author: RALPH B. GUY, Jr., District Judge.

text:
    Louise GADDIS, Personal Representative of the Estate of John C. Gaddis, Deceased, Plaintiff, v. UNITED STATES of America, Defendant. Lawrence PEPPER, Personal Representative of the Estate of Chris J. Fiala, Deceased, Plaintiff, v. UNITED STATES of America, Defendant. Florence HEATH and Thomas B. Wells, Co-Personal Representatives of the Estate of Frederick R. Heath, Deceased, Plaintiffs, v. UNITED STATES of America, Defendant.
    Civ. Nos. 82-71829, 82-73429 and 82-73469.
    United States District Court, E.D. Michigan, S.D.
    July 26, 1985.
    Victoria Heldman, Detroit, Mich., for Gaddis.
    Charles J. Barr, Detroit, Mich., for Pepper.
    Thomas B. Wells, Detroit, Mich., for Heath.
    Dennis Carroll, U.S. Dept. of Justice, Torts Branch, Civ. Div., Washington, D.C., for defendant.
   OPINION

RALPH B. GUY, Jr., District Judge.

This case involves a mid-air collision which occurred approximately three to four miles from Oakland-Pontiac Airport (hereinafter referred to as Pontiac) on October 14, 1980, in which three persons died. There were two aircraft involved. The first was a Cessna 337-H, a “Skymaster,” registration number N1333L (hereinafter referred to as 33L), which had departed from Parkersburg, West Virginia, and which was to land at Pontiac to pick up a passenger and return to Parkersburg. The pilot and sole occupant of that aircraft was Chris J. Fiala. Fiala was a professional pilot and regularly flew small aircraft, including a Cessna 337, on various cross-country flights. The second aircraft was a Cessna 182K, a “Skylane,” registration number N2555R (hereinafter referred to as 55R), which had departed from Pontiac en-route to the Detroit City Airport. The occupants of 55R were Frederick Heath and John Gaddis. Heath was a professional pilot who was giving instructions to Gad-dis in order for Gaddis to obtain his instrument rating. Gaddis was also an experienced pilot. It is not certain whether it was Heath or Gaddis in the pilot’s seat or who was actually flying 55R at the time of impact. There is no evidence that Gaddis was wearing a "hood” used in instrument training. All pilots were properly certified and qualified for the flight in question. No aircraft malfunction caused or contributed to the collision.

The other individuals involved in this case were air traffic controllers employed by defendant’s agency, the Federal Aviation Administration (FAA). Glenn Page was the local controller in the Pontiac tower. The tower has no radar. Aloysius Klein was the radar controller at Detroit Metropolitan Airport Terminal Radar Approach Control (TRACON) for the Pontiac West position (PTKW). Patrick Spencer was the radio controller at TRACON for the Pontiac East position (PTKE). Klein and Spencer were working at the same radar screen. All three controllers were properly certified for their positions. All three controllers lost their employment with the FAA as a result of the PATCO strike.

Reported weather at Oakland-Pontiac Airport the day of the accident was ceiling 3,000 feet broken; 8,000 foot overcast; wind 080 degrees at 10 knots; visibility 6 miles, with fog and haze; temperature 41 degrees Fahrenheit; dewpoint 39 degrees Fahrenheit.

In the National Transportation Safety Board (NTSB) factual report, the investigator, E.J. McAvoy, reported that the collision was witnessed by numerous persons in the area and that the general concensus of their observations was that 55R was heading southeasterly and was in a climb at the time of the impact, 33L was heading northwesterly and was descending, both aircraft were in an evasive bank to the right, and the left wing of each aircraft contacted each other.

33L departed from Parkersburg under an Instrument Flight Rules flight plan (IFR), which meant it was under radar control during its flight. At 12:36 P.M., 33L contacted TRACON. At 12:43 PM, the aircraft was “handed off” to the Pontiac East sector approach at TRACON, manned by Spencer, at which time Spencer gave Fiala the choice of a visual or Instrument Landing System (ILS) approach to runway 9R at Pontiac. Fiala requested a visual approach. At some point, Spencer handed off 33L to Klein. When 33L was seven miles out from the airport, Fiala reported the airport in sight. Klein then contacted Pontiac tower. He requested a visual approach to runway 9R and was given approval by Page. He then told 33L it was cleared for the visual approach and that it was to make contact with Pontiac tower. 33L made contact with the tower and was immediately informed by the tower: “Three Three Lima watch for a Cessna one mile Southeast of Pontiac. Southeast bound towards city.” Such a warning is a traffic advisory. Fiala, in 33L, replied: “Three Three Lima, I’ll be looking.”

Meanwhile, at 12:49 PM, the pilots in 55R advised Pontiac tower that they were ready to taxi for a Visual Flight Rules (VFR) flight to Detroit City Airport. The tower cleared the aircraft for taxi to runway 9R. At 12:53, 55R advised Pontiac tower that they were ready for takeoff, and the tower cleared 55R for takeoff “right turn approved.” At 12:55:51, after having advised 33L to watch for a Cessna southeast bound towards city, Pontiac tower transmitted the traffic advisory: “Five five Romeo, traffic is a Skymaster inbound on the visual Southeast.” There was no acknowledgement from 55R. At 12:56:14, 55R contacted the tower and requested a frequency change, which the tower approved. That was the last contact any controller had with either of the two aircraft before their mid-air collision.

It is plaintiffs’ contention that defendant, through its FAA air traffic controllers at Pontiac and Detroit Metropolitan Airports, was negligent in handling the two aircraft. They also claim that defendant was negligent in the design and execution of procedures for the handling of IFR arrivals on visual approach to Pontiac.

Defendant contends that the sole cause of the accident was the negligence of the three pilots, who failed to see and avoid each other as they should have. Defendant denies that its controllers were negligent in any way, or that its procedures contributed to the accident.

The parties agree that the major issues before the court are whether the controllers acted as reasonable air traffic controllers and whether the procedures in use were reasonable.

The court will deal with the parties’ arguments chronologically, turning first to the actions taken at Detroit Metro TRA-CON. The first issue involves plaintiffs’ claim that Klein should have followed the progress of 33L on the radar screen after clearing 33L for a visual approach. The court finds that no rule requires a controller to follow on the radar screen an aircraft he has handed off to a tower. Paragraph 796 of the Air Traffic Control Manual (Plaintiffs’ Exhibit No. 7) within Chapter 4 “Radar Operations,” concerns “Visual Approaches,” and is the paragraph to be applied to Klein. 33L had requested a visual approach. Paragraph 796 directs a radar controller, after clearance for a visual approach, to:

d. Continue radar monitoring and traffic information until the aircraft is instructed to contact the tower, the FSS, or on pilot request UNICOM or airline company radio when the destination airport is not tower controlled.

In this case, 33L was instructed to contact Pontiac tower and had done so. The Manual does not require further radar monitoring, and plaintiffs’ experts, Donald Sommer and Frank McDermott, both admitted in their testimony at trial that there is no obligation to continue radar monitoring. The court further finds that such a procedure is the reasonable one, given the circumstances under which radar controllers operate. They have a number of aircraft and other “blips” on the radar screen, and it would be impossible for a controller to continue to follow each aircraft he had handled when he was no longer the one giving directions to the pilot of the aircraft.

Klein testified that controllers do not ignore a dangerous situation which they happen to see on the screen, and that certainly they should be responsible for trying to do something about such a dangerous situation if they observe it. However, Klein’s testimony is that he did not notice any problem with 33L on the screen after 33L made contact with Pontiac tower. That testimony was not rebutted, and, indeed, McDermott testified that there is no evidence that Klein ever saw a target on the radar screen representing 55R and that he is sure that Klein was never aware of 55R.

The court would note here that it finds the testimony of both Mr. Klein and Mr. Page very credible. Both men were dismissed from their jobs as a result of the PATCO strike. They were not in-house government witnesses, nor were they at risk themselves in this litigation.

A second issue raised by plaintiffs the court finds a non-issue. That is the contention that Spencer, at TRACON PTKE, turned over 33L to Klein, at TRACON PTKW, too soon. First, Klein testified that turning over an aircraft early is not an infrequent occurrence, and that it was customary for PTKW to take control of an aircraft before it entered the West sector. The court finds such a procedure reasonable, given the work conditions of the controllers. More important, however, plaintiffs have completely failed to show that anything adverse flowed from this occurrence. Plaintiffs have not shown that handing over 33L early from Spencer to Klein caused anything to happen differently than it would have otherwise or had anything to do with the accident. The only comment from plaintiffs on this issue was McDermott’s response that he doesn’t know what Spencer might have done differently.

The court also finds no significance to Klein having allowed another aircraft, Skyline 26H, to travel farther north than it had planned. The plane was on a training flight, and Klein testified that he has many times given training flights more latitude so long as they do not go beyond an area with which he feels comfortable. This incident is no evidence of carelessness or a lack of attention on the controller’s part.

The major issue involving the actions of the TRACON controllers is Klein’s clearance of 33L for a visual approach. It is undisputed that Klein knew nothing of 55R. Plaintiffs neglected to ask Klein what the court views as the key question relating to this issue: “If you had been told that 55R was departing southeast bound would you have done anything differently?”

However, before the question is even reached, plaintiffs must first have established that Page was negligent in not reporting to Klein that 55R was taking off. Pertinent to this issue is the parties’ disagreement over the interpretation of Chapter 3, “IFR Operations,” Paragraph 430, “Visual Approach,” of the Air Traffic Control Manual, which reads as follows:

430. VISUAL APPROACH
ARTCC sectors, approach control positions of operation, and when authorized by a Letter of Agreement (at collocated facilities—a Facility Directive) with the facility providing IFR service, VFR towers may clear aircraft for a visual approach if the following conditions exist:
a. Potential conflicts with all other aircraft have been resolved.
b. Weather conditions at the airport are reported VFR, or at airports with no weather reporting service, the pilot reports that descent and flight to the airport can be made in VFR conditions.
c. The pilot has reported sighting the airport.
d. The aircraft is number one in the approach sequence or has reported the preceding aircraft in sight and is instructed to follow it.

