author: WILLIAM C. LEE, District Judge.

text:
    Steven L. SHAFER, Plaintiff, v. CITY OF FORT WAYNE and Lawrence D. Consalvos, Defendants.
    Civ. No. F 85-19.
    United States District Court, N.D. Indiana, Fort Wayne Division.
    Jan. 23, 1986.

      John C. Theisen and Kim Alan Armstrong, Gallucci, Hopkins & Theisen, Fort Wayne, Ind., for plaintiff.
    T. Dean Swihart and Bruce O. Boxberger, Grotrian & Boxberger, Fort Wayne, Ind., for defendants.
   MEMORANDUM OPINION AND JUDGMENT

WILLIAM C. LEE, District Judge.

This matter is before the court for a decision on the merits following a bench trial. This case deals with alleged violations of the first amendment, 42 U.S.C. § 1983, as well as state constitutional, contract and municipal ordinance violations arising out of the consolidation of certain accounting functions in the Fort Wayne Department of Public Safety and the transfer of plaintiff from an accounts officer to a combat position in the Fort Wayne Fire Department. Having examined and considered the entire record, having determined the credibility of the witnesses after viewing their demeanor and considering their interests, and being duly advised, the court hereby enters the following Findings of Fact and Conclusions of Law pursuant to Rule 52(a) of the Federal Rules of Civil Procedure.

Findings of Fact

The plaintiff, Steven L. Shafer, is an individual citizen and resident of Fort Wayne, Allen County, Indiana, who has been employed by the City of Fort Wayne Fire Department since on or about March 1970. The defendant, City of Fort Wayne (“City”), is a municipal corporation organized under the laws of the State of Indiana. The defendant, Lawrence D. Consalvos (“Consalvos”), is an individual citizen and a resident of Fort Wayne, Allen County, Indiana, and was at all times relevant to this cause either an applicant for or the incumbent Safety Director of the City of Fort Wayne, a position to which he was appointed on or about September 19, 1984. As Safety Director of the City of Fort Wayne, Consalvos was a division head, responsible for the operations of the Fort Wayne Fire Department, Fort Wayne Police Department, Humane Shelter, Communications Department, and Office of Civil Defense, and had authority with regard to those departments to re-organize the departments, transfer work, and eliminate positions.

Shafer served in the Operations Division of the Fort Wayne Fire Department for approximately ten years (from 1970 through 1980), was promoted to the rank of lieutenant and transferred to the Fire Prevention Bureau on or about July 1980. He served in the Fire Prevention Bureau for approximately ten months, and was promoted to the rank of platoon captain in 1981. He became accounts officer for the Fort Wayne Fire Department, which position he held until his transfer to the Operations Division. Shafer was notified of his transfer to the Operations Division by letter dated December 21, 1984, said transfer being effective January 7, 1985. After his transfer to the Operations Division, Shafer continued to hold the rank of platoon captain and his salary and all benefits • mployment, with the exception of hr trt on duty, did not change following his transfer. As an accounts officer, prior to his transfer, Shafer worked a five-day/40-hour week. After his transfer to the Operations Division, Shafer was required to work a 56-hour week, on a one-day-on/two-day-off schedule. Because of an injury received immediately after his transfer to the Operations Division, Shafer never assumed the duties as a Platoon Captain in the Operations Division and has been assigned to “light duty” jobs since the time of his injury.

Prior to the appointment of Consalvos to the position of Safety Director, the various departments of the Division of Public Safety engaged in individual accounting and purchasing practices without regard for inter-departmental needs or overall city budgets. City administrators who had interviewed Consalvos prior to his employment questioned him regarding his experience and possible solution for departmental organization and financial control. During the interview process, defendant Consalvos expressed his view that departmental control and re-organization would include the consolidation of accounting and budget functions. Consalvos, upon notification of his appointment, stated that he would move to consolidate the budget and accounting duties and functions of the various departments of the Division of Public Safety. Defendant Consalvos was considering the consolidation of accounting jobs and budget functions prior to his arrival in Fort Wayne in September 1984. After his arrival in Fort Wayne, Consalvos began gathering information regarding the accounting duties in the various departments in the Division of Safety.

Defendant Consalvos in his capacity as Safety Director, reorganized the various departments under his authority by, among other things, consolidating the accounting functions performed in the Fire, Police, Communications and Humane Shelter departments into one job. The City personnel department considered the position to be administrative assistant to Consalvos. The City had a practice of allowing administrative positions such as this to be filled by “lateral transfers” from the same pay grade positions in other departments without the posting of the position under job bidding guidelines set forth in City personnel policies. Robert Ebert laterally transferred from his position with the Board of Works into this new administrative assistant position. The consolidation of these accounting functions was undertaken pursuant to Consalvos’ desire as expressed during his interview for his Director of Public Safety position, and was not done in response to or as a result of any conduct or comments by Shafer.

As a result of the consolidation, some of the people previously performing accounting duties, including Steven Shafer, were re-assigned to other duties. At the time of Shafer’s re-assignment and transfer, the Operations Division of the Fire Department was undermanned and in need of additional personnel. There was an understanding at that time between the Fire Department and the Union that 40-hour positions would not be filled until the undermanning of the Operations Division was alleviated. Shafer’s transfer to the Operations Division was effected because of the manpower shortage in the Division and not as a result of any conduct or comments by Shafer.

Shortly after his arrival in Fort Wayne, Consalvos became involved in the contract negotiations between the City and Local No. 124 of the International Association of Firefighters. The original contract expired on November 16, 1984, and was verbally extended thirty days to December 16, 1984. At the time of Consalvos’ arrival, the City was represented in the contract negotiations primarily by Anthony Hodges, Thomas Heckman, and Noble Schlatter. Anthony Hodges served as chief negotiator and spokesman for the negotiating team. The Union was represented by, among others, David Fyock (as spokesman) and Steve Shafer. Shafer had been a member of the Fort Wayne Professional Firefighters’ Association Local No. 124 since on or about March 1970 and became a union steward for Local No. 124 on or about January 1984. Shafer’s responsibility as a union steward was to the platoon captains, of which he was one. Sometime prior to November 2,1984, the City and Union reached an agreement on a tentative contract, which the Union committee members were to present to the general union membership for ratification. At the time the tentative agreement was reached, it was understood by both bargaining committees that the Union committee members would support the tentative agreement and recommend the same to the general union membership. Shortly after the tentative agreement was reached, the Union committee members, including Shafer, advised City negotiators that they had reservations about the agreement and that they could not and would not recommend its passage to the general union membership. These concerns related primarily to the status of platoon captains under the agreement. The Union negotiators, including Shafer, actively lobbied against the approval of the tentative agreement and it was defeated unanimously by the general union membership. Following the defeat of the initial tentative agreement, Shafer and Consalvos met on several occasions to attempt to resolve the problems that had arisen with respect to the treatment of platoon captains under the proposed agreement. Sometime after the rejection of the initial tentative agreement, a second proposed contract was submitted to the union membership. At an open union meeting where Consalvos appeared to discuss the second proposed contract, Shafer asked certain questions of Consalvos regarding specifically the status of platoon captains under the second proposed agreement and how a platoon captain might be transferred. Consalvos responded to the question by pointing out to those assembled that Shafer’s question dealt specifically with his own status under the proposed contract. The second proposed contract was also defeated. A contract was ultimately ratified between the City and Local No. 124 in February, 1985 which was expressly retroactive to January 1, 1985, and under which the Union accepted a two percent less pay increase than that offered in the original tentative contract.

Statements made by Shafer regarding the various contract proposals were made almost exclusively to City negotiators and other union members. These statements were generally made in personal conversations or small groups. These statements were not generally made to the news media or at public meetings and were not intended to inform the public or the media regarding the contract negotiations or the particular points of dispute between the negotiating committees. The content of Shafer’s statements dealt almost exclusively with the specific terms of the proposed contract which related particularly to the group which he represented as union steward, to wit: platoon captains. Shafer’s statements did not involve the ability of the officers involved, the quality of fire service in the City of Fort Wayne, or any general policy matters regarding the operation of the Fort Wayne Fire Department.

Conclusions of Law

This court has jurisdiction over the subject matter of this case pursuant to 28 U.S.C. §§ 1331 and 1343, as well as pendent jurisdiction over the related state law claims. Jurisdiction over the parties is conceded by counsel.

Shafer asserts five causes of action: (1) a claim under the first amendment for violation of his right to freedom of speech and association; (2) a claim under 42 U.S.C. § 1983 for the violation of his right to freedom of speech; (3) a claim under article 1, §§ 1, 3, 9 of the Indiana state constitution for violation of free speech rights; (4) a breach of the collective bargaining agreement in several particulars; and (5) the violation of certain departmental regulations and municipal ordinances. Shafer conceded at final argument that the first three claims concerning freedom of speech and association are very similar, and that the legal analysis necessary to decide those claims is the same. Therefore, the court will analyze the freedom of speech claims together, and then examine Shafer’s fourth and fifth claims.

Freedom of Speech Claims

Shafer claims that the consolidation of the accounting functions of the several Public Safety departments into one person, as well as the transfer of Shafer to the Combat Division instead of the Fire Prevention Bureau, were both undertaken in retaliation for Shafer advocating rejection of the first two collective bargaining contract proposals.

Public employees do not abandon their first amendment rights upon entering the work place. Yoggerst v. Hedges, 739 F.2d 293, 295 (7th Cir.1984). The Supreme Court has developed a two step analysis for determining whether an adverse employment decision violates the public employee’s first amendment rights. The first step involves determining whether the employee’s speech is protectable under the first amendment. This first step has two subsidiary requirements: the speech must have been on a “matter of public concern,” Connick v. Myers, 461 U.S. 138, 103 S.Ct. 1684, 1689, 75 L.Ed.2d 708 (1983); Knapp v. Whitaker, 757 F.2d 827, 839 (7th Cir. 1985); Yoggerst, 739 F.2d at 295; and the speech must have played a causative role in the adverse employment decision. Givhan v. Western Line Consol. School District, 439 U.S. 410, 416, 99 S.Ct. 693, 697, 58 L.Ed.2d 619 (1979); Mt. Healthy City Board of Educ. v. Doyle, 429 U.S. 274, 285-87, 97 S.Ct. 568, 575-76, 50 L.Ed.2d 471 (1977); Lasco v. Northern, 733 F.2d 477, 480 (7th Cir.1984). If the plaintiff can establish this first step, then the court must balance the public employee’s first amendment interests against those of the public employer. Connick, 461 U.S. at 150-51,103 S.Ct. at 1692; Givhan, 439 U.S. at 414, 99 S.Ct. at 696; Mt. Healthy Board of Educ., 429 U.S. at 284, 97 S.Ct. at 574; Pickering v. Bd. of Educ., 391 U.S. 563, 568, 88 S.Ct. 1731, 1734, 20 L.Ed.2d 811 (1968). The court begins by analyzing the first step of this methodology.

