author: KEVIN THOMAS DUFFY, District Judge:

text:
    UNITED STATES of America v. Vito AIELLO, Felippo Gambina, Giuseppe Giusto, Defendants.
    No. S84 Cr. 881 (KTD).
    United States District Court, S.D. New York.
    Nov. 30, 1984.
    Rudolph W. Giuliani, U.S. Atty., S.D. N.Y., New York City, for United States; Edward J.M. Little, Asst. U.S. Atty., New York City, of counsel.
    LaRossa, Cooper, Axenfeld, Mitchell & Bergman, New York City, for defendants Vito Aiello and Felippo Gambina; Michael Ross, New York City, of counsel.
   OPINION

KEVIN THOMAS DUFFY, District Judge:

The passage of the Comprehensive Crime Control Act of 1984, Pub.L. No. 98-473, Title II, 98 Stat. 1837 (1984), containing the Bail Reform Act of 1984, has caused many individuals some consternation as it has revamped certain procedures and ideas which have become accepted by our society. Some would reject the new ideas and procedures apparently solely because they are new. Others would have the courts construe the Act to maintain those procedures which Congress has sought to replace. Such efforts have been directed particularly to the pretrial detention provisions of the Bail Reform Act (“the Act”) and the “presumptions” required by that statute. I have not been presented in this case with clear arguments challenging the constitutionality of the Act, nor do I rule on that question, but it should be clear that I would be loath to enforce a statute which is so repugnant as to be facially unconstitutional. This case involves the procedures to be followed in those cases where the government insists that pretrial detention is necessary and the effect of the statutory presumptions in such cases.

The government seeks review pursuant to 18 U.S.C. § 3145(a) of an order by Magistrate Nina Gershon that defendants Vito Aiello and Felippo Gambina be released on bail of $1 million and $1.5 million respectively. Defendant Giuseppe Giusto does not appeal from Magistrate Gershon’s order detaining him pending trial. For the reasons that follow, Magistrate Gershon’s order is reversed and Aiello and Gambina are ordered detained pending trial pursuant to the newly-enacted detention provisions in the Act (codified at 18 U.S.C. § 3141 et seq.).

Magistrate Gershon held two hearings on November 19-20, 1984 on the question of bail in this case. The submissions by defendants consisted of proffers; no evidence was introduced nor witnesses examined. I note that the proceedings on the first day were not recorded by a court reporter but were instead tape-recorded. This is another example of the ineffectiveness of this manner of trying to record judicial proceedings because the tape that was supplied to me is apparently incomplete as the conversation stops mid-sentence at the point when Assistant United States Attorney Little begins to recount the items seized from the home of Vito Aiello at the time of his arrest. The proceedings on the second day, however, were taken down by a court reporter and the transcript has been provided to me. In any case, there does not appear to be a dispute between the parties about what transpired on the first day. Furthermore, the transcript of the second day contains the positions of the parties. Finally, the government and the defendants summarized their positions at the hearing before me. Accordingly, I conclude that the record is not so deficient as to prevent a meaningful review.

In the complaint, the government alleges that Aiello and Gambina are part of the so-called “Pizza connection” in that they participated in a conspiracy to violate the federal narcotics laws and did in fact violate those laws by operating a narcotics business from a pizzeria located on West 125th Street, New York City. According to the government, the leader of the organization is Anthony Aiello who is a fugitive. Anthony’s father, Vito Aiello, one of the respondents here, is alleged by the government to be the financier of and adviser to the organization. The government asserts that the other two defendants, Gambina and Giusto, are “active lieutenants” in the organization.

The government based its application for a pretrial detainer on the nature of the alleged criminal violations, the defendants’ involvement in the drug operation, the nature of the items seized at the time of arrest, and the degree of defendants’ ties in Sicily as compared with the United States. The defendants’ proffers consisted of the fact that defendants have family ties in the United States and that neither defendant has a prior record. It should be noted that the defendants never actually called any witnesses nor submitted any evidence, by way of affidavit or otherwise, at the hearing. The Act specifically provides that the information presented at the hearing is not restricted to legally admissible evidence. 18 U.S.C. § 3142(f)(2) (“The rules concerning admissibility of evidence in criminal trials do not apply to the presentation and consideration of information at the hearing.”). For reasons stated later, however, it is my view that in cases involving the invocation of the presumption to detain a defendant, a mere “proffer” by defense counsel will generally be insufficient rebuttal.

After the parties summarized their positions at the second hearing, the Magistrate granted the government’s application for a pretrial detention order for Giusto. Magistrate Gershon stated that her decision was predicated on the fact that Giusto has “very limited roots in this community. His wife is here but he has been married only a short time. All of his other family ties are in Italy. He’s only 22 years old.” Transcript of Hearing held November 20, 1984 (“Tr ”) Furthermore, the Magistrate found that Giusto came to the United States in 1974 but spent three of the last ten years in Italy and has never made an effort to become a United States citizen. Id. Thus, the Magistrate held that the government had sustained its burden of proving by clear and convincing evidence that there are “no conditions of bail which could satisfy me that this defendant would return to court if he were released.” Id. at 8.

Magistrate Gershon, however, distinguished Aiello and Gambina from Giusto. With respect to Aiello, she stated that the nature of the charges against him “reduces the risk that he will feel he has to flee in order to avoid facing these charges.” Id. The Magistrate found that although a large sum of cash (in excess of $905,000) was found secreted in Aiello’s ceiling along with a handgun and although the complaint sets forth facts sufficient to constitute probable cause, it nevertheless appeared that defenses might be available to Aiello which would encourage him to appear for his trial. Furthermore, the Magistrate noted that Aiello, who is 74 years old, had been in the United States for thirty years and his wife and children are here. Aiello, over the past years, has visited Sicily on at least six occasions, usually for periods of approximately a month or more. The Magistrate noted also that Aiello had no prior record. After reciting the above factors, Magistrate Gershon concluded that there exist conditions that would assure Aiello’s reappearance.

Turning to Gambina who is 41 years old, the Magistrate noted that he has been in the United States for 17 years and has been a citizen for 10 years. Gambina has been married 17 years and has three children. Magistrate Gershon stated also that Gambina has no prior record and no substantial ties with Sicily. Thus, the bail set for Gambina was $1.5 million and the bail set for Aiello was $1 million. See Tr. 12.

DISCUSSION

The Act provides that a judicial officer may issue an order pending trial to detain a defendant if, after a hearing, the judicial officer determines that “no condition or combination of conditions will reasonably assure the appearance of the person as required and the safety of any other person and the community.” 18 U.S.C. § 3142(e); see id. § 3142(a).

The factors to be considered by the judicial officer in making a determination as to bail include (1) the “nature and circumstances of the offense charged, including whether the offense is a crime” involving a narcotic drug, (2) the “weight of the evidence against the person,” (3) the “history and characteristics of the person,” and (4) the “nature and seriousness of the danger to any person or the community that would be posed by the person’s release.” 18 U.S.C. § 3142(g). Furthermore, the Act provides that:

Subject to rebuttal by the person, it shall be presumed that no condition or combination of conditions will reasonably assure the appearance of the person as required and the safety of the community if the judicial officer finds that there is probable cause to believe that the person committed an offense for which a maximum term of imprisonment of ten years or more is prescribed in the Controlled Substances Act (21 U.S.C. § 801 et seq.)____

18 U.S.C. § 3142(e).

Here, Aiello and Gambina are charged with violating the Controlled Substances Act, 21 U.S.C. §§ 812, 841(a)(1), 841(b)(1)(A), and 846. Thus, the statutory presumption has been triggered. Defendants, relying on Magistrate Sharon Grubin’s decision in United States v. Chimurenga, 84 Cr. 81 (RLC) (Memorandum and Order dated November 5, 1984), argue that “[wjhere the ultimate result of the presumption is pretrial incarceration, the presumption must be viewed as one through which at most the burden of production and not the burden of persuasion shifts to the defendant.” Chimurenga at 13. Magistrate Grubin held that because the defendants in Chimurenga had not been charged with violating the sections of Title 21 which trigger the statutory presumption (though the government offered to amend the complaint to include such charges), the government would not be accorded the benefit of the presumption. Id. at 13 & n. 17. The Magistrate focused on the likelihood of the defendants committing further crimes if released and indicated that, in her view, the government, even if it were aided by the presumption, had not shown a “strong probability” or clear and convincing evidence of danger to the community. Id. at 13. Thus, after five days of hearing evidence during which the defendants produced a number of witnesses, Magistrate Grubin found also that there were conditions that, once imposed, would assure the reappearance of the defendants. Id. at 14.

I cannot state that I agree with Magistrate Grubin’s dicta in Chimurenga. According to the Senate Committee on the Judiciary, “it is appropriate in such circumstances [when the presumption is triggered] that the burden shift to the defendant to establish a basis for concluding that there are conditions of release sufficient to assure that he will not again engage in dangerous criminal activity pending his trial.” Senate Comm, on the Judiciary, S.Rep. No. 98-225, 98th Cong., 1st Sess. 19. Clearly the legislative intent was that the burden would fall on the defendants to rebut the ultimate facts presumed under the Act. Once a charge is made that a defendant is guilty of a “grave” narcotics violation, and in the absence of information supplied by the defendant tending to rebut the presumption, the government has sustained its burden of showing a “danger to society” or “risk of flight.”

Congress has found that dealing in narcotic drugs is a danger to society; the detrimental impact on society is just as lethal as cancer is to an individual human being. Experience and observation in court has proved that to be true. Rarely does one see an addict over fifty. And the criminal activity that accompanies all levels of the drug trade is well known. Experience has taught that persons engaged in the trafficking of narcotics are generally involved on a continuous basis and that this nefarious trade is often the centerpoint of their daily activities. I do not believe it incumbent on the government to bring forth specific facts in court as to these matters.

It is also well known that neither opium poppies nor coca leaves are grown in the United States (except perhaps for strictly-controlled experimental purposes). The gathering of these plants is highly labor intensive and would not be done profitably in this country. The processing of both opiates and cocaine generally is done outside this country. It follows, therefore, that most illegal drugs come from abroad. In turn, this necessarily means that large scale narcotics dealers must have connections in foreign countries from which to make purchases and to whom they could flee. The amount of money involved in the sale of large amounts of narcotics means that such people would be in a position to pay for their flight to foreign countries or to secrete themselves in this country. Accordingly it would not seem appropriate to require the government to specifically prove these facts at a bail hearing.

