author: BUA, District Judge.

text:
    UNITED STATES of America, Plaintiff, v. Cynthia KING, Defendant.
    No. 84 CR 744-7.
    United States District Court, N.D. Illinois, E.D.
    Jan. 28, 1985.
    Dan K. Webb, U.S. Atty. by James L. Sanders, Asst. U.S. Atty., Chicago, 111., for plaintiff.
    Philip Krasny, Chicago, 111., for defendant.
   MEMORANDUM ORDER

BUA, District Judge.

The defendant, Cynthia King, is charged with conspiracy to steal money from several federally insured financial institutions in violation of 18 U.S.C. § 371; theft of money from federally insured financial institutions in violation of 18 U.S.C. § 2113(b); and interstate transportation of false securities in violation of 18 U.S.C. § 2314. The government charges that King was part of a check-kiting scheme in which several defendants, including King, opened bank accounts with a small amount of cash, made subsequent deposits with bad checks, and later attempted to withdraw cash against the deposited bad checks.

Before the Court is defendant King’s motion to quash arrest and suppress evidence and motion to suppress confession. The Court, having heard testimony on January 4, 1985, and having considered exhibits and memoranda submitted by the parties, does hereby enter the following findings pursuant to Rule 12(e) of the Federal Rules of Criminal Procedure.

I. Facts

Detective Thomas Fries testified that he has been employed by the Schaumburg Police Department for ten years. Fries has been employed as a detective for the last eight years, and in 1981, Fries was responsible for the investigation of financial crimes. Prior to February 17, 1981, Fries had conducted investigations of check-kiting activities, and was aware that one of the methods used to kite checks was to open a bank account with a small cash deposit, make a later larger deposit with a bad check drawn on another bank, and then to attempt to withdraw cash against the check before bank officials discovered the check to be no good.

On February 17, 1981, at approximately 5:00 P.M., Fries received a telephone call from Jerry Gartner, an employee of the Schaumburg office of the Damen Savings and Loan Association (“Savings and Loan”). During that telephone conversation, Gartner told Fries that: (1) a woman named Cynthia King had opened an account at the Savings and Loan on February 6, 1981 with a $20 cash deposit; (2) after the account was opened, a $6,800 check drawn on a bank in Cleveland, Ohio was deposited into the account; (3) the $6,800 check was a starter check from the Ohio bank and was dated February 9, 1981; (4) the $6,800 check was not honored by the Cleveland bank; (5) Gartner had recently received information from the Cleveland bank that the bank account was opened with fictitious identification; and (6) Cynthia King was presently at the Savings and Loan picking up printed checks for her account. Gartner also provided a physical description of King to Fries during their conversation.

Based upon the information received from Gartner, Fries immediately radioed his partner, Detective Poss, and instructed Poss to meet him at the Savings and Loan. Within ten minutes, Fries and Poss arrived at the Savings and Loan. Upon their arrival, Fries observed a woman matching the description of King in the Savings and Loan parking lot. Fries approached the woman and asked her name. The woman identified herself as Cynthia King. Fries then asked King to wait with Detective Poss while Fries went into the Savings and Loan.

Fries entered the Savings and Loan and spoke briefly with Jerry Gartner, who confirmed the information he had previously given Fries on the telephone. During their face-to-face meeting, Gartner also told Fries that: (1) a teller had identified King as the same individual who had opened the account at the Savings and Loan on February 6,1981; (2) the $6,800 check was deposited at Damen’s Chicago branch on February 10, 1981; and (3) on February 13, 1981, King had attempted to cash a check for $400 at the Savings and Loan, but was refused because her account contained uncollected funds. Fries was inside the Savings and Loan for about 45 minutes to an hour.

Following his conversation with Gartner, Fries returned to the parking lot and informed King that she was under arrest. King was not advised of her Miranda rights at any time following her arrest. King was then transported to the Schaumburg Police Department where she was locked up. An individual named Webster Nolen who was with King at the bank was also arrested. As a part of the Schaumburg Police Department’s normal procedures, King’s purse was taken from her and inventoried. A number of records relating to other bank accounts were found during this inventory search.

II. Discussion

Defendant seeks an order quashing the arrest and suppression of all evidence obtained as a result of the arrest. Defendant argues that Detective Fries lacked probable cause to arrest King at the Savings and Loan based upon information known to Fries at the time of the arrest. Additionally, defendant seeks suppression of all statements made by King after her arrest due to the failure of anyone at the Schaumburg Police Department to inform King of her Miranda rights.

A. Motion to Quash Arrest

The first question that must be resolved is the exact point in time at which King was arrested. King argues that she was arrested when Fries first approached her in the bank parking lot. King testified that Detective Fries immediately told her to “get into the [police] car” with Detective Poss while Fries entered the bank. King estimates she was detained in the Savings and Loan parking lot for about 45 minutes to an hour while Fries was in the Savings and Loan. Detective Fries admitted that he considered King “not free to leave” after their initial encounter.

The government argues that, at the very least, Fries possessed a “reasonable suspicion” that King was involved in criminal activity at the time of their initial encounter in the parking lot, thus justifying a Terry investigatory stop of King. A Terry investigatory stop, however, is limited to a “brief, nonintrusive detention during a frisk for weapons or preliminary questioning.” United States v. Black, 675 F.2d 129, 133 (7th Cir.1982). The government has not supplied, nor has the Court discovered, any authority which would allow an individual subject to a Terry investigatory stop for “45 minutes to an hour” while the police officer continues his investigation elsewhere. For purposes of the fourth amendment, therefore, King was “seized” upon Fries’ initial encounter with her in the parking lot and the arrest is valid only if Fries possessed probable cause at the time of that arrest.

The Seventh Circuit has recently summarized the standards for probable cause. In United States v. Covelli, 738 F.2d 847 (7th Cir.1984), the Court stated:

‘The police have probable cause to arrest an individual where ‘the facts and circumstances within their knowledge and of which they [have] reasonable trustworthy information [are] sufficient to warrant a prudent [person] in believing that the [suspect] had committed or was committing an offense. [P]robable cause requires only a probability or substantial chance of criminal activity, not an actual showing of such activity.’ The determination of whether probable cause exists in a given situation involves ‘the factual, practical considerations of everyday life upon which reasonable, prudent [persons], not legal technicians act.’

Id. at 853 (citations omitted). The burden of establishing probable cause rests with the government. United States v. Allen, 629 F.2d 51, 55 (D.C.Cir.1980).