Plaintiffs argue that Page, at the VFR tower, was the controller who had to clear 33L for a visual approach. They contend that he should not have done so as, while conditions (b), (c), and (d) had been met, condition (a) had not been. Plaintiffs assert that 55R was a “potential conflict” about which Page knew. In response, defendant asserts that Pontiac tower was not authorized by a Letter of Agreement to clear aircraft for a visual approach. Defendant points to the language in the Detroit Metro/Pontiac Tower Letter of Agreement (Plaintiffs’ Exhibit No. 5) which sets forth Pontiac tower’s duties, including the responsibility to “approve or disapprove requests for visual or contact approaches.” (Letter at 2.) Defendant contends that, pursuant to the Letter and Paragraph 430, Pontiac tower could only “approve” a visual approach after a request from the approach control position, which then had the responsibility to “clear” the aircraft for a visual approach.

The court finds “clear” and “approve” to be technical terms of art, with different meanings. Pontiac tower was not authorized by the Letter of Agreement to “clear” aircraft for a visual approach, and, while Page was required to “approve” or “disapprove” a visual approach for 33L, that approval was prior to Klein’s clearance. Since Klein did not know of 55R as a “potential conflict,” he could not be negligent for clearing 33L for a visual approach. The question then is whether Page was negligent in approving a visual approach for 33L without reporting to Klein that just two minutes previously he had cleared 55R for takeoff.

First, Page’s testimony that he never saw 33L is unrebutted. 33L was still several miles from the airport when the accident occurred. Page had only a general knowledge of where 33L was since he did not have radar. He did not have 33L’s precise heading or its o’clock position. Further, according to all testimony, once 33L was cleared for a visual approach, it was free to change its direction and altitude, so Page could not know its exact location. Page acknowledged that he did not tell Klein about 55R and even agreed that the two aircraft were in “potential conflict.” However, Page defines potential conflict as analogous to vehicles approaching each other on a highway at any time. He never felt that 33L was in unsafe proximity to 55R. The court finds nothing in the record to indicate that Page actually suspected or should have suspected a problem of unsafe proximity between 33L and 55R.

Second, no one disagrees as to the accident having occurred under good VFR flying conditions. Given such conditions, the court finds that it was reasonable to have relied on the pilots to provide their own visual separation. Whether or not it was the controllers’ primary duty, it was agreed by all witnesses that separation of aircraft was one of their major duties. However, the court finds that the only reasonable way controllers can perform all their duties and for the air traffic control system to run at all efficiently is for controllers to rely on pilots to maintain vigilance and “see and avoid” each other under these circumstances.

Sommer testified that, according to the Airman’s Information Manual (Defendant’s Exhibit No. 18), a pilot is not to expect traffic advisories on all traffic. Here, the parties were given advisories. Sommer acknowledged that the Manual describes how to scan for other aircraft, and that he would expect pilots, including his students, to know this information. He further agreed that the FAA Regulations require pilots to be knowledgeable of FAA Advisory Circulars, and said he took no exception to the September 5,1980, Advisory Circular (Defendant’s Exhibit No. 20). That Advisory Circular describes the “see and avoid” concept, and requires vigilance when weather conditions permit regardless of whether the plan is IFR or VFR. It also describes visual scanning and clearing procedures.

Plaintiffs presented Stanley Roscoe as an expert on visibility from aircraft. Roscoe testified that it would have been difficult for 55R to have seen 33L due to 55R’s high “pitch” angle while ascending, and that it would have been difficult for 33L to see 55R, mainly due to the effect of “clutter”— the background of trees, houses, etc., while descending. He testified that if two aircraft are on a collision course, the pilots cannot detect vertical movement, and the effect is that they very seldom detect the collision course until the last minute, unless given directions on where to look.

Here, the pilots were given directions. When 33L contacted the tower, it was issued a traffic advisory and, immediately thereafter, the tower issued a traffic advisory to 55R. Page gave each pilot as much information as he knew, given the fact that 55R was flying VFR and that 33L was to be on a visual approach.

Page followed the usual procedures in acting as he did, and the court, as indicated above, finds those procedures reasonable. Plaintiffs’ experts proposed a number of different procedures which they claim could have been used. Sommer testified as to the problems with the “see and avoid” concept. He contends that even when a pilot is given the o’clock position, direction, and altitude of the other craft, he is likely to sight the other craft less than 30 percent of the time. If he is not given the o’clock position, direction, and altitude, the percentage is still lower. The problem is that, when the relative speeds are very high, by the time the pilots see each other, it is too late to take evasive action. Sommer’s opinion is that is what happened in this case. Sommer further testified that the solution for dealing with conflicting VFR traffic is for the tower to inform the pilots of the problem or to direct one plane in another direction. Here, the pilots were informed of the potential problem. Plaintiffs argue that the better alternative would have been to have directed one of the aircraft to take a turn. However, the court finds that, while that may be a valid procedure when dealing with two craft whose positions are known to the tower, here Page could not have known where to direct the planes. A turn by one might have brought them into the very unsafe proximity everyone was attempting to avoid. In order for controllers to know every aircraft’s o’clock position, direction, and altitude, no one could fly VFR or a visual approach on IFR. All pilots would have to fly IFR and be continuously monitored by radar.

As discussed above, plaintiffs’ vision expert, Mr. Roscoe, testified that if two aircraft are on a collision course they will very seldom detect each other until the last minute unless given specific directions on where to look. He testified that the “see and avoid” rule is a good one in that the system should take advantage of every recourse, but that the bad part of it is that it invites release from IFR to visual in situations in which the controller cannot be sure of separation. Again, if the goal were for the controllers to be sure of separation, no one could be allowed to fly VFR or visual on IFR.

Defendant’s expert, James Cikalo, testified that it is the pilots who are primarily responsible for separation and that, within the Airport Traffic Area (a five-mile radius around the tower), a controller is not completely responsible for separation, as the controller cannot see all the planes without radar. He stated that when a controller in the Pontiac tower approves a visual approach he has no way of determining whether all potential conflicts with VFR craft have been resolved. The controller does know if an aircraft just took off, but such a situation does not constitute a potential conflict. The controller does not know and cannot know the o’clock position, exact direction, and altitude of VFR aircraft and those on a visual approach.

Plaintiffs then argue that, even if the procedure followed was reasonable, Page did not follow that procedure and was negligent in not repeating his traffic advisory to 55R when he did not receive an acknowledgement of the first advisory. The court concludes that Page was justified in concluding that 55R had received the advisory. The court finds it more probable than not that 55R received the advisory.

It is undisputed that 55R was tuned to the proper frequency and that its radio was working before and after the advisory was issued, as it made contact with the tower both before and after. McDermott testified that there is no reason to believe 55R’s radio was not working properly. Further, besides the advisory issued to 55R itself, 55R was tuned to the same frequency over which there was talk between the tower and 33L and certainly could have heard those conversations, further alerting 55R to the situation. Sommer testified that a pilot generally does not have the time to keep track of others’ transmissions, but he did not know of anything to prevent 55R from hearing the transmissions.

There were good reasons presented as to why there was no acknowledgement by 55R. First, the court credits those witnesses who testified that traffic advisories, unlike safety advisories, are commonly not acknowledged. Klein testified that it was not uncommon to receive no acknowledgement, and that the other times when 55R had acknowledged transmissions were control instances where the controller would expect the pilot to acknowledge. Page also testified that it was not unusual to receive no acknowledgement to a traffic advisory. Defendant’s expert, Richard Taylor, testified that many times he has heard a traffic advisory and has not acknowledged it. James Cikalo’s testimony that he does not know of any requirement to acknowledge a traffic advisory was unrebutted. Although McDermott claimed that there is such a requirement, he could not point to any specific language in any document.. Second, the transcript of the transmissions between the tower and the several aircraft in the area shows that another transmission immediately intervened after the traffic advisory to 55R at the time 55R might have been expected to give any acknowledgement. There is only speculation that that transmission “cut off” the traffic advisory itself, and the court finds no evidence in support of this theory.

Furthermore, everyone who testified agrees that Page had no information calling for a safety advisory. Most important, he did not have both aircraft in sight. 55R could not even expect to receive a safety advisory at that point in time since the pilots knew, as indicated by their request for a frequency change, that the tower did not know 55R’s precise location. A traffic advisory, unlike a safety advisory, is not a top priority for controllers. The court finds no obligation on Page’s part to repeat the traffic advisory.

What plaintiffs seem to be asking for as to every procedure criticized is the ultimate in safety. That goal is simply not achievable. According to the unrebutted testimony of Mr. Cikalo, Pontiac is the busiest VFR airport in the Great Lakes region. The court finds that fact the major explanation for the procedures which the tower controllers normally follow and which Page followed on the day of this accident. The tower controller simply does not have the time or the resources to notify TRACON of every plane taking off when TRACON calls for an approval of a visual approach. Cikalo also testified that Page could have told TRACON of 55R’s departure, but that that is not standard procedure. The tower controller might have 10 to 12 planes waiting to take off. The airport cannot continue to operate if the controller must hold all those planes while another aircraft comes in on a visual approach. The testimony of defendant’s expert, James Rowan, was unrebutted that a visual approach could never be approved if all other aircraft first had to be cleared. Further, since most of the aircraft are flying VFR and the craft coming in is on a visual approach, the controller cannot know which planes will come in proximity to each other. The other alternative would be to never allow a visual approach, but Roscoe admitted that at busy airports controllers must often release planes from IFR to visual approach in order to expedite the flow of traffic. Cikalo testified that the IFR system would be unworkable if all VFR targets had to be cleared for approval on a visual approach and stated that, on the average day, Pontiac tower approves 50 visual approaches. Common sense leads to the conclusion that, if all those planes had to come in on ILS, they simply could not be handled. Furthermore, it is to the pilot’s advantage to come in on a visual approach. According to the testimony, a visual approach saves the pilot time and fuel.

Plaintiffs rely heavily upon the court’s ruling in Murff v. United States, 598 F.Supp. 290 (E.D.Texas 1984). The court finds the factual circumstances of Murff quite different from those of the instant case. Most important is the fact that one of the planes involved in the collision in Murff was flying IFR and was not on a visual approach. As the Murff court pointed out, a controller has an “earlier” duty to IFR pilots than to VFR. The controllers in Murff had a duty to protect the IFR plane and, if their workload permitted, to protect the VFR aircraft involved. The controllers in Murff had radar and were monitoring the IFR craft. They were, in fact, directing the IFR craft in its flight path. That was not the situation in the present case. Pontiac tower did not even have radar, and plaintiffs have not argued that defendant was under any duty to have radar in the tower. TRACON had radar, but the testimony is unrebutted that Klein and Spencer had no continuing obligation to monitor 33L after it was handed off to the tower. Further, in Murff the radar controllers had on radar six new views of the aircrafts’ relative positions, yet neither controller observed the VFR aircraft’s course change. The court found that “[gjiven the pilots’ failure, perhaps inability, to see and avoid the other’s plane, the radar screen of the FAA offered the only remaining means of perceiving the impending collision and of preventing it.” Murff at 293. Here, there was no such means. Klein had no duty to continue to monitor 33L and no duty to locate 55R on radar. His testimony is unrebutted that he never saw 55R on the screen. The Murff court concluded that the controllers were the only people who “had available the knowledge, the means, and the power to prevent the crash.” Murff at 295. The controllers in this case did not have the knowledge, nor did they have the means and power. Since one plane was on VFR and the other on a visual approach, the controllers could not know where they were. The proposed solution in Murff of vectoring the IFR craft was not an option in this case where Page could not know the exact location of either aircraft.

