author: BOGUE, Chief Judge.

text:
    Verlan PINSON, Special Administrator of the Estate of Roscoe Bowman Collins, a/k/a Roscoe B. Collins, Plaintiff, v. DEPCO, INC.; Hanover Petroleum Company; and Gulf Oil Corporation, jointly and severally, Defendants.
    No. CIV. 83-5149.
    United States District Court, D. South Dakota, W.D.
    Jan. 10, 1985.

      Terence R. Quinn, Stephens, Quinn & Buckmaster, Belle Fourche, S.D., Thomas E. Graslie, Buffalo, S.D., for plaintiff.
    ■ Donn Bennett, Max Main, Bennett & Main, Belle Fourche, S.D., for defendants.
   MEMORANDUM OPINION

The Defendants have made a motion to dismiss pursuant to Fed.R.Civ.P. 12(b)(6)— Failure to State a Claim and Fed.R.Civ.P. 12(b)(7) — Failure to Join a Party Under Rule 19. The Defendants have also made a motion for partial judgment on the pleadings.

I. MOTION TO DISMISS

A. Failure to State a Claim

In Count I of the Amended Complaint, the Plaintiff alleges that the Defendants breached their implied covenant of protection not to depreciate the lessor’s interest. The issue here is whether the lessor (Plaintiff) must allege and prove that an offset or protection well would have been profitable in an action against a lessee (Defendants) where the lessee is also the lessee of the adjoining tract on which the allegedly draining wells are located. In other words, the Defendants wish to apply the reasonable prudent operator doctrine. This doctrine states, “that it is the duty of the lessee to prevent substantial drainage of oil or gas from the leased land, when an offset well could be drilled which would produce oil or gas in paying quantities.” Cook v. El Paso Natural Gas Co., 560 F.2d 978, 984 n. 1 (10th Cir.1977).

There is a split of authority on this issue. Hemingway, Law of Oil and Gas, § 8.7. This Court chooses to follow the more enlightened view and hold that the reasonably prudent operator doctrine does not apply where the lessee is also the lessee of the alleged draining tract. Cook, 560 F.2d at 982-984. This additional element of proof, would impose an unreasonable burden on such a lessor. This is a diversity case, and this Court concludes that the South Dakota Supreme Court would also follow this view. CIR v. Bosch, 387 U.S. 456, 87 S.Ct. 1776, 18 L.Ed.2d 886 (1967). Therefore, the Defendants 12(b)(6) motion will be denied.

B. Failure to Join Party Under Rule 19

The Defendants allege that William C. Kirkwood should be joined as a party defendant. Kirkwood owns all the operating rights and working interests in the West Half of Section 15. (The Plaintiff owns the Northwest Quarter of Section 15). Kirk-wood obtained these rights as a result of a Farmout Agreement and a Partial Assignment of Oil and Gas Leases between Kirk-wood and the Defendants.

Upon examination of the pleadings and briefs in this matter, as well as the applicable standards set out in Fed.R.Civ.P. 19(a), this Court concludes that the Defendants have failed to allege sufficient facts to sustain their burden that Kirkwood should be joined as a party defendant under Rule 19(a). Therefore, their Fed.R.Civ.P. 12(b)(7) motion will be denied.

II. PARTIAL JUDGMENT ON THE PLEADINGS

A. Punitive Damages

The Defendants have moved for partial judgment on the pleadings on the Plaintiffs claim for punitive damages, on the grounds that punitive damages are barred by SDCL 21-3-2. SDCL 21-3-2 bars punitive damages for contract actions. However, in Count II, the Plaintiff appears to have alleged a cause of action based on either fraudulent drainage or tortious breach of contract. Therefore, the Defendants motion for partial judgment on the pleadings on this issue is denied. Although Count I and Count II may be inconsistent, the Plaintiff can plead inconsistent claims under Fed.R.Civ.P. 8(e).

B. Statute of Limitations

The Defendant alleges that the Plaintiff’s right to maintain this action for the time period prior to November 7, 1977 is barred by SDCL 15-2-13. SDCL 15-2-13 provides for a six year statute of limitations. The Plaintiff alleges that this action is controlled by SDCL 15-2-8(4), which provides for a ten year statute of limitations. Alternatively, the Plaintiff alleges he is entitled to an extra year under SDCL 15-2-26.

The Court concludes that SDCL 15-2-8(4) does not apply, and that the proper statute of limitations is six years, because it appears at this point in time, that the Plaintiff’s action is based on contract and fraud. SDCL 15-2-13. SDCL 15-2-26 does not extend the Statute of Limitations to seven years. 51 Am.Jur.2d Limitation of Actions § 195.


source: Caselaw Access Project

author: PLATT, District Judge.

license: Public Domain

text:
    Joseph M. McLOUGHLIN and Elizabeth A. McLoughlin, Plaintiffs, v. COMMERCIAL AIRWAYS (PTY) LTD. a/k/a Comair, Defendant. W.R. BRYAN, Adele Bryan, Bruce Murray, Alice Murray, Herbert Petry, Josephine Petry, Beauford W. Robinson, Murray Ryan, Dorothy Ryan, William Schooler and Jean Schooler, Plaintiffs, v. COMMERCIAL AIRWAYS (PTY) LTD. a/k/a Comair, Defendant.
    Nos. 84 CV 2585, 84 CV 3794.
    United States District Court, E.D. New York.
    Jan. 24, 1985.

      Kreindler & Kreindler by Gerald A. Robbie, New York City, for plaintiffs.
    Brauner Baron Rosenzweig Kligler Sparber & Bauman by Howard L. Simon, New York City, for defendant.
   MEMORANDUM AND ORDER

PLATT, District Judge.

Defendant COMAIR moves for an order dismissing this action on the ground that the Court lacks personal jurisdiction over it or, alternatively, in the event personal jurisdiction is found to exist, on the ground that a New York court is an improper and inconvenient forum to determine this lawsuit.

In this action plaintiffs sue to recover for personal injuries allegedly suffered by them while passengers on a COMAIR flight from Johannesburg, South Africa, to Kruger National Park in Skukuza, South Africa, on October 9, 1982.

COMAIR is a South African corporation located in Johannesburg. It makes domestic flights and operates tours within South Africa.

Plaintiffs Joseph and Elizabeth McLoughlin are residents of the State of Connecticut. They traveled to South Africa as members of a larger group of the Lions International Club (“the Lions Club”) from the United States attending an executive meeting in South Africa. From its main office in Chicago, the Lions Club made arrangements in the Fall of 1981 through South African Airways’ New York offices (“SAA New York”) for the transportation of a group of its 130 top executives from the United States to South Africa and return trip. In connection with these arrangements and at the Lions Club’s request, SAA New York booked space for approximately 80 members on a COMAIR tour package, which included round-trip flight from Johannesburg to Kruger Park and back and hotel accommodations at the Park for the night of October 9, 1982. SAA New York telexed a request to COMAIR for reservations, which COMAIR confirmed by reply telex. Payment for the COMAIR flights and accommodations were made by the Lions Club to SAA New York, which in turn remitted the funds to COMAIR.

In perfecting the foregoing arrangements, SAA New York operated under and pursuant to an exclusive General Sales Agency Agreement which it had made with COMAIR on August 25, 1972, wherein it was prescribed that “the General Sales Agent [SAA New York] shall perform the following functions on behalf of the Principal [COMAIR]”:

(a) soliciting and promoting traffic for the services of the Principal and, if necessary, employing staff competent and sufficient to do so;
(b) with respect to passengers’ transportation, holding out a passenger reservations facility to sales agents and the general public in the assigned territory;
(c) 'selection, appointment and cancellation of approved sales agents in accordance with the terms of the I.A. T.A. Resolutions;
(d) supervision and instruction of the Principal’s sales agents in the territory of the General Sales Agent and settlement of accounts with said agents in respect of sales effected on the traffic documents of the General Sales Agents;
(e) display to the reasonable satisfaction of the Principal of timetables and other publicity material provided by the Principal at the premises of the General Sales Agent and the distribution of said timetables, publicity and information material to sales agents and other interested parties in accordance with the reasonable requirements of the Principal. Publicity material provided by the Principal and of a permanent or intrinsic value shall remain the property of the Principal;
(f) organization of special publicity or press campaigns for the Principal if and when required; the cost of such special campaigns to be separately agreed between the parties and paid for by the Principal;
(g) to take all reasonable action to enhance the goodwill of the Principal in the Territory of the General Sales Agent in the Principal’s relations’ with the press, the general public and other persons;
(h) compilation and prompt despatch of such statistics and reports as may reasonably be required by the Principal;
(i) preparation of all documents required by national or international regulations or by internal regulations of the Principal, such as declarations for fiscal purposes;
(j) causing or arranging for consignments to be delivered to the receiving points designated by the Principal (with respect to cargo transportation).

In addition, under the agreement, SAA New York agreed “to follow to the best of its ability reasonable instructions” of COMAIR based on the applicable orders and regulations of the appropriate authorities.

Notwithstanding the broad functions which the General Sales Agency Agreement prescribed should be performed by SAA New York, it now maintains that it is limited to the booking activity described above and the following functions:

(1) providing SAA passengers with a copy of COMAIR’s travel brochure on request;
(2) carrying COMAIR’s advertisements (which are separately paid for by COMAIR) in SAA’s trade publication, which is distributed throughout the United States, including New York; and
(3) acting as a conduit for information about reservations on COMAIR tour packages and flights upon request of a passenger or travel group.

Under such circumstances, COMAIR maintains that its activities in New York are “mere solicitations” of business, do not constitute “doing business” in New York and do not constitute transaction by it or through an agent of any business within New York under N.Y. Civil Practice Law and Rules §§ 301 and 302.

The traditional rule in New York has been that “mere solicitation” of business in this State is not sufficient to constitute “doing business”. Something, but not very much, more is required.

There is no question here but that SAA New York is the agent of COMAIR. The rule nonetheless seems to be that only the acts of the agent (SAA New York), as agent, may be attributed to the principal (COMAIR), and only those acts may properly be factored into the “doing business” equation.

In the case at bar the agent (SAA New York) was indisputably doing business in New York; it had an office, employees, telephones, etc., and concededly it used a portion of each of these as agent for COMAIR .in a continuous and systematic course of activity over a period of 12 years to (i) solicit business for, (ii) book reservations with, (iii) accept and transmit cash payments for air transportation to, and (iv) distribute public information on behalf of, COMAIR. Under Frummer v. Hilton Hotels International, solicitation, public relations, publicity, and booking reservations, or in short, the fact that the agent did all the business which the defendant could do in New York were it here by its own officials, was sufficient to constitute doing business under CPLR § 301. 19 N.Y.2d 533, 537-38, 281 N.Y.S.2d 41, 44-45, 227 N.E.2d 851 (1967).

Moreover, it is even clearer that COMAIR transacted business within this State through its agent, SAA New York, within the meaning of CPLR 302(a)(1); Parke-Bernet Galleries, Inc. v. Franklyn, 26 N.Y.2d 13, 308 N.Y.S.2d 337, 256 N.E.2d 506 (1970); Traub v. Robertson-American Corp., 82 Misc.2d 222, 368 N.Y.S.2d 958 (Sup.Ct.1975), and that such business “was reasonably related” to plaintiffs’ cause of action. Traub, 368 N.Y.S.2d at 965; see also Singer v. Walker, 15 N.Y.2d 443, 466-67, 261 N.Y.S.2d 8, 26-27, 209 N.E.2d 68 (1965).