The legislative history of the Act bears out that these considerations were exactly what Congress had in mind when it enacted the presumption at issue here. The Senate Committee stated:

The drug offenses involve either trafficking in opiates or narcotic drugs,____ It is well known that drug trafficking is carried on to an unusual degree by persons engaged in continuing patterns of criminal activity ____ Because of the extremely lucrative nature of drug trafficking, and the fact that drug traffickers often have established substantial ties outside the United States from whence most dangerous drugs are imported into the country, these persons have both the resources and foreign contacts to escape to other countries with relative ease in order to. avoid prosecution for offenses punishable by lengthy prison sentences.

Senate Report at 20.

Thus, it seems clear to me that in a narcotics case where the presumption is triggered, a real burden to show specific facts rebutting the presumption falls to the defendant. The amount of information that must be put forward by the defendant to rebut the presumption will vary from case to case. I suggest that it in great part depends on how much has been shown by the government in establishing that there is probable cause that a specified offense has been committed and that there is probable cause to believe that the particular defendant is guilty of that offense. It should be noted that probable cause must be proved by the government before any presumption can be called into play. As to the showing of probable cause, the burden is always on the government and the defendant need do nothing. No proof whatsoever need be shown by the defendant on this issue.

Depending on the strength of the government’s showing on the question of probable cause, there is concomitant strength or weakness in the presumption called upon by the government. This, of course, means that the presumption can be very weak or very strong depending on where the ease falls in the spectrum of matters brought to this court under the Narcotics Control Act.

For example, pursuant to the “Federal Day” sweep tactics of the government, this court has been processing cases which pale in significance to the matter at bar. In United States v. Sanchez, 84 Cr. 621, the defendant was charged under the Narcotics Control Act sections, 21 U.S.C. §§ 812, 841(a)(1) and 841(b)(1), which carry a potential punishment of 15 years, a $25,000 fine and life-time special parole. The charge in the Sanchez case would give rise to the presumption under a literal reading of the Act. The facts underlying the indictment are that the defendant, an addict, sold one dilaudid tablet for $20 to an undercover police officer. Sanchez had absolutely no money and was interested basically in supporting his own addiction.

In Sanchez, the government did not attempt to rely on any presumption to have the defendant detained — but if the government had sought to invoke the presumption, it would have been extraordinarily weak and could easily have been rebutted. Could anyone believe that Sanchez had connections outside of the country to which he would flee or that he had money to do so? While he might have been a danger to himself, I find it difficult to believe that Sanchez was a danger to the community such as envisioned by the Act. Perhaps a defendant in such a situation could merely point to the charges against himself and the government’s proof as to probable cause to rebut the presumption.

The instant case, however, is on the opposite end of the spectrum from Sanchez. Here, I am faced with a case involving high level trafficking in narcotics solely for profit. In such a context, the triggering of the presumption makes sense because unless rebutted, it is clear that no combination of bail conditions would assure the appearance of such an individual at trial and the safety of the community. The defendant’s burden of rebutting the presumption is necessarily a heavy burden. Pointing to the charges against him would obviously be insufficient. In most instances, pointing to family obligations and ties in the United States would also be inadequate. A balancing of the factors set forth in section 3142(g) is necessary.

Applying these principles to the government’s application for the pretrial detention of Aiello and Gambina, I find that the nature of the charges against them and the strength of the government’s evidence indicate that pretrial detention is warranted. As I have noted, Aiello and Gambina are charged with engaging in, at a high level, the business of wholesaling narcotic drugs. The evidence accumulated against these defendants, as set forth in the sixty-page supplemental affidavit which has been incorporated into the complaint, is substantial. Extensive surveillance has been conducted and a large amount of physical evidence, including recordings of telephone conversations, has been seized. According to the government, documents relating to defendants’ narcotics’ business have been seized from the Cafe Aiello which is assertedly the headquarters for the organization.

Furthermore, the third factor — the defendants’ history — supports pretrial detention. Included among the person’s “history and characteristics” are his family ties, financial resources, length of residence in the community, community ties and criminal history. Id. § 3142(g)(3)(A).

There is probable cause, as set forth in the complaint, to believe that Aiello and Gambina have committed a “grave drug offense.” Senate Report at 20. In an attempt to rebut the presumption that was triggered by the nature of the charges against the defendants, defense counsel offered, by way of proffer, to show merely that both defendants had substantial family ties in the United States. The same proffer was made before me. I conclude that under the circumstances of this case, such a proffer is insufficient to rebut the presumption.

Both defendants have substantial ties in Sicily and have made or, in the case of Gambina, had planned to make trips to Sicily. Furthermore, both defendants have access to substantial sums of money as is evidenced by the approximately $905,000 found in Aiello’s ceiling. Indeed, the Senate Committee noted that:

“[t]he rationale for the use of financial conditions of release is that the prospect of forfeiture of the amount of a bond or of property used as collateral to secure release is sufficient to deter flight. However, when the proceeds of crime are used to post bond, this rationale no longer holds true. In recent years, there has been an increasing incidence of defendants, particularly those engaged in highly lucrative criminal activities such as drug trafficking, who are able to make extraordinarily high money bonds, posting bails and then fleeing the country. Among such defendants, forfeiture of bond is simply a cost of doing business, and it appears that there is a growing practice of reserving a portion of crime income to cover the cost of avoiding prosecution.

Senate Report at 24.

In addition, it appears that Magistrate Gershon did not consider squarely the issue of the danger posed to the community should Aiello and Gambina be released. In fact, the proffer by defense counsel as to the defendants’ ties in the United States is wholly irrelevant to the issue of danger to the community and according to the Senate Committee does not even “necessarily reflect a likelihood of appearance.” Id.

Thus, I find that under the circumstances in this case, pretrial detention of both defendants is warranted. The government has sustained its burden of establishing by clear and convincing evidence that there is “no condition or combination of conditions” that will “reasonably assure the appearance of the person as required and the safety of any other person and the community.”

Accordingly, Magistrate Gershon’s bail determination is reversed and both Vito Aiello and Felippo Gambina will be detained pending trial.

SO ORDERED.

      . The constitutionality of the Act, though not raised by defendants as a problem, was considered at length by the Senate Committee on the Judiciary. Senate Report at 7. The Act was patterned on the enactment of the District of Columbia Court Reform and Criminal Procedure Act of 1970. The discussion by the Senate Committee of the Act’s constitutionality began with a review of the decisions upholding the District of Columbia statute. See Senate Report at 8 (citing United States v. Edwards, 430 A.2d 1321 (D.C.App.1981) (en banc), cert. denied, 455 U.S. 1022, 102 S.Ct. 1721, 72 L.Ed.2d 141 (1982)).
      The Senate Report made reference to the two most commonly raised constitutional objections to the District of Columbia Act; that the Eighth Amendment prohibits excessive bail and therefore impliedly guarantees an absolute right to release pending trial and that the Due Process Clause of the Fifth Amendment prohibits punishment of a defendant prior to an adjudication of guilt. Senate Report at 8. I will not repeat the reasoning of the Edwards court except to state that the court concluded that the purpose of the Eighth Amendment was to limit the discretion of the judiciary in setting money bail in individual cases and not to limit Congress’ power to deny release for certain groups of individuals charged with certain crimes. Furthermore, in the past, courts have held that there is no absolute right to bail pending trial. See, e.g., United States v. Beaman, 631 F.2d 85, 86 (6th Cir.1980); United States ex rel. England v. Anderson, 347 F.Supp. 115, 118 (D.Del.1972) (bail may be denied before trial if there is reason to believe that defendant will not appear).
      With respect to the Due Process Clause, the Committee found that although the pretrial detention provision is not per se unconstitutional, it might be constitutionally defective in the absence of certain procedural safeguards. Senate Report at 8. Such procedural safeguards have been incorporated into the Act. See 18 U.S.C. § 3142(f) (there must be a prompt detention hearing at which 'defendant has the right to be represented by counsel, to testify, present witnesses, cross-examine the government’s witnesses, and to offer information not circumscribed by the formal rules of evidence). In addition the government must sustain its burden by clear and convincing evidence. Id.; cf. Schall v. Martin, - U.S. -,-, 104 S.Ct. 2403, 2405, 81 L.Ed.2d 207 (1984) (New York Family Court Act § 320.5(3)(b) authorizing preventive detention of an accused juvenile delinquent upon a finding of a "serious risk" that the juvenile may "commit an act which if committed by an adult would constitute a crime" is not unconstitutional as it serves a legitimate state objective and contains adequate procedural safeguards).

      . The Senate Committee’s comment on the shifting to the defendant of the burden to show the existence of conditions of release that would assure that the defendant will not engage in dangerous criminal activity was made in the context of the first set of instances warranting the use of the presumption. The first set of instances involve prior convictions of the defendant. The second set of instances — applicable in the instant situation — involves the nature of the crimes with which the defendant is being charged. In its discussion of the second set of instances, however, the Senate Committee did not make any distinction with reference to the defendants’ burden.

      . The legislative history indicates that the application of the rebuttable presumption should be limited to those cases "in which there is probable cause to believe that the person has committed a grave drug offense.” Senate Report at 20 (emphasis' supplied).

      . As a matter of discretion, the prosecutor has yet to rely on the presumption in a case such as Sanchez.


source: Caselaw Access Project

author: JOE J. FISHER, District Judge.

license: Public Domain

text:
    Glen E. LeBLANC v. Patrick SHIREY, et al. David M. PARKER v. Michael BECK, et al. Ocie E. TOLIVER v. C. ZABLOCKI. Dale CARTER v. C. ZABLOCKI. Beverly FONTENOT v. C. ZABLOCKI. James E. BALDWIN, III v. Marie JACKSON. Michael TOLIVER v. C. ZABLOCKI. Betty Jean CAPPS v. Roscoe EGGARS, et al. Joe C. McGovern v. U.S., et al.
    Civ. A. Nos. B-82-1162-CA, B-82-1196CA, B-83-9-CA, B-83-18-CA, B-83-34CA, B-83-85-CA, B-83-362-CA and B-83-756-CA.
    United States District Court, E.D. Texas, Beaumont Division.
    Nov. 30, 1984.

      Glen E. LeBlanc, David M. Parker, Ocie E. Toliver, Dale Carter, Beverly Fontenot, James E. Baldwin, Michael Tolliver, Betty Jean Capps and Joe C. McGovern, pro se.
    Bob Wortham, U.S. Atty., Beaumont, Tex., for defendants.
   FINAL ORDER

JOE J. FISHER, District Judge.

