author: MOYE, Chief Judge.

text:
    Donald F. TACKITT v. PRUDENTIAL INSURANCE COMPANY OF AMERICA, the United States of America and Special Agents Mutual Benefit Association, Inc.
    No. C83-2507A.
    United States District Court, N.D. Georgia, Atlanta Division.
    Oct. 11, 1984.

      Thomas W. Thrash, Finch, McCraine, Brown & Blank, Atlanta, Ga., for plaintiff.
    Ben Kingree, Carter, Ansley, Smith & McLendon, Atlanta, Ga., for defendant Prudential Ins. Co. of America.
    Myles E. Eastwood, Asst. U.S. Atty., Atlanta, Ga., for defendant U.S.
    Oliver B. Dickins, Jr., Edward Katze, Constangy, Brooks & Smith, Atlanta, Ga., Denis F. Gordon, Gordon & Barnett, Washington, D.C., for defendant Special Agents Mut. Ben. Ass’n.
   ORDER

MOYE, Chief Judge.

The above-styled action is before the Court on the plaintiff’s motion for partial summary judgment against the defendants Special Agents Mutual Benefit Association, Inc. (SAMBA) and Prudential Insurance Company of America (Prudential), and the cross-motions for summary judgment of the United States of America (Government) and SAMBA. Also before the court is the plaintiff’s motion for preliminary injunction. Jurisdiction is predicated on diversity of citizenship, 5 U.S.C.A. § 701 (West 1977), and 5 U.S.C.A. § 8912 (West Supp. 1984).

I. BACKGROUND

The plaintiff is a retired Special Agent of the Federal Bureau of Investigation. As such he is eligible to participate in the SAMBA Health Benefit Plan (SAMBA Plan or Plan) pursuant to the Federal Employees Health Benefits Act (FEHBA or Act). The plaintiff has been a member of the SAMBA Plan since 1972.

FEHBA establishes a subsidized health benefits system for federal employees, and during a four-week annual “open season,” these employees may choose the insurance

plan most suitable to their needs. 5 U.S. C.A. § 8905(e) (West Supp.1984); 5 C.F.R. 890.301(d) (1984). SAMBA is one of the employee organization carriers, which reimburses the cost of health services to its members according to the terms of the SAMBA Plan. The SAMBA Plan is underwritten in part by Prudential.

The plaintiff, a paraplegic with amputations in both lower limbs as a result of injuries received in an automobile accident and subsequent complications of those injuries, has received private duty nursing in his home since October of 1977. The SAMBA Plan covered one hundred percent of the plaintiff’s private duty nursing expenses through 1982, after subtraction of the amounts stated in its deductible and co-insurance provisions. The Office of Personnel Management (OPM) requested that the SAMBA and other health benefit plans maintain, in preparing estimates for the 1983 benefit and premium proposals, overall benefit levels at a constant level, possibly by increasing some and decreasing others, in order to “control spending under the Federal Employees Health Benefits Program.”

After consulting with Prudential, SAMBA proposed, among other changes, to limit benefits for private duty nursing care to $2,500 per calendar year. This change was one of eight changes SAMBA proposed to OPM after Prudential advised SAMBA that a 30.3% increase in premiums would occur if 1982 benefit levels were maintained. This contract modification was approved by the OPM for the 1983 contract year.

The issues to be decided in the pending motions for summary judgment are as follows: (1) whether plaintiff had a vested right to receive reimbursement for private duty nursing at the benefit level stated in his 1977 contract, (2) whether the reduction of the benefits level for private duty nursing care under the SAMBA Plan violated the statutory requirement to provide “catastrophic” coverage under 5 U.S.C.A. § 8904(4) (West 1967), and (3) whether OPM’s approval of the relevant changes in the SAMBA Plan was arbitrary and capricious.

For the reasons stated below, the Court grants the defendants’ motions for summary judgment and denies the plaintiff’s motion for partial summary judgment. In consequence, it is unnecessary to consider the plaintiff's motion for preliminary injunction, since it is based on the same legal issues as those decided below.

II. DISCUSSION

A. Standard of review

Under Federal Rule 56, summary judgment should be entered only if “there is no genuine issue as to any material fact and ... the moving party is entitled to a judgment as a matter of law.” Fed.R.Civ.P. 56(c). The movant bears the burden of demonstrating that there is no dispute as to any material fact in the case. “In assessing whether the movant has met this burden, the courts should view the evidence and all factual inferences therefrom in the light most favorable to the party opposing the motion.” Warrior Tombigbee Transportation Co. v. M/V Nan Fung, 695 F.2d 1294, 1296 (11th Cir.1983).

B. Contract interpretation

The plaintiff contends that Prudential and SAMBA have breached their contract with him by failing to consider his entitlement to reimbursement for expenses of private duty nursing care to be vested within the limitations of his 1977 contract with SAMBA. This question is to be decided under federal principles rather than state insurance law, since state law inconsistent with the contract is preempted and superseded by the contract provisions under 5 U.S.C.A. § 8902(m)(1) (West Supp. 1984). It is undisputed that the contracts in question are limited in duration to a single year, subject to annual modification or, with proper notice, termination. The plaintiff argues that his rights to private duty nursing expense reimbursement vested under his 1977 contract at the rates stated in that contract. His contention is based on the general principle of insurance contract construction that ambiguities in such contracts are to be construed in favor of the party who did not draft the contract.

The coverage language in the plaintiff’s 1977 brochure indicates that coverage under “major medical benefits” provides coverage “[s]ubject to the definitions, limitations, and exclusions in this brochure, ... for expenses of the following services and supplies (referred to as ‘eligible charges’) ...” This coverage language does not refer to “illness” or any synonym thereof, indicating that the risk insured against is the occurrence of medical expenses. Additional coverage language is provided in a conspicuous place at the second page of the brochure. It reads as follows: “The contract may be modified or terminated. However, no such modification or termination will affect adversely any benefit for a covered service received prior to such modification or termination.” The plaintiff contends that the language just quoted is ambiguous. His argument is as follows:

The language describing the terms under which the contract could be modified gave to Plaintiff a vested right to continuation of benefits for nursing care services at a level no less than that established by the 1977 contract. The language of this contract provided that modification of the contract will not affect adversely ‘any benefit for a covered service received prior to such modification or termination.’ The term ‘benefit’ should be construed to mean the ‘benefits’ described under the heading ‘Major Medical Benefits’ on page 8 of the brochure. The Plaintiff received benefits for nursing care services for a condition which developed prior to the modification which occurred with the 1983 contract. Therefore, that modification could not affect his continued benefits for those services at the levels which existed prior to the modification.

Contrary to the plaintiff’s contention, the Court finds this language unambiguous. The contract language does not suggest that modification could not affect continued benefits “at the levels which existed prior to the modification.” Benefit levels are not mentioned in this coverage language. The right expressly safeguarded by this language from the effect of any subsequent modification is “any benefit for a covered service received prior to such modification ...” The result of this language is preservation of the right to reimbursement for services received prior to the modification; a covered service received subsequent to the modification will not be reimbursed at the pre-modification rate. In consequence, the contract language precludes any vested right to receive reimbursement at pre-modification benefit rates for private duty home nursing care.

In accord with this result is a recent case from the Eastern District of Pennsylvania, Garvey v. Prudential Insurance Co., 596 F.Supp. 1119 (E.D.Pa.1984), attached to various of the defendants’ motions. The insurance plan involved in Garvey provided that modification would not “affect adversely any benefit for an allowable expense incurred prior to such modification or termination.” Id. at 1123. The plaintiff in Garvey also argued that the coverage language was ambiguous, and that he therefore had a vested right to reimbursement for expenses of private-duty nursing care without cost limitations resulting from a subsequent modification of these benefits. This language, in which the plaintiff finds a substantive difference from that in the Plan, appears to provide precisely the same coverage as the language of the Plan. The Garvey court held that this language contained no ambiguity and that the plaintiff had no vested right to reimbursement at pre-modification benefit levels. In addition, the Garvey court observed in a footnote that “[e]xpenses are incurred on the date services and supplies are received.” Id. at 1123 n. 15. Logic and the plain meaning of the contract language dictate the same result in the case sub judice. Accordingly, the Court holds that the plaintiff is subject to the modification of private duty nursing expense reimbursement as provided in the 1983 SAMBA Plan. In addition, since SAMBA is not liable for breach of contract, the issue of the defendant Prudential’s liability for this breach need not be reached.

C. Catastrophic Coverage

The plaintiff claims that the action of the Government through its agency, OPM, in contracting with Prudential to provide reduced benefits for private duty nursing care in the home, violated the statutory mandate of the FEHBA to provide coverage for health services of a catastrophic nature. The FEHBA provides that “[a]ll plans contracted for under paragraphs (1) and (2) of this section [relating to ‘government-wide’ plans] shall include benefits both for costs associated with care in a general hospital and for other health services of a catastrophic nature.” 5 U.S.C.A. § 8904 (West 1976) (emphasis added).

The plaintiff’s claim on this ground must fail, however, because under the FEHBA only “government-wide” plans are required to include benefits for expenses incurred for health services of a catastrophic nature, namely, “service benefit” and “indemnity benefit” plans. The SAMBA Plan, however, is an “employee organization” plan. In addition, as the Government notes, even when a government-wide plan is involved, it may be appropriate for OPM to balance the catastrophic coverage requirement against other statutory concerns. See Doe v. Devine, 703 F.2d 1319, 1327-28 (D.C.Cir.1983). Therefore, the Court holds that the plaintiff’s claim on this ground must be denied.

D. Agency review

The plaintiff contends that OPM’s renegotiation of the contract with SAMBA and Prudential so as to provide reduced coverage for private nursing care in the home was “arbitrary and capricious” under the terms of the judicial review provision in the Administrative Procedure Act (APA), 5 U.S.C.A. § 706 (West 1977). The APA provides that the Court “shall ... hold unlawful and set aside agency action, findings, and conclusions found to be — (A) arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law ...” Id. § 706(2)(A). No “statutes preclude” the Court’s authority to review this action, and since there is law to apply under sections 8902 and 8904 of the FEHBA, OPM’s action is not “wholly committed to agency discretion.” Id. § 701(a)(1) & (2). Under section 706 of the APA, “[t]he judicial function is exhausted when there is found to be a rational basis for the conclusions approved by the administrative body.” Valley Barge Co. v. United States, 292 U.S. 282, 286-87, 54 S.Ct. 692, 693-94, 78 L.Ed. 1260 (1934). Furthermore, “the scope of review is a narrow one____ The court is not empowered to substitute its judgment for that of the agency.” McHenry v. Bond, 668 F.2d 1185, 1190 (11th Cir.1982) (quoting Bowman Transportation, Inc. v. Arkansas-Best Freight Systems, 419 U.S. 281, 285-86, 95 S.Ct. 438, 441-42, 42 L.Ed.2d 447 (1974)).

