author: WILHOIT, District Judge.

text:
    FIRST BANK & TRUST COMPANY, Plaintiff, v. BOARD OF GOVERNORS OF FEDERAL RESERVE SYSTEM, Defendant.
    Civ. A. No. 81-38.
    United States District Court, E.D. Kentucky, Catlettsburg Division.
    Dec. 26, 1984.

      Gillard B. Johnson, II, Ashland, Ky., James Park, Lexington, Ky., for plaintiff.
    U.S. Atty., Louis DeFalaise, Lexington, Ky., James V. Mattingly, Jr., Associate General Counsel, Board of Governors of Federal Reserve System, Washington, D.C., for defendant.
   MEMORANDUM OPINION AND ORDER

WILHOIT, District Judge.

This action is before the Court on objections to the Magistrate’s Report and Recommendation (the “Report”) that declared portions of the Monetary Control Act of 1980 (MCA), as originally enacted, to be unconstitutional by virtue of the Fifth Amendment’s due process clause, although the Report upheld the constitutionality of the MCA as it was amended in 1982. The Board of Governors of the Federal Reserve (the “Board”) filed objections to the Report, to which First Bank & Trust Company (“First Bank”), the plaintiff herein, responded. The Board has replied to bank’s response, and the matter is, therefore, fully submitted to this Court.

I. FACTS

This action concerns the validity of the MCA of 1980, and as amended in 1982. In its pertinent parts, the MCA extended reserve requirements to all banks in the United States whether the bank was a member of the Federal Reserve System or not. Prior to 1980, a dual system of reserve requirements for banks was in existence. Banks that were members of the Federal Reserve were required to post reserves in accordance with the regulations of the Board. Banks not a member of the Federal Reserve could keep reserves in accordance with state banking laws. All nationally chartered banks are required to be members of the Federal Reserve and comply with its reserve requirements. State-chartered banks could be members of the Federal Reserve, but if they were not, they did not have to comply with the Board’s reserve requirements.

This dual system has been in existence for some time. In recent years it began to be unprofitable for many banks to maintain membership in the Federal Reserve System because of the relatively high cost of services provided by the Federal Reserve, and more importantly, because of the growing loss of profits occasioned by Federal Reserve’s relatively high percentage of required reserves, many banks began to leave the System.

Prior to 1980, First Bank was a nationally chartered bank. Because of the greater amount of idle reserves it had to hold being a member of the Federal Reserve, First Bank’s Board of Directors in 1979, decided to withdraw from the System and seek a state charter. The bank’s shareholders approved the Board of Director’s decision on February 26, 1980. A state charter was obtained March 3, 1980, and on the same day, the Bank withdrew its reserve balances from the Federal Reserve Bank of Cleveland, relinquishing its stock in the system.

The rising tide of “bank flight” from the Federal Reserve System did not escape Congress’ attention. Indeed, in 1979, at least five bills appeared in Congress aimed at correcting the Federal Reserve’s growing lack of control over the money supply.

Many of the proposed bills imposed mandatory reserve requirements for all banks including non-member banks. On November 1, 1979, however, the Senate passed S. 1347 with an amendment removing mandatory reserve requirements. The House had already approved legislation that did not require mandatory reserves for non-member banks. Therefore as of November 1, 1979, it appeared Congress would not pass legislation mandating reserves requirements for all banks.

Newsletters in the banking industry were circulated assuring bankers that Congress would not legislate mandatory reserve requirements because both houses had approved legislation without such a requirement. The news that Congress would not impose mandatory reserves reached the Board of Directors of First Bank and was one of the precipitating factors in its decision to withdraw from the Federal Reserve System.

The Conference Committee Report of the MCA, which was rendered on March 21, 1980, and which includes the provisions under dispute in this lawsuit, re-imposed mandatory reserve requirements. The Conference Report was approved by both houses of Congress and signed into law by President Carter on March 31, 1980.

The pertinent provisions of the MCA, as finally passed and signed by the President, provide that non-member banks shall be allowed an eight-year phase-in of the mandatory reserve requirements. Member banks, however, were not given any phase-in period and had to maintain reserves in accordance with federal regulations as always.

Under regulations promulgated by the Board shortly after the MCA was passed, a bank that was formerly a member but had withdrawn, must have taken some unambiguous, irrevocable action toward withdrawal before July 1,1979 to be eligible for the eight-year phase-in program. The regulations further provided that the Board may extend the time for posting reserves in “hardship” cases. These regulations, however, were promulgated without notice or comment as laid out in the procedures, of 5 U.S.C. § 553(b).

On June 13, 1980, First Bank petitioned the Board for a determination that it had withdrawn from membership prior to July I, 1979. On July 19th, the bank petitioned a second time seeking in the alternative a determination that the financial hardship exception as laid out in the regulations was applicable to it. Both petitions were denied on September 26, 1980: the first, for the reasons that the bank had not taken unambiguous, irrevocable steps to withdraw before July 1, 1979; and the second, for the reason that the bank’s financial condition as of June 30, 1980 did not warrant application of the hardship exception. After the Board denied reconsideration of its decision, the bank posted its required reserve deposits in October 1980. In February 1981, First Bank brought this action seeking judicial review of the Board’s decision under 5 U.S.C. §§ 701-06 and 12 U.S.C. § 632.

In October 1982, Congress passed the Garn-St. Germain Act amending the MCA. Congress recognized that the lack of any phase-in period for banks that had recently withdrawn from the Federal Reserve System could work an extreme hardship. The Garn-St. Germain amendments granted banks that had withdrawn between July 1, 1979 and March 31, 1980 a limited phase-in period.

This matter was referred to the United States Magistrate for a Report and Recommendation, see 28 U.S.C. § 636(b)(1)(B), after the defendants moved to dismiss or in the alternative for summary judgment and the plaintiff responded and cross-moved for summary judgment. The Court agrees with most of the Magistrate’s Report and adopts portions of the Report herein as and for its own opinion.

II. DEFENDANT’S MOTION TO DISMISS; ACTION COMMITTED TO AGENCY DISCRETION WITHIN THE MEANING OF 5 U.S.C. SECTION 701(a)(2)

The basis of defendant’s motion to dismiss is that matters now before the Court are committed to the Board’s discretion and, hence, are excluded from judicial review according to 5 U.S.C. § 701(a).

The exception found in Section 701(a), however, is very narrow. A-T-O, Inc. v. Pension Benefit Guaranty Corp., 634 F.2d 1013, 1019 (6th Cir.1980). Nonreviewability must be established by a clear showing of Congressional intent to preclude review. Citizens to Preserve Overton Park v. Volpe, 401 U.S. 402, 410, 91 S.Ct. 814, 820, 28 L.Ed.2d 136 (1971); Independent Bankers Assoc. of America v. Board of Governors of the Federal Reserve System, 500 F.2d 812, 814 (D.C.Cir.1974); Cf. Olson v. U.S., 514 F.Supp. 355, 356 (W.D.Ky.1981). Further, the agency has the burden of demonstrating that its decision is insulated from review. Dunlop v. Bachowski, 421 U.S. 560, 567, 95 S.Ct. 1851, 1857, 44 L.Ed.2d 377 (1975).

No reported case seems to have dealt with the precise issue of whether Section 701 precludes review of the Board’s actions under the MCA and related statutes. However, several suits challenging the Board’s actions under other sections of the MCA have, in fact, been brought under the Administrative Procedure Act (APA). Jet Courier Services, Inc. v. Federal Reserve Board of Atlanta, 713 F.2d 1221 (6th Cir.1983); Bank Stationers Association v. Board of Governors of the Federal Reserve System, 704 F.2d 1233 (11th Cir.1983).

In Jet Courier, the Sixth Circuit apparently approved the idea of APA review of the Federal Reserve Board’s actions under the Monetary Control Act of 1980 although it dismissed the ease because of standing problems. See Jet Courier, supra at 1224.

The Board seeks to meet the burden of demonstrating that its decision is insulated from review merely by making general comments about the agency’s discretion under “loose statutory terms”. However, while an agency may retain the discretion to act, its actions may not be ones “committed to agency discretion by law” under Section 701. Hondros v. United States Civil Rights Commission, 720 F.2d 278, 292 (3d Cir.1983.) Under that section: (1) the agency must have broad discretionary powers, in the sense that there is almost no law to apply; (2) the actions must implicate political, economic, military or other choices not readily susceptible to judicial review; and (3) even those actions which are committed to the agency’s discretion are reviewable on the ground that the decision violates a constitutional command. Id. at 293. Clearly, the Board has not established that any of these criteria have been met.

Therefore, Section 701 does not preclude judicial review of the present action and in that regard, defendant’s motion to dismiss is denied.

III. MOTIONS FOR SUMMARY JUDGMENT

A. STANDARD OF REVIEW

The principles a court must apply in deciding a motion for summary judgment are well established. Under Rule 56 of the Federal Rules of Civil Procedure, the moving party has the burden of demonstrating the absence of a genuine issue of material fact and that he is entitled to a judgment as a matter of law. Fed.R.Civ.P. 56(c). The Court is not to resolve issues of fact, but rather determine whether there are any material issues of fact to be tried. In Re: Atlas Concrete Pipe, Inc., 668 F.2d 905, 908 (6th Cir.1982). If a question of fact remains, the motion should be denied and the case should proceed to trial. Id. Finally, the case is to be viewed in the light most favorable to the party opposing the motion. Lewis Refrigeration Co. v. Sawyer Fruit Vegetable and Cold Storage Co., 709 F.2d 427 (6th Cir.1983).

It is upon these standards that the cross-motions for summary judgment should be viewed. Under either party’s analysis, this case involves the constitutional validity of statutory provisions, and the constitutional and statutory validity of administrative action. Thus, matters are appropriate for summary judgment.

The validity of the agency’s determination that the Bank did not withdraw from membership prior to July 1, 1979 will be examined first, since an incorrect assessment of the plaintiff’s status on this ground would allow the court to sidestep a decision on the constitutionality of the statutory provision itself.

B. VALIDITY OF THE ADMINISTRATIVE REGULATIONS

The complaint asks the court to declare the Board’s actions “in excess of ... statutory ... authority and in violation of the Constitution.” This statement encompasses an attack on the validity of the regulations themselves quite apart from the constitutional challenge to the statute.