The Plaintiffs complain generally that the Defendants and the Internal Revenue Service violated their Constitutional right to due process of law by imposing a $500 penalty upon them without notice, hearing, or right of appeal. They seek to enjoin or invalidate the collection of the penalty as an unconstitutional taking of property.

Following the court’s denial of temporary restraining orders, the Government Defendants moved to dismiss for lack of jurisdiction or for summary judgment. Defendants argued, first, that the United States of America, rather than the individuals, was the real party in interest, but had not been joined. Second, Defendants claimed the court lacks subject matter jurisdiction because the complaint fails to state a cause of action upon which relief can be granted. Equating the penalty with a tax, they insist the court can hear only a refund suit and may not enjoin the collection of the penalty qua tax.

THE ALLEGED MISDEED

The facts in each ease are similar and appear to be as follows. Plaintiffs filed forms W-4 on which they claimed exemption from income tax withholding as allowed in 26 U.S.C.S. 3402(n). By form letters the IRS told them the forms W-4 did not meet the requirements of section 3402 of the Internal Revenue Code. Moreover, the letters noted “we are assessing the $500 penalty” provided by section 6682 for false information with regard to withholding. Some of the plaintiffs responded by demanding, in effect, an administrative appeal of the penalty decision. Thereafter, the IRS billed each Plaintiff for the $500 penalty. The responding Plaintiffs received additional form letters acknowledging their response. The IRS letters concluded that the information sent did not justify waiving the penalty. The IRS gave “FINAL NOTICE” that the penalty, now referred to as “taxes,” was overdue and must be paid within ten days. Letters announced the possibilities of tax liens being filed, garnishment of wages, levying upon bank accounts, and the seizure and sale of property. The Plaintiffs claim that the IRS gave them no notice, no hearing, and no chance to appeal the penalty.

DEFENDANT NOT A PROPER PARTY?

The exercise by an officer of unconstitutional statutory powers can be made the basis of a suit for specific relief against the officer as an individual; although the relief sought may operate against the United States. Dugan v. Rank, 372 U.S. 609, 621-22, 83 S.Ct. 999, 1006-07, 10 L.Ed.2d 15 (1963); Malone v. Bowdoin, 369 U.S. 643, 647, 82 S.Ct. 980, 983, 8 L.Ed.2d 168 (1962); Larson v. Domestic & Foreign Corp., 337 U.S. 682, 69 S.Ct. 1457, 93 L.Ed. 1628 (1949); Land v. Dollar, 330 U.S. 731, 67 S.Ct. 1009, 91 L.Ed. 1209 (1947).

This is so when the actions of the officer are either “not within [his] statutory powers or, if within those powers, only if the powers or their exercise in the particular case, are constitutionally void.” Larson, 337 U.S. at 701-02, 69 S.Ct. at 1467. So also recovery may be had of property in an action against an official when the statute under which the seizure of property was made is unconstitutional. Id. 337 U.S. at 712-13, 69 S.Ct. at 1472-73 citing Poindexter v. Greenhow, 114 U.S. 270, 5 S.Ct. 903, 29 L.Ed. 185 (1884). Since the Plaintiffs attack the Constitutionality of the statute enforced by the Defendants, the individuals are a proper party to the suit.

MAY THE COURT ENTERTAIN THE SUIT?

Defendants’ second argument, that the Plaintiffs fail to state a claim for which relief can be granted, has two prongs that rely on a common premise. Defendants first insist that the Plaintiffs may only attack the “assessment” via a refund suit, not a suit to stop the collection of the penalty. Second, they correctly note that the “Anti-Injunction Act,” 26 U.S.C. 7421, prohibits suits to restrain “the assessment and collection of any tax ...” Clearly, both arguments are correct as to taxes.

The Plaintiffs protest, however, that they are victims to a penalty, not a tax. The power of the court to enjoin the assessment or collection of the $500 liability hinges, therefore, upon the nature of the liability. If it be a tax, the court should not interfere. If the $500 sought is a penalty, however, the Anti-Injunction Act should not apply. The nature of the “assessment” emerges as the crucial issue before the court: is it a penalty, or merely a tax?

The premise supporting Defendants’ arguments above is that the penalty is merely a tax. The Defendant draws that conclusion from 26 U.S.C. 6671(a), which provides

The penalties and liabilities provided by this subchapter shall be paid upon notice and demand by the Secretary, and shall be assessed and collected in the same manner as taxes. Except as otherwise provided, any reference in this title to “tax” imposed by this title shall be deemed also to refer to the penalties and liabilities provided by this subchapter.

While the meaning of the provision is not altogether clear, the paragraph ostensibly equates the $500 penalty with an ordinary tax liability, thus concealing its punitive quality. Adding to the confusion, the government brief euphemistically describes the penalty as an “assessment.”

The proposition that the penalty is actually a tax is startling. If this be a tax, what sort is it? The penalty is obviously not an income tax or an excise tax, not an import duty or an estate tax. Moreover, such penalties are emphatically not direct taxes. Cash v. Campbell, 346 F.2d 670, 673 (5th Cir.1965).

Merely calling the penalty a “tax” or an “assessment” does not alter the true nature of the pecuniary extraction. While many citizens might think federal taxes approach punitive levels, surely all understand the crucial difference between a tax and a penalty. Taxes raise revenue; penalties punish. That penalties incidentally raise revenue and taxes incidentally punish does not alter their identity. And the Defendants’ equivocation does not change the fundamentally punitive nature of the penalty. The IRS seeks $500 from each Plaintiff not to fund swollen government spending but to punish their alleged misdeeds. The attempt by the government to transmogrify a penalty into a mere “tax liability” goes too far. Simple intellectual honesty requires that we call this thing what it is. The character of a penalty is by no means changed by giving it another name. Simonson v. Granquist, 369 U.S. 38, 41, 82 S.Ct. 537, 539, 7 L.Ed.2d 557 (1962).

The court understands section 6671(a) to provide for the collection of penalties, not for their imposition. Obviously, penalties cannot be imposed in the same manner as taxes. Income taxes are imposed upon earners of income in direct relation to the amount of their taxable income; this penalty is imposed upon wrongdoers for filing false forms W-4. While tax liability accrues absent any procedure, penalty imposition requires an act of government. And where a penalty is involved, one would normally expect the government to provide some due process in determining liability. Once the penalty has been imposed with the proper regard for Constitutional guarantees of due process, however, the law provides “it shall'be assessed and collected in the same manner as taxes.” 26 U.S.C. 6671.

The court believes that the Plaintiffs challenge the imposition of a penalty and not a tax, and that necessarily, the Anti-Injunction Act does not apply. A recent opinion by the Court of Appeals for the Fifth Circuit, however, holds to the contrary. Herring v. Moore, et al., 735 F.2d 797 (5th Cir.1984). The court, therefore, is without power to grant the injunctive relief sought by the Plaintiffs.

THEIR DAY IN COURT

Concerned that the officers of the government may have acted high-handedly in assessing penalties, the Court retained jurisdiction and delayed ruling on the Defendants’ motions until a hearing could be held and evidence considered. The parties were invited to appear and offer evidence and argument on all pending motions. Four Plaintiffs appeared pro se. The Court has carefully considered the evidence, argument, and briefs before it.

Mrs. Capps appeared with a representative of the Constitutional Rights Foundation with whose assistance she articulately argued her case. Based on her testimony, the court finds that she filed the unsigned forms W-4 in question and that she has been employed since 1976. Moreover, income taxes were collected on her 1981 and 1982 earnings. Mrs. Capps insists, however, that “wages are not income” and that, therefore, she had no tax liability during the years in issue. Although she corresponded with the IRS and telephoned its office, her “Constitutional” arguments were not well received. The IRS collected the penalty plus interest by levying on her wages.

Mr. Parker filed a somewhat bizarre document requesting the court to declare the extent of his rights and liabilities to the government. He adamantly insisted that he had a right to a jury hearing of his case. Parker justified his claim of tax exemption with his assertion that “wages are not income.” He had earned wages during the relevant year and the IRS collected the penalty by levy.

Mr. LeBlanc made his exempt statement based on his understanding of the U.S. tax laws. The IRS, he claimed, ignored his requests that it define income, employee, tax liability, etc. Mr. LeBlanc claimed not to have received wages or income in the years involved, but acknowledged receiving “just compensation” in exchange for his labor. His belief that “wages are not income” gave him a “reasonable basis” for claiming exempt, he maintained.

Mr. Tullier, whose cause is not here included, appeared at the hearing and moved for leave to dismiss his complaint. The government did not object and the court granted his motion. A separate order has been entered to that effect.

Plaintiffs Baldwin, Carter, Fontenot, McGovern, M. Tollier, and 0. Tolliver did not appear at the hearing and were not represented by counsel. In considering their cases, the court necessarily relied upon their pleadings and previously filed briefs. Mrs. Capps and Messrs. LeBlanc and Parker conducted themselves well during the hearing despite their lack of legal training, and they appeared to be intelligent and responsible citizens.

Tom Norman, a special assistant U.S. Attorney from the IRS District Counsel’s Office, testified on behalf of the government. He explained the procedure followed by the IRS in reviewing exempt forms W-4 and in assessing penalties under sec. 6682. He testified that the IRS asks employees who have claimed exemption from withholding to explain their basis for doing so. One’s failure to responsively reply within fifteen days causes the IRS to order one’s employer to begin withholding based on one deduction. The IRS assesses the penalty and so informs the employee. Thereafter, the collection procedure resembles that for delinquent taxes. Numerous collection letters, however, precede collection of the penalty by garnishment, levy, or the like.

PLAINTIFFS’ CLAIMS FOR RELIEF

While the Court might be inclined, at least in hardship cases, to consider granting injunctive relief to the penalty assessment, the law in this Circuit is now “very clear” on that point. “[IJnjunctive relief does not lie to restrain the assessment or collection of taxes and the $500 civil penalty imposed upon [Plaintiffs] for providing false information with respect to withholding.” Herring v. Moore, 735 F.2d 797, 798 (5th Cir.1984). Necessarily, the Court therefore denies Plaintiffs’ requests for injunctive relief.

