author: HALL, District Judge.

text:
    Willie L. WEAVER, Plaintiff, v. Richard S. SCHWEIKER, Secretary of Health and Human Services, Defendant.
    No. TX-83-12-CA.
    United States District Court, E.D. Texas, Texarkana Division.
    Nov. 19, 1985.

      Joseph A. Sterle, Texarkana, Tex., for plaintiff.
    William J. Cornelius, Asst. U.S. Atty., Tyler, Tex., for defendant.
   MEMORANDUM OPINION AND FINAL ORDER OF REMAND

HALL, District Judge.

This appeal is brought under § 405(g) (1983) from the Secretary’s final decision denying Plaintiff Willie L. Weaver supplemental social security income and disability insurance benefits. Based on new evidence, this Court finds “good cause” to remand this case to the Secretary for further review.

On October 19, 1981 Weaver filed an application for disability asserting that he was totally disabled from a stroke he had suffered on September 11, 1981. (Exhibit 1, Tr. 44). An Administrative Law Judge (AU), on August 16,1982, denied Weaver’s request (Tr. 6-16) and concluded that although Petitioner is not capable of returning to his past work as a carpenter/laborer, he has “the residual functional capacity within 12 months to do medium, light, and sedentary work”. By letter dated December 22, 1982 the AU’s decision was upheld by the Appeals Council, becoming the final decision of the Secretary in this case. (Tr. 3). Weaver then filed this appeal challenging the Secretary’s denial of benefits.

Plaintiff’s appeal, filed with this Court by Complaint on January 27, 1983, prays that this Court reverse the Secretary’s decision and award the Plaintiff social security benefits. Attached to his Complaint, this Court finds a letter from Jerry B. String-fellow, M.D., dated December 6, 1982 wherein the Doctor opines that Mr. Weaver is “permanently and totally disabled”. The letter indicates that Dr. Stringfellow performed a physical examination on Weaver, although no medical reports are attached thereto. Defendant filed its Answer to Plaintiff’s Complaint on May 16, 1983 and then filed a Motion for Summary Judgment in November of 1983. Defendant’s Motion for Summary Judgment, pages 15-19, contains the argument that Plaintiff has failed to show “good cause” for remand as required by statute, and that because the Secretary’s determination is supported by substantial evidence, a “remand to develop more evidence would be without value”. In light of correspondence filed with this Court by Plaintiff’s Counsel on November 8, 1985 and on November 13, 1985, and in light of the administrative hearing held on April 20, 1982, this Court does not agree.

The record reflects that the AU held a hearing on April 20, 1982 to determine whether or not Weaver is entitled to benefits under the Social Security Act (the Act). (Tr. 29-43). During the hearing the AU considered evidence, in the form of medical evidence and witness testimony, that Mr. Weaver had suffered a stroke and that he was disabled. At the close of these proceedings the AU stated:

“he [claimant] has to prove he’s been disabled for twelve months. What I’m thinking is maybe I’ll get another examination. (Tr. 40)____I’m just saying that from the evidence, I can’t tell for sure that he’s going to be disabled for 12 months. ... Dr. Harris’ report ... doesn’t give me any indication of whether it’s likely to improve or get worse. So I’m just saying I don’t have sufficient evidence to make a decision____ (Tr. 41)”. (Emphasis added).

Accordingly, the AU had Weaver reexamined by a Dr. Capps on May 19, 1982. Dr. Capps concluded that Weaver’s condition had improved. (Exhibit 26, Tr. 124-127). The record reflects that Capps’ testimony played the crucial role in the AU’s determining that Weaver is not disabled. (AU’s Decision, Tr. 13, Is. 10-21).

The abovementioned portions of the transcript amply demonstrate that the AU was concerned with whether or not Weaver’s disability would last for a year beyond the date of its onset on September 11, 1981. Based on Dr. Capps’ testimony, he concluded that Weaver did not meet the durational requirement of twelve (12) months, under the Act, to entitle him to disability. Certainly, Dr. Stringfellow is of a different opinion as set forth in his letter of December 6, 1982, and certainly, under the facts of this case, it is prudent for the Court to conclude that a remand to the Secretary is appropriate. This Court cannot state that “there is no reasonable possibility that it [the new evidence (including any associated medical reports) ] would have changed the outcome of the Secretary’s determination”. Chaney v. Schweiker, 659 F.2d 676, 679 (5th Cir.1981).

Furthermore, Plaintiff has demonstrated to this Court, by correspondence dated November 8, 1985 and November 13, 1985, that he had “good cause” for his failure to submit the evidence at the administrative proceeding. Weaver was first examined by Dr. Stringfellow on November 4, 1982 for purposes of treatment, not for purposes of obtaining additional medical evidence to submit to the Secretary. Said examination occurring approximately seven (7) months after the hearing before the AU in April of 1982 and three (3) months after the AU denied Weaver’s application, it was impossible for Weaver to submit this evidence in the prior proceeding. Under the facts of this case, and upon the representation of Plaintiff’s Counsel that Plaintiff consulted Dr. Stringfellow in good faith, in the interests of justice this Court finds that Plaintiff has provided an explanation sufficient to demonstrate “good cause” for his failure to obtain this new evidence prior to the closing of the administrative record. Chaney v. Schweiker, supra at 679; Watts v. Harris, 614 F.2d 515 (5th Cir.), cert. denied, 449 U.S. 863, 101 S.Ct. 168, 66 L.Ed.2d 80 (1980). The Court further finds that the new evidence is unquestionably material, relevant and probative to the inquiry at hand.

For these reasons, the Court, in its discretion, finds “good cause shown” to remand this claim, in the interests of justice, in order that additional evidence can be considered by the Secretary. Johnson v. Harris, 612 F.2d 993 (5th Cir.1980). The existence of new evidence can create “good cause” for remand of a disability benefits claim to the AU for additional findings. Chaney v. Schweiker, supra at 679; Johnson v. Harris, supra at 999.

It is, therefore, ORDERED, ADJUDGED and DECREED that Defendant’s Motion for Summary Judgment be DENIED and the determination of the Secretary be REVERSED and this cause be REMANDED to the Secretary for reconsideration in accordance with this opinion. Further, the Court ORDERS that the Plaintiff be allowed to offer any evidence associated with Dr. Stringfellow’s opinion, such as medical reports, and any other evidence demonstrating the Plaintiff’s disability has lasted for twelve (12) months. Because it has been over four (4) years since Plaintiff initially filed this claim, it is further ORDERED that this case be given priority by the Secretary, and that the reevaluation ordered herein be completed within ninety (90) days of the signing of this memorandum opinion and order.


source: Caselaw Access Project

author: BARRINGTON D. PARKER, District Judge:

license: Public Domain

text:
    MARINE TRANSPORT LINES, INC., Plaintiff, v. John F. LEHMAN, et al., Defendants, Seafarers International Union of North America, Atlantic Gulf Lakes and Inland Waters District, AFL-CIO, Intervenor-Defendant.
    Civ. A. No. 85-3437.
    United States District Court, District of Columbia.
    Nov. 20, 1985.

      H. Clayton Cook, Ronald D. Eastman, Arnold B. Podgorsky, Washington, D.C., for plaintiff.
    Charles F. Flynn, Asst. U.S. Atty., Washington, D.C., for defendants.
    Richard Gabriele, New York City, Terry R. Yellig, Washington, D.C., for intervenor.
   MEMORANDUM OPINION

BARRINGTON D. PARKER, District Judge:

This case presents a controversy between a disappointed bidder and the federal government arising during the course of procurement negotiations. Litigation of this nature is filed with some frequency in this District Court. As is true in many such cases, the legal issues presented are involved and serious.

INTRODUCTION

The plaintiff Marine Transport Lines, Inc. (“Marine Transport” or “MTL”) brings this action against the Secretary of the Navy and the Commander of the Military Sealift Command (“Sealift Command” or “MSC”) seeking to establish and to enforce its right to a procurement contract for the operation of twelve oceanographic vessels. The plaintiff charges that it negotiated and entered into a lawful and binding agreement with the Sealift Command but that now the government refuses to pursue the necessary steps to implement the agreement, refuses to execute required contract documents, and intends and has taken steps to reopen the entire procurement efforts. Marine Transport seeks preliminary and permanent injunctive relief, prohibiting the government from taking any action to avoid or set aside the contract award or to solicit new offers for the operation of the vessels; a declaratory judgment that they have a contract with the Sealift Command, and a writ of mandamus requiring the government to execute the contract. The plaintiff claims that the defendants have violated applicable procurement law and regulations, that their actions are arbitrary and capricious and violate provisions of the Administrative Procedure Act, 5 U.S.C. § 551 et seq.

Marine Transport commenced this proceeding in the United States District Court for the District of New Jersey on October 4, 1985. Later, on application of the government, the proceeding was transferred to this District because of an earlier-filed case pending in this Court, involving similar and related factual and legal issues, Seafarers International Union of North America, etc., AFL-CIO (“SIU") v. Donnelly, et al., C.A. No. 85-2423 (filed July 29, 1985). See infra, p. 5. Following transfer, SIU was granted leave to intervene as party defendant in this proceeding.