There is not any evidence in the record to suggest that the information supplied to Detective Fries was not “reasonably trustworthy.” Information supplied to police by bank personnel uncovered in the normal course of their business is generally considered reliable. See United States v. Rowell, 612 F.2d 1176, 1178-79 (7th Cir.1980). In this case, the information supplied to Detective Fries came essentially from two sources. Jerry Gartner, an employee of the Savings and Loan, related to Fries that King had recently opened a checking account with a small cash deposit and that a starter check in the amount of $6,800 deposited into King’s account had been not honored. Additionally, Gartner informed Fries that an employee of the Cleveland bank which refused to honor the $6,800 cheek had informed Fries that the Cleveland account had been opened with fictitious identification. It is clear that the information supplied by the Savings and Loan and the Cleveland bank was “reasonably trustworthy information.” See United States v. Rowell, supra, 612 F.2d at 1178-79.

The issue then becomes whether the reasonably trustworthy information supplied to Fries was “sufficient 'to warrant a man of reasonable caution in the belief that an offense [had] been ... committed.’ ” United States v. Rowell, supra, 612 F.2d at 1179 (quoting Draper v. United States, 358 U.S. 307, 313, 79 S.Ct. 329, 333, 3 L.Ed.2d 327 (1959). This standard, however, is not entirely objective. One factor that may be considered by the Court is the past experience of the arresting officer with similar investigations. United States v. Green, 670 F.2d 1148, 1153 (D.C.Cir. 1981). Unusual banking transactions, although appearing legal on the surface, may cause a police officer with prior experience in financial crimes to reasonably believe an offense has been committed even where the average person would not have reason to question the apparently legal transactions. See United States v. Frazier, 545 F.2d 71, 72-73 (8th Cir.1976). See also United States v. Green, supra, 670 F.2d at 1153.

In this case, Detective Fries was experienced in investigating financial crimes. Furthermore, Fries had conducted investigations of check-kiting activities that involved opening a checking account with a small cash deposit, making a later larger deposit with a bad check drawn on another bank, and then attempting to withdraw cash against the bad check before bank officials became suspicious. Based upon the information related to Fries by Gartner during their telephone conversation, the Court is convinced that Fries possessed probable cause to arrest King upon arriving at the bank. King’s checking account transactions closely paralleled prior check-kiting schemes which Fries had investigated. Before King’s arrest, Fries had been informed that a $6,800 starter check drawn on an account opened with fictitious identification had been deposited into a checking account recently opened with a small cash deposit. Fries also was informed that King had opened the account and was presently at the Savings and Loan attempting to pick up printed checks for her account. Given Fries past experience in check-kiting schemes, he reasonably believed that an offense had been committed.

Having concluded that Fries possessed probable cause to arrest King at the Savings and Loan parking lot on February 17, 1981, the subsequent inventory search of King’s purse was proper. Illinois v. Lafayette, 462 U.S. 640, 103 S.Ct. 2605, 77 L.Ed.2d 65 (1983). In fact, King does not challenge the inventory search of the purse. For all of the above reasons, defendant’s motion to quash the February 17, 1981 arrest and to suppress evidence derived from that arrest is denied.

B. Motion to Suppress Confession

In light of the Schaumburg Police Department’s failure to inform King of her Miranda rights, the government does not oppose defendant’s motion to suppress her post-arrest statements. That motion therefore is granted.

III. Conclusion

Defendant’s motion to quash the February 17, 1981 arrest and to suppress evidence is denied. Defendant’s motion to suppress confession is granted.

IT IS SO ORDERED.

      . King testified that when she was first approached by Fries, Fries seized her purse and ordered her to wait in the police car while Fries entered the bank. On this point, the Court finds the testimony of Fries credible and the testimony of King not credible.

      . King testified that Fries seized her purse at their initial encounter. As noted earlier, the Court finds this testimony not credible. Even assuming, however, that Fries seized the purse upon his initial contact with King, the seizure would have been a proper search incident to a lawful arrest. See United States v. Edwards, 415 U.S. 800, 94 S.Ct. 1234, 39 L.Ed.2d 771 (1974); United States v. Robinson, 414 U.S. 218, 94 S.Ct. 467, 38 L.Ed.2d 427 (1973).


source: Caselaw Access Project

author: CHARLES R. RICHEY, District Judge.

license: Public Domain

text:
    Michael L. KELLER, Plaintiff, v. TRANSPORTES AEREOS MILITARES ECUADORIANOS, et al., Defendants.
    Civ. A. No. 84-1790.
    United States District Court, District of Columbia.
    Jan. 28, 1985.
    George E. Farrell, Speiser, Krause & Ma-dole, Washington, D.C., Joel A. Kolodny, Philip N. Davey, Thomas B. Kelly, Seawell, Dalton, Hughes & Timms, Norfolk, Va., for plaintiffs.
    Thomas J. Whalen, Cynthia J. Larsen, Evelyn D. Sahr, Condon & Forsyth, Washington, D.C., for defendants.
   CHARLES R. RICHEY, District Judge.

INTRODUCTION

Before the Court are motions to dismiss filed by both defendants herein, Transportes Aereos Militares Ecuadorianos (“TAME”) and Transportes Aereos Nacionales Ecuadorianos (“TAME C.A.”). Upon consideration of the motions, supporting memoranda, opposing memoranda, and the entire record herein, the Court, by Order of even date herewith, grants the motions and dismisses this case for lack of subject matter and personal jurisdiction.

BACKGROUND

The plaintiff, Michael L. Keller, is the administrator of the Estates of Leonard William Keller and Joseph Felix Keller, both of whom were killed in the July, 1983 crash of an aircraft owned by defendant TAME and operated by defendant TAME C.Á. The crash occurred near Cuenca, Ecuador.

TAME was created as a Department of the Ecuadorian Air Force by Supreme Decree No. 1020 issued by the Government of Ecuador’s Military Council and published in the Official Register of Ecuador on June 18, 1964. Defendant TAME owns 99.97 percent of the stock of defendant TAME C.A.

Plaintiff filed this suit on June 12, 1984. On October 17, 1984, after defendants filed their motions to dismiss, this Court issued an order permitting plaintiff to conduct discovery before responding to the motions to dismiss. Plaintiff has now responded, and the motions are fully briefed and ripe for decision.

BECAUSE DEFENDANTS ARE “FOREIGN STATES” UNDER THE FOREIGN SOVEREIGN IMMUNITIES ACT, THIS COURT HAS JURISDICTION UNLESS DEFENDANTS ARE IMMUNE FROM SUIT

The Foreign Sovereign Immunities Act (“FSIA”) specifically grants subject matter jurisdiction over “any nonjury civil action against a foreign state as defined in section 1603(a) of this title as to any claim for relief in personam with respect to which the foreign state is not entitled to immunity ... under sections 1605-1607 of this title.” 28 U.S.C. § 1330(a).