In determining the validity of administrative regulations, a three-prong test of inquiry is used. Wayne State University v. Cleland, 590 F.2d 627, 632 (6th Cir.1978), citing Overton Park, 401 U.S. 402, 91 S.Ct. 814, 28 L.Ed.2d 136.

First, the regulations must be examined to see if they were promulgated in excess of statutory authority. Wayne State, 590 F.2d at 632. Like the statute and regulations at issue in Wayne State, the regulations here were not inconsistent with the statute; the Board was specifically empowered by the statute to promulgate all necessary regulations in implementing the mandatory reserve requirement and also to suspend reserve requirements on a purely temporary basis. Nor were the provisions so clear as to be in no further need of clarification; the meaning of the word “withdrawal” was not defined in the statute.

The second prong of the inquiry is whether the regulations are arbitrary, capricious or otherwise not in accordance with law. Wayne State, 590 F.2d at 633. Here, the court is not empowered to substitute its judgment for the administrator and the agency’s action is entitled to a presumption of validity. Id. at 632. The regulations in the present case are not an arbitrary and capricious exercise of administrative authority. Rather, given the statute, they constitute an implementation of Congress’ mandate to prescribe regulations to effectuate the mandatory reserve system and ensure that it was not evaded.

The regulation concerning the withdrawal date mirrored the statutory provision concerning state banks (date of notification of the Board) but contained the provision that “clear evidence” of “an unambiguous irrevocable decision to withdraw” before that date would also be considered. This latter provision reflects legislative concern over the withdrawal date. 125 Cong.Rec., S. 3176 (daily ed. March 27, 1980).

The third prong of the test is the determination of whether appropriate procedures were followed in implementing the statute. Wayne State, 590 F.2d at 633. Notice and comment procedures to be followed by an administrative agency in rule making are found in 5 U.S.C. § 553(b) and (c). The parties to this action agree that no notice-and written-comment procedure was undertaken, but differ as to the effect flowing from this fact. The question is whether the regulations at issue are interpretive rules so as to fall within the exception to the requirement.

“Interpretive rules” is a term not defined by the APA. Case law, however, seems to define an interpretive rule as a clarification or explanation of an existing statute or rule. Avoyelles Sportsmen’s League, Inc. v. Marsh, 715 F.2d 897, 908-09 (5th Cir.1983). Stated another way, these rules are an agency’s construction of the existing laws it administers rather than a substantive modification of an existing regulation, announcing some new course of action. Jean v. Nelson, 711 F.2d 1455, 1478 (11th Cir.1983). They are not determinative of issues or rights addressed [but] express the agency’s intended course of action, its tentative view of the meaning of a particular statutory term, or are internal housekeeping measures organizing agency activities; they do not foreclose alternative courses of action or conclusively affect rights of private parties. Avoyelles Sportsmen’s League, 715 F.2d at 908-09, quoting Batterton v. Marshall, 648 F.2d 694 (D.C.Cir.1980).

On the other hand, substantive regulations, which are covered by the notice and comment procedures, are those issued by an agency pursuant to statutory authority and which actually implement the statute; there Congress entrusted to the agency, rather than the courts, the primary responsibility for interpreting the statutory term. Batterton v. Francis, 432 U.S. 416, 425, 97 S.Ct. 2399, 2405, 53 L.Ed.2d 448 (1977), (construing regulations issued pursuant to a statutory mandate). These rules grant rights, impose obligations, or produce other significant effects on private interests; they also narrowly constrict the discretion of agency officials by largely determining the issue addressed. Avoyelles, 715 F.2d at 908, quoting Batterton, 648 F.2d 694.

At least one Court of Appeals has held that rules may be characterized as legislative only if (1) Congress has delegated legislative power to the agency and (2) the agency intended to use that power in promulgating the rule, American Postal Workers Union v. United States Postal Service, 707 F.2d 548, 558-59 (D.C.Cir.1983), but to most courts, the distinction between the two types of rules can be blurred. Avoyelles, 715 F.2d at 909, quoting Batterton, 648 F.2d at 702-03.

The particular rules issued in the present case were characterized as “interpretation[s]” by the agency in the press release accompanying their publication. However, the label that the particular agency places on its given exercise of administrative power is not conclusive. Louisiana-Pacific Corp. v. Block, 694 F.2d 1205, 1210 (9th Cir.1982); Chamber of Commerce of the United States v. OSHA, 636 F.2d 464, 468 (D.C.Cir.1980).

Therefore it is necessary to look at the regulation itself. In doing so, it is most clear that the regulation pertaining to “withdrawal” is an interpretive regulation in that it is a “necessary and appropriate guideline defining more precisely what “withdrawal” means in the statute. See Woodard v. United States, 725 F.2d 1072, 1076 (6th Cir.1984). It merely provides an interpretative aid as to what a statutory term means, a term about which there could be considerable question.

Therefore, the regulation was properly promulgated.

C. THE BOARD’S ADJUDICATORY ACTION ON THE WITHDRAWAL ISSUE.

1. DID THE BOARD IMPROPERLY REFUSE TO CONDUCT A HEARING IN VIOLATION OF 5 U.S.C. SECTIONS 554 AND 557?

Plaintiff contends that the Board improperly failed and refused to conduct an adjudicatory proceeding in accordance with 5 U.S.C. §§ 554 and 557.

Certainly, the APA recognizes that a party is entitled to present its case either by oral or documentary evidence. American Transfer & Storage Co. v. ICC, 719 F.2d 1283, 1301 (5th Cir.1983). However, an agency is not required to provide oral hearings unless the statute governing the agency’s actions makes an oral hearing mandatory. Id.; Sealand Service, Inc. v. Federal Maritime Commission, 653 F.2d 544, 551 n. 18 (D.C.Cir.1981). In this instance, no such statutory provision exists.

There is no general constitutional right to oral arguments before an administrative agency. FCC v. WJR, 337 U.S. 265, 274-77, 69 S.Ct. 1097, 1102-04, 93 L.Ed. 1353 (1949). An administrative agency has considerable discretion through its procedural rules as to how it wishes to structure the presentation of evidence; an oral hearing should not be required unless verified statements do not provide an adequate basis for the resolution. Laird v. ICC, 691 F.2d 147, 154-55 (3d Cir.1982), cert. denied, 461 U.S. 927, 103 S.Ct. 2086, 77 L.Ed.2d 297. In this case, plaintiff was allowed to submit a lengthy, written petition (in excess of 120 pages including affidavits) on the issue. Subsequently, plaintiff was afforded another opportunity to submit facts on administrative appeal procedures, but confined itself to presentation of legal issues.

Moreover, due process does not require the Board to hold a hearing when the facts are not in dispute. U.S. v. Cheramie Bo-Truc No. 5, Inc., 538 F.2d 696, 698 (5th Cir.1976). And, in the case of the petition before the Board, no facts were in dispute; the only question for determination, essentially, was whether the Board of Directors’ adoption of a five year financial plan constituted an “unambiguous” decision to withdraw. This is, of course, a question of legal interpretation.

Therefore, no hearing was required.

2. DID THE BOARD’S DECISION VIOLATE THE STANDARDS SET OUT FOR JUDICIAL REVIEW UNDER THE APA?

Plaintiff contends that the Board’s decision with respect to the petition concerning withdrawal from the System violated the standard set out in the judicial review sections of the APA, which provides in pertinent part:

The reviewing court shall—...

(2) hold unlawful and set aside agency action, findings, and conclusions found to be—
(A) arbitrary, capricious, and abuse of discretion, or otherwise not in accordance with law....
In making the foregoing determinations, the court shall review the whole record or those parts of it cited by a party, and due account shall be taken of the rule of prejudicial error. 5 U.S.C. § 706.

Under the APA, an agency decision is entitled to a presumption of regularity, but the reviewing court must engage in an inquiry to determine whether the agency action was based on a consideration of the relevant factors and whether there has been a clear error of judgment; the ultimate standard of review is a narrow one. Citizens to Preserve Overton Park, 401 U.S. at 416, 91 S.Ct. at 823; Avoyelles, 715 F.2d at 904; Coastal Tank Lines v. Interstate Commerce Commission, 690 F.2d 537 (6th Cir.1982).

The Board’s stated reason for denying the first petition was that “there was no unambiguous irrevocable decision to withdraw from Federal Reserve membership before July 1, 1979.” (Administrative Record (A.R. 188.) This standard was directly drawn from the regulations, which calls for “clear” evidence to be submitted on the matter. It was undisputed that the Board of Director’s formal vote to withdraw (A.R. 118) and the effective date of the state charter (A.R. 18) occurred long after the date in question. The bank in its petition, however, urged that the adoption of the five-year business plan “incorporating the recommendation that the Federal Reserve membership be discontinued” by the Board of Directors satisfied the “unambiguous irrevocable” requirement. (A.R. 17-18.).

Unfortunately, the minutes for the meeting make no specific reference to the Reserve membership question (A.R. 64-65). Additionally, the record is replete with evidence from which it may be deduced that, although dropping the membership was much talked about at the bank, no firm and irrevocable decision was made until December, 1979. For example, in the affidavit of David Trubica (Vice-President of Operations at the bank) it was stated that:

[O] n several occasions from mid-1978 through most of 1979 we met with various representatives of the Cincinnati office of the Federal Reserve on different matters and discussed specifically our bank’s evaluation of its Fed membership. We made it clear during each discussion that if some relief was not granted by the Federal Reserve System for a bank of our size, we would have to drop membership.” (A.R. 56.) (Emphasis added.)

Indeed, the Board postponed taking any action in anticipation of Congressional action on the matter, (Affidavit of Johnson A.R. 54), and it wasn’t until December 14, 1979 that the Board voted to withdraw from membership. (A.R. 83.)

The minutes of the January 10, 1980 Executive Committee meeting reflected the fact that the bank did not perceive itself as out of the system as yet; chairman Johnson reported that:

It is just a matter of notice, that we will he out of the Federal Reserve System following approval by shareholders and obtaining the state charter and filing our charter in the county court. (A.R. 88.) (Emphasis added.)

Further, the letter going out to shareholders in January, 1980 stated:

The Directors have called a special meeting of the shareholders to decide on their recommendation that the bank withdraw from the Federal Reserve System ... In order to withdraw from the Federal Reserve System we will, subject to shareholders approval, be required to take these steps:

(1) Convert our Federal Charter to a State Charter....

