author: BOWEN, District Judge.

text:
    CAROLINA FURNITURE COMPANY, INC., Plaintiff, v. RHODES, INC. and Kincaid Furniture Company, Incorporated, Defendants.
    Civ. A. No. CV181-158.
    United States District Court, S.D. Georgia, Augusta Division.
    Nov. 19, 1984.

      J. Patrick Claiborne, William J. Cooney, H. William Sams, Jr., Augusta, Ga., for plaintiff.
    John A. Chandler and James R. McGibbon, David E. Hudson, Augusta, Ga., John M. Murchison, Jr., Charlotte, N.C., for defendants.
   ORDER ON DEFENDANTS’ MOTIONS FOR SUMMARY JUDGMENT

BOWEN, District Judge.

Plaintiff Carolina Furniture Company, Inc. (hereinafter “Carolina”) owns and operates a retail furniture store in Augusta, Georgia. Defendant Rhodes, Inc. (hereinafter “Rhodes”) owns and operates a number of retail furniture stores, including one store located in Augusta, Georgia. Defendant Kincaid Furniture Company, Incorporated (hereinafter “Kincaid”) is a manufacturer of furniture with its principal place of business in Hudson, North Carolina.

Plaintiff’s complaint is composed of three counts. In Count I, plaintiff alleges that the defendants conspired with each other and with other Kincaid distributors to restrain trade and commerce in violation of Section 1 of the Sherman Act (15 U.S.C. § 1). Counts II and III relate only to defendant Rhodes. In Count II, plaintiff alleges that defendant Rhodes, knowingly and maliciously and with intent to injure the plaintiff, interfered with plaintiff’s contract to purchase the Kincaid line of furniture from defendant Kincaid and from other Kincaid distributors. In Count III plaintiff alleges that Rhodes engaged in a deceptive trade practice in violation of the Georgia Uniform Deceptive Trade Practices Act (Ga.Code Ann. § 10-l-372(a)(8)), when, in the course of its business, it disparaged the goods, services, and business of plaintiff by false and misleading representations of fact. Both defendants to this action have filed motions for summary judgment that are ripe for adjudication.

Before reaching the merits of the defendants’ motions, the limited scope of this Court’s inquiry must be clearly defined. Summary judgment may only be entered if it is apparent that “there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law.” Rule 56(c), Fed.R.Civ.P.

The party seeking summary judgment bears the exacting burden of demonstrating that there is no actual dispute as to any material fact in the case. Adickes v. S.H. Kress & Co., 398 U.S. 144, 157, 90 S.Ct. 1598, 1608, 26 L.Ed.2d 142 (1970); Environmental Defense Fund v. Marsh, 651 F.2d 983, at 990-91 (5th Cir.1981). In assessing whether the movant has met this burden, the courts should view the evidence introduced and all factual inferences from that evidence in the light most favorable to the party opposing the motion. Id. All reasonable doubts about the facts should be resolved in favor of the non-moving litigant. Casey Enterprises v. American Hardware Mutual Insurance Co., 655 F.2d [598] at 602 [ (5th Cir.1981) ]. A court must not decide any factual issues it finds in the record, but if such are present, the court must deny the motion and proceed to trial. Environmental Defense Fund v. March, 651 F.2d at 991; Lighting Fixture & Electric Supply Co. v. Continental Insurance Co., 420 F.2d 1211, 1213 (5th Cir.1969). Summary judgment may be inappropriate even where the parties agree on the basic facts, but disagree about the factual inferences that should be drawn from these facts. Id. If reasonable minds might differ on the inferences arising from undisputed facts, then the court should deny summary judgment. Croley v. Matson Navigation Co., 434 F.2d 73, 75 (5th Cir.1970); Marsden v. Patane, 380 F.2d 489, 491 (5th Cir.1967).

Impossible Electronics Techniques, Inc. v. Wackenhut Protective System, Inc., 669 F.2d 1026, 1031 (5th Cir. Unit B 1982). Although summary judgment is not inapplicable to antitrust cases, the Supreme Court has noted that

summary procedures should be used sparingly in complex antitrust litigation where motive and intent play leading roles, the proof is largely in the hands of the alleged conspirators, and hostile witnesses thicken the plot. It is only when the witnesses are present and subject to cross-examination that their credibility and the weight to be given their testimony can be appraised.

Poller v. Columbia Broadcasting System, 368 U.S. 464, 473, 82 S.Ct. 486, 491, 7 L.Ed.2d 458 (1962). In light of the governing standards as set forth above and having acknowledged “that summary judgment is extreme relief which should be approached very cautiously,” Parsons v. Ford Motor Co., 669 F.2d 308, 312 (5th Cir.1982), I will now address the defendants’ motions.

FINDINGS OF FACT

Based on the defendants’ statements of undisputed material facts and the plaintiff’s responses thereto, the following facts emerge as undisputed:

1. Plaintiff Carolina bought furniture manufactured by Kincaid directly from Kincaid for a period beginning in the summer of 1979 and ending in the spring of 1980.
2. Carolina’s furniture store is located in Augusta, Georgia. A furniture showroom owned and operated by defendant Rhodes is also located in Augusta, Georgia.
3. Pretermitting the issue of whether Kincaid had, prior to the time that Carolina began to buy Kincaid furniture directly from Kincaid, made a commitment to sell certain groups of its furniture to Rhodes on an exclusive or semi-exclusive basis, Rhodes believed that Kincaid sold to Carolina furniture in the furniture groups promised to Rhodes on an exclusive or semi-exclusive basis.
4. At the time Carolina was a direct customer of Kincaid, Carolina always purchased furniture from Kincaid and paid by check, and always sought and received delivery of the furniture it bought at Kincaid’s factory in Hudson, North Carolina.
5. Although Carolina’s credit rating was modified as of May 18, 1981, at all times relevant to this suit, Carolina’s credit rating with Lyons — an independent credit reporting publication widely used in the furniture industry — was a 13-9 rating. Under the Lyons’ system, “13” means “inquire for report,” and “9” means “claims to buy always for cash.”
6. Carolina operated its business out of a metal, prefabricated building with few windows, no display windows and cement floors.
7. Carolina did not, during the period it was a direct customer of Kincaid, and at all other times material and relevant herein, display Kincaid furniture in room-like settings with appropriate accessories.
8. Immediately prior to the time he ordered that further direct sales of Kincaid furniture from Kincaid’s factory to Carolina cease, Steve Kincaid, Kincaid’s Executive Vice-President, viewed a number of pictures of the exterior and interior of Carolina’s Augusta furniture store.
9. When it takes on a new customer, Kincaid prefers that that customer be a leading retailer in its (the putative customer’s) marketing area, that is, the customer should be able and willing to advertise, display and adequately stock Kincaid furniture.
10. At all times relevant and material herein, Rhodes has had no contact whatsoever, with regard to Carolina, with any of the other Kincaid customers who have refused to sell Kincaid furniture to Carolina.
11. Carolina, Rhodes and the other Kincaid customers that Carolina alleges will not sell Kincaid furniture to it as a result of pressure from Kincaid are sellers and not manufacturers of furniture.
12. Following Kincaid’s refusal to sell Kincaid furniture to Carolina, Carolina has not gone out of business.
13. Following Kincaid’s refusal to sell Kincaid furniture to Carolina, Carolina has substituted other lines of furniture in place of Kincaid’s furniture. Moreover, Carolina still has some access to Kincaid furniture.
14. Plaintiff Carolina was not obligated to purchase any furniture from defendant Kincaid, nor was Kincaid obligated to supply any furniture to plaintiff, and plaintiff’s sole relationship with defendant Kincaid was to purchase furniture on an “as-ordered” basis.
15. Rhodes had no knowledge of any alleged contractual relationship between plaintiff and defendant Kincaid.
16. No allegedly disparaging statements made by any Rhodes employee were put into writing.
17. No Rhodes officials directed or authorized any disparaging remarks by any of Rhodes’ sales: employees or other employees.

An examination of the record indicates that one further fact is not legitimately in dispute. Although plaintiff Carolina asserts in its response to Kincaid’s statement of undisputed material facts that a genuine issue of fact exists as to whether Kincaid and Rhodes entered into their agreement, whatever the substance of that agreement might have been, prior to the time that Carolina began to buy Kincaid furniture directly from Kincaid in July of 1979, it appears that plaintiff’s assertion is founded on an error made by Rhodes in an interrogatory answer. That error has been corrected, and plaintiff has cited no independent facts to suggest than an understanding under which Rhodes was to buy Kincaid furniture was not entered into prior to the time that Carolina began to buy Kincaid furniture directly from Kincaid. (See Deposition of George Alden Thornton, III, at 45-46; Rhodes’ Supplemental Response to Plaintiff’s Second Interrogatory No. 3.)

CONCLUSIONS OF LAW

A. PLAINTIFF’S ANTITRUST CLAIM

In its brief in opposition to the defendants’ motions for summary judgment, the plaintiff characterizes its antitrust claim:

Plaintiff’s action is based on the theory that the concerted refusal of Kincaid and certain other North Carolina wholesalers to sell to plaintiff, as a result of pressure from defendant Rhodes is a group boycott and constitutes a per se violation of Section 1 of the Sherman Act, 15 U.S.C. § 1. It is a horizontal restraint for businessmen on the same distribution level to conspire to refuse to sell to a particular customer.

