author: LONGOBARDI, District Judge.

text:
    NEOPLAN USA CORPORATION, a Colorado corporation, and William D. Bubb, Plaintiffs, v. Robert, J. TAYLOR, Arthur N. Gaudet, Walter H. Daggett, Joseph J. Strusowski, Donald F. Neizer, Sanford L. Wohlman, John B. Wallace, General Motors Corporation, a Delaware corporation, Delaware Administration for Regional Transit, a Delaware corporation, and Kermit H. Justice, Secretary of Transportation, State of Delaware, Defendants.
    Civ. A. No. 84-09 LON.
    United States District Court, D. Delaware.
    March 26, 1985.

      Jay Stuart Radetsky, Denver, Colo., for plaintiffs; Mary C. Boudart, of Doroshow & Pasquale, Wilmington, Del., of counsel.
    Jerome O. Herlihy, of Herlihy, Herlihy & Harker, Wilmington, Del., for individual defendants, DART and State of Delaware.
    Charles E. Fairfax, III, of General Motors Corp., Detroit, Mich., for defendant, General Motors Corp.; Allen M. Terrell, Jr., of Richards, Layton & Finger, Wilmington, Del., of counsel.
   OPINION

LONGOBARDI, District Judge.

Defendants in this action, General Motors Corporation (“GMC”), Delaware Administration for Regional Transit (“DART”) and the eight individual Defendants have moved to dismiss Plaintiffs’, Neoplan USA Corporation (“Neoplan”) and William D. Bubb (“Bubb”), claims under 42 U.S.C. § 1983, 49 U.S.C. § 1601 and state contract law. The Defendants argue that Plaintiffs’ claims are barred by res judicata, collateral estoppel, official immunity and the eleventh amendment.

Since the motion to dismiss is accompanied by supplementary factual affidavits, the Court will treat the motion as one for summary judgment under Rule 56 of the Federal Rules of Civil Procedure.

In a motion for summary judgment, the moving party has the burden of showing that there is no genuine issue as to any material fact and that they are entitled to judgment as a matter of law. In the present case, the Defendants have made such a showing and their motion for summary judgment is granted.

The Plaintiffs allege that their procedural due process rights under the fifth and fourteenth amendments were violated by the bidding procedures utilized by Defendants in awarding GMC a contract to manufacture buses for the State of Delaware. In addition, the Plaintiffs claim that Defendants’ actions violated 29 Del. C. § 6901 and 49 U.S.C. § 1601 and that Defendant GMC wrongfully interfered with prospective contractual relations between DART and Neoplan.

The controversy began when DART obtained funds to buy fifty-five (55) new buses to replace the old buses in its fleet. Invitations for public bidding were issued in September, 1982, and DART received three bids: one from Neoplan, one from GMC and one from Grumman Flexible.

Because funds for the buses were provided by the federal government, the bidding process was controlled by federal law under the Urban Mass Transportation Act, 49 U.S.C. § 1601, et seq. The Urban Mass Transportation Administration (“UMTA”) required that the bidding be conducted in a two step process. Rather than base the award of the contract simply on the lowest cost per bus, UMTA required prospective bidders to submit information as to the projected “life cycle cost” of operating the buses. Thus, prospective bidders were required to submit both a “technical proposal” and a “price proposal.”

Each proposal was to be submitted separately with the technical proposal to be considered first. In an attempt to standardize the bids, the committee would then make necessary adjustments in the costs submitted, open the price proposal and, through a comparison of the price proposal to the adjusted technical proposal, determine the successful bidder. Then, the proposal of the successful bidder would be reviewed by DART to determine responsiveness to the bid specifications.

Initially, Neoplan was found to be the successful bidder and the committee began its final review to determine Neoplan’s responsiveness to the bid specifications. There is some dispute between the parties as to the events that occurred at this next stage of the process. After announcing Neoplan as the apparent low bidder, the Defendants claim that the committee issued an invitation to the bidders suggesting they were willing to further explain the procedure that was utilized in reaching their conclusions. According to the Defendants, GMC was the only bidder to accept the invitation which resulted in two meetings between GMC and the committee. On the other hand, the Plaintiffs deny that they were invited to meet with DART at that time and claim that GMC engaged in the private negotiations in an ex parte attempt to persuade the committee that Neoplan’s bid was nonresponsive. The factual dispute is not material based on the discussion of the law and final decision on this motion as discussed hereafter.

On the December 7 and 17 meetings between DART and GMC, the participants discussed DART’s treatment of the fuel figures submitted by the three bidders. After this discussion and discussions with UMTA in Washington, DART determined that Neoplan’s fuel specification did not meet the requirements of the bid proposals and that Neoplan had submitted no information at all in regard to other components of the “life cycle costs.” After some communication with Neoplan which apparently did not produce a satisfactory explanation, Neoplan was disqualified and the contract was awarded to GMC, the next lowest bidder.

Shortly thereafter, Neoplan filed a protest with UMTA’s regional office. In addition, Neoplan filed for injunctive relief in Delaware’s Court of Chancery in an attempt to prevent GMC from going ahead with the buses. Neoplan’s request for a temporary restraining order was denied. Neoplan USA Corporation, et al v. DART, et al, Del.Ch., C.A. No. 7139, Brown, C., (New Castle Co., Mar. 30, 1983).

Discovery began on March 31, 1983, and ended on April 25, 1983. After briefing and oral argument, the Court of Chancery denied plaintiffs’ requests for a preliminary and permanent injunction. Neoplan USA Corporation, et al v. Delaware Administration for Regional Transit, et al, Del.Ch., Civil Action No. 7138, Brown, C. (June 13, 1983). Shortly thereafter, UMTA’s regional office also denied Neoplan’s protests. DART then contacted GMC and ordered the buses which were soon thereafter delivered and placed in service.

In the meanwhile, plaintiffs appealed Chancery’s decision to the Delaware Supreme Court but they did not ask for a stay of the decision with the requisite posting of a supersedeas bond. Thus, DART consummated its purchase of the fifty-five (55) buses from GMC. The Delaware Supreme Court then dismissed plaintiffs’ appeal as moot. Neoplan USA Corporation v. DART, Del.Supr., 482 A.2d 765 (1984).

Defendants maintain that Plaintiffs’ claims in this action are barred by collateral estoppel and res judicata. Over the years, the evolution of preclusion concepts have led the commentators and courts through a maze of seemingly conflicting terminology and applications. The field is strewn with “merger”, “bar”, “cause of action”, “collateral estoppel” and “direct estoppel” and, more recently, with “claim preclusion” and “issue preclusion.” For the purposes of this decision, however, the Court adopts the definitions set forth by the Supreme Court in Migra v. Warren City School District, — U.S. -, 104 S.Ct. 892, 894 n. 1, 79 L.Ed.2d 56 (1983); that is, res judicata may be defined as “the effect of a judgment in foreclosing litigation of a matter that never has been litigated, because of a determination that it should have been advanced in an earlier suit.” Thus, res judicata may also be labeled “claim preclusion.” Collateral estoppel, on the other hand, refers to issue preclusion because it involves “foreclosing re-litigation of a matter that has been litigated and decided.” Id.

In Migra, the Supreme Court focused on res judicata, i.e., claim preclusion. That case involved a situation similar to the one in the instant case in that the plaintiff did not litigate her section 1983 claim in the state court proceeding and then argued that the state court judgment would not prevent her from proceeding with the 1983 claim in federal court. The Supreme Court held that a federal court must give a state court judgment the same preclusive effect it would be given under the law of the state in which it was rendered, even when the federal cause of action had not been addressed in the state court. Id. 104 S.Ct. at 896.

Thus, this Court must look to Delaware law of claim preclusion to determine if the present litigation should be barred. Under Delaware law, res judicata, as that term was used earlier, permits “a final judgment upon the merits rendered by a court of competent jurisdiction [to] be raised as an absolute bar to the maintenance of a second suit in a different court upon the same matter by the same party or his privies.” Epstein v. Chatham Park, Inc., Del.Super., 2 Storey 56, 52 Del. 56, 153 A.2d 180, 184 (1959). Historically, the doctrine was invoked only to bar the relitigation of the same cause of action. Ajax Rubber Co. v. GAM, Del.Super., 3 W.W. Harr. 73, 33 Del. 73, 130 A. 395 (1925). The modern view of res judicata in Delaware is substantially more broad and bars later litigation of any claim arising out of the same transaction that formed the basis for the prior adjudication. Maldonado v. Flynn, Del.Ch., 417 A.2d 378, 381 (1980), rev’d on other grounds, Del.Supr., 430 A.2d 779 (1981). The theory of this rule is that a transaction gives rise to only one claim, regardless of the number of ways the claim may be asserted. Id. Broadly speaking, therefore, it is apparent that Delaware law recognizes “claim preclusion” as that term is defined by the Supreme Court in Migra.

In Delaware, when a defendant contends that claim preclusion bars a subsequent action, he must demonstrate: (1) that all the elements of res judicata exist; (2) that the same transaction forms the basis for the prior and subsequent suits; and (3) that the claim for relief could have been properly presented in the prior action. Id. at 383.

The elements of res judicata were set forth in Epstein v. Chatham Park, Inc., 153 A.2d at 184. Res judicata exists when there has been a final judgment upon the merits rendered by a court of competent jurisdiction in the absence of fraud or collusion between the same party or his privies. Id.

The Plaintiffs have argued that there was no final judgment on the merits in the Chancery action because the Delaware Supreme Court dismissed their appeal as moot. The Plaintiffs, however, are responsible for that dismissal. They failed to file a supersedeas bond. “It would be quite destructive to the principle of judicial finality to put such a litigant in a position to destroy the collateral conclusiveness of a judgment by destroying his own right of appeal.” IB Moore’s Federal Practice § 0.416(6). In this case, the Plaintiffs’ failure to take the appropriate steps to preserve their right to appeal is the equivalent of the failure to appeal at all. Epstein, 153 A.2d at 185. Thus, the Chancery Court decision must be regarded as a final adjudication on the merits.