As noted ' above, Shafer’s freedom of speech claims requires that he first establish that his speech was about a matter of public concern and that the consolidation of the accounting functions and Shafer’s transfer back to the Combat Division were caused by his speech. For the sake of emphasis, the court begins with the second half of this analysis first.

The causation element of first amendment claims has been described as an initial burden on the plaintiff to show that his conduct was “a ‘substantial factor’ —or to put it in other words, that it was a ‘motivating factor’ ” in the adverse employment decision. Mt. Healty Bd. of Educ., 429 U.S. at 287, 97 S.Ct. at 576. If the plaintiff can carry this initial burden, the defendant is then allowed to show by a preponderance of the evidence that it would have reached the same employment decision even in the absence of the employee’s protected conduct. Givhan, 439 U.S. at 416, 99 S.Ct. at 697; Mt. Healthy Bd. of Educ., 429 U.S. at 287, 97 S.Ct. at 576. The rationale behind allowing defendants this chance to disprove causation is that

[a] rule of causation which focuses solely on whether protected conduct played a part, “substantial” or otherwise, in a decision not to rehire, could place an employee in a better position as a result of the exercise of constitutionally protected conduct than he would have occupied had he done nothing ... The constitutional principle at stake is sufficiently vindicated if such an employee is placed in no worse a position than if he had not engaged in the conduct.

Mt. Healthy Bd. of Educ., 429 U.S. at 285-86, 97 S.Ct. at 575.

14] The facts of this case make it clear that neither the consolidation of the accounting functions of the fire, police, communications and Humane Shelter departments under Robert Ebert, nor Shafer’s transfer to the Operations Division were motivated by Shafer’s advocacy of rejection of the first and second collective bargaining contract proposals. The consolidation of the accounting functions was considered and adopted as an administrative goal by Consalvos in September, 1984, long before Shafer’s speech took place. Shafer’s transfer to the Operations Division, once his financial officer responsibilities were consolidated, was effectuated pursuant to the understanding between the Fire Department and the Union that 40-hour positions (such as the one in the Fire Prevention Bureau which Shafer wanted to be transferred to) would not be filled as long as the Operations Division was undermanned. Thus, the consolidation and transfer took place for reasons unrelated to Shafer’s conduct in urging rejection of the contract proposals. Stated another way, Shafer has failed to meet his initial burden of showing that his conduct was a substantial or motivating factor in the adverse employment decision. Thus, Shafer has not proven the causation element of the first step of a first amendment claim analysis. See e.g. O’Connor v. Peru State College, 605 F.Supp. 753, 763 (D.Neb.1985).

The other element of this first analytical step requires that the speech or conduct in question be about a “matter of public concern.” As the Connick Court stated:

When employee expression cannot be fairly considered as relating to any matter of political, social, or other concern to the community, government officials should enjoy wide latitude in managing their offices, without intrusive oversight by the judiciary in the name of the First Amendment.
We hold only that when a public employee speaks not as a citizen upon matters of public concern, but instead as an employee upon matters only of personal interest, absent the most unusual circumstances, a federal court is not the appropriate forum in which to review the wisdom of a personal decision taken by a public agency allegedly in reaction to the employee’s behavior.

461 U.S. at 146-47, 103 S.Ct. at 1689-90. Whether an employee’s speech addresses a matter of public concern must be determined by the content, form, and context of a given statement. Id. at 146-48, 103 S.Ct. at 1690; Knapp, 757 F.2d at 839; Yoggerst, 739 F.2d at 296; Zaky v. Veterans Administration, 605 F.Supp. 449, 456 (N.D.Ind.1985).

Shafer argues in his post-trial brief that his statements urging rejection of the contract proposals were matters of public concern because the collective bargaining agreement itself, being a contract entered into by the City, is a matter of public concern. However, the Seventh Circuit has cautioned against so characterizing speech “just because such a concern provided the impetus for speaking.” Yoggerst, 739 F.2d at 296. The Connick Court itself warns that speech “not otherwise of public concern does not attain that status because its subject matter could, in different circumstances, have been a topic of communication to the public that might be of general interest.” 461 U.S. at 148-49, n. 8, 103 S.Ct. at 1691, n. 8. While the subject of speech is an important part of the content factor in Connick, the fact that the form and context of the speech must also be considered suggests that the focus of a “matter of public concern” must be broader than the nature of the subject itself.

The content factor is considered to be the “most important” Connick factor. Yoggerst, 739 F.2d at 296. Although no court has formulated a rule for determining when the content of an employee’s speech makes that speech be on a matter of public concerns, courts have given indications of how to approach the analysis of the content factor. The Connick Court speaks of speech which seeks to inform the public that the employing agency is not performing its duty, is breaching the public trust or is engaged in wrongdoing. 461 U.S. at 146-49, 103 S.Ct. at 1690-91. In Egger v. Phillips, 710 F.2d 292, 316 (7th Cir.), cert. denied, 464 U.S. 918, 104 S.Ct. 284, 78 L.Ed.2d 262 (1983), the Seventh Circuit spoke of speech “which implicates broader interests with societal ramifications.” Thus, it appears that the content of an employee’s speech must be a matter of importance to society at large and not to the employee alone if that speech is to be considered protectable under the first amendment.

Shafer’s statements at issue here concerned the status of platoon captains under the contract proposals. Those proposals sought to remove the platoon captains from the bargaining unit, which would directly affect Shafer as both platoon captain and union steward. While the public at large may be concerned about the City securing a contract with its firefighters, it does not necessarily follow that the component parts of such a contract would involve “broader interests with societal ramifications.” This is especially true of a provision concerning the status of platoon captain membership in the bargaining unit. Such a provision affects only the parties concerned; the public concern about the existence of a collective bargaining agreement is not affected by the platoon captain’s union status, except perhaps in the derivative sense that the contract is not approved by the union because of such an issue. This speech content contrasts sharply with speech about the wages under the contract or whether a certain type of service would continue to be performed. Such subjects have societal ramifications because they affect the cost and type of municipal services the public will receive. But union status of a small group of firefighters does not have such broad impact; while it may be very important to platoon captains, it is important as a personal concern. Shafer, in speaking out on the treatment of platoon captains, was speaking out for himself on a matter of personal, not public, concern.

That Shafer was concerned only with, himself is most evident in the colloquy between Shafer and Cónsalvos at the union meeting on the second proposed contract. Shafer asked questions about platoon captains, and specifically how a platoon captain would be treated in a transfer. In short, Shafer wanted to know what would happen to him under the contract proposal. Consalvos pointed out to the union membership that Shafer was negotiating for himself. Shafer claims that this evidences Consalvos’ desire to “get” Shafer, but Con-salvos was only speaking the truth. Shafer’s speech at that meeting, and his speech about the contract in general, evidences only a personal concern for Shafer’s status under the proposed contracts.

Nor can Shafer’s advocacy of rejecting the entire contract proposal make his speech a matter of public concern. The reason offered for rejection was personal— the status of platoon captains. The implication of the Yoggerst case is that the employee’s motivation for speaking is important to determining whether the employee is speaking personally or as a citizen on a matter of public concern. The fact that Shafer was advancing his own interests as platoon captain by speaking out removes his speech from the Connick and Yoggerst guidelines of what constitutes a matter of public concern.

The context and form factors do not alter this conclusion. Shafer made his statements only to City negotiators and union members; no attempt was made to pass these comments to the news media or the public at large, nor were they intended to inform the public about the contract negotiations or the provisions of the contract proposals. This contrasts sharply with Seventh Circuit case law finding speech to be about matters of public concern when it was an “attempt” or “intended” to inform the public on certain matters of public importance. See Knapp, 757 F.2d at 840-41; Yoggerst, 739 F.2d at 296; Egger, 710 F.2d at 306-17. Although the private communication of protected speech does not forfeit first amendment protections, Givhan, 439 U.S. at 414, 99 S.Ct. at 696, the private context of Shafer’s speech reinforces the conclusion that Shafer was pursuing a personal (or, at best, internal union) goal that had no broader application or ramification. The court therefore concludes as a matter of law that Shafer’s speech was on a matter of personal concern, so that it was not protected by the first amendment.

In summary, the court finds that Shafer has completely failed to satisfy the first step of first amendment analysis. His speech was not protected speech on a matter of public concern, and there is no causal link between his speech and the adverse employment decisions he claims befell him. Because the first step is unsatisfied, there is no need to proceed to the second step of balancing Shafer’s interests with those of the City. Connick, 461 U.S. at 145-46, 103 S.Ct. at 1689; Yoggerst, 739 F.2d at 295; Zaky, 605 F.Supp. at 456. Shafer’s freedom of speech claims therefore fail.

Breach of Contract Claims

Shafer claims that the collectively bargained contract between the City and the union was breached in several respects by the consolidation of accounting functions and Shafer’s transfer to the Operations Division. An initial issue to resolve is which (if any) contract applies to Shafer’s claim. One contract was in effect until December 16, 1984 (the “old” contract), while the other was made effective from January 1, 1985. Shafer’s brief references the old contract, even though his transfer was not effective until January 7, 1985. The relevant provisions of the old and new contracts are sufficiently similar (except for changes in numbering), so that the question of which contract applies is not important.

However, the City argues that because Shafer received notice of his transfer on December 21, 1984 — during the hiatus between the two contracts — no contract claims can be asserted. This argument is unpersuasive. To the extent that the consolidation of accounting functions allegedly breached the contract, the date of Shafer’s notification is irrelevant to determining whether a contract was in effect, and if so, which one. The decision to consolidate and the transfer of Robert Ebert into the new administrative assistant position occurred before December 16, 1984, and thus the old contract applies. To the extent Shafer’s transfer breached the contract, that transfer was not effective until January 7, 1985, and thus the new contract would apply. In both cases, the City’s analysis must be rejected.

