author: MALETZ, Senior Judge.

text:
    John LEAHY and Benjamin Mollica, Plaintiffs, v. FEDERAL EXPRESS CORPORATION, Defendant.
    No. CV-83-4031 (JBW).
    United States District Court, E.D. New York.
    May 9, 1985.

      Noah A. Kinigstein, New York City, for plaintiffs.
    Chadbourne, Parke, Whiteside & Wolff, New York City (Charles K. O’Neill and Melissa A. Young, New York City, of counsel), for defendant.
   Opinion and Order

MALETZ, Senior Judge.

Plaintiffs John Leahy and Benjamin Mollica commenced this action in the Supreme Court of the State of New York, County of Queens, and defendant Federal Express Corporation (Federal) petitioned for removal seasonably. At the conclusion of plaintiffs’ case, Federal has moved for a directed verdict in its favor on all of plaintiffs’ claims.

The action arises from Federal’s termination of its employment of Leahy and Mollica as couriers after a security investigation raised suspicions as to their implication in the theft of an expensive wristwatch entrusted to Federal for overnight delivery. Initially, plaintiffs advanced eight claims, but Chief Judge Weinstein dismissed before trial a claim alleging a violation of New York Labor Law § 734(1) and plain-w tiffs have now withdrawn their claim of* tortious and abusive discharge and Mollica’s claim of libel. There remain the following claims:

(1) breach of an alleged employment contract;
(2) false imprisonment;
(3) assault;
(4) intentional infliction of emotional distress; and
(5) negligent infliction of emotional distress.

In considering Federal’s motion for a directed verdict, Fed.R.Civ.P. 50(a), the court must view the evidence in the light most favorable to plaintiffs and must give them the benefit of all inferences fairly supported by the evidence. See, e.g., Continental Ore Co. v. Union Carbide & Carbon Corp., 370 U.S. 690, 696, 82 S.Ct. 1404, 1409, 8 L.Ed.2d 777 (1962); Feldman v. Simkins Industries, Inc., 679 F.2d 1299, 1303 (9th Cir.1982); Fortunato v. Ford Motor Co., 464 F.2d 962, 965 (2d Cir.), cert, denied, 409 U.S. 1038, 93 S.Ct. 517, 34 L.Ed.2d 487 (1972). If the court determines “ ‘that reasonable men could not arrive at a contrary verdict,’ ” Cora Pub, Inc. v. Continental Casualty Co., 619 F.2d 482, 484 (5th Cir.1980) (quoting Boeing Co. v. Shipman, 411 F.2d 365, 374 (5th Cir. 1969)), then a directed verdict is appropriate. Against this background, the court treats plaintiffs’ claims seriatim.

I. Breach of Employment Contract

Plaintiffs claim that Federal breached an employment contract under the theory enunciated in Weiner v. McGraw-Hill, Inc., 57 N.Y.2d 458, 443 N.E.2d 441, 457 N.Y. S.2d 193 (1982). In Weiner, the New York Court of Appeals held for the first time that a plaintiff had pleaded a good cause of action for breach of contract even though he had not been hired for a specific term of employment. The court held it possible for an employer to bind itself by promises in a handbook that employees would not be dismissed without “just and sufficient cause” or rehabilitative efforts, assuming that the employee relied on these promises when he accepted employment. Weiner listed the allegations that, taken together, evinced a contract and a breach:

First, plaintiff was induced to leave Prentice-Hall with the assurance that McGraw-Hill would not discharge him without cause. Second, this assurance was incorporated into the employment application. Third, plaintiff rejected other offers of employment in reliance on the assurance. Fourth, appellant alleged that, on several occasions when he had recommended that certain of his subordinates be dismissed, he was instructed by his supervisors to proceed in strict compliance with the handbook and policy manuals because employees could be discharged only for just cause. He also claims that he was told that, if he did not proceed in accordance with the strict procedures set forth in the handbook, McGraw-Hill would be liable for legal action.

Id. at 465-66, 443 N.E.2d at 445, 457 N.Y. S.2d at 197 (emphasis added).

The gold rush of litigation touched off by Weiner was blunted, in large measure, by Murphy v. American Home Products Corp., 58 N.Y.2d 293, 448 N.E.2d 86, 461 N.Y.S.2d 232 (1983). Murphy contended that “in all employment contracts the law implies an obligation on the part of the employer to deal with his employees fairly and in good faith and that a discharge in violation of that implied obligation exposes the employer to liability for breach of contract.” Id. at 304, 448 N.E.2d at 91, 461 N.Y.S.2d at 237. This proposition was rejected by the Court of Appeals, which summarized the applicable New York law:

[Ajbsent a constitutionally impermissible purpose, a statutory proscription, or an express limitation in the individual contract of employment, an employer’s right at any time to terminate an employment at will remains unimpaired.

Id. at 305, 448 N.E.2d at 91, 461 N.Y.S.2d at 237 (emphasis added).

The potentially broad implications of Weiner were very nearly limited to the facts of that case: “on an appropriate evidentiary showing, a limitation on the employer’s right to terminate an employment of indefinite duration might be imported from an express provision therefor found in the employer’s handbook on personnel policies and procedures.” Id. (emphasis added).

The court is not unmindful of the “harshness of a rule which permits an employer to discharge with impunity a 30-year employee one day before his pension vests,” id. at 307, 448 N.E.2d at 93, 461 N.Y.S.2d at 239 (Meyer, J., dissenting in part), but it goes without saying that, in this diversity action, the court must apply New York law as explicated by the New York Court of Appeals. The Murphy principle has been applied by state and federal courts, often with unpleasant consequences for wrongful discharge claimants.

Thus, in Rizzo v. International Brotherhood of Teamsters, Local 237, App.Div., 486 N.Y.S.2d 220 (1st Dep’t 1985), the Appellate Division reversed Special Term’s denial of defendant’s motion for summary judgment, despite plaintiff’s argument that she hoped to discover codified personnel policies that would give rise to a Weiner claim. Rizzo held that the existence of such policies would be unavailing to plaintiff because “they were not known to plaintiff at the time she began her employment, nor indeed thereafter, and therefore could not have been relied upon by plaintiff so that they might be deemed express limitations on the defendants’ right to terminate her employment at will____” Id. 486 N.Y. S.2d at 221.

Sixteen days after rendering its opinion in Rizzo, the same Appellate Division decided Wexler v. Newsweek, Inc., App.Div., 487 N.Y.S.2d 330 (1st Dep’t 1985). Plaintiff, whose employment was terminated after nearly twenty years with Newsweek because of “budget considerations,” was unable to derive benefit from Weiner, which the court observed was “a rather unique case.” Id. 487 N.Y.S.2d at 331. Notwithstanding Wexler’s allegations that defendant’s Supervisor’s Manual stated “that an employee satisfactorily performing his job could be terminated ‘only under extreme circumstances’ ” and that no such extreme circumstances existed, the court held that plaintiff failed to state a cause of action for breach of contract. Id. 487 N.Y.S.2d at 331.

In Toshiba America, Inc. v. Simmons, 104 A.D.2d 649, 480 N.Y.S.2d 28 (2d Dep’t 1984), the court held that the employee’s “allegation that at the time of hiring he was told by plaintiff’s personnel that plaintiff was ‘a good employer from the standpoint * * * of job security [and] that if any problems arose [plaintiff] would endeavor to work them out equitably’ is insufficient to defeat plaintiff’s motion for summary judgment____” Id. at 649-50, 480 N.Y. S.2d at 28 (citing Murphy).

Weiner was distinguished, and Murphy relied upon, in Patrowich v. Chemical Bank, 98 A.D.2d 318, 470 N.Y.S.2d 599 (1st Dep’t), appeal dismissed as against defendant Chemical Bank, 62 N.Y.2d 801, affd per curiam as against defendant Corney, 63 N.Y.2d 541, 473 N.E.2d 11, 483 N.Y.S.2d 659 (1984). The Appellate Division found plaintiff’s reliance upon an employee manual misplaced, since Chemical’s manual “contain[ed] no provision requiring termination solely for good cause shown,” but merely provided “general policy statements and supervisory guidelines.” Id. at 322, 470 N.Y.S.2d at 603. Accord Citera v. Chemical Bank, 105 A.D.2d 636, 481 N.Y. S.2d 694 (1st Dep’t 1984). See generally McKay v. Capital Cities Communications, Inc., 605 F.Supp. 1489 (S.D.N.Y. 1985) (available on WESTLAW, General Federal database, DCT file, May 9, 1985) (holding that Murphy precludes a finding of implied limitation on employer’s unfettered right to terminate at will employees at any time); Salanger v. U.S. Air, No. 81-CV-542, 611 F.Supp. 427 (N.D.N.Y. 1985) (judgment for defendant in absence of express limitation on employer’s right to terminate employment at will at any time); Carlson v. Viacom International Inc., 566 F.Supp. 289, 290-91 (S.D. N.Y.1983) (employer is under no good faith obligation to allow employee at will to continue employment).

In this case, both Leahy and Mollica signed employment applications that included an agreement, two paragraphs of which are crucial:

That should I be given employment either in the position applied for or any other, now or hereafter, such employment shall be for an indefinite period and may be terminated at any time without notice or liability for wages or salary, except such earned at date of such termination____
That all terms and conditions of my employment, except to the extent covered specifically by this contract or any other valid contract between Company and me (or someone legally acting on my behalf) shall be determined and governed by Company’s Policies and Procedures Manual, as same may be amended from time to time hereafter (a copy of which, together with all amendments, shall at all times be available to me).