In Doe, the court was asked to review contract negotiations by OPM and carriers of a government-wide health benefits plan under the FEHBA. The court said that contract negotiation did not lend itself to judicial review, given the lack of an accumulated and detailed record and the absence of orderly procedures. Such negotiations are inevitably somewhat ad hoc in nature, said the court, but this does not make them ipso facto “arbitrary and capricious.” The Doe court went on to observe that a reviewing court in this context “must be mindful of the considerable leeway an agency has ... to balance and accommodate competing interests. The agency’s judgment must be respected if consistent with the governing law and not unreasonable.” Further, the court may permissibly demand “a coherent, even if post-hoc, statement of the agency’s bargaining objectives and concerns, that the court may compare against the objectives prescribed by law____” 703 F.2d at 1326. The objectives prescribed by law in this instance are those stated in the FEHBA and the policy considerations permeating this Act. The primary objectives of the relevant sections of the FEHBA have been catalogued in various decisions reviewing the purposes of the Act and its legislative history as follows: (1) to afford federal employees the maximum in health benefits at the lowest cost to themselves, (2) the minimization of program costs to the government, and (3) preserving a competitive system among FEHBA contractors by considering the interests of insurers in the overall calculus of contract negotiations; to make health benefits to subscribers so generous that they were unacceptable to insurers would defeat this purpose. Doe, 703 F.2d at 1328-29; see also National Federation of Federal Employees v. Devine, 679 F.2d 907, 912-13 & n. 9 (D.C.Cir.1981).

The Doe case involved a challenge to OPM’s decision to accept mental health benefit reductions in a carrier’s federal health insurance plan as arbitrary and capricious or an abuse of discretion under the APA. The court found that OPM’s action withstood judicial review because its decision to accept the revised contract was consistent with the objectives of the Act. 703 F.2d at 1334. The Devine case involved a 6.5% reduction ordered by OPM in the government’s contribution for premium payments for employee health insurance contracts for 1982. The lower court found an abuse of discretion because it said OPM had not considered the effect of benefit cuts on government employees. The appellate court disagreed, holding that the record indicated that OPM had considered the impact of its benefit reduction on the health benefits available to government employees as well as the cost savings to the government. 679 F.2d at 908-09.

The plaintiff objects that these reductions disproportionately affect the four enrollees of the SAMBA Plan to whom benefits for private duty nursing expenses were paid during 1982. The Government, however, notes that the SAMBA Plan paid these four enrollees $270,561.09 to reimburse them for these expenses in 1982. This resulted in a cost for every enrollee in the SAMBA Plan of $12.93. The modification of this benefit would result in a projected savings of $314,191 in costs.

The plaintiff focuses on this aspect of the SAMBA modifications in particular, arguing that OPM’s approval of the $15.01 per year per enrollee projected cost savings resulting from the private duty nursing limitation was unreasonable in view of the total cost of the SAMBA Plan:

The documents submitted in justification of the benefit reduction show that it was estimated that the total cost of the plan would have been $38,371,000.00 in 1983 if benefits had been maintained at the 1982 level. This represents a yearly cost of approximately $1,827.00 per enrollee. Thus, the $15.01 reduction in cost per enrollee represented only an .8% — less than 1% — reduction of the cost per enrollee.
The 1983 contract resulted in a reduction of the estimated cost of nursing care from $324,191.00 to $10,000.00 per year — a 97% reduction. In exchange for this 97% reduction in benefits for nursing care services, a paltry .8% reduction in the total cost of the program was realized.

This argument, while compelling in relation to the plaintiff’s unfortunate circumstances, overlooks the fact that this proposed modification was one of eight changes proposed by SAMBA and accepted by OPM. With these eight changes, SAMBA was able to obtain a projected cost savings of $2,398,523, an 8.5% reduction in the total cost of the Plan.

The plaintiff asserts that this Court must consider as a disputed material fact the opposing positions of the Government and himself regarding the nature of OPM’s action: “when the hardship imposed by a benefits reduction is totally out of proportion to the overall cost savings, there is a point at which the agency’s action must be characterized as unreasonable, arbitrary, capricious and an abuse of discretion.” The Court disagrees. The facts regarding the actions of OPM are not in dispute, and the question of how to characterize OPM’s approval of the submitted SAMBA Plan modifications is a question of law, not of fact.

As noted above, this Court’s standard of review is a narrow one. Judicial review is bounded by the statutory scheme that vests OPM with authority. Under the FEHBA, OPM has broad discretionary authority to negotiate and contract for health plan benefits, including the authority to order reductions in benefits. The FEHBA requires that “[e]ach contract ... shall contain a detailed statement of benefits offered and shall include such máximums, limitations, exclusions, and other definitions of benefits as the Office considers necessary or desirable.” 5 U.S.C.A. § 8902(d) (West Supp.1984) (emphasis added); see Devine, 679 F.2d at 912. Further, OPM has broad discretion to vary the status of the plans. For example, OPM may adjust rates under 5 U.S.C.A. § 8902(i) (West Supp.1984); it may withdraw approval of a health benefit plan or carrier under 5 C.F.R. § 890.205 (1983); and it may bargain for diverse levels of health benefits under 5 U.S.C.A. § 8902(d) (West Supp. 1984). “OPM is obviously not precluded from agreeing to any benefit reductions that may disadvantage some individuals more than others, as long as this decision is not arbitrary or capricious.” Doe v. Devine, 545 F.Supp. 576, 583 n. 8 (D.D.C. 1982), aff'd, 703 F.2d 1319 (D.C.Cir.1983).

The decision by OPM in this case to approve a package of eight plan modifications pursuant to its request that the various plans maintain their benefit levels at a constant rate was consistent with the legislative purposes of the Act. As OPM stated in its letter to SAMBA, “OPM is firmly committed to the need to control spending under the Federal Employees Health Benefits Program. Toward this end, major cost and utilization containment initiatives were introduced in the 1982 contracts____ Each carrier should submit a plan for achieving such cost savings for Federal employees and annuitants.” The fact that OPM had an opportunity to consider the effect of the proposed SAMBA Plan changes on the fed-

eral enrollees, including the plaintiff, is amply documented in the record.

The action of OPM in approving these program modifications was apparently pursuant to a reasoned assessment of the legislative purposes underlying the FEHBA. Section 706 of the APA does not require more than a finding that agency action had a rational basis. Accordingly, this Court concludes that OPM was not arbitrary or capricious in approving the limitation on private duty home nursing care in the 1983 SAMBA Plan.

In summary, the Court holds as follows:

(1) the plaintiffs motion for partial summary judgment against SAMBA and Prudential is DENIED,

(2) the cross-motions for summary judgment by the Government, SAMBA, and Prudential are GRANTED, and

(3) the plaintiff’s motion for a preliminary injunction is DENIED.

      . Plaintiffs Affidavit, filed with plaintiffs motion for summary judgment on August 13, 1984, at ¶ 2.

      . Plaintiffs Affidavit, supra note 1, at ¶¶ 6 & 7.

      . Government's answers to plaintiff's first interrogatories, Exhibit B, at 2.

      . Id., Exhibits D & E, answering plaintiffs first interrogatories 8 & 9, at 3 & 7.

      . Government’s statement of material facts, filed with its motions for summary judgment, August 29, 1984, at ¶ 21.

      . Prudential’s motion for summary judgment, filed July 27, 1984, Exhibit G, at 81.

      . Plaintiff’s motion for partial summary judgment, filed August 13, 1984, Exhibit B, at 2 (emphasis added).

      . Plaintiffs motion for partial summary judgment, supra note 7, at 7.

      . Complaint, filed November 15, 1983, at 21.

      . These plans are defined in id. § 8903(1) & (2).

      . The FEHBA defines “employee organization” plans as follows: "[Such plans] ... are sponsored or underwritten, and are administered, in whole or substantial part, by employee organizations, ... [and] are available only to individuals and members of their families, who at the time of enrollment are members of the organization.” Id. § 8903(3).

        . Plaintiff s brief in opposition to the Government’s motion for summary judgment, filed September 18, 1984, at 4.

      . Government’s statement of material facts, filed with motion for summary judgment August 29, 1984, at ¶¶ 16 & 17.

      . Id. at ¶ 20.

      . Plaintiffs brief in opposition to the Government’s summary judgment motion, supra note 13, at 4-5.

      . Government’s brief in support of summary judgment motion, filed August 29, 1984, at 5.

      . Plaintiffs brief in opposition to the Government’s summary judgment motion, supra note 13, at 4.

      . Government's motion for summary judgment, filed August 29, 1984, Exhibit B, at 1.

      . In particular, see Government’s motion for summary judgment, supra, note 19, Exhibit “E” at 7.

      . Government’s motion for summary judgment, supra, note 19, Exhibit B, at 1.


source: Caselaw Access Project

author: TORRUELLA, Chief Judge.

license: Public Domain

text:
    FEDERAL DEPOSIT INSURANCE CORPORATION, Plaintiff, v. Rafael BARRERA, his wife Alma Barrera and the conjugal partnership constituted by, Defendants.
    Civ. No. 84-0824(TR).
    United States District Court, D. Puerto Rico.
    Oct. 11, 1984.

      Arturo A. Vera Rojas, F.D.I.C., San Juan, P.R., for plaintiff.
   OPINION AND ORDER

TORRUELLA, Chief Judge.

This action is before us on Defendants’ Motion for Summary Judgment. Defendants also filed a memorandum in support of a Motion for Summary Judgment and an affidavit signed and sworn by Codefendant Rafael Barrera on July 12, 1984.

The Court has jurisdiction in this action because it arises under the Laws of the United States of America, pursuant to 12 U.S.C. § 1819 and 28 U.S.C. § 1345.

The Federal Deposit Insurance Corporation (hereinafter referred to as FDIC) sued Rafael Barrera, Alma Barrera (husband and wife) and their “legal conjugal partnership” to collect the principal and interest due on various promissory notes executed by two corporations, Constructora Guayanés, Inc. (Guayanés), and Las Aguilas Development Corp. (Las Aguilas), in favor of Banco Crédito y Ahorro Ponceño (hereinafter Banco Crédito) and guaranteed thereof, jointly, severally, or in-solido by Defendants by two previously signed guarantee contracts.