The records do not clearly show whether Plaintiffs have all paid the penalties and sought refund from the IRS. Assuming that Plaintiffs have done so, the Court perceives no basis in the evidence justifying invalidation of the penalty assessments. The law requires imposition of the penalty if, when the form W-4 statement “result[ing] in a decrease in the amounts deducted and withheld ... was made, there was no reasonable basis for such statement ...” 26 U.S.C.S. 6682. Necessarily, all were employed when they filed the forms W-4. Most of the Plaintiffs were well paid tradesmen, and probably not unfamiliar with the higher tax brackets. The Court finds that Plaintiffs clearly had no reasonable basis for their statements. They claimed, variously, not to be persons subject to tax, that their earnings were not “income,” and that taxes are, generally, unconstitutional.

Like the appellant in Herring, these Plaintiffs “never set out any valid reason why [they], as ... wage earner[s], nevertheless would not be subject to income taxes. Obviously the government was not required to accept such a baldfaced and incredible contention without any support whatsoever.” 735 F.2d at 798. Finding no reasonable basis for the Plaintiffs’ claims of exemption, the court holds that the penalties were justifiably imposed.

Having found the ends justified, the Court considers the means employed to reach them. Plaintiffs vaguely allege in their complaints that the penalties were assessed without notice, hearing, or appeal. Were that assertion true, due process would be lacking and summary judgment would be inappropriate. The record shows, however, that the Plaintiffs were given notice that their forms W-4 were irregular. Moreover, the IRS invited Plaintiffs to correct or to justify their claims for exemption from withholding. Additional correspondence from the IRS preceded its collection of the penalties.

While letters from the IRS do not amount to a hearing, it is apparent that the IRS procedure at least allows a taxpayer ample opportunity to respond and challenge the government’s penalty assessment prior to the deprivation. Clearly, the Plaintiffs were free to call, write, or visit in person with a responsible agent of the government and contest the assessment prior to the collection of the penalty. And although additional procedural safeguards might arguably be desirable, the court does not find their absence in these circumstances to be a violation of due process. It appears that Plaintiffs simply declined to avail themselves of the procedural protection accorded them. Based on the evidence presented, the Court finds no genuine issue as to any material fact and concludes that, as to Plaintiffs’ due process claims, Defendants are entitled to judgment as a matter of law.

In addition to challenging Sec. 6682 penalties, three Plaintiffs seek relief under separate theories from private parties. Plaintiffs LeBlanc and Parker filed similar complaints against fellow employees. Mr. LeBlanc vaguely complains that Cora Hines, apparently a co-worker at Eldridge Electric Co., Inc., unlawfully collected money on instructions of the IRS. Mr. Parker seeks damages from C.W. Copeland, a coworker at duPont, for “allowing] defendants ... to unlawfully garnish [his] wages” on instructions from Defendants.

Plaintiff McGovern seeks invalidation of a tax assessment and tax lien arising from underpayment of income taxes in 1979. He further complains that the levy and sale of real property in satisfaction of his tax liability was unlawful. In that regard, McGovern joined Basco Construction and Lumber Co., the purchaser at the IRS sale of his property.

The record indicates that Defendants Hines and Copeland, acting on behalf of their employers, merely complied with the lawful instructions of the IRS to disregard the “exempt” forms W-4 filed by LeBlanc and Parker, respectively, and to withhold taxes from Plaintiffs’ income based on one deduction, until further notice from the IRS. In addition, the IRS apparently garnished wages in satisfaction of the unpaid penalty.

The law requires one in possession of property subject to a tax levy to surrender it to the Secretary of the Treasury on demand. 26 U.S.C.S. 6332(a). Section 6332(c) makes the holder of property subject to a levy personally liable to the IRS for an amount equal to the value of the property. Moreover, Section 6332(d) relieves the holder of such property from any liability to the taxpayer for surrendering it on demand to the Secretary. Clearly, Congress has the power to require withholding on wages, Beatty v. Commissioner of Internal Revenue, 667 F.2d 501 (5th Cir.1982), and, necessarily, the employer is obliged by law to do so. 26 U.S.C.S. 3402(a), et seq.

The complaints of Messrs. LeBlanc and Parker against their employer are bizarre and frivolous. Indeed, they are blatant examples of litigants acting in bad faith and for oppressive reasons. The disputes of Messrs. LeBlanc and Parker are with their government and its tax laws, not with their employers. Obviously, neither the employers nor the payroll clerks can be expected to interject themselves — least of all in the face of civil and criminal penalties — into the Plaintiffs’ battle with the IRS.

Plaintiff McGovern apparently seeks declaratory relief invalidating Defendant Basra's purchase of real property sold by the IRS in satisfaction of income tax liability. The Court perceives no basis for invalidating the sale. The deed given by the IRS pursuant to 26 U.S.C.S. 6338 “operate[d] as a conveyance of all the right, title, and interest the [Plaintiff] had in and to the real property ... at the time the lien of the government attached thereto.” 26 U.S.C.S. 6339(b). Moreover, in his answer, Basco offered to allow McGovern to redeem the property as provided by 26 U.S.C.S. 6337(b). As to Basco, Plaintiff utterly failed to allege any theory which justifies Basco’s joinder. The Court finds McGovern’s complaint against Basco to be manifestly oppressive and brought in bad faith.

McGovern’s complaint against the IRS agents challenging the tax lien and subsequent sale of his property is unfounded. The real property was not exempt from levy. 26 U.S.C.S. 6334(a), et seq. Plaintiff does not allege the sale was conducted other than as required by law. See 26 U.S.C.S. 6335, et seq. Although a third-party with an interest or lien on the property may sue the United States for wrongful levy, the liable taxpayer has no such right. 26 U.S.C.S. 7426(a)(1). See Bob Jones University v. Simon, 416 U.S. 725, 94 S.Ct. 2038, 40 L.Ed.2d 496 (1974). And finally, the government officials who seize and sell property in accord with lawful procedures — the violation of which has not been here alleged — are immune from suit for damages resulting from their acts. Bridges v. Internal Revenue Service, 433 F.2d 299 (5th Cir.1970). The Court concludes, therefore, that, as to the levy and sale of the property, Plaintiff fails to state a claim for relief.

THE PRICE OF FRIVOLITY

Having reviewed the records, the Court finds the complaints of the Plaintiffs to be frivolous, the cases of Messrs. LeBlanc, Parker, and McGovern being the most egregious of the lot. Inasmuch as the pleadings of the Plaintiffs are not “well grounded in fact and warranted by existing law or a good faith argument for the extension, modification, or reversal of existing law,” the Court is compelled to impose appropriate sanctions upon the miscreant parties. Fed.R.Civ.P. 11.

In 1981, the Court of Appeals for the Fifth Circuit published an opinion “as notice to future litigants that the continued advancing of these long-defunct arguments” invites the sanctions allowed by law. Lonsdale v. C.I.R., 661 F.2d 71, 72 (5th Cir.1981). In that case, the taxpayer raised numerous frivolous objections to the operation of the income tax laws. In two later attacks on the tax system, the court assessed double costs because the plaintiffs’ appeals were meritless and frivolous. Steinbrecher v. C.I.R., 712 F.2d 195 (5th Cir.1983); Knighten v. C.I.R., 702 F.2d 59 (5th Cir.1983). The court observed that “[Mjeritless appeals of this nature are becoming increasingly burdensome on the federal tax system.” Steinbrecher, 712 F.2d at 199, quoting Edwards v. C.I.R., 680 F.2d 1268, 1271 (9th Cir.1982).

More recently, the Court of Appeals sounded “a cautionary note to those who would persistently raise arguments against the income tax which have been put to rest for years. The full range of sanctions in Rule 38 hereafter shall be summoned in response to a totally frivolous appeal.” Parker v. C.I.R., 724 F.2d 469, 472 (5th Cir.1984).

Beyond doubt, litigants pursuing frivolous tax-related suits are on notice that sanctions will be imposed for abusing the judicial system. Naturally, the trial court is especially “sensitive to the need for the courts to remain open to all who seek in good faith to invoke the protection of the law.” Crain v. C.I.R., 737 F.2d 1417, 1418 (5th Cir.1984). That is why the court held a lengthy hearing instead of merely dismissing the suits summarily. Like the court in OCrain, the judge endured a “hodgepodge of unsupported assertions, irrelevant platitudes, and legalistic gibberish.” Id. The court therefore finds that sanctions should be imposed and orders the Plaintiffs to pay all costs of court.

At the trial level, a prevailing party is ordinarily not entitled to recover legal expenses. There are exceptions, however, such as when the losing party has abused the system by acting “in bad faith, vexatiously, wantonly, or for oppressive reasons.” Alyeska Pipeline Co. v. Wilderness Society, 421 U.S. 240, 258-59, 95 S.Ct. 1612, 1622, 44 L.Ed.2d 141 (1975). The cases of Messrs. LeBlanc, Parker, and McGovern against the non-government defendants epitomize the litigant acting in bad faith and for oppressive reasons. Their actions were but attempts to harass and impose oppressive burdens on Defendants Hines, Copeland, and Basco. The Court therefore orders that Plaintiffs LeBlanc, Parker, and McGovern pay the reasonable attorneys’ fees incurred by Defendants Copeland, Hines, and Basco, respectively, upon proof thereof.

Accordingly, it is ORDERED, ADJUDGED AND DECREED that the Motions of the Defendants for Summary Judgment be and are hereby GRANTED, and the causes are in all things DISMISSED with prejudice, costs and attorneys fees to be paid by the Plaintiffs indicated above.


author: KRAM, District Judge.

text:
    ROGERS, BURGUN, SHAHINE & DESCHLER, INC., Plaintiff, v. DONGSAN CONSTRUCTION CO., LTD., Defendant.
    No. 84 Civ. 7984 (SWK).
    United States District Court, S.D. New York.
    Nov. 30, 1984.

      Satterlee & Stephens by Robert M. Callagy, Peter Grossman, New York City, for plaintiff.
    R. Paul Cater, Fort Lee, N.J., for defendant.
   MEMORANDUM OPINION AND ORDER

KRAM, District Judge.

The above-captioned action is before this Court upon plaintiffs motion for a preliminary injunction enjoining defendant from calling a certain Letter of Guarantee for payment and upon defendant’s motion to stay these proceedings pending arbitration. For the reasons stated below, both motions are granted.

—BACKGROUND—

Rogers, Burgun, Shahine & Deschler, Inc. (“RBSD”) is a New York corporation engaged in business as architectural designers of hospitals.

