author: DeANDA, District Judge.

text:
    CHANNEL 20, INC.; et al. v. WORLD WIDE TOWERS SERVICES, INC.; et al.
    Civ. A. Nos. H-83-5023, H-83-5098, H-84-613, H-84-919, H-84-965, H-84-966, H-84-993, H-84-1120, H-84-1715 and H-84-2225.
    United States District Court, S.D. Texas, Houston Division.
    April 22, 1985.
    As Amended May 6, 1985.

      Joseph F. Archer, Archer, Peterson & Waldner, Houston, Tex., for plaintiffs.
    Russell McMains, Edwards, McMains & Constant, Corpus Christi, Tex., Guardian Ad Litem.
    Robert G. Taylor, II, Taylor, Hays, Price, McConn & Pickering, Houston, Tex., for World Wide Towers.
    Patricia Hair, Crain, Catón, James & Womble, Houston, Tex., for Stainless, Inc.
    Diana E. Marshall, Baker & Botts, Houston, Tex., for Harris Corp.
   MEMORANDUM AND ORDER

DeANDA, District Judge.

These consolidated diversity actions, which are governed by Texas law, were tried to a jury in February of 1985 for damages arising from the collapse of a 1,900-foot broadcast tower on December 7, 1982. All claims for personal injury arising out of this disaster were settled prior to trial, as were the claims filed by Channel 20, a Houston television station which lost substantial air-time due to the collapse, leaving outstanding the claims resulting from the deaths of the five workers, World Wide Towers’ claim for property damage, and related cross-actions among the Defendants. The jury returned a verdict on February 23, 1985, which imposed 100% liability on Defendant Stainless, Inc. for the deaths of five workers. (Stainless was the fabricator of the tower.) Pending before the Court are a number of post-verdict motions, to wit: Defendant Stainless’s motions for new trial, for judgment n.o.v., for remittitur, for trial on indemnity issues, and for stay of execution of the judgment; the Plaintiffs’ motions for partial new trial and severance, for certification and entry of judgment pursuant to Rule 54(b), F.R. Civ.P., and for judgment on the severed claims; and the motion for judgment n.o.v. of Defendant/cross-Plaintiff World Wide Towers.

We turn first to the motions of Stainless for new trial and for entry of judgment non obstante veredicto. One of the primary thrusts of these motions is that the Court incorrectly charged and instructed the jury on a number of points concerning Stainless’s legal status as a general contractor and the concomitant duties thereto. The Court concludes that it correctly instructed and charged the jury because a general contractor who is in control of the premises owes a duty to the employees of subcontractors similar to that owed by an owner or occupier of land to his invitees. Smith v. Henger [148 Tex. 456] 226 S.W.2d 425 (1950); also, Parker v. Highland Park, Inc., 565 S.W.2d 512 (Tex.1978), overruling in part McKee v. Patterson, [153 Tex. 517] 271 S.W.2d 391 (1954). This duty attaches regardless of whether the contractor is in actual physical possession of the premises; actual possession is not a necessary element of “control” so long as there is a right to manage, whether or not it is ever actually exercised. See, American Fidelity & Casualty Co. v. Traders and General Ins. Co., 160 Tex. 554, 334 S.W.2d 772 (1959). Based on the unambiguous provisions of the contract at issue and upon the evidence presented at trial, Stainless was “in control” of the premises based on the “right to manage” test. Since Stainless was in control of the job site within the meaning of the foregoing test, the Court properly instructed the jury that Stainless had a duty (inter alia) to provide a safe work place and safe equipment, including proper inspection of the premises and equipment so as to discover hidden dangerous conditions and to warn the subcontractor or his employees of such conditions. Guidry v. Neches Butane Products Co., 476 S.W.2d 666 (Tex.1972); see also, Hall v. Moveable Offshore, Inc., 455 F.2d 633 (5th Cir.1972). Stainless’s argument that it was merely another subcontractor which fabricated the tower is without any substantial support in the record.

A second line of argument is that exemplary damages were improperly awarded for a breach of contract. This contention is ill-founded since the imposition of liability here was not predicated on a plain breach of contract action. Rather, Texas law states that duties which arise pursuant to a contract must be performed with ordinary care and the failure to do so gives rise to a cause of action sounding in negligence. Montgomery Ward & Co. v. Scharrenbeck, 146 Tex. 153, 204 S.W.2d 508 (1947); UMC, Inc. v. Coonrad Electric Co., Inc., 667 S.W.2d 549 (Tex.Civ.App.— Corpus Christi 1983, writ ref’d. n.r.e.). In accordance with this aspect of Texas jurisprudence, the jury was instructed as to the pertinent contractual duties, and the jury found that Stainless was negligent in the performance (or non-performance) of these duties which proximately caused the collapse of the tower. While the jury did not find that the negligence of Stainless flowed from any reckless disregard or conscious indifference, the jury did find that Stainless intentionally or consciously failed or refused to perform its general contractor obligations. Such a willful failure to perform the duties of a general contractor, as outlined above, is sufficient to uphold the award of punitive damages. Stainless’s “breach of contract” argument simply misses this point.

Stainless argues that, in any event,' the award of damages to the widows and children of the deceased workers for their mental anguish was legally improper, absent some physical injury to the widows and children. Stainless relies on a number of authorities concerning this point, all of which pre-date the Texas Supreme Court’s decision in Sanchez v. Schindler, 651 S.W.2d 249 (Tex.1983); see also, Stanford v. McLean Trucking Co., 506 F.Supp. 1252 (E.D.Tex.1981), which effectively presaged Sanchez. The Sanchez court held that persons may recover damages for loss of society and mental anguish which flow from a wrongful death, pursuant to the Texas Wrongful Death Statute, Art. 4671, Tex. Rev.Civ.Stat.Ann. In light of this holding, Stainless’s argument to the contrary are to no avail.

Error is alleged by Stainless in the submission of exemplary damage issues on behalf of the estates and on behalf of the widows and children. The gist of the allegation is that the award of exemplary damages to the widows and children and to the estates constitutes a double recovery. A resolution of this question necessarily involves reference to Art. 5525, Tex.Rev.Civ. Stat., which provides in pertinent part that all causes of action arising out of injuries which result in a wrongful death shall survive to and in favor of the heirs and legal representatives and the estate of such injured party and against the person or persons liable for such injuries (emphasis added). It is how well-settled in Texas law that the death of the injured party does not bar a recovery of exemplary damages by the estate itself. Hofer v. Lavender, 679 S.W.2d 470, 472 (Tex.1984); Castleberry v. Goolsby Building Corp., 617 S.W.2d 665 (Tex.1981). Furthermore, under the Texas Wrongful Death Act and the state’s survival statute, two separate and distinct causes of action may arise in a wrongful death case. The former statute created a new cause of action in favor of certain named survivors (see e.g., Art. 4675, Tex.Rev.Civ. Stat.Ann.), while the latter did not create a new cause but rather kept alive the cause of action which the deceased might have had (Art. 5525, supra). Hence it is clear that the estate of a deceased person is a legal entity which is separate and distinct from those of the widows and other survivors of the deceased. It necessarily follows that no double recovery is present here; the estate may recover both actual and exemplary damages on behalf of the deceased workers, and the survivors may also recover both, in their own right. These two classes of Plaintiffs are not. only legally distinct and separable, but each is entitled to particular elements of damages. See Hofer, supra, esp. at 476; also, Stiles v. Union Carbide, 520 F.Supp. 865 (S.D.Tex.1981).

Stainless urges a number of points concerning foreseeability, legal duty, causation and sufficiency of the evidence which are either disposed of by previous portions of this opinion or are so lacking in merit as to warrant no discussion other than a summary rejection. Stainless does, however, raise one point of substance. The jury awarded $5,000,000.00 to the estates in punitive damages but awarded no actual damages for the men’s conscious pain and suffering. It is axiomatic that punitive damages must bear some reasonable relationship to, and be supported by, the imposition of actual damages. Therefore, the motion for new trial must be granted in part. This point will be discussed in greater detail infra.

Finally, Stainless contends in its motions for new trial and for judgment n.o.v. that it is entitled to full indemnification from Defendant World Wide (an erector company retained as a subcontractor by Stainless which employed the deceased men and which entered into an indemnity agreement with Stainless). This Court previously ruled herein, at 596 F.Supp. 928, that the indemnity provision at issue did not clearly and unequivocally express any obligation on the part of World Wide to protect Stainless from the consequences of its own negligence, nor does the provision indemnify Stainless from the consequences of any negligence or fault concurrently attributable to World Wide and Stainless. In light of the jury’s findings, made pursuant to proper charges and instructions, it is inconceivable that 100% of the negligence or fault attributed to Stainless can somehow be transmogrified into the sole negligence or fault of World Wide. Despite the fact that the Texas Workers Compensation Act, Art. 8306, Sec. 3, allows such an action seeking contractual indemnification to be maintained (as a general proposition), the terms of the contract and the facts of this case as developed at trial foreclose any colorable claim of Stainless’s alleged right to receive full indemnification from World Wide. Stainless is not entitled to judgment or a new trial based on this point.

The next motion for our consideration is Stainless’s motion for remittitur. A number of issues raised therein have already been addressed, leaving only the question of whether the damages were excessive. Aside from the damages awarded to the estate (see above), the jury’s findings are quite reasonable and are amply supported by the evidence. The men were all in their twenties and thirties at the time of their deaths and were employed in relatively high-paying jobs (because of the ultra-hazardous nature of their work). As to the pecuniary losses suffered by the various survivors, the evidence actually could have supported a much higher award than was made by the jury. Similarly, a reasonable fact-finder could have awarded significantly higher amounts to the survivors based only upon' the elements of mental anguish and loss of society. An award of punitive damages is supported by evidence showing a deliberate, conscious and willful decision on the part of certain Stainless executives to disregard the legal obligations created by their contract with the owners of the tower project, and defined by operation of law based on Stainless’s status as a general contractor with a right to manage the job site. The motion for remit-titur should be denied.