Shafer argues that the contract was breached in four ways. The first revolves around the creation of Robert Ebert's position as a result of the consolidation of accounting functions. Specifically, Shafer cites Article XXIV, § 15 of the old contract, which states:

Nothing in this Agreement shall prevent management from creating new job classifications or extending or decreasing existing job classifications provided each new job classification is posted for bid in accordance with the bidding procedures described herein.

The language of this section clearly gives the City the right to terminate (or “decrease”) Shafer’s accounting position. Shafer’s argument instead focuses on the requirement that “new job classifications” must be posted for bid, claiming that Ebert’s job should have been posted, and that this provision was breached when it was not so posted.

The essential premise of Shafer’s argument is that Ebert’s new position is a “new job classification” subject to Article XXIV, § 15. An examination of the entire collective bargaining agreement reveals that this premise is untrue. Not all jobs which affect the fire department are covered by the contract; the union bargains for the firefighters only, and thus some jobs are outside the scope of its representation. In Article IV of the contract, the union specifically recognizes the City’s right to “transfer work or otherwise perform work in the Fire Department,” thus allowing for the performance of Department work by City (and, therefore, non-union) employees.

Thus, a reasonable interpretation of the “new job classification” language of Article XXIV, § 15 is that it applies only to new job classes created for firefighters. Such an interpretation makes sense in light of the fact that Article XXIV, which sets forth bidding procedures, mandates that department seniority control in bidding for job openings in the department. When a job is created for firefighters to fill, seniority and other such union processes can play a role in sorting out which firefighter should get the job. However, when the City assumes certain work and assigns City employees to do that work, it makes no sense for the bidding process to be employed because the City is not looking to the firefighters to perform the work.

This implicates Shafer’s second argument about Ebert’s position: that assignment of bargaining unit work to non-bargaining unit personnel is as a matter of law a violation of the agreement. The court disagrees. While Shafer cites several arbitrator’s decisions, he fails to indicate that the contract provisions involved in those eases are similar to the contract here. In Article IV, the union specifically allows the City the right to- transfer and perform work of the department. Such a provision clearly contemplates work being done by City employees who would not be members of the bargaining unit. Ebert’s position is a City employee position, and therefore is outside the bargaining unit. Article IV justifies the creation of the position, and the reasonable interpretation of Article XXIV, § 15 set forth here indicates that such a position need not be posted for bid. Therefore, the court finds that the creation of and failure to post bids for Ebert’s position does not violate the collective bargaining agreement.

The second and third alleged violations of the contract revolve around Shafer's activity in advocating rejection of the contract. Article VII, § 1 provides that

The City will not interfere with, restrain or coerce ... [or] discriminate in respect to hire, tenure of employment or any term or condition of employment against any employee covered by this Agreement because of membership in, or activity on behalf of, the Union____

Article XX, § 6 of the old contract (Article XXII, § 6 of the new contract) specifically provides that “Unit members shall not receive any discipline for exercising their rights as a citizen guaranteed by the Constitution of the United States and the State of Indiana.” Shafer argues that these provisions were violated when the consolidation of accounting functions and his transfer were implemented because of his speaking out against the contract. However, the court has specifically found that both the consolidation and transfer were not undertaken in response to any activity by Shafer; thus, it is impossible for the City to have interfered with, discriminated against, or disciplined Shafer because of his advocacy. Therefore, these provisions of the contract could not have been breached.

The final breach of contract claim is based on the language of Article XX, § 8 of the old, and Article XXII, § 8 of the new, contract, which states:

Unit members shall not be demoted, except for just cause and after appropriate hearing and determination by the Board of Safety____

Shafer claims he was “demoted” or “constructively demoted” because his transfer moved him from a 40-hour per week job to a 56-hour per week job, even though he admittedly suffered no loss in rank, pay, or benefits.

The court finds that an increase in the number of hours worked is not a demotion under the terms of the contract. A distinction between demotions and changes in the number of hours worked is implicit in the language of Article IV, in which the union recognizes the authority of the City to, inter alia, “demote” and “assign work and the number of hours to be worked.” The fact that the contract delineates these as separate powers of the City suggests that the union knew there was a difference between the two. The traditional conception of demotion is tied directly to a lowering of rank; no such event occurred in this case. Shafer has maintained the same status in the department; he is simply required to work longer than he did before. The court concludes that Shafer was not “demoted” so as to require the procedural protections of § 8. Therefore, no breach of contract occurred.

Shafer has failed to establish that any breach of the collective bargaining agreement occurred. Therefore, the defendants are entitled to judgment on Count IV of the amended complaint.

Municipal Ordinances and Regulations

Shafer’s final claim relates to the violation of the City’s Municipal Code, and the personnel policies promulgated under it. Article I, § 20-2 requires all City departments to conform to official City personnel policies. Shafer contends that the City violated its personnel policy by failing to post Ebert’s position for bidding in accordance with those policies.

Betty Collins, the City’s personnel director, testified that under the City’s interpretation of, and practice under, City personnel policy, there was no need to post for bidding the consolidated accounting/administrative position filled by Ebert. According to Collins, Ebert filled the position by a “lateral transfer” — that is, a transfer from one department or division to another with the same labor grade. Ebert had been an administrative assistant to the Director of the Board of Works, and his transfer to be administrative assistant to the Director of the Board of Safety was considered “lateral” so as not to justify the posting of job bids.

An examination of the City’s policies confirms this analysis. Policy 7.1, which relates to transfers, allows for transfers to fill positions created by internal reorganizations of a department or function. Collins’ interpretation of this policy as exempting reorganization transfers from the bidding process is reasonable in light of the City’s entire policy and practice concerning lateral transfers.

The court also points out that Shafer has failed to show how he was harmed in any way by the failure to post bids for Ebert’s position. Shafer cannot claim that his transfer out of his accounting position (which gives rise to his only claim of “damage” — the increase in work hours) was caused by the failure to post bids; the transfer was the result of the decision to consolidate, which is not governed by the City personnel policies at issue here. This implicates Shafer’s standing to bring this claim. However, whether Shafer has standing or not, the court finds that the City’s personnel policies were not violated by the failure to post Ebert’s position for bidding, and thus Shafer’s final claim must fail as well.

This Memorandum of Decision contains the court’s Findings of Fact and Conclusions of Law pursuant to Rule 52 of the Federal Rules of Civil Procedure. See Rucker v. Higher Educational Aids Board, 669 F.2d 1179, 1183-84 (7th Cir. 1982).

Conclusion

The plaintiff has failed to establish by a preponderance of the evidence any violation of his rights of freedom of speech or association, any breach of the collective bargaining agreement between the City and the firefighter’s union, or any violation of municipal regulations concerning the posting of bids for City jobs. Therefore, the court hereby enters judgment for the defendants.

      . The court makes two specific credibility determinations. First, the court finds the testimony of Anthony Hodges to be noncredible. His reliability was specifically impugned by several witnesses. His testimony concerning comments made by defendant Consalvos was not corroborated by other witnesses who were allegedly present, including Noble Schlatter and Thomas Heckman.
      Second, although plaintiff has made an issue out of defendant Consalvos’ inability to correctly recall the dates of certain events, the court finds that these chronological mistakes were not contrived and do not undercut Consalvos’ essential credibility on the main issues in this case.

      . Shafer's claim under 42 U.S.C. § 1983 necessarily rests on the same principles as the first amendment claim itself, as § 1983 is merely an enabling statute allowing for claims under the fourteenth amendment, which in turn incorporates the first amendment, making it applicable to the states. The principles underlying article I, § 9 of the Indiana Constitution, which guarantees freedom of speech, are such that there is a “fundamental interplay" between them and the first amendment. Gintert v. Howard Publications, Inc., 565 F.Supp. 829, 837 (N.D.Ind. 1983). In the context of public employee suits based on violations of freedom of speech rights, Indiana courts have applied Supreme Court first amendment precedents, see McQueeney v. Glenn, 400 N.E.2d 806, 809-10 (Ind.App.1980), cert. denied, 449 U.S. 1125, 101 S.Ct. 943, 67 L.Ed.2d 112 (1981). Therefore, the court will treat all three freedom of speech claims under the same first amendment analysis.

      . Shafer cites four cases for the proposition that statements about collective bargaining agreements are protected speech. In Walje v. City of Winchester, 773 F.2d 729 (6th Cir.1985), the employee apparently communicated firefighters’ grievances concerning job training, work conditions and pay to local newspapers and a radio station. In Bickel v. Burkhart, 632 F.2d 1251 (5th Cir.1980), a firefighter was fired after making statements concerning defective equipment and the perception of the department among other firefighters. The contents of these statements are clearly matters of public concern because they relate to the quality and cost of the municipal services received by citizens. They are therefore distinguishable.
      More troubling is the Knapp case and McGill v. Bd. of Educ. of Pekin Elementary School, 602 F.2d 774, 778 (7th Cir.1979). In Knapp, the Seventh Circuit seemed to indicate that a teacher’s comments about the grievance procedure under the teachers’ contract was comment on a matter of public concern because "the grievance procedure was the subject of ongoing collective bargaining negotiations between the teachers’ union and the administrators of the school district.” 757 F.2d at 841. Without explaining why, the Knapp court stated ”[i]n the context of this case, the grievance procedure was a legitimate matter of interest for the citizens of Peoria who, as taxpayers, had a financial stake in the settlement reached between the teachers and the [School Board].’’ Id. at 842. The McGill court held that adjudicating a collective bargaining agreement in the teachers’ lounge and at a school board meeting was a matter of public concern. 602 F.2d at 778. However, these cases can be distinguished by the lack of a personal motive behind the speech. The comments about the grievance procedure in Knapp came from several teachers, and were about teachers in general. The collective bargaining agreement advocated in McGill affected all teachers. Here, Shafer’s focus was much narrower; he spoke to protect his own interest as a platoon captain, and was concerned only about how the contract would affect him, as evidenced by his questions at the union meeting on the second proposal. Thus, the context and content of Shafer’s remarks make his speech a matter of personal concern in this case.

      . Additional support for this conclusion is found in Policy 4.1(C)(8), which allows "confidential positions" (such as administrative assistant) to be filled by recruitment, which is fundamentally different from bidding. The fact that confidential positions are so distinguished strongly suggests that they should be viewed differently under City policy.


source: Caselaw Access Project

author: ROSENBAUM, District Judge.

license: Public Domain

text:
    James N. DUNLOP, et al. v. STATE OF MINNESOTA, et al.
    Civil No. 4-85-1226.
    United States District Court, D. Minnesota, Fourth Division.
    Jan. 23, 1986.
    Joe A. Walters and Douglas M. Carnival, O’Connor & Hannan, Minneapolis, Minn., for plaintiffs.
    Scott R. Strand, Sp. Asst. Atty. Gen., St. Paul, Minn., for defendants.
   ORDER

ROSENBAUM, District Judge.