On November 8, 1985, the Court scheduled and considered argument on the plaintiff’s motion for a preliminary injunction. A motion of the government for summary judgment was also at issue and argued. The parties agreed that there were no disputed material facts, that only legal issues remained for resolution, and that the stage was thus set and it was appropriate to render a final ruling on the merits.

On November 12, 1985, the Court entered an order denying the plaintiff’s application for a preliminary injunction and granting the government’s motion for summary judgment. In accordance with that Order, this Memorandum Opinion explains the reasons for the Court’s ruling.

BACKGROUND

The essential, material and undisputed facts are briefly stated. In March 1984, the Military Sealift Command, a division of the Department of the Navy, issued a Request for Proposal (“RFP”) seeking bids from private commercial contractors for the operation and maintenance of twelve oceanographic vessels. The ships were owned by the Navy and were used to support oceanographic research projects conducted by the Naval Oceanographic Office. In prior years the vessels were manned and operated by civil service personnel—mariners—employed by the Navy.

The RFP procedure was governed by a directive of the Office of Management and Budget (“OMB”), Circular A-76. The Circular required the Navy to prepare a cost estimate for operations of the ships by civil service mariners. Interested private contractors could also submit bid proposals. A cost comparison would then determine the most economical method for operation of the ships, either by in-house performanee through the Navy or by contracting-out to private companies.

In issuing the RFP, the Sealift Command made no determination and did not require that it be subject to the provisions of tne Service Contract Act of 1965 (“SCA” or “Act”), 41 U.S.C. §§ 351 et seq. The solicitation did not require the winning bidder to pay wages and fringe benefits in accordance with the Act. Nor did the RFP include any of the provisions of the Federal Acquisition Regulations (“FAR”), 48 C.F.R. Chapter 1, provisions which are required in solicitations subject to the Service Contract Act.

Initial offers in response to the RFP were received by the Sealift Command in January 1985. The plaintiff was one of several companies submitting an offer. After receiving offers in response to the bidding process and pursuant to 48 C.F.R. § 15.609, the contracting officer for the Sealift Command established a “competitive range,” which included all offerors having a reasonable chance of winning the contract. Three of the initial offers, including the plaintiffs, were considered to be within the competitive range. Conferences were then held with the three offerors pursuant to 48 C.F.R. § 15.610, and their “best and final” offers were requested, pursuant to 48 C.F.R. § 15.611. Those offers were received on April 15, 1985. The offers of the private commercial contractors were then compared with the cost of continued operation of the oceanographic vessels by the government. Following the comparison, it was determined that the plaintiff had .submitted the lowest-priced proposal, as compared both with those submitted by the other private competitors and with the government proposal.

In accordance with Circular A-76, plaintiff’s price proposal covering the contract term for each vessel was made available for public review. However, their proposed ship manning concept, the wages it planned to pay its employees and other details of their offer, were not revealed publicly. On May 9, 1985, MSC’s Contracting Officer notified all original offerors that

[A]s the cost comparison establishes that the cost of contract performance is less than the cost of Government performance it has been tentatively decided to award a contract to Marine Transport Lines, Inc. This tentative decision is subject to an administrative appeals procedure ... based on requirements of OMB Circular A-76 and currently applicable commercial activities (CA) program guidance promulgated by the Chief of Naval Operations.

(Emphasis added). The deadline for the filing of an appeal was June 3, 1985; fourteen appeals were filed. Copies of the appeals were made available to all directly affected parties. One appeal alleged that the Service Contract Act of 1965 was applicable to the solicitations.

In mid-July 1985, the reviewing officer denied all appeals. Following his decision, the Seafarers International Union filed suit in this Court, see supra p. 2, alleging that the Service Contract Act and implementing regulations required that the RFP solicitation and resulting contract include applicable provisions of the Act. Named as defendants in that proceeding were the Secretary of the Navy, the Military Sealift Command official involved in the RFP, the Secretary of Labor, and Marine Transport Lines. The complaint requested that the Navy be enjoined from further action under the RFP solicitation and that implementation of the tentative decision made on the Marine Transport offer be enjoined until the requirements of the Act were met.

The Service Contract Act of 1965 establishes basic labor standards governing the award and performance of government contracts for services in excess of $2,500 where the principal purpose of the contract is to furnish services to the government through use of service employees. Contracts covered by the Act must include provisions specifying that a minimum level of wages be paid, that a minimum level of fringe benefits be provided, and that the work environment meet minimum standards of health and safety. Enforcement of the Act was delegated by the Congress to the Department of Labor (“DOL”). Following that delegation, the Secretary of Labor promulgated implementing regulations codified at 29 C.F.R. Part 4. The determination of the level of wages and benefits to be paid on a particular contract was to be made by the Department's Wage and Hour Administration.

On August 2, 1985, representatives of the Departments of Labor and Defense met with Department of Justice representatives to discuss the recently-filed SIU complaint. At that conference the Justice Department representative advised those of the Defense and Labor Departments that the official government position would be that the Service Contract Act applied to the RFP solicitation. Accordingly, on August 5, 1985, the Deputy Administrator of the Wage and Hour Division of the Department of Labor notified the Sealift Command that the RFP under consideration was subject to the Act and that the labor standards requirement applied to the portions of the contract services performed within the United States. The August 5 letter requested that appropriate corrective action be taken “to include in the RFPs and contracts the Act’s stipulations____”

Thereafter, on August 16, the Sealift Command contracting officer issued Amendment 0018 to the RFP. The amendment rescinded the May 9, 1985 tentative award to the plaintiff and advised all offerors in the competitive range that the SCA applied to this solicitation. The amendment also added the requisite SCA clauses and notified offerors that revised best and final offers would be requested after receipt of a wage determination from the Labor Department.

In March 1984, when the Sealift.Command initiated the RFP, a revised DOL regulation was in effect. The revision was promulgated in October 1983 and became effective in January 1984. The revision effectively exempted contracts for oceanographic vessels from coverage under the Service Contract Act. The new regulation, codified at 29 C.F.R. § 4.112(b)(2) provided that

a contract which is performed essentially outside the United States, with only an incidental portion performed within the United States as defined is not covered by the Act.

Because the vessels performing the oceanographic research undertook those services primarily in international waters, the contract officer for Sealift Command concluded at the time of solicitation that the Act did not apply.

However, the revised 1984 regulation was challenged immediately by the Seafarers Union and other labor groups, and on March 12, 1985, the Court of Appeals for the District of Columbia Circuit ruled in AFL-CIO v. Donovan, 757 F.2d 330 (D.C. Cir.1985), that it was enacted unlawfully because the Department of Labor failed to comply with the notice and comment provisions of the Administrative Procedure Act when it promulgated the revision. As a consequence, because the revised 1984 regulation was declared null and void, the 1983 regulation continued to govern all coverage questions.

In early October 1985, the contract officer issued Amendment 0019, which set October 15, 1985 as the date by which all offerors were to submit revised best and final offers. The amendment required that all offerors agree to comply with the SCA throughout the period of the contract, and to authorize the release of the same information about their bids that had already been publicly disclosed about the plaintiff’s bid. On October 4, 1985, the same date as the issuance of Amendment 0019, Marine Transport filed this suit in the District of New Jersey federal court, seeking declaratory and injunctive relief to prevent any rebidding of the RFP by the Sealift Command.

ANALYSIS

The grant of a preliminary injunction is a drastic and unusual judicial measure. The award of such relief is not a matter of right, even though the petitioner claims and may incur irreparable injury. The matter is addressed to the sound discretion of the Court, and absent a strong showing of need, it need not be granted. Yakus v. United States, 321 U.S. 414, 440, 64 S.Ct. 660, 674, 88 L.Ed. 834 (1944). Where an injunction may adversely affect a public interest, the Court, in its exercise of discretion, may withhold such relief even though such denial may prove burdensome and cause hardship to the petitioner.

In Virginia Petroleum Jobbers Association v. FTC, 259 F.2d 921 (D.C.Cir.1958) our Circuit Court articulated four factors to be weighed before granting a preliminary injunction: whether a strong showing has been made that the petitioner is likely to prevail on the merits; whether a showing has been made that without such relief, irreparable injury would result; whether the issuance of a stay would substantially harm the interests of other parties in the proceedings; and whether the public interest supports granting such relief. Id. at 925. Application of the first factor to the underlying and uncontroverted facts in this proceeding leads to the conclusion that Marine Transport has failed to meet its burden and that the government is entitled to a final judgment on the merits.

Aside from those factors, however, when a government procurement decision is the subject of litigation, the party adversely affected by a government contract award and who challenges the legality of the decision

bear[s] a heavy burden of showing either that (1) the procurement official’s decisions on matters committed primarily to his own discretion had no rational basis, or (2) the procurement procedure involved a clear and prejudicial violation of applicable statutes or regulations.

Kentron Hawaii Ltd. v. Warner, 480 F.2d 1166, 1169 (D.C.Cir.1973). See Steinthal v. Seamans, 455 F.2d 1289, 1301 (D.C.Cir.1971); Wheelabrator Corp. v. Chafee, 455 F.2d 1306, 1312 (D.C.Cir.1971).

