author: IRVING BEN COOPER, District Judge.

text:
    Mandeville FROST, Plaintiff, v. Margaret M. HECKLER, Secretary of Health and Human Services, Defendant.
    No. 82 Civ. 4394 (IBC).
    United States District Court, S.D. New York.
    June 19, 1984.

      Davison F. Moore, Poughkeepsie, N.Y., for plaintiff.
    Rudolph W. Giuliani, U.S. Atty. for the Southern District of New York, New York City, for defendant.
    Stephen A. Dvorkin, Asst. U.S. Atty., New York City, of counsel.
   OPINION

IRVING BEN COOPER, District Judge.

Plaintiff, Mandeville Frost, seeks review of the decision of the Secretary of Health and Human Services terminating his disability insurance benefits following a most debilitating accident, as provided by Social Security Act §§ 216(i) and 223, 42 U.S.C. §§ 416(i) and 423. After fully exhausting his administrative remedies, including a hearing before an Administrative Law Judge (ALJ) and an additional adverse decision by the Appeals Council, plaintiff brought this action before us under section 205(g) of the Act, 42 U.S.C. § 405(g), seeking judicial review of the Secretary’s determination. Both parties now move for judgment on the pleadings.

The Facts

The following pertinent evidence was adduced from the transcript of the administrative record in this case.

Plaintiff was born on January 1, 1938, and was 43 years of age at the time of the 1981 hearing. He attended Princeton University while on a baseball scholarship, majoring in English. He went on to the University of Virginia Law School, wrote for one of the legal publications, and following graduation he was hired as an associate by Robert Marvin, Esquire. From 1965 until 1979, he practiced law in upstate Rhine-beck, New York; Mr. Marvin made him a full partner in the firm in 1978. Although he specialized primarily in real estate and zoning matters, plaintiff also engaged in some litigation and estate work. According to all accounts, a picture was painted of an exceptionally gifted and talented young man with a happy home life.

His friend, the man who made him partner, Robert Marvin, stated at the hearing that plaintiff had been “a very brilliant scholarly lawyer with excellent background and training” and was “an extremely articulate young man” before the accident. Plaintiff’s fine reputation is further reflected in psychologist Dr. David Crenshaw’s description of plaintiff as “a prominent and highly regarded attorney in this small [Rhinebeck] community ... well known and highly respected ... [h]e was also well known in this community for being an exceptional athlete, and therefore possessing, in addition to his intellectual gifts, tremendous physical skills as well.”

Indeed, the record is replete with references to his pre-accident physical prowess and exceptional coordination — he was' the number one top seeded tennis player for his age at the nearby Poughkeepsie tennis club; he skied avidly; and he was also an excellent trout fisherman. In summary, he was the all-around sportsman. It appears that he additionally enjoyed the blessing of a happy marriage and was the father of three young children who were about 16, 15 and 8 years of age at the time of the hearing. The Frost family lived on about ten acres of land, the residence occupying approximately two acres.

This storybook lifestyle altered abruptly at 1:30 a.m. on May 26, 1979 when plaintiff was involved in a tragic auto accident over the Memorial Day weekend. Rushed to the emergency room at Northern Dutchess Hospital with multiple severe injuries including advanced respiratory distress, plaintiff suffered laceration of the liver and the hepatic artery and vein, a herniated diaphragm, ruptured bowel and spleen, traumatic encephalopathy (head injuries), and a cardiac arrest followed by an anoxic brain episode (absence of oxygen to the brain). The ensuing hospital course included surgeries extending until July 6, 1979, when plaintiff was discharged and transferred for rehabilitation to the Burke Rehabilitation Center in White Plains, New York.

Upon admission to the Center, he was examined by Dr. Walter Reichert, the neurologist in charge of the Head Trauma Service, who found plaintiff to have status post closed head injuries, multiple internal injuries and post-surgical repair of same, and a history of hypertension secondary to cardiac arrest and hemorraghic shock resulting from the anoxic brain episode. Following this diagnosis, Dr. Reichert recommended a finding of disability under the Social Security law.

Plaintiff filed for disability benefits on August 8, 1979. After being examined for the Social Security Administration (SSA) by a review physician, who stated in his written evaluation of August 20, 1979 that “[claimant will be disabled for at least one year,” plaintiffs application was granted. Thereafter, he received $996 a month in disability insurance benefits.

The SSA, through the Bureau of Disability Determinations of the State of New York (the Bureau) undertook periodic reviews of his condition pursuant to their internal policy. On June 9, 1980, the Bureau notified plaintiff they had determined that his eligibility for disability benefits had ceased as of March, 1980. Upon reconsideration, the Bureau affirmed this initial determination but extended his eligibility to May 31, 1980 by a letter dated November 24, 1980.

Approximately a year later, an administrative hearing was held before ALJ Arthur E. Neubauer on November 4, 1981. Plaintiff was represented by counsel, Mr. Marvin, his friend and former law partner. The ALJ considered the case de novo, heard the testimony of both the plaintiff and his attorney, and reviewed the medical reports filed by treating and nontreating physicians, including neurologists, psychiatrists, psychologists, and neuropsychologists.

Plaintiff testified on his own behalf that he received memory training and psychological treatment from both Dr. Richard Kovner and Dr. Steven Mattis, neuropsychologists at Montefiore Hospital in New York City. He complained of continuing problems with his balance, his handwriting disability, his failure to remember appointments or directions or where he had parked his car. Although plaintiff felt he could walk normally, if someone brushed up against him he would “tip over.” Questioned about his physical status, plaintiff responded that he could drive with the directions tacked up in the windshield, and that he could “rak[e] leaves and [do] stuff around the house as best I can, but, you know, that’s a trouble. I can’t seem to keep my mower going.” He later expanded that he had mowed the lawn on a rider mower which had tipped over on one occasion. Once a week, he would attempt to hit tennis balls over the net with the aid of a tennis pro at the tennis club where he had once been top seed; apparently, this was a form of therapy as he was unable to consistently get the balls over the net.

He engaged in some mental exercise by virtue of a volunteer project suggested by his former partner, Mr. Marvin: three days a week he would drive to a local title company where he would re-trace a real estate title search. These searches were previously done by title company employees, and in stark contrast to his pre-accident search of three or four hours, one search would now take him eight or ten hours.

At one point, the ALJ also questioned plaintiff about his job capabilities, inquiring as to what prevented him from getting more active in the practice of law. Plaintiff responded, “Confusion that’s the thing that basically is the problem in my life right now. I’m confused a lot of the time.” The AU next asked whether he was considering any other kind of work besides the practice of law. Plaintiff stated: “Well, yes, sure, I consider them. But to be honest with you, I get so depressed when I think about anything else besides practicing law that I just can’t even function right.”

Mr. Marvin’s testimony consisted largely of commentary on plaintiff’s past and present capabilities and his financial status. He reported that plaintiff was receiving certain partnership income for the year 1978-79, approximately $1700 from two accident policies, $800 a month in no-fault insurance payments (up to a $50,000 limit), and unspecified income from oil and gas tax shelters.

The medical evidence consisted solely of written evaluations and letters by both treating and non-treating physicians; no oral testimony was presented. We have summarized the medical evidence in chronological order for the sake of clarity.

On March 19, 1980, Dr. Walter Reichert, the neurologist at the Burke Rehabilitation Center who had originally examined plaintiff upon his admission there, wrote that he had examined plaintiff and found continued decreased memory, coordination and motor skills; and that he was not on any medication. The doctor checked off several boxes on a standard form to indicate that plaintiff could frequently lift or carry over 50 pounds; could use his hands for repetitive actions such as grasping, pushing and pulling; could use his hands for fine manipulations; and could follow simple commands. Although his report does not indicate alternative employment possibilities, he stated that plaintiff was not able to return to his previous employment.

Based largely on Dr. Reichert’s report, Dr. Hahn, an internist and consultant for the SSA, stated that plaintiff could do medium work not entailing exposure to heights or machinery considering his physical status only.

In contrast, a letter dated December 26, 1980 from plaintiff’s treating neuropsychologist, Dr. Richard Kovner, stated that “no significant progress has been noted in [his] ability to store and retrieve new information. [This inability] prevents him from doing any work, high-level or low-level, in which a sequence of steps is necessary ... Additionally, his self-esteem has been severely damaged by his awareness of his memory and intellectual deficits. Requiring him to seek employment at an entry level position will confirm his inadequacies, and precipitate an abrupt, reactive, severe depression with suicidal potential.” (emphasis ours)

On December 29, 1980, Dr. Volpe, his treating neurologist, reported that plaintiff had “dense anterograde amnesia” and muscle tone and posture abnormalities underlying motor coordination for walking and hand activity. In this neurologist’s opinion, plaintiff “should be considered totally disabled to practice law, and [Dr. Volpe] would be very cautious in suggesting other work for him in the future.”

The ALJ also considered a letter written by a clinical neuropsychologist associated with Dr. Kovner, Dr. Steven Mattis. Dr. Mattis, who also treated plaintiff, wrote on March 2,1981 that plaintiff could not retain enough information to enable him to function at any sort of mentally demanding work. In his opinion, “to make [plaintiff] engage in less mentally demanding work, would run the risk of producing an explosive depressive response from him,” and that “suicide could be the result of such a reaction.” (emphasis ours)

On March 9, 1981, psychologist Dr. David Crenshaw, who had previously known plaintiff in their small community, performed a psychological examination. After extolling plaintiff’s exceptional reputation as a “highly gifted attorney” and “exceptional athlete” prior to the aceident, he wrote that plaintiff suffered from “significant problems with memory, balance and stilted speech”; that his eyes were “fixed in a rather rigid stare”; that his motor movements seemed “to be very rigid and poorly coordinated”; and that he became “highly frustrated” on each of the visual motor tasks that he was asked to perform during the examination.

The SSA then had Dr. William Johnston, a psychiatrist, examine plaintiff at his home in Rhinebeck on May 7, 1981. Some of his observations are summarized as follows: “He’s a tall man with suggestion of vacancy in his eyes. I am surprised by the weight that he gave [160-162 down from 175]. He appeared to me to be thin and fragile. He does not present the appearance of vigorous, good health ... On each occasion that he got up from the chair he started off with unsteadiness. As he returned, his gait was more stable ...” Dr. Johnston further stated that plaintiff showed a mild speech defect; that he lacked animation and recognized his deficiencies; that memory was a problem for him; and suggested a diagnosis of organic affective syndrome with organic personality syndrome due to brain damage. He also quoted plaintiff as stating, “[I]f I can’t go into law, I don’t know what I could do.”

On May 22, 1981, Dr. M.J. Tissenbaum, a review physician for the Bureau, who was a psychiatrist and a neurologist, stated that plaintiff had the residual functional capacity for non-stressful work, based upon the evidence in the file.

