author: ASPEN, District Judge:

text:
    JOSEPH CONSTRUCTION COMPANY, Plaintiff, v. The VETERANS ADMINISTRATION OF the UNITED STATES of America and Clyde C. Cook, Director of the Office of Procurement and Supply of the Veterans Administration, Defendants.
    No. 84 C 2816.
    United States District Court, N.D. Illinois, E.D.
    Aug. 27, 1984.

      John R. O’Brien, Chicago, III, for plaintiff.
    Mary S. Rigdon, Asst. U.S. Atty., Chicago, 111., for defendants.
   MEMORANDUM OPINION AND ORDER

ASPEN, District Judge:

Plaintiff Joseph Construction Company (“Joseph”) has brought this action for injunctive relief against the Veterans Administration of the United States of America (“V.A.”) and Clyde Cook, Director of the Office of Procurement and Supply of the V.A., for the unlawful deprivation of its right to bid on government contracts. Joseph, a general contractor which has performed a number of construction projects for the V.A., alleges that the process of “debarment” — the “official exclusion of a contractor from government contracting or government-approved subcontracting for a reasonable specified period,” Federal Acquisitions Regulation (“FAR”) Subpart 9.403 — is unconstitutional both on its face and as applied to Joseph.

Joseph claims that the V.A.’s use of the criminal conviction of Joseph’s president and sole stockholder, Robert J. Brack (“Brack”), as the basis for its decision to debar Joseph was unreasonable because it denied Joseph the opportunity of a hearing on the. merits, in violation of the due process clause of the Fifth Amendment. Furthermore, Joseph asserts that its successful completion of numerous government contracts after the occurrence which gave rise to Brack’s conviction should be sufficient evidence that Joseph is a responsible contractor and therefore should not be debarred.

Jurisdiction is asserted pursuant to 5 U.S.C. § 702 et seq. and 28 U.S.C. § 1331. Presently before the Court are Joseph’s motion for preliminary injunction and the defendants’ motion to dismiss for failure to state a claim upon which relief can be granted. For the reasons set forth below, the defendants’ motion to dismiss is granted.

Motion to Dismiss

In examining a due process claim, we must first determine whether the plaintiff has been deprived of a life, property or liberty interest protected by the Fifth Amendment; we must then determine what process is due the plaintiff. Shango v. Jurich, 681 F.2d 1091, 1097 (7th Cir.1982). A contractor's liberty interest is affected when it is denied the right to bid on government contracts based upon charges of fraud or dishonesty. Old Dominion Dairy Products, Inc. v. Secretary of Defense, 631 F.2d 953, 963-64 (D.C.Cir.1980). Because its debarment was based upon a finding of nonresponsibility, Joseph’s liberty interest was affected.

Due process requires that a contractor be given notice of a pending debarment proceeding and the opportunity of a hearing to present objections or argument. Transco Security, Inc. of Ohio v. Freeman, 639 F.2d 318, 323 (6th Cir.1981) [citing Mullane v. Central Hanover Bank and Trust Co., 339 U.S. 306, 314, 70 S.Ct. 652, 657, 94 L.Ed. 865 (1949)], cert. denied, 454 U.S. 820, 102 S.Ct. 101, 70 L.Ed.2d 90 (1981). Combined with the proper notice, the hearing requirement can be met by providing the opportunity to “present information or argument, in person, in writing or through representation in opposition to the suspension” or debarment. Transco at 322. Neither party has questioned the adequacy of the notice given Joseph, so we turn directly to the question of whether Joseph was given ample opportunity to present information in opposition to the debarment.

Joseph alleges that it was debarred without a hearing or without regard to its record of performance over the past several years. However, the letters attached to Joseph’s amended complaint demonstrate that this was not the case. Exhibit A, a letter from the V.A. notifying Joseph of the pending debarment proceeding, specifically stated that Joseph would be allowed to present information in writing, in person or through a representative, as required by FAR Subpart 9.406-3(c)(4). Exhibits C and D, correspondence from the V.A. responding to communications from Joseph, show that Joseph took advantage of this opportunity. Finally, Exhibit E, the notification of the V.A.’s decision to debar Joseph, indicates that the mitigating factors presented by Joseph, such as its performance record, were considered by the V.A. in arriving at its decision to limit the debarment to one year, rather than impose the three-year maximum debarment allowed by the regulations. FAR Subpart 9.406-4(a). The V.A. also considered Joseph’s potential financial problems in its decision to allow Joseph to complete all of its government contracts outstanding at the time of the debarment.

Because Joseph was given the opportunity to present information in opposition to the debarment, due process requirements have been met. For this reason, the defendants’ motion to dismiss is granted as to Count I.

In Counts II and III of its complaint, Joseph asserts that the debarment regulations are unreasonable and unconstitutional, generally and as applied to Joseph in particular, in that they claim to protect the government’s interests but may actually deprive the government of the service of the lowest bidder. Joseph further alleges that, because the government is already adequately protected by the Miller Act payment and performance bond requirements, the debarment regulations are nothing more than a vehicle for the government to impose additional punishment on a contractor, in violation of the double jeopardy clause of the Fifth Amendment.

Joseph’s claim that the debarment regulations are contrary to the government’s interests is unfounded. The contracting agency must consider all relevant factors, such as the low bidder’s reliability and honesty, in addition to the amount of the bid in order to determine whether a contract would be advantageous to the government. 41 U.S.C. § 253(b). Therefore, the rejection of the lowest bid or the exclusion of a contractor which may submit the lowest bid is not necessarily contrary to governmental interests.

Joseph’s claim that payment and performance bonds adequately protect the government against dishonest or irresponsible contractors is also without merit. Payment and performance bonds are required simply to insure that a government contract will be completed without financial harm to subcontractors. See, e.g., J.W. Bateson Co., Inc. v. United States ex rel. Board of Trustees of the National Automatic Sprinkler Industry Pension Fund, 434 U.S. 586, 587, 98 S.Ct. 873, 874, 55 L.Ed.2d 50 (1978); United States for Use of Way Panama, S.A. v. Uhlhom International, S.A., 238 F.Supp. 887, 891 (D.C.Canal Zone 1965), affd sub nom. National Surety Corp. v. United States for Use of Way Panama, S.A., 378 F.2d 294 (5th Cir. 1967), cert. denied, 389 U.S. 1004, 88 S.Ct. 561, 19 L.Ed.2d 598 (1967). The debarment process therefore protects governmental interests not covered by other laws and, as such, does not serve as a vehicle to allow the government to punish contractors a second time for criminal activity.

A court may not overturn an agency decision unless it is arbitrary, capricious or an abuse of discretion. Citizens to Preserve Overton Park, Inc. v. Volpe, 401 U.S. 402, 416, 91 S.Ct. 814, 823-24, 28 L.Ed.2d 136 (1971). In this case, the V.A. considered not only Brack’s conviction, but also the mitigating factors submitted by Joseph, as it was required to do under 41 U. S.C. § 253(b) and the debarment regulations. For this reason, we find that the V. A.’s decision was not arbitrary, capricious or an abuse of discretion. We further find that the debarment regulations are not unreasonable or unconstitutional, generally or as applied to Joseph. Therefore, the defendants’ motion to dismiss Counts II and III is granted as well.

For the reasons stated herein, the defendants’ motion to dismiss is granted in its entirety. It is so ordered.

      . On April 3, 1984, Joseph requested, and was denied, a temporary restraining order to block its debarment pending this proceeding.

      . Joseph has also attempted to assert jurisdiction under 28 U.S.C. § 1346(a). However, § 1346(a) applies only to cases in which the plaintiff is requesting monetary damages. Since Joseph is seeking injunctive relief, this section cannot be used to provide jurisdiction. See Barr v. United States, 478 F.2d 1152, 1155 (10th Cir.1973), cert. denied, 414 U.S. 910, 94 S.Ct. 233, 38 L.Ed.2d 148 (1973); Clay v. United States, 210 F.2d 686 (D.C.Cir.1953), cert. denied, 347 U.S. 927, 74 S.Ct. 530, 98 L.Ed. 1080 (1954).

      . Since we are granting the defendants’ motion to dismiss, we need not decide Joseph’s motion for a preliminary injunction.

      . A corporation may be liable for the criminal acts of its president. United States v. Griffin, 401 F.Supp. 1222, 1224 (S.D.Ind.1975), aff'd sub nom., United States v. Metro Management Corp., 541 F.2d 284 (7th Cir.1976). Brack’s guilt could

        therefore be ascribed to Joseph and used as a basis for a finding of nonresponsibility. FAR Subpart 9.406-5(a) states
      (a) The fraudulent, criminal, or other seriously improper conduct of any officer, director, shareholder, partner, employee, or other individual associated with a contractor may be imputed to the contractor when the conduct occurred in connection with the individual’s performance of duties for or on behalf of the contractor, or with the contractor’s knowledge, approval, or acquiescence. The contractor’s acceptance of the benefits derived from the conduct shall be evidence of such knowledge, approval, or acquiescence.

      . 40 U.S.C. § 270a(a) states in pertinent part
      Before any contract, exceeding $25,000 in amount, for the construction, alteration, or repair of any public building or public work of the United States is awarded to any person, such person shall furnish to the United States the following bonds, which shall become binding upon the award of the contract to such person, who is hereinafter designated a “contractor":
      (1) A performance bond with a surety or sureties satisfactory to the office awarding such contract, and in such amount as he shall deem adequate, for the protection of the United States.
      (2) A payment bond with a surety or sureties satisfactory to such office for the protection of all persons supplying labor and material in the prosecution of the work provided for in said contract for the use of each such person.

      . 41 U.S.C. § 253(b) states in pertinent part
      Award shall be made with reasonable promptness by written notice to that responsible bidder whose bid, conforming to the invitation for bids, will be most advantageous to the Government, price and other factors considered: Provided, That all bids may be rejected when the agency head determines that it is in the public interest so to do.
      (Emphasis in original).

      . The fact that the V.A. considered all the information presented by Joseph distinguishes this case from Roemer v. Hoffmann, 419 F.Supp. 130 (D.C.D.C.1976), upon which Joseph relies heavily. In that case the court remanded the case to the debarring officer precisely because he had failed to consider the mitigating factors presented by the contractor.


source: Caselaw Access Project

author: VANARTSDALEN, District Judge.

license: Public Domain

text:
    GETTY REFINING AND MARKETING CO. v. M/T FADI B, her engines, tackle, apparel, furniture, equipment, and all other necessaries thereunto appertaining and belonging, In Rem and Fadi Shipping Corporation In Personam.
    Civ. A. No. 81-759.
    United States District Court, E.D. Pennsylvania.
    Aug. 29, 1984.