The above-quoted section only applies to defendants who qualify as “foreign states” under the act. However, it is clear that defendant TAME is a foreign state as that term is defined in 28 U.S.C. §§ 1603(b) and 1603(a), and plaintiff so concedes. Plaintiff’s admission that TAME is a “foreign state” also means that co-defendant TAME C.A. is a “foreign state”. Under 28 U.S.C. § 1603(a), the definition of a “foreign state” includes an “instrumentality of a foreign state.” The statute then defines an “agency or instrumentality of a foreign state” as any entity “a majority of whose shares ... is owned by a foreign state.” 28 U.S.C. § 1603(b)(2). Because TAME, a foreign state, owns a majority of shares of TAME C.A., the latter is an “instrumentality of a foreign state” by virtue of 28 U.S.C. § 1603(b)(2), and thus a “foreign state” by virtue of 28 U.S.C. § 1603(a). Therefore, according to § 1330, this Court has jurisdiction if, and only if, TAME and TAME C.A. are not entitled to immunity under 28 U.S.C. §§ 1605-1607. See Verlinden B.V. v. Central Bank of Nigeria, 461 U.S. 480, 485, 103 S.Ct. 1962, 1967, 76 L.Ed.2d 81 (1983).

Plaintiff claims that defendant TAME has waived its immunity within the meaning of 28 U.S.C. § 1605(a)(1). Plaintiff also claims that defendant TAME C.A. falls within an exception to immunity under § 1605(a)(2). However, as demonstrated below, neither exception applies to this case, and the. defendants remain immune from suit.

TAME HAS NOT WAIVED ITS IMMUNITY, AND MUST BE DISMISSED

Plaintiff asserts that TAME has waived its sovereign immunity, and thus 28 U.S.C. § 1605(a)(1) establishes subject matter jurisdiction. That section provides as follows:

28 U.S.C. § 1605
(a) A foreign state shall not be immune from the jurisdiction of the courts of the United States ... in any case—
(1) in which the foreign state has waived its immunity either explicitly or by implication, notwithstanding any withdrawal of waiver which the foreign state may purport to effect except in accordance with the terms of the waiver.

Plaintiff argues that TAME has waived its immunity from suit by entering into a Credit Agreement with certain U.S. banks and other institutions to finance part of the cost of the aircraft which later crashed. The Credit Agreement, paragraph M, provided that TAME submitted to the jurisdiction of certain courts, (all located in the State of New York), for “any legal action or proceeding arising out of or relating to this Agreement.”

Another federal court, on similar facts, has held that such a provision did not constitute a waiver of immunity. In Ohntrup v. Firearms Center, Inc., 516 F.Supp. 1281 (E.D.Pa.1981), a Turkish firm had manufactured and sold an allegedly defective gun to a United States retailer, which sold it to plaintiff. The contract of sale contained a waiver provision which provided that:

Any dispute between the parties, arising in connection with the application of this agreement, will be handled and solved by the Paris International Court.

516 F.Supp. at 1284. Not surprisingly, the Ohntrup court held that a waiver of the defense of immunity as to the Paris International Court did not necessarily constitute such a waiver as to U.S. courts. Ohntrup also relied on an alternative holding, which is more relevant to the instant case: the waiver in the agreement between the Turkish manufacturer and the U.S. retailer did not apply to a dispute involving injuries to one not privy to the contract, such as plaintiff, and it did not apply to a dispute “which does not call into issue the contract” between the manufacturer and the retailer. Id.

In the present case, as in Ohntrup, the waiver of immunity in the Credit Agreement used to finance the purchase of the aircraft does not apply to this suit involving injuries to the plaintiff, who was not a party to the Credit Agreement. This tort action certainly “does not call into issue” the Credit Agreement.

Plaintiff attempts to distinguish Ohntrup on the grounds that the waiver provision in that case only applied to disputes “arising in connection with” the application of the contract, whereas the waiver in the Credit Agreement in this case applies to “any legal action or proceeding arising out of or relating to this Agreement.” (Emphasis supplied). Plaintiff contends that the phrase “relating to” is broader than the phrase “arising in connection with”, and that this suit relates to the Credit Agreement. Plaintiffs argument is based on nothing more than semantics. As a matter of law, this tort action involving injuries to plaintiff incurred when defendants’ airplane crashed in Ecuador does not relate to the Credit Agreement executed in connection with the aircraft’s financing. Therefore, because defendant TAME did not waive its sovereign immunity, this Court lacks jurisdiction as to this action against TAME.

THE “COMMERCIAL ACTIVITIES” EXCEPTION OF THE FOREIGN SOVEREIGN IMMUNITIES ACT DOES NOT APPLY, AND THUS TAME C.A. IS IMMUNE FROM SUIT AND MUST BE DISMISSED

Plaintiff claims that defendant TAME C.A. is not immune from suit because of one of the exceptions to immunity found in 28 U.S.C. § 1605(a)(2), which in relevant part provides as follows:

(a) A foreign state shall not be immune from the jurisdiction of the courts of the United States or of the states in any case—
(2) in which the action is based ... upon an act outside the territory of the United States in connection with a commercial activity of the foreign state elsewhere and that act causes a direct effect in the United States.

From the language of the statute, to establish jurisdiction, it is clear that plaintiff must demonstrate, inter alia, that the plane crash at issue caused a “direct effect” in the United States. It is equally clear that there was no such “direct effect” as that term is used in the statute.

In Upton v. Empire of Iran, 459 F.Supp. 264 (D.D.C.1978), aff'd 607 F.2d 494 (D.C. Cir.1979), this Court dismissed an action brought by the survivors of several individuals killed as a result of the collapse of a roof at an airport in Tehran, Iran, based on a lack of subject matter jurisdiction under § 1605(a)(2) of the FSIA. The court stated that, “as a matter of law', no direct effects were caused in the United States by the defendants’ actions at Mehrabad Airport in Tehran, Iran, and therefore one of the two tests of 28 U.S.C. § 1605(a)(2), clause 3, has not been satisfied.” Id. at 266.

Similarly, in Verlinden B.V. v. Central Bank of Nigeria, 488 F.Supp. 1284, 1298 (S.D.N.Y.1980), the court held that, in applying this commercial activity section of the FSIA, the locus of the injury, not the citizenship of the plaintiff, was dispositive of jurisdiction:

In applying this section courts have uniformly held that the locus of injury is dispositive of jurisdiction; indeed, that factor takes precedence over the citizenship of the victim. For example, even when the victim of a foreign state’s tortious conduct is an American citizen injured abroad, the sovereign is protected by immunity and there is no jurisdiction in the American courts. In such cases the injury to the victim’s bereaved relatives living in the United States is not sufficiently “direct” or “substantial” to support the assertion of federal jurisdiction.

