source: Caselaw Access Project

author: POLOZOLA, District Judge.

license: Public Domain

text:
    Billy COLE, et al. v. CIRCLE R. CONVENIENCE STORES, INC., et al.
    Civ. A. No. 84-903-B.
    United States District Court, M.D. Louisiana.
    Jan. 30, 1985.

      Ralph Brewer, Baton Rouge, La., for plaintiffs.
    Sam J. D’Amico, D’Amico, Curet & Dampf, Baton Rouge, La., Gregg R. Potvin, Washington, D.C., for defendants.
   POLOZOLA, District Judge.

This suit arises from an alleged franchise agreement entered into between the plaintiffs, Billy Cole and Sherry Cole (Coles) and the defendants, Circle R. Convenience Stores, Inc., J.C. Roberts Oil Company, James C. Roberts, Jr. and Mrs. Sylvia Roberts. The plaintiffs allege that two years after they were granted a franchise to operate a self service gasoline facility and convenience store, the defendants, “without legal sanction, notice or demand,” took possession of the leased franchise facilities and confiscated cash on hand, stock and other assets which belonged to the plaintiffs. The Coles claim that such actions violated the Petroleum Marketing Practices Act (PMPA) and the Racketeering Influenced and Corrupt Organization Act (RICO).

This matter is now before the court on motions of the defendants to dismiss for lack of subject matter jurisdiction and for failure to state a claim upon which relief can be granted.

I. The Petroleum Marketing Practices Act

The PMPA prohibits a franchisor from terminating or failing to renew a franchise except under carefully defined conditions and only for the specific grounds permitted by the Act. If a franchisor violates the Act, a franchisee may bring a civil action against the franchisor in a federal district court.

The defendants contend that this court lacks subject matter jurisdiction to adjudicate the plaintiffs claim brought pursuant to PMPA because the Coles have not alleged sufficient facts to satisfy the definition of a “franchisee”. A franchisee is “a retailor or distributor (as the case may be) who is authorized or permitted, under a franchise, to use a trademark in connection with the sale, consignment or distribution of a motor fuel.” According to the defendants, plaintiff fails to meet this definition for two reasons: (1) the plaintiff is neither a retailer nor a distributor; and (2) the agreement is not a “franchise” within the meaning of PMPA because the defendants did not authorize the plaintiffs to use a refiner’s trademark.

Initially this court must determine whether a plaintiff must establish that he is in fact a franchisee in order for there to be subject matter jurisdiction under PMPA or whether the definitional reach of the Act dictates if one has stated a claim upon which relief can be granted. The Court concludes that the definitional reach of PMPA is determinative of whether one has stated a claim pursuant to PMPA upon which relief could be granted. Therefore, the issue of whether plaintiffs are a franchise goes to the merits of the action and not to the power of the court to adjudicate the claim. The court’s conclusion is in accord with decisions rendered by other courts which have considered this issue. With one exception, decisions dismissing claims for failure to come within the definitional scope of Section 2801, have been rendered on the merits.

The defendants contend that if the court does not have subject matter jurisdiction, then this action should be dismissed for failure to state a claim pursuant to PMPA for which relief can be granted under Rule 12(b)(6) of the Federal Rules of Civil Procedure. Because matters outside of the pleadings have been filed in the record and because the court intends to rely on matters outside of the pleadings to resolve defendants’ motion to dismiss, the motion to dismiss must be converted to a motion for summary judgment. Since the court has converted the motion to dismiss for failure to state a claim upon which relief can be granted to a motion for summary judgment, the court must grant the parties additional time to file evidence permitted by Rule 56 of the Federal Rules of Civil Procedure in support of or in opposition to the motion. Each party shall have twenty (20) days from the date of this opinion to submit such evidence. After the evidence, if any, has been submitted to the court, the court shall issue its decision on the pending motion.

II. The Racketeer Influenced and Corrupt Organization Act

The defendants also contend that this court lacks subject matter jurisdiction to adjudicate the claim brought pursuant to the RICO Act because the allegations in the complaint do not constitute a “pattern of racketeering.” This court finds that it is firmly established in the jurisprudence that the presence of a “pattern of racketeering” goes to the merits of a RICO claim and not to the power of the court to adjudicate the claim. Therefore, the motion to dismiss the RICO claim for lack of subject matter jurisdiction must be denied.

Defendants further contend that the RICO complaint should be dismissed for failure to state a claim upon which relief can be granted. An action should not be dismissed under Rule 12(b)(6) of the Federal Rules of Civil Procedure unless it is evident that the plaintiff will be unable to prove a set of facts in support of his claim that would entitle him to relief.

The five elements that comprise a violation of 18 U.S.C. § 1962 are “(1) the existence of the enterprise; (2) that the enterprise affected interstate commerce; (3) that the defendant was employed by or associated with the enterprise; (4) that he participated in the affairs of the enterprise and (5) that he participated through a pattern of racketeering activity.” In Alcorn County, Miss. v. U.S. Interstate Supplies, supra, the Court stated that “a civil RICO claimant must prove (1) a violation of the substantive RICO statute, 18 U.S.C. § 1962, and (2) an injury to the plaintiffs ‘business or property by reason of a violation of section 1962.’ ” Alcorn County, 731 F.2d at 1167.

Presumably the defendants in this case base their motion to dismiss upon the fact that plaintiffs’ complaint does not state such facts as would indicate a “pattern of racketeering”. “Racketeering activity” is defined as “any act or threat involving ... robbery ... which is chargeable under State law and punishable by imprisonment for more than one year.” Plaintiffs’ complaint alleges that the defendants appeared on the franchise premises, dispossessed plaintiffs of such and confiscated various things on such premises. These actions should be sufficient to constitute criminal activity under Louisiana law which could be punishable by imprisonment for more than one year. Plaintiffs also allege in affidavits submitted with the motions that the defendants committed the same acts against another franchisee. However, these allegations are not included in the complaint. As the complaint now stands, the complaint fails to state a claim upon which relief can be granted because only one criminal act is alleged. If the allegations in the affidavit were included in the complaint, the complaint could possibly state a claim upon relief could be granted. Therefore, in the interest of justice, the Court will give the plaintiff 15 days to amend his complaint to set forth, if he wishes, the allegations set forth in the affidavit. The Court will reserve a ruling on defendant’s motion to dismiss until the Court determines whether the plaintiff will amend the complaint. If an amendment is timely filed, the parties shall have 20 days to file supplemental briefs in support of or in opposition to the motion to dismiss.'

Therefore:

IT IS ORDERED that the motion of the defendants to dismiss those claims pursuant to the Petroleum Marketing Practices Act, 15 U.S.C. §§ 2801-2806, for lack of subject matter jurisdiction be, and it is hereby DENIED.

IT IS FURTHER ORDERED that the motion of the defendants to dismiss those claims pursuant to the Petroleum Marketing Practices Act, 15 U.S.C. §§ 2801-2806, for failure to state a claim upon which relief can be granted be, and it is hereby converted to a motion for summary judgment and all parties shall have twenty (20) days from the date of this opinion to file evidence in support of or in opposition to the motion for summary judgment.

IT IS FURTHER ORDERED that the plaintiff shall have 15 days to amend his complaint in accordance with this minute entry.

IT IS FURTHER ORDERED that the motion of the defendants to dismiss those claims pursuant to the Racketeering Influenced and Corrupt Organization Act, 18 U.S.C. §§ 1961-1964, for lack of subject matter jurisdiction be, and it is hereby DENIED.

IT IS FURTHER ORDERED that the motion of the defendants to dismiss those claims pursuant to the Racketeering Influenced and Corrupt Organization Act, 18 U.S.C. §§ 1961-1964, for failure to state a claim upon which relief can be granted be, and it is hereby STAYED pending a decision by the plaintiff to amend his complaint as previously ordered herein. Each party shall have 20 days after plaintiff files an amended complaint to file supplemental briefs and affidavits in support of or in opposition to the motion to dismiss.

      . 15 U.S.C. §§ 2801-2806.

      . 18 U.S.C. §§ 1961-1964.

      . 15 U.S.C. § 2801(3) defines a franchisor as a "refiner or distributor (as the case may be) who authorizes or permits, under a franchise, a retailer or distributor to use a trademark in connection with the sale, consignment, or distribution of motor fuel.

      . A franchise is any contract "... between a distributor and a retailer, under which a refiner or distributor (as the case may be) authorizes or permits a retailer or distributor to use, in connection with the sale, consignment, or distribution of motor fuel, a trademark which is owned or controlled by such refiner or by a refiner which supplies motor fuel to the distributor which authorizes or permits such use.” 15 U.S.C. § 2801(l)(A)(iv).

      . 15 U.S.C. § 2804 states the temporal requirements for notice as well as specifications for the form and content of such notice.

      . 15 U.S.C. § 2802(b)(2) states the permitted grounds for both termination and nonrenewal of a franchise. 15 U.S.C. § 2802(b)(3) states additional grounds for nonrenewal.

      . 15 U.S.C. § 2802(a). See Checkrite Petroleum, Inc., v. Amoco Oil Co., 678 F.2d 5 (2d Cir.1982), cert. denied 459 U.S. 833, 103 S.Ct. 74, 74 L.Ed.2d 73 (1982) and Rogue Valley Station v. Birk Oil Co., Inc., 568 F.Supp. 337 (D.Ore.1983).

      . 15 U.S.C. § 2805(a) provides in pertinent part that "[i]f a franchisor fails to comply with the requirements of section 2802 or 2803 of this title, the franchisee may maintain a civil action against such franchisor____"

      . Under Section 2805(a), only a "franchisee” may bring an action pursuant to PMPA. See Note 8, supra.

