author: NAUMAN S. SCOTT, District Judge.

text:
    William Donald HAILS v. ATLANTIC RICHFIELD COMPANY and De Felice Equipment Company.
    Civ. A. No. 82-1468.
    United States District Court, W.D. Louisiana, Alexandria Division.
    Oct. 16, 1984.

      Führer & Flournoy, Leonard Führer, Alexandria, La., for plaintiff.
    Gist, Methvin, Hughes & Munsterman, Howard B. Gist, III, Alexandria, La., for Highlands Ins. Co.
    Provosty, Sadler & deLaunay, William H. deLaunay, Jr., Alexandria, La., for Atlantic Richfield Co. (ARCO).
    Deutsch, Kerrigan & Stiles, Christopher Tompkins and Bert M. Cass, Jr., New Orleans, La., for Graham and Ins. Co. of North America.
    Phelps, Dunbar, Marks, Claverie & Sims, Clayton G. Ramsey, New Orleans, La., for Horn Const. & Maint., Inc. & North East Ins. Co. & Defelice Equip. Co.
   NAUMAN S. SCOTT, District Judge.

RULING

This matter is before us on plaintiffs Motion to Strike Defendant’s Jury Demand. Argument having been heard and briefs submitted, we find as follows.

FACTS

This is an action brought under the General Maritime Law and the Outer Continental Shelf Lands Act (OCSLA), 43 U.S.C. § 1333, to recover for personal injuries sustained while plaintiff was aiding in the unloading of a vessel. Specifically, plaintiff, a platform worker, alleges that while in the course and scope of his employment, he was sent aboard the M/V BETTY G to help unload cargo, where he was struck by a piece of heavy compressor equipment swinging from a platform based crane. Joined as defendants were Atlantic Rich-field Company (ARCO) as platform owner, De Felice Equipment Company, Inc. (De Felice) as vessel owner and Horn Construction Company (Horn) as crane operator. Horn and De Felice were sued under the General Maritime Law. ARCO was sued under the General Maritime Law and OCS-LA. Plaintiff designated his claim as one in admiralty under Rule 9(h), Fed.R.Civ.P., without benefit of a trial by jury.

Defendant ARCO answered the complaint, and despite plaintiff’s 9(h) designation, requested a trial by jury. It contends that its status as owner of the fixed platform exempts it from admiralty jurisdiction, leaving only jurisdiction under the OCSLA. As authority for this proposition, ARCO cites the OCSLA statute itself, 43 U.S.C. § 1333, and In Re Dearborn Marine Service, Inc., 499 F.2d 263 (5th Cir.1974). Having reviewed the applicable case law, we conclude that defendants’ demand for a jury trial is not well founded.

JURISDICTION

If plaintiff had been injured on a vessel on the high seas, it is clear that admiralty jurisdiction would apply. But because his accident occurred on the Outer Continental Shelf, the Court must determine the effect, if any, of the provisions of the Outer Continental Shelf Lands Act. Smith v. Pan Air Corp., 684 F.2d 1102, 1109 (5th Cir.1982).

OCSLA makes the law of adjacent states, to the extent such law is not inconsistent with federal law, applicable as “surrogate” federal law to the subsoil and seabed of the Outer Continental Shelf and to the platforms erected thereon, 43 U.S.C. § 1333(a). “In 1969, the Supreme Court decided, in Rodrigue v. Aetna Cas. & Sur. Co. [395 U.S. 352, 89 S.Ct. 1835, 23 L.Ed.2d 360 (1969)], that accidents occurring on fixed platforms located on the Outer Continental Shelf are governed by the OCSLA, which ‘deliberately eschewed the application of admiralty principles’ to platforms; that Act requires the application of State law, 395 U.S. at 355, 365-66, 89 S.Ct. at 1837, 1842, 23 L.Ed.2d at 369-70.” Smith v. Pan Air Corp., 684 F.2d at 1109. Thus, it can be assumed that admiralty jurisdiction is lacking if the substantive law applicable is OCSLA-imposed State law. Id. at 1110 fn. 26.

In this ease, however, the accident did not occur on the fixed platform. Plaintiff was on the deck of a vessel when he was injured. Therefore, it would appear that maritime jurisdiction would be appropriate if it can be determined that this case meets the necessary tests for finding such jurisdiction.

In the seminal Supreme Court case of Executive Jet Aviation, Inc. v. City of Cleveland, 409 U.S. 249, 93 S.Ct. 493, 34 L.Ed.2d 454 (1972), the Court determined that admiralty jurisdiction is present where the tort occurs on navigable waters and the wrong bears a significant relationship to traditional maritime activity. 409 U.S. at 268, 93 S.Ct. at 504, 34 L.Ed.2d at 467. Accord, Foremost Ins. Co. v. Richardson, 457 U.S. 668, 102 S.Ct. 2654, 73 L.Ed.2d 300 (1982). Therefore, ápplying that test to the facts before us, we find that this is a maritime case. Plaintiff was injured on navigable waters while performing the traditional maritime activity of unloading a vessel. Clearly this gives rise to maritime jurisdiction. Kamani v. Port of Houston Authority, 702 F.2d 612, 613 (5th Cir.1983); see also, Kermarec v. Compagnie Generale Transatlantique, 358 U.S. 625, 628, 79 S.Ct. 406000, 408, 3 L.Ed.2d 550, 553 (1959). Moreover, it is significant to us that plaintiff was performing these tasks at the request and for the benefit of defendant ARCO. It makes sense to us that if ARCO desires to obtain the benefits of production with the aid of maritime commercial endeavors, then it must accept the responsibility of appearing in admiralty court to answer for wrongs and injustices arising from those endeavors.

Nonetheless, defendant argues that since ARCO is a fixed rig owner, the tort is “land-based” because: 1) the crane involved is an appurtenance to its rig; and 2) any orders or requests to perform work tasks originated from their position as owner on the rig. We find this argument to be without merit.

For jurisdictional purposes, “a tort occurs where the impact of the act or omission produces injury.” Avondale Shipyards, Inc. v. Vessel Thomas E. Cuffe, 434 F.Supp. 920, 927 (E.D.La.1977) (Rubin, D.J.). See, Executive Jet, 409 U.S. at 266, 93 S.Ct. at 504, 34 L.Ed.2d at 466; Harville v. Johns-Manville Prod. Corp., 731 F.2d 775, 782 (11th Cir.1984). “Thus, where a force giving rise to an injury on the waters originates on land, the tort is maritime.” Avondale Shipyards, 434 F.Supp. at 927; See generally, Bible v. Chevron Oil Co., 308 F.Supp. 312 (E.D.La. 1969). Therefore, the fact that plaintiffs injury was caused by a “land-based” crane or work request does not change the maritime nature of his claim. Kamani v. Port of Houston Authority, 702 F.2d at 613; Kelly v. Smith, 485 F.2d 520, 526 (5th Cir.1973), cert. denied sub nom., Chicot Land Co. v. Kelly, 416 U.S. 969, 94 S.Ct. 1991, 40 L.Ed.2d 558 (1974).

In its final argument, ARCO contends that the case of In Re Dearborn Marine Service, Inc., supra, dictates to us that State law must be applied because plaintiff was a platform worker. As explained in Smith v. Pan Air Corp., supra, Dearborn involved a platform worker, Monk, who was on a “stand-by” vessel tied up seventy-five feet from a platform when an explosion occurred on the platform. With the explosion, a “flaming ball of oil” rose above the platform. Carried by the wind, the ball of fire engulfed the vessel, killing all aboard. Monk’s heirs sought to maintain a suit against the platform defendants for negligence under the Death on the High Seas Act, 46 U.S.C. §§ 761-768 and general maritime law. The district court sustained admiralty jurisdiction over these claims. The Fifth Circuit reversed, concluding that “§ 1332(a)(3) of the OCSLA, when read against the background of legislative history outlined in Rodrigue and the increasing judicial and legislative dissatisfaction with strict locality as the sole test of jurisdiction, precludes us from treating Monk’s claim against [the platform defendants] as a suit in admiralty.” 499 F.2d at 276.

“The basic thrust of the Dearborn opinion holding Monk limited to State law remedies (as against the platform defendants) is that Monk, as a platform worker, was only fortuitously on a vessel at the time of the explosion and that, otherwise, there was virtually nothing to distinguish between him and his fellow platform-workers who perished on the platform.” Smith v. Pan Air Corp., 684 F.2d at 1111 (emphasis added). In the present case, Hails, by contrast, was not “fortuitously” aboard the vessel. He was sent there to unload it at ARCO’s request. Furthermore, no other platform workers were involved. .Hence, we find Dearborn clearly distinguishable from the case at hand and decline to follow it.

As (then Chief) Judge Brown stated in his well-reasoned dissent from the denial of rehearing Dearborn en banc:

“We do not have to make either a blue water or Sieracki -ambiguous-amphibious seaman out of (a platform worker) to make maritime principles the source of his (and his heirs’) rights____ To establish the ship-related status, I would apply by analogy the test announced in Offshore Co. v. Robison, 5 Cir., 1959, 266 F.2d 769 and just recently followed in Brown v. ITT Rayonier, Inc., 5 Cir.1974, 497 F.2d 234. The main question under that test is whether ‘the duties which he performed contributed to the function of the vessel as to the accomplishment of its mission____’ Offshore Co. v. Robison, supra, 266 F.2d at 779.”

In Re Dearborn Marine Services, Inc., 512 F.2d 1061, 1063 (5th Cir.1975) (reh’g enbanc denied) (Brown, C.J., dissenting). We find this reasoning persuasive. Clearly, the plaintiff meets this one leg of the Robison test since he was helping to unload cargo when the vessel’s mission was to deliver that cargo to the rig and unload it. Thus, the Court finds plaintiff’s application of admiralty jurisdiction in this case proper.

DESIGNATING 9(h)

Having determined that admiralty jurisdiction applies, it is necessary to determine whether plaintiff’s Rule 9(h) designation deprives defendant of a trial by jury.

In this case two bases of jurisdiction are alleged against ARCO: General Maritime Law and OCSLA. The general maritime law count, which invokes admiralty jurisdiction, is normally tried without a jury on the admiralty side of Federal Court. The OCSLA count, as described infra, employs state law as surrogate federal law and, as such, allows a trial by jury.

In support of its jury demand, ARCO relies heavily on its contention that admiralty jurisdiction does not exist in this case thereby leaving OCSLA as the sole basis of jurisdiction over it. As shown above, however, this is not the case.

The pleading device embodied in Rule 9(h) was enacted to allow the plaintiff to preserve admiralty jurisdiction, its unique rules, remedies and procedure, including the nonjury trial, when the pleadings show that admiralty jurisdiction and some other basis of jurisdiction exists. Romero v. Bethlehem Steel Corp., 515 F.2d 1249, 1252 (5th Cir.1975). That other basis is most commonly diversity or federal question jurisdiction.