Secondly, the requirement that the judgment be rendered by a court of competent jurisdiction in the absence of fraud or collusion is not contested here. Finally, as to the requirement that the decision must pertain to the same parties (or privies) as is appearing in the second action, that prong of the test is met except for GMC.

In order for claim preclusion to bar subsequent action, a litigant must demonstrate not only that the elements of res judicata (issue preclusion) have been satisfied but also that the same transaction provides the basis for the prior and subsequent suits and that the claim for relief could have properly been presented in the prior action. Maldonado, 417 A.2d at 383. In the present case, it is clear that the same transaction that gave rise to the state court action has spawned the litigation in this court. Even the Plaintiffs do not appear to contest the fact that the series of events giving rise to both the federal and state cause of action are substantially identical.

The next consideration, whether the claim for relief could have been properly presented in the prior case, deserves greater attention. The issue presented is whether the Court of Chancery would have had jurisdiction to hear a section 1983 action and grant a remedy at law along with any necessary equitable relief. Although there is no explicit Delaware law on the issue of whether the Delaware Chancery Court has jurisdiction to hear section 1983 actions, other decisional law indicates that it does. First of all, the Court of Chancery does have jurisdiction to rule on federal constitutional rights. Belton v. Gebhart, Del.Ch., 32 Del.Ch. 343, 87 A.2d 862 (1952), aff'd, Del.Supr., 33 Del.Ch. 144, 91 A.2d 137 (1952), aff'd, 349 U.S. 294, 75 S.Ct. 753, 99 L.Ed. 1083 (1955). Even more importantly, the Supreme Court has recognized that state courts have concurrent jurisdiction with federal courts over section 1983 actions. Maine v. Thiboutot, 448 U.S. 1, 100 S.Ct. 2502, 65 L.Ed.2d 555 (1980).

Finally, it is well settled that Chancery could have awarded money damages in a situation such as this where the primary cause of action is for injunctive relief. “[I]t is settled law that when equity obtains jurisdiction over some portion of the controversy it will decide the whole controversy and give complete and final relief, even though that involves the grant of a purely law remedy such as a money judgment.” Wilmont Homes, Inc. v. Weiler, Del.Supr., 42 Del.Ch. 8, 202 A.2d 576, 580 (1964).

In spite of the fact that Chancery would have heard their case, Plaintiffs maintain that they could not have proceeded with an action seeking both legal and equitable relief because of the doctrine of election of remedies. From the cases cited by Plaintiffs in support of their argument, it appears as if what they are really referring to is not the doctrine of election of remedies but Delaware case law suggesting that the same cause of action cannot be pursued simultaneously in a law and equity court as long as the plaintiff “may obtain complete relief in either court.” Wilmington Trust Co. v. Barry, Del.Super., 397 A.2d 135, 138 (1979). Since it is well settled that Plaintiffs could have pursued both claims in the Chancery action, their only obligation was to bring both claims in one state court, the very thing they did not do.

Plaintiffs’ final argument is that the Defendants waived their right to claim a bar to this suit because Defendants did not object to Plaintiffs’ filing only one claim in Chancery Court. In support of this proposition, Plaintiffs rely on one case, Weekes v. Atlantic National Ins. Co., 370 F.2d 264 (9th Cir.1966). The Weekes case differs substantially from the present situation in that it involved two actions simultaneously pending in state and federal-courts. The Ninth Circuit found that the parties’ settlement of one action did not bar the litigation of the previously filed personal injury action in federal court where the defendant did not object to the continued litigation at the settlement. In the present case, two actions were not pending simultaneously and the Defendants were not in a position to second guess the Plaintiffs’ strategy. Indeed, the proposition advanced by Plaintiffs, if given its full import, would require Defendants to suggest that Plaintiffs bring additional claims against them in order to preserve the defense of res judicata.

Claim preclusion clearly bars the Plaintiffs’ from using the guise of a section 1983 suit to litigate a claim in federal court that should have been brought in the Court of Chancery. In spite of this bar to their action against DART and the individual Defendants, the Plaintiffs argue that the suit against GMC can go forward for two reasons: first, because the Plaintiffs did not have an opportunity to fully litigate the claims brought against GMC in the present action in Chancery Court and, second, because GMC was not a party to the Chancery action.

Since GMC was not a party to the Chancery action, claim preclusion does not block Neoplan’s claim against them. However, collateral estoppel, i.e., issue preclusion, may serve to bind a plaintiff against a defendant not a party to the prior action if the issue in question was “fully litigated in the prior case.” Chrysler Corp. v. New Castle County, Del.Super., 464 A.2d 75, 80 (1983).

Delaware law allows collateral estoppel to preclude litigation of an issue in a subsequent suit between different parties when three requirements are met. First, the issue to be concluded must be the same as that involved in the prior action. Coca-Cola Co. v. Pepsi-Cola Co., Del.Super., 6 W.W.Harr. 124, 36 Del. 124, 172 A. 260, 263 (1934). Second, the issue must have been actually raised and fully litigated in the prior action. Auerbach v. Cities Service Company, Del.Supr., 36 Del.Ch. 554, 134 A.2d 846, 851 (1957). Finally, the issue must have been necessary to the outcome of a valid prior judgment. Chrysler Corp. v. New Castle County, 464 A.2d at 80.

In deciding whether the issues in both actions are similar enough to meet the requirements of issue preclusion, it must be remembered that a new contention is not necessarily a new issue. “Any contention that is necessarily inconsistent with a prior adjudication of a material and litigated issue, then, is subsumed in that issue and precluded by the prior judgment’s collateral estoppel effect.” IB Moore’s Federal Practice § 0.443(2). The best way to determine the similarity of issues in two actions is to examine the Plaintiffs’ complaint. Plaintiffs’ complaint in the Chancery Court alleges that DART acted improperly in discussing the bids with GMC following the opening of the sealed bids. Indeed, Chancellor Brown regarded this allegation as one of the mainstays of plaintiff’s complaint and stated in his June 13 opinion: “Neoplan’s argument breaks down to two separate thrusts____ It argues that the ex parte meddling by GMC after Neoplan had been declared to be the apparent successful bidder violates the bid specifications and requires the disqualification of GMC.” Neoplan USA, Civil Action No. 7138 at 7.

Plaintiffs’ complaint in the action filed in this court makes substantially similar allegations, albeit in greater detail. Plaintiffs allege that “[Defendant, GMC, by ... its active in-person solicitation and representations to DART, constituted a bad faith and wrongful interference with the prospective contractual relations between DART and GMC.” Compiaint ¶ 9. In this case, the Plaintiffs’ allegation that GMC’s actons were a “bad faith and wrongful interference” with the contractual relations between DART and GMC is inconsistent with the Chancery Court’s finding that “nothing ... in the arguments on the expanded record ... would have required the disqualification of GMC by DART.” Id. at 10. Indeed, if GMC had wrongfully interfered with the prospective contractual relations between DART and GMC, they would have had to have been disqualified under the stated conditions of the bid procedure. “Bidders and/or their representatives shall not be permitted to observe, participate in or otherwise be involved in the proceedings of (DART’s evaluation) committee. Attempts to take such action shall be cause for the bidder to be declared non-responsible.” Id. at 10. The Chancery Court found such sanctions to be unwarranted because the activities of GMC did not violate the bid procedure.

Under Delaware law, the next requirement to be met in order for issue preclusion to apply is that the issue must have been “actually litigated and determined in the first proceeding.” Auerbach v. Cities Service Co., 134 A.2d at 851. The excerpts from the Chancery opinion already quoted indicate that the issue regarding the interference between GMC and DART was actually litigated. Indeed, one of the major issues addressed and determined by Chancery was the alleged “ex parte meddling” by GMC. Neoplan USA, Civil Action No. 7138 at 7.

Finally, the Court must determine whether the findings of the Chancery Court concerning the interference of GMC in the bidding procedures was actually necessary to the determination of the Chancery judgment. Chrysler Corp., 464 A.2d at 80. Again, from the language of the Chancery opinion, it is clear that such findings were necessary to the judgment. Without a finding that GMC did not wrongfully interfere with the relationship between DART and Neoplan, the injunction preventing the consummation of the contract between DART and GMC would have been granted since GMC would no longer have been eligible to have been awarded the contract.

Thus, issue preclusion, applies in this case and Plaintiffs cannot relitigate conclusive findings of the state court in this court. For the foregoing reasons, Defendants’ motion to dismiss is granted.

      . The technical proposal was to cover "life cycle costs”, performance and the adaptability of the new buses to DART’s existing equipment. "Life cycle cost” was to include information on fuel economy, air conditioning, brakes, transmission, maintenance, electrical system and engine and oil consumption throughout the life cycle of the buses.

      . Neoplan had filed a complaint in Delaware’s Court of Chancery prior to filing this lawsuit. The Chancery Court found: "... representatives of GMC requested and were granted a meeting with representatives of the DART evaluation committee____
      “As a result of this complaint by GMC the DART evaluation committee looked again at the technical proposal of the three bidders.” Neoplan USA Corporation, et al v. Delaware Administration for Regional Transit, et al., Del.Ch., Civil Action No. 7138 at 5-6, Brown, C. (June 13, 1983). The Chancery Court record reveals that the committee had indeed extended an invitation to all bidders offering further information on its decision on the technical proposals. Affidavit of Manley Bean, Neoplan President, filed in Chancery, at 6.