The plaintiffs bring suit against the State of Minnesota, the Minnesota Department of Employee Relations, and certain of that department’s past and present employees. Plaintiffs are present or former employees of the State of Minnesota, who sue on their own behalf and as claimed-to-be representatives of an as yet uncertified class. The putative class, which they assert they represent, numbers between 2,500 and 5,000 people. Their assertion is that the State improperly withheld social security contributions from wages paid to its employees while on sick leave from 1955-1981.

Plaintiffs allege that this withholding by defendants amounted to a breach of fiduciary duty, the tort of negligence and wrongful conversion on the part of the defendants. They also argue that because this withholding of funds was in violation of the Social Security Act, a federal question is involved. The plaintiffs seek retroactive return of the funds they claim were wrongfully withheld, a sum they assert to be in the millions of dollars. The Court finds that the plaintiffs’ claims are barred as set' forth below, and summary judgment is granted to the defendants pursuant to Rule 56 of the Federal Rules of Civil Procedure (Fed.R.Civ.P.).

Facts

During the 1950’s, Congress passed the Social Security Act and a series of amendments permitting States to enter into voluntary agreements with the Secretary of Health and Human Services to extend social security coverage to their employees in what is now 42 U.S.C. 418 (1978). The State of Minnesota entered into such an agreement and by 1957 it had extended social security coverage to most of its employees. The Minnesota Agreement, in compliance with 42 U.S.C. 418 of the Social Security Act, requires that the State pay social security taxes to the Secretary of the Treasury. The taxes are computed as a percentage of wages received from employment.

This suit concerns the proper definition of “wages” and therefore the proper measure of social security contributions from 1955 to 1981. Prior to the re-definition in 26 U.S.C. 3121(a), the definition of “wages” was:

(2) the amount of any payment ... made to or on behalf of, an employee or any of his dependents under a plan or system established by an employer which makes provisions for his employees generally ... on account of
(B) sickness or accident disability.

By amendment on December 29, 1981, Congress defined “wages” in a manner which excluded payments on account of sickness unless the wages were received under a workmen’s compensation plan. 42 U.S.C. 409(b). Since 1982, the State of Minnesota (both the plaintiff and defendant agree) has complied with the 1981 definition of “wages” in calculating social security contributions.

From 1955 to 1981, the State had not excluded sick pay from wages in assessing social security contributions. The plaintiff argues that the failure to exclude payments on account of sickness violated the definition of “wages” in 26 U.S.C. 3121(a). The State, however, contends that “payments on account of sickness” was interpreted differently for the private and the public sectors. The State argues that absent affirmative legislative authority or a comprehensive plan, it was not empowered to exclude “payments on account of sickness” from public employees’ wages.

As a preface to any consideration of the merits of this case, the Court must consider the mandate of the eleventh amendment to the United States Constitution.

The eleventh amendment provides:

The Judicial power of the United States shall not be construed to extend to any suit in law or equity, commenced or prosecuted against one of the United States by Citizens of another State, or by Citizens or Subjects of any Foreign State.

The United States Supreme Court has interpreted this amendment to mean that a citizen may not bring suit against his own state in federal court. Hans v. State of Louisiana, 134 U.S. 1, 10 S.Ct. 504, 33 L.Ed. 842 (1890). The Supreme Court has recently reiterated the significance of the eleventh amendment in defining the states’ sovereign immunity. Atascadero State Hosp. v. Scanlon, — U.S.-, 105 S.Ct. 3142, 87 L.Ed.2d 171 (1985). The Court relied upon the Framer’s belief that “States played a vital role in our system and that strong state governments were essential to serve as a ‘counterpoise’ to the power of the federal government. See, e.g., The Federalist, No. 17, p. 107 (J. Cooke ed. 1961); The Federalist, No. 46, p. 316.” 105 S.Ct. at 3146, n. 2. The eleventh amendment as a fundamental principle of sovereign immunity which limits the grant of judicial authority in Article III has been affirmed time and time again. E.g., Edelman v. Jordan, 415 U.S. 651, 662-663, 94 S.Ct. 1347, 1355-1356, 39 L.Ed.2d 662 (1974); Pennhurst State School & Hosp. v. Halderman, 465 U.S. 89, 104 S.Ct. 900, 79 L.Ed.2d 67 (1984).

The plaintiffs argue that their claim is not a suit against the State which would be barred. They make this claim because of the possibility that the United States, itself, will reimburse the State for retroactive monetary relief. According to 20 C.F.R. 404.1201, et seq., effective January 1980, a state may seek reimbursement for overpayment of social security contributions from the United States. But the time for seeking such reimbursements has expired for all years except 1980 and 1981. 20 C.F.R. 404.1285, et seq. In response, plaintiffs argue that it is not impossible for the United States to reimburse the State for over-contributions prior to 1980 although there is no regulation which so requires. Thus, the plaintiffs steadfastly rely on the possibility that the State’s treasury will not be called upon to compensate them for their claimed loss as a means of circumventing the eleventh amendment’s jurisdictional bar.

This Court finds that either the eleventh amendment bars this suit, or the cause must fail pursuant to Rule 19, Fed.R. Civ.P., for the plaintiffs’ failure to join an indispensable party — the United States. In the absence of the joinder of the Republic, the plaintiffs’ attempt to avoid the eleventh amendment’s jurisdictional bar by claiming that the United States rather than Minnesota is a possible source of relief, cannot succeed. There are only two conceivable outcomes in the event that the plaintiffs prevail: either the State of Minnesota will pay retroactive monetary relief, or the United States will. If Minnesota is required to pay this sum, then the eleventh amendment explicitly bars any claim against a State for retroactive damages. Atascadero State Hosp. v. Scanlon, — U.S. -, 105 S.Ct. 3142, 87 L.Ed.2d 171 (1985). If, on the other hand, the United States is to be the payee, the suit must be dismissed for failure to join it as an indispensable party.

Thus, no matter who pays the relief, this Court may not hear the plaintiffs’ suit. Defendant’s motion for summary judgment must be granted.

Discussion

A. Eleventh Amendment

The United States Supreme Court’s recognized exceptions to the eleventh amendment bar were set out most recently in Atascadero, where the Court noted that,

[tjhere are, however, certain well-established exceptions to the reach of the Eleventh Amendment [sic]. For example, if a State waives its immunity and consents to suit in federal court, the Eleventh Amendment [sic] does not bar the action. (Citation omitted.) Moreover, the Eleventh Amendment [sic] is “necessarily limited by the enforcement provisions of section 5 of the Fourteenth Amendment [sic],” that is, by Congress’ power “to enforce by appropriate legislation, the substantive provisions of the Fourteenth Amendment [sic].” (Citation omitted.)

105 S.Ct. at 3145.

In a prior order in this case, my brother, Judge Renner, held that Minnesota has not waived its constitutional immunity from suit in federal court. Order dated July 5, 1984, U.S.D.C., D.Minn., Civil No. 3-84-485. Thus, the plaintiffs’ suit does not fall into the first exception, the state’s voluntary waiver of immunity. The action cannot be sustained on this ground.

Nor does this suit fall into the second Atascadero exception which occurs when Congress, acting under section 5 of the fourteenth amendment, authorizes federal courts to award retroactive monetary relief against a state government in favor of a private individual. The Supreme Court clarified the circumstances under which Congress abrogates a state’s immunity by requiring that “Congress unequivocally express this intention in the statutory language ____” Atascadero, 105 S.Ct. at 3148. The plaintiffs offer no argument that the Social Security Act was passed under section 5 of the fourteenth amendment. Nor is there any express statutory language in the Act allowing private individuals to sue the state in federal court. The only sanction against a state which is available under the Act is the termination of federal funds when the state fails to conform to federal law. 42 U.S.C. 604. Thus, the second exception does not apply to the plaintiffs’ claim and this cause cannot be sustained on this ground.

Plaintiffs, however, suggest the existence of an additional exception to the eleventh amendment which occurs when a state may permissively seek reimbursement from the federal government. They offer three inapposite cases in support of this thesis. The first, Witter v. Pennsylvania Nat. Guard, 462 F.Supp. 299 (E.D.Pa. 1978) involved an action brought against the Commonwealth of Pennsylvania under the Vietnam Era Veterans Readjustment Assistance Act of 1974, 38 U.S.C. 2021, et seq. (1976). That Act, unlike the Social Security Act, expressly provided that:

[i]f any employer, who is a private employer or a State or political subdivision thereof, fails or refuses to comply with [the Act], the district court of the United States ... shall have the power ... specifically to require such employer ... to compensate such person for any loss of wages or benefits suffered by reason of such employer’s unlawful action.

38 U.S.C. 2022 (1976) (emphasis provided). This express authorization which gave jurisdiction to federal courts is clearly distinguishable from the Social Security Act which grants no such authority to the federal courts to hear claims against the state. Thus Witter has no application here.

Plaintiffs also cite Fernandez v. Char-don, 681 F.2d 42 (1st Cir.1982). Fernandez was a class action alleging that the Commonwealth of Puerto Rico had discriminated against some of its employees because of their political beliefs and associations. The court specifically denied retroactive monetary relief against the Commonwealth. It held that the eleventh amendment barred such relief because an award would deplete the Commonwealth’s treasury. The court acknowledged in dicta that whether or not the eleventh amendment barred an action which would not effect a state’s treasury was a distinct issue. But the facts of Fernandez did not require the court to address it. Fernandez, 681 F.2d at 51-52. Therefore, Fernctndez does not speak to or provide any support for the plaintiffs’ argument.

Finally, plaintiffs directed the Court to Harrington v. Blum, 483 F.Supp. 1015 (S.D.N.Y.1979), aff’d without opinion, 639 F.2d 768 (2nd Cir. 1980). This case does not support the plaintiff’s position. Harrington was a class action brought against city, state and federal officials in New York alleging that they had failed to establish procedures for the distribution of food stamps under the Food Stamp Act of 1964. 7 U.S.C. 2011, et seq. (1976). The District Court found that food stamp regulations explicitly required the states to provide benefits if the state had erroneously denied applications. 7 C.F.R. 271.1(q)(l) (1978).. Because the state could seek reimbursement from the United States Department of Agriculture, the court permitted the plaintiffs to sue the State for retroactive monetary relief.

