author: WANGELIN, District Judge.

text:
    Soung O. KWOUN, et al., Plaintiffs, v. SOUTHEAST MISSOURI PROFESSIONAL STANDARDS REVIEW ORGANIZATION, et al., Defendants.
    No. S84-259C(D).
    United States District Court, E.D. Missouri, Southeastern Division.
    Sept. 19, 1985.

      George L. Fitzsimmons, Fitzsimmons & McMichael, P.C., Clayton, Mo., John C. Rasp, Peper, Martin, Jensen, Maichel & Hetlage, St. Louis, Mo., for Sandler, Legan and other defendants.
    Bruce Granger, (of counsel for Deputy Regional Atty.) Kansas City, Mo., Henry J. Fredericks, Asst. U.S. Atty., St. Louis, Mo., for Federal defendants.
    Richard R. Kordenbrock, Brinker, Doyen & Kovacs P.C., Clayton, Mo., for Bregant.
    Christopher J. Holthaus, Stephen H. Gilmore, St. Louis, Mo., Irwin M. Roitman, Clayton, Mo., for plaintiffs.
    William L. Webster, Atty. Gen., Jerry L. Short, Asst. Atty Gen., Jefferson City, Mo., for Clark.
   MEMORANDUM

WANGELIN, District Judge.

This matter is before the Court upon six separate motions to dismiss the above-styled action or, in the alternative, for summary judgment. Said motions were brought by defendants Howard, Nicholson, Kram, and Secretary of Health and Human Services; defendants Southeast Missouri Professional Standards Review Organization (SEMO PSRO) and named physicians (SEMO Doctors); defendant Legaspi and defendant Bregant. Each of the above named defendants incorporate Defendants’ Suggestions in Support of Motions of defendant SEMO PSRO and others to dismiss or, in the alternative, for summary judgment filed with this Court January 18,1985 as argument in support of their individual and collective motions.

FACTUAL BACKGROUND

Plaintiffs’ cause of action arises out of an initial determination by the Health Care Financing Administration (hereinafter HCFA), which is a branch of the Department of Health and Human Services, to exclude the plaintiff from the medicare reimbursement program. The plaintiff was notified on September 11, 1981 that the agency was suspending his receipt of reimbursement under the Medicare Program pending any administrative appeals pursuant to 42 U.S.C. § 1320c.

Plaintiff subsequently filed an action before Administrative Law Judge Francis J. Eyerman. The AU exonerated plaintiff Dr. Kwoun from all accusations against him. Plaintiffs filed this action alleging defendants’ conduct in the above mentioned proceedings constituted violations of 42 U.S.C. § 1981 (Count I); 42 U.S.C. § 1985(2) (Count II); 42 U.S.C. § 1985(3) (Count III); and the Fifth Amendment (Count IV). Plaintiffs’ further assert tort claims for malicious prosecution (Count V); intentional infliction of emotional distress (Count VI); and prima facie tort (Count VII).

In determining the sufficiency of a complaint in the face of a motion to dismiss for failure to state a claim pursuant to Federal Rule 12(b)(6), the accepted rule as articulated by the United States Supreme Court is that “a complaint should not be dismissed for failure to state a claim unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief.” Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 102, 2 L.Ed.2d 80 (1957). If, on a motion to dismiss or a motion for judgment on the pleadings, matters outside the pleadings are presented to and not excluded by the Court, the motion shall be treated as one for summary judgment and disposed of as provided in Rule 56. Ped.R.Civ.P. 12(c). Under Rule 56,

[t]he judgment sought shall be rendered forthwith if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.

When a motion for summary judgment is made and supported as provided in this rule, an adverse party may not rest upon the mere allegations or denials of his pleading, but his response, by affidavits or as otherwise provided in this rule, must set forth specific facts showing that there is a genuine issue for trial. If he does not so respond, summary judgment, if appropriate, shall be entered against him.

Defendants appear to raise challenges under both Rule 12(b)(6) and Rule 56(c), and accordingly, to the extent that the Court will consider matters outside the pleadings on a given claim, the ruling shall be based on Rule 56(c).

A.

Defendants’ first ground for dismissal is that the three corporate plaintiffs do not have a cause of action in that the complaint only alleged claims by plaintiff Kwoun not the three corporate plaintiffs. Defendants further assert that because the corporate plaintiffs are not members of a race, they cannot assert a cause of action under 42 U.S.C. §§ 1981 or 1985. Moreover, defendants assert that because no sanctions were brought against the corporate plaintiffs, they have no cause of action for denial of equal protection or due process or a claim for malicious prosecution.

Defendants’ motion to dismiss for failure to state a cause of action as to three corporate plaintiffs must be denied. The complaint regarding these three plaintiffs is sufficient since it “... contains allegations from which an inference fairly may be drawn that evidence of material points will be introduced at trial.” 5 Wright & Miller, Federal Practice & Procedure, § 1216 at 122-123 (1969). Moreover, corporations may file claims under 42 U.S.C. § 1981 as well as § 1985 and the United States Constitution. Des Vergners v. Seekonk Water District, 601 F.2d 9 (1st Cir.1979). The relationship between plaintiff Kwoun and each of the corporate plaintiffs is articulated in the Amended Complaint. In each instance, plaintiff Kwoun is either the principal stockholder or trustee of the plaintiff corporations and the plaintiff corporations are or have provided medical service. Given the possibility of alleged harm to plaintiff Kwoun, this Court finds that there is an inference that the plaintiff corporations in which plaintiff Kwoun was involved were also injured.

Thus, because the corporate plaintiffs may have been damaged by defendants’ actions and because corporations are persons for purposes of civil rights and Fifth Amendment claims, the corporate plaintiffs do have a cause of action and defendants’ motion to dismiss will be denied.

B.

Next, defendants assert that defendant SEMO doctors should be dismissed because defendant SEMO PSRO is a Missouri not-for-profit corporation which can be sued in its corporate name and that the inclusion of defendants SEMO doctors is surplusage. This contention also fails.

Corporate officers and directors have personal liability under the federal civil rights acts if they intentionally cause a corporation to infringe on the rights secured by those acts. Tillman v. Wheaton-Haven Recreation Association, 517 F.2d 1141, 1146 (4th Cir.1975). In Clark v. Universal Builders, Inc., 501 F.2d 324 (1974), the Seventh Circuit found that the concept of separate identity between shareholders, directors, and officers and their corporations is not sacrosanct. It demands even less respect if it becomes clear that the corporation is used as a shield to violate the civil rights of others. Id. at 340 n. 23. Plaintiffs’ amended complaint alleges that defendant doctors through defendant SEMO PRSO have abridged plaintiffs’ civil rights. As such plaintiffs’ amended complaint is sufficient to state a cause of action against both defendant SEMO PRSO and defendant SEMO doctors.

C.

Defendants’ next contention is that plaintiffs’ claim under 42 U.S.C. §§ 1981, 1985(2), 1985(3), the Fifth Amendment, and their state claims are precluded by the Medicare Act. In support of this contention defendants cite Middlesex County Sewerage Authority v. National Sea Clammers Association, 453 U.S. 1, 101 S.Ct. 2615, 69 L.Ed.2d 435 (1981).

In Middlesex County Sewerage Authority the Court determined that when remedial devices provided in a particular Act are sufficiently comprehensive, they may suffice to demonstrate Congressional intent to preclude the remedy of suits under the civil rights acts. Id. at 20, 101 S.Ct. at 2626.

The scope of the preclusion provision has engendered much litigation and little consensus. It is agreed by all of the circuits that the central target of a Section 405(h) preclusion is “any action envisioning recovery on any claim emanating from” the Medicare Act. Association of American Medical Colleges v. Califano, 569 F.2d 101, 107 (D.C.Cir.1977).

The holding in Middlesex County Sewerage Authority created a narrow exception to the Supreme Court’s 1981 holding in Main v. Thiboutot, 448 U.S. 1, 100 S.Ct. 2502, 65 L.Ed.2d 555 (1980) that 42 U.S.C. § 1983 authorizes a cause of action for violations of federal statutory rights. The Court in Middlesex was concerned that administrative procedures contained in particular statutes should not be circumvented. Middlesex, 453 U.S. at 20, 101 S.Ct. at 2626.

Defendants cite V.N.A. of Greater Tift City, Inc. v. Heckler, 711 F.2d 1020 (11th Cir.1983) for the proposition of the Medicare Acts’ exclusivity. While defendants correctly state the principle of V.N.A. of Greater Tift City, Inc., the facts here are distinguishable. In V.N.A. the plaintiffs’ claims were seeking recovery on a claim directly related to provisions of the Act and the Court held that plaintiffs were limited to the provisions of the Act when seeking a remedy. Here, however, plaintiffs are alleging separate claims unrelated to the Act. The only connection between the Act and plaintiffs’ claims is that plaintiffs’ claims arose during other proceedings under the Act. Plaintiff Kwoun has availed himself of the remedies available under the Act for his claims under the Act. Now plaintiffs are seeking redress for alleged wrongs which arose separate and apart from the Act. Accordingly, defendants’ assertion that the Medicare Act precludes plaintiffs’ action is unfounded.

D.

Next, defendants seek to dismiss all of plaintiffs’ civil rights claims contending that plaintiff Kwoun’s attempt to mitigate as reflected in Kwoun v. Schweiker, 528 F.Supp. 1004 (E.D.Mo.1981) constitutes collateral estoppel.

The Eighth Circuit has continuously held that only a prior final judgment on the merits can have the effect of collateral estoppel. Oldham v. Pritchett, 599 F.2d 274, 276 n. 1 (8th Cir.1979); Poe v. John Deere Co., 695 F.2d 1103, 1105 (8th Cir.1982). Further, a dismissal without prejudice operates to leave the parties as if no action had been brought at all. Moore v. St. Louis Music Supply, Inc., 539 F.2d 1191, 1194 (8th Cir.1976).

In Kwoun v. Schweiker, the Court specificly states that it will not consider the merits of plaintiffs’ cause of action. 528 F.Supp. 1004 at 1008. Judge Nangle left open the possibility of reaching the merits of plaintiffs’ cause of action if the situation arose where such consideration was appropriate. Id. Thus Kwoun v. Schweiker was not a decision on the merits and defendants’ claim of collateral estoppel is without merit.

E.

Defendants next contend that because they are members of a PSRO they are government officials and thus subject to a three year statute of limitations. Defendants rely on Smith v. North Louisiana Medical Review Assn., 735 F.2d 168 (5th Cir.1984). In Smith, the Fifth Circuit found that a PSRO is a federal entity because it is created by federal statute and performs a critical federal function of monitoring costs of services provided under the Medicare Act. Id. at 173.