In the present case, we have found that the facts alleged by plaintiff establish admiralty jurisdiction over the defendant. This being true, “... (t)he election made available to the pleader pursuant to Rule 9(h) is dispositive____” Harrison v. Flota Mercante Grancolumbiana, S.A., 577 F.2d 968, 986 (5th Cir.1978); Romero, supra; See also, Alaska Barite Co. v. Freighters, Inc., 54 F.R.D. 192, 194-5 (N.D.Cal.1972); Willis v. Woodson Construction Co. (W.D. La.1983), 593 F.Supp. 464 (W.D.La.1983) (Order granting Motion to Strike Jury Demand).

In conclusion, the plaintiff has made his designation properly under Rule 9(h) and the defendant is not entitled to a jury. Accordingly, plaintiffs Motion to Strike the Demand for a Jury from defendant’s answer is GRANTED.

         If we were to hold otherwise, and find that admiralty jurisdiction was not proper, we shudder to think of the results. In our opinion the OCSLA would be expanded to cover a "penumbra” of activities that now clearly reside on the admiralty side of Federal court. We believe this "penumbra”, if it were to be created, would reach far beyond the present scope of the statute and the Congressional intent behind it.


source: Caselaw Access Project

author: CONNER, District Judge.

license: Public Domain

text:
    Charles MILLS, Plaintiff, v. Margaret HECKLER, Secretary of Health and Human Services, Defendant.
    No. 84 Civ. 3555.
    United States District Court, S.D. New York.
    Oct. 16, 1984.
    The Legal Aid Soc., New York City, for plaintiff; Olive L. Clark, Conrad A. Johnson, New York City, of counsel.
    Rudolph W. Giuliani, U.S. Atty., S.D. N.Y., New York City, for defendant; Neal S. Mann, Sp. Asst. U.S. Atty., New York City, of counsel.
   OPINION AND ORDER

CONNER, District Judge.

Plaintiff Charles Mills (“Mills”) brought this action pursuant to 42 U.S.C. § 1383(c)(3), seeking review of a decision by the Secretary of Health and Human Services (“the Secretary”) to deny him social security benefits. The complaint was served on May 25, 1984 and the Secretary’s answer, together with an administrative transcript, was due on July 24, 1984. Rule 12(a), F.R.Civ.P.; 42 U.S.C. § 405(g). On June 28, 1984 the Secretary moved for a sixty-day extension of time to answer. Over plaintiff’s objection, the Court granted the Secretary’s motion; it also declined to order the Secretary to pay plaintiff interim benefits. The matter is now before the Court on the Secretary’s motion for a second sixty-day extension, which would bring to six months the period between plaintiff’s service of the complaint and the Secretary’s answer. Plaintiff objects once again to an extension, and renews his request for interim benefits. For the reasons set forth briefly below, the Court extends the Secretary’s time to answer to November 24, 1984, and orders the Secretary to pay plaintiff benefits from the date her answer was due to the date her answer is filed.

Discussion

In support of her motions for a first and second extension, the Secretary has repeatedly cited the administrative difficulties involved in compiling the relevant documents. She has noted the “limited resources of the Social Security Administration in relation to the large volume of cases it must handle,” and has indicated that “it normally takes approximately 90 to 120 days from the date of service” for preparation of the record. Mann Aff. at 118. Regrettably, the Secretary has not attempted to detail for the Court the progress it has made in preparing the record during the past several months, or to explain why this record should take longer than the “normal” period to compile. Nonetheless, plaintiff cannot deny the existence of severe administrative burdens upon the agency; indeed, the plight of the Social Security Administration has recently been the subject of considerable congressional attention and public debate, and it is well known to the Court.

Plaintiff has argued that the request for a second extension is unreasonable, that “the agency is not without fault in creating the factors that perpetuate delays,” and that it should have been prepared for the onslaught of litigation it fostered by its own policies. Pl.Mem. in Opposition to First Extension at 8. However, the Court is not concerned at this juncture with laying the blame for these delays on any particular individual or policy, nor is it concerned with penalizing the Social Security Administration for what plaintiff perceives to be a “flagrant abuse” of the leniency previously shown by district courts in these circumstances. For this reason, the Secretary’s motion for a second extension of time to answer is granted.

The Court is interested, on the other hand, in balancing against the Secretary’s concerns the needs of a claimant whose statutory right to a speedy review has been substantially eroded, and in providing the Secretary with every incentive to proceed as expeditiously as possible. Plaintiff asserts that the Court can appropriately accommodate these interests by awarding interim benefits, and he has cited in support of his position several cases in which district courts have made similar provisions.

The most widely cited of plaintiff’s authorities is LaBonne v. Heckler, 574 F.Supp. 1016 (D.Minn.1983), wherein the district court granted interim benefits to a claimant whose appeal languished for eight months because the Secretary could not locate the hearing tapes and therefore could not compile a record for review. The court observed that the agency had done its best to keep up with an unprecedented flood of cases, but that it was not thereby excused from its “duty to each and every claimant to act with reasonable speed” Id. at 1019. The court concluded that “[n]o one — even if not entitled to benefits for which they have applied — should be expected to endure a process so cumbersome and full of delays.” Id. at 1018. Noting that an applicant for disability benefits typically has no resources to meet minimum subsistence needs and that such an individual may require immediate assistance to prevent irreparable harm to his well-being, the court concluded that the payment of interim benefits would preserve the needy applicant’s status quo, and was an appropriate exercise of its discretion to formulate equitable remedies. The court ordered that interim payments be made in an amount equivalent to what the claimant would receive if ultimately found eligible, and that the payments cease upon the filing of an answer. Further, the court provided that if the claimant were ultimately found ineligible, the Secretary could utilize its overpayment and recoupment procedures to recover the amounts paid.

The same approach has been followed by other district courts. In Gallo v. Heckler, No. 83 Civ. 4305, slip op. (E.D.N.Y. May 18, 1984), for example, the court awarded interim benefits, recognizing that such an award “protects the rights of claimants who, through no fault of their own, have been deprived of their right to a timely appeal from the denial of benefits.” Id. at 2-3. In the most recent case cited by plaintiff, Gomaz v. Heckler, 591 F.Supp. 1122 (E.D.Wis.1984), the district judge ordered payment of interim benefits, retroactive to the date the Secretary’s answer was due, to effect “a retroactive preservation of the status quo for those weeks when the progress of [the] litigation was stymied.” Id. at 1127.

The Secretary raises several objections to the Court’s granting plaintiff interim benefits in this case. She argues, first, that the Court is without authority to order interim benefits because payments are permitted under 42 U.S.C. § 405(i) only upon a “final decision” by the Secretary or a “final judgment” by a court that a claimant is “entitled” to benefits. The Secretary asserts that there is no entitlement to benefits unless the claimant is under a disability and has satisfied the other criteria set forth in the relevant statutory provisions. Since no such findings have been made with regard to Mills, the argument continues, an award of interim benefits would violate the statutory prohibition.

While there is some logic to this argument, it will not carry the day for the Secretary. The Court notes, first of all, that in Saunders v. Schweiker, 508 F.Supp. 305 (W.D.N.Y.1981), the case cited by the Secretary in support of her position, the district court did not conclude that it was without authority to grant interim benefits. Rather, the court expressly declined to decide the question because it was remanding the matter to the Secretary. Moreover, in White v. Mathews, 559 F.2d 852 (2d Cir. 1977), the Court of Appeals for the Second Circuit ruled that 42 U.S.C. § 405(i) was no bar to an award of interim benefits where claimants were subjected to protracted delays at the administrative hearing stage. The court stated:

This section is plainly directed at the ordinary situation in which payments become due after favorable administrative adjudication, or judicial review under § 405(g). We do not read § 405(i) as excluding the possibility of interim payments ordered by a court exercising its remedial power.

The Secretary has also presented an alternative argument that some of the cases cited by plaintiff are factually distinguishable from the instant case because they involve interim payments during a remand period while this case involves payment during the Secretary’s time to answer the complaint in the district court. Def.Mem. at 3. This argument is neither correct nor persuasive. Defendant directs the Court’s attention to LaBonne, supra, stating that the court there awarded interim benefits pending a decision on remand. In LaBonne, the Secretary moved that several cases be remanded for further proceedings because of lost or inaudible tapes. Plaintiffs opposed the motion and requested that interim benefits be paid pending the filing of the Government’s answers. The court ordered that the agency make such interim payments, and that the payments “céase upon the agency’s filing of an answer to the complaint.” 547 F.Supp. at 1020. Thus, it appears that LaBonne is factually indistinguishable from this case. Moreover, other courts have followed LaBonne. In Gomaz v. Heckler, supra, for example, the district court for the Eastern District of Wisconsin entered an order for payment of interim benefits identical to that requested here.

A number of the authorities plaintiff cites do indeed involve interim payments during a remand period, and thus the Secretary’s argument is not entirely baseless. However, the Secretary has drawn a distinction without establishing a meaningful difference. Nowhere does she offer any legal or practical basis for denying plaintiff’s motion on this ground, and it may well be that the only difference between this case and the remand cases is that the Secretary has not yet conceded that the record here is lost. The Government does say that the period between a complaint and answer is “comparatively brief,” and that payment of interim benefits will impose an administrative burden on the agency. Def.Mem. at 3. While this Order may well impose some burden on the agency, the Court has already concluded that it must consider as well the interests of a needy claimant in a prompt review of the agency’s denial of benefits. Having reviewed plaintiff’s authorities, some of which involve eight-month delays in the filing of an answer, and having been provided with no progress report on the compilation of an administrative record for review of plaintiff’s claim, even after four months have passed, the Court cannot agree with the Secretary’s assessment of this delay as “brief,” nor can it share her confidence that an answer will soon be forthcoming. The Court can hope, however, that its Order will provide the agency with any necessary incentive to proceed expeditiously.

For the foregoing reasons, the Court grants the Secretary’s motion for a second extension of her time to answer, and also grants plaintiff’s request for payment of interim benefits for the period commencing on July 24, 1984, the date the Secretary’s answer was due, and continuing until such answer is filed. Payment shall be made at a rate equal to that at which plaintiff will be compensated if found eligible. If the Court ultimately determines that the plaintiff is not entitled to receive such benefits, the standard recoupment procedures applicable in any case of overpayment shall be available to the Secretary.

SO ORDERED.