However, although there is substantial evidence for the agency’s decision, an agency’s action cannot be upheld merely because findings might have been made and considerations disclosed that would justify its order. Coastal Tank Lines, 690 F.2d at 543. The agency must have articulated a rational choice between the facts found and the choice made; post hoc rationalizations are unacceptable. Id. The court cannot supply a reasoned basis for the agency’s action that the agency itself did not give, although it may uphold a decision of less than ideal clarity if the agency’s path can reasonably be discerned. In order to meet this standard, there must be in the decision some analysis to justify the choice made and some indication of the decision’s basis. Id. The Legal Staff’s report included in the Board record note that (1) minutes of the 1978 board meeting contains no reference to Federal Reserve membership, (2) that Bank of Ashland officers had discussed withdrawal from the System with Federal Reserve representatives, (3) the state charter did not predate July 1, 1979 and (4) the shareholders did not vote to convert to a national bank until after July 1, 1979, and (5) the Board of Directors vote to withdraw did not come until December, 1979. Clearly, these findings (undisputed by the Bank) are sufficient to justify the decision.

Thus, the Board’s decision was rational and based on evidence in the record.

D. CONSTITUTIONALITY OF THE STATUTE

In its complaint plaintiff seeks a declaration that 12 U.S.C. § 461(b)(8)(D)(i) violates its substantive due process rights as guaranteed by the Fifth Amendment of the Constitution. Plaintiff contends that the MCA’s original provisions violated its rights by providing no phase-in period for banks which had withdrawn from the Federal Reserve System after July 1, 1979; of particular concern was the fact that the date selected was almost nine months before the enactment of the original provision in the MCA. Additionally, at issue are the provisions as modified by the Garn-St. Ger-main Act.

It is well established that legislative acts adjusting the burden and benefits of economic life come to the court with a presumption of constitutionality. Hodel v. Indiana, 452 U.S. 314, 323, 101 S.Ct. 2376, 2382, 69 L.Ed.2d 40 (1981); Richardson v. Secretary of Labor, 689 F.2d 632, 633 (6th Cir.1981), cert. denied, 461 U.S. 928, 103 S.Ct. 2088, 77 L.Ed.2d 299. In areas of economic regulation, the courts have consistently deferred to legislative determinations as to the desirability of particular statutory discriminations. Id. Unless the classification trammels fundamental personal rights or is drawn on an inherently suspect classification, its constitutionality is presumed and the challenged classification need only be rationally related to a legitimate governmental interest. Id.

This rational relationship test means that the court must defer to congressional judgment unless it is demonstrably arbitrary or irrational. Duke Power Co. v. Carolina Environmental Study Group, Inc., 438 U.S. 59, 83-84, 98 S.Ct. 2620, 2635-36, 57 L.Ed.2d 595 (1977). Underinclusiveness alone does not make a legislative classification invalid. Richardson, 689 F.2d at 634.

However, this case involves not merely the questions of whether Congress could pass legislation concerning the reserve requirements in the Federal Reserve system or whether it could extend those requirements to non-member banks. Clearly, it has that authority consistent with the Constitution.

At issue are the constitutional problems occasioned by the retroactive application of the statute in question. As the Supreme Court in Usery v. Turner Elkhorn Mining Co., 428 U.S. 1, 16-17, 96 S.Ct. 2882, 2892-93, 49 L.Ed.2d 752 (1976), pointed out, it is not necessarily true that “what Congress can legislate prospectively, it can legislate retrospectively”; the retrospective aspects of legislation must also meet the due process test and what may justify law prospective in application may not suffice with a retroactive statute. The Magistrate’s Report recommended the MCA, as passed in its original form, be found unconstitutional because of its retroactive effect. The Court does not agree.

In reaching his conclusion, the Magistrate relied on several cases which have been recently disapproved by the United States Supreme Court. See Pension Benefit Guaranty Corp. v. R.A. Gray & Co., — U.S. -, 104 S.Ct. 2709, 81 L.Ed.2d 601 (1984). The Magistrate relied and the parties focused their arguments on Nachman Corp. v. Pension Benefit Guaranty Corp., 592 F.2d 947 (7th Cir.1979), aff’d on other grounds, 446 U.S. 359, 100 S.Ct. 1723, 64 L.Ed.2d 354. The four-pronged analysis of the constitutionality of retroactive legislation as laid out in the Nachman case was rejected in Pension Benefit Guaranty Corp. v. R.A. Gray & Co., supra — U.S. at - n. 6, 104 S.Ct. at 2717 n. 6. Instead, the Supreme Court stated that the rational basis test is what should be applied to legislation that bears on the economic benefits and burdens of retroactive federal legislation. See id. — U.S. at -, 104 S.Ct. at 2718.

The Court assumes arguendo that the MCA, as originally enacted and amended, was retroactive in application although the Court realizes a substantial question is posed whether it is in fact retroactive. The Court finds, however, that even if it were said to be retroactive, there is a rational basis for its retrospective effect. This is all that is required for upholding the legislation under the Fifth Amendment’s Due Process clause. See id.

It is clear from the legislative history behind the MCA that one of the principle purposes of the Act was to equalize the inequities between the amount of reserves required to be kept by non-member banks vis-a-vis member banks. In attempting to equalize these inequities, by establishing mandatory reserve requirements for all banks, Congress intended to curb the rising tide of bank flight from the Reserve System. Bank flight created what many, including Congress, perceived to be an alarming decrease in the amount of the nation’s money supply directly controllable by the Federal Reserve Board. The equalization brought about by the MCA, albeit accomplished through a phase-in for non-member banks, has the effect of reducing the attractiveness for member banks to withdraw from the System. There is no longer any significant competitive advantage to be gained by forfeiting Reserve membership in favor of a state charter. With fewer banks, therefore, “fleeing” from the Reserve System, the Board is assured of not losing anymore control over the nation’s money supply via its member banks.

Pursuant to the intent behind the MCA, it is clear Congress had a rational purpose in picking a date prior in time to the Act’s enactment for determining which banks would be deemed member or non-member banks for purposes of the Act’s phase-in provision. First of all, Congress wanted to curb bank flight and therefore was not going to reward banks that had recently withdrawn from the System in anticipation of Congress’ imposing mandatory reserve requirements. More importantly, Congress wanted to equalize the inequitable differences in the amount of reserves required of member and non-member banks. Congress no longer wanted member banks to be at a competitive disadvantage with their nonmember counterparts. At the same time, Congress did not want to impose mandatory reserves on non-member banks effective immediately without some transitional, phase-in provisions to ease the financial hardship that might be occasioned on nonmember banks having to increase their required reserves. The phase-in provisions of the Act allow non-member banks the opportunity to gradually post the increased reserves required of them by the federal government.

Transitional, phase-in provisions are, of course, short term, anti-equalization measures. Moreover, equalization of the differing amounts of reserves required by federal and state regulations was one of the primary purposes of the Act. Consequently, Congress did not want to extend the transitional, phase-in provisions to any banks that did not need the benefit of the phase-in provisions. Indeed, within the overall intent of the Act, the phase-in provisions were tolerated only to ease the hardship that might otherwise be created for non-member banks that have never been subjected to federal reserve requirements.

Recently withdrawn banks—i.e. banks that have withdrawn from the Reserve within the past nine months—would not be significantly oppressed by immediately posting the mandatory reserves required of all banks under the Act. These banks, having recently been members of the Reserve, would not be as financially oppressed in posting reserves in amounts which they were required to keep when they were member banks. Certainly for them, putting up the reserves would not be as much of a hardship as it would be for banks that had never been required to keep such a level of reserves. Congress could, therefore, rationally conclude that banks which had been members of the Reserve as of July 1, 1979, approximately nine months before the MCA’s enactment, should not benefit from the transitional, phase-in provisions.

Given this rationale for the legislative scheme, First Bank simply cannot point to any lack of a rational basis for the way in which the MCA, as originally enacted and/or as amended in 1982, attempts to impose mandatory reserve requirements on non-member banks. Congress rationally discriminated between recently withdrawn non-member banks and all other non-member banks. The rationale is, simply put, that recently withdrawn banks do not need the benefit of a phase-in while other nonmember banks do. At the same time, Congress rationally chose to make the operative date in the Act nine months prior to its enactment. The rational basis for this is simply that it avoids extending the transitional, phase-in provisions to banks that really do not need it, at least they do not need it to the extent other banks that had never been members may need it. Cf. Pension Benefit Guaranty Corp. v. R.A. Gray & Co., — U.S. at - - -, 104 S.Ct. at 2717-19.

There is, therefore, no equal protection or retroactive (due process) problems with the MCA, either as originally enacted or amended. Although the Bank’s complaint—that it has been inequitably treated vis-a-vis other state banks because it was not permitted a phase-in period for posting reserves while other state banks were permitted such a phase-in—is a compelling and logical argument the Court does not believe the argument raises a substantial constitutional question. There being a rational basis for requiring the Bank to post its reserves without a phase-in, the Court believes the argument is a matter best settled in the political arena. Indeed, it is for this reason the Court believes that the Board adopted the “hardship exception” in its regulations and that Congress later enacted the limited, phase-in provisions of the Garn St. Germain Amendments of 1982.

Consequently, the Court refuses to adopt the Magistrate’s report in this respect and agrees with the Board with regard to the validity of the MCA and the regulatory scheme promulgated pursuant thereto. Accordingly,

IT IS HEREBY ORDERED AND ADJUDGED AS FOLLOWS:

(1) The Defendant Board’s motion to dismiss be and same is DENIED.

(2) The Plaintiff First Bank’s motion for summary judgment be and same is DENIED.

(3) The Defendant Board’s motion for summary be and same is GRANTED.

(4) A judgment in conformity herewith shall this date be entered.

      . "Reserves” refers to the percentage of deposits that a bank must, by law, keep either as vault cash or in non-interest bearing accounts at the Regional Federal Reserve Bank. See 12 C.F.R. § 204.3(b) (1983).