There are a number of procedures which defendant could have adopted, but defendant is not required to adopt the ultimate in safety procedures, only reasonable procedures. The question before the court is whether the controllers acted as reasonably prudent controllers following reasonably prudent procedures. As in all tort actions, a balancing test is involved—in this case, balancing safety with efficiency. On the highways, we have a 55 mile per hour speed limit and, in cities, we have open intersections. Safety could be improved by further lowering the speed limit and putting a stop sign on every corner. However, the rules in effect are the result of an appropriate societal balance. The court finds the procedures adopted by defendant and followed by controllers Page, Klein, and Spencer to also be the result of such a balance. As discussed above, the air traffic control system would simply be unworkable if each aircraft had to be monitored as plaintiffs suggest. If pilots want to continue to fly aircraft such as were involved in this collision, there must be VFR flights and visual approaches for IFR flights. On such flights, the primary responsibility for separation must be the pilots’.

Accordingly, the court will enter a judgment of no cause for action in favor of the defendant as to the mid-air collision on October 14, 1980.


source: Caselaw Access Project

author: JUNE L. GREEN, District Judge.

license: Public Domain

text:
    John F. “Jack” WALSH, et al., Plaintiffs, v. FORD MOTOR COMPANY, Defendant.
    Civ. A. No. 81-1998.
    United States District Court, District of Columbia.
    July 31, 1985.
    Beverly C. Moore, Jr., Law Offices of Beverly C. Moore, Jr., Washington, D.C., Landon Gerald Dowdey, Law Offices of Landon Gerald Dowdey, Washington, D.C., Wallace J. Smith and Ben Schiebel, Wallace J. Smith, Inc., Sacramento, Cal., Barry Schwartz, Wolf, Block, Schorr & Solis-Cohen, Philadelphia, Pa., William H. McDonald, David A. Childers, John E. Price, and Robert M.N. Palmer, Woolsey, Fisher, Whiteaker, McDonald & Ansley, Springfield, Mo., for plaintiffs.
    William T. Coleman, Jr., Richard C. Warmer, Carl R. Schenker, Jr., and John H. Beisner, O’Melveny & Myers, Washington, D.C., for defendant; Henry R. Nolte, Jr., James M. MacNee, Ford Motor Co., Dear-born, Mich., of counsel.
   OPINION

JUNE L. GREEN, District Judge.

This matter is before the Court on plaintiffs’ Motion to Expand the Certified Classes to Include All Purchasers of the Subject 1976 and 1977 Model Year Vehicles Prior to August 21, 1977, Regardless of Whether They Experienced Park-to-Reverse Incidents Before or After November 2, 1977; defendant’s Motion to Narrow Certified Classes with Respect to Statute of Limitations Issues; oppositions thereto; and the entire record herein. For the reasons set forth below, the Court grants plaintiffs’ motion and denies defendant’s motion.

Plaintiffs’ Motion to Expand Certified Classes

Plaintiffs seek reconsideration of the Court’s prior ruling on the statute of limitations question raised in Ford Motor Company’s (“Ford”) motion to dismiss the second amended complaint. In the March 14, 1984 memorandum opinion the Court determined that the claim of fraudulent concealment in this ease would not toll the limitation period of four years. The Court reasoned that although the first two elements of fraudulent concealment, that of alleged deliberative concealment on the part of the defendant and plaintiffs’ failure to discover the basis of the lawsuit, were satisfied, the remaining element, that of due diligence, was not. Walsh v. Ford Motor Co., 588 F.Supp. 1513, 1521-23 (1984). The Court, therefore, concluded that all persons who purchased their vehicles prior to August 21, 1977 and have alleged incidents or complained to Ford or its dealers on or after October 1977, are barred by the statute of limitations to assert warranty claims. Id. at 1523.

Plaintiffs aver, and the Court agrees, that this conclusion on how the question of due diligence should be applied cannot be the law. Surely a person who purchased a Ford vehicle prior to August 21, 1977, and who did not experience an incident until long after the announcement of the National Highway Traffic and Safety Administration (“NHTSA”) investigation, could hardly be accused of a lack of due diligence. As plaintiffs note, the non-incident owners who could not have known prior to October 1977 that they may have a claim, were under no duty prior to that date to investigate the possibility of pursuing a claim against Ford. Plaintiffs’ Reply Memorandum at 4. Under the doctrine of fraudulent concealment “time does not begin to run until plaintiff discovers, or by reasonable diligence could have discovered, the basis of the lawsuit.” E.g., Fitzgerald v. Seamans, 553 F.2d 220, 228 (D.C.Cir. 1977). The limitation period must, therefore, be suspended until October 1977, the date alleged in the complaint in which plaintiffs could, through the exercise of due diligence, have discovered the basis of the lawsuit. Because plaintiffs filed this action on August 21, 1981, less than four years from the date plaintiffs were effectively put on notice of a potential claim against Ford, the limitations period does not bar any plaintiffs from pursuing this action.

Defendant’s Motion to Narrow Certified Classes

Ford avers that the Court must limit the certified classes by requiring that each plaintiff specifically claim that they were misrepresented in some way by Ford’s action. Ford bases this argument on “what is actually stated in the Amended Complaint.” Reply Memorandum of Ford Motor Company in Support of the Motion to Narrow Certified Classes with Respect to Statute of Limitations Issue at 2. In examining the Second Amended Complaint it is plain that the plaintiffs do not base their claim of fraudulent concealment solely on the individual acts of certain plaintiffs. The complaint states:

Ford actively concealed the defects and extraordinarily high frequency of park to reverse incidents in its FMX, C-3, C-4, and C-6 transmissions by systematically denying the existence of any tendency of such transmissions to jump from park to reverse and by asserting contrarywise that such transmissions always slipped into reverse only because of the vehicle operator’s negligence. Purchasers and owners and passengers who incurred personal injuries in connection with vehicles sold prior to August 21, 1977 were thereby discouraged from investigating and seeking a remedy for such defective transmissions and could not through the exercise of due diligence have discovered Ford’s potential liability____ Notwithstanding ... internal knowledge of a major problem, every time a consumer who had experienced a park to reverse problem complained to Ford, Ford responded that it was the consumer’s fault, always concealing the large volume of such complaints it had received.

Plaintiffs’ Second Amended Complaint ¶ 33.

In the March 14,1984 memorandum opinion the Court noted:

In their complaint, plaintiffs not only allege that Ford actively concealed the existence of a transmission defect, but also told those who inquired about the problem that the alleged incidents were caused by driver error and negligence.

Walsh v. Ford Motor Company, 588 F.Supp. at 1522. It therefore concluded that

plaintiffs have adequately pleaded that Ford did actively and affirmatively misrepresent to certain plaintiffs that the transmission failure occurred, not because of possible design flaws, but because of driver error, despite knowledge of numerous complaints alleging exactly the same problem. Therefore, the Court finds that plaintiffs have adequately pleaded the first element necessary for proving fraudulent concealment, i.e., wrongful concealment by Ford.

Id. at 1522-23. Based on the above, the Court again concludes that plaintiffs have alleged wrongful concealment, not simply for certain individual plaintiffs, but for the entire class.

Also in defendant’s motion Ford notes that for purposes of establishing the date on which plaintiffs could have reasonably known that Ford’s explanations may not have been true, the date is October 1977 and not November 2, 1977. It argues that if the Court should look beyond the complaint for determining when the limitations period shall begin to run, a date much earlier in time should be used. In opposition, plaintiffs aver that a date sometime after October 1977 should be the relevant point in time when plaintiffs could have learned of the alleged defect.

For purposes of the motion to dismiss, the Court used October 1977 as the date in which plaintiffs should have known of the alleged defect in the Ford vehicles. This date was taken from plaintiff’s complaint which states, “only after the NHTSA investigation commenced in October 1977 could consumers have reasonably suspected Ford’s explanations to be erroneous.” Second Amended Complaint at ¶ 33. The Court at this stage does not intend to probe the fraudulent concealment issue beyond what appears in the complaint.

An appropriate order is attached.

ORDER

Upon consideration of plaintiffs’ Motion to Expand Certified Classes to Include All Purchasers of the Subject 1976 and 1977 Model Year Ford Vehicles Prior to August 21, 1977 Regardless of Whether They Experienced Park-to-Reverse Incidents Before or After November 2, 1977, defendant’s Motion to Narrow Certified Classes with Respect to Statute of Limitations Issues, oppositions thereto, the entire record herein, and for the reasons set forth in the accompanying opinion, it is by the Court this 31st day of July 1985,

ORDERED that plaintiffs’ motion is granted; it is further

ORDERED that defendant’s motion is denied; it is further

ORDERED that the Court’s Memorandum Opinion of March 14, 1984, is amended, and that the parties dismissed on statute of limitations grounds are now permitted to bring their claims for breach of implied and written warranties; and it is further

ORDERED that the definition of the classes conditionally certified in this Court’s order of May 9, 1985, be hereby modified to read as follows:

I. Implied Warranty Incidents, pursuant to Rule 23(b)(3):
All purchasers or owners (other than for purposes of resale) of 1976-1979 and 1980 pre-design change model year Ford vehicles equipped with an FMX, C-3, C-4, or C-6 automatic transmission seeking recovery of property damages incurred as a result of a Ford park-to-reverse incident, but excluding such persons who purchased such Ford vehicles in States which required the presence of vertical privity to pursue such claims.
II. Written Warranty Incidents, pursuant to Rule 23(b)(3):
All purchasers or owners (other than for purposes of resale) of 1976-1979 and 1980 pre-design change model year Ford vehicles equipped with an FMX, C-3, C-4, or C-6 automatic transmission seeking recovery of property damages incurred as a result of a Ford park-to-reverse incident occurring within the 12,-000 mile/12 month written warranty period about which they complained to Ford or a Ford dealer within a reasonable time thereafter.
III. All Owners Difference in Value Damages, pursuant to Rule 23(b)(3):
All owners (other than for purposes of resale) of 1976-1979 and 1980 pre-design change model year Ford vehicles equipped with an FMX, C-3, C-4, or C-6 automatic transmission seeking recovery of damages equal to the difference in value between those transmissions as received and those transmissions as warranted.

