author: LOVELL, District Judge.

text:
    TRANSAMERICA INSURANCE GROUP, Plaintiff, v. Charles L. OSBORN and Mountain West Farm Bureau Insurance Company, Inc., Defendants.
    No. CV 83-204-M-CCL.
    United States District Court, D. Montana, Missoula Division.
    Feb. 6, 1986.

      Paul C. Miesmer, Garlington, Lohn & Robinson, Missoula, Mont., for plaintiff.
    Gene I. Brown, Landoe, Brown, Planalp, Kommers & Lineberger, Bozeman, Mont., Shelton C. Williams, Williams Law Firm, Missoula, Mont., for defendant Mountain West Farm Bureau Ins Co.
    Sam E. Haddon, Boone, Karlberg & Had-don, Missoula, Mont., for defendant Osborn.
   OPINION AND ORDER

LOVELL, District Judge.

Plaintiff filed this declaratory judgment action seeking a determination of the extent of liability to its insured, defendant Charles L. Osborn, under the “underin-sured motorists coverage” provisions of the insured’s policy. Both plaintiff and defendant Osborn have moved for summary judgment, and the issue has been submitted on briefs. Jurisdiction is based on diversity of citizenship, 28 U.S.C. § 1332.

Plaintiff (hereinafter “Transamerica”) issued a policy of automobile insurance to defendant Charles Osborn (hereinafter “Osborn”), under the terms of which Transamerica agreed to provide coverage for damages occasioned by an accident with an underinsured motor vehicle. This policy was in effect on March 22,1980. On that date, while Osborn was on duty as a police officer for the City of Dillon, Montana, he was struck by an automobile owned by Ralph Huntley & Sons, Inc., and operated by one Gerald McArthur. It is undisputed that Osborn sustained severe injuries as a result of the accident.

On October 5, 1983, Osborn recovered a judgment in state district court against Gerald McArthur in the amount of $187,-333.19. In partial satisfaction of said judgment, Farmers Insurance Exchange paid to Osborn the sum of $25,000.00, representing the limits of liability coverage under Gerald McArthur’s policy with Farmers.

Defendant Mountain West Farm Bureau Insurance Company, Inc., (hereinafter “Mountain West”), which carried a policy of insurance for the Huntley vehicle, filed a declaratory judgment action in state court, resulting in a jury determination that Mountain West’s coverage extended to Gerald McArthur for the accident in question. This determination was upheld on appeal to the Supreme Court of Montana. Mountain West Farm Bureau Mut. Ins. Co. v. Farmers Ins. Exch. Co., — Mont. —, 680 P.2d 330 (1984). As a result, a maximum of $101,000 of coverage was made available to Osborn under the Mountain West policy. All claims between Osborn and Mountain West now have been fully settled.

Because Osborn was acting within the scope of his employment at the time of the accident, he received approximately $17,-885.85 in workers’ compensation benefits from the Workers’ Compensation State Fund for the State of Montana.

The issue presented for summary judgment is whether, in light of the above monies paid or made available to Osborn, the Huntley vehicle comes within the policy definition of “underinsured motor vehicle” so as to render Transamerica liable to Osborn for the $50,000.00 limits of liability under the policy.

The policy language around which the dispute revolves is the definition of “under-insured motor vehicle," which is defined as

a land motor vehicle or trailer of any type to which a bodily injury liability bond or policy applies at the time of the accident but its limit for bodily injury liability is less than the limit of liability for this coverage.

Transamerica’s position is that the under-insured motorist coverage is intended to provide an absolute minimum amount of recovery for the insured, so that the insured would be guaranteed $50,000.00 coverage where the “underinsured” vehicle carried less than that amount. Under this construction of the policy, the underinsured motorist provision is applicable only where the vehicle involved carries the minimum amount of insurance required by the state’s financial responsibility laws, but does not carry insurance with limits in excess of $50,000.00. The policy specifically excludes from the definition of “underin-sured motor vehicle” any vehicle which carries an insurance policy with limits of liability less than the minimum limit required by the state financial responsibility law. In this case, Transamerica argues that since Osborn has received upwards of $125,000 from the insurers of the automobile and the driver, the Huntley vehicle is not “underinsured” within the meaning of the policy, and therefore the underinsured motorist provisions are not applicable.

Osborn, on the other hand, contends that the $50,000.00 coverage should be available without offset of either the workers’ compensation benefits received by Osborn or the insurance coverage from other sources. This construction of the policy, Osborn maintains, is consistent with Montana law and public policy, the purpose of which is to compensate the injured party for his loss without resulting in duplication of payment. Osborn claims that payment of the $50,000.00 is justified under the terms of the policy because the Huntley vehicle was underinsured in relation to the judgment recovered by Osborn, and that even if Transamerica pays the full extent of the coverage he will not be compensated for his entire loss.

This case presents an issue of first impression in the interpretation of insurance law and policy provisions in Montana. Where jurisdiction is based on diversity of citizenship, the court is bound to follow the substantive law of the forum state. St. Paul Fire and Marine Ins. Co. v. Weiner, 606 F.2d 864 (9th Cir.1979). When a federal court confronts a situation not yet met by the forum state’s highest court, it must seek the rule it believes that state court would adhere to were it confronted with a similar situation. Commercial Union Ins. Co. v. Ford Motor Co., 640 F.2d 210 (9th Cir.1981), cert. den. 454 U.S. 858, 102 S.Ct. 310, 70 L.Ed.2d 154.

Construction of insurance contracts in Montana is governed by the general law of contract interpretation contained in Title 28, Chapter 3, Montana Code Annotated, and the case law which has developed thereunder in the context of insurance. The Montana Insurance Code, Title 33, M.C.A., further provides:

Every insurance contract shall be construed according to the entirety of its terms and conditions as set forth in the policy and as amplified, extended, or modified by any rider, endorsement, or application which is a part of the policy.

§ 33-15-316, M.C.A. (1985).

Transamerica contends that strict interpretation of the policy language at issue will reveal that Transamerica is entitled to judgment as a matter of law. Osborn argues (1) that the policy language is ambiguous and all doubts must be resolved in his favor, and (2) that construing the policy in accordance with Transamerica’s interpretation would violate the letter and spirit of Montana insurance law.

In examining the policy language, the words are to be understood in their ordinary and popular sense rather than according to their strict legal meaning unless used by the parties in some technical sense. § 28-3-502, M.C.A. (1985). The “Declarations Page” of Osborn’s policy shows limits of $100,000.00 for liability, $1,000.00 for medical payments, and $50,000.00 for “UM/UNDINS MOT.” Under the “Abbreviation Key,” “UM” means Uninsured Motorist and “UNDINS MOT” means Under-insured Motorist.

Underinsured motorist coverage is explained on Page 12 of the policy. Under these provisions, Transamerica agrees to pay damages which a covered person is legally entitled to recover from the owner or operator of an underinsured motor vehicle because of bodily injury sustained by a covered person and caused by an accident. “Underinsured motor vehicle” carries the definition set forth ante. There is no dispute that Osborn is a covered person under the policy.

Osborn claims that the definition of “underinsured motor vehicle” is ambiguous and inconsistent with the limits of liability expressed on the Declarations Page. The policy must be read as a whole and, if possible, the various parts reconciled and given meaning and effect. Fitzgerald v. Aetna Ins. Co., 176 Mont. 186, 677 P.2d 370, 373 (1978).