However, an entity’s status as a federal entity is controlled by Congress’s intent in creating the organization. Recent cases have made it clear that any general definition of the term agency can be of only limited utility to a court confronted with one of the myriad organizational arrangements for getting the business of the government done. The unavoidable fact is that each new arrangement must be examined anew and in its own context. Public Citizen Health v. Dept. Health, Ed., Etc., 668 F.2d 537, 542 (D.C.Cir.1981).

The Report of the Senate Committee on Finance on the Social Security Amendments of 1972, S.Rep. No. 92-1230, 92 Cong., 2nd Sess. (1972) provides a clear summary of Congress’s intent as to the status PSRO’s should have with respect to government versus private agency.

The committee believes that the review process should be based upon the premise that only physicians are, in general, qualified to judge whether services ordered by other physicians are necessary. The committee is aware of increasing instances of criticism directed at the use of insurance company personnel and government employees in reviewing the medical necessity of services. S.Rep, supra at 256.

The committee has therefore included an amendment, as it did in H.R. 17550, which authorizes the establishment of independent professional standards review organizations by means of which practicing physicians would assume responsibility for reviewing the appropriateness and quality of the services provided under medicare and medicaid.

The committee’s bill provides specifically for the establishment of independent professional standards review organizations formed by organizations representing substantial numbers of practicing physicians in local areas to assume responsibility for the review of service (but not payments) provided through the medicare and medicaid programs. Id. at 257.

It is preferable and appropriate that organizations of professionals undertake review of members of their profession rather than for government to assume that role. The inquiry of the committee into medicare and medicaid indicates that government is ill equipped to assume adequate utilization review. Indeed, in the committee’s opinion, government should not have to review medical determinations unless the medical profession evidences an unwillingness to properly assume the task. Id. at 258.

Priority in designation as a PSRO would be given to organizations established at local levels representing substantial numbers of practicing physicians who are willing and believed capable of progressively assuming responsibility for overall continuing review of institutional and outpatient care and services. Local sponsorship and operation should help engender confidence in the familiarity of the review group with norms of medical practice in the area as well as in their knowledge of available health care resources and facilities. Participation in a PSRO would be voluntary and open to every physician in the area. Id. at 259.

PSRO physicians engaged in the review of the medical necessity for hospital care and justification of need for continued hospital care must be active hospital staff members. The purpose here is to assure that only doctors knowledgeable in the provision and practice of hospital care will review such care. Id. at 260.

It is expected that a PSRO would operate in a manner which conserves and maximizes the productivity of physician review time without unduly imposing on his principal function, the provision of health care services to his own patients. Id. at 264.

Employees of PSRO would be selected by the organization and would not be government employees. Id. at 266.

This Court finds that these expressions demonstrate the fixed purpose of Congress that PSRO’s should be independent medical organizations operated by practicing physicians in the private sector, and not government agencies run by government employees. Public Citizen Health v. Dept. of Health Fed. etc., 668 F.2d 537, 543 (D.C.Cir.1981). A finding that defendant SEMO PSRO and defendant SEMO doctors make up a governmental agency would be inconsistant with the Congressional purpose.

As such, plaintiffs’ claim provides a sound basis for applying the five year statute of limitations contained in MoRS § 516.120. Moreover, the Eighth Circuit has determined that the five year statute of limitations is applicable for actions brought under 42 U.S.C. § 1981. See Drake v. Southwestern Bell Telephone Co., 553 F.2d 1185 (8th Cir.1977).

The five-year Missouri statute, § 516.-120 Mo.Ann.Stat, however, is applicable because a proceeding under § 1981 represents an action upon a liability implied, subd. 1; or an “action upon a liability created by a statute,” subd. 2; or an action for “injury to the person or rights of another, not arising on contract and not herein otherwise enumerated,” subd. 4. This Court need not decide which of these subdivisions covers this statutory action but the cases indicate that a § 1981 action properly fits the description of one or more subdivisions of § 516.120.

Id. at 1188.

Additionally, plaintiffs allege that the complained of actions constitute a continuing course of conduct and did not accrue at a specific isolated date. If plaintiffs’ allegations are found to be true, no statute of limitation began to run until the date of the hearing before ALJ Eyerman. As such there is sufficient recent conduct to sustain a cause of action in this matter and defendants’ motion to dismiss based upon the statute of limitations will be denied.

F.

Defendants Kram, Nicholson, and Howard assert sovereign immunity and seek to dismiss all claims against them. Defendants contend that they are entitled to absolute immunity because plaintiffs’ claims arise from the initiation of administrative actions of a prosecutorial nature.

The Supreme Court has issued a clear description of the immunities available to federal officials in Butz v. Economou, 438 U.S. 478, 98 S.Ct. 2894, 57 L.Ed.2d 895 (1978). Without retracing the Supreme Court’s steps, it is abundantly clear that federal officials cannot claim immunity if their actions are manifestly beyond their line of duty. Butz, supra at 484-85, 98 S.Ct. at 2899-2900.

In the present case, plaintiffs allege misconduct seemingly beyond the scope of defendants duty and authority. Plaintiffs cite the AU’s finding that “the HCFA employees were involved in defendant SEMO PSRO’s Sanction Report long before it was any of their business, even before it was issued by defendant SEMO PSRO and defendant SEMO doctors.” This Court finds that reasonable minds could differ as to whether such activity is within defendants’ scope of authority. Accordingly, defendants Kram, Nicholson, and Howard will not be dismissed based upon an absolute immunity theory.

G.

Defendants next seek to dismiss plaintiffs’ claims under 42 U.S.C. § 1981 contending that plaintiffs have failed to plead a denial of any right protected by the act and have failed to plead detailed factual allegations showing the defendants’ actions were racially motivated.

In a civil rights action, pleadings are to be liberally construed. Only when the plaintiff can prove no set of facts that would entitle him to relief is a district Court warranted in granting a motion to dismiss. Windsor v. Bethesda General Hospital, 523 F.2d 891, 893 (8th Cir.1975).

Plaintiffs’ complaint contends that plaintiff was denied participation in the Medicare program, subjected to abuses in connection with the sanction process and essentially deprived of income because of his race. Among the rights protected by 42 U.S.C. § 1981 are the right to earn a living without regard to one’s race, to make contracts for education, to fair use and access to justice, and to participate in public benefits programs. See Graham v. Richardson, 403 U.S. 365, 91 S.Ct. 1848, 29 L.Ed.2d 534 (1971); Johnson v. Railway Express Agency, Inc., 421 U.S. 454, 95 S.Ct. 1716, 44 L.Ed.2d 295 (1975); Runyon v. McCrary, 427 U.S. 160, 96 S.Ct. 2586, 49 L.Ed.2d 415 (1976); Martinez v. Fox Valley Bus Lines, 17 F.Supp. 576 (N.D.Ill.1936); Pennsylvania v. Local 542, 347 F.Supp. 268 (E.D.Penn.1972).

In Taylor v. Flint Osteopathic Hospital, Inc., 561 F.Supp. 1152 (E.D.Mich.1983) the Court denied defendant’s motion to dismiss saying:

... Plaintiff’s complaint appears to state a claim under § 1981 against the PSRO in as much as it alleges, in essence, that the PSRO acted in a discriminatory manner in performing its peer review functions and that PSRO’s discriminatory conduct precluded plaintiff from performing his “contracts” with his patients and, ultimately, with FOH.
The PSRO’s sole direct challenge to the § 1981 claim is that it is devoid of specific factual allegations that PSRO’s treatment of plaintiff differed from their treatment of similarly situated white persons, as required by § 1981. This court having concluded, however, that the complaint fairly apprises the PSRO of the elements of plaintiffs claim under § 1981, the motion to dismiss this claim pursuant to F.R.Civ.P. 12(b)(6) is hereby denied.

Id. at 1159-60.

Defendants in this case are in no better position than defendant in Taylor. Plaintiffs have alleged actions taken which if true have deprived plaintiffs of rights protected by 42 U.S.C. § 1981. Further, plaintiff has alleged that the actions were motivated by plaintiff’s race. Accordingly, this Court finds that plaintiff has stated a cause of action under 42 U.S.C. § 1981.

H.

Defendants next move to dismiss Count II of plaintiffs’ complaint alleging a violation of 42 U.S.C. § 1985(2). Section 1985(2) relates to institutions and processes of federal judicial proceedings and conspiracies to obstruct the course of justice in state courts. Kush v. Rutledge, 460 U.S. 719, 103 S.Ct. 1483, 75 L.Ed.2d 413 (1983). Moreover, § 1985(2) expressly requires force, intimidation, or threat against persons holding public office, witnesses, or jurors. Williams v. St. Joseph Hospital, 629 F.2d 448, 451 (7th Cir.1980).

There are no allegations regarding either federal courts or state courts in plaintiffs’ complaint or amended complaint. Further, plaintiffs have not alleged that defendants ever subjected any person to any force, intimidation or threat. Accordingly, this Court will grant defendants’ motion to dismiss Count II of plaintiffs’ amended complaint.

I.

Defendants further contend that plaintiffs have failed to state a cause of action under 42 U.S.C. § 1985(3) claiming the amended complaint (1) fails to adequately allege the existence of a conspiracy, (2) fails to allege an invidiously discriminatory animus, and (3) fails to allege the deprivation of a constitutional right protected by § 1985(3).

Under Fed.R.Civ.P. 8, technical niceties of pleading are not required. Rather a short and plain summary of the facts sufficient to give fair notice of the claim asserted is sufficient. Means v. Wilson, 522 F.2d 833, 840 (8th Cir.1975). In addition, a complaint under 42 U.S.C. § 1985(3) must allege facts to show that intentional or invidious discrimination was the object of the conspiracy. Griffin v. Breckenridge, 403 U.S. 88, 91 5.Ct. 1790, 29 L.Ed.2d 338 (1971).

In Means v. Wilson, the complaint alleged that the defendant conspired with "private individuals" and two other named individuals to ensure defendant was reelected. Means v. Wilson, 522 F.2d at 840-41. Upon no more than the above, the Eighth Circuit found that the plaintiff had stated a cause of action under 42 U.s.c. § 1985(3). Id.

In the present case, plaintiffs have alleged that the named defendants "acted individually, together, and with others. . . ." Such allegations fairly raises the inference of conspiracy. Following the president of Means, supra, the Court finds that plaintiffs' amended complaint, although inartfully drafted, does allege conspiracy sufficiently to state a claim under 42 U.S.C. § 1985(3).

Defendants' contention that the complaint fails to allege a class based animus is also without merit. The amended complaint alleges that plaintiff Kwoun is an Asian-American and that defendants subjected him to treatment different than that reserved for white persons. The amended complaint then enumerates all of plaintiffs' charges of how he was treated. This Court finds the pleadings sufficient to allege a class based animus and thus support a § 1985(3) cause of action.