      . Because this action was filed on August 21, 1981, the relevant date for limitations purposes is August 21, 1977.
      Section 2-725 provides in pertinent part:
      § 2-725 Statute of Limitations in Contracts for Sale
      (1) An action for breach of any contract for sale must be commenced within four years after the cause of action has accrued____
      (2) A cause of action accrued when the breach occurs, regardless of the aggrieved party’s lack of knowledge of the breach. A breach of warranty occurs when tender of delivery is made____
      U.C.C. § 2-725.

      . The October 1977 date is taken from plaintiffs’ second amended complaint. The complaint states that "[o]nly after the NHTSA Investigation commenced in October 1977 could consumers have reasonably suspected Ford’s explanation to be erroneous.” Plaintiffs' Second Amended Complaint at ¶ 33.


author: JOSEPH H. YOUNG, District Judge.

text:
    Paul J. MRAZ, et al. v. AMERICAN UNIVERSAL INSURANCE COMPANY, et al.
    Civ. No. Y-84-4426.
    United States District Court, D. Maryland.
    Aug. 1, 1985.

      Thomas R. Kline, Robert S. Faron, Mary Douglas Dick, Brown, Roady & Gold, Washington, D.C., for plaintiff.
    Hartman J. Miller, Baltimore, Md., for defendant.
   MEMORANDUM

JOSEPH H. YOUNG, District Judge.

This is an action for a declaratory judgment to determine the rights of the parties under a contract for insurance issued by the defendant, Canadian Universal Insuranee Company. Galaxy Chemical, Inc., represented by Paul Mraz and Sally Mraz, as directors and trustees of the assets of Galaxy (“Galaxy”), and Paul Mraz individually, have brought this case seeking a declaratory judgment as to coverage for the claims made against them in United States, et al. v. Bissell, et al., Civil No. Y-83-3745, also pending before this Court. Galaxy and Mraz seek a determination of the duty of Canadian Universal Insurance Company to defend them in the Bissell case. In Bis-sell, they are faced with potential liability in litigation filed by the federal government and the State of Maryland for cleanup of an alleged hazardous waste dump site (“the Leslie site”) in North East, Maryland under the provisions of the Comprehensive Environmental Response, Compensation and Liability Act of 1980 (“CERCLA”), 42 U.S.C. § 9601, et seq. and the Maryland Code Health and Environmental Article, § 7-218, et seq.

This action was filed in Circuit Court for Cecil County against American Universal Insurance Company on November 14, 1984, and was removed to this Court. On April 3, 1985, the complaint was amended to include Canadian Universal. By stipulation in the pre-trial order, American Universal was dismissed.

A bench trial was conducted on July 10, 1985. At the time, both parties presented evidence and the Court heard argument. Having reviewed the evidence and considered the testimony produced at trial, the Court will now enter judgment in this action. The findings of fact and conclusions of law made herein are in accordance with the provisions of Rule 52, F.R.Civ.P. whether or not specifically identified as such.

Mraz was the founder and president of Galaxy Chemicals, a company engaged in recycling chemical solvents. Galaxy received waste materials from its client companies, recycled those materials into usable solvents and other chemicals, and returned the finished products to the clients. Galaxy produced some residual waste material in the process.

Canadian Universal issued policies to Galaxy providing operations liability coverage for calendar years 1966-1969, for which Galaxy paid premiums. Policies were issued through an agent named Robert Krapf of the Krapf and Kraft Insurance Agency. Defendant does not deny that the policies were written. Those policies also covered Paul Mraz and Sally Mraz, individually, for actions taken within the scope of their responsibilities.

Soon after Galaxy commenced operations, allegations of odors emanating from the plant site began to occur, and there was extensive involvement of the Cecil County Health Department and other state agencies concerning the fumes and possible health hazards from the plant. The allegations of harm began to center on certain drums of material which were stored at the plant before being processed. By 1969, there was such a crescendo of protest that the State entered suit and on September 16, 1970, the plant was declared a public nuisance in the Circuit Court for Cecil County. Also in 1970, a group of eleven citizens from the neighborhood of the plant sued Galaxy, alleging bodily injury occasioned by the noxious odors caused by the plant. Judgment was eventually entered against Galaxy in that suit.

As part of the effort to solve the problems which were the subject of those two actions, Galaxy arranged to dispose of those drums which were the main subject of controversy. The arrangement for the disposal were made with the involvement and cooperation of the state and county health department officials. In August of 1969, drums from the Galaxy Plant were placed on two acres of land in North East, Maryland, known as the Leslie site. The disposal was arranged by Galaxy through its employees Paul Mraz and James Waters, at the direction of, and with the agreement of, Maryland and Cecil County officials. The drums of material, which had been stored at the plant but never processed, were buried in a clay pit on the Leslie property. At that time, Galaxy and health officials thought that the clay would form a natural barrier against any leaking of chemicals from the drums.

Galaxy now claims that immediately upon being dumped, the barrels began leaking into the ground and water in the area and began to cause damage to persons or property at or nearby the Leslie site.

In late 1981 and early 1982, after the passage of CERCLA, the State of Maryland and the Environmental Protection Agency (EPA) investigated the Leslie site and determined that hazardous substances were buried at the site and that those substances had caused or threatened to cause damage to the health of area residents. Based on these findings, EPA and the state removed the buried drums, disposed of contaminated soil, treated contaminated water and took other clean-up action from June through December, 1982.

In 1983, the United States and the State of Maryland filed the Bissell suit against Galaxy and Mraz, seeking to recover under CERCLA which created retroactive liability for clean-up costs against those who caused environmental damage. In Bissell, the state and the United States allege that in 1969 Galaxy and Mraz arranged for or participated in the disposal of hazardous wastes or substances from Galaxy’s manufacturing operations. The complaint alleges environmental damage to the Leslie site and the nearby area, and injury to the health of residents near the site who were exposed to or came in contact with alleged hazardous substances. The state and the United States have also sued other potentially responsible parties who apparently used the dump site to recover money that the state and federal governments spent for clean-up. Some of those parties have filed cross-claims and counterclaims against Galaxy and Mraz.

Following receipt of the complaint in Bis-sell, Mraz notified Canadian of the suit, and requested payment of legal fees and expenses, and indemnification of any potential liability that he and Galaxy may face, under the policy issued in 1969. Canadian declined to defend or indemnify Galaxy under that policy. Galaxy and Mraz then filed this action for declaratory judgment.

In general, an insurer has a duty to defend an insured if there is a claim alleged against the insured which is potentially within the policy coverage. Brohawn v. Transamerica Insurance Co., 276 Md. 396, 347 A.2d 842 (1975). If the allegations of the complaint against the insured are clearly outside of the scope of coverage, however, there is no duty to defend. Minnick’s, Inc. v. Reliance Insurance Co., 47 Md.App. 329, 422 A.2d 1028 (1980); Harleysville Mutual Cas. Co. v. Harris & Brooks, Inc., 248 Md. 148, 235 A.2d 556 (1967).

Plaintiffs here allege that Canadian has a duty to defend them in the Bissell suit, because the policies issued by Canadian provide coverage for any liability arising out of the allegations of the Bissell complaint. Plaintiffs argue that the general liability policy issued by Canadian in 1969 provided coverage for the operations of Galaxy, that they cover this type of injury and property damage which occurred within the policy period, and that all prerequisites for coverage have been met. Defendant counters that there has been no “occurrence” within the meaning of the policy, no damage or loss within the policy period, and that it has no potential liability because of numerous exclusions within the policy.

Canadian has a duty to defendant Mraz and Galaxy in the Bissell action if there are allegations in that action that fall potentially within the terms of the Canadian policy. Galaxy and Mraz allege that the United States or Maryland may prove, in the Bis-sell action, that an occurrence in 1969 (the last Canadian policy expired December 31, 1969) caused bodily injury or property damage within the policy triggering coverage. Specifically, the allegations in Bissell are: (1) that hazardous substances had in the past been released and threatened to continue to be released from the Leslie site into the air, water, and soil, before the site was cleaned up, (2) that those releases resulted in strong odors in the air and discolored run-off in a nearby creek, (3) that they imposed a possible health threat to residents, and (4) that Galaxy was at least partially responsible. It is necessary, therefore, to determine whether any of these allegations state claims which are potentially within the coverage of that 1969 policy.

The 1969 policy issued by Canadian provided general liability insurance coverage for the operations of Galaxy. It covered personal injury or property damage caused by an “occurrence” within the policy period. The policy contained various exclusions, which excluded coverage for completed operations or products liability, as well as others on which Canadian now seeks to rely. Under the Canadian policies an “occurrence” means an “accident, including injurious exposure to conditions, which results, during the policy period, in bodily injury or property damage neither expected nor intended from the standpoint of the insured.” “Property damage” is defined as “injury to or destruction of tangible property.” The last Canadian policy was issued in 1969 and expired on December 31, 1969.

In this case, Galaxy and Mraz assert that the 1969 dumping and the resulting damage constitute an “occurrence” within the meaning of the policy. The occurrence provision and similar policy language has been interpreted to apply to allegations of environmental damage, see Steyer v. Westvaco Corp., 450 F.Supp. 384 (D.Md.1978) (alleged air pollution damage to a Christmas tree farm). Other courts have held that unlawful dumping of hazardous wastes are “occurrences” in the context of CERCLA cost recovery actions, if the resulting damage was unintended or unexpected. CPS Chemical Company, Inc. v. Continental Insurance Co., 199 N.J.Super. 558, 489 A.2d 1265, 1269 (1984). In that case, CPS Chemical sought a declaratory judgment that the insurance company had a duty to defend it against allegations of liability based on claims that the chemical company had generated toxic wastes which were illegally deposited in a city garbage dump. The chemical company had hired a disposal company which deposited the chemical wastes, without the chemical company’s knowledge, illegally in the city dump. The court held that the illegal dumping constituted an unexpected or unforeseen event, thus an “accident” under the policy. (The policy language in CPS was similar to that in the instant case, but did not include the requirement that the damage result during the policy period. That requirement was contained elsewhere in the policy, however.) The court found that the illegal dumping was not expected or intended from the standpoint of the insured, and that it therefore constituted an occurrence. The court also held that that occurrence happened within the policy period, even though the damage was not discovered until 4-5 years later, after the expiration of the policies, because the allegations in the underlying complaint under the CERCLA alleged damages commencing upon dumping.

