text:
    FIDELITY AND DEPOSIT COMPANY OF MARYLAND, a corporation, Plaintiff, v. Nathan ROSENMUTTER and Charles Rosenmutter, Defendants.
    No. 84 C 5434.
    United States District Court, N.D. Illinois, E.D.
    July 24, 1985.

      Neal R. Novak, McNeela & Griffin, Ltd., Chicago, Ill., for plaintiff.
    Paula K. Jacobi, Schwartz, Cooper, Kolb & Gaynor, Chicago, Ill., for defendants.
   MEMORANDUM ORDER

BUA, District Judge.

Fidelity and Deposit Company of Maryland (“Fidelity”) brings this action against Nathan Rosenmutter and Charles Rosenmutter (“the Rosenmutters”), seeking entry of a judgment declaring that Fidelity is entitled to receive collateral from defendants in the amount of $50,000 to secure its surety bond and awarding Fidelity $11,-140.71 in costs and attorneys’ fees. Before the Court is plaintiff’s motion for summary judgment in its favor pursuant to Rule 56 of the Federal Rules of Civil Procedure. For the reasons stated below, plaintiff’s motion for summary judgment is granted in part and denied in part. The remainder of plaintiff’s complaint is dismissed without prejudice.

I. FACTS

■ Summary judgment is appropriate under Rule 56 “only if pleadings, depositions and affidavits fail to disclose a genuine issue of material fact.” Gracyalny v. Westinghouse Electric Co., 723 F.2d 1311, 1316 (7th Cir.1983). In deciding the motion, the Court “must resolve all doubts against the party seeking summary judgment.” Id. Under this standard, the following facts are assumed to be true for purposes of this motion.

Fidelity is a Maryland corporation with its principal place of business in Baltimore. The Rosenmutters are residents and citizens of Illinois. Federal jurisdiction is based on diversity of citizenship, 28 U.S.C. § 1332.

General Iron Industries, Inc. (“General Iron”) and Chimet Corporation, two entities not parties to this action, were approved self-insureds under the Illinois Workers’ Compensation Act, Ill.Rev.Stat. ch. 48, § 138.1 et seq. (1983). As a condition of obtaining self-insured status, the Illinois Industrial Commission (“the Commission”) required the companies to post a $50,000 surety bond. The bond, secured by a letter of credit for the full amount, was executed by Fidelity on October 1, 1977. The Workers’ Compensation Act states that the purpose of such a bond is to guarantee payment by the employer of any compensation awards made pursuant to the Act. IlLRev. Stat. ch. 48, § 138.4(a)(2) (1983).

The penal sum of the surety bond was subsequently increased to $100,000 and then, on August 21, 1981, to $200,000. The defendants, acting as indemnitors, signed and accepted both riders increasing the amount of the surety bond. As an inducement to Fidelity to execute the surety bond, the defendants, acting in their individual capacities, executed and delivered to Fidelity an Application for Miscellaneous Bonds containing an indemnity agreement between the parties. Additionally, General Iron arranged for a letter of credit in the amount of $150,000 to be issued by Main Bank of Chicago as collateral for the $200,-000 surety bond.

In February 1982, General Iron filed for reorganization under Chapter 11 of the Federal Bankruptcy Code, 11 U.S.C. § 1101 et seq. Thereafter, it failed to pay a worker’s compensation claim, approved by the Commission, in the amount of $25,000. The injured General Iron employee then filed suit demanding that Fidelity disburse the amount of the claim from the bond proceeds. Calvin v. Fidelity & Deposit Company of Maryland, 82 C 2016 (N.D.Ill. Nov. 2, 1982). The Commission, intervening as a defendant in that suit, requested that Fidelity not make payment on the Calvin claim or on any other claim until the total amount of outstanding and potential claims against General Iron and Chimet Corporation could be ascertained. Potential claimants could file claims until March of 1985.

Presently, there are 33 claims pending against General Iron. Four claims totaling $34,913 have been adjudicated. Of these, one claim for $25,000 has been settled and approved by the Commission. Three other claims totaling $9,913 have been settled but not yet approved. Fidelity estimates its ultimate liability on the bond to exceed the $150,000 secured amount and seeks summary judgment in the amount of $50,000 as collateral for the unsecured portion of the bond.

Fidelity also contends it is owed by defendants costs and attorneys’ fees in the amount of $11,140.71. Fidelity alleges that it incurred these expenses in defending the Calvin suit and enforcing the indemnity agreement at issue in this lawsuit.

II. DISCUSSION

A. The Indemnity Agreement

The controversy between the two parties centers upon the indemnity agreement contained in paragraph two of the Application for Miscellaneous Bonds. It reads as follows:

The undersigned do hereby represent that the statements made herein as an inducement to the Fidelity & Deposit Company of Maryland, its successors and assigns, (hereinafter called Company) to execute the bond applied for herein, are true, and, should the Company execute said bond, do hereby agree as follows: * * * * * *
SECOND, to indemnify the Company against all loss, costs, damages, expenses and attorneys’ fees whatever, and any and all liability therefor, which the Company may sustain or incur by reason of executing said bond, in making any investigation on account thereof, in prosecuting or defending any action which may be brought in connection therewith, and obtaining a release therefrom, and in enforcing any of the agreements in any of the paragraphs herein contained. Payment of any such amounts shall be made to the Company by the undersigned as soon as the Company shall be liable therefor, whether or not it shall have paid out any portion thereof (emphasis added)

Specifically, this Court is being asked to interpret the term “liable” under the terms of the agreement.

Fidelity asserts that its liability under the agreement has accrued because claims estimated to be valued in excess of the $200,000 bond limit have been filed. Fidelity’s interpretation of the accrual of liability would require the Rosenmutters to indemnify Fidelity by providing the remaining $50,000 collateral required under the Collateral Agreement.

The Rosenmutters, however, contend that Fidelity’s liability under the agreement accrues only after claims have been adjudicated and the exact amount of Fidelity’s liability is fixed. The Rosenmutters’ interpretation of the accrual of liability would require them to post additional collateral only after adjudicated claims for which Fidelity is liable have exceeded the $150,000 collateral already posted. Since adjudicated claims, under this interpretation, currently total only $34,913, the Rosenmutters would not now be required to post additional collateral.

In Illinois, indemnity contracts or provisions are to be strictly construed against the indemnitee. Mclnerney v. Hasbrook Const. Co., 16 Ill.App.3d 464, 306 N.E.2d 619 (1973), modified on appeal, 62 Ill.2d 93, 338 N.E.2d 868 (1975). This is especially true where, as in this case, the indemnity provision is contained within the indemnitee’s form. Gay v. S.N. Nielsen Co., 18 Ill.App.2d 368, 152 N.E.2d 468 (1958).

It is a settled principle of Illinois law that a surety, after a debt has become due, may, without making payment himself, compel the principal to pay the debt. Moore v. Topliff, 107 Ill. 241, 249 (1883); Western Casualty v. Biggs, 217 F.2d 163 (7th Cir.1954). The liability of an indemnitor, however, does not arise until it has been definitely ascertained that loss or damage has been sustained. City of Chicago v. Siebert, 244 Ill.App. 83, 87 (1927); Cunningham Brothers, Inc. v. Bail, 407 F.2d 1165, 1169 (7th Cir.1969). Accordingly, in this case, Fidelity is “liable” at this time only for worker compensation claims in which there has been an ascertained amount of damages. While it seems likely, based on the 33 claims presently pending against General Iron, that Fidelity’s ultimate liability will exceed the 150,000 secured amount, only four claims totaling $34,913 have accrued to date. In fact, only one claim has been approved by the Commission (Rubin Calvin’s claim of $25,000). Three other claims totaling $9,913 have been settled but have not yet been approved by the Commission. These four claims total $34,913.

Fidelity cites Safeco Insurance Co. of America v. Schwab, 739 F.2d 431 (9th Cir.1984), in support of its position that the Rosenmutters, as indemnitors, must post additional collateral on the basis of estimates of future liability rather than on fixed liability. The Safeco holding, however, interpreted an indemnity agreement that required the indemnitors to pay the surety, upon demand,

[a]n amount sufficient to discharge any claim made against Surety [Safeco] on any Bond. This sum may be used by Surety to pay such claim or be held by Surety as collateral security against any loss on any Bond.

Id. at 432 (emphasis added). The indemnity agreement signed by the Rosenmutters is easily distinguished from that in the Safeco case in that it provides only that the Rosenmutters pay “any such amounts ... to [Fidelity) ... as soon as [Fidelity] shall be liable therefor, whether or not it shall have paid out any portion thereof” (emphasis added). The agreement does not require payment of amounts sufficient to discharge unadjudicated or anticipated claims. Fidelity is entitled to indemnification when its liability is fixed and certain “whether or not it shall have paid out any portion thereof.”

Fidelity further relies upon Milwaukie Construction Co. v. Glens Falls Insurance Co., 367 F.2d 964 (9th Cir.1966), for its claim that it is entitled to exoneration from the anticipated $50,000 unsecured portion of the bond. Consistent with the Court’s interpretation of the indemnity agreement, however, Fidelity’s invocation of the doctrine of exoneration as a basis for obtaining additional collateral is premature. “A surety cannot invoke the doctrine of exoneration unless his liability is imminent and absolute.” Falvey v. Foreman—State National Bank, 101 F.2d 409, 417 (7th Cir.1939). Fidelity’s liability under the bond is neither imminent nor absolute. Therefore, the doctrine of exoneration is inapplicable at this time.

Accordingly, Fidelity presently is “liable” under the indemnity agreement in the amount of $34,913. Since that amount is less than $150,000, Fidelity is not entitled to additional collateral from the Rosenmutters at this time. To the extent plaintiff seeks summary judgment on that issue, the motion is denied.

B. Attorneys’ Fees and Costs

Fidelity asserts that it is entitled to receive $11,140.71 in attorneys’ fees and costs incurred to date. This total represents $7,713.21 in attorneys’ fees and costs incurred defending the Calvin suit, $657.50 in unspecified attorneys’ fees and $2,770 in attorneys’ fees and costs incurred in bringing this action.

Paragraph two of the Application for Miscellaneous Bonds permits Fidelity to recover costs and attorneys’ fees “which the Company [Fidelity] may sustain or incur by reason of executing said bond ... and in enforcing any of the agreements in any of the paragraphs herein contained.” Under this provision, Fidelity is clearly entitled to the $7,713.21 it requests for defending the Calvin suit. These expenses have been incurred by Fidelity, and the Rosenmutters are liable for them. Attorneys’ fees and costs are separate from and additional to the amount of the surety bond which represents the total amount designated to pay workers’ compensation claims. Therefore, the defendant’s liability of $7,713.21 is due and plaintiff is entitled to judgment in that amount.