      . 15 U.S.C. § 2801(4).

      . A retailer is "any person who purchases motor fuel for sale to the general public for ultimate consumption." 15 U.S.C. § 2801(7).

      . 15 U.S.C. § 2801(6) provides that a distributor is a person or an affiliate of such person who:
      (A) purchases motor fuel for sale, consignment, or distribution to another; or
      (B) receives motor fuel on consignment for consignment or distribution to his own motor fuel accounts or to accounts of his supplier, but shall not include a person who is an employee of, or merely serves as a common carrier providing transportation service for, such supplier.

      . See note 4, supra, for definition of franchise.

      . A refiner is “any person engaged in the refining of crude oil to produce motor fuel, and includes any affiliate of such person.” 15 U.S.C. § 2801(5).

      . See, Bell v. Hood, 327 U.S. 678, 66 S.Ct. 773, 90 L.Ed. 939 (1946).

      . In Smith v. Atlantic Richfield Co., 533 F.Supp. 264 (E.D.Pa.1982), aff'd. mem., 692 F.2d 749 (3rd Cir.1982) the court held that Section 2801 was a purely jurisdictional matter and dismissed the action for lack of subject matter jurisdiction.

      . Sun Valley Gas v. Ernst Enterprises, Inc., 711 F.2d 138 (9th Cir.1983); Brown v. American Petrofina Marketing, Inc., 555 F.Supp. 1327 (M.D.Fla.1983) judgment affirmed Brown v. American Petrofina Mktg., 733 F.2d 906 (11th Cir.1984); Johnson v. Mobil Oil Corp., 553 F.Supp. 195 (S.D.N.Y.1982); Meyer v. Amerada Hess Corp., 541 F.Supp. 321 (D.N.J.1982); Blackwell v. Power Test Corp., 540 F.Supp. 802 (D.N.J.1981), aff'd. mem., 688 F.2d 818 (3rd Cir.1982); Bsales v. Texaco, Inc., 516 F.Supp. 655 (D.N.J.1981). In Checkrite Petroleum, Inc. v. Amoco Oil Co., supra, the Second Circuit reversed a lower court judgment for the plaintiff on the basis that the plaintiff was not a "franchisee"; in so doing, there was no acknowledgement of a jurisdictional problem.

      . This conclusion is based upon rule 12(b) which provides:
      If, on a motion asserting the defense numbered (6) to dismiss for failure of the pleading to state a claim upon which relief can be granted, matters outside the pleading 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, and all parties shall be given reasonable opportunity to present all material made pertinent to such a motion by Rule 56.

      . See, Alcorn County, Miss. v. U.S. Interstate Supplies, 731 F.2d 1160 (5th Cir.1984); United States v. Martino, 648 F.2d 367 (5th Cir.1981), cert. denied, 456 U.S. 943, 102 S.Ct. 2006, 72 L.Ed.2d 465 (1982) and United States v. Uni Oil, 646 F.2d 946 (5th Cir.1981), cert. denied, 455 U.S. 908, 102 S.Ct. 1254, 71 L.Ed.2d 446 (1982).

      . Watts v. Graves, 720 F.2d 1416 (5th Cir.1983) and Johnson v. Wells, 566 F.2d 1016 (5th Cir.1978).

      . United States v. Martino, 648 F.2d at 394.

      . 18 U.S.C. § 1961(1)(A).


author: BULLOCK, District Judge.

text:
    Bruce SPRINGSTEEN, Sweet Summer Night Music, See This House Music, PGP Music, Brockman Music, Cass County Music Company, Kortchmar Music, Red Cloud Music Company, Jeddrah Music, and Night Kitchen Music, Plaintiffs, v. PLAZA ROLLER DOME, INC., and Gerald E. Manuel, Defendants, v. AMERICAN SOCIETY OF COMPOSERS, AUTHORS, AND PUBLISHERS, Additional Defendant on Counterclaim.
    Civ. No. C-84-11-R.
    United States District Court, M.D. North Carolina, Rockingham Division.
    Jan. 30, 1985.
    Michael E. Weddington, Raleigh, N.C., for plaintiffs.
    John R. Erwin and David M. Clark, Greensboro, N.C., for Plaza Roller and Manuel.
    Michael E. Weddington, Raleigh, N.C., for American Society of Composers, etc.
   MEMORANDUM OPINION

BULLOCK, District Judge.

Plaintiffs in this copyright infringement action are ten copyright owners and members of the American Society of Composers, Authors, and Publishers (“ASCAP”), seeking monetary damages and injunctive relief against Defendants Plaza Roller Dome, Inc., and Gerald E. Manuel for their allegedly unauthorized transmission via radio and speaker system of Plaintiffs’ copyrighted compositions. The unlawful transmissions allegedly were made at the Plaza Putt-Putt golf course in Laurinburg, North Carolina, which is owned and controlled by Defendants. This action arises under the federal copyright laws, 17 U.S.C. § 101 et seq. Defendants have filed an answer and counterclaim based on allegations arising from the same transaction. Pending before the court are the parties’ cross-motions for summary judgment as to whether Defendants’ Putt-Putt course falls within the 17 U.S.C. § 110(5) exemption to the copyright laws. For the reasons set forth below, Defendants’ motion for summary judgment will be granted, Plaintiffs’ cross-motion for summary judgment will be denied, and Plaintiffs’ six causes of action will be dismissed.

Factual Background

The complex owned and controlled by Defendant Plaza Roller Dome, Inc., consists of an indoor roller rink and an adjacent outdoor miniature golf course and is located at the College Plaza Shopping Center in Laurinburg, North Carolina. Defendant Gerald E. Manuel is the president and principal shareholder of Plaza Roller Dome, Inc. The genesis of the present dispute between the two parties was the October 15, 1980, initialing of a licensing agreement between Defendants and AS-CAP whereby Defendants would be entitled to perform musical compositions by ASCAP's members. The agreement was the result of a long, arduous, and often bitter negotiating process; it provided for ASCAP to settle any and all claims of copyright infringement against the Defendants through October 14, 1980, for the payment of $500.00, and Defendants agreed to pay $300.00 per year for the privilege of performing musical compositions by AS-CAP’s members thereafter. Defendants claim that they understood and were led to believe by ASCAP that the settlement covered both the roller rink and the Putt-Putt course. Plaintiffs disagree, claiming that the agreement does not cover the Putt-Putt course.

Shortly after the October 15, 1980, signing of the licensing agreement, ASCAP, as agent for Plaintiffs, approached Defendants and insisted that the Defendants pay an additional fee in order to license the Putt-Putt course. Defendants contend that Plaintiffs, through their agent ASCAP, were well aware of the scope of the initial agreement, and that ASCAP, on behalf of Plaintiffs, threatened suit and ultimately brought about the institution of this action in order to coerce the Defendants into paying for privileges to which they were already entitled under the 1980 agreement. This course of action was pursued by Plaintiffs and ASCAP, the Defendants contend, to punish them for being tough negotiators in the discussions leading up to the agreement. As a result, when Plaintiffs instituted this litigation, Defendants filed their counterclaim alleging state law causes of action sounding in fraud, deceit, intentional harassment, and unfair trade practices.

The specific infringements complained of by Plaintiffs are alleged to have arisen from the performance, via radio and speaker system, of copyrighted musical compositions at Defendants’ Putt-Putt course on August 27, 1983. The radio and speaker system at the Putt-Putt course consists of a radio receiver wired to six separate speakers mounted on light poles interspersed over the 7,500 square foot area of the course. The Defendants contend (and are not controverted by Plaintiffs) that the speakers are very unsophisticated, do not project well, and can be heard without distortion only at a close proximity thereto. They argue that this lack of sophistication, inferior to many home systems, and the limited revenue generated by the Putt-Putt course ($24,308.00 over the six-year period ending July 31, 1983 or slightly over $4,000.00 per year — or less than 3% of the gross revenue of the Plaza Roller Dome) support their contention that the course is not of sufficient size to justify, as a practical matter, a subscription to a commercial background music system and thus is exempt under Section 1KK5).

Discussion

Section 106(4) of Title 17 of the United States Code grants copyright owners the exclusive rights publicly to perform, or authorize the performance of, their copyrighted works. Pursuant to this provision of the copyright law, Plaintiffs, through AS-CAP, received licensing fees from radio stations for the performance of their copyrighted works. Plaintiffs and ASCAP now claim that the “further transmission or performance” of its members’ copyrighted works via a radio receiving apparatus “not of a kind commonly used in private homes” by the Plaza Roller Dome and Putt-Putt golf course constitutes copyright infringement. Defendants contend that their use of Plaintiffs’ copyrighted materials falls within the 17 U.S.C. § 110(5) exemption to the copyright laws.

The Supreme Court, in Twentieth Century Music Corp. v. Aiken, 422 U.S. 151, 95 S.Ct. 2040, 45 L.Ed.2d 84 (1975), created an exemption to the copyright laws for small business establishments, noting that the absence of such an exemption “would result in a regime of copyright law that would be both wholly unenforceable and highly inequitable.” Id. at 162, 95 S.Ct. at 2047. Specifically, the court held that the owner and operator of a chain of fast-food restaurants in the Pittsburgh area who kept a radio with outlets to four speakers in the ceiling turned on throughout the business day for the enjoyment of the customers and employees in his downtown restaurant was exempt from coverage of the 1909 copyright laws. The size of the particular restaurant in Aiken was 1,055 square feet, of which 620 square feet were open to the public; no mention of the revenues of the restaurant was included in the opinion.

