Kamen v. American Tel. & Tel. Co.

Decision Date23 May 1986
Docket NumberNo. 706,D,706
Citation791 F.2d 1006
Parties40 Fair Empl.Prac.Cas. 1517, 40 Empl. Prac. Dec. P 36,163, 4 Fed.R.Serv.3d 979, 1 A.D. Cases 894 Susan Mary KAMEN, Plaintiff-Appellant, v. AMERICAN TELEPHONE & TELEGRAPH CO., Patricia McDonald and Carol Buckham, Defendants-Appellees. ocket 85-7799.
CourtU.S. Court of Appeals — Second Circuit

Robert L. Becker, Raff & Becker, New York City (David Seth Michaels, New York City, of counsel), for plaintiff-appellant.

Eric Rosenfeld, New York City (Seyfarth, Shaw, Fairweather & Geraldson, New York City, of counsel), for defendants-appellees.

Before OAKES, KEARSE and PRATT, Circuit Judges.

OAKES, Circuit Judge:

In this case--one involving a questionable grant of a motion to dismiss--the district court imposed Rule 11 sanctions on the plaintiff or the plaintiff's attorney apparently for failure to make "reasonable inquiry" into the action's jurisdictional basis before filing the complaint. Purporting to follow Eastway Construction Corp. v. City of New York, 762 F.2d 243 (2d Cir.1985), the district court ordered payment of $4,000 in attorneys' fees and $12 in expenses to the defendants, without stating whether the sanctions were imposed on client, counsel, or both. We reverse.


Plaintiff, Susan Mary Kamen, sought an injunction and damages under section 504 of the Rehabilitation Act of 1973, 29 U.S.C. Sec. 794 (1982), and the New York Human Rights Law, N.Y.Exec.Law Sec. 296 (McKinney In order for the employer ATCOM to be subject to the Rehabilitation Act, it must have received "Federal financial assistance." 29 U.S.C. Sec. 794 (1982). 2 Paragraph 6 of the complaint alleged on information and belief that "defendant AT & T is a recipient of federal funds." After the complaint was filed, but before filing an answer, an ATCOM attorney telephoned plaintiff's counsel twice to inform him that ATCOM received no "Federal financial assistance" within the meaning of section 504, and insisted that plaintiff voluntarily discontinue her action. On July 9, 1985, the same day as the second telephone call, counsel for ATCOM hand-delivered a letter to plaintiff's counsel, asserting for a third time that ATCOM received "no 'federal financial assistance,' " and threatening that if plaintiff did not voluntarily dismiss her case the defendants would seek sanctions, including attorneys' fees and costs incurred "in defending this improperly filed action." On July 10, 1985, plaintiff's counsel sent a letter to ATCOM's counsel in which he pointed out that he "would be remiss in advising a client to dismiss her case against AT & T Communications, Inc. based solely upon defendants' counsel's representation...." Plaintiff's counsel indicated that he had nothing before him to permit him to determine that the parties agreed upon the meaning of federal financial assistance or, assuming agreement, to verify ATCOM's representation that it received none. Accordingly, he requested ATCOM to provide him with a statement of "every grant, loan, or contract, or any other agreement by which federal funds or services of federal personnel are received by AT & T Communications, Inc.," including the purpose of The motion for dismissal was supported by two affidavits, one by defendants' counsel and one by an Assistant Secretary and General Attorney of ATCOM. Defendants' counsel's affidavit indicated on its face that it was derived solely from hearsay. 3 The affidavit of ATCOM's Assistant Secretary and General Attorney, after describing defendants' business and summarizing the lawsuit, contained the single conclusory assertion: "However, AT & T receives no 'federal financial assistance' as that term is defined above. It is not, therefore, subject to suit under Section 504." The United States District Court for the Southern District of New York, Gerard L. Goettel, Judge, granted dismissal for lack of jurisdiction despite plaintiff's arguments that the affidavits were inadmissible hearsay and conclusory and that, in any event, since material on the matter was exclusively or largely in defendants' control, plaintiff should be permitted to conduct discovery on the question whether ATCOM received federal financial assistance.

