writ of habeas corpus, stating in dictum that “the state prosecutor could and did waive exhaustion” in that case. See McCarthy v. Manson, 714 F.2d 234, 238 (2d Cir.1983).

It should be noted, however, that the McCarthy case involved rather unique circumstances. In that case, the district court permitted waiver of the exhaustion defense by Connecticut’s Chief State’s Attorney primarily because “Connecticut is one of the few states that retain the early American constitutional structure in which prosecutors are appointed by judges (rather than popularly elected or appointed by the executive) and in which their office is created in the judicial rather than the executive article of the state constitution.” McCarthy v. Manson, 554 F.Supp. 1275, 1290-91 (D.Conn.1982), aff'd, 714 F.2d 234, 238 (2d Cir.1983). Thus, in McCarthy, the prosecutor was viewed as being in a unique position to represent not only the people of the state, but also the judiciary. See id. at 1291-92. This unique facet of Connecticut’s criminal justice system was emphasized as a critical factor in finding that waiver of the exhaustion defense presented no affront to comity. Because New York’s prosecutors are not appointed by the judiciary, but rather are elected by the people, the decision in McCarthy is not apposite to the present case. Indeed, in the present case, the prosecutor has sided with the petitioner, and taken a position directly contrary to that of the state trial judge, in both the motion in state court and this federal habeas case.

Finding no controlling authority in the Second Circuit, this Court finds persuasive, and consequently adopts, the reasoning set forth by the Third Circuit in United States ex rel. Trantino v. Hatrack, 563 F.2d 86 (3d Cir.1977), cert. denied, 435 U.S. 928, 98 S.Ct. 1499, 55 L.Ed.2d 524 (1978), and followed by several other circuits:

The basis for rejection of the concept of waiver ... is found in the policy underlying the exhaustion requirement. Exhaustion is a rule of comity. “Comity,” in this context, is that measure of deference and consideration that the federal judiciary must afford to the co-equal judicial systems of the various states. Exhaustion, then, serves an interest not of state prosecutors but of state courts. It follows, therefore, that the state court interest which underlies the exhaustion requirement of § 2254(b) cannot be conceded or waived by state prosecutors— for the state court interest in having “an initial ‘opportunity to pass upon and correct’ alleged violations of its prisoners’ federal rights” is simply not an interest that state prosecutors have been empowered to yield. “Waiver,” like “concession,” is not a talisman, the incantation of which will cause the exhaustion requirement to disappear. That requirement remains.

Id. at 96 (footnote omitted) (emphasis in original). Thus, this Court holds that the prosecutor’s “waiver” of the exhaustion defense has no effect on the Court’s duty to dismiss habeas petitions where state remedies have not been exhausted.

This holding, however, does not end the inquiry. As noted above, because the exhaustion requirement is not jurisdictional, a federal court may overlook a failure to exhaust state remedies “in those rare instances where justice so requires.” United States ex rel. Graham v. Mancusi, 457 F.2d 463, 468 (2d Cir.1972). Unfortunately for petitioner, this case does not represent such an instance. In the present case, there is no question of defendant’s guilt. Nor is there any allegation that she was incarcerated without due process, or that her punishment has been excessive. Petitioner’s claim is that when she entered into the plea bargain, she understood the bargain to include a promise that she would not serve any time in state custody—i.e., that her state sentence would expire concurrently with her federal sentence. Apparently, upon consideration of this contention, the state trial judge did not agree, even though the state prosecutor sided with petitioner. This habeas petition, therefore, in essence asks this Court to reverse the state trial judge’s decision without permitting the New York appellate courts to review the ease first. This is not proper.

It may also be true that petitioner went directly to federal court because she believed the New York courts could not hear her appeal before her scheduled date for release from state custody. However, she made no attempt whatsoever to seek review in state court. Petitioner surely was aware of the exhaustion requirement in federal court, because her earlier petition was dismissed by this Court on precisely those grounds on December 18, 1984. Moreover, because the state prosecutor in this case virtually joined in petitioner’s motion, it is more likely that, had she appealed in state court, petitioner may have received an expedited review under the circumstances. In any event, it is difficult to imagine that her direct appeal to federal court, which was given expedited, priority treatment by this Court notwithstanding its crowded docket, saved petitioner any time in relation to her prospects in state court.