488 F.Supp. at 1298 (footnotes omitted). Accord, Harris v. VAO Intourist, Moscow, 481 F.Supp. 1056, 1062-63 (E.D.N.Y.1979); Carey v. National Oil Corp., 592 F.2d 673, 676 (2d Cir.1979).

The present case is indistinguishable from those cited above. The effects relevant to this case, injuries to the decedent’s relatives, are no more “direct” or “substantial” than those in Upton or Verlinden, supra. Because there are no “direct effects in the United States”, TAME C.A. retains its immunity, and must be dismissed for lack of jurisdiction.

CONCLUSION

Both defendants named herein are immune from suit. The exceptions to immunity relied upon by plaintiff simply do not apply. Thus, this Court has neither subject matter jurisdiction, nor personal jurisdiction over these defendants. See Verlinden B.V. v. Central Bank of Nigeria, 461 U.S. 480, 485 n. 5, 103 S.Ct. 1962, 1967 n. 5, 76 L.Ed.2d 81 (1983). The Court has today issued an Order, consistent with this Opinion, which dismisses this action.

      . The FSIA, in § 1330, also establishes jurisdiction if any "applicable international agreements” creates an exception to immunity. There is no claim of any such agreement in this case.

      . Aff’d on other grounds, 647 F.2d 320 (2d Cir. 1981), rev'd on other grounds, 461 U.S. 480, 103 S.Ct. 1962, 76 L.Ed.2d 81 (1983).


author: HADEN, Chief Judge.

text:
    Jimmy E. HUBBARD, Plaintiff, v. UNION OIL COMPANY OF CALIFORNIA, Defendant.
    Civ. A. No. 84-2154.
    United States District Court, S.D. West Virginia, Charleston Division.
    Jan. 28, 1985.

      Marvin W. Masters, Masters & Taylor, Charleston, W.Va., for plaintiff.
    Richard A. Hayhurst, Davis, Bailey, Pfalzgraf & Hall, Parkersburg, W.Va., for defendant.
   MEMORANDUM OPINION AND ORDER

HADEN, Chief Judge.

The Plaintiff brought this action against Defendants Union Oil Company of California and Heater Oil Company, Inc. in the Circuit Court of Kanawha County seeking monetary damages and specific performance of an alleged oral contract to sell to Plaintiff a service station in Kanawha County owned by Heater Oil. The trial was scheduled to commence in Circuit Court on April 23, 1984. However, just prior to this scheduled trial date, the Plaintiff settled his claims against Heater Oil and pursuant to the settlement agreement dismissed Heater Oil as a defendant. Because Heater Oil was the non-diverse defendant in the action its dismissal created complete diversity between the parties, thus giving rise to federal diversity jurisdiction. See 28 U.S.C. § 1332; Strawbridge v. Curtiss, 7 U.S. 267 (3 Cranch 267), 2 L.Ed. 435 (1806) and its progeny. On April 18, 1984, Union Oil removed the case to this Court pursuant to 28 U.S.C. § 1446 based upon diversity of citizenship and federal question jurisdiction. After filing the initial petition for removal, counsel for Union Oil concluded that no federal question basis for removal existed and on May 8, 1984, filed an Amended Petition for Removal asserting solely diversity jurisdiction as the basis for removal. This matter is now before the Court on Plaintiffs motion to remand this action to state court.

I. Plaintiffs Motion to Remand

The Plaintiff asserts two grounds in support of his motion to remand this action to state court. First, Plaintiff argues Defendant’s removal petition was not timely filed and, as a consequence, Defendant has waived his right to remove. Second, Plaintiff points out that this case was pending in the Circuit Court of Kanawha County for over two years, had been pretried by Judge Harvey of that court, who had also heard testimony and ruled on Plaintiff’s motion for injunctive relief, and that to allow Defendant to remove the case to federal court will result in prejudice to the Plaintiff and a duplication of judicial time and effort. The Court will address these contentions in reverse order.

A. Prejudice. As to the second ground asserted by Plaintiff, the Court has no doubt that the removal of this action less than one week before the scheduled trial date has served to prejudice and inconvenience Plaintiff and his counsel. However, the Court has been referred to no case, and the Court’s research discloses none, which would support the contention that removal on the eve of trial is improper. To the contrary, the case law reveals that the timing of the removal petition, in relation to the status of the state court proceedings, is irrelevant as long as the petition is filed within thirty days of the date it became apparent the case was removable to federal court. See e.g., Gottlieb v. Firestone Steel Products Co., 524 F.Supp. 1137, 1140 (E.D.Pa.1981) wherein the court held that:

“Plaintiff’s claim of prejudice by removal on the eve of trial is insufficient to compel remand since, an action may be properly remanded only for the specific reasons delineated in the controlling statute.
s)s sf: ¡fs * * *
Moreover, where counsel dismisses non-diverse, unknown defendants just before the case goes to the jury, removal is proper. First National Bank in Little Rock v. Johnson, 455 F.Supp. 361 (E.D. Ark.1978). In one case a removal petition was held properly filed when fictitious defendants were dismissed during jury deliberations. Heniford v. American Motors Sales Corp., 471 F.Supp. 328 (D.S.C.1979) appeal dismissed, 622 F.2d 584 (4th Cir.1980) [emphasis supplied in Gottlieb ]”

Applying the authorities discussed in the Gottlieb case, the Court concludes that prejudice to the Plaintiff and duplication of judicial resources, while unfortunate, do not constitute grounds for remand however compelling and persuasive grounds they may be from a practical standpoint.

B. Defendant’s Waiver of its Right to Removal. Plaintiff argues that federal question jurisdiction arose on May 11,1983, when Judge Harvey entered an order (more than thirty days prior to removal), denying Plaintiff’s motion for injunctive relief, wherein the Court concluded it had jurisdiction to “decide any and all issues presented with respect to PMPA [Petroleum Marketing Practices Act], 15 U.S.C. § 2801.” If Plaintiff is correct in this assertion, then the later removal on diversity grounds was unseasonable. Union Oil responds to this argument by citing to the Court several cases from this Circuit supporting the proposition that in order to make removal proper on federal question grounds, the federal question must arise from the Complaint itself. See e.g., Burgess v. Charlottesville Savings and Loan Association, 477 F.2d 40, 43 (4th Cir.1973):

“As stated in the order of the District Court, federal subject-matter jurisdiction in this case is predicated entirely on the claim that the suit ‘arises under’ federal law. Such a claim of federal question jurisdiction is to be resolved on the basis of the allegations of the complaint itself. To sustain it, the complaint must, however, contain allegations ‘affirmatively and distinctly' establishing federal grounds ‘not in mere form, but in substance’ and ‘not in mere assertion, but in essence and effect.’
******
In ascertaining whether there is a real federal issue upon ‘which the result depends’ the Courts have observed ‘the distinction between controversies that are basic and those that are collateral, between disputes that are necessary and those that are merely possible’ and federal question jurisdiction attaches only ‘to cases where the plaintiff’s cause of action, the rule of substance under which he claims the right to have a remedy, is the product of federal law.’ ” [footnotes omitted; emphasis in the original].

