author: Fiste, J. S. C.

text:
    JOHN BORLAND, JR., ET AL., PLAINTIFFS, v. BAYONNE HOSPITAL, ET AL., DEFENDANTS.
    Superior Court of New Jersey Chancery Division
    Decided January 22, 1973.

      Messrs. Krieger & Chodash, attorneys for plaintiffs, by Mr. Harold Krieger.

      Messrs. Smith, Stratton, Wise & Heher, attorneys for defendant, Bayonne Hospital, by Mr. John R. Heher.

      Messrs. Lebson & Prigojf, attorneys for defendant, Englewood Hospital Association, by Mr. John F. Fegelein.

      Messrs. Morrison & Griggs, attorneys for defendant, Greater Paterson General Hospital, by Mr. Donald W. de Cordova.

      Messrs. Winne & Banta, attorneys for defendant, Hackensack Hospital Association, by Mr. Peter G. Banta.

      Messrs. Kein, Pollatschelc & Iacopino, attorneys for defendant, Irvington General Hospital, by Mr. Vincent J. Xacopino.

      Messrs. Breslin & Breslin, attorneys for the defendant, Holy Name Hospital, by Mr. Charles Rodgers.

      Messrs. Biker, Danzig, Scherer & Brown, attorneys for defendants, The Hospital Center at Orange and Saint Barnabas Medical Center, by Mr. Dickinson R. DeBevoise.

      Messrs. Schenck, Price, Smith .& King, attorneys for defendant, Morristown Memorial Hospital, by Mr. Clifford W. Starrett.

      Messrs. Booth, Bate, Hagoort, Keith ■& Harris, attorneys for defendant, The Mountainside Hospital, by Mr. David S. Bate.

      Messrs. Lowenstein, Sandler, Brochin, Kohl <& Fisher, attorneys for defendant, Newark Beth Israel Medical Center, by Mr. Bruce D. Shoulson.

      Messrs. Clapp & Eisenlerg, attorneys for defendant, River-dell Hospital, by Mr. Stuart L. Pachman.

      Messrs. McCann & McCann, attorneys for defendant, Saddle Brook Hospital, by Mr. Edmund Y. McCann.

      Messrs. Milton, Keane & Brady, attorneys for defendants, St. Michael’s Medical Center and St. Mary’s Hospital of Hoboken, by Mr. William F. Tuohey.

      Messrs. Johnson, Johnson & Murphy, attorneys for defendant, St. Joseph’s Hospital, by Mr. William F. Johnson, Jr.

      Messrs. Mandate, Both & Ferrante, attorneys for defendant, St. Mary’s Hospital of Passaic, by Mr. Frank A. Ferrante.

      Mr. George F. Kugler, Jr., Attorney General of New Jersey, attorney for defendants, Commissioner of Insurance and Commissioner of Health, by Mr. Mark L. First, Deputy Attorney General.

      Messrs. Pitney, Hardin & Kipp, attorneys for defendant, Hospital Service Plan of New Jersey, by Mr. Clyde A. Szuch.

      Mr. Herbert Alterman, attorney for defendant, Beth Israel Hospital.

      Mr. Michael J. Ferrara, attorney for defendant, Bergen Pines County Hospital.

      Messrs. Smith, Kramer & Morrison, attorneys for defendant, Clara Maas Memorial Hospital.

      Messrs. Giordano, Giordano & Halleran, attorneys for defendant, Monmouth Medical Center.

      Messrs. Wilentz, Goldman, & Spitzer, attorneys for defendant South Amboy Memorial Hospital.
   Fiste, J. S. C.

Plaintiffs, Trustees of the Welfare Fund of Local 464, Amalgamated Meat Cutters and Food Store Employees Union, AFL-CIO (hereinafter “union”), and Howard Marks, a union member and eligible beneficiary of the union welfare plan, have instituted the within action against 22 New Jersey hospitals, the Hospital Service Plan of New Jersey (herein impleaded as “The Blue Cross-Blue Shield Plan of New Jersey”), the New Jersey Commissioner of Insurance and the New Jersey Commissioner of Flealth.

The suit is filed as a class action on behalf of labor union welfare funds in the state providing medical service benefits not funded through Blue Cross and members of labor unions providing such plans. Plaintiffs seek injunctive relief and damages for alleged discrimination by defendant hospitals in charging plaintiffs higher rates for hospital services than are charged to Blue Cross subscribers for identical service.

The complaint asserts that the differential in rates is illegal and improper in that:

1. It deprives plaintiffs of due process under Article I, paragraph 1 of the 1947 New Jersey Constitution ;

2. It deprives plaintiffs of equal protection of the laws under the United States and State Constitutions ;

3. It constitutes an infringement of the right to bargain collectively, contrary to Article I, paragraph XIX of the State Constitution;

4. It is the end result of a conspiracy between the hospitals and Blue Cross in furtherance of a common plan and mutual scheme in violation of the New Jersey Anti-Trust Act (N. J. 8. A. 56:9-l et seq.)

Defendant hospitals moved to dismiss the complaint as it applies to them on the ground that the complaint fails to state a cause of action against them. This motion, under B. 4:6-2, will be treated ás a motion for summary judgment.

Defendant Hospital Service Plan of New Jersey (hereinafter “Blue Cross” moved for summary judgment on the ground that there exists no genuine issue as to any material fact and that Blue Cross is entitled to a judgment in its favor as a matter of law.

The Commissioner of Insurance and the Commissioner of Health have filed an answer but do not join in these motions.

The right to proceed with this litigation as a class action under B. 4:32-1 has not yet been established. The parties have stipulated that the proceedings necessary to establish this litigation as a class action should be held in abeyance until the determination of the pending motions.

The threshold question is whether the matter is ripe for summary judgment as between plaintiffs, the hospitals and the Hospital Plan of New Jersey.

For the reasons that follow, it is my judgment that the issues involved are legal in nature only.

All of the parties admit that there is such a differential — • that is, plaintiffs, commercial insurance companies, individuals, labor unions and all others, pay for hospital services at higher rates than are prescribed by the Commissioner of Insurance and the Commissioner of Health for reimbursement for services rendered Blue Cross subscribers. At this point it must be noted that federal agencies under the Medicare program also pay less by reason of applicable statutory law. N. J. S. A. 26:2H-18(b); 42 U. S. C. A., § 1395f (b); 20 CFR, § 405.401(a).

Plaintiffs assert that there are fact issues that preclude disposition of the case as to the hospitals and Blue Cross on a summary judgment basis. In their brief they state:

The unknown factual questions which necessitate and warrant discovery stem from the first negotiations between N. J. Hospitals - arid Blue Cross, whereby a formula is determined and agreed upon between the parties, which is then used to calculate the per diem rate to be charged Blue Cross subscribers after approval by the Commissioners of Insurance and Health. The secrecy of these negotiations, and the defendants refusal to stipulate as to these matters -has created a factual question which must be exposed by discovery. This factual question is: what specific cost and expense items are excluded or included from the total costs (as required by NJRS. 26:2H-4) in arriving at the formula which is used as basis for calculation of the per diem rate charged Blue Cross subscribers, and as a result thereof, fixes the discriminatory rate charged non-Blue Cross subscribers.

Plaintiffs’ contention overlooks the fact, however, that neither Blue Cross nor the hospitals control how much Blue Cross reimburses the hospitals for services rendered to Blue Cross subscribers. That function is vested in the Commissioner of Insurance of the State of New Jersey with the approval of the Commissioner of Health of the State of New Jersey by virtue of the Health Caro Facilities Planning Act, N. J. 8. A. 26:2H-18(d). On the other hand, the power and duty to determine charges made to the general public remain vested in the governing bodies of defendant hospitals. The rate-making process under the above act requires the rate of payment by Blue Cross to participating hospitals to be approved annually. The actual procedure is that in October or November of the preceding year each hospital prepares and submits its proposed operating budget for the coming calendar year to the Budget and Advisory Committee appointed by the Commissioner of Insurance. The Advisory Committee consists of three physicians, five hospital administrators, and four hospital trustees, The Committee is assisted in its review by the Budget Review Staff, a division of the Hospital Research and Educational Trust of New Jersey. The Health Care Eaeilities Planning Act requires the Commissioner of Health, in consultation with the Commissioner of Insurance, to determine and certify the costs of providing health care services based on reports prepared by the hospitals in accordance with a uniform system of cost accounting. N. J. 8. A. 26:2H-18(e).

The Committee recommends to the Commissioner for his approval a tentative per diem reimbursement rate for the operating year for admissions to each hospital.

It is conceded by the hospitals and Blue Cross that in computing reimbursement rates by Blue Cross the Commissioners of Insurance and Health omit from consideration some of the costs necessary to the operation of hospitals (e. g., the cost of providing indigent care). As a result the rates hospitals charge others, including plaintiffs, is computed to permit the hospitals to recapture their omitted costs. The difference in rates is said to approximate 20%.

Thus, the alleged questions of fact are not questions of fact at all. The hospitals and Blue Cross concede that the reimbursement rate paid by Blue Cross for services rendered to subscribers is less than the rates paid by plaintiffs and others, and they also concede the method by which those different'rates are established. Their response, however, is that they do not control the ultimate reimbursement rate paid by Blue Cross; that this is the sole function of the Commissioners of Insurance and Health, and that plaintiffs’ complaints against them are misdirected.

In the face of the admission by the hospitals and Blue Cross that some items of cost are omitted by the Commissioners of Insurance and Health in calculating the reimbursement rate, I see no necessity for a plenary hearing to determine the precise item or items of cost that are omitted from consideration by the Commissioners of Insurance and Health. That may become necessary in the remaining part of the action against the Commissioners of Insurance and Health. N. J. S. A. 26:2H-18(d) provides that in establishing such rates the Commissioners shall take into consideration the total costs of the hospitals. In actual practice, the form on which each hospital must submit its budget is provided by the Commissioner of Health. Such forms exclude certain items of nonreimbursible costs based on policy decisions made by the Commissioners of Health and Insurance, and this generally accounts for the difference betv/een the reimbursement rates paid by Blue Cross and the hospital-established rates to non-hospital service corporations. Whether such omissions are in violation of the provisions of N. J. S. A. 26 :2H-18(d) is, however, not an issue as between plaintiffs and the hospitals and Blue Cross. In fact, it is an issue which the hospitals themselves, in their brief, have reserved the right to raise at an appropriate time and in an appropriate proceeding. Insofar as the present litigation is concerned, the omission of costs is an issue as between plaintiffs and the Commissioners of Health and Insurance.