Defendants' contention that plaintiffs § 1985(3) claim must fail because it lacks a constitutional predicate is also without merit. Case law supports plaintiffs' contention that 42 U.S.C. § 1981 provides a substantive basis for redress under § 1985(3). In Witten v. A.H. Smith and Co., 567 F.Supp. 1063 (D.Md.1983), Judge Miller examined the language of the statute, the general legislative history with regard to the rights for which a remedy is provides by § 1985(3), and the intent of the Forty Second Congress. Judge Miller concluded that 42 U.S.C. § 1981 is a proper substantive basis for a claim of redress under § 1985(3). Id. at 1072. This same position was taken in Miller v. St. Louis Theatrical Co., No. 83-2305C(1) (E.D.Mo. August 1, 1984).

As discussed, supra, this Court has determined that plaintiffs have raised a color-able claim under 42 U.S.C. § 1981. Accordingly, defendants' motion to dismiss plaintiffs' § 1985(3) claim will be denied.

J.

Defendants seek to dismiss plaintiffs' Count IV. Plaintiffs agree that defendant SEMO PSRO and defendant SEMO doctors are not federal officials subject to a claim under the Fifth Amendment. Accordingly, plaintiffs' Count IV will be dismissed with respect to defendant SEMO PSRO and defendant SEMO doctors.

Defendants Kram, Nicholson, and Howard challenge plaintiffs' constitutional claims contending that there is no private right of action under the Fifth Amendment because plaintiff Kwoun had an alternate remedy via the administrative review process and that plaintiff has not alleged the deprivation of a constitutionally protected property interest without due process.

The Supreme Court has held that victims of a constitutional violation by a federal officer have a right to recover damages against the official in federal court despite the absence of any statute conferring such a right. Bivens v. Six Unknown Federal Narcotics Agents, 403 U.S. 388, 91 S.Ct. 1999, 19 L.Ed.2d 619 (1971). Additionally, plaintiffs are not limited to statutorily created causes of action to the exclusion of a Bivens action if the alternative remedy is not equally effective and intended to operate as a substitute for the action under Bivens. Carlson v. Green, 446 U.S. 14, 100 S.Ct. 1468, 64 L.Ed.2d 15 (1980).

The "Medicare Act" provides only for reimbursement in connection with care services provided without compensation. It does not provide compensation for plaintiffs' alleged loss of reputation, emotional distress, lost business, punitive damages, nor an opportunity to be heard before a jury. All of the aforementioned differences between the Medicare Act remedy and a Bivens action are significant and counsel in favor of allowing plaintiffs’ claim in Count IV against defendants Kram, Nicholson, and Howard. Carlson v. Green, supra.

Further, plaintiffs have alleged the deprivation of constitutionally protected rights without the benefit of due process.

“To have a property interest in a benefit, a person clearly must have more than an abstract need or desire for it. He must have more than a unilateral expectation of it. He must, instead, have a legitimate claim of entitlement to it. It is a purpose of the ancient institution of property to protect those claims upon which people rely in their daily lives, reliance that must not be arbitrarily undermined. It is a purpose of the constitutional right to a hearing to provide an opportunity for a person to vindicate those claims.
“Property interests, of course, are not created by the Constitution. Rather, they are created and their dimensions are defined by existing rules or understandings that stem from an independent source such as state law — rules or understandings that secure certain benefits and that support claims of entitlement of those benefits.”

Board of Regents v. Roth, 408 U.S. 564, 577, 92 S.Ct. 2701, 2709, 33 L.Ed.2d 548 (1972). Here plaintiff asserts a property interest in his continued participation in the Medicare Program and to receive reimbursement for his services. Physicians such as plaintiff Kwoun are entitled to participation in the Medicare Program provided they comply with certain conditions and requirements under 42 U.S.C. §§ 1320 and 1395. This Court finds that these conditions and requirements are sufficient to secure benefits and to support claims of entitlement to those benefits under the rule in Board of Regents v. Roth, supra.

Plaintiff also alleges deprevation of his interest in his profession and a right to earn a living. These interest have long been recognized as property interests which are protected by due process. Schware v. Board of Bar. Examiners, 353 U.S. 232, 238, 77 S.Ct. 752, 755, 1 L.Ed.2d 796 (1957).

Plaintiff also has alleged that he was denied fair access to the procedures normally provided to physicians under the Medicare Act. The Eighth Circuit has previously determined that if a plaintiff can prove defendant interfered with his right to procedural due process, he is entitled to damages that actually resulted, which would include, for example, mental and emotional distress. Bishop v. Tice, 622 F.2d 349, 357 (8th Cir.1980). Accordingly, this Court finds that plaintiff Kwoun’s amended complaint alleges deprivation of the types of property and liberty interests which are necessary to state a claim under the Fifth Amendement.

K.

Defendants seek to dismiss plaintiffs’ claim of malicious prosecution contending that neither defendant SEMO PSRO or defendant DEMO doctors commenced a prosecution against defendant Kwoun.

The elements of a cause for malicious prosecution are: (1) commencement of prosecution of the pi’oceedings against the present plaintiff; (2) its legal causation by the present defendant; (3) its termination in favor of the present plaintiff; (4) absence of probable cause for such proceedings; (5) the presence of malice therein; (6) damage to plaintiff by reason thereof.

Palermo v. Cottom, 525 S.W.2d 758, 763 (Mo.App.1975). Of these six factors defendants complain of only the first.

A person’s acts may be the legal cause of prosecution if instituted at his insistence and request. It is sufficient if his action takes the form of an affidavit on which the case is based, regardless of further participation in the prosecution____ To impose liability there must be affirmative action by way of advice, encouragement, pressure or something similar in the institution, or causing the institution of the prosecution.

Id.

In this case plaintiff has alleged that defendants prepared fraudulent reports and recommended that plaintiff be permanently excluded from participation in Medicare and related programs. Plaintiff further alleges that defendants’ recommendations and reports precipitated the institution of the action complained of. Such allegations are sufficient to survive a motion to dismiss for failure to state a cause of action for which relief can be granted.

L.

Defendants also seek to dismiss plaintiffs’ claim for outrageous conduct contending that the conduct alleged in the complaint is not extreme and outrageous as a matter of law.

The Missouri Supreme Court “has accepted the Restatement’s view that a right of action does exist for damages for severe emotional distress, intentionally and recklessly caused, by ‘extreme and outrageous conduct’.” Pretsky v. Southwestern Bell Telephone Co., 396 S.W.2d 566 (Mo.Sup.1965); Nelson v. Grice, 411 S.W.2d 117 (Mo.Sup.1967.)

Both of the cited cases quote at length from the Restatement’s comment on the type of conduct which will give rise to such liability. Essentially the conduct must have been “so outrageous in character, and so extreme in degree, as to go beyond all possible bounds of decency, and to be regarded as atrocious, and utterly intolerable in a civilized community.” Restatement, § 46 p. 73. Warrem v. Parrish, 436 S.W.2d 670, 673 (Mo.Supp.1969).

In passing upon the sufficiency of plaintiffs’ complaint, the Court must consider the truth of the facts alleged, giving them liberal construction and give plaintiff the benefit of all fair implications from such facts. Matthews v. Pratt, 367 S.W.2d 632, 634 (Mo.Supp.1963).

In the present case plaintiffs allege that defendants willfully issued a sanction report calling for permanent exclusion which contained manufactured and fabricated matters and refused to provide plaintiff Kwoun notice of charges or any opportunity to explain his situation. Plaintiff further alleges that defendants thereafter pursued the matter through the statewide council and HCFA, with notice to the public, deliberately misstating facts, and contriving exhibits in their efforts to further prosecute him. Plaintiff alleges not one act but a continuous course of conduct. If the facts plaintiff alleges are true, reasonable men might well consider defendants’ actions of such an extreme and outrageous nature as will render them liable for extreme emotional distress intentionally caused thereby.

M.

Defendants seek next to dismiss plaintiffs’ claim for prima facie tort. The doctrine of prima facie tort, which first appeared in the Restatement, has been adopted by the courts of Missouri, Porter v. Crawford, 611 S.W.2d 265 (Mo.App.1980). However, as is clearly set out in the Restatement, the doctrine is applicable only when the factual basis of the complaint does not fall within the parameters of an established tort.

Thus, application of the doctrine is not justified here as plaintiff has factually alleged malicious prosecution and outrageous conduct which are torts presently recognized by Missouri courts.

Plaintiffs have cited the case of Lohse v. St. Louis Children’s Hospital, 646 S.W.2d 130 (Mo.App.1983) to support the position that an alternative tort claim does not defeat the prima facie tort claim. The court in Lohse, however, dismissed plaintiff’s claim because plaintiff failed to plead any facts to support the claim. The court made no comment as to the appropriateness of a prima facie tort claim pled as a second cause with wrongful discharge. Id. at 130-31.

Accordingly, because plaintiffs have alleged the same set of facts as malicious prosecution and prima facie tort, this Court will dismiss the prima facie tort claim.

N.

Finally, defendants seek summary judgment on all counts.

Summary judgment is an extreme remedy, one which is not to be entered unless the movant has established his right to a judgment with such clarity as to leave no room for controversy and that the other party is not entitled to recover under any discerible circumstances.
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... the Supreme Court set the standard that should be applied when one party to a lawsuit in federal court makes a motion for a summary judgment:
Summary judgment should be entered only when the pleadings, depositions, affidavits, and admissions filed in the case ‘show that [except as to the amount of damages] there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.’ Rule 56(c), Fed.Rules Civ.Proc. This rule authorizes summary judgment ‘only where the moving party is entitled to judgment as a matter of law, where it is quite clear what the truth is, ... [and where] no genuine issue remains for trial ... [for] the purpose of the rule is not to cut litigants off from their right of trial by jury if they really have issues to try.’

Ozark Milling Co. v. Allied Mills, Inc., 480 F.2d 1014, 1015 (8th Cir.1973); Sartor v. Arkansas Natural Gas Corp., 321 U.S. 620, 627, 64 S.Ct. 724, 728, 88 L.Ed. 967 (1944).

In the present ease plaintiffs have alleged violations of the civil rights statutes, malicious prosecution, conspiracy, and outrageous conduct. Each of these charges are in themselves questions of fact in that their ultimate determination revolves on findings of motivation, intent, good-faith, and subjective feelings. The Eighth Circuit has determined that summary judgment is notoriously inappropriate for a determination of claims on which the issue of intent, good-faith, or other subjective feelings played dominate roles. McGee v. Hester, 724 F.2d 89, 91 (8th Cir.1984). In this instance this Court finds summary judgment inappropriate due to the inherently factual nature of plaintiffs’ claims and the belief that reasonable minds could differ as to defendants’ culpability for their alleged actions.