The Court in Harrington specifically relied upon a prior federal decision which held the federal government liable for retroactive food stamp benefits, Bermudez v. United States Department of Agriculture, 490 F.2d 718 (D.C.Cir.1973), cert. denied, 414 U.S. 1104, 94 S.Ct. 737, 38 L.Ed.2d 559 (1973). Harrington, then, is limited to the Food Stamp Act. It has not been extended by another court to apply to any other act in which possible reimbursement by the federal government entitled a private individual to sue the state in contravention of the eleventh amendment.

This Court feels no compulsion to whittle at the sound principles of federalism encompassed by the eleventh amendment. This limited reading of the exceptions to the eleventh amendment is appropriate in light of the Supreme Court’s recent discussion in Atascadero, 105 S.Ct. at 3145. The Court did not recognize federal reimbursement to a state as an established exception to a state’s sovereign immunity.

B. Rule 19, Federal Rules of Civil Procedure

Even if this Court found that the eleventh amendment did not bar the suit, because the United States and not Minnesota might bear the financial burden, this Court would be required to dismiss this suit for failure to join an indispensable party pursuant to Rule 19(a), Fed.R.Civ.P. Under Rule 19(a), a person is a necessary party if:

(1) in his absence complete relief cannot be accorded among those already parties, or
(2) he claims an interest relating to the subject of the action and is so situated that the disposition of the action in his absence may (i) as a practical matter impair or impede his ability to protect that interest or (ii) leave any of the persons already parties subject to a substantial risk of incurring double, multiple, or otherwise inconsistent obligations ____

It is integral to the plaintiffs argument' that the eleventh amendment does not bar their action because the United States may be the ultimate payor of any recovery. They make this assertion under the authority of 20 C.F.R. 404.1201, et seq. Under this section, a state may seek reimbursement for overpayment of social security contributions from the federal social security pool. By its terms, the regulation limits the reimbursement of funds to two years after the overpayment was made to the Secretary of the Treasury. 20 C.F.R. 404.-1285(c)(3). The plaintiff also argues that the United States may, in its discretion, reimburse beyond this two year period. From this formulation the Court concludes that the possibility that the United States would be obligated to pay all or a portion of the damages makes its presence “necessary” (i) in order that complete relief may be granted, and (ii) to protect its own interest in the action.

Whereas the United States is a necessary party, it cannot be joined because of the lack of subject matter jurisdiction. According to 42 U.S.C. 405(h), the only type of claim permitted against the United States or the Secretary of Health and Human Services under the Social Security Act in federal court requires exhaustion of administrative remedies. Weinberger v. Salft, 422 U.S. 749, 95 S.Ct. 2547, 45 L.Ed.2d 522 (1975). The Social Security Act prohibits any other type of claim:

No action against the United States the Secretary of Health and Human Services or any officer or employee thereof shall be brought under Section 1331 or 1346 of Title 28 to recover on any claim arising under this subchapter (i.e. Title II).

42 U.S.C. 405(h). Therefore, absent the necessary exhaustion, acknowledged at oral argument, this court lacks subject matter jurisdiction to hear this case.

According to Rule 19(b), Fed.R.Civ.P., when joinder of a necessary party is not feasible, “the court shall determine whether in equity and good conscience the action should proceed among the parties before it, or should be dismissed, the absent person being thus regarded as indispensable.” In determining whether the United States is indispensable or not, Rule 19(b) lists four factors:

[Fjirst, to what extent a judgment rendered in the person’s absence might be prejudicial to him or those already parties; second, the extent to which, by protective provisions in the judgment, by the shaping of relief, or other measures, the prejudice can be lessened or avoided; third, whether a judgment rendered in the person’s absence will be adequate; fourth, whether the plaintiff will have an adequate remedy if the action is dismissed for nonjoinder.

The factor of paramount importance here is the plaintiffs’ right to pursue an administrative and judicial remedy provided by the Social Security Act as their “adequate remedy.”

Congress has specifically delineated a procedure whereby an aggrieved employee may seek relief for overcontributions. The employee may first request an official “statement of earnings record” from the Social Security Administration 42 U.S.C. 405(c)(5)(B), 20 C.F.R. 404.902. If the employee is not satisfied with the Social Security Administration’s determination, he may file an appeal within the agency and then appeal to. the federal district court. 42 U.S.C. 405(c)(8) and (g).

The putative class representatives have not attempted to seek relief before the administrative tribunals. They cannot, and do not (in the absence of so much as an attempt), make a valid claim that there is no administrative remedy for their alleged injury. The plaintiffs have sought to bypass the method for seeking relief specifically provided by Congress. Because of the availability of administrative remedies and subsequent judicial review, this Court finds that the plaintiffs have an “adequate remedy” pursuant to Rule 19(b) of the Fed. R.Civ.P.

With these considerations in mind, this Court cannot find that "... in equity and good conscience the action should proceed among the parties before it %y(3(27.” Instead, the Court finds that the action “... should be dismissed, the ... [United States] being thus regarded as indispensable.” Rule 19(b), Fed.R.Civ.P.

Conclusion

The eleventh amendment’s jurisdictional bar against suits for monetary relief against the state and the indispensability of the United States as a party to this action bar this Court from hearing plaintiffs’ suit. For these reasons, this Court grants defendant’s motion for summary judgment, pursuant to Rule 56, Fed.R.Civ.P.

      . ... Those employees who voted against coverage prior to the referendum are not covered by the social security system. Minn.Stat. ch. 355 (1982); Op. Att’y Gen. 331-i (November 15, 1982).

        . A related case was decided by the United States Supreme Court, Chardon v. Soto, 462 U.S. 650, 103 S.Ct. 2611, 77 L.Ed.2d 74 (1983), but the Court did not review the decision in Fernandez v. Chardon, 681 F.2d 42 (1st Cir.1982). See, Chardon v. Soto, 462 U.S. at 653, n. 4, 103 S.Ct. at 2614, n. 4.


author: DIMMICK, District Judge.

text:
    Gary LIEN and Margaret Lien, husband and wife, Plaintiffs, v. ALLSTATE INSURANCE COMPANY, an Illinois corporation, Defendant.
    No. C85-1527D.
    United States District Court, W.D. Washington, at Seattle.
    Jan. 23, 1986.

      Ronald Castleberry, Williams, Novack & Hansen, Everett, Wash., for plaintiffs.
    Bruce T. Bjerke, Don Curie, Riddell, Williams, Bullitt & Walkinship, Seattle, Wash., for defendant.
   MEMORANDUM AND ORDER

DIMMICK, District Judge.

This action is brought under the Court’s diversity jurisdiction and concerns a chai-. lenge to the underinsured vehicle coverage limits on automobile insurance purchased by Gary and Margaret Lien from Allstate Insurance Company (“Allstate”). Both parties have moved for summary judgment on an issue governed by Washington law. After consideration of the memoranda and affidavits submitted by counsel, the Court grants Allstate’s motion.

It is undisputed that plaintiffs, the Liens, purchased from Allstate an automobile insurance policy for their three separate automobiles. The policy coverage for underinsured vehicles was $50,000 per person and $100,000 total per accident for each vehicle. Premium costs were allocated separately for each vehicle on the single policy. The renewal statement for the period September 20, 1981 to March 20, 1982, shows underinsured coverage as costing $10.50 for a Datsun, $8.50 for a Chevrolet and $8.50 for an International. On February 24, 1982, the Liens were both injured in an automobile accident involving their 1975 Datsun.

Allstate refused to compensate the Liens for their injuries. Pursuant to a provision in the policy, the Liens sought arbitration of their underinsured vehicle claim. The arbitrators found for Mrs. Lien in the amount of $160,238 and for Mr. Lien in the amount of $10,000.

Allstate paid $10,000 to Mr. Lien, but offered only $50,000 to Mrs. Lien, relying on the underinsured vehicle limitation in the policy. The Liens then filed their complaint seeking a judgment for $150,000 (aggregating the individual policy limits for the three automobiles). Subsequently, Allstate and the Liens reached a partial settlement, with Mrs. Lien receiving payment of $50,000 and the Liens dropping their claim under the Washington Consumer Protection Act, RCW 19.86. Under the settlement terms, the Liens’ claim for the remaining $100,000 continued.

Summary judgment is appropriate when there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. The initial burden of showing the absence of material facts rests on the proponent of a summary judgment motion. Once that burden is met, the opponents must counter with specific factual allegations revealing a genuine dispute of fact to preclude summary disposition. International Union of Bricklayers v. Martin Jaska, Inc., 752 F.2d 1401, 1404-05 (9th Cir.1985).

The Liens insist that the court must address questions of fact in order to grant Allstate’s motion for summary judgment. The allegedly disputed facts involve (1) an affidavit from Gregory J. Ciezadlo, actuary for Allstate, and (2) a question raised by William Tri, attorney for plaintiff, referring to a letter from Richard Johnson and to an attached “amendatory endorsement.”

Neither of these is an impediment to summary judgment. The Ciezadlo affidavit states that the premium rates charged to the Liens reflect a limit on the risk of injury from an underinsured motorist and do not reflect “stacking” (multiplying the limits of liability for each car that is insured). The Liens dispute this factual conclusion, but offer no evidence. Moreover, the Ciezadlo affidavit is not necessary to the Court’s decision. As to the “amendatory endorsement,” its relevance is unclear. More importantly, Allstate presents an affidavit asserting that the endorsement did not exist at the time of the accident and was not a part of the Liens’ insurance. The Liens simply do not present competent evidence to rebut Allstate’s statements. The Court’s decision can be based on the language of the Liens’ policy and application of Washington law.

The issue is whether the terms of the Liens’ insurance policy provide for stacking the individual $50,000 limitations so as to reach a maximum of $150,000 for damages sustained by Margaret Lien. A sub-issue is whether the Liens should have to bear half the expense of arbitration, totaling $2,700.

Plaintiffs’ argument is that public policy supports stacking for underinsured vehicle coverage (UVC) and that the Allstate policy failed to repeat the language of RCW 48.-22.030(5) applying to limitations:

The limits of liability under the policy coverage may be defined as the maximum limits of liability for all damages resulting from any one accident regardless of the number of covered persons, claims made, or vehicles or premiums shown on the policy, or premiums paid, or vehicles involved in an accident.