Based upon the assumption that under the Health Care Facilities Act, N. J. 8. A. 26 :2H-1 et seq., reimbursement rates to Blue Cross for services to its subscribers may be at a rate which is less than that charged to others, the hospitals and Blue Cross take the position that that is constitutionally permissible. Plaintiffs take the position that this is constitutionally impermissible. It is that issue, among others, that will occupy the attention of this Court in this opinion.

As to the allegations levelled by plaintiffs at the hospitals and Blue Cross involving “secret negotiations,” “mutual schemes” and “conspiracy” to fix the rates Blue Cross pays, they are just that, namely, bare allegations. There is not a single pleaded fact to support them. In my opinion they are spurious and warrant no consideration.

The constitutional issues arising under the Due Process Clause of the New Jersey Constitution and the Equal Protection Clause of the Federal Constitution.

Plaintiffs allege a violation of their rights to due process under Article I, paragraph 1 of the 1947 New Jersey Constitution, and to equal protection under Section 1 of the Fourteenth Amendment of the United States Constitution.

While the due process and equal protection guaranties are not coterminous in their spheres of protection, equality of right is.fundamental in both. Each forbids class legislation arbitrarily discriminatory against some and favoring others in like circumstances. [Washington National Ins. Co. v. Board of Review, 1 N. J. 545 (1949)].

Discrimination and inequality of rights are plaintiffs’ sole complaints. Since those complaints invoke the same principles involving due process under the State Constitution, and equal protection under the Federal Constitution, they will be discussed under one heading.

Specifically, plaintiffs allege that the hospitals and Blue Cross illegally discriminate against them in violation of their constitutional rights in that the hospitals charge Blue Cross-less for services rendered its subscribers than is charged to plaintiffs for identical services rendered to its members.

In challenging the rates paid by Blue Cross plaintiffs are in effect challenging the constitutionality of the Hospital Service Corporation Act.

Not every inequality offends the constitutional provision of due process and equal protection. Lindsley v. Natural Carbonic Gas Co., 220 U. S. 61, 78-79, 31 S. Ct. 337, 55 L. Ed. 369 (1911); Dandridge v. Williams, 397 U. S. 471, 485, 90 S. Ct. 1153, 25 L. Ed. 2d 491 (1970). See also, David v. Vesta Co., 45 N. J. 301, 315 (1965).

The requirement of equal protection is satisfied if all persons within a class, reasonably selected, are treated alike. And a classification is reasonable if it rests upon some grounds of difference having a real and substantial relation to the basic object of the particular enactment or on some relevant consideration of public policy. If there is a reasonable distinction, there is no oppressive discrimination. The Legislature has a wide range of discretion in this area and distinctions will be presumed to rest upon a rational basis if there be any conceivable state of facts which would afford reasonable support for them. Robson v. Rodriquez, 26 N. J. 517 (1958); Wilson v. Long Branch, 27 N. J. 360 (1958).

Hence, in assailing the statutory scheme which compels the present difference in rates on the grounds that it violates the equal protection and due process clauses of the Fourteenth Amendment, plaintiffs must carry the burden of showing that the classification which results in favorable benefits to hospital service corporations such as Blue Cross does not bear a reasonable relation to a permissible legislative objective. West Coast Hotel Co. v. Parrish, 300 U. S. 379, 391, 57 S. Ct. 578, 81 L. Ed. 703 (1937), and is essentially arbitrary, Goldblatt v. Hempstead, 369 U. S. 590, 82 S. Ct. 987, 8 L. Ed. 2d 130 (1962); Lindsley v. Natural Carbonic Gas Co., 220 U. S. 61, 78-79, 31 S. Ct. 337 (1911); Independent Elec. & Elec. Contractors’ Ass’n of N. J. v. N. J. Bd. of Exam. of Elec. Cont., 54 N. J. 466, 473 (1969); David v. Vesta Co., 45 N. J. 301, 314-315 (1965). If any state of facts reasonably may be conceived to justify the distinction, the statute will be upheld. Dandridge v. Williams, 397 U. S. 471, 486-487, 90 S. Ct. 1153 (1970); Metropolitan Casualty Ins. Co. v. Brownell, 294 U. S. 580, 55 S. Ct. 538, 79 L. Ed. 1070 (1935).

The State has unquestioned power to legislate in the area of public health. Williamson v. Lee Optical of Ok lahoma, Inc., 348 U. S. 483, 75 S. Ct. 461, 99 L. Ed. 563 (1955). This is especially so regarding the modern hospital system which is operated for the benefit of the public. See Griesman v. Newcomb Hospital, 40 N. J. 389, 396, 192 A. 2d 817 (1963). Equally clear is the fact that, at least in the field of insurance, “the power of the state is broad enough to take over the whole business, leaving no part for private enterprise.” California State Auto. Ass’n Inter-Ins. Bureau v. Maloney, 341 U. S. 105, 110, 71 S. Ct. 601, 604, 95 L. Ed. 788 (1951); Osborn v. Ozlin, 310 U. S. 53, 60 S. Ct. 758, 84 L. Ed. 1074 (1940). Not only may the State completely preempt the field of health insurance, but it may affirmatively require the purchase of insurance or its equivalent. New York Central R. Co. v. White, 243 U. S. 188, 208-209, 37 S. Ct. 247, 61 L. Ed. 667 (1917) (workmen’s compensation). Alternatively, the State may enact compulsory health insurance supported by employer contributions or by tases. See generally, Falk, “National Health Insurance; A Review of Policies and Proposals,” 37 L. & Contemp. Prob. 669 (1970); Falk, “Beyond Medicare,” 59 Am. J. Pub. Health 608 (1969). Cf. Mountain Timber Co. v. Washington, 243 U. S. 219, 37 S. Ct. 260, 61 L. Ed. 685 (1917) (contribution to state fund for workmen’s compensation).

In New Jersey, rather than preempt the health insurance field entirely, cf. Independent Service Corp. v. Tousant, 56 F. Supp. 75 (D. Mass. 1944), aff’d 149 F. 2d 204 (1 Cir. 1945), the Legislature has chosen to enact the Hospital Service Corporation Act (N. J. S. A. 17:48-l et seq.) which is designed particularly to accomplish the purpose of a broad-based community health program, i. e., to satisfy the needs of the hospitals and the community as a whole through a partnership between hospitals and a non profit prepayment plan. See Associated Hospital Service, Inc. v. Milwaukee, 13 Wis. 2d 447, 109 N. W. 2d 271 (Sup. Ct. 1961); cf. Johnson v. Hospital Service Plan of N. J., 25 N. J. 134 (1957). See generally, Report of Special Counsel, to the Commissioner of Banking and Insurance of the State of New Jersey for the Public Interest, 30-32 (1970) (Wharton Report); Final Report of the Special Commission appointed by the Governor to Study Blue Cross in New Jersey (1967) (Ward Report); Final Report of the New Jersey Blue Cross Rate Study Commission, 28-30 (1960) (Simon Report) (“The basic philosophy of Blue Cross has always been that of constant progress toward the goal of complete protection against the unpredictable costs of hospital services for all the people of the community.”) The goals and objectives of this partnership are: (a) to provide to the public a payment-in-advance method for financing care provided by hospitals and to guarantee payment to the hospitals; (b) to make hospital care needed by the public financially accessible to the largest number of people at the lowest possible cost, and (c) to help the community carry the social and economic burden created when people are unable to pay for the necessary care rendered by hospitals. See generally, Wharton Report 30-32 (1970). Cf. Johnson v. Hospital Service Plan of N. J., 25 N. J. 134, 144 (1957).

The relationship of the Legislative program to these goals is readily apparent from the statutory provisions of the Hospital Service Corporation Act and companion legislation. So, for example, in order to maintain low cost to the public, the statute requires that a hospital service corporation be organized without capital stock and not for profit (N. J. S. A. 17:48-l) ; that it be operated only for the benefit of its subscribers (N. J. S. A. 17:48-2) ; that it be strictly limited as to expenditures for solicitation and administration (N. J. S. A. 17:48-10); that its reserves be kept low in contrast to commercial carriers (compare N. J. S. A. 17 :48 — 10 with N. J. S. A. 17B:19-5) ; that its investments be strictly limited (N. J. S. A. 17:48-10), and that it be exempt from most taxes (N. J. S. A. 17:48-18).

When the Hospital Service Corporation Act is read together with the recently enacted Health Care Facilities Planning Act, there emerges an integrated program combining Blue Cross with the entire apparatus for the control of hospital costs under the Commissioners of Health and Insurance. Section 1 of the new act states:

It is hereby declared to be the public policy of the State that hospital and related health care services of the highest quality, of demonstrated need, efficiently provided and properly utliized at a reasonable cost are of vital concern to the public health. [N. J. S. A. 26:2H-1]

It is under this act that the commissioners of Health and Insurance are given power to determine a “reasonable” rate of reimbursement for the hospitals (N. J. S. A. 26 :2H-18).

In contrast to the statutorily created tripartite program involving the Commissioners of Insurance and Health, Blue Cross and the hospitals, commercial health insurance carriers operate for profit and charge whatever premiums and pay whatever benefits they choose subject only to the requirement that benefits to individual subscribers are not unreasonble in relation to the premium charged (N. J. 8. A. 17B':26~1 (h) 1). Moreover, a commercial carrier has great freedom to experience rate its group customers, and unlike a hospital service corporation it is not limited in its right to terminate coverage.

Plaintiff trustees do not constitute either a hospital service corporation or an insurance company. Hence, they are not subject to the strict regulatory statutory controls imposed on hospital service corporations or even to the looser regulations governing insurance companies. They provide benefits to members subject only to general fiduciary principles. Most importantly, the goals and objectives of plaintiff trustees are not to provide prepayment of hospital care for the community at large or to help the community carry the social and economic burden of such care. Nor is it their function to guarantee payment or insure its prompt receipt by the hospitals. See Johnson v. Hospital Service Plan of N. J. 25 N. J. 134 (1957).