Thus, plaintiff argues that the “rule of reason” standard articulated in Standard Oil Co. v. United States, 221 U.S. 1, 31 S.Ct. 502, 55 L.Ed. 619 (1911) is inapplicable to the present case. Plaintiff asserts that the defendants’ conduct in this ease falls into the exception to the rule of reason which mandates per se treatment for “[a]greements or practices which because of their pernicious effect on competition and lack of any redeeming virtue are conclusively presumed to be unreasonable and therefore illegal without elaborate inquiry as to the precise harm they have caused or the business excuse for their use.” Northern Pacific Railway v. United States, 356 U.S. 1, 5, 78 S.Ct. 514, 518, 2 L.Ed.2d 545 (1958). Plaintiff asserts that group boycotts have typically been among those categories of conduct deemed unreasonable per se. See United States v. General Motors Corp., 384 U.S. 127, 145-146, 86 S.Ct. 1321, 1330-1331, 16 L.Ed.2d 415 (1966).

In analyzing plaintiff’s argument, it should be noted that “ ‘there is more confusion about the scope and operation of the per se rule against group boycotts than in reference to any other aspect of the per se doctrine.’ L. Sullivan, Antitrust 229-230 (1977).” United States v. Realty Multi-List, Inc., 629 F.2d 1351, 1366 (5th Cir. 1980); see R. Bork, The Antitrust Paradox 330 (1978). In order to navigate through this confusion without adding to it, constant reference to the policy underlying the utilization of a per se rule of liability must be maintained. Caution must be taken “to determine whether conduct whose apparent purposes, standing alone, might warrant per se treatment are reasonably connected to an integration of productive activities or other efficiency — creating activity in such a manner as to require an inquiry into the net competitive effect under the rule of reason.” United States v. Realty Multi-List, Inc., 629 F.2d 1351, 1367 (5th Cir. 1980). In other words, “[w]hile the boycott concept is infinitely expandable, the per se doctrine ought not to be.” Sullivan, Antitrust 256 (1977), quoted in Oreck Corp. v. Whirlpool Corp., 579 F.2d 126, 131 (2d Cir.) (en banc), cert. denied 439 U.S. 946, 99 S.Ct. 340, 58 L.Ed.2d 338 (1978).

In determining whether to apply a per se test under the facts of this case, the first step is to determine whether the boycott alleged is “horizontal,” a restraint originating between competitors at the same level of market structure, or vertical, a restraint originating between entities at different levels such as manufacturers and distributors.

The reason for focusing on the source of restraints on distributors is economic. Distributors have an incentive to agree among themselves to restrict competition, such as by allocating territories, in order to raise the price they receive for their product because to do so normally increases their profits. Such a horizontal conspiracy, which generates simply an increase in prices, is generally detrimental to consumers and is illegal per se.
Not only does a horizontal among distributors hurt consumers, however; it injures the manufacturer as well because the higher retail price of the product reduces the quantity sold at retail and hence the quantity demanded from the manufacturer. A manufacturer generally prefers that its distributors sell its product for as low a price as possible, given the price at which it sells the product to them, i.e., for as small a markup as possible over the wholesale price, because its sales of the products are normally greater the lower the retail price. See Continental T.V. [Inc. v. GTE Sylvania, Inc.], 433 U.S. [36] at 56 & n. 24, 97 S.Ct. [2549] at 2560 & n. 24 [53 L.Ed.2d 568 (1977) ]. A manufacturer thus will typically encourage intrabrand competition in order to enhance interbrand competition, i.e., the competitiveness of its product with those of other manufacturers. Sometimes, however, a manufacturer will find it advantageous to impose restrictions, such as assigned territories, on its distributors in order to induce them to undertake advertising or promotional activities, to render more or better services to customers, or simply to push the product more vigorously. By facilitating such efforts on the part of distributors, the restrictions tend to increase retail sales of the product, and may do so on balance even if they also generate some increase in the price the distributors charge. Thus, restrictions on intrabrand competition are sometimes a means whereby a manufacturer can increase interbrand competition. Because increasing interbrand competition is generally socially desirable and because intrabrand restrictions are generally not socially harmful when there is significant interbrand competition, manufacturer-imposed, i.e., vertical, restraints are governed by the rule of reason.

Red Diamond Supply, Inc. v. Liquid Carbonic Corp., 637 F.2d 1001, 1004 n. 4 (5th Cir.), cert. denied, 454 U.S. 827, 102 S.Ct. 119, 70 L.Ed.2d 102 (1981).

The fact that Kincaid may distribute some of its own goods does not make it a competitor of Carolina and therefore render Kincaid’s conduct horizontal.

When a producer elects to market its goods through distributors, the latter are not, in an economic sense, competitors of the producer even though the producer also markets some of its goods itself; rather, the distributors are “agents” of the producer, employed because the producer has determined that it can supply its goods to consumers more efficiently by using distributors than it can by marketing them entirely by itself.

Id. at 1005.

On the surface, therefore, it appears that vertical and not horizontal conduct is involved in this case. Plaintiff, however, relies upon Cernuto v. United Cabinet Corp., 595 F.2d 164 (3rd Cir.1979) to allege that this case should be treated as a horizontal restraint in that it involves “the vertical expression of a horizontal desire.” Valley Liquors, Inc. v. Renfield Importers, Ltd., 678 F.2d 742, 744 (7th Cir.1982). Although it is undisputed that Rhodes did not directly contact any of the Kincaid customers who have allegedly refused to sell Kincaid furniture to Carolina, plaintiff contends that Kincaid forced those customers to refuse to deal with Carolina at the behest of Rhodes.

As Judge Posner recognized in Valley Liquors, there is

a certain unreality in the careful parsing of motives that Cernuto seems to require. If a supplier wants his distributors to emphasize nonprice rather than price competition, which as we said is the usual reason why he would restrict his distribution, he will be hostile to price cutters because they will make it harder for his other distributors to recoup the expenditures that he wants them to make on presale services to consumers and on other forms of nonprice competition, and of course the undersold distributors will be equally or more hostile. The motive of supplier and distributors alike could thus be described as wanting to eliminate price cutters yet there would be no per se illegality so long as the supplier was not just knuckling under to the distributors’ desire for less competition. It is difficult to see how a court could distinguish empirically between such a case and the pure antipathy to price competition envisaged by Cernuto.

Id.

In this case, Kincaid had legitimate business reasons for terminating Carolina as its distributor. It is uncontested that Carolina operated its business out of a metal, prefabricated building with few windows, no display windows and cement floors. Carolina did not display Kincaid furniture in accessorized settings. Thus, it is clear that Carolina was not taking steps to emphasize nonprice competition in compliance with Kincaid’s marketing policy of utilizing distributors that were able and willing to advertise, display and adequately stock Kincaid furniture.

While the facts may be disputed as to some of the motivations of Kincaid’s management, it would be impossible to find that Kincaid was motivated solely by impermissible considerations. See Cernuto, 595 F.2d at 170. Under the facts present in this case, I conclude that the conduct alleged is not clearly a “naked restraint of trade.” E.A. McQuade Tours v. Consolidated Air Tour Manual Committee, 467 F.2d 178, 187 (5th Cir.1972), cert. denied, 409 U.S. 1109, 93 S.Ct. 912, 34 L.Ed.2d 690 (1973). Accordingly, I conclude that rule of reason as opposed to a per se rule of liability must be applied to the facts of this case.

Under a rule of reason analysis, the plaintiff must show “that the restriction [it] is complaining about was unreasonable because, weighing effects on both intrabrand and interbrand competition, it made consumers worse off.” Valley Liquor, Inc., 678 F.2d at 745. In order to carry its burden, the plaintiff must prove that Kincaid has substantial market power in some relevant market based on a market share analysis. Muenster Butane, Inc. v. Stewart Co., 651 F.2d 292, 298 (5th Cir.1981); Red Diamond Supply, Inc. v. Liquid Carbonic Corp., 637 F.2d 1001, 1005-06 (5th Cir.), cert. denied, 454 U.S. 827, 102 S.Ct. 119, 70 L.Ed.2d 102 (1981). As Judge Posner has explained,

[a] firm that has no market power is unlikely to adopt policies that disserve its consumers; it cannot afford to. And if it blunders and does adopt such a policy, market retribution will be swift. Thus its mistakes do not seriously threaten consumer welfare, which is the objective that we are told should guide us in interpreting the Sherman Act.

Valley Liquors, 678 F.2d at 745.

In this case, it is undisputed that Carolina has substituted other lines of furniture in place of Kincaid’s furniture and that Carolina still has some access to Kincaid furniture. Exhibit 1 to Kincaid’s statement of undisputed material facts indicates the number of furniture lines carried by Carolina.

In response to these facts Carolina asserts that it has been unable to find a substitute which has the distinct quality and price of Kincaid furniture. In effect, Carolina is asserting that interbrand competition does not act as a “significant check on the exploitation of intrabrand market power” in the relevant furniture market. Continental T.V., Inc. v. GTE Sylvania, Inc., 433 U.S. 36, 53 n. 19, 97 S.Ct. 2549, 2559 n. 19, 53 L.Ed.2d 568 (1977). This bald assertion is not sufficient to avoid summary judgment in light of the evidence presented by Kincaid of the number of different lines of furniture being sold in the Augusta furniture market. Plaintiff has presented no evidence to support its claim that Kincaid furniture is insulated from interbrand competition. See Mendelovitz v. Adolph Coors Company, 693 F.2d 570, 576 (5th Cir.1982). Plaintiff, thus, has made no showing that Kincaid has substantial market power in any relevant market and cannot prevail under a rule of reason analysis.

Accordingly, the defendants’ motions for summary judgment as to plaintiff’s antitrust claim are hereby GRANTED.