In 1976, primarily as a result of this decision, Congress enacted Section 110(5) (17 U.S.C. § 110[5]) to limit the exemption from rights granted copyright owners under Section 106(4).

Section 110(5) exempts from liability:

[Cjommunication of a transmission embodying a performance or display of a work by the public reception of a transmission on a single receiving apparatus of a kind commonly used in private homes, unless—
(A) a direct charge is made to see or hear the transmission; or
(B) the transmission thus received is further transmitted to the public.

The meaning of this statutory language is far from clear, and its reach has scarcely been tested in the courts. Only two reported cases, each involving virtually identical factual situations, have interpreted Section 110(5) and both have relied very heavily on the legislative history in determining whether the exemption applies in a particular factual setting. In Sailor Music v. Gap Stores, Inc., 516 F.Supp. 923 (S.D.N.Y.1981), aff'd, 668 F.2d 84 (7th Cir.1981), cert. denied, 456 U.S. 945, 102 S.Ct. 2012, 72 L.Ed.2d 468 (1982), (hereinafter “the Gap case”), the defendant was a well-known chain of approximately 420 clothing stores with annual revenues of nearly $300 million. Plaintiffs, members of ASCAP, brought an infringement action against defendant seeking monetary damages and injunctive relief against every Gap Store in the country. It was Gap’s policy to transmit for the enjoyment of its customers radio programs by means of radio receivers connected to recessed loudspeakers arranged so that the music was audible throughout their stores. The allegedly infringing acts occurred at two Gap Stores located in New York City — one on Sixth Avenue and the other on Thirty-Fourth Street. In each of the stores the speakers were recessed behind wire grids in the store’s ceiling and were connected to the receiver by built-in wiring. There were four speakers at the Sixth Avenue store and seven speakers at the Thirty-Fourth Street store. The two stores had areas of 2,679 and 6,770 square feet, respectively, and the average size of all Gap stores was 3,500 square feet.

In his consideration of whether the Section 110(5) exemption applied to the Gap Stores, Judge Gagliardi quoted at length from the House Judiciary Committee report on the 1976 copyright act. The relevant discussion from the committee report provides:

Under the particular fact situation in the Aiken case, assuming a small commercial establishment and the use of a home receiver with four ordinary loudspeakers grouped within a relatively narrow circumference from the set, it is intended that the performances would be exempt under clause (5). However, the Committee considers this fact situation to represent the outer limit of the exemption, and believes that the line should be drawn at that point. Thus, the clause would exempt small commercial establishments whose proprietors merely bring onto their premises standard radio or television equipment and turn it on for their customers’ enjoyment, but it would impose liability where the proprietor has a commercial “sound system” installed or converts a standard home receiving apparatus (by agumenting [sic] it with sophisticated or extensive amplification equipment) into the equivalent of a commercial sound system. Factors to consider in particular cases would include the size, physical arrangement, and noise level of the areas within the establishment where the transmissions are made audible or visible, and the extent to which the receiving apparatus is altered or augmented for the purpose of improving the oral or visual quality of the performance for individual members of the public using those areas.

U.S.Code Cong. & Admin.News 1976, pp. 5659, 5701 (quoted by Judge Gagliardi in the Gap case, 516 F.Supp. 923, 924-25).

Applying the standard set forth above for the Gap Stores, Judge Gagliardi held that Congress clearly did not intend for stores of that size to fall within the scope of the exemption. The court, noting that the Gap Stores, with an average size of 3,500 square feet, were much larger than the public area of 620 square feet in the fast-food store at issue in Aiken (which fact situation the Committee emphasized, was to be “the outer limit” of the Section 110[5] exemption), concluded, by virtue of the size of the Gap Stores, that the radio transmissions received on the radio receivers and played via recessed loudspeakers were “further transmitted to the public,” thus placing the stores outside the scope of the exemption.

Judge Gagliardi found further support for his conclusion in the following statement of the Conference Committee Report:

“It is the intent of the conferees that a small commercial establishment of the type involved in Twentieth Century Music Corp. v. Aiken, 422 U.S. 151 [95 S.Ct. 2040, 45 L.Ed.2d 84] (1975), which merely augmented a home-type receiver and which was not of sufficient size to justify, as a practical matter, a subscription to a commercial background music service, would be exempt.” H.Rep. No. 94-1733, 94th Cong., 2d Sess., 75 (1976), U.S.Code Cong. & Admin.News (1976), p. 5816.

516 F.Supp. at 925. Without specifying whether by size he meant the revenues of the Gap Stores, which totaled over $300 million in 1979, or the average size of each Gap store, which was nearly 3,500 square feet (indoors), Judge Gagliardi held that “[t]he Gap is ‘of sufficient size to justify, as a practical matter, a subscription to a commercial background music service.’ ” The court thus held that Gap was not a small commercial establishment whose reception and performance of radio transmissions via commonly used stereo equipment Congress intended in Section 110(5) to exempt from the category of copyright infringing uses, granted plaintiff’s motion for summary judgment, and entered an order enjoining defendant’s infringing use of plaintiff’s copyrighted works.

The only other reported case which has interpreted the Section 110(5) exemption is Broadcast Music, Inc. v. United States Shoe Corporation, 211 U.S.P.Q. 43 (C.D.Cal.1980), aff'd, 678 F.2d 816 (9th Cir.1982) (hereinafter “BMI v. U.S. Shoe"). BMI v. U.S. Shoe, as was mentioned supra, presented a factual situation virtually identical to that presented by the Gap case. Defendant United States Shoe Corporation owned and operated a chain of more than 600 women’s retail apparel stores under the name “Casual Corner.” In many of its stores, radio broadcasts were played to the public through the use of a single radio receiver connected to four or more speakers mounted on the store’s ceiling. The radio broadcasts included many copyrighted songs. BMI was the licensee of the public performance rights of many of the songs which were played at the facilities without BMI’s permission. BMI thus brought suit against United States Shoe Corporation seeking injunctive relief and damages for defendant’s unauthorized use of plaintiff’s copyrighted materials. Defendant in turn contended that it was. eligible for the 17 U.S.C. § 110(5) exemption and both sides submitted cross-motions for summary judgment on that issue.

The Ninth Circuit Court of Appeals upheld the district court’s order granting summary judgment in favor of Plaintiffs. The court relied heavily on the Section 110(5) legislative history quoted in the Gap case, as well as on Judge Gagliardi’s opinion. The court held that the Casual Corner stores exceeded the “outer limit” of the exemption (specified by the House Judiciary Committee to approximate the facts in Aiken), because each store had a commercial monaural system, with widely separated speakers of a type not used in private homes, and the size and nature of the operation justified, in the eyes of the court, the use of a commercial background music system. 678 F.2d at 817.

Turning now to the case at bar, there are several significant distinctions between the facts presented in the Gap and BMI v. U.S. Shoe cases, where the exemption was held not to apply, and the instant litigation. Plaintiffs contend that since the Aiken case was intended, according to the House Judiciary Committee Report, to “represent the outer limit of the exemption,” and since the Plaza Roller Dome Putt-Putt course is both larger in area and has a greater number of speakers than did the exempted restaurant in Aiken, that the exemption clearly should not apply to Defendants’ Putt-Putt facility. However, an objective assessment of the facts is much more complex than Plaintiffs’ open and shut analysis.

It is true, as Plaintiffs contend, that the public area of Defendants’ Putt-Putt course is larger (by a factor of 12 — 7,500 square feet to 620) than that of the restaurant in Aiken, and that the Putt-Putt course employed more speakers (six) than did the Aiken facility (four). The size of the allegedly offending facility and the number of speakers are not, however, standing alone, the sole or even predominant factors to consider in determining the applicability of the exemption. According to the House Judiciary Committee Report, “size, physical arrangement, and noise level of the areas within the establishment where the transmissions are made audible or visible, and the extent to which the receiving apparatus is altered or augmented for the purpose of improving the oral or visual quality of the performance” are all factors to consider in determining whether the receiving apparatus has been converted into the equivalent of a “commercial sound system” so as to remove the establishment from the scope of the Section 110(5) exemption.

Applying these factors to Defendants’ Putt-Putt course, the argument against applying the Section 110(5) exemption becomes much less persuasive. To begin with, ASCAP’s own field representative described the sound system at Defendants’ Putt-Putt facility as follows:

[S]ix speakers, attached to white posts that also provide lighting for evening Putt-Putt are equidistantly spread throughout the course. The speakers did not project very well and one needed to be in a close proximity to the speaker to hear without much distortion.

Brief in Support of Defendants’ Motion for Summary Judgment — Exhibit A (emphasis added).

Clearly, the noise level and audibility of songs transmitted over Defendants’ loudspeakers, by Plaintiffs’ own admission, is not comparable to the sound systems in the Gap case and BMI v. U.S. Shoe, and does not rise to the level or minimum quality requisite for a commercial sound system. Unlike the systems involved in those two cases, where the infringing performances were audible throughout the stores and the speakers improved the quality of the performance, the allegedy infringing performances at Defendants’ Putt-Putt course were scarcely audible without distortion even at very close proximity to the speakers. Under such circumstances, the speakers could scarcely be said to have “improved the quality of the performance.” Indeed, the poor quality of speakers and the outdoor nature of the course guaranteed that the quality of sound performed for customers at Defendants’ course would be lower than that which was performed for customers in the Gap and Casual Corner stores. Moreover, with respect to audibility and lack of improvement in the quality of the performance via augmentation, the receiving apparatus and speakers at Defendants’ Putt-Putt course are inferior to those involved in the Aiken case. Hence, when all relevant factors have been taken into account, including those set out in the House Judiciary Committee Report, Defendants’ sound system does not exceed the outer limit of the exemption as specified by the fact situation in Aiken and should therefore be entitled to the exemption to the copyright laws pursuant to Section 110(5).