      . The Secretary does not deny that plaintiff, who allegedly suffers from severe cervical fusion, arthritis, hypertension, an ulcer, shortness of breath and bronchitis, is in a difficult financial position. The affidavit he submitted in support of his petition to proceed in forma pauperis indicates that as of May 1984, he was receiving $661 monthly in company disability benefits and Worker’s Compensation, and that he had less than $25 worth of cash or property. He had moved in with a friend after losing all of his furnishings because he could not pay a storage bill. Ex.A. to Pl.Mem. in Opp. to First Extension.


author: SWEET, District Judge.

text:
    NECA INSURANCE, LTD., Plaintiff, v. NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA., and J.F. Buchanan Management Company, Inc., Defendants.
    No. 84 Civ. 5097 (RWS).
    United States District Court, S.D. New York.
    Oct. 16, 1984.

      Quirk & Bakalor, P.C., New York City, for plaintiff; Jeffrey J. Ellis, Richard Bakalor, New York City, of counsel.
    Kroll, Pomerantz & Cameron, New York City, for defendant National Union Fire Ins.; Roy E. Pomerantz, New York City, of counsel.
    Schwarzfeld, Ganfer, Shore & Rosenblum, New York City, for defendant J.F. Buchanan Management Co., Inc.; Neal Schwarzfeld, New York City, of counsel.
   OPINION

SWEET, District Judge.

In this diversity action, plaintiff NIL Insurance Ltd. (“NIL”), a reinsurance company, seeks a recovery against defendant National Union Fire Insurance Co. (“National Union”), an insurance company, and Buchanan Management Company (“Buchanan”), a program administrator, for moneys paid in connection with the settlement of a personal injury action by National Union and for punitive damages. National Union and Buchanan have moved to compel arbitration of claims brought by NIL and to stay this action pending arbitration. National Union’s motion to compel arbitration is granted, and the action is dismissed without prejudice subject to restoration to the calendar upon the completion of the arbitration.

Prior Proceedings

National Union entered into a reinsurance agreement with NIL in which NIL agreed to reinsure 100% of National Union’s ultimate net loss under all policies covered by the agreement entered into by National Union or on behalf of National Union by co-defendant Buchanan. National Union thereafter paid $500,000 in settlement of a personal injury action brought by Martha Abbott (the “Abbott action”) against defendant insured under a policy issued by National Union and reinsured by NIL. National Union unsuccessfully sought repayment from NIL, under the reinsurance agreement. Subsequently, certain funds were paid by a third party to National Union which also drew upon a NIL letter of credit to cover the cost of settling the Abbott action. National Union also served a demand for arbitration on NIL on July 11, 1984. NIL, on July 26, 1984, initiated this action and alleges eight causes of action in its complaint.

The first cause asserts negligence, bad faith, and breach of contract in National Union’s alleged failure to notify NIL of settlement discussions and in the payment of the settlement and related costs. The second cause of action alleges bad faith and negligence on National Union’s part in entering into the $500,000 settlement. The third and fourth causes of action allege negligence and breach of contract on National Union’s part in not accepting various settlement offers and assert that NIL’s liability to National Union, if not totally eliminated by the initial causes of action, should be limited to the amount of these settlement offers. The fifth cause of action seeks a determination of NIL’s liability to National Union as a consequence of the events surrounding the settlement. The sixth cause of action alleges that a fine resulting from delayed payment of the settlement was negligently incurred by National Union and therefore cannot be attributed to NIL.

The seventh cause seeks to determine the status of an $875,000 letter of credit issued by NIL to National Union. Finally, in its eighth cause of action, NIL alleges that both National Union and Buchanan improperly sought to begin their own reinsurance program in violation of obligations owed NIL under the reinsurance contract and demanded a letter of credit in excess of that needed to cover insurance claims, while a previous letter of credit had not been exhausted.

NIL also sought a stay of arbitration in New York State Supreme Court. National Union removed the state court action to this court where it was joined with this action pursuant to Fed.R.Civ.P. 42(a). National Union and Buchanan have now moved to compel arbitration of all disputed issues.

Conclusions

Article XVII of the reinsurance agreement between National Union and NIL provides that:

All disputes or differences arising out of the interpretation of this Agreement shall be submitted to the decision of two Arbitrators, one to be chosen by each party and in the event of the arbitrators failing to agree, to the decision of an Umpire to be chosen by the Arbitrators. ... they shall settle any dispute under this Agreement according to an equitable rather than a strictly legal interpretation of its terms ...

Article XV states that:

The true intent of the Agreement is that the Reinsurers shall, in every case to which this Agreement applies and in the proportions specified herein, follow the fortunes of the Company.
This Article shall not apply insofar as it can be shown during a duly held Arbitration in accordance with Article XVII of this Agreement that the Company has been tortious, willful, wanton, or reckless in handling a claim which is the subject matter of this Agreement.

Article IX provides that:

The Reinsurer agrees to abide by the loss settlements of the Company, it being understood, however, that when so requested, the Company will afford the Reinsurer ... an opportunity to be associated with the Company, at the expense of the Reinsurer ...

And Article XI provides that:

The Reinsurer will fund ... outstanding loss reserves ... by letter of credit.

Article XX states:

SERVICE OF SUIT: It is agreed that in the event of the failure of reinsurers hereon to pay any amount claimed to be due hereunder, Reinsurers hereon, at the request of the Company, will submit to the jurisdiction of any court of competent jurisdiction within the United States and will comply with all requirements necessary to give such court jurisdiction and all matters arising hereunder shall be determined in accordance with the law and practice of such court.

In deciding a motion to compel arbitration, a court must determine 1) whether there is an agreement to arbitrate, 2) whether there are arbitrable claims, and 3) whether there has been a waiver of the right to arbitration. Lubrizol Int’l S.A. v. M/V STOLTARGOBAY, 562 F.Supp. 565, 572 (S.D.N.Y.1982); Janmort Leasing, Inc. v. Econo-Car Int’l, Inc., 475 F.Supp. 1282, 1288 (E.D.N.Y.1979).

It has been noted that a “written agreement for arbitration is the sine qua non of an enforceable arbitration agreement.” Garnac Grain Co. v. Nimpex International, Inc., 249 F.Supp. 986 (S.D.N.Y.1964). Article XVII of the reinsurance contract, quoted supra, imposes a contractual obligation on the parties to this action to arbitrate all disputes or differences arising out of the interpretation of the agreement. NIL suggests that Article XX of the contract quoted above, providing for the rein-surer’s consent to suit, eliminates any obligation to arbitrate.

This clause, however, does not by its terms limit the obligation to arbitrate but simply provides a consent to jurisdiction to enforce payments by Reinsurers granted through arbitration. As the Honorable Charles L. Brieant, Jr. ruled recently when interpreting the relationship between the arbitration and service of suit clauses of a similar contract involving National Union, an arbitration award cannot be enforced without access to the courts. The service of suit clause is therefore designed to guarantee the enforcement of arbitration awards and is not designed to supercede an obligation to arbitrate disputes within the scope of the arbitration clause. See In the Matter of the Petition of J. W. Pryke, et al., For an Order staying the Proceedings in an action Pending in the Court of Common Pleas of Chester County, Pa. Entitled National Union Fire Insurance, et al., 83 Civ. 6156 (CLB) (Sept. 8, 1983) (transcript at 10). Article XX does not vitiate the terms of Article XVII making arbitration a condition of the agreement.

However, the motion requires a determination as to whether or not the claims in this action are within the scope of arbitrable claims as defined by Article XVII. Of course, there is a strong federal policy in favor of construing commercial arbitration clauses broadly. See Hanes Corp. v. Millard, 531 F.2d 585 (D.C.Cir.1976); Junior Belle, Inc. v. New York Coat, Suit, Dress, Rainwear and Allied Workers Union, No. 81 Civ. 5659 (RWS) (slip op. Dec. 9, 1981, at 5). As soon as differing interpretations of the contract’s provisions determine the liabilities of the parties, the dispute is within the scope of the arbitration clause in this contract. See Pryke, supra, at 11.

Claims 1 through 6 hinge upon the interpretation given to various clauses of the contract and are therefore arbitrable. Whether the payment in excess of $500,000 was in settlement of a claim within the meaning of Article IX, was an element of National Union’s net loss within the meaning of Article IV(c), was within Article V's 100% reinsurance clause, and is encompassed by Article XV’s “follow the fortunes” clause are the issues that determine liability on these claims. NIL’s assertions of National Union’s negligence and recklessness do not eliminate a duty to arbitrate, for Article XV states that these defenses can themselves be established in arbitration held in accordance with article XVII.

Liability in the seventh and eighth claims depends upon the interpretation and scope of the reinsurer’s obligations under Article XI, which requires the reinsurer to fund loss reserves by letters of credit. Whether National Union improperly allocated funds from such letters of credit or made demands for unwarranted extensions of credit hinges upon interpretation of the clause itself and the manner in which NIL was obligated to provide funds to National Union. Similarly, the nature of Buchanan’s obligations, as program administrator, to refrain from establishing a competitor reinsurance company depends upon an interpretation of Buchanan’s contractual duties to NIL. Accordingly, the issues presented are arbitrable. Buchanan and NIL have agreed that in the event that the disputes between NIL and National Union were found arbitrable, Buchanan and NIL would agree to a stay of their dispute pending the outcome of the NIL-National Union arbitration.

National Union’s motion to stay proceedings in this action and to compel arbitration of all issues set forth in the complaint, pursuant to the arbitration provision of the contract between the parties, is granted. The claims asserted by NIL against Buchanan are dismissed without prejudice. Judgment will be entered dismissing the action with leave to renew and restore it to the calendar if necessary upon completion of the arbitration without prejudice to any rights of the parties as they exist at this time.

IT IS SO ORDERED.


text:
    Henry R. SILVERMAN; Peter F. Edelman; Adrian B. Werner; HRS/Dallas Parc, Inc., PFE/Dallas Parc, Inc.; and ABW/Dallas Park, Inc., Plaintiffs, v. WORSHAM BROTHERS CO., INC. and Earl S. Worsham, Defendants.
    No. 84 Civ. 5063 (RWS).
    United States District Court, S.D. New York.
    Oct. 16, 1984.
    Russel H. Beatie, Jr., New York City, for plaintiffs; Russel H. Beatie, Jr., Eric R. Finkelman, New York City, of counsel.
    Nitkin, Alkalay, Handler & Robbins, New York City, Kilpatrick & Cody, Atlanta, Ga., for defendants; Jon Paul Robbins, New York City, William H. Boice, Atlanta, Ga., of counsel.
   OPINION

SWEET, District Judge.

Defendants Worsham Brothers Co. (“Worsham Brothers”) and Earl Worsham (“Worsham”) have brought this motion pursuant to Fed.R.Civ.P. 12(b)(2) to dismiss this diversity action for failure of personal jurisdiction. The motion is denied.

Facts

Worsham Brothers is a Tennessee corporation with its principal place of business in Atlanta, Georgia and with an office in Miami, Florida. Worsham Brothers does not have an office in New York State, does not have representatives in New York State, and does not own property in New York State.

