author: YOUNG, District Judge.

text:
    CLIFTEX CORPORATION, Plaintiff, v. LOCAL 377, NEW ENGLAND REGIONAL JOINT BOARD, AMALGAMATED CLOTHING AND TEXTILE WORKERS UNION, AFL-CIO, CLC, Defendant. LOCAL 377, NEW ENGLAND REGIONAL JOINT BOARD, AMALGAMATED CLOTHING AND TEXTILE WORKERS UNION, AFL-CIO, CLC, Plaintiff, v. CLIFTEX CORPORATION, and Town and Country Slacks, Inc., Defendants.
    Civ. A. Nos. 83-2251-Y, 83-2335-Y.
    United States District Court, D. Massachusetts.
    Jan. 9, 1986.

      Kenneth H. Tatarian, Boston, Mass., for plaintiff.
    Leonard Schneider, North Dartmouth, Mass., for defendant.
   MEMORANDUM AND ORDER

YOUNG, District Judge.

These cases arise out of an arbitrator’s resolution of a dispute between the parties to a collective bargaining agreement. The arbitrator ordered Cliftex Corporation and Town and Country Slacks, Inc. (the “Companies”) to reinstate with back pay three employees; Alda Melo, Emily Sedgwick, and Anna Iria. When the companies refused to comply with the arbitrator’s award, Local 377 (the “Union”) sought to enforce the award in the Superior Court of Massachusetts. The Companies removed the case to this Court, and in the meantime brought a separate action seeking to vacate the arbitrator’s award. In both cases jurisdiction is alleged to exist under § 301 of the Labor Management Relations Act (the “Taft-Hartley Act”), -29 U.S.C. § 185(a). The cases now are before the Court on the parties’ cross motions for summary judgment. For the reasons discussed below, the Court allows the Union’s motion, denies the Companies’ motion, and enforces the arbitrator’s award.

I.

The arbitrator found the following facts, which the parties agree are binding upon this Court. The Companies are related manufacturers of men’s clothing in New Bedford, Massachusetts. Each has a collective bargaining agreement with the Union that prohibits discharge without just cause.

On February 3, 1983 an election was held at Cliftex’s Plant A for the position of chairperson. The chairperson functions as chief steward at the plant and deals with the company supervisors, the plant manager, and upper level managers on matters relating to enforcement of the collective bargaining agreement. An employee named Alda Melo won the election by a margin of 301 to 43. During the course of her campaign Melo distributed to employees a leaflet containing a statement vice-president Kane believed to be slanderous of his name. Kane scheduled a meeting between him and Melo for February 9, 1983.

Kane met Melo for the first time at the February 9th meeting. A heated discussion ensued. Kane apparently was surprised by Melo’s intelligence, and commented that “she was a lawyer ... her grammer was exquisite ... I’ve never heard language like this from someone in the shop.” Kane left the meeting and began asking around about Melo’s background. On February 9th or 10th Kane learned that Melo had been a school teacher and had a college degree. This information was not on her employment application.

Kane then contacted the managers of other company facilities to find out whether there were other employees who had made similar misrepresentations. Mike Castaldi, the manager at Town and Country, told Kane that “I have a real genius over here,” and he identified Emily Sedgwick. Castaldi described her as “the brightest girl I’ve run into.” Subsequent investigation revealed that Sedgwick failed to list her A.B. degree from Harvard College on her application.

On February 16th Cliftex fired Melo. On February 18th Sedgwick and one Anna Iria were discharged. All three employees filed grievances stating as follows:

I have been discharged without just cause. Further I believe the Company is retaliating against me because of Union and concerted activities protected by the National Labor Relations Act. I wish to be reinstated with all wages and benefits restored.

The parties submitted the dispute to arbitration under the provisions of the agreements.

Based on “massive evidence,” the arbitrator found that both Melo and Sedgwick “vigorously pursued their rights and the rights of other employees under their respective collective bargaining agreements. Each of their plant managers well knew their interest in and awareness of their contractual rights.” (Award at 7 and 13) Although the Companies claimed that all three employees were fired for the misrepresentations on their applications, the arbitrator specifically rejected this argument:

On the basis of all the evidence in this case, I conclude that the Company used the falsifications on their employment applications as a pretext to discharge Melo and Sedgwick. The evidence is overwhelming that the Company’s real reason for discharging these employees was their activity on behalf of the union and on behalf of their fellow employees. I find further that but for the Union activity neither Melo nor Sedgwick would have been discharged.

(Award at 14). As to whether discharge under these circumstances violated the contract, the arbitrator ruled that:

The collective bargaining agreements in question here do not by their terms prohibit discipline for Union activity. Nevertheless, I conclude that such improper motivation must be considered within the just cause standard of discharge. As a matter of industrial relations it is simply not appropriate to discharge an employee because of his or her Union activity.

(Award at 14-15). The arbitrator further found that the discharge of Iria was without just cause. In his view, the evidence suggested that the Companies wished to discharge Iria simultaneously with the two Union activists. From this he evidently inferred that her discharge was an attempt to cover up the real reasons for discharging Melo and Sedgwick. Accordingly, the arbitrator ordered all three reinstated with back pay.

II.

In the seminal case of Textile Workers v. Lincoln Mills, 353 U.S. 448, 77 S.Ct. 912, 1 L.Ed.2d 972 (1957), the Supreme Court held that § 301 of the TaftHartley Act imposes upon the federal courts a duty to “fashion from the policy of our labor laws” a substantive federal common law to be applied to suits for enforcing collective bargaining agreements. Id. at 456, 77 S.Ct. at 918. Central to this federal common law of labor agreements is the primacy of arbitration in the enforcement scheme. United Steelworkers v. American Manufacturing Co., 363 U.S. 564, 80 S.Ct. 1343, 4 L.Ed.2d 1403 (1960); United Steelworkers v. Warrior & Gulf Navigation Co., 363 U.S. 574, 80 S.Ct. 1347, 4 L.Ed.2d 1409 (1960); United Steelworkers v. Enterprise Wheel & Car Corp., 363 U.S. 593, 80 S.Ct. 1358, 4 L.Ed.2d 1424 (1960). Accordingly, a federal court must enforce an arbitrator’s award “so long as [the award] draws its essence from the collective bargaining agreement.” Enterprise Wheel, 363 U.S. at 597, 80 S.Ct. at 1361. A court “may not overrule an arbitrator’s decision simply because the court believes its own interpretation of the contract would be the better one.” W.R. Grace & Co. v. Rubber Workers, 461 U.S. 757, 764, 103 S.Ct. 2177, 2182, 76 L.Ed.2d 298 (1983). The established rule in this circuit is that an arbitrator’s award will not be disturbed unless it is “unfounded in reason and fact, ... based on reasoning ‘so palpably faulty that no judge, or group of judges, could ever conceivably have made such a ruling,’ ... or is mistakenly based on a crucial assumption which concededly is a nonfact.” Bettencourt v. Boston Edison, 560 F.2d 1045, 1050 (1st Cir.1977).

Faced with this presumption of the correctness of the arbitrator’s decision, the Companies nonetheless contend that the award must be vacated. They argue that the sole remedy available to an employee who is discharged for engaging in union activities is to file an unfair labor practice charge with the National Labor Relations Board (the “Board”). Although it is unclear whether the Companies’ attack is on the jurisdiction of the arbitrator to render the award or on the substantive basis of the decision, in either ease their position is utterly without merit.

It is too late in the day for the Companies seriously to contest the authority of the arbitrator to address the merits of the unfair labor practice charge. In Dubo Manufacturing Company, 142 NLRB 431 (1963), enforced, 353 F.2d 157 (6th Cir.1963), the Board held that if the party filing an unfair labor practice has voluntarily agreed to submit the matter to arbitration it will defer further processing of the case. After the arbitrator renders an award the Board, if the parties wish, will review the arbitrator’s treatment of the unfair labor practice charge under the standards announced in Speilberg Manufacturing Company, 112 NLRB 1080 (1955), and Olin Corporation, 268 NLRB 573 (1984). The Supreme Court long has upheld this power to defer processing of certain cases pending completion of arbitration. See e.g., Carey v. Westinghouse, 375 U.S. 261, 270 n. 7, 84 S.Ct. 401, 408 n. 7, 11 L.Ed.2d 320 (1964). Here the Board deferred processing the grievants’ charges under the Dubo doctrine because arbitration already had been sought. The Companies therefore are wrong in suggesting that the grievants were limited to their remedy at the Board. More importantly, it appears that the parties and the arbitrator agreed at the hearing that the arbitrator would not decide whether the Companies had violated the National Labor Relations Act (the “Act”). Instead, evidence of antiunion animus was considered only for the purpose of determining whether there was just cause under the agreement. Accordingly, the Companies’ argument that the arbitrator impermissibly based the award on his interpretation of the Act is not only without basis in law, but also inapplicable to the facts of this case.