This conclusion is reinforced by the language of the Conference Committee Report, incorporated into the legislative history subsequent to the House Judiciary Committee Report, which stated that a small commercial establishment of the type involved in Aiken which was not of sufficient size to justify, as a practical matter, a subscription to a commercial background service, would be exempt. The courts in the Gap and BMI v. U.S. Shoe cases held that operations with 420 and 600 prosperous retail outlets, respectively, both of which did hundreds of millions of dollars of business annually, were not within the purview of the Section 110(5) exemption. This court does not contest the soundness of those opinions. However, if any operation is “not of sufficient size to justify, as a practical matter, a subscription to a commercial background music service,” it is Defendants’ Putt-Putt course.

The restaurant involved in the Aiken case was a fast-food restaurant in Pittsburgh which operated year-round, did a brisk business, and undoubtedly generated substantial revenues. It was one of a chain of restaurants in the area. Defendants’ Putt-Putt course, by contrast, is open for only roughly six months per year and rarely if ever generates over $1,000.00 per month. Writing in the New York Law School Law Review, Mr. Bernard Korman, general counsel for ASCAP, correctly described the congressionally-mandated scope of the Section 110(5) exemption as follows: “it [is] a very limited exemption which ... require[s] any establishment large enough to be a potential customer of a background music service to obtain a license if it chooses to perform music broadcast by any radio station.” Korman, Performance Rights in Music under Sections 110 and 118 of the 1976 Copyright Act, 22 N.Y.L.Sch.L.Rev. 521, 534 (1977).

Based on all of the factors analyzed above, this court must conclude that the Plaza Roller Dome Putt-Putt course is not. of sufficient size to justify a subscription to a commercial background music service and therefore is within the scope of the Section 110(5) exemption. When due weight is given to each of the factors mentioned by Congress in determining the applicability of the exemption, the size of the course and the slightly larger number of speakers involved in the instant case vis-avis Aiken, standing alone, do not alter this conclusion.

Consequently, Defendants’ motion for summary judgment will be granted and Plaintiffs’ motion for partial summary judgment will be denied.

A judgment will be entered in accordance with this Memorandum Opinion.

      . The reference to commercial background music systems is not in the statute, but was indicated to be a key consideration in the legislative history, as discussed infra.

      . Both the Supreme Court and court of appeals decisions referred to four speakers in the ceiling of the restaurant. However, the district court opinion stated that there were five separate speakers.

      . Of which only 4,690 square feet consisted of selling area open to the public.

      . Further, the court observed, without conclusively deciding the issue, that
      the stereo apparatus used by the specified Gap stores, including built-in wiring and four or seven loudspeakers recessed in ceiling cavities, may be considered to be "standard home receiving apparatus [converted] (by augmenting it with sophisticated or expensive amplification equipment) into the equivalent of a commercial sound system.” H.Rep., supra, at 87, U.S.Code Cong. & Admin.News 1976, p. 3701.
      516 F.Supp. at 925.
      Finally, the court held that it could not as a matter of law decide whether or not the particular components used in the two Gap Stores in question were of a type "commonly used in private homes” and declined to grant summary judgment on that basis.

      . Whether or not a system has been transformed into the equivalent of a commercial sound system is a significant test in the legislative history because, inferentially. Congress apparently concluded that a receiving apparatus is "not of a kind commonly used in private homes” precisely when it has been transformed into the equivalent of a commercial sound system.

      . The Putt-Putt course is, of course, only a part of a larger operation which may be of sufficient size to justify a subscription to a commercial music system, i.e., the Plaza Roller Dome complex which includes Defendants’ licensed roller rink. However, since Plaintiffs seek to treat the Putt-Putt course separately for purposes of licensing, this court will likewise treat the course as analytically separate for the purpose of applying the Section 110(5) exemption.

      . Over the six-year period from July 1977 through July 1983, Defendánts’ Putt-Putt course never generated revenues in excess of $5,700.00 in any six-month period.


author: TEITELBAUM, Chief Judge.

text:
    Roselia SNIZASKI, Plaintiff, v. Margaret HECKLER, Secretary of Health and Human Services, Defendant. Robert J. ANDREWS, Plaintiff, v. SECRETARY OF the DEPARTMENT OF HEALTH AND HUMAN SERVICES, Defendant. William W. GEARY, Plaintiff, v. SECRETARY OF the DEPARTMENT OF HEALTH AND HUMAN SERVICES, Defendant.
    Civ. A. Nos. 83-1414, 83-1984 and 83-2410.
    United States District Court, W.D. Pennsylvania.
    Jan. 31, 1985.

      Robert N. Peirce, Jr., Pittsburgh, Pa., for plaintiff in No. 83-1414.
    Amiel B. Caramanna, Jr., Pittsburgh, Pa., for plaintiff in Nos. 83-1984, 83-2410.
    Albert W. Schollaert, Asst. U.S. Atty., Pittsburgh, Pa., for defendant.
   MEMORANDUM OPINION

TEITELBAUM, Chief Judge.

Before the Court are petitions for attorney’s fees in social security disability cases which raise two issues: 1) are the district courts authorized to award attorney’s fees for services before the Social Security Administration; 2) are the fees requested reasonable.

Services before the agency

In each case the claimant prevailed before the court and the. attorney filed a petition for twenty-five percent (25%) of the past-due benefits for services before the agency and the court. The Secretary takes the position that the district courts lack jurisdiction to award attorney’s fees for representation at the administrative level. The Secretary maintains that counsel must petition the Social Security Administration for payment of fees for services provided during administrative proceedings.

The Social Security Act, as amended in 1968, authorizes the Secretary to set a fee for services before the agency.

The Secretary may, by rule and regulation, prescribe the maximum fees which may be charged for services performed in connection with any claim before the Secretary under this subchapter, and any agreement in violation of such rules and regulations shall be void. Whenever the Secretary, in any claim before him under this subchapter, makes a determination favorable to the claimant, he shall, if the claimant was represented by an attorney in connection with such claim, fix ... a reasonable fee to compensate such attorney for the services performed by him in connection with such claim. If as a result of such determination, such claimant is entitled to past-due benefits under this subchapter, the Secretary shall ... certify for payment (out of such past-due benefits) to such attorney an amount equal to whichever of the following is the smaller: (A) 25 per centum of the total amount of the past-due benefits, (B) the amount of the attorney’s fee so fixed, or (C) the amount agreed upon between the claimant and such attorney as the fee for such attorney’s services.

42 U.S.C. § 406(a).

The Act, as amended in 1965, authorizes the district courts to award a fee for services before the court.

Whenever a court renders a judgment favorable to a claimant under this sub-chapter who was represented before the court by an attorney, the court may determine and allow as part of its judgment a reasonable fee for such representation, not in excess of 25 percent of the total of the past-due benefits to which the claimant is entitled by reason of such judgment, and the Secretary may ... certify the amount of such fee for payment to such attorney out of, and not in' addition to, the amount of past-due benefits. In case of any such judgment, no other fee may be payable or certified for payment for such representation except as provided in this paragraph.

42 U.S.C. § 406(b)(1).

The Court of Appeals for this Circuit has not decided whether the district courts have the power to award fees for services before the agency. Reid v. Heckler, 735 F.2d 757, 761 n. 3 (3d Cir.1984). The other Courts of Appeals that have addressed the power of the district courts under section 406 have reached different results. The Fourth and Ninth Circuits have held that the Secretary alone is empowered to award fees for services before the agency. Morris v. Social Security Administration, 689 F.2d 495, 497 (4th Cir.1982); MacDonald v. Weinberger, 512 F.2d 144, 146 (9th Cir.1975). The Sixth Circuit has held that the tribunal that ultimately upholds the claim for benefits is the only tribunal that can approve and certify payment of attorney’s fees. Webb v. Richardson, 472 F.2d 529, 536 (6th Cir.1972).

The district courts in this Circuit, in the reported decisions, have also reached differing results. Oroshnik v. Schweiker, 569 F.Supp. 399, 400 (D.N.J.1983) held the district courts lack authority to award fees for services before the agency. Kemp v. Schweiker, 587 F.Supp. 778, 780 (W.D.Pa.1984) followed the Sixth Circuit decision in Webb v. Richardson and found the district courts authorized to award fees for services before the agency.

The statutory language indicates that the district courts do not have authority to award attorney’s fees for services before the agency. 42 U.S.C. § 406(b)(1) provides “whenever a court renders a judgment favorable to a claimant ... who was represented before the court by an attorney, the court may determine and allow as part of its judgment a reasonable fee for such representation ...” The phrase “such representation” has been held to “obviously mean[] representation before the court.” Oroshnik v. Schweiker, 569 F.Supp. at 400-401.

42 U.S.C. § 406(a) authorizes the Secretary to prescribe maximum fees for services before the Secretary. Identical language in another Title of the Act has been held to authorize the Secretary to prescribe maximum fees for services in the administrative process and “not [to] authorize the Secretary to exercise any function with respect to fees for services in the courts.” Reid v. Heckler, 735 F.2d at 762.

The Sixth Circuit approach of one tribunal awarding fees furthers several policies: simplicity and clarity in application, assurance that the aggregate fee does not exceed the statutory maximum, and elimination of redundancy. However, the language of the statute suggests that Congress intended to fulfill another policy: that each forum is in the best position to assess the value of counsel’s services to the client as it observed those services in the proceedings before it.