      . The Court has no occasion to address the interpretative or substantive nature of the Board's regulations setting up the so-called "hardship exception”. The Court is aware that the Magistrate by way of dicta suggested the hardship exception regulation may be substantive, and hence not properly promulgated pursuant to the notice-and-comment procedures of 5 U.S.C. § 553. But, the Court fails to find any current controversy with respect to that regulation.
      If this Court held the hardship exception was substantive, no benefit could possibly accrue to the plaintiff bank. The bank was denied status under the hardship exception, and now the hardship exception regulations have been completely superseded by the Garn-St. Germain Amendment to the MCA. The regulation no longer exists, and if the Court declared it illegal during the two year period in which it existed, it could not be re-promulgated or otherwise applied to give the plaintiff any relief. In this posture, the Court views any controversy regarding the validity of the hardship exception regulation as moot.

      . The Equal Protection clause of the Fourteenth Amendment is inapplicable to federal action as such. Nevertheless, grossly unreasonable action by the federal government violates the Due Process clause of the Fifth Amendment. Bolling v. Sharpe, 347 U.S. 497, 74 S.Ct. 693, 98 L.Ed. 884 (1954).

      . In this case, it is conceded that no fundamental right or suspect classification is involved. (H. Tr. 8-9).

      . This was conceded by plaintiff. (H. Tr. 22).


source: Caselaw Access Project

author: DUNCAN, District Judge.

license: Public Domain

text:
    Richard A. BLAKE, Plaintiff, v. CITY OF COLUMBUS, Defendant.
    No. C-2-83-31.
    United States District Court, S.D. Ohio, E.D.
    Dec. 28, 1984.

      Albert R. Ritcher, Asst. U.S. Atty., Columbus, Ohio, for plaintiff.
    Guy L. Reece, II, Asst. City Atty., Columbus, Ohio, for defendant.
   MEMORANDUM AND ORDER

DUNCAN, District Judge.

Plaintiff filed this action on January 5, 1983, under Section 404(a) of the Vietnam Era Veterans Readjustment Assistance Act of 1974, 38 U.S.C. § 2021 et seq. Plaintiff alleges that defendant, City of Columbus, violated 38 U.S.C. § 2024(d) by refusing to reinstate plaintiff to his pre-service position with the Division of Police with such seniority, status, pay and vacation as plaintiff would have had if he had not been absent for military service. Defendant denies committing any violations of the Act and claims that plaintiff has received all re-employment benefits to which he is entitled. Defendant further claims that this action is barred pursuant to the doctrine of laches. This action is presently before the Court on plaintiffs motion for summary judgment. In addition, by agreement of the parties, the case was submitted to the Court upon the joint stipulation of facts, other evidence of record, and briefs for decision on the merits. The Court’s findings of fact and conclusions of law are set forth below.

I

The essential facts as they appear in the joint stipulation of facts, the depositions, and other matters of record are as follows.

1. Plaintiff was hired by the City of Columbus on May 1, 1967, as a full-time police patrolman in the Division of Police, Department of Public Safety.

2. On August 11, 1967, plaintiff was ordered to active duty for training in the Army National Guard for a period of duty from August 12, 1967 to September 2, 1967.

3. During the course of his military duties plaintiff suffered a severe injury to his right hand and arm when he was loading a mortar on August 22, 1967.

4. From August 1967 to February 1968 plaintiff received surgery and treatment for his injury on an inpatient and outpatient basis at military hospital facilities.

5. In February 1968, plaintiff returned to Columbus and applied for reinstatement with defendant Division of Police.

6. Defendant’s chief physician determined that because of his injury plaintiff was not qualified to perform the duties of a police patrolman in the Division of Police and would not be so qualified in the foreseeable future. Although a physician with the Walter Reed Army Medical Center issued his opinion that plaintiff would regain improved use of his hand over several months and that plaintiff was presently qualified to perform light duty work, defendant refused to reinstate him.

7. On April 18, 1968, plaintiff was transferred to the Department of Services, Division of Airport, based upon his inability to operate a firearm in accordance with the Division of Police standards as determined by the City Chief Physician.

8. Plaintiff served as a full-time Airport Police Officer with the Division of Airport from April 16, 1968 until April 13, 1969. On April 13, 1969, plaintiff was restored to the Division of Police as a Patrolman pursuant to the Chief City Physician’s determination that plaintiff was qualified to perform the duties of a police patrolman.

9. The airport police were uniformed and they were authorized to use a .38 caliber revolver. Their duties included making felony and misdemeanor arrests.

10. From 1968 through 1971 plaintiff, acting alone and through counsel, sought to be returned to the Division of Police and after his transfer back to the Division of Police sought to regain police department benefits lost while plaintiff was with the Division of Airport.

11. On July 15, 1971, the City of Columbus Civil Service Commission determined that plaintiff had continuous service from May 1, 1967. The period of continuous service is the period of the employee’s service, uninterrupted by resignation, retirement, or discharge for cause, excluding leaves of absence without pay except military leave.

12. Plaintiff has been on active service with the Division of Police since April 13, 1969. Active service is defined as “being present for the performance of duties to which an officer ... of the City of Columbus has been assigned.” In this case, active service has been construed by the defendant to mean that time actually spent in service with the Division of Police.

13. Plaintiff has been denied advancement on the Division of Police administrative seniority list to May 1, 1967, his original date of appointment to the Division of Police. Plaintiff’s current adjusted appointment date on the seniority list is May 11, 1968. The seniority list is based on total active service with the Division of Police, including periods of active military service. This seniority list is used as an administrative tool to determine priorities for transfers, days off, and vacation time. The date plaintiff is considered to have begun “active” service also determines his eligibility for pension benefits.

14. Plaintiff asserts he first learned that he did not have the same status on the administrative seniority list as that of his continuous service when he did not receive some benefits that such status would have entitled him to in 1975. Prior to 1975 plaintiff states that he had no reason to believe that his seniority status based on active service was not equal to his continuous service.

II

This case is before the Court on plaintiff’s motion for summary judgment. A motion for summary judgment should be granted when there is no genuine issue as to any material fact and the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56. There are two issues in this case. The first issue presented is whether the doctrine of laches bars plaintiff from asserting in a lawsuit filed in 1983 his claim under the Vietnam Era Veterans Readjustment Assistance Act of 1974, 38 U.S.C. § 2021 et seq., regarding a cause of action which accrued in 1968.

Congress did not provide a federal statute of limitations to limit the period of time in which a suit may be brought under this statute. Under the enforcement procedures of 38 U.S.C. § 2022 Congress specifically states that “no State statute of limitations shall apply to any proceedings under this chapter.” Courts will apply the equitable doctrine of laches to determine whether plaintiff has unduly delayed the filing of his claim. In determining whether the doctrine of laches applies in a case brought pursuant to 38 U.S.C. § 2022, “[a] court should focus upon the length of the delay, the reasons therefor, how the delay affected the defendant, and the overall fairness of permitting the assertion of the claim,” Goodman v. McDonnell Douglas Corp., 606 F.2d 800, 806 (8th Cir.1979). See Stevens v. Tennessee Valley Authority, 712 F.2d 1047, 1056 (6th Cir.1983). If both elements are met, the doctrine of laches bars the lawsuit.

Defendant argues that there was inordinate and inexcusable delay when plaintiff asserted a claim in 1983 which had accrued about 15 years earlier in 1968. Plaintiff counters this argument by asserting that except for a five-year period of time from 1976 to 1981 when plaintiff did not press his claim, the delay is excusable because of plaintiff’s continuous efforts from 1968 to 1976 to have his full status with the Division of Police restored and plaintiff’s efforts at negotiating a settlement with defendant through the United States Attorney’s office from 1981 until this lawsuit was filed in 1983.

The facts presented do not fully support this contention by plaintiff. Although it appears that plaintiff actively pursued his claim to regain full status with the Division of Police from 1968 to 1971, it is equally clear that from 1971 to 1975 plaintiff did nothing because he was under the mistaken belief that he had achieved his goal in 1971.

At first blush the United States Court of Appeals for the Sixth Circuit appears to subscribe to the view that laches is rebuttably presumed if suit is commenced after the most analogous state statute of limitations has run. Thereafter plaintiff has the burden of persuasion to show excusable delay and absence of prejudice to defendant. This is the substance of the Court of Appeals holding in TWM Mfg. Co. v. Dura Corp., 592 F.2d 346, 348-49 (6th Cir.1979), a case involving federal patent law and a patent infringement action. In Greathouse v. Babcock & Wilcox Co., 381 F.Supp. 156, 163 (N.D.Ohio 1974) the court used similar reasoning in deciding a case under the Vietnam Veterans Readjustment Assistance Act. However, dicta in a recent case strongly suggests that the Sixth Circuit has abandoned this view and would now follow the Eighth Circuit’s approach in Goodman v. McDonnell Douglas Corp., 606 F.2d 800 (8th Cir.1979) whereby a state statute of limitations is only one element to be considered in determining whether the length of the delay was unreasonable and whether the potential for prejudice was great.

In Stevens v. Tennessee Valley Authority, 712 F.2d 1047 (6th Cir.1983), plaintiff brought an action under 5 U.S.C. § 3551, the Veterans Preference Act, seeking reinstatement with full seniority to his pre-service position with the TVA. The defense of laches was raised by defendant. Congress did not specifically provide a statute of limitations for that Act so the Court looked to 38 U.S.C. § 2022 as an analogy for guidance on the effect of the running of a state statute of limitations.

After noting the rule which had been applied in TWM Mfg. Co., supra and Greathouse, supra, the Sixth Circuit stated:

Whatever may be the wisdom of that rule generally, it is in our view one which ought not be applied rigidly here where Congress has so clearly eschewed any reliance on state statutes of limitations with respect to claims of veterans for reemployment. We do not have a comparable or analogous statute of limitations for the simple reason that Congress has said that there shall be none in that cause of action [38 U.S.C. § 2022] is most nearly analogous to the one involved here [5 U.S.C. § 3551].

Stevens v. Tennessee Valley Authority, 712 F.2d 1047, 1056 (6th Cir.1983). The Sixth Circuit then noted the factors set forth in Goodman, supra, as a guideline for applying the doctrine of laches in cases involving 5 U.S.C. § 3551.