      E. Michael Keating, Philadelphia, Pa., for plaintiff.
    Richard W. Palmer, Palmer, Biezup & Henderson, Philadelphia, Pa., for defendant.
   MEMORANDUM OPINION AND ORDER

VANARTSDALEN, District Judge.

Plaintiff Getty Refining and Marketing Co. (Getty) operates a marine terminal at Delaware City, Delaware. This terminal is used primarily for the loading and unloading of crude oil and oil products at Getty’s refinery. The M/T Fadi B is an oil tanker owned by defendant Fadi Shipping Corporation (Fadi). On January 12, 1981, the Fadi B sustained a crack in her deck and side hull plating while discharging a cargo of crude oil at Pier 1 of Getty’s Delaware City terminal. The source of the crack was a defective weld in the ship’s main deck plating. The weld had been put in place in early 1980 during shipyard repairs in Piraeus, Greece. The crack caused neither physical damage to Getty’s facilities nor pollution damage to the waters surrounding Getty’s terminal. The United States Coast Guard, however, ordered the Fadi B to cease discharging her cargo and to remain at her berth until a safe plan for discharging the balance of the cargo could be developed and implemented. As a result, the Fadi B’s cargo operations ceased for over two and one-half days, and the ship was forced to remain moored at Getty’s pier until January 17, 1981.

Getty brought the present action to recover damages for the loss of use of its pier during the extra time used by the Fadi B following the cracking of her hull. Getty contends that the defendants are liable for the consequences of the Fadi B’s cracking, because the defendants were negligent in failing to inspect the defective weld at the time of the ship’s repair in Greece, and later in mooring the Fadi B at Getty’s terminal under conditions that foreseeably would result in the cracking of the ship. The damages that Getty seeks to recover as a result of the defendants’ negligence consist of the demurrage paid by Getty to several vessels that were scheduled to dock at Getty’s terminal, but were delayed in doing so while the Fadi B remained at Getty’s pier.

A nonjury trial was held earlier this year. At the close of Getty’s evidence, the defendants moved for dismissal of the action pursuant to Federal Rule of Civil Procedure 41(b). The basis for the defendants’ motion was that Getty had offered evidence only as to economic injury, and that recovery for purely economic loss is barred as a matter of law by Robins Dry Dock & Repair Co. v. Flint, 275 U.S. 303, 48 S.Ct. 134, 72 L.Ed. 290 (1927). At the time, I declined to render a judgment, but took the defendants’ motion under advisement until the close of all the evidence. At the close of all the evidence, the defendants renewed their motion. I heard arguments of counsel on the Robins issue; and requested additional briefing by the parties. Because the Robins issue is dispositive, judgment will be entered in favor of the defendants.

In Robins, the operators of a shipyard negligently damaged a ship’s propeller while performing repair work on the ship. The damage to the propeller required the ship to remain in drydock for several additional days. A party that had contracted with the owner to charter the ship sued the shipyard for the damages arising from the loss of use of the ship during the time needed to replace the damaged propeller. The Supreme Court held that the time charterer could not recover from the shipyard. Justice Holmes, writing for the court, stated:

[the time charterer’s] loss arose only through [its] contract with the owners— and while intentionally to bring about a breach of contract may give rise to a cause of action, no authority need be cited to show that, as a general rule, at least, a tort to the person or property of one man does not make the tort-feasor liable to another merely because the injured person was under a contract with that other, unknown to the doer of the wrong. The law does not spread its protection so far.

275 U.S. at 308-09, 48 S.Ct. at 135 (citations omitted).

Although the Robins court did not articulate a rationale for the rule denying the charterer’s claim for the negligent interference with contractual relations, it is generally accepted that the rule reflects a concern for limiting the scope of a defendant’s potential economic liability. See generally, Restatement (Second) of Torts § 766C, comment a (1979); Prosser and Keeton on the Law of Torts, § 129 at 1001 (W.P. Keeton 5th ed. 1984); James, Tort Liability for Economic Loss, 25 Vand.L.Rev. 43 (1972). Without such a limitation, a defendant may be exposed to potentially limitless liability, because a single negligent act may affect a multitude of contractual relationships. Prosser and Keeton note:

The policy against recovery based on [negligent interference with contractual relations] is rooted at least in part on what Professor James has called the “pragmatic objection” that while physical harm generally has limited effects, a chain reaction occurs when economic harm is done and may produce an unending sequence of financial effects best dealt with by insurance, or by contract, or by other business planning devices.

Prosser and Keeton, § 129 at 1001. By limiting a defendant’s exposure for economic losses that arise solely by reason of a contractual relation, the rule against recovery for the negligent interference with the performance of a contract cuts off the chain reaction of financial effects at the first link.

Some courts have extended this policy analysis, and apply Robins as authority for a per se rule barring recovery for all negligently inflicted economic losses, where such losses are unaccompanied by physical damage to the plaintiff’s person or property. In particular, the Fifth and Eleventh Circuits routinely apply Robins to deny recovery where a defendant negligently obstructs the use of a navigable waterway and causes vessel owners, terminal operators, or various other commercial enterprises to lose profits or incur additional expenses. See, e.g., Louisiana v. M/T Testbank, 728 F.2d 748 (5th Cir.1984); Hercules Carriers, Inc. v. Florida, 720 F.2d 1201 (11th Cir.1983); Akron Corp. v. M/T Cantigny, 706 F.2d 151 (5th Cir.1983); Kingston Shipping Co. v. Roberts, 667 F.2d 34 (11th Cir.), cert. denied, 458 U.S. 1108, 102 S.Ct. 3487, 73 L.Ed.2d 1369 (1982); Dick Meyers Towing Service, Inc. v. United States, 577 F.2d 1023 (5th Cir.1978), cert. denied, 440 U.S. 908, 99 S.Ct. 1215, 59 L.Ed.2d 455 (1979). In Testbank, for example, the court stated:

Building on the Supreme Court's decision in [Robins ], the Fifth Circuit Court of Appeals has developed a doctrine of maritime law that controls the outcome of this case: in a suit based upon the alleged negligence of a defendant, a plaintiff cannot recover consequential economic losses if the alleged negligence has not caused any physical damage to the person or property of the plaintiff.

728 F.2d at 749-50. Needless to say, application of such a per se rule in the present case would bar Getty from recovering from the defendants, because Getty admittedly has not suffered any physical damage to its facilities.

On the other hand, some courts, led by the Second Circuit’s opinion in In re Kinsman Transit Co., 388 F.2d 821 (2d Cir. 1968) (Kinsman II), have expressed dissatisfaction with the negligent breach of contract analysis of Robins, and with the per se rule denying recovery for purely economic losses. See Federal Commerce & Navigation Co. v. M/V Marathonian, 392 F.Supp. 908 (S.D.N.Y.), aff'd, 528 F.2d 907 (1975). See also Testbank, 728 F.2d at 750-51 (Wisdom, J., concurring); Hercules Carriers, 720 F.2d at 1202-05 (Clark, J., concurring). Although the Kinsman II approach recognizes the practical necessity of curtailing unlimited liability, it views the bright line limitations imposed by Robins and the per se rule as artificial, and as unreasonably restricting a plaintiff’s ability to obtain redress for the consequences of a defendant’s negligent conduct. Kinsman II, 388 F.2d at 823-24. See Testbank, 728 F.2d at 750-51 & n. 1 (Wisdom, J., concurring). This approach advocates the use of traditional tort principles rather than bright line rules. Under this approach, a defendant is held to be liable for all of the economic losses that are proximately caused by his negligent conduct. A court applying the Kinsman II approach substitutes principles such as remoteness, foreseeability, and proximate cause to provide the necessary limitation of liability. Kinsman II, 388 F.2d at 824-25. See Venore Transportation Co. v. M/V Struma, 583 F.2d 708, 710 (4th Cir.1978) (Robins “is essentially a principle of disallowing damages because of remoteness____”). But see, Marathonian, 392 F.Supp. at 913-16 (although preferring the Kinsman II approach, the court applies the Robins analysis because bound by precedent).

In the present case, it is neither necessary to rely on the per se rule against recovery of purely economic losses, nor appropriate to apply the Kinsman II approach, because the Robins analysis directly governs the disposition of Getty’s claim. Assuming for purposes of the present motion that the defendants acted negligently, the only injury that Getty has established was its payment of demurrage to several vessels that were delayed while the Fadi B was forced to remain at Getty’s pier. Getty’s obligation to pay these demurrage claims arose, if at all, from Getty’s contracts with each of the delayed vessels. Getty’s claim thus essentially is one for interfering with its contracts by requiring it to undertake contractual obligations that made its performance more expensive. Getty admits this much in its brief:

Getty was under a contractual obligation to pay demurrage to vessels it had under hire. The damages that Getty is seeking consist principally of the excess demur-rage payments that it was required to make as a result of the FADI B’s tortious conduct in blocking Getty’s main pier. The FADI B did not interfere with Getty’s contractual relationships. Rather, the tortious conduct of the FADI B caused Getty to incur extra expenses which were based upon contact obligations and were of a nature that are well known to any shipowner.

Plaintiff’s Memorandum of Law at 6.

Getty seeks to distinguish the present case from Robins because the defendants’ interference did not result in a breach of contract. This distinction is irrelevant. As the Restatement (Second) of Torts illustrates, the interference with contractual relations can take several forms. See Restatement, §§ 766-766B. In Robins, the shipyard interfered with the contract between the shipowner and the charterer by preventing the shipowner from performing. The charterer’s claim thus corresponds to what the Restatement labels “interference with the performance of a contract by a third person.” Id. at § 766. In the present case, the defendants interfered with Getty’s contracts by making the performance of those contracts more burdensome (i.e., incurring demurrage charges to delayed vessels). Getty’s claim thus corresponds to what the Restatement labels “interference with another’s performance of his own contract.” Id. at 766A. As the Restatement recognizes, an interference under either circumstance is not actionable if it was done negligently. Id. at 766C. Because Getty seeks only to recover economic losses resulting from the negligent interference with its own contracts, Getty’s claim is barred as a matter of law by the holding of Robins.

Applying Robins in the context of this case not only is consistent with precedent, it is also consistent with the pragmatic policy of limiting the scope of liability for economic losses. In fact, the case exemplifies the “chain reaction” of economic effects to which Prosser and Keeton refer. Because of an apparent shortage of crude oil at its refinery, Getty scheduled several ships to arrive at the Delaware City anchorage within a relatively short time span. These incoming ships were prevented from mooring at Getty’s terminal for a time by the circumstances surrounding the cracking of the Fadi B. Each succeeding ship that arrived at the breakwater was delayed from proceeding to Getty’s terminal. Getty added together the economic consequences of this chain reaction of delays, and presented them to the defendants as a claim for damages. The evidence at trial extended to at least eight different vessels. The liability to the defendants conceivably could have been endless, and was dependent upon Getty’s own scheduling decisions. The testimony of the various scheduling witnesses, and the charts each prepared, proved, if anything, that to isolate accurately the delays that are fairly attributable to the Fadi B is a nearly impossible task. Robins sensibly avoids the uncertainties inherent in such an undertaking.