Fidelity’s request for the remaining $3,427.50, however, is denied. The $657.50 it requests is not clearly explained in that the Court is unable to ascertain whether the costs and fees were incurred as part of the Calvin defense or as part of the current action. Therefore, summary judgment will be denied as to those fees without prejudicing plaintiff’s right to file an affidavit within 30 days establishing that the $657.50, or a part thereof, was incurred in defense of one of the four claims.

The $2,770 amount which Fidelity requests is based on expenses incurred in bringing this action. This action, however, was unnecessary to enforce the contract since this lawsuit was premature. Accordingly, each party must bear its own expenses and fees on this suit.

III. CONCLUSION

This motion for summary judgment is granted in part and denied in part. Plaintiff’s motion for summary judgment is granted in the amount of $7,713.21. Plaintiff is given leave to file an affidavit within 30 days justifying additional fees up to $657.50. In all other respects, plaintiff’s motion is denied. The remainder of the complaint is dismissed without prejudice.

IT IS SO ORDERED.

      . The Self Insurance Program in Illinois was terminated on March 10, 1982. Coverage under Fidelity’s bond was terminated concurrently. Pursuant to Ill.Rev.Stat. ch. 48 § 138.6, potential claimants had three years, or until March 10, 1985, in which to file claims under Fidelity’s bond.

      . Judge McGarr wrote in the Calvin case in his Memorandum Opinion dated November 2, 1982, at p. 7: "The defendant-surety [Fidelity] is clearly liable for the entire $200,000 amount of the bond.” Calvin v. Fidelity & Deposit Company of Maryland, 82 C 2016 (N.D.Ill., Nov. 2, 1982). That statement was not a finding of fact. Judge McGarr made the statement in his ruling on a Motion to Intervene brought by the Illinois Industrial Commission. The issue before the court was the Commission’s intervention and not the adjudication of workers’ compensation claims.


source: Caselaw Access Project

author: KANE, District Judge.

license: Public Domain

text:
    SEALTITE CORPORATION, Standish Corporation, Plaintiffs, v. GENERAL SERVICES ADMINISTRATION, William Bounds, the Regional Administrator of the GSA, Defendants.
    Civ. A. No. 85-K-193.
    United States District Court, D. Colorado.
    July 24, 1985.

      Robert P. Manning, Cogswell & Wehrle, Denver, Colo., for plaintiffs.
    Coleen L. Conlin, Asst. U.S. Atty., Denver, Colo., for defendants.
   ORDER

KANE, District Judge.

This is an action for the return of property brought by the Sealtite and Standish corporations against the General Services Administration and its regional administrator. It involves a dispute which arose under government contract No. GS-08B-81072, under which Sealtite was to perform an energy conservation retrofit on Building 50 at the Denver Federal Center. Defendants have moved to dismiss for lack of subject matter jurisdiction.

Plaintiffs invoke jurisdiction under 28 U.S.C. § 1331 (federal question jurisdiction), § 1361 (mandamus), and the Administrative Procedure Act, 5 U.S.C. § 701 et seq. Defendants assert that the dispute, being grounded in contract and involving a controversy in excess of $10,000, is exclusively within the jurisdiction of the Court of Claims under the Contract Disputes Act, 41 U.S.C. § 601 et seq. and the Tucker Act, 28 U.S.C. §§ 1346(a)(2), 1491.

Subject matter jurisdiction does not exist. I dismiss the complaint. Further, sua sponte, I award defendants the costs of responding to this action, including reasonable attorney fees, pursuant to Rule 11 of the Federal Rules of Civil Procedure.

I.

The pertinent facts are as follows. On April 15, 1983, the parties entered into a $189,187 contract to retrofit Building 50 at the Federal Center. In accordance with the contract, Sealtite began work. In April, 1984, a dispute arose regarding payments which Sealtite considered over and above the contract price. When these payments were denied by the government, Sealtite ceased performance under the contract and the contract remains unperformed to date.

When Sealtite left the job site, the government secured the site and barred Sealtite from access to materials which it had supplied for the job. Sealtite claims it is entitled to these materials. The primary item is insulation which has not yet been installed worth approximately $15,000.

The contract between the parties provided for resolution of all disputes in accordance with the Contract Disputes Act. On September 26, 1983, the contracting officer denied Sealtite’s claim for the insulation on the grounds that the government had made payment for material as required under the contract, including the insulation. On reconsideration, the contracting officer again denied the claim and notified Sealtite that the government was terminating the contract for default as of March 28, 1984. Sealtite then appealed this decision to the General Services Board of Contract Appeals. On May 1,1984, the GSBCA docketed this appeal as No. 7458. It is still pending. Sealtite commenced this action on January 28, 1985.

II.

In S.J. Groves & Sons Co. v. United States, 495 F.Supp. 201 (1980), I held that where a claim is essentially grounded in contract, and adequate resolution is available under established procedures for review of decisions made regarding government contracts, a dispute rests exclusively with the Court of Claims where the amount in controversy exceeds $10,000. I also noted in dictum that although the Contract Disputes Act of 1978 was not controlling in that case, it nevertheless gives the Court of Claims exclusive jurisdiction over disputes regarding government contracts. Groves, 495 F.Supp. at 207, n. 7.

The plaintiff in Groves attempted to invoke jurisdiction in precisely the same three ways as Sealtite does in the complaint before me. Sealtite’s reasons for doing so are no more persuasive. For the reasons expounded in Groves, I reject all three bases for jurisdiction.

The Contract Disputes Act provides for review of contract dispute decisions by only two methods: (1) appeal of a contracting officer’s decision to the Board of Contract Appeals {see 41 U.S.C. § 606); or (2) direct relief from the Court of Claims {see 41 U.S.C. § 609). Group Health Inc. v. Schweiker, 549 F.Supp. 135 (S.D.Fla.1982). Once a contractor makes an election to go to the Board of Contract Appeals, it has chosen the means of review.

This suit is nothing more than a second attempt to gain possession of materials. The contracting officer has already ruled in favor of the GSA. Plaintiffs’ attempt to circumvent the Contract Disputes Act by characterizing this dispute as an action in replevin, or for the return of property, must fail.

III.

I further find that the complaint in this action is not grounded in fact or law. The plaintiffs’ attempt to invoke this court’s jurisdiction is no more than a duplication of the proceedings before the GSBCA. Because this claim needlessly expands the scope of litigation, it is grounds for sanctions under Rule 11 of the Federal Rules of Civil Procedure. Weir v. Lehman Newspaper, Inc., 105 F.R.D. 574 (1985). I would be remiss in my duty if I did not impose sanctions.

As discussed in the advisory notes to Rule 11, the rule “stresses the need for some prefiling inquiry into both the facts and the law to satisfy the affirmative duty imposed by the rule. The standard is one of reasonableness under the circumstances.” As I noted in Weir, Rule 11 imposes a personal duty on the attorney to “stop, think and investigate” before filing a pleading. Rothschild, Fenton and Swanson, Rule 11: Stop, Think, and Investigate, Vol. 11 No. 2 Litigation 13 (Winter 1985). I do not find that the complaint is based on a plausible view of the law. Since the attorney here had no objective basis to believe that his clients’ claims were warranted by existing law, or a good faith extension, modification, or reversal of existing law, sanctions should be imposed.

It is therefore ORDERED that this action be dismissed.

It is further ORDERED that plaintiffs’ counsel bear all costs of this action, including reasonable attorney fees. Defendants shall file with this court, on or before Au-' gust 5, 1985, affidavits and contemporaneous time records indicating the appropriateness of the amounts requested. See, e.g., Blum v. Stenson, 465 U.S. 886, 104 S.Ct. 1541, 79 L.Ed.2d 891 (1984); Hensley v. Eckerhart, 461 U.S. 424, 103 S.Ct. 1933, 76 L.Ed.2d 40 (1983); Ramos v. Lamm, 713 F.2d 546 (10th Cir.1983). Plaintiffs’ counsel may respond to defendants’ filing on or before August 19, 1985.

The complaint and civil action are dismissed.

      . See defendants’ motion to dismiss, paragraph 2.

      . See defendants’ motion to dismiss, exhibit B.

      . See defendants’ motion to dismiss, exhibit D.

      . Rule 11 imposes an affirmative duty on judges to impose sanctions. "[Tjhe words 'shall impose’ in the last sentence focus the court's attention on the need to impose sanctions for pleading and motion abuses.” Advisory Notes to the 1983 Amendments to Rule 11. It is also my responsibility under Canon 1 of the Code of Judicial Conduct to uphold the integrity and independence of the judiciary by enforcing high standards of conduct.


author: BENJAMIN F. GIBSON, District Judge.

text:
    Melvin BREEN, et al., Plaintiffs, v. Phillip E. RUNKEL, Defendant.
    No. G85-531 CA.
    United States District Court, W.D. Michigan, S.D.
    July 25, 1985.

      Philip R. Sielski, Bussard & Sielski, Grand Haven, Mich., for plaintiffs.
    Gerald F. Young, Paul J. Zimmer, Asst. Attys. Gen., Lansing, Mich., for defendant.
   OPINION

BENJAMIN F. GIBSON, District Judge.

Plaintiffs in this case, teachers, students, and parents of students at Allendale Elementary School, seek declaratory and injunctive relief against Phillip E. Runkel, Michigan’s Superintendent of Public Instruction. According to the allegations of their complaint, plaintiff teachers, from time to time, pray in their classrooms, read from the Bible, and tell stories that have a biblical basis. Complaint U 7. Plaintiff students, from time to time, attend a Bible club which meets at lunch hour at the Allendale Elementary School. The Bible club is not supported by the Allendale Public School District, nor does the school district require students to attend. Attendance is with consent of the student’s parents. Complaint ¶ 8. Plaintiffs claim that defendant has directed the Allendale Public School Board of Education and the school administrators to take actions to stop these religious practices. Plaintiffs claim rights under the first amendment of the United States Constitution and article I, section 4, of the Michigan Constitution to continue their religious practices, and they petition the Court to enjoin defendant Runkel from interfering with their rights.

Defendants have moved for dismissal on the grounds that plaintiffs have failed to state a claim upon which relief can be granted. Fed.R.Civ.P. 12(b)(6). The Court’s inquiry at this point, before the reception of any evidence, is merely whether the challenged pleading sets forth allegations sufficient to make out the elements of a right to relief. A complaint should not be dismissed for failure to state a claim, unless it appears beyond doubt that the plaintiffs can prove no set of facts which would entitle them to relief. California Motor Transport Co. v. Trucking Unlimited, 404 U.S. 508, 515, 92 S.Ct. 609, 614, 30 L.Ed.2d 642 (1972); Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 101-102, 2 L.Ed.2d 80 (1957). Given the crucial role which the particular facts of a case play in every first amendment analysis, special care must be taken by trial courts in establishing factually complete records before deciding such issues. Bender v. Williamsport Area School District, 741 F.2d 538, 541-42 (3rd Cir.1984), cert. granted, — U.S. -, 105 S.Ct. 1167, 84 L.Ed.2d 319 (1985); Stein v. Plainwell Public Schools, 610 F.Supp. 43, 46 (W.D.Mich.1985).