The final piece of medical evidence considered by the AU was a letter written to counsel on November 4, 1981 by Dr. Kenneth Appell, the surgeon who had initially treated the plaintiff following the accident. In a brief statement, Dr. Appell wrote that the plaintiff would be unable to return to gainful employment for another 12 months.

In a thoughtful and well-written decision dated January 27, 1982, the AU concluded that plaintiff’s eligibility for benefits had ceased as of September, 1980. He reasoned that the plaintiff was “not now disabled within the meaning of the [Social Security] Act ... [although] rather evidently, and as claimant testified, he still experiences deficits from his severe injuries”; and found that he had the “physical and mental capability to engage in work of at least medium exertion” not involving heights or machinery and “notwithstanding his decrease in memory” — all based upon his assessment of the medical evidence. The AU further concluded that he could “not accept the statement of Dr. Appell that the claimant cannot engage in any gainful employment, noting that it is not supported by any clinical details, and is inconsistent with claimant’s daily activities.”

As for the opinions of the treating experts, the AU afforded little weight to their opinions as to potential psychological effects or consequences, as is reflected in his decision: “The psychologists he presently is seeing have reported the risk of dire emotional consequences if attempt is made to require the claimant to engage in less mentally demanding work. However the fact that the claimant is denied continued ... benefits does not mean that he is required to engage in lesser work, particularly considering his current income even without Social Security benefits. It simply means that he no longer is prevented from engaging in some kind of substantial gainful work, regardless of how menial it might be. Further, regarding a statement in his psychologist’s most recent report that the claimant has significant agitated depression and anxiety, this was not shown in the psychiatric examination [apparently, by Dr. Johnston] and is inconsistent with the nature and extent of his daily activities, and accordingly I cannot find it of such severity as to prevent work activity.”

After reviewing the AU’s decision, the Appeals Council amended it only to reflect cessation of the plaintiff’s disability as of November, 1980 (thereby extending his benefits two months) but affirmed it in all other respects. This became the final decision of the Secretary on June 4, 1982. Discussion

In the instant case, the sole issue is whether the plaintiff’s eligibility for disability benefits was improperly terminated by the Secretary, based upon the determination that plaintiff’s disability had ceased.

Section 223(d)(1) of the Act defines disability as the “inability to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or which has lasted or can be expected to last for a continuous period of not less than 12 months.” Section 223(d)(2)(A) further provides that “an individual shall be determined to be under a disability only if his physical or mental impairment or impairments are of such se-' verity that he is not only unable to do his previous work but cannot, considering his age, education, and work experience, engage in any other kind of substantial gainful work...”

Once evidence has been presented to support a finding that a given condition of disability exists, the general rule adhered to by this Court is that the condition has remained unchanged. See Delamater v. Schweiker, 721 F.2d 50 (2d Cir.1983); Simpson v. Schweiker, 691 F.2d 966 (11th Cir.1982) (citing Rivas v. Weinberger, 475 F.2d 255 (5th Cir.1973)). The Secretary, however, may terminate disability benefits whenever presented with evidence that a claimant’s disability has ceased. 42 U.S.C. § 425; 20 C.F.R. § 404.1590(a) and 404.-1594(a).

It is clear that a final decision of the Secretary will be sustained if it is supported by “substantial evidence” on the record as a whole. See Cutler v. Weinberger, 516 F.2d 1282 (2d Cir.1975). Substantial evidence has been defined as “more than a mere scintilla. It means such relevant evidence as a reasonable mind might accept as adequate to support a conclusion.” See Richardson v. Perales, 402 U.S. 389, 401, 91 S.Ct. 1420, 1427, 28 L.Ed.2d 842 (1971).

In order to determine whether there is substantial evidence to support the Secretary’s conclusion, we must apply the correct legal standards to the facts of the instant case in evaluating the evidence of plaintiff’s disabilities. See De Leon v. Secretary, 734 F.2d 930, 936 (2d Cir.1984). These standards are: (1) the medical improvement standard; (2) the combination of impairments standard; and (3) the testimony of treating experts standard. De Leon, supra.

Under the medical improvement standard, the proper inquiry is whether the Secretary’s finding of improvement — to the point of no disability — is supported by substantial evidence. See Simpson, supra. The underlying rationale for this is the principle of res judicata; as cogently explained elsewhere, “if a termination of benefits were effected without a showing either of improvement or newly discovered evidence, such a termination would of necessity be based on whim or caprice or would constitute an impermissible relitigation of facts and determinations already finally decided.” Shaw v. Schweiker, 536 F.Supp. 79, 83 (E.D.Pa.1982). Furthermore, we must find that there was adequate comparison of evidence between plaintiff’s condition at the time he was initially found to be disabled and his condition at the time of the administrative hearing, in order to provide substantial support for finding the requisite medical improvement. De Leon, supra, at 937. In addition, once a claimant meets his burden under 42 U.S.C. § 423(d) of showing that his physical impairment is severe enough to preclude a return to his former employment, the burden shifts to the Secretary to show the existence of “alternative substantial gainful work” consistent with plaintiff’s physical capability, age, education, experience, and training. See Ghazibayat v. Schweiker, 554 F.Supp. 1005 (S.D.N.Y.1983).

In the case before us, the administrative record shows that the AU did compare plaintiff’s condition at the time he was initially found to be disabled and his condition at the time of the hearing below. Both the medical evidence and plaintiff’s testimony reflect that, to some degree, he could lift, exercise, mow the lawn, rake leaves, and drive an automobile. In other words, despite some lingering infirmity, plaintiff could “get around.” Based upon this evidence, the AU concluded that medical improvement had been demonstrated to warrant a finding of “no disability.”

While we support the proposition that an injured man, once recovered, should do what he can perform, we find that the AU failed to take into account the organic brain syndrome and consequent psychological impairments which the evidence overwhelmingly demonstrates plaintiff suffered from at the time of the hearing below. Consequently, we conclude that the AU failed to apply the combination of impairments standard, or the testimony of treating experts standard; each of these errors constitute adequate grounds for reversal. De Leon, supra.

Under the combination of impairments standard, “all complaints ... must be considered together in determining ... work capacity.” De Leon, supra (citing Gold v. Secretary, 463 F.2d 38, 42 (2d Cir.1972)). In the instant case, it is undisputed that plaintiff suffers from a severe organic brain syndrome resulting from head injuries incurred in the accident.

In addition to this impairment, there is evidence from his treating physicians that plaintiff suffers understandably from frustration over his current state, and that requiring him to seek an entry level position might provoke an “abrupt, reactive, severe depression with suicidal potential.” (Tr. 173, Dr. Richard Kovner) While we are cognizant of the notorious difficulties encountered in making accurate psychiatric diagnoses, we are compelled to the conclusion that plaintiff’s lingering motor damage, in combination with the memory problems associated with his organic brain syndrome and the purported psychological disorder with possible tragic consequences, warrants a reversal of the decision below.

Finally, we find that the AU failed to give proper weight to the expert opinions of the treating physicians. See Aubeuf v. Schweiker, 649 F.2d 107 (2d Cir.1981). He was unimpressed by the opinions of plaintiff’s treating physicians and found that plaintiff’s psychological impairment was not “of such severity as to prevent work activity.” He also afforded little weight to the opinion of the treating surgeon, Dr. Appell, whose recommendation was that plaintiff be considered as disabled for another year. We find that the AU relied primarily upon his own observations of plaintiff, and on the evidence presented by the non-treating physicians who were consultants for the SSA. Thus, he failed to give the required weight to the views of the experts treating the plaintiff. This too warrants our disagreement with the decision below.

We stress that we would uphold the finding below if not for its drastic adverse effect (possibly irremediable) upon the plaintiff; the fact that he could arguably perform some menial tasks leaves unanswered: at what price?

Proper application of the relevant legal standards to the facts of this case mandates our conclusion, that the Secretary’s finding that plaintiff is not disabled is not supported by substantial evidence on the record before us.

Conclusion

Accordingly, the determination by the Secretary is reversed. Further, we direct that a reappraisal of the claimant’s benefits be made consistent with this opinion.

SO ORDERED.

      . 20 CFR App. I, subpart P of Part 404, § 12.02 (1983) provides: 12.02 Chronic brain syndromes (organic brain syndromes) ... A. Demonstrated deterioration in intellectual functioning, manifested by persistence of one or more of the following clinical signs: 1. Marked memory defeet for recent events; or 2. Impoverished, slowed, perseverative thinking, with confusion or disorientation; or 3. Labile, shallow, or coarse affect; B. Resulting persistence of marked restriction of daily activities and constriction of interests ...


source: Caselaw Access Project

author: NORTHROP, Senior District Judge.

license: Public Domain

text:
    AD+SOIL SERVICES, INC. v. The BOARD OF COUNTY COMMISSIONERS OF QUEEN ANNE’S COUNTY, et al.
    Civ. A. No. N-83-4413.
    United States District Court, D. Maryland.
    June 25, 1984.

      Benjamin R. Civilettei, J. Phillip Jordan, James A. Dunbar, and Venable, Baetjer & Howard, Baltimore, Md., for plaintiff.
    Roger D. Redden and Piper & Marbury, Baltimore, Md., for defendants.
   MEMORANDUM

NORTHROP, Senior District Judge.

Plaintiff, Ad+Soil Services, Inc., (“Ad+Soil”), is a Pennsylvania Corporation in the business of transportation, processing, and storage of sludge and the incorporation of sludge into farmland, where the sludge enriches the soil. Plaintiff brought this action for a declaratory judgment pursuant to 28 U.S.C. sections 2201 and 2202. Plaintiff alleges that certain of the recent amendments to the Queen Anne’s County Comprehensive Zoning Ordinance are violative of the Constitutions of the United States and the State of Maryland and invalid under other laws of Maryland. Presently before this Court is a motion to dismiss filed by the defendants: the Board of Commissioners of Queen Anne’s County, Oscar A. Schultz, President of the Board, Thomas F. Pierson, Vice-President of the Board, Vernon B. Sultenfuss, County Commissioner and Wayne L. Gardner, Zoning Administrator. (Hereinafter collectively referred to as “the Board”). The motion is based upon the doctrine of abstention. Defendants argue that this Court should abstain based upon principles of federalism because such principles are particularly significant where the land use and zoning policies of a local government are at issue. Oral argument by counsel for the parties was heard on June 21, 1984.