See also, Eure v. NVF Co., 481 F.Supp. 639 (E.D.N.C.1979); O.F. Shearer & Sons, Inc. v. Decker, 349 F.Supp. 1214 (S.D.W. Va.1972); Meyerhoff v. Garten, 232 F.Supp. 363 (D.Md.1964).

The Defendant also correctly points out that a federal question arising by way of defense to Plaintiff’s claims does not support removal. See Gully v. First National Bank in Meridian, 299 U.S. 109, 57 S.Ct. 96, 81 L.Ed. 70 (1936); Tennessee v. Union and Planter’s Bank, 152 U.S. 454, 14 S.Ct. 654, 38 L.Ed. 511 (1894); Levitt & Sons, Inc. v. Prince George County Congress of Racial Equality, 221 F.Supp. 541 (D.M.D.1963). This principle is not applicable to the case at bar, however, because the federal statute giving rise to federal question jurisdiction was not raised as a defense; the PMPA was asserted by the Plaintiff as a basis for affirmative relief. See discussion infra at pp. 793-794.

Before addressing the Defendant’s arguments, it is advisable to review the relevant portion of the removal statute here in controversy:

“The petition for removal of a civil action or proceeding shall be filed within thirty days after receipt by the defendant, through service or otherwise, of a copy of the initial pleading setting forth the claim for relief upon which such action or proceeding is based, or within thirty days after the service of summons upon the defendant if such initial pleading has then been filed in court and is not required to be served on the defendant, whichever period is shorter.
If the case stated by the initial pleading is not removable, a petition for removal may be filed within thirty days after receipt by the defendant, through service or otherwise, of a copy of an amended pleading, motion, order or other paper from which it may first be ascertained that the case is one which is or has become removable. [Emphasis added].”

28 U.S.C. § 1446(b).

Because there is no disagreement that Plaintiff’s complaint stated only state law-based claims for relief, the focus in this case must center on the second paragraph of the above reproduced statute. O’Bryan v. Chadler, 496 F.2d 403, 409 (10th Cir. 1974) (Section 1446(b) “is designed to allow a defendant to remove a state action when it was not originally removable as stated by the plaintiff’s initial complaint in the state court, but has become removable due to the filing in state court of ‘an amended pleading, motion, order or other paper from which it may first be ascertained that the case is one which is or has become removable’ ”). For this reason, the cases relied upon by the Defendant for the proposition that the complaint itself must raise a federal question to make the case removable to federal court are inapposite. The issue here is not whether the initial pleading raised a federal question, but whether a federal question sprung from subsequent proceedings in the case.

After reviewing the parties’ memoranda submitted to the Circuit Court preparatory to the hearing on Plaintiff’s motion for injunctive relief, the Court finds that a federal question was clearly raised at that point in the state court proceedings. The parties’ briefed the issue of the applicability of the PMPA and Plaintiff’s memorandum specifically and “voluntarily” requested relief under the PMPA:

“Union’s sale of the property to Heater was in violation of the Petroleum Marketing Practices Act, 15 U.S.C. 2801, et seq., copy attached. The Act, at 2802, which outlines the requirements for notification of termination or nonrenewal of the franchise relationship, requires the franchiser to do as follows: [Subsection (D) of Section 2802 is reproduced verbatim in the Plaintiff’s memorandum].”

Plaintiff’s memorandum in support of injunction at pp. 9-10. Further, the entirety of Plaintiff’s reply memorandum, filed in the Circuit Court, is devoted to requesting relief under the PMPA. These pleadings are more than sufficient to satisfy the “amended pleading, motion, order or other paper” requirement of Section 1446(b). See O’Bryan v. Chadler, 496 F.2d at 408 (modification of memorandum to trial court held sufficient to constitute “an amended pleading” for purposes of satisfying Section 1446(b)).

The fact that the Plaintiff affirmatively sought relief under a federal statute distinguishes this case from those cited by the Defendant for the proposition that a federal question asserted as a defense does not make a case removable on the basis of federal question jurisdiction. See cases cited supra at p. 793.

From the procedural history of this case at the Circuit Court level and applying the case law previously discussed, the Court concludes that a federal question making this action one properly removable under Section 1446(b) arose at the time Plaintiff filed his memorandum in support of his motion for injunctive relief (and it certainly should have been clear to all concerned that a federal question existed when Judge Harvey ruled expressly referring to the PMPA and the Circuit Court’s jurisdiction consider relief under that federal statute). Further, inasmuch as Plaintiff’s motion for injunctive relief was briefed and ruled upon in 1983 (the Circuit Court’s order was entered on May 11, 1983, and Union Oil’s original petition for remand was not filed until April 18, 1984), the removal petition was not timely filed as to the federal question ground for removal; however, Defendant’s petition was filed within thirty days of the date diversity jurisdiction arose.

The issue confronting the Court at this point, therefore, is when a case becomes removable on successive grounds, may a party decline to remove a case when the first basis for removal appears but then remove the case within thirty days of the appearance of the second basis establishing federal jurisdiction. Before addressing this specific issue, the Court notes that “[i]t is a well-settled rule of law that the removal statutes are to be strictly construed against permitting removal.” Continental Resources and Mineral Corp. v. Continental Ins. Co., 546 F.Supp. 850, 852 (S.D. W.Va.1982). See also, Shamrock Oil Corp. v. Sheets, 313 U.S. 100, 107, 61 S.Ct. 868, 871, 85 L.Ed. 1214 (1941); W Va. State Bar v. Bostic, 351 F.Supp. 1118, 1120 (S.D. W.Va.1972). The public policy consideration behind this principle of statutory construction is essentially a practical one and is well illustrated by this case. While jurisdiction in the state court is clearly proper, it is a very close question whether this Court can also properly assert jurisdiction over this matter. If this Court were to deny the motion to remand and retain this ease on its docket through trial, there is a very real possibility that all of the labors of counsel and the Court would be held for naught by an appellant ruling that the removal of this case was improvident and that as a result this Court had no jurisdiction to preside over this action. The safe course, then, is to remand this action to a court where all can agree jurisdiction is properly exercised rather than retain this case in a federal forum where jurisdiction is questionable. See Burgess v. Charlottesville Savings and Loan Association, 477 F.2d at 43 (“[I]t has often been-held that federal courts must be alert to avoid overstepping their limited grants of jurisdiction. At any stage of a litigation, including the appellate, subject-matter jurisdiction may be questioned.”); Freeman v. Colonial Liquors, Inc., 502 F.Supp. 367, 369 (D.Md.1980); Healy v. Ratta, 292 U.S. 263, 270, 54 S.Ct. 700, 703, 78 L.Ed. 1248 (1934):