B. TORTIOUS INTERFERENCE WITH CONTRACTUAL OR BUSINESS RELATIONSHIP

Having ruled on plaintiff’s antitrust claim, only issues of state law remain. Since substantial time and energy has been expended on discovery and briefing regarding these issues, I choose to proceed with these pendent claims and to rule on the merits of plaintiff’s state law contentions. Henson v. Columbus Bank and Trust Co., 651 F.2d 320, 325 (5th Cir.1981); Pharo v. Smith, 621 F.2d 656, 674-75 (5th Cir.1980).

Plaintiff alleges that Rhodes intentionally interfered with plaintiff’s business relationship with defendant Kincaid and other North Carolina wholesalers resulting in damage to plaintiff’s business income and profits. It is undisputed that Rhodes had no knowledge of any alleged contractual relationship between plaintiff and defendant Kincaid. Moreover, plaintiff concedes that it was not obligated to purchase any furniture from defendant Kincaid and that Kincaid was not obligated to supply any furniture to plaintiff. Significantly, it is uncontroverted that Rhodes had no contact whatsoever, regarding Carolina, with any of the other Kincaid customers who refused to sell Kincaid furniture to Carolina.

Without knowledge of the contractual relationship there can be no intentional interference with the relationship. Allstate Beer, Inc. v. Julius Wile Sons & Co., 479 F.Supp. 605, 612 (N.D.Ga.1979). With no mutuality of obligation, there is no contract with which to interfere. Id. at 613. Moreover, there is no evidence on this case of independently tortious conduct. See NAACP v. Overstreet, 221 Ga. 16, 142 S.E.2d 816 (1965), cert, dismissed, 384 U.S. 118, 86 S.Ct. 1306, 16 L.Ed.2d 409 (1966). Thus, I conclude that under the facts of this case there was no intentional interference with any actual contract in this case.

Given the fact that there is no cause of action available to the plaintiff for tortious interference with any contractual right, plaintiff must look to the more general tort of malicious interference with business relations for relief. It is far from clear whether Georgia recognizes such a cause of action. See W. Welch and J. Ruff, The Business Tort — Interference with Contractual Relationships or Business Expectations, 19 Ga.State Bar Journal 66, 68 (1982). It is the federal decisions interpreting Georgia law, not the decisions of Georgia’s own courts, that have extended protection to unilateral business expectations. See Hayes v. Irwin, 541 F.Supp. 397 (N.D.Ga.1982); aff’d 729 F.2d 1466 (1984); Record Data, Inc. v. Preferred Research of Ga., Inc., No. 78-1339A (N.D.Ga.1979), aff’d, 633 F.2d 581 (5th Cir.1980). Absent some clearer signal from the Georgia courts, I am reluctant to grant relief under the facts of this case. I am not free under the Erie doctrine to create remedies that do not exist under state law. Accordingly, I conclude that plaintiff’s attempt to fall back onto the tort of tortious interference with business relations must fail.

Assuming arguendo that the courts of Georgia would recognize a cause of action for malicious interference with business relations under the facts of this case, I still must conclude that the plaintiff cannot prevail.

In establishing a cause of action for malicious interference with business relations, a plaintiff must demonstrate that the defendant (1) acted improperly and without privilege, (2) purposely and with malice with the intent to injure, (3) induced a third party or parties not to enter into or continue a business relationship with the plaintiff, and (4) for which the plaintiff suffered some financial injury. Record Data, Inc. v. Preferred Research of Georgia, Inc., Civil Action No. C78-1339 (N.D.Ga. Feb. 14, 1979) (Freeman, J.), affd, 633 F.2d 581 (5th Cir. 1980).

Hayes v. Irwin, 541 F.Supp. 397, 429 (N.D.Ga.1982).

It is undisputed that regardless of whether Rhodes actually had exclusive or semi-exclusive rights in the relevant furniture lines, Rhodes legitimately believed that Kincaid was selling to Carolina furniture groups promised to Rhodes on an exclusive or semi-exclusive basis. I conclude that this fact negates the necessary element of malice since Rhodes was entitled under the circumstances to question Kincaid’s relationship with the plaintiff. See Luke v. DuPree, 158 Ga. 590, 124 S.E. 13 (1924); Architectural Manufacturing Co. v. Airotec, Inc., 119 Ga.App. 245, 166 S.E.2d 744 (1969). Rhodes actions clearly were not taken with knowledge that the plaintiff had a right to the furniture in question. Hayes v. Irwin, 541 F.Supp. 397, 429 (N.D.Ga.1982).

Accordingly, defendant Rhodes’ motion for summary judgment as to Count II of plaintiff’s complaint is hereby GRANTED.

C. DISPARAGEMENT

The plaintiff does not appear to seriously contest defendant Rhodes’ motion as to Count III of its complaint. It is undisputed that no allegedly disparaging statements made by any Rhodes’ employee were put into writing and that no Rhodes’ officials directed or authorized any disparaging remarks by any of Rhodes’ sales employees or other employees.

As a corporation the defendant “is not liable for damages resulting from the speaking of false, malicious, or defamatory words by one of its agents, even where in uttering such words the speaker was acting for the benefit of the corporation and within the scope of the duties of his agency, unless it affirmatively appears that the agent was expressly directed or authorized by the corporation to speak the words in question.” Behre v. National Cash Register Co., 100 Ga. 213(1) (27 SE 986). Accord, Garren v. Southland Corp., 237 Ga. 484 (228 SE2d 870); Ga. Power Co. v. Busbin, 242 Ga. 612(4) (250 SE2d 442).

Swift v. S.S. Kresge Co., 159 Ga.App. 571, 572, 284 S.E.2d 74 (1981).

Accordingly, defendant Rhodes motion for summary judgment as to Count III of plaintiff’s complaint is hereby GRANTED.

CONCLUSION

For the reasons outlined above, the plaintiff’s antitrust claims contained in Count I of its complaint are without merit as a matter of law, and the defendants’ motions for summary judgment as to these claims are therefore GRANTED. Plaintiff’s remaining state claims contained in Counts II and III of plaintiff’s complaint and heard under this Court’s pendent jurisdiction are likewise without merit, and defendant’s Rhodes motion for summary judgment as to those claims is also GRANTED. Having considered all claims raised by the plaintiff and having determined that the defendants are entitled to judgment as a matter of law, this case is hereby DISMISSED. The clerk shall enter judgment in favor of the defendants whose costs shall be taxed against the plaintiff.

      . Plaintiffs reliance upon United States v. General Motors Corp., 384 U.S. 127, 86 S.Ct. 1321, 16 L.Ed.2d 415 (1966) and Klor’s, Inc. v. Broadway-Hale Stores, Inc., 359 U.S. 207, 79 S.Ct. 705, 3 L.Ed.2d 741 (1959) is, therefore, misplaced. Those cases involved "illegal horizontal combinations, not permissible vertical impositions." Sports Center, Inc. v. Riddell, Inc., 673 F.2d 786, 791 (5th Cir.1982). It is also significant in this case that plaintiff has not been denied access to other lines of furniture so as to have been effectively driven out of business. See E.A. McQuade Tours, Inc. v. Consolidated Air Tour Manual Committee, 467 F.2d 178, 186-87 (5th Cir.1972), cert. denied 409 U.S. 1109, 93 S.Ct. 912, 34 L.Ed.2d 690 (1973).

      . Plaintiffs repeated reference to a Rhodes inter-office memorandum in which it is noted that "Carolina Freight is ‘cleaning our clock’ on Kincaid case pieces” can best be understood in light of this economic reasoning. Complaints about price do not necessarily suggest illicit price fixing. Such complaints may instead suggest that a particular distributor is emphasizing price over non-price competition contrary to the manufacturer’s chosen distribution scheme.


source: Caselaw Access Project

author: HAROLD H. GREENE, District Judge.

license: Public Domain

text:
    David LEBOUTILLIER, Plaintiff, v. AIRLINE PILOTS ASSOCIATION, INTERNATIONAL AND TRANS WORLD AIRLINES, INC., Defendants.
    Civ. A. No. 83-3841.
    United States District Court, District of Columbia.
    Nov. 21, 1984.
    Robert F. Gore, National Right to Work Legal Defense Foundation, Inc., Springfield, Va., for plaintiff.

      Gary Green, Sarah Perry Fleischer, Air Line Pilots Association, Inc., Washington, D.C., for defendant ALPA.
    Michael A. Katz, New York City, Elliot A. Shaller, Dow, Lohnes & Albertson, Washington, D.C., for defendant TWA.
   MEMORANDUM

HAROLD H. GREENE, District Judge.

This is an action by a former pilot-employee of Trans World Airlines (TWA) against that airline and against the Air Line Pilots Association (ALPA) for reinstatement and other relief. Presently before the Court are defendants’ motions for summary judgment.

I

TWA and ALPA have for many years been operating under an “agency shop” agreement which requires those TWA pilots who are not members of the union to pay to that organization a service charge equivalent to the regular union dues. See section 25 of the current agreement between TWA and ALPA. As a non-member of ALPA, plaintiff was required to pay this charge. However, as one who regards himself as a dissenter from the imposition of this kind of charge, plaintiff has made his displeasure with the fee known by being repeatedly delinquent in his payments and then, at almost literally the last minute, when the union was recommending his discharge or when the discharge was about to become final, making up the delinquency.

These controversies came to a head in June 1983. On April 12 of that year, ALPA advised plaintiff that his account was delinquent in the amount of $386.38, and that under the agreement, unless payment was received within fifteen days, the union would request his discharge. Plaintiff took no action. On May 25 ALPA requested TWA to discharge him, and on June 8 and 9, the company advised plaintiff of his termination effective June 22.