On August 22, 1969, Rafael Barrera and Alma Barrera executed a document of guarantee to Banco Crédito, jointly and severally guaranteeing loans to Las Aguilas for up to $1,353,000.00, against periodic request for loans, each loan being evidenced by a promissory note of Las Aguilas payable on demand to the order of Banco Crédito. Thereafter, on February 26, 1970 Rafael Barrera, signing singly, executed another document of guarantee in favor of Banco Crédito for the amount of $100,000. Mr. Barrera was also a co-issuer of Guayanés’ obligations, which date back to the period of 1968-70. Las Aguilas’ notes and obligations pertinent herein were undertaken from 1968 to 1973.

The FDIC, in its corporate capacity, purchased the above referred notes and guarantees from the FDIC, the appointed receiver of Banco Crédito, when the Secretary of the Treasury for the Commonwealth of Puerto Rico closed said bank on March 31,1978 due to its unsound financial condition. 7 L.P.R.A. 201. The dual capacities of Plaintiff in the liquidation of a state insured bank are specifically authorized by 12 U.S.C. § 1821(e) and § 1823(e).

In the present suit the F.D.I.C. demands the payment of the amounts due in relation to the debts of Las Aguilas that were personally guaranteed by Defendants. The F.D.I.C. also seeks the payment of the amounts due in relation to the obligations of Guayanés that were co-issued by Codefendant Rafael Barrera.

Defendants raise as a defense, however, that the transactions which originated the F.D.I.C.’s claims are governed by the Commerce Code of Puerto Rico and thus, they argue, under that Code’s three year statute of limitations the period for enforcing the collection of either the notes or the personal guarantees had expired before the filing of the above captioned complaint on March 30, 1984.

The Court notes that the standard for summary judgment requires an inquiry into the merits of the parties’ claims. Under Fed.R.Civ.P. 56, the party seeking summary judgment bears the exacting burden of demonstrating that there is no actual dispute as to any material fact. Warrior Tombigbee Transportation Co., Inc. v. M/V Nan Fung, 695 F.2d 1294, 1296 (11th Cir.1983); Impossible Electronics Techniques Inc. v. Wakenhut Protective Systems, Inc., 669 F.2d 1026 (5th Cir.1982). Summary judgment should be granted when it is clear what the truth is, and when no genuine issue remains for trial. National Screen Services Corp. v. Poster Exchange, Inc., 305 F.2d 647 (5th Cir.1962). If the record is adequate and there is no genuine factual issue as to any material fact then summary judgment should be rendered as the substantive legal principles warrant. 6 Pt. 2 Moore’s Federal Practice. See 56-20(2).

On the other hand, while the basic principles underlying summary judgment apply, of course, to a motion based on an affirmative defense, their application may, nevertheless, warrant summary judgment on the basis of the statute of limitations, since this defense, perhaps more so than laches, does not usually involve genuine issues of material facts. When this is true and the defense is legally sufficient, summary judgment should be rendered for the defending party. Moore’s Federal Practice, supra, Sec. 56.17(58).

At the outset it must be understood that this is an action brought by the FDIC in its corporate capacity; therefore, the questions presented in this action in which the FDIC is a party in such corporate capacity are governed by federal and not state law. FDIC v. Cardona, 723 F.2d 132, 134 (1st Cir.1983); FDIC v. Bird, 516 F.Supp. 647, 649 (D.P.R., 1981). “With specific respect to the FDIC, when, as in the instant case, it exercises authority granted it under 12 U.S.C., Sec. 1823, and purchases assets from the receiver of a closed insured bank, its rights shall be determined by reference to federal law.” FDIC v. Bird, supra, at 649, and cases cited therein.

In this action, as in the Bird case, supra, the court’s “task of giving content to the federal law to be applied with respect to the applicable statute of limitations is not difficult.” In 1966 Congress enacted Public Law 89-505, codified at 28 U.S.C. § 2415, which established to the exclusion of the application of any state law, “a federal statute of limitations with respect to every action for money damages brought by the United States or an officer thereof which is founded upon any contract express or implied ... ”, 28 U.S.C. § 2415(a). The intention of Congress to include federally created corporations such as Plaintiff is clear from the legislative history of the statute. S.Rep. No. 1328, 89th Cong., 2d Sess., reprinted in 1966, U.S.Code Cong. & Ad.News 2502, 2508. Furthermore, it has been held that the “federal statute of limitations is applicable where the agency has acquired its claim by assignment.” (Citations omitted). FDIC v. Bird, supra, at 650 and cases cited therein. The existence of a clear Congressional intent to establish for the United States and its agencies a statute of limitations with respect to contract claims dictates the result that the provisions of 28 U.S.C. § 2415 be applied to this action. The federal statute of limitations appliable herein is thus six years from the time the right of action accrues. Consequently, FDIC would have had six years from the date of accrual to file this action.

The issue that remains to be determined is that of when FDIC’s cause of action accrued.

The mere fact of the acquisition of the claims asserted in this action by the FDIC would not revive any claim which was already time-barred by a Puerto Rican statute of limitations. 516 F.Supp. at 650. On the other hand, as was said in FDIC v. Cardona, “when the FDIC purchases the assets of a bank, it should not be barred from bringing an action if a private party acquiring the same assets in the same manner would not be barred”, supra, at 134. Therefore, the issue, of necessity, is whether the causes of action asserted by FDIC were time-barred by the running of the three-year statute of limitations of the Commerce Code, 10 L.P.R.A. 1908, when it became the holder of both the notes executed by Guayanés and Las Aguilas and the contracts of guarantee signed by Defendants.

It is settled law that the three-year period of prescription fixed by Article 946 of the Code of Commerce for actions on promissory notes is only applicable to commercial notes, and not to notes in general. Banco de Puerto Rico v. Rodriguez, 53 P.R.R. 166 (1938). A non-mercantile note is not subject to the three-year period of limitation fixed by Article 946 of the Commerce Code, but to the fifteen-year term provided by Article 1864 of the Civil Code, 31 L.P.R.A. 5294. Luengo v. Fernández, 83 P.R.R. 613, 616 (1961); Mediterranean Investment Corp. v. Rodriguez, 575 F.Supp. 268, 269 (1983).

On the other hand, a guarantor is only liable to the extent the person he guaranteed is liable. Indeed, according to Article 1746 of the Civil Code of Puerto Rico, “the obligation of the surety shall expire at the same time as that of the debtor, and for the same causes as all other obligations.” 31 L.P.R.A. 4951. Moreover, as stated in the Civil Code, “a joint debtor may utilize, against the claim of the creditor, all the exceptions arising from the nature of the obligation and those which are personal to him.” 31 L.P.R.A. 3112. The success of Defendants’ argument depends, therefore, on their ability to show that the loans made thereof would be considered “commercial” under Puerto Rican law. FDIC v. Cardona, supra at 134.

In order to establish under Puerto Rican Law the commercial nature of a loan, two conditions must be present: (1) that one of the parties thereto be a merchant, and (2) that the loan be devoted to commercial transactions. Article 229 of the Commerce Code of Puerto Rico, 10 L.P.R.A. 1651; FDIC v. Cardona, supra; Mediterranean Investment Corp. v. Rodriguez, supra. It is not sufficient that one of the requirements of Article 229 is found to be present in the obligation in question. Luengo v. Fernández, supra; FDIC v. Marco Discount House, 575 F.Supp. 730, 732 (1983). Furthermore, the fact that a bank is one of the lending parties does not necessarily render the loans “commercial” in nature under the Commerce Code of Puerto Rico. Banco de Puerto Rico v. Rodrguez, supra at 433; FDIC v. Cardona, supra, at 135. Nonetheless, Defendants have brought forward enough evidence to show the presence of the elements required by said Code to characterize loans as “commercial.”

Indeed, as was shown by Defendants, under Acevedo v. Viñas Sorba, 111 D.P.R. 633 (1981), Las Aguilas was a promoter in the construction business; that is, a professional who conceived and organized the construction and development of housing projects so that others could acquire, lease, or enjoy them. Thus, it devoted itself to the business of developing or building for others as part of a plan of commercial activity. Guayanés was active both as a promoter and as a general contractor. As a promoter its activities were identical to those of Las Aguilas. As a general contractor, however, Guayanés was in charge of the main portion of the construction work in the development of projects conceived by promoters. Thus, it devoted itself to the business of developing or building for others who, in turn, sold or leased the housing units to the public.

Besides, the notes from Las Aguilas were issued in connection with said corporation’s commercial activities and business. The funds borrowed by Guayanés were also used exclusively in connection with said corporation’s business; at the time of the issuance of the notes Guayanés was acting as a general contractor of Las Aguilas for site improvement works and for the construction of housing units for sale to the public by Las Aguilas.

As stated by Spanish commentator Manuel de la Cámara Alvarez, it is clear that those involved in the areas of promotion and construction of structures, houses and buildings in the context of the construction industry have to be considered as merchants subject to the regulation of the Commerce Code. Estudios de Derecho Mercantil, V.I., Editorial de Derecho Financiero, pp. 38-41. Therefore, the essential circumstances surrounding the issuance of the notes and/or disbursements of loans arouse in the instant case from the commercial operations of Las Aguilas and Guayanés, both of whom were “merchants” within the meaning of said term in the Commerce Code of Puerto Rico.

As to Codefendant Rafael Barrera, it must be said that he, through Las Aguilas and Guayanés, was the moving factor in making one a promoter in the construction business and the other both a promoter and a general contractor. In any case, aside from Mr. Barrera, Banco Crédito was the sole source of funding and loans for both Guayanés and Las Aguilas. As a matter of fact, the contracts of guarantee signed by Defendants allowed Las Aguilas to obtain financing from Banco Crédito. In other words, the guarantees were given to insure the fulfillment of commercial transactions. The execution of the aforementioned guarantees was, then, a commercial act under the Commerce Code, as stated in 10 L.P.R.A. 1821: “All guarantees the purpose of which is to insure the fulfillment of a commercial contract shall be considered commercial, even though the guarantor is not a merchant.”

Since more than three years have elapsed since the issuance of each of the notes and/or from the execution of the guarantees pertinent herein, the only remaining question as far as the notes are concerned is whether the period of prescription of three years established by the Commerce Code was in any way interrupted.

In 10 L.P.R.A. 1903 it is provided:

“Prescription shall be interrupted by suit or any judicial proceeding brought against the debtor, by the acknowledgement of the obligations, or by the renewal of the instrument on which the right of the creditor is based.
Prescription shall be considered uninterrupted by a judicial proceeding if the plaintiff should withdraw it or the case should go by default or the complaint be dismissed.
The period of prescription shall begin to be counted again, in case of the acknowledgement of the obligations, from the day this is done; in case of their renewal, from the date of the new instrument, and if the period for meeting the obligation should have been extended, from the date this extension expires.”