World Wide, who was a Plaintiff against Defendant Harris for property damage, has moved for judgment n.o.v. Harris manufactured the antenna which was being hoisted to the top of the tower when the collapse occurred. Various strict liability theories were posited against Harris regarding the design and manufacture of the antenna vis-a-vis its safe installation atop the tower. The jury found in favor of Harris on all pertinent issues, and these findings are by no means against the great weight and preponderance of the evidence. Moreover, the jury affirmatively found that Stainless negligently failed to provide information pertaining to the lifting of the antenna and failed to properly coordinate and supervise the lifting project. Such findings bolster the conclusion that Harris’s antenna was properly designed and manufactured under the relevant circumstances and was reasonably fit for its intended purposes. We will not set aside the jury’s findings entered in favor of Harris.

Plaintiffs have filed motions for partial new trial, severance, and certification of judgment pursuant to Rule 54(b), F.R.Civ.P. A core issue of these motions pertains to the jury’s failure to award any actual damages to the estates for the decedents’ conscious pain and suffering while awarding $5,000,000.00 to the estates in punitive damages. Plaintiffs contend that a finding of no actual damages is contrary to the great weight and preponderance of the evidence, and that a partial new trial should be granted only as to the estates’ damages. Stainless counters by arguing that the evidence does not demonstrate any conscious pain and suffering, and that if any new trial is granted, only a full retrial would be proper.

A thorough review of the record supports the Plaintiffs’ view of the evidence. A hallmark of this trial was the presentation into evidence of a videotape made of the calamity as it actually occurred. This videotape, with the audio portions deleted, was seen several times in court, including a slow-motion viewing with a witness analyzing the details' of the lifting failure as it occurred. Such a close monitoring of the disaster reveals that the men appeared to be fully conscious at the beginning of the fall. The sequence of events causing the collapse of the tower began when the second stage of the antenna was being lifted to the top of the tower for installation. The bolts used in the lift suddenly broke, causing the antenna to fall. The deceased workmen were “riding” the antenna and there was ho impact of any sort for several seconds until the antenna struck a large guy wire. At that instant, the men were forcefully dislodged from their positions on the antenna. This impact in turn caused the guy wire to snap and the tower itself then collapsed. Prior to the impact of the antenna hitting the guy wire, the uncontro-verted evidence demonstrates that the men were conscious. Further, Plaintiffs introduced a second copy of the videotape with amplified audio containing distinct screaming which was not viewed by the jury. (This audio included narration.) The screams certainly seem to be those of the hapless workers plunging to their deaths. Based only on the video actually seen by the jury, the Plaintiffs made a showing (by the great preponderance of the evidence) that the men were conscious for at least part of their fall, and no one can seriously question that such a fall would engender terror and mental suffering of the greatest magnitude known to the human experience. Stainless did not produce any evidence whatsoever to negative this evidence, which strongly indicates the men’s conscious anguish. Rather, Stainless relies only on its arguments that the men were not conscious. Arguments are not evidence. The Court finds that the great weight and preponderance of the evidence establishes the decedents’ conscious pain and suffering. A new trial, at least in part, must be granted. Brown v. Wacholz, Inc., 467 F.2d 18 (10th Cir.1972).

Rule 59(a), F.R.Civ.P., authorizes a new trial on all or part of the issues and as to all or any of the parties for any of the reasons for which new trials have heretofore been granted in actions at law in the courts of the United States. Under pre-Rules practice, courts would generally order a new trial only for those parties prejudiced by an improper verdict or judgment. This principle continues under Rule 59, limited only by the precepts that a complete new trial is necessary when the liability of one party is so interrelated with that of others that the grant of a new trial must include all parties, or where it would be manifestly prejudicial not to retry the entire case. 6A Moore, Federal Practice, § 59.06 (1984). Ample authority exists for exercising our discretion to grant a partial new trial as to some parties or claims and allowing a favorable verdict to stand as to others. E.g., Juneau Square Corp. v. First Wisconsin National Bank of Mil waukee, 624 F.2d 798 (7th Cir.1980); Vidrine v. Kansas City Southern Railway Co., 466 F.2d 1217 (5th Cir.1972); Compagnie Nationale Air France v. Port of New York Authority, 427 F.2d 951 (2d Cir.1970). This course is an appropriate one where some error requires a new trial on some distinct and separable issues but leaves the verdict on completely separate issues uninfected. Gasoline Products v. Champlin Refining Co., 283 U.S. 494, 51 S.Ct. 513, 75 L.Ed. 1188 (1931); Camalier v. Buckley-Madison Hotel, 513 F.2d 407 (D.C.Cir.1975). Stated another way, a partial new trial is proper where the issue to be retried is so distinct and separable from the other issues that a trial of it alone may be had without prejudice. Eximco, Inc. v. Trane Co., 748 F.2d 287, 290 (5th Cir.1984); Vidrine, supra, at 1221.

Prior decisions provide guidance in fleshing out the general principles enunciated in cases such as Gasoline Products, Vidrine and Camalier. For example, where the evidence supports the jury’s liability findings, and the issues of liability and damages (for which a new trial is mandated by improper cumulation of verdicts rendered on alternate theories of liability) are not necessarily interwoven, a new trial may be properly limited to damages only, with the jury’s apportionment of liability left undisturbed. Greenwood Ranches, Inc. v. Skie Construction Co., 629 F.2d 518 (8th Cir.1980). Where there is no substantial indication that liability and damage issues are somehow inextrieally interwoven, nor is there an indication that the verdict was the result of the jury compromising the liability and damage question, a retrial limited to damages is entirely proper. Great Coastal Exports, Inc. v. International Brotherhood of Teamsters, 511 F.2d 839 (4th Cir.1975), cert. denied, 425 U.S. 975, 96 S.Ct. 2176, 48 L.Ed.2d 799 (1976). As a general rule, error with respect to damages should require a new trial on damages only. Sylvania Elec. Products, Inc. v. Flanagan, 352 F.2d 1005 (1st Cir.1965). Finally, where questions of willful and wanton misconduct are involved in a personal injury action, a new trial limited solely to damage issues should be granted where it is plain that the error which has crept into one element of the verdict did not affect the jury’s determination of any other issues. Johnson v. Bowers, 151 F.Supp. 777 (E.D.Ill.1957).

Based on the instant record, the Court finds that a partial new trial should be granted as to the estates’ damages. As discussed earlier, the claims of the estates and the survivors are legally distinct and separable under Texas law. The jury’s determinations of liability are supported by the evidence and appear to be sufficiently discreet (both factually and legally) from the question of damages to allow a partial new trial. There is no indication of any jury compromise. We can discern no error in any of the jury’s other determinations, and there is no manifest prejudice to Stainless in exposing it to a retrial of only one set of the many claims asserted against it. Finally, the Court perceives no basis for concluding that all the issues are so inextricably interwoven as to mandate a complete retrial. The Plaintiffs’ motion should be granted.

Rule 54(b), F.R.Civ.P., expressly allows parties involved in multiple claims or multi-party litigation who have separable causes of action to obtain the entry of judgment as to fewer than all of the claims or parties. This type of entry of judgment is proper only where the court makes an express determination that there is no just reason for delay in entering such a judgment, and when the equities of the situation outweigh the interests of judicial economy against potential piecemeal appeals. E.g., Sears Roebuck and Co. v. Mackey, 351 U.S. 427, 76 S.Ct. 895, 100 L.Ed. 1297 (1956).

In Curtiss-Wright Corp. v. General Electric Co., 446 U.S. 1, 100 S.Ct. 1460, 64 L.Ed.2d 1 (1980), the Supreme Court extensively reviewed the proper factors to be considered in whether a Rule 54(b) certification should be entered. The factors which are to be balanced against the equities include these:

(1) is the judgment on which certification is sought an ultimate disposition of the individual claim(s) concerned in this multiple party/multiple claim litigation;
(2) are the claims to be certified as final separable from the other claim(s) to be adjudicated; and
(3) is the nature of the claims already determined such that no appellate court would have to decide the same issue more than once in the event of subsequent appeals.

Id., at 8-9, 100 S.Ct. at 1465; see also, Piney Woods Country Life School v. Shell Oil Co., 726 F.2d 225 (5th Cir.1984).

The equities presented here are (inter alia) that no bonding or surety requirements will protect the minor Plaintiffs (or the other Plaintiffs) absent certification of judgment; available insurance proceeds may be insufficient to satisfy the judgment; and delay in execution on the claims of the widows, minor children and parents of the decedents may seriously impair collection of the judgment. Furthermore, Stainless is not entitled to any credits or set-offs in the subsequent partial retrial. A complex case should not, in and of itself, operate to prevent entry of judgment where, as here, liability and damages have been fully determined as to a large number of Plaintiffs and Defendants. As discussed earlier, the claims of the estate are entirely separable from those of the other Plaintiffs. Further, an ultimate disposition has been made as to the claims for which certification is sought. While the impact of certification on any subsequent appeals is not entirely clear and an appellate could conceivably have to decide certain issues twice, this factor alone should not be dis-positive of the question before us. Curtiss-Wright, supra, 446 U.S. at 8, n. 2, 100 S.Ct. at 1465, n. 2. On balance, both the Curtiss-Wright factors and a consideration of the equities weigh heavily in favor of certifying that no just reason for delay in the entry of judgment is present. See International Controls Corp. v. Vesco, 535 F.2d 742 (2d Cir.1976). The Court hereby expressly so finds, pursuant to Rule 54(b), and directs the entry of judgment as to all claims except those of the estates against Stainless, which will be severed from the case.

Having determined that a partial new trial should be granted and that the remaining claims should be severed and certified for judgment under Rule 54(b), we next focus on Plaintiffs’ motion for entry of judgment on the remaining claims. The substance of the proposed judgment accurately reflects the Court’s various actions taken in the resolution of this litigation. Before entering this judgment, however, we must address two important points: (1) whether prejudgment interest should be awarded to the Plaintiffs; and (2) the proper amount of fees to be awarded to the attorney ad litem.

Traditionally, Texas courts have denied the recovery of prejudgment interest in wrongful death actions. Plaintiffs ask us to change this rule and allow the recovery of prejudgment interest in the ease at bar. Prior to embarking on the jurisprudential voyage which is necessary to resolve this issue, we should begin the inquiry by discussing the scope of our Erie powers to make such a determination.