In Associated Hospital Service, Inc. v. Milwaukee, 13 Wis. 2d 447, 109 N. W. 2d 271, 88 A. L. R. 2d 1395 (1961), the Wisconsin Supreme Court considered whether the tax exemption granted the Blue Cross plan resulted in an unreasonable classification violative of the equal protection clause of the Fourteenth Amendment. In particular, the City of Milwaukee argued that an arbitrary and unconstitutional classification is made by the statute in granting exemption to the property of Blue Cross and not that of insurance companies. The court, after discussing the history and background of Blue Cross and the purposes and objectives to which it is dedicated, noted the “marked difference in method of operation between a Blue Cross hospital service corporation and a commercial insurance company that sells hospital care indemnity insurance.” 13 Wis. 2d at 471, 109 N. W. 2d at 283, 88 A. L. R. 2d at 1411. The court said:

The state’s interest in protecting the financial status of its state, county, municipal, and voluntary non-profit hospitals is a further justification for treating Blue Cross hospital service corporations differently tax wise than it does commercial insurance companies writing hospital care indemnity insurance. [13 Wis. 2d 471, 109 N. W. 2d 283, 88 A. L. R. 2d at 1412]

The court concluded:

Enough has been said to indicate that the classification made by [the statute] does rest upon real differences existing between nonprofit hospital service corporations and commercial insurance companies writing' hospital care indemnity insurance. Therefore, such statute does not impose an arbitrary unreasonable classification and is constitutional. [Id]

For purposes of this motion it may be assumed arguendo that plaintiff trustees, in attempting to provide a health service benefits program to members of the union, are at a competitive disadvantage vis á vis Blue Cross to the extent that the latter pays less per patient than plaintiff trustees. However, given the public and (/wasi-public nature of the entire hospital service corporation system — especially the Blue Cross-member hospital relationship as controlled and regulated by the Commissioners of Health and Insurance— it is apparent that the trustees are complaining of an unequal competitive environment created by and maintained by the State. No constitutional doctrine requires that the State permit free competition or eschew competing with private concerns, especially in an area of such public concern as health financing for the community. Cf. Tennessee Electric Power Co. v. T.V.A., 306 U. S. 118, 138-140, 59 S. Ct. 366, 83 L. Ed. 543 (1939) (private utility complains of T.V.A. competition and T.V.A.’s ability to offer lower rates); Madera Water Works v. Madera, 228 U. S. 454, 33 S. Ct. 571, 57 L. Ed. 915 (1913); Helena Water Works Co. v. Helena, 195 U. S. 383, 388, 25 S. Ct. 40, 49 L. Ed. 245 (1904); Joplin v. Southwest Missouri Light Co., 191 U. S. 150, 24 S. Ct. 43, 48 L. Ed. 127 (1903). Cf. Hardin v. Kentucky Utility Co., 390 U. S. 1, 88 S. Ct. 651, 19 L. Ed. 2d 787 (1968) (T.V.A. competition). Indeed, the Government can compete even though such competition destroys its competitors. Missouri Utilities Co. v. California, 8 F. Supp. 454, 465 (W. D. Mo. 1934), app. dism. 79 F. 2d 1003 (8 Cir. 1935).

Notwithstanding its power to do so, in creating hospital service corporations and in regulating their reimbursement of hospitals, the State of New Jersey has not sought to forbid or destroy competition among other organizations wishing to provide health insurance or health service benefits.. Neither has the State required all persons to purchase Blue Cross insurance or forbidden others to act as third-party payors. Rather, the statute creating the Blue Cross program provides certain benefits to and imposes certain burdens on Blue Cross so as to enable it to accomplish its statutory purposes. The fact that in so doing plaintiff trustees’ welfare plan has been put at a competitive disadvantage does no violence to the Constitution. Cf. Independent Service Corp. v. Tousant, 56 F. Supp. 75 (D. Mass. 1944), aff’d 149 F. 2d 204 (1 Cir. 1945). See also Virgo Corp. v. Paiewonsky, 384 F. 2d 569 (3 Cir. 1967), cert. den. 390 U. S. 1041, 88 S. Ct. 1633, 20 L. Ed. 2d 303 (1968) (one of four competitors may be denied subsidies granted to others where, in view of public purpose of subsidy program, classification was not “patently arbitrary”).

The constitutional issue arising under Article I, paragraph 19 of the New Jersey Constitution which guarantees the rights of employees to organize and, bargain collectively.

The pertinent part of the constitutional provision referred to above states:

Persons in private employment shall have the right to organize and bargain collectively.

Plaintiffs assert that their right to organize and bargain, collectively has been infringed upon, but how it has been infringed upon by the hospitals and Blue Cross is not explained. In my judgment the constitutional guarantee of the; right of persons in private employment to organize and bargain collectively has no application to the dispute between the parties in this case. The relationship of employer and employee does not exist between the hospitals, Blue Cross and plaintiffs. The gravamen of a right to collective bargaining rests upon an employee-employer relationship. Compare Johnson v. Christ Hospital, 84 N. J. Super. 541 (Ch. Div. 1964), aff’d 45 N. J. 108 (1965).

Neither the industry of counsel nor of this court has turned up a case in New Jersey or in federal law whereby a third party not involved in labor negotiations has been held bound by the provisions of Article I, paragraph 19 of the 1947 New Jersey Constitution.

The New Jersey Anti-Trust Act, N. J. S. A. 56:9-1 et seq. has no application in this case.

Section 3 of the above act provides:

Every contract, combination in the form of trust, or otherwise, or conspiracy in restraint of trade or commerce in this State shall be unlawful.

Plaintiffs assert:

The defendant hospitals have conspired with the officers, employees and directors of Blue Cross in furtherance of a common plan and a mutual scheme in violation of the New Jersey Anti-Trust Act in charging the plaintiffs and members of all other welfare unions similarly situated more than subscribers of defendant Blue Cross are required to pay for the same equipment, facilities and services, thereby depriving plaintiff and members of their class of their property by reason of such acts, conspiracy, common plan, mutual scheme and monopolization in violation of the provisions of the New Jersey Anti-Trust Law.

The New Jersey Anti-Trust Act, N. J. S. A. 56:9-12, also provides:

(a). Any person who shall be injured in his business or property by reason of a violation of the provisions of this act may sue therefor and shall recover threefold the damages sustained by him, together with reasonable attorneys’ fees, filing fees and reasonable costs of suit. Reasonable costs of suit may include, but shall not be limited to the expenses of discovery and document reproduction.

Based upon the authority of the above section, plaintiffs for themselves and for each member of the contemplated class seek treble damages together with reasonable attorneys’ fees, filing fees and reasonable costs of suit.

In my judgment, the New Jersey Anti-Trust Act has no application in this controversy for the following reasons:

(1) I have heretofore pointed out that plaintiffs allege nó facts to support their contention that defendant hospitals have conspired with the officers, members and directors of Blue Cross in furtherance of a common plan, a mutual scheme and monopolization in violation of the New Jersey Anti-Trust Act. Plaintiffs charge conspiracy but tacitly admit that the charge is based upon no known facts. In plaintiffs’ brief, reference is made to “the unknown factual questions” which necessitate and warrant discovery and stem from the first negotiations between New Jersey hospitals and Blue Cross whereby a formula is determined and agreed upon between the parties which is then used to calculate the per diem rate to be charged Blue Cross subscribers after approval by the Commissioners of Insurance and Health.

Even assuming, as plaintiffs charge, that a formula is determined and agreed upon between the parties which is then used to calculate the per diem rate to be charged Blue Cross subscribers after approval by the Commissioners of Insurance and Health, it is not conceivable how those negotiations and the resultant formulas in which the State of New Jersey, through the Commissioner of insurance and the Commissioner of Health participates, constitute a violation of the New Jersey Anti-Trust Act

(2) The Anti-Trust Act provides that:

Charitable Exemption: No provisions of this Act shall be construed to make illegal:
3? >jn $ $
(5) The bona fide religious and charitable activities of any not for profit corporation s: * * established exclusively for religious or charitable purposes, or for both purposes. [N. J. S. A. 56:9-5(b)]

All but one of defendant hospitals come within this class of organization.

Plaintiffs’ brief offers no reason or authority to support its bare statement that defendant hospitals should be denied the exemption for which the statute specifically provides.

(3) Insurance Exemption. Blue Cross and the rate of Blue Cross reimbursement to hospitals are subject to detailed regulation by the Commissioner of Insurance. As such, the establishment of the payment rates to which plaintiffs object is exempt from New Jersey’s Anti-Trust Act, which provides

No provisions of this act shall be construed to make illegal:
* sis *S* sf?
(4) The activities * * * of any insurer * * * to the extent that such activities are subject to regulation by the Commissioner of Insurance of this State under, or are permitted, or are authorized by, the Department of Banking and Insurance Act of 1948 (C. 17:1-1 et seq.) and the Department of Insurance Act of 1970 (C. 17:1C-1 et seq.) [N. J. S. A. 56:9-5(b) (4)]

Plaintiffs argue that Blue Cross is not an “insurer” within the meaning of this exemption, citing cases which define “insurer” in contexts outside of the anti-trust field and which, therefore, are not pertinent.

The ■ determination of whether Blue Cross is an insurer within the meaning of the Anti-Trust Act exemption must be determined in light of the purpose of the exemption. Clearly the exemption is designed to avoid the situation whereby a state regulatory agency acting pursuant to one •statute (the insurance laws) requires conduct which might be held to violate another statute (the Anti-Trust Act).

With the purpose of the' anti-trust exemption language in mind, the cases follow a consistent pattern. In that context, Blue Cross organizations regulated by a Commissioner of Insurance are deemed to be insurers and exempt from antitrust provisions.