On June 17 and June 23, plaintiff sent in two checks to cover the delinquency, but this fact did not become known to the union staff until June 24. In the meantime, TWA had terminated plaintiff’s employment. On June 24, as soon as the union learned that a check had been received prior to the critical date — June 22 — it requested TWA to reinstate plaintiff. However, before the company took the necessary action, the union further learned that both checks sent in by plaintiff had been dishonored by the bank for lack of sufficient funds, and, in order to have time to study what it should do next, it requested TWA to withhold plaintiff’s reinstatement until further notice. Eventually, ALPA advised plaintiff that it would not request his reinstatement, and this lawsuit followed.

II

Sections 25(D) and (E) of the agreement between TWA and ALPA provide that a pilot who believes that his discharge for failure to pay the service charge obligation was improper may invoke a protest procedure. That procedure includes an appeal to the TWA vice president for labor relations, to be followed by a hearing before a neutral arbitrator. During the protest procedure, the employee retains his employment. Neither after his discharge on June 22 nor after the failure of the union to request his reinstatement in July, did plaintiff invoke the contractual remedies.

National labor policy favors the resolution of disputes such as these through contractually-negotiated mechanisms, and the failure to employ such mechanisms acts as a bar to litigation. See Clayton v. UAW, 451 U.S. 679, 101 S.Ct. 2088, 68 L.Ed.2d 538 (1981); Hines v. Anchor Motor Freight, Inc., 424 U.S. 554, 563, 96 S.Ct. 1048, 1055, 47 L.Ed.2d 231 (1976).

In his opposition to the motion for summary judgment, plaintiff offered no explanation or excuse for his failure to exhaust his contractual remedies other than to question whether he needs to do so when defendants have allowed other delinquent pilots to cure their agency fee problems without utilizing those remedies. Even assuming that plaintiffs premise is correct (but see note 9, infra), it would not excuse his failure to employ the contractual procedure, for it is precisely issues such as these that should be submitted to those most familiar with labor-management relations in the particular industry or company rather than being taken directly to the courts. See, e.g., Washington Hospital Center v. Service Employees International Union, 746 F.2d 1503 (D.C.Cir.1984). Nor could it reasonably be argued that resort to the procedures would have been futile in this case because of the presumed hostility of the decision-makers. The agreement between TWA and ALPA establishes a system of expeditious dispute resolution by arbitrators who are entirely neutral.

Since plaintiff failed to exhaust his contractual remedies, his action in court is subject to dismissal.

III

On the merits — assuming arguendo that the Court may properly reach the merits— plaintiff fares no better.

Plaintiffs case rests on two contentions. First, he argues that he should not have been discharged on June 22 because he had sent in his check prior to that time. That argument, of course, overlooks the fact that the check was a worthless piece of paper for there were no funds in the bank to back it. Second, he contends that his discharge should have been rescinded when on June 24 the union learned that he had previously mailed in two checks. The short answer is that the union did just that: they immediately requested plaintiffs reinstatement. That reinstatement request was halted in its tracks, and properly so, both by the union and by TWA, when it was discovered that plaintiffs two checks were worthless. If plaintiff was to be reinstated, notwithstanding his game-playing, it was up to him to carry the reinstatement process forward by invoking the contractual protest procedure. Having once again created a confusing situation in his desire to frustrate the agency fee process, plaintiff could not sit back, expect the union and the company on their own to extricate him and, upon their failure to do so, expect the Court to award him damages.

The motions for summary judgment filed by both ALPA and TWA will be granted.

      . The action against ALPA proceeds on the theory that the union violated its duty of fair representation under 45 U.S.C. § 152. That theory is not available to plaintiff, however, for the duty of fair representation extends only to union representation vis-a-vis the employer. See Vaca v. Sipes, 386 U.S. 171, 87 S.Ct. 903, 17 L.Ed.2d 842 (1967). Where, as here, the union member’s dispute is with the union itself, the fair representation principle has no application. See Kolinske v. Lubbers, 712 F.2d 471, 481 (D.C. Cir.1983). Plaintiffs action against ALPA is therefore subject to dismissal on this basis alone.

        . As explained below, plaintiff was discharged on June 22, 1983.

      . Plaintiff does not contest the legality of this kind of agreement. However, he was one of several plaintiffs in Bagnall v. ALPA, 626 F.2d 336 (4th Cir.1980), who challenged the method by which the service charge was being calculated.

      . Disputes regarding plaintiffs obligations occurred in the Spring of 1976, in July 1977, February 1978, June-July 1982, November 1982, and the Spring of 1983.

      . Sections 25(B) and (C) of the ALPA-TWA agreement provide that if a pilot who has received notice of delinquency does not remit or tender the required payment within fifteen days, the union ‘‘shall certify in writing [that he is delinquent] and is therefore to be discharged ... [and the company] shall thereupon take proper steps to discharge such pilot____’’

      . In the meantime, plaintiff tendered yet a third check (which was not dishonored). In order to give plaintiff an opportunity to explain or to justify his repeated failure to pay his service charges in a timely manner, ALPA requested plaintiff to appear at a meeting on August 23, 1983. At that meeting, plaintiff stated that he had a "dislike” for the union and that the "only way [he] could express [his] frustration ... was to delay payment of what [he] owed them". Transcript of meeting at 38 (ALPA's Exhibit 1).

      . At oral argument on the motion for summary judgment, counsel for plaintiff also relied on Exhibit O (Memorandum from Hilly, TWA’s Vice President of Labor Relations, to Hoar), but it is not apparent what light that document sheds on the issues before the Court. The subject matter of this memorandum, written over ten months before plaintiff was discharged, was ALPA’s administration of section 25 of the collective bargaining agreement. Based on discussions with Gary Green, ALPA’s in-house general counsel, Hilly described ALPA’s practice concerning delinquent pilots, as follows:
      (I)t has always been ALPA’s position if the delinquent pilot pays his service obligation prior to the effective date of his termination, ALPA would rescind the notice of termination. Mr. Green advised me that the law in this regard required the Union to rescind the notice of termination if the pilot tendered his service fee payment on or before the effective date of the proposed termination. Consequently, although Section 25 provides for a 15 day grace period before the notice of termination, a pilot's failure to clear the delinquency during that grace period does not prevent him from tendering payment after he has received from the Company a letter of termination. (Emphasis supplied).
      Plaintiff clearly does not fall within this scenario for he did not tender payment until July 5, 1984 — almost two weeks after his termination became effective. See United States v. Allen, 699 F.2d 1117, 1122 (11th Cir.1983) ("(A) check written on insufficient funds does not constitute valid legal tender despite the drawer’s willingness to deposit funds to cover the check.").

      . Clayton v. UAW, supra, 451 U.S. at 689, 101 S.Ct. at 2095.

      . Plaintiff also argues that defendants treated him differently from other similarly situated pilots because of his determined resistance to the agency fee process. However, not only is the motivation of defendants irrelevant as long as they correctly followed the proper contractual procedure and afforded plaintiff all of his contractual rights, but the record clearly shows that no other pilot had a history of delinquency with respect to the payment of fees or otherwise that was remotely comparable to plaintiffs.

      . Plaintiff acknowledges this to be so, but he contends that the union did not know that the check was worthless, and that they must therefore be deemed to have acted improperly. But if the Court is to inquire as to what the union knew or did not know, the uncontradicted fact is that the union personnel did not know that a check had been received on June 21, that is, before his discharge became effective.


text:
    Dr. Philip RICHARDS, Plaintiff, v. The EMANUEL COUNTY HOSPITAL AUTHORITY and Joe Tucker, Hospital Administrator, Defendant.
    Civ. A. No. CV683-29.
    United States District Court, S.D. Georgia, Swainsboro Division.
    Nov. 26, 1984.

      Robert S. Highsmith, Highsmith & Highsmith, Baxley, Ga., for plaintiff.
    Jack Spalding Schroder, Jr., J. Scott Jacobson, Atlanta, Ga., for defendant.
   ORDER

BOWEN, District Judge.

This case involves a dispute between the plaintiff, Dr. Philip Richards, and the defendants, the Emanuel County Hospital Authority and Joe Tucker, who is Hospital Administrator, concerning the suspension of Dr. Richards’ staff privileges at the hospital. Dr. Richards brought this action pursuant to 42 U.S.C. § 1983; he claims that his rights to due process and equal protection have been violated. Before the Court are both the plaintiff’s and defendants’ motions for summary judgment.

Plaintiff is a doctor of osteopathic medicine. On May 18, 1982, five members of the Emanuel County Hospital’s medical staff wrote a letter to Dr. C.L. Meadows, chief of the medical staff, requesting the convening of the medical staff’s Credentials Committee for the purpose of determining whether or not Dr. Richards should retain his medical staff privileges. Two days later, three members of the medical staff wrote to Dr. Meadows and to the chairman of the Emanuel County Hospital Authority requesting that Dr. Richard’s privileges be suspended during the pendency of an investigation into whether or not his privileges should be suspended. That same day, Dr. Meadows and James E. Boatwright, chairman of the hospital authority, wrote to Dr. Richards and informed him that his privileges were suspended. Five members of the medical staff issued a letter on May 25, 1982, to Dr. Richards notifying him of the reasons for his suspension. On May 26, 1982, Dr. Meadows informed Dr. Richards in writing that a meeting of the Credentials Committee was scheduled for June 10, 1982, for the purpose of hearing evidence on the question of whether or not Dr. Richards’ staff membership and privileges should be suspended. The parties later agreed to a postponement of the meeting.