The Companies’ arguments attacking the arbitrator’s substantive interpretation of the agreements likewise are unavailing. While admitting that the agreements required just cause to discharge the grievants, the Companies urge the Court to focus on the fact that the agreements do not explicitly prohibit discharge or discipline of employees for union activity. The Companies argue that this absence of an anti-discrimination provision in the agreements is fatal to the grievants’ case. The logical extension of this argument, which the Companies not surprisingly leave unstated, is that it is within the concept of just cause for a company to discharge an employee in retaliation for her pursuing rights guaranteed under § 7 of the Act. The Court has found absolutely no authority which supports so bold a proposition.

Seemingly undeterred by the novelty of their position, the Companies go on to argue that the award does not draw its essence from the agreement because the arbitrator’s conclusion that just cause does not include anti-union animus rests on his “own view of industrial relations.” This argument ignores the dynamic nature of the collective bargaining process. When the parties agreed that discharges would only be for just cause they did not necessarily limit themselves to some static definition of that term. It is commonplace for parties to a collective bargaining agreement consciously to agree on ambiguous terms with the intent that an arbitrator will further define their agreement at a later date. To do otherwise would require the parties to set upon the impossible task of addressing every possible contingency that might arise during the life of the agreement. The Supreme Court, recognizing that the inability of parties to anticipate or address all future problems necessarily will leave “gaps” in collective bargaining agreements, has nourished the view that arbitrators often must settle labor disputes by reference to the “common law of the shop.” Warrior & Gulf, 363 U.S. at 578-80, 80 S.Ct. at 1350-51. This “industrial common law — the practices of the industry, and the shop — is equally a part of the collective bargaining agreement although not expressed in it.” Id. at 582, 80 S.Ct. at 1352.

The arbitrator here found that “as a matter of industrial relations it is simply not appropriate to discharge an employee because of his or her Union activity.” (Award at 15). This view of the common law of the shop is well supported and not unreasonable. See e.g., Farmer Brothers Co., 64 LA (BNA) 901, 904-5 (1975) (“By necessary implication, if not expressly, collective agreements every bit as much as the statute, typically proscribe anti-union disciplinary actions discriminating against employees because of their union acts and views.”); and Dura-Containers, Inc. 67 LA (BNA) 82, 84 (1976) (Discharge “was in violation of the NLRB and therefore without just cause.”) The arbitrator’s conclusion here does not violate the standards established by Bettencourt. A Court should not deny enforcement of an arbitrator’s award simply because the arbitrator determined that discharging an employee for protected activities is a violation of the contract. International Brotherhood of Electrical Workers v. Sho-Me Power, 715 F.2d 1322, 1324 (8th Cir.1983).

The Companies also argue that the award is invalid because it relies on the arbitrator’s interpretation of the Act, not the contract. It is true that there exists a philosophical dispute among the commentators over the proper role of external 'law in contract disputes, see generally F. Elkouri and E. Elkouri, How Arbitration Works 366-370 (5th ed. 1985), and that an arbitrator exceeds his authority if his award is “based solely upon the arbitrator’s view of the requirements of enacted legislation.” Enterprise Wheel, 363 U.S. at 597, 80 S.Ct. at 1361 (emphasis added). But the mere fact that an arbitrator finds facts with statutory significance does not implicate these concerns. Here the arbitrator specifically limited the basis of his decision to the requirements of the contract. Nowhere in the opinion did he ever mention the Act. Moreover, it is not objectionable that the arbitrator might have “looked to ‘the law’ for help in determining the sense of the agreement.” Enterprise Wheel, 363 U.S. at 598, 80 S.Ct. at 1361. As one leading treatise notes, “most arbitrators would agree ... [that] where the contract provision being interpreted or applied has been formulated loosely, the arbitrator may consider all relevant factors, including relevant law.” How Arbitration Works, supra, at 370.

In short, there is no reason not to enforce the arbitrator’s award. The Companies’ argument that the contracts reserve to them the right to discharge employees in retaliation for union activities is singularly unpersuasive. The arbitrator ordered the employees reinstated with back pay on July 12, 1983. On June 15, 1984 this Court entered a preliminary injunction ordering the reinstatement of the grievants pending further action by the Court. In order to give full remedial effect to the arbitrator’s reinstatement award the Companies must pay, in addition to the back pay ordered by the arbitrator, the wages that would have been earned had the award been implemented between the time of the decision and the preliminary injunction, less any amount earned during that period. Cf. Service Employees International v. Washington Hospital Center, 115 LRRM (BNA) 3581, 3583 (D.D.C.1983). Furthermore, the Court rules that prejudgment interest on this sum is appropriate. Id. at 3583 (citing Miller v. Robertson, 266 U.S. 243, 257-58, 45 S.Ct. 73, 78, 69 L.Ed. 265 [1924]).

Finally, the Court rules that this is an appropriate case for imposing sanctions against the Companies. An award of attorney’s fees is appropriate when a party, “without justification,” refuses to comply with an enforceable award. Courier Citizen v. Boston Electrotypes Union No. 11, 702 F.2d 273, 282 (1st Cir.1983); Local No. 252 v. Narragansett Improvement Co., 503 F.2d 309, 312-13 (1st Cir.1974); International Union of Electrical Workers v. Peerless Press Metal Corp., 489 F.2d 768, 769 (1st Cir.1973). The Court rules that the Companies’ positions are unsupported by law or fact, and are asserted in bad faith. For example, the Companies’ arguments misrepresent the arbitrator’s findings. They contend that “the arbitrator did not have contractual authority to decide whether an anti-union motivation vitiated otherwise sufficient just cause for discharging these employees.” In fact, the arbitrator never found that the companies’ pretextual reasons constituted just cause. Quite to the contrary, he found that but for the union activity of Meló and Sedgwick the employees would not have been fired. Stripped of this embellishment the Companies’ argument is that by engaging in the union activity the employees established just cause for discharge. The Companies’ inability to cite any authority to support this rather startling position justifies an award of legal fees. Teamsters Local Union No. 264 v. J.H. Merritt, 770 F.2d 40, 43 n. 2 (3d Cir.1985).

Accordingly, it is ORDERED:

1) That the Union’s motion for summary judgment is ALLOWED and that Cliftex’s motion for summary judgment is DENIED;
2) Cliftex shall comply with the arbitrator’s award;
3) Cliftex shall pay each of the employees the amount of wages she would have earned between July 12, 1983 and June 15, 1984, less any amount earned during that period, plus prejudgment interest on that sum from July 12, 1983 until this date at the prevailing legal rate; and
4) The parties are ordered to appear before this Court on Wednesday, January 29, 1986 at 2:00 p.m. for an hearing to determine the reasonable attorney’s fees to be awarded the Union.

      . The parties further agree that there are no disputed issues of fact, and that one of them is entitled to judgment as matter of law. See Rule 56, Fed.R.Civ.P.

      . At the time of the execution of the applicable agreements the Companies were separate legal entities with separate agreements with the Union. Town and Country is now a division of Cliftex.

      . Actually, the Cliftex agreement requires "just cause," while the Town and Country agreement requires "sufficient reasonable cause.” ' However, the arbitrator elected to treat these as a single just cause standard. Neither party contests the correctness of that ruling.

      . Although the Court was not provided a transcript of the hearings, the Union’s representations concerning this agreement are uncontested by the Companies, and are supported by the fact that the award nowhere mentions the Act.