      . A comprehensive review of the development of preclusion concepts is to be found in Restatement (Second) of Judgments, Introductory Note to Chapter 3 (1982); See also 18 C. Wright, A. Miller & Cooper, Federal Practice and Procedure § 4402 (1982).

      . In one sense, claim preclusion is more broad than issue preclusion in that it precludes relitigation of matters that could have been raised but were not. In another sense, however, claim preclusion is more limited in that it requires both parties to have been present in the first suit while issue preclusion may be used against a party not present in the prior action. IB Moore’s Federal Practice § 0.441(a) (1984).

      . Res judicata as used here connotes Delaware's earlier view of that term which is consonant with "issue preclusion.”

      . The effect of the Chancery Court decision on Neoplan’s claim against GMC will be addressed in the later discussion of collateral estoppel.

      . See, footnote 5, supra.

      . Despite the settled law, Plaintiffs maintain they were not sure the Chancery Court would have heard their action. In support of this proposition, they cite two instances where cases were dismissed in Chancery because of the lack of an equitable claim. Chateau Apartments Co. v. City of Wilmington, Del.Supr., 391 A.2d 205 (1978); Reeves v. Transport Data Communications, Inc., Del.Ch., 318 A.2d 147 (1974). Those cases are inapposite to the situation in the present case where Plaintiffs clearly had an equitable claim to be presented in Chancery. Plaintiffs have cited no authority for the proposition that Chancery may not provide a remedy at law as well as an equitable remedy when it has proper equitable jurisdiction.

      . The doctrine of election of remedies states that by asserting a choice of inconsistent claims for relief in a judicial proceeding, a litigant is precluded from advancing inconsistent claims in subsequent litigation. However, if two causes of action that are not mutually inconsistent arise from a single course of events, the doctrine of election of remedies does not require that a plaintiff who chooses to assert one cause of action will be precluded from asserting the other. IB Moore’s Federal Practice § 0.405(7) (1984).

      . The individual employees of DART named in this action were not named defendants in the Chancery action. However, as parties in privity with DART, the Chancery decision is binding to preclude suit against them as well as DART.

      . Thus, Plaintiffs allegation that the sole determination made by the Chancery Court was whether to grant "GMC the contract despite actions taken by GMC” is misleading. If the Chancery Court had found that any action by GMC interfered wrongfully with the bid decision, the language of the bid procedure itself required its disqualification. Neoplan USA, Civil Action No. 7138 at 10.

      . Since the Defendants’ motion to dismiss is granted on the grounds of claim preclusion and issue preclusion, the Court finds it unnecessary to consider Defendants’ immunity arguments.


source: Caselaw Access Project

author: KEETON, District Judge.

license: Public Domain

text:
    EXETER TOWERS ASSOCIATES, Brian M. Capalbo, P. Edward Capalbo, Ronald E. Capalbo, Lawrence Dukatz, Edward R. Goldberg, Erza Goldberg, M. Howard Jacobson, Stuart R. Jaffee, Noel G. Posternak, David B. Reen, and Michael H. Smith, Plaintiffs, v. Robert S. BOWDITCH, Jr., Wesley E. Finch, and Fleet National Bank, Defendants.
    Civ. A. No. 84-3464-K.
    United States District Court, D. Massachusetts.
    March 28, 1985.

      Robert D. Cohan, Boston, Mass., for plaintiffs.
    Jeffrey B. Rudman, Stephen A. Jonas, Lee Johnson, Hale & Dorr, Boston, Mass., for Bowditch.
    Daniel L. Goldberg, William G. Southard, Bingham, Dana & Gould, Boston, Mass., for Finch.
    James P. Marusak, Hinckley, Allen, To-bin and Silverstein, Providence, R.I., for Fleet Nat. Bank.
   OPINION

KEETON, District Judge.

A Massachusetts limited partnership, Ex-eter Towers Associates, and its limited partners have filed this action against the general partners for breach of contract, breach of fiduciary duty, fraud, unfair and deceptive practices in violation of the Massachusetts Regulation of Business Practices for Consumers Protection Act, and racketeering activities in violation of the Racketeer Influenced and Corrupt Organizations Act (RICO). The general partner defendants have filed a motion to dismiss this case for lack of subject matter jurisdiction under Rule 12(b)(1), because the plaintiffs have failed to state a claim under RICO — the only alleged basis for federal jurisdiction in this case. If the motion is granted, they request that the pendent state claims also be dismissed without prejudice to refiling in state court. Defendant Fleet National Bank has filed a motion to dismiss based upon several grounds. Plaintiffs have filed a motion to amend their complaint to include additional defendants and several new state causes of action. I treat the general partner defendants’ motion as one filed under Rule 12(b)(6) and dismiss the RICO claim. I deny the plaintiffs’ motion to amend the complaint because no independent basis for jurisdiction is alleged, and I also decline to exercise pendent jurisdiction over the state law claims. In light of these rulings, I grant Fleet National Bank’s motion to dismiss.

I.

On November 21, 1977, the general partners formed a partnership to acquire a parcel of real property and to construct, maintain, and operate an apartment complex on that property. The partnership acquired several mortgages, which were eventually consolidated into one mortgage with a face value of $4,862,800. In the fall of 1978 the general partners circulated a confidential memorandum to attract several investors to purchase limited partnership interests. On March 26, 1981, the primary lending institution assigned the mortgage to the Government National Mortgage Association, which offered the mortgage in an auction to Federal Housing Association (FHA) approved mortgagees. In the auction the general partners, without notifying the limited partners, purchased the mortgage for $3,000,000 through an agreement with Merrill, Lynch, Huntoon, Prize, Inc. (Merrill Lynch), an FHA approved purchaser. The purchase was made by the general partners individually and not by the partnership. The limited partners were not approved mortgagees and were not aware of the auction. Merrill Lynch eventually assigned the mortgage to Merchants Bank. The purchased mortgage was held by Merchants Bank for two and a half years. It was assigned to Fleet National Bank on August 2, 1984.

In the Spring of 1983 plaintiffs became aware of the mortgage and asserted a 90% interest in any future profits derived from its sale. The limited partners claimed that the general partners used partnership information to purchase the mortgage, and such actions constituted a fraud upon the limited partners and the partnership. They also contend in this action that the general partners’ interest in the mortgage created a conflict of interest with respect to the sale of the partnership property. On July 3, 1984, the partnership sold Exeter Towers for $7,900,000. The mortgage is now valued at a sum of about $1,000,000 over the original purchase price.

On October 31, 1984, plaintiffs instituted this action and simultaneously filed a motion for a temporary restraining order and a preliminary injunction. Plaintiffs included Fleet National Bank as a defendant and sought a declaratory judgment against the bank as to their rights in the mortgage. I granted the temporary restraining order on that day and scheduled a hearing. At the conclusion of the hearing, on November 9, 1984, I vacated the former order, and denied the plaintiffs’ motion for a preliminary injunction. Plaintiffs have filed a motion for reconsideration and to reinstate the temporary restraining order. I deny the motion for reconsideration. For the reasons stated during the hearing of November 9, 1984, and in this Opinion, I conclude that plaintiffs have failed to satisfy the requirements of Rule 65.

The only basis for this court’s jurisdiction in this action is the federal RICO count. I conclude that if the RICO count is dismissed, then the pendent state claims should also be dismissed.

Have the plaintiffs stated a cause of action under civil RICO?

Under 18 U.S.C. § 1964(c) (1982), “Any person injured in his business or property by reason of a violation of section 1962 ... may sue therefor in any appropriate United States district court and shall recover threefold the damages he sustains and the cost of the suit, including a reasonable attorney’s fee.” Section 1962(c) provides that “It shall be unlawful for any person employed by or associated with any enterprise engaged in, or the activities of which affect, interstate or foreign commerce, to conduct or participate, directly or indirectly, in the conduct of such enterprise’s affairs through a pattern of racketeering activity or collection of unlawful debt.” Section 1962(d) prohibits a conspiracy to perform such activities. A “pattern of racketeering activity” is generally defined as two violations of specified federal statutes within a ten-year period. See 18 U.S.C. § 1961(5) (1982).

If one disregards the connotations of “racketeering” and “pattern of racketeering activity,” the definitions in 18 U.S.C. § 1961 (1982) may lead to a very broad construction of the statute as tending to federalize most garden variety common law actions for fraud. Some of the conflicting precedents appear to support this construction. Others do not. Neither the Supreme Court nor the First Circuit has yet addressed this question.

I turn, first, to an examination of the precedents and then to other factors bearing upon the decision in this case — factors relevant to predicting how this disputed issue is most likely to be resolved by the Supreme Court, at least insofar as is necessary to the decision of the present case.

II.

Among the precedents favoring a very broad construction of the statute is Harco, Inc. v. American National Bank & Trust Co., 747 F.2d 384 (7th Cir.1984) (Harco, Inc.), cert. granted, — U.S. -, 105 S.Ct. 902, 83 L.Ed.2d 917 (1985). In Harco, Inc. the Seventh Circuit rejected all limitations upon civil RICO other than the requirements explicitly stated in the statute:

With respect to the case before us, it does not seem at all likely that Congress anticipated the application of civil RICO to improperly calculated interest charges by a commercial bank. And this may or may not be an appropriate subject for this federal statute. Nevertheless, it does not seem fitting for us to attempt to narrow the statute in ways which are nearly impossible to rationalize merely to exclude subjects of this kind. For to say that Congress did not anticipate this subject is not to say that Congress would have excluded it if the subject had been brought explicitly to its attention. Congress appears to have preferred a broad statute, even if overinclusion might result.

Id. at 399. Other decisions have adopted a similarly broad construction of civil RICO. See id. at 388 (decisions rejecting limitations); Sutliff, Inc. v. Donovan Companies, Inc., 727 F.2d 648 (7th Cir.1984).