Federal emphasizes the first paragraph as guaranteeing its right to terminate at any time employees at will. Plaintiffs argue that the second paragraph incorporated the provisions of the manual known as Your Employee Handbook and the Guaranteed Fair Treatment Procedure (GFTP) covered therein. Additionally, plaintiffs testified that oral representations were made to them by Federal employees, with Leahy being told that Federal provided good, secure employment and Mollica being told that he could not be fired unless he was caught stealing.

Given all these considerations, and taking all the evidence in the light most favorable to plaintiffs, their claims for breach of contract remain legally insufficient and may not go to the jury. For even if plaintiffs are correct that Federal violated the spirit and letter of the GFTP and did not give them the hearing to which they believed themselves entitled, nowhere in the record is there any indication of an express limitation on Federal’s right to terminate employees at will, as required by Murphy. Indeed, the unambiguous language of the first paragraph of the agreement quoted above expressly preserved Federal’s right to terminate employees at will.

Moreover, nothing in the record rises to the level of the promises made in Weiner. General statements about job security, and even an oral representation that employees could not be fired without just cause, do not satisfy the panoply of requirements set forth in Weiner. Whether or not each of the factors listed in Weiner was necessary to the result in that case, the paucity of the record here makes it clear that plaintiffs have not satisfied the Weiner standard.

Finally, the record indicates that Leahy and Mollica were unemployed and did not turn down any pending job offers when they accepted employment with Federal. The absence of reliance upon the alleged promises of Federal is particularly telling and further removes plaintiffs from the Weiner criteria. Accordingly, defendant’s motion for a directed verdict on plaintiffs’ breach of contract claims is granted.

II. False Imprisonment, Assault, Intentional Infliction of Emotional Distress, and Negligent Infliction of Emotional Distress

In support of their claims for false imprisonment, assault, intentional infliction of emotional distress, and negligent infliction of emotional distress, plaintiffs have testified that they were mistreated by Federal employees during the security investigation that followed the disappearance of the wristwatch. More specifically, Leahy testified that a Federal employee named John Flynn prevented him from leaving a room and placed him in apprehension of immediate harm by pulling back his jacket to reveal a firearm he was carrying. Mollica testified that he was similarly confined to a room and placed in apprehension of immediate harm when a Federal employee named John Ridell placed his arm upon the wall and pushed Mollica backwards in response to Mollica’s attempt to exit.

To establish a false imprisonment claim, “plaintiff must show that: (1) the defendant intended to confine him, (2) the plaintiff was conscious of the confinement, (3) the plaintiff did not consent to the confinement and (4) the confinement was not otherwise privileged____” Broughton v. State, 37 N.Y.2d 451, 456, 335 N.E.2d 310, 314, 373 N.Y.S.2d 87, 93, cert, denied, 423 U.S. 929, 96 S.Ct. 277, 46 L.Ed.2d 257 (1975).

“An action for an assault need not involve physical injury, but only a grievous affront or threat to the person of the plaintiff.” DiGilio v. William J. Burns International Detective Agency, Inc., 46 A.D.2d 650, 650, 359 N.Y.S.2d 688, 689 (2d Dep’t 1974).

The requisites of a cause of action for intentional infliction of severe emotional distress were enumerated in Fischer v. Maloney, 43 N.Y.2d 553, 557, 373 N.E.2d 1215, 1217, 402 N.Y.S.2d 991, 992-93 (1978):

An action may lie for intentional infliction of severe emotional distress “for conduct exceeding all bounds usually tolerated by decent society” (Prosser, Torts [4th ed.], § 12, p. 56). The rule is stated in the Restatement, Torts 2d, as follows: “One who by extreme and outrageous conduct intentionally or recklessly causes severe emotional distress to another is subject to liability for such emotional distress” (§ 46, subd. [1]; see for one aspect Comment d: “Liability has been found only where the conduct has been so outrageous in character, and so extreme in degree, as to go beyond all possible bounds of decency, and to be regarded as atrocious, and utterly intolerable in a civilized community”).

Taking all the evidence in the light most favorable to plaintiffs, the court finds that they have made out prima facie cases on their claims for false imprisonment, assault, and intentional and negligent infliction of emotional distress. Accordingly, defendant's motion for a directed verdict on these claims is denied.

SO ORDERED.

       Of the United States Court of International Trade, sitting by designation.


source: Caselaw Access Project

author: VUKASIN, District Judge.

license: Public Domain

text:
    Pershing F. WONG, Plaintiff, v. KEYSTONE SHIPPING CO., a corporation, Margate Shipping Co., a corporation, and Keystone Tankers, Inc., a corporation, Defendants.
    No. C-84-7130 JPV.
    United States District Court, N.D. California.
    May 9, 1985.

      Martin J. Jarvis, Jarvis,- Miller, Brodsky & Baskin, San Francisco, Cal., for plaintiff.
    James Quirk, Brobeck, Phleger & Harrison, San Francisco, Cal., for defendants.
   AMENDED ORDER GRANTING DEFENDANTS' MOTION FOR SUMMARY JUDGMENT

VUKASIN, District Judge.

INTRODUCTION

Plaintiff Pershing F. Wong, a United States Coast Guard licensed deck officer, was employed as Second Mate aboard the SS CORONADO, a United States flag tanker vessel operated by defendants [collectively, “Keystone”] in interstate and foreign commerce. In the Autumn of 1984, while the vessel was en route from Europe to the Netherlands Antilles, a labor dispute developed between Keystone and plaintiffs union, the International Organization of Masters, Mates & Pilots [the “MM & P” ], arising out of Keystone’s September 27th termination of the parties’ collective bargaining agreement. On or about October 3, 1984, the MM & P instructed plaintiff and other MM & P member deck officers on duty aboard Keystone vessels to engage in “job action” — i.e., strike — against Keystone by immediately ceasing all work not related to the security of the affected craft. On October 8 and 9 of that year, after the SS CORONADO had reached Aruba, Netherlands Antilles, plaintiff complied with these instructions, and refused to perform his assigned duties as Second Mate. Because of this conduct, the Master of the vessel relieved plaintiff, replacing him with another licensed deck officer. Plaintiff's employment with Keystone was thus terminated effective October 9, 1984.

On the following November 16 plaintiff filed his complaint under the general maritime laws, alleging that he was discharged solely because of his membership in and lawful activities on behalf of the MM & P and that said discharge effected a breach of the shipping articles which constituted his maritime employment contract with Keystone. He seeks over $7 million in punitive and other tort damages.

Keystone’s motion for summary judgment came on regularly for hearing before this Court on April 25, 1985. Having considered the briefs and entertained oral argument on the motion, the Court concludes that there is no genuine issue as to any material fact and that defendants are entitled to judgment as a matter of law pursuant to Rule 56(c) of the Federal Rules of Civil Procedure.

DISCUSSION

1 Factual Summary

Plaintiff’s complaint and the declarations of the parties establish that there is no genuine issue with respect to the following material facts:

1. Plaintiff’s duties and responsibilities as a licensed deck officer and Second Mate made him a “supervisor” within the meaning of the National Labor Relations Act, as amended [“N.L.R.A.”], 29 U.S.C. §§ 151 et seq., 152(11). Keystone is an “employer” subject to the N.L.R.A., 29 U.S.C. § 152(2).

2. Throughout his employment with Keystone, plaintiff was a member in good standing of the MM & P, a “labor organization” subject to the N.L.R.A., 29 U.S.C. § 152(5).

3. On September 27, 1984, Keystone terminated its collective bargaining agreement with the MM & P; the agreement had applied to the licensed deck officer supervisory personnel, including plaintiff. At no time since the termination date has the MM & P contended that Keystone was without the legal or contractual right to terminate the collective bargaining agreement, or to refuse to negotiate with the MM & P for a successor agreement.

4. Plaintiff was offered continuing employment as a licensed deck officer and Second Mate aboard the SS CORONADO, subject to new wages and working conditions to be made effective upon the termination of the then-current shipping articles aboard the vessel. Plaintiff declined this offer.

5. The shipping articles applicable to plaintiffs employment were opened on February 12, 1984, in New York harbor. They did not include a promise by or impose a duty on Keystone to engage in collective bargaining with the MM & P.

6. On or about October 3, 1984, the MM & P issued instructions to its licensed deck officer members, including plaintiff, serving aboard Keystone vessels: in substance, these instructions directed said MM & P deck officers to engage in “job action” against Keystone by immediately ceasing all work of any kind except that involving security of the vessels.

7. On October 8 and 9, 1984, while the SS CORONADO was at Aruba, in the Netherlands Antilles, plaintiff engaged in a strike and refusal to perform his assigned duties as a licensed deck officer and Second Mate aboard the vessel.

8. Because of this strike, the Master of the SS . CORONADO on October 9, 1984, relieved and replaced plaintiff as the vessel’s Second mate, thereby terminating his employment with Keystone.

9. Plaintiff’s complaint and the damages for which he prays are based on an alleged tortious wrongful discharge grounded solely upon his membership in the MM & P and his lawful activities as a member of that labor organization.