      . Alexander v. Gardner-Denver, 415 U.S. 36, 94 S.Ct. 1011, 39 L.Ed.2d 147 (1974) and Barrentine v. Arkansas Best Freight System, 450 U.S. 728, 101 S.Ct. 1437, 67 L.Ed.2d 641 (1981), cited by the Companies, are inapposite. Those cases hold only that certain substantive individual rights may not be waived by the majority in the collective bargaining context. Because neither case limits “the Law” to which an arbitrator may look, they have no application here.


source: Caselaw Access Project

author: PEREZ-GIMENEZ, Chief Judge.

license: Public Domain

text:
    UNITED STATES of America, Plaintiff, v. Gonzalo Valdes RODRIGUEZ, Defendant.
    Crim. No. 83-0190 (PG).
    United States District Court, D. Puerto Rico.
    Jan. 9, 1986.

      Asst. U.S. Attys. Earl Shamwell and Salixto Medina-Malave, San Juan, Puerto Rico, for plaintiff.
    Joaquin Monserrate Matienzo, Reinaldo Vega Otero, Hato Rey, Puerto Rico, for defendant.
   OPINION AND ORDER

PEREZ-GIMENEZ, Chief Judge.

On August 9, 1985, defendant Gonzalo Valdés Rodríguez filed a motion under 28 U.S.C. Section 2255 requesting the court to vacate, set aside or correct the sentence imposed upon him on May 7, 1984. The motion, files and record of the case conclusively show that petitioner is entitled to no relief. See Fontaine v. United States, 411 U.S. 213, 93 S.Ct. 1461, 36 L.Ed.2d 169 (1973); McCarthy v. United States, 764 F.2d 28, 31 (1st Cir.1985); United States v. Butt, 731 F.2d 75 (1st Cir.1984); United States v. Fournier, 594 F.2d 276, 278-279 (1st Cir.1979).

Defendant Valdés Rodríguez pled guilty to two counts of conspiracy to commit an offense against the United States. The maximum penalty for this offense, as set forth in 18 U.S.C. Section 371, is five years imprisonment and/or a fine of $10,000. The government, as part of the plea bargain, agreed not to oppose defendant’s request for a maximum sentence of eight years. See Fed.R.Crim.P. 11(e)(1)(B). However, the defendant was sentenced to a $5,000 fine and the maximum of five years imprisonment on each count, sentences to be served consecutively.

Defendant argues that the sentence imposed was based on erroneous information, which was contained in the presentence investigation (hereafter “PSI”) report, and that the sentence actually imposed was in violation of the terms of the plea agreement accepted by the court.

Defendant alleges that the statement in the presentence report that, if the defendant were ordered incarcerated, he would be eligible for parole after 24 to 36 months, was inaccurate since the defendant was subsequently found not to be eligible for parole until after serving 40 months. Another alleged inaccuracy in the report is the statement that “the defendant tends to minimize his participation in the case.” The defendant argues that this statement is misleading and prejudicial. Finally, objection is made to a portion of the report which states that the probation officer “takes sides according to the version of one of the informants.” The defendant objects to this statement of the probation officer since it gives “more credibility to the other codefendant than to himself.” The defendant argues that in leaving these statements in the presentence report, after timely objection, the court was implying that defendant Valdés’ position in the offense was greater than it actually was.

Generally, a court will not review the severity of a sentence imposed within statutory limits. United States v. Tooker, 747 F.2d 975, 978 (5th Cir.1984), cert. denied, - U.S. -, 105 S.Ct. 2032, 85 L.Ed.2d 314 (1985); United States v. Pasarell, 727 F.2d 13, 17 (1st Cir.), cert. denied, - U.S. -, 105 S.Ct. 107, 83 L.Ed.2d 51 (1984); United States v. Sparrow, 673 F.2d 862, 864 (5th Cir.1982). For defendant Valdés Rodriguez to prevail in his challenge to the sentence imposed upon him, which is concededly within the statutorily permissible limits, he must show that the trial judge’s action amounted to an arbitrary or capricious abuse of discretion. United States v. Tooker, 747 F.2d at 978; United States v. Ames, 743 F.2d 46, 48 (1st Cir.1984), cert. denied, - U.S. -, 105 S.Ct. 927, 83 L.Ed.2d 927 (1985); United States v. Garcia, 693 F.2d 412, 415 (5th Cir.1982); United States v. Cimino, 659 F.2d 535, 537 (5th Cir.1981).

In regard to defendant’s specific charge that the trial judge relied on inaccurate and challenged information in his PSI report in imposing sentence, defendant Valdés must not only show that the information was “materially false,” but he must also show that the judge relied on that information as a foundation for imposing the sentence. Merely alleging that the PSI report contained inaccurate or inappropriate information does not sufficiently call into question a violation of due process in sentencing. Townsend v. Burke, 334 U.S. 736, 741, 68 S.Ct. 1252, 1255, 92 L.Ed. 1690 (1948); United States v. Tooker, 747 F.2d at 978; United States v. Ruster, 712 F.2d 409, 412 (9th Cir.1983); United States v. Green, 680 F.2d 183, 187 (D.C.Cir.1982), cert. denied, 459 U.S. 1210, 103 S.Ct. 1204, 75 L.Ed.2d 445 (1983); United States v. Garcia, 693 F.2d at 415; United States v. Cimino, 659 F.2d at 537.

In his motion to vacate, set aside or correct sentence, defendant has introduced no evidence to support his claim that his sentence was imposed in an illegal manner. He neither shows that the contents of the PSI report were extensively or materially false, nor that the court relied upon any erroneous information in imposing sentence. The only factor defendant points out that the court relied upon in imposing sentence was the general deterrence the sentence would have upon the community. Defendant argues that the trial judge erred in imposing a harsher sentence upon him in order that it would act as a deterrent factor to others. We disagree.

Deterrence is a legitimate aspect of sentencing. United States v. Colmenares Hernández, 659 F.2d 39, 42 (5th Cir.), cert. denied, 454 U.S. 1127, 102 S.Ct. 979, 71 L.Ed.2d 116 (1981); United States v. Moore, 599 F.2d 310, 315 (9th Cir.), cert. denied, 444 U.S. 1024, 100 S.Ct. 687, 62 L.Ed.2d 658 (1980).

In Pell v. Procunier, 417 U.S. 817, 94 S.Ct. 2800, 41 L.Ed.2d 495 (1974), the court stated:

An important function of the corrections system is the deterrence of crime. The premise is that by confining criminal offenders in a facility where they are isolated from the rest of society, a condition that most people presumably find undesirable, they and others would be deterred from committing additional criminal offenses. Id. at 822, 94 S.Ct. at 2804.

Thus, there remains room, even when imposing an acceptably “individualized” sentence, for a judge to look beyond the offender to the sentence’s presumed effect on others. United States v. Foss, 501 F.2d 522, 528 (1st Cir.1974); see United States v. Collado Betancourt, 405 F.Supp. 1063 (D.Puerto Rico 1975).

To the extent that defendant is concerned that certain comments in the PSI report may have an adverse impact on the decision of the United States Parole Commission, his remedy does not lie with the district court in a section 2255 motion. The procedure for correcting errors in a PSI report relied upon by the Parole Commission is set forth in 28 C.F.R. Section 2.19(c) (1985), which provides specifically for an administrative challenge to the accuracy of a PSI report. See Johnson v. United States, 650 F.2d 1 (1st Cir.1981).

Defendant further alleges that the sentence imposed by the court was in violation of the plea agreement entered into. We disagree. The plea agreement entered into by defendant, under Rule 11(e)(1)(B) of the Federal Rules of Criminal Procedure, was not a binding agreement upon the court that a particular sentence be imposed. See Rule 11. The Advisory Committee Note to the 1979 amendment of Rule 11(e)(1) says in part:

A (B) type of plea agreement is clearly of a different order than the other two, for an agreement to recommend or not to oppose is discharged when the prosecutor performs as he agreed to do. By comparison, critical to a type (A) or (C) agreement is that the defendant receive the contemplated charge dismissal or agreed-to sentence. Consequently, there must ultimately be an acceptance or rejection by the court of a type (A) or (C) agreement so that it may be determined whether the defendant shall receive the bargained for concessions or shall instead be afforded an opportunity to withdraw his plea. But this is not so as to a type (B) agreement; there is no ‘disposition provided for’ in such plea agreement so as to make the acceptance provisions of subdivision (e)(3) applicable, nor is there a need for rejection with opportunity for withdrawal under subdivision (e)(4) in light of the fact that the defendant knew the nonbinding character of the recommendation or request. United States v. Henderson, 565 F.2d 1119, 1122 (9th Cir.1977); United States v. Savage, 561 F.2d 554, 556 (4th Cir.1977).