The Court believes the period from April 1968 through July 1971, during which plaintiff was actively negotiating with defendant to resolve the dispute concerning his employment status, to be reasonable delay. See Blake affidavit pp. 1-2. In addition, that period of time from December 1975 through September 1976, during which plaintiff was engaged in discussion with the department concerning his status in “active” versus “continuous” service is also excludable delay. Similarly, the period from 1981 to 1983 during which the United States Attorney’s office was attempting to negotiate a settlement between the parties is not to be charged to plaintiff. See Armstrong v. Baker, 394 F.Supp. 1380, 1385 (N.D.W.Va.1975). Whether plaintiff acted reasonably when he waited four years from 1971 to 1975 without action is more problematic. It is conceivable that once plaintiff received the “continuous service” status he sought in 1971 he may not have realized he still lacked the equivalent “seniority” status. However, when coupled with the subsequent five-year period from 1976 through 1981 in which plaintiff sat on his rights, the entire delay becomes unreasonable. Under the Goodman analysis overall fairness requires this Court to hold that the plaintiff unreasonably delayed asserting his rights under the Act and that the first prong of the laches test has been met.

A valid laches defense requires that plaintiff’s unreasonable delay results in prejudice to the defendant. There are two kinds of prejudice which might support a defense of laches: (1) the delay has resulted in the loss of evidence which would support the defendant’s position; or (2) the defendant has changed his position in a way that would not have occurred if the plaintiff had not delayed. Tobacco Workers International Union Local 317 v. Lorillard Corp., 448 F.2d 949, 958 (4th Cir.1971); see Goodman, supra, at 808 n. 17. Defendant argues that it has been prejudiced by the delay because most of the potential witnesses are no longer in defendant’s employ. Defendant concludes that these witnesses are no longer available to provide testimony; however, defendant provides no specific examples to support this conclusion. Defendant did not attempt to identify the lost witnesses or what the nature of their expected testimony in support of defendant’s position would be.

Plaintiff has correctly pointed out that at least two employees, plaintiff Richard Blake and Chief of Police Dwight D. Joseph, were still employed by defendant and were available as witnesses for deposition during the course of this litigation. Moreover, defendant has not indicated that it has changed position in any manner which it might not have done had plaintiff not delayed.

After carefully balancing the equities involved in this case and considering the overall fairness to the parties, the Court concludes that defendant has not met its burden of showing that plaintiff’s delay caused prejudice to defendant. Thus the second prong of the laches test has not been met. The Court holds that since the test of laches was not met in the instant case plaintiff is not barred from asserting his claim by the doctrine of laches. Defendant’s motion to dismiss on the basis of laches is DENIED.

The second question presented by this case is whether the provision of the Columbus City Code, which as applied, prevents plaintiff from collecting all benefits to which he would have been otherwise entitled due to plaintiff’s transfer from the Division of Police to the Division of Airport upon his return from military service, is overriden by the language and intent of the Vietnam Era Veterans Readjustment Assistance Act.

The threshold question is whether defendant complied with the requirements of 38 U.S.C. § 2024(d) when defendant transferred plaintiff to the Division of Airport upon plaintiff’s return from military service. Pertinent language in 38 U.S.C. § 2024(d) states:

... If an employee covered by this subsection (members of Reserve components of the Armed Forces ordered to active duty for training for less than three months) is not qualified to perform the duties of such employee’s position by reason of disability sustained during active duty for training or inactive duty training, but is qualified to perform the duties of any other position in the employ of the employer ..., such employee shall be offered employment and, if such person so requests, be employed by that employer ... in such other position the duties of which such employee is qualified to perform as will provide such employee like seniority, status, and pay, or the nearest approximation thereof consistent with the circumstances in such employee’s case.

Plaintiff was at all times relevant an employee of the City of Columbus. Due to a service-related disability the defendant’s chief physician found plaintiff to be unqualified to return to his former position as a patrolman with the Division of Police. Plaintiff was then transferred to the Division of Airport for approximately one year during which he recovered from his disability. Plaintiff’s position at the Division of Airport differed somewhat from that as a police officer with respect to his duties and benefits received. On May 11, 1968, plaintiff was restored to his position as a patrolman with the Division of Police.

Defendant argues that, by placing plaintiff with the Division of Airport, it fulfilled its obligation to place' him in a position providing the nearest approximation of his former job and available benefits. Plaintiff contends that he could have been placed in a “light duty” position within the Division of Police until he had recovered from his disability. He argues that this is particularly evident in light of the fact that his duties with the Division of Police included the use of a weapon, the very factor which the defendant’s chief physician argued made him unqualified for the position of patrolman. Defendant does not deny that light duty positions were available but argues that 38 U.S.C. §§ 2021 and 2024 do not speak of providing a returning serviceman his position in a “light duty status.” The Court agrees that Title 38 U.S.C. § 2024(d) does not attempt to preempt the employer’s right to determine what position a disabled veteran is qualified to perform but rather it focuses on what seniority, status, and pay the veteran is entitled to receive, upon his return from active military duty and placement in a position he is qualified to perform with the employer.

It is well settled that the Veterans’ Reemployment Act is for the benefit and protection of persons covered therein. In Fishgold v. Sullivan Drydock and Repair Corp., 328 U.S. 275, 66 S.Ct. 1105, 90 L.Ed. 1230 (1946) the Supreme Court stated that “the Act should be liberally construed so that a veteran steps back on the seniority escalator at the precise point he would have occupied had he kept his position continuously rather than enter the armed forces.” As the Fifth Circuit pointed out in Hembree v. Georgia Power Co., 637 F.2d 423 (1981), Congress recognized soon after the original Veterans Reemployment Rights Act was passed that disabled veterans needed additional protection. In addressing this need, Congress added 38 U.S.C. § 2021(a)(B)(i), a section analogous to the last sentence of 38 U.S.C. § 2024(d) which section is pertinent in the case at bar. Hembree involved a veteran who was no longer qualified to perform his preservice position due to a disability resulting from an injury received while on active military duty. The Fifth Circuit found that the Act imposed a duty on the employer to offer the employee a position of like seniority, status, and pay. “Simply because the company could not employ plaintiff in an appropriate position in the shop where he was originally employed did not relieve the company of [this] obligation ...” Hembree at 428. The Hembree court held that plaintiff should be granted seniority from the date of his original employment notwithstanding the employer-union collective bargaining agreement which provided that when an employee transferred to a new department he would lose departmental seniority. The Fifth Circuit stated, “And we do not think, as the Union argues, that the mere fact that granting plaintiff a position of like status and pay has the same effect as transferring plaintiff from one department to another dictates that plaintiff’s seniority be computed as though he in fact transferred.” Hembree at 428.

In the case at bar the benefits plaintiff is seeking are “seniority benefits.” As stipulated, defendant’s seniority list is used as an administrative tool to determine priorities for transfer, days off and vacation. Such use of seniority is within the intent of Congress as the term is used in 38 U.S.C. § 2021 et seq. Defendant argues that seniority is based on active service with the Division of Police and that plaintiff was not on active duty with the Division of Police while he was in the Division of Airport of defendant. The issue is whether, in the facts present in the case at bar, defendant’s regulations which differentiate between active service with the Division of Police and continuous service with the City of Columbus can operate to deprive plaintiff of seniority benefits to which he would have been entitled had he not been injured while on military duty.

First, the Court notes that defendant’s position concerning plaintiff’s inability to function as a patrolman is entitled to some deference. The responsibilities of a full-time police officer are such that a physical impairment, however limited, may be sufficient to justify a decision not to employ a returning serviceman in that capacity.

Had plaintiff been permanently transferred to another Division of the City, his vacation time, days off and pension benefits would have been determined in accordance with that time spent in “continuous service” with the City. He would, therefore, have to his credit the year spent in the Division of Airport in determining such benefits. Had plaintiff been placed in a position within the Division of Police with duties comparable to those which he had as an officer with the Division of Airport, he would be considered to have been in “active service” since May 1967 and receiving benefits determined therefrom. It seems anomalous to the Court that the change in Divisions should operate to deny plaintiff credit for a year of employment to which he would have been entitled had either one of the above circumstances been true.

This Court considers this aspect of the case analogous to the Hembree employer departmental transfer situation and the Court feels a similar result is appropriate here. The Supreme Court has held that “no practice of employers or agreements between employers and unions can cut down the service adjustment benefits which Congress has secured the veteran under the Act.” Fishgold v. Sullivan, 328 U.S. 275, 285, 66 S.Ct. 1105, 1111, 90 L.Ed. 1230 (1945). This Court finds that defendant’s practice is one which reduces service adjustment benefits to which plaintiff is entitled. As such, defendant’s practice is preempted by 38 U.S.C. § 2024(a). The Court further finds that to the extent the Columbus City Code conflicts with the Act, the provisions of the Act must prevail to serve Congressional intent to secure certain rights to returning veterans.

For the reasons set forth above, the Court finds that there are no issues of material fact and that plaintiff is entitled to judgment as a matter of law. Plaintiff’s motion for summary judgment is GRANTED. Defendant is ORDERED to credit plaintiff with continuous active service with the defendant’s Division of Police from May 1, 1967 for the purpose of determining plaintiff’s standing on the administrative seniority roster. Defendant is further ORDERED to compensate plaintiff for any loss of pay and benefits suffered by plaintiff as a result of the incorrect seniority standing.


author: THELTON E. HENDERSON, District Judge.

text:
    Robert H. MILLER, Regional Director of Region 20 of the National Labor Relations Board, for and on Behalf of the NATIONAL LABOR RELATIONS BOARD, Petitioner, v. HOTEL AND RESTAURANT EMPLOYEES AND BARTENDERS UNION, LOCAL 2, HOTEL AND RESTAURANT EMPLOYEES AND BARTENDERS INTERNATIONAL UNION, AFL-CIO, Respondent.
    No. C-84-6382 TEH.
    United States District Court, N.D. California.
    Jan. 3, 1985.

      Walter L. Kintz, Alan D. Longman, Joseph P. Norelli, N.L.R.B., Region 20, San Francisco, Cal., for petitioner.
    Matthew D. Ross, Neyhart, Anderson, Nussbaum, Reilly & Freitas, San Francisco, Cal., for respondent.
   FINDINGS OF FACT AND CONCLUSIONS OF LAW

THELTON E. HENDERSON, District Judge.