Once it is clear that a federal court must apply state law in a case, the court must then determine the content of the state law that is to be applied. Erie Railroad Co. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1938); Wright & Miller & Cooper, Federal Practice and Procedure, § 4507 (1982). Under prevailing Texas conflicts of laws principles, it has been clear ab initio that Texas law should be applied to this litigation (the parties have in fact never disputed this determination). See Klaxon v. Stentor Elec. Mfg. Co., 313 U.S. 487, 61 S.Ct. 1020, 85 L.Ed. 1477 (1941). Federal courts sitting in diversity cases should not blindly follow state court decisions when the development of the pertinent law or laws casts serious doubt on those prior decisions; rather, federal courts should be sensitive to possible changes in the state law they are bound to apply under Erie. Bernhardt v. Poly- graphic Company of America, 350 U.S. 198, 76 S.Ct. 273, 100 L.Ed. 199 (1956). However, even if a rule of law announced by a state’s highest court appears to be anomolous, antiquated or simply unwise in light of comparable federal law or the laws of sister states, it must be followed unless there are very persuasive grounds for believing the state’s highest court would no longer adhere to the rule. Wright & Miller & Cooper, supra, § 4507, n. 32 and 33, and cases cited therein. In this regard, pertinent recent decisions of the state’s intermediate courts must be given proper respect, but they may be disregarded if the federal court is convinced by other persuasive data that the state’s highest court would decide the issue differently. E.g., Shelp v. National Surety Corp., 333 F.2d 431 (5th Cir.), cert. denied, 379 U.S. 945, 85 S.Ct. 439, 13 L.Ed.2d 543 (1964).

Under Texas law, prejudgment interest has been awarded as a post-verdict remedy in a variety of actions. Absent statute or contract, the availability of the remedy is based on equitable principles and is used by the courts to compensate a plaintiff for the use of funds to which he is entitled but which have been retained (and presumably used) by a defendant during the pendency of the case. Phillips Petroleum Co. v. Stahl Petroleum Co., 569 S.W.2d 480, 485 and cases cited therein (Tex.1978). To date, these equitable principles have not been applied to wrongful death and personal injury cases. The apparent genesis of this prohibition lies in Watkins v. Junker, 90 Tex. 584, 40 S.W. 11 (1897). The rule has been recently reiterated by intermediate appellate courts, but the Texas Supreme Court has granted an application for writ of error on this precise point. Cavnar v. Quality Control Parking, Inc., 678 S.W.2d 548 (Tex.Civ. App.—Houston [14th Dist.] 1984), appl. for writ granted, 28 Tex.S.Ct.J. 103 (Nov. 24, 1984).

Watkins was a suit arising out of a contract to service rental boats. In dicta, the Watkins court stated:

Interest as damages may be allowed upon unliquidated demands whether they arise out of a breach of contract or out of a tort, (citations omitted) Interest, however, cannot be allowed upon damages arising from assault and battery ... nor for personal injuries and the like, (citations omitted) The reason why interest cannot be given in the class of cases last mentioned is, that the measure of damages is not fixed at any particular time, but the right of recovery may be greater or less at the time of trial than it would have been at the time the injury was inflicted...

Id., 90 Tex. at 587, 40 S.W. 11. For the reasons set forth below, this rationale for prohibiting the recovery of prejudgment interest in death cases has been significantly eroded by subsequent case-law.

Current Texas law defines prejudgment interest as the interest calculated on the sum payable to the plaintiff from the time of his loss or injury to the date of judgment. Republic Nat. Bank v. Northwest Nat. Bank, 578 S.W.2d 109, 116 (Tex.1979). The right to prejudgment interest does not depend on whether the case sounds in contract or tort. Hyatt Creek Builders-Engineers Co. v. Board of Regents, 607 S.W.2d 258, 265 (Tex.Civ.App.—Texarkana 1980, writ dism’d w.o.j.); Maxey v. Texas Commerce Bank, 571 S.W.2d 39, 50-51 (Tex.Civ.App.—Amarillo 1978), writ ref’d per curiam, 580 S.W.2d 340 (Tex.1979). The general rule is that prejudgment interest is recoverable as a matter of right when an ascertainable sum of money is determined to have been due and payable at a definite date prior to judgment. Republic Nat. Bank, supra, at 116; Phillips v. Stahl, supra, at 488; Miles v. Royal Indemnity Co., 589 S.W.2d 725 (Tex.Civ.App.—Corpus Christi 1979, writ ref’d n.r.e.). Stated another way, the proper test for determining whether prejudgment interest may be awarded is whether or not the measure of recovery — not necessarily the amount of damages — is fixed by conditions existing at the time of the loss or injury. Lubbock Feed Lots, Inc. v. Iowa Beef Processors, Inc., 630 F.2d 250, 276-277 (5th Cir.1980) (and cases cited therein). In the context of a fire and casualty insurance policy dispute, at least one Texas court has held that a good faith dispute over the precise amount of the sum payable to plaintiff does not foreclose an award of prejudgment interest, even if expert testimony is required to establish the exact monetary amount due. Fort Worth Lloyds v. Hale, 405 S.W.2d 639 (Tex.Civ.App.—Amarillo 1966, writ ref'd n.r.e.).

Texas Courts have awarded prejudgment interest in such disparate cases as broken contracts, property damage, breaches of fiduciary duties, injured cattle, and lost good will. Miner-Dederick Const. Corp. v. Mid-County Rental Service, Inc., 603 S.W.2d 193, 200 (Tex.1980) (breach of contract); Miles v. Royal Indemnity, supra, at 735 (property damage); Gabriel v. Snell, 613 S.W.2d 810 (Tex.Civ.App.—Houston [14th Dist.] 1981, no writ) (fiduciary duties); Panhandle & S.F. Ry. Co. v. Montgomery, 140 S.W.2d 241 (Tex.Civ.App.—Amarillo 1940, no writ) (injured cattle); and Ewing v. William L. Foley, Inc., 115 Tex. 222, 280 S.W. 499 (1926) (lost good will). The rationale underlying these cases is that the party who breached contractual or fiduciary duties or who damaged property or chattel should not profit from the detention and use of money owed to the plaintiff pending a judicial determination of the plaintiffs rights. This equitable concern is reflected in the Phillips opinion, wherein the court discussed the availability of prejudgment interest in cases not governed by statute or contract. As the Phillips court noted, Texas courts have not insisted on statutory rigidity in the allowance of prejudgment interest when necessary to permit compensation for the use or detention of one’s money. Phillips, supra, at 486.

In Watkins, the two major components of the court’s rationale were that damages in personal injury (and death) cases are unliquidated and that the measure of recovery is not fixed. A review of more recent Texas cases shows that the liquidated/unliquidated dichotomy has virtually evaporated. The emphasis now is upon whether the measure of recovery is fixed and ascertainable at the time the claim arises. (See discussion supra.) Moreover, the United States Supreme Court long ago criticized the distinction of unliquidated versus liquidated damages as the basis for awarding interest. Funkhouser v. J.B. Preston Co., 290 U.S. 163, 168, 54 S.Ct. 134, 136, 78 L.Ed. 243 (1933). Nonetheless, Texas courts have continued to rely on the Watkins rationale for denying an award of prejudgment interest in wrongful death cases.

The law has evolved to the point where the measure of damages which accrue in a wrongful death action are fixed as of the instant of death. The pain and suffering occurring prior to death and the pecuniary and non-pecuniary losses of the survivors are all essentially determinable under legal methods for measuring such losses as of a date certain. See Annot., 14 A.L.R.2d 485, § 30. While the amount of recovery may be unknown prior to return of the verdict, the measures of recovery are clear when death occurs. It is extremely difficult to rationally, equitably and morally draw a distinction between (1) the measure of damages for cases involving matters such as lost profits, property values, and injured cattle, and (2) the measure of damages in a death case. This Court is of the opinion that the Texas Supreme Court, when it again faces the question, will in all probability agree that such a distinction is no longer viable.

While an Erie court is not to disregard prior state decisions simply because other jurisdictions follow what may appear to be a “better rule,” the trends in other jurisdictions are probative data of how the Texas Supreme Court will resolve the instant issue. For example, in the recent landmark case of Duncan v. Cessna, 665 S.W.2d 414 (Tex.1984), the court undertook an extensive survey of the pertinent law in other jurisdictions. Concerning prejudgment interest, only five states allowed prejudgment interest (by statute) in tort cases pri- or to 1965. Between 1965 and 1978, seven states passed prejudgment interest statutes, and since that time, statutes have been enacted in twelve more states. Court decisions have extended prejudgment interest to tort cases in New Jersey and Pennsylvania. E.g., Busik v. Levine, 63 N.J. 351, 307 A.2d 571, app. dism’d, 414 U.S. 1106, 94 S.Ct. 831, 38 L.Ed.2d 733 (1973). In several of these twenty-six jurisdictions, the award of prejudgment is discretionary. It is the general rule in the admiralty jurisdiction that the court may exercise its discretion to award prejudgment interest even on unliquidated claims of any type. E.g., Doucet v. Wheless Drilling Co., 467 F.2d 336 (5th Cir.1972). Prejudgment interest is generally awarded on recoveries of back pay in Title VII discrimination cases. E.g., Pettway v. American Cast Iron Pipe Co., 494 F.2d 211 (5th Cir.1974), cert. denied, 439 U.S. 1115, 99 S.Ct. 1020, 59 L.Ed.2d 74 (1979). Finally, the Fifth Circuit recently held that prejudgment interest may be properly awarded in a death case brought under the Warsaw Convention. Domangue v. Eastern Airlines, Inc., 722 F.2d 256 (5th Cir.1984).

The Domangue court noted that two important objectives leading to the modification of the Warsaw Convention were to allow victims a more adequate recovery and to ensure a speedy disposition of claims. Id., at 263. That court went on to hold that prejudgment interest was permissible under the Convention, stating that “[w]e are also influenced by the inequity of Eastern Airlines benefitting from the length of time between the crash and a final judgment in this case, to the detriment of decedents’ survivors.” Id., at 263-264. These same concerns should be considered in determining the equitable powers of Texas courts to award prejudgment interest in wrongful death cases.