See United States v. Incrovato, 611 F.2d 5, 7 (1st Cir.1979); Wright, Federal Practice and Procedure: Criminal 2d Section 175.1 (1985), pp. 648-659.

The plea agreement entered into by defendant was a type (B) agreement in which the government agreed not to oppose defendant’s request for a maximum sentence of eight years. The government honored its promise stipulated in the plea agreement by remaining silent during defendant’s sentencing hearing.

Defendant further alleges that the District Attorney “lured” him into signing the plea agreement by assuring him that he “would probably get 5 to 6 years and certainly no more than a maximum of 8 years.” The government denies that this statement was explicitly or implicitly ever made during the course of negotiations that led to the plea agreement. The record favors the government’s position. The terms of the plea agreement are clear and do not leave any room for misunderstanding or for an allegation that defendant was coerced by misrepresentation. Paragraphs 7 and 8 speak for themselves; they provide:

7. The parties understand and agree that this Plea Agreement is not binding on the Court and that it may impose any sentence and conditions of imprisonment authorized by law and that the defendant may not withdraw his plea solely as a result of the sentence imposed.
8. There are no other agreements between the parties.

See United States v. Schmader, 650 F.2d 533, 534 (4th Cir.), cert. denied, 454 U.S. 898, 102 S.Ct. 400, 70 L.Ed.2d 215 (1981) (after defendant entered guilty plea to conspiracy to import heroin in fulfilling his part of the plea bargain agreement, imposition of a longer sentence than that recommended by the government did not constitute a rejection of the plea bargain agreement.)

Even assuming, for purposes of argument, that the government misinformed the defendant as to the maximum sentence he could receive, such would not warrant setting aside the sentence. Fontaine v. United States, 411 U.S. at 214-215, 93 S.Ct. at 1462-1463; Limón González v. United States, 499 F.2d 936, 938 (5th Cir.1974).

Petitioner Valdés Rodríguez has not been able to show that the alleged inaccuracies in his PSI report were materially false nor has he been able to show that the trial judge relied on said inaccuracies in imposing sentence. Furthermore, the plea agreement was not a binding agreement upon the court that a particular sentence be imposed. Thus, the court did not abuse its discretion in imposing a longer sentence than that requested by the defendant and not opposed by the government. Therefore, defendant’s motion to vacate, set aside or correct sentence is DENIED.

IT IS SO ORDERED.


author: ARCENEAUX, District Judge.

text:
    Mrs. Norman H. HATTEN v. ESTES CADILLAC, INC., et al.
    Civ. A. No. 83-3113.
    United States District Court, E.D. Louisiana.
    Jan. 13, 1986.

      Thos. W. Davenport, Jr., Davenport, Files & Kelly, Monroe, La., Charles C. Garretson, New Orleans, La., for Mrs. Norman H. Hatten.
    Deutsch, Kerrigan & Stiles, David L. Campbell, New Orleans, La., for General Motors Corp.
    Edwin A. Stoutz, Jr., New Orleans, La., for Estes Cadillac, Inc.
   OPINION

ARCENEAUX, District Judge.

This is a redhibitory action for recission of the sale of a 1982 Cadillac Seville. Jurisdiction is based on diversity of citizenship pursuant to 28 U.S.C. § 1332.

Presently before the Court are numerous motions filed by defendants General Motors Corporation (GMC) and Estes Cadillac, Inc. (Estes). The parties agreed to waive oral argument; the Court ordered supplemental memoranda and took the motions under submission. Having considered the memoranda of counsel, the record and the applicable law, the Court 1) DENIES the joint motion of GMC and Estes to dismiss for lack of jurisdictional amount, 2) DENIES the motion of GMC and Estes to dismiss on the grounds of prescription, 3) GRANTS as to Estes but DENIES as to GMC the motion to dismiss for failure to tender for repair, 4) DENIES the motion of GMC to determine reasonable attorneys’ fees, 5) GRANTS the motion of GMC to dismiss claims of plaintiff for the cost of the Mississippi Road and Bridge Privilege Tax 6) DENIES the motion of GMC to determine mileage credit and 7) DENIES the motion of GMC to dismiss claims of plaintiff against GMC for acts or omissions of GMC dealerships. This Court has previously dismissed plaintiff’s claim for non-pecuniary damages on defendants’ motion for summary judgment.

Plaintiff purchased the Seville on March 5, 1982, from Estes in New Orleans for $25,404.00. In subsequent months, plaintiff claims the auto revealed many defects ranging from the incessant illumination of the “check engine” light on the dashboard to uncontrollable acceleration. On five occasions in the following twelve months, plaintiff brought the Seville in for service and repair at Estes. The service record reflects minor complaints except for the last two occasions involving the malfunctioning cruise control (February 9, 1983) and intermittently non-operational windshield wipers (March 17, 1983). Eight other malfunctions occurred and were repaired on the road or were repaired by Watkins Oldsmobile-Cadillac (Watkins), a Gulfport, Mississippi, Cadillac dealer unrelated to Estes.

On April 20, 1983, plaintiff abandoned the Seville at Watkins upon learning of new complications which rendered the car immobile. After this suit was filed the Seville was sold at an auction pursuant to an agreement among the parties to the lawsuit. By the terms of the agreement, titled “Agreement to Mitigate Damages,” the proceeds are to be credited against any recovery by plaintiff in this action.

At Louisiana law, a seller is bound to two principal obligations: that of delivering and that of warranting the object sold. La.Civ. Code.Ann. art. 2475 (1952). The obligation of warranty has two facets. First, the seller warrants that the buyer will not be deprived of the thing sold by claims of third persons. La.Civ.Code Ann. arts. 2476, 2500 (1952). Second, the seller warrants that the thing sold is free from hidden defects or redhibitory vices. La.Civ. Code Ann. arts. 2476, 2520 (1952).

A buyer has two options upon his discovery of a defect in the thing sold. First, he may bring an action in redhibition for recission of the sale if the defect renders the thing sold “either absolutely useless, or its use so inconvenient and imperfect, that it must be supposed that the buyer would not have purchased it, had he known of the vice.” La.Civ.Code Ann. art. 2520 (1952). A seller in good faith, i.e. one who was unaware at the time of sale of the defect in the thing sold, is initially bound only to repair the defect. La.Civ.Code Ann. art. 2531 (1985). If the seller is unable to repair the defect, the seller is bound to restore the price, expenses of sale and expenses of preservation of the object of sale. Id. The bad faith seller, one who knew of the defect and neglected to declare it, is liable for damages suffered by the buyer as a result of the defect in addition to liability for the price and expenses. La. Civ.Code Ann. art. 2545 (1952).

The second option available to the buyer is the action for reduction of the price or action in quanti minoris. La.Civ.Code Ann. art. 2541 (1952). This action permits the buyer to retain the defective thing sold and obtain a refund of part of the purchase price in proportion to the reduction in value caused by the defect.

Although an action in redhibition is essentially contractual, Louisiana law requires no privity of contract for a buyer to recover from the manufacturer of a defective product. Rey v. Cuccia, 298 So.2d 840 (La.1974). Because the manufacturer is presumed to be a bad faith seller, the manufacturer is subject to the provisions of article 2545 in a suit in redhibition. Id. at 845.

PLAINTIFF’S CLAIM SATISFIES THE REQUISITE JURISDICTIONAL AMOUNT

In a joint motion to dismiss, GMC and Estes contend that plaintiff’s claim fell below the minimum jurisdictional amount after this Court’s denial of non-pecuniary damages and after the parties’ sale of the Seville at the auction. As a result, movers argue, this Court no longer has jurisdiction.

The amount in controversy is determined at the time suit is filed in federal court. Subsequent events, “whether beyond plaintiff’s control or the result of his own volition,” cannot destroy the Court’s jurisdiction once it has been acquired. C. Wright, A. Miller & E. Cooper, Federal Practice & Procedure: Jurisdiction § 3702 (1976).