2 Legal Analysis

The national labor policy articulated by Congress in Section 14(a) of the N.L.R.A., 29 U.S.C. § 164(a), mandates that the theories upon which plaintiff has based his complaint must be rejected. Section 14(a) states:

Nothing herein shall prohibit any individual employed as a supervisor from becoming or remaining a member of a labor organization, but no employer subject to this subchapter shall be compelled to deem individuals defined hérein as supervisors as employees for the purpose of any law, either national or local, relating to collective bargaining.

This policy was upheld in Beasley v. Food Fair of North Carolina, Inc., 416 U.S. 653, 94 S.Ct. 2023, 40 L.Ed.2d 443 (1974), where the Supreme Court enforced the right of employers subject to the N.L.R.A. to discharge supervisory employees for the very reason — lawful labor organization membership and activities — which plaintiff alleges to have been the sole basis for his discharge by Keystone. In Beasley the Court looked to the legislative history of Section 14(a) for confirmation of the principle that, because supervisors are management personnel obliged to be loyal to the employer’s interests — and because their identity with the interests of rank-and-file employees might impair that loyalty — Congress did not intend that employers be obligated to recognize and bargain with unions including or composed of supervisors. As the relevant House Report stated:

The bill does not forbid anyone to organize. It does not forbid any employer to recognize a union of foremen. Employers who, in the past, have bargained collectively with supervisors may continue to do so. What the bill does is to say ... [tjhat no one, whether employer or employee, need have as his agent one who is obligated to those on the other side, or one whom, for any reason, he does not trust.

Id., 416 U.S. at 661, 94 S.Ct. at 2027-2028, citing H.R.Rep. No. 245, 80th Cong., 1st Sess. 16, 17 (1947) (emphasis in original). Based on this clear statement of congressional intent, the Court therefore concluded that Section 14(a) constituted a bar to the assertion of wrongful discharge claims such as that advanced by plaintiff on the grounds that to allow such a claim to be maintained would “flout the national policy against compulsion upon employers from either federal or state agencies to treat supervisors as employees.” Id., 416 U.S. at 662, 94 S.Ct. at 2028 (citation and footnote omitted).

Plaintiff argues, however, that the extensive statutory and common law protections traditionally afforded to seamen should preclude the application of Beasley and Section 14(a) to his discharge by Keystone. The Court is unpersuaded by this theory, and is thus of the opinion that the complaint fails to state a claim under the general maritime laws. Plaintiff is unable to cite any authority in support of the proposition that there exists a maritime wrongful discharge tort action for breach of a seaman’s shipping articles. The existing authority, rather, is to the contrary. See, e.g. Belanger v. Keydril Co., 596 F.Supp. 823 (E.D.La.1984); Nugent v. Sea-Land Service, 1973 A.M.C. 977 (N.D.Cal.1972). That the “tort” does not presently exist thus appears certain, and nothing in the facts of this case convinces the Court that such a tort should be judicially created.

In consideration of the foregoing, therefore, defendants’ motion for summary judgment is hereby granted.


author: ASPEN, District Judge:

text:
    George LOCKETT and Leonard Pierce, Plaintiffs, v. INTERNATIONAL LONGSHOREMEN’S ASSOCIATION, LOCAL 19 AFL-CIO, Defendant.
    No. 84 C 10699.
    United States District Court, N.D. Illinois, E.D.
    May 9, 1985.
    Murray Wolley, Chicago, Ill., for plaintiff.
    Michael B. Erp/Irving M. Friedman/Stanley Eisenstein, Katz, Friedman, Schur & Eagle, Chicago, Ill., for defendant.
   MEMORANDUM ORDER

ASPEN, District Judge:

Defendant’s motion for judgment on the pleadings is granted.

Plaintiffs essentially complain that their removal from union offices and disqualification from eligibility to run for union office for two years constitutes improper disciplinary action under 29 U.S.C. § 411(a)(5). It is clear, however, that section 411 “refers only to union members— not officers — and that it protects members of a labor organization qua members but has no application to officers of the union qua officers.” Lux v. Blackman, 546 F.2d 713, 716 (7th Cir.1976); see also Airline Stewards and Stewardesses Ass’n v. Transport Workers Union, 334 F.2d 805 (7th Cir.1964), cert, denied, 379 U.S. 972, 85 S.Ct. 648, 13 L.Ed.2d 563 (1965). The Supreme Court recently noted that Congress specifically intended not to protect a member’s status as a union employee or officer. In Finnegan v. Leu, 456 U.S. 431, 102 S.Ct. 1867, 72 L.Ed.2d 239 (1982), the Court discussed the legislative history of section 411:

The Conference Report accompanying S. 1555 as finally enacted, H.R.Rep. 1147, 86th Cong., 1st Sess. 31 (1959), I Leg. Hist. 935, explains that this “prohibition on suspension without observing certain safeguards applies only to suspension of membership in the union; it does not refer to suspension of a member’s status as an officer of the union ” (emphasis added).

Id., 456 U.S. at 438, 102 S.Ct. at 1871. Thus, members of a union may be removed summarily from union office. Lux, 546 F.2d at 716.

Plaintiffs concede that Pierce, who was Vice President of Local 19, was an officer. However, they argue that Lockett was not a union officer because he served as steward and trustee of the welfare and pension funds, two positions not specifically named in Article VII, Section 1 of Local 19’s bylaws. This argument is unconvincing. The enumeration of officers in the by-laws is obviously not intended to be all-inclusive, as Article VII, Section 1 goes on to provide that “[t]he executive board, with the consent of the membership, shall appoint or hire additional employees or officers for such periods as may be deemed advisable.” We therefore find that Lockett was an officer in the union, at least insofar as status as an officer is distinguished from status as a union member for purposes of section 411. See Cehaich v. International Union, U.A.W., 710 F.2d 234 (6th Cir.1983) (benefits representative was a union officer without a § 411 cause of action for summary dismissal).

Plaintiffs likewise have no claim under section 411 arising from their two year disqualification from running for union offices. Ineligibility from running for or holding office — like removal from an office already held — does nothing to suspend membership in the union, which is the sole object of section 411’s protection. Finnegan, 456 U.S. at 438, 102 S.Ct. at 1871. Thus, plaintiffs’ disqualification is not a disciplinary action governed by section 411.

Accordingly, defendant’s motion for judgment on the pleadings is granted. It is so ordered.

      . Plaintiffs also complain of fines and benefit overpayments assessed against them. However, the decision to fine plaintiffs and order them to pay back fringe benefit monies was reversed by the Great Lakes District Executive Board, which heard plaintiffs' internal union appeals.

      . Plaintiffs incorrectly try to distinguish Lux from this case by claiming that it involved the removal of a union president. In fact, the Lux plaintiffs were removed by the president from their positions on the Milwaukee Labor Council and their local's Nominating and Legislative Committees.

      . The by-laws expressly mention the offices of president, vice-president, recording secretary, financial secretary, business agent, trustee, sergeant at arms and executive board member at large.

      . Plaintiffs inexplicably place considerable reliance on footnote 11 of the Finnegan decision. We find the footnote inapplicable to this case and simply observe that rather than creating an “exception” to the Supreme Court's holding, the footnote merely identified a question left open by the opinion.


author: SWEET, District Judge.

text:
    ASHLEY MEADOWS FARM, INC., Plaintiff, v. AMERICAN HORSE SHOWS ASSOCIATION, INC., Defendant.
    No. 82 Civ. 5691 (RWS).
    United States District Court, S.D. New York.
    May 10, 1985.

      Butler, Fitzgerald & Potter, P.C., New York City, for plaintiff; Thomas A. Butler, James M. Davis, James H. Neale, New York City, of counsel.
    LeBoeuf, Lamb, Leiby & MacRae, New York City, for defendant; H. Richard Wachtel, Molly S. Boast, John T. Patterson, New York City, of counsel.
   OPINION

SWEET, District Judge.

Plaintiff Ashley Meadows Farm, Inc. (“Ashley”) has moved for summary judgment pursuant to Fed.R.Civ.P. 56 upon its claim for a permanent injunction under Section 1 of the Sherman Act and Section 16 of the Clayton Act, 15 U.S.C. §§ 1 and 26. Defendant American Horse Shows Association, Inc. (“AHSA”) has moved to amend its answer to include a seventh defense based upon the Amateur Sports Act of 1978, 36 U.S.C. § 371 et seq. AHSA’s motion was granted at oral argument, and Ashley’s motion is denied.

Prior Proceedings

Ashley and Ashley’s president, Dolores Swann (“Swann!’), brought this action against AHSA and Ira Finkelstein (“Finkelstein”), counsel to AHSA, alleging conspiracies to violate and actual violations of the antitrust laws. In an opinion of September 28, 1983 I granted Finkelstein’s motion to dismiss but denied AHSA’s similar motion. In an opinion of September 20, 1984 I granted AHSA’s- subsequent motion for summary judgment with respect Swann. Ashley has now moved for .partial summary judgment, alleging that the mileage and protected date rules violate 15 U.S.C. §§ 1 and 26.

Facts

The facts as alleged with respect to AHSA’s structure and role in the horse showing community, Ashley, and the operation of AHSA’s “mileage” and “protected” date rules are set forth with sufficient specificity in the September 28, 1983 and September 20,. 1984 opinions, 593 F.Supp. 1184. Familiarity with these opinions is assumed.