Thus, this Court has personal jurisdiction over the defendant and the latter’s motion to dismiss for lack thereof must be denied.

Alternatively, defendant moves to dismiss on the ground of forum non conveniens.

When the doctrine of forum non conveniens comes into play, “it presupposes at least two forums in which the defendant is amenable to process”, the doctrine merely furnishes the criteria for choice between them. See, e.g., Gulf Oil Corpora tion v. Gilbert, 330 U.S. 501, 507-09, 67 S.Ct. 839, 842-43, 91 L.Ed. 1055 (1947). In the present case, the defendant has failed to demonstrate why it is not amenable to process here. ‘According to the Warsaw Convention, the defendant through its relation to SAA New York is clearly and properly amenable to suit here. Article 1(3) of the Warsaw Convention provides:

Transportation to be performed by several successive air carriers shall be deemed, for purposes of this Convention, to be one undivided transportation, if it has been regarded by the parties as a single operation, whether it has been agreed upon under the form of a single contract or a series of contracts, and it shall not lose its international character merely because one contract or a series of contracts is to be performed entirely within [one] territory____

(Emphasis added.)

The law seems clear that where, as here, the parties arrange and pay in full for an international trip at the outset, each leg of the journey (even though some legs may be wholly domestic, covered by a separate ticket and carried on a separate airline) is within the Convention. Egan v. Kollsman Instrument Corp., 21 N.Y.2d 160, 167-68, 287 N.Y.S.2d 14, 18, 234 N.E.2d 199 (1967); see also Stratis v. Eastern Air Lines, Inc., 682 F.2d 406, 409-14 (2d Cir.1982); Berner v. United Airlines, Inc., 3 A.D.2d 9, 157 N.Y.S.2d 884 (1st Dep’t 1956), aff'd, 3 N.Y.2d 1003, 170 N.Y.S.2d 340, 147 N.E.2d 732 (1957) (lower court held Warsaw Convention applicable and found jurisdiction over defendant who was “doing business” through an agent).

The Warsaw Convention specifically permits under Article 28(1) that an action may be brought in at least four places against a defendant; these are (i) the domicile; (ii) the principal place of business of the carrier; (iii) the carrier’s place of business through which the contract was made; and (iv) the place of destination. These choices were essentially for the convenience of the carrier and the litigation. Applying Article 28 to the case at bar, there appear to be only two proper forums, the United States and South Africa.

As noted above, the doctrine of forum non conveniens dictates that this Court should consider a range of factors in choosing .between proper forums, “[b]ut unless the balance is strongly in favor of the defendant, the plaintiff’s choice of forum should rarely be disturbed.” Gulf Oil Corp. v. Gilbert, 330 U.S. at 508, 67 S.Ct. at 843. Here, this Court finds that the defendant has not met this heavy burden of persuasion, and thus, the presumption in favor of the plaintiffs’ forum choice rests undisturbed.

For the foregoing reasons defendant’s motion must be and the same hereby is denied in all respects.

SO ORDERED.

      . The initial plaintiffs in this lawsuit were the McLoughlins. Additional plaintiffs who were on the same aircraft and who also arranged their air transportation through the office of COMAIR’s New York agent, later commenced a separate action to recover for their alleged injuries. By agreement of all the parties, the actions were consolidated; and thus, the decision of the Court, herein, is generally applicable to the consolidated action.
      It may be noted that the additional plaintiffs do not destroy complete diversity among all the parties. The other plaintiffs are alleged to be citizens and residents of the following: W.R. and Adele Bryan of Arizona; Bruce and Alice Murray of Canada; Herbert and Josephine Petry of Texas; Beauford W. Robinson of Missouri; Murray and Dorothy Ryan of Maryland; and William and Jean Schooler of Indiana.

      . The Court of Appeals in Frummer recognized the implications of its decision for foreign corporations, stating:
      We are not unmindful that litigation in a foreign jurisdiction is a burdensome inconvenience for any company. However, it is part of the price which may properly be demanded of those who extensively engage in international trade____ [Tjhey received considerable benefits from such foreign business and may not be heard to complain.
      19 N.Y.2d at 538, 281 N.Y.S.2d at 45, 227 N.E.2d 851.


author: LEIGHTON, District Judge.

text:
    David BARANSKI, et al., Plaintiffs, v. Robert SERHANT, et al., Defendants.
    No. 82 C 6611.
    United States District Court, N.D. Illinois, E.D.
    Jan. 25, 1985.

      Robert L. Byman, Thomas P. Sullivan, Jenner & Block, Chicago, Ill., for Saul Stone & Co.
    Robert J. Vollen, William D. Kelly, III, Schwartz & Freeman, Robert A. Vanasco, Siegel, Denberg, Vanasco, Shukovsky, Moses & Schoenstadt, Chicago, 111., for Estate of Fred Ness.
    Janet L. Reed, Patrick O’Brien, Mayer, Brown & Platt, Chicago, Ill., for Berwyn Nat. Bank.
    William J. Harte, William Rodeghier, William J. Harte, Ltd., Chicago, III, for Delmonico.
    William T. Dwyer, Jr., Mary Anne Spell-man Gerstner, Burke, Griffin, Chomicz & Wienke, Chicago, Ill., for First Bank of Schaumburg.
    Jerrold Salzman, Glenna Freeman, Daniel A. Clune, Freeman, Freeman & Salzman, Chicago, Ill., for CME.
    Dennis P. Kyros, Chicago, Ill., for Nicholas Kyros.
    William M. Phelan, Bernard F. Doyle, Jr., Phelan & Doyle, Ltd., Chicago, 111., for Donald Judy.
    George B. Collins, Collins & Uscian, Chicago, Ill., for K & S Commodities, Inc. and Morris Krumhorn.
    Philip M. Bloom, Bloom & Eilen, Chicago, Ill., for Sinclair Global.
    Arthur Hahn, Katten, Muchin, Zavis, Pearl & Galler, Chicago, Ill., for Ronald M. Schiller.
    Joseph E. Coughlin, Lord, Bissell & Brook, Chicago, Ill., for Lawrence Lagrotteria.
    Lloyd A. Kadish, Chicago, Ill., for Geitter.
    Karla Wright; Donald C. Shine, Nisen, Elliot & Meier, Ron A. Cohen, Martin B. Snow, Cohen & Lau, C. Philip Curley, Edward J. Burke, Burke & Smith, Michael Moirano, Edward R. Joyce, Joyce & Kubasiak, Stephen B. Diamond, Margaret M. Fahrenbach, Beeler, Schad & Diamond, Chicago, Ill., for plaintiffs.
    Paul J. Sussman, Sussman & Samson, Chicago, Ill., for Bosco.
    Joseph H. Cassell, Wichita, Kan., for Cassell Commodities.
    James W. Hathaway, James W. Hathaway & Associates, Chicago, 111., for Anthony Vaceariello.
    Leroy G. Inskeep, Rudnick & Wolfe, Chicago, Ill., for Trustee Serhant Estate.
    Stephen Bobo, Chicago, Ill., for CFTC.
   Memorandum

LEIGHTON, District Judge.

This cause is before the court on the motion of defendant Lawrence B. Lagrotteria, pursuant to 28 U.S.C. § 1292(b), for permission to appeal the court’s order of December 20, 1984. That order denied defendant’s Rule 4(j) motion to dismiss. In support of his motion for certification, defendant states that the court’s order denying his motion to dismiss involves a controlling question of law as to which there is substantial ground for difference of opinion, and that an immediate appeal may materially advance the ultimate termination. of this litigation.

i

The cause presents an interesting set of pleading facts which will be set forth in some detail here. The original Baranski complaint was filed in October 1982. Lagrotteria was not named as a defendant. On January 21, 1983, the Baranski plaintiffs filed their First Amended Complaint, naming Lagrotteria as a defendant for the first time. Lagrotteria was already a party to a related class action suit before this court, and had been served as a defendant in that action. He was never served with a summons and copy of the First Amended Complaint in this action, however, because plaintiffs’ attorneys believed that “in a consolidated action, once jurisdiction has been obtained in one portion of the case, Rule 4© does not apply and there is no need to serve that party again.”

On October 27, 1983, Lagrotteria filed a petition for bankruptcy. As a result, § 362(a) of the Bankruptcy Code automatically stayed the prosecution of all claims against Lagrotteria. The Baranski plaintiffs sued for a determination as to dischargeability of Lagrotteria’s alleged debt to them, and moved to modify the automatic stay to proceed against Lagrotteria in this court. During the period of the stay, the Baranski plaintiffs filed their Second Amended Complaint, and, on August 10, 1984, their Third Amended Complaint. Both of these complaints named Lagrotteria as a defendant. On September 17, 1984, the Bankruptcy Court granted plaintiffs’ motion to modify the stay against Lagrotteria. Three days later, plaintiffs served Lagrotteria with a copy of the Third Amended Complaint.

Subsequently, defendant brought a Rule 4© motion to dismiss claiming that service was not effectuated on him within 120 days of the filing of the First Amended Complaint, as required by the federal rules. Plaintiffs, however, believed that they had satisfied the technical requirements of Rule 4© because defendant had been served within 120 days of the filing of the Third Amended Complaint. As stated earlier, they understood that service in a consolidated case made him a party to this action. Plaintiffs further explained that they were unable to serve defendant with a copy of the Second Amended Complaint, as he was the subject of a bankruptcy stay when that was filed. Once the stay was lifted, however, plaintiffs moved immediately to serve defendant with a copy of the operative Third Amended Complaint.

This court denied Lagrotteria’s motion to dismiss because it was satisfied that defendant was a party to the class action at the time plaintiffs first named him in their complaint, and that he was properly served within 120 days of the filing of the Third Amended Complaint. The court concluded that he was thus served within the guidelines enunciated by the federal rules “to secure the just, speedy and inexpensive determination of every action.” Fed.R. Civ.P. 1. Additionally, the court noted that where defendant was a party to the related class action, he suffered no harm by not being served with the First Amended Complaint.

One consideration in focusing on the liberal construction of the federal rules, rather than the technical requirements of Rule 4©, was that the court believed defendant’s reliance on Rule 4© was misplaced. The rule did not take effect until February 26, 1983, and was not in effect when the First Amended Complaint was filed on January 21, 1983. Legislative history does not indicate whether the 120-day limit should apply to a complaint filed before its effective date, but on which service was not made until after its effective date. But the court agrees with the reasoning in Verri v. State Automobile Mutual Insurance Company, 583 F.Supp. 302, 306 (D.R.I.1984), where the court held that Rule 4(j) was not effective in such a case, because “it seems unduly harsh to dismiss a complaint for failure to comply with a rule not in existence when it was filed ...”