Petitioner apparently is scheduled for release on November 10 or November 17 of this year. The state trial judge was aware of this, and was also aware that the state prosecutor had agreed that petitioner should be released. Nevertheless, and this Court will presume for legitimate reason, the state trial judge believed that petitioner should not be released prior to the date scheduled. The state court interest in the exhaustion rule is simply too strong for this Court to review the state trial judge’s decision absent some attempt by petitioner to exhaust state remedies, particularly because even if relief were ultimately granted in this case, the affront to comity would save petitioner only three weeks of a three- and-one-half-year term of incarceration.

III. CONCLUSION

Based on the foregoing analysis, petitioner’s application for habeas corpus relief is DISMISSED.

IT IS SO ORDERED.


author: JACKSON, District Judge.

text:
    INDEPENDENT U.S. TANKER OWNERS COMMITTEE, Plaintiff, v. Elizabeth H. DOLE, et al., Defendants. ALASKA BULK CARRIERS, INC., et al., Plaintiffs, v. Elizabeth H. DOLE, et al., Defendants. FIRST ATTRANSCO TANKER CORP., et al., Plaintiffs, v. Elizabeth H. DOLE, et al., Defendants. OVERSEAS SHIPHOLDING GROUP, INC., Plaintiff, v. Elizabeth H. DOLE, et al., Defendants.
    Civ. A. Nos. 85-1555, 85-1740, 85-1752 and 85-1771.
    United States District Court, District of Columbia.
    Oct. 25, 1985.
    Joseph A. Klausner, Allan A. Tuttle, Washington, D.C., for Independent U.S. Tanker.

      Robert J. Blackwell, Anne E. Mickey, Washington, D.C., for Alaska Bulk Carriers.
    Amy Loeserman Klein, Washington, D.C., for First Attransco Tanker.
    Daniel P. Levitt, New York City, for Overseas Shipholding.
    Michael Joseph, Washington, D.C., for Atlantic Richfield — defendant intervenors.
    Richard H. Saltsman, Washington, D.C., for American Petrofina — defendant inter-venors.
    William E. McDaniels, Washington, D.C., for Seatrain — plaintiff intervenor.
    Leslie K. Dellon, Dept. Justice, Civil Div., Washington, D.C., for Justice Dept.
    Cleveland Thornton, Office Gen. Counsel, Dept, of Transp., Washington, D.C., for Dept. Transp.
    Richard J. Wertheimer, Washington, D.C., for Overseas Shipholding.
   MEMORANDUM AND ORDER

JACKSON, District Judge.

These consolidated cases represent a renewal of the protracted conflict between the Executive Branch official responsible for the administration of the Merchant Marine Act of 1936, 46 U.S.C.App. §§ 1151 et seq. (1982 & Supp. 1 1983), (the “Act”), and an ad hoc guild of shipowners who fear an infringement of the franchise they presently enjoy under the Act and related legislation.

Plaintiffs are owners and operators of various-sized U.S.-flag tankers built entirely with private capital and now employed in the domestic trade, primarily in the transport of crude oil from the oil fields of the Alaskan North Slope (“ANS”) to Panama. Defendant Secretary of Transportation (the “Secretary”) has, by rule last published May 7, 1985 (the “payback rule”), purported to enable similar vessels built with government subsidies to be relieved of statutory restrictions on competition with plaintiffs’ ships in the same trade by repaying their subsidies within the year. Defendant-intervenors are subsidized-vessel owners/operators who expect to avail themselves of the payback rule. At issue is whether, and, if so, to what extent and in what circumstances, the Secretary may lawfully implement the payback rule. The cases are presently before the Court on cross-motions for summary judgment, and, because they entail only a review of agency action taken pursuant to the notice-and-comment provisions of the Administrative Procedure Act, 5 U.S.C. §§ 551 et seq. (1982) (“APA”), the parties agree that there are no material issues of fact in dispute which could be tried in this forum. See Camp v. Pitts, 411 U.S. 138, 93 S.Ct. 1241, 36 L.Ed.2d 106 (1973). For the reasons set forth below, the Court concludes that the Secretary acted in accordance with law and within the limits of her discretion, and will, therefore, deny plaintiffs’ motions for summary judgment, grant those of defendant and defendant-intervenors, and dismiss the several complaints with prejudice.