The Court is not unmindful of cases such as Life Ins. Co. of Virginia v. Murray Investment Co., 646 F.2d 224 (5th Cir.1981), cert. denied, 454 U.S. 1163, 102 S.Ct. 1037, 71 L.Ed.2d 319 (1982), which arguably support the proposition that prejudgment interest is not properly awarded in a death case. Life Ins. v. Murray is not really on point, however, since it involved causes for fraud and breach of contract. Further, the discussion found in footnote 3 of the Murray opinion merely summarizes certain general principles discussed above. In any event, while there may be some persuasive arguments against changing the current rule in Texas, these arguments appear to go against the clear trends in the laws both of this state and of other jurisdictions as discussed above.

Based on all the foregoing analysis, the Court finds and concludes that there is ample persuasive data to support the proposition that the Texas Supreme Court, when it again faces the issue, will hold that prejudgment interest may be awarded in a wrongful death case, based on the courts’ equitable powers. Under the Erie doctrine, the Court holds that this ruling governs the instant case.

We next turn to the question of whether prejudgment interest should be awarded here. In the Court’s view, the progress of this case is a perfect example of the inequities noted in the Domangue opinion. This is not only a case which should have settled prior to trial, it actually had settled in principle until Stainless caused the settlement proceedings to derail. The evidence heard at trial amply supports findings of liability for both actual and punitive damages on the part of Stainless. Nonetheless, Stainless has at times persisted in espousing untenable positions, thereby causing unnecessary and costly delays in the resolution of this case. Meanwhile, the Plaintiffs have been denied the use of funds to which they are entitled. The Court is convinced that the equities of the case cry out for the imposition of prejudgment interest.

The Texas courts are permitted to exercise discretion in awarding prejudgment interest at either the statutory rate of 6% per annum or at a higher rate. Awards of 9% prejudgment^ interest have been expressly approved by Texas courts and by the Fifth Circuit (applying Texas law). Dallas-Fort Worth Regional Airport Bd. v. Combustion Equipment Assoc., Inc., 623 F.2d 1032, 1042 and cases cited therein (5th Cir.1980); Boehringer Mannheim Diagnostics v. Pan Am., etc., 531 F.Supp. 344, 354 (S.D.Tex.1981). The Court exercises its discretion to award 9% prejudgment interest from December 7, 1982, the date of the losses, to the date judgment is entered.

An attorney ad litem was appointed to represent the interest of the minors. Extensive settlement negotiations were undertaken by the parties which resulted in fair and reasonable settlements with Defendants Harris and World Wide. The activities of the ad litem were an integral component of these successful negotiations. Moreover, the ad litem was very active in the abortive settlement proceedings with Stainless. Mr. Russell McMains, whose appointment was jointly requested by the Plaintiffs and at least two of the Defendants, is a leading expert on certain legal issues which were crucial to effective representation of the minors’ interests. Because of the fruitless settlement negotiations with Stainless, the Court exercised its discretion to permit Mr. McMains to participate in the trial and certain trial preparations so as to fully protect the minor Plaintiffs. The ad litem obtained excellent overall results in his representation of the children.

Mr. McMains testified that he expended over 500 hours of time in representing the minors. ' These hours include estimated time which will be spent in finalizing the necessary documents on behalf of the minors. The Court finds this time to be a reasonable and necessary expenditure of attorney work-time in light of the relative complexities of the ease. Further, Mr. McMains suggests that his time is worth $350.00 per hour. While this is a rate higher than the usual award for ad litem representation, the ad litem’s duties herein were necessarily greater than those of the ordinary case. The number of apparent conflicting interests was such that the Court could have properly appointed more than one ad litem, which would have effectively resulted in the combined award of hourly rates at a rate well in excess of $350.00 per hour. Based on these considerations together with a review of the evidence presented at the hearing on attorney fees, the Court finds and concludes that Mr. McMains should be awarded $175,-000.00 in ad litem fees, which is the product of 500 hours times $350.00. In addition, the ad litem is entitled to recover $7,122.40 in necessary expenses.

We must apportion recovery of the ad litem fees and expenses among the various Defendants. The ad litem fees recoverable against World Wide have been paid and are not included in the amounts at issue. The Court finds, based in part on certain stipulations, that $100,000.00 of the ad li-tem fees had accrued as of the time the Harris settlements were consummated. A significant portion of that amount is attributable to the ad litem’s activities undertaken to protect the minors’ interests vis-a-vis the other parties to the litigation, including Stainless. Therefore, the $100,-000.00 should be allocated between Harris and Stainless. These two Defendants should each pay half of these amounts. As to the remaining $75,000.00, Stainless should bear that entire amount. The Court concludes that Harris shall be responsible for $50,000.00 in attorney ad litem fees and Stainless shall be responsible for $125,-000.00 in ad litem fees. The Court exercises its equitable powers to assess the $7,122.40 in ad litem expenses as charges in the nature of taxable costs against Stainless.

Stainless has filed a motion to set the indemnity issues for trial. As noted earlier, the Court has ruled that Stainless cannot recover indemnity from World Wide for any losses flowing from Stainless’s sole negligence (or fault) or from any concurrent negligence of Stainless and World Wide. We left open the narrow question of whether Stainless could enforce the indemnity provision resulting from the (sole) negligence of World Wide, and that any such indemnity issues should be separately tried, if necessary. 596 F.Supp., at 932. There is no such necessity to raise these issues as the great weight and preponderance of the evidence and the jury’s findings show that Stainless bears 100% of the culpability in this litigation. Further, no evidence has been presented and no factual allegations have been made on which a reasonable finder of fact could impute any acts of World Wide to Stainless (e.g. on a respon-deat superior basis). After thoroughly reviewing the record, the Court can conceive of no manner in which the losses herein could be attributed to the sole negligence (or fault) of World Wide. It necessarily follows from the foregoing discussion that Stainless is foreclosed from obtaining indemnity from World Wide. The motion to set trial on indemnity issues should be denied.

Finally, Stainless has filed a motion to stay execution of judgment on appeal. The only bases for the motion are that Stainless intends to appeal the case and that Stainless is financially unable to post an adequate supersedeas bond. The financial standing of a defendant is inadmissible as evidence in determining the amount of compensatory damages to be awarded. Geddes v. United Financial Group, 559 F.2d 557 (9th Cir.1977); Parkins v. Brown, 241 F.2d 367, 368 n. 2 (5th Cir.1957). Financial ability is simply immaterial to the issue of properly-recoverable damages. By analogy, it is, in and of itself, immaterial to the question of whether a judgment should be stayed. Stainless has not made or offered to make the requisite showings under the explicit provisions of Rule 62, F.R.Civ.P., which governs a stay of proceedings to enforce a judgment. The motion to stay must be denied. If Stainless fails to post a supersedeas bond in an amount sufficient to cover the entire amount of the judgment, including interest, costs, and damages for delay, execution may issue. See Poplar Grove Planting and Refining Co., Inc. v. Bache Halsey Stuart, Inc., 600 F.2d 1189 (5th Cir.1979).

It is hereby ORDERED that Defendant Stainless’s motion for judgment n.o.v. be DENIED; that Defendant Stainless’s motion for remittitur be DENIED; that Defendant Stainless’s motion for new trial be GRANTED in part and DENIED in part to the extent set forth above; that Defendant Stainless’s motion to set trial on indemnity issues be DENIED; that Defendant Stainless’s motion to stay execution of judgment be DENIED; that Plaintiffs’ motion for partial new trial and severance be GRANTED and that the claims of the estates of the five decedents be SEVERED from all other claims herein; that Plaintiffs’ motion for certification pursuant to Rule 54(b) be GRANTED; that Plaintiffs’ motion for entry of judgment be GRANTED; and, that Defendant/cross-Plaintiff World Wide Towers’ motion for judgment n.o.v. be DENIED.

A judgment will be entered in accordance with this Memorandum and Order.

      . We note in passing that Stainless also argues that there are no pleadings to support submission of the jury question relating to the intentional or conscious failure or refusal to perform the obligations of a general contractor. A review of the Joint Amended Pretrial Order (filed Nov. 2, 1984) clearly shows that the Plaintiffs made the necessary factual contentions regarding this jury question, esp. at pages 3 through 6. Since all parties were on notice that it is the standard practice of this Court to use the Joint Pretrial Order as the parties’ trial pleadings, Stainless cannot be allowed to complain that no pleadings support any of the various jury issues. Moreover, Stainless cannot claim surprise regarding this jury question since the Plaintiffs submitted a specific and separate brief in support of submitting this (and certain other) questions on Nov. 2, 1984.

      . For example, the estates may recover for the men’s conscious pain and suffering incurred prior to death while the widows may not. The widows, on the other hand, may recover lost future earnings caused by the men’s deaths together with damages for lost society and mental anguish (i.e. "grief"). Thus, the two classes of Plaintiffs not only find their respective causes of action in different statutes, but the types of damages recoverable by them are different.

      . The previous ruling left open certain narrow contingencies on the indemnification issues. Stainless has accordingly moved for a trial setting on the indemnity issues, which will be addressed below.

      . The jury did not expressly find separate amounts for the pecuniary and non-pecuniary losses. A review of their findings in light of the evidence presented shows that the jury made rather modest overall awards for the Plaintiffs’ actual damages. The bifurcated review of pecuniary and non-pecuniary losses above is made solely for analytical purposes.

      . We note in passing that the issue of whether to award prejudgment interest in a personal injury case is not properly before us, and therefore we should not address that issue. Art. Ill, Sec. 2, U.S. Const.Ann.

      . COLO.REV.STAT. § 13-21-101 (enacted 1935); LA.REV.STAT.ANN. § 13-4203 (enacted 1916); MASS.ANN.LAWS Ch. 231 § 6B, supp. § 11 (enacted 1946); N.H.REV.STAT.ANN. § 524:l-b (enacted 1957); R.I.GEN.LAWS § 9.21-10 (enacted 1958).

      . ALASKA STAT. §§ 09.50.270; 45.45.010 (enacted 1968); ME.REV.STAT.ANN. tit. 14 § 1602 (enacted 1969); MICH.COMP.LAWS § 600.6013 (enacted 1965); N.Y. ESTATES POWER & TRUST LAW § 5-4.3 (McKinney enacted 1967); OKLA.STAT. tit. 12, § 727(2) (enacted 1971); UTAH CODE ANN. § 15-1-4; 7-8-27-44 (enacted 1975).