FACTS

The relevant facts as stated in the complaint are as follows: In June of 1982, Ad+Soil, entered into a contract with the Washington Suburban Sanitary Commission. Ad-(-Soil contracted to dispose of sludge generated by the Blue Plains Wastewater Treatment plant located just outside Washington, D.C. The Blue Plains plant serviced residents of the District of Columbia and its Virginia and Maryland suburbs. Ad+Soil started operations under the contract in September of 1982. Ad+Soil sought a state permit in order to use a farm zoned “A-l” as a sludge storage, transfer, and distribution facility. On December 21, 1982, the County Zoning Administrator issued a cease and desist order prohibiting Ad-(-Soil from operating a sludge storage facility in an “A-l” zone. Gardner later advised Ad-(-Soil that the proper zone would be a “B-2” zone. (Complaint, Exhibit C). Thereafter, Ad-(-Soil leased a tract of B-2 zoned land from R.B. Baker & Sons, Inc. (“the Baker property”).

In June of 1983, Ad+Soil began preparation of the facility on the Baker property. Throughout this time period, Ad+Soil representatives had been conferring with county officials “to determine whether Ad+Soil and/or Baker would be required to take further action with respect to the facility.” (Complaint, paragraph 23). On August 23, 1983, Gardner notified Baker that it would have to comply with conditions concerning a prior “conditional use” agreement before zoning permits could be issued for the sludge facility. Baker thereafter filed an application for relief from the conditional use agreement.

On September 1, 1983, Ad+Soil filed an erosion and sedimentation control plan with the county office of the Soil Conservation Service of the United States Department of Agriculture (“SCS”). This plan was for a portion of the Baker property which was in an “M-2” district and which plaintiff refers to as “the Route 18 site.” After some changes were made, the SCS approved the plan and forwarded the approved plan to the County Planning Commission. The County Commission accepted the application and referral fees, but refused to issue the permit at that time. On September 13, 1983, after complying with the state procedures, Ad+Soil submitted an application for a zoning certificate and a building permit with Queen Anne’s County. Ad+Soil was informed that no action would be taken until after a hearing was held on the above-mentioned Baker application. Such a hearing was held and the board voted unanimously to grant the Baker application.

However, subsequent to the decision to grant the Baker application, Ad+Soil’s applications previously submitted were not acted upon. Two weeks after the Baker decision, on October 11, 1983, the County Commissioners met to' consider proposed amendments to the County’s zoning ordinance. The amendments would require conditional use approval for sludge storage and distribution in an “M-2” zone. This apparently took Ad+Soil by surprise since Ad+Soil officials had asked Gardner to keep them informed of zoning amendments which related to sludge operations. (Complaint, Exhibit N). On October 25, 1983, the County Commissioners adopted the amendments. Pursuant to the amendments, Ad+Soil would have to obtain a conditional use permit. On December 22, 1983, Ad+Soil filed this action.

Plaintiff states five theories of recovery in the complaint which can be summarized as follows: 1.) the amendments to the zoning ordinance are so arbitrary and without rational basis that they violate the Fifth and Fourteenth Amendment guarantees of due process (as well as the parallel Maryland constitutional provisions); 2.) the actions of the County and its officials over the past two years present such an egregious pattern of bad faith and harassment that they violate the most basic guarantees of procedural due process contained in the Fifth and Fourteenth Amendments to the United States Constitution; 3.) the amendments are invalid as beyond the zoning power of the County; 4.) the amendments are preempted by a comprehensive state regulatory scheme; and 5.) that the amendments are in irreconcilable conflict with state statutory law. Plaintiff seeks injunctive and declaratory relief.

DISCUSSION

As noted above, defendants move this Court to abstain from granting the relief requested by plaintiff because federal judicial intervention into the zoning and land use policies of Queen Anne’s County and the State of Maryland would result in inappropriate and unnecessary federal interference with a complex state regulatory arrangement concerning important matters of state policy for which impartial and fair state remedies are available.

Initially, the abstention doctrine in general will be reviewed. It is well established as a matter of federal law that abstention is the exception and not the rule. Colorado River Water Conservation District v. United States, 424 U.S. 800, 813, 96 S.Ct. 1236, 1244, 47 L.Ed.2d 483 (1976); Planned Parenthood of Maryland, Inc. v. Mayor and Alderman of Annapolis, Civ. No. N-78-501 (D.Md., April 7, 1978). However, there are three basic categories of cases where abstention is appropriate. Abstention under the standard set forth in Railroad Commission of Texas v. Pullman Co., 312 U.S. 496, 61 S.Ct. 643, 85 L.Ed. 971 (1941), is appropriate to avoid deciding a federal constitutional issue where the case may be disposed of by a decision on questions of state law. Abstention under Burford v. Sun Oil Co., 319 U.S. 315, 63 S.Ct. 1098, 87 L.Ed. 1424 (1943), is appropriate to avoid needless state-federal friction caused by federal interference with the administration by the state of its own purely local affairs. Abstention under Younger v. Harris, 401 U.S. 37, 91 S.Ct. 746, 27 L.Ed.2d 669 (1971), is appropriate where, absent bad faith harassment or a patently invalid state statute, federal jurisdiction has been invoked to restrain a state civil or criminal law enforcement proceeding. See generally, Kent Island Joint Venture v. Smith, 452 F.Supp. 455, 461 (D.Md.1978). Clearly, Younger -type abstention is not appropriate in the instant case. The issue for present determination is whether Pullman abstention, Burford abstention, or both, are appropriate in this instance.

The basic principle behind both Pullman and Burford abstention is that the federal courts should exercise discretion in the use of their equitable powers, particularly when asked to enjoin state officiáis in the exercise of their duties. This is especially true concerning local land disputes. Federal courts should refrain from injecting themselves into such disputes pri- or to adjudication by the state courts. See: Ahrensfeld v. Stephens, 528 F.2d 193 (7th Cir.1975). The instant case involves a local land dispute in which plaintiff challenges the actions of the Board and the propriety of the zoning amendments. It should be noted with emphasis that this case was brought prior to plaintiff’s allowing the state court to review and interpret the amendments. It is particularly appropriate in zoning cases to allow the state court an opportunity to interpret the laws because “zoning clearly involves matters entirely within the realm of the state and local governments with which they are singularly familiar, and there are few local issues more sensitive.” Planned Parenthood v. Mayor and Alderman of the City of Annapolis, Civil No. N-78-501, slip op. at 5 (D.Md. April 7, 1978).

Moreover, defendants point out that Ad+Soil has not exhausted all state remedies. Plaintiff argues that under the Fourth Circuit decision in Wohl v. Keene, 476 F.2d 171 (4th Cir.1973), the issue of whether adequate state remedies exist is irrelevant to abstention. This may be true; however, a distinction must be made between state judicial remedies such as the various avenues of appeal available in the Maryland State courts, and the county zoning permit procedures. It is this Court’s view that plaintiff’s action is premature since they have failed to even apply for the conditional use permit. It is this type of premature action that the Pullman abstention doctrine seeks to prevent. The Pullman doctrine indicates that the federal court should refrain to adjudicate matters where the state has not had an opportunity to act and where the state’s action may avoid unnecessary resolution of a federal constitutional issue. Here, the zoning board may yet grant the permit to Ad+Soil. This may resolve the entire matter.

Plaintiff, however, argues that because Ad+Soil has invoked this Court’s diversity jurisdiction, they are entitled to have their state law issues concerning the validity of the zoning amendments decided in this Court. This Court disagrees that diversity jurisdiction absolutely precludes abstention. Although Judge Winter stated in the Wohl case that the discretion to abstain is especially limited in diversity cases, it must be noted that in the Wohl case, Judge Winter specifically found that there was not an unsettled question of state law that only a state tribunal could authoritatively construe. Wohl v. Keene, 476 F.2d 171, 174 (4th Cir.1973). See also: Educational Services v. Maryland State Board for Higher Education, 710 F.2d 170, 175 (4th Cir.1983) (where it was held that abstention was not appropriate where there was no state issue which could be ruled upon, thus the federal constitutional issue could not, in any event, be avoided.) Even though diversity jurisdiction exists, the same considerations of comity and avoiding federal intervention into local land use policies still apply. See, Smith v. Metropolitan Property, 629 F.2d 757 (2d Cir.1980) (where it was held that abstention was appropriate despite existence of diversity jurisdiction, since federal court should not intervene in state policies concerning a comprehensive insurance regulation scheme.)

Here, the new zoning amendments have never been interpreted by the state courts. Although one issue is pending before Judge Raisin of the Circuit Court for Queen Anne’s County, that issue is whether, under the former zoning law prior to the amendments, a conditional use permit would be required for sludge operations. The present question whether the sludge operations have been preempted by the Regulations of the Maryland Department of Health and Mental Hygiene is an unsettled question of state law.

Plaintiff suggests that, if this Court finds that the issue is unsettled, then it should be certified to the Court of Appeals of Maryland. However, under these circumstances, there is no advantage to following that procedure since the only federal question left for decision would be that involving due process. Instead, it would be far more beneficial to the parties in this action to have the matter fully resolved in the state court. Indeed, the facts of this case fall well within the ruling of the United States Court of Appeals for the Fourth Circuit in Fralin & Waldron, Inc. v. City of Martinsville, 493 F.2d 481 (4th Cir. 1974), which states:

All of [the plaintiff’s] claims raise legitimate questions involving municipal zoning ordinances, the correct construction of local land use law ..., and the delineation of the proper scope and exercise of local administrative discretion. Understandably, the courts of Virginia have extensive familiarity and experience with such matters, and we believe that they should have the initial opportunity to pass upon them. A state adjudication may well avoid the necessity of a decision on the federal constitutional questions] presented as well as avoid needless friction in federal-state relations over the administration of purely state affairs.

493 F.2d at 482-83. See also: Caleb Stowe v. County of Albemarle, 724 F.2d 1079, at 1080-1081 (4th Cir.1984).

This Court finds that, under the above-cited authorities, abstention is appropriate in this action. It now must be decided whether jurisdiction should be retained pending the state court adjudication. The usual procedure is to retain jurisdiction in Pullman situations and to dismiss in Bur-ford situations. Where abstention is appropriate under both doctrines, a federal court should refer all issues in the case to the state court and not retain jurisdiction. Kent Island Joint Venture v. Smith, 452 F.Supp. 455 (D.Md.1978); Planned Parenthood, supra; Santa Fe Improvement v. City of Chula Vista, 71 F.R.D. 573 (S.D.Cal.1976).

In the instant case, Pullman abstention is appropriate because unsettled issues of state law exist including issues concerning preemption by state law and the Board’s authority to enact the amendments. Also, it is possible that plaintiffs could obtain the necessary conditional use permit if they submit a proper application. Moreover, the outcome of the state litigation may avoid the need to decide the federal constitutional issue. Regarding Bur-ford abstention, this Court finds that the Burford considerations also apply to the instant case, since it is clearly a local land use case. Zoning has repeatedly been held to be a particularly local affair. See generally: Note, Land Use Regulation, The Federal Courts, and The Abstention Doctrine, 89 Yale L.J. 1134, 1142 (1980). Thus, under both Pullman and Burford, abstention is appropriate.