Other courts have concluded that the statute should be construed as imposing some limitations beyond those explicitly stated. The most widely accepted limitation on the scope of civil RICO is a “standing” requirement that is inferred from the “by reason of” language of § 1964(c). One version of this requirement has been recently adopted by the Second Circuit. See Sedima, S.P.R.L. v. Imrex, Co., Inc., 741 F.2d 482 (2d Cir.1984) (Sedima), cert. granted, — U.S. -, 105 S.Ct. 901, 83 L.Ed.2d 917 (1985). By this view, in order to have standing under the act, a plaintiff must allege an injury caused by activity that the statute was designed to deter, which is not simply the injury caused by the predicate acts. “RICO was not enacted merely because criminals break laws, but because mobsters, either through the infiltration of legitimate enterprises or through the activities of illegitimate enterprises, cause systemic harm to competition and the market, and thereby injure investors and competitors____ It is only when injury caused by this kind of harm can be shown, therefore, that we believe that Congress intended that standing to sue civilly should be granted.” Id. at 495-96. Some district courts have followed this formulation of the standing requirement. See, e.g., Atlantic Federal Savings & Loan Ass’n v. Dade Savings & Loan Ass’n, 592 F.Supp. 1089, 1092-93 (S.D.Fla.1984).

Another Second Circuit case has elaborated upon Sedima’s standing limitation. See Bankers Trust Co. v. Rhoades, 741 F.2d 511 (2d Cir.1984). This decision follows Sedima’s holding that a plaintiff “must allege a proprietary injury caused by a RICO violation, not just one caused by some of the essential elements of a RICO violation.” Id. at 516. But it goes on to conclude that each element of § 1962 must be a “but for” cause of the injury. Id. at 517. The opinion then provides several examples of circumstances in which the injury is attributable to a pattern and not to the individual predicate acts:

For example, a plaintiff who is victimized by a defendant enterprise’s multiple acts of arson may thereafter be denied fire insurance as a result of his fire history; such a plaintiff whose property subsequently suffers innocent fire damage would be unable to obtain reimbursement for the damage, and his monetary loss would be the result of the pattern of predicate acts of the enterprise, rather than any of the individual acts. Or, a plaintiff might be forced to incur an unwanted debt or to take on an unwanted business partner because an enterprise has placed his business in jeopardy by using felonious means to cause a number of his customers to withhold their custom. In each instance, the plaintiff would have suffered an injury to his business or property by reason of the defendants’ use of a RICO enterprise and a pattern of racketeering acts; the individual racketeering acts, however, could not be said to have caused the same injury.

Id.

The Eighth Circuit has adopted a less restrictive standing requirement than the Second Circuit’s Sedima holding. See Alexander Grant & Co. v. Tiffany, Ind., Inc., 742 F.2d 408 (8th Cir.1984). “[Cjivil RICO plaintiffs [must] allege something more than injury from the underlying predicate acts.” Id. at 413. That holding does not require however that the “injury result from mobster activity or the efforts of organized crime” as is the case with the Second Circuit’s limitation. Id.

The Second Circuit has also imposed another limitation to be used in identifying defendants who may be sued under civil RICO. See Sedima, 741 F.2d at 496. Interpreting the term “violation,” the court found that a plaintiff may file an action against a defendant only after the defendant has been convicted in a criminal case for the underlying predicate offenses. Thus, a civil RICO case may only follow a government prosecution of the defendant which has resulted in a conviction. Commentators and courts have severely criticized this criminal conviction requirement. See, e.g., Harco, Inc., 747 F.2d at 384.

The Seventh Circuit has dismissed a civil RICO action against an accounting firm on the basis of an infiltration requirement. See Cenco, Inc. v. Seidman & Seidman, 686 F.2d 449, 457 (7th Cir.), cert. denied, 459 U.S. 880, 103 S.Ct. 177, 74 L.Ed.2d 145 (1982). The court found that no legitimate purpose would be served, by awarding RICO damages to those who have suffered indirectly from a violation of the statute, whose primary purpose is to cope with the infiltration of legitimate business enterprises. The scope of this requirement should be read, however, in'light of the recent decision in Sutliff, Inc. v. Donovan Companies, Inc., 727 F.2d 648 (7th Cir.1984).

Some courts have used Rule 9(b), of the Federal Rules of Civil Procedure, to limit civil RICO allegations. See Moss v. Morgan Stanley, Inc., 719 F.2d 5, 19 (2d Cir.1983), cert. denied, — U.S. -, 104 S.Ct. 1280, 79 L.Ed.2d 684 (1984). This rule establishes a strict pleading requirement in the context of fraud allegations. These courts reason that the need for particularity of pleading is increased because of the “in terrorem” effect that is associated with charges of racketeering activity.

Recently, courts in this district have split on the proper scope of civil RICO. One decision required that the plaintiff show that the defendants are somehow connected with organized crime to determine whether a claim is within the spirit of civil RICO. See Aliberti v. E.F. Hutton & Co., Inc., 591 F.Supp. 632 (D.Mass.1984). But see Owl Construction Co., Inc. v. Ronald Adams Contractor, Inc., 727 F.2d 540 (5th Cir.), cert. denied, — U.S. -, 105 S.Ct. 118, 83 L.Ed.2d 61 (1984). Another decision in this district has rejected the Second and Eighth Circuit standing limitations and the criminal conviction requirement. See Grado v. Gross, CA 84-1087-MA (D.Mass. Aug. 20, 1984).

For reasons stated below, I need not and do not attempt to resolve conflicts among the various ways of formulating limitations of the scope of liability. Rather, I consider only the more basic conflict with respect to the general scope of civil RICO remedies.

III.

The central question presented here is whether Congress, in defining “racketeering” and “pattern of racketeering activity” in the way it did, manifested an intent that these concepts not be limited on any grounds beyond those stated in the text of 18 U.S.C. § 1961 (1982).

It has been reasoned that a literal reading of the text of the statute supports the answer that the only limitations are those explicitly stated in the statutory definitions. See Harco, Inc., 747 F.2d at 387, 398-99; Note, Civil RICO: The Temptation and Impropriety of Judicial Restriction, 95 Harv.L.Rev. 1101 (1982). That view, however, fails to take due account of the fact that Congress used “racketeering” repeatedly in the text of the statute rather than using “X” or some other neutral concept that would have carried no hint of statutory objectives and would have focused attention more sharply, if not exclusively, on the statutory definition of “X.” To read the statute as if “X” were substituted wherever “racketeering” appears in the text is to disregard a compelling manifestation of congressional purpose.

Words are vehicles for expression of ideas. Some words are more precise than others, but all are to some degree imprecise and imperfect expressions of meaning. The full meaning is understood only with awareness also of context and connotation. Both the user of words and one reading or hearing them, if the two are communicating and understanding well, are aware of context and of connotations of ordinary usage. Taking account of these inherent characteristics of communication, abjuring legalistic canons of interpretation that are readily available in contradictory pairs, and applying reason and common sense to the task of determining what the text of the statute says about the issue now under consideration, we must pay attention not only to the words used in defining key concepts of the statute — including “racketeering” and “pattern of racketeering activity” — but also to the words used in labeling those concepts. The necessity of doing so, if we are truly searching for manifested meaning, is underscored by the fact that the labels are used over and over in the text of the statute, in committee and floor debate, in communications among legislators and staff, and elsewhere throughout the legislative history to which courts also turn for aid in understanding statutory meaning.

In the present case, to disregard the connotations of “racketeering” in ordinary usage would be to treat this legislation as meant to be misleading — perhaps even deceptive. It would be to treat it as having a sweep reaching into human affairs almost as extensively as the concept of common law fraud, but flying the strikingly narrower banner of an attack merely upon racketeering and racketeers. Courts would manifest disrespect for Congress and disregard for manifested congressional mandate were they to approach the task of construing this statute as if the congressional choice of the term “racketeering” to identify the central concept of the statute were to be disregarded entirely.

I conclude that, in enacting the “Racketeering Influenced and Corrupt Organizations Act” and its civil remedy provisions, Congress manifested an intent that these remedies be available only in relation to activities having some association with “racketeering” as that term is used in ordinary discourse. The precise characteristics of that association were not defined by the statute. Just as Congress left to the Supreme Court the authority and responsibility for defining more precisely the meaning of “restraint of trade,” 15 U.S.C. § 1 (1982), in the RICO act Congress has left to the Supreme Court the authority and responsibility for defining more precisely the kind of association with “racketeering” activity that is a prerequisite to a RICO civil remedy.

IV.

The submissions before me allude to legislative history through the citation of various judicial interpretations of congressional intent. Plaintiffs have done so chiefly to show that no limitations other than those explicitly stated in the text of the act were intended. Defendants have done so chiefly to show that intended purpose and limitations of the statute not expressed in the text of the act were made apparent in legislative hearings and debates. Even on this field of battle, victory would likely be awarded to defendants, on the ground that legislative history on RICO reveals allusions to expressed or assumed limitations on civil remedies that would be inconsistent with reading the act so as to encompass .most occurrences of fraud in commercial transactions during which negotiations have included communication by mail. These arguments and responses, however, miss the central point of Part III of this Opinion, and I do not examine them in detail. More to the point is an easily established proposition: The legislative history, like the text of the statute, is rich with references to “racketeering” and “pattern of racketeering activity.” As in the context of the statutory text, these references in the legislative history invoke all the connotations of “racketeering” in ordinary usage as part of the manifestation of intended meaning. Thus, legislative history, even if not read as supporting limitations not derived from the text of the statute, at least does not manifest an intent contrary to limitations implicit in the text — including limitations implicit in the congressional choice to enact a statute explicitly aimed at doing something about racketeer influenced and corrupt organizations, and not generally about fraud, or even mail fraud.

V.