The Court has concluded that those portions of the complaint that claim a right of the teachers to read the Bible, pray, and tell Bible stories in the classroom have failed to state a claim upon which relief can be granted. Accordingly, these portions of the complaint must be dismissed. The Court has further concluded that it is unable to judge, without the benefit of further factual development, whether the remaining portions of the complaint state claims upon which relief can be granted. Accordingly, defendant’s motion to dismiss those portions of the complaint is denied.

RIGHTS CLAIMED BY TEACHERS

Defendant contends that the plaintiff teachers have no constitutional right to pray, read the Bible, or tell Bible stories in the classroom. He argues that such conduct is strictly prohibited by the establishment clause of the first amendment and that he, therefore, has an obligation to prohibit plaintiffs from continuing such practices.

Certainly, any analysis of this issue must start with an examination of the leading Supreme Court precedents which defendant has cited, Engel v. Vitale, 370 U.S. 421, 82 S.Ct. 1261, 8 L.Ed.2d 601 (1962), and Abington Township School District v. Schempp, 374 U.S. 203, 83 S.Ct. 1560, 10 L.Ed.2d 844 (1963). In Engel, the Court held that the Constitution prohibited a local school board from requiring teachers to begin each day in the classroom with a short, non-denominational prayer composed by the New York Board of Regents. The Court held the practice unconstitutional, even though the teachers did not require all pupils to recite the prayer but permitted those who wished to do so to remain silent or be excused from the room. “Neither the fact that the prayer may be denominationally neutral nor the fact that its observance on the part of the students is voluntary can serve to free it from the limitations of the Establishment Clause.” 370 U.S. at 430, 82 S.Ct. at 1266. In Abington, the Court held invalid two separate practices calling for the reading of the Bible in the classroom. In the first, the Pennsylvania legislature had passed a statute requiring that at least ten verses from the Bible should be read, without comment, at the opening of each public school day. In the second, a local school board in Maryland adopted a rule also requiring daily Bible reading. The Supreme Court held that both of these practices violated the establishment clause of the first amendment, even though the rules permitted students to be excused from the classroom during the Bible reading exercises.

Plaintiffs argue that this case is distinguishable from Engel and Abington because the Allendale school district in no way sponsors or encourages the religious practices of the teachers. In Engel, plaintiffs point out, a local school board passed a resolution requiring daily prayer. In Abington, a state legislature and a local school board, both clearly governmental bodies, required daily Bible reading. Here, accepting the averments of the complaint as true, as the Court must at this point, the local school district in this case has no direct role in the religious practices of the teachers. Thus, plaintiffs argue, there is no “state action” that violates the establishment clause.

The Court cannot accept plaintiffs’ argument that their classroom religious practices do not constitute “state action” and that the establishment clause, therefore, does not apply to their conduct. Under Michigan law, teachers are appointed, suspended and removed by the local school boards. Mich.Comp.Laws Ann. § 380.1231 (Supp.1985); Mich.Comp.Laws Ann. § 38.-101 (1967). The local school boards are creatures of the state and are controlled by state law. Mich.Comp.Laws Ann. §§ 380.-1-380.703 (Supp.1985); see also Jaffree v. Wallace, 705 F.2d 1526 (1983), aff'd mem. (with respect to this issue), — U.S.-, 104 S.Ct. 1704-05, 80 L.Ed.2d 178 (1984), aff'd (on other issues), — U.S.-, 105 S.Ct. 2479, 86 L.Ed.2d 29 (1985). Thus, the Court concludes that, when they are acting in their capacity as classroom teachers, plaintiff teachers are “state actors” for purposes of this establishment clause analysis.

Further, the Court notes that the establishment clause places on defendant Runkel, in his role as state Superintendent of Public Instruction, the affirmative duty to ensure that individual teachers are not, through their classroom conduct, violating the guidelines of the establishment clause. See Grand Rapids School District v. Ball, — U.S.-,-, 105 S.Ct. 3216, 3224, 87 L.Ed.2d 267 (1985) (quoting Levitt v. Committee for Public Education, 413 U.S. 472, 480, 93 S.Ct. 2814, 2819, 37 L.Ed.2d 736 (1973)). As noted by the Eleventh Circuit, a mockery would be made out of the establishment clause if unconstitutional activities could be carried on merely because no statute or, in this case, official school board policy authorized the activities. Jaffree v. Wallace, 705 F.2d at 1534.

Plaintiffs also seek to distinguish Engel and Abington on the grounds that this case tests the free speech and free exercise rights of the teachers, rather than the establishment clause limitations on a local school board or state legislature. Plaintiffs claim defendant has an obligation to “accommodate” practices protected by their free speech and free exercise rights.

In their brief, plaintiffs invite the Court to consider their free speech and free exercise rights in the context of a hypothetical:

Another means of examining the question is to start with the teacher outside of the public schools. Certainly her religious conduct outside the school would not be an establishment of religion, nor could the state proscribe that. On her way to the school, her conduct is not state action and she would be free to exercise her religious beliefs and preferences. While walking from the school parking lot to her assignment, could she pray silently to herself or even wear some religious symbol such as a cross or Star of David? I anticipate few objections to that religious conduct as state action. In her classroom, before the beginning of class, could she not read the Bible silently to herself and pray? When does her private conduct, unsupported by, unencouraged by and unendorsed by the State, cross the dividing line that separates “teacher action” from “state action?”

Plaintiffs’ hypothetical illustrates what has come to be known as the “tension” between the free exercise clause and the establishment clause of the first amendment. See, e.g., Bender v. Williamsport Area School District, 741 F.2d at 541. As the Supreme Court has explained:

The constitutional inhibition of legislation on the subject of religion has a double aspect. On the one hand, it forestalls compulsion by law of the acceptance of any creed or the practice of any form of worship. Freedom of conscience and freedom to adhere to such religious organization or form of worship as the individual may choose cannot be restricted by law. On the other hand, it safeguards the free exercise of the chosen form of religion.

Cantwell v. Connecticut, 310 U.S. 296, 303, 60 S.Ct. 900, 903, 84 L.Ed. 1213 (1940), quoted in Wallace v. Jaffree, 105 S.Ct. at 2487; see also Abington Township School District v. Schempp, 374 U.S. at 217-22, 83 S.Ct. at 1568-71. In a July 1985 opinion, the Court explained further the relationship of the two clauses:

[J]ust as religion throughout history has provided spiritual comfort, guidance, and inspiration to many, it can also serve powerfully to divide societies and to exclude those whose beliefs are not in accord with particular religions or sects that have from time to time achieved dominance. The solution to this problem adopted by the Framers and consistently recognized by this Court is jealously to guard the right of every individual to worship according to the dictates of conscience while requiring the government to maintain a course of neutrality among religions, and between religion and non-religion. Only in this way can we “make room for as wide a variety of beliefs and creeds as the spiritual needs of man deem necessary” and “sponsor an attitude on the part of government that shows no partiality to any one group and lets each flourish according to the zeal of its adherents and the appeal of its dogma.” Zorach v. Clauson, 343 U.S. 306, 313, 72 S.Ct. 679, 684, 96 L.Ed. 954 (1952).

Grand Rapids School District v. Ball, — U.S. at-, 105 S.Ct. at 3222.

In addition to the tension between the two religion clauses themselves, the facts of this case present a tension between the establishment clause and the free speech clause of the first amendment. The free speech clause clearly protects the rights of individuals to speak on religious topics. Widmar v. Vincent, 454 U.S. 263, 268-69, 269 n. 6, 102 S.Ct. 269, 273-74, 274 n. 6, 70 L.Ed.2d 440 (1981). Plaintiffs point to the case of James v. Board of Education, 461 F.2d 566 (2d Cir.), cert. denied, 409 U.S. 1042, 93 S.Ct. 529, 34 L.Ed.2d 491 (1972), where the court held that a high school teacher who wore a black armband in class as an expression of his religious aversion to the Vietnam war did so under the protection of the free speech clause of the first amendment. Those rights, however, may be limited by the strictures that the establishment clause places on state institutions. See Widmar, 454 U.S. at 276, 102 S.Ct. at 277; Bender, 741 F.2d at 557. In the public school context, an individual’s free speech right may also be limited if exercise of that right materially and substantially interferes with the requirements of appropriate discipline in the operation of the school or invades or collides with the rights of others. Tinker v. Des. Moines Independent Community School District, 393 U.S. 503, 513, 89 S.Ct. 733, 740, 21 L.Ed.2d 731 (1969).

The cited cases reveal that, even after a court concludes that individuals have asserted valid free speech or free exercise rights, that court’s inquiry has not ended. When, as in this case, exercise of those individual first amendment rights might violate the mandate of the establishment clause, the Court must proceed to resolve “a constitutional conflict of the highest order.” Bender, 741 F.2d at 557.

Plaintiffs’ hypothetical presents an interesting exercise that tests that conflict. The Court need not, however, in the context of this case, resolve where along that slippery slope the line between constitutionality and unconstitutionality is drawn.

Because the Court concludes, as a matter of law, that the facts presented by the complaint in this case are not legally distinguishable from the facts presented in the Engel and Abington cases, it further concludes that the conduct of plaintiff teachers is constitutionally prohibited. Although plaintiffs attempt to distinguish this case on the grounds that the Allendale school district does not support or require the religious activities of the teachers, the Court does not find that this factor was important in the Supreme Court’s decisions. In the Abington casé, the Supreme Court found significant that: 1) the states were requiring Bible reading and prayer, 2) the exercises were prescribed as part of the curricular activities of students who were required by law to attend school, and 3) they were held in school buildings under the supervision and with the participation of teachers employed in those schools. 374 U.S. at 223, 83 S.Ct. at 1572. With the exception, discussed above, that the teachers are the state actors in this case, rather than the school board or state legislature, these same factors are. all present in this case: 1) the teachers are conducting Bible reading and prayer in the classrooms, 2) those exercises are part of the normal classroom activities of students required by law to attend school, and 3) the religious exercises take place in the Allendale public school buildings under the supervision and with the participation of teachers employed in those schools.

Plaintiffs could argue that the Engel and Abington cases, even if they present the same facts, were raised in a different context. In those cases, individuals were suing the state entities to prevent the religious practices. No teachers making free speech and free exercise claims were party to those suits as they are in this case. Thus, plaintiffs could argue, it is possible that the Supreme Court would have reached a different result had it been faced with the claims made by the individual teachers in this case.