Subsequently, Dr. Richards, through his attorney, requested on at least two occasions additional information concerning alleged deficiencies in plaintiff’s medical practice. The hospital provided the information.

Meanwhile, on May 31, 1982, Dr. Richards moved to disqualify six of the members of the Credentials Committee who had signed the letters initiating the investigation and suspension of Richards’ staff privileges. The Credentials Committee is comprised of the entire, albeit small, active medical staff of the hospital. Dr. Richards asked the six doctors to disqualify themselves because he felt that they were “the accusers and prosecutors of the action against him and will be witnesses against him.” Dr. Richards requested that only two persons, Dr. Guzzman and Dr. Smith, be allowed to sit on the Credentials Committee. The six doctors named by Dr. Richards declined to disqualify themselves.

As an alternative to a hearing before the Credentials Committee, the hospital suggested a hearing before an independent tribunal of three doctors, one of whom Dr. Richards would select, one of whom the hospital authority would select, and one of whom the two chosen members of the tribunal would select. Dr. Richards did not avail himself of the offer of a tribunal to hear the matter of his staff privileges. In an affidavit on record, Dr. Richards states that he “was unwilling to accept the arbitration procedures” because (a) he “preferred to follow the procedure authorized in the by-laws,” (b) “[t]he panel of arbitrators was selected by the same doctors who were [his] prosecutors and who were going to be witnesses against [him], and [he] could not be certain that there was fairness in their selection,” (c) he “did not know of any doctor who [he] could get to serve on such a tribunal,” and (d) he “was never given any guarantees that anyone would abide by the decision of the independent tribunal, and therefore, it seemed pointless to go through that process.”

Dr. Richards filed suit in this Court in an effort to solve his problems with the hospital. He asks the Court to enjoin the defendants from denying him hospital privileges and to reinstate him with full privileges on the staff of Emanuel County Hospital. Dr. Richards also seeks actual damages in excess of $75,000.00 and punitive damages of $500,000.00.

Before the Court examines the question of whether the defendants’ actions deprived plaintiff of his constitutional rights, the Court must determine whether the actions were “state action.” The acts of the county hospital authority are state acts. Ga.Code Ann. §§ 31-7-1 to 31-7-208 (Supp.1984); Sosa v. Board of Managers of Val Verde Memorial Hospital, 437 F.2d 173 (5th Cir.1971); but cf. Madry v. Sorel, 558 F.2d 303 (5th. Cir.1977), cert. denied, 434 U.S. 1086, 98 S.Ct. 1280, 55 L.Ed.2d 791 (1978); Greco v. Orange Memorial Hospital Corp., 513 F.2d 873 (5th Cir.1975).

Having decided that state action is involved, the Court turns to Dr. Richards’ claims of deprivations of constitutional rights. Dr. Richards was not denied due process of law. Due process was not offended when Dr. Richards’ privileges were suspended prior to a hearing. Jackson v. Fulton-Dekalb Hospital Authority, 423 F.Supp. 1000, 1004 (N.D.Ga.1976), affd 559 F.2d 1214 (5th Cir.1977). The protection of human health and life is a valid governmental and medical interest permitting summary action preceding a hearing. See Northeast Georgia Radiological Associates v. Tidwell, 670 F.2d 507, 511 (5th Cir. Unit B 1982).

Due process was not offended because the members of the Credentials Committee were also the members of the medical staff, some of whom requested a hearing on the matter of Dr. Richards’ staff privileges and the suspension of his staff privileges pending the hearing. Dr. Richards contends that the doctors who initiated the hearing procedure were biased as a result of the requests for a hearing and the suspension of Richards’ privileges. Richards, however, has failed to demonstrate any actual prejudice on the part of the medical staff. Laje v. R.E. Thomason General Hospital, 564 F.2d 1159, 1162 (5th Cir.1977); Robbins v. Ong, 452 F.Supp. 110, 116 (S.D.Ga.1978); Jackson, 423 F.Supp. at 1005. “The consideration on a previous occasion of the plaintiff’s qualifications would not demonstrate such bias as to constitute a denial of due process.” Woodbury v. McKinnon, 447 F.2d 839, 845 (5th Cir.1971).

[P]laintiff was not entitled to a panel made up of outsiders or of doctors who had never heard of the case and who knew nothing about the facts of it or what they supposed the facts to be.... Obviously, plaintiff’s problem with the Hospital had come to the attention of other members of his profession who practiced in the Hospital. It does not follow, however, that the members of the panel were disqualified from sitting or that they were unable to and did not give the case fair and impartial consideration in the context in which it was presented to them. A panel of doctors does not ordinarily vote to expel a colleague from a hospital staff for trivial causes or where lesser sanctions or restrictions would serve the purpose.

Klinge v. Lutheran Charities Association, 523 F.2d 56, 63 (8th Cir.1975). “ ‘[T]he Fourteenth Amendment is not automatically offended despite the realistic possibility, even probability, that among the members of the medical staff there are some who harbor resentment or jealousy, and others who have formed personal evaluations in the course of experience over the years with the physician in question.’ ” Robbins, 452 F.Supp. at 116, quoting, Suckle v. Madison General Hospital, 362 F.Supp. 1196, 1209 (W.D.Wis.1973), aff’d, 499 F.2d 1364 (8th Cir.1974).

Plaintiff has insisted that the decision of the Supreme Court of the United States in the case of Gibson v. Berryhill, 411 U.S. 564, 93 S.Ct. 1689, 36 L.Ed.2d 488 (1973) controls this case. It does not. Plaintiff argues that the doctors on the medical staff at Emanuel County Hospital should not have been allowed to review his qualifications for staff privileges because of their alleged pecuniary interests in the number of doctors who are allowed to admit and treat patients at the hospital. Plaintiff asserts that his suspension from the staff financially benefited the other doctors who were able to acquire plaintiff’s former or potential patients. In the Gibson case, the Supreme Court affirmed the conclusion of the district court that the pecuniary interest of the members of the Alabama Board of Optometry, the statutory body with authority to issue, suspend, and revoke licenses for the practice of optometry, had sufficient substance to disqualify them, given the context in which the case arose. Id. at 579, 93 S.Ct. at 1698.

The case now before this Court does not arise in the same context as that of the Gibson case. The Gibson case concerned the efforts of independent practitioners of optometry not employed by others to prevent optometrists in the employ of others, such as Lee Optical Company, from practicing the profession of optometry. Id. at 567-568, 93 S.Ct. at 1692. The present case involves an individual doctor’s staff privileges at a county hospital but not the individual’s right to practice his profession. In the Gibson case, the licenses of the optometrists working for Lee Optical were at stake. Although medical staff privileges embody a valuable property interest; see, e.g., Northeast Georgia Radiological Associates, 670 F.2d at 511; the loss of staff privileges does not prevent the doctor from practicing his profession, as does the revocation of his license.

The requirements of due process are flexible and are shaped by the interest affected and the context of the case. License revocations are so serious as to be treated “ ‘in the nature of criminal proceedings.’ ” Wall v. American Optometric Association, Inc., 379 F.Supp. 175, 184 (N.D.Ga.), aff’d, 419 U.S. 888, 95 S.Ct. 166, 42 L.Ed.2d 134 (1974), quoting, Geiger v. Jenkins, 316 F.Supp. 370, 372 (N.D.Ga.1970), aff’d, 401 U.S. 985, 91 S.Ct. 1236, 28 L.Ed.2d 525 (1971). Procedural requirements are therefore rigorous for a license revocation proceeding. As noted, the loss of medical staff privileges does not prohibit a doctor from practicing his profession. Thus, “[t]he Constitution does not require that the decision-making process be ‘as antiseptic in this context as it is required to be, for example, in a criminal prosecution.’ ” Jackson, 423 F.Supp. at 1005, quoting, Suckle, 362 F.Supp. at 1210. See also, Paine v. Brunswick County Hospital Authority, 470 F.Supp. 28, 32 (E.D.N.C. 1978) (“The procedural niceties imposed on courts are not placed on authorities such as are before us here.”)

Arguably, the medical staff of any hospital has a pecuniary interest in the number of doctors on the staff. Bad motive, however, is not to be presumed. Peer review of doctors is an established procedure for determining qualifications for staff privileges. The doctors of a hospital’s medical staff and the hospital’s governing authority are best able to establish the criteria and methodology for review of a doctor’s competence to serve on the staff. See, e.g., Truly v. Madison General Hospital, 673 F.2d 763, 765 (5th Cir.), cert. denied, 459 U.S. 909, 103 S.Ct. 214, 74 L.Ed.2d 170 (1982); Laje, 564 F.2d at 1162; Klinge, 523 F.2d at 60; Sosa, 437 F.2d at 176; Woodbury, 447 F.2d at 842-843; Paine, 570 F.Supp. at 31-32; Robbins, 452 F.Supp. at 115; Jackson, 423 F.Supp. at 1003; Kaplan v. Carney, 404 F.Supp. 161, 163 (E.D.Mo.1975). I am satisfied that peer review by members of the medical staff of a fellow doctor’s qualifications to continue on the medical staff does not automatically violate the requirements of due process, and I am unwilling to presume that the possibility of financial gain would motivate the individuals of the staff to act in an arbitrary and capricious manner.

The hospital’s offer to submit the question of Dr. Richards’ competence to serve on the medical staff to a panel of three doctors not on the staff did not violate due process requirements, even assuming that the procedure was not part of the bylaws of the hospital. Again, bad motive will not be presumed. The offer of a hearing before an independent panel was made in an effort to accommodate Dr. Richards and to alleviate his suspicions of bias. The offer complied with due process, and the hospital’s alleged failure to abide by internal procedures does not require judgment for the plaintiff. See Kaplan, 404 F.Supp. at 165.