The Allstate policy section limiting liability reads as follows:

Limits of Liability.
(a) The limit of liability stated in the declarations as applicable to “each person” is the limit of Allstate’s liability for all damages, including damages for care or loss of services, because of bodily injury sustained by one person as the result of any one accident and, subject to the above provision respecting each person, the limit of liability stated in the declaration as applicable to “each accident” is the total limit of Allstate’s liability for all damages, including damages for care or loss of services, because of bodily injury sustained by two or more persons as the result of any one accident.
However, the maximum limits of liability stated above are the maximum limits of liability for all damages because of bodily injury sustained by one person, and by more than one person, in one accident, regardless of the number of claims made, vehicles or persons shown in the declarations or vehicles involved in an accident.

Thus, the Liens argue that the policy limitation is defective because it does not refer to limitations regardless of “premiums shown on the policy, or premiums paid.” They argue that this creates an ambiguity, which must be resolved in favor of the insured. See Witherspoon v. St. Paul Fire & Marine Ins. Co., 86 Wash.2d 641, 649, 548 P.2d 302 (1976); United States v. Nationwide Mutual Ins. Co., 499 F.2d 1355 (9th Cir.1974) (interpreting Wash- ■ ington law).

Plaintiffs rely on Washington cases favoring stacking of liability limits for separate vehicles. American States Ins. Co. v. Milton, 89 Wash.2d 501, 573 P.2d 367 (1978); Federated American Ins. Co. v. Raynes, 88 Wash.2d 439, 563 P.2d 815 (1977); Cammel v. State Farm Ins., 86 Wash.2d 264, 543 P.2d 634 (1975). In Cammel, the court considered a limitation on cumulative coverage to be unreasonable when the covered persons had paid for separate uninsured motorist coverage for each automobile. Cammel, 86 Wash.2d at 266, 270, 543 P.2d 634. Similarly, in Raynes, the court reasoned that the payment of two premiums for two separate cars under one policy entitled the insured to the limits of uninsured coverage for each. Raynes, 88 Wash.2d at 447-48, 563 P.2d 815. In Milton, the court held that the payment of nine premiums under a single policy entitled a covered party to a maximum of “nine times the stated policy amount” for each vehicle. Milton, 89 Wash.2d at 501, 573 P.2d 367.

The Washington Supreme Court, however, has since recognized that amendment of RCW 48.22.030 overrules its earlier decisions. Miller’s Casualty Ins. Co. of Texas v. Briggs, 100 Wash.2d 1, 665 P.2d 891 (1983). Briggs was an interpleader action brought by an insurance company to determine the limits of liability under a policy covering a vehicle in which passengers were injured. The policy excluded the insured vehicle from the definition of an underinsured vehicle. While not addressing the same statutory language at issue in this case, the Briggs court acknowledged the effect of legislative amendments in RCW 48.22.030(5) and (6). Recognizing that RCW 48.22.030 requires insurers to offer underinsured vehicle coverage, the court said:

This coverage, like uninsured motorist coverage, is a first-party coverage that individuals may purchase to protect themselves against other drivers. Additionally, the statute allows insurers to include provisions limiting coverage to liability for one accident regardless of the number of persons or vehicles involved and provisions preventing an injured person from stacking policies. RCW 48.22.030(5) and (6). These statutory exceptions implicitly overrule two of our rulings interpreting the uninsured statute. [Citing Raynes and Cammel.]

Briggs, 100 Wash.2d at 4, 665 P.2d 891. Thus, this Court concludes that the reference to premiums paid in Cammel, Raynes and Milton is not significant in light of Briggs. It becomes a matter of determining the meaning of the contract limitations.

Under Washington law, “a contract of insurance should be given a fair, reasonable, and sensible construction, consonant with the apparent object and intent of the parties, a construction such as would be given the contract by the average man purchasing insurance”. Morgan v. Prudential Insurance Company of America, 86 Wash.2d 432, 434, 545 P.2d 1193 (1976).

The following language in the Liens’ policy is susceptible of but one interpretation— the maximum underinsured coverage for Mrs. Lien’s injuries is $50,000.

[T]he maximum limits of liability stated above are the maximum limits of liability for all damages because of bodily injury sustained by one person and by more than one person, in one accident, regardless of the number of claims made, vehicles or persons shown in the declarations or vehicles involved in an accident.

One additional issue remains: plaintiffs contend that as prevailing parties in arbitration, they should not be responsible for arbitration fees. The arbitration clause in the insurance contract follows:

Arbitration. If any person making claim hereunder and Allstate do not agree that such person is legally entitled to recover damages from the owner or operator of an underinsured motor vehicle because of bodily injury or property damage to the insured, or do not agree as to the amount of payment which may be owing under this coverage, then, upon demand of either, the matter or matters upon which such person and Allstate do not agree shall be settled by arbitration in accordance with the rules of the American Arbitration Association, and judgment upon the award rendered by the arbitrators may be entered in any court having jurisdiction thereof. Such person and Allstate each agree to consider itself bound and to be bound by any award made by the arbitrators pursuant to this coverage.

The contract makes no reference to who bears the cost of arbitration. Allstate, however, submitted the rules of the American Arbitration Association (“AAA”) in effect at the time the contract was signed. The Liens do not dispute their existence. Under paragraph 33 of those rules, the parties bear general expenses equally unless they agree otherwise.

Nonetheless, the Liens argue that they could not be expected to know the rules of the AAA or that there were costs to them even if they prevailed in arbitration. They argue under a theory of disallowing adhesion contracts and construing ambiguous contracts to benefit the insured. See Witherspoon, supra and Blakely v. Housing Authority, 8 Wash.App. 204, 212-13, 505 P.2d 151 (1973).

In addition, the Liens’ attorney attests to a number of instances during arbitration when the rules of the AAA were not followed. Allstate’s attorney counters by unchallenged affidavit that the attorney representing the Liens knew from previous experience of the AAA’s cost sharing arrangements for arbitration and voiced no objections to either the shared costs or a failure to follow the rules.

Here, again, the terms of the contract control. Furthermore, argument of ambiguity was waived by the Liens’ initiation of arbitration and participation without objection.

THEREFORE, defendant Allstate's motion for summary judgment is GRANTED.

The Clerk of the Court is instructed to enter judgment accordingly and to send copies of this Order, to all counsel of record.

      . Plaintiff also relies on recent Washington Court of Appeals cases: Abshere v. Prudential Ins. Co., 38 Wash.App. 1, 683 P.2d 625 (1984); Thompson v. Grange Ins., 34 Wash.App. 151, 660 P.2d 307 (1983); Rodenbough v. Grange Ins. Ass'n, 33 Wash.App. 137, 652 P.2d 22 (1982). None is directly on point as to the issue in this case. Both the Abshere and Thompson courts held that a person insured only by reason of his riding in an insured vehicle at the time of the accident cannot “stack" policy coverage on different vehicles. But the Court of Appeals in both cases did discuss the public policy favoring stacking of UVC. In Rodenbough, the court held that stacking did not apply to personal injury coverage. The court, however, noted the public policy distinction between voluntary personal injury coverage and mandatory UVC. The language of Abshere, Thompson and Rodenbough which supports the Liens’ position is dicta. It is unpersuasive to this Court in light of the Washington Supreme Court’s decision in Miller's Casualty Insurance Co. of Texas v. Briggs, 100 Wash.2d 1, 665 P.2d 891 (1983).


author: PETTINE, Senior District Judge.

text:
    Brian FARLAND, John Santos, George A. Johnston, Donald Capps, Jr., Steven Farland, George Altman, Peter Farland and Roland Farland v. T & T FISHING CORPORATION and Medway Marine Corporation, Samuel Snow, Samuel Snow c/b/a Samuel Snow Insurance, Samuel Snow as Vice President of Medway Marine Corporation, Commodore Insurance Company, Ltd., Kentfield Insurance Company, Ltd., Independent Marine and Cargo Services, Independence Marine Services, Inc. and Richard Browning.
    Civ. A. No. 85-0629 P.
    United States District Court, D. Rhode Island.
    Jan. 23, 1986.

      Joseph P. Flannery, Boston, Mass., and Teresa Paiva, Newport, R.I., for plaintiffs.
    Thomas A. Tarro, III and David Oliveria, Providence, R.I., for defendants.
   MEMORANDUM AND ORDER

PETTINE, Senior District Judge.

This case involves the rights of the parties to the insurance settlement proceeds relative to a fishing vessel of the defendant, T & T Fishing Corp., which sank in October of 1980. Currently before the Court are the plaintiffs’ motion for a preliminary injunction, and defendants’ T & T Fishing Corp’s, and Community Loan and Development Corp.’s (“Community”) motions to dismiss.

Factual Background

On October 1, 1985, Plaintiffs, Brian Far-land, et al., became judgment creditors of the defendant T & T Fishing Corporation as a result of default judgments entered by the United States District Court for the District of Massachusetts, in a suit filed in 1983. The claim in that suit was for injuries sustained by the plaintiffs when the sole asset of T & T, a fishing vessel Terry T, sank. The plaintiffs were crew members on the Terry T at the time of the accident.

Community had advanced funds to T & T to purchase the Terry T and had secured the debt with a preferred ship mortgage. Coomunity conditioned the loan on a promise from T & T that it would insure the Terry T and name Community as loss payee under the policy. T & T then sought to obtain a loss policy from defendant Samuel Snow, d/b/a Samuel Snow Insurance Company. Snow, apparently acting as an agent of defendant Medway Marine Corporation (“Medway”), quoted T & T a premium for the coverage, and T & T paid for the protection.

After the vessel sank, T & T and Community discovered that the Terry T had not been insured at the time of the accident. Each filed a lawsuit in Rhode Island Superior Court against defendants Snow, Med-way and the other named insurance companies involved in the process of issuing the coverage, alleging claims of negligence and bad faith. These actions were consolidated and on September 13, 1985, the parties reported to the court that they had reached a settlement. The proposed settlement contemplated a payment to Community by the insurers, which payment would be applied by Community to T & T’s debt.