I.

The twentieth-century tribulations of the American maritime industry have been well-documented in the history of the legislation which has been enacted for its protection and in the judicial antecedents of this case. In brief and general summary, the U.S. merchant marine has been so beset by circumstances — including, inter alia, large subsidies given by other trading nations to their own flag fleets, and the higher wages, safety standards, and costs of operation obtaining aboard its own — that it has been rendered largely uncompetitive with foreign merchantmen at sea. To redress its competitive disadvantages and encourage American shipping abroad, therefore, Congress has for a number of years authorized construction and operating differential subsidies (“CDS” and “ODS,” respectively) to be paid by the government for ships to be built in U.S. shipyards which are destined for carriage in foreign commerce under the U.S. flag. 46 U.S.C.App. §§ 1151-61. Only U.S.-flag vessels which have received no construction or operating differential subsidies, however, are eligible to participate in an artificial domestic shipping market from which both foreign carriers and government-subsidized U.S.-flag ships are excluded by Section 27 of the Merchant Marine Act of 1926 (the “Jones Act”), 46 U.S.C.App. § 883 (1982 & Supp. I 1983), and Section 506 of the Act of 1936, 46 U.S.C.App. § 1156 (1982 & Supp. I 1983). The U.S.-flag fleet is, thus, divided generally into two distinct segments: the so-called “Jones Act fleet,” operating exclusively in the protected U.S. domestic trade, safe from all but intramural competition; and the subsidized overseas fleet, permitted, as a matter of policy, to operate only in foreign commerce.

Even with the substantial help of government subsidies, however, U.S.-flag tankers have fared poorly in the international mercantile competition over the course of the last decade. Primarily as a result of market forces beyond the United States’ — or any one nation’s — control, world shipping rates have fallen below the break-even costs of the subsidized American industry. At the same time, however, not altogether by coincidence, the domestic market has flourished, especially down the West Coast en route from the Alaskan oil fields to Panama. As a result, since the late 1970s, substantial pressure has been building to relax the strictures of Section 506 of the Act and admit subsidized tankers to the domestic trade to share the bounty.

In 1980, the Supreme Court held the Secretary to have authority to release a single financially-distressed CDS vessel permanently from its foreign trade commitment, provided the unamortized portion of its subsidy were repaid with interest. Seatrain Shipbuilding Corp. v. Shell Oil Co., 444 U.S. 572, 100 S.Ct. 800, 63 L.Ed.2d 36 (1980). Although the Seatrain case involved but one ship in unique circumstances of duress upon which the Supreme Court dwelt at length in its opinion, shortly after the decision MarAd issued what it called an “interim” rule of general applicability which would have permitted certain other vessels to repay their CDS to gain admission to the domestic trade, upon a showing of exceptional circumstances and after a determination that no favorable employment opportunities existed for them in foreign commerce. Then, pursuant to its “interim” rule, MarAd granted an application for repayment of its CDS by a second large tanker.

The “interim” rule was immediately challenged by plaintiff Independent U.S. Tanker Owners Committee (“ITOC”) on both procedural and substantive grounds vatici-nal of most of those it asserts here. In September, 1982, the court of appeals struck down the “interim” rule for Mar-Ad’s failure to accompany it with a statement of basis and purpose, and remanded to the district court with instructions to vacate the “interim” rule and order new rulemaking proceedings. Independent US. Tanker Owners Committee v. Lewis, 690 F.2d 908, 918-20 (D.C.Cir.1982) (hereinafter cited as “ITOC’).

On January 31, 1983, therefore, the Department of Transportation published the immediate ancestor of the instant payback rule, which purported to permit the repayment of its CDS by any vessel without first requiring a demonstration of economic necessity. 48 Fed.Reg. 4408 (1983). While the rulemaking was pending, however, Congress acted, on three separate occasions, to preclude implementation of the proposed rule for finite periods, the last prohibition expiring May 15, 1985. A week earlier, anticipating the removal of the impediment, the Secretary promulgated the instant payback rule, in its present and final form, 50 Fed.Reg. 19,170 (1985) (to be codified at 40 C.F.R. pt 276) (proposed May 7, 1985), to become effective one month later. The payback rule provides, in substance, that any tanker vessel built with CDS may repay its subsidy, with interest, in return for permission to permanently enter the domestic trade, conditioned only by a requirement that the repayment obligation be satisfied by June 8, 1986.