Worsham Brothers, through its president Earl Worsham, and plaintiffs Henry Silver-man (“Silverman”), Peter Edelman (“Edelman”), and Adrian Werner (“Werner”) entered into an oral partnership agreement to form Dallas Parc Associates in March of 1982. The partnership planned to have Dallas Parc Associates acquire real property consisting of land and a building in Miami, Florida and to renovate the building into a hotel to be called the River Parc Hotel. On August 16, 1982, this oral partnership agreement was supplemented and formalized in a written contract. An indemnification agreement between Worsham Brothers and Silverman was also signed in August 1982. Both the March, 1982 and August, 1982 meetings were held in Miami, Florida.

Prior to. the March and August 1982 meetings, a series of four meetings was held in New York by the parties to the final agreements. Sworn affidavits submitted by Silverman, Edelman, Werner, and Joanne McGowan allege that there were meetings at 919 Third Avenue, New York, New York, on April 10, 1981, September 18, 1981, December 21, 1981 and January 25, 1982 attended by Worsham and one or more of the plaintiffs. At these meetings the affidavits allege that the terms and conditions of the River Parc agreements were discussed, negotiated, and agreed upon. Worsham, in his sworn affidavit, does not dispute either that these meetings were held or that the discussions at these meetings focused on the structure of the partnership that would develop the River Parc Hotel. However, he does dispute the assertion that the terms of the Dallas Parc partnership were agreed to at these meetings. Indeed, Worsham claims that the inability to agree on the terms of the partnership necessitated the meetings in Miami where final agreements were reached.

Law

At issue in this case are the rights and obligations of the parties arising out of the agreements signed in August 1982. The question posed by the motion to dismiss is whether, under the New York long-arm statute, the four meetings in New York are a sufficient basis to support personal jurisdiction over Worsham Brothers and Worsham. Arrowsmith v. United Press International, 320 F.2d 219 (2d Cir. 1963). The plaintiffs carry the burden of establishing that the defendant is subject to jurisdiction under New York law. Pneuma-Flo Systems, Inc. v. Universal Machinery, 454 F.Supp. 858 (S.D.N.Y. 1978). Although the parties are in basic agreement as to the facts, as set forth above, conflicts have been resolved in favor of the non-moving party. Dogan v. Harbert Const. Corp., 507 F.Supp. 254 (S.D.N.Y.1980).

Personal jurisdiction over Worsham in this action is alleged based on N.Y.Civ.Prac.Law § 302(a)(1). It states:

As to a cause of action arising from any of the acts enumerated in this section, a court may exercise personal jurisdiction over any non-domiciliary, or his executor or administrator, who in person or through an agent:
1. transacts any business within the state or contracts anywhere to supply goods or services in the state

Jurisdiction is proper under C.P. L.R. § 302(a)(1) when “looking at ‘the totality of the defendant’s activities within the forum, purposeful acts have been performed in New York by the foreign corporation in relation to the contract, ‘albeit preliminary or subsequent to its execution.’ ” (citations omitted). Sterling Nat. B. & T. Co. of N. Y. v. Fidelity Mtg. Invest., 510 F.2d 870, 873 (2d Cir.1975). BGW Associates, Inc. v. Valley Broadcasting Co., 532 F.Supp. 1112, 1115 (S.D.N.Y.1984). Under the circumstances of this case, examining the totality of Worsham’s contacts with New York, see Sterling, supra, at 873,1 determine that this test is met. That the contracts were not executed in New York is not determinative, see Moser v. Boatman, 392 F.Supp. 270, 274 (S.D.N.Y. 1975); Dogan, supra, at 261; nor is the fact that certain terms of the contracts may have remained unresolved even after the New York meetings.

In interpreting the scope of § 302(a)(1) the New York Court of Appeals has indicated that “the requisite transaction of business by the nonresident defendant within the forum may consist of such activity on his part as engaging in preliminary negotiations for the contract ...” Longines-Wittnauer Co. v. Barnes & Reinecke, 15 N.Y.2d 443, 261 N.Y.S.2d 8, 18 n. 5, 209 N.E.2d 68, 78 n. 5 (1965), Parke-Bernet Galleries, Inc. v. Franklyn, 26 N.Y.2d 13, 308 N.Y.S.2d 337, 256 N.E.2d 506 (1970). Even accepting Worsham’s assertion that the failure to resolve all issues necessitated the subsequent meetings in Florida, the sequence of four preliminary meetings in New York is sufficient to constitute the necessary “purposeful acts ... performed by the defendant in connection with the disputed contracts.” Dogan, supra, at 260. Implicit in this conclusion is the court’s assessment that the assertion of jurisdiction comports with the guarantees of due process.

Worsham has relied on National Spinning Co. v. Talent Network, Inc., 481 F.Supp. 1243 (S.D.N.Y.1979) in support of his argument that the facts of the case before the court are insufficient to support jurisdiction. National Spinning is distinguishable, however, because there it was “undisputed that agreement on all of the terms set forth in the letter, including the product to be licensed, royalty, rate, terms of payment and duration of the license, was reached outside New York State ...” id., at 1244, and that none of the substantive commercial terms were resolved in New York. Plaintiffs here allege that agreement on most, if not all, of the substantive provisions was reached in meetings in New York. Similarly, in Transatlantic Cement v. Lambert Freres et Cie, 448 F.Supp. 816 (S.D.N.Y.1978), relied on by Worsham, the motion to dismiss for failure of personal jurisdiction was granted only with respect to those defendants whose contact with New York was limited to a single meeting where proposed contract terms were expressly rejected. The court denied the motion to dismiss with respect to defendants who participated over several months in a series of negotiations that eventually produced the contract underlying the cause of action. Id. at 818. The facts in the case before the court are more similar to those which did not lead to dismissal in Transatlantic. Similarly, in Pneuma-Flo, supra, the court dismissed for failure of personal jurisdiction because the defendant’s contacts with New York were limited to post-contract visits. Prior to formation of the contract at issue the defendant had no contact with New York. “The contracts in issue were negotiated as executed in California. There is no claim that the subsequent New York meetings were essential to the ongoing relationship of the parties.” Id. at 866. Based on the record developed thus far, the pre-contract New York meetings in the case before the court appear to be important in defining the terms of the final contract and structuring the relationship among the parties. Of course, subsequent evidence at trial may later require a reexamination of this conclusion.

Conclusion

The four meetings in New York provide a basis for this court to exercise personal jurisdiction over the defendants at this time, and the motion to dismiss is therefore denied. Discovery shall be completed by January 2, 1985, and pretrial orders shall be submitted by January 9, 1985.

IT IS SO ORDERED.


author: PHILIP PRATT, District Judge.

text:
    Norbert A. OGDEN, et al., Plaintiffs, v. MICHIGAN BELL TELEPHONE COMPANY, a Michigan corporation, and Dan Grady, Defendants.
    No. 83-CV-0482.
    United States District Court, E.D. Michigan, S.D.
    Oct. 16, 1984.

      Michael Kubacki, Detroit, Mich., Francis M. Fitzgerald, Mount Clemens, Mich., Theresa M. Smith, Detroit, Mich., John F. O’Grady, Saginaw, Mich., for plaintiffs.
    Robert M. Vercruysse, Barbara S. Kendzierski, Constance M. Ettinger, Detroit, Mich., for defendants.
   MEMORANDUM OPINION AND ORDER

PHILIP PRATT, District Judge.

Plaintiffs commenced this action seeking retirement benefits allegedly denied in violation of the Employee Retirement Income Security Act (“ERISA”), 29 U.S.C. Sec. 1001 et seq., and Michigan Common Law. Plaintiffs have amended their complaint twice. The second amendment was in response to this Court’s decision granting defendant Michigan Bell Telephone Company’s (“Michigan Bell”) motion for partial dismissal pursuant to Fed.R.Civ.Proc., Rule 12(b)(6). Ogden v. Michigan Bell Telephone Co., 571 F.Supp. 520 (E.D.Mich. 1983). Plaintiffs’ complaint now contains, two counts. Count I alleges a violation of fiduciary duties imposed by ERISA on plan fiduciaries. See 29 U.S.C. § 1104. Count II avers a claim under 29 U.S.C. § 1132(a)(1)(B). Presently before the Court is defendants’ motion to dismiss part of Count II pursuant to Rule 12(b)(6).

Plaintiff alleges the following facts. Michigan Bell has from time to time offered its employees enhanced severance benefits under its Management Income Protection Plan (“MIPP”). Michigan Bell has used the MIPP selectively to encourage voluntary terminations by its employees, particularly those eligible for early retirement. Whenever Michigan Bell’s Vice President of Personnel designates a group of employees as affected by a “resizing opportunity,” the eligible employees may accept the offer of MIPP benefits at any time within the designated period. After this designated period lapses, MIPP benefits are unavailable until another “resizing opportunity” is announced.

MIPP benefits were first offered to Michigan Bell employees in the period between October 1, 1980 and December 1, 1980. Plaintiffs allege that defendant Dan Grady, the fiduciary of MIPP, thereafter informed them that MIPP benefits would never again be available. He allegedly stated that anyone considering retirement should not wait for another offering of MIPP benefits. Plaintiffs retired from their employment with Michigan Bell between March 1, 1982 and June 1, 1982 acting in reliance upon Grady’s statements. On June 17, 1982, however, Michigan Bell announced that MIPP benefits would be available to employees who terminated their employment between June 1, 1982 and July 31, 1982. Although more than 800 Michigan Bell employees obtained MIPP benefits by accepting this offer, plaintiffs were ineligible for these benefits because of their earlier retirements.

Plaintiffs’ first amended complaint contained three counts. Count I asserted a claim for breach of fiduciary duties in violation of ERISA. After an allegation that defendants breached their fiduciary duties, plaintiffs included six “sub-counts”, A through F, which purported to be examples of the ways in which defendants breached their duties. Plaintiffs entitled each of the sub-counts with terms which are commonly associated with common law causes of action, i.e., sub-count A was entitled “equitable estoppel”; sub-count B alleged “breach of employment contract”; sub-count C claimed a “breach of employment contract”; sub-count D averred a cause for “promissory estoppel”; sub-count E set for a claim based on “innocent misrepresentation”; sub-count F asserts a claim for negligence.” Previously, defendants brought a motion to dismiss these sub-counts asserting that they were state causes of action preempted by ERISA. The plaintiffs contended that sub-counts A through F were not intended to assert state law claims, but instead alleged facts which would show a breach of fiduciary duty under ERISA. Plaintiffs argued that a body of federal common law has developed to augment the requirements found in ERI-SA. Plaintiffs reasoned that federal courts must refer to state common law in developing the federal common law on this subject which accounted for the sub-counts found in Count I.