“Due regard for the rightful independence of state governments, which should actuate federal courts, requires that they scrupulously confine their own jurisdiction to the precise limits which the [removal] statute has defined.”

The express language of the statute itself resolves the issue under consideration. As the underscored portions of the second paragraph of Section 1446(b), reproduced above, indicate, the removal petition must be filed within thirty days of the first pleading giving rise to federal jurisdiction. The necessity of this time limitation is obvious: Without it a Defendant, once having identified the case as one removable to federal court, could retain the unfair advantage of being able to remove the case at will, enabling a Defendant to exercise his unilateral power of removal at a strategic juncture in the litigation. The thirty-day limit for removal upon the initial pleading provided in the first paragraph of Section 1446(b) serves the same purpose. This purpose would be defeated if a Defendant were allowed to decline to remove a case upon one ground and then, later in the litigation, attempt to remove the case when a second ground for removal presented itself. If a Defendant is desirous of litigating an action in federal court, he must seize the first opportunity to do so by removing the case to federal court within the prescribed thirty-day period. If the Defendant does not remove the case upon the first opportunity, the Defendant has waived his right to remove at a later time. “If a case is removable from the outset, it must be removed within the initial thirty-day period specified by section 1446(b); subsequent events do not make it ‘more removable’ or ‘again removable’.” Lassiter v. State Farm Mutual Automobile Insurance Co., 371 F.Supp. 1221, 1224 (E.D.Ark.1974); Feller v. National Enquirer, 555 F.Supp. 1114, 1120 (N.D.Ohio 1982); Lee v. Volkswagen of America, Inc., 429 F.Supp. 5, 7 (W.D.Okla.1976).

The Defendant here, having declined to remove the action to federal court within thirty days of the date federal question jurisdiction was injected into the case, has waived its right to remove this case based upon diversity of citizenship jurisdiction. Accordingly, the Court concludes that this action was improvidently removed to this Court and remands this case to the Circuit Court of Kanawha County for further proceedings.

      . Plaintiff is a citizen of West Virginia; Defendant Heater Oil is a West Virginia corporation with its principal place of business in West Virginia; Defendant Union Oil is a corporation incorporated under laws of the State of California. See Complaint at ¶ 1 and ¶ 5 of the Petition for Removal.

      . See cases cited supra at p. 792.

      . Because Plaintiff voluntarily requested relief under the PMPA, Defendant’s reliance on the case of Great Northern Railroad Company v. Alexander, 246 U.S. 276, 38 S.Ct. 237, 62 L.Ed. 713 (1918) is misplaced. See Defendant’s memorandum of law at p. 11.


author: McMILLAN, District Judge.

text:
    UNITED STATES of America, Plaintiff, v. Robert L. BRANDON, Defendant.
    No. C-C-83-580-M.
    United States District Court, W.D. North Carolina, Charlotte Division.
    Jan. 29, 1985.

      Charles R. Brewer, U.S. Atty., Asheville, N.C., for plaintiff.
    Edward G. Connette, Harper, Connette & Stovall, Charlotte, N.C., for defendant.
   FINDINGS OF FACT AND CONCLUSIONS OF LAW

McMILLAN, District Judge.

The United States of America, plaintiff, sued Robert L. Brandon in this action to recover $2,532.63 plus interest for alleged overpayments made to him by the Veterans Administration (VA) in educational assistance allowances. The suit is based on 38 U.S.C. §§ 1785(a), 1785(b), 1780(a)(4) and 1780(e).

The case was tried to the court without a jury on November 1, 1984.

I

FINDINGS OF FACT

Robert Brandon was enrolled at Central Piedmont Community College (CPCC) in Charlotte, North Carolina, during the spring and summer quarters of 1979 and the fall quarter of 1980. Defendant Brandon received monthly advance educational assistance benefits during that period as a result of his service for three and one-half years as a Marine, and one year in the reserves. He now is a member of the North Carolina National Guard.

During the spring and summer of 1979 and the fall of 1980 at CPCC, defendant received some “nonpunitive grades.” This strange phrase is defined by the VA as “grade assigned for pursuit of a course (whether upon completion of the course or at the time of withdrawal from it) which has the effect of excluding the course from any consideration in determining progress toward fulfillment of graduation requirements.” Department of Veterans Benefits (DVB) Circular 20-76-84. Under the VA’s policy, a veteran could not receive any benefits for a course which he audited or for which he received a “nonpunitive” grade.

As Mr. Brandon was to learn, the VA’s policy on “nonpunitive” grades would be very punitive against veterans.

At all times relevant to this suit, CPCC did not give failing grades to students. The only passing grades given were A, B, and C, which gave a student credit toward graduation. The other grades were W (withdrawal), IR (incomplete-repeat), and IM (incomplete-make-up). The grade of IR required a student to repeat the entire course before any credit toward graduation would be given. The grade of IM allowed a student to receive credit for the course upon successful completion of additional work.

In the spring quarter of 1979, defendant enrolled in three courses and did not receive a passing mark in any of them. In the summer quarter of 1979, he enrolled in three courses and failed to receive a passing grade in one course. In the fall of 1980, defendant enrolled in three courses and received a passing mark for one course.

According to the VA’s policy as stated in DVB 20-76-84, defendant was not entitled to benefits paid for those courses in which he received “nonpunitive” grades. The VA interpreted that to mean that defendant was not entitled to benefits for any course in which he did not receive an A, B, or C grade.

The government does not seriously contend that defendant provided “erroneous information” in order to receive benefits, or that he failed to “pursue” his courses. The government’s theory is that defendant was not entitled to the benefits he received and must repay them because he received “non-punitive” grades in certain courses.