In another similar case, Buckeye Union Insurance Company v. Liberty Solvents and Chemicals, 17 Ohio App.3d 127, 477 N.E.2d 1227,1233 (Ohio App.1984), the court noted that the term “occurrence” was broader than the term “accident” and held that the “releases and threatened releases” of hazardous waste materials alleged in the underlying CERCLA complaint were “occurrences” within the common understanding of that term and within the policy definition in question. That definition was similar to the definition in the Canadian policy in this case. The court further found that the releases of chemical substances into the environment from a hazardous waste dump where the chemical company had contracted to dispose of its wastes was neither expected nor intended by Liberty Solvents, since it was the result of leakage of the drums after they were dropped, punctured, ruptured, etc. A similar conclusion follows here. The drums which were disposed of by Galaxy and Mraz were legally disposed of, and the resulting leakage was unintended and unexpected because the clay pit was supposed to form a natural barrier against any such leakage. Thus, under the reasoning used in Buckeye Insurance, the dumping and resulting leakage constitute an “occurrence” within the policy terms.

Defendant argues that the 1969 disposal at the Leslie site was not unexpected or unintended, and therefore is not within the policy terms. In American States Insurance Company v. Maryland Casualty Company, et al., 587 F.Supp. 1549 (E.D. Mich.1984), the court held that the release of toxic chemicals from a dump site was not “sudden or accidental” because dumping of wastes was a part of the insured’s usual business, and thus was not an “occurrence” within the meaning of the policy. The Court obviously rested its decision on a holding that the dumping itself must have been accidental for the injury to be an “occurrence.” However, Steyer v. Westvaco, stated: “it is the opinion of this court that the words ‘unexpected or unintended’ or words of similar import with respect to the definition of ‘occurrence’ do not refer to unknown, unexpected, or unintended emissions from the Westvaco plant, but refer instead to unknown, unexpected, or unintended damage of the type complained of by the plaintiffs.” 450 F.Supp. at 388. That holding, made in the context of air pollutants emitted from a plant, is analogous to a holding in this case that the words “unexpected or unintended” refer to the leakage and resulting damage, not to the actual dumping itself. The Court in Buckeye Insurance, 477 N.E.2d at 1233, also adopted that reasoning. In the context of toxic waste disposal,' where the dumping was obviously intended and even necessary, the better conclusion seems to be that reached in Steyer and Buckeye. The words “unexpected or unintended” in the policy must refer to the leakage, not to the actual dumping. In this case, the leakage and the resulting damage were indeed unexpected and unintended, and as such, come within the policy definition of “occurrence.”

Defendant also alleges that the dumping did not constitute an occurrence because it did not “result, during the policy period, in property damage ...” in that any damage in this case occurred after the policy expired in 1969. Galaxy and Mraz assert that the drums disposed of at the Leslie site began leaking immediately upon disposal, and began to cause damage at the point. Defendant points, however, to the fact that the EPA and the state did not begin clean-up operations or notify Galaxy of any problem until 1981-82, and claims that at any rate, the damage did not occur in 1969, during the policy period. Defendant points to many cases, none of which involve the disposal of hazardous wastes, which hold that for purposes of defining “occurrence,” coverage is based not upon the time when the accident happened, but upon the time when the damage was discovered. See, e.g., Aetna Casualty and Surety Co. v. PPG Industries, 554 F.Supp. 290 (D.Ariz.1983) (improper installation of polyurethane foam); Bartholemew v. Insurance Company of North America, 502 F.Supp. 246 (D.R.I.1980) (products liability). Thus, defendant argues, because no damage was discovered at the Leslie site until 1981, there was no loss during the policy period and no responsibility for coverage.

In a case more directly on point, however, the New Jersey Superior Court held, in a case involving the duty to defend a chemical company against an action under CERCLA, that the “time of discovery of an accident does not determine when it took place. The complaint [in the underlying action] alleges damages commencing with the date of dumpings. For determination of the duty to defend under those policies, it is not necessary now to resolve the factual accuracy of those allegations.” CPS Chemicals Co., supra, 489 A.2d at 1269. The complaint in Bissell may be construed to allege that environmental damage began to take place immediately in 1969 upon dumping at the Leslie site creating the potential for liability within the scope of coverage of the 1969 policy. Canadian’s duty to defend is triggered by the existence of any potential for liability; the determination of whether there must be actual coverage must await the outcome of the Bissell action. See CPS Chemical Co. at 1269.

Defendant has also claimed that the damage asserted in the Bissell action is not “property damage” within the meaning of the policy term. This assertion is without merit. Property damage as defined in the policy is “injury to or destruction of tangible property.” The Bissell suit alleges that the leakage from Galaxy’s wastes caused contamination of soil and water which resulted in the need for the clean-up. Water contamination has been held to be “property damage” for insurance policy purposes, see Port of Portland v. Water Quality Insurance Syndicate, 549 F.Supp. 233 (D.Oreg.1982); Lansco, Inc. v. Dept. of Environmental Protection, 138 N.J.Super. 275, 350 A.2d 520 (1975), aff’d, 145 N.J.Super. 433, 368 A.2d 363, cert. denied, 73 N.J. 57, 372 A.2d 322 (1977), and certainly the leakage of hazardous wastes was assumed to be “property damage” in CPS and Buckeye. Canadian’s assertions that the damage alleged in the Bissell suit is not “property damage” are, in the words of the Port of Portland court, 549 F.Supp. at 235, “untenable.”

Defendant has also claimed, in addition to claiming that the leakage alleged in Bissell is not within the basic definition of “occurrence,” that the leakage is excluded from coverage by one of the various “exclusions” in the 1969 policy. Canadian also asserts that Galaxy did not comply with certain requirements of the policy.

Canadian asserts, first, that Galaxy did not give timely notice of the claims against it as required under the policy. Condition 4 of the policy requires that in the event of an “occurrence,” the insured must give notice to the insurer as “soon as practicable.” In this case, Canadian asserts that if Galaxy knew the drums were leaking in 1969, and if the occurrence took place in 1969, then Galaxy had a duty to notify Canadian of that fact. Instead, Galaxy notified Canadian of its potential liability when it received the complaint filed in the Bissell action. Canadian claims that the notice was not timely given and that therefore there is no duty to defend or to grant coverage.

Plaintiffs gave notice “as soon as practicable” after they had reason to believe that their actions may have resulted in possible liability triggering coverage. State Farm Mutual Automobile Insurance Co. v. Hearn, 242 Md. 575, 219 A.2d 820 (1966). Notice was given to Canadian within one week of the filing of the Bissell complaint. Plaintiffs note that the insurer must show some actual prejudice from the allegedly inadequate notice, Washington v. Federal Kemper Insurance Co., 60 Md. App. 288, 482 A.2d 503 (1984). Canadian cannot establish any prejudice in this case. Earlier notice would not have been helpful to Canadian when there was nothing to defend. While it may seem inconsistent for the plaintiffs to argue that although the occurrence took place in 1969, there was no duty to notify the insurer until the suit was filed, that reasoning is consistent with the requirement that the insured give notice as soon as he has reason to believe that his actions may have resulted in possible liability. Until the passage of CERCLA in 1980, there was no possibility of liability, and there was no reason to believe that there was possible liability regarding the Leslie site until the time the Bissell suit was filed. There is no reason to conclude that notice was not reasonably given in this case, especially since Canadian has made no claim of prejudice.

Canadian also asserts that Galaxy did not comply with another provision of the policy, Condition 4, which required the insured to take steps to prevent further injury when an occurrence takes place. Canadian asserts that if the plaintiffs knew that the drums were leaking when they were disposed of 1969, they should have taken steps to prevent further leakage. Plaintiffs assert that disposal in a clay pit was recognized as the best method of disposal in 1969 and claim that they were taking steps to prevent further injury when they used the Leslie site. Galaxy has complied with Condition 4, and the potential for coverage exists to the extent that it would trigger a duty to defend.

Defendant has also claimed that even if there was an “occurrence,” coverage is nevertheless excluded within the terms of the policy. Defendant claims that this “occurrence” falls within exclusion (k) of the policy. That provision states that the policy does not apply to “property damage to the named insured’s products arising out of such products or any part of such products.” Defendant claims that the drums buried at the Leslie site were part of the plaintiff's product, and therefore covered by this exclusion, and that the cost of cleaning up that product falls within this exclusion also. See Carpole’s, Inc. v. Insurance Co. of North America, 544 F.Supp. 6 (D.Minn.1982) (“to find coverage for the cost of removing the product where coverage for the product itself is excluded would effectively negate the exclusion.”) Plaintiffs contend that the material stored in the drums buried at the Leslie site was not its “product,” since it had never been processed, but were instead some form of waste which needed disposal in the ordinary course of business. In CPS Chemical, supra, 489 A.2d at 1270, the court held that “industrial wastes not intended for consumption, sale or use by others are not ‘products’ in the view of this court, nor would a reading of the policy reasonably indicate that they were so intended by the parties.” In this case, plaintiff Mraz testified that some of the drums contained material belonging to duPont which had never been processed, and that others contained legitimate waste products left after Galaxy processing. None of these materials were “product(s)” of Galaxy, therefore, exclusion (k) does not apply.

Basically, the same argument applies with respect to the “completed operations/products hazard” exclusion, (m). That provision excludes coverage for damage which occurs after the operations have been completed or abandoned and away from the insured’s premises, and for damage arising out of the named insured’s product. Defendant claims that the drums abandoned at the Leslie site constituted completed operations, and that because the damage occurred after the drums were abandoned and away from the Galaxy premises, that damage is not covered because of this exclusionary provision. This argument ignores the fact that the “completed operations” provision is meant to mean the same thing for a service company that a “products liability” provision would mean for a manufacturing company, see Steyer v. Westvaco Corp., 450 F.Supp. at 394, n. 10, CPS Chemical, 489 A.2d at 1270, and to refer to liability stemming from the services, materials, or structures which the insured introduces into the marketplace. The burial of these drums at the Leslie site does not involve construction or service operations of plaintiff, and the material buried there is not a “product” of the plaintiffs. Therefore, coverage should not be precluded by the completed operations hazard exclusion in the policy. This conclusion was reached in a very similar situation in CPS, 489 A.2d at 1270, and this Court is satisfied that it is appropriate in this case.