That plaintiff purchased the Seville for over $25,000.00 is undisputed. Clearly, plaintiff’s claim for recission of the sale was also in excess of $25,000.00 at the time suit was filed. The subsequent sale of the Seville and court order denying non-pecuniary damages, even if they caused the claim to fall below $10,000.00, do not affect this Court’s jurisdiction. See Commercial Credit Corp. v. Lane, 466 F.Supp. 1326 (M.D.Fla.1979) (Creditor’s recovery of $7,000 by repossession and sale of mobile homes did not destroy federal jurisdiction in the diversity action, even though the amount in controversy fell below $10,-000.00) Thus, the motion to dismiss for lack of jurisdictional amount is DENIED.

PRESCRIPTION DOES NOT BAR PLAINTIFF’S ACTION

Movers argue that prescription bars plaintiff’s suit because it was filed more than one year after the date of sale. Under La.Civ.Code art. 2534, a redhibitory claim prescribes one year after the date of sale. The article does not, however, apply to sellers with knowledge of the defect. In the case of such sellers, La.Civ.Code art. 2546 provides that prescription runs from the time the buyer discovers the defect. Because the manufacturer is presumed to be a seller with knowledge of the defect, redhibitory prescription runs from the time the buyer discovers the defect. Rey v. Cuccia, 298 So.2d 840, 845 (La.1974); Blalock v. American Employers Insurance Co., 345 So.2d 166, 167 (La.App. 2nd Cir.1977), writ denied, 396 So.2d 221 (La.1978). In the instant ease, most of the defects complained of were discovered within a year of the initiation of plaintiff’s action. Thus, for the purposes of this motion, plaintiff’s claim against GMC has not prescribed.

Furthermore, plaintiff’s claim against Estes has not prescribed. Where a seller attempts to remedy a defect in the thing sold, the one year prescriptive period begins to run when the seller abandons his attempt to repair the defect. De la Houssaye v. Star Chrysler, Inc., 284 So.2d 63 (La.App. 4th Cir.), writ denied, 286 So.2d 662 (La.1973); Domingue v. Whirlpool Corp., 303 So.2d 813, 815 (La.App. 3rd Cir.1974). “[OJnce the prescriptive period has commenced to run, any repair attempts made by the seller interrupt prescription, and the purchaser has one year from the last attempted repair to bring suit.” Domingue, 303 So.2d at 815. Estes concedes that plaintiff’s car was brought in for repair on several occasions but questions whether the defects repaired were of a redhibitory nature.

The question of the existence of a redhibitory defect is a question of fact to be decided by the trier of fact. Newman v. Dixie Sales & Service, 387 So.2d 1333, 1339 (La.App. 1st Cir.1980). Caselaw indicates that even where defects considered in isolation are not redhibitory, the defects may be redhibitory when considered in toto. Chalmers v. Stephens Chevrolet, Inc., 461 So.2d 395 (La.App. 4th Cir.1984); Redman, Redhibition in Louisiana; Uses and Its Problems Today, 50 Tul.L.Rev. 530, 536 (1976). In cases such as this one where many of the defects claimed do not rise to redhibitory vices, the factual issue is whether the defects, considered in toto, would render use of the car “so inconvenient that it must be supposed plaintiffs would not have paid almost [$28,000] had they known of the defects.” Chalmers, 461 So.2d at 399. Such a determination should be made at trial. The motion of GMC and Estes for summary judgment on the grounds of prescription are DENIED.

PLAINTIFF FAILED TO TENDER THE AUTOMOBILE FOR REPAIR

Defendants further argue that plaintiffs claim must fail because of plaintiff’s failure to tender her car for repair before the filing of this action. Tender to the seller for repair is a prerequisite to recovery from the good faith seller in redhibition. La.Civ.Code Ann. art. 2531 (1985), Dickerson v. Begnaud Motors, Inc., 446 So.2d 536 (La.App. 3rd Cir.), writ denied, 449 So.2d 1349 (La.1984).

Plaintiff failed to tender the Seville to the seller Estes when she abandoned the car in Mississippi. Plaintiff, without citing authority, argues that abandoning the car at a GMC dealer in Mississippi constituted the requisite tender to Estes because GMC dealers are agents of GMC. Both the law and Estes’ dealership agreement belie plaintiff’s contention.

The Court in Arnson v. General Motors Corporation, 377 F.Supp. 209 (N.D.Ohio 1974) considered the relationship of GMC and one of its dealers. The Court held, as a matter of law, that no agency relationship was established by the dealership contract where there was no evidence indicating any control by GMC over dealership operations. In the instant case, plaintiff has not pointed to any such control. Furthermore, plaintiff’s assertion that the dealers are GMC’s agents is contrary to the express provision of the dealership contract.

Plaintiff further argues that tender for repair was excused because the car was brought in for repair several times before its abandonment in Mississippi. This is not a ease, however, such as either Wiltz v. Dixie Auto Sales, Inc., 315 So.2d 811 (La. App. 3rd Cir.1975) or Evangeline Medical & X-Ray Distributors Corp. v. Coleman Oldsmobile, Inc., 402 So.2d 208 (La.App. 1st Cir.1981), where the seller tried and failed several times to repair a recurring defect. In such cases, further attempts to repair would be fruitless and therefore tender for repair is obviated. Breaux v. Winnebago Industries, Inc., 282 So.2d 763 (La.App. 1st Cir.1973), is also distinguishable. That case was decided before the 1974 amendment to La.Civ.Code art. 2531 requiring tender for repair as a prerequisite to a suit in redhibition.

Even if plaintiff satisfied her obligation to tender the auto for repair, she failed to tender the Seville to the seller for recission of the sale. Rather, plaintiff filed suit before Estes was even aware that plaintiff wanted recission of the sale. Thus, plaintiff failed to satisfy this essential prerequisite, distinct from the tender for repair requirement, for recission of the sale in redhibition. See Ford v. Dixie Buick, Inc., 400 So.2d 228 (La.App. 4th Cir.1981).

Plaintiff attempts to excuse her failure to tender the object of sale in light of the car’s immobility at the time of its abandonment. Although the car was inoperable at the time it was abandoned in Mississippi, plaintiff does not claim that the car could not have been repaired and driven to New Orleans for proper tender. In any event, plaintiff cannot provide any excuse for her failure to at least notify Estes of the whereabouts of the ear and her intention to rescind the sale. The policy of avoidance of litigation reflected by the tender for repair requirement of La.Civ.Code art. 2531 would hardly be served without the imposition of at least this minimal obligation on the buyer.

On the other hand, plaintiff was not required to tender her car to GMC for repair. By the terms of La.Civ.Code art. 2531, the buyer’s obligation to tender only extends to the “seller who knew not the vices of the thing.” The manufacturer of the allegedly defective product is conclusively presumed to know the vices of the things he makes. Weber v. Fidelity & Casualty Insurance Co., 259 La. 599, 250 So.2d 754 (1971); Anselmo v. Chrysler Corp., 414 So.2d 872 (La.App. 4th Cir.1982). Thus, the buyer is not required to tender the defective product to the manufacturer for repair before instituting a suit in redhibition against the manufacturer. Dickerson v. Begnaud Motors, Inc., 446 So.2d 536 (La.App. 3rd Cir.), writ denied, 449 So.2d 1349 (La.1984); Associates Financial Services v. Ryan, 382 So.2d 215 (La.App. 1st Cir.1980).

The cases cited by GMC in support of its assertion that plaintiff must afford it an opportunity to repair the defect before instituting an action in redhibition are inapt. Both Vance v. Emerson, 420 So.2d 1032 (La.App. 5th Cir.1982) and Starwood v. Taylor, 434 So.2d 1236 (La.App. 1st Cir.1983) address the buyer’s obligation to tender the thing sold. As noted above this obligation is distinct from the obligation to afford the good faith seller the opportunity to repair. See Robertson, Manufacturer’s Liability for Defective Products in Louisiana Law, 50 Tul.L.Rev. 50, 96-98 (1975).

PLAINTIFF HAS SATISFIED HER OBLIGATION TO TENDER THE OBJECT OF SALE FOR RECISSION WITH RESPECT TO GMC

The obligation to tender the object of sale for recission was satisfied here with respect to GMC. In Ticheli v. Silmon, 304 So.2d 792 (La.App. 2nd Cir.1974), the required tender was satisfied when “plaintiff’s attorney made written demand upon the manufacturer to immediately contact his office to make arrangements for an exchange or cancellation of the entire transaction.” Ticheli, 304 So.2d at 798. Likewise, in Greenburg v. Fourroux, 300 So.2d 641 (La.App. 3rd Cir.), writ denied, 303 So.2d 181 (La.1974), plaintiff’s letter to defendant, in which plaintiff stated, “[either take the puppy back and return my $200 purchase price ... or I will file a redhibitory action against you,” was held to constitute the required tender. Greenburg, 304 So.2d at 644. Against this backdrop of Louisiana jurisprudence, plaintiff’s letter to GMC demanding recission of the sale satisfies the buyer’s obligation to tender the object of sale.