The insurer is responsible for the language contained within the policy, and whenever a contract of insurance is drawn so that it is fairly susceptible of two constructions, one favorable to the insured and the other favorable to the insurer, the construction most favorable to the insured will be adopted. State Farm Mutual Auto. Ins. Co. v. Queen, — Mont. —, 685 P.2d 935 (1984). Under Montana law, the test to be used in interpreting ambiguous policy language is not what the insurer intended the words to mean but what a reasonable person in the position of an insured would understand them to mean. St. Paul Fire and Marine Ins. Co. v. Thompson, 150 Mont. 182, 433 P.2d 795 (1967); Alpha Real Estate Development, Inc. v. Aetna Life and Cas. Co., 174 Mont. 301, 570 P.2d 585 (1977). On the other hand, if the language of the insurance policy admits of only one meaning, there is no basis for interpretation of the policy language under the guise of ambiguity. Universal Underwriters Ins. Co. v. State Farm Mutual Auto. Ins. Co., 166 Mont. 128, 531 P.2d 668 (1975).

Transamerica asks this court to determine as a matter of law that the policy language is clear and unambiguous and subject to only one interpretation. The definition of “underinsured motor vehicle” makes clear that it refers only to a vehicle which is insured, but for which the liability limit “is less than the limit of liability for this coverage ” (emphasis added). The first exclusion contained within this section excludes from underinsured motorist coverage any vehicle which is insured, but for which the limit of liability is less than the minimum amount required by state financial responsibility laws. A vehicle which meets this definition is «¿reinsured within the meaning of the policy.

The result of a strict interpretation of the policy language, applying Montana’s financial responsibility laws, is that the uninsured motorist coverage will be triggered whenever the vehicle involved is covered by less than $25,000.00 of liability insurance or has no liability insurance at all. The underinsured motorist coverage will be triggered only when the vehicle involved carries insurance of at least $25,-000.00 but less than $50,000.00. In the final analysis, under no set of circumstances will Transamerica be liable for more than $25,000.00 under the underinsured motorist provisions of the policy.

It is not a question of how I would interpret this contract in the first instance (indeed, I might well reach a contrary result.) Rather, it is how I perceive that the Montana Court would decide this case. I apply that standard for the remainder of this discussion.

A reasonable person in the position of an insured, viewing the coverage amounts on the Declarations Page, surely would not expect that “UNDINS MOT $50,000” actually means that the total amount for which his insurer will be liable will not exceed $25,000.00. The reasonable expectation of the insured at the time he purchases the policy will be that he has purchased $50,-000.00 uninsured motorist coverage and $50,000.00 underinsured motorist coverage.

Montana law requires that contracts of insurance must be interpreted in light of all relevant provisions contained within the contract. Aetna Ins. Co. v. Cameron, — Mont. —, 633 P.2d 1212 (1981). Interpreting the Transamerica-Osborn policy as a whole, the language "... but its limit for bodily injury liability is less than the limit of liability for this coverage” is inherently inconsistent with the limits of $50,000.00 specified on the Declarations Page. The definition of underinsured motor vehicle contained on the twelfth page of the policy conflicts with the insured’s reasonable belief that he is paying an additional premium for an additional $50,000.00 coverage.

The unfairness of the provision may be demonstrated by example. Insured is involved in an automobile accident, caused by the negligence of the other driver, “B”. B carries liability insurance in the amount of $25,000.00. Insured sustains damages in the amount of $75,000.00. Transamerica’s reading of the policy would result in payment to the insured of $25,000.00 from B’s liability carrier and $25,000.00 from Trans-america. The additional $25,000.00 coverage for which the insured paid disappears in the policy translation. This illustrates an inherent ambiguity in the policy which cannot be reconciled.

Having determined that the policy language is ambiguous, the Court must ascertain the manner in which the policy should be construed so as to comport with the laws and public policy of the State of Montana. The Supreme Court of Montana has declared void clauses within insurance policies which are held to be in derogation of the letter and spirit of Montana law. Sullivan v. Doe, 159 Mont. 50, 495 P.2d 193 (1972); McGlynn v. Safeco Ins. Co. of America, — Mont. —, 701 P.2d 735 (1985).

Osborn cites numerous Montana cases in support of his position that public policy is to uphold the insured’s expectation of what he “bought and paid for” and that Montana law prevents insurance companies from obtaining windfalls by relying on payments from collateral sources. Transamerica cites authority from jurisdictions outside Montana to demonstrate the reasonableness of its interpretation that the underin-sured motorist coverage serves as a “low-end cushion” for the insured.

Transamerica claims that there is no public policy prohibiting contractual limitations on underinsured motorist coverage. Thus, Transamerica argues that it has a right to rely upon the express contract language, under which the Huntley vehicle is not underinsured.

A review of the caselaw from other jurisdictions discloses a split of authority on this issue. The first viewpoint appears to be, as Transamerica argues, that underin-sured motorist coverage is a guaranteed minimum amount of coverage purchased by the insured to enable recovery of benefits in an amount greater than that required by state financial responsibility laws. The second viewpoint, urged by Osborn, adopts the reasoning that underin-sured motorist provisions will be triggered any time the payments from other sources fail to compensate the insured for his entire loss.

Jurisdictions adopting the position taken by Transamerica focus on the policy limits of the tortfeasor in determining whether the vehicle is underinsured. These states allow the insurer to reduce the amount it must pay under the underinsured motorist coverage by the amount the insured has collected from the tortfeasor’s liability insurer.

For example, in Rutherford v. Tennessee Farmers Mutual Ins. Co., 608 S.W.2d 843 (Tenn.1980), the plaintiff’s damages exceeded $50,000.00, but the tortfeasor carried only $10,000.00 of liability insurance, which satisfied the state’s financial responsibility laws. The plaintiff carried uninsured motorist coverage with limits of $50,000.00 per person, and underinsured motorist coverage which covered loss from “a motor vehicle with automobile liability insurance limits less than the limits of the uninsured motor vehicle coverage carried by [the] insured under the policy.” Relying on the language of the policy, the court allowed the plaintiff to recover $40,000.00, the difference between the underinsured motorist limits and the tortfeasor’s coverage.

Other courts have denied recovery to plaintiffs under their underinsured motorist coverage where the amount of the tort-feasor’s liability limits was equivalent to the maximum liability under the underinsu-rance policy. LaFrange v. United Services Auto. Assn., 1984-85 Automobile Law Reports — Insurance Cases 1113466 (Ky.Ct.App.1984); Muller v. Allstate Ins. Co., 627 S.W.2d 775 (Tex.App.1981).

A typical statute reflecting public policy of this nature is the state of Maine’s Title 24-A M.R.S. § 2902(1), which defines an underinsured vehicle as “a motor vehicle for which coverage is provided, but in amounts ... less than the limits of the injured party’s uninsured vehicle coverage.” Interpreting this section, the Supreme Court of Maine has held that the legislature “intended to permit the injured party to recover the amount he would have received had the tortfeasor been insured to the same extent as the injured party.” Connolly v. Royal Globe Ins. Co., 455 A.2d 982, 936 (Me.1983). Under this interpretation, the court allowed plaintiff to recover the deficiency between the aggregate amount of the tortfeasor’s liability coverage and the amount of plaintiff’s uninsured motorist coverage. Id.

In Wert v. Picciano, 189 N.J.Super. 178, 459 A.2d 697 (1982), the plaintiff’s policy language regarding underinsured motorist coverage was substantially identical to the language contained in Osborn’s policy. The court considered the issue of whether the underinsured motorist coverage and the tortfeasor’s liability coverage were intended to be cumulative or whether the underinsured motorist endorsement was meant to guarantee a minimum to its insured allowing deduction of amounts received under other policies. The court rejected the plaintiff’s argument that the underinsured motorist endorsement should be construed in the same manner as the uninsured motorist endorsement, i.e., giving effect to a legislative mandate compelling coverage without offset for payments made under liability coverage. Rather, the court held that underinsured motorist coverage “fills the vacuum” and guarantees to an insured motorist a minimum coverage up to the amount he chooses against the person who is insufficiently insured. Id., 459 A.2d at 700. See also, Dewberry v. Auto-Owners Ins. Co., 363 So.2d 1077, 1081 (Fla.1978).