For the foregoing reason this Court concludes that it is without authorization to award fees for services before the Social Security Administration and can consider only the services before it.

Reasonable fees

The Social Security Act authorizes the court to award a reasonable fee for services before the court, not to exceed twenty-five percent (25%) of the past-due benefits. 42 U.S.C. § 406(b)(1). Routine approval of the statutory maximum should be avoided in all cases. Redden v. Celebrezze, 370 F.2d 373, 376 (4th Cir.1966).

In general, the reasonableness of court-awarded attorney’s fees is determined under the criteria set forth in Lindy Bros. Bldrs., Inc. v. American Radiator & Standard Sanitary Corp., 487 F.2d 161 (3d Cir.1973) and its progeny. Lindy requires consideration of the number of hours that should reasonably have been devoted to the case, a reasonable hourly rate, the contingent nature of the case and the quality of services. See In re: Fine Paper Antitrust Litigation, 751 F.2d 603 (3d Cir.1984). See also 20 C.F.R. § 404.1725(b) for factors considered by the Secretary when evaluating a request for approval of a fee for services before her.

The fee petition must accurately itemize the hours spent on specific activities. Lewis v. Secretary HHS, 707 F.2d 246 (6th Cir.1983); see also Fed.R.Civ.P. 11. (“The signature of an attorney ... constitutes a certificate by him that he has read the ... motion, ...; that to the best of his knowledge, information, and belief formed after reasonable inquiry it is well grounded in fact ... ”). The time spent preparing the fee petition does not benefit the claimant and cannot be compensated. Whitt v. Califano, 601 F.2d 160, 161 n. 2 (4th Cir.1979). Hourly billing rates for different services and information from which a contingency factor can be determined must also be provided.

Because the fee petitions submitted do not provide a basis for the required Lindy determination, they will be denied without prejudice and counsel may file amended fee petitions.

It may be that counsel-representing successful claimants in social security disability cases should be awarded a straight twenty-five (25%) of the past-due benefits for services before the agency and the court. That decision, however, must come from Congress and not this Court.

Appropriate orders will be entered.

      . Although the court in Kemp presumably found that its power to award fees for services before it and the agency derived from section 406(b)(1), it then went on, without discussion, to determine the reasonableness of the entire fee requested, for services before the court and the agency, under the "whichever is smaller” test in section 406(a) governing the Secretary’s determination of a fee for services before the agency.


text:
    Kenneth N. CARNEY, Plaintiff, v. Margaret HECKLER, Secretary of Health and Human Services, Defendant.
    Civ. A. No. 83-3028.
    United States District Court, W.D. Pennsylvania.
    Jan. 31, 1985.

      Alfred G. Yates, Jr., Pittsburgh, Pa., for plaintiff.
    J. Alan Johnson, U.S. Atty., Pittsburgh, Pa., for defendant.
   MEMORANDUM OPINION

TEITELBAUM, Chief Judge.

This is an action for judicial review of a final decision of the Secretary denying disability benefits.

Kenneth N. Carney applied for disability insurance benefits on September 8, 1982. He alleged he was unable to work because of low back problems, .back and leg pain, tiredness, depression and nervousness, and arthritis in his shoulders and fingers. The application was denied initially and on reconsideration. The matter was considered de novo by an Administrative Law Judge who, by decision dated July 21, 1983, found Carney retained the residual functional capacity for medium work and therefore was not disabled under the Act. The Appeals Council denied Carney’s request for review making the AU’s decision the final decision of the Secretary.

Carney then commenced the present action under 42 U.S.C. § 405(g). Cross motions for summary judgment were filed. The case was originally assigned to the Honorable Edward Dumbauld and reassigned to this member of the Court the week of January 14, 1985.

The Social Security Act limits judicial review to a determination of whether the Secretary’s factual determinations are supported by substantial evidence. 42 U.S.C. § 405(g); Richardson v. Perales, 402 U.S. 389, 91 S.Ct. 1420, 28 L.Ed.2d 842 (1971). Substantial evidence is “such relevant evidence as a reasonable mind might accept as adequate to support a conclusion.” Pe rales at 401, 91 S.Ct. at 1427. It consists of more than a mere scintilla of evidence, id., but may be less than a preponderance, Ginsburg v. Richardson, 436 F.2d 1146 (3d Cir.), cert. denied, 402 U.S. 976, 91 S.Ct. 1680, 29 L.Ed.2d 142, reh. denied, 403 U.S. 912, 91 S.Ct. 2213, 29 L.Ed.2d 690 (1971).

Under the Act the claimant has the initial burden of demonstrating by medical evidence that he is unable to return to his previous employment, Livingston v. Califano, 614 F.2d 342, 345 (3d Cir.1980). The Secretary then must establish that the claimant has the ability to engage in some other substantial gainful employment. Id.

This case was decided under the medical-vocational regulations which require that the Secretary undertake a five step sequential evaluation of disability claims. See Heckler v. Campbell, 461 U.S. 458, 103 S.Ct. 1952, 76 L.Ed.2d 66 (1983). In performing this sequential evaluation the Secretary must consider, in turn, current work activity, the severity of the impairment, the ability to perform past work and vocational factors. 20 C.F.R. § 404.-1520.

Carney was born August 15, 1926 and has a high school education. He previously had back surgery in 1966 or 1967. Following this surgery he worked as a finisher in drywall construction. This work required carrying buckets of drywall cement weighing 65 pounds, climbing ladders, working on scaffolding, standing eight hours per day, and constantly bending and reaching. This was described as heavy unskilled work by the vocational expert. In September, 1980 Carney injured his back in a work-related fall. Carney last worked on April 4, 1981.

The Secretary found Carney had a severe back impairment and was unable to perform his past work, but retained the residual functional capacity to perform medium work. The finding that Carney could do medium work when considered with Carney’s advanced age, high school education and history of unskilled work activity resulted in the conclusion that Carney was not disabled under the Act under Rule 203.-14, Table No. 3, Appendix 2. However, had the Secretary found that Carney could do only light, as opposed to medium, work, this finding when considered with Carney’s age, education and work history would have resulted in the conclusion that Carney was disabled under the Act under Rule 202.04, Table No. 2, Appendix 2. Thus a precise determination of Carney’s exertional capabilities is crucial to a proper resolution of his claim for benefits.

The applicable regulations define light and medium work. Light work involves lifting no more than twenty pounds at a time with frequent lifting or carrying of objects weighing up to ten pounds. Even though the weight lifted my be very little, a job is in this category when it requires a good deal of walking or standing, or when it involves sitting most of the time with some pushing and pulling arm or leg controls. 20 C.F.R. § 404.1567(b).

Medium work involves lifting no more than fifty pounds at a time with frequent lifting or carrying of objects weighing up to twenty five pounds. If someone can do medium work, he can also do light work. 20 C.F.R. § 404.1567(c).

The medical evidence consists of the records of a hospitalization, reports from five physicians who examined Carney and a residual functional capacity assessment completed by a medical consultant who did not examine Carney.

The hospital records indicate Carney was hospitalized in September, 1981 for lumbar spondylosis and a lumbar laminectomy was performed.

Harold Thomas, D.O., reported that he saw Carney in January, 1982 at which time Carney had lumbar pain radiating to the right buttock and posterior aspect of the right leg.

Noor Hassan, M.D., Carney’s surgeon, examined Carney in October, 1982 and reported Carney had some back pain but no significant pain radiation into the lower extremities. Dr. Hassan opined that Carney was not able to go back to his past work, but should be able to do work which did not involve “lifting, pushing or pulling heavy weights.”

Victor Nieto, M.D., a surgeon, examined Carney in November, 1982 and reported chronic low back pain. Dr. Nieto stated:

The patient complained of pain on pressure over the lumbo-sacral spine and there was moderate degree of spasm of the paraspinal muscles at the lumbo-sacral level. Sciatic notches were not painful. The sacro-iliac joints were not tender. The patient was asked to walk and his gait was found to be normal. He was able to walk on his toes without difficulty, but was unable to walk on his heels. Forward flexion of the lumbo-sacral spine was within normal limits and there was restriction of the lateral flex-ion to the right and left sides. He was able to stoop and kneel down with minimal degree of difficulty. The patient was asked to lay supine on the examining table and straight leg raising test was performed. This was negative in both right and left sides. The movements of the hip joints did not seem to cause much pain. Neurological examination shows deep tendon reflexes to be normal in both knees. The ankle jerks were bilaterally absent despite repeated stimulation. Pin prick stimulation did not reveal any area of abnormal sensation. Motor power in both lower extremities was normal. No evidence of atrophy was found in this patient. Examination of the cervical spine did not reveal any abnormalities and examination of the upper and lower extremities did not reveal any abnormalities in this patient’s joints.

Kenneth K. Ung, M.D., examined Carney in March, 1983 and reported chronic low back pain. Dr. Ung found:

The shoulders, however, display bilateral muscle stiffness in the deltoid and trapezius areas. There is no local tenderness, however, and the patient has a lot of difficulty with abduction of • both shoulders, however the right is worse than the left. The elbows have fairly good range of motion bilaterally without swelling or tenderness. The hands and wrists have good range of motion and there is no swelling or erythema or tenderness. However, there are mild development of some Heberden’s nodes in the distal interphalangeal joints bilaterally. There is no neurovascular deficits in the upper extremities. There is no atrophy of the musculature ... The lumbar spine displays an old surgical scar down the midline. There is fairly good range of motion. However, there was tenderness over the L5-S1 area with some mild spasm bilaterally in the lower paravertebral musculature. Straight leg raisings are negative. Knees and ankles are normal to range of motion and palpation, there is no swelling.