The failure of the hospital authority itself to hold a hearing for Dr. Richards did not violate due process. Dr. Richards requested a hearing before the hospital authority, apparently pursuant to Art. Ill, Sec. 3(a) of the Bylaws of the Medical-Dental Staff of Emanuel County Hospital:

The governing body shall act on appointments, reappointments, and revocation of ■appointments only after there has been recommendation from the medical staff as provided in these bylaws; provided that in the event of unwarranted delay on the part of the medical staff, the governing body may act without such recommendation on the basis of documented" evidence of the applicant’s or staff member’s professional and ethical qualifications obtained from reliable sources other than the medical staff.

“The term ‘governing body’ means the Hospital Authority of Emanuel County....” Bylaws at 2. In the case of Dr. Richards, the delay was not “unwarranted”; Dr. Richards was the primary cause of any delay. Furthermore, the authority had no “reliable sources other than the medical staff” upon which to base a decision; Dr. Richards had rejected the suggestion of a panel of three doctors. Finally, Dr. Richards requested more than just a hearing before the authority. He first wanted a “general investigation ... of each and every doctor who is on the medical staff of Emanuel County Hospital, including [a] thorough investigation of their patient charts.” When a doctor’s competence to remain on a medical staff is under review, he is not entitled to have a hearing contingent upon an investigation of the competence of the other doctors on the staff.

Defendants have urged the granting of summary judgment in their favor, arguing that plaintiff has not exhausted his administrative remedies. The exhaustion of administrative remedies is not required prior to the bringing of a § 1983 action. Patsy v. Board of Regents, 457 U.S. 496, 516, 102 S.Ct. 2557, 2568, 73 L.Ed.2d 172 (1982). That does not mean, however, that Dr. Richards can successfully bring a suit claiming a denial of due process after he rejected the hearings that were offered him. “The ... federal right he claims is the right to a due process hearing before denial of reappointment. It is therefore incorrect to characterize the proffered hearing as a remedy which must be exhausted; for federal purposes, it is the right which he seeks. He cannot sue in federal court to secure a right which he declined when it was voluntarily offered to him.” Suckle, 499 F.2d at 1367. See also Jackson, 423 F.Supp. at 1004-1005 (“Any procedural deficiency resulted only from plaintiff’s failure to avail himself of the protections offered him.”).

To summarize, defendants did not deny Dr. Richards due process of law. When “a hearing is offered, the offeree should assume that it will be a fair hearing until the offeror indicates otherwise”, unless “the hearing offered plaintiff was clearly insufficient under the law at the time the hearing was offered.” Suckle, 499 F.2d at 1367. The hearings offered Dr. Richards were sufficient under the law.

In addition to his due process claim, Dr. Richards alleges thht he has been denied equal protection of the law. “The claim that Dr. [Richards] may be getting uneven treatment because other members of the medical staff are no better than he gives little support to his constitutional argument. Where there is no intentional or purposeful discrimination, and a standard reasonable on its face is applied in good faith, the one who fails to meet the standard has not been denied constitutional equal protection just because others have not likewise been held accountable.” Woodbury, 447 F.2d at 845-846. Dr. Richards has not been denied his right to equal protection of the law.

The Court need not decide the question of the immunity of defendant Tucker.

In conclusion, the Court DENIES plaintiffs motion for summary judgment, GRANTS defendants’ motion for summary judgment and orders the case DISMISSED.

      . Likewise, he has failed to show any actual bias of any members of the Hospital Authority.

        . I question the authenticity of Dr. Richards’ concern with the pecuniary interests of the doctors on the medical staff. When Dr. Richards first moved to disqualify the majority of the staff from sitting on the Credentials Committee, his concern was that the doctors were both accusers and judges. Dr. Richards was willing to have staff members Guzzman and Wilder sit on the Credentials Committee. Arguably, they too would have a pecuniary interest in a decision on Richards’ staff privileges.


author: JOHN GARRETT PENN, District Judge.

text:
    TITANIUM METALS CORP., Plaintiff, v. Gerald J. MOSSINGHOFF, Commissioner of Patents & Trademarks, Defendants.
    No. CA 79-1119.
    United States District Court, District of Columbia.
    Nov. 28, 1984.
    William R. Hinds, Larson, Roberta B. Larson, Taylor & Hinds, Arlington, Va., for plaintiff.
    Joseph F. Nakamura, U.S. Patents & Trademarks, Washington, D.C., for defendants.
   MEMORANDUM

JOHN GARRETT PENN, District Judge.

The plaintiff brought this action pursuant to 35 U.S.C. § 145. Plaintiff requests that the Court find that the plaintiff is the assignee and owner of all right, title and interest in and to the invention and Application Serial No. 598,935, and as such is entitled to receive United States Letters Patent for Titanium Alloy as specified in Claims Nos. 1, 2 and 3. The case came before the Court for trial and this Memorandum constitutes the Court’s findings of fact and conclusions of law. See Fed.R. Civ.P. 52.

I

The underlying facts are as follows: The plaintiff is incorporated in the state of Delaware and has its principal place of business in Pennsylvania. It is the assignee of the application and the invention which is the subject of this litigation. The inventors are Loren C. Covington and Howard R. Palmer and they assigned all right, title and interest in the invention and the application to the plaintiff on July 21, 1975. That assignment is recorded in the United States Patent and Trademark Office under date of August 6, 1975 at Reel 3218, Frame 120.

Plaintiff describes the invention as follows: The invention is a titanium base alloy having good corrosion resistance in hot brine solutions. The broad composition of the alloy disclosed and claimed in the application is 0.6%-0.9% nickel, 0.2%-0.4% molybdenum, up to 0.2% maximum iron, balance titanium. The preferred composition of the alloy, as set forth in Claim 3 of the application, is 0.8% nickel, 0.3% molybdenum, up to 0.1% maximum iron, balance titanium. The claimed alloy has substantial uses in hot brine solutions at temperatures on the order of 185 degrees C and in other corrosive environments because of its excellent corrosion resistance. In addition to having good corrosion resistance, the claimed alloy is sufficiently ductile to be fabricated into practical structures. Fabricability is an important consideration since a primary use of the alloy is in the manufacture of welded tube which requires good rollability. Structures fabricated from the alloy are used in equipment such as desalination units, salt evaporators, waste disposal systems and cloride cells.

The claimed ranges for the nickel and the molybdenum are both narrow and critical, and the iron content of the alloy is important. The criticality of the nickel and molybdenum contents of the alloy is shown by their effect upon corrosion resistance and fabricability. For example, in Table III on Page 7 of the Application Specifications, it is shown that 0.6%-2.0% nickel in an alloy including 0.3% molybdenum has a substantial beneficial effect upon the corrosion rate of the alloy. However, nickel in excess of 0.9% results in decreases in notch tear strength and bend ductility which cannot be tolerated because the metal cannot be fabricated and, hence, is of no practical value.

Test results reported in the Table IV on page 9 of the Application shows that the passivation of a Ti-Ni-Mo alloy in hydrocloric acid is not achieved until the nickel content is at least about 0.6% and, therefore, this is the minimum amount of nickel which must be included in the alloy. The data in the Table shows the corrosion potential of various alloys at 95 degrees C in hydrocloric acid. The corrosion potential is shifted in the positive direction by the inclusion of nickel and the potential reaches the passive region in a Ti-Ni-O.3% Mo alloy when the nickel content is 0.6% or more.

The effect of molybdenum on the corrosion rate of the alloy is shown by the data in Table VI on pp. 13-15 of the Application Specification. It is there shown that molybdenum increases the corrosion resistence of the alloys by stabilizing the passive behavior. The criticality of a minimum molybdenum content of 0.2% is shown by comparing the data for titanium base compositions having 0% Mo-0.8% Ni, 0.1% Mo-0.8% Ni, 0.2% Mo.-0.8% Ni and 0.3% Mo.-0.8% Ni. The comparison shows that the corrosion rates are erratic and unacceptably high for the compositions which have less than 0.2% of molybdenum. The criticality of the maximum nickel and molybdenum contents of the alloy is shown by data in Table VII on pp. 16 and 17 of the Application Specification. The data on Table VII shows that more than 0.9% nickel or more than 0.4% molybdenum causes in loss in notch tear strength and an increase in bend ductility which means that the alloy cannot be readily fabricated into usable structures.

The Application claims are: (1) a titanium base alloy consisting essentially by weight of about 0.6% to 0.9% nickel, 0.2% to 0.4% molybdenum, up to 0.2% maximum iron, balance titanium, said alloy being characterized by good corrosion resistance in hot brine environments, (2) a titanium base alloy as set forth in claim one having up to 0.1% maximum iron, balance titanium, and (3) a titanium base alloy as set forth in claim one having .0.8% nickel, 0.3% molybdenum up to 0.1% maximum iron, balance titanium. See Pretrial Brief for Plaintiff at 2-4.

The Application is directed to a titanium base alloy having very small additions of nickel and molybdenum with a limited amount of iron which combines good resistance to corrosion with good tensile properties and good fabricability.

The issues before the Court are whether Claims 1, 2 and 3 of the application are anticipated under 35 U.S.C. § 102 and whether Claim 3 is obvious under 35 U.S.C. § 103 from a consideration of an article entitled “Investigation of the Mechanical Properties of Ti-Mo-Ni Alloys” written by two Russians, S.V. Kalabukhova and V.S. Mikheyev (hereinafter referred to as “the Russian article”).