During the two-year hiatus occasioned by Congress’ moratoria on implementation of the rule, plaintiffs, or some of them, petitioned the Secretary to reopen the record to receive comments with respect to “changed circumstances” in the interim. But, although it appears from the record that some additional comments were received informally from other interested parties, plaintiffs’ petitions to reopen were formally denied, in conjunction with the promulgation of the rule in final form, on the ground that the reopening of the record was both unnecessary (the Secretary having been already sufficiently apprised of plaintiffs’ positions) and would serve only to delay the matter further. The Secretary also stated that she was receiving “up-to-date” information from the Department of Energy and other sources, bringing to her attention directly any “changed circumstances.”

II.

The Secretary’s Authority Under the Act

Notwithstanding the Seatrain case, supra, plaintiffs say, the Secretary lacks authority under the Act to lift domestic trading restrictions on all CDS-built vessels by means of single rule which applies automatically to the entire subsidized tanker fleet without regard to circumstances. The Secretary maintains the issue was determined in her favor by the Supreme Court in Seatrain.

It is certainly arguable that Seatrain was limited to its facts. The case concerned the approval of the application of a single CDS tanker for admission to the domestic trade, not an entire flotilla, and in upholding the Secretary’s authority to allow the application conditioned upon a repayment of its CDS, the Supreme Court remarked upon market conditions, took into consideration the straitened circumstances of the vessel’s owner, and then concluded that nothing in the Act suggested that “the Secretary is forbidden to approve transactions of this sort under these circumstances. 444 U.S. at 588, 100 S.Ct. at 809 (emphasis added).

On the other hand, it is manifest from the balance of the Seatrain opinion that the Supreme Court ruled as it did as a matter of statutory construction, not in review of an exercise of administrative discretion. “The primary question for decision” was, as the Court stated it, “whether the Secretary ... may terminate the restrictions imposed pursuant to [the Act] when the owners of a vessel constructed with a CDS repay that subsidy in full.” Id. at 574, 100 S.Ct. at 802. It said nothing about the plight of the applicant or the state of the market. And, in reversing a decision of the court of appeals for this circuit which had found, in the express provision in Section 506 of the Act for temporary admissions of CDS vessels to the domestic trade upon specified conditions, an implied prohibition of permanent admissions upon any conditions, the Court said:

The Court of Appeals was of the view that the specific exceptions in § 506 marked the limit of the Secretary’s authority to approve entry of subsidized vessels into the domestic trade. By its logic, detail, and legislative history, the panel majority reasoned, that section prohibits transactions like the one before us. In consequence, that court found the broad sweep of the Secretary’s power under the balance of the Act irrelevant, the express language giving the Secretary authority to make and amend contracts unimportant, and the policy arguments advanced by the Secretary unpersuasive.
We disagree. On the face of the statute, the Secretary’s broad contracting powers and discretion to administer the Act seem to comprehend the authority urged by petitioners here.

Id. at 587-88, 100 S.Ct. at 809-10 (footnote omitted). “In conclusion,” it said, “we hold that the Act empowers the Secretary to approve full-repayment/permanent-release transactions of the type at issue here.... [W]e express no view upon the merits of the Secretary’s particular exercise of discretion with regard to the [vessel involved] since that issue is not before us.” Id. at 597, 100 S.Ct. at 814.

This Court concludes that Seatrain did confirm the discretionary authority of the Secretary under the Act to admit CDS-built vessels to the domestic trade, upon repayment of their subsidies, in circumstances otherwise undefined. It must, therefore, consider whether the authority can be exercised without regard to individual circumstances at all other than generic market conditions for U.S.-flag tankers and consumers of their services.