Having found that both Pullman and Burford considerations are present, this Court will abstain from deciding this case and will dismiss the action.

A separate Order will be issued in accordance with this Memorandum.


author: OBERDORFER, District Judge.

text:
    SEA-LAND SERVICE, INC., Plaintiff, v. Elizabeth Hanford DOLE, et al., Defendants. FOSS ALASKA LINE, INC., et al., Plaintiffs, v. Elizabeth Hanford DOLE, et al., Defendants.
    Civ. A. Nos. 83-0929, 83-0972.
    United States District Court, District of Columbia.
    June 26, 1984.

      Edward M. Shea, Francis W. Fraser, James A. Kahl, Ragan & Mason, Washington, D.C., for Sea-Land Service, Inc.
    Harold E. Mesirow, Richard D. Gluck, Lillick, McHose & Charles, Washington, D.C., for Foss Alaska Line, Inc. and Western Pioneer, Inc.
    Gerry Levenberg, P.C., S. Lynn Sutcliffe, Ellen S. Young, Van Ness, Feldman, Sutcliffe, Curtis & Levenberg, Washington, D.C., for American President Lines, Inc. (intervening defendant).
    Alan P. Sherbrooke, Seattle, Wash., Mary A. Sheehan, Washington, D.C., for Totem Ocean Trailer Express, Inc. (plaintiff-intervenor).
    John Bayly, Asst. U.S. Atty., Cleveland Thornton, Dept, of Transp., Washington, D.C., for defendants.
   MEMORANDUM

OBERDORFER, District Judge.

On June 29, 1983, the Court granted summary judgment for the plaintiffs in these consolidated cases and declared an amended order of the Secretary of Transportation to be arbitrary, capricious, an abuse of discretion, and contrary to law. Both the Secretary of Transportation and defendant-intervenor American President Lines, Ltd. (“APL”) have moved to alter and/or amend that judgment on various grounds. The motions will be denied in an accompanying order.

At issue is a decision of the Secretary of Transportation authorizing APL to carry certain cargo between Dutch Harbor, Alaska, and Vancouver, British Columbia. The facts have already been summarized in the Court’s memorandum of June 29, 1983, which is attached as an exhibit. Nevertheless, the complexity of the legal and factual issues raised in the motions to alter and/or amend warrant a brief restatement.

I.

As our Court of Appeals has recently noted, Congress has enacted several statutes to protect American competitors in the merchant marine market. Sea-Land Service, Inc. v. Dole, 723 F.2d 975, 976 (D.C. Cir.1983). Under the Merchant Marine Act of 1936, ch. 858, 49 Stat. 1985 (codified as amended at 46 U.S.C. §§ 1101-1295g (1976 & Supp. V 1981)), the federal government subsidizes the construction and operation of certain American-flag vessels so they can compete, in foreign trade with foreign ships whose labor and operating costs are considerably lower. Conversely, the Merchant Marine Act of 1920, ch. 250, 41 Stat. 999 (codified as amended at 46 U.S.C. § 883 (1976 & Supp. V 1981)) (the “Jones Act”) protects American competitors in domestic trade between points in the United States by excluding foreign vessels from such carriage. A complex regulatory framework has been developed under these statutes not only to protect the American merchant fleet from lower cost foreign competition, but also to protect the unsubsidized domestic American merchant fleet from lower cost subsidized American competition. The latter concern is embodied in Sections 506 and 605(a) of the Merchant Marine Act of 1936, 46 U.S.C. §§ 1156 & 1175(a). Section 605(a) provides that:

[n]o operating differential subsidy shall be paid for the operation of any vessel on a voyage on which it engages in coast-wise or intercoastal trade.

46 U.S.C. § 1175(a). Section 506 requires that owners of subsidized American vessels agree that their ships will be operated exclusively in foreign trade or on a round the world voyage. 46 U.S.C. § 1156.

On January 31, 1983, Secretary of Transportation Drew Lewis issued a brief opinion and order that on its face was inconsistent with the statutory provisions noted above. The order, which reversed a contrary decision of the Maritime Subsidy Board, authorized APL, a subsidized American line, to carry cargo between Dutch Harbor, Alaska, and Vancouver, British Columbia. Under the order, the cargo carried between these ports could originate in or be destined for points in the United States Pacific Northwest (“USPNW”), with connection to Vancouver by rail. It is not contested that all current cargo service between the USPNW and Dutch Harbor and other proximate Aleutian ports is conducted exclusively by unsubsidized American lines such as the plaintiffs in these cases. It is also undisputed that competition by a subsidized American line in the Dutch Harbor-USPNW trade could have a devastating effect on the business of the unsubsidized American carriers.

Faced with this threat by the Secretary’s January 31, 1983 decision, plaintiffs petitioned the Secretary for reconsideration, and when no response appeared to be forthcoming, filed these lawsuits. The complaints asserted that the Secretary’s January 31, 1983, decision embodied improper interpretations of both APL’s Operating Differential Subsidy (“ODS”) agreement and the Merchant Marine Act of 1936.

While the suits were pending, but before summary judgment motions became ripe, the new Secretary of Transportation, Elizabeth Dole, issued an opinion and order granting in part and denying in part plaintiffs’ motions for reconsideration. Opinion and Order of May 31,1983. In the January 31, 1983, decision, Secretary Lewis had interpreted a phrase in APL’s longstanding ODS agreement which limited APL to “overseas carriage.” Although trade between the USPNW and Dutch Harbor via Vancouver would clearly be “coastwise” (i.e., domestic) trade within the meaning of the Merchant Marine Act of 1936, Secretary Lewis concluded that it would also be “overseas” trade within the meaning of the ODS contract because it was “transoceanic carriage ... over the 1700-plus nautical miles between the foreign port of Vancouver and the domestic port of Dutch Harbor.” Decision and Order of January 31, 1983, at 3. Secretary Lewis failed to explain, however, how such carriage could be squared with the Merchant Marine Act of 1936.

Secretary Dole’s opinion on reconsideration embraced Secretary Lewis’s novel interpretation of the ODS contract, but also added lengthy discussion explaining why carriage of cargo from Dutch Harbor to Vancouver for transshipment to the USPNW would not violate the provisions of the Merchant Marine Act of 1936 that barred subsidized shippers from coastwise trade. In that portion of the May 31, 1983, opinion, Secretary Dole concluded that the term “coastwise trade” in 46 U.S.C. § 1175(a) did indeed mean domestic trade, even though the term “overseas trade” in the ODS agreement did not mean foreign trade. Nevertheless, she concluded that APL could still carry cargo from Dutch Harbor to Vancouver and then transship it by rail to points in the United States. She reasoned that 46 U.S.C. § 1175(a), in barring subsidized shippers from coastwise (i.e., domestic) trade, was really intended by Congress only to bar subsidized shippers from that portion of the domestic market that was protected from foreign competition by the Jones Act, 46 U.S.C. § 883 (1976 & Supp. V 1981). She then interpreted the third proviso of the Jones Act as creating the possibility that foreign ships could carry cargo between Dutch Harbor and the USPNW via Vancouver. Opinion and Order of May 31, 1984, at 15. Since foreign shippers might compete in the future with unsubsidized American lines in the Vancouver-Dutch Harbor trade, the Secretary reasoned, subsidized American carriers should be able to compete with unsubsidized American lines on that route as well.

In its memorandum of June 29, 1983, the Court accepted the Secretary’s interpretation of the ODS contract, but found the Secretary’s interpretation of the Merchant Marine Act of 1936 to be untenable. Although the Secretary’s interpretation of the ODS agreement was questionable, it appeared to lie within the limits of the agency’s discretion in interpreting documents that it had itself created. Memorandum Opinion of June 29, 1983, at 5. The Secretary’s interpretation of the provisions of the Merchant Marine Act of 1936 barring subsidized shippers from coastwise trade, however, were a different matter. Based on a review of the administrative record, the Court found it to be arbitrary, capricious, an abuse of discretion, and contrary to law to interpret a provision barring coastwise trade by subsidized lines such as APL in a way that permitted a subsidized line such as APL to engage in coastwise trade. Such an interpretation, the Court reasoned, flew in the face of the clear statutory intent of 46 U.S.C. § 1175(a), which was to protect unsubsidized lines such as plaintiffs here from competition by subsidized lines such as APL on domestic cargo routes. Memorandum Opinion of June 29, 1983, at 6-7.

II.

Unfortunately, the Memorandum Opinion of June 29, 1983, appears to have created an unintended ambiguity and to have tabled a related issue that must now be addressed. The ambiguity was created when the Court, after rejecting the Secretary’s interpretation of 46 U.S.C. § 1175(a), noted in passing that there was in fact no actual or potential foreign competition in the Alaska-USPNW trade. The absence of actual foreign competition was undisputed, but the Court noted as well that potential foreign competition was barred because the joint rate tariffs requisite to such competition were non-existent. Memorandum Opinion of June 29, 1983, at 7.

In their motions' to alter or amend the Court’s judgment, the Secretary and APL have gone to considerable lengths to show that there is potential foreign competition in the Dutch Harbor-USPNW trade. Thus, the Secretary has solicited letters from government officials indicating that it is possible that & foreign carrier could press for appropriate joint rate tariffs (although not for the container cargo that apparently predominates the current trade of APL) and might in the future enter the market. See United States Motion to • Alter or Amend Judgment at 3-7 (filed July 15, 1983).

However tenuous these documents as support for the proposition that there is a realistic threat of foreign competition in the Dutch Harbor-USPNW trade, the Court need not discredit them. They are irrelevant simply because the presence or absence of potential foreign competition is irrelevant to the validity of the Secretary’s interpretation of 46 U.S.C. § 1175(a). That interpretation fails on the face of the express statutory provision, which says, and was intended to say, that subsidized American lines shall not compete on coastwise routes (such as that between Dutch Harbor and the USPNW) with unsubsidized domestic carriers. The Court can find nothing in the Jones Act’s third proviso or the legislative history of the proviso noted by the Secretary which contradicts this clear command of the Merchant Marine Act of 1936. To the extent the Court, in its June 29, 1983, opinion, noted the weakness of the Secretary’s allegations concerning potential foreign competition, it was merely underscoring the faults in the Secretary’s position even assuming that her interpretation of the Merchant Marine Act of 1936 was correct. Because that interpretation was incorrect, the discussion of foreign competition was not essential to the opinion.