Turning to the particulars of this case as disclosed in the complaint and supplemented by other submissions of the plaintiffs, I conclude that limitations necessarily connoted by the concept of “racketeering” as a key indication of the scope of the legislation demonstrate that no valid RICO claim is stated in this complaint.

The following excerpts from the plaintiffs’ complaint state their civil RICO claim:

COUNT V — LIMITED PARTNERS CLAIM FOR RACKETEERING ACTIVITIES
74. [Reincorporation of the previous paragraphs of the complaint]
75. The Partnership is an enterprise engaged in, or the activities of which affect, interstate commerce.
76. The General Partners conducted and participated, directly and indirectly, in the conduct of Partnership affairs and conspired to conduct and participate, directly and indirectly, in the conduct of Partnership affairs through a pattern of racketeering activities, including but not limited to the fraudulent acts and practices alleged in paragraph 65, above [allegations relating to acquisition of mortgage, concealment of the transaction, and conduct amounting to misrepresentations to the limited partners].
77. The said pattern of racketeering activities included numerous acts which are indictable as mail fraud under 18 U.S.C. § 1341 inasmuch as the fraudulent misrepresentations and concealments alleged in paragraph 65(c)(1) through (iv), above, were sent or delivered by the Postal Service.
78. The acts of the General Partners set forth above constitute violations of 18 U.S.C. § 1962(c) and (d) and caused the Limited Partners injury in their business or property in the amount of lost profits earned or to be earned on payoff or sale of the Mortgage.

Plaintiffs’ Complaint at 21-22 (Oct. 31, 1984). The partnership claim for racketeering damages simply incorporates the above quoted paragraphs. See id. at Count IX.

The above quoted provisions of the complaint are based solely upon the predicate acts of mail fraud. The acts of misrepresentation all related to the purchase of the mortgage.

I conclude that the connotations of a “pattern of racketeering activity,” as that phrase is used in the RICO statute, are not satisfied by proof that, in effectuating the purchase of a single mortgage, the defendants committed two or more predicate acts of mail fraud. To construe the statute as applying in these circumstances would be to give it a sweep so broad as to be inconsistent with manifested congressional objectives. Most substantial business transactions involve two or more uses of the mail during negotiations. To hold that two such uses of the mail, in circumstances otherwise satisfying the prerequisites of proof of an offense under the mail fraud statute, are sufficient to constitute a “pattern of racketeering activity” would be to sweep into federal courts, under RICO, the great majority of actions for fraud in commercial transactions. I conclude that the Supreme Court will not read the RICO statute this broadly, whatever may be the precise terms of the limiting formulation it fashions.

A second independent ground for holding that the complaint in this case fails to state a viable claim under RICO is that some form of limitation based upon a causal connection or relationship between racketeering and plaintiffs’ alleged harm is implicit in the statute. Whether a limitation should be reasoned on grounds of “standing,” or “causation,” or some other basis, may be quite debatable. The prediction that some limitations will be fashioned by the Supreme Court in construing and applying the act is nevertheless secure. If those limitations are reasoned on grounds of standing requirements such as have been articulated in the Second and Eighth Circuit decisions, the complaint in this case should be held insufficient on that ground. In challenging this conclusion, plaintiffs state:

The Gravamen of the RICO claims (Count V and IX) is that the General Partners participated in the affairs of the Partnership through a pattern of racketeering activities. The injury flowing from that activity was the diversion from the Partnership (not the Limited Partners personally) of a major Partnership opportunity. The predicate acts of fraud were employed to conceal from the Limited Partners the prior fraud perpetrated on the Partnership and to discourage or thrwart the Limited Partners from asserting their claim for relief. Therefore, the injury arising from the predicate acts is separate and distinct from the injury caused by the pattern of racketeering activities.

Plaintiffs’ Memorandum in Support of Jurisdiction at 14-15 (Nov. 27, 1984). They appear to argue that two types of injury have occurred: first, the injury to the partnership for loss of partnership opportunity (including injury for loss of the best sales price for the partnership property) and, second, an indirect injury to the partners. The first of these types of injury is alleged to have occurred before the two predicate acts that, according to their contention, constitute the alleged pattern of racketeering activity. I conclude that neither the first nor the second of these injuries meets the injury requirements as formulated by the Second and Eighth Circuits. Nor does the sum of the two types of injury do so. The plaintiffs’ formulation as to the kind of injury required would be satisfied whenever an entity exists for the benefit of its shareholders or its partners. In this case the pattern of misrepresentations does not create injuries beyond the act of denying the limited partners the mortgage — “profits earned or to be earned on payoff or sale of the Mortgage.” This case also does not involve infiltration or organized crime. This is no more than an alleged case of common law fraud and breach of fiduciary duty of the general partners to the limited partners. I conclude that Congress did not intend to give federal courts jurisdiction in such cases. This would so radically alter the federal-state balance that it is not a credible assertion that Congress would have enacted such a mandate in any form other than a very explicit statement of that intent.

The defendants’ motion to dismiss will be granted. The plaintiffs’ motion for reconsideration of the denial of the preliminary injunction will be denied. Likewise, the plaintiffs’ motion to amend their complaint will be denied. The civil RICO count will be dismissed. The pendent state claims will be dismissed without prejudice. In light of these rulings, the plaintiffs’ claims against Fleet National Bank will be dismissed for lack of jurisdiction.


author: DIANA E. MURPHY, District Judge.

text:
    Matthew STARK and Erma Sentz, Plaintiffs, v. ST. CLOUD STATE UNIVERSITY, Minnesota State University Board, Larry Putbrese, Field Experience Coordinator, St. Cloud State University, Defendants.
    Civ. No. 4-83-681.
    United States District Court, D. Minnesota, Fourth Division.
    March 29, 1985.

      Barbara A. Leininger, Minnesota Civil Liberties Union, Minneapolis, Minn., for plaintiffs.
    Michael K. Jordan, Sp. Asst. Atty. Gen., St. Paul, Minn., for defendants.
   MEMORANDUM OPINION AND ORDER

DIANA E. MURPHY, District Judge.

Plaintiffs, Matthew Stark and Erma Sentz, brought this action for declaratory and permanent injunctive relief and attorney’s fees alleging that defendants are funding and administering a program which advances religion in violation of the Establishment Clause of the First Amendment to the United States Constitution. Jurisdiction in the original complaint was alleged under 27 U.S.C. § 1343(3) and 42 U.S.C. § 1983. The case has previously been before the court on defendants’ motion to dismiss or, in the alternative, for summary judgment. In an order dated December 31, 1983, the court dismissed the complaint against defendant Minnesota State Board of Teaching for failure to state a claim, but denied all other motions to dismiss on the basis that the plaintiffs should be allowed to amend their compláint to allege federal question jurisdiction. An amended complaint was filed and jurisdiction is alleged under federal question jurisdiction, 28 U.S.C. § 1331, and the First Amendment to the United States Constitution. This matter is now before the court on cross-motions for summary judgment brought by all parties.

Background

The facts are basically undisputed. This action arises out of a student teaching program administered by defendant St. Cloud State University (the University). Larry Putbrese, Field Experience Coordinator at the University, is the administrator of the program. The program allows students to satisfy their student teaching requirement at private and private parochial • schools.

Plaintiff Erma Sentz is a resident of Minnesota and an educator and employee of the University. She is presently on a three year leave of absence from the University. She expects to return to her position as of January 1, 1986. Sentz is an instructor and professor in the Department of Teacher Development (Department) and has been a Student Teaching Supervisor responsible for the coordination of student teaching centers. Sentz is also President of the Central Minnesota Teacher Education Council (CMIEC). CMIEC is a non-profit corporation established by the University for the purpose of promoting the improvement of teacher education with emphasis on student teaching. CMIEC functions as an advisory board for the student teaching program at the University. Affidavit of Erma Sentz.

The other plaintiff Matthew Stark is an individual taxpayer residing in the State of Minnesota who alleges that he has been directly affected by the student teacher policy administered by the University.

Except for Larry Putbrese, defendants are all state agencies. Defendant Minnesota State University Board supervises the state universities. See Minn.Stat. §§ 136.-03, 136.12, and 136.14. The University is a state agency under the board. Minn.Stat, § 16.011. Funds for operation of the University program are provided in part from the State of Minnesota’s general operating fund pursuant to Article 11, § 1 of the Minnesota Constitution and Minn.Stat. §§ 16A.095-.il and 16A.57.

The University’s Student Teaching Program

The University’s teacher preparation program has been established and approved in accordance with the rules of the Minnesota Board of Teaching. In the student teaching phase of the program, students are assigned for a full quarter to work in the classroom. The student teacher begins the quarter observing and gradually takes over teaching responsibilities until they are actually teaching the class. The placement is coordinated by a university supervisor in connection with the local school district and the cooperating teacher whose class the student teacher is to take over. The supervisor arranges the placement and visits the classroom on approximately a weekly basis to observe and evaluate the student teacher. The cooperating teacher works with the student teacher on a daily basis first demonstrating and explaining his or her own teaching methods. As the quarter progresses, the cooperating teacher gives feedback on the student teaching performance and, in some instances, assistance with lesson plans. Deposition of Kenneth Kelsey 38-39; Deposition of Jack Jones 23-24. The student teacher is also expected to become familiar with the normal routine of the school and in general do the things that teachers are required to do. Deposition of Kenneth Kelsey 39.