The F.D.I.C. did not file any judicial action against either Guayanés or Defendants in any way relating to its claims against Guayanés until the filing of the instant complaint. Nor has there been any acknowledgement whatsoever to the F.D.I.C. as to any obligations relating to either Guayanés or Defendants. In addition, there has been no renewal of the instruments on which the F.D.I.C.’s rights as Guayanés’ creditor are based.

The claims of the F.D.I.C. against Guayanés are thus barred by the applicable statute of limitations. The mere fact of the acquisition of the claims asserted in this action by the FDIC does not revive any claim which is already time-barred by a Puerto Rican statute of limitations. 516 F.Supp. at 650. The claims against Guayanés were, in effect, already time-barred when the FDIC acquired them on 1978, having the acquisition taken place more than three years after the maturity date of the notes. Therefore, the F.D.I.C.’s claims against Defendants as co-issuers with Guayanés are also time-barred and for the same reason. 31 L.P.R.A. 3112.

As to Las Aguilas, on September 27, 1972 said corporation filed Chapter 11 proceedings under the Bankruptcy Act and was thereafter duly adjudged a bankrupt by the Court on November 21, 1974. As a general rule, Section 391 of the Bankruptcy Act of 1898, 11 U.S.C. Sec. 791, (repealed) provided that “all statutes of limitations affecting claims provable under this chapter ... shall be suspended while a proceeding under this chapter is pending and until it is finally dismissed.” Moreover, in cases commenced by the filing of a Chapter 11 petition while bankruptcy proceedings were pending, limitation of actions was controlled by Section 11(f) of the Bankruptcy Act of 1898, 11 U.S.C. Sec. 29 (repealed). Collier on Bankruptcy, 14th Ed., Vol. 9, Sec. 12.01, pp. 705-06. Said Section 11(f) provided that “the operation of any statute of limitations of the United States or of any State affecting the debts of a bankrupt provable under this Act, shall be suspended during the period from the date of the filing of the petition in bankruptcy (1) until the expiration of thirty days after the date of the entry of an order denying his discharge; or (2) ... in the case of a corporation, if no application for a discharge is filed within, the period of six months after the adjudication, then until the expiration of thirty days after the end of such period; or (3) until thirty days after the dismissal of the bankruptcy proceedings, whichever may first occur.”

The three-year applicable statute of limitations was thus interrupted in the case of Las Aguilas in the year 1972 until at least seven months after the date of adjudication (seven months after adjudication in November 21, 1974). See Collier on Bankruptcy, supra, Vol. 1A, Sec. 11-14, p. 1224. This interruption of the period of limitations against Las Aguilas, the principal debtor, also operated against its surety. FDIC v. Marco Discount House, supra. See Article 1875 of the Civil Code of Puerto Rico, 31 L.P.R.A. 5305; see also Article 1874 of the Civil Code, 31 L.P.R.A. 5304. Consequently, the three-year period had not expired when the F.D.I.C. acquired the assets of Banco Crédito on 1978. On that date, the statute of limitations again ceased to run against the F.D.I.C., a federal agency. FDIC v. Marco Discount Home, supra, and cases cited therein. From that moment the federal statute of limitations, 28 U.S.C. § 2415, was applicable. 575 F.Supp. at 732. Since this action was filed before the six-year period of limitations established in 28 U.S.C. § 2415 had expired, it would not have been barred against Las Aguilas by the applicable statute of limitations as far as most of the notes pertinent herein are concerned.

Section 11(f) of the Bankruptcy Act of 1898 referred only to claims not already time-barred when bankruptcy petitions were filed. Collier on Bankruptcy, Vol. 1A — supra. Hence, said Section did not operate to extend the limitations period where the period set by applicable state law had already expired before the filing of the bankruptcy petition. See In Re: Discount Plywood Centers, Inc., 11 B.R. 866 (1981). Las Aguilas filed Chapter 11 proceedings for an arrangement on September 27, 1972. By that date two of the notes in question (one executed on August 19, 1969 for the amount of $25,012.58; the other on September 16, 1969 for the amount of $8,000.00) were already time-barred by the applicable statute of limitations. Therefore, as of these notes the claims asserted by the F.D.I.C. against Defendants on the basis of the contracts of guarantee are time-barred since they were already so barred as to Las Aguilas when the filing of the Chapter 11 petition took place and as such were not subject to the toll compelled by Section 11(f).

The fact that the F.D.I.C.’s claims as to the two above-referred notes are time-barred is not changed by the language of a waiver provision that was incorporated by Banco Crédito in the contracts of guarantee that were signed by Defendants. Such provision, translated from Spanish, reads as follows:

“No delay by the Bank or its succesors or assignees in exercising or making fulfill any right or obligation under this document, or in taking any action to collect or exercise any right of the debt or obligations hereby guaranteed, shall be interpreted as a waiver of such rights or liens or obligations, or shall affect the rights of the Bank in this document as refers to the subscribers to this letter of guaranty.”

Through this language, it could be said, Defendants waived beforehand their right as guarantors to raise as a defense a delay by the Bank in taking action to collect against the principal. The problem is that this type of waiver provision is against the specific language of the Civil Code of Puerto Rico. In effect, as stated in 31 L.P.R.A. 5246: “Persons with the capacity to alienate may renounce the prescription acquired, but not the right to prescription in the future.”

In the words of Spanish commentator Luis Diez Picazo, Article 1935 of the Spanish Civil Code, equivalent to Article 1835 of the Civil Code of Puerto Rico (31 L.P.R.A. 5246), prohibits the waiver beforehand of the right to raise in the future the prescription not yet acquired. See, La prescripción en el Código civil, Bosch, Barcelona, 1964, pp. 63-65. And as was suggested by another distinguished scholar, waiver provisions like the above are against public policy as established in the Civil Code, and as such, out of the reach of the obligations that can be created by private parties in a contract. See, Quintus Mucius Scaevola, Código civil comentado, Instituto Editorial Reus, Madrid, 1958, T.xx, pp. 589-90. See also T. Castán Tobeñas, Derecho civil español, común y foral, Reus, S.A. Madrid, 1971, T. I, Vol. II, p. 850; Mazeaud & Mazeaud, Lecciones de Derecho civil, Ediciones Jurídicas Europa-América, Buenos Aires, Vol. III, Pt. 2, p. 434; T.I, Vol. 1(2), p. 434; J. Puig Brutau, Fundamentos de Derecho civil, Bosch, Barcelona, 1979, T.I, Vol. 1(2), pp. 849-59.

At the time that the contracts of guarantee were signed by Defendants the defense of prescription was not then available. Thus, the waiver provision in question falls within the prohibition contained in Article 1835 of the Puerto Rico Civil Code. 31 L.P.R.A. 5246.

Nor is the result of this case changed by the fact that on 1977, according to Co-defendant Rafael Barrera’s Sworn Statement, an acknowledgement of Las Aguilas’ obligation took place. In effect, on November 30, 1977, the Trustee for Las Aguilas acknowledged said corporation’s obligations to the F.D.I.C. According to the Commerce Code of Puerto Rico, “the period of prescription shall begin to be counted again in case of the acknowledgement of the obligations from the day this is done.” 10 L.P.R.A. 1903. Thus, as to Las Aguilas a new period of prescription began on the date of the acknowledgement of its obligations to the F.D.I.C. Consequently, the new three-year period had not expired as to Las Aguilas when the F.D.I.C. acquired the assets of Banco Crédito on 1978.

However, as stated in the Civil Code, any person “interested in validating a prescription may benefit thereby, notwithstanding the express or implied renunciation of the debtor or owner.” 31 L.P.R.A. 5248. According to Spanish commentator José Puig Brutau, this Section allows the surety to benefit from prescription despite the acknowledgement by the principal of its obligations to creditors. See, Fundamentos de Derecho civil, supra, at 866. See also T.M. Manresa y Navarro, Comentarios al Código civil espaól, Reus, S.A., Madrid, 1973, T. Xll, p. 1048. Since under Mansiones de Park Gardens v. Scotiabank de Puerto Rico, 83 J.T.S. 77, the relationship of Defendant to Las Aguilas is one based on joint surety, the acknowledgement by Las Aguilas of its obligations with the F.D.I.C. does not work to enjoin Defendants from alleging the affirmative defense of prescription in the instant case. See also Carr v. Nones, 98 P.R.R. 230 (1970); J.M. Manresa y Navarro, Comentarios al Código civil español, supra, J.L. Lacruz Berdejo, Manual de Derecho civil, Bosch, Barcelona, 1980, p. 537. Defendants did not join Las Aguilas in acknowledging the Las Aguilas’ extension of the obligations. Thus Defendants are not bound as sureties for the prescriptive consequences of said acknowledgment. In addition, there has been no renewal of the instruments on which Plaintiff’s claims against Defendants are based. Accordingly, Plaintiff's claims against Defendants relating to the promissory notes executed by Las Aguilas on August 19,1969 and on September 16,1969 are, as are those that relate to the notes executed by Guayanés, time-barred by the Commerce Code of Puerto Rico since they were already so barred when Plaintiff acquired the assets of Banco Crédito on 1978.

Defendants’ Motion for Summary Judgment is hereby GRANTED as to these time-barred claims. Therefore, the complaint is DISMISSED as to all claims pertaining to the notes executed by Las Aguilas before September 27, 1969.

It is also ORDERED that the complaint be DISMISSED as to all claims relating to the notes executed by Guayanés.

It is further ORDERED that Defendants’ Summary Judgment be DENIED as to those claims that relate to the promissory notes executed by Las Aguilas after September 27, 1969 guaranteed by Defendants through the contracts of guarantee of August 22, 1968 and February 6, 1970.

IT IS SO ORDERED.

      . Promoters are professional enterprises that operate within the construction industry. As such, they conceive and organize, for others, generally as part of a plan of commercial activity, the construction and development of housing and building projects so that other individuals can acquire, lease or enjoy them. In addition, they also hire the ones who will be responsible for the design or construction of projects, buy the land in which the project will be developed and finally, work out the problems involved in the financial investment that is needed to complete the design, development, and construction of projects. Theirs is thus, the responsibility of carrying out the complex professional, real estate and financial transactions needed for the structuring and sale of housing and building projects. Moreover, it is the promoter the one who assumes the initiative of carrying out this complex economic process. See Cabanillas Sánchez, "Ejecución defectuosa de la Cbra Inmobiliaria — Responsabilidad del Promotor ...”, 33 Anuario de Derecho Civil 194 (1980); R. Saint-Alary, Droit de la Construction, Presses Universitaries de France, Paris, 1977, p. 303.