The Court has carefully reviewed the Engel and Abington opinions. Admittedly, the Supreme Court did not consider those cases in the context of specific assertions of free speech and free exercise rights by teachers. The Court did, however, deal carefully and at great length with the delicate balance between the free exercise and establishment clauses. See Engel, 370 U.S. at 429-31, 82 S.Ct. at 1266-67; Abington, 374 U.S. at 217-23, 83 S.Ct. at 1568-72. Thus, an implicit holding of those decisions is that the establishment clause limitations placed on public schools outweigh whatever free speech or free exercise claims could have been asserted by individual teachers.

Accordingly, because this Court finds the facts of this case indistinguishable from those of Engel and Abington, this Court is bound by the precedent set in those cases. Although plaintiff teachers do not “shed their constitutional rights ... at the schoolhouse gate,” Tinker, 393 U.S. at 506, 89 S.Ct. at 736, those rights are not absolute. The Engel and Abington cases hold that, whatever the extent of the teachers’ rights, they do not extend so far as to permit individual teachers to pray or read the Bible in public school classrooms. Thus, this Court concludes that plaintiffs will not be able to prove any set of facts that would entitle them to relief on the claims alleging free speech and free exercise rights of the teachers to pray, read the Bible, or tell Bible stories in their classrooms. Those claims must be dismissed.

RIGHTS CLAIMED BY STUDENTS

Defendant also contends that plaintiff students have no constitutional right to attend Bible clubs during lunch hour. He argues, as with the claims of the teachers, that such conduct is strictly prohibited by the establishment clause.

Defendant has cited two recent decisions dealing with similar facts. In Bender v. Williamsport Area School District, 741 F.2d 538 (3d Cir.1984), cert. granted, — U.S. -, 105 S.Ct. 1167, 84 L.Ed.2d 319 (1985), the Third Circuit held that the Constitution prohibits a student-initiated prayer club from meeting during the activity period of a public high school. In Michigan State Board of Education v. Tri-County Area School District, No. G841029 (W.D.Mich.), the Honorable Richard A. Enslen entered a preliminary injunction on October 1, 1984, enjoining that school district from permitting Bible clubs to meet on school grounds during the pendency of the suit.

Although the cases cited by defendants prohibited the practice of holding Bible clubs, one permanently and one on a preliminary basis, the Court notes that the results reached by both courts were very fact specific. In the Bender opinion, the Third Circuit specifically noted that it would have been aided by a more fully developed record. 741 F.2d at 542. In contrast, at this point, the only record of the Bible club practice in this ease is the one paragraph of the complaint briefly explaining the practice.

The Court has concluded that it is unable to decide the constitutionality of the Bible club practice in the Allendale schools without the benefit of further factual development. Unlike the issues of prayer and Bible reading in the classroom, no Supreme Court precedent exists clearly on point. Thus, the Court is unable to conclude that plaintiffs, as a matter of law, will be unable to prove any facts that would support their claim for relief.

RIGHTS CLAIMED BY PARENTS

Plaintiff parents claim that defendant Runkel will infringe their liberty interests, protected under the fourteenth amendment, if he prohibits plaintiff teachers from continuing to pray and read the Bible in the classroom and plaintiff students from attending Bible clubs. The Supreme Court has held that the fourteenth amendment protects the “liberty of parents and guardians to direct the upbringing and education of children under their control.” Pierce v. Society of Sisters, 268 U.S. 510, 45 S.Ct. 571, 69 L.Ed. 1070 (1925); see also Wisconsin v. Yoder, 406 U.S. 205, 92 S.Ct. 1526, 32 L.Ed.2d 15 (1972). The liberty interest of parents, however, is not absolute. Rather, the parents’ power to direct the upbringing of their children must yield if their actions impinge on other fundamental rights or impair a compelling state interest. 406 U.S. at 223-34, 92 S.Ct. at 1537-42.

In this case, the Court has already held that the establishment clause prohibits prayer and Bible reading in the classroom. Just as the teachers’ free speech and free exercise rights must yield to the requirements of the establishment clause under the facts of this ease, so the parents’ rights to direct their childrens’ upbringing are similarly limited. Accordingly, the Court dismisses plaintiff parents’ claim that their liberty interests are infringed because their childrens’ teachers are not permitted to pray or read the Bible in the classroom.

The Court denies, however, defendant’s motion to dismiss the parents’ claim that they have a constitutional right to let their children attend Bible clubs that meet on the school premises. The Court is unable to conclude at this time that plaintiffs can prove no set of facts which would entitle them to relief.

IT IS SO ORDERED.

ORDER

In accordance with the Opinion dated July 25, 1985, IT IS HEREBY ORDERED that defendant’s motion to dismiss is GRANTED with respect to plaintiff teachers’ claims That they have a constitutional right to pray, read the Bible, and tell stories with a biblical basis in the classroom. Defendant’s motion is DENIED with respect to plaintiff students’ asserted right to attend Bible clubs. With respect to the claims of plaintiff parents, defendant’s motion is GRANTED to the extent those claims are based on a right of teachers to read the Bible and pray in the classrooms, but DENIED to the extent those claims are based on the alleged rights of the students to attend Bible clubs.

IT IS SO ORDERED.

      . The first amendment provides that
      Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof; or abridging the freedom of speech, or of the press; or the right of the people peaceably to assemble, and to petition the Government for a redress of grievances.
      In Cantwell v. Connecticut, 310 U.S. 296, 303, 60 S.Ct. 900, 903, 84 L.Ed. 1213 (1940), the Supreme Court held that the same prohibition extends, through the fourteenth amendment, to the states. Hence, to prove that the establishment clause would be violated in this case if plaintiffs continue their practices, defendant must show that plaintiffs' activity has the character of "state action.”

      . Plaintiff teachers have also claimed a right to pray and read Bible stories in the classroom under article I, section 4, of the Michigan Constitution. Because the Court has concluded that the teachers’ practices are barred by the United States Constitution, it need not address the state constitutional issue. U.S. Constitution art. VI.


author: SPRIZZO, District Judge:

text:
    HAWLEY FUEL COALMART, INC. and Hawley Fuel Coal, Inc., Plaintiffs, v. STEAG HANDEL, GmbH., Defendant.
    No. 82 Civ. 3686 (JES).
    United States District Court, S.D. New York.
    July 25, 1985.

      Phillips, Nizer, Benjamin, Krim & Ballon, New York City, for plaintiffs; George Berger, Martha R. Overall, Debra A. Roth, New York City, of counsel.
    Herzfeld & Rubin, P.C., New York City, for defendant; Herbert Rubin, Edward L. Birnbaum, Terry Myers, Barbara D. Goldberg, New York City, of counsel.
   SPRIZZO, District Judge:

Plaintiffs Hawley Fuel Coalmart, Inc. and Hawley Fuel Coal, Inc. (collectively referred to as “plaintiff” or “Hawley”) seek to enforce an alleged contract of guarantee against defendant Steag Handel, GmbH (“Steag”). Hawley, a supplier of coal to Alla Ohio Valley Coals, Inc. (“Alla”), alleged at trial that defendant Steag agreed to guarantee the debts of Alla to plaintiff in exchange for plaintiff’s agreement to continue to deliver coal to Alla, which was a supplier of coal to Steag. Plaintiff contended at trial that it would have ceased shipment of coal to Alla and would have sought to recover coal already shipped had not defendant guaranteed payment of Alla’s debts to plaintiff.

The jury found that Steag had orally guaranteed Alla’s debts. The only issue raised by defendant’s motion for judgment notwithstanding the verdict is whether the alleged oral contract of guarantee is enforceable pursuant to the New York statute of frauds. N.Y.Gen.Oblig.Law § 5-701(a)(2) (McKinney Supp.1984-85).

Plaintiff contends that the oral contract of guarantee is enforceable because it is evidenced by writings sufficient to satisfy the statute of frauds, i.e. that there are writings signed by and/or prepared by the defendant which set forth all of the essential terms of the oral contract alleged. See, e.g., Scheck v. Francis, 26 N.Y.2d 466, 470-71, 260 N.E.2d 493, 495, 311 N.Y.S.2d

****** 841, 843-44 (1970); Intercontinental Planning, Ltd. v. Daystrom, Inc., 24 N.Y.2d 372, 379, 248 N.E.2d 576, 579-80, 300 N.Y.S.2d 817, 822 (1969); Crabtree v. Elizabeth Arden Sales Corp., 305.N.Y. 48, 55-56, 110 N.E.2d 551, 554 (1953); Standard Oil Co. v. Koch, 260 N.Y. 150, 155, 183 N.E. 278, 279 (1932); Dorman v. Cohen, 66 A.D.2d 411, 418, 413 N.Y.S.2d 377, 382 (1st Dept.1979); cf. Martin Roofing, Inc. v. Goldstein, 60 N.Y.2d 262, 265, 457 N.E.2d 700, 701, 469 N.Y.S.2d 595, 596 (1983), cert. denied, — U.S. -, 104 S.Ct. 1681, 80 L.Ed.2d 156 (1984). However, the Court has reviewed the documents upon which plaintiff relies and concludes that those memoranda are insufficient.

None of the documents prepared by defendant, with one possible exception, even mentions the word guarantee, and all of these documents taken together do not contain the essential terms of the alleged oral contract of guarantee proved at trial. Thus, there is no mention of any agreement by plaintiff to forebear exercising its legal rights against Alla in exchange for Steag’s guarantee, and certainly not the clear and unambiguous expression of an agreement to pay the debt of another, which the New York courts have required as a safeguard against oral testimony. See, e.g., Savoy Record Co. v. Cardinal Export Corp., 15 N.Y.2d 1, 5-7, 203 N.E.2d 206, 208-09, 254 N.Y.S.2d 521, 525-26 (1964); Salzman Sign Co. v. Beck, 10 N.Y.2d 63, 67, 176 N.E.2d 74, 76, 217 N.Y.S.2d 55, 57-58 (1961); Standard Oil, supra, 260 N.Y. at 154, 183 N.E. at 279; Walker v. Roth, 90 A.D.2d 847, 847, 456 N.Y.S.2d 95, 95 (2d Dept.1982).

The only document which even contains the word “guarantee” is a telex sent by Bonner, an Alla employee, to Hawley, which refers to defendant’s intention to guarantee the debts of Alla. However, without reaching the issue of whether Alla was acting on Steag’s behalf in sending this telex, which is not apparent from the telex itself, it is clear that a writing which at best evidences a future intention to guarantee is not sufficient to support an alleged existing oral guarantee.