In ruling against the Secretary on June 29, 1983, the Court was not unaware of the principle, recently emphasized by our Court of Appeals, that the judiciary’s job is not to provide its own original construction of the Secretary’s governing statute, but rather to determine whether the Secretary’s construction is sufficiently reasonable to be allowed. Sea-Land Service, Inc. v. Dole, supra, 723 F.2d at 979. Accepting this standard, the Court has held that when the Congress expressly barred subsidized American vessels from “coastwise” trade, and notably omitted Alaska-USPNW trade from the exceptions, it meant what it said. It did not mean to permit what was expressly barred — coastwise trade by APL between Alaska and the USPNW — merely because another proviso in another statute created the possibility, however remote, of foreign competition on that route. The Court here holds that it is not “sufficiently reasonable” to interpret the statute in a way that ignores the demonstrable, undisputed threat of subsidized competition with unsubsidized lines — a threat that 46 U.S.C. § 1175(a) was expressly intended to disarm — simply because of the somewhat uncertain threat of foreign competition created by the Secretary’s as yet untested interpretation of the third proviso of the Jones Act. Accordingly, to the extent the Secretary’s opinion and order permit carriage between Dutch Harbor and Vancouver with direct transshipment to or from the USPNW, it is invalid and contrary to law.

When the Court reached this conclusion in the Memorandum Opinion of June 29, 1983, it appeared that no further analysis of the issues presented in the briefs was required. Plaintiffs had advanced several arguments against the Secretary’s actions in addition their reliance on 46 U.S.C. § 1175(a), but the Court found it unnecessary to reach them. Memorandum Opinion of June 29, 1983, at 5 n. 2. The Court assumed from the briefs that all carriage by APL between Dutch Harbor and Vancouver would be barred by its interpretation of 46 U.S.C. § 1175(a).. The motions to alter or amend the judgment correctly point out, however, the Court’s holding would only bar that portion of APL’s Dutch Harbor-Vancouver carriage which originates in or is destined for the lower 48 states without prior interim processing into other products in Canada. Section 605(a) of Merchant Marine Act of 1936, even as interpreted by the Court, does not bar a subsidized shipper from carrying cargo of Canadian origin or destined for Canadian use or consumption between Dutch Harbor and Vancouver, nor does it bar transport of goods that are to be processed into other products in Canada prior to their export to the United States. As the motions to alter and amend indicate that some of APL’s anticipated Dutch Harbor-Vancouver cargo falls in these latter categories. Accordingly, the Court must address the plaintiffs’ additional arguments which were expressly tabled in the June 29, 1983, memorandum.

III.

In addition to their other contentions, plaintiffs argue that APL is barred from carrying any cargo between Vancouver and Dutch Harbor by the first clause of section 605(c) of the Merchant Marine Act of 1936, 46 U.S.C. § 1175, which provides:

No contract shall be made under this subchapter with respect to a vessel to be operated in an essential service served by citizens of the United States which would be in addition to the existing service, or services, unless the Secretary of Transportation shall determine after proper hearing of all parties that the service already provided by vessels of United States registry is inadequate, and that in the accomplishment of the purposes and policy of this chapter additional vessels should be operated thereon; — [Emphasis added.]

Citing Sea-Land Service, Inc. v. Connor, 418 F.2d 1142 (D.C.Cir.1969), plaintiffs contend that carriage between Dutch Harbor and Vancouver would constitute additional subsidized service within the meaning of the first clause of section 605(c). Since no hearing on the adequacy of existing service on that route has been held, plaintiffs reason, the Secretary’s decision authorizing subsidized Vancouver-Dutch Harbor carriage must be struck down.

The Secretary and APL counter these arguments by asserting that Vancouver-Dutch Harbor carriage by APL is not “in addition to the existing service” because such carriage is within the scope of APL’s current ODS agreement. Thus APL states that

The request for a contract interpretation [by the Secretary that would permit Dutch Harbor-Vancouver service] did not result in a proceeding to approve a “new” or “additional” service to be operated by APL. The effect of the Secretary’s interpretation is not to authorize a new or additional service because, as the Secretary found, Vancouver-Dutch Harbor service is authorized by APL’s contract and in reasonably general accord with service on trade route 29 operated by APL.

APL Memorandum in Support of Motion for Summary Judgment at 57 (filed June 7, 1983).

Secretary Dole’s Opinion and Order of May 31, 1983, explains in greater detail why a section 605(c) hearing on Dutch Harbor-Vancouver service by APL is unnecessary. According to the Secretary’s interpretation of the ODS agreement, Vancouver-Dutch Harbor service is “overseas” service and thus is authorized by the agreement. Because plaintiffs had an opportunity to challenge APL’s “overseas” carriage in a 1967 hearing pursuant to the first clause of section 605(c), and in a 1975 hearing on renewal of the subsidy contract pursuant to the second clause of section 605(c), the Secretary argues that no new hearing can now be required. Opinion and Order of May 31, 1983, at 8-11.

With all due respect to the Secretary’s contract interpretation, her conclusion that APL’s carriage of cargo between Dutch Harbor and Vancouver would not be “in addition to existing service” is just not sufficiently reasonable to be allowed. It was not until after 1980 that any party to this litigation seriously contended that APL’s ODS agreement contemplated trade between Vancouver and Dutch Harbor when it authorized “overseas” carriage. In the more than twenty-five years that APL has operated on trade route 29, it has never carried any cargo between Dutch Harbor and Vancouver. Indeed, various filings by APL in the administrative record indicate that APL itself was aware that its contract and the statute might, under some interpretations, bar such carriage.

Under such circumstances, it was not unreasonable for plaintiffs here to fail to challenge Dutch Harbor-Vancouver service in the earlier hearings. They were faced with a long history in which APL had chosen to carry no cargo between Dutch Harbor and Vancouver, and with a contract that limited APL to overseas carriage. They could reasonably expect that such contract language, combined with the past practice of APL, indicated that Vancouver-Dutch Harbor carriage, with transshipment to the USPNW, was “coastwise” carriage rather “overseas” carriage, and hence would not take place. Now they are suddenly confronted with the Secretary’s novel interpretation of the term “overseas” in the ODS agreement, an interpretation which authorized the service they reasonably believed was barred. A due regard to the purposes and policy of the Merchant Marine Act of 1936 requires that they be given an opportunity to show that existing Dutch Harbor-Vancouver service by United States registry vessels is adequate.

Such a holding is also consistent with the statutory requirement of a hearing when service “in addition to the existing service” is proposed. At the outset, it is notable that “the presumption stands in favor of a hearing rather than the other way around,” and that “for a hearing to pass muster in this court, it must be impeccably dressed with fairness.” Sea-Land Service, Inc. v. Connor, supra, 418 F.2d at 1146 & 1149. It cannot seriously be claimed that there has already been a hearing “impeccably dressed with fairness” on APL’s proposed Dutch Harbor-Vancouver carriage. At most, there was a hearing on APL’s entire trade route 29 service in 1967, at which time it may reasonably have appeared that some Dutch Harbor-Vancouver service was barred. And since that time, the quality and degree of service by unsubsidized vessels of United States registry may well have changed substantially, especially since there has been no subsidized service by APL or anyone else in the interim.

Under such circumstances, the Court concludes that the first subsidized Dutch Harbor-Vancouver service in more than twenty-five years would be “new” and would be “in addition to existing service.” Cf Sea-Land Service, Inc. v. Connor, supra, 418 F.2d at 1148. A hearing in accordance with the first clause of section 605(c), followed by the appropriate findings contemplated by that clause, would accordingly be a prerequisite to APL’s subsidized Dutch Harbor-Vancouver service. As no such hearing, “impeccably dressed with fairness,” has taken place, the Secretary’s January 31, 1983, Order, as amended on May 31, 1983, cannot stand. On this separate and distinct ground, as on the grounds discussed in Part II of this memorandum, the motions to alter and/or amend the judgment are denied.

EXHIBIT A

MEMORANDUM

This matter is before the Court on the cross-motions for summary judgment filed by defendants and by plaintiffs, who are a number of unsubsidized sea carriers who serve ports in Alaska. Plaintiffs object to a decision by the Secretary of Transportation on January 31, 1983, as clarified on May 31, 1983, that American President Lines, Ltd. (APL) may carry domestic cargo between Dutch Harbor, Alaska and Vancouver, British Columbia. APL has intervened and has also filed for summary judgment. On June 16, 1983, the Court held a hearing on the various motions for summary judgment. For reasons more fully stated here, the accompanying Order will grant the plaintiffs’ motions and deny the motions filed by the Secretary and APL.

The Merchant Marine Act of 1920, generally known as the Jones Act, 46 U.S.C. § 883, and the Merchant Marine Act of 1936, 46 U.S.C. §§ 1156 and 1175(a), specifically restrict the voyages of U.S. flag vessels whose construction and operation are subsidized by the United States. Section 506 of the 1936 Act requires the owner of a subsidized vessel to “agree that the vessel shall be operated exclusively in foreign trade, or on a round the world voyage.” 46 U.S.C. § 1156. Section 605(a) of that same Act provides that

[n]o operating-differential subsidy shall be paid for the operation of any vessel on a voyage on which it engages in coast-wise or intercoastal trade.

46 U.S.C. § 1175(a). Both of these provisions exempt from their prohibitions stops at intercoastal ports on round-the-world voyages, voyages from the United States west coast to Europe, and voyages from the United States east coast to the Orient. In addition, subsidized vessels on voyages in foreign trade may stop at the State of Hawaii, or an island possession or island territory of the United States.” Stops at Alaska are conspicuously omitted from these exemptions.

The Secretary of Transportation has implemented these and other statutory provisions in an Operating-Differential Subsidy Agreement (MA/MSB-417), which subsidizes APL to permit it to compete effectively in foreign trade. The agreement specifically restricts APL’s service at ports in Alaska and British Columbia to “overseas carriage.”

On March 9, 1979, and again on April 14, 1982, APL asked the agency to interpret the Agreement so as to permit the carriage of cargo between Dutch Harbor and Vancouver. The Maritime Subsidy Board (MSB) denied that request, but on January 31, 1983, Secretary Lewis reversed that decision. Secretary Lewis’s decision was reaffirmed, with modifications, by Secretary Dole on May 31, 1983.

In deciding to permit APL to carry domestic cargo between Dutch Harbor and Vancouver, the Secretary addressed both the contract and the statutes. The contract phrase “only for overseas carriage” was found to have been “originally intended to preclude short-run ‘coasting’ from the United States Pacific Northwest and Alaska to British Columbia.” Opinion and Order Granting Reconsideration in Part and Denying Reconsideration in Part at 5 (May 31, 1983) (hereinafter “Reconsideration Order). By contrast:

[T]he long and often difficult carriage over the 1,724 nautical miles between the foreign port of Vancouver and the isolated Aleutian Island port of Dutch Harbor, located on the western extremity of the Gulf of Alaska, constitutes overseas transportation.

Id. at 6.