The plaintiff cannot reasonably claim that the RFP was not subject to the provisions of the Service Contract Act. The August 5, 1985 Department of Labor letter determined that the Act applied to the procurement. The Secretary of Labor or his representative was the designated authority to interpret and enforce the Act. His interpretation of the Act becomes of controlling weight unless plainly erroneous or inconsistent with the regulation. Udall v. Tallman, 380 U.S. 1, 16-17, 85 S.Ct. 792, 801, 13 L.Ed.2d 616 (1965) (quoting Bowles v. Seminole Rock Co., 325 U.S. 410, 413-414, 65 S.Ct. 1215, 1217, 89 L.Ed. 1700 (1945)). The Secretary of Labor’s determination had a rational basis and was consistent with the statute and the regulation.

The August 16, 1985 decision of the Military Sealift Command, amending the RFP (Amendment 0018) by rescinding the tentative award of the contract to the plaintiff, and the later October 4th amendment (Amendment 0019), specifying that revised “best and final” offers be submitted by October 15, 1985, had a rational basis for support and were not clearly illegal.

A,

For Marine Transport to prevail it has the burden of demonstrating that it had an enforceable contract with the government. The plaintiff contends that it was awarded a contract on May 9, 1985 and that while appropriate documents had not been executed, only some few ministerial acts remained to be performed, since all conditions precedent to the award had been satisfied. It further contends that if the contract was not consummated on May 9, by mid-July 1985, when the appeals process was concluded, nothing further was to be done.

Marine Transport misreads what transpired. MSC’s contracting officer notified the plaintiff and the other offerors on May 9, that the decision to award the contract was tentative, not that an award of the contract had been made. The notice also provided that the tentative decision was subject to an administrative appeal process. That process rendered the tentative decision even further removed from a final award of the contract.

Representations made by Marine Transport in the earlier-filed and still-pending proceeding, SIU v. Donnelly, supra p. 2, are also relevant, for they clearly show that the plaintiff did not consider that it had been awarded a contract. On July 31, 1985, Marine Transport stipulated with the government that no award on the RFP at issue here would be made until September 13, 1985 or until the Court ruled on SIU’s motion for a preliminary injunction. Stipulation of Briefing Schedule for Plaintiffs Motion for a Preliminary Injunction, UU 5 and 6, July 31, 1985. That stipulation is a part of the official record in SIU v. Donnelly.

Marine Transport also overlooks the fact that the Department of Defense Authorization Act of 1981, Pub.L. 96-342 (1980), provides that specific notification be transmitted to Congress under these circumstances. Section 502(a) requires that the Secretary of Defense provide certain certifications to Congress and that reporting requirements be observed when private commercial contractors are utilized, as here. The notification and reporting requirements were to be met by an official of the Department of the Navy. Such a report has never been submitted.

Finally, it should be clear that awarding a contract with the intention of significantly modifying the contract after award is improper. A & J Manufacturing, 53 Comp.Gen. 838, 74 CPD ¶ 240 (1974). See also, Tecom, Inc., 84-2 CPD ¶ 152 (1984); Central Mechanical, Inc., 82-1 CPD ¶ 91 (1982). Application of the Service Contract Act to this solicitation or to any contract arising from this solicitation is a significant modification. Consequently, the contracting officer could not legally award the contract to Marine Transport, while intending to later modify the solicitation to include provisions required by the SCA and the Federal Acquisition Regulations, 48 C.F.R. Chapter 1.

The addition of the Service Contract Act requirements made it impossible for the contracting officer to determine that the plaintiff had submitted the most advantageous offer. Section 15.606 of 48 C.F.R. provides that

(a) When, either before or after receipt of proposals, the Government changes, relaxes, increases, or otherwise modifies its requirements, the contracting officer shall issue a written amendment to the solicitation.
(b) In deciding which firms to notify of a change, the contracting officer shall consider the stage in the acquisition cycle at which the change occurs and the magnitude of the change, as follows:
(3) If the competitive range (see 15.-609(a)) has been established, only those offerors within the competitive range shall be sent the amendment.

Section 15.611(c) of 48 C.F.R. provides that

After receipt of best and final offers, the contracting officer should not reopen discussions unless it is clearly in the Government’s interest to do so (e.g., it is clear that information available at that time is inadequate to reasonably justify contractor selection and award based on the best and final offers received). If discussions are reopened, the contracting officer shall issue an additional request for best and final offers to all offerors still within the competitive range.

The contracting officer properly amended the solicitation in accordance with 48 C.F.R. § 15.606 and properly requested a new round of best and final offers in accordance with 48 C.F.R. § 15.611(c).

B.

In order to obtain a preliminary injunction, Marine Transport must show that it is likely to prevail on the merits—in other words, that it had been awarded a contract. This it has not done. Rather the government has shown, on the undisputed facts before the Court, that no contract was ever awarded and that the plaintiff was entitled to no preference, once it had been decided to apply the provisions of the SCA to the solicitation in question. Because the Court grants the government’s motion for summary judgment, it need not address further the question of whether plaintiff is entitled to preliminary relief, for the merits of this action have already been reached. Any issue concerning the likelihood of irreparable injury is, of course, moot.

Because there are no material facts in dispute, and for the above reasons, the defendants are entitled to a final judgment as a matter of law.


author: CONTI, District Judge.

text:
    UNITED STATES FIRE INSURANCE COMPANY, Plaintiff, v. Denise GANZ, et al., Defendants.
    No. C-85-2400 SC.
    United States District Court, N.D. California.
    Nov. 22, 1985.
    Coddington & Winters, Menlo Park, Cal., James P. Wagoner, James H. Wilkins, McCormick, Barstow, Sheppard, Wayte & Carruth, Fresno, Cal., for plaintiff.

      William L. Garfield, Pursley & Garfield, Los Gatos, Cal., for B. Jack Elkin and Elkcam Air.
    William F. Murphy, John N. Dahlberg, Dillingham & Murphy, San Francisco, Cal., for Ganz.
    David A. Prestholt, O’Flaherty, Abrahams & Carl, Los Angeles, Cal., for Enviroscope Corp and Lars De Jounge.
    James J. Keenan, Jr., Mercer, Gallagher & Zinder, Lafayette, Cal., for The Neptune Soc.
   ORDER RE MOTIONS FOR SUMMARY JUDGMENT

CONTI, District Judge.

Plaintiff United States Fire Insurance Company (“USFI”) filed this declaratory relief action on March 19, 1985, to determine its rights and responsibilities under insurance policies issued to defendant Elk-cam Air Services (“Elkcam”). On July 26, 1985, this court entered an order granting motions to intervene as plaintiffs submitted by United Pacific Insurance Company (“UPIC”) and United States Fidelity & Guaranty Company (“USFG”). On October 11, 1985, this court entered an order granting in part defendants’ motion to stay the instant action pending resolution of underlying state court actions.

The matter is presently before the court on motions for summary judgment submitted by USFI and UPIC.

This action arises out of the alleged commingling of cremated remains by Elkcam and/or defendant B. Jack Elkin (hereinafter collectively referred to as “Elkin”). Beginning in June, 1984, thousands of lawsuits were filed in state court against Elkin, defendant Neptune Society, and others seeking compensatory and punitive damages for fraud, breach of contract, civil conspiracy, intentional infliction of emotional distress, misrepresentation, breach of confidential relationship, tortious mishandling of corpse, improper burial, conversion of personal property, violation of the Constitutional Remedies Act, negligence, negligence per se, and violation of the Consumer Legal Remedies Act. USFI, UPIC, and USFG thereafter filed state declaratory relief actions seeking determinations of their liability as insurers of Elkin. The underlying state court actions were subsequently coordinated in the County of Sacramento under the title “The Neptune Society Cases Judicial Council Coordinated Proceedings Nos. 1814 and 1817.” On September 19, 1985, the Court of Appeal for the State of California, Third District, stayed all actions concerning the coordinated proceedings until further notice.

On August 3, 1984, defendant Denise Ganz filed a lawsuit in the United States District Court for the Northern District of California entitled Denise Ganz v. Neptune Society, et al., No. C-84-5430 EFL. On January 25, 1985, defendant Michael Ganz commenced an action in the same court entitled Michael Ganz v. The Neptune Society, et al., No. C-85-1258 EFL. The Ganz lawsuits concern defendants’ allegedly tortious handling of the remains of Denise Ganz’ father. Briefly, the Ganz plaintiffs claim that Elkin “disseminated the remains of [Denise Ganz’ father] by trucking [or flying] the same [from San Jose] to Amador County, [there] commingling the ashes with others, wheelbarrowing the mixture to a back lot, and dumping it on a pile containing ashes of hundreds of others.” USFI’s Memorandum of Points and Authorities in Support of Motion for Summary Judgment, p. 3. The Ganz plaintiffs seek compensatory and punitive damages for negligence, tortious interference with decedent’s remains, fraud, breach of contract, infliction of emotional distress, breach of the covenant of good faith and fair dealing, and loss of consortium. USFI, UPIC, and USFG subsequently filed declaratory relief actions with this court, again seeking a determination of their liability as insurers of Elkin.