Steag did send a telex, jointly with H.C. Sleigh Ltd., a 50% owner of Alla, to Hawley and to all other Alla creditors which stated that they were working to strengthen Alla’s “financial capacity” and that “[tjhis strengthening is expected to result in a transfer of funds to your account in full payment of the indebtedness presently owed to you.” It did not state that payment would be made by Steag, and it did not mention a guarantee. Moreover, the fact that the joint telex was sent to all creditors of Alla detracts from the conclusion that it can or should be regarded as sufficient to evidence the alleged specific oral contract of guarantee between Steag and plaintiff which plaintiff claims existed. The only other documents which arguably support the alleged oral guarantee were prepared by and signed only by plaintiff, and these are not sufficient. See, e.g., Dorman, supra, 66 A.D.2d at 415, 413 N.Y.S.2d at 380; Brause v. Goldman, 10 A.D.2d 328, 335, 199 N.Y.S.2d 606, 614 (1st Dept.1960), aff'd, 9 N.Y.2d 620, 172 N.E.2d 78, 210 N.Y.S.2d 225 (1961); Chu v. Chu, 9 A.D.2d 888, 889, 193 N.Y.S.2d 859, 860 (1st Dept.1959).

In this respect, this case is markedly different from Crabtree, supra, which is heavily relied upon by plaintiff. In Crabtree, all of the essential terms and conditions of the oral contract were set forth in documents signed and/or prepared by the defendant. See 305 N.Y. at 57, 110 N.E.2d at 555. All that the Crabtree case holds is that where the entire contract is contained in such separate documents which all clearly refer to the same subject or transaction, and where the Court can ascertain the essential terms of the agreement by considering all of these various memoranda together and without recourse to oral testimony, the requirements of the statute of frauds can be satisfied. It does not hold, as plaintiff appears to argue, that the Court may take oral testimony to characterize or to establish a connection between the various memoranda at issue or to supply essential missing terms of the contract where the memoranda signed and/or prepared by the defendant are not otherwise sufficient. See 305 N.Y. at 55-56, 110 N.E. at 554.

Indeed, as New York case authorities make clear, and as the Appellate Division has most recently emphasized in Cunnison v. Richardson Greenshields Securities, Inc., 107 A.D.2d 50, 54, 485 N.Y.S.2d 272, 276 (1st Dept.1985), the purpose of the statute of frauds is to protect a defendant against having a contract established by oral testimony. See also Martin Roofing, supra, 60 N.Y.2d at 265, 457 N.E.2d at 701, 469 N.Y.S.2d at 596; Ginsberg v. Fairfield-Noble Corp., 81 A.D.2d 318, 320, 440 N.Y.S.2d 222, 224 (1st Dept.1981). Therefore, the memoranda relied upon to satisfy the statute of frauds must be such that from an examination of the documents themselves all of the essential terms and conditions of the oral contract may be obtained. See, e.g., Intercontinental Planning, supra, 24 N.Y.2d at 378-79, 248 N.E.2d at 579-80, 300 N.Y.S.2d at 822; Crabtree, supra, 305 N.Y. at 55-56, 110 N.E.2d at 554; Standard Oil, supra, 260 N.Y. at 155, 183 N.E. at 279; Poel v. Brunswick-Balke-Collender Co., 216 N.Y. 310, 314, 110 N.E. 619, 620 (1915); Dorman, supra, 66 A.D.2d at 416, 417-18, 413 N.Y.S.2d at 381; Kobre v. Instrument Systems Corp., 54 A.D.2d 625, 626, 387 N.Y.S.2d 617, 618-19 (1st Dept.1976), aff'd, 43 N.Y.2d 862, 374 N.E.2d 131, 403 N.Y,S.2d 220 (1978); Chu, supra, 9 A.D.2d at 888-89, 193 N.Y.S.2d at 860.

In this case, the documents signed and/or prepared by the defendant manifest at best an agreement by the defendant to set up new letters of credit. An examination of these documents alone, without recourse to oral testimony, does not permit the Court to ascertain all of the essential terms and conditions of the oral contract of guarantee which plaintiff established at trial.

Plaintiff also argues that the defendant has admitted the existence of the oral contract and that therefore under New York law, see Holender v. Fred Cammann Productions, Inc., 78 A.D.2d 233, 434 N.Y.S.2d 226 (1st Dept.1980), oral testimony is permissible to resolve disputes between the parties as to the terms of the alleged oral contract. Even assuming the correctness of the case relied upon by plaintiff, the defendant in this case has not admitted the alleged oral agreement, but rather has consistently denied any oral contract of guarantee.

Plaintiffs argument that defendant has admitted the agreement alleged rests largely upon the contention that Steag agreed to open up unconditional letters of credit, which plaintiff claims amounted to an unequivocal guarantee of Alla’s indebtedness to plaintiff. In this regard, plaintiff relies, inter alia, on the testimony of Dr. Thomas Mulert. Even assuming that Dr. Mulert’s testimony can be construed to state that Steag opened up unconditional letters of credit, which is not clearly the case, see, e.g., Trial Transcript (“Tr.”) at 395-97, 468-80, it is nonetheless insufficient to support the alleged oral guarantee.

An agreement to open new letters of credit, even unconditional letters of credit, is not the same as a contract of guarantee, even though the letters of credit, once established, permit plaintiff to secure payment without meeting any of the technical requirements normally set forth in conditional letters of credit. The terms, remedies, and the conduct which would constitute a breach of such a contract are all markedly different from those with respect to a contract of guarantee. It follows that a memorandum reflecting an agreement to open unconditional letters of credit is not sufficient to support an alleged contract of guarantee. See, e.g., Stone v. Metropolitan Life Insurance Co., 12 N.Y.2d 487, 491, 191 N.E.2d 287, 288, 240 N.Y.S.2d 754, 755 (1963) (per curiam); Standard Oil, supra, 260 N.Y. at 155, 183 N.E. at 279; Poel, supra, 216 N.Y. at 314, 310 N.E. at 620; Dorman, supra, 66 A.D.2d at 414, 413 N.Y.S.2d at 379; Kobre, supra, 54 A.D.2d at 626, 387 N.Y.S.2d at 619.

Plaintiff also contends that in continuing to ship coal to Alla and in not seeking to recover coal already shipped, plaintiff has already performed its end of the bargain and that the contract may therefore be enforced on a theory of partial performance. However, partial performance, under New York law, must be unequivocably referable to the alleged oral contract. Where, as here, plaintiff had a contractual obligation to deliver coal to Alla, the performance of that contractual obligation cannot properly be regarded as unequivocably referable to the alleged oral contract of guarantee. Therefore, it cannot constitute the part performance which the New York courts have recognized as sufficient to take an otherwise unenforceable oral contract outside of the statute of frauds. See, e.g., American Bartenders School, Inc. v. 105 Madison Co., 59 N.Y.2d 716, 718, 450 N.E.2d 230, 230, 463 N.Y.S.2d 424, 424 (1983); Anostario v. Vicinanzo, 59 N.Y.2d 662, 664, 450 N.E.2d 215, 216, 463 N.Y.S.2d 409, 410 (1983); Geraci v. Jenrette, 41 N.Y.2d 660, 666-67, 363 N.E.2d 559, 564, 394 N.Y.S.2d 853, 857-58 (1977); Burns v. McCormick, 233 N.Y. 230, 232, 135 N.E. 273, 273 (1922); Woolley v. Stewart, 222 N.Y. 347, 351, 118 N.E. 847, 848 (1918); Cunnison, supra, 107 A.D.2d at 54, 485 N.Y.S.2d at 276-77; Bakhshandeh v. American Cyanamid Co., 8 A.D.2d 35, 38, 185 N.Y.S.2d 635, 638 (1st Dept.1959); Bright Radio Laboratories, Inc. v. Coastal Commercial Corp., 4 A.D.2d 491, 494, 166 N.Y.S.2d 906, 909-10 (1st Dept.1957).

The only remaining issue then is whether concepts of equitable and/or promissory estoppel render the oral contract enforceable against the defendant. Plaintiff contends that had not the defendant orally guaranteed the performance of Alla’s obligations, plaintiff would have ceased shipping coal to Alla and would have attempted to retrieve coal already shipped, and thus has suffered substantial prejudice in reliance upon Steag’s promise.

However, although the New York cases may not reflect a consistent pattern in distinguishing between equitable estoppel, promissory estoppel, and part performance, it is clear in New York that concepts of estoppel may require the enforcement of an oral promise only where a plaintiff has suffered an unconscionable injury. See, e.g., Philo Smith & Co. v. USLIFE Corp., 554 F.2d 34, 36 (2d Cir.1977); American Bartenders School, supra, 59 N.Y.2d at 718, 450 N.E.2d at 230, 463 N.Y.S.2d at 424; Cunnison, supra, 107 A.D.2d at 53, 485 N.Y.S.2d at 275-76; Ginsberg, supra, 81 A.D.2d at 320-21, 440 N.Y.S.2d at 224; Swerdloff v. Mobil Oil Corp., 74 A.D.2d 258, 264, 427 N.Y.S.2d 266, 269-70 (2d Dept.), leave to appeal denied, 50 N.Y.2d 913, 409 N.E.2d 995, 431 N.Y.S.2d 523 (1980). Plaintiff has suffered no such unconscionable injury in this case.

The only injury which plaintiff alleges is that which resulted from its performance of its contractual obligations to Alla. If that were sufficient, then in every case in which a seller has performed its contractual obligation, an oral contract of guarantee would be enforceable against the alleged guarantor. This result would not be consistent with the protection against oral testimony that the statute of frauds was designed to afford. Cf. Martin Roofing, supra, 60 N.Y.2d at 266, 457 N.E.2d at 702, 469 N.Y.S.2d at 597. Plaintiff has cited no authority which supports the claim that the performance of a contractual obligation is sufficient to equitably estop a defendant from relying on the statute of frauds.

M.H. Metal Products Corp. v. April, 251 N.Y. 146, 167 N.E. 201 (1929), relied upon by plaintiff, is legally and factually inapposite. In that case, a defendant solicited an oral modification of a contract under which it had guaranteed payment, and orally agreed that the guarantee would continue under the modified contract. When plaintiff sued to enforce the guarantee, the defendant interposed the defense of the statute of frauds. The Court found it would be unconscionable and subversive of the broad policies of the statute to allow a defendant to assert the defense of the statute of frauds under those circumstances. See id., 251 N.Y. at 150, 167 N.E. at 202. This case presents no such facts.

It follows from what has been said that defendant’s motion for judgment notwithstanding the verdict must be granted and a judgment should be entered accordingly.

It is SO ORDERED.

      . The statute provides, in relevant part:
      a. Every agreement, promise or undertaking is void, unless it or some note or memorandum thereof be in writing, and subscribed by the party to be charged therewith, ... if such agreement, promise or undertaking:
      2. Is a special promise to answer for the debt, default or miscarriage of another person.

      . This joint telex clearly does not evidence an unequivocal guarantee, but is equally consistent with defendant’s argument that all it agreed to do was open letters of credit. In fact, defendant’s position is further supported by an earlier telex sent to Hawley from Steag which states that ”[t]he balance of the amounts owed to you by [Alla] shall be paid under letters of credit” to be opened by Steag.

      . The defendant testified that this was done to avoid the difficulties that had been encountered because of the inability of plaintiff to satisfy the technical requirements of the previously existing letters of credit.