To deal with the statutes barring use of subsidized vessels to transport cargo between U.S. ports, the Secretary invoked the so-called third proviso of the Jones Act. The Jones Act generally limits coastwise transportation of cargo to U.S. flag vessels constructed here and owned by U.S. citizens. The third exemption makes this limitation inapplicable to a voyage by a foreign built or foreign flag vessel carrying to and from a Canadian port cargo that arrived there over Canadian rail lines pursuant to a rail-water rate tariff that has been filed with and accepted by the Interstate Commerce Commission. 46 U.S.C. § 883. The Secretary concluded that voyages and cargoes permissible for foreign flag and foreign built vessels pursuant to the third provision should also be permissible for U.S. vessels subsidized by the U.S. As the Secretary put it:

[W]hen cargo moving between U.S. points is to be carried on a subsidized vessel between one of the U.S. points and an intermediate foreign point in a manner which, if the vessel were foreign, would be compatible with the Jones Act and other coastwise laws, such subsidized carriage would not be prohibited by sections 506 and 605(a).

Reconsideration Order at 14-15. According to the Secretary “the fact that no foreign flag vessels may now be plying the route is irrelevant because the cargoes can be carried by foreign vessels.” Id. at 15 n. 11 (emphasis added).

Plaintiffs have challenged the Secretary’s rulings on two principal grounds. Sea-Land focuses its attack primarily on the interpretation of the contract. Foss and Western Pioneer, on the other hand, challenge the Secretary’s interpretation of the governing statutes.

Sea-Land challenges the Secretary’s interpretation of the term “only for overseas carriage” used in the contracts between the Secretary and APL’s predecessors in interest. Sea-Land makes a strong argument that the earlier and authoritative interpretations of the term contemplated voyages to and from Vancouver to the Far East and to and from Dutch Harbor and the Far East, but did not contemplate cargo-carrying voyages between Vancouver and Dutch Harbor. Moreover, Sea-Land makes a strong case for its contention that changes in the service to permit APL’s predecessor to move cargo to and from Alaska west of longitude 155 did not convert voyages between Alaska (as redefined) and Vancouver from coastwise to “overseas” carriage.

However, Sea-Land is as familiar as are all these well-represented parties with the familiar litanies about the limits on a court’s authority to disturb an administrative agency’s interpretation of documents it has itself created. See, e.g., North Atlantic Westbound Freight Association v. Federal Maritime Commission, 397 F.2d 683, 685 (D.C.Cir.1968). If, as Sea-Land contends, the bare contract were the only fulcrum for decision here, the Court would defer to the Secretary’s interpretation as not so implausible and not such a radical departure from the earlier interpretations as to justify condemnation as arbitrary and capricious. The earlier interpretations relied on by Sea-Land did not turn upon the facts and issues that APL presented to the Secretary here. The Secretary’s present interpretation is questionable, but not outrageous. Since the prior interpretations were made in a different context, they do not automatically govern here.

The telling attack upon the Secretary’s decision comes from Foss and Western Pioneer. They state a syllogism and present a policy exposition that defendant and APL have failed to meet. These plaintiffs point to the double-barreled effect of sections 506 and 605(a): these statutes both require a U.S. subsidized carrier such as APL to confine itself to foreign trade and prohibit it from operating in the domestic coastwise trade between the Pacific Northwest and Alaska via Vancouver. The third proviso of the Jones Act, which permits a foreigneonstructed or a foreign flag vessel to engage in certain coastwise shipping, does not define that service as “foreign trade.” Instead, it merely provides an exception to the general rule that foreign vessels may also engage, in foreign trade. The third proviso is thus irrelevant for the purpose of defining the scope of the “foreign trade” permitted to subsidized U.S. carriers.

This interpretation of the relevant statutes fulfills the underlying policy purpose anticipated by Congress when it enacted the subsidy program: assisting U.S. vessels in meeting foreign competition. Foss and Western Pioneer demonstrate without contradiction that no foreign vessels now serve the Vancouver-Dutch Harbor route which the Secretary has authorized APL to enter. Even more important, they show that under existing statutes and regulations the joint rate tariffs requisite to foreign ship service coastwise between Vancouver and Dutch Harbor are non-existent. See American Trucking Associations, Inc. v. ICC, 656 F.2d 1115 (5th Cir.1981). There is no realistic possibility that any foreign carrier could qualify for such service. According to the Secretary:

The fact that no foreign flag vessels may now be plying the route is irrelevant because the cargoes can be carried by foreign vessels; the Act requires no more.

Reconsideration Order at 15 n. 11. This is a plain error of law.

The overriding purpose of the entire U.S. ship subsidy program is to meet foreign competition in U.S. foreign commerce. See 46 U.S.C. 1244(a). As the D.C. Circuit has stated:

The Act and its history make it clear that the operating subsidy established by 46 U.S.C. § 1171 was intended by Congress to be paid in order to meet foreign competition. It does not appear that Congress intended that the subsidy would compensate shippers which had no actual or potential competition from foreign lines.

State Marine International, Inc. v. Peterson, 518 F.2d 1070, 1077 (D.C.Cir.1975). The Secretary has not found that there is actual or potential competition from foreign lines that would justify sanctioning what is plainly coastwise service between Vancouver and Dutch Harbor by a subsidized U.S. carrier such as APL. Accordingly, the accompanying Order will declare that the decision of the Secretary authorizing APL to serve between Vancouver and Dutch Harbor is arbitrary and capricious, an abuse of discretion, and contrary to law. 5 U.S.C. § 706(2)(A).

/s/LOUIS F. OBERDORFER

UNITED STATES

DISTRICT JUDGE

Date: June 29, 1983

      . Plaintiff Sea-Land Service filed its complaint on March 30, 1983. Plaintiff Foss Alaska Line filed its complaint on April 4, 1983.

      . The third proviso states:
      That this section shall not apply to merchandise transported between points within the continental United States, including Alaska, over through routes heretofore or hereafter recognized by the Interstate Commerce Commission for which route tariffs have been or shall hereafter be filed with said Commission when such routes are in part over Canadian rail lines and their own or other connecting water facilities.
      46 U.S.C. § 883 (1976 & Supp. V 1981).

      . See Citizens to Preserve Overton Park, Inc. v. Volpe, 401 U.S. 402, 414, 91 S.Ct. 814, 822, 28 L.Ed.2d 136 (1971); 5 U.S.C. § 706(2)(A).

      . This portion of the Court’s opinion contained a clerical error that may have caused some confusion. On page 7, the word “also” in the first line should have read "only.”

      . Specifically, APL ships en route to the United States from the Orient would carry seafood from Dutch Harbor to Vancouver. En route from the United States to the Orient they would carry supplies from Vancouver to Dutch Harbor residents. There would be no bar to transhipment of the seafood overland from Vancouver to U.S. points or to shipments of Dutch Harbor-bound supplies from the U.S. to Vancouver.

      . Other issues raised include the authority of the Secretary to review and override the decisions adverse to APL made earlier by the Maritime Subsidy Board, the authority of that Board to address a matter allegedly committed to unreviewable direction of the head of the Maritime Administration (now the Assistant Secretary of Transportation), and the failure of the Secretary to afford the plaintiffs a hearing. Since the statutory issue is decisive, it is unnecessary to address these other issues.

      . For example, Sea-Land itself makes much of the fact that APL has never before provided the Vancouver-Dutch Harbor service for which it now seeks authority.


author: HOEVELER, District Judge.

text:
    FLORIDA NURSING HOME ASSOCIATION, INC., a non-profit corporation, University Park Convalescent Center, Inc., Ambrosia Home, Inc., Louise Russ, Theresa Hicks, Juliie Mae van Blount, Edward Anderson, Jimmy Lee Watson and Marilyn Morton as representatives of a class, Julia Mansell, in her own right and as representative of a class, Plaintiffs, v. William J. PAIGE, Jr., Secretary of the Department of Health and Rehabilitative Services of the State of Florida, Frank Groschelle, Regional Director of the Department of Health, Education and Welfare and Joseph A. Califano, Secretary of the Department of Health, Education and Welfare, Defendants.
    No. 77-559-CIV-WMH.
    United States District Court, S.D. Florida, Miami Division.
    Aug. 1, 1984.

      Bernard H. Dempsey, Jr., Karen L. Goldsmith, Dempsey & Goldsmith, P.A., Orlando, Fla., for plaintiffs.
    Alicia S. Jacobs, State of Fla., Dept, of Health and Rehabilitative Services, M. Stephen Turner, Culpepper, Turner & Mannheimer, Tallahasse, Fla., for state defendants.
    Richard K. Willard, Acting Asst. Atty. Gen., Washington, D.C., Stanley Marcus, U.S. Atty., Marc Fagelson, Asst. U.S. Atty., Miami, Fla., Lewis K. Wise, Elisa B. Vela, Loretta R. Pitt, Dept, of Justice, Civ. Div., Washington, D.C., for federal defendants; Jeffrey Golland, Dept, of Health and Human Services, Washington, D.C., of counsel.
   ORDER

HOEVELER, District Judge.

THIS CAUSE came before the Court on Defendants’ motions to dismiss for lack of jurisdiction. Defendants contend that the relief sought by plaintiffs is barred by the Eleventh Amendment.

HISTORY

Plaintiffs are nursing homes and a nursing home association. They brought suit against the State of Florida and the United States alleging that the plan under which Florida reimbursed them for services to Medicaid patients did not meet the standards set by the federal Medicaid law, and that as a result they were underpaid. At the time this action was brought, the Social Security Act, at 42 U.S.C. § 1396a(a)(13)(E), required that nursing homes be reimbursed “on a reasonable cost related basis” effective July 1, 1976. Florida was reimbursing the plaintiffs under a plan employing fixed maximum reimbursement rates. The State was relying on a regulation of the U.S. Department of Health, Education and Welfare which did not require states to begin reimbursing on a cost-related basis until January 1, 1978.

On October 18,1977, this Court issued an order in the related case of Golden Isles Convalescent Center, Inc. v. Califano holding that the plaintiff nursing homes in that case were entitled to Medicaid reimbursements on a “reasonable cost related basis,” effective July 1, 1976, as required by statute, and that HEW regulations were invalid insofar as they set any other effective date. Golden Isles Convalescent Center, Inc. v. Califano, 442 F.Supp. 201 (S.D.Fla.1977). By that Order (hereinafter the “October 18th Order”), the Court also directed HEW to determine whether Florida’s reimbursement plan (hereinafter the “original plan”) complied with that federal standard, and ordered that, if HEW found that the plan did not comply, the state must submit a new plan to HEW for approval. It was further held that any plan submitted must “make provision for the reimbursement to plaintiffs on a reasonable cost related basis for services rendered from the date of this Order prospectively.” On January 5, 1978, the October 18th Order order was adopted in the case at bar.