      .CAL.CIVIL CODE § 3291 (enacted 1982); CONN.GEN.STAT. § 37-3a (enacted 1981); HAWAII REV.STAT. § 636-16 (enacted 1979); IOWA CODE § 535.3 (enacted 1980); MD.CTS. & JUD.PROC.CODE ANN. § 11-301 (enacted 1980); NEV.REV.STAT. § 1981); OHIO REV. CODE ANN. § 1343.03 (Page enacted 1982); TENN.CODE ANN. § 47-14-123 (enacted 1979); VA.CODE 8.01-382 (enacted 1979); W.VA.CODE § 56-3-31 (enacted 1981); WIS.STAT. § 807.01 (enacted 1980).

      . During a post-verdict hearing held at Stainless's request concerning the proper amount of attorney fees to be awarded to the ad litem, counsel for Stainless appeared to object to the appointment of Mr. McMains. By the conclusion of the hearing, this apparent objection had evolved into a study in ambivalence and ambiguity. If Stainless wanted to object to the appointment, it could have done so at any time during the eleven months between the Order of March 28, 1984 appointing Mr. McMains and the conclusion of the trial. Any such objection must therefore be deemed to have been waived. The only objection of Stainless properly before us is as to the amount of fees requested by the ad litem.

      . Since this award is not predicated on a federal statute authorizing attorney fees, we need not apply the factors set forth in Johnson v. Georgia Highway Express, 488 F.2d 714 (5th Cir.1974). Under Texas law, we have discretion to award reasonable and necessary attorney fees to an ad litem.


source: Caselaw Access Project

author: CALDWELL, District Judge.

license: Public Domain

text:
    JFWIRS, LTD., Plaintiff, v. The UNITED STATES of America, Defendant.
    Civ. A. No. 84-0549.
    United States District Court, M.D. Pennsylvania.
    April 23, 1985.
    Richard E. Fehling, Marcia A. Binder, Stevens & Lee, Reading, Pa., for plaintiff.
    James West, Asst. U.S. Atty., Harrisburg, Pa., Jefferson K. Fox, U.S. Dept, of Justice, Tax Div., Washington, D.C., for defendant.
   MEMORANDUM

CALDWELL, District Judge.

I.Introduction and Background

Pending at present in this matter are cross motions for summary judgment. At issue is whether the Internal Revenue Service (IRS) may impose a levy upon a liquor license issued by the Commonwealth of Pennsylvania, and sell the same at an execution sale to satisfy a tax claim against the holder of the license.

The parties are in essential agreement on the facts which relate to the present dispute:

1. The taxpayer against whom IRS is proceeding is a corporation known as Guytrak’s Scotch N’Sirloin, Inc. (Guyt-rak’s).
2. In 1983 and 1984 the IRS made assessments against Guytrak’s for federal employment and unemployment taxes for 1982 and 1983.
3. Between August 12, 1983 and February 27, 1984, Notices of Federal Tax Lien Under Internal Revenue Law on all property and rights to property of Guyt-rak’s were filed in the Prothonotary’s Office, Berks County, Pa.
4. On March 8, 1984 IRS notified Guytrak’s of the seizure and a levy upon Guytrak’s, “property right in and under Pennsylvania Liquor License No. R-2459.”

On April 30, 1984, after hearing, we issued a preliminary injunction- enjoining the defendant from enforcing its levy or selling the license in question pending disposition of this action. We also directed the defendant to permit the Pennsylvania Liquor Control Board to transfer the license to the plaintiff, and we enjoined the plaintiff from transferring the license until this case is resolved. It appeared that the interests of all litigants would thereby be protected, and reflected our opinion at that time that plaintiff would prevail on the merits in this action. Additional background was stated in our memorandum of April 30, 1984:

The liquor license in question was originally issued to Joseph H. Welsh (Mr. Welsh) who assigned his interest to Guytrak’s Scotch N’Sirloin, Inc., (Guyt-rak’s) for $7,500, which sum, apparently, has remained unpaid. Mr. Welsh was also Guytrak’s landlord, leasing to them the premises in Muhlenberg Township, Berks County, Pennsylvania which Guyt-rak’s operated as a restaurant. The lease agreement (plaintiff’s exhibit 1) provided at article IX for the landlord’s option to repurchase the liquor license for $7,500 in the event of termination of the lease.
As of January 23, 1984, Guytrak’s owed Welsh Interests, Mr. Welsh’s as-signee, $84,757.94, which debt included back rent, the unpaid $7,500 for the liquor license, and other obligations. On January 27, 1984, the lease was terminated and Welsh Interests executed its option to repurchase the liquor license which was to be transferred to its nominee, JFWIRS (plaintiff). On February 22, 1984, the liquor license was surrendered to the Pennsylvania Liquor Control Board (PLCB) pending approval of the transfer.

The IRS levy of March 8,1984 temporarily derailed the liquor license transfer to plaintiff but our order of April 30, 1984 allowed the transfer to occur, subject to being divested should we later determine that the IRS levy and seizure of the license was valid.

II. Discussion

Under Fed.R.Civ.P. 56 summary judgment is appropriate when “there is no genuine issue as to any material fact and ... the moving party is entitled to a judgment as a matter of law.” The material facts are not in dispute in this case so it is appropriate to dispose of it on motion after application of the relevant law. After careful consideration we have reversed our preliminary thoughts in this matter and will grant summary judgment in favor of defendant.

A. Federal Law Controls Whether the Liquor License Is Property Which Can Be Subjected to a Federal Tax Lien.

In 1J/.12 Spruce, Inc. v. Commonwealth, Pennsylvania Liquor Control Board, 504 Pa. 394, 474 A.2d 280 (1984), the Pennsylvania Supreme Court held that a liquor license was a privilege and not property which could be subject to execution and sheriffs sale .to satisfy a judgment creditor. Plaintiff strenuously argues that this court is bound by the state court characterization of the liquor license as a “privilege” rather than “property.” The distinction is important because 26 U.S.C. § 6321, under which the government asserts its lien on the license, provides, in relevant part, as follows (emphasis added):

If any person liable to pay any tax neglects or refuses to pay the same after demand, the amount ... shall be a lien in favor of the United States upon all property and rights to property, whether real or personal, belonging to such person.

Hence, plaintiff contends that the government’s levy upon the license was wrongful because the liquor license, as a privilege, could not be attached under a statute permitting liens only on property.

The United States asserts, on the other hand, that state law controls only the nature and extent of the delinquent taxpayer’s'legal interests or rights in the property by way of ownership or otherwise. The determination of what constitutes property for the purposes of the federal lien law is controlled by federal law and this court should view the liquor license as property for that purpose.

We think the defendant’s position is the better one. While some of the language in the cases cited by plaintiff support its position, those eases never reached the issue presented in the instant one. In Aguilino v. United States, 363 U.S. 509, 80 S.Ct. 1277, 4 L.Ed.2d 1365 (1960), the dispute was between third party subcontractors and the government over $2,200 owed by a building owner to the delinquent taxpayer, the general contractor. The government had placed a lien on the fund and the subcontractors claimed that a state statute gave them beneficial ownership of the fund with only bare legal title in the taxpayer. The government contended that the statute created only an ordinary lien in favor of the subcontractors. The United States Supreme Court sent the case back to the New York Court of Appeals to resolve this question of state law. The Court stated:

The threshold question in this case, as in all cases where the Federal Government asserts its tax lien, is whether and to what extent the taxpayer had “property” or “rights to property” to which the tax lien could attach. In answering that question, both federal and state courts must look to state law for it has long been the rule that “in the application of a federal revenue act, state law controls in determining the nature of the legal interest which the taxpayer had in the property ... sought to be reached by the statute.” Morgan v. Commissioner, 309 U.S. 78, 82, 84 L.Ed.2d 585, 589, 60 S.Ct. 424 [426]. Thus, as we held only two terms ago, Section 3670 “creates no property rights but merely attaches consequences, federally defined, to rights created under state law....” United States v. Bess, 357 U.S. 51, 55, 78 S.Ct. 1054, 1057, 2 L.Ed.2d 1135, 1140. However, once the tax lien has attached to the taxpayer’s state-created interests, we enter the province of federal law, which we have consistently held determines the priority of competing liens asserted against the taxpayer’s “property” or “rights to property.” [citations omitted].

Id. at 512-14, 80 S.Ct. at 1280, 4 L.Ed.2d at 1368-69 (emphasis added) (brackets added) (footnotes omitted).

Some of the above-quoted language lends support to plaintiff’s position that state law controls the determination of what constitutes property under section 6321. Thus, the court did state that “both federal and state courts must look to state law” to discover “to what extent the taxpayer had ‘property,’ ” id. at 512, 80 S.Ct. at 1280, 4 L.Ed.2d at 1368, but the rest of the opinion speaks about “property rights” and “property interests” as being controlled by state law. It is clear from the context of the opinion that the Court did not intend to be bound by state law definitions of property but only by whether state law conferred any right in the property upon the taxpayer which could then be attached by the government. This rule was established for the obvious reason that federal law has never played a part in creating rights in property while the states have had a “long-established role” in doing so. Id. at 513 n. 3, 80 S.Ct. at 1280 n. 3, 4 L.Ed.2d at 1368 n. 3. The Court did not want to impose upon the federal judiciary “the task of attempting to ascertain a taxpayer’s property rights under an undefined rule of federal law.” Id. To have done so may have led to the anamolous situation where federal law said a taxpayer owned property and state law said he did not. Id.

Our analysis of Aguilino can also be applied to another case cited by plaintiff, Pittsburgh National Bank, 498 F.Supp. 101 (W.D.Pa.1980), aff'd., 657 F.2d 36 (3d Cir.1981). In that case the taxpayer had borrowed money from the bank, giving the latter a note for the loan. The note provided that the bank would have a lien on the taxpayer’s deposits equal to the unpaid balance of the loan. Applying Pennsylvania law, the district court held that the government’s levy upon the taxpayer’s account with the bank was unsuccessful because the money had already passed by operation of law to the bank on the date of the note’s maturity. No affirmative act by the bank was required to extinguish the taxpayer’s right to the property and there was nothing to which the government’s levy could attach.

Pittsburgh National Bank did not turn on the nature of the asset in dispute. No one was contesting whether money was “property.” The court looked to state law only to determine whether the taxpayer owned the money in the account at the time of the notice of the government’s levy. Because state law required a negative answer, the levy was ineffective.