Defendant asserts that coverage is precluded by certain other provisions, namely (1), (n) and (o). Exclusion (1) excludes “property damage to work performed by or on behalf of the named insured arising out of the work or any portion thereof or out of materials, parts or equipment furnished in connection therewith.” Exclusion (n) excludes damage “arising out of operations performed for the insured by independent contractors ...” Defendant asserts, without much discussion, that these exclusions should apply because Galaxy contracted to have the offending materials hauled away to the Leslie site. The Bissell action, however, seeks to hold plaintiffs liable for their own actions in disposing of wastes, and not for any damage arising from contractors’ actions. Whether there was separate or additional damage caused by the contractors’ actions may be a subject of the underlying action. At this point, it is sufficient that Bissell contains allegations which may result in Galaxy’s liability which is within the policy coverage.

Exclusion (o) excludes underground property damage “to wires, conduits, etc. ... caused by and occurring during the use of mechanical equipment for the purpose of grading land ... filling ...” This exclusion obviously does not apply and does not merit discussion.

Defendants have asserted two other defenses. First, they assert that the action is barred by the applicable statute of limitations. Galaxy filed suit seeking a declaratory judgment in the Circuit Court for Cecil County on November 14, 1984. On April 3, 1985, the complaint was amended to include Canadian Universal. The applicable statute of limitations is the three year statute in the Maryland Code, Courts and Judicial Proceedings article, § 5-101. As the last policy expired at the end of 1969, and because Galaxy knew that Canadian denied coverage in the 1970 personal injury actions resulting from the plant fumes, Canadian asserts that this declaratory judgment action should have been brought to determine liability for coverage before now. Galaxy knew in 1969 that Canadian contested coverage regarding the fumes, and in fact filed a declaratory judgment action to determine the parties’ rights. That action was settled. Canadian now asserts that plaintiffs should have proceeded to judgment in that action, and that the present action is time-barred. Canadian argues that the action accrued when Galaxy discovered that Canadian would not perform, under the “discovery rule” adopted in Maryland, see Levin v. Friedman, 271 Md. 438, 317 A.2d 831 (1974) (holding that the right of action accrued upon failure to perform contract). Plaintiffs argue that the statute of limitations did not begin to run until they had actual notice of the potential liability they faced, see Poffenberger v. Risser, 290 Md. 631, 431 A.2d 677 (1981); Harig v. Johns-Manville Products Corp., 284 Md. 70, 394 A.2d 299 (1978) (adopting discovery rule in tort actions). In American Home Assurance Company v. Osbourn, 47 Md.App. 73, 422 A.2d 8 (1980), the Court held that the statute of limitations began to run on the day the insured discovered that the insurance company would not defend.

The fact that Galaxy knew that Canadian denied coverage in the 1970 actions regarding the fumes coming from the Galaxy plant did not necessarily mean that Galaxy knew that Canadian would deny coverage in this type of action. Furthermore, the plaintiffs could not have brought a declaratory judgment action earlier because there was no case or controversy between these two parties until there was actually a claim against Galaxy which Canadian declined to defend. That did not occur until the state and the United States filed the Bissell action in October of 1983. This action was filed, and amended to include Canadian, well within three years of that date.

Finally, Canadian asserts that a release signed in connection with the settlement of the 1970 declaratory judgment action releases Canadian from any obligation in this suit. In 1970, lawsuits were pending in Caroline County regarding the fumes generated by the Galaxy plant. Canadian maintained that there was no coverage under their policies for this type of claim, and filed a declaratory judgment action in federal court to determine their rights. After judgments were entered for the plaintiffs in the personal injury actions a settlement was reached in the declaratory judgment action. As part of that settlement, the parties signed an “Agreement and Release” which Canadian now claims released any potential liability of Canadian under the policy issued in 1969.

Although the Release signed by the parties does contain broad language, it is clear from reading the entire Agreement and Release that the release was no broader than the events and circumstances which were the subject of the state court personal injury suits. The introduction to the release contains several “whereas” clauses which set out the circumstances on which the release is based, and it is evident that the only real concern of the parties were the personal injury claims and future claims based on the same alleged injury. Neither party anticipated the type of claim which is involved in this lawsuit, and the release was not intended to deal with such a claim. Canadian cannot rely on this defense.

The defenses asserted by Canadian are without merit and the damage claimed in the Bissell suit alleges an “occurrence” within the policy period, is a claim potentially within the Canadian policy coverage. Canadian therefore has a duty to defend this action. Whether there is indeed liability for coverage must await the outcome of the Bissell action.

Judgment will be entered in favor of the plaintiff.


author: WRIGHT, District Judge.

text:
    C.L.G., an unemancipated female minor, seventeen years of age, Plaintiff, v. William L. WEBSTER, Attorney General of the State of Missouri, and the State of Missouri, Defendants.
    No. 85-4302-CV-C-5.
    United States District Court, W.D. Missouri, C.D.
    Aug. 7, 1985.

      Frank Susman, Thomas M. Blumenthal, Susman, Schermer, Rimmel & Parker, St. Louis, Mo., Doug Ghertner, Kansas City, Mo., for plaintiff.
    Jerry Short, Asst. Atty. Gen., Jefferson City, Mo., for defendants.

      . At this time plaintiff, C.L.G., no longer needs or desires an abortion. The Court has been informed that C.L.G.’s pregnancy has been terminated by abortion. Unlike the T.LJ. action, however, plaintiff's receipt of the requested relief does not necessarily render this action moot. Insofar as C.L.G. is approximately 17 years, 4 months old, she may again become an unemancipated, pregnant minor—i.e., her condition is truly capable of repetition; to declare her claim moot may cause it to evade review. See Roe v. Wade, 410 U.S. 113, 125, 93 S.Ct. 705, 712, 35 L.Ed.2d 147 (1973). Furthermore, as a proposed class representative, the mooting of C.L.G.'s claim [even] prior to the certification of a class does not necessarily render this action moot. See Gerstein v. Pugh, 420 U.S. 103, 110, 95 S.Ct. 854, 861, 43 L.Ed.2d 54 (1975); United States Parole Com’n v. Geraghty, 445 U.S. 388, 398, 100 S.Ct. 1202, 1209, 63 L.Ed.2d 479 (1980).

   ORDER

WRIGHT, District Judge.

This action is factually similar to T.L.J. v. Ashcroft, 585 F.Supp. 712 (D.C.Mo.1983).. In that action, this Court temporarily restrained the application of Missouri Revised Statute § 188.028 to the plaintiff therein. Plaintiff T.L.J. ultimately received an abortion, without parental consent or court-ordered self-consent.

Mo.Rev.Stat. § 188.028 does indeed establish the procedure and criteria necessary to legally perform abortions on unemancipated female minors. The statute requires unemancipated minors to secure parental consent or court-ordered right to self-consent. Mo.Rev.Stat. § 188.028.1. The statute provides the procedure to be followed in obtaining the court-ordered self-consent as well as quantitative limits on the filing and perfection of [expedited] appeals from such decisions. Mo.Rev.Stat. § 188.028.2(6).

Background

At the time this action was filed, plaintiff was indeed an unemancipated, pregnant, minor, seeking an abortion without parental involvement or consent. Plaintiff filed a verified complaint seeking to represent the entire class of unemancipated pregnant females under the age of eighteen years residing in the State of Missouri who desire to terminate their pregnancies without parental consent and/or involvement. Plaintiff requested designation of a class and certification as class representative. Plaintiffs claim for relief is based on her assertion that Mo.Rev.Stat. § 188.028 is unconstitutional on its face, and as presently applied, by reason of the failure of the Missouri Supreme Court to “fill the gaps of the statute by court rule” in order to ensure an expedited hearing on appeal of the juvenile court’s decision regarding self-consent.

Plaintiff has never applied for court-approved self-consent, and thus has had no occasion to seek an expedited appeal therefrom. At the time this action was filed plaintiff maintained it would be “impractical” to seek judicial authority for such a medical proceeding, alleging that the State of Missouri has established no mechanism to expedite such a request for judicial authority. Nevertheless, plaintiff now asks this Court to declare Mo.Rev. Stat. § 188.028 unconstitutional and permanently restrain its application to plaintiff, and those members of the putative class, pending the promulgation and adoption of rules of civil procedure providing for expedited appeals of Juvenile Court decisions rendered pursuant to Mo.Rev.Stat. § 188.-028.

For the following reasons, plaintiff’s motion for judgment on the pleadings will be denied, and this action will be dismissed.

Opinion

The relevant legal standards surrounding parental consent requirements vis-a-vis unemancipated minors’ abortions are not in dispute. See Planned Parenthood Association of Kansas City, Mo., Inc. v. Ashcroft, 462 U.S. 476, 103 S.Ct. 2517, 2525, 76 L.Ed.2d 733 (1983); City of Akron v. Akron Center for Reproductive Health, Inc., 462 U.S. 416, 103 S.Ct. 2481, 2497, 76 L.Ed.2d 687 (1983). The United States Supreme Court has continued to hold that a state’s interest in protecting immature minors will sustain a requirement of a consent substitute, either parental or judicial. Ashcroft, supra, 103 S.Ct. at 2525. The state, however, must provide an alternative whereby a pregnant minor may demonstrate that she is sufficiently mature to make the abortion decision herself, or that despite her immaturity an abortion would be in her best interest. Akron, supra, 103 S.Ct. at 2497-98.

To pass Constitutional muster, however, the [statutory] alternative to parental consent must assure that the resolution of the issue will be completed with anonymity and sufficient expedition to provide an effective opportunity for an abortion to be obtained. Bellotti v. Baird, 443 U.S. 622, 99 S.Ct. 3035, 3048, 61 L.Ed.2d 797 (1979). This includes an expeditious appeal from an initial (judicial) decision denying a plaintiff the right to self-consent.

Plaintiff challenges the facial constitutionality of Mo.Rev.Stat. § 188.028 and its constitutionality as applied to her and members of the purported class. The Court addresses her claims seriatim.