Finally, the Pennsylvania Superior Court has considered underinsured motorist coverage in the context of that state’s Uninsured Motorist Coverage Act, which neither requires nor refers to underinsured motorist coverage. Votedian v. General Accident Fire & Life Assur. Corp., 1984-85 Automobile Law Reports—Insurance Cases Ď13,251 (Pa.Super.Ct.1984). Based upon the policy provisions at issue in that case, the court allowed set-off for sums paid by the tortfeasor’s insurance and held:

When underinsured motorist coverage is included, the terms and limitations thereof are not controlled by statute or by public policy but by the agreement reached by the parties. That agreement, as expressed in the policy of insurance, may place limitations upon underinsured motorist coverage, subject only to the requirement that the limitation be clearly worded and conspicuously displayed.

Id.

The position urged by Osborn has been adopted in a number of states, including South Carolina, Louisiana, Oklahoma, Minnesota, and Washington. An example of a statute representing the “total damages” theory is the legislation enacted in South Carolina.

[Automobile insurance] carriers shall also offer, at the option of the insured, underinsured motorist coverage up to the limits of the insured’s liability coverage — to provide coverage in the event that damages are sustained in excess of the liability carried by an at fault insured or underinsured motorist.

S.C.Code Ann. § 56-9-831 (Supp.1982). Applying the above statute, the Supreme Court of South Carolina held void a policy provision of underinsured motorist coverage identical in substance to the Trans-america-Osborn policy provision. Gambrell v. Travelers Ins. Co., 1984-85 Automobile Law Reports — Insurance Cases ¶ 12,-881 (S.C.1983). The court held in Gambrell that an insured procures underinsured motorist coverage to protect himself in case an at fault driver has liability coverage but the amount is insufficient to cover the damages sustained. “Accordingly optional underinsured coverage would always be over and above either the at fault driver’s liability coverage or over and above the policyholder’s own uninsured motorist coverage. This is the protection provided for the additional premium paid for the under-insured motorist coverage.” Id. The court further stated that the construction urged by the insurer, and reflected in the policy language, would essentially make underin-sured motorist coverage valueless in many instances. Id. See also, Hoeschen v. South Carolina Ins. Co., 349 N.W.2d 833 (Minn.App.1984); Garris v. Cincinnati Ins. Co., 1984-85 Auto. Law Reports 1112,962 (S.C.1984); United Services Auto. Assn. v. Winbeck, 30 Wash.App. 769, 637 P.2d 996 (1981); Millers Cas. Ins. Co. of Texas v. Briggs, 100 Wash.2d 1, 665 P.2d 891 (1983).

In Montana, there is no statutory directive by which this Court may be guided. Likewise, there is no policy directive from the Montana Supreme Court specifically directed to underinsured motorists. Analogous public policy statements, however, have been expressed in the areas of uninsured motorist coverage and subrogation.

The Montana Supreme Court has identified specific legislative policy with respect to uninsured motorist laws — “to provide protection for the automobile insurance policyholder against the risk of inadequate compensation for injuries or death caused by the negligence of financially irresponsible motorists.” Mountain West Farm Bureau v. Neal, 169 Mont. 317, 547 P.2d 79 (1977). The court has invalidated clauses by which the insurer attempted to limit its liability below the statutory minimum by deducting workers’ compensation or “other insurance” benefit payments. Sullivan v. Doe, 159 Mont. 50, 495 P.2d 193 (1972). The court recently struck down a policy provision that required physical contact for an insured to recover under his uninsured motorist coverage. McGlynn v. Safeco Ins. Co. of America, — Mont. —, 701 P.2d 735 (1985). Finally, the court has held that an insurer may not assert its right of subrogation unless and until the insured is made whole for his entire loss. Skauge v. Mountain States Telephone & Telegraph Co., 172 Mont. 520, 528, 565 P.2d 628, 632 (1977); Hall v. State Comp. Ins. Fund, — Mont. —, 708 P.2d 234, 42 St.Rep. 1502 (1985).

These recent decisions indicate the policy behind the laws of Montana with respect to insurance. The underlying theme is the protection of the reasonable expectations of the insured at the time the policy was purchased. The insurance business is heavily regulated in Montana, and the courts usually have the benefit of some statutory guidance as they sift through the often convoluted language of insurance policies. In this case there is no such statutory guidance. However, “giving due deference to [the] pronouncements of policy issued by the Montana [Supreme] Court,” I believe that this issue may be resolved in a manner “wholly consistent with the law of Montana as it may be seen to be developing.” Kelly v. General Motors Corp., 487 F.Supp. 1041, 1044 (D.Mont.1980).

Interpreting the Transamerica-Osborn policy in light of Sullivan v. Doe and Skauge v. Mountain States Tel. & Tel. Co., supra., I hold that Osborn’s position must be adopted as a matter of law. Sullivan held that the insurer could not offset workers’ compensation benefits or payments received from other insurance against uninsured motorist coverage. Skauge held that an insurer has no right to subrogation until all of the insured’s damages have been paid. There is no logical distinction between these cases and the case at bar. Had Transamerica paid Osborn $50,000.00 prior to the determination of Mountain West’s or Farmer’s liability, Transamerica would not be entitled to sub-rogation because Osborn would not be made whole for his injuries. Skauge, supra. Allowing Transamerica to offset the payments received by Osborn against its liability as underinsurance carrier cannot be reconciled with these Montana decisions.

Therefore, it is the holding of the Court that, under the factual circumstances presented by this case, the Huntley vehicle was underinsured within the meaning of the policy as reasonably understood by the insured, and that the policy provision defining underinsured motor vehicle is void as against public policy of the State of Montana.

Accordingly, plaintiff Transamerica Insurance Group’s motion for summary judgment is hereby DENIED, and defendant Charles Osborn’s motion for summary judgment is GRANTED.

Judgment shall enter in accordance with this order, each party to bear his or its own costs.

      . The court was also guided by Tennessee’s underinsured motorist legislation, which focuses on the policy limits of the tortfeasor. See, Comment, Underinsured Motorist Coverage in Tennessee, 43 Tenn.L.Rev. 664 (1976).

      . For a discussion of state statutes adopting this theory, see Comment, Washington’s Underinsured Motorist Statute: Balancing the Interests of Insurers and Insureds, 55 Wash.L.Rev. 819 (1980), and Barns & Smith, Washington's Under-insured Motorist Statute: Examining the Procedural Issues, 17 Gonz.L.Rev. 269 (1982).


source: Caselaw Access Project

author: SHADUR, District Judge.

license: Public Domain

text:
    FACTOFRANCE HELLER, Plaintiff, v. I.P.M. PRECISION MACHINERY COMPANY and Josef Blechner, Defendants.
    No. 84 C 3987.
    United States District Court, N.D. Illinois, E.D.
    Feb. 7, 1986.

      Kenneth B.. Drost, Rachel F. Best, Fatten, Muchin, Zavis, Pearl & Galler, Chicago, Ill., for plaintiff.
    Jerome Rotenberg, Norman L. Hafron, Rosenfeld, Rotenberg, Schwartzman, Haf-ron & Shapiro, Chicago, Ill., for defendants.
   MEMORANDUM OPINION AND ORDER

SHADUR, District Judge.

Factofrance Heller (“Factofrance”) has filed a four-count Amended Complaint (the “Complaint”) in this diversity action against I.P.M. Precision Machinery Company (“IPM”) and Josef Blechner (“Blech-ner”), charging:

1. breach of contract (Count I);
2. unjust enrichment (Count II);
3. conversion of Factofrance’s property (Count III); and
4. conspiracy to convert Facto-france’s property (Count IV).