At present, the University is utilizing the school districts with which it has student teaching agreements on a rotating basis rather than using all of the districts each quarter. Deposition of Larry Putbrese 18. The University pays a participating district $6.00 per quarter hour for each student placed in the school district. Deposition of Kenneth Kelsey' Exhibit 1. Payment is made by a requisition form completed by the Department. The University then issues a check to the school district. Once a check is issued, no limitation is placed on how the recipient school district uses the funds. Deposition of Robert Becker 14-17; Deposition of Kenneth Kelsey 42-44; Deposition of Kenneth Kelsey Exhibits 7-8. The funds for this program are received by the College of Education through the University budget appropriations from the state legislature. Deposition of Kenneth Kelsey 40-41; Deposition of Robert Becker 14; Defendants’ Interrogatory Response Exhibits 21-24. Since the fall of 1980, the University has placed two students at parochial schools for their student teaching experience. These schools have received $96 per student per quarter in public funds from the University for the participation in the program.' These are tax funds appropriated by the state legislature. Deposition of Robert Becker 14-17; Deposition of Kenneth Kelsey 42-44.

Involvement of Parochial Schools

In the late 1970’s the University received several inquiries from St. Cloud Cathedral High School (Cathedral), a private parochial school about the possibility of it becoming a student teaching site. Deposition of Kenneth Kelsey Exhibits 3-5. Cathedral’s request was initially denied because the Department had decided not to establish any new student teaching sites in light of the continued decline in enrollment in the program. Id. Exhibit 3. Subsequently, the Department researched issues raised by using private schools, including any potential legal problems. Deposition of Robert Becker 8.

Eventually, in spite of opposition from the director of the student teaching program and others, arrangements were made for a student teaching placement in English to be made at Cathedral in the spring of 1980. See Deposition of James Jones 15, 32; Affidavit of Erma Sentz. A student teaching agreement with Cathedral was executed in April of 1980 on the University’s standard form agreement. Deposition of Kenneth Kelsey Exhibit 1. Following the execution of this agreement the University adopted a formal policy entitled the “St. Cloud State University Policy regarding the Establishment of Student Teaching Sites at Private and Private Parochial Schools” (the policy). Id. Exhibit 6. It is this policy that the plaintiffs challenge as unconstitutional under the Establishment Clause of the First Amendment to the United States Constitution.

The policy provides that any private and parochial schools selected by the University’s College of Education must meet all of the state and university criteria to the same extent and in the same manner as the public schools. Once a site is selected and the agreement with the University is signed, students may, at their option, be placed in a nonpublic school for their student teaching assignment. The policy provides that students who choose to be placed in a nonpublic school shall be made aware that any involvement on their part in any religious aspect of a nonpublic school’s program “is exclusively between the parochial school’s personnel and the student teacher.” Id. at ¶ 4b. The policy also provides that accommodations will be made for any University student teaching supervisors who, based upon religious grounds, object to supervising a placement at a nonpublic school. Id. at 118. Beyond these specific references to any religious aspects of a nonpublic school’s program, the policy generally requires that the placement follow the procedures utilized in a public school placement.

The policy was developed after research by, and discussion among, members of the Department’s faculty and staff from the office of the Minnesota Attorney General. Deposition of J. Jones 10-12, 16. In addition, a special form “Student Teaching Agreement” was drafted by the Attorney General’s Office to insure that certain requirements imposed on- public schools as a matter of state law were included in the agreements with nonpublic schools. Cathedral subsequently entered into such an agreement on January 26, 1982. Deposition of Kenneth Kelsey Exhibit 2.

The University has to date utilized two parochial schools as student teaching sites: Cathedral and St. Peter and Paul Primary School (St. Peter and Paul). A total of three students have been placed, two at Cathedral and the most recent, a kindergarten placement, at St. Peter and Paul in the spring of 1983. St. Peter and Paul did not formally execute a student teaching agreement with the University, but its administrator was contacted by telephone and indicated she was aware of the guidelines for placing students in a parochial school. Deposition of Larry Putbrese 30.

These placements were carried out according to the standard operating procedures. The students were placed for a full quarter, the typical observation and evaluation took place, and the schools were paid for the placements at the standard rate. The funds paid to Cathedral were deposited into its food service account. Deposition of P. Wenner 33. At the present time, there are no agreements between the University and parochial schools for use as student teaching sites. According to Larry Putbrese, current Director of Field Experiences, this is primarily due to the institution of this litigation. Deposition of Larry Putbrese 33.

Cathedral and St. Peter and Paul

Both Cathedral and St. Peter and Paul are part of the Catholic Diocese of St. Cloud. Cathedral serves students from over twenty-seven local parishes. Deposition of Kenneth Kelsey Exhibit 11. The faculties include both lay and religious teachers. Id. The philosophy of Cathedral has been described in pamphlets prepared by the Cathedral High School Education Foundation and the school itself. Id. The brochures indicate the Christian emphasis of the school and the importance of religious values in its mission. “First and Foremost at Cathedral is the mission of teaching, living, and sharing the Christian faith.” Id. “The Catholic faith was the inspiration that founded Cathedral____ That same selfless spirit of dedication to God and neighbor permeates the entire community of Cathedral ... today.” Id. “At the heart of Cathedral is the Church.” Id. “On the basketball court, in the chemistry lab, around the lunch table, during a hard test, at Mass, in the morning when you greet friends in the hall, and at night when you wave good-bye from your bus, God is the center, of all we do.” Id.

Discussion

In passing upon a motion for summary judgment, the court is required to view the facts in the light most favorable to the nonmoving party, and the movant has the burden of establishing that no genuine issue of material fact remains and that the case may be decided as a matter of law. Buller v. Buechler, 706 F.2d 844 (8th Cir.1983); Ralph’s Distributing Co. v. AMF, Inc., 667 F.2d 670 (8th Cir.1981). The non-moving party is entitled to the benefit of all reasonable inferences to be drawn from the underlying facts disclosed in pleadings and affidavits. Vette Co. v. Aetna Casualty & Surety Co., 612 F.2d 1076 (8th Cir.1980). However, the nonmoving party may not merely rest upon allegations or denials of the party’s pleadings, but must set forth specific facts by affidavits or otherwise showing that there is a genuine issue for trial. Burst v. Adolph Coors Co., 650 F.2d 930, 932 (8th Cir.1981).

Plaintiffs claim that the facts establish that the placement policy has the impermissible effect of advancing religion and fosters an excessive government entanglement with religion. Defendants assert that no such forbidden attributes are attached to this policy and program because the parochial schools are providing a secular service for the state, that being the training of student teachers, rather than receiving any benefit.

In seeking to define the proper application of the Establishment Clause to the facts of this case the court is guided by well-established principles and Supreme Court precedents that appear directly on point. The court’s role in such instances is not to construct new paths, but merely to ensure that the principles established are faithfully followed in this case. Roemer v. Board of Public Works, 426 U.S. 736, 96 S.Ct. 2337, 49 L.Ed.2d 179 (1976). Nevertheless, the defendants contend that the earlier cases and their rationales are suspect in light of the Court’s recent decisions.

The general test governing this area is not controverted by the parties:

Every analysis in this area must begin with consideration of the cumulative criteria developed by the Court over many years. Three such tests may be gleaned from our cases. First, the statute must have a secular legislative purpose; second, its principal or primary effect must be one that neither advances nor inhibits religion ...; finally, the statute must not foster “an excessive government entanglement with religion.”

Lemon v. Kurtzman, 403 U.S. 602, 91 S.Ct. 2105, 29 L.Ed.2d 745 (1971). Since Lemon, the parameters of this test have been explored and shaped. The Court has detailed the restraints imposed by the Establishment Clause on state aid for nonpublic school teachers and the utilization of state subsidized teachers in nonpublic schools. See generally Felton v. Secretary, United States Dep’t of Educ., 739 F.2d 48, 55 (2d Cir.), cert. granted, — U.S. -, 105 S.Ct. 241, 83 L.Ed.2d 180 (1984). In Lemon itself, the Court found excessive entanglement in a Rhode Island statute providing for up to a 15% salary supplement to teachers in nonpublic schools in which the average per pupil expenditure on secular education was below the average in public schools, conditioned on the teachers’ giving only courses offered in the public schools and agreeing not to teach courses in religion. Writing for the court, Chief Justice Burger found the arrangement created excessive entanglement:

A comprehensive, discriminating, and continuing state surveillance will inevitably be required to ensure that these restrictions are obeyed and the First Amendment otherwise respected. Unlike a book, a teacher cannot be inspected once so as to determine the extent and intent of his or her personal beliefs and subjective acceptance of the limitations imposed by the First Amendment. These propylactic contacts will involve excessive and enduring entanglement between state and church.

Lemon, 403 U.S. at 619, 91 S.Ct. at 2114.

The Court’s subsequent decision in Meek v. Pittenger, 421 U.S. 349, 95 S.Ct. 1753, 44 L.Ed.2d 217 (1975) appears to be most analogous to the facts of this case. In part V of Meek the plurality held unconstitutional a Pennsylvania statute, Act 194, which authorized the Secretary of Education to provide “auxiliary services” such as counseling and remedial teaching to all children enrolled in nonpublic schools grades K-12 meeting Pennsylvania’s compulsory attendance requirements. The teachers involved in the program were part of the public school system and similar services were provided to public school children. The plurality refused to recognize any distinction from Lemon based on the fact that “the teachers and counselors providing auxiliary services are employees of the public intermediate unit, rather than of the church-related schools in which they work.” 421 U.S. at 371, 95 S.Ct. at 1766. This “does not substantially eliminate the need for continuing surveillance.” Id. While the auxiliary services personnel were not “directly subject to the discipline of a religious authority,” they were “performing important educational services in schools in which education is an integral part of the dominant sectarian mission and in which an atmosphere dedicated to the advancement of religious belief is constantly maintained.” Id.