In 1978, the VA audited the Veteran Affairs Office at CPCC. As a result, the VA discovered that CPCC was not complying with the regulations contained in the predecessor of DVB-76-84, which had become effective in 1976. Before the audit, CPCC had not been reporting to the VA those veterans who had received “nonpunitive” grades.

After the audit, CPCC agreed to review all records of veterans and apply the regulations in DVB-76-84 to identify and report to the VA those veterans who had received “nonpunitive” grades since the winter of 1977.

In December, 1979, CPCC’s Veterans Affairs Office sent a letter to each enrolled veteran explaining the changes in policy that would come from enforcement of DVB-76-84. This letter explained the “nonpunitive” grading policy and warned of possible overpayments that had been made to students in the past. It informed those who received it that there were procedures for consideration of “mitigating circumstances” for “nonpunitive” grades, which could lead to elimination of past overpayments. The letter is difficult to understand, as admitted by Don Ray, a Mecklenburg Veterans Service official then on assignment at CPCC.

Defendant Brandon has no recollection of receiving this letter or discussing it with any veterans at school.

Though the evidence that the letter was mailed may support a finding that defendant received it, the court declines to make a finding that defendant did receive it, and the court declines to find that, if received, it was understood.

John Tripp, the Director of Veterans Affairs and Testing Services at CPCC, had his office review the academic files of veterans. This search identified the “nonpunitive” grades received by defendant in 1979 and 1980. CPCC then informed the VA of these grades.

The VA started sending collection letters. First, the VA sent defendant a letter on November 12, 1980, informing him of a possible overpayment of benefits during the spring and summer quarters of 1979. On April 9, 1981, the VA sent defendant a statement and another letter explaining that he had received $639.26 in overpayments for the fall quarter of 1980. The letter stated that defendant could apply for a waiver of the debt by writing the VA and giving reasons for the waiver. No specific limitation of time to apply for the waiver is mentioned in the letter. However, on the back of the letter, there is a summary of procedural and appeal rights which states that the veteran can appeal the decision “at any time within one year from the date of this letter.”

Defendant made no appeal nor did he apply for a waiver of the overpayment that was assessed. The director of veterans affairs at CPCC, John Tripp, testified that he thought that the filing of a suit against a veteran ended any right to a consideration of waiver. Dan Ray, who also worked in the veterans affairs office at CPCC, thought that a waiver could be considered only for one year.

On October 15, 1981, the VA issued a certificate of indebtedness against defendant for $2,532.63 in overpayments— $1,893.37 for the spring and summer of 1979 and $639.27 for the fall of 1980. There is no breakdown in the letter or elsewhere in the record of how much in benefits was allegedly overpaid for each specific course.

Shortly thereafter, the VA turned the matter over to the United States Attorney. On October 21, 1981, an Assistant United States Attorney sent defendant a demand letter warning that unless payment was made in full within fifteen days, suit would be filed by the government. After Mr. Brandon received this letter, he went to the offices of the United States Attorney to ask about this alleged debt. There he talked with a responsible non-lawyer employee. No mention was made to defendant about any possibility of a waiver of the debt, but he was advised either at the time or by subsequent letter that he could pay off part of the debt by reenrolling in classes and passing some of them. The letter stated that if a veteran does not pass a course, even if he or she attends all classes, the VA will not pay benefits for the class.

There were no further communications between the parties until suit was filed on July 26, 1983.

II

CONCLUSIONS OF LAW

A

THE VA CAN NOT TREAT MONTHLY ADVANCE EDUCATIONAL ASSISTANCE PAYMENTS AS OVERPAYMENTS SIMPLY BECAUSE A VETERAN FAILS TO RECEIVE A PASSING GRADE.

In an order filed May 9, 1984, denying the government’s motion for summary judgment, this court has already ruled that pursuant to 38 U.S.C. § 1780(e), the VA can recover advance payments made to a veteran for educational assistance only upon proof that the veteran “fails to enroll in or pursue a course” or provides “erroneous information required to be furnished.” United States v. Brandon, 584 F.Supp. 803 (W.D.N.C.1984).

In that decision, this court found that it has the power to examine the validity of the alleged debt owed to the plaintiff despite the alleged bar to such review by 38 U.S.C. § 211(a). The government claimed that this court could only look into the validity of the debt if it ruled for the government. The court rejected this claim and embraced the reasoning in De Magno v. United States, 636 F.2d 714, 724-27 (D.C.Cir.1980), that it could review the validity of the alleged debt.

The court finds that the plaintiff can bring this suit despite the requirement of 38 U.S.C. § 3116(a)(2), that no suit may be filed “unless the Administrator has determined ... that such person has failed to respond appropriately to reasonable administrative efforts to collect such indebtedness.” Plaintiff asserts that it has made reasonable efforts to collect the debt before filing suit. The VA sent several letters to defendant requesting payment of the alleged overpayment. The VA also sent a certificate of indebtedness setting forth the amount allegedly due and the basis for the alleged debt. After the case was turned over to the attorney, the defendant received a demand letter requesting payment once again before a suit was filed. Prior to the filing of this suit, plaintiff determined that defendant had failed to respond to reasonable efforts to collect the alleged debt. On this point, the court agrees with the plaintiff. Therefore, 38 U.S.C. § 3116 does not bar plaintiff’s bringing this suit.

The court previously found that the applicable statute (if there is one) for recovery of the alleged debt is 38 U.S.C. § 1780(e):

If an eligible veteran or eligible person fails to enroll in or pursue a course for which an educational assistance or subsistence allowance advance payment is made, the amount of such payment and any amount of subsequent payments which, in whole or in part, are due to erroneous information required to be furnished under subsection (d)(2) of this section, shall become an overpayment and shall constitute a liability of such veteran or person to the United States and may be recovered, unless waived pursuant to section 3102 of this title from any benefit otherwise due such veteran or person under any law administered by the Veterans’ Administration or may be recovered in the same manner as any other debt due to the United States. [Emphasis added.]

Under this section, the VA can recover past payments only (1) if there has been a failure “to enroll in or pursue a course” or if (2) “erroneous information” has been provided to the VA. As stated earlier, the government does not contend that the defendant failed to “enroll in or pursue” his courses, nor that he submitted “erroneous information.” The government bases its claims solely on the fact that defendant received “nonpunitive” grades.

This court has already rejected the government’s claim that 38 U.S.C. § 1780(a)(4) allowed a recovery of payments for courses for which the veteran received “nonpunitive” grades. The court found in its earlier summary judgment opinion that 38 U.S.C. § 1780(a)(4) is prospective only, allowing the VA to refuse to make future payments, but providing no basis for recovery of past benefits.