Discussion

The parties agree that NCAA v. Board of Regents, — U.S. —, 104 S.Ct. 2948, 82 L.Ed.2d 70 (1984) (“NCAA”) is dispositive of this case. Two issues must be resolved in light of the Supreme Court’s reasoning in NCAA: should the per se rule be applied to AHSA’s mileage and protected date rules, and, if not, are there material questions of fact which prevent granting summary judgment under a rule of reason analysis.

The Per Se Rule

In NCAA the Supreme Court evaluated a scheme pursuant to which the television committee of the NCAA was granted sole authority to negotiate all rights to televise member college’s football games. The scheme limited both the total quantity of televised intercollegiate football and the number of games that any one team could televise. Member schools were permitted to televise games only in accordance with the approved scheme, and when certain member schools began to negotiate additional sales of television rights, the NCAA threatened disciplinary action.

After a full trial, the district court found the scheme and its enforcement to constitute a “classic cartel,” and it found the plan to be both per se price fixing and a per se group boycott in violation of Section One of the Sherman Act. Board of Regents v. NCAA, 546 F.Supp. 1276, 1300-1313 (W.D.Okl.1982). The Ninth Circuit affirmed on the ground that the plan constituted per se price fixing. Bd. of Reg. of U. of Okl. v. NCAA, 707 F.2d 1147 (10th Cir. 1983).

The Supreme Court rejected the lower court’s application of the per se rule, invoking, in its stead, the rule of reason:

There can be no doubt that the challenged practices of the NCAA constitute a “restraint of trade” in the sense that they limit members’ freedom to negotiate and enter into their own television contracts.
It is also undeniable that these practices share characteristics of restraints we have previously held unreasonable____ By participating in an association which prevents member institutions from competing against each other on the basis of price or kind of television rights that can be offered to broadcasters, the NCAA member institutions have created a horizontal restraint — an agreement among competitors on the way in which they will compete with one another. A restraint of this type has often been held to be unreasonable as a matter of law. Because it places a ceiling on the number of games member institutions may televise, the horizontal agreement places an artificial limit on the quantity of televised football that is available to broadcasters and consumers. By restraining the quantity of television rights available for sale, the challenged practices create a limitation on output; our cases have held that such limitations are unreasonable restraints of trade____
Horizontal price-fixing and output limitation are ordinarily condemned as a matter of law under an “illegal per se” approach because the probability that these practices are anti-competitive is so high; ... Nevertheless, we have decided that it would be inappropriate to apply the per se rule to this case. [W]hat is critical is that this ease involves an industry in which horizontal restraints on competition are essential if the product is to be available at all.
What the NCAA and its member institutions market in this case is competition itself — contests between competing institutions. Of course, this would be completely ineffective if there were no rules on which the competitors agreed to create and define the competition to be marketed____ And the integrity of the “product” cannot be preserved except by mutual agreement; if an institution adopted such restrictions unilaterally, its effectiveness as a competitor on the playing field might soon be destroyed. Thus, the NCAA plays a vital role in enabling college football to preserve its character, and as a result enables a product to be marketed which might otherwise be unavailable. In performing this role, its actions widen consumer choice — not only the choices available to sports fans but also those available to athletes — and hence can be viewed as procompetitive____ Thus, despite the fact that this case involves restraints on the ability of member institutions to compete in terms of price and output, a fair evaluation of their of their competitive character requires consideration of the NCAA’s justifications for the restraints.

The Court reasoned in NCAA that where cooperation and rule creation among members of a sports organization are necessary to insure the existence of a product defined as the marketing of high caliber competition then the application of the per se rule may be inappropriate. This case is analogous. What the AHSA markets is a system of horse show certification and recognition designed to produce uniform grading and ranking of horses. Consumers are both the exhibitors of horses and the viewing public. Consequently, just as the NCAA can proffer potentially anticompetitive rules outside the scrutiny of the per se rule in order to ensure the integrity of college football, so too can the AHSA create a framework of rules to guarantee the continued quality of horse competitions. Because AHSA claims that its market restrictions perform a pro competitive function through their preservation of the character and caliber of the sport, a factual issue has been presented which makes the application of the per se rules inappropriate. See the following cases, all cited approvingly in NCAA, note 24. Brenner v. World Boxing Council, 675 F.2d 445 (2d Cir.1982); North American Soccer v. National Football League, 670 F.2d 1249 (2d Cir.1982); Hatley v. American Quarter Horse Ass’n., 552 F.2d 646 (5th Cir.1977); Justice v. NCAA, 511 F.Supp. 356 (D.D.C. 1983); Cooney v. American Horse Shows Ass’n., 495 F.Supp. 424 (S.D.N.Y.1980). The mileage and protected date rules, because they might exert regulatory pressures akin to those acknowledged by the Court in NCAA, require a more searching analysis than that of the per se test.

Rule of Reason

Under a rule of reason analysis the trier of fact must “form a judgment about the competitive significance of the restraint.” NCAA, — U.S. at —, 104 S.Ct. at 2962, quoting National Society of Professional Engineers v. United States, 435 U.S. 679, 692, 98 S.Ct. 1355, 1365, 55 L.Ed.2d 637 (1978). In North American Soccer the Second Circuit defined the factors that must be weighed in rule of reason analysis:

The true test of legality is whether the restraint imposed is such as merely regulates and perhaps thereby promotes competition or whether it is such as may suppress or even destroy competition. To determine that question the court must ordinarily consider-the facts peculiar to the business to which the restraint is applied; its conditions before and after the restraint was imposed; the nature of the restraint and its effect, actual or probable. The history of the restraint, the evil believed to exist, the reason for adopting the particular remedy, the purpose or end sought to be attained, are all relevant facts. This is not because good intention will save an otherwise objectionable regulation or the reverse; but because knowledge of intent may help the court to interpret facts and to predict consequences.

670 F.2d at 1259.

The multiplicity of factors that must be balanced under this test makes this task particularly unsuited to resolution on a motion for summary judgment in the face of AHSA’s assertion that its mileage and protected date rules are reasonable and necessary to maintain the integrity or character of the sport and the caliber, integrity, and uniformity of competition. See Brenner v. World Boxing Council, supra, at 455; Justice v. NCAA, supra, at 382 n. 17. Whether these claims can be supported, and whether AHSA can demonstrate that the rules are sufficiently akin to “the size of the field, the number of players on a team” NCAA, — U.S. at —, 104 S.Ct. at 2961, such that the restraint on competition is reasonable, awaits a determination at trial. The rule of reason, however, “does not support a defense based on the assumption that competition itself is unreasonable;” NCAA at —, 104 S.Ct. at 2969, quoting Professional Engineers, supra, 435 U.S. at 696, 98 S.Ct. at 1367. The undisputed restraint on trade places on AHSA “a heavy burden of establishing an affirmative defense which competitively justifies this apparent deviation from the operations of the free market.” NCAA, —U.S. at —, 104 S.Ct. at 2967.

Conclusion

Under NCAA, in my view, the per se rule should not be applied on the facts of this case. Further, the balancing of the factors to be applied under the rule of reason requires a factual resolution inappropriate to summary judgment when conflicting testimony is urged with respect to the purpose and effect of the restraint. The motion for summary judgment is therefore denied. All discovery must be completed by July 3, 1985 and a joint pretrial order submitted by July 10, 1985.

IT IS SO ORDERED.


author: WEXLER, District Judge.

text:
    Harold MOORE, Plaintiff, v. UNITED STATES POSTAL SERVICE, Defendant.
    No. CV 84-1340.
    United States District Court, E.D. New York.
    May 13, 1985.
    Bloom & Amrod by Michael Creighton, Garden City, N.Y., for plaintiff.
    Raymond J. Dearie, U.S. Atty. by William B. Peterson, Asst. U.S. Atty., Brooklyn, N.Y., for defendant.
   MEMORANDUM AND ORDER

WEXLER, District Judge.

This is an action for alleged violations of 5 U.S.C. § 552a, which concerns disclosure of federal employee records.

Plaintiff was a U.S. Postal Service employee. The Postal Service was served with a judicial subpoena duces tecum for plaintiffs records. The subpoena was prepared by the attorney for plaintiffs wife in a divorce action, and approved by a state court judge. The Postal Service complied with the subpoena.

Under 5 U.S.C. § 552a(b), a federal agency generally cannot disclose an employee’s records without his consent. However, under § 552a(b)(ll), this rule does not apply when such disclosure is “pursuant to the order of a court of competent jurisdiction.” Further, under § 552a(e)(8), an agency must “make reasonable efforts to serve notice on an individual when any record of such individual is made available to any person under compulsory legal process when such process becomes a matter of public record.” An individual adversely affected by violations of these provisions may bring suit under § 552a(g)(l)(D).