Dongsan Construction Company, Ltd. (“Dongsan”) is a Korean corporation, with offices in New Jersey, engaged in business as general contractors in construction projects.

In 1982, Saudi Arabia undertook to build a hospital in Jubail. Dongsan secured the main contract on this project. Dongsan subcontracted a portion of the architectural and engineering design work on the project to RBSD (the “Subcontract”).

Under the Subcontract, RBSD agreed to perform certain services, some of which RBSD, in turn, subcontracted to other entities. In return for those services, Dongsan agreed to pay RBSD some $2,596,086. Dongsan further agreed to pay RBSD twenty per cent of that amount ($519,217) in advance of RBSD’s performance. In order to secure this advance payment, RBSD provided Dongsan a Letter of Guarantee from Bank Al-Jazira in the full amount of the advance payment. The amount guaranteed by this letter was to decrease periodically commensurate with the percentage of work performed by RBSD and paid for by Dongsan.

The Subcontract also provided in broad terms for resolution of disputes by arbitration in Paris, France, under the rules of Conciliation and Arbitration of the International Chamber of Commerce.

RBSD has performed some of the services required by the Subcontract and Dongsan has paid RBSD for that work. Pursuant to the terms of the Letter of Guarantee, the amount currently secured is $155,-766. There have been occasional disputes during the course of RBSD’s performance regarding changed specifications, new demands, and delays in performance. These disputes, for the most part, were resolved amicably by the parties and a modification of the Subcontract agreed to on August 22, 1984. The modification essentially established a firm, detailed schedule for the completion of performance under the Subcontract. The modification also provides that “[ejxcept as expressly provided herein, both parties reserve all rights under the Subcontract and the Subcontract remains unmodified and in full force and effect.” The modification in no way alters the dispute resolution mechanism set out in Article XVI of the Subcontract.

Thereafter, a dispute arose with respect to RBSD’s performance in accordance with the schedule set forth in the August 1984 modification. RBSD claims that the dispute concerns a very small portion of the work performed or owing. On September 16, 1984, Dongsan notified RBSD that it intended to complete certain of RBSD’s obligations itself, effecting a partial termination of the Subcontract as modified. Additionally, Dongsan indicated that it would withhold the remaining balance due RBSD under the Subcontract to set-off the anticipated expenses in completing those parts of RBSD’s services it had terminated.

RBSD claims that it has substantially performed all of its obligations due to date, that it is owed some $752,865 for actual and tendered performance, and that it is entitled to the release of the remaining $155,766 held by way of the Letter of Guarantee as security.

RBSD filed the complaint herein on November 5, 1984, alleging breach of contract by Dongsan and seeking inter alia the $908,631 allegedly owed RBSD by Dongsan and a preliminary injunction enjoining Dongsan from calling the Letter of Guarantee. By Order to Show Cause dated November 5,1984, RBSD moved this Court for the preliminary injunction, pursuant to Fed.R.Civ.P. 65. The Court thereby also entered a temporary restraining order against Dongsan enjoining it from calling the Letter of Guarantee. At the request of, and with the consent of, Dongsan, the hearing scheduled on that motion was adjourned from November 13 to November 21, 1984, and the temporary restraining order continued for that period.

On November 21, 1984, Dongsan filed its motion to dismiss or stay this action pending arbitration of the disputes herein.

On November 21 this Court held a hearing on both motions. Based upon the affidavits and memoranda submitted, and upon counsel’s arguments at that hearing, the Court finds that both motions should be granted.

—DISCUSSION—

Dongsan’s Motion for Stay

For years, courts were hostile to agreements which called for arbitration. See H.R.Rep. No. 96, 68th Cong., 1st Sess., I, 2 (1924). That hostility was reversed by the enactment of the Federal Arbitration Act, 9 U.S.C. § 1 et seq. The enactment of the Arbitration Act reflected the new policy in favor of resolving disputes by arbitration in order “to allow parties to avoid ‘the costliness and delays of litigation,' and to place arbitration agreements upon the same footing as other contracts.” Scherk v. Alberto-Culver Co., 417 U.S. 506, 510-11, 94 S.Ct. 2449, 2452-53, 41 L.Ed.2d 270 (1974) (quoting H.R.Rep. No. 96, 68th Cong., 1st Sess., 1, 2 (1924)). That strong public policy in favor of dispute resolution by arbitration extends to international contracts. Fotochrome, Inc. v. Copal Co., 517 F.2d 512, 516 (2d Cir.1975). Indeed, specifically to encourage Americans engaged in international commerce to submit their commercial disputes to arbitration, Congress adopted and implemented the Convention of Recognition and Enforcement of Foreign Arbitral Awards of June 10, 1958, 9 U.S.C. § 201 et seq. (the “Convention”). Island Territory of Curacao v. Solitron Devices, Inc., 356 F.Supp. 1, 14 (S.D.N.Y.), aff'd, 489 F.2d 1313 (2d Cir.1973), cert. denied, 416 U.S. 986, 94 S.Ct. 2389, 40 L.Ed.2d 763 (1974); see also Scherk, 417 U.S. at 520 n. 15, 94 S.Ct. at 2457 n. 15.

Against this background favoring arbitration, we must decide whether this dispute between RBSD and Dongsan is subject to arbitration. At the outset, it is clear that the subcontract involved herein is a “contract evidencing a transaction involving commerce” within the meaning of section 2 of the Arbitration Act, 9 U.S.C. § 2. As such, it falls under the Convention, 9 U.S.C. § 202, and is enforceable in this Court. 9 U.S.C. § 201.

Section 206 of the Arbitration Act provides, in relevant part, as follows:

A court having jurisdiction under this chapter may direct that arbitration be held in accordance with the agreement at any place therein provided for, whether that place is within or without the United States.

9 U.S.C. § 206. Moreover, section 3 of the Act provides for a stay of court proceedings until the arbitration is completed. 9 U.S.C. § 3. Accordingly, if this dispute is governed by the arbitration clause contained in the subcontract, this Court must stay these proceedings and let the parties proceed to arbitrate. See McCreary Tire & Rubber Co. v. Ceat S.p.A., 501 F.2d 1032, 1036-37 (3d Cir.1974) (stay not discretionary); cf., Scherk v. Alberto-Culver Co., 417 U.S. 506, 94 S.Ct. 2449 (reversing denial of stay without discussion of discretion).

The arbitration provision of the Subcontract is very broad. It provides that “any question, dispute or difference whatsoever ... in relation to or in conjunction with this Agreement ... shall be referred to arbitration.” It cannot seriously be claimed that the dispute here is not within that clause.

Plaintiff argues that the arbitration provision of the Subcontract is optional, not mandatory. Plaintiff bases this argument on the following language: “that party may give to the other party notice in writing of the existence of such question, dispute or difference” (emphasis added).

It is clear that Article XVI envisions arbitration of disputes that cannot be resolved amicably. Article XVI is entitled “Arbitration.” Furthermore, Article XVI continues from the language quoted above as follows: “unless it [the dispute] shall have been amicably resolved within one month from the date of such notice, the same shall be referred to arbitration” (emphasis added). This is not language creating an option. Moreover, Dongsan did notify RBSD in writing of its intent to partially terminate the Subcontract. Thereafter, several communications were exchanged attempting to resolve this dispute amicably. Thus, the Court does not agree that these provisions are optional, and finds that this dispute is governed by Article XVI, the arbitration provisions of the Subcontract.

Plaintiffs only other claim in opposition to Dongsan’s motion to stay is that Dongsan has not proceeded to arbitration and RBSD chooses not to proceed there either. Essentially, therefore, RBSD is waiving its right to enforcement of the arbitration provision and asserting that Dongsan has waived its right, too, by failing to commence the arbitration.

Dongsan moved to stay or dismiss this action relying on the arbitration provision in its first court filing in this action. This hardly evinces an intent on Dongsan’s part to waive its right to arbitrate this dispute. See I.T.A.D. Assocs., Inc. v. Podar Bros., 636 F.2d 75, 77 (4th Cir.1981) (issue of arbitration was raised in first pleading in court, held not waived). Dongsan must, however, move toward arbitration or the Court will find its conduct tantamount to a waiver.

Accordingly, Dongsan’s motion to stay these proceedings is granted. Dongsan shall file proof that it has commenced arbitration proceedings pursuant to Article XVI of the Subcontract with this Court within thirty days of the date of this Order and RBSD is directed to proceed to such arbitration. If Dongsan does not institute arbitration proceedings within thirty days, this action will resume and Dongsan shall answer the complaint by January 10, 1985, or be deemed in default.

RBSD’s Motion for a Preliminary Injunction

The fact that this dispute is to be arbitrated does not deprive the Court of its authority to provide provisional remedies. See Roso-Lino Beverage Distribs., Inc. v. Coca-Cola Bottling Co. of New York, Inc., 749 F.2d 124 (2d Cir.1984); Erving v. Virginia Squires Basketball Club, 349 F.Supp. 716, 719-20 (E.D.N.Y.), aff'd, 468 F.2d 1064, 1067 (2d Cir.1972); see also Boys Markets, Inc. v. Retail Clerk’s Union, 398 U.S. 235, 90 S.Ct. 1583, 26 L.Ed.2d 199 (1970). The Court must, therefore, decide if this is “a proper case” for an injunction. Erving, 468 F.2d at 1067.

The standards governing the issuance of a preliminary injunction are well established in this Circuit. A preliminary injunction will issue only upon

a showing of (a) irreparable harm and (b) either (1) likelihood of success on the merits or (2) sufficiently serious questions going to the merits to make them a fair ground for litigation and a balance of hardships tipping decidedly toward the party requesting the preliminary relief.

Jackson Dairy, Inc. v. H.P. Hood & Sons, Inc., 596 F.2d 70, 72 (2d Cir.1979); see also, e.g., Jack Kahn Music Co. v. Baldwin Piano & Organ Co., 604 F.2d 755, 758 (2d Cir.1979). I find that the second prong test has been met in the present case.

The relief sought in this case is minimal. RBSD seeks only to preserve the status quo with respect to the Letter of Guarantee. “The status quo has been frequently defined as the last uncontested status which preceded the pending controversy.” Flood v. Kuhn, 309 F.Supp. 793, 798 (S.D.N.Y.1970), aff'd, 443 F.2d 264 (2d Cir.1971), aff'd, 407 U.S. 258, 92 S.Ct. 2099, 32 L.Ed.2d 728 (1972), quoted in Erving, 349 F.Supp. at 719. The last uncontested status in this case found Dongsan holding a Letter of Guarantee for $155,766 with RBSD holding that sum to indemnify Bank Al-Jazira for the letter should it be called. Dongsan’s argument that the status quo would be preserved by allowing it to call the letter and take the $155,766 secured thereby is unavailing. RBSD seeks only to prevent Dongsan from calling this letter.