In cases where Rule 4© does not apply, a court must examine the law on Rule 4 as it existed prior to the introduction of Rule 4(j). Rule 4(a) had no time limits, and a dismissal pursuant to the Rule could only be had where plaintiff had not exercised due diligence to perfect service, and the delay substantially prejudiced defendants. H. Alpers & Associates v. Omega Precision Hand Tools, Inc., 62 F.R.D. 408 (E.D.Pa.1974). Neither of these factors was present here. Plaintiffs’ attorneys had exercised diligence in serving defendant once the bankruptcy stay was lifted; and he was not prejudiced by the delay in service because of his involvement in the related class action suit. Accordingly, the motion to dismiss was denied.

II

Defendant now moves to amend the court’s order to permit an interlocutory appeal, pursuant to 28 U.S.C. § 1292(b). That Rule requires a district judge to certify in writing that he is “of the opinion that (the order) involves a controlling question of law as to which there is substantial ground for difference of opinion and that an immediate appeal from the order may materially advance the ultimate termination of the litigation ...” Id. Also see Marrese v. American Academy of Orthopaedic Surgeons, 706 F.2d 1488, 1497-98 (7th Cir.1983). Both components must be present for a district judge to certify an appeal.

This case presents a peculiar set of facts, and presents a question which has not been ruled on in this circuit, namely, whether the 120-day limit of Rule 4(j) runs from the date of filing of a first complaint naming a party as a defendant. While this is a unique issue, the very fact that it has never before been presented does not necessarily make it a matter of substance, so as to warrant an interlocutory appeal. See Barrett v. Burt, 250 F.Supp. 904 (S.D.Iowa 1966), where the court stated that:

The mere fact that there are no cases interpreting the language involved herein does not necessarily create substantial grounds for difference of opinion.

Where it is doubtful that Rule 4(j) even applies in this case, the court does not find that the issue presented involves a “controlling question of law as to which there is substantial ground for difference of opinion.”

Nor does this court believe that an appeal would materially advance the litigation. The case has been proceeding since 1982; a discovery cutoff date has been set for March, 1985, and trial is scheduled to begin on July 8, 1985. An interlocutory appeal at this time would result in further delay. Delay is a particularly strong ground for denying appeal if certification is sought from a ruling made shortly before trial. See 16 Wright & Miller, Federal Practice & Procedure, § 3930; State Teachers Retirement Board v. Fluor Corp., 84 F.R.D. 38 (D.C.N.Y.1979).

Section 1292 is used sparingly by courts, and used only in exceptional cases. Vaughn v. Regents of the University of California, 504 F.Supp. 1349, 1355 (D.C.Cal.1981). The cause before the court is not such a case. The court does not find that appellant has sustained his burden in proving that appeal of the court’s order involves either a controlling question of law, or that an appeal would advance the determination of the litigation, as required by 28 U.S.C. § 1292(b). Accordingly, the motion to amend the court’s order to include findings for an interlocutory appeal is denied.

      . That modification is now on appeal to this court.


author: JAMES R. MILLER, Jr., District Judge.

text:
    WESTERN WORLD INSURANCE COMPANY, INC. v. HARFORD MUTUAL INSURANCE COMPANY.
    Civ. A. No. M-83-2599.
    United States District Court, D. Maryland.
    Jan. 28, 1985.

      Howard J. Schulman, Baltimore, Md., for plaintiff.
    Frank X. Gallagher, Baltimore, Md., for defendant.
   MEMORANDUM AND ORDER

JAMES R. MILLER, Jr., District Judge.

Plaintiff Western World Insurance Co. (Western World) contends that it is entitled to fees and costs in the sum of $7,731.75 in connection with the prosecution of the present declaratory judgment action, in which it has won a partial victory over Harford Mutual Insurance Company (Harford). See Western World Insurance Co., Inc. v. Harford Mutual Insurance Co., 600 F.Supp. 313 (D.Md.1984). Harford has filed an opposition to an award of attorneys’ fees (Paper No. 42), Western World has filed a reply (Paper No. 43), and Harford has filed a response (Paper No. 44). No hearing is deemed necessary by the court. Local Rule 6(E).

In a declaratory judgment action brought pursuant to 28 U.S.C. §§ 2201, 2202, the reasonable sum of attorneys’ fees and costs incurred in the filing and prosecution of the declaratory judgment action may be recovered, in the discretion of the court, if such recovery would be available under state law. National Indemnity Co. v. Harper, 295 F.Supp. 749, 757 (W.D.Mo.1969); Broyles v. Commercial Union Ins. Co. of New York, 287 F.Supp. 942, 952-53 (W.D.Ark.1968). Where such a recovery would not accord with state law, the court should not award attorneys’ fees and costs for the declaratory judgment action. Royal Indemnity Co. v. Kenny Constr. Co., 528 F.2d 184, 190-91 (7th Cir.1975); Mattocks v. Daylin, Inc., 452 F.Supp. 512, 516 (W.D.Pa.1978), aff'd, 614 F.2d 769 (3d Cir.1979).

In Maryland, attorneys’ fees and costs incurred in prosecuting a declaratory judgment action may be recovered by an insured from an insurer who unjustifiably has refused to defend. Cohen v. American Home Assurance Co., 255 Md. 334, 350-63, 258 A.2d 225 (1969). In the present case, Western World has prevailed on a part of its declaratory judgment action, but not on the monetarily larger part. As stated in this court’s Memorandum and Order of October 31, 1984, Western World has been assigned the rights of the insureds, and, unless the circumstances warrant different treatment, Western World stands in the shoes of the insureds.

Harford contends that attorneys’ fees should not be awarded for the prosecution of this declaratory judgment action, because it involves a dispute between two insurers in which the court found that Harford’s refusal to defend was largely justified.

In Cohen, the Court of Appeals of Maryland stated:

“American Home [the insurer] produced the current situation when it refused to defend its assured. Accordingly, whether one speaks in terms of its having authorized the expenditure by its failure to defend or whether one speaks in terms of the attorney’s fees for the declaratory judgment action being a part of the damages sustained by the insured by American Home’s wrongful breach of the contract, we hold American Home bound to pay the fees incurred by Mrs. Brown [the insured] in bringing the declaratory judgment action to establish that American Home had not done that which it had agreed with her to do.”

255 Md. at 363, 258 A.2d 225. In so holding, the court considered and, by implication, rejected the approach taken by some jurisdictions of awarding such attorneys’ fees only where the insurer acted fraudulently or in bad faith. 255 Md. at 354, 258 A.2d 225.

Under neither of the alternative analyses stated by the court in Cohen does it appear that a different approach should be taken on this issue if the declaratory judgment action involves a dispute between two insurers. If Harford is said to have impliedly authorized the expenditure by Chief Wroten or the City by its failure to defend them, then such authorization should run as well to Western World, which has been assigned their rights. Similarly, if the cost of bringing the declaratory judgment action is said to be a part of the damages sustained by the insureds, Chief Wroten and the City, as a result of the breach, then these damages should be recoverable by Western World, as the assignee of Chief Wroten and the City.

In regard to Harford’s assertion that its refusal to defend was largely justified, this court found that such refusal was justified as to Officer Mears, but not as to Chief Wroten and the City. Certainly Harford has no liability with respect to that portion of the expenses attributable to Western World’s bringing the declaratory judgment action for recovery of the cost of defending Officer Mears. Under Cohen, however, it appears that Harford should be required to reimburse Western World for that part of Western World’s attorneys’ fees and costs attributable to its bringing the declaratory-judgment action to establish its right to reimbursement of the cost of defending Chief Wroten and the City. Since the court finds that the fact that the case involves two insurance companies has no effect on this issue under Maryland law, and because Harford has suggested no other reason why Western World’s expense in bringing this action should not be apportioned in this way, the court will grant Western World’s request for attorneys’ fees and costs to the extent those fees and costs are attributable to its recovery for its defense of Chief Wroten and the City.

As Harford has not challenged the reasonableness of the amount of fees and costs requested, the award shall be for the sum of $7,731.75.

Accordingly, it is this 28th day of January, 1985, by the United States District Court for the District of Maryland, ORDERED:

1. That the request of the plaintiff, Western World, for attorneys’ fees and costs in the amount of $7,731.75 be, and the same is hereby, GRANTED.

2. That the Clerk enter the separate declaratory and monetary judgment of even date herewith on the docket.

3. That the Clerk mail a copy of this Memorandum and Order to counsel for the parties.

JUDGMENT ORDER

For the reasons set forth in the Memoranda filed by the court on October 31, 1984, December 19, 1984, and this day, it is this 28th day of January, 1985, by the United States District Court for the District of Maryland, ORDERED:

1. That judgment be, and the same is hereby, entered as follows:

a) The court declares that defendant Harford Mutual Insurance Company was obligated at all relevant times under the terms of its policy to provide a defense for the City of Cambridge, Maryland and for Police Chief Russell E. Wroten of the Cambridge, Maryland Police Department, but was not obligated to provide a defense for Officer Scott Mears, in the case entitled Sampson v. Mears, et al., Civil Action No. M-82-2263.
b) That monetary judgment be, and the same is hereby, entered for plaintiff Western World Insurance Company, Inc. in the amounts of $19,416.58 for the fee of Mr. Burch, $1,408.84 for 15% of the fee of Mr. Mackie, and $7,731.75 for the attorneys’ fees and costs of the plaintiff in bringing this declaratory judgment action, for a total of $28,557.17.

2. That the Clerk mail a copy of this Judgment Order to counsel for the parties.


author: HAUK, District Judge.

text:
    BACHE HALSEY STUART SHIELDS INCORPORATED, Plaintiff and Cross-Defendant, v. Mark H. GUEST and Rick Underwood, Defendants and Cross-Complainants.
    No. CV 82-4237-AAH(Kx).
    United States District Court, C.D. California.
    Jan. 28, 1985.

      Michael M. Gless, Keesal, Young & Logan, Professional Corp., Long Beach, Cal., for plaintiff and cross-defendant.
    Michael T. Kenney, Santa Ana, Cal., for defendants and cross-complainants.
   FINDINGS OF FACT AND CONCLUSIONS OF LAW

HAUK, District Judge.

Pursuant to Federal Rule of Civil Procedure 52, the Court makes the following Findings of Fact and Conclusions of Law, having considered Defendants’ Objections filed 1/23/85 and Plaintiff’s Reply filed 1/25/85, and having made certain Amendments pursuant thereto:

FINDINGS OF FACT

1. Plaintiff, BACHE HALSEY STUART SHIELDS INCORPORATED, is a Delaware corporation engaged in the general securities brokerage business, a registered broker-dealer with the SEC, a member of the New York Stock Exchange and the Commodity Futures Trading Commission, and is doing business in California.

2. Defendants MARK H. GUEST and RICK UNDERWOOD are residents of the County of Orange, State of California.

3. On July 15, 1982, defendants opened a joint commodity account, No. PH-01289, with the Pasadena office of plaintiff through its employee and account executive Bruce P. Gustafson. Both defendants represented they were experienced in the commodity area and had an investment objective of speculation. Mr. Gustafson was only to act as an order taker.

4. Defendants entered into a written agreement with plaintiff that they would maintain sufficient margin and would pay on demand any debit balance owing in their account.

5. At the time the account was opened, Mr. GUEST indicated he had an annual income of $75,000 and a net worth of $100,-000. Mr. UNDERWOOD indicated that he had an annual income of $75,000 and a net worth of $150,000.