Ray E. Bullard, Jr., M.D., a psychiatrist, evaluated Carney in September, 1982 and diagnosed depressive neurosis with mild anxiety. The vocational expert testified that although severe depression would cause an inability to perform any work, Dr. Bullard’s findings would not necessarily be functional limiting.

Asha Potnis, M.D., a medical consultant specializing in hematology and pediatrics, reviewed the medical evidence and concluded Carney retained the residual functional capacity for medium work.

The record contains a paucity of evidence concerning Carney’s ability to do medium, as opposed to light, work. The hospital records and the reports submitted by Drs. Thomas, Nieto, Ung and Bullard do not address Carney’s ability to do specific work activities. Dr. Hassan did state that Carney should be able to do work which did not involve lifting, pushing or pulling heavy weights. However, Dr. Hassan’s use of the phrase “heavy weights” cannot reasonably be construed as meaning that Carney can do medium work as that term is defined in the regulations.

Only Dr. Potnis opined that Carney could do medium work as that term is defined in the regulations. As noted, Dr. Potnis is a consultant to the Social Security Administration and specializes in hematology and pediatrics. Dr. Potnis did not examine Carney but instead reviewed the medical evidence and completed a residual functional capacity assessment.

The use of a medical consultant who has not examined the claimant is permitted, but the weight given a consultant’s report must be determined by the circumstances of the particular case. Smith v. Schweiker, 671 F.2d 789, 791-792 (3d Cir.1982). If a physical capacities evaluation form is completed by an examining doctor, but not accompanied by a thorough written report, the form is not substantial evidence. Green v. Schweiker, 749 F.2d 1066 at 1071 n. 3 (3d Cir. December 7, 1984). It follows that if a physical capacities evaluation form is completed by a medical consultant who has not examined the claimant, and is not accompanied by a thorough written report, the form also is not substantial evidence.

Here Dr. Potnis did not examine Carney and the residual functional capacity assessment is not accompanied by a thorough written report. Thus Dr. Potnis’ assessment of Carney’s residual functional capacity is not substantial evidence to support the Secretary’s finding.

Because the Secretary’s finding that Carney retained the residual functional capacity to do medium work is not supported by substantial evidence, the case must be remanded.

An appropriate order will be entered.


author: KEENAN, District Judge:

text:
    UNITED STATES of America, Plaintiff, v. Roger RESEK, Defendant.
    84 Cr. 841 (JFK).
    United States District Court, S.D. New York.
    Feb. 1, 1985.

      Rudolph W. Giuliani, U.S. Atty. for the S.D.N.Y. by Baruch Weiss, Asst. U.S. Atty., New York City, for plaintiff.
    Frank Freeman, Miami, Fla., Lawrence A. Omansky, New York City, for defendant.
   OPINION AND ORDER

KEENAN, District Judge:

This motion involves the newly enacted Bail Reform Act of 1984, part of the Comprehensive Crime Control Act, 18 U.S.C. §§ 3141-3151 (“Act”), which was signed into law on October 12, 1984. The government seeks a detention order, pursuant to 18 U.S.C. § 3142(e) of the new Act. In order to issue a detention order, the Court must hold a detention hearing in accordance with § 3142(f). The issue in this case is whether the government can obtain a detention hearing long after the defendant’s first appearance before a judicial officer and without representing to the Court that there exists dramatically new information or changed circumstances bearing on defendant’s likelihood of flight.

Oral argument on this motion was held January 29 and 30, 1985. There was no briefing of the issue, though short affidavits were filed by both parties.

BACKGROUND

Defendant was arrested, along with four co-defendants, on October 25, 1984. He was arraigned the following day before Magistrate Washington who set bail at $100,000 personal recognizance bond backed by $10,000 cash or surety. On the government’s motion, Magistrate Gershon increased defendant’s bail to $1 million backed by $100,000 cash or surety. Later that day, October 30, 1984, Judge Ward affirmed Magistrate Gershon’s determination. The bail condition was later modified, without objection by the government, to allow defendant to post property for bail purposes.

On November 5, 1984, defendant was indicted on two counts. Count one alleges a conspiracy, under 18 U.S.C. § 371, to commit a theft from a bank, 18 U.S.C. § 2113(b), and interstate transportation of stolen money and securities, 18 U.S.C. § 2314. Count two alleges a violation of 18 U.S.C. § 2113(b), which prohibits various forms of bank theft. These counts carry maximum penalties of five and ten years incarceration, respectively. The acts forming the basis of the indictment allegedly occurred between October 18 and October 25, 1984. The government alleges that defendant negotiated a check for $50,000, payable to Chase Manhattan Bank, which had been received as proceeds of a counterfeit check.

DISCUSSION

Apparently to the government’s surprise, the defendant is now prepared to meet the terms of his bail. The government has stated to the Court that it will not request a Nebbia hearing.

Nonetheless, the government seeks an order, pursuant to 18 U.S.C. § 3142(e) of the new Act, detaining defendant prior to trial without the opportunity for release on bail. Subsection (e) states that such an order may be issued only after the Court holds a detention hearing, described in subsection (f) of § 3142, to determine whether any condition or combination of conditions will reasonably assure the appearance of the defendant as required and the safety of other persons in the community.

Section 3142(f) detention hearings fall into two basic categories. Section 3142(f)(1) provides for hearings, upon motion of the government, under four precisely defined circumstances: (1) a crime of violence; (2) an offense for which the maximum sentence is life imprisonment; (3) a drug-related offense for which a term of ten years or more imprisonment is prescribed; or (4) any felony committed after the defendant had been convicted of two or more of the offenses described above, whether those offenses were under state or federal law. In this case, the government’s indictment of defendant fails to allege an offense justifying a detention hearing under § 3142(f)(1).

Under § 3142(f)(2), a detention hearing is authorized, upon motion of the government or the court, in two situations: (1) where there is a serious risk the defendant will flee, or (2) a serious risk that the defendant will obstruct justice, or threaten, injure, or intimidate, a prospective witness or juror. The government bases its request for detention on the likelihood defendant will flee. (Affidavit of Baruch Weiss, Assistant United States Attorney, ¶ 4 (hereinafter “Weiss Aff.”)).

The critical part of subsection (f), for purposes of this motion, provides: “The hearing shall be held immediately upon the person’s first appearance before the judicial officer ...” The requirement that the hearing be held at the defendant’s first appearance before a judicial officer is grounded on due process considerations. Comprehensive Crime Control Report, supra, at 21-22. In this regard, the Senate Judiciary Committee stated that “the requisite circumstances for invoking a detention hearing in effect serve to limit the types of cases in which detention may be ordered prior to trial.” Id. at 20.

Defendant first appeared before a judicial officer on October 25, 1984. Several appearances and 94 days later, on January 29, the government formally sought a detention hearing. Thus, the government’s request fails to come within those requests állowable under the express language of subsection (f).

In response, the government relies on § 3142(c), which authorizes a judicial officer “to at any time amend his order to impose additional or different conditions of release.” Taken at face value, this provision of subsection (c) appears to contradict the “first appearance” requirement of subsection (f). After all, why would Congress require the government to apply for a detention order at the defendant’s first appearance before a judicial officer, yet authorize a judicial officer to order detention at any later appearance based on information that was available to the government at the start of the case?

One possible answer is that in allowing a judicial officer to amend his order at any time to “impose additional or different conditions of release,” Congress did not contemplate the imposition of a detention order. Although § 3142(c) does not specifically authorize such an order, it is clear nonetheless that Congress did intend to allow such orders under this section. If a court, based on new information it received from the government, determined that “no condition or combination of conditions will reasonably assure the appearance of the person as required and the safety of any other person and the community,” 18 U.S.C. § 3142(e), detention would be appropriate. If an order of detention is the only means of securing the appearance of a defendant or protecting the community, then a detention order under § 3142(c) is contemplated by Congress. United States v. Payden, 598 F.Supp. 1388, at 1393 n. 5 (S.D.N.Y.1984); Comprehensive Crime Control Report, supra, at 16. Indeed, the entire thrust of the Bail Reform Act is toward increased use of detention to assure the defendant’s appearance and to protect the community. See Comprehensive Crime Control Report, supra, at 33. To deprive the government of the opportunity to seek detention based on information obtained after defendant’s first appearance before a judicial officer would run afoul of the policies of the new Act. Payden, at 1393 n. 5. It is clear, therefore, that Congress intended to allow the government to seek a detention order under § 3142(c). Thus, the apparent contradiction between subsections (f) and (c) cannot be harmonized by disallowing detention orders under § 3142(c).

The language of subsections (f) and (c) can be harmonized by recognizing that the authorization to amend a release order in § 3142(c) is “based on the possibility that a changed situation or new information may warrant altered release conditions.” Comprehensive Crime Control Report, supra, at 16. Thus, the government’s contention that the information already on the record justifies a detention order, pursuant to § 3142(c), is inconsistent with a fair reading of the statute.

It could be argued that there is a changed situation in this case — to wit, the defendant can now meet the terms of his bail. This, however, is surely not the type of changed situation contemplated by Congress in enacting § 3142(c). Indeed, this very subsection unequivocally states that “[t]he judicial officer may not impose a financial condition that results in the pretrial detention of the person.” This subsection, to the extent it precludes the use of high bail as a means of confinement, is a significant departure from past practice. See Bail Reform Report, supra, at 20-21. To permit the government to use a high bail term in lieu of a detention order, which is what was effectively done in this case, is therefore inconsistent with the new law.