Morgan v. Commissioner, 309 U.S. 78, 60 S.Ct. 424, 84 L.Ed. 585 (1940) supports our conclusion that state law cannot define what is property for the purposes of federal law. In Morgan, the executor of an estate contested the application of the federal estate tax to a power of appointment, claiming that under Wisconsin law it was a special power of appointment and not subject to estate tax as a general power would have been. Concluding that it did not have to decide this issue, the Supreme Court stated:

State law creates legal interests and rights. The federal revenue acts designate what interests or rights, so created, shall be taxed. Our duty is to ascertain the meaning of the words used to specify the thing taxed. If it is found in a given case that an interest or right created by local law was the object intended to be taxed, the federal law must prevail no matter what name is given to the interest or right by state law.

Id. at 80-81, 60 S.Ct. at 426, 84 L.Ed. at 588. There was no question that the two powers of appointment belonged to the decedent and that she exercised them in her will. State law created and recognized this property right in her. Regardless of how state law would have characterized the powers, however, the Supreme Court concluded that under federal law they were taxable in her estate.

Plaintiff is in the same position as petitioner was in Morgan. Plaintiff claims that a state law characterization of the asset precludes application of federal law. Morgan, establishes, however, that how a state labels a property right is not disposi-tive of the reach of federal law. We conclude that 1412 Spruce, Inc., supra, does not control whether the liquor license is “property” within the meaning of section 6321. That is a federal question. See In re Halprin, 280 F.2d 407 (3d Cir.1960).

B. The Liquor License Is Property Within the Meaning of Section 6321

“[A] liquor license issued by the [Pennsylvania Liquor Control Board] is a valuable item of intrinsic worth subject to bargain and sale in the marketplace.” 1412 Spruce, Inc., supra, 504 Pa. at 405, 474 A.2d at 286 (Larsen, J., dissenting) (brackets added). As such, it constitutes property upon which the United States could attach a lien under section 6321.

C. The Government’s Lien Upon the Liquor License Must Be Limited to $7,500.

At the time of the notice of levy, plaintiff had exercised an option to purchase the license for $7,500 from the taxpayer, pursuant to Article IX of the lease executed on November 1, 1981. The transfer of the license was subject to the approval of the Liquor Control Board, but no one has suggested that the Board would not have approved the transfer especially since the transfer would only have returned the license, in essence, to the original holder. Under these circumstances, the taxpayer’s interest in the license at the time of the notice of levy to the Board was limited to $7,500. Since this was the limit of the taxpayer’s property interest in the license under Pennsylvania law of contracts, this is the limit of the government’s interest in the license. The value of the license in excess of this amount remains with plaintiff.

We will issue an appropriate order.

ORDER

AND NOW, this 23rd day of April, 1985, it is ordered that:

1. Defendant’s motion for summary judgment shall be and is hereby granted.
2. Plaintiff’s motion for summary judgment shall be and is hereby denied.
3. Defendant, United States of America, may execute upon liquor license No. R2459 to the extent of the interest of the taxpayer, Guytrak’s Scotch N’Sirloin, Inc., in the license, to wit, the sum of $7,500.
4. Plaintiff shall take all reasonable and necessary steps to permit defendant to execute on the liquor license.
5. The Clerk of Court shall close this file.

       On December 11, 1978, Mr. Welsh conveyed his interests in the lease, liquor license and Guytrak’s debt to J.F. Welsh Interests, Inc. (Welsh Interests). This is reflected in a new lease executed November 1, 1981 which lease accorded Welsh Interests the repurchase option.

      . State law comes into play here in establishing that Guytrak’s owned the liquor license at the time of the IRS levy of March 8, 1984. The license was in the possession of the Pennsylvania Liquor Control Board at that time, awaiting approval for the transfer to plaintiff. Nevertheless, it was still owned by the taxpayer and no provision of state law in the Liquor Code, 47 P.S. § 1-101, et seq., or elsewhere provides otherwise. The extent of his ownership interest is discussed below.

      . Because of this conclusion, we will not discuss defendant’s argument concerning our lack of jurisdiction to hear this case under 28 U.S.C. § 1346.


author: SPRIZZO, District Judge.

text:
    TEXTILE WORKERS PENSION FUND, Plaintiff, v. STANDARD DYE & FINISHING CO., INC., et al., Defendants.
    No. 81 Civ. 2479 (JES).
    United States District Court, S.D. New York.
    April 23, 1985.

      Grutman Miller Greenspoon & Hendler, New York City for plaintiff; Ronald E. Richman, of counsel.
    Wilentz, Goldman & Spitzer, Wood-bridge, N.J., for defendants; Richard R. Bonamo, of counsel.
   OPINION & ORDER

SPRIZZO, District Judge.

FACTS

The parties have stipulated to the following facts. Plaintiff Textile Workers Pension Fund (“Pension Fund”) is a multiem-ployer pension plan trust, established pursuant to a collective bargaining agreement between the Amalgamated Clothing and Textile Workers Union, AFL-CIO (the “Union”) and various employers in the dyeing, finishing and printing industry. Defendant Standard Dye & Finishing Co., Inc. (“Standard Dye”) is a corporation engaged in the business of processing and distributing dye and textile materials, and has contributed to the multiemployer pension plan administered by Pension Fund.

On or about May 6, 1980, Standard Dye notified the Union of its intention to close down and cease all of its operations in the dyeing and textile business. • On June 6, 1980, Standard Dye was formally dissolved by the unanimous vote of its shareholders. In June of 1980, Standard Dye closed its plant, ceased all of its normal business operations, liquidated its assets and began distributing liquidating dividends to its shareholders. During that month, all production workers employed by Standard Dye were terminated. However, three employees were retained to aid in “clean-up work” and in the dismantling of equipment through October of 1980, during which time Standard Dye made contributions to the Pension Fund on their behalf. See Stipulation of Material Facts.

Plaintiff now seeks to collect withdrawal assessments made against defendant Standard Dye. Defendants have moved for summary judgment pursuant to Fed.R. Civ.P. 56, contending that Standard Dye had withdrawn from the plan prior to September 26, 1980 and thus liability has been eliminated by § 558 of the Tax Reform Act of 1984, Pub.L. No. 98-369, § 558, 1984 U.S.Code Cong. & Ad.News (98 Stat.) 494, 899.

DISCUSSION

The sole issue presented in this case is whether Standard Dye “completely withdrew” from the Pension Fund prior to September 26, 1980, the effective date of the MPPAA. Plaintiff Pension Fund argues that because Standard Dye continued to employ various individuals through October, 1980, and was obligated to contribute to the Plan for those workers through October, 1980, it did not effect “complete withdrawal,” within the meaning of the MPPAA, until after its effective date of September 26, 1980. See Plaintiff’s Memorandum of Law in Opposition to Defendants’ Motion for Summary Judgment at 4-5.

Defendants argue that “covered operations,” as referred to in 29 U.S.C. § 1383(a)(2), should be construed as those operations which gave rise to the employer’s contributions to the pension plan, i.e., the processing and distribution of dye and textile materials. See Defendants’ Proposed Conclusions of Law, ¶ 7. Defendants assert that those operations ceased no later than June 20, 1980, when Standard Dye ceased all normal business operations, closed its plant, formally dissolved the company and terminated all of its production workers. See id. at ¶ 8. Defendants further contend that the term “covered operations” should not be construed to include work activities, such as clean-up and dismantling of equipment, which are incidental to cessation of normal business activities, even though pension fund contributions are made by the employer for workers performing those incidental activities. See id. at II9.

The only courts which have passed on this issue have agreed with defendants’ view of the statute. Thus, in Speckman v. Barford Chevrolet, 535 F.Supp. 488 (E.D.Mo.1982), an automobile dealership closed down and sold its facilities prior to the effective date of the MPPAA. The employer retained one employee to perform phaseout work and made pension plan contributions on behalf of that employee subsequent to the effective date of the MPPAA. Id. at 489-90. The court in Speckman noted that the employer’s “retention of a sole employee and its contribution to the Plan on his behalf ... did not prevent its cessation [of “all covered operations”] from being ‘complete’ within the meaning of the Act. A permanent cessation can occur even though an employer remains signatory to a collective bargaining agreement requiring contributions to the plan.” Id. at 491.

In F.H. Cobb Co. v. N.Y.S. Teamsters Conference, 584 F.Supp. 1181 (N.D.N.Y.1984), a distributor of food and non-food items to retail customers ceased its distribution operations and sold its assets prior to the MPPAA’s effective date. The company laid off all employees, except for a “skeleton” crew of nine to sixteen employees, who remained to move inventory and equipment until after such date. Id. at 1182. The Cobb court reasoned that although these remaining employees constituted between 5% and 9% of the company’s preclosure work force, the company had “ceased all covered operations within the meaning of the MPPAA.” Id. at 1184.

Plaintiff in the instant action contends that these cases were decided erroneously, and argues that “covered operations” and “normal business operations” are two distinct concepts. See Plaintiff’s Memorandum of Law in Opposition to Defendants’ Motion for Summary Judgment at 5. Plaintiff asserts that a “covered operation” is an operation, covered under a collective bargaining agreement, for which an employer is required to contribute under a plan. See id. at 12-13. Thus, in plaintiff’s view, “Standard ceased all covered operations on October 31, 1980 when all its employees for whom it made pension contributions ceased working for Standard.” See id. at 3 (emphasis in original).

Plaintiff’s argument is not supported by the express language of § 1383(a), or by its legislative history. That statute provides that “a complete withdrawal for a multiem-ployer plan occurs when an employer — (1) permanently ceases to have an obligation to contribute under the plan, or (2) permanently ceases all covered operations under the plan.” 29 U.S.C. § 1383(a) (emphasis added). There is no justification for this Court to accept plaintiff’s argument, which would render the second clause of § 1383(a) mere surplusage, especially since it is clear that a court must “give effect, if possible, to every clause and word of a statute.” See Montclair v. Ramsdell, 17 Otto 147, 107 U.S. 147, 152, 27 L.Ed. 431 (1882); see also United States v. Menasche, 348 U.S. 528, 538-39, 75 S.Ct. 513, 519-20, 99 L.Ed. 615 (1955); National Labor Relations Board v. Jones & Laughlin Steel Corp., 301 U.S. 1, 30, 57 S.Ct. 615, 621, 81 L.Ed. 893 (1937) (“The cardinal principle of statutory construction is to save and not to destroy.”)