6. It was not defendants’ intent at any time to have a free play of the market.

7. On July 18, 1982, Mr. GUEST delivered to BACHE his $5,000 check dated July 18, 1982. The check was returned to BACHE July 28, 1982 by Mr. GUEST’S bank marked “Not Sufficient Funds.” This check was resubmitted by BACHE to defendant’s bank and was returned marked “Payment Stopped.” On July 21, 1982, Mr. UNDERWOOD delivered his check for $6,000 to BACHE dated July 21, 1982. This check was returned to BACHE by Mr. UNDERWOOD’S bank on July 30, 1982, marked “Payment Stopped,” after which date, neither GUEST nor UNDERWOOD ever deposited good funds in their account at Bache to pay for any of the trades they placed because of their claimed disagreement with plaintiff.

8. During the period July 20, 1982 through July 23, 1982, defendants placed numerous unsolicited orders in their account to buy and sell silver futures contracts.

9. As of 10 a.m. on July 22, 1982, defendants held in their account ten contracts of silver short. At 10:06 a.m., defendants placed an order to short (sell) an additional ten contracts of silver if silver reached the specific price of $7.03. At 10:19 a.m., defendants placed an unsolicited order to buy twenty contracts of silver if silver dropped to the specific price of $6.85 without verifying that their 10:06 a.m. order to sell had been filled in its entirety.

10. During a telephone conversation at approximately 10:45 a.m., on July 22, 1982, Mr. Gustafson advised the defendants that Bache’s managing floor broker had acknowledged that a recording and reporting error had been made with respect to the defendants’ 10:06 a.m. order of that date and that, in fact, the 10:06 a.m. order had been filled by the Exchange for only nine of the ten contracts at the $7.03 price specified by defendants.

11. During the 10:45 a.m. telephone conversation, Mr. Gustafson confirmed to the defendants they now held nineteen contracts short and that the Exchange had not been able to fill their order to buy twenty contracts at $6.85 because the price of silver had not dropped to that price.

12. During the 10:45 a.m. telephone conversation, defendants were advised by Mr. Gustafson that if they felt the price of silver was going to continue to rise rather than decline, they should place an order to liquidate all of the nineteen contracts.

13. On July 22, 1982, defendants placed orders at their own designated prices by entering a series of limit orders, none of which were ever filled. The limit orders entered by defendants were as follows:

1. 11:03 a.m. — buy 19 contracts at $6.95 and cancel order to buy 20 contracts at $6.85;
2. 11:07 a.m. — buy 19 contracts at $6.98 and cancel order to buy 19 at $6.85; and
3. 11:15 a.m. — buy 19 contracts at $7.00 and cancel order to buy 19 at $6.98.

14. On July 22, 1982, the price of silver fluctuated from a low of $6.90 to a high of $7.06.

15. BACHE had the right and authority to liquidate defendants’ positions pursuant to the terms of the customer’s agreement executed by defendants on July 15, 1982 and being Exhibit E in this case.

16. Both the plaintiff and the defendants could have liquidated the silver positions in the account prior to the close of trading on July 22 and prevented any further losses from being incurred on July 23.

17. If either the plaintiff or the defendants had liquidated defendants’ silver position on July 22, 1982 at 10:19 a.m. at the market price of $6.93, the defendants would have made a profit of $7,000 which, when combined with the $3,325 profit in the account from the beginning of the day, would have left defendants with profits of $10,325.

18. If either the plaintiff or the defendants had liquidated defendants’ silver position on July 22, 1982 at 11:02 a.m. or 11:03 a.m. at the market price of $7.00, the profit position in defendant’s account would have been $3,325.

19. If either the plaintiff or the defendants had liquidated defendants’ silver positions on July 22, 1982 at 11:07 a.m. at the market price of $7.01, the defendants would have had a profit of $2,300.

20. If either the plaintiff or the defendants had liquidated defendants’ silver position on July 22, 1982 at 11:14 a.m., or shortly prior to the closing of the market at 11:15 a.m. Pacific Daylight Time, at the market price of $7.06, defendants would have suffered a loss of $2,675 in the account.

21. Neither plaintiff nor defendants elected to liquidate the silver positions in the account prior to the close of the market on July 22, 1982.

22. At the close of business on July 22, defendants still held their position of 19 contracts of September silver short.

23. Mr. Gustafson knew or should have known that defendants were day traders and wanted to avoid holding their positions overnight on July 22, 1982.

24. On July 23 the silver market opened at a price of $7.26 and proceeded to rise in price rapidly for the rest of the day. Mr. Gustafson telephoned defendants at 6:00 a.m. on July 23 and urged them to place a market order or at least enter a stop loss order. Defendants refused.

25. At 8:45 a.m. on July 23, Mr. Gustafson again telephoned defendants and advised them to place a stop loss and to remind them of the 10:30 a.m. deadline for meeting the margin call.

26. As the price of silver continued to climb on July 23, the equity in defendants’ account continued to drop. BACHE was required to make a margin call in defendants’ account for $52,000 payable by 10:30 a.m.

27. Defendants failed to meet the margin call as required and at 11:08 a.m. on July 23 BACHE closed out all of defendants’ silver positions at the best possible price during the trading day and liquidated defendants’ 19 silver contracts at the market price, which resulted in a debit balance in defendants’ account of $23,095.

28. To the extent the Findings of Fact herein contain conclusions of law, such conclusions of law are incorporated into the Conclusion of Law section herein. To the extent the conclusions of law herein contain findings of fact, such findings of fact are incorporated in the Findings of Fact section herein.

CONCLUSIONS OF LAW

1. Federal jurisdiction over the subject matter and venue is proper in this action. 15 U.S.C. § 78aa; 28 U.S.C. § 1332(a).

2. Plaintiff did not convert any of defendants’ funds to plaintiff’s own use.

3. Considering the contract and the relationship between the parties, access to necessary information, the knowledge that defendants were day traders, and related necessary facts, BACHE had a duty, if defendants failed to close out their positions by the close of the trading day at 11:15 a.m. on July 22, 1982, to liquidate the account. Plaintiff breached said duty.

4. Defendants are liable to BACHE for the $2,675 loss which would have resulted from the liquidation of their account on July 22, 1982. Plaintiff is responsible for bearing the remaining loss suffered when the account was liquidated on July 23, 1982.

5. Defendants, under the written agreement that they would maintain sufficient margin and pay on demand any debit owing in their accounts, had the obligation to deposit good funds in the account to pay for the trades they placed. Defendants breached said obligation.

6. Plaintiff is entitled to judgment against both defendants, jointly and severally, in the sum of $11,000 representing the amount of the checks on which defendants stopped payment. . In addition, plaintiff is entitled to judgment against both defendants, jointly and severally, in the sum of $2,675 representing the loss for which defendants are liable had the account been liquidated on July 22, 1982 for a total judgment of $13,675 plus interest thereon at the rate of ten percent per annum from August 24, 1984. Defendants are not entitled to recovery on their counterclaim. Each party is to bear their own costs and attorneys’ fees.


author: CASTAGNA, District Judge.

text:
    James M. CORKERY, and Carol A. Corkery, his wife, Plaintiffs, v. SUPERX DRUGS CORPORATION, and Kroger Company, Inc., Defendants.
    No. 84-442 Civ-T-15.
    United States District Court, M.D. Florida, Tampa Division.
    Feb. 1, 1985.

      Warren T. La Fray P.A. and Michael J. Ebin, Clearwater, Fla., for plaintiffs.
    Peter W. Zinober, John P. McAdams, Kathleen S. Edwards, Carlton, Fields, Ward, Emmanuel, Smith & Cutler, Tampa, Fla., for defendants.
   AMENDED ORDER

CASTAGNA, District Judge.

The Court has for consideration the status of the above-styled case. The Defendants have filed a Motion To Dismiss the Plaintiff’s fifteen Count complaint, which encompasses claims under 42 U.S.C. § 1985, the Employee Retirement Income Security Act (ERISA), and numerous state law claims. Both the Plaintiff and Defendant have supported their arguments with extensive memoranda, which the Court has carefully considered.

This case involves the unusual factual situation of a Plaintiff who fell victim to a system of discrimination that he unwittingly helped promote at an earlier time. According to the factual allegations of the Complaint, which the Court of course must accept as true for purposes of a motion to dismiss under Fed.R.Civ.P. 12(b)(6), e.g., Miree v. DeKalb County, Ga., 433 U.S. 25, 27 n. 2, 97 S.Ct. 2490, 2492 n. 2, 53 L.Ed.2d 557 (1977), the Plaintiff is a former employee of Defendant SuperX. Plaintiff alleges that he was originally employed in July of 1977 as SuperX’s Regional Loss Prevention Manager and was subsequently promoted to the position of National Security Manager in charge of the entire SuperX chain. During 1980 and up to April of 1981, the Plaintiff was directed by his immediate superior, a Mr. Layfield, to conduct investigations into the background of certain designated employees. Layfield later informed Plaintiff that the purpose of these investigations was to discover pretexts to justify the termination of those employees, all of whom were handicapped.

On or about April 6,1981, the tide turned on the Plaintiff, however, when he suffered serious congestive heart failure at the age of 42. Plaintiff was unable to work until May 18, 1981, at which time he returned to work. Upon return, the complaint alleges, the Plaintiff was met with a markedly different, and hostile, work environment. The adverse working atmosphere escalated, aggravating the Plaintiff’s health condition to the point that he took permanent disability status in March of 1982. The Plaintiff alleges that the adverse working conditions were purposefully perpetrated to the detriment of his already fragile physical condition. Subsequently, Defendant SuperX allegedly communicated to the company’s group employee insurer a falsehood — that Plaintiff had obtained other employment— resulting in the wrongful discontinuation of his disability benefits.

Following this background, the instant controversy ensued. Count I of the complaint seeks redress for violations of 42 U.S.C. § 1985(3), alleging the violation of numerous of Plaintiff’s state-conferred rights as a member of the class of “handicapped employees” against whom the Defendants’ discriminatory animus was based. Counts II and III are asserted under ERI-SA, 29 U.S.C. § 1140, charging the Defendants with purposefully discriminating against the Plaintiff in an attempt to interfere with his attainment of rights under his employer supported health and retirement plans. Count V seeks relief for intentional/negligent infliction of emotional distress contending that the Defendants’ activities were undertaken with full knowledge of the Plaintiff’s particular susceptibility to emotional upset and for the specific purpose of inflicting emotional harm. As to Count VII, based upon defamation, Plaintiff seeks to prove he was defamed by representations made to the group insurer that Plaintiff, in effect, had attempted to perpetrate a fraud to receive disability benefits. The remaining counts present grounds for recovery based upon civil conspiracy, breach of contract and interference with contract, among others.

As to Count I, based upon § 1985(3), the Defendants contend that the Plaintiff has failed to allege the requisite “class-based” animus which is necessary to state a claim under that provision. See Griffin v. Breckenridge, 403 U.S. 88, 102, 91 S.Ct. 1790, 1798, 29 L.Ed.2d 338 (1971). The class asserted by Plaintiff is that he was a “member of the class of handicapped employees toward whom the conspirators’ discriminatory animus was directed.” Complaint, Paragraph 25. In Whilhelm v. Continental Title Co., 720 F.2d 1173, 1176 (10th Cir.1983), cert. denied, _ U.S. _, 104 S.Ct. 1601, 80 L.Ed.2d 131 (1984), the Tenth Circuit addressed precisely this same question and determined:

It is apparent that different individuals are handicapped in vastly different ways, for different periods of time, and to very different degrees or extent. The variations in each category are infinite and as a consequence the term “handicapped” does not have a definition capable of a reasonably precise application for the purposes before us____ The Complaint does not contain a description of a class of persons or group that is sufficiently definite or precise to set against the “class of persons” terminology in § 1985(3).