The first issue is whether the subpoena in this case constituted a “court order” within the meaning of § 552a(b)(11). There is some authority for the proposition that mere issuance of a subpoena does not constitute a court order. Stiles v. Atlanta Gas Light Co., 453 F.Supp. 798, 800 (N.D. Ga.1978). We respectfully disagree. We see nothing in the language of the statute to preclude its application to subpoenas. It is interesting to note in this connection that the judge who approved the subpoena used the words “so ordered”, and that New York law requires a “court order” for the issuance of subpoenas of this type, CPLR 2302. While there might perhaps be some merit in the notion that a federal subpoena issued by the clerk pursuant to Rule 45(a) of the Federal Rules of Civil Procedure does not constitute a “court order”, we believe that it is clear that a New York subpoena issued under CPLR 2302(b) (which cannot be issued by a clerk) constitutes a “court order”. Although it appears that the attorney for plaintiff’s wife failed to give the Postal Service notice of a motion for a subpoena (as is required by CPLR 2302(b)), this is of no relevance, since the notice is for the benefit of the Postal Service and may be waived by the Postal Service. We therefore hold that there has been no violation of § 552a(b).

The second issue is whether the Postal Service’s failure to notify plaintiff of the release of the records pursuant to § 552a(e)(8) gives rise to a claim for relief in the instant case. We hold that it does not. We see no basis for believing that plaintiff was prejudiced by such absence of notice. Plaintiff’s position appears to be that, had the Postal Service notified plaintiff before releasing the records, plaintiff could have opposed such release in court. However, § 552a(e)(8) does not speak of advance notice of release, but simply requires an agency to notify an individual of the fact that his records are being or have been released. If for any reasons the records were inadmissible, plaintiff could have raised this issue in the state court action. If plaintiff failed to raise the issue or received an adverse determination on the issue by a competent court, he has no right to complain. In any event, plaintiff has done no more than make a conclusory assertion of prejudice.

Defendant’s motion for summary judgment is granted. Plaintiff shall have no relief. The Clerk shall enter judgment accordingly.

SO ORDERED.


text:
    Harold MOORE, Plaintiff, v. UNITED STATES of America, United States Postal Service, Mark Hortion, Robert May, John Hopkins and Andrew Marino, Defendants.
    No. CV 84-2314.
    United States District Court, E.D. New York.
    May 17, 1985.

      Bloom & Amrod, Garden City, N.Y., for plaintiff.
    Raymond J. Dearie, U.S. Atty. by William Peterson, Asst. U.S. Atty., Brooklyn, N.Y., for defendants.
   MEMORANDUM AND ORDER

WEXLER, District Judge.

I. FACTS

Plaintiff is an employee of the U.S. Postal Service. On August 29, 1979 plaintiff’s supervisors suspended plaintiff for seven days without pay, allegedly on the ground that plaintiff had deliberately mishandled certain equipment. Plaintiff’s union appealed to the installation head. On December 4, 1979 the installation head affirmed the suspension. On April 9, 1981 the union sent a letter to the Regional Labor Relations Office. The union stated that the union local had sent an appeal to the Regional Office on December 4, 1979. On April 21, 1981 the Regional Office stated that it would accept the appeal for processing but that the Regional Office reserved the right to raise the issue of timeliness. On December 31, 1981 the Regional Office affirmed the suspension, finding both that the appeal was untimely and that the suspension was justified on the merits. The union then appealed, demanding arbitration. On November 1, 1982 the arbitration hearing was held. On November 16, 1982 the Postal Service withdrew its contention that the proceeding was time-barred. On November 19, 1982 the arbitrator ruled in plaintiffs favor, finding that the suspension was unjustified, and ordering that plaintiff be compensated for lost wages.

Plaintiff filed the instant action May 24, 1984. In the first cause of action, plaintiff alleges that the individual defendant supervisors conspired to interfere with plaintiffs employment by filing false statements and giving false testimony (plaintiff originally named the United States Postal Service as a defendant on this cause of action, but has withdrawn this cause of action as against the Postal Service). In the second cause of action; plaintiff alleges that all defendants violated plaintiffs right to due process under the Fifth Amendment by delaying the hearing. Plaintiff has withdrawn the third, fourth, and fifth causes of action.

II. DISCUSSION

A. DUE PROCESS CLAIM AGAINST POSTAL SERVICE

The first issue is whether the due process claim against the Postal Service is barred by sovereign immunity. We hold that it is. The Due Process Clause of the Fifth Amendment does not create a cause of action for money damages against the federal government. Duarte v. U.S., 532 F.2d 850, 852 (2d Cir.1976); Boyce v. U.S., 523 F.Supp. 1012, 1016 (E.D.N.Y.1981) (Neaher, J.). We see nothing in the decision in United States v. Mitchell, 463 U.S. 206, 103 S.Ct. 2961, 77 L.Ed.2d 580 (1983) to the contrary.

B. DUE PROCESS CLAIM AGAINST . INDIVIDUALS

The second issue is whether the complaint states a claim for relief under the Due Process Clause of the Fifth Amendment against the individual defendants. We hold that it does not.

We begin by noting that, had the complaint stated a claim for relief, such claim would not be barred on the ground of failure to exhaust union remedies. Nothing which has been presented to us suggests that there exist union remedies in the form of money damages against individuals alleged to have violated the Due Process Clause.

Plaintiff acknowledges that mere delay in the processing of a claim will not give rise to a violation of the Due Process Clause. Polk v. Kramarsky, 711 F.2d 505, 508-509 (2d Cir.1983). Plaintiff argues, however, that the delay in the processing of plaintiffs case prevented plaintiff from being promoted. However, a federal employee’s expectation of promotion does not constitute “property” within the meaning of the Due Process Clause. Boyce v. U.S., 523 F.Supp. 1012, 1017 (E.D.N.Y.1981) (Neaher, J.). Consequently, the complaint does not state a claim against the individual defendants under the Due Process Clause.

Even if the complaint had stated a claim under the Due Process Clause against the individual defendants, we would grant summary judgment to the defendants. The responsibility for sending a notice of appeal from the December 4, 1979 decision to the Regional Office rested upon the union local. The delay which took place between December 4, 1979 and April 21, 1981 could have resulted from error on the part of the union local or the Regional Office, or from papers being lost in the mail. We see no way in which such delay could have resulted from misconduct on the part of the individual defendants.

C. CONSPIRACY CLAIM AGAINST INDIVIDUALS

The conspiracy claim against the individual defendants is based upon state law. Dismissal of federal claims does not automatically result in refusal to exercise pendent jurisdiction over related state law claims. Stamford Bd. of Educ. v. Stamford Educ. Ass’n, 697 F.2d 70, 72 (2d Cir. 1982). In the process of examining the motion papers, we simultaneously recognized that both the federal and state law claims should be dismissed. Accordingly, we will exercise pendent jurisdiction over the state law claims for the purpose of dismissing them.

As already explained in our discussion of the due process claim against the individual defendants, delay in the processing of plaintiffs case could not have been caused by the individual defendants. Accordingly, plaintiff can have no relief upon his state law conspiracy claim that defendants delayed his case.

With respect to plaintiffs claim that defendants conspired to give false testimony and make false statements, the applicable limitation is clearly the one year limitation for actions for malicious prosecution, libel, and slander provided by N.Y. CPLR § 215(3). See Morrison v. NBC, 19 N.Y.2d 453, 280 N.Y.S.2d 641, 227 N.E.2d 572 (1967); Sacks v. Stewart, 75 A.D.2d 536, 427 N.Y.S.2d 20, 22-23 (1980). The claim is therefore time-barred.

III. CONCLUSION

The Clerk shall close the file and enter judgment as follows:

1. The first cause of action is dismissed as against the United States, and the third, fourth, and fifth causes of action are dismissed in their entirety, on the ground that plaintiff concedes that they are barred;

2. The first cause of action is dismissed as against the individual defendants, on the ground that:

(a) the claim for the giving of false testimony and the making of false statements is time-barred;

(b) the other claims in the first cause of action should be dismissed pursuant to Rule 56;

3. The second cause of action is dismissed as against the United States on the ground of sovereign immunity;

4. The second cause of action is dismissed as against the other defendants pursuant to Rules 12(b)(6) and 56.

SO ORDERED.


author: GILES, District Judge.

text:
    COMMERCIAL UNION INSURANCE CO. v. PITTSBURGH CORNING, et al.
    Civ. A. No. 81-2129.
    United States District Court, E.D. Pennsylvania.
    May 16, 1985.

      James Lewis Griffith, Griffith & Burr, P.C., Philadelphia, Pa., for Commercial Union Ins. Co.
    James J. Restivo, Jr., Reed, Smith, Shaw & McClay, Pittsburgh, Pa., for Pittsburgh Corning Corp.
    Dennis Jacobs, Simpson, Thacher & Bartlett, New York City, Wayne A. Schaible, Duane, Morris & Heckscher, Philadelphia, Pa., for Travelers Indem. Co.
    Daniel P. Stefko, Dickie, McCamey & Chilcote, Pittsburgh, Pa., for PPG Industries, Inc.
   MEMORANDUM

GILES, District Judge.

By order dated October 29, 1981 (filed November 2, 1981), and as explained by Memorandum of December 4, 1981, reported at 553 F.Supp. 425 (E.D.Pa.1981), this court held that The Travelers Indemnity Company (“Travelers”) had a duty to continue to defend its insured, Pittsburgh Corning Corporation (“Pittsburgh Corning”) in the thousands of asbestos-disease related lawsuits then pending. This duty existed despite exhaustion by settlements or other payments of the aggregate limits of the Travelers’ policy of general liability insurance covering the period of 1962 through July, 1970. Commercial Union Insurance Company (“Commercial Union”) had issued to Pittsburgh Corning excess umbrella policies covering that same period of time. The 1981 ruling did not otherwise clarify Travelers’ duty to defend and did not purport to allocate the expense of defense between Travelers and the insured’s excess insurance carrier, Commercial Union.