      . Rule 41(b) states that "[i]f the court renders judgment on the merits against the plaintiff, the court shall make findings as provided in Rule 52(a).” Fed.R.Civ.P. 41(b). This memorandum represents my findings of fact and conclusions of law in accordance with Rule 52(a).

      . Although I have not reviewed all of the evidence, the record contains much evidence tending to establish that Fadi had no duty to inspect the particular weld that caused the crack in the Fadi B, and that a reasonable inspection would not have uncovered the defect in the weld.

      . Fadi strenuously maintains that the various provisions in Getty’s contracts did not require Getty to pay demurrage under the circumstances of this case.

      . Getty had entered into several different types of contractual arrangements with the delayed vessels. Getty chartered the Alabama Getty, Pennsylvania Getty, and Texas Getty under contracts of affreightment with its parent company, Getty Oil Co. Getty hired the Interstate 140 directly from a barge operator, and Getty entered into exchange agreements with the owners and charterers of the Ogden Champion and the Solveig.

      . Getty asserts that Robins does not apply because Getty had a proprietary interest in the blocked pier. See Vicksburg Towing Co. v. Mississippi Marine Transport Co., 609 F.2d 176 (5th Cir.1980). As the quoted passage demonstrates, however, Getty’s claim for damages does not arise by reason of its ownership of the pier as such, but rather because Getty entered into contractual arrangements whereby it hired vessels to deliver crude oil to its refining facility. The interference, therefore, was with Getty's contractual rights and interests, not with proprietary rights and interests.


author: CASSIBRY, Senior District Judge.

text:
    Carroll James FANGUY v. UNITED STATES of America.
    Civ. A. No. 82-3723.
    United States District Court, E.D. Louisiana.
    Aug. 30, 1984.

      Ronald L. Menville, H. Neil Young, Houma, La., for plaintiff, Carroll James Fan-guy-
    John Volz, U.S. Atty., W. Glenn Burns, S. Mark Gallinghouse, Asst. U.S. Attys., New Orleans, La., for defendant U.S.
   OPINION

CASSIBRY, Senior District Judge.

Plaintiff Carroll James Fanguy brought this medical malpractice action against the United States under the Federal Tort Claims Act (“FTCA”), 28 U.S.C. § 2671, et seq. Fanguy alleges that he lost both his legs to amputation as a result of the refusal of the Veterans Administration (“VA”) Hospital in New Orleans to admit him for treatment on November 2, 1980. Trial.of this matter was held before the court, sitting without a jury, on March 22, 1984. Post-trial briefing was completed on July 16, 1984. The court now enters its findings of fact and conclusions of law in support of its judgment.

FINDINGS OF FACT

1. Carroll James Fanguy is a career military man who retired from the service at the end of 1971 with service-connected disabilities.

2. Fanguy presents a medical history replete with vascular circulatory disorders. He first developed circulatory difficulties approximately five years prior to the time when the events in question in this case took place. More severe problems manifested themselves roughly eighteen months prior to the amputation of this right leg in November 1980.

3. On June 15, 1979, Fanguy underwent the first of three arterial bypasses and grafts to restore circulation to his right leg. An arterial graft and bypass operation is a surgical procedure performed to improve or restore circulation to a part of the body, in this case, Fanguy’s right foot. The occluded, or blocked, portion of the blood vessel is removed and replaced by synthetic vessels. If unrelieved, the consequences of vessel occlusion can be severe. The occlusion deprives the affected area of blood supply and the oxygen necessary to sustain cell life. The anoxic region will become aschemic (discolored), painful and cold. Only if blood circulation is restored promptly can cell damage be reversed.

Time is, therefore, of the essence in such cases. The time for restoration of circulation is measured in hours and days. Within a matter of three or four days, anoxia may be so severe that cell damage is likely to be irreversible even if the blockage to circulation is eliminated. Once cell damage has reached this stage, the threat of infectious gangrene mandates amputation of all or part of the affected limb.

4. Fanguy underwent two subsequent arterial graft and bypass operations in November of 1979 and June of 1980. All three bypass procedures were performed within three days of the onset of symptoms associated with vessel occlusion (severe pain, discoloration, and weak pulses).

5. On Saturday, November 1, 1980, Fan-guy contacted his personal physician, Dr. Jerry Levine, and complained of a resumption of pain and other symptoms of impaired circulation in his right foot. Dr. Levine examined Fanguy that morning and found his foot to be cold and aschemic. Dr. Levine, a general practitioner who had treated Fanguy for the past nine years, but who had no specialized training in vascular medicine, recommended that Fanguy proceed to New Orleans at once for consultation with his private vascular surgeon.

6. Fanguy thereupon travelled from his home in Chauvin, Louisiana to New Orleans, a journey of less than two hours. In New Orleans, he presented himself to Dr. Rudolph Weichert in the early afternoon. Dr. Weichert was a member of the group of vascular surgeons who had preformed Fanguy’s previous arterial bypass operations and was personally familiar with Fan-guy’s medical history.

7. Dr. Weichert’s examination of Fan-guy revealed undiminished pain and lost pulses in the right foot. After the examination, Dr. Weichert recommended that Fanguy be admitted to the hospital that afternoon. It was Dr. Weichert’s intention to admit Fanguy to Touro Hospital, a private institution in New Orleans.

8. Fanguy, however, demurred and stated his preference for the VA. Fanguy explained that he had exhausted his financial resources in paying for his prior medical treatment and that he wished to determine if he would be eligible for admission to the VA. Dr. Weichert agreed to allow Fanguy to explore this possibility and, as an alternative, scheduled Fanguy to be admitted to Touro for the following Monday. Dr. Weichert also gave Fanguy a prescription for Percodan, a pain-killing drug.

9. Fanguy determined not to seek admission to the VA that Saturday. Instead, he repaired to his sister-in-law’s home to rest. Rest, however, proved impossible to achieve on account of the intractable pain in his right foot. Despite consuming Percodan at four times the prescribed rate, Fanguy was unable to alleviate the pain.

10. Early Sunday morning, Fanguy’s wife contacted the VA and made arrangements to bring her husband in at once. The couple went together to the New Orleans VA Hospital and presented themselves at the emergency room.

After a lengthy wait, Fanguy was seen by Dr. Cynthia Coe of the VA staff. Fan-guy complained of pain so “hard” he had been unable to sleep. At this time, Fan-guy’s foot was cold and aschemic and he continued to be in great pain despite the pain medication. Dr. Coe removed Fan-guy’s shoe and sock to reveal a discolored, bluish foot. She asked Fanguy to walk, but conducted no further examination.

11. This was not Fanguy’s first visit to the VA for his circulatory problems. He had been seen twice before in the month of October at the Vascular Clinic and had another appointment with the Neurosurgery Clinic scheduled for November 5th, the following Wednesday.

12. Dr. Coe neither consulted Fanguy’s hospital records nor did she take a proper history of his circulatory problems. She ignored his complaints of great pain and chose instead to write a prescription for sleeping pills. Despite Fanguy’s statement that he had seen a vascular surgeon on the previous day, Dr. Coe did not refer Fanguy to a vascular surgeon at the VA. Instead of admitting him or referring him to a vascular specialist for further consultation, Dr. Coe discharged Fanguy with instructions to return on Wednesday to keep his scheduled appointment with the Neurosurgery Clinic. Unable to obtain admission to the VA, and distraught over Dr. Coe’s remark that “All you’re looking for is dope,” Fanguy returned to his sister-in-law’s home for another insufferably long day and night.

13. Pain is the most telling and reliable indicator of the condition of a patient with Fanguy’s symptoms. When Dr. Weichert examined Fanguy on Saturday, Fanguy had just begun to suffer from rest pain and his pain had not yet had an opportunity to respond to the prescribed medication. By the time Fanguy was seen at the VA on Sunday, his condition had undergone at least one critical change, namely, the failure of the pain medication to have an effect. Fanguy was then suffering from continuous, severe pain despite the heavy dosages of potent pain reliever he had been taking.

Dr. Coe ignored this and other indications of the seriousness of Fanguy’s condition. The testimony of defendant’s own medical experts confirm that, under the circumstances, Dr. Coe’s refusal to refer Fanguy to a vascular surgeon or to admit him to the VA for treatment was conduct falling below the standard of proper medical practice for emergency room physicians.

14. The next day, Monday, November 3, 1980, Fanguy went to Touro Hospital and was admitted there. He was attended at Touro by his vascular surgeon, Dr. Weichert. On Tuesday, November 4th, Dr. Weichert performed an arteriogram which revealed all major femoral vessels to be occluded. No sites for a possible bypass were found. Dr. Weichert next attempted a popliteal exploration of the foot and leg in an effort to salvage Fanguy’s leg. The exploration revealed chronic obliteration of the blood vessels by the process of arteriosclerosis. Again, no possible bypass sites were discovered.

15. Finally, with all hope for a successful bypass gone, on Friday, November 7, 1980, Fanguy’s right leg was amputated above the knee. This was to be the first in a series of five amputations. Complications from the initial surgery continued to plague Fanguy and made it necessary for him to submit to subsequent operations which cost him the remainder of his right leg.

16. Within a short time after his initial amputation, Fanguy began to develop circulatory difficulties in his left leg. Ultimately, this leg was also amputated at the hip, leaving Fanguy confined to a wheelchair. The failure to admit Fanguy to the VA for treatment of the circulatory problems in his right foot did not, however, contribute to the loss of his left leg.

17. It was negligence to deny Fanguy a referral to a vascular surgeon or admittance to the VA on Sunday. The question remains, however, whether Fanguy’s amputation would not otherwise have taken place. The medical testimony adduced at trial is unanimous on one point at least. No matter what, Fanguy’s circulatory problems were so severe that he would have lost his right leg within a year of November 1980, even if a fourth arterial bypass had been successfully performed. Thus, any negligence on the part of the VA cost Fanguy the use of his leg for, at most, one year.

18. The refusal of the VA to treat or admit Fanguy on Sunday did not, however, cost him his leg. This fact is established by the course of treatment followed at Touro once Fanguy did gain admittance. He was not rushed immediately upon admittance to the operating room. Instead, Fanguy was treated on an nonemergent basis, undergoing a series of procedures over the course of several days. Only when all of these tests proved that no procedure or operation would be likely to restore circulation to Fanguy’s foot did the medical team surrender to the inevitable.