To hold otherwise would be contrary to established principles of statutory construction, for then acts which the Commissioner is authorized and directed to perform under N. J. S. A. 17:48-l et seq., regulating hospital service corporations, would be prohibited by N. J. S. A. 56 :9-l et seq. A statute is not to be construed in such a way that it will render other legislative acts vain or impotent. State v. McCall, 14 N. J. 538 (1954); Loftus v. Public Service Interstate Transp. Co., 26 N. J. Misc. 246, 59 A. 2d 652 (Sup. Ct. 1948).

Even without a specific exemption for insurers the Wisconsin Supreme Court held that Wisconsin Blue Cross, which received a discount from contracting hospitals, did not violate the state anti-trust laws. The court reasoned that the federal “rule of reason” test should be used in construing the Wisconsin Anti-Trust Law because it had previously been held that the state law was a reenactment of the Sherman Act for intrastate transactions. Applying the rule of reason test, the court held that to violate the state anti-trust law the alleged restraint on trade must be unreasonable, and the restraint in this case was not unreasonable because it was authorized by state laws which clearly fulfilled the legislative intent behind their enactment. Reese v. Associated Hospital Service, Inc., 45 Wis. 2d 526, 173 N. W. 2d 661 (Sup. Ct. 1970).

The application of the McCarren Act, 15 U. S. C. A., §§ 1011-1015, to hospital service corporations compels the conclusion that such a corporation is an “insurer” for the purpose of exemption provisions of anti-trust laws and that contracts establishing hospital reimbursement rates are entered into in the course of an insurer’s business.

The McCarren Act provides that the business of insurance and the persons engaged therein shall be subject to the laws of the several states which regulate such business and that the federal anti-trust laws shall be applicable to the business of insurance only to the extent that such business is not regulated by state law (except that the Sherman Act shall continue to apply to boycotts, coercion and intimidation).

In Traveler’s Insurance Co. v. Blue Cross of Western Pa., CCH Trade Reg. Rep. par. 73, 811 (W. D. Penna. 1972), plaintiff insurance company sued Blue Cross under the federal anti-trust laws. The facts were very similar to those in the present case. The hospitals under contract with Blue Cross charged plaintiff and other commercial carriers an average of 14% more for their services than they accepted as full payment from Blue Cross. The activities of Blue Cross, including the contracts for reimbursement, were regulated by the Pennsylvania Insurance Department pursuant to statute.

Blue Cross claimed that it was in the business of insurance and therefore exempt from the federal anti-trust laws by virtue of the MeCarren Act. Agreeing with this position, the court stated:

* * * The Blue Cross hospital contract is, therefore, an integral part of Pennsylvania’s regulated hospital plan. By reason of the interrelationship of hospital payments and Blue Cross subscriber-rates the contract also falls within the ambit of “insurance business.”

Further, Blue Cross denied that it had engaged in any acts which constituted monopolization or restraint of trade within the meaning of the Sherman Act. As in the present case, the heart of plaintiff’s case was the “discriminatory price advantage emanating from Blue Cross’ contract with hospitals.” The court held not only that Blue Cross was exempt from the anti-trust act by virtue of the MeCarren Act, it also held that in any event there was no restraint of trade or monopolization in violation of the Sherman AntiTrust Act.

Motion for summary judgment in favor of defendant hospitals and the Hospital Service Plan of New Jersey (Blue Cross) is granted.


source: Caselaw Access Project

author: McGaítk, Jr., J. S. C.

license: Public Domain

text:
    THE STATE OF NEW JERSEY, PLAINTIFF, v. EDWARD SHAPIRO AND MILTON NERENBERG, DEFENDANTS.
    Superior Court of New Jersey Law Division (Criminal)
    Decided January 26, 1973.

      Mr. Robert F. Levy, attorney for defendants.

      Mr. Steven C. Rubin, Assistant Prosecutor for the State (Mr. James M. Coleman, Jr., Prosecutor of Monmouth County, attorney; Paul D. Moroney, Asst. Prosecutor, on the brief).

      Mr. Richard B. McGlynn, Deputy Attorney General, for the State (Mr. George F. Kugler, Jr., Attorney General of New Jersey, attorney).
   McGaítk, Jr., J. S. C.

Prior to August 25, 1972 defendants had been in the business of selling books and magazines at the “Action Auction” on Highway 36 in Middletown township. On August 25, 1972 and again on September 1, 1972 police officers of the township, without benefit of a warrant, entered defendants’ premises and seized various publications. These publications are listed in schedules A through D and encompass 270 different items. Copies of some of the items were also seized.

Pursuant to R. 3:5-7 timely motions were made to suppress the use of such items as evidence in any pending criminal prosecution, as well as for return of the property seized. Pending the disposition of the motion all of the items seized were turned over to the Monmouth County Prosecutor’s Office. Between the date of the motion and the hearing I reviewed each of them.

I

If a warrant is couched in general terms directing a police officer to search for and seize property “used as a means of committing a misdemeanor in violation of the laws of the St.ate of Yew Jersey, to wit: 2A:115-2, uttering, exposing or selling obscene literature or pictures,” it violates Eourth Amendment rights as applied to Eirst Amendment freedoms. State v. Muldowney, 60 N. J. 594 (1972). The prosecutor conceded the legal conclusion of the a fortiori argument in this case where the police had no warrant whatsoever. The order of suppression was entered on October 3, 1972.

II

The Prosecutor resists, however, the return of the publications. He argues that they are obscene; that their being possessed by defendants with intent to sell violates N. J. S. A. 2A:115-2; that the items are therefore contraband and not subject to return. N. J. S. A. 2A :115-2 provides in pertinent part as follows:

Any person who, without just cause, utters or exposes to the view :-r # * 0¡ another, or possesses with intent to utter or expose to the view * * * of another, any obscene or indecent book, publication, pamphlet, picture * * * or other representation however made or any person who shall sell * * * or distribute or possess with intent to sell * * distribute, or offer for sale any obscene or indecent book, publication, pamphlet, picture or other representation, however made * s- s js guilty of a misdemeanor.

There is no doubt but that defendants were in the business of selling the seized publications. If the materials are obscene or indecent, defendants were prima facie violating the criminal law. That the actions of the police effectively frustrated any prosecution for the crime does not detract from the criminal activity engaged in by defendants. If the materials are obscene or indecent, they are contraband.

In this action the State is not seeking a forfeiture; it is resisting defendants’ motion that the materials be returned. Strictly speaking, forfeiture principles do not apply. State v. Sherry, 46 N. J. 172 (1965). If the materials are obscene, the activity engaged in by defendants was a crime. As a matter of public policy the materials should not be returned to be used in future illegal activity, any more easily than would an unauthorized weapon whose evidential use had been suppressed. If the materials are obscene, defendants can claim no property right in them by virtue of purchase from a distributor, any more successfully than could a pawnbroker who purchased a stolen item for adequate value.

Ill

Insofar as a determination of obscenity vel non is concerned, defendants raise a number of threshold arguments.

A

They urge, initially, that before this court can make any determination it must hold an “adversary hearing.”

In obscenity cases, in order that Pirst Amendment rights be safeguarded, an adversary (as contrasted with an ex parte) hearing is required before a wholesale seizure. A Quantity of Books v. Kansas, 378 U. S. 205, 84 8. Ct. 1723, 12 L. Ed. 2d 809 (1964). An adversary hearing in this sense consists in “the opportunity for adversary presentation to ensure that expression will not be suppressed without contest and justification.” Cambist Films, Inc. v. Illinois, 292 F. Supp. 185 (U. S. D. C. 1968).

The term “adversary hearing” is meaningless as applied to this case where the seizure has already been declared illegal. What is before the court is the question of return of the materials. That issue has been fully argued. Defense counsel has submitted lengthy and detailed memoranda and supplements thereto. Oral argument was had in which the positions of the parties were fully explored. If an “adversary hearing” is required, one was had.

It must be remembered that this case is not that of a wholesale seizure which would effectively deprive the citizens of a large area of the opportunity to buy and read the publications — as was A Quantity of Books, supra. If the people of Monmouth County feel a need to read the titles listed in the schedules, I have no doubt but that they can find other sources readily available. The instant action arises not because a prosecutor is on a county-wide sweep to prevent the free expression of ideas but rather because a local police department, in a proeedurally incorrect way, is seeking to enforce the criminal law.

B

Defendants argue additionally that to find justification to deny the motion for return of the books, i. e., in order to determine them obscene, this court must apply not only the correct constitutional tests but also must have the benefit of expert testimony. No authority is cited making that a mandatory requirement. There may be cases in which expert opinion could well be helpful to the factfinder. Cf. Keuper v. Wilson, 111 N. J. Super. 489, 495 (Ch. Div. 1970). This is not such a case. I have perused the publications — all 270 of them. I can read English; I can see the photographs. 1 am able to comprehend each work as a whole. After determining as a matter of law what constitutional standards should apply, I no more need “expert” opinion to make the ultimate finding than I would in applying the standard of the reasonably prudent man in a negligence action. Evidence rule 56 (2); Angel v. Rand Express Lines, Inc., 66 N. J. Super. 77 (App. Div. 1961).

C

At oral argument counsel for defendants urged that there were available publications similar to those before the court which had been adjudicated nonobscene by other courts and which, as comparable materials, would bind this court to a finding of nonobscenity of the materials in issue. Opportunity was allowed for submission of those publications. Two were received. They are magazine type items of the same general nature as Schedules C and D, entitled “My-O-My Volume II” with a sale price of $6 and “Togetherness” with a sale price of $5. “My-O-My” contains 30 pages of “Ex-citachrome” color photographs of nude males making love to one another. “Togetherness” contains 29 pages of “T.H.P. Vitra Color” color photographs of nude males and females with their genitalia juxtaposed and in each other’s (and the viewer’s) face. It is alleged that “Togetherness” was one of the items involved in the reversal of a state conviction of obscenity in Burgin v. South Carolina, 404 U. S. 806, 92 S. Ct. 46, 30 L. Ed. 2d 39 (1971). “My-O-My” allegedly was among the magazines and films involved in the Supreme Court reversal of a California conviction in Weiner v. California, 404 U. S. 988, 92 S. Ct. 534, 30 L. Ed. 2d 539 (1971).