This case came to be heard upon the verified Petition of Robert H. Miller, Regional Director of Region 20 of the National Labor Relations Board, herein called “Petitioner” or “Board”. The Board’s Petition, supported by affidavits and exhibits, seeks an injunction abating alleged unfair labor practices, pursuant to Section 10(l) of the National Labor Relations Act, as amended, 29 U.S.C. § 151, et seq., herein called the “Act”, pending final disposition of the Board’s unfair labor practice complaint. The underlying unfair labor practice complaint alleges that the Respondent in this case, Hotel and Restaurant Employees and Bartenders Union, Local 2, Hotel Employees and Restaurant Employees International Union, AFL-CIO, herein called “Respondent”, “the Union” or “Local 2”, engaged in unfair labor practices in violation of Section 8(b)(4)(i)(ii)(B) of the Act, in the course of picketing at or near the business location of the charging party, Scoma’s Restaurant Inc., herein referred to as “Scoma’s” or the “charging party”. In opposition to the Board’s Petition for a Section 10(Z) injunction, Respondent filed a memorandum of points and authorities supported by counter-affidavits and exhibits.

The Court, having heard oral argument in this matter on October 15, 1984, and having fully considered the papers, affidavits, and the entire record in this case, finds that the Board has failed to establish reasonable cause to believe that Respondent has violated Section 8(b)(4)(i)(ii)(B) of the Act, and therefore DENIES the petition for an injunction under Section 10(/) based on the following findings of fact and conclusions of law.

I. FINDINGS OF FACT

A. BACKGROUND

The last collective bargaining agreement between Local 2 and Scoma’s expired August 31, 1984. Thereafter, Local 2 and Scoma’s were unable to agree upon the terms of a new collective bargaining agreement and the Union began picketing at or near Scoma’s on September 1 in furtherance of its contract demands.

Seoma’s is located in the Fisherman’s Wharf area of San Francisco. A reduced section of the site plan from the San Francisco Port Authority, Department of Engineering, supplied by Petitioner (see Initial Affidavits at 1) and incorporated in this Order, Findings of Fact and Conclusions of Law, shows that Scoma’s Restaurant is accessed by way of Pier 47, commonly known as Jones Alley. [See Appendix.] The alley, which leads north off of Jefferson Street, a main east-west avenue in the Fisherman’s Wharf area, is approximately 30 feet wide, and is shown on the reproduced site plan as Wharf J6. Scoma’s Restaurant is located at the north end of the Alley, approximately 400 feet from the intersection of Jones Alley and Jefferson Street. The customer and service entrances to Scoma’s are located along the North side of Scoma’s building facing the wharf area identified in the site plan as Wharf J7. This area is not visible from the intersection of Jefferson and Jones Alley. The Wharf ends and the San Francisco Bay begins north of Wharf J7.

Scoma’s maintains a large sign on a utility pole located at the southeast corner of Capurro’s building, adjacent to the entrance to Jones Alley, in view of pedestrians and motor vehicles passing through Jefferson Street. The sign reads:

OPEN

LUNCH DINNER

SCOMA’S

From on or about the third day of the strike, Scoma’s also operated a shuttle service to transport customers and employees between Scoma’s Restaurant and the entrance of Jones Alley on Jefferson Street and/or a point a block or two beyond.

Several other businesses operate on Jones Alley. Castignola’s Restaurant is located on the northeast corner of Jefferson Street and Jones Alley, with its main entrance on Jefferson Street. Capurro’s Restaurant is located on the northwest corner on Jefferson Street and Jones Alley; its main entrance is also on Jefferson Street. The Crab Boat Onwers’ Association is located on the west side of Jones Alley, about 80 feet north of Jefferson Street. United Shell Fish Company is located on both the east and west sides of Jones Alley, about 150 to 200 feet north of Jefferson Street. Fisherman’s Wharf Seafood Company is located at the end of Wharves J7 and J8, about 450 feet to the northwest of the entrances to Scoma’s. California Shellfish Co. is located at the end of Wharf J9. Captain Phil, Butchie “B”, Uncle Ray, New Holiday III and Ketchikan are charter fishing boats berthed along the east side of Wharf J6, from about 240 feet to about 360 feet north of Jefferson Street. Lucky Lady and Miss Jody are charter fishing boats berthed along Wharf J8, to the northwest of Scoma’s. Respondent does not have a labor dispute with any of the above-mentioned entities.

While there is some dispute about the precise location and number of pickets used by Respondent, it is undisputed that, since the picketing began, Respondent has placed pickets at the following locations: at the two customer entrances to Seoma’s, in the area in front of Scoma’s and in front of Scoma’s Fish Receiving facility; at the Jefferson Street entrance to Pier 47; and at various points along the far east and west sides of Pier 47 and Jones Alley, between Scoma’s and Jefferson Street. At all times the picketers carried signs indicating that Respondent was on strike at Scoma’s.

On September 10, 1984, Scoma’s filed a charge with the Board in Case No. 20-CC-2792, alleging that Local 2 was engaging in unfair labor practices in violation of Section 8(b)(4)(i)(ii)(B) of the Act. In a September 13th letter to Scoma’s, the Regional Director initially refused to issue a complaint on the grounds that the picketing was at a location identified as an entrance to Scoma’s and used to transport employees/patrons intermittently, that the picketing was complying with the terms of a temporary restraining order issued September 7, 1984 (see n. 10), and that the picketing had only a de minimus effect on neutral employers.

The Board subsequently issued a complaint in response to the September 10th charge on September 25. On September 27th, the Board filed the instant Petition pursuant to § 10(i) of the Act to enjoin the Union from picketing at the head of and along Jones Alley. The petition essentially alleges that the Board has reasonable cause to believe that the Union, by picketing at these points, has an illegal objective of 1) forcing or requiring United Shell Fish Co., Fisherman’s Wharf Seafood Co. and others engaged in commerce to cease doing business with Scoma’s, 2) forcing or requiring Sorenson Trucking, Mid-Coast Trucking, Petrini’s Market, Paoli’s Fish Market, Canton Fish Market, Tamaras Supply Co. and others engaged in commerce to cease doing business with the neutral businesses on Jones Alley, and 3) forcing or requiring a cessation of business between the neutral businesses on Jones Alley and others engaged in commerce.

B. EVIDENCE OF RESPONDENT’S CONDUCT TOWARD NEUTRAL BUSINESSES & REVENUE LOSS BY NEUTRALS

Although the Board primarily relies on the mere location of the picketing to establish reasonable cause to believe that the Union has an unlawful objective of enmeshing neutral employers in its labor dispute with Scoma’s it also submitted numerous affidavits concerning the Union’s conduct toward neutrals and revenue loss by neutral businesses in an attempt to buttress the reasonableness of inferring such an objective from the mere location of the pickets. In fact, the Board explains in its Reply Brief, that such evidence was what, in part, prompted it to issue a complaint after it had initially declined to do so, although the location of the picketing had not changed. The Court agrees that evidence of Union interference with neutrals (or the absence thereof) is relevant to determining whether there is reasonable cause to believe that it has an unlawful objective based on the location of the pickets. Therefore, the Court makes the following findings regarding the affidavits submitted which bear on Respondent’s conduct toward neutral businesses and the strike’s effect on the revenues of neutral businesses.

1. Capurro’s Restaurant

There is no evidence in the record that Respondent has intended to interfere with this neutral business. Although, in a September 14th declaration, Paul Capurro, owner of Capurro’s restaurant, stated that Respondent generally told people not to go down the pier and that his business was off 25-50% as a result of the strike, he subsequently contradicted the first statement, and was forced to recant on the second when the Board eventually asked for documentation of the financial loss. Capurro also complained that strikers carrying signs as they passed in front of his business on their way to converse with strikers at a nearby struck restaurant adversely affected his business. However, subsequent affidavits indicate that this is no longer a problem.

In addition, the Court also finds that Local 2 took affirmative steps to minimize any inconvenience or harm to Capurro’s business by (1) posting a sign on September 20th stating that “Local 2 Has No Dispute With Capurro’s,” (2) sending a telegram to Capurro promising cooperation, and (3) meeting with Capurro in order to discuss possible measures to minimize any inconvenience to Capurro’s Restaurant. Mr. Capurro confirmed the meeting with the Union representative but still asserted the Union’s offer of cooperation had little effect. In the same affidavit, however, Capurro conceded that the pickets had made an effort to lower their picket signs when walking in front of his business, on their way to or from Pompei’s Grotto. In addition, Local 2 members have referred potential customers to Capurro’s. All of the above is inconsistent with an alleged objective of enmeshing neutrals on the pier.

2. United Shell Fish Company

The Board’s Initial Affidavits include three affidavits from Joseph Svedise, owner of the United Shell Fish, alleging that since the Union’s picketing, his revenues dropped 15% and that customers and suppliers were reluctant to use Jones Alley to deliver or pick up products, and that certain suppliers were making deliveries a block or two from Jones Alley. The Court notes that the stated revenue loss is not documented in the record and finds that his statements concerning deliveries/pick ups are not reasonably supported by the record, as is discussed below:

a) Paoli’s Meat Market

Mr. Svedise alleges that Paoli’s Fish Market stopped picking up fish products from United Shell Fish during the strike because of harassment from pickets. Mr. Paoli, however, was quite clear that “[the] pickets have not interfered with my picking up products from United Shell Fish Company.” Mr. Paoli, whose statement was taken by a Board agent on September 24th, stated that he asked United Shell Fish to deliver to him the week of September 16 only because he was short two employees, but that “prior to [that] week I went daily to pick up fresh sea products from United Shell Fish Company.”

b) Canton Fish Market and Petrini’s

Mr. Svedise also alleges that Canton Fish Market and Petrini’s refused to make pickups from United Shell Fish for two days because of picketing, yet he admits that after he told the pickets that Canton Fish market was a customer of United Shell Fish the pickets made no effort to interfere with Canton Fish Market’s use of Jones Alley. The manager of Canton Fish states that his company picks up fish products at United Shell Fish daily and that Canton Fish drivers were “stopped”, early in the strike twice, but were “let pass with no trouble” when they indicated they had business with United Shell Fish.