Conformity of the Payback Rule With the Act

Plaintiffs take issue with the payback rule itself in multiple respects. Assuming her discretion in the matter, they assert, the Secretary has abused it grievously by promulgating a rule with so drastic and precipitous an impact upon an entire industry that it will confound each of the purposes the Act proclaims for itself. Plaintiffs maintain that the rule would compromise national defense because it would deplete the merchant fleet of the smaller, so-called “handy-tankers” which are most useful for military purposes. They argue that the rule imperils civilian commerce, because it abrogates the two-fleet principle embodied in the Jones Act, invites the en masse abandonment of foreign commerce by U.S.-flag vessels altogether, and threatens the vitality of the domestic trade fleet by suffusing the market with a vast overtonnage. The decline of the domestic fleet would, in turn, diminish the number of jobs available for American merchant seamen. Moreover, the intensified competition would most severely affect the newer tankers in the ANS fleet, according to plaintiffs, because those ships are, as a rule, both debt-ridden and not fully written off, and must, therefore, operate at higher rates in order to cover costs. The result will be, according to plaintiffs, contrary to the Secretary’s expectations, antithetical to the Act’s objective of a modern and efficient merchant marine with the “safest” and “best” equipment aboard. Finally, plaintiffs submit that the influx of existing large CDS tankers into the ANS trade will significantly reduce demand for new tankers for the domestic trade, historically the largest consumer of new ship construction, thus idling the shipyards where they might have been built.

The Secretary’s response to each point invokes the same Darwinian principles, but the points are, each and all, touched upon, directly or indirectly, in her commentary accompanying the rule and the administrative record. Confronted with a surfeit of underemployed U.S.-flag vessels generally, she says, and an artificially dislocated market for their services, she has determined to dispense with at least one of the artifices within her control in the hope that disinhi-bited competition will, over time, distill the best U.S.-flag merchant tanker fleet of which present circumstances will admit, although admittedly less than everyone would desire.

Plaintiffs’ objections are all, in substance, simply that the Secretary has grossly underestimated the rule’s sanguinary consequences, and that its ultimate effect will not be the survival of the fittest but the extinction of the entire species. But having been presented with an agency record which speaks to all the concerns to which plaintiffs give expression, this Court cannot, within the limits of the scope of the review it is permitted to make of the payback rule, find that the Secretary has failed to give consideration to the relevant factors or has made a clear error of judgment in her disposition of them. See Center for Auto Safety v. Peck, 751 F.2d 1336, 1342 (D.C.Cir.1985) quoting Motor Vehicle Manufacturers Ass’n, Inc. v. State Farm Mutual Automobile Insurance Co., 463 U.S. 29, 43, 103 S.Ct. 2856, 2866-67, 77 L.Ed.2d 443 (1983).

The Secretary’s Consideration of Post-Comment Data

During the two-plus years the payback rule lay dormant at congressional direction, the domestic shipping market obviously did not. Oil was shipped from ANS, and data was generated with respect thereto, which were not in anyone’s contemplation when the payback rule was first published in 1983. Both plaintiffs and the Secretary draw upon the data to make projections and predictions for the future. The Secretary continues to foresee a decline in shipping costs with some, albeit acceptable, attrition of the least efficient vessels from the Jones Act fleet. Plaintiffs say the figures are considerably more lugubrious: they forebode a glut of tanker tonnage relative to anticipated ANS oil production which will so depress the market that the domestic merchant tanker fleet would unlikely survive the carnage.

Relying upon supporting affidavits submitted with their motions, plaintiffs argue that the Secretary has been led into fundamental misjudgments of fact and policy that public comment would have brought to light; specifically, they contend that the estimates of present costs, charter rates and fuel consumption, as well as predictions of future Alaskan crude oil production found in the Regulatory Impact Analysis (“RIA”) of May, 1985, accompanying (but not published with) the payback rule (A.R. 2412-2488), were erroneous and led to grossly overstated estimates of savings that could be expected as a result of the rule. Plaintiffs assert that the Secretary’s refusal to reopen the comment period in May, 1985, to allow them to expound upon the changed economic conditions, together with her own reliance on data compiled for her alone after the close of the comment period, violates § 553(c) of the APA. See International Harvester Co. v. Ruckelshaus, 478 F.2d 615, 649 (D.C.Cir.1973); Portland Cement Association v. Ruckelshaus, 486 F.2d 375, 393 & n. 67 (D.C.Cir.1973).