Travelers had contended that the duty to defend pending and future claims terminated immediately upon exhaustion of its aggregate policy limits and timely notice of exhaustion. Travelers took this position even though it meant abandoning the insured’s defense in on-going litigation. The court rejected this limited view of the duty to defend, predicting that the Pennsylvania Supreme Court would follow the “continuation of defense” rationale set out in the line of cases beginning with American Casualty Co. v. McCaleb, 178 F.2d 322 (5th Cir. 1950). See Commercial Union Insurance Co. v. Pittsburgh Corning Corp., 553 F.Supp. 425, 429 n. 11 (E.D.Pa.1981). In McCaleb, the Fifth Circuit, apparently applying the law of the state of Texas, held that in the absence of a policy provision limiting the defense obligation, an insurer could not avoid its defense obligation by simply paying into court a definite sum. The policy of insurance specifically stated that the expense of defense would be paid in addition to the state aggregate limits of liability. Moreover, it has been consistently held in this Commonwealth that the insurer has a duty to defend independent of the limitation on liability, absent unambiguous policy language to the contrary. See Liberty Mutual Ins. Co. v. Pacific Indemnity Co., 557 F.Supp. 986, 988 (W.D.Pa. 1983) (and cases cited therein); Simmons v. Jeffords, 260 F.Supp. 641, 642 (E.D.Pa. 1966) (and cases cited therein).

In this case, Travelers’ defense cost obligation policy language was found to be ambiguous. In Pennsylvania, ambiguity is construed against the insurer. Cadwallader v. New Amsterdam Casualty Co., 396 Pa. 582, 587, 152 A.2d 484 (1959). This ambiguity has been conceded, at least implicitly, by Travelers through its own internal memoranda. In these memoranda it recognized the reasonableness of interpreting the policy language in question as obligating it to continue the defense of pending cases despite exhaustion of aggregate policy limits. See Brief of Insured, Pittsburgh Corning Corp., in Response to the Motion of Travelers Indemnity Co. for Partial Summary Judgment at 10-14 and Exhibits thereto. The most persuasive evidence of an ambiguity is Travelers’ amendment of the language regarding its duty to defend in subsequently issued policies. The amended language specified that the “insurer shall not be obligated to defend any suit after the applicable limit of the company’s liability has been exhausted by payment of judgments or settlements.”

This court has not held, contrary to the contentions of Pittsburgh Corning and Commercial Union, that Travelers has an unending duty to defend. More specifically, there has been no determination that after the exhaustion of aggregate policy limits, Travelers has a duty to defend non-pending litigation or future claims arising from asbestos exposures which occurred during the policy period.

Despite the court’s ruling, Travelers declined to contribute to the defense of the insured’s pending litigation. Commercial Union responded to Pittsburgh Coming’s demands to defend and indemnify it by assuming the defense of the approximately 7,600 pending cases under a reservation of rights. Thereafter, the parties requested the court to hold in abeyance further ruling on all matters pending settlement negotiations on numerous issues in the case. These settlement discussions were diligent and prolonged but ultimately no agreement was reached.

On July 30, 1982, Travelers filed a Motion for Partial Summary Judgment Regarding Allocation of Costs of the Defense of Pittsburgh Corning Corporation'. This court’s December 4, 1981 decision did not preclude a later assignment of defense to the excess carrier; nor was there a decision as to the priority of defense obligations among insurers. The matter lay dormant until Travelers, in July 1984, filed a petition to withdraw without prejudice the motion it filed on July 30, 1982. The remaining parties opposed both the motion for partial summary judgment and the motion to withdraw and urged the court to decide the allocation issue, in effect, filing cross-motions for partial summary judgment. See Highway Truck Drivers and Helpers Local 107 v. Roadway Express, Inc., 266 F.Supp. 868, 869-70 (E.D.Pa.1966), affd, 377 F.2d 552 (3d Cir.1967) (citations omitted). The insured sought a declaration that Travelers is fully responsible for the defense of all cases arising or which may arise from exposures during the period of the policy. Commercial Union, in its brief opposing Travelers’ motion for partial summary judgment, sought a declaration that it has no responsibility under its excess policies for costs of defense that should have been borne by Travelers. The court has been pressed to render a final decision on the allocation of costs between the parties. Oral arguments were held on February 25, 1985. The parties were given until March 1985 to file any supplemental brief. Each has done so.

In its motion for allocation of costs Travelers has urged that under the Commercial Union policy sections entitled “Liability,” “Ultimate Net Loss,” “Loss Payable” and “Assistance and Cooperation of the Insured,” the excess carrier is liable for defense costs. A review of the cited policy-language shows that Commercial Union is obligated for the payment of costs of defense in accordance with the terms of its respective policies. However, Commercial Union .argues that each of the policies expressly conditions the commencement of any such obligation upon such expenses not being included in other “valid and collectible insurance.” The “Ultimate Net Loss” section in each of its policies concludes with the sentence; “The company shall not be liable for expenses as aforesaid when such expenses are included in other valid and collectible insurance.” Commercial Union argues that because Travelers’ duty to defend arises either under its explicit contractual obligations to the insured or as a matter of law there exists other “valid and collectible insurance” and, therefore, Commercial Union is not responsible for defense costs until Travelers’ duty expires, if ever.

Travelers maintains that reading each policy as a whole plainly compels the conclusion that Commercial Union’s duty to settle, pay judgments and defend against claims commenced with the exhaustion of the aggregate limits of liability under the policies of underlying insurance. For example, paragraph 7 of the Conditions sections of the Commercial Union policies begins “ASSISTANCE AND COOPERATION OF THE INSURED.” It continues;

With respect to any claim made, suit brought or proceeding instituted against the insured to which the policies of underlying insurance set forth in Item 3 of the Declarations will not apply because of the exhaustion of the aggregate limits of liability thereunder, if such claim, suit or proceeding is one which could result in liability of the company to indemnify the insured hereunder for damages, the company may, if it so elects, assume complete control of the investigation, negotiations, settlement and defense of any such claim, suit or proceeding against the insured. In the event the company notifies the insured that it has so elected, the insured shall cooperate with the company....

However, Travelers does not confront and address the fact that the Commercial Unión policies condition any payment upon proof that such payments or costs are not included in other valid and collectible insurance. Travelers does not contend that an independent duty to defend is other than “valid and collectible insurance.” This phrase is not ambiguous. I find that the duty to defend constitutes valid and collectible insurance. Since it has already been determined that Travelers had a duty to defend those claims pending when the policy limits were exhausted, as to these claims, there is valid and collectible insurance from Travelers. Therefore, Commercial Union’s duty to pay for the cost of defense of claims against the insured does not start until the Travelers’ duty to defend ends.

In McCaleb, supra, and progeny, the rationale for the independent duty to defend was to preclude the insurer from simply paying a definite sum into court or the policy limits and then abandoning the insured. It would seem that at the heart of the obligation to defend is the notion that at the time that the defense is undertaken, there exists either policy coverage or the possibility of policy coverage for the event, coupled with the possibility of some payment on behalf of the insured within the policy limits. See Cadwallader v. New Amsterdam Casualty Co., supra. Once the duty to defend attaches, I have predicted, it cannot be abandoned in Pennsylvania as an extension of existing case law and public policy. Commercial Union Ins. Co. v. Pittsburgh Corning Corp., supra. However, where the aggregate limits have been exhausted, the insured is on notice that as to new claims there is no monetary insurance coverage, or, in other words, no existing valid and collectible insurance. Under these circumstances, there is no duty to defend. While the duty to defend once undertaken is independent of any subsequent obligation to pay, it arises in the first instance only if there is or may be a contractual obligation to pay.

Thus, Travelers’ duty to defend extends to all claims which were in litigation at the time of exhaustion of its aggregate limits of liability. The costs of that defense cannot be passed on to Commercial Union under the terms of its policies since the obligation to defend pending lawsuits was part of the Travelers’ insurance coverage of the insured. Travelers’ duty to defend, however, does not extend beyond that point to other claims asserted against the insured.

The insured’s position that Travelers is responsible for the defense of claims arising from asbestos exposures during the period of coverage but asserted after the exhaustion of aggregate limits is untenable. By making this argument the insured, Pittsburgh Corning, does not seek protection under the terms of a subsisting policy but rather seeks a continuation of policy protections simply because a policy had once issued. Such an extention of protection cannot be afforded by this court. Consequently, the costs of defense of asbestos claims, which were not pending at the time of exhaustion of Travelers’ aggregate limits of liability, became the obligations of the insured, and by operation of its excess policies, the obligation of Commercial Union within the limits of those policies.

Accordingly, the motion of Pittsburgh Corning for partial summary judgment is granted insofar as it sought assignment of the costs of defense of pending asbestos cases to Travelers and denied insofar as it argued for an unlimited defense obligation to all asbestos related claims arising during Travelers’ policy periods.

An appropriate order follows.