USFI and UPIC now move for summary judgment on grounds that claims raised by the Ganz plaintiffs do not arise out of the “ownership, maintenance or use of,” respectively, Elkin’s aircraft or automobiles. Summary judgment is proper only where there is no genuine issue of material fact or when, viewing the evidence in the light most favorable to the non-moving party, the movant is clearly entitled to prevail as a matter of law. Bank of California, N.A. v. Opie, 663 F.2d 977, 979 (9th Cir.1981); State ex rel. Edwards v. Heimann, 633 F.2d 886, 888 (9th Cir.1980). Once a summary judgment motion has been made and properly supported, the adverse party may not rest on the mere allegations of his pleadings, but must set forth specific facts showing that there is a genuine issue for trial. Steckl v. Motorola, Inc., 703 F.2d 392, 393 (9th Cir.1983); Ruffin v. County of Los Angeles, 607 F.2d 1276, 1280 (9th Cir.1979), cert. denied, 445 U.S. 951, 100 S.Ct. 1600, 63 L.Ed.2d 786 (1980).

Under California law, an insurance policy “is but a contract [that] ... must be construed from the language used and ... where ... its terms are plain and unambiguous, the courts have a duty to enforce the contract as agreed upon by the parties.” VTN Consolidated, Inc. v. Northbrook Insurance Co., 92 Cal.App.3d 888, 892, 155 Cal.Rptr. 172 (1979); see also, State Farm Mutual Automobile Insurance Co. v. Ball, 127 Cal.App.3d 568, 673, 179 Cal. 644 (1982). “An insurance company has the right to limit [, by plain language,] the coverage of a policy issued by it.” Apparel City Sewing Machine Co. v. Transamerica Insurance Group, 129 Cal.App.3d 400, 405, 181 Cal.Rptr. 64 (1982); see also, VTN Consolidated, 92 Cal.App.3d at 892, 155 Cal.Rptr. 172. To protect the insured’s reasonable expectation of coverage, however, insurance policies “must be strictly construed against the insurer and any ambiguity must be resolved in favor of coverage.” Truck Insurance . Exchange v. Webb, 256 Cal.App.2d 140, 144, 63 Cal.Rptr. 791 (1967); see also, Reserve Insurance Co. v. Pisciotta, 30 Cal.3d 800, 807, 180 Cal.Rptr. 628, 640 P.2d 764 (1982). Moreover,

“[t]he [insurers’] duty to defend [the insured in the event of a lawsuit] is broader than the duty to indemnify ... Where there is doubt as to whether the duty to defend exists, the doubt should be resolved in favor of the insured ...”

Eichler Holmes, Inc. v. Underwriters, 238 Cal.App.2d 532, 538, 47 Cal.Rptr. 843 (1965). Nonetheless, courts, “will not indulge in a forced construction so as to fasten a liability on the insurance company which it has not assumed.” Pacific Employers Insurance Co. v. Maryland Casualty Co., 65 Cal.2d 318, 323, 54 Cal.Rptr. 385, 419 P.2d 641 (1966) (citations omitted); see also, Reserve Insurance, 30 Cal.3d at 807, 180 Cal.Rptr. 628, 640 P.2d 764.

UPIC moves for summary judgment on grounds that the automobile insurance policy it issued to Elkin does not cover the injuries allegedly sustained by the Ganz plaintiffs. Pursuant to Cal.Ins.Code § 11580.1, the policy in question protects Elkin from liability pertaining to the ‘ownership, maintenance or use’ of his automobiles. UPIC argues that, “the injuries and damages alleged in [the Ganz actions] ... do not arise out of the use, including the loading and unloading, of any automobile.” UPIC’s Reply Memorandum in Support of Motion for Summary Judgment, p. 4. Upon review of the record, the court finds merit to UPIC’s argument.

As the court noted in Transport Indemnity Co. v. Schnack, 131 Cal.App.3d 149, 152, 182 Cal.Rptr. 256 (1982),

“[t]he words ‘arising out of the ownership, maintenance, or use of the ... [vehicle]’ are not words of narrow and specific limitation, but are broad, general, and comprehensive terms effecting broad coverage ...”

Notwithstanding this general rule, courts recognize that “parties to an automobile liability policy do not contemplate a general liability insurance contract.” Webb, 256 Cal.App.2d at 145, 63 Cal.Rptr. 791; see also, Camay Drilling Co. v. Travelers Indemnity Co., 12 Cal.App.3d 237, 241, 90 Cal.Rptr. 710 (1970); Pacific Indemnity Co. v. Truck Insurance Exchange, 270 Cal.App.2d 700, 704, 76 Cal.Rptr. 281 (1969). Accordingly,

“[although the word ‘use’ must be given an all-inclusive connotation, there must be a causal connection between the use and the injury ... The test for determining the existence of the requisite causal connection has been expressed in varying language. It has been stated that the resulting injury must be a ‘natural and reasonable incident or consequence of the use of the [automobile] for the purposes shown by the declarations [to an insurance policy], though not foreseen or expected ... ’ and that the injury cannot be said to arise out of the use of an automobile ‘if it was directly caused by some independent act, or intervening cause wholly disassociated from, independent of and remote from the use of the [automobile].’ ”

Webb, 256 Cal.App.2d at 145-146, 63 Cal.Rptr. 791 (citations omitted); see also, Dillon v. Hartford Accident and Indemnity Co., 38 Cal.App.3d 335, 341, 113 Cal.Rptr. 396 (1974).

In Webb, a truckdriver transported a load of cardboard boxes in his employer’s truck to a point west of some commercial buildings, unloaded them, and then ignited the boxes. The fire spread to the employer’s building. The court denied the employer coverage under his automobile insurance policy, noting,

“although the use of the pick-up truck did play a part in the chain of events, it cannot be reasonaby said that the destruction of the buildings arose out of the ‘use’ of the vehicle. The conduct of [the truckdriver] in igniting the boxes and leaving the fire unattended was independent of and unrelated to the use of the truck. The use of the truck was neither a ‘predominating cause’ or a ‘substantial factor.’ ”

Id., 256 Cal.App.2d at 148, 63 Cal.Rptr. 791 (citations omitted).

In Aetna Casualty & Surety Co. v. Safeco Insurance Co., 103 Cal.App.3d 694, 163 Cal.Rptr. 219 (1980), a young boy was injured when a gun accidentally went off inside the insured’s truck. The insured’s policy provided coverage for accidents arising out of use of the truck. Nonetheless, the court found against coverage, noting, “It is well established that an automobile need not be the proximate cause of an injury in order for automobile liability coverage to apply within the meaning of that phrase ... Some minimal causal connection between the vehicle and an accident is, however, required.”

Id. at 697, 163 Cal.Rptr. 219.

Finally, in Interinsurance Exchange v. Macias, 116 Cal.App.3d 935, 172 Cal.Rptr. 385 (1981), the insured drove his intoxicated son to a waiting car. His son was later involved in an accident while driving that car. The court found that the insured’s policy did not cover injuries sustained in the accident, indicating,

“The scope of coverage of a vehicle liability policy is to be construed with regard to the intent and reasonable expectations of the insured ... Here transportation of passengers, drunk or sober, is an intended, normal and expected ‘use’ of a car. However, when [the insured’s son] left [the insured’s] vehicle, got into his own and then committed some negligent act of driving ..., his independent acts broke the ‘causal’ link between the ‘use’ of the insured vehicle and [the victim’s] injuries.”

Id. at 938, 172 Cal.Rptr. 385; see also, Traveler’s Insurance Co. v. Northwestern Mutual Insurance Co., 27 Cal.App.3d 959, 104 Cal.Rptr. 283 (1972) (injuries sustained when service station owner jacked up car to change tire did not arise out of use of vehicle); State Farm Mutual Automobile Insurance Co. v. Cummings, 21 Cal.App.3d 441, 98 Cal.Rptr. 320 (1971) (repair of brakes by garage not a use of vehicle for purposes of determining coverage under insurance policy); compare, United Service Automobile Association v. United States Fire Insurance Co., 36 Cal.App.3d 765, 770, 111 Cal.Rptr. 595 (1973) (court denied coverage where victim was struck by a can of burning gasoline that had ignited while the insured’s son was pouring gasoline into a carburetor. Court held that the insured’s son was “clearly using the ... vehicle ... [The son’s] actions in attempting to start the car constituted a physical relationship to it and was present use performed for the purpose of making the vehicle operative.”)

The Ganz plaintiffs allege injury resulting from the manner in which the remains of Denise Ganz’ father were disposed. As Elkin describes the treatment of decedent’s cremated remains,

“ELKIN either transported the cremated remains ... from San Jose to his property in Amador county via airplane in which case he would [have] transported] the remains from the airport to his property by automobile, or ... he ... transported] the remains solely by automobile to his property ... Thereon he ... ‘unloaded]’ the remains from his auto. ‘Following the removal’ of the remains from the auto, he ... walk[ed] at least thirty feet from the auto and deliver[ed] the remains to their final resting place by scattering them to the wind ... He ... then returned] to his auto and [left] his property ...”

Elkin’s Memorandum of Points and Authorities in Opposition to UPIC’s Motion for Summary Judgment, p. 9 (emphasis in original).

As UPIC notes,

“The actual scattering of the remains [, the action upon which the Ganz plaintiffs base their claims,] took place after the remains were removed from [Elkin’s automobile] ..., and occurred a considerable distance away from the automobile, i.e. 30 feet or more ... Clearly any automobile use was limited to the transportation of cremated remains. At no time were the packaged remains ever commingled and/or disturbed while they were being transported by automobile.”