The Wilhelm Court went on to hold that even if further amendment could have developed a sufficiently defined “class” of handicapped persons, under the Supreme Court decisions in United Brotherhood of Carpenters v. Scott, 463 U.S. 825, 103 S.Ct. 3352, 77 L.Ed.2d 1049 (1983) and Breckenridge, supra, handicapped persons are not a class contemplated or protected by § 1985(3).

Plaintiff cites People By Abrams v. 11 Cornwell Co., 695 F.2d 34, 42-43 (2d Cir.1982), modified on other grounds, 718 F.2d 22 (1983), where the Court determined that a class of “mentally retarded” persons was sufficient for §' 1985(3) purposes. That case can be distinguished to a certain degree from the instant case and Wilhelm by the fact that “mentally retarded persons” is a significantly more limited class than the broader categorization of “handicapped persons.” People By Abrams also predates the recent United Brotherhood of Carpenter’s decision. And finally, the Court notes that the instant case much more closely approximates Wilhelm on a factual basis — a § 1985(3) claim brought by a handicapped employee against his employer for, inter alia, improper discharge. Count I will therefore be dismissed without leave to amend, and the Court need not reach the other proffered grounds for dismissal of this count.

As to Counts II and III, the Defendants urge dismissal based upon a statute of limitations argument. The parties agree that this Court must look to the most analogous state statute of limitations for guidance, and offer as alternatives FlaStat. § 760.10(10) (1983) (180 days for handicap discrimination); § 95.11(4)(e) (two years for action to recover lost wages); § 95.11(3)(f) (four years for action on statutory liability); and § 95.11(2)(b) (five years for contract action based upon written instrument). The parties also agree that there is no authority supporting which limitations period should be used in relation to the specific section of ERISA in question, section 510, 29 U.S.C. § 1140.

In determining the applicable statute of limitations, “the proper approach is to first determine the essential nature of the claim under federal law and then focus on the period applicable to such a claim under state law.” McGhee v. Ogburn, 707 F.2d 1312, 1315 (11th Cir.1983). The McGhee Court went on to observe that:

But as recognized in Braden v. Texas A & M University System, 636 F.2d [90] at 92 [(5th Cir.1981)], and Shaw v. McCorkle, 537 F.2d 1289, 1292 (5th Cir.1976), the distinction between the two steps becomes blurred sirfce the federal characterization of the claim draws heavily on state law. [Broward Builders Exchange, Inc. v.] Goehring [231 So.2d 513 (FIa.1970) ] suggests that no matter how an employment termination suit is characterized, Florida law dictates that the two-year statute applies. McWilliams [v. Escambia County School Board, 658 F.2d 326 (5th Cir. Unit B 1981)] holds that even though § 95.-11(4)(c) may appear on its face to be limited to actions for the recovery of back-pay, it applies to § 1983 employment suits in which the plaintiff requests legal and equitable relief.

Significantly, McGhee dealt with the statute of limitations applicable to racial discrimination in an employment case under § 1983 and determined that the “spirit of Florida law appears to be that employer/employee cases are governed by the two year period.” 707 F.2d at 1314. As a signal of the breadth of the Court’s interpretation of Florida law, the Court concluded: “Thus, no matter the theory or legal basis for the cause of action, the two year statute applies.” Id.

With this frame of reference, it is clear that a discrimination action under § 510 of ERISA is analogous to an employment termination case. The Court in West v. Butler, 621 F.2d 240, 245 (6th Cir.1980), broadly examined the purposes behind § 510. The West Court noted that “it appears Congress designed § 510 primarily to protect the employment relationship that gives rise to an individual’s pension rights,” observing that the statute covers discrimination that may “make an employee’s work life so unpleasant as to amount to a constructive discharge.” Id. at 245. As the McGhee Court determined, “no matter how an employment termination suit is characterized, Florida law dictates that the two-year statute applies.” 707 F.2d at 1314. This Court consequently finds that the essential federal nature of this ERISA claim is most strongly analogous to a state employment termination suit, and consequently the applicable state statute of limitations is the two year period contained in Fla.Stat. § 95.11(4)(c). It is apparent from the Defendant’s argument that the only finding that would result in dismissal of the ERISA Counts would be an application of the 180 day limit for handicap discrimination cases, and dismissal therefore is not warranted.

Turning to Count V, the Court recognizes that the Florida District Courts of Appeal are split over the viability of an action for intentional infliction of severe emotional distress. The First, Third, Fourth and Fifth Districts recognize such a claim, see Dominguez v. Equitable Life Assur. Soc., 438 So.2d 58, 59-60 (Fla. 3d DCA 1983) and cases cited therein, while the Second District does not, see Gmuer v. Garner, 426 So.2d 972 (Fla. 2d DCA 1982). Siding with the greater weight of authority, this Court finds such an action viable even if unconnected to any other identifiable tort, so long as the conduct is sufficiently outrageous. The Eleventh Circuit in Mundy v. Southern Bell Telephone & Telegraph Co., 676 F.2d 503, 506 (11th Cir.1982), has interpreted job harassment allegations similar to those found here as not meeting the requisite standard for outrageous conduct under Florida law, noting that no Florida case to that time had permitted such an action by an employee against an employer. The Court notes that the instant case, unlike Mundy, is more than a pure “employment” case. It also involves a claim for insurance benefits, as did Dominguez which postdates Mundy and in fact seems to lessen the “outrageous” standard somewhat where benefits claims are involved. Specifically, Dominguez, cited with approval two cases dealing with withholding of insurance or disability benefits that, in this Court’s estimation, contain no more “outrageous” conduct than the allegations of this Complaint. See Holmes v. Oxford Chemicals, Inc., 510 F.Supp. 915 (M.D.Ala.1981), aff'd, 672 F.2d 854 (11th Cir.1982); Strader v. Union Hall, Inc., 486 F.Supp. 159 (N.D.Ill.1980). Although at a later time this point may be raised again on a motion for summary judgment for factual insufficiency, see Mundy, 676 F.2d at 505 n. 4, Count V is sufficient under Dominguez to withstand dismissal on a Rule 12(b)(6) motion.

As to Count VII for defamation, the Defendant moves to dismiss based upon the Plaintiff’s failure to comply with the notice requirement found in Fla.Stat. § 770.01. The Court recognizes that Ross v. Gore, 48 So.2d 412 (Fla.1950), can be read to support Plaintiff’s reasoning, although Judge King reached a contrary interpretation of Ross in Laney v. Knight-Ridder Newspapers, Inc., 532 F.Supp. 910 (S.D.Fla.1982). Laney’s construction of § 770.10 and Ross has recently been soundly rejected by two Florida court opinions holding the statutory notice provision not applicable to nonmedia defendants. See Bridges v. Williamson, 449 So.2d 400, 401 (Fla. 2d DCA 1984); Davies v. Bossert, 449 So.2d 418, 421 (Fla. 3d DCA 1984). Count VII, therefore, need not be dismissed.

The Court has carefully examined each of the Defendants’ remaining points urging dismissal, especially the challenges of the sufficiency of the conspiracy allegations, and finds them lacking. Accordingly, it is

ORDERED:

1. The Defendants’ Motion To Dismiss is granted to the extent that Count I brought under § 1985(3) is dismissed with prejudice. In all other respects, the Motion is denied.

2. The Defendants’ Request For Oral Argument is denied.


author: BUA, District Judge.

text:
    Russell ANDERSON, Plaintiff, v. Margaret HECKLER, Secretary, Department of Health and Human Services, Defendant.
    No. 84 C 5693.
    United States District Court, N.D. Illinois, E.D.
    Feb. 6, 1985.

      Daniel Galatzer, Lamet, Galatzer & Associates, Chicago, Ill., for plaintiff.
    Gregory G. Jones, Acting U.S. Atty. by Elizabeth Stein, Asst. U.S. Atty., Chicago, Ill., for defendant.
   ORDER

BUA, District Judge.

This action was brought by Russell Anderson pursuant to Sections 216(i) and 205(g) of the Social Security Act, 42 U.S.C. §§ 416(i) and 405(g) to review a final decision of the Secretary of Health and Human Services (“the Secretary”) denying Anderson Social Security Disability Benefits. Before the Court are the parties’ cross-motions for summary judgment. The issue before the Court is whether there is substantial evidence to support the final decision of the Secretary.

For the reasons stated below, this Court finds that substantial evidence does not exist to support the final decision of the Secretary, and the decision of the Secretary is remanded for reconsideration consistent with this opinion.

I. FACTS

Russell Anderson is a 49-year-old married male with a high school education and two years of college obtained through a United States Armed Forces Institute. Anderson was employed as a paper cutter which required walking, standing, and lifting bundles which were often over 100 pounds. On January 8, 1982, Anderson was taken to the hospital from work. He has not been able to return to work since January 8, 1982. Since 1981, Anderson has had back surgery five times and complains of constant pain from various claimed back problems which include tumors, muscle spasms, and slipped discs.

On April 19, 1983, Anderson applied for Social Security Disability benefits. He was denied initially and on reconsideration and after a request for review was denied at each of the first two steps. An Administrative Law Judge (“AU”) also heard the case and also denied Anderson’s claim. After the Appeals Council affirmed the decision of the AU, Anderson sought judicial review of the case which is before this Court with cross-motions for summary judgment.

II. DISCUSSION

To qualify for disability insurance benefits one must be “under a disability” according to 42 U.S.C. § 423(a)(1). The term disability is defined in subsection (d)(1)(A) as an “inability to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or which has lasted or can be expected to last for a continuous period of not less than 12 months.” The Code defines physical or mental impairment as “an impairment that results from anatomical, physiological, or psychological abnormalities which are demonstrable by medically acceptable clinical and laboratory diagnostic techniques.” 42 U.S.C. § 423(d)(1), (2), (3) (1978). A two-step process has been generally accepted in determining “disability.” A medically determinable impairment must be shown to exist, and there must be a factual determination that the impairment renders the plaintiff unable to perform substantial gainful employment, Lowery v. Weinberger, [1974 Transfer Binder] Unempl.Ins.Rep. (CCH) ¶ 17,727 (E.D.Term.1973), aff'd. 495 F.2d 1373 (6th Cir.1974).

In weighing the evidence to determine whether or not a disability exists, the AU must weigh all the evidence and may not ignore evidence that suggests an opposite conclusion. Garcia v. Califano, 463 F.Supp. 1098, 1105 (N.D.Ill.1979); see also Whitney v. Schweiker, 695 F.2d 784 (7th Cir.1982). Often, the AU must assess the credibility of physicians who either testify or submit statements. In so doing, the AU may decide against the treating physician’s assessment if it appears to the AU that the “personal physician ... might have been leaning over backwards to support the application for disability benefits.” Cummins v. Schweiker, 670 F.2d 81, 84 (7th Cir.1982).