As a general proposition, however, a new round of notice and comment is required only where the data relied upon is entirely new and is critical to the agency’s determination. See Community Nutrition Institute v. Block, 749 F.2d 50, 58 (D.C.Cir.1984) (distinguishing Portland Cement, supra ). Where subsequent studies or information gathered after close of the comment period merely expand upon or confirm earlier studies’ conclusions, or enhance the reliability of earlier data, failure to provide an opportunity for comments on such information is not fatal to the rule it purports to underlie. Id.

The Secretary maintains that the data she considered was neither “entirely new” nor “critical,” and that, as the information went merely to a “predictive judgment” on her part, the Court should defer to her expertise in any event. She also points out that plaintiffs had the right, and ample opportunity, to submit their own up-to-date information under Department of Transportation regulations had they desired to do so, see 49 C.F.R. § 5.27, and that other comments were, in fact, received and considered.

It is, however, immediately apparent that the payback rule published in May, 1985, is identical with the rule published in January of 1983 (save for the repayment terms and the one-year time limit), and the reasons given for it are essentially the same reasons advanced in 1983, as illuminated by the comments received. It is, thus, clear that the post-record data, whether right or wrong, did not shape the rule but, as the Secretary suggests, the absence of a rule may have shaped the data.

The rule-making process must end at some point. As the court of appeals stated in ITOC, supra, when it last remanded to the agency for a resumption of the rule-making proceedings more than three years ago:

An agency is not obliged to publish a tentative opinion for comment. Otherwise, an absurd and endless process could [ensue]: notice and comment procedures followed by a tentative opinion followed by comment followed by a new tentative opinion (necessary to take account of and respond to the new set of comments) and so on.

690 F.2d at 926. Moreover, in such rule-making proceedings generally, it is not only entirely permissible for an agency to consult extra-record information to give meaning to that upon which its decisions are based, but

[interpretation of, and assignment of weight to, data such as these is a task which particularly calls for expert judgment. In interpreting such data and in making predictions based on them, the [agency] must be expected to make use of the experience it has gained through years of dealing with the problem.... Frequently, statistics, scientific reports and studies will be amenable to various interpretations and effective regulation requires that the [agency] bring to bear the full range of its knowledge, garnered from whatever source, in making the interpretation on which it bases important policy decisions.

City of Chicago v. FPC, 458 F.2d 731, 747 (D.C.Cir.1971), cert. denied, 405 U.S. 1074, 92 S.Ct. 1495, 31 L.Ed.2d 808 (1972) (footnote omitted). In such cases, the object of judicial review is simply “to determine whether a reasoned conclusion from the record as a whole could support the premise on which the [agency’s] action rests_ [I]n all cases, reasoned conclusions are the hallmark of regularity.” Id. at 744.

III.

This Court must also add to its legal obligation to refrain from substituting its judgment for that of the Secretary, see Citizens to Preserve Overton Park, Inc. v. Volpe, 401 U.S. 402, 416, 91 S.Ct. 814, 823-24, 28 L.Ed.2d 136 (1971), its recognition of the fact that the genesis of this particular rule is at least as much Executive Branch policy of the current Administration as it is the product of routine regulatory activity. The Secretary acknowledges that CDS repayment “is consistent with this Administration’s pro-competitive, anti-regulatory philosophy,” 50 Fed.Reg. 19,172, and that “[i]t is this Administration’s position that competition should be relied upon whenever feasible to allocate our nation’s transportation resources.” A.R. at 2433. Thus, it is the President’s— not merely an agency’s — policy which the payback rule will implement, unless Congress or the courts should gainsay him. And, from the days of the Seatrain case all three branches of government have been aware that the prospect of commingling subsidized and unsubsidized vessels in the domestic trade raises issues as complex as the consequences of their resolution are profound; such questions, being matters of national policy, are best answered by the political branches, not the judicial.