The comparability argument has no merit. This court must decide the obscenity of the materials before it on their merits, not on the merits of some other materials passed on by some other courts. Womack v. United States, 111 U. S. App. D. C. 8, 294 F. 2d 204 (D. C. Cir. 1961). I fail to comprehend the argument that five of nine Supreme Court justices find one item to be nonobscene, such action establishes a "community standard” to be applied to other allegedly similar publications. Whether a specific item is obscene is an individual determination. An adjudication on one work cannot be binding, as a matter of law, on another.

IY

N. J. 8. A. 2A:115-2 is constitutional.

"If men were angels no government would be necessary.” James Madison, Federalist No. 51.

* * * [T]he police power is a sovereign right of the government existing essentially to protect the lives, health, morals, comfort, and general welfare of the people. [McSweeney v. Equitable Trust Co., 16 N. J. Misc. 193 (Sup. Ct. 1938 aff’d 127 N. J. L. 299 (E & A. 1941), app. dism. 315 U. S. 785, 62 S. Ct. 805, 86 L. Ed. 1191 (1941)]
The police power does not have its genesis in a written constitution. It is an indispensable attribute of our society, possessed by the state sovereignties before the adoption of the Federal Constitution. [Schmidt v. Board of Adjustment, Newark, 9 N. J. 405, 414 (1952)]
Government under our form of democracy has the responsibility of protecting the morals of its people. The obligation is basic and undisputed. [Adams Newark Theater Co. v. Newark, 22 N. J. 472, 478 (1956)]
The State has the power, in the interests of the common good, to enact all' manner of laws reasonably designed for the protection of the public health, welfare, safety and morals. The exercise of the IDOwer may cause individual hardship or even limit the freedom of individual action; but so -long as there is some degree of reasonable necessity to protect the legitimate interests of the public, and the regulation resulting from the use of the power is not arbitrary or oppressive, the greater good for the greater number must prevail and individual inconveniences must be suffered as the price to be paid for living in a well ordered society * * * Mr. Justice Holmes, in Noble State Bank v. Haskell, 219 U. S. 104, 31 S. Ct. 186, 188, 55 L. Ed. 112, 32 L. R. A. (N. S.) 1062 (1911), mentions that this power
“* * * may be put forth in aid of what is sanctioned by usage, or held by the prevailing morality or strong and preponderant opinion to be greatly and immediately necessary to the public welfare.”
[Vanderbilt, C. J. in Gundaker Central Motors v. Gassert, 23 N. J. 71, 78 (1956)]

Pursuant to that police power the Legislature of New Jersey, beginning in 1868, enacted legislation prohibiting the sale or distribution of obscene or indecent literature (L. 1868, c. 536, p. 1160). The basic enactment — carried through a series of supplements and revisions — currently appears as N. J. S. A. 2A:115-2, supra.

Unchecked police power leads inevitably to a police state. Wise limitations were placed on the federal power by the Bill of Eights and in our State Constitution (1947) by Article I, “Eights and Privileges.” “But the police power may not be exercised so as to be repugnant to the fundamental constitutional rights guaranteed to all citizens.” Gundaker Central Motors v. Gassert, supra, at 79.

Under the police power government does have the right to regulate public morality. Our statute, N. J. S. A. 2A :115 — 2, supra, prohibting exposing to the view of another or distribution of obscene and indecent materials, is constitutional. Roth v. United States 354 U. S. 476, 77 S. Ct. 1304, 1 L. Ed. 2d 1498 (1957); State v. Hudson County News Co., supra. The First Amendment raises no bar to such a statute since it does not encompass obscenity. Both, supra. “* * * [T]he States retain broad power to regulate obscenity.” Stanley v. Georgia, 394 U. S. 557, 89 S. Ct. 1243, 22 L. Ed. 2d 542 (1969).

Government's right to regulate private morality is more constricted. In this area there is both a practical limitation and a constitutional one as well. Insofar as obscenity is concerned it is a fact that in every age there has been a minority of people engrossed with perverted sex. No amount of legislation can change that. Government is in fact powerless to dictate private morality. Constitutionally it is recognized that the First and Fourteenth Amendments have created a certain “zone of privacy” protected from government control. Griswold v. Connecticut, 381 U. S. 479, 85 S. Ct. 1678, 14 L. Ed. 2d 510 (1965) ; Stanley v. Georgia, 394 U. S. 557, 89 8. Ct. 1243, 22 L. Ed. 2d 542 (1969); Roe v. Wade, - U. S. - , 93 8. Ct. 705, 35 L. Ed. 2d 147 (1973). Cf. State v. Clark, 58 N. J. 72 (1971).

It is also true that there are persons in every age who will pander to the perverted sexual engrossment of a minority by supplying them materials for a price. Government does have the right to punish such activity. It can, through its laws, make the suppliers run the risk of punishment if caught. Every penal law does that to the potential offender. In a similar fashion the laws against gambling do not punish the bettor but rather the bookmaker — for his is the public aspect of the activity.

Therefore, N. J. S. A. 2A:115-2 is constitutional. In prosecutions under it (as in any criminal prosecution) the question of appellate review is whether there was sufficient factual and legal basis for a conviction. That review involves, among other things, whether the trier of the fact applied the correct definition of the crime — specifically, the correct definition of “obscenity.” One of the basic purposes of appellate review is to ensure that all constitutional rights — not just those afforded by the First Amendment — have been observed. There is no reason to suggest that some sort of extraordinary procedure must he followed in a criminal prosecution for obscenity; that obscenity cases are sui generis; that trial by jury is somehow outmoded.

V

Applicable Standard Of Obscenity

What is a constitutionally acceptable definition of obscenity for the purpose of determining whether the publications should be returned? The plethora of opinions on the subject consider Roth v. United States, supra. as the leading case. Both still stands for the proposition that obscenity is not “speech” protected by the First Amendment. Stanley v. Georgia, supra, reiterated that “the States retain broad power to regulate obscenity.” State legislatures continue to accept that statement at face value; prosecutors bring charges; juries convict; state appellate courts affirm. Almost invariably the United States Supreme Court, since Roth, reverses. The states are left to wonder, with reason, whether “broad” aiso is a word having a different meaning than people usually ascribe to it.

Roth approved the definition of obscenity given by the trial judge. The charge there was as follows:

* * * The test is not whether it would arouse sexual desires or sexual impure thoughts in those comprising a particular segment of the community, the young, the immature or the highly prudish or would leave another segment, the scientific or highly educated or the so-called worldly-wise and sophisticated indifferent and unmoved. * * *
The test in each case is the effect of the hook, picture or publication considered as a whole, not upon any particular class, but upon all those whom it is likely to reach. In other words, you determine its impact upon the average person in the community. The books, pictures and circulars must be judged as a whole, in their entire context, and you are not to consider detached or separate portions in reaching a conclusion. You judge the circulars, pictures and publications which have been put in evidnce by present-day standards of the community. You may ask yourselves does it offend the common conscience of the community by present-day standards.
In this case, ladies and gentlemen of the jury, you and you alone are the exclusive judges of what the common conscience of the community is, and in determining that conscience you are to consider the community as a whole, young and old, educated and uneducated, the religious and the irreligious — men, women and children. [77 S. Ct. at 1312]

The federal conviction was affirmed by a 6-3 vote.

In the companion case of Alberts the Supreme Court approved the test applied by the trial judge sitting without a jury, to wit: “whether the material has ‘a substantial tendancy to deprave or corrupt its readers by inciting lascivious thoughts or arousing lustful desires.’ ” 77 S. Ct. at 1310. It found that the trial judge had judged “each item as a whole as it would affect the normal person.” 77 S. Ct. at 1312. The state conviction was affirmed by a 7-2 vote.

Roth also mentioned with approval the definition of obscenity suggested by the A. L. I. Model Penal Code § 207.10 (2) (Tent. Draft No. 6, 1957);

* -r * A thing is obscene if, considered as a whole, its predominant appeal is to prurient interest, i. e., a shameful or morbid interest in nudity, sex, or excretion, and if it goes substantially beyond customary limits of candor in description or representation of such matters * * *

Under any of the above definitions I would find the materials in Schedules A and C to be obscene.

In Roth the test is synthesized in this language: “Obscene material is material which deals with sex in a manner appealing to prurient interest.” Whether the material appeals to a prurient interest is not to be subjectively adjudged but rather objectively, that is, “whether to the average person, applying contemporary community standards, the dominant theme of the material taken as a whole appeals to the prurient interest.” That definition is comprehensible to a judge. It would, of course, require amplification and further defining of terms to be understandable to a jury.

The problem is one of semantics. The semantics problem is two-fold: one for judges, the other for jurors. The basic words are “obscene and indecent.” A judge must first comprehend in a legal sense what those words connote and then in a practical sense make them understandable to jurors in his charge so that their judgment will be properly directed. The trial judge in Both fulfilled his function in explaining what is meant by “obscene or indecent.” The standards applied by the California judge can be said to be fairly understandable to laymen. The A. L. I. and Roth tests are more difficult since they add other terms which require added definition to jurors by a trial judge.

The following language in Roth is important to note because the emphasized words have given rise to the multiplicity of opinions in the obscenity field:

All ideas haring even the slightest redeeming social importance —■ unorthodox ideas, controversial ideas, even ideas hateful to the prevailing climate of opinion — have the full protection of the guaranties. unless excludable because they encroach upon the limited area of more important interests. But implicit in the history of the First Amendment is the rejection of obscenity as utterly without redeeming social importance, (at 1309)

The clear meaning of that language is that obscenity is something without redeeming social importance. If a thing is obscene it in fact has no redeeming social importance. But one must first determine what is obscene and that is done on the basis of the synthesized Roth definition set forth above. “Without redeeming social importance” is the result of being obscene. It is not an element in the definition of obscene.

The use of the word “utterly” has caused innumerable problems of interpretation. Its use in Roth is mostly casual. It is both unfortunate and illogical.