The contract dispute involves nearly one million dollars. Dongsan is a Korean corporation with apparently no fixed assets in the United States. Dongsan does maintain an office in New Jersey and a large amount of liquid assets in bank accounts in New York and New Jersey. Those assets, however, because they are all liquid, could easily be depleted or removed from the United States. If that were to occur, RBSD’s ability to recover in this Court on any arbitration award obtained in Paris would be frustrated.

With respect to the Letter of Guarantee, the potential for frustration of RBSD’s recovery is doubled. The monies securing the letter are currently in RBSD’s possession. If Dongsan is permitted to call the letter, those assets would be transferred, essentially, from RBSD to Dongsan. Any arbitral determination that RBSD is entitled to recover from Dongsan, or. that Dongsan was not entitled to call the letter, would be meaningless if Dongsan were to transfer its liquid assets, increased by the monies securing the letter, out of the reach of this Court. Since there would then be no adequate remedy at law for RBSD in this Court, the Court finds that there could be irreparable harm to RBSD if Dongsan is not enjoined from calling the letter.

Dongsan’s argument that RBSD would be able to enforce any arbitration award in Korea does not change this finding. RBSD would still have no adequate remedy at law here, in this Court. See Petroleum Exploration, Inc. v. Public Service Comm’n, 804 U.S. 209, 217, 58 S.Ct. 834, 838, 82 L.Ed. 1294 (1938); Di Giovanni v. Camden Fire Ins. Ass’n, 296 U.S. 64, 69, 56 S.Ct. 1, 3, 80 L.Ed. 47 (1935); United States v. State of New York, 708 F.2d 92, 93 (2d Cir.1983). In those cases, the federal courts held that legal remedies in state courts did not suffice to make injunctive relief in federal courts unavailable. The absence of legal remedy is to be determined in this Court. If the availability of legal remedies in state court is not sufficient to preclude injunctive relief here, a fortiori the availability of a legal remedy in a foreign country is not sufficient.

The parties are in hot dispute about the underlying contractual claims. Plaintiff claims it is due nearly $1,000,000. Defendant asserts that plaintiff’s obligation to indemnify could total $10,000,000. Certainly this is sufficient to establish serious questions going to the merits for the arbitrator’s decision.

Finally, the Court finds that the balance of hardships tips decidedly toward RBSD. If the status quo is maintained, defendant feels no hardship whatsoever. Dongsan maintains security in the sum of $155,766 should the' arbitrators determine that it is entitled to any or all of that sum (or more), and loses nothing that it currently has. If the status quo is not maintained, and Dongsan is permitted to call the letter, RBSD stands to lose its own money (the $155,766) without recourse here.

Accordingly, RBSD’s motion is granted. RBSD is to file proof of extension of the Letter of Guarantee for one year (to be extended further if necessary) by December 15, 1984. Dongsan, and any of its officers, directors, controlling persons, parents, affiliates, and/or subsidiaries, is hereby enjoined from directing the Bank Al-Jazira to honor or pay the Letter of Guarantee involved herein.

In sum, as set out more fully above, RBSD’s motion for a preliminary injunction is GRANTED; and Dongsan’s motion to stay these proceedings pending arbitration of the underlying dispute is GRANTED.

SO ORDERED.

      . Article XVI of the subcontract provides as follows: "If at any time either party considers that any question, dispute or difference whatsoever has arisen between the parties herein in relation to or in conjunction with this Agreement then that party may give to the other party notice in writing of the existence of such question, dispute or difference and, unless it shall have been amicably resolved within one month from the date of such notice, the same shall be referred to arbitration to be finally settled under the Rules of Conciliation and Arbitration of the International Chamber of Commerce, unless otherwise agreed, in Paris, France.”

      . Dongsan actually styled its motion one to dismiss on various grounds all apparently related to the agreement to arbitrate albeit without requesting that such arbitration be held. The Court expects that Dongsan will pursue its rights to arbitration (as discussed in the text) and therefore construes this motion as one for a stay pending arbitration.

      . By Order that date, this Court extended the temporary restraining order for good cause (to allow for the disposition of the motions).

      . The Court recognizes that it is somewhat unusual to dispose of motions for a preliminary injunction without an evidentiary hearing. See, e.g., Forts v. Ward, 566 F.2d 849 (2d Cir.1977). The Court, however, expected that the hearing on November 21 would be an evidentiary hearing. The parties chose not to offer testimony at that hearing and to proceed by way of argument by counsel; therefore, they should not be heard to cry now, or at any future date, that they were not provided an opportunity to produce testimony at an evidentiary hearing. See Semmes Motors, Inc. v. Ford Motor Co., 429 F.2d 1197, 1205 n. 11 (2d Cir.1970); Sugarhill Records Ltd. v. Motown Records Corp., 570 F.Supp. 1217, 1221-22 (S.D.N.Y.1983).

      . The jurisdiction of this Court is therefore based upon 9 U.S.C. § 203 and 28 U.S.C. § 1331. In any event, there is also complete diversity of citizenship here creating an independent basis for jurisdiction.

      . Although this action involves international commerce under the Convention, 9 U.S.C. § 201 et seq., the provisions of section 3 regarding a stay of proceedings are still applicable because the subcontract is one of the kinds specified in section 1. See Scherk v. Alberto-Culver Co., 417 U.S. at 511 n. 5, 94 S.Ct. at 2453 n. 5.

      . Dongsan’s motion predated even an answer to the complaint herein. Since the motion is being granted no answer will be necessary until the arbitration is concluded.

      . Dongsan also argues that the status quo will be upset if it "is unable to maintain its security in the form of the Letter of Guarantee” (emphasis added), presumably because the Letter might expire by its own terms and Dongsan would be left with nothing. RBSD has, however, agreed to secure an extension of the Letter for the duration of the arbitration. RBSD is directed to do so and to file proof of such extension with the Court by December 15, 1984. Thus, the status quo will be maintained.

      . The underlying dispute involves nearly one million dollars, RBSD has not attempted to restrain Dongsan from doing anything with assets valued near that amount to secure any potential judgment. Rather it has merely sought to avoid increasing the amounts potentially unrecoverable from Dongsan.

      . The Court notes that there is some question about the availability of prejudgment attachment under the Convention. Compare Carolina Power & Light Co. v. Uranex, 451 F.Supp. 1044 (N.D.Cal.1977) (yes) with Metropolitan World Tanker Corp. v. P.N. Pertambangan Minjakdangas Bumi Nasional, 427 F.Supp. 2 (S.D.N.Y. 1975) (no). However, the relief sought here is not an attachment. Dongsan is in no way restricted in its use or possession of its assets, but only in its power to gather more assets from RBSD leaving RBSD with only the recourse of recovery in Korea.


author: HUNGATE, District Judge.

text:
    MAC CORPORATION OF AMERICA and WDS, Inc. (successors in interest to Saturn Manufacturing, Inc.), Plaintiff, v. WILLIAMS PATENT CRUSHER & PULVERIZER CO., et al., Defendants.
    No. 80-0124C(3).
    United States District Court, E.D. Missouri, E.D.
    Nov. 30, 1984.
    James S. Leigh, Portland, Or., John C. Shepherd, Steven S. Sanders, St. Louis, Mo., for plaintiff.
    Frederick M. Woodruff, Mark T. Keaney, St. Louis, Mo., for defendants.
   MEMORANDUM

HUNGATE, District Judge.

On November 16, 1981, this Court entered a final judgment for the plaintiff’s predecessor, Saturn Manufacturing, Inc., and permanently enjoined defendants from infringing claims 8 or 10 of U.S. Patent No. 4,034,918 (hereafter “the ’918 patent”). Saturn Manufacturing, Inc. v. Williams Patent Crusher & Pulverizer Co., No. 80-0124C (E.D.Mo. Nov. 16, 1981), aff'd, 713 F.2d 1347 (8th Cir.1983).

Plaintiff, successor to Saturn Manufacturing, Inc., now moves for an order to show cause and for a contempt judgment, alleging that defendants’ shredding machine, made in accordance with U.S. Patent No. 4,452,400 (hereafter “the '400 patent”), is in contempt of this Court’s order. On July 19, 1984, before plaintiff filed the instant motion, defendants filed suit against plaintiff in the United States District Court for the Southern District of Texas, seeking a declaratory judgment that defendants’ new design, the ’400 patent, does not infringe on plaintiff’s ’918 patent.

It is well established that a contempt proceeding is the appropriate action for deciding patent disputes only where there are merely slight or colorable differences between the enjoined device and the new device. American Foundry & Mfg. Co. v. Josam Mfg. Co., 79 F.2d 116 (8th Cir.1935). If the difference between the two devices or machines is more than color-able, the infringement should not amount to a contempt nor should it be tested in a contempt proceeding. Id. at 117; Siebring v. Hansen, 346 F.2d 474, 477 (8th Cir.1965); Sure Plus Mfg. Co. v. Kobrin, 719 F.2d 1114, 1118 (11th Cir.1988).

A colorable difference is defined as one in which there is a “fair ground of doubt” as to the infringement by defendant’s device. American Foundry, supra, 79 F.2d at 118. “Where infringement by the new device is not clear on the face of the matter, and there are substantial issues for the determination of the court, the plaintiff may not have them determined in contempt proceedings.” Id. at 118 (emphasis by the appellate court).

This Court has carefully considered the pleadings and memoranda filed by the ■ parties detailing the differences between the shredding machines made pursuant to patents ’918 and ’400. The Court finds that there exists a fair ground of doubt as to whether defendants’ machine infringes upon plaintiff’s patent ’918. Therefore, the difference between the two machines is more than colorable, and the appropriate proceeding is the previously filed declaratory judgment action rather than a contempt proceeding in this Court.