Accordingly, defendants’ motions will be granted in part and denied in part.


source: Caselaw Access Project

author: HODGES, Chief Judge.

license: Public Domain

text:
    CBS, INC., Plaintiff, v. Charles GARROD, et al., Defendants.
    No. 83-988 Civ-T-10.
    United States District Court, M.D. Florida, Tampa Division.
    Sept. 19, 1985.

      Michael R. Carey, Barnett, Bolt & Russo, Tampa, Fla., for plaintiff.
    David L. Partlow, Tampa, Fla., for defendants.
   ORDER ON CROSS MOTIONS FOR SUMMARY JUDGMENT

HODGES, Chief Judge.

This is a diversity action in which Plaintiff, CBS, Inc. (hereinafter “CBS”), alleges that Defendants, Charles Garrod, et al. (hereinafter “Garrod”), engaged in unfair competition, conversion and statutory theft. Each cause of action alleges that Garrod engaged in record piracy by duplicating the impulses of certain master recordings belonging to CBS, and then transferring the duplicated impulses into “bootleg” phonographic records and tapes which were subsequently sold in competition with CBS. Plaintiff seeks both damages and injunctive relief.

By Order dated January 16, 1985, the Court bifurcated the damages issues from the liability and injunctive relief issues pursuant to Rule 42(b), F.R.Civ.P. Presently before the Court are the parties’ cross motions for summary judgment and joint stipulation of facts on the issue of liability. Also to be considered is CBS’ Motion to Strike Defendants’ Third Affirmative Defense.

Summary Judgment

Under Rule 56(c), F.R.Civ.P., the question is whether, on the facts stipulated, either party is entitled to judgment as a matter of law. In a diversity case, the substantive law applicable is that of the forum, which in this case is Florida. Impossible Electronics Techniques, Inc. v. Wackenhut Protective Systems, Inc., 669 F.2d 1026 (5th Cir.1982).

The claims alleged by CBS — conversion, unfair competition and statutory theft — are all predicated on CBS having some protectible property interest. Defendants argue that CBS had no property interest in the records which Defendants copied. More specifically, Garrod argues that CBS either had no common law copyright in the records, or if it had, that the right was lost upon CBS’ “publication” of the records through duplication and commercial sale.

I. Common Law Copyright

The issue of common law copyright was previously raised in Defendants’ Motion to Dismiss. It is also central to Defendants’ Third Affirmative Defense which Plaintiff seeks to strike. Defendants claim that Fla. Stat. § 543.02 abolished all common law copyrights in Florida. However, this statute was repealed effective July 1, 1977. Laws of Florida, 1977, c. 77-440, § 1. Thus, the Court concluded in its Order of January 16, 1984 that § 543.02 “cannot now preclude this action.”

Defendants’ only new argument cites 73 Am.Jur.2d, Statutes, §§ 384-85, which provides in pertinent part:

(T)he repeal of a statute renders it thenceforth inoperative, but it does not undo or set aside the consequences of its operation while in force____A legal exemption from or limitation upon, liability on a particular demand, constituting a complete defense to an action, stands on quite as good ground as a right of action, and is not abrogated by a repeal of the statute after accrual of the cause of action.

Id. at § 385 (emphasis added). The Court agrees that repeal of a statute does not divest one of a defense which arose under the former statute. Thus, arguably, anyone who relied on § 543.02, Fla.Stat., to protect against a claim of common law copyright prior to July 1, 1977 may be protected.

However, since this is an action seeking damages and injunctive relief for future wrongdoings, Defendants have failed to state a reason why this Court should reverse its prior ruling that § 543.02 cannot preclude this action.

Defendants argue in the alternative that CBS lost its common law copyright by reason of publication. Defendants cite DeSilva Construction Corp. v. Herrald, 213 F.Supp 184 (M.D.Fla.1962), where an architect’s plans were considered “published” after being filed with the city in order to obtain a building permit. Herrald must be distinguished from the instant case because architectural plans, unlike phono-records prior to February 15, 1972, are copyrightable. Id. at 193. There was ample protection available to plaintiff in Herrald by the simple device of complying with the notice requirements of the copyright statute. Id. at 195. Moreover, contrary to Defendants’ contention, Herrald was not stating Florida law. Id. at 194.

Since there is no Florida law to point to the question of what constitutes publication of records, the Court finds persuasive the reasoning in A & M Records, Inc. v. M.V.C. Distributing Corp., 574 F.2d 312 (6th Cir.1978). In M.V.C., a producer of musical records sought damages and an injunction for unauthorized copying and sale of their records. In rejecting the defendant’s argument that distribution of plaintiff’s records constituted publication, the M.V.C. Court quoted International News Service v. Associated Press, 248 U.S. 215, 236, 39 S.Ct. 68, 71, 63 L.Ed. 211 (1918) to the effect that musical recordings, like wire service news reports, are “stock in trade, to be gathered at the cost of enterprise, organization, skill, labor, and money, and to be distributed and sold to those who will pay money for it, as for any merchandise.” Unlike architectural plans where the common law copyright protects the idea rather than the blueprints and copies, a record producer’s common law copyright protects the record itself, whether it is the master recording or a copy.

Adopting Defendant Garrod’s argument that distribution of records constitutes publication would lead to inequitable results. No record producer would distribute a record until enough copies were made to sell to the entire market. Otherwise, a limited release of a record to a small market would be at great risk. If the record turns out to be a smash hit, anyone who could buy a copy could then mass-produce more copies and undersell the original producer (who, in addition to the expenses of copying, must also bear the costs of “enterprise, organization, skill, labor and money” of getting the musicians, music and recording time, International News Service, 39 S.Ct. at 71). Thus, because of the unique nature of the recording business, and the fact that there was no simple method of protecting record producers’ interests until phono-records were protected by the Sound Recording Act of 1972, Public Law 92-140, § 3, 85 U.S. Stats. at Large 391, 392, CBS did not lose its common law copyright through publication by distribution of its records. See also United States v. Drum, 733 F.2d 1503 (11th Cir.1984).

II. Other Property Interests of CBS

Although the Court has ruled that Plaintiff did not lose its common law copyright interest in the records reproduced by Defendant, either through Fla.Stat. § 543.02 or through publication, there is an additional ground for finding in favor of Plaintiff’s having a protectible property interest. Specifically, Mercury Record Productions, Inc. v. Economic Consultants, Inc., 64 Wis.2d 163, 218 N.W.2d 705 (1974), appeal dismissed, 420 U.S. 914, 95 S.Ct. 1107, 43 L.Ed.2d 386 (1975), citing International News Service, held in an analogous case that a record producer has an intangible property interest in their “professional investment of time, skill, and money in the recordings.” Mercury Record, 218 N.W.2d at 714.

The Court in Mercury Record went on to hold that such a property interest is protectible under state law against “unfair competition ... appropriation, ... (and) larceny.” Id. Thus, independent of its common law copyright, CBS also has a protectible property interest in the professional expertise invested in the recordings at issue in this case.

Having disposed of Defendants’ Affirmative Defenses, the next question is whether Plaintiff has established Defendants’ liability-

ill. Unfair Competition

By its decision in Goldstein v. California, 412 U.S. 546, 93 S.Ct. 2303, 37 L.Ed.2d 163 (1973), the U.S. Supreme Court held that federal law did not preempt state law concerning phono-records “fixed” prior to February 15, 1972. Thus, Plaintiff must show both that Florida law provides a remedy and that Plaintiff is entitled to relief.

Both parties agree that Florida recognizes the tort of unfair competition. B.H. Bunn Co., Inc. v. AAA Replacement Parts Co., Inc., 451 F.2d 1254 (5th Cir.1971). However, the parties cannot agree as to the requisite elements for stating a claim of unfair competition. Defendants maintain that in Florida “the gist of unfair competition ... is ‘palming off.’ ” Id. at 1262. This is clearly true in the area of trademark infringement; however, as the court in Bunn points out:

Unfair competition is a broader area than trademark infringement. In the area of unfair competition the use of a similar mark may be probative of intent, of the defendant’s state of mind. Intent has no relevance to trademark infringement, because customer confusion is the sine qua non. As in trademark infringement, intent is neither necessary to nor conclusive of unfair competition, but, unlike in trademark infringement, intent is probative of unfair competition.

451 F.2d at 1264; see also Boston Professional Hockey Association Inc. v. Dallas Cap & Emblem Mfg., Inc., 360 F.Supp. 459 (N.D.Tex.1973), aff'd, 510 F.2d 1004 (5th Cir.1975), cert. denied, 423 U.S. 868, 96 S.Ct. 132, 46 L.Ed.2d 98 reh’g denied, 423 U.S. 991, 96 S.Ct. 408, 46 L.Ed.2d 312 (1975) (trademark case where the District Court found unfair competition while expressly finding no “palming off”). Where palming off is shown, there is a claim for unfair competition. However, the “gist” of unfair competition is more a question of defendant’s intent which can be proved in other ways besides palming off. Moreover, in cases of unfair competition where the basis of the complaint is not that defendant is selling his goods disguised as plaintiff’s, but that defendant is misappropriating plaintiff’s property, the test to be applied clearly does not require a showing of palming off. International News Service, 39 S.Ct. at 73.

Plaintiff urges a more liberal view of unfair competition as applied to unauthorized reproductions of phono-records. Although there is no Florida decision directly on point, the Bunn court recognized that Florida courts seek to apply the generally prevailing view of unfair competition. Bunn, 451 F.2d at 1262 n. 3. Thus, this Court adopts the prevailing view that the tort of unfair competition involving record piracy requires proof of three elements: (1) time, labor, and money expended by the plaintiff, (2) competition, and (3) commercial damage. Mercury Record, 218 N.W.2d at 709, citing International News Service, 39 S.Ct. 68.

Clearly all three elements are present in the instant case. CBS expended time, labor and money in making the records copied by Garrod. Stipulation at paragraph 18. Garrod did directly copy and sell records produced by CBS which CBS is either presently selling or seeking to sell in the future. Stipulation at paragraphs 18 and 25. And, “the damage to CBS from Defendants’ Activities is irreparable and cannot be adequately measured or compensated by monetary damages.” Stipulation at paragraph 29. Thus, based upon the law as stated above and the facts as set forth in the Stipulation, Plaintiff’s Motion for Partial Summary Judgment on the claim of unfair competition, Count I of the Complaint, is hereby GRANTED.