Upon learning of this lawsuit and settlement, the plaintiffs brought an action against T & T and the insurers in the Providence County Superior Court in an attempt to secure and enforce their judgments out of the proposed settlement funds offerred by the insurers. The request for a temporary restraining order was denied by the state court, and a hearing was scheduled for November 1, 1985. Plaintiffs then commenced this action and sought a temporary restraining order from this Court delaying the disbursement of the settlement funds until after the parties’ priorities to these funds could be established. The plaintiffs asserted that by virtue of their default tort judgments, they had a preferred maritime lien pursuant to 46 U.S.C. § 911, et seq. This Court granted the requested temporary restraining order. This Court also granted Community’s Motion to Intervene on Nov. 15, 1985. Discussion

The first issue I must address before reaching the merits of the motion for preliminary injunction is the appropriateness of this Court’s retaining jurisdiction of this action. I will first dismiss T & T’s assertion that plaintiffs George Altman and Steve Farland’s claims do not satisfy the minimum jurisdictional amount requirements for diversity jurisdiction and therefore the claims of those plaintiffs should be dismissed. As these plaintiffs, like the others, are seeking to have their default judgments determined to be a priority maritime lien pursuant to 46 U.S.C. § 911 et seq., they have established federal question jurisdiction. The issue of whether the plaintiffs have pleaded a federal claim supporting jurisdiction is distinct from whether the plaintiffs have in fact stated a claim for which relief may be granted under the federal statute plaintiffs purportedly invoke. See, e.g., Bell v. Hood, 327 U.S. 678, 681— 83, 66 S.Ct. 773, 775-76, 90 L.Ed. 939 (1946).

A more difficult question is whether this Court should “abstain” from this case so as to avoid duplicative litigation, because the plaintiffs have previously filed a very similar action in the Providence County Superior Court. First, I must rule the well-established doctrine that if a state court has already obtained possession, custody, or control of property, that possession may not be disturbed by any other court. See, e.g., Mandeville v. Canterbury, 318 U.S. 47, 63 S.Ct. 472, 87 L.Ed.2d 605 (1943); Norton v. Bridges, 712 F.2d 1156 (7th Cir.1983). It might be argued that this rule should apply in this case because the plaintiffs are seeking to have the insurance settlement proceeds due to the defendant T & T, applied to the payment of the plaintiffs’ claims; thus, the plaintiffs are seeking the distribution of a particular res which is also at issue in the state court proceeding.

I find, however, that this rule is not controlling here. It is not considered an interference with one court’s exclusive control of a res for another court to adjudicate the right of an individual to that res in an in personam action. See, e.g., Fischer v. American United Life Insurance Co., 314 U.S. 549, 62 S.Ct. 380, 86 L.Ed. 444 (1942); Knaefler v. Mack, 680 F.2d 671 (9th Cir. 1982). Accordingly, in this case I may also determine the rights of the parties to the insurance settlement proceeds without interfering with the Providence County Superior Court’s jurisdiction.

In addition, the state court has not yet actually taken possession, control, or custody of the insurance settlement proceeds. All that transpired in the state court is that a temporary restraining order was denied, and the Nov. 1 hearing has been postponed for a number of weeks. The state court has taken no action with respect to the specific res, the insurance settlement proceeds. Compare Palmer v. State of Texas, 212 U.S. 118, 29 S.Ct. 230, 53 L.Ed. 435 (1909) (appointment of receivers constitutes constructive possession); Empire Trust Company v. Brooks, 232 Fed. 641 (5th Cir.1916), cert. denied, 243 U.S. 655, 37 S.Ct. 480, 61 L.Ed. 948 (1917), appeal dismissed, 245 U.S. 634, 38 S.Ct. 133, 62 L.Ed. 522 (1917) (no appointment of a receiver or actual possession had been affected in state court). I am therefore not limited in this action to an adjudication of the rights of the parties to the insurance settlement proceeds as I would be if the state court did have sufficient possession, custody or control, see Pufahl v. Parks’ Estate, 299 U.S. 217, 57 S.Ct. 151, 81 L.Ed. 133 (1936), but can also order an actual distribution of the property.

Although I have concluded that this action does not come within the rule relating to state court possession of a res, I must also consider whether I should abstain from hearing this case under the Colorado River Water Conservation District v. United States, 424 U.S. 800, 96 S.Ct. 1236, 47 L.Ed.2d 483 (1976) “exceptional circumstances” test. In Colorado River the Supreme Court emphasized “the virtually unflagging obligation of the federal courts to exercise the jurisdiction given them.” “Generally, as between state and federal courts, the rule is that ‘the pendency of an action in the state court is no bar to proceedings concerning the same matter in the Federal Court having jurisdiction.’ ” 424 U.S. at 817, 96 S.Ct. at 1246, (quoting McClellan v. Carland, 217 U.S. 268, 282, 30 S.Ct. 501, 505, 54 L.Ed. 762, 767 (1910)). The Court then went on to identify “exceptional” circumstances which might counsel against the exercise of jurisdiction by the federal court where there is a parallel state proceeding. The use of these factors as well as their exceptional nature were reiterated more recently in Moses H. Cone Hospital v. Mercury Construction Corporation, 460 U.S. 1, 103 S.Ct. 927, 74 L.Ed.2d 765 (1983). A district court, in deciding whether to stay federal proceedings should consider that: (1) the court first assuming jurisdiction over property may exercise that jurisdiction to the exclusion of other courts; (2) the inconvenience of the federal forum may counsel in favor of granting the stay; (3) the desirability of avoiding piecemeal litigation may favor a stay; (4) the order in which jurisdiction was obtained by the concurrent forums in terms of the progress of the two suits should be considered; and (5) the forum whose law provides the rule of decision on the merits should be considered. Only the clearest of justifications will warrant dismissal. See Moses H. Cone, 460 U.S. at 15-29, 103 S.Ct. at 937-44; American Manufacturers Mutual Insurance v. Edward D. Stone, Jr., 743 F.2d 1519, 1525 (11th Cir.1984).

In examining these factors in the instant case, I find no reason why I should not exercise jurisdiction. As to the first factor, I have already considered it above and concluded that this action does not come within the rule relating to state court possession of property. As to the second factor, there is no indication that the federal forum is in any way inconvenient. As to the third factor, my deciding the merits of this case will not result in piecemeal litigation because the plaintiffs have agreed to dismiss the state court action if this Court retains jurisdiction. As to the fourth factor, although the state court first obtained jurisdiction, the action in this Court has progressed further. And as to the fifth factor, it clearly counsels towards my retention of this case as the principal issue to be decided on the merits is whether or not the plaintiffs have a priority maritime lien pursuant to 46 U.S.C. § 911 et seq. Accordingly, I will now adjudicate the merits of this action and determine whether the plaintiffs are entitled to a preliminary injunction.

Plaintiffs claim that they are entitled to a portion of the insurance settlement proceeds because they are holders of a preferred maritime lien pursuant to 46 U.S.C. § 911 et seq. Under 46 U.S.C. § 953(a), a preferred maritime lien includes a lien for damages arising out of tort. Thus, the plaintiffs assert that the judgments they have obtained from the Massachusetts District Court for personal injuries sustained when the fishing vessel Terry T sank, constitute liens for damages arising out of tort. Because the insurance settlement proceeds are the only assets, if any, that T & T possesses, the plaintiffs claim that their liens attach to that money and that their judgments should be satisfied from the proceeds before T & T pays off its other creditors, i.e., Community.

The plaintiffs, however, cannot prevail on this argument. The law is well settled that the priorities they seek to rely on apply only in a proceeding in rem in admiralty. Thus, plaintiffs’ tort judgments would only give rise to a preferred maritime lien in an action involving the sale or foreclosure of the ship. Once the ship itself is destroyed, as has occurred here, a proceeding in rem is no longer possible, and the priorities established by the admiralty statute no longer apply. See 46 U.S.C. § 953; see also e.g., The Galena, Dubuque, Dunleith, & Minnesota Packet Co. v. Rock Island Railroad Bridge, 73 U.S. (6 Wall.) 213, 216, 18 L.Ed. 753, 755 (1867) (proceeding in rem is the remedy afforded for the enforcement of maritime liens arising out of tort claims); West of England Ship Owners v. Patriarch Steamship Co., 491 F.Supp. 539, 542 (D.Mass.1980) (referring to party’s acceptance of position that a maritime lien may be executed only by an admiralty court in an in rem proceeding against the vessel or the proceeds after a judicial sale of the vessel, and that the lien is extinguished upon the loss or destruction of the vessel).

In addition, the plaintiffs seek to attach their lien to settlement monies which are the result of suits by T & T and Community because of various agents’ and insurance companies’ failure to insure. All of the cases I have found have uniformly held that a lien on a ship does not transfer into a lien on the insurance proceeds paid as a result of loss or damage to the ship. Walsh v. Tadlock, 104 F.2d 131 (9th Cir.), cert. denied, 308 U.S. 584, 60 S.Ct. 107, 84 L.Ed. 489 (1939); The Donald T. Wright, 30 F.Supp. 610 (W.D.Ky.1939); A.M. Bright Grocery Co. v. Lindsey, 225 Fed. 257 (S.D.Ala.1915). This rule of law is consistent with a similar principle in insurance law generally, i.e., in the area of fire insurance, one who has a mere lien only on the insured property has no claim to the insurance money realized by the insured. See, e.g., Peoples State Bank of EUinwood, Kansas v. Marlette Coach Co., 336 F.2d 3 (10th Cir.1964); Michigan Fire and Marine Insurance Company v. Genie Craft Corp., 224 F.Supp. 636 (D.Md.1964). While the funds at issue in this case are not per se insurance proceeds, but rather money to be paid in settlement as a result of a suit for failure to insure, I believe that these settlement funds should be treated in the same manner as insurance proceeds because an insurance contract or the lack thereof is the basis for the settlement funds.

For the above stated reasons, I conclude that the plaintiffs cannot rely on the federal admiralty statute to press their claim of having a priority lien. The plaintiffs do have the right, however, to proceed in personam against T & T so as to execute their judgment liens. The question then becomes whether the settlement monies previously referred to are an asset of T & T’s which the plaintiffs can proceed against or whether that money is, in fact, Community’s.

The settlement is a result of separate suits between T & T and the insurance companies and agents and Community and the insurance companies and agents. Thus, it might be argued that, at least in part, the settlement monies belong to T & T, itself. But, Community was the intended loss payee under the insurance policy T & T sought from its agent. But for some mix-up, Community would have been the beneficiary of insurance proceeds paid on the policy. Therefore, it is only logical to treat the settlement monies as one would an insurance policy — as a contract with the proceeds belonging to whoever is the loss payee. Consequently, the settlement monies are an asset of Community, not T & T, and the plaintiffs have no cause of action against Community. See West of England Ship Owners Mutual Protection and Indemnity Association v. Patriarch Steamship Co., 491 F.Supp. 539 (D.Mass.1980). Accordingly, there is no reason to bar the completion of the settlement of the Superi- or Court cases, and the preliminary injunction is dissolved. Plaintiffs, of course, may proceed against any assets proven to belong to T & T.