Petrini’s buyer, Alfredo Caturegli, also states that Petrini’s changed its operations and began having United Shell Fish deliver supplies to Petrini’s more than two months before the strike for pure business reasons.

c) Sorenson Trucking

Mr. Svedise also states that the driver for Sorenson Trucking refused to make deliveries at United Shell Fish’s premises during the strike and has instead unloaded products outside Jones Alley on Jefferson Street. When the Union became aware of the Sorenson driver’s reluctance to enter Jones Alley, the Union immediately took affirmative measures to remedy the situation. Specifically, the Union sent a mail-gram, and then made follow-up telephone calls, clarifying that it had no dispute with United Shell Fish and requesting that Sorenson “complete pickup and deliveries in the usual and customary fashion.

d) Tamaras Trucking

The most specific allegation made by Mr. Svedise concerns an incident where he claims to have observed a picket approach a Tamaras Supply Company vehicle with a picket sign. Svedise admits that after the Tamaras driver asked him if United Shell Fish was on strike and he said “no”, the delivery was made. The Union was able to locate the Tamaras driver and he stated under oath that not only did he make the delivery, but that he never perceived an attempt by Local 2 pickets to persuade or prevent him from delivering products to United Shell Fish. Both the driver and another Tamaras declarant, the Tamaras warehouse supervisor, confirm that Local 2 called and sent telegrams to Tamaras stating that the Union’s disputes was limited to Scoma’s and requested that Tamaras deliver to United Shell Fish in the usual and customary manner.

e) McCalls Trucking and The Brown Line, Inc.

In an October 10th rebuttal affidavit, Svedise claims that drivers for McCalls Trucking and The Brown Line, Inc. were refusing to use Jones Alley, forcing United Shell Fish employees to pick up fish products or salt from these two suppliers in front of Capurro’s or at other areas on Jefferson Street. This latter affidavit, however, does not allege that the Union attempted in any way to discourage either vendor from using Jones Alley. Furthermore, affidavits and exhibits by Respondent indicate that it contacted McCalls and Mid-Coast Trucking to assure them that it had no dispute with United Shell Fish and requested that deliveries be made as usual.

f) A ark Seafood Company

Svedise, in his Oct. 10 affidavit, and F. Kinley, owner of Aark Seafood Company, state that while Kinley was delivering scallops to United Shell Fish Company on October 3rd, pickets yelled at him not to go down the pier and that one picket jumped on his truck. Kinley told the picket to get off the truck and proceeded to make his delivery. The Union subsequently sent a telegram apologizing for the incident and requesting that deliveries be made as usual.

3. Other Businesses

The remaining neutral businesses on the Pier (Fisherman’s Wharf Seafood, California Shellfish Company, various charter boats, including Captain Phil, Butchie “B”, uncle Ray, New Holiday III, Ketchikan, Lucky Lady and Miss Jody, and Castagnola’s Restaurant) can be summarily dealt with by stating that there is no evidence that respondent has interfered with traffic to or from their businesses or caused revenues to fall. The Court also finds that, at least as of September 20th, Respondent posted a sign at the entrance to Jones Alley reading “Scoma’s on Strike. Local 2 has no dispute with any other business or charter of commercial fisherman on Pier 47.”

Any Finding of Fact herein deemed to be a Conclusion of Law shall be considered a Conclusion of Law.

CONCLUSIONS OF LAW

Any Conclusion of Law herein deemed to be a Finding of Fact shall be considered a Finding of Fact.

Section 8(b)(4) of the Act was designed to meet the dual Congressional objectives of preserving the right of unions to pressure offending employers in primary labor disputes while shielding unoffending employers from pressures generated by the controversies of others. NLRB v. Denver Building and Construction Trades Council, 341 U.S. 675, 692, 71 S.Ct. 943, 953, 95 L.Ed. 1284 (1951). To this end, the Act prohibits a union from picketing with an object of inducing a neutral employer to cease doing business with the primary employer with whom the union has a dispute or with any other person engaged in commerce. 29 U.S.C. § 158(b)(4). See Huber and Antilla Construction v. Carpenters, Local 470, 659 F.2d 1013 (9th Cir.1981) (‘[I]f [the union’s] object is to bring indirect pressure on the primary employer by involving neutral or secondary employers and their employees, then [the picketing] may be unlawful.’)

However, the concluding provision to Section 8(b)(4)(B), stating that “nothing contained in this clause (B) shall be construed to make unlawful, where not otherwise unlawful, any primary strike or primary picketing” has been interpreted to mean that if picketing is directed solely at the employer with whom a union has a bona fide labor dispute, it may be lawful even though some neutral or secondary employers might be affected. Huber and Antilla Construction v. Carpenters Local 470, supra, 659 F.2d at 1017; NLRB v. Northern California District Council of Hod Carriers and Common Laborers, 389 F.2d 721, 725 (9th Cir.1968).

Section 10(i) of the Act, 29 U.S.C. 160(i), provides that when the Board has “reasonable cause” to believe that the Union has violated § 8(b)(4)(B), and therefore an unfair labor practice complaint should issue, the Board shall petition a United States district court for injunctive relief pending the final adjudication by the Board of the unfair labor practice complaint. In Kennedy v. Teamsters Local 542, 443 F.2d 627, 628-29 (9th Cir.1971), the Court set forth the standard for granting preliminary injunctive relief.

All that is required under Section 10(l) for a regional director to petition for such an injunction is reasonable cause to believe an unfair labor practice is being committed. The preliminary injunction should be granted by the court if the court finds that the factual allegations and the propositions of law underlying the regional director’s petition are not insubstantial and frivolous so that he has reasonable cause for believing the Act has been violated, and if the court finds that injunctive relief is appropriate ... San Francisco-Oakland Newspaper Guild v. Kennedy, 412 F.2d 541, 544-545 (9th Cir.1969) (footnote omitted).

In determining whether an injunction should issue, this Court must focus on whether there is reasonable cause to believe that the union’s objective, by picketing at the locations described above, was to indirectly pressure Scoma’s by enmeshing neutral employers in its labor dispute. See Constar, Inc. v. Plumbers Local 447, 568 F.Supp. 1440, 1442 (E.D.Cal.1983) (“[S]ince picketing ... is not unlawful in itself, ‘[t]he key to determining whether Section 158(b)(4)(i) and (ii)(B) was violated here'is to identify the object of the union’s picketing ...’”) (emph. in original).

Petitioner contends that because Respondent could have limited its picketing to the area directly north of Scoma’s, and still confronted persons seeking access to the restaurant, that there is reasonable cause to believe that one of the Union’s objectives, in picketing along and at the head of Jones Alley was to bring pressure on the neutral parties using the Alley. Petitioner further contends that such a belief is buttressed by the Aark Seafood “incident”, the possible reluctance of certain companies to make deliveries to the door of United Shell Fish, and the alleged 15% loss of business by United Shell Fish.

However, upon reviewing the circumstances and facts as a whole, as this Court is required to do, Retail Fruit & Vegetable Clerks v. NLRB (Crystal Palace), 249 F.2d 591, 599 (9th Cir.1957), we conclude that Board’s evidence supporting its petition is insubstantial and that no reasonable basis exists for believing that Respondent intends to enmesh neutral employers in its dispute with Scoma’s.

First, primary, lawful, objectives are readily apparent from the particular physical layout in this case. As described above, the physical entrance to Scoma’s is approximately 400 feet from the Jones Alley and Jefferson Street intersection, and is not visible from that point. Respondent convincingly argues that to effectively picket the primary employer, potential patrons must be appraised of the strike before they walk or drive the length of the Alley. Moreover, Scoma’s maintains a large sign at the intersection and uses the Alley intermittently to shuttle patrons/employees and thus to some extent maintains a presence at the head of and along the Alley. These two factors further indicate that picketing at the locations described above is important to Respondent’s ability to effectively picket the primary employer. In addition, the Union has a legitimate and primary objective in picketing in areas that are generally visible in order to fully appraise the public of its grievance with the primary employer.

Not only does the peculiar physical setting, the sign, and the shuttle, provide clearly lawful and primary objectives, but given the affidavits submitted to the Court, there is no reasonable basis for believing that the Union had any other secondary or unlawful objectives. As discussed in the findings of fact, the Union has taken numerous affirmative steps to avert any negative impact that the strike might have on neutral employers, including sending telegrams and making personal visits to various neutrals, referring customers to businesses on the Alley, and posting signs indicating that the dispute is only with Scoma’s. It is also undisputed that, at all times, the strikers carried picket signs clearly indicating that the dispute was with Scoma’s.

In addition to the undisputed affirmative efforts by Respondent, the record also reflects a marked absence of any significant evidence indicating a secondary objective. Of all the numerous neutral businesses on the Alley, only one, United Shell Fish, maintains that it suffers any disruptions, interference, or loss of revenue due to pickets, and most of those allegations were so undermined by contrary affidavits that the Board abandoned reliance on them, except for the undocumented allegation that revenues had declined 15% and the reference to the Aark Seafood incident.

If a union’s object is to enmesh neutrals, it is likely that this intent would result in some verifiable effects and/or affirmative efforts by the union, apart from the mere location of the pickets, to discourage neutral use of the Alley. However, besides the undocumented 15% revenue loss by United Shell Fish, which if true could be caused by any number of reasons, the Board can only point to one, apparently isolated, incident involving a delivery by Aark Seafood Company. Moreover, an examination of the relevant affidavits suggests that, in that incident, the strikers were concerned with ascertaining the driver’s destination, not in preventing a delivery to United Shell Fish. In light of the record as a whole, the above evidence appears insubstantial.

In sum, given respondent’s clear, primary lawful objectives, any inference that respondent harbored an unlawful objective by virtue of the location of the pickets, is amply rebutted by respondent’s affirmative efforts to prevent interference with neutrals, and the near absence of evidence indicating an unlawful intent or negative effects on neutrals due to the picketing. The Court therefore concludes that there is no reasonable basis, on the record before us, for believing that the Union was picketing with an unlawful objective in violation of the Act. The Court further concludes that to the extent neutral businesses have been adversely affected, such effects have been minimal and incidental to the Union’s primary lawful objectives.