IV. Conversion

In Florida, an action for conversion will lie for a “wrongful taking of intangible interests in a business venture.” In re Estate of Corbin, 391 So.2d 731, 732-33 (Fla. 3d DCA, 1980) and cases cited therein. The unfair competition found in Count I of this action involves a wrongful taking of CBS’ recordings. It has already been established that CBS has, and for all times relevant to this action has had, an intangible property interest in the time, effort and expense of producing the records at issue here. See supra Section II. Moreover, CBS has its common law copyright in the subject records. See supra Section I. Additionally, CBS’ recordings are already part of a business venture, Stipulation at paragraphs 19 and 20, which were sold by Defendants for profit, Stipulation at paragraphs 10, 16,18, 23 and 24. See also A & M Records, Inc. v. Heilman, 75 Cal.App.3d 554, 142 Cal.Rptr. 390 (Ct.App.1977), appeal dismissed, 436 U.S. 952, 98 S.Ct. 3063, 57 L.Ed.2d 1118, reh’g denied, 439 U.S. 884, 99 S.Ct. 228, 58 L.Ed.2d 198 (1978) (cited with approval in Corbin, 391 So.2d at 733). Thus, Plaintiff’s Motion for Partial Summary Judgment on the claim of conversion, Count II of the Complaint, is hereby GRANTED.

V. Statutory Theft

Plaintiff relies on Fla.Stat. § 812.014(1) which provides in pertinent part that one is liable for theft if one “knowingly ... uses the property of another with intent to ... appropriate the property to his own use.” Without re-examining all of the above discussion, the Court finds that Defendants’ actions fall squarely within the confines of the Florida Statute defining theft. See e.g., Sections I- III, supra, and paragraphs 10, 23 and 24 of the Stipulation. Thus, Plaintiff’s Motion for Partial Summary Judgment on the claim of statutory theft, Count III of the Complaint, is hereby GRANTED.

Conclusion

Consistent with the above rulings, the Court takes the following actions:

1. CBS’ Motion for Partial Summary Judgment on Counts I-III of the Complaint is hereby GRANTED.

2. Defendants’ Motion for Partial Summary Judgment is hereby DENIED.

3. The Plaintiff is directed to prepare and submit within ten (10) days a proposed form of final injunction.

IT IS SO ORDERED.

       Additional cases cited by Defendants on this issue are inapposite, as they deal with loss of the author’s common law copyright to the recorded music or other performance on the record and not with the producer’s rights to the record itself growing out of the producer’s labor, expense, etc.


author: EDGAR, District Judge.

text:
    C.F. SCOTT, Jr., Plaintiff, v. INTERNAL REVENUE SERVICE, Defendant.
    No. CIV-1-85-294.
    United States District Court, E.D. Tennessee, S.D.
    Sept. 20, 1985.

      C.F. Scott, Jr., pro se.
    John C. Gill, U.S. Atty., Paul M. Predmore, Atty. Tax Div., Dept, of Justice, Washington, D.C., for defendant.
   MEMORANDUM

EDGAR, District Judge.

This matter is before the Court on defendant’s motion to dismiss pursuant to Federal Rules of Civil Procedure 12(b)(1), (2), and (6). This is a proceeding filed by a taxpayer claiming damages for various tortious acts allegedly committed by the Internal Revenue Service (hereinafter “IRS”) and for a claim for moneys allegedly due and owing from the IRS. Plaintiff appears in this case pro se.

Defendant asserts a number of different grounds in its motion to dismiss. First, defendant argues that the IRS is not a proper party to the proceedings and that the United States of America is the only proper defendant. Incidental to this argument is the claim that proper service of process, therefore, has never been served on the defendant and that the entry of default made against the defendant should be set aside. Second, defendant claims plaintiff has failed to establish a jurisdictional basis for the present action. Third, defendant asserts that the Court lacks subject matter jurisdiction by virtue of sovereign immunity. In addition, the IRS claims that there is no basis for a refund action under the facts plead.

I. THE UNITED STATES IS THE PROPER PARTY.

Defendant asserts that the IRS is not a proper party to the present action and that the proper party is the United States of America. The Government cites a number of different cases concerning the lack of capacity of the IRS to sue or be sued, but the Court need look no further than 26 U.S.C. § 7422(f)(1) and (2) which clearly establish that the United States of America is the proper party in matters involving the collection of the federal income tax. As the IRS is not the proper party, the Internal Revenue Service will be dismissed from this action and the United States of America will be substituted as a party defendant.

Plaintiff, in a motion filed July 16, 1985, sought the entry of default in the present matter. A default was entered by the Clerk of the Court on July 22, 1985. The defendant now comes before this Court to set aside the entry of default for failure to have proper service of process made on the Attorney General of the United States. Federal Rules of Civil Procedure 4(d)(4) and (5). The Court finds no indication in the record that proper service of process was made on the Attorney General. Therefore, the entry of default will be set aside pursuant to Federal Rule of Civil Procedure 55(c).

II. SUBJECT MATTER JURISDICTION IS LACKING.

Subject matter jurisdiction over the United States is limited by the terms of the specific statute establishing jurisdiction because of the doctrine of sovereign immunity. Affiliated Ute Citizens of Utah v. United States, 406 U.S. 128, 141, 92 S.Ct. 1456, 1466, 31 L.Ed.2d 741 (1972). The United States is permitted to specify the terms upon which it may be sued. United States v. Mitchell, 445 U.S. 535, 538, 100 S.Ct. 1349, 1351, 63 L.Ed.2d 607 (1980). Based on the specific facts that are asserted in the complaint, the present action must be characterized as one for either a refund of taxes or a tort claim.

If the present action is construed as one for a refund of taxes, the complainant is required to follow the provisions outlined in Title 26 of the United States Code. As a jurisdictional prerequisite, a claim for refund must be filed with the IRS before any court action may be undertaken. 26 U.S.C. § 7422(a). This refund action must be filed within three years from the time the return is filed or within two years from the time the tax is paid, the time limit expiring at the end of the latest period. 26 U.S.C. § 6511. After the claim for refund is filed, a suit must be filed within two years after the disallowance of the claim. 26 U.S.C. § 6532(a). The record does not reveal that a formal claim was filed.

Assuming arguendo that a claim was filed, the Court’s best reading of the complaint indicates that the last significant event outlined in the complaint occurred or commenced in 1976 or sometime immediately thereafter. The complaint in count twelve then discusses events continuing over the next four years. At the latest, according to the complaint, the plaintiff received a notice from the Memphis Office of the IRS in 1980 that no action had been taken on inquiries made to the IRS. Assuming that some date in 1980 is the date of notification of disallowance, this action is filed outside the jurisdictional time period.

The complaint may also be characterized as a tort action pursuant to the Federal Tort Claims Act (the “Act”), 28 U.S.C. § 2671 et seq. The Act also has a number of jurisdictional prerequisites, including the requirement that an administrative claim be filed with the agency with which the dispute occurs. 28 U.S.C. § 2675(a). The defendant argues that no administrative claim has been filed and that this Court lacks jurisdiction. Caton v. United States, 495 F.2d 635, 638 (9th Cir.1974); Best Bearings Co. v. United States, 463 F.2d 1177, 1179 (7th Cir.1972); see also Executive Jet Aviation, Inc. v. United States, 507 F.2d 508, 514-15 (6th Cir.1974). Nowhere in the complaint does an allegation appear that this jurisdictional prerequisite was satisfied.

Assuming for the moment that the plaintiff’s various letters to the IRS could be construed as an administrative claim, the Act still prohibits tort actions which arise with respect to the assessment and collection of a federal income tax. 28 U.S.C. § 2680(c); see American Association of Commodity Traders v. Department of the Treasury, 598 F.2d 1233 (1st Cir.1979). The plaintiff’s complaint states facts which all relate to actions dealing with the assessment or collection of taxes. See, generally, Mack v. Alexander, 575 F.2d 488 (5th Cir.1978); Morris v. United States, 521 F.2d 872 (9th Cir.1975); Pugh v. Internal Revenue Service, 472 F.Supp. 350 (E.D.Tenn.1979).

Additionally, the tort claims appear to be time barred by the Act’s statute of limitations. The Act requires the filing of an administrative claim within two years after a claim arises and the filing of a lawsuit within six months after rejection of the claim. 28 U.S.C. § 2401(b). As previously stated, the last significant act occurred in either 1976 or, with a liberal reading of the complaint, in 1980. Regardless, more than two years have expired. Thus, any tort claim is barred either by the failure to abide by the jurisdictional prerequisites or by the expiration of the statute of limitations.

III. CONCLUSION.

The law appears to be very clear on the defenses raised by the Government. Initially, the United States is substituted as a proper parly in the proceeding. The new defendant is thereafter dismissed for lack of jurisdiction and for the failure of the plaintiff to state a claim upon which relief can be granted. First, the plaintiff has failed to meet the jurisdictional prerequisites under the various statutes upon which he might establish a claim. Second, the various statutes of limitations have run based on the facts alleged in his complaint. Third, tort actions relating to the collection of income taxes are not permitted. This case will be DISMISSED and an appropriate order will be entered.

ENTER.


author: LAEFITTE, District Judge.

text:
    ESSO STANDARD OIL COMPANY, (PUERTO RICO), et al., Plaintiffs, v. DEPARTMENT OF CONSUMER AFFAIRS, and Hector Ricardo Ramos Diaz, Defendants. The SHELL COMPANY (P.R.) LIMITED, Plaintiff, v. Hector Ricardo Ramos DIAZ, et al., Defendants. COMPAÑIA PETROLERA CHEVRON, INC., Plaintiff, v. Hector Ricardo Ramos DIAZ, et al., Defendants. MOBIL OIL CARIBE, INC., et al., Plaintiffs, v. DEPARTMENT OF CONSUMER AFFAIRS, et al., Defendants.
    Civ. Nos. 81-1747 HL, 81-1771 HL, 81-1790 HL and 81-1792 HL.
    United States District Court, D. Puerto Rico.
    Sept. 24, 1985.

      Otto Miguel Bustelo Garriga, San Juan, Puerto Rico, for plaintiffs.
    Jorge Bermudez Torregrosa, San Juan, Puerto Rico, for Compañia Petrolera Chevron, Inc.
   OPINION AND ORDER

LAEFITTE, District Judge.

Plaintiffs, five oil companies engaged in the distribution and marketing of gasoline, diesel and other petroleum products in the Commonwealth of Puerto Rico, brought this action for declaratory judgment, pursuant to 28 U.S.C. Sections 2201, 2202, asking this Court to invalidate Commonwealth Regulation No. 2758 (“the Regulation”) which controls the rents to be paid by gasoline filling stations. The Regulation was promulgated and will be enforced by defendants, the Department of Consumer Affairs (“DOCA”), an administrative agency of Puerto Rico, and Héctor Ricardo Ramos Diaz, former Secretary of DOCA. Plaintiffs sole claim is that the Regulation is preempted by the Supremacy Clause of the Constitution, Art. VI, Cl. 2, as it conflicts with the federal Petroleum Marketing Practices Act (“PMPA”), 15 U.S.C. 2801 et seq.