      . The Court is not convinced that this precedent is truly reflective of the law in New York, and "Holender" does not, in the Court’s view, appear to be consistent with the broad underlying purposes of the statute of frauds. See, e.g., Martin Roofing, supra, 60 N.Y.2d at 265, 457 N.E.2d at 701, 469 N.Y.S.2d at 596; Cunnison, supra, 107 A.D.2d at 54, 485 N.Y.S.2d at 276; Ginsberg, supra, 81 A.D.2d at 320, 440 N.Y.S.2d at 224.

      . Plaintiff also argues that Steag opened these unconditional letters of credit directly in favor of Hawley, and that this constitutes an agreement to unequivocally guarantee payment of Alla to Hawley. Dr. Mulert consistently testified that Steag never opened any letter of credit directly in Hawley’s favor, see, e.g., Tr. at 434-38, 468, although he acknowledged that letters of credit opened for Alla could indirectly benefit Hawley because they could be transferred to Hawley. See, e.g., id. at 478; cf. id. at 415-17, 437-38, 462.


author: KRAM, District Judge.

text:
    UNITED STATES of America v. Samuel CADMUS, Defendant.
    No. 85 Cr. 146 (SWK).
    United States District Court, S.D. New York.
    July 25, 1985.

      Rudolph W. Giuliani, U.S. Atty., S.D. N.Y., by David E. Brodsky, New York City, for plaintiff.
    Caesar D. Cirigliano, The Legal Aid Society, Federal Defender Services Unit by Leonard F. Joy, New York City, for defendant.
   MEMORANDUM OPINION AND ORDER

KRAM, District Judge.

The above-captioned action is before the Court upon defendant’s motion to suppress certain statements obtained from him by Immigration and Naturalization Service (“INS”) detention officers. For the reasons stated below, the motion is granted.

BACKGROUND

The defendant Samuel Cadmus is charged with one count of possession with intent to distribute heroin. On April 17, 1984, Cadmus filed this motion to suppress certain statements which were obtained pri- or to his arrest on these charges. On June 25, 1985, the Court held an evidentiary hearing on Cadmus’ motion. From the testimony adduced at that hearing and the papers submitted on the motion, the Court finds that the facts set out below describe the relevant history of this case for this motion.

Cadmus is a Nigerian national. His primary language is Yoruban, but he speaks and understands a little English. On February 8, 1985, Cadmus was detained upon his arrival at John F. Kennedy International Airport when he presented a false passport. He was transported to the INS detention center at 201 Varick Street in Manhattan, where he was to be held pending deportation.

On February 15, 1985, after one week of detention, Cadmus had a visitor at the INS detention center. He met with this individuar in the detention center’s visiting area, which is set up to allow contact visits (Tr. 8-9, 30). After the visit, Cadmus was strip-searched by Detention Officer Sigfredo Hernandez, in accordance with standard procedures prior to re-entry into the detention center population (Tr. 5). During the strip-search, Officer Hernandez found an item secreted in Cadmus’ right sock. The item was approximately six inches in length, cylindrical, and was wrapped in brown paper with a tight, white tape on it (Tr. 5, 13).

Officer Hernandez knew that Cadmus was not permitted to possess such an item within the detention facility (Tr. 6). He asked Cadmus what the object was, to which Cadmus allegedly responded that it was a religious object (Tr. 5). Officer Hernandez also discovered $100 in Cadmus’ possession, an amount in excess of that permitted to be carried by a detainee within the facility (Tr. 9-11). He brought Cadmus to see his supervisor, Officer Oppie Johnson, ostensibly to have the item and the money stored with Cadmus’ personal property (Tr. 6).

Johnson’s office is located approximately one-half city block (within the same building) from the search area (Tr. 29). Hernandez and Cadmus walked side-by-side down the hallway through three locked gates to get to Johnson’s office (Tr. 17-19).

When Hernandez and Cadmus reached Johnson’s office, Hernandez noticed that Cadmus no longer was carrying the cylindrical item (Tr. 6). Hernandez twice asked Cadmus what he had done with the cylindrical object (Tr. 7) or where it was (Tr. 35). Cadmus allegedly responded that he did not have it (Tr. 7) or that he did not know what Hernandez was talking about (Tr. 35). Thereafter, Johnson told Hernandez to go back over the route between the search area and his office to see if the item could be located. Hernandez did so, although it is unclear from the testimony whether Cad-mus went with Hernandez (Tr. 36) or not (Tr. 7, 19).

While Hernandez was searching for the item, Johnson found it on the floor near his office (Tr. 26). Johnson verified with Hernandez that the item he found was the one that Hernandez had discovered in Cadmus’ sock (Tr. 20, 39). Johnson asked Cadmus questions about the item. Johnson asked Cadmus what the object was; Cadmus allegedly responded that he did not know (Tr. 26, 39). Then Johnson asked Cadmus whether it was his; Cadmus allegedly responded that it was not (Tr. 26, 39). Then Johnson asked Cadmus whether he knew whose it was, and Cadmus allegedly responded first that it was his brother’s, but then retracted that and said he did not know whose it was (Tr. 26, 39).

At some point thereafter Johnson discovered that the object had a strong odor of feces (Tr. 38, 39). Hernandez had not noticed the odor (Tr. 15).

Agents of the Drug Enforcement Administration (“DEA”) were summoned to the detention center. They field tested the contents of the object, and determined that it contained a quantity of heroin. The DEA agents then arrested Cadmus and advised him of his Miranda rights. The DEA agents took Cadmus’ statement wherein he apparently denied any knowledge of the object. These charges ensued.

The statement obtained by the DEA agents has not been challenged. Cadmus moves to suppress all statements obtained from him by Hernandez and Johnson, however, on the grounds that they were obtained in violation of his Fifth Amendment rights.

DISCUSSION

The Fifth Amendment provides that “[n]o person ... shall be compelled in any criminal case to be a witness against himself.” Generally, this privilege is not self-executing: an individual must claim the privilege against self-incrimination in response to specific questions if he desires the protection of the privilege. See, e.g., Roberts v. United States, 445 U.S. 552, 559, 100 S.Ct. 1358, 1363, 63 L.Ed.2d 622 (1980); United States v. Monia, 317 U.S. 424, 427, 63 S.Ct. 409, 410, 87 L.Ed. 376 (1943). There are, however, limited exceptions to this general rule.

One well-known exception to this rule involves statements obtained during custodial interrogation. Miranda v. Arizona, 384 U.S. 436, 86 S.Ct. 1602, 16 L.Ed.2d 694 (1966). As the Court stated in Miranda, “when an individual is taken into custody or otherwise deprived of his freedom by the authorities in any significant way and is subjected to questioning, the privilege against self-incrimination is jeopardized.” 384 U.S. at 478, 86 S.Ct. at 1630. Miranda requires that before any questions can be posed to an individual in custody the individual must be advised of certain rights (now known as Miranda rights).

There is no dispute that Officers Hernandez and Johnson did not advise Cadmus of his Miranda rights. Defendant argues, therefore, that since he was in custody at the time, his statements must be suppressed. The Government argues that Cadmus was not “in custody” within the import of Miranda.

The Court in Miranda held that “[b]y custodial interrogation, we mean questioning initiated by law enforcement officers after a person has been taken into custody or otherwise deprived of his freedom of action in any significant way.” 384 U.S. at 444, 86 S.Ct. at 1612 (footnote omitted) (emphasis added). Accordingly, the custody element of Miranda is found where there are significant restrictions on the individual’s freedom of action, or on the individual’s freedom to depart. See Oregon v. Mathiason, 429 U.S. 492, 495, 97 S.Ct. 711, 714, 50 L.Ed.2d 714 (1977). As the Court recently stated, “the ultimate inquiry is simply whether there is a ‘formal arrest or restraint on freedom of movement’ of the degree associated with a formal arrest.” California v. Beheler, 463 U.S. 1121, 103 S.Ct. 3517, 3520, 77 L.Ed.2d 1275 (1983) (quoting Mathiason, 429 U.S. at 495, 97 S.Ct. at 714).

Cadmus was detained at the INS detention center, a facility similar, if not identical, to a prison. Cf Rodriguez-Fernandez v. Wilkinson, 654 F.2d 1382, 1387 (10th Cir.1981) (“[detention pending deportation ... properly analogized to incarceration pending trial or other disposition of criminal charge”). Clearly, he was not free to leave the facility. He was not even free to move around the facility without the companionship of a detention officer (Tr. 19). This would appear to satisfy the requirements of Miranda.

Such a strict application of a “freedom to leave” or “freedom of movement” standard would lead to a per se rule regarding the questioning of an individual in a prison setting. Relying on United States v. Scalf, 725 F.2d 1272 (10th Cir.1984), and Cervantes v. Walker, 589 F.2d 424 (9th Cir.1978), the Government argues that, in such a setting, some additional restraint on the defendant’s liberty must be present to require the Miranda warnings.

The court in Cervantes rejected a per se rule that any investigatory questioning inside a prison requires Miranda warnings. 589 F.2d at 427. In determining that the questioning involved had not occurred while the defendant was in custody, the court in Cervantes held that an “added imposition on [the inmate’s] freedom of movement” is necessary to constitute “custody” within the principles of Miranda. Id. at 428. See also Scalf, 725 F.2d 1272 (adopting reasoning of Cervantes). Moreover, the courts analogized the interrogations involved to on-the-scene questioning. Scalf 725 F.2d at 1276; Cervantes, 589 F.2d at 429. Recognizing that the Court in Miranda had explained that “[g]eneral on-the-seene questioning as to facts surrounding a crime ... is not affected by our holding,” 384 U.S. at 477, 86 S.Ct. at 1629, the courts in Cervantes and Scalf held that Miranda warnings were not required. This Court, however, does not find the reasoning of these cases persuasive.

In Mathis v. United States, 391 U.S. 1, 88 S.Ct. 1503, 20 L.Ed.2d 381 (1968), the Court held that Miranda warnings were required before questions could be put to a prisoner regarding possible criminal tax violations. The government had attempted to distinguish the application of Miranda in the prison setting by urging that the “custody” the inmate faced at the time of the questioning had arisen from another crime. The Court made short shrift of that argument, stating “[t]hese differences are too minor and shadowy to justify a departure from the well-considered conclusions of Miranda with reference to warnings to be given to a person held in custody.” 391 U.S. at 4, 88 S.Ct. at 1504 (emphasis added). In its decision, the Court perforce held that the inmate there was in custody within the meaning of Miranda, and therefore determined that his statements, obtained without a Miranda warning, had to be suppressed.