Finally, the payback rule has most assuredly not evolved in obscurity. Congress has thrice put the rule on hold, then ultimately allowed its prohibition to lapse. While it is settled wisdom not to attribute more significance to legislative inertia than is wont, congressional inaction in response to an agency’s public declaration of what it intends to do with what it believes its statutory authority to be, particularly when Congress is aware of the controversy attending it, gives credence to the supposition that Congress either approves, or is at least willing that the agency be allowed to try what it proposes. See North Haven Board of Education v. Bell, 456 U.S. 512, 533-35, 102 S.Ct. 1912, 1924-25, 72 L.Ed.2d 299 (1982); CBS, Inc. v. Federal Communications Comm’n, 453 U.S. 367, 382-85, 101 S.Ct. 2813, 2823-25, 69 L.Ed.2d 706 (1981); Planned Parenthood Fed. of America v. Heckler, 712 F.2d 650, 660 (D.C.Cir.1983).

The Court concludes that the Secretary’s reasoning is clear, whether' or not it will prove to have been correct, and that the payback rule rationally follows from that reasoning. It concludes, further, that the rule, its historical origins, and its expected consequences have been sufficiently vexed before the courts, Congress, and the agency for nearly a decade, and that no purpose would be served by a remand for further administrative mastication. What plaintiffs might have told the Secretary about the rule or the post-1983 data in the RIA had she reopened the record as they wished, they have now presented in the context of this proceeding, with no perceptible effect on her thinking. She remains committed to the rule as written, and it is for Congress, if anyone, to require that it be altered.

For the foregoing reasons, therefore, it is, this 25th day of October, 1985,

ORDERED, that plaintiffs’ motions for summary judgment are denied; and it is

FURTHER ORDERED, that defendant’s and defendant-intervenors’ motions for summary judgment are granted; and it is

FURTHER ORDERED, that the complaints are dismissed with prejudice.

      . Administration of the Act was originally entrusted to the Secretary of Commerce, and, within his Department, the Maritime Subsidy Board and the Maritime Administration ("Mar-Ad”). In 1981 both the responsibility and the administering agencies were transferred to the Secretary of Transportation by Pub.L. No. 97-31, 95 Stat. 151 (1981). See, generally, Independent U.S. Tanker Owners Committee v. Lewis, 690 F.2d 908, 910 n. 1 (D.C.Cir.1982). All references to “the Secretary” herein are to the responsible Executive Branch officers at the relevant time, irrespective of the departments in which they served.

      . Another shipowner, Seatrain Lines, Inc., see infra, has recently moved to intervene as a party-plaintiff, alleging that the competition it anticipates for its vessels previously admitted to the domestic trade as hardship cases will be ruinous, and those still outside — all idle — which would like to repay their construction subsidies are unable to do so without further financial aid from the government, which is unlikely to be forthcoming. Those defendants who oppose the motion for leave to intervene do so on standing and timeliness grounds. The motion is granted.

      .Jurisdiction is predicated upon §§ 701 et seq. of the APA, and 28 U.S.C. §§ 1331, 1333, 1337, 1651, 2201-02 (1982). Review is sought pursuant to § 706(2)(A) of the APA.

      . See, generally, Seatrain Shipbuilding Corp. v. Shell Oil Co., 444 U.S. 572, 574-75, 584, 100 S.Ct. 800, 802-03, 807, 63 L.Ed.2d 36 (1980); Independent U.S. Tanker Owners Comm. v. Lewis, 690 F.2d 908, 911-13 (D.C.Cir.1982). See also Kurtz & Isikoff, Industry Foundering In an Ocean of Aid, Washington Post, July 16, 1985, at Al, col. 1.

      . To prevent unfair competition between its subsidized vessels and those constructed and operated entirely with private capital, the U.S. has required that any ship built with CDS funds operate exclusively in foreign trade, with two minor exceptions: CDS vessels may sail in the domestic trade on either the first or last leg of an overseas voyage, and MarAd may consent to the operation of a CDS tanker in the domestic trade for up to six months in any 12-month period whenever it determines that "such transfer is necessary or appropriate to carry out the purposes” of the Act. Proportional repayment of the subsidy is required under either exception. 46 U.S.C.App. § 1156. See Atlantic Richfield Co. v. United States, 774 F.2d 1193 (D.C.Cir.1985).

      . Unlike the payback rule, however, the "interim” rule contemplated ad hoc determinations of each individual application for a CDS repayment, afforded notice and opportunity to comment as to each, and required, as a necessary condition for approval, a showing that "no favorable opportunities exist for viable employment of the vessel in the foreign trade." 46 C.F.R. § 276.3(b) (1984).