GMC further argues that plaintiff cannot return the object of sale because the car was sold at auction. Therefore, according to GMC, there can be no recission. This argument is disingenuous since plaintiff and defendants entered an “Agreement to Mitigate Damages” in which the parties agreed that the car should be sold at auction without affecting the rights of the parties to the contract. This case should be no different from a case in which the buyer returned the product to the manufacturer who subsequently resold the product. That contractual obligations may alter the provisions of the Civil Code was made clear in Primeaux v. Bennet Homes, Inc., 339 So.2d 1251, 1254 (La.App. 1st Cir.1976) where the Court stated that “codal articles on redhibition ... do not proscribe agreements modifying their provisions, they merely regulate the rights of purchaser and vendor in the absence of agreement contrary to their terms.”

Whether or not the requirements of tender for repair and tender for return were met by plaintiff, she has a cause of action for reduction of price pursuant to La.Civ.Code art. 2544. Tender for repair is not a prerequisite for an action under La. Civ.Code art. 2544. Boeneke v. W.D. Trotter, 426 So.2d 230 (La.App. 1st Cir.1983); Dunn v. Pauratore 387 So.2d 1227 (La. App. 1st Cir.1980). Nor does the buyer’s obligation to tender the return of the object of sale apply to actions for reduction of price. Morris N. Palmer Co. v. Campesi, 647 F.2d 608 (5th Cir.1981); Stratton-Baldwin Co. v. Brown, 343 So.2d 292 (La.App. 1st Cir.1977). Otherwise, an action for reduction of the purchase price is governed by the same rules that govern redhibition. See Gonzales v. Schultis, 427 So.2d 669 (La.App. 4th Cir.1983); Bendana v. Mossy Motors, Inc., 347 So.2d 946 (La.App. 4th Cir.1977). The trial court has the discretion to determine whether an action should be for recission or reduction of price. La. Civ.Code Ann. art. 2543 (1952). Thus, in the instant case plaintiff has at least stated a claim against both the manufacturer and the dealer for reduction of the purchase price. In light of the foregoing, defendants’ motion for summary judgment on grounds of prematurity is GRANTED with respect to plaintiff’s redhibitory claim against Estes and DENIED with respect to plaintiff’s claim against GMC.

PLAINTIFF MAY NOT RECOVER THE MISSISSIPPI ROAD AND BRIDGE PRIVILEGE TAX

GMC contends that the recovery provided for in La.Civ.Code art. 2545 does not include the cost of the Mississippi Road and Bridge Privilege Tax. La.Civ.Code art. 2545 provides that a bad faith seller must, among other things, reimburse the expenses occasioned by the sale. The category of expenses of sale has been held to include such matters as sales tax, license tax, license and title transfer fees and finance charges. See Smith v. Max Thieme Chevrolet Co., 315 So.2d 82 (La.App. 2nd Cir.1975); Lee v. Blanchard, 264 So.2d 364 (La.App. 1st Cir.1972). However, collision insurance is not an “expense of sale” if it is not required by the seller. Cain v. Rapides Dodge, Inc., 207 So.2d 918, 921 (La. App. 3rd Cir.), writ denied, 252 La. 163, 210 So.2d 51 (1968).

While it is certainly true that the Privilege tax expense would not have been incurred “but for” the sale of the car, it is clear that such a sine qua non test cannot be conclusive. The payment of the Mississippi tax is relatively remote from the sale of the car. Like collision insurance, which is not recoverable in redhibition, the Mississippi tax may be characterized as stemming from plaintiff’s use of the car rather than its sale. Furthermore, the payment of the costly Mississippi tax is more an expense of plaintiff’s residence in Mississippi than an expense of the sale of the car in Louisiana. Finally, plaintiff has cited no authority whatsoever indicating that taxes imposed by a foreign state may be recovered as an expense of sale. Contrary to plaintiff’s contention, this Court has never analogized Louisiana’s license fees to the Mississippi Road and Bridge Privilege Tax. Therefore, GMC’s motion to dismiss is GRANTED with respect to plaintiff’s recovery of the Mississippi Road and Bridge Privilege Tax.

MILEAGE CREDIT AND ATTORNEYS’ FEES MAY NOT BE SET AT THIS EARLY STAGE

GMC has submitted a motion to set mileage credit and attorneys’ fees. In support of its motion, GMC cites caselaw which shows a wide range of attorneys’ fees awards, often including the cost of appeal. Obviously these fees cannot be determined at this stage.

Plaintiff has submitted no opposition to defendants’ motion for credit for mileage. However, the “use value” of the car should be determined in light of the inconvenience caused by the defects. See Capitol City Leasing Corp. v. Hill, 404 So.2d 935 (La.1981) (manufacturer received no credit for buyer’s use of machines where use was interrupted frequently). Therefore, GMC’s motion to assess attorneys’ fees and mileage credit is DENIED at this time.

PLAINTIFF’S CLAIM IS NOT BASED ON ACTS OR OMISSIONS OF GMC DEALERS

GMC has moved to dismiss plaintiff’s claims based on acts or omissions of Watkins and Estes. No such claims exist in this case. Plaintiff’s claim in redhibition is based on alleged defects existing at the time of sale, not on any acts or omissions of GMC dealerships. Thus, GMC’s motion to dismiss these claims is without merit. It would be an act of ultimate futility for the Court to “dismiss” claims which have not been exerted. GMC’s motion is therefore DENIED.

      . The requirement of privity in redhibitory actions was abolished by the Louisiana Supreme Court in Media Production Consultants, Inc., v. Mercedes Benz of North America, Inc., 262 La. 80, 262 So.2d 377 (1972), thus providing Louisiana consumers with a direct right of action against the manufacturer. The Media case has been critized as unjustifiable under the Code since it relies on common law jurisprudence in obviating privity. Note, 47 Tul.L.Rev. 473 (1973). Another commentator has asserted that the legislature did not intend Media to survive the 1974 amendment to Civil Code art. 2531 which requires tender to the good faith seller for repair of the defective product before initiation of an action in redhibition. Note, 49 Tul. L.Rev. 484, 488 (1975). The obvious purpose of the amendment was to avoid lawsuits over easily remedied defects. This purpose is undermined if not entirely frustrated by judicial legislation of a direct right of action against the manufacturer since the manufacturer, presumed a bad faith seller, is afforded no right of repair. Were this Court writing on a clean slate, plaintiffs claims against GMC would be dismissed for lack of privity. The Court, however, is Erie-bound to follow state supreme court decisions to the contrary. See, e.g., Rey v. Cuccia, 298 So.2d 840 (La.1974). The Court is also circuit-bound to hold that privity is not required. See Austin v. North American Forest, 656 F.2d 1076 (5th Cir.1981).


author: MATSCH, District Judge.

text:
    NATIONAL COMMODITY AND BARTER ASSOCIATION, et al., Plaintiffs, v. UNITED STATES of America, Defendant.
    Civ. A. No. 85-M-1064.
    United States District Court, D. Colorado.
    Jan. 13, 1986.
    William A. Cohan, Carl E. Stahl, Cohan & Stahl, Denver, Colo., for plaintiffs.
    Angelo I. Castelli, James M. McCarten, Trial Attys., Tax Div., Office of Special Litigation, U.S. Dept, of Justice, Washington, D.C., Robert Hackman, Asst. U.S. Atty., Denver, Colo., for defendant.
   MEMORANDUM OPINION AND ORDER

MATSCH, District Judge.

On April 5, 1985, a United States Magistrate in this court issued search warrants for the search of three locations, and the seizure of books and records, gold and silver, and many other things in the care, custody and control of the National Commodity and Barter Association (NCBA), and the National Commodity Exchange (NCE), as evidence of violations of Title 18, United States Code, Section 371. The warrants were based on the affidavit of Larry Bergsgaard, a special agent of the Criminal Investigation Division of the Internal Revenue Service, assigned to the St. Paul, Minnesota office.