The only other possibly applicable statute is 38 U.S.C. §§ 1785(a) and (b), which state:

(a) Whenever the Administrator finds that an overpayment has been made to a veteran or eligible person, the amount of such overpayment shall constitute a liability of such veteran or eligible person to the United States.
(b) Whenever the Administrator finds than [sic] an overpayment has been made to a veteran or eligible person as the result of (1) the willful or negligent failure of an educational institution to report, as required under this chapter or chapter 34 or 35 of this title, to the Veterans’ Administration excessive absences from a course, or discontinuance or interruption of a course by the veteran or eligible person, or (2) the willful or negligent false certification by an educational institution, the amount of such overpayment shall constitute a liability of the educational institution to the United States.

Section (b) allows the VA to recover certain overpayments from either the veteran or the educational institution. Although CPCC may have been negligent in failing to comply with DVB 20-76-84, the VA has not attempted to hold the institution liable and instead has pursued only the individual veteran. However, the government still cannot recover from the veteran under 38 U.S.C. § 1785. Though Section 1785 allows the VA to recover for an “overpayment,” what constitutes an overpayment must be determined by reference to 38 U.S.C. § 1780(e). Section 1780(e) defines what is an overpayment in the case of advance monthly educational assistance and subsistence allowance payments, and Section 1785 must be read in light of this definition. Otherwise, the VA could simply declare an overpayment under Section 1785 and avoid the specific applicable requirements of Section 1780(e). As stated above, the plaintiff has not shown any overpayment to defendant that can be recovered under 38 U.S.C. § 1780(e). Plaintiff cannot recover under Section 1785 alone.

The government can recover from defendant, if at all, only pursuant to 38 U.S.C. § 1780(e). It does not contend seriously, and does not show, that it can meet the requirements of that statute. Thus, it cannot recover from the veteran for the alleged overpayments.

B

THERE APPEAR TO BEEN PROCEDURAL DEFICIENCIES THAT DEPRIVED THE VETERAN OF HIS RIGHT TO HAVE THE ALLEGED DEBT CONSIDERED FOR WAIVER; HOWEVER, THE COURT NEED NOT REACH THIS ISSUE.

Defendant contends that the government cannot recover for the alleged debt because it deprived him of his right to have the debt considered for a two-year waiver by the VA. 38 U.S.C. § 3102. (At all relevant times, the waiver period was for two years. It was amended in 1982 to provide for waiver consideration only for 180 days.)

A review of the statute, regulations, and letters sent to defendant reveals a Byzantine system that confuses even the most determined reader.

Section 3102 provided for a waiver period of two years. The April 9, 1981, letter to defendant stated that consideration for a waiver was available, but did not mention any time limit. However, it did state that he had a right to appeal the decision for one year. Federal regulations state that a veteran can have mitigating circumstances considered for a withdrawal or nonpunitive grade for a one-year period. 38 C.F.R. § 21.4136(k)(ii). The December, 1979, letter sent by CPCC to all enrolled veterans advised them of a right to consideration of waiver, but says that the veteran should present mitigating circumstances to the CPCC office by January -23, 1980, or when the VA contacts the veteran. The officials administering veterans benefits at CPCC were unaware of the statutory two-year period. At trial, John Tripp testified that he thought that the VA would not consider a waiver requested after suit is filed. Dan Ray testified that he thought the waiver period lasted only one year. Whether or not this is accurate, it is significant that these people who ran the office at CPCC for veteran affairs were not aware of the statutory two-year period.

Defendant argues that the government has adopted a regulation (38 C.F.R. § 21.-4136(k)(ii)) allowing consideration for one year that is inconsistent with the statutory two-year period. The regulation is ambiguous, but one possible reading is that it applies only to waiver of denial of future benefits to be paid:

The Veterans Administration will not pay any benefits to a veteran ... unless (i) There are mitigating circumstances, and (ii) The veteran submits the circumstances to the Veterans Administration within one year ... (Emphasis added).

Section 3102 allows two years for consideration of a waiver of a recovery of an overpayment. Although the regulation and statute are not clear, this reading would avoid inconsistency.

Defendant Brandon may not have been allowed the full waiver period provided for by statute. The VA did advise him by letter of his right to have his case considered for a waiver, but Brandon was never given a clear statement of how long that right would last, and there was confusion even among the administrators as to how long the period for consideration for waiver would last. However, it is not clear whether this uncertainty over the waiver period would be a violation of the due process clause.

Despite the foregoing decision, the court need not decide whether defendant’s due process rights were violated by notification of his right to consideration for waiver at a time when he was either misled as to the period or had not been notified of the correct time limitation on the waiver. The court has determined that the government cannot recover from the veteran on the merits of the case. Therefore, the court will not rule on the due process claims made by the veteran.

Ill

CONCLUSION

If the government can recover at all, that recovery must be based on 38 U.S.C. § 1780(e). The government has not seriously contended that it can recover under that statute, but has requested that the court reconsider its conclusions previously made in denying the government’s motion for summary judgment. The court declines to do so, and finds that plaintiff cannot recover from defendant in this case.

It is disturbing that the VA has taken the position that it can recover benefits paid to veterans with respect to courses in which they have not received passing grades. This in effect forces the veterans to gamble on their education. If they pass their courses, they win and can keep the benefits already paid. If they do not pass the courses and receive “nonpunitive” grades, which automatically occurs at CPCC, then they lose, and the VA attempts to recover the benefits already paid. This procedure by the VA is not allowed by the laws governing recovery of overpayments.

This is the first case before this court in which a veteran has challenged the VA’s collection of an alleged debt. The court has estimated that almost half of the civil cases filed in this division in the first half of 1983 were suits of this nature in which the government sought to collect amounts generally less than $1,000. Almost all of the cases resulted in consent judgments in which the veterans agreed to pay back the alleged overpayment. The court can only wonder how many of those suits were based on the same interpretation of the law by the VA that has been held invalid in this case.

ORDER

Findings of fact and conclusions of law have been entered.

However, the question of attorney’s fees and costs remains to be determined.

The defendant veteran has requested that the court allow recovery from the government of reasonable attorney fees and costs. Under the Equal Access to Justice Act (28 U.S.C. § 2412(d)(1)(A)), fees and costs should be awarded to a party prevailing against the United States, “unless the court finds that the position of the United States was substantially justified or. that special circumstances make an award unjust.” The court will defer decision on the award of fees and costs until further word from the parties. Defendant is required by 28 U.S.C. § 2412(d)(1)(B) to file a petition within thirty days, along with a showing that he is the prevailing party, and that the government’s position was not substantially justified. The United States shall file its response to that petition within thirty days after it has been received.

Final judgment will be entered after the fee question has been decided.