“Utterly” means completely, absolutely, entirely. The American Heritage Dictionary of the English Language (1969, 1970). It is an absolute. Absolutes are foreign to the criminal law. The law perforce functions with more practical terms. A jury does not have to be utterly or absolutely certain of guilt before a guilty verdict can be returned; it need be satisfied only beyond a reasonable doubt of guilt. How could jurors ever return a verdict of guilty in an obscenity case if they are told the item must be found to be completely or absolutely without redeeming social importance? What is “social importance?” The term includes “literally or scientific or artistic value or any other form of social importance.” Jacobellis v. Ohio, 378 U. S. 184, 191, 84 S. Ct. 1676, 1680, 12 L. Ed. 2d 793 (1964). Literary, scientific or artistic values are comprehended in the dominant theme requirement of Both. But in defining “social importance,” using the words “any other form of social importance” adds nothing. The phrase to be defined is thus defined by itself. Such definition is valueless. Does the fact that a book has hard rather than soft covers give it “social importance” of the most infinitesimal value so as to preclude a finding of “utterly without” ? If a magazine uses full color photos rather than black and white photos does that give it some measure of “social importance” which will redeem it from being declared obscene?

What is “redeeming” social value? “Redeem,” in the sense in which it is used, means “to make up for.” The American Heritage Dictionary, supra. Por example, one may say that the play was redeemed by the acting. In other words, the play was terrible but on balance it was worth going to the theater because the acting was excellent. Literally, “redeem” means to buy back. Therefore, in order that a work have social importance to redeem it from its valuelessness, that importance must have value. Something more than a -whiff or whisper of social importance is required in order to be redeeming. One slice of good apple does not redeem an otherwise rotten fruit salad. A work which contains nauseating recitals of human degradation is not redeemed because the author uses “Ph.D” after his name or asserts in a page or so of introductions that these are clinical studies of abnormal behavior.

Both set forth a test which could be understood. “Utterly without redeeming social importance” was not part of its test.

In Manual Enterprises, Inc. v. Day, 370 U. S. 473, 82 S. Ct. 1432, 8 L. Ed. 2d 639 (1962), the two-fold concept of obscenity enunciated in Both was considered in the context of prosecution for mailing magazines or photographs of nude males. The conviction was reversed. Two justices did so on the basis of nonobscenity; three did so on procedural grounds; two took no part in the decision; one simply concurred in the result and one dissented. Such a potpourri added nothing to Both.

Jacobellis v. Ohio, supra, is interesting mainly because it is difficult to discover whether it adds anything to a legal understanding of obscenity. The holding is quite simple. A state court conviction of exhibiting an obscene film was reversed by a 6-3 majority. The three dissenters felt there was no need for federal intrusion; that there was sufficient evidence to sustain the conviction; that the court was not an “ultimate censor.” Two of the concurring justices, Justices Black and Douglas, did so because of their previously stated position that under the First Amendment there can be no crime of obscenity. Justice Stewart concurred because he felt simply that the picture was not “hard-core” pornography. Justice Goldberg concurred because the one objectionable love scene in the film was “fragmentary and fleeting” and therefore the dominant theme requirement was not present. He also concurred in Justice Brennan’s plurality opinion. Justice White merely concurred in the judgment.

Thus, Justice Brennan’s opinion expressed the thinking of but two of the nine. It is in that opinion that is found the so-called “third prong” for the test of obscenity, viz, “utterly without redeeming social importance.”

As discussed in detail, supra, the phrase is a meaningless appendage to any workable definition of obscenity. If judges grope, as they have, to fathom such a Delphic phrase, how can they ever interpret it to a jury F

The Jacobellis plurality opinion in which two justices concurred, by way of dictum, also suggests that the community standard test of Roth means a “national standard” — and this because mandated as a matter of “due process” and “equal protection”. Uo one has ever suggested that due process or equal protection mean that the laws of each state must be the same. Less than unanimous verdicts in criminal cases are constitutionally permitted to some states even though the vast majoriy of states require unanimity. It may be a crime to carry a weapon in one state without a permit, yet perfectly legal to do so in another • — ■ and it is not seriously suggested that this varying use of their reserved powers by the states violates the equal protection clause. Roth itself approved three separate and varying ways of defining obscenity — none of which mentioned a national standard.

Our Supreme Court had adopted the “national standard” prior to Jacobellis. State v. Hudson County News Co., 41 N. J. 247, 266 (1963). If the trier of fact is to he entrusted without more, to apply that standard poses no problem. If, however, a jury must have presented to it proof of a national standard, grave problems indeed are raised.

A standard is an “acknowledged measure of comparison for quantitative or qualitative value; criteron; norm.” The American Heritage Dictionary, supra. What sort of Gallup poll could be taken to establish such standard? If it were taken, how valid would be the sample ? Of what value would be the opinions of “experts” as to a national standard, other than guesswork based on their own subjective tastes’. We trust jurors with the standard of the “reasonable man.” Assuredly that standard probably varies from place to place. In final analysis, just as beauty is in the eye of the beholder, concepts such as negligence, reasonable doubt, lewdness, obscenity, fair recompense, etc., rest in the concurrent judgment of the requisite number of jurors under the facts of each specific case and under the explanatory charge of the trial judge. One can say no more than that, and beyond that community standards, be they local or national are at best vague.

In this case I find that in any part of this nation the items in Schedules A and C are obscene to the average person.

In A Book Named “John Cleland’s Memoirs Of A Woman Of Pleasure" v. Massachusetts, 383 U. S. 413, 86 S. Ct. 975, 16 L. Ed. 2d 1 (1966), a state court determination of obscenity in a civil proceeding was reversed. Three justices held the book to be nonobscene; two concurred though not in the plurality opinion; one, Justice Douglas, held to his position that under the Eirst Amendment there could be no obscenity; three justices vigorously dissented. Justice Black’s concurrence was based on his oft-stated view that under the Eirst and Eourteenth Amendments no form of expression can be restricted by government. Justice Stewart concurred based on his dissent in Ginsburg, infra, 86 S. Ct. at 956. There he advanced his theory of “hard-core pornography” as the sole constitutional basis for a declaration of obscenity. At best, then, can it be said that four of the nine justices agreed with the rationale of the lead opinion. That opinion is based on Both, but with the third distinctive element of “utterly without redeeming social importance” added by a two-justice minority in Jacobellis, supra.

If the accused is a purveyor of the material and is “pandering” it, that is certainly an added fact which jurors are entitled to consider in reaching their ultimate judgment. Ginsburg v. United States, 383 U. S. 463, 86 S. Ct. 942, 16 L. Ed. 2d 31 (1966).

The foregoing summarizes the essential United States Supreme Court declarations on obscenity from Both to date.

Legal scholars may try to find hidden meanings. They may pore over opinions of justices for clues to possible future rulings. They may speculate on changes in court membership, or predict likely trends. See California v. LaRue, 409 U. S. 109, 93 S. Ct. 390, 34 L. Ed. 2d 342, 12 Cr. L. 3027 (1972). But a trial judge may not. He must search out and determine the present state of the law and apply it as he finds it or instruct a jury accordingly.

Beyond a 7-2 decision in Both affirming a state prosecution, and the two-pronged test enunciated therein, I cannot say that I feel an abiding conviction to a moral certainty as to the law of obscenity. Both is the test I apply, modified solely by the requirement of a national standard. State v. Hudson County News Co., 41 N. J. 247, supra.

VI

It is never amiss to rethink basic concepts.

Were the average citizen to read a list of the publications and films reviewed by the United States Supreme Court (and held not obscene) after being held obscene by various state courts, he would be struck by the remarkable fact that had all of them never appeared on the face of the earth, this nation would have been lessened not one whit in greatness. In other words, in retrospect, had the United States Supreme Court let stand convictions entered by juries and affirmed on state appellate review, the principles which the First Amendment sought to protect would remain firm and intact.

The underlying reason for protecting a right freely to speak or freely to print is that the pepole may be informed. In a free society, if the people are informed and then structure their laws accordingly, a minority can be heard to complain but must nevertheless live under the rule oí law constituted by the majority. The First Amendment seeks to keep sources of information available to the people. If the people want to know about sexual intercourse, or sodomy or buggery or animalism, or fellatio, or cunnilinguism, or masturbation, or homosexuality or lesbianism, or sadism or masochism, or nymphomania, they have a right to have sources available to them for that knowledge. Once they know what those subjects are all about, they may decide whether some or all of them shall be regulated. But no one suggests that such information is unavailable in medical or scientific journals, in serious studies on sexual behavior, or even in how-to-do handbooks for couples planning matrimony. Indeed, there is nothing new under the sun in the sexual field. The human body has changed in no essential way since time began, nor has the human mind in either its good or evil bents. The people have acted on knowledge available to them, and indeed set up a rule of law forbidding certain conduct and specifically prohibiting the distribution of obscene and indecent materials. That is why, as Roih states, obscenity is outside the protection of the First Amendment.

If the First Amendment — enacted to protect the free expression of ideas; to allow the people to call a tyrant a tyrant or a public official a thief; with impunity to freely advocate change or a complete turnabout in their government •— if that First Amendment has any connection with the type publication in Schedules A and C, it is ephemeral. When one reads the extensive and numerous opinions penned by federal and state courts in the field of obscenity and examines in the descriptive footnotes of those cases the actual materials involved which led to the pronouncements, one cannot but be shocked at the tremendous waste of judicial time. The subject matter is not the advocacy of unpopular ideas; it is literary garbage. If the country had not seen any one of those publications, it would in no way be less free or less strong or less democratic. If the criminal judicial system has become bogged down by an excess of pretrial maneuverings, the obscenity cases have more than contributed their share. Two facts emerge from all the cases with startling clarity: (1) those charged with the sale of obscene materials do not want a jury of 12 average citizens of the community to determine their guilt or innocence; (2) when that determination is made by a jury the verdict is overwhelmingly that of guilt • — • unanimously and beyond a reasonable doubt.

Chief Justice Weintraub ably pointed up the problem presented to state trial courts in his concurring opinion in State v. Funicello, 60 N. J. 60 (1972). His language there is peculiarly apt to the obscenity field.