19. Although time is of the essence in treating a circulatory obstruction of this nature, there is a complete lack of evidence upon which the court might base a conclusion that a delay of one day in admitting plaintiff to the hospital made it less likely that a bypass site would be found. There is simply no indication in the record that the anoxia due to the interruption of blood supply to plaintiffs right foot also diminished the likelihood that a site for a bypass could be discovered. The rapidity with which cell death occurs in areas deprived of blood flow has not been related to the preservation of sites for bypass and graft surgery to restore circulation. There is no indication that such an operation could have been successfully performed had a proper course of treatment commenced on Sunday rather than Monday. The plaintiff has, therefore, failed to establish that the negligent conduct of the VA in any way caused him to lose his leg.

CONCLUSIONS OF LAW

1. The court has jurisdiction over this suit under the Federal Tort Claims Act (“FTCA”), 28 U.S.C. § 2671 et seq. and 28 U.S.C. § 1846(b).

2. Under the FTCA, the liability of the United States is to be adjudicated in accordance with the substantive law of the state where the act of negligence occurred. 28 U.S.C. § 2672. See, e.g., Arrendale v. U.S., 469 F.Supp. 883 (N.D.Tex.1979); Johnson v. U.S., 271 F.Supp. 205 (W.D. Ark.1967).

3. Louisiana Revised Statute 9:2794 governs medical malpractice actions in this state. The statute places the burden on the plaintiff to prove:

(1) The degree of knowledge or skill possessed or the degree of care ordinarily exercised by physicians or dentists licensed to practice in the state of Louisiana and actively practicing in a similar community or locale and under similar circumstances; and where the defendant practices in a particular specialty and where the alleged acts of medical negligence raise issues peculiar to the particular medical specialty involved, then the plaintiff has the burden of proving the degree of care ordinarily practiced by physicians or dentists within the involved medical specialty.
(2) That the defendant either lacked this degree of knowledge or skill or failed to use reasonable care and diligence, along with his best judgment in the application of that skill, and
(3) That as a proximate result of this lack of knowledge or skill or the failure to exercise this degree of care the plaintiff suffered injuries that would not otherwise have been incurred.

4. The United States contends that plaintiff’s failure to identify Dr. Coe’s medical specialty makes it impossible for plaintiff to satisfy the first prong of his burden of proof under the statute. Although Dr. Coe’s particular medical specialty was not known, plaintiff did establish that Dr. Coe was a staff physician in the emergency room of the New Orleans VA Hospital. Thus, Dr. Coe’s conduct is to be considered in view of the degree of care ordinarily practiced by physicians engaged in emergency medicine.

5. In coming to a conclusion regarding the customary standard of care, the court is to rely on the testimony of qualified medical experts. Steinbach v. Barfield, 428 So.2d 915, 919 (La.App.1983). The testimony of both Dr. Levine, a general practitioner, and Dr. Weichert, a cardiovascular surgeon, established that an emergency room physician confronted with a patient exhibiting those symptoms Fanguy presented on Sunday morning would be expected to either consult with a vascular surgeon or admit the patient to the hospital for treatment.

6. Dr. Coe failed to meet this standard of care. She conducted a brief and cursory examination of Fanguy and ignored his symptoms of circulatory insufficiency. For Dr. Coe to prescribe sleeping pills and direct a patient in Fanguy’s condition to return in four days is conduct falling below the standard of care owed by an emergency room physician. Thus, Fanguy has satisfied the first two prongs of the statutory test.

7. Fanguy has not, however, been able to demonstrate, as required by the statute, that the VA’s negligence was a proximate cause of his injuries. At trial, Fanguy relied on Dr. Levine for expert medical testimony. Dr. Levine, however, testified only as an expert in the general practice of medicine. When questioned about the short-term consequences of the failure to admit Fanguy to the VA on Sunday, Dr. Levine gave no answer since the question took him past the limits of his expertise. Instead, he stated that he would leave the question to be answered by a vascular surgeon. Neither of defendant’s medical experts, both vascular surgeons, were prepared to say that the course of events was affected by the VA’s failure to admit Fanguy on Sunday. In their view, the progression of Fanguy’s peripheral vascular disease had already passed the stage where his leg could be salvaged by bypass surgery. The record, therefore, simply leaves the court unable to conclude that the negligence of the VA was a proximate cause of the plaintiff’s injuries. The third prong of the statutory test for medical malpractice has not, therefore, been satisfied and there can be no recovery for plaintiff.

Accordingly, plaintiff’s claim against defendant is DISMISSED with judgment to be entered accordingly.

      . We note that Fanguy has also advanced a claim for damages for the mental anguish he suffered as a result of the VA’s negligence. In the absence of a finding that the VA’s negligence was a proximate cause of the amputation of plaintiff’s leg, the evidence must establish the requisite intent on the part of the defendant to injure the plaintiff in order for Fanguy to recover. See, e.g., Ferlito v. Cecola, 419 So.2d 102 (La.App.1982). Fanguy has established no such intent and, therefore, is not entitled to recover on this ground.


text:
    Doris Jean FISHER v. Willie DANOS, Gulf Oil Corporation, the Travelers Insurance Company.
    Civ. A. No. 75-3447.
    United States District Court, E.D. Louisiana.
    Aug. 30, 1984.

      Robert McComiskey, Anthony Marinaro, John P. Massicot, Mark Davis, New Orleans, La., for plaintiff.

      Charles Hanemann, Houma, La., for defendants Gulf Oil Corp. and Travelers Ins. Co.
    Darryl W. Bubrig, Buras, La., for cross-defendant Willie Danos.
   OPINION

CASSIBRY, Senior District Judge.

Plaintiff Doris Jean Fisher brought this lawsuit to recover for injuries she sustained when a skiff on which she was a passenger struck an unlit jetty built by Gulf Oil Company. The owner of the skiff, Willie Danos, was released by compromise before trial. At trial, the jury found that Gulf was not negligent, that the negligence of Danos was seventy percent and that Fisher was thirty percent contributorily negligent. After judgment, Fisher appealed and Gulf and The Travelers Insurance Company, Gulf’s insurer, cross-appealed, claiming that the compromise executed by Fisher released Gulf and Travelers as well as Danos. The Court of Appeals found that Fisher had effectively revoked her election of a jury trial and was entitled to reconsideration of her case by the court sitting without a jury. Fisher v. Danos, 671 F.2d 904 (5th Cir.1982). The Court of Appeals did not determine whether the compromise between Fisher and Danos also released Gulf, but remanded the entire matter for consideration on the basis of the present record uninfluenced by the jury verdict. After consideration of the record, the court now enters findings, of fact and conclusions of law in support of its judgment.

FINDINGS OF FACT

1. On the moonless evening of November 11, 1974, the plaintiff, Doris Jean Fisher, met her friend Willie Danos at a boat landing in Venice, Louisiana known as The Jump. The time was approximately 7:00 p.m. Fisher arrived at The Jump from The Den, a bar where she had spent the past several hours. During that time, she had had at least two drinks of an alcoholic content. Fisher carried with her from the bar several bottles of liquor and mixers.

2. Willie Danos was the owner of a twenty-foot, open Lafitte skiff, the M/V ROADRUNNER II. This skiff was powered by an Evinrude outboard motor capable of attaining speeds of 25 miles per hour or faster.

3. Fisher and Danos left The Jump in the M/V ROADRUNNER II shortly after 7:00 p.m. The purpose of their trip was to bring the liquor to friends who were fishing some distance away. Danos had also had two or three drinks earlier in the afternoon, but neither party consumed any of the alcohol they brought with them after leaving The Jump.

4. During the course of their brief excursion, Danos was standing at the wheel amidships and operating the skiff. Fisher was seated on a small ice chest just forward of Danos and was facing him.

5. The pair traveled in a generally easterly direction from The Jump on the Mississippi River through the Baptiste Collette Bayou and on into Denesse or Dennis Pass. Dennis Pass is a navigable waterway leading to the Gulf of Mexico.

6. Danos was piloting the M/V ROADRUNNER II through Dennis Pass at 25 miles per hour or more at the time of the accident. Roughly fifteen minutes after its departure from The Jump, the M/V ROADRUNNER II struck the channel end of a wind dam jetty with sufficient force to stove in its bow. As a result of the collision, Fisher suffered multiple fractures, a loss of consciousness and great pain. Danos pulled her from the bow and obtained emergency medical attention for her.

7. The jetty struck by Danos was one of a series of five timber wind dam jetties which run perpendicular to the right descending or southern bank of Dennis Pass in between Gulf’s South Grand Bay warehouse and its nearby compressor station. The width of the pass in this area is approximately 200 feet from shore to shore. The jetties protrude into the channel from 50 to 80 feet.

8. At the time of the accident, the jetties were covered with creosote and were of a dark hue. The jetties, at normal water levels, stand four feet above the level of the water. None of the jetties were marked, at the time of the accident, by any lights, reflectors, or other device to illuminate or warn of their presence. Any reflecting tape they had once had was old, faded and ineffective.

9. The jetties were designed and built to divert water into the center of the channel and thereby function as a form of erosion control to protect Gulfs compressor station and other installations in the vicinity. The jetties were owned by Gulf and were constructed over a period of approximately two months in mid-1967 under the supervision of Gulfs area production superintendent, R.E. Valentine. Although a work order of the J. Ray McDermott Company (“McDermott”) dated November 22, 1969 refers to the job as “building wind jams”, the jetties were actually completed in 1967. Only thirteen hours were expended by McDermott’s work crew on the job described as “building wind dams”. It is obvious that the five jetties in question could not have been built in such a short time. Each jetty was at least fifty feet long, built of wood planking and braced by pilings sunk in water at least fifteen feet deep. In light of the relatively small amount of time spent on this work order, I conclude that it refers to the repairs made to the jetties in the wake of Hurricane Camille. Moreover, the testimony of Danos and other trial witnesses uniformly indicated that the jetties were completed before December of 1968.

10. Gulf never obtained a permit from the Army Corps of Engineers authorizing the construction of these jetties as required by the Rivers and Harbors Appropriation Act of 1899, 33 U.S. § 403.

11. Danos was an experienced crewboat operator who had traveled through Dennis Pass more times than he cared to count. Danos knew of the jetties’ existence and had traveled through Dennis Pass at night on several occasions. On the evening of the accident, Danos was hugging the right or southern bank of Dennis Pass and making occasional use of a hand-held spotlight to ascertain his distance from the bank. He successfully navigated past the first two jetties, each about 50 feet long. Danos then turned the skiff to angle it past the third and longest jetty. This jetty protrudes approximately 80 feet into the channel and the M/V ROADRUNNER II struck it near its channel end.

12. Willie Danos had actual knowledge of the presence of the jetties in Dennis Pass and, in the exercise of reasonable care, he should have proceeded more cautiously to insure the safety of his passenger. I find 25 miles per hour to have been an unreasonable speed for travel in the darkness of Dennis Pass. I therefore find that Danos failed to exercise reasonable care and that this failure constituted negligence on his part. Danos’ negligence was a proximate cause of the collision with the jetty and Fisher’s injuries and damages.