The government argues alternatively that it has newly-acquired information that provides a sufficient basis for a detention hearing under § 3142(c). This information allegedly concerns various check schemes involving the defendant. The sums of money involved in these schemes allegedly suggest that defendant will be prepared to forfeit bond “as a ‘cost of doing business.’” (Weiss Aff. ¶7, citing Comprehensive Crime Control Report, supra, at 24). The Assistant United States Attorney says that he acquired this information on January 16 or 17, 1985 and, at the next conference on this case, indicated that he might want a detention hearing. (Weiss Aff. ¶ 8). The Court finds the government’s action in this respect insufficient to warrant a detention hearing for two reasons.

First, to meet the “new information” or “changed circumstances” requirement of § 3142(c), the government must bring these new facts to the Court’s attention when the information is still new or the circumstances have recently changed. If the government fails to disclose new information or a recent change of circumstances, it loses the opportunity to use the information as a basis for a detention order. Such an interpretation is a necessary analogue to § 3142(f)’s “first appearance” requirement and the due process considerations upon which it is grounded.

The government’s information in this case was not new. Although the Assistant currently handling this case did not hear about the information until January 16 or 17, 1985 (Weiss Aff. 118), his predecessor was aware of the information in December, 1984 (Weiss Aff. ¶ 9). The internal operations of the United States Attorney’s Office are not a justification for the government’s delay in revealing its new information. Thus, the fact that the government changed prosecutors can certainly not be held against the defendant.

The Court’s second reason for denying a detention hearing pursuant to subsection (c) is that the government represented at oral argument that its “new information” is primarily cumulative, to the extent it is the product of an ongoing government investigation. Criminal investigations are always ongoing. If such cumulative evidence could be marshalled at any time for a detention hearing, the requirement of “new information” or “changed circumstances,” and the due process considerations they reflect, would effectively be deleted from the statute and its legislative history. To obtain a detention hearing, pursuant to subsection (c), the government must represent that it is prepared to come forward with more than merely new cumulative evidence. The government must be prepared to present dramatic new information to the Court to come within § 3142(c).

In support of its position, the government relies on Payden. Payden, however, is distinguishable. In Payden, Judge Edelstein permitted a detention hearing because of the existence of new information. At 1393. Although the government had information relating to the defendant’s danger to the community at the start of the case, it was not a permissible consideration for the court under the prevailing law on August 3, 1984, when Payden first appeared before a judicial officer. At 1393-1394. It was a permissible consideration, however, on October 31, 1984 when the government moved to detain Payden under the new Act. See id. at 1390-1391. Thus, it constituted new information for the court.

In the instant case, defendant’s first appearance was October 26, 1984, shortly after most judges and lawyers had received copies of the new Act that had become effective two weeks earlier. If the government wished to detain defendant, it should have done so at this first appearance or at least sought the three day continuance, permitted the government under subsection (f), to further investigate the case. Instead, the government did not seek detention until approximately three months later when the defendant was prepared to make bail.

To allow the government a detention hearing at this late date, absent a contention by the government of a “changed situation” or “new information,” other than the fact that defendant can now make bail, would be tantamount to reading the “first appearance” requirement of subsection (f) out of the Act. The Court declines to ignore Congress’ language or the due process rights it was designed to protect.

The government makes two other arguments that merit attention. First, the government contends that a strict construction of the “first appearance” requirement would preclude the government from seeking detention orders when it discovered, only after the first appearance, that, for example, a defendant was an escapee or mass murderer. This argument is without merit since these are independent offenses that form a separate basis for arrest and incarceration. In addition, the provision of § 3142(f) allowing the government a continuation of the detention hearing for at least three days is designed to give the government the opportunity to investigate a suspect’s record. See Comprehensive Crime Control Report, supra, at 21-22. Even in the closer case, however, where the government may discover, after the first appearance, that the defendant is likely to flee, yet has committed no prior independent criminal act, the government has recourse in § 3142(c). As discussed above, this section allows the judicial officer to modify a defendant’s release conditions if new information or changed circumstances so warrant.

As long as the government discloses new information or a changed circumstance to the Court immediately upon learning of it, § 3142(c) recourse will be available. The government may not, as it did in this case, conceal the information until such time as defendant is prepared to make bail.

Finally, the government pleads for the Court’s sympathy in enforcing the new law. The government has represented to the Court that it has sought detention hearings from several judges of this Court only to be told not to bother with a hearing until their defendants attempt to make bail. Obviously, the government can do no more than try to obtain a detention hearing and inform the Court that it has new information or that circumstances have changed such that a detention order is appropriate. Assuming the government also informs the defendant of its position in this regard, there would seem to be no due process problems. In fact, this approach appears to be eminently practical. Courts, defendants and the government could be spared needless detention hearings when defendants do not plan to seek release on bail. Yet, those defendants that do plan to seek release on bail would realize that a detention hearing to consider specified new information or changed circumstances is a prerequisite to their relese.

If, as in the instant case, the relevant information was known to the government at the defendant’s first appearance before a judicial officer, the government has a choice. It can bring this information to the attention of the court and seek a detention order under § 3142(e) or remain silent and waive its right to seek detention based on this information when the defendant later attempts to make bail.

CONCLUSION

The government did not make a motion for a detention hearing at defendant’s first appearance before a judicial officer under § 3142(f). Nor has the government represented that it has obtained dramatic new information or that it is aware of changed-circumstances within the meaning of § 3142(c).

Accordingly, the government’s motion for a detention hearing is denied.

      . The law provides neither an “and" nor an "or” between these considerations. Since the other part of subsection (f) uses "or”, one might con-elude — as a matter of pure statutory construction — that the conjunctive "and” should be implied. But Congress knew the word “and”, having used it throughout the Act, including subsection (e). Thus, it is just as plausible to read it disjunctively as conjunctively. More important, common sense compels the conclusion that Congress would not allow the release of a defendant who, for example, threatened witnesses, but was not likely to flee. Reading an "and" into subsection (f)(2) would compel such an absurd result. This common sense interpretation is consistent with the legislative history. The Senate Judiciary Committee recognized that dangerous persons are often not those who are likely to flee. Senate Comm. on the Judiciary, The Bail Reform Act of 1983, S.Rep. No. 147, 98th Cong., 1st Sess. 23 (1983) [hereinafter cited as Bail Reform Report]. Thus, this section would have little value in promoting the pretrial detention of persons if they had to be proven both dangerous and likely to flee. Additionally, another Senate Judiciary Committee Report states that pretrial detention is permissible in cases that "involve either a serious risk that the defendant will flee, or a serious risk that the defendant will obstruct justice, or threaten ...” Senate Comm, on the Judiciary Comprehensive Crime Control Act of 1983, S.Rep. No. 225, 98th Cong., 1st Sess. 21 (1983) (emphasis added) [hereinafter cited as Comprehensive Crime Control Report].

      . Of course, the "first appearance” requirement of subsection (f) would still be given effect to the extent it would require the government to present newly-acquired evidence to the Court during the defendant’s first appearance before the Court after the evidence or information was obtained.

      . The United States Attorney’s Office seemed to be aware of the "first appearance” requirement of § 3142(f) by this time. See, e.g., United States v. Chimurenga, No. 84 Cr. 818, Slip op. at 1-2 (S.D.N.Y. Nov. 5, 1984) (defendants arrested October 17, 1984 and the government moved for detention under § 3142(e) of the new Act at presentment the following day).

      . See Comprehensive Crime Control Report, supra, at 21-22. Upon a showing of good cause, the statute permits the government to obtain a continuance beyond three days to prepare for the detention hearing. Id.

      . Criminal statutes should be narrowly construed in favor of the defendant. See Williams v. United States, 458 U.S. 279, 290, 102 S.Ct. 3088, 3094, 73 L.Ed.2d 767 (1982); United States v. Bass, 404 U.S. 336, 347, 92 S.Ct. 515, 522, 30 L.Ed.2d 488 (1971).


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

text:
    UNITED STATES of America, Plaintiff, v. John Joseph VACCARO, Francis J. Cullinen, William K. Cushing, Sandra Vaccaro, Dorothy M. Snider, Patti Lane, Norman Alvis, Ross Durham, Paul Bond, Stephen S. LaBarbera, Michael K. Brennan, Defendants.
    No. CR-R-84-46-ECR.
    United States District Court, D. Nevada.
    Feb. 4, 1985.

      Donald Cavin Hill, Asst. U.S. Atty., Reno, Nev., for plaintiff.
    Dominic P. Gentile, Las Vegas, Nev., for John Joseph Vaccaro.
    Dennis Fredrickson, Encino, Cal., and Samuel B. Francovich, Reno, Nev., for Francis J. Cullinen.
    Annabelle Whiting Hall, Reno, Nev., for William K. Cushing.
    Fred D. Gibson, III, Reno, for Sandra Vaccaro.
    William M. O’Mara, Reno, Nev., for Dorothy M. Snider.
    David Chesnoff, Las Vegas, Nev., for Patti Lane.
    David Weiner, Cameron Park, Cal., and James W. Johnson, Jr., Reno, Nev., for Norman Alvis.
    Laurence P. Digestí, Reno, Nev., for Ross Durham.
    C. Frederick Pinkerton, Reno, Nev., for Paul Bond.
    John L. Conner, Reno, Nev., for Stephen S. LaBarbera.
    Fred H. Atcheson, Reno, Nev., for Michael K. Brennan.
   ORDER

EDWARD C. REED, Jr., District Judge.