Factofrance has now moved under Fed.R. Civ.P. (“Rule”) 56 for summary judgment against IPM and Blechner. For the reasons stated in this memorandum opinion and order, that motion is granted in part and denied in part.

Facts

Factofrance is a French corporation in the factoring business — financing accounts receivable — for various European companies. Illinois corporation IPM acts as an independent sales representative for domestic and foreign manufacturers of high precision machine tools, including Societe d’Innovations Techniques (“SIT”). Blech-ner owns or controls 100% of IPM’s stock (Answer to First Amended Complaint [“Ans.”] 1115).

On June 9, 1976 Factofrance and SIT entered into a factoring contract (P.Ex.4). They later amended that contract to include accounts receivable generated by SIT’s transactions with IPM (Complaint ¶ 7; Ans. 117).

In May 1980 Blechner met Daniel Dus-seau (“Dusseau”) and Mary Croft (“Croft”) —two representatives of SIT — at a Chicago trade show (Blechner Dep. 17-18). Dus-seau and Croft indicated SIT needed a United States sales and service agent (id. at 21-22). Several months later Blechner toured SIT’s factory in Cholet, France and IPM and SIT tentatively agreed “to work together” (id. at 23).

During the summer of 1981 IPM agreed to buy two machines from SIT (id. at 38, 42):

1. a 650 creep feed grinder (“RPM 650”); and
2. a Universal O.D. grinder (“RCE 700”).

SIT shipped the machines to IPM and IPM paid SIT in full (id. at 43, 131).

After demonstrating both machines at an October or November 1981 trade show, IPM arranged to sell the RPM 650 to Waltz Bros., Inc. (“Waltz”) (id. at 52-54). Dus-seau represented to IPM and Waltz that SIT could modify the RPM 650 to conform to Waltz’ requirements (id. at 67-70). Nonetheless, a series of tests conducted by IPM in 1982 revealed the RPM 650 did not meet Waltz’ specifications (id. at 77-80).

In June 1982 Blechner again visited SIT representatives in France. SIT agreed:

1. to furnish a different machine to IPM — an “RPM 1000” — if the RPM 650 could not meet Waltz’ requirements (id. at 83, 85);
2. to allow IPM to exchange the original RPM 650 for a new RPM 650 machine (id); and
3. to pay 60% of the cost of a September 1982 trade show (id. at 109-10).

Later that summer IPM and SIT concluded the RPM 650 could not satisfy Waltz’ needs (id. at 92). IPM and SIT then agreed IPM would return the RPM 650 to France with several other machines SIT intended to ship back to France after they had been demonstrated at the September 1982 trade show (id. at 92-93).

During the summer of 1982 IPM also ordered the RPM 1000 to install at Waltz (id. at 94-96) and an R650 HLT to sell to Durand Bros. Glass Mfg. Co. (“Durand”) (id. at 108-09, 128-29; P.Ex.6). SIT first demonstrated the RPM 1000 at the September 1982 trade show before turning it over to IPM (Blechner Dep. 96). SIT shipped the R650 HLT directly to Durand (id. at 108-09). SIT never sent IPM a new RPM 650 to replace the original RPM 650 rejected by Waltz (id. at 128).

On July 23, 1982 SIT sent three invoices (the “Invoices”) to IPM:

1. No. 4335 (Complaint Ex. A) covered the R650 HLT shipped to Durand.
2. Nos. 4338 and 4339 (Complaint Exs. B and C) covered the RPM 1000 and its accessories.

All invoices reflect the agreed purchase price (in French francs) of the machines (P.Ex.7 and 8): 151,648 francs for the R650 HLT and an aggregate of 615,644 francs for the RPM 1000, or a total of 767,292 francs. IPM never paid SIT for those machines.

Factofrance later purchased the accounts receivable represented by the Invoices. On August 30, 1982 SIT notified IPM of that factoring contract and directed IPM to pay Walter Heller & Company, Inc. (“Heller”), Factofrance’s United States agent (P.Ex.9). On August 31, 1982 Factofrance itself sent a similar notice and direction to IPM (P.Ex. 10). IPM received those notices on September 7 (P.Ex.6). It never paid Heller or Factofrance for the machines covered by the Invoices (Blechner Dep. 131).

In September 1982 Durand paid IPM $46,341 for the R650 HLT (P.Exs.6, 14). On October 6,1982 IPM telexed SIT, rejecting both the RPM 650 and the RPM 1000 (P.Ex.ll). Nonetheless IPM later sold the RPM 1000 to Waltz for $120,000 (P.Ex.12) —$24,216 less than the price Waltz had originally agreed to pay (P.Ex.5).

IPM had agreed to bill SIT for its share of the September 1982 trade show expenses before SIT would be required to remit payment (Blechner Dep. 110). In June and October 1981 IPM billed SIT for its share of booth rental costs (id. at 148, 150; Dep.Ex.7,9). SIT paid its share of those costs in full (Blechner Dep. 151). IPM did not bill SIT for the remaining trade show costs until some time after the trade show (id.).

In early 1983 SIT entered bankruptcy proceedings in France. IPM attempted to send the rejected RPM 650 back to SIT, but the freight forwarder was told to return the machine to this country and to find a buyer (id. at 110-11). Blechner himself bought the machines from the freight forwarder (id).

Count I: Breach of Contract

Factofrance asserts — and IPM agrees— the Illinois version of Uniform Commercial Code (“UCC”) Article 9, Ill.Rev.Stat. ch. 26, ¶¶ 9-101 to 9-507, governs IPM’s liability to Factofrance on the two assigned Invoices. Section 9-318(1) outlines the defenses an account debtor can assert against the assignee of an account:

Unless an account debtor has made an enforceable agreement not to assert defenses or claims arising out of a sale as provided in Section 9-206 the rights of an assignee are subject to
(a) all the terms of the contract between the account debtor and assignor and any defense or claim arising therefrom; and
(b) any other defense or claim of the account debtor against the assignor which accrues before the account debt- or receives notification of the assignment.

In that respect Factofrance contends:

1. IPM cannot assert any defense arising from the contract — evidenced by Invoice 4335 — to buy the R650 HLT.

2. IPM can assert a breach of warranty claim arising out of the contract— evidenced by Invoices 4338 and 4339 — to buy the RPM 1000, but IPM’s damages for that claim are limited to the difference between (a) the amount Waltz originally agreed to pay for the RPM 1000 and (b) the amount Waltz eventually paid in fact.

3. IPM’s remaining claims against SIT — those not arising out of the sales contracts themselves — accrued after IPM received notice of the assignment and cannot be asserted against Factofrance. Factofrance also seeks to hold Blechner personally liable for IPM’s debts.

1.Claims Arising From the Contracts Between SIT and IPM

IPM does not dispute any of the critical facts relating to the R650 HLT shipped by SIT (Blechner Dep. 108-09; P.Ex.6):

1. Durand actually received and installed that machine.
2. Durand never rejected it.
3. Durand paid IPM for it in full.

Hence IPM cannot assert against Facto-france any claims or defenses arising out of its contract to purchase the R650 HLT. IPM does not quarrel with that result.

IPM also does not dispute (Blechner Dep. 109) its eventual sale of the RPM 1000 to Waltz despite its earlier purported rejection (P.Ex.ll) of that machine. Under Sections 2-606(l)(c) and 2-607(1), that sale was an “act inconsistent with the seller’s ownership” and constituted an acceptance of the RPM 1000 obligating IPM to pay for the machine. Lorenzo Banfi di Banfi Renzo & Co. v. Davis Congress Shops, Inc., 568 F.Supp. 432, 433-34 (N.D.Ill.1982).