13. The jetty Danos struck was unmarked and unlit. Even someone familiar with the Pass as Danos was could not spot the jetty in the dark. Gulf built and maintained the jetty and could have foreseen that it could present a hazard to navigation to a vessel traveling in the dark, at any speed. Gulf was at all times capable of installing a light on the jetty and it could have done so at minimal expense. The jetty Danos struck protruded far out into the channel and, without a light or other device to warn river traffic away from it, the jetty constituted a hazard to navigation. Gulf’s failure to take reasonable steps to mark the jetty constituted negligence and was a proximate cause of the collision and the injuries and damages suffered by the plaintiff.

14. Danos and Gulf were equally responsible for Fisher’s injuries.

15. Fisher also bears some of the responsibility for her accident. She accompanied Danos on the trip and they had both been drinking. Her conduct on the trip also distracted Danos while he was operating the skiff. She should have used more caution in riding with Danos in his condition. I therefore find that her negligence contributed to the accident and also constituted a proximate cause of her injuries. I fix her contributory negligence at twenty-five percent.

16. In the accident, Fisher sustained injuries consisting of an open fracture of the right leg between the knee and ankle, and an extremely comminuted fracture of the left leg and hip. She also suffered a fractured collar bone and multiple abrasions. Her right leg was placed in a cast, but the fractures to her left leg required surgery. A pin and nail plate were inserted to repair the fractures to her left leg and hip. In the process of knitting together, Fisher’s left leg came to be one and a half inches shorter than her right. Fisher attempted to meliorate the effects of the discrepancy in a number of ways. She used heel lifts and altered her gait but to no avail.

17. Suffering from persistent pain and embarrassment over the unequal length of her limbs, Fisher chose to undergo corrective surgery. In December of 1978, she returned to the hospital for surgery to shorten her longer leg by removing a portion of her left femur. This surgery gave her legs of equal length, but left them assymetrical in that her knees were now of unequal height. In addition, Fisher was left with metal implants in her left leg and severe scarring. Fisher is unable to run and cannot walk without discomfort. She suffers from persistent pain and is subject to an increased risk of degenerative arthritis in the affected joints. In sum, the accident has resulted in a thirteen percent partial permanent disability of her body as a whole.

18. At the time of the April 1980 trial, Fisher’s life expectancy was forty-three years and her work-life expectancy was twenty-six years.

19. The mother of six children at the time of trial, Fisher had a record of sporadic employment as a waitress and barmaid. She had never progressed past the eighth grade and her abilities in the three R’s bad declined measurably below that grade level. Neither her education nor her job skills suggest Fisher would be likely to advance to more remunerative employment than that in which she was engaged at the time of the accident. At that time, she was a barmaid at The Den and her earnings were in the neighborhood of $165.00 per week.

20. Fisher attempted on more than one occasion to return to her job as a barmaid following her accident, but was unable to continue due to the pain in her legs. It is likely that she will be unable to return to work in the future given the condition of her limbs.

21. Fisher has suffered total damages in the amount of $200,000.00 before deducting for her own negligence.

22. On February 28, 1975, Fisher executed a release in favor of Danos “which does expressly release and forever discharge the said Willie Danos and all other persons from any and all claims for damages arising out of or in any way connected with the boating accident.” Despite the use of the phrase “all other persons”, the intent of the February 28, 1975 agreement was to release Willie Danos only and not to release either Gulf or Travelers. The release made no mention of Gulf or Travelers. Gulf and Travelers were not present at the execution of the agreement and did not contribute any sums to either Fisher or Danos as part of this or any other settlement. Fisher and Danos did not discuss releasing Gulf during their settlement negotiations. Fisher was not represented by counsel at the time she executed the release and given the low level of her reading skills and education, she cannot be found to have also intended to release absent parties. To the contrary, Fisher’s intention was to settle with Danos and proceed against Gulf.

23. Subsequent to the filing of this action, Fisher executed a second release, dated August 10, 1976, in favor of Willie Danos. This agreement was reached after Danos had failed to honor his obligations under the first release. This agreement supplanted the parties’ former agreement. In contrast to the earlier agreement, Fisher made this release “with a full reservation by me of any and all rights which I may have against the Gulf Oil Corporation.” Pursuant to the release, on August 25, 1976, the Court entered an order dismissing Fisher’s claim against defendant Willie Danos.

CONCLUSIONS OF LAW

1. The court has jurisdiction over this matter pursuant to its admiralty jurisdiction. 28 U.S.C. § 1833; F.R.Civ.P. 9(h); Fisher, 671 F.2d at 906.

2. Gulf and Travelers have contended throughout this lawsuit that the release executed by Fisher on February 28, 1975 in favor of Danos “and all other persons” was effective to release them from any liability that they might have to Fisher as a result of her accident. In an admiralty case, the effect of a release should be determined in accordance with principles of federal law. See Ingram Corp. v. J. Ray McDermott & Co., Inc., 698 F.2d 1295, 1317 n. 27 (5th Cir.1983). The federal rule in this regard is well established. A release of one joint tortfeasor is not a release of others unless the party signing the release intended the others to be released. Locafrance U.S. Corp. v. Intermodal Systems Leas., 558 F.2d 1113, 1115 (2nd Cir. 1977) (citations omitted).

3. The effect of this release, therefore, is to be determined by the intentions of the parties. Zenith Radio Corp. v. Hazeltine Research, Inc., 401 U.S. 321, 347, 91 S.Ct. 795, 810, 28 L.Ed.2d 77 (1971); Cates v. United States, 451 F.2d 411, 415 (5th Cir.1971). Seamen are wards of the admiralty court and their releases merit close scrutiny. The burden rests on the party seeking to use a seaman’s release as a defense to show that it was given with an informed understanding of his rights and a full appreciation of the consequences. Cates, 451 F.2d at 414. Although Fisher is not a seaman, her release also merits careful scrutiny. Because of her lack of education and legal sophistication, comprehension of the legal consequences of a document she could not even read cannot be imputed to Fisher. See Locafrance, 558 F.2d at 1114 (in a personal injury case, questions regarding the intent of the parties may arise even when a release is unambiguous on its face).

4. Determination of the intentions of the parties is a question of fact. I have found that Fisher did not intend to release Gulf or Travelers when she executed the release agreement of February 28, 1975. There was never any bargaining between the parties because Gulf and Travelers had no contact with Fisher in connection with this release. Absent evidence to the contrary, a release of a settling tortfeasor is not effective to release an absent non-participating, non-settling tortfeasor. Therefore, the failure of the first release to include an express reservation of Fisher’s rights against Gulf and Travelers is of no moment. Gulf and Travelers cannot rely on the first release as a defense to their liability to Fisher.

5. Section 10 of the Rivers and Harbors Appropriation Act of 1899 (“the Act”) mandates that express authorization be obtained for the creation of any obstruction to a navigable waterway of the United States. 33 U.S.C. § 403. There is no question that the statute applies to the jetties Gulf built in Dennis Pass. It is also clear that Gulf never sought or obtained the requisite permit from the Army Corps of Engineers for these jetties.

6. Instead, Gulf has contended that its failure to comply with the statute is excused by the grandfather clause contained in 33 C.F.R. § 322.4(g) (1981). The regulation provides that no section 10 permit is required for “structures or work completed before 18 December 1968 or in waterbodies over which the District Engineer has not asserted jurisdiction provided there is no interference with navigation.” Although the jetties were completed before the December 1968 cut-off date, they were a hazard to navigation. The jetties, particularly the one struck by the M/V ROADRUNNER II, obstructed a substantial portion of the channel, lay low in the water, and could not be readily identified in the dark. Thus, the grandfather clause is inapplicable to these jetties and Gulfs failure to comply with the statutory permit requirement is not excused.

7. One of the purposes of the Act is the protection of navigable waterways from encroachment and obstruction in order to promote the safety of navigation. See, e.g., Atlantic Refining Co. v. Moller, 320 U.S. 462, 466, 64 S.Ct. 225, 227, 88 L.Ed. 168 (1943). The permit requirement of section 10 of the Act imposed a specific duty on Gulf for the protection of a class of which Fisher was a member. Although Fisher contends for the application of a strict rule of negligence per se for Gulfs failure to comply with the statute, all that is established is a standard by which the fact of negligence may be determined and liability imposed for injuries of the character which the statute was designed to prevent. See Prosser, Handbook of the Law of Torts 200 (4th ed. 1971).

8. The Army Corp of Engineers has no requirements of its own with respect to lighting. Instead, a section 10 permit contains the condition that any structures authorized by it be marked or lighted as required by the Coast Guard. Coast Guard regulations call for the placement of obstruction lights with a 360° lens on any structure over 50 feet long. 33 C.F.R. § 67.051(c) (1983). None of the jetties had such lights. Inasmuch as the jetties protruded into navigable waters, Gulf had a duty to install lights to mark the jetties. Gele v. Chevron Oil Co., 574 F.2d 243, 247 (5th Cir.1978).

9. Gulf’s failure to meet its statutory duties and either mark or light the jetties brings on the Rule of The Pennsylvania, 86 U.S. (19 Wall.) 125, 22 L.Ed. 148 (1874). Gele, 574 F.2d at 247. Under the Rule, the burden is on Gulf to show not merely that its fault might not have been one of the causes, or that it probably was not, but that its violation of these rules intended to prevent collisions could not have been a cause of the collision. Id. (citations omitted). This is obviously a difficult burden to meet and Gulf has not been able to overcome it. Gulf has not shown that, by all reasonable probabilities, its failure to light the jetty did not contribute to the cause of the collision. Id.

10. Even were the Rule of The Pennsylvania not applicable, we would have no difficulty in concluding that Fisher had shown, by a preponderance of the evidence, that Gulf’s failure to light its jetties was negligence and a proximate cause of the accident. With the exception of the jetties, Gulf had lights on each and every structure it had placed in the channel of Dennis Pass or along its banks. The jetties were entirely under Gulf’s control and the task of adding lights to them would have been a simple one involving minimal expenditures of time and money. Even if Coast Guard permission were required for the installation of obstruction lights, there is nothing to indicate permission would not have been readily granted. See 14 U.S.C. § 83.

11. Danos, as the captain and operator of the M/Y ROADRUNNER II, owed his passenger a duty to exercise reasoable care for her safety. Despite his knowledge of the existence of the jetties, he was traveling along the bank at full speed on a dark and moonless night. His operation of the skiff at high speed under these conditions was dangerous and unreasonable. His negligence was a proximate cause of the collision with the jetty and the resulting injuries and damages suffered by Fisher.