This Court ruled that sub-counts B, C, D and E be dismissed because those allegations do not state a claim for breach of fiduciary duty under ERISA. ERISA creates two duties of a fiduciary: (i) the fiduciary must discharge his duties solely in the interest of the plan’s participants, and for the exclusive purpose of providing benefits and defraying the costs of administering the plan; and (ii) the fiduciary must perform his duties with reasonable care. See 29 U.S.C. § 1104. Since these were the exclusive bases for recovery under ERISA, the Court ordered that those sub-counts which did not conform to those requirements be dismissed. Since the statute expressly established the duties of a fiduciary, the plaintiffs could not look elsewhere to create other duties.

Count III of the first amended complaint averred a common law action for fraud. This count was also dismissed because the broad preemption of ERISA, as provided in 29 U.S.C. § 1144(a), precluded such claims.

Although Count II of the first amended complaint incorporated sub-counts A through F of Count I by reference, defendant previously did not challenge the validity of any cause averred in that count. In plaintiffs’ second complaint, the sub-counts are specifically set forth in Count II. According to plaintiffs, Count II asserts a cause of action under section 1132(a)(1)(B) of ERISA. Sub-count A is entitled “Equitable Estoppel” and states that defendants made material representations to plaintiffs regarding the unavailability of the MIPP, that those statements were knowingly false, that they were made with the intent of plaintiffs acting in reliance thereon, that plaintiffs did act in reliance thereon, and that plaintiffs were thereby injured. Sub-count B is labeled “Breach of Employment Contract” and asserts that defendants made statements of company policy that the MIPP benefits would not be made available again, that the “oral and written representations by the defendants became part of the employment contracts of the plaintiffs,” and that Michigan Bell breached that contract by effectuating a resizing opportunity between June 1, 1982 and July 31,1982. Sub-count C is captioned “Breach of Contract to Retire” and states in pertinent part:

2. Statements of the Defendants that no MIPP benefits would again be available had the purpose and effect of encouraging voluntary terminations of employees who would otherwise have waited until MIPP benefits were offered.
3. In exchange for the Plaintiffs’ terminations, the Defendants promised that the plaintiffs would receive the same benefits by retiring immediately that they would receive if they were to terminate at a later date.
4. By the act of voluntarily terminating employment, the plaintiffs accepted the Defendants’ offer for a unilateral contract, and the Defendants thereby were obligated to pay MIPP benefits to the Plaintiffs if MIPP benefits were again made available by the Defendants. The Defendants’ failure to pay MIPP benefits has breached the contract ...

Subcount D is titled “Promissory Estoppel” which contends that the defendants’ statements that MIPP benefits would no longer be offered were reasonably relied upon by plaintiffs, that defendants should have reasonably expected such reliance, that the statements induced plaintiffs to retire earlier than they would have, and that the early termination benefited Michigan Bell. Sub-count E is named “Innocent Misrepresentation” and states the “[Representations and announcements made by the Defendants to the Plaintiffs regarding MIPP benefits were made in the context of the employment relationship and in a context of negotiation over benefits to be paid ... ”, that the statements about the future unavailability of the MIPP were false, that these statements actually deceived plaintiffs, that such reliance injured the plaintiffs, and that the plaintiffs’ loss inured to the benefit of defendants. Finally, sub-count F is labeled “Negligence” and claims that defendants assumed a duty to use reasonable care in advising their employees about the availability of MIPP benefits, that in representing that MIPP benefits would not be available again defendants breached that legal duty, and that the breach was a proximate cause of the damages suffered by plaintiffs.

Defendants have moved for dismissal of sub-counts A through F of Count II pursuant to Rule 12(b)(6). Defendants contend that plaintiff is precluded from asserting these claims by the Court’s previous ruling concerning Count I. Defendants claim that these are merely state causes of action which are preempted by ERISA and not actionable.

Plaintiffs’ original response was similar to their answer to defendants’ motion to dismiss parts of Count I. Plaintiffs argued that Count II is brought under Section 1132(a)(1)(B) of ERISA which contemplates a federal common law that adopts state law concepts. Plaintiffs’ position was that all the concepts in sub-counts A through F were actionable as independent causes of action. Plaintiffs contended: “State law concepts appear throughout Count II because these state law concepts are the only logical source of the federal common law of contract applicable to claims for benefits under employee benefit plans.” Plaintiff’s Response Brief, at page 7. After oral arguments on defendants’ motion were heard, plaintiffs filed a supplemental brief which asserted: “Whether or not the state law headings in Count II of the amended cause of action are retained, it is proper for the court to look to those considerations in: 1. Deciding if the MIPP plan was impliedly amended; and 2. Construing the MIPP plan.” Plaintiffs’ Supplemental Brief, at page 7.

The issue now before the Court, then, is not simply whether federal law preempts this area, but whether the federal common law should recognize claims under § 1132(a)(1)(B) as pled in sub-counts A through F of Count II. In determining this question, the scope of this legislation must be examined.

Last term the Supreme Court in Shaw v. Delta Airlines, Inc., 463 U.S. 85, 103 S.Ct. 2890, 77 L.Ed.2d 490 (1983), recognized the broad preemption of pension law by ERISA. Section 514(a) of ERISA, 29 U.S.C. § 1144(a), preempts “any and all State laws insofar as they may now or hereafter relate to any employee benefit plan” covered by ERISA (emphasis supplied). The Court held that Congress intended § 514(a) to not only preempt state laws dealing with the subjects covered by ERISA, but all laws which directly or indirectly effect or touch upon employee benefit plans. Id. 103 S.Ct. at 2900-01. The Supreme Court reached this conclusion based upon the broad language of § 514(a) as well as several statements in the enactment’s legislative history. For instance, Representative Dent stated: “With the preemption of the field, we round out the protection afforded participants by eliminating the threat of conflicting and inconsistent State and local regulation.” Id. 103 5. Ct. at 2901. Senator Williams also asserted:

It should be stressed that with the narrow exceptions specified in the bill, the substantive and enforcement provisions of the conference substitute are intended to preempt the field for Federal regulations, thus eliminating the threat of conflicting or inconsistent State and local regulation of employee benefit plans. This principle is intended to apply in its broadest sense to all actions of State or local governments, or any instrumentality thereof, which have the force or effect of law.

Id.

Plaintiffs do not dispute that due to this broad preemption, they must base their claims on ERISA. Instead, plaintiffs argue that Count II is based upon § 1132(a)(1)(B) which adopts state law contract principles. Section 1132(a)(1)(B) provides:

(a) A civil action may be brought—
(1) by a participant or beneficiary—
;); * * * * *
(B) to recover benefits due him under the terms of his plan, to enforce his rights under the terms of the plan, or to clarify his rights to future benefits under the terms of the plan ...

Plaintiffs correctly recognize that an action under § 1132(a) is markedly different than an action for breach of fiduciary duties under § 1104. ERISA expressly establishes the duties of a fiduciary and, as this Court previously ruled, due to the broad preemptive application of the Act, it is only those actions which concern breach of those statutory duties which are actionable. ERISA does not establish similar standards in regard to § 1132(a)(1)(B) claims. The plaintiffs fail to recognize, however, that § 1132(a)(1)(B) is not open ended. In order to maintain an action under this sub-section, a plaintiff must be seeking to assert rights “under the terms of his plan.” The employee benefit plan itself must be the basis of such an action. As this Court stated in its previous decision: “While a body of federal common law may be developing on the subject of employee benefit plans, the content of that body of law obviously must conform to the requirements of ERISA.” 571 F.Supp. at 522. Hence, insofar as sub-count C concerns a contract which is not part of the employee benefit plan, an action for a breach of an employment contract to retire is not maintainable under § 1132(a)(1)(B). See e.g., Anthony v. Rysler Truck Lines, Inc., 466 F.Supp. 1287 (E.D.Pa.1979); O’Brien v. Univac, 458 F.Supp. 1179 (D.C. D.C.1978).

Plaintiffs support their adoption of state common law claims in Count II with two arguments. First, plaintiffs contend that concurrent jurisdiction exists in § 1132(a)(1)(B) claims because Congress viewed “[s]tate courts [as] fully competent to adjudicate claims for benefits under ER-ISA because they are applying a body of federal law that is identical to the common law of contract.” Plaintiffs’ Brief, at page 11. Plaintiffs cite the fact that federal district courts have exclusive jurisdiction over a claim for breach of fiduciary duties. 29 U.S.C. § 1132(e)(1). According to plaintiffs, Congress expressly created the substantive law for fiduciaries and intended federal courts to apply those requirements to ensure uniformity. Plaintiffs conclude that Congress did not intend the same result by providing concurrent jurisdiction over these claims. The argument is not wholly convincing.

The fact that state courts have concurrent jurisdiction over federal causes of action does not mean that local law should be applied as the federal standard. For example, concurrent jurisdiction exists under § 301 of the National Labor Relations Act (“NLRA”). E.g., Amalgamated Association of Street, Electric Railway & Motor Coach Employees of America v. Lockridge, 403 U.S. 274, 91 S.Ct. 1909, 29 L.Ed.2d 473 (1971); Harris v. Edward Hyman Co., 664 F.2d 943 (5th Cir.1981). Federal courts, however, have uniformly recognized that “[wjhile State courts may have concurrent jurisdiction [over section 301 case], they are bound to apply Federal law.” E.g., Avco Corp. v. Aero Lodge No. 735, 376 F.2d 337, 340 (6th Cir.1967) (citing Charles Dowd Box Company v. Courtney, 368 U.S. 502, 82 S.Ct. 519, 7 L.Ed.2d 483 (1962)); Teamsters Local Union v. Fargo-Moorehead Automobile Dealers Association, 459 F.Supp. 558 (D.C.N.D.1978). In applying § 301, federal courts do not apply the entire panoply of the common law of contracts of the state. This application would destroy the purpose of § 301 of the NLRA, which was the uniform interpretation and enforcement of collective bargaining agreements. See Textile Workers Union of America v. Lincoln Mills, 353 U.S. 448, 77 S.Ct. 912, 1 L.Ed.2d 972 (1957). Instead, federal courts have adopted a much more guarded approach:

We conclude that the substantive law to be applied in suits under section 301(a) is federal law, which courts must fashion from the policy of our national labor laws____ Federal interpretation of the federal law will govern, not state law____ But state law, if compatible with the purpose of section 301, may be resorted to in order to find the rule that will best effectuate the federal policy.

Id.

Since the purpose of ERISA parallels the NLRA, similar reasoning applies in this situation. Hence, the existence of concurrent jurisdiction, by itself, does not support the independent form plaintiffs plead state law concepts in sub-counts A through F. Concurrent jurisdiction may, however, indicate that the principles to be applied to this section are not so specialized or in need of uniformity to require exclusive jurisdiction in federal courts. See e.g., 28 U.S.C. §§ 1334 and 1338.