Under the Act, the burden of proving the existence of a disability falls on the plaintiff. Bloch v. Richardson, 438 F.2d 1181 (6th Cir.1971). However, the burden of going forward shifts to the Secretary to prove that there is available some other kind of “substantial gainful employment” that the claimant can perform, once the plaintiff establishes that his impairment is of such significant severity that it precludes him from performing his former work. McNeil v. Califano, 614 F.2d 142 (7th Cir.1980).

The review of this Court' is limited to determining whether or not the Secretary’s findings are supported by “substantial evidence” based on the record as a whole. Generally, the courts define “substantial evidence” as “such relevant evidence as a reasonable mind might accept as adequate to support a conclusion.” Richardson v. Perales, 402 U.S. 389, 401, 91 S.Ct. 1420, 1427, 28 L.Ed.2d 842 (1971); see also Whitney, supra. Therefore, a showing that the AU’s decision was not supported by “substantial evidence” requires this case to be remanded.

Since leaving work in early 1982, Anderson has claimed a number of back ailments. These ailments, recorded by treating physicians, range from central disc herniation and muscle spasm to arteriosclerosis involving the spinous joints of the lower lumbar spine and many others. Anderson claims to be in a great deal of pain which the AU found to be real. The plaintiff testified that he is required to take a number of drugs for his spasms along with periodic pain treatment injections. He claims that his pain is so intense that he cannot sit for more than one-half hour nor stand for more than 10 or 25 minutes. For all practical purposes, he is confined to his home. He no longer has a driver’s license.

Two of the four doctors involved in this case were of the opinion that the plaintiff would never be able to return to work again. In an examination dated May 25, 1982, Dr. Livas, one of the doctors that treated the plaintiff, stated that the plaintiff’s pain was continuous, bilateral, and uncontrollable by medication. Medical evidence included a CT-scan interpretation demonstrating a narrowing of the neural foromena at L5/S1, arthritic changes at L4/L5 and the suggestion of central disc herniation at SI. Dr. Livas ordered Anderson to lift no more than ten pounds and sit for no longer than one hour. Dr. Livas’ opinion was that the plaintiff was unable to work.

The second treating physician, Dr. Morgenstern, completed three reports dated March 28, October 19, and November 21, 1983. All three reports plainly set forth the opinion that Anderson was so disabled that he could not participate in any type of employment whatsoever.

A consultative examination performed by Dr. Panopio on June 16, 1983 noted muscle spasm at the cervical spine and other complications, but did not comment on the plaintiff’s ability to work. The X-ray showed apparent narrowed disc space at L4/L5 level and irregularities involving the spinous processes at L4/L5 as well as osteoarthritis of the small joints with minimal bony lipping involving the interior margins of the lower lumbar vertebrae. A nonexamining physician from the Social Security Administration was of the opinion that Anderson could lift up to 20 pounds occasionally and stand and walk during a full day.

Some courts have held that an AU does not commit an impropriety when he relies on his own observations during a hearing concerning the severity of a claimant’s pain. However, the AU must weigh all the evidence and may not ignore evidence that suggests an opposite conclusion. Garcia v. Califano, 463 F.Supp. 1098, 1105 (N.D.Ill.1979). Here, two independent doctors who actually treated Anderson over a period of months found that Anderson was so disabled that he could not work. These two opinions were not given proper weight in the ALJ’s finding.

Controlling weight must be given to examining physicians’ opinions over consulting physicians who have only seen the claimant on one occasion. Allen v. Weinberger, 552 F.2d 781, 786 (7th Cir.1977). Accordingly, the opinions of nonexamining physicians are given little weight when they conflict with those of the treating physicians. Whitney, supra. The present case presents such a conflict. Two examining physicians, one who has seen the plaintiff over a two-year period, have made a determination as to the plaintiff’s abilities. The AU rejected these opinions without a determination of credibility. Following Whitney and Allen, the Court finds that the AU failed to give proper weight to the treating physicians’ opinions in contrast to the great weight given the opinions of the' nonexamining physicians.

The defendant suggests that this case may be controlled by Cummins v. Schweiker, 670 F.2d 81 (7th Cir.1982), which allows the ALJ to lend little credibility to a treating physician who may have been “leaning over backwards to support the application for disability benefits____” Id. at 84. However, in the administrative record, there was no finding that either of the two independent treating physicians had been “leaning over backwards to support the application.” The only evidence which supported the AU’s finding was that of the reviewing physician from the Social Security Administration.

Regarding the opinion of doctors who merely review the claimant’s medical file and do not perform an examination, the Court in Whitney said that a nonexamining report, “without personal examination of the claimant, deserves little weight in the overall evaluation of liability. The advisers’ (physicians’) assessment of what other doctors find is hardly a basis for competent evaluation____” Whitney v. Schweiker, supra, 695 F.2d at 789, (quoting Landess v. Weinberger, 490 F.2d 1187, 1190 (8th Cir.1974)). Considering the evidence of the four doctors’ opinions, this Court concludes that the AU incorrectly assessed the claim because he did not accord proper weight to the reports of the two examining physicians.

In full view of the fact that the AU improperly accorded weight to a nonexamining physician and failed to discredit the findings of the examining physicians, this Court concludes that the Secretary’s decision to disallow the claimant’s benefits was not supported by the requisite “substantial evidence.”

CONCLUSION

Accordingly, cross-motions for summary judgment are denied. This case is remanded to the Administrative Law Judge for further proceedings consistent with this opinion.

IT IS SO ORDERED.


author: PENCE, Senior District Judge.

text:
    Elsa Lucero SIVERTS, Plaintiff, v. William CRAIG, District Director, U.S. Immigration and Naturalization Service, Defendant. (Two cases).
    Civ. Nos. 81-0214, 81-0221.
    United States District Court, D. Hawaii.
    Feb. 7, 1985.

      William F. Thompson, III, Honolulu, Hawaii, for plaintiff.
    Elliot Enoki, Asst. U.S. Atty., Honolulu, Hawaii, for defendant.
   ORDER GRANTING PLAINTIFF’S PETITION FOR WRIT OF HABEAS CORPUS

ORDER GRANTING DEFENDANT’S MOTION TO DISMISS THE DECLARATORY JUDGMENT ACTION

PENCE, Senior District Judge.

Defendant’s Motion to Dismiss each of the above actions having come on for a hearing on December 19, 1984 at 11:00 a.m. before the Honorable Martin Pence, and the court having reviewed the record and the parties’ written and oral arguments, finds as follows:

At the hearing on December 19,1984, the court agreed to postpone any ruling on defendant’s Motion to Dismiss and Plaintiff’s Petition for a Writ of Habeas Corpus until a decision on a Motion for Reconsideration in the case of Patel v. Landon, 739 F.2d 1455, was rendered by the Ninth Circuit. The Ninth Circuit entered an Order Denying Petition for Rehearing in Patel v. Landon on December 26, 1984. This case is thus ripe for adjudication.

I.

Plaintiff was admitted to the U.S. as a nonimmigrant visitor on April 2, 1973. On April 25th of that year, plaintiff applied for an adjustment of status due to her marriage to a U.S. citizen, Eufenico Tacub. Her status was adjusted to that of lawful permanent resident on August 22, 1973.

Plaintiff’s marriage to Tacub was void, however, in that at the time of the marriage, plaintiff was still married to a Mahittipongse of Thailand. Upon obtaining this information, the Immigration and Naturalization Service (“INS”) notified plaintiff of its intent to rescind her adjustment of status on February 11, 1975.

Plaintiff had since divorced her U.S. husband, Tacub on April 23, 1974 and her Thai husband on May 17, 1974. On May 30, 1974, plaintiff married another U.S. citizen, Cranston.

The rescission hearing was held on February 27, 1976. Plaintiff appeared pro se and admitted that she had married Tacub solely for the purpose of gaining permanent resident status. Plaintiff testified that she and Tacub had not lived together, and that the marriage had been entered into for immigration purposes only. The immigration judge rescinded her adjustment of status.

After the rescission hearing, plaintiff filed another application for adjustment of status to that of permanent resident based upon her marriage to Cranston. Plaintiff then requested advance parole status so that she could leave the U.S. to visit her sick child in Thailand. The INS interviewed plaintiff in August of 1976 and granted her advance parole status. Plaintiff left the country on September 2, 1976.

Upon her return to the U.S. on October 5, 1976, the INS notified plaintiff of its intention to conduct an exclusion and detainment hearing under IN A § 212(a)(20) [8 U.S.C. § 1182(a)(20) ], charging plaintiff with being an “immigrant not in possession of a valid immigrant visa.” On January 24, 1977, INS revoked its approval of plaintiffs husband’s petition in her behalf due to their divorce in December of 1976.

An exclusion hearing was convened on February 4, 1977 and continued to April 12 so that the plaintiff could procure counsel. On April 12 the immigration judge ordered that plaintiff be excluded as an immigrant not in possession of a valid immigrant visa.

Plaintiff appealed the exclusion order to the Board of Immigration Appeals, which dismissed the appeal on February 6, 1978. The Board then denied plaintiff’s Motion to Reconsider on May 20, 1980 and her Motion to Reopen on May 21, 1981.

Plaintiff filed a request for deferred action status under INS Operations Instructions 103.1(a)(l)(ii) on June 8, 1981. The INS denied plaintiff's request, and plaintiff then filed her Declaratory Judgment action and Petition for Writ of Habeas Corpus in the United States District Court for the District of Hawaii.

II.

The decisive issue in this case is whether plaintiff’s brief departure from and return to the U.S. in 1976 constituted an “entry” under the U.S. immigration laws so as to subject her to exclusion proceedings. As to this issue, the Ninth Circuit case of Patel v. Landon, 739 F.2d 1455 (1984), is, without a doubt, controlling.

Because of the remarkable factual similarity between Patel and the instant case, a synopsis of the facts of Patel is deemed appropriate. Patel came from India to the U.S. as a nonimmigrant student in 1971. In 1974, he bought a Los Angeles hotel and sought adjustment status from the INS to that of a non-preference investor. Plaintiff’s application was denied, and plaintiff sought review and reconsideration. On May 17, 1978, prior to any decision from the INS on plaintiff’s Motion for Reconsideration, plaintiff was granted advance authorization for parole into the U.S. so that he could visit his ailing father in India. On June 6, 1978, plaintiff returned from India to resume his application for adjustment of status.

On October 31, 1978, INS denied the Motion for Reconsideration, revoked Patel’s parole, and placed Patel in exclusion proceedings. Patel argued that he should have been in deportation proceedings, due to the substantial procedural advantages not available in exclusion proceedings.

The Ninth Circuit held that Patel’s brief departure from the U.S. did not subject him to exclusion upon his return. INS’s paroling of Patel into the U.S. was merely an effort to set up the fiction that Patel was still outside the U.S. seeking entry. 739 F.2d at 1457. Patel’s departure was innocent, casual and brief, as such, his application “ ‘[must] be adjudicated without regard to the departure and absence.’ ” citing, Joshi v. District Director, INS, 720 F.2d 799 (4th Cir.1983).