The Patent Office Examiner rejected Claims 1-2 as anticipated under Section 102 by the Russian article, and rejected claim 3 as obvious under Section 103 as a result of the Russian article. The Board of Appeals affirmed the Patent Office Examiner’s final rejection of claims 1-3 as anticipated under 35 U.S.C. § 102 by the Russian article.

II

A plaintiff in an .action brought pursuant to 35 U.S.C. § 145 has a heavy burden. “Because the ‘Patent Office [is] an expert body preeminently qualified to determine questions of this kind’ ..., its conclusions are entitled to a strong presumption of validity.” Pro-Col Corp. v. Commissioner of Patents, 141 U.S. App.D.C. 142,143, 436 F.2d 296, 297 (1970) (citations omitted). “In these circumstances [the court] is authorized to reverse the decision ... only if the Patent Office did not have ‘a rational basis for [its] conclusions’ ... or if [the plaintiff] presented new evidence ... which leads to a ‘thorough conviction’ that [the plaintiff] should prevail.” Id. (citations omitted, emphasis this Court’s). “In trials de novo under 35 U.S.C. § 145, great weight attaches to the expertise of the Patent Office and its findings ... will not be overturned unless new evidence is introduced which carries a ‘through conviction’ that the Patent Office erred.” DeSeversky v. Brenner, 137 U.S.App.D.C. 369, 370, 424 F.2d 857, 858 (1970) (emphasis the Court’s). “Deference is owed to the findings of the Patent Office.” Puharich v. Brenner, 134 U.S.App.D.C. 399, 402, 415 F.2d 979, 982 (1969).

III

The Patent Examiner rejected Claims 1 and 2 pursuant to 35 U.S.C. § 102, as having been anticipated by the Russian article, and he rejected Claim 3, pursuant to 35 U.S.C. § 103, as being obvious in view of the Russian article. The Board of Appeals upheld the Patent Examiner’s decision, but did so based on Section 102. The Court concludes that the Claims are patentable.

While it is true that the plaintiff has a heavy burden, see Part II, supra, it is one which may be overcome by clear and convincing evidence, or if the Court is “thoroughly convinced” that the determination by the Board was in error.

Turning first to the issue raised under Section 102, the Court notes that that section has been interpreted as precluding the grant of a patent only when the claimed invention is described in a printed publication in such a manner that the disclosure in the publication is specific to every critical element of the application claims and when the disclosure in the publication is sufficiently enabling to place the subject matter claimed in the application in the public knowledge.

Simply stated, a prior publication or patent description will be considered as anticipatory when its disclosure is at once specific and enabling with regard to the particular subject matter at issue. In effect, a prima facie case is made out whenever a reference is shown to contain a disclosure which is specific as to every critical element of the appealed claims. However, such disclosure may yet be held not to legally anticipate the claimed subject matter if it is found not to be sufficiently enabling, in other words, if it does not place the subject matter of the claims within “the possession of the public.

In re Wilder, 429 F.2d 447, 451, 57 CCPA 1314 (1970) (citations omitted, emphasis this Court’s). In Application of LeGrice, 301 F.2d 929, 936, 49 CCPA 1124 (1962), the court observed:

We think it is sound law, consistent with the public policy underlying our patent law, that before any publication can amount to a statutory bar to the grant of a patent, its disclosure must be such that a skilled artisan could take its teachings in combination with his own knowledge of the particular art and be in possession of the invention.

(Emphasis in the original).

It seems to this Court that the Hall, Rosenberg, and Palmer affidavits and the Minkler declaration, demonstrate that the invention was not anticipated by the Russian article. Each of the above persons qualifies as an expert in the field of metallurgy. Hall notes that it is his opinion, “that a titanium base molybdenum — nickel alloy with a claimed 0.2% to 0.4% molybdenum and 0.6% to 0.9% nickel would not be exclusively selective for melting by one skilled in the art of titanium metallurgy unless that person made the selection on the basis of knowledge first obtained from the specification of application serial number 598,935.” Hall Affidavit ¶ 16. If that opinion is to be accepted, it would seem that the invention, at least to that extent, was not anticipated. Rosenberg states that “[bjased upon the data set forth in the specification of application serial number 598,935 and the disclosures at pp. 131-133 of the Russian Metallurgy (Metally), it is my opinion that a Ti-Mo-Ni alloy with a specific minimum and maximum limitations on the amounts of both nickel and molybdenum which is claimed in application serial number 598,935 could not be determined by one skilled in the art of titanium metallurgy from a consideration of the teachings at pp. 131-133 of Russian Metallurgy (Metally).” Rosenberg Affidavit. ¶ 21. What has been said with respect to the Hall Affidavit applies with equal force to those comments by Rosenberg.

The quoted opinions of Hall and Rosenberg, together with the comments of Minkler and Palmer are in the view of this Court, persuasive, and of course, contrary to the final determination by the Board. Nevertheless, up to this point, the Court, having in mind the heavy burden on the plaintiff and the fact that the Board had an opportunity to consider and weigh the above affidavits, cannot say that those affidavits standing alone would be sufficient to overturn the decision of the Board. Thus, while the Court would have reached a different result than the Board based upon the above affidavits and the declaration and the record before the Board, the Court cannot say that it is so “thoroughly convinced” that it concludes that the decision of the Board must be overturned.

Here however, another factor has been added, that is the testimony of Dr. Williams. Dr. Williams, like the affiants, is an expert and is a member of the faculty of the Metallurgy Department of Carnegie-Mellon University in Pittsburgh. Unlike the other experts, he is not employed by the plaintiff. His testimony fully supports the arguments made by the plaintiff in this case. The following is illustrative of the opinions expressed by Dr. Williams during the trial:

Q. Would either of those alloys [referred to in the Russian Article] be within the scope of a claim in Patent Application Serial No. 598,935?
A. No. The broad claim, which is claim No. one is .2 to .4 and .6 to .9 so you miss basically on both counts.

(Transcript 37). With respect to the overall disclosures in the Russian Article Dr. Williams states:

Q. Does the article direct you as one skilled in the art to a titanium alloy having nickel present in an amount between .6 and .9 percent and molybdenum in an amount between .2 and .4 percent? A. In those ratios under no circumstances.
Q. Is there anything in the article which directs you to such an alloy?
A. No.
Q. Is there anything mentioned in the article about corrosion resistence?
A. No. Absolutely nothing. It’s only mechanical properties. The only other property they even mention is in the very high solute alloys of 14 to 15 percent alloys. They mention that they were hard to forge.

Based upon the testimony of Dr. Williams the Court is satisfied that the only way one would reach the plaintiffs claimed alloy composition from the disclosures in the Russian article is by experimentation. The testimony offered on behalf of the plaintiff at the trial is uneontradieted by the defendant. The Court finds that testimony to be very persuasive, and the Court concludes that the plaintiff has demonstrated by clear and convincing evidence that the determination by the Board of Appeals was in error. The Court concludes that Claims 1, 2 and 3 should not have been rejected on the basis of anticipation pursuant to 35 U.S.C. § 102. Moreover, the Court concludes that Claim 3 should not have been rejected as being obvious pursuant to 35 U.S.C. § 103.

Thus, the Court finds as a fact and concludes as a matter of law that the decision of the Board of Appeals was in error. The testimony of Dr. Williams, which remains uncontradicted, adds sufficient weight to the plaintiffs side to tip the scales and, in the Court’s view, to result in clear and convincing evidence that the application should not have been rejected.

An appropriate order has issued authorizing the Commissioner of Patents and Trademarks to allow Claims 1-3.


author: MILBURN, District Judge.

text:
    MOSE AND GARRISON SISKIN MEMORIAL FOUNDATION, INC., Plaintiff, v. UNITED STATES of America, Defendant.
    No. CIV-1-83-143.
    United States District Court, E.D. Tennessee, S.D.
    Dec. 4, 1984.
    William L. Taylor, Jr., Spears, Moore, Rebman & Williams, Chattanooga, Tenn., for plaintiff.
    Gregory L. Nelson, Tax Div., Dept, of Justice, Washington, D.C., and John W. Gill, Jr., U.S. Atty., Eastern District of Tennessee, Knoxville, Tenn., for defendant.
   MEMORANDUM

MILBURN, District Judge.

This action is for an income tax refund. Jurisdiction has been invoked pursuant to 28 U.S.C. Section 1346(a)(1), and is not in dispute. The action is presently before this Court on cross motions for summary judgment.

I.

The parties made the following stipulations of facts:

1. The plaintiff, Mose and Garrison Sis-kin Memorial Foundation, Inc., is a Tennessee not-for-profit corporation and tax-exempt organization that operates a rehabilitation facility and school for handicapped individuals. Plaintiff has its principal place of business in Chattanooga, Hamilton County, Tennessee.

2. The plaintiff qualifies as a tax-exempt organization under Section 501(c)(3) of the Internal Revenue Code and, as such, normally files annual returns with the Internal Revenue Service without liability for income tax.

3. The officers of the plaintiff during the years 1979 and 1980 were:

William D. Spears, President

Peter T. Cooper, Treasurer

William L. Taylor, Jr., Secretary

4. Contributors to the plaintiff organization frequently donate life insurance policies to the plaintiff and continue to pay the annual premiums. These policies name the plaintiff as beneficiary and are held and controlled by the plaintiff for investment purposes.

5. During the calendar year 1979, the plaintiff owned in excess of 800 life insurance policies issued by various life insurance companies on the lives of in excess of 800 persons. The annual premiums on such life insurance policies were being donated by the original purchasers of such policies. As of February 1, 1979, such life insurance policies had accumulated cash values of approximately $2,292,900.00.