Although Illinois case law suggests IPM’s sale of the RPM 1000 might have obligated IPM to pay the full contract price to SIT (see Ozite Corp. v. F.C. Clothier & Sons Corp., 130 Ill.App.2d 716, 719, 264 N.E.2d 833, 835 (4th Dist.1970)), Factofrance Mem. 14 has acknowledged IPM can assert a breach of warranty claim arising out of the sales contract. Section 2-714(2) establishes the measure of damages IPM may offset against its liability:

The measure of damages for breach of warranty is the difference at the time and place of acceptance between the value of the goods accepted and the value they would have had if they had been as warranted, unless special circumstances show proximate damages of a different amount.

Factofrance contends the objective measurement of the difference in value is the difference between the $144,216 Waltz originally agreed to pay IPM for the RPM 1000 (P.Ex.5) and the $120,000 reduced price Waltz eventually paid (P.Ex.12).

IPM accepts that measure so far as it goes, but argues it should also recover its expenses incurred in putting the RPM 1000 in working order. Factofrance R. Mem. 4 n. 1 retorts briefly that added measure of damages would confer a double recovery on IPM.

Factofrance’s position on that score is unsound on its face. Section 2-714(2) speaks of the “value of the goods accepted.” But that value — the best evidence of which is the price paid by arms-length purchaser Waltz — was not $120,000 if repairs had to be made to the RPM 1000 before that price could be realized. Whether such repairs were to be made by the buyer (who would then pay that much less for the machine) or by IPM in order to obtain the $120,000 price, in either case the “value of the goods accepted” “at the time and place of acceptance” would be $120,000 minus any out-of-pocket costs required to repair the RPM 1000.

Any such possibility, though, is really beside the mark. In Rule 56(e) terms, IPM has failed to “set forth specific facts” as to any claimed out-of-pocket repair costs. Walker v. Hoffman, 583 F.2d 1073, 1075 (9th Cir.1978) (quoting Donnelly v. Guion, 467 F.2d 290, 293 (2d Cir.1972)) teaches a litigant cannot hold back evidence on a summary judgment motion:

The non-movant has an affirmative duty to come forward to meet a properly supported motion for summary judgment:
A party opposing a motion for summary judgment simply cannot make a secret of his evidence until the trial, for in doing so he risks the possibility that there will be no trial. A summary judgment motion is intended to “smoke out” the facts so that the judge can decide if anything remains to be tried.

Accord, Publishers Resource, Inc. v. Walter-Davis Publications, Inc., 762 F.2d 557, 561 (7th Cir.1985).

This Court has frequently pointed out summary judgment is a substitute for trial, dependent on the nonexistence of controverted facts to be resolved by the factfinder (whether jury or judge). Just as a litigant cannot say, post-verdict, “Oh by the way, here’s some evidence I failed to put in during the trial that would have reduced the judgment against me,” so the target of a plaintiff’s summary judgment motion cannot fail to put its evidence in before judgment is rendered. Hence IPM’s mere assertion in its briefing about repair costs — wholly unsubstantiated in terms of admissible evidence — cannot operate to reduce the damages shown by Factofrance’s proofs.

2. Claims Unrelated to the Contracts Between SIT and IPM

IPM urges its right to assert against Factofrance two additional claims not arising out of the contracts evidenced by the Invoices assigned to Factofrance:

1. a claim for damages for the defective RPM 650; and
2. a claim for the trade show expenses SIT agreed to pay.

Factofrance responds those claims accrued after IPM received notice of the assignment, so that Section 9-318(2) bars their assertion against Factofrance.

(a) RPM 650

Factofrance does not dispute the RPM 650 was defective: It failed to meet Waltz’ requirements despite SIT’s assurances. Hence IPM has a claim for breach of warranty in the sale of the RPM 650. Section 2-725(2) establishes the time of accrual of that claim:

A cause of action accrues when the breach occurs, regardless of the aggrieved party’s lack of knowledge of the breach. A breach of warranty occurs when tender of delivery is made, except that where a warranty explicitly extends to future performance of the goods and discovery of the breach must await the time of such performance the cause of action accrues when the breach is or should have been discovered.

IPM’s claim for breach of warranty thus accrued when SIT delivered the defective RPM 650 in early 1982 — well before IPM received notice of the assignment to Facto-france in September 1982.

Factofranee insists IPM and SIT entered into a “novation” of the sales contract when (1) IPM agreed to wait until after the September 1982 trade show to return the RPM 650 and (2) SIT agreed to send IPM a new RPM 650 machine. From that perspective, Factofranee says, IPM’s claim did not accrue until SIT breached that second contract to replace the RPM 650 and IPM wrote to SIT rejecting the machine in October 1982.

But Factofranee glosses over the controlling fact that Section 2-725(2) speaks of the time of accrual in terms of “breach.” IPM’s agreement to return the RPM 650 at a later date, rather than insisting on immediate money damages, did not somehow extinguish (and it certainly did not waive) SIT’s breach of warranty. All the parties did was to agree to substitute one remedy for that breach — replacement of nonconforming goods — for another remedy — money damages. If the parties had agreed on the amount of damages but had given SIT added time to make payment, surely Facto-france could not assert that as deferring the accrual of IPM’s breach of warranty claim. And the situation here is no different. IPM’s claim — the breach of warranty — never changed. Because that claim accrued before IPM received notice of the assignment, IPM may assert that claim against Factofranee.

(b) Trade Show Expenses

SIT obligated itself in June 1982 to pay 60% of IPM’s trade show expenses, and IPM asserts its claim for those expenses therefore accrued at that time. But “accrual” of a “claim” in Section 9-318(l)(b) terms bespeaks more than the existence of an unripened obligation. Though there is little legislative history or case law on point, the official UCC Comment says the subsection “makes no substantial change in prior law.” And the common-sense usage of the term “accrual” would appear to embody the same “cause of action” concept embraced in Section 2-725(2) and discussed in the preceding section. As Seattle First National Bank v. Oregon Pacific Industries, Inc., 262 Or. 578, 500 P.2d 1033, 1035 (1972) put it:

“Accrue,” aside from its fiscal use, generally is used in the law to describe when a cause of action comes into being. Its chief use is to determine when the statute of limitations commences. We believe it is advisable to use “accrue” in the Code in its usual sense; that is, a claim or set-off accrues when a cause of action exists.

Thus “accrual” of the “claim” — a “cause of action” notion — necessarily involves a breach of an obligation rather than its mere existence. And by definition no breach of SIT’s duty to pay the trade show expenses could arise until IPM billed SIT for its proportionate share and SIT did not pay. See State Department of Agriculture v. Ackerman, 34 Ill.App.3d 796, 798-99, 341 N.E.2d 48, 50-51 (5th Dist.1975). Because the amount of the expenses could not even be known until the trade show (after the notice of assignment), and because in any event IPM did not bill SIT until several months after the September trade show (Blechner Dep. 151), SIT’s refusal to pay — and therefore IPM’s claim for breach of the expense-sharing agreement — did not “accrue” until after IPM had received notice of the assignment to Factofrance. IPM cannot assert that claim against Factofrance.

Count I: IPM as Blechner’s Alter Ego

After an extended period of digression (initiated by Steven v. Roscoe Turner Aeronautical Corp., 324 F.2d 157 (7th Cir.1963)), our Court of Appeals has now made it plain in Van Dorn Co. v. Future Chemical and Oil Corp., 753 F.2d 565, 570-71 (7th Cir.1985) that Illinois law does (as it must under Erie v. Tompkins) provide the rule of decision as to “piercing the corporate veil” in Illinois-based diversity eases. Gallagher v. Reconco Builders, Inc., 91 Ill.App.3d 999, 1004, 47 Ill.Dec. 555, 415 N.E.2d 560, 563-64 (1st Dist.1980) (citations omitted) teaches:

[A] corporate entity will be disregarded and the veil of limited liability pierced where it would otherwise present an obstacle to the protection of private rights or where the corporation is merely the alter ego or business conduit of a governing or dominating personality... .For the doctrine traditionally known as the “piercing of the corporate veil” to apply two requirements must be met: first, there must be such unity of interest and ownership that the separate personalities of the corporation and the individual no longer exist; and second, circumstances must be such that an adherence to the fiction of separate corporate existence would sanction a fraud or promote injustice.