Defendant Sandra Vaccaro moves this Court to dismiss Counts I, II, IV, and XIV based on a failure to state an offense against the United States and for want of subject matter jurisdiction. Defendants Stephen LaBarbera, John Vaccaro, Paul Bond, Patti Lane, Norman Alvis, Dorothy Snider, and Michael Brennan have all joined in the motion to dismiss.

In support of their motion to dismiss these counts, defendants argue that 18 U.S.C. § 1952, the Travel Act, is inapplicable to cheating at gambling and was only intended to apply to illegal gambling businesses. Defendants misread the statute and thus the motion to dismiss is DENIED.

The counts of the superceding indictment at issue in this motion all charge violations of-18 U.S.C. § 1952(a)(3) and 2. The counts allege various instances of a business enterprise conducted to cheat at gambling in violation of the gambling laws of Nevada, specifically, NRS 465.070, 465.080, 465.-083. The named defendants are charged with traveling in interstate commerce with the intent to promote, manage, establish, carry on, and facilitate the promotion, management, establishment and the carrying on of an unlawful activity. Specifically, the defendants are charged with illegally setting up and collecting certain jackpots in Las Vegas, Nevada, and Reno, Nevada.

The Travel Act, 18 U.S.C. § 1952, makes it a federal offense to travel in interstate commerce with the intent to promote or facilitate the promotion of any unlawful activity, including “any business enterprise involving gambling ... in violation of the laws of the State in which they are committed or of the United States — ” 18 U.S.C. § 1952(a)(3) and (b)(1). When the unlawful activity in the indictment is the violation of state law, the commission of or the intent to commit such a violation is an element of the federal offense. United States v. Bertman, 686 F.2d 772, 774 (9th Cir.1982). The Government thus must allege as part of the Travel Act charge that the defendant has or could have violated the underlying state law, and the defendant may assert any relevant substantive state law defense. Id.

Defendants contend that the “business enterprise” requirement was included in § 1952 in order to limit the statute to prosecutions of those running illegal gambling businesses. However, as the court in Roselli noted, Congress did not confine the parameters of the statute in this way. United States v. Roselli, 432 F.2d 879, 886 (9th Cir.1970). Defendants’ contention that they were merely involved in fraud or theft from the legal gaming establishments in Nevada and therefore are not a member of the “racketeers” Congress intended to reach by § 1952 is equally misplaced. Id.

Defendants fail to perceive the distinction between legitimate legalized gambling, permitted in Nevada, and illegitimate or dishonest gambling, which is illegal in Nevada. The activity which defendants are charged with is illegal in Nevada. Nevada does not permit the use of wires or other devices to manipulate the slot machines. The defendants by allegedly participating in such activity and travelling interstate in furtherance of this activity have exposed themselves to the instant counts.

Defendants argue that the legislative history of § 1952 demonstrates a congressional intent aimed only at control of the operation of illegal gambling business enterprises. The legislative history, however, does not support defendants’, argument.

As the Supreme Court noted in Rewis v. United States, 401 U.S. 808, 811, 91 S.Ct. 1056, 1059, 28 L.Ed.2d 493 (1971), although the legislative history of the Travel Act is limited, it does reveal that § 1952 was aimed primarily at organized crime and more specifically, at persons who reside in one State while operating or managing illegal activities located in another. Here defendants allegedly lived outside of Nevada while their business enterprise, which was aimed at illegally manipulating and collecting various jackpots, was operated in Nevada. Thus, the facts alleged in this case bring it squarely within the plain language of the Travel Act. Congress did not exclude from application of the statute the gambling laws of Nevada, nor did Congress exclude alleged cheaters from the application of the statute. The Government does not ask us to interpret the statute beyond the ordinary meaning of the language of the Travel Act as the Supreme Court was asked to do in Rewis. See Rewis, 401 U.S. at 812, 91 S.Ct. at 1059. Therefore, we look to the unambiguous words of the statute.

As previously noted, the Travel Act condemns interstate travel or the use of interstate facilities in the furtherance of “any business enterprise involving gambling ... offenses in violation of the laws of the State in which they are committed or of the United States....” 18 U.S.C. § 1952(b)(1). Defendants are charged with violating the gambling laws in Nevada which make it a crime to cheat the legal gaming establishments. The reference to state law is necessary to identify the type of unlawful activity in which the defendants intended to engage. See United States v. Polizzi, 500 F.2d 856, 869 (9th Cir.1974). Defendants are charged with violating the federal Travel Act by conduct which was a “business enterprise” that involved “gambling ... offenses” in violation of NRS 465.070, NRS 465.080, NRS 465.083. The Travel Act on its face clearly covers the activity charged in this case.

Further support against defendants’ arguments can be found by an examination of opinions from other courts faced with an indictment based on the Travel Act where the unlawful activity was illegal gambling. For example, one of the Nevada statutes defendants are charged with violating, NRS 465.070, has been specifically held to provide the basis for a § 1952 conviction. United States v. Morris, 532 F.2d 436, 443 (5th Cir.1976). The Morris court found that cheating at cards was prohibited under Nevada law and could provide predicate for a Travel Act violation.

Also, the Ninth Circuit has upheld a conviction under § 1952 for a defendant who was charged with cheating a gaming establishment in violation of the laws of the State of Nevada. United States v. Garner, 663 F.2d 834 (9th Cir.1981). Although it was not an issue discussed by the court, impliedly the court was recognizing that § 1952 does give rise to a prosecution against gambling cheats, not just those who run illegal gambling enterprises.

Finally, in Roselli, the court refused to accept the conclusion (which defendants urge this Court to reach) “that illegal cheating incidental to lawful gambling is not within section 1952.” 432 F.2d at 888.

Defendants are charged with organizing and participating in an enterprise which violates the anti-cheating statutes of Nevada. As such the allegations are clearly “gambling offenses ... in violation of the laws of the State” and are thus punishable under 18 U.S.C. § 1952(a)(3). This activity falls squarely within the conduct which under § 1952 is a violation of federal law.

IT IS, THEREFORE, HEREBY ORDERED that the motion to dismiss is DENIED.

      . Defendants also urge this Court to dismiss the instant counts because to do otherwise would be "to protect and vindicate ... organized crime interests.” See Defendants’ Motion to Dismiss at 18. The defendants urge this Court not to protect the operators of legal gambling establishments of Nevada from those who cheat, but rather to protect those members of the public who cheat the gaming establishments of Nevada. Defendants’ argument obviously has no merit.

      . The Court notes that in Count I of the superceding indictment a typographical error has been made. NRS 465.083 is typed at “463.083.” It is, however, obvious that it is merely a typographical error. The Court notes that in the subsequent Counts it is correctly typed at 465.-083, and also that there is no NRS 463.083.

      . Defendants also argue that the “rule of lienity [sic] resolve[s] [this case] in favor ... for the Defendants].” Defendant’s Motion to Dismiss at 17. That rule has no place in our analysis. The rule which requires that criminal statutes be interpreted in favor of leniency to the accused only serves as an aid for resolving ambiguities. See Callanan v. United States, 364 U.S. 587, 81 S.Ct. 321, 5 L.Ed.2d 312 (1961); in accord United States v. LeFaivre, 507 F.2d 1288, 1296 (4th Cir.1974) cert. denied 420 U.S. 1004, 95 S.Ct. 1446, 43 L.Ed.2d 762 (1975).

      . 465.070 Fraudulent acts. It is unlawful for any person:
      1. To alter or misrepresent the outcome of a game or other event on which wagers have been made after the outcome is made sure but before it is revealed to the players.
      2. To place a bet after acquiring knowledge, not available to all players, of the outcome of the game or other event which is the subject of the bet or to aid anyone in acquiring such knowledge for the purpose of placing a bet contingent upon that outcome.
      3. To claim, collect or take, or attempt to claim, collect or take, money or anything of value in or from a gambling game, with intent to defraud, without having made a wager contingent thereon, or to claim, collect or take an amount greater than the amount won.
      4. Knowingly to entice or induce another to go to any place where a gambling game is being conducted or operated in violation of the provisions of this chapter, with the intent that such other person play or participate in that gambling game.

      . 465.080 Unlawful use of counterfeit or unapproved chips, tokens or unlawful coins, devices; unlawful possession of devices.
      1. It is unlawful for any licensee, employee or other person to use counterfeit chips in a gambling game.
      2. It is unlawful for any person, in playing or using any gambling game designed to be played with, receive or be operated by chips or tokens approved by the state gaming control board or by lawful coin of the United States of America:
      (a) Knowingly to use other than chips or tokens approved by the state gaming control board or lawful coin, legal tender of the United States of America, or to use coin not of the same denomination as the coin intended to be used in that gambling game; or
      (b) To use any device or means to violate the provisions of this chapter.
      3. It is unlawful for any person, not a duly authorized employee of a licensee acting in furtherance of his employment within such establishment, to have on his person or in his possession any device intended to be used to violate the provisions of this chapter.
      4. It is unlawful for any person, not a duly authorized employee of a licensee acting in furtherance of his employment within such establishment, to have on his person or in his possession while on the premises of any licensed gaming establishment any key or device known to have been designed for the purpose of and suitable for opening, entering or affecting the operation of any gambling game, drop box or any electronic or mechanical device connected thereto, or for removing money or other contents therefrom.
      5. Possession of more than one of the devices described in this section permits a rebuttable inference that the possessor intended to use them for cheating.

      . 465.083 Cheating Prohibited. It is unlawful for any person, whether he is an owner or employee of or a player in an establishment, to cheat at any gambling game.