6. During 1979, the plaintiff determined that the investment of the accumulated cash values in the life insurance policies could return a higher yield if withdrawn from the policies and reinvested in marketable securities and other forms of income paying investments. The accumulated cash values were withdrawn and so reinvested on various dates in 1979 (the enumeration of which is not material to the issues). The reinvested cash values earned $134,501.00, net, of life insurance company charges for such withdrawals, during the calendar year 1979.

7. The purpose of the plaintiffs withdrawal of the cash value of these insurance policies and reinvestment of the funds was to gain leverage in the property in order to acquire additional investment, and, accordingly, to earn more than the nominal rate paid under the policies. The plaintiff paid a cost for withdrawing the cash values from the life insurance policies which averaged approximately 5.5% per annum. The plaintiff earned in excess of 10% per annum on the reinvestment of such cash values.

8. During 1979, the plaintiff became aware that the defendant considered the withdrawal of cash value of life insurance and reinvestment thereof as causing unrelated business income for organizations exempt under Section 501(c)(3) of the Internal Revenue Code. This information was announced by the Commissioner of Internal Revenue in Letter Ruling 7918095. Subsequently, Technical Advice memorandum 80-28-002 was published by the defendant’s agents setting forth the same position.

The plaintiff caused an Exempt Organization Business Income Tax Return (Form 990-T) for the calendar year 1979 to be prepared and timely filed with the Internal Revenue Service. Such return reflected a tax liability of $42,160.00, which was paid by the plaintiff to the Internal Revenue Service in installments of $21,500.00 on May 15, 1980, and $20,660.00 on August 15, 1980.

9. On March 16, 1981, the plaintiff caused a claim and Amended Exempt Organization Business Income Tax Return to be prepared and filed which sought a refund of the $42,160.00 in income tax. The claim and refund request was disallowed by the Internal Revenue Service on January 13, 1983.

10. The plaintiff subsequently filed suit asking refund of $42,160.00 of income tax for the calendar year 1979 on March 17, 1983, in the United States District Court for the Eastern District of Tennessee.

11. The plaintiff has no obligation to repay any withdrawals of cash values from the life insurance contracts, but if an insured individual died, the face amount of the policy would be decreased by any previous withdrawals.

12. The plaintiff has no obligation to return any funds withdrawn to the insurance company. If the plaintiff has not returned the funds withdrawn from the cash reserve of a given policy to the insurance company at the time of death of that policy’s insured, such policy will have its cash reserve payable on the death of the insured reduced by the amount withdrawn and by the annual charge imposed by the insurance company attendant upon such withdrawal.

13. Plaintiff held the power to surrender any or all of the life insurance policies owned by it and to receive all of the accumulated cash values without charge by the life insurance companies. However, to surrender such life insurance contracts would cause the donors of annual premiums for such policies to reconsider their gifts to plaintiff.

II.

The plaintiff tax-exempt corporation insists that an advance against a life insurance contract is not an “indebtedness”, and that plaintiff’s activities sought to be included within 26 U.S.C. Section 514 are not of the character Section 514 was designed to prevent, and, finally, that charges on policy advances are not interest such as to make the advances acquisition indebtedness.

In response the government insists that the income generated by the plaintiff’s loans is acquisition indebtedness and that the position of the United States is consistent with the legislative history of 26 U.S.C. Sections 512 and 514.

Therefore, the issue is whether the money obtained from withdrawing the accumulated cash values of insurance policies for which the beneficiary, charitable organization pays an annual fee, but has no obligation to repay, is “acquisition indebtedness” within the meaning of Section 514(c) of the Internal Revenue Code.

III.

The Internal Revenue Code 26 U.S.C. Section 511 imposes a tax upon all “unrelated business taxable income (as defined in Section 512)” of certain organizations, such as the plaintiff, which are exempt from taxation under Section 501 of the Internal Revenue Code.

The term “unrelated business taxable income” is defined in Section 512 of the Internal Revenue Code to include certain amounts realized by organizations such as the plaintiff. Specifically, Section 512(b)(4) provides that in the case of “debt-financed property” (as defined in Section 514), there shall be included, as an item of gross income derived from an unrelated trade or business, the amount ascertained under Section 514(a)(1). Section 514(a)(1) sets forth the actual method of computation of unrelated business taxable income in situations involving debt-financed property.

“Debt-financed property” is defined in Section 514(b) to include any property which is held to produce income and with respect to which there is an “acquisition indebtedness” at any time during the taxable year.

“Acquisition indebtedness” is defined, in pertinent part, to mean with respect to debt-financed property, the unpaid amount of:

(A) the indebtedness incurred by the organization in acquiring or improving such property;
(B) the indebtedness incurred before the acquisition or improvement of such property if such indebtedness would not have been incurred but for such acquisition or improvement; ...

26 U.S.C. Section 514(c).

The plaintiff insists that because there is no obligation to repay the advance, it is not an indebtedness and cites several cases decided over twenty years ago. Although this Court does not believe this precedent to be totally irrelevant or overruled, it is of the opinion that the better view is expressed in the tax court case, Minnis v. Commissioner, 71 T.C. 1049 (1979) in which it was held that amounts paid on loans from an insurer against the cash surrender value of life insurance policies, not involving sham transactions, are deductible as interest on indebtedness. The Tax Court in Minnis squarely addressed the present problem before this Court and stated the following in relevant part:

It is true that a policy loan differs in some respects from an ordinary loan. The issuer of the policy generally has no discretion as to whether to grant a policy loan and the policyholder has no obligation to repay the loan by a set date. If the policyholder fails to repay the loan, the proceeds payable upon maturity of the policy are reduced accordingly. In this sense, the loan is actually an advance payment and, in some contexts, courts have held that a policy loan does not create a debtor-creditor relationship. See, e.g., Orleans Parish v. N.Y. Life Ins. Co., 216 U.S. 517 [30 S.Ct. 385, 54 L.Ed. 597] (1910) (existence of “property” for purposes of State taxation of the insurance company); United States v. Miroff 353 F.2d 481 (7th Cir.1965), and United States v. Sullivan, 333 F.2d 100 (3d Cir.1964) (both involving the existence of a sufficient interest for purposes of a tax lien).
However, for the purposes of determining a taxpayer’s Federal income tax liability, policy loans have generally been regarded as a valid form of indebtedness. Despite the insurance company’s lack of recourse against the borrower, this Court has repeatedly recognized that interest paid on a policy loan is deductible as interest on indebtedness under section 163. Salley v. Commissioner, 55 T.C. [896] at 903; Kay v. Commissioner, 44 T.C. 660, 672 (1965); Dean v. Commissioner, 35 T.C. 1083, 1085 (1961); Emmons v. Commissioner, 31 T.C. 26, 30 (1958), aff’d sub nom. Weller v. Commissioner, 270 F.2d 294 (3d Cir.1959). See also Coors v. United States, 215 Ct.Cl. 840, 572 F.2d 826 (1978).

71 T.C. at 1054.

Not only has the Tax Court ruled that an advance on a policy is an indebtedness but the policy itself, both in the Minnis case and in the instant case, supports this holding. See 71 T.C. at 1051. In this case, typical policies are attached as exhibits to the Stipulation of Facts. One such policy states, “The company will grant an advance (herein called a loan) upon the assignment of this policy to the company as the only security, provided a cash value is available ...”. The policy goes on to define “loan value”, “loan interest”, and “loan repayment” by contractual provisions.

In addition, the finding that loans on insurance policies are indebtedness is consistent with the intent and purpose behind Section 514. The House Report accompanying the Tax Reform Act of 1969 states in relevant part:

Certain tax-exempt organizations are now subject to income tax on their “unrelated business income,” a concept which includes not only the active conduct of a business but also a portion of rental income from “business leases” measured by the proportion of debt on the realty. Your committee has concluded that it is necessary to increase the effectiveness of this provision in two major respects. The first is to expand “unrelated business income” to include a new category, “unrelated debt-financed income” from investment property, with the portion included measured by the proportion of debt on the investment property. This provision will discourage a developing device for trading in the tax exemption of nonprofit organizations, which now escapes unrelated business income tax....
In addition to the general problem of unfair competition resulting from the conduct of an unrelated trade or business, social clubs, fraternal beneficiary societies, and voluntary employee beneficiary associations present a special problem with regard to any income from sources outside the membership, whether such income results from the conduct of an unrelated trade or business or passive investments.
Consequently, the bill contains two amendments with respect to tax-exempt organizations generally: the so-called Clay-Brown provision which encompasses “debt-financed income” within the scope of “unrelated business income;” and the extension of the unrelated business income tax to additional tax-exempt organizations.

H.Rep. No. 91-413, 91st Cong., 1st Sess., reprinted in 1969 U.S.Code Cong. & Ad. News 1645, at 1689.

In conclusion, it is common knowledge that the exemption granted a charitable organization is narrow and includes the generation of income related only to its tax exempt activities. In this case, plaintiff borrowed money at a low interest rate on numerous donated life insurance policies and reinvested at a higher rate much as a bank or financial institution would do. If our holding were other than it is today, there would be nothing in this case to keep this charity from investing large amounts of proceeds in the proverbial hot dog stand or controlling any other unrelated business. Congress enacted Section 514 to tax unrelated business activity and this Court holds that advances on life insurance policies are “acquisition indebtedness” within the meaning of Section 514(c) of the Internal Revenue Code. Clearly, the potential for abuse is evident. This Court overrules plaintiff’s motion for summary judgment and sustains defendant’s motion for summary judgment.