In those cases where the court has distinguished or perhaps limited Lemon or Meek, it has reaffirmed its essential holding that the funding of academic or therapeutic services for parochial students, when it is provided at the parochial school, violates the Establishment Clause even if provided by public school personnel. In Wolman v. Walter, 433 U.S. 229, 97 S.Ct. 2593, 53 L.Ed.2d 714 (1977), an Establishment Clause challenge was made to the provisions of an Ohio statute authorizing the expenditure of state funds for diagnostic services to be provided to nonpublic schools on the nonpublic school premises, and for therapeutic services to be provided off the school premises. The Wolman plaintiffs argued first that the diagnostic services violated the three-prong test because they were provided on the premises of the nonpublic school. The Court upheld this portion of the statute, distinguishing Meek on the basis that the role of the diagnostician “does not provide the same opportunity for the transmission of sectarian views as attends the relationship between teacher and student or that between counselor and student.” 433 U.S. at 244, 97 S.Ct. at 2603.

In contrast, in the action before the court, the student-teacher is responsible for the full classroom experience during a high percentage of one school quarter in a manner substantially identical to a fully-certified teacher. The relationship even goes beyond that of a public school teacher in a nonpublic school, because the student-teacher is directly under the supervision and guidance of a parochial school teacher, and thus is in the impressionable position of being a student as well as a teacher.

The Wolman Court also upheld the funding of off-premises therapeutic services, holding that “the services are to be offered under circumstances that reflect their religious neutrality.” Id. at 247, 97 S.Ct. at 2605. Justice Blackmun writing for the Court emphasized that this factual setting distinguished the case from Meek where the danger that public personnel might transmit religious instruction and beliefs

arose from the fact that the services were performed in the pervasively sectarian atmosphere of the church-related school____ The danger existed there, not because the public employee was likely deliberately to subvert his task to the service of religion, but rather because the pressures of the environment might alter his behavior from its normal course.

Id. Where therapeutic services are offered at truly religiously neutral locations, “the danger perceived in Meek does not arise”, since “the influence of a therapist’s behavior that is exerted by the fact that- he serves a sectarian pupil is qualitatively different from the influence of the pervasive atmosphere of a religious institution.” Id. The Court added that under these circumstances there would be no excessive entanglement since “[i]t can hardly be said that the supervision of public employees performing public functions on public property creates an excessive entanglement between church and state.” Id. at 248, 97 S.Ct. at 2605 (emphasis supplied). On this portion of the decision five Justices upheld the government funding of therapeutic services for parochial school students only if these were provided in public facilities. Two Justices would have found even that to violate the Establishment Clause. Felton, 739 F.2d at 63-64 & n. 14. In direct contrast to the therapeutic services in Wolman, the teaching and evaluation process at issue here is conducted at the parochial schools themselves.

In Felton, the Second Circuit felt compelled to conclude that, based on this line of precedent, public funds can be used to afford instruction or therapeutic services in parochial schools only if they are afforded at a neutral site off the premises of the religious school. Id. at 64. The Establishment Clause challenge in Felton was to the use of federal funds under Title I of the Elementary and Secondary Education Act of 1965, 20 U.S.C. § 2701 et seq., to finance a New York City program wherein public school teachers and other professionals were sent into nonpublic schools to provide remedial instruction and clinical and guidance services to students meeting the federal standards. The court rejected the challenge that the actual working of the New York City program saved it from any funding of unconstitutionality. It emphasized that Meek did not rest on a conclusion that the challenged act had actually fostered religion but “rather on a conclusion that, in order to be sure it would not, Pennsylvania would be required to monitor its operation so closely as to violate the entanglement test”. Id. at 65. Accordingly, the Felton court struck down the challenged program on the excessive entanglement test, and noted that constitutional infirmities existed on the primary effect test, also. Id. at 65-72.

In Americans United for Separation of Church and State v. School District of the City of Grand Rapids, 718 F.2d 1389 (6th Cir.1983), cert. granted, — U.S. -, 104 S.Ct. 1412, 79 L.Ed.2d 739 (1984), the Sixth Circuit found the Establishment Clause to be violated by a “Shared Time and Community Education” program funded and operated by the public school district in school buildings owned and operated by various religious denominations. Under the Shared Time program, the public school district offered substantive courses from its general curriculum to nonpublic students during regular school hours. The courses were offered at the nonpublic schools in classroom space leased by the public school district. The court found the Supreme Court precedents noted above to be determinative, and accordingly, affirmed the district court’s judgment that the challenged programs created an excessive entanglement between government and religion. Id. at 1404-05. The court found fault with many aspects of the program, but emphasized that direct aid to the parochial schools coupled with the on-site instruction to students was impermissible. Id. at 1405-07.

The undisputed facts in this action, interpreted in light of the above case-law, establish that the University policy violates the Establishment Clause. The challenged policy allows the placement of public university student-teachers at a parochial school in any one of the substantive academic areas for which teachers are certified. The Department’s hands-on role in the program is the weekly on-site supervision of the placement by a faculty member including discussions with both the student-teacher and the parochial teacher. The sum of the various aspects of the program is that a much greater entanglement with a pervasively sectarian setting occurs than is permissible under the Court’s decisions in this area.

In fact, the on-site teaching of the full range of academic subjects creates an even greater danger of fostering religion than the programs involved in Meek, Wolman, Americans United for Separation of Church and State, and Felton. The policy does not establish any procedures to ensure that the public university students and the university supervisors maintain the necessary strict religious neutrality. Rather, “[a]ny involvement by the student teacher in any religious aspect of a private parochial school’s program is exclusively between the parochial school personnel and the student teacher.” The only limitation imposed is that the student must teach a subject area for which certification is sought, eliminating the risk that a religion course would be taught. Thus, the danger that the student-teacher might intentionally or unintentionally engage in the impermissible inculcation of religion is real and not insubstantial. To ensure this did not occur would require “comprehensive, discriminating and continuing state surveillance”. Lemon, 403 U.S. at 619, 91 S.Ct. at 2114. This surveillance by itself is a constitutionally excessive entanglement of church and state.

An examination of the policy’s operation to date gives some indication of the difficulties faced by the University and other defendants in proving that the policy does not foster religion and that the surveillance necessary to ensure such an outcome is not excessively entangling. The defendants face a heavy burden to dispel the possibility of intentional or inadvertent fostering of religion. The policy and special agreement form for parochial schools were not adopted until after the first placement at Cathedral, and it is unclear whether Cathedral even received a copy of the policy prior to this litigation. The subsequent placement at St. Peter and Paul was done over the telephone and the school never did formally execute a student teaching agreement, nor did it receive a copy of the policy. It can hardly be said that the necessary safeguards both exist and are not excessively entangling when the participating schools may not even have a copy of the policy, and, no prohibition exists against the public university student-teachers involving themselves in the religious activities of the school.

Furthermore, the participants in the program are by definition all supportive of the placement in a parochial school and therefore no incentive exists for complaint. Felton, 739 F.2d at 65. The nonpublic school, its cooperating teacher, and its students are all accustomed to coloring the educational experience with religious content and perspective. They are unlikely to notice or complain if the student teacher is included in or initiates that type of experience. The student teacher will have agreed to the placement in a parochial school and, therefore, often will be supportive of its religious milieu. The lack of incentive to complain is even greater than in those cases involving fully licensed teachers because the university student is at an impressionable stage of teacher preparation and subject to the influences of the parochial histructor who is, in effect, the tutor. The university supervisor must also be a willing participant in the parochial placement and the oversight provided is limited. “Because ‘[t]he State must be certain, given the Religion Clauses, that subsidized teachers do not inculcate religion’, reliance could not be placed simply ‘on the good faith and professionalism of the secular teachers and counselors functioning in church-related schools.’ ” Felton, 739 F.2d at 65-66 (quoting Lemon, 403 U.S. at 619, 91 S.Ct. at 2114; and Meek, 421 U.S. at 369, 95 S.Ct. at 1765).

Accordingly, there must be active and extensive surveillance, which has not been provided, to prevent the fostering of religion. Yet, under Meek this very surveillance constitutes excessive entanglement. Meek, 421 U.S. at 372, 95 S.Ct. at 1766; Felton, 739 F.2d at 64 & n. 16.

The policy also fails to provide any express restrictions on the use of the state funds that are provided to a parochial school for the placement of a student teacher in its classrooms. Even though it appears that the monies actually paid to date have been used for secular purposes, there is no prohibition against their being used wholly or primarily to advance religion. In addition, the surveillance necessary to ensure this did not occur simply increases the already constitutionally excessive entanglement. Id.

The defendants argue that the reasoning of Meek and Felton is factually distinguishable because in those cases the State was helping the nonpublic school advance its secular functions. The constitutional infirmities arose because it could not be determined without excessive entanglement whether such aid was also promoting sectarian functions. The defendants claim that in this case the nonpublic institutions are providing a wholly secular service to the University for which it can receive payment; any other benefit it might be receiving' is incidental and permissible.

A careful review of the record establishes that the defendants’ position is incorrect, however. The policy does help the nonpublic school advance its secular functions. To begin with, all actions taken must be viewed in light of the undisputed fact that the placement of student-teachers in nonpublic schools was initiated at the request of the parochial schools. Indeed, the University has an overabundance of available public school districts for student teacher placement and has no need to use parochial schools. Under these circumstances, no secular purpose is advanced by using a parochial school when there are public school alternatives. In fact, public schools that wish to participate in the program are harmed because they lose the opportunity of a student-teacher placement with every placement in a nonpublic school.

On the other hand, a number of important benefits are provided to the parochial school that participates in the program. The parochial school receives public funds based on the student teacher’s quarter hours and, has, for all practical purposes, no offsetting expenses arising from its participation in the program. While the cooperating parochial teacher must spend time supervising or assisting the student, by the later part of the quarter the student has taken over all or part of the class load. The interaction of the student and University supervisor with the parochial school provides access to the latest instruction methods and ideas on improving the educational experience. The placement also provides the school with an excellent opportunity to evaluate the student-teacher’s qualifications and, if the reviews are favorable, to persuade the student to join the faculty upon graduation. Finally, the highly visible connection with a state university program for the certification of teachers may provide a significant symbolic and practical benefit to religion by raising an aura of state sponsorship and/or approval of the parochial school and its teaching staff. See, e.g., Roemer v. Maryland Public Works Bd., 426 U.S. 736, 747-48, 96 S.Ct. 2337, 2345-46, 49 L.Ed.2d 179 (1976); Felton, 739 F.2d at 67-68.