Moreover, the legislative history demonstrates that Congress clearly contemplated that a complete withdrawal could occur even where, as here, an obligation to make pension contributions for a relatively small number of employees continued. As the House Report on the MPPAA makes clear, “a virtually complete cessation of contributions, e.g., a 98-percent reduction, that has the same effect on the plan as a complete cessation of contributions, is a complete withdrawal.” H.R.Rep. No. 869, 96th Cong., 2d Sess. 73, reprinted in 1980 U.S. Code Cong. & Ad.News 2918, 2941.

Plaintiff also argues that, since § 1385(b)(1)(A) provides that a decline in contributions of 70% or greater constitutes a “partial withdrawal,” to accept defendant’s argument would obliterate the distinction between a partial and complete withdrawal. See Plaintiff’s Memorandum of Law in Opposition to Defendants’ Motion for Summary Judgment at 7-8. This argument lacks merit. The partial withdrawal contemplated by Section 1385(b)(1)(A) arises when the 70% or more decline in contributions occurs over a period of three consecutive years, see 29 U.S.C. § 1385(b)(1)(A) (1982), and clearly does not apply to the brief winding-up periods incidental to liquidation. Moreover, the partial withdrawal provisions of the MPPAA were designed to apply to a situation where an employer ceases some operation(s) while continuing others covered by the applicable multiemployer plan. See id. at 1385(b)(2)(A). This has not occurred here. Standard Dye ceased all its operations related to the manufacturing and distribution of dye and textile materials well before the effective date of the MPPAA.

Plaintiff also contends that it would be inconsistent with § 108(e)(1) of the MPPAA to hold that no withdrawal liability exists on facts such as these. See Plaintiff’s Memorandum of Law in Opposition to Defendants’ Motion for Summary Judgment at 5-6. That statute provides that in situations where an employer announces its intention to cease operations and does so within twelve months, there is a limitation but not an absence of withdrawal liability. See Pub.L. No. 96-364, § 108(e)(1), 94 Stat. 1208, 1269 (1980), reprinted in 29 U.S.C. § 1385 app. (1982).

However, that’inconsistency is more apparent than real. A decision to cease covered operations, and subsequent cessation within twelve months of the announcement of that decision, is not synonomous with a decision to liquidate, to cease covered operations immediately, and to maintain a skeleton staff for purposes of effecting that liquidation. Obviously, in the former instance the employer could continue its normal business activities during that twelvemonth period so that the employer’s exemption from withdrawal liability pursuant to 29 U.S.C. § 1383(a) would not apply.

The Court, therefore, finds that defendant Standard Dye, which, prior to the effective date of the MPPAA, closed its plant, ceased its normal business operations, liquidated its assets, and terminated employees engaged m production and distribution activities, effected a “complete withdrawal” from the Plan within the meaning of 29 U.S.C. § 1383(a). Defendants’ motion for summary judgment is hereby granted and plaintiffs cross-motion for summary judgment is denied.

It is SO ORDERED.

      . The Multiemployer Pension Plan Amendments Act of 1980 ("MPPAA"), 29 U.S.C. §§ 1381-1461, establishes liability for a participating employer that withdraws from a multiemployer pension plan. Under the MPPAA, a withdrawing employer incurs liability on the date of withdrawal for a proportionate share of the unfunded vested liability of the multiemployer pension plan. 29 U.S.C. § 1381. The MPPAA was signed into law on September 26, 1980, Pub.L. No. 96-364, 94 Stat. 1208 (1980), but created a retroactive liability for all covered employers who withdrew after April 29, 1980. 29 U.S.C. § 1461(e)(2)(A) (1982).

        The Pension Fund, observing that Standard Dye had withdrawn after April 29, 1980, the effective date of the statute, calculated withdrawal liability of $1,000,000 in accordance with the MPPAA. When Standard Dye refused to make the required payments, Pension Fund brought an action in the United States District Court for the Southern District of New York. Standard Dye moved for summary judgment, contending that the retroactive application of withdrawal liability under the MPPAA violated its Fifth Amendment rights to due process.
      The Court sustained the constitutionality of the retroactive liability provisions, concluding that they "constituted a rational means to a legitimate end.” Textile Workers Pension Fund v. Standard Dye & Finishing Co., 549 F.Supp. 404, 410 (S.D.N.Y.1982). The Second Circuit affirmed, noting that the MPPAA “plainly bears a reasonable relation to a legitimate governmental purpose.” Textile Workers Pension Fund v. Standard Dye & Finishing Co., Inc., 725 F.2d 843, 857-58 (2d Cir.), cert. denied, -U.S. -, 104 S.Ct. 3554, 82 L.Ed.2d 856 (1984). The Supreme Court upheld the retroactive withdrawal liability provisions of the MPPAA against a constitutional attack in Pension Benefit Guaranty Corp. v. R.A. Gray & Co., — U.S. -, 104 S.Ct. 2709, 81 L.Ed.2d 601 (1984). Congress, however, in enacting § 558 of the Tax Reform Act of 1984, eliminated the retroactive application of the MPPAA, thereby voiding any liability arising under the MPPAA for withdrawal from a pension plan prior to September 26, 1980.

      . Under the MPPAA, "a complete withdrawal from a multiemployer plan occurs when an employer — (1) permanently ceases to have an obligation to contribute under the plan, or (2) permanently ceases all covered operations under the plan." 29 U.S.C. § 1383(a).

      . In the previous decision involving these parties it was unnecessary for this Court to decide whether Standard Dye had withdrawn from the plan prior to September 26, 1980 in order to reach the constitutional issue of retroactivity, because the Court concluded that the significant date for determining whether the MPPAA was retroactively applied to Standard Dye was the date Standard Dye made its decision to liquidate its operations in reliance on the pre-existing statutory provisions, and not the date when Standard Dye actually ceased its operations. See Textile Workers Pension Fund, supra, 549 F.Supp. at 406.

      . Speckman was decided prior to the enactment of the Tax Reform Act of 1984, when the effective date of MPPAA was April 29, 1980.

      . Indeed, plaintiff conceded at oral argument that had Standard Dye terminated its entire work force prior to September 26, 1980 and hired an outside staff to perform the dismantling and clean-up activities, a "complete withdrawal” within the meaning of § 1383(a) would have been effected. The Court can find no rational basis for concluding that Congress intended that the substantial withdrawal penalties provided for in the statute should be applied merely because an employer chooses to retain a skeleton crew of its own employees to effect the liquidation rather than engaging other persons to perform the same task.


author: NICKERSON, District Judge.

text:
    Phyllis GARBER, Plaintiff, v. Margaret M. HECKLER, Secretary of Health and Human Services, Defendant.
    No. 83 C 5013.
    United States District Court, E.D. New York.
    April 23, 1985.

      Torres & Leonard, P.C., New York City (Alvin Eugene Leonard, New York City, of counsel), for plaintiff.
    Raymond J. Dearie, U.S. Atty., Brooklyn, N.Y. (Kevin P. Simmons, Asst. U.S. Atty., Brooklyn, N.Y., of counsel), for defendant.
   MEMORANDUM AND ORDER

NICKERSON, District Judge.

Plaintiff’s attorney moves for an award of attorney’s fees under the Social Security Act, 42 U.S.C. § 406(b)(1). On September 21, 1984 the court reversed a determination of the Secretary of Health and Human Services denying plaintiff’s application for a period of disability and disability insurance benefits. Familiarity with that opinion is assumed.

Under section 406(b)(1) of the Social Security Act, a court rendering a judgment favorable to a claimant who was represented by an attorney may allow as part of its judgment a reasonable fee for representation before the court, not to exceed 25% of the total of past-due benefits. Plaintiff’s attorney seeks an award for the 24 hours of work before the court.

Plaintiff’s attorney should be advised that this court will not treat the contingency agreement as a factor in setting fees under 406(b)(1) since the agreement can only serve to increase the fee in this kind of case. Modica v. Secretary of Health and Human Services, 581 F.Supp. 39 (E.D.N.Y.1984). Attorneys are not entitled to a flat 25% of the past-due benefits, but only such amount as is determined and allowed as a reasonable fee.

In determining a reasonable fee the court may consider the benefit achieved for the client and the ability of counsel. See, Allen v. Heckler, 588 F.Supp. 1247, 1249-50 (W.D.N.Y.1984). While counsel has applied for attorney’s fees for himself under the Social Security Act, 42 U.S.C. § 406(b)(1), he has not applied for fees for his client under the Equal Access to Justice Act, 28 U.S.C. § 2412(d)(1)(A). Attorney’s fees under the Equal Access to Justice Act are available in social security cases, and are awarded directly to claimants in order to defray legal expenses in actions in which the position of the United States was not substantially justified. See, Eustache v. Secretary of the Dept. of Health and Human Services of the U.S., 601 F.Supp. 176 (E.D.N.Y.1985). Absent special factors, $75 an hour is the maximum rate permitted by the Act. 28 U.S.C. § 2412(d)(2)(A).

An application for fees under the Equal Access to Justice Act must be made within 30 days of a final judgment in the action, 28 U.S.C. § 2412(d)(1)(B), and is now time barred. While the court does not decide whether an award would have been granted, an application for fees under the Equal Access to Justice Act would have been appropriate in light of the court's finding of clear medical evidence in support of plaintiffs position. See, e.g., Kauffman v. Schweiker, 559 F.Supp. 372, 375-76 (M.D.Pa.1983) and cases cited.

Plaintiff’s attorney states that he spent IV2 hours reviewing the court’s September 21, 1984 decision. He also states that he spent 2 hours consulting his client about granting the defendant an extension of time to answer the complaint. The court finds that counsel reasonably spent 21 hours on the federal court action, and that a rate of $75 an hour is reasonable. The fee is fixed at $1,575.00. So ordered.


author: GENE CARTER, District Judge.

text:
    Robert WILLEY, Plaintiff, v. Margaret M. HECKLER, Secretary of Health and Human Services, Defendant.
    Civ. No. 83-0189 P.
    United States District Court, D. Maine.
    April 23, 1985.