12. Fisher’s contributory negligence was also a proximate cause of the accident and her resulting injuries.

13. At the time of trial, an award of future lost earnings was governed by Johnson v. Penrod Drilling Co., 510 F.2d 234 (5th Cir.), cert. denied, 423 U.S. 839, 96 S.Ct. 68, 46 L.Ed.2d 58 (1975). Accordingly, the court permitted no proof, argument, or jury instructions concerning inflationary factors to be considered or used at trial. In the years since this suit was first tried, of course, the law regarding the calculation of future lost earnings has endured considerable upheaval. Penrod was first overruled by Culver I. Culver v. Slater Boat Co., 688 F.2d 280 (5th Cir.1982) (en banc). Thereafter, the Supreme Court decided Jones & Laughlin Steel Corp. v. Pfeifer, 462 U.S. 523, 103 S.Ct. 2541, 76 L.Ed.2d 768 (1983), and the Fifth Circuit undertook to reconsider Culver I in light of Pfeifer. In Culver II, the Fifth Circuit adopted the below-market-discount method for use in calculation of future lost earnings. Culver v. Slater Boat Co., 722 F.2d 114 (5th Cir. 1983) (en banc).

The question remains, however, whether this case is now governed by Culver II. The Fifth Circuit recently delineated the categories of cases governed by Penrod, Culver I, and Culver II, respectively. Martin v. Missouri Pacific R. Co., 732 F.2d 435 (5th Cir.1984). As was true of Martin, the instant case was tried prior to the Fifth Circuit’s decision in Culver I, but the plaintiff objected to the application of Penrod’s principles. Thus, Penrod is not applicable. Relying on Penrod, the court submitted the case to the jury without consideration of the inflation adjustments approved in Culver I. Since this case falls within neither of the first two categories delineated in Martin, it comes under the third category which covers all other cases in which the inflation-discount issues were raised in the district court. Culver II is applicable to cases in Martin’s third category and would ordinarily apply here. Martin, 732 F.2d at 436.

There is a problem with applying Culver II to this case, however. The Fifth Circuit instructed the court to decide the case on the basis of the record made before the jury. That record, however, is insufficient to permit the calculation of future lost income in accordance with Culver II. Plaintiff's evidence of future lost earnings was presented by her expert economist in accordance with the then-applicable law. In order to arrive at an award for future lost income, any calculation of future lost earnings would have to be made in accordance with the below-market discount rate method mandated by Culver II. There appear, however, to be as many methods of calculating an award of future lost earnings under Culver II as there are economists available to perform the calculation. See, e.g., Wolfson, Wright v. ODECO: State Court Economic Evaluation of Maritime Personal Injury Claims, The Trial Brief, July 1984 (Special Supplement) at 1, 4. Even were the court to direct the calculation to be made in accordance with a below-market rate fixed by the court, further proceedings would be necessary to allow the method of calculation to be tested on cross-examination. Thus, compliance with Culver II appears to require the court to go beyond the present record in disregard of the mandate of the Court of Appeals.

Thus, the court finds itself able to apply the law of this circuit only at the risk of violating the Court of Appeals’ explicit instructions on remand. In an effort to avoid this particular Scylla and Charybdis, we have chosen to make an award of general damages. An award of general damages is especially appropriate in a case such as this where the record supports an award of $200,000.00 for pain and suffering alone. Most, if not all, of Fisher’s damages are attributable to her physical injuries and her attendant pain and suffering, both physical and emotional. The proof of her lost income, past and future, is considerably weaker. As the Court of Appeals recognized, its remand “for a trial by the trial judge on the basis of the record made before the jury” placed this case in “peculiar circumstances.” These peculiar circumstances are most evident with respect to the calculation of future lost earnings.

This accident took place ten years ago. The voyage of this case through the courts has been a long one and it is time to bring it to a close. It would be unfortunate and unjust to delay Doris Jean Fisher’s recovery yet again as a result of the peculiar circumstances of this case.

14. Fisher bears twenty-five percent of the responsibility for the accident. Therefore, her total damages have been reduced from $200,000.00 to $150,000.00. Her recovery from Gulf and Travelers, moreover, is reduced further to account for the compromise she entered into with Danos. As a result of this compromise, Fisher is entitled to recovery limited to the proportional share of the damages attributed to Gulf’s comparative negligence. United States v. Reliable Transfer Co., 421 U.S. 397, 95 S.Ct. 1708, 44 L.Ed.2d 251 (1975). Danos and Gulf have been found equally responsible for Fisher’s injuries. Judgment shall, therefore, be entered in favor of plaintiff and against Gulf and Travelers, in solido, in the sum of $75,000.00, with interest and costs as taxed by the Clerk of Court.

15. Gulf’s sole remedy on its cross-claim against Danos for contribution and indemnification is reduction of Fisher’s recovery in accordance with the apportionment of liability between Danos and Gulf. Reliance Transfer, 421 U.S. 397, 95 S.Ct. 1708, 44 L.Ed.2d 251; Leger v. Drilling Well Control, Inc., 592 F.2d 1246, 1249 (5th Cir.1979). No right to indemnity arises here, either by agreement between the parties or by operation of law. Gulf, therefore, is not entitled to indemnification from Danos. Gele, 574 F.2d at 251.

      . The statute provides as follows:
      The creation of any obstruction not affirmatively authorized by Congress, to the navigable capacity of any of the waters of the United States is prohibited: and it shall not be lawful to build or commence the building of any ... jetty ... in any ... navigable river ... except on plans recommended by the Chief of Engineers and authorized by the Secretary of the Army.

      . The regulations provide, in pertinent part:
      (c) Structures having a horizontal dimension of over 50 feet on any one side, or in diameter, shall be required to have an obstruction light on each corner ... or as prescribed by the District Commander, each light to have a 360° lens.

      . Fisher’s future lost earnings were calculated to total $200,000.00. This figure represents an annual after-tax income of $8,000.00 for 25 years. Plaintiffs expert chose two different discount rates to arrive at a figure representing the present value of Fisher’s total future lost earnings. Discounting at the rate of 5% yielded a present value amount of $114,900.00; discounting at the rate of 7.5% yielded a present value figure of $90,300.00.
      In order to arrive at these figures, plaintiffs expert assumed that Fisher would work full-time into the 21st century. In light of plaintiffs prior employment history, family situation, and the failure of her income tax returns to support these assumptions of full and regular employment, the court is unable to accept the income stream calculated by her expert. In the court’s view, her expert's calculation of future lost earnings exaggerates Fisher's future lost income by a factor of four.

      . If the court were to estimate future lost earnings in accordance with Culver II, it would apply a below-market discount rate of 2%. Excepting price inflation, societal factors are unlikely to push Fisher’s future wages up. Consideration of her individual skills and resources leads the court to conclude that she would not achieve any real wage growth. We would, therefore, merely set off an estimate of future price inflation against the market interest rate to arrive at the pre-tax below-market-discount rate. Only a minimal adjustment, if any, would be required for tax effects since Fisher’s earnings leave her in a bracket only slightly above minimum wage levels. See Culver II, 722 F.2d at 118, 122; Culver I, 688 F.2d at 296; Pfeiffer, 103 S.Ct. at 2556.

      . The testimony adduced at trial represented Fisher’s lost earnings to have reached $10,800.00. This figure was calculated on the basis of earnings of $165.00 per week from December 1978 to the time of trial with an appropriate deduction for taxes. No evidence was presented upon which to base a calculation of lost earnings for the period from the time of the accident to December 1978. For the reasons noted above, even the figure of $10,800.00 is open to question. See, note 3, supra.

        . Admiralty courts have discretion in setting the rate of pre-judgment interest. In re M/V VULCAN, 553 F.2d 489, 491 (5th Cir.1977). In view of the yields available to investors over the past decade, pre-judgment interest shall run from the date of judicial demand at the rate of eleven percent per annum.


author: CANNELLA, Senior District Judge:

text:
    s.a.r.l. ORLIAC, Plaintiff, v. WINEBOW, INC., Defendant and Third-Party Plaintiff, v. Henri BERTHE, Cognac & Brandies From France, Inc., and La Maison Du Vigneron, Third-Party Defendants.
    No. 83 Civ. 7286 (JMC).
    United States District Court, S.D. New York.
    Aug. 31, 1984.
    Solin & Breindel, P.C., New York City (Daniel R. Solin, David L. Ferstendig and Claude M. Tusk, New York City, of counsel), for plaintiff.
    Gordon, Shechtman & Gordon, P.C., New York City (Ronald H. Shechtman, Richard M. Betheil and Richard Imbrogno, New York City, of counsel), for defendant and third-party plaintiff.
    Max Block, Jr., New York City, for third-party defendants.
   MEMORANDUM AND ORDER

CANNELLA, Senior District Judge:

Plaintiff’s motion for summary judgment is granted in part and denied in part. Fed. R.Civ.P. 56(a).

Defendant’s motion for summary judgment is denied without prejudice with leave to resubmit. Fed.R.Civ.P. 56(a).

Third-party defendants’ motions to dismiss and for partial summary judgment are denied without prejudice with leave to resubmit. Fed.R.Civ.P. 12(b)(2), (3), 4), (6); 56(b).

FACTS

The parties to this action are entangled in a web of litigation stretching from state and federal courts to a French tribunal. Each party is aligned as a plaintiff and defendant somewhere in the list of lawsuits. Although the disputes involve a large number of international wine and alcohol transactions, the instant action is limited to one shipment of wine.

Plaintiff s.a.r.l. Orliac [“Orliac”] is a French exporter of wines and brandies with its principal place of business in La Magistere, Tarn et Garonne, France. Defendant Winebow, Inc. [“Winebow”] is a New Jersey importer of alcohol and wine with offices in New Jersey and New York. Third-party defendant La Maison du Vigneron [“Vigneron”] is a French agricultural cooperative that produces wine and alcohol with its principal place of business in Lons le Saulnier, Jura, France. Third-party defendant Henri Berthe is a Connecticut domiciliary who acted as sales and collection agent for Orliac and Vigneron. Third-party defendant Cognac & Brandies from France, Inc. [“Cognac & Brandies”] is a Connecticut corporation run and apparently wholly owned by Berthe. Cognac & Brandies also acted as a collection agent on behalf of Orliac and Vigneron.

Vigneron, Orliac and Cognac & Brandies contracted on November 15, 1982 for Vigneron to ship its products through Orliac to American importers with all payments to be collected by Cognac & Brandies. On April 20, 1983, Orliac shipped 800 cases of Vigneron’s Brut Royal wine, vintage 1981, to Winebow. Orliac invoice 320 requested payment of 192,000 French francs, approximately $21,734, by July 4, 1983. On April 25, 1983, Orliac shipped an identical order of wine to Winebow and requested the same purchase price through invoice 327, to be remitted by July 30, 1983. There is no dispute that both orders of wine were sold, shipped and delivered to Winebow which incurred a debt to Orliac of 394,000 francs, approximately $43,469.