      . Defendant, T & T, has withdrawn its earlier contention that the plaintiffs are collaterally es-topped from proceeding in this court by the denial of their motion for temporary restraining order by the Providence County Superior Court. It is unclear from defendant’s pleadings, however, whether T & T still asserts that this Court should "abstain” from hearing this case on the grounds of avoiding duplicative litigation, especially given that T & T, in its most recent brief, has failed to argue the import of the numerous pages of C. Wright, A. Miller, E., Cooper Federal Practice and Procedure (1978 & Supp.1985) which it attached to its memorandum of October 11, 1985, as I had requested. Nonetheless, I must address these issues as they relate to the jurisdiction of this Court.

      . In addition, there is diversity jurisdiction for six of the eight plaintiffs. As for the other two plaintiffs whose claims fail to satisfy the jurisdictional amount requirement, I can exercise ancillary jurisdiction over their actions. Ancillary jurisdiction is often exercised to allow the federal court to hear the claims of all persons to given property, or in this case to the settlement monies. See, e.g., Freeman v. Howe, 65 U.S. (24 How.) 450, 16 L.Ed. 749 (1860); see also 13 Wright, Miller & Cooper, supra, § 3523 at 87-89.

      . The United States Supreme Court has been unwilling to use the name "abstention" for the doctrine discussed in the text, but clearly recognizes this category of cases as one in which federal courts should decline to exercise their jurisdiction in certain cases. See Colorado River Water Conservation District v. United States, 424 U.S. 800, 96 S.Ct. 1236, 47 L.Ed.2d 483 (1976). The commentators, however, have identified this doctrine as a fourth category of abstention used to avoid duplicative litigation. See 17 C. Wright, A. Miller, E. Cooper, Federal Practice and Procedure § 4247 (1978 & Supp. 1985).

      . I would note the difference in treatment in the case law between the insurance proceeds cases discussed in the text and those cases where the owners of the ship had a claim against others arising out of the operation of the ship and wrongful acts done to it. In the latter cases, a lien against the ship attaches to the proceeds which are recovered by reason of such a claim for damages. See, e.g., The Donald T. Wright, 30 F.Supp. 610 (W.D.Ky.1939).


author: DUFF, District Judge.

text:
    LYONS SAVINGS AND LOAN ASSOCIATION, an Illinois Banking Corporation, Plaintiff, v. GEODE INC. a/k/a Geode Company, an Arizona General Partnership, E. Rusell Riggs, Betty M. Riggs, Bradford R. Riggs, Anne Riggs, Robert C. Riggs, Sheree Riggs, Thomas S. Davies and Christine Davies, as Individuals, Defendants.
    No. 85 C 1873.
    United States District Court, N.D. Illinois, E.D.
    Jan. 23, 1986.

      Douglas Drenk, Guerard, Konewko & Drenk, Ltd., Wheaton, Ill., for plaintiff.
    William M. Stevens, Barbara Frick, Rooks, Pitts & Poust, Chicago, Ill., for defendants.
   MEMORANDUM OPINION

DUFF, District Judge.

This matter comes before the court on Defendants’ motion entitled “Motion to Dismiss and/or for Summary Judgment on Plaintiff’s First Amended Complaint or, in the Alternative, to Transfer to Arizona”.

FACTS

This action arises from a loan plaintiff Lyons Savings and Loan Association (“Lyons”) made to defendant Geode Company (“Geode”). Lyons is an Illinois banking corporation. Geode is a general partnership organized under the laws of and doing business in Arizona. The partnership is comprised of defendants E. Russell Riggs, Betty M. Riggs, Bradford Riggs, Anne Riggs, Robert Riggs, Sheree Riggs, Thomas S. Davies and Christine Davies. These defendants are all citizens and residents of Arizona.

According to the affidavits submitted, the negotiations for this loan were initiated in 1983, after Geode failed to close on a contract for the sale of Arizona property to Michael C. Birnkrant (not a party to this action). Michael B. Farrington, Vice President of BA Mortgage of Chicago, arranged the financing by Lyons for that transaction. When the sale to Birnkrant failed, Mr. Farrington obtained Lyons’ approval to offer the financing package to Geode.

Lyons prepared a loan commitment, dated September 23, 1983, signed by Laurance B. Miller, Chairman of Lyons, for acceptance by Geode. Mr. Farrington presented the loan commitment to Geode at a meeting in Maricopa County, Arizona, on September 28, 1983. Geode accepted the loan commitment subject to additional terms set forth in Geode’s September 28, 1983 letter. This letter and the acknowledgment by Farrington on the face of the loan commitment evidence Geode’s intent not to go forward if Lyons did not accept Geode’s additional terms. It is clear that no contract was formed until Lyons accepted those terms on October 3, 1983 in Illinois.

The transaction was closed in Arizona and the Note evidencing the loan is dated November 7, 1983. The Note, drafted by Lyons, states that payment is to be made to an Illinois corporation, that interest, to be charged in the event of default, is to be at a rate charged by Continental Illinois Bank and Trust Company of Chicago or First National Bank of Chicago and that the rights and obligations of the parties are to be governed by the laws of the State of Illinois.

A dispute has arisen between the parties as to Lyons’ interest in the proceeds from the sale of the property. Geode filed suit for declaratory relief in Arizona on February 22,1985. Lyons filed suit in the Circuit Court of DuPage County, Illinois, on February 25, 1985. The DuPage action was removed to this court on March 3, 1985. On July 25,1985, the United States District Court, District of Arizona, denied Lyons’ motion to dismiss for lack of personal jurisdiction and stayed further proceedings pending this court’s ruling on the motion presently at issue.

DISCUSSION

Defendants argue that this court has no personal jurisdiction over them since they are not subject to Illinois long-arm jurisdiction and since they do not have sufficient “minimum contacts” with the state of Illinois to satisfy due process. The Illinois long-arm statute confers jurisdiction over non-residents who transact business within the state. A single act may be enough to find that business was transacted within the state if that act forms the basis of plaintiff’s claim. Plaintiff’s claim must “lie in the wake” of the commercial activities by which it is alleged that defendant submitted to the jurisdiction of Illinois courts. Financial Management Services, Inc. v. Sibilsky and Sibilsky, Inc., 130 Ill.App.3d 826, 86 Ill.Dec. 100, 474 N.E.2d 1297 (1st Dist.1985).

In Financial Management, the Illinois appellate court found that Michigan residents were subject to Illinois jurisdiction where they had executed, in Michigan, a power of attorney which gave plaintiff’s general manager authority to execute a promissory note. The note was entered into in Illinois and payment was to be made to an Illinois corporation. Similarly, the agreement between Geode and Lyons was formed in Illinois when Lyons accepted the conditions to the loan commitment submitted by Geode. The funds loaned to Geode came from Lyons in Illinois and Geode was obligated to make payments to Lyons in Illinois. As in the Financial Management case, these defendants are subject to Illinois long-arm jurisdiction.

Jurisdiction in the Financial Management case was also sustained on due process grounds and should likewise be sustained here. Subjecting the Geode defendants to Illinois jurisdiction does not offend the “traditional notions of fair play and substantial justice” set forth in International Shoe Co. v. Washington, 326 U.S. 310, 66 S.Ct. 154, 90 L.Ed. 95 (1945). Geode has purposefully availed itself of the privilege of conducting business in Illinois by borrowing funds from an Illinois corporation. Geode was aware that the pertinent documents were prepared in Illinois on Lyons’ stationery. The provisions of the Note, particularly paragraph 3.9 which provides for Illinois law to govern, should have alerted defendant to the likelihood of litigation in Illinois.

Defendant also argues that this matter should be dismissed because the Arizona action was filed first and the Illinois Code of Civil Procedure provides for dismissal of a case where “there is another action pending between the same parties for the same cause.” Ill.Rev.Stat. ch. 110, § 2-619(a)(3). Application of the Illinois statute, however, does not turn on the time of filing of the complaint.

The statute which preceded § 2-619(a)(3) was discussed by the Illinois Supreme Court in A.E. Staley Manufacturing Co. v. Swift & Co., 84 Ill.2d 229, 49 Ill.Dec. 276, 417 N.E.2d 1290 (1980). The court stated that the statute and the doctrine of forum non conveniens were interrelated procedural devices to be used together when an action is pending in another forum. The court went on to state that the relevant filing times of the two pending actions is not determinative and that the trial court has the discretion to proceed with an Illinois action, as long as the litigation has a “legitimate and substantial” relation to Illinois. The litigation here has a legitimate and substantial relation to Illinois. The contract was formed in Illinois and plaintiff loaned approximately $8,000,000.00 of Illinois money to the defendant.

As the Staley court indicated, § 2-619(a)(3) is interrelated with the doctrine of forum non conveniens. Considerations of forum non conveniens are applied in the federal courts through 28 U.S.C. § 1404 which is the basis of defendant’s motion to transfer this matter to Arizona. Section 1404(a) provides that:

For the convenience of parties and witnesses, in the interest of justice, a district court may transfer any civil action to any other district or division where it might have been brought.

Defendant argues that this matter should be transferred to Arizona because many of the events which are the subject of this litigation occurred in Arizona and because of the ill health of the principal defendant. Transferring this case to Arizona, however, would only shift the inconvenience to the plaintiff. While the court is concerned for the well-being of defendant E. Russell Riggs, it is believed that this can be accommodated through the use of depositions, if necessary.

The facts in this case militate against dismissing this action under the Illinois Code of Civil Procedure or transferring this case under the federal change of venue statute. The only non-party witness lives and works in Illinois and the documents pertaining to the transaction were drafted in Illinois. The contract was formed in Illinois and the $8,000,000.00 left Illinois for the loan to Geode. It is also apparent from the language of the agreement that the parties contemplated an Illinois forum. Therefore, the interests of justice would best be served by litigating this matter in Illinois.

For these reasons, defendants’ motion to dismiss or, in the alternative, to transfer to Arizona is denied.

      . Sec. 2-209. Act submitting to jurisdiction— Process, (a) Any person, whether or not a citizen or resident of this State, who in person or through an agent does any of the acts hereinafter enumerated, thereby submits such person, and, if an individual, his or her personal representative, to the jurisdiction of the courts of this State as to any cause of action arising from the doing of any of such acts:
      (1) The transaction of any business within this State;
      110 Ill.Rev.Stat. § 2-209