A. Facial Constitutionality

In challenging the facial constitutionality of Mo.Rev.Stat. § 188.028, plaintiff asks this Court to ignore the United States Supreme Court’s decision in Planned Parenthood Assoc. of Kansas City, Mo., Inc. v. Ashcroft. As plaintiff well knows, in Ashcroft, the United States Supreme Court upheld a challenge to the facial constitutionality of the parental consent portion of Mo.Rev.Stat. § 188.028. Ashcroft, supra, 103 S.Ct. at 2526.

The Supreme Court did emphasize, however, the constitutional necessity of an expedited appeal process from initial judicial self-consent decisions. It must be noted that at the time the Ashcroft case was decided no unemancipated minor had been required to comply with the statute [and seek an expedited appeal). The Supreme Court, however, asserted that Mo.Rev.Stat. § 188.028, as written, provided the framework for a constitutionally sufficient means of expediting judicial procedures. Ashcroft, supra, 103 S.Ct. at 2525 n. 16.

At the time Ashcroft was argued, there was no Missouri Rule of Civil Procedure concerning expedited appeals from judicial decisions under Mo.Rev.Stat. § 188.028. The Supreme Court, however, found no reason to believe that Missouri appellate courts would not expedite any appeal consistent with the mandate in their prior opinions. Ashcroft, supra, 103 S.Ct. at 2525 n. 16. Although the Supreme Court may have suggested the advisability of procedural rules to define and facilitate expedited appeal, they neither expressed, nor even implied, an intention to conditionally uphold the constitutionality of Mo.Rev.Stat. § 188.-028 pending promulgation of detailed rules governing such appeals.

Despite this Court’s reservations about Mo.R.Civ.Pro. 84.02, the fact that this rule was promulgated after the argument in Ashcroft (and presumably without knowledge of the Supreme Court) would seem to strengthen the constitutionality of the statute. Moreover, the [constitutionally required] expedition of this type of appeal could, arguably, be accomplished without a specific rule of court. The statute itself contains a section concerning procedural details of the appeal, Ashcroft, supra, 103 S.Ct. at 2525 n. 16; interestingly enough, used as a “model” by the Seventh Circuit Court of Appeals in striking down an Illinois self-consent statute.

The United States Supreme Court has clearly upheld the facial constitutionality of Mo.Rev.Stat. § 188.028. Furthermore, as if to fulfill the Supreme Court’s prophecy, Missouri has indeed promulgated a rule of court demanding expedited appeal of cases appealed under Mo.Rev.Stat. § 188.028.2(6). The Constitution demands expedited appeal, not detailed rules of proeedure. Regardless of the language of the rule itself, there can be no doubt the statute is constitutional on its face, and plaintiffs challenge thereto cannot be made consistent with the United States Supreme Court’s decision in Akron, Bellotti and Ashcroft.

B. Constitutionality “As Applied”

Plaintiff, C.L.G., has never made application to a juvenile court pursuant to the requirements of Mo.Rev.Stat. § 188.028.2. C.L.G. has never been denied judicial consent pursuant to the statute, nor has she ever sought appellate review pursuant to the provisions of § 188.028.2(6). Finally, Missouri Rule 84.02 has never been applied to C.L.G.

Plaintiff’s inability to challenge the constitutionality of the Missouri statute, as applied, is readily apparent. Plaintiff insists that Rule 84.02 makes it “impractical” to comply with the provisions of Mo.Rev. Stat. § 188.028. Plaintiff’s failure to seek judicial ordered self-consent, given the established facial constitutionality of Mo.Rev. Stat. § 188.028, precludes further constitutional challenge to the Missouri statute in this Court. Quite simply, as the Missouri statute has never been applied to plaintiff, she cannot be heard to complain that it is unconstitutional “as applied” to her.

Article III of the United States Constitution prevents this Court from issuing speculative, advisory, or hypothetical decisions. City of Los Angeles v. Lyons, 461 U.S. 95, 103 S.Ct. 1660, 75 L.Ed.2d 675 (1983). Plaintiff clearly lacks the real or threatened injury, or personal stake in this action, fairly traceable to defendants’ alleged unlawful conduct that will support this Court’s exercise of jurisdiction. See Allen v. Wright, — U.S. —, 104 S.Ct. 3315, 82 L.Ed.2d 556 (1984). Plaintiff cannot herein challenge the application of the Missouri statute—plaintiff has never applied to the juvenile court for majority rights or an order of self-consent, nor has she ever been denied such relief and then sought appellate review.

Since the facial validity of Section 188.-028 has been upheld, plaintiff has neither standing nor cause to challenge the constitutionality of that section. Until such time as a Missouri appellate court fails to apply Section 188.028.2(6) and Rule 84.02 to plaintiff in a manner consistent with the mandate expressed by the Supreme Court of the United States regarding expedition of appeal in this type of case, this Court is powerless to afford plaintiff the relief she requests.

Accordingly, this action will be dismissed; plaintiff C.L.G. cannot challenge the facial constitutionality of Mo.Rev.Stat. § 188.028, nor does she have standing to challenge it as applied to her. Moreover, the stay of this Court’s previous order of May 29, 1985 will be vacated, and, for the reasons stated in that order, the T.L.J. action will also be dismissed. The State of Missouri is thus free to enforce or apply Mo.Rev.Stat. § 188.028 consistent with the United States Supreme Court’s decision in Ashcroft and this order.

Therefore, it is hereby

ORDERED that plaintiff’s motion for judgment on the pleadings is denied, and this action will be dismissed due to plaintiff’s failure to state a claim for relief and lack of standing.

      . Mo.Rev.Stat. § 188.028

        Minors, abortion requirements and procedure

      1. No person shall knowingly perform an abortion upon a pregnant woman under the age of eighteen years unless:
      (1) The attending physician has secured the informed written consent of the minor and one parent or guardian; or
      (2) The minor is emancipated and the attending physician has received the informed written consent of the minor; or
      (3) The minor minor has been granted the right to self-consent to the abortion by court order pursuant to subsection 2 of this section, and the attending physician has received the informed written consent of the minor; or
      (4) The minor has been granted consent to the abortion by court order, and the court has given its informed written consent in accordance with subsection 2 of this section, and the minor is having the abortion willingly, in compliance with subsection 3 of this section.
      ******
      2. (6) An appeal from an order issued under the provisions of this section may be taken to the court of appeals of this state by the minor or by a parent or guardian of the minor. The notice of intent to appeal shall be given within twenty-four hours from the date of issuance of the order. The record on appeal shall be completed and the appeal shall be perfected within five days from the filing of notice of appeal. Because time may be of the essence regarding the performance of the abortion, the Supreme Court of this state shall, by court rule, provide for expedited appellate review of cases appealed under this section.

      . See the Order of this Court, Nov. 4, 1983, T.L.J. v. Ashcroft, 585 F.Supp. 712.

      . Plaintiffs counsel herein was the attorney of record in the Ashcroft case, and argued the same before the United States Supreme Court.

      . The Ashcroft case was the initial [constitutional] challenge to Mo.Rev.Stat. § 188.028. The District Court therein had enjoined enforcement of the statute almost immediately after the statute became effective. See Planned Parenthood of Kansas City, Mo. v. Ashcroft, 462 U.S. 476, 103 S.Ct. 2517, 2525 n. 16, 76 L.Ed.2d 733 (1983).

      . On January 1, 1983, the Missouri Supreme Court amended Rule 84.02 of the Missouri Rules of Civil Procedure to provide that "appellate review of cases appealed under Section 188.028.-2(6), RSMo., shall be expedited.” Missouri Rules of Court, Missouri Supreme Court Rule 84.02, 16th Ed., 1985. This amendment came subsequent to the date Ashcroft was argued, but prior to the decision of the United States Supreme Court. The language of the Ashcroft decision, especially note 16, makes it clear that the Supreme Court remained unaware of the [recent] amendment to the Missouri Rules of Court.

      . See Zbaraz, et al. v. Hartigan, et al., 763 F.2d 1532 (7th Cir.1984). The Seventh Circuit Court of Appeals declared the Illinois self-consent statute unconstitutional due in part to its failure to provide any regulation of appellate procedure such as the limitations imposed by the Missouri statute. See at 1540, 1541.


author: DeMASCIO, District Judge.

text:
    L.P. ACQUISITION COMPANY and L.P. Media, Inc., Plaintiffs, v. Carl L. TYSON, Acting Director of the Corporation and Securities Bureau of the Department of Commerce of the State of Michigan, et al., Defendants.
    No. 85CV73341DT.
    United States District Court, E.D. Michigan, S.D.
    Aug. 7, 1985.

      Theodore Souris, Detroit, Mich., for plaintiffs.
    William M. Saxton, Detroit, Mich., Joe D. Sutton, Office of Mich. Atty. Gen., Lansing, Mich., for defendants.
   MEMORANDUM OPINION (FINDINGS OF FACT—CONCLUSIONS OF LAW)

DeMASCIO, District Judge.

Plaintiffs, L.P. Acquisition Company and L.P. Media, Inc. (LP or plaintiffs) filed a three-count complaint against Carl Tyson, Acting Director of the Securities & Exchange Bureau; Doug Ross, Director of the Michigan Department of Commerce; Frank Kelley, Michigan Attorney General; and The Evening News Association (ENA), seeking declaratory relief pursuant to 28 U.S.C. § 2201. Jurisdiction is based primarily upon 28 U.S.C. § 1331(a).

L.P. Acquisition is a wholly-owned subsidiary of L.P. Media. Both corporations were formed on July 26, 1985 for the purpose of acquiring ENA. The principals behind LP are A. Jerrold Perenchio and Norman Lear, self-described “entertainment industry executives.” The ENA is a closely held corporation; i.e., its shares are not registered with the Securities and Exchange Commission (SEC) nor listed on any other exchange, a critical fact made clear to the court after study of briefs submitted by the parties. The ENA has approximately 333 shareholders and 45,000 shares outstanding. One-half of the shares and shareholders are located in Michigan; the remainder is found in 24 other states.

On July 28, 1985, LP commenced a cash tender offer of $1,000 per share directed to all shareholders of ENA wherever located. The offer is due to expire on August 23, 1985 and LP anticipates that it will begin to purchase shares on August 17, 1985. LP alleges voluntary compliance with § 14(d) of the Williams Act, 15 U.S.C. § 78n(d) and § 12(g) of the 1934 Securities Exchange Act (1934 Act), 15 U.S.C. § 781(g). LP also alleges compliance with § 14(e) of the Williams Act, 15 U.S.C. § 78n(e), which plaintiffs contend applies to this (and every other) tender offer.