UPIC’s Memorandum of Points and Authorities in Support of Motion for Summary Judgment, p. 3. Accordingly, as in Webb, Aetna Casualty, and Macias, Elkin’s “act of scattering and/or commingling the cremated remains ... [lacked the requisite] causal link with the use of any automobile” for purposes of triggering coverage under UPIC’s auto insurance policy. Id. at 14.

Elkin notes in response that “the unloading process is an included ‘use’ of the automobile” under the UPIC policy. Elkin Memorandum in Opposition to UPIC Motion, p. 9. Elkin argues that in disseminating the remains in question he was merely “unloading” his vehicle, and that the Ganz plaintiffs’ alleged injuries thus resulted from the “use” of his automobile. The court finds Elkin’s argument to be without merit. As Elkin notes,

“ ‘unloading’ [of a vehicle] has been completed when, following removal of the material from the vehicle, the deliveror has finished his handling of it, and it has been placed in the hands of the receivor at the designated reception point

Entz v. Fidelity & Casualty Co., 64 Cal.2d 379, 383, 50 Cal.Rptr. 190, 412 P.2d 382 (1966) (emphasis added). It is well established, however, that this so-called “complete operations” rule can be used to invoke insurance coverage only where “there is some causal relationship between the accident and the use of the vehicle.” Id. Because Elkin has not established a sufficient causal connection between the act of scattering decedent’s remains and use of his automobile, UPIC’s motion for summary judgment must be granted.

USFI moves, next, for summary judgment on grounds that the claims asserted by the Ganz plaintiffs do not stem from the use. of aircraft, and are thus not covered under the aircraft insurance policy that USFI issued to Elkin. The court finds merit to USFI’s motion. “California courts have long looked to ... automobile cases in interpreting ‘arising out of the use of’ provisions in aircraft policies.” USFI’s Memorandum, p. 8. As the court noted in Schnack, 131 Cal.App.3d at 152, 182 Cal.Rptr. 256,

“it has been judicially recognized that [in drafting liability policies,] the aircraft insurance industry apparently drew upon the experience of the automobile industry, for generally the aircraft policies have a coverage analogous to the bodily injury and property damage liability in automobile policies, and, when desired, a coverage analogous to collision coverage in such policies ... Since the policy here is phrased in terms common to automobile policies, it is appropriate to look to anologous automobile coverage cases.”

(citations omitted).

The USFI policy at issue expressly limited Elkin's coverage to damages “caused by an occurrence and arising out of the ownership, maintenance or use of the aircraft.” Declaration of Daniel W. Winters in Support of USFI’s Motion for Summary Judgment, Exhibit 5, p. 1. As noted earlier, a given injury does not “arise out of use of” automobiles or aircraft unless there is some causal connection between that use and the injury. Even if Elkin used his airplane to fly the remains of Denise Ganz’ father from San Jose to Amador County, he eventually scattered those remains at least ten miles from the Amador County airport. Moreover, the remains in question were not commingled in the aircraft. Winters Declaration, Exhibit 2. As such,

“[t]o suggest that Elkin’s abuse of [decedent’s] remains after their removal from the aircraft, their placement in an automobile, their transport in the automobile 10 miles, their removal from the automobile and their hand carriage [at least thirty feet] onto Elkin’s property is somehow a part of the unloading [and, hence, ‘use’] of the aircraft is absurd at best.”

USFI’s Reply Memorandum in Support of Motion for Summary Judgment, p. 3. Accordingly, the court grants USFI’s motion for summary judgment. Because the court grants USFI’s motion on grounds that the Ganz plaintiffs’ injuries did not arise from the use of aircraft, the court does not address the merits of USFI's remaining arguments for summary judgment.

The court is cognizant of arguments that Elkin and defendant Enviroscope Corporation make to the effect that USFI and UPIC agreed to provide coverage for the Ganz plaintiffs’ claims by reason of the conduct of one Bill Barden, Elkin’s insurance agent. The court rejects this argument. First, Elkin and Enviroscope present no evidence suggesting that Bar-den acted as USFI and UPIC’s agent in obtaining insurance for Elkin. Moreover, “no defendant has raised this as an affirmative defense in [an] ... answer.” UPIC’s Reply Memorandum, p. 14.

In accordance with the foregoing, it is hereby ordered that:

(1) UPIC’s motion for summary judgment is granted; and

(2) USFI’s motion for summary judgment is granted.


author: EDWARD C. REED, Jr., District Judge.

text:
    Douglas Boyd REED, Plaintiff, v. Steven C. BROWN; Commercial Union Insurance Company, a Kentucky corporation; Black & White Corporations I through V, Corporations; Able & Baker Companies I through V, Partnerships; John and Jane Does I through V, Individuals, Defendants.
    No. CV-R-84-528-ECR.
    United States District Court, D. Nevada.
    Nov. 25, 1985.

      Douglas Boyd Reed, in pro per.
    Paul F. Hamilton, Reno, Nev., for defendants Steven C. Brown and Commercial Union Ins. Co.
   ORDER

EDWARD C. REED, Jr., District Judge.

Plaintiff commenced this action on December 14, 1984, in his own behalf seeking damages for alleged personal injuries from an accident which occurred on December 15, 1982. In the accident, which occurred on State Highway 236 in Kenton County of the State of Kentucky, the plaintiff alleges that he was struck as a pedestrian by a motor vehicle driven by the defendant. As a result of the accident, plaintiff alleges that he has sustained injuries totaling more than $100,000.

Plaintiff further alleges that the defendant Steven Brown was then and is currently a resident of the State of Kentucky. Commercial Union Insurance Company is a Kentucky corporation, according to the plaintiff, and he has effected personal service upon this defendant at its offices in Cincinnati, Ohio. Plaintiff served defendant Brown at his home in Kentucky. The sole Nevada contacts of both defendants arise out of the plaintiff’s allegation that he was at the time of the accident and is currently a Nevada resident.

Defendants have moved this Court to quash the service of process on them, in that that service was improperly made, and there exists no personal jurisdiction over them in this forum. Plaintiff concedes that service was improper and that no personal jurisdiction exists, and petitions this Court pursuant to 28 U.S.C. § 1406(a) to transfer the case to a jurisdiction where service and jurisdiction would be proper.

There is no doubt that service must be quashed in this case. The federal rules state that “[a]ll process other than a subpoena may be served anywhere within the territorial limits of the state in which the district court is held, and, when authorized by a statute of the United States or by these rules, beyond the territorial limits of that state.” Fed.R.Civ.P. 4(f). See Powers v. Mitchell, 463 F.2d 212 (9th Cir.1972). Rule 4(e) extends the territorial limits of federal service by providing that federal district courts may serve non-resident defendants in accordance with the personal jurisdiction statutes and long-arm statutes of the state in which the court sits. Wells Fargo & Co. v. Wells Fargo Express Co., 556 F.2d 406, 414 (9th Cir.1977); Myers v. Johns Manville Sales Corp., 600 F.Supp. 977, 982 (D.Nev.1984). Because all service occurred outside of this State, the Court must examine Nevada’s long-arm statute to determine whether that service was proper.

The Nevada long-arm statute, NRS § 14.065, declares that effective personal service may be made upon a party outside of the state if the party has submitted himself to the exercise of that state’s jurisdiction. NRS § 14.065(l)(b). The statute further declares that

[a]ny person who, in person or through an agent or instrumentality, does any of the acts enumerated in this subsection thereby submits himself and, if a natural person, his personal representative to the jurisdiction of the courts of this state as to any cause of action which arises from:
(a) Transacting any business or negotiating any commercial paper within this state;
(b) Committing a tortious act within this state;
(c) Owning, using or possessing any real property situated in this state;
(d) Contracting to insure any person, property or risk located within this state at the time of contracting;
(e) Living in the marital relationship within this state notwithstanding subsequent departure from this state, as to all obligations arising for alimony, child support or property settlement, if the other party to the marital relationship continues to reside in this state; or
(f) Violating NRS 207.400.

The statute thus contemplates that only certain, forum related acts may give rise to personal jurisdiction over the defendant.

It is certain that the defendants in this case have not submitted themselves to the jurisdiction of the Nevada courts in this case, for none of the acts of which the plaintiff complains were committed in this state. In that all of the acts which gave rise to the cause of action took place in Kentucky, the Nevada long-arm statute will not reach these defendants. Shapiro v. Pavlikowski, 98 Nev. 548, 654 P.2d 1030, 1031 (1982); see Greenspun v. Del E. Webb Corp., 634 F.2d 1204, 1209 (9th Cir.1980); Wells Fargo & Co. v. Wells Fargo Express Co., 556 F.2d 406, 417 (9th Cir.1977).

The Nevada Supreme Court, however, has recently indicated that the Nevada long-arm statute can “reach the outer limits of federal constitutional due process.” Galatz v. Eighth Judicial District, 683 P.2d 26, 28 (Nev.1984). Even under the broader standards of due process, however, it is clear that personal jurisdiction does not lie in this case.