ORDER

AND NOW, this 16th day of May, 1985, consistent with the foregoing Memorandum, it is hereby ORDERED that the Motion of Pittsburgh Corning for Partial Summary Judgment Regarding Allocation of Costs of the Defense of Pittsburgh Corning Corporation is GRANTED in part and DENIED in part. It is further ORDERED that The Travelers Indemnity Company shall bear the costs of the defense of those asbestos exposure claims against its insured Pittsburgh Corning Corporation which were pending as lawsuits at the time the aggregate limits of the general liability policy covering the period 1962-1966 were exceeded.

      . At oral argument, Travelers asked that it be permitted to withdraw its partial summary judgment motion and have the court decide the same issue later in Civil Action No. 84-3985. Because I considered the other parties’ submissions cross-motions for partial summary judgment on the same issue in this case, I permitted Travelers to withdraw its motion but advised that I would now decide this crucial issue in this declaratory action.


author: BECHTLE, District Judge.

text:
    Robert TADDONIO v. Margaret M. HECKLER, Secretary of Health and Human Services.
    Civ. A. No. 83-5600.
    United States District Court, E.D. Pennsylvania.
    May 16, 1985.

      Mark Kaufman, Delaware County Legal Assistance, Chester, Pa., for plaintiff.
    Edward S.G. Dennis, Jr., U.S. Atty., Joan Garner, Edith Ho, Asst. U.S. Attys., Philadelphia, Pa., for defendant.
   MEMORANDUM AND ORDER

BECHTLE, District Judge.

Presently before the court are the parties’ cross-motions for summary judgment. Briefly stated, plaintiff argues that the termination of his Supplemental Security Income benefits (“SSI”) for non-medical reasons prior to a hearing before an Administrative Law Judge (“AU”) violates his Fifth Amendment right of due process. Taking a position contrary to that of plaintiff, the Secretary of Health and Human Services (“Secretary”) contends that the pretermination process afforded plaintiff is sufficient. For the reasons stated below, plaintiff’s motion for summary judgment will be denied and the Secretary’s motion will be granted.

The parties have stipulated to the facts in this case, and the court recited those facts in its Opinion of February 28, 1985, 603 F.Supp. 1008. The court adopts that recitation of facts to the extent that those facts are relevant here.

DISCUSSION

By way of background, in order to reach plaintiff's principal challenge, the court has disposed of numerous preliminary issues in its prior rulings on the parties’ other motions. Relevant to this decision are the following two holdings: (1) this court has subject matter jurisdiction over plaintiff’s challenge under 42 U.S.C. § 405(g), Taddonio v. Heckler, 607 F.Supp. 620, (E.D.Pa. 1985); Taddonio v. Heckler, No. 83-5600 (E.D.Pa. April 9, 1984); and (2) plaintiff’s motion to certify a class consisting of

the SSI beneficiaries whose benefits have been reduced or terminated based on non-medical eligibility factors and who, within 10 days of the reconsideration decision requested a hearing before an Administrative Law Judge

was denied. The court found that plaintiff’s proffered common issue pf law was not common to all members of the proposed class and that plaintiff’s claims differed from those of other class members. Taddonio v. Heckler, 607 F.Supp. 620 (E.D. Pa.1985).

Turning now to the merits in the present case, the court adopts and applies, as it must, the well known standard of summary judgment under Fed.R.Civ.P. 56.

The parties do not contest that plaintiff has a Fifth Amendment due process “property” interest in the continued receipt of SSI. That plaintiff has such an interest is well established. See Mathews v. Eldridge, 424 U.S. 319, 322, 96 S.Ct. 893, 896, 47 L.Ed.2d 18 (1976); Goldberg v. Kelly, 397 U.S. 254, 90 S.Ct. 1011, 25 L.Ed.2d 287 (1970). Whether the process afforded plaintiff by the statute and regulations is all that is due is contested. Thus, at the heart of this case, like other Social Security Act due process cases, is not the issue of whether process is due, but, whether the process afforded plaintiff is constitutionally adequate. Here, as in other due process cases, the due process standard is flexible and depends upon the surrounding circumstances and existing procedural protections. In particular, the appropriate due process analysis focuses on the balancing of three factors. This test was set forth in Mathews v. Eldridge, supra, as follows:

First, the private interest that will be affected by the official action; second, the risk of an erroneous deprivation of such interest through the procedures used, and the probable value, if any, of additional or substitute procedural safeguards; and finally, the Government’s interest, including the function involved and the fiscal and administrative burdens that the additional or substitute procedural requirement would entail.

Mathews v. Eldridge, 424 U.S. 319, 335, 96 S.Ct. 893, 903, 47 L.Ed.2d 18 (1976).

Before this test is addressed, a brief description of the procedure afforded plaintiff is appropriate.

A. The Procedure

Federal government agencies administer the Supplemental Security Income program. Claims representatives at the District Offices of the Social Security Administration have the responsibility to take claims, authorize payments, and do post-entitlement work. Post-entitlement work presumably includes the developing of information on post-entitlement claims, interviewing of the claimant, and determining whether claimant’s eligibility is continuing. A file is kept for each case. Different representatives may conduct, without any coordination of effort with other representatives, the post-entitlement work and add to the file. Representatives become involved in the particular case at random. As a result, at any time, any representative, including those who have not before seen the recipient’s file, nor seen nor talked with the recipient, could make the initial determination terminating the recipient’s benefits.

Notice of the adverse initial determination is required by the statute and the regulations. 20 C.F.R. § 416.1421. A 60 day appeal period begins to run after the recipient receives notice of the initial determination. In the event that an initial determination adverse to the recipient’s interest is made, the recipient may request reconsideration within 60 days after the date on which the recipient received notice of initial determination. 20 C.F.R. § 416.1409(a); see also 20 C.F.R. § 416.1425(a)(3). If the recipient does not request reconsideration within the first 10 days of the appeal period, the recipient’s benefits are terminated. 20 C.F.R. § 416.1336(b).

As part of the. reconsideration process of post-eligibility claims, SSI recipients who have been terminated for non-medical reasons, including those terminated for SGA related reasons, can request a procedure from three available methods: a case review; an informal conference; or a formal conference. 20 C.F.R. § 416.1415. The procedure can be chosen by the recipient and is conducted, and the decision is rendered at this reconsideration stage, by a claim representative, but cannot be decided by the claim representative who rendered the initial termination decision. If the recipient chooses reconsideration by the case review method, the recipient can review the evidence in the Secretary’s files and can present additional written and oral evidence. If the recipient chooses the informal conference, the recipient can present witnesses at such a conference and a summary of the proceeding becomes part of the case record. If the formal conference is the method of reconsideration chosen, the recipient can present witnesses, request the Secretary to subpoena adverse witnesses and relevant documents, and cross-examine adverse witnesses. A summary of the formal conference also becomes part of the case record.

B. The Mathews v. Eldridge Test: Plaintiffs Interest

It is with respect to this first factor that the weight of the plaintiff’s argument is heaviest. Plaintiff analogizes this case to Goldberg v. Kelly and distinguishes Mathews v. Eldridge. Plaintiff argues that his situation is identical to the situation of plaintiff in Goldberg v. Kelly, and therefore, this case should be controlled by Goldberg v. Kelly.

In Goldberg v. Kelly, the Court was concerned with federal and state agencies’ failures to give pretermination hearings under the federally assisted program of “Aid to Families with Dependent Children,” Social Security Act of 1935, 49 Stat. 627, as amended, 42 U.S.C. §§ 601-610 (1964 ed. and Supp. IV), and “New York State’s General Home Relief Program,” N.Y.Social Welfare Law §§ 157-165 (1966), since July 1, 1967, Social Services Law §§ 157-166. 397 U.S. at 256, 90 S.Ct. at 1014. The Court in Goldberg v. Kelly held that due process required a pretermination hearing because the benefits under these particular federal and state assistance programs were essential for the survival of these recipients. The Court emphasized that the crucial factor in the decision was that

termination of aid pending resolution of a controversy over eligibility may deprive an eligible recipient of the very means by which to live while he waits. Since he lacks independent resources, his situation becomes immediately desperate. His need to concentrate upon finding the means for daily subsistence, in turn, adversely affects his ability to seek redress from the welfare bureaucracy.

Goldberg v. Kelly, 397 U.S. 254, 264, 90 S.Ct. 1011, 1018, 25 L.Ed.2d 287 (1970). In contrast to Goldberg v. Kelly, the Court in Mathews v. Eldridge held that a pretermination hearing, is not necessary for Title II disability benefits which are not based on financial need. See 424 U.S. at 340, 96 S.Ct. at 905. In the present case, the assistance benefits are Title XVI SSI benefits. These benefits are conferred according to financial need. In order to be eligible, the SSI claimant must show both a lack of financial resources and income as well as disability, blindness or advanced age. It is, therefore, apparent that the statute is aimed at assisting financially needy disabled, blind, or aged persons. Social Security Amendments of 1972, Pub.L. No. 92-603, 1972 U.S.Code Cong. & Ad.News 4989, 4992, 5012-5015. The recipient’s need for monetary SSI benefits here closely approaches the recipient’s need for monetary welfare benefits in Goldberg v. Kelly. See Johnson v. Mathews, 539 F.2d 1111 (8th Cir.1976). The issue is whether Goldberg v. Kelly controls this case.