Although it is unclear who toppled the first domino, Orliac at some point stopped paying Berthe’s commissions and remitting Vigneron’s share from the foreign sales. Berthe stopped sending Orliac payments from American importers and instead deposited the monies as a means of recovering his commissions. Vigneron sued Orliac for unpaid proceeds approximating one million francs in the Court of Commerce in Montauban, Tarn et Garonne. The French court ordered the seizure of Orliac’s bank account at La Societe General, Bordeaux and issued a “saisie-arret” or “stop payment” on August 12, 1983 authorizing Vigneron to start proceedings in the United States to attach outstanding payments owed to Orliac by American importers.

Cognac & Brandies sued Orliac, again in the Montauban court, for unpaid commissions, and Orliac counterclaimed for the amounts that Cognac & Brandies had retained to pay past commissions due. Each party to that action alleges damages approximating 1,500,000 francs. The French court ordered the seizure of Berthe’s bank account in the amount of 200,000 francs at Credit Agricole, France. An accountant’s report prepared under order of the Montauban tribunal concludes that Berthe owes Orliac approximately 135,000 francs. Orliac also alleges additional claims against Berthe for 3,727,000 francs which are not covered in the accountant’s report. Orliac then brought the instant action against Winebow to recover outstanding debts resulting from the April shipments.

This Court granted summary judgment in favor of plaintiff for invoice 327. See Memorandum and Order, 83 Civ. 7286 (S.D. N.Y. May 2, 1984) [hereinafter “May Memorandum”]. Winebow admitted liability on the invoice and had deposited the funds pursuant to the “saisie-arret” in a segregated bank account. The Court found that the “saisie-arret”, a procedural mechanism authorizing the attachment of assets, did not affect payment for invoice 327. Moreover, the French court does not have jurisdiction over Winebow, and Vigneron failed to proceed in United States courts. The Court noted that although the French court may require Orliac to remit payment to Vigneron for invoice 327, that issue is not before this Court.

Winebow failed to release the segregated funds to Orliac and the Court held them in contempt. Because of problems involving the substitution of counsel for Winebow, the Court did not impose sanctions but ordered Winebow to pay Orliac pursuant to the May Memorandum within two days. See Memorandum and Order, 83 Civ. 7286 (S.D.N.Y. June 21, 1984).

DISCUSSION

Plaintiffs Motion for Summary Judgment

Orliac now seeks summary judgment as to invoice 320. It asserts that Winebow paid Berthe after Winebow was notified to remit payment only to Orliac. It is undisputed that Berthe was Orliac’s collection agent, a position he had held since 1978. Winebow paid the entire amount of invoice 320 to Berthe on June 29, 1983. The Court denied a prior summary judgment motion on invoice 320 because Orliac presented only evidence that it sent Winebow a letter on July 7, 1983 requesting direct payment to Orliac’s account at the Banque Nationale de Paris and asking Winebow not to pay Cognac & Brandies. See May Memorandum at 2-3.

Orliac now presents a telex sent to Wine-bow in New York on June 27, 1983, which was received, according to the telex acknowledgment. The telex requested Wine-bow to pay all invoices directly to Orliac and not to Cognac & Brandies. A second telex was sent to Winebow on June 28, 1983 requesting a return telex confirmation of the first telex.

Winebow does not dispute that it received the telexes; rather, they allege a disputed issue of material fact with respect to Berthe’s agency and authority. Wine-bow’s president, Peter Matt, affirms that he was uncertain of the relationship between Berthe, Orliac and Vigneron. Wine-bow “accordingly” obtained an indemnification from Vigneron, Cognac & Brandies and possibly Berthe protecting them from any claim by Orliac arising from their payments to Berthe.

To grant the instant motion, the Court must be convinced, after viewing the facts and circumstances in the light most favorable to Winebow, see United States v. Diebold, 369 U.S. 654, 655, 82 S.Ct. 993, 994, 8 L.Ed.2d 176 (1962), that no genuine issues of material fact exist for trial and that Orliac is entitled to a judgment as a matter of law. See Adickes v. Kress & Co., 398 U.S. 144, 159, 90 S.Ct. 1598, 1609, 26 L.Ed.2d 142 (1970); United States v. Potamkin Cadillac Corp., 689 F.2d 379, 381 (2d Cir.1982). Merely because a “factual dispute may exist, without more, is not sufficient to overcome a convincing presentation by the moving party.” Quinn v. Syracuse Model Neighborhood Corp., 613 F.2d 438, 445 (2d Cir.1980) (emphasis in original).

Winebow was aware of Orliac’s instructions not to pay Berthe and it demanded multiple indemnifications for Orliac’s anticipated claim as a quid pro quo for paying Berthe. Winebow cannot avoid its obligation to Orliac by using the complex interrelationship of the parties as a smokescreen to summary judgment. Orliac’s clear telex instructions on payment are not rebutted by Winebow’s affidavits. Accordingly, the Court grants Orliac partial summary judgment on invoice 320. See C.R.A. Realty Corp. v. Tri-South Investments, 738 F.2d 73 at 78-79 (2d Cir.1984).

Orliac is awarded 192,000 francs, minus (1) the amount Berthe would normally receive as commission and (2) the amount Vigneron would normally receive as its share of the proceeds from invoices 320 and 327.

Defendant’s Motion for Summary Judgment

Winebow seeks summary judgment on its claim that any amount paid to Orliac is recoverable from the third-party defendants because of at least two indemnification agreements. It is axiomatic that a cause of action for indemnity does not accrue until payment of the primary liability is made. See St. Paul Fire & Marine Ins. Co. v. United States Lines Co., 258 F.2d 374, 376 (2d Cir.1958); Index Fund, Inc. v. Hagopian, 91 F.R.D. 599, 605 (S.D.N.Y.1981). Any primary liability of Wine-bow has not been paid or even determined at this time. The instant third-party complaint for indemnity has therefore not accrued. Accordingly, defendant’s motion for summary judgment is denied without prejudice, with leave to reopen if Winebow is forced to pay its primary liability. See Franco-steel Corp. v. S.S. Tien Cheung, 375 F.Supp. 794, 796 (S.D.N.Y.1973).

Third Party Defendants’ Motions to Dismiss and for Partial Summary Judgment

Third-party defendants’ motions are contingent on the availability of Winebow’s claim for indemnification. If there is no primary liability, Winebow’s claim is moot and third-party defendants’ motions are moot. The Court finds it to be the more prudent course to stay decision on third-party defendants’ motions and allow them to participate in the calculation of summary judgment damages. Accordingly, third-party defendants’ motions are denied without prejudice with leave to reopen.

CONCLUSION

Plaintiff’s motion for summary judgment is granted in part and denied in part. Fed. R.Civ.P. 56(a).

Defendant’s motion for summary judgment is denied without prejudice with leave to resubmit. Fed.R.Civ.P. 56(a).

Third-party defendants’ motions to dismiss and for partial summary judgment are denied without prejudice with leave to resubmit. Fed.R.Civ.P. 12(b)(2), (3), (4), (6); 56(b).

The parties are directed to submit a joint order to the Court for signature by September 7, 1984 at 5:00 p.m. If the parties are unable to reach an agreement on the final figure, this issue will be decided at trial on September 10,1984 at 10:00 a.m. in Courtroom 1106.

SO ORDERED.

      . Although the Court was inclined to reduce the award of summary judgment in the May Memorandum by the two amounts to be determined, neither Berthe nor Vigneron were parties to the action. After calculating the deductions from the 192,000 francs, Orliac will only be paid its share of the invoices and the third-party defendants are protected from the inequitable possibility that they may win a total net verdict against Orliac in the French litigations but would be unable to recover fully because Orliac’s frozen and/or total assets are insufficient to satisfy the final judgments.
      The Court is confident that the parties can arrive at a joint figure that reflects the Court’s decision. The Court cites the accountant’s report prepared for the French tribunal which lists 22,400 francs — 11.67%—as Berthe’s expected commissions for both invoices. The following illustrations — both assuming the accuracy of the 22,400 franc commission — should assist the parties:

        (1) Assume Orliac and Vigneron originally agreed to split the proceeds 2-1 in Orliac’s favor after first subtracting Berthe's commission. Under this arrangement, Orliac would then receive 192,000 francs less 44,800 francs (representing two commissions) and less 113,067 francs (representing Vigneron’s 56,533.33 franc share for each invoice). The net result is that Winebow would pay 34,133 francs to Orliac.
      (2) Assume Orliac and Vigneron originally agreed to split the proceeds 50-50 after first subtracting Berthe’s commission. Under this arrangement, Orliac would receive 192,000 francs less 44,800 francs (representing two commissions) and less 169,600 francs (representing Vigneron's 84,800 franc share for each invoice.) The net result is that Winebow would "owe” a negative amount of 22,400 francs. Winebow’s recovery of this sum would be an undeserved windfall, and therefore, no party would recover when there is a negative debt.
      The French litigation is still in the discovery stage and the results in the instant action should necessarily affect the determination of damages in France. A recovery by Orliac here should work to its disadvantage in France; likewise, if the end result is that Orliac was overpaid on the two invoices, the French court should even any discrepancy.


author: GETZENDANNER, District Judge:

text:
    UNITED STATES of America, Plaintiff, v. Earline BROWN, Defendant.
    No. 82 CR 139-1.
    United States District Court, N.D. Illinois, E.D.
    Aug. 31, 1984.

      Ira H. Raphaelson, Asst. U.S. Atty., Dan K. Webb, U.S. Atty., Chicago, 111., for plaintiff.
    Maren Dougherty, Chicago, 111., for defendant.
   FINDINGS OF FACT

GETZENDANNER, District Judge:

This case has been remanded by the Court of Appeals for entry of findings of fact to determine whether or not the defendant’s accounts were shown to be balanced within tolerance within a reasonable period after the St. Jude’s transaction. United States v. Earline Brown, 716 F.2d 457, 462 (7th Cir.1983). If the finding is that the accounts were in tolerance, the Court of Appeals’ instructions are to enter a judgment of conviction. On the other hand, if the finding is that the accounts have not been shown to be in tolerance, then this court is instructed to grant the defendant’s motion for judgment of acquittal.

The defendant, a United States postal worker, was accused of converting the proceeds of a $394.18 check which on July 7, 1981 had been given to her by St. Judge’s for overdue postage. Under postal regulations, a receipt for overdue postage contained either a postage meter strip or can-celled stamps in the amount of the overdue postage. The government’s theory was that the defendant failed to issue a receipt to St. Jude’s for the $394.18 check, thus enabling her to convert $394.18 in cash or stamps. (Hannah at 184-85).