      . According to Plaintiff, Defendants were not merchants within the scope of the Commerce Code because they were involved in the construction business. However, nowhere does it say in the Commerce Code that those involved in the construction industry are incapable of being regulated by the provisions of said Code or, further, incapable of being considered merchants by the code in question. Indeed, industrial enterprises are capable of carrying out commercial acts and transactions through their own industrial activities. Moreover, when this is so, the elements required by 10 L.P.R.A. 1002 to consider companies, corporations or associations as merchants for purposes related to the Commerce Code are present.
      Much more than the mere construction of a single building is required, of course, for anyone to be considered as a participant engaged in the construction industry. See Building Maintenance Serv. v. H.R. Exec. Bldg. 109 D.P.R. 656, 664 (1980). However, both Las Aguilas and Guayanés were actively involved in the construction industry, one as a promoter (the former), the other as a promoter and general contractor. As such, these two corporations served as intermediaries in chains of acts and transactions, whose objective was, basically, to satisfy human housing needs. The enterprises in question were commercial in character and, as such, subject to the applicable provisions of the Commerce Code. See M. Planiol, Traité Elémentaire de Droit Civil, V-2-2 Louisiana State Law Institute, 1939, 11th Ed., pp. 140-45; Nueva Enciclopedia Jurídica Francisco Seix, Editor, Barcelona, T. II, 1950, p. 310; J. Puig Brutau, Fundamentos de Derecho civil, T. II, V. II, infra, at 446, N. 82; Rodrigo Uria, Derecho mercantil, 11th Ed., Madrid, 1975, pp. 31-32.


author: JOINER, District Judge.

text:
    The MIHALEK CORPORATION and Lawrence Patrick Mihalek, Plaintiffs, v. The STATE OF MICHIGAN, Governor James J. Blanchard, the Department of Commerce of the State of Michigan, Ralph J. Gerson, Director, Defendants.
    Civ. A. No. 84-CV-7202-AA.
    United States District Court, E.D. Michigan, S.D.
    Oct. 12, 1984.

      Thomas A. Hallin, Harry G. Iwasko, Jr., Philip J. Smith, Asst. Atty. Gen., Lansing, Mich., for Plaintiffs.
    James M. Deimen, Ann Arbor, Mich., Richard A. Heikkinen, The Heikkinen Law Firm, P.C., Howell, Mich., for Defendants.
   MEMORANDUM OPINION AND ORDER

JOINER, District Judge.

This case is before the court on defendants’ motion to dismiss or in the alternative, for change in venue. For reasons stated herein, the motion to dismiss is granted in part, and the motion for change of venue is denied.

In brief summary, the action is one for infringement of copyright, violation of trademark, and violation of constitutional rights brought pursuant to 42 U.S.C. § 1983, along with a pendent state claim for unfair competition and misappropriation of work product. Plaintiff was the registered holder of certain copyrighted materials, which are collectively described as the “Michigan is Good News” campaign. Plaintiff alleges that he entered into agreements with agents of the state of Michigan for creation of these materials. He showed the materials to these people while the work was in progress, and the agents allegedly appropriated the designs for their own use, incorporating them into the “Say Yes to Michigan” and “Yes Michigan” campaigns, which are well known promotional operations designed to encourage investment and travel in this state. Plaintiff alleges that he was never paid for his efforts in developing the designs, and that the wrongful appropriation of the designs supports the various causes of action alleged in the complaint, which seeks money damages and injunctive relief.

The defendants in this action are the State of Michigan, the Department of Commerce of the State, James Blanchard, the Governor, and Ralph Gerson, the Director of the Department of Commerce. DISCUSSION

Motion to Dismiss

All defendants have moved to dismiss the complaint, arguing that, despite the presence of individual state officials as parties defendant, the action is- one against the state, and therefore barred by the eleventh amendment. Plaintiff has responded to this motion with the argument that the eleventh amendment does not bar an action against the state and state officials for infringement of copyright, relying exclusively on Mills Music v. State of Arizona, 591 F.2d 1278 (9th Cir.1979). The court in Mills Music did expressly hold that, by enacting the Copyright Act, 17 U.S.C. § 1 et seq. pursuant to the authority granted to it by the Copyright and Patent Clause of the United States Constitution, Art. 1, § 8, Cl. 8, Congress has specifically authorized private actions against a class of defendants that includes states, and thereby abroggated the states’ eleventh amendment immunity, id. at 1284-85.

With the exception of Wihtol v. Crow, 309 F.2d 777 (8th Cir.1962), which simply held without discussion that the eleventh amendment barred an action against a local school district, as an instrumentality of the state, for copyright infringement, Mills Music appears to be the only case directly on point. Although the opinion reflects a thorough and thoughtful discussion of recent eleventh amendment jurisprudence, this court is compelled to conclude that Mills Music was decided incorrectly, insofar as it held that an action for damages could be maintained against a state for infringement.

In Edelman v. Jordan, 415 U.S. 651, 94 S.Ct. 1347, 39 L.Ed.2d 662 (1974), the Supreme Court held that the eleventh amendment barred an action against a state for recovery of benefits to which the plaintiffs were entitled under the Aid to Aged, Blind, and Disabled program, established by the Social Security Act. The Court concluded that, insofar as the District Court had ordered the Director of the Department of Public Aid of Illinois to make payments to the plaintiffs on the basis of benefits wrongfully denied prior to the entry of the decree by the District Court, that order constituted a form of “retroactive relief” that was barred by the eleventh amendment. The Court distinguished between this kind of retroactive relief, which was analogous to an award of money damages for injuries sustained prior to entry of the judgment, and “prospective relief” in the form of an injunction, requiring the defendant to conform its future conduct to legal requirements, id. at 678, 94 S.Ct. at 1363. The Court thereby reconciled the historic opinion of Ex Parte Young, 209 U.S. 123, 28 S.Ct. 441, 52 L.Ed. 714 (1908), in which it held that an action for equitable relief, brought under 42 U.S.C. § 1983, charging a state official with unconstitutional conduct in the exercise of his official duties, was not barred by the eleventh amendment, with Ford Motor Co. v. Department of Treasury, 323 U.S. 459, 65 S.Ct. 347, 89 L.Ed. 389 (1945), in which it held that an action for recovery of damages from a state official, in which judgment would have to be paid from the state treasury, was subject to the sovereign immunity defense established by the amendment.

The holding in Edelman was subsequently reaffirmed in Quern v. Jordan, 440 U.S. 332, 99 S.Ct. 1139, 59 L.Ed.2d 358 (1979), which arose from the same action as Edelman. The Quern Court concluded that cases decided subsequent to Edelman, particularly Hutto v. Finney 437 U.S. 678, 98 S.Ct. 2565, 57 L.Ed.2d 522 (1978) and Monell v. New York Department of Social Services, 436 U.S. 658, 98 S.Ct. 2018, 56 L.Ed.2d 611 (1978), did not undermine in any way Edelman’s conclusion that enactment of the Civil Rights Act of 1871, currently codified in 42 U.S.C. § 1983, did not abrogate the states’ sovereign immunity under the eleventh amendment, Quern, supra, 440 U.S. at 339-41, 99 S.Ct. at 1144-45.

Although neither Edelman nor Quern dealt with the precise issue presented in this motion to dismiss and answered in the affirmative by the Mills Music court, that is, did enactment of the Copyright Act abrogate the eleventh amendment immunity of the states, this court concludes that those opinions from the Supreme Court compel a different result from that reached in Mills Music. Although the federal interest in patent and copyright law is expressly declared in the body of the constitution itself, it is the Copyright Act which establishes the substantive legal right to be free from infringement which is the basis for the relief sought in this case by plaintiff. As such, the right to be free from infringement, although a substantial one guaranteed by federal law, is deserving of no more protection than is the right to benefits for the aged, blind, and disabled, which rights were also expressly established by act of Congress. Despite the existence of a Congressional guaranty to these benefits, the Supreme Court concluded that a federal court is without jurisdiction, by operation of the eleventh amendment, to impose an award of damages against a state, or against its agents when the award would compel an invasion of the coffers of the state, for violation of federal law.

This court holds that all defendants in this action are entitled to immunity under the eleventh amendment from plaintiff’s prayer for money damages under each of his four theories of liability. Further, the recent decision of Pennhurst State School v. Halderman, — U.S.-, 104 S.Ct. 900, 79 L.Ed.2d 67 (1984), makes clear that the eleventh amendment also prohibits federal courts from awarding injunctive relief against state officials for claims predicated upon state law. Insofar as plaintiff’s claim for disclosure of trade secrets, unfair competition, and misappropriation of word product is grounded upon state statutory or common law, that claim can not support an action for injunctive relief against these defendants under the reasoning of Pennhurst. To the extent that plaintiff is seeking injunctive relief against future violations of his federally protected rights, by the individual defendants, the eleventh amendment offers no protection to the individual defendants, Ex Parte Young, supra. The State itself, and the Department of Treasury, are immune from suit altogether, however, Hans v. Louisiana, 134 U.S. 1, 10 S.Ct. 504, 33 L.Ed. 842 (1890), Employees v. Department of Public Health and Welfare, 411 U.S. 279, 93 S.Ct. 1614, 36 L.Ed.2d 251 (1973).

Motion for Change of Venue

Venue in this case is predicated upon the Patents and Copyright Venue statute, 28 U.S.C. § 1400, with respect to the copyright claims, and upon the general venue provision, 28 U.S.C. 1391(b) with respect to the other claims. Defendants urge that venue does not properly lie in this court with respect to the instant claims under either statute.

Section 1391(b) of Title 28 provides as follows:

(b) A civil action wherein jurisdiction is not founded solely on diversity of citizenship may be brought only in the judicial district where all defendants reside, or in which the claim arose, except as otherwise provided by law.

Defendants accurately assert that venue of an action against public officials under this statute is properly laid in the judicial district in which the official maintains his official residence, O’Neill v. Battisti, 472 F.2d 789 (6th Cir.1972). The individual defendants in this action, Governor Blanchard and Secretary of Treasury Ger-son, maintain their official residences in Lansing, Michigan, which is located in the Western District of Michigan. This court therefore lacks venue for the trademark infringement and § 1983 claims against those defendants.

Section § 1400(a) of Title 28 provides as follows:

(a) Civil actions, suits, or proceedings arising under any Act of Congress relating to copyrights may be instituted in the district in which the defendant or his agent resides or may be found.

This subsection provides a less restrictive venue standard than does either § 1391 or subsection (b) of § 1400, Time Incorporated v. Manning, 366 F.2d 690, 697 (5th Cir.1966).