Plaintiffs’ second argument is based upon cases which have adopted state contract principles in applying § 1132(a). Plaintiffs rely upon cases such as Woodfork v. Marine Cooks & Stewards Union, 642 F.2d 966 (5th Cir.1981), Murphy v. Heppenstall, 635 F.2d 233 (3rd Cir.1980), Holliday v. Xerox Corp., 555 F.Supp. 51 (E.D.Mich.1982), and Shaw v. Kruidenier, 470 F.Supp. 1375 (S.D.Iowa 1979). The case law established in these decisions do not provide support to plaintiffs’ position. In these cases, the courts adopted certain state contract law concepts for the interpretation of the expressed terms of various pension plans. As plaintiffs concede, these courts did not recognize state law doctrines which do not relate to the application of the express terms of the plans. Plaintiffs in the instant case, however, have plead state law claims which extend beyond the express terms of the plan and concern a modification of the plan or separate contracts or duties. The reason for plaintiffs pleading their claim in this fashion is obvious. Plaintiffs do not qualify for benefits under the express terms of the MIPP, since they were not employed during its implementation. Thus, plaintiffs have attempted to plead causes of actions which would extend or modify the MIPP beyond its expressed terms.

Defendants note that the cases relied upon by plaintiffs only apply state law concepts to interpret expressed provisions of benefit plans and further argue that a claim under § 1132(a)(1)(B) can only be based upon the expressed terms of the plan. Defendants assert that § 1132(a)(1)(B) only allows recovery under “the terms of [the] plan” which defendants argue are those expressed in the written document. Defendants combine this argument with the broad preemptive effect of ERISA to contend that plaintiffs are precluded from bringing any claim unless it is under the expressed written terms of the plan. According to defendants, state law theories of tort and contract cannot be used to alter the unambiguous terms of an ERI-SA plan.

The question of whether the state law claims contained in subcounts A through F should be adopted by the federal common law is a difficult one. The cases which have adopted state law standards in § 1132(a)(1)(B) claims are of limited guidance since, as mentioned, those cases concerned the interpretation of the expressed provisions of benefit plans.

The Supreme Court, however, has developed certain general principles to be applied when considering whether federal common law should adopt state law concepts. First, local principles of law are not appropriate when the federal program or legislative scheme requires uniform standards and applications of law. See DelCostello v. International Brotherhood of Teamsters, 462 U.S. 151, 103 S.Ct. 2281, 2289-91, 76 L.Ed.2d 476 (1983); United States v. Yazell, 382 U.S. 341, 354-58, 86 S.Ct. 500, 507-10, 16 L.Ed.2d 404 (1966) (“applying ‘federal law’ to supersede state law typically relates to programs and actions which by their nature are and must be uniform in character throughout the Nation.”); Clearfield Trust Co. v. United States, 318 U.S. 363, 367, 63 S.Ct. 573, 575, 87 L.Ed. 838 (1943). Often, state laws will vary due to the particular interests or character of the locality. Federal legislation intended to create stability and consistency cannot tolerate “great diversity in results by making identical transactions subject to the vagaries of the laws of the several states.” Clearfield Trust Co. v. United States, supra, 318 U.S. at 367, 63 S.Ct. at 575.

Second, courts must consider “the specific governmental interests and [] the effects upon them of applying state law.” Wilson v. Omaha Indian Tribe, 442 U.S. 653, 672, 99 S.Ct. 2529, 2540, 61 L.Ed.2d 153 (1979); United States v. Kimbell Foods, Inc., 440 U.S. 715, 727-28, 99 S.Ct. 1448, 1457-58, 59 L.Ed.2d 711 (1979); United States v. Little Lake Misere Land Co., 412 U.S. 580, 585, 93 S.Ct. 2389, 2393, 37 L.Ed.2d 187 (1973); United States v. Standard Oil Co., 332 U.S. 301, 310, 67 S.Ct. 1604, 1609, 91 L.Ed. 2067 (1947). Not only should the desirability of uniformity be explored, but also whether the “congressional purpose can best be accomplished by appli cation of settled state rules ...” United States v. Little Lake Misere Land Co., supra, 412 U.S. at 596, 93 S.Ct. at 2399, quoting, RFC v. Beaver County, 328 U.S. 204, 210, 66 S.Ct. 992, 995, 90 L.Ed. 1172 (1946). See U.A.W. v. Hoosier Corp., 383 U.S. 696, 706, 86 S.Ct. 1107, 1113, 16 L.Ed.2d 192 (1966) (“there is no reason to reject the characterization that state law would impose unless that characterization is unreasonable or otherwise inconsistent with national labor policy.”). “State legislatures [and courts] do not devise their [laws] with national interests in mind, and it is the duty of the federal courts to assure that the importation of state law will not frustrate or interfere with the implementation of national policies.” DelCostello v. International Brotherhood of Teamsters, supra, 103 S.Ct. at 2289, quoting, Occidental Life Insurance Co. v. EEOC, 432 U.S. 355, 367, 97 S.Ct. 2447, 2455, 53 L.Ed.2d 402 (1977).

Third, the Court should contemplate the nature of the action pursued and its analogy to state common law claims. See Del-Costello v. International Brotherhood of Teamsters, supra, 103 S.Ct. at 2289; U.A.W. v. Hoosier Corp., supra, 383 U.S. at 701-03, 86 S.Ct. at 1110-12. For example, in U.A.W. v. Hoosier Corp., supra, the Court found the adoption of state principles of contract law appropriate in a § 301 action because “an action for damages caused by an alleged breach of an employer’s obligation embodied in a collective bargaining agreement ... closely resembles an action for breach of contract cognizable at common law.” 383 U.S. at 705, n. 7.

This last consideration appears to underly the courts’ reasoning in the decisions which have applied state principles of contract law to § 1132(a)(1)(B) actions. Interpreting the terms of a benefit plan to determine the rights and obligations it creates is closely akin, if not identical, to contractual interpretation. See Woodfork v. Marine Cooks & Stewards Union, supra, 642 F.2d at 973; Holliday v. Xerox Corp., supra, 555 F.Supp. at 55; Shaw v. Kruidenier, supra, 470 F.Supp. at 1382. This reasoning also bears upon the consideration of the need for uniformity and the accomplishment of the congressional purpose. Claims for breach of a collective bargaining agreement under § 301 requires a federal common law of contracts to ensure necessary consistency; however, a “district court may use forum contract law to flesh out federal principles affecting the respective rights of the parties, but only where it effectuates the policy that underlies federal labor legislation.” Kemmis v. McGoldrick, 706 F.2d 993 (1983). Similar reasoning is applicable here based upon the considerations enunciated by the Supreme Court and the parallel purpose of the NLRA to ERISA. Hence, in determining whether Michigan state law claims should be adopted which extend beyond construing the written terms of the MIPP, the Court must examine the policy and purpose of ERISA and the § 1132 private cause of action.

Congress enacted ERISA as a comprehensive statute designed to protect employees. See e.g., Nachman v. Pension Benefit Guarantee Corp., 446 U.S. 359, 361-62, 100 S.Ct. 1723, 1726-27, 64 L.Ed.2d 354 (1980). “Congress through ERISA wanted to ensure that if a worker has been promised a defined pension benefit upon retirement — and if he has fulfilled whatever conditions are required to obtain a vested benefit ... he actually receives it.” Alessi v. Raybestos-Manhattan, Inc., 451 U.S. 504, 510, 101 S.Ct. 1895, 1899, 68 L.Ed.2d 402 (1981). Section 1132 is one of the instruments Congress provided to implement that purpose. Section 1132(a)(1)(B) allows a participant to “recover benefits due to him under the terms of the plan.” Defendant urges the Court to interpret the “terms of the plan” to mean only those provisions which are written in a singular, integrated document. Adoption of this absolute rule seems unwarranted. There may be circumstances in which employer representations and employee expectations define the terms of a benefit plan beyond the language in the document creating the plan. In this situation, federal preemption would contribute to the defeat of the congressional purpose. Moreover, the Act itself suggests the inappropriateness of defendants’ hard and fast rule. The “Definitions” section of ERISA provides:

The terms “employee pension benefit plan” and “pension plan” mean any plan, fund, or program which was heretofore or is hereafter established or maintained by an employer or by an employee organization, or both, to the extent that by its express terms or as a result of surrounding circumstances such plan, fund, or program—
(A) provides retirement income to employees, or
(B) results in a referral of income ...

29 U.S.C. § 1002(2) (emphasis supplied). Although this statutory language does not indicate that state law concepts should be adopted in interpreting a plan beyond its expressed terms, it does indicate, however, that Congress clearly did not intend that only the expressed written terms of a pension plan were to be covered by ERISA. Therefore, state law concepts which extend beyond the written terms of the plan may be a proper reference in § 1132(a)(1)(B) claims.

This conclusion, however, does not rescue Count II of plaintiffs’ amended complaint. Sub-counts A through F assert contract or tort claims which are independent of the terms of the benefit plan. For example, sub-count F claims that defendants breached their “duty” to properly advise plaintiffs regarding the availability of the MIPP. This claim is not one to “recover benefits due to [them] under the terms of the plan” as required under § 1132(a)(1)(B). The remaining sub-counts suffer from the identical defects. Therefore, Count II of plaintiffs’ complaint is DISMISSED for failure to state a claim under § 1132(a)(1)(B). IT IS FURTHER ORDERED that plaintiffs are granted leave by the Court to file an amended complaint in conformity with this opinion within 20 days.

IT IS SO ORDERED.

      . The factual presentation in this opinion is nearly identical to the Court’s previous Memorandum Opinion at 571 F.Supp. 520, 520-21.

      . Citing Woodfork v. Marine Cooks & Stewards Union, 642 F.2d 966 (5th Cir.1981).

      . Ogden v. Michigan Bell Telephone Co., 571 F.Supp. 520, 522 (E.D.Mich.1983).

      . The Court concluded:
      In sum, Congress has unequivocally indicated that ERISA preempts all state laws concerning employee benefit plans. In addition, ERISA provides a remedy for the breach of fiduciary duty which is alleged by plaintiffs in the case at bar. Accordingly, plaintiffs' claim for common law fraud is preempted by ERISA____ Defendants’ motion to dismiss Count III is therefore granted. 571 F.Supp. at 524.