Before the Court are cross-motions for summary judgment under Rule 56 of the Federal Rules of Civil Procedure. Summary judgment is proper when there exists no genuine dispute as to a material fact and the prevailing party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(c), Metropolitan Life Ins. Co. v. Ditmore, 729 F.2d 1 (1st Cir.1984). The parties, here, acknowledge that they are in agreement on all material factual matters. The only issue remaining before the Court is whether the Commonwealth Regulation is preempted by the Supremacy Clause of the Constitution. Upon careful review of the material issues presented by the parties, the Court finds the defendants entitled to summary judgment.

FACTUAL BACKGROUND.

Congress enacted the Petroleum Marketing Products Act (PMPA), 15 U.S.C. Section 2801 et seq. in June, 1978. The express purpose of the statute is to set minimum federal standards governing the termination and nonrenewal of franchise relationships between the suppliers of fuel (“franchisors”) and the retailers (“franchisees”). S.Rep. No. 731, 95th Cong., 2d Sess., reprinted in 1978 U.S.Code Cong. & Ad.News 873. The Legislature of the Commonwealth of Puerto Rico enacted Act No. 156, 23 L.P.R.A. 1133(e) (as an amendment to Act No. 73, 23 L.P.R.A. 1133 et seq.) on July 20, 1979. This Act delegated authority to DOCA to regulate the rents that lessors of gasoline stations could charge their lessees. On August 23, 1979, DOCA declared a “freeze” on rents of gasoline stations in order to prepare the rent control regulation. Regulation No. 2758, “Regulation to Determine the Rents to be Paid by Gasoline Filling Stations”, the Regulation at issue in this case, was adopted by DOCA on March 25, 1981. On October 8, 1981 the Regulation, as amended, went into effect.

Plaintiffs are “franchisors” within the meaning of the PMPA, 15 U.S.C. Section 2801(3), and “lessors” under Section 2 of the Regulation. Plaintiffs each have numerous franchise agreements, including leases for gasoline filling stations at locations throughout the Commonwealth. These agreements have expired or are due to expire within the next twelve months. The renegotiation of the terms of the franchise will be affected by DOCA’s Regulation controlling rents.

I. PMPA: AN OVERVIEW.

Congress enacted the PMPA with the intent of protecting petroleum retailers, “franchisees”, from arbitrary or discriminatory termination or nonrenewal by franchisors, and to establish uniform guidelines regarding termination and nonrenewal of franchise relationships. S.Rep. No. 731, 95th Cong., 2d Sess., reprinted in 1978 U.S. Code Cong. & Ad.News 873, 875, 877. The legislative history of the statute indicates that Congress understood that the franchise relationship in the petroleum industry was unique because the franchisor not only grants a trademark license to the franchisee, but also leases to the franchisee the gasoline station and is the primary, even exclusive, supplier of motor oil, the franchisee’s principal sale item. Congress recognized that this relationship resulted in a gross disparity in bargaining power which lead to contracts of adhesion and to situations where franchisors abused their position and would terminate a franchise for arbitrary or discriminatory reasons or would threaten termination or nonrenewal in order to compel the franchisee to comply with the franchisor’s market policies. Id., at 875-877. The PMPA is an effort to remedy these concerns with the franchise relationship. See Brach v. Amoco Oil Co., 677 F.2d 1213 (7th Cir.1982). See also Haberthur, Petroleum Marketing Act: Equalizing the Bargaining Power in the Franchise Relationship, 25 South Dakota Law Review 69 (1980).

Congress was also aware that numerous states had enacted legislation addressing the petroleum franchise problems which had resulted in an uneven patchwork of rules. 1978 U.S.Code Cong. & Ad.News at 877. The PMPA was designed to establish a uniform regulation governing the grounds for termination or nonrenewal of a franchise. Id.

Title I of the PMPA prohibits termination or nonrenewal of any franchise relationship except on the basis of specifically enumerated grounds and upon compliance with certain notification requirements. 15 U.S.C. 2802(a),(b)(1).

Section 2802(b)(2) sets forth grounds for termination and nonrenewal: (A) failure to comply with any provision of the franchise, which provision is both reasonable and of material significance to the franchise relationship; (B) failure to exert good faith efforts to carry out the provisions of the franchise; (C) the occurrence of an event which is relevant to the franchise relationship and makes termination or nonrenewal reasonable; (D) a written agreement to end the franchise relationship; and (E) a good faith decision to withdraw from the relevant geographic market. Section 2802(b)(3) enumerates additional grounds which provide a basis for nonrenewal only: (A) failure to agree to good faith changes to the franchise provisions; (B) receipt of numerous bona fide customer complaints; (C) continued failure to operate the premises in a clean and safe manner; and (D) if the franchise term was at least three years long, a good faith decision to convert the premises to another use or that renewal would be uneconomical despite any reasonable changes to the provisions of the franchise.

II. PREEMPTION.

Plaintiffs claim that the challenged Regulation of the Commonwealth of Puerto Rico is preempted by the PMPA under the Supremacy Clause of the U.S. Constitution. When Congress states expressly in its enactment which areas of state authority are to be preempted, a state law will fall if: 1) a direct conflict exists between the state and federal regulation, such that it is impossible to comply with both laws, Florida Lime and Avocado Growers, Inc. v. Paul, 373 U.S. 132, 142, 83 S.Ct. 1210, 1217, 10 L.Ed.2d 248 (1963); or 2) the state regulation “stands as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress.” Hines v. Davidowitz, 312 U.S. 52, 67, 61 S.Ct. 399, 404, 85 L.Ed. 581 (1941); or 3) when Congress “has occupied the field” in a given area so as to displace all state regulations whether compatible or hostile. Campbell v. Hussey, 368 U.S. 297, 82 S.Ct. 327, 7 L.Ed.2d 299 (1961).

Section 2806(a) of the PMPA states specifically which area of state authority to regulate petroleum franchises is preempted.

“To the extent that any provision of this subchapter applies to the termination (or the furnishing of notification with respect thereto) of any franchise, or to the non-renewal (or the furnishing of notification with respect thereto) or any franchise relationship, no State or any political subdivision thereof may adopt, enforce, or continue in effect any provision of any law or regulation (including any remedy or penalty applicable to any violation thereof) with respect to termination (or the furnishing of notification with respect thereto) of any such franchise or to the nonrenewal (or the furnishing of notification with respect thereto) of any such franchise relationship unless such provision of such law or regulation is the same as the applicable provision of this subchapter.”

This provision clearly marks the boundary of federal power. It also manifests Congress’ intent to treat state laws governing petroleum franchises as severable and to preempt only those provisions which address termination or nonrenewal. Ted’s Tire Service, Inc. v. Chevron U.S.A., Inc., 470 F.Supp. 163, 165 (D.Conn.1979). Following this reasoning, courts have invalidated state laws concerning franchise termination or non-renewal but have allowed to stand provisions addressing other aspects of the franchise relationship. Exxon v. Georgia Ass’n. of Petroleum Retailers, 484 F.Supp. 1008 (N.D.Ga.1979), aff’d. 644 F.2d 1030 (5th Cir.1981) (Georgia statute provisions which prescribe grounds for termination and nonrenewal preempted. Provision limiting hours of operation by service station not preempted); DiNapoli v. Exxon Corp., 549 F.Supp. 449 (D.N.J.1982) (Provision of New Jersey statute concerning franchise termination preempted); Lasko v. Consumers Petroleum of Conn., Inc., 547 F.Supp. 211 (D.Conn.1981) (Connecticut statute setting a three-year minimum franchise lease period not preempted). See also Ted’s Tire Service, Inc., supra; Ricco v. Shell Oil Co., 180 N.J.Super 399, 434 A.2d 1151 (Ch.Div.1981).

It is the task of this Court to analyze the Puerto Rico regulation to determine whether it concerns the termination or nonrenewal of the petroleum franchise relationship and, if so, whether the regulation conflicts with the PMPA or serves as an obstacle to the PMPA’s purpose and objectives.

A. The Regulation: an overview.

The Regulation was enacted by the Puerto Rico legislature for the purpose, similar to that of the PMPA, of protecting the franchisee (termed “lessee”) of a gasoline station. The Regulation sets the criteria, procedure, and formula for determining the monthly rental rate of a service station.

Section 5 of the Regulation states that the rental rate shall be established by agreement of the parties by taking into account fixed criteria.

Sections 6, 7, and 8 establish the procedure to be followed when the parties are unable to reach agreement on the rent. When impasse is reached either party may petition the assistance of DOCA within three months before or after the expiration date of the existing contract. Within two months of the petition’s filing date, DOCA will set the rent by applying an established formula. Section 9 states that once the rent is fixed by DOCA it is to be frozen at that rate for a period of four years and may be altered only by petitioning DOCA and proving a substantial change in one of the elements of the formula. The final section pertinent to the present claim, Section 10, states that the rental rate under no circumstances is to exceed 10% of the market value of the property to be leased. This limitation applies to the agreement between the parties as well as the rate set by DOCA.

B. The PMPA and the Regulation compared.

On its face, the Regulation addresses only lease rental rates and does not concern the termination or nonrenewal of a franchise. Plaintiffs argue, however, that the application of the Regulation will affect termination or nonrenewal of the franchise agreements. They contend that Section 5 of the Regulation, which allows either party to petition DOCA when they fail to agree on rent, directly conflicts with provision 2802(b)(3)(A) of the PMPA. This provision permits a franchisor not to renew a franchise agreement when the franchisor and the franchisee fail to agree on changes or additions to the agreement, provided that the franchisor’s insistence on these terms is not for the purpose of preventing renewal.

Plaintiff's argument that Section 5 and PMPA provision 2802(b)(3)(A) are in conflict, would have merit if section 5 of the Regulation required the parties to submit to the jurisdiction of DOCA as a sort of binding arbitration whenever their negotiations come to an impasse. However, nowhere on the face of the Regulation is there an indication that it will be mandatory for the parties to appear before DOCA once a petition is filed. In fact, when asked the question on oral argument whether a franchisor was free to terminate (or not renew) a franchise relationship when the parties could not reach an agreement on rent, the attorney for DOCA replied:

“Regulation 2715 (sic, 2758) does not force anyone to continue a franchise relationship. We’d be the first to agree that if it did it could be preempted ... If there is no agreement on the rent, the company is free to say that they can’t accept any less than twelve per cent and terminate under the PMPA.” Transcript, p. 34.