The policy does not even facially limit itself to advancing a secular function of the parochial school, but allows the student-teacher’s involvement with religion to be left up to the student and the parochial school. Likewise, the parochial school’s use of the public funds provided is not in anyway regulated. Those facial inadequacies combined with the actual operation of the program establish that the defendants as a matter of law cannot show with sufficient clarity that this policy would serve the State’s legitimate secular ends in using nonpublic schools, if any exist, without any appreciable risk of being used to advance religious views. Committee for Public Education v. Regan, 444 U.S. 646, 662, 100 S.Ct. 840, 850, 63 L.Ed.2d 94 (1982); Meek v. Pittinger, 421 U.S. 349, 369-73, 95 S.Ct. 1753, 1765-67, 44 L.Ed.2d 217 (1975).

The Supreme Court has recently recognized the importance of examining historical tradition in analyzing First Amendment issues concerning separation of church and state. Marsh v. Chambers, 463 U.S. 783, 103 S.Ct. 3330, 77 L.Ed. 1019 (1983). The Free Exercise and Establishment Clauses of the First Amendment have enabled our society to develop with all individuals having the right to practice the religion of their choice, and the state preferring none. A great many religions have flourished, but the state has remained independent of any. Under the Constitution care must be taken to preserve this balance, and for the reasons already discussed the student-teaching program at issue does not pass constitutional muster.

DECLARATORY JUDGMENT AND ORDER

Accordingly, based upon the above and all the files, records, and proceedings herein,

1. The motion of plaintiffs Matthew Stark and Erma Sentz for summary judgment is granted, and the court hereby declares that the St. Cloud State University Policy Regarding the Establishment of Student Teaching Sites at Private and Private Parochial Schools is unconstitutional for the reasons set forth in the Memorandum Opinion accompanying this Order.

2. Defendants, their agents, employees, and persons acting under their direction and control, are hereby permanently enjoined from enforcing, applying, or implementing in any way, the St. Cloud State University Policy Regarding the Establishment of Student Teaching Sites at Private and Private Parochial Schools.

3. The motion of defendants for summary judgment is denied.

4. Plaintiffs' claim for attorney’s fees pursuant to 42 U.S.C. § 1988 is dismissed.

LET JUDGMENT BE ENTERED ACCORDINGLY.

      . The plaintiffs agreed at the hearing to dismiss their claim for attorney's fees and costs pursuant to 42 U.S.C. § 1988.

      . The court’s order of December 30, 1983 found that defendants’ challenge to plaintiffs’ standing to sue was premature and allowed plaintiffs to amend their complaint and conduct discovery on the issue. The defendants have not raised the issue of standing in their present motion. The court finds that Sentz has a factual basis for alleging both a past and ongoing injury and that Stark has standing to sue as an injured taxpayer. See, e.g., Valley Forge Christian College v. Americans United For Separation of Church and State, 454 U.S. 464, 102 S.Ct. 752, 70 L.Ed.2d 700 (1982); Glastone Realtors v. City of Bellwood, 441 U.S. 91, 99, 99 S.Ct. 1601, 1607, 60 L.Ed.2d 66 (1979); Duke Power Co. v. Carolina Environmental Study Group, Inc., 438 U.S. 59, 98 S.Ct. 2620, 57 L.Ed.2d 595 (1978); Flast v. Cohen, 392 U.S. 83, 88 S.Ct. 1942, 20 L.Ed.2d 947 (1968).

      . For example, the local district must agree that the cooperating teachers will be certified at standards equal or superior to the regulations of the State of Minnesota during the student teaching assignments. Deposition of Kenneth Kelsey Exhibit 1.

      . The student placed at St. Peter and Paul had gone to a parochial school for some period of time and was very much aware of the differences between a parochial and a public school. Deposition of Larry Putbrese 28.

      . Under the standard $6 per quarter hour rate Cathedral received $96 for each student placed.

      . This result was reached under the facts presented in Earley v. Dicenso, 403 U.S. 602, 91 S.Ct. at 2105, 29 L.Ed.2d 745 (1971), the companion case to Lemon.

      . The plurality opinion was written by Justice Stewart for himself, Justice Blackmun and Justice Powell, and concurred in by Justice Brennan for himself, Justice Douglas and Marshall. Dissenting opinions were written by Chief Justice Burger and Justice Rehnquist, the latter being joined by Justice White.

      . The Court has limited this line of reasoning to elementary and secondary schools, finding challenged private institutions of higher learning to be categorically different. In Roemer v. Board of Public Works, 426 U.S. 736, 96 S.Ct. 2337, 49 L.Ed.2d 179 (1976), the Court upheld a state grant program to private colleges that was based on the number of full time students and which provided that no monies could be utilized for sectarian purposes. Justice Blackmun writing for the plurality thought that the primary-effect test was met by the district court’s finding that the four colleges at issue were not pervasively sectarian. This conclusion was based on the lower court’s subsidiary findings on the role of religion in particular aspects of the colleges which he found were not clearly erroneous. Id. at 758, 96 S.Ct. at 2350. Justice Blackmun also found on several grounds that the funding relationship was not excessively entangling. Most relevant to the case at hand are the distinctions the plurality noted between the schools in Lemon and the colleges in Roemer, which they found to be "most impressive”:
      The elementary and secondary schooling in Lemon I came at an impressionable age; the aided schools were "under the general supervision” of the Roman Catholic diocese; each school had a local Catholic parish that assumed "ultimate financial responsibility” for it; the principals of the schools were usually appointed by church authorities; religion "pervade[d] the school system”; teachers were specifically instructed by the "Handbook of School Regulations” that "'[r]eligious formation is not confined to formal courses; nor is it restricted to a single subject area.”' 403 U.S. 617-618 [91 S.Ct. at 2113-2114]. These things made impossible what is crucial to a nonentangling aid program; the ability of the State to identify and subsidize separate secular functions carried out at the school, without on-the-site inspections being necessary to prevent diversion of the funds to sectarian purposes.

        Id. at 764-65, 96 S.Ct. at 2353-54.
      Cathedral and St. Peter and Paul, the parochial schools utilized thus far under the policy challenged here, fit precisely the "pervasively sectarian” description in Lemon.

      . The parochial schools used under the program contain the same ingredients that were recognized in Lemon as providing a pervasively sectarían setting. Lemon, 403 U.S. 617-18, 91 S.Ct. at 2113-14; see supra note 8.

      . The defendants are correct in stating that the Supreme Court has dispelled "any notion that a religious person can never be in the state's pay for a secular purpose.” Roemer v. Maryland Public Works Bd., 426 U.S. 736, 746 & n. 13, 96 S.Ct. 2337, 2345 & n. 13, 49 L.Ed.2d 179. Yet, such arrangements are permissible only where a valid secular purpose exists and the danger of aiding sectarian values is circumscribed. Neutrality is what is required. Id. at 747, 96 S.Ct. at 2345. In the case cited by the Court in Roemer as upholding payment for a secular service, there was no question that the payment was for a wholly secular task. Bradfield v. Roberts, 175 U.S. 291, 20 S.Ct. 121, 44 L.Ed. 168 (1899) (public aid to corporation which, although composed entirely of members of a religious order, was limited by its corporate charter to the secular purpose of operating a charitable hospital). The parochial schools involved here, far from being limited to secular purposes like the hospital in Bradfield, are pervasively sectarian settings, however. Thus, even accepting defendants argument that the parochial schools are providing a service rather than accepting benefits, the arrangement is impermissible. Furthermore, the State’s involvement goes beyond monetary payment and includes the presence of public university student-teachers and faculty members in the parochial schools. Their participation in the educational process makes it impossible to ensure that there is no appreciable risk of the program being used to advance religion. See, e.g., Meek v. Pittinger, 421 U.S. 349, 369-73, 95 S.Ct. 1753, 1765-67, 44 L.Ed.2d 217 (1975); Lemon v. Kurtzman, 403 U.S. 602, 619, 91 S.Ct. 2105, 2114, 29 L.Ed.2d 745 (1971).
      Defendants argue that the Supreme Court’s recent decisions on the Establishment Clause require looking at the area with new eyes. See Lynch v. Donnelly, - U.S. -, 104 S.Ct. 1355, 79 L.Ed.2d 604 (1984); Mueller v. Allen, 463 U.S. 388, 103 S.Ct. 3062, 77 L.Ed.2d 721 (1983). Those cases arise in contexts other than State involvement with teachers in nonpublic schools, however. The precedents in that area such as Lemon v. Kurtzman and Meek v. Pittinger remain, and this court is bound by them. Hutto v. Davis, 454 U.S. 370, 375, 102 S.Ct. 703, 706, 70 L.Ed.2d 556 (1982) (per curiam).

      . This determination is further supported by evidence of divisiveness caused by adoption of the policy. The policy was opposed by the director of student teaching and some faculty members. See Deposition of James Jones 15, 32; Affidavit of Erma Sentz. The existence of political divisiveness is an evil addressed by the Establishment Clause, and the controversy here is further evidence of excessive institutional entanglement and that the policy is perceived as an endorsement of religion. Lynch v. Donnelly, — U.S. -, 104 S.Ct. 1355, 1367, 79 L.Ed.2d 604 (1984) (O'Connor, J. concurring); Lemon, 403 U.S. at 622-25, 91 S.Ct. at 2115-17.