In order to exercise jurisdiction over a non-resident defendant, the Ninth Circuit has noted that “due process requires ... certain minimum contacts with [the forum] such that the maintenance of the suit does not offend ‘traditional notions of fair play and substantial justice.’ ” Pacific Atlantic Trading Co. v. M/V Main Express, 758 F.2d 1325, 1327 (9th Cir.1985) (quoting International Shoe Co. v. Washington, 326 U.S. 310, 316, 66 S.Ct. 154, 158, 90 L.Ed. 95 (1945)). In addition, if the non-resident’s activities in the forum are sufficiently substantial and continuous, general jurisdiction will lie even if the cause of action is unrelated to the defendant’s activities in the state. Id. (citing Perkins v. Benguet Consolidated Mining Co., 342 U.S. 437, 72 S.Ct. 413, 96 L.Ed. 485 (1952)). If the defendant’s activities are not sufficiently pervasive to warrant general jurisdiction, however, the nature and quality of the forum related activities must be examined in relation to the specific cause of action to determine whether limited jurisdiction exists.

Although the Circuit has developed specific rules by which activities are examined in order to determine whether general or limited jurisdiction exists, see Pacific Atlantic, supra, at 1327; Data Disc, Inc. v. Systems Technology Associates, 557 F.2d 1280 (9th Cir.1977), it is unnecessary to discuss them in this case for the present defendants have absolutely no contacts with this forum. As seen above, all of the acts which gave rise to this cause of action occurred in Kentucky. All defendants, moreover, are residents of that state, and there is nothing in the record to indicate that they have so much as visited Nevada on vacation. In that plaintiff has completely failed to show any contacts by the defendants with this state, the Nevada long-arm statute is inapplicable, and the service of process on the defendants in Kentucky must be quashed.

The question remains before the Court whether this action may be transferred to the federal district court in Kentucky. Plaintiff contends that this Court has such power under 28 U.S.C. § 1406(a). Defendants, on the other hand, argue that this statute, and its companion, 28 U.S.C. § 1404(a), are meant solely for the transfer of cases in which venue is improper, and may not be used in cases where a defect exists in the transferring court’s subject matter or personal jurisdiction.

The Supreme Court has resolved this question. In Goldlawr, Inc. v. Heiman, 369 U.S. 463, 82 S.Ct. 913, 8 L.Ed.2d 39 (1962), the plaintiff had brought a private anti-trust action against a number of defendants in the district court in Pennsylvania. After hearing arguments regarding the lack of personal jurisdiction and of venue in the State of Pennsylvania, the court found that personal jurisdiction did not exist, and that venue was improperly laid as to two of the defendants. The court refused to dismiss the action as to those defendants, however, choosing instead to transfer the action under 28 U.S.C. § 1406(a) to the Southern District of New York, where both venue and personal jurisdiction were proper as to all defendants. That district court, however, dismissed the entire action, finding that the Pennsylvania court’s lack of personal jurisdiction precluded its using the venue transfer statutes.

The Supreme Court found this reasoning unconvincing. “Nothing in [the statute’s language] indicates that the operation of the section was intended to be limited to actions in which the transferring court has personal jurisdiction over the defendants,” the Court noted. Id. The philosophy behind the statute, it continued, was to prevent prejudice to a plaintiff which might have to guess as to the existence of elusive facts upon which venue provisions turn. Id. Dismissal in this case would work such prejudice, concluded the Court, for the plaintiff would lose a substantial portion of his cause of action under the applicable statute of limitations, owing to his mistake in thinking that one of the defendants could be “found” in Pennsylvania. Moreover, the Court noted that the mere filing of the lawsuit shows the proper diligence on the part of the plaintiff which the statutes of limitations were intended to ensure. Therefore, § 1406(a) expresses the “interests of justice,” in that it allows the court to transfer the action, rather than dismissing it because of “time consuming and justice defeating technicalities.” Id. at 467, 82 S.Ct. at 916.

A federal district court may then transfer an action under 28 U.S.C. § 1406(a) even where the court is entirely without subject matter jurisdiction over the defendant. The problem in this case is that § 1406(a) is inapplicable for other reasons. That statute states that “[t]he district court of a district in which is filed a case laying venue in the wrong division or district shall dismiss, or if it be in the interests of justice, transfer such case to any district or division in which it could have been brought.” 28 U.S.C. § 1406(a) (emphasis added). Thus, the statute allows transfer only where venue is improperly laid in that district. Such is not the case here. In that this is a diversity action, venue is proper in any district in which all plaintiffs reside. 28 U.S.C. § 1391(a). Reed is the only plaintiff in this case, and is a resident of the State of Nevada. Venue, therefore, is technically proper in this district.

Where venue is proper, however, transfer may be ordered by the court under 28 U.S.C. § 1404(a). The question • arises whether the ability to transfer a case under § 1406(a) in which personal jurisdiction is lacking over defendants, as described in Goldlawr, supra, exists under 28 U.S.C. § 1404(a) as well. Several courts have held that this is true. In United States v. Berkowitz, 328 F.2d 358 (3rd Cir.1964), for example, the United States had filed an action against the defendant in the Eastern District of Pennsylvania in order to recover back taxes. The action was filed, and service was made only seventeen days prior to the expiration of the statute of limitations. Shortly thereafter, the defendant moved to dismiss the complaint and to quash the service of process on the grounds that he was not a citizen of New York, and that he had not been properly served with process. Because the statute had expired by this time, the government moved to transfer the case to the Eastern District of New York, pursuant to 28 U.S.C. § 1404(a). The district court, however, declined to transfer the case, on the basis that it had not acquired personal jurisdiction over the defendant. In addition, the court held that the Goldlawr case only provided for jurisdictionless transfer in cases under § 1406(a).

The Court of Appeals for the Third Circuit overruled the holding of the lower court. The Goldlawr case, noted the court, conclusively settled the question of whether transfer of a case could be effected even though the transferring court lacks subject matter jurisdiction. Id. at 360. Even though the Goldlawr Court had decided that transfer was available under § 1406(a), the court found that “its rationale applies equally to § 1404(a), for these are companion sections, remedial in nature, enacted at the same time, and both dealing with the expeditious transfer of an action from one district or division to another.” Id. (citing Internatio-Rotterdam, Inc. v. Thomsen, 218 F.2d 514 (4th Cir.1955). Therefore, the court held that the district court has the power to transfer a case in which it lacks personal jurisdiction, as long as the considerations set forth in § 1404(a) have been satisfied. Id. at 361.

Those considerations indicate that a case may be transferred if the convenience of the parties and witnesses would be served, and if the interests of justice would likewise benefit. 28 U.S.C. § 1404(a). In this case, there is no doubt that all parties and witnesses would benefit from transfer, in that they are all located in Kentucky, with the exception of the plaintiff. The plaintiff will still benefit from transfer, however, in that his action, if dismissed, would quite likely be barred by the applicable statute of limitations. By allowing transfer, the Court will allow this cause of action to remain alive.

Keeping this action alive in face of possible time bar also will serve the interests of justice. In Ladwig v. Truck Insurance Exchange, 498 F.Supp. 161 (E.D.Wis.1980), for example, the plaintiff filed a diversity action in Wisconsin federal court arising out of a truck collision which occurred in the State of Idaho. All of the defendants were either Idaho residents or corporations organized under Idaho law with no contacts with Wisconsin whatsoever. The defendants moved to dismiss the case for lack of personal jurisdiction, but the plaintiffs moved to transfer under 28 U.S.C. § 1406(a).

The Court, after finding that no personal jurisdiction existed over the defendants in Wisconsin, declared that transfer was appropriate. The Court noted that “since it appears that if the action is dismissed plaintiffs may be barred from refiling in the Idaho state or federal court by Idaho’s two-year statute of limitations, the action will be transferred” to a court in which personal jurisdiction and venue are proper. In that dismissal of the action would be equivalent to barring the assertion of an otherwise valid claim, this court concluded that the interests of justice would be served by transferring the action. See Goldlawr, supra (in that substantial portion of claim could be lost to statute if claims were dismissed, interests of justice dictated that claims should be transferred); United States v. Berkowitz, supra (transfer would serve the interests of justice where claims would be lost due to the applicable statute of limitations). See also Wood v. Santa Barbara Chamber of Commerce, Inc., 705 F.2d 1515 (9th Cir.1983) (transfer would not be allowed where plaintiff had purposefully avoided filing suit in proper jurisdiction in blatant attempt to “forum shop”).

In the present case, it appears likely that all of the plaintiff’s action would be lost to the Kentucky statute of limitations if the action were not transferred. Certainly, plaintiff could have avoided this difficulty by filing the action in the proper district court to begin with, but the Court notes that he is proceeding in propria persona. Because the plaintiff is unschooled in the vagaries of personal jurisdiction and other important, but sophisticated procedural matters, the Court finds that justice would be better served by allowing this action to be transferred to the United States District Court, Eastern District of Kentucky.

IT IS, THEREFORE, HEREBY ORDERED that the motion to quash service of process for lack of personal jurisdiction is GRANTED.

IT IS FURTHER ORDERED, that the motion to transfer this action to the United States District Court, Eastern District of Kentucky, is GRANTED.