Factofrance seeks to hold Blechner personally liable for IPM’s obligation on those grounds.

To portray IPM as Blechner’s “alter ego,” Factofrance asserts two “facts”:

1. Blechner owned or controlled 100% of IPM’s stock.
2. IPM was inadequately capitalized.

Blechner does not dispute, his ownership and control of IPM (Ans. II15). However, Factofrance’s generalized blanket assertion that IPM lacked sufficient capital to meet its potential liabilities is unsupported by any factual showing of undercapitalization when IPM contracted with SIT. At worst Factofrance is guilty of a total failure of proof, and at best the issue is too fact-bound to resolve at the summary judgment stage. At a minimum, Factofrance has failed to show the absence of a material fact on that score.

Other Counts

This opinion’s prior discussion has established Factofrance is entitled to summary judgment against IPM on its breach of contract claim, subject of course to any valid setoff. It is therefore unnecessary to discuss Factofrance’s alternative theories of recovery, none of which would appear to enlarge IPM’s potential liability. And Count IV, the only one that could support possible liability on Blechner’s part, has not even been briefed or argued by Facto-france.

Applicable Exchange Rate

In Newman-Green, Inc. v. Alfonzo-Larrain R., 612 F.Supp. 1434, 1441 (N.D.Ill.1985) this Court identified the two approaches, springing from three terse opinions written by Justice Holmes in the 1920s, that have developed to determine the proper exchange rate for converting into dollars an obligation measured in foreign currency:

One line of cases looks mechanically to the place of payment, applying the breach-day rule when payment is due in the United States and the judgment-day rule when it is due in a foreign country. By contrast, a second line of cases looks instead to the jurisdiction in which the cause of action arises, applying the breach-day rule if the claim arises under American law and the judgment-day rule if it arises under foreign law.

Each of those formulations points to the. breach-day rule here:

1. Both notices to IPM require payment in the United States to Facto-france’s United States agent, Heller (P.Ex.9 and 10).
2. Factofrance’s right to payment arises under American law: the Illinois version of the UCC.

IPM does not dispute the application of the breach-day rule.

Conclusion

There is no genuine issue of material fact as to, and Factofrance is entitled to judgment as a matter of law on, Count I (the United States dollar equivalent of 767,-292 French francs, calculated according to the franc-dollar rate of exchange in effect on the date of IPM’s breach) subject to reduction by:

1. the $24,216 difference in value ascribable to the RPM 1000; and
2. the amount of IPM’s breach of warranty claim on the defective RPM 650.

Both litigants should promptly confer and then apprise this Court of the appropriate time for any necessary evidentiary hearing on the latter item (and on the rate of exchange, if for some reason they cannot agree on that subject). Factofrance's remaining efforts to obtain summary judgment are denied.

      . Rule 56 principles impose on the party moving for summary judgment the burden of establishing the lack of a genuine issue of material fact. Korf v. Ball State University, 726 F.2d 1222, 1226 (7th Cir.1984). For that purpose this Court must view the evidence in the light most favorable to the nonmovants — here IPM and Blechner. Hermes v. Hein, 742 F.2d 350, 353 (7th Cir.1984).

      . All further citations to Illinois’ UCC will simply take the form "Section — .”

      . Section 9-106 defines "account”:
      "Account” means any right to payment for goods sold or leased or for services rendered which is not evidenced by an instrument or chattel paper, whether or not it has been earned by performance.
      Section 9-105(a) defines "account debtor":
      “Account debtor" means the person who is obligated on an account, chattel paper or general intangible.
      SIT's right to payment for each piece of equipment sold to IPM was an "account.” Hence IPM — the entity obligated to pay for those goods — is an "account debtor.”

      .Section 2-607(2) provides in part:
      [Ajcceptance does not of itself impair any other remedy provided by this Article for nonconformity.

      . That measure of damages in effect compensates IPM for its lost profits. Illinois law considers lost profits a proper element of damages for breach of warranty. Burrus v. Itek Corp., 46 Ill.App.3d 350, 358-59, 4 Ill.Dec. 793, 360 N.E.2d 1168, 1173 (3d Dist.1977).

      . IPM-Blechner Mem. 4 also recognizes Seattle First National Bank as persuasive authority, seeking to cite that case to their own benefit.

      . Moreover Count IV, like Count III, depends on the existence of a security interest in the goods having been given Factofrance. That is an issue disputed by the litigants, and neither has seen fit to furnish this court with a translation of the critical contract (written in French).


text:
    NATIONAL AUDUBON SOCIETY, Plaintiff, v. F. Eugene HESTER, et al., Defendants.
    Civ. A. No. 86-0053.
    United States District Court, District of Columbia.
    Feb. 3, 1986.

      Kenneth Berlin, Edward F. Gerwin, Jr., Winston & Strawn, James P. Leape, National Audubon Soc., Washington, D.C., for plaintiff.
    Peter R. Steenland, Karen L. Florini, Donald A. Carr, Leslie M. Kannan, U.S. Dept, of Justice, Washington, D.C., for defendants.

      . It is widely believed that lead-poisoning was at least a substantial factor in the increased mortality experienced by the birds.

      . In its motion for summary judgment, the government raised, and then disclaimed reliance upon, plaintiffs failure to comply with the 60-day notice requirements for the bringing of a citizen suit under ESA § 11, 16 U.S.C. § 1540(g). Plaintiff did give written notice, on October 28, 1985, of its intention to sue with respect to an earlier permit amendment. Accordingly, the plaintiff is at least in substantial compliance with the notice requirement.

   MEMORANDUM OPINION GRANTING PRELIMINARY INJUNCTION

BARRINGTON D. PARKER, Senior District Judge:

In this proceeding plaintiff National Audubon Society (“Audubon” or “NAS”) seeks to enjoin the United States Fish and Wildlife Service (“FWS”) from capturing and removing from the wild all the remaining California Condors. The decision to remove the Condors from the wild was finalized by the FWS in December 1985. While the parties have filed cross-motions for summary judgment as well as supporting legal memoranda and other pleadings in connection with plaintiffs motion for preliminary injunction, this Opinion resolves only the latter motion.

For the reasons set out below, the plaintiffs application for injunctive relief is granted. The Court will also grant the plaintiffs motion for summary judgment. The opinion supporting that ruling will be filed at a later date.

BACKGROUND

The National Audubon Society is a long-established non-profit national organization concerned with the conservation and prudent use of the Nation’s natural resources, including its endangered species. The California Condor is the largest flying land bird in North America and one of the rarest species of birds on this continent. On March 11, 1967, it was one of the first species to be listed under the Endangered Species Act (“ESA”), 16 U.S.C. § 1533. See 50 C.F.R. 17.11(h). At that time it was estimated that only 40 Condors remained in the wild.

There is little dispute as to the underlying facts in this litigation. The parties have stipulated and agreed on the many facts material to the outcome of the case. They rely principally upon the Administrative Record (“A.R.”) as the source of their factual assertions.

There are at the present 26 Condors in existence; five continue to live in the wild, and 21 are held by the Los Angeles Zoo and the San Diego Wild Animal Park. Before the winter of 1984-85, there were 15 birds in the wild, but during that winter six of the birds perished from as yet unknown causes. Later in the spring of 1985, three of the remaining nine Condors were captured. The death of the bird designated AC-3 on January 18, 1986 left a population of only five wild Condors.