                1982 & Supp.1986) from her employer, AT & T Communications, Inc.  (ATCOM), 1 and two of her supervisors.  The complaint alleged that plaintiff had a life-long history of severe tobacco smoke hypersensitivity and was a protected person within both section 7(7)(B) of the Rehabilitation Act, 29 U.S.C. Sec. 706(7)(B) (1982), and the N.Y.Exec.Law Sec. 292(21) (McKinney Supp.1986).   See Vickers v. Veterans Administration, 549 F.Supp. 85, 86-87 (W.D.Wash.1982) (plaintiff who is hypersensitive to tobacco smoke is "handicapped person" as defined in 29 U.S.C. Sec. 706(7)(B)).  Plaintiff allegedly had numerous reactions when exposed to smoke, including difficulty in breathing, severe pain and discomfort, faintness, nausea, and headaches, but in no other respect did her medical condition affect her ability to perform her job.  According to the complaint, when Kamen, who had worked for the American Telephone & Telegraph Company (AT & T) or its recently formed subsidiary ATCOM for over twelve years, was assigned to a new supervisor, co-defendant Patricia McDonald, and the new supervisor (breaking with the practice of Kamen's previous supervisors) refused to provide her with a smoke-free environment, defendants violated the Rehabilitation Act and the New York Human Rights Law.  The complaint also alleges that a violation of these laws occurred when McDonald suspended plaintiff for two days in February, 1985, for "insubordination" because Ms. Kamen had sought medical assistance from company physicians
                the grant, loan or contract, dollar amount and government agency involved.  He also sought copies of government documents evidencing the grant, loan or contract as well as information as to any federal government personnel on loan to ATCOM.  Counsel's letter then offered "unquestionably and without hesitation" to dismiss the instant action if the information provided showed, upon analysis, that ATCOM did not receive federal financial assistance.  Counsel's letter also noted that in light of AT & T's history of accommodating plaintiff's sensitivity to smoke during most of her twelve years of employment, "there is ample room upon which we could simply and swiftly resolve the merits of this small, but important dispute."    Counsel received a telephone call from defendants' counsel and again explained that the request for injunctive relief could be simply resolved by permitting plaintiff to work as she had previously in a no smoking area and by obtaining co-workers' consent not to smoke during meetings attended by plaintiff.  A few days later, on July 22, 1985, defendants filed their motion for dismissal for lack of subject matter jurisdiction and for failure to state a claim, Fed.R.Civ.P. 12(b)(1) and (6), and for sanctions

In granting the dismissal the court stated that the 1983 amendment to Rule 11 requires the plaintiff's counsel to have a good faith belief in the allegations made in the complaint and to have made a reasonable inquiry into whether the facts support them. The court declared that nothing in plaintiff's opposing papers indicated that such an inquiry was made and added that "[i]n the absence of any such proof, it is clear that there is no sufficient allegation of a claim of receipt of federal financial assistance as contrasted to possibly federal funds received under contracts." Thus, Rule 11 was used as a springboard to decide the Rule 12(b) motion and then the grant of that motion, from which no appeal was taken, was used subsequently as the basis for the imposition of sanctions. 4 In opposing the imposition of sanctions, counsel for the plaintiff filed an affirmation stating that his client had informed him that ATCOM was organized in several "regions," in one of which she was employed.

                Another region was called the Government Communications Corporation (GCC).  Counsel stated that his client had advised him that GCC was divided into two parts, military and non-military, the former of which was involved in research and development of military communications equipment.  She believed that GCC was a recipient not only of federal grants, but also of services of federal personnel, both of which, plaintiff's counsel noted, qualify as federal financial assistance.  Counsel maintained that, because GCC and plaintiff's region were jointly managed and interrelated parts of ATCOM, all of ATCOM, or at least plaintiff's region, was arguably subject to the requirements of section 504.  The district court found this reasoning "very attenuated."    Without receiving any factual information on the matter, or without apparent further investigation, the court asserted, "[m]ilitary development programs are hardly 'federal financial assistance' as that term is commonly understood.  If such programs could be so construed, anyone doing business with the federal government (and that includes most corporations of any size) would have to be considered as receiving federal financial assistance."    Purporting to follow Eastway, the district court then found that "[t]his case clearly falls within the intendment of the revised rule " and awarded defendants approximately two-thirds of the sums requested, namely $4,000 attorneys' fees and $12 costs, noting that "it would seem that such an early and relatively easy termination of an unjustified action could have been obtained, even by motion, at a lesser expense" than that sought by defendants.  Interestingly, the affidavit submitted by counsel for defendants seeking attorneys' fees indicated that on July 12, 1985, counsel was spending time doing "additional research regarding issue of whether AT & T receives federal financial assistance and other related issues," three days after demand had already been made on

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