Plaintiffs further assert that Section 9 of the Regulation, which freezes rents for a period of four years at the rate set by DOCA, conflicts with various provisions of the PMPA by preventing a franchisor from terminating or not renewing an agreement during that period. The Court disagrees. As Section 9 is worded it merely regulates one of the terms of the franchise relationship if the parties enter into an agreement. Courts have consistently upheld state legislation regulating terms of a petroleum franchise relationship other than the terms of termination and nonrenewal. Georgia Ass’n. of Petroleum Retailers, supra (held state regulation limiting hours of service station operation not preempted by the PMPA); Lasko, supra (held state regulation setting a minimum three year lease term for gasoline service stations not preempted). In reference to Connecticut’s law regulating a minimum lease term, the court in Lasko stated:

“The Connecticut statute does not prohibit a franchisor from ever terminating or nonrenewing a franchise, it simply requires that a franchise will be automatically renewed at the conclusion of a term for a new three-year term if not properly terminated or nonrenewed. And, of course, what constitutes proper nonrenewal or termination is now determined by PMPA.”

Id. at 213.

Similarly, in the present action, Section 9 of the Regulation does not prohibit the franchisor from terminating or nonrenewing a franchise arrangement. Under PMPA Section 2802(b)(2)(C), the franchisor could properly terminate a lease upon the occurrence of an event which is relevant to the franchise or, under Section 2802(b)(2)(E), termination would be proper after making a good faith decision to withdraw from marketing motor fuel in that area. The franchisor may also decide not to renew the agreement under Section 28-02(b)(3)(D)(i)(IV) based on a determination in good faith that the venture is uneconomical. These provisions provide the franchisor with a valid defense if DOCA tries to intervene in the termination or nonrenewal relationship. See Ricco v. Shell Oil Co., supra.

This Court acknowledges that the regulation of the rental rate of the franchise agreement is more burdensome on the franchisor than other state legislation which has been upheld — the regulation of the hours of filling station service and the regulation of the lease term. See Georgia Ass’n. of Petroleum Retailers, supra; Lasko, supra. Nonetheless, the regulation of rental rates is the regulation of a term other than termination or nonrenewal and under the narrow preemption provision of the PMPA Puerto Rico has authority to regulate in this area.

Finally, plaintiffs contend that the Regulation as a whole, and, in particular, Section 10, which places a ceiling on rental rates, obstructs the purpose and objective of the PMPA. They argue that Congress’ intent in enacting the PMPA was not only to protect the franchisee but also to assure the franchisor sufficient flexibility to freely negotiate an agreement. Plaintiffs rely on Munno v. Amoco Oil, 488 F.Supp. 1114 (D.Conn.1980) to support their argument that Congress intended the market place to control the service station lease agreement. See also, Palmieri v. Mobil Oil Corp., 682 F.2d 295 (2nd Cir.1982).

Munno, supra, held that the Court was empowered to interfere with the actions of a franchisor only when the franchisor intended to discriminate against the franchisee, otherwise, “the dictates of the market place alone will govern the transaction ...” Id. at 1119. Plaintiffs’ reliance on this case to support the argument that Congress intended the PMPA to assure that the market place would control lease rates is misplaced. Munno is a decision interpreting the statutes’ “good faith” standard and the role of the judiciary. It is not a decision analyzing the purpose or objective of the PMPA.

It is true that in enacting the PMPA, Congress was concerned not to unduly burden the franchisor and was careful to strike a balance between the competing interests of the parties. 1978 U.S.Code Cong. & Ad.News at 890, 893-894. However, the sole and express purpose and objective of the statute was to establish a uniform regulation protecting the franchisee from arbitrary termination. The challenged Regulation in no way obstructs this purpose.

For the above reasons, the Court grants summary judgment in favor of the defendants. The Clerk shall enter judgment dismissing the complaint.

IT IS SO ORDERED.

      . Defendant Héctor Ricardo Ramos has been succeeded in office by Carlos López. A successor in office is automatically substituted under Fed.R.Civ.P. 25(d). Maria Santiago v. CRUV, 554 F.2d 1210 (1st Cir.1977).

      . This Act comes out of a history of rent control legislation in Puerto Rico beginning with Act No. 464, April 25, 1946, 17 L.P.R.A. 181 et seq.

      . The notice requirements of the PMPA are embodied in section 2804. Generally, notice of termination or nonrenewal must be “furnished” not less than 90 days before the effective date. Id. Section 2804(a)(2).

      . Invocation of these grounds is further conditioned on various time limitations which are designed to prevent franchisors from basing termination or nonrenewal upon "old and long forgotten events," yet which give the franchisor adequate time to evaluate the events or to work with the franchisee to correct the situation. See Senate Report at 33-34, U.S.Code Cong. & Ad. News at 892.

      . Section 5.
      The rental rate of a gasoline filling station shall be established by agreement between the lessor and lessee taking into account the following criteria and limitations established in these Regulations:
      1. The amount of investment made by lessor in land and/or building.
      2. The market value of property to be leased.
      3. The amount of property taxes.
      4. Equipment maintenance cost incurred by the lessor.
      5. The former rental rates.
      6. The average volume of gallons of gasoline sold by the station during the twelve (12) months prior to the proposed effective date of the new rental rate; and
      7. The net income derived by the lessee from the operation of the station.

        . This Department shall use the following formula for the determination of the rental rate:
      CF = F (CE)
      CE = CO + .06 (VMP)
      CO = D + TX + M
      The variables used in the preceding formula shall have the following meaning:

        CF —Rent determined by the Department

        F —Adjustment Factor

        CE —Estimated Rent

        CO —Cost of Occupancy

        D —Property Depreciation

        TX —Property Taxes

        M —Maintenance Cost

        VMP — Market Value of Property
      The rental rate determined and fixed (CF) by this Department shall be equal to the estimated cost (CE) multiplied by the adjustment factor (F) which shall be based on the criteria established in Article 5 of these Regulations and may fluctuate between fifteen (15) percent and minus fifteen (-15) percent of the estimated rent (CE), in accordance with the aforementioned criteria.
      The estimated rent (CE) shall be the sum of the cost occupancy (CO) plus six (6) percent of the market value of the property (VMP).
      The cost of occupancy (CO) shall be the sum of the property depreciation (D), the real property taxes (TX) and the maintenance cost (M).

      . The Court reiterates that the Puerto Rico Regulation is being challenged solely on the grounds of preemption. No other constitutional or statutory claims to invalidate the Regulation have been presented to the Court.

      . The Court is aware that the Regulation, in particular Section 10, tilts the balance in favor of the franchisee. However, under the test for preemption, neither this section, nor any other, conflicts with the PMPA or obstructs its purpose. Again the Court states that the Regulation is being challenged on the grounds of preemption only. On this issue it is noted that Congress’ concern with allowing the franchisor flexibility came in part to assure that "there should be no basis for a claim of unconstitutional taking of property without compensation.” 1978 U.S.Code Cong. & Ad.News, at 890.


author: JOSÉ A. CABRANES, District Judge:

text:
    Steven M. RUOTOLO v. The SHERWIN-WILLIAMS COMPANY.
    Civ. No. H-84-605(JAC).
    United States District Court, D. Connecticut.
    Sept. 26, 1985.

      Joseph D. Garrison, New Haven, Conn., for plaintiff.
    Robert H. Hall, Newtown, Conn., for defendant.
   RULING ON PLAINTIFF’S MOTION FOR SUMMARY JUDGMENT AND ON DEFENDANT’S CROSS-MOTION FOR SUMMARY JUDGMENT

JOSÉ A. CABRANES, District Judge:

The questions presented on these cross-motions for summary judgment are the sufficiency of the summary description of an employee benefit plan established pursuant to the Employee Retirement Income Security Act, 29 U.S.C. § 1001 et seq. (“ERISA”) and the availability of relief to an employee who received a summary plan description that fails to satisfy the statutory standards.

The plaintiff, Steven M. Ruotolo, is a former traveling salesman for the defendant, The Sherwin-Williams Company (“Sherwin-Williams”). In November 1983, the plaintiff obtained long-term disability benefits from the defendant on the ground that his vision problems made it dangerous for him to drive a car. The defendant subsequently discovered that the plaintiff was “moonlighting” as a bartender and sought to reduce his benefits retroactively by 70 percent of his bartending income.

The parties agree that the defendant’s long-term disability plan permits an employee who can no longer perform his former job to qualify as “disabled” for 24 months even though he is capable of performing other work. After that period, the employee is considered disabled only if he cannot work at all. An employee who works at another job while receiving his initial 24 months of long-term disability benefits will have his benefits reduced by 70 percent of his earnings from the other job.

The plaintiff is seeking the restoration of his long-term disability benefits, retroactive to November 1983, on the ground that the defendant has violated 29 U.S.C. § 1022. This provision requires the administrator of an employee benefit plan covered by ERISA to provide participants with a “summary plan description” written in a manner reasonably calculated to apprise the average participant of any rules that would occasion a loss or reduction of benefits. 29 U.S.C. § 1022(a).

The defendant counters that its summary plan description satisfies the requirements of Section 1022. In the alternative, the defendant argues that, even if the plan fails to meet the statutory standards, the plaintiff cannot recover either because his loss of benefits did not result from his reliance upon the summary plan description or because he has “unclean hands.” Both parties have moved for summary judgment pursuant to Rule 56(c), Fed.R.Civ.P., and the motions were submitted for decision on September 19, 1985, following an extended oral argument in open court.

I.

The prerequisites for granting a motion for summary judgment are well established. Schwabenbauer v. Board of Education, 667 F.2d 305, 313 (2d Cir.1981). For summary judgment to be appropriate, there can be no “genuine issue as to any material fact” and the moving party must be “entitled to a judgment as a matter of law.” Fed.R.Civ.P. 56(c). “The burden is on the moving party ‘to demonstrate the absence of any material factual issue genuinely in dispute.’ ” American International Group, Inc. v. London American International Corp., 664 F.2d 348, 351 (2d Cir.1981), quoting Heyman v. Commerce & Industry Co., 524 F.2d 1317, 1319-20 (2d Cir.1975). Moreover, there must be no controversy as to the inferences to be drawn from the evidentiary facts. Phoenix Savings & Loan, Inc. v. Aetna Casualty & Surety Co., 381 F.2d 245, 249 (4th Cir.1967). In determining whether or not there is a genuine factual issue in the case, the court must “resolve all ambiguities and draw all reasonable inferences against the moving party.” Schwabenbauer, supra, 667 F.2d at 313; see also United States v. Diebold, Inc., 369 U.S. 654, 655, 82 S.Ct. 993, 994, 8 L.Ed.2d 176 (1962); Quinn v. Syracuse Model Neighborhood Corp., 613 F.2d 438, 445 (2d Cir.1980).