In December 1979, a consortium of governmental and private groups joined in a Captive Recovery Program designed to work toward and ensure the preservation and the continued survival in the wild of the California Condor. Included in that group are FWS, Audubon, the California Department of Fish and Game, the United States Forest Service, and the Bureau of Land Management. FWS and Audubon were named as the agencies having lead responsibility for establishing and conducting the California Condor research and recovery programs.

The Recovery Program has long emphasized that three measures are essential to ensuring the continued survival of the species in the wild: (1) captive propagation of birds to be reintroduced into the wild; (2) research relying principally on radio telemetry to study the habits and the habitat of the wild Condor population; and (3) continued efforts to preserve and acquire important habitats.

Until December 1985, FWS viewed as critical to the Recovery Program the continued maintenance of a wild population. On December 16, 1985, FWS executed an abrupt about-face and issued a permit authorizing the capture and removal of all surviving wild California Condors.

After learning of FWS’ intentions, Audubon then filed this suit, seeking injunctive and declaratory relief against any further trapping of Condors. Plaintiff charges in the complaint filed on January 9, 1986, that the issuance of the amended permit was arbitrary and capricious and thus violated the Administrative Procedure Act (“APA”), 5 U.S.C. § 706(2)(A), as well as Sections 7 and 10 of the Endangered Species Act, 16 U.S.C. §§ 1536, Í539, and Section 102 of the National Environmental Policy Act (“NEPA”), 42 U.S.C. § 4332. Specifically with regard to its challenges under the latter two statutes, Audubon contends that in making its decision, FWS (1) failed to “insure” that capture of the remaining Condors would not “jeopardize the continued existence of ... [the] species or result in the destruction or adverse modification of habitat of such species ...,” in violation of ESA § 7(a)(2), 16 U.S.C. § 1536(a)(2); (2) failed to otherwise protect the habitat of the Condors in violation of ESA § 7(a)(2); (3) failed to consider the “best scientific ... data,” in violation of ESA § 7(a)(2) and 50 C.F.R. § 17.22(b)(5) (regulations promulgated under ESA § 10, 16 U.S.C. § 1539); (4) failed to comply with the emergency permit requirements of ESA § 10, 16 U.S.C. § 1539(c), and (5) failed to prepare an Environmental Impact Statement (“EIS”) as required by NEPA § 102(2)(C), 42 U.S.C. § 4332(2)(C) or to adequately discuss the available alternatives pursuant to NEPA § 102(2)(E), 42 U.S.C. § 4332(2)(E).

ANALYSIS

In order to prevail on its motion for preliminary injunction, plaintiff must show (1) likelihood of success on the merits; (2) that, without obtaining the relief requested, it would be irreparably injured; (3) that the issuance of a stay would not substantially harm other parties; and (4) that the public interest favors the issuance of the injunction. Washington Metropolitan Area Transit Comm’n v. Holiday Tours, Inc., 559 F.2d 841, 843 (D.C.Cir.1977); Virginia Petroleum Jobbers Ass’n v. FPC, 259 F.2d 921, 925 (D.C.Cir.1958).

A.

LIKELIHOOD OF SUCCESS ON THE MERITS

APA and ESA Claims

While the APA is not an independent grant of jurisdiction, Califano v. Sanders, 430 U.S. 99, 107, 97 S.Ct. 980, 985, 51 L.Ed.2d 192 (1977), the judicial review provisions of the APA do apply to actions taken pursuant to the ESA. Cabinet Mountains Wilderness v. Petersen, 685 F.2d 678, 685 (D.C.Cir.1982). Accordingly, to prevail on the merits plaintiff must demonstrate that the agency’s decision was “arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law....” 5 U.S.C. § 706(2)(A). An agency must follow its own precedents or explain any deviations from them. In the absence of reasons for the change, the action of the agency is arbitrary and capricious under APA. Local 777, Democratic Union Org. Comm. v. NLRB, 603 F.2d 862, 882 (D.C.Cir.1978). Prior policy can-' not casually be ignored and a reasoned analysis must accompany changes from previous decisions.

In determining whether or not an agency decision was arbitrary or capricious, the reviewing court must be wary of substituting its own judgment for that of the agency. Citizens to Preserve Overton Park v. Volpe, 401 U.S. 402, 416, 91 S.Ct. 814, 823-24, 28 L.Ed.2d 136 (1971). Rather, the court should accord the actions of an agency due deference where the agency has resolved a controversial issue reflecting competing expert opinions. Lead Indus. Ass’n v. EPA, 647 F.2d 1130, 1160 (D.C.Cir.1980). Nevertheless, when an agency changes its course, it must supply a “reasoned analysis” indicating what factors brought about the change and why. Motor Vehicle Mfrs. Ass’n v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 57, 103 S.Ct. 2856, 2874, 77 L.Ed.2d 443 (1983).

In this proceeding, the record offers no reasoned analysis nor any strong justification for FWS’ abrupt policy reversal. FWS has referred repeatedly, both in its papers and in oral argument, to the exigent circumstances occasioned by the decline of the wild population during the winter of 1984-85. Yet in September 1985, FWS prepared an Environmental Assessment (“EA”) that reviewed seven alternative courses of action designed to deal with the potential danger to the wild population during subsequent winters. A.R. 57, attach. FWS specifically rejected the capture of all the remaining wild birds and emphasized that the elimination of a wild population would decrease the likelihood that captive birds could later be successfully released into the wild. Instead, FWS decided that the best course would be to remove only three birds from the wild and to then release three captive birds into the wild. Upon later learning that no release birds were likely to be available, FWS amended the EA on November 26, 1985 to provide that, while only three birds were still to be captured, three would be released only if available. A.R. 67.

It appears that between November 26, 1985, when the last EA amendment favoring maintenance of a wild population was issued, and December 23, 1985, when FWS authorized capture of all the remaining birds, nothing occurred to justify such a sudden policy reversal. In the December 23 EA amendment recommending capture, A.R. 84, as well as in a December 16 memorandum from FWS Director Hester, A.R. 79, FWS cites three “new” factors that it claims required a change of course. These were (1) that a female, AC-8 (previously designated for capture) and a male, IC-9, were exhibiting “courtship behavior”; (2) that a female, AC-3, was discovered to have an elevated level of lead in her blood; and (3) that five potential release birds were not likely to be available in 1986, due to mishandling at the Los Angeles Zoo. Yet all of these factors were known to FWS before November 26, 1985, at which time the agency still believed that at least some birds should be left in the wild. Moreover, if the factors were truly “new,” it is surprising that FWS consulted with no one in the scientific community — or even with its own biologist and geneticist — between November 26 and December 23, 1985, even though they had been consulted and involved in prior discussions. Stipulation No. 16.

Even were the factors cited by FWS “new,” the December 23 EA addendum appears to provide insufficient analysis of the type required to justify a policy reversal. While acknowledging the drawbacks to capture of all the remaining birds, drawbacks that had previously led FWS to conclude that a wild population must be maintained, FWS seems to have ignored them and rather to have concentrated only on the need to maximize genetic diversity in the captive population. Such concentration on a single factor to the exclusion of all others is all the more surprising in view of an October 16, 1985 letter from Director Hester to the California Department of Fish and Game. A.R. 54. In that letter, Hester states that the genes of the remaining wild birds were well represented in the captive population and that, consequently, FWS was willing to risk the loss of one or more of the three birds to be left in the wild. In an earlier presentation to the California Fish and Game Commission, Jan Riffe of FWS stated that nearly 100 percent of the gene pool was represented in the captive population. A.R. 45 at 6. Why suddenly FWS came to believe that the captive gene pool was in danger and that that danger should now counsel capture of all the remaining birds is not only unexplained by the record, but appears to be contradicted by it. Plaintiff has thus made a strong showing that it is likely to prevail on the merits.

NEPA Claims

Even in light of the observation that plaintiff has made a preliminary showing that FWS’ actions were arbitrary and capricious, it is nonetheless appropriate to consider the question of whether the defendants should have analyzed and considered different courses of action under NEPA. If this is so, additional grounds for relief may be available to Audubon.