       The government then moved to transfer the case to New York under § 1406(a), but this motion was also denied. The court reasoned that the tax liability had arisen in the Eastern District of Pennsylvania, and that venue was thus technically proper under 28 U.S.C. § 1396. § 1406(a) was technically inapplicable, the court concluded, because venue had not been improperly laid in that district.


author: REGAN, District Judge.

text:
    CONSOLIDATED GRAIN & BARGE COMPANY, Plaintiff, v. HUFFMAN TOWING COMPANY, Defendant.
    No. 84-2448C(B).
    United States District Court, E.D. Missouri, E.D.
    Nov. 25, 1985.

      John Halpern, Goldstein & Price, St. Louis, Mo., for plaintiff.
    Frank Thackston, Jr., Lake, Tindall, Hunger & Thackston, Greenville, Miss., for defendant.
   MEMORANDUM OPINION AND ORDER

REGAN, District Judge.

This action, tried to the Court, to recover the substantial damages admittedly sustained by Consolidated Grain and Barge Company on January 4, 1984, when the lead barges in a tow of twenty loaded unmanned barges dived as they were being towed upriver by MV Janet Marie operated by Huffman Towing Company on the Mississippi River. The principal controverted issue is whether Consolidated adduced sufficient evidence to permit a finding of causal negligence on the part of Huffman’s pilot, Captain Drury, without resort to speculation.

We first briefly state the admitted facts and those which, though not admitted or evidentially controverted, are supported by the evidence and the reasonable inferences to be drawn therefrom. On January 2, 1984, Consolidated barges KMZ-46, CGB-131, CB-41 and CGB-417B were taken in tow near New Orleans at Mile 126, Lower Mississippi River. At that time, in accordance with Huffman’s customary practice, the crew members of the Janet Marie inspected the barges. They determined that the barges were floating on an even keel and in suitable condition for towage. The barges were again inspected at each watch change (the last very shortly before the accident) and found to be in good condition. We find that in all material respects, Consolidated’s barges were seaworthy and that their condition neither caused nor contributed to cause the casualty.

As of January 3, 1984, the Janet Marie, which had commenced its journey with 16 barges, had 20 loaded barges in tow, arranged in four strings, each containing five barges. The accident in question occurred on the morning of January 4, 1984 at or near Mile 296, Lower Mississippi River after the tow had traveled without incident about 180 miles upriver. The day was clear with excellent visibility. When the tow of the Janet Marie, which was pushing the barges at full speed, reached a point adjacent to Catfish Point Light (Mile 296.2) three of the lead barges dove resulting in the substantial damage to Consolidated’s barges and to the cargo on one of them.

On the day of the accident, the river at Mile 296 was marked by one red buoy which had been placed in the area in 20 feet of water by the U.S. Coast Guard on December 20, 1983. At that time, the river stage at the Red River Landing approximately six miles upriver was 45.41 feet. The red buoy marked the outer limits of the left descending side of the channel to the right descending bank. The water is shallow along the red buoy line and becomes progressively deeper going across river to the right descending bank. By January 4, 1984 the river stage at the Red River Landing had dropped about 10.5 feet. However, there is no evidence of the river stage at or near Catfish Point, in particular in that part of the navigable channel in which the accident occurred. On the date of the accident, the navigable channel was about 1500 feet wide. The starboard side of the tow was approximately 300 feet out from the red buoy line.

Consolidated concedes that the burden of proving negligence rests upon it, and that the mere fact its barges was damaged while in the control of Huffman is not sufficient, of itself, to sustain a finding of causal negligence. It argues that negligence may reasonably be inferred in the circumstances. Its principal reliance is upon an opinion expressed by Captain Drury both in his accident report (written January 5, 1984, one day after the accident) and in his deposition that the barges dove because they hit shallow water.

Although it may well be that Captain Drury could have navigated the tow in a deeper part of the channel, there is no substantial evidence from which we can find it was improper to run the channel where he did. So, too, although Captain Drury could have navigated in this area at half throttle, thus making it less likely that the barges would dive (if the water was sufficiently “shallow”), it is also true that by traveling at five miles an hour, he made less likely the build up of ice on the head of the tow. Hindsight, all based on the assumption that “shallow” water (of unknown depth) was in fact present at the place in question, does not justify a finding that Captain Drury failed to exercise reasonable care and maritime skill.

True, Captain Drury, who had been a pilot for a number of years, was aware that the loaded barges in tow would probably dive if they ran from deep into “shallow” water. However, although the water may have been shallow at the red buoy line, its depth some 300 feet out is a matter of speculation, as we pointed out at the trial.

Missing from Consolidated’s proof is evidence from which we can reasonably find (1) that the unknown depth of the water at the place where the barges dove made it sufficiently “shallow” as compared to the depth of the water downriver as to pose a reasonably foreseeable danger that the loaded barges would be caused to dive, and (2) that Captain Drury either knew or should have known of the existence of such “shallow” water, and based on such knowledge failed to take reasonable precautions to avoid the known danger.

The initial “opinion” of Captain Drury as to the reason the barges dove was clearly not based on facts known to him prior to the accident. It was, at most, a guess as to which of several possible circumstances could have caused the barges to dive. An “opinion” of an expert is no better than the facts upon which it is based. In this case, Captain Drury’s “opinion”, based solely on the fact the barges dove (and which assumed the unknown fact of the depth of the water), is too slender a reed upon which to predicate a finding of negligence.

Consolidated cites cases supportive of the proposition that although the burden of proving the tower’s negligence rests on the tow, where the damage to the tow occurs under circumstances which would not ordinarily cause the damage had the proper care been exercised, an inference of causal negligence is justified, in which event “the defendant bears the burden of coming forward with an explanation sufficient to rebut the inference.” Agri-Trans Corp. v. Peavey Co., 742 F.2d 1137 (8 Cir.1984); Mid-America Transportation Co., Inc. v. National Marine Service, Inc., 497 F.2d 776 (8th Cir.1974).

In our judgment, these and other cited cases are distinguishable, and do not obviate the necessity for Consolidated to prove negligent navigation on the part of Captain Drury. We do not read Agri-Trans, supra, on which Consolidated relies, as holding that the rule not only is an aid in establishing negligence, but relieves the tow of the burden of demonstrating negligence in the first instance. In that case, the structural damage sustained by the barge was of a nature which would support an inference it collided with a large, solid, rounded stationary object, and this circumstantial evidence that such a collision had occurred would permit the conclusion that such a collision would not ordinarily occur absent negligence on the part of the tug. In the instant case, by contrast, both Consolidated’s expert witness and Captain Drury testified that the barges could dive for reasons unrelated to negligence on the part of the tower. There is no evidence that Captain Drury knew or should have known the depth of the water into which the lead barges dove or the depth of the water ahead or behind that portion' of the river. And certainly, absent evidence not merely of the depth of the water but of Captain Drury’s knowledge or presumptive knowledge thereof, a finding that he failed to exercise due care in navigating the Janet Marie would be sheer speculation.

The casualty giving rise to this action was unfortunate, and Consolidated’s damages were sustained without fault on its part. However, Huffman was not an insurer or a common carrier. In our judgment, Consolidated has not sustained its burden of establishing that Captain Drury failed to exercise due care under the then existing circumstances.

The foregoing Memorandum Opinion and Order constitutes our findings of fact and conclusions of law. Judgment will be entered for defendant.


author: BARRINGTON D. PARKER, District Judge.

text:
    David B. RICHARDSON, et al., Plaintiffs, v. U.S. NEWS & WORLD REPORT, INC., et al., Defendants.
    Civ. A. No. 85-2195.
    United States District Court, District of Columbia.
    Nov. 26, 1985.

      E. Roger Frisch, New York City, George A. Bangs and Joseph M. Butler, Rapid City, S.D., Raoul L. Carroll, Washington, D.C., for plaintiffs.
    Nell Straehan, Venable, Baetjer & Howard, Lawrence Latto, Shea & Gardner, Washington, D.C., for defendants.
   MEMORANDUM ORDER

(Dismissing Complaint as to Mercantile and Plan Committee Members)

BARRINGTON D. PARKER, District Judge.

Plaintiffs in this action are former employees of U.S. News and World Report magazine (“U.S. News”) who retired or otherwise separated from the company in the year 1982. They seek recovery from the magazine, several former members of its board of directors, an independent appraisal firm, the magazine’s Profit-Sharing Plan (“Plan”), Mercantile-Safe Deposit and Trust Company (“Mercantile”), the Plan trustee, and current members of the Plan’s management committee (Gretchen Langston, James Glassman, John Mashek and Neil Rice).

The gravamen of plaintiffs’ amended complaint is that, by a pattern of concerted activity, the details of which need not be discussed here, these defendants, except for the Plan trustee and the Plan Committee members, caused plaintiffs’ retirement benefits, as measured by U.S. News stock held by plaintiffs and by the Plan, to be undervalued. Such undervaluation allegedly became apparent in 1984, when U.S. News was sold to Mortimer Zuckerman for approximately $140 million.

This suit follows upon the heels of class-action litigation commenced in early 1984 by employees who during the years 1974-1981, left the employment of U.S. News. Foltz, et al. v. U.S. News & World Report, Inc., et al., 613 F.Supp. 634. On June 14, 1985, this Court, on application of the Foltz plaintiffs, enjoined distribution of approximately $41.7 million of the Plan assets, a sum deemed sufficient to satisfy any likely judgment awarded those plaintiffs. 613 F.Supp. 634 (D.D.C.1985). One month later, in response to a request for a temporary restraining order filed by the Richardson plaintiffs, which was treated as a motion for a preliminary injunction, an additional $4 million was held back, Order of July 15, 1985, in addition to the $41.7 million held back in Foltz. Shortly thereafter a portion of the remaining funds was distributed to current beneficiaries of the Plan.