Plaintiff argues that the State of Michigan maintains a liquor store in Ann Arbor, and that, because this agent is “found” in this district, venue is properly laid here under § 1400(b). Defendant contends, without citation to authority, that plaintiffs position is preposterous on its face, because the existence of a state-operated liquor store in this district should not be sufficient to vest this court with venue.

The court has conducted its own research into this matter, and finds nothing on point. The general rule of construction of § 1400(a) is that a defendant or his agent “may be found” in any district in which he is amenable to personal jurisdiction, or wherever he may validly be served with process, see Micromanipulator Co., Inc. v. Bough, 558 F.Supp. 36, 37 (D.Nev. 1982); Donner v. Tams-Witmark Music Library, 480 F.Supp. 1229, 1234 (E.D.Pa. 1979).

The court concludes that venue is properly laid in this district, but not for the reasons set forth by plaintiff. The individual defendants, the Governor and the Secretary of Commerce, are amenable to personal jurisdiction throughout this state, including the area comprised by the Eastern District of this state, see Michigan GCR 105.9 and RJA § 701 [M.C.L.A. § 600.701] (personal jurisdiction over individuals). Further, the Department of Commerce may be sued in this district for the same reasons. This result is especially appropriate in this case, because the acts which constituted the alleged infringement of plaintiffs’ copyrights occurred throughout the state, including this district. Further, because venue is proper in this court with respect to the copyright infringement claims, this court, in the interests of efficiency, will retain the trademark infringement and constitutional claims, insofar as they seek injunctive relief, even though those claims, had they been brought without the copyright claim, would not have been sufficient to vest this court with venue against these defendants, see Carolyn Chenilles, Inc. v. Ostow & Jacobs, Inc., 168 F.Supp. 894 (S.D. N.Y.1958).

For the foregoing reasons the motion for change of venue is denied.

SO ORDERED.

      . The complaint alleges that the copyrights are currently held by the corporate plaintiff, of which the individual plaintiff is apparently the sole shareholder. For purposes of this opinion, the term "plaintiff" will be used to designate both plaintiffs.


author: COHN, District Judge.

text:
    Stefano MORREALE, Plaintiff, v. Margaret HECKLER, Secretary of Health and Human Services, Defendant.
    Civ. No. 84-CV-0007-DT.
    United States District Court, E.D. Michigan, S.D.
    Oct. 12, 1984.

      Roger R. Kline of Mancini, Schreuder, Kline & Conrad, P.C., Warren, Mich., for plaintiff.
    Ellen E. Christensen, Asst. U.S. Atty., Detroit, Mich., for defendant.
   OPINION

COHN, District Judge.

I.

In this social security disability case, plaintiff objects to the magistrate’s recommendation that defendant’s decision denying disability benefits be affirmed.

Plaintiff applied for disability insurance benefits on August 18, 1981 alleging disability due to right brachial plexus, Bell’s palsy, Meniere’s disease and extreme nervousness. The application was denied. An administrative law judge (ALJ) affirmed the denial after finding that while plaintiff was unable to perform his past relevant work as a stockman picker and packer at Chrysler Corporation, he had the residual functional capacity to perform sedentary work. The issue now is whether the AU’s decision is supported by substantial evidence in the record. 42 U.S.C. § 405(g); Gibson v. Secretary, 678 F.2d 653, 654 (6th Cir.1982).

II.

The ALJ found that the medical evidence did not establish that plaintiff could not perform sedentary work and that his allegations of debilitation were not credible. In reaching these conclusions the AU made an improper credibility determination contrary to both Sixth Circuit law and the weight of the evidence and also failed to consider the combined effects of plaintiffs various impairments.

A.

The erroneous credibility determination made by the AU related to plaintiffs claim that he suffered from Meniere’s disease. This disease is defined as “[a] recurrent and usually progressive group of symptoms including progressive deafness, ringing in the ears, dizziness, and a sensation of fullness or pressure in the ears.” Taber’s Medical Dictionary, p. M-29. Meniere’s disease is a listed impairment in 20 C.F.R. Appendix I, Subpart P, Regulation No. 4 § 2.07. Plaintiff claimed to suffer from severe dizziness accompanied by ringing in his right ear. This dizziness caused him to black out, become nauseous and necessitated his lying down twice a day for at least 5 minutes at a time. Plaintiff claimed both in his application for disability benefits and before the ALJ that his condition met § 2.07 of the listings. The ALJ did not find that plaintiff had an impairment equal to any listed impairment, nor did he credit any of plaintiff’s testimony relating to his alleged Meniere’s symptoms, finding specifically that “claimant’s allegations of debilitation were not supported fully by the medical evidence or by his demeanor at the hearing. Subsequently (sic), they were not considered credible.” (Tr. at 24).

The medical record which relates to plaintiff’s dizziness includes letters from three examining physicians retained by the Secretary, testimony from a medical advis- or, and a letter from plaintiff’s treating physician. Dr. Fred Averbuch, an ENT specialist, stated in a letter dated October 2, 1981 that plaintiff

continuously from at least 1975 and probably earlier has been having difficulty with vertigo. Initial ENG’s (electronystagmograms) have showed end organ disorder in the right vestibular apparatus. This has been a rather consistent finding substantiated by a last electronystagmogram which was obtained 9/13/79. In addition Mr. Morreale has a high frequency neurosensory hearing loss in the right ear but there are no other physical abnormalities.

(Tr. at 352). Dr. Averbuch concluded that “[f]or the past several months the lightheadedness and vertigo that he has been suffering has been accentuated to the point where I do not feel he can be placed in a work position where either he or his fellow workers may be endangered ____ I feel that the vertigo may well continue and therefore the prognosis would be very poor.”

Dr. M. Ragheb, an examining physician, stated in a report dated October 2, 1981 that his impression of plaintiff’s condition was “[d]izziness-ataxia due to organic vestibular disease secondary to # 1.” (Tr. at 345). Another examining physician, Dr. M. Seid Arabi, a neurologist, submitted a report dated September 21, 1982 (Tr. at 356). After an examination of plaintiff’s hearing, Dr. Arabi found that plaintiff suffered from (among other impairments) “hearing loss, sensory and conduction in the right side related to damage in the inner ear [and] vertigo, related to injury of the vestibular system in the right side.” Dr. Arabi concluded that plaintiff’s “inner ear damage and also damage to the vestibular system and hearing organs would be permanent as far as I can say at the present time.” (Tr. at 357).

The third physician retained by the Secretary, Dr. Benjamin Lewis, did not actually examine plaintiff but reviewed plaintiffs medical file. (Tr. at 376). As to plaintiffs complaints of dizziness, Dr. Lewis found that the electronystagmograms taken by Dr. Averbuch showed impairment of vestibular functions relating to high frequencies on the right. Dr. Lewis found, however, that there are “substantial reasons” to doubt the diagnosis of Meniere’s disease. Dr. Lewis thought that it would be helpful to have all the material reviewed by a specialist, perhaps with an additional audio-gram prior to the hearing. At the hearing, medical advisor Dr. James McKenna, a board certified ENT specialist, testified extensively as to plaintiff’s ear problems (Tr. at 79-93). Dr. McKenna initially stated that, based on the medical record and testimony presented, he “would have no trouble in saying that [Meniere’s disease is] present in this case.” (Tr. at 81). Dr. McKenna concluded that plaintiff’s condition met § 2.07 of the listings (Tr. at 88). Dr. McKenna stated that a slight disruption in hearing could produce a severe amount of dizziness and that plaintiff’s tension and diabetes could also be aggravating factors to his hearing problems. Dr. McKenna also stated that unless plaintiff’s current condition became somehow controlled by medication he would not be able to engage in any employment. (Tr. at 86).

The ALJ did not give credence to Dr. McKenna’s conclusion and did not mention in his decision the fact that Dr. McKenna had stated that plaintiff met the listings. The ALJ did note that a progressive hearing disorder is required by § 2.07 and that Dr. McKenna did not state that there was any indication that plaintiff’s hearing problem was progressive. However, Dr. McKenna actually said, in response to the AU’s statement that plaintiff “doesn’t meet though the progress loss of hearing,” was “No, well, see it depends he has a hearing loss and we didn’t know whether that will progress or not, we know what he has is permanent.” (Tr. at 91).

The magistrate’s report states that “most of the examining physicians agree that plaintiff suffers from ... Meniere’s disease.” This statement is inconsistent with the AU’s actual finding, affirmed by the magistrate, that plaintiff’s complaints were not supported by medical evidence. If it was as clear as indicated by the magistrate that plaintiff suffered from Meniere’s disease, the AU would have erred in not finding that plaintiff met the listing in § 2.07. However, the ALJ has the right to resolve conflicting respectable medical opinions. LeMaster v. Weinberger, 533 F.2d 337, 349 (6th Cir.1976); Halsey v. Richardson, 441 F.2d 1230 (6th Cir.1971). Given that Dr. Lewis doubted that Meniere’s diagnosis, and none of the medical reports state conclusively that plaintiff’s hearing loss was progressive, the medical record was not quite so clear as suggested by the magistrates’ report and the AU could conclude that plaintiff did not meet the listings.

Although the ALJ did not err in his determining that plaintiff did not meet the listings, his determination that plaintiff’s allegations of disabling dizziness were not credible based on the medical record was incorrect. Analogizing to Sixth Circuit cases dealing with credibility determinations regarding complaints of disabling pain, a claimant need not present clinical and diagnostic evidence that his symptoms would be inevitable. Beavers v. Secretary of HEW, 577 F.2d 383, 386 (6th Cir.1978). A medical condition supporting subjective complaints need only be “reasonably expected to produce those symptoms.” 29 C.F.R. § 404.1529 (1983). A vocational expert testified that if plaintiff’s testimony as to his impairments, particularly that testimony which related to his dizziness, was taken as credible plaintiff would be unable to perform any type of gainful employment. (See Tr. at 100-102). Even if there was reason to doubt whether plaintiff met the listings, the hearing impairments which are acknowledged by all the physicians of record clearly could be reasonably expected to produce the symptoms that he complained of and therefore those symptoms were improperly discounted by the ALJ.

The ALJ stated that while doctors found that claimant’s dizzy spells preclude him from working at heights or being around dangerous machinery, no doctors concluded that plaintiff is completely disabled due to his dizzy spells. (Tr. at 22). While the conclusion of plaintiff’s treating physician that he is disabled would be entitled to great weight if supported by objective medical findings, the absence of such a conclusion is not dispositive on the issue of whether a claimant is disabled. Since the medical evidence is clearly consistent with plaintiff’s testimony as to his symptoms, the fact that no doctor concluded that plaintiff was totally disabled did not constitute substantial evidence supporting the ALJ’s conclusion that his complaints were not credible.