Mathis makes it clear that an individual imprisoned, irrespective of the reason for his incarceration, is in custody. See also Blyden v. Hogan, 320 F.Supp. 513 (S.D.N.Y.1970); cf. United States v. Henry, 447 U.S. 264, 273-74, 100 S.Ct. 2183, 2188-89, 65 L.Ed.2d 115 (1980) (incarcerated defendant is “in custody” for purposes of Sixth Amendment; citing Miranda with approval). In Blyden, several inmates from the Manhattan House of Detention argued, among other things, that any interrogation of them concerning recent prison riots without the recitation of Miranda warnings violated their constitutional rights. Judge Lasker agreed, holding that the inmates “are clearly in custody within the rule of Mathis.” 320 F.Supp. at 519.

Moreover, the analogy urged by the Government, and drawn by the courts in Scalf and Cervantes, to on-the-scene questioning is unpersuasive. Persons temporarily detained for on-the-scene questioning simply are not in custody at all. Berkemer v. McCarty, — U.S.-, 104 S.Ct. 3138, 3151, 82 L.Ed.2d 317 (1984). Individuals stopped for such questioning are generally detained briefly and temporarily. They can reasonably expect soon to “be allowed to continue on [their] way.” Id., 104 S.Ct. at 3149. Additionally, the detention is generally public, in the open for anyone to see— allaying some fears and suspicions about the interrogator. Id. at 3150. Neither of these mitigating circumstances is present in a prison interrogation — even one concerning prison crime conducted immediately after its discovery. On-the-scene questioning also rarely, if ever, involves a strip-search. Certainly, being disrobed places more restrictions on the individual’s freedom of movement. Furthermore, the Court in Berkemer specifically distinguished the circumstances of ordinary traffic stops — classic on-the-scene investigation — from the custodial atmosphere surrounding interrogation of an individual while he is in jail. Id. at 3150, 3150 n. 28.

This Court feels that a stronger, though still imperfect, analogy can be drawn to customs, or immigration, searches and interrogations. Customs and immigration searches are generally brief, like on-the-scene questioning, and accompanied by the reasonable expectation that the individual will soon be free to go where he pleases. They are, however, often conducted in personal search rooms, and sometimes entail invasive, detaining stripsearches. Nonetheless, in such situations, brief detention for a search with concomitant routine questioning is entirely appropriate, and does not require the application of Miranda. See United States v. Espericueta-Reyes, 631 F.2d 616, 622 (9th Cir.1980); United States v. Golden, 532 F.2d 1244, 1246 (9th Cir.), cert. denied sub nom. Trowery v. United States, 429 U.S. 842, 97 S.Ct. 118, 50 L.Ed.2d 111 (1976). In those situations, however, once the answers to the questions, or the results of a search, provide the official with probable cause to arrest the detainee, Miranda generally is applicable. See Espericueta-Reyes, 631 F.2d at 622; see also United States v. Estrada-Lucas, 651 F.2d 1261, 1265-66 (9th Cir.1980) (finding detainee to be in custody on facts of case); United States v. Berard, 281 F.Supp. 328 (D.Mass.1968).

The facts and holding of the Berard case are particularly instructive. There an alien was detained upon arrival at Logan International Airport in Boston for a customs inspection. During the course of the detention, the alien was taken to a personal search room and partially strip-searched. When the alien removed his shirt, he revealed a torso taped, from waist to armpit, with white tape holding plastic bags containing white powder. 281 F.Supp. at 332. The alien was then asked, without Miranda warnings, what was contained in the plastic bags. He responded, “heroin.” The court held that at the point where the detainee had partially disrobed and the material taped to his person had been discovered, he was no longer free to leave and was in custody within the meaning of Miranda. 281 F.Supp. at 335. Accordingly, the detainee’s admission that the material was heroin was suppressed.

The strip-searching of a prison inmate is even more custodial than the searching of an individual in a customs or immigration context. The inmate has no expectation that he will soon be free to leave, or, for that matter, that he can soon “escape” the interrogator’s reach. For the reasons discussed above, this Court finds that prison interrogation, whether by an investigator concerning prior potentially criminal conduct, or by a prison guard regarding prison crime immediately after its discovery, is custodial within the meaning of Miranda.

A rule that persons in prison are in custody and must be advised of their rights prior to questioning is fully consistent with the logic underlying Miranda and Mathis. Miranda established a prophylactic rule intended to ensure that suspects are not coerced into confessing. See Berkemer, 104 S.Ct. at 3147; see also Henry, 447 U.S. at 273-74, 100 S.Ct. at 2188. The rule was designed for situations believed to be intrinsically coercive and susceptible of abuse. See Miranda, 384 U.S. at 467, 86 S.Ct. at 1624 (“inherently compelling pressures which work to undermine the individual’s will to resist and to compel him to speak where he would not otherwise do so freely”); see also Minnesota v. Murphy, 465 U.S. 420, 104 S.Ct. 1136, 1144, 79 L.Ed.2d 409 (1984). Prison is certainly a “police dominated” surrounding that is inherently coercive. See Berkemer, 104 S.Ct. at 3150, 3150 n. 28. Miranda recognized the powerful psychological effect on a person confined, alone with his interrogator, which often induces the individual to reach for aid. 384 U.S. at 448-55, 86 S.Ct. at 1614-17. This powerful influence is certainly present when the individual is confined in prison. See Henry, 447 U.S. at 273-74, 100 S.Ct. at 2188. Furthermore, the coercion inherent in custodial interrogation derives in large part from the knowledge of the accused that he cannot escape his interrogator, and that the questioning can continue until the desired answer is obtained. See Miranda, 384 U.S. at 468, 86 S.Ct. at 1624; see also Murphy, 104 S.Ct. at 1145-46. In Murphy, the Court discussed the situation where “a suspect ... is painfully aware that he literally cannot escape a persistent custodial interrogator.” 104 S.Ct. at 1146. It would be hard to conceive of a situation where the accused was less able to escape his interrogator than in a prison setting. Compare Berkemer, 104 S.Ct. at 3149-50 (motorist stopped for traffic stop reasonably expects to be free to continue on his way in short order). Indeed, in this case, Cadmus had already spent seven days in detention. There was no way for him to know when he might at least be able to return to his home.

Justice White, dissenting in Mathis, urged that

Miranda rested not on the mere fact of physical restriction but on a conclusion that coercion — pressure to answer questions — usually flows from a certain type of custody, police station interrogation of someone charged with or suspected of a crime. Although petitioner was confined, he was at the time of interrogation in familiar surroundings____ The rationale of Miranda has no relevance to inquiries conducted outside the allegedly hostile and forbidding atmosphere surrounding police station interrogation of a criminal suspect.

391 U.S. at 7-8, 88 S.Ct. at 1506. This reasoning, apparently consonant with the decisions in Cervantes and Scalf, was squarely rejected by the majority in Mathis. The prison setting is an inherently coercive one. An individual incarcerated, or detained in a prison-like facility, is in custody.

The Court in Miranda also wanted to obviate the need for case-by-case analysis of the voluntariness of the suspect’s confession, or of the coerciveness of the particular circumstances surrounding that confession. See Berkemer, 104 S.Ct. at 3147. Application of the principles enunciated in Cervantes and Scalf, as the Government urges, would reintroduce, in the prison setting, the case-by-case analysis of coerciveness that Miranda was intended to avoid.

Finally, Miranda established a clear rule, specifically instructing law enforcement officials as to what they must do in custodial interrogations. See Berkemer, 104 S.Ct. at 3145-46; Fare v. Michael C., 442 U.S. 707, 718, 99 S.Ct. 2560, 2568, 61 L.Ed.2d 197 (1979). The test the Government would apply to the question of whether interrogation in prison is custodial in nature is elusive. Where bright-line distinctions can be drawn, consistent with the principles enunciated in Miranda, they should be, lest we undermine the clarity of Miranda, one of its “crucial advantages.” Berkemer, 104 S.Ct. at 3146.

In sum, this Court believes that a fair reading of Miranda and Mathis leads ineluctably to the conclusion that custody is custody — an individual incarcerated, or detained in a prison-like facility, is in custody and must be advised of his Miranda rights before any interrogation can take place. Even were this Court to hold otherwise, the statements in this case would still have to be suppressed.

In the case at bar, even without the application of a per se rule, the Court would hold that Cadmus’ interrogation was custodial. It is clear that at the point that Hernandez discovered the cylindrical item in Cadmus’ sock, there was probable cause to believe that Cadmus had committed a crime. Defendant points out that it is a federal crime to possess, within a facility such as the INS detention center, any object or currency in violation of the regulations of that institution. 18 U.S.C. § 1791. Officer Hernandez knew, at the time he began questioning Cadmus, that there had been a likely violation of the law (Tr. 14). Moreover, the nature of the item found — a six-inch cylindrical container, wrapped in brown paper, taped tightly shut with white tape, and smelling of feces (although it is unclear whether Hernandez noticed this last factor) — was so suspicious that surely Cadmus would not have been permitted to simply return to his already restricted environment until further investigation was completed. The surroundings and circumstances of the interrogation were coercive. Cadmus was questioned first in a small, private room, away from the general population. Cadmus had been forced to disrobe. After the questions asked by Hernandez apparently did not occasion a suitable response, Cadmus was taken to Hernandez’ supervisor. There again he was confronted with the evidence against him. Finally, Cadmus was only slightly conversant with the language, and probably was not familiar at all with the law, of this country. See United States v. Prestigiacomo, 504 F.Supp. 681, 683 (E.D.N.Y.1981). In such circumstances, Cadmus was restrained to a “degree associated with a formal arrest.”

Since Cadmus was in custody at the time he was interrogated and at the time the statements that are the subject of this motion were obtained, the INS officers were required to advise him of his Miranda rights before questioning him. They did not do so. Accordingly; defendant’s motion must perforce be GRANTED. The statements obtained from him prior to his arrest on the instant charges are hereby SUPPRESSED.

SO ORDERED.

       References to the transcript of the June 25, 1985, evidentiary hearing are noted as “Tr." followed by the relevant page or pages.


text:
    Marilyn BARNELL, Plaintiff, v. PAINE WEBBER JACKSON & CURTIS, INCORPORATED and Steven Kraus, Defendants.
    No. 82 Civ. 1988 (SWK).
    United States District Court, S.D. New York.
    July 25, 1985.

      Donovan, Maloof, Walsh & Kennedy by John T. Lillis, Jr., New York City, for plaintiff.
    Moss & Boris, P.C. by Richard S. Boris, Neal D. Haber, New York City, for defendants.
   MEMORANDUM OPINION AND ORDER

KRAM, District Judge.

The above-captioned action is before this Court upon the motion of defendant Paine Webber Jackson & Curtis, Incorporated (“Paine Webber”) for summary judgment in its favor. For the reasons stated below, defendant’s motion for summary judgment is denied.