      Michael Sayer, Sayer & Golden, Lisbon Falls, Me., for plaintiff.
    Paula D. Silsby, Asst. U.S. Atty., Portland, Me., for defendant.
   MEMORANDUM OF DECISION

GENE CARTER, District Judge.

This is an action under 42 U.S.C. § 405(g) for review of the final decision of the Secretary of Health and Human Services, which denied Plaintiff’s application for disability insurance benefits. Plaintiff is a 55-year-old man who alleges that he became disabled on April 15, 1976 as a result of a variety of impairments. Plaintiffs application was denied administratively, and after hearing, by an Administrative Law Judge (AU). The case is before the Court on Plaintiff’s Motion for Summary Judgment and Defendant’s Motion for Order Affirming the Decision of the Secretary.

In reviewing the denial of disability benefits, the standard of this Court’s review is whether the determination made by the AU is supported by substantial evidence. 42 U.S.C. § 405(g); Lizotte v. Secretary of Health and Human Services, 654 F.2d 127, 128 (1st Cir.1981). In other words, the determination must be supported by such relevant evidence as a reasonable mind might accept as adequate to support the conclusions drawn. Richardson v. Perales, 402 U.S. 389, 401, 91 S.Ct. 1420, 1427, 28 L.Ed.2d 842 (1971).

The Court has thoroughly reviewed the entire record, including the transcript of the hearing below, the exhibits, and the briefs submitted by counsel. After careful consideration, the Court finds that the case must be remanded for a determination of whether the claimant’s skills are transferable and whether his residual functional capacity is as it was assessed by the AU.

The medical evidence and the Claimant’s testimony indicate that the Claimant suffers from an assortment of complaints, including asthma with shortness of breath, joint pain, and depression or anxiety. The AU separated the Claimant’s problems into three basic areas and found that Claimant does not have a severe pulmonary impairment, is not suffering from any mental impairment, but does have a severe orthopedic impairment in his left shoulder. The AU then found that Claimant has a residual functional capacity for sedentary work. Although he found claimant to be limited by his asthma in performing jobs in extremely hot or cold temperatures or extremely dirty environments, he found that these limitations did not significantly compromise Claimant’s ability to perform sedentary work. The AU “accept[ed]” that Claimant experiences pain in his shoulders upon activity and recognized that Claimant may have mild degenerative disc disease and soft spinal bones which may result in pain. However, the AU did not find credible Claimant’s allegations of extensive and disabling pain. Finding that Claimant had limited education and was approaching advanced age, and relying on a vocational expert’s opinion that Claimant’s past work was semi-skilled and that he had transferable skills, the AU applied Vocational Rule 201.11 of the Medical Vocational Guidelines, [the Grid] 20 C.F.R. Part 404 App. 2, § 201.11, which directed a finding of not disabled.

Claimant complains that the AU’s routine application of the Grid was erroneous given Claimant’s combination of exertional and nonexertional impairments. The regulations set forth a procedure for the Secretary to follow when both exertional and nonexertional impairments are present:

[W]here an individual has an impairment or combination of impairments resulting in both strength limitations and nonexer-tional limitations, the rules in this sub-part are considered in determining first whether a finding of disabled may be possible based on the strength limitations alone and, if not, the rule(s) reflecting the individual’s maximum residual strength capabilities, age, education, and work experience provide a framework for consideration of how much the individual’s work capability is further diminished in terms of any types of jobs that would be contraindicated by the nonexer-tional limitations. Also, if these combinations of nonexertional and exertional limitations which cannot be wholly determined under the rules in this Appendix 2, full consideration must be given to all the relevant facts in the case in accordance with the definitions and discussions of each factor in the appropriate sections of the regulations, which will provide insight into the adjudicative weight to be accorded each factor.

20 C.F.R. Part 404, App. 2, § 200.00(e)(2). Although the AU purported to consider the effect of Claimant’s nonexertionál impairments before determining that he was not disabled under the Grid, it is clear to the Court that full consideration was not “given to all the relevant facts in the case” to “provide adjudicative weight to be accorded each factor.” The AU’s application of the Grid was based in part on the vocational expert’s findings that Claimant has skills that are transferable. The vocational expert’s determination of transferability, however, was not informed by adequate information concerning Claimant’s exer-tional and nonexertional impairments. The expert’s conclusions in this case were, therefore, neither relevant nor reliable. As the Court of Appeals for the First Circuit has stated:

[I]n order for a vocational expert’s answer to a hypothetical question to be relevant, the input into that hypothetical must correspond to conclusions that are supported by the outputs from the medical authorities. To guarantee that correspondence, the Administrative Law Judge must both clarify the outputs (deciding what testimony will be credited and resolving ambiguities), and accurately transmit the clarified output to the expert in the form of assumptions.

Arocho v. Secretary of Health and Human Services, 670 F.2d 374 (1st Cir.1982).

The AU found that Claimant suffered various types of pain but did not find credible his allegations of extensive and disabling pain. Although Claimant’s pain alone was not found to be disabling, it should have been considered by the AU in conjunction with Claimant’s other impairments. This means that the AU should have transmitted his medical findings concerning pain into an accurate hypothetical for the vocational expert, on whose opinion he relied in making his final determination. The record demonstrates that such an assessment would have been pertinent to the expert’s opinion. When asked by Claimant’s attorney whether pain would have an impact on an individual’s ability to do the types of work she had described, the vocational expert stated: “I think that is a medical question, and I would think it would depend upon the degree.” The AU’s determination of the degree of Claimant’s pain and how it would limit his abilities were not delineated in his opinion, and were not transmitted to the vocational expert, so his assessment of transferability lacked an important component.

Similarly, the AU determined that Claimant had asthma and was limited in his ability to work in hot and cold environments and in extremely dusty environments. Neither the symptoms of Claimant’s asthma nor the restrictions which the AU found on the basis of those symptoms were conveyed to the expert in the AU’s hypothetical. Initially, the expert responded that there would be no transferability of Claimant’s skills, and she was cut off by the AU when she started to explain the reason. She stated, “No transferability. Basically because of the ...,” and the AU supplied the word “fumes.” She responded that “[fjumes would be a big problem in any other work which would be similar to that.” The AU then stated the hypothetical as, “Assuming that he does not have a severe impairment of a pulmonary nature, would he have any transferability?” Although the AU found that standing alone Claimant’s pulmonary problem was not severe, he was bound to consider it together with Claimant’s other impairments. It is clear that the AU determined that the asthma had some effect on Claimant’s ability to work, but these facts were not conveyed to the vocational expert so that she could give her evaluation on them. The hypothetical should also have contained far more specific details of Claimant’s pulmonary impairment.

One further problem with the AU’s use of the vocational expert’s determination remains. The expert determined that Claimant’s transferable skills included fine-finger dexterity, manual dexterity, fine manipulation, and ability to adjust or operate machinery. These findings do not correspond to the “inputs” on which her findings were based. Although the AU seemed to ignore her testimony in his eagerness to set the parameters of the hypothetical to include only pulmonary problems, the expert stated that in addition to fumes, her finding of nontransferability was based on

worker functions, in the Claimant’s former work, he was using a lot of gross ■manipulation, fine finger dexterity, manual dexterity, and, according to the Claimant’s testimony, and the Doctor’s testimony that would be restricted. Which would, again, restrict the transferability of skills. And restrict a lot of the work processes that he would have to go through.

TR. 102. This qualification by the expert seemed based in part on her previous colloquy with the medical examiner. She had asked the medical examiner if Claimant’s orthopedic problems would “affect his gross manipulation, fine finger dexterity?” Tr. 99. He replied that it would and was then asked what kind of work the Claimant might do with his impairments. He responded:

Well, under normal circumstances, a patient who has, you know, some bursitis of the shoulder, say a tennis elbow, he has no problem in driving. He has no problem in dressing and undressing themselves. They might have a little difficulty in scratching their back or wiping themselves after a bowl [sic] movement. They don’t have any difficulty in writing. Oh, some long writing might cause some discomfort, but a normal amount of writing wouldn’t bother them too much. Typing, again, they could type to some degree.
Now, they can use their hands and arms to shuffle papers and file papers, and things of that sort.

Tr. 99.

Claimant had testified previously that he could not do many of the things which the medical examiner mentioned, including dressing himself, driving, and writing. He also stated that he could not grasp well. After the AU had focused the vocational expert’s inquiry on unspecified pulmonary impairment, she seemed to ignore the dexterity and manipulation problems to which she had initially referred. In response to the AU’s hypothetical concerning Claimant’s skills if he had no pulmonary problems, and in response to a similar interrogatory, the expert listed jobs to which Claimant’s skills would be transferable. The AU’s opinion shows that he had clearly believed at least some of Claimant’s testimony regarding limitations on the use of his arms, for he stated that Claimant’s shoulder problem would “limit his ability to push and pull on controls.” The AU did not resolve the conflict raised by the medical expert’s and Claimant’s testimony concerning his use of his arms and hands. Claimant’s abilities in these respects, even as found by the AU, were not mentioned in the hypothetical put to the vocational expert. Since the hypothetical on which the expert’s conclusions were based did not accurately reflect the combination of Claimant’s exertional and nonexertional impairments, the AU was not entitled to use those conclusions as a basis for his application of the Grid.

Since this case must be remanded, the Court will not address at this time Claimant’s arguments that many of the AU’s findings are unsupported by substantial evidence. The Court will note, however, that the Grid should not be applied in a case like this where the Claimant suffers from both exertional and nonexer-tional impairments unless it has been determined that Claimant retains the residual functional capacity on which the guidelines are predicated. Torres v. Secretary of Health and Human Services, 668 F.2d 67, 69 (1st Cir.1981). In this regard, although the AU, in his opinion, acknowledges Claimant’s pain and does not find it alone to be disabling, he does not adequately consider it in relation to Claimant’s residual functional capacity. See Gagnon v. Secretary of Health and Human Services, 666 F.2d 662, 668, n. 8 (1st Cir.1981).

Accordingly, it is ORDERED that this case be, and is hereby, REMANDED to the Secretary for another determination of whether Claimant’s skills are transferable and for a finding of how Claimant’s pain affects his residual functional capacity.

So ORDERED.