Since there is nothing in the record to cast doubt on plaintiff’s credibility, the court is of the opinion that it must take the testimony at face value. This is not a case where someone is claiming the existence of [symptoms] where there is no discernable medical cause.

Huff v. Califano, Unemp.Ins.Rep. ¶ 16,063 (E.D.Mich.1978).

The ALJ made the type of “sit and squirm” credibility determination specifically rejected in Garland v. Secretary, 528 F.Supp. 415 (E.D.Mich.1981). At Tr. p. 20, the ALJ states that “the claimant had no trouble hearing the conversational questions and answers during the two hour hearing.” This is precisely the type of “objective observation of the plaintiff’s physical condition in preference to the medical evidence” that was criticized in Garland, 528 F.Supp. 415, 416-17 (E.D. Mich.1981). This observation was also irrelevant considering the fact that it was high frequencies, not speech frequencies in which plaintiff suffered his impairments.

B.

Even if the ALJ did not err in discounting plaintiff’s claim of disabling dizziness, the AU erred in failing to consider the combined effects of his impairments. In addition to plaintiff’s inner ear problems the medical record shows through various physicians’ reports that he suffers from right facial paralysis as a result of Bell’s palsy which causes problems with his right eye, radiating pain and tenderness in his right arm and shoulder and diabetes. As stated in Hurst v. Schweiker, 725 F.2d 53, 55-56 (6th Cir.1980)

It is the view of this Circuit ... that disability may be established by a claimant suffering from a variety of medical problems, no one of which might be sufficiently disabling to prevent substantial gainful employment but when taken together have that result.

The Secretary stated in her response to plaintiff’s objections that the consensus of medical opinion does not support the proposition that he is disabled. The AU and the defendant find it significant that no doctor’s reports conclude that plaintiff is completely disabled. However, the doctors who state that plaintiff is only partially disabled were also not looking at the totality of his impairments — i.e., they were specialists who only concluded that he was not totally disabled due to his right arm pain, or due to his dizziness. It is obvious that taking all of plaintiffs impairments together it is not realistic to find a residual functional capacity for sedentary work.

III.

In conclusion, the AU’s denial of benefits is not supported by substantial evidence in the record. The ALJ’s decision was based on an improper credibility determination and on a failure to consider the combined effects of plaintiffs impairments. Plaintiffs motion for summary judgment is GRANTED and the Secretary’s motion for summary judgment is DENIED. This case is REMANDED to the Secretary for a determination of benefits.

SO ORDERED.

      . After a hearing held on March 25, 1980 plaintiff was awarded a closed period of disability benefits from July 12, 1978 to October 1979 due to traction of his right shoulder and neck resulting from an injury. He was found able to perform sedentary work after this period. Since plaintiff did not file a timely appeal and a request for reopening was denied, the Secretary and the AU considered the issue of plaintiffs disability prior to March 2, 1980 as res judicata and did not consider any evidence relating to his condition prior to that date.

      . See also Tr. p. 17 "OBSERVATIONS OF THE PRESIDING OFFICER”.
      The Sixth Circuit has stated repeatedly that findings by the ALJ regarding the claimant’s credibility cannot be the basis for a denial of benefits. The Court has said that
      “credibility, especially with alleged pain, is crucial to the resolution of the claim [and] the ALJ’s opportunity to observe the demeanor of the claimant is invaluable, and should not be discarded lightly.” Kirk v. Secretary, 667 F.2d 524, 538 (6th Cir.1981) (quoting Beavers v. Secretary, 577 F.2d 383, 387 (6th Cir.1978)). However, as later cases have made increasingly clear, where the claimant’s subjective complaints are consistent with and substantiated by the medical evidence of record, the ALJ cannot discount the claimant’s complaints solely on the basis of demeanor evidence. King v. Heckler, 742 F.2d 968 at 975 (6th Cir. August 30, 1984); Martin v. Secretary, 735 F.2d 1008, 1010 (6th Cir.1984); Weaver v. Secretary, 722 F.2d 310, 312 (6th Cir.1983). Indeed, the Sixth Circuit stated in the recent case King v. Heckler, supra, that in cases where the medical evidence does not conflict and is “entirely consistent” with the claimant’s subjective complaints, “the importance of credibility findings is substantially decreased.” At 975 n. 2.


author: FILIPPINE, District Judge.

text:
    Joseph H. SOLIEN, Regional Director of Region 14 of the National Labor Relations Board, for and on Behalf of the NATIONAL LABOR RELATIONS BOARD, Petitioner, v. TEAMSTERS LOCAL UNION NO. 688 affiliated with International Brotherhood of Teamsters, Chauffeurs, Warehousemen and Helpers of America, Respondent.
    No. 84-2219C(2).
    United States District Court, E.D. Missouri.
    Oct. 12, 1984.
    Mary J. Tobey, N.L.R.B., St. Louis, Mo., for petitioner.
    Clyde E. Craig, St. Louis, Mo., for respondent.
   MEMORANDUM

FILIPPINE, District Judge.

This matter is before the Court on the petition of the National Labor Relations Board (Board) for an injunction prohibiting Teamsters Local Union No. 688 (Local 688) from picketing at the Isolda Avenue garage of Airlane Cab Co., Inc., Skyway Cab Co., Inc., and Air-Ways Cab Co., Inc. (the Cab Companies) and at Lambert Airport pending the final disposition of an unfair labor practice charge filed with the Board by the Cab Companies. The Cab Companies filed an unfair labor practice charge with the Board alleging that Local 688 was violating Section 8(b)(4)(B) of the National Labor Relations Act (the Act), codified as amended at 29 U.S.C. §§ 151-69, by engaging in a secondary boycott against the Cab Companies. Pursuant to section 10(l) of the Act the Board filed a petition for injunctive relief with this Court. A hearing on all issues was held by the Court, and both parties to the action presented evidence for the Court’s consideration. The Court adopts the following memorandum as its findings of fact and conclusions of law pursuant to Federal Rule of Civil Procedure 52.

The Cab Companies are each corporations and employers engaged in interstate commerce within the meaning of the Act. During the past year, in the course and conduct of their business operations, the Cab Companies derived gross revenues in excess of $500,000 and purchased and received in St. Louis, Missouri, goods and materials valued in excess of $20,000 directly from points outside the State of Missouri. Local 688, against whom the Cab Companies filed the unfair labor practice charge, is a labor organization under the provisions of the Act.

Prior to July 28, 1984 the Cab Companies provided services from Lambert Airport utilizing the services of employee drivers, who were paid on a commission basis. The cab drivers employed by the Cab Companies were represented by Local 688 and terms and conditions of employment were governed by a collective bargaining agreement, the last of which expired on April 30, 1984.

Negotiations were conducted during the summer of 1984 during which the Cab Companies proposed to change from the commission method of compensation to a lease operation. The parties did not reach agreement on this issue.

On July 28, 1984, Air-Ways, and on August 31, 1984, Airlane and Skyway, implemented changes in operations. Under the new plan persons wishing to drive the cabs are required to sign a lease agreement and pay a set fee. The independent contractors who lease the cabs receive no wages or benefits from the Cab Companies and are not required to make any reports to the Cab Companies. All fares and tips are kept by the independent contractors. The Cab Companies require no uniforms and provide no dispatchers.

Picketing by Local 688 commenced on July 28, 1984, against Air-Ways and on July 31, 1984, against Airlanes and Skyway at the garage facilities of the Cab Companies and at the taxi stands located at the passenger arrival doors to the terminal at Lambert St. Louis International Airport.

From July 28, 1984, to July 31, 1984, Local 688’s picket signs read as follows:

Employees of Air-Ways We have no dispute with any other employer at this location ON STRIKE Teamsters Local Union 688 I.B. of T.C.W. & H. of A.

From July 31, 1984, and continuing to date, the picket signs read:

Employees of Airway Skyway Airlane We have no dispute with any other employer at this location ON STRIKE Teamsters Local Union 688 I.B. of T.C.W. & H. of A.

When Air-Ways first implemented the lease program the independent contractors were not required to pay the rental fee. Lillian Miceli, President of Air-Ways, testified that the lease fee was waived because of the difficulty she encountered in attempting to get independent contractors. She testified that they were harrassed by the picketers and that many worked only a half day and then quit. She testified that the independent contractors drove for approximately three weeks without being required to pay the lease fee. The testimony of Ervin K. Eltinge, President of Airlane and Vice President of Skyway, was substantially the same on this point. He testified that the independent contractors were allowed to drive the cabs without paying the lease fee for a period of approximately three weeks.

On August 6, 1984, the Cab Companies filed charges with the Board alleging that Local 688 has been and is engaging in unfair labor practices within the meaning of Section 8(b)(4)(B) of the Act. On September 19, 1984, amended charges were filed with the Board. The Board maintains that Local 688 has a primary dispute with the independent contractors, and that there is reasonable cause to. believe that the picketing of the Cab Companies with signs indicating that the dispute is with the Cab Companies is an unfair labor practice prohibited by Section 8(b)(4)(B).

The Court has jurisdiction over the case, and venue is proper in this district. The unfair labor practice in question “is alleged to have occurred” in this district, and this Court has the power to issue “appropriate injunctive relief pending the final adjudication of the Board with respect to [this] matter” under Section 10(l). In a Section 10(Z) proceeding such as this the function of this Court is to determine whether there is reasonable cause to believe that a violation of Section 8(b)(4)(B) has occurred and that injunctive relief is just and proper. The statutory standard of reasonable cause is satisfied even if there is a showing of factual issues which must be resolved by the Board. The ultimate determination of a violation is left to the Board, and subject to review by the Court of Appeals. Solien v. United Steelworkers, 593 F.2d 82, 86-87 (8th Cir.1979), cert. denied, 444 U.S. 828, 100 S.Ct. 54, 62 L.Ed.2d 36; Wilson v. Milk Drivers & Dairy Employees Local 471, 491 F.2d 200, 203 (8th Cir.1974).

Thus, this Court must determine, based upon the evidence presented to it at the hearing whether or not there is reasonable cause to believe that Local 688 is engaging in an unlawful secondary boycott prohibited by Section 8(b)(4)(B). A secondary boycott is an effort by a labor organization to force or require “any employer or other person to cease using, selling, handling, transporting, or otherwise dealing in the products of any other producer, processor, or manufacturer, or to cease doing business with any other person, or forcing or requiring any other employer to recognize or bargain with a labor organization as the representative of his employees unless such labor organization has been certified as the representative of such employees under the provisions of section 9____”

Under the facts of this case the Court concludes that there is reasonable cause to believe that the picketing of Local 688 is a prohibited secondary boycott directed toward the Cab Companies and the customers of the Cab Companies to force them to cease doing business with the independent contractors who are currently leasing the cabs.