The affiant set forth information obtained during an investigation of “tax protestors” in Minnesota, and described with particularity the activities of Norbert Stelten. The affidavit included information pertaining to the NCBA offices located at 8000 E. Girard in Denver, Colorado, and the manner in which the “warehouse exchange” worked by accepting from account holders checks, cash, wire transfers, and other property for deposit and exchange into cash or precious metals on demand.

The purpose of such activity was said to be the avoidance of tax by making financial transactions without creating records which could be used by the IRS in detecting income in the course of tax investigations. After an evidentiary hearing, Judge Kane of this court held that the affidavits set forth sufficient probable cause, but concluded that the warrants were invalid because of the lack of particularity in the description of the items to be seized. Accordingly, the property seized was ordered to be returned. That decision was affirmed by the Tenth Circuit Court of Appeals in Voss v. Bergsgaard, 774 F.2d 402 (10th Cir.1985).

A “Notice of Jeopardy Assessment,” dated April 5, 1985, was issued to the NCBA and the NCE by the Internal Revenue Service pursuant to Section 6862 of the Internal Revenue Code. The notice asserted that a penalty had been assessed in the amount of $20 million for violating Section 6700 of the Code by promoting abusive tax shelters from September 4, 1982 through April 5,1985. Notices of Levy and Notices of Seizure have been issued, and the same property seized by the invalid search warrants has been affected, together with certain bank accounts. This civil action challenges that jeopardy assessment and the associated liens and levies upon the NCBA/NCE. The government has filed a motion to dismiss, and plaintiffs have filed a motion for summary judgment.

The United States, as a sovereign entity, may be sued only to the extent it has consented to suit by statute. United States v. Testan, 424 U.S. 392, 399, 96 S.Ct. 948, 953-54, 47 L.Ed.2d 114 (1976). Actions which seek to enjoin the United States from collecting taxes are generally barred by the doctrine of sovereign immunity. The Anti-Injunction Act, 26 U.S.C. § 7421, specifically prohibits suits to restrain the assessment or collection of taxes. The policy of the Act is to enable the government “to assess and collect taxes as expeditiously as possible with a minimum of pre-enforcement judicial interference.” Bob Jones University v. Simon, 416 U.S. 725, 736, 94 S.Ct. 2038, 2045-46, 40 L.Ed.2d 496 (1974). The Act provides that with certain express exceptions, “[N]o suit for the purpose of restraining the assessment or collection of any tax shall be maintained in any court by any person, whether or not such person is the person against whom such tax is assessed.” 26 U.S.C. § 7421. The assessment was made pursuant to Section 6862, authorizing jeopardy assessments for taxes other than income, estate, gift and excise taxes. Because Section 6671 provides that penalties shall be assessed and collected in the same manner as taxes, the plaintiffs’ effort to enjoin the defendant would be barred by Section 7421 unless one of the exceptions is applicable.

There are both judicial and statutory exceptions which allow persons to bring suit under special circumstances. The judicially created exception to the Act allows a taxpayer to obtain an injunction if he proves that (1) the government cannot prevail under any set of circumstances, and (2) irreparable injury would otherwise occur. Enochs v. Williams Packing and Navigation Co., 370 U.S. 1, 6-8, 82 S.Ct. 1125, 1128-30, 8 L.Ed.2d 892, reh’g denied, 370 U.S. 965, 82 S.Ct. 1579, 8 L.Ed.2d 833 (1962). The plaintiffs filed a motion for temporary restraining order which was heard in this court on April 19, 1985. Joseph P. Gorman, John Grandbouche, and Steve Wagner testified at that hearing. These witnesses described the operations of the NCBA/NCE, and their individual roles as agents for the “members” in buying and selling gold and silver, and the payment of creditors pursuant to direction of the members. Mr. Grandbouche testified that the members must pay an annual membership fee of $280.00 for the first year, and $160.00 for each year thereafter, and that a percentage charge is made for each financial transaction.

The witnesses also testified that bank accounts are maintained in the name of NCBA/NCE, and that members’ money is deposited into the association accounts with coded accounting to avoid the name identification of the members. The seizure of all of the books and records, through the execution of the search warrants, had prevented these agents and others from conducting the business of the NCBA/NCE and had, of course, also prevented the carrying out of members’ transactions and the recovery of funds and property on deposit with the association. In the course of the hearing, counsel for the government agreed that the items which could be seized under levies would not include accounting records, or anything else which would not be considered subject to sale by the IRS on tax liens.

While the plaintiffs did establish substantial injury, probably irreparable, to the association and its members from the seizures made pursuant to the assessment, this court did not grant any emergency relief because of an uncertainty with respect to the legal status of the NCBA/NCE, and the very substantial legal question of jurisdiction.

The NCBA/NCE has been the subject of other litigation in this court, and in the Tenth Circuit Court of Appeals. A grand jury subpoena was served on the First National Bank of Englewood, Colorado for the production of any and all records pertaining to the NCBA, and the National Unconstitutional Tax Strike Committee (NUTS). John Grandbouche and others moved to quash that subpoena as an infringement on first amendment rights. Chief Judge Fine-silver of this court held that they lacked standing to make the challenge. That conclusion was reversed by the Tenth Circuit Court of Appeals in In re First Nat’l Bank, Englewood, Colo., 701 F.2d 115 (10th Cir.1983), in which the court held that the petitioners had made a sufficient showing of a potential first amendment violation to warrant an evidentiary hearing to determine whether enforcement of the subpoena would likely chill associational and political rights protected by the Constitution. No such hearing was ever held, and the subpoena was not enforced. It should be emphasized that the appellate court held only that the petitioners had standing to make their claims, and that an evidentiary hearing was required to consider them. No adjudication of the status of the organization was made.

In the course of litigation commenced in the federal district court in Oklahoma by Madill Bank & Trust Company and the Farmers Home Administration in connection with loans, discovery was undertaken to determine if collateral pledged as security was being disposed of through the NCE. A discovery dispute then arose in this court in the enforcement of subpoenas directed to “Larry D. Martin, National Commodity Exchange” and “National Commodity and Barter Association” for testimony and documents. The end result of that dispute was that Judge Weinshienk of this court held Mr. Martin and Mr. Grandbouche in contempt of court for the failure to obey those subpoenas. The court of appeals affirmed in Heinold Hog Market, Inc. v. McCoy, 700 F.2d 611 (10th Cir.1983), and made the following conclusions with respect to the NCE:

In Colorado, an unincorporated organization formed to conduct business for profit is characterized as a partnership. See Fisher v. Colorado Central Power Co., 94 Colo. 218, 29 P.2d 641, 642 (1934). Under the Uniform Partnership Act, which is in effect in Colorado, “every partner shall at all times have access to and may inspect and copy any [partnership records].” Colo.Rev.Stat. § 7-60-119. The NCE has the appearance of a business operated for profit. It charges for its services; it buys and sells silver and gold; it assumes the risk of declines in the market prices of these commodities and recoups its losses from account holders when prices increase. Even if the NCE is a non-profit unincorporated association, Colorado law permits suit to enforce “against it a substantive right,” and outsiders may reach “the joint property of the associates, and the separate property of any individual member” over whom the court has jurisdiction. With respect to the right of access to records of a nonprofit unincorporated association, ordinary agency principles apply. Members of the organization’s governing body, if there is one, control the access to records of the organization. See United States v. Fleischman, 339 U.S. 349, 70 S.Ct. 739, 94 L.Ed. 906 (1950). If the organization has no governing structure at all, all members or participants have equal access to the organization’s records, as is the rule for partnerships.
An important purpose underlying shifting the burden of production is to place on the person most likely to have access to the relevant evidence the obligation of bringing it forward. The record in this case highlights the utility of this rule. The only relevant document in the record explaining the operation of the NCE declares explicitly that the NCE is set up to avoid scrutiny by the Internal Revenue Service and others and to provide a bill paying service that leaves no paper trail through the Federal Reserve System (even NCE’s cancelled checks representing payment of bills for its account holders are destroyed after 90 days). To avoid taxation and scrutiny from any source, Grandbouche designated an “unincorporated association” apparently with no formal governing structure, oral irrevocable delegations, and no paper records (except the “Common Law” contract, the ledger showing gold and silver balances, and checks that cleared within the last 90 days). The NCE, then, is an organization designed to operate in secrecy, to leave no paper trail, and to avoid service of process. Given this emphasis on secrecy, requiring Grandbouche to present specific evidence of his inability to control the records is particularly justified.