When making this tender offer, LP deliberately failed to comply with the requirements of the Michigan Take Over Offers Act (Take Over Act), Mich.Comp.Laws Ann. § 451.901 et seq., which LP contends is unconstitutional as applied to their tender offer. LP further contends that any attempt to apply the Michigan Blue Sky Law, Mich.Comp.Laws Ann. § 451.501 et seq. to plaintiffs’ tender offer would be likewise unconstitutional. In this action, LP seeks preliminary and permanent injunctive relief enjoining defendants from attempting to apply the procedural and enforcement provisions of these Michigan acts to LP’s tender offer. The state defendants have, indicated that although they are prepared to enforce the Michigan acts as to LP’s offer, they will await the decision of this court. LP represents that ENA will surely seek to enforce the Michigan acts. This matter is presently before the court on plaintiffs’ motion for a preliminary injunction.

The crucial issue here is whether plaintiffs can demonstrate a likelihood of success on the merits. LP must show the likely existence of a constitutional violation causally related to the threatened action sought to be enjoined. Wilson v. Thompson, 593 F.2d 1375, 1384-85 (5th Cir.1979).

In alleging that the Michigan statutes are unconstitutional as applied to its tender offer, LP cites the Sixth Circuit opinion in Martin-Marietta Corp. v. Bendix Corp., 690 F.2d 558 (6th Cir.1982) as controlling in this case. In that decision, the Sixth Circuit held that the Take Over Act and the Blue Sky Law violated the commerce clause as applied to a tender offer by Martin Marietta for outstanding shares of Bendix Corporation. Those shares were registered with the SEC and fully governed by the Williams Act.

In assessing the precedential value of the Martin-Marietta decision, our initial inquiry is whether LP’s tender offer, for unregistered securities, is subject to any provision of the Williams Act, §§ 14(d), (e). There is no dispute that § 14(d) is not applicable to LP’s tender offer. The only remaining provision, § 14(e), reads as follows:

It shall be unlawful for any person to make any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements made, in the light of the circumstances under which they are made, not misleading, or to engage in any fraudulent, deceptive, or manipulative acts or practices, in connection with any tender offer or request or invitation for tenders, or any solicitation of security holders in opposition to or in favor of any such offer, request or invitation. (Emphasis added.)

LP contends that the language “in connection with any tender offer” renders § 14(e) applicable to its tender offer for ENA shares.

The relevant legislative history of the Williams Act indicates otherwise. Enacted in 1968 to correct a perceived gap in federal securities regulation which left cash tender offers for control blocks of equity securities completely unregulated, the act was the subject of the following discussion directed to Congress:

The bill before you deals with stock acquisitions in three specific contexts— first, the acquisition by means of a cash tender offer of more than 10% of any class of stock, of a publicly held company, second, other acquisitions by any person or group of more than 10% of any class of stock of a publicly held company ; and third, the repurchase by a corporation of its own outstanding shares.

Testimony of SEC Chairman Cohen, Hearings on S.150 Before the Subcomm. on Securities of the Senate Comm. on Bank ing and Currency, 90th Cong., 1st Sess. 32-33 (1967) (emphasis added).

Throughout various Congressional proceedings relating to the Williams Act, there appears a reoccurring analogy to the proxy rules (applicable only to registered securities). A prime example is found in this statement contained in the committee reports of both houses:

The cash tender offer is similar to a proxy contest, and the committee could find no reason to continue the present gap in the Federal securities laws which leaves the cash tender offer exempt from disclosure provisions.

S.Rep. No. 550, 90th Cong., 1st Sess. 3 (1967); H.R.Rep. No. 1711, 90th Con., 2d Sess. 3 (1968), U.S.Code Cong. & Admin. News 1968, 2811, 2813.

It is clear from these passages that Congress intended that the Williams Act provisions be applicable to tender offers for registered equity securities. Moreover, a recent extensive review of the act’s legislative history by Professor Alfred P. Conrad yields the conclusion that no senator or congressman was conscious of a difference in coverage between § 14(e) and any other subsections of the Williams Act. See Conard, Tender Offer Fraud: The Secret Meaning of Subsection 14(e), 40 Bus.Law 87, 89-93 (Nov. 1984).

Further evidence of legislative intent can be gleaned by comparison of the phrasing of § 14(e) with that of § 10(b) of the 1934 Act, where Congress expressly stated that the section applies to the

purchase or sale of any security registered on a national securities exchange or any security not so registered.

15 U.S.C. § 78j(b) (emphasis added).

If Congress had intended to apply § 14(e) tender offers to unregistered securities, it would have used this type of language in that section. Moreover, to interpret § 14(e) broadly would render an absurd result by extending coverage of its provisions to foreign and totally intrastate tender offers, as well as those made for the securities of closely held corporations. That Congress would intend for only one subsection of an extensive regulatory scheme to have this cosmic scope defies logic. The court would suggest that Congress’ choice of the phrase “any tender offer” was intended to refer to the form tender offers take— whether for cash or securities, for all or a portion of the outstanding shares, and the type of transmittal through which the tender offer is made.

We conclude that the scope of § 14(e) is limited to tender offers for registered equity securities, made by means of interstate commerce, the mails, or national securities exchanges. In so concluding, the court is mindful of the SEC’s broad interpretation of § 14(e), which suggests that the provision governs tender offers for non-registered securities. Having failed to glean any legislative intent for such an interpretation, however, we find that the commission was acting beyond its statutory authority. Accordingly, we give no weight to the SEC’s interpretation.

As LP’s tender offer for ENA’s unregistered securities is not governed by the Williams Act, LP’s reliance on the Martin-Marietta decision is misplaced. Implicit throughout Judge Kennedy’s opinion is that Bendix shares were registered with the SEC, that the Martin-Marietta tender offer was fully subject to the requirements of the Williams Act, and, accordingly, that Bendix shareholders were afforded the protection of the federal securities laws, rules and regulations:

We find that to the extent that the state statutes confer power on state authorities to interfere with the timing of an interstate tender offer made under the Williams Act, or to compel the revision of the solicitation or tender offer as a condition of proceeding, they impose an unconstitutional burden on interstate commerce. 690 F.2d at 565 (emphasis added).

Because Martin-Marietta deals with a tender offer made for registered securities, fully governed by the Williams Act, that decision has no application here.

Finally, we must address whether, despite the absence of any applicable federal law, the Take Over Act has an undue burden on interstate commerce; i.e., beyond that necessary to protect a legitimate state interest. A state statute must be upheld if it “regulates even-handedly to effectuate a legitimate local public interest, and its effects on interstate commerce are only incidental ... unless the burden imposed on such commerce is clearly excessive in relation to the putative local benefits.” Pike v. Bruce Church, Inc. 397 U.S. 137, 142, 90 S.Ct. 844, 847, 25 L.Ed.2d 174 (1970).

An examination of the major features of the Take Over Act is in order. On its face, the act applies to offers to acquire equity securities of corporations with more than 100 shareholders, either incorporated in or having their principal place of business in Michigan. Excepted from the provisions are “friendly” tender offers, i.e., either approved by incumbent management or self tenders by the corporation itself. Section 451.904(2)(d), (f). The act requires the offeror to file a registration statement with the Department of Commerce (department) ten days prior to commencement of any offer. Section 451.905(3). The department is empowered to stay the effectiveness of the offer if it orders a hearing to consider a violation of the act. Section 451.905(4). The department may issue cease and desist orders, § 451.914(1), and refer violations to the attorney general and/or local prosecutors. The act also affords target companies standing to seek enforcement.

The act also requires that a tender offer be open for not less than 60 days. Additionally, if the price or consideration is increased, it is considered as a new offer, subject to being kept open for an additional 60 days, limited by a 90-day cap. During this time period, the offeror may not purchase shares from Michigan shareholders. The offeror may still purchase shares during this period from non-Michigan shareholders. Section 451.904(2). The act contains anti-fraud requirements that are quite similar to the provisions of § 14(e) of the Williams Act. Section 451.905.

The protection of resident shareholders of a Michigan corporation is a legitimate state interest. This is particularly true in the absence of any applicable federal regulation and under the facts of this case. The ENA is a closely held corporation with 50 percent of its shares and shareholders located in Michigan. The corporation owns a major newspaper that impacts upon the entire state and two radio stations in Michigan’s largest city. Each of these factors underscore the need for regulation of a hostile tender offer. These state interests outweigh the incidental burden the application of the Take Over Act will have on interstate commerce. We are loathe to deny enforcement of a state regulatory statute under the circumstances apparent here.

Thus, we conclude that Congress never intended § 14(e) to apply to tender offers for unregistered securities; that when Congress enacted the Williams Act, it declined an opportunity to amend § 28(a), the scope section that preserves the jurisdiction of state agencies performing like functions over unregistered securities, so long as the actions of state regulatory agencies do not conflict with provisions of the federal act; that Congress has made clear its willingness to leave the states free to regulate tender offers for unregistered securities and to tolerate the burden on interstate commerce, if any, such state regulations may cause; that the SEC’s contrary interpretation is more expansive than the act will permit; that the Michigan acts are not unconstitutional on their face or as applied to the LP tender offer for the shares in ENA.

Having so concluded, LP cannot succeed on the merits of their claim of entitlement to injunctive relief, the only relief LP seeks. Accordingly, plaintiffs’ complaint must be dismissed.

IT IS SO ORDERED.

      . Plaintiffs also rely on the United States Supreme Court decision of Edgar v. MITE Corp., 457 U.S. 624, 102 S.Ct. 2629, 73 L.Ed.2d 269 (1982), wherein the Court held that an Illinois take-over statute imposed an undue burden on interstate commerce. The tender offer in MITE was concerned solely with registered equity securities fully subject to the Williams Act.

      . The number of closely held corporations in the United States is presently over three million, as compared with approximately seven thousand equity securities registered under the 1934 Act. U.S. Statistical Abstract 1984, at 532; I.R.S. SOI Bulletin, Winter 1983-84, at 23.

      . In Martin-Marietta, Judge Kennedy acknowledged that the protection of Michigan shareholders is a legitimate state interest. 690 F.2d at 566.

       The court has examined plaintiffs' amended complaint filed moments before the completion of this opinion. We hold that our findings and conclusion apply to the amended complaint as well.