Of significance to Siverts’ claim is the Patel court’s finding that

By seeking advance parole prior to his departure from this country in 1978, [Patel] sought to preserve his right to deportation proceedings upon his return.. Form 1-512, which [Patel] filled out in conjunction with his request for advance parole, did not sufficiently indicate otherwise. It is clear that [Patel] was trapped into exclusion status when he was given parole and this the Court cannot condone. Id. at 1457.

Siverts also filled out Form 1-512 prior to her departure to and return from Thailand. Siverts’ statement that she did not realize the consequences of a grant of advance parole is undisputed by the INS, and it is clear that her absence from the U.S. was “innocent, casual and brief.”

The decisions of the Ninth Circuit are binding upon this court. As such, this court has no choice but to hold that Siverts should be in deportation, not exclusion, proceedings. Plaintiff’s Petition for Writ of Habeas Corpus is hereby GRANTED. Defendant’s Motion to Dismiss Civil No. 81-0214 is thus DENIED.

III.

Defendant has also brought a Motion to Dismiss in Civil No. 81-0221, plaintiff’s Declaratory Judgment action. In this action, plaintiff seeks to have the court order the INS to defer action on plaintiff’s exclusion. This court’s holding that plaintiff is not an appropriate candidate for exclusion renders plaintiff’s declaratory judgment action moot.

However, for the sake of limiting further litigation should plaintiff be found deportable, the court grants INS’s Motion to Dismiss.

The granting of “deferred action status” under INS Operating Instruction 103.1(a)(l)(ii) is an informal administrative stay of deportation, “having no effect on an alien’s adjudication as deportable but potentially leading to an extended stay in this country.” Wan Chung Wen v. Ferro, 543 F.Supp. 1016 (W.D.N.Y.1982). The decision to grant or withhold deferred action status lies within the discretion of the INS and is clearly for the INS’s convenience and benefit, not the alien’s. Soon Bok Yoon v. INS, 538 F.2d 1211 (5th Cir.1976).

The Ninth Circuit reached a contrary conclusion in Nicholas v. INS, 590 F.2d 802 (1979), deciding that deferred action status was a “directive provision conferring a substantial benefit upon aliens based upon humanitarian considerations rather than existing solely for the convenience of the INS.” 590 F.2d at 808. However, this decision has been severely criticized and rejected in Zacharakis v. Howerton, 517 F.Supp. 1026 (S.D.Fla.1981) and other cases. Moreover, the rationale of Nicholas has been severely undermined by a recent amendment of Operating Instruction 103.-1(a)(1)(h). It is no longer possible to conclude that it is intended to confer any benefit upon aliens; it exists solely for the INS’s own convenience. As it is an act of administrative choice, the court cannot and will not order that the INS grant plaintiff deferred action status.

IT IS SO ORDERED.

      . On April 5, 1977, plaintiff married another U.S. citizen, Louis Brown. Plaintiff then obtained a divorce from Brown and has since married her fifth, and as of this date final, husband, Blair Siverts, also a U.S. citizen. Plaintiff has had one child by Siverts.

      . Plaintiff argues that the INS should have brought deportation rather than exclusion proceedings against her. An alien in deportation proceedings has great advantages than one in exclusion proceedings. An alien subject to deportation can designate the country of deportation; can depart the U.S. voluntarily, thus avoiding the stigma of deportation; and, most importantly, can seek suspension of deportation, because of a marriage, children, hardship, etc. These "rights” are not available to an alien in exclusion proceedings.


author: EDWARD C. REED, Jr., District Judge.

text:
    UNITED STATES of America, Plaintiff, v. Charles Douglas STEELE, aka Miles Sherman, Defendant.
    No. CR-R-84-40-ECR.
    United States District Court, D. Nevada.
    Feb. 7, 1985.

      Brian L. Sullivan, Asst. U.S. Atty., Reno, Nev., for plaintiff.
    Richard L. Davenport, Reno, Nev., for defendant.
   MEMORANDUM DECISION AND ORDER

EDWARD C. REED, Jr., District Judge.

The defendant has moved for a new trial pursuant to Fed.R.Crim.P. 33 on the ground that a dictionary was supplied by the bailiff to the jurors during their deliberations. It was furnished without the knowledge of the Court and counsel.

After the matter was brought to the Court’s attention, individual hearings were held for all twelve jurors to ascertain the extent of the use made of the dictionary. It is clear that the book was in the jury room for two hours or more on the last day of the deliberations and that the dictionary definitions for certain words were read aloud and discussed.

The sending of a dictionary into the jury room, without consulting counsel, is error. United States v. Birges, 723 F.2d 666, 670 (9th Cir.1984). The danger is that the jurors will use it to construct their own inaccurate definitions of legal terms. Id. at 671. A violation of the rule does not compel reversal, nevertheless, unless a reasonable possibility of prejudice is shown. Id. at 670. If it had been extrinsic or unadmitted evidence, rather than a dictionary, the rule would be that the defendant is entitled to a new trial if there existed a reasonable possibility that the extrinsic material could have affected the verdict. United States v. Vasquez, 597 F.2d 192, 193 (9th Cir.1979).

It is the defendant’s contention that the dictionary definitions of some of the words looked up by the jurors were inaccurate or, at least, confusing. Although there was not unanimity of agreement as to exactly what words were looked at, the specific words recalled by one or more jurors were “conspiracy”, “conspirator”, “concerted”, “copyright”, “infringement”, “plagiarism” and “doubt”. The jury convicted the defendant of two counts of copyright infringement, one by unauthorized reproduction of motion pictures and the other by unauthorized distribution of copies of those pictures. A count charging conspiracy to infringe the copyrights of motion pictures was dismissed on motion of the prosecution after the jury indicated it was unable to reach a verdict as to that count. The dismissal eliminated any possibility that the dictionary definitions of “conspiracy”, “conspirator” and “concerted” could have prejudiced the defendant.

The particular dictionary that was used in the jury room was “Webster’s Third New International Dictionary”, unabridged. Its definition of “copyright” is: “the exclusive, legally secured right to reproduce (as by writing or printing), publish and sell the matter and form of a literary, musical, or artistic work (as by dramatizing, novelizing, performing or reciting in public, or filming) for a period in the U.S. of 28 years with a right of renewal for another 28 years”. The word “infringement” is there defined: “the unlawful manufacture, use, or sale of a patented or copyrighted article, such as constitutes a tort in law”.

Instruction No. 19 quotes the criminal copyright infringement statutes, 17 U.S.C. § 506(a) and 18 U.S.C. § 2319(b)(2)(B). Instruction No. 21 lists the essential elements of the offense of copyright infringement by unauthorized reproduction of motion pictures, whereas No. 23 lists the essential elements of copyright infringement by unauthorized distribution of copies of motion pictures. Instruction No. 25 quotes 17 U.S.C. § 106 as to the exclusive rights possessed by a copyright owner. No. 26 explains the “first sale” doctrine. The Court has compared closely these instructions with the dictionary definitions and finds no reasonable possibility of prejudice arising from perusal of the dictionary in connection with the words “copyright” and “infringement”.

The word “plagiarism” is defined in the dictionary as: “an act or instance of plagiarizing____” “Plagiarize” is defined: “to steal and pass off as one’s own (the ideas or words of another): use (a created production) without crediting the source ...: to commit literary theft: present as new and original an idea or product derived from an existing source”. Plagiarism is comparable to copyright infringement in the sense that someone else’s creativity is misappropriated. However, the instructions to the jury did not mention the word and no reasonable possibility of prejudice has been shown as a result of its discussion in the jury room. The jury must be accepted as a rational body, capable of making the distinctions and constructions necessary to the fact-finding process. United States v. Bagnariol, 665 F.2d 877, 888 (9th Cir.1981).

The noun “doubt” is defined in the dictionary used in the jury room as: “uncertainty of belief or opinion ..: the subjective state of being uncertain of the truth of a statement or the reality of an event as a result of incomplete knowledge or evidence..: a deliberate suspension of judgment or withholding of belief ..: a systematic weighing of the reasons for holding a belief or opinion ..: the condition of being objectively uncertain: a state of affairs giving rise to uncertainty, hesitation or suspense ..: a feeling of uncertainty ..: an uncertain or unsettled point or matter: difficulty ..: a lack of confidence: distrust, suspicion ..: an inclination not to believe or accept: question ... ”. The defendant argues that the jurors could have undertaken their own definition of “reasonable doubt” and lessened the burden placed on the prosecution.

• Instruction No. 4 emphasizes that the evidence in the case must convince the jury beyond a reasonable doubt of the guilt of the accused, or else it is the jury’s duty to find him not guilty. The same message is provided in Instruction No. 7, which also states that proof beyond a reasonable doubt must “be proof of such a convincing character that a reasonable person would not hesitate to rely and act upon it in the most important of his own affairs.” The Government’s burden to prove beyond a reasonable doubt that the defendant has committed every element of an offense with which he is charged, is noted in Instruction No. 8. The same guiding principle is set forth in Instruction No. 12. Instruction No. 39 again declares that the accused’s guilt must be proved beyond a reasonable doubt. Instruction 40 specifies: “After weighing all the evidence, if you are not convinced of the guilt of the defendant beyond a reasonable doubt you must find him not guilty.” The duty of jurors to follow the law stated in the instructions and to apply the rules of law to the facts found from the evidence in the case is made clear in Instruction No. 1.

The Court is convinced that the charge to the jury fairly and accurately conveyed the meaning of “reasonable doubt”. Although it was not proper for jury members to read or discuss Webster’s definitions of “doubt”, no reasonable possibility of prejudice is shown therefrom. The instructions, both individually and as a whole, emphasized the necessity that the jury apply the reasonable doubt standard. See United States v. Newport, 747 F.2d 1307 (9th Cir.1984).

IT IS, THEREFORE, HEREBY ORDERED that the defendant’s motion for a new trial be, and the same hereby is, DENIED.


author: BARBOUR, District Judge.

text:
    Paul V. O’MALLEY and Douglas Talbot, d/b/a “The Bowie Knife”, Plaintiffs, v. UNITED STATES FIDELITY AND GUARANTY COMPANY, Defendant. Andre C. FARISH, Plaintiff, v. UNITED STATES FIDELITY AND GUARANTY COMPANY, et al., Defendants.
    Civ. A. Nos. W82-0007(B), W82-0008(B).
    United States District Court, S.D. Mississippi, W.D.
    Feb. 7, 1985.
    John E. Mulhearn, Jr., Mulhearn & Mulhearn, John R. Kingsafer, Hudson & King-safer, Ltd., Natchez, Miss., for plaintiffs.
    James L. Carroll, Virginia Munford, Watkins & Eager, Carey E. Bufkin, Shell, Buford, Bufkin, Callicutt & Perry, Jackson, Miss., for defendants.
   FINDINGS OF FACT AND CONCLUSIONS OF LAW

BARBOUR, District Judge.

The Court, after consolidating these cases for trial and bifurcating the trial on the issue of whether Defendants are liable under certain insurance policies for losses sustained by Plaintiffs from the issue of Defendants’ alleged bad faith dealings with Plaintiffs, heard the testimony and received the evidence presented by both sides at a trial commencing on January 28, 1985, and continuing through January 30, 1985. The Court heard the arguments of counsel, received trial briefs on the issues and took the case under advisement. Now having considered the evidence and the law, the Court makes the following Findings of Fact:

1. The Defendant, USF & G issued an insurance policy no. FP-7035487 to Plaintiffs, Paul O’Malley and Doug Talbot d/b/a The Bowie Knife, providing coverage from March 26, 1980, to March 26, 1983, in the total sum of $7,000.00 on the contents of The Bowie Knife Building, subject to the terms and provisions thereof.