Id. at 615-17 (footnotes omitted).

The plaintiffs contend that there is both an invalid assessment and a wrongful levy. The assessment is a jeopardy assessment based on 26 U.S.C. § 6700 which provides for the imposition of a penalty as follows:

(a) Imposition of penalty. — Any person who—
(1)(A) organizes (or assists in the organization of)—
(i) a partnership or other entity,
(ii) any investment plan or arrangement, or
(iii) any other plan or arrangement, or
(B) participates in the sale of any interest in any entity or plan or arrangement referred to in subparagraph (A), and
(2) makes or furnishes (in connection with such organization or sale)—
(A) a statement with respect to the allowability of any deduction or credit, the excludability of any income, or the securing of any other tax benefit by reason of holding an interest in the entity or participating in the plan or arrangement which the person knows or has reason to know is false or fraudulent as to any material matter, or
(B) a gross valuation overstatement as to any material matter,
shall pay a. penalty equal to the greater of $1,000 or 20 percent of the gross income derived or to be derived by such person from such activity.

The plaintiffs contend that the NCBA/NCE cannot be both the “entity” and the “person” under this statute. Thus, the argument is that the tax shelter cannot also be the promoter. The legislative history of the statute indicates that the introduction of Section 6700 (together with an injunctive remedy under Section 7408, which is not at issue here) was based on a need to “target the promoters, organizers, and salesmen of abusive tax shelters.” United States v. Buttorff, 563 F.Supp. 450, 452 (N.D.Tex.1983) (citing S.Rep. No. 97-494, 97th Cong., 2d Sess. 266 (1982) U.S. Code Cong. & Admin.News 1982, p. 781). Due to its recent enactment, few courts have been called upon to interpret and apply Section 6700. However, cases which have dealt with various provisions of the statute have chosen not to interpret it more broadly than its terms prescribe. United States v. Turner, 601 F.Supp. 757, 759 (E.D.Wis.1985). See also United States v. Savoie, 594 F.Supp. 678 (D.La.1984); United States v. White, 583 F.Supp. 1118 (D.Minn.1984); Buttorff, 563 F.Supp. at 450. Although primarily dealing with injunctions imposed as a result of violations of Section 6700, these cases have held only individuals liable under the statute, not the entity or shelter which was promoted.

The plaintiffs’ argument would have merit if the association were separate and distinct from its members, and the transactions were at arms-length. That is not this case. The suggested analogy of a bank with a debtor-creditor relationship to its depositors is not apt. Indeed, the very purpose of this plan and organization is to permit persons to engage in financial transactions without the use of a commercial bank and the attendant “paper trail” which would permit IRS investigation of their activities. While the association has been characterized as a group calling for tax reform, it is apparent that there is a very substantial basis for the government’s belief that tax avoidance is the objective. It is also apparent that this objective can be furthered by the failure to use any recognizable legal structure, preferring the amorphous label of “voluntary association.”

The Tenth Circuit Court of Appeals was correct in its conclusion in Heinold, supra, that under Colorado law a voluntary association is treated as a partnership for most purposes. Colorado has enacted the Uniform Partnership Law under which every partner is an agent of the partnership for the purpose of its business and the acts of the partners are binding on the partnership. C.R.S. § 7-60-109. That includes wrongful acts under the following provision:

7-60-113. Partner’s wrongful acts— liability. Where, by any wrongful act or omission of any partner acting in the ordinary course of the business of the partnership or with the authority of his partners, loss or injury is caused to any person, not being a partner in the partnership, or any penalty is incurred, the partnership is liable therefor to the same intent as the partner so acting or omitting to act. (emphasis added).

Additionally, partners are jointly and severally liable for the debts and obligations of the partnership. C.R.S. § 7-60-115.

Applying these legal principles to the facts as they appear in the government’s assertions in the Bergsgaard affidavit, and the evidentiary record made in the course of this litigation, there is support for the government’s position that membership in the NCBA/NCE and active participation in these activities constitute the promoting of abusive tax shelters for which a penalty may be assessed properly, and that the penalty becomes the obligation of the participating members as partners, and the NCBA/NCE as the partnership. The IRS does not know the identity of the participating members. Accordingly, it has proceeded against the partnership to make the assessment, and that appears to be appropriate.

The plaintiffs have challenged the government’s assumption that there are 20,000 members and, therefore, that a penalty of $2 million can be assessed. This court cannot address that issue because the membership lists have not been provided, and the plaintiffs have insisted that they have a constitutional right to privacy. While the limits of a constitutional right to privacy have not been clearly defined in the law, there is no basis for the contention that bald assertions of property rights and interests can be accepted anonymously and without any opportunity for challenge under the ordinary procedural mechanisms of the adversary system of adjudication. The amount of the assessment is questionable, but on the basis of the record presented, this court cannot say that the government cannot prevail under any set of circumstances. Accordingly, the plaintiffs have not established the exception to the Anti-Injunction Act recognized in the Enochs case, and the plaintiffs’ motion for summary judgment must be denied.

The claims of individual plaintiffs presented in this civil action are brought pursuant to 26 U.S.C. § 7426(a)(1), which provides:

(1) Wrongful levy. — If a levy has been made on property or property has been sold pursuant to a levy, any person (other than the person against whom is assessed the tax out of which such levy arose) who claims an interest in or lien on such property and that such property was wrongfully levied upon may bring a civil action against the United States in a district court of the United States. Such action may be brought without regard to whether such property has been surrendered to or sold by the Secretary or his delegate.

In this case, the levy is based on the promoter penalty assessment and, as previously indicated, there is the assumption that the individual members participating in the activities of the association have subjected themselves to the penalty by the conduct proscribed in Section 6700 of the Internal Revenue Code. That, of course, is an assumption which may be rebutted, and persons claiming that their property has been unlawfully seized have the opportunity to come forward under the jurisdiction conferred by Section 7426 to prove that they have property which has been made subject to the levy, and that they are not properly subject to the penalty assessment because they have not violated Section 6700. In that regard, some of the named plaintiffs in this civil action have sought to represent themselves, pro se, and declined representation by appearing counsel. Some of these same persons have filed another civil action, Civil Action No. 85-M-2734, in which they assert claims under Section 7426(a)(1) through their counsel, Cecil A. Hartman. While, for purposes of computing time for the filing of the action they may be recognized as having asserted such claims originally in this case, it is no longer correct procedurally for them to be considered as parties in this civil action, and they are, accordingly, dismissed from it.

The government moved to dismiss the Section 7426 claims by contending that the NCBA/NCE owns the assets which were made subject to levy and seizure. Reliance for that contention is placed on Glenn Justice Mortgage Co. v. Trust Nat’l Bank of Fort Collins, 592 F.2d 567 (10th Cir.1979), which involved a bank and the legal conclusion that the bank takes title to general deposit accounts. As previously noted, the NCBA/NCE is not in the position of a bank, and the government’s argument in this respect is wholly inconsistent with the assertion that the association can be penalized for the prohibited promotions under Section 6700. The more appropriate analysis is that the assets are partnership assets subject to the penalties imposed by the conduct of the partners in the promoting of the plan and organization which constitutes the tax shelter.

This court previously denied jurisdiction for expedited judicial review, under 26 U.S.C. § 7429(b), upon the conclusion that such review is limited to consideration of reasonableness of the jeopardy assessment and reasonableness of the amount assessed, and that in this civil action both the associations and individuals have made a broader attack on the authority of the Internal Revenue Service to make the assessment on the subject property. That holding has no effect on claims made under 26 U.S.C. § 7426(a).

Upon the foregoing, it is

ORDERED that the plaintiffs’ motion for summary judgment is denied, and it is

FURTHER ORDERED that the defendant’s motion to dismiss is granted with respect to all claims other than claims asserted pursuant to 26 U.S.C. § 7426, and it is

FURTHER ORDERED that Joseph P. Gorman, Sandra L. Gorman, Marlene Aspinall and Dean Salisbury are withdrawn from this action, and it is

FURTHER ORDERED that on or before February 10, 1986, the plaintiffs shall file an amended complaint clearly setting forth such claims as they may wish to assert under 26 U.S.C. § 7426.