The Richardson plaintiffs now charge that the Plan trustee, Mercantile, and the members of the Plan Committee, by approving the distribution, violated fiduciary duties imposed upon them by the Employee Retirement Income Security Act (“ERI-SA”), 29 U.S.C. § 1001, et seq. Amended Complaint ¶¶ 5.01-5.15 (Counts 7-9). Plaintiffs also allege that these defendants breached their fiduciary duties in approving the 1984 sale, whose terms included the diversion of $13 million of the proceeds to most of the director-defendants as consideration for “phantom” stock they held, and $10 million to an indemnification fund. Amended Complaint ¶¶ 5.14(b), (c).

Mercantile and the Plan Committee members have moved to dismiss the complaint as to them. Mercantile argues, first, that it is not a fiduciary within the meaning of ERISA; second, that claims alleged against it are premature; and third, that it was entitled to rely upon directions from the Plan Committee and upon this Court’s Order of July 15, 1985. While not alleging that they are not fiduciaries under ERISA, the Plan Committee members join with Mercantile in challenging Counts 7 through 9 as not ripe for adjudication.

ANALYSIS

A. Fiduciary Status of Mercantile Under ERISA

As the controlling statute, ERISA provides the guidelines for determining who is a fiduciary with respect to an employee benefit plan. ERISA expressly limits fiduciary status to those persons who either exercise “discretionary authority or ... control” over the assets or administration of a plan, or “render[] investment advice for a fee____” ERISA § 3(21), 29 U.S.C. § 1002(21). Those persons acting as trustees who perform wholly nondiscretionary functions fall outside the class of actors upon whom Congress sought to impose fiduciary duties. See, e.g., O’Toole v. Arlington Trust Co., 681 F.2d 94, 96 (1st Cir.1982); Robbins v. First American Bank of Virginia, 514 F.Supp. 1183, 1189-91 (N.D.Ill.1981); Hibernia Bank v. Int’l Bhd. of Teamsters, 411 F.Supp. 478, 489-90 (N.D.Cal.1976).

Plaintiffs allege no facts that would support a threshold determination of fiduciary status as to Mercantile. What allegations they do make already presuppose the existence of such status. In this connection, for example, plaintiffs charge that, in approving the terms of the 1984 sale, Mercantile violated the trust it held on behalf of the plaintiffs. Yet no violation of trust could have taken place unless there arose a trust relationship at the outset. Neither did Mercantile stand in a fiduciary relation to the plaintiffs while they were still employed, nor after they left their employment. If Mercantile can be said to be a fiduciary at all, it is such with respect to the current Plan participants, who benefited from the 1984 sale, not with respect to former participants who terminated their relationship with the magazine well before the sale. Consequently, if any class of individuals has standing to object to the terms of the sale, it is the current, not former, beneficiaries of the Plan.

B. Ripeness

Both Mercantile and the Plan Committee members contend that the issues raised in Counts 7 through 9 of the amended complaint are not yet justiciable. The defendants are correct; it is not within the purview of federal courts to decide controversies based on contingencies that have yet to ripen into actualities. See, e.g., Dames & Moore v. Regan, 453 U.S. 654, 689, 101 S.Ct. 2972, 2991, 69 L.Ed.2d 918 (1981); Hodel v. Virginia Surface Mining & Reclamation Ass’n, 452 U.S. 264, 304, 101 S.Ct. 2352, 2374, 69 L.Ed.2d 1 (1981); Metzenbaum v. Federal Energy Reg. Comm’n, 675 F.2d 1282, 1289-90 (D.C.Cir.1982); American Intemat’l Group, Inc. v. Islamic Republic of Iran, 657 F.2d 430 (D.C.Cir.1981); 13A Wright & Miller, Federal Practice and Procedure: Jurisdiction 2d §§ 3532, 3532.2 (1984); C. Wright, Law of Federal Courts § 12 (4th ed. 1983).

Plaintiffs’ claim against Mercantile and the Plan Committee members is not that they were involved in the underlying transactions that initially gave rise to this and the Foltz suits, but that these defendants have acted so as to lessen the amount of funds available to satisfy a possible judgment to be awarded either to the Foltz plaintiffs or to those in this suit. For such a claim to state a cognizable cause of action, the distribution occurring in July 1985 must have been itself wrongful. It is not enough that plaintiffs prefer to look to more or deeper pockets than those currently within their reach. Absent some wrongdoing on their part, there is no reason why either of these defendants should be joined in this suit merely to satisfy some speculative shortfall in the recovery available. To this extent, not only are the claims against Mercantile and the Plan Committee members not ripe, but it may be improbable that they will ever lie against those defendants.

Finally, in response to plaintiffs’ “apodictie” assertion that Mercantile, if not the Plan Committee members, is a “necessary” party to the suit, we note that not even Mercantile fits into that category of parties within the meaning of Rule 19, Fed.R. Civ.P. There is no reason why “complete relief cannot be accorded among those already parties” in Mercantile’s absence. At most Mercantile is a stakeholder and, as such, has been enjoined from distributing monies representing the measure of plaintiffs’ likely recovery. There is simply no need to make Mercantile a party-defendant.

CONCLUSION

For the reasons outlined above, it is this 26th day of November, 1985,

ORDERED

That defendants’ motions are granted and that Counts 7 through 9 of the Amended Complaint are dismissed without prejudice as to Mercantile and defendants Gretchen Langston, James Glassman, John Mashek and Neil Rice.

      . Plaintiff Dorothy G. Haller is trustee of the estate of a former employee Ellis M. Haller, who retired in 1981.

      . The $41.7 million included an amount equal to $29 million in potential lost benefits plus pre-judgment interest at the legal rate.

      . While Counts 7 through 9 join Mercantile and the Plan Committee with the other defendants in charging undervaluations of the magazine’s stock, it is clear from the record that Mercantile and the Plan Committee members could have had no part in that alleged misconduct. See discussion, infra.

      . To the contrary, plaintiffs elsewhere assert that the voting trustees "had and exercised total control over the affairs ... of the Plan." Amended Complaint ¶ 3.17. Nothing in the record, even as it has been fully developed in the Foltz litigation, suggests that Mercantile ever exercised any "discretionary authority ... or control” over the Plan assets or administration.

      . In addition, plaintiffs assert that Mercantile was under a duty at all times to certify the accuracy of financial information about the Plan assets to the Plan administrators, relying on Section 103(a)(2) of ERISA, 29 U.S.C. § 1023(a)(2). This provision, however, pertains only to “such information as is contained within the ordinary records of the bank ... and is needed by the plan administrator to comply [with reporting and disclosure requirements].” 29 C.F.R. § 2520.103-5(c)(2)(iii) (1985) (emphasis added). In other words, because the Plan Committee received what information it needed from other sources, Section 103 imposed no duties upon Mercantile. See Plan Document ¶ 6.3 (Exhibit 6 submitted by the Foltz plaintiffs in support of their Motion for Preliminary Injunction) (Board transmits information to Plan Committee, which informs Trustee).

      . The Richardson plaintiffs have made vague reference to, and the Foltz plaintiffs have elaborated, the notion that they are continuing participants in the Plan. For an analysis of why that contention is without merit, see the Order filed this day dismissing Mercantile and the Plan Committee members from the Foltz litigation.

      . Mercantile acted at the direction of the Plan Committee, which in turn acted for the benefit of the Plan's current beneficiaries and in reliance upon this Court’s Orders of June 14, 1985 and July 15, 1985. While these Orders do not foreclose a finding of liability exceeding the sum set aside for satisfaction of a potential judgment, they do mark the limits of any likely recovery. See 613 F.Supp. at 646-48. Significantly, the funds set aside by this Court’s injunctions represent, not just monies due from the Plan, but a measure of damages equivalent to the difference between what benefits plaintiffs were paid and what they allege was due. See Foltz v. U.S. News & World Report, 760 F.2d 1300, 1307-08 (D.C.Cir.1985) (remanding to district court). Admittedly, the set-aside in Foltz did not include $4 million attributable to the phantom stock, but, as noted in this Court’s June 14, 1985 opinion, such sum cannot be recovered from the Plan. 613 F.Supp. at 644 n. 11, 645-46. On the whole, however, the set-aside represents the amount of damages (other than the punitive damages claimed in the most recent Foltz amended complaint) recoverable under the most generous legal theory pressed in either suit. Significantly, neither group of plaintiffs has appealed either set-aside as inadequate.
      In addition, because the set-asides were designed to balance the interests of the Foltz and Richardson plaintiffs against those of the current Plan beneficiaries, Mercantile and the Plan Committee were wholly justified in relying upon the Orders. Since guilty of no wrongdoing, these defendants cannot be charged with any shortfall in recovery available to either group of plaintiffs. See III A. Scott, Trusts § 226 at 1800 (3d ed. 1967) (trustee entitled to rely upon court instructions).
      Finally, because the claims against these defendants are dismissed without prejudice to renew them at a later time, the Court’s Order works no hardship upon plaintiffs.