If Mr. Justice Holmes was correct when he said the life of the law is experience and not logic, it is understandable that State Judges do not believe their federal counterparts are better informed to make value judgments in this area of intense State experience. Indeed a lack of realism is the persistent criticism of the federal decisions to which I have referred.
Many citizens continue to charge the State judiciary with the shortcomings in this critical area, while the State judiciary chafes because it is unable to do what it believes ought to be done, and to boot, it cannot find out in some expeditious way precisely what the Federal Supreme Court wants it to do.
The problem is aggravated by the fact that the Federal Supreme Court does not have the options available to the State Supreme Court. Whereas the State Supreme Court can make new law at a non-constitutional level, thus leaving the Legislature free to disagree and the Court itself free to change its mind more comfortably if experience should reveal it erred, the Federal Supreme Court cannot itself lap down a rule without attributing it to some constitutional command. It might have been more serviceable merely to have found a federal interest in a subject justifying congressional action rather than to attribute some final solution to the Constitution itself. But that is not the course the Federal Supreme Court pursued. Rather the Court fashioned its own rules and said the Constitution made it do so.
In that process the Federal Supreme Court had to read the Consitution to embrace subjects never thought to be within the Constitution’s reach. Indeed the outside limits of the process are not yet visible. After all, good law is a matter of “fairness,” and one need but insist that a given rule is “fundamentally” unfair to call upon the Constitution to establish his view. The tendency is thtis to claim “constitutional” moment in matters which, i/n my appraisal, are quite minimal in a scheme of values. The more the Constitution is found to be intolerant of disagreement upon arguable issues, the deadlier becomes the grip upon the genius of men. The price of such intolerance may be sterility. It is true that on occasions, the Federal Supreme Court suggests a new constitutional rule will not deny the States an opportunity to devise another approach, [citations omitted] But no one seems to have found elbow room.
Commonly a constitutional question involves no more than a value judgment upon a factual complex rather than an evident application of a precise rule of law, and indeed a value judgment which inevitably reflects the seasoning and experience of the one who judges. Federal trial judges are thus ashed to “review” the judgments of the State Court by no more than a substitution of their factual evaluations for those of the State Court.
My point is that the doctrines of the Federal Supreme Court have led to an impossible situation. There is more than enough work for both judicial systems. Good management calls for husbanding of their energies and the elimination of conflicting judgments which really do Utile if anything to advance justice. [Emphasis supplied]

If a man stands on a street corner and exposes Ms genitals, the judicial system has no trouble in prosecuting and convicting Mm under N. J. 3. A. 2A:115-1 which provides that

Aliy person who commits open lewdness or a notorious act of public indecency, grossly scandalous and tending to debauch the morals and manners of the people, or in private commits an act of lewdness or carnal indecency with another, grossly scandalous and tending to debauch the morals and manners of the people, is guilty of a misdemeanor.

Ln such ease we have no intellectual difficulty in trusting 12 average citizens to apply the standard of proof beyond a reasonable doubt to a charge involving words like “lewdness” a “nortoi'ious act of public indecency,” or “grossly scandalous,” or “debauch,” or “carnal indecency.” The law concludes, and rightly so, that the average person has a pretty fair comprehension of what those words mean and that with added clarification supplied by a judge they have the capacity to make the required judgment.

Yet if the same man has a photograph of himself taken wtih his genitals exposed and posed alongside of another male with his mouth open and an anticipatory smile on Ms face; and if that photograph is placed in a magazine along with a series of similar photographs, and that magazine is sold from public newsstands, it is urged that the judicial system cannot prosecute and convict the purveyor of the magazine because the Eirst Amendment is somehow involved and it is difficult for jurors to comprehend the words "obscene or indecent” given adequate judicial explanation. There is no logic to the argument.

Similarly, if a man engages in fellatio with another man, or woman, or child in public, there would be no difficulty in prosecuting or convicting him. That is also true in a case of cunnilinguism, sodomy or buggery (N. J. S. A. 2A:143-1) or sadism (N. J. S. A. 2A:90-1 and 2A:90-2). Our Legislature has declared such conduct to be a crime no matter what the private thoughts of some citizens be. Again a jury is trusted to understand the definitions of those crimes as explained by a judge.

If photographs are taken of such activities or simulations of such activities, placed in a magazine along with other similar photographs, and placed for display and sale at a public newsstand, and if the Legislature makes such display and sale a crime, it is difficult to follow the argument that such crime cannot be prosecuted in the traditional manner — simply because the cry "Eirst Amendment” is raised.

The argument is made that these forms of "expression” cannot demonstrably be said to cause harm. Cannot it reasonably be asked what good do they do ? And if the answer comes back to the negative — overwhelmingly (as it does) from state legislatures, from Congress and from the community speaking through its jurors — should not judges wonder that they can find a constitutional right involved?

If a prosecutor should charge a local museum with uttering obscene material because it contains nude statuary, I think we can trust the good judgment of a grand and (if necessary) a trial jury to handle it. After all, the test to be applied is that of the "average man,” not that of a puritanical prude. In like fashion, our Eirst Amendment sensibilities need not be unduly aroused if a prosecutor should seek to indict the local library for having a copy of Dante’s Inferno on its shelves. It would be the act of an incompetent. But obviously, in this case we are not concerned with that situation.

If a prosecutor should attempt to use the criminal process (rather than the injunctive avenue provided by N. J. S. A. 2A:115-3.5 et seq.) to impose a county-wide “ban” on a particular publication by sweeping all shelves clean, appropriate relief is available in the federal courts (Cine-Com Theatres Eastern States, Inc. v. Lordi, 351 F. Supp. 42 (D. C. N. J. 1972), if not in our state system. Cf. Keuper v. Wilson, 111 N. J. Super. 502 (Ch. Div. 1970). The books in Schedule A fulfill no need at all. If they should disappear from the American scene, the human spirit would in no sense be diminished. In their fantasized, explicit, vulgar detailing of varying mixtures of the sexual activities listed above, those books are obscene.

The same principles are applicable to the publications listed in Schedule G. What is portrayed therein is designed solely to appeal to a prurient interest. It is not protected by the First Amendment. Those items may not be returned. On the other hand, those items in Schedule D may arguably be held not to have as a dominant theme an appeal to the prurient interest. They are to be returned.

The principle that emerges is not that judges will not ultimately review any constitutional question involved, but rather that there is no need for an extraordinary procedure requiring that they do so before a jury has made its initial determinations.

Due process provides for appellate review. The First Amendment protects freedom of expression of ideas whose dominant theme is not an appeal to prurient interest, or is not libellous, Beauharnais v. Illinois, 343 U. S. 250, 72 S. Ct. 725, 96 L. Ed. 919 (1952), or is not riot or panic-provoking, Schenck v. United States, 249 U. S. 47, 39 S. Ct. 247, 63 L. Ed. 470 (1919). There is no reason to believe that' having the judicial process find some modes of expression to be obscene will in any way shatter our constitutional structure. There is good reason to conceive that if we try to use meaningless definitions, the system will collapse because of its unworkability.

I reject the “utterly without redeeming social value” as a third separate and distinct requirement before material can be deemed “obscene” and unprotected by the First Amendment. It adds nothing to the “two-pronged” Both test which I accept as a generalized statement of the proposition. In other words, I believe the Both test is to guide judges in their comprehension of the applicable constitutional principles but is not mandatory language to be charged to a jury.

In taking that position I recognize that I differ with the United States District Court for the District of New Jersey. Cine-Com Theatres Eastern States, Inc. v. Lordi, supra. I am free to do so, albeit comity requires due deference to its opinion as a parallel court of equal dignity. State v. Coleman, 46 N. J. 16 (1965). Cine-Com held unconstitutional the definition of obscenity enacted by New Jersey Legislature. N. J. S. A. 2A:115-1.1 became effective February 15, 1972. It provides:

The word “obscene” wherever it appears in the chapter to which this act is a supplement shall mean that which to the average person, applying contemporary community standards, when considered as a whole, has as its dominant theme or purpose an appeal to prurient interest.

As part of the enactment the Legislature set forth its findings, which are codified as N. J. S. A. 2A :115-l.la:

The Legislature finds that the standards of obscenity now enunciated in chapter 115 of Title 2A of the New Jersey Statutes as amended and supplemented in recent years is unnecessarily permissive and a hindrance to effective legal action against obscene matter. The Legislature further finds that such unnecessary permissiveness has resulted from the incorporation into New Jersey Statutes of language from influential opinions authored by certain United States Supreme Court justices; which language, however, does not represent binding majority decisions of the Supreme Court and, accordingly, need not bind the Legislature or the Judiciary of this State. The Legislature further finds that the most recent binding definition of “obscenity” enunciated by the United States Supreme Court is represented by section 1 of chapter 105, laws of 1962, prior to subsequent amendments; and that said subsequent amendments ought to be repealed in order to reestablish a workable definition of “obscenity” within the framework of our statutory law, and that certain other changes should be made in other statutes for the purpose of consistency.

The Legislature was clearly returning to the Roth standards by eliminating the Jacobellis requirement of “utterly without redeeming social importance.” That requirement had been included by an amendment (effective July 21, 1966) to the original definition. Between Jnly 21, 1966 and February 16, 1972, N. J. S. A. 2A:115-1 reads as follows:

(a) The word “obscene” wherever it appears in the chapter to which this act is a supplement shall mean that which to the average person, applying contemporary community standards, when considered as a whole, has as its dominant theme or purpose an appeal to prurient interest.
(b) Any book, publication, picture, writing, record or other mechanical or electronic audio or visual reproduction or other material shall be obscene within the meaning of subsection (a) hereof if it is established that:
(.1) The dominant theme of the material taken as a whole appeals to a jirurient interest;
(2) The material is patently offensive because it affronts contemporary community standards relating to the description or representation of sexual matters; and
(3) The material is utterly without redeeming social value.

From its original enactment in 1962, until July 21, 1966, it had read as follows:

The word “obscene” wherever it appears in the chapter to which this act is a supplement shall mean that which to the average person, applying contemporary community standards, when considered as a whole, has as its dominant theme or purpose an appeal to prurient interest.

- The foregoing discussion indicates this court’s agreement with that legislative position. Applying that definition I find the material set forth in Schedules A and C to be obscene; those in Schedules B and D not to be obscene. The prosecutor is ordered to return the latter; defendants’ motion is denied as to the former.

       The schedules referred to in the opinion are omitted for purposes of publication. .