Unlike the plaintiff welfare recipient in Goldberg v. Kelly, the plaintiff here has or may have resort to other governmental entitlement programs or private financial sources. See Mathews v. Eldridge, 424 U.S. at 342-347, n. 27, 96 S.Ct. at 906-908 n. 27; 42 U.S.C. § 1382h; 20 C.F.R. § 416.-210; 20 C.F.R. § 416.262; 20 C.F.R. § 416.-1332. The court finds that 42 U.S.C. § 1382h has significant and important impact on the situation of plaintiff. Under this statute, plaintiff’s SSI benefits cannot be terminated merely on the basis that he is engaging in SGA. Under § 1382h(a), he would be entitled to cash benefits if his income was not found to exceed the income eligibility requirements for SSL Furthermore, under § 1382h(b), if his income was found to exceed SSI income eligibility requirements, and he met the requirements under the section which would render him eligible for Medicaid, he would be eligible for special SSI status. Moreover, plaintiff may be eligible for other public and private assistance programs. These programs include general assistance, Medicaid, food stamps, veteran’s benefits, and church and social service agencies. Accordingly, the termination of SSI benefits will not deprive plaintiff of the “very means by which to live while he waits.” 397 U.S. at 264, 90 S.Ct. at 1018. Additionally, plaintiff’s ability to seek “redress from the welfare bureaucracy” is not destroyed because plaintiff has other available means of assistance. Id. Therefore, Goldberg v. Kelly does not control this case.

C. The Mathews v. Eldridge Test: Procedural Error/Value of Additional Safeguards

The second factor to be considered here is the likelihood of an erroneous ruling and the value of additional procedural safeguards. In support of his position, the plaintiff sets forth statistics which he argues show that a substantial percentage of initial determinations to terminate recipients for non-medical reasons are reversed at the AU stage and consequently must have been wrongly decided at the reconsideration stage.

After carefully considering plaintiffs statistics, the court does not believe that the risk of erroneous termination of plaintiff’s benefits at the reconsideration stage is great. This court agrees with the Court in Mathews v. Eldridge when it said that “statistics rarely provide a satisfactory measure of the fairness of a decision-making process.” 424 U.S. at 346, 96 S.Ct. at 908. Plaintiff’s statistics do not support plaintiff’s position that the decision-making process is unfair. Although plaintiff tells this court that AUs reversed 49% of the cases appealed from reconsideration, he does not tell the court the grounds for reversal. The reversals may have been on the basis of the discovery of new and additional evidence and not because the reconsideration process was unfair. Furthermore, the figures presented by plaintiff are not impressive. In 1983, 148,500 individuals were terminated for non-medical reasons including SGA, but only 16,230 of those terminations were reversed by an ALJ. When one considers all of the circumstances under which the system functions, and the fact that the portion of the reversals that may have been for reasons based on unfairness is unknown, this is a relatively small percentage of reversals that does not support plaintiff’s allegation.

Also, the nature of the evidence presented at non-medical termination reconsiderations does not create a likelihood that the terminations will be erroneous-. This evidence is simply based in dollar figures, and it could not be more straightforward. These cases are not the type which usually turn entirely on the credibility of witnesses or oral testimony. Thus, the court finds that the nature of the non-medical termination evidence mediates against the risk of error.

D. The Mathews v. Eldridge Test: The Government’s Interest

Conservation of fiscal and administrative resources is a prime governmental concern in all quarters. Although this factor was given little weight in Goldberg v. Kelly, the Mathews v. Eldridge Court found that it was of significant importance.

The most visible burden would be the incremental cost resulting from the increased number of hearings and the expense of providing benefits to ineligible recipients pending decision. No one can predict the extent of the increase, but the fact that full benefits would continue until after such hearings would assure the exhaustion in most cases of this attractive option. Nor would the theoretical right of the Secretary to recover undeserved benefits result, as a practical matter in any substantial offset to the added outlay of public funds. The parties submit widely varying estimates of the probable additional financial cost. We only need say that experience with the constitutionalizing of government procedures suggests that the ultimate additional cost in terms of money and administrative burden would not be insubstantial.
Significantly, the cost of protecting those whom the preliminary administrative process has identified as likely to be found undeserving may in the end come out of the pockets of the deserving since resources available for any particular program of social welfare are not unlimited. See Friendly, supra, 123 U.Pa.L.Rev., at ,1276, 1303.

Mathews v. Eldridge, 424 U.S. at 347-348, 96 S.Ct. at 909.

E. The Mathews v. Eldridge Test: Adequacy of the Secretary’s Process

Finally, the court turns to the issue of whether the process afforded plaintiff prior to termination of his benefits was adequate under the due process clause of the Fifth Amendment. The Mathews v. Eldridge Court stated:

The judicial model of an evidentiary hearing is neither a required, nor even the most effective method of decisionmaking in all circumstances. The essence of due process is the requirement that “a person in jeopardy of serious loss [be given] notice of the case against him and opportunity to meet it.” Joint Anti-Fascist Comm. v. McGrath, 341 U.S. [123] at 171-172 [71 S.Ct. 624 at 649, 95 L.Ed. 817 (1951) ] (Frankfurter, J., concurring). All that is necessary is that the procedures be tailored, in light of the decision to be made, to “the capacities and circumstances of those who are to be heard.” Goldberg v. Kelly, 397 U.S., at 268-269 [90 S.Ct., at 1021] (footnote omitted), to insure that they are given a meaningful opportunity to present their case. In assessing what process is due in this case, substantial weight must be given to the good-faith judgments of the individuals charged by Congress with the administration of social welfare programs that the procedures they have provided assure fair consideration of the entitlement claims of individuals. See Arnett v. Kennedy, 416 U.S. [134] at 202 [94 S.Ct. 1633 at 1667-1668, 40 L.Ed.2d 15 (1974) ] (White, J., concurring in part and dissenting in part). This is especially so where, as here, the prescribed procedures not only provide the claimant with an effective process for asserting his claim prior to any administrative action, but also assure a right to an evidentiary hearing, as well as to subsequent judicial review, before the denial of his claim becomes final. Cf. Boddie v. Connecticut, 401 U.S. 371, 378 [91 S.Ct. 780, 786, 28 L.Ed.2d 113] (1971).

Mathews v. Eldridge, 424 U.S. at 348-349, 96 S.Ct. at 909-910. The Court in Goldberg v. Kelly also gives direction. In Goldberg v. Kelly, the Court held that the due process clause requires that an opportunity for a pretermination “fair hearing” to determine the grounds upon which the decision to terminate the recipient’s benefits were made and to determine whether the grounds are erroneous. A “fair hearing” involves the following factors: (1) timely and adequate notice must be given to the claimant detailing the legal and factual reasons for the proposed termination; (2) the claimant must have an opportunity to be heard in writing and orally; (3) the claimant must have the opportunity to confront and cross-examine witnesses; (4) the claimant must have the opportunity formally or informally to present evidence and arguments; (5) the claimant must have the opportunity to appear with counsel; and (6) the decision-maker must be impartial, he must rest his decision on legal rules and evidence adduced at the hearing, and he must set forth the reasons for his decision and the evidence upon which he relied to reach his conclusion. See Goldberg v. Kelly, 397 U.S. at 268, 90 S.Ct. at 1020.

After the initial determination to terminate plaintiff’s SSI benefits for non-medical reasons, plaintiff had the option to request reconsideration by case review, informal conference, or formal conference. 20 C.F.R. § 416.1415. Plaintiff does not dispute that the Secretary gives adequate notice detailing the legal and factual reasons for the proposed termination well in advance of the reconsideration decision. Also, plaintiff does not dispute that the Secretary’s procedures on reconsideration affords him with the opportunity to present oral and written evidence, confront and cross-examine witnesses, and make arguments. In addition, plaintiff does not assert that he does not have the opportunity to appear at the reconsideration proceeding with counsel. Moreover, plaintiff does not dispute that the decision-maker is required to rest his reconsideration decision on legal rules and evidence adduced at the hearing or that the decision-maker has to set forth the reasons for his decision and the evidence upon which he relied to reach his conclusion. Plaintiffs entire claim is based on the assertion that the hearing is unfair because the claims representative is not impartial at the starting point of the review procedures.

The Court in Goldberg v. Kelly discusses briefly the issue of impartiality of the decision-maker.

We agree with the District Court that prior involvement in some aspects of a case will not necessarily bar a welfare official from acting as a decision maker. He should not, however, have participated in making the determination under review.

Goldberg v. Kelly, 397 U.S. at 271, 90 S.Ct. at 1022. Applying this analysis to the present case, the court concludes that the decision-maker at the reconsideration stage is not necessarily biased against the recipient. First, it is not required that the decision-maker be an ALJ. Claims representatives or another welfare official are not automatically precluded from being the decision-maker. Secondly, claims representatives who participated in the initial determination are barred by the Secretary’s regulations from taking part in the reconsideration decision. The court concludes that the decision-maker may be impartial, and, thus, all the elements required for a pretermination “fair hearing” are satisfied.

CONCLUSION

The Secretary’s procedure for the termination of SSI benefits for non-medical reasons do not violate the due process clause.

      . SGA is the designation used in the Social Security field to denote “Substantial Gainful Activity."

      . Recipients whose eligibility is ruled to have ceased for medical reasons are immediately allowed a hearing before an ALJ prior to the termination of benefit payments. Since the class of plaintiffs in this case includes only those terminated for non-medical reasons, the court focuses only on the procedural due process rights afforded to them.