Section 102(2)(C) of NEPA, 42 U.S.C. § 4332(2)(C), mandates that proposals for “major federal actions significantly affecting the quality of the human environment” must be accompanied by a detailed Environmental Impact Statement (EIS”). All federal actions involving “unresolved conflicts concerning alternative uses of available resources” must be preceded by an agency effort to develop alternatives, NEPA § 102(2)(E), 42 U.S.C. § 4332(2)(E). In December 1985 FWS circumvented compliance with these requirements, claiming that the Condor capture and removal decision was exempt as an “emergency” action and that the effects of the program would not be “significant.” FWS also ignored alternatives that could have preserved the wild Condor population. In departing from its longstanding policy and to avoid compliance with NEPA, FWS advised the Council on Environmental Quality (“CEQ”) that immediate removal of the Condors was necessary to avoid jeopardy to the continued survival of the species.

Plaintiff points out, however, that the only document explaining the claim to an emergency exemption from NEPA is a letter from the CEQ general counsel to Mr. Hester, stating in part that “[FWS] views this action as an emergency due to the precipitous decline in the number of Condors in the past year (6 Condors have been lost from the wild population).” A.R. 82. This, however, is a questionable basis for the finding of an “emergency.” The 6 Condors referred to were lost during the winter of 1984-85 and more than eight months before the declaration of the emergency. As noted, the record is very sparse and limited in supporting FWS’ assertions and, consequently, the claim of an emergency exemption is suspect. An agency must comply with NEPA requirements “to the fullest extent possible,” 42 U.S.C. § 4332, and claimed exemptions should be narrowly construed. See Calvert Cliffs Coordinating Committee v. U.S. Atomic Energy Commission, 449 F.2d 1109, 1115 (D.C.Cir.1971).

In Sierra Club v. Peterson, 717 F.2d 1409 (D.C.Cir.1983), our Circuit Court held that NEPA required an agency to prepare an EIS “[i]f any ‘significant’ environmental impacts might result from the proposed agency action.... ” Id. at 1415 (emphasis in original). In reviewing an agency decision to forego preparation of the EIS, the court suggested that areas of inquiry should focus on: whether the agency took a hard look at the problem and identified the relevant areas of environmental concern; whether in doing so the agency made a convincing case that the impact was insignificant; and if there was an impact of true significance, whether the agency convincingly established that changes in the project sufficiently reduced it to a minimum. Id. at 1413.

Plaintiff argues that the FWS analysis of December 1985 falls far short of the Peterson standards. The Court agrees. For example, FWS never countered the argument that removal of the birds from the wild poses a serious threat to survival and recovery of the species, arising from the likely loss of important Condor habitat as well as from the loss of “guide birds.” The September 1985 EA lists those general concerns in a cursory fashion, concluding that the removal of the birds could not be justified. However, subsequent addenda to the EA, intended to justify the decision to remove the birds, simply do not reveal that FWS took a hard look at the problem and made a convincing showing that the impact of removing all the birds was insignificant.

Finally, the record does not clearly demonstrate that there was a meaningful consideration and discussion of alternatives to capture. NEPA § 102(2)(E), 42 U.S.C. § 4332(2)(E), requires all federal agencies to “study, develop, and describe appropriate alternatives to recommended courses of action in any proposal which involves unresolved conflicts concerning alternative uses of available resources[.]” The consideration of such alternatives is independent of the duty to file an EIS. Trinity Episcopal School Corp. v. Romney, 523 F.2d 88, 93 (2d Cir.1975). When no EIS is prepared, the analysis should be presented in the EA. 40 C.F.R. 1508.9(b). The scope of the duty is the same whether undertaken in an EIS or an EA: “no major federal project should be undertaken without intense consideration of other more ecologically sound courses of action, including shelving the entire project, or of accomplishing the same result by entirely different means.” Environmental Defense Fund v. Corps of Engineers, 492 F.2d 1123, 1135 (5th Cir.1974). Several possible alternatives designed to preserve the wild Condor population were available, but there is no showing that they were carefully considered.

B.

HARM TO THE RESPECTIVE PARTIES

It is somewhat difficult to speak of harm either to NAS or to defendants, for each of the parties is concerned with one thing— the protection of the species, especially as it exists in the wild. What divides the parties is the way in which each views its mission. NAS is concerned lest the survivability of the wild population be extinguished by act of man, by the capture of the remaining birds. FWS believes, on the other hand, that if left out in the wild, the remaining birds will die of unknown causes.

Yet the balance of harm as between the parties has already been determined. The harm that FWS views as likely to befall the wild population was already considered in the September EA. In that document, FWS determined that the possibility of increased mortality was outweighed by the danger to the Recovery Program posed by capture of all the birds. Specifically, FWS feared that such capture (1) would eliminate the benefits of further habitat studies; (2) would likely lessen future habitat protections; and (3) would remove all potential guidebirds from the wild, thus lessening the likelihood that captive Condors could ever be successfully released back into their natural environment. A.R. 57, attach. FWS was willing to risk the possible death of one or more of the birds left in the wild. A.R. 54, 45 at 6. No new factors have been brought to the Court’s attention that would justify overturning the balance previously reached by FWS.

The Court notes, also, that of the six birds that died during the winter of 1984-85, five were not wearing functioning radio transmitters. Stipulation No. 5. Of the five birds now in the wild, four are wearing transmitters. Stipulation No. 7. With careful monitoring and a program of providing the birds leadfree carcasses upon which to feed, the possible harm to the remaining birds if left in the wild is even more outweighed by the possible damage, previously identified by FWS, to the Recovery Program from their capture.

c.

THE PUBLIC INTEREST

The protection of the Condor population is, of course, a matter of public interest. See Tennessee Valley Auth. v. Hill, 437 U.S. 153, 194, 98 S.Ct. 2279, 2301-02, 57 L.Ed.2d 117 (1978). The furtherance of that public interest, in turn, has been delegated by Congress to the Department of the Interior and specifically to FWS.

FWS has represented earnestly to the Court that the public interest now favors immediate capture of the birds. Certainly an agency is permitted to change its mind as to what course of action best serves the public interest. Greater Boston T.V. Corp. v. FCC, 444 F.2d 841, 852 (D.C.Cir.1970), cert. denied, 403 U.S. 923, 91 S.Ct. 2229, 29 L.Ed.2d 701 (1971). Yet a change of course must follow a reasoned analysis; otherwise the agency ceases to perform its congressionally mandated role. Motor Vehicle Mfrs. Ass’n, 463 U.S. at 57, 103 S.Ct. at 2874. To the extent that plaintiff has made a showing that FWS has acted arbitrarily or capriciously in carrying out its delegated duty, the public interest favors the issuance of an injunction.

CONCLUSION

Based on the foregoing, the Court determines that the plaintiff has met the standards for awarding equitable relief and that its application for a preliminary injunction should be granted. An appropriate Order accompanies this Memorandum Opinion. The Court will also grant the plaintiffs motion for summary judgment supported by a Memorandum Opinion.

      . "AC-” denominates an adult bird; immature birds bear the designation "IC-”.

      . FWS suspected the courtship behavior in early October 1985, Stipulation No. 17. AC-3 indicated a lead level of 1.8 ppm on November 23, 1985. A.R. 86. By October 30, 1985, if not earlier, FWS was on notice that no release birds would likely be available in 1986. A.R. 62, 64, 65.

      . It is believed that the birds become poisoned by ingesting lead from the carcasses of animals killed by hunters. Stipulation No. 8. Accordingly, the Condor Research Center in California began, in the spring of 1985, a daily feeding program whereby "clean" carcasses are put out for the birds. Stipulations Nos. 8, 9.