       A perusal of the titles set forth in the schedules would indicate, without more, than an adequate showing of scienter was present. State v. Hudson County News Co., 85 N. J. 284, 294 (1961).

       The federal statute in Both prohibited the mailing of “obscene, lewd, lascivious or filthy book[s].” The Cailfornia statute in the companion case of Alberts v. California, prohibited “obscene or indecent” writings, etc., in a statute very similar to N. J. S. A. 2A:115-2. Both statutes survived a constitutional attack based on vagueness of the language.

       Under our statute, N. J. S. A. 2A :115-2, supra, a case such as Stanley never would have arisen. Our statute does not make criminal private possession of obscene materials.

       tit can regulate private morality where such conduct has a public aspect. If, for example, a married couple should copulate in a crowded school yard, such activity could be criminally prosecuted as a common law nuisance under N. J. S. A. 2A:85-1. The government can also regulate private morality where the activity in and of itself affronts publicly accepted standards of human conduct. Hence, for example, there are criminal laws prohibiting lewdness (N. J. S. A. 2A:115-1) and sodomy or bestiality (N. J. S. A. 2A:143-1).

       Whatever else may be unclear, it is patent that any discussion of that phrase in Jacobellis was by way of obiter dictum. As Justice Goldberg pointed out, the film “The Lovers” did not meet the Koth tests of obscenity because its dominent theme was not an appeal to prurient interest.


author: Geeoesky, A. J. S. C.

text:
    MARTIN KEARNY, AN INFANT BY HIS GUARDIAN AD LITEM, WILLIAM KEARNY AND WILLIAM KEARNY, INDIVIDUALLY, PLAINTIFFS, v. CHEMICAL LEAMAN LINES CO., INC., AND RONALD M. HEYMANN, DIRECTOR OF THE DIVISION OF MOTOR VEHICLES, DEPARTMENT OF LAW AND PUBLIC SAFETY, STATE OF NEW JERSEY, DEFENDANTS.
    Superior Court of New Jersey Law Division
    Decided January 26, 1973.

      Mr. J. Lance Lintner for plaintiffs (Messrs. Graham, YurasJco, Golden & Lintner, attorneys).

      Mr. Michael B. Oropollo for defendant Chemical Leaman Lines Co., Inc. (Messrs. Cohen, Hoagland, Cohen & Keefe, attorneys).

      Mr. Philip Blacker for the Director.
   Geeoesky, A. J. S. C.

This case arises out of an automobile accident in which plaintiff Martin Kearny, an infant, was injured while operating a vehicle owned by his father. The facts are not in dispute and bring before the court a legal issue which is novel to this jurisdiction. The legal issue to be decided is: Can an insurer, having voluntarily made payment to its insured under an Uninsured Motorist Endorsement, bring suit against the owner of an insured motor vehicle?

The undisputed facts are that Martin Kearny was injured as a result of the negligence of a <fhit and run” tractor-trailer. The Kearny vehicle and the tractor-trailer were the only two vehicles involved in the accident. There has been no positive identification of the tractor-trailer involved although Martin Kearny’s complaint alleged it to be a vehicle owned and operated by Chemical Leaman Lines Co., Inc. (Chemical). As a result of the accident suit was instituted on June 30, 1970 on behalf of the infant Martin Kearny, against defendants Chemical and Ronald M. Heymann, Director of Motor Vehicles for the State of New Jersey (Director). In addition, attorneys for Martin Kearny also notified State Earm Mutual Automobile Insurance Company (State Earm) of a claim under the policy covering the Kearny vehicle. The policy covering the Kearny vehicle did not provide uninsured motorist coverage and no election rejecting the coverage was made by the insured. N. J. 8. A. 17:28-l.l et seq. By failing to comply with the statutory sections, State Earm is deemed to have provided uninsured motorist coverage. Peraglia v. Jones, 120 N. J. Super. 518 (App. Div. 1972); Hannan v. Employers Commercial Union Insurance Co., 117 N. J. Super. 485 (Law Div. 1971).

In July 1972, with full knowledge of the allegations in the Kearny complaint, and with ample opportunity to investigate the facts, State Farm settled the matter with Kearny under its uninsured motorist coverage upon the payment of $3,500 to Kearny, and a substitution of attorney was forwarded from Kearny’s attorneys to attorneys selected by State Farm. Chemical’s attorneys were not made aware of the settlement. Without knowledge of the attorneys for State Farm, a dismissal with prejudice was entered at the calendar call. At this juncture, the real party plaintiff is State Farm and its attorneys seek an order vacating the dismissal. Counsel for Chemical, in opposing the motion, contends that State Farm is collaterally estopped from pursuing the lawsuit instituted by its insured.

Counsel agree that the order of dismissal was entered by mistake; therefore, the court vacates the order of dismissal. However, the court will treat the motion by Chemical as a motion for summary judgment. B. 4:46.

At all times pertinent to this suit Chemical was an insured by a policy issued by Aetna Life & Casualty Company, and counsel were aware of this fact.

The purpose of the Uninsured Motorist Coverage Act, N. J. S. A. 17:28 — 1.1 et seq., was to relieve the State of some of the burden regarding claims against the Uninsured Motorists Fund. Exum v. Marrow, 112 N. J. Super. 570 (Law Div. 1970). The Uninsured Motorist Endorsement seeks to protect an insured person from damages caused by an uninsured highway vehicle. The antithesis would be applicable to the case at bar: the Uninsured Motorist Endorsement was not intended to protect an insured person from damages caused by an insured highway vehicle.

While the precise question herein has not been answered by our courts in any prior decision, so far as I am aware, the decision in Kelleher v. Lozzi, 7 N. J. 17 (1951), is relevant. Indeed, Kelleher is the nearest ease in point of fact. Kelleher sued Lozzi for personal injuries and damage to her automobile sustained in an intersection collision of their respective automobiles. A previous suit had been instituted by Lozzi against Kelleher for personal injuries and Kelleher filed an answer denying liability, but no counterclaim. That suit was settled and dismissed upon Kelleher’s paying Lozzi $550 for the dismissal and a release executed by Lozzi.

Lozzi moved for and was granted a judgment of dismissal because of the incidents in the former suit. On the Supreme Court’s certification, the judgment of dismissal was affirmed. The court reasoned that the parties had by their settlement really made their own adjudication, and payment by the one for a release and a dismissal by the other was an acknowledgment that the one who paid was at fault, thereby estopping the payor from subsequently taking the opposite position. Moreover, by every fair expectation, the question of Lozzi’s negligence as between him and Kelleher was settled in the negative by the parties inter sese.

In the present case the pleadings clearly draw the issues. The collision was one involving Chemical’s tractor-trailer which was insured or an “uninsured” and unidentified tractor-trailer. Before getting into trial State Farm, by making a cash payment to its assured under its uninsured motorists coverage policy, acknowledged that Chemical was not the tortfeasor. By making its settlement on that basis, I conclude that it is estopped from taking the opposite position.

Counsel for State Farm argues that State Farm’s obligation to pay was based upon contract. State Farm also argues that if it did not settle the matter, it would be bound to arbitration and would have no recourse from an arbitrator’s decision.

I find no merit in these arguments. An arbitration clause does not operate to deprive a court of jurisdiction to render ancilliary, provisional or protective relief, short of adjudication, of arbitrable issues. Pyramid Electric Co. v. Staklinski, 61 N. J. Super. 278 (App. Div. 1960).

State Farm could have sought to join in the suit to have a determination made whether an insured or uninsured motor vehicle caused the accident, or State Farm could have moved to stay the arbitration proceedings, as was the case in Rosenbaum v. American Surety Co., 11 N. Y. 2d 310, 229 N. Y. S. 2d 375, 183 N. E. 2d 667 (Ct. App. 1962), where the court held the arbitration agreement did not encompass the issue of whether the other motorist was uninsured and a jury trial was the proper procedure for settlement of that issue.

The conflict here could have been avoided if State Farm had required Kearny to proceed to judgment on the issue of liability. Indeed, such a procedure is exceptionally suited to the bifurcated trial plan in effect in Middlesex County. R. 4:38-2.

Accordingly, Chemical is entitled to summary judgment of dismissal.


author: Per Curiam.

text:
    CITY OF MILLVILLE, PLAINTIFF-APPELLANT, v. CUMBERLAND COUNTY BOARD OF TAXATION, DEFENDANT-RESPONDENT. CITY OF VINELAND, PLAINTIFF-CROSS-APPELLANT, v. CITY OF MILLVILLE, DEFENDANT-APPELLANT.
    Superior Court of New Jersey Appellate Division
    Argued May 1, 1972
    Decided June 29, 1972.

      Before Judges Conford, Matthews and Fritz.

      Mr. Edward S. Miller argued the cause for appellant (Messrs. Gant & Miller, attorneys).

      Mr. Bennett I. Bardfeld argued the cause for cross-appellant City of Vineland.

      Mr. George F. Kugler, Jr., Attorney General of New Jersey, attorney for Division of Tax Appeals, filed a statement in lieu of brief (Mr. Richard M. Gonley, Deputy Attorney General, of counsel).
   Per Curiam.

We reject the contention of Millville that all properties of the Millville Municipal Airport, regardless of their uses, are exempt from taxation by virtue of their incidental association with the public purpose of the airport or by virtue of their contribution to the financial solvency of the airport. Moonachie v. Port of New York Authority, 38 N. J. 414 (1962). There our Supreme Court held (at 423) that “property of public agencies which is not used for the authorized public purpose or held for such expected use within a reasonable time” is not exempted from taxation. It also there ruled that the “revenue motive” is not such an authorized public purpose.

Por reasons set forth in our opinion in Brody v. Millville, 120 N. J. Super. 1 (App. Div. 1972), filed simultaneously herewith, we agree with the Division of Tax Appeals that Airwork Company and Boeing Vertol are sufficiently dedicated to a public use as to justify the exemption. Nor do we have any doubt that the restaurant operated by Dale Wettstein serves the requisite public purpose.

Affirmed.

       Questions of fact and law are sufficiently common to this action and Brody v. Millville, that final arguments were consolidated, and the parties stipulated that the records in both were to be considered in each.