This Court is not unmindful of the fact that where primary and neutral employers do business in the same or closely related area, that special care must be taken to protect the neutral employers from involvement in unrelated labor disputes. Such a situation requires a careful balancing of the Union’s right to effectively communicate its grievance with the primary employer against the interests of the neutral employers to be free from controversy. See Sailors Union of the Pacific (Moore Dry Dock), 92 NLRB 547, 549 (1950). The Union has an obligation to conduct its picketing so as to “minimize its impact on neutral employees [or others] insofar as this can be done without substantial impairment of the effectiveness of the picketing in reaching the primary employees [or employers].” Retail Fruit & Vegetable Clerks’ Union (Crystal Palace Market), 116 NLRB 856 (1956), enf’d, 249 F.2d 591 (9th Cir.1957). Here, where the record shows that respondent has tried to minimize its impact on neutrals to the extent possible without substantially impairing effectiveness, and where, in light of the record as a whole, there is insubstantial evidence of an unlawful objective, Petitioner has failed to establish the reasonable cause necessary to support the issuance of an injunction under § 10(l) of the Act. Accordingly, the Petition for Injunction is HEREBY DENIED.

IT IS SO ORDERED.

APPENDIX

       The Court exercised its discretion under section 10(/) to allow the charging party (Scoma’s), by its counsel, to address the Court as well.

      . All dates referred to herein are to 1984 unless otherwise indicated.

      . Respondent’s Declarations, page 12; Petitioner’s Initial Affidavits, pages 22, 35. The Board produced three sets of affidavits and exhibits in support of its Application for an Injunction. Each set is consecutively paginated. Reference herein to the Petitioner's evidence shall be as follows: Petitioner's Initial Affidavits and Exhibits filed September 27th: "Petitioner’s Initial Affidavits”; Petitioner’s Supplemental Affidavits and Exhibits filed October 2: "Petitioner's Affidavits”; Petitioner's Rebuttal Affidavits and Exhibits, filed October 19th: "Petitioner's Rebuttal Affidavits.”

      . Petitioner's Initial Affidavits, page 22.

      . Id.

      . A photograph of the sign is attached to the Declaration of Keffer, Respondent’s Declarations, page 37. See also photograph “PP”, taken by a Scoma’s agent, appearing at Respondent's Declarations, p. 61; also Respondent’s Declarations, p. 13.

      . There is conflicting evidence as to the frequency of shuttles, whether one or two automobiles were used for this purpose, and the exact drop off point. See Respondent’s Declarations, pages 40-44; Initial Affidavits, pages 81-82). For the purposes of this petition, the Court looked at the conflicting evidence in the light most favorable to petition.

      . Initial Affidavits, page 41.

      . Initial Affidavits, pages 1, 22, 35-36, 39, 58.

      . Initial Affidavits, pages 35, 49.

      . At the end of the first week of picketing, on September 6, Scoma’s sought and obtained a Temporary Restraining Order issued by a Judge of the Superior Court of the City and County of San Francisco, limiting the location and conduct of Union pickets in Jones Alley and in the area north of or "in front of' Scoma’s. Under the Temporary Restraining Order, the Union was allowed two pickets at the entrance to Jones Alley on Jefferson Street. Additional pickets were allowed within five feet of the buildings on the west side of Jones Alley, between the north side of the Capurro’s Restaurant to the south side of the first pier intersecting the west side of Pier 47, shown on the site plan as Wharf J9. Additional pickets were authorized on both sides of Jones Alley near the area identified as Wharf J6 between Wharf J9 and Scoma's. The Union was permitted additional pickets in the area in front of or north of Scoma’s. See Initial Affidavits, pages 13-15. The areas authorized for picketing by the State Court Temporary Restraining Order are shown on the attached site plan. The Superior Court proceedings did not involve any unfair labor practice issue under the Act, and petitioner was not a party to the proceedings.

      . Initial Affidavits, pages 45, 85.

      . See Respondent’s Declarations, page 87 (Exhibit A).

      . The Board contends that affidavits submitted after September 13th prompted it, in part, to reevaluate the evidence and subsequently issue a complaint. Reply Brief at 3-7.

      . Petition, pages 3-4.

      . Initial Affidavits, page 43, lines 3-12.

      . Initial Affidavits, page 44, lines 21-24. See abo, Initial Affidavits, page 42, lines 3-8.

      . Mr. Capurro contradicted himself on this point in his October 9, 1984 Affidavit when he stated "I have not heard the pickets tell people not to go down Pier 47.... I have heard the pickets tell people not to go to Scoma’s Restaurant and that the food at Scoma’s is not good.” (Emphasis supplied) (Rebuttal Affidavits, p. 9, lines 1-5). The Board expressly disavowed reliance on the earlier affidavit.

      . See .Rebuttal Affidavits, pages 10-25. According to Capurro’s October 11th declaration, Capurro’s gross receipts for July, August and September of 1983 were $76,440.78, $62,163.56 and $47,729.61, respectively. Capurro’s gross receipts for the same months in 1984 were $73,-050.15 (July), $68,911.00 (August), and $46,-799.69 in gross receipts for September 1984 during Local 2’s strike. The Board again, disavowed any reliance on Capurro’s earlier statement.

      . Initial Affidavits, pp. 40-45.

      . See Rebuttal Affidavits, p. 8, lines 14-19.

      . Respondent's Declarations, p. 22, photograph 1 and 2 at page 23. Capurro states he took down the sign because its message was on a strike sign. Rebuttal Affidavits, p. 7.

      . Respondent’s Declarations, p. 28.

      . Respondent’s Declarations, pp. 27-30.

      . Rebuttal Affidavits, p. 7.

      . Rebuttal Affidavits, p. 8, lines 14-19.

      . Respondent’s Declarations, p. 39 (Helin); Supplemental Affidavits, p. 95 (Gribbon); and p. 96 (Toporovich).

      . Initial Affidavits, pp. 25-32.

      . Initial Affidavits, p. 26.

      . Initial Affidavits, p. 26.

      . Respondent’s Declarations, p. 1.

      . Supplemental Affidavits, p. 104.

      . Initial Affidavits, p. 26.

      . Respondent’s Declarations, p. 4.

      . Initial Affidavits, p. 27.

      . Respondent’s Declarations, p. 2.

      . Respondent’s Declarations, p. 3.

      . Rebuttal Affidavits, pp. 3-4.

      . Declaration of Keffer, Oct. 15, pp. 2-4.

      . Rebuttal Affidavits, pp. 1, 3.

      . Declaration of Keffer, Oct. 15, and attached exhibits.

      . See Supplemental Affidavits at 70-71. (Balestrieri, Owner of Fisherman’s Wharf Seafood, stating that "the picketing has not affected any of my deliveries or pick ups by FWS' customers. At most the pickets have been a nuisance to myself and my employees. We have been stopped at the entrance to Pier 47 by the pickets. I was stopped twice. I was, and my drivers, also, were, allowed to continue about our business when the picket learned of our business. Other than this the picketing has not affected my business.”)

      . One of the Supplemental Affidavits filed on October 2 alleges Union efforts to involve a private charter fishing boat in Local 2's dispute with Scoma’s, e.g., the declaration of Barry Stanford (Supplemental Affidavits, p. 89). Stanford alleged that he was a deck hand of the Ketchikan and witnessed Union pickets attempt to dissuade potential customers from chartering the Ketchikan for a fishing or boating excursion. Before the issuance of the Complaint, the Board gave some weight to the Stanford affidavit (See Declaration of Ross, Respondent’s Declarations, p. 80), but the Board does not rely on Stanford’s Affidavit in this proceeding for reasons which are readily apparent from a reading of the declaration of the skipper of the Ketchikan, Jerry Hunt, who discredits Stanford and completely denies any effort by Union supporters to affect his business or even any incidental impact on the business of the Ketchikan. (Supplemental Affidavits, p. 92).

      . The Union also supplied declarations from employees of other companies using Jones Alley to deliver to Fisherman’s Wharf Seafood Company or Castagnola’s and these declarants state that pickets did nothing more than question the drivers about their destination and made no effort to impede deliveries. (See Declarations of Guidott (Steiner Corp.), Respondent’s Declaration, page 7; Hendrie (Rathjen Liquors), Respondent’s Declaration, page 8).

      . Respondent's Affidavits at 22-23.

      . Section 8(b)(4)(i)(ii), subparagraph (B) of the Act, as amended by the Labor-Management Reporting and Disclosure Act of 1959 [29 U.S.C. § 158(b)(4)(i)(ii)(B), provides, in relevant part:
      Section 8(b): It shall be an unfair labor practice for the labor organization or its agents—
      (4)(i) to engage in or to induce or encourage any individual employed by any person engaged in commerce or in an industry affecting commerce to engage in, a strike or a refusal in the course of his employment to use, manufacture, process, transport or otherwise handle or work on any goods, articles, materials, or commodities or to perform any services: or
      (ii) to threaten, coerce, or restrain any person engaged in commerce, where in either case an object thereof is:
      (B) forcing or requiring any person to cease using, selling, handling, transporting, or otherwise dealing in the products of any other producer, processor or manufacturer, or requiring any other employer to recognize or bargain with a labor organization as the representative of his employees..... Provided, that nothing contained in this clause (B) shall be construed to make unlawful, where not otherwise unlawful, any primary strikes or primary picketing.

      . This Court recognizes that it is bound by the standard set forth in Kennedy, supra, and has made its ruling in light of its teachings. However, this Court does not infer from Kennedy that our Circuit desires district courts to merely rubber-stamp every Board petition for an injunction pursuant to § 10(l) of the Act. Rather, the language of Kennedy must be read in the context of the statutory framework requiring the Board to make a showing of "reasonable cause” to believe violation has occurred.
      This Court also recognizes that strikes may settle by the time the Board holds its formal hearing on the complaint, rendering such a hearing or further action by the Board moot. Thus, the resolution of a § 10(/) petition may, practically speaking, dispose of the issues raised by the complaint. Given the above, and the thoughtful analysis in Danielson v. Joint Bd. of Coat, Suit & Allied Garment Workers Union, 494 F.2d 1230, 1239-45 (2nd Cir.1974), this Court respectfully submits that the reasonable cause standard provided for in the Act does not warrant dilution.

      . See Respondent’s Affidavits, pp. 13-14.

      . The Court notes that this is not the usual "common situs” case in which the primary and neutral employers operate out of a single site. See Moore Dry Dock, supra. Counsel have not pointed to, and this Court is not aware of, any cases involving the unusual situs situation presented by this case.