Accordingly, plaintiff’s motion will be denied without prejudice and may be refiled, if deemed necessary, upon the conclusion of proceedings in Williams Patent Crusher & Pulverizer Co., Inc. v. WDS, Inc., No. H-84-3041 (S.D.Tex., filed July 19, 1984).


author: PER CURIAM:

text:
    Thomas R. FORTUNE and Anthony J. Genovesi, Plaintiffs, v. KINGS COUNTY DEMOCRATIC COUNTY COMMITTEE, Executive Committee of the Kings County Democratic Committee, Herbert S. Lupka, as Chairperson of the Kings County Democratic County Committee, and Howard Golden, as Chairperson of the Executive Committee of the Kings County Democratic County Committee, Defendants.
    No. 84 Civ. 0718.
    United States District Court, E.D. New York.
    Nov. 30, 1984.

      Genovesi & Kellman, Brooklyn, N.Y., for plaintiffs.
    Fisher & Fisher, Brooklyn, N.Y., for defendants.
    Before PRATT, Circuit Judge, WEINSTEIN and PLATT, District Judges.
   MEMORANDUM AND ORDER

PER CURIAM:

This action has its genesis in the January 1984 election of the chairperson of the Executive Committee of the Kings County Democratic Committee. Plaintiffs, both nominated for the position, lost the election to Howard Golden, a defendant in this action. Plaintiffs’ claim focuses upon certain amendments to the rules of the Kings County Democratic County Committee adopted on October 6, 1982.

For many years prior to 1982, the Executive Committee had been made up of state committeemen, who were elected by members of the Democratic. party in Kings County, the chairperson, secretary, treasurer and assistant treasurer of the County Committee, who were appointed by the County Committee; and the chairpersons of all standing committees of the Executive Committee, who were appointed by the chairperson of the Executive Committee. Under the old rules certain key functions, including organization of the Executive Committee, election of officers of the Executive Committee, filling of vacancies in the Executive Committee, authorizing nonparty members to run as Democrats for public office, and filling vacancies in nominations for public office, were voted upon by only those members of the Executive Committee who were also members of the state committee. By the 1982 amendments, this restriction on voting was eliminated so that those matters could be voted upon by the entire Executive Committee, which included the state committeemen plus the 19 other members who were appointed either by the chairman of the Executive Committee or by the County Committee.

Plaintiffs claim that these amendments as to voting in the Executive Committee must be submitted to the Attorney General of the United States for preclearance pursuant to § 5 of the Voting Rights Act of 1965, 42 U.S.C. § 1973c, because they constitute a “standard, practice, or procedure with respect to voting” within the meaning of § 5. Defendants contend, on the other hand, that the rule changes do not come within the purview of § 5 because they merely affect the internal operating procedures of the Executive Committee and are not concerned with any public electoral functions of the party.

After the complaint was filed, this three-judge district court was convened pursuant to 28 U.S.C. § 2284 and 42 U.S.C. § 1973c. Defendants moved to dismiss pursuant to Fed.R.Civ.P. 12(b)(6). Because affidavits have been submitted and considered by the court, we treat the motion as one for summary judgment. Fed.R.Civ.P. 56. After argument of the motion, the parties were given additional time in which to submit supplemental materials. Having reviewed all the submitted materials and concluding that there is no genuine issue as to any material fact, we deny defendants’ motion and, despite the absence of a cross-motion for judgment, grant a summary declaratory judgment to plaintiffs. See 10A Wright, Miller & Kane, Federal Practice and Procedure: Civil 2d § 2720 at 29-33 and n. 20 (1983).

Section 5 of the Voting Rights Act, 42 U.S.C. § 1973c, in relevant part, provides:

[Wjhenever a [SJtate or political subdivision [covered by Section 4] shall enact or seek to administer any voting qualification or prerequisite to voting, or standard, practice, or procedure with respect to voting different from that in force or effect on November 1, 1968, * * * such State or subdivision may institute an action in United States District Court for the District of Columbia for a declaratory judgment that such qualification, prerequisite, standard, practice, or procedure does.not have the purpose and will not have the effect of denying or abridging the right to vote on account of race or color, * * * and unless and until the court enters such judgment no person shall be denied the right to vote for failure to comply with such qualification, prerequisite, standard, or procedure. Provided, that such qualification, prerequisite, standard, practice, or procedure may be enforced without such proceeding if [it] has been submitted * * * to the Attorney General and the Attorney General has not interposed an objection within sixty days * * *.

The impact of this statute was applied to some actions of a political party by 28 C.F.R. § 51.7:

Certain activities of political parties are subject to the preclearanee requirement of Section 5. A change affecting voting effected by a political party is subject to the preclearanee requirement: (1) If the change relates to a public electoral function of the party and (2) if the party is acting under authority explicitly or implicitly granted by a covered jurisdiction or political subunit subject to the preclearance requirement of Section 5.

While the complaint seeks broad based relief, plaintiffs’ claim was substantially limited at the hearing on the motion and in the posthearing submissions. No longer do plaintiffs seek to depose the chairman of the Executive Committee or undo any past actions taken by the Executive Committee. Instead, plaintiffs seek a declaratory judgment that the 1982 rule changes, which for certain issues expanded the Executive Committee’s eligible voters from only the state committeemen to the entire membership, including those appointed by the committee chairman, violate the voting rights act because of their racially discriminatory effect. It is not disputed that a substantial number of the elected state committeemen were black, but that none of the appointed members of the Executive Committee were black. Consequently, plaintiffs argue, before the 1982 rule changes could be properly implemented, preclearanee through the Attorney General’s office was required.

We note in passing that the “trigger” for this action was the election of the chairman of the Executive Committee by a group that plaintiffs imply was, or could have been, “packed” by the chairman’s own appointments. In fact, however, a majority of the elected state committeemen, as well as a majority of the appointed members, voted for the chairman.

Among the issues we must consider are (1) jurisdiction, (2) merits of plaintiffs’ claim, and (3) the defenses of laches and mootness.

1. Jurisdiction

Although the parties have assumed jurisdiction, we have had some difficulty with it. The jurisdictional question is whether this court has subject matter jurisdiction over an action such as this. Plaintiff alleges jurisdiction under 42 U.S.C. §§ 1973c and 1973d. Section 1973 prohibits any procedure imposed by any state or political subdivision to deny or abridge any citizen’s right to vote on account of race or color. Violators are subject to severe penalties. 42 U.S.C. § 1973j.

The risk of penalties is reduced through section 1973c, which requires approval of any changes in procedures either by preclearance through the Attorney General, or by a declaratory judgment action in the district court for the District of Columbia. The authorized declaratory judgment action can be brought by the “state or political subdivision,” (in this case the Kings County Democratic party or its Executive Committee) whose rule or procedure is challenged. “Submissions” to the Attorney General can be made by “an appropriate official of the political party”. 28 C.F.R. § 51.21(b). Although “appropriate official” is not formally defined, we interpret it to mean an authorized official of the party, because of the context of the preceding subsection, 28 C.F.R. § 51.21(a), which provides that submission shall be “by the chief legal officer or other appropriate official of the submitting authority or by any other authorized person on behalf of the submitting authority.” Emphasis added.

Contrary to defendants’ argument, there is no authority in the statute or the regulations for a disgruntled member of the committee to file either a declaratory judgment action in the D.C. district court or a preclearance request with the Attorney General. Moreover, neither the Attorney General’s approval nor the declaratory judgment action “will bar a subsequent action to enjoin enforcement of such * * * procedure”, § 1973c, and the statute gives no guidance as to who might bring such a “subsequent action”.

Section 1973j(f) grants jurisdiction to all district courts “of proceedings instituted pursuant to this section”, and it eliminates any requirement of exhausting administrative remedies. It is true that nowhere is any authority expressly given to people such as plaintiffs, who are mere members of the Executive Committee, for bringing a declaratory action such as this one to either establish the need for preclearance of the relevant changes, or to enjoin enforcement of such changes until preclearance is obtained. However, since § 5 of the voting rights act should be liberally construed, see United Ossining Party v. Hayduk, 357 F.Supp. 962, 966 (S.D.N.Y. 1971); see also Allen v. State Board of Elections, 393 U.S. 544, 566, 89 S.Ct. 817, 832, 22 L.Ed.2d 1 (1969), such a right should be implied under Cort v. Ash, 422 U.S. 66, 95 S.Ct. 2080, 45 L.Ed.2d 26 (1975), particularly because the statute, as noted above expressly contemplates court involvement for purposes in addition to the District of Columbia preclearance action. Our conclusion, therefore, is that we do have subject matter jurisdiction over the present case as an implied right of action under § 1973c.

2. Merits of Plaintiffs’ Claim.

Plaintiffs’ case has been shifting its grounds. The complaint seemed to concentrate on the combined effect of the rules for appointing additional members to the Executive Committee and for electing the chairman of the Executive Committee. On the oral argument plaintiffs seemed to be attacking virtually every change in the rules which had occurred since November 1, 1968. In their supplemental brief, plaintiffs focus on the 1982 amendments which enlarged the voting powers of the appointed members. They attack the amendments as racially discriminatory and seek to bring them within the prohibitions of § 1973 as a “public electoral function”, primarily because the Executive Committee, as thus enlarged, has powers to fill vacancies in nominations and to permit non-party members to run under the party label.

Relying on United States v. Margiotta, 688 F.2d 108 (2d Cir.1982), plaintiffs argue that election of the chairman, himself, is a public electoral function, because in practice the chairman of the Executive Committee has extensive powers which approach one man rule of the Kings County argument. Rather, we conclude that the Executive Committee performs a public electoral function with respect to filling vacancies in nominations pursuant to New York Election Law § 6-148, and in authorizing nonparty members to run as Democrats pursuant to New York Election Law § 6-120. Because they affected the public electoral functions of the Executive Committee in these ways, the 1982 amendments, which enlarged the voting constituency of the Executive Committee, constitute changes covered by the Voting Rights Act and required preclearance. Plaintiffs, therefore are entitled to declaratory relief as set forth below.

3. Laches and Mootness.

Defendants have argued both laches and mootness. Since no prejudice to defendants has resulted from plaintiffs’ delay in bringing this action, and since plaintiffs seek only the limited relief of a declaratory judgment, we decline to dismiss on grounds of laches.

Mootness has been suggested on two grounds: (1) plaintiffs can themselves seek preclearance and therefore have no need for a declaratory judgment; and (2) since the County Committee and the Executive Committee are replaced every two years at the primary election and then reorganized with new rules, the 1982 rules under which plaintiffs are proceeding became moot early in October of this year.