On July 7, 1978, the Court held that plaintiffs were barred by the Eleventh Amendment from recovering retroactive damages for reimbursement deficiencies occurring prior to the October 18, 1977, Order. That ruling was affirmed by the United States Supreme Court. Florida Dept. of Health and Rehabilitative Services v. Florida Nursing Home Ass’n., 450 U.S. 147, 101 S.Ct. 1032, 67 L.Ed.2d 132 (1981).

Pursuant to the October 18th Order, the State submitted for HEW approval a new reimbursement plan, called “Plan 77-13”. That Plan was approved by HEW, and, on September 16, 1978, the Court ordered the State to reimburse plaintiffs according to Plan 77-13 retroactively from October 18, 1977, the date the original plan was ruled inadequate. The Court reserved for trial the review of HEW’s finding that Plan 77-13 complied with the federal statutory standard.

On May 7, 1980, the Fifth Circuit held in Alabama Nursing Home Ass’n. v. Harris, 617 F.2d 388 (5th Cir.1980), that HEW procedures for reviewing and approving state Medicaid reimbursement plans were inadequate. The Fifth Circuit directed HEW, which by then had been renamed the Department of Health and Human Services, to devise new review procedures. On July 28, 1980, this Court ordered HHS to review Plan 77-13 under the new procedures created pursuant to the Fifth Circuit’s decision in Harris, and to issue monthly status reports on its progress. The parties dispute whether Plan 77-13 was ever approved by HHS under the new procedures. This issue need not be addressed in order to decide the motion now before the Court. The parties do agree that the Court never passed on the adequacy of Plan 77-13 or reviewed any approval by HHS under the new procedures, if there was such an approval.

Effective October 1980, the federal Medicaid statute was changed. Under the Boren Amendment, the federal standard for state Medicaid reimbursement plans was revised to provide that reimbursement rates must be “reasonable and adequate to meet the costs which must be incurred by efficiently and economically operated facilities ... .” The parties disagree as to whether this new language changed the substance of the standard and whether, assuming Plan 77-13 violated the old standard, Plaintiffs could recover damages for any deficiency that occurred after new standard took effect and before the Plan was found by the Court to violate the new standard. Even if the Court were to hold that Plaintiffs could not obtain damages for deficiencies occurring after the Amendment took effect, the issue presented in the present motion would remain alive, because plaintiffs might still be entitled to damages for the period prior to the statutory change.

In April, 1983, a third plan, called the Gainesville Plan took effect pursuant to the agreement of the parties. Thereafter, the Golden Isles plaintiffs settled all claims against the defendants. The Florida Nursing Home plaintiffs did not settle completely. They reserved the right to litigate their claim that the state did not adequately reimburse them under Plan 77-13 from October 18, 1977, to April, 1983, because Plan 77-13 did not meet the federal statutory standard. They do not claim that Plan 77-13 was not related to costs. Rather, they complain of certain technical defects in the plan which rendered payments thereunder not “reasonably” cost related and thus not in compliance with the federal standard and the Court’s October 18th Order. They seek damages in an amount equal to the difference between what they would have received during that period under a fully complying plan, and what they actually received under Plan 77-13.

DEFENDANTS’ MOTIONS

Defendants moved to dismiss, contending that, even if Plan 77-13 did not fully comply with the federal statute, plaintiffs may not recover for alleged inadequacies in Plan 77-13 because that plan has never been found by the Court to be invalid, and the Eleventh Amendment bars an award of damages for injuries incurred prior to such a finding. Put another way, plaintiffs may recover only for reimbursement deficiencies occurring after Plan 77-13 is ruled illegal by the Court. Since Plan 77-13 is no longer in use, there will be no such deficiencies.

Plaintiffs respond that the Eleventh Amendment does not bar the Court from awarding damages here because such damages are merely the costs of complying with the prospective injunctive Order of October 18th. Their argument runs as follows: On October 18, 1977, the court ordered the state to institute a plan that would reimburse plaintiffs on a “reasonably cost related basis,” as provided by federal statute, and that plaintiffs were entitled to be reimbursed under such a plan from the date of the October 18th Order forward. Defendants submitted Plan 77-13, which was the first attempt to comply with the Court’s Order. The Plan was implemented on an interim basis from October 18, 1977 forward,- but, plaintiffs assert, it did not comply with the October 18th Order because, although it was cost related, it had certain technical defects and was therefore not “reasonably” cost related.

The Eleventh Amendment, plaintiffs argue, does not prevent the Court from enforcing its original prospective order by requiring the state to pay according to a fully complying plan from the date of the original order. Such damages are merely the cost of compliance with the original prospective order. The funds spent would be the same funds that the state would have to spend to comply with the original order. If the Court could not award such damages, the defendants could disregard the Court’s orders at will. They could implement one non-complying plan after another and never be held liable for the deficiencies of those plans. Plaintiffs rely heavily on Hutto v. Finney, 437 U.S. 678, 98 S.Ct. 2565, 57 L.Ed.2d 522 (1978), discussed below.

Defendants argue that Plan 77-13 was the product of a good faith effort to comply with an order which did not direct a specific solution. Under those circumstances, they contend, the Court may not award damages which accrued before the plan is found to be non-complying by the Court. It may be true that the Court can order a state to pay damages which represent the cost of complying with a previously issued prospective injunction, but only when the injunction directs the state to take a reasonably specific action. Here the injunction was unspecific and indefinite about the amounts to be paid. In such a case, damages may be assessed only upon a showing that the State failed to act with reasonable diligence in attempting to comply. If this were not so, then at any time in the future plaintiffs could return to Court and complain about a new defect and receive damages retroactive to the date of the October 18, 1977 order. Here, for example, plaintiffs now seek damages for alleged defects in technical aspects of the Plan 77-13 that did not even exist in the original plan.

ANALYSIS

The Eleventh Amendment reads as follows:

The Judicial power of the United States shall not be construed to extend to any suit in law or equity, commenced or prosecuted against one of the United States by Citizens of another State, or by Citizens or Subjects of any Foreign State.

Although the Amendment does not explicitly bar suits against a state by its own citizens, the Supreme Court has consistently held that an unconsenting state is immune from suits brought in federal courts by its own citizens as well as by citizens of another state.

In the landmark case of Ex Parte Young, 209 U.S. 123, 28 S.Ct. 441, 52 L.Ed. 714 (1908), however, the Supreme Court held that the Eleventh Amendment did not bar an action in federal court to enjoin the Minnesota Attorney General from enforcing a statute claimed to violate the 14th Amendment. Thus, the Court established that a state may be sued in federal court for prospective injunctive relief. In later cases the Court made clear that suits for injunctive relief were not barred even when compliance with the injunction would cost the state a great deal of money. In Graham v. Richardson, 403 U.S. 365, 91 S.Ct. 1848, 29 L.Ed.2d 534 (1971), for example, suit was brought in federal court to enjoin two states from denying welfare benefits to otherwise qualifying aliens. In such cases, the fiscal consequences to the state are the necessary result of compliance with decrees which by their terms are prospective in nature. Such “ancillary effects” are permissible under the doctrine of Ex Parte Young.

Nevertheless, as the Court has recently reaffirmed in Edelman v. Jordan, 415 U.S. 651, 94 S.Ct. 1347, 39 L.Ed.2d 662 (1974), and on the interlocutory appeal in the case at bar, Fla. Dept, of Health and Rehab. Services, supra, the Eleventh Amendment prohibits a federal court from awarding damages against a non-consenting state to compensate foi past wrongs. Yet, as the Court recognized in Edelman, the difference between retroactive and prospective relief “will not in many instances be that between day and night.” 415 U.S. at 667, 94 S.Ct. at 1357. The damages sought by plaintiff nursing homes in this case fall within the twilight between retroactive and prospective relief, for they are prospective when viewed in relation to the Court’s October 18th Order, but are retrospective when viewed in relation to any future finding by the Court that Plan 77-13 was inadequate.

The most closely analogous Supreme Court case is Hutto v. Finney, supra. There the district court had found that Missouri state prison conditions were unconstitutional and generally ordered the state department of corrections to make improvements. Later the court identified four particular areas in need of change. Eventually conditions improved, but some time later they deteriorated drastically. Again ordering the state to remedy the constitutional violations, the Court made a specific finding of bad faith on the part of the State and awarded plaintiffs’ counsel $20,000 in' attorneys’ fees for his efforts to get the state to comply with the prior orders of the Court. Before the Supreme Court, the State argued that the award of fees was prohibited by the Eleventh Amendment’s bar against retroactive damages. The Court rejected that argument, holding:

The. line between retroactive and prospective relief cannot be so rigid that it defeats the effective enforcement of prospective relief. ...
In exercising their prospective powers under Ex Parte Young and Edelman v. Jordan, federal courts are not reduced to issuing injunctions against state officers and hoping for compliance. Once issued, an injunction may be enforced. Many of the court’s most effective enforcement weapons involve financial penalties. ... Civil contempt may ... be punished by a remedial fine, which compensates the party who won the injunction for the effects of his opponent’s noncompliance____ The principles of federalism that inform Eleventh Amendment doctrine surely do not require federal courts to enforce their decrees only by sending high state officials to jail. The less intrusive power to impose a fine is properly treated as ancillary to the federal court’s power to impose injunctive relief.
In this case, the award of attorney’s fees for bad faith served the same purpose as a remedial fine imposed for civil contempt. It vindicated the District Court’s authority over a recalcitrant litigant____

437 U.S. at 690-91, 98 S.Ct. at 2573-74 (citations omitted.)

It may be fairly concluded from Hutto that a federal court can, under certain circumstances, award damages in the nature of a civil contempt fine to compensate a plaintiff for a defendant’s failure to comply with an earlier prospective order. The remaining question is whether that power is limited to situations in which the state defendant has demonstrated bad faith in its failure to comply with the Court’s original order. The Supreme Court’s language in Hutto did not explicitly limit the court s power in this way, but the district court had expressly found bad faith and awarded the attorneys’ fees on that basis.

Plaintiffs, noting the Hutto Court’s analogy to civil contempt fines, argue that a Hutto -type damages award against a state is proper whenever a civil contempt fine could issue against a similarly situated private litigant and that such damages are therefore permissible even absent a showing of bad faith by the state. They cite McComb v. Jacksonville Paper Co., 336 U.S. 187, 69 S.Ct. 497, 93 L.Ed. 599 (1949), in which the Supreme Court held civil contempt sanctions could be imposed against a private defendant, despite the district court’s finding that the defendants’ violation of an injunction was not willful. Stated the Court:

The absence of wilfulness does not relieve from civil contempt. Civil as distinguished from criminal contempt is a sanction to enforce compliance with an order of the court or to compensate for losses or damages sustained by reason of noncompliance. Since the purpose is remedial, it matters not with what intent the defendant did the prohibited act. The decree was not fashioned so as to grant or withhold its benefits dependent on the state of mind of respondents. It laid on them a duty to obey specified provisions of the statute. An Act does not cease to be a violation of a law and of a decree merely because it may have been done innocently.