There is no dispute of fact between the parties as to the provisions of the SherwinWilliams long-term disability plan or the contents of the summary plan description. See Memorandum in Support of Plaintiff’s Motion for Summary Judgment (filed March 26, 1985) (“Plaintiff's Memorandum”), Exhibits A (“The Sherwin-Williams Company Salaried Employees’ Long Term Disability Plan”) and B (summary plan description); Defendant’s Affidavit in Opposition to the Plaintiff’s Motion for Summary Judgment and in Support of the Defendant’s Motion for Summary Judgment (filed June 27, 1985) (“Defendant’s Affidavit”), Exhibits 27 (“The Sherwin-Williams Company Salaried Employees’ Long Term Disability Plan”) and 26 (summary plan description). There is likewise no dispute that the plaintiff was provided with a copy of the summary. Instead, the dispute between the parties centers on whether the summary satisfies the requirements of Section 1022 and on whether a violation of that provision entitles the plaintiff to the retroactive restoration of his benefits regardless of whether he took any action in reliance on the summary or whether he has “unclean hands.”

II.

All participants in an employee benefit plan covered by ERISA must be provided with a summary plan description that is “written in a manner calculated to be understood by the average plan participant.” 29 U.S.C. § 1022(a)(1). The summary must be “sufficiently accurate and comprehensive to reasonably apprise such participants and beneficiaries of their rights and obligations under the plan.” Id. More specifically, the summary must contain a description of the “circumstances which may result in disqualification, ineligibility, or denial or loss of benefits.” 29 U.S.C. § 1022(b).

The requirements of the summary plan description are further detailed in the regulations promulgated by the U.S. Department of Labor. For example, the summary “must not have the effect [of] misleading, misinforming or failing to inform participants and beneficiaries” with respect to pertinent provisions of the plan. 29 C.F.R. § 2520.102-2(b). Furthermore, the summary must contain “a statement clearly identifying circumstances which may result in disqualification, ineligibility or denial, loss, forfeiture or suspension of any benefits that a participant or beneficiary might otherwise reasonably expect the plan to provide.” 29 C.F.R. § 2520.102-3(1).

Our Court of Appeals, after examining the relevant statutory language and legislative history, concluded that “the focus of concern [of Section 1022] is with circumstances that might cause a participant or beneficiary not to receive benefits.” Pompano v. Michael Schiavone & Sons, Inc., 680 F.2d 911, 914 (2d Cir.), cert. denied, 459 U.S. 1039, 103 S.Ct. 454, 74 L.Ed.2d 607 (1982). See also Morse v. Stanley, 732 F.2d 1139, 1147 (2d Cir.1984) (accord). It is therefore appropriate to subject a summary plan description to careful scrutiny where, as here, it is challenged for having failed to inform participants of circumstances that might lead to the loss or reduction of benefits.

The summary description of the Sherwin-Williams long-term disability plan fails to meet the standards established by Section 1022 and the regulations promulgated thereunder. The summary nowhere tells the employee in straightforward terms that, although he need not be incapable of all work in order to receive his first 24 months of disability benefits, those benefits will be reduced by 70 percent of any earnings that he receives from paid employment. See Defendant’s Affidavit, Exhibit 26.

Indeed, the summary plan description alludes to this requirement only in two sentences that appear at the beginning of the section titled “Rehabilitative Work.” The sentences provide:

Ordinarily, you can’t receive disability benefits if you are doing any kind of work for pay. However, to help you during your recovery from total disability, your Sherwin-Williams LTD plan has a special feature that lets you perform certain kinds of work for pay, while you are still receiving disability benefits.

Id. at 11.

This provision does not meet the test imposed by the regulations of “clearly identifying circumstances which may result in ... loss, forfeiture or suspension of any benefits.” The first sentence is vague and ambiguous, or might seem so to the “average plan participant,” because it is unclear whether it refers to Sherwin-Williams’ disability benefits or to disability benefits in general. The provision is also inaccurate, because it fails to state that disability benefits ordinarily will be reduced, rather than lost entirely, if the participant has other earnings.

Finally, the provision is misplaced, at the beginning of a section on “Rehabilitative Work,” in a manner that may cause its significance to go unrecognized by the average participant. There is no indication in the sections of the summary titled “Limitations on Benefits” and “Termination of Benefits” that a participant may suffer a loss or reduction of his long-term disability benefits if he engages in paid employment.

III.

The court is not persuaded, however, that deficiencies in the summary plan description are sufficient in themselves to permit the plaintiff to recover his lost disability benefits. Instead, the plaintiff is entitled to recover only if he can establish that he lost his disability benefits as a result of his reliance on the deficiencies in the summary plan description.

The Court of Appeals for the First Circuit, in an action brought under the same provision of ERISA, held that “to secure relief [under Section 1022, the participant] must show some significant reliance upon, or possible prejudice flowing from, the faulty plan description.” Govoni v. Bricklayers, Masons & Plasterers International Union, 732 F.2d 250, 252-253 (1st Cir.1984). See also Freund v. Gerson, 610 F.Supp. 69 (D.C.Fla.1985) (accord).

Our Court of Appeals has not yet addressed the question of whether reliance or prejudice is a prerequisite to recovery under Section 1022. However, in Morse v. Stanley, 566 F.Supp. 1455 (S.D.N.Y.1983), aff'd on other grounds, 732 F.2d 1139 (2d Cir.1984), the district court denied recovery to the plaintiff for a violation of Section 1022 because he had not been prejudiced by the inadequacy of the summary plan description provided by the plan trustees. The Court of Appeals did not reach the prejudice question because it found that the plan summary was not inadequate as a matter of law.

Furthermore, our Court of Appeals has upheld a district court decision that required a showing of reliance or prejudice as a prerequisite to recovery under a related provision of ERISA. See Pollock v. Castrovinci, 476 F.Supp. 606, 617-618 (S.D.N.Y.1979), aff'd without opinion, 622 F.2d 575 (2d Cir.1980). The district court in Pollock held that, although the plan administrator had violated 29 U.S.C. § 1024 by failing to supply the plaintiff with a copy of an employee benefit plan, the plaintiff could not recover because she had not been prejudiced by the administrator’s action.

In this case, there is a genuine dispute of fact between the parties as to whether the plaintiff’s injury resulted from his reliance on the defendant’s summary plan description. For example, the plaintiff states in his affidavit that his decision to elect the defendant’s long-term disability option, rather than its early retirement option, was based in part on his reading of the summary plan description. Affidavit of Steven M. Ruotolo (filed March 26, 1985), ¶¶ 7, 9. However, in somewhat ambiguous testimony at his deposition, the plaintiff suggested that he merely “glanced” at the summary but did not study it in any detail. Defendant’s Affidavit, Exhibit 1, at 18-19. See also id. at 60-62, 68. It would therefore be inappropriate for this court to award summary judgment to either party with respect to the relief sought by the plaintiff.

The defendant contends that the plaintiff should be denied recovery — regardless of any deficiencies in the summary plan description and regardless of any reliance or prejudice on his part — because he has “unclean hands.” In essence, the defendant asks the court to find that the plaintiff forfeited any claim to recovery by having failed to answer questions about his employment status that the defendant failed to ask.

The courts of this Circuit are generally “reluctant to apply the unclean hands doctrine in all but the most egregious situations.” Market v. Scovill Manufacturing Co., 471 F.Supp. 1244, 1255 (W.D.N.Y.), affd without opinion, 610 F.2d 807 (2d Cir.1979). The defendant has established no conduct by Mr. Ruotolo that is so egregious as to deny him any benefits to which he may be deemed entitled as a result of further proceedings in this case.

Conclusion

For the reasons stated above, the court holds that the plaintiff is entitled to partial summary judgment that the defendant violated 29 U.S.C. § 1022(a)(1) and (b). What relief the plaintiff is entitled to obtain, if any, remains to be determined at trial upon a factual showing by the plaintiff of injury resulting from his reliance on the deficiencies in the defendant’s summary plan description. Accordingly, the plaintiff’s motion for summary judgment is granted in part and denied in part, and the defendant’s cross-motion for summary judgment is denied.

It is so ordered.

      . The statute provides, in pertinent part:
      (a) (1) A summary plan description of any employee benefit plan shall be furnished to participants and beneficiaries as provided in section 1024(b) of this title. The summary plan description shall include the information described in subsection (b) of this section, shall be written in a manner calculated to be understood by the average plan participant, and shall be sufficiently accurate and comprehensive to reasonably apprise such participants and beneficiaries of their rights and obligations under the plan____
      (b) The plan description and summary plan description shall contain the following information: The name and type of administration of the plan; the name and address of the person designated as agent for the service of legal process, if such person is not the administrator; the name and address of the administrator; names, titles, and addresses of any trustee or trustees (if they are persons different from the administrator); a description of the relevant provisions of any applicable collective bargaining agreement; the plan's requirements respecting eligibility for participation and benefits; a description of the provisions providing for nonforfeitable pension benefits; circumstances which may result in disqualification, ineligibility, or denial or loss of benefits; the source of financing of the plan and the identity of any organization through which benefits are provided; the date of the end of the plan year and whether the records of the plan are kept on a calendar, policy, or fiscal year basis; the procedures to be followed in presenting claims for benefits under the plan and the remedies available under the plan for the redress of claims which are denied in whole or in part (including procedures required under section 1133 of this title).
      29 U.S.C, § 1022 (emphasis added).

      . The regulations provide, in pertinent part:
      (a) Method of presentation. The summary plan description shall be written in a manner calculated to be understood by the average plan participant and shall be sufficiently comprehensive to apprise the plan's participants and beneficiaries of their rights and obligations under the plan. In fulfilling these requirements, the plan administrator shall exercise considered judgment and discretion by taking into account such factors as the level of comprehension and education of typical participants in the plan and the complexity of the terms of the plan. Consideration of these factors will usually require the limitation or elimination of technical jargon and of long, complex sentences, the use of clarifying examples and illustrations, the use of clear cross references and a table of contents.
      (b) General format. The format of the summary plan description must not have the effect to [sic] misleading, misinforming or failing to inform participants and beneficiaries. Any description of exceptions, limitations, reductions, and other restrictions of plan benefits shall not be minimized, rendered obscure, or otherwise made to appear unimportant. Such exceptions, limitations, reductions, or restrictions of plan benefits shall be described or summarized in a manner not less prominent than the style, captions, printing type and prominence used to describe or summarize plan benefits. The advantages and disadvantages of the plan shall be presented without either exaggerating the benefits or minimizing the limitations. The description or summary of restrictive plan provisions need not be disclosed in the summary plan description in close conjunction with the description or summary of benefits, provided that adjacent to the benefit description the page on which the restrictions are described is noted.
      29 C.F.R. § 2520.102-3.