As to the first argument, it seems clear, despite plaintiffs’ apparent concession at the time of oral argument, that the “submission” of a request for preclearance to the Attorney General under 28 CFR § 51.-21 can be done only by the committee or its authorized representative, and not by a disgruntled member. “Communications” from anyone, including plaintiffs, might be received by the Attorney General in connection with a proceeding that is pending by reason of a “submission”, 28 CFR § 51.27, but the regulations clearly distinguish such “communications” from a “submission” for preclearance.

As to the second mootness claim, since the new committee, elected in 1984, has adopted essentially the same rules as those adopted by the 1982 committee, mootness does not require dismissal merely because in theory the committee is different. The offending rule has now been continued, even though it is in violation of the Act because it has never received preclearance.

CONCLUSIONS

We have jurisdiction. Neither laches nor mootness bar relief. Since the Executive Committee performs public electoral functions by filling vacancies in nominations and by approving candidacies of nonparty members, changes in its voting membership require preclearance.

Plaintiffs are therefore entitled to a declaratory judgment that the amendments to the Rules for the Government of the Kings County Democratic County Committee, initially adopted October 6, 1982, and thereafter continued, insofar as they deleted from certain sections the limitation of voting to state committeemen only, were changes requiring preelearance under the Voting Rights Act, and further declaring that the amendments can have no further effect until defendants comply with the preclearance requirements of the Act.

SO ORDERED.


author: ELFVIN, District Judge.

text:
    William R. HUGHES, Plaintiff, v. Margaret M. HECKLER, Secretary of Health and Human Services, Defendant.
    No. CIV-78-377E.
    United States District Court, W.D. New York.
    Nov. 30, 1984.

      Joan J. Kronman, Buffalo, N.Y., for plaintiff.
    Salvatore R. Martoche, U.S. Atty., Joseph M. Guerra III, Asst. U.S. Atty., Buffalo, N.Y., for defendant.

      . Such individual is hereby ORDERED substituted as the defendant pursuant to Fed.R.Civ.P. rule 25(d).

   ELFVIN, District Judge.

Defendant Secretary of the Department of Health and Human Services (“the Secretary”) has moved and the plaintiff has cross-moved for summary judgment in this action brought pursuant to 42 U.S.C. § 405(g) to review the Secretary’s final decision denying Social Security disability insurance benefits to the plaintiff.

The case is before this Court for a second time. Plaintiff, a 50-year old man, initially filed for benefits February 10, 1977. His application was ultimately denied by the Secretary. Upon appeal of that determination, this Court remanded the case, by Memorandum and Order dated June 25,1981, and directed the Secretary to evaluate the record more fully with regard to several specific factual questions. Upon rehearing, an Administrative Law Judge (“the AU”) determined that plaintiff was in fact disabled. That decision was rejected by the Appeals Council in a decision dated January 13, 1983. For reasons that follow, the decision of the Appeals Council must be reversed, the Secretary’s motion for summary judgment denied and plaintiff’s motion for summary judgment granted.

Plaintiff alleges disability resulting from a combination of hypertension, gouty arthritis in one foot, shortness of breath, headaches, dizziness, severe diarrhea and excessive nervousness and anxiety. The facts of the case were detailed in this Court’s earlier decision. Apparently much, if not all, of plaintiff's physical and psychological difficulty can be attributed to severe injuries suffered in a motor vehicle accident while on active duty with the United States Air Force in 1953. Subsequent to the accident, he had been discharged from the Air Force and awarded a 100% medical disability. Since that time his employment record has been erratic. He has had a history of alcohol abuse which contributed to stomach and duodenal ulcers for which a surgical operation was performed in 1976. He has not worked since then and claims disability from the date of surgery.

The critical issue in this type of case is whether the Secretary’s decision is supported by substantial evidence. Substantial evidence is such relevant evidence as a reasonable mind might accept as adequate to support a conclusion. Richardson v. Perales, 402 U.S. 389, 91 S.Ct. 1420, 28 L.Ed.2d 842 (1971). The Secretary’s decision is binding on this Court as to both findings of fact and reasonable inferences drawn from those facts, if supported by substantial evidence. Cotter v. Harris, 642 F.2d 700 (3d Cir.1981).

The Secretary’s position in this case has never been a strong one. Following the decision of an AU in 1978 to deny benefits to plaintiff, the Secretary acknowledged that a preponderance of evidence in the record favored plaintiff’s position but argued, nonetheless, that that ALJ’s decision was supported by substantial evidence and should accordingly be affirmed. It was precisely to avoid this kind of hypertechnical juggling of evidentiary standards that this Court remanded the case for further development of the record. Specifically, the Secretary was directed to evaluate in greater detail the opinion of plaintiff’s treating physician, and to defer to it appropriately. It was also stated that the Veterans’ Administration award of disability benefits to the plaintiff should be given reasonable, albeit not controlling, consideration. Finally, the Secretary was told to consider whether plaintiff was suffering from an “anxiety neurosis,” as had been suggested by Dr. M., the physician to whom plaintiff had been referred by New York’s Bureau of Disability Determinations, the agency that had initially considered his case.

Although a treating physician’s opinion of disability is not wholly binding on the Secretary, it is entitled to great deference and is to be hewed to absent substantial medical evidence to the contrary. See, e.g., Parker v. Harris, 626 F.2d 225, 231-33 (2d Cir.1980). On remand the Appeals Council abruptly dismissed the opinion of plaintiff’s physician Dr. K., a member of the staff of the Veterans’ Administration Hospital in Buffalo, as “not supported by medically acceptable diagnostic techniques.” There is no apparent or expressed basis for this conclusion. In a letter dated April 4, 1978 Dr. K. describes plaintiff as “totally disabled and unable to perform sedentary work,” and “100% unemployable.” He discusses in some detail plaintiff’s medical history and concludes that “based on the totality of these medical problems” the claimant is unfit for employment. (Record [“R”] at 184.) There is no evidence in the record which directly rebuts these conclusions.

The Appeals Council’s consideration of what weight should be given the fact that plaintiff had been found to be disabled for Veterans’ Administration purposes is equally superficial. It is true, as the Council has noted, that a determination by another government organization is not binding on the Social Security Administration because the definitions of disability are different under the various programs. Nevertheless, such a determination is entitled to some weight and should be considered. Cutler v. Weinberger, 516 F.2d 1282, 1286 (2d Cir.1975). The Appeals Council has failed to accord it such consideration.

The bulk of new evidence elicited on remand concerned plaintiff’s psychiatric status. Significantly, the ALJ found plaintiff’s psychological condition in and of itself to be a sufficient ground to support a finding of disability. Plaintiff had been examined by a psychologist and by a psychiatrist April 29-30, 1982 at the request of the Social Security Administration. Testing revealed that plaintiff has an I.Q. of 81 and is considered to be a “slow learner.” (R 580.) Dr. G.., a board-certified psychiatrist, reported that plaintiff suffers from “anxiety-neurosis with severe somatization.” (R 586.) In testimony before the AU Dr. G. stated that, realistically speaking, he did not consider plaintiff employable. (R 274.) Based on this testimony and other evidence in the record, the AU concluded that “the medical evidence overwhelmingly establishes that the claimant is suffering from a severe mental impairment which prevents him from engaging in any substantial gainful activity.” (R 199.)

The Appeals Council has failed to give adequate consideration to the question raised in this Court’s Order. However, it is clear from the record that the position of the Secretary is not supported by substantial evidence and that plaintiff has established his entitlement to disability benefits. Accordingly, it is hereby ORDERED that plaintiff’s motion for summary judgment is granted, that the Secretary’s motion for summary judgment is denied and that this case is remanded to the Secretary solely for a calculation and award of benefits.


author: CAFFREY, Chief Judge.

text:
    Joseph G. ONDISH, Plaintiff, v. UNITED PARCEL SERVICE, INC., Defendant.
    Civ. A. No. 84-2388-C.
    United States District Court, D. Massachusetts.
    Dec. 3, 1984.
    Michael D. Greenberg, Cambridge, Mass., for plaintiff.
    Alan D. Rose, David E. Watson, Eric I. Lisman, Nutter, McClennen & Fish, Boston, Mass., for defendant.
   MEMORANDUM

CAFFREY, Chief Judge.

This is a civil action originally filed in Middlesex Superior Court, Commonwealth of Massachusetts by Joseph G. Ondish, a resident of Arlington, Massachusetts against United Parcel Service, Inc. (“UPS”), a foreign corporation. The case was removed to this Court by defendant and is presently before the Court on the recommendation of Magistrate DeGiacomo that defendant’s motion for summary judgment be allowed.

In the complaint, plaintiff alleges that he became an employee of defendant in 1971 and continued as such until stricken with a heart attack while on a picket line in September of 1976. Thereafter, plaintiff went on medical leave pursuant to a contract between his employer and the Teamsters Union of which he was a member. Plaintiff further alleges that he was advised by his doctor in February, 1982 that he was healthy enough to resume his employment and he so notified defendant despite which defendant refused to hire back the plaintiff.

Subsequent to certain union procedures and arbitration, plaintiff resumed working for defendant in January, 1984. In his complaint plaintiff states that on the basis of the foregoing he seeks $80,000 for violation of M.G.L. ch. 149 § 24K which proscribes discrimination against persons solely because of their past handicap. Plaintiff further charges defendant with an implied covenant of good faith.

Defendant moved for summary judgment on the grounds that 1) plaintiff has failed to exhaust contractual remedies available under the terms of the collective bargaining agreement, 2) that plaintiff has failed to allege a breach of the duty of fair representation, and 3) that the action is barred by the statute of limitations set forth in 29 U.S.C. § 160(b). Defendant’s motion is supported by affidavit and the matter is presently before the Court on the Magistrate’s recommendation that summary judgment be granted.

On the basis of the Magistrate’s recommendation, to which no objection was lodged since the filing thereof on October 26 last, and having in mind that in Price v. United Parcel Service, Inc., 601 F.Supp. 2. Memorandum and Order, dated September 20, 1984, Judge Keeton rejected the same argument briefed by the plaintiff herein, i.e. that his claim against UPS is not a claim under § 301 of the Labor Management Relations Act but rather a common law claim under state law for breach of the implied covenant of good faith and fair dealing developed by the Massachusetts courts in employment at will termination cases, I accept the Magistrate’s recommendation and rule that the motion for summary judgment should be allowed because of 1) plaintiff’s failure to exhaust his remedies under the collective bargaining agreement, 2) plaintiff’s failure to allege that his union breached its fair representation and 3) that the action is barred by the applicable statute of limitations.

Order accordingly.