336 U.S. at 191, 69 S.Ct. at 499.

Even assuming arguendo that damages may be awarded against a state defendant whenever a similarly situated private litigant could be cited for contempt, the Court is not persuaded that the State of Florida can be required to pay damages in this case because it is doubtful whether private party could be held in contempt on the facts herein. The facts in the case at bar differ significantly from those in McComb. The district court decree in McComb required defendants to comply with provisions of the federal wage laws that were fairly specific in their requirements. As the Supreme Court put it:

The decree ... does not ... compute the weekly and monthly amount that is due each employee under the correct construction of the Act. Nor does it contain the names of the payees. But it provides the formula by which the amounts can be simply computed.

336 U.S. at 194, 69 S.Ct. at 501.

In contrast, the Court’s October 18th Order required defendants to comply with a rather vague statutory standard. They were directed to submit a reimbursement plan that was “reasonably cost related”. The problem presented by Plaintiffs’ position is highlighted by the history of this case, which reveals the difficulty of determining whether a medicaid reimbursement plan is “reasonably cost related.” Suffice it to say that in the course of this litigation the Court has had occasion to take vast amounts of complex economic evidence directed at making such a determination,' and the Court is satisfied that Defendants could not tell with reasonable certainty whether the plan they submitted complied with the standard in the absence of a ruling by the Court on the question. In such circumstances, it is not clear that even a private litigant could be fined for contempt for failure to comply, for it has been held that an order of contempt cannot issue unless the order claimed to have been violated is sufficiently specific and definite. See, e.g., UFI Razor Blades v. District 65, etc., 610 F.2d 1018 (2d Cir.1979), and cases cited therein.

Furthermore, even if a private party may be held in contempt under these facts, the Court is not persuaded that Hutto allows a state to be fined absent a showing of bad faith. Hutto uses a civil contempt model to analyze when the Eleventh Amendment will allow damages against the state, but this does not mean that every time a civil contempt fine is allowable against a private party, a damages remedy is available against the state. Rather, this Court should look to the justification underlying the Hutto exception to the Eleventh Amendment ban on retroactive damages, which was that an award of attorney’s fees in the nature of a civil contempt fine was necessary to enforce a prospective order against a recalcitrant litigant. That justification simply does have as much strength where the prospective order is non-specific (either in its terms or because it requires compliance with a non-specific statutory duty) and the state defendant has made a good faith effort to comply.

For that reason, this Court holds that the Eleventh Amendment bars an award of damages against the state for failure to comply with the terms of a prior prospective order, where the state could not know with reasonable certainty what was required for full compliance with those terms, and the state has made a good faith effort to comply. The Court finds that the State could not reasonably know what was required for full compliance with the portion of its October 18th Order that directed the State to institute a “reasonably cost related” reimbursement plan. Therefore, damages for failure to comply with that portion of the Order may be awarded only upon a showing that the state acted in bad faith in proposing and instituting Plan 77-13.

Accordingly, it is

ORDERED AND ADJUDGED that the Court will conduct a hearing on the question of whether the State acted in bad faith in promulgating Plan 77-13. If Plaintiffs cannot demonstrate such bad faith, the case against the State will be dismissed.


author: VON DER HEYDT, District Judge.

text:
    Lillian N. PRESTON, for herself and all others similarly situated, Plaintiffs, v. Margaret M. HECKLER, Secretary of the Department of Health and Human Services, et al., Defendants.
    No. F80-039 CIV.
    United States District Court, D. Alaska.
    Aug. 20, 1984.

      Daniel L. Callahan, Schendel & Callahan, Fairbanks, Alaska, for plaintiffs.
    Michael Spaan, U.S. Atty., Anchorage, Alaska, for defendants.
   MEMORANDUM AND ORDER

VON DER HEYDT, District Judge.

THIS CAUSE comes before the court on plaintiffs’ motion for attorney’s fees under the Equal Access to Justice Act (EAJA), 28 U.S.C. § 2412 (1982).

I. 28 U.S.C. § 2412(b)

Attorney’s fees are not available pursuant to 28 U.S.C. § 2412(b) on the theory that this case was analogous to a section 1983 action for which attorney’s fees are available under § 1988. Lauritzen v. Lehman, 736 F.2d 550 (9th Cir.1984).

II. 28 U.S.C. § 2412(d)(1)(A)

This section provides that attorney’s fees shall be “awarded to a prevailing party in a civil action against the government unless the court finds that the position of the United States was substantially justified ...” In determining whether the government’s position was substantially justified, the district court must evaluate the “totality of the circumstances prelitigation and during trial.” Rawlings v. Heckler, 725 F.2d 1192, 1196 (9th Cir.1984). The standard to be applied is one of reasonableness. If the government can show that its case had a reasonable basis both in law and in fact, no award will be made. Id. (citing 1980 U.S.Code Cong. & Ad.News 4953, 4984, 4989-90).

In this case, the court held that the Secretary of Health and Human Services violated the Indian Preference Act by failing to consider alternative employment standards which reflect the special needs of Indians. Preston v. Schweiker, 555 F.Supp. 886, 891 (D.Alaska 1983). As a preliminary matter, the court held that Congress had by implication repealed a crucial clause of Section 12 of the Indian Preference Act. The court of appeals reversed this court's holding on repeal by implication but affirmed the holding that the Secretary was required to consider the unique needs and status of Indians, Preston v. Heckler, 734 F.2d 1359 (9th Cir.1984). Further, the court of appeals affirmed this court’s finding that the Secretary had, in fact, failed to consider unique needs of Indians but rather had blindly transferred civil service standards to the Indian Health Service. Id. at 1373.

In determining whether the position of the government was substantially justified, the court looks to the pre-litigation posture of the agency as well. Here, as the court of appeals noted, the Secretary has, contrary to the Indian Preference Act, consistently and uniformly applied civil service standards to Indians without any consideration of the Indian applicants’ unique background. 734 F.2d at 1373. The Secretary simply had no facts to support the claim that the special circumstances of Indians had been considered. As the court of appeals noted, “to say that they [the Secretary’s substantive arguments] are frivolous would be an act of generosity.” Id.

The Secretary claims that the fact that this case represents the first impression testing of her compliance with the Indian Preference Act and that the policies challenged were longstanding in duration evidences substantial justification. In Rawlings, 725 F.2d at 1196 and Wolverton v. Heckler, 726 F.2d 581, 583-84 (9th Cir. 1984) the Ninth Circuit although upholding fee awards below, denied petitions for fees on appeal because the appeals raised issues of first impression. While the fact that the government litigates a position for the first time may be relevant to a determination of its justification, there is nothing in the EAJA or the appellate decisions cited to suggest that an agency’s position is substantially justified until tested in a court of law or because its position goes years without challenge. Furthermore, although the court’s ruling is first impression, the policy of disregarding the Indian Preference Act in this manner had long been recognized as unlawful and criticized. See Preston v. Heckler, 734 F.2d at 1373. Although the government’s position on the issue of plaintiff’s standing was reasonable, the agency’s larger position properly considered under the totality of circumstances was not substantially justified.

III. Failure to Segregate Hours for Count I

The government argues that plaintiffs’ failure to accurately segregate and document hours billed in reference to Counts I, which was dismissed, and II, upon which they prevailed, should result in a denial of any awards.

As a general principle, hours spent litigating claims upon which the plaintiffs did not prevail are not reasonably expended and not recoverable. Copeland v. Marshall, 641 F.2d 880, 891-92 (D.C.Cir. 1980); see also Nat’l. Ass’n of Concerned Vets v. Secretary of Defense, 675 F.2d 1319, 1327 (D.C.Cir.1982). A fee application should therefore indicate if time is excluded for unsuccessful claims and the nature of the work and number of hours involved should be stated. Concerned Vets, 675 F.2d at 1327-28. In this case, plaintiffs’ attorneys have filed affidavits indicating the number of hours involved. See Callahan Aff., May 6, 1983 at H 4; Schendel Supplemental Aff., May 6,1983 at ¶ 3. The same affidavits refer to the nature of the work performed, (i.e. on Count I). The government argues that in the absence of greater documentation of the excluded time, no recovery should be allowed. To do so would be clearly arbitrary. Count I was a different legal theory complaining of essentially the same injury — failure to promote or employ Native Alaskans. To the extent, if at all, the attorneys’ affidavits fall short of a statement of the nature of the hours worked and the hours involved, the court holds that Count I is not sufficiently fractionable to require greater accuracy. See Copeland, 641 F.2d at 892 n. 18; Concerned Vets, 675 F.2d at 1327 n. 13.

IV. Billing Rates in Excess of $75.00 Per Hour

Attorneys Schendel and Callahan seek recovery for fees at rates in excess of $75.00 per hour. See Attachment A to Schendel Aff., March 30, 1983 and Schendel Supplemental Aff. at II3. The EAJA provides, at 28 U.S.C. § 2412(d)(2)(A)(ii):

“attorneys fees shall not be awarded in excess of $75.00 per hour unless the court determines that an increase in the cost of living ... justifies a higher fee.” The higher fees billed here are justified by the increased costs of living in Fairbanks, Alaska. See May 6, 1983 Callahan Aff.; see generally NRDC, Inc. v. U.S. E.P.A., 703 F.2d 700, 713 (3rd Cir.1983); Impro Products, Inc. v. Block, 569 F.Supp. 1389 (D.C. Cir.1983) (increasing awards per consumer price index); cf. Hoopa Valley Tribe v. Watt, 569 F.Supp. 943, 947 (N.D.Cal.1983) (expertise in Indian Law).

V. Other Expenses

Plaintiffs have requested $1,059.02 in expenses. Defendants have not specifically objected to these expenses. The expenses are allowed. See Local 3-98, Int. Woodworkers of America v. Donovan, 580 F.Supp. 714, 717 (N.D.Cal.1984); (expenses); Glick v. U.S. Civil Service Com’n, 567 F.Supp. 1483 (D.C.Ill.1983) (lack of objection); Hoopa Valley Tribe v. Watt, 569 F.Supp. 943, 947 (law clerk fees).

Accordingly, IT IS ORDERED:

(1) Plaintiffs’ motion for attorney’s fees is granted;

(2) Plaintiffs may recover $29,755.00 in attorney’s fees from defendant;

(3) Plaintiffs may recover $1,059.02 in expenses from defendant;

(4) The clerk may amend the final judgment as appropriate.

DATED at Anchorage, Alaska, this 20th day of August, 1984.

      . A second claim of racially discriminatory employment practices was dismissed with prejudice.