If the government’s theory is correct and the defendant had done the conversion, her accounts would have been in tolerance, that is they would have balanced. Her withdrawal of $394.18 in either cash or stamps would have cancelled out the $394.18 represented by the St. Jude’s check. If she had negligently or inadvertently failed to issue the receipt and did not convert funds or stamps in an amount equal to the check, the defendant’s accounts would have shown an overage. For this reason the Court of Appeals held that in the absence of direct proof that the defendant pocketed cash or stamps equal in value to the St. Jude’s check, it was not enough for the government to prove that the defendant failed to give a receipt. It was critical for the government to prove that the defendant’s accounts balanced (were in tolerance) within a reasonable time after the St. Jude’s transaction. 716 F.2d at 461.

In this case, however, the defendant’s defense was that she in fact issued a receipt to St. Jude’s and that the receipt contained $394.18 in stamps, mostly $1.00 and $2.00 stamps, which she took from her stock of stamps. She gave this explanation to the postal inspectors shortly after the transaction (Hannah at 189); and she testified at trial to the issuance of such a receipt (Brown at 463-66). If the defendant had issued such a receipt, her accounts also would have been in tolerance. Her use of $394.18 worth of stamps to create the receipt would have had the same impact on her stock of stamps as a conversion of $394.18 in stamps. Her accounts would have balanced because the inflow of $394.18 resulting from the St. Jude’s check would have been balanced by the outflow of $394.18 in stamps on the receipt. This fact explains the defendant’s consistent argument, both at trial and on appeal and with different counsel, that her accounts were in tolerance after the St. Jude’s transaction. The defendant perceived being in tolerance as evidence that the transaction occurred the way she testified it did.

The fact that the defendant’s accounts were in tolerance, therefore, would support both the government’s theory of conversion and the defendant’s defense. Under these circumstances, the government sought to prove the defendant’s criminal conduct by proving that her exculpatory statements were false. The government did prove that the defendant’s statements to Inspector Hannah on July 16, 1981 regarding the alleged receipt, testified to by Hannah at 189, were in fact false exculpatory statements. Thus, the government proved more than the simple failure of the defendant to issue a receipt. Nevertheless, the instructions of the Court of Appeals require an analysis of the trial record to determine whether the defendant's accounts were proved to be in tolerance.

The defendant’s accounts frequently were audited and the results of those audits are reflected on Exhibit 5. (Hannah at 260). There were two kinds of audits. (See generally Inspector Hannah’s testimony at 160-61). The first was that Inspector Hannah described as “window accountability.” (Hannah at 202-03; 260). A review of Exhibit 5 reveals that a window accountability audit was of two basic items: the “ca'sh portion of fixed credit on hand” and “stock on hand.” If the total of these amounts was greater than the employee’s “fixed credit accountability,” then an “overage” resulted. If the total was less than “fixed credit accountability,” then a “shortage” resulted. A window accountability audit was. basically “a perpetual inventory of the stock as counted approximately 120 days apart. (Hannah at 206). Exhibit 5 reflected audits of the defendant’s window accountability from July 14, 1974 to October 15, 1981. The entries for February, June, and October of 1981 are as follows:

Date Fixed Credit Accountability Cash Portion On Hand Stock on Hand Overage + Shortage —

2/24/81 5263.53 424.74 4810.91 -27.88

6/18/81 6640.40 718.32 5958.54 +36.46

10/15/81 9233.50 319.96 8918.15 + 4.61

The other audit is of “reserve stock.” Reserve stock was described by Inspector Hannah as the “unit reserve” and he defined “unit reserve” as the “bulk quantity of stamps that is maintained at the Station by a chief stamp clerk.” (Hannah at 203). Thus, the audit of reserve stock was only a stamp audit and by definition did not include any cash audit. The defendant was a chief stamp clerk and Exhibit 5 contains the historic records of the audits of her reserve stock. The entries for February, June, and August of 1981 are as follows:

Fixed Credit Date Accountability Overage + Stock on Hand Shortage —

2/24/81 55,766.89 55,766.89 -

6/18/81 41,607.12 41,607.12 -

8/25/81 42,505.20 42,212.20 —293.00

There are no entries following the August 25th entry.

Inspector Hannah testified that on July 16, 1981, he made a physical count of the defendant’s $1.00 and $2.00 stamps in her window accountability and in the unit reserve. (Hannah at 202). He made this audit to determine if the defendant could have created the receipt which she told the postal inspectors she gave to St. Jude’s. The audit results were that the defendant could not have created the receipt she described because she did not have enough $1.00 and $2.00 stamps at her window or in the reserve unit.

Most of Hannah’s trial testimony was about this $1.00 and $2.00 stamp audit, because proof of the defendant’s false exculpatory statement was a critical element of the government’s proof. However, Hannah also testified: “In addition, Inspector Gorolski and I at a later date made a thorough audit of her window accountability and her unit reserve.” (Hannah at 203). This would have been a complete audit of the defendant’s accounts, including her cash on hand. This audit, and the results of this audit, are not reflected on Exhibit 5 and were not described further by Hannah during his testimony. However, in defendant’s counsel’s written closing argument, he describes in detail a July 28, 1981 audit:

Her window accountability was $959.92 over and her chief stamp clerk (unit reserve) was $949.27 short. This comparison posted a shortage of $10.65. This was well within the acceptable range of tolerance for Ms. Brown’s accounts.

The audit counsel described very likely was the “thorough audit” referred to by Hannah, but it was not introduced into evidence by either party. The existence of such an audit (even though not in evidence) explains why all the parties appeared during the trial to agree that the defendant was “in tolerance.” It also is consistent with Hannah’s testimony that the defendant historically was in tolerance (Hannah at 202-06), and the defendant’s own testimony about the regularity of her accounts {Brown at 425-29).

However, the Court of Appeals rejected defense counsel’s admission and instructed this court to search the trial record for proof that the accounts were in tolerance after the St. Jude’s transaction. The only audits in evidence are those reflected on Exhibit 5. The first window accountability audit conducted after the St. Jude’s transaction and reflected on Exhibit 5 was on October 15, 1981, 99 days after the transaction. The first reserve stock (or unit reserve) audit conducted after the St. Jude’s transaction and reflected on Exhibit 5 was on August 25, 1981, 48 days after the transaction.

Regular audits were performed about every 120 days (Hannah at 206) and under post office regulations required to be performed every 120 days. (Hannah at 161). The October 15, 1981 window accountability audit was the next regularly scheduled audit since it occurred 118 days after the last audit reflected on Exhibit 5. The unit reserve audit on August 25, 1981 was not the regularly scheduled audit. It appears from a review of Exhibit 5 that window accountability and unit reserve audits were usually conducted on the same day, and there is no corresponding August 25th window accountability audit. It may have been a special audit performed simply because the defendant was under suspicion by the postal inspectors. However, it is the first audit after the transaction and it occurred well before the regular audit date.

Since both audits were within the regular audit period, the court finds that they were within a reasonable time after the St. Jude's transaction.

First, it was the government’s theory that the defendant deliberately failed to issue a receipt for the $394.18 St. Jude’s check to enable her to remove an equivalent amount of cash or stamps at any time prior to the next audit. “It wouldn’t necessarily have to be taken that day. She could take it any time between then and her next audit.” (Hannah at 185). The cash would have to be removed from the defendant’s window account, or the unit reserve, prior to the next audit so that the defendant’s accounts would balance and not reveal possible malfeasance. Thus, the next regular audit would be the critical audit in the ordinary case.

Secondly, the purpose of the post office audit procedures is to insure “financial accountability for individual window clerks of the stock they receive and the transactions they are involved in on a daily basis.” (Hannah at 203). The audits are conducted in part to detect employee malfeasance. If a regularly scheduled audit indicates a possible conversion of post office funds, the court obviously could rely on evidence of that audit, even if the actual conversion had occurred early in the period between regular audits. Spacing audits 120 days instead of more frequently clearly is a reasonable procedure for the post office to adopt. The post office’s expertise in employee financial accountability, and its procedure of audits every 120 days, fully supports a finding that the audits in this case were conducted within a reasonable period after the St. Jude’s transaction.

Also, in this case the use of audits 44 and 99 days after the transaction is reasonable because of the consistency of the defendant’s accounts. As Exhibit 5 and Inspector Hannah’s testimony show, the audits of defendant’s accounts established a “trend” of consistently being in tolerance. (Hannah at 263). The defendant was able to maintain “fairly good control over her window accountability and the unit reserve.” (Hannah at 266). Thus, the defendant was not erratic during the 120-day period between audits. If she mistakenly did not give St. Jude’s the receipt, thereby creating an explainable overage in her accounts, that overage would have been reflected in the next regular audit. It would not have been obscured by any other mistakes in the intervening days because the defendant did not make $400 mistakes. She obviously, however, was fully capable of “adjusting” her accounts to cover an embezzlement.

Finally, it is irrelevant that the St. Jude’s transaction on July 7th was almost immediately suspected of involving employee malfeasance. What for sure occurred on July 7th was the defendant’s deliberate failure to issue the receipt to St. Jude’s. She was free to complete the conversion by actually taking the money or stamps at any time prior to her next audits. She also could have taken the money or stamps before the St. Jude’s transaction but after the last regular audit on June 18, 1981. We do not know when she took the cash or stamps— only that it was accomplished at least by the next documented audits of her accounts on August 25th (unit reserve) and October 15th (window accountability).

The August 25th audit of unit reserve showed a shortage in stamps — not an overage. The October 15th window accountability audit showed a $4.61 overage, clearly within tolerance. An overage in the amount or the approximate amount of the St. Jude’s check is not shown. Accordingly, the court finds that audits conducted within a reasonable time after the St. Jude’s transaction do not show an overage. This is equivalent to finding that the audits showed that defendant’s accounts were in tolerance.

Accordingly, pursuant to the instructions of the Court of Appeals, the court enters judgment of conviction on Count 4 of the indictment. It is so ordered.

      . While at this point in his testimony Inspector Hannah described Exhibit 5 as an inventory of stock, it is clear from the Exhibit that cash on hand was also audited. Cash would have to be audited in order to do the audit of window accountability. This was fully discussed by Inspector Hannah in his direct testimony. (Hannah at 160-61). Also, the references to "STA. AUDIT” on Exhibit 5 are to station audits, not stamp audits. This is clear from the asterisks on the first page (or top of) Exhibit 5. Only certain audits have the asterisks and those were audits conducted at the Pilsen Station where the defendant worked.

      . The defendant later changed her story and said that she must have "borrowed” some stamps from her co-workers. (Brown at 468). The defendant’s testimony was not believed.

      . The Court of Appeals discussed Exhibit 5 and found it lacking. However, the Court apparently believed that Exhibit 5 did not reflect an audit of cash as well as stock and the Court did not discuss the October 15, 1981 window accountability audit. The Court did not preclude this court from relying on Exhibit 5.