      . See Department of Transportation Appropriations Act, FY 1984, Pub.L. No. 98-78, 97 Stat. 453; Department of Commerce Appropriations Act, FY 1984, Pub.L. No. 98-166, 97 Stat. 1071; and Department of Commerce, Justice and State Department Appropriations Act, FY 1985, Pub.L. No. 98-411, 98 Stat. 1545.
      The Court is informed that on June 12, 1985, the House of Representatives passed a similar prohibition which is now pending before the entire Congress as part of the 1985 supplemental budget proposal.

      . The court of appeals subsequently observed of Seatrain in ITOC v. Lewis, supra, "The Supreme Court specifically did not address the question ... of when or how [the Secretary] might exercise this discretion [to allow permanent repayment and entry into the domestic trade] in accordance with the purposes of the Act.” 690 F.2d at 913-14 & n. 17.

      . 46 U.S.C. § 1101 provides in pertinent part:
      It is necessary for the national defense and development of its foreign and domestic commerce that the United States shall have a merchant marine (a) sufficient to carry its domestic water-borne commerce and a substantial portion of the water-borne export and import foreign commerce ... and to provide shipping service essential for maintaining the flow of such domestic and foreign ... commerce at all times, (b) capable of serving as a naval and military auxiliary, ... (c) owned and operated under the United States flag by citizens of the United States, ... (d) composed of the best-equipped, safest, and most suitable types of vessels, constructed in the United States and manned with a trained and efficient citizen personnel, and (e) supplemented by efficient facilities for shipbuilding and repair. It is declared to be the policy of the United States to foster the development and encourage the maintenance of such a merchant marine.

        See also, Seatrain, 444 U.S. at 584 & n. 25, 100 S.Ct. at 807-08 & n. 25.

      . Plaintiff Overseas Shipholding Group, Inc. ("OSG”) also argues that the Secretary’s rule-making was inadequate in its failure to include an Environmental Impact Statement (“EIS”) or satisfactorily explain its absence, as required by the National Environmental Policy Act of 1969, 42 U.S.C. §§ 4321 et seq. (1982 & Supp. I 1983) ("NEPA”).
      NEPA requires that the promulgation of any rule be accompanied by an EIS, 42 U.S.C. § 4332(2)(C); 40 C.F.R. § 1508.9 (1985), unless the agency finds that the rule will have “no significant impact” on the quality of the human environment. 40 C.F.R. § 1508.13 (1985). A finding of “no impact," in turn, must be supported by an environmental assessment (“EA"), containing "sufficient evidence and analysis for determining whether to prepare an [EIS] or a finding of no significant impact." 40 C.F.R. §§ 1501.4, 1508.9.
      The Secretary made such a finding, basing it upon a 65-page EA accompanying the rule, A.R. at 2490-2555, which discussed its potential hazards, the most significant being, of course, oil spills. The Secretary concluded that, some large CDS vessels being already in the trade, the nature of the hazard was merely more of the same rather an hitherto unencountered risk, and that larger vessels carrying the same quantity of oil would mean fewer voyages on which spills might occur.
      Moreover, it appears that a comprehensive EIS was prepared in May, 1973, in connection with the CDS payment program, which explored in detail the environmental hazards attendant upon, inter alia, the transport of crude oil by the very ships now expected to repay their subsidies. Since the nature of those hazards is unaffected by the character of the vessels as payee or payor, there seems little point in studying the matter again.

      . Defendant-intervenors Atlantic Richfield Co., Moore-McCormack Bulk Transport, Inc., and Yeon Shipping Corp. have moved that the affidavits, being dehors the administrative record in these cases, be stricken insofar as they attack the merits of the agency action. While it is true that "judicial review of agency action is normally confined to the full administrative record before the agency at the time the decision was made,” Environmental Defense Fund, Inc. v. Costle, 657 F.2d 275, 284 (D.C.Cir.1981), the Court may use such extra-record evidence not to examine the propriety of the decision itself, but merely as an indication of the sufficiency of the record before the Secretary when she made it. Id. at 286. They may be similarly useful to the court of appeals, and the motion to strike is denied.