BACKGROUND

Paine Webber employed plaintiff Marilyn Barnell as a stockbroker in its Park Avenue, New York City office from November, 1972 until she was terminated on March 29, 1979. On April 17, 1980, plaintiff filed a complaint with the New York State Division of Human Rights (“NYSDHR”) charging Paine Webber with gender-based discrimination in violation of the New York State Human Rights Law, N.Y.Exec.Law § 290 et seq., and Title VII of the Civil Rights Act of 1964, as amended, 42 U.S. C.A. § 2000e et seq. (Title VII). The NYSDHR dismissed the complaint on April 29, 1982, because it had not been filed within one year of the alleged discrimination, as required under New York law. N.Y.Exec.Law § 297(5) (McKinney 1982). The dismissal was affirmed for the same reason on subsequent appeals to the New York State Human Rights Appeal Board, on November 3, 1983, and the New York State Supreme Court Appellate Division, First Department, on December 4, 1984.

In addition to these state proceedings, plaintiff filed an administrative discrimination complaint with the Equal Employment Opportunity Commission (“EEOC”) on or about April 17, 1980. Thereafter, she requested, and received, a Right to Sue Letter from the EEOC, and commenced the instant action on or about March 29, 1982. Paine Webber and Kraus moved for summary judgment pursuant to Rule 56 of the Federal Rules of Civil Procedure on the ground that plaintiffs charge of sex discrimination filed with the EEOC was not timely. On May 9, 1983, Judge Gagliardi denied the motion, holding that an issue of fact existed as to whether plaintiffs alleged mental disability was sufficient to toll the EEOC filing period limitation, and thereby render her charge timely. Kraus also moved for summary judgment on the ground that plaintiffs EEOC charge did not name him as a respondent. The Court granted that motion. Plaintiff’s motion for appointment of counsel was denied without prejudice to renewal with supplemented information.

Thereafter, plaintiff renewed her motion for appointment of counsel and provided sufficient information. Defendant moved for a separate trial on the issue of the timeliness of plaintiff’s complaint with the EEOC, pursuant to Rule 42(b) of the Federal Rules of Civil Procedure. This Court recognized that a decision adverse to plaintiff on this issue would obviate the need for further proceedings and thus granted both motions by Memorandum Opinion and Order dated January 19, 1984.

Paine Webber has now moved for summary judgment on the grounds of res judicata and collateral estoppel.

DISCUSSION

Relying on Kremer v. Chemical Constr. Corp., 456 U.S. 461, 102 S.Ct. 1883, 72 L.Ed.2d 262 (1982), Paine Webber argues that the doctrines of res judicata and collateral estoppel apply to Title VII actions, requiring federal courts to give preclusive effect to a state court decision upholding a state administrative agency’s dismissal of an employment discrimination claim. Here a state agency dismissed plaintiff’s claim as untimely, and that decision was upheld by the state court. The state proceeding specifically involved the timeliness of plaintiff’s claim, and plaintiff did litigate the issue fully. Barnell, in the state proceedings, argued that the facts did not support a finding that her claim was filed more than one year after her termination; she did not, however, argue that the limitation period should be equitably tolled because of her incapacity around the time of her termination. Paine Webber argues that plaintiff is barred, by the doctrines of res judicata and collateral estoppel, from raising the issue of an equitable tolling of the time limitation in the present action because she failed to raise that issue in her earlier state proceeding. Accordingly, defendant argues, Barnell’s claim should be dismissed as untimely.

Res judicata and collateral estoppel preclude the rehearing of any issues which “were or could have been raised” in an earlier action. Kremer, 456 U.S. at 466 n. 6, 102 S.Ct. at 1889 n. 6; Allen v. McCurry, 449 U.S. 90, 94, 101 S.Ct. 411, 414, 66 L.Ed.2d 308 (1980). The doctrine of res judicata, however, does not require a party to raise a futile argument in the first proceeding in order to preserve the potentially viable argument for a later proceeding. See Costello v. Pan American World Airways, Inc., 295 F.Supp. 1384, 1389 (S.D.N.Y.1969); cf. State Farm Mutual Auto. Ins. Co. v. Duel, 324 U.S. 154, 162, 65 S.Ct. 573, 577, 89 L.Ed. 812 (1945) (estoppel does not apply when change in law has intervened between time of first judgment and second action); Robbins v. Police Pension Fund, 321 F.Supp. 93 (S.D.N.Y.1970) (federal constitutional issue could not be raised in state proceeding; state decision not a bar to subsequent federal action). There is no dispute that Barnell did not raise the issue of equitable tolling in the state proceedings. The question involved in this motion for summary judgment, therefore, is whether plaintiff “could” have raised the equitable tolling issue in the course of the state proceeding.

The relevant New York statute is section 297 of the Executive Law, subdivision 5, which states: “[a]ny complaint filed pursuant to this section must be so filed within one year after the alleged unlawful discriminatory practice.” New York courts have interpreted this requirement strictly. The New York Court of Appeals emphasized the word “must” and described the requirement as a “condition to be performed before the substantive right to the relief sought arises.” Board of Educ. v. New York State Division of Human Rights, 44 N.Y.2d 902, 904, 407 N.Y.S.2d 636, 637, 379 N.E.2d 163, 164 (1978). See also Horn v. New York State Human Rights Appeal Board, 75 A.D.2d 978, 428 N.Y.S.2d 368 (3rd Dep’t 1980); Consolidated Edison Company of New York, Inc. v. New York State Human Rights Appeal Board, 65 A.D.2d 546, 409 N.Y.S.2d 141 (2d Dep’t 1978). Thus, it would appear that the NYSDHR had no power to toll the statutory time limitation.

Defendant urges that Stacey v. McDaniel, 54 A.D.2d 645, 387 N.Y.S.2d 631 (1st Dep’t 1976), holds that the limitations period for filing a charge of discrimination is subject to equitable tolling in appropriate circumstances under New York law. Defendant’s reliance on Stacey is misguided. In Stacey, the plaintiff claimed that he had orally made a complaint to a member of NYSDHR’s staff at the NYSDHR office approximately five months after his termination. He was assured at that time, he claimed, that his oral complaint was sufficient to effect the timely filing of his complaint, but that he should follow it up with specifies. Plaintiff allegedly sent a letter containing specifics a few days thereafter, but did not submit his formal complaint until a year later. Those factual assertions were essentially verified by the NYSDHR employee he had spoken with during his initial visit to the NYSDHR office. The First Department reversed the trial court’s dismissal of Stacey’s complaint as untimely, holding that if the facts were as alleged, the complaint should be processed “as timely filed.” 387 N.Y.S.2d at 632.

Stacey, therefore, does not indicate that the state limitations period is subject to equitable tolling. Rather Stacey holds that, on the facts of that particular case, the complaint had been timely filed. It was the internal procedures of the NYSDHR that had failed to adequately assure that plaintiff’s oral complaint was processed properly to effect a formal complaint. Cf, e.g., Rosenberg v. Martin, 478 F.2d 520, 522 n.la (2d Cir.1973) (Friendly, J.) (for limitations purposes, action treated as commenced when Clerk of Court receives complaint, irrespective of when formally filed following internal courthouse procedures); Simpson v. Bank of New York, Empl.Prac. Dec. (CCH) ¶ 32,114, at 22,079 (S.D.N.Y. 1981) (complaint timely filed when delivered to Pro Se Clerk within limitations period, irrespective of delay before official docketing due to internal courthouse procedures). In the final analysis, defendant does not cite a single case, and the Court has found none, in which a plaintiff successfully argued that the state limitations period should, or more importantly could, be equitably tolled.

With regard to plaintiff’s federal claim, defendant properly acknowledges that the Title VII limitations period is not a jurisdictional prerequisite, but may be equitably tolled under appropriate circumstances if necessary to honor the statute’s remedial purposes. Zipes v. Trans World Airlines, 455 U.S. 385, 102 S.Ct. 1127, 71 L.Ed.2d 234 (1982). No court in New York has adopted the reasoning of Zipes in addressing the state limitations period. Thus, as discussed above, in New York, the statute of limitations cannot be equitably tolled. Defendant argues that Barnell should, nonetheless, have raised her equitable tolling argument in the state proceedings to give the NYSDHR an opportunity to accept or reject her claimed mental incompetency as a reason for tolling its limitations period. It appears that it would have been futile to do so.

In Costello, the plaintiff in a federal action brought in this District argued that a particular date governed for statute of limitations purposes. Defendants sought to bar his argument on this issue on the ground that he had not raised the issue in an earlier action on different subject matter in federal court in California. The court refused to apply the principles of res judicata and collateral estoppel because (1) this Circuit’s interpretation of the governing law was different from that of the California court and (2) the plaintiff would have been raising a futile argument in the former action since, under the California court’s interpretation of the law, either date chosen would lead to the same result — to wit, that the claims were time-barred. 295 F.Supp. at 1389.

The Court finds the logic of Costello persuasive in this case. Simply stated, a different judicial principle from the one currently before the Court governed the issue in the state proceedings. Res judicata and collateral estoppel should not apply in such a case. See Young v. United States, 518 F.Supp. 921 (S.D.N.Y.1981) (determination under Iowa law did not bar relitigation of issue under New York law); cf Tomanio v. Board of Regents, 603 F.2d 255, 258 n. 1 (2d Cir.1979) (res judicata does not bar plaintiff from bringing federal civil rights and constitutional claims in federal court after losing in state court on state claims arising out of same facts), rev’d on other grounds, 446 U.S. 478, 100 S.Ct. 1790, 64 L.Ed.2d 440 (1980). Additionally, as the court stated in Costello, “[t]he focus of that [former] litigation did not afford the legally requisite fair opportunity to consider the date selection that is critical here.” 295 F.Supp. at 1384 (emphasis added).

Finally, to force the plaintiff, under threat of being barred by res judicata and collateral estoppel on her federal claims, to foresee and guard against potential changes in state law (changes which to this date have not been adopted), would violate the remedial purposes of Title VII which Zipes was intended to further. See 455 U.S. at 398, 102 S.Ct. at 1135 (“we honor the remedial purpose of the legislation as a whole”); see also id. at 395, 102 S.Ct. at 1133 (quoting 118 Cong.Ree. 7166, 7167 (1972)) (“interpret this time limitation so as to give the aggrieved person the maximum benefit of the law”).

Accordingly, the Court finds that res judicata is inapplicable to the instant case because the issue of equitable tolling could not have been raised effectively at the state agency level. Likewise, collateral estoppel does not apply to the question of Barnell’s competency around the time of her termination, because, given the agency’s lack of authority to equitably toll the time limitation under current New York State law, any decision as to the plaintiff’s mental incapacity would not have been necessary to the court’s judgment. Id. There remains a genuine issue of material fact as to whether Barnell’s incapacity around the time of her termination compels the tolling of the period of limitations for filing her complaint with the EEOC for a sufficient period to render her claim timely. Defendants’ motion for summary judgment on the basis of res judicata and collateral estoppel is therefore DENIED.

SO ORDERED.

       See footnote page 377, infra.

       It would appear that collateral estoppel does apply, however, to the factual determination in the state proceedings that Barnell was terminated on March 29, 1979.