In Otis Elevator v. Local 989, 269 NLRB No. 162, 5-6 (April 6, 1984), the Board held that where a decision by a company “turns upon a change in the nature or direction of the business,” rather than upon a desire to reduce labor costs, it is not subject to mandatory bargaining. Here, the testimony indicates that the decision on the part of the Cab Companies to change from a commission system to a lease system was based upon a change in the nature of the business. Miceli indicated that she decided to change to the lease format because she was getting tired and wanted to have less work for herself. Eltinge indicated that the commission system, with its resultant paperwork, was the reason behind the changes made by Airlane and Skyway. He stated that in the past his mother had been the bookkeeper and that upon her death his father, nearing age 70, had taken them over but that the amount of work was getting to be too much for him. Nothing indicates that the reason for the change was a reduction of labor costs.

The Union points to the fact that the independent contractors were allowed to drive for the first three weeks without paying the lease fee as evidence that the changes were not simply management decisions to change the nature of the business but, rather, were made after the picketing began in an apparent attempt to retaliate against Local 688. The testimony, however, does not support this conclusion. Both Miceli and Eltinge testified that they allowed the three week period without the lease payments as an incentive to encourage independent contractors to engage in business with the Cab Companies. Both testified that the incentive was necessary because the independent contractors were being harrassed and the working conditions were unmanageable. Further, the fact that during the first few days independent contractors were driving cabs without having signed a lease is not determinative. Nothing in the testimony indicates that during that time period the independent contractors were being paid on a commission basis, that they were required to come in and leave at specified times or that they were receiving benefits from the Cab Companies. Considering the fact that the lease program was apparently instituted on July 28, 1984, for Air-Way and on July 31, 1984, for Airlane and Skyway, the mere fact that an incentive, i.e., up to three weeks of free leases, was provided the drivers does not convince the Court that the lease operations began only after the picketing began.

Thus, the facts indicate that there is reasonable cause to believe that under Otis Elevator the Cab Companies were free to change over from a commission system to a lease system. As a result, Local 688 has no valid dispute with the Cab Companies. Its primary dispute, the Board argues, is with the independent contractors who are leasing cabs from the Cab Companies and that by picketing the companies at their headquarters and at the airport with signs indicating that their grievance is against the companies’ practices, Local 688 is engaging in an unlawful secondary boycott.

The Court agrees. Under Otis Elevator the Union has no valid dispute with the Cab Companies. The only persons with whom it could possibly have a dispute with are the independent contractors. The mere fact that the Union characterizes its dispute as being with the Cab Companies does not change its true nature. Because its dispute is with the independent contractors, the Court has reasonable cause to believe that the picketing of the Cab Companies’ garage on Isolda Avenue and the picketing at the airport designating the Cab Companies as the target of the picketing constitutes secondary activity under Section 8(b)(4)(B). Accordingly, the Court will issue the injunction requested.

JUDGMENT

In accordance with the Memorandum filed this date and incorporated herein,

IT IS HEREBY ORDERED, ADJUDGED, and DECREED that until final disposition of the matters now pending before the National Labor Relations Board, Teamsters Local No. 688, affiliated with the International Brotherhood of Teamsters, Chauffeurs, Warehousemen and Helpers of America, and all its officers, representatives, agents, servants, employees, attorneys and all members and persons acting in concert or participation with it or them, be, and they hereby are, enjoined and restrained from:

a) Picketing at the Isolda Avenue garage of Airlane Cab Co., Inc., Skyway Cab Co., Inc., and Air-Ways Cab Co., Inc., and at Lambert St. Louis International Airport.

b) In any manner, or by any means, including picketing, orders, directions, instructions, requests or appeals, however given, made or imparted, or by like or related acts, or by permitting any such to remain in existence or effect, engaging in or inducing or encouraging any individual employed by Airlane Cab Co., Inc., Skyway Cab Co., Inc. and Air-Ways Cab Co., Inc., or by any other person engaged in commerce or in an industry affecting commerce, to engage in a strike or a refusal in the course of his employment to use, manufacture, process, transport, or otherwise handle or work on any goods, articles, materials or commodities, or to perform any service, or in any manner, or by any means, threatening, coercing or restraining Airlane Cab Co., Inc., Skyway Cab Co., Inc., and Air-Ways Cab Co., Inc., or any other person engaged in commerce or in an industry affecting commerce where in either case an object thereof is to force or require Airlane Cab Co., Inc., Skyway Cab Co., Inc., and Air-Ways Cab Co., Inc., or any other person, to cease doing business with the independent contractors.


author: WEINER, District Judge.

text:
    Gary Lee GONCE v. Walter W. REDMAN, Warden and the Attorney General of the State of Pennsylvania.
    Civ. A. No. L 84-1558.
    United States District Court, E.D. Pennsylvania.
    Oct. 12, 1984.
    Gary Lee Gonce, pro se.
   MEMORANDUM OPINION AND ORDER

WEINER, District Judge.

Presently before the court is a “Motion for Rehearing” filed by the petitioner, Gary Lee Gonce, a prisoner at the Delaware Correctional Center at Smyrna, Delaware, requesting this court to allow the petitioner to proceed with his writ of habeas corpus, which motion we shall treat as a motion to vacate our Order of August 15, 1984, 590 F.Supp. 1155, dismissing the petition for writ of habeas corpus.

On October 24, 1980, petitioner was extradited from the state of Delaware to Pennsylvania to await a hearing for a 1977 robbery which was alleged to have occurred in Delaware County, Pennsylvania. Petitioner was found guilty, after a jury trial, for robbery and conspiracy. Thereafter, petitioner was sentenced by the Pennsylvania court to consecutive terms of ten-to-twenty years imprisonment for robbery and five-to-ten years for conspiracy, both of which to run consecutively to petitioner’s Delaware sentence, which had already commenced. Petitioner next appealed to the Superior Court of Pennsylvania which affirmed the decision of the lower court.

Petitioner then filed a petition for a writ of habeas corpus in this court, attacking the Pennsylvania conviction and alleging various errors made by the trial court. In a Memorandum Opinion and Order of August 15, 1984, this court dismissed the petition on the ground that the power to review a prisoner’s habeas corpus petition extends only to present, not future, custody. Therefore, since the petitioner had not yet commenced service of the Pennsylvania sentence, the petition could not be considered.

Petitioner now asks this court to reconsider his petition and allow him to proceed in light of Ward v. Knoblock, 738 F.2d 134 (6th Cir.1984). For the reasons which follow, we vacate our Order of August 15, 1984.

Section 2241 of the Judicial Code, contained in 28 U.S.C., gives a district court the power to grant a writ of habeas corpus if the prisoner “is in custody in violation of the Constitution on laws or treaties of the United States.” 28 U.S.C. § 2241(c)(3). In Peyton v. Rowe, 391 U.S. 54, 88 S.Ct. 1549, 20 L.Ed.2d 426 (1968), the Supreme Court held that when a prisoner is serving consecutive sentences, the “in custody” requirement of § 2241(c)(3) is satisfied and the prisoner need not wait until the termination of the first sentence. Id. at 67, 88 S.Ct. at 1556. In so doing, the court overruled McNally v. Hill, 293 U.S. 131, 55 S.Ct. 24, 79 L.Ed. 238 (1934), which held that the habeas corpus statute does not authorize attacks upon future consecutive sentences, the so-called “prematurity rule.” Peyton, 391 U.S. at 55, 64, 88 S.Ct. at 1549, 1554.

The Peyton court reasoned that the writ of habeas corpus has three general characteristics: to provide (1) post conviction relief, (2) prompt adjudication of the petitioner’s claims, and (3) to authorize the district court to look beyond the trial record and conduct a factual hearing to determine the merits of alleged deprivations of constitutional rights. Id. at 59, 60, 88 S.Ct. at 1552. The prematurity rule of McNally undermined at least two of these characteristics by possibly causing the delay of a federal claim for decades at which time “dimmed memories or the death of witnesses is bound to render it difficult or impossible to secure crucial testimony on disputed areas of fact,” and by possibly extending the time a prisoner entitled to release must remain in confinement. Id. at 61, 62, 88 S.Ct. at 1553.

Although Peyton involved consecutive prison sentences in the same state, the court soon extended the doctrine to situations where the consecutive sentences were to be served in different states. In Braden v. 30th Judicial Circuit Court of Kentucky, 410 U.S. 484, 93 S.Ct. 1123, 35 L.Ed.2d 443 (1973), petitioner had been indicted for certain crimes in Kentucky but escaped to Alabama where he was arrested, convicted and imprisoned for crimes committed in that state. Kentucky officials lodged a detainer against him. The petitioner sought a writ of habeas corpus, attacking the validity of the Kentucky indictment, while he was serving the Alabama sentence. The Supreme Court held that the considerations which were held in Peyton to warrant a prompt resolution of the claim also applied when “the ‘future custody’ under attack will not be imposed by the same sovereign which holds the petitioner in his current confinement.” Id. at 489, n. 4, 93 S.Ct. at 1126, n. 4. The court reasoned that the detainer issued by the Kentucky officials made the Alabama warden Kentucky’s agent, making the petitioner “in custody” for purposes of 28 U.S.C. § 2241(c)(3).

The Third Circuit, although in dicta, has recognized this doctrine. In United States ex rel. Van Scoten v. Pennsylvania, 404 F.2d 767 (3d Cir.1968), the court states that Peyton applied when a prisoner in New Jersey attempted to challenge the validity of a sentence imposed upon him by a Pennsylvania state court, the service of which was to commence upon completion of the New Jersey imprisonment. Id. at 767, 768. Similarly, the Fourth Circuit applied Peyton in Ward v. Knoblock, 738 F.2d 134 (6th Cir.1984), ruling that a Missouri prisoner was “in custody” under 28 U.S.C. § 2255, the federal-prisoner habeas corpus statute, and could challenge the validity of a future consecutive federal prison sentence. Neither the Van Scoten nor the Ward courts considered it necessary to deal with the issue expressly left open in Braden, that is, whether Peyton applies when a detainer has not been lodged against the prisoner. Braden 410 U.S. at 489, n. 4, 93 S.Ct. at 1126, n. 4. In fact, the courts in neither Braden nor Ward revealed whether detainers had been lodged against the respective petitioners.

For the reasons explained above, it is clear that under the holdings in Peyton and Braden, the petitioner in the case sub judice, is “in custody” for purposes of 28 U.S.C. § 2241(c)(3). We therefore vacate our Order of August 15, 1984.

      . Petitioner’s application for habeas corpus before this court indicated that the Supreme Court of Pennsylvania denied petitioner's petition for allowance of appeal.