2. The Defendant, USF & G, issued its policy no. FC 19526 to the Plaintiffs, A.C. Farish and Paul V. O’Malley d/b/a Under the Hill Club, providing coverage in the total amount of $50,000 on the building, and $10,000 (with 75% co-insurance) on the contents of the building, subject to the terms and provisions thereof, for the policy period from September 26, 1977 to September 26, 1980.

3. The Defendant, Western, issued its policy no. OC-793398 to the Plaintiffs, A.C. Farish and Paul V. O’Malley d/b/a Under the Hill Club, in the same amount as the above mentioned USF & G policy covering that property, with the same co-insurance applicable on the contents, for the same policy period, subject to the terms and provisions of that policy.

4. The Bowie Knife and the Under the Hill Club are a sandwich shop and a bar located in the old historic section of Natchez, Mississippi, known as Natchez Under the Hill. This area lies on the east bank of the Mississippi River and below the tall (between 200 and 300 feet high), near vertical bluff on top of which sits the town of Natchez itself. The businesses occupied restored, brick buildings the rear of which were against the toe of the bluff.

5. On March 29, 1980, at about 3:35 p.m. a huge section of the bluff, estimated to be approximately 50 feet wide by 20 feet high by 10 feet deep and weighing 800,000 to 1,000,000 pounds, broke loose and slid with accompanying trees and other debris down the bluff and into and through the two buildings, totally destroying them and their contents and killing two people.

6. The Defendants denied Plaintiffs’ claims under the policies on the basis of the water exclusion portions of the policies asserting that the bluff had been weakened by excessive rainfall and that it finally collapsed in a mudslide. The policies of insurance all contained the following language:

Water Exclusions:

This Company shall not be liable, for loss caused by, resulting from, contributed to or aggravated by any of the following— (a) flood, surface water, waves, tidal water, or tidal wave, overflow of streams or other bodies of water, or spray from any of the foregoing, all whether driven by wind or not; (b) water which backs up through sewers or drains; (c) water below the surface of the ground including that which exerts pressure on or flows, seeps or leaks through sidewalks, driveways, foundations, walls, basements, or other floors, or through doors, windows or any other openings in such sidewalks, driveways, foundations, walls or floors.

7. Plaintiffs asserted that high winds blowing on trees growing on the bluff loosened their root structure and that this action triggered the mudslide. Plaintiffs claim that the cause of the mudslide and resulting loss was windstorm.

8. It is undisputed that Natchez had experienced excessive rains during the late fall and winter of 1979 and 1980. 15.04 inches had fallen in the month of March, 1980, alone. Natchez received 4 inches of rain on the day of the slide.

9. The bluff towering over Natchez Under the Hill is composed of a wind-deposited soil known as Loess. Loess has the unusual properties of being extremely stable when dry and of being extremely unstable when saturated with moisture.

10. Before the mudslide on March 29, large trees grew on the bluff behind and above the Bowie Knife and the Natchez Under the Hill Club, the tops of some of which reached above the upper edge of the bluff. If, in fact, the wind was blowing at the time the mudslide started, it was blowing from the southeast and a southeasterly wind cannot be felt in Natchez Under the Hill because it is protected by the bluff.

11. A conflict exists in the evidence as to whether the wind was blowing at about 3:35 on March 29. Plaintiff, Paul O’Malley, testified there was a blustering wind on top of the bluff when he left the Bowie Knife with his grandchildren at 3:00. Jerry Strahan, the general manager of the Bowie Knife, testified he drove to the top of the bluff at 3:30 and that a gust of wind which he estimated to be blowing at 35-45 miles per hour shook his truck. Charlie Haile, the insurance adjuster assigned to investigate the loss, testified it had been windy around noon but was calm when he left his Natchez office between 3:25 and 4:00. Official weather records show no unusual or damaging winds on March 29. There was evidence that there were no other windstorm claims for March 29, 1980, within 4 miles of Natchez Under the Hill investigated by either Defendant, U.S.F. & G. or by the Natchez office of Crawford and Company, the adjusting company for whom Haile worked. Steve Stevens was the only unaligned witness who testified. He operates a boat dock and fueling depot at the base of Silver Street in Natchez under the Hill. Stevens was on the river earlier in the day pursuant to his job of checking oil wells and noted high winds. He testified he did not note any high winds at the time of the mudslide although he admitted that the bluff protected Natchez Under the Hill from southeast winds. The Court concludes from a preponderance of the credible evidence that there were no unusually high winds at the time of or immediately preceding the mudslide.

12. Each side presented expert witnesses who, predictably, presented conflicting, opinions. All of the experts agreed that the bluff had been saturated by the excessive rains and would have been in a weakened and precipitous condition. All agreed that excessive moisture adds extra weight to the soil and that the Loess becomes unstable when wet. The Plaintiffs’ expert testified that in his opinion the wind against the trees whose tops rose above the bluff blew their roots loose, thus triggering not only a slide of those trees but also of the section of the bluff above them.

13. Testimony of experts for the Defendants and photographs of the slide area indicate the fracture plane, the area from which the slide moved, was relatively smooth, indicating that the trees slid with the slide rather than having been pulled out from the bluff by the wind.

14. Testimony was admitted of a similar slide which had occurred on April 22, 1979, which damaged the Silver Street, Ltd. building which adjoins the Bowie Knife. Plaintiffs contend that the payment of the loss by Defendant, U.S.F. & G. under the windstorm provisions of that policy constitutes an admission in regard to the present case. That slide occurred after rains in excess of 6 inches in the preceding 24 hour period. The Court is, of course, not called upon to rule on that matter, but considers that payment by U.S.F. & G. non-controlling here.

15. Defendants’ expert witness compared the forces of a 35-45 miles per hour wind upon a tree with the estimated weight of the slide mass and found those forces to be inconsequential.

16. The apparently unbiased testimony of Steve Stevens was supportive of the opinions of the experts presented by the Defendants. About five minutes before the mudslide in question, Stevens was near his boat dock and noticed several small slides occurring on the bluff. He went to the Silver Street, Ltd. to warn the two ladies employed there of the danger which was apparent to him. In addition, he advised two other ladies not to park in a particular parking lot for the same reason. Stevens further testified that an earlier major slide had occurred after it had been “raining, raining, raining.” Stevens, the only eyewitness to the actual mudslide, was attracted by the crack of exploding power lines and saw the mass of mud sliding down the bluff preceded by the roots of a large tree. Plaintiffs argue that the fact that the tree roots came down the bluff first supports their theory but could not present a plausible explanation of why the wind would not have blown the top of the tree down the hill first.

17. The Court concludes from a preponderance of the credible evidence that the sole cause of the mudslide was the excessive rains which had penetrated and soaked below the surface of the ground of the bluff, weakening it, adding weight and causing it to collapse. The Court finds that the mudslide was not proximately caused or proximately contributed to by windstorm. Even if there were a strong wind (which the Court has found did not exist) and even if it is assumed the wind exerted some causative force on the mudslide (which the Court has found not to be the case) such windstorm was not the dominant and efficient cause of the losses incurred.

The Court accordingly reaches the following Conclusions of Law based upon its Findings of Fact:

1. The policies in question exclude losses “caused by, resulting from, contributed to or aggravated by ... water below the surface of the ground____”

2. The losses incurred by the Plaintiffs were excluded by the policies and the Plaintiffs should recover nothing thereunder.

The Plaintiffs also alleged as a separate and independent ground for recovery a tort for the Defendants’ bad faith failure to properly investigate and pay the losses incurred by the Plaintiffs. In support of this theory of recovery, Plaintiffs plead primarily, but among other things, that Charlie Haile, an experienced insurance adjuster with Crawford and Company, was hired by Defendants to investigate the losses and that when Haile reported that his investigation revealed the insurance companies to be liable under the policies, the Defendants hired another adjuster. Plaintiffs claim a right to recover for this alleged bad faith even in the absence of their prevailing on the merits, citing Gruenberg v. Aetna Insurance Company, 9 Cal.3d 566, 108 Cal.Rptr. 480, 510 P.2d 1032 (1973) and Griffin v. Ware, 457 So.2d 936 (Miss.1984).

As stated above, this Court bifurcated the trial of this cause and only heard testimony and received evidence on the issue of whether or not the losses were covered by the policies. The question now before this Court is whether the law of the State of Mississippi allows recovery for a bad faith tort alleged to have been committed by an insurance company when the insured fails to prevail on its claim for its loss under the policy. This Court being Erie bound, holds that it does not.

Although the decision of the California court in Gruenberg may be read to imply a separate cause of action arising in tort whether the insurer is liable on the underlying policy contract or not, no Mississippi court has embraced this doctrine. The Plaintiffs’ contention that Griffin v. Ware adopts the Gruenberg doctrine is based on a misreading of Griffin. The holding of Gruenberg adopted by the Griffin court was that non-insurer defendants were not bound by any duty of good faith and fair dealing to the insureds.

The Plaintiffs have not cited, and the Court has not discovered on its own search, any cases in which a court applying Mississippi law has held that there may be a viable cause of action for bad faith failure to pay where the insurer prevails on the question of policy coverage. In fact, all decisions involving Mississippi law indicate that the insured must establish not only that the insurer was liable on the policy but that the insurer had no “arguable reason” for denying coverage.

The general rule which appears to prevail in this jurisdiction is that if, as a matter of law, there is an “arguable reason” for the insurance company to deny liability on the policy, punitive damages are improper regardless of whether the insurance company prevails or loses on the issue of liability. See Henderson v. United States Fidelity & Guaranty Co., 620 F.2d 530, 536 (5th Cir.1980); Reserve Life Insurance Co. v. McGee, 444 So.2d 803, 809 (Miss.1983); Standard Life Insurance Co. of Indiana v. Veal, 354 So.2d 239, 248 (Miss.1978).

O’Connor v. Equitable Life Assur. Soc. of U.S., 592 F.Supp. 595, 597 (N.D.Miss.1984) (summary judgment for insurer on issue of bad faith). See also, Blue Cross & Blue Shield of Mississippi, Inc. v. Campbell, 466 So.2d 833 (Miss.1984) (J.N.O.V. for insurer on issue of extra-contractural damages); Consolidated American Life Insurance Co. v. Toche, 410 So.2d 1303, 1306 (Miss.1982) (no punitive damages where insurer has arguable reason to deny claim); Peel v. American Fidelity Assurance Co., 680 F.2d 374, 377 (5th Cir.1982) (same).

Accordingly, there is no need to consider any evidence of alleged bad faith on the part of the Defendants and the counts of the Complaint dealing with bad faith should be finally dismissed with prejudice.

The Court accordingly holds that the Plaintiffs are entitled to recover nothing and that the Defendants in both cases should be finally dismissed with prejudice with costs to be assessed to Plaintiffs.

Attorneys for the Defendants are to prepare a final judgment consistent with these Findings of Fact and Conclusions of Law and present it to the Court within five days as required by the Local Rules of this Court.