      . Plaintiffs also posed two procedural oppositions to defendants’ motion. Both contentions are meritless. First, plaintiffs argue that defendants’ motion is actually an untimely motion for reconsideration pursuant to Local District Rule 17 k. According to plaintiffs, the Court already passed upon the propriety of Count II in an earlier opinion. The only issue this Court has had before it concerning Count II is whether plaintiffs are "participants” within the meaning of ERISA. The Court has not passed upon the questions presented here.
      Plaintiffs' second argument is that defendants have waived their right to bring this motion under Fed.R.Civ.Pro., Rule 12(b)(6) because it was not timely filed. This contention is incorrect. Rule 12(h)(1) provides that only Rule 12(b)(2)-(5) motions are deemed waived if not raised in the first responsive pleading. Rule 12(h)(2) specifically states that a Rule 12(b)(6) motion “may be made in any pleading permitted or ordered under Rule 7(a), or by motion for judgment on the pleadings, or at the trial on the merits.”

      . See also 120 Cong.Rec. 29942 (remarks of Senator Javits).

      . 571 F.Supp. at 522.

      . 29 U.S.C. § 1132(e)(1) states:
      Except for actions under subsection (a)(1)(B) of this section, the district courts of the United States shall have exclusive jurisdiction of civil cases under this subchapter brought by the Secretary or by a participant, beneficiary, or fiduciary. State courts of competent jurisdiction and district courts of the United States shall have concurrent jurisdiction of actions under subsection (a)(1)(B) of this section.

      . See also De Sylva v. Ballentine, 351 U.S. 570, 580, 76 S.Ct. 974, 979, 100 L.Ed. 1415 (1956); RFC v. Beaver County, 328 U.S. 204, 66 S.Ct. 992, 90 L.Ed. 1172 (1946); Board of County Commissioners v. United States, 308 U.S. 343, 351-52, 60 S.Ct. 285, 288-89, 84 L.Ed. 313 (1939); United States v. Yazell, 382 U.S. 341, 356-57, 86 S.Ct. 500, 508-09, 16 L.Ed.2d 404 (1966).

      . Generally, the need for uniformity and consideration of the federal interest or purpose coincided. See U.A. W. v. Hoosier Corp., 383 U.S. 696, 702, 86 S.Ct. 1107, 1111, 16 L.Ed.2d 192 (1966). There are situations, however, when federal acts do not necessarily require uniform application to exclude the use of state law, but application of particular state or local rules would defeat the congressional purpose. See RFC v. Beaver County, 328 U.S. 204, 66 S.Ct. 992, 90 L.Ed. 1172 (1946).

      . Several cases have implicitly applied this rule in § 301 claims of the NLRA. E.g., Kemmis v. McGoldrick, 706 F.2d 993, 996 (9th Cir.1983); Seymour v. Hull & Moreland Engineering, 605 F.2d 1105, 1109 (9th Cir.1979).

      . In Shaw v. Kruidenier, 470 F.Supp. 1375, 1382 (S.D.Iowa 1979), the court acknowledged:
      Moreover, it was intended that federal courts would develop a body of federal substantive law in interpreting or construing private welfare and pension plans____ Obviously a body of law does not spring from whole cloth. When the question is what do the terms of the plan mean, and the terms in question are not plainly inconsistent with ERISA, the Court finds no incompatibility between the pre-ERISA contract principles briefed by the parties, and the [c]ongressional purpose to invest private benefit plans ...

      . See supra, note 11.

      . See 29 U.S.C. § 1001(1).

      . Dismissal of all of the sub-counts is necessary because they are not properly plead under § 1132(a)(1)(B). In their supplemental briefs, plaintiffs claim that the sub-counts are various theories in which the pension plan was modified or changed. The language of the sub-counts, however, does not reflect that understanding. The sub-counts relate to contracts which are independent of the benefit plan of Michigan Bell or independent tort claims. Plaintiffs have apparently changed their position since drafting Count II and it does not reflect their new stand. This situation has placed plaintiffs in the inconsistent posture of both defending the sub-counts as drafted, while presenting their new theory of plan modification. This has led to confused arguments by plaintiffs. For instance, plaintiffs stated in their Supplemental Brief, at page 1, "... when the employee has fulfilled all of the conditions of acceptance, but for the requirement of employment, a binding unilateral contract may exist if the employer has impliedly amended the plan.” The mixing of contract theories in this passage and their relationship to Count II as plead, is difficult, if not impossible, to reconcile.


author: GERRY, District Judge.

text:
    Theodore P. GOGOL and Madeline Gogol, his wife, Plaintiffs, v. JOHNS-MANVILLE SALES CORPORATION, Successor to Johns-Manville Products Corporation; Johns-Manville Canada, Inc., formerly known as Canadian Johns-Manville Company, Ltd.; Carey Canadian Mines, Ltd., Subsidiary of Panacon Corporation; Owens Illinois, Inc.; Keene Corporation; Keene Building Products Corporation; Raybestos-Manhattan, Inc.; the Celotex Corporation, Successor in interest to Philip Carey Manufacturing Co., Philip Carey Corp., Briggs Manufacturing Co., and Panacon Corp.; Owens Corning Fiberglas Corporation; and John Doe; Fred Doe; James Doe; Joseph Doe; Tom Doe; Harry Doe; Robert Doe; Ken Doe; Daniel Doe; Michael Doe; Larry Doe; Ben Doe; and Bill Doe; and Pittsburgh Corning Corp., as successor in interest to Unarco Industries, Inc., Defendants. Robert J. SEMPLE and Evangeline Semple, his wife, Plaintiffs, v. JOHNS-MANVILLE SALES CORPORATION, Successor to Johns-Manville Products Corporation; Nicolet Industries; Keene Corporation; Keene Building Products Corporation; Raybestos-Manhattan, Inc.; the Celotex Corporation, Successor in interest to Philip Carey Manufacturing Co., Philip Carey Corp., Briggs Manufacturing Co., and Panacon Corp.; Armstrong Cork Company; and John Doe; Fred Doe; James Doe; Joseph Doe; Tom Doe; Harry Doe; Robert Doe; Ken Doe; Daniel Doe; Michael Doe; Larry Doe; Ben Doe; and Bill Doe; and Pittsburgh Corning Corp., as successor in interest to Unarco Industries Corp., Defendants.
    Civ. A. Nos. 81-1501, 81-1790.
    United States District Court, D. New Jersey.
    Oct. 16, 1984.

      Ergood & Gavin, P.A., Westmont, N.J., for plaintiffs Theodore P. Gogol and Madeline Gogol, his wife; and Robert J. Semple and Evangeline Semple, his wife.
    Budd, Larner, Kent, Gross, Picillo & Rosenbaum, Newark, N.J., for defendant Johns-Manville Sales Corp.
    McCarter & English, Newark, N.J., for defendant Owens-Illinois, Inc.
    Lowenstein, Sandler, Brochin, Kohl, Fisher & Boylan, Roseland, N.J., for Keene Corp. and Keene Bldg. Products Corp.
    Morgan, Melhuish, Monaghan & Spielvogel, Livingston, N.J., for Raybestos-Manhattan, Inc.
    Tuso, Gruccio, Pepper, Buonadonna, Giovinazzi & Butler, P.A., Vineland, N.J., for Celotex Corp.
    Horn, Kaplan, Goldberg & Gorny, Atlantic City, N.J., for Owens Corning Fiberglas Corp.
    Henry R. Simon, Newark, N.J., for Pittsburgh Corning Corp.
    Horuvitz, Perlow & Morris, Bridgeton, N.J., for Nicolet Industries.
    Steedle, Megargee, Youngblood, Franklin & Corcoran, Pleasantville, N.J., for Armstrong Cork Co.
   GERRY, District Judge.

These are two asbestos cases which the court is treating together because the issues are identical. The plaintiffs allege that they contracted the disease of asbestosis as a proximate result of exposure to asbestos-containing products supplied by, among others, defendant Pittsburgh Corning, to the plaintiffs’ employer.

According to the certification of plaintiffs’ counsel, plaintiffs were shipyard workers who worked in close proximity to an asbestos-containing product manufactured by Pittsburgh Corning. Plaintiffs allege that Pittsburgh Corning was negligent in failing to warn of known dangers associated with exposure to asbestos, and that Pittsburgh Corning sold a defective product (strict liability) because it did not contain proper warnings. Relevant to these causes of action is the question of what Pittsburgh Corning knew about the dangers of asbestos.

The plaintiffs would like to introduce into evidence the deposition testimony of Richard Gaze, an officer of Cape Industries, a company which supplied raw asbestos fiber to Pittsburgh Corning. This deposition was taken in connection with two federal cases in Texas in which Pittsburgh Corning was a defendant. The deposition sets forth communications Mr. Gaze had with representatives of Pittsburgh Corning regarding the dangers of asbestos. The certification states that Gaze is unavailable to testify since he is beyond the territorial jurisdiction of the United States. Further, it is stated that Pittsburgh Corning was represented by counsel at the Gaze deposition and had an opportunity to cross-examine the witness and would have had an identical motive in cross-examining Gaze in the Texas cases as would be present in this case. The motion for admission of this testimony against Pittsburgh Corning only is based on Evidence Rule 804(b)(1).

The plaintiffs are also moving to strike the state of the art defense raised by all defendants, claiming that as to the strict liability/failure to warn counts of the complaint, this defense is unavailable under New Jersey law. Further, defendant Raybestos-Manhattan, Inc. (Raymark) is moving for summary judgment on the issue of punitive damages.

1. Rule 804(b)(1) provides:

The following [is] not excluded by the hearsay rule if the declarant is unavailable as a witness:
Testimony given as a witness ... in a deposition taken in compliance with law in the course of the same or another proceeding, if the party against whom the testimony is now offered ... had an opportunity and similar motive to develop the testimony by direct, cross, or redirect examination.

“Unavailability” is defined to cover a situation where the declarant cannot be procured by process or other reasonable means.

The deposition testimony in question fits all the requirements of Rule 804: the declarant is unavailable, the testimony was given at a deposition, and Pittsburgh Corning, according to plaintiffs’ counsel, was present and had the opportunity and motive to develop the testimony (regarding knowledge of dangers).

Therefore, the testimony fits within the Rule 804 hearsay exception and may be admitted against Pittsburgh Corning. The court must here emphasize that our ruling is limited to the issue of admissibility under Rule 804. The defendant, Pittsburgh Corning, remains free at the time of trial to object to the testimony on other grounds. The court has not, in deciding this motion, expressed any opinion, for example, regarding the relevance or probativeness of the proffered testimony.

The motion will be granted.

2. The plaintiffs next move to strike the defendants’ state of the art defense in connection with the strict liability count of the complaint. The strict liability count charges that the defendants’ products were defective “for want of proper, sufficient, and adequate notice, warnings, instructions and packaging.” The plaintiffs, according to the certification of counsel, will stipulate that their cause of action under the strict liability count is limited to the allegation of failure to warn. The certification states that the state of the art defense has been raised by all defendants as to all of plaintiffs’ claims, strict liability included. It is argued that this defense is unavailable in New Jersey in strict liability/failure to warn cases.

As it relates to warning cases, the state-of-the-art defense asserts that distributors of products can be held liable only for injuries resulting from dangers that were scientifically discoverable at the time the product was distributed.

Beshada v. Johns-Manville, 90 N.J. 191, 202, 447 A.2d 539 (1982). The Beshada court expressly rejected the state of the art defense in warning cases:

Essentially, state-of-the-art is a negligence defense. It seeks to explain why defendants are not culpable for failing to provide a warning____ But in strict liability cases, culpability is irrelevant. The product was unsafe. That it was unsafe because of the state of technology does not change the fact that it was unsafe. Strict liability focuses on the product, not the fault of the manufacturer.

Id. at 204, 447 A.2d 539. Knowledge of the dangers of the product is imputed to defendants as a matter of law. Id. at 203, 447 A.2d 539.

On the basis of Beshada, the plaintiff here quite correctly moved to strike the state of the art defense.

On July 30, 1984, the New Jersey Supreme Court decided Feldman v. Lederle Laboratories, 97 N.J. 429, 479 A.2d 374 (1984). That case throws the vitality of Beshada into considerable doubt. Feldman, after holding that strict liability is applicable to manufacturers of prescription drugs, went on to again consider the state of the art defense in warning cases. Feldman states:

When the strict liability defect consists of an improper ... warning, reasonableness of the defendant’s conduct is a factor in determining liability____ Generally, ... available knowledge in defect warning situations [is a] relevant factor in measuring reasonableness of conduct. Generally, conduct should be measured by knowledge at the time the manufacturer distributed the product. Did the defendant know, or should he have known, of the danger, given the scientific, technological, and other information available when the product was distributed; or, in other words, did he have actual or constructive knowledge of the danger.

The court further stated that:

A warning that a product may have an unknowable danger warns one of nothing.

Thus, Feldman seems to resuscitate the state of the art defense in warning cases. The manufacturer will no longer be held, as a matter of law, to know the unknowable. To be sure, Feldman places a heavy burden on the manufacturer of demonstrating that a danger was unknowable. The manufacturer is held to the standard of an expert in the field and is required to keep abreast of scientific advances. Still, these are factual issues, and, legally, it seems that state of the art is now a valid defense.

The Feldman court’s treatment of Beshada is somewhat cryptic. The court states:

If Beshada were deemed to hold generally or in all cases ... that in a warning context knowledge of the unknowable is irrelevant in determining the applicability of strict liability, we would not agree. The rationale of Beshada is not applicable to this case. We do not overrule Beshada, but restrict Beshada to the circumstances giving rise to its holding.

Significantly, Beshada was an asbestos case. Moreover, Beshada is not a case limited to plaintiffs who worked with asbestos in its rawest, least refined form. At least some of the plaintiffs in Beshada, like the plaintiffs here, used asbestos products or materials in the course of their work, or worked with and around insulation products containing asbestos.

Thus, since the Feldman court states that Beshada is restricted to the circumstances giving use to its holding, this court believes that in ruling on these plaintiffs’ motion, it must still follow Beshada, not the modification announced in Feldman. For the circumstances giving rise to the holding in Beshada are the circumstances present here. The import of Feldman, therefore, is that one rule applies to asbestos products, and a different rule applies to non-asbestos products. Although the New Jersey Supreme Court did not explicitly draw this distinction, this court believes it to necessarily be drawn by the language of Feldman.

The defendants argue that this distinction is unconstitutional in that it denies equal protection to asbestos product manufacturers who are singled out for special disfavored treatment compared with manufacturers of non-asbestos products. The defendants cite the case of Suchit v. Baxt, 176 N.J.Super. 407, 423 A.2d 670 (Law Div. 1980), a case which upheld, on equal protection grounds, certain court rules which treated medical malpractice tort claimants differently from non-medical malpractice tort claimants.

This court, conscious of its rather “passive” role as a court sitting in diversity, is hesitant to even address this issue. We are bound to follow the pronouncements of the New Jersey Supreme Court, and we are confident that that distinguished court is no more disposed to set up unconstitutional classifications than this court. We presume that the New Jersey Supreme Court was aware of the constitutional issues posed by Feldman and found them not to be problematic. Like the actions of other branches of government, those of the Supreme Court are presumed constitutional.

We therefore will address the defendants’ argument only cursorily. We start with the unassailable proposition that:

in the areas of economics and social welfare [such as we are presented with here], a state does not violate the equal protection clause ... if the classification has some “reasonable basis” [even if] in practice it results in some inequality.

Dandridge v. Williams, 397 U.S. 471, 485, 90 S.Ct. 1153, 1161, 25 L.Ed.2d 491 (1970), cited in Suchit, supra. Here, then, the distinction made by Feldman need merely be rationally related to some legitimate end the Supreme Court desires to see achieved.

Looking generally at tort law, this court recognizes numerous distinctions made between classes of litigants. Under the New Jersey Tort Claims Act, for example, governmental entities and officers are at a distinct advantage over private actors. Non-medical-malpractice plaintiffs, as we have just learned, are somewhat more favorably treated by New Jersey courts than malpractice claimants. The whole workmen’s compensation scheme places both employers and employees in a position different from those involved in non-job-related accidents. There is nothing unconstitutional about any of the above examples. All of them are the result of legitimate policy decisions of New Jersey (and other states).

Looking at tort law generally, there is a huge distinction made between those defendants subjected to strict liability and those against whom plaintiffs are only entitled to prove negligence. Again, the courts have acted on the basis of public policy. Indeed, Feldman itself is basically a case dealing with the reasons to subject or not subject drug manufacturers to strict liability. Clearly, the chasm between strict liability defendants who may advance a state of the art defense and those who may not is not nearly so wide as the chasm between defendants subjected to strict liability and those who are not.

It needs hardly be stated that asbestos cases are like no other products liability cases in terms of their volume and difficulty, as well as the massive societal problem they manifest. This alone, we believe, warrants the distinction made by the Feldman court. And other reasons can surely be generated for disparate treatment, which, we trust, the New Jersey Supreme Court will elucidate when called upon to do so.

We return to the presumption of constitutional validity. Here, other than making a bald assertion that the classification at issue is infirm, the defendants have told us nothing. Under that circumstance, as well as based on all we have stated earlier, we decline to declare Feldman’s distinction unconstitutional.

Therefore, plaintiffs’ motion will be granted.

3. The defendant Raymark asks for a ruling barring the plaintiffs’ claim for punitive damages. The plaintiffs are asking for punitive damages on both theii negligence and strict liability/failure to warn causes of action.

The defendant advances a number of arguments as to why such damages should not be allowed:

1. As a matter of policy, punitive damages should not be awarded where a defendant is faced with multiple punitive damages claims for the same conduct.
2. Punitive damages are unconstitutional in a civil action.

In the alternative, the defendant argues that if the court refuses to throw out the punitive damage claim, it should sever the trial of that issue from the trial of the compensatory damage issue.

As to public policy, the defendant argues that the punishment and deterrent purposes of punitive damages are adequately served by its having to defend over 14,000 asbestos suits nationwide and pay out compensatory awards potentially in the billions of dollars. There are other arguments that the awarding of punitive damages in the first-tried round of asbestos cases will make it less likely that the defendant will be financially able to pay out compensatory damages to plaintiffs whose cases go to trial later. Then there is an argument that strict liability — with emphasis on the product — and punitive damages — with emphasis on the conduct — are incompatible. Finally, it is said, because the conduct occurred so many years ago, an award would punish actors who are themselves blameless.

In passing upon these arguments, we are conscious of our role as a court sitting in diversity: we are not free to accept these arguments unless the New Jersey Supreme Court has accepted them; and if the New Jersey Supreme Court has not addressed these arguments, we must attempt to predict its disposition.

Significantly, Judge Ackerman, in Gold v. Johns-Manville, 553 F.Supp. 482 (D.N.J. 1982), and Judge Fisher, following Gold, in Wolf v. Procter & Gamble, 555 F.Supp. 613 (D.N.J.1982), have predicted that the New Jersey Supreme Court would not permit punitive damages in the strict liability context. But see Cinnaminson Township v. U.S. Gypsum, 552 F.Supp. 855 (D.N.J.1982—Thompson) (contra). These courts reasoned that under the New Jersey Supreme Court’s decision in Beshada v. Johns-Manville, 90 N.J. 191, 447 A.2d 539 (1982), punitive damages, with their emphasis on conduct, are not compatible with the product-orientation inherent in strict liability. Importantly, the Gold court refused to extend its holding to include asbestos negligence claims. Thus, under Gold, where a plaintiff sues under both theories, he may still be entitled to punitive damages on the negligence theory. Here, of course, the plaintiffs are suing on both theories.

Because of a New Jersey court decision which deals with strict liability and punitive damages, a decision issued more recently than the decisions of the federal courts, we reach a different result than the Gold and Wolf courts. We agree with the views most recently expressed by the New Jersey Appellate Division in Fischer v. Johns-Manville, 193 N.J.Super. 113, 472 A.2d 577 (App.Div.1984, per J. Pressler). The Fischer court persuasively explained that Beshada merely relieves the plaintiff of the obligation of proving fault. It does not preclude the plaintiff from doing so in an egregious case.

We further concur with the Fischer court’s rejection of the other policy grounds advanced by the defendant here. The contention that the presently constituted corporation should not be punished for the acts of the prior corporate principals ignores the concept of the corporation as a legal entity. See also Moran v. Johns-Manville, 691 F.2d 811 (6th Cir.1982). The argument regarding the effect of mass litigation has a certain validity, but we are not comfortable accepting it, again for the reasons persuasively advanced in Fischer.

4. Constitutionality. The defendant argues that punitive damages are de facto a criminal sanction, and that it would be unconstitutional to subject defendant to this sanction without affording defendant the procedural safeguards present in criminal cases; e.g., the heightened burden of proof, the protection against double jeopardy, etc.

The court, in the faee of centuries of punitive damages litigation, is at a loss as to how to address this contention. The defendant does not cite a single case on which the court might rely in reaching such a radical conclusion. Accordingly, we will reject the defendant’s conclusory argument that punitive damage claims constitute a criminal action. (The Kennedy v. Mendoza-Martinez case, 372 U.S. 144, 83 S.Ct. 554, 9 L.Ed.2d 644 (1963) on which defendant relies is so clearly irrelevant that it does not warrant discussion.)

5. Severance. This motion will also be denied. It appears that, at least as to his negligence claim, the plaintiff will have to show knowledge of danger (via the Sumner Simpson papers, et al). To bifurcate would require the jury to hear the same evidence twice, not a very economical result.

Plaintiff shall submit an appropriate order on the punitive damages issue.